G.R. No. 84606 June 28, 1989
SPOUSES RAMON A. GONZALES and LILIA Y. GONZALES, petitioners, vs. SUGAR REGULATORY ADMINISTRATION, respondent.

FACTS

Petitioners obtained a loan from Republic Planters Bank (RPBank), secured by a real estate mortgage, payable from their sugar crop proceeds. The Philippine Sugar Commission (Philsucom), which owned RPBank, was to remit amortizations. Petitioners later claimed they had overpaid the loan, alleging Philsucom made unauthorized deductions from their sugar sale proceeds. They filed a complaint for cancellation of mortgage and recovery of money against RPBank, Philsucom, and the Sugar Regulatory Administration (SRA).
Before the complaint was filed, Philsucom had been abolished by Executive Order No. 18, which created the SRA and transferred Philsucom’s assets to it. Petitioners filed an amended complaint, assailing the constitutionality of E.O. No. 18. They argued that the abolition of Philsucom destroyed their right to recover from it, constituting a deprivation of property without due process. The trial court dismissed the complaint as against the SRA, prompting this petition.

ISSUE

Whether the abolition of Philsucom and the transfer of its assets to the SRA, via E.O. No. 18, unconstitutionally deprived petitioners of their property right to sue Philsucom for recovery of alleged overpayments.

RULING

No. The Court upheld the dismissal of the complaint against the SRA, finding no unconstitutional taking. The legal logic is clear: the mere abolition of a government agency does not, by itself, extinguish rights or claims that may be asserted against it. A claimant has no vested right to the perpetual existence of a juridical entity. The law provides mechanisms for the settlement of claims upon dissolution. E.O. No. 18 itself contained transitory provisions, stating that Philsucom “shall nevertheless continue as a juridical entity for three years after the time when it would have been so abolished, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs.” This provision precisely safeguards the rights of creditors and claimants, like petitioners, by preserving Philsucom’s juridical personality for a limited period to allow the resolution of pending obligations. Petitioners’ cause of action, if any, remains enforceable against the juridical entity of Philsucom during this winding-up period. The transfer of assets to the SRA was a lawful exercise of governmental reorganization authority and did not automatically make the SRA liable for Philsucom’s alleged debts. Liability does not ipso facto transfer with assets; petitioners must pursue their claim against the proper party, which is Philsucom in its transitional capacity. Their constitutional challenge, therefore, lacks merit.