G.R. No.

215847
GOV.
EXEQUIEL
B.
JAVIER, Petitioner,
vs.
COMMISSION
ON
ELECTIONS, CORNELIO P.
ALDON, and RAYMUNDO
T. ROQUERO, Respondents.
DECISION
BRION, J.:
This
is
a
petition
for certiorari under Rule 65
in relation to Rule 64 of the
Rules of Court, filed to
challenge the January 12,
2015 per curiam order of
the
Commission
on
Elections (COMELEC/The
Commission)
en
banc in SPA
No. 13-254
(DC).1 The
Commission
granted the petition to
disqualify
the
petitioner
Exequiel Javier and to annul
his proclamation as the duly
elected governor of Antique.
THE ANTECEDENTS
On December 3, 1985, the
Batasang
Pambansa
enacted
the
Omnibus
Election
Code (Election
2
Code). Section
261(d)
and
(e) of
this
Code
prescribe
the
following
elements of coercion as an
election offense:

Section
261. Prohibited
Acts. - The following shall be
guilty of an election offense:
xxx
(d) Coercion
subordinates. -

of

(1) Any public officer,

or any officer of any
public
or
private
corporation
or
association,
or
any
head,
superior,
or
administrator of any
religious organization,
or any employer or
landowner
who coerces
or
intimidates
or
compels, or in any
manner
influence,
directly or indirectly,
any
of
his
subordinates or
members
or
parishioners
or
employees or house
helpers,
tenants,
overseers,
farm
helpers, tillers, or lease
holders to
aid,
campaign or vote for
or
against
any
candidate
or
any
aspirant for
the
nomination or selection
of candidates.
(2)
Any public
officer or any officer of
any
commercial,

industrial, agricultural,
economic
or
social
enterprise or public or
private corporation or
association,
or
any
head,
superior
or
administrator of any
religious organization,
or any employer or
landowner
who dismisses
or
threatens to dismiss,
punishes
or
threatens
to
punish by reducing his
salary,
wage
or
compensation, or by
demotion,
transfer, suspension,
separation,
excommunication,
ejectment, or causing
him annoyance in the
performance of his job
or
in
his
membership, any
subordinate member
or affiliate, parishioner,
employee
or
house
helper,
tenant,
overseer, farm helper,
tiller, or lease holder,
for disobeying or not
complying with any of
the acts ordered by the
former to
aid,
campaign or vote for
or
against
any
candidate, or any
aspirant
for
the
nomination
or

selection
candidates.

of

(e) Threats, intimidation,

terrorism, use of fraudulent
device or other forms of
coercion. - Any person who,
directly
or
indirectly,
threatens, intimidates or
actually causes, inflicts or
produces
any
violence,
injury,
punishment,
damage,
loss
or
disadvantage
upon
any
person or persons or that of
the immediate members of
his family, his honor or
property,
or
uses
any
fraudulent device or scheme
to compel or induce the
registration or refraining
from registration of any
voter, or the participation in
a campaign or refraining or
desistance
from
any
campaign, or the casting of
any vote or omission to
vote, or any promise of such
registration,
campaign,
vote, or omission therefrom.
(emphases supplied)
Coercion, as an election
offense, is punishable by
imprisonment of not less
than one year but not more
than six years.3 Notably,
Section 68 of the Election
Code provides that the
Commission
may
administratively disqualify a

candidate
who
violates
Section 261(d) or (e).
On February 20, 1995,
Congress enacted Republic
Act No. 7890 amending the
definition of Grave Coercion
under the Revised Penal
Code.4 It
increased
the
penalty
for
coercion
committed in violation of a
persons right to suffrage
to prision
mayor. Further,
Section 3 of R.A. 7890
expressly repealed Section
26, paragraphs (d)(1) and
(2) of the Election Code.
On April 3, 2012, COMELEC
issued Resolution
No.
5
9385 fixing the calendar of
activities for the May 2013
elections. The resolution set
the election period from
January 13, 2013 until June
12, 2013.
On September 3, 2012,
Valderrama Municipal ViceMayor
Christopher
B.
Maguad
filed
an
administrative complaint for
Gross
Misconduct/Dereliction
of
Duty and Abuse of Authority
against Valderrama Mayor
Mary
Joyce
U.
Roquero (Mayor
Roquero).
This
complaint
was
docketed as Administrative
Case No. 05-2012.

On November 9, 2012, the

Sangguniang Panlalawigan
(SP) issued Resolution No.
291-2012 recommending
to
Antique
Governor
Exequiel
Javier (Gov.
Javier) the
preventive
suspension
of
Mayor
Roquero.
On November 21, 2012,
Mayor Roquero filed a
petition
for certiorari and
prohibition with prayer for
the issuance of a temporary
restraining
order
(TRO)
before the Regional Trial
Court (RTC), Branch 12,
Antique, against Gov. Javier
and the members of the SP
to
restrain
them
from
proceeding
with
Administrative Case No. 052012. The petition was
docketed as Special Civil
Action No. 12-11-86.
The case was re-raffled to
the RTC, Branch 11 which
issued a writ of preliminary
injunction.
Gov. Javier, Vice-Governor
Dimamay, and the members
of the SP filed a petition
for certiorari with
urgent
prayer
for
TRO
and
preliminary
injunction
before the CA, docketed as
CA-G.R. SP-07307.
On December
COMELEC

18,

2012,

issued Resolution
No.
6
9581 prohibiting any public
official from suspending any
elective
provincial,
city,
municipal,
or
barangay
officer during the election
period for the May 13, 2013
elections. This resolution
implements Section 261
(x)7 of the Election Code.
On January 15, 2013, the CA
issued a TRO in CA-G.R. SP07307.
On January 16, 2013, the
RTC, Branch 11 promulgated
its
judgment
granting certiorari and
prohibition. It ordered the
SP to cease and desist from
further
proceeding
with
Administrative Case No. 052012. It likewise ordered
Gov. Javier to refrain from
implementing SP
Resolution
No.
2912012 and from preventively
suspending Mayor Roquero.
On January 23, 2013, Gov.
Javier
issued Executive
Order No. 003, S. 2013,
preventively
suspending
Mayor Roquero for thirty
(30) days.
On February 7, 2013, the SP
of Antique issued a decision
finding
Mayor
Roquero
guilty
of Grave
Misconduct in relation
with Section 3(e) of R. A.

3019, the Anti-Graft and

Corrupt
Practices
Act, and Grave Abuse of
Authority in relation with
Section 5(e) of R.A. No.
6713. The SP suspended her
for four (4) months.
Mayor Roquero filed an
Election Offense complaint
against Gov. Javier for
violating Section 261(x) of
the Election Code. The case
was
filed
before
the
COMELEC Law Department
and docketed as Election
Offense Case (EOC) No.
13-025.
Meanwhile (or on March 15,
2013), the CA granted the
writ
of
preliminary
injunction filed by Gov.
Javier, et al., in CA-G.R. SP07307. It enjoined Judge
Nery Duremdes of the RTC,
Branch 11 from conducting
further proceedings in SPL
Civil Action No. 12-11-86.
On March 22, 2013, private
respondents
Cornelio
P.
Aldon
(Aldon)
and
Raymundo
T.
Roquero (Roquero) also filed
a petition for disqualification
before
the
Commission
against Gov. Javier, ViceGovernor Rosie A. Dimamay,
and the other members of
the SP. The case was
docketed
as

COMELEC Special
Action
(SPA) No. 13-254 (DC.)
Aldon and Roquero sought
to disqualify Gov. Javier and
the
other
incumbent
officials from running in the
2013 elections on the
ground that the latter
committed
the
election
offenses of Coercion of
Subordinates [Sec.
261(d)]
and Threats,
Intimidation, Terrorism x
x x or Other Forms of
Coercion [Sec. 261(e)] by
suspending Mayor Roquero.
They
alleged
that
the
suspension was political
harassment calculated to
intimidate the Roqueros into
backing out of the 2013
elections.8
On April 29, 2013, the Clerk
of
the
Commission
conducted a conference
hearing
between
the
parties.
On April 30, 2013, Gov.
Javier (together with the SP
Members) filed a motion to
dismiss
with
answer ex
abundante ad cautelam.
After the May 13, 2013
Elections, only Gov. Javier
and SP Members Tobias M.
Javier, Edgar D. Denosta,
Teopisto C. Estaris, Jr., and
Victor R. Condez were
proclaimed winners. Hence,

the Commission considered

the disqualification cases
against
the
losing
candidates moot.
On October 3, 2014, the
COMELEC Second Division
issued a resolution in SPA
No.
13-254
(DC) disqualifying
Gov.
Javier and annulling his
proclamation
as
the
Governor of Antique. The
resolution was penned by
Commissioner
Elias
R.
Yusoph.
The COMELEC held that the
preventive suspension of
Mayor
Roquero
under Executive
Order
No.
003 violated
the
election period ban because
it was not for the purpose of
applying the Anti-Graft and
Corrupt Practices Act. It also
considered
the
Commissions
findings
in EOC No. 13-025 that
there
was
substantial
evidence showing that Gov.
Javier acted in bad faith
when he suspended Mayor
Roquero as a form of
punishment for opposing
him.9
The COMELEC ruled that
Gov.
Javiers
act
of
preventively
suspending
Mayor Roquero during the
election
period
ban fell

within the contemplation of

Section
261(d)
of
the
Election Code, which is a
ground for disqualification
under Section 68. It held
that while Section 261(d) of
the Election Code was
repealed by Republic Act
No. 7890, it did not remove
coercion "as a ground per se
for disqualification under
[Section] 68." In fact, R.A.
7890 made Coercion (an
election offense) a felony
with a higher penalty.10 The
COMELEC added that the
general repealing clause of
R.A.
No.
7890
cannot
impliedly repeal Section 68
because the latter was "not
absolutely and irreconcilably
incompatible with Article
286."11
Commissioner Luie Tito F.
Guia dissented from the
resolution.
Commissioner
Guia reasoned that the legal
basis to dismiss Gov. Javier
no longer exists because
Section 3 of Republic Act
No. 7890 had repealed
Section
261(d)
of
the
Election
Code.
Commissioner Arthur D. Lim
took no part in the vote
because
he
did
not
participate
in
the
deliberations.
With the votes tied at 1-1-1
(one voted to grant, one

dissenting, and one not

participating),
the
case
failed
to
obtain
the
necessary
majority.
Consequently on October
14, 2014, the COMELEC
Second Division issued an
order elevating the case to
the en
banc for
its
12
disposition.
The
Commission en
banc agreed, as a matter of
internal arrangement, to
submit
their
respective
opinions explaining their
respective votes or their
concurrence
with
either
Commissioner Yusoph or
Commissioner Guia.
Three (3) Commissioners
concurred
with
Commissioner
Yusoph:
Chairman Sixto Brillantes,
Jr., Commissioner Lucenito
Tagle, and Commissioner
Arthur Lim. Commissioner
Christian Robert Lim joined
Commissioner
Guias
dissent. Commissioner Al A.
Parreo did not participate
in the vote as he was away
on official business. Thus,
the vote was 4-2-1 in favor
of disqualification; in a per
curiam order
promulgated
on January 12, 2015, the
Commission en
banc disqualified Gov. Javier
and
annulled
his

proclamation
as
governor of Antique.

the

On January 20, 2015, Gov.

Javier filed the present
petition for certiorari under
Rule 65 in relation with Rule
64 of the Rules of Court.
THE PETITION
The petitioner argues that
the
Commission en
banc committed
grave
abuse of discretion because:
(1) its January 12, 2015
order was arrived at on the
basis
of
an
"internal
arrangement; and (2) the
order did not obtain a
majority
vote
because
Commissioner Arthur Lim
should not have been
allowed to participate.
The petitioner also asserts
that the Commission erred
in ruling that R.A. 7890 did
not remove Section 261(d)
of the Election Code as a
ground for administrative
disqualification. Finally, the
petitioner maintains that
the
Commission
unconstitutionally set the
Election Period for the May
13,
2013
elections
in
violation of Article IX-C,
Section
9
of
the
Constitution, Sec. 62 (c) of
the Local Government Code,
and Section 8 of Republic
Act No. 7056.13

In its comment on the

petition, COMELEC, through
the Office of the Solicitor
General (OSG), counters
that it did not abuse its
discretion in issuing the
January 12, 2015 order
disqualifying Gov. Javier.
The Commission insists that
the
procedure
observed
during the proceedings was
not infirm and that there
was no legal impediment for
Commissioner Arthur Lim to
participate
in
the en
banc vote.
On the alleged errors of law,
the Commission insists that
there was legal basis to
disqualify Gov. Javier under
both Sections 261 (d) and
(e) of the Election Code; the
repeal of Section 261(d) by
R.A. 7890 did not ipso
facto remove coercion as a
ground for disqualification
under Section 68 of the
Election Code. It added that
Section 261(e), on the other
hand,
has
not
been
repealed, either expressly or
impliedly.
Finally,
the
Commission
asserts
that
COMELEC
Resolution No. 9581 fixing
the date of the election
period
is
expressly
authorized by Article IX,
Section 9 of the Constitution

and Section 8 of Republic

Act No. 7056.
Based
on
these
submissions, the following
issues now confront the
Court:
I.
Whether the Commission
gravely
abused
its
discretion when it issued
Resolution No. 9581 fixing
the 2013 election period
from January 13, 2013 until
June 12, 2013, for the
purpose
of
determining
administrative and criminal
liability
for
election
offenses.
II.
Whether the Commission
erred in ruling that R.A. No.
7890
did
not
remove
coercion as a ground for
disqualification
under
Section 68 of the Election
Code.
III.
Whether the Commission en
banc committed
grave
abuse
of
discretion
in
issuing its Order dated
January
12,
2015,
disqualifying Gov. Javier and
annulling his proclamation
as the governor of Antique.
OUR RULING:

After due consideration,

we resolve to grant the
petition.
The
COMELEC
is
expressly authorized to
fix a different date of the
election period.
The petitioner contends that
the election period for the
reckoning of administrative
and criminal liabilities under
election laws should always
be the same-90 days before
and 30 days after an
election-fixed in Article IX-C,
Section 9 of the Constitution
and Section 8 of Republic
Act No. 7056.14 He argues
that
the
Commissions
authority to fix the preelection period refers only
to the period needed to
properly
administer
and
conduct orderly elections.
The petitioner argues that
by extending the period for
incurring criminal liability
beyond the 90-day period,
the Commission encroached
on
the
legislatures
prerogative
to
impute
criminal and administrative
liability
on mala
prohibita acts.
Therefore,
COMELEC Resolution Nos.
9385
and
9581
were
issued ultra vires.
We
do
not
find
argument meritorious.

this

No
less
than
the
Constitution authorizes the
Commission to fix the dates
of the election period.
Article
IX-C,
Section
9
provides:

peaceful,
and
credible
elections. This is not merely
a
statutory
but
a constitutionally
granted power
of
the
Commission.

Section
9. Unless
otherwise fixed by the
Commission in special
cases, the election period
shall commence ninety days
before the day of election
and shall end thirty days
thereafter.15

Contrary to the petitioners

contention,
the
Commissions act of fixing
the election period does not
amount to an encroachment
on legislative prerogative.
The Commission did not
prescribe or define the
elements
of
election
offenses. Congress already
defined them through the
Omnibus Election Code, the
Fair Elections Act, and other
pertinent election laws.

Congress,
through
the
Election
Code,
explicitly
recognizes this authority:
Sec.
3.
Election
and
campaign periods. Unless
otherwise
fixed
in
special cases by the
Commission on Elections,
which hereinafter shall be
referred
to
as
the
Commission, the election
period
shall
commence
ninety days before the day
of the election and shall end
thirty
days
16
thereafter. (emphases
supplied)
Evidently,
the
120-day
period is merely the default
election
period.
The
Commission
is
not
precluded from fixing the
length and the starting date
of the election period to
ensure free, orderly, honest,

As defined by Congress,
some election offenses and
prohibited acts can only be
committed
during
the
election period. An element
of these offenses (i.e., that
it be committed during the
election period) is variable,
as election periods are not
affixed to a specific and
permanent
date.
Nevertheless, the definition
of the offense is already
complete. By fixing the date
of the election period, the
Commission did not change
what the offense is or how it
is committed. There is thus
no
intrusion
into
the
legislative sphere.

There is also no merit in the

petitioners argument that
the
extended
election
period only applies to preelection activities other than
the
determination
of
administrative or criminal
liability for violating election
laws. Neither the law nor
the Constitution authorizes
the use of two distinct
election periods for the
same election. The law does
not distinguish between
election offenses and other
pre-election
activities
in
terms of the applicable
election period. Where the
law does not distinguish,
neither should this Court.
The Alleged Lack of Due
Process
We find the petitioners
claim that the Commission
committed grave abuse of
discretion since there was
no preliminary investigation
as required under Section
265 of the Omnibus Election
Code to be misplaced.17
SPA No. 13-254 was an
administrative
proceeding
for disqualification and not a
criminal prosecution of an
election offense. The due
process requirements and
the procedures for these are
not the same. Section 265
of the Election Code only

applies
to
criminal
prosecutions.
Disqualification cases are
summary in nature and
governed by Rule 25 of the
COMELEC
Rules
of
Procedure.
There is likewise no merit in
the petitioners allegation
that he was denied due
process
because
the
Commission adjudicated the
issue without conducting
any subsequent hearings
and without requiring the
submission
of
position
papers
or
memoranda,
notarized witness affidavits,
or
other
documentary
evidence aside from the
annexes included in the
petition and the answer.
Administrative
due
process cannot
be
fully
equated with due process in
its strict judicial sense.18 A
formal hearing is not always
necessary
and
the
observance
of
technical
rules of procedure is not
strictly
applied
in
administrative
proceedings.19 The essence
of
administrative
due
process is the right to be
heard and to be given an
opportunity to explain ones
side.20 Where
the
Commission
hears
both
sides and considers their

contentions,
the
requirements
of
administrative due process
are complied with.
As we held in Lanot v.
Commission on Elections:21
The electoral aspect of a
disqualification
case
determines whether the
offender
should
be
disqualified from being a
candidate or from holding
office.
Proceedings
are
summary in character and
require
only
clear
preponderance of evidence.
An erring candidate may be
disqualified even without
prior
determination
of
probable
cause
in
a
preliminary
investigation.
The electoral aspect may
proceed independently of
the criminal aspect, and
vice versa.
The criminal aspect of a
disqualification
case
determines whether there is
probable cause to charge a
candidate for an election
offense. The prosecutor is
the COMELEC, through its
Law
Department,
which
determines
whether
probable cause exists. If
there is probable cause, the
COMELEC, through its Law
Department,
files
the
criminal information before

the
proper
court.
Proceedings
before
the
proper court demand a fullblown hearing and require
proof beyond reasonable
doubt to convict. A criminal
conviction shall result in the
disqualification
of
the
offender, which may even
include disqualification from
holding a future public
office.
Commissioner
Arthur
Lims Participation in the
En Banc Voting
The
petitioner
further
argues that the Commission
committed grave abuse of
discretion
by
allowing
Commissioner Arthur D. Lim
to
participate
in
the
proceedings
before
the
Commission en
banc. The
petitioner maintains that
because
Commissioner
Arthur Lim took no part in
the proceedings before the
COMELEC Second Division,
then
he
should
have
inhibited
from
the en
banc proceedings pursuant
to the ruling in Estrella v.
COMELEC.22 If we disregard
Commissioner Arthur Lims
vote, then the Commission
would have failed to attain
the necessary majority vote
of all the members of the
Commission.

The petitioners reliance

on Estrella is
misplaced
because the facts of this
case are different from
those
of
the
present
case. Estrella involved two
related
election
cases
between the same parties:
an election protest and an
action
for certiorari. One
party
moved
for
Commissioner
Lantions
inhibition
which
the
Commission
denied.
However,
Commissioner
Lantion
later
inhibited
himself
from
the certiorari proceeding
and was substituted by
another
Commissioner.23 The
substitution order was also
adopted in the election
protest case. When the
election
protest
was
elevated
to
the
COMELEC en
banc, Commissioner Lantion
participated
in
the
deliberations
and
voted
despite his prior inhibition.
This
Court
granted certiorari and held
that Commissioner Lantions
piecemeal
voluntary
inhibition was illegal and
unethical.
In
the
present
case,
Commissioner Arthur Lim
did not inhibit from the
proceedings.
If
the

Commissioner had inhibited,

there would have been a
need
to
replace
him
pursuant to Rule 3, Section
6 of the COMELEC Rules of
Procedure24 (as
what
happened in Estrella where
there was an issuance of an
order
designating
Commissioner
Borra
as
Commissioner
Lantions
substitute).
Commissioner
Arthur Lim only abstained
from voting; he did not
participate
in
the
deliberations.
When
the
Commission en banc, as a
matter
of
internal
arrangement,
agreed
among
themselves
to
submit their own opinion
explaining their respective
vote
or
merely
their
concurrence
with
either
Commissioner
Elias
R.
Yusoph or Commissioner
Luie Tito F. Guias position
on the matter, no legal or
ethical impediment existed
preventing
him
(Commissioner Arthur Lim)
from
subsequently
participating
in
the
deliberations
and
from
casting his vote.
COMELECs
Arrangement

Internal

The
petitioner
also
maintains
that
the
Commission gravely abused

its discretion when it set

aside its own rules and
resolved the case through
an "internal arrangement."
He
submits
that
the
Commission should have
waited
for
the
assigned ponente to
write
an opinion before agreeing
to vote based on the
positions of Commissioner
Yusoph and Commissioner
Guia. The petitioner also
claims that the assailed
Order
is
a
"midnight
decision" and cites the
absence of a promulgation
date on the front page and
of a certification signed by
the Chairman as procedural
infirmities.
The petitioner clearly refers
to Rule 18 of the COMELEC
Rules of Procedure which
states:
Part
Rule 18 Decisions

IV

Sec. 1 Procedure in Making

Decisions. The conclusions
of the Commission in any
case submitted to it for
decision en
banc or
in
Division shall be reached
in consultation before the
case is assigned by raffle to
a Member for the writing of
the
opinion
of
the
Commission or the Division
and a certification to this

effect
signed
by
the
Chairman or the Presiding
Commissioner, as the case
may
be,
shall
be
incorporated in the decision.
Any member who took no
part,
dissented,
or
abstained from a decision or
resolution must state the
reason therefor.
Every
decision
shall
express therein clearly
and distinctly the facts
and the law on which it
is
based. (emphasis
supplied)
To our mind, the essence of
this provision is: (1) that
decisions
of
the
Commission, whether in
Division or en banc, must be
reached in consultation; and
(2) that the decisions must
state their factual and legal
bases. Moreover, Rule 18,
Section 1 must be read
together with the other
provisions of the COMELEC
Rules
of
Procedure,
particularly the following
related portions:
Rule
1
Provisions

Introductory

Sec. 3. Construction These

rules
shall
be liberally
construed in
order
to
promote the effective and
efficient implementation of
the objectives of ensuring

the holding of free, orderly,

honest,
peaceful
and
credible elections and to
achieve just, expeditious
and
inexpensive
determination
and
disposition of every action
and proceeding brought
before the Commission.
Sec. 4. Suspension of the
Rules In the interest of
justice and in order to
obtain
speedy
disposition
of
all
matters pending before the
Commission, these rules
or any portion thereof
may be suspended by the
Commission.
The
COMELEC
Rules
specifically authorize the
Commission to suspend the
strict application of its rules
in the interest of justice and
the speedy disposition of
cases. In this case, the
Commission suspended Rule
18,
Section
1.
The
Commission, as a body,
dispensed
with
the
preparation
of
another ponencia and opted
to vote on the legal
positions of Commissioners
Yusoph
and
Guia.
Nevertheless, the decision
was
evidently
reached
through consultation. Then
Chairman Sixto Brillantes,
Jr., Commissioner Lucenito

Tagle, and Commissioner

Arthur Lim concurred with
Commissioner
Yusoph.
Commissioner
Christian
Robert
Lim
joined
Commissioner
Guias
dissent.
Chairman
Brillantes,
Jr.
and
Commissioner Arthur Lim
also
wrote
separate
concurring opinions. The
Court does not see any
arbitrariness or infirmity in
this internal arrangement
that would have deprived
the
petitioner
of
due
process.
Moreover, the Commission
resorted
to
this
arrangement because, as
the petitioner pointed out,
three Commissioners were
retiring soon. There was a
need to resolve the cases
because
the
impending
vacancies
would
have
resulted in further delay.
Contrary to the petitioners
insinuations,
"midnight
decisions" are not illegal.
Judges and other quasijudicial officers cannot sit
back, relax, and refuse to do
their work just because they
are nearing retirement or
are near the end of their
term. As civil servants, they
are expected to diligently
carry out their duties until
their
separation
from
service.
Thus,
the

Commissions suspension of
its rules and use of an
internal
arrangement
to
expedite
its
internal
proceedings is not at all
unusual in collegial bodies.
We note that the vote was
divided and dissents were
filed, thereby indicating the
absence of any malicious
departure from the usual
procedures in arriving at the
Commissions ruling on the
case.
Absence
of
a
Promulgated Date and
Failure to Serve Advance
Copy
With respect to the absence
of a promulgation date on
the first page of the assailed
order, this Court directs the
petitioners attention to the
last page stating that the
Order was "Given this 12th
day
of
January
2015,
Manila,
Philippines.25 Promulgation
is the process by which a
decision
is
published,
officially announced, made
known to the public, or
delivered to the clerk of
court for filing, coupled with
notice to the parties or their
counsel.26 The order was
evidently promulgated on
January 12, 2015.

The Commission does not

deny that it failed to serve
an advance copy of the
order to the petitioner as
required under Rule 18,
Section 527 of its Rules. But
as we previously held in the
cases
of Lindo
v.
28
COMELEC andPimping
v.
29
COMELEC, this
kind
of
procedural lapse does not
affect the validity of the
order and is insufficient to
warrant the grant of a writ
of certiorari in the absence
of any grave abuse of
discretion prejudicing the
rights of the parties.
Repeal of Section 261 (d)
of Batas Pambansa Blg.
881 by Republic Act No.
7890
No
less
than
the
Constitution empowers the
Commission to decide all
questions affecting elections
except those involving the
right to vote.30 It is the sole
arbiter of all issues involving
elections. Hence, unless
tainted with grave abuse of
discretion, simple errors of
judgment committed by
COMELEC
cannot
be
reviewed even by this
Court.31
An error of judgment is one
that the court may commit
in the exercise of its

jurisdiction;32 they
only
involve errors in the court or
tribunals appreciation of
the facts and the law.33 An
error of jurisdiction is one
where the act complained of
was issued by the court
without or in excess of its
jurisdiction, or with grave
abuse
of
discretion
tantamount to lack or
excess of jurisdiction.34
A review of the October 3,
2014
COMELEC
Second
Division resolution (penned
by Commissioner Yusoph),
however, showed that the
main
thrust
of
this
resolution to which four
Commissioners concurred in
when the case was elevated
to the en banc is faulty.35 It
considered the repeal of
Section 261(d) by R.A.
No.7890 to be an implied
one, which is contrary to the
wordings of R.A. 7890.
For clarity, we reproduce
the pertinent provisions of
R.A. No. 7890, thus:
SECTION 1. Article 286,
Section Three, Chapter Two,
Title Nine of Act No. 3815,
as amended, is hereby
further amended to read as
follows:
ART. 286. Grave Coercions.
The penalty of prision
correccional and a fine not

exceeding
Six
thousand
pesos shall be imposed
upon any person who,
without any authority of
law, shall, by means of
violence,
threats
or
intimidation,
prevent
another
from
doing
something not prohibited by
law, or compel him to do
something against his will,
whether it be right or
wrong.
If
the
coercion
be
committed in violation of
the exercise of the right of
suffrage, or for the purpose
of compelling another to
perform any religious act, to
prevent him from exercising
such right or from so doing
such act, the penalty next
higher in degree shall be
imposed."
SEC.
2. Section
261,
Paragraphs (d)(1) and
(2), Article XXII of Batas
Pambansa Blg. 881 is
hereby repealed.
SEC. 3. All other election
laws, decrees, executive
orders rules and regulations,
or parts thereof inconsistent
with the provisions of this
Act are hereby repealed.
xxxx
A repeal may be express or
implied.36 An express repeal

is one wherein a statute

declares, usually in its
repealing clause, that a
particular and specific law,
identified by its number or
title,
is
repealed.37 An
implied repeal, on the other
hand, transpires when a
substantial conflict exists
between the new and the
prior laws. In the absence of
an
express
repeal,
a
subsequent law cannot be
construed as repealing a
prior
law
unless
an
irreconcilable inconsistency
and repugnancy exist in the
terms of the new and the
old laws.38

disqualification
due
to
coercion under Section 68
can very well stand apart
from the criminal case for
coercion under Article 286,
as amended. This is so
because Section 68 involves
an
administrative
proceeding
intended
to
disqualify
a
candidate
whereas Article 286, supra,
involves
a
criminal
proceeding
intended
to
penalize
coercion.
Both
laws, therefore, can be
given
effect
without
nullifying the other, hence
the inapplicability of implied
repeal.

In the present case, it is

clear that R.A. No. 7890
expressly repealed Section
261, paragraphs (d)(1) and
(2) of the Omnibus Election
Code. The COMELEC Second
Divisions October 3, 2014
resolution, however, treated
this repeal as merely an
implied one. Commissioner
Yusoph reasoned out as
follows:

To firm up our stance

against implied repeal of
coercion as a ground for
disqualification,
the
following pronouncements
of the Supreme Court are
guiding:

Moreover,
the
general
repealing clause in Section
3
of
RA
7890 cannot
impliedly
repeal Section
68 because the latter is not
absolutely and irreconcilably
incompatible with Article
286, as amended by RA
7890. Meaning, a case for

Implied
repeal by
irreconcilable inconsistency
takes place when the two
statutes cover the same
subject matter; they are so
clearly
inconsistent
and
incompatible
with
each
other that they cannot be
reconciled or harmonized;
and both cannot be given
effect, that is, that one law
cannot be enforced without
nullifying the other."

Well-settled is the rule is

statutory
construction
that implied
repeals are
disfavored. In order to effect
a repeal by implication, the
latter statute must be so
irreconcilably
inconsistent
and repugnant with the
existing law
that they
cannot be made to reconcile
and stand together. The
clearest case possible must
be
made
before
the
inference
of implied
repeal may be drawn, for
inconsistency
is
never
39
presumed. x x x x"
We point out that this
resolution
and
the
dissenting
opinion
of
Commissioner Guia became
the basis of the internal
arrangement reached upon
by
the
Commission en
banc whereby
the
commissioners agreed to
submit
their
respective
opinions explaining their
votes or their concurrence
with either Commissioner
Yusoph or Guia.
As earlier stated, the vote
was 4-2-1 in favor of
disqualification; in a per
curiam order
promulgated
on January 12, 2015, the
Commission en
banc disqualified Gov. Javier
and
annulled
his
proclamation
as
the

governor
of
Antique.
Chairman Brillantes and
Commissioner Arthur Lim
wrote their own opinions
concurring with the position
of Commissioner Yusoph,
while Commissioner Tagle
submitted
his
vote
concurring with the opinions
of Commissioner Yusoph
and Chairman Brillantes.
In his Separate Opinion,
Chairman Brillantes agreed
with Commissioner Yusoph
that the repeal of Section
261(d) by R.A. No. 7890 was
merely implied, and made
the following disquisition:
xxxx
The Supreme Court, in a
long line of cases, has
constantly disfavored and
struck down the use of
repeal
by
implication.
Pursuant to jurisprudence,
well entrenched is the rule
that an implied repeal is
disfavored. The apparently
conflicting provisions of a
law or two laws should be
harmonized as much as
possible, so that each shall
be effective. For a law to
operate to repeal another
law, the two laws must
actually be inconsistent. The
former
must
be
so
repugnant
as
to
be
irreconcilable with the latter

act.
Stated
plainly,
a
petition for disqualification
on the ground of coercion
shall be taken differently
and distinctly from coercion
punishable under the RPC
for the two can very well
stand independently from
each other. x x x Therefore,
unless proven that the two
are inconsistent and would
render futile the application
and enforcement of the
other, only then that a
repeal by implication will be
preferred. x x x x40
A law that has been
expressly repealed ceases
to
exist
and
becomes
inoperative
from
the
moment the repealing law
becomes
effective.41 The
discussion
on
implied
repeals by the Yusoph
resolution,
(and
the
concurring
opinion
of
Chairman Brillantes, Jr.),
including the concomitant
discussions on the absence
of irreconcilable provisions
between the two laws, were
thus
misplaced.
The
harmonization of laws can
only be had when the repeal
is implied, not when it is
express, as in this case.
The COMELECs reasoning
that coercion remains to be
a ground for disqualification
under Section 68 of the

Election Code despite the

passage of R.A. No. 7890 is
erroneous. To the point of
our being repetitive, R.A.
No. 7890 expressly repealed
Section 261 d(1) and (2) of
Batas Pambansa Blg. 881,
rendering these provisions
inoperative. The effect of
this
repeal
is
to remove Section
261(d)
from among those listed as
ground for disqualification
under Section 68 of the
Omnibus Election Code.
In
his
Memorandum/Concurring
Opinion,
Commissioner
Arthur Lim stated that the
petition for disqualification
is anchored not only on
violation of Section 261 (d),
but also on the violation of
Section 261(e) in relation to
Section 68 of the OEC. We
point out, however, that the
COMELEC Second Divisions
October 3, 2014 resolution
in
SPA
No.
13254 (disqualifying
Gov.
Javier and annulling his
proclamation
as
the
Governor of Antique) was
premised solely on violation
of Section 261(d) of the
OEC; it did not find that Gov.
Javier even by substantial
evidence - violated the
provisions of Section 261(e).
For clarity and accuracy, we
quote the pertinent portions

of the COMELECs (Second

Division) October 3, 2014
resolution:
Ineluctably, the act of Gov.
Javier
in
preventively
suspending Mayor Roquero
during the Election period
ban
falls
within
the
contemplation of Section
261(d) of the Election Code
which is a ground for
disqualification
under
Section 68, Election Code.
That is, Gov. Javier issued
Executive Order No. 003
suspending Mayor Roquero
to
coerce,
intimidate,
compel, or influence the
latter to collaborate with or
campaign for the former, or
to punish the latter for
having manifested political
opposition
against
the
former. For that, he must be
disqualified.42
With the express repeal of
Section 261(d), the basis for
disqualifying
Javier
no
longer existed. As we held
inJalosjos, Jr. v. Commission
on
Elections,43 [t]he
jurisdiction of the COMELEC
to disqualify candidates is
limited to those enumerated
in Section 68 of the
Omnibus Election Code. All
other election offenses are
beyond
the
ambit
of
COMELEC jurisdiction. They
are
criminal
and
not

administrative
in
44
nature. Pursuant
to
sections 265 and 268 of the
Omnibus Election Code, the
power of the COMELEC is
confined to the conduct of
preliminary investigation on
the
alleged
election
offenses for the purpose of
prosecuting
the
alleged
offenders before the regular
courts of justice.45
There is grave abuse of
discretion
justifying
the
issuance
of
the
writ
of certiorari when there is
such
capricious
and
whimsical
exercise
of
judgment as is equivalent to
lack of jurisdiction,46 where
power
is
exercised
arbitrarily or in a despotic
manner
by
reason
of
passion,
prejudice,
or
personal hostility amounting
to an evasion of positive
duty, or to virtual refusal to
perform the duty enjoined,
or
to
act
at
all
in
contemplation of law, as
where
the
power
is
exercised in an arbitrary
and despotic manner by
reason of passion and
hostility.47
To our mind, the COMELEC
gravely
abused
its
discretion
when
it
disqualified
Gov.
Javier
based on a provision of law

that
had
already
been expressly repealed. Its
stubborn insistence that
R.A.
No.
7890
merely
impliedly repealed Section
261 (d) despite the clear
wordings
of
the
law,
amounted to an arbitrary
and whimsical exercise of
judgment.
WHEREFORE, premises
considered,
we
hereby GRANT the petition
and SET ASIDE the January
12, 2015 per curiam order
of the Commission on
Elections en banc in SPA No.
13-254 (DC).
SO ORDERED.

TRUST; and PHILYARDS

HOLDINGS,
INC., respondents.
RESOLUTION
PUNO, J.:
For resolution before this
Court are two motions filed
by
the
petitioner,
J.G.
Summit Holdings, Inc. for
reconsideration
of
our
Resolution dated September
24, 2003 and to elevate this
case to the Court En Banc.
The petitioner questions the
Resolution which reversed
our Decision of November
20, 2000, which in turn
reversed and set aside a
Decision of the Court of
Appeals promulgated on July
18, 1995.
I. Facts
The undisputed facts of the
case, as set forth in our
Resolution of September 24,
2003, are as follows:

Year: 2005
G.R. No. 124293
January 31, 2005
J.G. SUMMIT HOLDINGS,
INC., petitioner,
vs.
COURT
OF
APPEALS;
COMMITTEE
ON
PRIVATIZATION,
its
Chairman and Members;
ASSET
PRIVATIZATION

On January 27, 1997, the

National Investment and
Development
Corporation
(NIDC),
a
government
corporation, entered into a
Joint Venture Agreement
(JVA) with Kawasaki Heavy
Industries, Ltd. of Kobe,
Japan (KAWASAKI) for the
construction, operation and
management of the Subic

National
Shipyard,
Inc.
(SNS) which subsequently
became
the
Philippine
Shipyard and Engineering
Corporation
(PHILSECO).
Under the JVA, the NIDC and
KAWASAKI
will
contribute P330 million for
the
capitalization
of
PHILSECO in the proportion
of 60%-40% respectively.
One of its salient features is
the grant to the parties of
the right
of
first
refusal should either of
them decide to sell, assign
or transfer its interest in the
joint venture, viz:
1.4 Neither party shall sell,
transfer or assign all or any
part of its interest in SNS
[PHILSECO] to any third
party without giving the
other under the same terms
the right of first refusal. This
provision shall not apply if
the
transferee
is
a
corporation
owned
or
controlled
by
the
GOVERNMENT or by a
KAWASAKI affiliate.
On November 25, 1986,
NIDC transferred all its
rights, title and interest in
PHILSECO to the Philippine
National Bank (PNB). Such
interests were subsequently
transferred to the National
Government pursuant to
Administrative Order No. 14.

On December 8, 1986,
President Corazon C. Aquino
issued Proclamation No. 50
establishing the Committee
on Privatization (COP) and
the Asset Privatization Trust
(APT) to take title to, and
possession of, conserve,
manage and dispose of nonperforming assets of the
National
Government.
Thereafter, on February 27,
1987, a trust agreement
was entered into between
the National Government
and the APT wherein the
latter
was
named
the
trustee of the National
Government's
share
in
PHILSECO. In 1989, as a
result
of
a
quasireorganization of PHILSECO
to settle its huge obligations
to
PNB,
the
National
Government's shareholdings
in PHILSECO increased to
97.41% thereby reducing
KAWASAKI's shareholdings
to 2.59%.
In the interest of the
national economy and the
government, the COP and
the APT deemed it best to
sell
the
National
Government's
share
in
PHILSECO
to
private
entities. After a series of
negotiations between the
APT and KAWASAKI, they
agreed that the latter's right
of first refusal under the JVA

be "exchanged" for the right

to top by five percent (5%)
the highest bid for the said
shares. They further agreed
that KAWASAKI would be
entitled to name a company
in
which
it
was
a
stockholder, which could
exercise the right to top. On
September
7,
1990,
KAWASAKI informed APT
that Philyards Holdings, Inc.
(PHI)1 would exercise its
right to top.
At
the
pre-bidding
conference
held
on
September
18,
1993,
interested
bidders
were
given copies of the JVA
between
NIDC
and
KAWASAKI, and of the Asset
Specific
Bidding
Rules
(ASBR) drafted for the
National
Government's
87.6% equity share in
PHILSECO. The provisions of
the ASBR were explained to
the interested bidders who
were notified that
the
bidding would be held on
December
2,
1993.
A
portion of the ASBR reads:
1.0 The subject of this Asset
Privatization Trust (APT) sale
through public bidding is the
National
Government's
equity
in
PHILSECO
consisting of 896,869,942
shares
of
stock
(representing 87.67% of

PHILSECO's
outstanding
capital stock), which will be
sold as a whole block in
accordance with the rules
herein enumerated.
xxx xxx xxx
2.0 The highest bid, as well
as the buyer, shall be
subject to the final approval
of both the APT Board of
Trustees and the Committee
on Privatization (COP).
2.1 APT reserves the right in
its sole discretion, to reject
any or all bids.
3.0 This public bidding shall
be on an Indicative Price
Bidding basis. The Indicative
price set for the National
Government's
87.67%
equity
in
PHILSECO
is
PESOS: ONE BILLION THREE
HUNDRED
MILLION
(P1,300,000,000.00).
xxx xxx xxx
6.0 The highest qualified bid
will be submitted to the APT
Board of Trustees at its
regular meeting following
the bidding, for the purpose
of determining whether or
not it should be endorsed by
the APT Board of Trustees to
the COP, and the latter
approves the same. The APT
shall advise Kawasaki Heavy
Industries, Inc. and/or its

nominee,
[PHILYARDS]
Holdings, Inc., that the
highest bid is acceptable to
the National Government.
Kawasaki Heavy Industries,
Inc.
and/or
[PHILYARDS]
Holdings, Inc. shall then
have a period of thirty (30)
calendar days from the date
of receipt of such advice
from APT within which to
exercise their "Option to Top
the Highest Bid" by offering
a bid equivalent to the
highest bid plus five (5%)
percent thereof.
6.1 Should Kawasaki Heavy
Industries,
Inc.
and/or
[PHILYARDS] Holdings, Inc.
exercise their "Option to Top
the Highest Bid," they shall
so notify the APT about such
exercise of their option and
deposit
with
APT
the
amount equivalent to ten
percent
(10%)
of
the
highest bid plus five percent
(5%) thereof within the
thirty
(30)-day
period
mentioned in paragraph 6.0
above. APT will then serve
notice upon Kawasaki Heavy
Industries,
Inc.
and/or
[PHILYARDS] Holdings, Inc.
declaring them as the
preferred bidder and they
shall have a period of ninety
(90) days from the receipt
of the APT's notice within
which to pay the balance of
their bid price.

6.2 Should Kawasaki Heavy

Industries,
Inc.
and/or
[PHILYARDS] Holdings, Inc.
fail to exercise their "Option
to Top the Highest Bid"
within the thirty (30)-day
period, APT will declare the
highest
bidder
as
the
winning bidder.
xxx xxx xxx
12.0 The bidder shall be
solely
responsible
for
examining with appropriate
care these rules, the official
bid forms, including any
addenda or amendments
thereto issued during the
bidding period. The bidder
shall likewise be responsible
for informing itself with
respect to any and all
conditions concerning the
PHILSECO
Shares
which
may, in any manner, affect
the
bidder's
proposal.
Failure on the part of the
bidder to so examine and
inform itself shall be its sole
risk and no relief for error or
omission will be given by
APT or COP. . . .
At the public bidding on the
said date, petitioner J.G.
Summit
Holdings,
2
Inc. submitted a bid of Two
Billion and Thirty Million
Pesos (P2,030,000,000.00)
with an acknowledgment of

KAWASAKI/[PHILYARDS']
right to top, viz:
4. I/We understand that the
Committee on Privatization
(COP) has up to thirty (30)
days to act on APT's
recommendation based on
the result of this bidding.
Should the COP approve the
highest bid, APT shall advise
Kawasaki Heavy Industries,
Inc. and/or its nominee,
[PHILYARDS] Holdings, Inc.
that the highest bid is
acceptable to the National
Government.
Kawasaki
Heavy
Industries,
Inc.
and/or
[PHILYARDS]
Holdings, Inc. shall then
have a period of thirty (30)
calendar days from the date
of receipt of such advice
from APT within which to
exercise their "Option to Top
the Highest Bid" by offering
a bid equivalent to the
highest bid plus five (5%)
percent thereof.
As petitioner was declared
the highest bidder, the COP
approved
the
sale
on
December 3, 1993 "subject
to the right of Kawasaki
Heavy
Industries,
Inc./
[PHILYARDS] Holdings, Inc.
to top JGSMI's bid by 5% as
specified in the bidding
rules."

On December 29, 1993,

petitioner informed APT that
it was protesting the offer of
PHI to top its bid on the
grounds
that:
(a)
the
KAWASAKI/PHI
consortium
composed of KAWASAKI,
[PHILYARDS], Mitsui, Keppel,
SM Group, ICTSI and Insular
Life violated the ASBR
because the last four (4)
companies were the losing
bidders
thereby
circumventing the law and
prejudicing
the
weak
winning bidder; (b) only
KAWASAKI could exercise
the right to top; (c) giving
the same option to top to
PHI constituted unwarranted
benefit to a third party; (d)
no right of first refusal can
be exercised in a public
bidding or auction sale; and
(e)
the
JG
Summit
consortium
was
not
estopped from questioning
the proceedings.
On
February
2,
1994,
petitioner was notified that
PHI had fully paid the
balance of the purchase
price of the subject bidding.
On February 7, 1994, the
APT notified petitioner that
PHI had exercised its option
to top the highest bid and
that the COP had approved
the same on January 6,
1994. On February 24,
1994, the APT and PHI

executed a Stock Purchase

Agreement. Consequently,
petitioner filed with this
Court
a
Petition
for
Mandamus under G.R. No.
114057. On May 11, 1994,
said petition was referred to
the Court of Appeals. On
July 18, 1995, the Court of
Appeals denied the same
for lack of merit. It ruled
that
the
petition
for
mandamus was not the
proper remedy to question
the
constitutionality
or
legality of the right of first
refusal and the right to top
that was exercised by
KAWASAKI/PHI, and that the
matter must be brought "by
the proper party in the
proper forum at the proper
time and threshed out in a
full blown trial." The Court
of Appeals further ruled that
the right of first refusal and
the right to top are prima
facie legal and that the
petitioner, "by participating
in the public bidding, with
full knowledge of the right
to top granted to KAWASAKI/
[PHILYARDS]
isestopped
from
questioning
the
validity of the award given
to [PHILYARDS] after the
latter exercised the right to
top and had paid in full the
purchase
price
of
the
subject shares, pursuant to
the ASBR." Petitioner filed a
Motion for Reconsideration

of said Decision which was

denied on March 15, 1996.
Petitioner
thus
filed
a
Petition for Certiorari with
this Court alleging grave
abuse of discretion on the
part of the appellate court.
On November 20, 2000, this
Court rendered x x x [a]
Decision
ruling
among
others that the Court of
Appeals erred when it
dismissed the petition on
the sole ground of the
impropriety of the special
civil action of mandamus
because the petition was
also one of certiorari. It
further ruled that a shipyard
like PHILSECO is a public
utility whose capitalization
must be sixty percent (60%)
Filipino-owned.
Consequently, the right to
top granted to KAWASAKI
under the Asset Specific
Bidding
Rules
(ASBR)
drafted for the sale of the
87.67%
equity
of
the
National
Government
in
PHILSECO is illegal not
only because it violates the
rules on competitive bidding
but more so, because it
allows foreign corporations
to own more than 40%
equity in the shipyard. It
also held that "although the
petitioner
had
the
opportunity to examine the
ASBR before it participated

in the bidding, it cannot be

estopped from questioning
the unconstitutional, illegal
and inequitable provisions
thereof." Thus, this Court
voided the transfer of the
national
government's
87.67% share in PHILSECO
to Philyard[s] Holdings, Inc.,
and upheld the right of JG
Summit, as the highest
bidder, to take title to the
said shares, viz:
WHEREFORE, the instant
petition
for
review
on
certiorari is GRANTED. The
assailed
Decision
and
Resolution of the Court of
Appeals are REVERSED and
SET ASIDE. Petitioner is
ordered to pay to APT its bid
price of Two Billion Thirty
Million
Pesos
(P2,030,000,000.00), less its
bid deposit plus interests
upon the finality of this
Decision. In turn, APT is
ordered to:
(a) accept the said
amount
of P2,030,000,000.00
less bid deposit and
interests
from
petitioner;
(b) execute a Stock
Purchase
Agreement
with petitioner;
(c) cause the issuance
in favor of petitioner of

the
certificates
of
stocks
representing
87.6% of PHILSECO's
total capitalization;
(d) return to private
respondent PHGI the
amount of Two Billion
One Hundred ThirtyOne
Million
Five
Hundred
Thousand
Pesos
(P2,131,500,000.00);
and
(e)
cause
the
cancellation
of
the
stock
certificates
issued to PHI.
SO ORDERED.
In separate Motions for
Reconsideration,
respondents
submit[ted]
three basic issues for x x x
resolution:
(1)
Whether
PHILSECO is a public utility;
(2) Whether under the 1977
JVA, KAWASAKI can exercise
its right of first refusal only
up to 40% of the total
capitalization of PHILSECO;
and (3) Whether the right to
top granted to KAWASAKI
violates the principles of
competitive
bidding.3 (citations omitted)
In
a
Resolution
dated
September 24, 2003, this
Court ruled in favor of the
respondents. On the first

issue,
we
held
that
Philippine
Shipyard
and
Engineering
Corporation
(PHILSECO) is not a public
utility, as by nature, a
shipyard is not a public
utility4 and that no law
declares a shipyard to be a
public utility.5 On the second
issue, we found nothing in
the 1977 Joint Venture
Agreement
(JVA)
which
prevents Kawasaki Heavy
Industries, Ltd. of Kobe,
Japan
(KAWASAKI)
from
acquiring more than 40% of
PHILSECOs
total
6
capitalization. On the final
issue, we held that the right
to top granted to KAWASAKI
in exchange for its right of
first refusal did not violate
the principles of competitive
bidding.7
On October 20, 2003, the
petitioner filed a Motion for
Reconsideration8 and
a
Motion to Elevate This Case
to the Court En Banc.9 Public
respondents Committee on
Privatization
(COP)
and
Asset
Privatization
Trust
(APT),
and
private
respondent
Philyards
Holdings, Inc. (PHILYARDS)
filed their Comments on J.G.
Summit Holdings, Inc.s (JG
Summits)
Motion
for
Reconsideration and Motion
to Elevate This Case to the
Court En Banc on January

29, 2004 and February 3,

2004, respectively.
II. Issues
Based on the foregoing, the
relevant issues to resolve to
end this litigation are the
following:
1. Whether there are
sufficient
bases
to
elevate the case at bar
to the Court en banc.
2. Whether the motion
for
reconsideration
raises any new matter
or cogent reason to
warrant
a
reconsideration of this
Courts Resolution of
September 24, 2003.
Motion to Elevate this Case
to the
Court En Banc
The petitioner prays for the
elevation of the case to the
Court en
banc on
the
following grounds:
1. The main issue of
the propriety of the
bidding
process
involved in the present
case
has
been
confused
with
the
policy issue of the
supposed fate of the
shipping industry which
has never been an

issue
that
determinative of
case.10

is
this

2. The present case

may
be
considered
under the Supreme
Court Resolution dated
February
23,
1984
which
included
among en banc cases
those involving a novel
question of law and
those where a doctrine
or principle laid down
by the Court en banc or
in division may be
modified or reversed.11
3. There was clear
executive interference
in the judicial functions
of the Court when the
Honorable Jose Isidro
Camacho, Secretary of
Finance, forwarded to
Chief Justice Davide, a
memorandum
dated
November 5, 2001,
attaching a copy of the
Foreign
Chambers
Report dated October
17, 2001, which matter
was placed in the
agenda of the Court
and noted by it in a
formal resolution dated
November 28, 2001.12
Opposing
J.G.
Summits
motion
to
elevate
the
case en banc, PHILYARDS

points out the petitioners

inconsistency
in
previously opposing PHILYA
RDS Motion to Refer the
Case
to
the
Court En
Banc. PHILYARDS contends
that J.G. Summit should now
be estopped from asking
that the case be referred to
the
Court en
banc.
PHILYARDS further contends
that the Supreme Court en
banc is not an appellate
court to which decisions or
resolutions of its divisions
may be appealed citing
Supreme Court Circular No.
2-89 dated February 7,
1989.13 PHILYARDS
also
alleges that there is no
novel
question
of
law
involved in the present case
as the assailed Resolution
was based on well-settled
jurisprudence.
Likewise,
PHILYARDS stresses that the
Resolution was merely an
outcome of the motions for
reconsideration filed by it
and the COP and APT and is
"consistent
with
the
inherent power of courts to
amend and control its
process and orders so as to
make them conformable to
law and justice. (Rule 135,
sec. 5)"14 Private respondent
belittles
the
petitioners
allegations regarding the
change in ponente and the
alleged
executive
interference as shown by

former Secretary of Finance

Jose
Isidro
Camachos
memorandum
dated
November 5, 2001 arguing
that these do not justify a
referral of the present case
to the Court en banc.
In insisting that its Motion to
Elevate This Case to the
Court En Banc should be
granted, J.G. Summit further
argued that: its Opposition
to the Office of the Solicitor
Generals Motion to Refer is
different
from
its
own
Motion to Elevate; different
grounds are invoked by the
two motions; there was
unwarranted
"executive
interference";
and
the
change in ponente is merely
noted in asserting that this
case should be decided by
the Court en banc.15
We
find
no
merit
in
petitioners contention that
the propriety of the bidding
process involved in the
present case has been
confused with the policy
issue of the fate of the
shipping industry which,
petitioner maintains, has
never been an issue that is
determinative of this case.
The Courts Resolution of
September 24, 2003 reveals
a clear and definitive ruling
on the propriety of the
bidding
process.
In

discussing whether the right

to top granted to KAWASAKI
in exchange for its right of
first refusal violates the
principles of competitive
bidding,
we
made
an
exhaustive discourse on the
rules and principles of
public bidding and whether
they were complied with in
the case at bar.16 This Court
categorically ruled on the
petitioners argument that
PHILSECO, as a shipyard, is
a public utility which should
maintain
a
60%-40%
Filipino-foreign equity ratio,
as it was a pivotal issue. In
doing so, we recognized the
impact of our ruling on the
shipbuilding industry which
was beyond avoidance.17
We
reject
petitioners
argument that the present
case may be considered
under the Supreme Court
Resolution dated February
23, 1984 which included
among en banc cases those
involving a novel question
of law and those where a
doctrine or principle laid
down
by
the
court en
banc or in division may be
modified or reversed. The
case was resolved based on
basic principles of the right
of first refusal in commercial
law and estoppel in civil law.
Contractual
obligations
arising from rights of first

refusal are not new in this

jurisdiction and have been
recognized in numerous
cases.18 Estoppel
is
too
known a civil law concept to
require
an
elongated
discussion.
Fundamental
principles on public bidding
were
likewise
used
to
resolve the issues raised by
the petitioner. To be sure,
petitioner leans on the right
to top in a public bidding in
arguing that the case at bar
involves a novel issue. We
are not swayed. The right to
top was merely a condition
or a reservation made in the
bidding rules which was
fully disclosed to all bidding
parties. In Bureau Veritas,
represented by Theodor
H. Hunermann v. Office
of the President, et
al., 19 we dealt with this
conditionality, viz:
x x x It must be stressed, as
held in the case of A.C.
Esguerra & Sons v. Aytona,
et al., (L-18751, 28 April
1962, 4 SCRA 1245), that in
an "invitation to bid, there
is a condition imposed
upon the bidders to the
effect that the bidding
shall be subject to the
right of the government
to reject any and all bids
subject to its discretion.
In the case at bar, the
government has made

its choice and unless an

unfairness or injustice is
shown,
the
losing
bidders have no cause to
complain nor right to
dispute that choice. This
is a well-settled doctrine
in this jurisdiction and
elsewhere."
The discretion to accept or
reject a bid and award
contracts is vested in the
Government
agencies
entrusted with that function.
The discretion given to the
authorities on this matter is
of such wide latitude that
the Courts will not interfere
therewith,
unless
it
is
apparent that it is used as a
shield to a fraudulent award
(Jalandoni v. NARRA, 108
Phil. 486 [1960]). x x x The
exercise of this discretion is
a
policy
decision
that
necessitates prior inquiry,
investigation, comparison,
evaluation,
and
deliberation. This task can
best be discharged by the
Government
agencies
concerned, not by the
Courts. The role of the
Courts
is
to
ascertain
whether
a
branch
or
instrumentality
of
the
Government
has
transgressed
its
constitutional
boundaries.
But the Courts will not
interfere with executive or

legislative
discretion
exercised
within
those
boundaries. Otherwise, it
strays into the realm of
policy decision-making.
It is only upon a clear
showing of grave abuse of
discretion that the Courts
will set aside the award of a
contract
made
by
a
government entity. Grave
abuse of discretion implies a
capricious, arbitrary and
whimsical exercise of power
(Filinvest Credit Corp. v.
Intermediate
Appellate
Court,
No.
65935,
30
September 1988, 166 SCRA
155).
The
abuse
of
discretion must be so patent
and gross as to amount to
an evasion of positive duty
or to a virtual refusal to
perform a duty enjoined by
law, as to act at all in
contemplation of law, where
the power is exercised in an
arbitrary
and
despotic
manner
by
reason
of
passion or hostility (Litton
Mills, Inc. v. Galleon Trader,
Inc., et al[.], L-40867, 26
July 1988, 163 SCRA 489).
The facts in this case do not
indicate any such grave
abuse of discretion on the
part of public respondents
when they awarded the
CISS contract to Respondent
SGS. In the "Invitation to

Prequalify and Bid" (Annex

"C,"
supra),
the
CISS
Committee made
an
express reservation of
the
right
of
the
Government to "reject
any or all bids or any
part thereof or waive
any defects contained
thereon and accept an
offer most advantageous
to the Government." It is
a well-settled rule that
where such reservation
is made in an Invitation
to Bid, the highest or
lowest bidder, as the
case may be, is not
entitled to an award as a
matter of right (C & C
Commercial Corp. v. Menor,
L-28360, 27 January 1983,
120 SCRA 112). Even the
lowest Bid or any Bid may
be rejected or, in the
exercise of sound discretion,
the award may be made to
another than the lowest
bidder (A.C. Esguerra &
Sons v. Aytona, supra, citing
43
Am.
Jur.,
788).
(emphases
supplied)1awphi1.nt
Like
the
condition
in
the Bureau Veritas case,
the right to top was a
condition imposed by the
government in the bidding
rules which was made
known to all parties. It was
a condition imposed on

all
bidders
equally,
based
on
the
APTs
exercise of its discretion
in deciding on how best
to
privatize
the
governments shares in
PHILSECO. It was not a
whimsical
or
arbitrary
condition plucked from the
ether and inserted in the
bidding rules but a condition
which the APT approved as
the
best
way
the
government could comply
with
its
contractual
obligations to KAWASAKI
under the JVA and its
mandate of getting the
most advantageous deal for
the government. The right
to top had its history in the
mutual right of first refusal
in the JVA and was reached
by
agreement
of
the
government and KAWASAKI.
Further,
there
is
no
"executive interference" in
the functions of this Court
by the mere filing of a
memorandum by Secretary
of
Finance
Jose
Isidro
Camacho.
The
memorandum was merely
"noted" to acknowledge its
filing. It had no further legal
significance.
Notably
too, the
assailed
Resolution
dated
September 24, 2003 was
decided unanimously by
the Special First Division

in
favor
respondents.

of

the

Again, we emphasize that a

decision or resolution of a
Division is that of the
Supreme Court20 and the
Court en banc is not an
appellate court to which
decisions or resolutions of a
Division may be appealed.21
For
all
the
foregoing
reasons, we find no basis to
elevate this case to the
Court en banc.
Motion for Reconsideration
Three principal arguments
were
raised
in
the
petitioners
Motion
for
Reconsideration. First, that a
fair resolution of the case
should be based on contract
law,
not
on
policy
considerations;
the
contracts do not authorize
the right to top to be
derived from the right of
first refusal.22 Second, that
neither the right of first
refusal nor the right to top
can be legally exercised by
the consortium which is not
the proper party granted
such right under either the
JVA or the Asset Specific
Bidding
Rules
23
(ASBR). Third,
that
the
maintenance of the 60%40% relationship between
the National Investment and

Development
Corporation
(NIDC) and KAWASAKI arises
from contract and from the
Constitution
because
PHILSECO is a landholding
corporation and need not be
a public utility to be bound
by
the
60%-40%
constitutional limitation.24
On the other hand, private
respondent
PHILYARDS
asserts that J.G. Summit has
not been able to show
compelling
reasons
to
warrant a reconsideration of
the
Decision
of
the
25
Court. PHILYARDS
denies
that the Decision is based
mainly
on
policy
considerations and points
out that it is premised on
principles
governing
obligations and contracts
and corporate law such as
the rule requiring respect
for contractual stipulations,
upholding rights of first
refusal, and recognizing the
assignable
nature
of
26
contracts rights. Also, the
ruling that shipyards are not
public utilities relies on
established case law and
fundamental
rules
of
statutory
construction.
PHILYARDS stresses that
KAWASAKIs right of first
refusal or even the right to
top is not limited to the 40%
equity of the latter.27 On the
landholding issue raised by

J.G.
Summit,
PHILYARDS
emphasizes that this is a
non-issue and even involves
a question of fact. Even
assuming that this Court
can take cognizance of such
question
of
fact
even
without the benefit of a trial,
PHILYARDS
opines
that
landholding by PHILSECO at
the time of the bidding is
irrelevant because what is
essential is that ultimately a
qualified
entity
would
eventually hold PHILSECOs
real
estate
28
properties. Further, given
the assignable nature of the
right of first refusal, any
applicable
nationality
restrictions,
including
landholding
limitations,
would not affect the right of
first refusal itself, but only
the
manner
of
its
29
exercise. Also, PHILYARDS
argues that if this Court
takes cognizance of J.G.
Summits allegations of fact
regarding
PHILSECOs
landholding, it must also
recognize
PHILYARDS
assertions that PHILSECOs
landholdings were sold to
another
corporation.30 As
regards the right of first
refusal, private respondent
explains that KAWASAKIs
reduced
shareholdings
(from 40% to 2.59%) did not
translate to a deprivation or
loss of its contractually

granted
right
of
first
31
refusal. Also, the bidding
was
valid
because
PHILYARDS exercised the
right to top and it was of no
moment that losing bidders
later joined PHILYARDS in
raising the purchase price.32
In cadence with the private
respondent
PHILYARDS,
public respondents COP and
APT contend:
1. The conversion of
the right of first refusal
into a right to top by
5% does not violate
any provision in the JVA
between
NIDC
and
KAWASAKI.
2. PHILSECO is not a
public
utility
and
therefore not governed
by the constitutional
restriction on foreign
ownership.
3. The petitioner is
legally estopped from
assailing the validity of
the proceedings of the
public bidding as it
voluntarily
submitted
itself to the terms of
the
ASBR
which
included the provision
on the right to top.
4. The right to top was
exercised
by
PHILYARDS
as
the

nominee of KAWASAKI
and
the
fact
that
PHILYARDS formed a
consortium to raise the
required amount to
exercise the right to
top the highest bid by
5% does not violate the
JVA or the ASBR.
5.
The
60%-40%
Filipino-foreign
constitutional
requirement for the
acquisition of lands
does not apply to
PHILSECO because as
admitted by petitioner
itself,
PHILSECO
no
longer
owns
real
property.
6. Petitioners motion
to elevate the case to
the Court en banc is
baseless and would
only
delay
the
termination
of
this
33
case.
In a Consolidated Comment
dated March 8, 2004, J.G.
Summit
countered
the
arguments of the public and
private respondents in this
wise:
1. The award by the
APT of 87.67% shares
of
PHILSECO
to
PHILYARDS with losing
bidders through the
exercise of a right to

top, which is contrary

to
law
and
the
constitution is null and
void for being violative
of
substantive
due
process and the abuse
of right provision in the
Civil Code.

c. That PHILSECO
owned land at the
time that the right
of first refusal was
agreed upon and
at the time of the
bidding are most
relevant.

a. The bidders[]
right to top was
actually exercised
by losing bidders.

d.
Whether
a
shipyard
is
a
public utility is not
the core issue in
this case.

b. The right to top

or the right of first
refusal cannot coexist
with
a
genuine
competitive
bidding.
c. The benefits
derived from the
right to top were
unwarranted.
2.
The
landholding
issue
has
been
a
legitimate issue since
the start of this case
but
is
shamelessly
ignored
by
the
respondents.

3. Fraud and bad faith

attend
the
alleged
conversion
of
an
inexistent right of first
refusal to the right to
top.
a.
The
history
behind the birth of
the right to top
shows fraud and
bad faith.
b. The right of first
refusal
was,
indeed,
"effectively
useless."

a. The landholding
issue is not a nonissue.

4. Petitioner is not
legally
estopped
to
challenge the right to
top in this case.

b. The landholding
issue
does
not
pose questions of
fact.

a.
Estoppel
is
unavailing as it
would
stamp
validity to an act

that is prohibited
by law or against
public policy.
b. Deception was
patent; the right to
top
was
an
attractive
nuisance.
c. The 10% bid
deposit
was
placed in escrow.
J.G. Summits insistence
that the right to top cannot
be sourced from the right of
first refusal is not new and
we have already ruled on
the issue in our Resolution
of September 24, 2003. We
upheld the mutual right of
first refusal in the JVA.34 We
also ruled that nothing in
the JVA prevents KAWASAKI
from acquiring more than
40% of PHILSECOs total
capitalization.35 Likewise,
nothing in the JVA or ASBR
bars the conversion of the
right of first refusal to the
right to top. In sum, nothing
new and of significance in
the petitioners pleading
warrants a reconsideration
of our ruling.
Likewise,
we
already
disposed of the argument
that neither the right of first
refusal nor the right to top
can legally be exercised by
the consortium which is not

the proper party granted

such right under either the
JVA or the ASBR. Thus, we
held:
The fact that the losing
bidder, Keppel Consortium
(composed of Keppel, SM
Group,
Insular
Life
Assurance,
Mitsui
and
ICTSI),
has
joined
PHILYARDS in the latter's
effort to raise P2.131 billion
necessary in exercising the
right to top is not contrary
to law, public policy or
public morals. There is
nothing in the ASBR that
bars the losing bidders from
joining either the winning
bidder (should the right to
top is not exercised) or
KAWASAKI/PHI (should it
exercise its right to top as it
did), to raise the purchase
price. The petitioner did not
allege, nor was it shown by
competent evidence, that
the participation of the
losing bidders in the public
bidding was done with
fraudulent intent. Absent
any proof of fraud, the
formation by [PHILYARDS] of
a consortium is legitimate in
a free enterprise system.
The appellate court is thus
correct
in
holding
the
petitioner estopped from
questioning the validity of
the transfer of the National

Government's
shares
in
36
PHILSECO to respondent.
Further, we see no inherent
illegality on PHILYARDS act
in seeking funding from
parties who were losing
bidders. This is a purely
commercial decision over
which the State should not
interfere absent any legal
infirmity. It is emphasized
that the case at bar involves
the disposition of shares in
a corporation which the
government
sought
to
privatize. As such, the
persons
with
whom
PHILYARDS desired to enter
into business with in order
to raise funds to purchase
the shares are basically its
business. This is in contrast
to a case involving a
contract for the operation of
or
construction
of
a
government infrastructure
where the identity of the
buyer/bidder or financier
constitutes an important
consideration.
In
such
cases,
the
government
would have to take utmost
precaution to protect public
interest by ensuring that the
parties with which it is
contracting have the ability
to satisfactorily construct or
operate the infrastructure.
On the landholding issue,
J.G. Summit submits that

since
PHILSECO
is
a
landholding
company,
KAWASAKI could exercise its
right of first refusal only up
to 40% of the shares of
PHILSECO
due
to
the
constitutional prohibition on
landholding by corporations
with more than 40% foreignowned equity. It further
argues that since KAWASAKI
already held at least 40%
equity in PHILSECO, the
right of first refusal was
inutile and as such, could
not
subsequently
be
converted into the right to
top. 37 Petitioner also asserts
that, at present, PHILSECO
continues to violate the
constitutional provision on
landholdings as its shares
are more than 40% foreignowned.38 PHILYARDS admits
that it may have previously
held land but had already
divested
such
39
landholdings. It contends,
however,
that
even
if
PHILSECO owned land, this
would not affect the right of
first refusal but only the
exercise thereof. If the land
is retained, the right of first
refusal, being a property
right, could be assigned to a
qualified
party.
In
the
alternative, the land could
be divested before the
exercise of the right of first
refusal. In the case at bar,
respondents
assert
that

since the right of first

refusal
was
validly
converted into a right to
top, which was exercised
not by KAWASAKI, but by
PHILYARDS
which
is
a
Filipino corporation (i.e.,
60% of its shares are owned
by Filipinos), then there is
no
violation
of
the
Constitution.40 At first, it
would seem that questions
of fact beyond cognizance
by this Court were involved
in the issue. However, the
records
show
that PHILYARDS admits it
had owned land up until
the
time
of
the
41
bidding. Hence,
the
only issue is whether
KAWASAKI had a valid
right of first refusal over
PHILSECO shares under
the JVA considering that
PHILSECO owned land
until the time of the
bidding and KAWASAKI
already held 40% of
PHILSECOs equity.
We uphold the validity of
the mutual rights of first
refusal
under
the
JVA
between
KAWASAKI
and
NIDC. First of all, the right of
first refusal is a property
right
of
PHILSECO
shareholders,
KAWASAKI
and NIDC, under the terms
of their JVA. This right allows
them
to
purchase
the

shares
of
their
coshareholder before they are
offered to a third party. The
agreement
of
coshareholders to mutually
grant this right to each
other, by itself, does not
constitute a violation of
the provisions of the
Constitution
limiting
land
ownership
to
Filipinos
and
Filipino
corporations.
As
PHILYARDS correctly puts it,
if PHILSECO still owns land,
the right of first refusal can
be validly assigned to a
qualified Filipino entity in
order to maintain the 60%40% ratio. This transfer, by
itself, does not amount to a
violation of the Anti-Dummy
Laws, absent proof of any
fraudulent
intent.
The
transfer could be made
either to a nominee or such
other party which the holder
of the right of first refusal
feels it can comfortably do
business with. Alternatively,
PHILSECO may divest of its
landholdings, in which case
KAWASAKI, in exercising its
right of first refusal, can
exceed 40% of PHILSECOs
equity. In fact, it can even
be said that if the
foreign shareholdings of
a
landholding
corporation
exceeds
40%, it is not the foreign
stockholders ownership

of the shares which is

adversely affected but
the
capacity
of
the
corporation to own land
that is, the corporation
becomes disqualified to own
land. This finds support
under the basic corporate
law
principle
that
the
corporation
and
its
stockholders are separate
juridical entities. In this
vein, the right of first refusal
over shares pertains to the
shareholders whereas the
capacity
to
own
land
pertains to the corporation.
Hence,
the
fact
that
PHILSECO owns land cannot
deprive stockholders of their
right of first refusal. No law
disqualifies
a
person
from purchasing shares
in
a
landholding
corporation even if the
latter will exceed the
allowed foreign equity,
what the law disqualifies
is the corporation from
owning land. This is the
clear import of the following
provisions
in
the
Constitution:
Section 2. All lands of the
public
domain,
waters,
minerals, coal, petroleum,
and other mineral oils, all
forces of potential energy,
fisheries, forests or timber,
wildlife, flora and fauna, and
other natural resources are

owned by the State. With

the exception of agricultural
lands, all other natural
resources shall not be
alienated. The exploration,
development, and utilization
of natural resources shall be
under the full control and
supervision of the State.
The State may directly
undertake such activities, or
it may enter into coproduction, joint venture, or
production-sharing
agreements with Filipino
citizens, or corporations
or associations at least
sixty per centum of
whose capital is owned
by such citizens. Such
agreements may be for a
period
not
exceeding
twenty-five
years,
renewable for not more than
twenty-five
years,
and
under such terms and
conditions
as
may
be
provided by law. In cases of
water rights for irrigation,
water supply, fisheries, or
industrial uses other than
the development of water
power, beneficial use may
be the measure and limit of
the grant.
xxx xxx xxx
Section 7. Save in cases of
hereditary
succession, no
private lands shall be
transferred or conveyed

except to individuals,
corporations,
or
associations qualified to
acquire or hold lands of
the
public
42
domain. (emphases
supplied)
The
petitioner
further
argues that "an option to
buy land is void in itself
(Philippine
Banking
Corporation v. Lui She, 21
SCRA 52 [1967]). The right
of first refusal granted to
KAWASAKI,
a
Japanese
corporation,
is
similarly
void. Hence, the right to
top, sourced from the right
of first refusal, is also
void."43 Contrary
to
the
contention of petitioner, the
case of Lui She did not that
say "an option to buy land is
void in itself," for we ruled
as follows:
x x x To be sure, a lease
to
an
alien
for
a
reasonable
period
is
valid. So is an option
giving an alien the right
to buy real property on
condition that he is
granted
Philippine
citizenship. As this Court
said in Krivenko vs.
Register of Deeds:
[A]liens are not completely
excluded
by
the
Constitution from the use of

lands
for
residential
purposes.
Since
their
residence in the Philippines
is temporary, they may be
granted temporary rights
such as a lease contract
which is not forbidden by
the Constitution. Should
they desire to remain here
forever
and
share
our
fortunes and misfortunes,
Filipino citizenship is not
impossible to acquire.
But if an alien is given
not only a lease of, but
also an option to buy, a
piece of land, by virtue
of which the Filipino
owner cannot sell or
otherwise dispose of his
property, this to last for
50
years,
then
it
becomes clear that the
arrangement is a virtual
transfer of ownership
whereby
the
owner
divests himself in stages
not only of the right to
enjoy
the
land (jus
possidendi, jus utendi,
jus
fruendi
and
jus
abutendi) but also of the
right to dispose of it (jus
disponendi) rights the
sum total of which make
up ownership. It is just
as
if
today
the
possession
is
transferred,
tomorrow,
the use, the next day,
the disposition, and so

on, until ultimately all

the
rights
of
which
ownership is made up are
consolidated in an alien.
And yet this is just exactly
what the parties in this case
did within this pace of one
year, with the result that
Justina Santos'[s] ownership
of her property was reduced
to a hollow concept. If this
can be done, then the
Constitutional ban against
alien landholding in the
Philippines, as announced
in Krivenko vs. Register
of Deeds, is indeed in
grave
peril.44 (emphases
supplied; Citations omitted)
In Lui She, the option to
buy
was
invalidated
because it amounted to a
virtual transfer of ownership
as the owner could not sell
or dispose of his properties.
The
contract
in Lui
She prohibited the owner of
the
land
from
selling,
donating, mortgaging, or
encumbering the property
during the 50-year period of
the option to buy. This is not
so in the case at bar where
the mutual right of first
refusal in favor of NIDC and
KAWASAKI does not amount
to a virtual transfer of land
to a non-Filipino. In fact, the
case at bar involves a right
of
first
refusal
over
shares
of
stock while

the Lui She case involves

an option to buy the land
itself. As discussed earlier,
there
is
a
distinction
between the shareholders
ownership of shares and the
corporations ownership of
land
arising
from
the
separate
juridical
personalities
of
the
corporation
and
its
shareholders.
We note that in its Motion
for Reconsideration, J.G.
Summit
alleges
that
PHILSECO
continues
to
violate the Constitution as
its foreign equity is above
40% and yet owns longterm leasehold rights
which are real rights.45It
cites Article 415 of the Civil
Code which includes in the
definition
of
immovable
property,
"contracts
for
public works, and servitudes
and other real rights over
immovable property."46 Any
existing
landholding,
however, is denied by
PHILYARDS citing its recent
financial statements.47 First,
these are questions of fact,
the veracity of which would
require
introduction
of
evidence. The Court needs
to validate these factual
allegations
based
on
competent
and
reliable
evidence. As such, the Court
cannot
resolve
the

questions
they
pose.
Second,
J.G.
Summit
misreads the provisions of
the Constitution cited in its
own pleadings, to wit:
29.2
Petitioner
has
consistently pointed out in
the
past
that
private
respondent is not a 60%40% corporation, and this
violates the Constitution x x
x The violation continues to
this day because under the
law, it continues to own
real property
xxx xxx xxx
32.
To
review
the
constitutional
provisions
involved, Section 14, Article
XIV of the 1973 Constitution
(the JVA was signed in
1977), provided:
"Save in cases of hereditary
succession, no
private
lands shall be transferred
or conveyed except to
individuals, corporations, or
associations qualified to
acquire or hold lands of the
public domain."
32.1 This provision is the
same as Section 7, Article
XII of the 1987 Constitution.
32.2 Under the Public Land
Act, corporations qualified
to acquire or hold lands of
the
public
domain are

corporations at least 60% of

which is owned by Filipino
citizens
(Sec.
22,
Commonwealth Act 141, as
amended).
(emphases
supplied)
As correctly observed by the
public
respondents,
the
prohibition
in
the
Constitution applies only to
ownership of land.48 It does
not extend to immovable
or
real
property
as
defined under Article 415
of
the
Civil
Code.Otherwise, we would
have a strange situation
where the ownership of
immovable property such as
trees, plants and growing
fruit
attached
to
the
49
land would be limited to
Filipinos
and
Filipino
corporations only.
III.
WHEREFORE, in view of
the
foregoing,
the
petitioners
Motion
for
Reconsideration is DENIED
WITH FINALITY and the
decision appealed from is
AFFIRMED. The Motion to
Elevate This Case to the
Court En Banc is likewise
DENIED for lack of merit.
SO ORDERED.

Year : 2000
G.R. No. 124293
November 20, 2000
JG SUMMIT HOLDINGS,
INC., petitioner,
vs.
COURT
OF
APPEALS,
COMMITTEE
ON
PRIVATIZATION,
its
Chairman and Members;
ASSET
PRIVATIZATION
TRUST and PHILYARDS
HOLDINGS,
INC., respondents.
DECISION
YNARES-SANTIAGO, J.:
On January 27, 1977, the
National Investment and
Development
Corporation
(NIDC),
a
government
corporation, entered into a
Joint Venture Agreement
(JVA) with Kawasaki Heavy
Industries, Ltd. of Kobe,
Japan (Kawasaki) for the
construction, operation, and
management of the Subic
National
Shipyard,
Inc.
(SNS), which subsequently
became
the
Philippine
Shipyard and Engineering
Corporation
(PHILSECO).
Under the JVA, NIDC and
Kawasaki would maintain a
shareholding proportion of

60%-40%, respectively. One

of the provisions of the JVA
accorded the parties the
right of first refusal should
either party sell, assign or
transfer its interest in the
joint
venture.
Thus,
paragraph 1.4 of the JVA
states:
"Neither party shall sell,
transfer or assign all or any
part of its interest in SNS to
any third party without
giving the other under the
same terms the right of first
refusal. This provision shall
not apply if the transferee is
a corporation owned or
controlled
by
the
GOVERNMENT or by a
KAWASAKI affiliate." (Italics
supplied.)
On November 25, 1986,
NIDC transferred all its
rights, title and interest in
PHILSECO to the Philippine
National Bank (PNB). More
than two months later or on
February 3, 1987, by virtue
of Administrative Order No.
14,
PNBs
interest
in
PHILSECO was transferred
to the National Government.
Meanwhile, on December 8,
1986, President Corazon C.
Aquino issued Proclamation
No. 50 establishing the
Committee on Privatization
(COP)
and
the
Asset

Privatization Trust (APT) to

take title to and possession
of, conserve, manage and
dispose of non-performing
assets of the National
Government. On February
27, 1987, a trust agreement
was entered into between
the National Government
and the APT by virtue of
which the latter was named
the trustee of the National
Governments
share
in
PHILSECO. In 1989, as a
result
of
a
quasireorganization of PHILSECO
to settle its huge obligations
to
PNB,
the
National
Governments shareholdings
in PHILSECO increased to
97.41% thereby reducing
Kawasakis shareholdings to
2.59%.
Exercising their discretion,
the COP and the APT
deemed it in the best
interest of the national
economy
and
the
government to privatize
PHILSECO by selling 87.67%
of its total outstanding
capital stock to private
entities. After a series of
negotiations between the
APT and Kasawaki, they
agreed that the latters right
of first refusal under the JVA
be "exchanged" for the right
to top by five percent (5%)
the highest bid for said
shares. They further agreed

that Kawasaki would be

entitled to name a company
in
which
it
was
a
stockholder, which could
exercise the right to top. On
September
7,
1990,
Kawasaki informed APT that
Philyards Holdings, Inc. (PHI)
would exercise its right to
top by 5%.
At
the
pre-bidding
conference
held
on
September
28,
1993,
interested
bidders
were
given copies of the JVA
between
NIDC
and
Kawasaki, and of the Asset
Specific
Bidding
Rules
(ASBR) drafted for the
87.67%
equity (sic)1in
PHILSECO of the National
Government.
Salient
provisions of the ASBR
state:
"1.0. The subject of this
Asset
Privatization
Trust
(APT) sale through public
bidding is
the
National
Governments
equity
in
PHILSECO
consisting
of
896,869,942 shares of stock
(representing 87.67% of
PHILSECOs
oustanding
capital stock), which will
be sold as a whole block in
accordance with the rules
herein enumerated.
xxx

xxx

xxx

3.0. This public bidding shall

be on an Indicative Price
Bidding basis. The Indicative
price set for the National
Governments
87.67%
equity
in
PHILSECO
is PESOS: ONE BILLION
THREE
HUNDRED
MILLION
(P1,300,000,000.00).
xxx

xxx

xxx

12.0. The bidder shall be

solely
responsible
for
examining with appropriate
care these rules, the official
bid forms, including any
addenda or amendments
thereto issued during the
bidding period. The bidder
shall likewise be responsible
for informing itself with
respect to any and all
conditions concerning the
PHILSECO
Shares
which
may, in any manner, affect
the
bidders
proposal.
Failure on the part of the
bidder to so examine and
inform itself shall be its sole
risk and no relief for error or
omission will be given by
APT or COP. x x x."
The provisions of the ASBR
were explained to the
interested bidders who were
notified that bidding would
be held on December 2,
1993.

At the public bidding on said

date,
the
consortium
composed of petitioner JG
Summit
Holdings,
Inc.,
Sembawang Shipyard Ltd.
of Singapore (Sembawang),
and Jurong Shipyard Limited
of Malaysia (Jurong), was
declared the highest bidder
at
P2.03
billion.
The
following day, December 3,
1993, the COP approved the
sale of 87.67% National
Government shares of stock
in
PHILSECO
to
said
consortium.
It
notified
petitioner of said approval
"subject to the right of
Kawasaki Heavy Industries,
Inc./Philyards Holdings, Inc.
to top JGSMIs (petitioners)
bid by 5% as specified in
the bidding rules."
On December 29, 1993,
petitioner informed the APT
that it was protesting the
offer of PHI to top its bid on
the grounds that: (a) the
Kawasaki/PHI
consortium
composed
of
Kawasaki,
Philyards, Mitsui, Keppel, SM
Group, ICTSI and Insular Life
violated the ASBR because
the last four (4) companies
were the losing bidders (for
P1.528
billion)
thereby
circumventing the law and
prejudicing
the
weak
winning bidder; (b) only
Kawasaki could exercise the
right to top; (c) giving the

same option to top to PHI

constituted
unwarranted
benefit to a third party; (d)
no right of first refusal can
be exercised in a public
bidding or auction sale, and
(e)
the
JG
Summit
Consortium
was
not
estopped from questioning
the proceedings.
On
February
2,
1994,
petitioner was notified that
PHI had fully paid the
balance of the purchase
price of the subject bidding.
On February 7, 1994, the
APT notified petitioner that
PHI had exercised its option
to top the highest bid and
that the COP had approved
the same on January 6,
1994. On February 24,
1994, the APT and PHI
executed a Stock Purchase
Agreement.
Consequently,
petitioner
filed with this Court a
petition
for mandamus under G.R.
No.
114057. On May
11,1994, said petition was
referred to the Court of
Appeals --"x
x
x
for
proper
determination
and
disposition,
pursuant
to
Section 9, paragraph 1 of
B.P. 129, granting the Court
of
Appeals
original

jurisdiction to issue writs of

mandamus x x x and
auxiliary writs or processes,
whether or not in aid of its
appellate jurisdiction, which
jurisdiction is concurrent
with this Court, there being
no special and important
reason for this Court to
assume jurisdiction over the
case in the first instance."2
On July 18, 1995, the Court
of Appeals "denied" for lack
of
merit
the
petition
for mandamus.
Citing Guanio
v.
3
Fernandez, it
held
that mandamus is not the
proper remedy to "compel
the undoing of an act
already
done
or
the
correction
of
a
wrong
already perpetuated, even
though the action taken was
clearly
illegal."
It
was
further ruled that it was not
the proper forum for a
"mere
petition
for mandamus" that aimed
to
question
the
constitutionality or legality
of the right of first refusal
and the right to top that
was
exercised
by
Kawasaki/PHI and that the
matter must be brought "by
the proper party in the
proper forum at the proper
time and threshed out in a
full blown trial."

After ruling that the right of

first refusal and the right to
top are prima facie legal,
the Court of Appeals found
petitioner to be in estoppel
for the following reasons:
"5. If petitioner found the
right to top to be illegal, it
should
not
have
participated in the public
bidding; or it should have
questioned the legality of
the rules before the courts
or filed a petition for
declaratory relief (Rule 64,
Rules of Court) before the
public bidding could have
taken place.
By participating in the
public bidding, with full
knowledge of the right to
top
granted
to
Kawasaki/Philyards,
petitioner is estopped from
questioning the validity of
the award given to Philyards
after the latter exercised the
right to top and had paid in
full the purchase price of
the subject shares, pursuant
to the ASBR.
6. The fact that the losing
bidder, Keppel Consortium
(composed of Keppel, SM
Group,
Insular
Life
Assurance, Mitsui and ICTSI)
appears to have joined
Philyards in the latters
effort to raise P2.131 billion

necessary in exercising the

right to top by 5% is a valid
activity in free enterprise
that is not contrary to law,
public policy or public
morals. It should not be a
cause of grievance for
petitioner as it is the very
essence of free competition
in the business world.
Astute
businessmen
involved
in
the
public
bidding in question knew
what they were up against.
And when they participated
in the public bidding with
prior knowledge of the right
to top, they did so, with full
knowledge
of
the
eventuality that the highest
bidder may still be topped
by Kawasaki/Philyards by
5%. It is admitted by
petitioner that it likewise
represents a consortium
composed of JG Summit,
Sembawang Singapore and
Jurong of Malaysia. Why
should
petitioner
then
expect Philyards to limit
itself to its own resources
when the latter can enter
into agreements with other
entities to help it raise the
money it needed to pay the
full purchase price as in fact
it had already paid the
National Government in the
amount of P2.131 billion as
required under the ASBR?"4

Petitioner filed a motion for

the reconsideration of said
Decision which was denied
on
March
15,
1996.
Petitioner thus filed the
instant petition for review
on certiorari, raising the
following arguments:
I.
THE
COURT
OF
APPEALS GRIEVOUSLY
ERRED IN HOLDING
THAT PETITIONER JG
SUMMIT IS LEGALLY
ESTOPPED
FROM
CHALLENGING
THE
LEGALITY
OF
THE
RIGHT
TO
TOP,
INSERTED
IN
THE
BIDDING RULES, AS
WELL AS THE RIGHT OF
FIRST REFUSAL FROM
WHICH THE RIGHT TO
TOP WAS ADMITTEDLY
SOURCED, BY SIMPLY
STATING THAT THOSE
RIGHTS ARE VALID AND
ENFORCEABLE
WITHOUT RULING ON
ANY
OF
THE
IMPORTANT LEGAL AND
CONSTITUTIONAL
GROUNDS RAISED BY
THE PETITIONER AS
FOLLOWS:
(A) THE RIGHT OF
FIRST
REFUSAL,
GRANTED TO A
JAPANESE

CORPORATION AT
A TIME WHEN IT
HELD 40% EQUITY
IN PHILSECO, A
LANDHOLDING
CORPORATION, IS
NULL AND VOID
FOR
BEING
CONTRARY TO THE
CONSTITUTION.
(B) THE RIGHT TO
TOP
WAS
GRANTED TO THE
JAPANESE
CORPORATION AT
A TIME WHEN IT
MERELY
HELD
2.6% EQUITY IN
PHILSECO.
(C) THE RIGHT OF
FIRST
REFUSAL
GRANTED TO THE
JAPANESE
CORPORATION
OVER SHARES OF
STOCK
IS
CONTRARY TO THE
CORPORATION
CODE.
(D) THE RIGHT TO
TOP IS CONTRARY
TO PUBLIC POLICY
AS
IT
IS
ANATHEMA
TO
COMPETITIVE
PUBLIC
BIDDING
FOR
BEING
UNDULY
RESTRICTIVE

THEREOF,
AND,
MOREOVER,
IS
CONTRARY TO DUE
PROCESS OF LAW
AS IT IS AGAINST
THE
BASIC
RUDIMENTS
OF
FAIR PLAY.
(E) THE GRANT OF
THE RIGHT TO TOP
IS
A
CRIMINAL
VIOLATION OF THE
ANTI-GRAFT LAW
AS IT GIVES A
CLEARLY
UNWARRANTED
BENEFIT IN FAVOR
OF PHILYARDS AS
SHOWN BY CLEAR
AND UNDISPUTED
DOCUMENTARY
EVIDENCE.
II.
THE
COURT
OF
APPEALS GRIEVOUSLY
ERRED IN HOLDING
THAT MANDAMUS IS
NOT A PROPER REMEDY
IN THIS CASE.
III.
FOLLOWING ITS OWN
FINDINGS, THE COURT
OF
APPEALS
GRIEVOUSLY ERRED (A)
IN
NOT
DIRECTING
THAT TRIAL BE HELD
ON ALLEGED ISSUES
OF FACT AND (B) IN

NOT
APPOINTING
ANAMICUS
CURIAE FROM AMONG
THE LAWYERS IN THE
COMMISSION ON AUDIT
TO DETERMINE THE
APPLICABILITY OF ITS
REQUIREMENTS TO THE
TRANSACTIONS IN THIS
CASE.5
In their comment on the
petition, private respondent
PHI contends that the real
party in interest which
should
have
filed
the
petition
for mandamus is
the JG Summit Consortium
and not solely petitioner JG
Summit Holdings, Inc. which
is just a part of that
consortium.
Since
Sembawang and Jurong, the
other members of the
consortium,
are
indispensable parties to the
petition,6 petitioners failure
to implead them as copetitioners warranted the
dismissal of the petition.
Public
respondents
contention must fail. While
it is true that Rule 3, Section
2 of the Rules of Court
provides that "(a)ll persons
having an interest in the
subject of the action and in
obtaining
the
relief
demanded shall be joined as
plaintiffs," petitioner may
file the petition alone. In the

first place, Sembawang and

Jurong are not indispensable
parties, such that their nonjoinder as petitioners will
not necessarily result in a
failure to arrive at a final
determination
of
the
7
case. They
may
be
necessary parties as they
were
members
of
the
consortium that won the
public bidding prior to the
exercise of the right to top
by private respondent, but
the
petition
may
be
resolved even without their
active
participation.
Secondly, there is a doubt
as to whether or not said
foreign corporations are
"subject to the jurisdiction
of the court as to both
service of process and
venue."8 Thirdly, petitioner
may
be
deemed
to
represent Sembawang and
Jurong. The admission of
petitioners counsel that
said foreign corporations
are underwriting his and the
other counsels fees reflects
this fact.9 By the nexus that
binds the members of the
consortium, in the event
that petitioner succeeds in
pursuing this case, it is
bound
to
respect
the
existence of the consortium
and
the
corresponding
responsibilities
arising
therefrom.

Public
respondents
also
contend that petitioner has
no standing to question the
legality of a provision of the
JVA in which it is not a
party.10 However, as this
Court held in Kilosbayan v.
Morato,11 there
is
a
difference between the rule
on real-party-in-interest and
the rule on standing, as the
latter
has
constitutional
underpinnings. In the case
at
bar,
petitioner
has
sufficiently
alleged
constitutional ramifications
in the questioned public
bidding of the PHILSECO
that merit the attention of
the Court. Moreover, the
prospect of financial gains
arising from the award of
the sale of PHILSECO is
enough personal stake in
the
outcome
of
the
controversy to vest upon
petitioner
the locus
standi to file the petition
for mandamus.
Besides,
without Kawasaki-PHIs right
to top the highest bid,
petitioner would have been
awarded the sale as the
highest bidder. A winning
bidder has personality to
initiate
proceedings
to
prevent setting at naught
his right; otherwise, his right
to due process would be
violated.12 As such winning
bidder, petitioner has "a
present
substantial

interest," or such interest in

the subject matter of action
as will entitle it, under
substantive law, to recover
if
the
evidence
is
13
sufficient.
With
respect
to
the
propriety of the remedy
availed by petitioner, the
Court of Appeals correctly
held that the special civil
action of mandamus is not
the
proper
remedy
to
question the legality of the
exercise of the right to top
by private respondent. It
does not lie to compel the
award of a contract subject
of
bidding
to
an
unsuccessful
bidder.14 Mandamus applies
as a remedy only where
petitioners right is founded
clearly in law and not when
it is doubtful.15 Thus:

"In order that a writ of

mandamus may issue, it is
essential that the person
petitioning for the same has
a clear legal right to the
thing demanded and that it
is the imperative duty of the
respondent to perform the
act required. It neither
confers powers nor imposes
duties and is never issued in
doubtful cases. It is simply a
command to exercise a
power already possessed
and to perform a duty
already imposed."16
The Court of Appeals cannot
declare petitioner as the
winning bidder in this case
and direct the COP/APT to
award the sale to it without
first determining the validity
of the right to top stipulated
in the ASBR. Moreover, the
sale of government share in
PHILSECO is a fait accompli,
in view of the execution of
the
Stock
Purchase
Agreement between APT
and
PHI. Mandamus may
not be availed to direct the
exercise of judgment or
discretion in a particular
way or to retract or reverse
an action already taken in
the exercise of either.17
Be that as it may, the Court
of Appeals erred when it
dismissed the petition on
the sole ground of the

impropriety of the special

civil action of mandamus. It
must be stressed that the
petition
was
also
one
for certiorari, seeking to
nullify the award of the sale
to private respondent of the
PHILSECO shares. Verily, the
petition
alleges
that
"respondents COP and APT
have committed such a
grave abuse of discretion
tantamount to lack or
excess of their jurisdiction in
insisting on awarding the
bid to Philyards, for the
various
reasons
stated
herein, particularly since the
right of first refusal and the
right to top the bid are
unconstitutional, contrary to
law
and
public
18
policy." Petitioners failure
to include certiorari in its
caption should not negate
the fact that the petition
charged public respondent
with
grave
abuse
of
discretion in awarding the
sale to private respondent.
Well-settled is the rule that
it is not the caption of the
pleading but the allegations
therein that determine the
nature of the action and the
Court shall grant relief
warranted
by
the
allegations and the proof
even if no such relief is
prayed for.19

Petitioners main contention

is that PHILSECO, as a
shipyard, is a public utility
and,
hence,
could
be
operated
only
by
a
corporation at least 60% of
whose capital is owned by
Filipino
citizens,
in
accordance with Article XII,
Section
10
of
the
Constitution.
Petitioner
asserts that a shipyard is a
public utility pursuant to
Section
13
(b)
of
Commonwealth
Act
No.
20
146. Respondents, on the
other hand, contend that
shipyards are no longer
public utilities by express
provision
of
Presidential
Decree No. 666, which
provided incentives to the
shipbuilding and ship repair
industry.
Indeed, P.D. No. 666 dated
March 5, 1975 explicitly
stated that a "shipyard" was
not a "public utility." Section
1 thereof provide as follows:
"d) Registration required
but
not
as
Public
Utility. The business of
constructing and repairing
vessels or parts thereof
shall not be considered a
public
utility and
no
Certificate
of
Public
Convenience
shall
be
required therefor. However,
no shipyard, graving dock,

marine railway or marine

repair shop and no person
or enterprise shall engage
in the construction and/or
repair of any vessel, or any
phase or part thereof,
without a valid Certificate of
Registration and license for
this
purpose
from
the
Maritime Industry Authority,
except those owned or
operated by the Armed
Forces of the Philippines or
by
foreign
governments
pursuant to a treaty or
agreement." (Underscoring
supplied.)
However, Section 1 of P.D.
No. 666 was expressly
repealed by Section 20 of
Batas Pambansa Blg. 391,
the Investment Incentive
Policy
Act
of
21
1983. Subsequently,
Executive Order No. 226,
the Omnibus Investments
Code of 1987, was issued
and Section 85 thereof
expressly repealed B.P. Blg.
391.22
The express repeal of B.P.
Blg. 391 by E.O. No. 226 did
not revive Section 1 of P.D.
No. 666, declassifying the
shipbuilding and ship repair
industry as a public utility,
as said executive order did
not
provide
otherwise.
When a law which expressly
repeals a prior law is itself

repealed, the law first

repealed
shall
not
be
thereby
revived
unless
expressly
so
23
provided. Consequently,
when the APT drafted the
ASBR sometime in 1993,
P.D. No. 666 no longer
existed in our statute books.
While it is true that the
repeal of a statute does not
operate to impair rights that
have become vested or
accrued while the statute
was in force, there are no
vested rights of the parties
that should be protected in
the case at bar. The reason
is simple: said decree was
already inexistent when the
ASBR was issued.
A
shipyard
such
as
PHILSECO being a public
utility as provided by law,
the following provision of
the Article XII of the
Constitution applies:
"Sec. 11. 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 in
character or for a longer
period than fifty years.
Neither shall any such
franchise
or
right
be
granted except under the
condition that it shall be
subject
to
amendment,
alteration, or repeal by the
Congress when the common
good so requires. The State
shall
encourage
equity
participation
in
public
utilities by the general
public. The participation of
foreign investors in the
governing body of any
public utility enterprise shall
be
limited
to
their
proportionate share in its
capital,
and
all
the
executive and managing
officers of such corporation
or association shall be
citizens
of
the
Philippines." (Italics
supplied.)
The
progenitor
of
this
constitutional
provision,
Article XIV, Section 5 of the
1973 Constitution, required
the same proportion of 60%40% capitalization. The JVA
between NIDC and Kawasaki
entered into on January 27,
1977
manifests
the
intention of the parties to
abide by the constitutional
mandate on capitalization of
public
utilities.24Paragraph

1.3 of the JVA, as amended

by Addendum No. 2 dated
December
28,
1983,25 provides:
"The
authorized
capital
stock of PHILSECO shall be
P330 milion. The parties
shall thereafter increase
their
subscription
in
PHILSECO
as
may
be
necessary and as called by
the
Board
of
Directors, maintaining
a
proportion of 60%-40% for
NIDC
and
KAWASAKI,
respectively, up to a total
subscribed
and
paid-up
capital
stock
of
P312
million."
(Underscoring
supplied.)
A joint venture is an
association of persons or
companies
jointly
undertaking
some
commercial enterprise with
all
of
them
generally
contributing
assets
and
sharing risks. It requires a
community of interest in the
performance of the subject
matter, a right to direct and
govern
the
policy
in
connection therewith, and
duty, which may be altered
by agreement to share both
in
profit
and
26
losses. Persons
and
business enterprises usually
enter into a joint venture
because it is exempt from

corporate
income
27
tax. Considered more of a
partnership,28 a
joint
venture is governed by the
laws on contracts and on
partnership.
The
joint
venture created between
NIDC and Kawasaki falls
within the purview of an
"association" pursuant to
Section 5 of Article XIV of
the 1973 Constitution and
Section 11 of Article XII of
the
1987
Constitution.
Consequently,
a
joint
venture that would engage
in the business of operating
a public utility, such as a
shipyard, must observe the
proportion
of
60%-40%
Filipino-foreign
capitalization.
Notably, paragraph 1.4 of
the JVA accorded the parties
the right of first refusal
"under the same terms."
This phrase implies that
when either party exercises
the right of first refusal
under paragraph 1.4, they
can only do so to the extent
allowed them by paragraphs
1.2 and 1.3 of the JVA or
under the proportion of
60%-40% of the shares of
stock. Thus, should the
NIDC opt to sell its shares of
stock to a third party,
Kawasaki
could
only
exercise its right of first
refusal to the extent that its

total shares of stock would

not exceed 40% of the
entire shares of stock of
SNS or PHILSECO. The NIDC,
on the other hand, may
purchase even beyond 60%
of the total shares. As a
government corporation and
necessarily a 100% Filipinoowned corporation, there is
nothing
to
prevent
its
purchase of stocks even
beyond
60%
of
the
capitalization
as
the
Constitution clearly limits
only foreign capitalization.
Parenthetically,
the
Maritime Industry Authority
(MARINA) which has been
tasked to regulate the
operation of shipbuilding
and
ship
repair
29
yards, abides
by
the
Filipino
capitalization
requirement
as
far
as
corporations
and
partnerships are concerned.
However, Section 2.3.1 (a)
of its Memorandum Circular
No.
95,
Series
of
30
1994, setting
out
the
Revised
Implementing
Guidelines on the Licensing
of
Shipbuilders,
Ship
Repairers, Afloat Repairers,
Boatbuilders
and
Shipbreakers,
seems
to
exempt
joint
ventures
registered with the SEC, the
BOI and the EPZA from the
60% requirement of Filipino

ownership.31 The
provision states:

said

"The applicant must be a

Filipino
citizen
or
a
corporation/partnership
at
least 60% of the authorized
capital stock of which is
owned by Filipino citizens
except for joint ventures
which are registered with
the Securities and Exchange
Commission, the Board of
Investments and/or Export
Processing
Zone
32
Authorities."
The constitutionality of said
MARINA guideline, however,
is not in issue here.
Kawasaki was bound by
itscontractual
obligation under the JVA
that limits its right of first
refusal to 40% of the total
capitalization of PHILSECO.
Thus, Kawasaki
cannot
purchase beyond 40% of
the capitalization of the
joint venture on account
of both constitutional
and
contractual
proscriptions.
From the facts on record, it
appears that at the outset,
the APT and Kawasaki
respected the 60%-40%
capitalization proportion in
PHILSECO. However, APT
subsequently
encouraged
Kawasaki to participate in

the public bidding of the

National
Governments
shareholdings of 87.67% of
the total PHILSECO shares,
definitely over and above
the
40%
limit
of
its
shareholdings. In so doing,
the APT went beyond the
ambit of its authority.
It is well settled that the role
of courts is to ascertain
whether
a
branch
or
instrumentality
of
Government
has
transgressed
its
constitutional or statutory
boundaries.
The
courts,
must
examine
those
boundaries in the light of
provisions
of
the
law.
Otherwise, it would stray
into the realm of policy
decision-making.33
Proclamation
No.
50,
creating the COP and the
APT,
was
issued
by
President Corazon C. Aquino
pursuant to her legislative
powers
under
the
Provisional Constitution of
1986. Section 12 of said
Proclamation vested the APT
with the following powers:
(1) To formulate and,
after approval by the
Committee, implement
a program for the
disposition of assets
transferred to it under

this Proclamation, such

program
to
be
completed
within
a
period of five years
from the date of the
issuance
of
this
Proclamation;
(2)
Subject
to
its
having received the
prior written approval
of the Committee to
sell such asset at a
price and on terms of
payment and to a party
disclosed
to
the
Committee, to sell each
asset referred to it by
the Committee to such
party and on such
terms
as
in
its
discretion are in the
best interest of the
National Government,
and for such purpose to
execute and deliver, on
behalf and in the name
of
the
National
Government,
such
deeds of sale, contracts
and other instruments
as may be necessary or
appropriate to convey
title to such assets;
xxx
xxx

xxx

(7) To adopt its internal

rules and regulations,
to adopt, alter and use
a seal which shall be

judicially noticed; to
enter into contracts; to
sue and be sued;
xxx
x x x"

xxx

Pursuant
to
these
provisions, the APT drafted
the ASBR. Since the APTs
rule-making
authority
is
merely delegated, the ASBR
should be measured by the
standard
set
by
said
34
proclamation. Notably, the
discretion granted by the
proclamation to the APT for
the sale of government
property is circumscribed
only by the "best interest of
the National Government."
Implicitly written in any
delegated
legislative
authority, such as that
provided for in Proclamation
No. 50, is the requisite that
the rules and regulations
which
an
administrative
body adopts must respect
pertinent provisions of the
Constitution
and
the
35
law. Article XII, Section 11
of the Constitution providing
for
a
60%
Filipino
capitalization in order that
public utilities may be
granted a franchise should
thus
be
deemed
a
paramount consideration in
drafting the ASBR. In this
regard, worth noting is

paragraph 15.0 of the ASBR,

which provides that:
"In the event that the
winning bidder is a 100%
foreign-owned corporation,
it may name its nominee
corporation to whom the NG
shares shall be conveyed,
provided it owns 40% equity
in the nominee corporation,
so
as
not
to
affect
PHILSECOs qualification to
own real estate properties in
the Philippines."
This rule is fraught with
dangerous implications. It
allows a completely foreign
corporation to participate in
the public bidding of more
than 60% of the total shares
of
a
public
utility
corporation without setting
a period within which the
foreign bidder should name
its nominee. As it is, the rule
allows a totally foreign
investor to engage in the
business of operating a
public
utility
for
an
unlimited period of time in
total
disregard
of
the
constitutional
proscription
on the percentage of Filipino
ownership of corporations
engaged therein. Paragraph
15.0 of the ASBR is thus
directly
and
openly
repugnant
to
the
Constitution
considering
that
it
allows
foreign

corporations to operate a
public
utility
for
an
unlimited period of time.
In carrying out its objective
of disposing of government
property, the APT should
take
into
account
the
pertinent laws. Since the
method of disposing the
PHILSECO that the APT had
adopted was through public
bidding, it was duty-bound
to follow the rules and
regulations
on competitive public
bidding, in order to uphold
the elementary rule on
fairness in such disposition.
As this Court once said:
"x x x. A competitive public
bidding aims to protect the
public interest by giving the
public the best possible
advantages through open
competition.
It
is
a
mechanism that enables the
government
agency
to
avoid or preclude anomalies
in the execution of public
contracts."36
The word "bidding" in its
comprehensive
sense
means making an offer37 or
an invitation to prospective
contractors whereby the
government manifests its
intention
to
make
38
proposals for the purchase
of supplies, materials and

equipment
for
official
business or public use,39 or
for public works or repair.
The three principles in
public bidding are: the offer
to the public; an opportunity
for competition; and a basis
for exact comparison of
bids.
The
distinctive
character of the system is
destroyed and the purpose
of its adoption is thwarted
when a regulation thereon
excludes any of these
principles.40 Public
bidding
of government contracts
and for the disposition of
government assets should
have the same principles
and objectives. Their only
difference, if at all, is that in
the public bidding for public
contracts, the award is
generally given to the
lowest bidder while in the
disposition of government
assets, the award is to the
highest bidder.41 The term
"public bidding" imports a
sale to the highest bidder
with absolute freedom for
competitive bidding.42
Under Section 504 of the
Government Auditing Rules
and Regulations, a public
auction, which is the mode
of divestment or disposal of
government property, shall
adhere
to
established
mechanics and procedures
in public bidding.43 In such

public auction sales, the

presence of a Commission
on
Audit
(COA)
representative who shall see
to the proper observance of
auditing
rules
is
44
imperative. In this case,
there is no record that a
COA
representative
witnessed the public auction
on December 2, 1993.
Neither is there a showing
that the APT observed the
requirement of COA Circular
No. 89-296, to the effect
that a government entity
that
is
disposing
of
government property shall
furnish the COA with the
disposal procedure adopted.
Likewise, nowhere in the
record is it stated that the
APT heeded the suggestion
of Secretary of Finance and
COP Chairman Jayme that
its
decision
to
grant
Kawasaki the right to top
the highest bid be made
"known to the Commission
on Audit." What appears on
record is that the COA did
not approve the ASBR,
specifically the provision on
the right to top the highest
bidder. Thus, then COA
Chairman
Pascasio
S.
Banaria, replying to the
query of petitioners counsel
on whether or not the COA
had approved the right to
top the highest bid by 5%,
stated:

"Per information received

from our Auditor at APT, no
prior approval was issued by
their Office regarding said
preferential option. We have
instructed
our
Auditor
thereat to advise this Office
of the result of the review of
the
Corporations
procedures for the sale of
the assets including the
review
of
the
bidding
documents pertaining to the
subject
public
bidding
pursuant to the provisions
of the Commission on Audit
Circular No. 89-296 dated
January 27, 1989."45
In according the KHI/PHI the
right to top, the APT
violated
the
rule
on
competitive public bidding,
under which the highest
bidder is declared the
winner entitled to the award
of the subject of the auction
sale. In effect, the grant to
KHI/PHI of the right to top
can be likened to a second
bidding, which, however, is
allowed only if there is a
failure of bidding, such as
when there is only one
bidder or none at all.46 By
placing
KHI/PHI
in
the
advantageous position of
topping the highest bidder,
the APT set aside the basic
rule in public bidding that
there be an opportunity for
competition.

While it may be argued that

the right to top was aimed
at giving the best financial
advantage
to
the
government, the manner by
which
that
right
was
conceived and arrived at in
this case manifested bias in
favor of KHI, thereby clearly
brushing aside the rule
on fair competition. More
importantly,
the
ASBR
provision on the right to top
the
highest
bidder
completely disregarded the
stipulation
in
the
JVA
between NIDC and KHI to
comply with the 60%-40%
capitalization arrangement
whereby KHI, the foreign
investor, would be able to
exercise its right of first
refusal to the extent of only
40%
of
the
total
capitalization
of
the
PHILSECO. Thus, KHI, whose
investment exposure was
already diminished to only
2.59% of the total PHILSECO
shares, was given the
privilege,
through
its
nominee PHI, of exercising
the right to top the highest
bid to 87.67% of those
shares or definitely over and
above its 40% contractual
right to PHILSECO shares
under
the
JVA.
Consequently,
the
APT
rendered
nugatory
the
constitutional
and
contractual
proscriptions

clearly to favor a foreign

investor.
Furthermore, while the right
of first refusal entitled KHI
to priority in the award of
the contract, that right
cannot bar another bidder
from
submitting
a
bid
because, precisely, the law
requires public bidding in
government
contracts.47Thus,
by
engrafting in the provisions
of the ASBR the right to top,
which was only an offshoot
of the right of first refusal,
the APT effectively did away
with pubic bidding insofar
as KHI/PHI was concerned.
To be sure, the right to top
is different from the right to
match. In the latter, a
qualified bidder is given the
privilege of offering the
same bid as that of the
highest
bidder.48 In
the
former, as provided for by
the ASBR, a non-bidder is
accorded the right to top
the highest bid. There is
reason, therefore, for the
petitioner to complain that
the APT made a show of a
public bidding in order to
elicit the highest bid, only to
award the sale to a nonbidder. The unfair manner
by which the purported
public
bidding
was
conducted by the APT is
even made more blatant by

the
fact
that after the
"public
bidding,"
KHI
exercised the right to top
through its nominee, private
respondent PHI, which has
among
its
stockholders
some losing bidders.
In drafting the ASBR, the
APT should have noted the
fact that foreign investors
were competing in the
bidding. While it is true that
foreign investment should
be encouraged in this
country, however, the ASBR
provision on the right to top
is unfair to all competitors,
be they foreign or local, in
the
public
auction
of
87.67% of PHILSECO shares
as it provided for a method
that would set at naught the
entire public bidding.
It was thus error for the
Court
of
Appeals
to
conclude that petitioner was
estopped from contesting
the validity of the ASBR and
the
bidding
procedure
conducted pursuant to it. It
is clear from the provisions
of the ASBR itself that the
basic
rules
on
fair
competition
in
public
biddings
have
been
disregarded.
Although
petitioner
had
the
opportunity to examine the
ASBR before it participated
in the bidding, it cannot be

estopped from questioning

the unconstitutional, illegal
and inequitable provisions
thereof.
Estoppel
is
unavailing in this case;
otherwise, it would stamp
validity to an act that is
prohibited by law or against
public policy.49
WHEREFORE, the instant
petition
for
review
on certiorari is
GRANTED.
The assailed Decision and
Resolution of the Court of
Appeals are REVERSED and
SET ASIDE. Petitioner is
ordered to pay to APT its bid
price of Two Billion Thirty
Million
Pesos
(P2,030,000,000.00), less its
bid deposit plus interests
upon the finality of this
Decision. In turn, APT is
ordered to:
(a) accept said amount
of
P2,030,000,000.00
less bid deposit and

interests
petitioner;

from

(b) execute a Stock

Purchase
Agreement
with petitioner;
(c) cause the issuance
in favor of petitioner of
the
certificates
of
stocks
representing
87.67% of PHILSECOs
total capitalization;
(d) return to private
respondent
PHI
the
amount of Two Billion
One Hundred Thirty
One
Million
Five
Hundred
Thousand
Pesos
(P2,131,500,000.00);
and
(e)
cause
the
cancellation
of
the
stock
certificates
issued to PHI.
SO ORDERED.