IRON AND STEEL AUTHORITY vs.

  CA and MARIA CRISTINA FERTILIZER

CORPORATION
G.R. No. 102976
October 25, 1995
FACTS: Iron and Steel Authority (ISA)  was created by P.D. No. 272  in order,
generally, to develop and promote the iron and steel industry in the Philippines. The list
of powers and functions of the ISA included the following: xx
Sec. 4. Powers and Functions. – The authority shall have the following powers and
functions: xx
(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; xx
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. Pursuant to the expansion program
of the NSC, Proc. No. 2239 was issued by the President of the Philippines withdrawing
from sale or settlement a large tract of public 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 Proclamation No. 2239 were
occupied by a non-operational chemical fertilizer plant and related facilities owned by
Maria Cristina Fertilizer Corporation (“MCFC”), Letter of Instruction (LOI), No. 1277,
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.
Negotiations between NSC and private respondent MCFC did fail. Accordingly ISA
commenced eminent domain proceedings against MCFC in the RTC of Iligan City,
praying that it be placed in possession of the property involved upon depositing in court
representing ten percent (10%) of the declared market values of that property.

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 ongoing, however, the statutory
existence of petitioner ISA expired. 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.
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.”
Petitioner ISA moved for reconsideration which the trial court denied.

ISA went on appeal to the CA, which affirmed the order of dismissal of the trial court. 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.

Hence this Petition for Review.

ISSUE: WON the RP is entitled to be substituted for ISA in view of the expiration of

ISA’s term.
HELD: The Decision of the CA 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
RPfor petitioner ISA
YES

Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action:

Sec. 1. Who May Be Parties. – Only natural or juridical persons or entities authorized
by law may be parties in a civil action.
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. 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: xx
(i) 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;   xxx
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.
We consider that the ISA is properly regarded as an agent or delegate of the RP. The
Republic itself is a body corporate and juridical person vested with the full panoply of
powers and attributes which are compendiously described as “legal personality.” The
relevant definitions are found in the Administrative Code of 1987:
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:
(1) Government of the RPrefers to the corporate governmental entity through which the
functions of government are exercised throughout the Philippines, including, save as the
contrary appears from the context, the various arms through which political authority is
made effective in the Philippines, whether pertaining to the autonomous regions, the
provincial, city, municipal or barangay subdivisions or other forms of local government.
xxx xxx xxx

(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.
xxx xxx xxx

(10) Instrumentality refers to any agency of the National Government, not integrated

within the department framework, vested with special functions or jurisdiction by
law, endowed with some if not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter. This term includes regulatory
agencies, chartered institutions and government-owned or controlled corporations.
xxx xxx xxx

When the statutory term of a non-incorporated agency expires, the powers, duties and
functions as well as the assets and liabilities of that agency revert back to, and are re-
assumed by, the RP, in the absence of special provisions of law specifying some other
disposition thereof such as, e.g., devolution or transmission of such powers, duties,
functions, etc. to some other identified successor agency or instrumentality of the RP.
When the expiring agency is an incorporated one, the consequences of such expiry
must be looked for, in the first instance, in the charter of that agency and, by way of
supplementation, in the provisions of the Corporation Code.
Since, in the instant case, ISA is a non-incorporated agency or instrumentality of the
Republic, its powers, duties, functions, assets and liabilities are properly regarded as
folded back into GRP and hence assumed once again by the Republic, no special
statutory provision having been shown to have mandated succession thereto by some
other entity or agency of the Republic.
The principal or the real party in interest is thus the RP and not the NSC, 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 RP 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.
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 CA had required, was to generate
unwarranted delay and create needless repetition of proceedings:
NOTES:
1. Since, as we have held above, the powers and functions of ISA have reverted to the
RP upon the termination of the statutory term of ISA, the question should be addressed
whether fresh legislative authority is necessary before the RP 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 RTC , provided that:
Sec. 64. Particular powers and duties of the President of the Philippines. – In addition to
his general supervisory authority, the President of the Philippines shall have such other
specific powers and duties as are expressly conferred or imposed on him by law, and
also, in particular, the powers and duties set forth in this Chapter.
Among such special powers and duties shall be: xx

(h) To determine when it is necessary or advantageous to exercise the right of eminent

domain in behalf of the Government of the Philippines; and to direct the Secretary of
Justice, where such act is deemed advisable, to cause the condemnation proceedings
to be begun in the court having proper jurisdiction. xx
The Revised Administrative Code of 1987 currently in force has substantially
reproduced the foregoing provision in the following terms:

Sec. 12. Power of eminent domain. – The President shall determine when it is

necessary or advantageous to exercise the power of eminent domain in behalf of the
National Government, and direct the Solicitor General, whenever he deems the action
advisable, to institute expopriation proceedings in the proper court. (Emphasis supplied)
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 SG to proceed with the suit. 17
2. It is argued by private respondent MCFC that, because Congress after becoming
once more the depository of primary legislative power, had not enacted a statute
extending the term of ISA, such non-enactment must be deemed a manifestation of a
legislative design to discontinue or abort the present expropriation suit. We find this
argument much too speculative; it rests too much upon simple silence on the part of
Congress and casually disregards the existence of Section 12 of the 1987
Administrative Code already quoted above.

3. 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 RTC  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 RTC
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