Case Digest: NPC v. Heirs of f Sangkay

G.R. No. 165828 : August 24, 2011




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.

On November 21, 1997, the respondents as the owners of land with an area of 221,573 square meters situated in Ditucalan, Iligan City, sued NPC in the RTC for the recovery of damages and of the property, with the alternative prayer for the payment of just compensation. They alleged that they had belatedly discovered that one of the underground tunnels of NPC that diverted the water flow of the Agus River for the operation of the Hydroelectric Project in Agus V, Agus VI and Agus VII traversed their land; that their discovery had occurred in 1995 after Atty. Saidali C. Gandamra, President of the Federation of Arabic Madaris School, had rejected their offer to sell the land because of the danger the underground tunnel might pose to the proposed Arabic Language Training Center and Muslims Skills Development Center; that such rejection had been followed by the withdrawal by Global Asia Management and Resource Corporation from developing the land into a housing project for the same reason; that Al-Amanah Islamic Investment Bank of the Philippines had also refused to accept their land as collateral because of the presence of the underground tunnel; that the underground tunnel had been constructed without their knowledge and consent; that the presence of the tunnel deprived them of the agricultural, commercial, industrial and residential value of their land; and that their land had also become an unsafe place for habitation because of the loud sound of the water rushing through the tunnel and the constant shaking of the ground, forcing them and their workers to relocate to safer grounds.

In its answer with counterclaim, 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.

After trial, the RTC ruled in favor of the plaintiffs (Heirs of Macabangkit).

Earlier, on August 18, 1999, the Heirs of Macabangkit filed an urgent motion for execution of judgment pending appeal. The RTC granted the motion and issued a writ of execution, 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.

On October 5, 2004, the CA affirmed the decision of the RTC.


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.

HELD: We uphold the liability of NPC for payment of just compensation.

REMEDIAL LAW: 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. 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.

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. 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, and to supervise the construction of the Agus 1 Hydroelectric Plant itself from 1978 until his retirement from NPC. Besides, he declared that he personally experienced the vibrations caused by the rushing currents in the tunnel, particularly near the outlet channel. 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.

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.

It bears noting that NPC did not raise any issue against or tender any contrary comment on the ocular inspection report.

POLITICAL LAW: five-year prescriptive period under Section 3(i) of Republic Act No. 6395 does not apply to claims for just compensation

Without necessarily adopting the reasoning of the CA, we uphold its conclusion that prescription did not bar the present action to recover just compensation.

Section 3 (i) of Republic Act No. 6395, the cited law, relevantly provides:

Section 3.Powers and General Functions of the Corporation. The powers, functions, rights and activities of the Corporation shall be the following: xxx

(i) To construct works across, or otherwise, any stream, watercourse, canal, ditch, flume, street, avenue, highway or railway of private and public ownership, as the location of said works may require:Provided, That said works be constructed in such a manner as not to endanger life or property; And provided, further, That the stream, watercourse, canal ditch, flume, street, avenue, highway or railway so crossed or intersected be restored as near as possible to their former state, or in a manner not to impair unnecessarily their usefulness. Every person or entity whose right of way or property is lawfully crossed or intersected by said works shall not obstruct any such crossings or intersection and shall grant the Board or its representative, the proper authority for the execution of such work. The Corporation is hereby given the right of way to locate, construct and maintain such works over and throughout the lands owned by the Republic of the Philippines or any of its branches and political subdivisions. The Corporation or its representative may also enter upon private property in the lawful performance or prosecution of its business and purposes, including the construction of the transmission lines thereon;Provided,that the owner of such property shall be indemnified for any actual damage caused thereby;Provided, further,That said action for damages is filed within five years after the rights of way, transmission lines, substations, plants or other facilities shall have been established;Provided, finally, That after said period, no suit shall be brought to question the said rights of way, transmission lines, substations, plants or other facilities;

A cursory reading shows that Section 3(i) covers the construction of works across, or otherwise, any stream, watercourse, canal, ditch, flume, street, avenue, highway or railway of private and public ownership, as the location of said works may require. It is notable that Section 3(i) includes no limitation except those enumerated after the termworks. 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.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. 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.

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.

POLITICAL LAW: just compensation

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.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 owner's loss. The word just is used to intensify the meaning of the word compensation in order to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full, and ample. 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 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.

The two actions are radically different in nature and purpose. The action to recover just compensation is based on the Constitution 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, for the suit is not based on tort, but on the constitutional prohibition against the taking of property without just compensation. 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.

POLITICAL LAW: 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 sub-terrain portion, petitioner took a risk and exposed itself to greater liability with the passage of time. It must be emphasized that the acquisition of the easement is not without expense. The underground tunnels impose limitations on respondents use of the property for an indefinite period and deprive them of its ordinary use. Based upon the foregoing, respondents are clearly entitled to the payment of just compensation.Notwithstanding the fact that petitioner only occupies the sub-terrain portion, it is liable to pay not merely an easement fee but rather the full compensation for land. This is so because in this case, the nature of the easement practically deprives the owners of its normal beneficial use. Respondents, as the owner of the property thus expropriated, are entitled to a just compensation which should be neither more nor less, whenever it is possible to make the assessment, than the money equivalent of said property.

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.

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. Indeed, the expropriators action may be short of acquisition of title, physical possession, or occupancy but may still amount to a taking. 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. It is neither necessary that the owner be wholly deprived of the use of his property, nor material whether the property is removed from the possession of the owner, or in any respect changes hands.

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.

POLITICAL LAW: reckoning point of just compensation on the value at the time the owners commenced these inverse condemnation proceedings is entirely warranted.

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, 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, 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.

CIVIL LAW: awards for rentals, moral damages, exemplary damages, and attorney's fees are deleted for insufficiency of factual and legal bases

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 attorney's fees. The terse statement found at the end of the body of the RTCs decision,stating: xxx The contingent attorney's fee is hereby reduced from 20% to only 15% of the total amount of the claim that may be awarded to plaintiffs, without more, did not indicate or explain why and how the substantial liability of NPC for attorneys fees could have arisen and been determined.

In assessing attorney's fees against NPC and in favor of the respondents, the RTC casually disregarded the fundamental distinction between the two concepts of attorneys fees the ordinary and the extraordinary.These concepts were aptly distinguished in Traders Royal Bank Employees Union-Independent v. NLRC, thus wise:

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 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. Nor should an adverse decision ipso facto justify an award of attorney's fees to the winning party. The policy of the Court is that no premium should be placed on the right to litigate.Too, such fees, as part of damages, are assessed only in the instances specified in Art. 2208,Civil Code. Indeed,attorneys fees are in the nature of actual damages.But even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, attorney's fees may still be withheld where no sufficient showing of bad faith could be reflected in a party's persistence in a suit other than an erroneous conviction of the righteousness of his cause. 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 justification 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.

CIVIL LAW: attorneys fees under quantum meruit principle are fixed at 10% of the judgment award; quantum meruit; guidelines in determining the proper attorneys fees

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.

Both Atty. Dibaratun and Atty. Ballelos posited that their entitlement to attorney's fees was contingent. Yet, a contract for a contingent fees is an agreement in writing by which the fees, usually a fixed percentage of what may be recovered in the action, are made to depend upon the success in the effort to enforce or defend a supposed right. Contingent fees depend upon an express contract, without which the attorney can only recover on the basis of quantum meruit.With neither Atty. Dibaratun nor Atty. Ballelos presenting a written agreement bearing upon their supposed contingent fees, the only way to determine their right to appropriate attorney's fees is to apply the principle of quantum meruit.

Quantum meruit literally meaning as much as he deserves is used as basis for determining an attorney's professional fees in the absence of an express agreement. The recovery of 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. 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.
Rule 20.01 of the Code of Professional Responsibility lists the guidelines for determining the proper amount of attorney fees, to wit: 
Rule 20.1 A lawyer shall be guided by the following factors in determining his fees: 
a) The time spent and the extent of the services rendered or required;
b) The novelty and difficult of the questions involved;
c) The important of the subject matter;
d) The skill demanded;
e) The probability of losing other employment as a result of acceptance of the proffered case;
f) The customary charges for similar services and the schedule of fees of the IBP chapter to which he belongs;
g) The amount involved in the controversy and the benefits resulting to the client from the service;
h) The contingency or certainty of compensation;
i) The character of the employment, whether occasional or established; and
j) The professional standing of the lawyer.

In the event of a dispute as to the amount of fees between the attorney and his client, and the intervention of the courts is sought, the determination requires that there be evidence to prove the amount of fees and the extent and value of the services rendered, taking into account the facts determinative thereof.Ordinarily, therefore, the determination of the 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, 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.

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.

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 GRANTED the motion to register attorney's lien filed by Atty. Macarupung Dibaratun, and FIXES Atty. Dibaratun's attorney's fees on the basis of quantum meruit at 10% of the principal award of P113,532,500.00.

The motion to register attorney's lien of Atty. Manuel D.Ballelos is PARTLY GRANTED, and Atty. Ballelos is DECLARED ENTITLED TO RECOVER from Cebu, Batowa-an, Sayana, Nasser, Manta and Edgar, all surnamed Macabangkit, the amount of P5,000.00 as attorneys fees on the basis of quantum meruit.