G.R. No.

122156, February 3, 1997

Manila Prince Hotel, petitioner
Vs
Government Service Insurance System,
Manila Hotel Corporation, Committee on
Privatization and Office of the Government
Corporate Counsel, respondents
FACTS
Pursuant to the privatization program of the Philippine Government, Government Service
Insurance System (GSIS) decided to sell through public bidding 30% to 51% of the issued
and outstanding shares of Manila Hotel Corporation (MHC). On September 18, 1995, two
(2) bidders participated: petitioner Manila Prince Hotel Corporation, a Filipino corporation,
which offered to buy 51% of the MHC or 15,300,000 shares at P41.58 per share, and
Renong Berhad, a Malaysian firm, with ITT-Sheraton as its hotel operator, which bid for
the same number of shares at P44.00 per share, or P2.42 more than the bid of petitioner.
Pending the declaration of Renong Berhad as the winning bidder/strategic partner of MHC,
petitioner matched the formers bid also with P44.00 per share followed by managers
check worth P33 million as bid security, but the GSIS refused to accept both the bid match
and the managers check. On October 18, 1995, the Court issued a Temporary Restraining
Order (TRO) enjoining respondents from perfecting and consummating the sale to the
Renong Berhad. On 10 September 1996 the instant case was accepted by the Court En
Banc after it was referred to it by the First Division

ISSUE
WON the petitioner should be preferred after it has matched the bid offered of Renong
Berhad invoking Article 12, Section 10, second paragraph of the 1987 Constitution?

HELD

Yes. Article 12, Section 10, second paragraph of the 1987 Constitution provides that
in the grant of rights, privileges, and concessions covering the national economy and
patrimony, the State shall give preference to qualified Filipinos. Said provision is a

mandatory, positive command which is complete in itself and which needs no further
guidelines or implementing laws or rules for its enforcement. When the Constitution
speaks of national patrimony, it refers not only to the natural resources of the Philippines
but also to the cultural heritage of the Filipinos. Manila Hotel has become a landmark - a
living testimonial of Philippine heritage. While it was restrictively an American hotel when
it first opened, it immediately evolved to be truly Filipino. Thus Manila Hotel has become
part of our national economy and patrimony.
Respondents further argue that the Constitutional provision is addressed to the State,
not to GSIS which by itself possesses a separate and distinct personality. In constitutional
jurisprudence, the acts of a person distinct from the government are considered state
action covered by the Constitution (1) when the activity it engages is a public function;
(2) when the government is so significantly involved with the private actor as to make the
government responsible for his action; and, (3) when the government has approved or
authorized the action.
Without doubt, the transaction entered into by GSIS, is in fact a transaction of the State
and therefore subject to the constitutional command. Thus, the GSIS is directed to accept
the matching bid of petitioner Manila Prince Hotel.

BDRAMOS