PATRICIA L. TIONGSON, SPS. EDUARDO GO AND PACITA GO, ROBERTO LAPERAL III, ELISA MANOTOK, MIGUEL A.B.

SISON, ET AL., PETITIONERS, VS. NATIONAL HOUSING AUTHORITY,* RESPONDENT. DECISION CARPIO MORALES, J.: The present petition for review on certiorari raises the question of from what date should just compensation of the subject properties sought to be expropriated be reckoned - whether it is from the taking of the property or on the filing of the complaint.

Respondent National Housing Authority (NHA) took possession in 1978 of properties belonging to petitioners Patricia L. Tiongson, et al. pursuant to P.D. No. 1669, "AN ACT PROVIDING FOR THE EXPROPRIATION OF THE PROPERTY KNOWN AS THE `TAMBUNTING ESTATE' REGISTERED UNDER TCT NOS. 119059, 122450, 122459, 122452 AND LOT NOS. 1-A, 1-C, 1-D, 1-E, 1-F, 1-G AND 1-H OF (LRC) PSD230517 (PREVIOUSLY COVERED BY TCT NO. 119058) OF THE REGISTER OF DEEDS OF MANILA AND FOR THE SALE AT COST OF THE LOTS THEREIN TO THE BONA FIDE OCCUPANTS AND OTHER SQUATTERS FAMILIES AND TO UPGRADE THE SAME, AND AUTHORIZING THE APPROPRIATION OF FUNDS FOR THE PURPOSE" (underscoring supplied), and of properties belonging to Patricia Tiongson, et al. pursuant to P.D. No. 1670, "AN ACT PROVIDING FOR THE EXPROPRIATION OF THE PROPERTY ALONG THE ESTERO DE SUNOG-APOG FORMERLY CONSISTING OF LOTS NOS. 55-A, 55-B AND 55-C, BLOCK 2918 OF THE SUBDIVISION PLAN PSD-11746, COVERED BY TCT NOS. 49286, 49287 AND 49288, RESPECTIVELY, OF THE REGISTER OF DEEDS OF MANILA AND FOR THE SALE AT COST OF THE LOTS THEREIN TO THE BONA FIDE OCCUPANTS AND OTHER SQUATTER FAMILIES AND TO UPGRADE THE SAME, AND AUTHORIZING THE APPROPRIATION OF FUNDS FOR THE PURPOSE" (underscoring supplied). In G.R. Nos. L-55166, "Elisa R. Manotok, et al.v. National Housing Authority et al.," and 55167 , "Patricia Tiongson et al. v. National Housing Authority, et al.," this Court, by Decision of May 21, 1987,[1] held that "Presidential Decree Numbers 1669 and 1670, which respectively proclaimed the Tambunting Estate and the Estero de Sunog-Apoy area expropriated, are declared unconstitutional and, therefore, null and void," they being violative of the therein petitioners' right to due process of law. The decision had become final and executory. Subsequently or on September 14, 1987, NHA filed before the Regional Trial Court of Manila a complaint against petitioners, docketed as Civil Case No. 87-42018, which was later amended, for expropriation of parcels of land - part of those involved in G.R. No. L-55166. By Order of April 29, 1997,[2] Branch 41 of the Manila RTC[3] to which the complaint for expropriation was raffled brushed aside a previous order dated June 15, 1988 of the then Presiding Judge of said branch of the RTC[4] and held that the determination of just compensation of the properties should be reckoned from the date of filing of NHA's petition or on September 14, 1987. The NHA moved to

reconsider the said April 29, 1997 Order of the trial court, contending that the determination of the just compensation should be reckoned from the time it took possession of the properties in 1978. The trial court, by Order of August 5, 1997,[5] denied NHA's motion for reconsideration. The NHA assailed the above-stated trial court's Orders of April 29, 1997 and August 5, 1997 via petition for certiorari before the Court of Appeals. The appellate court, by the challenged Decision of June 16, 1999,[6] reversed and set aside the trial court's orders and held that the just compensation should be "based on the actual taking of the property in 1978." Thus it disposed: WHEREFORE, the lower court's Order dated April 29, 1997 ruling that the amount of just compensation should be based on the date of the filing of the complaint in 1987, as well as the Order dated August 5, 1997 denying the motion for reconsideration are hereby set aside and the appointed commissioners are ordered to re-convene and submit to the court a recommendation on the amount of just compensation of subject property based on the actual taking of the property in 1978. (Underscoring supplied) Petitioners moved for a reconsideration of the appellate court's decision but the same was denied by Resolution of October 7, 1999,[7] hence, the present petition for review on certiorari. In its Petition for Expropriation filed before the RTC on September 14, 1987, the NHA alleged, inter alia, that: xxx Pursuant to Presidential Decree No. 1669 providing for the expropriation of the subject properties and granting the plaintiff the authority to immediately take possession, control and disposition, with power of demolition of the subject properties, plaintiff took and had been in possession of the subject properties, until Presidential Decree No. 1669 was declared unconstitutional by the Supreme Court in the case entitled Patricia Tiongson, et al. vs. National Housing Authority and Republic of the Philippines, G.R. No. 5516[6][8] (Emphasis and underscoring supplied) x x x, and prayed as follows: WHEREFORE, it is respectfully prayed of this Honorable Court that: 1. An order be issued provisionally fixing the value of said properties in the amount equal to the assessed value of the same and authorizing the plaintiff to enter or take possession and/or placing the plaintiff in possession of the parcels of land described above; (Emphasis and underscoring supplied) xxxx In the present petition, petitioners argue that since P.D. No. 1669 pursuant to which NHA took possession of their properties in 1978 was declared unconstitutional, "[n]ecessarily, in thereafter resurrecting the filing of another (sic) complaint for expropriation of the same properties," it would be unlawful . . . to fix the reckoning period for purposes of computing the just compensation . . . based on [NHA's] previous unlawful taking of said properties in 1978." They thus maintain that the trial court's Order of April 29, 1997 holding that the determination of the just compensation of their properties should be reckoned from the date NHA filed the petition before the RTC on September 14, 1987 is in order.

The petition is impressed with merit. In declaring, in its challenged Decision, that the determination of just compensation should be reckoned from NHA's taking of the properties in 1978, the appellate court simply relied on Annex "C" of NHA's petition before it, the Order dated June 15, 1988 of the then Presiding Judge of the trial court reading: In this condemnation proceedings, by agreement of the parties, the total value of the properties to be condemned is hereby fixed at P14,264,465.00, provisionally, and considering the admission of the parties that plaintiff has taken possession of the properties in question sometime in 1978, or long before the complaint in this case was filed, plaintiff is hereby authorized to retain possession thereof upon its depositing with the City Treasurer of Manila the aforesaid sum of P14,264,465.00 subject to the Orders of this Court and forthwith submit the Official Receipt of the said deposit to this Court,[9] (Emphasis and underscoring supplied), and thus concluded that "the parties admitted that [NHA] took possession of the subject properties as early as 1978." The appellate court reached that conclusion, despite its recital of the antecedents of the case including herein petitioners' sustained moves, even before the trial court, in maintaining that the reckoning of just compensation should be from the date of filing of the petition for expropriation on September 14, 1987. The earlier-quoted allegations of the body and prayer in NHA's Petition for Expropriation filed before the RTC constitute judicial admissions [10] of NHA - that it possessed the subject properties until this Court's declaration, in its above-stated Decision in G.R. No. L-55166 promulgated on May 21, 1987, that P.D. No. 1669 pursuant to which NHA took possession of the properties of petitioners in 1978 was unconstitutional and, therefore, null and void. These admissions, the appellate court either unwittingly failed to consider or escaped its notice. Petitioners even brought to the appellate court's attention, in their Motion for Reconsideration[11] of its Decision of June 16, 1999, the fact that they had called the trial court's attention to NHA's allegationadmissions in the body and prayer of its petition. But the appellate court, by Resolution of October 7, 1999, [12] denied petitioners' motion upon the ground that it raised substantially the same issues that were already considered and passed upon in arriving at its decision. The appellate court's June 16, 1999 decision glaringly shows, however, that the matter of judicial admissions of NHA in the body and prayer in its petition were not considered by it. Following then Rule 67, Section 4 of the Rules of Court reading: SEC. 4. Order of expropriation. - If the objections to and the defenses against the right of the plaintiff to expropriate the property are overruled, or when no party appears to defend as required by this Rule, the court may issue an order of expropriation declaring that the plaintiff has a lawful right to take the property sought to be expropriated, 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 taking of the property or the filing of the complaint, whichever came first. x x x x (Emphasis and underscoring supplied),

vis a vis the factual backdrop of the case, the just compensation of petitioners' properties must be determined "as of the date of . . . the filing of [NHA's] complaint" on September 14, 1987." WHEREFORE, the challenged June 16, 1999 Decision of the Court of Appeals is REVERSED and SET ASIDE and the April 29, 1997 Order of Branch 41 of the Regional Trial Court of Manila in Civil Case No. 8742018 is REINSTATED. SO ORDERED.

REPUBLIC OF THE PHILIPPINES THROUGH THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, G.R. No. 160379 Petitioner, Present:

- versus -

PUNO, C.J., Chairperson, CARPIO, CORONA, LEONARDO-DE CASTRO, and BERSAMIN, JJ. COURT OF APPEALS and ROSARIO RODRIGUEZ REYES, Promulgated: Respondents. August 14, 2009 x-----------------------------------------------------------------------------------------x

DECISION

CARPIO, J.:

The Case This is a petition for review*1+ of the Court of Appeals Decision*2+ dated 15 November 2002 and Resolution dated 17 September 2003 in CA-G.R. CV No. 50358. The Court of Appeals affirmed with modifications the Amended Decision of the Regional Trial Court of Cagayan de Oro City, Branch 19 (RTC). The Antecedent Facts Private respondent Rosario Rodriguez Reyes is the absolute owner of a parcel of land identified as Lot 849-B and covered by TCT No. T-7194. The 1,043-square meter lot is situated on Claro M. Recto and Osmea Streets, Cagayan de Oro City. On 6 November 1990, private respondent received a letter from petitioner Republic of the Philippines, through the Department of Public Works and Highways (DPWH), requesting permission to enter into a portion of private respondents lot consisting of 663 square meters, and to begin construction of the Osmea Street extension road. On 20 December 1990, petitioner took possession of private respondents property without initiating expropriation proceedings. Consequently, on 4 and 7 January 1991, private respondent sent letters to the DPWH stating her objection to the taking of her property. On 16 May 1991, private respondent sent a letter to the City Appraisal Committee (CAC) rejecting the latters appraisal of the subject property, to wit:*3+ Declared Owner Tax Declaration No. Market Value 1981 Schedule Recommended Appraised Value Description Rosario Reyes 90066 P400/sq.m. P4,000/sq.m. 1 to 20 meters from Claro M. Recto Super Highway

P3,200/sq.m.

21 to 40 meters from Claro M. Recto Super Highway

P2,400/sq.m. 41 to 60 meters from Claro M. Recto Super Highway In the same letter, private respondent requested the City Assessor for a reappraisal of her property, but said request was denied.[4] On 17 March 1992 , private respondent filed with the Regional Trial Court (RTC) of Cagayan de Oro City a complaint claiming just compensation and damages against petitioner. On 30 June 1993, the RTC appointed three commissioners*5+ to determine the subject propertys fair market value, as well as the consequential benefits and damages of its expropriation. On 15 September 1993, one of the three commissioners, Provincial Assessor Corazon Beltran, submitted to the RTC a separate report, the dispositive portion of which reads: WHEREFORE, the undersigned deems it only to be just, fair and reasonable to adopt the market value of FOUR THOUSAND PESOS (P4,000.00) per square meter as the highest price obtaining and prevailing in 1990, the time of the taking of the property subject of the above entitled case, and fairly reasonable also to impose an additional value equivalent to 5% of the market value as fixed for severance fee.[6]

On 13 April 1994, the scheduled hearing was reset to 19 May 1994, to give private respondent (plaintiff) time to consider the offer of petitioner (defendant) to amicably settle the case and to accept the just compensation of P3,200 per square meter, or a total of P2,212,600, for the 663-square meter portion of private respondents lot.*7+ On 16 May 1994, private respondent filed with the RTC an Urgent Motion to Deposit The Amount of P2,121,600 in Court, alleging that petitioners counsel previously manifested in open court that the amount of P2,121,600 was ready for release should the amount be acceptable to private respondent, and praying that said amount of P2,121,600 be deposited by petitioner with the trial court.[8] The RTC granted the motion in an Order dated 16 June 1994.[9] However, it was only on 21 October 1994 that petitioner deposited with the RTC Clerk of Court a Landbank check amounting to P2,121,600 as just compensation.[10] On 16 June 1994, the RTC ordered the commissioners to submit their report as soon as possible, but until the scheduled hearing on 15 July 1994, the commissioners still failed to submit their report. Upon motion of private respondent, the RTC issued an order appointing a new set of commissioners.[11]

On 11 October 1994, the new commissioners submitted their report, the pertinent portions of which provide, thus: COMMISSIONERS REPORT xxx The property litigated upon is strategically located along Recto Avenue (National Highway) which is a commercial district. Fronting it across the national highway is the Cagayan Coca Cola Plant and the Shell Gasoline Station. It adjoins an establishment known as the Palana Grocery Store and after it is the Northern Mindanao Development Bank. Three Hundred (300) meters to the west of plaintiffs property is the gigantic structure of the Gaisano City department store along Recto Avenue and Corrales Avenue Extension. Towards the eastern direction of the property are banking institution buildings and the Ororama Superstore along the national highway (Recto Avenue) and the Limketkai Commercial Complex. For purpose of affording a fair assessment of the market value of plaintiffs property, the herein Commissioners have divided the whole parcel of land into three parts, viz: 1. Front portion along Recto Avenue measuring 21.52 meters from south to north ------------- 347.66 SQM 2. Middle portion with a measurement of 21.52 meters ---------------------------------------------- 347.66 SQM 3. Rear/back portion with a measurement of 21.52 meters ------------------------------------- 347.66 SQM TOTAL AREA: ------- 1,043 SQM Taking into consideration, among others, the location of the property and a research of the prevailing prices of lots proximate to and/or near the vicinity of plaintiff's property, the undersigned Commissioners respectfully recommend to the Honorable Court the following valuation, to wit: (CURRENT VALUE) 1. Front portion along Recto Avenue with a measurement of 21.52 meters from south to north with an area of 347.66 square meters at P18,000.00 to P20,000.00 per square meter; 2. Middle portion with a measurement of 21.52 meters containing an area of 347.66 square meters at P16,000.00 to P18,000.00 per square meter;

3. Rear/back portion measuring 21.52 meters with an area of 347.66 square meters at P14,000.00 to P16,000.00 per square meter; VALUATION AS OF 1990 1. 2. 3. Front Portion - P10,000.00 to P12,000.00 per square meter; Middle Portion- P8,000.00 to P10,000.00 per square meter; Rear Portion - P6,000.00 to P8,000.00 per square meter;

The undersigned Commissioners would however like to bring to the attention of the Honorable Court that in the subdivision plan prepared by the City Engineers Office, the whole of plaintiffs property was subdivided into three (3) lots designated as follows:

Lot 849-B-1 (Road Lot)-83 square meters; Lot 849-B-2 (Road Lot traversed by the RCDP Osmea Extension Lot 849-B-3 remaining portion with an area of 297 square meters; In effect, what has been taken over and used by the defendant is not only 663 square meters but 746 square meters, more or less, which includes Lot No. 849-B-1. On the other hand, the remaining portion left to the plaintiff, Lot No. 849-B-3 will not actually be 297 square meters. If we deduct the setback area from Osmea Extension Street, the usable/buildable area left to the plaintiff would only be a little over 50 square meters. This portion would not command a good price if sold. Neither is it ideal for purposes of any building construction because aside from its being a very small strip of land, the shape is triangular.[12] Street)-663 SQM;

The Trial Courts Ruling On 2 June 1995, the RTC rendered a Decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, declaring the former as having the right to retain 590 square meters of the property covered by TCT No. T-7194, and ordering the latter to return 210 square meters of the 663 square meters taken; that defendants are solidarily liable to pay the sum of P5,526,000.00, the fair market value of 1990 (sic), as just compensation for the 536 square meters taken for the Osmea street extension; to pay

P185,000.00 representing damages for 37 months computed at the rate of P5,000.00 per month from the filing of this case; and Attorneys fees of P10,000.00 plus costs of suit. Plaintiff herein is ordered to forthwith defray the expenses to be incurred in undertaking the road construction of the 210 square meters which the defendants will later on provide along the right portion of her property. SO ORDERED.[13] On 15 June 1995, the RTC rendered an Amended Decision with the following dispositive portion, thus: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, declaring the former as having the right to retain 590 square meters of the property covered by TCT No. T-7194, and ordering the latter to return 293 square meters of the 746 square meters taken; that defendants are solidarily liable to pay the sum of P4,696,000.00, the fair market value of 1990 (sic), as just compensation for the 453 square meters taken for the Osmea Street extension; to pay P185,000.00 representing damages for 37 months computed at the rate of P5,000.00 per month from the filing of this case; and Attorneys fees of P10,000.00 plus costs of suit. Plaintiff herein is ordered to forthwith defray the expenses to be incurred in undertaking the road construction of the 293 square meters which the defendants will later on provide along the right portion of her property. SO ORDERED.[14]

The Court of Appeals Ruling On appeal by petitioner, the Court of Appeals rendered judgment,[15] affirming with modifications the decision of the RTC. The Court of Appeals found that the commissioners recommendations on just compensation were not supported by valid documents. Also, it was unclear in the RTC decision whether the trial court merely adopted the commissioners recommendations or the court made its own independent valuation of the subject property. Thus, the Court of Appeals held that a reconvening of the commissioners or an appointment of new commissioners to determine just compensation was necessary. The appellate court further held that the trial courts order for petitioners return of the 293-square meter lot had no legal basis and was no longer feasible since the lot was already part of the completed Sergio Osmea extension road. Moreover, consequential damages should be awarded in lieu of actual damages for private respondents alleged loss of income from the remaining 297-square meter lot. We quote the dispositive portion of the Court of Appeals decision below. WHEREFORE , the appealed judgment is hereby MODIFIED.

1. The case is REMANDED to the trial court which is ordered to reconvene the commissioners or appoint new commissioners to determine, in accordance with this Decision, the amount of just compensation due to plaintiff-appellee Rosario Rodriguez Reyes for the 746 square meters of land taken from her and consequential damages to the 297-square meter portion left. 2. Defendant-appellant DWPH[16] is ordered to pay plaintiff-appellee the following amounts: a. the balance, if any, of just compensation to be finally determined after deducting the amount of P2,161,600.00[17] DPWH previously advanced and deposited with the trial court; b. 6% legal interest per annum on the amount it provisionally deposited from the time of taking up to the time it is deposited with the trial court on October 21, 1994; and on the balance, if any, from the time of taking on December 20, 1990 until fully paid; c. attorneys fees of P20,000.00. 3. Defendant-appellant City Government of Cagayan de Oro is relieved from any liability; 4. The award of P185,000.00 as actual damages is deleted; 5. No pronouncement as to costs. SO ORDERED.[18]

Petitioner filed a Motion for Reconsideration, but this was denied by the Court of Appeals in its Resolution of 17 September 2003.[19] Hence, this appeal.

The Issues Petitioner raises the following issues: 1. Whether the Court of Appeals erred in ordering the remand of the case to the trial court, to order the reconvening of the commissioners or appointment of new commissioners to determine the consequential damages for the remaining 297- square meter lot; and 2. Whether the Court of Appeals erred in ordering petitioner to pay attorneys fees.

The Courts Ruling We find the appeal unmeritorious.

On whether the Court of Appeals erred in ordering the remand of the case to the trial court to order the reconvening of the commissioners or appointment of new commissioners to determine the consequential damages for the remaining 297-square meter lot Eminent domain is the authority and right of the State, as sovereign, to take private property for public use upon observance of due process of law and payment ofjust compensation.[20] The Constitution provides that, *p+rivate property shall not be taken for public use without just compensation.*21+ Just compensation is the full and fair equivalent of the property sought to be expropriated.[22] Among the factors to be considered in arriving at the fair market value of the property are the cost of acquisition, the current value of like properties, its actual or potential uses, and in the particular case of lands, their size, shape, location, and the tax declarations thereon.*23+ The measure is not the takers gain but the owners loss.*24+ To be just, the compensation must be fair not only to the owner but also to the taker.[25] J ust compensation is based on the price or value of the property at the time it was taken from the owner and appropriated by the government.[26] However, if the government takes possession before the institution of expropriation proceedings, the value should be fixed as of the time of the taking of said possession, not of the filing of the complaint. The value at the time of the filing of the complaint should be the basis for the determination of the value when the taking of the property involved coincides with or is subsequent to the commencement of the proceedings.[27] The procedure for determining just compensation is set forth in Rule 67 of the 1997 Rules of Civil Procedure. Section 5 of Rule 67 partly states that *u+pon the rendition of the order of expropriation, the court shall appoint not more than three (3) competent and disinterested persons as commissioners to ascertain and report to the court the just compensation for the property sought to be taken. However, we held in Republic v. Court of Appeals[28] that Rule 67 presupposes a prior filing of complaint for eminent domain with the appropriate court by the expropriator. If no such complaint is filed, the expropriator is considered to have violated procedural requirements, and hence, waived the usual procedure prescribed in Rule 67, including the appointment of commissioners to ascertain just compensation.[29] In National Power Corporation v. Court of Appeals,[30] we clarified that when there is no action for expropriation and the case involves only a complaint for damages or just compensation,

the provisions of the Rules of Court on ascertainment of just compensation (i.e., provisions of Rule 67) are no longer applicable, and a trial before commissioners is dispensable, thus: In this case, NPC appropriated Pobres Property without resort to expropriation proceedings. NPC dismissed its own complaint for the second expropriation. At no point did NPC institute expropriation proceedings for the lots outside the 5,554 square-meter portion subject of the second expropriation. The only issues that the trial court had to settle were the amount of just compensation and damages that NPC had to pay Pobre. This case ceased to be an action for expropriation when NPC dismissed its complaint for expropriation. Since this case has been reduced to a simple case of recovery of damages, the provisions of the Rules of Court on the ascertainment of the just compensation to be paid were no longer applicable. A trial before commissioners, for instance, was dispensable.[31]

In this case, petitioner took possession of the subject property without initiating expropriation proceedings. Consequently, private respondent filed the instant case for just compensation and damages. To determine just compensation, the trial court appointed three commissioners pursuant to Section 5 of Rule 67 of the 1997 Rules of Civil Procedure. None of the parties objected to such appointment. The trial courts appointment of commissioners in this particular case is not improper. The appointment was done mainly to aid the trial court in determining just compensation, and it was not opposed by the parties. Besides, the trial court is not bound by the commissioners recommended valuation of the subject property. The court has the discretion on whether to adopt the commissioners valuation or to substitute its own estimate of the value as gathered from the records.[32] However, we agree with the appellate court that the trial courts decision is not clear as to its basis for ascertaining just compensation. The trial court mentioned in its decision the valuations in the reports of the City Appraisal Committee and of the commissioners appointed pursuant to Rule 67. But whether the trial court considered these valuations in arriving at the just compensation, or the court made its own independent valuation based on the records, was obscure in the decision. The trial court simply gave the total amount of just compensation due to the property owner without laying down its basis. Thus, there is no way to determine whether the adjudged just compensation is based on competent evidence. For this reason alone, a remand of the case to the trial court for proper determination of just compensation is in order. In National Power Corporation v. Bongbong,[33] we held that although the determination of just compensation lies within the trial courts discretion, it should not be done arbitrarily or capriciously. The decision of the trial court must be based on all established rules, correct legal principles, and competent evidence.[34] The court is proscribed from basing its judgment on speculations and surmises.[35]

Petitioner questions the appellate courts decision to remand the case to determine the consequential damages for the remaining 297-square meter lot of private respondent. Petitioner contends that no consequential damages may be awarded as the remaining lot was not actually taken by the DPWH, and to award consequential damages for the lot which was retained by the owner is tantamount to unjust enrichment on the part of the latter. Petitioners contention is unmeritorious. No actual taking of the remaining portion of the real property is necessary to grant consequential damages. If as a result of the expropriation made by petitioner, the remaining lot (i.e., the 297-square meter lot) of private respondent suffers from an impairment or decrease in value, consequential damages may be awarded to private respondent. On the other hand, if the expropriation results to benefits to the remaining lot of private respondent, these consequential benefits[36] may be deducted from the awarded consequential damages, if any, or from the market value of the expropriated property. We held in B.H. Berkenkotter & Co. v. Court of Appeals[37] that: To determine just compensation, the trial court should first ascertain the market value of the property, to which should be added the consequential damages after deducting therefrom the consequential benefits which may arise from the expropriation. If the consequential benefits exceed the consequential damages, these items should be disregarded altogether as the basic value of the property should be paid in every case.

Section 6 of Rule 67 of the Rules of Civil Procedure provides: x x x The commissioners shall assess the consequential damages to the property not taken and deduct from such consequential damages the consequential benefits to be derived by the owner from the public use or purpose of the property taken, the operation of its franchise by the corporation or the carrying on of the business of the corporation or person taking the property. But in no case shall the consequential benefits assessed exceed the consequential damages assessed, or the owner be deprived of the actual value of his property so taken.

An award of consequential damages for property not taken is not tantamount to unjust enrichment of the property owner. There is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience.*38+ Article 22 of the Civil Code provides that *e+very person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. The principle of unjust enrichment under Article 22 requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at

anothers expense or damage.*39+ There is no unjust enrichment when the person who will benefit has a valid claim to such benefit.[40] As stated, consequential damages are awarded if as a result of the expropriation, the remaining property of the owner suffers from an impairment or decrease in value. Thus, there is a valid basis for the grant of consequential damages to the property owner, and no unjust enrichment can result therefrom.

On whether the Court of Appeals erred in ordering petitioner to pay attorneys fees.

The Court of Appeals did not err in granting attorneys fees to private respondent. Article 2208(2) of the New Civil Code provides that attorneys fees may be awarded:

xxx (2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. xxx

Attorneys fees may be awarded by a court if one who claims it is compelled to litigate with third persons or to incur expenses to protect ones interest by reason of an unjustified act or omission on the part of the party from whom it is sought.[41] In this case, petitioner took possession of private respondents real property without initiating expropriation proceedings, and over the latters objection. As a result, private respondent was compelled to litigate and incur expenses to protect her interests over her property. Thus, the appellate courts award of attorneys fees is proper, viz:

We find, however, the award of attorneys fees in plaintiff-appellees favor justified. x x x It is admitted that defendant-appellant DPWH neglected to file the appropriate expropriation proceedings before taking over plaintiff-appellees land. That their road contractor no longer has any portion to work on except on plaintiff-appellees property is no justification for the precipitate taking of her lot. It is incumbent upon defendant-appellant DPWH to foresee whether private lands will be affected by their

project and to file appropriate expropriation proceedings if necessary. They did not do so. Thus, plaintiff-appellee was constrained to institute the instant suit to protect her rights.[42]

WHEREFORE, we DENY the petition. We AFFIRM the Court of Appeals Decision dated 15 November 2002 and Resolution dated 17 September 2003 in CA-G.R. CV No. 50358.

SO ORDERED. REPUBLIC OF THE PHILIPPINES, G.R. No. 166429 Represented by Executive Secretary Eduardo R. Ermita, the DEPARTMENT OF TRANSPORTATION AND Present: COMMUNICATIONS (DOTC), and the MANILA INTERNATIONAL AIRPORT DAVIDE, JR., C.J., AUTHORITY (MIAA), PUNO, Petitioners, PANGANIBAN, ' QUISUMBING, YNARES-SANTIAGO, SANDOVAL-GUTIERREZ, CARPIO, ' -versus- AUSTRIA-MARTINEZ, CORONA, CARPIO-MORALES, CALLEJO, SR.,

AZCUNA, HON. HENRICK F. GINGOYON, TINGA, In his capacity as Presiding CHICO-NAZARIO, and Judge of the Regional Trial Court, GARCIA, JJ. Branch 117, Pasay City and PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., Respondents. Promulgated:

December 19, 2005

x---------------------------------------------------------------------- x

DECISION TINGA, J.: The Ninoy Aquino International Airport Passenger Terminal III (NAIA 3) was conceived, designed and constructed to serve as the country's show window to the world. Regrettably, it has spawned controversies. Regrettably too, despite the apparent completion of the terminal complex way back it has not yet been operated. This has caused immeasurable economic damage to the country, not to mention its deplorable discredit in the international community.

In the first case that reached this Court, Agan v. PIATCO, [1] the contracts' which the Government had with the contractor were voided for being contrary to law and public policy. The second case now before the Court involves the matter of just compensation due the contractor for the terminal complex it built.

We decide the case on the basis of fairness, the same norm that pervades both the Court's 2004 Resolution in the first case and the latest expropriation law.

The present controversy has its roots with the promulgation of the Court's decision in Agan v. PIATCO, [2] promulgated in 2003 (2003 Decision). This decision nullified the 'Concession Agreement for the BuildOperate-and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III entered into between the Philippine Government (Government) and the Philippine International Air Terminals Co., Inc. (PIATCO), as well as the amendments and supplements thereto. The agreement had authorized PIATCO to build a new international airport terminal (NAIA 3), as well as a franchise to operate and maintain the said terminal during the concession period of 25 years. The contracts were nullified, among others, that Paircargo Consortium, predecessor of PIATCO, did not possess the requisite financial capacity when it was awarded the NAIA 3 contract and that the agreement was' contrary to public policy. [3]

At the time of the promulgation of the 2003 Decision, the NAIA 3 facilities had already been built by PIATCO and were nearing completion. [4] However, the ponencia was silent as to the legal status of the NAIA 3 facilities following the nullification of the contracts, as well as whatever rights of PIATCO for reimbursement for its expenses in the construction of the facilities. Still, in his Separate Opinion, Justice Panganiban, joined by Justice Callejo, declared as follows:

Should government pay at all for reasonable expenses incurred in the construction of the Terminal? Indeed it should, otherwise it will be unjustly enriching itself at the expense of Piatco and, in particular, its funders, contractors and investors ' both local and foreign . After all, there is no question that the State needs and will make use of Terminal III, it being part and parcel of the critical infrastructure and transportation-related programs of government. [5]

PIATCO and several respondents-intervenors filed their respective motions for the reconsideration of the 2003 Decision. These motions were denied by the Court in its Resolution dated 21 January 2004 (2004 Resolution). [6] However, the Court this time squarely addressed the issue of the rights of PIATCO to refund, compensation or reimbursement for its expenses in the construction of the NAIA 3 facilities. The holding of the Court on this crucial point follows:

This Court, however, is not unmindful of the reality that the structures comprising the NAIA IPT III facility are almost complete and that funds have been spent by PIATCO in their construction. For the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures. The compensation must be just and in accordance with law and equity for the government can not unjustly enrich itself at the expense of PIATCO and its investors. [7]

After the promulgation of the rulings' in Agan, the NAIA 3 facilities have remained in the possession of PIATCO, despite the avowed intent of the Government to put the airport terminal into immediate operation. The Government and PIATCO conducted several rounds of negotiation regarding the NAIA 3 facilities. [8] It also appears that arbitral proceedings were commenced before the International Chamber of Commerce International Court of Arbitration and the International Centre for the Settlement of Investment Disputes, [9] although the Government has raised jurisdictional questions before those two bodies. [10]

Then, on 21 December 2004, the Government [11] filed a Complaint for expropriation with the Pasay City Regional Trial Court (RTC), together with an Application for Special Raffle seeking the immediate holding of a special raffle. The Government sought upon the filing of the complaint the issuance of a writ of possession authorizing it to take immediate possession and control over the NAIA 3 facilities.

The Government also declared that it had deposited the amount of P 3,002,125,000.00 [12] (3 Billion) [13] in Cash with the Land Bank of the Philippines, representing the NAIA 3 terminal's assessed value for taxation purposes. [14]

The case [15] was raffled to Branch 117 of the Pasay City RTC, presided by respondent judge Hon. Henrick F. Gingoyon (Hon. Gingoyon). On the same day that the Complaint was filed, the RTC issued an Order [16] directing the issuance of a writ of possession to the Government, authorizing it to 'take or enter upon the possession of the NAIA 3 facilities. Citing the case of City of v. Serrano, [17] the RTC

noted that it had the ministerial duty to issue the writ of possession upon the filing of a complaint for expropriation sufficient in form and substance, and upon deposit made by the government of the amount equivalent to the assessed value of the property subject to expropriation. The RTC found these requisites present, particularly noting that '[t]he case record shows that [the Government has] deposited the assessed value of the [NAIA 3 facilities] in the Land Bank of the Philippines, an authorized depositary, as shown by the certification attached to their complaint. Also on the same day, the RTC issued a Writ of Possession. According to PIATCO, the Government was able to take possession over the NAIA 3 facilities immediately after the Writ of Possession was issued. [18]

However, on 4 January 2005, the RTC issued another Order designed to supplement its 21 December 2004 Order and the Writ of Possession. In the 4 January 2005 Order, now assailed in the present petition, the RTC noted that its earlier issuance of its writ of possession was pursuant to Section 2, Rule 67 of the 1997 Rules of Civil Procedure. However, it was observed that Republic Act No. 8974 (Rep. Act No. 8974), otherwise known as 'An Act to Facilitate the Acquisition of Right-of-Way, Site or Location for National Government Infrastructure Projects and For Other Purposes' and its Implementing Rules and Regulations (Implementing Rules) had amended Rule 67 in many respects.

There are at least two crucial differences between the respective procedures under Rep. Act No. 8974 and Rule 67. Under the statute, the Government is required to make immediate payment to the property owner upon the filing of the complaint to be entitled to a writ of possession, whereas' in Rule 67, the Government is required only to make an initial deposit with an authorized government depositary. Moreover, Rule 67 prescribes that the initial deposit be equivalent to the assessed value of the property for purposes of taxation, unlike Rep. Act No. 8974 which provides, as the relevant standard for initial compensation, the market value of the property as stated in the tax declaration or the current relevant zonal valuation of the Bureau of Internal Revenue (BIR), whichever is higher, and the value of the improvements and/or structures using the replacement cost method.

Accordingly, on the basis of Sections 4 and 7 of Rep. Act No. 8974 and Section 10 of the Implementing Rules, the RTC made key qualifications to its earlier issuances. First, it directed the Land Bank of the Philippines, Baclaran Branch (LBP-Baclaran), to immediately release the amount of US$62,343,175.77 to PIATCO, an amount which the RTC characterized as that which the Government 'specifically made available for the purpose of this expropriation; and such amount to be deducted from the amount of just compensation due PIATCO as eventually determined by the RTC. Second, the Government was directed to submit to the RTC a Certificate of Availability of Funds signed by authorized officials to cover the payment of just compensation. Third, the Government was directed 'to maintain, preserve and safeguard the NAIA 3 facilities or 'perform such as acts or activities in preparation for their direct

operation of the airport terminal, pending expropriation proceedings and full payment of just compensation. However, the Government was prohibited 'from performing acts of ownership like awarding concessions or leasing any part of [NAIA 3] to other parties. [19]

The very next day after the issuance of the assailed 4 January 2005 Order, the Government filed an Urgent Motion for Reconsideration, which was set for hearing on 10 January 2005. On 7 January 2005, the RTC issued another Order, the second now assailed before this Court, which appointed three (3) Commissioners to ascertain the amount of just compensation for the NAIA 3 Complex. That same day, the Government filed a Motion for Inhibition of Hon. Gingoyon.

The RTC heard the Urgent Motion for Reconsideration and Motion for Inhibition on 10 January 2005. On the same day, it denied these motions in an Omnibus Order dated 10 January 2005. This is the third Order now assailed before this Court. Nonetheless, while the Omnibus Order affirmed the earlier dispositions in the 4 January 2005 Order, it excepted from affirmance 'the superfluous part of the Order prohibiting the plaintiffs from awarding concessions or leasing any part of [NAIA 3] to other parties. [20]

Thus, the present Petition for Certiorari and Prohibition under Rule 65 was filed on 13 January 2005. The petition prayed for the nullification of the RTC orders dated 4 January 2005, 7 January 2005, and 10 January 2005, and for the inhibition of Hon. Gingoyon from taking further action on the expropriation case. A concurrent prayer for the issuance of a temporary restraining order and preliminary injunction was granted by this Court in a Resolution dated 14 January 2005. [21]

The Government, in imputing grave abuse of discretion to the acts of Hon. Gingoyon, raises five general arguments, to wit:

(i) that Rule 67, not Rep. Act No. 8974, governs the present expropriation proceedings;

(ii) that Hon. Gingoyon erred when he ordered the immediate release of the amount of US$62.3 Million to PIATCO considering that the assessed value as alleged in the complaint was only P 3 Billion;

(iii) that the RTC could not have prohibited the Government from enjoining the performance of acts of ownership;

(iv) that the appointment of the three commissioners was erroneous; and

(v) that Hon. Gingoyon should be compelled to inhibit himself from the expropriation case. [22]

Before we delve into the merits of the issues raised by the Government, it is essential to consider the crucial holding of the Court in its 2004 Resolution in Agan, which we repeat below:

This Court, however, is not unmindful of the reality that the structures comprising the NAIA IPT III facility are almost complete and that funds have been spent by PIATCO in their construction. For the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures. The compensation must be just and in accordance with law and equity for the government can not unjustly enrich itself at the expense of PIATCO and its investors. [23]

This pronouncement contains the fundamental premises which permeate this decision of the Court. Indeed, Agan , final and executory as it is, stands as governing law in this case, and any disposition of the present petition must conform to the conditions laid down by the Court in its 2004 Resolution .

The 2004 Resolution Which Is Law of This Case Generally Permits Expropriation

The pronouncement in the 2004 Resolution is especially significant to this case in two aspects, namely: (i) that PIATCO must receive payment of just compensation determined in accordance with law and equity; and (ii) that the government is barred from taking over NAIA 3 until such just compensation is paid . The parties cannot be allowed to evade the directives laid down by this Court through any mode of judicial action, such as the complaint for eminent domain.

It cannot be denied though that the Court in the 2004 Resolution prescribed mandatory guidelines which the Government must observe before it could acquire the NAIA 3 facilities. Thus, the actions of respondent judge under review, as well as the arguments of the parties must, to merit affirmation, pass the threshold test of whether such propositions are in accord with the 2004 Resolution.

The Government does not contest the efficacy of this pronouncement in the 2004 Resolution , [24] thus its application

to the case at bar is not a matter of controversy. Of course, questions such as what is the standard of 'just compensation and which particular laws and equitable principles are applicable, remain in dispute and shall be resolved forthwith.

The Government has chosen to resort to expropriation, a remedy available under the law, which has the added benefit of an integrated process for the determination of just compensation and the payment thereof to PIATCO. We appreciate that the case at bar is a highly unusual case, whereby the Government seeks to expropriate a building complex constructed on land which the State already owns.

[25] There is an inherent illogic in the resort to eminent domain on property already owned by the State. At first blush, since the State already owns the property on which NAIA 3 stands, the proper remedy should be akin to an action for ejectment.

However, the reason for the resort by the Government to expropriation proceedings is understandable in this case. The 2004 Resolution, in requiring the payment of just compensation prior to the takeover by the Government of

NAIA 3, effectively precluded it from acquiring possession or ownership of the NAIA 3 through the unilateral exercise of its rights as the owner of the ground on which the facilities stood. Thus, as things stood after the 2004 Resolution, the right of the Government to take over the NAIA 3 terminal was preconditioned by lawful order on the payment of just compensation to PIATCO as builder of the structures.

The determination of just compensation could very well be agreed upon by the parties without judicial intervention, and it appears that steps towards that direction had been engaged in. Still, ultimately, the Government resorted to its inherent power of eminent domain through expropriation proceedings. Is eminent domain appropriate in the first place, with due regard not only to the law on expropriation but also to the Court's 2004 Resolution in Agan ?

The right of eminent domain extends to personal and real property, and the NAIA 3 structures, adhered as they are to the soil, are considered as real property. [26] The public purpose for the expropriation is also beyond dispute. It should also be noted that Section 1 of Rule 67 (on Expropriation) recognizes the possibility that the property sought to be expropriated may be titled in the name of the

Republic of the Philippines, although occupied by private individuals, and in such case an averment to that effect should be made in the complaint. The instant expropriation complaint did aver that the NAIA 3 complex 'stands on a parcel of land owned by the Bases Conversion Development Authority, another agency of [the Republic of the Philippines]. [27]

Admittedly, eminent domain is not the sole judicial recourse by which the Government may have acquired the NAIA 3 facilities while satisfying the requisites in the 2004 Resolution. Eminent domain though may be the most effective, as well as the speediest means by which such goals may be accomplished. Not only does it enable immediate possession after satisfaction of the requisites under the law, it also has a built-in procedure through which just compensation may be ascertained. Thus, there should be no question as to the propriety of eminent domain proceedings in this case.

Still, in applying the laws and rules on expropriation in the case at bar, we are impelled to apply or construe these rules in accordance with the Court's prescriptions in the 2004 Resolution to achieve the end effect that the Government may validly take over the NAIA 3 facilities. Insofar as this case is concerned, the 2004 Resolution is effective not only as a legal precedent, but as the source of rights and prescriptions that must be guaranteed, if not enforced, in the resolution of this petition. Otherwise, the integrity and efficacy of the rulings of this Court will be severely diminished.

It is from these premises that we resolve the first question, whether Rule 67 of the Rules of Court or Rep. Act No. 8974 governs the expropriation proceedings in this case.

Application of Rule 67 Violates the 2004 Agan Resolution

The Government insists that Rule 67 of the Rules of Court governs the expropriation proceedings in this case to the exclusion of all other laws. On the other hand, PIATCO claims that it is Rep. Act No. 8974 which does apply. Earlier, we had adverted to the basic differences between the statute and the procedural rule. Further elaboration is in order.

Rule 67 outlines the procedure under which eminent domain may be exercised by the Government. Yet by no means does it serve at present as the solitary guideline through which the State may expropriate private property. For example, Section 19 of the Local Government Code governs as to the exercise by

local government units of the power of eminent domain through an enabling ordinance. And then there is Rep. Act No. 8974, which covers expropriation proceedings intended for national government infrastructure projects.

Rep. Act No. 8974, which provides for a procedure eminently more favorable to the property owner than Rule 67, inescapably applies in instances when the national government expropriates property 'for national government infrastructure projects. [28] Thus, if expropriation is engaged in by the national government for purposes other than national infrastructure projects, the assessed value standard and the deposit mode prescribed in Rule 67 continues to apply.

Under both Rule 67 and Rep. Act No. 8974, the Government commences expropriation proceedings through the filing of a complaint. Unlike in the case of local governments which necessitate an authorizing ordinance before expropriation may be accomplished, there is no need under Rule 67 or Rep. Act No. 8974 for legislative authorization before the Government may proceed with a particular exercise of eminent domain. The most crucial difference between Rule 67 and Rep. Act No. 8974 concerns the particular essential step the Government has to undertake to be entitled to a writ of possession.

The first paragraph of Section 2 of Rule 67 provides:

'SEC. 2. Entry of plaintiff upon depositing value with authorized government depository. ' Upon the filing of the complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall have the right to take or enter upon the possession of the real property involved if he deposits with the authorized government depositary an amount equivalent to the assessed value of the property for purposes of taxation to be held by such bank subject to the orders of the court. Such deposit shall be in money, unless in lieu thereof the court authorizes the deposit of a certificate of deposit of a government bank of the Republic of the Philippines payable on demand to the authorized government depositary.

In contrast, Section 4 of Rep. Act No. 8974 relevantly states:

SEC. 4. Guidelines for Expropriation Proceedings . Whenever it is necessary to acquire real property for the right-of-way, site or location for any national government infrastructure project through expropriation, the appropriate proceedings before the proper court under the following guidelines: a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency shall immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR); and (2) the value of the improvements and/or structures as determined under Section 7 hereof; ... c) In case the completion of a government infrastructure project is of utmost urgency and importance, and there is no existing valuation of the area concerned, the implementing agency shall immediately pay the owner of the property its proffered value taking into consideration the standards prescribed in Section 5 hereof.

Upon completion with the guidelines abovementioned, the court shall immediately issue to the implementing agency an order to take possession of the property and start the implementation of the project. Before the court can issue a Writ of Possession, the implementing agency shall present to the court a certificate of availability of funds from the proper official concerned. ...

As can be gleaned from the above-quoted texts, Rule 67 merely requires the Government to deposit with an authorized government depositary the assessed value of the property for expropriation for it to be entitled to a writ of possession. On the other hand, Rep. Act No. 8974 requires that the Government make a direct payment to the property owner before the writ may issue. Moreover, such payment is based on the zonal valuation of the BIR in the case of land, the value of the improvements or structures

under the replacement cost method, [29] or if no such valuation is available and in cases of utmost urgency, the proffered value of the property to be seized.

It is quite apparent why the Government would prefer to apply Rule 67 in lieu of Rep. Act No. 8974. Under Rule 67, it would not be obliged to immediately pay any amount to PIATCO before it can obtain the writ of possession since all it need do is deposit the amount equivalent to the assessed value with an authorized government depositary. Hence, it devotes considerable effort to point out that Rep. Act No. 8974 does not apply in this case, notwithstanding the undeniable reality that NAIA 3 is a national government project. Yet, these efforts fail, especially considering the controlling effect of the 2004 Resolution in Agan on the adjudication of this case.

It is the finding of this Court that the staging of expropriation proceedings in this case with the exclusive use of Rule 67 would allow for the Government to take over the NAIA 3 facilities in a fashion that directly rebukes our 2004 Resolution in Agan . This Court cannot sanction deviation from its own final and executory orders.

Section 2 of Rule 67 provides that the State 'shall have the right to take or enter upon the possession of the real property involved if [the plaintiff] deposits with the authorized government depositary an amount equivalent to the assessed value of the property for purposes of taxation to be held by such bank subject to the orders of the court. [30] It is thus apparent that under the provision, all the Government need do to obtain a writ of possession is to deposit the amount equivalent to the assessed value with an authorized government depositary.

Would the deposit under Section 2 of Rule 67 satisfy the requirement laid down in the 2004 Resolution that '[f]or the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures' ? Evidently not.

If Section 2 of Rule 67 were to apply, PIATCO would be enjoined from receiving a single centavo as just compensation before the Government takes over the NAIA 3 facility by virtue of a writ of possession. Such an injunction squarely contradicts the letter and intent of the 2004 Resolution. Hence, the position of the Government sanctions its own disregard or violation the prescription laid down by this Court that

there must first be just compensation paid to PIATCO before the Government may take over the NAIA 3 facilities.

Thus, at the very least, Rule 67 cannot apply in this case without violating the 2004 Resolution. Even assuming that Rep. Act No. 8974 does not govern in this case, it does not necessarily follow that Rule 67 should then apply. After all, adherence to the letter of Section 2, Rule 67 would in turn violate the Court's requirement in the 2004 Resolution that there must first be payment of just compensation to PIATCO before the Government may take over the property.

It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit under Rule 67 with the scheme of 'immediate payment in cases involving national government infrastructure projects. The following portion of the Senate deliberations, cited by PIATCO in its Memorandum, is worth quoting to cogitate on the purpose behind the plain meaning of the law:

THE CHAIRMAN (SEN. CAYETANO). 'x x x Because the Senate believes that, you know, we have to pay the landowners immediately not by treasury bills but by cash. Since we are depriving them, you know, upon payment, 'no, of possession, we might as well pay them as much, 'no, hindi lang 50 percent . xxx THE CHAIRMAN (REP. VERGARA). Accepted. xxx THE CHAIRMAN (SEN. CAYETANO). Oo. Because this is really in favor of the landowners, e. THE CHAIRMAN (REP. VERGARA). That's why we need to really secure the availability of funds. xxx THE CHAIRMAN (SEN. CAYETANO). No, no. It's the same. It says here: iyong first paragraph, diba? Iyong zonal ' talagang magbabayad muna. In other words, you know, there must be a payment kaagad. (TSN, Bicameral Conference on the Disagreeing Provisions of House Bill 1422 and Senate Bill 2117, August 29, 2000, pp. 14-20)

xxx THE CHAIRMAN (SEN. CAYETANO). Okay, okay, 'no. Unang-una, it is not deposit, 'no. It's payment. REP. BATERINA. It's payment, ho, payment. (Id., p. 63) [31]

It likewise bears noting that the appropriate standard of just compensation is a substantive matter. It is well within the province of the legislature to fix the standard, which it did through the enactment of Rep. Act No. 8974. Specifically, this prescribes the new standards in determining the amount of just compensation in expropriation cases relating to national government infrastructure projects, as well as the manner of payment thereof. At the same time, Section 14 of the Implementing Rules recognizes the continued applicability of Rule 67 on procedural aspects when it provides 'all matters regarding defenses and objections to the complaint, issues on uncertain ownership and conflicting claims, effects of appeal on the rights of the parties, and such other incidents affecting the complaint shall be resolved under the provisions on expropriation of Rule 67 of the Rules of Court. [32]

'Given that the 2004 Resolution militates against the continued use of the norm under Section 2, Rule 67, is it then possible to apply Rep. Act No. 8974? We find that it is, and moreover, its application in this case complements rather than contravenes the prescriptions laid down in the 2004 Resolution.

Rep. Act No. 8974 Fits to the Situation at Bar

and Complements the 2004 Agan Resolution

Rep. Act No. 8974 is entitled 'An Act To Facilitate The Acquisition Of Right-Of-Way, Site Or Location For National Government Infrastructure Projects And For Other Purposes. Obviously, the law is intended to cover expropriation proceedings intended for national government infrastructure projects. Section 2 of Rep. Act No. 8974 explains what are considered as 'national government projects.

Sec. 2. National Government Projects . ' The term 'national government projects' shall refer to all national government infrastructure, engineering works and service contracts, including projects undertaken by government-owned and controlled corporations, all projects covered by Republic Act No. 6957, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer Law, and other related and necessary activities, such as site acquisition, supply and/or installation of equipment and materials, implementation, construction, completion, operation, maintenance, improvement, repair and rehabilitation, regardless of the source of funding.

As acknowledged in the 2003 Decision, the development of NAIA 3 was made pursuant to a buildoperate-and-transfer arrangement pursuant to Republic Act No. 6957, as amended, [33] which pertains to infrastructure or development projects normally financed by the public sector but which are now wholly or partly implemented by the private sector. [34] Under the build-operate-and-transfer scheme, it is the project proponent which undertakes the construction, including the financing, of a given infrastructure facility. [35] In Tatad v. Garcia, [36] the Court acknowledged that the operator of the EDSA Light Rail Transit project under a BOT scheme was the owner of the facilities such as 'the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant. [37]

There can be no doubt that PIATCO has ownership rights over the facilities which it had financed and constructed. The 2004 Resolution squarely recognized that right when it mandated the payment of just compensation to PIATCO prior to the takeover by the Government of NAIA 3. The fact that the Government resorted to eminent domain proceedings in the first place is a concession on its part of PIATCO's ownership. Indeed, if no such right is recognized, then there should be no impediment for the Government to seize control of NAIA 3 through ordinary ejectment proceedings.

Since the rights of PIATCO over the NAIA 3 facilities are established, the nature of these facilities should now be determined. Under Section 415(1) of the Civil Code, these facilities are ineluctably immovable or real property, as they constitute buildings, roads and constructions of all kinds adhered to the soil. [38] Certainly, the NAIA 3 facilities are of such nature that they cannot just be packed up and transported by PIATCO like a traveling circus caravan.

Thus, the property subject of expropriation, the NAIA 3 facilities, are real property owned by PIATCO. This point is critical, considering the Government's insistence that the NAIA 3 facilities cannot be deemed as the 'right-of-way', 'site or 'location of a national government infrastructure project, within the coverage of Rep. Act No. 8974.

There is no doubt that the NAIA 3 is not, under any sensible contemplation, a 'right-of-way. Yet we cannot agree with the Government's insistence that neither could NAIA 3 be a 'site or 'location. The petition quotes the definitions provided in Black's Law Dictionary of 'location as the specific place or position of a person or thing and 'site as pertaining to a place or location or a piece of property set aside for specific use. [39] Yet even Black's Law Dictionary provides that '[t]he term [site] does not of itself necessarily mean a place or tract of land fixed by definite boundaries. [40] One would assume that the Government, to back up its contention, would be able to point to a clear-cut rule that a 'site or 'location exclusively refers to soil, grass, pebbles and weeds. There is none.

Indeed, we cannot accept the Government's proposition that the only properties that may be expropriated under Rep. Act No. 8974 are parcels of land. Rep. Act No. 8974 contemplates within its coverage such real property constituting land, buildings, roads and constructions of all kinds adhered to the soil. Section 1 of Rep. Act No. 8974, which sets the declaration of the law's policy, refers to 'real property acquired for national government infrastructure projects are promptly paid just compensation. [41] Section 4 is quite explicit in stating that the scope of the law relates to the acquisition of 'real property, which under civil law includes buildings, roads and constructions adhered to the soil.

It is moreover apparent that the law and its implementing rules commonly provide for a rule for the valuation of improvements and/or structures thereupon separate from that of the land on which such are constructed. Section 2 of Rep. Act No. 8974 itself recognizes that the improvements or structures on the land may very well be the subject of expropriation proceedings. Section 4(a), in relation to Section 7 of the law provides for the guidelines for the valuation of the improvements or structures to be expropriated. Indeed, nothing in the law would prohibit the application of Section 7, which provides for the valuation method of the improvements and or structures in the instances wherein it is necessary for the Government to expropriate only the improvements or structures, as in this case.

The law classifies the NAIA 3 facilities as real properties just like the soil to which they are adhered. Any sub-classifications of real property and divergent treatment based thereupon for purposes of expropriation must be based on substantial distinctions, otherwise the equal protection clause of the Constitution is violated. There may be perhaps a molecular distinction between soil and the inorganic improvements adhered thereto, yet there are no purposive distinctions that would justify a variant treatment for purposes of expropriation. Both the land itself and the improvements thereupon are susceptible to private ownership independent of each other, capable of pecuniary estimation, and if taken from the owner, considered as a deprivation of property. The owner of improvements seized through expropriation suffers the same degree of loss as the owner of land seized through similar means. Equal protection demands that all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed. For purposes of expropriation, parcels of land are similarly situated as the buildings or improvements constructed thereon, and a disparate treatment between those two classes of real property infringes the equal protection clause.

Even as the provisions of Rep. Act No. 8974 call for that law's application in this case, the threshold test must still be met whether its implementation would conform to the dictates of the Court in the 2004 Resolution. Unlike in the case of Rule 67, the application of Rep. Act No. 8974 will not contravene the 2004 Resolution, which requires the payment of just compensation before any takeover of the NAIA 3 facilities by the Government. The 2004 Resolution does not particularize the extent such payment must be effected before the takeover, but it unquestionably requires at least some degree of payment to the private property owner before a writ of possession may issue. The utilization of Rep. Act No. 8974 guarantees compliance with this bare minimum requirement, as it assures the private property owner the payment of, at the very least, the proffered value of the property to be seized. Such payment of the proffered value to the owner, followed by the issuance of the writ of possession in favor of the Government, is precisely the schematic under Rep. Act No. 8974, one which facially complies with the prescription laid down in the 2004 Resolution.

Clearly then, we see no error on the part of the RTC when it ruled that Rep. Act No. 8974 governs the instant expropriation proceedings.

The Proper Amount to be Paid under Rep. Act No. 8974

Then, there is the matter of the proper amount which should be paid to PIATCO by the Government before the writ of possession may issue, consonant to Rep. Act No. 8974.

At this juncture, we must address the observation made by the Office of the Solicitor General in behalf of the Government that there could be no 'BIR zonal valuations' on the NAIA 3 facility, as provided in Rep. Act No. 8974, since zonal valuations are only for parcels of land, not for airport terminals. The Court agrees with this point, yet does not see it as an impediment for the application of Rep. Act No. 8974.

It must be clarified that PIATCO cannot be reimbursed or justly compensated for the value of the parcel of land on which NAIA 3 stands. PIATCO is not the owner of the land on which the NAIA 3 facility is constructed, and it should not be entitled to just compensation that is inclusive of the value of the land itself. It would be highly disingenuous to compensate PIATCO for the value of land it does not own. Its entitlement to just compensation should be limited to the value of the improvements and/or structures themselves. Thus, the determination of just compensation cannot include the BIR zonal valuation under Section 4 of Rep. Act No. 8974.

Under Rep. Act No. 8974, the Government is required to 'immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property based on the current relevant zonal valuation of the [BIR]; and (2) the value of the improvements and/or

structures as determined under Section 7. As stated above, the BIR zonal valuation cannot apply in this case, thus the amount subject to immediate payment should be limited to 'the value of the improvements and/or structures as determined under Section 7, with Section 7 referring to the 'implementing rules and regulations for the equitable valuation of the improvements and/or structures on the land. Under the present implementing rules in place, the valuation of the improvements/structures are to be based using 'the replacement cost method. [42] However, the replacement cost is only one of the factors to be considered in determining the just compensation.

In addition to Rep. Act No. 8974, the 2004 Resolution in Agan also mandated that the payment of just compensation should be in accordance with equity as well. Thus, in ascertaining the ultimate amount of just compensation, the duty of the trial court is to ensure that such amount conforms not only to the law, such as Rep. Act No. 8974, but to principles of equity as well.

Admittedly, there is no way, at least for the present, to immediately ascertain the value of the improvements and structures since such valuation is a matter for factual determination. [43] Yet Rep. Act No. 8974 permits an expedited means by which the Government can immediately take possession of the property without having to await precise determination of the valuation. Section 4(c) of Rep. Act No. 8974 states that 'in case the completion of a government infrastructure project is of utmost urgency and importance, and there is no existing valuation of the area concerned, the implementing agency shall immediately pay the owner of the property its proferred value, taking into consideration the standards prescribed in Section 5 [of the law]. [44] The 'proffered value may strike as a highly subjective standard based solely on the intuition of the government, but Rep. Act No. 8974 does provide relevant standards by which 'proffered value should be based, [45] as well as the certainty

of judicial determination of the propriety of the proffered value. [46]

In filing the complaint for expropriation, the Government alleged to have deposited the amount of P3 Billion earmarked for expropriation, representing the assessed value of the property. The making of the deposit, including the determination of the amount of the deposit, was undertaken under the erroneous notion that Rule 67, and not Rep. Act No. 8974, is the applicable law. Still, as regards the amount, the Court sees no impediment to recognize this sum of P3 Billion as the proffered value under Section 4(b) of Rep. Act No. 8974. After all, in the initial determination of the proffered value, the Government is not

strictly required to adhere to any predetermined standards, although its proffered value may later be subjected to judicial review using the standards enumerated under Section 5 of Rep. Act No. 8974.

How should we appreciate the questioned order of Hon. Gingoyon, which pegged the amount to be immediately paid to PIATCO at around $62.3 Million? The Order dated 4 January 2005, which mandated such amount, proves problematic in that regard. While the initial sum of P3 Billion may have been based on the assessed value, a standard which should not however apply in this case, the RTC cites without qualification Section 4(a) of Rep. Act No. 8974 as the basis for the amount of $62.3 Million, thus leaving the impression that the BIR zonal valuation may form part of the basis for just compensation, which should not be the case. Moreover, respondent judge made no attempt to apply the enumerated guidelines for determination of just compensation under Section 5 of Rep. Act No. 8974, as required for judicial review of the proffered value.

The Court notes that in the 10 January 2005 Omnibus Order , the RTC noted that the concessions agreement entered into between the Government and PIATCO stated that the actual cost of building NAIA 3 was 'not less than US$350 Million. [47] The RTC then proceeded to observe that while Rep. Act No. 8974 required the immediate payment to PIATCO the amount equivalent to 100% of the value of NAIA 3, the amount deposited by the Government constituted only 18% of this value. At this point, no binding import should be given to this observation that the actual cost of building NAIA 3 was 'not less than US$350 Million, as the final conclusions on the amount of just compensation can come only after due ascertainment in accordance with the standards set under Rep. Act No. 8974, not the declarations of the parties. At the same time, the expressed linkage between the BIR zonal valuation and the amount of just compensation in this case, is revelatory of erroneous thought on the part of the RTC.

We have already pointed out the irrelevance of the BIR zonal valuation as an appropriate basis for valuation in this case, PIATCO not being the owner of the land on which the NAIA 3 facilities stand. The subject order is flawed insofar as it fails to qualify that such standard is inappropriate.

It does appear that the amount of US$62.3 Million was based on the certification issued by the LBPBaclaran that the Republic of the Philippines maintained a total balance in that branch amounting to such amount. Yet the actual representation of the $62.3 Million is not clear. The Land Bank Certification expressing such amount does state that it was issued upon request of the International Airport Authority 'purportedly as guaranty deposit for the expropriation complaint. [48] The Government claims in its Memorandum that the entire amount was made available as a guaranty fund for the final and

executory judgment of the trial court, and not merely for the issuance of the writ of possession. [49] One could readily conclude that the entire amount of US$62.3 Million was intended by the Government to answer for whatever guaranties may be required for the purpose of the expropriation complaint.

Still, such intention the Government may have had as to the entire US$62.3 Million is only inferentially established. In ascertaining the proffered value adduced by the Government, the amount of P3 Billion as the amount deposited characterized in the complaint as 'to be held by [Land Bank] subject to the [RTC's ] orders, [50] should be deemed as controlling. There is no clear evidence that the Government intended to offer US$62.3 Million as the initial payment of just compensation, the wording of the Land Bank Certification notwithstanding, and credence should be given to the consistent position of the Government on that aspect.

In any event, for the RTC to be able to justify the payment of US$62.3 Million to PIATCO and not P3 Billion Pesos, he would have to establish that the higher amount represents the valuation of the structures/improvements, and not the BIR zonal valuation on the land wherein NAIA 3 is built. The Order dated 5 January 2005 fails to establish such integral fact, and in the absence of contravening proof, the proffered value of P3 Billion, as presented by the Government, should prevail.

Strikingly, the Government submits that assuming that Rep. Act No. 8974 is applicable, the deposited amount of P3 Billion should be considered as the proffered value, since the amount was based on comparative values made by the City Assessor. [51] Accordingly, it should be deemed as having faithfully complied with the requirements of the statute. [52] While the Court agrees that P3 Billion should be considered as the correct proffered value, still we cannot deem the Government as having faithfully complied with Rep. Act No. 8974. For the law plainly requires direct payment to the property owner, and not a mere deposit with the authorized government depositary. Without such direct payment, no writ of possession may be obtained.

Writ of Possession May Not Be Implemented Until Actual Receipt by PIATCO of Proferred Value

The Court thus finds another error on the part of the RTC. The RTC authorized the issuance of the writ of possession to the Government notwithstanding the fact that no payment of any amount had yet been made to PIATCO, despite the clear command of Rep. Act No. 8974 that there must first be payment before the writ of possession can issue. While the RTC did direct the LBP-Baclaran to immediately release the amount of US$62 Million to PIATCO, it should have likewise suspended the writ of possession, nay, withdrawn it altogether, until the Government shall have actually paid PIATCO. This is the inevitable consequence of the clear command of Rep. Act No. 8974 that requires immediate payment of the initially determined amount of just compensation should be effected. Otherwise, the overpowering intention of Rep. Act No. 8974 of ensuring payment first before transfer of repossession would be eviscerated.

Rep. Act No. 8974 represents a significant change from previous expropriation laws such as Rule 67, or even Section 19 of the Local Government Code. Rule 67 and the Local Government Code merely provided that the Government deposit the initial amounts [53] antecedent to acquiring possession of the property with, respectively, an authorized Government depositary [54] or the proper court. [55] In both cases, the private owner does not receive compensation prior to the deprivation of property. On the other hand, Rep. Act No. 8974 mandates immediate payment of the initial just compensation prior to the issuance of the writ of possession in favor of the Government.

Rep. Act No. 8974 is plainly clear in imposing the requirement of immediate prepayment, and no amount of statutory deconstruction can evade such requisite. It enshrines a new approach towards eminent domain that reconciles the inherent unease attending expropriation proceedings with a position of fundamental equity. While expropriation proceedings have always demanded just compensation in exchange for private property, the previous deposit requirement impeded immediate compensation to the private owner, especially in cases wherein the determination of the final amount of compensation would prove highly disputed. Under the new modality prescribed by Rep. Act No. 8974, the private owner sees immediate monetary recompense with the same degree of speed as the taking of his/her property.

While eminent domain lies as one of the inherent powers of the State, there is no requirement that it undertake a prolonged procedure, or that the payment of the private owner be protracted as far as practicable. In fact, the expedited procedure of payment, as highlighted under Rep. Act No. 8974, is inherently more fair, especially to the layperson who would be hard-pressed to fully comprehend the social value of expropriation in the first place. Immediate payment placates to some degree whatever illwill that arises from expropriation, as well as satisfies the demand of basic fairness.

The Court has the duty to implement Rep. Act No. 8974 and to direct compliance with the requirement of immediate payment in this case. Accordingly, the Writ of Possession dated 21 December 2004 should be held in abeyance, pending proof of actual payment by the Government to PIATCO of the proffered value of the NAIA 3 facilities, which totals P3,002,125,000.00.

Rights of the Government upon Issuance of the Writ of Possession

Once the Government pays PIATCO the amount of the proffered value of P3 Billion, it will be entitled to the Writ of Possession. However, the Government questions the qualification imposed by the RTC in its 4 January 2005 Order consisting of the prohibition on the Government from performing acts of ownership such as awarding concessions or leasing any part of NAIA 3 to other parties. To be certain, the RTC, in its 10 January 2005 Omnibus Order , expressly stated that it was not affirming 'the superfluous part of the Order [of 4 January 2005] prohibiting the plaintiffs from awarding concessions or leasing any part of NAIA [3] to other parties. [56] Still, such statement was predicated on the notion that since the Government was not yet the owner of NAIA 3 until final payment of just compensation, it was obviously incapacitated to perform such acts of ownership.

In deciding this question, the 2004 Resolution in Agan cannot be ignored, particularly the declaration that '[f]or the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures. The obvious import of this holding is that unless PIATCO is paid just compensation, the Government is barred from 'taking over, a phrase which in the strictest sense could encompass even a bar of physical possession of NAIA 3, much less operation of the facilities.

There are critical reasons for the Court to view the 2004 Resolution less stringently, and thus allow the operation by the Government of NAIA 3 upon the effectivity of the Writ of Possession. For one, the national prestige is diminished every day that passes with the NAIA 3 remaining mothballed. For another, the continued non-use of the facilities contributes to its physical deterioration, if it has not already. And still for another, the economic benefits to the Government and the country at large are beyond dispute once the NAIA 3 is put in operation.

Rep. Act No. 8974 provides the appropriate answer for the standard that governs the extent of the acts the Government may be authorized to perform upon the issuance of the writ of possession. Section 4 states that 'the court shall immediately issue to the implementing agency an order to take possession of the property and start the implementation of the project. We hold that accordingly, once the Writ of Possession is effective, the Government itself is authorized to perform the acts that are essential to the operation of the NAIA 3 as an international airport terminal upon the effectivity of the Writ of Possession. These would include the repair, reconditioning and improvement of the complex, maintenance of the existing facilities and equipment, installation of new facilities and equipment, provision of services and facilities pertaining to the facilitation of air traffic and transport, and other services that are integral to a modern-day international airport.

The Government's position is more expansive than that adopted by the Court. It argues that with the writ of possession, it is enabled to perform acts de jure on the expropriated property. It cites Republic v. Tagle , [57] as well as the statement therein that 'the expropriation of real property does not include mere physical entry or occupation of land, and from them concludes that 'its mere physical entry and occupation of the property fall short of the taking of title, which includes all the rights that may be exercised by an owner over the subject property.

This conclusion is indeed lifted directly from statements in Tagle , [58] but not from the ratio decidendi of that case. Tagle concerned whether a writ of possession in favor of the Government was still necessary in light of the fact that it was already in actual possession of the property. In ruling that the Government was entitled to the writ of possession, the Court in Tagle explains that such writ vested not

only physical possession, but also the legal right to possess the property. Continues the Court, such legal right to possess was particularly important in the case, as there was a pending suit against the Republic for unlawful detainer, and the writ of possession would serve to safeguard the Government from eviction. [59]

At the same time, Tagle conforms to the obvious, that there is no transfer of ownership as of yet by virtue of the writ of possession. Tagle may concede that the Government is entitled to exercise more than just the right of possession by virtue of the writ of possession, yet it cannot be construed to grant the Government the entire panoply of rights that are available to the owner. Certainly, neither Tagle nor any other case or law, lends support to the Government's proposition that it acquires beneficial or equitable ownership of the expropriated property merely through the writ of possession.

Indeed, this Court has been vigilant in defense of the rights of the property owner who has been validly deprived of possession, yet retains legal title over the expropriated property pending payment of just compensation. We reiterated the various doctrines of such import in our recent holding in Republic v. Lim: [60]

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 [ [61] ] , 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 condemnor's title relates back to the date on which the petition under the Eminent Domain Act, or the commissioner's 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 Yorksaid 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 Republic's acquisition of ownership is conditioned upon the full payment of just compensation within a reasonable time. Significantly, in Municipality of Bian v. Garcia [ [62]] 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 [ [63]] , 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.

Lim serves fair warning to the Government and its agencies who consistently refuse to pay just compensation due to the private property owner whose property had been expropriated. At the same time, Lim emphasizes the fragility of the rights of the Government as possessor pending the final payment of just compensation, without diminishing the potency of such rights. Indeed, the public policy, enshrined foremost in the Constitution, mandates that the Government must pay for the private property it expropriates. Consequently, the proper judicial attitude is to guarantee compliance with this primordial right to just compensation.

Final Determination of Just Compensation Within 60 Days

The issuance of the writ of possession does not write finis to the expropriation proceedings. As earlier pointed out, expropriation is not completed until payment to the property owner of just compensation. The proffered value stands as' merely a provisional determination of the amount of just compensation, the payment of which is sufficient to transfer possession of the property to the Government. However, to effectuate the transfer of ownership, it is necessary for the Government to pay the property owner the final just compensation.

In Lim, the Court went as far as to countenance, given the exceptional circumstances of that case, the reversion of the validly expropriated property to private ownership due to the failure of the Government to pay just compensation in that case. [64] It was noted in that case that the Government deliberately refused to pay just compensation. The Court went on to rule that 'in cases where the government failed to pay just compensation within five (5) years from the finality of the judgment in the

expropriation proceedings, the owners concerned shall have the right to recover possession of their property. [65]

Rep. Act No. 8974 mandates a speedy method by which the final determination of just compensation may be had. Section 4 provides:

In the event that the owner of the property contests the implementing agency's proffered value, the court shall determine the just compensation to be paid the owner within sixty (60) days from the date of filing of the expropriation case. When the decision of the court becomes final and executory, the implementing agency shall pay the owner the difference between the amount already paid and the just compensation as determined by the court.

We hold that this provision should apply in this case. The sixty (60)-day period prescribed in Rep. Act No. 8974 gives teeth to the law's avowed policy 'to ensure that owners of real property acquired for national government infrastructure projects are promptly paid just compensation. [66] In this case, there already has been irreversible delay in the prompt payment of PIATCO of just compensation, and it is no longer possible for the RTC to determine the just compensation due PIATCO within sixty (60) days from the filing of the complaint last 21 December 2004, as contemplated by the law. Still, it is feasible to effectuate the spirit of the law by requiring the trial court to make such determination within sixty (60) days from finality of this decision, in accordance with the guidelines laid down in Rep. Act No. 8974 and its Implementing Rules.

Of course, once the amount of just compensation has been finally determined, the Government is obliged to pay PIATCO the said amount. As shown in Lim and other like-minded cases, the Government's refusal to make such payment is indubitably actionable in court.

Appointment of Commissioners

The next argument for consideration is the claim of the Government that the RTC erred in appointing the three commissioners in its 7 January 2005 Order without prior consultation with either the Government or PIATCO, or without affording the Government the opportunity to object to the appointment of these commissioners. We can dispose of this argument without complication.

It must be noted that Rep. Act No. 8974 is silent on the appointment of commissioners tasked with the ascertainment of just compensation. [67] This protocol though is sanctioned under Rule 67. We rule that the appointment of commissioners under Rule 67 may be resorted to, even in expropriation proceedings under Rep. Act No. 8974, since the application of the provisions of Rule 67 in that regard do not conflict with the statute. As earlier stated, Section 14 of the Implementing Rules does allow such other incidents affecting the complaint to be resolved under the provisions on expropriation of Rule 67 of the Rules of Court. Even without Rule 67, reference during trial to a commissioner of the examination of an issue of fact is sanctioned under Rule 32 of the Rules of Court.

But while the appointment of commissioners under the aegis of Rule 67 may be sanctioned in expropriation proceedings under Rep. Act No. 8974, the standards to be observed for the determination of just compensation are provided not in Rule 67 but in the statute. In particular, the governing standards for the determination of just compensation for the NAIA 3 facilities are found in Section 10 of the Implementing Rules for Rep. Act No. 8974, which provides for the replacement cost method in the valuation of improvements and structures. [68]

Nothing in Rule 67 or Rep. Act No. 8974 requires that the RTC consult with the parties in the expropriation case on who should be appointed as commissioners. Neither does the Court feel that such a requirement should be imposed in this case. We did rule in Municipality of Talisay v. Ramirez [69] that 'there is nothing to prevent [the trial court] from seeking the recommendations of the parties on [the] matter [of appointment of commissioners], the better to ensure their fair representation. [70] At the same time, such solicitation of recommendations is not obligatory on the part of the court, hence we cannot impute error on the part of the RTC in its exercise of solitary discretion in the appointment of the commissioners.

What Rule 67 does allow though is for the parties to protest the appointment of any of these commissioners, as provided under Section 5 of the Rule. These objections though must be made filed within ten (10) days from service of the order of appointment of the commissioners. [71] In this case, the proper recourse of the Government to challenge the choice of the commissioners is to file an objection with the trial court, conformably with Section 5, Rule 67, and not as it has done, assail the same through a special civil action for certiorari. Considering that the expropriation proceedings in this case were effectively halted seven (7) days after the Order appointing the commissioners, [72] it is permissible to allow the parties to file their objections with the RTC within five (5) days from finality of this decision.

Insufficient Ground for Inhibition of Respondent Judge

The final argument for disposition is the claim of the Government is that Hon. Gingoyon has prejudged the expropriation case against the Government's cause and, thus, should be required to inhibit himself. This grave charge is predicated on facts which the Government characterizes as 'undeniable. In particular, the Government notes that the 4 January 2005 Order was issued motu proprio , without any preceding motion, notice or hearing. Further, such order, which directed the payment of US$62 Million to PIATCO, was attended with error in the computation of just compensation. The Government also notes that the said Order was issued even before summons had been served on PIATCO.

The disqualification of a judge is a deprivation of his/her judicial power [73] and should not be allowed on the basis of mere speculations and surmises. It certainly cannot be predicated on the adverse nature of the judge's rulings towards the movant for inhibition, especially if these rulings are in accord with law.

Neither could inhibition be justified merely on the erroneous nature of the rulings of the judge. We emphasized in Webb v. People : [74]

To prove bias and prejudice on the part of respondent judge, petitioners harp on the alleged adverse and erroneous rulings of respondent judge on their various motions. By themselves, however, they do not sufficiently prove bias and prejudice to disqualify respondent judge. To be disqualifying, the bias and prejudice must be shown to have stemmed from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case. Opinions formed in the course of judicial proceedings, although erroneous, as long as they are based on the evidence presented and conduct observed by the judge, do not prove personal bias or prejudice on the part of the judge. As a general rule, repeated rulings against a litigant, no matter how erroneous and vigorously and consistently expressed, are not a basis for disqualification of a judge on grounds of bias and prejudice. Extrinsic evidence is required to establish bias, bad faith, malice or corrupt purpose, in addition to the palpable error which may be inferred from the decision or order itself. Although the decision may seem so erroneous as to raise doubts concerning a judge's integrity, absent extrinsic evidence, the decision itself would be insufficient to establish a case against the judge. The only exception to the rule is when the error is so gross and patent as to produce an ineluctable inference of bad faith or malice. [75]

The Government's contentions against Hon. Gingoyon are severely undercut by the fact that the 21 December 2004 Order , which the 4 January 2005 Order sought to rectify, was indeed severely flawed as it erroneously applied the provisions of Rule 67 of the Rules of Court, instead of Rep. Act No. 8974, in ascertaining compliance with the requisites for the issuance of the writ of possession. The 4 January

2005 Order , which according to the Government establishes Hon. Gingoyon's bias, was promulgated precisely to correct the previous error by applying the correct provisions of law. It would not speak well of the Court if it sanctions a judge for wanting or even attempting to correct a previous erroneous' order which precisely is the right move to take.

Neither are we convinced that the motu proprio issuance of the 4 January 2005 Order , without the benefit of notice or hearing, sufficiently evinces bias on the part of Hon. Gingoyon. The motu proprio amendment by a court of an erroneous order previously issued may be sanctioned depending on the circumstances, in line with the long-recognized principle that every court has inherent power to do all things reasonably necessary for the administration of justice within the scope of its jurisdiction. [76]

Section 5(g), Rule 135 of the Rules of Court further recognizes the inherent power of courts 'to amend and control its process and orders so as to make them conformable to law and justice, [77] a power which Hon. Gingoyon noted in his 10 January 2005 Omnibus Order. [78] This inherent power includes the right of the court to reverse itself, especially when in its honest opinion it has committed an error or mistake in judgment, and that to adhere to its decision will cause injustice to a party litigant. [79]

Certainly, the 4 January 2005 Order was designed to make the RTC's previous order conformable to law and justice, particularly to apply the correct law of the case. Of course, as earlier established, this effort proved incomplete, as the 4 January 2005 Order did not correctly apply Rep. Act No. 8974 in several respects. Still, at least, the 4 January 2005 Order correctly reformed the most basic premise of the case that Rep. Act No. 8974 governs the expropriation proceedings.

Nonetheless, the Government belittles Hon. Gingoyon's invocation of Section 5(g), Rule 135 as 'patently without merit. Certainly merit can be seen by the fact that the 4 January 2005 Order reoriented the expropriation proceedings towards the correct governing law. Still, the Government claims that the unilateral act of the RTC did not conform to law or justice, as it was not afforded the right to be heard.

The Court would be more charitably disposed towards this argument if not for the fact that the earlier order with the 4 January 2005 Order sought to correct was itself issued without the benefit of any hearing. In fact, nothing either in Rule 67 or Rep. Act No. 8975 requires the conduct of a hearing prior to the issuance of the writ of possession, which by design is available immediately upon the filing of the complaint provided that the requisites attaching thereto are present. Indeed, this expedited process for the obtention of a writ of possession in expropriation cases comes at the expense of the rights of the property owner to be heard or to be deprived of possession. Considering these predicates, it would be highly awry to demand that an order modifying the earlier issuance of a writ of possession in an expropriation case be barred until the staging of a hearing, when the issuance of the writ of possession itself is not subject to hearing. Perhaps the conduct of a hearing under these circumstances would be prudent. However, hearing is not mandatory, and the failure to conduct one does not establish the manifest bias required for the inhibition of the judge.

The Government likewise faults Hon. Gingoyon for using the amount of US$350 Million as the basis for the 100% deposit under Rep. Act No. 8974. The Court has noted that this statement was predicated on the erroneous belief that the BIR zonal valuation applies as a standard for determination of just compensation in this case. Yet this is manifest not of bias, but merely of error on the part of the judge. Indeed, the Government was not the only victim of the errors of the RTC in the assailed orders. PIATCO

itself was injured by the issuance by the RTC of the writ of possession, even though the former had yet to be paid any amount of just compensation. At the same time, the Government was also prejudiced by the erroneous ruling of the RTC that the amount of US$62.3 Million, and not P3 Billion, should be released to PIATCO.

The Court has not been remiss in pointing out the multiple errors committed by the RTC in its assailed orders, to the prejudice of both parties. This attitude of error towards all does not ipso facto negate the charge of bias. Still, great care should be had in requiring the inhibition of judges simply because the magistrate did err. Incompetence may be a ground for administrative sanction, but not for inhibition, which requires lack of objectivity or impartiality to sit on a case.

The Court should necessarily guard against adopting a standard that a judge should be inhibited from hearing the case if one litigant loses trust in the judge. Such loss of trust on the part of the Government may be palpable, yet inhibition cannot be grounded merely on the feelings of the party-litigants. Indeed, every losing litigant in any case can resort to claiming that the judge was biased, and he/she will gain a sympathetic ear from friends, family, and people who do not understand the judicial process. The test in believing such a proposition should not be the vehemence of the litigant's claim of bias, but the Court's judicious estimation, as people who know better than to believe any old cry of 'wolf!', whether such bias has been irrefutably exhibited.

The Court acknowledges that it had been previously held that 'at the very first sign of lack of faith and trust in his actions, whether well-grounded or not, the judge has no other alternative but to inhibit himself from the case. [80] But this doctrine is qualified by the entrenched rule that 'a judge may not be legally prohibited from sitting in a litigation, but when circumstances appear that will induce doubt to his honest actuations and probity in favor of either party, or incite such state of mind, he should conduct a careful selfexamination. He should exercise his discretion in a way that the people's faith in the Courts of Justice is not impaired. [81] And a self-assessment by the judge that he/she is not impaired to hear the case will be respected by the Court absent any evidence to the contrary. As held in Chin v. Court of Appeals :

An allegation of prejudgment, without more, constitutes mere conjecture and is not one of the "just and valid reasons" contemplated in the second paragraph of Rule 137 of the Rules of Court for which a judge may inhibit himself from hearing the case. We have repeatedly held that mere suspicion that a judge is partial to a party is not enough. Bare allegations of partiality and prejudgment will not suffice in the absence of clear and convincing evidence to overcome the presumption that the judge will undertake his noble role to dispense justice according to law and evidence and without fear or favor. There should be adequate evidence to prove the allegations, and there must be showing that the judge had an interest, personal or otherwise, in the prosecution of the case. To be a disqualifying circumstance, the bias and prejudice must be shown to have stemmed from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case. [82]

The mere vehemence of the Government's claim of bias does not translate to clear and convincing evidence of impairing bias. There is no sufficient ground to direct the inhibition of Hon. Gingoyon from hearing the expropriation case.

In conclusion, the Court summarizes its rulings as follows:

(1) The 2004 Resolution in Agan sets the base requirement that has to be observed before the Government may take over the NAIA 3, that there must be payment to PIATCO of just compensation in accordance with law and equity. Any ruling in the present expropriation case must be conformable to the dictates of the Court as pronounced in the Agan cases.

(2) Rep. Act No. 8974 applies in this case, particularly insofar as it requires the immediate payment by the Government of at least the proffered value of the NAIA 3 facilities to PIATCO and provides certain valuation standards or methods for the determination of just compensation.

(3) Applying Rep. Act No. 8974, the implementation of Writ of Possession in favor of the Government over NAIA 3 is held in abeyance until PIATCO is directly paid the amount of P3 Billion, representing the proffered value of NAIA 3 under Section 4(c) of the law.

(4) Applying Rep. Act No. 8974, the Government is authorized to start the implementation of the NAIA 3 Airport terminal project by performing the acts that are essential to the operation of the NAIA 3 as an international airport terminal upon the effectivity of the Writ of Possession, subject to the conditions above-stated. As prescribed by the Court, such authority encompasses 'the repair, reconditioning and improvement of the complex, maintenance of the existing facilities and equipment, installation of new facilities and equipment, provision of services and facilities pertaining to the facilitation of air traffic and transport, and other services that are integral to a modern-day international airport. [83]

(5) The RTC is mandated to complete its determination of the just compensation within sixty (60) days from finality of this Decision. In doing so, the RTC is obliged to comply with 'law and equity as ordained in Again and the standard set under Implementing Rules of Rep. Act No. 8974 which is the 'replacement cost method as the standard of valuation of structures and improvements.

(6) There was no grave abuse of discretion attending the RTC Order appointing the commissioners for the purpose of determining just compensation. The provisions on commissioners under Rule 67 shall apply insofar as they are not inconsistent with Rep. Act No. 8974, its Implementing Rules, or the rulings of the Court in Agan .

(7) The Government shall pay the just compensation fixed in the decision of the trial court to PIATCO immediately upon the finality of the said decision.

(8) There is no basis for the Court to direct the inhibition of Hon. Gingoyon.

All told, the Court finds no grave abuse of discretion on the part of the RTC to warrant the nullification of the questioned orders. Nonetheless, portions of these orders should be modified to conform with law and the pronouncements made by the Court herein.

WHEREFORE, the Petition is GRANTED in PART with respect to the orders dated 4 January 2005 and 10 January 2005 of the lower court. Said orders are AFFIRMED with the following MODIFICATIONS:

1) The implementation of the Writ of Possession dated 21 December 2005 is HELD IN ABEYANCE, pending payment by petitioners to PIATCO of the amount of Three Billion Two Million One Hundred Twenty Five Thousand Pesos (P3,002,125,000.00), representing the proffered value of the NAIA 3 facilities; 2) Petitioners, upon the effectivity of the Writ of Possession, are authorized start the implementation of the Ninoy Aquino International Airport Pasenger Terminal III project by performing the acts that are essential to the operation of the said International Airport Passenger Terminal project; 3) RTC Branch 117 is hereby directed, within sixty (60) days from finality of this Decision, to determine the just compensation to be paid to PIATCO by the Government.

The Order dated 7 January 2005 is AFFIRMED in all respects subject to the qualification that the parties are given ten (10) days from finality of this Decision to file, if they so choose, objections to the appointment of the commissioners decreed therein.

The Temporary Restraining Order dated 14 January 2005 is hereby LIFTED.

No pronouncement as to costs.

SO ORDERED. MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY and AIR TRANSPORTATION OFFICE, Petitioners, vs. BERNARDO L. LOZADA, SR., and the HEIRS OF ROSARIO MERCADO, namely, VICENTE LOZADA, MARIO M. LOZADA, MARCIA L. GODINEZ, VIRGINIA L. FLORES, BERNARDO LOZADA, JR., DOLORES GACASAN, SOCORRO CAFARO and ROSARIO LOZADA, represented by MARCIA LOZADA GODINEZ, Respondents.

DECISION

NACHURA, J .: This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to reverse, annul, and set aside the Decision[1] cralaw dated February 28, 2006 and the Resolution[2] cralaw dated February 7, 2007 of the Court of Appeals (CA) ( Cebu City), Twentieth Division, in CA-G.R. CV No. 65796. The antecedent facts and proceedings are as follows: Subject of this case is Lot No. 88-SWO-25042 (Lot No. 88), with an area of 1,017 square meters, more or less, located in Lahug, Cebu City.Its original owner was Anastacio Deiparine when the same was subject to expropriation proceedings, initiated by the Republic of the Philippines (Republic), represented by the then Civil Aeronautics Administration (CAA), for the expansion and improvement of the Lahug Airport.The case was filed with the then Court of First Instance of Cebu, Third Branch, and docketed as Civil Case No. R-1881. As early as 1947, the lots were already occupied by the U.S. Army.They were turned over to the Surplus Property Commission, the Bureau of Aeronautics, the National Airport Corporation and then to the CAA. During the pendency of the expropriation proceedings, respondent Bernardo L. Lozada, Sr. acquired Lot No. 88 from Deiparine.Consequently, Transfer Certificate of Title (TCT) No. 9045 was issued in Lozadas name. On December 29, 1961, the trial court rendered judgment in favor of the Republic and ordered the latter to pay Lozada the fair market value of Lot No. 88, adjudged at P3.00 per square meter, with consequential damages by way of legal interest computed from November 16, 1947the time when the lot was first occupied by the airport.Lozada received the amount of P3,018.00 by way of payment. The affected landowners appealed.Pending appeal, the Air Transportation Office (ATO), formerly CAA, proposed a compromise settlement whereby the owners of the lots affected by the expropriation proceedings would either not appeal or withdraw their respective appeals in consideration of a commitment that the expropriated lots would be resold at the price they were expropriated in the event that the ATO would abandon the Lahug Airport, pursuant to an established policy involving similar cases.Because of this promise, Lozada did not pursue his appeal.Thereafter, Lot No. 88 was transferred and registered in the name of the Republic under TCT No. 25057. The projected improvement and expansion plan of the old Lahug Airport, however, was not pursued. Lozada, with the other landowners, contacted then CAA Director Vicente Rivera, Jr., requesting to repurchase the lots, as per previous agreement.The CAA replied that there might still be a need for the Lahug Airport to be used as an emergency DC-3 airport.It reiterated, however, the assurance that should this Office dispose and resell the properties which may be found to be no longer necessary as an airport,

then the policy of this Office is to give priority to the former owners subject to the approval of the President. On November 29, 1989, then President Corazon C. Aquino issued a Memorandum to the Department of Transportation, directing the transfer of general aviation operations of the Lahug Airport to the Mactan International Airport before the end of 1990 and, upon such transfer, the closure of the Lahug Airport. Sometime in 1990, the Congress of the Philippines passed Republic Act (R.A.) No. 6958, entitled An Act Creating the Mactan-Cebu International Airport Authority, Transferring Existing Assets of the Mactan International Airport and the Lahug Airport to the Authority, Vesting the Authority with Power to Administer and Operate the Mactan International Airport and the Lahug Airport, and For Other Purposes. From the date of the institution of the expropriation proceedings up to the present, the public purpose of the said expropriation (expansion of the airport) was never actually initiated, realized, or implemented.Instead, the old airport was converted into a commercial complex.Lot No. 88 became the site of a jail known as Bagong Buhay Rehabilitation Complex , while a portion thereof was occupied by squatters.[3] cralaw The old airport was converted into what is now known as the Ayala I.T. Park, a commercial area. Thus, on June 4, 1996, petitioners initiated a complaint for the recovery of possession and reconveyance of ownership of Lot No. 88.The case was docketed as Civil Case No. CEB-18823 and was raffled to the Regional Trial Court (RTC), Branch 57, Cebu City.The complaint substantially alleged as follows: (a) Spouses Bernardo and Rosario Lozada were the registered owners of Lot No. 88 covered by TCT No. 9045; (b) In the early 1960s, the Republic sought to acquire by expropriation Lot No. 88, among others, in connection with its program for the improvement and expansion of the Lahug Airport; (c) A decision was rendered by the Court of First Instance in favor of the Government and against the land owners, among whom was Bernardo Lozada, Sr. appealed therefrom; (d) During the pendency of the appeal, the parties entered into a compromise settlement to the effect that the subject property would be resold to the original owner at the same price when it was expropriated in the event that the Government abandons the Lahug Airport; (e) Title to Lot No. 88 was subsequently transferred to the Republic of the Philippines (TCT No. 25057); (f) The projected expansion and improvement of the Lahug Airport did not materialize;

(g) Plaintiffs sought to repurchase their property from then CAA Director Vicente Rivera.The latter replied by giving as assurance that priority would be given to the previous owners, subject to the approval of the President, should CAA decide to dispose of the properties; (h) On November 29, 1989, then President Corazon C. Aquino, through a Memorandum to the Department of Transportation and Communications (DOTC), directed the transfer of general aviation operations at the Lahug Airport to the Mactan-Cebu International Airport Authority; (i) Since the public purpose for the expropriation no longer exists, the property must be returned to the plaintiffs. [4] In their Answer, petitioners asked for the immediate dismissal of the complaint.They specifically denied that the Government had made assurances to reconvey Lot No. 88 to respondents in the event that the property would no longer be needed for airport operations.Petitioners instead asserted that the judgment of condemnation was unconditional, and respondents were, therefore, not entitled to recover the expropriated property notwithstanding non-use or abandonment thereof. After pretrial, but before trial on the merits, the parties stipulated on the following set of facts: (1) The lot involved is Lot No. 88-SWO-25042 of the Banilad Estate, situated in the City of Cebu, containing an area of One Thousand Seventeen (1,017) square meters, more or less; (2) The property was expropriated among several other properties in Lahug in favor of the Republic of the Philippines by virtue of a Decision dated December 29, 1961 of the CFI of Cebu in Civil Case No. R1881; (3) The public purpose for which the property was expropriated was for the purpose of the Lahug Airport; (4) After the expansion, the property was transferred in the name of MCIAA; [and] (5) On November 29, 1989, then President Corazon C. Aquino directed the Department of Transportation and Communication to transfer general aviation operations of the Lahug Airport to the Mactan-Cebu International Airport Authority and to close the Lahug Airport after such transfer[.] [5] During trial, respondents presented Bernardo Lozada, Sr. as their lone witness, while petitioners presented their own witness, Mactan-Cebu International Airport Authority legal assistant Michael Bacarisas. On October 22, 1999, the RTC rendered its Decision, disposing as follows:

WHEREFORE, in the light of the foregoing, the Court hereby renders judgment in favor of the plaintiffs, Bernardo L. Lozada, Sr., and the heirs of Rosario Mercado, namely, Vicente M. Lozada, Marcia L. Godinez, Virginia L. Flores, Bernardo M. Lozada, Jr., Dolores L. Gacasan, Socorro L. Cafaro and Rosario M. Lozada, represented by their attorney-in-fact Marcia Lozada Godinez, and against defendants CebuMactan International Airport Authority (MCIAA) and Air Transportation Office (ATO): 1.ordering MCIAA and ATO to restore to plaintiffs the possession and ownership of their land, Lot No. 88 Psd-821 (SWO-23803), upon payment of the expropriation price to plaintiffs; and 2.ordering the Register of Deeds to effect the transfer of the Certificate of Title from defendant[s] to plaintiffs on Lot No. [88] , cancelling TCT No. 20357 in the name of defendant MCIAA and to issue a new title on the same lot in the name of Bernardo L. Lozada, Sr. and the heirs of Rosario Mercado, namely: Vicente M. Lozada, Mario M. Lozada, Marcia L. Godinez, Virginia L. Flores, Bernardo M. Lozada, Jr., Dolores L. Gacasan, Socorro L. Cafaro and Rosario M. Lozada. No pronouncement as to costs. SO ORDERED. [6] Aggrieved, petitioners interposed an appeal to the CA.After the filing of the necessary appellate briefs, the CA rendered its assailed Decision dated February 28, 2006, denying petitioners appeal and affirming in toto the Decision of the RTC, Branch 57, Cebu City.Petitioners motion for reconsideration was, likewise, denied in the questioned CA Resolution dated February 7, 2007. Hence, this petition arguing that: (1) the respondents utterly failed to prove that there was a repurchase agreement or compromise settlement between them and the Government; (2) the judgment in Civil Case No. R-1881 was absolute and unconditional, giving title in fee simple to the Republic; and (3) the respondents claim of verbal assurances from government officials violates the Statute of Frauds. The petition should be denied. Petitioners anchor their claim to the controverted property on the supposition that the Decision in the pertinent expropriation proceedings did not provide for the condition that should the intended use of Lot No. 88 for the expansion of the Lahug Airport be aborted or abandoned, the property would revert to respondents, being its former owners.Petitioners cite, in support of this position, Fery v. Municipality of Cabanatuan ,[7] cralaw which declared that the Government acquires only such rights in expropriated parcels of land as may be allowed by the character of its title over the properties If x x x 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 x x x 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. x x x.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. x x x. 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 right 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. x x x. [8] Contrary to the stance of petitioners, this Court had ruled otherwise in Heirs of Timoteo Moreno and Maria Rotea v. Mactan-Cebu International Airport Authority ,[9] cralaw thus Moreover, respondent MCIAA has brought to our attention a significant and telling portion in the Decision in Civil Case No. R-1881 validating our discernment that the expropriation by the predecessors of respondent was ordered under the running impression that Lahug Airport would continue in operation As for the public purpose of the expropriation proceeding, it cannot now be doubted.Although 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 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 up to 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 showing, the Court will presume that the Lahug Airport will continue to be in operation (emphasis supplied). While in the trial in Civil Case No. R-1881 [we] could have simply acknowledged the presence of public purpose for the exercise of eminent domain regardless of the survival of Lahug Airport, the trial court in its Decision chose not to do so but instead prefixed its finding of public purpose upon its understanding that Lahug Airport will continue to be in operation. Verily, these meaningful statements in the body of the Decision warrant the conclusion that the expropriated properties would remain to be so until it was confirmed that Lahug Airport was no longer in operation. This inference further implies two (2) things: (a) after the Lahug Airport ceased its undertaking as such and the expropriated lots were not being used for any airport expansion project, the rights vis--vis the expropriated Lots Nos. 916 and 920 as between the State and their former owners, petitioners herein, must be equitably adjusted; and (b) the foregoing unmistakable declarations in the body of the Decision should merge with and become an intrinsic part of the fallo thereof which under the premises is clearly inadequate since the dispositive portion is not in accord with the findings as contained in the body thereof. [10]

Indeed, the Decision in Civil Case No. R-1881 should be read in its entirety, wherein it is apparent that the acquisition by the Republic of the expropriated lots was subject to the condition that the Lahug Airport would continue its operation.The condition not having materialized because the airport had been abandoned, the former owner should then be allowed to reacquire the expropriated property.[11] cralaw On this note, we take this opportunity to revisit our ruling in Fery , which involved an expropriation suit commenced upon parcels of land to be used as a site for a public market.Instead of putting up a public market, respondent Cabanatuan constructed residential houses for lease on the area.Claiming that the municipality lost its right to the property taken since it did not pursue its public purpose, petitioner Juan Fery, the former owner of the lots expropriated, sought to recover his properties.However, as he had admitted that, in 1915, respondent Cabanatuan acquired a fee simple title to the lands in question, judgment was rendered in favor of the municipality, following American jurisprudence, particularly City of Fort Wayne v. Lake Shore & M.S. RY. Co., [12] cralaw McConihay v. Theodore Wright, [13] cralaw and Reichling v. Covington Lumber Co., [14] cralaw all uniformly holding that the transfer to a third party of the expropriated real property, which necessarily resulted in the abandonment of the particular public purpose for which the property was taken, is not a ground for the recovery of the same by its previous owner, the title of the expropriating agency being one of fee simple. Obviously, Fery was not decided pursuant to our now sacredly held constitutional right that private property shall not be taken for public use without just compensation.[15] cralaw It is well settled that the taking of private property by the Governments power of eminent domain is subject to two mandatory requirements: (1) that it is for a particular public purpose; and (2) that just compensation be paid to the property owner. These requirements partake of the nature of implied conditions that should be complied with to enable the condemnor to keep the property expropriated.[16] cralaw More particularly, with respect to the element of public use, the expropriator should commit to use the property pursuant to the purpose stated in the petition for expropriation filed, failing which, it should file another petition for the new purpose.If not, it is then incumbent upon the expropriator to return the said property to its private owner, if the latterdesires to reacquire the same.Otherwise, the judgment of expropriation suffers an intrinsic flaw, as it would lack one indispensable element for the proper exercise of the power of eminent domain, namely, the particular public purpose for which the property will be devoted.Accordingly, the private property owner would be denied due process of law, and the judgment would violate the property owners right to justice, fairness, and equity. In light of these premises, we now expressly hold that the taking of private property, consequent to the Governments exercise of its power of eminent domain, is always subject to the condition that the property be devoted to the specific public purpose for which it was taken.Corollarily, if this particular purpose or intent is not initiated or not at all pursued, and is peremptorily abandoned, then the former owners, if they so desire, may seek the reversion of the property, subject to the return of the amount of

just compensation received.In such a case, the exercise of the power of eminent domain has become improper for lack of the required factual justification.[17] cralaw Even without the foregoing declaration, in the instant case, on the question of whether respondents were able to establish the existence of an oral compromise agreement that entitled them to repurchase Lot No. 88 should the operations of the Lahug Airport be abandoned, we rule in the affirmative. It bears stressing that both the RTC, Branch 57, Cebu and the CA have passed upon this factual issue and have declared, in no uncertain terms, that a compromise agreement was, in fact, entered into between the Government and respondents, with the former undertaking to resell Lot No. 88 to the latter if the improvement and expansion of the Lahug Airport would not be pursued.In affirming the factual finding of the RTC to this effect, the CA declared Lozadas testimony is cogent.An octogenarian widower-retiree and a resident of Moon Park, >California since 1974, he testified that government representatives verbally promised him and his late wife while the expropriation proceedings were on-going that the government shall return the property if the purpose for the expropriation no longer exists. This promise was made at the premises of the airport.As far as he could remember, there were no expropriation proceedings against his property in 1952 because the first notice of expropriation he received was in 1962.Based on the promise, he did not hire a lawyer.Lozada was firm that he was promised that the lot would be reverted to him once the public use of the lot ceases.He made it clear that the verbal promise was made in Lahug with other lot owners before the 1961 decision was handed down, though he could not name the government representatives who made the promise.It was just a verbal promise; nevertheless, it is binding.The fact that he could not supply the necessary details for the establishment of his assertions during cross-examination, but that When it will not be used as intended, it will be returned back, we just believed in the government, does not dismantle the credibility and truthfulness of his allegation.This Court notes that he was 89 years old when he testified in November 1997 for an incident which happened decades ago.Still, he is a competent witness capable of perceiving and making his perception known.The minor lapses are immaterial.The decision of the competency of a witness rests primarily with the trial judge and must not be disturbed on appeal unless it is clear that it was erroneous.The objection to his competency must be made before he has given any testimony or as soon as the incompetency becomes apparent.Though Lozada is not part of the compromise agreement, [18] he nevertheless adduced sufficient evidence to support his claim. [19] As correctly found by the CA, unlike in Mactan Cebu International Airport Authority v. Court of Appeals, [20] cralaw cited by petitioners, where respondent therein offered testimonies which were hearsay in nature, the testimony of Lozada was based on personal knowledge as the assurance from the government was personally made to him. His testimony on cross-examination destroyed neither his credibility as a witness nor the truthfulness of his words. Verily, factual findings of the trial court, especially when affirmed by the CA, are binding and conclusive on this Court and may not be reviewed. A petition for certiorari under Rule 45 of the Rules of Court

contemplates only questions of law and not of fact.[21] cralaw Not one of the exceptions to this rule is present in this case to warrant a reversal of such findings. As regards the position of petitioners that respondents testimonial evidence violates the Statute of Frauds, suffice it to state that the Statute of Frauds operates only with respect to executory contracts, and does not apply to contracts which have been completely or partially performed, the rationale thereof being as follows: In executory contracts there is a wide field for fraud because unless they be in writing there is no palpable evidence of the intention of the contracting parties.The statute has precisely been enacted to prevent fraud.However, if a contract has been totally or partially performed, the exclusion of parol evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already delivered by him from the transaction in litigation, and, at the same time, evade the obligations, responsibilities or liabilities assumed or contracted by him thereby. [22] In this case, the Statute of Frauds, invoked by petitioners to bar the claim of respondents for the reacquisition of Lot No. 88, cannot apply, the oral compromise settlement having been partially performed.By reason of such assurance made in their favor, respondents relied on the same by not pursuing their appeal before the CA.Moreover, contrary to the claim of petitioners, the fact of Lozadas eventual conformity to the appraisal of Lot No. 88 and his seeking the correction of a clerical error in the judgment as to the true area of Lot No. 88 do not conclusively establish that respondents absolutely parted with their property.To our mind, these acts were simply meant to cooperate with the government, particularly because of the oral promise made to them. The right of respondents to repurchase Lot No. 88 may be enforced based on a constructive trust constituted on the property held by the government in favor of the former.On this note, our ruling in Heirs of Timoteo Moreno is instructive, viz. : Mactan-Cebu International Airport Authority is correct in stating that one would not find an express statement in the Decision in Civil Case No. R-1881 to the effect that the [condemned] lot would return to [the landowner] or that [the landowner] 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. This omission notwithstanding, and while the inclusion of this pronouncement in the judgment of condemnation would have been ideal, such precision is not absolutely necessary nor is it fatal to the cause of petitioners herein.No doubt, the return or repurchase of the condemned properties of petitioners could be readily justified as the manifest legal effect or consequence of the trial courts underlying presumption that Lahug Airport will continue to be in operation when it granted the complaint for eminent domain and the airport discontinued its activities. The predicament of petitioners involves a constructive trust, one that is akin to the implied trust referred to in Art. 1454 of the Civil Code, If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is

established.If the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the property to him. In the case at bar, petitioners conveyed Lots No. 916 and 920 to the government with the latter obliging itself to use the realties for the expansion of Lahug Airport; failing to keep its bargain, the government can be compelled by petitioners to reconvey the parcels of land to them, otherwise, petitioners would be denied the use of their properties upon a state of affairs that was not conceived nor contemplated when the expropriation was authorized. Although the symmetry between the instant case and the situation contemplated by Art. 1454 is not perfect, the provision is undoubtedly applicable.For, as explained by an expert on the law of trusts: The only problem of great importance in the field of constructive trust is to decide whether in the numerous and varying fact situations presented to the courts there is a wrongful holding of property and hence a threatened unjust enrichment of the defendant. Constructive trusts are fictions of equity which are bound by no unyielding formula when they are used by courts as devices to remedy any situation in which the holder of legal title may not in good conscience retain the beneficial interest. In constructive trusts, the arrangement is temporary and passive in which the trustees sole duty is to transfer the title and possession over the property to the plaintiff-beneficiary.Of course, the wronged party seeking the aid of a court of equity in establishing a constructive trust must himself do equity. Accordingly, the court will exercise its discretion in deciding what acts are required of the plaintiffbeneficiary as conditions precedent to obtaining such decree and has the obligation to reimburse the trustee the consideration received from the latter just as the plaintiff-beneficiary would if he proceeded on the theory of rescission.In the good judgment of the court, the trustee may also be paid the necessary expenses he may have incurred in sustaining the property, his fixed costs for improvements thereon, and the monetary value of his services in managing the property to the extent that plaintiffbeneficiary will secure a benefit from his acts. The rights and obligations between the constructive trustee and the beneficiary, in this case, respondent MCIAA and petitioners over Lots Nos. 916 and 920, are echoed in Art. 1190 of the Civil Code, When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have received x x x In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return x x x. [23] On the matter of the repurchase price, while petitioners are obliged to reconvey Lot No. 88 to respondents, the latter must return to the former what they received as just compensation for the expropriation of the property, plus legal interest to be computed from default, which in this case runs from the time petitioners comply with their obligation to respondents. Respondents must likewise pay petitioners the necessary expenses they may have incurred in maintaining Lot No. 88, as well as the monetary value of their services in managing it to the extent that respondents were benefited thereby.

Following Article 1187[24] cralaw of the Civil Code, petitioners may keep whatever income or fruits they may have obtained from Lot No. 88, and respondents need not account for the interests that the amounts they received as just compensation may have earned in the meantime. In accordance with Article 1190[25] cralaw of the Civil Code vis--vis Article 1189, which provides that (i)f a thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor x x x, respondents, as creditors, do not have to pay, as part of the process of restitution, the appreciation in value of Lot No. 88, which is a natural consequence of nature and time.[26] cralaw WHEREFORE, the petition is DENIED.The February 28, 2006 Decision of the Court of Appeals, affirming the October 22, 1999 Decision of the Regional Trial Court, Branch 87, Cebu City, and its February 7, 2007 Resolution are AFFIRMEDwith MODIFICATIONas follows: 1.Respondents are ORDERED to return to petitioners the just compensation they received for the expropriation of Lot No. 88, plus legal interest, in the case of default, to be computed from the time petitioners comply with their obligation to reconvey Lot No. 88 to them; 2.Respondents are ORDERED to pay petitioners the necessary expenses the latter incurred in maintaining Lot No. 88, plus the monetary value of their services to the extent that respondents were benefited thereby; 3.Petitioners are ENTITLED to keep whatever fruits and income they may have obtained from Lot No. 88; and 4.Respondents are also ENTITLED to keep whatever interests the amounts they received as just compensation may have earned in the meantime, as well as the appreciation in value of Lot No. 88, which is a natural consequence of nature and time; In light of the foregoing modifications, the case is REMANDED to the Regional Trial Court, Branch 57, Cebu City, only for the purpose of receiving evidence on the amounts that respondents will have to pay petitioners in accordance with this Courts decision.No costs. SO ORDERED.

G.R. No. 168770

February 9, 2011

ANUNCIACION VDA. DE OUANO, MARIO P. OUANO, LETICIA OUANO ARNAIZ, and CIELO OUANO MARTINEZ, Petitioners, vs. THE REPUBLIC OF THE PHILIPPINES, THE MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY, and THE REGISTER OF DEEDS FOR THE CITY OF CEBU, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 168812 MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA), Petitioner, vs. RICARDO L. INOCIAN, in his personal capacity and as Attorney-in-Fact of OLYMPIA E. ESTEVES, EMILIA E. BACALLA, RESTITUTA E. MONTANA, and RAUL L. INOCIAN; and ALETHA SUICO MAGAT, in her personal capacity and as Attorney-in-Fact of PHILIP M. SUICO, DORIS S. DELA CRUZ, JAMES M. SUICO, EDWARD M. SUICO, ROSELYN SUICO-LAWSIN, REX M. SUICO, KHARLA SUICO-GUTIERREZ, ALBERT CHIONGBIAN, and JOHNNY CHAN, Respondents. DECISION VELASCO, JR., J.: At the center of these two (2) Petitions for Review on Certiorari under Rule 45 is the issue of the right of the former owners of lots acquired for the expansion of the Lahug Airport in Cebu City to repurchase or secure reconveyance of their respective properties. In the first petition, docketed as G.R. No. 168770, petitioners Anunciacion vda. de Ouano, Mario Ouano, Leticia Ouano Arnaiz and Cielo Ouano Martinez (the Ouanos) seek to nullify the Decision1 dated September 3, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 78027, affirming the Order dated December 9, 2002 of the Regional Trial Court (RTC), Branch 57 in Cebu City, in Civil Case No. CEB-20743, a suit to compel the Republic of the Philippines and/or the Mactan-Cebu International Airport Authority (MCIAA) to reconvey to the Ouanos a parcel of land. The second petition, docketed as G.R. No. 168812, has the MCIAA seeking principally to annul and set aside the Decision2 and Resolution3 dated January 14, 2005 and June 29, 2005, respectively, of the CA in CA-G.R. CV No. 64356, sustaining the RTC, Branch 13 in Cebu City in its Decision of October 7, 1988 in Civil Case No. CEB-18370. Per its October 19, 2005 Resolution, the Court ordered the consolidation of both cases.

Except for the names of the parties and the specific lot designation involved, the relevant factual antecedents which gave rise to these consolidated petitions are, for the most part, as set forth in the Courts Decision4 of October 15, 2003, as reiterated in a Resolution5 dated August 9, 2005, in G.R. No. 156273 entitled Heirs of Timoteo Moreno and Maria Rotea v. Mactan-Cebu International Airport Authority (Heirs of Moreno), and in other earlier related cases.6 In 1949, the National Airport Corporation (NAC), MCIAAs predecessor agency, pursued a program to expand the Lahug Airport in Cebu City. Through its team of negotiators, NAC met and negotiated with the owners of the properties situated around the airport, which included Lot Nos. 744-A, 745-A, 746, 747, 761-A, 762-A, 763-A, 942, and 947 of the Banilad Estate. As the landowners would later claim, the government negotiating team, as a sweetener, assured them that they could repurchase their respective lands should the Lahug Airport expansion project do not push through or once the Lahug Airport closes or its operations transferred to Mactan-Cebu Airport. Some of the landowners accepted the assurance and executed deeds of sale with a right of repurchase. Others, however, including the owners of the aforementioned lots, refused to sell because the purchase price offered was viewed as way below market, forcing the hand of the Republic, represented by the then Civil Aeronautics Administration (CAA), as successor agency of the NAC, to file a complaint for the expropriation of Lot Nos. 744-A, 745-A, 746, 747, 761-A, 762-A, 763-A, 942, and 947, among others, docketed as Civil Case No. R-1881 entitled Republic v. Damian Ouano, et al. On December 29, 1961, the then Court of First Instance (CFI) of Cebu rendered judgment for the Republic, disposing, in part, as follows: IN VIEW OF THE FOREGOING, judgment is hereby rendered: 1. Declaring the expropriation of Lots Nos. 75, 76, 76, 89, 90, 91, 92, 105, 106, 107, 108, 104, 921-A, 88, 93, 913-B, 72, 77, 916, 777-A, 918, 919, 920, 764-A, 988, 744-A, 745-A, 746, 747, 762-A, 763-A, 951, 942, 720-A, x x x and 947, included in the Lahug Airport, Cebu City, justified in and in lawful exercise of the right of eminent domain. xxxx 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.7 In view of the adverted buy-back assurance made by the government, the owners of the lots no longer appealed the decision of the trial court.8 Following the finality of the judgment of condemnation, certificates of title for the covered parcels of land were issued in the name of the Republic which, pursuant to Republic Act No. 6958,9 were subsequently transferred to MCIAA.

At the end of 1991, or soon after the transfer of the aforesaid lots to MCIAA, Lahug Airport completely ceased operations, Mactan Airport having opened to accommodate incoming and outgoing commercial flights. On the ground, the expropriated lots were never utilized for the purpose they were taken as no expansion of Lahug Airport was undertaken. This development prompted the former lot owners to formally demand from the government that they be allowed to exercise their promised right to repurchase. The demands went unheeded. Civil suits followed. G.R. No. 168812 (MCIAA Petition) On February 8, 1996, Ricardo L. Inocian and four others (all children of Isabel Limbaga who originally owned six [6] of the lots expropriated); and Aletha Suico Magat and seven others, successors-in-interest of Santiago Suico, the original owner of two (2) of the condemned lots (collectively, the Inocians), filed before the RTC in Cebu City a complaint for reconveyance of real properties and damages against MCIAA. The complaint, docketed as Civil Case No. CEB-18370, was eventually raffled to Branch 13 of the court. On September 29, 1997, one Albert Chiongbian (Chiongbian), alleging to be the owner of Lot Nos. 761-A and 762-A but which the Inocians were now claiming, moved and was later allowed to intervene. During the pre-trial, MCIAA admitted the following facts: 1. That the properties, which are the subject matter of Civil Case No. CEB-18370, are also the properties involved in Civil Case R-1881; 2. That the purpose of the expropriation was for the expansion of the old Lahug Airport; that the Lahug Airport was not expanded; 3. That the old Lahug Airport was closed sometime in June 1992; 4. That the price paid to the lot owners in the expropriation case is found in the decision of the court; and 5. That some properties were reconveyed by the MCIAA because the previous owners were able to secure express waivers or riders wherein the government agreed to return the properties should the expansion of the Lahug Airport not materialize. During trial, the Inocians adduced evidence which included the testimony of Ricardo Inocian (Inocian) and Asterio Uy (Uy). Uy, an employee of the CAA, testified that he was a member of the team which negotiated for the acquisition of certain lots in Lahug for the proposed expansion of the Lahug Airport. He recalled that he acted as the interpreter/spokesman of the team since he could speak the Cebuano dialect. He stated that the other members of the team of negotiators were Atty. Pedro Ocampo, Atty. Lansang, and Atty. Saligumba. He recounted that, in the course of the negotiation, their team assured

the landowners that their landholdings would be reconveyed to them in the event the Lahug Airport would be abandoned or if its operation were transferred to the Mactan Airport. Some landowners opted to sell, while others were of a different bent owing to the inadequacy of the offered price. Inocian testified that he and his mother, Isabel Lambaga, attended a meeting called by the NAC team of negotiators sometime in 1947 or 1949 where he and the other landowners were given the assurance that they could repurchase their lands at the same price in the event the Lahug Airport ceases to operate. He further testified that they rejected the NACs offer. However, he said that they no longer appealed the decree of expropriation due to the repurchase assurance adverted to. The MCIAA presented Michael Bacarizas (Bacarizas), who started working for MCIAA as legal assistant in 1996. He testified that, in the course of doing research work on the lots subject of Civil Case No. CEB18370, he discovered that the same lots were covered by the decision in Civil Case No. R-1881. He also found out that the said decision did not expressly contain any condition on the matter of repurchase. Ruling of the RTC On October 7, 1998, the RTC rendered a Decision in Civil Case No. CEB-18370, the dispositive portion of which reads as follows: WHEREFORE, in view of the foregoing, judgment is hereby rendered directing defendant Mactan Cebu International Airport Authority (MCIAA) to reconvey (free from liens and encumbrances) to plaintiffs Ricardo Inocian, Olimpia E. Esteves, Emilia E. Bacalla, Restituta E. Montana and Raul Inocian Lots No. 744-A, 745-A, 746, 762-A, 747, 761-A and to plaintiffs Aletha Suico Magat, Philip M. Suico, Doris S. dela Cruz, James M. Suico, Edward M. Suico, Roselyn S. Lawsin, Rex M. Suico and Kharla Suico-Gutierrez Lots No. 942 and 947, after plaintiffs shall have paid MCIAA the sums indicated in the decision in Civil Case No. R-1881. Defendant MCIAA is likewise directed to pay the aforementioned plaintiffs the sum or P50,000.00 as and for attorneys fees and P10,000.00 for litigation expenses. Albert Chiongbians intervention should be, as it is hereby DENIED for utter lack of factual basis. With costs against defendant MCIAA.10 Therefrom, MCIAA went to the CA on appeal, docketed as CA-G.R. CV No. 64356. Ruling of the CA On January 14, 2005, the CA rendered judgment for the Inocians, declaring them entitled to the reconveyance of the questioned lots as the successors-in-interest of the late Isabel Limbaga and Santiago Suico, as the case may be, who were the former registered owners of the said lots. The decretal portion of the CAs Decision reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DISMISSING the appeal filed in this case and AFFFIRMING the decision rendered by the court a quo on October 7, 1998 in Civil Case No. CEB-18370. SO ORDERED. The CA, citing and reproducing excerpts from Heirs of Moreno,11 virtually held that the decision in Civil Case No. R-1881 was conditional, stating "that the expropriation of [plaintiff-appellees+ lots for the proposed expansion of the Lahug Airport was ordered by the CFI of Cebu under the impression that Lahug Airport would continue in operation."12 The condition, as may be deduced from the CFIs decision, was that should MCIAA, or its precursor agency, discontinue altogether with the operation of Lahug Airport, then the owners of the lots expropriated may, if so minded, demand of MCIAA to make good its verbal assurance to allow the repurchase of the properties. To the CA, this assurance, a demandable agreement of repurchase by itself, has been adequately established. On September 21, 2005, the MCIAA filed with Us a petition for review of the CAs Decision, docketed as G.R. No. 168812. G.R. No. 168770 (Ouano Petition) Soon after the MCIAA jettisoned the Lahug Airport expansion project, informal settlers entered and occupied Lot No. 763-A which, before its expropriation, belonged to the Ouanos. The Ouanos then formally asked to be allowed to exercise their right to repurchase the aforementioned lot, but the MCIAA ignored the demand. On August 18, 1997, the Ouanos instituted a complaint before the Cebu City RTC against the Republic and the MCIAA for reconveyance, docketed as Civil Case No. CEB-20743. Answering, the Republic and MCIAA averred that the Ouanos no longer have enforceable rights whatsoever over the condemned Lot No. 763-A, the decision in Civil Case No. R-1881 not having found any reversionary condition. Ruling of the RTC By a Decision dated November 28, 2000, the RTC, Branch 57 in Cebu City ruled in favor of the Ouanos, disposing as follows: WHEREFORE, in the light of the foregoing, the Court hereby renders judgment in favor of the plaintiffs, Anunciacion Vda. De Ouano, Mario P. Ouano, Leticia Ouano Arnaiz and Cielo Ouano Martinez and against the Republic of the Philippines and Mactan Cebu International Airport Authority (MCIAA) to restore to plaintiffs, the possession and ownership of their land, Lot No. 763-A upon payment of the expropriation price to defendants; and

2. Ordering the Register of Deeds to effect the transfer of the Certificate of Title from defendant Republic of the Philippines on Lot 763-A, canceling TCT No. 52004 in the name of defendant Republic of the Philippines and to issue a new title on the same lot in the names of Anunciacion Vda. De Ouano, Mario P. Ouano, Leticia Ouano Arnaiz and Cielo Ouano Martinez. No pronouncement as to costs.13 Acting on the motion of the Republic and MCIAA for reconsideration, however, the RTC, Branch 57 in Cebu City, presided this time by Judge Enriqueta L. Belarmino, issued, on December 9, 2002, an Order14 that reversed its earlier decision of November 28, 2000 and dismissed the Ouanos complaint. Ruling of the CA In time, the Ouanos interposed an appeal to the CA, docketed as CA-G.R. CV No. 78027. Eventually, the appellate court rendered a Decision15 dated September 3, 2004, denying the appeal, thus: WHEREFORE, premises considered, the Order dated December 9, 2002, of the Regional Trial Court, 7th Judicial Region, Branch 57, Cebu City, in Civil Case No. CEB-20743, is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. Explaining its case disposition, the CA stated that the decision in Civil Case No. R-1881 did not state any condition that Lot No. 763-A of the Ouanosand all covered lots for that matterwould be returned to them or that they could repurchase the same property if it were to be used for purposes other than for the Lahug Airport. The appellate court also went on to declare the inapplicability of the Courts pronouncement in MCIAA v. Court of Appeals, RTC, Branch 9, Cebu City, Melba Limbago, et al.,16 to support the Ouanos cause, since the affected landowners in that case, unlike the Ouanos, parted with their property not through expropriation but via a sale and purchase transaction. The Ouanos filed a motion for reconsideration of the CAs Decision, but was denied per the CAs May 26, 2005 Resolution.17 Hence, they filed this petition in G.R. No. 168770. The Issues G.R. No. 168812 GROUNDS FOR ALLOWANCE OF THE PETITION l. THE ASSAILED ISSUANCES ILLEGALLY STRIPPED THE REPUBLIC OF ITS ABSOLUTE AND UNCONDITIONAL TITLE TO THE SUBJECT EXPROPRIATED PROPERTIES.

ll. THE IMPUNGED DISPOSITIONS INVALIDLY OVERTURNED THIS HONORABLE COURTS FINAL RULINGS IN FERY V. MUNICIPALITY OF CABANATUAN, MCIAA V. COURT OF APPEALS AND REYES V. NATIONAL HOUSING AUTHORITY. lll. THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THIS HONORABLE COURTS RULING IN MORENO, ALBEIT IT HAS NOT YET ATTAINED FINALITY.18 G.R. No. 168770 Questions of law presented in this Petition Whether or not the testimonial evidence of the petitioners proving the promises, assurances and representations by the airport officials and lawyers are inadmissbale under the Statute of Frauds. Whether or not under the ruling of this Honorable Court in the heirs of Moreno Case, and pursuant to the principles enunciated therein, petitioners herein are entitiled to recover their litigated property. Reasons for Allowances of this Petition Respondents did not object during trial to the admissibility of petitioners testimonial evidence under the Statute of Frauds and have thus waived such objection and are now barred from raising the same. In any event, the Statute of Frauds is not applicable herein. Consequently, petitioners evidence is admissible and should be duly given weight and credence, as initially held by the trial court in its original Decision.19 While their respective actions against MCIAA below ended differently, the Ouanos and the Inocians proffered arguments presented before this Court run along parallel lines, both asserting entitlement to recover the litigated property on the strength of the Courts ruling in Heirs of Moreno. MCIAA has, however, formulated in its Consolidated Memorandum the key interrelated issues in these consolidated cases, as follows: I WHETHER ABANDONMENT OF THE PUBLIC USE FOR WHICH THE SUBJECT PROPERTIES WERE EXPROPRIATED ENTITLES PETITIONERS OUANOS, ET AL. AND RESPONDENTS INOCIAN, ET AL. TO REACQUIRE THEM. II WHETHER PETITIONERS OUANOS, ET AL. AND RESPONDENTS INOCIAN, ET AL. ARE ENTITLED TO RECONVEYANCE OF THE SUBJECT PROPERTIES SIMPLY ON THE BASIS OF AN ALLEGED VERBAL PROMISE

OR ASSURANCE OF SOME NAC OFFICIALS THAT THE SUBJECT PROPERTIES WILL BE RETUNRED IF THE AIRPORT PROJECT WOULD BE ABANDONED. The Courts Ruling The Republic and MCIAAs petition in G.R. No. 168812 is bereft of merit, while the Ouano petition in G.R. No. 168770 is meritorious. At the outset, three (3) fairly established factual premises ought to be emphasized: First, the MCIAA and/or its predecessor agency had not actually used the lots subject of the final decree of expropriation in Civil Case No. R-1881 for the purpose they were originally taken by the government, i.e., for the expansion and development of Lahug Airport. Second, the Lahug Airport had been closed and abandoned. A significant portion of it had, in fact, been purchased by a private corporation for development as a commercial complex.20 Third, it has been preponderantly established by evidence that the NAC, through its team of negotiators, had given assurance to the affected landowners that they would be entitled to repurchase their respective lots in the event they are no longer used for airport purposes.21 "No less than Asterio Uy," the Court noted in Heirs of Moreno, "one of the members of the CAA Mactan Legal Team, which interceded for the acquisition of the lots for the Lahug Airports expansion, affirmed that persistent assurances were given to the landowners to the effect that as soon as the Lahug Airport is abandoned or transferred to Mactan, the lot owners would be able to reacquire their properties."22 In Civil Case No. CEB-20743, Exhibit "G," the transcript of the deposition23 of Anunciacion vda. de Ouano covering the assurance made had been formally offered in evidence and duly considered in the initial decision of the RTC Cebu City. In Civil Case No. CEB-18370, the trial court, on the basis of testimonial evidence, and later the CA, recognized the reversionary rights of the suing former lot owners or their successors in interest24 and resolved the case accordingly. In point with respect to the representation and promise of the government to return the lots taken should the planned airport expansion do not materialize is what the Court said in Heirs of Moreno, thus: This is a difficult case calling for a difficult but just solution. To begin with there exists an undeniable historical narrative that the predecessors of respondent MCIAA had suggested to the landowners of the properties covered by the Lahug Airport expansion scheme that they could repurchase their properties at the termination of the airports venue. Some acted on this assurance and sold their properties; other landowners held out and waited for the exercise of eminent domain to take its course until finally coming to terms with respondents predecessors that they would not appeal nor block further judgment of condemnation if the right of repurchase was extended to them. A handful failed to prove that they acted on such assurance when they parted with ownership of their land.25 (Emphasis supplied; citations omitted.)

For perspective, Heirs of Morenolater followed by MCIAA v. Tudtud (Tudtud)26 and the consolidated cases at baris cast under the same factual setting and centered on the expropriation of privatelyowned lots for the public purpose of expanding the Lahug Airport and the alleged promise of reconveyance given by the negotiating NAC officials to the private lot owners. All the lots being claimed by the former owners or successors-in-interest of the former owners in the Heirs of Moreno, Tudtud, and the present cases were similarly adjudged condemned in favor of the Republic in Civil Case No. R1881. All the claimants sought was or is to have the condemned lots reconveyed to them upon the payment of the condemnation price since the public purpose of the expropriation was never met. Indeed, the expropriated lots were never used and were, in fact, abandoned by the expropriating government agencies. In all then, the issues and supporting arguments presented by both sets of petitioners in these consolidated cases have already previously been passed upon, discussed at length, and practically peremptorily resolved in Heirs of Moreno and the November 2008 Tudtud ruling. The Ouanos, as petitioners in G.R. No. 168770, and the Inocians, as respondents in G.R. No. 168812, are similarly situated as the heirs of Moreno in Heirs of Moreno and Benjamin Tudtud in Tudtud. Be that as it may, there is no reason why the ratio decidendi in Heirs of Moreno and Tudtud should not be made to apply to petitioners Ouanos and respondents Inocians such that they shall be entitled to recover their or their predecessors respective properties under the same manner and arrangement as the heirs of Moreno and Tudtud. Stare decisis et non quieta movere (to adhere to precedents, and not to unsettle things which are established).27 Just like in Tudtud and earlier in Heirs of Moreno, MCIAA would foist the theory that the judgment of condemnation in Civil Case No. R-1881 was without qualification and was unconditional. It would, in fact, draw attention to the fallo of the expropriation courts decision to prove that there is nothing in the decision indicating that the government gave assurance or undertook to reconvey the covered lots in case the Lahug airport expansion project is aborted. Elaborating on this angle, MCIAA argues that the claim of the Ouanos and the Inocians regarding the alleged verbal assurance of the NAC negotiating team that they can reacquire their landholdings is barred by the Statute of Frauds.28 Under the rule on the Statute of Frauds, as expressed in Article 1403 of the Civil Code, a contract for the sale or acquisition of real property shall be unenforceable unless the same or some note of the contract be in writing and subscribed by the party charged. Subject to defined exceptions, evidence of the agreement cannot be received without the writing, or secondary evidence of its contents. MCIAAs invocation of the Statute of Frauds is misplaced primarily because the statute applies only to executory and not to completed, executed, or partially consummated contracts.29 Carbonnel v. Poncio, et al., quoting Chief Justice Moran, explains the rationale behind this rule, thusly: x x x "The reason is simple. In executory contracts there is a wide field for fraud because unless they may be in writing there is no palpable evidence of the intention of the contracting parties. The statute has been precisely been enacted to prevent fraud." x x x However, if a contract has been totally or partially

performed, the exclusion of parol evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already derived by him from the transaction in litigation, and at the same time, evade the obligations, responsibilities or liabilities assumed or contracted by him thereby.30 (Emphasis in the original.) Analyzing the situation of the cases at bar, there can be no serious objection to the proposition that the agreement package between the government and the private lot owners was already partially performed by the government through the acquisition of the lots for the expansion of the Lahug airport. The parties, however, failed to accomplish the more important condition in the CFI decision decreeing the expropriation of the lots litigated upon: the expansion of the Lahug Airport. The projectthe public purpose behind the forced property takingwas, in fact, never pursued and, as a consequence, the lots expropriated were abandoned. Be that as it may, the two groups of landowners can, in an action to compel MCIAA to make good its oral undertaking to allow repurchase, adduce parol evidence to prove the transaction. At any rate, the objection on the admissibility of evidence on the basis of the Statute of Frauds may be waived if not timely raised. Records tend to support the conclusion that MCIAA did not, as the Ouanos and the Inocians posit, object to the introduction of parol evidence to prove its commitment to allow the former landowners to repurchase their respective properties upon the occurrence of certain events. In a bid to deny the lot owners the right to repurchase, MCIAA, citing cases,31 points to the dispositive part of the decision in Civil Case R-1881 which, as couched, granted the Republic absolute title to the parcels of land declared expropriated. The MCIAA is correct about the unconditional tone of the dispositive portion of the decision, but that actuality would not carry the day for the agency. Addressing the matter of the otherwise absolute tenor of the CFIs disposition in Civil Case No. R-1881, the Court, in Heirs of Moreno, after taking stock of the ensuing portion of the body of the CFIs decision, said: As for the public purpose of the expropriation proceeding, it cannot now be doubted. Although 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 of both civilian and military. From it aircrafts fly to Mindanao and Visayas and pass thru it on their 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 up to the other departments of the Government to determine said matters. The Court cannot substitute its judgments for those of the said departments or agencies. In the absence of such showing, the court will presume that the Lahug Airport will continue to be in operation.32 (Emphasis supplied.) We went on to state as follows: While the trial court in Civil Case No. R-1881 could have simply acknowledged the presence of public purpose for the exercise of eminent domain regardless of the survival of the Lahug Airport, the trial court in its Decision chose not to do so but instead prefixed its finding of public purpose upon its

understanding that Lahug Airport will continue to be in operation. Verily, these meaningful statements in the body of the Decision warrant the conclusion that the expropriated properties would remain to be so until it was confirmed that Lahug Airport was no longer in operation. This inference further implies two (2) things: (a) after the Lahug Airport ceased its undertaking as such and the expropriated lots were not being used for any airport expansion project, the rights vis--vis the expropriated lots x x x as between the State and their former owners, petitioners herein, must be equitably adjusted; and (b) the foregoing unmistakable declarations in the body of the Decision should merge with and become an intrinsic part of the fallo thereof which under the premises is clearly inadequate since the dispositive portion is not in accord with the findings as contained in the body thereof.33 Not to be overlooked of course is what the Court said in its Resolution disposing of MCIAAs motion to reconsider the original ruling in Heirs of Moreno. In that resolution, We stated that the fallo of the decision in Civil Case R-1881 should be viewed and understood in connection with the entire text, which contemplated a return of the property taken if the airport expansion project were abandoned. For ease of reference, following is what the Court wrote: Moreover, we do not subscribe to the *MCIAAs+ contention that since the possibility of the Lahug Airports closure was actually considered by the trial court, a stipulation on reversion or repurchase was so material that it should not have been discounted by the court a quo in its decision in Civil Case No. R1881, if, in fact, there was one. We find it proper to cite, once more, this Courts ruling that the fallo of the decision in Civil Case No. R-1881 must be read in reference to the other portions of the decision in which it forms a part. A reading of the Courts judgment must not be confined to the dispositive portion alone; rather it should be meaningfully construed in unanimity with the ratio decidendi thereof to grasp the true intent and meaning of a decision.34 The Court has, to be sure, taken stock of Fery v. Municipality of Cabanatuan,35 a case MCIAA cites at every possible turn, where the Court made these observations: 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. x x x 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 x x x and in that case the non-user does not have the effect of defeating the title acquired by the expropriation proceedings x x x. Fery notwithstanding, MCIAA cannot really rightfully say that it has absolute title to the lots decreed expropriated in Civil Case No. R-1881. The correct lesson of Fery is captured by what the Court said in that case, thus: "the government acquires only such rights in expropriated parcels of land as may be allowed by the character of its title over the properties." In light of our disposition in Heirs of Moreno and Tudtud, the statement immediately adverted to means that in the event the particular public use for which a parcel of land is expropriated is abandoned, the owner shall not be entitled to recover or repurchase it as a matter of right, unless such recovery or repurchase is expressed in or irresistibly

deducible from the condemnation judgment. But as has been determined below, the decision in Civil Case No. R-1881 enjoined MCIAA, as a condition of approving expropriation, to allow recovery or repurchase upon abandonment of the Lahug airport project. To borrow from our underlying decision in Heirs of Moreno, "[n]o doubt, the return or repurchase of the condemned properties of petitioners could readily be justified as the manifest legal effect of consequence of the trial courts underlying presumption that Lahug Airport will continue to be in operation when it granted the complaint for eminent domain and the airport discontinued its activities."36 Providing added support to the Ouanos and the Inocians right to repurchase is what in Heirs of Moreno was referred to as constructive trust, one that is akin to the implied trust expressed in Art. 1454 of the Civil Code,37 the purpose of which is to prevent unjust enrichment.38 In the case at bench, the Ouanos and the Inocians parted with their respective lots in favor of the MCIAA, the latter obliging itself to use the realties for the expansion of Lahug Airport; failing to keep its end of the bargain, MCIAA can be compelled by the former landowners to reconvey the parcels of land to them, otherwise, they would be denied the use of their properties upon a state of affairs that was not conceived nor contemplated when the expropriation was authorized. In effect, the government merely held the properties condemned in trust until the proposed public use or purpose for which the lots were condemned was actually consummated by the government. Since the government failed to perform the obligation that is the basis of the transfer of the property, then the lot owners Ouanos and Inocians can demand the reconveyance of their old properties after the payment of the condemnation price. Constructive trusts are fictions of equity that courts use as devices to remedy any situation in which the holder of the legal title, MCIAA in this case, may not, in good conscience, retain the beneficial interest. We add, however, as in Heirs of Moreno, that the party seeking the aid of equitythe landowners in this instance, in establishing the trustmust himself do equity in a manner as the court may deem just and reasonable. The Court, in the recent MCIAA v. Lozada, Sr., revisited and abandoned the Fery ruling that the former owner is not entitled to reversion of the property even if the public purpose were not pursued and were abandoned, thus: On this note, we take this opportunity to revisit our ruling in Fery, which involved an expropriation suit commenced upon parcels of land to be used as a site for a public market. Instead of putting up a public market, respondent Cabanatuan constructed residential houses for lease on the area. Claiming that the municipality lost its right to the property taken since it did not pursue its public purpose, petitioner Juan Fery, the former owner of the lots expropriated, sought to recover his properties. However, as he had admitted that, in 1915, respondent Cabanatuan acquired a fee simple title to the lands in question, judgment was rendered in favor of the municipality, following American jurisprudence, particularly City of Fort Wayne v. Lake Shore & M.S. RY. Co., McConihay v. Theodore Wright, and Reichling v. Covington Lumber Co., all uniformly holding that the transfer to a third party of the expropriated real property, which necessarily resulted in the abandonment of the particular public purpose for which the property

was taken, is not a ground for the recovery of the same by its previous owner, the title of the expropriating agency being one of fee simple.1avvphi1 Obviously, Fery was not decided pursuant to our now sacredly held constitutional right that private property shall not be taken for public use without just compensation. It is well settled that the taking of private property by the Governments power of eminent domain is subject to two mandatory requirements: (1) that it is for a particular public purpose; and (2) that just compensation be paid to the property owner. These requirements partake of the nature of implied conditions that should be complied with to enable the condemnor to keep the property expropriated. More particularly, with respect to the element of public use, the expropriator should commit to use the property pursuant to the purpose stated in the petition for expropriation filed, failing which, it should file another petition for the new purpose. If not, it is then incumbent upon the expropriator to return the said property to its private owner, if the latter desires to reacquire the same. Otherwise, the judgment of expropriation suffers an intrinsic flaw, as it would lack one indispensable element for the proper exercise of the power of eminent domain, namely, the particular public purpose for which the property will be devoted. Accordingly, the private property owner would be denied due process of law, and the judgment would violate the property owners right to justice, fairness, and equity. In light of these premises, we now expressly hold that the taking of private property, consequent to the Governments exercise of its power of eminent domain, is always subject to the condition that the property be devoted to the specific public purpose for which it was taken. Corollarily, if this particular purpose or intent is not initiated or not at all pursued, and is peremptorily abandoned, then the former owners, if they so desire, may seek the reversion of the property, subject to the return of the amount of just compensation received. In such a case, the exercise of the power of eminent domain has become improper for lack of the required factual justification.39 (Emphasis supplied.) Clinging to Fery, specifically the fee simple concept underpinning it, is no longer compelling, considering the ensuing inequity such application entails. Too, the Court resolved Fery not under the cover of any of the Philippine Constitutions, each decreeing that private property shall not be taken for public use without just compensation. The twin elements of just compensation and public purpose are, by themselves, direct limitations to the exercise of eminent domain, arguing, in a way, against the notion of fee simple title.1avvphi1 The fee does not vest until payment of just compensation.40 In esse, expropriation is forced private property taking, the landowner being really without a ghost of a chance to defeat the case of the expropriating agency. In other words, in expropriation, the private owner is deprived of property against his will. Withal, the mandatory requirement of due process ought to be strictly followed, such that the state must show, at the minimum, a genuine need, an exacting public purpose to take private property, the purpose to be specifically alleged or least reasonably deducible from the complaint.

Public use, as an eminent domain concept, has now acquired an expansive meaning to include any use that is of "usefulness, utility, or advantage, or what is productive of general benefit [of the public]."41 If the genuine public necessitythe very reason or condition as it wereallowing, at the first instance, the expropriation of a private land ceases or disappears, then there is no more cogent point for the governments retention of the expropriated land. The same legal situation should hold if the government devotes the property to another public use very much different from the original or deviates from the declared purpose to benefit another private person. It has been said that the direct use by the state of its power to oblige landowners to renounce their productive possession to another citizen, who will use it predominantly for that citizens own private gain, is offensive to our laws.42 A condemnor should commit to use the property pursuant to the purpose stated in the petition for expropriation, failing which it should file another petition for the new purpose. If not, then it behooves the condemnor to return the said property to its private owner, if the latter so desires. The government cannot plausibly keep the property it expropriated in any manner it pleases and, in the process, dishonor the judgment of expropriation. This is not in keeping with the idea of fair play, The notion, therefore, that the government, via expropriation proceedings, acquires unrestricted ownership over or a fee simple title to the covered land, is no longer tenable. We suggested as much in Heirs of Moreno and in Tudtud and more recently in Lozada, Sr. Expropriated lands should be differentiated from a piece of land, ownership of which was absolutely transferred by way of an unconditional purchase and sale contract freely entered by two parties, one without obligation to buy and the other without the duty to sell. In that case, the fee simple concept really comes into play. There is really no occasion to apply the "fee simple concept" if the transfer is conditional. The taking of a private land in expropriation proceedings is always conditioned on its continued devotion to its public purpose. As a necessary corollary, once the purpose is terminated or peremptorily abandoned, then the former owner, if he so desires, may seek its reversion, subject of course to the return, at the very least, of the just compensation received. To be compelled to renounce dominion over a piece of land is, in itself, an already bitter pill to swallow for the owner. But to be asked to sacrifice for the common good and yield ownership to the government which reneges on its assurance that the private property shall be for a public purpose may be too much. But it would be worse if the power of eminent domain were deliberately used as a subterfuge to benefit another with influence and power in the political process, including development firms. The mischief thus depicted is not at all far-fetched with the continued application of Fery. Even as the Court deliberates on these consolidated cases, there is an uncontroverted allegation that the MCIAA is poised to sell, if it has not yet sold, the areas in question to Cebu Property Ventures, Inc. This provides an added dimension to abandon Fery. Given the foregoing disquisitions, equity and justice demand the reconveyance by MCIAA of the litigated lands in question to the Ouanos and Inocians. In the same token, justice and fair play also dictate that the Ouanos and Inocian return to MCIAA what they received as just compensation for the expropriation of their respective properties plus legal interest to be computed from default, which in this case should

run from the time MCIAA complies with the reconveyance obligation.43 They must likewise pay MCIAA the necessary expenses it might have incurred in sustaining their respective lots and the monetary value of its services in managing the lots in question to the extent that they, as private owners, were benefited thereby. In accordance with Art. 1187 of the Civil Code on mutual compensation, MCIAA may keep whatever income or fruits it may have obtained from the parcels of land expropriated. In turn, the Ouanos and Inocians need not require the accounting of interests earned by the amounts they received as just compensation.44 Following Art. 1189 of the Civil Code providing that "[i]f the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor x x x," the Ouanos and Inocians do not have to settle the appreciation of the values of their respective lots as part of the reconveyance process, since the value increase is merely the natural effect of nature and time. Finally, We delete the award of PhP 50,000 and PhP 10,000, as attorneys fees and litigation expenses, respectively, made in favor of the Inocians by the Cebu City RTC in its judgment in Civil Case No. CEB18370, as later affirmed by the CA. As a matter of sound policy, no premium should be set on the right to litigate where there is no doubt about the bona fides of the exercise of such right,45 as here, albeit the decision of MCIAA to resist the former landowners claim eventually turned out to be untenable. WHEREFORE, the petition in G.R. No. 168770 is GRANTED. Accordingly, the CA Decision dated September 3, 2004 in CA-G.R. CV No. 78027 is REVERSED and SET ASIDE. Mactan-Cebu International Airport Authority is ordered to reconvey subject Lot No. 763-A to petitioners Anunciacion vda. de Ouano, Mario P. Ouano, Leticia Ouano Arnaiz, and Cielo Ouano Martinez. The Register of Deeds of Cebu City is ordered to effect the necessary cancellation of title and transfer it in the name of the petitioners within fifteen (15) days from finality of judgment. The petition of the Mactan-Cebu International Airport Authority in G.R. No. 168812 is DENIED, and the CAs Decision and Resolution dated January 14, 2005 and June 29, 2005, respectively, in CA-G.R. CV No. 64356 are AFFIRMED, except insofar as they awarded attorneys fees and litigation expenses that are hereby DELETED. Accordingly, Mactan-Cebu International Airport Authority is ordered to reconvey to respondents Ricardo L. Inocian, Olympia E. Esteves, Emilia E. Bacalla, Restituta E. Montana, and Raul L. Inocian the litigated Lot Nos. 744-A, 745-A, 746, 762-A, 747, and 761-A; and to respondents Aletha Suico Magat, Philip M. Suico, Dolores S. dela Cruz, James M. Suico, Edward M. Suico, Roselyn S. Lawsin, Rex M. Suico, and Kharla Suico-Gutierrez the litigated Lot Nos. 942 and 947. The Register of Deeds of Cebu City is ordered to effect the necessary cancellation of title and transfer it in the name of respondents within a period of fifteen (15) days from finality of judgment. The foregoing dispositions are subject to QUALIFICATIONS, to apply to these consolidated petitions, when appropriate, as follows:

(1) Petitioners Ouano, et al. in G.R. No. 168770 and respondents Ricardo L Inocian, et al. in G.R. No. 168812 are ordered to return to the MCIAA the just compensation they or their predecessors-in-interest received for the expropriation of their respective lots as stated in Civil Case No. R-1881, within a period of sixty (60) days from finality of judgment; (2) The MCIAA shall be entitled to RETAIN whatever fruits and income it may have obtained from the subject expropriated lots without any obligation to refund the same to the lot owners; and (3) Petitioners Ouano, et al. in G.R. No. 168770 and respondents Ricardo L. Inocian, et al. in G.R. No. 168812 shall RETAIN whatever interests the amounts they received as just compensation may have earned in the meantime without any obligation to refund the same to MCIAA. SO ORDERED. PRESBITERO J. VELASCO, JR. Associate Justice

NATIONAL POWER CORPORATION, Petitioner, -versusLUCMAN 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.

G.R. No. 168732

Present:

PUNO, C.J., Chairperson, SANDOVAL-GUTIERREZ,* CORONA, AZCUNA, and GARCIA, JJ.

Promulgated:

June 29, 2007

X----------------------------------------------------------------------------------------X

DECISION AZCUNA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul the Decision[1] dated June 8, 2005 rendered by the Court of Appeals (CA) in C.A.-G.R. CV No. 57792. The facts are as follows:

On November 23, 1994, respondent Lucman G. Ibrahim, in his personal capacity and in behalf of his coheirs 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 latters Acting Assistant Project Manager. The tunnels were apparently being used by NAPOCOR in siphoning the water of Lake Lanao and in the operation of NAPOCORs 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 that NAPOCOR pay damages and vacate the subterrain 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 subject to such easement as may be necessary for the same.[2] 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 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. 5. Ordering defendant to pay plaintiffs the sum of P200,000.00 as moral damages; and Ordering defendant to pay the further sum of P200,000.00 as attorneys fees and the costs.

SO ORDERED.[3]

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 NAPOCORs 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. Maruhom, 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 attorneys 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 attorneys 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 see their land crumble to dust than sell it to anybody.[4]

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. 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 attorneys fees and costs. SO ORDERED.[5]

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 attorneys 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 attorneys 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--vis the actual amount of damages awarded by this Court. Such additional filing fee shall constitute a lien on the judgment. SO ORDERED.[6]

Hence, this petition ascribing the following errors to the CA:

(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 (P1000.00/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 effect was, therefore, purely conjectural and speculative.[7] 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 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.[8] 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 CAs 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 it. In Republic of the Philippines v. Court of Appeals,[9] this principle was applied to show that rights over lands are indivisible and, consequently, require a definitive and categorical classification, thus: 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 dividing 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 Laws or in appropriate expropriation proceedings.[10] Moreover, petitioners 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.[11] 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 permit 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). There in fact exists ample evidence that this construction of the tunnel without the prior consent of plaintiffs beneath the latters 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 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 just compensation and/or reasonable monthly rental since 1978.[12]

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 of possession is neither convenient nor feasible.[13] This is in accordance with the principle that persons shall not be deprived of their property except by competent authority and for public use and always upon payment of just compensation.[14] 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 mere burden upon the owner of the condemned property.[15] 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.[16] 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.[17] 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.[18] 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 Corporation v. Court of Appeals and Macapanton Mangondato[19] 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 plan which is the subject of the instant controversy.*20+ Just compensation has been understood to be the just and complete equivalent of the loss[21] 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.*22+ 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.*23+ 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.[24] 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: 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 taking. 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 extraordinary increase in the value of the owners 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 petitioners 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 following 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 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 petitioners 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 respondents 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 anothers 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 petitioners 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 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 petitioners intent to expropriate became manifest as private respondent disagreed and, barely a month, filed suit.[25]

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.[26] 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 xxx Commissioner Doromals 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 latters chairman in response to NAPOCORs general counsels 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, such general rule should in fact be observed in this case.[27] 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 C.A.-G.R. CV No. 57792 dated June 8, 2005 is AFFIRMED. No costs. SO ORDERED. NATIONAL POWER CORPORATION, PETITIONER, VS. HEIRS OF MACABANGKIT SANGKAY, NAMELY: CEBU, BATOWA-AN, SAYANA, NASSER, MANTA, EDGAR, PUTRI , MONGKOY*, AND AMIR, ALL SURNAMED MACABANGKIT, RESPONDENTS. DECISION BERSAMIN, J.: Private property shall not be taken for public use without just compensation. - Section 9, Article III, 1987 Constitution The application of this provision of the Constitution is the focus of this appeal. Petitioner National Power Corporation (NPC) seeks the review on certiorari of the decision promulgated on October 5, 2004,[1] whereby the Court of Appeals (CA) affirmed the decision dated August 13, 1999 and the supplemental decision dated August 18, 1999, ordering NPC to pay just compensation to the respondents, both rendered by the Regional Trial Court, Branch 1, in Iligan City (RTC). Antecedents Pursuant to its legal mandate under Republic Act No. 6395 (An Act Revising the Charter of the National Power Corporation), NPC undertook the Agus River Hydroelectric Power Plant Project in the 1970s to generate electricity for Mindanao. The project included the construction of several underground tunnels to be used in diverting the water flow from the Agus River to the hydroelectric plants.[2]

On November 21, 1997, the respondents, namely: Cebu, Bangowa-an, Sayana, Nasser, Manta, Edgar, Putri, Mongkoy and Amir, all surnamed Macabangkit (Heirs of Macabangkit), as the owners of land with an area of 221,573 square meters situated in Ditucalan, Iligan City, sued NPC in the RTC for the recovery of damages and of the property, with the alternative prayer for the payment of just compensation.[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: 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. 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. That underground tunnel was constructed therein.[5] After trial, the RTC ruled in favor of the plaintiffs (Heirs of Macabangkit),[6] decreeing: WHEREFORE, premises considered:

1. The prayer for the removal or dismantling of defendant's tunnel is denied. However, defendant is hereby directed and ordered: a) To pay plaintiffs' land with a total area of 227,065 square meters, at the rate of FIVE HUNDRED (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 attorney's fees, and to pay the cost. SO ORDERED. The RTC found that NPC had concealed the construction of the tunnel in 1979 from the Heirs of Macabangkit, and had since continuously denied its existence; that NPC had acted in bad faith by taking possession of the subterranean portion of their land to construct the tunnel without their knowledge and prior consent; that the existence of the tunnel had affected the entire expanse of the land, and had restricted their right to excavate or to construct a motorized deep well; and that they, as owners, had lost the agricultural, commercial, industrial and residential value of the land. The RTC fixed the just compensation at P500.00/square meter based on the testimony of Dionisio Banawan, OIC-City Assessor of Iligan City, to the effect that the appraised value of the adjoining properties ranged from 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 NAPOCOR'S UNDERGROUND TUNNEL IN ITS AGUS RIVER HYDRO-ELECTRIC PLANT PROJECT TRAVERSED AND/OR AFFECTED APPELLEES' PROPERTY AS THERE IS NO CLEAR EVIDENCE INDUBITABLY ESTABLISHING THE SAME II THE COURT A QUO SERIOUSLY ERRED IN GRANTING APPELLEES' CLAIMS IN THEIR ENTIRETY FOR GRANTING ARGUENDO THAT NAPOCOR'S UNDERGROUND TUNNEL INDEED TRAVERSED APPELLEE'S PROPERTY, THEIR CAUSE OF ACTION HAD ALREADY BEEN BARRED BY PRESCRIPTION, ESTOPPEL AND LACHES

On October 5, 2004, the CA affirmed the decision of the RTC, holding that the testimonies of NPC's witness Gregorio Enterone and of the respondents' witness Engr. Pete Sacedon, the topographic survey map, the sketch map, and the ocular inspection report sufficiently established the existence of the underground tunnel traversing the land of the Heirs of Macabangkit; that NPC did not substantiate its defense that prescription already barred the claim of the Heirs of Macabangkit; and that Section 3(i) of R.A. No. 6395, being silent about tunnels, did not apply, viz: As regard Section 3(i) of R.A. No. 6395 (An Act Revising the Charter of the National Power Corporation), it is submitted that the same provision is not applicable. There is nothing in Section 3(i) of said law governing claims involving tunnels. The same provision is applicable to those projects or facilities on the surface of the land, that can easily be discovered, without any mention about the claims involving tunnels, particularly those surreptitiously constructed beneath the surface of the land, as in the instant case. Now, while it is true that Republic Act No. 6395 authorizes NAPOCOR to take water from any public stream, river, creek, lake, spring or waterfall in the Philippines for the realization of the purposes specified therein for its creation; to intercept and divert the flow of waters from lands of riparian owners (in this case, the "Heirs"), and from persons owning or interested in water which are or may be necessary to said purposes, the same Act expressly mandates the payment of just compensation. WHEREFORE, premises considered, the instant appeal is hereby DENIED for lack of merit. Accordingly, the appealed Decision dated August 13, 1999, and the supplemental Decision dated August 18, 1999, are hereby AFFIRMED in toto. SO ORDERED.[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 Macabangkit's land constructed by NPC; and (2) Whether the Heirs of Macabangkit's right to claim just compensation had prescribed under section 3(i) of Republic Act No. 6395, or, alternatively, under Article 620 and Article 646 of the Civil Code. Ruling We uphold the liability of NPC for payment of just compensation. 1. Factual findings of the RTC, when affirmed by the CA, are binding The existence of the tunnel underneath the land of the Heirs of Macabangkit, being a factual matter, cannot now be properly reviewed by the Court, for questions of fact are beyond the pale of a petition for review on certiorari. Moreover, the factual findings and determinations by the RTC as the trial court are generally binding on the Court, particularly after the CA affirmed them.[13] Bearing these doctrines in mind, the Court should rightly dismiss NPC's appeal. NPC argues, however, that this appeal should not be dismissed because the Heirs of Macabangkit essentially failed to prove the existence of the underground tunnel. It insists that the topographic survey map and the right-of-way map presented by the Heirs of Macabangkit did not at all establish the presence of any underground tunnel. NPC still fails to convince. Even assuming, for now, that the Court may review the factual findings of the CA and the RTC, for NPC to insist that the evidence on the existence of the tunnel was not adequate and incompetent remains futile. On the contrary, the evidence on the tunnel was substantial, for the significance of the topographic survey map and the sketch map (as indicative of the extent and presence of the tunnel construction) to the question on the existence of the tunnel was strong, as the CA correctly projected in its assailed decision, viz: Among the pieces of documentary evidence presented showing the existence of the said tunnel beneath the subject property is the topographic survey map. The topographic survey map is one conducted to

know about the location and elevation of the land and all existing structures above and underneath it. Another is the Sketch Map which shows the location and extent of the land traversed or affected by the said tunnel. These two (2) pieces of documentary evidence readily point the extent and presence of the tunnel construction coming from the power cavern near the small man-made lake which is the inlet and approach tunnel, or at a distance of about two (2) kilometers away from the land of the plaintiffsappellees, and then traversing the entire and the whole length of the plaintiffs-appellees' property, and the outlet channel of the tunnel is another small man-made lake. This is a sub-terrain construction, and considering that both inlet and outlet are bodies of water, the tunnel can hardly be noticed. All constructions done were beneath the surface of the plaintiffs-appellees' property. This explains why they could never obtain any knowledge of the existence of such tunnel during the period that the same was constructed and installed beneath their property.[14] The power cavern and the inlet and outlet channels established the presence of the underground tunnel, based on the declaration in the RTC by Sacedon, a former employee of the NPC.[15] It is worthy to note that NPC did not deny the existence of the power cavern, and of the inlet and outlet channels adverted to and as depicted in the topographic survey map and the sketch map. The CA cannot be faulted for crediting the testimony of Sacedon despite the effort of NPC to discount his credit due to his not being an expert witness, simply because Sacedon had personal knowledge based on his being NPC's principal engineer and supervisor tasked at one time to lay out the tunnels and transmission lines specifically for the hydroelectric projects,[16] and to supervise the construction of the Agus 1 Hydroelectric Plant 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: xxx (i) To construct works across, or otherwise, any stream, watercourse, canal, ditch, flume, street, avenue, highway or railway of private and public ownership, as the location of said works may require:Provided, That said works be constructed in such a manner as not to endanger life or property; And provided, further, That the stream, watercourse, canal ditch, flume, street, avenue, highway or railway so crossed or intersected be restored as near as possible to their former state, or in a manner not to impair unnecessarily their usefulness. Every person or entity whose right of way or property is lawfully crossed or intersected by said works shall not obstruct any such crossings or intersection and shall grant the Board or its representative, the proper authority for the execution of such work. The Corporation is hereby given the right of way to locate, construct and maintain such works over and throughout the lands owned by the Republic of the Philippines or any of its branches and political subdivisions. The Corporation or its representative may also enter upon private property in the lawful performance or prosecution of its business and purposes, including the construction of the transmission lines thereon; Provided, that the owner of such property shall be indemnified for any actual damage caused thereby;Provided, further, That said action for damages is filed within five years after the rights of way, transmission lines, substations, plants or other facilities shall have been established; Provided, finally, That after said period, no suit shall be brought to question the said rights of way, transmission lines, substations, plants or other facilities; A cursory reading shows that Section 3(i) covers the construction of "works across, or otherwise, any stream, watercourse, canal, ditch, flume, street, avenue, highway or railway of private and public ownership, as the location of said works may require." It is notable that Section 3(i) includes no limitation except those enumerated after the term works. Accordingly, we consider the term works as

embracing all kinds of constructions, facilities, and other developments that can enable or help NPC to meet its objectives of developing hydraulic power expressly provided under paragraph (g) of Section 3.[23] The CA's restrictive construal of Section 3(i) as exclusive of tunnels was obviously unwarranted, for the provision applies not only to development works easily discoverable or on the surface of the earth but also to subterranean works like tunnels. Such interpretation accords with the fundamental guideline in statutory construction that when the law does not distinguish, so must we not.[24] Moreover, when the language of the statute is plain and free from ambiguity, and expresses a single, definite, and sensible meaning, that meaning is conclusively presumed to be the meaning that the Congress intended to convey.[25] Even so, we still cannot side with NPC. We rule that the prescriptive period provided under Section 3(i) of Republic Act No. 6395 is applicable only to an action for damages, and does not extend to an action to recover just compensation like this case. Consequently, NPC cannot thereby bar the right of the Heirs of Macabangkit to recover just compensation for their land. The action to recover just compensation from the State or its expropriating agency differs from the action for damages. The former, also known as inverse condemnation, has the objective to recover the value of property taken in fact by the governmental defendant, even though no formal exercise of the power of eminent domain has been attempted by the taking agency.[26] Just compensation is the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the taker's gain, but the owner's loss. The word just is used to intensify the meaning of the word compensation in order to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full, and ample.[27] On the other hand, the latter action seeks to vindicate a legal wrong through damages, which may be actual, moral, nominal, temperate, liquidated, or exemplary. When a right is exercised in a manner not conformable with the norms enshrined in Article 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. NPC's construction of the tunnel constituted taking of the land, and entitled owners to just compensation The Court held in National Power Corporation v. Ibrahim that NPC was "liable to pay not merely an easement fee but rather the full compensation for land" traversed by the underground tunnels, viz: In disregarding this procedure and failing to recognize respondents' ownership of the sub-terrain portion, petitioner took a risk and exposed itself to greater liability with the passage of time. It must be emphasized that the acquisition of the easement is not without expense. The underground tunnels

impose limitations on respondents' use of the property for an indefinite period and deprive them of its ordinary use. Based upon the foregoing, respondents are clearly entitled to the payment of just compensation. Notwithstanding the fact that petitioner only occupies the sub-terrain portion, it is liable to pay not merely an easement fee but rather the full compensation for land. This is so because in this case, the nature of the easement practically deprives the owners of its normal beneficial use. Respondents, as the owner of the property thus expropriated, are entitled to a just compensation which should be neither more nor less, whenever it is possible to make the assessment, than the money equivalent of said property.[35] Here, like in National Power Corporation v. Ibrahim, NPC constructed a tunnel underneath the land of the Heirs of Macabangkit without going through formal expropriation proceedings and without procuring their consent or at least informing them beforehand of the construction. NPC's construction adversely affected the owners' rights and interests because the subterranean intervention by NPC prevented them from introducing any developments on the surface, and from disposing of the land or any portion of it, either by sale or mortgage. Did such consequence constitute taking of the land as to entitle the owners to just compensation? We agree with both the RTC and the CA that there was a full taking on the part of NPC, notwithstanding that the owners were not completely and actually dispossessed. It is settled that the taking of private property for public use, to be compensable, need not be an actual physical taking or appropriation.[36] Indeed, the expropriator's action may be short of acquisition of title, physical possession, or occupancy but may still amount to a taking.[37] Compensable taking includes destruction, restriction, diminution, or interruption of the rights of ownership or of the common and necessary use and enjoyment of the property in a lawful manner, lessening or destroying its value.[38] It is neither necessary that the owner be wholly deprived of the use of his property,[39] nor material whether the property is removed from the possession of the owner, or in any respect changes hands.[40] As a result, NPC should pay just compensation for the entire land. In that regard, the RTC pegged just compensation at 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. NPC's silence was probably due to the correctness of the RTC's valuation after careful consideration and weighing of the parties' evidence, as follows: The matter of what is just compensation for these parcels of land is a matter of evidence. These parcels of land is (sic) located in the City of Iligan, the Industrial City of the South. Witness Dionisio Banawan, OIC- City Assessor's Office, testified, "Within that area, that area is classified as industrial and residential. That plaintiffs' land is adjacent to many subdivisions and that is within the industrial classification. He testified and identified Exhibit "AA" and "AA-1", a Certification, dated April 4, 1997, showing that the appraised value of plaintiffs land ranges from 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 defendant's witness Gregorio Enterone, and that of the City Assessor of Iligan City, the latter is more credible. Considering however, that the appraised value of the land in the area as determined by the City Assessor's Office is not uniform, this Court, is of the opinion that the reasonable amount of just compensation of plaintiff's land should be fixed at FIVE HUNDRED (500.00) PESOS, per square meter. xxx.[41] The RTC based its fixing of just compensation ostensibly on the prevailing market value at the time of the filing of the complaint, instead of reckoning from the time of the taking pursuant to Section 3(h) of Republic Act No. 6395. The CA did not dwell on the reckoning time, possibly because NPC did not assign that as an error on the part of the RTC. We rule that the reckoning value is the value at the time of the filing of the complaint, as the RTC provided in its decision. Compensation that is reckoned on the market value prevailing at the time either when NPC entered or when it completed the tunnel, as NPC submits, would not be just, for it would compound the gross unfairness already caused to the owners by NPC's entering without the intention of formally expropriating the land, and without the prior knowledge and consent of the Heirs of Macabangkit. NPC's entry denied elementary due process of law to the owners since then until the owners commenced the inverse condemnation proceedings. The Court is more concerned with the necessity to prevent NPC from unjustly profiting from its deliberate acts of denying due process of law to the owners. As a measure of simple justice and ordinary fairness to them, therefore, reckoning just compensation on the value at the time the owners commenced these inverse condemnation proceedings is entirely warranted. In National Power Corporation v. Court of Appeals,[42] a case that involved the similar construction of an underground tunnel by NPC without the prior consent and knowledge of the owners, and in which we held that the basis in fixing just compensation when the initiation of the action preceded the entry into the property was the time of the filing of the complaint, not the time of taking,[43] we pointed out that there was no taking when the entry by NPC was made "without intent to expropriate or was not made under warrant or color of legal authority." 4. Awards for rentals, moral damages, exemplary damages, and attorney's fees are deleted for insufficiency of factual and legal bases

The CA upheld the RTC's granting to the Heirs of Macabangkit of rentals of 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 of interest of 12% interest per annum follows a long line of pertinent jurisprudence,[45] whereby the Court has fixed the rate of interest on just compensation at 12% per annum whenever the expropriator has not immediately paid just compensation. The RTC did not state any factual and legal justifications for awarding to the Heirs of Macabangkit moral and exemplary damages each in the amount of 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 attorney's fees, and to pay the cost." The body of the decision did not state the factual and legal reasons why NPC was liable for attorney's fees. The terse statement found at the end of the body of the RTC's decision, stating: "xxx The contingent attorney's fee is hereby reduced from 20% to only 15% of the total amount of the claim that may be awarded to plaintiffs," without more, did not indicate or explain why and how the substantial liability of NPC for attorney's fees could have arisen and been determined. In assessing attorney's fees against NPC and in favor of the respondents, the RTC casually disregarded the fundamental distinction between the two concepts of attorney's fees -- the ordinary and the extraordinary. These concepts were aptly distinguished in Traders Royal Bank Employees UnionIndependent v. NLRC,[46] thuswise: There are two commonly accepted concepts of attorney's fees, the so-called ordinary and extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation is the fact of his employment by and his agreement with the client.

In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to be paid by the losing party in a litigation. The basis of this is any of the cases provided by law where such award can be made, such as those authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof. By referring to the award as contingency fees, and reducing the award from 20% to 15%, the RTC was really referring to a supposed agreement on attorney's fees between the Heirs of Macabangkit and their counsel. As such, the concept of attorney's fees involved was the ordinary. Yet, the inclusion of the attorney's fees in the judgment among the liabilities of NPC converted the fees to extraordinary. We have to disagree with the RTC thereon, and we express our discomfort that the CA did not do anything to excise the clearly erroneous and unfounded grant. An award of attorney's fees has always been the exception rather than the rule. To start with, attorney's fees are not awarded every time a party prevails in a suit.[47] Nor should an adverse decision ipso facto justify an award of attorney's fees to the winning party.[48] The policy of the Court is that no premium should be placed on the right to litigate.[49] Too, such fees, as part of damages, are assessed only in the instances specified in Art. 2208, Civil Code.[50] Indeed, attorney's fees are in the nature of actual damages.[51] But even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, attorney's fees may still be withheld where no sufficient showing of bad faith could be reflected in a party's persistence in a suit other than an erroneous conviction of the righteousness of his cause.[52] And, lastly, the trial court must make express findings of fact and law that bring the suit within the exception. What this demands is that the factual, legal or equitable justifications for the award must be set forth not only in the fallo but also in the text of the decision, or else, the award should be thrown out for being speculative and conjectural.[53] Sound policy dictates that even if the NPC failed to raise the issue of attorney's fees, we are not precluded from correcting the lower courts' patently erroneous application of the law.[54] Indeed, the Court, in supervising the lower courts, possesses the ample authority to review legal matters like this one even if not specifically raised or assigned as error by the parties. 5. Attorney's fees under quantum meruit principle are fixed at 10% of the judgment award

Based on the pending motions of Atty. Macarupung Dibaratun and Atty. Manuel D. Ballelos to assert their respective rights to attorney's fees, both contending that they represented the Heirs of Macabangkit in this case, a conflict would ensue from the finality of the judgment against NPC.

A look at the history of the legal representation of the Heirs of Macabangkit herein provides a helpful predicate for resolving the conflict. Atty. Dibaratun was the original counsel of the Heirs of Macabangkit. When the appeal was submitted for decision in the CA,[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 CA's decision was furnished solely to Atty. Ballelos. However, shortly before the rendition of the decision, Atty. Dibaratun filed in the CA a motion to register attorney's lien,[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. Dibaratun's 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 Amir's 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 attorney's fees equivalent of 15% of the judgment award,[69] and (b) a motion to register his attorney's lien that he claimed was contingent.[70] 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.[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 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.[72] The recovery of attorney's fees on the basis of quantum meruit is a device that prevents an unscrupulous client from running away with the fruits of the legal services of counsel without paying for it and also avoids unjust enrichment on the part of the attorney himself.[73] An attorney must show that he is entitled to reasonable compensation for the effort in pursuing the client's cause, taking into account certain factors in fixing the amount of legal fees.[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) 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.[75] Ordinarily, therefore, the determination of the attorney's fees on quantum meruit is remanded to the lower court for the purpose. However, it will be just and equitable to now assess and fix the attorney's fees of both attorneys in order that the resolution of "a comparatively simple controversy," as Justice Regalado put it in Traders Royal Bank Employees Union-Independent v. NLRC,[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 attorney's 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 attorney's fees will be defrayed by the Heirs of Macabangkit out of their actual recovery from NPC, giving to each of the two attorney's 15% of the principal award as attorney's fees would be excessive and unconscionable from the point of view of the clients. Thus, the Court, which holds and exercises the power to fix attorney's fees on a quantum meruit basis in the absence of an express written agreement

between the attorney and the client, now fixes attorney's fees at 10% of the principal award of P113,532,500.00. Whether it is Atty. Dibaratun or Atty. Ballelos, or both, who should receive attorney's fees from the Heirs of Macabangkit is a question that the Court must next determine and settle by considering the amount and quality of the work each performed and the results each obtained. Atty. Dibaratun, the attorney from the outset, unquestionably carried the bulk of the legal demands of the case. He diligently prepared and timely filed in behalf of the Heirs of Macabangkit every pleading and paper necessary in the full resolution of the dispute, starting from the complaint until the very last motion filed in this Court. He consistently appeared during the trial, and examined and cross-examined all the witnesses presented at that stage of the proceedings. The nature, character, and substance of each pleading and the motions he prepared for the Heirs of Macabangkit indicated that he devoted substantial time and energy in researching and preparing the case for the trial. He even advanced P250,000.00 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 Amir's 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 attorney's fees that the

clients ought to pay to their attorney. Given the amount and quality of his legal work, his diligence and the time he expended in ensuring the success of his prosecution of the clients' cause, he deserves the recognition, notwithstanding that some of the clients might appear to have retained Atty. Ballelos after the rendition of a favorable judgment.[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% attorney's fees decreed to be paid by National Power Corporation to the Heirs of Macabangkit is DELETED. The Court PARTLY GRANTS the motion to register attorney's lien filed by Atty. Macarupung Dibaratun, and FIXES Atty. Dibaratun's attorney's fees on the basis of quantum meruit at 10% of the principal award of 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 attorney's fees on the basis of quantum meruit. Costs of suit to be paid by the petitioner. SO ORDERED.

EPANTO CONSOLIDATED MINING COMPANY, petitioner, vs. WMC RESOURCES INTERNATIONAL PTY. LTD., WMC (PHILIPPINES), INC., SOUTHCOT MINING CORPORATION, TAMPAKAN MINING CORPORATION and SAGITTARIUS MINES, INC., respondents. DECISION CARPIO-MORALES, J.: Elevated to this Court are twin petitions for review on certiorari under Rule 45 of the Rules of Court which involve substantially the same parties and the same subject matter, hence, have been consolidated. The first case, G. R. No. 153885, is an appeal from the Court of Appeals Decision of February 22, 2002 in CA-G.R. Sp No. 65496, WMC Resources Intl. Pty. Ltd., and WMC (Philippines), Inc. v. Hon. Francisco B. Ibay, in his capacity as Presiding Judge, Regional Trial Court of Makati City, Branch 135 and Lepanto Consolidated Mining Company, and Resolution of June 6, 2002 denying reconsideration of said decision. The second case, G. R. No. 156214, is an appeal from the Regional Trial Court (RTC) of Makati City, Branch 135 Orders dated September 9, 2002 and November 22, 2002 dismissing Civil Case No. 01-087, Lepanto Consolidated Mining Company v. WMC Resources Intl. Pty. Ltd., and WMC (Philippines), Inc., Southcot Mining Corporation, Tampakan Mining Corporation and Sagittarius Mines, Inc. The antecedents of the cases are as follows: In a contract denominated as Tampakan Option Agreement dated April 25, 1991,*1] WMC Resources International Pty. Ltd. (WMC), a wholly owned subsidiary of Western Mining Corporation Holdings Limited, a publicly listed major Australian mining and exploration company, through its local subsidiary Western Mining Corporation (Philippines), Inc. (WMCP), a corporation organized under Philippine laws, acquired the mining claims in Tampakan, South Cotabato of Southcot Mining Corporation, Tampakan Mining Corporation, and Sagittarius Mines, Inc. (Tampakan Companies). The Tampakan Option Agreement was amended by subsequent agreements including Amendatory Agreement dated July 15, 1994[2] under which the Tampakan Companies were given preferential option to acquire the shares of WMC in WMCP and Hillcrest Inc. in the event it (WMC) decided to sell them. On March 22, 1995, then President Ramos on behalf of the Republic of the Philippines, entered into a Financial and Technical Assistance Agreement (FTAA)[3] with WMCP for the large scale exploration, development and commercial exploitation of mineral resources in 99,387 hectares of lands in South Cotabato, Sultan Kudarat, Davao Del Sur and North Kotabato. On July 12, 2000, WMC, by a Sale and Purchase Agreement,[4] sold to herein petitioner Lepanto Consolidated Mining Company its shares of stock in WMCP and Hillcrest, Inc. for $10,000,000.00. The sale was subject to certain conditions including the Tampakan Companies failure to accept WMCPs

offer to sell the same shares, under the companies right of first refusal provided for in the Tampakan Option Agreement and its amendments. By letter of July 13, 2000,[5] WMCP tendered to the Tampakan Companies its offer for the latter to purchase WMCs shares of stock in it (WMCP) and Hillcrest, Inc. In the meantime or by letter of August 28, 2000,[6] petitioner requested the approval by the Department of Environment and Natural Resources (DENR) Secretary of the transfer to and acquisition by it of WMCPs FTAA on account of its (petitioners) purchase of WMCs shares of stock in WMCP, which approval of transfer was required in the FTAA agreement forged between then President Ramos and WMCP. As the Tampakan Companies later availed of their preferential right under the Tampakan Option Agreement,*7+ a Sale and Purchase Agreement*8+ was concluded on October 6, 2000 between WMC and the Tampakan Companies over the same shares of stock priorly purchased by petitioner. On October 12, 2000, the Tampakan Companies notified the Director of the Mines and Geosciences Bureau (MGB) of the DENR of the exercise of their preemptive right to buy WMCs equity in WMCP and Hillcrest, Inc., seeking at the same time the MGB Directors formal expression of support for the stock transfer transaction.[9] Petitioner, getting wind of the Sale and Purchase Agreement between WMC and Tampakan Companies, wrote, by letter of October 13, 2000,[10] the DENR Secretary about the invalidity of said agreement and reiterated its request for the approval of its acquisition of the disputed shares. The MGB accordingly informed the Tampakan Companies of petitioners position on the matter and required the submission of a comment thereto.[11] WMCP and WMC, respondents herein, by letters to the MGB, proffered their side. Several other letters or position papers were filed by the parties with the MGB or the DENR. The Tampakan Companies later opted to acquire the disputed shares of stock through Sagittarius Mines, Inc. WMC and Tampakan Companies thus entered into a Sale and Purchase Agreement dated January 10, 2001[12] which paved the way for the forging of two deeds of absolute sale of the shares of stock, those of WMC in WMCP and in Hillcrest, Inc., both in favor of Sagittarius Mines, Inc.[13] On January 22, 2001, petitioner filed before the Makati RTC a complaint against herein respondents WMC, WMCP, and the three corporations comprising the Tampakan Companies, for specific performance, annulment of contracts, contractual interference and injunction (Civil Case No. 01-087). The suit principally sought the enforcement of the July 12, 2000 Sale and Purchase Agreement between petitioner and WMC and the consequent nullification of the latters agreements with the Tampakan Companies.

Therein defendants-herein respondents filed before the Makati RTC a Joint Motion to Dismiss[14] petitioners complaint on the ground that the court was without jurisdiction over the subject matter of the case; that petitioners complaint had no cause of action; that petitioner was guilty of forum shopping due to the pendency of its claim with the MGB; and that petitioner also failed to exhaust administrative remedies. Branch 135 of the Makati RTC denied herein respondents Motion to Dismiss as it did respondents Motion for Reconsideration.[15] Hence, respondents lodged on July 6, 2001 a special civil action for certiorari and prohibition[16] (CA-G.R. SP No. 65496) with the Court of Appeals which was granted by February 22, 2002 Decision,[17] the dispositive part of which reads: WHEREFORE, the petition for certiorari is hereby GRANTED. The assailed Order dated March 21, 2001 and May 2, 2001 are hereby declared null and void and SET ASIDE. Respondent court is directed to desist from proceeding with Civil Case No. 01-087 and to dismiss the same on ground of forum shopping committed by private respondent. (Underscoring supplied) Petitioners motion for reconsideration of the appellate courts judgment was denied by Resolution of June 6, 2002,[18] hence, it filed on June 28, 2002 a petition for review on certiorari[19] before this Court (G.R. No. 153885), the first case subject of the present decision. In the meantime, Branch 135 of the Makati RTC, upon receipt of the above-said February 22, 2002 Decision of the Court of Appeals, dismissed petitioners complaint-Civil Case No. 01-087 by Order of March 1, 2002.[20] On petitioners motion, the trial court, by Order of April 23, 2002,*21+ suspended the effectivity of its March 1, 2002 Order in light of the pendency of petitioners motion for reconsideration of the decision of the Court of Appeals. The appellate court subsequently, as reflected above, denied petitioners motion for reconsideration by Resolution of June 6, 2002 following which the trial court issued its Order of September 9, 2002[22] dismissing Civil Case No. 02-087, it holding that petitioners appeal from the appellate court decision before this Court (G.R. No. 153885, the first case) does not interrupt the course of said civil case unless a temporary restraining order or a writ of preliminary injunction is issued against it, citing Section 7 of Rule 65, Rules of Court. Petitioner filed a motion for reconsideration of the September 9, 2002 Order of the trial court which it denied by Order of November 22, 2002,*23+ it holding that the dismissal of petitioners complaint was merely in compliance with the Court of Appeals ruling and is deemed final until set aside by the Supreme Court. From these Orders, petitioner appealed to this Court by petition for review on certiorari[24] (G.R. No. 156214), the second case subject of the present decision. Petitioners appeal in the first case is premised on the following grounds:

I. THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONER WAS GUILTY OF FORUM SHOPPING. THE ELEMENTS OF FORUM SHOPPING ARE NOT PRESENT IN THE CASE AT BAR. II. THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE PETITION FOR CERTIORARI FOR LACK OF PROPER VERIFICATION. Petitioner claims that the issues/matters raised before the RTC of Makati and those before the MGB are not dependent on each other. It argues that in bringing its July 12, 2000 Sale and Purchase Agreement with WMC to the knowledge of the DENR, it was merely requesting for the consent of the Secretary to the transfer of WMCPs FTAA to it, it not having raised any contentious issues before said office; and that the request merely called for MGB to review the respective financial and technical qualifications of both petitioner and respondent Tampakan Companies to determine who between them is fit to become the transferee of the FTAA. With respect to the case before the RTC, petitioner asserts that what are principally raised therein are the non-performance by respondent WMC of its obligations to petitioner under their contract of sale and the validity of WMCs subsequent agreements with the Tampakan Companies. Petitioner adds that the MGB is not being made to exercise quasi-judicial power or function but only recommendatory or administrative functions in contrast to what the RTC is being called upon to do. Petitioner thus concludes that there could be no forum shopping in light of the difference in the nature of the proceedings before the two fora. Finally, petitioner underscores that the petition brought by respondents before the Court of Appeals should have been dismissed for not having been properly verified by WMC. Petitioners ratiocinations do not persuade. It is clear from the proceedings before the DENR, specifically before the MGB, that the issue of which between petitioner and respondent Tampakan Companies possesses the better right to acquire the mining rights, claims and interests held by WMC through its local subsidiary WMCP, especially with respect to the 1995 FTAA, had been brought to the fore. The MGB cannot just assess the qualifications of petitioner and of the Tampakan Companies as potential transferee or assignee of the rights and obligations of WMCP under the FTAA without also resolving the issue of which has priority of right to become one. True, the questioned agreements of sale between petitioner and WMC on one hand and between WMC and the Tampakan Companies on the other pertain to transfer of shares of stock from one entity to another. But said shares of stock represent ownership of mining rights or interest in mining agreements. Hence, the power of the MGB to rule on the validity of the questioned agreements of sale, which was raised by petitioner before the DENR, is inextricably linked to the very nature of such agreements over which the MGB has jurisdiction under the law. Unavoidably, there is identity of reliefs that petitioner seeks from both the MGB and the RTC.

Forum shopping exists when both actions involve the same transactions, same essential facts and circumstances and raise identical causes of actions, subject matter, and issues.[25] Such elements are evidently present in both the proceedings before the MGB and before the trial court. The case instituted with the RTC was thus correctly ordered dismissed by the appellate court on the ground of forum shopping. Besides, not only did petitioner commit forum shopping but it also failed to exhaust administrative remedies by opting to go ahead in seeking reliefs from the court even while those same reliefs were appropriately awaiting resolution by the MGB. As for petitioners assailing of respondents petition for certiorari before the Court of Appeals for not being properly verified by WMC, the same fails. The verification and certification against forum shopping of the petition was signed by a duly authorized officer of WMC in the person of Terence Gardner, Chairman of the Board and President of WMCP, who was the signing representative of WMC in the July 12, 2000 Sale and Purchase Agreement with petitioner. With respect to the second case (G.R. No. 156214), this Court sets aside the appealed Orders of the trial court dismissing Civil Case No. 01-087. The orders are patently erroneous for the appellate courts decision directing the dismissal of the said civil case had not yet become final and executory, the appeal therefrom by petitioner to this Court-subject of the herein first case having been duly perfected. WHEREFORE, judgment is hereby rendered in 1) G.R. No. 153885 AFFIRMING the assailed Decision of the Court of Appeals, and 2) G.R. No. 156214 SETTING ASIDE the assailed Orders of Branch 135 of the Makati Regional Trial Court. SO ORDERED.

RE: Query of Mr. Roger C. Prioreschi Re: Exemption from legal and ...
The Courts cannot grant to foundations like the Good Shepherd Foundation, Inc., the same exemptions from payment of legal fees granted to indigent litigants even if the foundations are working for indigent and underprivileged people. The basis for the exemption from legal and filing fees is the free access clause, embodied in Sec. 11, Art. III of the 1987 Constitution, thus: Sec. 11. Free access to the courts and quasi judicial bodies and adequate legal assistance shall not be denied to any person by reason of poverty. The importance of the right to free access to the courts and quasi judicial bodies and to adequate legal assistance cannot be denied. A move to remove the provision on free access from the Constitution on the ground that it was already covered by the equal protection clause was defeated by the desire to give constitutional stature to such specific protection of the poor. In implementation of the right of free access under the Constitution, the Supreme Court promulgated rules, specifically, Sec. 21, Rule 3, Rules of Court, and Sec. 19, Rule 141, Rules of Court, the clear intent and precise language

thereof indicate that only a natural party litigant may be regarded as an indigent litigant. The Good Shepherd Foundation, Inc. being a corporation invested by the State with a juridical personality separate and distinct from that of its members, is a juridical person. Among others, it has the power to acquire and possess property of all kinds as well as incur obligations and bring civil or criminal actions, in conformity with the laws and regulations of their organization. As a juridical person, therefore, it cannot be accorded the exemption from legal and filing fees granted to indigent litigants. That the Good Shepherd Foundation, Inc. is working for indigent and underprivileged people is of no moment. Clearly, the Constitution has explicitly premised the free access clause on a person's poverty, a condition that only a natural person can suffer. There are other reasons that warrant the rejection of the request for exemption in favor of a juridical person. For one, extending the exemption to a juridical person on the ground that it works for indigent and underprivileged people may be prone to abuse (even with the imposition of rigid documentation requirements), particularly by corporations and entities bent on circumventing the rule on payment of the fees. Also, the scrutiny of compliance with the documentation requirements may prove too time-consuming and wasteful for the courts. IN VIEW OF THE FOREGOING, the Good Shepherd Foundation, Inc. cannot be extended the exemption from legal and filing fees despite its working for indigent and underprivileged people. (pp. 3091-3093)

PEOPLE OF THE PHILIPPINES, Appellee,

G.R. No. 157399 Present:

Davide, Jr., C.J. (Chairman), - versus Carpio, and Azcuna, JJ. JOSE TING LAN UY, JR. (Acquitted), ERNESTO GAMUS y SOTELO, JAIME OCHOA, all of the National Power Corporation, and RAUL GUTIERREZ alias Raul Nicolas, Alias George Aonuevo, alias Mara Aonuevo (At large), Accused. Promulgated: JAIME OCHOA,

Quisumbing, Ynares-Santiago,

Appellant. November 17, 2005 x ---------------------------------------------------------------------------------------- x DECISION

YNARES-SANTIAGO, J.: For allegedly diverting and collecting funds of the National Power Corporation (NPC) intended for the purchase of US Dollars from the United Coconut Planters Bank (UCPB), Jose Ting Lan Uy, Jr., Ernesto Gamus,[1] Jaime Ochoa and Raul Gutierrez were indicted before the Sandiganbayan for the complex crime of Malversation through Falsification of Commercial Documents defined and penalized under Articles 217 and 171 (8), in relation to Article 48 of the Revised Penal Code, in an amended Information,[2] docketed as Criminal Case No. 19558, which alleges That sometime in July 1990, or for sometime prior or subsequent thereto, in Quezon City, Philippines, and within the jurisdiction of this Honorable Court, accused Jose Ting Lan Uy, Jr., a public accountable officer, being the Treasurer of National Power Corporation (NAPOCOR), Ernesto Gamus and Jaime Ochoa, both public officers being the Manager of the Loan Management and Foreign Exchange Division (LOMAFED) and Foreign Trader Analyst, respectively, also of NAPOCOR, and accused Raul Gutierrez, alias Raul Nicolas, alias George Aonuevo, alias Mara Aonuevo, a private individual being a foreign exchange trader, said public officers taking advantage of their official positions, with grave abuse of authority and committing the offense in relation to their office, conspiring, confederating and mutually helping one another, with their private co-accused, did then and there willfully, unlawfully and feloniously falsify or cause to be falsified the NPCs application for managers checks with the Philippine National Bank (PNB), NPC Branch in the total amount of ONE HUNDRED EIGHTY THREE MILLION EIGHT HUNDRED FIVE THOUSAND TWO HUNDRED NINETY ONE PESOS and TWENTY FIVE CENTAVOS (P183,805,291.25), Philippine Currency, intended for the purchase of US dollars from the United Coconut Planters Bank (UCPB), by inserting the account number of Raul Gutierrez SA-111-121204-4, when in truth and in fact as the accused well knew that the Payment Instructions (PI) when signed by the NAPOCOR authorities did not indicate the account number of Raul Gutierrez, thereby making alteration or intercalation in a genuine document which changes its meaning, and with the use of the said falsified commercial documents, accused succeeded in diverting, collecting and receiving the total amount of ONE HUNDRED EIGHTY THREE MILLION EIGHT HUNDRED FIVE THOUSAND TWO HUNDRED NINETY ONE PESOS AND TWENTY FIVE CENTAVOS (P183,805,291.75), Philippine Currency from the National Power Corporation, which they thereafter malverse, embezzle, misappropriate and convert to their own personal use and benefit to the damage and prejudice of the National Power Corporation in the aforementioned sum. CONTRARY TO LAW. Upon arraignment, Gamus, Uy and Ochoa pleaded not guilty to the charge, while Gutierrez has remained at large. On pre-trial, the prosecution and the defense stipulated 1. That accused Uy at the time stated in the information was a Treasurer at the NPC;

2. That accused Ernesto Gamus was at the time mentioned in the information was (sic) the Manager of Loan Management and Foreign Exchange Division (LOMAFED); 3. That accused Jaime Ochoa was the Senior Financial Analyst, LOMAFED, at the time mentioned in the information; 4. That accused Gamus does not have any custody to (sic) public funds;

5. That accused Ochoas position as Sr. Financial Analyst did not require him to take custody or control of public funds; 6. That the application forms for cashiers check or Managers check are not accountable forms of the NAPOCOR.[3] Trial on the merits thereafter ensued. On May 28, 2002, the Sandiganbayan rendered its Decision,[4] the dispositive portion of which reads: WHEREFORE, premises considered, accused Jaime B. Ochoa is hereby found GUILTY beyond reasonable doubt of the crime of Malversation thru falsification of Commercial Document and is sentenced to suffer the penalty of reclusion perpetua and to pay a fine equal to the amount malversed which is ONE HUNDRED EIGHTY THREE MILLION EIGHT HUNDRED FIVE THOUSAND TWO HUNDRED NINETY ONE PESOS AND TWENTY FIVE CENTAVOS (P183,805,291.25) solidarily with accused Jose Ting Lan Uy, Jr. Accused Ochoa shall also suffer the penalty of perpetual disqualification. Costs against the accused. On the ground of reasonable doubt, accused JOSE TING LAN UY, Jr. is hereby ACQUITTED of Malversation of Public Funds thru Falsification of Commercial Document. However, because of preponderance of evidence, he is CIVILLY LIABLE for the damages suffered by the NPC in the amount of ONE HUNDRED EIGHTY THREE MILLION EIGHT HUNDRED FIVE THOUSAND TWO HUNDRED NINETY ONE PESOS AND TWENTY FIVE CENTAVOS (P183,805,291.25) solidarily with accused Jaime Ochoa. The Hold Departure Order against the accused embodied in this Courts Resolution dated April 18, 2002 is recalled. Let an alias warrant of arrest be issued against Raul Gutierrez, alias Raul Nicolas, alias George Aonuevo, alias Mara Aonuevo with last known address at 1348 A. Mabini Street, Ermita, Manila or Suite 603 VIP Building, Roxas Boulevard, Manila. SO ORDERED.[5] Aggrieved, Ochoa interposed this appeal alleging that the Sandiganbayan erred in

1. 2. 3.

convicting him based on the allegations in the information; admitting and considering his alleged sworn statements; considering the alleged transcripts of stenographic notes and the NBI Report.[6]

The factual antecedents of the case, as summed by the Sandiganbayan, are not disputed by the parties: In July of 1990, the National Power Corporation (NPC) became embroiled in a controversy involving the disappearance of P183,805,291.25 of its funds which were originally on deposit with the Philippine National Bank, NPC Branch (PNB) but were subsequently used to purchase two (2) managers/cashiers checks (the first check was in the amount of P70,000,000.00 while the second was for P113,805,291.25) in order to comply with its loan obligations to the Asian Development Bank (ADB). As NPCs debt in favor of ADB was in yen, NPC was obligated to follow an intricate and circuitous procedure of buying US dollars from a local bank (in this case, United Coconut Planters Bank or UCPB T.M. Kalaw Branch), which local bank was supposed to remit the US dollars to an off-shore bank. This off-shore bank (in this case, the Credit Lyonnais, New York) was then supposed to remit the yen equivalent of the US dollars to a third bank (in this case, the Bank of Japan, Tokyo Branch) which would then credit the funds to the account of the ADB. The contracts of NPC with the concerned banks (embodied in three *3+ Payment Instructions) included a value date (which was July 13, 1990), the mere arrival of which would trigger the above-mentioned procedure, culminating in the payment to ADB of the NPC obligation in the foreign currency agreed upon. On value date, per routing procedure, Credit Lyonnais (the second bank) remitted Japanese Yen 1,143,316,130.00 to the Bank of Japan, Tokyo Branch. Likewise, per routing procedure, UCPB T.M. Kalaw Branch was supposed to have remitted on said value date the amount of US$7,740,799.80. UCPB T.M. Kalaw, however, despite the fact that the PNB had already issued two (2) managers/cashiers checks (Managers check for brevity) for such purpose, did not make the agreed remittance to Credit Lyonnais, so Credit Lyonnais received no payment for the funds it had remitted to the Bank of Japan, Tokyo. Both the State and the accused have offered explanations for the failure of UCPB, T.M. Kalaw Branch to remit the dollar equivalent of P183,805,291.25 to Credit Lyonnais. Both explanations, naturally, were diametrically opposed.[7] The prosecution theorizes that the accused diverted the funds covered by the two PNB Managers checks by falsifying a commercial document called an Application for Cashiers Check (ACC) by inserting an account number (A/C #111-1212-04) of a private individual after the name of the payee, UCPB, T.M. Kalaw Branch. It claims that NPC did not authorize the insertion considering that the Payment Instruction (PI) issued by NPC instructing PNB to prepare a Managers check to be charged to NPCs savings account did not contain any account number. Through the insertion, the accused allegedly succeeded in diverting the funds from the UCPB, T.M. Kalaw Branch in favor of Raul Gutierrez @ Raul Nicolas @ George Aonuevo @ Mara Aonuevo, who is still at large.

In his defense, appellant asserts that there was no evidence that he committed any of the acts alleged in the information, particularly the intercalation on the ACC; that he deposited the checks subsequently issued or that he received the proceeds thereof; or that he conspired with any of his coaccused. He claims that his conviction was based on the alleged sworn statement and the transcript of stenographic notes of a supposed interview with appellant by the NPC personnel and the report of the National Bureau of Investigation (NBI). Appellant maintains that he signed the sworn statement while confined at the Philippine Heart Center and upon assurance that it would not be used against him. He was not assisted by counsel nor was he apprised of his constitutional rights when he executed the affidavit. To be found guilty of malversation, the prosecution must prove the following essential elements: a.] b.] c.] The offender is a public officer; He has the custody or control of funds or property by reason of the duties of his office; The funds or property involved are public funds or property for which he is accountable; and

d.] He has appropriated, taken or misappropriated, or has consented to, or through abandonment or negligence, permitted the taking by another person of, such funds or property.[8] Appellant insists that he could not be convicted under the allegations in the information without violating his constitutional right to due process and to be informed of the accusation against him. He points out that the information alleges willful and intentional commission of the acts complained of while the judgment found him guilty of inexcusable negligence amounting to malice. Appellants contention lacks merit. Malversation may be committed either through a positive act of misappropriation of public funds or property or passively through negligence by allowing another to commit such misappropriation.[9] To sustain a charge of malversation, there must either be criminal intent or criminal negligence[10] and while the prevailing facts of a case may not show that deceit attended the commission of the offense, it will not preclude the reception of evidence to prove the existence of negligence because both are equally punishable in Article 217 of the Revised Penal Code. More pointedly, the felony involves breach of public trust, and whether it is committed through deceit or negligence, the law makes it punishable and prescribes a uniform penalty therefor. Even when the information charges willful malversation, conviction for malversation through negligence may still be adjudged if the evidence ultimately proves that mode of commission of the offense.[11] Explicitly stated Even on the putative assumption that the evidence against petitioner yielded a case of malversation by negligence but the information was for intentional malversation, under the circumstances of this case

his conviction under the first mode of misappropriation would still be in order. Malversation is committed either intentionally or by negligence. The dolo or the culpa present in the offense is only a modality in the perpetration of the felony. Even if the mode charged differs from mode proved, the same offense of malversation is involved and conviction thereof is proper.[12] The question of whether or not an information charging the commission of the crime by means of deceit will preclude a conviction on the basis of negligence is neither novel nor of first impression. In Samson v. Court of Appeals, et al.,[13] we ruled that an accused charged with willful or intentional falsification can validly be convicted of falsification through negligence, thus: While a criminal negligent act is not a simple modality of a willful crime, as we held in Quizon vs. Justice of the Peace of Bacolor, but a distinct crime in itself, designated as a quasi offense in our Penal Code, it may however be said that a conviction for the former can be had under an information exclusively charging the commission of a willful offense, upon the theory that the greater includes the lesser offense. This is the situation that obtains in the present case. Appellant was charged with willful falsification but from the evidence submitted by the parties, the Court of Appeals found that in effecting the falsification which made possible the cashing of the checks in question, appellant did not act with criminal intent but merely failed to take proper and adequate means to assure himself of the identity of the real claimants as an ordinary prudent man would do. In other words, the information alleges acts which charge willful falsification but which turned out to be not willful but negligent. This is a case covered by the rule when there is a variance between the allegation and proof, and is similar to some of the cases decided by this Tribunal. .... The fact that the information does not allege that the falsification was committed with imprudence is of no moment for here this deficiency appears supplied by the evidence submitted by appellant himself and the result has proven beneficial to him. Certainly, having alleged that the falsification has been willful, it would be incongruous to allege at the same time that it was committed with imprudence for a charge of criminal intent is incompatible with the concept of negligence. In People v. Consigna, et al.,[14] we ruled that the afore-stated rationale also applies to the felony of malversation, that is, that an accused charged with willful malversation, in an information containing allegations similar to the present case, can be validly convicted of the same offense of malversation through negligence where the evidence sustains the latter mode of perpetrating the offense. Appellant next claims that he should be acquitted since his conviction was based on his sworn statement, transcript of stenographic notes from which the sworn statement was taken and the NBI Report, which are incompetent evidence. He contends that his sworn statement was taken without the benefit of counsel, in violation of his constitutional right under Section 12, Article III of the 1987 Constitution.

Paragraph 1, Section 12, Article III of the 1987 Constitution states that Section 12. (1). Any person under investigation for the commission of an offense shall have the right to be informed of his right to remain silent and to have competent and independent counsel preferably of his own choice. If the person cannot afford the services of counsel, he must be provided with one. These rights cannot be waived except in writing and in the presence of counsel. The investigation under the above-quoted provision refers to a custodial investigation where a suspect has already been taken into police custody[15] and the investigating officers begin to ask questions to elicit information and confessions or admissions from the suspect.[16] More specifically Custodial investigation involves any questioning initiated by law enforcement authorities after a person is taken into custody or otherwise deprived of his freedom of action in any significant manner. And, the rule begins to operate at once as soon as the investigation ceases to be a general inquiry into an unsolved crime and direction is then aimed upon a particular suspect who has been taken into custody and to whom the police would then direct interrogatory question which tend to elicit incriminating statements.[17] Succinctly stated, custodial investigation refers to the critical pre-trial stage when the investigation ceases to be a general inquiry into an unsolved crime but has begun to focus on a particular person as a suspect.[18] Such a situation contemplated has been more precisely described thus where After a person is arrested and his custodial investigation begins a confrontation arises which at best may be termed unequal. The detainee is brought to an army camp or police headquarters and there questioned and cross-examined not only by one but as many investigators as may be necessary to break down his morale. He finds himself in a strange and unfamiliar surrounding, and every person he meets he considers hostile to him. The investigators are well-trained and seasoned in their work. They employ all the methods and means that experience and study has taught them to extract the truth, or what may pass for it, out of the detainee. Most detainees are unlettered and are not aware of their constitutional rights. And even if they were, the intimidating and coercive presence of the officers of the law in such an atmosphere overwhelms them into silence....[19] Clearly, therefore, the rights enumerated by the constitutional provision invoked by accused-appellant are not available before government investigators enter the picture.[20] Thus we held in one case[21] that admissions made during the course of an administrative investigation by Philippine Airlines do not come within the purview of Section 12. The protective mantle of the constitutional provision also does not extend to admissions or confessions made to a private individual,[22] or to a verbal admission made to a radio announcer who was not part of the investigation,[23] or even to a mayor approached as a personal confidante and not in his official capacity.[24] Along the same vein, we held that a videotaped interview showing the accused unburdening his guilt willingly, openly and publicly in the presence of newsmen is not covered by the provision although in so

ruling, we warned trial courts to take extreme caution in further admitting similar confessions because we recognized the distinct possibility that the police, with the connivance of unscrupulous media practitioners, may attempt to legitimize coerced extrajudicial confessions and place them beyond the exclusionary rule by having an accused admit an offense on television.[25] Neither does the constitutional provision on custodial investigation extends to a spontaneous statement, not elicited through questioning by the authorities, but given in an ordinary manner whereby the accused orally admits having committed the crime,[26] nor to a person undergoing an audit examination because an audit examiner is not a law enforcement officer.[27] Thus, the flaw in appellants argument in this regard becomes immediately apparent vis--vis the foregoing legal yardsticks, considering that his statement was taken during the administrative investigation of NPCs audit team*28+ and before he was taken into custody. As such, the inquest was still a general inquiry into an unsolved offense at the time and there was, as yet, no specific suspect. Much less can appellant claim that he was in police custody because he was confined at the time at the Philippine Heart Center and he gave this statement to NPC personnel, not to police authorities.[29] Appellant can hardly claim that, under the prevailing circumstances at the time, whatever degree of compulsion may have existed went beyond the borders of the unobjectionable where impermissible levels of duress would force him into making false and incriminating declarations against his interest. While he may have been persuaded into doing so, he cannot feign that he was intimidated in such a way as to bring his statements within the ambit of the exclusionary constitutional provision. The fact that an NBI investigation was being contemporaneously conducted at the time the sworn statement was taken will not extricate appellant from his predicament. The essence of the constitutional safeguard is protection from coercion. The interview where the sworn statement is based was conducted by NPC personnel for the NPCs administrative investigation. Any investigation conducted by the NBI is a proceeding separate, distinct and independent from the NPC inquiry and should not be confused or lumped together with the latter. Appellant invokes Galman v. Pamaran[30] in insisting that the constitutional safeguard should have been applied notwithstanding that he was not yet arrested or under detention at the time. He also invites our attention to the pronouncements of Fr. Joaquin G. Bernas*31+ that the right to counsel is available if a person is in custody, even if he is not a suspect; or even if not yet in custody but he is a suspect. The contention is tenuous. Although we held in Galman that the constitutional protection covers not only confessions but admissions as well, we qualified the ruling with the statement that what is being eschewed is the evil of extorting a confession from the mouth of the person being interrogated. As defined, extortion is an act or practice of taking or obtaining anything from a person by illegal use of fear, whether by force, threats or any undue exercise of power.[32] In the context of obtaining an admission, extorting means compelling or coercing a confession or information by any means serving to overcome his power of resistance, or making the confession or admission involuntary.*33+ In this

case, we find nothing on record to support appellants claim that his statements were extorted from him. Furthermore, while indeed Galman taken together with the 1986 deliberations on what was later to become Section 12 (1) of the 1987 Constitution may lead to the conclusion that the rights are available when the person is already in custody as a suspect, or if the person is a suspect even if he is not yet deprived in any significant way of his liberty, Fr. Bernas[34] qualified this statement by saying that *J+urisprudence under the 1987 Constitution, however, has consistently held, following Escobedo, the stricter view, that the rights begin to be available only when the person is already in custody.*35+ Appellant next advances the argument that even if his sworn statement were admissible in evidence, the contents thereof may not be sufficient to sustain a conviction. He contends that although his statement was supposedly gathered from the transcript of stenographic notes of the conversation between him and Atty. Bagcal, neither Atty. Bagcal nor the person who actually prepared the sworn statement was presented. Therefore, the sworn statement is hearsay. The argument is puerile. It bears stressing that the prosecution presented as witness Atty. Lamberto P. Melencio who saw appellant at the hospital to show him the prepared statement and to verify from him the truth of its contents.[36] Atty. Melencio testified that he asked appellant to go over the document before affixing his signature thereto.[37] He also inquired whether or not appellant was coerced or intimidated by anybody when the statement was taken.[38] Appellant denied that he was coerced or intimidated,[39] affirmed the contents of the document as a true reflection of his statements,[40] and signed the same.[41] It need not be overemphasized that the sworn statement is a duly notarized document which has in its favor the presumption of regularity and, thus, it can be contradicted only by clear and convincing evidence. Without that sort of evidence, the presumption of regularity, the evidentiary weight conferred upon such public document with respect to its execution, as well as the statements and the authenticity of the signatures thereon, stand.[42] In disclaiming the authenticity of his sworn statement, appellant insists that at the time he signed the document, he was confined in the hospital and therefore not physically and mentally fit to assess the significance of his signature. This pretext however collides with the testimony of his own witness, Dr. Teresita Sadava, who stated that appellant was confined for three days and, who, when queried whether ischemic heart disease had any emotional or psychological effect, gave the inconclusive reply that it may or may not. Moreover, as aptly observed by the Sandiganbayan, although supposedly violated and repulsed as he was by the alleged falsity of the affidavit, it is strange that appellant, who is supposedly astute in business matters as he then occupied the position of Foreign Trader Analyst of the NPC, nevertheless felt it unnecessary to execute another affidavit retracting the same after his recovery from illness. Verily, evidence to be believed must not only proceed from the mouth of a credible witness, but must be credible in itself such as the common experience and observation of mankind can approve as probable under the circumstances.[43]

Appellant finally contends that both the NBI Investigation Report and the transcript of stenographic notes are hearsay for having been made extra-judicially. The record, however, shows that the prosecution presented the team leader of the NBI investigators who conducted the investigation, although his testimony was dispensed with as the parties stipulated on the existence and due execution of the NBI Investigation report albeit without admitting the truth of its contents. If at all, the admission of the reports existence is an acknowledgment that it is neither spurious nor counterfeit. All told, given the paucity of substance in the arguments advanced by appellant to prop up his cause, his appeal must fall. WHEREFORE, the May 28, 2002 Decision of the Sandiganbayan is hereby AFFIRMED in all respects. SO ORDERED.