G.R. No. 122156 | Manila Prince Hotel vs.

Government Service Insurance

System (GSIS) Case Digest

Petitioner/s: Manila Prince Hotel (MPH)

Respondent/s: Government Service Insurance System (GSIS); Manila Hotel
Corporation (MHC); Committee on Privatization; and Office of the
Government Corporate Counsel
Ponente: Bellosillo, J.
Date: February 3, 1997

SUMMARY: The controversy in the case arose when GSIS decided to sell
30% to 51% of the issued and outstanding shares of MHC through public
bidding. Two bidders participated: MPH, a Filipino corporation, and
Renong Berhard, a Malaysian firm. Renong Berhard offered P2.42 more
than the bid of petitioner bid for the same shares at P44.00 per share.
Pending the declaration of the winning bidder, MPH matched the bid price
tendered by Renong Berhard. The main issues are whether or not the
Filipino First Policy (FFP) in the Constitution (Par. 2, Sec. 10, Art. XII, 1987
Constitution) is applicable in the present case and whether or not the said
provision is self-executing. The court held that the FFP provision in the
Constitution is self-executing and must be enforced in the case at hand.
GSIS is mandated by the constitution to give preference to the MPH in the
said bidding since the controlling shares of the MHC form part of the
Philippines national patrimony.

There are six separate opinions: Padilla, J. (concurring), Vitug, J.

(concurring), Mendoza, J. (concurring), Torres, Jr., J. (concurring), Puno, J.
(dissenting), and Panganiban, J. (dissenting).

FACTS:
- Dec. 8, 1986: GSIS decided to sell 30% to 51% of the issued and
outstanding shares of MHC through public bidding pursuant to the
privatization program of the Philippine Government under Proclamation
No. 50.
- The winning bidder ("strategic partner"): to provide management
expertise and/or an international marketing/reservation system, and
financial support to strengthen the profitability and performance of MPH.
- Sept. 18, 1995: the bidding was held where to bidders participated —
MPH, a Filipino corporation, and Renong Berhard, a Malaysian firm.
- MPH offered to buy 51% of the MHC or 15,300,000 shares at P41.58 per
share.
- Renong Berhard bid for the same shares at P44.00 per share.
- Sept. 28, 1995: MPH wrote a letter addressed to GSIS, matching the bid
price of P44.00 per share tendered by Renong Berhad.
- Oct. 10, 1995: MPH wrote another letter with a manager's check issued by
Philtrust Bank for Thirty-three Million Pesos (P33,000,000.00) as Bid
Security to match the bid of Renong Berhard. GSIS refused to accept.
- Oct. 17, 1995: MPH petitioned for issuance of prohibition and mandamus.
The following day, the SC issued a temporary restraining order enjoining
respondents from perfecting and consummating the sale to the Malaysian
firm.
- Sept. 10, 1996: the case commenced.

Petitioner's Arguments:
- Petitioner invokes Par. 2, Sec. 10, Art. XII, 1987 Constitution, and submits
that MHC has been identified with the Filipino nation, a historical
monument reflecting the vibrancy of Philippine heritage and culture. It
has become part of the national patrimony.
- Since 51% of the shares of the MHC carries with it the ownership of the
business of the hotel which is owned by GSIS, a government-owned and
controlled corporation, the hotel business of GSIS being a part of the
tourism industry is unquestionably a part of the national economy. Any
transaction involving 51% of the shares of stock of the MHC is clearly
covered by the term national economy Par. 2, Sec. 10, Art. XII, 1987
Constitution.
- Based on the bidding rules, the petitioner has validly matched the highest
bid.

Respondents' Arguments:
- Respondents claim that Par. 2, Sec. 10, Art. XII, 1987 Constitution is not a
self-executing provision and requires implementing legislation(s).
- Granting that this provision is self-executing, MHC does not fall under
the term national patrimony.
- Granting the MHC form part of the national patrimony, the constitutional
provision still cannot be invoked since the 51% of the equity of the MHC
being sold cannot be considered part of the national patrimony.
- Based on the bidding rules, the privilege of submitting a matching bid
has not yet arisen since it only takes place if for any reason, the Highest
Bidder cannot be awarded the Block of Shares.

ISSUE/S:
1. W/N Par. 2, Sec. 10, Art. XII, 1987 Constitution is a self-executing provision
—YES, it is a self executing provision and does not need implementing
legislation(s) to carry it into effect.

- General rule: in case of doubt, the Constitution should be considered

self-executing rather than non-self-executing. Unless it is expressly
provided that a legislative act is necessary to enforce a constitutional
mandate, the presumption is that all provisions of the constitution are self-
executing.
- However, in self-executing constitutional provisions, the legislature may
still enact legislation, granted that the legislation is in harmony with the
constitution. Moreover, subsequent legislation does not necessarily mean
that the subject constitutional provision is not, by itself, fully enforceable.
- Regarding the respondents argument that the non-self-executing nature of
Par. 2, Sec. 10, Art. XII, 1987 Constitution is implied from the tenor of the
first and third paragraphs of the same section that undoubtedly are not
self-executing, the court held that the argument was flawed. The second
paragraph can only be self-executing as it does not by its language
require any legislation in order to give preference to qualified Filipinos in
the grant of rights, privileges and concessions covering the national
economy and patrimony. A constitutional provision may be self-executing
in one part and non-self-executing in another.
- Par. 2, Sec. 10, Art. XII, 1987 Constitution is a mandatory, positive
command which is complete in itself and which needs no further
guidelines or implementing laws or rules for its enforcement. From its very
words, it is per se judicially enforceable.

2. W/N the controlling shares of the MHC form part of the Philippines'
patrimony—YES, the controlling shares of the MHC form part of our
patrimony as a nation.

- A member of the 1986 Constitutional Commission explains: the

patrimony refers not only to our rich natural resources but also to the
cultural heritage of our race. It also refers to our intelligence in arts,
sciences and letters.
- The court agrees with this definition. The term patrimony pertains to
heritage.
- The MHC has become a landmark — a living testimonial of Philippine
heritage. It has become the venue of various significant events which have
shaped Philippine history. It was called the Cultural Center of the 1930’s.
It was the site of the festivities during the inauguration of the
Philippine Commonwealth. It was also dubbed as the Official Guest
House of the Philippine Government.
- The MHC has become part of our national economy and patrimony.
- The owner of the 51% of the equity of the MHC would have the actual
control and management of the hotel. Thus, the 51% of the MHC cannot be
disassociated from the hotel and the land on which the hotel edifice stands.
- The court did not sustain respondents’ claim that the Filipino First Policy
provision is not applicable since what is being sold is only 51% of the
outstanding shares of the corporation, not the Hotel building nor the land
upon which the building stands.

3. W/N GSIS is included in the term "State," and thus mandated to implement
Par. 2, Sec. 10, Art. XII, 1987 Constitution—YES, GSIS, being included in
the term "State," is mandated to implement the said provision.

- The sale of 51% of the MHC could only be carried out with the prior
approval of the State acting through respondent Committee on
Privatization. Fr. Joaquin G. Bernas, S.J., pointed out that this fact alone
makes the sale of the assets of respondents GSIS and MHC a "state action."
- According to constitutional jurisprudence, the following are considered as
"state action:"
1) when the activity it engages in is a "public function;"
2) when the government is so-significantly involved with the private actor
as to make the government responsible for his action; and,
3) when the government has approved or authorized the action.
- The act of GSIS in selling 51% of its share in MHC comes under the second
and third categories of "state action." Thus, the transaction, although
entered into by respondent GSIS, is in fact a transaction of the State and
therefore subject to the constitutional command.
- When the Constitution addresses the State it refers not only to the people
but also to the government as elements of the State. A constitutional
mandate is directed to the three (3) branches of the government: executive,
legislative, and judiciary. In this case, the subject constitutional injunction
is addressed among others to the Executive Department and respondent
GSIS, a government instrumentality deriving its authority from the State.

4. W/N GSIS should give preference to the petitioner, a Filipino corporation,

over Renong Berhard, a foreign corporation—YES, GSIS should give
preference to the petitioner in the sale of the controlling shares of the
MHC.

- The court stressed that while the Malaysian firm offered the higher bid it
is not yet the winning bidder.  The bidding rules expressly provide that the
highest bidder shall only be declared the winning bidder after it has
negotiated and executed the necessary contracts, and secured the requisite
approvals.
- Since the Filipino First Policy provision of the Constitution bestows
preference on qualified Filipinos the mere tending of the highest bid is
not an assurance that the highest bidder will be declared the winning
bidder.
- There is no time frame for invoking the constitutional safeguard unless
perhaps the award has been finally made. Since petitioner has already
matched the bid price tendered by Renong Berhad pursuant to the bidding
rules, GSIS is left with no alternative but to award to petitioner the block of
shares of MHC.
- The Filipino First Policy is a product of Philippine nationalism. It is
embodied in the 1987 Constitution not merely to be used as a guideline for
future legislation but primarily to be enforced; so must it be enforced.
- The policy is not to discourage foreign investors. Filipinos and foreigners
alike may be invited to the bidding. However, foreigners may be awarded
the sale only if no Filipino qualifies, or if the qualified Filipino fails to
match the highest bid tendered by the foreign entity.

RULING:
WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM,
MANILA HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and
OFFICE OF THE GOVERNMENT CORPORATE COUNSEL are directed to
CEASE and DESIST from selling 51% of the shares of the Manila Hotel
Corporation to RENONG BERHAD, and to ACCEPT the matching bid of
petitioner MANILA PRINCE HOTEL CORPORATION to purchase the subject
51% of the shares of the Manila Hotel Corporation at P44.00 per share and
thereafter to execute the necessary agreements and documents to effect the
sale, to issue the necessary clearances and to do such other acts and deeds
as may be necessary for the purpose.