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

The delegation of eminent domain power to a new franchise holder to acquire an existing distribution system from an expired franchise holder for the same public purpose of electricity distribution is constitutional, as it serves the distinct public necessity of ensuring uninterrupted utility service during the franchise transition, and the classification of the new franchisee as differently situated from existing utilities satisfies the equal protection clause.

Panay Electric Company, Inc. (PECO) operated the electric power distribution system in Iloilo City under a legislative franchise that expired on January 18, 2019, without renewal. Congress subsequently enacted R.A. No. 11212, granting a franchise to MORE Electric and Power Corporation to operate the same system. Because MORE lacked existing infrastructure and PECO’s system already occupied public spaces, Sections 10 and 17 of the new law authorized MORE to exercise eminent domain over PECO’s distribution assets to ensure an uninterrupted power supply during the operational transition. PECO challenged these provisions as an unconstitutional corporate takeover that violated its rights to due process and equal protection.

• PECO operated the electric power distribution system in Iloilo City under a legislative franchise that expired on January 18, 2019, and was not renewed.
• R.A. No. 11212 was enacted, granting a new franchise to MORE Electric and Power Corporation to establish, operate, and maintain the distribution system in Iloilo City.
• Section 10 of R.A. No. 11212 authorized MORE to exercise the power of eminent domain to acquire private property, including poles, wires, transformers, and other infrastructure previously or currently used for electricity distribution in the franchise area.
• Section 17 allowed PECO to continue operating the system under a provisional Certificate of Public Convenience and Necessity (CPCN) during a transition period not exceeding two years, but explicitly stated this interim arrangement would not prevent MORE from exercising eminent domain over the existing assets.
• MORE filed a complaint for expropriation against PECO’s distribution system, while PECO filed a petition for declaratory relief challenging the constitutionality of Sections 10 and 17, arguing the provisions authorized an unconstitutional taking of property already devoted to public use for the same use, amounting to a private corporate takeover.

• MORE and the OSG argued that the expropriation serves a distinct emergency public purpose: ensuring the continuous and uninterrupted supply of electricity during the critical transition from the old franchise holder to the new one.
• They asserted that MORE is differently situated from other existing utilities because it must establish its service in a franchise area already burdened by an existing distribution system, making immediate acquisition necessary to avoid economic disruption and public inconvenience.
• They contended that PECO’s distribution system is not ordinary private property but is historically burdened with public use and susceptible to expropriation under prior franchise laws, and that the payment of just compensation and the provisional deposit mechanism comply with constitutional due process.

• PECO argued that expropriating property already devoted to a public use for the exact same public use serves no genuine public necessity and constitutes a confiscatory corporate takeover for private gain.
• PECO claimed Sections 10 and 17 violate the equal protection clause by granting MORE unprecedented powers, including immediate takeover upon deposit of the assessed value, while other similarly situated utilities only have the right to expropriate for maintenance and operation.
• PECO maintained that the expiration of its franchise did not strip it of its constitutional right to due process and equal protection against the illegal expropriation of its privately owned distribution assets.

• Procedural Issues:
  • Whether the RTC properly made permanent a Temporary Restraining Order that had already expired by operation of law.
  • Whether the RTC correctly rendered judgment on the pleadings without allowing the OSG to comment on the constitutional issue.
  • Whether MORE engaged in forum shopping by simultaneously pursuing the Supreme Court petition, expropriation proceedings, and a motion for reconsideration.
• Substantive Issues:
  • Whether PECO’s existing power distribution system can be subjected to expropriation for the same public purpose of electricity distribution.
  • Whether the expropriation authorized under Sections 10 and 17 of R.A. No. 11212 complies with the constitutional requirements of due process and equal protection.

• Procedural: The procedural issues were rendered moot or resolved without prejudice to the merits. The RTC’s reference to an expired TRO was deemed a careless drafting error that did not affect the substantive ruling. The OSG’s lack of opportunity to be heard at the trial court was cured by its direct participation before the Supreme Court. The forum shopping allegation was mooted by subsequent RTC orders denying the motion for reconsideration and suspending the expropriation proceedings.
• Substantive: The petitions were granted, the RTC decision was reversed, and Sections 10 and 17 of R.A. No. 11212 were declared constitutional. The Court held that PECO’s distribution system is not ordinary private property but is historically burdened with public use and has always been susceptible to government expropriation under prior franchise laws. The taking serves a distinct and genuine public purpose beyond ordinary power distribution: ensuring the uninterrupted supply of electricity during the franchise transition to prevent massive economic disruption. The classification of MORE as differently situated from other existing utilities is valid under the equal protection clause, as MORE is a new franchisee facing the unique challenge of establishing service in an area already saturated with existing infrastructure. The immediate takeover upon deposit of assessed value is a provisional measure consistent with Rule 67 of the Rules of Court and does not preclude the subsequent judicial determination of just compensation.

• Public Use as Public Purpose — The concept of "public use" in eminent domain has evolved from literal use by the public to encompass any taking that serves a public advantage, convenience, or general welfare. The Court applied this to uphold the expropriation, recognizing that ensuring uninterrupted electricity supply during a franchise transition serves a distinct public purpose and security interest.
• Valid Delegation of Eminent Domain to Public Utilities — The State’s inherent power of eminent domain may be delegated to private entities performing public functions, such as public utilities, provided the delegation is strictly construed and exercised for a genuine public necessity. The Court upheld Congress's delegation to MORE as necessary to fulfill its franchise mandate.
• Historical Burden on Franchise Assets — Legislative franchises for public utilities inherently burden the acquired distribution assets with public use. Even after franchise expiration, these assets remain susceptible to expropriation for the same public purpose because their installation and continued existence rely on the privilege of occupying public spaces granted by the State.
• Equal Protection and Reasonable Classification — A law does not violate the equal protection clause if it applies equally to all members of a class and the classification rests on substantial distinctions germane to the law's purpose. The Court held MORE is not similarly situated to existing utilities because it is a new entrant that must immediately secure infrastructure to prevent service disruption, justifying the unique expropriation authority.

• "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."
• "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."
• "The distribution system of PECO in Iloilo City is no ordinary private property. To begin with, the very installation of the distribution system depends on a franchise... Moreover, the distribution system is burdened with public use even after the termination of the franchise either by expiration or decision of the government."

• Heirs of Suguitan v. City of Mandaluyong — Cited as the controlling precedent establishing the general principles and constitutional limitations on the valid exercise of the power of eminent domain, including the requirements of valid delegation, public use, prior offer, and just compensation.
• National Electrification Administration v. Maguindanao Electric Cooperative, Inc. — Cited to support the proposition that the State may order the transfer of distribution assets from an old franchise holder to a new one to ensure the uninterrupted supply of electricity, recognizing it as a valid public purpose.
• Kelo v. City of New London (U.S. Supreme Court) — Referenced to illustrate the evolution of foreign jurisprudence on eminent domain, particularly the expansion of "public use" to include economic development and public purpose, though the Court noted it relied primarily on domestic law and facts.
• City of Manila v. Chinese Community of Manila — Cited to affirm that whether a taking is for a public use is ultimately a judicial question, and that property already devoted to a public use can be burdened with a different or similar public purpose if expressly authorized by law.

• Article III, Section 1 and Section 9, 1987 Constitution — The due process and equal protection clauses, and the prohibition against taking private property for public use without just compensation, were the primary constitutional standards applied to evaluate the validity of the expropriation.
• Sections 10 and 17, Republic Act No. 11212 — The specific provisions of MORE's franchise law authorizing the exercise of eminent domain and the transition of operations, which were the direct subject of the constitutional challenge.
• Section 23, Republic Act No. 9136 (EPIRA) — Cited as the statutory basis delegating the power of eminent domain to distribution utilities, subject to constitutional and legal limitations.
• Rule 67, Rules of Court — Referenced to validate the procedural mechanism allowing immediate possession upon deposit of the assessed value, clarifying that such deposit is provisional and does not replace the judicial determination of just compensation.

• Justice Perlas-Bernabe — Concurred in the result, emphasizing that the case involves a declaratory relief on constitutionality rather than the propriety of the specific taking, which remains subject to judicial determination in the ongoing expropriation proceedings.
• Justice Caguioa — Concurred, providing an extensive analysis on the nature of electric distribution as a natural monopoly and the historical context of franchise laws. He clarified that the deposit of assessed value under Section 10 is merely a provisional amount for immediate possession under Rule 67, and does not limit the court's ultimate determination of full just compensation based on fair market value. He also stressed that the legislative grant of franchise is a political question, and the Court's role is limited to determining if the delegation of eminent domain passes constitutional muster, which it does.

• Justice Leonen — Dissented, arguing that Section 10 constitutes class legislation violating the equal protection clause by granting MORE unwarranted benefits (immediate takeover upon assessed value deposit) not given to similarly situated utilities. He contended that taking property already devoted to public use for the same use serves no genuine public purpose and merely transfers private property for corporate profit, failing the strict scrutiny test applicable to property rights.
• Justice Lazaro-Javier — Dissented, characterizing Sections 10 and 17 as unconstitutional bills of attainder. She argued that the provisions singled out PECO for legislative punishment based on alleged past service deficiencies without a judicial trial, effectively bypassing the courts' function to determine public use and genuine necessity. She further asserted that the provisions violate equal protection by targeting a specific entity and that the purported public purpose was merely a pretext for a forced corporate takeover.