FACTS : The case arose from an expropriation complaint filed by the respondent to acquire 11,460 square meters of Lot No. 104 in Baloi, Lanao del Norte for the maintenance of the Baloi-Agus 2 138kV Transmission Line (BATL), which had been constructed by the National Power Corporation (NPC) in 1978. Pursuant to Republic Act No. 9136 (Electric Power Industry Reform Act of 2001), the transmission functions of the NPC were transferred to the National Transmission Corporation (TRANSCO), whose management, operation, and maintenance were later assumed by the respondent. To facilitate the maintenance of the transmission lines, the respondent initiated expropriation proceedings in 2014, deposited the amount equivalent to 100% of the Bureau of Internal Revenue (BIR) zonal value as required for the issuance of a writ of possession, and was subsequently placed in possession of the property. The petitioners, however, sought substantially higher just compensation, including accrued interest and rentals. After the parties failed to reach an amicable settlement, the Regional Trial Court (RTC), assisted by commissioners pursuant to the Rules of Court governing expropriation proceedings, granted the complaint and awarded just compensation amounting to ₱49,622,050.00, directing the respondent to pay the deficiency after deducting its initial deposit.
On appeal, the Court of Appeals (CA) affirmed the respondent's authority to expropriate the property but modified the RTC's ruling by deleting the additional award of ₱47,865,650.00 as just compensation. The CA held that because the property originated from a free patent, it was subject to the 60-meter legal easement of right-of-way in favor of the government under Section 112 of Commonwealth Act No. 141 (Public Land Act). Under this provision, the owner of the affected property is generally entitled only to compensation for the value of improvements situated within the easement. The CA further observed that the transmission lines had already been constructed in 1978, whereas the petitioners' predecessor-in-interest acquired title to the property only in 2012. Consequently, the petitioners could not claim actual loss arising from the existence of the transmission line because the easement had long been established before they acquired ownership. Moreover, the appellate court found no competent evidence showing the existence or value of improvements on the property at the time of the original taking in 1978, as the evidence presented referred only to improvements introduced during the filing of the expropriation case. For these reasons, the CA sustained the expropriation but deleted the RTC's award of additional just compensation.
ISSUE : WON petitioners are entitled to just compensation and correspondingly, the reckoning point for its computation.
HELD : The Supreme Court denied the petition and upheld the Court of Appeals' ruling that the petitioners were not entitled to just compensation for the portion of their property traversed by the Baloi-Agus 2 138kV Transmission Line (BATL). The Court first affirmed the respondent's authority to expropriate property, holding that while the power of eminent domain is an inherent attribute of State sovereignty, Congress may validly delegate its exercise to government agencies and quasi-public entities. Pursuant to Republic Act No. 9511, which granted the respondent its legislative franchise, the respondent was expressly authorized under Section 4 to exercise the power of eminent domain whenever reasonably necessary for the construction, expansion, operation, and maintenance of the national transmission system, subject to the constitutional and statutory requirements governing expropriation, including the payment of just compensation. This authority complements the respondent's functions under Republic Act No. 9136 (Electric Power Industry Reform Act of 2001), which transferred the transmission functions of the National Power Corporation (NPC) to the National Transmission Corporation (TRANSCO) and eventually to the respondent. Since the parties did not dispute the necessity of the expropriation or the public purpose it served, the only issue before the Court was whether the petitioners were entitled to just compensation.
The Court ruled that the reckoning point for determining just compensation was the date of the actual taking in 1978, when the NPC entered the property and constructed the transmission lines, and not the filing of the expropriation complaint in 2014. Citing Republic v. Vda. de Castellvi, National Transmission Corporation v. Oroville Development Corporation, National Power Corporation v. Vda. de Capin, National Power Corporation v. Manalastas, and Republic v. Heirs of Borbon, the Court reiterated that "taking" occurs when the government permanently enters private property under lawful authority for public use and substantially deprives the owner of its beneficial enjoyment. Applying these principles, the Court found that the BATL had occupied the property continuously since 1978, thereby constituting the actual taking contemplated under the law. Consequently, just compensation, if any, should be determined based on the property's condition and ownership at that time. The Court emphasized that just compensation is measured by the owner's loss rather than the government's gain, and therefore only the owner at the time of the taking is entitled to compensation.
The Court held that the petitioners were not entitled to just compensation because they and their predecessor-in-interest acquired ownership of the property only in 2012, or thirty-four years after the transmission line had already been constructed. At the time of the taking in 1978, ownership of the land remained with the government, as the petitioners' predecessor acquired the property only through a free patent issued decades later. The Court explained that an application for a free patent constitutes recognition that the land is public land, citing Yabut v. Alcantara, and that mere possession, even for several decades, does not automatically convert public land into private property. Moreover, the petitioners failed to prove ownership or lawful possession prior to 1978 and never questioned the NPC's occupation of the property or sought compensation through inverse condemnation, circumstances that further weakened their claim. The Court also stressed that the petitioners purchased or acquired the property with full knowledge that the transmission line had long existed, meaning they suffered no compensable injury from its installation.
The Court further ruled that the property remained subject to the 60-meter statutory right-of-way easement under Section 112 of Commonwealth Act No. 141 (Public Land Act), as amended by Presidential Decree No. 635, because it originated from a homestead or free patent. Since the transmission corridor occupied only 30 meters, it fell squarely within the statutory easement, under which the landowner may recover only damages for existing improvements and not the value of the land itself. The Court rejected the petitioners' argument that Republic Act No. 8974 and Republic Act No. 10752 (The Right-of-Way Act) had impliedly repealed Section 112, emphasizing that repeals by implication are disfavored and that Section 4 of R.A. No. 10752 expressly recognizes the continued applicability of Section 112 of C.A. No. 141 to lands acquired through free patents. The Court likewise found no factual basis for awarding damages for improvements because the records contained no competent evidence that improvements existed at the time of the taking in 1978. Instead, the evidence showed that most trees were planted only a few years before the filing of the complaint, indicating an attempt to increase the value of the claim.
Finally, the Court held that the ₱1,756,400.00 previously deposited by the respondent, representing 100% of the property's BIR zonal value, was mistakenly paid under the erroneous belief that the petitioners were legally entitled to just compensation. Applying the doctrine of solutio indebiti under Article 2154 of the Civil Code, which requires the return of money or property unduly delivered through mistake when the recipient has no legal right thereto, the Court ordered the petitioners to return the entire amount to the respondent. Accordingly, while the Court affirmed the respondent's authority to expropriate the property for public use, it held that the petitioners had no legal entitlement to compensation because they were not the owners at the time of the taking, the property remained subject to the statutory easement under Commonwealth Act No. 141, and no compensable improvements existing in 1978 had been proven. Consequently, the petition was denied, the Court of Appeals' decision was affirmed with modification, and the petitioners were ordered to refund the amount previously deposited by the respondent.
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