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IRON v. CA

FACTS:

The Iron and Steel Authority (ISA) was created to develop and promote the iron and steel industry in the Philippines, with the power to initiate expropriation of land for iron and steel facilities. The National Steel Corporation (NSC) planned to construct a steel mill and a large tract of land was reserved for its use. As part of the project, the Maria Cristina Fertilizer Corporation (MCFC) was directed to negotiate compensation with NSC for the occupied portions of the land. When negotiations failed, ISA initiated expropriation proceedings against MCFC and obtained a writ of possession. However, during trial, ISA's statutory existence expired. MCFC filed a motion to dismiss, arguing that ISA, as a juridical person, could not be a party. The trial court granted the motion to dismiss and ISA filed a motion for reconsideration, arguing that its juridical existence continued until the winding up of its affairs or alternatively, the Republic of the Philippines should be allowed to be substituted.

The petitioner, ISA, initiated an expropriation suit against the private respondent, MCFC, to acquire land for iron and steel facilities. The trial court dismissed the complaint, stating that the property to be expropriated was not for public use but for the benefit of NSC. The Court of Appeals affirmed the dismissal but also held that it was premature for the trial court to rule on the public purpose aspect. The Solicitor General argued that the Republic should be substituted for ISA as the party-plaintiff in the expropriation suit. MCFC argued that the failure of Congress to extend ISA's term terminated its existence and that the exercise of eminent domain for the benefit of NSC was improper. The main issue was whether the Republic was entitled to be substituted for ISA after its expiration.

ISSUES:

  1. Whether the Industrial Authority of the Philippines (ISA) is a separate and distinct juridical personality from the Government of the Republic of the Philippines.

  2. What happens to the powers, duties, functions, assets, and liabilities of a non-incorporated agency or instrumentality of the Republic when its statutory term expires.

  3. Whether the Republic of the Philippines is a real party in interest in the expropriation proceedings.

  4. Whether the expiration of the statutory term of the agent or delegate, ISA, requires or justifies the dismissal of the expropriation proceedings.

  5. Whether fresh legislative authority is necessary for the Republic of the Philippines to continue the expropriation proceedings.

  6. Whether the non-enactment of a statute by Congress extending the term of the Iron and Steel Authority (ISA) can be interpreted as a manifestation to discontinue the expropriation suit.

  7. Whether the constitutional requirement of "public use" or "public purpose" is present in the case.

  8. Whether the element of just compensation is present in the case.

RULING:

  1. The Court held that ISA is not a separate and distinct juridical personality from the Government of the Republic of the Philippines. While ISA was vested with some powers or attributes normally associated with juridical personality, there is no provision in its enabling statute recognizing it as possessing general or comprehensive juridical personality separate and distinct from the Government. ISA is considered as an agent or delegate of the Republic.

  2. When the statutory term of a non-incorporated agency expires, the powers, duties, functions, assets, and liabilities of that agency revert back to, and are re-assumed by, the Republic of the Philippines, in the absence of special provisions of law specifying some other disposition thereof. Since 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 the Government of the Republic of the Philippines and assumed once again by the Republic.

  3. The Republic of the Philippines is the real party in interest in the expropriation proceedings, not the National Steel Corporation.

  4. The expiration of ISA's statutory term does not require or justify the dismissal of the expropriation proceedings. The Republic of the Philippines is entitled to be substituted as the party-plaintiff in place of ISA.

  5. No fresh legislative authority is necessary for the Republic of the Philippines to continue the expropriation proceedings. A continuing or standing delegation of authority to the President of the Philippines to exercise the power of eminent domain on behalf of the Government exists.

  6. The non-enactment of a statute by Congress extending the term of ISA does not automatically mean a discontinuation or abortion of the expropriation suit. The existence of Section 12 of the 1987 Administrative Code, which grants the President the power to determine when it is necessary or advantageous to exercise the power of eminent domain, supports the continuation of the expropriation suit.

  7. The Court of Appeals and Regional Trial Court correctly ruled that the issues of "public use" or "public purpose" and just compensation are premature and should be addressed in the proceedings before the trial court. The Republic, as the substituted party plaintiff, should have the opportunity to determine the continuation of the proceedings in light of the developments in the iron and steel sector, including the partial privatization of the National Steel Corporation (NSC).

PRINCIPLES:

  • An agency or instrumentality of the Government refers to any unit of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy (Administrative Code of 1987).

  • When the statutory term of a non-incorporated agency expires, its powers, duties, functions, assets, and liabilities revert back to, and are re-assumed by, the Republic of the Philippines (unless there is a special provision of law mandating succession to another entity or agency).

  • The Rules of Court recognize the role of representative parties, and a party authorized by statute may sue or be sued without joining the party for whose benefit the action is presented or defended.

  • The principal or the real party in interest in an expropriation proceeding is the Republic of the Philippines, even if an agency such as ISA is the party initiating the proceedings.

  • The non-joinder of the Republic of the Philippines as a party-plaintiff upon the expiration of ISA's statutory term is not a ground for dismissal of the proceedings, as a party may be dropped or added by order of the court at any stage of the action.

  • The Republic of the Philippines may initiate or participate in actions involving its agents, and act as the principal of the agent in exercising delegated authority.

  • Dismissing a complaint on the ground that the Republic of the Philippines is not the proper party would result in unwarranted delay and create needless repetition of proceedings, going against the policy against multiplicity of suits.

  • In a delegation of authority to exercise the power of eminent domain, no new legislative act is necessary for the Republic of the Philippines to continue expropriation proceedings if the powers and functions of the delegate have reverted to the Republic upon termination of the delegate's statutory term.

  • The President of the Philippines has the power to determine when it is necessary or advantageous to exercise the right of eminent domain on behalf of the Government of the Philippines.

  • The non-enactment of a statute by Congress does not necessarily indicate a discontinuation or abortion of an expropriation suit.

  • The determination of "public use" or "public purpose" and just compensation should be addressed in the proceedings before the trial court.