More Electric And Power Corporation, vs. Panay Electric Company, Inc.

G.R. No. 248061, September 15, 2020

FACTS

R.A. No. 11212 grants to MORE a franchise to establish, operate and maintain an electric power distribution system in Iloilo City. Under Section 10, MORE may “exercise the power of eminent domain” when necessary for the efficient establishment of its service. In particular, it may acquire a distribution system consisting of poles, wires, cables, transformers, switching equipment and stations, buildings, infrastructure, machineries and equipment previously, currently or actually used x x x for the conveyance of electric power to end-users in its franchise area.

The distribution system which is currently and actually being used in Iloilo City was owned by PECO, the holder of the franchise since 1922. PECO’s franchise expired on January 18, 2019, and no new franchise has been issued to it since. While PECO is allowed to operate the existing distribution system in the interim, the law provides that MORE shall not be prevented from acquiring the system through the exercise of the right of eminent domain.

After R.A. No. 11212 took effect on March 9, 2019, MORE filed on March 11, 2019 a Complaint for Expropriation with the RTC of Iloilo City over the distribution system of PECO.

PECO filed a Petition for Declaratory Relief assailing the constitutionality of Sections 10 and 17 of R.A. No. 11212, on the ground that these provisions violate the constitutional guarantees of due process and equal protection since the expropriation is an ill-disguised corporate takeover.

The RTC issued a Temporary Restraining Order enjoining commencement of expropriation proceedings and takeover by MORE of PECO’s distribution system. It renders that Sections 10 and 17 of R.A. No. 11212 void and unconstitutional for infringing on PECO’s right to due process and equal protection of the law.

ISSUES: 

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Whether the power and electricity distribution system which is owned by the previous franchise holder Panay Electric Company, Inc. (PECO) may be acquired by the current franchise holder MORE Electric and Power Corporation (MORE), through the exercise of the right of eminent domain, and applied to the same public purpose of power distribution

HELD: 

YES. Distribution system of PECO can be subjected to expropriation for the same public purpose. 

The general rule is that private property which is already devoted to a public use can be burdened by expropriation with a different public purpose, provided it is expressly authorized by law or necessarily implied in the law. The underlying reason for this is that the power of eminent domain is an attribute of sovereignty which is not exhausted by use; otherwise, the promotion of the public good, which is the purpose of sovereignty, would be frustrated.

Although public use or necessity is defined by legislation, the courts have the power to review whether such use or necessity is of a genuine and public character. For this purpose, the court applies as standards of review the constitutional requirements of due process and equal protection.

Under Section 17 of Act No. 2983, Act No. 3035 and Act No. 3665, the distribution system is susceptible to expropriation subject to the conditions that it is exercised 1) after the 21 year of the franchise; 2) by the national government or the local government to which the right has been assigned; and 3) upon payment of compensation. Section 4 of R.A. No. 5360 retained remnants of Section 17 of Act No. 2983 by providing that the government may exercise the right of expropriation should it “desire to operate and maintain” the system. In other words, under the foregoing legislative franchises, the distribution system of PECO in Iloilo City is susceptible to expropriation by the government for the very same public purpose of electricity distribution. There is no specific public necessity that can precipitate the exercise of eminent domain; mere desire to operate by the government or mere assignment of the right to operate to a local government or agency is sufficient. It is notable that, while these provisions can be found in PECO’s own legislative franchises, PECO never questioned their constitutionality.

Expropriation by MORE of the distribution system of PECO is for a genuine public purpose. Expropriation under Sections 10 and 17 of R.A. No. 11212 is not only for the general purpose of electricity distribution. A more distinct public purpose is emphasized: the protection of the public interest by ensuring the uninterrupted supply of electricity in the city during the transition from the old franchise to the new franchise. This distinct purpose has arisen because MORE is the new franchise holder in a city whose public space is already burdened by an existing distribution system, and that distribution system cannot continue to serve a public use for it is owned by the old franchise holder.

This provisional authority to operate during the transition period shall not be construed as extending the franchise of PECO after its expiration on January 18, 2019, and it shall not prevent the grantee from exercising the right of eminent domain over the distribution assets existing at the franchise area as provided in Section 10 of this Act.

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