Inverse Condemnation: When Must NGCP Be Impleaded as an Indispensable Party

The Supreme Court recently settled an important question in property and eminent domain law: when a landowner sues for inverse condemnation over property affected by a transmission line, who must be named as defendant? In National Transmission Corporation v. Untiveros (G.R. No. 266880, May 15, 2024), the Court ruled that the National Grid Corporation of the Philippines (NGCP) must be impleaded as an indispensable party when the alleged taking occurred after NGCP took over the transmission system in 2009.

The Dispute

Landowners in Barangay Bucal, Batangas City filed a complaint for inverse condemnation against the National Transmission Corporation (TRANSCO). They claimed that in early 2017, TRANSCO encroached on their seven parcels of land, demolished structures and trees, and restricted their use of the properties within a 40-meter range of the Batangas-Makban 230KV Transmission Line. TRANSCO even asserted ownership over the properties, claiming the acquisition was necessary for improving the electricity transmission system.

The landowners sought to compel TRANSCO to exercise its power of eminent domain and pay just compensation.

The Procedural Issue

The Regional Trial Court (RTC) ordered TRANSCO to deposit PHP 138,448,000.00—100% of the properties' value based on the Bureau of Internal Revenue's zonal valuation—pursuant to Republic Act No. 10752 (the Right-of-Way Act).

TRANSCO then filed motions to archive the case and to implead NGCP as an indispensable party. TRANSCO argued that NGCP, not TRANSCO, operated and maintained the transmission system under a Concession Agreement. The RTC denied both motions, ruling that NGCP's right of eminent domain under RA 9511 did not automatically make it an indispensable party.

TRANSCO elevated the matter to the Court of Appeals (CA) via certiorari, but the CA dismissed the petition on procedural grounds: late filing, incomplete docket fees, and failure to attach certified true copies of the RTC resolution.

The Supreme Court's Ruling

The Supreme Court relaxed the procedural rules, citing the exceptional circumstances of the COVID-19 pandemic and the substantial merits of the case. The Court then resolved the substantive issue.

On archiving: The Court affirmed the RTC's denial of the motion to archive. Under OCA Circular No. 89-2004, a civil case may be archived only in limited instances—such as pending settlement or an interlocutory order elevated to a higher court. The pending inclusion of an indispensable party is not among them.

On NGCP as an indispensable party: The Court ruled that NGCP is indeed an indispensable party. Under Rule 3, Section 7 of the Rules of Court, parties in interest without whom no final determination can be had must be joined. An indispensable party has such an interest in the controversy that a final decree cannot be made without affecting that interest.

The Court explained that inverse condemnation is an action to recover the value of property taken by the government or its agency without formal expropriation proceedings. Implicit in this recourse is the need for the entity ultimately accountable for the taking to be the defendant.

Here, the Court found that NGCP assumed the operation and maintenance of the transmission system on January 15, 2009, under the Concession Agreement. Section 8 of RA 9136 (EPIRA) granted TRANSCO the power of eminent domain, but the Concession Agreement transferred operational responsibility to NGCP. RA 9511 likewise granted NGCP the right of eminent domain.

Since the alleged encroachment occurred in 2017—well after the commencement date—NGCP was accountable for the claims. The Concession Agreement even confirmed this: TRANSCO remained liable only for claims on existing rights of way whose causes of action accrued before the commencement date.

The Court emphasized that the absence of an indispensable party renders all subsequent actions of the court null and void for want of jurisdiction. It remanded the case for NGCP's inclusion.

Practical Takeaways

• Inverse condemnation suits must name the entity actually responsible for the taking. If the taking occurred after NGCP assumed operations in 2009, NGCP—not just TRANSCO—should be impleaded.
• Failure to implead an indispensable party is jurisdictional. Any judgment rendered without such party is void, even as to the parties present.
• Procedural rules may be relaxed for compelling reasons. The Court may overlook late filings or incomplete docket fees where substantial justice requires, particularly during extraordinary circumstances like a pandemic.
• A right-of-way easement can constitute "taking." Restrictions that substantially impair property value or interfere with its use—such as a 40-meter transmission line buffer—may trigger the constitutional requirement of just compensation.
• Archiving a case has limited grounds. A pending motion to implead a party does not warrant archiving under OCA Circular No. 89-2004.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.