National Power Corporation vs. Ibrahim, 526 SCRA 149, June 29, 2007

2/22/22, 8:38 PM SUPREME COURT REPORTS ANNOTATED VOLUME 526
VOL. 526, JUNE 29, 2007 149

National Power Corporation vs. Ibrahim
*
G.R. No. 168732. June 29, 2007.
NATIONAL POWER CORPORATION, petitioner, vs.

LUCMAN G. IBRAHIM, OMAR G. MARUHOM, ELIAS G.
MARUHOM, BUCAY G. MARUHOM, FAROUK G.
MARUHOM, HIDJARA G. MARUHOM, ROCANIA G.
MARUHOM, POTRISAM G. MARUHOM, LUMBA G.
MARUHOM, SINAB G. MARUHOM, ACMAD G.
MARUHOM, SOLAYMAN G. MARUHOM, MOHAMAD M.
IBRAHIM, and CAIRONESA M. IBRAHIM, respondents.
Appeals; In an appeal by certiorari under Rule 45, the

jurisdiction of the Supreme Court is limited to reviewing and
revising the errors of law imputed to it, its findings of fact being as
a rule conclusive and binding on the Court.—Generally, in an
appeal by certiorari under Rule 45 of the Rules of Court, the
Court does not pass upon questions of fact. Absent any showing
that the trial and appellate courts gravely abused their discretion,
the Court will not examine the evidence introduced by the parties
below to determine if they correctly assessed and evaluated the
evidence on record. The jurisdiction of the Court in cases brought
to it from the CA is limited to reviewing and revising the errors of
law imputed to it, its findings of fact being as a rule conclusive
and binding on the Court.
Ownership; The sub-terrain portion of the property belongs to
the surface owner of the land.—In the present case, petitioner
failed to point to any evidence demonstrating grave abuse of
discretion on the part of the CA or to any other circumstances
which would call for the application of the exceptions to the above
rule. Consequently, the CA’s findings which upheld those of the
trial court that respondents owned and possessed the property
and that its substrata was possessed by petitioner since 1978 for
the underground tunnels, cannot be disturbed. Moreover, the
Court sustains the finding of the lower courts that the sub-terrain
portion of the property similarly belongs to respondents. This
conclusion is drawn from Article 437 of the Civil Code which
https://central.com.ph/sfsreader/session/0000017f2170f73eea506eff000d00d40059004a/t/?o=False 1/24
provides: ART. 437. The owner of a parcel of land is the owner of

its surface and of everything under it, and he can construct
_______________
* FIRST DIVISION.
150
150 SUPREME COURT REPORTS ANNOTATED
thereon any works or make any plantations and excavations

which he may deem proper, without detriment to servitudes and
subject to special laws and ordinances. He cannot complain of the
reasonable requirements of aerial navigation.
Same; The landowners’ right extends to such height or depth
where it is possible for them to obtain some benefit or enjoyment,
and it is extinguished beyond such limit as there would be no more
interest protected by law.—Petitioner’s argument that the
landowners’ right extends to the sub-soil insofar as necessary for
their practical interests serves only to further weaken its case.
The theory would limit the right to the sub-soil upon the economic
utility which such area offers to the surface owners. Presumably,
the landowners’ right extends to such height or depth where it is
possible for them to obtain some benefit or enjoyment, and it is
extinguished beyond such limit as there would be no more
interest protected by law.
Same; Eminent Domain; The power of eminent domain
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.—Petitioner contends that the underground tunnels in
this case constitute an easement upon the property of respondents
which does not involve any loss of title or possession. The manner
in which the ease-ment 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.
Same; Same; Where the nature of the easement practically
deprives the owners of the property’s normal beneficial use,
notwithstanding the fact that the expropriator only occupies the
sub-terrain
151
VOL. 526, JUNE 29, 2007 151
portion, it is liable to pay not merely an easement fee but rather the
full compensation for land.—In disregarding this procedure and
failing to recognize respondents’ ownership of the sub-terrain
portion, petitioner took a risk and exposed itself to greater
liability with the passage of time. It must be emphasized that the
acquisition of the easement is not without expense. The
underground tunnels impose limitations on respondents’ use of
the property for an indefinite period and deprive them of its
ordinary use. Based upon the foregoing, respondents are clearly
entitled to the payment of just compensation. Notwithstanding
the fact that petitioner only occupies the sub-terrain portion, it is
liable to pay not merely an easement fee but rather the full
compensation for land. This is so because in this case, the nature
of the easement practically deprives the owners of its normal
beneficial use. Respondents, as the owners 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.
Just Compensation; Words and Phrases; Just compensation
has been understood to be the just and complete equivalent of the
loss and is ordinarily determined by referring to the value of the
land and its character at the time it was taken by the
expropriating authority; There is a “taking” when the owners are
actually deprived or dispossessed of their property, where there is a
practical destruction or a material impairment of the value of their
property, or when they are deprived of the ordinary use thereof.—
Just compensation has been understood to be the just and
complete equivalent of the loss and is ordinarily determined by
referring to the value of the land and its character at the time it
was taken by the expropriating authority. There is a “taking” in
this sense when the owners are actually deprived or dispossessed

of their property, where there is a practical destruction or a
material impairment of the value of their property, or when they
are deprived of the ordinary use thereof. There is a “taking” in
this context when the expropriator enters private property not
only for a momentary period but for more permanent duration, for
the purpose of devoting the property to a public use in such a
manner as to oust the owner and deprive him of all beneficial
enjoyment thereof. Moreover, “taking” of the property for
purposes of eminent domain entails that the entry into the
property must be under warrant or color of legal authority.
152
Same; In determining the just compensation, the valuation of

the property should be based on the value on the date when the
landowners discovered the presence of the huge underground
tunnels beneath their lands, not the value on the date on which the
latter constructed the tunnels.—In the present case, to allow
petitioner to use the date it constructed the tunnels as the date of
valuation would be grossly unfair. First, it did not enter the land
under warrant or color of legal authority or with intent to
expropriate the same. In fact, it did not bother to notify the
owners and wrongly assumed it had the right to dig those tunnels
under their property. Secondly, the “improvements” introduced by
petitioner, namely, the tunnels, in no way contributed to an
increase in the value of the land. The trial court, therefore, as
affirmed by the CA, rightly computed the valuation of the
property as of 1992, when respondents discovered the
construction of the huge underground tunnels beneath their lands
and petitioner confirmed the same and started negotiations for
their purchase but no agreement could be reached.
PETITION for review on certiorari of a decision of the

Court of Appeals.
The facts are stated in the opinion of the Court.

Daud Calala and Alex Macabangkit for petitioner.
Dimnatang T. Saro and Casan Macabanding for
respondents.
Pete Quirino-Quadra and Dipatuan P. Umpa for
respondent Heirs of Lucman M. Ibrahim.
AZCUNA, J.:
This is a petition for review on certiorari under Rule

1
45 of
the Rules of Court seeking to annul the Decision dated
June 8, 2005 rendered by the Court of Appeals (CA) in
C.A.-G.R. CV No. 57792.
_______________
1 Rollo, pp. 114-133.
153
VOL. 526, JUNE 29, 2007 153

The facts are as follows:

On November 23, 1994, respondent Lucman G. Ibrahim,
in his personal capacity and in behalf of his co-heirs Omar
G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom,
Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G.
Maruhom, Rocania G. Maruhom, Potrisam G. Maruhom,
Lumba G. Maruhom, Sinab G. Maruhom, Acmad G.
Maruhom, Solayman G. Maruhom, Mohamad M. Ibrahim
and Caironesa M. Ibrahim, instituted an action against
petitioner National Power Corporation (NAPOCOR) for
recovery of possession of land and damages before the
Regional Trial Court (RTC) of Lanao del Sur.
In their complaint, Ibrahim and his co-heirs claimed
that they were owners of several parcels of land described
in Survey Plan FP (VII-5) 2278 consisting of 70,000 square
meters, divided into three (3) lots, i.e. Lots 1, 2, and 3
consisting of 31,894, 14,915, and 23,191 square meters each
respectively. Sometime in 1978, NAPOCOR, through
alleged stealth and without respondents’ knowledge and
prior consent, took possession of the sub-terrain area of
their lands and constructed therein underground tunnels.
The existence of the tunnels was only discovered sometime
in July 1992 by respondents and then later confirmed on
November 13, 1992 by NAPOCOR itself through a
memorandum issued by the latter’s Acting Assistant
Project Manager. The tunnels were apparently being used
by NAPOCOR in siphoning the water of Lake Lanao and in
the operation of NAPOCOR’s Agus II, III, IV, V, VI, VII
projects located in Saguiran, Lanao del Sur; Nangca and
Balo-i in Lanao del Norte; and Ditucalan and Fuentes in
Iligan City.
On September 19, 1992, respondent Omar G. Maruhom
requested the Marawi City Water District for a permit to
construct and/or install a motorized deep well in Lot 3
located in Saduc, Marawi City but his request was turned

down because the construction of the deep well would cause
danger to lives and property. On October 7, 1992,
respondents demanded
154

that NAPOCOR pay damages and vacate the sub-terrain

portion of their lands but the latter refused to vacate much
less pay damages. Respondents further averred that the
construction of the underground tunnels has endangered
their lives and properties as Marawi City lies in an area of
local volcanic and tectonic activity. Further, these illegally
constructed tunnels caused them sleepless nights, serious
anxiety and shock thereby entitling them to recover moral
damages and that by way of example for the public good,
NAPOCOR must be held liable for exemplary damages.
Disputing respondents’ claim, NAPOCOR filed an
answer with counterclaim denying the material allegations
of the complaint and interposing affirmative and special
defenses, namely that (1) there is a failure to state a cause
of action since respondents seek possession of the sub-
terrain portion when they were never in possession of the
same, (2) respondents have no cause of action because they
failed to show proof that they were the owners of the
property, and (3) the tunnels are a government project for
the benefit of all and all private lands are 2subject to such
easement as may be necessary for the same.
On August 7, 1996, the RTC rendered a Decision, the
decretal portion of which reads as follows:
“WHEREFORE, judgment is hereby rendered:
1. Denying plaintiffs’ [private respondents’] prayer for

defendant [petitioner] National Power Corporation to
dismantle the underground tunnels constructed between
the lands of plaintiffs in Lots 1, 2, and 3 of Survey Plan FP
(VII-5) 2278;
2. Ordering defendant to pay to plaintiffs the fair market
value of said 70,000 square meters of land covering Lots 1,
2, and 3 as described in Survey Plan FP (VII-5) 2278 less
the area of 21,995 square meters at P1,000.00 per square
meter or a total of P48,005,000.00 for the remaining
unpaid portion of 48,005 square
_______________
2 Id., at pp. 117-118.
155
VOL. 526, JUNE 29, 2007 155

meters; with 6% interest per annum from the filing of this

case until paid;
3. Ordering defendant to pay plaintiffs a reasonable monthly
rental of P0.68 per square meter of the total area of 48,005
square meters effective from its occupancy of the foregoing
area in 1978 or a total of P7,050,974.40.
4. Ordering defendant to pay plaintiffs the sum of
P200,000.00 as moral damages; and
5. Ordering defendant to pay the further sum of P200,000.00
as attorney’s fees and the costs.
3
SO ORDERED.”
On August 15, 1996, Ibrahim, joined by his co-heirs, filed

an Urgent Motion for Execution of Judgment Pending
Appeal. On the other hand, NAPOCOR filed a Notice of
Appeal by registered mail on August 19, 1996. Thereafter,
NAPOCOR filed a vigorous opposition to the motion for
execution of judgment pending appeal with a motion for
reconsideration of the Decision which it had received on
August 9, 1996.
On August 26, 1996, NAPOCOR filed a Manifestation
and Motion withdrawing its Notice of Appeal purposely to
give way to the hearing of its motion for reconsideration.
On August 28, 1996, the RTC issued an Order granting
execution pending appeal and denying NAPOCOR’s motion
for reconsideration, which Order was received by
NAPOCOR on September 6, 1996.
On September 9, 1996, NAPOCOR filed its Notice of
Appeal by registered mail which was denied by the RTC on
the ground of having been filed out of time. Meanwhile, the
Decision of the RTC was executed pending appeal and
funds of NAPOCOR were garnished by respondents
Ibrahim and his co-heirs.
On October 4, 1996, a Petition for Relief from Judgment
was filed by respondents Omar G. Maruhom, Elias G.
Maru-
_______________
3 Id., at pp. 118-119.
156

hom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G.

Maruhom, Hidjara G. Maruhom, Potrisam G. Maruhom
and Lumba G. Maruhom asserting as follows:
“1) they did not file a motion to reconsider or appeal the

decision within the reglementary period of fifteen (15)
days from receipt of judgment because they believed in
good faith that the decision was for damages and rentals
and attorney’s fees only as prayed for in the complaint:
2) it was only on August 26, 1996 that they learned that the
amounts awarded to the plaintiffs represented not only
rentals, damages and attorney’s fees but the greatest
portion of which was payment of just compensation which
in effect would make the defendant NPC the owner of the
parcels of land involved in the case;
3) when they learned of the nature of the judgment, the
period of appeal has already expired;
4) they were prevented by fraud, mistake, accident, or
excusable negligence from taking legal steps to protect
and preserve their rights over their parcels of land in so
far as the part of the decision decreeing just compensation
for petitioners’ properties;
5) they would never have agreed to the alienation of their
property in favor of anybody, considering the fact that the
parcels of land involved in this case were among the
valuable properties they inherited from their dear father
and they would rather
4
see their land crumble to dust than
sell it to anybody.”
The RTC granted the petition and rendered a modified

judgment dated September 8, 1997, thus:
“WHEREFORE, a modified judgment is hereby rendered:
1) Reducing the judgment award of plaintiffs for the fair

market value of P48,005,000.00 by 9,526,000.00 or for a
difference by P38,479,000.00 and by the further sum of
P33,603,500.00 subject of the execution pending appeal
leaving a difference of 4,878,500.00 which may be the
subject of execution upon the finality of this modified
judgment with 6% interest per annum from the filing of

the case until paid.
_______________
4 Id., at pp. 121-122.
157
VOL. 526, JUNE 29, 2007 157

2) Awarding the sum of P1,476,911.00 to herein petitioners

Omar G. Maruhom, Elias G. Maruhom, Bucay G.
Maruhom, Mahmod G. Maruhom, Farouk G. Maruhom,
Hidjara G. Maruhom, Portrisam G. Maruhom and Lumba
G. Maruhom as reasonable rental deductible from the
awarded sum of P7,050,974.40 pertaining to plaintiffs.
3) Ordering defendant embodied in the August 7, 1996
decision to pay plaintiffs the sum of P200,000.00 as moral
damages; and further sum of P200,000.00 as attorney’s
fees and costs.
5
SO ORDERED.”
Subsequently, both respondent Ibrahim and NAPOCOR

appealed to the CA.
In the Decision dated June 8, 2005, the CA set aside the
modified judgment and reinstated the original Decision
dated August 7, 1996, amending it further by deleting the
award of moral damages and reducing the amount of
rentals and attorney’s fees, thus:
“WHEREFORE, premises considered, herein Appeals are hereby

partially GRANTED, the Modified Judgment is ordered SET
ASIDE and rendered of no force and effect and the original
Decision of the court a quo dated 7 August 1996 is hereby
RESTORED with the MODIFICATION that the award of moral
damages is DELETED and the amounts of rentals and attorney’s
fees are REDUCED to P6,888,757.40 and P50,000.00,
respectively.
In this connection, the Clerk of Court of RTC Lanao del Sur is
hereby directed to reassess and determine the additional filing fee
that should be paid by Plaintiff-Appellant IBRAHIM taking into
consideration the total amount of damages sought in the
complaint vis-à-vis the actual amount of damages awarded by this
Court. Such additional filing fee shall constitute a lien on the
judgment.
6
6
SO ORDERED.”
Hence, this petition ascribing the following errors to the

CA:
_______________
5 Id., at pp. 122-123.

6 Id., at pp. 132-133.
158

(a) RESPONDENTS WERE NOT DENIED THE

BENEFICIAL USE OF THEIR SUBJECT
PROPERTIES TO ENTITLE THEM TO JUST
COMPENSATION BY WAY OF DAMAGES;
(b) ASSUMING THAT RESPONDENTS ARE
ENTITLED TO JUST COMPENSATION BY WAY
OF DAMAGES, NO EVIDENCE WAS
PRESENTED ANENT THE VALUATION OF
RESPONDENTS’ PROPERTY AT THE TIME OF
ITS TAKING IN THE YEAR 1978 TO JUSTIFY
THE AWARD OF ONE THOUSAND SQUARE
METERS (P 1000.00/SQ. M.) EVEN AS PAYMENT
OF BACK RENTALS IS ITSELF IMPROPER.
This case revolves around the propriety of paying just

compensation to respondents, and, by extension, the basis
for computing the same. The threshold issue of whether
respondents are entitled to just compensation hinges upon
who owns the sub-terrain area occupied by petitioner.
Petitioner maintains that the sub-terrain portion where
the underground tunnels were constructed does not belong
to respondents because, even conceding the fact that
respondents owned the property, their right to the subsoil
of the same does not extend beyond what is necessary to
enable them to obtain all the utility and convenience that
such property can normally give. In any case, petitioner
asserts that respondents were still able to use the subject
property even with the existence of the tunnels, citing as
an example the fact that one of the respondents, Omar G.
Maruhom, had established his residence on a part of the
property. Petitioner concludes that the underground
tunnels 115 meters below respondents’ property could not
have caused damage or prejudice to respondents and their
claim to this
7
effect was, therefore, purely conjectural and
speculative.
The contention lacks merit.
Generally, in an appeal by certiorari under Rule 45 of
the Rules of Court, the Court does not pass upon questions
of fact. Absent any showing that the trial and appellate
courts
_______________
7 Id., at pp. 95-98.
159
VOL. 526, JUNE 29, 2007 159

gravely abused their discretion, the Court will not examine

the evidence introduced by the parties below to determine
if they8 correctly assessed and evaluated the evidence on
record. The jurisdiction of the Court in cases brought to it
from the CA is limited to reviewing and revising the errors
of law imputed to it, its findings of fact being as a rule
conclusive and binding on the Court.
In the present case, petitioner failed to point to any
evidence demonstrating grave abuse of discretion on the
part of the CA or to any other circumstances which would
call for the application of the exceptions to the above rule.
Consequently, the CA’s findings which upheld those of the
trial court that respondents owned and possessed the
property and that its substrata was possessed by petitioner
since 1978 for the underground tunnels, cannot be
disturbed. Moreover, the Court sustains the finding of the
lower courts that the sub-terrain portion of the property
similarly belongs to respondents. This conclusion is drawn
from Article 437 of the Civil Code which provides:
“ART. 437. The owner of a parcel of land is the owner of its

surface and of everything under it, and he can construct thereon
any works or make any plantations and excavations which he
may deem proper, without detriment to servitudes and subject to
special laws and ordinances. He cannot complain of the
reasonable requirements of aerial navigation.”
Thus, the ownership of land extends to the surface as well

as to the subsoil under
9
it. In Republic of the Philippines v.
Court of Appeals, this principle was applied to show that
rights over lands are indivisible and, consequently, require

a definitive and categorical classification, thus:
_______________
8 Concepcion v. Court of Appeals, G.R. No. 120706, January 31, 2000,

324 SCRA 85.
9 G.R. No. L-43938, April 15, 1988, 160 SCRA 228.
160

“The Court of Appeals justified this by saying there is “no conflict

of interest” between the owners of the surface rights and the
owners of the sub-surface rights. This is rather strange doctrine,
for it is a well-known principle that the owner of a piece of land
has rights not only to its surface but also to everything
underneath and the airspace above it up to a reasonable height.
Under the aforesaid ruling, the land is classified as mineral
underneath and agricultural on the surface, subject to separate
claims of title. This is also difficult to understand, especially in its
practical application.
Under the theory of the respondent court, the surface owner
will be planting on the land while the mining locator will be
boring tunnels underneath. The farmer cannot dig a well because
he may interfere with the mining operations below and the miner
cannot blast a tunnel lest he destroy the crops above. How deep
can the farmer, and how high can the miner go without
encroaching on each others rights? Where is the dividi ng line
between the surface and the sub-surface rights?
The Court feels that the rights over the land are indivisible
and that the land itself cannot be half agricultural and half
mineral. The classification must be categorical; the land must be
either completely mineral or completely agricultural.”
Registered landowners may even be ousted of ownership

and possession of their properties in the event the latter
are reclassified as mineral lands because real properties
are characteristically indivisible. For the loss sustained by
such owners, they are entitled to just compensation under
the
Mining 10Laws or in appropriate expropriation
proceedings. Moreover, petitioner’s argument that the
landowners’ right extends to the sub-soil insofar as
necessary for their practical interests serves only to further
weaken its case. The theory would limit the right to the
sub-soil upon the economic utility which such area offers to

the surface owners. Presumably, the landowners’ right
extends to such height or depth where it is possible for
them to obtain some benefit or enjoyment, and it
_______________
10 Id.
161
VOL. 526, JUNE 29, 2007 161

is extinguished beyond such limit

11
as there would be no
more interest protected by law.
In this regard, the trial court found that respondents
could have dug upon their property motorized deep wells
but were prevented from doing so by the authorities
precisely because of the construction and existence of the
tunnels underneath the surface of their property.
Respondents, therefore, still had a legal interest in the sub-
terrain portion insofar as they could have excavated the
same for the construction of the deep well. The fact that
they could not was appreciated by the RTC as proof that
the tunnels interfered with respondents’ enjoyment of their
property and deprived them of its full use and enjoyment,
thus:
“Has it deprived the plaintiffs of the use of their lands when from
the evidence they have already existing residential houses over
said tunnels and it was not shown that the tunnels either
destroyed said houses or disturb[ed] the possession thereof by
plaintiffs? From the evidence, an affirmative answer seems to be
in order. The plaintiffs and [their] co-heirs discovered [these] big
underground tunnels in 1992. This was confirmed by the
defendant on November 13, 1992 by the Acting Assistant Project
Manager, Agus 1 Hydro Electric Project (Exh. “K”). On September
16, 1992, Atty. Omar Maruhom (co-heir) requested the Marawi
City Water District for permit to construct a motorized deep well
over Lot 3 for his residential house (Exh. “Q”). He was refused the
perm it “because the construction of the deep well as (sic) the
parcels of land will cause danger to lives and property.” He was
informed that “beneath your lands are constructed the Napocor
underground tunnel in connection with Agua Hydroelectric plant”
(Exh. “Q-2”). Ther e in fact exists ample evidence that this
construction of the tunnel without the prior consent of plaintiffs
beneath the latter’s property endangered the lives and properties
of said plaintiffs. It has been proved indubitably that Marawi City

lies in an area of local volcanic and tectonic activity. Lake Lanao
has been formed by extensive earth movements and is considered
to be a drowned basin of volcano/tectonic origin. In
_______________
11 TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON

THE CIVIL CODE, Vol. II, p. 90.
162

Marawi City, there are a number of former volcanoes and an

extensive amount of faulting. Some of these faults are still
moving. (Feasibility Report on Marawi City Water District by
Kampsa-Kruger, Consulting Engineers, Architects and
Economists, Exh. “R”). Moreover, it has been shown that the
underground tunnels [have] deprived the plaintiffs of the lawful
use of the land and considerably reduced its value. On March 6,
1995, plaintiffs applied for a two-million peso loan with the
Amanah Islamic Bank for the expansion of the operation of the
Ameer Construction and Integrated Services to be secured by said
land (Exh. “N”), but the application was disapproved by the bank
in its letter of April 25, 1995 (Exh. “O”) stating that:
“Apropos to this, we regret to inform you that we cannot consider your

loan application due to the following reasons, to wit:
That per my actual ocular inspection and verification, subject property
offered as collateral has an existing underground tunnel by the NPC for
the Agus I Project, which tunnel is traversing underneath your property,
hence, an encumbrance. As a matter of bank policy, property with an
existing encumbrance cannot be considered neither accepted as collateral
for a loan.”
All the foregoing evidence and findings convince this Court

that preponderantly plaintiffs have established the condemnation
of their land covering an area of 48,005 sq. meters located at
Saduc, Marawi City by the defendant National Power Corporation
without even the benefit of expropriation proceedings or the
payment of any just12
compensation and/or reasonable monthly
rental since 1978.”
In the past, the Court has held that if the government

takes property without expropriation and devotes the
property to public use, after many years, the property
owner may demand payment of just compensation in the
event restoration
13
of possession is neither convenient nor
feasible. This is in accordance with the principle that
persons shall not be
_______________
12 Rollo, pp. 152-154.

13 Militante v. Court of Appeals, 386 Phil. 522; 330 SCRA 318 (2000).
163
VOL. 526, JUNE 29, 2007 163

deprived of their property except by competent authority

and for public 14
use and always upon payment of just
compensation.
Petitioner contends that the underground tunnels in
this case constitute an easement upon the property of
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 mere15
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 payment16 of just compensation and that
there is due process of law.
In disregarding this procedure and failing to recognize
respondents’ ownership of the sub-terrain portion,
petitioner took a risk and exposed itself to greater liability
with the passage of time. It must be emphasized that the
acquisition of the easement is not without expense. The
underground tunnels impose limitations on respondents’
use of the property for an indefinite period and deprive
them of its ordinary use. Based upon the foregoing,
respondents are clearly entitled to
_______________
14 CONSTITUTION, Art. III, Sec. 9. See also CIVIL CODE, Art. 435.
15 Republic v. Philippine Long Distance Telephone Co., 136 Phil. 20; 26
SCRA 620 (1969).
16 National Power Corporation v. Court of Appeals, G.R. No. 106804,
August 12, 2004, 436 SCRA 195.
164

17
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 owners 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 18
assessment, than the
money equivalent of said property.
The entitlement of respondents to just compensation
having been settled, the issue now is on the manner of
computing the same. In this regard, petitioner claims that
the basis for the computation of the just compensation
should be the value of the property at the time it was taken
in 1978. Petitioner also impugns the reliance made by the
CA upon National Power Corporation19
v. Court of Appeals
and Macapanton Mangondato as the basis for computing
the amount of just compensation in this action. The CA
found that “the award of damages is not excessive because
the P1000 per square meter as the fair market value was
sustained in a case involving a lot adjoining the property in
question which case involved an expropriation by
[petitioner] of portion of Lot 1 of the subdivision plan (LRC)
PSD 116159 which is adjacent to Lots 2 and 3 of the same
subdivision 20plan which is the subject of the instant
controversy.”
Just compensation has been understood 21
to be the just
and complete equivalent of the loss and is ordinarily
determined by referring to the value of the land and its
character at the
_______________
17 National Power Corporation v. Gutierrez, G.R. No. 60077, January

18, 1991, 193 SCRA 1.
18 Id.
19 G.R. No. 113194, March 11, 1996, 254 SCRA 577.

20 Rollo, p. 130.
21 Supra note 16.
165
VOL. 526, JUNE 29, 2007 165

22
time it was taken by the expropriating authority. There is
a “taking” in this sense when the owners are actually
deprived or dispossessed of their property, where there is a
practical destruction or a material impairment of the value
of their property, or when they are deprived of the ordinary
use thereof. There is a “taking” in this context when the
expropriator enters private property not only for a
momentary period but for more permanent duration, for
the purpose of devoting the property to a public use in such
a manner as to oust the owner 23
and deprive him of all
beneficial enjoyment thereof. Moreover, “taking” of the
property for purposes of eminent domain entails that the
entry into the property
24
must be under warrant or color of
legal authority.
Under the factual backdrop of this case, the last element
of taking mentioned, i.e., that the entry into the property is
under warrant or color of legal authority, is patently
lacking. Petitioner justified its nonpayment of the
indemnity due respondents upon its mistaken belief that
the property formed part of the public dominion.
This situation is on all fours with that in the
Mangondato case. NAPOCOR in that case took the
property of therein respondents in 1979, using it to build
its Aqua I Hydroelectric Plant Project, without paying any
compensation, allegedly under the mistaken belief that it
was public land. It was only in 1990, after more than a
decade of beneficial use, that NAPOCOR recognized
therein respondents’ ownership and negotiated for the
voluntary purchase of the property.
In Mangondato, this Court held:
_______________
22 Supra note 17.

23 Republic v. Sarabia, G.R. No. 157847, August 25, 2005, 468 SCRA
142.
24 Supra note 19.
166

The First Issue: Date of Taking or Date of Suit?
The general rule in determining “just compensation” in

eminent domain is the value of the property as of the date
of the filing of the complaint, as follows:
“Sec. 4. Order of Condemnation.—When such a motion is
overruled or when any party fails to defend as required by this
rule, the court may enter an order 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”
(Italics supplied).
Normally, the time of the taking coincides with the filing of the
complaint for expropriation. Hence, many ruling of this Court
have equated just compensation with the value of the property as
of the time of filing of the complaint consistent with the above
provision of the Rules. So too, where the institution of the action
precedes entry to the property, the just compensation is to be
ascertained as of the time of filing of the complaint.
The general rule, however, admits of an exception:
where this Court fixed the value of the property as of the
date it was taken and not the date of the commencement of
the expropriation proceedings.
In the old case of Provincial Government of Rizal vs. Caro de
Araullo, the Court ruled that “x x x the owners of the land have
no right to recover damages for this unearned increment resulting
from the construction of the public improvement (lengthening of
Taft Avenue from Manila to Pasay) from which the land was
taken. To permit them to do so would be to allow them to recover
more than the value of the land at the time it was taken, which is
the true measure of the damages, or just compensation, and
would discourage the construction of important public
improvements.”
In subsequent cases, the Court, following the above
doctrine, invariably held that the time of taking is the
critical date in determining lawful or just compensation.
Justifying this stance, Mr. Justice (later Chief Justice) Enrique
Fernando, speaking for the Court in Municipality of La Carlota
vs. The Spouses Felicidad Baltazar and Vicente Gan, said, “x x x
the owner as is the constitutional intent, is paid what he is
entitled to according to the value of the property so devoted to
public use as of the date of tak-
167
VOL. 526, JUNE 29, 2007 167

ing. From that time, he had been deprived thereof. He had no

choice but to submit. He is not, however, to be despoiled of such a
right. No less than the fundamental law guarantees just
compensation. It would be injustice to him certainly if from such a
period, he could not recover the value of what was lost. There
could be on the other hand, injustice to the expropriator if
by a delay in the collection, the increment in price would
accrue to the owner. The doctrine to which this Court has been
committed is intended precisely to avoid either contingency
fraught with unfairness.”
Simply stated, the exception finds the application where
the owner would be given undue incremental advantages
arising from the use to which the government devotes the
property expropriated—as for instance, the extension of a
main thoroughfare as was in the case in Caro de Araullo. In the
instant case, however, it is difficult to conceive of how
there could have been an extra-ordinary increase in the
value of the owner’s land arising from the expropriation,
as indeed the records do not show any evidence that the
valuation of P1,000.00 reached in 1992 was due to
increments directly caused by petitioner’s use of the land.
Since the petitioner is claiming an exception to Rule 67, Section 4,
it has the burden in proving its claim that its occupancy and use
—not ordinary inflation and increase in land values—was the
direct cause of the increase in valuation from 1978 to 1992.
Side Issue: When is there “Taking” of Property?
But there is yet another cogent reason why this petition should
be denied and why the respondent Court should be sustained. An
examination of the undisputed factual environment would show
that the “taking” was not really made in 1978.
This Court has defined the elements of “taking” as the main
ingredient in the exercise of power of eminent domain, in the
follow-ing words:
“A number of circumstances must be present in “taking” of
property for purposes of eminent domain: (1) the expropriator
must enter a private property; (2) the entrance into private
property must be for more than a momentary period; (3) the entry
into the property should be under warrant or color of legal
authority; (4) the property must be devoted to a public use or
otherwise informally appropriated
168

or injuriously affected; and (5) the utilization of the property for

public use must be in such a way to oust the owner and deprive
him of all beneficial enjoyment of the property.” (Italics supplied)
In this case, the petitioner’s entrance in 1978 was without
intent to expropriate or was not made under warrant or color of
legal authority, for it believed the property was public land
covered by Proclamation No. 1354. When the private respondent
raised his claim of ownership sometime in 1979, the petitioner
flatly refused the claim for compensation, nakedly insisted that
the property was public land and wrongly justified its possession
by alleging it had already paid “financial assistance” to Marawi
City in exchange for the rights over the property. Only in 1990,
after more than a decade of beneficial use, did the petitioner
recognize private respondent’s ownership and negotiate for the
voluntary purchase of the property. A Deed of Sale with
provisional payment and subject to negotiations for the correct
price was then executed. Clearly, this is not the intent nor the
expropriation contemplated by law. This is a simple attempt at a
voluntary purchase and sale. Obviously, the petitioner neglected
and/or refused to exercise the power of eminent domain.
Only in 1992, after the private respondent sued to recover
possession and petitioner filed its Complaint to expropriate, did
petitioner manifest its intention to exercise the power of eminent
domain. Thus the respondent Court correctly held:
“If We decree that the fair market value of the land be
determined as of 1978, then We would be sanctioning a
deceptive scheme whereby NAPOCOR, for any reason
other than for eminent domain would occupy another’s
property and when later pressed for payment, first
negotiate for a low price and then conveniently
expropriate the property when the land owner refuses to
accept its offer claiming that the taking of the property for
the purpose of the eminent domain should be reckoned as
of the date when it started to occupy the property and that
the value of the property should be computed as of the
date of the taking despite the increase in the meantime in
the value of the property.”
In Noble vs. City of Manila, the City entered into a lease-

purchase agreement of a building constructed by the
petitioner’s predecessor-in-interest in accordance with the
specifications of the former. The Court held that being
bound by the said contract, the City could not expropriate
the building. Expropriation could be
169
VOL. 526, JUNE 29, 2007 169

resorted to “only when it is made necessary by the opposition of

the owner to the sale or by the lack of any agreement as to the
price.” Said the Court:
“The contract, therefore, in so far as it refers to the purchase of
the building, as we have interpreted it, is in force, not having
been revoked by the parties or by judicial decision. This being the
case, the city being bound to buy the building at an agreed price,
under a valid and subsisting contract, and the plaintiff being
agreeable to its sale, the expropriation thereof, as sought by the
defendant, is baseless. Expropriation lies only when it is made
necessary by the opposition of the owner to the sale or by the lack of
any agreement as to the price. There being in the present case a
valid and subsisting contract, between the owner of the building
and the city, for the purchase thereof at an agreed price, there is
no reason for the expropriation.” (Italics supplied)
In the instant case, petitioner effectively repudiated the deed of
sale it entered into with the private respondent when it passed
Resolution No. 92-121 on May 25, 1992 authorizing its president
to negotiate, inter alia, that payment “shall be effective only after
Agus I HE project has been placed in operation.” It was only then
that petitioner’s intent to expropriate became manifest 25
as private
respondent disagreed and, barely a month, filed suit.”
In the present case, to allow petitioner to use the date it

constructed the tunnels as the date of valuation would be
grossly unfair. First, it did not enter the land under
warrant or color of legal authority or with intent to
expropriate the same. In fact, it did not bother to notify the
owners and wrongly assumed it had the right to dig those
tunnels under their property. Secondly, the
“improvements” introduced by petitioner, namely, the
tunnels, in no way contributed to an increase in the value
of the land. The trial court, therefore, as affirmed by the
CA, rightly computed the valuation of the property as of
1992, when respondents discovered the construction of the
huge underground tunnels beneath their
_______________
25 Supra, note 19 at pp. 588-592; Emphasis supplied, italics in the

original.
170

lands and petitioner confirmed the same and started

negotiations
26
for their purchase but no agreement could be
reached.
As to the amount of the valuation, the RTC and the CA
both used as basis the value of the adjacent property, Lot 1
(the property involved herein being Lots 2 and 3 of the
same subdivision plan), which was valued at P1,000 per sq.
meter as of 1990, as sustained by this Court in
Mangondato, thus:
The Second Issue: Valuation
We now come to the issue of valuation.
“The fair market value as held by the respondent Court, is the

amount of P1,000.00 per square meter. In an expropriation case
where the principal issue is the determination of just
compensation, as is the case here, a trial before Commissioners is
indispensable to allow the parties to present evidence on the issue
of just compensation. Inasmuch as the determination of just
compensation in eminent domain cases is a judicial function and
factual findings of the Court of Appeals are conclusive on the
parties and reviewable only when the case falls within the
recognized exceptions, which is not the situation obtaining in this
petition, we see no reason to disturb the factual findings as to
valuation of the subject property. As can be gleaned from the
records, the court-and-the-parties-appointed commissioners did
not abuse their authority in evaluating the evidence submitted to
them nor misappreciate the clear preponderance of evidence. The
amount fixed and agreed to by the respondent appellate Court is
not grossly exorbitant. To quote:
“Commissioner Ali comes from the Office of the Register of
Deeds who may well be considered an expert, with a general
knowledge of the appraisal of real estate and the prevailing prices
of land in the vicinity of the land in question so that his opinion
on the valuation of the property cannot be lightly brushed aside.
“The prevailing market value of the land is only one of the
determinants used by the commissioners’ report the other being
as herein shown:
xxx
_______________
26 See RTC decision of August 7, 1996, Rollo, p. 158.
171
VOL. 526, JUNE 29, 2007 171

xxx
“Commissioner Doromal’s report, recommending P300.00 per
square meter, differs from the 2 commissioners only because his
report was based on the valuation as of 1978 by the City
Appraisal Committee as clarified by the latter’s chairman in
response to NAPOCOR’s general counsel’s query.”
In sum, we agree with the Court of Appeals that petitioner has
failed to show why it should be granted an exemption from the
general rule in determining just compensation provided under
Section 4 of Rule 67. On the contrary, private respondent has
convinced us that, indeed,
27
such general rule should in fact be
observed in this case.”
Petitioner has not shown any error on the part of the CA in

reaching such a valuation. Furthermore, these are factual
matters that are not within the ambit of the present
review.
WHEREFORE, the petition is DENIED and the
Decision of the Court of Appeals in CA-G.R. CV No. 57792
dated June 8, 2005 is AFFIRMED.
No costs.
SO ORDERED.
Puno (C.J., Chairperson), Corona and Garcia, JJ.,

concur.
Sandoval-Gutierrez, J., On Leave.
Petition denied, judgment affirmed.
Notes.—The DAR is an administrative agency which

cannot be granted jurisdiction over cases of eminent
domain and over criminal cases. (Republic vs. Court of
Appeals, 263 SCRA 758 [1996])
Mere discontinuance of the use of the pipes does not
amount to voluntary renunciation of a waterwork
company’s
_______________
27 See, supra note 19 at pp. 592-593.
172

Dalida vs. Naguit
claim over the land. (Santiago vs. Court of Appeals, 334

SCRA 454 [2000])
The expropriation of landholding covered by P.D. No. 27
did not take place on the effectivity of the Decree on 21
October 1973 but on the payment of just compensation,
judicially determined. (Office of the President, Malacañang,
Manila vs. Court of Appeals, 361 SCRA 390 [2001])
——o0o——
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National Power Corporation vs. Ibrahim, 526 SCRA 149, June 29, 2007

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2/22/22, 8:38 PM SUPREME COURT REPORTS ANNOTATED VOLUME 526

VOL. 526, JUNE 29, 2007 149

NATIONAL POWER CORPORATION, petitioner, vs.

Appeals; In an appeal by certiorari under Rule 45, the

provides: ART. 437. The owner of a parcel of land is the owner of

150 SUPREME COURT REPORTS ANNOTATED

National Power Corporation vs. Ibrahim

thereon any works or make any plantations and excavations

Significantly, though, landowners cannot be deprived of their

VOL. 526, JUNE 29, 2007 151

National Power Corporation vs. Ibrahim

this sense when the owners are actually deprived or dispossessed

152 SUPREME COURT REPORTS ANNOTATED

National Power Corporation vs. Ibrahim

Same; In determining the just compensation, the valuation of

PETITION for review on certiorari of a decision of the

The facts are stated in the opinion of the Court.

This is a petition for review on certiorari under Rule

1 Rollo, pp. 114-133.

VOL. 526, JUNE 29, 2007 153

The facts are as follows:

located in Saduc, Marawi City but his request was turned

154 SUPREME COURT REPORTS ANNOTATED

that NAPOCOR pay damages and vacate the sub-terrain

“WHEREFORE, judgment is hereby rendered:

1. Denying plaintiffs’ [private respondents’] prayer for

2 Id., at pp. 117-118.

VOL. 526, JUNE 29, 2007 155

meters; with 6% interest per annum from the filing of this

On August 15, 1996, Ibrahim, joined by his co-heirs, filed

3 Id., at pp. 118-119.

156 SUPREME COURT REPORTS ANNOTATED

hom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G.

“1) they did not file a motion to reconsider or appeal the

The RTC granted the petition and rendered a modified

“WHEREFORE, a modified judgment is hereby rendered:

1) Reducing the judgment award of plaintiffs for the fair

judgment with 6% interest per annum from the filing of

4 Id., at pp. 121-122.

VOL. 526, JUNE 29, 2007 157

2) Awarding the sum of P1,476,911.00 to herein petitioners

Subsequently, both respondent Ibrahim and NAPOCOR

“WHEREFORE, premises considered, herein Appeals are hereby

Hence, this petition ascribing the following errors to the

5 Id., at pp. 122-123.

158 SUPREME COURT REPORTS ANNOTATED

(a) RESPONDENTS WERE NOT DENIED THE

This case revolves around the propriety of paying just

7 Id., at pp. 95-98.

VOL. 526, JUNE 29, 2007 159

gravely abused their discretion, the Court will not examine

“ART. 437. The owner of a parcel of land is the owner of its

Thus, the ownership of land extends to the surface as well

rights over lands are indivisible and, consequently, require

8 Concepcion v. Court of Appeals, G.R. No. 120706, January 31, 2000,

160 SUPREME COURT REPORTS ANNOTATED

“The Court of Appeals justified this by saying there is “no conflict

Registered landowners may even be ousted of ownership

sub-soil upon the economic utility which such area offers to

VOL. 526, JUNE 29, 2007 161