Power Sector Assets and Liabilities Management Corporation v. Felisa Agricultural Corporation
REITERATIONFacts
The Antecedents: Felisa Agricultural Corporation (Felisa) commenced an inverse condemnation proceeding against the National Power Corporation (NPC) in 2001, alleging non-payment of just compensation for its property occupied by NPC since 1978. In 2001, Republic Act No. 9136 (EPIRA) was enacted, creating TRANSCO to assume NPC's transmission functions and PSALM to manage NPC's assets and liabilities. TRANSCO was granted the power of eminent domain, and PSALM wholly owns TRANSCO. In 2010, the Regional Trial Court (RTC) ordered NPC to pay Felisa P7,845,000.00 as provisional just compensation. NPC's petition for certiorari was dismissed for being filed out of time. Felisa moved for a writ of execution against NPC, TRANSCO, and PSALM, arguing that TRANSCO and PSALM, as transferees of NPC's properties under EPIRA, were liable. The RTC granted the writ of execution against NPC, TRANSCO, and PSALM. Notices of garnishment were issued against PSALM's funds with National Grid Corporation of the Philippines (NGCP) and Manila Electric Company (Meralco). Procedural History: PSALM filed a petition for certiorari before the Court of Appeals (CA) assailing the writ of execution and garnishment. The CA issued a Temporary Restraining Order (TRO), but later lifted it and dismissed PSALM's petition, holding that PSALM was ultimately liable for just compensation as transmission-related liabilities were transferred to it under EPIRA. The CA found that PSALM, as a GOCC, could have its properties subjected to execution and drew guidance from a previous minute resolution of the Supreme Court in a similar case. PSALM's motion for reconsideration was denied. The Petition: PSALM filed a Petition for Review on Certiorari before the Supreme Court, arguing that TRANSCO, not PSALM, is liable for right-of-way claims, citing a Concession Agreement and an Authority to Purchase issued by TRANSCO. PSALM also argued that it was not a party to the inverse condemnation case, thus deprived of due process, and that its funds, being government funds, are not subject to execution. Felisa countered that the issue had already been resolved in a previous minute resolution and that PSALM's properties are subject to execution. NPC and TRANSCO argued that all transmission liabilities were assumed by PSALM. NGCP argued it was incorrectly impleaded and that the claim was TRANSCO's liability. Meralco stated it acted in good faith as a garnishee.
Issue(s)
Whether PSALM is liable for the payment of provisional just compensation and right-of-way claims from owners of properties traversed by transmission towers formerly owned by NPC. Whether PSALM was deprived of due process when the Writ of Execution was issued against it despite not being a party to the inverse condemnation case. Whether the properties of PSALM can be the subject of execution.
Ruling
The Supreme Court granted the Petition for Review on Certiorari, reversed and set aside the Court of Appeals' Decision and Resolution, set aside the RTC's May 7, 2010 Order as against PSALM, and lifted the Writ of Execution and Notices of Garnishment against PSALM's funds and properties. The Court also lifted its own June 5, 2013 TRO.
Ratio Decidendi
On the issue of PSALM's liability for provisional just compensation: The Court ruled that TRANSCO, not PSALM, is liable for the payment of provisional just compensation to Felisa Agricultural Corporation. The transmission towers were constructed on Felisa's property in 1978, but the order to pay provisional just compensation was issued in 2010. By then, TRANSCO, which succeeded NPC in its transmission functions and eminent domain powers under EPIRA, already owned the transmission towers. While Section 8 of EPIRA states that all transmission and subtransmission-related liabilities of NPC shall be transferred to PSALM, this liability became certain only in 2010, when TRANSCO already owned the assets. The Court distinguished this from cases where liabilities were already existing at the time of EPIRA's enactment. Furthermore, the Court clarified that PSALM's ownership of TRANSCO does not automatically make PSALM liable for TRANSCO's operational liabilities, as PSALM has a distinct corporate personality and its principal purpose is to manage the sale and disposition of NPC's generation assets and liabilities. On the issue of due process: The Court held that PSALM was deprived of due process because it was not a party to the inverse condemnation case. A writ of execution can only be issued against a party to the case, and not against a stranger who has not had its day in court. The Court emphasized that even if TRANSCO and PSALM were considered "assignees" of NPC, the Rules of Court require a motion for substitution or joinder of parties before an action can be continued by or against them. Since no such motion was filed, it was an error for the Clerk of Court to issue the writ against PSALM, which has a corporate personality separate and distinct from NPC. Consequently, the garnishment of PSALM's funds and properties was also deemed invalid because PSALM was not the judgment obligor. On the issue of whether PSALM's properties can be subject to execution: The Court reiterated the general rule that government funds and properties are generally exempt from execution. However, it clarified that this exemption applies to properties held in a governmental capacity. Properties held by government-owned and controlled corporations (GOCCs) in their proprietary or business-like capacity are subject to execution. The Court found that the functions of TRANSCO (transmission) and PSALM (generation asset management) are proprietary in nature, not governmental. Therefore, their properties and funds are subject to execution, and their assets possessed or controlled by third parties can be garnished. However, this principle was applied to TRANSCO's assets, not PSALM's, because PSALM was not a proper party to the execution proceedings.
Main Doctrine
A writ of execution can only be issued against a party to the case. Garnishment of funds and properties of a corporation not impleaded as a defendant in the inverse condemnation case is invalid as it violates due process. While government-owned and controlled corporations (GOCCs) may have their properties subjected to execution, this applies to properties held in their proprietary capacity, not those used for governmental purposes. Claims against GOCCs for provisional just compensation, especially when arising from expropriation, do not necessarily require prior filing with the Commission on Audit if the execution is against their proprietary assets.