ila

EN BANC
G.R. No. 83551 July 11, 1989
RODOLFO B. ALBANO, petitioner,
vs.
HON. RAINERIO O. REYES, PHILIPPINE PORTS AUTHORITY, INTERNATIONAL
CONTAINER TERMINAL SERVICES, INC., E. RAZON, INC., ANSCOR CONTAINER
CORPORATION, and SEALAND SERVICES. LTD., respondents.
Vicente Abad Santos for petitioner.
Bautista, Picazo, Buyco & Tan for private respondents.

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" 3as 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 5would constitute sufficient authority for upholding
petitioner's standing. [Cf. Taada 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.
Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Gancayco, Bidin, Cortes, Grio-Aquino,
Medialdea and Regalado, JJ., concur.
Feliciano, J., concurs in the result.
Padilla and Sarmiento, JJ., took no part.

Separate Opinions
GUTIERREZ, JR., J., concurring:
I concur in the Court's decision that 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 Philippine Ports Authority (PPA). I agree that the PPA is the agency
which can best evaluate the comparative qualifications of the various bidding
contractors and that in making such evaluation it has the technical expertise which
neither this Court nor Congress possesses.
However, I would feel more comfortable in the thought that the above rulings are not
only grounded on firm legal foundations but are also factually accurate if the PPA shows
greater consistency in its submissions to this Court.
I recall that in E. Razon, Inc. v. Philippine Ports Authority (151 SCRA 233 [1977]), this
Court decided the case in favor of the PPA because, among others, of its submissions
that: (1) the petitioner therein committed violations as to outside stevedoring services,
inadequate equipment, delayed submission of reports, and non-compliance with certain
port regulations; (2) respondent Marina Port Services and not the petitioner was better
qualified to handle arrastre services; (3) the petitioner being controlled by Alfredo

Romualdez could not enter into a management contract with PPA and any such contract
would be null and void; and (4) even if the petitioner may not have shared in the illegal
intention behind the transfer of majority shares, it shared in the benefits of the violation
of law.
I was surprised during the oral arguments of the present petition to hear the counsel for
PPA submit diametrically different statements regarding the capabilities and worth of E.
Razon, Inc., as an arrastre operator. It now turns out that the Manila International
Container Terminal will depend a great deal on the expertise, reliability and competence
of E. Razon, Inc., for its successful operations. The time difference between the two
petitions is insubstantial. After going over the pleadings of the present petition, I am
now convinced that it is the submissions of PPA in this case and not its contentions in
G.R. No. 75197 which are accurate and meritorious. There is the distinct possibility that
we may have been unfair in the earlier petition because of assertions made therein
which are contradictory to the submissions in the instant petition. No such doubts would
exist if the Government is more consistent in its pleadings on such important factual
matters as those raised in these two petitions.

Separate Opinions
GUTIERREZ, JR., J., concurring:
I concur in the Court's decision that 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 Philippine Ports Authority (PPA). I agree that the PPA is the agency
which can best evaluate the comparative qualifications of the various bidding
contractors and that in making such evaluation it has the technical expertise which
neither this Court nor Congress possesses.
However, I would feel more comfortable in the thought that the above rulings are not
only grounded on firm legal foundations but are also factually accurate if the PPA shows
greater consistency in its submissions to this Court.
I recall that in E. Razon, Inc. v. Philippine Ports Authority (151 SCRA 233 [1977]), this
Court decided the case in favor of the PPA because, among others, of its submissions
that: (1) the petitioner therein committed violations as to outside stevedoring services,
inadequate equipment, delayed submission of reports, and non-compliance with certain
port regulations; (2) respondent Marina Port Services and not the petitioner was better
qualified to handle arrastre services; (3) the petitioner being controlled by Alfredo
Romualdez could not enter into a management contract with PPA and any such contract
would be null and void; and (4) even if the petitioner may not have shared in the illegal
intention behind the transfer of majority shares, it shared in the benefits of the violation
of law.
I was surprised during the oral arguments of the present petition to hear the counsel for
PPA submit diametrically different statements regarding the capabilities and worth of E.

Razon, Inc., as an arrastre operator. It now turns out that the Manila International
Container Terminal will depend a great deal on the expertise, reliability and competence
of E. Razon, Inc., for its successful operations. The time difference between the two
petitions is insubstantial. After going over the pleadings of the present petition, I am
now convinced that it is the submissions of PPA in this case and not its contentions in
G.R. No. 75197 which are accurate and meritorious. There is the distinct possibility that
we may have been unfair in the earlier petition because of assertions made therein
which are contradictory to the submissions in the instant petition. No such doubts would
exist if the Government is more consistent in its pleadings on such important factual
matters as those raised in these two petitions.
Footnotes
1 A "Public utility" is a business or service engaged in regularly
supplying the public with some commodity or service of public
consequence such as electricity, gas, water, transportation, telephone or
telegraph service. Apart from statutes which define the public utilities that
are within the purview of such statutes, it would be difficult to construct a
definition of a public utility which would fit every conceivable case. As its
name indicates, however, the term public utility implies a public use
and service to the public. (Am. Jur. 2d V. 64, p. 549).
2 The Public Service Act (C.A. No. 146, as amended) provides that the

public service

term
"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 purposes, 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 water craft, engaged in the transportation of
passengers and freight or both, shipyard, marine railway,
refrigeration plant, canal, irrigation system, gas, electric light,
heat and power, water supply and power, petroleum, sewerage
system, wire or wireless communications system, wire or wireless
broadcasting stations and other similar public services. . ." [Sec.
13 (b).].

dock

3 Under P.D. 857 the term

"includes locks, cuts entrances,
graving docks, inclined planes, slipways, quays and other works and

wharf

things appertaining to any dock", while

"means a continuous
structure built parallel to along the margin of the sea or alongside
riverbanks, canals, or waterways where vessels may lie alongside to

receive or discharge cargo, embark or disembark passengers, or lie at

rest." [Sec. 30) and (o).].
4 Examples of such agencies are:
1. The Land Transportation Franchising and Regulatory Board created
under E.O. No. 202, which is empowered to "issue, amend, revise, suspend
or cancel Certificates of Public Convenience or permits authorizing the
operation of public land transportation services provided by motorized
vehicles, and to prescribe the appropriate terms and conditions therefor."
[Sec. 5(b).].
2. The Board of Energy, reconstituted into the Energy Regulatory Board
created under E.O. No. 172, is empowered to license refineries and
regulate their capacities and to issue certificates of public convenience for
the operation of electric power utilities and services, except electric
cooperatives [Sec. 9 (d) and (e), P.D. No. 1206.].
5 Art. II, Sec. 28. Subject to reasonable conditions prescribed by law, the
State adopts and implements a policy of full disclosure of all its
transactions involving public interest.

G.R. No. 114222 April 6, 1995

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

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.

I
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: BuildOperate-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 midsection 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); Rollop. 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-operateand-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 inpari 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
Bellosillo and Kapunan, JJ., concur.
Padilla and Regalado, JJ., concurs in the result.
Romero, J., is on leave.

Separate Opinions

MENDOZA, J., concurring:

I concur in all but Part III of the majority opinion. Because I hold that petitioners do not
have standing to sue, I join to dismiss the petition in this case. I write only to set forth
what I understand the grounds for our decisions on the doctrine of standing are and,
why in accordance with these decisions, petitioners do not have the rights to sue,
whether as legislators, taxpayers or citizens. As members of Congress, because they
allege no infringement of prerogative as legislators. 1 As taxpayers because petitioners
allege neither an unconstitutional exercise of the taxing or spending powers of Congress
(Art VI, 24-25 and 29) 2 nor an illegal disbursement of public money. 3 As this Court
pointed out in Bugnay Const. and Dev. Corp. v. Laron, 4 a party suing as taxpayer "must
specifically prove that he has sufficient interest in preventing the illegal expenditure of
money raised by taxation and that he will sustain a direct injury as a result of the
enforcement of the questioned statute or contract. It is not sufficient that he has merely
a general interest common to all members of the public." In that case, it was held that a
contract, whereby a local government leased property to a private party with the
understanding that the latter would build a market building and at the end of the lease
would transfer the building of the lessor, did not involve a disbursement of public funds
so as to give taxpayer standing to question the legality of the contract. I see no
substantial difference, as far as the standing is of taxpayers to question public contracts
is concerned, between the contract there and the build-lease-transfer (BLT) contract
being questioned by petitioners in this case.
Nor do petitioners have standing to bring this suit as citizens. In the cases 5 in which
citizens were authorized to sue, this Court found standing because it thought the
constitutional claims pressed for decision to be of "transcendental importance," as in
fact it subsequently granted relief to petitioners by invalidating the challenged statutes
or governmental actions. Thus in the Lotto case 6 relied upon by the majority for
upholding petitioners standing, this Court took into account the "paramount public
interest" involved which "immeasurably affect[ed] the social, economic, and moral wellbeing of the people . . . and the counter-productive and retrogressive effects of the
envisioned on-line lottery system:" 7 Accordingly, the Court invalidated the contract for
the operation of lottery.
But in the case at bar, the Court precisely finds the opposite by finding petitioners'
substantive contentions to be without merit To the extent therefore that a party's
standing is affected by a determination of the substantive merit of the case or a
preliminary estimate thereof, petitioners in the case at bar must be held to be without
standing. This is in line with our ruling in Lawyers League for a Better Philippines v.
Aquino 8 and In re Bermudez9 where we dismissed citizens' actions on the ground that
petitioners had no personality to sue and their petitions did not state a cause of action.
The holding that petitioners did not have standing followed from the finding that they
did not have a cause of action.
In order that citizens' actions may be allowed a party must show that he personally has
suffered some actual or threatened injury as a result of the allegedly illegal conduct of
the government; the injury is fairly traceable to the challenged action; and the injury is
likely to be redressed by a favorable action. 10 As the U.S. Supreme Court has held:
Typically, . . . the standing inquiry requires careful judicial examination of a complaint's
allegation to ascertain whether the particular plaintiff is entitled to an adjudication of

the particular claims asserted. Is the injury too abstract, or otherwise not appropriate, to
be considered judicially cognizable? Is the line of causation between the illegal conduct
and injury too attenuated? Is the prospect of obtaining relief from the injury as a result
of a favorable ruling too speculative? These questions and any others relevant to the
standing inquiry must be answered by reference to the Art III notion that federal courts
may exercise power only "in the last resort, and as a necessity, Chicago & Grand Trunk
R. Co. v. Wellman, 143 US 339, 345, 36 L Ed 176,12 S Ct 400 (1892), and only when
adjudication is "consistent with a system of separated powers and [the dispute is one]
traditionally thought to be capable of resolution through the judicial process," Flast v
Cohen, 392 US 83, 97, 20 L Ed 2d 947, 88 S Ct 1942 (1968). See Valley Forge, 454 US,
at 472-473, 70 L Ed 2d 700, 102 S Ct 752. 11
Today's holding that a citizen, qua citizen, has standing to question a government
contract unduly expands the scope of public actions and sweeps away the case and
controversy requirement so carefully embodied in Art. VIII, 5 in defining the jurisdiction
of this Court. The result is to convert the Court into an office of ombudsman for the
ventilation of generalized grievances. Consistent with the view that this case has no
merit I submit with respect that petitioners, as representatives of the public interest,
have no standing.
Narvasa, C.J., Bidin, Melo, Puno, Vitug and Francisco, JJ., concur.
DAVIDE, JR., J., dissenting:
After wading through the record of the vicissitudes of the challenged contract and
evaluating the issues raised and the arguments adduced by the parties, I find myself
unable to joint majority in the well-written ponencia of Mr. Justice Camilo P. Quiason.
I most respectfully submit that the challenged contract is void for at least two reasons:
(a) it is an-ultra-vires act of the Department of Transportation and Communications
(DOTC) since under R.A. 6957 the DOTC has no authority to enter into a Build-Leaseand-Transfer (BLT) contract; and (b) even assuming arguendo that it has, the contract
was entered into without complying with the mandatory requirement of public bidding.
I
Respondents admit that the assailed contract was entered into under R.A. 6957. This
law, fittingly entitled "An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, and For Other Purposes,"
recognizes only two (2) kinds of contractual arrangements between the private sector
and government infrastructure agencies: (a) the Build-Operate-and-Transfer (BOT)
scheme and (b) the Build-and-Transfer (BT) scheme. This conclusion finds support in
Section 2 thereof which defines only the BOT and BT schemes, in Section 3 which
explicitly provides for said schemes thus:
Sec. 3 Private Initiative in Infrastructure. All government infrastructure agencies,
including government-owned and controlled corporations and local government units,
are hereby authorized to enter into contract with any duly prequalified private

contractor for the financing, construction, operation and maintenance of any financially
viable infrastructure facilities through the build-operate-and transfer or build-andtransfer scheme, subject to the terms and conditions hereinafter set forth; (Emphasis
supplied).
and in Section 5 which requires public bidding of projects under both schemes.
All prior acts and negotiations leading to the perfection of the challenged contract were
clearly intended and pursued for such schemes.
A Build-Lease-and-Transfer (BLT) scheme is not authorized under the said law, and none
of the aforesaid prior acts and negotiations were designed for such unauthorized
scheme. Hence, the DOTC is without any power or authority to enter into the BLT
contract in question.
The majority opinion maintains, however, that since "[t]here is no mention in the BOT
Law that the BOT and the BT schemes bar any other arrangement for the payment by
the government of the project cost," then "[t]he law must not be read in such a way as
to rule outer unduly restrict any variation within the context of the two schemes." This
interpretation would be correct if the law itself provides a room for flexibility. We find no
such provisions in R.A. No. 6957 if it intended to include a BLT scheme, then it should
have so stated, for contracts of lease are not unknown in our jurisdiction, and Congress
has enacted several laws relating to leases. That the BLT scheme was never intended as
a permissible variation "within the context" of the BOT and BT schemes is conclusively
established by the passage of R.A. No. 7718 which amends:
a. Section 2 by adding to the original BOT and BT schemes the following
schemes:
(1)

Build-own-and-operate (BOO)

(2)

Build-Lease-and-transfer (BLT)

(3)

Build-transfer-and-operate (BTO)

(4)

Contract-add-and-operate (CAO)

(5)

Develop-operate-and-transfer (DOT)

(6)

Rehabilitate-operate-and-transfer (ROT)

(7)

Rehabilitate-own-and-operate (ROO).

b) Section 3 of R.A. No. 6957 by deleting therefrom the phrase "through the buildoperate-and-transfer or build-and-transfer scheme."
II

Public bidding is mandatory in R.A. No. 6957. Section 5 thereof reads as follows:
Sec. 5 Public Bidding of Projects. Upon approval of the projects mentioned in Section
4 of this Act, the concerned head of the infrastructure agency or local government unit
shall forthwith cause to be published, once every week for three (3) consecutive weeks,
in at least two (2) newspapers of general circulation and in at least one (1) local
newspaper which is circulated in the region, province, city or municipality in which the
project is to be constructed a notice inviting all duly prequalified infrastructure
contractors to participate in the public bidding for the projects so approved. In the case
of a build-operate-and-transfer arrangement, the contract shall be awarded to the
lowest complying bidder based on the present value of its proposed tolls, fees, rentals,
and charges over a fixed term for the facility to be constructed, operated, and
maintained according to the prescribed minimum design and performance standards
plans, and specifications. For this purpose, the winning contractor shall be automatically
granted by the infrastructure agency or local government unit the franchise to operate
and maintain the facility, including the collection of tolls, fees, rentals; and charges in
accordance with Section 6 hereof.
In the case of a build-and-transfer arrangement, the contract shall be awarded to the
lowest complying bidder based on the present value of its proposed, schedule of
amortization payments for the facility to be constructed according to the prescribed
minimum design and performance standards, plans and specifications: Provided,
however, That a Filipino constructor who submits an equally advantageous bid shall be
given preference.
A copy of each build-operate-and-transfer or build-and-transfer contract shall forthwith
be submitted to Congress for its information.
The requirement of public bidding is not an idle ceremony. It has been aptly said that in
our jurisdiction "public bidding is the policy and medium adhered to in Government
procurement and construction contracts under existing laws and regulations. It is the
accepted method for arriving at a fair and reasonable price and ensures that
overpricing, favoritism, and other anomalous practices are eliminated or minimized. And
any Government contract entered into without the required bidding is null and void and
cannot adversely affect the rights of third parties." (Bartolome C. Fernandez, Jr., A
TREATISE ON GOVERNMENT CONTRACTS UNDER PHILIPPINE LAW 25 [rev. ed. 1991],
citing Caltex vs. Delgado Bros., 96 Phil. 368 [1954]).
The Office of the President, through then Executive Secretary Franklin Drilon Correctly
disapproved the contract because no public bidding is strict compliance with Section 5
of R.A. No. 6957 was conducted. Secretary Drilon Further bluntly stated that the
provision of the Implementing Rules of said law authorizing negotiated contracts was of
doubtful legality. Indeed, it is null and void because the law itself does not recognize or
allow negotiated contracts.
However the majority opinion posits the view that since only private respondent EDSA
LRT was prequalified, then a public bidding would be "an absurd and pointless exercise."
I submit that the mandatory requirement of public bidding cannot be legally dispensed
with simply because only one was qualified to bid during the prequalification

proceedings. Section 5 mandates that the BOT or BT contract should be awarded "to the
lowest complying bidder," which logically means that there must at least be two (2)
bidders. If this minimum requirement is not met, then the proposed bidding should be
deferred and a new prequalification proceeding be scheduled. Even those who were
earlier disqualified may by then have qualified because they may have, in the
meantime, exerted efforts to meet all the qualifications.
This view of the majority would open the floodgates to the rigging of prequalification
proceedings or to unholy conspiracies among prospective bidders, which would even
include dishonest government officials. They could just agree, for a certain
consideration, that only one of them qualify in order that the latter would automatically
corner the contract and obtain the award.
That section 5 admits of no exception and that no bidding could be validly had with only
one bidder is likewise conclusively shown by the amendments introduced by R.A. No.
7718 Per section 7 thereof, a new section denominated as Section 5-A was introduced in
R.A. No. 6957 to allow direct negotiation contracts. This new section reads:
Sec. 5-A. 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 requirements,
after which it is required to submit a bid/proposal which 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, only one submit bids but only
one is found by the agency/LGU to be complying: Provided, That, any of the disqualified
prospective bidder may appeal the decision contractor of the implementing
agency/LGUs prequalification bids an award 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, That the
implementing agency/LGUs concerned should act on the appeal within forty-five (45)
working days from receipt thereof.
Can this amendment be given retroactive effect to the challenged contract so that it
may now be considered a permissible negotiated contract? I submit that it cannot be
R.A. No. 7718 does not provide that it should be given retroactive effect to pre-existing
contracts. Section 18 thereof says that it "shall take effect fifteen (15) days after its
publication in at least two (2) newspapers of general circulation." If it were the intention
of Congress to give said act retroactive effect then it would have so expressly provided.

Article 4 of the Civil Code provides that "[l]aws shall have no retroactive effect, unless
the contrary is provided."
The presumption is that all laws operate prospectively, unless the contrary clearly
appears or is clearly, plainly, and unequivocally expressed or necessarily implied. In
every case of doubt, the doubt will be resolved against the retroactive application of
laws. (Ruben E Agpalo, STATUTORY CONSTRUCTION 225 [2d ed. 1990]). As to
amendatory acts, or acts which change an existing statute, Sutherland states:
In accordance with the rule applicable to original acts, it is presumed that provisions
added by the amendment affecting substantive rights are intended to operate
prospectively. Provisions added by the amendment that affect substantive rights will not
be construed to apply to transactions and events completed prior to its enactment
unless the legislature has expressed its intent to that effect or such intent is clearly
implied by the language of the amendment or by the circumstances surrounding its
enactment. (1 Frank E. Horack, Jr., SUTHERLAND'S STATUTES AND STATUTORY
CONSTRUCTION 434-436 [1943 ed.]).
I vote then to grant the instant petition and to declare void the challenged contract and
its supplement.
FELICIANO, J., dissenting:
After considerable study and effort, and with much reluctance, I find I must dissent in
the instant case. I agree with many of the things set out in the majority opinion written
by my distinguished brother in the Court Quiason,J. At the end of the day, however, I
find myself unable to join in the result reached by the majority.
I join in the dissenting opinion written by Mr. Justice. Davide, Jr; which is appropriately
drawn on fairly narrow grounds. At the same time; I wish to address briefly one of the
points made by Justice Quiason in the majority opinion in his effort to meet the
difficulties posed by Davide Jr., J.
I refer to the invocation of the provisions of presidential Decree No. 1594 dated 11 June
1978 entitled: "Prescribing policies, Guidelines, Rules and Regulations for Government
Infrastructure Contracts" More specifically, the majority opinion invokes paragraph 1 of
Section 4 of this Degree which reads as follows:
Sec. 4. 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 a
conclusive evidence that greater economy and efficiency would be achieved through
this arrangement, and in accordance with provisions of laws and acts on the matter,
subject to the approval of the Ministry of public Works, 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 of the President of the Philippines,
upon the recommendation of the Minister, if the project cost is P1 Million or more.

xxx xxx xxx

I understand the unspoken theory in the majority opinion to be that above Section 4 and
presumably the rest of Presidential Decree No. 1594 continue to exist and to run parallel
to the provisions of Republic Act No. 6957, whether in its original form or as amended
by Republic Act No. 7718.
A principal difficulty with this approach is that Presidential Decree No. 1594 purports to
apply to all "government contracts for infrastructure and other construction projects."
But Republic Act No. 6957 as amended by Republic Act No. 7718, relates only to
"infrastructure projects" which are financed, constructed, operated and maintained "by
the private sector" "through the build/operate-and-transfer or build-and-transfer
scheme" under Republic Act No. 6597 and under a series of other comparable
schemes under Republic Act No. 7718. In other words, Republic Act No. 6957 and
Republic Act. No. 7718 must be held, in my view, to be special statutes applicable to a
more limited field of "infrastructure projects" than the wide-ranging scope of application
of the general statute i.e., Presidential Decree No. 1594. Thus, the high relevance of the
point made by Mr. Justice Davide that Republic Act No. 6957 in specific connection with
BCT- and BLT type and BLT type of contracts imposed anunqualified requirement of
public bidding set out in Section 5 thereof.
It should also be pointed out that under Presidential Decree No. 1594, projects may be
undertaken "by administration or force account or by negotiated contract only"
(1) in exceptional cases where time is of the essence; or
(2) where there is lack of bidders or contractors; or
(3) where there is a conclusive evidence that greater economy and efficiency would be
achieved through these arrangements, and in accordance with provision[s] of laws and
acts on the matter.
It must, upon the one hand, be noted that the special law Republic Act No. 6957 made
absolutely no mention of negotiated contracts being permitted to displace the
requirement of public bidding. Upon the other hand, Section 5-a, inserted in Republic
Act No. 6957 by the amending statute Republic Act No. 7718, does not purport to
authorize direct negotiation of contracts situations where there is a lack of pre-qualified
contractors or, complying bidders. Thus, even under the amended special statute,
entering into contracts by negotiation is notpermissible in the other (2) categories of
cases referred to in Section 4 of Presidential Decree No. 1594, i.e., "in exceptional cases
where time is of the essence" and "when there is conclusive evidence that greater
economy and efficiency would be achieved through these arrangements, etc."
The result I reach is that insofar as BOT, etc.-types of contracts are concerned, the
applicable public bidding requirement is that set out in Republic Act No. 6957 and, with
respect to such type of contracts opened for pre-qualification and bidding after the date
of effectivity of Republic Act No. 7718, The provision of Republic Act No. 7718. The
assailed contract was entered into before Republic Act. No. 7718 was enacted.

The difficulties. of applying the provisions of Presidential Degree No. 1594 to the Edsa
LRT-type of contracts are aggravated when one considers the detailed "Implementing
Rules and Regulations as amended April 1988" issued under that Presidential
Decree. 1 For instance:
IB [2.5.2] 2.4.2 By Negotiated Contract
xxx xxx xxx
a. In times of emergencies arising from natural calamities where immediate action is
necessary to prevent imminent loss of life and/or property.
b. Failure to award the contract after competitive public bidding for valid cause or
causes [such as where the prices obtained through public bidding are all above the AAE
and the bidders refuse to reduce their prices to the AAE].
In these cases, bidding may be undertaken through sealed canvass of at least three (3)
qualified contractors. Authority to negotiate contracts for projects under these
exceptional cases shall be subject to prior approval by heads of agencies within their
limits of approving authority.
c. Where the subject project is adjacent or contiguous to an on-going project and it
could be economically prosecuted by the same contractor provided that he has no
negative slippage and has demonstrated a satisfactory performance. (Emphasis
supplied).
Note that there is no reference at all in these Presidential Decree No. 1594
Implementing Rules and Regulations to absence of pre-qualified applicants and bidders
as justifying negotiation of contracts as distinguished from requiring public bidding or a
second public bidding.
Note also the following provision of the same Implementing Rules and Regulations:
IB 1 Prequalification
The following may be become contractors for government projects:
1 Filipino
a. Citizens (single proprietorship)
b. Partnership of corporation duly organized under the laws of the Philippines, and at
least seventy five percent (75%) of the capital stock of which belongs to Filipino
citizens.
2. Contractors forming themselves into a joint venture, i.e., a group of two or more
contractors that intend to be jointly and severally responsible for a particular contract,
shall for purposes of bidding/tendering comply with LOI 630, and, aside from being

currently and properly accredited by the Philippine Contractors Accreditation Board,

shall comply with the provisions of R.A. 4566, provided that joint ventures in which
Filipino ownership is less than seventy five percent ( 75%) may be prequalified where
the structures to be built require the application of techniques and/or
technologies which are not adequately possessed by a Filipino entity as defined above.
[The foregoing shall not negate any existing and future commitments with respect to
the bidding and aware of contracts financed partly or wholly with funds from
international lending institutions like the Asian Development Bank and the Worlds Bank
as well as from bilateral and other similar sources.(Emphases supplied)
The record of this case is entirely silent on the extent of Philippine equity in the Edsa
LRT Corporation; there is no suggestion that this corporation is organized under
Philippine law and is at least seventy-five (75%) percent owned by Philippine citizens.
Public bidding is the normal method by which a government keeps contractors honest
and is able to assure itself that it would be getting the best possible value for its money
in any construction or similar project. It is not for nothing that multilateral financial
organizations like the World Bank and the Asian Development Bank uniformly require
projects financed by them to be implemented and carried out by public bidding. Public
bidding is much too important a requirement casually to loosen by a latitudinarian
exercise in statutory construction.
The instant petition should be granted and the challenged contract and its supplement
should be nullified and set aside. A true public bidding, complete with a new
prequalification proceeding, should be required for the Edsa LRT Project.

Separate Opinions
MENDOZA, J., concurring:
I concur in all but Part III of the majority opinion. Because I hold that petitioners do not
have standing to sue, I join to dismiss the petition in this case. I write only to set forth
what I understand the grounds for our decisions petitioners do not have the rights to
sue, whether as legislators, taxpayers or citizens. As members of Congress, because
they allege no infringement of prerogative as legislators. 1 As taxpayers because
petitioners allege neither an unconstitutional exercise of the taxing or spending powers
of Congress (Art VI, 24-25 and 29) 2 nor an illegal disbursement of public money. 3 As
this Court pointed out in Bugnay Const. and Dev. Corp. v. Laron, 4 a party suing as
taxpayer "must specifically prove that he has sufficient interest in preventing the illegal
expenditure of money raised by taxation and that he will sustain a direct injury as a
result of the enforcement of the questioned statute or contract, It is not sufficient that
has merely a general interest common to all members of the public." In that case, it was
held that a contract, whereby a local government leased property to a private party with
the understanding that the latter would build a market building and at the end of the
lease would transfer the building of the lessor, did not involve a disbursement of public

funds so as to give taxpayer standing to question the legality of the contract contracts I
see no substantial difference, as far as the standing is of taxpayers is concerned,
between the contract there and the build-lease-transfer (BLT) contract being questioned
by petitioners in this case.
Nor do petitioners have standing to bring this suit as citizens. In the cases 5 in which
citizens were authorized to sue, this Court found standing because it thought the
constitutional claims pressed for decision to be of "transcendental importance," as in
fact it subsequently granted relief to petitioners by invalidating the challenged statutes
or governmental actions. Thus in the Lotto case 6 relied upon by the majority for
upholding petitioners standing, this Court took into account the "paramount public
interest" involved which "immeasurably affect[ed] the social, economic, and moral wellbeing of the people . . . and the counter-productive and retrogressive effects of the
envisioned on-line lottery system:" 7 Accordingly, the Court invalidated the contract for
the operation of lottery.
But in the case at bar, the Court precisely finds the opposite by finding petitioners'
substantive contentions to be without merit To the extent therefore that a party's
standing is affected by a determination of the substantive merit of the case or a
preliminary estimate thereof, petitioners in the case at bar must be held to be without
standing. This is in line with our ruling in Lawyers League for a Better Philippines v.
Aquino 8 and In re Bermudez9 where we dismissed citizens' actions on the ground that
petitioners had no personality to sue and their petitions did not state a cause of action.
The holding that petitioners did not have standing followed from the finding that they
did not have a cause of action.
In order that citizens' actions may be allowed a party must show that he personally has
suffered some actual or threatened injury as a result of the allegedly illegal conduct of
the government; the injury is fairly traceable to the challenged action; and the injury is
likely to be redressed by a favorable action. 10 As the U.S. Supreme Court has held:
Typically, . . . the standing inquiry requires careful judicial examination of a complaint's
allegation to ascertain whether the particular plaintiff is entitled to an adjudication of
the particular claims asserted. Is the injury too abstract, or otherwise not appropriate, to
be considered judicially cognizable? Is the line of causation between the illegal conduct
and injury too attenuated? Is the prospect of obtaining relief from the injury as a result
of a favorable ruling too speculative? These questions and any others relevant to the
standing inquiry must be answered by reference to the Art III notion that federal courts
may exercise power only "in the last resort, and as a necessity, Chicago & Grand Trunk
R. Co. v. Wellman, 143 US 339, 345, 36 L Ed 176,12 S Ct 400 (1892), and only when
adjudication is "consistent with a system of separated powers and [the dispute is one]
traditionally thought to be capable of resolution through the judicial process," Flast v
Cohen, 392 US 83, 97, 20 L Ed 2d 947, .88 S Ct 1942 (1968). See Valley Forge, 454 US,
at 472-473, 70 L Ed 2d 700, 102 S Ct 752. 11
Today's holding that a citizen, qua citizen, has standing to question a government
contract unduly expands the scope of public actions and sweeps away the case and
controversy requirement so carefully embodied in Art. VIII, 5 in defining the jurisdiction
of this Court. The result is to convert the Court into an office of ombudsman for the

ventilation of generalized grievances. Consistent with the view that this case has no
merit I submit with respect that petitioners, as representatives of the public interest,
have no standing.
Narvasa, C.J., Bidin, Melo, Puno, Vitug and Francisco, JJ., concur.
DAVIDE, JR., J., dissenting:
After wading through the record of the vicissitudes of the challenged contract and
evaluating the issues raised and the arguments adduced by the parties, I find myself
unable to joint majority in the well-written ponencia of Mr. Justice Camilo P. Quiason.
I most respectfully submit that the challenged contract is void for at least two reasons:
(a) it is an-ultra-vires act of the Department of Transportation and Communications
(DOTC) since under R.A. 6957 the DOTC has no authority to enter into a Build-Leaseand-Transfer (BLT) contract; and (b) even assuming arguendo that it has, the contract
was entered into without complying with the mandatory requirement of public bidding.
I
Respondents admit that the assailed contract was entered into under R.A. 6957. This
law, fittingly entitled "An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, and For Other Purposes,"
recognizes only two (2) kinds of contractual arrangements between the private sector
and government infrastructure agencies: (a) the Build-Operate-and-Transfer (BOT)
scheme and (b) the Build-and-Transfer (BT) scheme. This conclusion finds support in
Section 2 thereof which defines only the BOT and BT schemes, in Section 3 which
explicitly provides for said schemes thus:
Sec. 3 Private Initiative in Infrastructure. All government infrastructure agencies,
including government-owned and controlled corporations and local government units,
are hereby authorized to enter into contract with any duly prequalified private
contractor for the financing, construction, operation and maintenance of any financially
viable infrastructure facilities through the build-operate-and transfer or build-andtransfer scheme, subject to the terms and conditions hereinafter set forth; (Emphasis
supplied).
and in Section 5 which requires public bidding of projects under both schemes.
All prior acts and negotiations leading to the perfection of the challenged contract were
clearly intended and pursued for such schemes.
A Build-Lease-and-Transfer (BLT) scheme is not authorized under the said law, and none
of the aforesaid prior acts and negotiations were designed for such unauthorized
scheme. Hence, the DOTC is without any power or authority to enter into the BLT
contract in question.

The majority opinion maintains, however, that since "[t]here is no mention in the BOT
Law that the BOT and the BT schemes bar any other arrangement for the payment by
the government of the project cost," then "[t]he law must not be read in such a way as
to rule outer unduly restrict any variation within the context of the two schemes." This
interpretation would be correct if the law itself provides a room for flexibility. We find no
such provisions in R.A. No. 6957 if it intended to include a BLT scheme, then it should
have so stated, for contracts of lease are not unknown in our jurisdiction, and Congress
has enacted several laws relating to leases. That the BLT scheme was never intended as
a permissible variation "within the context" of the BOT and BT schemes is conclusively
established by the passage of R.A. No. 7718 which amends:
a. Section. 2 by adding to the original BOT and BT schemes the following
schemes:
1) Build-own-and-operate (BOO)
2) Build-Lease-and-transfer (BLT)
3) Build-transfer-and-operate (BTO)
4) Contract-add-and-operate (CAO)
5) Develop-operate-and-transfer (DOT)
6) Rehabilitate-operate-and-transfer (ROT)
7) Rehabilitate-own-and-operate (ROO).
b) Section 3 of R.A. No. 6957 by deleting therefrom the phrase "through the buildoperate-and-transfer or build-and-transfer scheme.
II
Public bidding is mandatory in R.A. No. 6957. Section 5 thereof reads as follows:
Sec. 5 Public Bidding of Projects. Upon approval of the projects mentioned in Section
4 of this Act, the concerned head of the infrastructure agency or local government unit
shall forthwith cause to be published, once every week for three (3) consecutive weeks,
in at least two (2) newspapers of general circulation and in at least one (1) local
newspaper which is circulated in the region, province, city or municipality in which the
project is to be constructed a notice inviting all duly prequalified infrastructure
contractors to participate in the public bidding for the projects so approved. In the case
of a build-operate-and-transfer arrangement, the contract shall be awarded to the
lowest complying bidder based on the present value of its proposed tolls, fees, rentals,
and charges over a fixed term for the facility to be constructed, operated, and
maintained according to the prescribed minimum design and performance standards
plans, and specifications. For this purpose, the winning contractor shall be automatically

granted by the infrastructure agency or local government unit the franchise to operate
and maintain the facility, including the collection of tolls, fees, rentals; and charges in
accordance with Section 6 hereof.
In the case of a build-and-transfer arrangement, the contract shall be awarded to the
lowest complying bidder based on the present value of its proposed, schedule of
amortization payments for the facility to be constructed according to the prescribed
minimum design and performance standards, plans and specifications: Provided,
however, That a Filipino constructor who submits an equally advantageous bid shall be
given preference.
A copy of each build-operate-and-transfer or build-and-transfer contract shall forthwith
be submitted to Congress for its information.
The requirement of public bidding is not an idle ceremony. It has been aptly said that in
our jurisdiction "public bidding is the policy and medium adhered to in Government
procurement and construction contracts under existing laws and regulations. It is the
accepted method for arriving at a fair and reasonable price and ensures that
overpricing, favoritism, and other anomalous practices are eliminated or minimized. And
any Government contract entered into without the required bidding is null and void and
cannot adversely affect the rights of third parties." (Bartolome C. Fernandez, Jr., A
TREATISE ON GOVERNMENT CONTRACTS UNDER PHILIPPINE LAW 25 [rev. ed. 1991],
citing Caltex vs. Delgado Bros., 96 Phil. 368 [1954]).
The Office of the president secretary through then Executive Secretary Franklin Drilon
Correctly disapproved the contract because no public bidding is strict compliance with
Section 5 of R.A. No. 6957 was conducted. Secretary Drilon Further bluntly stated that
the provision of the Implementing Rules of said law authorizing negotiated contracts
was of doubtful legality. Indeed, it is null and void because the law itself does not
recognize or allow negotiated contracts.
However the majority opinion posits the view that since only private respondent EDSA
LRT was prequalified, then a public bidding would be "an absurd and pointless exercise."
I submit that the mandatory requirement of public bidding cannot be legally dispensed
with simply because only one was qualified to bid during the prequalification
proceedings. Section 5 mandates that the BOT or BT contract should be awarded "to the
lowest complying bidder," which logically means that there must at least be two (2)
bidders. If this minimum requirement is not met, then the proposed bidding should be
deferred and a new prequalification proceeding be scheduled. Even those who were
earlier disqualified may by then have qualified because they may have, in the
meantime, exerted efforts to meet all the qualifications.
This view of the majority would open the floodgates to the rigging of prequalification
proceedings or to unholy conspiracies among prospective bidders, which would even
include dishonest government officials. They could just agree, for a certain
consideration, that only one of them qualify in order that the latter would automatically
corner the contract and obtain the award.

That section 5 admits of no exception and that no bidding could be validly had with only
one bidder is likewise conclusively shown by the amendments introduced by R.A. No.
7718 Per section 7 thereof, a new section denominated as Section 5-A was introduced in
R.A. No. 6957 to allow direct negotiation contracts. This new section reads:
Sec. 5-A. 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 requirements
submit a bid/proposal which 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, only one submit bids but only
one is found by the agency/LGU to be complying: Provided, That, any of the disqualified
prospective bidder may appeal the decision contractor of the implementing
agency/LGUs prequalification bids an award committee within fifteen (15) working days
to the head of the agency 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, That the implementing agency/LGUs
concerned should act on the appeal within forty-five (45) working days from receipt
thereof.
Can this amendment be given retroactive effect to the challenged contract so that it
may now be considered a permissible negotiated contract? I submit that it cannot be
R.A. No. 7718 does not provide that it should be given retroactive effect to pre-existing
contracts. Section 18 thereof says that it "shall take effect fifteen (15) after its
publication in at least two (2) newspapers of general circulation." If it were the intention
of Congress to give said act retroactive effect then it would have so expressly provided.
Article 4 of the Civil Code provides that "[l]aws shall have no retroactive effect, unless
the contrary is provided."
The presumption is that all laws operate prospectively, unless the contrary clearly
appears or is clearly, plainly, and unequivocally expressed or necessarily implied. In
every case of doubt, the doubt will be resolved against the retroactive application of
laws. (Ruben E Agpalo, STATUTORY CONSTRUCTION 225 [2d ed. 1990]). As to
amendatory acts, or acts which change an existing statute, Sutherland states:
In accordance with the rule applicable to original acts, it is presumed that provisions
added by the amendment affecting substantive rights are intended to operate
prospectively. Provisions added by the amendment that affect substantive rights will not
be construed to apply to transactions and events completed prior to its enactment

unless the legislature has expressed its intent to that effect or such intent is clearly
implied by the language of the amendment or by the circumstances surrounding its
enactment. (1 Frank E. Horack, Jr., SUTHERLAND'S STATUTES AND STATUTORY
CONSTRUCTION 434-436 [1943 ed.]).
I vote then to grant the instant petition and to declare void the challenged contract and
its supplement.
FELICIANO, J., dissenting:
After considerable study and effort, and with much reluctance, I find I must dissent in
the instant case. I agree with many of the things set out in the majority opinion written
by my distinguished brother in the Court Quiason,J. At the end of the day, however, I
find myself unable to join in the result reached by the majority.
I join in the dissenting opinion written by Mr. Justice. Davide, Jr; which is appropriately
drawn on fairly narrow grounds. At the same time; I wish to address briefly one of
Justice Quiason in the majority opinion in his effort to meet the difficulties posed by
Davide Jr., J.
I refer to the invocation of the provisions of presidential Decree No. 1594 dated 11 June
1978 entitled: "Prescribing policies, Guidelines, Rules and Regulations for Government
Infrastructure Contracts" More specifically, the majority opinion invokes paragraph 1 of
Section 4 of this Degree which reads as follows:
Sec. 4. 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 a
conclusive evidence that greater economy and efficiency would be achieved through
this arrangement, and in accordance with provisions of laws and acts on the matter,
subject to the approval of the Ministry of public Works, 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 of the president of the Philippines,
upon the recommendation of the Minister, if the project cost is P1 Million or more.
xxx xxx xxx
I understand the unspoken theory in the majority opinion utility and the ownership of
the facilities used to serve the public can be very w1594 continue to exist and to run
parallel to the provisions of Republic Act No. 6957, whether in its original form or as
amended by Republic Act No. 7718.
A principal difficulty with this approach is that Presidential Decree No. 1594 purports to
apply to all "government contracts for infrastructure and other construction projects"
But Republic Act No. 6957 as amended by Republic Act No. 7718, relates on to
"infrastructure projects" which are financed, constructed, operated and maintained "by
the private sector" "through the build/operate-and-transfer or build-and-transfer

scheme" under Republic Act No. 6597 and under a series of other comparable
schemes under Republic Act No. 7718. In other words, Republic Act No. 6957 and
Republic Act. No: 7718 must be held, in my view, to be special statutes applicable to a
more limited field of "infrastructure projects" than the wide-ranging scope of application
of the general statute i.e., Presidential Decree No. 1594. Thus, the high relevance of the
point made by Mr. Justice Davide that Republic Act No. 6957 in specific connection with
BCT- and BLT type and BLT type of contracts imposed anunqualified requirement of
public bidding set out in Section 5 thereof.
It should also be pointed out that under Presidential Decree No. 1594, projects may be
undertaken "by administration or force account or by negotiated contract only "
(1) in exceptional cases where time is of the essence; or
(2) where there is lack of bidders or contractors; or
(3) where there is a conclusive evidence that greater economy and efficiency would be
achieved through these arrangements, and in accordance with provision[s] of laws and
acts on the matter.
It must, upon the one hand, be noted that the special law Republic Act- No. 6957 made
absolutely no mention ofnegotiated contracts being permitted to displace the
requirement of public bidding. Upon the other hand, Section 5-a, inserted in Republic
Act No. 6957 by the amending statute Republic Act No. 7718, does not purport to
authorize direct negotiation of contracts situations where there is a lack of pre-qualified
contractors or, complying bidders. Thus, even under the amended special statute,
entering into contracts by negotiation is notpermissible in the other (2) categories of
cases referred to in Section 4 of Presidential Decree No. 1594, i.e., "in exceptional cases
where time is of the essence" and "when there is conclusive evidence that greater
economy and efficiency would be achieved through these arrangements, etc."
The result I reach is that insofar as BOT, etc.-types of contracts are concerned, the
applicable public bidding requirement is that set out in Republic Act No. 6957 and, with
respect to such type of contracts opened for pre-qualification and bidding after the date
of effectivity of Republic Act No. 7718. The provision of Republic Act No. 7718. The
assailed contract was entered into before Republic Act. No. 7718 was enacted.
The difficulties. of applying the provisions of presidential Degree No. 1594 to the Edsa
LRT-type of contracts are aggravated when one considers the detailed" Implementing
Rules and Regulations as amended April 1988" issued under that Presidential
Decree. 1 For instance:
IB [2.5.2] 2.4.2 By Negotiated Contract
xxx xxx xxx
a. In times of emergencies arising from natural calamities where immediate action is
necessary to prevent imminent loss of life and/or property.

b. Failure to award the contract after competitive public bidding for valid cause or
causes [such as where the prices obtained through public bidding are all above the AAE
and the bidders refuse to reduce their prices to the AAE].
In these cases, bidding may be undertaken through sealed canvass of at least three (3)
qualified contractors. Authority to negotiate contracts for projects under these
exceptional cases shall be subject to prior approval by heads of agencies within their
limits of approving authority.
c. Where the subject project is adjacent or contiguous to an on-going project and it
could be economically prosecuted by the same contractor provided that he has no
negative slippage and has demonstrated a satisfactory performance. (Emphasis
supplied).
Note that there is no reference at all in these presidential Decree No. 1594
Implementing Rules and Regulations to absence of pre-qualified applicants and bidders
as justifying negotiation of contracts as distinguished from requiring public bidding or a
second public bidding.
Note also the following provision of the same Implementing Rules and Regulations:
IB 1 Prequalification
The following may be become contractors for government projects:
1 Filipino
a. Citizens (single proprietorship)
b. Partnership of corporation duly organized under the laws of the Philippines, and at
least seventy five percent (75%) of the capital stock of which belongs to Filipino
citizens.
2. Contractors forming themselves into a joint venture, i.e., a group of two or more
contractors that intend to be jointly and severally responsible for a particular contract,
shall for purposes of bidding/tendering comply with LOI 630, and, aside from being
currently and properly accredited by the Philippine Contractors Accreditation Board,
shall comply with the provisions of R.A. 4566, provided that joint ventures in which
Filipino ownership is less than seventy five percent ( 75%) may be prequalified where
the structures to be built require the application of techniques and/or
technologies which are not adequately possessed by a Filipino entity as defined above.
[The foregoing shall not negate any existing and future commitments with respect to
the bidding and aware of contracts financed partly or wholly with funds from
international lending institutions like the Asian Development Bank and the Worlds Bank
as well as from bilateral and other similar sources.(Emphases supplied)

The record of this case is entirely silent on the extent of Philippine equity in the Edsa
LRT Corporation; there is no suggestion that this corporation is organized under
Philippine law and is at least seventy-five (75%) percent owned by Philippine citizens.
Public bidding is the normal method by which a government keeps contractors honest
and is able to assure itself that it would be getting the best possible value for its money
in any construction or similar project. It is not for nothing that multilateral financial
organizations like the World Bank and the Asian Development Bank uniformly require
projects financed by them to be implemented and carried out by public bidding. Public
bidding is much too important a requirement casually to loosen by a latitudinarian
exercise in statutory construction.
The instant petition should be granted and the challenged contract and its supplement
should be nullified and set aside. A true public bidding, complete with a new
prequalification proceeding, should be required for the Edsa LRT Project.
Footnotes
MENDOZA, J., concurring:
1 Philconsa v. Enriquez, 235 SCRA 506 (1994); Gonzales v. Macaraig, 191 SCRA 452
(1990); Tolentino v. Comelec, 41 SCRA 702 (1971).
2 Flast v. Cohen, 392 U.S. 83, 20 L. Ed. 2d 947 (1968), cited in Igot v. Comelec, 95 SCRA
392 (1980).
3 Pascual v. Secretary of Public Works, 110 Phil 331 (1960); Sanidad v Comelec, 73
SCRA 333 (1976).
4 176 SCRA 240, 251-2 (1989).
5 Emergency Powers Cases [Araneta v. Dinglasan]. 84 Phil. 368 (1949), Iloilo Palay and
Corn Planters Ass'n. v. Feliciano, 121 Phil. 358 (1965); Philconsa v. Gimenez. 122 Phil.
894 (1965); CLU v. Executive Secretary, 194 SCRA 317 (1991).
6 Kilosbayan, Inc. v. Guingona, 232 SCRA 110 (1994).
7 Id. at 139.
8 G.R Nos. 73748, 73972, and 73990, May 22, 1986. (Questioning the legitimacy of the
Provisional Government of President Aquino).
9 145 SCRA 160 (1986). (Questioning whether President Aquino and Vice President
Laurel were the "President and Vice-President elected in the February 7, 1986 election"
within the meaning of Art XVIII, 5 of the Constitution.
10 Valley Forge College v. Americans United, 454 U.S. 464, 70 L. Ed. 2d 700 (1982);
Bugnay Const. and Dev. Corp. v. Laron, supra, note 4.

11 Allen v. Wright, 468 U.S. 737, 752, 82 L. Ed. 2d 556, 170 (1984).
FELICIANO, J., dissenting:
1 Text in 84 Official Gazette, No. 23, pp. 33-37, et seq. (June 1988).

G.R. No. L-24219

June 13, 1968

PHILIPPINE AIR LINES, INC., petitioner,

vs.
CIVIL AERONAUTICS BOARD, and FILIPINAS ORIENT AIRWAYS, INC., respondents.
Crispin D. Baizas, Edgardo Diaz de Rivera and Cenon S. Cervantes, Jr. for petitioner.
Office of the Solicitor General for respondent Civil Aeronautics Board.
Honorio Poblador and Ramon A. Pedrosa for respondent Filipinas Orient Airways, Inc.
CONCEPCION, C.J.:
Original petition for certiorari, to set aside and annul a resolution of the Civil Aeronautics
Board hereinafter referred to as CAB granting respondent Filipinas Orient Airways
Inc. hereinafter referred to as Fairways "provisional authority to operate scheduled
and non-scheduled domestic air services with the use of DC-3 aircrafts", subject to
specified conditions.
Pursuant to Republic Act No. 4147, granting thereto "a franchise to establish, operate
and maintain transport services for the carriage of passengers, mail, industrial flights
and cargo by air in and between any and all points and places throughout the
Philippines and other countries", on September 16, 1964, Fairways filed with CAB the
corresponding application for a "certificate of public convenience and necessity", which
was Docketed as economic proceedings (EP) No. 625, and was objected to by herein
petitioner, Philippine Air Lines, Inc., hereinafter referred to as PAL. Subsequently, a CAB
hearing officer began to receive evidence on said application. After several hearings
before said officer, or on December 14, 1964, Fairways filed an "urgent petition for
provisional authority to operate" under a detailed "program of implementation"
attached to said petition, and for the approval of its bond therefor, as well as the
provisional approval of its "tariff regulations and the conditions of carriage to be printed
at the back of the passenger tickets." Despite PAL's opposition thereto, in a resolution
issued on January 5, 1965, CAB granted said urgent petition of Fairways. The pertinent
part of said resolution provides:
Filipinas Orient Airways, Inc., (FAIRWAYS) having presented to the Board evidence
showing prima facieits fitness, willingness and ability to operate the services applied for

and the public need for more air transportation service, and to encourage and develop
commercial air transportation, RESOLVED, to grant, as the Board hereby grants, the said
Filipinas Orient Airways, Inc., provisional authority to operate scheduled and nonscheduled domestic air services with the use of DC-3 aircraft, subject to the following
conditions;
1. The term of the provisional authority herein granted shall be until such time as the
main application for a certificate of public convenience and necessity is finally decided
or for such period as the Board may at any time determine;
xxx

xxx

xxx

A reconsideration of this resolution having been denied, PAL filed the present civil action
alleging that, in issuing said resolution, CAB had acted illegally and in excess of its
jurisdiction or with grave abuse of discretion, because:
(1) CAB is not empowered to grant any provisional authority to operate, prior to the
submission for decision of the main application for a certificate of public convenience
and necessity;
(2) CAB had no evidence before it that could have justified the granting of the
provisional authority complained of;
(3) PAL was denied due process when CAB granted said authority before the
presentation of its evidence on Fairway's main application; and
(4) In granting said provisional authority, the CAB had prejudged the merits of said
application.
The first ground is devoid of merit. Section 10-C(1) of Republic Act No. 776, reading:
(C) The Board shall have the following specific powers and duties:
(1) In accordance with the provisions of Chapter IV of this Act, to issue, deny, amend,
revise, alter, modify, cancel suspend or revoke, in whole or in part, upon petitioner
complaint, or upon its own initiative, any temporary operating permit or Certificate of
Public Convenience and Necessity; Provided, however, That in the case of foreign air
carriers, the permit shall be issued with the approval of the President of the Republic of
the Philippines....
explicitly authorizes CAB to issue a "temporary operating permit," and nothing
contained, either in said section, or in Chapter IV of Republic Act No. 776, negates the
power to issue said "permit", before the completion of the applicant's evidence and that
of the oppositor thereto on the main petition. Indeed, the CAB's authority to grant a
temporary permit "upon its own initiative," strongly suggests the power to exercise said
authority, even before the presentation of said evidence has begun.

Moreover, we perceive no cogent reason to depart, in connection with the commercial

air transport service, from the policy of our public service law, which sanctions the
issuance of temporary or provisional permits or certificates of public convenience and
necessity, before the submission of a case for decision on the merits.1The overriding
considerations in both instances are the same, namely, that the service be required by
public convenience and necessity, and, that the applicant is fit, as well as willing and
able to render such service properly, in conformity with law and the pertinent rules,
regulations and requirements.2
As regards PAL's second contention, we have no more than PAL's assertion and
conclusion regarding the absence of substantial evidence in support of the finding, in
the order complained of, to the effect that Fairways' evidence had established " prima
facie its fitness, willingness and ability to operate the services applied for and the public
need for more transportation service ...". Apart from PAL's assertion being contradicted
by the tenor of said order, there is the legal presumption that official duty has been duly
performed.
Such presumption is particularly strong as regards administrative agencies, like the
CAB, vested with powers said to be quasi-judicial in nature, in connection with the
enforcement of laws affecting particular fields of activity, the proper regulation and/or
promotion of which requires a technical or special training, aside from a good
knowledge and grasp of the overall conditions, relevant to said field, obtaining in the
nation.3 The consequent policy and practice underlying our Administrative Law is that
courts of justice should respect the findings of fact of said administrative agencies,
unless there is absolutely no evidence in support thereof or such evidence is clearly,
manifestly and patently insubstantial.4 This, in turn, is but a recognition of the necessity
of permitting the executive department to adjust law enforcement to changing
conditions, without being unduly hampered by the rigidity and the delays often
attending ordinary court proceedings or the enactment of new or amendatory
legislations. In the case at bar, petitioner has not satisfactorily shown that the
aforementioned findings of the CAB are lacking in the necessary evidentiary support.
Needless to say, the case of Ang Tibay vs. C.I.R.5 on which petitioner relies, is not in
point. Said case refers to the conditions essential to a valid decision on the merits, from
the viewpoint of due process, whereas, in the case at bar, we are concerned with
an interlocutory order prior to the rendition of said decision. In fact, interlocutory orders
may sometimes be issued ex parte, particularly, in administrative proceedings, without
previous notice and hearing, consistently with due process.6 Again, the constitutional
provision to the effect that "no decision shall be rendered by any court of record without
expressing therein clearly and distinctly the facts and the law on which it is
based",7 applies, not to such interlocutory orders, but to the determination of the case
on the merits.8
Lastly, the provisional nature of the permit granted to Fairways refutes the assertion
that it prejudges the merits of Fairways' application and PAL's opposition thereto. As
stated in the questioned order, CAB's findings therein made reflect its view merely on
the prima facie effect of the evidence so far introduced and do not connote a
pronouncement or an advanced expression of opinion on the merits of the case.

WHEREFORE, the petition herein should be, as it is hereby, dismissed, and the writ
prayed for, denied, with costs against petitioner Philippine Air Lines, Inc. It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Angeles, JJ., concur.
Fernando, J., took no part.
Footnotes
1

Javellana v. La Paz Ice Plant & Cold Storage Co., 66 Phil. 893; Ablaza v. Transportation
Co., 88 Phil. 412.
2

Section 21, Republic Act No. 776; Act No. 3108, Section (1); Batangas Transportation v.
Orlanes, 55 Phil. 659; Manila Electric v. Pasay Transportation, 57 Phil. 825.
3

Pangasinan Transportation v. Public Utility Commission, 70 Phil. 221.

Heacock v. National Labor Union, 95 Phil. 553.

60 Phil. 635.

Cornejo v. Gabriel, 41 Phil. 188.

Article VIII, Section 12, Constitution of the Philippines.

Soncuya vs. National Loan & Investment Board, 69 Phil. 602.