Professional Documents
Culture Documents
6.1 Should Kawasaki Heavy Industries, Inc. and/or Philyards Holdings, Inc.
exercise their Option to Top the Highest Bid, they shall so notify the APT
about such exercise of their option and deposit with APT the amount
equivalent to ten percent (10%) of the highest bid plus five percent (5%)
thereof within the thirty (30)-day period mentioned in paragraph 6.0 above.
APT will then serve notice upon Kawasaki Heavy Industries, Inc. and/or
Philyards Holdings, Inc. declaring them as the preferred bidder and they shall
have a period of ninety (90) days from the receipt of the APTs notice within
which to pay the balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or Philyards Holdings, Inc. fail
to exercise their Option to Top the Highest Bid within the thirty (30)-day
period, APT will declare the highest bidder as the winning bidder.
...
12.0 The bidder shall be solely responsible for examining with appropriate
care these rules, the official bid forms, including any addenda or
amendments thereto issued during the bidding period. The bidder shall
likewise be responsible for informing itself with respect to any and all
conditions concerning the PHILSECO Shares which may, in any manner,
affect the bidders proposal. Failure on the part of the bidder to so examine
and inform itself shall be its sole risk and no relief for error or omission will
be given by APT or COP. . ..[6]
At the public bidding on the said date, petitioner J.G. Summit Holdings,
Inc. submitted a bid of Two Billion and Thirty Million Pesos
(P2,030,000,000.00) with an acknowledgement of KAWASAKI/Philyards right
to top, viz:
4. I/We understand that the Committee on Privatization (COP) has up to thirty
(30) days to act on APTs recommendation based on the result of this bidding.
Should the COP approve the highest bid, APT shall advise Kawasaki Heavy
Industries, Inc. and/or its nominee, Philyards Holdings, Inc. that the highest
bid is acceptable to the National Government. Kawasaki Heavy Industries,
Inc. and/or Philyards Holdings, Inc. shall then have a period of thirty (30)
calendar days from the date of receipt of such advice from APT within which
to exercise their Option to Top the Highest Bid by offering a bid equivalent to
the highest bid plus five (5%) percent thereof.[7]
As petitioner was declared the highest bidder, the COP approved the sale
on December 3, 1993 subject to the right of Kawasaki Heavy Industries,
Inc./Philyards Holdings, Inc. to top JGSMIs bid by 5% as specified in the
bidding rules.[8]
On December 29, 1993, petitioner informed APT that it was protesting
the offer of PHI to top its bid on the grounds that: (a) the KAWASAKI/PHI
consortium composed of Kawasaki, Philyards, Mitsui, Keppel, SM Group, ICTSI
and Insular Life violated the ASBR because the last four (4) companies were
the losing bidders thereby circumventing the law and prejudicing the weak
winning bidder; (b) only KAWASAKI could exercise the right to top; (c) giving
the same option to top to PHI constituted unwarranted benefit to a third
party; (d) no right of first refusal can be exercised in a public bidding or
auction sale; and (e) the JG Summit consortium was not estopped from
questioning the proceedings.[9]
On February 2, 1994, petitioner was notified that PHI had fully paid the
balance of the purchase price of the subject bidding. On February 7, 1994,
the APT notified petitioner that PHI had exercised its option to top the
highest bid and that the COP had approved the same on January 6, 1994. On
February 24, 1994, the APT and PHI executed a Stock Purchase Agreement.
[10]
Consequently, petitioner filed with this Court a Petition for Mandamus
under G.R. No. 114057. On May 11, 1994, said petition was referred to the
Court of Appeals. On July 18, 1995, the Court of Appeals denied the same for
lack of merit. It ruled that the petition for mandamus was not the proper
remedy to question the constitutionality or legality of the right of first refusal
and the right to top that was exercised by KAWASAKI/PHI, and that the
matter must be brought by the proper party in the proper forum at the
proper time and threshed out in a full blown trial. The Court of Appeals
further ruled that the right of first refusal and the right to top are prima
facie legal and that the petitioner, by participating in the public bidding, with
full knowledge of the right to top granted to KASAWASAKI/Philyards is . .
.estopped from questioning the validity of the award given to Philyards after
the latter exercised the right to top and had paid in full the purchase price of
the subject shares, pursuant to the ASBR. Petitioner filed a Motion for
Reconsideration of said Decision which was denied on March 15, 1996.
Petitioner thus filed a Petition for Certiorari with this Court alleging grave
abuse of discretion on the part of the appellate court.[11]
On November 20, 2000, this Court rendered the now assailed
Decision ruling among others that the Court of Appeals erred when it
dismissed the petition on the sole ground of the impropriety of the special
civil action of mandamus because the petition was also one of certiorari.[12] It
further ruled that a shipyard like PHILSECO is a public utility whose
capitalization
must
be
sixty
percent
(60%)
Filipino-owned.
[13]
Consequently, the right to top granted to KAWASAKI under the Asset
Specific Bidding Rules (ASBR) drafted for the sale of the 87.67% equity of the
National Government in PHILSECO is illegal---not only because it violates the
rules on competitive bidding--- but more so, because it allows foreign
corporations to own more than 40% equity in the shipyard. [14] It also held
that although the petitioner had the opportunity to examine the ASBR before
it participated in the bidding, it cannot be estopped from questioning the
unconstitutional, illegal and inequitable provisions thereof. [15] Thus, this Court
voided the transfer of the national governments 87.67% share in PHILSECO
to Philyard Holdings, Inc., and upheld the right of JG Summit, as the highest
bidder, to take title to the said shares, viz:
including indirect import, as well as replacement and spare parts for the
repair and overhaul of vessels such as steel plates, electrical machinery and
electronic parts, shall be exempt from the payment of customs duty and
compensating tax: Provided, however, That the Maritime Industry Authority
certifies that the item or items imported are not produced locally in sufficient
quantity and acceptable quality at reasonable prices, and that the
importation is directly and actually needed and will be used exclusively for
the construction, repair, alteration, or overhaul of merchant vessels, and
other watercrafts; Provided, further, That if the above machinery, equipment,
materials and spare parts are sold to non-tax exempt persons or entities, the
corresponding duties and taxes shall be paid by the original
importer; Provided, finally, That local dealers and/or agents who sell
machinery, equipment, materials and accessories to shipyards for
shipbuilding and ship repair are entitled to tax credits, subject to approval by
the total tariff duties and compensating tax paid for said machinery,
equipment, materials and accessories.
(b) Accelerated depreciation.- Industrial plant and equipment may, at the
option of the shipbuilder and ship repairer, be depreciated for any number of
years between five years and expected economic life.
(c) Exemption from contractors percentage tax.- The gross receipts derived
by shipbuilders and ship repairers from shipbuilding and ship repairing
activities shall be exempt from the Contractors Tax provided in Section 91 of
the National Internal Revenue Code during the first ten years from
registration with the Maritime Industry Authority, provided that such
registration is effected not later than the year 1990; Provided, That any and
all amounts which would otherwise have been paid as contractors tax shall
be set aside as a separate fund, to be known as Shipyard Development Fund,
by the contractor for the purpose of expansion, modernization and/or
improvement of the contractors own shipbuilding or ship repairing facilities;
Provided, That, for this purpose, the contractor shall submit an annual
statement of its receipts to the Maritime Industry Authority; and Provided,
further, That any disbursement from such fund for any of the purposes
hereinabove stated shall be subject to approval by the Maritime Industry
Authority.
In addition, P.D. No. 666 removed the shipbuilding and ship repair
industry from the list of public utilities, thereby freeing the industry from the
60% citizenship requirement under the Constitution and from the need to
obtain Certificate of Public Convenience pursuant to section 15 of C.A No.
146. Section 1 (d) of P.D. 666 reads:
(d) Registration required but not as a Public Utility.- The business of
constructing and repairing vessels or parts thereof shall not be
considered a public utility and no Certificate of Public Convenience
shall be required therefor. However, no shipyard, graving dock, marine
railway or marine repair shop and no person or enterprise shall engage in
the legislature did not clearly and unambiguously express its intention to
include shipyards in the list of public utilities indicates that that it did not
intend to do so. Thus, a shipyard reverts back to its status as non-public
utility prior to the enactment of the Public Service Law.
This interpretation is in accord with the uniform interpretation placed
upon it by the Board of Investments (BOI), which was entrusted by the
legislature with the preparation of annual Investment Priorities Plan (IPPs).
The BOI has consistently classified shipyards as part of the manufacturing
sector and not of the public utilities sector. The enactment of Batas
Pambansa Blg. 391 did not alter the treatment of the BOI on shipyards. It has
been, as at present, classified as part of the manufacturing and not of the
public utilities sector.[32]
Furthermore, of the 441 Ship Building and Ship Repair (SBSR) entities
registered with the MARINA,[33] none appears to have an existing franchise. If
we continue to hold that a shipyard is a pubic utility, it is a necessary
consequence that all these entities should have obtained a franchise as was
the rule prior to the enactment of P.D. No. 666. But MARINA remains without
authority, pursuant to P.D. No. 474[34] to issue franchises for the operation of
shipyards. Surely,
the legislature did not intend to create a vacuum by continuously treating
a shipyard as a public utility without giving MARINA the power to issue a
Certificate of Public Convenience (CPC) or a Certificate of Public Convenience
and Necessity (CPCN) as required by section 15 of C.A. No. 146.
II.
Whether under the 1977 Joint Venture Agreement,
KAWASAKI can purchase only a maximum of 40%
of PHILSECOs total capitalization.
A careful reading of the 1977 Joint Venture Agreement reveals that there
is nothing that prevents KAWASAKI from acquiring more than 40% of
PHILSECOs total capitalization. Section 1 of the 1977 JVA states:
1.3 The authorized capital stock of Philseco shall be P330 million. The parties
shall thereafter increase their subscription in Philseco as may be necessary
and as called by the Board of Directors, maintaining a proportion of 60%-40%
for NIDC and KAWASAKI respectively, up to a total subscribed and paid-up
capital stock of P312 million.
1.4 Neither party shall sell, transfer or assign all or any part of its interest in
SNS [renamed PHILSECO] to any third party without giving the other under
the same terms the right of first refusal. This provision shall not apply if the
transferee is a corporation owned and controlled by the GOVERMENT [of the
Philippines] or by a Kawasaki affiliate.
1.5 The By-Laws of SNS [PHILSECO] shall grant the parties preemptive rights
to unissued shares of SNS [PHILSECO].[35]
Under section 1.3, the parties agreed to the amount of P330 million as
the total capitalization of their joint venture. There was no mention of the
amount of their initial subscription. What is clear is that they are to infuse
the needed capital from time to time until the total subscribed and paid-up
capital reaches P312 million. The phrase maintaining a proportion of 60%40% refers to their respective share of the burden each time the Board of
Directors decides to increase the subscription to reach the target paid-up
capital of P312 million. It does not bind the parties to maintain the sharing
scheme all throughout the existence of their partnership.
The parties likewise agreed to arm themselves with protective
mechanisms to preserve their respective interests in the partnership in the
event that (a) one party decides to sell its shares to third parties; and (b)
new Philseco shares are issued. Anent the first situation, the non-selling
party is given the right of first refusal under section 1.4 to have a
preferential right to buy or to refuse the selling partys shares. The right of
first refusal is meant to protect the original or remaining joint venturer(s) or
shareholder(s) from the entry of third persons who are not acceptable to it as
co-venturer(s) or co-shareholder(s). The joint venture between the Philippine
Government and KAWASAKI is in the nature of a partnership [36] which, unlike
an ordinary corporation, is based on delectus personae.[37] No one can
become a member of the partnership association without the consent of all
the other associates. The right of first refusal thus ensures that the parties
are given control over who may become a new partner in substitution of or in
addition to the original partners. Should the selling partner decide to dispose
all its shares, the non-selling partner may acquire all these shares and
terminate the partnership. No person or corporation can be compelled to
remain or to continue the partnership. Of course, this presupposes that there
are no other restrictions in the maximum allowable share that the non-selling
partner may acquire such as the constitutional restriction on foreign
ownership in public utility. The theory that KAWASAKI can acquire, as a
maximum, only 40% of PHILSECOs shares is correct only if a shipyard is a
public utility. In such instance, the non-selling partner who is an alien can
acquire only a maximum of 40% of the total capitalization of a public utility
despite the grant of first refusal. The partners cannot, by mere agreement,
avoid the constitutional proscription. But as afore-discussed, PHILSECO is not
a public utility and no other restriction is present that would limit the right of
KAWASAKI to purchase the Governments share to 40% of Philsecos total
capitalization.
Furthermore, the phrase under the same terms in section 1.4 cannot be
given an interpretation that would limit the right of KAWASAKI to purchase
PHILSECO shares only to the extent of its original proportionate contribution
of 40% to the total capitalization of the PHILSECO. Taken together with the
whole of section 1.4, the phrase under the same terms means that a
partner to the joint venture that decides to sell its shares to a third
party shall make a similar offer to the non-selling partner. The selling
may exercise the right even after the auctioneer has accepted a bid, and this
applies to the auction of public as well as private property. [40] Thus:
It is a settled rule that where the invitation to bid contains a reservation for
the Government to reject any or all bids, the lowest or the highest bidder, as
the case may be, is not entitled to an award as a matter of right for it does
not become a ministerial duty of the Government to make such an award.
Thus, it has been held that where the right to reject is so reserved, the
lowest bid or any bid for that matter may be rejected on a mere technicality,
that all bids may be rejected, even if arbitrarily and unwisely, or under a
mistake, and that in the exercise of a sound discretion, the award may be
made to another than the lowest bidder. And so, where the Government as
advertiser, availing itself of that right, makes its choice in rejecting any or all
bids, the losing bidder has no cause to complain nor right to dispute that
choice, unless an unfairness or injustice is shown. Accordingly, he has no
ground of action to compel the Government to award the contract in his
favor, nor compel it to accept his bid.[41]
In the instant case, the sale of the Government shares in PHILSECO was
publicly known. All interested bidders were welcomed. The basis for
comparing the bids were laid down. All bids were accepted sealed and were
opened and read in the presence of the COAs official representative and
before all interested bidders. The only question that remains is whether or
not the existence of KAWASAKIs right to top destroys the essence of
competitive bidding so as to say that the bidders did not have an opportunity
for competition. We hold that it does not.
The essence of competition in public bidding is that the bidders are
placed on equal footing. This means that all qualified bidders have an equal
chance of winning the auction through their bids. In the case at bar, all of the
bidders were exposed to the same risk and were subjected to the same
condition, i.e., the existence of KAWASAKIs right to top. Under the ASBR, the
Government expressly reserved the right to reject any or all bids, and
manifested its intention not to accept the highest bid should KAWASAKI
decide to exercise its right to top under the ABSR. This reservation or
qualification was made known to the bidders in a pre-bidding conference
held on September 28, 1993. They all expressly accepted this condition in
writing without any qualification. Furthermore, when the Committee on
Privatization notified petitioner of the approval of the sale of the National
Government shares of stock in PHILSECO, it specifically stated that such
approval was subject to the right of KAWASAKI Heavy Industries,
Inc./Philyards Holdings, Inc. to top JGSMIs bid by 5% as specified in the
bidding rules. Clearly, the approval of the sale was a conditional one. Since
Philyards eventually exercised its right to top petitioners bid by 5%, the sale
was not consummated. Parenthetically, it cannot be argued that the
existence of the right to top set for naught the entire public bidding. Had
Philyards Holdings, Inc. failed or refused to exercise its right to top, the sale
between the petitioner and the National Government would have been
If at all, the obvious consideration for the exchange of the right of first
refusal with the right to top is that KAWASAKI can name a nominee, which it
is a shareholder, to exercise the right to top. This is a valid contractual
stipulation; the right to top is an assignable right and both parties are aware
of the full legal consequences of its exercise. As aforesaid, all bidders were
aware of the existence of the right to top, and its possible effects on the
result of the public bidding was fully disclosed to them. The petitioner, thus,
cannot feign ignorance nor can it be allowed to repudiate its acts and
question the proceedings it had fully adhered to.[43]
The fact that the losing bidder, Keppel Consortium (composed of Keppel,
SM Group, Insular Life Assurance, Mitsui and ICTSI), has joined Philyards in
the latters effort to raise P2.131 billion necessary in exercising the right to
top is not contrary to law, public policy or public morals. There is nothing in
the ASBR that bars the losing bidders from joining either the winning bidder
(should the right to top is not exercised) or KAWASAKI/PHI (should it exercise
its right to top as it did), to raise the purchase price. The petitioner did not
allege, nor was it shown by competent evidence, that the participation of the
losing bidders in the public bidding was done with fraudulent intent. Absent
any proof of fraud, the formation by Philyards of a consortium is legitimate in
a free enterprise system. The appellate court is thus correct in holding the
petitioner estopped from questioning the validity of the transfer of the
National Governments shares in PHILSECO to respondent.
Finally, no factual basis exists to support the view that the drafting of the
ASBR was illegal because no prior approval was given by the COA for it,
specifically the provision on the right to top the highest bidder and that the
public auction on December 2, 1993 was not witnessed by a COA
representative. No evidence was proffered to prove these allegations and the
Court cannot make legal conclusions out of mere allegations. Regularity in
the performance of official duties is presumed [44] and in the absence of
competent evidence to rebut this presumption, this Court is duty bound to
uphold this presumption.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration is hereby
GRANTED. The impugned Decision and Resolution of the Court of Appeals are
AFFIRMED.
SO ORDERED.
G.R. No. L-22545
and routes, from 6:30 A.M. to 8:30 P.M. every day except Sundays and
holidays:
xxx
xxx
xxx
xxx
xxx
(c) All such shuttle buses are not permitted to load or unload or
to pick and/or drop passengers along the way but must do so
only in the following places:
xxx
xxx
xxx
(3) South
(a) Harrison Boulevard, between Dakota and Taft Avenue.
Administrative Order No. 1, series of 1964, issued by the Commissioner, in
part, provides:
2. All public utilities including jeepneys heretofore authorized to
operate from the City of Manila to any point in Luzon, beyond the
perimeter of Greater Manila, shall carry the words "For Provincial
Operation" in bold and clear types on both sides or on one side and at
the back of the vehicle and must not be less than 12 inches in
dimension. All such vehicles marked "For Provincial Operation" are
authorized to operate outside the perimeter of Greater Manila in
accordance with their respective certificates of public convenience,
and are not authorized to enter or to operate beyond the boundary line
fixed in our order of March 12, 1963 and July 22, 1963, with the
exception of those vehicles authorized to carry their provincial
passengers thru the boundary line up to their Manila terminal which
shall be identified by a sticker signed and furnished by the PSC and by
the Mayors of the affected Cities and municipalities, and which shall be
carried on a prominent place of the vehicle about the upper middle
part of the windshield.
xxx
xxx
xxx
All such public utility vehicles authorized by this Order to enter the City
of Manila and to carry their passengers thru the boundary line, are not
permitted to load or unload or to pick and/or drop passengers along
the way, but must do so only in the following places:
xxx
xxx
xxx
c. Vehicles coming from the SOUTH may load or unload at the San
Andres-Taft Rotonda; at Plaza Lawton or at the Corner of Harrison and
Mabini Streets near the Manila Zoo.
On April 21, 1964, the Commissioner issued Administrative Order No. 3 which
resolved motions for reconsideration (of the first administrative order
Administrative Order No. 1, series of 1964) filed by several affected
operators. This order (No. 3), amongst others, states that only 10% of the
provincial buses and jeepneys shall be allowed to enter Manila; however,
provincial buses and jeepneys "operating within a radius of 50 kms. from
Manila City Hall and whose business is more on the Manila end than on the
provincial end are given fifteen per cent to prevent a dislocation of their
business; provided that operators having less than five units are not
permitted to cross the boundary and shall operate exclusively on the
provincial end." This order also allocated the number of units each provincial
bus operator is allowed to operate within the City of Manila.
1. On the main, nothing new there is in the present petition. For, the validity
of Ordinance 4986 and the Commissioner's Administrative Order No. 1, series
of 1964, here challenged, has separately passed judicial tests in two cases
brought before this Court.
In Lagman vs. City of Manila (June 30, 1966), 17 SCRA 579, petitioner
Lagman was an operator of PU auto trucks with fixed routes and regular
terminals for the transportation of passengers and freight on the Bocaue
(Bulacan) Paraaque (Rizal) line via Rizal Avenue, Plaza Goiti, Sta. Cruz
Bridge, Plaza Lawton, P. Burgos, Taft Avenue, and Taft Avenue Extension,
Manila. He sought to prohibit the City of Manila, its officers and agents, from
enforcing Ordinance 4986. His ground was that said ordinance was
unconstitutional, illegal, ultra vires and null and void. He alleged, amongst
others, that (1) "the power conferred upon respondent City of Manila, under
said Section 18 (hh) of Republic Act No. 409, as amended, does not include
the right to enact an ordinance such as the one in question, which has the
effect of amending or modifying a certificate of public convenience granted
by the Public Service Commission, because any amendment or modification
of said certificate is solely vested by law in the latter governmental agency,
and only after notice and hearing (Sec. 16 [m], Public Service Act); but since
this procedure was not adopted or followed by respondents in enacting the
disputed ordinance, the same is likewise illegal and null and void"; (2) "the
enforcement of said ordinance is arbitrary, oppressive and unreasonable
because the city streets from which he had been prevented to operate his
buses are the cream of his business"; and (3) "even assuming that Ordinance
No. 4986 is valid, it is only the Public Service Commission which can require
compliance with its provisions (Sec. 17[j], Public Service Act), but since its
implementation is without the sanction or approval of the Commission, its
enforcement is also unauthorized and illegal." This Court, in a decision
impressive because of its unanimity, upheld the ordinance. Speaking through
Mr. Justice J.B.L. Reyes, we ruled:
First, as correctly maintained by respondents, Republic Act No. 409, as
amended, otherwise known as the Revised Charter of the City of
Manila, is a special law and of later enactment than Commonwealth
Act No. 548 and the Public Service Law (Commonwealth Act No. 146,
as amended), so that even if conflict exists between the provisions of
the former act and the latter acts, Republic Act No. 409 should prevail
over both Commonwealth Acts Nos. 548 and 146. In Cassion vs. Banco
Nacional Filipino, 89 Phil. 560, 561, this Court said:
". . . for with or without an express enactment it is a familiar rule
of statutory construction that to the extent of any necessary
repugnancy between a general and a special law or provision,
the latter will control the former without regard to the respective
dates of passage."
It is to be noted that Commonwealth Act No. 548 does not confer
an exclusive power or authority upon the Director of Public Works,
subject to the approval of the Secretary of Public Works and
Communications, to promulgate rules and regulations relating to the
use of and traffic on national roads or streets. This being the case,
section 18 (hh) of the Manila Charter is deemed enacted as an
exception to the provisions of Commonwealth Act No. 548.
xxx
xxx
xxx
Second, the same situation holds true with respect to the provision of
the Public Service Act. Although the Public Service Commission is
empowered, under its Section 16(m), to amend, modify or revoke
certificates of public convenience after notice and hearing, yet there is
no provision, specific or otherwise, which can be found in this statute
(Commonwealth Act No. 146) vesting power in the Public Service
Commission to superintend, regulate, or control the streets of
xxx
xxx
That the powers conferred by law upon the Public Service Commission
were not designed to deny or supersede the regulatory power of local
governments over motor traffic, in the streets subject to their control is
made evident by section 17 (j) of the Public Service Act
(Commonwealth Act No. 146) that provides as follows:
"SEC. 17. Proceedings of Commission without previous hearing.
The Commission shall have power, without previous hearing,
subject to established limitations and exceptions, and saving
provisions to the contrary:
xxx
xxx
xxx.
those of state organs, such as the police, upon which the enforcement
of laws primarily rests.
Third, the implementation of the ordinance in question cannot be
validly assailed as arbitrary, oppressive and unreasonable. Aside from
the fact that there is no evidence to substantiate this charge it is not
disputed that petitioner has not been totally banned or prohibited from
operating all his buses, he having been allowed to operate two (2)
"shuttle" buses within the city limits.1
The second case for certiorari and prohibition, filed by same petitioner in the
first case just mentioned, is entitled "Lagman vs. Medina" (December 24,
1968), 26 SCRA 442. Put at issue there is the validity of the Commissioner's
Administrative Order No. 1, series of 1964, also disputed herein. It was there
alleged, inter alia, that "the provisions of the bus ban had not been
incorporated into his certificate of public convenience"; "to be applicable to a
grantee of such certificate subsequently to the issuance of the order
establishing the ban, there should be a decision, not merely by the
Commissioner, but, also, by the PSC, rendered after due notice and hearing,
based upon material changes in the facts and circumstances under which the
certificate had been granted"; and "the ban is unfair, unreasonable and
oppressive." We dismissed this petition and upheld the validity of the
questioned order of the Commissioner. On the aforequoted issues, Chief
Justice Roberto Concepcion, speaking for an equally unanimous Court, said
Petitioner's claim is devoid of merit, inasmuch as:
1. The terms and conditions of the bus ban established by the
Commissioner are substantially identical to those contained in
Ordinance No. 4986 of the City of Manila 'rerouting traffic on roads and
streets' therein, approved on July 30, 1964. In G.R. No. L-23305,
entitled "Lagman vs. City of Manila, petitioner herein assailed the
validity of said ordinance," upon the ground, among others, that it
tended to amend or modify certificates of public conveniences issued
by the PSC; that the power therein exercised by the City of Manila
belongs to the PSC; and that the ordinance is arbitrary, oppressive and
unreasonable. In a decision promulgated on June 30, 1966, this Court
rejected this pretense and dismissed Lagman's petition in said case.
2. Petitioner's certificate of public convenience, like all other similar
certificates, was issued subject to the condition that operators shall
observe and comply [with] . . . all the rules and regulations of the
Commission relative to PUB service," and the contested orders
issued pursuant to Sections 13 (a), 16 (g) and 17 (a) of Commonwealth
Act 146, as amended partake of the nature of such rules and
regulations.
xxx
xxx
xxx
xxx
xxx
It has been said that a vested right is one which is "fixed, unalterable, or
irrevocable."3 Another definition would give vested right the connotation that
it is "absolute, complete, and unconditional, to the exercise of which no
obstacle exists . . . ."4 Petitioners' citation from 16 C.J.S., pp. 642643,5 correctly expresses the view that when the "right to enjoyment,
present or prospective, has become the property of some particular person
or persons as a present interest," that right is a vested right. Along the same
lines is our jurisprudential concept. Thus, inBenguet Consolidated Mining Co.
vs. Pineda,6 we put forth the thought that a vested right is "some right or
interest in the property which has become fixed and established, and is no
longer open to doubt or controversy"; it is an "immediate fixed right of
present and future enjoyment"; it is to be contra-distinguished from a right
that is "expectant or contingent." The Benguet case also quoted from 16
C.J.S., Sec. 215, pp. 642-643, as follows: "Rights are vested when the right to
enjoyment, present or prospective, has become the property of some
particular person or persons as a present interest. The right must be
absolute, complete, and unconditional, independent of a contingency, and a
mere expectancy of future benefit, or a contingent interest in property
founded on anticipated continuance of existing laws, does not constitute a
vested right. So, inchoate rights which have not been acted on are not
vested."7
Of course, whether a right is vested or not, much depends upon the
environmental facts.8
Contending that they possess valid and subsisting certificates of public
convenience, the petitioning public services aver that they acquired a vested
right to operate their public utility vehicles to and from Manila as appearing
in their said respective certificates of public convenience.
Petitioner's argument pales on the face of the fact that the very nature of a
certificate of public convenience is at cross purposes with the concept of
vested rights. To this day, the accepted view, at least insofar as the State is
concerned, is that "a certificate of public convenience constitutes neither a
franchise nor a contract, confers no property right, and is a mere license or
privilege."9 The holder of such certificate does not acquire a property right in
the route covered thereby. Nor does it confer upon the holder any proprietary
right or interest of franchise in the public highways.10 Revocation of this
certificate deprives him of no vested right.11 Little reflection is necessary to
show that the certificate of public convenience is granted with so many
xxx
xxx
The foregoing, without more, rejects the vested rights theory espoused by
petitioning bus operators.
Very little need be added to show that neither do bus passengers have a
vested right to be transported directly into the City of Manila. It would suffice
if a statement be here made that the alleged right of bus passengers, to a
great extent, is dependent upon the manner public services are allowed to
operate within a given area. Because, regulations imposed upon public
services directly affect the bus passengers. It is quite obvious that if buses
were allowed to load or unload solely at specific or designated places, a
passenger cannot legally demand or insist that the operator load or unload
him at a place other than those specified or designated.
It is no argument to support the vested rights theory that petitioning
passengers have enjoyed the privilege of having been continuously
transported even before the outbreak of the war directly without transfer
from the provinces to places inside Manila up to the respective bus terminals
in said City. Times have changed. Vehicles have increased in number. Traffic
congestion has moved from bad to worse, from tolerable to critical. The
number of people who use the thoroughfares has multiplied.
3. It is because of all of these that it has become necessary for the police
power of the State to step in, not for the benefit of the few, but for the
benefit of the many. Reasonable restrictions have to be provided for the use
of the thoroughfares.19 The operation of public services may be subjected to
restraints and burdens, in order to secure the general comfort.20 No franchise
or right can be availed of to defeat the proper exercise of police power21
the authority "to enact rules and regulations for the promotion of the general
welfare." 22 So it is, that by the exercise of the police power, which is a
continuing one, a business lawful today may in the future, because of the
changed situation, the growth of population or other causes, become a
menace to the public health and welfare, and be required to yield to the
public good."23 Public welfare, we have said, lies at the bottom of any
regulatory measure designed "to relieve congestion of traffic, which is, to say
the least, a menace to public safety."24 As a corollary, measures calculated to
promote the safety and convenience of the people using the thoroughfares
by the regulation of vehicular traffic, present a proper subject for the
exercise of police power.25
Both Ordinance 4986 and the Commissioner's administrative orders fit into
the concept of promotion of the general welfare. Expressive of the purpose of
Ordinance 4986 is Section 1 thereof, thus "As a positive measure to
relieve the critical traffic congestion in the City of Manila, which has grown to
alarming and emergency proportions, and in the best interest of public
welfare and convenience, the following traffic rules and regulations are
hereby promulgated." Along the same lines, the bus ban instituted by the
Commissioner has for its object "to minimize the 'traffic problem in the City
of Manila' and the 'traffic congestion, delays and even accidents' resulting
from the free entry into the streets of said City and the operation 'around
said streets, loading and unloading or picking up passengers and cargoes' of
PU buses in great 'number and size.'"26
Police power in both was properly exercised.
4. We find no difficulty in saying that, contrary to the assertion made by
petitioners, Ordinance 4986 is not a class legislation.
It is true that inter-urban buses are allowed to enter the City of Manila, while
provincial buses are not given the same privilege, although they are allowed
shuttle service into the City of Manila. There is no point, however, in placing
provincial buses on the same level as the inter-urban buses plying to and
from Manila and its suburban towns and cities (Makati, Pasay, Mandaluyong,
Caloocan, San Juan, Quezon City and Navotas). Inter-urban buses are used
for transporting passengers only. Provincial buses are used for passengers
and freight. Provincial buses, because of the freight or baggage which the
passengers usually bring along with them, take longer time to load or unload
than inter-urban buses. Provincial buses generally travel along national
highways and provincial roads, cover long distances, have fixed trip
schedules. Provincial buses are greater in size and weight than inter-urban
buses. The routes of inter-urban buses are short, covering contiguous
municipalities and cities only. Inter-urban buses mainly use city and
municipal streets.
These distinctions generally hold true between provincial passenger
jeepneys and inter-urban passenger jeepneys.
No unjustified discrimination there is under the law.
The obvious inequality in treatment is but the result flowing from the
classification made by the ordinance and does not trench upon the equal
protection clause.27 The least that can be said is that persons engaged in the
same business "are subjected to different restrictions or are held entitled to
different privileges under the same conditions."28
Neither is there merit to the charge that private vehicles are being
unjustifiably favored over public vehicles. Private vehicles are not geared for
profit, usually have but one destination. Public vehicles are operated
primarily for profit and for this reason are continually operated to make the
most of time. Public and private vehicles belong to different classes.
Differences in class beget differences in privileges. And petitioners have no
cause to complain.
The principles just enunciated have long been recognized. In Ichong vs.
Hernandez,29 our ruling is that the equal protection of the law clause "does
not demand absolute equality amongst residents; it merely requires that all
persons shall be treated alike, under like circumstances and conditions both
as to privileges conferred and liabilities enforced"; and, that the equal
protection clause "is not infringed by legislation which applies only to those
persons falling within a specified class, if it applies alike to all persons within
such class, and reasonable grounds exist for making a distinction between
those who fall within such class and those who do not."30
FOR THE REASONS GIVEN, the petition herein is denied.
Costs against petitioners. So ordered.
G.R. No. 115381 December 23, 1994
KILUSANG MAYO UNO LABOR CENTER, petitioner,
vs.
HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION
FRANCHISING AND REGULATORY BOARD, and the PROVINCIAL BUS
OPERATORS ASSOCIATION OF THE PHILIPPINES, respondents.
KAPUNAN, J.:
Public utilities are privately owned and operated businesses whose service
are essential to the general public. They are enterprises which specially cater
to the needs of the public and conduce to their comfort and convenience. As
such, public utility services are impressed with public interest and concern.
The same is true with respect to the business of common carrier which holds
such a peculiar relation to the public interest that there is superinduced upon
it the right of public regulation when private properties are affected with
public interest, hence, they cease to be juris privati only. When, therefore,
one devotes his property to a use in which the public has an interest, he, in
effect grants to the public an interest in that use, and must submit to the
control by the public for the common good, to the extent of the interest he
has thus created. 1
An abdication of the licensing and regulatory government agencies of their
functions as the instant petition seeks to show, is indeed lamentable. Not
only is it an unsound administrative policy but it is inimical to public trust
and public interest as well.
The instant petition for certiorari assails the constitutionality and validity of
certain memoranda, circulars and/or orders of the Department of
Transportation and Communications (DOTC) and the Land Transportation
Franchising and Regulatory Board LTFRB) 2 which, among others, (a)
authorize provincial bus and jeepney operators to increase or decrease the
prescribed transportation fares without application therefor with the LTFRB
and without hearing and approval thereof by said agency in violation of Sec.
16(c) of Commonwealth Act No. 146, as amended, otherwise known as the
Public Service Act, and in derogation of LTFRB's duty to fix and determine
just and reasonable fares by delegating that function to bus operators, and
(b) establish a presumption of public need in favor of applicants for
certificates of public convenience (CPC) and place on the oppositor the
burden of proving that there is no need for the proposed service, in patent
violation not only of Sec. 16(c) of CA 146, as amended, but also of Sec. 20(a)
of the same Act mandating that fares should be "just and reasonable." It is,
likewise, violative of the Rules of Court which places upon each party the
burden to prove his own affirmative allegations. 3 The offending provisions
contained in the questioned issuances pointed out by petitioner, have
resulted in the introduction into our highways and thoroughfares thousands
of old and smoke-belching buses, many of which are right-hand driven, and
have exposed our consumers to the burden of spiraling costs of public
transportation without hearing and due process.
The following memoranda, circulars and/or orders are sought to be nullified
by the instant petition, viz: (a) DOTC Memorandum Order 90-395, dated June
26, 1990 relative to the implementation of a fare range scheme for provincial
bus services in the country; (b) DOTC Department Order No.
92-587, dated March 30, 1992, defining the policy framework on the
regulation of transport services; (c) DOTC Memorandum dated October 8,
1992, laying down rules and procedures to implement Department Order No.
92-587; (d) LTFRB Memorandum Circular No. 92-009, providing implementing
guidelines on the DOTC Department Order No. 92-587; and (e) LTFRB Order
dated March 24, 1994 in Case No. 94-3112.
The relevant antecedents are as follows:
On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued
Memorandum Circular No. 90-395 to then LTFRB Chairman, Remedios A.S.
Fernando allowing provincial bus operators to charge passengers rates within
a range of 15% above and 15% below the LTFRB official rate for a period of
one (1) year. The text of the memorandum order reads in full:
One of the policy reforms and measures that is in line with the
thrusts and the priorities set out in the Medium-Term Philippine
Development Plan (MTPDP) 1987 1992) is the liberalization of
regulations in the transport sector. Along this line, the
Government intends to move away gradually from regulatory
policies and make progress towards greater reliance on free
market forces.
Based on several surveys and observations, bus companies are
already charging passenger rates above and below the official
fare declared by LTFRB on many provincial routes. It is in this
context that some form of liberalization on public transport fares
is to be tested on a pilot basis.
In view thereof, the LTFRB is hereby directed to immediately
publicize a fare range scheme for all provincial bus routes in
country (except those operating within Metro Manila). Transport
Operators shall be allowed to charge passengers within a range
of fifteen percent (15%) above and fifteen percent (15%) below
the LTFRB official rate for a period of one year.
Guidelines and procedures for the said scheme shall be prepared
by LTFRB in coordination with the DOTC Planning Service.
The implementation of the said fare range scheme shall start on
6 August 1990.
Hence, the instant petition for certiorari with an urgent prayer for issuance of
a temporary restraining order.
The Court, on June 20, 1994, issued a temporary restraining order enjoining,
prohibiting and preventing respondents from implementing the bus fare rate
increase as well as the questioned orders and memorandum circulars. This
meant that provincial bus fares were rolled back to the levels duly authorized
by the LTFRB prior to March 16, 1994. A moratorium was likewise enforced on
the issuance of franchises for the operation of buses, jeepneys, and taxicabs.
Petitioner KMU anchors its claim on two (2) grounds. First, the authority given
by respondent LTFRB to provincial bus operators to set a fare range of plus or
minus fifteen (15%) percent, later increased to plus twenty (20%) and minus
twenty-five (-25%) percent, over and above the existing authorized fare
without having to file a petition for the purpose, is unconstitutional, invalid
and illegal. Second, the establishment of a presumption of public need in
favor of an applicant for a proposed transport service without having to
prove public necessity, is illegal for being violative of the Public Service Act
and the Rules of Court.
In its Comment, private respondent PBOAP, while not actually touching upon
the issues raised by the petitioner, questions the wisdom and the manner by
which the instant petition was filed. It asserts that the petitioner has no legal
standing to sue or has no real interest in the case at bench and in obtaining
the reliefs prayed for.
In their Comment filed by the Office of the Solicitor General, public
respondents DOTC Secretary Jesus B. Garcia, Jr. and the LTFRB asseverate
that the petitioner does not have the standing to maintain the instant suit.
They further claim that it is within DOTC and LTFRB's authority to set a fare
range scheme and establish a presumption of public need in applications for
certificates of public convenience.
We find the instant petition impressed with merit.
At the outset, the threshold issue of locus standi must be struck. Petitioner
KMU has the standing to sue.
The requirement of locus standi inheres from the definition of judicial power.
Section 1 of Article VIII of the Constitution provides:
power would indeed constitute a negation of the duty in violation of the trust
reposed in the delegate mandated to discharge it directly. 11 The policy of
allowing the provincial bus operators to change and increase their fares at
will would result not only to a chaotic situation but to an anarchic state of
affairs. This would leave the riding public at the mercy of transport operators
who may increase fares every hour, every day, every month or every year,
whenever it pleases them or whenever they deem it "necessary" to do so.
In Panay Autobus Co. v. Philippine Railway Co., 12 where respondent
Philippine Railway Co. was granted by the Public Service Commission the
authority to change its freight rates at will, this Court categorically declared
that:
In our opinion, the Public Service Commission was not authorized
by law to delegate to the Philippine Railway Co. the power of
altering its freight rates whenever it should find it necessary to
do so in order to meet the competition of road trucks and
autobuses, or to change its freight rates at will, or to regard its
present rates as maximum rates, and to fix lower rates
whenever in the opinion of the Philippine Railway Co. it would be
to its advantage to do so.
The mere recital of the language of the application of the
Philippine Railway Co. is enough to show that it is untenable. The
Legislature has delegated to the Public Service Commission the
power of fixing the rates of public services, but it has not
authorized the Public Service Commission to delegate that power
to a common carrier or other public service. The rates of public
services like the Philippine Railway Co. have been approved or
fixed by the Public Service Commission, and any change in such
rates must be authorized or approved by the Public Service
Commission after they have been shown to be just and
reasonable. The public service may, of course, propose new
rates, as the Philippine Railway Co. did in case No. 31827, but it
cannot lawfully make said new rates effective without the
approval of the Public Service Commission, and the Public
Service Commission itself cannot authorize a public service to
enforce new rates without the prior approval of said rates by the
commission. The commission must approve new rates when they
are submitted to it, if the evidence shows them to be just and
reasonable, otherwise it must disapprove them. Clearly, the
P0.37
P0.42
P0.56
P0.73
Moreover, rate making or rate fixing is not an easy task. It is a delicate and
sensitive government function that requires dexterity of judgment and sound
discretion with the settled goal of arriving at a just and reasonable rate
acceptable to both the public utility and the public. Several factors, in fact,
have to be taken into consideration before a balance could be achieved. A
rate should not be confiscatory as would place an operator in a situation
where he will continue to operate at a loss. Hence, the rate should enable
public utilities to generate revenues sufficient to cover operational costs and
provide reasonable return on the investments. On the other hand, a rate
which is too high becomes discriminatory. It is contrary to public interest. A
rate, therefore, must be reasonable and fair and must be affordable to the
end user who will utilize the services.
Given the complexity of the nature of the function of rate-fixing and its farreaching effects on millions of commuters, government must not relinquish
this important function in favor of those who would benefit and profit from
the industry. Neither should the requisite notice and hearing be done away
with. The people, represented by reputable oppositors, deserve to be given
full opportunity to be heard in their opposition to any fare increase.
The present administrative procedure, 14 to our mind, already mirrors an
orderly and satisfactory arrangement for all parties involved. To do away with
such a procedure and allow just one party, an interested party at that, to
determine what the rate should be, will undermine the right of the other
parties to due process. The purpose of a hearing is precisely to determine
what a just and reasonable rate is. 15 Discarding such procedural and
constitutional right is certainly inimical to our fundamental law and to public
interest.
On the presumption of public need.
ERNESTO B. FRANCISCO,
JR.and JOSE MA. O. HIZON,
Petitioners,
- versus TOLL REGULATORY BOARD,
PHILIPPINE NATIONAL
CONSTRUCTION CORPORATION,
MANILA NORTH TOLLWAYS
CORPORATION, BENPRES
HOLDINGS CORPORATION,
FIRST PHILIPPINE
INFRASTRUCTURE
DEVELOPMENT CORPORATION,
TOLLWAY MANAGEMENT
CORPORATION, PNCC SKYWAY
CORPORATION, CITRA METRO
MANILA TOLLWAYS
CORPORATION and HOPEWELL
CROWN INFRASTRUCTURE,
INC.,
Respondents.
x-------------------------------------------x
HON. IMEE R. MARCOS,
RONALDO B. ZAMORA,
CONSUMERS UNION OF THE
PHILIPPINES, INC., QUIRINO A.
MARQUINEZ, HON. LUIS A.
ASISTIO, HON. ERICO BASILIO
A. FABIAN, HON. RENATO KA
RENE B. MAGTUBO, HON.
RODOLFO G. PLAZA, HON.
ANTONIO M. SERAPIO, HON.
EMMANUEL JOEL J.
VILLANUEVA, HON. ANIBAN NG
MGA MANGGAGAWA SA
AGRIKULTURA (AMA), INC.,
ANIBAN NG MGA MAGSASAKA,
MANGINGISDA AT
MANGGAGAWA SA
AGRIKULTURA-KATIPUNAN,
INC., KAISAHAN NG MGA
MAGSASAKA SA AGRIKULTURA,
INC., KILUSAN NG
MANGAGAWANG MAKABAYAN,
Petitioners,
- versus The REPUBLIC OF THE
PHILIPPINES, acting by and
through the TOLL REGULATORY
BOARD, MANILA NORTH
TOLLWAYS CORPORATION,
PHILIPPINE NATIONAL
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,*
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
SERENO, JJ.
CONSTRUCTION CORPORATION,
and FIRST PHILIPPINE
INFRASTRUCTURE
DEVELOPMENT CORP.,
Respondents.
x-------------------------------------------x
GISING KABATAAN MOVEMENT,
INC., BARANGAY COUNCIL
OF SAN
ANTONIO,MUNICIPALITY OF SA
NPEDRO, LAGUNA [as
Represented by COUNCILOR
CARLON G. AMBAYEC], and
YOUNG PROFESSIONALS AND
ENTREPRENEURS OF SAN
PEDRO, LAGUNA
Petitioners,
Promulgated:
Before us are four petitions; the first three are special civil actions
under Rule 65, assailing and seeking to nullify certain statutory provisions,
presidential actions and implementing orders, toll operation-related contracts
and issuances on the construction, maintenance and operation of the major
tollway systems in Luzon. The petitions likewise seek to restrain and
permanently prohibit the implementation of the allegedly illegal toll fee rate
hikes for the use of the North Luzon Expressway (NLEX), South Luzon
Expressway (SLEX) and the South Metro Manila Skyway (SMMS). The fourth,
a petition for review under Rule 45, seeks to annul and set aside the decision
dated June 23, 2008 of the Regional Trial Court (RTC) of Pasig, in SCA No.
3138-PSG, enjoining the original toll operating franchisee from collecting toll
fees in the SLEX.
By Resolution of March 20, 2007, the Court ordered the consolidation
of the first three petitions, docketed as G.R. Nos. 166910,
169917 and 173630, respectively.
The
fourth
petition, G.R.
No.
183599, would later be ordered consolidated with the earlier three petitions.
THE FACTS
The antecedent facts are as follows
On March 31, 1977, then President Ferdinand E. Marcos issued
Presidential Decree No. (P.D.) 1112, authorizing the establishment of toll
facilities on public improvements.[1] This issuance, in its preamble, explicitly
acknowledged the huge financial requirements and the necessity of tapping
the resources of the private sector to implement the governments
infrastructure programs. In order to attract private sector involvement, P.D.
1112 allowed the collection of toll fees for the use of certain public
improvements that would allow a reasonable rate of return on investments.
The same decree created the Toll Regulatory Board (TRB) and invested it
under Section 3 (a) (d) and (e) with the power to enter, for the Republic, into
contracts for the construction, maintenance and operation of tollways, grant
authority to operate a toll facility, issue therefor the necessary Toll
Operation Certificate (TOC) and fix initial toll rates, and, from time to time,
adjust the same after due notice and hearing.
On the same date, P.D. 1113 was issued, granting to the Philippine
National Construction Corporation (PNCC), then known as the Construction
and Development Corporation of the Philippines (CDCP), for a period of thirty
years from May 1977 or up to May 2007 a franchise to construct, maintain
and operate toll facilities in the North Luzon and South Luzon Expressways,
with the right to collect toll fees at such rates as the TRB may fix and/or
authorize. Particularly, Section 1 of P.D. 1113 delineates the coverage of the
expressways from Balintawak, Caloocan City to Carmen, Rosales, Pangasinan
and from Nichols, Pasay City to Lucena, Quezon. And because the franchise
is not self-executing, as it was in fact made subject, under Section 3 of P.D.
1113, to such conditions as may be imposed by the Board in an appropriate
contract to be executed for such purpose, TRB and PNCC signed in October
1977, a Toll Operation Agreement (TOA) on the North Luzon and South Luzon
Tollways, providing for the detailed terms and conditions for the construction,
maintenance and operation of the expressway.[2]
On December 22, 1983, P.D. 1894 was issued therein further granting
PNCC a franchise over the Metro Manila Expressway (MMEX), and the
expanded and delineated NLEX and SLEX. Particularly, PNCC was granted
the right, privilege and authority to construct, maintain and operate any and
all such extensions, linkages or stretches, together with the toll facilities
appurtenant thereto, from any part of the North Luzon Expressway, South
Luzon Expressway and/or Metro Manila Expressway and/or to divert the
original route and change the original end-points of the North Luzon
Expressway and/or South Luzon Expressway as may be approved by the
[TRB].[3] Under Section 2 of P.D. 1894, the franchise granted the [MMEX] and
all extensions, linkages, stretches and diversions after the approval of the
decree that may be constructed after the approval of this decree [on
December 22, 1983] shall likewise have a term of thirty (30) years,
commencing from the date of completion of the project.
As expressly set out in P.D. 1113 and reiterated in P.D. 1894, PNCC may
sell or assign its franchise thereunder granted or cede the usufruct [4] thereof
upon the Presidents approval.[5] This same provision on franchise transfer
and cession of usufruct is likewise found in P.D. 1112.[6]
Then came the 1987 Constitution with its franchise provision.[7]
In 1993, the Government Corporate Counsel (GCC), acting on PNCCs
request, issued Opinion No. 224, s. 1993, [8] later affirmed by the Secretary of
Justice,[9] holding that PNCC may, subject to certain clearance and approval
requirements, enter into a joint venture (JV) agreement (JVA) with private
The STOA defines the scope of the road project coverage, the
terminal date of the concession, and includes provisions on initial toll
rate and a built-in formula for adjustment of toll rates, investment recovery
clauses and contract termination in the event of the concessionaires, PNCCs
or TRBs default, as the case may be.
The following events or transactions, involving the personalities as
indicated, transpired with respect to the following projects:
THE SOUTH METRO MANILA SKYWAY (SMMS)
(BUENDIA BICUTAN ELEVATED STRETCH) PROJECT
PNCC entered into a JV partnership arrangement with P.T. Citra, an
Indonesian company, and created, for the SMMS project, the Citra Metro
Manila Tollways Corporation (CMMTC).
On November 27, 1995, TRB, PNCC and CMMTC executed a STOA for
the SMMS project (CITRA STOA). And on April 7, 1996, then President Fidel V.
Ramos approved the CITRA STOA.
Phase I of the SMMS project the Bicutan to Buendia elevated
expressway stretch was completed in December 1998, and the consequent
initial toll rates for its use implemented a month after. On November 26,
2004, the TRB passed Resolution No. 2004-53, approving the periodic toll
rate adjustment for the SMMS.
THE
NLEX
EXPANSION
PROJECT
(REHABILITATED
AND
WIDENED
NLEX, SUBIC EXPRESSWAY, CIRCUMFERENTIAL ROAD C-5)
In reply to the query of the then TRB Chairman, the Department of
Justice (DOJ) issued DOJ Opinion No. 79, s. of 1994, echoing an earlier opinion
of the GCC, that the TRB can implement the NLEX expansion project through
a JV scheme with private investors possessing the requisite technical and
financial capabilities.
On May 16, 1995, then President Ramos approved the assignment of
PNCCs usufructuary rights as franchise holder to a JV company to be formed
by PNCC and FPIDC.PNCC and FPIDC would later ink a JVA for the
TO
LUCENA CITY)
For the SLEX expansion project, PNCC and Hopewell Holdings Limited
(HHL), as JV partners, executed a Memorandum of Agreement (MOA),
[12]
which eventually led to the formation of a JV company Hopewell Crown
Infrastructure, Inc. (HCII), now MTD Manila Expressways, Inc., (MTDME). And
pursuant to the PNCC-MTDME JVA, the South Luzon Tollway Corporation
(SLTC) and the Manila Toll Expressway Systems, Inc. (MATES) were
incorporated to undertake the financing, construction, operation and
maintenance of the resulting Project Toll Roads forming part of the SLEX. The
toll road projects are divisible toll sections or segments, each segment
defined as to its starting and end points and each with the corresponding
distance coverage. The proposed JVA, as later amended, between PNCC and
MTDME was approved by the OP on June 30, 2000.
Eventually, or on February 1, 2006, a STOA [13] for the financing, design,
construction, lane expansion and maintenance of the Project Toll Roads (PTR)
of the rehabilitated and improved SLEX was executed by and among the
Republic, PNCC, SLTC, as investor, and MATES, as operator. To be precise, the
PTRs, under the STOA, comprise and contemplated the full rehabilitation
and/or roadway widening of the following existing toll roads or facilities: PTR
1 that portion of the tollway commencing at the end of South MM Skyway to
the Filinvest exit at Alabang (1-242 km); PTR 2 the tollway from Alabang to
Calamba, Laguna (27.28 km); PTR 3 the tollway from Calamba to Sto. Tomas,
Batangas (7.6 km) and PTR 4 the tollway from Sto. Tomas
to Lucena City (54.27 km).[14]
Under Clause 6.03 of the STOA, the Operator, after substantially
completing a TPR, shall file an application for a Toll Operation Permit over the
relevant completed TPR or segment, which shall include a request for a
review and approval by the TRB of the calculation of the new current
authorized toll rate.
G.R. NO. 166910
Petitioners Francisco and Hizon, as taxpayers and expressway users,
seek to nullify the various STOAs adverted to above and the corresponding
TRB resolutions, i.e. Res. Nos. 2004-53 and 2005-04, fixing initial rates and/or
approving periodic toll rate adjustments therefor. To the petitioners, the
STOAs and the toll rate-fixing resolutions violate the Constitution in that they
veritably impose on the public the burden of financing tollways by way of
exorbitant fees and thus depriving the public of property without due
process. These STOAs are also alleged to be infirm as they effectively
awarded purported build-operate-transfer (BOT) projects without public
bidding in violation of the BOT Law (R.A. 6957, as amended by R.A. 7718).
Petitioners likewise assail the constitutionality of Sections 3 (a) and (d)
of P.D. 1112 in relation to Section 8 (b) of P.D. 1894 insofar as they vested
the TRB, on one hand, toll operation awarding power while, on the other
hand, granting it also the power to issue, modify and promulgate toll rate
charges. The TRB, so petitioners bemoan, cannot be an awarding party of a
TOA and, at the same time, be the regulator of the tollway industry and an
adjudicator of rate exactions disputes.
Additionally, petitioners also seek to nullify certain provisions of P.D.
1113 and P.D. 1894, which uniformly grant the President the power to
approve the transfer or assignment of usufruct or the rights and privileges
thereunder by the tollway operator to third parties, particularly the transfer
effected by PNCC to MNTC. As argued, the authority to approve partakes of
an exercise of legislative power under Article VI, Section 1 of the
Constitution.[15]
In the meantime, or on April 8, 2010, the TRB issued a Certificate of
Substantial Completion[16] with respect to PTR 1 (Alabang-Filinvest stretch)
and PTR 2 (Alabang-Calamba segments) of SLEX, signifying the completion of
the
full
rehabilitation/expansion
of
both
segments
and
the
linkages/interchanges in between pursuant to the requirements of the
corresponding STOA. TRB on even date issued a Toll Operation Permit in
favor of MATES over said PTRs 1 and 2. [17] Accordingly, upon due application,
the TRB approved the publication of the toll rate matrix for PTRs 1 and 2, the
rate to take effect on June 30, 2010. [18] The implementation of the published
rate would, however, be postponed to August 2010.
On July 5, 2010, petitioner Francisco filed a Supplemental Petition with
prayer for the issuance of a temporary restraining order (TRO) and/or status
quo order focused on the impending collection of what was perceived to be
toll rate increases in the SLEX. The assailed adjustments were made public in
a TRB notice of toll rate increases for the SLEX from Alabang to Calamba on
June 6, 2010, and were supposed to have been implemented on June 30,
2010. On August 13, 2010, the Court granted the desired TRO, enjoining the
respondents in the consolidated cases from implementing the toll rate
increases in the SLEX.
In their Consolidated Comment/Opposition to the Supplemental
Petition, respondents SLTC et al., aver that the disputed rates are actually
initial and opening rates, not an increase or adjustment of the prevailing
rate, for the new expanded and rehabilitated SLEX. In fine, the new toll rates
are, per SLTC, for a new and upgraded facility, i.e. the aforementioned Project
BEFORE THE
RTC
OF THE
RTC
IN
By Decision[19] dated June 23, 2008, the RTC, for the main stated reason
that the authority to grant or renew franchises belongs only to Congress,
granted YPES petition, disposing as follows:
ACCORDINGLY, the instant Petition for Certiorari,
Prohibition and Mandamus is hereby GRANTED and the
questioned Toll Operation Certificate (TOC) covering the [SLEX]
issued by respondent TRB in April, 2007, is hereby ordered
ANNULLED and SET ASIDE.
FURTHER, respondent PNCC is hereby immediately
PROHIBITED from collecting toll fess along the SLEX facilities as it
no longer has the power and authority to do so.
FINALLY, as mandated under Section 9 of PD No. 1113,
respondent PNCC is hereby COMMANDED to turn over without
further delay the physical assets and facilities of the SLEX
including improvements thereon, together with the equipment
and appurtenances directly related to their operations, without
any cost, to the Government through the Toll Regulatory Board x
x x.[20]
Thus, the instant petition for review on certiorari under Rule 45, filed
by the TRB on pure questions of law, docketed as G.R. No. 183599.
In their separate comments, public and private respondents uniformly
seek the dismissal of the three special civil actions on the threshold issue of
the absence of a justiciable case and lack of locus standi on the part of the
petitioners therein. Other grounds raised range from the impropriety
of certiorari to nullify toll operation agreements; the inapplicability of the
public bidding rules in the selection by PNCC of its JV partners and the
authority of the President to approve TOAs and the transfer of usufructuary
rights. PNCC argues, in esse, that its continuous toll operations did not
constitute an extension of its franchise, its authority to operate after the
expiry date thereof in May 2007 being based on the valid authority of TRB to
issue TOC.
THE ISSUES
The principal consolidated but interrelated issues tendered before the
Court, most of which with constitutional undertones, may be reduced into six
(6) and formulated in the following wise: first, whether or not an actual case
or controversy exists and, relevantly, whether petitioners in the first three
petitions have locus standi; second, whether the TRB is vested with the
power and authority to grant what amounts to a franchise over tollway
facilities; third, corollary to the second, whether the TRB can enter into TOAs
and, at the same time, promulgate toll rates and rule on petitions for toll rate
adjustments; fourth, whether the President is duly authorized to approve
contracts, inclusive of assignment of contracts, entered into by the TRB
relative to tollway operations; fifth, whether the subject STOAs covering the
NLEX, SLEX and SMMS and their respective extensions, linkages, etc. are
valid; sixth, whether a public bidding is required or mandatory for these
tollway projects.
Expressly prayed, if not subsumed, in the first three petitions, is to
prohibit TRB and its concessionaires from collecting toll fees along the
Skyway and Luzon Tollways.
EXISTENCE
PRELIMINARY ISSUES
ACTUAL CONTROVERSY, ITS RIPENESS
THE LOCUS STANDI TO SUE
OF AN
AND
conduct of the government; (2) the injury is fairly traceable to the challenged
action; and (3) the injury is likely to be redressed by a favorable action.[27]
Petitions for certiorari and prohibition are, as here, appropriate
remedies to raise constitutional issues and to review and/or prohibit or
nullify, when proper, acts of legislative and executive officials. [28] The present
petitions allege that then President Ramos had exercised vis--vis an
assignment of franchise, a function legislative in character. As alleged, too,
the TRB, in the guise of entering into contracts or agreements with PNCC and
other juridical entities, virtually enlarged, modified to the core and/or
extended the statutory franchise of PNCC, thereby usurping a legislative
prerogative. The usurpation came in the form of executing the assailed
STOAs and the issuance of TOCs. Grave abuse of discretion is also laid on the
doorstep of the TRB for its act of entering into these same contracts or
agreements without the required public bidding mandated by law,
specifically the BOT Law (R.A. 6957, as amended) and the Government
Procurement Reform Act (R.A. 9184).
In fine, the certiorari petitions impute on then President Ramos and the
TRB, the commission of acts that translate inter alia into usurpation of the
congressional authority to grant franchises and violation of extant
statutes. The petitions make a prima facie case for certiorari and prohibition;
an actual case or controversy ripe for judicial review exists. Verily, when an
act of a branch of government is seriously alleged to have infringed the
Constitution, it becomes not only the right but in fact the duty of the
judiciary to settle the dispute. In doing so, the judiciary merely defends the
sanctity of its duties and powers under the Constitution.[29]
In any case, the rule on standing is a matter of procedural technicality,
which may be relaxed when the subject in issue or the legal question to be
resolved is of transcendental importance to the public.[30] Hence, even absent
any direct injury to the suitor, the Court can relax the application of legal
standing or altogether set it aside for non-traditional plaintiffs, like ordinary
citizens, when the public interest so requires. [31] There is no doubt that
individual petitioners, Marcos, et al., in G.R. No. 169917, as then members of
the House of Representatives, possess the requisite legal standing since they
assail acts of the executive they perceive to injure the institution of
Congress. On the other hand, petitioners Francisco, Hizon, and the other
TO
OPERATE
It is abundantly clear that Sections 3 (a) and (e) of P.D. 1112 in relation
to Section 4 of P.D. 1894 have invested the TRB with sufficient power to
grant a qualified person or entity with authority to construct, maintain,
and operate a toll facility and to issue the corresponding toll operating
permit or TOC.
Sections 3 (a) and (e) of P.D. 1112 and Section 4 of P.D. 1894 amply
provide the power to grant authority to operate toll facilities:
Section 3. Powers and Duties of the Board. The Board shall have
in addition to its general powers of administration the following
powers and duties:
(a) Subject to the approval of the President of the Philippines, to
enter into contracts in behalf of the Republic of
an
to
for
of
in
As aptly pointed out by the TRB and other private respondents, the
Land Transportation Franchising and Regulatory Board (LTFRB), the Civil
Aeronautics Board (CAB), the National Telecommunications Commission
(NTC), and the Philippine Ports Authority (PPA), to name a few, have been
such delegates. The TRB may very well be added to the growing list, having
been statutorily endowed, as earlier indicated, the power to grant to
qualified persons, authority to construct road projects and operate thereon
toll facilities. Such grant, as evidenced by the corresponding TOC or set out
in a TOA, may be amended, modified, or revoked [by the TRB] whenever the
public interest so requires.[40]
In Philippine Airlines, Inc. v. Civil Aeronautics Board,[41] the Court
reiterated its holding in Albano that the CAB, like the PPA, has sufficient
statutory powers under R.A. 776 to issue a Certificate of Public Convenience
and Necessity, or Temporary Operating Permit to a domestic air transport
operator who, although not possessing a legislative franchise, meets all the
(1)
public hearing called for the purpose after due notice, shall then
conduct a review of the initial toll shall be appealable (sic) to the
Office of the President within ten (10) days from the
promulgation thereof. The GRANTEE may be required to post a
bond in such amount and from such surety or sureties and under
such terms and conditions as the Toll Regulatory Board shall fix in
case of any petition for review of, or appeal from, decisions of
the Toll Regulatory Board.
In case it is finally determined, after a review by the Toll
Regulatory Board or appeal therefrom, that the GRANTEE is not
entitled, in whole or in part, to the initial toll, the GRANTEE shall
deposit in the escrow account the amount collected under the
approved initial toll fee and such amount shall be refunded to
Expressways users who had paid said toll in accordance with the
procedure as may be prescribed or promulgated by the Toll
Regulatory Board. (Emphasis ours.)
The petitioners are indulging in gratuitous, if not unfair, conclusion as
to the capacity of the TRB to act as a fair and objective tribunal on matters of
toll fee fixing.
Administrative bodies have expertise in specific matters within the
purview of their respective jurisdictions. Accordingly, the law concedes to
them the power to promulgate implementing rules and regulations (IRR) to
carry out declared statutory policies provided that the IRR conforms to the
terms and standards prescribed by that statute.[72]
The Court does not perceive an irreconcilable clash in the enumerated
TRBs statutory powers, such that the exercise of one negates another. The
ascription of impartiality on the part of the TRB cannot, under the premises,
be accorded cogency. Petitioners have not shown that the TRB lacks the
expertise, competence and capacity to implement its mandate of balancing
the interests of the toll-paying motoring public and the imperative of
allowing the concessionaires to recoup their investment with reasonable
profits. As it were, Section 9 of P.D. 1894 provides a parametric formula for
adjustment of toll rates that takes into account the Peso-US Dollar exchange
rate, interest rate and construction materials price index, among other
verifiable and quantifiable variables.
the exercise of the prerogative, then the approval action may be nullified for
that reason, but not on the ground that the underlying authority is
constitutionally doubtful. If the TRB may validly be empowered to grant
private entities the authority to operate toll facilities, would a delegation of a
lesser authority to approve the grant to the head of the administrative
machinery of the government be objectionable?
The fact that P.D. 1112 partakes of a martial law issuance does
not per se provide an objectionable feature to the decree, albeit it may be
argued with some plausibility that then President Marcos intended to have
the final say as to who shall act as the toll operators of the Luzon
expressways. Be that as it may, all proclamations, orders, decrees,
instructions, and acts promulgated, issued, or done by the former President
(Ferdinand E. Marcos) are part of the law of the land, and shall remain valid,
legal, binding, and effective, unless modified, revoked or superseded by
subsequent proclamations, orders, decrees, instructions, or other acts of the
President.[83] To emphasize, Padua v. Ranadacited Association of Small
Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, quoting
that:
The Court wryly observes that during the past dictatorship,
every presidential issuance, by whatever name it was called, had
the force and effect of law because it came from President
Marcos. Such are the ways of despots. Hence, it is futile to argue
that LOI 474 could not have repealed P.D. No. 27 because the
former was only a letter of instruction. The important thing is that
it was issued by President Marcos, whose word was law during
that time.[84]
FIFTH ISSUE: ASSAILED STOAS VALIDLY ENTERED
This brings us to the issue of the validity of certain provisions of the
STOAs and related agreements entered into by the TRB, as duly approved by
the President.
Relying on Clause 17.4.1[85] of the MNTC STOA that the lenders have
the unrestricted right to appoint a substitute entity in case of default of
From the foregoing, it is clear that the lenders do not actually have an
absolute or unrestricted right to appoint the SUBSTITUTED ENTITY in view of
TRBs right to accept or reject the substitution within one (1) month from
notice and such right to appoint comes into force only if and when the TRB
decides to effectuate the substitution of MNTC as allowed in Clause 17.2 of
the MNTC STOA.
At the same time, Clause 17.4.4 particularizes the conditions upon
which the substitution shall become effective, to wit:
This assertion is impressed with merit. At the outset, Clause 17.5 does
not actually grant the lenders of the defaulting concessionaire, the power to
unilaterally extend the concession for a period not exceeding fifty years. For
reference, the pertinent provision states:
17.5 Only if no SUBSTITUTE ENTITY is established shall the
GRANTOR [TRB] be entitled to take-over the CONCESSION with
no commitment on the LOANS in which case the OPERATION AND
MAINTENANCE CONTRACT shall be assigned to any entity that
the AGENT[100] may designate provided such entity has a
sufficient legal and technical capacity to perform and assume the
obligations of the OPERATION AND MAINTENANCE CONTRACT
under this AGREEMENT. The LENDERS shall receive all TOLL,
excepting PNCCs revenue share provided for under the JOINT
INVESTMENT PROPOSAL (vide: Annex C hereof), for as long as
required until full repayment of the LOANS including if
necessary an extension of the CONCESSION PERIOD which
in no case shall exceed fifty (50) years; Provided that the
LENDERS support all amounts payable under the OPERATION
AND MAINTENANCE CONTRACT. For avoidance of doubt, the
GRANTOR will have no obligation in relation to liabilities incurred
by MNTC prior to such take-over.[101] (Emphasis supplied)
The afore-quoted provision should be read in conjunction with Clause
20.12, which expressly provides that the MNTC STOA is made under and shall
be governed by and construed in accordance with the laws of the Philippines,
and particularly, by the provisions of P.D. Nos. 1112, 1113 and 1894. Under
the applicable laws, the TRB may very well amend, modify, alter or revoke
the authority/franchise whenever the public interest so requires. [102] In a
word, the power to determine whether or not to continue or extend the
authority granted to a concessionaire to operate and maintain a tollway is
vested to the TRB by the applicable laws. The necessity of whether or not to
extend the concession or the authority to construct, operate and maintain a
tollway rests, by operation of law, with the TRB. As such, the lenders cannot
unilaterally extend the concession period, or, with like effect, impose upon or
demand that the TRB agree to extend such concession.
Be that as it may, it must be noted, however, that while the TRB is
vested by law with the power to extend the administrative franchise or
What the law seeks to prevent in this situation is the eventuality that
the Government, through any of its agencies, could be obligated to pay or
secure, whether directly or indirectly, the financing by the private investor of
the project. In this case, under Clause 11.7 of the MNTC STOA, the Republic
of the Philippines (through the TRB) guaranteed the security of the project
against revenue losses that could result, in case the TRB, based on its
determination of a just and reasonable toll fee, decides not to effect a toll fee
adjustment under the STOAs periodic/interim adjustment formula. The OSG,
in its Comment, admitted that the amounts the government undertook to
pay in case of Clause 11.7 violation is an undertaking to pay compensatory
damage for something akin to a breach of contract.[106] As P.D. 1112 itself
expressly prohibits the guarantee of a security in the financing of the toll
operator pursuant to its tollway project, Clause 11.7 cannot be a valid
stipulation in the STOA.
This is more so for being in violation of the Constitution. Article VI,
Section 29 (1) of the Constitution mandates that [n]o money shall be paid
out of the Treasury except in pursuance of an appropriation made by law.
[107]
We have held in Radstock that government funds or property shall be
spent or used solely for public purposes, as expressly mandated by Section 4
(2) of PD 1445 or the Government Auditing Code. [108] Particularly, We held
in Radstock case that:
[t]he power to appropriate money from the General Funds of the
Government belongs exclusively to the Legislature. Any act in
violation of this iron-clad rule is unconstitutional.
Reinforcing this Constitutional mandate, Sections 84 and
85 of PD 1445 require that before a government agency can
enter into a contract involving the expenditure of
government funds, there must be an appropriation law
for such expenditure, thus:
hearing and publication, must therefore be struck down as void. In such case,
the previously valid toll rate shall consequently apply, pending compliance
with the twin requirements for the new toll rate.
In the instant consolidated cases, the fixing of the initial toll rates may
have indeed come to pass without any public hearing. [118] Unfortunately for
petitioners, and notwithstanding its presumptive validity, they did not assail
the initial toll rates within the timeframe provided in P.D. 1112 and P.D. 1894.
[119]
Besides, as earlier explicated, the STOA provisions on periodic rate
adjustments are not a bar to a public hearing as the formula set forth therein
remains constant, serving only as a guide in the determination of the level of
toll rates that may be allowed.
It is apropos to state at this juncture that, in determining the
reasonableness of the subsequent toll rate increases, it behooves the TRB to
seek out the Commission on Audit (COA) for assistance in examining and
auditing the financial books of the public utilities concerned. Section 22,
Chapter 4, Subtitle B, Title 1, Book V of the Administrative Code of 1987
expressly authorizes the COA to examine the aforementioned documents in
connection with the fixing of rates of every nature, including as in this case,
the fixing of toll fees.[120] We have on certain occasions applied this
provision. Manila Electric Company, Inc. v. Lualhati easily comes to mind
where this Court tasked the Energy Regulatory Commission to seek the
assistance of the COA in determining the reasonableness of the rate
increases that MERALCO intended to implement. [121] We have consistently
held that the law is deemed written into every contract. [122] Being a provision
of law, this authority of the COA under the Administrative Code should
therefore be deemed written in the subject contracts i.e. the STOAs.
In this regard, during the examination and audit, the public utilities
concerned are mandated to produce all the reports, records, books of
accounts and such other papers as may be required, and the COA is
empowered to examine under oath any official or employee of the said public
utilit[ies].[123] Any public utility unreasonably denying COA access to the
aforementioned documents, unnecessarily obstructs the examination and
audit and may be adjudged liable of concealing any material information
nature and function of toll roads and toll fees paid by motorists, as aptly
elucidated inNorth Negros Sugar Co., Inc. v. Hidalgo,[131] thus:
Toll is the price of the privilege to travel over that
particular highway, and it is a quid pro quo. It rests on the
principle that he who, receives the toll does or has done
something as an equivalent to him who pays it. Every traveler
has the right to use the turnpike as any other highway, but he
must pay the toll.[132]
A toll road is a public highway, differing from the
ordinary public highways chiefly in this: that the cost of
its construction in the first instance is borne by
individuals, or by a corporation, having authority from
the state to build it, and, further, in the right of the public
to use the road after completion, subject only to the
payment of toll.[133]
Toll roads are in a limited sense public roads, and are
highways for travel, but we do not regard them as public roads in
a just sense, since there is in them a private proprietary
rightx x x.[134] (Emphasis ours.)
hearing, the absence of which will nullify the imposition and collection of the
new toll fees.
In all, the initial toll rates and periodic adjustments appear to Us as
simply predicated on the basic rationale for investing in a toll project, which
to repeat is: a reasonable rate of return for the investment. Section 2 (o) of
the BOT Law, as amended, provides for a definition for a reasonable rate of
return on investments and operating and maintenance cost.[135] Running
through the gamut of our statutes providing for and encouraging partnership
of the public and private sector is the paramount common good for
infrastructure projects and the equally important factor of giving a
reasonable rate of return to private sectors investments. The viability of any
infrastructure project depends on the returns which should be reasonable of
the investment coming from the private sector.
While the interests of the public are ideally to be accorded primacy in
considering government contracts, the reality on the ground is that the
tollway projects may not at all be possible or would be difficult to realize
without the involvement of the investing private sector, which expects its
usual share of profit. Thus, the Court is at a loss to understand how the level
of the initial toll rates, which depended on several factors indicated above,
and the subsequent adjustments resulted in the charging of exorbitant toll
fees that, to petitioners, enabled the investors to shift the burden of
financing the completion of the projects on the motoring public.
Neither does the alleged drasticif we may characterize it as suchsteep
increase in the level of toll rates for NLEX constitute a killing for PNCC and its
partner MNTC.Petitioners make much of the amount of the toll fees vis--vis
the then prevailing minimum wage. These plays of figures detract from the
essential concern on the propriety of the level of the toll rates vis--vis the
investments sunk in the NLEX project with a view, on the part of private
investors, to a reasonable return on their investment. Where no substantial
figures were provided on the investments, the projected operating and
maintenance costs vis--vis the projected revenue from the toll fees, no
substantial conclusions may reasonably be deduced therefrom. Besides, to
be taken into account in relation to the costs of the construction and
rehabilitation of the NLEX is the length of the tollway and for which motorists
have to pay the corresponding toll. Certainly, the allegations and conclusions
of petitioners as to the unreasonable increase of the toll rates are without
adequate factual mooring.
The use of a tollway is a privilege that comes at a cost. The toll is a
price paid for the use of a privilege. There are to be sure alternative roads
and routes, which motorists may fall back on if they are unwilling to pay the
toll. The toll, as might be expected, is pegged at a level that makes the
developmental projects and their maintenance viable; otherwise, no
investment can be expected for the furtherance of the projects.
Petitioners Francisco and Hizon alleged that, per the minutes of the
TRB meetings, the Board deliberately refrained, particularly with respect to
the Skyway project, from conducting public hearings for the grant of the
initial toll rates and on the rate adjustment formula to be used in order to
accelerate the implementation of the projects. The allegation is far from
correct. A perusal of the pertinent minutes of the TRB meetings, particularly
that held on August 17, 1995,[136] in fact would disclose a picture different
from that depicted by said petitioners. Nothing in the minutes of said
meeting tends to indicate that the TRB resolved to dispense with public
hearings. We, therefore, find petitioners Francisco and Hizons attempt to
mislead the Court by falsely citing supposed portions [137] of the August 17,
1995 TRB meeting very unfortunate. They quoted a correction on the
minutes of the Special Board Meeting No. 95-05 held on July 26, 1995, which
was taken up in the August 17, 1995 meeting for the approval of the minutes
of the previous meeting. In said special meeting of July 26, 1995, [138] the
Board deliberated on the recommendation of ADG Santos for the conduct of
a public hearing or soliciting the endorsement of the Metro Manila
Development Authority (MMDA).[139] But the TRB did not resolve to omit a
public hearing with respect to the toll rates. In fact, the deliberations used
the words in the event the Board decides and if the Board conducts, clearly
conveying the notion that the TRB had not decided or resolved the issue of
public hearings. Be that as it may, We rule that the TRB is mandated to
comply with the twin requirements of public hearing and publication.
Petitioners Francisco and Hizons lament about the TRB merely relying
on, if not yielding to, the recommendation and findings of the Technical
Working Group (TWG) of the DPWH on matters relative to STOA stipulations
and toll-rate fixing cannot be accorded cogency. In the area involving big
finance and complex project planning, banking on the data supplied by
technicians and experts is at once practical as it is inevitable. The Court
cannot see its way clear to understand why petitioners would begrudge the
TRB for tapping the technical know-how of others. And it cannot be
overemphasized that a recommendation is no more than an exhortation or
an urging as to what is advisable or expedient, not binding on the person to
which it is being made.[140] To recommend involves the idea that another has
the final decision.[141] The ultimate decision still rests with the TRB whether or
not to accept the findings of the TWG. The minutes of the TRB meetings
show that its members went through the tedious process of deliberating on
the formula to be used in computing the toll rates. The fact that the TRB
might have adopted the TWGs recommendation would not, on that ground
alone, vitiate the bona fides of the formers decision nor stain the
proceedings leading to such decision. In any case, as earlier held, the toll
rate adjustment formula does not and cannot contravene the legal twin
requirements of public hearing and publication.
In another bid to nullify the STOAs in question, petitioners would foist
on the Court the arguments that, firstly, President Ramos twisted the arms of
the TRB towards entering into the agreements in question and, secondly,
that the CITRA STOA contained restrictive confidentiality provisions barring
the public from knowing their contents and the details of the negotiations
related thereto.
We are not persuaded by the first ground, not necessarily because the
pressure brought to bear on TRB rendered the STOAs infirm, but because the
allegations on pressure-tactics allegedly employed by President Ramos are
too speculative for acceptance.
On the second ground, We fail to see how the insertion of the alleged
confidentiality clause in the CITRA STOA translates into grave abuse of
discretion or a violation of the Constitution, particularly Article III, Section
7[142] thereof. First off, the Court can take judicial notice that most commercial
contracts, including finance-related project agreements carry the standard
confidentiality clause to protect proprietary data and/or intellectual property
rights. This protection angle appears to be the intent of Clause 14.04(l) [143] of
the CITRA STOA. And as may be noted, the succeeding Clause 14.04 (2)
[144]
removes from the ambit of the confidentiality restriction the following:
disclosure of any information: (a) not otherwise done by the parties;
(b) which is required by law to be disclosed to any person who is
authorized by law to receive the same; (c) to a tribunal hearing
pertinent proceedings relative to the contract or agreement; and (d) to
confidential entities and persons relative to the disclosing party like its
banks, consultants, financiers and advisors. The second (item b) exception
provides a reasonable dimension to the assailed confidentiality clause.
Needless to stress, the obligation of the government to make
information available cannot be exaggerated. [145] The constitutional right to
information does not mean that every day and every hour is open house in
government offices having custody of the desired documents. [146] Petitioners
have not sufficiently shown, thus cannot really be heard to complain, that
they had been unreasonably denied access to information with regard to the
MNTC or SMMS STOA. Besides, the remedy for unreasonable denial of
information that is a matter of public concern is by way of mandamus.[147]
Finally, as to petitioners catch-all claim that the STOAs are
disadvantageous to the government, as therein represented by the TRB,
suffice it to state for the nonce that behind these agreements are the Boards
expertise and policy determination on technical, financial and operational
matters involving expressways and tollways. It is not for courts to look into
the wisdom and practicalities behind the exercise by the TRB of its contractmaking prerogatives under P.D. Nos. 1112, 1113 and 1894, absent proof of
grave abuse of discretion which would justify judicial review. In this regard,
the Court recalls what it wrote in G & S Transport Corporation v. Court of
Appeals,[148] to wit:
x x x courts, as a rule, refuse to interfere with proceedings
undertaken by administrative bodies or officials in the exercise of
The petitioners in the first three (3) petitions and the respondent in the
fourth have not so said explicitly, but their brief is against the issuance of
P.D. Nos. 1112, 1113 and 1894, which conferred a package of express and
implied powers and discretion to the TRB and the President resulting in the
execution of what is perceived to be offending STOAs and the runaway
collection of illegal toll fees. And they have come to the Court to strike down
all these issuances, agreements and exactions. While the Court is not
insensitive to their concerns, the rule is that all reasonable doubts should be
resolved in favor of the constitutionality of a statute, [153] and the validity of
the acts taken in pursuant thereof. It follows, therefore, that the Court will
not set aside a law as violative of the Constitution except in a clear case of
breach[154] and only as a last resort. [155]And as the theory of separation of
powers prescribes, the Court does not pass upon questions of wisdom,
expediency and justice of legislation. To Us, petitioners and respondent YPES
in the fourth petition have not discharged the heavy burden of
demonstrating in a clear and convincing manner the unconstitutionality of
the decrees challenged or the invalidity of assailed acts of the President and
the TRB. Because they failed to do so, the Court must uphold the
presumptive constitutionality and validity of the provisions of the three
decrees in question, and the subject contracts and TOCs.
Regarding petitioner Franciscos Supplemental Petition, the toll rates, the
collection of which in the amount based on the formula and assumptions set
forth in the law, and the adverted STOA dated February 1, 2006 and subject
of the TRO issued on August 13, 2010, has been duly published [156] and
approved by the TRB, as required by Section 5 of P.D. 1112. [157] And the
party-concessionaires have adequately demonstrated, and the TRB has
virtually acknowledged[158] that the said rates subject of the TRO partake of
the nature of opening or initial toll rates, which have not yet been
implemented since the time the SLTC STOA took effect. [159] To note, the toll
rates subject of the TRO were approved and are to be implemented in
connection with the new facility, such as Project Toll Roads 1 and 2 pursuant
to the new SLTC STOA and the expanded and rehabilitated SLEX. [160] As
earlier discussed, public hearing is not required in the fixing and
implementation of initial toll rates. But an interested party aggrieved by the
initial rates imposed is not without any resource as he may, within the time
frame provided by Section 8 (b) of P.D. 1894, repair to the TRB for review and
thereafter to the OP.[161] As expressly provided in the same section, however,
the pendency of the petition for review, if there be any, shall not suspend the
2.
3.
4.
5.
2.
3.
4.
5.
is REMANDED to the TRB for a review of the assailed toll rates to determine
whether SLTC and MATES are entitled to the toll fees.
No Cost.
SO ORDERED.
EN BANC
METROPOLITAN
CEBU
WATER DISTRICT (MCWD),
Petitioner,
- versus -
MARGARITA A. ADALA,
Respondent.
x------------------------------------------------x
DECISION
Respondent filed on October 24, 2002 an application with the NWRB for the
issuance of a Certificate of Public Convenience (CPC) to operate and
maintain
waterworks
system
in sitios San
Vicente,
Fatima,
and
Sambag in Barangay Bulacao, Cebu City.
At the initial hearing of December 16, 2002 during which respondent
submitted proof of compliance with jurisdictional requirements of notice and
publication, herein petitioner Metropolitan Cebu Water District, a
government-owned and controlled corporation created pursuant to P.D.
198[1] which took effect upon its issuance by then President Marcos on May
25, 1973, as amended, appeared through its lawyers to oppose the
application.
While petitioner filed a formal opposition by mail, a copy thereof had not,
on December 16, 2002, yet been received by the NWRB, the day of the
hearing. Counsel for respondent, who received a copy of petitioners
Opposition dated December 12, 2002 earlier that morning, volunteered to
give a copy thereof to the hearing officer.[2]
In its Opposition, petitioner prayed for the denial of respondents application
on the following grounds: (1) petitioners Board of Directors had not
consented to the issuance of the franchise applied for, such consent being a
mandatory condition pursuant to P.D. 198, (2) the proposed waterworks
would interfere with petitioners water supply which it has the right to protect,
and (3) the water needs of the residents in the subject area was already
being well served by petitioner.
After hearing and an ocular inspection of the area, the NWRB, by Decision
dated September 22, 2003, dismissed petitioners Opposition for lack of merit
and/or failure to state the cause of action [3] and ruled in favor of respondent
as follows:
PREMISES ALL CONSIDERED, and finding that Applicant is legally
and financially qualified to operate and maintain the subject
waterworks system, and that said operation shall redound to the
benefit of the of the [sic] consumers of Sitios San Vicente, Fatima
and Sambag at Bulacao Pardo, Cebu City, thereby promoting
Proposed Rates
P125.00(min.
charge)
13.50 per cu. m.
14.50 per cu. m.
35.00 per cu. m.
37.00 per cu. m.
38.00 per cu. m.
40.00 per cu. m.
45.00 per cu. m.
50.00 per cu. m.
2004 which
It bears noting, moreover, that as early as 1933, the Court held that a
particular water district the Metropolitan Water District is a public utility.[20]
The ruling in National Waterworks and Sewerage Authority v. NWSA
Consolidated Unions[21] is also instructive:
Since Section 47 of P.D. 198, which vests an exclusive franchise upon public
utilities, is clearly repugnant to Article XIV, Section 5 of the 1973
Constitution,[22] it isunconstitutional and may not, therefore, be relied upon
by petitioner in support of its opposition against respondents application for
CPC and the subsequent grant thereof by the NWRB.
WHEREFORE, Section 47 of P.D. 198 is unconstitutional. The Petition is thus,
in light of the foregoing discussions, DISMISSED.
SO ORDERED.
G.R. No. 166471
Nonetheless, the grantee cannot set up its exclusive franchise against the
ultimate authority of the State.7
TMPC filed a motion for reconsideration. In its 6 November 2004 Order, the
RTC denied the motion. Hence, the present petition.
Issue
TMPC raises as issue that the RTC erred in holding that Section 47 of PD No.
198, as amended, is valid.
The Courts Ruling
The petition is meritorious.
What cannot be legally done directly cannot be done indirectly. This rule is
basic and, to a reasonable mind, does not need explanation. Indeed, if acts
that cannot be legally done directly can be done indirectly, then all laws
would be illusory.
In Alvarez v. PICOP Resources, Inc.,8 the Court held that, "What one cannot
do directly, he cannot do indirectly."9In Akbayan Citizens Action Party v.
Aquino,10 quoting Agan, Jr. v. Philippine International Air Terminals Co.,
Inc.,11 the Court held that, "This Court has long and consistently adhered to
the legal maxim that those that cannot be done directly cannot be done
indirectly."12 In Central Bank Employees Association, Inc. v. Bangko Sentral
ng Pilipinas,13 the Court held that, "No one is allowed to do indirectly what he
is prohibited to do directly."14
The President, Congress and the Court cannot create directly franchises for
the operation of a public utility that are exclusive in character. The 1935,
1973 and 1987 Constitutions expressly and clearly prohibit the creation of
franchises that are exclusive in character. Section 8, Article XIII of the 1935
Constitution states that:
No franchise, certificate, or any other form of authorization for the operation
of a public utility shall be granted except to citizens of the Philippines or to
corporations or other entities organized under the laws of the Philippines,
sixty per centum of the capital of which is owned by citizens of the
Philippines, nor shall such franchise, certificate or authorization be
express terms, interpretation being called for only when such literal
application is impossible. No process of interpretation or construction need
be resorted to where a provision of law peremptorily calls for
application. Where a requirement or condition is made in explicit and
unambiguous terms, no discretion is left to the judiciary. It must see
to it that its mandate is obeyed."16 (Emphasis supplied)
In Republic of the Philippines v. Express Telecommunications Co., Inc.,17 the
Court held that, "The Constitution is quite emphatic that the operation of a
public utility shall not be exclusive."18 In Pilipino Telephone Corporation v.
National Telecommunications Commission,19 the Court held that, "Neither
Congress nor the NTC can grant an exclusive franchise, certificate, or any
other form of authorization to operate a public utility."20 In National Power
Corp. v. Court of Appeals,21 the Court held that, "Exclusivity of any public
franchise has not been favored by this Court such that in most, if not all,
grants by the government to private corporations, the interpretation of
rights, privileges or franchises is taken against the grantee."22 In Radio
Communications of the Philippines, Inc. v. National Telecommunications
Commission,23 the Court held that, "The Constitution mandates that a
franchise cannot be exclusive in nature."24
Indeed, the President, Congress and the Court cannot create directly
franchises that are exclusive in character. What the President, Congress and
the Court cannot legally do directly they cannot do indirectly. Thus, the
President, Congress and the Court cannot create indirectly franchises that
are exclusive in character by allowing the Board of Directors (BOD) of a water
district and the Local Water Utilities Administration (LWUA) to create
franchises that are exclusive in character.
In PD No. 198, as amended, former President Ferdinand E. Marcos (President
Marcos) created indirectly franchises that are exclusive in character by
allowing the BOD of LTWD and the LWUA to create directly franchises that are
exclusive in character. Section 47 of PD No. 198, as amended, allows the
BOD and the LWUA to create directly franchises that are exclusive in
character. Section 47 states:
Sec. 47. Exclusive Franchise. No franchise shall be granted to any other
person or agency for domestic, industrial or commercial water service
within the district or any portion thereof unless and except to the extent
that the board of directors of said district consents thereto by
consent to the grant of other franchises would carry with it the legal
presumption that public officers regularly perform their official functions.
The dissenting opinion states two "reasonable and legitimate grounds" for
the creation of exclusive franchise: (1) protection of "the governments
investment,"35 and (2) avoidance of "a situation where ruinous competition
could compromise the supply of public utilities in poor and remote areas." 36
There is no "reasonable and legitimate" ground to violate the Constitution.
The Constitution should never be violated by anyone. Right or wrong, the
President, Congress, the Court, the BOD and the LWUA have no choice but to
follow the Constitution. Any act, however noble its intentions, is void if it
violates the Constitution. This rule is basic.
In Social Justice Society,37 the Court held that, "In the discharge of their
defined functions, the three departments of government have no
choice but to yield obedience to the commands of the Constitution.
Whatever limits it imposes must be observed."38 In Sabio,39 the Court
held that, "the Constitution is the highest law of the land. It is the basic
and paramount law to which x x x all persons, including the highest
officials of the land, must defer. No act shall be valid, however noble
its intentions, if it conflicts with the Constitution."40 In Bengzon v.
Drilon,41 the Court held that, "the three branches of government must
discharge their respective functions within the limits of authority conferred
by the Constitution."42 In Mutuc v. Commission on Elections,43 the Court held
that, "The three departments of government in the discharge of the
functions with which it is [sic] entrusted have no choice but to yield
obedience to [the Constitutions] commands. Whatever limits it
imposes must be observed."44
Police power does not include the power to violate the Constitution. Police
power is the plenary power vested in Congress to make
laws not repugnant to the Constitution. This rule is basic.
In Metropolitan Manila Development Authority v. Viron Transportation Co.,
Inc.,45 the Court held that, "Police power is the plenary power vested in the
legislature to make, ordain, and establish wholesome and reasonable laws,
statutes and ordinances, not repugnant to the Constitution."46 In Carlos
Superdrug Corp. v. Department of Social Welfare and Development,47 the
Court held that, police power "is the power vested in the legislature by the
constitution to make, ordain, and establish all manner of wholesome and
October 9, 2012
the term "capital" found in the various economic provisions of the 1935,
1973 and 1987 Philippine Constitutions.
The opinions of the SEC, as well as of the Department of Justice (DOJ), on the
definition of the term "capital" as referring to both voting and non-voting
shares (combined total of common and preferred shares) are, in the first
place, conflicting and inconsistent. There is no basis whatsoever to the claim
that the SEC and the DOJ have consistently and uniformly adopted a
definition of the term "capital" contrary to the definition that this Court
adopted in its 28 June 2011 Decision.
In DOJ Opinion No. 130, s. 1985,10 dated 7 October 1985, the scope of the
term "capital" in Section 9, Article XIV of the 1973 Constitution was raised,
that is, whether the term "capital" includes "both preferred and common
stocks." The issue was raised in relation to a stock-swap transaction between
a Filipino and a Japanese corporation, both stockholders of a domestic
corporation that owned lands in the Philippines. Then Minister of Justice
Estelito P. Mendoza ruled that the resulting ownership structure of the
corporation would beunconstitutional because 60% of the voting stock
would be owned by Japanese while Filipinos would own only 40% of the
voting stock, although when the non-voting stock is added, Filipinos would
own 60% of the combined voting and non-voting stock. This ownership
structure is remarkably similar to the current ownership structure of
PLDT. Minister Mendoza ruled:
xxxx
Thus, the Filipino group still owns sixty (60%) of the entire subscribed capital
stock (common and preferred) while the Japanese investors control sixty
percent (60%) of the common (voting) shares.
It is your position that x x x since Section 9, Article XIV of the
Constitution uses the word "capital," which is construed "to include
both preferred and common shares" and "that where the law does
not distinguish, the courts shall not distinguish."
xxxx
In light of the foregoing jurisprudence, it is my opinion that the stockswap transaction in question may not be constitutionally upheld.
While it may be ordinary corporate practice to classify corporate shares into
common voting shares and preferred non-voting shares, any arrangement
which attempts to defeat the constitutional purpose should be
eschewed. Thus, the resultant equity arrangement which would place
ownership of 60%11 of the common (voting) shares in the Japanese
group, while retaining 60% of the total percentage of common and
So, under the law, it is the Commission En Banc that can issue an
SEC Opinion, correct?
COMMISSIONER GAITE:13
Thats correct, Your Honor.
JUSTICE CARPIO:
Can the Commission En Banc delegate this function to an SEC
officer?
COMMISSIONER GAITE:
Yes, Your Honor, we have delegated it to the General Counsel.
JUSTICE CARPIO:
It can be delegated. What cannot be delegated by the
Commission En Banc to a commissioner or an individual
employee of the Commission?
COMMISSIONER GAITE:
Novel opinions that [have] to be decided by the En Banc...
JUSTICE CARPIO:
What cannot be delegated, among others, is the power to adopt
or amend rules and regulations, correct?
COMMISSIONER GAITE:
Thats correct, Your Honor.
JUSTICE CARPIO:
So, you combine the two (2), the SEC officer, if delegated
that power, can issue an opinion but that opinion does
not constitute a rule or regulation, correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
So, all of these opinions that you mentioned they are not
rules and regulations, correct?
COMMISSIONER GAITE:
They are not rules and regulations.
JUSTICE CARPIO:
If they are not rules and regulations, they apply only to that
particular situation and will not constitute a precedent, correct?
COMMISSIONER GAITE:
Yes, Your Honor.14 (Emphasis supplied)
Significantly, the SEC en banc, which is the collegial body statutorily
empowered to issue rules and opinions on behalf of the SEC, has adopted
even the Grandfather Rule in determining compliance with the 60-40
ownership requirement in favor of Filipino citizens mandated by the
Constitution for certain economic activities. This prevailing SEC ruling, which
the SEC correctly adopted to thwart any circumvention of the required
Filipino "ownership and control," is laid down in the 25 March 2010 SEC en
banc ruling in Redmont Consolidated Mines, Corp. v. McArthur Mining, Inc., et
al.,15 to wit:
The avowed purpose of the Constitution is to place in the hands of Filipinos
the exploitation of our natural resources. Necessarily, therefore, the Rule
interpreting the constitutional provision should not diminish that
right through the legal fiction of corporate ownership and control.
But the constitutional provision, as interpreted and practiced via the 1967
SEC Rules, has favored foreigners contrary to the command of the
Constitution. Hence, the Grandfather Rule must be applied to
accurately determine the actual participation, both direct and
indirect, of foreigners in a corporation engaged in a nationalized
activity or business.
Compliance with the constitutional limitation(s) on engaging in nationalized
activities must be determined by ascertaining if 60% of the investing
corporations outstanding capital stock is owned by "Filipino citizens", or as
interpreted, by natural or individual Filipino citizens. If such investing
corporation is in turn owned to some extent by another investing
corporation, the same process must be observed. One must not stop until
the citizenships of the individual or natural stockholders of layer after layer
two cases dealt solely with the determination of the correct regulatory fees
under Section 40(e) and (f) of the Public Service Act, to wit:
(e) For annual reimbursement of the expenses incurred by the Commission in
the supervision of other public services and/or in the regulation or fixing of
their rates, twenty centavos for each one hundred pesos or fraction thereof,
of the capital stock subscribed or paid, or if no shares have been issued,
of the capital invested, or of the property and equipment whichever is higher.
(f) For the issue or increase of capital stock, twenty centavos for each one
hundred pesos or fraction thereof, of the increased capital. (Emphasis
supplied)
The Courts interpretation in these two cases of the terms "capital stock
subscribed or paid," "capital stock" and "capital" does not pertain to, and
cannot control, the definition of the term "capital" as used in Section 11,
Article XII of the Constitution, or any of the economic provisions of the
Constitution where the term "capital" is found. The definition of the term
"capital" found in the Constitution must not be taken out of context. A careful
reading of these two cases reveals that the terms "capital stock subscribed
or paid," "capital stock" and "capital" were defined solely to determine the
basis for computing the supervision and regulation fees under Section 40(e)
and (f) of the Public Service Act.
III.
Filipinization of Public Utilities
The Preamble of the 1987 Constitution, as the prologue of the supreme law
of the land, embodies the ideals that the Constitution intends to
achieve.22 The Preamble reads:
We, the sovereign Filipino people, imploring the aid of Almighty God, in order
to build a just and humane society, and establish a Government that shall
embody our ideals and aspirations, promote the common good, conserve
and develop our patrimony, and secure to ourselves and our posterity,
the blessings of independence and democracy under the rule of law and a
regime of truth, justice, freedom, love, equality, and peace, do ordain and
promulgate this Constitution. (Emphasis supplied)
Consistent with these ideals, Section 19, Article II of the 1987 Constitution
declares as State policy the development of a national economy
"effectively controlled" by Filipinos:
Section 19. The State shall develop a self-reliant and independent national
economy effectively controlled by Filipinos.
capital, and all the executive and managing officers of such corporation or
association must be citizens of the Philippines. (Emphasis supplied)
This provision, which mandates the Filipinization of public utilities, requires
that any form of authorization for the operation of public utilities shall be
granted only to "citizens of the Philippines or to corporations or associations
organized under the laws of the Philippines at least sixty per centum of
whose capital is owned by such citizens." "The provision is [an express]
recognition of the sensitive and vital position of public utilities both
in the national economy and for national security." 24
The 1987 Constitution reserves the ownership and operation of public
utilities exclusively to (1) Filipino citizens, or (2) corporations or associations
at least 60 percent of whose "capital" is owned by Filipino citizens. Hence, in
the case of individuals, only Filipino citizens can validly own and operate a
public utility. In the case of corporations or associations, at least 60 percent
of their "capital" must be owned by Filipino citizens. In other words, under
Section 11, Article XII of the 1987 Constitution, to own and operate
a public utility a corporations capital must at least be 60 percent
owned by Philippine nationals.
IV.
Definition of "Philippine National"
Pursuant to the express mandate of Section 11, Article XII of the 1987
Constitution, Congress enacted Republic Act No. 7042 or the Foreign
Investments Act of 1991 (FIA), as amended, which defined a "Philippine
national" as follows:
SEC. 3. Definitions. - As used in this Act:
a. The term "Philippine national" shall mean a citizen of the Philippines; or a
domestic partnership or association wholly owned by citizens of the
Philippines; or a corporation organized under the laws of the
Philippines of which at least sixty percent (60%) of the capital stock
outstanding and entitled to vote is owned and held by citizens of
the Philippines; or a corporation organized abroad and registered as doing
business in the Philippines under the Corporation Code of which one hundred
percent (100%) of the capital stock outstanding and entitled to vote is wholly
owned by Filipinos or a trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is a Philippine national
and at least sixty percent (60%) of the fund will accrue to the benefit of
Philippine nationals: Provided, That where a corporation and its non-Filipino
stockholders own stocks in a Securities and Exchange Commission (SEC)
registered enterprise, at least sixty percent (60%) of the capital stock
outstanding and entitled to vote of each of both corporations must be owned
and held by citizens of the Philippines and at least sixty percent (60%) of the
members of the Board of Directors of each of both corporations must be
citizens of the Philippines, in order that the corporation, shall be considered a
"Philippine national." (Boldfacing, italicization and underscoring supplied)
Thus, the FIA clearly and unequivocally defines a "Philippine national" as a
Philippine citizen, or a domestic corporation at least "60% of the capital
stock outstanding and entitled to vote" is owned by Philippine citizens.
The definition of a "Philippine national" in the FIA reiterated the meaning of
such term as provided in its predecessor statute, Executive Order No. 226 or
the Omnibus Investments Code of 1987,25 which was issued by then
President Corazon C. Aquino. Article 15 of this Code states:
Article 15. "Philippine national" shall mean a citizen of the Philippines or a
diplomatic partnership or association wholly-owned by citizens of the
Philippines; or a corporation organized under the laws of the
Philippines of which at least sixty per cent (60%) of the capital stock
outstanding and entitled to vote is owned and held by citizens of
the Philippines; or a trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is a Philippine national
and at least sixty per cent (60%) of the fund will accrue to the benefit of
Philippine nationals: Provided, That where a corporation and its non-Filipino
stockholders own stock in a registered enterprise, at least sixty per cent
(60%) of the capital stock outstanding and entitled to vote of both
corporations must be owned and held by the citizens of the Philippines and
at least sixty per cent (60%) of the members of the Board of Directors of
both corporations must be citizens of the Philippines in order that the
corporation shall be considered a Philippine national. (Boldfacing, italicization
and underscoring supplied)
Under Article 48(3)26 of the Omnibus Investments Code of 1987, "no
corporation x x x which is not a Philippine national x x x shall do business
x x x in the Philippines x x x without first securing from the Board of
Investments a written certificate to the effect that such business or economic
activity x x x would not conflict with the Constitution or laws of the
Philippines."27Thus, a "non-Philippine national" cannot own and operate a
reserved economic activity like a public utility. This means, of course, that
only a "Philippine national" can own and operate a public utility.
In turn, the definition of a "Philippine national" under Article 15 of the
Omnibus Investments Code of 1987 was a reiteration of the meaning of such
term as provided in Article 14 of the Omnibus Investments Code of 1981,28 to
wit:
public utilities in the Philippines. The following exchange during the Oral
Arguments is revealing:
JUSTICE CARPIO:
Counsel, I have some questions. You are aware of the Foreign
Investments Act of 1991, x x x? And the FIA of 1991 took effect
in 1991, correct? Thats over twenty (20) years ago, correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
And Section 8 of the Foreign Investments Act of 1991 states that
[]only Philippine nationals can own and operate public utilities[],
correct?
COMMISSIONER GAITE:
Yes, Your Honor.
JUSTICE CARPIO:
And the same Foreign Investments Act of 1991 defines a
"Philippine national" either as a citizen of the Philippines, or if it
is a corporation at least sixty percent (60%) of the voting stock is
owned by citizens of the Philippines, correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
And, you are also aware that under the predecessor law of the
Foreign Investments Act of 1991, the Omnibus Investments Act
of 1987, the same provisions apply: x x x only Philippine
nationals can own and operate a public utility and the Philippine
national, if it is a corporation, x x x sixty percent (60%) of the
capital stock of that corporation must be owned by citizens of the
Philippines, correct?
COMMISSIONER GAITE:
equated with the term "capital" in Section 11, Article XII of the 1987
Constitution. Pangilinan similarly contends that the FIA and its predecessor
statutes do not apply to "companies which have not registered and obtained
special incentives under the schemes established by those laws."
Both are desperately grasping at straws. The FIA does not grant tax or fiscal
incentives to any enterprise. Tax and fiscal incentives to investments are
granted separately under the Omnibus Investments Code of 1987, not under
the FIA. In fact, the FIA expressly repealed Articles 44 to 56 of Book II of the
Omnibus Investments Code of 1987, which articles previously regulated
foreign investments in nationalized or partially nationalized industries.
The FIA is the applicable law regulating foreign investments in nationalized
or partially nationalized industries. There is nothing in the FIA, or even in the
Omnibus Investments Code of 1987 or its predecessor statutes, that states,
expressly or impliedly, that the FIA or its predecessor statutes do not apply
to enterprises not availing of tax and fiscal incentives under the Code. The
FIA and its predecessor statutes apply to investments in all domestic
enterprises, whether or not such enterprises enjoy tax and fiscal incentives
under the Omnibus Investments Code of 1987 or its predecessor
statutes. The reason is quite obvious mere non-availment of tax and
fiscal incentives by a non-Philippine national cannot exempt it from
Section 11, Article XII of the Constitution regulating foreign
investments in public utilities. In fact, the Board of Investments Primer
on Investment Policies in the Philippines,34 which is given out to foreign
investors, provides:
PART III. FOREIGN INVESTMENTS WITHOUT INCENTIVES
Investors who do not seek incentives and/or whose chosen activities do not
qualify for incentives, (i.e., the activity is not listed in the IPP, and they are
not exporting at least 70% of their production) may go ahead and make the
investments without seeking incentives. They only have to be guided by
the Foreign Investments Negative List (FINL).
The FINL clearly defines investment areas requiring at least 60% Filipino
ownership. All other areas outside of this list are fully open to foreign
investors. (Emphasis supplied)
V.
Right to elect directors, coupled with beneficial ownership,
translates to effective control.
The 28 June 2011 Decision declares that the 60 percent Filipino ownership
required by the Constitution to engage in certain economic activities applies
not only to voting control of the corporation, but also to the beneficial
ownership of the corporation. To repeat, we held:
Mere legal title is insufficient to meet the 60 percent Filipino-owned "capital"
required in the Constitution. Full beneficial ownership of 60 percent of
the outstanding capital stock, coupled with 60 percent of the voting
rights, is required. The legal and beneficial ownership of 60 percent of the
outstanding capital stock must rest in the hands of Filipino nationals in
accordance with the constitutional mandate. Otherwise, the corporation is
"considered as non-Philippine national[s]." (Emphasis supplied)
This is consistent with Section 3 of the FIA which provides that where 100%
of the capital stock is held by "a trustee of funds for pension or other
employee retirement or separation benefits," the trustee is a Philippine
national if "at least sixty percent (60%) of the fund will accrue to the benefit
of Philippine nationals." Likewise, Section 1(b) of the Implementing Rules of
the FIA provides that "for stocks to be deemed owned and held by Philippine
citizens or Philippine nationals, mere legal title is not enough to meet the
required Filipino equity. Full beneficial ownership of the stocks, coupled
with appropriate voting rights, is essential."
Since the constitutional requirement of at least 60 percent Filipino ownership
applies not only to voting control of the corporation but also to the beneficial
ownership of the corporation, it is therefore imperative that such
requirement apply uniformly and across the board to all classes of shares,
regardless of nomenclature and category, comprising the capital of a
corporation. Under the Corporation Code, capital stock35 consists of all
classes of shares issued to stockholders, that is, common shares as well as
preferred shares, which may have different rights, privileges or restrictions
as stated in the articles of incorporation.36
The Corporation Code allows denial of the right to vote to preferred and
redeemable shares, but disallows denial of the right to vote in specific
corporate matters. Thus, common shares have the right to vote in the
election of directors, while preferred shares may be denied such right.
Nonetheless, preferred shares, even if denied the right to vote in the election
of directors, are entitled to vote on the following corporate matters: (1)
amendment of articles of incorporation; (2) increase and decrease of capital
stock; (3) incurring, creating or increasing bonded indebtedness; (4) sale,
lease, mortgage or other disposition of substantially all corporate assets; (5)
investment of funds in another business or corporation or for a purpose other
than the primary purpose for which the corporation was organized; (6)
adoption, amendment and repeal of by-laws; (7) merger and consolidation;
and (8) dissolution of corporation.37
Since a specific class of shares may have rights and privileges or restrictions
different from the rest of the shares in a corporation, the 60-40 ownership
requirement in favor of Filipino citizens in Section 11, Article XII of the
Constitution must apply not only to shares with voting rights but also to
shares without voting rights. Preferred shares, denied the right to vote in the
election of directors, are anyway still entitled to vote on the eight specific
corporate matters mentioned above. Thus, if a corporation, engaged in a
partially nationalized industry, issues a mixture of common and
preferred non-voting shares, at least 60 percent of the common
shares and at least 60 percent of the preferred non-voting shares
must be owned by Filipinos. Of course, if a corporation issues only a
single class of shares, at least 60 percent of such shares must necessarily be
owned by Filipinos. In short, the 60-40 ownership requirement in favor
of Filipino citizens must apply separately to each class of shares,
whether common, preferred non-voting, preferred voting or any
other class of shares. This uniform application of the 60-40 ownership
requirement in favor of Filipino citizens clearly breathes life to the
constitutional command that the ownership and operation of public utilities
shall be reserved exclusively to corporations at least 60 percent of whose
capital is Filipino-owned. Applying uniformly the 60-40 ownership
requirement in favor of Filipino citizens to each class of shares, regardless of
differences in voting rights, privileges and restrictions, guarantees effective
Filipino control of public utilities, as mandated by the Constitution.
Moreover, such uniform application to each class of shares insures that the
"controlling interest" in public utilities always lies in the hands of Filipino
citizens. This addresses and extinguishes Pangilinans worry that foreigners,
owning most of the non-voting shares, will exercise greater control over
fundamental corporate matters requiring two-thirds or majority vote of all
shareholders.
VI.
Intent of the framers of the Constitution
While Justice Velasco quoted in his Dissenting Opinion38 a portion of the
deliberations of the Constitutional Commission to support his claim that the
term "capital" refers to the total outstanding shares of stock, whether voting
or non-voting, the following excerpts of the deliberations reveal otherwise. It
is clear from the following exchange that the term "capital" refers
to controlling interest of a corporation, thus:
MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino
equity and foreign equity; namely, 60-40 in Section 3, 60-40 in Section 9 and
2/3-1/3 in Section 15.
MR. VILLEGAS. That is right.
MR. NOLLEDO. In teaching law, we are always faced with this question:
"Where do we base the equity requirement, is it on the authorized capital
stock, on the subscribed capital stock, or on the paid-up capital stock of a
corporation"? Will the Committee please enlighten me on this?
MR. VILLEGAS. We have just had a long discussion with the members of the
team from the UP Law Center who provided us a draft. The phrase that is
contained here which we adopted from the UP draft is "60 percent
of voting stock."
MR. NOLLEDO. That must be based on the subscribed capital stock, because
unless declared delinquent, unpaid capital stock shall be entitled to vote.
MR. VILLEGAS. That is right.
MR. NOLLEDO. Thank you.
With respect to an investment by one corporation in another corporation,
say, a corporation with 60-40 percent equity invests in another corporation
which is permitted by the Corporation Code, does the Committee adopt the
grandfather rule?
MR. VILLEGAS. Yes, that is the understanding of the Committee.
MR. NOLLEDO. Therefore, we need additional Filipino capital?
MR. VILLEGAS. Yes.39
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MR. AZCUNA. May I be clarified as to that portion that was accepted by the
Committee.
MR. VILLEGAS. The portion accepted by the Committee is the deletion of the
phrase "voting stock or controlling interest."
MR. AZCUNA. Hence, without the Davide amendment, the committee report
would read: "corporations or associations at least sixty percent of whose
CAPITAL is owned by such citizens."
MR. VILLEGAS. Yes.
MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60
percent of the capital to be owned by citizens.
MR. VILLEGAS. That is right.
MR. AZCUNA. But the control can be with the foreigners even if they
are the minority. Let us say 40 percent of the capital is owned by
them, but it is the voting capital, whereas, the Filipinos own the
nonvoting shares. So we can have a situation where the corporation
is controlled by foreigners despite being the minority because they
have the voting capital. That is the anomaly that would result here.
MR. BENGZON. No, the reason we eliminated the word "stock" as
stated in the 1973 and 1935 Constitutions is that according to
Commissioner Rodrigo, there are associations that do not have
stocks. That is why we say "CAPITAL."
MR. AZCUNA. We should not eliminate the phrase "controlling
interest."
MR. BENGZON. In the case of stock corporations, it is
assumed.40 (Boldfacing and underscoring supplied)
Thus, 60 percent of the "capital" assumes, or should result in, a
"controlling interest" in the corporation.
The use of the term "capital" was intended to replace the word "stock"
because associations without stocks can operate public utilities as long as
they meet the 60-40 ownership requirement in favor of Filipino citizens
prescribed in Section 11, Article XII of the Constitution. However, this did not
change the intent of the framers of the Constitution to reserve exclusively to
Philippine nationals the "controlling interest" in public utilities.
During the drafting of the 1935 Constitution, economic protectionism was
"the battle-cry of the nationalists in the Convention."41 The same battle-cry
resulted in the nationalization of the public utilities.42 This is also the same
intent of the framers of the 1987 Constitution who adopted the exact
formulation embodied in the 1935 and 1973 Constitutions on foreign equity
limitations in partially nationalized industries.
The OSG, in its own behalf and as counsel for the State,43 agrees fully with
the Courts interpretation of the term "capital." In its Consolidated Comment,
the OSG explains that the deletion of the phrase "controlling interest" and
replacement of the word "stock" with the term "capital" were intended
specifically to extend the scope of the entities qualified to operate public
utilities to include associations without stocks. The framers omission of the
phrase "controlling interest" did not mean the inclusion of all shares of stock,
whether voting or non-voting. The OSG reiterated essentially the Courts
declaration that the Constitution reserved exclusively to Philippine nationals
the ownership and operation of public utilities consistent with the States
VII.
Last sentence of Section 11, Article XII of the Constitution
The last sentence of Section 11, Article XII of the 1987 Constitution reads:
The participation of foreign investors in the governing body of any public
utility enterprise shall be limited to their proportionate share in its capital,
and all the executive and managing officers of such corporation or
association must be citizens of the Philippines.
During the Oral Arguments, the OSG emphasized that there was never a
question on the intent of the framers of the Constitution to limit foreign
ownership, and assure majority Filipino ownership and control of public
utilities. The OSG argued, "while the delegates disagreed as to the
percentage threshold to adopt, x x x the records show they clearly
understood that Filipino control of the public utility corporation can only be
and is obtained only through the election of a majority of the members of the
board."
Indeed, the only point of contention during the deliberations of the
Constitutional Commission on 23 August 1986 was the extent of majority
Filipino control of public utilities. This is evident from the following exchange:
THE PRESIDENT. Commissioner Jamir is recognized.
MR. JAMIR. Madam President, my proposed amendment on lines 20 and 21 is
to delete the phrase "two thirds of whose voting stock or controlling
interest," and instead substitute the words "SIXTY PERCENT OF WHOSE
CAPITAL" so that the sentence will read: "No franchise, certificate, or any
other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines at least SIXTY
PERCENT OF WHOSE CAPITAL is owned by such citizens."
xxxx
THE PRESIDENT: Will Commissioner Jamir first explain?
MR. JAMIR. Yes, in this Article on National Economy and Patrimony, there were
two previous sections in which we fixed the Filipino equity to 60 percent as
against 40 percent for foreigners. It is only in this Section 15 with respect to
public utilities that the committee proposal was increased to two-thirds. I
think it would be better to harmonize this provision by providing that even in
the case of public utilities, the minimum equity for Filipino citizens should be
60 percent.
Section 11, Article XII of the Constitution and directed the SEC to apply such
definition in determining the exact percentage of foreign ownership in PLDT.
IX.
PLDT is not an indispensable party;
SEC is impleaded in this case.
In his petition, Gamboa prays, among others:
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5. For the Honorable Court to issue a declaratory relief that ownership of
common or voting shares is the sole basis in determining foreign equity in a
public utility and that any other government rulings, opinions, and
regulations inconsistent with this declaratory relief be declared
unconstitutional and a violation of the intent and spirit of the 1987
Constitution;
6. For the Honorable Court to declare null and void all sales of common
stocks to foreigners in excess of 40 percent of the total subscribed common
shareholdings; and
7. For the Honorable Court to direct the Securities and Exchange
Commission and Philippine Stock Exchange to require PLDT to make a
public disclosure of all of its foreign shareholdings and their actual
and real beneficial owners.
Other relief(s) just and equitable are likewise prayed for. (Emphasis supplied)
As can be gleaned from his prayer, Gamboa clearly asks this Court to compel
the SEC to perform its statutory duty to investigate whether "the required
percentage of ownership of the capital stock to be owned by citizens of the
Philippines has been complied with [by PLDT] as required by x x x the
Constitution."51 Such plea clearly negates SECs argument that it was not
impleaded.
Granting that only the SEC Chairman was impleaded in this case, the Court
has ample powers to order the SECs compliance with its directive contained
in the 28 June 2011 Decision in view of the far-reaching implications of this
case. In Domingo v. Scheer,52 the Court dispensed with the amendment of
the pleadings to implead the Bureau of Customs considering (1) the unique
backdrop of the case; (2) the utmost need to avoid further delays; and (3)
the issue of public interest involved. The Court held:
The Court may be curing the defect in this case by adding the BOC as partypetitioner. The petition should not be dismissed because the second action
thus are clearly within the jurisdiction of the SEC. In short, PLDT must be
impleaded, and must necessarily be heard, in the proceedings before the
SEC where the factual issues will be thoroughly threshed out and resolved.
Notably, the foregoing issues were left untouched by the Court. The
Court did not rule on the factual issues raised by Gamboa, except the single
and purely legal issue on the definition of the term "capital" in Section 11,
Article XII of the Constitution. The Court confined the resolution of the instant
case to this threshold legal issue in deference to the fact-finding power of the
SEC.
Needless to state, the Court can validly, properly, and fully dispose of the
fundamental legal issue in this case even without the participation of PLDT
since defining the term "capital" in Section 11, Article XII of the Constitution
does not, in any way, depend on whether PLDT was impleaded. Simply put,
PLDT is not indispensable for a complete resolution of the purely legal
question in this case.55 In fact, the Court, by treating the petition as one for
mandamus,56 merely directed the SEC to apply the Courts definition of the
term "capital" in Section 11, Article XII of the Constitution in determining
whether PLDT committed any violation of the said constitutional
provision. The dispositive portion of the Courts ruling is addressed
not to PLDT but solely to the SEC, which is the administrative
agency tasked to enforce the 60-40 ownership requirement in favor
of Filipino citizens in Section 11, Article XII of the Constitution.
Since the Court limited its resolution on the purely legal issue on the
definition of the term "capital" in Section 11, Article XII of the 1987
Constitution, and directed the SEC to investigate any violation by PLDT of the
60-40 ownership requirement in favor of Filipino citizens under the
Constitution,57 there is no deprivation of PLDTs property or denial of PLDTs
right to due process, contrary to Pangilinan and Nazarenos misimpression.
Due process will be afforded to PLDT when it presents proof to the SEC that it
complies, as it claims here, with Section 11, Article XII of the Constitution.
X.
Foreign Investments in the Philippines
Movants fear that the 28 June 2011 Decision would spell disaster to our
economy, as it may result in a sudden flight of existing foreign investors to
"friendlier" countries and simultaneously deterring new foreign investors to
our country. In particular, the PSE claims that the 28 June 2011 Decision may
result in the following: (1) loss of more than P 630 billion in foreign
investments in PSE-listed shares; (2) massive decrease in foreign trading
transactions; (3) lower PSE Composite Index; and (4) local investors not
investing in PSE-listed shares.58
Dr. Bernardo M. Villegas, one of the amici curiae in the Oral Arguments,
shared movants apprehension. Without providing specific details, he pointed
out the depressing state of the Philippine economy compared to our
neighboring countries which boast of growing economies. Further, Dr.
Villegas explained that the solution to our economic woes is for the
government to "take-over" strategic industries, such as the public utilities
sector, thus:
JUSTICE CARPIO:
I would like also to get from you Dr. Villegas if you have additional
information on whether this high FDI59 countries in East Asia have allowed
foreigners x x x control [of] their public utilities, so that we can compare
apples with apples.
DR. VILLEGAS:
Correct, but let me just make a comment. When these neighbors of ours find
an industry strategic, their solution is not to "Filipinize" or "Vietnamize" or
"Singaporize." Their solution is to make sure that those industries are
in the hands of state enterprises. So, in these countries,
nationalization means the government takes over. And because
their governments are competent and honest enough to the public,
that is the solution. x x x 60 (Emphasis supplied)
If government ownership of public utilities is the solution, then foreign
investments in our public utilities serve no purpose. Obviously, there can
never be foreign investments in public utilities if, as Dr. Villegas claims, the
"solution is to make sure that those industries are in the hands of state
enterprises." Dr. Villegass argument that foreign investments in
telecommunication companies like PLDT are badly needed to save our ailing
economy contradicts his own theory that the solution is for government to
take over these companies. Dr. Villegas is barking up the wrong tree since
State ownership of public utilities and foreign investments in such industries
are diametrically opposed concepts, which cannot possibly be reconciled.
In any event, the experience of our neighboring countries cannot be used as
argument to decide the present case differently for two reasons. First, the
governments of our neighboring countries have, as claimed by Dr. Villegas,
taken over ownership and control of their strategic public utilities like the
telecommunications industry. Second, our Constitution has specific
provisions limiting foreign ownership in public utilities which the Court is
sworn to uphold regardless of the experience of our neighboring countries.
In our jurisdiction, the Constitution expressly reserves the ownership and
operation of public utilities to Filipino citizens, or corporations or associations
Any other construction of the term "capital" in Section 11, Article XII of the
Constitution contravenes the letter and intent of the Constitution. Any other
meaning of the term "capital" openly invites alien domination of economic
activities reserved exclusively to Philippine nationals. Therefore,
respondents interpretation will ultimately result in handing over effective
control of our national economy to foreigners in patent violation of the
Constitution, making Filipinos second-class citizens in their own country.
Filipinos have only to remind themselves of how this country was exploited
under the Parity Amendment, which gave Americans the same rights as
Filipinos in the exploitation of natural resources, and in the ownership and
control of public utilities, in the Philippines. To do this the 1935 Constitution,
which contained the same 60 percent Filipino ownership and control
requirement as the present 1987 Constitution, had to be amended to give
Americans parity rights with Filipinos. There was bitter opposition to the
Parity Amendment62 and many Filipinos eagerly awaited its expiration. In late
1968, PLDT was one of the American-controlled public utilities that became
Filipino-controlled when the controlling American stockholders divested in
anticipation of the expiration of the Parity Amendment on 3 July 1974.63 No
economic suicide happened when control of public utilities and mining
corporations passed to Filipinos hands upon expiration of the Parity
Amendment.
Movants interpretation of the term "capital" would bring us back to the same
evils spawned by the Parity Amendment, effectively giving foreigners
parity rights with Filipinos, but this time even without any
amendment to the present Constitution. Worse, movants interpretation
opens up our national economy toeffective control not only by Americans
but also by all foreigners, be they Indonesians, Malaysians or
Chinese, even in the absence of reciprocal treaty arrangements. At
least the Parity Amendment, as implemented by the Laurel-Langley
Agreement, gave the capital-starved Filipinos theoretical parity the same
rights as Americans to exploit natural resources, and to own and control
public utilities, in the United States of America. Here, movants interpretation
would effectively mean a unilateral opening up of our national economy to
all foreigners, without any reciprocal arrangements. That would mean
that Indonesians, Malaysians and Chinese nationals could effectively control
our mining companies and public utilities while Filipinos, even if they have
the capital, could not control similar corporations in these countries.
The 1935, 1973 and 1987 Constitutions have the same 60 percent Filipino
ownership and control requirement for public utilities like PLOT. Any deviation
from this requirement necessitates an amendment to the Constitution as
exemplified by the Parity Amendment. This Court has no power to amend the
Constitution for its power and duty is only to faithfully apply and interpret the
Constitution.
(LTO) the power and duty to enforce traffic laws and issue the appropriate
traffic citation tickets to erring drivers as well as confiscate their drivers
license;
WHEREAS, the establishment and use of transport terminals by public utility
vehicles with franchises issued by the national government as well as the
determination of their routes fall within the jurisdiction of the DOTC/Land
Transportation Franchising and Regulatory Board (LTFRB);
WHEREAS, pursuant to Article 458 of the Local Government Code, the
power of the Local Government Units (LGUs) to regulate the operation of
tricycles and to grant franchise is subject to the guidelines prescribed by the
DOTC;
WHEREAS, under Section 17, Article VII of the Constitution, the President
has control of all executive departments, bureaus and offices, and pursuant
to Section 4, Article IX exercises general supervision over all local
government units;
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the
Republic of the Philippines, by virtue of the powers vested in me by
Constitution, do hereby order:
SECTION 1. The Department of Transportation and Communications (DOTC)
is hereby directed to immediately review all existing orders, rules and
regulations issued by Local Government Units (LGUs) concerning public
transportation within their jurisdiction, including the grant of franchises to
tricycles, establishment and operation of transport terminals, authority to
issue traffic citation tickets, and unilateral rerouting schemes of public utility
vehicles.
SECTION 2. Pending the review by the DOTC under Section 1 hereof of
existing orders, rules and regulations issued by LGUs, the Department of
Interior and Local Government (DILG) shall, subject to existing laws, advise
LGUs to suspend (1) the establishment and operations of new and existing
transport terminals that charge fees and require compulsory use by public
utility vehicles, (2) the enforcement of re-routing schemes that violate the
authorized routes as provided for in the PUV franchises, (3) the issuance of
new tricycle franchises while respecting those that have been issued already,
(4) the increase in local fees and charges applicable to public transportation,
and (5) the implementation of local programs, projects and ordinances that
have impact on the cost of operations of public utility vehicles without first
coordinating and getting the approval of the DOTC to ensure that these
programs, projects and ordinances do not prejudice public interest by way of
higher transport fares.
SECTION 3. The DOTC shall establish a National Land Transport Policy
Framework, which shall facilitate the modernization of the land transport
industry through the promotion of utility services which are environmentfriendly and shall provide assistance to the land transport sector through
lease-to-own programs, technical assistance, subsidies, and the
encouragement of the use of alternative fuels and/or renewable energy,
among others.
SECTION 4. The Metropolitan Manila Development Authority (MMDA) shall
implement a single ticketing system throughout Metro Manila in accordance
with Republic Act 7924
SECTION 5. The DILG shall, subject to existing laws, establish and
implement uniform truck ban hours that shall be applicable to LGUs located
in a common area nationwide.
SECTION 6. If any section or part of this Executive Order shall be declared
unconstitutional or illegal, the other sections or parts thereof shall not
thereby be affected.
SECTION 7. All other orders, issuances or portions thereof, which are
inconsistent with this Executive Order are hereby revoked, amended or
modified accordingly.
SECTION 8. This Executive Order shall take effect immediately following its
publication in a national newspaper of general circulation.
DONE in the City of Manila, this 11th day of March in the year of our Lord,
Two Thousand Eight.
(Sgd.) GLORIA MACAPAGAL-ARROYO
President of the Philippines