Case Digest: Tatad vs. Garcia, Jr., G.R. No. 114222

 

Tatad vs. Garcia, Jr., G.R. No. 114222, April 6, 1995

Subject: Transportation Law

FACTS

The petitioners, Francisco S. Tatad, John H. Osmena, and Rodolfo G. Biazon, who are members of the Philippine Senate, initiated a petition under Rule 65 of the Revised Rules of Court. Their objective was to prohibit the implementation and enforcement of 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" dated May 6, 1993.

The respondents in this case include Jesus B. Garcia, Jr., the Secretary of the Department of Transportation and Communications (DOTC), and EDSA LRT Corporation, Ltd., a private corporation organized under the laws of Hong Kong.

The Department of Transportation and Communications (DOTC) had devised plans to construct a light railway transit line along EDSA, a major thoroughfare in Metropolitan Manila, known as EDSALRT III.Eli Levin Enterprises, Inc., proposed the construction of the EDSA LRT III on a Build-Operate-Transfer (BOT) basis, in accordance with Republic Act No. 6957, also known as the BOT Law. This law outlined two financing schemes for government projects through private initiative and investment: Build-Operate-Transfer (BOT) or Build-Transfer (BT).

To facilitate the prequalification process for contractors, the DOTC established the Prequalification Bids and Awards Committee (PBAC) and the Technical Committee. The PBAC issued guidelines for prequalification, resulting in five groups responding, with the EDSA LRT Consortium meeting the specified criteria.

Secretary Pete Nicomedes Prado, who replaced Secretary Orbos, became involved in negotiations with the EDSA LRT Consortium. The negotiations were recommended to President Aquino, who instructed the DOTC to proceed, leading to the submission of a bid proposal by the EDSA LRT Consortium.

However, the contract signing faced procedural issues, as conveyed by Executive Secretary Orbos. Subsequent renegotiations resulted in the "Revised and Restated Agreement" and the "Supplemental Agreement."

President Fidel V. Ramos approved these agreements, officially designating EDSA LRT Corp. Ltd. as the owner of rail facilities for the EDSA LRT III project. 

ISSUE/S

1. Whether or not the petitioners, acting as Senators and taxpayers, have legal standing to challenge the constitutionality and validity of the agreements.

2. Whether or not a foreign corporation, EDSA LRT Corp. Ltd., can own EDSA LRT III, considering the constitutional requirement for Filipino ownership of public utilities.

3. Whether or not the BLT (Build-Lease-Transfer) scheme, not explicitly recognized in the BOT Law, is valid and within the scope of permissible arrangements.

RULING

1. The court affirms the legal standing of the petitioners, who are acting as Senators and taxpayers, to challenge the constitutionality and validity of the agreements. This ruling is grounded in the precedent set by the Kilosbayan, Inc. v. Guingona case, allowing taxpayers to question contracts entered into by the government or government-owned corporations if they are believed to contravene the law. The court emphasizes that as long as this precedent stands, the petitioners have the right to raise legal challenges.

2. The court determines that EDSA LRT Corp. Ltd. is the owner and lessor of facilities, not a public utility. The distinction made between ownership and operation is crucial, as the Constitution requires Filipino ownership for the operation of a public utility, but not necessarily for ownership of facilities. The court clarifies that what constitutes a public utility is the use of facilities to serve the public, not their ownership. Therefore, the foreign ownership of EDSA LRT Corp. Ltd. is deemed acceptable as it pertains to ownership rather than operation.

3. The court accepts the BLT scheme as a valid variation within the context of the BOT Law. It emphasizes that the law does not explicitly preclude variations, and no provision restricts the arrangement for the payment by the government of the project cost. The court acknowledges that the burden on the government to raise funds is made lighter by allowing it to amortize payments out of the income from the operation of the LRT System. The court's decision underscores the flexibility of the law to accommodate variations and variations within the two recognized schemes.