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.
TOPIC: TAX PAYER'S SUIT
FACTS:
1. 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.
2. 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.
3. The petitioners filed a petition 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.
4. A bidding was held for the construction of EDSA Light Rail Transit III (EDSA LRT III) and after the prequalification bids, among the five applicants, only the EDSA LRT Consortium met the requirements.
5. DOTC and respondent EDSA LRT Corporation, Ltd., in substitution of the EDSA LRT Consortium, then entered into an "Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" under the terms of the BOT Law. However, it was not granted by president Ramos as indicated in the letter by Exec. Sec. Franklin Drilon dated Mar. 13, 1992.
6. 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" 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 necessitated the revision of the Agreement.
7. 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.
8.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.
9. 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, underwent the necessary publication, and took effect on May 28, 1994. The law expressly recognizes BLT scheme and allows direct negotiation of BLT contracts.
10. Petitioners argued that April 22, 1992 Agreement, as amended by the May 6, 1993 Supplemental Agreement, 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 and prayed the prohibition of respondents from further implementing and enforcing the contract.
11. Secretary Garcia and private respondent claimed that petitioners are not the real parties-in-interest and have no legal standing to institute the present petition.
ISSUE:
Whether or not the petitioners had the legal standing to initiate the instant action.
RULING:
YES. The petitioners can file the petition in their capacity 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, there is no choice but to follow it and uphold the legal standing of petitioners as taxpayers to institute the present action.
Thus, petitioners have the legal standing as taxpayers.
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ON CONSTITUTIONALITY: source
ISSUE:
Whether the agreement granting EDSA LRT Corporation LTD, a foreign corporation, the ownership of EDSA LRT III, a public utility, violates constitution.
RULING:
No. 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.
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.
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. 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.
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]).
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