Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 165828 August 24, 2011

NATIONAL POWER CORPORATION, Petitioner,

vs.
HEIRS OF MACABANGKIT SANGKAY, namely: CEBU, BATOWA-AN, SAYANA, NASSER,
MANTA, EDGAR, PUTRI , MONGKOY*, and AMIR, all surnamed
MACABANGKIT, Respondents.

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. 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 defendant’s 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 (₱500.00) PESOS per square meter, or a total of ONE HUNDRED THIRTEEN
MILLION FIVE HUNDRED THIRTY TWO THOUSAND AND FIVE HUNDRED
(₱113,532,500.00), 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
(₱30,000.00) PESOS from 1979 up to July 1999 with 12% interest per annum;

c)To pay plaintiffs the sum of TWO HUNDRED THOUSAND (₱200,000.00) PESOS, as
moral damages;

d) To pay plaintiffs, the sum of TWO HUNDRED THOUSAND (₱200,000.00) PESOS, as

exemplary damages;
 e)To pay plaintiffs, the sum equivalent to 15% of the total amount awarded, as attorney’s
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 ₱500.00/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 ₱700.00 to ₱750.00, while the appraised value of their affected land
ranged from ₱400.00 to ₱500.00. 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
(₱500.00) PESOS per square meter, or a total of ONE HUNDRED THIRTEEN MILLION FIVE
HUNDRED THIRTY TWO THOUSAND AND FIVE HUNDRED (₱113,532,500.00) 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.

Ruling of the CA

NPC raised only two errors in the CA, namely:

THE COURT A QUO SERIOUSLY ERRED IN RULING THAT NAPOCOR’S 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 NAPOCOR’S UNDERGROUND TUNNEL
INDEED TRAVERSED APPELLEE’S 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
NPC’s 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.
 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 Macabangkit’s land constructed by NPC; and

(2) Whether the Heirs of Macabangkit’s 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 NPC’s 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 NPC’s 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 itself17 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 63522 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 CA’s 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 taker’s gain, but the owner’s 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 1928 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 Constitution30 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.

3.

NPC’s 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. NPC’s
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 expropriator’s 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 ₱500.00/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.
NPC’s silence was probably due to the correctness of the RTC’s 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 Assessor’s 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 ₱400.00 to
₱500.00 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 ₱700.00 to ₱750.00 per square meter. As between the much lower
price of the land as testified by defendant’s 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 Assessor’s Office is not uniform, this Court, is of
the opinion that the reasonable amount of just compensation of plaintiff’s 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 NPC’s entering without
the intention of formally expropriating the land, and without the prior knowledge and consent of
the Heirs of Macabangkit. NPC’s 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 attorney’s fees are deleted
for insufficiency of factual and legal bases

The CA upheld the RTC’s granting to the Heirs of Macabangkit of rentals of ₱ 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 annum whenever 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 ₱200,000.00. 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 attorney’s fees, and to pay the cost."
The body of the decision did not state the factual and legal reasons why NPC was liable for
attorney’s fees. The terse statement found at the end of the body of the RTC’s decision, stating:
"xxx The contingent attorney’s 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 attorney’s fees could have arisen and been determined.

In assessing attorney’s fees against NPC and in favor of the respondents, the RTC casually
disregarded the fundamental distinction between the two concepts of attorney’s 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 attorney’s fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney’s 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 attorney’s 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 attorney’s fees between the Heirs of
Macabangkit and their counsel. As such, the concept of attorney’s fees involved was the ordinary.
Yet, the inclusion of the attorney’s 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 attorney’s fees has always been the exception rather than the rule. To start with,
attorney’s fees are not awarded every time a party prevails in a suit. 47 Nor should an adverse
decision ipso facto justify an award of attorney’s 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,
attorney’s 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, attorney’s fees may still be
withheld where no sufficient showing of bad faith could be reflected in a party’s 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 attorney’s 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.

Attorney’s 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 attorney’s 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, Atty. Ballelos filed his entry of appearance, and a motion for
early decision. Atty. Ballelos subsequently filed also a manifestation, supplemental manifestation,

reply, and ex parte motion reiterating the motion for early decision. It appears that a copy of the
CA’s 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 attorney’s lien, 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. Thus, on February 14, 2005, the Court directed Atty. Dibaratun
to enter his appearance herein. He complied upon filing the comment.

Amir Macabangkit confirmed Atty. Dibaratun’s representation through an ex parte manifestation

that he filed in his own behalf and on behalf of his siblings Mongkoy and Putri. Amir reiterated his
manifestation on March 6, 2006, and further imputed malpractice to Atty. Ballelos for having filed
an entry of appearance bearing Amir’s forged signature and for plagiarism, i.e., copying verbatim
the arguments contained in the pleadings previously filed by Atty. Dibaratun.

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

Both Atty. Dibaratun and Atty. Ballelos posited that their entitlement to attorney’s 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.
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 attorney’s 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 attorney’s professional fees in the absence of an express agreement. The recovery of
attorney’s 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. An attorney must show that he is
entitled to reasonable compensation for the effort in pursuing the client’s cause, taking into
account certain factors in fixing the amount of legal fees.

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. Ordinarily, therefore, the determination of the attorney’s 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 attorney’s 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, 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 attorney’s fees equivalent to 15% of the principal
award of ₱113,532,500.00, which was the amount granted by the RTC in its decision. Considering
that the attorney’s fees will be defrayed by the Heirs of Macabangkit out of their actual recovery
from NPC, giving to each of the two attorney’s 15% of the principal award as attorney’s 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 attorney’s fees on a quantum meruit basis in the absence of
an express written agreement between the attorney and the client, now fixes attorney’s fees at
10% of the principal award of ₱113,532,500.00.

Whether it is Atty. Dibaratun or Atty. Ballelos, or both, who should receive attorney’s 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 advanced ₱250,000.00 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. 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 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 Amir’s strong denial of having retained him.1avvphil

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 attorney’s 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.

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 ₱5,000.00, 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
₱113,532,500.00 as just compensation, reckoned from the filing of the complaint on
November 21, 1997 until the full liability is paid;

(b) The awards of ₱30,000.00 as rental fee, ₱200,000.00 as moral damages, and
₱200,000.00 as exemplary damages are DELETED; and

(c) The award of 15% attorney’s fees decreed to be paid by National Power Corporation
to the Heirs of Macabangkit is DELETED.

The Court PARTLY GRANTS the motion to register attorney’s lien filed by Atty. Macarupung
Dibaratun, and FIXES Atty. Dibaratun’s attorney’s fees on the basis of quantum meruit at 10% of
the principal award of ₱113,532,500.00.

The motion to register attorney’s 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 ₱5,000.00 as attorney’s fees on the
basis of quantum meruit.

Costs of suit to be paid by the petitioner.

SO ORDERED.