Case Summary (G.R. No. 165828)
Factual Background
The respondents, owners of a tract of land in Ditucalan, Iligan City, filed suit alleging that an underground tunnel constructed by NPC in 1979 as part of the Agus River Hydroelectric Power Plant Project traversed and impaired their property. The complaint, docketed as Civil Case No. 4094, asserted that the subterranean works were constructed without the owners’ knowledge or consent, thereby depriving the land of its agricultural, commercial, industrial and residential value and rendering it unsafe for habitation. The respondents stated that their cause of action arose only after prospective purchasers, developers, and a bank declined to deal with the property in 1995 because of the presence of the tunnel.
Trial Court Proceedings
After an ocular inspection on July 23, 1998 and trial, the RTC found that an underground tunnel existed beneath the respondents’ property and that NPC acted in bad faith by constructing it without the owners’ knowledge or consent. The RTC denied the prayer for removal of the tunnel but ruled that NPC pay just compensation for 227,065 square meters of land at P500.00 per square meter, or P113,532,500.00, plus interest; monthly rentals of P30,000.00 from 1979 to July 1999 with 12% interest per annum; moral damages of P200,000.00; exemplary damages of P200,000.00; and attorney’s fees equivalent to 15% of the award. The RTC issued a supplemental decision condemning the plaintiffs’ land in favor of NPC upon payment of the award.
Proceedings in the Court of Appeals
NPC appealed to the Court of Appeals, which affirmed the RTC on October 5, 2004. The CA credited the testimony of the respondents’ witness, Engr. Pete Sacedon, and the topographic survey and sketch maps together with the ocular inspection report as sufficient to establish the existence and extent of the underground tunnel. The CA rejected NPC’s defense of prescription under Section 3(i) of R.A. No. 6395 and sustained the award of just compensation.
Issues Presented to the Supreme Court
The Supreme Court framed the issues as whether the lower courts erred in holding that an underground tunnel constructed by NPC traversed the respondents’ land, and whether the respondents’ right to claim just compensation had been barred by prescription under Section 3(i) of R.A. No. 6395 or alternatively by acquisitive prescription under Article 620 of the Civil Code and provisions on easements.
Parties’ Contentions
NPC argued that the evidence did not satisfactorily prove the existence or location of the tunnel, that witnesses lacked personal knowledge, and that the documentary maps were self-serving. NPC also contended that Section 3(i) of R.A. No. 6395 imposed a five‑year period within which actions for damages must be filed and that the respondents’ claims were prescribed because the tunnel had been constructed in 1979. Alternatively, NPC urged that acquisitive prescription under Article 620 should apply to the continuous and apparent easement, barring the action.
The respondents maintained that the tunnel was clandestinely constructed and affected the full beneficial use and value of the land, that they belatedly discovered its existence only in 1995, and that their suit sought just compensation for a taking by the State or its agent.
Standard of Review and Binding Nature of Factual Findings
The Supreme Court observed that the existence of the tunnel was a factual matter and that trial court findings, affirmed by the Court of Appeals, were binding on this Court in a petition for review on certiorari. The Court therefore refrained from reweighing factual evidence unless a pure question of law or grave abuse of discretion appeared.
Findings on the Existence of the Tunnel
The Court upheld the lower courts’ factual findings that an underground tunnel traversed the respondents’ land. The Court found persuasive the testimony of Engr. Sacedon, who had been NPC’s principal engineer and had personal supervisory experience in laying out tunnels for the Agus projects, the topographic and sketch maps depicting inlet and outlet channels and a power cavern, and the ocular inspection report. The Court noted that NPC did not deny the existence of the power cavern or the inlet and outlet channels shown on the maps and did not challenge the ocular inspection.
Applicability of Section 3(i) of R.A. No. 6395 and Prescription
The Court construed Section 3(i) of R.A. No. 6395 as embracing the construction of works generally, including subterranean works such as tunnels, because the statute used the broad term “works” without differentiation. Nevertheless, the Court held that the five‑year prescriptive period in Section 3(i) applied only to actions for damages and did not extinguish a landowner’s constitutional right to recover just compensation for a taking. The Court therefore rejected NPC’s reliance on that statutory prescription to bar the respondents’ inverse condemnation claim.
Nature of the Action: Inverse Condemnation and Distinction from Damages
The Court explained that the respondents’ suit was an action for just compensation or inverse condemnation, founded on the constitutional guarantee against taking private property without just compensation. The Court distinguished such an action from a suit for damages: the action for just compensation seeks the monetary equivalent of property taken in fact by a governmental defendant, whereas a damages action vindicates a legal wrong and is subject to statutory prescription. Because the remedy for a taking is rooted in the Constitution, it would be contrary to constitutional guarantees to permit statutory prescription alone to bar recovery of just compensation.
Taking and Entitlement to Just Compensation
Applying prior precedents, including National Power Corporation v. Ibrahim, the Court held that NPC’s clandestine construction of the tunnel and occupation of the sub‑terrain portion of the respondents’ land constituted a compensable taking even if the owners remained in surface possession. The Court reiterated that a taking may occur without formal expropriation or physical displacement where governmental works substantially restrict or deprive the owner of normal beneficial use, thereby justifying payment of just compensation. Consequently, NPC was liable to pay compensation for the entire affected land.
Valuation and Reckoning Date for Just Compensation
The RTC had fixed just compensation at P500.00 per square meter for 227,065 square meters, producing an award of P113,532,500.00. The Supreme Court affirmed that valuation because NPC did not assail it on appeal. The Court adopted the RTC’s choice to reckon market value at the time of the filing of the complaint, November 21, 1997, rather than at the time of the taking, reasoning that assigning value at the time of entry would permit NPC to profit from its failure to observe due process and to avoid fair redress to the owners. The Court cited precedent holding that when entry lacked intent to expropriate or was not under legal color, reckoning at the time of filing is appropriate.
Deletion of Rentals, Moral and Exemplary Damages, and Attorney’s Fees Award
Although the Court affirmed liability for just compensation, it struck down several ancillary awards for lack of factual and legal basis. The Court deleted the RTC’s award of back rentals of P30,000.00 per month from 1979 to July 1999, holding that once just compensation is awarded, back rentals are unwarranted and that interest suffices. The Court also deleted awards of moral damages and exemplary damages of P200,000.00 each because the RTC and the CA failed to state the factual or legal foundations required for such awards. The award of attorney’s fees set at 15% by the RTC likewise lacked articulation of the factual and legal grounds; the Court therefore deleted that award as speculative and contrary to the rule that awards of attorney’s fees are exceptional and must be expressly justified.
Interest on Just Compensation
In lieu of back rentals, the Court imposed interest at the rate of 12% per annum on the principal award of P113,532,500.00, reckoned from the filing of the complaint on November 21, 1997 until full payment, following the established jurisprudential practice fixing 12% in cases where the expropriator failed to immediately pay just compensation.
Attorney’s Fees on Quantum Meruit and Allocation Between Counsel
Faced with competing claims by two counsel, the Court fixed attorney’s fees on the basis of quantum meruit at ten percent of the principal award, amounting to the reasonable fee in the absence of
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Case Syllabus (G.R. No. 165828)
Parties and Procedural Posture
- National Power Corporation was the petitioner in a certiorari appeal from the Court of Appeals decision affirming the trial court's award of just compensation to the respondents.
- Heirs of Macabangkit Sangkay, namely: Cebu, Batowa-an, Sayana, Nasser, Manta, Edgar, Putri, Mongkoy, and Amir, all surnamed Macabangkit were the respondents and original plaintiffs in Civil Case No. 4094 in the Regional Trial Court, Branch 1, Iligan City.
- The respondents filed their complaint on November 21, 1997 seeking recovery of damages and possession, with an alternative prayer for payment of just compensation.
- The RTC rendered its decision on August 13, 1999 and a supplemental decision on August 18, 1999, ordering payment of just compensation and condemning the properties in favor of National Power Corporation upon payment.
- National Power Corporation appealed to the Court of Appeals, which affirmed the RTC on October 5, 2004, and the petitioner brought the present petition for review on certiorari to this Court.
Key Factual Allegations
- NPC constructed underground tunnels for the Agus River Hydroelectric Power Plant Project in the 1970s and one such tunnel was later discovered to traverse the respondents' land in Ditucalan, Iligan City.
- The respondents alleged that discovery of the tunnel occurred in 1995 after several proposed dispositions and developments of the land were aborted due to the tunnel's presence.
- The respondents claimed the tunnel had been constructed without their knowledge or consent and that the subterranean works deprived them of agricultural, commercial, industrial and residential value and rendered the land unsafe for habitation.
- The respondents alleged that NPC concealed the construction of the tunnel and continuously denied its existence, and the tunnel's vibrations and noise forced relocation of occupants and workers.
Trial Court Findings
- The RTC found that an underground tunnel was constructed beneath the respondents' land and that NPC acted in bad faith by taking possession of the subterranean portion without notice or consent.
- The RTC fixed the area involved at 227,065 square meters and set just compensation at P500.00 per square meter, for a principal award of P113,532,500.00.
- The RTC awarded monthly rentals at P30,000.00 from 1979 to July 1999 with 12% interest, moral damages of P200,000.00, exemplary damages of P200,000.00, attorney's fees equivalent to 15% of the total award, and costs, while denying the prayer for dismantling or removal of the tunnel.
- The RTC declared that the plaintiffs' land was condemned in favor of NPC upon payment of the awarded sum.
Appellate Court Ruling
- The Court of Appeals affirmed the RTC's factual findings that the underground tunnel traversed the respondents' property based on testimonial and documentary evidence and on the ocular inspection report.
- The Court of Appeals rejected NPC's contention that Section 3(i) of Republic Act No. 6395 barred the action by prescribing a five-year period for claims, reasoning that Section 3(i) did not govern concealed subterranean tunnels.
- The Court of Appeals therefore denied the appeal for lack of merit and affirmed the RTC decision in toto.
Issues Presented
- Whether the Court of Appeals and the RTC erred in holding that an underground tunnel constructed by NPC traversed the respondents' land.
- Whether the respondents' right to recover 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 as contended by NPC.
Evidence and Credibility
- The trial and appellate courts credited the testimony of Engr. Pete Sacedon, a former NPC principal engineer and supervisor, and of documentary exhibits including a topographic survey map and a sketch map indicating inlet and outlet channels connected to a power cavern.
- The courts relied on the ocular inspection conducted on July 23, 1998, which the record shows confirmed the existence and extent of the subterranean tunnel beneath the subject property.
- NPC did not deny the existence of the power cavern or the inlet and outlet channels depicted in the maps, and NPC tendered no persuasive contradiction t