Key Takeaway: Liability for Just Compensation in Expropriation Must Be Clearly Defined and Adhered to by All Parties Involved

Power Sector Assets and Liabilities Management Corporation (PSALM) v. Felisa Agricultural Corporation, G.R. No. 205193, July 05, 2021

Imagine waking up one day to find a towering structure on your property, erected without your consent. This was the reality for Felisa Agricultural Corporation, whose land was taken over by the National Power Corporation (NPC) in 1978 to build transmission towers. For decades, Felisa Agricultural sought compensation, leading to a legal battle that reached the Supreme Court of the Philippines. The central question: Who should pay the just compensation for the land taken—PSALM, TRANSCO, or NPC?

This case delves into the intricacies of liability in expropriation cases, especially after the Electric Power Industry Reform Act of 2001 (EPIRA) restructured the power industry, transferring NPC’s assets and liabilities to new entities. The outcome of this case not only affects Felisa Agricultural but sets a precedent for how similar disputes will be resolved in the future.

Legal Context

The Philippine Constitution guarantees that private property shall not be taken for public use without just compensation. This principle is enshrined in Article III, Section 9, which states, “Private property shall not be taken for public use without just compensation.”

Expropriation, the process by which the government acquires private property for public use, is governed by the Rules of Court and specific statutes like Republic Act No. 8974, which provides guidelines for the payment of provisional just compensation. The term “just compensation” refers to the fair market value of the property at the time of taking, plus consequential damages, if any.

The EPIRA, enacted in 2001, restructured the power industry by creating the National Transmission Corporation (TRANSCO) and the Power Sector Assets and Liabilities Management Corporation (PSALM). TRANSCO assumed NPC’s transmission functions, including the power to exercise eminent domain, while PSALM took over NPC’s generation assets and related liabilities. This restructuring raised questions about which entity should bear the responsibility for liabilities incurred before the EPIRA’s enactment.

Consider a scenario where a local government decides to build a new road through your property. Under Philippine law, they must pay you just compensation, which should reflect the current market value of your land. If the government entity responsible for the project changes due to restructuring, as in the case of NPC, TRANSCO, and PSALM, it becomes crucial to determine who should pay this compensation.

Case Breakdown

Felisa Agricultural Corporation’s ordeal began in 1978 when NPC built transmission towers on its land without paying just compensation. In 2001, Felisa filed an inverse condemnation case against NPC, seeking compensation for the land taken.

The case took a turn with the enactment of the EPIRA, which transferred NPC’s transmission assets to TRANSCO. In 2010, the Regional Trial Court ordered NPC to pay Felisa Agricultural a provisional amount of P7,845,000.00. When NPC failed to pay, Felisa moved for a Writ of Execution against NPC, TRANSCO, and PSALM, arguing that the latter two were assignees of NPC’s properties.

The Court of Appeals upheld the Writ of Execution against all three entities, prompting PSALM to appeal to the Supreme Court. PSALM argued that it was not liable for transmission-related liabilities and that it was not a party to the original case, thus being deprived of due process.

The Supreme Court’s decision hinged on several key points:

• TRANSCO, having succeeded NPC in its transmission functions and eminent domain powers, was liable for the just compensation owed to Felisa Agricultural.
• PSALM, as a separate and distinct corporation from TRANSCO, could not be held liable for transmission-related liabilities.
• The Writ of Execution against PSALM was invalid because PSALM was not a party to the original case and was thus deprived of due process.

The Court emphasized, “A writ of execution can only be issued against a party to the case and not against one who has not had its day in court.” It further clarified, “That TRANSCO is wholly owned by PSALM does not make the latter liable for the payment of just compensation.”

Practical Implications

This ruling clarifies the liability for just compensation in expropriation cases, particularly after corporate restructuring. It underscores the importance of ensuring that the correct entity is held accountable for liabilities incurred before and after such changes.

For businesses and property owners, this decision highlights the need to identify the responsible party when dealing with government entities, especially in industries undergoing restructuring. It also emphasizes the importance of due process in legal proceedings, ensuring that all parties have the opportunity to defend their interests.

Key Lessons:

• Understand the legal framework governing expropriation and the entities involved, especially in sectors undergoing restructuring.
• Ensure that any claim for just compensation is directed at the correct entity to avoid unnecessary legal battles.
• Be aware of the procedural requirements for enforcing judgments, such as the need for proper substitution of parties in legal proceedings.

Frequently Asked Questions

What is just compensation in the context of expropriation?
Just compensation is the fair market value of the property at the time of taking, plus any consequential damages, as guaranteed by the Philippine Constitution.

Who is responsible for paying just compensation if a government entity undergoes restructuring?
The entity that succeeds the original government entity in its functions and powers, such as TRANSCO in this case, is responsible for paying just compensation.

Can a writ of execution be issued against a non-party to a case?
No, a writ of execution can only be issued against a party to the case, as it would be a violation of due process to execute a judgment against someone who has not had their day in court.

What should property owners do if their land is taken for public use?
Property owners should file a claim for just compensation and ensure that they identify the correct government entity responsible for the taking, especially in cases involving corporate restructuring.

How can businesses protect their interests in expropriation cases?
Businesses should monitor changes in the legal framework governing expropriation and ensure they have legal representation to navigate complex cases involving multiple government entities.

ASG Law specializes in property and expropriation law. Contact us or email hello@asglawpartners.com to schedule a consultation.