Case No.

46_Ferrer (Art 437)

FACTS:
On November 23, 1994, respondent Lucman G. Ibrahim, in his personal capacity and in behalf of his co-
heirs, instituted an action against petitioner National Power Corporation (NAPOCOR) for recovery of possession of
land and damages before the 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 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 sub-terrain 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.

On August 7, 1996, the RTC rendered a Decision favouring the Ibrahims, ordering NAPOCOR to pay them
fair market value, monthly rentals, and moral damages. However, it did not order the dismantling of the tunnels.

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.

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:

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

ISSUE:
1. Whether or not the Ibrahims are entitled to just compensation by way of damages
2. If they are entitled to just compensation, what would be the basis of valuation

HELD:
Yes, the Inrahims are entitled to just compensation by way of damages because the subterranean portion of
their lot also belongs to them and was unjustly taken by NAPOCOR for public purposes.

In the present case, NAPOCOR 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, 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.

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.

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

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. 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.
 NAPOCOR 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. 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.

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 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.

The entitlement of respondents to just compensation having been settled, the issue now is on the manner of
computing the same. Just compensation has been understood to be the just and complete equivalent of the loss 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. 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. 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.

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.

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.