Just Compensation in Inverse Condemnation Proceedings When Entry into the Property was Concealed from Owner

NATIONAL POWER CORPORATION, Petitioner, versus HEIRS OF MACABANGKIT SANGKAY Respondents. (G.R. No. 165828; 24 August 2011)

Just Compensation

The Constitution decrees that private property shall not be taken for public use without payment of just compensation (Section 9, Article III). It is a well-settled  rule  that just compensation must be reckoned from the time of  taking or filing of complaint whichever comes first. Due to peculiar attendant circumstances, however, the case of National Power Corporation vs. Heirs of Macabangkit deviated from this rule.


On November 21, 1997, the Heirs of Macabangkit, as the owners of land with an area of 221,573 square meters situated in Ditucalan, Iligan City, sued the National Power Corporation (NPC) for the recovery of damages and of the property, with the alternative prayer for the payment of just compensation.  They alleged that they had belatedly discovered that one of the underground tunnels of NPC that diverted the water flow of the Agus River for the operation of the Hydroelectric Project in Agus V, Agus VI and Agus VII traversed their land.

The trial court (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 pegged just compensation at ₱500.00/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 Court of Appeals (CA) upheld the RTC.

Affirming the appealed decision, the Supreme Court said:

“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.” 

The Supreme Court clarified the ruling further in the case of NPC v. Dianalan (G.R. Nos. 212059-60), thus:

“Macabangkit Sangkay is an exception to the general rule that just compensation must be reckoned from the time of taking or filing of complaint whichever comes first. Macabangkit Sangkay came to fore due to the peculiar circumstances of the case particularly how NPC did not even inform the property owners of the construction of the underground tunnels. It may even be said that there, NPC employed stealth instead of complying with the legal process of expropriation.”