G.R. No.

103982 December 11, 1992

ANTONIO A. MECANO, petitioner,

vs.
COMMISSION ON AUDIT, respondent.

CAMPOS, JR., J.:

Antonio A. Mecano, through a petition for certiorari, seeks to nullify the decision of the
Commission on Audit (COA, for brevity) embodied in its 7th Indorsement, dated January 16, 1992,
denying his claim for reimbursement under Section 699 of the Revised Administrative Code
(RAC), as amended, in the total amount of P40,831.00.

Petitioner is a Director II of the National Bureau of Investigation (NBI). He was hospitalized for
cholecystitis from March 26, 1990 to April 7, 1990, on account of which he incurred medical and
hospitalization expenses, the total amount of which he is claiming from the COA.

On May 11, 1990, in a memorandum to the NBI Director, Alfredo S. Lim (Director Lim, for brevity),
he requested reimbursement for his expenses on the ground that he is entitled to the benefits
under Section 699 of the RAC, the pertinent provisions of which read:
1

Sec. 699. Allowances in case of injury, death, or sickness incurred in performance of

duty. — When a person in the service of the national government of a province, city,
municipality or municipal district is so injured in the performance of duty as
thereby to receive some actual physical hurt or wound, the proper Head of
Department may direct that absence during any period of disability thereby
occasioned shall be on full pay, though not more than six months, and in such case
he may in his discretion also authorize the payment of the medical attendance,
necessary transportation, subsistence and hospital fees of the injured person.
Absence in the case contemplated shall be charged first against vacation leave, if
any there be.

xxx xxx xxx

In case of sickness caused by or connected directly with the performance of some

act in the line of duty, the Department head may in his discretion authorize the
payment of the necessary hospital fees.

Director Lim then forwarded petitioner's claim, in a 1st Indorsement dated June 22, 1990, to the
Secretary of Justice, along with the comment, bearing the same date, of Gerarda Galang, Chief,
LED of the NBI, "recommending favorable action thereof". Finding petitioner's illness to be service-
connected, the Committee on Physical Examination of the Department of Justice favorably
recommended the payment of petitioner's claim.

However, then Undersecretary of Justice Silvestre H. Bello III, in a 4th Indorsement dated
November 21, 1990, returned petitioner's claim to Director Lim, having considered the
statements of the Chairman of the COA in its 5th Indorsement dated 19 September 1990, to the
effect that the RAC being relied upon was repealed by the Administrative Code of 1987.

Petitioner then re-submitted his claim to Director Lim, with a copy of Opinion No. 73, S.
1991 dated April 26, 1991 of then Secretary of Justice Franklin M. Drilon (Secretary Drilon, for
2
brevity) stating that "the issuance of the Administrative Code did not operate to repeal or abregate
in its entirety the Revised Administrative Code, including the particular Section 699 of the latter".

On May 10, 1991, Director Lim, under a 5th Indorsement transmitted anew Mecano's claim to then
Undersecretary Bello for favorable consideration. Under a 6th Indorsement, dated July 2, 1991,
Secretary Drilon forwarded petitioner's claim to the COA Chairman, recommending payment of the
same. COA Chairman Eufemio C. Domingo, in his 7th Indorsement of January 16, 1992, however,
denied petitioner's claim on the ground that Section 699 of the RAC had been repealed by the
Administrative Code of 1987, solely for the reason that the same section was not restated nor
re-enacted in the Administrative Code of 1987. He commented, however, that the claim may be
filed with the Employees' Compensation Commission, considering that the illness of Director
Mecano occurred after the effectivity of the Administrative Code of 1987.

Eventually, petitioner's claim was returned by Undersecretary of Justice Eduardo Montenegro to

Director Lim under a 9th Indorsement dated February 7, 1992, with the advice that petitioner
"elevate the matter to the Supreme Court if he so desires".

On the sole issue of whether or not the Administrative Code of 1987 repealed or abrogated Section
699 of the RAC, this petition was brought for the consideration of this Court.

Petitioner anchors his claim on Section 699 of the RAC, as amended, and on the aforementioned
Opinion No. 73, S. 1991 of Secretary Drilon. He further maintains that in the event that a claim is
filed with the Employees' Compensation Commission, as suggested by respondent, he would still not
be barred from filing a claim under the subject section. Thus, the resolution of whether or not
there was a repeal of the Revised Administrative Code of 1917 would decide the fate of
petitioner's claim for reimbursement.

The COA, on the other hand, strongly maintains that the enactment of the Administrative Code of
1987 (Exec. Order No. 292) operated to revoke or supplant in its entirety the Revised
Administrative Code of 1917. The COA claims that from the "whereas" clauses of the new
Administrative Code, it can be gleaned that it was the intent of the legislature to repeal the old
Code. Moreover, the COA questions the applicability of the aforesaid opinion of the Secretary of
Justice in deciding the matter. Lastly, the COA contends that employment-related sickness, injury or
death is adequately covered by the Employees' Compensation Program under P.D. 626, such that
to allow simultaneous recovery of benefits under both laws on account of the same
contingency would be unfair and unjust to the Government.

The question of whether a particular law has been repealed or not by a subsequent law is a
matter of legislative intent. The lawmakers may expressly repeal a law by incorporating therein a
repealing provision which expressly and specifically cites the particular law or laws, and portions
thereof, that are intended to be repealed. A declaration in a statute, usually in its repealing clause,
3

that a particular and specific law, identified by its number or title, is repealed is an express repeal; all
others are implied repeals. 4

In the case of the two Administrative Codes in question, the ascertainment of whether or not it was
the intent of the legislature to supplant the old Code with the new Code partly depends on the
scrutiny of the repealing clause of the new Code. This provision is found in Section 27, Book VII
(Final Provisions) of the Administrative Code of 1987 which reads:

Sec. 27. Repealing Clause. — All laws, decrees, orders, rules and regulations, or
portions thereof, inconsistent with this Code are hereby repealed or modified
accordingly.
The question that should be asked is: What is the nature of this repealing clause? It is certainly not
an express repealing clause because it fails to identify or designate the act or acts that are intended
to be repealed. Rather, it is an example of a general repealing provision, as stated in Opinion
5

No. 73, S. 1991. It is a clause which predicates the intended repeal under the condition that
substantial conflict must be found in existing and prior acts. The failure to add a specific repealing
clause indicates that the intent was not to repeal any existing law, unless an irreconcilable
inconcistency and repugnancy exist in the terms of the new and old laws. This latter situation falls
6

under the category of an implied repeal.

Repeal by implication proceeds on the premise that where a statute of later date clearly reveals an
intention on the part of the legislature to abrogate a prior act on the subject, that intention must be
given effect. Hence, before there can be a repeal, there must be a clear showing on the part of
7

the lawmaker that the intent in enacting the new law was to abrogate the old one. The intention
to repeal must be clear and manifest; otherwise, at least, as a general rule, the later act is to be
8

construed as a continuation of, and not a substitute for, the first act and will continue so far as the
two acts are the same from the time of the first enactment. 9

There are two categories of repeal by implication. The first is where provisions in the two acts on
the same subject matter are in an irreconcilable conflict, the later act to the extent of the conflict
constitutes an implied repeal of the earlier one. The second is if the later act covers the whole
subject of the earlier one and is clearly intended as a substitute, it will operate to repeal the earlier
law.10

Implied repeal by irreconcilable inconsistency takes place when the two statutes cover the same
subject matter; they are so clearly inconsistent and incompatible with each other that they cannot be
reconciled or harmonized; and both cannot be given effect, that is, that one law cannot be enforced
without nullifying the other.
11

Comparing the two Codes, it is apparent that the new Code does not cover nor attempt to
cover the entire subject matter of the old Code. There are several matters treated in the old Code
which are not found in the new Code, such as the provisions on notaries public, the leave law, the
public bonding law, military reservations, claims for sickness benefits under Section 699, and still
others.

Moreover, the COA failed to demonstrate that the provisions of the two Codes on the matter
of the subject claim are in an irreconcilable conflict. In fact, there can be no such conflict
because the provision on sickness benefits of the nature being claimed by petitioner has not been
restated in the Administrative Code of 1987. However, the COA would have Us consider that the fact
that Section 699 was not restated in the Administrative Code of 1987 meant that the same section
had been repealed. It further maintained that to allow the particular provisions not restated in the
new Code to continue in force argues against the Code itself. The COA anchored this argument on
the whereas clause of the 1987 Code, which states:

WHEREAS, the effectiveness of the Government will be enhanced by a new

Administrative Code which incorporate in a unified document the major structural,
functional and procedural principles and rules of governance; and

xxx xxx xxx

It argues, in effect, that what is contemplated is only one Code — the Administrative Code of 1987.
This contention is untenable.
The fact that a later enactment may relate to the same subject matter as that of an earlier statute is
not of itself sufficient to cause an implied repeal of the prior act, since the new statute may merely be
cumulative or a continuation of the old one. What is necessary is a manifest indication of
12

legislative purpose to repeal. 13

We come now to the second category of repeal — the enactment of a statute revising or codifying
the former laws on the whole subject matter. This is only possible if the revised statute or code was
intended to cover the whole subject to be a complete and perfect system in itself. It is the rule that
a subsequent statute is deemed to repeal a prior law if the former revises the whole subject
matter of the former statute. When both intent and scope clearly evidence the idea of a repeal,
14

then all parts and provisions of the prior act that are omitted from the revised act are deemed
repealed. Furthermore, before there can be an implied repeal under this category, it must be the
15

clear intent of the legislature that the later act be the substitute to the prior act. 16

According to Opinion No. 73, S. 1991 of the Secretary of Justice, what appears clear is the intent to
cover only those aspects of government that pertain to administration, organization and procedure,
understandably because of the many changes that transpired in the government structure since the
enactment of the RAC decades of years ago. The COA challenges the weight that this opinion
carries in the determination of this controversy inasmuch as the body which had been entrusted with
the implementation of this particular provision has already rendered its decision. The COA relied on
the rule in administrative law enunciated in the case of Sison vs. Pangramuyen that in the absence
17

of palpable error or grave abuse of discretion, the Court would be loathe to substitute its own
judgment for that of the administrative agency entrusted with the enforcement and implementation of
the law. This will not hold water. This principle is subject to limitations. Administrative decisions may
be reviewed by the courts upon a showing that the decision is vitiated by fraud, imposition or
mistake. It has been held that Opinions of the Secretary and Undersecretary of Justice are material
18

in the construction of statutes in pari materia.

19

Lastly, it is a well-settled rule of statutory construction that repeals of statutes by implication are
not favored

. The presumption is against inconsistency and repugnancy for the legislature is presumed to know
20

the existing laws on the subject and not to have enacted inconsistent or conflicting statutes. 21

This Court, in a case, explains the principle in detail as follows: "Repeals by implication are not
favored, and will not be decreed unless it is manifest that the legislature so intended . As laws
are presumed to be passed with deliberation with full knowledge of all existing ones on the subject, it
is but reasonable to conclude that in passing a statute it was not intended to interfere with or
abrogate any former law relating to some matter, unless the repugnancy between the two is not only
irreconcilable, but also clear and convincing, and flowing necessarily from the language used, unless
the later act fully embraces the subject matter of the earlier, or unless the reason for the earlier act is
beyond peradventure renewed. Hence, every effort must be used to make all acts stand and if, by
any reasonable construction, they can be reconciled, the later act will not operate as a repeal of the
earlier.
22

Regarding respondent's contention that recovery under this subject section shall bar the recovery of
benefits under the Employees' Compensation Program, the same cannot be upheld. The second
sentence of Article 173, Chapter II, Title II (dealing on Employees' Compensation and State
Insurance Fund), Book IV of the Labor Code, as amended by P.D. 1921, expressly provides that "the
payment of compensation under this Title shall not bar the recovery of benefits as provided for in
Section 699 of the Revised Administrative Code . . . whose benefits are administered by the system
(meaning SSS or GSIS) or by other agencies of the government."
WHEREFORE, premises considered, the Court resolves to GRANT the petition; respondent is
hereby ordered to give due course to petitioner's claim for benefits. No costs.

G.R. No. L-66614 January 25, 1988

PRIMITIVO LEVERIZA, FE LEVERIZA, PARUNGAO & ANTONIO C. VASCO, petitioners,

vs.
INTERMEDIATE APPELLATE COURT, MOBIL OIL PHILIPPINES & CIVIL AERONAUTICS
ADMINISTRATION, respondents.

BIDIN, J.:

This is a Petition for Review on certiorari seeking the reversal of the decision of the Intermediate
Appellate Court, Third Division * dated February 29, 1984 in AC-G.R. No. CV No. 61705
entitled Mobil Oil Philippines, Inc., plaintiff-appellee vs. Primitivo Leveriza Parungao, Antonio C.
Vasco and Civil Aeronautics Administration, defendants-appellants; Primitive Leveriza, Fe
Leveriza Parungao and Antonio C. Leveriza, cross-defendant, affirming in toto the decision of
the trial court dated April 6, 1976.

As found by the trial court and adopted by the Intermediate Appellate Court, the facts of this case
are as follows:

Around three contracts of lease resolve the basic issues in the instant case. These
three contracts are as follows:

First Contract. — For purposes of easy reference and brevity, this contract shall be
referred to hereinafter as Contract A. This is a "CONTRACT OF LEASE", executed
between the REPUBLIC OF THE PHILIPPINES, represented by Defendant CIVIL
AERONAUTICS ADMINISTRATION, as lessor, and ROSARIO C. LEVERIZA, as
lessee, on April 2, 1965, over a certain parcel of land at the MIA area, consisting of
approximately 4,502 square meters, at a monthly rental of P450.20, for a period of 25
years, (Exhibit "A", Exhibit "I-Leverizas", Exhibit "I-CAA").

Second Contracts. — For purposes of easy references and brevity, this contract
shall be referred to hereinafter as Contract B. This is a "LEASE AGREEMENT",
executed between ROSARIO C. LEVERIZA, as lessor, and Plaintiff MOBIL OIL
PHILIPPINES, INC., as lessee on May 21, 1965, over 3,000 square meters of that
SAME Parcel of land subject of Contract A above mentioned, at a monthly rental of
P1,500.00, for a period of 25 years (Exhibit 'B', Exhibit 4-Leverizas' ).

Third Contract. — For purposes of easy reference and brevity, this contract shall be
referred to hereinafter as Contract C. This is a "LEASE AGREEMENT", executed
between Defendant CIVIL AERONAUTICS ADMINISTRATION, as lessor, and
plaintiff MOBIL OIL PHILIPPINES, INC., as lessee, on June 1, 1968 over that SAME
parcel of land (Lot A, on plan being a portion of Parcel, Psu 2031), containing an
area of 3,000 square meters more or less, at a monthly rental of P.25 per square
meter for the second 200 square meters, and P.20 per square meter for the rest, for
a period of 29 (sic) years. (Exhibit "C").

There is no dispute among the parties that the subject matter of the three
contracts of lease above mentioned, Contract A, Contract B, and Contract C, is
the same parcel of land, with the noted difference that while in Contract A, the area
leased is 4,502 square meters, in Contract B and Contract C, the area has been
reduced to 3,000 square meters. To summarize:

Contract A — a lease contract of April 2, 1965 between the Republic

of the Philippines, represented by Defendant Civil Aeronautics
Administration and Rosario C. Leveriza over a parcel of land
containing an area of 4,502 square meters, for 25 years.

Contract B — a lease contract (in effect a sublease) of May 21, 1965

between defendant Rosario C. Leveriza and plaintiff Mobil Oil
Philippines, Inc. over the same parcel of land, but reduced to 3,000
square meters for 25 years; and

Contract C — a lease contract of June 1, 1968 between defendant

Civil Aeronautics Administration and plaintiff Mobil Oil Philippines,
Inc., over the same parcel of land, but reduced to 3,000 square
meters, for 25 years.

It is important to note, for a clear understanding of the issues involved, that it appears
that defendant Civil Aeronautics Administration as LESSOR, leased the same parcel
of land, for durations of time that overlapped to two lessees, to wit: (1) Defendant
Rosario C. Leveriza, and that plaintiff Mobil Oil Philippines, Inc., as LESSEE, leased
the same parcel of land from two lessors, to wit: (1) defendant Rosario C. Leveriza
and (2) defendant Civil Aeronautics Administration, Inc., for durations of time that
also overlapped.

For purposes of brevity defendant Civil Aeronautics Administration shall be referred

to hereinafter as defendant CAA.

Rosario C. Leveriza, the lessee in Contract A and the lessor in Contract B, is now
deceased. This is the reason why her successor-in-interest, her heirs, are sued,
namely: Defendants Primitive Leveriza, her second husband, (now also deceased),
Fe Leveriza Parungao, her daughter by her second husband, and Antonio C. Vasco,
her son by her first husband. For purposes of brevity, these defendants shall be
referred to hereinafter as Defendants Leveriza.

Plaintiff Mobil Oil Philippines, Inc., shall be referred to hereinafter simply as the
Plaintiff. (pp. 95-99, Record on Appeal).

Plaintiff in this case seeks the rescission or cancellation of Contract A and Contract B
on the ground that Contract A from which Contract B is derived and depends has
already been cancelled by the defendant Civil Aeronautics Administration and
maintains that Contract C with the defendant CAA is the only valid and
subsisting contract insofar as the parcel of land, subject to the present
litigation is concerned. On the other hand, defendants Leverizas' claim that
Contract A which is their contract with CAA has never been legally cancelled and still
valid and subsisting; that it is Contract C between plaintiff and defendant CAA which
should be declared void.

Defendant CAA asserts that Exhibit "A" is still valid and subsisting because its
cancellation by Guillermo Jurado was ineffective and asks the court to annul Contract
 A because of the violation committed by defendant Leveriza in leasing the parcel of
land to plaintiff by virtue of Contract B without the consent of defendant CAA.
Defendant CAA further asserts that Contract C not having been approved by the
Director of Public Works and Communications is not valid. ...

xxx xxx xxx

After trial, the lower court render judgment on April 6, 1976 the dispositive part of which reads:

WHEREFORE, after having thus considered the evidence of all the parties,
testimonial and documentary, and their memoranda and reply-memoranda, this
Court hereby renders judgment:

1. Declaring Contract A as having been validly cancelled on June

28, 1966, and has therefore ceased to have any effect as of that
date;

2. Declaring that Contract B has likewise ceased to have any

effect as of June 28, 1966 because of the cancellation of Contract A;

3. Declaring that Contract C was validly entered into on June 1,

1968, and that it is still valid and subsisting;

4. Ordering defendant CAA to refund to defendants Leverizas the

amount of P32,189.30 with 6% per annum until fully paid;

5. Ordering defendants Leverizas to refund to plaintiff the amount

of P48,000.00 with 6% interest per annum until fully paid;

6. Dismissing defendants Leverizas' four counterclaims against

plaintiff;

7. Dismissing defendants Leverizas' cross-claim against defendant

CAA;

8. Dismissing defendant CAA's counterclaim against plaintiff;

9. Dismissing defendant CAA's counterclaim against defendant

Leverizas.

No pronouncements as to costs.

On June 2, 1976, defendant Leveriza filed a motion for new trial on the ground of newly
discovered evidence, lack of jurisdiction of the court over the case and lack of evidentiary support of
the decision which was denied in the order of November 12,1976 (Rollo, p. 17).

On July 27, 1976, the CAA filed a Motion for Reconsideration, averring that because the lot lease
was properly registered in the name of the Republic of the Philippines, it was only the
President of the Philippines or an officer duly designated by him who could execute the lease
contract pursuant to Sec. 567 of the Revised Administrative Code; that the Airport General
Manager has no authority to cancel Contract A, the contract entered into between the CAA and
Leveriza, and that Contract C between the CAA and Mobil was void for not having been approved by
the Secretary of Public Works and Communications. Said motion was however denied on November
12, 1976 (Rollo, p. 18).

On appeal, the Intermediate Appellate Court, being in full accord with the trial court, rendered a
decision on February 29, 1984, the dispositive part of which reads:

WHEREFORE, finding no reversible error in the decision of the lower court dated
April 6, 1976, the same is hereby affirmed in toto.

Hence, this petition.

The petitioners raised the following assignment of errors:

THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE

ADMINISTRATOR OF THE CIVIL AERONAUTICS ADMINISTRATION (CAA) HAD
THE STATUTORY AUTHORITY TO LEASE, EVEN WITHOUT APPROVAL OF
THE THEN SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, REAL
PROPERTY BELONGING TO THE REPUBLIC OF THE PHILIPPINES.

II

THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE

ADMINISTRATOR OF THE CIVIL AERONAUTICS ADMINISTRATION HAD
STATUTORY AUTHORITY, WITHOUT THE APPROVAL OF THE THEN
SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, TO CANCEL A
LEASE CONTRACT OVER REAL PROPERTY OWNED BY THE REPUBLIC OF
THE PHILIPPINES, WHICH CONTRACT WAS APPROVED, AS REQUIRED BY
LAW, BY THE SECRETARY.

III

THE INTERMEDIATE APPELLATE COURT ERRED WHEN IT RULED THAT THE

CONTRACT OF SUBLEASE (CONTRACT B) ENTERED INTO BETWEEN
PETITIONERS' PREDECESSOR-IN-INTEREST AND RESPONDENT MOBIL OIL
PHILIPPINES, INC. WAS WITHOUT THE CONSENT OF THE ADMINISTRATOR
OF THE CIVIL AERONAUTICS ADMINISTRATION.

The petition is devoid of merit.

There is no dispute that Contract "A" at the time of its execution was a valid contract . The
issue therefore is whether or not said contract is still subsisting after its cancellation by CAA on the
ground of a sublease executed by petitioners with Mobil Oil Philippines without the consent of CAA
and the execution of another contract of lease between CAA and Mobil Oil Philippines (Contract
"C").

Petitioners contend that Contract "A" is still subsisting because Contract "B" is a valid sublease and
does not constitute a ground for the cancellation of Contract "A", while Contract "C", a subsequent
lease agreement between CAA and Mobil Oil Philippines is null and void, for lack of approval by the
Department Secretary. Petitioners anchor their position on Sections 567 and 568 of the Revised
Administrative Code which require among others, that subject contracts should be executed by the
President of the Philippines or by an officer duly designated by him, unless authority to execute the
same is by law vested in some other officer (Petition, Rollo, pp. 15-16).

At the other extreme, respondent Mobil Oil Philippines asserts that Contract "A" was validly
cancelled on June 28, 1966 and so was Contract "B" which was derived therefrom. Accordingly, it
maintains that Contract "C" is the only valid contract insofar as the parcel of land in question is
concerned and that approval of the Department Head is not necessary under Section 32 (par. 24) of
the Republic Act 776 which expressly vested authority to enter into such contracts in the
Administrator of CAA (Comment; Rollo, p. 83).

On its part, respondent Civil Aeronautics Administration took the middle ground with its view that
Contract "A" is still subsisting as its cancellation is ineffective without the approval of the
Department Head but said contract is not enforceable because of petitioners' violation of its terms
and conditions by entering into Contract "B" of sublease without the consent of CAA. The CAA
further asserts that Contract "C" not having been approved by the Secretary of Public Works and
Communications, is not valid (Rollo, p. 43). However, in its comment filed with the Supreme Court,
the CAA made a complete turnabout adopting the interpretation and ruling made by the trial court
which was affirmed by the Intermediate Appellate Court (Court of Appeals), that the CAA
Administrator has the power to execute the deed or contract of lease involving real
properties under its administration belonging to the Republic of the Philippines without the
approval of the Department Head as clearly provided in Section 32, paragraph (24) of Republic Act
776.

The issue narrows down to whether or not there is a valid ground for the cancellation of Contract "A."

Contract "A" was entered into by CAA as the lessor and the Leverizas as the lessee specifically "for
the purpose of operating and managing a gasoline station by the latter, to serve vehicles going in
and out of the airport."

As regards prior consent of the lessor to the transfer of rights to the leased premises, the provision
of paragraph 7 of said Contract reads in full:

7. The Party of the Second part may transfer her rights to the leased premises but in
such eventuality, the consent of the Party of the First Part shall first be secured.
In any event, such transfer of rights shall have to respect the terms and conditions of
this agreement.

Paragraph 8 provides the sanction for the violation of the above-mentioned terms and conditions of
the contract. Said paragraph reads:

8. Failure on the part of the Party of the Second Part to comply with the terms
and conditions herein agreed upon shall be sufficient for revocation of this
contract by the Party of the First Part without need of judicial demand.

It is not disputed that the Leverizas (lessees) entered into a contract of sublease (Contract "B") with
Mobil Oil Philippines without the consent of CAA (lessor). The cancellation of the contract was made
in a letter dated June 28, 1966 of Guillermo P. Jurado, Airport General Manager of CAA addressed
to Rosario Leveriza, as follows:
 (Letterhead)

June 28, 1966

Mrs. Rosario Leveriza

Manila International Airport

Madam:

It has been found out by the undersigned that you have sublet the
property of the CAA leased to you and by virtue of this, your lease
contract is hereby cancelled because of the violation of the
stipulations of the contract. I would like to inform you that even
without having sublet the said property the said contract would have
been cancelled as per attached communication.

Very
truly
yours,

For the
Directo
r:

(Sgd.)
Illegible
(Typed
)

GUILLERMO P.
JURADO
Airport General
Manager

Respondent Leverizas and the CAA assailed the validity of such cancellation, claiming that the
Airport General Manager had no legal authority to make the cancellation. They maintain that
it is only the Secretary of Public Works and Communications, acting for the President, or by
delegation of power, the Director of Civil Aeronautics Administration who could validly cancel the
contract. They do admit, however, and it is evident from the records that the Airport General
Manager signed "For the Director." Under the circumstances, there is no question that such act
enjoys the presumption of regularity, not to mention the unassailable fact that such act was
subsequently affirmed or ratified by the Director of the CAA himself (Record on Appeal, pp.
108-110).

Petitioners argue that cancelling or setting aside a contract approved by the Secretary is, in effect,
repealing an act of the Secretary which is beyond the authority of the Administrator.

Such argument is untenable. The terms and conditions under which such revocation or cancellation
may be made, have already been specifically provided for in Contract "A" which has already been
approved by the Department Head, It is evident that in the implementation of aforesaid contract, the
approval of said Department Head is no longer necessary if not redundant.
It is further contended that even granting that such cancellation was effective, a subsequent billing
by the Accounting Department of the CAA has in effect waived or nullified the rescission of
Contract "A."

It will be recalled that the questioned cancellation of Contract "A" was among others, mainly based
on the violation of its terms and conditions, specifically, the sublease of the property by the lessee
without the consent of the lessor.

The billing of the petitioners by the Accounting Department of the CAA if indeed it transpired, after
the cancellation of Contract "A" is obviously an error. However, this Court has already ruled that the
mistakes of government personnel should not affect public interest. In San Mauricio Mining
Company v. Ancheta (105 SCRA 391, 422), it has been held that as a matter of law rooted in the
protection of public interest, and also as a general policy to protect the government and the people,
errors of government personnel in the performance of their duties should never deprive the people of
the right to rectify such error and recover what might be lost or be bartered away in any actuation,
deal or transaction concerned. In the case at bar, the lower court in its decision which has been
affirmed by the Court of Appeals, ordered the CAA to refund to the petitioners the amount of
rentals which was not due from them with 6% interest per annum until fully paid.

Petitioners further assail the interpretation of Contract "A", claiming that Contract "B" was a mere
sublease to respondent Mobil Oil Philippines, Inc. and requires no prior consent of CAA to perfect
the same. Citing Article 1650 of the Civil Code, they assert that the prohibition to sublease must be
expressed and cannot be merely implied or inferred (Rollo, p. 151).

As correctly found by the Court of Appeals, petitioners in asserting the non- necessity for a prior
consent interprets the first sentence of paragraph 7 of Contract "A" to refer to an assignment of
lease under Article 1649 of the Civil Code and not to a mere sublease. A careful scrutiny of said
paragraph of Contract "A" clearly shows that it speaks of transfer of rights of Rosario Leveriza to the
leased premises and not to assignment of the lease (Rollo, pp. 48-49).

Petitioners likewise argued that it was contemplated by the parties to Contract "A" that Mobil Oil
Philippines would be the owner of the gasoline station it would construct on the leased premises
during the period of the lease, hence, it is understood that it must be given a right to use and occupy
the lot in question in the form of a sub-lease (Rollo, p. 152).

In Contract "A", it was categorically stated that it is the lessee (petitioner) who will manage and
operate the gasoline station. The fact that Mobil Oil was mentioned in that contract was clearly not
intended to give approval to a sublease between petitioners and said company but rather to insure
that in the arrangements to be made between them, it must be understood that after the expiration of
the lease contract, whatever improvements have been constructed in the leased premises shall be
relinquished to CAA. Thus, this Court held that "the primary and elementary rule of construction of
documents is that when the words or language thereof is clear and plain or readily understandable
by any ordinary reader thereof, there is absolutely no room for interpretation or construction
anymore." (San Mauricio Mining Company v. Ancheta, supra).

Finally, petitioners contend that the administrator of CAA cannot execute without approval of the
Department Secretary, a valid contract of lease over real property owned by the Republic of the
Philippines, citing Sections 567 and 568 of the Revised Administrative Code, which provide as
follows:

SEC. 567. Authority of the President of the Philippines to execute contracts relative
to real property. — When the Republic of the Philippines is party to a deed conveying
 the title to real property or is party to any lease or other contract relating to real
property belonging to said government, said deed or contract shall be executed on
behalf of said government by the President of the Philippines or by an officer duly
designated by him, unless authority to execute the same is by law expressly vested
in some other officer. (Emphasis supplied)

SEC. 568. Authority of national officials to make contract. — Written contracts not
within the purview of the preceding section shall, in the absence of special provision,
be executed, with the approval of the proper Department Head, by the Chief of the
Bureau or Office having control of the appropriation against which the contract would
create a charge; or if there is no such chief, by the proper Department Head himself
or the President of the Philippines as the case may require.

On the other hand, respondent CAA avers that the CAA Administrator has the authority to lease real
property belonging to the Republic of the Philippines under its administration even without the
approval of the Secretary of Public Works and Communications, which authority is expressly vested
in it by law, more particularly Section 32 (24) of Republic Act 776, which reads:

Sec. 32. Powers and Duties of the Administrator. — Subject to the general control
and supervision of the Department Head, the Administrator shall have, among
others, the following powers and duties:

xxx xxx xxx

(24) To administer, operate, manage, control, maintain and develop the Manila
International Airport and all government aerodromes except those controlled or
operated by the Armed Forces of the Philippines including such power and duties as:
... (b) to enter into, make and execute contracts of any kind with any person,
firm, or public or private corporation or entity; (c) to acquire, hold, purchase, or
lease any personal or real property; right of ways, and easements which may be
proper or necessary: Provided, that no real property thus acquired and any other real
property of the Civil Aeronautics Administration shall be sold without the approval
of the President of the Philippines. ...

There is no dispute that the Revised Administrative Code is a general law while
Republic Act 776 is a special law nor in the fact that the real property subject of the
lease in Contract "C" is real property belonging to the Republic of the Philippines.

Under 567 of the Revised Administrative Code, such contract of lease must be executed: (1) by the
President of the Philippines, or (2) by an officer duly designated by him or (3) by an officer
expressly vested by law. It is readily apparent that in the case at bar, the Civil Aeronautics
Administration has the authority to enter into Contracts of Lease for the government under
the third category. Thus, as correctly ruled by the Court of Appeals, the Civil Aeronautics
Administration has the power to execute the deed or contract involving leases of real
properties belonging to the Republic of the Philippines

, not because it is an entity duly designated by the President but because the said authority to
execute the same is, by law expressly vested in it.

Under the above-cited Section 32 (par. 24) of Republic Act 776, the Administrator (Director) of the
Civil Aeronautics Administration by reason of its creation and existence, administers properties
belonging to the Republic of the Philippines and it is on these properties that the Administrator must
exercise his vast power and discharge his duty to enter into, make and execute contract of any kind
with any person, firm, or public or private corporation or entity and to acquire, hold, purchase, or
lease any personal or real property, right of ways and easements which may be proper or
necessary. The exception, however, is the sale of properties acquired by CAA or any other real
properties of the same which must have the approval of the President of the Philippines. The Court
of appeals took cognizance of the striking absence of such proviso in the other transactions
contemplated in paragraph (24) and is convinced as we are, that the Director of the Civil Aeronautics
Administration does not need the prior approval of the President or the Secretary of Public Works
and Communications in the execution of Contract "C."

In this regard, this Court, ruled that another basic principle of statutory construction mandates that
general legislation must give way to special legislation on the same subject, and generally be so
interpreted as to embrace only cases in which the special provisions are not applicable (Sto.
Domingo v. De los Angeles, 96 SCRA 139),. that specific statute prevails over a general statute (De
Jesus v. People, 120 SCRA 760) and that where two statutes are of equal theoretical application to
a particular case, the one designed therefor specially should prevail (Wil Wilhensen, Inc. v. Baluyot,
83 SCRA 38)

WHEREFORE, the petition is DISMISSED for lack of merit and the decision of the Court of
Appeals appealed from is AFFIRMED in toto.

SO ORDERED.

A.M. No. 88-7-1861-RTC October 5, 1988

IN RE: DESIGNATION OF JUDGE RODOLFO U. MANZANO AS MEMBER OF THE ILOCOS

NORTE PROVINCIAL COMMITTEE ON JUSTICE.

PADILLA, J.:

On 4 July 1988, Judge Rodolfo U. Manzano, Executive Judge, RTC, Bangui, Ilocos Norte,
Branch 19, sent this Court a letter which reads:

Hon. Marcelo Fernan

Chief Justice of the Supreme Court
of the Philippines
Manila

Thru channels: Hon. Leo Medialdea

Court Administrator
Supreme Court of the Philippines

Sir:

By Executive Order RF6-04 issued on June 21, 1988 by the Honorable Provincial
Governor of Ilocos Norte, Hon. Rodolfo C. Farinas, I was designated as a member
of the Ilocos Norte Provincial Committee on Justice created pursuant to
Presidential Executive Order No. 856 of 12 December 1986, as amended by
Executive Order No. 326 of June 1, 1988. In consonance with Executive Order RF6-
 04, the Honorable Provincial Governor of Ilocos Norte issued my appointment as a
member of the Committee. For your ready reference, I am enclosing herewith
machine copies of Executive Order RF6-04 and the appointment.

Before I may accept the appointment and enter in the discharge of the powers and
duties of the position as member of the Ilocos (Norte) Provincial Committee on
Justice, may I have the honor to request for the issuance by the Honorable Supreme
Court of a Resolution, as follows:

(1) Authorizing me to accept the appointment and to as assume and

discharge the powers and duties attached to the said position;

(2) Considering my membership in the Committee as neither

violative of the Independence of the Judiciary nor a violation of
Section 12, Article VIII, or of the second paragraph of Section .7,
Article IX (B), both of the Constitution, and will not in any way amount
to an abandonment of my present position as Executive Judge of
Branch XIX, Regional Trial Court, First Judicial Region, and as a
member of the Judiciary; and

(3) Consider my membership in the said Committee as part of the

primary functions of an Executive Judge.

May I please be favored soon by your action on this request.

Very respectfully yours,

(Sgd) RODOLFO U. MANZANO

Judge

An examination of Executive Order No. 856, as amended, reveals that Provincial/City Committees
on Justice are created to insure the speedy disposition of cases of detainees, particularly
those involving the poor and indigent ones, thus alleviating jail congestion and improving local jail
conditions. Among the functions of the Committee are—

3.3 Receive complaints against any apprehending officer, jail warden, final or judge
who may be found to have committed abuses in the discharge of his duties and
refer the same to proper authority for appropriate action;

3.5 Recommend revision of any law or regulation which is believed prejudicial to

the proper administration of criminal justice.

It is evident that such Provincial/City Committees on Justice perform administrative functions.

Administrative functions are those which involve the regulation and control over the conduct
and affairs of individuals for; their own welfare and the promulgation of rules and regulations to
better carry out the policy of the legislature or such as are devolved upon the administrative agency
by the organic law of its existence (Nasipit Integrated Arrastre and Stevedoring Services Inc., vs.
Tapucar, SP-07599-R, 29 September 1978, Blacks Law Dictionary).

Furthermore, under Executive Order No. 326 amending Executive Order No. 856, it is provided that
—
 Section 6. Supervision.—The Provincial/City Committees on Justice shall be under
the supervision of the Secretary of justice Quarterly accomplishment reports shall be
submitted to the Office of the Secretary of Justice.

Under the Constitution, the members of the Supreme Court and other courts established by
law shall not be designated to any agency performing quasi- judicial or administrative
functions (Section 12, Art. VIII, Constitution

).

Considering that membership of Judge Manzano in the Ilocos Norte Provincial Committee on
Justice, which discharges a administrative functions, will be in violation of the Constitution, the
Court is constrained to deny his request.

Former Chief Justice Enrique M. Fernando in his concurring opinion in the case of Garcia vs.
Macaraig (39 SCRA 106) ably sets forth:

2. While the doctrine of separation of powers is a relative theory not to be enforced

with pedantic rigor, the practical demands of government precluding its doctrinaire
application, it cannot justify a member of the judiciary being required to assume a
position or perform a duty non-judicial in character. That is implicit in the principle.
Otherwise there is a plain departure from its command. The essence of the trust
reposed in him is to decide. Only a higher court, as was emphasized by Justice
Barredo, can pass on his actuation. He is not a subordinate of an executive or
legislative official, however eminent. It is indispensable that there be no exception to
the rigidity of such a norm if he is, as expected, to be confined to the task of
adjudication. Fidelity to his sworn responsibility no less than the maintenance of
respect for the judiciary can be satisfied with nothing less.

This declaration does not mean that RTC Judges should adopt an attitude of monastic insensibility
or unbecoming indifference to Province/City Committee on Justice. As incumbent RTC Judges, they
form part of the structure of government. Their integrity and performance in the adjudication of cases
contribute to the solidity of such structure. As public officials, they are trustees of an orderly society.
Even as non-members of Provincial/City Committees on Justice, RTC judges should render
assistance to said Committees to help promote the laudable purposes for which they exist, but only
when such assistance may be reasonably incidental to the fulfillment of their judicial duties.

ACCORDINGLY, the aforesaid request of Judge Rodolfo U. Manzano is DENIED.

G.R. No. 102976 October 25, 1995

IRON AND STEEL AUTHORITY, petitioner,

vs.
THE COURT OF APPEALS and MARIA CRISTINA FERTILIZER CORPORATION, respondents.

FELICIANO, J.:
Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272 dated 9
August 1973 in order, generally, to develop and promote the iron and steel industry in the
Philippines. The objectives of the ISA are spelled out in the following terms:

Sec. 2. Objectives — The Authority shall have the following objectives:

(a) to strengthen the iron and steel industry of the Philippines and to expand the
domestic and export markets for the products of the industry;

(b) to promote the consolidation, integration and rationalization of the industry in

order to increase industry capability and viability to service the domestic market and
to compete in international markets;

(c) to rationalize the marketing and distribution of steel products in order to achieve a
balance between demand and supply of iron and steel products for the country and
to ensure that industry prices and profits are at levels that provide a fair balance
between the interests of investors, consumers suppliers, and the public at large;

(d) to promote full utilization of the existing capacity of the industry, to discourage
investment in excess capacity, and in coordination, with appropriate government
agencies to encourage capital investment in priority areas of the industry;

(e) to assist the industry in securing adequate and low-cost supplies of raw materials
and to reduce the excessive dependence of the country on imports of iron and steel.

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;

xxx xxx xxx

(Emphasis supplied)

P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August
1973. When ISA's original term expired on 10 October 1978, its term was extended for another ten
1

(10) years by Executive Order No. 555 dated 31 August 1979.

The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National
Development Corporation which is itself an entity wholly owned by the National Government,
embarked on an expansion program embracing, among other things, the construction of an
integrated steel mill in Iligan City. The construction of such a steel mill was considered a priority
and major industrial project of the Government. Pursuant to the expansion program of the NSC,
Proclamation No. 2239 was issued by the President of the Philippines 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 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.
2

Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August
1983, petitioner ISA commenced eminent domain proceedings against private respondent
MCFC in the Regional Trial Court, Branch 1, of Iligan City, praying that it (ISA) be places in
possession of the property involved upon depositing in court the amount of P1,760,789.69
representing ten percent (10%) of the declared market values of that property. The Philippine
National Bank, as mortgagee of the plant facilities and improvements involved in the expropriation
proceedings, was also impleaded as party-defendant.

On 17 September 1983, a 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.

The case proceeded to trial. 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.

In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did
dismiss the case. The dismissal was anchored on the provision of the Rules of Court stating that
"only natural or juridical persons or entities authorized by law may be parties in a civil
case." The trial court also referred to non-compliance by petitioner ISA with the requirements of
3

Section 16, Rule 3 of the Rules of Court.4

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. In this
connection, ISA referred to a letter from the Office of the President dated 28 September 1988 which
especially directed the Solicitor General to continue the expropriation case.

The trial court denied the motion for reconsideration, stating, among other things that:

The property to be expropriated is not for public use or benefit [__] but for the
use and benefit [__] of NSC, a government controlled private corporation engaged in
private business and for profit, specially now that the government, according to
newspaper reports, is offering for sale to the public its [shares of stock] in the
 National Steel Corporation in line with the pronounced policy of the present
administration to disengage the government from its private business
ventures. (Brackets supplied)
5

Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the 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:

It is our considered opinion that under the law, the complaint cannot prosper, and
therefore, has to be dismissed without prejudice to the refiling of a new complaint for
expropriation if the Congress sees it fit." (Emphases supplied)

At the same time, however, the Court of Appeals held that it was premature for the trial court
to have ruled that the expropriation suit was not for a public purpose, considering that the
parties had not yet rested their respective cases.

In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted the
action for expropriation in its capacity as agent of the Republic of the Philippines, the Republic, as
principal of ISA, is entitled to be substituted and to be made a party-plaintiff after the agent
ISA's term had expired.

Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a law
further extending the term of ISA after 11 August 1988 evinced a "clear legislative intent to
terminate the juridical existence of ISA," and that the authorization issued by the Office of the
President to the Solicitor General for continued prosecution of the expropriation suit could not prevail
over such negative intent. It is also contended that the exercise of the eminent domain by ISA or the
Republic is improper, since that power would be exercised "not on behalf of the National
Government but for the benefit of NSC."

The principal issue which we must address in this case is whether or not the Republic of the
Philippines is entitled to be substituted for ISA in view of the expiration of ISA's term. As will be made
clear below, this is really the only issue which we must resolve at this time.

Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action:

Sec. 1. Who May Be Parties. — Only natural or juridical persons or entities

authorized by law may be parties in a civil action.

Under the above quoted provision, it will be seen that those who can be parties to a civil
action may be broadly categorized into two (2) groups:
 (a) those who are recognized as persons under the law whether natural, i.e.,
biological persons, on the one hand, or juridical person such as corporations, on the
other hand; and

(b) entities authorized by law to institute actions.

Examination of the statute which created petitioner ISA shows that ISA falls under category (b)
above. P.D. No. 272, as already noted, contains express authorization to ISA to commence
expropriation proceedings like those here involved:

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;

xxx xxx xxx

(Emphasis supplied)

It should also be noted that the enabling statute of ISA expressly authorized it to enter into
certain kinds of contracts "for and in behalf of the Government" in the following terms:

xxx xxx xxx

(i) to negotiate, and when necessary, to enter into contracts for and in behalf of the
government, for the bulk purchase of materials, supplies or services for any sectors
in the industry, and to maintain inventories of such materials in order to insure a
continuous and adequate supply thereof and thereby reduce operating costs of such
sector;

xxx xxx xxx

(Emphasis supplied)

Clearly, 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. Among such incorporated agencies or instrumentalities are: National
Power Corporation; Philippine Ports Authority; National Housing Authority; Philippine National Oil
6 7 8

Company; Philippine National Railways; Public Estates Authority; Philippine Virginia Tobacco
9 10 11
Administration, and so forth. It is worth noting that the term "Authority" has been used to designate
12

both incorporated and non-incorporated agencies or instrumentalities of the Government.

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." The relevant
definitions are found in the Administrative Code of 1987:

Sec. 2. General Terms Defined. — Unless the specific words of the text, or the
context as a whole, or a particular statute, require a different meaning:

(1) Government of the Republic of the Philippines refers to the corporate

governmental entity through which the functions of government are exercised
throughout the Philippines, including, save as the contrary appears from the context,
the various arms through which political authority is made effective in the Philippines,
whether pertaining to the autonomous regions, the provincial, city, municipal or
barangay subdivisions or other forms of local government.

xxx xxx xxx

(4) Agency of the Government refers to any of the various units of the Government,
including a department, bureau, office, instrumentality, or government-owned or
controlled corporation, or a local government or a distinct unit therein.

xxx xxx xxx

(10) Instrumentality refers to any agency of the National Government, not integrated
within the department framework, vested with special functions or jurisdiction by
law, endowed with some if not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions and government-owned or controlled
corporations.

xxx xxx xxx

(Emphases supplied)

When the statutory term of a non-incorporated agency expires, the powers, duties and
functions as well as the assets and liabilities of that agency revert back to, and are re-
assumed by, the Republic of the Philippines, in the absence of special provisions of law
specifying some other disposition thereof such as, e.g., devolution or transmission of such powers,
duties, functions, etc. to some other identified successor agency or instrumentality of the Republic of
the Philippines. When the expiring agency is an incorporated one, the consequences of such expiry
must be looked for, in the first instance, in the charter of that agency and, by way of
supplementation, in the provisions of the Corporation Code. 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 procedural implications of the relationship between an agent or delegate of the Republic of the
Philippines and the Republic itself are, at least in part, spelled out in the Rules of Court. The general
rule is, of course, that an action must be prosecuted and defended in the name of the real party in
interest. (Rule 3, Section 2) Petitioner ISA was, at the commencement of the expropriation
proceedings, a real party in interest, having been explicitly authorized by its enabling statute to
institute expropriation proceedings. The Rules of Court at the same time expressly recognize the
role of representative parties:

Sec. 3. Representative Parties. — A trustee of an expressed trust, a guardian, an

executor or administrator, or a party authorized by statute may sue or be sued
without joining the party for whose benefit the action is presented or defended; but
the court may, at any stage of the proceedings, order such beneficiary to be made a
party. . . . . (Emphasis supplied)

In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or
delegate or representative of the Republic of the Philippines pursuant to its authority under P.D.
No. 272. The present expropriation suit was brought on behalf of and for the benefit of the Republic
as the principal of ISA. Paragraph 7 of the complaint stated:

7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land
for the construction and installation of iron and steel manufacturing facilities that are
indispensable to the integration of the iron and steel making industry which is vital to
the promotion of public interest and welfare. (Emphasis supplied)

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.

It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration of
ISA's statutory term, was not a ground for dismissal of such proceedings since a party may be
dropped or added by order of the court, on motion of any party or on the court's own initiative at any
stage of the action and on such terms as are just. In the instant case, the Republic has precisely
13

moved to take over the proceedings as party-plaintiff.

In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court, the Court recognized that
14

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. The Court said:

It can be said that in suing for the recovery of the rentals, the Republic of the
Philippines acted as principal of the Philippine Ports Authority, directly exercising the
commission it had earlier conferred on the latter as its agent. . . . (Emphasis
15

supplied)
 In E.B. Marcha, the Court also stressed that to require the Republic to commence all over
again another proceeding, as the trial court and Court of Appeals had required, was to
generate unwarranted delay and create needless repetition of proceedings:

More importantly, as we see it, dismissing the complaint on the ground that the
Republic of the Philippines is not the proper party would result in needless delay in
the settlement of this matter and also in derogation of the policy against multiplicity
of suits. Such a decision would require the Philippine Ports Authority to refile the very
same complaint already proved by the Republic of the Philippines and bring back as
it were to square one. (Emphasis supplied)
16

As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the
Philippines for the ISA upon the ground 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 legally ineffective by reason of the expiration of the statutory term of the agent or
delegated i.e., ISA. Since, as we have held above, the powers and functions of ISA have
reverted to the Republic of the Philippines upon the termination of the statutory term of ISA ,
the question should be addressed whether fresh legislative authority is necessary before the
Republic of the Philippines may continue the expropriation proceedings initiated by its own delegate
or agent.

While the power of eminent domain is, in principle, vested primarily in the legislative department of
the government, we believe and so hold that no new legislative act is necessary should the Republic
decide, upon being substituted for ISA, in fact to continue to prosecute the expropriation
proceedings. For the legislative authority, a long time ago, enacted a continuing or standing
delegation of authority to the President of the Philippines to exercise, or cause the exercise of, the
power of eminent domain on behalf of the Government of the Republic of the Philippines. The 1917
Revised Administrative Code, which was in effect at the time of the commencement of the present
expropriation proceedings before the Iligan Regional Trial Court, provided that:

Sec. 64. Particular powers and duties of the President of the Philippines. — In
addition to his general supervisory authority, the President of the Philippines shall
have such other specific powers and duties as are expressly conferred or imposed
on him by law, and also, in particular, the powers and duties set forth in this Chapter.

Among such special powers and duties shall be:

xxx xxx xxx

(h) To determine when it is necessary or advantageous to exercise the right of

eminent domain in behalf of the Government of the Philippines; and to direct the
Secretary of Justice, where such act is deemed advisable, to cause the
condemnation proceedings to be begun in the court having proper jurisdiction.
(Emphasis supplied)

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 expopriation proceedings in the proper court. (Emphasis
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. 17

It is argued by private respondent MCFC that, because Congress after becoming once more the
depository of primary legislative power, had not enacted a statute extending the term of ISA, such
non-enactment must be deemed a manifestation of a legislative design to discontinue or abort the
present expropriation suit. We find this argument much too speculative; it rests too much upon
simple silence on the part of Congress and casually disregards the existence of Section 12 of the
1987 Administrative Code already quoted above.

Other contentions are made by private respondent MCFC, such as, that the constitutional
requirement of "public use" or "public purpose" is not present in the instant case, and that the
indispensable element of just compensation is also absent. We agree with the Court of Appeals in
this connection that these contentions, which were adopted and set out by the Regional Trial Court
in its order of dismissal, are premature and are appropriately addressed in the proceedings before
the trial court. Those proceedings have yet to produce a decision on the merits, since trial was still
on going at the time the Regional Trial Court precipitously dismissed the expropriation proceedings.
Moreover, as a pragmatic matter, the Republic is, by such substitution as party-plaintiff, accorded an
opportunity to determine whether or not, or to what extent, the proceedings should be continued in
view of all the subsequent developments in the iron and steel sector of the country including, though
not limited to, the partial privatization of the NSC.

WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991 to
the extent that it affirmed the trial court's order dismissing the expropriation proceedings, is hereby
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 petitioner Iron and Steel Authority and for
further proceedings consistent with this Decision. No pronouncement as to costs.

SO ORDERED.