G.R. No. 155407 November 11, 2008
PHILIPPINE NATIONAL OIL COMPANY, petitioner vs. LEONILO A. MAGLASANG and OSCAR S. MAGLASANG, respondents.

FACTS

The Philippine National Oil Company (PNOC) filed two complaints for eminent domain to acquire parcels of land for the construction and operation of the 125MW Upper Mahiao Geothermal Power Plant Project. The first complaint (Civil Case No. 3267-O) was filed on October 25, 1994, against Oscar S. Maglasang, owner of a 63,333-square meter lot (Lot No. 11900). The second complaint (Civil Case No. 3273-O) was filed on November 10, 1994, against Leonilo A. Maglasang, owner of a 98,206-square meter lot (Lot No. 11907). The Regional Trial Court (RTC) issued writs of possession after PNOC posted the required deposits. Upon finality of the orders of condemnation, the RTC appointed commissioners to determine just compensation. The commissioners submitted varying valuations: P1,000.00, P900.00, and P400.00/P85.00 per square meter. The RTC, setting the reckoning period at the time of the filing of the complaints, initially pegged the value at P300.00 per square meter but then increased it to P700.00 per square meter, applying an “inflation factor” and “adjustment factor” citing the case of Cosculluela v. Court of Appeals. Both parties appealed to the Court of Appeals (CA). The CA modified the RTC decision, reducing the just compensation to P300.00 per square meter, ruling that the RTC erred in applying an inflation and adjustment factor, and that just compensation should be based on the value at the time of taking, with legal interest for any delay. The CA ordered payment at P300.00 per square meter with 6% interest per annum from the respective filing dates until full payment. PNOC’s motion for reconsideration was denied.

ISSUE

The primary issue is the correct determination of just compensation for the expropriated properties, specifically: (1) the proper reckoning time for valuation, and (2) the correct valuation per square meter based on the character of the land (agricultural or industrial) at the time of taking.

RULING

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The Court held that in expropriation proceedings, the value of the land and its character at the time it was taken by the government are the criteria for determining just compensation. The Court found no merit in PNOC’s argument that the taking should be reckoned prior to the filing of the complaint (claiming possession via a Lease Agreement dated January 1, 1992). Citing Republic v. Castellvi, the Court ruled that a lease for a determinate time does not constitute a “taking” within the constitutional sense, as it does not oust the owner and deprive him of all beneficial enjoyment permanently. The “taking” occurred when the writs of possession were issued in December 1994. The Court also upheld the CA’s finding that the initial valuation of P300.00 per square meter was supported by evidence and that the properties were industrial, not agricultural, at the time of taking. The Court emphasized that factual findings of the lower courts, when affirmed by the CA, are generally binding and not subject to review. The CA correctly eliminated the RTC’s unauthorized “inflation factor” and “adjustment factor,” holding that just compensation is the fair market value at the time of taking, and any delay in payment is compensated by legal interest, not by inflating the land value.