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MORE ELECTRIC v. PANAY ELECTRIC COMPANY

FACTS:

This case involves the dispute between Panay Electric Company, Inc. (PECO) and MORE Electric and Power Corporation (MORE) over the expropriation of PECO's electricity and power distribution system in Iloilo City. PECO challenges the constitutionality of Sections 10 and 17 of Republic Act (R.A.) No. 11212, arguing that the expropriation amounts to a corporate takeover driven by private greed and violates PECO's right to due process and equal protection. PECO also argues that MORE's exercise of eminent domain gives them an unfair advantage. MORE questions the RTC decision and raises issues regarding the judgment on the pleadings and the constitutionality of R.A. No. 11212. The procedural issues raised by the parties were rendered moot by subsequent court orders. The Court identifies the substantive issues of whether PECO's distribution system can be expropriated for the same public purpose, and whether the expropriation under R.A. No. 11212 complies with constitutional requirements of due process and equal protection.

ISSUES:

  1. Whether the distribution system of PECO can be subjected to expropriation for the same public purpose of power distribution.

  2. Whether the legislative franchises governing the distribution system of PECO allow for the expropriation of its assets.

  3. Whether the expropriation by MORE of PECO's distribution system is for a genuine public purpose.

  4. Is the expropriation of the distribution system of Panay Electric Company, Inc. (PECO) for the purpose of power distribution a genuine public necessity?

  5. Does the expropriation amount to an ill-disguised corporate takeover?

  6. Whether the expropriation of the distribution system of PECO under Sections 10 and 17 of R.A. No. 11212 is constitutional.

  7. Whether Sections 10 and 17 of R.A. No. 11212 favor MORE with unwarranted benefits and discriminate against PECO.

  8. Whether the grant of authority to initiate expropriation of the distribution assets of the franchise holder is within the power of Congress

  9. Whether the authorization given to the new franchise holder to take over the distribution system upon deposit of assessed value is discriminatory

  10. Whether Section 17 of R.A. No. 11212 authorizes an expropriation that serve no distinct public purpose and amounts to a taking without due process

  11. Whether Sections 10 and 17 of R.A. No. 11212 enable the new franchise holder to piggyback on the old franchise holder to establish and operate its franchise

  12. Whether or not the questioned law is constitutional.

RULING:

  1. The Supreme Court held that the distribution system of PECO can be subjected to expropriation for the same public purpose of power distribution. The legislative franchises of PECO declare its distribution system in Iloilo City as susceptible to expropriation for the same public purpose of power and electricity distribution. The expropriation by MORE of the distribution system of PECO pursuant to Sections 10 and 17 of R.A. No. 11212 is in accordance with the constitutional requirements of due process and equal protection. The Court relied on the history of the legislative franchises governing the distribution system to conclude that the distribution system coexists with the franchise and can be subject to expropriation.

  2. Yes. The legislative franchises, including Act No. 2983, Act No. 3035, Act No. 3665, and R.A. No. 5360, allow for the expropriation of PECO's distribution system. While the provision on the automatic transfer to the government of all properties upon expiration of the franchise is no longer present in subsequent franchises, there is still a provision for the government's right to exercise eminent domain for the purpose of electricity distribution. This right is subject to certain conditions, such as the government exercising this power after a certain period of the franchise, by the national or assigned local government, and upon payment of compensation.

  3. Yes. The expropriation by MORE of PECO's distribution asset under Sections 10 and 17 of P.A. No. 11212 is for a genuine public purpose. Although it is Congress that defines public necessity or purpose, the court has the power to review whether such necessity is genuine and public in character. The expropriation for power distribution satisfies the constitutional requirements of due process and equal protection.

  4. The expropriation of the distribution system of PECO for the purpose of power distribution is deemed a genuine public necessity. The distinct public purpose of ensuring the uninterrupted supply of electricity in the city during the transition from the old franchise to the new franchise is emphasized. This purpose arises because the new franchise holder, MORE Electric and Power Corporation (MORE), needs to establish its own distribution system due to the existing distribution system being owned by the old franchise holder, PECO. The requirement for uninterrupted electricity supply is deemed a public and genuine necessity.

  5. The expropriation of the distribution system does not amount to an ill-disguised corporate takeover. The expropriation is authorized under the law, specifically Sections 10 and 17 of Republic Act No. 11212, which grants MORE the power of eminent domain for the efficient establishment, improvement, upgrading, rehabilitation, maintenance, and operation of its services. The expropriation is for the purpose of enabling MORE to efficiently establish its service and ensure uninterrupted electricity supply. The expropriation is therefore deemed to serve a genuine public purpose and is in line with the public interest.

  6. The expropriation of the distribution system of PECO under Sections 10 and 17 of R.A. No. 11212 is constitutional. The Court held that uninterrupted supply of electricity is a public purpose distinct from the general purpose of electricity distribution, and such purpose is both public and genuine. The Court also stated that the end-users in Iloilo have a stake in the uninterrupted operation of the distribution system, and it is a valid expectation on their part that they will enjoy uninterrupted supply of power during the transition from the old franchise holder to the new franchise holder. Therefore, the RTC erred in declaring these provisions unconstitutional.

  7. Sections 10 and 17 of R.A. No. 11212 do not favor MORE with unwarranted benefits nor discriminate against PECO. The Court reasoned that MORE, as a new franchise holder, is not similarly situated as other public utilities because it must provide uninterrupted supply of electricity during the transition period. MORE is also burdened with the existing distribution system of PECO and is required to ensure the continuous supply of electricity to the city. The Court also noted that the termination of PECO's franchise does not automatically mean that the public purpose for which the distribution system was installed ceases. Therefore, Sections 10 and 17 of R.A. No. 11212 do not violate the principle of equal protection.

  8. The grant of authority to initiate expropriation of the distribution assets of the franchise holder is within the power of Congress, subject to the requirements of a valid expropriation.

  9. The authorization given to the new franchise holder to take over the distribution system upon deposit of the assessed value is not discriminatory as it still requires payment of just compensation and is warranted by the public necessity for the continued and uninterrupted supply of electricity.

  10. Section 17 of R.A. No. 11212 authorizes an expropriation that serves distinct public purposes, namely power distribution and preventing disruption in the supply of electricity during the transition. Thus, it does not amount to a taking without due process.

  11. Sections 10 and 17 of R.A. No. 11212 enable the new franchise holder to acquire the assets of the old franchise holder and any other assets necessary for the discharge of its public franchise. This does not amount to piggybacking but is a valid exercise of legislative franchise power.

  12. The Supreme Court declared that the questioned law is constitutional.

PRINCIPLES:

  • Legislative franchises allow for the expropriation of the distribution system of PECO for the purpose of electricity distribution, subject to certain conditions.

  • The expropriation of private property must be for a genuine public purpose and should satisfy the constitutional requirements of due process and equal protection.

  • The expropriation of private property for a similar, but not identical, public use is considered valid.

  • The requirement for uninterrupted supply of electricity can be deemed a distinct public necessity and a genuine public purpose.

  • Expropriation for the purpose of ensuring uninterrupted supply of electricity has been recognized as serving the public interest.

  • The protection of public interest in relation to rates and services of electric utilities and providers of electric power is recognized as a public purpose.

  • The provision of uninterrupted supply of electricity may be considered a matter of national security and essential to sustaining the country's economic development.

  • Uninterrupted supply of electricity is a public purpose, distinct from the general purpose of electricity distribution.

  • End-users have a valid expectation of enjoying uninterrupted supply of power during the transition from the old franchise holder to the new franchise holder.

  • A new franchise holder may be burdened with the existing distribution system of the previous franchise holder and must ensure continuous supply of electricity during the transition period.

  • Termination of a franchise that fails to render competent public service is not a deprivation of a right or property amounting to punishment.

  • The power of the Court to subject franchise legislation to judicial review does not extend to assessing the expertise of franchise holders.

  • The power to expropriate is not limited by the expiration of a franchise. The government can still initiate expropriation as long as the requirements of a valid expropriation are met.

  • The immediate takeover of assets upon deposit of assessed value is without prejudice to the determination of just compensation by the RTC in the expropriation case.

  • Expropriation serves distinct public purposes, such as power distribution and preventing disruption in the supply of electricity.

  • Legislative franchises may include the authority to expropriate assets necessary for the discharge of the franchise.

  • Foreign jurisprudence on expropriation may not be applicable if there is sufficient basis in the facts and law of the jurisdiction to uphold the constitutionality of the expropriation provisions.

  • The Supreme Court has the power to declare a law as either constitutional or unconstitutional.