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GR NO. 114222 April 6, 1995
Francisco Tatad, John Osmena and Rodolfo Biazon, petitioners,
vs.
Hon. Jesus Garcia, in his capacity as the Secretary of the Department of Transportation & Communications, and EDSA LRT CORPORATION, LTD., respondents.
Facts:
This is a petition under Rule 65 of the Revised Rules of Court to prohibit respondents from further implementing the “Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA and the Supplemental Agreement to the same project.
Petitioners Francisco Tatad, John Osmena and Rodolfo Biazon are members of the Philippine Senate and are suing in their capacities as Senators and as taxpayers. Respondent Jesus Garcia was then Secretary of the DOTC, while private respondent EDSA LRT CORPORATION, Ltd. is a private corporation organized under the laws of Hongkong.
In 1989, DOTC planned to construct a light railway transit line along EDSA, which shall traverse the cities of Pasay, Quezon, Mandaluyong and Makati. The objective is to provide a mass transit system along EDSA and to alleviate the congestion in the metropolis.
On March 15, 1990, then DOTC Secretary Oscar Orbos, acting upon a proposal to construct the EDSA LRT III on a Build-Operate-Transfer (BOT) basis, had invited Elijahu Levin from the Eli Levin Enterprises, Inc to send a technical team to discuss the project with the DOTC.
On July 9, 1990, RA No. 6957 referred to as the Build-Operate-Transfer (BOT) was signed by then President Corazon Aquino. The said Act provides for two schemes for the financing, construction and operation of government projects through private initiative and investment: BOT or Build-Transfer (BT).
In accordance with the provisions of RA 6957 and to set the EDSA LRT III project underway, the Prequalification Bids and Awards Committee and the Technical Committee were formed.
The prequalification criteria totalling 100% are as follows: a.) Legal aspects – 10%; b.) Management/Organizational capability – 30%; c.) Financial capability- 30%; and d.) Technical capability – 30%.
Of the 5 applicants, only the EDSA LRT Consortium “met the requirements of garnering at least 21 points per criteria, except for Legal aspects, and obtaining an over-all passing mark of at least 82 points.” The Legal aspects referred to provided that the BOT/BT contractor-applicant meet the requirements specified in the Constitution and other pertinent laws.
Subsequently, Sec. Orbos was appointed Executive Secretary to the President of the Philippines and was replaced by Nicomedes Prado. The latter recommended the award of the EDSA LRT III project to the sole complying bidder, the EDSA LRT Consortium, and requested for authority to negotiate with the said firm for the contract pursuant to the BOT Law. Authority was granted to proceed with the negotiations. The EDSA LRT Consortium submitted its proposal to DOTC.
Finding the proposal to be in compliance with the bid requirements, DOTC and EDSA LRT Corporation, Ltd., in substitution of the EDSA LRT Consortium, entered into an “An Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA” under the terms of the BOT Law.
Secretary Prado, thereafter, requested presidential approval of the contract.
Exec. Sec. Franklin Drilon, who replaced Sec. Orbos, informed Sec. Prado that the President could not grant the requested approval for failure to comply with the requirements of the BOT Law.
In view whereof, Sec. Drilon, the DOTC and private respondent re-negotiated the agreement. On April 22, 1992, the parties entered into a “Revised and Restated Agreement to Build, Lease and Transfer and Light Rail Transit System for EDSA. On May 6, 1992, DOTC, represented by Sec. Jesus Garcia, Sec. Prado and private respondent entered into a Supplemental Agreement to the April Revised Agreement so as to clarify their respective rights and responsibilities.
The two agreements were approved by President Fidel Ramos.
According to the agreements, the EDSA LRT III will use light rail vehicles from the Czech and Slovak Federal Republics and will have a maximum carrying capacity of 450,000 passengers a day. The system will have its own power facility. It will also have 13 passenger stations and one depot in 16-hectare government property at North Avenue.
Private respondents shall undertake and finance the entire project required for a complete operational light rail transit system. Target completion date is approximately 3 years from the implementation date of the contract. Upon full and partial completion and viability thereof, private respondent shall deliver the use and possession of the completed portion to DOTC which shall operate the same. DOTC shall pay private respondent rentals on aj monthly basis through an Irrevocable Letter of Credit. The rentals shall be determined by an independent and internationally accredited inspection firm to be appointed by the parties.
As agreed upon, private 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. After 25 years and DOTC shall have completed payment of the rentals, ownership of the project shall be transferred to the latter for a consideration of only US $1.00.
In their petition, petitioners argued that the agreement of April 22, 1992, as amended by the Supplemental Agreement of May 6, 1993, in so far as it grants EDSA LRT COPORTATION, LTD., a foreign corporation, the ownership of EDSA LRT III, a public utility, violates the constitution, and hence, is unconstitutional. They contend that the EDSA LRT III is a public utility, and the ownership and operation thereof is limited by the Constitution to Filipino citizens and domestic corporations, not foreign corporations like private respondent.
Issue:
Whether or not the EDSA LRT III assumes all the obligations and liabilities of a common carrier.
Held:
What private respondent owns are the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant, not a public utility. While a franchise is needed to operate these facilities to serve the public, they do not by themselves constitute a public utility. What constitutes a public utility is not their ownership but their use to serve the public.
Section 11 of Article XII of the Constitution provides:
No franchise, certificate or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive character or for a longer period than 50 years.
The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One can own said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning the facilities used to serve the public. The devotion of property to serve the public may be done by the owner or by the person in control thereof who may not necessarily be the owner thereof.
While private respondent is the owner of the facilities necessary to operate the EDSA LRT III, it admits that it is not enfranchised to operate a public utility. In view of this incapacity, private respondent and DOTC agreed that on completion date, private respondent will immediately deliver possession of the LRT system by of lease for 25 years, during which period DOTC shall operate the same as a common carrier and private respondent shall provide technical maintenance and repair services to DOTC.
Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and liabilities of a common carrier. For this purpose, DOTC shall indemnify and hold harmless private respondent from any losses, damages, injuries or death which may be claimed in the operation or implementation of the system, except losses, damages, injury or death due to defects in the EDSA LRT III on account of the defective condition of equipment or facilities or the defective maintenance of such equipment facilities.
Wherefore, the petition is DISMISSED.
Acknowledgment: Flor Bonador
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