Case Summary (G.R. No. 190207)
Factual background: property use and dispute
Lloyds Richfield owned multiple parcels near its cement plant and quarried limestone from those lots for cement manufacturing. NPC sought to construct transmission lines traversing those parcels. Negotiations for an easement failed; NPC filed an expropriation complaint and secured ex parte possession by writ. Lloyds Richfield answered, claiming that construction of transmission lines would render the affected properties useless for quarrying and demanding full fair market value for the land and for the limestone deposits.
Appraisal process and Commissioners’ Report
A Committee on Appraisal was convened (city assessor chair; NPC and Lloyds representatives as members). The DENR geodetic engineer was ordered to survey and to determine extractable limestone volume and a safe blasting distance. The Committee’s Amended Report recommended increasing the safety zone from 20 meters to 200 meters on each side (effectively expanding the affected area), increasing the number of lots to be expropriated from seven to eleven, valuing land at P450.00 per square meter, and valuing limestone at P26.00 per ton with an estimated extractable volume of 3,651,092.40 tons. NPC’s representative dissented and NPC opposed aspects of the report.
Trial court ruling (RTC, December 13, 1999)
The trial court condemned 11 lots in favor of NPC and held that Lloyds Richfield was entitled to full fair market value (not a mere easement fee) because the restrictions imposed by transmission-line construction would indefinitely deprive Lloyds Richfield of use (notably quarrying and blasting). The trial court also awarded compensation for the limestone deposits and adopted the Committee’s valuations: P450.00/sqm for 88,064 square meters (P39,628,800.00) and P26.00/ton for limestone (P94,928,402.40).
Court of Appeals ruling (December 3, 2008)
The Court of Appeals affirmed condemnation of all 11 lots and the principle that full just compensation (not a 10% easement fee) was required. It accepted the enlarged safety zone and inclusion of the four additional lots because NPC failed to rebut the Committee’s recommendation. The CA, however, deleted the award for the limestone deposits, reasoning that minerals are owned by the State, that Lloyds Richfield’s interest was at best a contract/right subject to State control (not ownership of the minerals), and that any increased cost to Lloyds Richfield was a commercial/business loss. The CA remanded the case to the RTC to re-determine just compensation for the land, finding the P450.00/sqm valuation insufficiently supported.
Parties’ positions before the Supreme Court
Lloyds Richfield: contended it was entitled to full market value (citing prior jurisprudence rejecting the 10% easement approach), asserted that the additional four lots were properly included given the safety zone, argued the limestone deposits had commercial value and that Article 437 of the Civil Code supports ownership of the substrate, and claimed P450.00/sqm was supported by comparable expropriations (Santa Loro, Villamor) making remand unnecessary.
NPC: argued it may acquire only an easement under its charter (RA 6395 Sec. 3A) and thus pay an easement fee of up to 10% of market value; disputed the need to condemn four extra lots; relied on the CA’s deletion of limestone compensation (State ownership of minerals); and agreed the valuation needed reevaluation.
Issues presented to the Court
- Whether Lloyds Richfield is entitled to just compensation equivalent to full fair market value (not a 10% easement fee).
- Whether the four additional lots affected by the increased safety zone were properly included among the expropriated properties.
- Whether Lloyds Richfield is entitled to just compensation for the limestone deposits under the affected lots.
- Whether the CA erred in remanding the case to the RTC to redetermine the amount of just compensation.
Supreme Court: constitutional and doctrinal framework for just compensation
The Court reiterated that Section 9, Bill of Rights, mandates just compensation—“the full and fair equivalent” of property taken, generally measured by fair market value. Expropriation includes taking title and possession or imposing burdens (easements) where those burdens do not indefinitely deprive the owner of use. However, where the effect is indefinite or perpetual restriction of proprietary rights (as when transmission lines permanently preclude quarrying or blasting and risk life and limb), the restriction constitutes a taking requiring full compensation. The Court confirmed that reliance on RA 6395 Sec. 3A (the 10% easement formula) has been rejected in earlier Supreme Court jurisprudence where the nature of the imposition effectively deprives the owner of ordinary use.
Supreme Court holding on full compensation vs easement fee
Applying the above principles and precedent (including National Power Corporation v. Gutierrez and later cases), the Court held that NPC’s installation of transmission lines imposed an indefinite and perpetual restriction on Lloyds Richfield’s proprietary rights—most importantly, the permanent prohibition on dynamite blasting and quarrying in the affected areas. Consequently, an easement fee would not suffice; NPC must acquire the properties in the traditional expropriation sense and pay the full fair market value as just compensation.
Supreme Court holding on inclusion of four additional lots
The Court upheld the inclusion of the four additional lots (brought about by the increased 200-meter safety zone). The Mines and Geosciences Bureau’s recommendation of a 200-meter safety zone rendered those lots unusable for blasting or quarrying; NPC failed to present evidence to rebut the committee’s recommendation despite opportunities and continuances. Under Rule 10, Sec. 5 (amendment to conform to evidence), the inclusion of the additional lots was deemed tried with NPC’s consent; the condemnation of all 11 lots was proper.
Supreme Court holding on limestone deposits (minerals)
The Court affirmed the CA’s deletion of compensation for the limestone deposits. It emphasized Article XII, Section 2 of the 1987 Constitution that the State owns all minerals in Philippine soil; Article 437 of the Civil Code is subject to special laws and cannot override the Constitution. Lloyds Richfield did not
Case Syllabus (G.R. No. 190207)
Procedural Posture and Nature of the Case
- Consolidated Petitions for Review on Certiorari (G.R. No. 190207 and G.R. No. 190213) assailing the Court of Appeals Decision (Dec. 3, 2008) and Resolution (Oct. 16, 2009) that affirmed the Regional Trial Court (RTC) Decision (Dec. 13, 1999) condemning 11 parcels of land owned by Lloyds Richfield Industrial Corporation in favor of the National Power Corporation (NPC), remanding for redetermination of just compensation, and deleting award for limestone deposits.
- RTC (Branch 25, Danao City) initially ordered condemnation of 11 lots and awarded just compensation for the lands and for limestone deposits; CA affirmed condemnation and inclusion of 11 lots but deleted limestone award and remanded to RTC to determine anew the amount of just compensation for the lands; both parties filed petitions to the Supreme Court, which consolidated the cases.
- The Supreme Court rendered a decision (per Associate Justice Leonen) partly granting Lloyds Richfield’s petition (G.R. No. 190207) and denying NPC’s petition (G.R. No. 190213), with affirmation, modification, and deletion of the CA’s remand and of limestone award as detailed below.
Factual Background
- Lloyds Richfield Industrial Corporation (cement manufacturer, with plant site in Danao City) purchased multiple parcels in Dawis Norte and Dawis Sur, Carmen, Cebu, and quarried limestones from these areas for cement manufacture.
- The parcels were covered by Tax Declaration Nos. 1501100012, 150110001, 1501100039, 15001100038, 1500110042, 151100041, and 1501100005; location map depicted Lloyds’ lots as Lot Nos. 1859, 1861, 1860, 1833, 1832, 1830, and 1829.
- Sometime before June 25, 1996, NPC negotiated with Lloyds to create an easement of right of way to construct transmission lines for the 230 KV Leyte-Cebu Interconnection Project; negotiations failed and NPC filed a Complaint for expropriation (complaint filed June 25, 1996).
- NPC secured an ex parte Writ of Possession allowing immediate possession of Lloyds’ properties; Lloyds moved to dismiss which the trial court denied; Lloyds later answered and made a compulsory claim for fair market value of parcels and for the limestone deposits.
Committee on Appraisal: Formation, Findings, and Amended Report
- Committee composition: Alexander G. Parilla, Sr. (Danao City assessor) as chair; Sebastian Ocon (NPC representative) and Henry Gallego (Lloyds representative) as members.
- The Department of Environment and Natural Resources (DENR), through its geodetic engineer, was ordered to survey lots, estimate extractable limestone volume, and determine the safety zone (distance where dynamite blasting may be safely conducted).
- The Committee’s initial Report recommended increasing the safety zone from 20 meters to 200 meters on each side (totaling 400 meters), which would require expropriation of four additional lots not originally in the Complaint; the Report did not delineate boundaries of increased safety zone nor contain annexes supporting limestone valuation, prompting Lloyds to move for amendment.
- Amended Commissioners’ Report recommendations: just compensation for lands at P450.00 per square meter; limestone fair market value at P26.00 per ton; increase in lots to be expropriated from 7 to 11 (adding Lot Nos. 1824, 1831, 1862, and 1863); total limestone extractable volume determined as 3,651,092.40 tons.
- Signatures: only Parilla and Gallego signed the Amended Report; Ocon (NPC representative) filed a dissenting opinion.
RTC Findings and Decision (Dec. 13, 1999)
- RTC ordered condemnation of 11 lots in favor of NPC.
- RTC held that the asserted easement sought by NPC was not a mere easement but a taking requiring full just compensation, citing National Power Corporation v. Gutierrez — reasoning that once transmission lines are constructed, Lloyds would be perpetually deprived of proprietary rights to quarry and blast, rendering properties useless for their intended purpose.
- RTC held NPC must pay just compensation for all 11 lots (not only original seven) because the increased safety zone would deprive Lloyds of quarrying in the additional four lots as well.
- On limestone deposits, RTC concluded that although minerals are owned by the State, Lloyds had been allowed to quarry limestones and would be indefinitely deprived of these limestones by the taking; therefore, Lloyds was entitled to compensation for the limestone deposits (citing Benguet Consolidated Mining v. Republic).
- RTC accepted Committee valuations: P450.00 per square meter for lands, P26.00 per ton for limestones; computed awards:
- Just compensation for land: P39,628,800.00 = P450.00 × total area 88,064 sq.m.
- Just compensation for limestone deposits: P94,928,402.40 = P26.00 × 3,651,092.40 tons.
Court of Appeals Ruling (Dec. 3, 2008) and Resolution (Oct. 16, 2009)
- CA affirmed condemnation of all 11 parcels and the principle that full just compensation, not merely an easement fee, must be paid where restrictions indefinitely deprive owner of proprietary rights; cited a line of cases including Gutierrez and others.
- CA upheld inclusion of the four additional lots, concluding NPC failed to rebut the Committee’s recommendation for an increased safety zone, leaving the court “with no other logical conclusion but to accept the same.”
- CA deleted the award for limestone deposits: emphasized State ownership of minerals under the Constitution; noted that, under the Mineral Production Sharing Agreement, Lloyds could only acquire land or surface rights but not title to the mining area; characterized Lloyds’ claim for limestones as an income or opportunity loss and an “indispensable product cost,” a business risk not compensable in expropriation.
- CA found distinctions between this case and Benguet Consolidated (e.g., Benguet’s claim dated back to 1909 under the Philippine Bill of 1902 and was a vested right; here Lloyds’ mining claim was belated, three years after taking), and questioned the Committee’s limestone valuation procedures and contingent fee request.
- CA remanded the case to RTC to re-evaluate P450.00 per square meter valuation as CA considered the Committee’s valuation to be apparently based solely on deeds of sale of other lots of different nature and distance; CA ordered RTC to fix just compensation within six months and report compliance.
- CA’s dispositive order: affirmed condemnation of 11 lots; remanded for redetermination of just compensation; deleted award for limestone deposits; no pronouncement as to costs.
- CA denied both parties’ motions for reconsideration in its Oct. 16, 2009 Resolution.
Issues Presented to the Supreme Court
- Whether Lloyds Richfield is entitled to just compensation equivalent to the fair market value of the properties expropriated (rather than a 10% easement fee under Section 3A of RA 6395).
- Whether the four additional lots covered by the increased safety zone were properly included among the expropriated properties.
- Whether Lloyds Richfield is entitled to just compensation for the value of the limestone deposits found in its lots.
- Whether the Court of Appeals erred in remanding the case to the RTC to determine anew the amount of just com