CASE #1:

G.R. No. 176579 June 28, 2011

WILSON P. GAMBOA v. FINANCE SECRETARY MARGARITO B. TEVES

The Case

This is an original petition for prohibition, injunction, declaratory relief and declaration of nullity of the sale of shares of stock of Philippine
Telecommunications Investment Corporation (PTIC) by the government of the Republic of the Philippines to Metro Pacific Assets Holdings,
Inc. (MPAH), an affiliate of First Pacific Company Limited (First Pacific).

The Antecedents

The facts, according to petitioner Wilson P. Gamboa, a stockholder of Philippine Long Distance Telephone Company (PLDT), are as
follows:1

On 28 November 1928, the Philippine Legislature enacted Act No. 3436 which granted PLDT a franchise and the right to engage in
telecommunications business. In 1969, General Telephone and Electronics Corporation (GTE), an American company and a major PLDT
stockholder, sold 26 percent of the outstanding common shares of PLDT to PTIC. In 1977, Prime Holdings, Inc. (PHI) was incorporated by
several persons, including Roland Gapud and Jose Campos, Jr. Subsequently, PHI became the owner of 111,415 shares of stock of PTIC
by virtue of three Deeds of Assignment executed by PTIC stockholders Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415
shares of stock of PTIC held by PHI were sequestered by the Presidential Commission on Good Government (PCGG). The 111,415 PTIC
shares, which represent about 46.125 percent of the outstanding capital stock of PTIC, were later declared by this Court to be owned by the
Republic of the Philippines.2

In 1999, First Pacific, a Bermuda-registered, Hong Kong-based investment firm, acquired the remaining 54 percent of the outstanding
capital stock of PTIC. On 20 November 2006, the Inter-Agency Privatization Council (IPC) of the Philippine Government announced that it
would sell the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, through a public bidding to be conducted on
4 December 2006. Subsequently, the public bidding was reset to 8 December 2006, and only two bidders, Parallax Venture Fund XXVII
(Parallax) and Pan-Asia Presidio Capital, submitted their bids. Parallax won with a bid of ₱25.6 billion or US$510 million.

Thereafter, First Pacific announced that it would exercise its right of first refusal as a PTIC stockholder and buy the 111,415 PTIC shares by
matching the bid price of Parallax. However, First Pacific failed to do so by the 1 February 2007 deadline set by IPC and instead, yielded its
right to PTIC itself which was then given by IPC until 2 March 2007 to buy the PTIC shares. On 14 February 2007, First Pacific, through its
subsidiary, MPAH, entered into a Conditional Sale and Purchase Agreement of the 111,415 PTIC shares, or 46.125 percent of the
outstanding capital stock of PTIC, with the Philippine Government for the price of ₱25,217,556,000 or US$510,580,189. The sale was
completed on 28 February 2007.

Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of 46.125 percent of PTIC shares is actually an indirect sale of
12 million shares or about 6.3 percent of the outstanding common shares of PLDT. With the sale, First Pacific’s common shareholdings
in PLDT increased from 30.7 percent to 37 percent, thereby increasing the common shareholdings of foreigners in PLDT to about
81.47 percent. This violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign ownership of the capital of a
public utility to not more than 40 percent.3

On the other hand, public respondents Finance Secretary Margarito B. Teves, Undersecretary John P. Sevilla, and PCGG Commissioner
Ricardo Abcede allege the following relevant facts:

On 9 November 1967, PTIC was incorporated and had since engaged in the business of investment holdings. PTIC held 26,034,263 PLDT
common shares, or 13.847 percent of the total PLDT outstanding common shares. PHI, on the other hand, was incorporated in 1977, and
became the owner of 111,415 PTIC shares or 46.125 percent of the outstanding capital stock of PTIC by virtue of three Deeds of
Assignment executed by Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 PTIC shares held by PHI were sequestered by the
PCGG, and subsequently declared by this Court as part of the ill-gotten wealth of former President Ferdinand Marcos. The sequestered
PTIC shares were reconveyed to the Republic of the Philippines in accordance with this Court’s decision4 which became final and executory
on 8 August 2006.

The Philippine Government decided to sell the 111,415 PTIC shares, which represent 6.4 percent of the outstanding common shares of
stock of PLDT, and designated the Inter-Agency Privatization Council (IPC), composed of the Department of Finance and the PCGG, as the
disposing entity. An invitation to bid was published in seven different newspapers from 13 to 24 November 2006. On 20 November 2006, a
pre-bid conference was held, and the original deadline for bidding scheduled on 4 December 2006 was reset to 8 December 2006. The
extension was published in nine different newspapers.
During the 8 December 2006 bidding, Parallax Capital Management LP emerged as the highest bidder with a bid of ₱25,217,556,000. The
government notified First Pacific, the majority owner of PTIC shares, of the bidding results and gave First Pacific until 1 February 2007 to
exercise its right of first refusal in accordance with PTIC’s Articles of Incorporation. First Pacific announced its intention to match Parallax’s
bid.

On 31 January 2007, the House of Representatives (HR) Committee on Good Government conducted a public hearing on the particulars of
the then impending sale of the 111,415 PTIC shares. Respondents Teves and Sevilla were among those who attended the public hearing.
The HR Committee Report No. 2270 concluded that: (a) the auction of the government’s 111,415 PTIC shares bore due diligence,
transparency and conformity with existing legal procedures; and (b) First Pacific’s intended acquisition of the government’s 111,415
PTIC shares resulting in First Pacific’s 100% ownership of PTIC will not violate the 40 percent constitutional limit on foreign
ownership of a public utility since PTIC holds only 13.847 percent of the total outstanding common shares of PLDT.5 On 28
February 2007, First Pacific completed the acquisition of the 111,415 shares of stock of PTIC.

Respondent Manuel V. Pangilinan admits the following facts: (a) the IPC conducted a public bidding for the sale of 111,415 PTIC shares or
46 percent of the outstanding capital stock of PTIC (the remaining 54 percent of PTIC shares was already owned by First Pacific and its
affiliates); (b) Parallax offered the highest bid amounting to ₱25,217,556,000; (c) pursuant to the right of first refusal in favor of PTIC and its
shareholders granted in PTIC’s Articles of Incorporation, MPAH, a First Pacific affiliate, exercised its right of first refusal by matching the
highest bid offered for PTIC shares on 13 February 2007; and (d) on 28 February 2007, the sale was consummated when MPAH paid IPC
₱25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares. Respondent Pangilinan denies the other
allegations of facts of petitioner.

On 28 February 2007, petitioner filed the instant petition for prohibition, injunction, declaratory relief, and declaration of nullity of sale of the
111,415 PTIC shares. Petitioner claims, among others, that the sale of the 111,415 PTIC shares would result in an increase in First Pacific’s
common shareholdings in PLDT from 30.7 percent to 37 percent, and this, combined with Japanese NTT DoCoMo’s common shareholdings
in PLDT, would result to a total foreign common shareholdings in PLDT of 51.56 percent which is over the 40 percent constitutional limit.6
Petitioner asserts:

If and when the sale is completed, First Pacific’s equity in PLDT will go up from 30.7 percent to 37.0 percent of its common – or voting-
stockholdings, x x x. Hence, the consummation of the sale will put the two largest foreign investors in PLDT – First Pacific and Japan’s NTT
DoCoMo, which is the world’s largest wireless telecommunications firm, owning 51.56 percent of PLDT common equity. x x x With the
completion of the sale, data culled from the official website of the New York Stock Exchange (www.nyse.com) showed that those foreign
entities, which own at least five percent of common equity, will collectively own 81.47 percent of PLDT’s common equity. x x x

x x x as the annual disclosure reports, also referred to as Form 20-K reports x x x which PLDT submitted to the New York Stock Exchange
for the period 2003-2005, revealed that First Pacific and several other foreign entities breached the constitutional limit of 40 percent
ownership as early as 2003. x x x"7

Petitioner raises the following issues: (1) whether the consummation of the then impending sale of 111,415 PTIC shares to First Pacific
violates the constitutional limit on foreign ownership of a public utility; (2) whether public respondents committed grave abuse of discretion in
allowing the sale of the 111,415 PTIC shares to First Pacific; and (3) whether the sale of common shares to foreigners in excess of 40
percent of the entire subscribed common capital stock violates the constitutional limit on foreign ownership of a public utility.8

On 13 August 2007, Pablito V. Sanidad and Arno V. Sanidad filed a Motion for Leave to Intervene and Admit Attached
Petition-in-Intervention. In the Resolution of 28 August 2007, the Court granted the motion and noted the Petition-in-Intervention.

Petitioners-in-intervention "join petitioner Wilson Gamboa x x x in seeking, among others, to enjoin and/or nullify the sale by respondents of
the 111,415 PTIC shares to First Pacific or assignee." Petitioners-in-intervention claim that, as PLDT subscribers, they have a "stake in the
outcome of the controversy x x x where the Philippine Government is completing the sale of government owned assets in [PLDT],
unquestionably a public utility, in violation of the nationality restrictions of the Philippine Constitution."

The Issue

This Court is not a trier of facts. Factual questions such as those raised by petitioner,9 which indisputably demand a thorough examination of
the evidence of the parties, are generally beyond this Court’s jurisdiction. Adhering to this well-settled principle, the Court shall confine the
resolution of the instant controversy solely on the threshold and purely legal issue of whether the term "capital" in Section 11, Article XII of
the Constitution refers to the total common shares only or to the total outstanding capital stock (combined total of common and
non-voting preferred shares) of PLDT, a public utility.

The Ruling of the Court

The petition is partly meritorious.

Petition for declaratory relief treated as petition for mandamus

At the outset, petitioner is faced with a procedural barrier. Among the remedies petitioner seeks, only the petition for prohibition is within the
original jurisdiction of this court, which however is not exclusive but is concurrent with the Regional Trial Court and the Court of Appeals.
The actions for declaratory relief,10 injunction, and annulment of sale are not embraced within the original jurisdiction of the Supreme Court.
On this ground alone, the petition could have been dismissed outright.

While direct resort to this Court may be justified in a petition for prohibition,11 the Court shall nevertheless refrain from discussing the
grounds in support of the petition for prohibition since on 28 February 2007, the questioned sale was consummated when MPAH paid IPC
₱25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares.

However, since the threshold and purely legal issue on the definition of the term "capital" in Section 11, Article XII of the Constitution has
far-reaching implications to the national economy, the Court treats the petition for declaratory relief as one for mandamus.12

In Salvacion v. Central Bank of the Philippines,13 the Court treated the petition for declaratory relief as one for mandamus considering the
grave injustice that would result in the interpretation of a banking law. In that case, which involved the crime of rape committed by a foreign
tourist against a Filipino minor and the execution of the final judgment in the civil case for damages on the tourist’s dollar deposit with a local
bank, the Court declared Section 113 of Central Bank Circular No. 960, exempting foreign currency deposits from attachment, garnishment
or any other order or process of any court, inapplicable due to the peculiar circumstances of the case. The Court held that "injustice would
result especially to a citizen aggrieved by a foreign guest like accused x x x" that would "negate Article 10 of the Civil Code which provides
that ‘in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to
prevail.’" The Court therefore required respondents Central Bank of the Philippines, the local bank, and the accused to comply with the writ
of execution issued in the civil case for damages and to release the dollar deposit of the accused to satisfy the judgment.

In Alliance of Government Workers v. Minister of Labor,14 the Court similarly brushed aside the procedural infirmity of the petition for
declaratory relief and treated the same as one for mandamus. In Alliance, the issue was whether the government unlawfully excluded
petitioners, who were government employees, from the enjoyment of rights to which they were entitled under the law. Specifically, the
question was: "Are the branches, agencies, subdivisions, and instrumentalities of the Government, including government owned or
controlled corporations included among the four ‘employers’ under Presidential Decree No. 851 which are required to pay their employees x
x x a thirteenth (13th) month pay x x x ?" The Constitutional principle involved therein affected all government employees, clearly justifying a
relaxation of the technical rules of procedure, and certainly requiring the interpretation of the assailed presidential decree.

In short, it is well-settled that this Court may treat a petition for declaratory relief as one for mandamus if the issue involved has far-reaching
implications. As this Court held in Salvacion:

The Court has no original and exclusive jurisdiction over a petition for declaratory relief. However, exceptions to this rule have been
recognized. Thus, where the petition has far-reaching implications and raises questions that should be resolved, it may be treated
as one for mandamus.15 (Emphasis supplied)

In the present case, petitioner seeks primarily the interpretation of the term "capital" in Section 11, Article XII of the Constitution. He prays
that this Court declare that the term "capital" refers to common shares only, and that such shares constitute "the sole basis in determining
foreign equity in a public utility." Petitioner further asks this Court to declare any ruling inconsistent with such interpretation unconstitutional.

The interpretation of the term "capital" in Section 11, Article XII of the Constitution has far-reaching implications to the national economy. In
fact, a resolution of this issue will determine whether Filipinos are masters, or second class citizens, in their own country. What is at stake
here is whether Filipinos or foreigners will have effective control of the national economy. Indeed, if ever there is a legal issue that has
far-reaching implications to the entire nation, and to future generations of Filipinos, it is the threshhold legal issue presented in this case.

The Court first encountered the issue on the definition of the term "capital" in Section 11, Article XII of the Constitution in the case of
Fernandez v. Cojuangco, docketed as G.R. No. 157360.16 That case involved the same public utility (PLDT) and substantially the same
private respondents. Despite the importance and novelty of the constitutional issue raised therein and despite the fact that the petition
involved a purely legal question, the Court declined to resolve the case on the merits, and instead denied the same for disregarding the
hierarchy of courts.17 There, petitioner Fernandez assailed on a pure question of law the Regional Trial Court’s Decision of 21 February
2003 via a petition for review under Rule 45. The Court’s Resolution, denying the petition, became final on 21 December 2004.

The instant petition therefore presents the Court with another opportunity to finally settle this purely legal issue which is of transcendental
importance to the national economy and a fundamental requirement to a faithful adherence to our Constitution. The Court must forthwith
seize such opportunity, not only for the benefit of the litigants, but more significantly for the benefit of the entire Filipino people, to ensure, in
the words of the Constitution, "a self-reliant and independent national economy effectively controlled by Filipinos."18 Besides, in the light of
vague and confusing positions taken by government agencies on this purely legal issue, present and future foreign investors in this country
deserve, as a matter of basic fairness, a categorical ruling from this Court on the extent of their participation in the capital of public utilities
and other nationalized businesses.
Despite its far-reaching implications to the national economy, this purely legal issue has remained unresolved for over 75 years since the
1935 Constitution. There is no reason for this Court to evade this ever recurring fundamental issue and delay again defining the term
"capital," which appears not only in Section 11, Article XII of the Constitution, but also in Section 2, Article XII on co-production and joint
venture agreements for the development of our natural resources,19 in Section 7, Article XII on ownership of private lands,20 in Section 10,
Article XII on the reservation of certain investments to Filipino citizens,21 in Section 4(2), Article XIV on the ownership of educational
institutions,22 and in Section 11(2), Article XVI on the ownership of advertising companies.23

Petitioner has locus standi

There is no dispute that petitioner is a stockholder of PLDT. As such, he has the right to question the subject sale, which he claims to violate
the nationality requirement prescribed in Section 11, Article XII of the Constitution. If the sale indeed violates the Constitution, then there is a
possibility that PLDT’s franchise could be revoked, a dire consequence directly affecting petitioner’s interest as a stockholder.

More importantly, there is no question that the instant petition raises matters of transcendental importance to the public. The fundamental
and threshold legal issue in this case, involving the national economy and the economic welfare of the Filipino people, far outweighs any
perceived impediment in the legal personality of the petitioner to bring this action.

In Chavez v. PCGG,24 the Court upheld the right of a citizen to bring a suit on matters of transcendental importance to the public, thus:

In Tañada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the
enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a
citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special interest in the
result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right
then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be valid and enforceable
must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners’ legal standing, the Court declared
that the right they sought to be enforced ‘is a public right recognized by no less than the fundamental law of the land.’

Legaspi v. Civil Service Commission, while reiterating Tañada, further declared that ‘when a mandamus proceeding involves the
assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and,
therefore, part of the general ‘public’ which possesses the right.’

Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract for
the development, management and operation of the Manila International Container Terminal, ‘public interest [was] definitely involved
considering the important role [of the subject contract] . . . in the economic development of the country and the magnitude of the
financial consideration involved.’ We concluded that, as a consequence, the disclosure provision in the Constitution would constitute
sufficient authority for upholding the petitioner’s standing. (Emphasis supplied)

Clearly, since the instant petition, brought by a citizen, involves matters of transcendental public importance, the petitioner has the requisite
locus standi.

Definition of the Term "Capital" in

Section 11, Article XII of the 1987 Constitution

Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution mandates the Filipinization of public utilities, to wit:

Section 11. 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 in character or for
a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to
amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in
public utilities by the general public. 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. (Emphasis supplied)

The above provision substantially reiterates Section 5, Article XIV of the 1973 Constitution, thus:

Section 5. 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 the capital of which is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character
or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject
to amendment, alteration, or repeal by the National Assembly when the public interest so requires. The State shall encourage equity
participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise
shall be limited to their proportionate share in the capital thereof. (Emphasis supplied)
The foregoing provision in the 1973 Constitution reproduced Section 8, Article XIV of the 1935 Constitution, viz:

Section 8. 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 exclusive in
character or for a longer period than fifty years. No franchise or right shall be granted to any individual, firm, or corporation, except under the
condition that it shall be subject to amendment, alteration, or repeal by the Congress when the public interest so requires. (Emphasis
supplied)

Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional Commission, reminds us that the Filipinization provision in the
1987 Constitution is one of the products of the spirit of nationalism which gripped the 1935 Constitutional Convention.25 The 1987
Constitution "provides for the Filipinization of public utilities by requiring that any form of authorization for the operation of public utilities
should 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."26 The evident purpose of the citizenship
requirement is to prevent aliens from assuming control of public utilities, which may be inimical to the national interest.27 This specific
provision explicitly reserves to Filipino citizens control of public utilities, pursuant to an overriding economic goal of the 1987 Constitution: to
"conserve and develop our patrimony"28 and ensure "a self-reliant and independent national economy effectively controlled by Filipinos."29

Any citizen or juridical entity desiring to operate a public utility must therefore meet the minimum nationality requirement
prescribed in Section 11, Article XII of the Constitution. Hence, for a corporation to be granted authority to operate a public utility, at
least 60 percent of its "capital" must be owned by Filipino citizens.

The crux of the controversy is the definition of the term "capital." Does the term "capital" in Section 11, Article XII of the Constitution refer to
common shares or to the total outstanding capital stock (combined total of common and non-voting preferred shares)?

Petitioner submits that the 40 percent foreign equity limitation in domestic public utilities refers only to common shares because such shares
are entitled to vote and it is through voting that control over a corporation is exercised. Petitioner posits that the term "capital" in Section 11,
Article XII of the Constitution refers to "the ownership of common capital stock subscribed and outstanding, which class of shares alone,
under the corporate set-up of PLDT, can vote and elect members of the board of directors." It is undisputed that PLDT’s non-voting preferred
shares are held mostly by Filipino citizens.30 This arose from Presidential Decree No. 217,31 issued on 16 June 1973 by then President
Ferdinand Marcos, requiring every applicant of a PLDT telephone line to subscribe to non-voting preferred shares to pay for the investment
cost of installing the telephone line.32

Petitioners-in-intervention basically reiterate petitioner’s arguments and adopt petitioner’s definition of the term "capital."33
Petitioners-in-intervention allege that "the approximate foreign ownership of common capital stock of PLDT x x x already amounts to at least
63.54% of the total outstanding common stock," which means that foreigners exercise significant control over PLDT, patently violating the 40
percent foreign equity limitation in public utilities prescribed by the Constitution.

Respondents, on the other hand, do not offer any definition of the term "capital" in Section 11, Article XII of the Constitution. More
importantly, private respondents Nazareno and Pangilinan of PLDT do not dispute that more than 40 percent of the common shares of
PLDT are held by foreigners.

In particular, respondent Nazareno’s Memorandum, consisting of 73 pages, harps mainly on the procedural infirmities of the petition and the
supposed violation of the due process rights of the "affected foreign common shareholders." Respondent Nazareno does not deny
petitioner’s allegation of foreigners’ dominating the common shareholdings of PLDT. Nazareno stressed mainly that the petition "seeks to
divest foreign common shareholders purportedly exceeding 40% of the total common shareholdings in PLDT of their ownership
over their shares." Thus, "the foreign natural and juridical PLDT shareholders must be impleaded in this suit so that they can be heard."34
Essentially, Nazareno invokes denial of due process on behalf of the foreign common shareholders.

While Nazareno does not introduce any definition of the term "capital," he states that "among the factual assertions that need to be
established to counter petitioner’s allegations is the uniform interpretation by government agencies (such as the SEC),
institutions and corporations (such as the Philippine National Oil Company-Energy Development Corporation or PNOC-EDC) of
including both preferred shares and common shares in "controlling interest" in view of testing compliance with the 40%
constitutional limitation on foreign ownership in public utilities."35

Similarly, respondent Manuel V. Pangilinan does not define the term "capital" in Section 11, Article XII of the Constitution. Neither does he
refute petitioner’s claim of foreigners holding more than 40 percent of PLDT’s common shares. Instead, respondent Pangilinan focuses on
the procedural flaws of the petition and the alleged violation of the due process rights of foreigners. Respondent Pangilinan emphasizes in
his Memorandum (1) the absence of this Court’s jurisdiction over the petition; (2) petitioner’s lack of standing; (3) mootness of the petition;
(4) non-availability of declaratory relief; and (5) the denial of due process rights. Moreover, respondent Pangilinan alleges that the issue
should be whether "owners of shares in PLDT as well as owners of shares in companies holding shares in PLDT may be required to
relinquish their shares in PLDT and in those companies without any law requiring them to surrender their shares and also without notice and
trial."
Respondent Pangilinan further asserts that "Section 11, [Article XII of the Constitution] imposes no nationality requirement on the
shareholders of the utility company as a condition for keeping their shares in the utility company." According to him, "Section 11
does not authorize taking one person’s property (the shareholder’s stock in the utility company) on the basis of another party’s alleged
failure to satisfy a requirement that is a condition only for that other party’s retention of another piece of property (the utility company being
at least 60% Filipino-owned to keep its franchise)."36

The OSG, representing public respondents Secretary Margarito Teves, Undersecretary John P. Sevilla, Commissioner Ricardo Abcede, and
Chairman Fe Barin, is likewise silent on the definition of the term "capital." In its Memorandum37 dated 24 September 2007, the OSG also
limits its discussion on the supposed procedural defects of the petition, i.e. lack of standing, lack of jurisdiction, non-inclusion of interested
parties, and lack of basis for injunction. The OSG does not present any definition or interpretation of the term "capital" in Section 11, Article
XII of the Constitution. The OSG contends that "the petition actually partakes of a collateral attack on PLDT’s franchise as a public utility,"
which in effect requires a "full-blown trial where all the parties in interest are given their day in court."38

Respondent Francisco Ed Lim, impleaded as President and Chief Executive Officer of the Philippine Stock Exchange (PSE), does not also
define the term "capital" and seeks the dismissal of the petition on the following grounds: (1) failure to state a cause of action against Lim;
(2) the PSE allegedly implemented its rules and required all listed companies, including PLDT, to make proper and timely disclosures; and
(3) the reliefs prayed for in the petition would adversely impact the stock market.

In the earlier case of Fernandez v. Cojuangco, petitioner Fernandez who claimed to be a stockholder of record of PLDT, contended that the
term "capital" in the 1987 Constitution refers to shares entitled to vote or the common shares. Fernandez explained thus:

The forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of shares of stock
entitled to vote, i.e., common shares, considering that it is through voting that control is being exercised. x x x

Obviously, the intent of the framers of the Constitution in imposing limitations and restrictions on fully nationalized and partially nationalized
activities is for Filipino nationals to be always in control of the corporation undertaking said activities. Otherwise, if the Trial Court’s ruling
upholding respondents’ arguments were to be given credence, it would be possible for the ownership structure of a public utility corporation
to be divided into one percent (1%) common stocks and ninety-nine percent (99%) preferred stocks. Following the Trial Court’s ruling
adopting respondents’ arguments, the common shares can be owned entirely by foreigners thus creating an absurd situation wherein
foreigners, who are supposed to be minority shareholders, control the public utility corporation.

xxxx

Thus, the 40% foreign ownership limitation should be interpreted to apply to both the beneficial ownership and the controlling interest.

xxxx

Clearly, therefore, the forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of
shares of stock entitled to vote, i.e., common shares. Furthermore, ownership of record of shares will not suffice but it must be shown that
the legal and beneficial ownership rests in the hands of Filipino citizens. Consequently, in the case of petitioner PLDT, since it is already
admitted that the voting interests of foreigners which would gain entry to petitioner PLDT by the acquisition of SMART shares through the
Questioned Transactions is equivalent to 82.99%, and the nominee arrangements between the foreign principals and the Filipino owners is
likewise admitted, there is, therefore, a violation of Section 11, Article XII of the Constitution.

Parenthetically, the Opinions dated February 15, 1988 and April 14, 1987 cited by the Trial Court to support the proposition that the meaning
of the word "capital" as used in Section 11, Article XII of the Constitution allegedly refers to the sum total of the shares subscribed and
paid-in by the shareholder and it allegedly is immaterial how the stock is classified, whether as common or preferred, cannot stand in the
face of a clear legislative policy as stated in the FIA which took effect in 1991 or way after said opinions were rendered, and as clarified by
the above-quoted Amendments. In this regard, suffice it to state that as between the law and an opinion rendered by an administrative
agency, the law indubitably prevails. Moreover, said Opinions are merely advisory and cannot prevail over the clear intent of the framers of
the Constitution.

In the same vein, the SEC’s construction of Section 11, Article XII of the Constitution is at best merely advisory for it is the courts that finally
determine what a law means.39

On the other hand, respondents therein, Antonio O. Cojuangco, Manuel V. Pangilinan, Carlos A. Arellano, Helen Y. Dee, Magdangal B.
Elma, Mariles Cacho-Romulo, Fr. Bienvenido F. Nebres, Ray C. Espinosa, Napoleon L. Nazareno, Albert F. Del Rosario, and Orlando B.
Vea, argued that the term "capital" in Section 11, Article XII of the Constitution includes preferred shares since the Constitution does not
distinguish among classes of stock, thus:

16. The Constitution applies its foreign ownership limitation on the corporation’s "capital," without distinction as to classes of shares. x x x

In this connection, the Corporation Code – which was already in force at the time the present (1987) Constitution was drafted – defined
outstanding capital stock as follows:
Section 137. Outstanding capital stock defined. – The term "outstanding capital stock", as used in this Code, means the total shares of
stock issued under binding subscription agreements to subscribers or stockholders, whether or not fully or partially paid, except treasury
shares.

Section 137 of the Corporation Code also does not distinguish between common and preferred shares, nor exclude either class of shares, in
determining the outstanding capital stock (the "capital") of a corporation. Consequently, petitioner’s suggestion to reckon PLDT’s foreign
equity only on the basis of PLDT’s outstanding common shares is without legal basis. The language of the Constitution should be
understood in the sense it has in common use.

xxxx

17. But even assuming that resort to the proceedings of the Constitutional Commission is necessary, there is nothing in the Record of the
Constitutional Commission (Vol. III) – which petitioner misleadingly cited in the Petition x x x – which supports petitioner’s view that only
common shares should form the basis for computing a public utility’s foreign equity.

xxxx

18. In addition, the SEC – the government agency primarily responsible for implementing the Corporation Code, and which also has the
responsibility of ensuring compliance with the Constitution’s foreign equity restrictions as regards nationalized activities x x x – has
categorically ruled that both common and preferred shares are properly considered in determining outstanding capital stock and the
nationality composition thereof.40

We agree with petitioner and petitioners-in-intervention. The term "capital" in Section 11, Article XII of the Constitution refers only to
shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares,41 and not to the
total outstanding capital stock comprising both common and non-voting preferred shares.

The Corporation Code of the Philippines42 classifies shares as common or preferred, thus:

Sec. 6. Classification of shares. - The shares of stock of stock corporations may be divided into classes or series of shares, or both, any of
which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation: Provided,
That no share may be deprived of voting rights except those classified and issued as "preferred" or "redeemable" shares, unless
otherwise provided in this Code: Provided, further, That there shall always be a class or series of shares which have complete voting
rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided for in the articles of
incorporation: Provided, however, That banks, trust companies, insurance companies, public utilities, and building and loan associations
shall not be permitted to issue no-par value shares of stock.

Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the corporation in case of
liquidation and in the distribution of dividends, or such other preferences as may be stated in the articles of incorporation which are not
violative of the provisions of this Code: Provided, That preferred shares of stock may be issued only with a stated par value. The Board of
Directors, where authorized in the articles of incorporation, may fix the terms and conditions of preferred shares of stock or any series
thereof: Provided, That such terms and conditions shall be effective upon the filing of a certificate thereof with the Securities and Exchange
Commission.

Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the holder of such shares shall not be
liable to the corporation or to its creditors in respect thereto: Provided; That shares without par value may not be issued for a consideration
less than the value of five (₱5.00) pesos per share: Provided, further, That the entire consideration received by the corporation for its no-par
value shares shall be treated as capital and shall not be available for distribution as dividends.

A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional or legal requirements.

Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to
every other share.

Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall
nevertheless be entitled to vote on the following matters:

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;

3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property;

4. Incurring, creating or increasing bonded indebtedness;

5. Increase or decrease of capital stock;

6. Merger or consolidation of the corporation with another corporation or other corporations;

7. Investment of corporate funds in another corporation or business in accordance with this Code; and

8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in this
Code shall be deemed to refer only to stocks with voting rights.

Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the corporation.43 This is exercised
through his vote in the election of directors because it is the board of directors that controls or manages the corporation.44 In the absence of
provisions in the articles of incorporation denying voting rights to preferred shares, preferred shares have the same voting rights as common
shares. However, preferred shareholders are often excluded from any control, that is, deprived of the right to vote in the election of directors
and on other matters, on the theory that the preferred shareholders are merely investors in the corporation for income in the same manner
as bondholders.45 In fact, under the Corporation Code only preferred or redeemable shares can be deprived of the right to vote.46 Common
shares cannot be deprived of the right to vote in any corporate meeting, and any provision in the articles of incorporation restricting the right
of common shareholders to vote is invalid.47

Considering that common shares have voting rights which translate to control, as opposed to preferred shares which usually have no voting
rights, the term "capital" in Section 11, Article XII of the Constitution refers only to common shares. However, if the preferred shares also
have the right to vote in the election of directors, then the term "capital" shall include such preferred shares because the right to participate
in the control or management of the corporation is exercised through the right to vote in the election of directors. In short, the term
"capital" in Section 11, Article XII of the Constitution refers only to shares of stock that can vote in the election of directors.

This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of Filipino citizens the control and
management of public utilities. As revealed in the deliberations of the Constitutional Commission, "capital" refers to the voting stock or
controlling interest of a corporation, to wit:

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.48

xxxx

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.49 (Emphasis supplied)

Thus, 60 percent of the "capital" assumes, or should result in, "controlling interest" in the corporation. Reinforcing this interpretation of the
term "capital," as referring to controlling interest or shares entitled to vote, is the definition of a "Philippine national" in the Foreign
Investments Act of 1991, 50 to wit:

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." (Emphasis
supplied)

In explaining the definition of a "Philippine national," the Implementing Rules and Regulations of the Foreign Investments Act of 1991
provide:

b. "Philippine national" shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by the 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 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 the Philippine nationals; Provided, that where a corporation 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 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 corporation must be citizens of the Philippines, in order that the corporation shall be considered a Philippine
national. The control test shall be applied for this purpose.

Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding capital stock
whether fully paid or not, but only such stocks which are generally entitled to vote are considered.

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. Thus, stocks,
the voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or
Philippine nationals.

Individuals or juridical entities not meeting the aforementioned qualifications are considered as non-Philippine nationals.
(Emphasis supplied)

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]."
Under Section 10, Article XII of the Constitution, Congress may "reserve to citizens of the Philippines or to corporations or associations at
least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of
investments." Thus, in numerous laws Congress has reserved certain areas of investments to Filipino citizens or to corporations at least
sixty percent of the "capital" of which is owned by Filipino citizens. Some of these laws are: (1) Regulation of Award of Government
Contracts or R.A. No. 5183; (2) Philippine Inventors Incentives Act or R.A. No. 3850; (3) Magna Carta for Micro, Small and Medium
Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping Development Act or R.A. No. 7471; (5) Domestic Shipping Development Act
of 2004 or R.A. No. 9295; (6) Philippine Technology Transfer Act of 2009 or R.A. No. 10055; and (7) Ship Mortgage Decree or P.D. No.
1521. Hence, the term "capital" in Section 11, Article XII of the Constitution is also used in the same context in numerous laws reserving
certain areas of investments to Filipino citizens.

To construe broadly the term "capital" as the total outstanding capital stock, including both common and non-voting preferred shares,
grossly contravenes the intent and letter of the Constitution that the "State shall develop a self-reliant and independent national economy
effectively controlled by Filipinos." A broad definition unjustifiably disregards who owns the all-important voting stock, which necessarily
equates to control of the public utility.

We shall illustrate the glaring anomaly in giving a broad definition to the term "capital." Let us assume that a corporation has 100 common
shares owned by foreigners and 1,000,000 non-voting preferred shares owned by Filipinos, with both classes of share having a par value of
one peso (₱1.00) per share. Under the broad definition of the term "capital," such corporation would be considered compliant with the 40
percent constitutional limit on foreign equity of public utilities since the overwhelming majority, or more than 99.999 percent, of the total
outstanding capital stock is Filipino owned. This is obviously absurd.

In the example given, only the foreigners holding the common shares have voting rights in the election of directors, even if they hold only
100 shares. The foreigners, with a minuscule equity of less than 0.001 percent, exercise control over the public utility. On the other hand,
the Filipinos, holding more than 99.999 percent of the equity, cannot vote in the election of directors and hence, have no control over the
public utility. This starkly circumvents the intent of the framers of the Constitution, as well as the clear language of the Constitution, to place
the control of public utilities in the hands of Filipinos. It also renders illusory the State policy of an independent national economy effectively
controlled by Filipinos.

The example given is not theoretical but can be found in the real world, and in fact exists in the present case.

Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of directors. PLDT’s Articles of Incorporation
expressly state that "the holders of Serial Preferred Stock shall not be entitled to vote at any meeting of the stockholders for the
election of directors or for any other purpose or otherwise participate in any action taken by the corporation or its stockholders, or to
receive notice of any meeting of stockholders."51

On the other hand, holders of common shares are granted the exclusive right to vote in the election of directors. PLDT’s Articles of
Incorporation52 state that "each holder of Common Capital Stock shall have one vote in respect of each share of such stock held by him on
all matters voted upon by the stockholders, and the holders of Common Capital Stock shall have the exclusive right to vote for the
election of directors and for all other purposes."53

In short, only holders of common shares can vote in the election of directors, meaning only common shareholders exercise control over
PLDT. Conversely, holders of preferred shares, who have no voting rights in the election of directors, do not have any control over PLDT. In
fact, under PLDT’s Articles of Incorporation, holders of common shares have voting rights for all purposes, while holders of preferred shares
have no voting right for any purpose whatsoever.

It must be stressed, and respondents do not dispute, that foreigners hold a majority of the common shares of PLDT. In fact, based on
PLDT’s 2010 General Information Sheet (GIS),54 which is a document required to be submitted annually to the Securities and Exchange
Commission,55 foreigners hold 120,046,690 common shares of PLDT whereas Filipinos hold only 66,750,622 common shares.56 In other
words, foreigners hold 64.27% of the total number of PLDT’s common shares, while Filipinos hold only 35.73%. Since holding a majority of
the common shares equates to control, it is clear that foreigners exercise control over PLDT. Such amount of control unmistakably exceeds
the allowable 40 percent limit on foreign ownership of public utilities expressly mandated in Section 11, Article XII of the Constitution.

Moreover, the Dividend Declarations of PLDT for 2009,57 as submitted to the SEC, shows that per share the SIP58 preferred shares earn a
pittance in dividends compared to the common shares. PLDT declared dividends for the common shares at ₱70.00 per share, while the
declared dividends for the preferred shares amounted to a measly ₱1.00 per share.59 So the preferred shares not only cannot vote in the
election of directors, they also have very little and obviously negligible dividend earning capacity compared to common shares.

As shown in PLDT’s 2010 GIS,60 as submitted to the SEC, the par value of PLDT common shares is ₱5.00 per share, whereas the par value
of preferred shares is ₱10.00 per share. In other words, preferred shares have twice the par value of common shares but cannot elect
directors and have only 1/70 of the dividends of common shares. Moreover, 99.44% of the preferred shares are owned by Filipinos while
foreigners own only a minuscule 0.56% of the preferred shares.61 Worse, preferred shares constitute 77.85% of the authorized capital stock
of PLDT while common shares constitute only 22.15%.62 This undeniably shows that beneficial interest in PLDT is not with the non-voting
preferred shares but with the common shares, blatantly violating the constitutional requirement of 60 percent Filipino control and Filipino
beneficial ownership in a public utility.
The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipinos in accordance with the
constitutional mandate. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights,
is constitutionally required for the State’s grant of authority to operate a public utility. The undisputed fact that the PLDT preferred shares,
99.44% owned by Filipinos, are non-voting and earn only 1/70 of the dividends that PLDT common shares earn, grossly violates the
constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership of a public utility.

In short, Filipinos hold less than 60 percent of the voting stock, and earn less than 60 percent of the dividends, of PLDT. This
directly contravenes the express command in Section 11, Article XII of the Constitution that "[n]o franchise, certificate, or any other form of
authorization for the operation of a public utility shall be granted except to x x x corporations x x x organized under the laws of the
Philippines, at least sixty per centum of whose capital is owned by such citizens x x x."

To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of shares exercises the sole right to vote in the election
of directors, and thus exercise control over PLDT; (2) Filipinos own only 35.73% of PLDT’s common shares, constituting a minority of the
voting stock, and thus do not exercise control over PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no voting rights; (4)
preferred shares earn only 1/70 of the dividends that common shares earn;63 (5) preferred shares have twice the par value of common
shares; and (6) preferred shares constitute 77.85% of the authorized capital stock of PLDT and common shares only 22.15%. This kind of
ownership and control of a public utility is a mockery of the Constitution.

Incidentally, the fact that PLDT common shares with a par value of ₱5.00 have a current stock market value of ₱2,328.00 per share,64 while
PLDT preferred shares with a par value of ₱10.00 per share have a current stock market value ranging from only ₱10.92 to ₱11.06 per
share,65 is a glaring confirmation by the market that control and beneficial ownership of PLDT rest with the common shares, not with the
preferred shares.

Indisputably, construing the term "capital" in Section 11, Article XII of the Constitution to include both voting and non-voting shares will result
in the abject surrender of our telecommunications industry to foreigners, amounting to a clear abdication of the State’s constitutional duty to
limit control of public utilities to Filipino citizens. Such an interpretation certainly runs counter to the constitutional provision reserving certain
areas of investment to Filipino citizens, such as the exploitation of natural resources as well as the ownership of land, educational
institutions and advertising businesses. The Court should never open to foreign control what the Constitution has expressly reserved to
Filipinos for that would be a betrayal of the Constitution and of the national interest. The Court must perform its solemn duty to defend and
uphold the intent and letter of the Constitution to ensure, in the words of the Constitution, "a self-reliant and independent national economy
effectively controlled by Filipinos."

Section 11, Article XII of the Constitution, like other provisions of the Constitution expressly reserving to Filipinos specific areas of
investment, such as the development of natural resources and ownership of land, educational institutions and advertising business, is
self-executing. There is no need for legislation to implement these self-executing provisions of the Constitution. The rationale why these
constitutional provisions are self-executing was explained in Manila Prince Hotel v. GSIS,66 thus:

x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now is
that all provisions of the constitution are self-executing. If the constitutional provisions are treated as requiring legislation instead of
self-executing, the legislature would have the power to ignore and practically nullify the mandate of the fundamental law. This can be
cataclysmic. That is why the prevailing view is, as it has always been, that —

. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-executing. . . . Unless the contrary is
clearly intended, the provisions of the Constitution should be considered self-executing, as a contrary rule would give the
legislature discretion to determine when, or whether, they shall be effective. These provisions would be subordinated to the will of the
lawmaking body, which could make them entirely meaningless by simply refusing to pass the needed implementing statute. (Emphasis
supplied)

In Manila Prince Hotel, even the Dissenting Opinion of then Associate Justice Reynato S. Puno, later Chief Justice, agreed that
constitutional provisions are presumed to be self-executing. Justice Puno stated:

Courts as a rule consider the provisions of the Constitution as self-executing, rather than as requiring future legislation for their enforcement.
The reason is not difficult to discern. For if they are not treated as self-executing, the mandate of the fundamental law ratified by the
sovereign people can be easily ignored and nullified by Congress. Suffused with wisdom of the ages is the unyielding rule that
legislative actions may give breath to constitutional rights but congressional inaction should not suffocate them.

Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests, searches and seizures, the rights of a person under
custodial investigation, the rights of an accused, and the privilege against self-incrimination. It is recognized that legislation is unnecessary
to enable courts to effectuate constitutional provisions guaranteeing the fundamental rights of life, liberty and the protection of property. The
same treatment is accorded to constitutional provisions forbidding the taking or damaging of property for public use without just
compensation. (Emphasis supplied)

Thus, in numerous cases,67 this Court, even in the absence of implementing legislation, applied directly the provisions of the 1935, 1973 and
1987 Constitutions limiting land ownership to Filipinos. In Soriano v. Ong Hoo,68 this Court ruled:
x x x As the Constitution is silent as to the effects or consequences of a sale by a citizen of his land to an alien, and as both the citizen and
the alien have violated the law, none of them should have a recourse against the other, and it should only be the State that should be
allowed to intervene and determine what is to be done with the property subject of the violation. We have said that what the State should do
or could do in such matters is a matter of public policy, entirely beyond the scope of judicial authority. (Dinglasan, et al. vs. Lee Bun Ting, et
al., 6 G. R. No. L-5996, June 27, 1956.) While the legislature has not definitely decided what policy should be followed in cases of
violations against the constitutional prohibition, courts of justice cannot go beyond by declaring the disposition to be null and
void as violative of the Constitution. x x x (Emphasis supplied)

To treat Section 11, Article XII of the Constitution as not self-executing would mean that since the 1935 Constitution, or over the last 75
years, not one of the constitutional provisions expressly reserving specific areas of investments to corporations, at least 60 percent of the
"capital" of which is owned by Filipinos, was enforceable. In short, the framers of the 1935, 1973 and 1987 Constitutions miserably failed to
effectively reserve to Filipinos specific areas of investment, like the operation by corporations of public utilities, the exploitation by
corporations of mineral resources, the ownership by corporations of real estate, and the ownership of educational institutions. All the
legislatures that convened since 1935 also miserably failed to enact legislations to implement these vital constitutional provisions that
determine who will effectively control the national economy, Filipinos or foreigners. This Court cannot allow such an absurd interpretation of
the Constitution.

This Court has held that the SEC "has both regulatory and adjudicative functions."69 Under its regulatory functions, the SEC can be
compelled by mandamus to perform its statutory duty when it unlawfully neglects to perform the same. Under its adjudicative or
quasi-judicial functions, the SEC can be also be compelled by mandamus to hear and decide a possible violation of any law it administers or
enforces when it is mandated by law to investigate such violation.1awphi1

Under Section 17(4)70 of the Corporation Code, the SEC has the regulatory function to reject or disapprove the Articles of Incorporation of
any corporation where "the required percentage of ownership of the capital stock to be owned by citizens of the Philippines has not
been complied with as required by existing laws or the Constitution." Thus, the SEC is the government agency tasked with the
statutory duty to enforce the nationality requirement prescribed in Section 11, Article XII of the Constitution on the ownership of public
utilities. This Court, in a petition for declaratory relief that is treated as a petition for mandamus as in the present case, can direct the SEC to
perform its statutory duty under the law, a duty that the SEC has apparently unlawfully neglected to do based on the 2010 GIS that
respondent PLDT submitted to the SEC.

Under Section 5(m) of the Securities Regulation Code,71 the SEC is vested with the "power and function" to "suspend or revoke, after
proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of
the grounds provided by law." The SEC is mandated under Section 5(d) of the same Code with the "power and function" to "investigate x
x x the activities of persons to ensure compliance" with the laws and regulations that SEC administers or enforces. The GIS that all
corporations are required to submit to SEC annually should put the SEC on guard against violations of the nationality requirement
prescribed in the Constitution and existing laws. This Court can compel the SEC, in a petition for declaratory relief that is treated as a
petition for mandamus as in the present case, to hear and decide a possible violation of Section 11, Article XII of the Constitution in view of
the ownership structure of PLDT’s voting shares, as admitted by respondents and as stated in PLDT’s 2010 GIS that PLDT submitted to
SEC.

WHEREFORE, we PARTLY GRANT the petition and rule that the term "capital" in Section 11, Article XII of the 1987 Constitution refers only
to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares, and not to the total
outstanding capital stock (common and non-voting preferred shares). Respondent Chairperson of the Securities and Exchange Commission
is DIRECTED to apply this definition of the term "capital" in determining the extent of allowable foreign ownership in respondent Philippine
Long Distance Telephone Company, and if there is a violation of Section 11, Article XII of the Constitution, to impose the appropriate
sanctions under the law.

SO ORDERED.
CASE #2:

G.R. No. L-5458 September 16, 1953

LUZON STEVEDORING CO., INC., and VISAYAN STEVEDORE TRANSPORTATION CO., v. THE PUBLIC SERVICES COMMISSION
and THE PHILIPPINE SHIPOWNERS' ASSOCIATION

Perkins, Ponce Enrile, Contreras and Enrique Belo for petitioners.

TUASON, J.:

Petitioners apply for review of a decision of the Public Service Commission restraining them "from further operating their watercraft to
transport goods for hire or compensation between points in the Philippines until the rates they propose to charge are approved by this
Commission."

The facts are summarized by the Commission as follows:.

... respondents are corporations duly organized and existing under the laws of the Philippines, mainly engaged in the stevedoring or
lighterage and harbor towage business. At the same time, they are engaged in interisland service which consists of hauling cargoes such as
sugar, oil, fertilizer and other commercial commodities which are loaded in their barges and towed by their tugboats from Manila to various
points in the Visayan Islands, Particularly in the Provinces of Negros Occidental and Capiz, and from said places to manila. For this service
respondents charge freightage on a unit price with rates ranging from P0.50 to P0.62 1/2 per bag or picul of sugar loaded or on a unit price
per ton in the case of fertilizer or sand. There is no fixed route in the transportation of these cargoes, the same being left at the indication of
the owner or shipper of the goods. the barge and the tugboats are manned by the crew of respondents and, in case of damage to the goods
in transit caused by the negligence of said crews, respondents are liable therefore. The service for which respondents charge freightage
covers the hauling or carriage of the goods from the point of embarkation to the point of disembarkation either in Manila or in any point in the
Visayan Islands, as the case may be.

The evidence also sufficiently establishes that respondents are regularly engaged in this hauling business serving a limited portion of the
public. Respondent Luzon Stevedoring Company, Inc., has among its regular customers the San Miguel Glass Factory, PRATRA, Shell Co.,
of P. I., Ltd., Standard Oil Co., of New York and Philippine-Hawaiian; while respondent Visayan Stevedore transportation Co., has among its
regular customers the Insular Lumber, Shell Company, Ltd., Kim Kee Chua Yu & Co., PRATRA and Luzon Merchandising Corporation.
During the period from January, 1949 and up to the present, respondents Luzon Stevedoring Co. Inc., has been rendering to PRATRA
regularly and on many occasions such service by carrying fertilizer from Manila to various points in the Provinces of Negros Occidental and
Capiz, such as Hinigatan, Silay, Fabrica, Marayo, Mambaquid, Victorias and Pilar, and on the return services, as evidenced by Exhibits A,
A-1, A-2, A-3 and A-4, respondent Luzon Stevedoring Company, Inc., charged PRATRA at the rate of P0.60 per picul or bag of sugar and,
according to Mr. Mauricio Rodriquez, chief of the division in charge of sugar and fertilizer of the PRATRA, for the transportation of fertilizer,
this respondent charged P12 per metric ton. During practically the same period, respondent Visayan Stevedore Transportation Company
transported in its barges and towed by its tugboats sugar for Kim Kee Chua Yu & Company coming from Victorias, Marayo and Pilar to
Manila, and for Luzon Merchandising Corporation, from Hinigaran, Bacolod, Marayo and Victorias to Manila. For such service respondent
Visayan Stevedore Transportation Company charge Kim Kee Chua Yu Company for freightage P0.60 per picul or bag as shown in Exhibits
C, C-1, C-2, C-3, C-4, C-5, C-6, C-7 and C-8, and Luzon Merchandising Corporation was also charged for the same service and at the
same rate as shown in Exhibits B, B-1 and B-2.

It was upon these findings that the Commission made the order now sought to be reviewed, upon complaint of the Philippine Shipowners'
Association charging that the then respondent were engaged in the transportation of cargo in the Philippines for hire or compensation
without authority or approval of the Commission, having adopted, fixed and collected freight charges at the rate of P0.60 per bag or picul,
particularly sugar, loaded and transported in their lighters and towed by their tugboats between different points in the Province of Negros
Occidental and Manila, which said rates resulted in ruinous competition with complainant..

Section 13 (b) of the Public Service Law (Commonwealth Act No. 146) defines public service thus:

The term "public service" includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purpose any
common carrier, railroad, street railway, traction railway, subway, motor vehicle, either for freight or passenger, or both, with or without fixed
route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines,
ferries, and small water craft, engaged in the transportation of passengers and freight, shipyard, marine railway, marine repair shop,
warehouse, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, sewerage, gas, electric light, hear and power, water
supply and power, petroleum, sewerage system, telephone, wire or wireless telegraph system and broadcasting radio stations.

It is not necessary, under this definition, that one holds himself out as serving or willing to serve the public in order to be considered public
service. .
In Luzon Brokerage Company vs. Public Service Commission (40 Off. Gaz., 7th Supplement, p. 271), this court declared that "Act 454 is
clear in including in the definition of a public service that which is rendered for compensation, although limited exclusively to the customers
of the petitioner."

In that case, the Luzon Brokerage Company, a customs broker, had been receiving, depositing and delivering goods discharged from ships
at the pier to its customers. As here, the Luzon Brokerage was then rendering transportation service for compensation to a limited clientele,
not to the public at large..

In the United States where, it is said, there is no fixed definition of what constitutes public service or public utility it is also held that it is no
always necessary, in order to be a public service, that an organization be dedicated to public use, i.e., ready and willing to serve the public
as a class. It is only necessary that it must in some way be impressed with a public interest; and whether the operation of a given business
is a public utility depends upon whether or not the service rendered by it is a public as a class. It is only necessary that it must in some way
be impressed with a public interest; and whether the operation of a given business is a public utility depends upon whether or not the
service rendered by it is of a public character and of public consequence and concern. (51 C. J. 5.) Thus, a business may be affected with
public interest and regulated for public good although not under any duty to serve the public. (43 Am. Jur., 572.) .

It can scarcely be denied that the contracts between the owners of the barges and the owners of the cargo at bar were ordinary contracts of
transportation and not of lease. Petitioners' watercraft was manned entirely by crews in their employ and payroll, and the operation of the
said craft was under their direction and control, the customers assuming no responsibility for the goods handled on the barges. The great
preponderance of the evidence contradicts the assertion that there was any physical or symbolic conveyance of the possessing of the
tugboats and barges to the shippers. Whether the agreements were written or verbal, the manner of payment of freight charges, the
question who loaded and unloaded the cargo, the propriety of the admission of certain receipts in evidence, etc., to all of which the parties
have given much attention — these are matters of form which do not alter the essential nature of the relationship of the parties to the
transactions as revealed by the fundamental facts to record..

It is contended that "if the Public Service Act were to be construed in such manner as to include private lease contracts, said law would be
unconstitutional," seemingly implying that, to prevent the law from being in contravention of the Constitution, it should be so read as to
embrace only those persons and companies that are in fact engaged in public service" with its corresponding qualification of an offer to
serve indiscriminately the public.".

It has been already shown that the petitioners' lighters and tugboats were not leased, but used to carry goods for compensation at a fixed
rate for a fixed weight. At the very least, they were hired, hired in the sense that the shippers did not have directions, control and
maintenance thereof, which is a characteristic feature of lease..

On the second proposition, the Public Service Commission has, in our judgment, interpreted the law in accordance with legislative intent.
Commonwealth Act No. 146 declares in unequivocal language that an enterprise of any of the kinds therein enumerated is a public service if
conducted for hire or compensation even if the operator deals only with a portion of the public or limited clientele.

It has been seen that public utility, even where the term is not defined by statute, is not determined by the number of people actually served.
Nor does the mere fact that service is rendered only under contract prevent a company from being a public utility. (43 Am. Jur., 573.) on the
other hand, casual or incidental service devoid of public character and interest, it must be admitted, is not brought within the category of
public utility. The demarcation line is not susceptible of exact description or definition, each case being governed by its peculiar
circumstances..

"It is impossible to lay down any general rule on the subject whether the rendering of incidental service to member of the public by an
individual or corporation whose principal business is of a different nature constitute cases are in conflict, as the question involved depends
on such factor as the extent of service, whether such person or company has held himself or itself out as ready to serve the public or a
portion of the public generally, or in other ways conducted himself or itself as a public utility. In several cases, it has been held that the
incidental service rendered to others constituted such person or corporation a public utility, but in other cases, a contrary decision has been
reached." (43 Am. Jur., 573.).

The transportation service which was the subject of complaint was not casual or incidental. It had been carried on regularly for two years at
almost uniform rates of charges. Although the number of the petitioners' customers was limited, the value of goods transported was not
inconsiderable. Petitioners did not have the same customers all the time embraced in the complaint, and there was no reason to believe that
they would not accept, and there was nothing to prevent them from accepting, new customers that might be willing to avail of their service to
the extent of their capacity. Upon the well-established facts as applied to the plain letter of Commonwealth Act No. 146, we are of the
opinion that the Public Service Commission's order does not invade private rights of property or contract..

In at least one respect, the business complained of was a matter of public concern. The Public Service Law was enacted not only to protect
the public against unreasonable charges and poor, inefficient service, but also to prevent ruinous competition. That, we venture to say, is the
main purpose in bringing under the jurisdiction of the Public Service Commission motor vehicles, other means of transportation, ice plants,
etc., which cater to a limited portion of the public under private agreements. To the extent that such agreement may tent to wreck or impair
the financial stability and efficiency of public utilities who do offer service to the public in general, they are affected with interest and come
within the police power of the state to regulate..
Just as the legislature may not "declare a company or enterprises to be a public utility when it is not inherently such," a public utility may not
evade control and supervision of its operation by the government by selecting its customers under the guise of private
transactions.1âwphïl.nêt

For the rest, the constitutionality of Commonwealth Act No. 146 was upheld, implicitly in Luzon Brokerage Company vs. Public Service
Commission, supra, and explicitly in Pangasinan Transportation Company vs. Public Service Commission (70 Phil., 221).

Where there serious doubts, the court should still be reluctant to invalidate the Public Service Law of any provision thereof. Although the
legislature can not, by its mere declaration, make something a utility which is not a fact such, "the public policy of the state as announced by
the legislature will be given due weight, and the determination of the legislature that a particular business is subject to the regulatory power,
because the public welfare is dependent upon its proper conduct and regulation, will not lightly be disregarded by the court." (51 C. J. 5.).

The objection to the designation of Attorney Aspillera as commissioner to take the evidence was tardy. It was made for the first time after
decision was rendered, following a prolonged hearing in which the petitioners cross-examined the complainant's witnesses and presented
their own evidence..

The point is procedural, not jurisdictional, and may be waived by express consent or acquiescence. So it was held in Everett Steamship
Corporation vs. Chua Hiong, 90 Phil. 64 and La Paz Ice Plant and Cold Storage Company vs. Commission de Utilidades Publicas et al., 89
Phil., 109..

Upon the foregoing considerations, the appealed order of the Public Service Commission is affirmed, with costs against the petitioners. .

Paras, C. J., Pablo, Bengzon, Padilla, Montemayor, Reyes, Jugo, Bautista Angelo and Labrador, JJ., concur.
CASE #3:

Munn v. Illinois - 94 U.S. 113 (1876)

RULE:

A mere common law regulation of trade or business may be changed by statute. A person has no property, no vested interest, in any rule of
the common law. That is only one of the forms of municipal law, and is no more sacred than any other. Rights of property which have been
created by the common law cannot be taken away without due process; but the law itself, as a rule of conduct, may be changed at the will,
or even at the whim, of the legislature, unless prevented by constitutional limitations.

FACTS:

Defendants were charged with operating a public warehouse in Chicago in which they unlawfully transacted business without procuring a
license under An Act to Regulate Public Warehouses and the Warehousing and Inspection of Grain, and to Give Effect to Ill. Const. art. XIII
(Grain Act). The lower court held that defendants had complied except in two respects: first, they had not complied with licensing
requirements; second, they had charged rates higher than those fixed by § 15 of the Grain Act. Defendants appealed, and the state
supreme court affirmed. Defendants appealed to the United States Supreme Court, arguing that the Grain Act was unconstitutional. The
Court held that the statute was a legitimate regulation of business under state law as the state was free to regulate commerce within its own
boundaries even if it might incidentally become connected with interstate commerce. The Court affirmed the lower court's ruling.

ISSUE:

Is the contested statute repugnant to the Constitution of the United States?

ANSWER:

No.

CONCLUSION:

The Court held that the statute in question was not unconstitutional because defendants were engaged in a public business to such an
extent that the state was permitted to regulate, and the statute did not impermissibly interfere with the Commerce Clause of Constitution
because the state's regulation of commerce was within its own boundaries.
CASE #4:

G.R. No. 141314 April 9, 2003

REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ENERGY REGULATORY BOARD, petitioner,

vs.

MANILA ELECTRIC COMPANY, respondent.

PUNO, J.:

The business and operations of a public utility are imbued with public interest. In a very real sense, a public utility is engaged in public
service-- providing basic commodities and services indispensable to the interest of the general public. For this reason, a public utility
submits to the regulation of government authorities and surrenders certain business prerogatives, including the amount of rates that may be
charged by it. It is the imperative duty of the State to interpose its protective power whenever too much profits become the priority of public
utilities.

For resolution is the Motion for Reconsideration filed by respondent Manila Electric Company (MERALCO) on December 5, 2002 from the
decision of this Court dated November 15, 2002 reducing MERALCO's rate adjustment in the amount of P0.017 per kilowatthour (kwh) for
its billing cycles beginning 1994 and further directing MERALCO to credit the excess average amount of P0.167 per kwh to its customers
starting with MERALCO's billing cycles beginning February 1994.1

First, we leapfrog through the facts. On December 23, 1993, MERALCO filed with the Energy Regulatory Board (ERB) an application for
revised rates, with an average increase of P0.21 per kwh in its distribution charge. On January 28, 1994 the ERB granted a provisional
increase of P0.184 per kwh subject to the condition that in the event the ERB determines that MERALCO is entitled to a lesser increase in
rates, all excess amounts collected by MERALCO shall be refunded to its customers or credited in their favor. The Commission on Audit
(COA) conducted an examination of the books of accounts and records of MERALCO and thereafter recommended, among others, that: (1)
income taxes paid by MERALCO should not be included as part of MERALCO's operating expenses and (2) the "net average investment
method" or the "number of months use method" should be applied in determining the proportionate value of the properties used by
MERALCO during the test year.

In its decision dated February 16, 1998, the ERB adopted the recommendations of the COA and authorized MERALCO to adopt a rate
adjustment of P0.017 per kilowatthour (kwh) for its billing cycles beginning 1994. The ERB further directed MERALCO to credit the excess
average amount of P0.167 per kwh to its customers starting with MERALCO's billing cycles beginning February 1994. The said ruling of the
ERB was affirmed by this Court in its decision dated November 15, 2002.

In its Motion for Reconsideration, respondent MERALCO contends that: (1) the deduction of income tax from revenues allowed for rate
determination of public utilities is part of its constitutional right to property; (2) it correctly used the "average investment method" or the
"simple average" in computing the value of its properties entitled to a return instead of the "net average investment method" or the "number
of months use method"; and (3) the decision of the ERB ordering the refund of P0.167 per kwh to its customers should not be given
retroactive effect.2

The Republic of the Philippines through the ERB, now Energy Regulatory Commission (ERC), represented by the Office of the Solicitor
General, filed its Comment on March 7, 2003. Surprisingly, in its Comment, the ERC proffered a divergent view from the Office of the
Solicitor General. The ERC submits that income taxes are not operating expenses but are reasonable costs that may be recoverable from
the consuming public. While the ERC admits that "there is still no categorical determination on whether income tax should indeed be
deducted from revenues of a public utility," it agrees with MERALCO that to disallow public utilities from recovering its income tax payments
will effectively lower the return on rate base enjoyed by a public utility to 8%. The ERC, however, agrees with this Court's ruling that the use
of the "net average investment method" or the "number of months use method" is not unreasonable.3

The Office of the Solicitor General, under its solemn duty to protect the interests of the people, defended the thesis that income tax
payments by a public utility should not be recovered as costs from the consuming public. It contended that: (1) the foreign jurisprudence
cited by MERALCO in support of its position is not applicable in this jurisdiction; (2) MERALCO was given a fair rate of return; (3) the COA
and the ERB followed the National Accounting and Auditing Manual which expressly disallows the treatment of income tax as operating
expense; (4) Executive Order No. 72 does not grant electric utilities the privilege of treating income tax as operating expense; (5) the COA
and the ERB have been consistent in not allowing income tax as part of operating expenses; (6) ERB decisions allowing the application of a
tax recovery clause are inapropos; (7) allowing MERALCO to treat income tax as an operating expense would set a dangerous precedent;
(8) assuming that the disallowance of income tax as operating expense would discourage foreign investors and lenders, the government is
not precluded from enacting laws and instituting measures to lure them back; and (9) the findings and conclusions of the ERB carry great
weight and should be binding on the courts in the absence of grave abuse of discretion. The Solicitor General agrees with the ERC that the
"net average investment method" is a reasonable method for property valuation. Finally, the Solicitor General argues that the ERB decision
may be applied retroactively and the use of a test period to determine the rate base and allowable rates to be collected by a public utility is
an accepted practice.4
We shall discuss the main issues in seriatim.

MERALCO argues that deduction of all kinds of taxes, including income tax, from the gross revenues of a public utility is firmly entrenched in
American jurisprudence. It contends that the Public Service Act (Commonwealth Act No. 146) was patterned after Act 2306 of the Philippine
Commission, which, in turn, was borrowed from American state public utility laws such as the New Jersey Public Utility Act. Hence, it
maintains that American jurisprudence on the inclusion of income taxes as a lawful charge to operating expenses should be controlling. It
cites the rule on statutory construction that a statute adopted from a foreign country will be presumed to be adopted with the construction
placed upon it by the courts of that country before its adoption.5

We are not persuaded. American decisions and authorities are not per se controlling in this jurisdiction. At best, they are persuasive for no
court holds a patent on correct decisions. Our laws must be construed in accordance with the intention of our own lawmakers and such
intent may be deduced from the language of each law and the context of other local legislation related thereto. More importantly, they must
be construed to serve our own public interest which is the be-all and the end-all of all our laws. And it need not be stressed that our public
interest is distinct and different from others.

Rate regulation calls for a careful consideration of the totality of facts and circumstances material to each application for an upward rate
revision. Rate regulators should strain to strike a balance between the clashing interests of the public utility and the consuming public and
the balance must assure a reasonable rate of return to public utilities without being unreasonable to the consuming public. What is
reasonable or unreasonable depends on a calculus of changing circumstances that ebb and flow with time. Yesterday cannot govern today,
no more than today can determine tomorrow.

Prescinding from these premises, we reject MERALCO's insistence that the non-inclusion of income tax payments as a legitimate operating
expense will deny public utilities a fair return of their investment. This stubborn stance is belied by the report submitted by the COA on the
audit conducted on MERALCO's books of accounts and the findings of the ERB.6

Upon the instructions of the ERB, the COA conducted an audit of the operations of MERALCO covering the period from February 1, 1994 to
January 31, 1995, or the period immediately after the implementation of the provisional rate increase.7 Hence, amounts culled by the COA
from its examination of the books of MERALCO already included the provisional rate increase of P0.184 granted by the ERB.

From the figures submitted by the COA, the ERB was able to determine that MERALCO derived excess revenue during the test year in the
amount of P2,448,378,000.8 This means that during the test year, and after the rates were increased by P0.184, MERALCO earned
P2,448,378,000 or 8.15% more than the amount it should have earned at a 12% rate of return on rate base. Accordingly, based on this
amount of excess revenue, the ERB determined that the provisional rate granted by it to MERALCO was P0.167 per kwh more than the
amount MERALCO ought to charge its customers to obtain the prescribed 12% rate of return on rate base. Thus, the ERB correspondingly
lowered the provisional increase by P0.167 per kwh and ordered MERALCO to increase its rates at a reduced amount of P0.017 per kwh,
computed as follows:

(REFER TO THE TABLE ONLINE)

In fact, even if MERALCO's income tax liability would be included as an operating expense, MERALCO would still enjoy excess revenue of
P312,738,000.00 or 1.04% above the authorized rate of return of 12%. Based on its audit, the COA determined that the provision for income
tax liability of MERALCO amounted to P2,135,639,000.00.12 Thus, even if such amount of income tax liability would be included as
operating expense, the amount of excess revenue earned by MERALCO during the test year would be more than sufficient to cover the
additional income tax expense. Thus:

(REFER TO THE TABLE ONLINE)

It is crystal clear, therefore, that even if income tax is to be included as an operating expense and hence, recoverable from the consuming
public, MERALCO would still enjoy a rate of return that is above the authorized rate of 12%. Public utilities cannot be allowed to overcharge
at the expense of the public and worse, they cannot complain that they are not overcharging enough.

Be that as it may, MERALCO contends that considering income tax payments of public utilities constitute one-third of their net income,
public utilities will effectively get, not the 12% rate of return on rate base allowed them, but only about 8%.14 Again, we are not persuaded.

The foregoing argument assumes that the 12% return allowed to public utilities is equivalent to its taxable income which will be subject to
income tax. The 12% rate of return is computed only for the purpose of fixing the allowable rates to be charged by a public utility and is in no
way determinative of the income subject to income tax of the public utility. The computation of a corporation's income tax liability is an
altogether different matter, with the corporation's taxable income derived by taking into account the corporation's gross revenues less
allowable deductions.15
At any rate, even on the assumption that in the test year involved (February 1, 1994 to January 31, 1995), MERALCO's computed revenue
of P 41,867,573,000 or the amount that it is allowed to earn based on a 12% rate of return is its taxable income, after payment of its income
tax liability of P2,135,639,000.00, MERALCO would still obtain an 11.38% rate of return or a return that is well within the 12% rate allowed to
public utilities.16

MERALCO also contends that even the successor of the ERB or the ERC created under the Electric Power Industry Reform Act of 2001
(EPIRA)17 "adheres to the principle that income tax is part of operating expense."18 To bolster its argument, MERALCO cites Article 36 of the
EPIRA which charges the ERC with the responsibility of unbundling the rates of the National Power Corporation (NPC) and each distribution
utility coming within the coverage of the law.19 MERALCO alleges that pursuant to said provision, the ERC issued a set of Uniform Rate
Filing Requirements (UFR) containing guidelines to be followed with respect to rate unbundling applications to be filed. MERALCO asserts
that under the UFR, the enumeration of the expenses which are to be recovered through the rates, and which are to be separated or
allocated for the purpose of unbundling of these rates include income tax expenses.

Under Section 36 of the EPIRA, the NPC and every distribution facility covered by the law is mandated to unbundle, segregate or itemize its
rates according to the various sectors of the electric power industry identified in the law, namely: generation, transmission, distribution and
supply.20 The law further directs the ERC to regulate and facilitate the unbundling of rates prescribed by Section 36. Thus, on October 30,
2001, the ERC issued guidelines prescribing the uniform rate filing requirements to be followed by distribution facilities for the purposes of
unbundling rates.21

A proper appreciation of the UFR shows that it simply specifies a uniform accounting system to be complied with by a distribution facility
when filing an application for revised rates under the EPIRA. As the EPIRA requires the unbundling or segregation of rates according to the
different sectors of the electric power industry, the UFR seeks to facilitate this process by properly identifying the accounts or information
required for proper evaluation by the ERB. Thus, the introductory statements of the UFR provide:

These uniform rate filing requirements are intended to promote consistency and completeness in the rate filings required by Republic Act
No. 9136 (RA 9136), Section 36. To that end, the filing requirements only specify minimum form and content. A rate application in all its
aspects continues to be subject to subsequent Commission review and deliberation.22

At the onset, it is clear that the UFR does not seek to determine which accounting method will be used by the ERC for determination of rate
base or the items of expenses that may be recovered by a public utility from its customers. The UFR only seeks to prescribe a uniform
system or format to standardize or facilitate the process of unbundling of rates mandated by the EPIRA. At best, the UFR prescribes the set
of raw data or figures to be disclosed by a distribution facility that the ERC will need to determine the authorized rates that a distribution
facility may charge. The UFR does not, in any way, determine the manner by which the set of data or figures indicated in the rate application
will be evaluated by the ERC for rate determination purposes.

II

MERALCO also challenges the use of the "net average investment method" or the "number of months use method" on the ground that
MERALCO and the Public Service Commission (PSC) have been consistently applying the "average investment method" or "simple
average", which it alleged was also affirmed by this Court in the case of MERALCO v. PSC23 and Republic v. Medina.24

It is true that in MERALCO v. PSC,25 the issue of the proper valuation method to be used in determining the value of MERALCO's utility
plants for rate fixing purposes was brought to fore. In the said case, MERALCO applied the "average investment method" or "simple
average" by obtaining the average value of the utility plants, using its values at the beginning and at the end of the test year. In contrast, the
General Auditing Office used the "appraisal method" which fixes the value of the utility plants by ascertaining the cost of production per
kilowatt and multiplying the same by the total capacity of said plants, less the corresponding depreciation.26 In upholding the "average
investment method" used by MERALCO, this Court adopted the findings of the PSC for being "by and large, supported by the records of the
case."27 This Court did not make an independent assessment of the validity or applicability of the average investment method but simply did
not disturb the findings of the PSC for being supported by substantial evidence. To conclude that the said decision "affirmed" the use of the
"average investment method" thereby implying that the said method is the only method to be applied in all instances, is a strained reading of
the decision.

In fact, in the case of Republic v. Medina,28 also cited by MERALCO to have affirmed the use of the "average investment method", this Court
ruled:

The decided weight of authority, however, is to the effect that property valuation is not to be solved by formula but depends upon the
particular circumstances and relevant facts affecting each utility as to what constitutes a just rate base and what would be a fair return, just
to both the utility and the public.29

Further, Mr. Justice Castro in his concurring opinion in the same case elucidated:

A regulatory commission's field of inquiry, however, is not confined to the computation of the cost of service or capital nor to a mere
prognostication of the future behavior of the money and capital markets. It must also balance investor and consumer expectations in such a
way that broad requirements of public interest may be meaningfully realized. It would hence appear in keeping with its public duty if a
regulatory body is allowed wide discretion in the choice of methods rationally related to the achievement of this end.30
Thus, the rule then as it is now, is that rate regulating authorities are not hidebound to use any single formula or combination of formulas for
property valuation purposes because the rate-making process involves the balancing of investor and consumer interests which takes into
account various factors that may be unique or peculiar to a particular rate revision application.

We again stress the long established doctrine that findings of administrative or regulatory agencies on matters which are within their
technical area of expertise are generally accorded not only respect but at times even finality if such findings and conclusions are supported
by substantial evidence.31 Rate fixing calls for a technical examination and a specialized review of specific details which the courts are
ill-equipped to enter, hence, such matters are primarily entrusted to the administrative or regulating authority.32

Thus, this Court finds no reversible error on the part of the COA and the ERB in adopting the "net average investment method" or the
"number of months use method" for property valuation purposes in the cases at bar.

III

MERALCO also rants against the retroactive application of the rate adjustment ordered by the ERB and affirmed by this Court. In its
decision, the ERB, after authorizing MERALCO to adopt a rate adjustment in the amount of P0.017 per kwh, directed MERALCO to refund
or credit to its customers' future consumption the excess average amount of P0.167 per kwh from its billing cycles beginning February
199433 until its billing cycles beginning February 1998.34 In the decision appealed from, this Court likewise ordered that the refund in the
average amount of P0.167 per kwh be made to retroact from MERALCO's billing cycles beginning February 1994.

MERALCO contends that the refund cannot be given retroactive effect as the figures determined by the ERB only apply to the test year or
the period subject of the COA Audit, i.e., February 1, 1994 to January 31, 1995. It reasoned that the amounts used to determine the proper
rates to be charged by MERALCO would vary from year to year and thus the computation of the excess average charge of P0.167 would
hold true only for the test year. Thus, MERALCO argues that if a refund of P0.167 would be uniformly applied to its billing cycles beginning
1994, with respect to periods after January 31, 1995, there will be instances wherein its operating revenues would fall below the 12%
authorized rate of return. MERALCO therefore suggests that the dispositive portion be modified and order that "the refund applicable to the
periods after January 31, 1995 is to be computed on the basis of the excess collection in proportion to the excess over the 12% return."35

The purpose of the audit procedures conducted in a rate application proceeding is to determine whether the rate applied for will generate a
reasonable return for the public utility, which, in accordance with settled laws and jurisprudence, is 12% on rate base or the present value of
the assets used in the operations of a public utility. For audit purposes, however, there is a need to obtain a sample set of data-- usually
derived from figures within a designated period of time-- to determine the amount of returns obtained by a public utility during such period. In
the cases at bar, the COA conducted an audit for the test year beginning February 1, 1994 and ending January 31, 1995 or a 12-month
period immediately after the order of the ERB granting a provisional increase in the amount of P0.184 per kwh was issued. Thus, the
ultimate issue resolved by the COA when it conducted its audit was whether the provisional increase granted by the ERB generated an
amount of return well within the rates authorized by law. As stated earlier, based on the findings of the ERB, with the increase of P0.184 per
kwh, MERALCO obtained a rate of return which was 8.15% more than the authorized rate of return of 12%.36 Thus, a refund in the amount
of P0.167 was determined and ordered by ERB.

The essence of the use of a "test year" for auditing purposes is to obtain a sample or representative set of figures to enable the examining
authority to arrive at a conclusion or finding based on the gathered data. The use of a "test year" does not mean that the information and
conclusions so derived would only be correct for that year and would be incorrect on the succeeding years. The use of a "test year"
assumes that within a reasonable period after such test year, figures used to determine the amount of return would only vary slightly from
the figures culled during the test year such that the impact on the utility's rate of return would not be very significant. Thus, in the event that
there is a substantial change in circumstances significantly affecting the variable amounts that would determine the reasonableness of a
return, an event which would normally occur after a certain period of time has elapsed, the public utility may subsequently apply for a rate
revision.

We agree with the Solicitor General that following MERALCO's reasoning that the figures culled from a test year would only be relevant
during such year, there would be a need for public utilities to apply for a rate adjustment every year and perform an audit examination on a
public utility's books of accounts every year as the amount of a utility's revenue may fall above or below the authorized rates at any given
year. Needless to say, the trajectory of MERALCO's arguments will lead to an absurdity.

From the time the order granting a provisional increase was issued by the ERB, nowhere in the records does it appear that the subsequent
refund of P0.167 per kwh ordered by the ERB was ever implemented or executed by MERALCO.37 Accordingly, from January 28, 1994
MERALCO imposed on its customers a charge that is P0.167 in excess of the proper amount. In fact, any application for rate adjustment
that may have been applied for and/or granted to MERALCO during the intervening period would have to be reckoned from rates increased
by P0.184 per kwh as these were the rates prevailing at the time any application for rate adjustment was made by MERALCO.
While we agree that the amounts used to determine the utility's rate of return would vary from year to year, we are unable to subscribe to the
view that the refund applicable to the periods after January 31, 1995 should be computed on the basis of the excess collection in proportion
to the excess over the 12% return. MERALCO's contention that the refund for periods after January 31, 1995 should be computed on the
basis of revenue of each year in excess of the 12% authorized rate of return calls for a year-by-year computation of MERALCO's revenues
and assets which would be contrary to the essence of an audit examination of a public utility based on a test year. To grant MERALCO's
prayer would, in effect, allow MERALCO the benefit of a year-by-year adjustment of rates not normally enjoyed by any other public utility
required to adopt a subsequent rate modification. Indeed, had the ERB ordered an increase in the provisional rates it previously granted,
said increase in rates would apply retroactively and would not have varied from year to year, depending on the variable amounts used to
determine the authorized rates that may be charged by MERALCO. We find no significant circumstance prevailing in the cases at bar that
would justify the application of a yearly adjustment as requested by MERALCO.

WHEREFORE, in view of the foregoing, the petitioner's Motion for Reconsideration is DENIED WITH FINALITY.

SO ORDERED.
CASE #5:

G.R. No. 83551 July 11, 1989

RODOLFO B. ALBANO v. HON. RAINERIO O. REYES, PHILIPPINE PORTS AUTHORITY, INTERNATIONAL CONTAINER TERMINAL
SERVICES, INC., E. RAZON, INC., ANSCOR CONTAINER CORPORATION, and SEALAND SERVICES. LTD.

PARAS, J.:

This is a Petition for Prohibition with prayer for Preliminary Injunction or Restraining Order seeking to restrain the respondents Philippine
Ports Authority (PPA) and the Secretary of the Department of Transportation and Communications Rainerio O. Reyes from awarding to the
International Container Terminal Services, Inc. (ICTSI) the contract for the development, management and operation of the Manila
International Container Terminal (MICT).

On April 20, 1987, the PPA Board adopted its Resolution No. 850 directing PPA management to prepare the Invitation to Bid and all relevant
bidding documents and technical requirements necessary for the public bidding of the development, management and operation of the
MICT at the Port of Manila, and authorizing the Board Chairman, Secretary Rainerio O. Reyes, to oversee the preparation of the technical
and the documentation requirements for the MICT leasing as well as to implement this project.

Accordingly, respondent Secretary Reyes, by DOTC Special Order 87-346, created a seven (7) man "Special MICT Bidding Committee"
charged with evaluating all bid proposals, recommending to the Board the best bid, and preparing the corresponding contract between the
PPA and the winning bidder or contractor. The Bidding Committee consisted of three (3) PPA representatives, two (2) Department of
Transportation and Communications (DOTC) representatives, one (1) Department of Trade and Industry (DTI) representative and one (1)
private sector representative. The PPA management prepared the terms of reference, bid documents and draft contract which materials
were approved by the PPA Board.

The PPA published the Invitation to Bid several times in a newspaper of general circulation which publication included the reservation by the
PPA of "the right to reject any or all bids and to waive any informality in the bids or to accept such bids which may be considered most
advantageous to the government."

Seven (7) consortia of companies actually submitted bids, which bids were opened on July 17, 1987 at the PPA Head Office. After
evaluation of the several bids, the Bidding Committee recommended the award of the contract to develop, manage and operate the MICT to
respondent International Container Terminal Services, Inc. (ICTSI) as having offered the best Technical and Financial Proposal. Accordingly,
respondent Secretary declared the ICTSI consortium as the winning bidder.

Before the corresponding MICT contract could be signed, two successive cases were filed against the respondents which assailed the
legality or regularity of the MICT bidding. The first was Special Civil Action 55489 for "Prohibition with Preliminary Injunction" filed with the
RTC of Pasig by Basilio H. Alo, an alleged "concerned taxpayer", and, the second was Civil Case 88-43616 for "Prohibition with Prayer for
Temporary Restraining Order (TRO)" filed with the RTC of Manila by C.F. Sharp Co., Inc., a member of the nine (9) firm consortium —
"Manila Container Terminals, Inc." which had actively participated in the MICT Bidding.

Restraining Orders were issued in Civil Case 88-43616 but these were subsequently lifted by this Court in Resolutions dated March 17,
1988 (in G.R. No. 82218 captioned "Hon. Rainerio O. Reyes etc., et al. vs. Hon. Doroteo N. Caneba, etc., et al.) and April 14, 1988 (in G.R.
No. 81947 captioned "Hon. Rainerio O. Reyes etc., et al. vs. Court of Appeals, et al.")

On May 18, 1988, the President of the Philippines approved the proposed MICT Contract, with directives that "the responsibility for planning,
detailed engineering, construction, expansion, rehabilitation and capital dredging of the port, as well as the determination of how the
revenues of the port system shall be allocated for future port works, shall remain with the PPA; and the contractor shall not collect taxes and
duties except that in the case of wharfage or tonnage dues and harbor and berthing fees, payment to the Government may be made
through the contractor who shall issue provisional receipts and turn over the payments to the Government which will issue the official
receipts." (Annex "I").

The next day, the PPA and the ICTSI perfected the MICT Contract (Annex "3") incorporating therein by "clarificatory guidelines" the
aforementioned presidential directives. (Annex "4").

Meanwhile, the petitioner, Rodolfo A. Albano filed the present petition as citizen and taxpayer and as a member of the House of
Representatives, assailing the award of the MICT contract to the ICTSI by the PPA. The petitioner claims that since the MICT is a public
utility, it needs a legislative franchise before it can legally operate as a public utility, pursuant to Article 12, Section 11 of the 1987
Constitution.

The petition is devoid of merit.

A review of the applicable provisions of law indicates that a franchise specially granted by Congress is not necessary for the operation of the
Manila International Container Port (MICP) by a private entity, a contract entered into by the PPA and such entity constituting substantial
compliance with the law.
1. Executive Order No. 30, dated July 16, 1986, provides:

WHEREFORE, I, CORAZON C. AQUINO, President of the Republic of the Philippines, by virtue of the powers vested in me by the
Constitution and the law, do hereby order the immediate recall of the franchise granted to the Manila International Port Terminals, Inc.
(MIPTI) and authorize the Philippine Ports Authority (PPA) to take over, manage and operate the Manila International Port Complex at North
Harbor, Manila and undertake the provision of cargo handling and port related services thereat, in accordance with P.D. 857 and other
applicable laws and regulations.

Section 6 of Presidential Decree No. 857 (the Revised Charter of the Philippine Ports Authority) states:

a) The corporate duties of the Authority shall be:

xxx xxx xxx

(ii) To supervise, control, regulate, construct, maintain, operate, and provide such facilities or services as are necessary in the ports vested
in, or belonging to the Authority.

xxx xxx xxx

(v) To provide services (whether on its own, by contract, or otherwise) within the Port Districts and the approaches thereof, including but not
limited to —

— berthing, towing, mooring, moving, slipping, or docking of any vessel;

— loading or discharging any vessel;

— sorting, weighing, measuring, storing, warehousing, or otherwise handling goods.

xxx xxx xxx

b) The corporate powers of the Authority shall be as follows:

xxx xxx xxx

(vi) To make or enter into contracts of any kind or nature to enable it to discharge its functions under this Decree.

xxx xxx xxx

[Emphasis supplied.]

Thus, while the PPA has been tasked, under E.O. No. 30, with the management and operation of the Manila International Port Complex and
to undertake the providing of cargo handling and port related services thereat, the law provides that such shall be "in accordance with P.D.
857 and other applicable laws and regulations." On the other hand, P.D. No. 857 expressly empowers the PPA to provide services within
Port Districts "whether on its own, by contract, or otherwise" [See. 6(a) (v)]. Therefore, under the terms of E.O. No. 30 and P.D. No. 857, the
PPA may contract with the International Container Terminal Services, Inc. (ICTSI) for the management, operation and development of the
MICP.

2. Even if the MICP be considered a public utility, 1 or a public service 2 on the theory that it is a "wharf' or a "dock" 3 as contemplated under
the Public Service Act, its operation would not necessarily call for a franchise from the Legislative Branch. Franchises issued by Congress
are not required before each and every public utility may operate. Thus, the law has granted certain administrative agencies the power to
grant licenses for or to authorize the operation of certain public utilities. (See E.O. Nos. 172 and 202)

That the Constitution provides in Art. XII, Sec. 11 that the issuance of a franchise, certificate or other form of authorization for the operation
of a public utility shall be subject to amendment, alteration or repeal by Congress does not necessarily, imply, as petitioner posits that only
Congress has the power to grant such authorization. Our statute books are replete with laws granting specified agencies in the Executive
Branch the power to issue such authorization for certain classes of public utilities. 4

As stated earlier, E.O. No. 30 has tasked the PPA with the operation and management of the MICP, in accordance with P.D. 857 and other
applicable laws and regulations. However, P.D. 857 itself authorizes the PPA to perform the service by itself, by contracting it out, or through
other means. Reading E.O. No. 30 and P.D. No. 857 together, the inescapable conclusion is that the lawmaker has empowered the PPA to
undertake by itself the operation and management of the MICP or to authorize its operation and management by another by contract or
other means, at its option. The latter power having been delegated to the PPA, a franchise from Congress to authorize an entity other than
the PPA to operate and manage the MICP becomes unnecessary.
In the instant case, the PPA, in the exercise of the option granted it by P.D. No. 857, chose to contract out the operation and management of
the MICP to a private corporation. This is clearly within its power to do. Thus, PPA's acts of privatizing the MICT and awarding the MICT
contract to ICTSI are wholly within the jurisdiction of the PPA under its Charter which empowers the PPA to "supervise, control, regulate,
construct, maintain, operate and provide such facilities or services as are necessary in the ports vested in, or belonging to the PPA."
(Section 6(a) ii, P.D. 857)

The contract between the PPA and ICTSI, coupled with the President's written approval, constitute the necessary authorization for ICTSI's
operation and management of the MICP. The award of the MICT contract approved by no less than the President of the Philippines herself
enjoys the legal presumption of validity and regularity of official action. In the case at bar, there is no evidence which clearly shows the
constitutional infirmity of the questioned act of government.

For these reasons the contention that the contract between the PPA and ICTSI is illegal in the absence of a franchise from Congress
appears bereft of any legal basis.

3. On the peripheral issues raised by the party, the following observations may be made:

A. That petitioner herein is suing as a citizen and taxpayer and as a Member of the House of Representatives, sufficiently clothes him with
the standing to institute the instant suit questioning the validity of the assailed contract. While the expenditure of public funds may not be
involved under the contract, public interest is definitely involved considering the important role of the MICP in the economic development of
the country and the magnitude of the financial consideration involved. Consequently, the disclosure provision in the Constitution 5 would
constitute sufficient authority for upholding petitioner's standing. [Cf. Tañada v. Tuvera, G.R. No. 63915, April 24, 1985,136 SCRA 27, citing
Severino v. Governor General, 16 Phil. 366 (1910), where the Court considered the petitioners with sufficient standing to institute an action
where a public right is sought to be enforced.]

B. That certain committees in the Senate and the House of Representatives have, in their respective reports, and the latter in a resolution as
well, declared their opinion that a franchise from Congress is necessary for the operation of the MICP by a private individual or entity, does
not necessarily create a conflict between the Executive and the Legislative Branches needing the intervention of the Judicial Branch. The
court is not faced with a situation where the Executive Branch has contravened an enactment of Congress. As discussed earlier, neither is
the Court confronted with a case of one branch usurping a power pertaining to another.

C. Petitioner's contention that what was bid out, i.e., the development, management and operation of the MICP, was not what was
subsequently contracted, considering the conditions imposed by the President in her letter of approval, thus rendering the bids and
projections immaterial and the procedure taken ineffectual, is not supported by the established facts. The conditions imposed by the
President did not materially alter the substance of the contract, but merely dealt on the details of its implementation.

D. The determination of whether or not the winning bidder is qualified to undertake the contracted service should be left to the sound
judgment of the PPA. The PPA, having been tasked with the formulation of a plan for the development of port facilities and its
implementation [Sec. 6(a) (i)], is the agency in the best position to evaluate the feasibility of the projections of the bidders and to decide
which bid is compatible with the development plan. Neither the Court, nor Congress, has the time and the technical expertise to look into
this matter.

Thus, the Court in Manuel v. Villena (G.R. No. L-28218, February 27, 1971, 37 SCRA 745] stated:

[C]ourts, as a rule, refuse to interfere with proceedings undertaken by administrative bodies or officials in the exercise of administrative
functions. This is so because such bodies are generally better equipped technically to decide administrative questions and that non-legal
factors, such as government policy on the matter, are usually involved in the decisions. [at p. 750.]

In conclusion, it is evident that petitioner has failed to show a clear case of grave abuse of discretion amounting to lack or excess of
jurisdiction as to warrant the issuance of the writ of prohibition.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.
CASE #6:

G.R. No. 115381 December 23, 1994

KILUSANG MAYO UNO LABOR CENTER v. HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION FRANCHISING AND
REGULATORY BOARD, and the PROVINCIAL BUS OPERATORS ASSOCIATION OF THE PHILIPPINES

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.

For compliance. (Emphasis ours.)

Finding the implementation of the fare range scheme "not legally feasible," Remedios A.S. Fernando submitted the following memorandum
to Oscar M. Orbos on July 24, 1990, to wit:

With reference to DOTC Memorandum Order No. 90-395 dated 26 June 1990 which the LTFRB received on 19 July 1990, directing the
Board "to immediately publicize a fare range scheme for all provincial bus routes in the country (except those operating within Metro
Manila)" that will allow operators "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" the undersigned is respectfully adverting the Secretary's attention to the following for his
consideration:

1. Section 16(c) of the Public Service Act prescribes the following for the fixing and determination of rates — (a) the rates to be approved
should be proposed by public service operators; (b) there should be a publication and notice to concerned or affected parties in the territory
affected; (c) a public hearing should be held for the fixing of the rates; hence, implementation of the proposed fare range scheme on August
6 without complying with the requirements of the Public Service Act may not be legally feasible.

2. To allow bus operators in the country to charge fares fifteen (15%) above the present LTFRB fares in the wake of the devastation, death
and suffering caused by the July 16 earthquake will not be socially warranted and will be politically unsound; most likely public criticism
against the DOTC and the LTFRB will be triggered by the untimely motu propio implementation of the proposal by the mere expedient of
publicizing the fare range scheme without calling a public hearing, which scheme many as early as during the Secretary's predecessor know
through newspaper reports and columnists' comments to be Asian Development Bank and World Bank inspired.

3. More than inducing a reduction in bus fares by fifteen percent (15%) the implementation of the proposal will instead trigger an upward
adjustment in bus fares by fifteen percent (15%) at a time when hundreds of thousands of people in Central and Northern Luzon, particularly
in Central Pangasinan, La Union, Baguio City, Nueva Ecija, and the Cagayan Valley are suffering from the devastation and havoc caused by
the recent earthquake.

4. In lieu of the said proposal, the DOTC with its agencies involved in public transportation can consider measures and reforms in the
industry that will be socially uplifting, especially for the people in the areas devastated by the recent earthquake.

In view of the foregoing considerations, the undersigned respectfully suggests that the implementation of the proposed fare range scheme
this year be further studied and evaluated.

On December 5, 1990, private respondent Provincial Bus Operators Association of the Philippines, Inc. (PBOAP) filed an application for fare
rate increase. An across-the-board increase of eight and a half centavos (P0.085) per kilometer for all types of provincial buses with a
minimum-maximum fare range of fifteen (15%) percent over and below the proposed basic per kilometer fare rate, with the said
minimum-maximum fare range applying only to ordinary, first class and premium class buses and a fifty-centavo (P0.50) minimum per
kilometer fare for aircon buses, was sought.

On December 6, 1990, private respondent PBOAP reduced its applied proposed fare to an across-the-board increase of six and a half
(P0.065) centavos per kilometer for ordinary buses. The decrease was due to the drop in the expected price of diesel.

The application was opposed by the Philippine Consumers Foundation, Inc. and Perla C. Bautista alleging that the proposed rates were
exorbitant and unreasonable and that the application contained no allegation on the rate of return of the proposed increase in rates.

On December 14, 1990, public respondent LTFRB rendered a decision granting the fare rate increase in accordance with the following
schedule of fares on a straight computation method, viz:

AUTHORIZED FARES

LUZON

MIN. OF 5 KMS. SUCCEEDING KM.

REGULAR P1.50 P0.37

STUDENT P1.15 P0.28

VISAYAS/MINDANAO

REGULAR P1.60 P0.375

STUDENT P1.20 P0.285

FIRST CLASS (PER KM.)

LUZON P0.385
VISAYAS/

MINDANAO P0.395

PREMIERE CLASS (PER KM.)

LUZON P0.395

VISAYAS/

MINDANAO P0.405

AIRCON (PER KM.) P0.415.4

On March 30, 1992, then Secretary of the Department of Transportation and Communications Pete Nicomedes Prado issued Department
Order No.

92-587 defining the policy framework on the regulation of transport services. The full text of the said order is reproduced below in view of the
importance of the provisions contained therein:

WHEREAS, Executive Order No. 125 as amended, designates the Department of Transportation and Communications (DOTC) as the
primary policy, planning, regulating and implementing agency on transportation;

WHEREAS, to achieve the objective of a viable, efficient, and dependable transportation system, the transportation regulatory agencies
under or attached to the DOTC have to harmonize their decisions and adopt a common philosophy and direction;

WHEREAS, the government proposes to build on the successful liberalization measures pursued over the last five years and bring the
transport sector nearer to a balanced longer term regulatory framework;

NOW, THEREFORE, pursuant to the powers granted by laws to the DOTC, the following policies and principles in the economic regulation
of land, air, and water transportation services are hereby adopted:

1. Entry into and exit out of the industry. Following the Constitutional dictum against monopoly, no franchise holder shall be permitted to
maintain a monopoly on any route. A minimum of two franchise holders shall be permitted to operate on any route.

The requirements to grant a certificate to operate, or certificate of public convenience, shall be: proof of Filipino citizenship, financial
capability, public need, and sufficient insurance cover to protect the riding public.

In determining public need, the presumption of need for a service shall be deemed in favor of the applicant. The burden of proving that there
is no need for a proposed service shall be with the oppositor(s).

In the interest of providing efficient public transport services, the use of the "prior operator" and the "priority of filing" rules shall be
discontinued. The route measured capacity test or other similar tests of demand for vehicle/vessel fleet on any route shall be used only as a
guide in weighing the merits of each franchise application and not as a limit to the services offered.

Where there are limitations in facilities, such as congested road space in urban areas, or at airports and ports, the use of demand
management measures in conformity with market principles may be considered.

The right of an operator to leave the industry is recognized as a business decision, subject only to the filing of appropriate notice and
following a phase-out period, to inform the public and to minimize disruption of services.

2. Rate and Fare Setting. Freight rates shall be freed gradually from government controls. Passenger fares shall also be deregulated,
except for the lowest class of passenger service (normally third class passenger transport) for which the government will fix indicative or
reference fares. Operators of particular services may fix their own fares within a range 15% above and below the indicative or reference
rate.

Where there is lack of effective competition for services, or on specific routes, or for the transport of particular commodities, maximum
mandatory freight rates or passenger fares shall be set temporarily by the government pending actions to increase the level of competition.

For unserved or single operator routes, the government shall contract such services in the most advantageous terms to the public and the
government, following public bids for the services. The advisability of bidding out the services or using other kinds of incentives on such
routes shall be studied by the government.
3. Special Incentives and Financing for Fleet Acquisition. As a matter of policy, the government shall not engage in special financing and
incentive programs, including direct subsidies for fleet acquisition and expansion. Only when the market situation warrants government
intervention shall programs of this type be considered. Existing programs shall be phased out gradually.

The Land Transportation Franchising and Regulatory Board, the Civil Aeronautics Board, the Maritime Industry Authority are hereby directed
to submit to the Office of the Secretary, within forty-five (45) days of this Order, the detailed rules and procedures for the Implementation of
the policies herein set forth. In the formulation of such rules, the concerned agencies shall be guided by the most recent studies on the
subjects, such as the Provincial Road Passenger Transport Study, the Civil Aviation Master Plan, the Presidential Task Force on the
Inter-island Shipping Industry, and the Inter-island Liner Shipping Rate Rationalization Study.

For the compliance of all concerned. (Emphasis ours)

On October 8, 1992, public respondent Secretary of the Department of Transportation and Communications Jesus B. Garcia, Jr. issued a
memorandum to the Acting Chairman of the LTFRB suggesting swift action on the adoption of rules and procedures to implement
above-quoted Department Order No. 92-587 that laid down deregulation and other liberalization policies for the transport sector. Attached to
the said memorandum was a revised draft of the required rules and procedures covering (i) Entry Into and Exit Out of the Industry and (ii)
Rate and Fare Setting, with comments and suggestions from the World Bank incorporated therein. Likewise, resplendent from the said
memorandum is the statement of the DOTC Secretary that the adoption of the rules and procedures is a pre-requisite to the approval of the
Economic Integration Loan from the World Bank.5

On February 17, 1993, the LTFRB issued Memorandum Circular

No. 92-009 promulgating the guidelines for the implementation of DOTC Department Order No. 92-587. The Circular provides, among
others, the following challenged portions:

xxx xxx xxx

IV. Policy Guidelines on the Issuance of Certificate of Public Convenience.

The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a service shall be
deemed in favor of the applicant, while burden of proving that there is no need for the proposed service shall be the oppositor'(s).

xxx xxx xxx

V. Rate and Fare Setting

The control in pricing shall be liberalized to introduce price competition complementary with the quality of service, subject to prior notice and
public hearing. Fares shall not be provisionally authorized without public hearing.

A. On the General Structure of Rates

1. The existing authorized fare range system of plus or minus 15 per cent for provincial buses and jeepneys shall be widened to 20% and
-25% limit in 1994 with the authorized fare to be replaced by an indicative or reference rate as the basis for the expanded fare range.

2. Fare systems for aircon buses are liberalized to cover first class and premier services.

xxx xxx xxx

(Emphasis ours).

Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the DOTC allowing provincial bus
operators to collect plus 20% and minus 25% of the prescribed fare without first having filed a petition for the purpose and without the
benefit of a public hearing, announced a fare increase of twenty (20%) percent of the existing fares. Said increased fares were to be made
effective on March 16, 1994.

On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares.

On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the petition for lack of merit. The dispositive portion reads:

PREMISES CONSIDERED, this Board after considering the arguments of the parties, hereby DISMISSES FOR LACK OF MERIT the
petition filed in the above-entitled case. This petition in this case was resolved with dispatch at the request of petitioner to enable it to
immediately avail of the legal remedies or options it is entitled under existing laws.

SO ORDERED.6
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:

xxx xxx xxx

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of any branch or instrumentality of the Government.

In Lamb v. Phipps,7 we ruled that judicial power is the power to hear and decide causes pending between parties who have the right to sue
in the courts of law and equity. Corollary to this provision is the principle of locus standi of a party litigant. One who is directly affected by and
whose interest is immediate and substantial in the controversy has the standing to sue. The rule therefore requires that a party must show a
personal stake in the outcome of the case or an injury to himself that can be redressed by a favorable decision so as to warrant an
invocation of the court's jurisdiction and to justify the exercise of the court's remedial powers in his behalf.8

In the case at bench, petitioner, whose members had suffered and continue to suffer grave and irreparable injury and damage from the
implementation of the questioned memoranda, circulars and/or orders, has shown that it has a clear legal right that was violated and
continues to be violated with the enforcement of the challenged memoranda, circulars and/or orders. KMU members, who avail of the use of
buses, trains and jeepneys everyday, are directly affected by the burdensome cost of arbitrary increase in passenger fares. They are part of
the millions of commuters who comprise the riding public. Certainly, their rights must be protected, not neglected nor ignored.

Assuming arguendo that petitioner is not possessed of the standing to sue, this court is ready to brush aside this barren procedural infirmity
and recognize the legal standing of the petitioner in view of the transcendental importance of the issues raised. And this act of liberality is
not without judicial precedent. As early as the Emergency Powers Cases, this Court had exercised its discretion and waived the requirement
of proper party. In the recent case of Kilosbayan, Inc., et al. v. Teofisto Guingona, Jr., et al.,9 we ruled in the same lines and enumerated
some of the cases where the same policy was adopted, viz:

. . . A party's standing before this Court is a procedural technicality which it may, in the exercise of its discretion, set aside in view of the
importance of the issues raised. In the landmark Emergency Powers Cases, [G.R. No. L-2044 (Araneta v. Dinglasan); G.R. No. L-2756
(Araneta

v. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de Filipinas); G.R. No. L-3055 (Guerrero v. Commissioner of Customs); and G.R. No.
L-3056 (Barredo v. Commission on Elections), 84 Phil. 368 (1949)], this Court brushed aside this technicality because "the transcendental
importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of
procedure. (Avelino vs. Cuenco, G.R. No. L-2621)." Insofar as taxpayers' suits are concerned, this Court had declared that it "is not devoid
of discretion as to whether or not it should be entertained," (Tan v. Macapagal, 43 SCRA 677, 680 [1972]) or that it "enjoys an open
discretion to entertain the same or not." [Sanidad v. COMELEC, 73 SCRA 333 (1976)].

xxx xxx xxx

In line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of Congress, and even association of planters, and
non-profit civic organizations were allowed to initiate and prosecute actions before this court to question the constitutionality or validity of
laws, acts, decisions, rulings, or orders of various government agencies or instrumentalities. Among such cases were those assailing the
constitutionality of (a) R.A. No. 3836 insofar as it allows retirement gratuity and commutation of vacation and sick leave to Senators and
Representatives and to elective officials of both Houses of Congress (Philippine Constitution Association, Inc. v. Gimenez, 15 SCRA 479
[1965]); (b) Executive Order No. 284, issued by President Corazon C. Aquino on 25 July 1987, which allowed members of the cabinet, their
undersecretaries, and assistant secretaries to hold other government offices or positions (Civil Liberties Union v. Executive Secretary, 194
SCRA 317 [1991]); (c) the automatic appropriation for debt service in the General Appropriations Act (Guingona v. Carague, 196 SCRA 221
[1991]; (d) R.A. No. 7056 on the holding of desynchronized elections (Osmeña v. Commission on Elections, 199 SCRA 750 [1991]); (e) P.D.
No. 1869 (the charter of the Philippine Amusement and Gaming Corporation) on the ground that it is contrary to morals, public policy, and
order (Basco v. Philippine Amusement and Gaming Corp., 197 SCRA 52 [1991]); and (f) R.A. No. 6975, establishing the Philippine National
Police. (Carpio v. Executive Secretary, 206 SCRA 290 [1992]).

Other cases where we have followed a liberal policy regarding locus standi include those attacking the validity or legality of (a) an order
allowing the importation of rice in the light of the prohibition imposed by R.A. No. 3452 (Iloilo Palay and Corn Planters Association, Inc. v.
Feliciano, 13 SCRA 377 [1965]; (b) P.D. Nos. 991 and 1033 insofar as they proposed amendments to the Constitution and P.D. No. 1031
insofar as it directed the COMELEC to supervise, control, hold, and conduct the referendum-plebiscite on 16 October 1976 (Sanidad v.
Commission on Elections, supra); (c) the bidding for the sale of the 3,179 square meters of land at Roppongi, Minato-ku, Tokyo, Japan
(Laurel v. Garcia, 187 SCRA 797 [1990]); (d) the approval without hearing by the Board of Investments of the amended application of the
Bataan Petrochemical Corporation to transfer the site of its plant from Bataan to Batangas and the validity of such transfer and the shift of
feedstock from naphtha only to naphtha and/or liquefied petroleum gas (Garcia v. Board of Investments, 177 SCRA 374 [1989]; Garcia v.
Board of Investments, 191 SCRA 288 [1990]); (e) the decisions, orders, rulings, and resolutions of the Executive Secretary, Secretary of
Finance, Commissioner of Internal Revenue, Commissioner of Customs, and the Fiscal Incentives Review Board exempting the National
Power Corporation from indirect tax and duties (Maceda v. Macaraig, 197 SCRA 771 [1991]); (f) the orders of the Energy Regulatory Board
of 5 and 6 December 1990 on the ground that the hearings conducted on the second provisional increase in oil prices did not allow the
petitioner substantial cross-examination; (Maceda v. Energy Regulatory Board, 199 SCRA 454 [1991]); (g) Executive Order No. 478 which
levied a special duty of P0.95 per liter of imported oil products (Garcia v. Executive Secretary, 211 SCRA 219 [1992]); (h) resolutions of the
Commission on Elections concerning the apportionment, by district, of the number of elective members of Sanggunians (De Guia vs.
Commission on Elections, 208 SCRA 420 [1992]); and (i) memorandum orders issued by a Mayor affecting the Chief of Police of Pasay City
(Pasay Law and Conscience Union, Inc. v. Cuneta, 101 SCRA 662 [1980]).

In the 1975 case of Aquino v. Commission on Elections (62 SCRA 275 [1975]), this Court, despite its unequivocal ruling that the petitioners
therein had no personality to file the petition, resolved nevertheless to pass upon the issues raised because of the far-reaching implications
of the petition. We did no less in De Guia v. COMELEC (Supra) where, although we declared that De Guia "does not appear to have locus
standi, a standing in law, a personal or substantial interest," we brushed aside the procedural infirmity "considering the importance of the
issue involved, concerning as it does the political exercise of qualified voters affected by the apportionment, and petitioner alleging abuse of
discretion and violation of the Constitution by respondent."

Now on the merits of the case.

On the fare range scheme.

Section 16(c) of the Public Service Act, as amended, reads:

Sec. 16. Proceedings of the Commission, upon notice and hearing. — The Commission shall have power, upon proper notice and hearing in
accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the
contrary:

xxx xxx xxx

(c) To fix and determine individual or joint rates, tolls, charges, classifications, or schedules thereof, as well as commutation, mileage
kilometrage, and other special rates which shall be imposed, observed, and followed thereafter by any public service: Provided, That the
Commission may, in its discretion, approve rates proposed by public services provisionally and without necessity of any hearing; but it shall
call a hearing thereon within thirty days thereafter, upon publication and notice to the concerns operating in the territory affected: Provided,
further, That in case the public service equipment of an operator is used principally or secondarily for the promotion of a private business,
the net profits of said private business shall be considered in relation with the public service of such operator for the purpose of fixing the
rates. (Emphasis ours).

xxx xxx xxx

Under the foregoing provision, the Legislature delegated to the defunct Public Service Commission the power of fixing the rates of public
services. Respondent LTFRB, the existing regulatory body today, is likewise vested with the same under Executive Order No. 202 dated
June 19, 1987. Section 5(c) of the said executive order authorizes LTFRB "to determine, prescribe, approve and periodically review and
adjust, reasonable fares, rates and other related charges, relative to the operation of public land transportation services provided by
motorized vehicles."
Such delegation of legislative power to an administrative agency is permitted in order to adapt to the increasing complexity of modern life.
As subjects for governmental regulation multiply, so does the difficulty of administering the laws. Hence, specialization even in legislation
has become necessary. Given the task of determining sensitive and delicate matters as

route-fixing and rate-making for the transport sector, the responsible regulatory body is entrusted with the power of subordinate legislation.
With this authority, an administrative body and in this case, the LTFRB, may implement broad policies laid down in a statute by "filling in" the
details which the Legislature may neither have time or competence to provide. However, nowhere under the aforesaid provisions of law are
the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power to a common carrier, a transport operator, or other public
service.

In the case at bench, the authority given by the LTFRB to the provincial bus operators to set a fare range over and above the authorized
existing fare, is illegal and invalid as it is tantamount to an undue delegation of legislative authority. Potestas delegata non delegari potest.
What has been delegated cannot be delegated. This doctrine is based on the ethical principle that such a delegated power constitutes not
only a right but a duty to be performed by the delegate through the instrumentality of his own judgment and not through the intervening mind
of another.10 A further delegation of such 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 commission cannot determine in advance whether or not
the new rates of the Philippine Railway Co. will be just and reasonable, because it does not know what those rates will be.

In the present case the Philippine Railway Co. in effect asked for permission to change its freight rates at will. It may change them every day
or every hour, whenever it deems it necessary to do so in order to meet competition or whenever in its opinion it would be to its advantage.
Such a procedure would create a most unsatisfactory state of affairs and largely defeat the purposes of the public service law.13 (Emphasis
ours).

One veritable consequence of the deregulation of transport fares is a compounded fare. If transport operators will be authorized to impose
and collect an additional amount equivalent to 20% over and above the authorized fare over a period of time, this will unduly prejudice a
commuter who will be made to pay a fare that has been computed in a manner similar to those of compounded bank interest rates.

Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus operators to collect a thirty-seven (P0.37) centavo per
kilometer fare for ordinary buses. At the same time, they were allowed to impose and collect a fare range of plus or minus 15% over the
authorized rate. Thus P0.37 centavo per kilometer authorized fare plus P0.05 centavos (which is 15% of P0.37 centavos) is equivalent to
P0.42 centavos, the allowed rate in 1990. Supposing the LTFRB grants another five (P0.05) centavo increase per kilometer in 1994, then,
the base or reference for computation would have to be P0.47 centavos (which is P0.42 + P0.05 centavos). If bus operators will exercise
their authority to impose an additional 20% over and above the authorized fare, then the fare to be collected shall amount to P0.56 (that is,
P0.47 authorized LTFRB rate plus 20% of P0.47 which is P0.29). In effect, commuters will be continuously subjected, not only to a double
fare adjustment but to a compounding fare as well. On their part, transport operators shall enjoy a bigger chunk of the pie. Aside from fare
increase applied for, they can still collect an additional amount by virtue of the authorized fare range. Mathematically, the situation translates
into the following:

Year** LTFRB authorized Fare Range Fare to be

rate*** collected per

kilometer

1990 P0.37 15% (P0.05) P0.42

1994 P0.42 + 0.05 = 0.47 20% (P0.09) P0.56

1998 P0.56 + 0.05 = 0.61 20% (P0.12) P0.73

2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94

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 far-reaching 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.

A certificate of public convenience (CPC) is an authorization granted by the LTFRB for the operation of land transportation services for
public use as required by law. Pursuant to Section 16(a) of the Public Service Act, as amended, the following requirements must be met
before a CPC may be granted, to wit: (i) the applicant must be a citizen of the Philippines, or a corporation or co-partnership, association or
joint-stock company constituted and organized under the laws of the Philippines, at least 60 per centum of its stock or paid-up capital must
belong entirely to citizens of the Philippines; (ii) the applicant must be financially capable of undertaking the proposed service and meeting
the responsibilities incident to its operation; and (iii) the applicant must prove that the operation of the public service proposed and the
authorization to do business will promote the public interest in a proper and suitable manner. It is understood that there must be proper
notice and hearing before the PSC can exercise its power to issue a CPC.

While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB Memorandum Circular No. 92-009, Part IV, provides for yet
incongruous and contradictory policy guideline on the issuance of a CPC. The guidelines states:

The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a service shall be
deemed in favor of the applicant, while the burden of proving that there is no need for the proposed service shall be the oppositor's.
(Emphasis ours).

The above-quoted provision is entirely incompatible and inconsistent with Section 16(c)(iii) of the Public Service Act which requires that
before a CPC will be issued, the applicant must prove by proper notice and hearing that the operation of the public service proposed will
promote public interest in a proper and suitable manner. On the contrary, the policy guideline states that the presumption of public need for
a public service shall be deemed in favor of the applicant. In case of conflict between a statute and an administrative order, the former must
prevail.

By its terms, public convenience or necessity generally means something fitting or suited to the public need.16 As one of the basic
requirements for the grant of a CPC, public convenience and necessity exists when the proposed facility or service meets a reasonable
want of the public and supply a need which the existing facilities do not adequately supply. The existence or

non-existence of public convenience and necessity is therefore a question of fact that must be established by evidence, real and/or
testimonial; empirical data; statistics and such other means necessary, in a public hearing conducted for that purpose. The object and
purpose of such procedure, among other things, is to look out for, and protect, the interests of both the public and the existing transport
operators.

Verily, the power of a regulatory body to issue a CPC is founded on the condition that after full-dress hearing and investigation, it shall find,
as a fact, that the proposed operation is for the convenience of the public.17 Basic convenience is the primary consideration for which a CPC
is issued, and that fact alone must be consistently borne in mind. Also, existing operators in subject routes must be given an opportunity to
offer proof and oppose the application. Therefore, an applicant must, at all times, be required to prove his capacity and capability to furnish
the service which he has undertaken to

render. 18 And all this will be possible only if a public hearing were conducted for that purpose.
Otherwise stated, the establishment of public need in favor of an applicant reverses well-settled and institutionalized judicial, quasi-judicial
and administrative procedures. It allows the party who initiates the proceedings to prove, by mere application, his affirmative allegations.
Moreover, the offending provisions of the LTFRB memorandum circular in question would in effect amend the Rules of Court by adding
another disputable presumption in the enumeration of 37 presumptions under Rule 131, Section 5 of the Rules of Court. Such usurpation of
this Court's authority cannot be countenanced as only this Court is mandated by law to promulgate rules concerning pleading, practice and
procedure. 19

Deregulation, while it may be ideal in certain situations, may not be ideal at all in our country given the present circumstances. Advocacy of
liberalized franchising and regulatory process is tantamount to an abdication by the government of its inherent right to exercise police power,
that is, the right of government to regulate public utilities for protection of the public and the utilities themselves.

While we recognize the authority of the DOTC and the LTFRB to issue administrative orders to regulate the transport sector, we find that
they committed grave abuse of discretion in issuing DOTC Department Order

No. 92-587 defining the policy framework on the regulation of transport services and LTFRB Memorandum Circular No. 92-009 promulgating
the implementing guidelines on DOTC Department Order No. 92-587, the said administrative issuances being amendatory and violative of
the Public Service Act and the Rules of Court. Consequently, we rule that the twenty (20%) per centum fare increase imposed by
respondent PBOAP on March 16, 1994 without the benefit of a petition and a public hearing is null and void and of no force and effect. No
grave abuse of discretion however was committed in the issuance of DOTC Memorandum Order No. 90-395 and DOTC Memorandum
dated October 8, 1992, the same being merely internal communications between administrative officers.

WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and the challenged administrative issuances and orders,
namely: DOTC Department Order No. 92-587, LTFRB Memorandum Circular

No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are hereby DECLARED contrary to law and invalid insofar as
they affect provisions therein (a) delegating to provincial bus and jeepney operators the authority to increase or decrease the duly
prescribed transportation fares; and (b) creating a presumption of public need for a service in favor of the applicant for a certificate of public
convenience and placing the burden of proving that there is no need for the proposed service to the oppositor.

The Temporary Restraining Order issued on June 20, 1994 is hereby MADE PERMANENT insofar as it enjoined the bus fare rate increase
granted under the provisions of the aforementioned administrative circulars, memoranda and/or orders declared invalid.

No pronouncement as to costs.

SO ORDERED.
CASE #7:

G.R. No. 124293 January 31, 2005

J.G. SUMMIT HOLDINGS, INC. v. COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its Chairman and Members; ASSET
PRIVATIZATION TRUST; and PHILYARDS HOLDINGS, INC.

PUNO, J.:

For resolution before this Court are two motions filed by the petitioner, J.G. Summit Holdings, Inc. for reconsideration of our Resolution
dated September 24, 2003 and to elevate this case to the Court En Banc. The petitioner questions the Resolution which reversed our
Decision of November 20, 2000, which in turn reversed and set aside a Decision of the Court of Appeals promulgated on July 18, 1995.

I. Facts

The undisputed facts of the case, as set forth in our Resolution of September 24, 2003, are as follows:

On January 27, 1997, the National Investment and Development Corporation (NIDC), a government corporation, entered into a Joint
Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the construction, operation and
management of the Subic National Shipyard, Inc. (SNS) which subsequently became the Philippine Shipyard and Engineering Corporation
(PHILSECO). Under the JVA, the NIDC and KAWASAKI will contribute ₱330 million for the capitalization of PHILSECO in the proportion of
60%-40% respectively. One of its salient features is the grant to the parties of the right of first refusal should either of them decide to sell,
assign or transfer its interest in the joint venture, viz:

1.4 Neither party shall sell, transfer or assign all or any part of its interest in SNS [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 or controlled by the
GOVERNMENT or by a KAWASAKI affiliate.

On November 25, 1986, NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank (PNB). Such interests
were subsequently transferred to the National Government pursuant to Administrative Order No. 14. On December 8, 1986, President
Corazon C. Aquino issued Proclamation No. 50 establishing the Committee on Privatization (COP) and the Asset Privatization Trust (APT)
to take title to, and possession of, conserve, manage and dispose of non-performing assets of the National Government. Thereafter, on
February 27, 1987, a trust agreement was entered into between the National Government and the APT wherein the latter was named the
trustee of the National Government's share in PHILSECO. In 1989, as a result of a quasi-reorganization of PHILSECO to settle its huge
obligations to PNB, the National Government's shareholdings in PHILSECO increased to 97.41% thereby reducing KAWASAKI's
shareholdings to 2.59%.

In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National Government's share
in PHILSECO to private entities. After a series of negotiations between the APT and KAWASAKI, they agreed that the latter's right of first
refusal under the JVA be "exchanged" for the right to top by five percent (5%) the highest bid for the said shares. They further agreed that
KAWASAKI would be entitled to name a company in which it was a stockholder, which could exercise the right to top. On September 7,
1990, KAWASAKI informed APT that Philyards Holdings, Inc. (PHI) 1 would exercise its right to top.

At the pre-bidding conference held on September 18, 1993, interested bidders were given copies of the JVA between NIDC and
KAWASAKI, and of the Asset Specific Bidding Rules (ASBR) drafted for the National Government's 87.6% equity share in PHILSECO. The
provisions of the ASBR were explained to the interested bidders who were notified that the bidding would be held on December 2, 1993. A
portion of the ASBR reads:

1.0 The subject of this Asset Privatization Trust (APT) sale through public bidding is the National Government's equity in PHILSECO
consisting of 896,869,942 shares of stock (representing 87.67% of PHILSECO's outstanding capital stock), which will be sold as a whole
block in accordance with the rules herein enumerated.

xxx xxx xxx

2.0 The highest bid, as well as the buyer, shall be subject to the final approval of both the APT Board of Trustees and the Committee on
Privatization (COP).

2.1 APT reserves the right in its sole discretion, to reject any or all bids.

3.0 This public bidding shall be on an Indicative Price Bidding basis. The Indicative price set for the National Government's 87.67% equity in
PHILSECO is PESOS: ONE BILLION THREE HUNDRED MILLION (₱1,300,000,000.00).

xxx xxx xxx

6.0 The highest qualified bid will be submitted to the APT Board of Trustees at its regular meeting following the bidding, for the purpose of
determining whether or not it should be endorsed by the APT Board of Trustees to the COP, and the latter approves the same. The 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.

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 APT's 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.

xxx xxx xxx

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 bidder's 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. . . .

At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc.2 submitted a bid of Two Billion and Thirty Million Pesos
(₱2,030,000,000.00) with an acknowledgment 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 APT's 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.

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 JGSMI's bid by 5% as specified in the bidding rules."

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.

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. 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 KAWASAKI/[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.

On November 20, 2000, this Court rendered x x x [a] 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. It
further ruled that a shipyard like PHILSECO is a public utility whose capitalization must be sixty percent (60%) Filipino-owned.
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. 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." Thus, this Court voided the transfer of the national government's 87.67% share in PHILSECO to
Philyard[s] Holdings, Inc., and upheld the right of JG Summit, as the highest bidder, to take title to the said shares, viz:
WHEREFORE, the instant petition for review on certiorari is GRANTED. The assailed Decision and Resolution of the Court of Appeals are
REVERSED and SET ASIDE. Petitioner is ordered to pay to APT its bid price of Two Billion Thirty Million Pesos (₱2,030,000,000.00), less
its bid deposit plus interests upon the finality of this Decision. In turn, APT is ordered to:

(a) accept the said amount of ₱2,030,000,000.00 less bid deposit and interests from petitioner;

(b) execute a Stock Purchase Agreement with petitioner;

(c) cause the issuance in favor of petitioner of the certificates of stocks representing 87.6% of PHILSECO's total capitalization;

(d) return to private respondent PHGI the amount of Two Billion One Hundred Thirty-One Million Five Hundred Thousand Pesos
(₱2,131,500,000.00); and

(e) cause the cancellation of the stock certificates issued to PHI.

SO ORDERED.

In separate Motions for Reconsideration, respondents submit[ted] three basic issues for x x x resolution: (1) Whether PHILSECO is a public
utility; (2) Whether under the 1977 JVA, KAWASAKI can exercise its right of first refusal only up to 40% of the total capitalization of
PHILSECO; and (3) Whether the right to top granted to KAWASAKI violates the principles of competitive bidding.3 (citations omitted)

In a Resolution dated September 24, 2003, this Court ruled in favor of the respondents. On the first issue, we held that Philippine Shipyard
and Engineering Corporation (PHILSECO) is not a public utility, as by nature, a shipyard is not a public utility4 and that no law declares a
shipyard to be a public utility.5 On the second issue, we found nothing in the 1977 Joint Venture Agreement (JVA) which prevents Kawasaki
Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) from acquiring more than 40% of PHILSECO’s total capitalization.6 On the final issue,
we held that the right to top granted to KAWASAKI in exchange for its right of first refusal did not violate the principles of competitive
bidding.7

On October 20, 2003, the petitioner filed a Motion for Reconsideration8 and a Motion to Elevate This Case to the Court En Banc.9 Public
respondents Committee on Privatization (COP) and Asset Privatization Trust (APT), and private respondent Philyards Holdings, Inc.
(PHILYARDS) filed their Comments on J.G. Summit Holdings, Inc.’s (JG Summit’s) Motion for Reconsideration and Motion to Elevate This
Case to the Court En Banc on January 29, 2004 and February 3, 2004, respectively.

II. Issues

Based on the foregoing, the relevant issues to resolve to end this litigation are the following:

1. Whether there are sufficient bases to elevate the case at bar to the Court en banc.

2. Whether the motion for reconsideration raises any new matter or cogent reason to warrant a reconsideration of this Court’s Resolution of
September 24, 2003.

Motion to Elevate this Case to the

Court En Banc

The petitioner prays for the elevation of the case to the Court en banc on the following grounds:

1. The main issue of the propriety of the bidding process involved in the present case has been confused with the policy issue of the
supposed fate of the shipping industry which has never been an issue that is determinative of this case.10

2. The present case may be considered under the Supreme Court Resolution dated February 23, 1984 which included among en banc
cases those involving a novel question of law and those where a doctrine or principle laid down by the Court en banc or in division may be
modified or reversed.11

3. There was clear executive interference in the judicial functions of the Court when the Honorable Jose Isidro Camacho, Secretary of
Finance, forwarded to Chief Justice Davide, a memorandum dated November 5, 2001, attaching a copy of the Foreign Chambers Report
dated October 17, 2001, which matter was placed in the agenda of the Court and noted by it in a formal resolution dated November 28,
2001.12
Opposing J.G. Summit’s motion to elevate the case en banc, PHILYARDS points out the petitioner’s inconsistency in previously opposing
PHILYARDS’ Motion to Refer the Case to the Court En Banc. PHILYARDS contends that J.G. Summit should now be estopped from asking
that the case be referred to the Court en banc. PHILYARDS further contends that the Supreme Court en banc is not an appellate court to
which decisions or resolutions of its divisions may be appealed citing Supreme Court Circular No. 2-89 dated February 7, 1989.13
PHILYARDS also alleges that there is no novel question of law involved in the present case as the assailed Resolution was based on
well-settled jurisprudence. Likewise, PHILYARDS stresses that the Resolution was merely an outcome of the motions for reconsideration
filed by it and the COP and APT and is "consistent with the inherent power of courts to ‘amend and control its process and orders so as to
make them conformable to law and justice.’ (Rule 135, sec. 5)"14 Private respondent belittles the petitioner’s allegations regarding the
change in ponente and the alleged executive interference as shown by former Secretary of Finance Jose Isidro Camacho’s memorandum
dated November 5, 2001 arguing that these do not justify a referral of the present case to the Court en banc.

In insisting that its Motion to Elevate This Case to the Court En Banc should be granted, J.G. Summit further argued that: its Opposition to
the Office of the Solicitor General’s Motion to Refer is different from its own Motion to Elevate; different grounds are invoked by the two
motions; there was unwarranted "executive interference"; and the change in ponente is merely noted in asserting that this case should be
decided by the Court en banc.15

We find no merit in petitioner’s contention that the propriety of the bidding process involved in the present case has been confused with the
policy issue of the fate of the shipping industry which, petitioner maintains, has never been an issue that is determinative of this case. The
Court’s Resolution of September 24, 2003 reveals a clear and definitive ruling on the propriety of the bidding process. In discussing whether
the right to top granted to KAWASAKI in exchange for its right of first refusal violates the principles of competitive bidding, we made an
exhaustive discourse on the rules and principles of public bidding and whether they were complied with in the case at bar.16 This Court
categorically ruled on the petitioner’s argument that PHILSECO, as a shipyard, is a public utility which should maintain a 60%-40%
Filipino-foreign equity ratio, as it was a pivotal issue. In doing so, we recognized the impact of our ruling on the shipbuilding industry which
was beyond avoidance.17

We reject petitioner’s argument that the present case may be considered under the Supreme Court Resolution dated February 23, 1984
which included among en banc cases those involving a novel question of law and those where a doctrine or principle laid down by the court
en banc or in division may be modified or reversed. The case was resolved based on basic principles of the right of first refusal in
commercial law and estoppel in civil law. Contractual obligations arising from rights of first refusal are not new in this jurisdiction and have
been recognized in numerous cases.18 Estoppel is too known a civil law concept to require an elongated discussion. Fundamental principles
on public bidding were likewise used to resolve the issues raised by the petitioner. To be sure, petitioner leans on the right to top in a public
bidding in arguing that the case at bar involves a novel issue. We are not swayed. The right to top was merely a condition or a reservation
made in the bidding rules which was fully disclosed to all bidding parties. In Bureau Veritas, represented by Theodor H. Hunermann v.
Office of the President, et al., 19 we dealt with this conditionality, viz:

x x x It must be stressed, as held in the case of A.C. Esguerra & Sons v. Aytona, et al., (L-18751, 28 April 1962, 4 SCRA 1245), that in an
"invitation to bid, there is a condition imposed upon the bidders to the effect that the bidding shall be subject to the right of the
government to reject any and all bids subject to its discretion. In the case at bar, the government has made its choice and unless
an unfairness or injustice is shown, the losing bidders have no cause to complain nor right to dispute that choice. This is a
well-settled doctrine in this jurisdiction and elsewhere."

The discretion to accept or reject a bid and award contracts is vested in the Government agencies entrusted with that function. The
discretion given to the authorities on this matter is of such wide latitude that the Courts will not interfere therewith, unless it is apparent that it
is used as a shield to a fraudulent award (Jalandoni v. NARRA, 108 Phil. 486 [1960]). x x x The exercise of this discretion is a policy
decision that necessitates prior inquiry, investigation, comparison, evaluation, and deliberation. This task can best be discharged by the
Government agencies concerned, not by the Courts. The role of the Courts is to ascertain whether a branch or instrumentality of the
Government has transgressed its constitutional boundaries. But the Courts will not interfere with executive or legislative discretion exercised
within those boundaries. Otherwise, it strays into the realm of policy decision-making.

It is only upon a clear showing of grave abuse of discretion that the Courts will set aside the award of a contract made by a government
entity. Grave abuse of discretion implies a capricious, arbitrary and whimsical exercise of power (Filinvest Credit Corp. v. Intermediate
Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155). The abuse of discretion must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform a duty enjoined by law, as to act at all in contemplation of law, where the power is
exercised in an arbitrary and despotic manner by reason of passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al[.], L-40867, 26
July 1988, 163 SCRA 489).

The facts in this case do not indicate any such grave abuse of discretion on the part of public respondents when they awarded the CISS
contract to Respondent SGS. In the "Invitation to Prequalify and Bid" (Annex "C," supra), the CISS Committee made an express
reservation of the right of the Government to "reject any or all bids or any part thereof or waive any defects contained thereon and
accept an offer most advantageous to the Government." It is a well-settled rule that where such reservation is made in an
Invitation to Bid, the highest or lowest bidder, as the case may be, is not entitled to an award as a matter of right (C & C
Commercial Corp. v. Menor, L-28360, 27 January 1983, 120 SCRA 112). Even the lowest Bid or any Bid may be rejected or, in the exercise
of sound discretion, the award may be made to another than the lowest bidder (A.C. Esguerra & Sons v. Aytona, supra, citing 43 Am. Jur.,
788). (emphases supplied)1awphi1.nét
Like the condition in the Bureau Veritas case, the right to top was a condition imposed by the government in the bidding rules which was
made known to all parties. It was a condition imposed on all bidders equally, based on the APT’s exercise of its discretion in
deciding on how best to privatize the government’s shares in PHILSECO. It was not a whimsical or arbitrary condition plucked from the
ether and inserted in the bidding rules but a condition which the APT approved as the best way the government could comply with its
contractual obligations to KAWASAKI under the JVA and its mandate of getting the most advantageous deal for the government. The right to
top had its history in the mutual right of first refusal in the JVA and was reached by agreement of the government and KAWASAKI.

Further, there is no "executive interference" in the functions of this Court by the mere filing of a memorandum by Secretary of Finance Jose
Isidro Camacho. The memorandum was merely "noted" to acknowledge its filing. It had no further legal significance. Notably too, the
assailed Resolution dated September 24, 2003 was decided unanimously by the Special First Division in favor of the respondents.

Again, we emphasize that a decision or resolution of a Division is that of the Supreme Court20 and the Court en banc is not an appellate
court to which decisions or resolutions of a Division may be appealed.21

For all the foregoing reasons, we find no basis to elevate this case to the Court en banc.

Motion for Reconsideration

Three principal arguments were raised in the petitioner’s Motion for Reconsideration. First, that a fair resolution of the case should be based
on contract law, not on policy considerations; the contracts do not authorize the right to top to be derived from the right of first refusal.22
Second, that neither the right of first refusal nor the right to top can be legally exercised by the consortium which is not the proper party
granted such right under either the JVA or the Asset Specific Bidding Rules (ASBR).23 Third, that the maintenance of the 60%-40%
relationship between the National Investment and Development Corporation (NIDC) and KAWASAKI arises from contract and from the
Constitution because PHILSECO is a landholding corporation and need not be a public utility to be bound by the 60%-40% constitutional
limitation.24

On the other hand, private respondent PHILYARDS asserts that J.G. Summit has not been able to show compelling reasons to warrant a
reconsideration of the Decision of the Court.25 PHILYARDS denies that the Decision is based mainly on policy considerations and points out
that it is premised on principles governing obligations and contracts and corporate law such as the rule requiring respect for contractual
stipulations, upholding rights of first refusal, and recognizing the assignable nature of contracts rights.26 Also, the ruling that shipyards are
not public utilities relies on established case law and fundamental rules of statutory construction. PHILYARDS stresses that KAWASAKI’s
right of first refusal or even the right to top is not limited to the 40% equity of the latter.27 On the landholding issue raised by J.G. Summit,
PHILYARDS emphasizes that this is a non-issue and even involves a question of fact. Even assuming that this Court can take cognizance of
such question of fact even without the benefit of a trial, PHILYARDS opines that landholding by PHILSECO at the time of the bidding is
irrelevant because what is essential is that ultimately a qualified entity would eventually hold PHILSECO’s real estate properties.28 Further,
given the assignable nature of the right of first refusal, any applicable nationality restrictions, including landholding limitations, would not
affect the right of first refusal itself, but only the manner of its exercise.29 Also, PHILYARDS argues that if this Court takes cognizance of J.G.
Summit’s allegations of fact regarding PHILSECO’s landholding, it must also recognize PHILYARDS’ assertions that PHILSECO’s
landholdings were sold to another corporation.30 As regards the right of first refusal, private respondent explains that KAWASAKI’s reduced
shareholdings (from 40% to 2.59%) did not translate to a deprivation or loss of its contractually granted right of first refusal.31 Also, the
bidding was valid because PHILYARDS exercised the right to top and it was of no moment that losing bidders later joined PHILYARDS in
raising the purchase price.32

In cadence with the private respondent PHILYARDS, public respondents COP and APT contend:

1. The conversion of the right of first refusal into a right to top by 5% does not violate any provision in the JVA between NIDC and
KAWASAKI.

2. PHILSECO is not a public utility and therefore not governed by the constitutional restriction on foreign ownership.

3. The petitioner is legally estopped from assailing the validity of the proceedings of the public bidding as it voluntarily submitted itself to the
terms of the ASBR which included the provision on the right to top.

4. The right to top was exercised by PHILYARDS as the nominee of KAWASAKI and the fact that PHILYARDS formed a consortium to raise
the required amount to exercise the right to top the highest bid by 5% does not violate the JVA or the ASBR.

5. The 60%-40% Filipino-foreign constitutional requirement for the acquisition of lands does not apply to PHILSECO because as admitted by
petitioner itself, PHILSECO no longer owns real property.

6. Petitioner’s motion to elevate the case to the Court en banc is baseless and would only delay the termination of this case.33

In a Consolidated Comment dated March 8, 2004, J.G. Summit countered the arguments of the public and private respondents in this wise:
1. The award by the APT of 87.67% shares of PHILSECO to PHILYARDS with losing bidders through the exercise of a right to top, which is
contrary to law and the constitution is null and void for being violative of substantive due process and the abuse of right provision in the Civil
Code.

a. The bidders[’] right to top was actually exercised by losing bidders.

b. The right to top or the right of first refusal cannot co-exist with a genuine competitive bidding.

c. The benefits derived from the right to top were unwarranted.

2. The landholding issue has been a legitimate issue since the start of this case but is shamelessly ignored by the respondents.

a. The landholding issue is not a non-issue.

b. The landholding issue does not pose questions of fact.

c. That PHILSECO owned land at the time that the right of first refusal was agreed upon and at the time of the bidding are most relevant.

d. Whether a shipyard is a public utility is not the core issue in this case.

3. Fraud and bad faith attend the alleged conversion of an inexistent right of first refusal to the right to top.

a. The history behind the birth of the right to top shows fraud and bad faith.

b. The right of first refusal was, indeed, "effectively useless."

4. Petitioner is not legally estopped to challenge the right to top in this case.

a. Estoppel is unavailing as it would stamp validity to an act that is prohibited by law or against public policy.

b. Deception was patent; the right to top was an attractive nuisance.

c. The 10% bid deposit was placed in escrow.

J.G. Summit’s insistence that the right to top cannot be sourced from the right of first refusal is not new and we have already ruled on the
issue in our Resolution of September 24, 2003. We upheld the mutual right of first refusal in the JVA.34 We also ruled that nothing in the JVA
prevents KAWASAKI from acquiring more than 40% of PHILSECO’s total capitalization.35 Likewise, nothing in the JVA or ASBR bars the
conversion of the right of first refusal to the right to top. In sum, nothing new and of significance in the petitioner’s pleading warrants a
reconsideration of our ruling.

Likewise, we already disposed of the argument that neither the right of first refusal nor the right to top can legally be exercised by the
consortium which is not the proper party granted such right under either the JVA or the ASBR. Thus, we held:

The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM Group, Insular Life Assurance, Mitsui and ICTSI), has joined
PHILYARDS in the latter's effort to raise ₱2.131 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 Government's shares in PHILSECO to
respondent.36

Further, we see no inherent illegality on PHILYARDS’ act in seeking funding from parties who were losing bidders. This is a purely
commercial decision over which the State should not interfere absent any legal infirmity. It is emphasized that the case at bar involves the
disposition of shares in a corporation which the government sought to privatize. As such, the persons with whom PHILYARDS desired to
enter into business with in order to raise funds to purchase the shares are basically its business. This is in contrast to a case involving a
contract for the operation of or construction of a government infrastructure where the identity of the buyer/bidder or financier constitutes an
important consideration. In such cases, the government would have to take utmost precaution to protect public interest by ensuring that the
parties with which it is contracting have the ability to satisfactorily construct or operate the infrastructure.
On the landholding issue, J.G. Summit submits that since PHILSECO is a landholding company, KAWASAKI could exercise its right of first
refusal only up to 40% of the shares of PHILSECO due to the constitutional prohibition on landholding by corporations with more than 40%
foreign-owned equity. It further argues that since KAWASAKI already held at least 40% equity in PHILSECO, the right of first refusal was
inutile and as such, could not subsequently be converted into the right to top. 37 Petitioner also asserts that, at present, PHILSECO
continues to violate the constitutional provision on landholdings as its shares are more than 40% foreign-owned.38 PHILYARDS admits that it
may have previously held land but had already divested such landholdings.39 It contends, however, that even if PHILSECO owned land, this
would not affect the right of first refusal but only the exercise thereof. If the land is retained, the right of first refusal, being a property right,
could be assigned to a qualified party. In the alternative, the land could be divested before the exercise of the right of first refusal. In the
case at bar, respondents assert that since the right of first refusal was validly converted into a right to top, which was exercised not by
KAWASAKI, but by PHILYARDS which is a Filipino corporation (i.e., 60% of its shares are owned by Filipinos), then there is no violation of
the Constitution.40 At first, it would seem that questions of fact beyond cognizance by this Court were involved in the issue. However, the
records show that PHILYARDS admits it had owned land up until the time of the bidding.41 Hence, the only issue is whether
KAWASAKI had a valid right of first refusal over PHILSECO shares under the JVA considering that PHILSECO owned land until the
time of the bidding and KAWASAKI already held 40% of PHILSECO’s equity.

We uphold the validity of the mutual rights of first refusal under the JVA between KAWASAKI and NIDC. First of all, the right of first refusal is
a property right of PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA. This right allows them to purchase the
shares of their co-shareholder before they are offered to a third party. The agreement of co-shareholders to mutually grant this right to
each other, by itself, does not constitute a violation of the provisions of the Constitution limiting land ownership to Filipinos and
Filipino corporations. As PHILYARDS correctly puts it, if PHILSECO still owns land, the right of first refusal can be validly assigned to a
qualified Filipino entity in order to maintain the 60%-40% ratio. This transfer, by itself, does not amount to a violation of the Anti-Dummy
Laws, absent proof of any fraudulent intent. The transfer could be made either to a nominee or such other party which the holder of the right
of first refusal feels it can comfortably do business with. Alternatively, PHILSECO may divest of its landholdings, in which case KAWASAKI,
in exercising its right of first refusal, can exceed 40% of PHILSECO’s equity. In fact, it can even be said that if the foreign shareholdings
of a landholding corporation exceeds 40%, it is not the foreign stockholders’ ownership of the shares which is adversely affected
but the capacity of the corporation to own land – that is, the corporation becomes disqualified to own land. This finds support under the
basic corporate law principle that the corporation and its stockholders are separate juridical entities. In this vein, the right of first refusal over
shares pertains to the shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land
cannot deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding
corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land.
This is the clear import of the following provisions in the Constitution:

Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries,
forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all
other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full
control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or
production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is
owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five
years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant.

xxx xxx xxx

Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals,
corporations, or associations qualified to acquire or hold lands of the public domain.42 (emphases supplied)

The petitioner further argues that "an option to buy land is void in itself (Philippine Banking Corporation v. Lui She, 21 SCRA 52 [1967]). The
right of first refusal granted to KAWASAKI, a Japanese corporation, is similarly void. Hence, the right to top, sourced from the right of first
refusal, is also void."43 Contrary to the contention of petitioner, the case of Lui She did not that say "an option to buy land is void in itself," for
we ruled as follows:

x x x To be sure, a lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real property on
condition that he is granted Philippine citizenship. As this Court said in Krivenko vs. Register of Deeds:

[A]liens are not completely excluded by the Constitution from the use of lands for residential purposes. Since their residence in the
Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution. Should
they desire to remain here forever and share our fortunes and misfortunes, Filipino citizenship is not impossible to acquire.
But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner cannot
sell or otherwise dispose of his property, this to last for 50 years, then it becomes clear that the arrangement is a virtual transfer
of ownership whereby the owner divests himself in stages not only of the right to enjoy the land (jus possidendi, jus utendi, jus
fruendi and jus abutendi) but also of the right to dispose of it (jus disponendi) — rights the sum total of which make up ownership.
It is just as if today the possession is transferred, tomorrow, the use, the next day, the disposition, and so on, until ultimately all
the rights of which ownership is made up are consolidated in an alien. And yet this is just exactly what the parties in this case did within
this pace of one year, with the result that Justina Santos'[s] ownership of her property was reduced to a hollow concept. If this can be done,
then the Constitutional ban against alien landholding in the Philippines, as announced in Krivenko vs. Register of Deeds, is indeed in
grave peril.44 (emphases supplied; Citations omitted)

In Lui She, the option to buy was invalidated because it amounted to a virtual transfer of ownership as the owner could not sell or dispose of
his properties. The contract in Lui She prohibited the owner of the land from selling, donating, mortgaging, or encumbering the property
during the 50-year period of the option to buy. This is not so in the case at bar where the mutual right of first refusal in favor of NIDC and
KAWASAKI does not amount to a virtual transfer of land to a non-Filipino. In fact, the case at bar involves a right of first refusal over
shares of stock while the Lui She case involves an option to buy the land itself. As discussed earlier, there is a distinction between the
shareholder’s ownership of shares and the corporation’s ownership of land arising from the separate juridical personalities of the corporation
and its shareholders.

We note that in its Motion for Reconsideration, J.G. Summit alleges that PHILSECO continues to violate the Constitution as its foreign equity
is above 40% and yet owns long-term leasehold rights which are real rights.45 It cites Article 415 of the Civil Code which includes in the
definition of immovable property, "contracts for public works, and servitudes and other real rights over immovable property."46 Any existing
landholding, however, is denied by PHILYARDS citing its recent financial statements.47 First, these are questions of fact, the veracity of
which would require introduction of evidence. The Court needs to validate these factual allegations based on competent and reliable
evidence. As such, the Court cannot resolve the questions they pose. Second, J.G. Summit misreads the provisions of the Constitution cited
in its own pleadings, to wit:

29.2 Petitioner has consistently pointed out in the past that private respondent is not a 60%-40% corporation, and this violates the
Constitution x x x The violation continues to this day because under the law, it continues to own real property…

xxx xxx xxx

32. To review the constitutional provisions involved, Section 14, Article XIV of the 1973 Constitution (the JVA was signed in 1977), provided:

"Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain."

32.1 This provision is the same as Section 7, Article XII of the 1987 Constitution.

32.2 Under the Public Land Act, corporations qualified to acquire or hold lands of the public domain are corporations at least 60% of
which is owned by Filipino citizens (Sec. 22, Commonwealth Act 141, as amended). (emphases supplied)

As correctly observed by the public respondents, the prohibition in the Constitution applies only to ownership of land.48 It does not extend
to immovable or real property as defined under Article 415 of the Civil Code. Otherwise, we would have a strange situation where the
ownership of immovable property such as trees, plants and growing fruit attached to the land49 would be limited to Filipinos and Filipino
corporations only.

III.

WHEREFORE, in view of the foregoing, the petitioner’s Motion for Reconsideration is DENIED WITH FINALITY and the decision appealed
from is AFFIRMED. The Motion to Elevate This Case to the Court En Banc is likewise DENIED for lack of merit.

SO ORDERED.
CASE #8:

G.R. No. 114222 April 6, 1995

FRANCISCO S. TATAD, JOHN H. OSMENA and RODOLFO G. BIAZON v. HON. JESUS B. GARCIA, JR., in his capacity as the
Secretary of the Department of Transportation and Communications, and EDSA LRT CORPORATION, LTD.

QUIASON, J.:

This is a petition under Rule 65 of the Revised Rules of Court to prohibit respondents from further implementing and enforcing the "Revised
and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" dated April 22, 1992, and the "Supplemental
Agreement to the 22 April 1992 Revised and Restated Agreement To Build, Lease and Transfer a Light Rail Transit System for EDSA" dated
May 6, 1993.

Petitioners Francisco S. Tatad, John H. Osmena and Rodolfo G. Biazon are members of the Philippine Senate and are suing in their
capacities as Senators and as taxpayers. Respondent Jesus B. Garcia, Jr. is the incumbent Secretary of the Department of Transportation
and Communications (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, a major thoroughfare in Metropolitan Manila, which shall
traverse the cities of Pasay, Quezon, Mandaluyong and Makati. The plan, referred to as EDSA Light Rail Transit III (EDSA LRT III), was
intended to provide a mass transit system along EDSA and alleviate the congestion and growing transportation problem in the metropolis.

On March 3, 1990, a letter of intent was sent by the Eli Levin Enterprises, Inc., represented by Elijahu Levin to DOTC Secretary Oscar
Orbos, proposing to construct the EDSA LRT III on a Build-Operate-Transfer (BOT) basis.

On March 15, 1990, Secretary Orbos invited Levin to send a technical team to discuss the project with DOTC.

On July 9, 1990, Republic Act No. 6957 entitled "An Act Authorizing the Financing, Construction, Operation and Maintenance of
Infrastructure Projects by the Private Sector, and For Other Purposes," was signed by President Corazon C. Aquino. Referred to as the
Build-Operate-Transfer (BOT) Law, it took effect on October 9, 1990.

Republic Act No. 6957 provides for two schemes for the financing, construction and operation of government projects through private
initiative and investment: Build-Operate-Transfer (BOT) or Build-Transfer (BT).

In accordance with the provisions of R.A. No. 6957 and to set the EDSA LRT III project underway, DOTC, on January 22, 1991 and March
14, 1991, issued Department Orders Nos. 91-494 and 91-496, respectively creating the Prequalification Bids and Awards Committee
(PBAC) and the Technical Committee.

After its constitution, the PBAC issued guidelines for the prequalification of contractors for the financing and implementation of the project
The notice, advertising the prequalification of bidders, was published in three newspapers of general circulation once a week for three
consecutive weeks starting February 21, 1991.

The deadline set for submission of prequalification documents was March 21, 1991, later extended to April 1, 1991. Five groups responded
to the invitation namely, ABB Trazione of Italy, Hopewell Holdings Ltd. of Hongkong, Mansteel International of Mandaue, Cebu, Mitsui & Co.,
Ltd. of Japan, and EDSA LRT Consortium, composed of ten foreign and domestic corporations: namely, Kaiser Engineers International, Inc.,
ACER Consultants (Far East) Ltd. and Freeman Fox, Tradeinvest/CKD Tatra of the Czech and Slovak Federal Republics, TCGI Engineering
All Asia Capital and Leasing Corporation, The Salim Group of Jakarta, E. L. Enterprises, Inc., A.M. Oreta & Co. Capitol Industrial
Construction Group, Inc, and F. F. Cruz & co., Inc.

On the last day for submission of prequalification documents, the prequalification criteria proposed by the Technical Committee were
adopted by the PBAC. The criteria totalling 100 percent, are as follows: (a) Legal aspects — 10 percent; (b) Management/Organizational
capability — 30 percent; and (c) Financial capability — 30 percent; and (d) Technical capability — 30 percent (Rollo, p. 122).

On April 3, 1991, the Committee, charged under the BOT Law with the formulation of the Implementation Rules and Regulations thereof,
approved the same.

After evaluating the prequalification, bids, the PBAC issued a Resolution on May 9, 1991 declaring that of the five applicants, only the EDSA
LRT Consortium "met the requirements of garnering at least 21 points per criteria [sic], except for Legal Aspects, and obtaining an over-all
passing mark of at least 82 points" (Rollo, p. 146). The Legal Aspects referred to provided that the BOT/BT contractor-applicant meet the
requirements specified in the Constitution and other pertinent laws (Rollo, p. 114).
Subsequently, Secretary Orbos was appointed Executive Secretary to the President of the Philippines and was replaced by Secretary Pete
Nicomedes Prado. The latter sent to President Aquino two letters dated May 31, 1991 and June 14, 1991, respectively recommending the
award of the EDSA LRT III project to the sole complying bidder, the EDSA LRT Consortium, and requesting for authority to negotiate with
the said firm for the contract pursuant to paragraph 14(b) of the Implementing Rules and Regulations of the BOT Law (Rollo, pp. 298-302).

In July 1991, Executive Secretary Orbos, acting on instructions of the President, issued a directive to the DOTC to proceed with the
negotiations. On July 16, 1991, the EDSA LRT Consortium submitted its bid proposal to DOTC.

Finding this proposal to be in compliance with the bid requirements, DOTC and respondent EDSA LRT Corporation, Ltd., in substitution of
the EDSA LRT Consortium, entered into an "Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" under the terms
of the BOT Law (Rollo, pp. 147-177).

Secretary Prado, thereafter, requested presidential approval of the contract.

In a letter dated March 13, 1992, Executive Secretary Franklin Drilon, who replaced Executive Secretary Orbos, informed Secretary Prado
that the President could not grant the requested approval for the following reasons: (1) that DOTC failed to conduct actual public bidding in
compliance with Section 5 of the BOT Law; (2) that the law authorized public bidding as the only mode to award BOT projects, and the
prequalification proceedings was not the public bidding contemplated under the law; (3) that Item 14 of the Implementing Rules and
Regulations of the BOT Law which authorized negotiated award of contract in addition to public bidding was of doubtful legality; and (4) that
congressional approval of the list of priority projects under the BOT or BT Scheme provided in the law had not yet been granted at the time
the contract was awarded (Rollo, pp. 178-179).

In view of the comments of Executive Secretary Drilon, the DOTC and private respondents re-negotiated the agreement. On April 22, 1992,
the parties entered into a "Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" (Rollo, pp.
47-78) inasmuch as "the parties [are] cognizant of the fact the DOTC has full authority to sign the Agreement without need of approval by
the President pursuant to the provisions of Executive Order No. 380 and that certain events [had] supervened since November 7, 1991
which necessitate[d] the revision of the Agreement" (Rollo, p. 51). On May 6, 1992, DOTC, represented by Secretary Jesus Garcia vice
Secretary Prado, and private respondent entered into a "Supplemental Agreement to the 22 April 1992 Revised and Restated Agreement to
Build, Lease and Transfer a Light Rail Transit System for EDSA" so as to "clarify their respective rights and responsibilities" and to submit
[the] Supplemental Agreement to the President, of the Philippines for his approval" (Rollo, pp. 79-80).

Secretary Garcia submitted the two Agreements to President Fidel V. Ramos for his consideration and approval. In a Memorandum to
Secretary Garcia on May 6, 1993, approved the said Agreements, (Rollo, p. 194).

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, or 150 million a year to be achieved-through 54 such vehicles operating
simultaneously. The EDSA LRT III will run at grade, or street level, on the mid-section of EDSA for a distance of 17.8 kilometers from F.B.
Harrison, Pasay City to North Avenue, Quezon City. The system will have its own power facility (Revised and Restated Agreement, Sec. 2.3
(ii); Rollo p. 55). It will also have thirteen (13) passenger stations and one depot in 16-hectare government property at North Avenue
(Supplemental Agreement, Sec. 11; Rollo, pp. 91-92).

Private respondents shall undertake and finance the entire project required for a complete operational light rail transit system (Revised and
Restated Agreement, Sec. 4.1; Rollo, p. 58). Target completion date is 1,080 days or approximately three years from the implementation
date of the contract inclusive of mobilization, site works, initial and final testing of the system (Supplemental Agreement, Sec. 5; Rollo, p.
83). Upon full or partial completion and viability thereof, private respondent shall deliver the use and possession of the completed portion to
DOTC which shall operate the same (Supplemental Agreement, Sec. 5; Revised and Restated Agreement, Sec. 5.1; Rollo, pp. 61-62, 84).
DOTC shall pay private respondent rentals on a 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 (Supplemental Agreement, Sec. 6; Rollo, pp.
85-86) As agreed upon, private respondent's 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 (Revised and Restated Agreement, Sec. 1, p. 5; Rollo, p. 54). 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 U.S. $1.00 (Revised
and Restated Agreement, Sec. 11.1; Rollo, p. 67).

On May 5, 1994, R.A. No. 7718, an "Act Amending Certain Sections of Republic Act No. 6957, Entitled "An Act Authorizing the Financing,
Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes" was signed into law by
the President. The law was published in two newspapers of general circulation on May 12, 1994, and took effect 15 days thereafter or on
May 28, 1994. The law expressly recognizes BLT scheme and allows direct negotiation of BLT contracts.

II

In their petition, petitioners argued that:

(1) THE AGREEMENT OF APRIL 22, 1992, AS AMENDED BY THE SUPPLEMENTAL AGREEMENT OF MAY 6, 1993, INSOFAR AS IT
GRANTS EDSA LRT CORPORATION, LTD., A FOREIGN CORPORATION, THE OWNERSHIP OF EDSA LRT III, A PUBLIC UTILITY,
VIOLATES THE CONSTITUTION AND, HENCE, IS UNCONSTITUTIONAL;
(2) THE BUILD-LEASE-TRANSFER SCHEME PROVIDED IN THE AGREEMENTS IS NOT DEFINED NOR RECOGNIZED IN R.A. NO.
6957 OR ITS IMPLEMENTING RULES AND REGULATIONS AND, HENCE, IS ILLEGAL;

(3) THE AWARD OF THE CONTRACT ON A NEGOTIATED BASIS VIOLATES R; A. NO. 6957 AND, HENCE, IS UNLAWFUL;

(4) THE AWARD OF THE CONTRACT IN FAVOR OF RESPONDENT EDSA LRT CORPORATION, LTD. VIOLATES THE
REQUIREMENTS PROVIDED IN THE IMPLEMENTING RULES AND REGULATIONS OF THE BOT LAW AND, HENCE, IS ILLEGAL;

(5) THE AGREEMENTS VIOLATE EXECUTIVE ORDER NO 380 FOR THEIR FAILURE TO BEAR PRESIDENTIAL APPROVAL AND,
HENCE, ARE ILLEGAL AND INEFFECTIVE; AND

(6) THE AGREEMENTS ARE GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT ( Rollo, pp. 15-16).

Secretary Garcia and private respondent filed their comments separately and claimed that:

(1) Petitioners are not the real parties-in-interest and have no legal standing to institute the present petition;

(2) The writ of prohibition is not the proper remedy and the petition requires ascertainment of facts;

(3) The scheme adopted in the Agreements is actually a build-transfer scheme allowed by the BOT Law;

(4) The nationality requirement for public utilities mandated by the Constitution does not apply to private respondent;

(5) The Agreements executed by and between respondents have been approved by President Ramos and are not disadvantageous to the
government;

(6) The award of the contract to private respondent through negotiation and not public bidding is allowed by the BOT Law; and

(7) Granting that the BOT Law requires public bidding, this has been amended by R.A No. 7718 passed by the Legislature On May 12,
1994, which provides for direct negotiation as a mode of award of infrastructure projects.

III

Respondents claimed that petitioners had no legal standing to initiate the instant action. Petitioners, however, countered that the action was
filed by them in their capacity as Senators and as taxpayers.

The prevailing doctrines in taxpayer's suits are to allow taxpayers to question contracts entered into by the national government or
government-owned or controlled corporations allegedly in contravention of the law (Kilosbayan, Inc. v. Guingona, 232 SCRA 110 [1994]) and
to disallow the same when only municipal contracts are involved (Bugnay Construction and Development Corporation v. Laron, 176 SCRA.
240 [1989]).

For as long as the ruling in Kilosbayan on locus standi is not reversed, we have no choice but to follow it and uphold the legal standing of
petitioners as taxpayers to institute the present action.

IV

In the main, petitioners asserted that the Revised and Restated Agreement of April 22, 1992 and the Supplemental Agreement of May 6,
1993 are unconstitutional and invalid for the following reasons:

(1) 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;

(2) the Build-Lease-Transfer (BLT) scheme provided in the agreements is not the BOT or BT Scheme under the law;

(3) the contract to construct the EDSA LRT III was awarded to private respondent not through public bidding which is the only mode of
awarding infrastructure projects under the BOT law; and

(4) the agreements are grossly disadvantageous to the government.

1. Private respondent EDSA LRT Corporation, Ltd. to whom the contract to construct the EDSA LRT III was awarded by public respondent,
is admittedly a foreign corporation "duly incorporated and existing under the laws of Hongkong" (Rollo, pp. 50, 79). There is also no dispute
that once the EDSA LRT III is constructed, private respondent, as lessor, will turn it over to DOTC, as lessee, for the latter to operate the
system and pay rentals for said use.

The question posed by petitioners is:

Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III; a public utility? ( Rollo, p. 17).

The phrasing of the question is erroneous; it is loaded. 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 (Iloilo Ice
& Cold Storage Co. v. Public Service Board, 44 Phil. 551, 557 558 [1923]).

The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However, it does not require a franchise
before one can own the facilities needed to operate a public utility so long as it does not operate them 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 fifty years . . .
(Emphasis supplied).

In law, there is a clear distinction between the "operation" of a public utility and the ownership of the facilities and equipment used to serve
the public.

Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is completely subjected to his will in everything
not prohibited by law or the concurrence with the rights of another (Tolentino, II Commentaries and Jurisprudence on the Civil Code of the
Philippines 45 [1992]).

The exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated and used to serve the public as
a public utility unless the operator has a franchise. The operation of a rail system as a public utility includes the transportation of passengers
from one point to another point, their loading and unloading at designated places and the movement of the trains at pre-scheduled times (cf.
Arizona Eastern R.R. Co. v. J.A.. Matthews, 20 Ariz 282, 180 P.159, 7 A.L.R. 1149 [1919] ;United States Fire Ins. Co. v. Northern P.R. Co.,
30 Wash 2d. 722, 193 P. 2d 868, 2 A.L.R. 2d 1065 [1948]).

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.

This dichotomy between the operation of a public utility and the ownership of the facilities used to serve the public can be very well
appreciated when we consider the transportation industry. Enfranchised airline and shipping companies may lease their aircraft and vessels
instead of owning them themselves.

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 (Revised and Restated Agreement, Sec. 3.2; Rollo, p. 57). 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 way 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 (Revised and Restated Agreement, Secs. 3.2, 5.1 and 5.2; Rollo, pp. 57-58, 61-62). Technical maintenance consists of
providing (1) repair and maintenance facilities for the depot and rail lines, services for routine clearing and security; and (2) producing and
distributing maintenance manuals and drawings for the entire system (Revised and Restated Agreement, Annex F).

Private respondent shall also train DOTC personnel for familiarization with the operation, use, maintenance and repair of the rolling stock,
power plant, substations, electrical, signaling, communications and all other equipment as supplied in the agreement (Revised and Restated
Agreement, Sec. 10; Rollo, pp. 66-67). Training consists of theoretical and live training of DOTC operational personnel which includes actual
driving of light rail vehicles under simulated operating conditions, control of operations, dealing with emergencies, collection, counting and
securing cash from the fare collection system (Revised and Restated Agreement, Annex E, Secs. 2-3). Personnel of DOTC will work under
the direction and control of private respondent only during training (Revised and Restated Agreement, Annex E, Sec. 3.1). The training
objectives, however, shall be such that upon completion of the EDSA LRT III and upon opening of normal revenue operation, DOTC shall
have in their employ personnel capable of undertaking training of all new and replacement personnel (Revised and Restated Agreement,
Annex E Sec. 5.1). In other words, by the end of the three-year construction period and upon commencement of normal revenue operation,
DOTC shall be able to operate the EDSA LRT III on its own and train all new personnel by itself.

Fees for private respondent' s services shall be included in the rent, which likewise includes the project cost, cost of replacement of plant
equipment and spare parts, investment and financing cost, plus a reasonable rate of return thereon (Revised and Restated Agreement, Sec.
1; Rollo, p. 54).
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 (Revised and Restated Agreement, Secs. 12.1
and 12.2; Rollo, p. 68).

In sum, private respondent will not run the light rail vehicles and collect fees from the riding public. It will have no dealings with the public
and the public will have no right to demand any services from it.

It is well to point out that the role of private respondent as lessor during the lease period must be distinguished from the role of the Philippine
Gaming Management Corporation (PGMC) in the case of Kilosbayan Inc. v. Guingona, 232 SCRA 110 (1994). Therein, the Contract of
Lease between PGMC and the Philippine Charity Sweepstakes Office (PCSO) was actually a collaboration or joint venture agreement
prescribed under the charter of the PCSO. In the Contract of Lease; PGMC, the lessor obligated itself to build, at its own expense, all the
facilities necessary to operate and maintain a nationwide on-line lottery system from whom PCSO was to lease the facilities and operate the
same. Upon due examination of the contract, the Court found that PGMC's participation was not confined to the construction and setting up
of the on-line lottery system. It spilled over to the actual operation thereof, becoming indispensable to the pursuit, conduct, administration
and control of the highly technical and sophisticated lottery system. In effect, the PCSO leased out its franchise to PGMC which actually
operated and managed the same.

Indeed, a mere owner and lessor of the facilities used by a public utility is not a public utility (Providence and W.R. Co. v. United States, 46
F. 2d 149, 152 [1930]; Chippewa Power Co. v. Railroad Commission of Wisconsin, 205 N.W. 900, 903, 188 Wis. 246 [1925]; Ellis v.
Interstate Commerce Commission, Ill 35 S. Ct. 645, 646, 237 U.S. 434, 59 L. Ed. 1036 [1914]). Neither are owners of tank, refrigerator,
wine, poultry and beer cars who supply cars under contract to railroad companies considered as public utilities (Crystal Car Line v. State Tax
Commission, 174 p. 2d 984, 987 [1946]).

Even the mere formation of a public utility corporation does not ipso facto characterize the corporation as one operating a public utility. The
moment for determining the requisite Filipino nationality is when the entity applies for a franchise, certificate or any other form of
authorization for that purpose (People v. Quasha, 93 Phil. 333 [1953]).

2. Petitioners further assert that the BLT scheme under the Agreements in question is not recognized in the BOT Law and its Implementing
Rules and Regulations.

Section 2 of the BOT Law defines the BOT and BT schemes as follows:

(a) Build-operate-and-transfer scheme — A contractual arrangement whereby the contractor undertakes the construction including
financing, of a given infrastructure facility, and the operation and maintenance thereof. The contractor operates the facility over a fixed term
during which it is allowed to charge facility users appropriate tolls, fees, rentals and charges sufficient to enable the contractor to recover its
operating and maintenance expenses and its investment in the project plus a reasonable rate of return thereon. The contractor transfers the
facility to the government agency or local government unit concerned at the end of the fixed term which shall not exceed fifty (50) years. For
the construction stage, the contractor may obtain financing from foreign and/or domestic sources and/or engage the services of a foreign
and/or Filipino constructor [sic]: Provided, That the ownership structure of the contractor of an infrastructure facility whose operation requires
a public utility franchise must be in accordance with the Constitution: Provided, however, That in the case of corporate investors in the
build-operate-and-transfer corporation, the citizenship of each stockholder in the corporate investors shall be the basis for the computation
of Filipino equity in the said corporation: Provided, further, That, in the case of foreign constructors [sic], Filipino labor shall be employed or
hired in the different phases of the construction where Filipino skills are available: Provided, furthermore, that the financing of a foreign or
foreign-controlled contractor from Philippine government financing institutions shall not exceed twenty percent (20%) of the total cost of the
infrastructure facility or project: Provided, finally, That financing from foreign sources shall not require a guarantee by the Government or by
government-owned or controlled corporations. The build-operate-and-transfer scheme shall include a supply-and-operate situation which is
a contractual agreement whereby the supplier of equipment and machinery for a given infrastructure facility, if the interest of the
Government so requires, operates the facility providing in the process technology transfer and training to Filipino nationals.

(b) Build-and-transfer scheme — "A contractual arrangement whereby the contractor undertakes the construction including financing, of a
given infrastructure facility, and its turnover after completion to the government agency or local government unit concerned which shall pay
the contractor its total investment expended on the project, plus a reasonable rate of return thereon. This arrangement may be employed in
the construction of any infrastructure project including critical facilities which for security or strategic reasons, must be operated directly by
the government (Emphasis supplied).

The BOT scheme is expressly defined as one where the contractor undertakes the construction and financing in infrastructure facility, and
operates and maintains the same. The contractor operates the facility for a fixed period during which it may recover its expenses and
investment in the project plus a reasonable rate of return thereon. After the expiration of the agreed term, the contractor transfers the
ownership and operation of the project to the government.
In the BT scheme, the contractor undertakes the construction and financing of the facility, but after completion, the ownership and operation
thereof are turned over to the government. The government, in turn, shall pay the contractor its total investment on the project in addition to
a reasonable rate of return. If payment is to be effected through amortization payments by the government infrastructure agency or local
government unit concerned, this shall be made in accordance with a scheme proposed in the bid and incorporated in the contract (R.A. No.
6957, Sec. 6).

Emphasis must be made that under the BOT scheme, the owner of the infrastructure facility must comply with the citizenship requirement of
the Constitution on the operation of a public utility. No such a requirement is imposed in the BT scheme.

There is no mention in the BOT Law that the BOT and BT schemes bar any other arrangement for the payment by the government of the
project cost. The law must not be read in such a way as to rule out or unduly restrict any variation within the context of the two schemes.
Indeed, no statute can be enacted to anticipate and provide all the fine points and details for the multifarious and complex situations that
may be encountered in enforcing the law (Director of Forestry v. Munoz, 23 SCRA 1183 [1968]; People v. Exconde, 101 Phil. 1125 [1957];
United States v. Tupasi Molina, 29 Phil. 119 [1914]).

The BLT scheme in the challenged agreements is but a variation of the BT scheme under the law.

As a matter of fact, the burden on the government in raising funds to pay for the project is made lighter by allowing it to amortize payments
out of the income from the operation of the LRT System.

In form and substance, the challenged agreements provide that rentals are to be paid on a monthly basis according to a schedule of rates
through and under the terms of a confirmed Irrevocable Revolving Letter of Credit (Supplemental Agreement, Sec. 6; Rollo, p. 85). At the
end of 25 years and when full payment shall have been made to and received by private respondent, it shall transfer to DOTC, free from any
lien or encumbrances, all its title to, rights and interest in, the project for only U.S. $1.00 (Revised and Restated Agreement, Sec. 11.1;
Supplemental Agreement, Sec; 7; Rollo, pp. 67, .87).

A lease is a contract where one of the parties binds himself to give to another the enjoyment or use of a thing for a certain price and for a
period which may be definite or indefinite but not longer than 99 years (Civil Code of the Philippines, Art. 1643). There is no transfer of
ownership at the end of the lease period. But if the parties stipulate that title to the leased premises shall be transferred to the lessee at the
end of the lease period upon the payment of an agreed sum, the lease becomes a lease-purchase agreement.

Furthermore, it is of no significance that the rents shall be paid in United States currency, not Philippine pesos. The EDSA LRT III Project is
a high priority project certified by Congress and the National Economic and Development Authority as falling under the Investment Priorities
Plan of Government (Rollo, pp. 310-311). It is, therefore, outside the application of the Uniform Currency Act (R.A. No. 529), which reads as
follows:

Sec. 1. — Every provision contained in, or made with respect to, any domestic obligation to wit, any obligation contracted in the Philippines
which provisions purports to give the obligee the right to require payment in gold or in a particular kind of coin or currency other than
Philippine currency or in an amount of money of the Philippines measured thereby, be as it is hereby declared against public policy, and null,
void, and of no effect, and no such provision shall be contained in, or made with respect to, any obligation hereafter incurred. The above
prohibition shall not apply to (a) . . .; (b) transactions affecting high-priority economic projects for agricultural, industrial and power
development as may be determined by

the National Economic Council which are financed by or through foreign funds; . . . .

3. The fact that the contract for the construction of the EDSA LRT III was awarded through negotiation and before congressional approval
on January 22 and 23, 1992 of the List of National Projects to be undertaken by the private sector pursuant to the BOT Law (Rollo, pp.
309-312) does not suffice to invalidate the award.

Subsequent congressional approval of the list including "rail-based projects packaged with commercial development opportunities" (Rollo, p.
310) under which the EDSA LRT III projects falls, amounts to a ratification of the prior award of the EDSA LRT III contract under the BOT
Law.

Petitioners insist that the prequalifications process which led to the negotiated award of the contract appears to have been rigged from the
very beginning to do away with the usual open international public bidding where qualified internationally known applicants could fairly
participate.

The records show that only one applicant passed the prequalification process. Since only one was left, to conduct a public bidding in
accordance with Section 5 of the BOT Law for that lone participant will be an absurb and pointless exercise (cf. Deloso v. Sandiganbayan,
217 SCRA 49, 61 [1993]).

Contrary to the comments of the Executive Secretary Drilon, Section 5 of the BOT Law in relation to Presidential Decree No. 1594 allows
the negotiated award of government infrastructure projects.
Presidential Decree No. 1594, "Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts," allows the
negotiated award of government projects in exceptional cases. Sections 4 of the said law reads as follows:

Bidding. — Construction projects shall generally be undertaken by contract after competitive public bidding. Projects may be undertaken by
administration or force account or by negotiated contract only in exceptional cases where time is of the essence, or where there is lack of
qualified bidders or contractors, or where there is conclusive evidence that greater economy and efficiency would be achieved through this
arrangement, and in accordance with provision of laws and acts on the matter, subject to the approval of the Minister of Public Works and
Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case may be, if the project cost is
less than P1 Million, and the President of the Philippines, upon recommendation of the Minister, if the project cost is P1 Million or more
(Emphasis supplied).

xxx xxx xxx

Indeed, where there is a lack of qualified bidders or contractors, the award of government infrastructure contracts may he made by
negotiation. Presidential Decree No. 1594 is the general law on government infrastructure contracts while the BOT Law governs particular
arrangements or schemes aimed at encouraging private sector participation in government infrastructure projects. The two laws are not
inconsistent with each other but are in pari materia and should be read together accordingly.

In the instant case, if the prequalification process was actually tainted by foul play, one wonders why none of the competing firms ever
brought the matter before the PBAC, or intervened in this case before us (cf. Malayan Integrated Industries Corp. v. Court of Appeals, 213
SCRA 640 [1992]; Bureau Veritas v. Office of the President, 205 SCRA 705 [1992]).

The challenged agreements have been approved by President Ramos himself. Although then Executive Secretary Drilon may have
disapproved the "Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA," there is nothing in our laws that prohibits
parties to a contract from renegotiating and modifying in good faith the terms and conditions thereof so as to meet legal, statutory and
constitutional requirements. Under the circumstances, to require the parties to go back to step one of the prequalification process would just
be an idle ceremony. Useless bureaucratic "red tape" should be eschewed because it discourages private sector participation, the "main
engine" for national growth and development (R.A. No. 6957, Sec. 1), and renders the BOT Law nugatory.

Republic Act No. 7718 recognizes and defines a BLT scheme in Section 2 thereof as:

(e) Build-lease-and-transfer — A contractual arrangement whereby a project proponent is authorized to finance and construct an
infrastructure or development facility and upon its completion turns it over to the government agency or local government unit concerned on
a lease arrangement for a fixed period after which ownership of the facility is automatically transferred to the government unit concerned.

Section 5-A of the law, which expressly allows direct negotiation of contracts, provides:

Direct Negotiation of Contracts. — Direct negotiation shall be resorted to when there is only one complying bidder left as defined hereunder.

(a) If, after advertisement, only one contractor applies for prequalification and it meets the prequalification requirements, after which it is
required to submit a bid proposal which is subsequently found by the agency/local government unit (LGU) to be complying.

(b) If, after advertisement, more than one contractor applied for prequalification but only one meets the prequalification requirements, after
which it submits bid/proposal which is found by the agency/local government unit (LGU) to be complying.

(c) If, after prequalification of more than one contractor only one submits a bid which is found by the agency/LGU to be complying.

(d) If, after prequalification, more than one contractor submit bids but only one is found by the agency/LGU to be complying. Provided, That,
any of the disqualified prospective bidder [sic] may appeal the decision of the implementing agency, agency/LGUs prequalification bids and
awards committee within fifteen (15) working days to the head of the agency, in case of national projects or to the Department of the Interior
and Local Government, in case of local projects from the date the disqualification was made known to the disqualified bidder: Provided,
furthermore, That the implementing agency/LGUs concerned should act on the appeal within forty-five (45) working days from receipt
thereof.

Petitioners' claim that the BLT scheme and direct negotiation of contracts are not contemplated by the BOT Law has now been rendered
moot and academic by R.A. No. 7718. Section 3 of this law authorizes all government infrastructure agencies, government-owned and
controlled corporations and local government units to enter into contract with any duly prequalified proponent for the financing, construction,
operation and maintenance of any financially viable infrastructure or development facility through a BOT, BT, BLT, BOO
(Build-own-and-operate), CAO (Contract-add-operate), DOT (Develop-operate-and-transfer), ROT (Rehabilitate-operate-and-transfer), and
ROO (Rehabilitate-own-operate) (R.A. No. 7718, Sec. 2 [b-j]).

From the law itself, once and applicant has prequalified, it can enter into any of the schemes enumerated in Section 2 thereof, including a
BLT arrangement, enumerated and defined therein (Sec. 3).
Republic Act No. 7718 is a curative statute. It is intended to provide financial incentives and "a climate of minimum government regulations
and procedures and specific government undertakings in support of the private sector" (Sec. 1). A curative statute makes valid that which
before enactment of the statute was invalid. Thus, whatever doubts and alleged procedural lapses private respondent and DOTC may have
engendered and committed in entering into the questioned contracts, these have now been cured by R.A. No. 7718 (cf. Development Bank
of the Philippines v. Court of Appeals, 96 SCRA 342 [1980]; Santos V. Duata, 14 SCRA 1041 [1965]; Adong V. Cheong Seng Gee, 43 Phil.
43 [1922].

4. Lastly, petitioners claim that the agreements are grossly disadvantageous to the government because the rental rates are excessive and
private respondent's development rights over the 13 stations and the depot will rob DOTC of the best terms during the most productive
years of the project.

It must be noted that as part of the EDSA LRT III project, private respondent has been granted, for a period of 25 years, exclusive rights
over the depot and the air space above the stations for development into commercial premises for lease, sublease, transfer, or advertising
(Supplemental Agreement, Sec. 11; Rollo, pp. 91-92). For and in consideration of these development rights, private respondent shall pay
DOTC in Philippine currency guaranteed revenues generated therefrom in the amounts set forth in the Supplemental Agreement (Sec. 11;
Rollo, p. 93). In the event that DOTC shall be unable to collect the guaranteed revenues, DOTC shall be allowed to deduct any shortfalls
from the monthly rent due private respondent for the construction of the EDSA LRT III (Supplemental Agreement, Sec. 11; Rollo, pp. 93-94).
All rights, titles, interests and income over all contracts on the commercial spaces shall revert to DOTC upon expiration of the 25-year
period. (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92).

The terms of the agreements were arrived at after a painstaking study by DOTC. The determination by the proper administrative agencies
and officials who have acquired expertise, specialized skills and knowledge in the performance of their functions should be accorded
respect absent any showing of grave abuse of discretion (Felipe Ysmael, Jr. & Co. v. Deputy Executive Secretary, 190 SCRA 673 [1990];
Board of Medical Education v. Alfonso, 176 SCRA 304 [1989]).

Government officials are presumed to perform their functions with regularity and strong evidence is necessary to rebut this presumption.
Petitioners have not presented evidence on the reasonable rentals to be paid by the parties to each other. The matter of valuation is an
esoteric field which is better left to the experts and which this Court is not eager to undertake.

That the grantee of a government contract will profit therefrom and to that extent the government is deprived of the profits if it engages in the
business itself, is not worthy of being raised as an issue. In all cases where a party enters into a contract with the government, he does so,
not out of charity and not to lose money, but to gain pecuniarily.

5. Definitely, the agreements in question have been entered into by DOTC in the exercise of its governmental function. DOTC is the primary
policy, planning, programming, regulating and administrative entity of the Executive branch of government in the promotion, development
and regulation of dependable and coordinated networks of transportation and communications systems as well as in the fast, safe, efficient
and reliable postal, transportation and communications services (Administrative Code of 1987, Book IV, Title XV, Sec. 2). It is the Executive
department, DOTC in particular that has the power, authority and technical expertise determine whether or not a specific transportation or
communication project is necessary, viable and beneficial to the people. The discretion to award a contract is vested in the government
agencies entrusted with that function (Bureau Veritas v. Office of the President, 205 SCRA 705 [1992]).

WHEREFORE, the petition is DISMISSED.

SO ORDERED