In a significant ruling, the Supreme Court affirmed that the National Grid Corporation of the Philippines (NGCP) can expropriate land within the Petrochemical Industrial Park for its transmission lines, even though the park is dedicated to industrial development. The Court clarified that because the land is classified as patrimonial property, intended for commercial use and open to private investment, it assumes the nature of private property subject to expropriation. This decision underscores the balance between public infrastructure needs and private property rights, ensuring that essential projects can proceed while respecting the constitutional right to just compensation.

Power Lines and Petrochemicals: When Public Use Meets Private Capacity

This case arose from a complaint filed by the National Grid Corporation of the Philippines (NGCP) to expropriate a portion of land owned by PNOC Alternative Fuels Corporation (PAFC) within the Petrochemical Industrial Park in Bataan. NGCP needed the land to construct and maintain its Mariveles-Limay 230 kV Transmission Line Project, essential for ensuring a stable power supply to Bataan, Zambales, and other regions. PAFC, however, argued that the land was already dedicated to a public purpose – the development of the petrochemical industry – and therefore, was not subject to expropriation by NGCP. The Regional Trial Court (RTC) ruled in favor of NGCP, prompting PAFC to appeal directly to the Supreme Court.

At the heart of the legal matter was the interpretation of Republic Act (R.A.) No. 9511, which grants NGCP the right of eminent domain. This law allows NGCP to acquire “private property” necessary for the construction and maintenance of its transmission systems. The Supreme Court needed to determine whether the land owned by PAFC, situated within an industrial park intended for petrochemical development, qualified as “private property” under the context of R.A. No. 9511. This determination hinged on the complex interplay between the concepts of public dominion, patrimonial property, and private ownership under Philippine law.

The Supreme Court began its analysis by reiterating the fundamental principles of eminent domain. The power of eminent domain is an inherent right of the State to condemn private property for public use upon payment of just compensation. However, while this power is inherent, it is not absolute. The Constitution limits the State’s power, stating that “private property shall not be taken for public use without just compensation.” This limitation ensures that individuals are fairly compensated when their property is taken for the benefit of the public.

Building on this principle, the Court clarified that the power to expropriate is primarily lodged in the legislative branch. Congress can delegate this power to government agencies, public officials, and even quasi-public entities like NGCP. However, this delegated power is not inherent; it is limited by the terms of the delegating law. In this case, R.A. No. 9511 explicitly authorizes NGCP to exercise the right of eminent domain, but only with respect to “private property.” This restriction became the focal point of the Court’s analysis.

To resolve the central question, the Supreme Court delved into the classification of property under the Civil Code. Article 419 distinguishes between property of public dominion and property of private ownership. Property of public dominion is intended for public use, public service, or the development of national wealth. This type of property is outside the commerce of man, meaning it cannot be leased, donated, sold, or be the object of any contract. In essence, it is inalienable.

This approach contrasts with patrimonial property, which is owned by the State in its private or proprietary capacity. The State has the same rights and power of disposition over patrimonial property as private individuals. Such properties are intended to help the State attain its economic goals. Even property owned by the State can be considered private if it is held in its private and proprietary capacity, rather than its public capacity, to achieve economic ends. In cases like Republic v. Spouses Alejandre, the Civil Code classifies patrimonial property under private ownership into three categories: patrimonial property of the State, patrimonial property of Local Government Units, and property belonging to private individuals.

The Court then addressed the critical question of whether the subject property qualified as property of public dominion or patrimonial property. PAFC argued that because the Petrochemical Industrial Park was dedicated to the development of the petrochemical industry, it was devoted to public use and thus, could not be considered private property. However, the Supreme Court disagreed.

Drawing on the precedent set in Republic v. East Silverlane Realty Development Corp., the Court noted that when the government classifies property as an industrial zone, it is effectively declared patrimonial. Further, the Court emphasized that the management and operation of the Petrochemical Industrial Park were commercial in nature, serving the economic ends of the State. P.D. No. 949, as amended by R.A. No. 10516, explicitly allows for the development of the industrial estate by introducing business activities that promote its best economic use.

Moreover, the Court pointed out that the defining characteristic of property of public dominion is its inalienability. However, the laws governing the Petrochemical Industrial Park, particularly P.D. No. 949 and R.A. No. 10516, explicitly declared that the land could be leased, sold, or conveyed to private entities or persons for the conduct of related industrial activities. This express declaration of alienability and disposability negated the characterization of the property as land of public dominion.

Acknowledging this principle, the Court concluded that the subject property, although owned by a State instrumentality, was considered patrimonial property that assumes the nature of private property. Therefore, NGCP had the authority under Section 4 of R.A. No. 9511 to expropriate the subject property. The Supreme Court emphasized that R.A. No. 10516 allows the lease, sale, and conveyance of the Petrochemical Industrial Park for commercial utilization by private sector investors, further solidifying its classification as patrimonial property.

The Court also addressed the issue of whether the expropriation was reasonably necessary for the construction, expansion, and efficient maintenance of NGCP’s transmission system. The Court noted that PAFC did not specifically deny NGCP’s allegations that the Mariveles-Limay 230 kV Transmission Line Project was necessary and urgent to ensure the stability and reliability of power supply. Moreover, the parties had previously entered into a Tripartite Agreement acknowledging the necessity of the project.

Ultimately, the Supreme Court held that the expropriation of the subject property by NGCP was valid. The Court ruled that the land, although situated within an industrial park, was patrimonial property that assumed the nature of private property. As such, it was subject to expropriation under R.A. No. 9511. The Court also found that the expropriation was reasonably necessary for the construction and maintenance of NGCP’s transmission system.

FAQs

What was the key issue in this case?	The central issue was whether NGCP could expropriate land within the Petrochemical Industrial Park, considering PAFC’s argument that the land was already dedicated to a public purpose. The Court needed to clarify whether the land qualified as “private property” under R.A. No. 9511.
What is eminent domain?	Eminent domain is the inherent right of the State to condemn private property for public use upon payment of just compensation. It is a power that allows the government to take private property for projects that benefit the public.
What is the difference between property of public dominion and patrimonial property?	Property of public dominion is intended for public use, public service, or the development of national wealth and is inalienable. Patrimonial property is owned by the State in its private or proprietary capacity and can be leased, sold, or otherwise disposed of.
Why did the Court rule that the subject property was patrimonial?	The Court ruled that the subject property was patrimonial because it was located within an industrial park that was explicitly declared alienable and disposable for commercial utilization by private sector investors. This declaration of alienability negated its characterization as property of public dominion.
What is R.A. No. 9511?	R.A. No. 9511 is the law that grants NGCP a franchise to operate and maintain the country’s transmission system. It also authorizes NGCP to exercise the right of eminent domain to acquire private property necessary for its operations.
Did the Court consider the necessity of the expropriation?	Yes, the Court considered whether the expropriation was reasonably necessary for the construction and maintenance of NGCP’s transmission system. It found that PAFC did not specifically deny NGCP’s allegations about the necessity of the project.
What was the significance of the Tripartite Agreement?	The Tripartite Agreement, entered into by the parties, acknowledged the necessity of the Mariveles-Limay 230 kV Transmission Line Project. This agreement further supported NGCP’s claim that the expropriation was necessary.
What is the key takeaway from this case?	The key takeaway is that property owned by the State can still be considered private if it is held in its private and proprietary capacity. In this case, the fact that the Petrochemical Industrial Park was intended for commercial use and open to private investment meant that it could be expropriated for public infrastructure projects.

This case clarifies the scope of NGCP’s power of eminent domain and reinforces the principle that the classification of property as patrimonial allows for its expropriation for public infrastructure projects, even if the property is intended for other forms of development. It highlights the importance of balancing public needs with private property rights. This decision underscores the importance of carefully considering the classification of property and the specific terms of delegating laws when exercising the power of eminent domain.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: PNOC Alternative Fuels Corporation v. National Grid Corporation of the Philippines, G.R. No. 224936, September 04, 2019