G.R. No. 56378 , June 22, 1984
National Power Corporation, Petitioner, vs. The Court of Appeals; B.E. San Diego, Inc., Respondents.

FACTS

In 1961, petitioner National Power Corporation (NPC) negotiated with the spouses Sadang to purchase a portion of their agricultural land in Bulacan for an access road to the Angat Hydroelectric Project. With permission from the Sadangs, NPC entered and constructed the road in November 1961. On December 7, 1962, private respondent B.E. San Diego, Inc. acquired the entire land parcel at a public auction. NPC subsequently filed an expropriation case, later amended to implead San Diego. The trial court fixed just compensation at P3.75 per square meter, totaling P31,922.00, with 12% interest from March 1963.
Both parties appealed. The Court of Appeals modified the decision, increasing the compensation to P7.00 per square meter. It based this valuation on the land’s potential as a residential subdivision, a plan San Diego had after acquiring the property. NPC filed the present petition, arguing the appellate court erred in its valuation method and in not reducing the interest rate.

ISSUE

The primary issue is whether the Court of Appeals erred in fixing just compensation based on the land’s potential use as a subdivision, rather than its condition at the time of taking.

RULING

The Supreme Court reversed the Court of Appeals and reinstated the trial court’s decision. The legal logic is anchored on the fundamental principle in eminent domain that just compensation must be based on the property’s value at the time of its “taking” by the government. The “taking” for San Diego, the subsequent owner, commenced on December 7, 1962, when it acquired title. At that point, the land was agricultural, as evidenced by its classification and actual use. While future potential or adaptability for a higher use is a factor, it is not the controlling criterion. The principal determinant is the nature and value of the property as of the date of taking.
The Court cited established jurisprudence, including Republic v. Narciso and Municipality of La Carlota v. Spouses Baltazar, which consistently hold that the property’s character at the time of taking is paramount. The subdivision plan was non-existent when NPC entered the land and was conceived only by San Diego later. Therefore, the appellate court erred in primarily valuing the land as a potential subdivision site. The trial court’s valuation of P3.75 per square meter, considering its agricultural nature and the enhancement from the road construction, was reinstated. On the interest, the Court applied the ruling in Amigable v. Cuenca, setting legal interest at 6% per annum from December 7, 1962, until full payment.