IRON

AND STEEL AUTHORITY VS. COURT OF APPEALS (G.R. No. 102976, October 25, 1995), Feliciano, J.:

Doctrine: In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court, the Court recognized that the Republic
may initiate or participate in actions involving its agents. There the Republic of the Philippines was held to be a proper
party to sue for recovery of possession of property although the “real” or registered owner of the property was the
Philippine Ports Authority, a government agency vested with a separate juridical personality.

Facts: Iron and Steel Authority (“ISA”) was created by P.D. No. 272 dated 9 August 1973 in order, generally, to develop and
promote the iron and steel industry in the Philippines. P.D. No. 272 initially created ISA for a term of 5 years counting from
9 August 1973. When ISA’s original term expired on 10 October 1978, its term was extended for another 10 years by
Executive Order No. 555 dated 31 August 1979.

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:
xxx xxx xxx
(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;

Pursuant to the expansion program of the National Steel Corporation (NSC), Proclamation No. 2239 was issued by the
President 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.

Negotiations failed. ISA commended eminent domain proceedings against MCFC. 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. While the trial was ongoing, 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. Trial court granted MCFC’s motion to dismiss and
did dismiss the case.

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.
Motion for reconsideration was denied. Court of Appeals affirmed the order of dismissal of the trial court.

The Court of Appeals held that petitioner ISA, “a government regulatory agency exercising sovereign functions,” did not
have the same rights as an ordinary corporation and that the ISA, unlike corporations organized under the Corporation
Code, was not entitled to a period for winding up its affairs after expiration of its legally mandated term, with the result that
upon expiration of its term on 11 August 1987, ISA was “abolished and [had] no more legal authority to perform
governmental functions.” The Court of Appeals went on to say 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 ineffective as a result
of the delegate’s dissolution, and could not be continued in the name of Republic of the Philippines, represented by the
Solicitor General.

Issue: Whether or not the Republic of the Philippines is entitled to substitute for ISA in view of the expiration of ISA’s
term.

Ruling: Yes, the Republic of the Philippine is entitled to substitute for ISA.
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.

We consider that the ISA is properly regarded as an agent or delegate of the Republic of the Philippines. 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.”

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 the Government of the Republic of the
Philippines 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 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.

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 expropriation proceedings in the proper court.” (Italics
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 Solicitor General to proceed
with the suit.

Appealed decision is 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 ISA and for further proceedings consistent with this decision.