GR NO.

114222 April 6, 1995

Francisco Tatad, John Osmena and Rodolfo Biazon, petitioners,
vs.
Hon. Jesus Garcia, in his capacity as the Secretary of the Department of Transportation &
Communications, and EDSA LRT CORPORATION, LTD., respondents.

Facts:
This is a petition under Rule 65 of the Revised Rules of Court to prohibit
respondents from further implementing the Revised and Restated Agreement to
Build, Lease and Transfer a Light Rail Transit System for EDSA and the
Supplemental Agreement to the same project.
Petitioners Francisco Tatad, John Osmena and Rodolfo Biazon are members of the
Philippine Senate and are suing in their capacities as Senators and as taxpayers.
Respondent Jesus Garcia was then Secretary of the DOTC, while private respondent
EDSA LRT CORPORATION, Ltd. is a private corporation organized under the laws of
Hongkong.
In 1989, DOTC planned to construct a light railway transit line along EDSA, which
shall traverse the cities of Pasay, Quezon, Mandaluyong and Makati. The objective is
to provide a mass transit system along EDSA and to alleviate the congestion in the
metropolis.
On March 15, 1990, then DOTC Secretary Oscar Orbos, acting upon a proposal to
construct the EDSA LRT III on a Build-Operate-Transfer (BOT) basis, had invited
Elijahu Levin from the Eli Levin Enterprises, Inc to send a technical team to discuss
the project with the DOTC.
On July 9, 1990, RA No. 6957 referred to as the Build-Operate-Transfer (BOT) was
signed by then President Corazon Aquino. The said Act provides for two schemes for
the financing, construction and operation of government projects through private
initiative and investment: BOT or Build-Transfer (BT).
In accordance with the provisions of RA 6957 and to set the EDSA LRT III project
underway, the Prequalification Bids and Awards Committee and the Technical
Committee were formed.
The prequalification criteria totalling 100% are as follows: a.) Legal aspects 10%;
b.) Management/Organizational capability 30%; c.) Financial capability- 30%; and
d.) Technical capability 30%.
Of the 5 applicants, only the EDSA LRT Consortium met the requirements of
garnering at least 21 points per criteria, except for Legal aspects, and obtaining an

over-all passing mark of at least 82 points. The Legal aspects referred to provided
that the BOT/BT contractor-applicant meet the requirements specified in the
Constitution and other pertinent laws.
Subsequently, Sec. Orbos was appointed Executive Secretary to the President of the
Philippines and was replaced by Nicomedes Prado. The latter recommended the
award of the EDSA LRT III project to the sole complying bidder, the EDSA LRT
Consortium, and requested for authority to negotiate with the said firm for the
contract pursuant to the BOT Law. Authority was granted to proceed with the
negotiations. The EDSA LRT Consortium submitted its proposal to DOTC.
Finding the proposal to be in compliance with the bid requirements, DOTC and
EDSA LRT Corporation, Ltd., in substitution of the EDSA LRT Consortium, entered
into an An Agreement to Build, Lease and Transfer a Light Rail Transit System for
EDSA under the terms of the BOT Law.
Secretary Prado, thereafter, requested presidential approval of the contract.
Exec. Sec. Franklin Drilon, who replaced Sec. Orbos, informed Sec. Prado that the
President could not grant the requested approval for failure to comply with the
requirements of the BOT Law.
In view whereof, Sec. Drilon, the DOTC and private respondent re-negotiated the
agreement. On April 22, 1992, the parties entered into a Revised and Restated
Agreement to Build, Lease and Transfer and Light Rail Transit System for EDSA. On
May 6, 1992, DOTC, represented by Sec. Jesus Garcia, Sec. Prado and private
respondent entered into a Supplemental Agreement to the April Revised Agreement
so as to clarify their respective rights and responsibilities.
The two agreements were approved by President Fidel Ramos.
According to the agreements, the EDSA LRT III will use light rail vehicles from the
Czech and Slovak Federal Republics and will have a maximum carrying capacity of
450,000 passengers a day. The system will have its own power facility. It will also
have 13 passenger stations and one depot in 16-hectare government property at
North Avenue.
Private respondents shall undertake and finance the entire project required for a
complete operational light rail transit system. Target completion date is
approximately 3 years from the implementation date of the contract. Upon full and
partial completion and viability thereof, private respondent shall deliver the use and
possession of the completed portion to DOTC which shall operate the same. DOTC
shall pay private respondent rentals on aj monthly basis through an Irrevocable
Letter of Credit. The rentals shall be determined by an independent and

internationally accredited inspection firm to be appointed by the parties.

As agreed upon, private respondents capital shall be recovered from the rentals to
be paid by the DOTC which, in turn, shall come from the earnings of the EDSA LRT
III. After 25 years and DOTC shall have completed payment of the rentals,
ownership of the project shall be transferred to the latter for a consideration of only
US $1.00.
In their petition, petitioners argued that the agreement of April 22, 1992, as
amended by the Supplemental Agreement of May 6, 1993, in so far as it grants
EDSA LRT COPORTATION, LTD., a foreign corporation, the ownership of EDSA LRT III,
a public utility, violates the constitution, and hence, is unconstitutional. They
contend that the EDSA LRT III is a public utility, and the ownership and operation
thereof is limited by the Constitution to Filipino citizens and domestic corporations,
not foreign corporations like private respondent.
Issue:
Whether or not the EDSA LRT III assumes all the obligations and liabilities of a
common carrier.
Held:
What private respondent owns are the rail tracks, rolling stocks like the coaches,
rail stations, terminals and the power plant, not a public utility. While a franchise is
needed to operate these facilities to serve the public, they do not by themselves
constitute a public utility. What constitutes a public utility is not their ownership but
their use to serve the public.
Section 11 of Article XII of the Constitution provides:
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 per centum
of whose capital is owned by such citizens, nor shall such franchise, certificate or
authorization be exclusive character or for a longer period than 50 years.
The right to operate a public utility may exist independently and separately from
the ownership of the facilities thereof. One can own said facilities without operating
them as a public utility, or conversely, one may operate a public utility without
owning the facilities used to serve the public. The devotion of property to serve the
public may be done by the owner or by the person in control thereof who may not
necessarily be the owner thereof.

While private respondent is the owner of the facilities necessary to operate the
EDSA LRT III, it admits that it is not enfranchised to operate a public utility. In view
of this incapacity, private respondent and DOTC agreed that on completion date,
private respondent will immediately deliver possession of the LRT system by of
lease for 25 years, during which period DOTC shall operate the same as a common
carrier and private respondent shall provide technical maintenance and repair
services to DOTC.
Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and
liabilities of a common carrier. For this purpose, DOTC shall indemnify and hold
harmless private respondent from any losses, damages, injuries or death which
may be claimed in the operation or implementation of the system, except losses,
damages, injury or death due to defects in the EDSA LRT III on account of the
defective condition of equipment or facilities or the defective maintenance of such
equipment facilities.
Wherefore, the petition is DISMISSED.
Sabena Belgian World Airlines vs. CA
(GR 104685, 14 March 1996)
FACTS:
Private respondent MA. PAULA SAN AGUSTIN was a passenger on board Flight SN
284 of defendant airline originating from Casablanca to Brussels, Belgium on her
way back to Manila. She checked in her luggage which contained her valuables all
amounting to $4,265.00, for which she was issued Tag No. 71423. She stayed
overnight in Brussels and her luggage was left on board Flight SN 284. Upon Arrival
in Manila, she learned that her luggage was missing and was advised to accomplish
and submit a property Irregularity Report which she submitted and filed on the
same day.
Upon follow up, it remained missing; thus, she filed her formal complaint with the
office of Ferge Massed, petitioners Local Manager, demanding immediate attention.
Two weeks later she was notified that her luggage was found. But unfortunately
plaintiff was informed that the luggage was lost for the second time. She demanded
payment but the airline refused to settle the claim.
The trial court ruled in favor of Ma. Paula San Agustin. The appellate court affirmed
in toto the trial courts judgment.
Petitioner airline company, in contending that the alleged negligence of private
respondent should be considered the primary cause for the loss of her luggage,
avers that, despite her awareness that the flight ticket had been confirmed only for

Casablanca and Brussels, and that her flight from Brussels to Manila had yet to be
confirmed, she did not retrieve the luggage upon arrival in Brussels. Petitioner
insists that private respondent, being a seasoned international traveler, must have
likewise been familiar with the standard provisions contained in her flight ticket that
items of value are required to be hand-carried by the passenger and that the
liability of the airline or loss, delay or damage to baggage would be limited, in any
event, to only US$20.00 per kilo unless a higher value is declared in advance and
corresponding additional charges are paid thereon. At the Casablanca International
Airport, private respondent, in checking in her luggage, evidently did not declare its
contents or value. Petitioner cites Section 5(c), Article IX, of the General Conditions
of Carriage, signed at Warsaw, Poland, on 02 October 1929, as amended by the
Hague Protocol of 1955, generally observed by International carriers, stating,
among other things, that:
Passengers shall not include in his checked baggage, and the carrier may refuse to
carry as checked baggage, fragile or perishable articles, money, jewelry, precious
metals, negotiable papers, securities or other valuables.
ISSUE:
Whether or not the airline is negligent? Whether respondents negligence is the sole
and proximate of the loss?
HELD:
Yes.
Fault or negligence consists in the omission of that diligence which is demanded by
the nature of an obligation and corresponds with the circumstances of the person,
of the time, and of the place. When the source of an obligation is derived from a
contract, the mere breach or non-fulfillment of the prestation gives rise to the
presumption of fault on the part of the obligor. This rule is not different in the case
of common carriers in the carriage of goods which, indeed, are bound to observe
not just the due diligence of a good father of a family but that of extraordinary
care in the vigilance over the goods. The appellate court has aptly observed:
x x x Art. 1733 of the [Civil] Code provides that from the very nature of their
business and by reasons of public policy, common carriers are bound to observe
extraordinary diligence in the vigilance over the goods transported by them. This
extraordinary responsibility, according to Art. 1736, lasts from the time the goods
are unconditionally placed in the possession of and received by the carrier until
they are delivered actually or constructively to the consignee or person who has the
right to receive them. Art. 1737 states that the common carriers duty to observe
extraordinary diligence in the vigilance over the goods transported by them

remains in full force and effect even when they are temporarily unloaded or stored
in transit. And Art. 1735 establishes the presumption that if the goods are lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they had observed extraordinary
diligence as required in Article 1733.
The above rules remain basically unchanged even when the contract is breached by
tort although noncontradictory principles on quasi-delict may then be assimilated as
also forming part of the governing law. Petitioner is not thus entirely off track when
it has likewise raised in its defense the tort doctrine of proximate cause.
Unfortunately for petitioner, however, the doctrine cannot, in this particular
instance, support its case. Proximate cause is that which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces injury and without
which the result would not have occurred.
The above findings, which certainly cannot be said to be without basis, foreclose
whatever rights petitioner might have had to the possible limitation of liabilities
enjoyed by international air carriers under the Warsaw Convention .
The Warsaw Convention however denies to the carrier availment of the provisions
which exclude or limit his liability, if the damage is caused by his wilful misconduct
or by such default on his part as, in accordance with the law of the court seized of
the case, is considered to be equivalent to wilful misconduct, or if the damage is
(similarly) caused x x x by any agent of the carrier acting within the scope of his
employment.
The Convention does not thus operate as an exclusive enumeration of the instances
of an airlines liability, or as an absolute limit of the extent of that liability.
( Loss of baggage twice shows gross negligence)