Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 179334 July 1, 2013

SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT ENGINEER
CELESTINO R. CONTRERAS, Petitioners,
vs.
SPOUSES HERACLEO and RAMONA TECSON, Respondents.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of Appeals (CA)
Decision1 dated July 31, 2007 in CA-G.R. CV No. 77997. The assailed decision affirmed with modification the
Regional Trial Court (RTC)2 Decision3 dated March 22, 2002 in Civil Case No. 208-M-95.

The case stemmed from the following factual and procedural antecedents:

Respondent spouses Heracleo and Ramona Tecson (respondents) are co-owners of a parcel of land with an area of
7,268 square meters located in San Pablo, Malolos, Bulacan and covered by Transfer Certificate of Title (TCT) No. T-
430064 of the Register of Deeds of Bulacan. Said parcel of land was among the properties taken by the government
sometime in 1940 without the owners consent and without the necessary expropriation proceedings and used for the
construction of the MacArthur Highway.5

In a letter6 dated December 15, 1994, respondents demanded the payment of the fair market value of the subject
parcel of land. Petitioner Celestino R. Contreras (petitioner Contreras), then District Engineer of the First Bulacan
Engineering District of petitioner Department of Public Works and Highways (DPWH), offered to pay the subject land
at the rate of 0.70 per square meter per Resolution of the Provincial Appraisal Committee (PAC) of
Bulacan.7Unsatisfied with the offer, respondents demanded for the return of their property or the payment of
compensation at the current fair market value.8

As their demand remained unheeded, respondents filed a Complaint9 for recovery of possession with damages
against petitioners, praying that they be restored to the possession of the subject parcel of land and that they be paid
attorneys fees.10 Respondents claimed that the subject parcel of land was assessed at 2,543,800.00. 11

Instead of filing their Answer, petitioners moved for the dismissal of the complaint on the following grounds: (1) that
the suit is against the State which may not be sued without its consent; (2) that the case has already prescribed; (3)
that respondents have no cause of action for failure to exhaust administrative remedies; and (4) if respondents are
entitled to compensation, they should be paid only the value of the property in 1940 or 1941.12

On June 28, 1995, the RTC issued an Order13 granting respondents motion to dismiss based on the doctrine of state
immunity from suit. As respondents claim includes the recovery of damages, there is no doubt that the suit is against
the State for which prior waiver of immunity is required. When elevated to the CA,14 the appellate court did not agree
with the RTC and found instead that the doctrine of state immunity from suit is not applicable, because the recovery
of compensation is the only relief available to the landowner. To deny such relief would undeniably cause injustice to
the landowner. Besides, petitioner Contreras, in fact, had earlier offered the payment of compensation although at a
lower rate.Thus, the CA reversed and set aside the dismissal of the complaint and, consequently, remanded the case
to the trial court for the purpose of determining the just compensation to which respondents are entitled to recover
from the government.15 With the finality of the aforesaid decision, trial proceeded in the RTC.

The Branch Clerk of Court was initially appointed as the Commissioner and designated as the Chairman of the
Committee that would determine just compensation,16 but the case was later referred to the PAC for the submission
of a recommendation report on the value of the subject property. 17 In PAC Resolution No. 99-007,18 the PAC
recommended the amount of 1,500.00 per square meter as the just compensation for the subject property.

On March 22, 2002, the RTC rendered a Decision,19 the dispositive portion of which reads:

WHEREFORE, premises considered, the Department of Public Works and Highways or its duly assigned agencies
are hereby directed to pay said Complainants/Appellants the amount of One Thousand Five Hundred Pesos
(1,500.00) per square meter for the lot subject matter of this case in accordance with the Resolution of the
Provincial Appraisal Committee dated December 19, 2001.

SO ORDERED.20

On appeal, the CA affirmed the above decision with the modification that the just compensation stated above should
earn interest of six percent (6%) per annum computed from the filing of the action on March 17, 1995 until full
payment.21

In its appeal before the CA, petitioners raised the issues of prescription and laches, which the CA brushed aside on
two grounds: first, that the issue had already been raised by petitioners when the case was elevated before the CA in
CA-G.R. CV No. 51454. Although it was not squarely ruled upon by the appellate court as it did not find any reason to
delve further on such issues, petitioners did not assail said decision barring them now from raising exactly the same
issues; and second, the issues proper for resolution had been laid down in the pre-trial order which did not include
the issues of prescription and laches. Thus, the same can no longer be further considered. As to the propriety of the
propertys valuation as determined by the PAC and adopted by the RTC, while recognizing the rule that the just
compensation should be the reasonable value at the time of taking which is 1940, the CA found it necessary to
deviate from the general rule. It opined that it would be obviously unjust and inequitable if respondents would be
compensated based on the value of the property in 1940 which is 0.70 per sq m, but the compensation would be
paid only today. Thus, the appellate court found it just to award compensation based on the value of the property at
the time of payment. It, therefore, adopted the RTCs determination of just compensation of 1,500.00 per sq m as
recommended by the PAC. The CA further ordered the payment of interest at the rate of six percent (6%) per annum
reckoned from the time of taking, which is the filing of the complaint on March 17, 1995.

Aggrieved, petitioners come before the Court assailing the CA decision based on the following grounds:

I.

THE COURT OF APPEALS GRAVELY ERRED IN GRANTING JUST COMPENSATION TO RESPONDENTS

CONSIDERING THE HIGHLY DUBIOUS AND QUESTIONABLE CIRCUMSTANCES OF THEIR ALLEGED
OWNERSHIP OF THE SUBJECT PROPERTY.

II.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING JUST COMPENSATION TO RESPONDENTS

BECAUSE THEIR COMPLAINT FOR RECOVERY OF POSSESSION AND DAMAGES IS ALREADY BARRED BY
PRESCRIPTION AND LACHES.

III.

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL COURTS DECISION ORDERING THE
PAYMENT OF JUST COMPENSATION BASED ON THE CURRENT MARKET VALUE OF THE ALLEGED
PROPERTY OF RESPONDENTS.22

Petitioners insist that the action is barred by prescription having been filed fifty-four (54) years after the accrual of the
action in 1940. They explain that the court can motu proprio dismiss the complaint if it shows on its face that the
action had already prescribed. Petitioners likewise aver that respondents slept on their rights for more than fifty years;
hence, they are guilty of laches. Lastly, petitioners claim that the just compensation should be based on the value of
the property at the time of taking in 1940 and not at the time of payment. 23
The petition is partly meritorious.

The instant case stemmed from an action for recovery of possession with damages filed by respondents against
petitioners. It, however, revolves around the taking of the subject lot by petitioners for the construction of the
MacArthur Highway. There is taking when the expropriator enters private property not only for a momentary period
but for a permanent duration, or for the purpose of devoting the property to public use in such a manner as to oust the
owner and deprive him of all beneficial enjoyment thereof. 24

It is undisputed that the subject property was taken by petitioners without the benefit of expropriation proceedings for
the construction of the MacArthur Highway. After the lapse of more than fifty years, the property owners sought
recovery of the possession of their property. Is the action barred by prescription or laches? If not, are the property
owners entitled to recover possession or just compensation?

As aptly noted by the CA, the issues of prescription and laches are not proper issues for resolution as they were not
included in the pre-trial order. We quote with approval the CAs ratiocination in this wise:

Procedurally, too, prescription and laches are no longer proper issues in this appeal. In the pre-trial order issued on
May 17, 2001, the RTC summarized the issues raised by the defendants, to wit: (a) whether or not the plaintiffs were
entitled to just compensation; (b) whether or not the valuation would be based on the corresponding value at the time
of the taking or at the time of the filing of the action; and (c) whether or not the plaintiffs were entitled to damages.
Nowhere did the pre-trial order indicate that prescription and laches were to be considered in the adjudication of the
RTC.25

To be sure, the pre-trial order explicitly defines and limits the issues to be tried and controls the subsequent course of
the action unless modified before trial to prevent manifest injustice. 26

Even if we squarely deal with the issues of laches and prescription, the same must still fail. Laches is principally a
doctrine of equity which is applied to avoid recognizing a right when to do so would result in a clearly inequitable
situation or in an injustice.27 This doctrine finds no application in this case, since there is nothing inequitable in giving
due course to respondents claim. Both equity and the law direct that a property owner should be compensated if his
property is taken for public use.28 Neither shall prescription bar respondents claim following the long-standing rule
"that where private property is taken by the Government for public use without first acquiring title thereto either
through expropriation or negotiated sale, the owners action to recover the land or the value thereof does not
prescribe."29

When a property is taken by the government for public use, jurisprudence clearly provides for the remedies available
to a landowner. The owner may recover his property if its return is feasible or, if it is not, the aggrieved owner may
demand payment of just compensation for the land taken. 30 For failure of respondents to question the lack of
expropriation proceedings for a long period of time, they are deemed to have waived and are estopped from assailing
the power of the government to expropriate or the public use for which the power was exercised. What is left to
respondents is the right of compensation.31 The trial and appellate courts found that respondents are entitled to
compensation. The only issue left for determination is the propriety of the amount awarded to respondents.

Just compensation is "the fair value of the property as between one who receives, and one who desires to sell, x x x
fixed at the time of the actual taking by the government." This rule holds true when the property is taken before the
filing of an expropriation suit, and even if it is the property owner who brings the action for compensation. 32

The issue in this case is not novel.

In Forfom Development Corporation [Forfom] v. Philippine National Railways [PNR], 33 PNR entered the property of
Forfom in January 1973 for public use, that is, for railroad tracks, facilities and appurtenances for use of the Carmona
Commuter Service without initiating expropriation proceedings. 34 In 1990, Forfom filed a complaint for recovery of
possession of real property and/or damages against PNR. In Eusebio v. Luis, 35 respondents parcel of land was taken
in 1980 by the City of Pasig and used as a municipal road now known as A. Sandoval Avenue in Pasig City without
the appropriate expropriation proceedings. In 1994, respondent demanded payment of the value of the property, but
they could not agree on its valuation prompting respondent to file a complaint for reconveyance and/or damages
against the city government and the mayor. In Manila International Airport Authority v. Rodriguez, 36in the early 1970s,
petitioner implemented expansion programs for its runway necessitating the acquisition and occupation of some of
the properties surrounding its premises. As to respondents property, no expropriation proceedings were
initiated.1wphi1 In 1997, respondent demanded the payment of the value of the property, but the demand remained
unheeded prompting him to institute a case for accion reivindicatoria with damages against petitioner. In Republic v.
Sarabia,37 sometime in 1956, the Air Transportation Office (ATO) took possession and control of a portion of a lot
situated in Aklan, registered in the name of respondent, without initiating expropriation proceedings. Several
structures were erected thereon including the control tower, the Kalibo crash fire rescue station, the Kalibo airport
terminal and the headquarters of the PNP Aviation Security Group. In 1995, several stores and restaurants were
constructed on the remaining portion of the lot. In 1997, respondent filed a complaint for recovery of possession with
damages against the storeowners where ATO intervened claiming that the storeowners were its lessees.

The Court in the above-mentioned cases was confronted with common factual circumstances where the government
took control and possession of the subject properties for public use without initiating expropriation proceedings and
without payment of just compensation, while the landowners failed for a long period of time to question such
government act and later instituted actions for recovery of possession with damages. The Court thus determined the
landowners right to the payment of just compensation and, more importantly, the amount of just compensation. 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. In Forfom, the payment of just compensation was reckoned from the time of taking in
1973; in Eusebio, the Court fixed the just compensation by determining the value of the property at the time of taking
in 1980; in MIAA, the value of the lot at the time of taking in 1972 served as basis for the award of compensation to
the owner; and in Republic, the Court was convinced that the taking occurred in 1956 and was thus the basis in fixing
just compensation. As in said cases, just compensation due respondents in this case should, therefore, be fixed not
as of the time of payment but at the time of taking, that is, in 1940.

The reason for the rule has been clearly explained in Republic v. Lara, et al., 38 and repeatedly held by the Court in
recent cases, thus:

x x x "The value of the property should be fixed as of the date when it was taken and not the date of the filing of the
proceedings." For where property is taken ahead of the filing of the condemnation proceedings, the value thereof may
be enhanced by the public purpose for which it is taken; the entry by the plaintiff upon the property may have
depreciated its value thereby; or, there may have been a natural increase in the value of the property from the time it
is taken to the time the complaint is filed, due to general economic conditions. The owner of private property should
be compensated only for what he actually loses; it is not intended that his compensation shall extend beyond his loss
or injury. And what he loses is only the actual value of his property at the time it is taken x x x. 39

Both the RTC and the CA recognized that the fair market value of the subject property in 1940 was 0.70/sq
m.40Hence, it should, therefore, be used in determining the amount due respondents instead of the higher value
which is 1,500.00. While disparity in the above amounts is obvious and may appear inequitable to respondents as
they would be receiving such outdated valuation after a very long period, it is equally true that they too are remiss in
guarding against the cruel effects of belated claim. The concept of just compensation does not imply fairness to the
property owner alone. Compensation must be just not only to the property owner, but also to the public which
ultimately bears the cost of expropriation.41

Clearly, petitioners had been occupying the subject property for more than fifty years without the benefit of
expropriation proceedings. In taking respondents property without the benefit of expropriation proceedings and
without payment of just compensation, petitioners clearly acted in utter disregard of respondents proprietary rights
which cannot be countenanced by the Court.42 For said illegal taking, respondents are entitled to adequate
compensation in the form of actual or compensatory damages which in this case should be the legal interest of six
percent (6%) per annum on the value of the land at the time of taking in 1940 until full payment. 43 This is based on
the principle that interest runs as a matter of law and follows from the right of the landowner to be placed in as good
position as money can accomplish, as of the date of taking. 44

WHEREFORE, premises considered, the pet1t10n is PARTIALLY GRANTED. The Court of Appeals Decision dated
July 31, 2007 in CAG.R. CV No. 77997 is MODIFIED, in that the valuation of the subject property owned by
respondents shall be F0.70 instead of 1,500.00 per square meter, with interest at six percent ( 6o/o) per annum
from the date of taking in 1940 instead of March 17, 1995, until full payment.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice
 Republic of the Philippines
SUPREME COURT
Baguio City

EN BANC

G.R. No. 179334 April 21, 2015

SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT ENGINEER
CELESTINO R. CONTRERAS, Petitioners,
vs.
SPOUSES HERACLEO and RAMONA TECSON, Respondents.

RESOLUTION

PERALTA, J.:

For resolution is the Motion for Reconsideration1 filed by respondents-movants spouses Heracleo and Ramona
Tecson imploring the Court to take a second look at its July 1, 2013 Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated
July 31, 2007 in CAG.R. CV No. 77997 is MODIFIED, in that the valuation of the subject property owned by
respondents shall be P0.70 instead of 1,500.00 per square meter, with interest at six percent (6%) per annum from
the date of taking in 1940 instead of March 17, 1995, until full payment. 2

In view of the contrasting opinions of the members of the Third Division on the instant motion, and the transcendental
importance of the issue raised herein, the members of the Third Division opted to refer the issue to the En Banc for
resolution.

For a proper perspective, we briefly state the factual background of the case.

In 1940, the Department of Public Works and Highways (DPWH) took respondents-movants' subject property without
the benefit of expropriation proceedings for the construction of the MacArthur Highway. In a letter dated December
15, 1994,respondents-movants demanded the payment of the fair market value of the subject parcel of land.
Celestino R. Contreras (Contreras), then District Engineer of the First Bulacan Engineering District of the DPWH,
offered to pay for the subject land at the rate of Seventy Centavos (P0.70) per square meter, per Resolution of the
Provincial Appraisal Committee (PAC) of Bulacan. Unsatisfied with the offer, respondents-movants demanded the
return of their property, or the payment of compensation at the current fair market value. 3 Hence, the complaint for
recovery of possession with damages filed by respondents-movants. Respondents-movants were able to obtain
favorable decisions in the Regional Trial Court (RTC) and the Court of Appeals (CA), with the subject property valued
at One Thousand Five Hundred Pesos (1,500.00) per square meter, with interest at six percent (6%) per annum.

Petitioners thus elevated the matter to this Court in a petition for review on certiorari. The only issue resolved by the
Court in the assailed decision is the amount of just compensation which respondents-movants are entitled to receive
from the government for the taking of their property. Both the RTC and the CA valued the property at One Thousand
Five Hundred Pesos (1,500.00) per square meter, plus six percent (6%) interest from the time of the filing of the
complaint until full payment. We, however, did not agree with both courts and ruled instead that just compensation
should be based on the value of the property at the time of taking in 1940, which is Seventy Centavos (P0.70) per
square meter.4 In addition, and by way of compensation, we likewise awarded an interest of six percent (6%) per
annum from 1940 until full payment.5

Aggrieved, respondents-movants hereby move for the reconsideration of said decision on the following grounds:

A. THE HONORABLE COURT MAY LOOK INTO THE "JUSTNESS" OF THE MISERABLE AMOUNT OF
COMPENSATION BEING AWARDED TO THE HEREIN RESPONDENTS; and
 B. THE HONORABLE COURT MAY SETTLE FOR A HAPPY MIDDLE GROUND IN THE NAME OF
DOCTRINAL PRECISION AND SUBSTANTIAL JUSTICE.6

Citing the views of Justices Presbitero J. Velasco, Jr. and Marvic Mario Victor F. Leonen in their Dissenting and
Concurring Opinion and Separate Opinion, respectively, respondents-movants insist that gross injustice will result if
the amount that will be awarded today will be based simply on the value of the property at the time of the actual
taking. Hence, as proposed by Justice Leonen, they suggest that a happy middle ground be achieved by meeting the
need for doctrinal precision and the thirst for substantial justice. 7

We maintain our conclusions in the assailed July 1, 2013 Decision with modification on the amount of interest
awarded, as well as the additional grant of exemplary damages and attorney's fees.

At the outset, it should be stressed that the matter of the validity of the State's exercise of the power of eminent
domain has long been settled. In fact, in our assailed decision, We have affirmed the ruling of the CA that the pre-trial
order issued on May 17, 2001 has limited the issues as follows: (1) whether or not the respondents-movants are
entitled to just compensation; (2) whether or not the valuation would be based on the corresponding value at the time
of the taking or at the time of the filing of the action; and (3) whether or not the respondents-movants are entitled to
damages.8 Moreover, it was held that for failure of respondents-movants to question the lack of expropriation
proceedings for a long period of time, they are deemed to have waived and are estopped from assailing the power of
the government to expropriate or the public use for which the power was exercised. 9 What is, therefore, left for
determination in the instant Motion for Reconsideration, in accordance with our Decision dated July 1, 2013, is the
propriety of the amount awarded to respondents as just compensation.

At this juncture, We hold that the reckoning date for property valuation in determining the amount of just
compensation had already been addressed and squarely answered in the assailed decision. To be sure, the justness
of the award had been taken into consideration in arriving at our earlier conclusion.

We have in the past been confronted with the same issues under similar factual and procedural circumstances. We
find no reason to depart from the doctrines laid down in the earlier cases as we adopted in the assailed decision. In
this regard, we reiterate the doctrines laid down in the cases of Forfom Development Corporation (Forfom) v.
Philippine National Railways (PNR),10 Eusebio v. Luis,11 Manila International Airport Authority v. Rodriguez,12 and
Republic v. Sarabia.13

In Forfom, PNR entered the property of Forfom in January 1973 for railroad tracks, facilities and appurtenances for
use of the Carmona Commuter Service without initiating expropriation proceedings. In 1990, Forfom filed a complaint
for recovery of possession of real property and/or damages against PNR. In Eusebio, respondent's parcel of land was
taken in 1980 by the City of Pasig and used as a municipal road without the appropriate expropriation proceedings.
In1996, respondent filed a complaint for reconveyance and/or damages against the city government and the mayor.
In MIAA, in the early 1970s, petitioner implemented expansion programs for its runway, necessitating the acquisition
and occupation of some of the properties surrounding its premises. As to respondent's property, no expropriation
proceedings were initiated. In 1997, respondent initiated a case for accion reivindicatoriawith damages against
petitioner. In Republic, sometime in 1956, the Air Transportation Office (ATO) took possession and control of a
portion of a lot situated in Aklan, registered in the name of respondent, without initiating expropriation proceedings.
Several structures were erected thereon, including the control tower, the Kalibo crash fire rescue station, the Kalibo
airport terminal, and the Headquarters of the PNP Aviation Security Group. In 1995,several stores and restaurants
were constructed on the remaining portion of the lot. In 1997, respondent filed a complaint for recovery of possession
with damages against the storeowners wherein ATO intervened claiming that the storeowners were its lessees.

These cases stemmed from similar background, that is, government took control and possession of the subject
properties for public use without initiating expropriation proceedings and without payment of just compensation; while
the landowners failed for a long period of time to question such government act and later instituted actions for
recovery of possession with damages. In these cases, the Court has uniformly ruled that the fair market value of the
property at the time of taking is controlling for purposes of computing just compensation.

In Forfom, the payment of just compensation was reckoned from the time of taking in 1973; in Eusebio, the Court
fixed the just compensation by determining the value of the property at the time of taking in 1980; in MIAA, the value
of the lot at the time of taking in 1972 served as basis for the award of compensation to the owner; and,
in Republic,the Court was convinced that the taking occurred in 1956 and was thus the basis in fixing just
compensation.
As in the aforementioned cases, just compensation due respondents-movants in this case should, therefore, be fixed
not as of the time of payment but at the time of taking in 1940 which is Seventy Centavos (P0.70) per square meter,
and not One Thousand Five Hundred Pesos (1,500.00) per square meter, as valued by the RTC and CA.

While disparity in the above amounts is obvious and may appear inequitable to respondents-movants as they would
be receiving such outdated valuation after a very long period, it should be noted that the purpose of just
compensation is not to reward the owner for the property taken but to compensate him for the loss thereof. As such,
the true measure of the property, as upheld by a plethora of cases, is the market value at the time of the taking, when
the loss resulted. This principle was plainly laid down in Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank
of the Philippines,14 to wit:

x x x In Land Bank of the Philippines v. Orilla, a valuation case under our agrarian reform law, this Court had
occasion to state:

Constitutionally, "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 the one who receives and the one who desires to sell, it being fixed at the time of
the actual taking by the government. Just compensation is defined as the full and fair equivalent of the
property taken from its owner by the expropriator. It has been repeatedly stressed by this Court that the true
measure is not the taker's gain but the owner's loss. The word "just" is used to modify the meaning of the word
"compensation" to convey the idea that the equivalent to be given for the property to be taken shall be real,
substantial, full and ample. [Emphasis supplied.]15

Indeed, the State is not obliged to pay premium to the property owner for appropriating the latter's property; it is only
bound to make good the loss sustained by the landowner, with due consideration of the circumstances availing at the
time the property was taken. More, the concept of just compensation does not imply fairness to the property owner
alone. Compensation must also be just to the public, which ultimately bears the cost of expropriation. 16

Notwithstanding the foregoing, we recognize that the owner's loss is not only his property but also its income-
generating potential.17 Thus, when property is taken, full compensation of its value must immediately be paid to
achieve a fair exchange for the property and the potential income lost. 18 Accordingly, in Apo, we held that the
rationale for imposing the interest is to compensate the petitioners for the income they would have made had they
been properly compensated for their properties at the time of the taking.19 Thus:

We recognized in Republic v. Court of Appeals the need for prompt payment and the necessity of the payment of
interest to compensate for any delay in the payment of compensation for property already taken. We ruled in this
case that:

The constitutional limitation of "just compensation" is considered to be the sum equivalent to the market value of the
property, broadly described to be 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, i[f]
fixed at the time of the actual taking by the government. Thus, if property is taken for public use before
compensation is deposited with the court having jurisdiction over the case, the final compensation must
include interest[s] on its just value to be computed from the time the property is taken to the time when
compensation is actually paid or deposited with the court. In fine, 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.[Emphasis supplied]20

In other words, the just compensation due to the landowners amounts to an effective forbearance on the part of the
State-a proper subject of interest computed from the time the property was taken until the full amount of just
compensation is paid-in order to eradicate the issue of the constant variability of the value of the currency over
time.21 In the Court's own words:

The Bulacan trial court, in its 1979 decision, was correct in imposing interests on the zonal value of the property to be
computed from the time petitioner instituted condemnation proceedings and "took" the property in September
1969. This allowance of interest on the amount found to be the value of the property as of the time of the
taking computed, being an effective forbearance, at 12% per annum should help eliminate the issue of the
constant fluctuation and inflation of the value of the currency over time x x x. 22
On this score, a review of the history of the pertinent laws, rules and regulations, as well as the issuances of the
Central Bank (CB)or Bangko Sentral ng Pilipinas (BSP)is imperative in arriving at the proper amount of interest to be
awarded herein.

On May 1, 1916, Act No. 265523 took effect prescribing an interest rate of six percent (6%) or such rate as may be
prescribed by the Central Bank Monetary Board (CB-MB)for loans or forbearance of money, in the absence of
express stipulation as to such rate of interest, to wit:

Section 1. The rate of interest for the loan or forbearance of any money goods, or credits and the rate allowed in
judgments, in the absence of express contract as to such rate of interest, shall be six per centum per annum or
such rate as may be prescribed by the Monetary Board of the Central Bank of the Philippines for that
purpose in accordance with the authority hereby granted.

Sec. 1-a. The Monetary Board is hereby authorized to prescribe the maximum rate or rates of interest for the loan or
renewal thereof or the forbearance of any money, goods or credits, and to change such rate or rates whenever
warranted by prevailing economic and social conditions.

In the exercise of the authority herein granted, the Monetary Board may prescribe higher maximum rates for loans of
low priority, such as consumer loans or renewals thereof as well as such loans made by pawnshops finance
companies and other similar credit institutions although the rates prescribed for these institutions need not
necessarily be uniform. The Monetary Board is also authorized to prescribe different maximum rate or rates for
different types of borrowings, including deposits and deposit substitutes, or loans of financial intermediaries.24

Under the aforesaid law, any amount of interest paid or stipulated to be paid in excess of that fixed by law is
considered usurious, therefore unlawful.25

On July 29, 1974, the CB-MB, pursuant to the authority granted to it under the aforequoted provision, issued
Resolution No. 1622.1wphi1 On even date, Circular No. 416 was issued, implementing MB Resolution No. 1622,
increasing the rate of interest for loans and forbearance of money to twelve percent (12%) per annum, thus:

By virtue of the authority granted to it under Section 1 of Act No. 2655, as amended, otherwise known as the "Usury
Law," the Monetary Board, in its Resolution No. 1622 dated July 29, 1974, has prescribed that the rate of interest
for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence
of express contract as to such rate of interest, shall be twelve per cent (12%) per annum. 26

The foregoing rate was sustained in CB Circular No. 90527 which took effect on December 22, 1982, particularly
Section 2 thereof, which states:

Sec. 2. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in
judgments, in the absence of express contract as to such rate of interest, shall continue to be twelve per cent
(12%) per annum.28

Recently, the BSP Monetary Board (BSP-MB),in its Resolution No. 796 dated May 16, 2013, approved the
amendment of Section 2 of Circular No. 905, Series of 1982, and accordingly, issued Circular No. 799, Series of
2013, effective July 1, 2013, the pertinent portion of which reads:

The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions governing the
rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2 of Circular No. 905, Series
of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six percent
(6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1,
4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions are hereby amended
accordingly.
This Circular shall take effect on 01 July 2013.29

Accordingly, the prevailing interest rate for loans and forbearance of money is six percent (6%) per annum, in the
absence of an express contract as to such rate of interest.

In summary, the interest rates applicable to loans and forbearance of money, in the absence of an express contract
as to such rate of interest, for the period of 1940 to present are as follows:

Law, Rule and Regulations, Date of Effectivity Interest Rate

BSP Issuance
Act No. 2655 May 1, 1916 6%
CB Circular No. 416 July 29, 1974 12%
CB Circular No. 905 December 22, 1982 12%
CB Circular No. 799 July 1, 2013 6%

It is important to note, however, that interest shall be compounded at the time judicial demand is made pursuant to
Article 221230 of the Civil Code of the Philippines, and sustained in Eastern Shipping Lines v. Court of Appeals,31then
later on in Nacar v. Gallery Frames,32 save for the reduction of interest rate to 6% for loans or forbearance of money,
thus:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 33

Applying the foregoing law and jurisprudence, respondents-movants are entitled to interest in the amount of One
Million Seven Hundred Eighteen Thousand Eight Hundred Forty-Eight Pesos and Thirty-Two Centavos
(1,718,848.32) as of September 30, 2014,34 computed as follows:

January 1, 194035 to July 28, 1974 P 10,553.4937

July 29, 1974 to March 16, 1995 26,126.3138

March 17, 199536to June 30, 2013 232,070.3339

July 1, 2013 to September 30, 2014 250,098.1940

Market Value of the Property at the time of

taking including interest P 518,848.32

Market value of the property at the time of

taking including interest P 518,848.32

Add: Exemplary damages 1,000.000.00

Attorney's fees 200,000.00

Total Amount of Interest due to Respondents-

Movants as of September 30, 2014 1,718,848.16
Considering that respondents-movants only resorted to judicial demand for the payment of the fair market value of
the land on March 17, 1995, it is only then that the interest earned shall itself earn interest.

Lastly, from finality of the Court's Resolution on reconsideration until full payment, the total amount due to
respondents-movants shall earn a straight six percent (6%) legal interest, pursuant to Circular No. 799 and the case
of Nacar. Such interest is imposed by reason of the Court's decision and takes the nature of a judicial debt.

Clearly, the award of interest on the value of the land at the time of taking in 1940 until full payment is adequate
compensation to respondents-movants for the deprivation of their property without the benefit of expropriation
proceedings. Such interest, however meager or enormous it may be, cannot be inequitable and unconscionable
because it resulted directly from the application of law and jurisprudence-standards that have taken into account
fairness and equity insetting the interest rates due for the use or forbearance of money. 41 Thus, adding the interest
computed to the market value of the property at the time of taking signifies the real, substantial, full and ample value
of the property. Verily, the same constitutes due compliance with the constitutional mandate on eminent domain and
serves as a basic measure of fairness. In addition to the foregoing interest, additional compensation shall be awarded
to respondents-movants by way of exemplary damages and attorney's fees in view of the government's taking without
the benefit of expropriation proceedings. As held in Eusebio v. Luis,42 an irregularity in an expropriation proceeding
cannot ensue without consequence. Thus, the Court held that the government agency's illegal occupation of the
owner's property for a very long period of time surely resulted in pecuniary loss to the owner, to wit:

However, in taking respondents' property without the benefit of expropriation proceedings and without payment of just
compensation, the City of Pasig clearly acted in utter disregard of respondents' proprietary rights. Such conduct
cannot be countenanced by the Court. For said illegal taking, the City of Pasig should definitely be held liable
for damages to respondents. Again, in Manila International Airport Authority v. Rodriguez, the Court held that the
government agency's illegal occupation of the owner's property for a very long period of time surely resulted in
pecuniary loss to the owner. The Court held as follows:

Such pecuniary loss entitles him to adequate compensation in the form of actual or compensatory damages,
which in this case should be the legal interest (6%) on the value of the land at the time of taking, from said
point up to full payment by the MIAA. This is based on the principle that interest "runs as a matter of law and
follows from the right of the landowner to be placed in as good position as money can accomplish, as of the date of
the taking."

The award of interest renders unwarranted the grant of back rentals as extended by the courts below. In
Republic v. Lara, et al., the Court ruled that the indemnity for rentals is inconsistent with a property owner's right to be
paid legal interest on the value of the property, for if the condemn or is to pay the compensation due to the owners
from the time of the actual taking of their property, the payment of such compensation is deemed to retro act to the
actual taking of the property; and, hence, there is no basis for claiming rentals from the time of actual taking. More
explicitly, the Court held in Republic v. Garcellano that:

The uniform rule of this Court, however, is that this compensation must be, not in the form of rentals, but by
way of 'interest from the date that the company [or entity] exercising the right of eminent domain take
possession of the condemned lands, and the amounts granted by the court shall cease to earn interest only
from the moment they are paid to the owners or deposited in court x x x.

xxxx

For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of expropriation proceedings
and without the MIAA exerting efforts to ascertain ownership of the lot and negotiating with any of the owners of the
property. To our mind, these are wanton and irresponsible acts which should be suppressed and corrected.
Hence, the award of exemplary damages and attorneys fees is in order. However, while Rodriguez is entitled to
such exemplary damages and attorney's fees, the award granted by the courts below should be equitably reduced.
We hold that Rodriguez is entitled only to 200,000.00 as exemplary damages, and attorney's fees equivalent to one
percent (1%) of the amount due.43

Similarly, in Republic v. CA,44 We held that the failure of the government to initiate an expropriation proceeding to the
prejudice of the landowner may be corrected with the awarding of exemplary damages, attorney's fees and costs of
litigation. Thus:
The Court will not award attorney's fees in light of respondent's choice not to appeal the CA Decision striking down
the award. However, we find it proper to award temperate and exemplary damages in light of NIA's misuse of
its power of eminent domain. Any arm of the State that exercises the delegated power of eminent domain must
wield that power with circumspection and utmost regard for procedural requirements. A government instrumentality
that fails to observe the constitutional guarantees of just compensation and due process abuses the authority
delegated to it, and is liable to the property owner for damages.

Temperate or moderate damages may be recovered if pecuniary loss has been suffered but the amount cannot be
proved with certainty from the nature of the case.1wphi1 Here, the trial and appellate courts found that the owners
were unable to plant palay on 96,655 square meters of the Property for an unspecified period during and after NIA's
construction of the canals in 1972. The passage of time, however, has made it impossible to determine these losses
with any certainty. NIA also deprived the owners of the Property of possession of a substantial portion of their land
since 1972. Considering the particular circumstances of this case, an award of 150,000 as temperate damages is
reasonable.

NIA's irresponsible exercise of its eminent domain powers also deserves censure. For more than three decades, NIA
has been charging irrigation fees from respondent and other landowners for the use of the canals built on the
Property, without reimbursing respondent a single cent for the loss and damage. NIA exhibits a disturbingly cavalier
attitude towards respondent's property rights, rights to due process of law and to equal protection of the laws. Worse,
this is not the first time NIA has disregarded the rights of private property owners by refusing to pay just
compensation promptly. To dissuade NIA from continuing this practice and to set an example for other agencies
exercising eminent domain powers, NIA is directed to pay respondent exemplary damages of 250,000. 45

Applying the aforequoted doctrines to the present case, considering that respondents-movants were deprived of
beneficial ownership over their property for more than seventy (70) years without the benefit of a timely expropriation
proceedings, and to serve as a deterrent to the State from failing to institute such proceedings within the prescribed
period under the law, a grant of exemplary damages in the amount of One Million Pesos (1,000,000.00) is fair and
reasonable. Moreover, an award for attorney's fees in the amount of Two Hundred Thousand Pesos (200,000.00) in
favor of respondents-movants is in order.

In sum, respondents-movants shall be entitled to an aggregate amount of One Million Seven Hundred Eighteen
Thousand Eight Hundred Forty-Eight Pesos and Thirty-Two Centavos (1,718,848.32) as just compensation as
of September 30, 2014, computed as follows:

Market value of the property at the time P 518,848.32

of taking in 1940 including interest

Add: Exemplary Damages 1,000,000.00

Attorney's fees 200,000.00

Total Amount due to Respondents-

movants as of September 30, 2014 1,718,848.32

This Court is not unaware that at present, stringent laws and rules are put in place to ensure that owners of real
property acquired for national government infrastructure projects are promptly paid just compensation. Specifically,
Section 4 of Republic Act No. 8974 (R.A. 8974),46 which took effect on November 26, 2000, provides sufficient
guidelines for implementing an expropriation proceeding, to wit:

Section 4. Guidelines for Expropriation Proceedings. - Whenever it is necessary to acquire real property for the right-
of-way or location for any national government infrastructure project through expropriation, the appropriate
implementing agency shall initiate the expropriation proceedings before the proper court under the following
guidelines:

(a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency shall
immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred percent
(100%) of the value of the property based on the current relevant zonal valuation of the Bureau of Internal
Revenue (BIR); and (2) the value of the improvements and/or structures as determined under Section 7
hereof;
 (b) In provinces, cities, municipalities and other areas where there is no zonal valuation, the BIR is hereby
mandated within the period of sixty (60) days from the date of the expropriation case, to come up with a
zonal valuation for said area; and

(c) In case the completion of a government infrastructure project is of utmost urgency and importance, and
there is no existing valuation of the area concerned, the implementing agency shall immediately pay the
owner of the property its proffered value taking into consideration the standards prescribed in Section 5
hereof.

Upon compliance with the guidelines abovementioned, the court shall immediately issue to the implementing agency
an order to take possession of the property and start the implementation of the project.

Before the court can issue a Writ of Possession, the implementing agency shall present to the court a certificate of
availability of funds from the proper official concerned.

In the event that the owner of the property contests the implementing agency's proffered value, the court shall
determine the just compensation to be paid the owner within sixty (60) days from the date of filing of the expropriation
case. When the decision of the court becomes final and executory, the implementing agency shall pay the owner the
difference between the amount already paid and the just compensation as determined by the court.

Failure to comply with the foregoing directives shall subject the government official or employee concerned to
administrative, civil and/or criminal sanctions, thus:

Section 11. Sanctions. - Violation of any provisions of this Act shall subject the government official or employee
concerned to appropriate administrative, civil and/or criminal sanctions, including suspension and/or dismissal from
the government service and forfeiture of benefits. While the foregoing provisions, being substantive in nature or
disturbs substantive rights, cannot be retroactively applied to the present case, We trust that this established
mechanism will surely deter hasty acquisition of private properties in the future without the benefit of immediate
payment of the value of the property in accordance with Section 4 of R.A. 8974. This effectively addresses J.
Velasco's concerns that sustaining our earlier rulings on the matter would be licensing the government to dispense
with constitutional requirements in taking private properties. Moreover, any gap on the procedural aspect of the
expropriation proceedings will be remedied by the aforequoted provisions.

In effect, R.A. 8974 enshrines a new approach towards eminent domain that reconciles the inherent unease attending
expropriation proceedings with a position of fundamental equity. 47

Despite the foregoing developments, however, We emphasize that the government's failure, to initiate the necessary
expropriation proceedings prior to actual taking cannot simply invalidate the State's exercise of its eminent domain
power, given that the property subject of expropriation is indubitably devoted for public use, and public policy imposes
upon the public utility the obligation to continue its services to the public. To hastily nullify said expropriation in the
guise of lack of due process would certainly diminish or weaken one of the State's inherent powers, the ultimate
objective of which is to serve the greater good. Thus, the non-filing of the case for expropriation will not necessarily
lead to the return of the property to the landowner. What is left to the landowner is the right of compensation. 48

All told, We hold that putting to rest the issue on the validity of the exercise of eminent domain is neither tantamount
to condoning the acts of the DPWH in disregarding the property rights of respondents-movants nor giving premium to
the government's failure to institute an expropriation proceeding. This Court had steadfastly adhered to the doctrine
that its first and fundamental duty is the application of the law according to its express terms, interpretation being
called for only when such literal application is impossible. 49 To entertain other formula for computing just
compensation, contrary to those established by law and jurisprudence, would open varying interpretation of economic
policies - a matter which this Court has no competence to take cognizance of. Time and again, we have held that no
process of interpretation or construction need be resorted to where a provision of law peremptorily calls for
application.50 Equity and equitable principles only come into full play when a gap exists in the law and
jurisprudence.51 As we have shown above, established rulings of this Court are in place for full application to the case
at bar, hence, should be upheld.

WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.
SO ORDERED.
 EN BANC

MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY G.R. No. 176625

and AIR TRANSPORTATION OFFICE,
Petitioners, Present:

PUNO, C.J.,
CARPIO,
CORONA,
- versus - CARPIO MORALES,VELASCO, JR.,
NACHURA, LEONARDO-DE CASTRO,
BRION,
PERALTA,*
BERSAMIN,
BERNARDO L. LOZADA, SR., and the DEL CASTILLO,
HEIRS OF ROSARIO MERCADO, namely, VICENTE ABAD,
LOZADA, MARIO M. LOZADA, MARCIA L. GODINEZ, VILLARAMA, JR.,
VIRGINIA L. FLORES, BERNARDO LOZADA, JR., DOLORES PEREZ, and
GACASAN, SOCORRO CAFARO and ROSARIO LOZADA, MENDOZA, JJ.
represented by MARCIA LOZADA GODINEZ,
Respondents. Promulgated:

February 25, 2010

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to reverse, annul, and set aside
the Decision[1] dated February 28, 2006 and the Resolution[2] dated February 7, 2007 of the Court of Appeals (CA)
(Cebu City), Twentieth Division, in CA-G.R. CV No. 65796.

The antecedent facts and proceedings are as follows:

Subject of this case is Lot No. 88-SWO-25042 (Lot No. 88), with an area of 1,017 square meters, more or less,
located in Lahug, Cebu City. Its original owner was Anastacio Deiparine when the same was subject to expropriation
proceedings, initiated by the Republic of the Philippines (Republic), represented by the then Civil Aeronautics
Administration (CAA), for the expansion and improvement of the Lahug Airport. The case was filed with the then
Court of First Instance of Cebu, Third Branch, and docketed as Civil Case No. R-1881.

As early as 1947, the lots were already occupied by the U.S. Army. They were turned over to the Surplus Property
Commission, the Bureau of Aeronautics, the National Airport Corporation and then to the CAA.

During the pendency of the expropriation proceedings, respondent Bernardo L. Lozada, Sr. acquired Lot No. 88 from
Deiparine. Consequently, Transfer Certificate of Title (TCT) No. 9045 was issued in Lozadas name.

On December 29, 1961, the trial court rendered judgment in favor of the Republic and ordered the latter to pay
Lozada the fair market value of Lot No. 88, adjudged at P3.00 per square meter, with consequential damages by way
of legal interest computed from November 16, 1947the time when the lot was first occupied by the airport. Lozada
received the amount of P3,018.00 by way of payment.

The affected landowners appealed. Pending appeal, the Air Transportation Office (ATO), formerly CAA, proposed a
compromise settlement whereby the owners of the lots affected by the expropriation proceedings would either not
appeal or withdraw their respective appeals in consideration of a commitment that the expropriated lots would be
resold at the price they were expropriated in the event that the ATO would abandon the Lahug Airport, pursuant to an
established policy involving similar cases. Because of this promise, Lozada did not pursue his appeal. Thereafter, Lot
No. 88 was transferred and registered in the name of the Republic under TCT No. 25057.

The projected improvement and expansion plan of the old Lahug Airport, however, was not pursued.
Lozada, with the other landowners, contacted then CAA Director Vicente Rivera, Jr., requesting to repurchase the
lots, as per previous agreement. The CAA replied that there might still be a need for the Lahug Airport to be used as
an emergency DC-3 airport. It reiterated, however, the assurance that should this Office dispose and resell the
properties which may be found to be no longer necessary as an airport, then the policy of this Office is to give priority
to the former owners subject to the approval of the President.

On November 29, 1989, then President Corazon C. Aquino issued a Memorandum to the Department of
Transportation, directing the transfer of general aviation operations of the Lahug Airport to
the Mactan International Airport before the end of 1990 and, upon such transfer, the closure of the Lahug Airport.

Sometime in 1990, the Congress of the Philippines passed Republic Act (R.A.) No. 6958, entitled An Act Creating the
Mactan-Cebu International Airport Authority, Transferring Existing Assets of the Mactan International Airport and the
Lahug Airport to the Authority, Vesting the Authority with Power to Administer and Operate the Mactan International
Airport and the Lahug Airport, and For Other Purposes.

From the date of the institution of the expropriation proceedings up to the present, the public purpose of the said
expropriation (expansion of the airport) was never actually initiated, realized, or implemented. Instead, the old airport
was converted into a commercial complex. Lot No. 88 became the site of a jail known as Bagong Buhay
Rehabilitation Complex, while a portion thereof was occupied by squatters. [3] The old airport was converted into what
is now known as the Ayala I.T. Park, a commercial area.

Thus, on June 4, 1996, petitioners initiated a complaint for the recovery of possession and reconveyance of
ownership of Lot No. 88. The case was docketed as Civil Case No. CEB-18823 and was raffled to the Regional Trial
Court (RTC), Branch 57, Cebu City. The complaint substantially alleged as follows:

(a) Spouses Bernardo and Rosario Lozada were the registered owners of Lot No. 88 covered by
TCT No. 9045;

(b) In the early 1960s, the Republic sought to acquire by expropriation Lot No. 88, among others, in
connection with its program for the improvement and expansion of the Lahug Airport;

(c) A decision was rendered by the Court of First Instance in favor of the Government and against
the land owners, among whom was Bernardo Lozada, Sr. appealed therefrom;

(d) During the pendency of the appeal, the parties entered into a compromise settlement to the
effect that the subject property would be resold to the original owner at the same price when
it was expropriated in the event that the Government abandons the Lahug Airport;

(e) Title to Lot No. 88 was subsequently transferred to the Republic of the Philippines (TCT No.
25057);

(f) The projected expansion and improvement of the Lahug Airport did not materialize;

(g) Plaintiffs sought to repurchase their property from then CAA Director Vicente Rivera. The latter
replied by giving as assurance that priority would be given to the previous owners, subject to
the approval of the President, should CAA decide to dispose of the properties;

(h) On November 29, 1989, then President Corazon C. Aquino, through a Memorandum to the
Department of Transportation and Communications (DOTC), directed the transfer of general
aviation operations at the Lahug Airport to the Mactan-Cebu International Airport Authority;

(i) Since the public purpose for the expropriation no longer exists, the property must be returned to
the plaintiffs.[4]

In their Answer, petitioners asked for the immediate dismissal of the complaint. They specifically denied that the
Government had made assurances to reconvey Lot No. 88 to respondents in the event that the property would no
longer be needed for airport operations. Petitioners instead asserted that the judgment of condemnation was
unconditional, and respondents were, therefore, not entitled to recover the expropriated property notwithstanding
non-use or abandonment thereof.
After pretrial, but before trial on the merits, the parties stipulated on the following set of facts:

(1) The lot involved is Lot No. 88-SWO-25042 of the Banilad Estate, situated in the City of Cebu,
containing an area of One Thousand Seventeen (1,017) square meters, more or less;

(2) The property was expropriated among several other properties in Lahug in favor of the Republic
of the Philippines by virtue of a Decision dated December 29, 1961 of the CFI of Cebu in
Civil Case No. R-1881;

(3) The public purpose for which the property was expropriated was for the purpose of
the Lahug Airport;

(4) After the expansion, the property was transferred in the name of MCIAA; [and]

(5) On November 29, 1989, then President Corazon C. Aquino directed the Department of
Transportation and Communication to transfer general aviation operations of the Lahug
Airport to the Mactan-Cebu International Airport Authority and to close the Lahug Airport
after such transfer[.][5]

During trial, respondents presented Bernardo Lozada, Sr. as their lone witness, while petitioners presented their own
witness, Mactan-Cebu International Airport Authority legal assistant Michael Bacarisas.

On October 22, 1999, the RTC rendered its Decision, disposing as follows:

WHEREFORE, in the light of the foregoing, the Court hereby renders judgment in favor of the
plaintiffs, Bernardo L. Lozada, Sr., and the heirs of Rosario Mercado, namely, Vicente M. Lozada,
Marcia L. Godinez, Virginia L. Flores, Bernardo M. Lozada, Jr., Dolores L. Gacasan, Socorro L.
Cafaro and Rosario M. Lozada, represented by their attorney-in-fact Marcia Lozada Godinez, and
against defendants Cebu-Mactan International Airport Authority (MCIAA) and Air Transportation
Office (ATO):

1. ordering MCIAA and ATO to restore to plaintiffs the possession and ownership of their
land, Lot No. 88 Psd-821 (SWO-23803), upon payment of the expropriation price to plaintiffs; and

2. ordering the Register of Deeds to effect the transfer of the Certificate of Title from
defendant[s] to plaintiffs on Lot No. [88], cancelling TCT No. 20357 in the name of defendant
MCIAA and to issue a new title on the same lot in the name of Bernardo L. Lozada, Sr. and the
heirs of Rosario Mercado, namely: Vicente M. Lozada, Mario M. Lozada, Marcia L. Godinez,
Virginia L. Flores, Bernardo M. Lozada, Jr., Dolores L. Gacasan, Socorro L. Cafaro and Rosario M.
Lozada.

No pronouncement as to costs.

SO ORDERED.[6]

Aggrieved, petitioners interposed an appeal to the CA. After the filing of the necessary appellate briefs, the CA
rendered its assailed Decision dated February 28, 2006, denying petitioners appeal and affirming in toto the Decision
of the RTC, Branch 57, Cebu City. Petitioners motion for reconsideration was, likewise, denied in the questioned CA
Resolution dated February 7, 2007.

Hence, this petition arguing that: (1) the respondents utterly failed to prove that there was a repurchase agreement or
compromise settlement between them and the Government; (2) the judgment in Civil Case No. R-1881 was absolute
and unconditional, giving title in fee simple to the Republic; and (3) the respondents claim of verbal assurances from
government officials violates the Statute of Frauds.

The petition should be denied.

Petitioners anchor their claim to the controverted property on the supposition that the Decision in the pertinent
expropriation proceedings did not provide for the condition that should the intended use of Lot No. 88 for the
expansion of the Lahug Airport be aborted or abandoned, the property would revert to respondents, being its former
owners.Petitioners cite, in support of this position, Fery v. Municipality of Cabanatuan,[7] which declared that the
Government acquires only such rights in expropriated parcels of land as may be allowed by the character of its title
over the properties

If x x x land is expropriated for a particular purpose, with the condition that when that purpose is
ended or abandoned the property shall return to its former owner, then, of course, when the
purpose is terminated or abandoned the former owner reacquires the property so expropriated. If x
x x land is expropriated for a public street and the expropriation is granted upon condition that the
city can only use it for a public street, then, of course, when the city abandons its use as a public
street, it returns to the former owner, unless there is some statutory provision to the contrary. x x
x. If, upon the contrary, however, the decree of expropriation gives to the entity a fee simple title,
then, of course, the land becomes the absolute property of the expropriator, whether it be the State,
a province, or municipality, and in that case the non-user does not have the effect of defeating the
title acquired by the expropriation proceedings. x x x.

When land has been acquired for public use in fee simple, unconditionally, either by the
exercise of eminent domain or by purchase, the former owner retains no right in the land, and the
public use may be abandoned, or the land may be devoted to a different use, without any
impairment of the estate or title acquired, or any reversion to the former owner. x x x. [8]

Contrary to the stance of petitioners, this Court had ruled otherwise in Heirs of Timoteo Moreno and Maria
Rotea v. Mactan-Cebu International Airport Authority,[9] thus

Moreover, respondent MCIAA has brought to our attention a significant and telling portion in
the Decision in Civil Case No. R-1881 validating our discernment that the expropriation by the
predecessors of respondent was ordered under the running impression that Lahug Airport would
continue in operation

As for the public purpose of the expropriation proceeding, it cannot now be

doubted. Although Mactan Airport is being constructed, it does not take away the
actual usefulness and importance of the Lahug Airport: it is handling the air traffic
both civilian and military. From it aircrafts fly to Mindanao and Visayas and pass
thru it on their flights to the North and Manila. Then, no evidence was adduced to
show how soon is the Mactan Airport to be placed in operation and whether
the Lahug Airport will be closed immediately thereafter. It is up to the other
departments of the Government to determine said matters. The Court cannot
substitute its judgment for those of the said departments or agencies.In the
absence of such showing, the Court will presume that the Lahug Airport will
continue to be in operation (emphasis supplied).

While in the trial in Civil Case No. R-1881 [we] could have simply acknowledged the presence of
public purpose for the exercise of eminent domain regardless of the survival of Lahug Airport, the
trial court in its Decision chose not to do so but instead prefixed its finding of public purpose upon
its understanding that Lahug Airport will continue to be in operation. Verily, these meaningful
statements in the body of the Decision warrant the conclusion that the expropriated properties
would remain to be so until it was confirmed that Lahug Airport was no longer in operation. This
inference further implies two (2) things: (a) after the Lahug Airport ceased its undertaking as such
and the expropriated lots were not being used for any airport expansion project, the rights vis--vis
the expropriated Lots Nos. 916 and 920 as between the State and their former owners, petitioners
herein, must be equitably adjusted; and (b) the foregoing unmistakable declarations in the body of
the Decision should merge with and become an intrinsic part of the fallo thereof which under the
premises is clearly inadequate since the dispositive portion is not in accord with the findings as
contained in the body thereof.[10]

Indeed, the Decision in Civil Case No. R-1881 should be read in its entirety, wherein it is apparent that the acquisition
by the Republic of the expropriated lots was subject to the condition that the Lahug Airport would continue its
operation. The condition not having materialized because the airport had been abandoned, the former owner should
then be allowed to reacquire the expropriated property. [11]
On this note, we take this opportunity to revisit our ruling in Fery, which involved an expropriation suit commenced
upon parcels of land to be used as a site for a public market.Instead of putting up a public market,
respondent Cabanatuan constructed residential houses for lease on the area. Claiming that the municipality lost its
right to the property taken since it did not pursue its public purpose, petitioner Juan Fery, the former owner of the lots
expropriated, sought to recover his properties. However, as he had admitted that, in 1915,
respondent Cabanatuan acquired a fee simple title to the lands in question, judgment was rendered in favor of the
municipality, following American jurisprudence, particularly City of Fort Wayne v. Lake Shore & M.S. RY.
Co.,[12] McConihay v. Theodore Wright,[13] and Reichling v. Covington Lumber Co.,[14] all uniformly holding that the
transfer to a third party of the expropriated real property, which necessarily resulted in the abandonment of the
particular public purpose for which the property was taken, is not a ground for the recovery of the same by its
previous owner, the title of the expropriating agency being one of fee simple.

Obviously, Fery was not decided pursuant to our now sacredly held constitutional right that private property shall not
be taken for public use without just compensation. [15] It is well settled that the taking of private property by the
Governments power of eminent domain is subject to two mandatory requirements: (1) that it is for a particular public
purpose; and (2) that just compensation be paid to the property owner. These requirements partake of the nature of
implied conditions that should be complied with to enable the condemnor to keep the property expropriated. [16]

More particularly, with respect to the element of public use, the expropriator should commit to use the property
pursuant to the purpose stated in the petition for expropriation filed, failing which, it should file another petition for the
new purpose. If not, it is then incumbent upon the expropriator to return the said property to its private owner, if the
latter desires to reacquire the same. Otherwise, the judgment of expropriation suffers an intrinsic flaw, as it would lack
one indispensable element for the proper exercise of the power of eminent domain, namely, the particular public
purpose for which the property will be devoted. Accordingly, the private property owner would be denied due process
of law, and the judgment would violate the property owners right to justice, fairness, and equity.

In light of these premises, we now expressly hold that the taking of private property, consequent to the Governments
exercise of its power of eminent domain, is always subject to the condition that the property be devoted to the specific
public purpose for which it was taken. Corollarily, if this particular purpose or intent is not initiated or not at all
pursued, and is peremptorily abandoned, then the former owners, if they so desire, may seek the reversion of the
property, subject to the return of the amount of just compensation received. In such a case, the exercise of the power
of eminent domain has become improper for lack of the required factual justification. [17]

Even without the foregoing declaration, in the instant case, on the question of whether respondents were able to
establish the existence of an oral compromise agreement that entitled them to repurchase Lot No. 88 should the
operations of the Lahug Airport be abandoned, we rule in the affirmative.

It bears stressing that both the RTC, Branch 57, Cebu and the CA have passed upon this factual issue and have
declared, in no uncertain terms, that a compromise agreement was, in fact, entered into between the Government
and respondents, with the former undertaking to resell Lot No. 88 to the latter if the improvement and expansion of
the Lahug Airport would not be pursued. In affirming the factual finding of the RTC to this effect, the CA declared

Lozadas testimony is cogent. An octogenarian widower-retiree and a resident of Moon

Park, California since 1974, he testified that government representatives verbally promised him and
his late wife while the expropriation proceedings were on-going that the government shall return the
property if the purpose for the expropriation no longer exists. This promise was made at the
premises of the airport. As far as he could remember, there were no expropriation proceedings
against his property in 1952 because the first notice of expropriation he received was in
1962.Based on the promise, he did not hire a lawyer. Lozada was firm that he was promised that
the lot would be reverted to him once the public use of the lot ceases. He made it clear that the
verbal promise was made in Lahug with other lot owners before the 1961 decision was handed
down, though he could not name the government representatives who made the promise. It was
just a verbal promise; nevertheless, it is binding. The fact that he could not supply the necessary
details for the establishment of his assertions during cross-examination, but that When it will not be
used as intended, it will be returned back, we just believed in the government, does not dismantle
the credibility and truthfulness of his allegation. This Court notes that he was 89 years old when he
testified in November 1997 for an incident which happened decades ago. Still, he is a competent
witness capable of perceiving and making his perception known. The minor lapses are
immaterial. The decision of the competency of a witness rests primarily with the trial judge and
must not be disturbed on appeal unless it is clear that it was erroneous. The objection to his
competency must be made before he has given any testimony or as soon as the incompetency
 becomes apparent. Though Lozada is not part of the compromise agreement, [18] he nevertheless
adduced sufficient evidence to support his claim.[19]

As correctly found by the CA, unlike in Mactan Cebu International Airport Authority v. Court of Appeals, [20] cited by
petitioners, where respondent therein offered testimonies which were hearsay in nature, the testimony of Lozada was
based on personal knowledge as the assurance from the government was personally made to him. His testimony on
cross-examination destroyed neither his credibility as a witness nor the truthfulness of his words.

Verily, factual findings of the trial court, especially when affirmed by the CA, are binding and conclusive on
this Court and may not be reviewed. A petition for certiorariunder Rule 45 of the Rules of Court contemplates only
questions of law and not of fact.[21] Not one of the exceptions to this rule is present in this case to warrant a reversal
of such findings.

As regards the position of petitioners that respondents testimonial evidence violates the Statute of Frauds, suffice it to
state that the Statute of Frauds operates only with respect to executory contracts, and does not apply to contracts
which have been completely or partially performed, the rationale thereof being as follows:

In executory contracts there is a wide field for fraud because unless they be in writing there is no
palpable evidence of the intention of the contracting parties. The statute has precisely been
enacted to prevent fraud. However, if a contract has been totally or partially performed, the
exclusion of parol evidence would promote fraud or bad faith, for it would enable the defendant to
keep the benefits already delivered by him from the transaction in litigation, and, at the same time,
evade the obligations, responsibilities or liabilities assumed or contracted by him thereby.[22]

In this case, the Statute of Frauds, invoked by petitioners to bar the claim of respondents for the reacquisition of Lot
No. 88, cannot apply, the oral compromise settlement having been partially performed. By reason of such assurance
made in their favor, respondents relied on the same by not pursuing their appeal before the CA. Moreover, contrary to
the claim of petitioners, the fact of Lozadas eventual conformity to the appraisal of Lot No. 88 and his seeking the
correction of a clerical error in the judgment as to the true area of Lot No. 88 do not conclusively establish that
respondents absolutely parted with their property. To our mind, these acts were simply meant to cooperate with the
government, particularly because of the oral promise made to them.

The right of respondents to repurchase Lot No. 88 may be enforced based on a constructive trust constituted on the
property held by the government in favor of the former. On this note, our ruling in Heirs of Timoteo Moreno is
instructive, viz.:

Mactan-Cebu International Airport Authority is correct in stating that one would not find an express
statement in the Decision in Civil Case No. R-1881 to the effect that the [condemned] lot would
return to [the landowner] or that [the landowner] had a right to repurchase the same if the purpose
for which it was expropriated is ended or abandoned or if the property was to be used other than as
the Lahug Airport. This omission notwithstanding, and while the inclusion of this pronouncement in
the judgment of condemnation would have been ideal, such precision is not absolutely necessary
nor is it fatal to the cause of petitioners herein. No doubt, the return or repurchase of the
condemned properties of petitioners could be readily justified as the manifest legal effect or
consequence of the trial courts underlying presumption that Lahug Airport will continue to be in
operation when it granted the complaint for eminent domain and the airport discontinued its
activities.

The predicament of petitioners involves a constructive trust, one that is akin to the implied trust
referred to in Art. 1454 of the Civil Code, If an absolute conveyance of property is made in order to
secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is
established. If the fulfillment of the obligation is offered by the grantor when it becomes due, he
may demand the reconveyance of the property to him. In the case at bar, petitioners conveyed Lots
No. 916 and 920 to the government with the latter obliging itself to use the realties for the
expansion of Lahug Airport; failing to keep its bargain, the government can be compelled by
petitioners to reconvey the parcels of land to them, otherwise, petitioners would be denied the use
of their properties upon a state of affairs that was not conceived nor contemplated when the
expropriation was authorized.
 Although the symmetry between the instant case and the situation contemplated by Art. 1454 is not
perfect, the provision is undoubtedly applicable. For, as explained by an expert on the law of
trusts: The only problem of great importance in the field of constructive trust is to decide whether in
the numerous and varying fact situations presented to the courts there is a wrongful holding of
property and hence a threatened unjust enrichment of the defendant. Constructive trusts are
fictions of equity which are bound by no unyielding formula when they are used by courts as
devices to remedy any situation in which the holder of legal title may not in good conscience retain
the beneficial interest.

In constructive trusts, the arrangement is temporary and passive in which the trustees sole duty is
to transfer the title and possession over the property to the plaintiff-beneficiary. Of course,
the wronged party seeking the aid of a court of equity in establishing a constructive trust must
himself do equity. Accordingly, the court will exercise its discretion in deciding what acts are
required of the plaintiff-beneficiary as conditions precedent to obtaining such decree and has the
obligation to reimburse the trustee the consideration received from the latter just as the plaintiff-
beneficiary would if he proceeded on the theory of rescission. In the good judgment of the court,
the trustee may also be paid the necessary expenses he may have incurred in sustaining the
property, his fixed costs for improvements thereon, and the monetary value of his services in
managing the property to the extent that plaintiff-beneficiary will secure a benefit from his acts.

The rights and obligations between the constructive trustee and the beneficiary, in this case,
respondent MCIAA and petitioners over Lots Nos. 916 and 920, are echoed in Art. 1190 of the Civil
Code, When the conditions have for their purpose the extinguishment of an obligation to give, the
parties, upon the fulfillment of said conditions, shall return to each other what they have received x
x x In case of the loss, deterioration or improvement of the thing, the provisions which, with respect
to the debtor, are laid down in the preceding article shall be applied to the party who is bound to
return x x x.[23]

On the matter of the repurchase price, while petitioners are obliged to reconvey Lot No. 88 to respondents, the latter
must return to the former what they received as just compensation for the expropriation of the property, plus legal
interest to be computed from default, which in this case runs from the time petitioners comply with their obligation to
respondents.

Respondents must likewise pay petitioners the necessary expenses they may have incurred in maintaining Lot No.
88, as well as the monetary value of their services in managing it to the extent that respondents were benefited
thereby.

Following Article 1187[24] of the Civil Code, petitioners may keep whatever income or fruits they may have obtained
from Lot No. 88, and respondents need not account for the interests that the amounts they received as just
compensation may have earned in the meantime.

In accordance with Article 1190[25] of the Civil Code vis--vis Article 1189, which provides that (i)f a thing is improved
by its nature, or by time, the improvement shall inure to the benefit of the creditor x x x, respondents, as creditors, do
not have to pay, as part of the process of restitution, the appreciation in value of Lot No. 88, which is a natural
consequence of nature and time.[26]

WHEREFORE, the petition is DENIED. The February 28, 2006 Decision of the Court of Appeals, affirming the
October 22, 1999 Decision of the Regional Trial Court, Branch 87, Cebu City, and its February 7, 2007 Resolution
are AFFIRMED with MODIFICATION as follows:

1. Respondents are ORDERED to return to petitioners the just compensation they received for the expropriation of
Lot No. 88, plus legal interest, in the case of default, to be computed from the time petitioners comply with their
obligation to reconvey Lot No. 88 to them;

2. Respondents are ORDERED to pay petitioners the necessary expenses the latter incurred in maintaining Lot No.
88, plus the monetary value of their services to the extent that respondents were benefited thereby;

3. Petitioners are ENTITLED to keep whatever fruits and income they may have obtained from Lot No. 88;
and
4. Respondents are also ENTITLED to keep whatever interests the amounts they received as just compensation may
have earned in the meantime, as well as the appreciation in value of Lot No. 88, which is a natural consequence of
nature and time;

In light of the foregoing modifications, the case is REMANDED to the Regional Trial Court, Branch 57, Cebu City,
only for the purpose of receiving evidence on the amounts that respondents will have to pay petitioners in accordance
with this Courts decision. No costs.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 165354 January 12, 2015

REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL POWER CORPORATION, Petitioner,

vs.
HEIRS OF SATURNINO Q. BORBON, AND COURT OF APPEALS, Respondents.

DECISION

BERSAMIN, J.:

The expropriator who has taken possession of the property subject of expropriation is obliged to pay reasonable
compensation to the landowner for the period of such possession although the proceedings had been discontinued
on the ground that the public purpose for the expropriation had meanwhile ceased.

Antecedents

The National Power Corporation (NAPOCOR) is a government-owned and -controlled corporation vested with
authority under Republic Act No. 6395, as amended, to undertake the development of hydro-electric generation of
power, production of electricity from any and all sources, construction, operation and maintenance of power plants,
auxiliary plants, dams, reservoirs, pipes, main transmission lines, power stations and substations, and other works for
the purpose of developing hydraulic power from any river, lake, creek, spring and waterfalls in the Philippines and to
supply such power to the inhabitants thereof.1

In February 1993, NAPOCOR entered a property located in Barangay San Isidro, Batangas City in order to construct
and maintain transmission lines for the 230 KV Mahabang Parang-Pinamucan Power Transmission
Project.2 Respondents heirs of Saturnino Q. Borbon owned the property, with a total area of 14,257 square meters,
which was registered under Transfer Certificate of Title No. T-9696 of the Registry of Deeds of Batangas.3

On May 26, 1995, NAPOCOR filed a complaint for expropriation in the Regional Trial Court in Batangas City
(RTC),4seeking the acquisition of an easement of right of way over a portion of the property involving an area of only
6,326 square meters, more or less,5 alleging that it had negotiated with the respondents for the acquisition of the
easement but they had failed to reach any agreement; and that, nonetheless, it was willing to deposit the amount of
9,790.00 representing the assessed value of the portion sought to be expropriated. 6 It prayed for the issuance of a
writ of possession upon deposit to enable it to enter and take possession and control of the affected portion of the
property; to demolish all improvements existing thereon; and to commence construction of the transmission line
project. It likewise prayed for the appointment of three commissioners to determine the just compensation to be paid. 7

In their answer with motion to dismiss,8 the respondents staunchly maintained that NAPOCOR had not negotiated
with them before entering the property and that the entry was done without their consent in the process, destroying
some fruit trees without payment, and installing five transmission line posts and five woodpoles for its project; 9 that
the area being expropriated only covered the portion directly affected by the transmission lines; that the remaining
portion of the property was also affected because the transmission line passed through the center of the land, thereby
dividing the land into three lots; that the presence of the high tension transmission line had rendered the entire
property inutile for any future use and capabilities;10 that, nonetheless, they tendered no objection to NAPOCORs
entry provided it would pay just compensation not only for the portion sought to be expropriated but for the entire
property whose potential was greatly diminished, if not totally lost, due to the project; 11 and that their property was
classified as industrial land. Thus, they sought the dismissal of the complaint, the payment of just compensation of
1,000.00/square meter, and attorneys fees;12 and to be allowed to nominate their representative to the panel of
commissioners to be appointed by the trial court. 13

In the pre-trial conference conducted on December 20, 1995, the parties stipulated on: (1) the location of the
property; (2) the number of the heirs of the late Saturnino Q. Borbon; (3) the names of the persons upon whom title to
the property was issued; and (4) the ownership and possession of the property. 14 In its order of that date, the RTC
directed the parties to submit the names of their nominees to sit in the panel of commissioners within 10 days from
the date of the pre-trial.15

The RTC constituted the panel of three commissioners. Two commissioners submitted a joint report on April 8,
1999,16 in which they found that the property was classified as industrial land located within the Industrial 2
Zone;17that although the property used to be classified as agricultural (i.e., horticultural and pasture land), it was
reclassified to industrial land for appraisal or taxation purposes on June 30, 1994; and that the reclassification was
made on the basis of a certification issued by the Zoning Administrator pursuant to Section 3.10 (d) of the Amended
Zoning Ordinance (1989) of the City of Batangas.18 The two commissioners appraised the value at 550.00/square
meter.19However, the third commissioner filed a separate report dated March 16, 1999,20 whereby he recommended
the payment of "an easement fee of at least ten percent (10%) of the assessed value indicated in the tax
declaration21plus cost of damages in the course of the construction, improvements affected and tower occupancy
fee."22

The parties then submitted their respective objections to the reports. On their part, the respondents maintained that
NAPOCOR should compensate them for the entire property at the rate of 550.00/square meter because the
property was already classified as industrial land at the time NAPOCOR entered it.23 In contrast, NAPOCOR objected
to the joint report, insisting that the property was classified as agricultural land at the time of its taking in March 1993;
and clarifying that it was only seeking an easement of right of way over a portion of the property, not the entire area
thereof, so that it should pay only 10% of the assessed value of the portion thus occupied. 24

In the judgment dated November 27, 2000,25 the RTC adopted the recommendation contained in the joint report, and
ruled thusly:

The price to be paid for an expropriated land is its value at the time of taking, which is the date when the plaintiff
actually entered the property or the date of the filing of the complaint for expropriation. In this case, there is no
evidence as to when the plaintiff actually entered the property in question, so the reference point should be the date
of filing of the complaint, which is May 5, 1995.

On this date, the property in question was already classified as industrial. So, the Joint Report (Exhibit "1") is credible
on this point. The two Commissioners who submitted the Joint Report are government officials who were not shown
to be biased. So, that their report should be given more weight than the minority report submitted by a private lawyer
representing the plaintiff. In view of these, the Court adopts the Joint Report and rejects the minority report. The
former fixed the just compensation at 550.00 per square meter for the whole lot of 14,257 square meters. 26

Accordingly, the RTC ordered NAPOCOR to pay the respondents: (1) just compensation for the whole area of 14,257
square meters at the rate of 550.00/square meter; (2) legal rate of interest from May 5, 1995 until full payment; and
(3) the costs of suit.27

NAPOCOR appealed (CA-G.R. No. 72069).

On April 29, 2004,28 the CA promulgated its decision, viz:

WHEREFORE, premises considered, the Decision dated November 27, 2000 of Branch I of the Regional Trial Court
of Batangas City, is hereby AFFIRMED with the MODIFICATION that plaintiff-appellant shall pay only for the
occupied 6,326 square meters of the subject real property at the rate of 550.00 per square meter and to pay legal
interest therefrom until fully paid.

SO ORDERED.29

Hence, this appeal by NAPOCOR.

Issue

On December 3, 2012, during the pendency of the appeal, NAPOCOR filed a Motion to Defer Proceedings stating
that negotiations between the parties were going on with a view to the amicable settlement of the case. 30
On January 3, 2014, NAPOCOR filed a Manifestation and Motion to Discontinue Expropriation
Proceedings,31informing that the parties failed to reach an amicable agreement; that the property sought to be
expropriated was no longer necessary for public purpose because of the intervening retirement of the transmission
lines installed on the respondents property;32 that because the public purpose for which such property would be used
thereby ceased to exist, the proceedings for expropriation should no longer continue, and the State was now duty-
bound to return the property to its owners; and that the dismissal or discontinuance of the expropriation proceedings
was in accordance with Section 4, Rule 67 of the Rules of Court. Hence, NAPOCOR prayed that the proceedings be
discontinued "under such terms as the court deems just and equitable," 33 and that the compensation to be awarded
the respondents be reduced by the equivalent of the benefit they received from the land during the time of its
occupation, for which purpose the case could be remanded to the trial court for the determination of reasonable
compensation to be paid to them.34

In light of its Manifestation and Motion to Discontinue Expropriation Proceedings, NAPOCOR contends that the
expropriation has become without basis for lack of public purpose as a result of the retirement of the transmission
lines; that if expropriation still proceeds, the Government will be unduly burdened by payment of just compensation
for property it no longer requires; and that there is legal basis in dismissing the proceedings, citing Metropolitan Water
District v. De los Angeles35 where the Court granted petitioners prayer for the quashal of expropriation proceedings
and the eventual dismissal of the proceedings on the ground that the land sought to be expropriated was no longer
"indispensably necessary" in the maintenance and operation of petitioner's waterworks system.

The issue to be considered and resolved is whether or not the expropriation proceedings should be discontinued or
dismissed pending appeal.

Ruling of the Court

The dismissal of the proceedings for expropriation at the instance of NAPOCOR is proper, but, conformably with
Section 4,36 Rule 67 of the Rules of Court, the dismissal or discontinuance of the proceedings must be upon such
terms as the court deems just and equitable.

Before anything more, we remind the parties about the nature of the power of eminent domain. The right of eminent
domain is "the ultimate right of the sovereign power to appropriate, not only the public but the private property of all
citizens within the territorial sovereignty, to public purpose." 37 But the exercise of such right is not unlimited, for two
mandatory requirements should underlie the Governments exercise of the power of eminent domain, namely: (1) that
it is for a particular public purpose; and (2) that just compensation be paid to the property owner. 38 These
requirements partake the nature of implied conditions that should be complied with to enable the condemnor to keep
the property expropriated.39

Public use, in common acceptation, means "use by the public." However, the concept has expanded to include utility,
advantage or productivity for the benefit of the public.40 In Asia's Emerging Dragon Corporation v. Department of
Transportation and Communications,41 Justice Corona, in his dissenting opinion said that:

To be valid, the taking must be for public use. The meaning of the term "public use" has evolved over time in
response to changing public needs and exigencies. Public use which was traditionally understood as strictly limited to
actual "use by the public" has already been abandoned. "Public use" has now been held to be synonymous with
"public interest," "public benefit," and "public convenience."

It is essential that the element of public use of the property be maintained throughout the proceedings for
expropriation. The effects of abandoning the public purpose were explained in Mactan-Cebu International Airport
Authority v. Lozada, Sr.,42 to wit:

More particularly, with respect to the element of public use, the expropriator should commit to use the property
pursuant to the purpose stated in the petition for expropriation filed, failing which, it should file another petition for the
new purpose. If not, it is then incumbent upon the expropriator to return the said property to its private owner, if the
latter desires to reacquire the same. Otherwise, the judgment of expropriation suffers an intrinsic flaw, as it would lack
one indispensable element for the proper exercise of the power of eminent domain, namely, the particular public
purpose for which the property will be devoted. Accordingly, the private property owner would be denied due process
of law, and the judgment would violate the property owner's right to justice, fairness and equity. 43
A review reveals that Metropolitan Water District v. De los Angeles 44 is an appropriate precedent herein. There, the
Metropolitan Water District passed a board resolution requesting the Attorney-General to file a petition in the Court of
First Instance of the Province of Rizal praying that it be permitted to discontinue the condemnation proceedings it had
initiated for the expropriation of a parcel of land in Montalban, Rizal to be used in the construction of the Angat
Waterworks System. It claimed that the land was no longer indispensably necessary in the maintenance and
operation of its waterworks system, and that the expropriation complaint should then be dismissed. The Court,
expounding on the power of the State to exercise the right of eminent domain, then pronounced:

There is no question raised concerning the right of the plaintiff here to acquire the land under the power of eminent
domain.1wphi1 That power was expressly granted it by its charter. The power of eminent domain is a right reserved
to the people or Government to take property for public use. It is the right of the state, through its regular
organization, to reassert either temporarily or permanently its dominion over any portion of the soil of the state on
account of public necessity and for the public good. The right of eminent domain is the right which the Government or
the people retains over the estates of individuals to resume them for public use. It is the right of the people, or the
sovereign, to dispose, in case of public necessity and for the public safety, of all the wealth contained in the state. 45

Indeed, public use is the fundamental basis for the action for expropriation; hence, NAPOCORs motion to
discontinue the proceedings is warranted and should be granted. The Court has observed in Metropolitan Water
District v. De los Angeles:

It is not denied that the purpose of the plaintiff was to acquire the land in question for public use. The fundamental
basis then of all actions brought for the expropriation of lands, under the power of eminent domain, is public use. That
being true, the very moment that it appears at any stage of the proceedings that the expropriation is not for a public
use, the action must necessarily fail and should be dismissed, for the reason that the action cannot be maintained at
all except when the expropriation is for some public use. That must be true even during the pendency of the appeal or
at any other stage of the proceedings. If, for example, during the trial in the lower court, it should be made to appear
to the satisfaction of the court that the expropriation is not for some public use, it would be the duty and the obligation
of the trial court to dismiss the action. And even during the pendency of the appeal, if it should be made to appear to
the satisfaction of the appellate court that the expropriation is not for public use, then it would become the duty and
the obligation of the appellate court to dismiss it.

In the present case the petitioner admits that the expropriation of the land in question is no longer necessary for
public use. Had that admission been made in the trial court the case should have been dismissed there. It now
appearing positively, by resolution of the plaintiff, that the expropriation is not necessary for public use, the action
should be dismissed even without a motion on the part of the plaintiff. The moment it appears in whatever stage of
the proceedings that the expropriation is not for a public use the complaint should be dismissed and all the parties
thereto should be relieved from further annoyance or litigation.46 (underscoring and emphasis supplied)

It is notable that the dismissal of the expropriation proceedings in Metropolitan Water District v. De los Angeles was
made subject to several conditions in order to address the dispossession of the defendants of their land, and the
inconvenience, annoyance and damages suffered by the defendants on account of the proceedings. Accordingly, the
Court remanded the case to the trial court for the issuance of a writ of possession ordering Metropolitan Water District
to immediately return possession of the land to the defendants, and for the determination of damages in favor of the
defendants, the claims for which must be presented within 30 days from the return of the record to the court of origin
and notice thereof.47

Here, NAPOCOR seeks to discontinue the expropriation proceedings on the ground that the transmission lines
constructed on the respondents property had already been retired. Considering that the Court has consistently
upheld the primordial importance of public use in expropriation proceedings, NAPOCORs reliance on Metropolitan
Water District v. De los Angeles was apt and correct. Verily, the retirement of the transmission lines necessarily
stripped the expropriation proceedings of the element of public use. To continue with the expropriation proceedings
despite the definite cessation of the public purpose of the project would result in the rendition of an invalid judgment
in favor of the expropriator due to the absence of the essential element of public use.

Unlike in Metropolitan Water District v. De los Angeles where the request to discontinue the expropriation
proceedings was made upon the authority appearing in the board resolution issued on July 14, 1930, 48 counsel for
NAPOCOR has not presented herein any document to show that NAPOCOR had decided, as a corporate body, to
discontinue the expropriation proceedings. Nonetheless, the Court points to the Memorandum dated December 13,
201249 and the Certificate of Inspection/Accomplishment dated February 5, 2005 50 attached to NAPOCORs motion
attesting to the retirement of the transmission lines. Also, Metropolitan Water District v. De los Angeles emphasized
that it became the duty and the obligation of the court, regardless of the stage of the proceedings, to dismiss the
action "if it should be made to appear to the satisfaction of the court that the expropriation is not for some public
use."51 Despite the lack of the board resolution, therefore, the Court now considers the documents attached to
NAPOCORs Manifestation and Motion to Discontinue Expropriation Proceedings to be sufficient to establish that the
expropriation sought is no longer for some public purpose.

Accordingly, the Court grants the motion to discontinue the proceedings subject to the conditions to be shortly
mentioned hereunder, and requires the return of the property to the respondents. Having said that, we must point out
that NAPOCOR entered the property without the owners consent and without paying just compensation to the
respondents. Neither did it deposit any amount as required by law prior to its entry. The Constitution is explicit in
obliging the Government and its entities to pay just compensation before depriving any person of his or her property
for public use.52 Considering that in the process of installing transmission lines, NAPOCOR destroyed some fruit trees
and plants without payment, and the installation of the transmission lines went through the middle of the land as to
divide the property into three lots, thereby effectively rendering the entire property inutile for any future use, it would
be unfair for NAPOCOR not to be made liable to the respondents for the disturbance of their property rights from the
time of entry until the time of restoration of the possession of the property. There should be no question about the
taking. In several rulings, notably National Power Corporation v. Zabala,53 Republic v. Libunao,54 National Power
Corporation v. Tuazon,55 and National Power Corporation v. Saludares,56 this Court has already declared that "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."

There is a sufficient showing that NAPOCOR entered into and took possession of the respondents property as early
as in March 1993 without the benefit of first filing a petition for eminent domain. For all intents and purposes,
therefore, March 1993 is the reckoning point of NAPOCORs taking of the property, instead of May 5, 1995, the time
NAPOCOR filed the petition for expropriation. The reckoning conforms to the pronouncement in Ansaldo v. Tantuico,
Jr.,57 to wit:

Normally, of course, where the institution of an expropriation action precedes the taking of the property subject
thereof, the just compensation is fixed as of the time of the filing of the complaint. This is so provided by the Rules of
Court, the assumption of possession by the expropriator ordinarily being conditioned on its deposits with the National
or Provincial Treasurer of the value of the property as provisionally ascertained by the court having jurisdiction of the
proceedings.

There are instances, however, where the expropriating agency takes over the property prior to the expropriation suit,
as in this case although, to repeat, the case at bar is quite extraordinary in that possession was taken by the
expropriator more than 40 years prior to suit. In these instances, this Court has ruled that the just compensation shall
be determined as of the time of taking, not as of the time of filing of the action of eminent domain.

In the context of the State's inherent power of eminent domain, there is a "taking" 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 his
property or when he is deprived of the ordinary use thereof. There is a "taking" in this sense when the expropriator
enters private property not only for a momentary period but for a more permanent duration, for the purpose of
devoting the property to a public use in such a manner as to oust the owner and deprive him of all beneficial
enjoyment thereof. For ownership, after all, "is nothing without the inherent rights of possession, control and
enjoyment. Where the owner is deprived of the ordinary and beneficial use of his property or of its value by its being
diverted to public use, there is taking within the Constitutional sense." x x x. 58

In view of the discontinuance of the proceedings and the eventual return of the property to the respondents, there is
no need to pay "just compensation" to them because their property would not be taken by NAPOCOR. Instead of full
market value of the property, therefore, NAPOCOR should compensate the respondents for the disturbance of their
property rights from the time of entry in March 1993 until the time of restoration of the possession by paying to them
actual or other compensatory damages. This conforms with the following pronouncement in Mactan-Cebu
International Airport Authority v. Lozada, Sr.:59

In light of these premises, we now expressly hold that the taking of private property, consequent to the Governments
exercise of its power of eminent domain, is always subject to the condition that the property be devoted to the specific
public purpose for which it was taken. Corollarily, if this particular purpose or intent is not initiated or not at all
pursued, and is peremptorily abandoned, then the former owners, if they so desire, may seek the reversion of the
property, subject to the return of the amount of just compensation received. In such a case, the exercise of the power
of eminent domain has become improper for lack of the required factual justification. 60

This should mean that the compensation must be based on what they actually lost as a result and by reason of their
dispossession of the property and of its use, including the value of the fruit trees, plants and crops destroyed by
NAPOCORs construction of the transmission lines. Considering that the dismissal of the expropriation proceedings is
a development occurring during the appeal, the Court now treats the dismissal of the expropriation proceedings as
producing the effect of converting the case into an action for damages. For that purpose, the Court remands the case
to the court of origin for further proceedings, with instruction to the court of origin to enable the parties to fully litigate
the action for damages by giving them the opportunity to re-define the factual and legal issues by the submission of
the proper pleadings on the extent of the taking, the value of the compensation to be paid to the respondents by
NAPOCOR, and other relevant matters as they deem fit. Trial shall be limited to matters the evidence upon which had
not been heretofore heard or adduced. The assessment and payment of the correct amount of filing fees due from
the respondents shall be made in the judgment, and such amount shall constitute a first lien on the recovery. Subject
to these conditions, the court of origin shall treat the case as if originally filed as an action for damages.

WHEREFORE, the Court DISMISSES the expropriation proceedings due to the intervening cessation of the need for
public use; REMANDS the records to the Regional Trial Court, Branch 1, in Batangas City as the court of origin for
further proceedings to be conducted in accordance with the foregoing instructions; and ORDERS said trial court to try
and decide the issues with dispatch.

SO ORDERED.
 Republic of the Philippines
Supreme Court
Manila
FIRST DIVISION

NATIONAL POWER CORPORATION, G.R. No. 165828

Petitioner,
Present:

- versus - CORONA, C.J., Chairperson,

LEONARDO-DE CASTRO,
BERSAMIN,
HEIRS OF MACABANGKIT SANGKAY, namely: DEL CASTILLO, and
CEBU, BATOWA-AN, SAYANA, NASSER, MANTA, VILLARAMA, JR., JJ.
EDGAR, PUTRI , MONGKOY*, and AMIR, all
surnamed MACABANGKIT, Promulgated:
Respondents.

August 24, 2011

x-----------------------------------------------------------------------------------------x

DECISION

BERSAMIN, J.:
Private property shall not be taken for public use without just compensation.
Section 9, Article III, 1987 Constitution

The application of this provision of the Constitution is the focus of this appeal.

Petitioner National Power Corporation (NPC) seeks the review on certiorari of the decision promulgated on October
5, 2004,[1] whereby the Court of Appeals (CA) affirmed the decision dated August 13, 1999 and the supplemental
decision dated August 18, 1999, ordering NPC to pay just compensation to the respondents, both rendered by the
Regional Trial Court, Branch 1, in Iligan City (RTC).

Antecedents

Pursuant to its legal mandate under Republic Act No. 6395 (An Act Revising the Charter of the National Power
Corporation), NPC undertook the Agus River Hydroelectric Power Plant Project in the 1970s to generate electricity for
Mindanao. The project included the construction of several underground tunnels to be used in diverting the water flow
from the Agus River to the hydroelectric plants.[2]

On November 21, 1997, the respondents, namely: Cebu, Bangowa-an, Sayana, Nasser, Manta, Edgar, Putri,
Mongkoy and Amir, all surnamed Macabangkit (Heirs of Macabangkit), as the owners of land with an area of 221,573
square meters situated in Ditucalan, Iligan City, sued NPC in the RTC for the recovery of damages and of the
property, with the alternative prayer for the payment of just compensation.[3] They alleged that they had belatedly
discovered that one of the underground tunnels of NPC that diverted the water flow of the Agus River for the
operation of the Hydroelectric Project in Agus V, Agus VI and Agus VII traversed their land; that their discovery had
occurred in 1995 after Atty. Saidali C. Gandamra, President of the Federation of Arabic Madaris School, had rejected
their offer to sell the land because of the danger the underground tunnel might pose to the proposed Arabic
Language Training Center and Muslims Skills Development Center; that such rejection had been followed by the
withdrawal by Global Asia Management and Resource Corporation from developing the land into a housing project
for the same reason; that Al-Amanah Islamic Investment Bank of the Philippines had also refused to accept their land
as collateral because of the presence of the underground tunnel; that the underground tunnel had been constructed
without their knowledge and consent; that the presence of the tunnel deprived them of the agricultural, commercial,
industrial and residential value of their land; and that their land had also become an unsafe place for habitation
because of the loud sound of the water rushing through the tunnel and the constant shaking of the ground, forcing
them and their workers to relocate to safer grounds.

In its answer with counterclaim,[4] NPC countered that the Heirs of Macabangkit had no right to compensation under
section 3(f) of Republic Act No. 6395, under which a mere legal easement on their land was established; that their
cause of action, should they be entitled to compensation, already prescribed due to the tunnel having been
constructed in 1979; and that by reason of the tunnel being an apparent and continuous easement, any action arising
from such easement prescribed in five years.

Ruling of the RTC

On July 23, 1998, an ocular inspection of the land that was conducted by RTC Judge Mamindiara P.
Mangotara and the representatives of the parties resulted in the following observations and findings:

a. That a concrete post which is about two feet in length from the ground which according to the
claimants is the middle point of the tunnel.

b. That at least three fruit bearing durian trees were uprooted and as a result of the construction
by the defendant of the tunnel and about one hundred coconuts planted died.

c. That underground tunnel was constructed therein.[5]

After trial, the RTC ruled in favor of the plaintiffs (Heirs of Macabangkit),[6] decreeing:

WHEREFORE, premises considered:

1. The prayer for the removal or dismantling of defendants tunnel is denied. However,
defendant is hereby directed and ordered:

a)To pay plaintiffs land with a total area of 227,065 square meters, at the rate of FIVE
HUNDRED (P500.00) PESOS per square meter, or a total of ONE HUNDRED THIRTEEN
MILLION FIVE HUNDRED THIRTY TWO THOUSAND AND FIVE HUNDRED
(P113,532,500.00), PESOS, plus interest, as actual damages or just compensation;

b) To pay plaintiff a monthly rental of their land in the amount of THIRTY

THOUSAND (P30,000.00) PESOS from 1979 up to July 1999 with 12% interest per annum;

c)To pay plaintiffs the sum of TWO HUNDRED THOUSAND (P200,000.00) PESOS, as
moral damages;

d) To pay plaintiffs, the sum of TWO HUNDRED THOUSAND (P200,000.00)

PESOS, as exemplary damages;

e)To pay plaintiffs, the sum equivalent to 15% of the total amount awarded, as attorneys
fees, and to pay the cost.

SO ORDERED.

The RTC found that NPC had concealed the construction of the tunnel in 1979 from the Heirs of Macabangkit, and
had since continuously denied its existence; that NPC had acted in bad faith by taking possession of the
subterranean portion of their land to construct the tunnel without their knowledge and prior consent; that the existence
of the tunnel had affected the entire expanse of the land, and had restricted their right to excavate or to construct a
motorized deep well; and that they, as owners, had lost the agricultural, commercial, industrial and residential value
of the land.

The RTC fixed the just compensation at P500.00/square meter based on the testimony of Dionisio Banawan, OIC-
City Assessor of Iligan City, to the effect that the appraised value of the adjoining properties ranged from P700.00
to P750.00, while the appraised value of their affected land ranged from P400.00 to P500.00. The RTC also required
NPC to pay rentals from 1979 due to its bad faith in concealing the construction of the tunnel from the Heirs of
Macabangkit.
On August 18, 1999, the RTC issued a supplemental decision, [7] viz:
 Upon a careful review of the original decision dated August 13, 1999, a sentence should be added
to paragraph 1(a) of the dispositive portion thereof, to bolster, harmonize, and conform to the
findings of the Court, which is quoted hereunder, to wit:

Consequently, plaintiffs land or properties are hereby condemned in favor of defendant

National Power Corporation, upon payment of the aforesaid sum.
Therefore, paragraph 1(a) of the dispositive portion of the original decision should read, as follows:

a) To pay plaintiffs land with a total area of 227,065 square meters, at the rate of FIVE
HUNDRED (P500.00) PESOS per square meter, or a total of ONE HUNDRED
THIRTEEN MILLION FIVE HUNDRED THIRTY TWO THOUSAND AND FIVE
HUNDRED (P113,532,500.00) PESOS, plus interest, as actual damages or just
compensation; Consequently, plaintiffs land or properties are hereby condemned in
favor of defendant National Power Corporation, upon payment of the aforesaid sum;

This supplemental decision shall be considered as part of paragraph 1(a) of the dispositive portion
of the original decision.

Furnish copy of this supplemental decision to all parties immediately.

SO ORDERED.

On its part, NPC appealed to the CA on August 25, 1999.[8]

Earlier, on August 18, 1999, the Heirs of Macabangkit filed an urgent motion for execution of judgment
pending appeal.[9] The RTC granted the motion and issued a writ of execution, [10] prompting NPC to assail the writ by
petition for certiorari in the CA. On September 15, 1999, the CA issued a temporary restraining order (TRO) to enjoin
the RTC from implementing its decision. The Heirs of Macabangkit elevated the ruling of the CA (G.R. No. 141447),
but the Court upheld the CA on May 4, 2006.[11]

Ruling of the CA
NPC raised only two errors in the CA, namely:

I
THE COURT A QUO SERIOUSLY ERRED IN RULING THAT NAPOCORS UNDERGROUND
TUNNEL IN ITS AGUS RIVER HYDRO-ELECTRIC PLANT PROJECT TRAVERSED AND/OR
AFFECTED APPELLEES PROPERTY AS THERE IS NO CLEAR EVIDENCE INDUBITABLY
ESTABLISHING THE SAME

II
THE COURT A QUO SERIOUSLY ERRED IN GRANTING APPELLEES CLAIMS IN THEIR
ENTIRETY FOR GRANTING ARGUENDO THAT NAPOCORS UNDERGROUND TUNNEL
INDEED TRAVERSED APPELLEES PROPERTY, THEIR CAUSE OF ACTION HAD ALREADY
BEEN BARRED BY PRESCRIPTION, ESTOPPEL AND LACHES
On October 5, 2004, the CA affirmed the decision of the RTC, holding that the testimonies of NPCs witness Gregorio
Enterone and of the respondents witness Engr. Pete Sacedon, the topographic survey map, the sketch map, and the
ocular inspection report sufficiently established the existence of the underground tunnel traversing the land of the
Heirs of Macabangkit; that NPC did not substantiate its defense that prescription already barred the claim of the Heirs
of Macabangkit; and that Section 3(i) of R.A. No. 6395, being silent about tunnels, did not apply, viz:

As regard Section 3(i) of R.A. No. 6395 (An Act Revising the Charter of the National Power
Corporation), it is submitted that the same provision is not applicable. There is nothing in Section
3(i) of said law governing claims involving tunnels. The same provision is applicable to those
projects or facilities on the surface of the land, that can easily be discovered, without any mention
about the claims involving tunnels, particularly those surreptitiously constructed beneath the
surface of the land, as in the instant case.

Now, while it is true that Republic Act No. 6395 authorizes NAPOCOR to take water from any
public stream, river, creek, lake, spring or waterfall in the Philippines for the realization of the
purposes specified therein for its creation; to intercept and divert the flow of waters from lands of
 riparian owners (in this case, the Heirs), and from persons owning or interested in water which are
or may be necessary to said purposes, the same Act expressly mandates the payment of just
compensation.

WHEREFORE, premises considered, the instant appeal is hereby DENIED for lack of merit.
Accordingly, the appealed Decision dated August 13, 1999, and the supplemental Decision dated
August 18, 1999, are hereby AFFIRMED in toto.

SO ORDERED.[12]

Issue

NPC has come to the Court, assigning the lone error that:

THE APPELLATE COURT ERRED ON A QUESTION OF LAW WHEN IT AFFIRMED THE

DECISION AND SUPPLEMENTAL DECISION OF THE COURT A QUO DIRECTING AND
ORDERING PETITIONER TO PAY JUST COMPENSATION TO RESPONDENTS.

NPC reiterates that witnesses Enterone and Sacedon lacked personal knowledge about the construction and
existence of the tunnel and were for that reason not entitled to credence; and that the topographic and relocation
maps prepared by Sacedon should not be a basis to prove the existence and location of the tunnel due to being self-
serving.
NPC contends that the CA should have applied Section 3(i) of Republic Act No. 6395, which provided a period of only
five years from the date of the construction within which the affected landowner could bring a claim against it; and
that even if Republic Act No. 6395 should be inapplicable, the action of the Heirs of Macabangkit had already
prescribed due to the underground tunnel being susceptible to acquisitive prescription after the lapse of 10 years
pursuant to Article 620 of the Civil Code due to its being a continuous and apparent legal easement under Article 634
of the Civil Code.
The issues for resolution are, therefore, as follows:

(1) Whether the CA and the RTC erred in holding that there was an underground tunnel
traversing the Heirs of Macabangkits land constructed by NPC; and

(2) Whether the Heirs of Macabangkits right to claim just compensation had prescribed
under section 3(i) of Republic Act No. 6395, or, alternatively, under Article 620 and Article 646 of
the Civil Code.
Ruling

We uphold the liability of NPC for payment of just compensation.

1.
Factual findings of the RTC,
when affirmed by the CA, are binding

The existence of the tunnel underneath the land of the Heirs of Macabangkit, being a factual matter, cannot now be
properly reviewed by the Court, for questions of fact are beyond the pale of a petition for review on certiorari.
Moreover, the factual findings and determinations by the RTC as the trial court are generally binding on the Court,
particularly after the CA affirmed them.[13] Bearing these doctrines in mind, the Court should rightly dismiss NPCs
appeal.

NPC argues, however, that this appeal should not be dismissed because the Heirs of Macabangkit essentially failed
to prove the existence of the underground tunnel. It insists that the topographic survey map and the right-of-way map
presented by the Heirs of Macabangkit did not at all establish the presence of any underground tunnel.

NPC still fails to convince.

Even assuming, for now, that the Court may review the factual findings of the CA and the RTC, for NPC to insist that
the evidence on the existence of the tunnel was not adequate and incompetent remains futile. On the contrary, the
evidence on the tunnel was substantial, for the significance of the topographic survey map and the sketch map (as
indicative of the extent and presence of the tunnel construction) to the question on the existence of the tunnel was
strong, as the CA correctly projected in its assailed decision, viz:
 Among the pieces of documentary evidence presented showing the existence of the said
tunnel beneath the subject property is the topographic survey map. The topographic survey map is
one conducted to know about the location and elevation of the land and all existing structures
above and underneath it. Another is the Sketch Map which shows the location and extent of the
land traversed or affected by the said tunnel. These two (2) pieces of documentary evidence
readily point the extent and presence of the tunnel construction coming from the power
cavern near the small man-made lake which is the inlet and approach tunnel, or at a
distance of about two (2) kilometers away from the land of the plaintiffs-appellees, and then
traversing the entire and the whole length of the plaintiffs-appellees property, and the outlet
channel of the tunnel is another small man-made lake. This is a sub-terrain construction, and
considering that both inlet and outlet are bodies of water, the tunnel can hardly be noticed. All
constructions done were beneath the surface of the plaintiffs-appellees property. This explains why
they could never obtain any knowledge of the existence of such tunnel during the period that the
same was constructed and installed beneath their property. [14]

The power cavern and the inlet and outlet channels established the presence of the underground tunnel, based on
the declaration in the RTC by Sacedon, a former employee of the NPC. [15] It is worthy to note that NPC did not deny
the existence of the power cavern, and of the inlet and outlet channels adverted to and as depicted in the topographic
survey map and the sketch map. The CA cannot be faulted for crediting the testimony of Sacedon despite the effort of
NPC to discount his credit due to his not being an expert witness, simply because Sacedon had personal knowledge
based on his being NPCs principal engineer and supervisor tasked at one time to lay out the tunnels and
transmission lines specifically for the hydroelectric projects, [16] and to supervise the construction of the Agus 1
Hydroelectric Plant itself[17] from 1978 until his retirement from NPC.[18] Besides, he declared that he personally
experienced the vibrations caused by the rushing currents in the tunnel, particularly near the outlet channel. [19] Under
any circumstances, Sacedon was a credible and competent witness.

The ocular inspection actually confirmed the existence of the tunnel underneath the land of the Heirs of
Macabangkit. Thus, the CA observed:

More so, the Ocular inspection conducted on July 23, 1998 further bolstered such claim of the
existence and extent of such tunnel. This was conducted by a team composed of the Honorable
Presiding Judge of the Regional Trial Court, Branch 01, Lanao del Norte, herself and the respective
lawyers of both of the parties and found that, among others, said underground tunnel was
constructed beneath the subject property.[20]

It bears noting that NPC did not raise any issue against or tender any contrary comment on the ocular
inspection report.

2.
Five-year prescriptive period under Section 3(i) of Republic Act No. 6395 does not apply to
claims for just compensation

The CA held that Section 3(i) of Republic Act No. 6395 had no application to this action because it covered facilities
that could be easily discovered, not tunnels that were inconspicuously constructed beneath the surface of the land. [21]

NPC disagrees, and argues that because Article 635 [22] of the Civil Code directs the application of special
laws when an easement, such as the underground tunnel, was intended for public use, the law applicable was
Section 3(i) of Republic Act No. 6395, as amended, which limits the action for recovery of compensation to five years
from the date of construction. It posits that the five-year prescriptive period already set in due to the construction of
the underground tunnel having been completed in 1979 yet.
Without necessarily adopting the reasoning of the CA, we uphold its conclusion that prescription did not bar the
present action to recover just compensation.

Section 3 (i) of Republic Act No. 6395, the cited law, relevantly provides:

Section 3. Powers and General Functions of the Corporation. The powers, functions, rights and
activities of the Corporation shall be the following:

xxx
 (i) To construct works across, or otherwise, any stream, watercourse, canal, ditch, flume,
street, avenue, highway or railway of private and public ownership, as the location of
said works may require:Provided, That said works be constructed in such a manner as
not to endanger life or property; And provided, further, That the stream, watercourse,
canal ditch, flume, street, avenue, highway or railway so crossed or intersected be
restored as near as possible to their former state, or in a manner not to impair
unnecessarily their usefulness. Every person or entity whose right of way or property is
lawfully crossed or intersected by said works shall not obstruct any such crossings or
intersection and shall grant the Board or its representative, the proper authority for the
execution of such work. The Corporation is hereby given the right of way to locate,
construct and maintain such works over and throughout the lands owned by the
Republic of the Philippines or any of its branches and political subdivisions. The
Corporation or its representative may also enter upon private property in the lawful
performance or prosecution of its business and purposes, including the construction of
the transmission lines thereon; Provided, that the owner of such property shall be
indemnified for any actual damage caused thereby;Provided, further, That said action
for damages is filed within five years after the rights of way, transmission lines,
substations, plants or other facilities shall have been established; Provided, finally,
That after said period, no suit shall be brought to question the said rights of way,
transmission lines, substations, plants or other facilities;

A cursory reading shows that Section 3(i) covers the construction of works across, or otherwise, any stream,
watercourse, canal, ditch, flume, street, avenue, highway or railway of private and public ownership, as the location of
said works may require. It is notable that Section 3(i) includes no limitation except those enumerated after the
term works. Accordingly, we consider the term works as embracing all kinds of constructions, facilities, and other
developments that can enable or help NPC to meet its objectives of developing hydraulic power expressly provided
under paragraph (g) of Section 3.[23] The CAs restrictive construal of Section 3(i) as exclusive of tunnels was
obviously unwarranted, for the provision applies not only to development works easily discoverable or on the surface
of the earth but also to subterranean works like tunnels. Such interpretation accords with the fundamental guideline in
statutory construction that when the law does not distinguish, so must we not.[24] Moreover, when the language of the
statute is plain and free from ambiguity, and expresses a single, definite, and sensible meaning, that meaning is
conclusively presumed to be the meaning that the Congress intended to convey. [25]
Even so, we still cannot side with NPC.

We rule that the prescriptive period provided under Section 3(i) of Republic Act No. 6395 is applicable only
to an action for damages, and does not extend to an action to recover just compensation like this case.
Consequently, NPC cannot thereby bar the right of the Heirs of Macabangkit to recover just compensation for their
land.

The action to recover just compensation from the State or its expropriating agency differs from the action for
damages. The former, also known as inverse condemnation, has the objective to recover the value of property taken
in fact by the governmental defendant, even though no formal exercise of the power of eminent domain has been
attempted by the taking agency.[26] Just compensation is the full and fair equivalent of the property taken from its
owner by the expropriator. The measure is not the takers gain, but the owners loss. The word just is used to intensify
the meaning of the word compensation in order to convey the idea that the equivalent to be rendered for the property
to be taken shall be real, substantial, full, and ample. [27] On the other hand, the latter action seeks to vindicate a legal
wrong through damages, which may be actual, moral, nominal, temperate, liquidated, or exemplary. When a right is
exercised in a manner not conformable with the norms enshrined in Article 19 [28] and like provisions on human
relations in the Civil Code, and the exercise results to the damage of another, a legal wrong is committed and the
wrongdoer is held responsible.[29]

The two actions are radically different in nature and purpose. The action to recover just compensation is
based on the Constitution[30] while the action for damages is predicated on statutory enactments. Indeed, the
former arises from the exercise by the State of its power of eminent domain against private property for public use,
but the latter emanates from the transgression of a right. The fact that the owner rather than the expropriator brings
the former does not change the essential nature of the suit as an inverse condemnation, [31] for the suit is not based
on tort, but on the constitutional prohibition against the taking of property without just compensation. [32] It would very
well be contrary to the clear language of the Constitution to bar the recovery of just compensation for private property
taken for a public use solely on the basis of statutory prescription.
Due to the need to construct the underground tunnel, NPC should have first moved to acquire the land from the Heirs
of Macabangkit either by voluntary tender to purchase or through formal expropriation proceedings. In either case,
NPC would have been liable to pay to the owners the fair market value of the land, for Section 3(h) of Republic Act
No. 6395 expressly requires NPC to pay the fair market value of such property at the time of the taking, thusly:

(h) To acquire, promote, hold, transfer, sell, lease, rent, mortgage, encumber and otherwise
dispose of property incident to, or necessary, convenient or proper to carry out the purposes
for which the Corporation was created: Provided, That in case a right of way is necessary for its
transmission lines, easement of right of way shall only be sought: Provided, however, That in case
the property itself shall be acquired by purchase, the cost thereof shall be the fair market
value at the time of the taking of such property.

This was what NPC was ordered to do in National Power Corporation v. Ibrahim,[33] where NPC had denied
the right of the owners to be paid just compensation despite their land being traversed by the underground tunnels for
siphoning water from Lake Lanao needed in the operation of Agus II, Agus III, Agus IV, Agus VI and Agus VII
Hydroelectric Projects in Saguiran, Lanao del Sur, in Nangca and Balo-I in Lanao del Norte and in Ditucalan and
Fuentes in Iligan City. There, NPC similarly argued that the underground tunnels constituted a mere easement that
did not involve any loss of title or possession on the part of the property owners, but the Court resolved against NPC,
to wit:

Petitioner contends that the underground tunnels in this case constitute an easement upon
the property of the respondents which does not involve any loss of title or possession. The manner
in which the easement was created by petitioner, however, violates the due process rights of
respondents as it was without notice and indemnity to them and did not go through proper
expropriation proceedings. Petitioner could have, at any time, validly exercised the power of
eminent domain to acquire the easement over respondents property as this power encompasses
not only the taking or appropriation of title to and possession of the expropriated property but
likewise covers even the imposition of a mere burden upon the owner of the condemned property.
Significantly, though, landowners cannot be deprived of their right over their land until expropriation
proceedings are instituted in court. The court must then see to it that the taking is for public use,
that there is payment of just compensation and that there is due process of law.[34]

3.
NPCs construction of the tunnel
constituted taking of the land, and
entitled owners to just compensation

The Court held in National Power Corporation v. Ibrahim that NPC was liable to pay not merely an easement
fee but rather the full compensation for land traversed by the underground tunnels, viz:

In disregarding this procedure and failing to recognize respondents ownership of the sub-
terrain portion, petitioner took a risk and exposed itself to greater liability with the passage of time.
It must be emphasized that the acquisition of the easement is not without expense. The
underground tunnels impose limitations on respondents use of the property for an indefinite period
and deprive them of its ordinary use. Based upon the foregoing, respondents are clearly entitled to
the payment of just compensation. Notwithstanding the fact that petitioner only occupies the
sub-terrain portion, it is liable to pay not merely an easement fee but rather the full
compensation for land. This is so because in this case, the nature of the easement
practically deprives the owners of its normal beneficial use. Respondents, as the owner of
the property thus expropriated, are entitled to a just compensation which should be neither
more nor less, whenever it is possible to make the assessment, than the money equivalent
of said property.[35]

Here, like in National Power Corporation v. Ibrahim, NPC constructed a tunnel underneath the land of the Heirs of
Macabangkit without going through formal expropriation proceedings and without procuring their consent or at least
informing them beforehand of the construction. NPCs construction adversely affected the owners rights and interests
because the subterranean intervention by NPC prevented them from introducing any developments on the surface,
and from disposing of the land or any portion of it, either by sale or mortgage.
Did such consequence constitute taking of the land as to entitle the owners to just compensation?

We agree with both the RTC and the CA that there was a full taking on the part of NPC, notwithstanding that
the owners were not completely and actually dispossessed. It is settled that the taking of private property for public
use, to be compensable, need not be an actual physical taking or appropriation. [36] Indeed, the expropriators action
may be short of acquisition of title, physical possession, or occupancy but may still amount to a
taking.[37] Compensable taking includes destruction, restriction, diminution, or interruption of the rights of ownership or
of the common and necessary use and enjoyment of the property in a lawful manner, lessening or destroying its
value.[38] It is neither necessary that the owner be wholly deprived of the use of his property, [39] nor material whether
the property is removed from the possession of the owner, or in any respect changes hands. [40]

As a result, NPC should pay just compensation for the entire land. In that regard, the RTC pegged just
compensation at P500.00/square meter based on its finding on what the prevailing market value of the property was
at the time of the filing of the complaint, and the CA upheld the RTC.

We affirm the CA, considering that NPC did not assail the valuation in the CA and in this Court. NPCs silence was
probably due to the correctness of the RTCs valuation after careful consideration and weighing of the parties
evidence, as follows:

The matter of what is just compensation for these parcels of land is a matter of evidence.
These parcels of land is (sic) located in the City of Iligan, the Industrial City of the South. Witness
Dionisio Banawan, OIC- City Assessors Office, testified, Within that area, that area is classified as
industrial and residential. That plaintiffs land is adjacent to many subdivisions and that is within the
industrial classification. He testified and identified Exhibit AA and AA-1, a Certification, dated April
4, 1997, showing that the appraised value of plaintiffs land ranges from P400.00 to P500.00 per
square meter (see, TSN, testimony of Dionisio Banawan, pp. 51, 57, and 71, February 9, 1999).
Also, witness Banawan, testified and identified Two (2) Deeds of Sale, marked as Exhibit AA-2
and AA-3,[] showing that the appraised value of the land adjoining or adjacent to plaintiff land
ranges from P700.00 to P750.00 per square meter. As between the much lower price of the land as
testified by defendants witness Gregorio Enterone, and that of the City Assessor of Iligan City, the
latter is more credible. Considering however, that the appraised value of the land in the area as
determined by the City Assessors Office is not uniform, this Court, is of the opinion that the
reasonable amount of just compensation of plaintiffs land should be fixed at FIVE HUNDRED
(500.00) PESOS, per square meter. xxx.[41]

The RTC based its fixing of just compensation ostensibly on the prevailing market value at the time of the filing of the
complaint, instead of reckoning from the time of the taking pursuant to Section 3(h) of Republic Act No. 6395. The CA
did not dwell on the reckoning time, possibly because NPC did not assign that as an error on the part of the RTC.

We rule that the reckoning value is the value at the time of the filing of the complaint, as the RTC provided in
its decision. Compensation that is reckoned on the market value prevailing at the time either when NPC entered or
when it completed the tunnel, as NPC submits, would not be just, for it would compound the gross unfairness already
caused to the owners by NPCs entering without the intention of formally expropriating the land, and without the prior
knowledge and consent of the Heirs of Macabangkit. NPCs entry denied elementary due process of law to the
owners since then until the owners commenced the inverse condemnation proceedings. The Court is more
concerned with the necessity to prevent NPC from unjustly profiting from its deliberate acts of denying due process of
law to the owners. As a measure of simple justice and ordinary fairness to them, therefore, reckoning just
compensation on the value at the time the owners commenced these inverse condemnation proceedings is entirely
warranted.

In National Power Corporation v. Court of Appeals,[42] a case that involved the similar construction of an
underground tunnel by NPC without the prior consent and knowledge of the owners, and in which we held that the
basis in fixing just compensation when the initiation of the action preceded the entry into the property was the time of
the filing of the complaint, not the time of taking, [43] we pointed out that there was no taking when the entry by NPC
was made without intent to expropriate or was not made under warrant or color of legal authority.
4.
Awards for rentals, moral damages, exemplary
damages, and attorneys fees are deleted
for insufficiency of factual and legal bases
The CA upheld the RTCs granting to the Heirs of Macabangkit of rentals of P 30,000.00/month from 1979 up to July
1999 with 12% interest per annum by finding NPC guilty of bad faith in taking possession of the land to construct the
tunnel without their knowledge and consent.

Granting rentals is legally and factually bereft of justification, in light of the taking of the land being already
justly compensated. Conformably with the ruling in Manila International Airport Authority v. Rodriguez,[44] in which the
award of interest was held to render the grant of back rentals unwarranted, we delete the award of back rentals and
in its place prescribe interest of 12% interest per annum from November 21, 1997, the date of the filing of the
complaint, until the full liability is paid by NPC. The imposition of interest of 12% interest per annum follows a long line
of pertinent jurisprudence,[45] whereby the Court has fixed the rate of interest on just compensation at 12% per
annumwhenever the expropriator has not immediately paid just compensation.

The RTC did not state any factual and legal justifications for awarding to the Heirs of Macabangkit moral and
exemplary damages each in the amount of P200,000.00. The awards just appeared in the fallo of its decision. Neither
did the CA proffer any justifications for sustaining the RTC on the awards. We consider the omissions of the lower
courts as pure legal error that we feel bound to correct even if NPC did not submit that for our consideration. There
was, to begin with, no factual and legal bases mentioned for the awards. It is never trite to remind that moral and
exemplary damages, not by any means liquidated or assessed as a matter of routine, always require evidence that
establish the circumstances under which the claimant is entitled to them. Moreover, the failure of both the RTC and
the CA to render the factual and legal justifications for the moral and exemplary damages in the body of their
decisions immediately demands the striking out of the awards for being in violation of the fundamental rule that the
decision must clearly state the facts and the law on which it is based. Without the factual and legal justifications, the
awards are exposed as the product of conjecture and speculation, which have no place in fair judicial adjudication.

We also reverse and set aside the decree of the RTC for NPC to pay to the Heirs of Macabangkit the sum equivalent
to 15% of the total amount awarded, as attorneys fees, and to pay the cost. The body of the decision did not state the
factual and legal reasons why NPC was liable for attorneys fees. The terse statement found at the end of the body of
the RTCs decision, stating: xxx The contingent attorneys fee is hereby reduced from 20% to only 15% of the total
amount of the claim that may be awarded to plaintiffs, without more, did not indicate or explain why and how the
substantial liability of NPC for attorneys fees could have arisen and been determined.

In assessing attorneys fees against NPC and in favor of the respondents, the RTC casually disregarded
the fundamental distinction between the two concepts of attorneys fees the ordinary and the extraordinary. These
concepts were aptly distinguished in Traders Royal Bank Employees Union-Independent v. NLRC,[46] thuswise:

There are two commonly accepted concepts of attorneys fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorneys fee is the reasonable compensation paid to a
lawyer by his client for the legal services he has rendered to the latter. The basis of this
compensation is the fact of his employment by and his agreement with the client.

In its extraordinary concept, an attorneys fee is an indemnity for damages ordered by the
court to be paid by the losing party in a litigation. The basis of this is any of the cases provided by
law where such award can be made, such as those authorized in Article 2208, Civil Code, and is
payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to
the lawyer as additional compensation or as part thereof.

By referring to the award as contingency fees, and reducing the award from 20% to 15%, the RTC was
really referring to a supposed agreement on attorneys fees between the Heirs of Macabangkit and their counsel. As
such, the concept of attorneys fees involved was the ordinary. Yet, the inclusion of the attorneys fees in the
judgment among the liabilities of NPC converted the fees to extraordinary. We have to disagree with the RTC
thereon, and we express our discomfort that the CA did not do anything to excise the clearly erroneous and
unfounded grant.

An award of attorneys fees has always been the exception rather than the rule. To start with, attorneys fees
are not awarded every time a party prevails in a suit. [47] Nor should an adverse decision ipso facto justify an award of
attorneys fees to the winning party.[48] The policy of the Court is that no premium should be placed on the right to
litigate.[49] Too, such fees, as part of damages, are assessed only in the instances specified in Art. 2208, Civil
Code.[50] Indeed, attorneys fees are in the nature of actual damages. [51] But even when a claimant is compelled to
litigate with third persons or to incur expenses to protect his rights, attorneys fees may still be withheld where no
sufficient showing of bad faith could be reflected in a partys persistence in a suit other than an erroneous conviction
of the righteousness of his cause. [52] And, lastly, the trial court must make express findings of fact and law that bring
the suit within the exception. What this demands is that the factual, legal or equitable justifications for the award must
be set forth

not only in the fallo but also in the text of the decision, or else, the award should be thrown out for being speculative
and conjectural.[53]

Sound policy dictates that even if the NPC failed to raise the issue of attorneys fees, we are not precluded
from correcting the lower courts patently erroneous application of the law.[54] Indeed, the Court, in supervising the
lower courts, possesses the ample authority to review legal matters like this one even if not specifically raised or
assigned as error by the parties.

5.
Attorneys fees under quantum meruit principle
are fixed at 10% of the judgment award

Based on the pending motions of Atty. Macarupung Dibaratun and Atty. Manuel D. Ballelos to assert their
respective rights to attorneys fees, both contending that they represented the Heirs of Macabangkit in this case, a
conflict would ensue from the finality of the judgment against NPC.

A look at the history of the legal representation of the Heirs of Macabangkit herein provides a helpful
predicate for resolving the conflict.

Atty. Dibaratun was the original counsel of the Heirs of Macabangkit. When the appeal was submitted for decision in
the CA,[55] Atty. Ballelos filed his entry of appearance,[56]and a motion for early decision.[57] Atty. Ballelos
subsequently filed also a manifestation,[58] supplemental manifestation,[59]

reply,[60] and ex parte motion reiterating the motion for early decision. [61] It appears that a copy of the CAs decision
was furnished solely to Atty. Ballelos. However, shortly before the rendition of the decision, Atty. Dibaratun filed in the
CA a motion to register attorneys lien,[62] alleging that he had not withdrawn his appearance and had not been aware
of the entry of appearance by Atty. Ballelos. A similar motion was also received by the Court from Atty. Dibaratun a
few days after the petition for review was filed.[63]Thus, on February 14, 2005,[64] the Court directed Atty. Dibaratun to
enter his appearance herein. He complied upon filing the comment. [65]

Amir Macabangkit confirmed Atty. Dibaratuns representation through an ex parte manifestation that he filed in his
own behalf and on behalf of his siblings Mongkoy and Putri. [66] Amir reiterated his manifestation on March 6,
2006,[67] and further imputed malpractice to Atty. Ballelos for having filed an entry of appearance bearing Amirs
forged signature and for plagiarism, i.e., copying verbatim the arguments contained in the pleadings previously filed
by Atty. Dibaratun.[68]

On September 11, 2008, Atty. Ballelos submitted two motions, to wit: (a) a manifestation and motion authorizing a
certain Abdulmajeed Djamla to receive his attorneys fees equivalent of 15% of the judgment award, [69] and (b) a
motion to register his attorneys lien that he claimed was contingent. [70]

Both Atty. Dibaratun and Atty. Ballelos posited that their entitlement to attorneys fees was contingent. Yet, a contract
for a contingent fees is an agreement in writing by which the fees, usually a fixed percentage of what may be
recovered in the action, are made to depend upon the success in the effort to enforce or defend a supposed right.
Contingent fees depend upon an express contract, without which the attorney can only recover on the basis
of quantum meruit.[71] With neither Atty. Dibaratun nor Atty. Ballelos presenting a written agreement bearing upon
their supposed contingent fees, the only way to determine their right to appropriate attorneys fees is to apply the
principle of quantum meruit.

Quantum meruit literally meaning as much as he deserves is used as basis for determining an attorneys professional
fees in the absence of an express agreement. [72] The recovery of attorneys fees on the basis of quantum meruit is a
device that prevents an unscrupulous client from running away with the fruits of the legal services of counsel without
paying for it and also avoids unjust enrichment on the part of the attorney himself.[73] An attorney must show that he is
entitled to reasonable compensation for the effort in pursuing the clients cause, taking into account certain factors in
fixing the amount of legal fees.[74]
Rule 20.01 of the Code of Professional Responsibility lists the guidelines for determining the proper amount of
attorney fees, to wit:

Rule 20.1 A lawyer shall be guided by the following factors in determining his fees:

a) The time spent and the extent of the services rendered or required;

b) The novelty and difficult of the questions involved;

c) The important of the subject matter;

d) The skill demanded;

e) The probability of losing other employment as a result of acceptance of the proffered

case;

f) The customary charges for similar services and the schedule of fees of the IBP
chapter to which he belongs;

g) The amount involved in the controversy and the benefits resulting to the client from the
service;

h) The contingency or certainty of compensation;

i) The character of the employment, whether occasional or established; and

j) The professional standing of the lawyer.

In the event of a dispute as to the amount of fees between the attorney and his client, and the intervention of
the courts is sought, the determination requires that there be evidence to prove the amount of fees and the extent
and value of the services rendered, taking into account the facts determinative thereof. [75] Ordinarily, therefore, the
determination of the attorneys fees on quantum meruit is remanded to the lower court for the purpose. However, it will
be just and equitable to now assess and fix the attorneys fees of both attorneys in order that the resolution of a
comparatively simple controversy, as Justice Regalado put it in Traders Royal Bank Employees Union-Independent
v. NLRC,[76] would not be needlessly prolonged, by taking into due consideration the accepted guidelines and so
much of the pertinent data as are extant in the records.

Atty. Dibaratun and Atty. Ballelos each claimed attorneys fees equivalent to 15% of the principal award
of P113,532,500.00, which was the amount granted by the RTC in its decision. Considering that the attorneys fees
will be defrayed by the Heirs of Macabangkit out of their actual recovery from NPC, giving to each of the two
attorneys 15% of the principal award as attorneys fees would be excessive and unconscionable from the point of view
of the clients. Thus, the Court, which holds and exercises the power to fix attorneys fees on a quantum meruit basis
in the absence of an express written agreement between the attorney and the client, now fixes attorneys fees at 10%
of the principal award of P113,532,500.00.
Whether it is Atty. Dibaratun or Atty. Ballelos, or both, who should receive attorneys fees from the Heirs of
Macabangkit is a question that the Court must next determine and settle by considering the amount and quality of the
work each performed and the results each obtained.

Atty. Dibaratun, the attorney from the outset, unquestionably carried the bulk of the legal demands of the case. He
diligently prepared and timely filed in behalf of the Heirs of Macabangkit every pleading and paper necessary in the
full resolution of the dispute, starting from the complaint until the very last motion filed in this Court. He consistently
appeared during the trial, and examined and cross-examined all the witnesses presented at that stage of the
proceedings. The nature, character, and substance of each pleading and the motions he prepared for the Heirs of
Macabangkit indicated that he devoted substantial time and energy in researching and preparing the case for the trial.
He even advancedP250,000.00 out of his own pocket to defray expenses from the time of the filing of the motion to
execute pending appeal until the case reached the Court. [77] His representation of all the Heirs of Macabangkit was
not denied by any of them.

We note that Atty. Dibaratun possessed some standing in the legal profession and in his local community.
He formerly served as a member of the Board of Director of the Integrated Bar of the Philippines (IBP), Lanao del
Norte-Iligan City Chapter, and was an IBP national awardee as Best Legal Aid Committee Chairman. He taught at
Mindanao State University College of Law Extension. He was a Municipal Mayor of Matungao, Lanao del Norte, and
was enthroned Sultan a Gaus.

In contrast, not much about the character and standing of Atty. Ballelos, as well as the nature and quality of the legal
services he rendered for the Heirs of Macabangkit are in the records. The motions he filed in the

Court and in the CA lacked enlightening research and were insignificant to the success of the clients cause. His legal
service, if it can be called that, manifested no depth or assiduousness, judging from the quality of the pleadings from
him. His written submissions in the case appeared either to have been lifted verbatim from the pleadings previously
filed by Atty. Dibaratun, or to have been merely quoted from the decisions and resolutions of the RTC and the CA. Of
the Heirs of Macabangkit, only Cebu, Batowa-an, Sayana, Nasser, Manta, Mongkoy[78] and Edgar gave their consent
to Atty. Ballelos to appear in their behalf in the CA, which he did despite Atty. Dibaratun not having yet filed any
withdrawal of his appearance. The Court did not receive any notice of appearance for the Heirs of Macabangkit from
Atty. Ballelos, but that capacity has meanwhile become doubtful in the face of Amirs strong denial of having retained
him.

In fairness and justice, the Court accords full recognition to Atty. Dibaratun as the counsel de parte of the
Heirs of Macabangkit who discharged his responsibility in the prosecution of the clients cause to its successful end. It
is he, not Atty. Ballelos, who was entitled to the full amount of attorneys fees that the clients ought to pay to their
attorney. Given the amount and quality of his legal work, his diligence and the time he expended in ensuring the
success of his prosecution of the clients cause, he deserves the recognition, notwithstanding that some of the clients
might appear to have retained Atty. Ballelos after the rendition of a favorable judgment.[79]

Atty. Ballelos may claim only from Cebu, Batowa-an, Sayana, Nasser, Manta and Edgar, the only parties who
engaged him. The Court considers his work in the case as very minimal. His compensation under the quantum
meruit principle is fixed at P5,000.00, and only the Heirs of Macabangkit earlier named are liable to him.

WHEREFORE, the Court AFFIRMS the decision promulgated on October 5, 2004 by the Court of Appeals, subject to
the following MODIFICATIONS, to wit:

(a) Interest at the rate of 12% per annum is IMPOSED on the principal amount of P113,532,500.00
as just compensation, reckoned from the filing of the complaint on November 21, 1997 until the
full liability is paid;

(b) The awards of P30,000.00 as rental fee, P200,000.00 as moral damages, and P200,000.00 as
exemplary damages are DELETED; and

(c) The award of 15% attorneys fees decreed to be paid by National Power Corporation to the
Heirs of Macabangkit is DELETED.
The Court PARTLY GRANTS the motion to register attorneys lien filed by Atty. Macarupung Dibaratun,
and FIXES Atty. Dibaratuns attorneys fees on the basis of quantummeruit at 10% of the principal award
of P113,532,500.00.

The motion to register attorneys lien of Atty. Manuel D. Ballelos is PARTLY GRANTED, and Atty. Ballelos
is DECLARED ENTITLED TO RECOVER from Cebu, Batowa-an, Sayana, Nasser, Manta and Edgar, all surnamed
Macabangkit, the amount of P5,000.00 as attorneys fees on the basis of quantum meruit.

Costs of suit to be paid by the petitioner.

SO ORDERED.