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Through a series of transfers, NIDCs rights, title and interest in PHILSECO eventually
went to the National Government. In the interest of national economy, it was decided
that PHILSECO should be privatized by selling 87.67% of its total outstanding capital
stock to private entities. After negotiations, it was agreed that Kawasakis right of first
refusal under the JVA be exchanged for the right to top by five percent the highest bid
for said shares. Kawasaki that Philyards Holdings, Inc. (PHI), in which it was a
stockholder, would exercise this right in its stead.
During bidding, Kawasaki/PHI Consortium is the losing bidder. Even so, because of the
right to top by 5% percent the highest bid, it was able to top JG Summits bid. JG
Summit protested, contending that PHILSECO, as a shipyard is a public utility and,
hence, must observe the 60%-40% Filipino-foreign capitalization. By buying 87.67% of
PHILSECOs capital stock at bidding, Kawasaki/PHI in effect now owns more than 40%
of the stock.
ISSUE:
HELD:
In arguing that PHILSECO, as a shipyard, was a public utility, JG Summit relied on sec.
13, CA No. 146. On the other hand, Kawasaki/PHI argued that PD No. 666 explicitly
stated that a shipyard was not a public utility. But the SC stated that sec. 1 of PD No.
666 was expressly repealed by sec. 20, BP Blg. 391 and when BP Blg. 391 was
subsequently repealed by EO 226, the latter law did not revive sec. 1 of PD No. 666.
Therefore, the law that states that a shipyard is a public utility still stands.
Kawasaki was bound by its contractual 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.