Iron and Steel Authority vs. Court of Appeals, G.R. No. 102976, October 25, 1995
Iron and Steel Authority vs. Court of Appeals, G.R. No. 102976, October 25, 1995
Iron and Steel Authority vs. Court of Appeals, G.R. No. 102976, October 25, 1995
648
THIRD DIVISION
[ G.R. No. 102976, October 25, 1995 ]
IRON AND STEEL AUTHORITY, PETITIONER, VS. THE COURT OF
APPEALS AND MARIA CRISTINA FERTILIZER CORPORATION,
RESPONDENTS.
DECISION
FELICIANO, J.:
Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree
(P.D.) No. 272 dated 9 August 1973 in order, generally, to develop and promote
the iron and steel industry in the Philippines. The objectives of the ISA are
spelled out in the following terms:
(a) to strengthen the iron and steel industry of the Philippines and
to expand the domestic and export markets for the products of
the industry;
(b) to promote the consolidation, integration and rationalization of
the industry in order to increase industry capability and
viability to service the domestic market and to compete in
international markets;
(c) to rationalize the marketing and distribution of steel products in
order to achieve a balance between demand and supply of iron
and steel products for the country and to ensure that industry
prices and profits are at levels that provide a fair balance
between the interests of investors, consumers suppliers, and the
public at large;
(d) to promote full utilization of the existing capacity of the
industry, to discourage investment in excess capacity, and in
coordination with appropriate government agencies to
encourage capital investment in priority areas of the industry;
(e) to assist the industry in securing adequate and low-cost supplies
of raw materials and to reduce the excessive dependence of the
country on imports of iron and steel."
The list of powers and functions of the ISA included the following:
"Sec. 4. Powers and Functions. — The authority shall have the
following powers and functions:
x x x x x x x x x
(Italics supplied)
P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting
from 9 August 1973.[1] When ISA's original term expired on 10 October 1978, its
term was extended for another ten (10) years by Executive Order No. 555 dated
31 August 1979.
The National Steel Corporation ("NSC") then a wholly owned subsidiary of the
National Development Corporation which is itself an entity wholly owned by the
National Government, embarked on an expansion program embracing, among
other things, the construction of an integrated steel mill in Iligan City. The
construction of such a steel mill was considered a priority and major industrial
project of the Government. Pursuant to the expansion program of the NSC,
Proclamation No. 2239 was issued by the President of the Philippines on 16
November 1982 withdrawing from sale or settlement a large tract of public land
(totalling about 30.25 hectares in area) located in Iligan City, and reserving that
land for the use and immediate occupancy of NSC.
Since certain portions of the public land subject matter of Proclamation No. 2239
were occupied by a non-operational chemical fertilizer plant and related
facilities owned by private respondent Maria Cristina Fertilizer Corporation
("MCFC"), Letter of Instruction (LOI) No. 1277, also dated 16 November 1982, was
issued directing the NSC to "negotiate with the owners of MCFC, for and on
behalf of the Government, for the compensation of MCFC's present occupancy
rights on the subject land." LOI No. 1277 also directed that should NSC and
private respondent MCFC fail to reach an agreement within a period of sixty (60)
days from the date of LOI No. 1277, petitioner ISA was to exercise its power of
eminent domain under P.D. No. 272 and to initiate expropriation proceedings in
respect of occupancy rights of private respondent MCFC relating to the subject
public land as well as the plant itself and related facilities and to cede the same
to the NSC.[2]
Negotiations between NSC and private respondent MCFC did fail. Accordingly,
on 18 August 1983, petitioner ISA commenced eminent domain proceedings
against private respondent MCFC in the Regional Trial Court, Branch 1, of Iligan
City, praying that it (ISA) be placed in possession of the property involved upon
depositing in court the amount of P1,760,789.69 representing ten percent (10%)
of the declared market values of that property. The Philippine National Bank, as
mortgagee of the plant facilities and improvements involved in the
expropriation proceedings, was also impleaded as party-defendant.
On 17 September 1983, a writ of possession was issued by the trial court in favor
of ISA. ISA in turn placed NSC in possession and control of the land occupied by
MCFC's fertilizer plant installation.
The case proceeded to trial. While the trial was on-going, however, the statutory
existence of petitioner ISA expired on 11 August 1988. MCFC then filed a motion
to dismiss, contending that no valid judgment could be rendered against ISA
which had ceased to be a juridical person. Petitioner ISA filed its opposition to
this motion.
In an Order dated 9 November 1988, the trial court granted MCFC's motion to
dismiss and did dismiss the case. The dismissal was anchored on the provision of
the Rules of Court stating that "only natural or juridical persons or entities
authorized by law may be parties in a civil case."[3] The trial court also referred
to non-compliance by petitioner ISA with the requirements of Section 16, Rule 3
of the Rules of Court.[4]
Petitioner ISA moved for reconsideration of the trial court's Order, contending
that despite the expiration of its term, its juridical existence continued until the
winding up of its affairs could be completed. In the alternative, petitioner ISA
urged that the Republic of the Philippines, being the real party-in-interest,
should be allowed to be substituted for petitioner ISA. In this connection, ISA
referred to a letter from the Office of the President dated 28 September 1988
which especially directed the Solicitor General to continue the expropriation
case.
The trial court denied the motion for reconsideration, stating, among other
things, that:
"The property to be expropriated is not for public use or benefit [—] but
for the use and benefit [—] of NSC, a government controlled private
corporation engaged in private business and for profit, specially now
that the government, according to newspaper reports, is offering for
sale to the public its [shares of stock] in the National Steel Corporation
in line with the pronounced policy of the present administration to
disengage the government from its private business ventures."[5]
(Brackets supplied)
"It is our considered opinion that under the law, the complaint cannot
prosper, and therefore, has to be dismissed without prejudice to the
refiling of a new complaint for expropriation if the Congress sees it fit."
(Italics supplied)
At the same time, however, the Court of Appeals held that it was premature for
the trial court to have ruled that the expropriation suit was not for a public
purpose, considering that the parties had not yet rested their respective cases.
In this Petition for Review, the Solicitor General argues that since ISA initiated
and prosecuted the action for expropriation in its capacity as agent of the
Republic of the Philippines, the Republic, as principal of ISA, is entitled to be
substituted and to be made a party-plaintiff after the agent ISA's term had
expired.
Private respondent MCFC, upon the other hand, argues that the failure of
Congress to enact a law further extending the term of ISA after 11 August 1988
evinced a "clear legislative intent to terminate the juridical existence of ISA," and
that the authorization issued by the Office of the President to the Solicitor
General for continued prosecution of the expropriation suit could not prevail
over such negative intent. It is also contended that the exercise of the eminent
domain by ISA or the Republic is improper, since that power would be exercised
"not on behalf of the National Government but for the benefit of NSC."
The principal issue which we must address in this case is whether or not the
Republic of the Philippines is entitled to be substituted for ISA in view of the
expiration of ISA's term. As will be made clear below, this is really the only issue
which we must resolve at this time.
Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil
action:
Under the above quoted provision, it will be seen that those who can be
parties to a civil action may be broadly categorized into two (2) groups:
(a) those who are recognized as persons under the law whether
natural, i.e., biological persons, on the one hand, or juridical persons
such as corporations, on the other hand; and
Examination of the statute which created petitioner ISA shows that ISA falls
under category (b) above. P.D. No. 272, as already noted, contains express
authorization to ISA to commence expropriation proceedings like those here
involved:
"Section 4. Powers and Functions. — The Authority shall have the
following powers and functions:
x x x x x x x x x
(j) to initiate expropriation of land required for basic iron and steel
facilities for subsequent resale and/or lease to the companies
involved if it is shown that such use of the State's power is
necessary to implement the construction of capacity which is
needed for the attainment of the objectives of the Authority;
(Italics supplied)
It should also be noted that the enabling statute of ISA expressly authorized it to
enter into certain kinds of contracts "for and in behalf of the Government" in the
following terms:
(j) to negotiate, and when necessary, to enter into contracts for and
in behalf of the government, for the bulk purchase of materials,
supplies or services for any sectors in the industry, and to
maintain inventories of such materials in order to insure a
continuous and adequate supply thereof and thereby reduce
operating costs of such sector;
(Italics supplied)
Clearly, ISA was vested with some of the powers or attributes normally
associated with juridical personality. There is, however, no provision in P.D. No.
272 recognizing ISA as possessing general or comprehensive juridical personality
separate and distinct from that of the Government. The ISA in fact appears to the
Court to be a non-incorporated agency or instrumentality of the Republic of the
Philippines, or more precisely of the Government of the Republic of the
Philippines. It is common knowledge that other agencies or instrumentalities of
the Government of the Republic are cast in corporate form, that is to say, are
incorporated agencies or instrumentalities, sometimes with and at other times
without capital stock, and accordingly vested with a juridical personality distinct
from the personality of the Republic. Among such incorporated agencies or
instrumentalities are: National Power Corporation;[6] Philippine Ports Authority;
[7] National Housing Authority;[8] Philippine National Oil Company;[9] Philippine
National Railways;[10] Public Estates Authority;[11] Philippine Virginia Tobacco
Administration;[12] and so forth. It is worth noting that the term "Authority" has
been used to designate both incorporated and non-incorporated agencies or
instrumentalities of the Government.
"Sec. 2. General Terms Defined. — Unless the specific words of the text,
or the context as a whole, or a particular statute, require a different
meaning:
x x x x x x x x x
(4) Agency of the Government refers to any of the various units of the
Government, including a department, bureau, office, instrumentality,
or government-owned or controlled corporation, or a local government
or a distinct unit therein.
x x x x x x x x x
(Italics supplied)
In the instant case, ISA instituted the expropriation proceedings in its capacity as
an agent or delegate or representative of the Republic of the Philippines
pursuant to its authority under P.D. No. 272. The present expropriation suit was
brought on behalf of and for the benefit of the Republic as the principal of ISA.
Paragraph 7 of the complaint stated:
"7. The Government, thru the plaintiff ISA, urgently needs the subject
parcels of land for the construction and installation of iron and steel
manufacturing facilities that are indispensable to the integration of the
iron and steel making industry which is vital to the promotion of public
interest and welfare." (Italics supplied)
The principal or the real party in interest is thus the Republic of the Philippines
and not the National Steel Corporation, even though the latter may be an
ultimate user of the properties involved should the condemnation suit be
eventually successful.
From the foregoing premises, it follows that the Republic of the Philippines is
entitled to be substituted in the expropriation proceedings as party-plaintiff in
lieu of ISA, the statutory term of ISA having expired. Put a little differently, the
expiration of ISA's statutory term did not by itself require or justify the dismissal
of the eminent domain proceedings.
It is also relevant to note that the non-joinder of the Republic which occurred
upon the expiration of ISA's statutory term, was not a ground for dismissal of
such proceedings since a party may be dropped or added by order of the court,
on motion of any party or on the court's own initiative at any stage of the action
and on such terms as are just.[13] In the instant case, the Republic has precisely
moved to take over the proceedings as party-plaintiff.
In E.B. Marcha, the Court also stressed that to require the Republic to commence
all over again another proceeding, as the trial court and Court of Appeals had
required, was to generate unwarranted delay and create needless repetition of
proceedings:
As noted earlier, the Court of Appeals declined to permit the substitution of the
Republic of the Philippines for the ISA upon the ground that the action for
expropriation could not prosper because the basis for the proceedings, the ISA's
exercise of its delegated authority to expropriate, had become legally ineffective
by reason of the expiration of the statutory term of the agent or delegate, i.e., ISA.
Since, as we have held above, the powers and functions of ISA have reverted to
the Republic of the Philippines upon the termination of the statutory term of ISA,
the question should be addressed whether fresh legislative authority is
necessary before the Republic of the Philippines may continue the expropriation
proceedings initiated by its own delegate or agent.
While the power of eminent domain is, in principle, vested primarily in the
legislative department of the government, we believe and so hold that no new
legislative act is necessary should the Republic decide, upon being substituted
for ISA, in fact to continue to prosecute the expropriation proceedings. For the
legislative authority, a long time ago, enacted a continuing or standing delegation
of authority to the President of the Philippines to exercise, or cause the exercise
of, the power of eminent domain on behalf of the Government of the Republic of
the Philippines. The 1917 Revised Administrative Code, which was in effect at
the time of the commencement of the present expropriation proceedings before
the Iligan Regional Trial Court, provided that:
x x x x x x x x x
In the present case, the President, exercising the power duly delegated under
both the 1917 and 1987 Revised Administrative Codes in effect made a
determination that it was necessary and advantageous to exercise the power of
eminent domain in behalf of the Government of the Republic and accordingly
directed the Solicitor General to proceed with the suit.[17]
Other contentions are made by private respondent MCFC, such as, that the
constitutional requirement of "public use" or "public purpose" is not present in
the instant case, and that the indispensable element of just compensation is also
absent. We agree with the Court of Appeals in this connection that these
contentions, which were adopted and set out by the Regional Trial Court in its
order of dismissal, are premature and are appropriately addressed in the
proceedings before the trial court. Those proceedings have yet to produce a
decision on the merits, since trial was still on going at the time the Regional Trial
Court precipitously dismissed the expropriation proceedings. Moreover, as a
pragmatic matter, the Republic is, by such substitution as party-plaintiff,
accorded an opportunity to determine whether or not, or to what extent, the
proceedings should be continued in view of all the subsequent developments in
the iron and steel sector of the country including, though not limited to, the
partial privatization of the NSC.
WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8
October 1991 to the extent that it affirmed the trial court's order dismissing the
expropriation proceedings, is hereby REVERSED and SET ASIDE and the case is
REMANDED to the court a quo which shall allow the substitution of the Republic
of the Philippines for petitioner Iron and Steel Authority and for further
proceedings consistent with this Decision. No pronouncement as to costs.
SO ORDERED.
"(2) In the event that NSC and MCFC fail to agree on the foregoing
within sixty (60) days from the date hereof, the Iron and Steel Authority
(ISA) shall exercise its authority under Presidential Decree (PD) No.
272, as amended, to initiate the expropriation of the aforementioned
occupancy rights of MCFC on the subject lands as well as the plant,
structures, equipment, machinery and related facilities, for and on
behalf of NSC, and thereafter cede the same to NSC. During the
pendency of the expropriation proceedings, NSC shall take possession
of the property, subject to bonding and other requirements of P.D. No.
1533.