LTFRB v STRONGHOLD INSURANCE

G.R. No. 200740

October 2, 2013
Art. 3, Sec. 1
Facts:
The case at bar seeks to review the Court of Appeals decision annulling a government bidding to accredit
providers of accident insurance to operators of passenger public utility vehicles. The petitioners are chairmen and
members of the Special Bids and Awards Committee and the Land Transportation Franchising and Regulatory Board
(Petitioner) while the respondent is Stronghold Insurance Company, Inc. (Respondent). The subject of the cases
arises from the creation of the Passenger Personal Accident Insurance Program (Program) which will accredit two
groups of insurance providers through open bidding. In 2005, Universal Transport Solutions, Inc. was selected as
one of the two groups, the lead insurer of which was Respondent. Subsequent to the selection, the accredited group
was engaged in a five-year contract with the LTFRB, embodied in a Memorandum of Agreement with a Matching
Clause, providing that in subsequent biddings to the expiration of the contract, the prior accredited group may opt to
match the bid of the highest bid to be accredited again. Before the Memorandum of Agreement expired, the LTFRB
opened public bidding under Terms of Reference, which in effect added a third reference, requiring a minimum of
ten (10) members and the lead insurer capitalizing PHP 250 million, in contrast to the first and second reference
which may be aggregated. Before the bidding was complete, Respondent filed for a writ of prohibition, with the
contention that they were unjustly disqualified (Respondents group only consisted of six members, and as lead
insurer, only had PHP 140 million, falling short of the PHP 250 million requirement), as the third reference was
clearly discriminatory against those similarly situated. The Court of Appeals found merit in Respondents (Then
petitioner) contention, finding the LTFRB abused its discretion in implementing the third reference. The Court of
Appeals also held that Respondent had the right to make use of the post-bid Matching Clause.
Issues:
1. Whether or not the third reference implemented by the LTFRB amounts to abuse of discretion
Held:
The Court found that the Court of Appeals erred in affirming Respondents petition, and that it is within the
discretionary power of the LTFRB to implement the third reference. It is important to note that the issuance of the
writ of prohibition not only requires an abuse of discretion, but a grave abuse of discretion, and even then it would
not prosper in this case as there was in fact no abuse of discretion. The Court acknowledges that it is within the
powers of the LTFRB to determine policies best suited to serve the publics interest. In this case, the LTFRB was
doing its duty under its charter to formulate, promulgate, administer, implement and enforce rules and regulations
on land transportation public utilities. Setting the standard for insurance of public utilities serves this purpose, as it
is an exercise of Police Power in ensuring financially sound mandatory insurance for the public welfare.
Additionally, the Court found that the Matching Clause is void as it requires the government to award the
accreditation by right of first refusal, which defeats the purpose of a public bidding. Thus the Court granted the
petition and sets aside the Court of Appeals decision.

Prepared by: Ramon Rodrigo L. Gutierrez