Article 435

SECOND DIVISION
[G.R. No. 158563. June 30, 2005]
AIR

TRANSPORTATION OFFICE (ATO) and MACTAN-CEBU INTERNATIONAL

(MCIAA), petitioners, vs. APOLONIO GOPUCO, JR., respondent.

AIRPORT

AUTHORITY

DECISION
CHICO-NAZARIO, J.:
When private land is expropriated for a particular public use, and that particular public use is abandoned, does
its former owner acquire a cause of action for recovery of the property?
The trial courts ruling in the negative was reversed by the Court of Appeals in its Decision [1] of 28 February
2001. Hence this petition for review under Rule 45 of the 1997 Rules of Civil Procedure of the said Decision of the
court a quo, and its Resolution[2] of 22 May 2003 dismissing petitioners motion for reconsideration.
The facts, as adduced from the records, are as follows:
Respondent Apolonio Gopuco, Jr. was the owner of Cadastral Lot No. 72 consisting of 995 square meters
located in the vicinity of the Lahug Airport in Cebu City covered by Transfer Certificate of Title (TCT) No. 13061-T.
The Lahug Airport had been turned over by the Unites States Army to the Republic of the Philippines sometime
in 1947 through the Surplus Property Commission, which accepted it in behalf of the Philippine Government. In
1947, the Surplus Property Commission was succeeded by the Bureau of Aeronautics, which office was supplanted
by the National Airport Corporation (NAC). The NAC was in turn dissolved and replaced with the Civil Aeronautics
Administration (CAA).[3]
Sometime in 1949, the NAC informed the owners of the various lots surrounding the Lahug Airport, including
the herein respondent, that the government was acquiring their lands for purposes of expansion. Some landowners
were convinced to sell their properties on the assurance that they would be able to repurchase the same when
these would no longer be used by the airport. Others, including Gopuco, refused to do so.
Thus, on 16 April 1952, the CAA filed a complaint with the Court of First Instance (CFI) of Cebu for the
expropriation of Lot No. 72 and its neighboring realties, docketed as Civil Case No. R-1881.
On 29 December 1961, the CFI promulgated a Decision,
1. Declaring the expropriation of [the subject lots, including Lot No. 72] justified and in lawful exercise of the right
of eminent domain;
2. Declaring . a balance of P1,990 in favor of Apolonio Go Puco, Jr. with legal interest from November 16, 1947 until
fully paid. ;
3. After the payment of the foregoing financial obligation to the landowners, directing the latter to deliver to the
plaintiff the corresponding Transfer Certificates of Title to their respective lots; and upon the presentation of the
said titles to the Register of Deeds, ordering the latter to cancel the same and to issue, in lieu thereof, new Transfer
Certificates of Title in the name of the plaintiff. [4]
No appeal was taken from the above Decision on Lot No. 72, and the judgment of condemnation became final
and executory. Thereafter, on 23 May 1962, absolute title to Lot No. 72 was transferred to the Republic of the
Philippines under TCT No. 25030.[5]
Subsequently, when the Mactan International Airport commenced operations, the Lahug Airport was ordered
closed by then President Corazon C. Aquino in a Memorandum of 29 November 1989. [6] Lot No. 72 was thus
virtually abandoned.[7]

On 16 March 1990, Gopuco wrote[8] the Bureau of Air Transportation, through the manager of the Lahug
Airport, seeking the return of his lot and offering to return the money previously received by him as payment for
the expropriation. This letter was ignored.[9]
In the same year, Congress passed Republic Act No. 6958 creating the Mactan-Cebu International Airport
Authority (MCIAA) and in part providing for the transfer of the assets of the Lahug Airport thereto. Consequently, on
08 May 1992, ownership of Lot No. 72 was transferred to MCIAA under TCT No. 120356. [10]
On 06 August 1992, Apolonio Gopuco, Jr. filed an amended complaint [11] for recovery of ownership of Lot No.
72 against the Air Transportation Office [12] and the Province of Cebu with the Regional Trial Court (RTC) of Cebu,
Branch X, docketed as Civil Case No. CEB-11914. He maintained that by virtue of the closure of the Lahug Airport,
the original purpose for which the property was expropriated had ceased or otherwise been abandoned, and title to
the property had therefore reverted to him.
Gopuco further alleged that when the original judgment of expropriation had been handed down, and before
they could file an appeal thereto, the CAA offered them a compromise settlement whereby they were assured that
the expropriated lots would be resold to them for the same price as when it was expropriated in the event that the
Lahug Airport would be abandoned. Gopuco claims to have accepted this offer. [13] However, he failed to present any
proof on this matter, and later admitted that insofar as the said lot was concerned, no compromise agreement was
entered into by the government and the previous owners. [14]
Lastly, Gopuco asserted that he had come across several announcements in the papers that the Lahug Airport
was soon to be developed into a commercial complex, which he took to be a scheme of the Province of Cebu to
make permanent the deprivation of his property.
On 20 May 1994, the trial court rendered a Decision [15] dismissing the complaint and directing the herein
respondent to pay the MCIAA exemplary damages, litigation expenses and costs.
Aggrieved by the holding of the trial court, Gopuco appealed to the Court of Appeals, which overturned the
RTC decision, ordered the herein petitioners to reconvey Lot No. 72 to Gopuco upon payment of the reasonable
price as determined by it, and deleted the award to the petitioners of exemplary damages, litigation expenses and
costs.
The Motion for Reconsideration was denied [16] on 22 May 2003, hence this petition, which raises the following
issues:
WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT HAS THE RIGHT TO RECLAIM
OWNERSHIP OVER THE SUBJECT EXPROPRIATED LOT BASED ON THE IMPORT OF THE DECEMBER 29, 1961
DECISION IN CIVIL CASE NO. 1881.
WHETHER THE COURT OF APPEALS ERRED IN DELETING THE AWARD OF LITIGATION EXPENSES AND COSTS IN
FAVOR OF PETITIONERS.
In deciding the original expropriation case that gave rise to the present controversy, Civil Case No. R-1881, the
CFI reasoned that the planned expansion of the airport justified the exercise of eminent domain, thus:
As for the public purpose of the expropriation proceeding, it cannot be doubted. Although the 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 return
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 for 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 a showing, the Court will presume that the
Lahug Airport will continue to be in operation.[17] (emphasis supplied)
By the time Gopuco had filed his action for recovery of ownership of Lot No. 72, Lahug Airport had indeed
ceased to operate. Nevertheless, the trial court held:
The fact of abandonment or closure of the Lahug Airport admitted by the defendant did not by itself, result in the
reversion of the subject property back to the plaintiff. Nor did it vest in the plaintiff the right to demand
reconveyance of said property.

When real property has been acquired for public use unconditionally, either by eminent domain or by purchase, the
abandonment or non-use of the real property, does not ipso facto give to the previous owner of said property any
right to recover the same (Fery vs. Municipality of Cabanatuan, 42 Phil. 28).[18]
In reversing the trial court, the Court of Appeals called attention to the fact that both parties cited Fery v.
Municipality of Cabanatuan,[19] which the trial court also relied on in its Decision. The court a quo agreed in
Gopucos interpretation of Fery that when the CFI in Civil Case No. R-1881 held that,
. . . [T]hen, 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.In the absence of such a showing, the Court will
presume that the Lahug Airport will continue to be in operation, . . . .[20]
the expropriation of the property was conditioned on its continued devotion to its public purpose. Thus, although
the MCIAA stressed that nothing in the judgment of expropriation expressly stated that the lands would revert to
their previous owners should the public use be terminated or abandoned, the Court of Appeals nevertheless ruled
that,
. . . [W]hile, there is no explicit statement that the land is expropriated with the condition that when the purpose is
ended the property shall return to its owner, the full import of the decision (in Civil Case No. R-1881) suggests that
the expropriation was granted because there is no clear showing that Lahug Airport will be closed, the moment
Mactan International Airport is put to operation. It stands to reason that should that public use be abandoned, then
the expropriated property should revert back to its former owner.
Moreover, the foundation of the right to exercise the power of eminent domain is genuine necessity. Condemnation
is justified only if it is for the public good and there is genuine necessity of a public character. Thus, when such
genuine necessity no longer exists as when the State abandons the property expropriated, government interest
must yield to the private right of the former land owner, whose property right was disturbed as a consequence of
the exercise of eminent domain.
Justice, equity and fair play demand that the property should revert back to plaintiff-appellant upon paying the
reasonable value of the land to be based on the prevailing market value at the time of judicial demand to recover
the property. If the State expects landowners to cooperate in its bid to take private property for its public use, so
must it apply also the same standard, to allow the landowner to reclaim the property, now that the public use has
been abandoned.[21]
In this petition, the MCIAA reiterates that the Republic of the Philippines validly expropriated Lot No. 72
through the proceedings in Civil Case No. R-1881, the judgment of which had long become final and executory. It
further asserts that said judgment vested absolute and unconditional title in the government, specifically on the
petitioners, there having been no condition whatsoever that the property should revert to its owners in case the
Lahug Airport should be abandoned.
On the other hand, the respondent would have us sustain the appellate courts interpretation of Fery as
applied to the original judgment of expropriation, to the effect that this was subject to the condition that the Lahug
Airport will continue to be in operation.
We resolve to grant the petition.
In Fery, the Court asked and answered the same question confronting us now: When private land is
expropriated for a particular public use, and that particular public use is abandoned, does the land so expropriated
return to its former owner?[22]
The answer to that question depends upon the character of the title acquired by the expropriator, whether it be the
State, a province, a municipality, or a corporation which has the right to acquire property under the power of
eminent domain. If, for example, 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, for example, 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. . . 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. (10

R.C.L., 240, sec. 202; 20 C.J. 1234, secs. 593-599 and numerous cases cited; Reichling vs. Covington Lumber Co.,
57 Wash., 225; 135 Am. St. Rep., 976; McConihay vs. Wright, 121 U.S., 201.)
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 rights 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. (Fort Wayne vs. Lake Shore, etc. Ry. Co., 132
Ind., 558; 18 L.R.A., 367.) (Emphases Supplied) [23]
Did the judgment of expropriation in Civil Case No. R-1881 vest absolute and unconditional title in the
government? We have already had occasion to rule on this matter in Mactan-Cebu International Airport Authority v.
Court of Appeals,[24] which is a related action for reconveyance of a parcel of land also subject of the expropriation
proceedings in Civil Case No. R-1881. One of the landowners affected by the said proceeding was Virginia
Chiongbian, to whom the CFI ordered the Republic of the Philippines to pay P34,415.00, with legal interest
computed from the time the government began using her land. Like the herein respondent, she did not appeal
from the CFIs judgment. Also like Gopuco, she eventually filed for the reconveyance of her property when the
airport closed. Although she was upheld by both the RTC of Cebu and the Court of Appeals, on appeal we held
that the terms of the judgment (in Civil Case No. R-1881) are clear and unequivocal and granted title to
Lot No. 941 in fee simple to the Republic of the Philippines. There was no condition imposed to the
effect that the lot would return to CHIONGBIAN or that CHIONGBIAN 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.[25] Moreover, we held that although other lot owners were able to
successfully reacquire their lands by virtue of a compromise agreement, since CHIONGBIAN was not a party to any
such agreement, she could not validly invoke the same.
The respondent would have us revisit this ruling for three reasons. First, because he claims there is no showing
that the government benefited from entering into compromise agreements with the other lot owners; second,
because such a doctrine supposedly discriminates against those who have neither the werewithal nor the savvy to
contest the expropriation, or agree to modify the judgment; and third, because there exists between the
government and the owners of expropriated realty an implied contract that the properties involved will be used
only for the public purpose for which they were acquired in the first place.
As to respondents first and second arguments, we have time and again ruled that a compromise agreement,
when not contrary to law, public order, public policy, morals, or good customs, is a valid contract which is the law
between the parties.[26] It is a contract perfected by mere consent,[27] whereby the parties, making reciprocal
concessions, avoid litigation or put an end to one already commenced. It has the force of law and is conclusive
between the parties,[28] and courts will not relieve parties from obligations voluntarily assumed, simply because
their contracts turned out to be unwise. [29] Note that respondent has not shown that any of the compromise
agreements were in any way tainted with illegality, irregularity or imprudence. Indeed, anyone who is not a party
to a contract or agreement cannot be bound by its terms, and cannot be affected by it. [30] Since Gopuco was not a
party to the compromise agreements, he cannot legally invoke the same. [31]
Lastly, Gopuco argues that there is present, in cases of expropriation, an implied contract that the properties
will be used only for the public purpose for which they were acquired. No such contract exists.
Eminent domain is generally described as the highest and most exact idea of property remaining in the
government that may be acquired for some public purpose through a method in the nature of a forced purchase by
the State.[32] Also often referred to as expropriation and, with less frequency, as condemnation, it is, like police
power and taxation, an inherent power of sovereignty and need not be clothed with any constitutional gear to
exist; instead, provisions in our Constitution on the subject are meant more to regulate, rather than to grant, the
exercise of the power. It is a right to take or reassert dominion over property within the state for public use or to
meet a public exigency and is said to be an essential part of governance even in its most primitive form and thus
inseparable from sovereignty.[33] In fact, all separate interests of individuals in property are held of the government
under this tacit agreement or implied reservation. Notwithstanding the grant to individuals, the eminent domain,
the highest and most exact idea of property, remains in the government, or in the aggregate body of people in
their sovereign capacity; and they have the right to resume the possession of the property whenever the public
interest so requires it.[34]
The ubiquitous character of eminent domain is manifest in the nature of the expropriation proceedings.
Expropriation proceedings are not adversarial in the conventional sense, for the condemning authority is not
required to assert any conflicting interest in the property. Thus, by filing the action, the condemnor in effect merely

serves notice that it is taking title and possession of the property, and the defendant asserts title or interest in the
property, not to prove a right to possession, but to prove a right to compensation for the taking. [35]
The only direct constitutional qualification is thus that private property shall not be taken for public use
without just compensation.[36] This prescription is intended to provide a safeguard against possible abuse and so to
protect as well the individual against whose property the power is sought to be enforced. [37]
In this case, the judgment on the propriety of the taking and the adequacy of the compensation received have
long become final. We have also already held that the terms of that judgment granted title in fee simple to the
Republic of the Philippines. Therefore, pursuant to our ruling in Fery, as recently cited in Reyes v. National Housing
Authority,[38] no rights to Lot No. 72, either express or implied, have been retained by the herein respondent.
We are not unaware of the ruling in Heirs of Timoteo Moreno v. Mactan-Cebu International Airport Authority,
concerning still another set of owners of lots declared expropriated in the judgment in Civil Case No. R-1881. As
with Chiongbian and the herein respondent, the owners of the lots therein did not appeal the judgment of
expropriation, but subsequently filed a complaint for reconveyance. In ordering MCIAA to reconvey the said lots in
their favor, we held that the predicament of petitioners therein involved a constructive trust akin to the implied
trust referred to in Art. 1454[40] of the Civil Code. [41] However, we qualified our Decision in that case, to the effect
that,
[39]

We adhere to the principles enunciated in Fery and in Mactan-Cebu International Airport Authority, and do not
overrule them. Nonetheless the weight of their import, particularly our ruling as regards the properties of
respondent Chiongbian in Mactan-Cebu International Airport Authority, must be commensurate to the facts that
were established therein as distinguished from those extant in the case at bar.Chiongbian put forth
inadmissible and inconclusive evidence, while in the instant case we have preponderant proof as
found by the trial court of the existence of the right of repurchase in favor of petitioners.
Neither has Gopuco, in the present case, adduced any evidence at all concerning a right of repurchase in his
favor. Heirs of Moreno is thus not in point.
The trial court was thus correct in denying Gopucos claim for the reconveyance of Lot No. 72 in his favor.
However, for failure of the petitioners to present any proof that this case was clearly unfounded or filed for
purposes of harassment, or that the herein respondent acted in gross and evident bad faith, the reimposition of
litigation expenses and costs has no basis. It is not sound public policy to set a premium upon the right to litigate
where such right is exercised in good faith, as in the present case. [42]
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 49898 dated
28 February 2001, and its Resolution of 22 May 2003 are hereby REVERSED and SET ASIDE. The Decision of RTCBranch X of Cebu dated 20 May 1994 in Civil Case No. CEB-11914 is REINSTATED with the modification that the
award of exemplary damages, litigation expenses and costs are DELETED.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

EN BANC
[G.R. No. 161656. June 29, 2005]
REPUBLIC OF THE PHILIPPINES, GENERAL ROMEO ZULUETA, COMMODORE EDGARDO GALEOS, ANTONIO
CABALUNA, DOROTEO MANTOS & FLORENCIO BELOTINDOS, petitioners, vs. VICENTE G.
LIM, respondent.
RESOLUTION
SANDOVAL-GUTIERREZ, J.:
Justice is the first virtue of social institutions. [1] When the state wields its power of eminent domain, there
arises a correlative obligation on its part to pay the owner of the expropriated property a just compensation. If it

fails, there is a clear case of injustice that must be redressed. In the present case, fifty-seven (57) years have
lapsed from the time the Decision in the subject expropriation proceedings became final, but still the Republic of
the Philippines, herein petitioner, has not compensated the owner of the property. To tolerate such prolonged
inaction on its part is to encourage distrust and resentment among our people the very vices that corrode the ties
of civility and tempt men to act in ways they would otherwise shun.
A revisit of the pertinent facts in the instant case is imperative.
On September 5, 1938, the Republic of the Philippines (Republic) instituted a special civil action for
expropriation with the Court of First Instance (CFI) of Cebu, docketed as Civil Case No. 781, involving Lots 932 and
939 of the Banilad Friar Land Estate, Lahug, Cebu City, for the purpose of establishing a military reservation for the
Philippine Army. Lot 932 was registered in the name of Gervasia Denzon under Transfer Certificate of Title (TCT) No.
14921 with an area of 25,137 square meters, while Lot 939 was in the name of Eulalia Denzon and covered by TCT
No. 12560 consisting of 13,164 square meters.
After depositing P9,500.00 with the Philippine National Bank, pursuant to the Order of the CFI dated October
19, 1938, the Republic took possession of the lots. Thereafter, or on May 14, 1940, the CFI rendered its Decision
ordering the Republic to pay the Denzons the sum of P4,062.10 as just compensation.
The Denzons interposed an appeal to the Court of Appeals but it was dismissed on March 11, 1948. An entry
of judgment was made on April 5, 1948.
In 1950, Jose Galeos, one of the heirs of the Denzons, filed with the National Airports Corporation a claim for
rentals for the two lots, but it denied knowledge of the matter. Another heir, Nestor Belocura, brought the claim to
the Office of then President Carlos Garcia who wrote the Civil Aeronautics Administration and the Secretary of
National Defense to expedite action on said claim. On September 6, 1961, Lt. Manuel Cabal rejected the claim but
expressed willingness to pay the appraised value of the lots within a reasonable time.
For failure of the Republic to pay for the lots, on September 20, 1961, the Denzons successors-ininterest, Francisca Galeos-Valdehueza and Josefina Galeos-Panerio,[2] filed with the same CFI an action for
recovery of possession with damages against the Republic and officers of the Armed Forces of the Philippines in
possession of the property. The case was docketed as Civil Case No. R-7208.
In the interim or on November 9, 1961, TCT Nos. 23934 and 23935 covering Lots 932 and 939 were issued in
the names of Francisca Valdehueza and Josefina Panerio, respectively. Annotated thereon was the phrase subject to
the priority of the National Airports Corporation to acquire said parcels of land, Lots 932 and 939 upon previous
payment of a reasonable market value.
On July 31, 1962, the CFI promulgated its Decision in favor of Valdehueza and Panerio, holding that they are
the owners and have retained their right as such over Lots 932 and 939 because of the Republics failure to pay the
amount of P4,062.10, adjudged in the expropriation proceedings. However, in view of the annotation on their land
titles, they were ordered to execute a deed of sale in favor of the Republic. In view of the differences in money
value from 1940 up to the present, the court adjusted the market value at P16,248.40, to be paid with 6% interest
per annum from April 5, 1948, date of entry in the expropriation proceedings, until full payment.
After their motion for reconsideration was denied, Valdehueza and Panerio appealed from the CFI Decision, in
view of the amount in controversy, directly to this Court. The case was docketed as No. L-21032. [3] On May 19,
1966, this Court rendered its Decision affirming the CFI Decision. It held that Valdehueza and Panerio are still the
registered owners of Lots 932 and 939, there having been no payment of just compensation by the Republic.
Apparently, this Court found nothing in the records to show that the Republic paid the owners or their successorsin-interest according to the CFI decision. While it deposited the amount of P9,500,00, and said deposit was
allegedly disbursed, however, the payees could not be ascertained.
Notwithstanding the above finding, this Court still ruled that Valdehueza and Panerio are not entitled to
recover possession of the lots but may only demand the payment of their fair market value, ratiocinating as
follows:
Appellants would contend that: (1) possession of Lots 932 and 939 should be restored to them as owners of the
same; (2) the Republic should be ordered to pay rentals for the use of said lots, plus attorneys fees; and (3) the
court a quo in the present suit had no power to fix the value of the lots and order the execution of the deed of sale
after payment.

It is true that plaintiffs are still the registered owners of the land, there not having been a transfer of said lots in
favor of the Government. The records do not show that the Government paid the owners or their successors-ininterest according to the 1940 CFI decision although, as stated, P9,500.00 was deposited by it, and said deposit
had been disbursed. With the records lost, however, it cannot be known who received the money (Exh. 14 says: It
is further certified that the corresponding Vouchers and pertinent Journal and Cash Book were destroyed during the
last World War, and therefore the names of the payees concerned cannot be ascertained.) And the Government
now admits that there is no available record showing that payment for the value of the lots in
question has been made (Stipulation of Facts, par. 9, Rec. on Appeal, p. 28).
The points in dispute are whether such payment can still be made and, if so, in what amount. Said
lots have been the subject of expropriation proceedings. By final and executory judgment in said
proceedings, they were condemned for public use, as part of an airport, and ordered sold to the
Government. In fact, the abovementioned title certificates secured by plaintiffs over said lots
contained annotations of the right of the National Airports Corporation (now CAA) to pay for and
acquire them. It follows that both by virtue of the judgment, long final, in the expropriation suit, as
well as the annotations upon their title certificates, plaintiffs are not entitled to recover possession of
their expropriated lots which are still devoted to the public use for which they were expropriated but
only to demand the fair market value of the same.
Meanwhile, in 1964, Valdehueza and Panerio mortgaged Lot 932 to Vicente Lim, herein respondent,[4] as
security for their loans. For their failure to pay Lim despite demand, he had the mortgage foreclosed in 1976. Thus,
TCT No. 23934 was cancelled, and in lieu thereof, TCT No. 63894 was issued in his name.
On August 20, 1992, respondent Lim filed a complaint for quieting of title with the Regional Trial Court (RTC),
Branch 10, Cebu City, against General Romeo Zulueta, as Commander of the Armed Forces of the Philippines,
Commodore Edgardo Galeos, as Commander of Naval District V of the Philippine Navy, Antonio Cabaluna, Doroteo
Mantos and Florencio Belotindos, herein petitioners. Subsequently, he amended the complaint to implead the
Republic.
On May 4, 2001, the RTC rendered a decision in favor of respondent, thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Vicente Lim and against all defendants, public and
private, declaring plaintiff Vicente Lim the absolute and exclusive owner of Lot No. 932 with all the
rights of an absolute owner including the right to possession. The monetary claims in the complaint and in
the counter claims contained in the answer of defendants are ordered Dismissed.
Petitioners elevated the case to the Court of Appeals, docketed therein as CA-G.R. CV No. 72915. In its
Decision[5] dated September 18, 2003, the Appellate Court sustained the RTC Decision, thus:
Obviously, defendant-appellant Republic evaded its duty of paying what was due to the landowners.
The expropriation proceedings had already become final in the late 1940s and yet, up to now, or more
than fifty (50) years after, the Republic had not yet paid the compensation fixed by the court while
continuously reaping benefits from the expropriated property to the prejudice of the landowner. x x x.
This is contrary to the rules of fair play because the concept of just compensation embraces not only
the correct determination of the amount to be paid to the owners of the land, but also the payment
for the land within a reasonable time from its taking. Without prompt payment, compensation cannot
be considered just for the property owner is made to suffer the consequence of being immediately
deprived of his land while being made to wait for a decade or more, in this case more than 50 years,
before actually receiving the amount necessary to cope with the loss. To allow the taking of the
landowners properties, and in the meantime leave them empty-handed by withholding payment of
compensation while the government speculates on whether or not it will pursue expropriation, or
worse, for government to subsequently decide to abandon the property and return it to the
landowners, is undoubtedly an oppressive exercise of eminent domain that must never be
sanctioned. (Land Bank of the Philippines vs. Court of Appeals, 258 SCRA 404).
xxxxxx
An action to quiet title is a common law remedy for the removal of any cloud or doubt or uncertainty on the title to
real property. It is essential for the plaintiff or complainant to have a legal or equitable title or interest in the real
property, which is the subject matter of the action. Also the deed, claim, encumbrance or proceeding that is being
alleged as cloud on plaintiffs title must be shown to be in fact invalid or inoperative despite its prima
facie appearance of validity or legal efficacy (Robles vs. Court of Appeals, 328 SCRA 97). In view of the

foregoing discussion, clearly, the claim of defendant-appellant Republic constitutes a cloud, doubt or
uncertainty on the title of plaintiff-appellee Vicente Lim that can be removed by an action to quiet
title.
WHEREFORE, in view of the foregoing, and finding no reversible error in the appealed May 4, 2001 Decision of
Branch 9, Regional Trial Court of Cebu City, in Civil Case No. CEB-12701, the said decision is UPHELD AND
AFFIRMED. Accordingly, the appeal is DISMISSED for lack of merit.
Undaunted, petitioners, through the Office of the Solicitor General, filed with this Court a petition for review on
certiorari alleging that the Republic has remained the owner of Lot 932 as held by this Court in Valdehueza vs.
Republic.[6]
In our Resolution dated March 1, 2004, we denied the petition outright on the ground that the Court of Appeals
did not commit a reversible error. Petitioners filed an urgent motion for reconsideration but we denied the
same with finality in our Resolution of May 17, 2004.
On May 18, 2004, respondent filed an ex-parte motion for the issuance of an entry of judgment. We only noted
the motion in our Resolution of July 12, 2004.
On July 7, 2004, petitioners filed an urgent plea/motion for clarification, which is actually a second motion
for reconsideration. Thus, in our Resolution of September 6, 2004, we simply noted without action the motion
considering that the instant petition was already denied with finality in our Resolution of May 17, 2004.
On October 29, 2004, petitioners filed a very urgent motion for leave to file a motion for reconsideration of our
Resolution dated September 6, 2004 (with prayer to refer the case to theEn Banc). They maintain that the
Republics right of ownership has been settled in Valdehueza.
The basic issue for our resolution is whether the Republic has retained ownership of Lot 932 despite its failure
to pay respondents predecessors-in-interest the just compensation therefor pursuant to the judgment of the CFI
rendered as early as May 14, 1940.
Initially, we must rule on the procedural obstacle.
While we commend the Republic for the zeal with which it pursues the present case, we reiterate that its
urgent motion for clarification filed on July 7, 2004 is actually a second motion for reconsideration. This motion is
prohibited under Section 2, Rule 52, of the 1997 Rules of Civil Procedure, as amended, which provides:
Sec. 2. Second motion for reconsideration. No second motion for reconsideration of a judgment or final resolution
by the same party shall be entertained.
Consequently, as mentioned earlier, we simply noted without action the motion since petitioners petition was
already denied with finality.
Considering the Republics urgent and serious insistence that it is still the owner of Lot 932 and in the interest
of justice, we take another hard look at the controversial issue in order to determine the veracity of petitioners
stance.
One of the basic principles enshrined in our Constitution is that no person shall be deprived of his private
property without due process of law; and in expropriation cases, an essential element of due process is that there
must be just compensation whenever private property is taken for public use. [7] Accordingly, Section 9, Article III, of
our Constitution mandates: Private property shall not be taken for public use without just compensation.
The Republic disregarded the foregoing provision when it failed and refused to pay respondents predecessorsin-interest the just compensation for Lots 932 and 939. The length of time and the manner with which it evaded
payment demonstrate its arbitrary high-handedness and confiscatory attitude. The final judgment in the
expropriation proceedings (Civil Case No. 781) was entered on April 5, 1948. More than half of a century has
passed, yet, to this day, the landowner, now respondent, has remained empty-handed. Undoubtedly, over 50 years
of delayed payment cannot, in any way, be viewed as fair. This is more so when such delay is accompanied by
bureaucratic hassles. Apparent from Valdehueza is the fact that respondents predecessors-in-interest were given a
run around by the Republics officials and agents. In 1950, despite the benefits it derived from the use of the two
lots, the National Airports Corporationdenied knowledge of the claim of respondents predecessors-in-interest. Even

President Garcia, who sent a letter to the Civil Aeronautics Administration and the Secretary of National Defense to
expedite the payment, failed in granting relief to them. And, on September 6, 1961, while the Chief of Staff of the
Armed Forces expressed willingness to pay the appraised value of the lots, nothing happened.
The Court of Appeals is correct in saying that Republics delay is contrary to the rules of fair play, as just
compensation embraces not only the correct determination of the amount to be paid to the owners of
the land, but also the payment for the land within a reasonable time from its taking. Without prompt
payment, compensation cannot be considered just. In jurisdictions similar to ours, where an entry to the
expropriated property precedes the payment of compensation, it has been held that if the compensation is not
paid in areasonable time, the party may be treated as a trespasser ab initio.[8]
Corollarily, in Provincial Government of Sorsogon vs. Vda. De Villaroya,[9] similar to the present case, this Court
expressed its disgust over the governments vexatious delay in the payment of just compensation, thus:
The petitioners have been waiting for more than thirty years to be paid for their land which was taken
for use as a public high school. As a matter of fair procedure, it is the duty of the Government, whenever it
takes property from private persons against their will, to supply all required documentation and facilitate payment
of just compensation. The imposition of unreasonable requirements and vexatious delays before
effecting payment is not only galling and arbitrary but a rich source of discontent with government.
There should be some kind of swift and effective recourse against unfeeling and uncaring acts of
middle or lower level bureaucrats.
We feel the same way in the instant case.
More than anything else, however, it is the obstinacy of the Republic that prompted us to dismiss its petition
outright. As early as May 19, 1966, in Valdehueza, this Court mandated the Republic to pay respondents
predecessors-in-interest the sum of P16,248.40 as reasonable market value of the two lots in question.
Unfortunately, it did not comply and allowed several decades to pass without obeying this Courts mandate. Such
prolonged obstinacy bespeaks of lack of respect to private rights and to the rule of law, which we cannot
countenance. It is tantamount to confiscation of private property. While it is true that all private properties are
subject to the need of government, and the government may take them whenever the necessity or the exigency of
the occasion demands, however, the Constitution guarantees that when this governmental right of expropriation is
exercised, it shall be attended by compensation.[10] From the taking of private property by the government under
the power of eminent domain, there arises an implied promise to compensate the owner for his loss. [11]
Significantly, the above-mentioned provision of Section 9, Article III of the Constitution is not a grant but
a limitation of power. This limiting function is in keeping with the philosophy of the Bill of Rights against the
arbitrary exercise of governmental powers to the detriment of the individuals rights. Given this function, the
provision should therefore be strictly interpreted against the expropriator, the government, and liberally in favor
of the property owner.[12]
Ironically, in opposing respondents claim, the Republic is invoking this Courts Decision in Valdehueza, a
Decision it utterly defied. How could the Republic acquire ownership over Lot 932 when it has not paid its owner
the just compensation, required by law, for more than 50 years? The recognized rule is that title to the property
expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation.
Jurisprudence on this settled principle is consistent both here and in other democratic jurisdictions. In Association
of Small Landowners in the Philippines, Inc. et al., vs. Secretary of Agrarian Reform, [13] thus:
Title to property which is the subject of condemnation proceedings does not vest the condemnor until
the judgment fixing just compensation is entered and paid, but the condemnors title relates back to the
date on which the petition under the Eminent Domain Act, or the commissioners report under the Local
Improvement Act, is filed.
x x x Although the right to appropriate and use land taken for a canal is complete at the time of entry,
title to the property taken remains in the owner until payment is actually made. (Emphasis supplied.)
In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to property does not pass to
the condemnor until just compensation had actually been made. In fact, the decisions appear to be uniform to this
effect. As early as 1838, in Rubottom v. McLure, it was held that actual payment to the owner of the
condemned property was a condition precedent to the investment of the title to the property in the
State albeit not to the appropriation of it to public use. In Rexford v. Knight, the Court of Appeals of New
York said that the construction upon the statutes was that the fee did not vest in the State until the payment of the

compensation although the authority to enter upon and appropriate the land was complete prior to the payment.
Kennedy further said that both on principle and authority the rule is . . . that the right to enter on and
use the property is complete, as soon as the property is actually appropriated under the authority of
law for a public use, but that the title does not pass from the owner without his consent, until just
compensation has been made to him.
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that:
If the laws which we have exhibited or cited in the preceding discussion are attentively examined it
will be apparent that the method of expropriation adopted in this jurisdiction is such as to afford
absolute reassurance that no piece of land can be finally and irrevocably taken from an unwilling
owner until compensation is paid...(Emphasis supplied.)
Clearly, without full payment of just compensation, there can be no transfer of title from the landowner to the
expropriator. Otherwise stated, the Republics acquisition of ownership is conditioned upon the full payment of just
compensation within a reasonable time.[14]
Significantly, in Municipality of Bian v. Garcia [15] this Court ruled that the expropriation of lands consists of two
stages, to wit:
x x x The first is concerned with the determination of the authority of the plaintiff to exercise the power of eminent
domain and the propriety of its exercise in the context of the facts involved in the suit. It ends with an order, if not
of dismissal of the action, of condemnation declaring that the plaintiff has a lawful right to take the property sought
to be condemned, for the public use or purpose described in the complaint, upon the payment of just
compensation to be determined as of the date of the filing of the complaint x x x.
The second phase of the eminent domain action is concerned with the determination by the court of the just
compensation for the property sought to be taken. This is done by the court with the assistance of not more than
three (3) commissioners. x x x.
It is only upon the completion of these two stages that expropriation is said to have been completed.
In Republic v. Salem Investment Corporation,[16] we ruled that, the process is not completed until payment of just
compensation. Thus, here, the failure of the Republic to pay respondent and his predecessors-in-interest for a
period of 57 years rendered the expropriation process incomplete.
The Republic now argues that under Valdehueza, respondent is not entitled to recover possession of Lot 932
but only to demand payment of its fair market value. Of course, we are aware of the doctrine that non-payment of
just compensation (in an expropriation proceedings) does not entitle the private landowners to recover possession
of the expropriated lots. This is our ruling in the recent cases of Republic of the Philippines vs. Court of Appeals, et
al.,[17] and Reyes vs. National Housing Authority.[18] However, the facts of the present case do not justify its
application. It bears stressing that the Republic was ordered to pay just compensation twice, the first was in the
expropriation proceedings and the second, in Valdehueza. Fifty-seven (57) years have passed since then. We
cannot but construe the Republics failure to pay just compensation as a deliberate refusal on its
part. Under such circumstance,recovery of possession is in order. In several jurisdictions, the courts held that
recovery of possession may be had when property has been wrongfully taken or is wrongfully retained by one
claiming to act under the power of eminent domain [19] or where a rightful entry is made and the party
condemning refuses to pay the compensation which has been assessed or agreed upon; [20] or fails or
refuses to have the compensation assessed and paid. [21]
The Republic also contends that where there have been constructions being used by the military, as in this
case, public interest demands that the present suit should not be sustained.

[22]

It must be emphasized that an individual cannot be deprived of his property for the public convenience.
In Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform,[23] we ruled:

One of the basic principles of the democratic system is that where the rights of the individual are concerned, the
end does not justify the means. It is not enough that there be a valid objective; it is also necessary that the means
employed to pursue it be in keeping with the Constitution. Mere expediency will not excuse constitutional
shortcuts. There is no question that not even the strongest moral conviction or the most urgent public
need, subject only to a few notable exceptions, will excuse the bypassing of an individual's rights. It
is no exaggeration to say that a person invoking a right guaranteed under Article III of the
Constitution is a majority of one even as against the rest of the nation who would deny him that right.

The right covers the persons life, his liberty and his property under Section 1 of Article III of the
Constitution. With regard to his property, the owner enjoys the added protection of Section 9, which
reaffirms the familiar rule that private property shall not be taken for public use without just
compensation.
The Republics assertion that the defense of the State will be in grave danger if we shall order the reversion of
Lot 932 to respondent is an overstatement. First, Lot 932 had ceased to operate as an airport. What remains in the
site is just the National Historical Institutes marking stating that Lot 932 is the former location of Lahug
Airport. And second, there are only thirteen (13) structures located on Lot 932, eight (8) of which are residence
apartments of military personnel. Only two (2) buildings are actually used as training centers. Thus, practically
speaking, the reversion of Lot 932 to respondent will only affect a handful of military personnel. It will not result to
irreparable damage or damage beyond pecuniary estimation, as what the Republic vehemently claims.
We thus rule that the special circumstances prevailing in this case entitle respondent to recover possession of
the expropriated lot from the Republic. Unless this form of swift and effective relief is granted to him, the grave
injustice committed against his predecessors-in-interest, though no fault or negligence on their part, will be
perpetuated. Let this case, therefore, serve as a wake-up call to the Republic that in the exercise of its power of
eminent domain, necessarily in derogation of private rights, it must comply with the Constitutional limitations. This
Court, as the guardian of the peoples right, will not stand still in the face of the Republics oppressive and
confiscatory taking of private property, as in this case.
At this point, it may be argued that respondent Vicente Lim acted in bad faith in entering into a contract of
mortgage with Valdehueza and Panerio despite the clear annotation in TCT No. 23934 that Lot 932 is subject to
the priority of the National Airports Corporation [to acquire said parcels of land] x x x upon previous
payment of a reasonable market value.
The issue of whether or not respondent acted in bad faith is immaterial considering that the Republic did not
complete the expropriation process. In short, it failed to perfect its title over Lot 932 by its failure to pay just
compensation. The issue of bad faith would have assumed relevance if the Republic actually acquired title over Lot
932. In such a case, even if respondents title was registered first, it would be the Republics title or right of
ownership that shall be upheld. But now, assuming that respondent was in bad faith, can such fact vest
upon the Republic a better title over Lot 932? We believe not. This is because in the first place, the Republic
has no title to speak of.
At any rate, assuming that respondent had indeed knowledge of the annotation, still nothing would have
prevented him from entering into a mortgage contract involving Lot 932 while the expropriation proceeding was
pending. Any person who deals with a property subject of an expropriation does so at his own risk, taking into
account the ultimate possibility of losing the property in favor of the government. Here, the annotation merely
served as a caveat that the Republic had a preferential right to acquire Lot 932 upon its payment of a
reasonable market value. It did not proscribe Valdehueza and Panerio from exercising their rights of ownership
including their right to mortgage or even to dispose of their property. In Republic vs. Salem Investment
Corporation,[24] we recognized the owners absolute right over his property pending completion of the expropriation
proceeding, thus:
It is only upon the completion of these two stages that expropriation is said to have been completed. Moreover, it
is only upon payment of just compensation that title over the property passes to the government. Therefore, until
the action for expropriation has been completed and terminated, ownership over the property being expropriated
remains with the registered owner. Consequently, the latter can exercise all rights pertaining to an
owner, including the right to dispose of his property subject to the power of the State ultimately to
acquire it through expropriation.
It bears emphasis that when Valdehueza and Panerio mortgaged Lot 932 to respondent in 1964, they were still
the owners thereof and their title had not yet passed to the petitioner Republic. In fact, it never did. Such title or
ownership was rendered conclusive when we categorically ruled in Valdehueza that: It is true that plaintiffs are
still the registered owners of the land, there not having been a transfer of said lots in favor of the
Government.
For respondents part, it is reasonable to conclude that he entered into the contract of mortgage with
Valdehueza and Panerio fully aware of the extent of his right as a mortgagee. A mortgage is merely an accessory
contract intended to secure the performance of the principal obligation. One of its characteristics is that it
is inseparable from the property. It adheres to the property regardless of who its owner may subsequently be.

Respondent must have known that even if Lot 932 is ultimately expropriated by the Republic, still, his right as a
mortgagee is protected. In this regard, Article 2127 of the Civil Code provides:
[25]

Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing fruits, and the rents
or income not yet received when the obligation becomes due, and to the amount of the indemnity granted or
owing to the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for public
use, with the declarations, amplifications, and limitations established by law, whether the estate remains in
the possession of the mortgagor or it passes in the hands of a third person.
In summation, while the prevailing doctrine is that the non-payment of just compensation does not entitle the
private landowner to recover possession of the expropriated lots, [26]however, in cases where the government failed
to pay just compensation within five (5)[27] years from the finality of the judgment in the expropriation
proceedings, the owners concerned shall have the right to recover possession of their property. This is in
consonance with the principle that the government cannot keep the property and dishonor the judgment. [28]To be
sure, the five-year period limitation will encourage the government to pay just compensation punctually. This is in
keeping with justice and equity. After all, it is the duty of the government, whenever it takes property from private
persons against their will, to facilitate the payment of just compensation. In Cosculluela v. Court of Appeals,[29] we
defined just compensation as not only the correct determination of the amount to be paid to the property owner
but also the payment of the property within a reasonable time. Without prompt payment, compensation cannot
be considered just.
WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV No. 72915 is AFFIRMED in toto.
The Republics motion for reconsideration of our Resolution dated March 1, 2004 is DENIED with FINALITY. No
further pleadings will be allowed.
Let an entry of judgment be made in this case.
SO ORDERED.
Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Corona, CarpioMorales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia, JJ.,concur.

Republic of the Philippines

Supreme Court
Manila
FIRST DIVISION

NATIONAL POWER CORPORATION,

Petitioner,

G.R. No. 165828

Present:

- versus HEIRS OF MACABANGKIT SANGKAY,

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

CORONA, C.J., Chairperson,

LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.
Promulgated:

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, OICCity 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:
(i)

xxx
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 subterrain 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 ofinterest 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)
service;

The amount involved in the controversy and the benefits resulting to the client from the

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.