G.R. No.

196140, January 27, 2016

NATIONAL POWER CORPORATION, Petitioner, v. ELIZABETH MANALASTAS AND BEA CASTILLO,

DECISION

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying that the
Decision1 of the Court of Appeals (CA) promulgated on September 9, 2010, and its Resolution 2 dated March
14, 2011, denying petitioner's Motion for Partial Reconsideration be reversed and set aside.

Sometime in 1977 to 1978, petitioner, a government-owned and controlled corporation involved in the
development of hydro-electric generation of power and production of electricity, and the construction,
operation and maintenance of power plants, transmission lines, power stations and substations, among
others, constructed a 230 KV transmission line for the Naga-Tiwi line and a 69 KV transmission line for the
Naga-Tinambac line on respondents' parcel of land covered by TCT No. 26263, affecting an area of 26,919
square meters. Petitioner entered said land without the knowledge or consent of respondents, without
properly initiating expropriation proceedings, and without any compensation to respondents-landowners.
Because of said transmission lines, respondents alleged that they could no longer use their land as part of a
subdivision project as originally intended, which ultimately caused financial loss to their family. Thus, in July
2000, respondents (plaintiffs below, who were then joined by their mother, Celedonia, and brother, Mariano;
Celedonia and Mariano are no longer impleaded as parties in this petition as the CA Decision has attained
finality as to them)3 filed a complaint against petitioner and its officers with the Regional Trial Court of Naga
City (RTC). Respondents demanded the removal of the power lines and its accessories and payment of
damages, or in the alternative, payment of the fair market value of the affected areas totalling 26,000
square meters of respondents' land at P800.00 per square meter.

On November 17, 2006, the RTC issued a Decision, the dispositive portion of which reads as follows:

WHEREFORE, defendant NAPOCOR is hereby ordered to:

1) Pay plaintiffs the amount of PESOS: NINETY-TWO MILLION EIGHT HUNDRED TWENTY-SEVEN THOUSAND
and THREE HUNDRED FIFTY-ONE (P92,827,351.00), by way of just compensation, broken down as
follows:ChanRoblesVirtualawlibrary

a) For (he plaintiffs Elizabeth Manalastas and Bea Castillo:

P32,033,610.00 - Value of the land

b) For the plaintiffs Celedonia Mariano and Enrico Mariano:

P1,000,200.00  - Value of the land

With cost against plaintiff (sic) NAPOCOR.

SO ORDERED.4 chanroblesvirtuallawlibrary

On appeal to the CA, herein petitioner argued that the RTC erred in factoring the devaluation of the peso in
the computation of the fair market value of respondents' land. In a Decision dated September 9, 2010, the
CA affirmed the RTC judgment with modification, reducing the award to Celedonia and Enrico Mariano
(respondents' co-plaintiffs below) to P1,678,908.00. The CA ruled that petitioner could no longer assail the
valuation that petitioner itself recommended, the same being a judicial admission. Moreover, the CA pointed
out that taking an inconsistent position on appeal cannot be allowed. Petitioner's motion for reconsideration
was denied in a Resolution dated March 14, 2010.
Hence, the present petition where petitioner alleges as follows:

I.

ESTOPPEL IS INOPERATIVE AGAINST THE GOVERNMENT; THE INFLATION FACTOR SHOULD NOT BE
INCLUDED IN THE COMPUTATION OF JUST COMPENSATION chanRoblesvirtualLawlibrary

II.

THE DETERMINATION OF JUST COMPENSATION IS A JUDICIAL FUNCTION. COURTS ARE THEREFORE NOT
BOUND TO UPHOLD A PARTY'S FORMULATION OF JUST COMPENSATION; [and] chanRoblesvirtualLawlibrary

III.

THE AWARD OF EIGHTY-FIVE MILLION EIGHT HUNDRED FIFTY THOUSAND AND SEVENTY-ONE PESOS
(Php85,850,071.00) WILL UNJUSTLY ENRICH THE RESPONDENTS. 5 chanroblesvirtuallawlibrary

The Court finds the petition meritorious.

The bone of contention in this case is the inclusion of the inflation rate of the Philippine Peso in determining
the just compensation due to respondents. Petitioners maintain that such inclusion of the inflation rate in
arriving at the value of just compensation has no legal basis, and it was a palpable mistake on the part of its
representatives and counsel below to make a recommendation factoring in said inflation rate in the
computation of just compensation. None of the parties contest the finding that the fair market value of the
property at the time of taking was Php 170.00 per square meter.

It should be noted that in Secretary of the Department of Public Works and Highways, et al. v. Spouses
Heracleo and Ramona Tecson,6 the Court stressed that "just compensation is the value of the property at
the time of taking that is controlling for purposes of compensation." In a motion for reconsideration of the
Decision in said case, the landowners argued that it would be unjust if the amount that will be awarded to
them today will be based on the value of the property at the time of actual taking. In its Resolution dated
April 21, 2015, the Court fully explained that:

x x x the State is not obliged to pay premium to the properly owner for appropriating the latter's property; it
is only bound to make good the loss sustained by the landowner, with due consideration of the
circumstances availing at the time the property was taken. More, the concept of just compensation does not
imply fairness to the property owner alone. Compensation must also be just to the public, which ultimately
bears the cost of expropriation.

Notwithstanding the foregoing, we recognize that the owner's loss is not only his property but also its
income-generating potential. Thus, when properly is taken, full compensation of its value must immediately
be paid to achieve a fair exchange for the property and the potential income lost. Accordingly, in Apo, we
held that the rationale for imposing the interest is to compensate the petitioners for the income they would
have made had they been proprely compensated for their properties at the time of the taking. Thus:

We recognized in Republic v. Court of Appeals the need for prompt payment and the necessity of the
payment of interest to compensate for any delay in the payment of compensation for property already
taken. We ruled in this ease that:ChanRoblesVirtualawlibrary

The constitutional limitation of "just compensation" is considered to be the sum equivalent to the market
value of the property, broadly described to be the price fixed by the seller in open market in the usual and
ordinary course of legal action and competition or the fair value of the property as between one who
receives, and one who desires to sell, i[f] fixed at the time of the actual taking by the government.

Thus, if property is taken for public use before compensation is deposited with the court having
jurisdiction over the case, the final compensation must include interest/sj on its just value to be
computed from the time the property is taken to the time when compensation is actually paid or
deposited with the court. In fine, between the taking of the property and the actual payment,
legal interest/sj accrue in order to place the owner in a position as good as (but not better than)
the position he was in before the taking occurred. [Emphasis supplied]
In other words, the just compensation due to the landowners amounts to an effective forbearance
on the part of the State—a proper subject of interest computed from the time the property was
taken until the full amount of just compensation is paid—in order to eradicate the issue of the
constant variability of the value of the currency over time. In the Court's own words: ChanRoblesVirtualawlibrary

The Bulacan trial court, in its 1979 decision, was correct in imposing interests on the zonal value of the
property to he computed from the time petitioner instituted condemnation proceedings and "look" the
property in September 1969. This allowance of interest on the amount found to be the value of the
property as of the time of the taking computed, being an effective forbearance, at 12% per
annum should help eliminate the issue of the constant fl net nation and inflation of the value of
the currency over time x x x.7

The foregoing clearly dictates that valuation of the land for purposes of determining just compensation
should not include the inflation rate of the Philippine Peso because the delay in payment of the price of
expropriated land is sufficiently recompensed through payment of interest on the market value of the land
as of the time of taking from the landowner.

Moreover, the fact that it was petitioner's own counsel below that recommended the inclusion of the inflation
rate in the determination of just compensation should not be taken against petitioner. Alter all, it is
ultimately the courts' mandated duty to adjudge whether the parties' submissions are correct. It is the
courts, not the litigants, who decide on the proper interpretation or application of the law and, thus, only the
courts may determine the rightful compensation in accordance with the law and evidence presented by the
parties. It is incongruous for the court below to uphold a proposition merely because it was recommended
by a party, despite the same being erroneous. Thus, in Secretary of Finance v. Oro Maura Shipping Lines,8
the Court emphasized, thus:

x x x Assuming further x x x that the Collector of the Port of Manila similarly erred, we reiterate the legal
principle that estoppel generally finds no application against the State when it acts to rectify mistakes,
errors, irregularities, or illegal acts, of its officials and agents, irrespective of rank. This ensures efficient
conduct of the affairs of the State without any hindrance on the part of the government from irnplementing
laws and regulations, despite prior mistakes or even illegal acts of its agents shackling government
operations and allowing others, some by malice, to profit from official error or misbehavior. The rule holds
true even if the rectification prejudices parties who had meanwhile received benefits.9 chanrobleslaw

Such important principle was reiterated in the more recent Republic v. Bacas,10 where the Court stated that
even "[g]ranting that the persons representing the government were negligent, the doctrine of estoppel
cannot be taken against the Republic." 11 Again, in National Power Corporation v. Samar,12 the Court
admonished the trial court to disregard even the panel of commissioners' recommended valuation of the
land if such valuation is not the relevant value at the time the NPC took possession of the property. 13 The
cases cited by the lower court to justify its ruling that petitioner is bound by the recommendation made by
its counsel before the trial court, are all inapplicable to the present case as said cases do not involve
agencies or instrumentalities of the State.

Lastly, in addition to the award for interests, Article 2229 of the Civil Code provides that "[e]xemplary or
corrective damages are imposed by way of example or correction for the public good" and Article 2208 of
the same code states that attorney's fees may be awarded by the court in cases where such would be just
and equitable. As held in the Resolution dated April 21, 2015 in Secretary of the Department of Public Works
and Highways, et al. v. Spouses Heracleo and Ramona Tecson,14additional compensation in the form of
exemplary damages and attorney's fees should likewise be awarded as a consequence of the
government agency's illegal occupation of the owner's property for a very long time, resulting in
pecuniary loss to the owner. Indeed, government agencies should be admonished and made to realize
that its negligence and inaction in failing to commence the proper expropriation proceedings before taking
private property, as provided for by law, cannot be countenanced by the Court.

To recapitulate, the formula for determination of just compensation to landowners does not include the
factor for inflation rate, as inflation is properly accounted for through payment of interest on the amount due
to the landowner, and through the award of exemplary damages and attorney's fees in cases where there
was irregularity in the taking of property.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 89366 is
MODIFIED, such that petitioner is adjudged liable to PAY JUST COMPENSATION to respondents at the
rate of Php 170.00 per square meter, subject to interest at the rate of twelve percent (12%) per annum
from the time of taking in 1978 up to June 30, 2013 and, thereafter, six percent (6%) per annum from July
1, 2013 until full satisfaction, pursuant to Bangko Sentral ng Pilipinas -Monetary Board Circular No. 799,
Series of 2013 and applicable jurisprudence. Petitioner is, likewise, ORDERED to PAY respondents
exemplary damages in the amount of Php500,000.00 and attorney's fees in the amount of Php200,000.00.

SO ORDERED. cralawlawlibrary

Velasco, Jr., (Chairperson), Peralta, Perez, Reyes, and Jardeleza, JJ., concur