2003 Resolution - JG - Summit - Holdings - v. - Court - of - Appeals PDF

SPECIAL FIRST DIVISION
[G.R. No. 124293. September 24, 2003.]
JG SUMMIT HOLDINGS, INC. , petitioner, vs . COURT OF APPEALS,

COMMITTEE ON PRIVATIZATION, its Chairman and Members;
ASSET PRIVATIZATION TRUST and PHILYARDS HOLDINGS, INC. ,
respondents.
Romulo Mabanta Buenaventura Sayoc & Delos Angeles for petitioner.

Sycip Salazar Hernandez & Galmailan for PHILYARDS HOLDINGS, Inc.
Raid B. Villanueva and Dinah Bal for Privatization & Management Office.
SYNOPSIS
Petitioner JG Summit Holdings, Inc. (JGSMI) was declared the highest bidder of
the National Government's share in Philippine Shipyard Engineering Corporation
(PHILSECO). The Committee on Privatization (COP) approved the sale subject to the
right of government's business partner Kawasaki Heavy Industries, Ltd. or its assignee,
Philyards Holdings, Inc. (PHI) to top JGSMI's bid by 5% as specified in the bidding rules.
PHI exercised its option to top the highest bid. Petitioner led a petition for mandamus
to the Court of Appeals but was dismissed by the latter on the grounds, among others,
that the right of first refusal and the right to top are prima facie legal and that petitioner,
by participating in the public bidding, with full knowledge of the right to top granted to
KAWASAKI/ Philyards is estopped from questioning the validity of the award given to
Philyards. Thus, petitioner raised the issue to this Court. The Court reversed the
decision of the Court of Appeals. It ruled, among others, 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 Asset Speci c Bidding
Rules (ASBR) drafted for the sale of the 87.67% equity of the National Government in
PHILSECO was 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. Hence, in the motions for reconsideration, respondents questioned (a)
whether a shipyard is a public utility; and (2) whether the right to top granted to
KAWASAKI violates the principles of competitive bidding. TAHcCI
In granting the motions, the Court ruled that a shipyard is not a public utility. Its
nature dictates that it serves but a limited clientele whom it may choose to serve at its
discretion. While it offers its facilities to whoever may wish to avail of its services, a
shipyard is not legally obliged to render its services indiscriminately to the public. It has
no legal obligation to render the services sought by each and every client. The fact that
it publicly offers its services does not give the public a legal right to demand that such
services be rendered. Thus, the theory that KAWASAKI can acquire, as a maximum, only
40% of PHILSECO's shares is correct only if a shipyard is a public utility. But then
PHILSECO is not a public utility and no other restriction is present that would limit the
right of KAWASAKI to purchase the Government's share to 40% of Philseco's total
capitalization.
Moreover, the obvious consideration for the exchange of the right of rst refusal
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with the right to top is that KAWASAKI can name a nominee, which is a shareholder, to
exercise the right to top. This is a valid contractual stipulation; the right to top is an
assignable right and both parties are aware of the full legal consequences of its
exercise. As aforesaid, all bidders were aware of the existence of the right to top, and
its possible effects on the result of the public bidding was fully disclosed to them. The
petitioner, thus, cannot feign ignorance nor can it be allowed to repudiate its acts and
question the proceedings it had fully adhered to.
SYLLABUS
1. MERCANTILE LAW; CORPORATION LAW; PUBLIC UTILITY; ELUCIDATED. — A

"public utility" is "a business or service engaged in regularly supplying the public with
some commodity or service of public consequence such as electricity, gas, water,
transportation, telephone or telegraph service." To constitute a public utility, the facility
must be necessary for the maintenance of life and occupation of the residents.
However, the fact that a business offers services or goods that promote public good
and serve the interest of the public does not automatically make it a public utility.
Public' use is not synonymous with public interest. As its name indicates, the term
"public utility" implies public use and service to the public. The principal determinative
characteristic of a public utility is that of service to, or readiness to serve, an inde nite
public or portion of the public as such which has a legal right to demand and receive its
services or commodities. Stated otherwise, the owner or person in control of a public
utility must have devoted it to such use that the public generally or that part of the
public which has been served and has accepted the service, has the right to demand
that use or service so long as it is continued, with reasonable e ciency and under
proper charges. Unlike a private enterprise which independently determines whom it
will serve, a "public utility holds out generally and may not refuse legitimate demand for
service."
2. ID.; ID.; ID.; PUBLIC USE; DEFINED. — Thus, in Iloilo Ice and Cold Storage Co. vs.
Public Utility Board, this Court de ned "public use," viz: "Public use" means the same as
"use by the public." The essential feature of the public use is that it is not con ned to
privileged individuals, but is open to the inde nite public. It is this inde nite or
unrestricted quality that gives it its public character. In determining whether a use is
public, we must look not only to the character of the business to be done, but also to
the proposed mode of doing it. If the use is merely optional with the owners, or the
public bene t is merely incidental, it is not a public use, authorizing the exercise of
jurisdiction of the public utility commission. There must be, in general, a right which the
law compels the owner to give to the general public. It is not enough that the general
prosperity of the public is promoted. Public use is not synonymous with public interest.
The true criterion by which to judge the character of the use is whether the public may
enjoy it by right or only by permission.
3. ID.; ID.; SHIPYARD; NOT A PUBLIC UTILITY. — [I]t is crystal clear that a shipyard
cannot be considered a public utility. A "shipyard" is "a place or enclosure where ships
are built or repaired." Its nature dictates that it serves but a limited clientele whom it
may choose to serve at its discretion. While it offers its facilities to whoever may wish
to avail of its services, a shipyard is not legally obliged to render its services
indiscriminately to the public. It has no legal obligation to render the services sought by
each and every client. The fact that it publicly offers its services does not give the
public a legal right to demand that such services be rendered.
4. ID.; ID.; ID.; REGULATION FOR PUBLIC GOOD CANNOT JUSTIFY THE
CLASSIFICATION OF A PURELY PRIVATE ENTERPRISE AS A PUBLIC UTILITY. — There
can be no disagreement that the shipbuilding and ship repair industry is imbued with
public interest as it involves the maintenance of the seaworthiness of vessels
dedicated to the transportation of either persons or goods. Nevertheless, the fact that
a business is affected with public interest does not imply that it is under a duty to serve
the public. While the business may be regulated for public good, the regulation cannot
justify the classi cation of a purely private enterprise as a public utility. The legislature
cannot, by its mere declaration, make something a public utility which is not in fact
such; and a private business operated under private contracts with selected customers
and not devoted to public use cannot, by legislative at or by order of a public service
commission, be declared a public utility, since that would be taking private property for
public use without just compensation, which cannot be done consistently with the due
process clause. It is worthy to note that automobile and aircraft manufacturers, which
are of similar nature to shipyards, are not considered public utilities despite the fact
that their operations greatly impact on land and air transportation. The reason is
simple. Unlike commodities or services traditionally regarded as public utilities such as
electricity, gas, water, transportation, telephone or telegraph service, automobile and
aircraft manufacturing - and for that matter ship building and ship repair- serve the
public only incidentally.
5. ID.; ID.; ID.; CANNOT BE CLASSIFIED AS PUBLIC UTILITY BASED ON A
REPEALED STATUTE. — We rule that the express repeal of Batas Pambansa Blg. 391 by
E.O. No. 226 did not revive Section I of P.D. No. 666. But more importantly, it also put a
period to the existence of Sections 13 (b) and 15 of C.A. No. 146. It bears emphasis
that Sections 13 (b) and 15 of C.A. No. 146, as originally written, owed their continued
existence to Batas Pambansa Big. 391. Had the latter not repealed P.D. No. 666, the
former should have been modi ed accordingly and shipyards effectively removed from
the list of public utilities. Ergo, with the express repeal of Batas Pambansa Blg. 391 by
E.O. No. 226, the revival of Sections 13 (b) and 15 of C.A. No. 146 had no more leg to
stand on. A law that has been expressly repealed ceases to exist and becomes
inoperative from the moment the repealing law becomes effective. Hence, there is
simply no basis in the conclusion that shipyards remain to be a public utility. A repealed
statute cannot be the basis for classifying shipyards as public utilities. In view of the
foregoing, there can be no other conclusion than to hold that a shipyard is not a public
utility. A shipyard has been considered a public utility merely by legislative declaration.
Absent this declaration, there is no more reason why it should continuously be regarded
as such. The fact that the legislature did not clearly and unambiguously express its
intention to include shipyards in the list of public utilities indicates that that it did not
intend to do so. Thus, a shipyard reverts back to its status as nonpublic utility prior to
the enactment of the Public Service Law.
6. ID.; ID.; ID.; PART OF THE MANUFACTURING SECTOR — This interpretation is in
accord with the uniform interpretation placed upon it by the Board of Investments
(B01), which was entrusted by the legislature with the preparation of annual Investment
Priorities Plan (IPPs). The BOI has consistently classi ed shipyards as part of the
manufacturing sector and not of the public utilities sector. The enactment of Batas
Pambansa Blg. 391 did not alter the treatment of the BOl on shipyards. It has been, as
at present, classified as part of the manufacturing and not of the public utilities sector.
7. ID.; ID.; ID.; ITS OPERATION DOES NOT NEED A FRANCHISE. — Furthermore, of
the 441 Ship Building and Ship Repair (SBSR) entities registered with the MARINA, none
appears to have an existing franchise. If we continue to hold that a shipyard is a public
utility, it is a necessary consequence that all these entities should have obtained a
franchise as was the rule prior to the enactment of P.D. No. 666. But MARINA remains
without authority, pursuant to P.D. No. 474 to issue franchises for the operation of
shipyards. Surely, the legislature did not intend to create a vacuum by continuously
treating a shipyard as a public utility without giving MARINA the power to issue a
Certi cate of Public Convenience (CPC) or a Certi cate of Public Convenience and
Necessity (CPCN) as required by Section 15 of C.A. No. 146.
8. CIVIL LAW; PARTNERSHIP; 60%-40% PROPORTION DOES NOT BIND THE
PARTIES TO MAINTAIN THE SHARING SCHEME ALL THROUGHOUT THE EXISTENCE
THEREOF; CASE AT BAR. — Under Section 1.3, the parties agreed to the amount of
P330 million as the total capitalization of their joint venture. There was no mention of
the amount of their initial subscription. What is clear is that they are to infuse the
needed capital from time to time until the total subscribed and paid-up capital reaches
P312 million. The phrase "maintaining a proportion of 60%-40%" refers to their
respective share of the burden each time the Board of Directors decides to increase the
subscription to reach the target paid-up capital of P312 million. It does not bind the
parties to maintain the sharing scheme all throughout the existence of their partnership.
9. ID.; ID.; RIGHT OF FIRST REFUSAL; BASED ON DELECTUS PERSONAE; CASE AT
BAR. — The parties likewise agreed to arm themselves with protective mechanisms to
preserve their respective interests in the partnership in the event that (a) one party
decides to sell its shares to third parties; and (b) new Philseco shares are issued. Anent
the first situation, the nonselling party is given the right of first refusal under Section 1.4
to have a preferential right to buy or to refuse the selling party's shares. The right of
rst refusal is meant to protect the original or remaining joint venturer(s) or
shareholder(s) from the entry of third persons who are not acceptable to it as
coventurer(s) or co-shareholder(s). The joint venture between the Philippine
Government and KAWASAKI is in the nature of a partnership which, unlike an ordinary
corporation, is based on delectus personae. No one can become a member of the
partnership association without the consent of all the other associates. The right of
first refusal thus ensures that the parties are given control over who may become a new
partner in substitution of or in addition to the original partners. Should the selling
partner decide to dispose all its shares, the nonselling partner may acquire all these
shares and terminate the partnership.
10. ID.; ID.; ID.; THE LIMITATION OF 40% AS MAXIMUM SHARE OF FOREIGN
CORPORATION IS CORRECT ONLY IF THE SHIPYARD IS A PUBLIC UTILITY. — No
person or corporation can be compelled to remain or to continue the partnership. Of
course, this presupposes that there are no other restrictions in the maximum allowable
share that the non-selling partner may acquire such as the constitutional restriction on
foreign ownership in public utility. The theory that KAWASAKI can acquire, as a
maximum, only 40% of PHILSECO's shares is correct only if a shipyard is a public utility.
In such instance, the non-selling partner who is an alien can acquire only a maximum of
40% of the total capitalization of a public utility despite the grant of rst refusal. The
partners cannot, by mere agreement, avoid the constitutional proscription. But as afore
discussed, PHILSECO is not a public utility and no other restriction is present that
would limit the right of KAWASAKI to purchase the Government's share to 40% of
Philseco's total capitalization.
11. ID.; ID.; ID.; "UNDER THE SAME TERMS" IN THE JOINT VENTURE
AGREEMENT, CONSTRUED. — [T]hephrase "under the same terms" in Section 1.4
cannot be given an interpretation that would limit the right of KAWASAKI to purchase
PHILSECO shares only to the extent of its original proportionate contribution of 40% to
the total capitalization of the PHILSECO. Taken together with the whole of Section 1.4,
the phrase "under the same terms" means that a partner to the joint venture that
decides to sell its shares to a third party shall make a similar offer to the non-selling
partner. The selling partner cannot make a different or a more onerous offer to the non-
selling partner.
12. ID.; ID.; ID.; DOES NOT DEPRIVE THE OTHER PARTNER THE RIGHT TO SELL
ITS SHARES TO THIRD PERSONS IF, UNDER THE SAME OFFER, IT DOES NOT BUY THE
SHARES. — The exercise of rst refusal presupposes that the non-selling partner is
aware of the terms of the conditions attendant to the sale for it to have a guided
choice. While the right of rst refusal protects the non-selling partner from the entry of
third persons, it cannot also deprive the other partner the right to sell its shares to third
persons if, under the same offer, it does not buy the shares.
13. ID.; ID.; PREEMPTIVE RIGHT; GIVES A PARTNER PREFERENTIAL RIGHT OVER
THE NEWLY ISSUED SHARES ONLY TO THE EXTENT THAT IT RETAINS ITS ORIGINAL
PROPORTIONATE SHARE IN THE JOINT VENTURE. — Apart from the r ight of rst
refusal, the parties also have preemptive rights under Section 1.5 in the unissued
shares of Philseco. Unlike the former, this situation does not contemplate transfer of a
partner's shares to third parties but the issuance of new Philseco shares. The grant of
preemptive rights preserves the proportionate shares of the original partners so as not
to dilute their respective interests with the issuance of the new shares. Unlike the right
of rst refusal, a preemptive right gives a partner a preferential right over the newly
issued shares only to the extent that it retains its original proportionate share in the
joint venture.
14. POLITICAL LAW; ADMINISTRATIVE LAW; PUBLIC BIDDING; ELUCIDATED. —
The word "bidding" in its comprehensive sense means making an offer or an invitation
to prospective contractors whereby the government manifests its intention to make
proposals for the purpose of supplies, materials and equipment for o cial business or
public use, or for public works or repair. The three principles of public bidding are: (1)
the offer to the public; (2) an opportunity for competition; and (3) a basis for
comparison of bids.
15. ID.; ID.; ID.; NOT NECESSARY THAT THE HIGHEST BIDDER BE
AUTOMATICALLY ACCEPTED. — As long as these three principles are complied with,
the public bidding can be' considered valid and legal. It is not necessary that the highest
bid be automatically accepted. The bidding rules may specify other conditions or the
bidding process be subjected to certain reservation or quali cation such as when the
owner reserves to himself openly at the time of the sale the right to bid upon the
property, or openly announces a price below which the property will not be sold. Hence,
where the seller reserves the right to refuse to accept any bid made, a binding sale is
not consummated between the seller and the bidder until the seller accepts the bid.
Furthermore, where a right is reserved in the seller to reject any and all bids received,
the owner may exercise the right even after the auctioneer has accepted a bid, and this
applies to the auction of public as well as private property. Thus: It is a settled rule that
where the invitation to bid contains a reservation for the Government to reject any or all
bids, the lowest or the highest bidder, as the case may be, is not entitled to an award as
a matter of right for it does not become a ministerial duty of the Government to make
such an award. Thus, it has been held that where the right to reject is so reserved, the
lowest bid or any bid for that matter may be rejected on a mere technicality, that all
bids may be rejected, even if arbitrarily and unwisely, or under a mistake, and that in the
exercise of a sound discretion, the award may be made to another than the lowest
bidder. And so, where the Government as advertiser, availing itself of that right, makes
its choice in rejecting any or all bids, the losing bidder has no cause to complain nor
right to dispute that choice, unless an unfairness or injustice is shown. Accordingly, he
has no ground of action to compel the Government to award the contract in his favor,
nor compel it to accept his bid.
16. ID.; ID.; ID.; BIDDERS ARE PLACED ON EQUAL FOOTING; PRESENT IN CASE
AT BAR. — The essence of competition in public bidding is that the bidders are placed
on equal footing. This means that all quali ed bidders have an equal chance of winning
the auction through their bids. In the case at bar, all of the bidders were exposed to the
same risk and were subjected to the same condition, i, e., the existence of KAWASAKI's
right to top. Under the ASBR, the Government expressly reserved the right to reject any
or all bids, and manifested its intention not to accept the highest bid should KAWASAKI
decide to exercise its right to top under the ABSR. This reservation or quali cation was
made known to the bidders in a pre-bidding conference held on September 28, 1993.
They all expressly accepted this condition in writing without any quali cation.
Furthermore, when the Committee on Privatization noti ed petitioner of the approval of
the sale of the National Government shares of stock in PHILSECO, it speci cally stated
that such approval was subject to the right of KAWASAKI Heavy Industries,
Inc./Philyards Holdings, Inc. to top JGSMI's bid by 5% as speci ed in the bidding rules.
Clearly, the approval of the sale was a conditional one. Since Philyards eventually
exercised its right to top petitioner's bid by 5%, the sale was not consummated.
Parenthetically, it cannot be argued that the existence of the right to top "set for naught
the entire public bidding." Had Philyards Holdings, Inc. failed or refused to exercise its
right to top, the sale between the petitioner and the National Government would have
been consummated.
17. ID.; ID.; ID.; EXISTENCE OF THE RIGHT TO TOP CANNOT BE LIKENED TO A
SECOND BIDDING. — In like manner, the existence of the right to top cannot be likened
to a second bidding, which is countenanced, except when there is failure to bid as when
there is only one bidder or none at all. A prohibited second bidding presupposes that
based on the terms and conditions of the sale, there is already a highest bidder with the
right to demand that the seller accept its bid. In the instant case, the highest bidder was
well aware that the acceptance of its bid was conditioned upon the non-exercise of the
right to top. To be sure, respondents did not circumvent the requirements for bidding
by granting KAWASAKI, a non-bidder, the right to top the highest bidder. The fact that
KAWASAKI's nominee to exercise the right to top has among its stockholders some
losing bidders cannot also be deemed "unfair."
18. CIVIL LAW; PARTNERSHIP; RIGHT OF FIRST REFUSAL; THE BASIS FOR THE
RIGHT TO TOP. — It must be emphasized that none of the parties questions the
existence of KAWASAKI's right of rst refusal, which is concededly the basis for the
grant of the right to top. Under KAWASAKI's right of rst refusal, the National
Government is under the obligation to give preferential right to KAWASAKI in the event
it decides to sell its shares in PHILSECO. It has to offer to KAWASAKI the shares and
give it the option to buy or refuse under the same terms for which it is willing to sell the
said shares to third parties. KAWASAKI is not a mere non-bidder. It is a partner in the
joint venture; the incidents of which are governed by the law on contracts and on
partnership.
19. ID.; ID.: ID.; PUBLIC BIDDING IS AN ESSENTIAL FIRST STEP IN THE EXERCISE
THEREOF CONCERNING THE PROPERTIES OF THE GOVERNMENT. — It is true that
properties of the National Government, as a rule, may be sold only after a public bidding
is held. Public bidding is the accepted method in arriving at a fair and reasonable price
and ensures that overpricing, favoritism and other anomalous practices are eliminated
or minimized. But the requirement for public bidding does not negate the exercise of
the right of rst 'refusal. In fact, public bidding is an essential rst step in the exercise
of the right of first refusal because it is only after the public bidding that the terms upon
which the Government may be said to be willing to sell its shares to third parties may
be known. It is only after the public bidding that the Government will have a basis with
which to offer KAWASAKI the option to buy or forego the shares.
20. ID.; ID.; RIGHT TO TOP; NATIONAL GOVERNMENT WAS BENEFITED. —
Assuming that the parties did not swap KAWASAKI's right of rst refusal with the right
to top, KAWASAKI would have been able to buy the National Government's shares in
PHILSECO under the same terms as offered by the highest bidder. Stated otherwise, by
exercising its right of rst refusal, KAWASAKI could have bought the shares for only
P2.03 billion and not the higher amount of P2.1315 billion. There is, thus, no basis in the
submission that the right to top unfairly favored KAWASAKI. In fact, with the right to
top, KAWASAKI stands to pay higher than it should had it settled with its right of rst
refusal. The obvious beneficiary of the scheme is the National Government.
21. ID.; ID.; ID.; AN ASSIGNABLE RIGHT. — If at all, the obvious consideration for
the exchange of the right of rst refusal with the right to top is that KAWASAKI can
name a nominee, which it is a shareholder, to exercise the right to top. This is a valid
contractual stipulation; the right to top is an assign able right and both parties are
aware of the full legal consequences of its exercise. As aforesaid, all bidders were
aware of the existence of the right to top, and its possible effects on the result of the
public bidding was fully disclosed to them. The petitioner, thus, cannot feign ignorance
nor can it be allowed to repudiate its acts and question the proceedings it had fully
adhered to.
22. ID.; ID.; ID.; NOT CONTRARY TO LAW, PUBLIC POLICY OR PUBLIC MORALS
FOR THE LOSING BIDDERS TO JOIN A PARTICULAR CORPORATION IN THE EXERCISE
THEREOF. — 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 PHILSECO to respondent.
23. REMEDIAL LAW; EVIDENCE; PRESUMPTIONS; REGULARITY IN THE
PERFORMANCE OF OFFICIAL DUTIES IS PRESUMED. — Finally, no factual basis exists
to support the view that the drafting of the ASBR was illegal because no prior approval
was given by the COA for it, speci cally the provision on the right to top the highest
bidder and that the public auction on December 2, 1993 was not witnessed by a COA
representative. No evidence was proffered to prove these allegations and the Court
cannot make legal conclusions out of mere allegations. Regularity in the performance
of o cial duties is presumed and in the absence of competent evidence to rebut this
presumption, this Court is duty bound to uphold this presumption.
TINGA, J., separate opinion:
1. MERCANTILE LAW; CORPORATION LAW; SHIPYARD; NOT A PUBLIC UTILITY
WHETHER BY LEGISLATIVE DECLARATION OR EXECUTIVE FIAT.- Since the enactment
of Commonwealth Act No. 454 on June 8, 1939, shipyards have never been considered
public utilities, whether by legislative declaration or executive at, or even in
administrative practice. . . . The test, therefore, in determining if a service is a public
utility, is whether the public may enjoy it by right or only by permission. A shipyard fails
this test. As Justice Puno points out, a shipyard is not, by nature or tradition, a public
utility in much the same way as automobile or airplane manufacturers are not public
utilities. x x x Still on the legislative side, to the best of my knowledge, no person or rm
has secured a legislative franchise to operate a shipyard or even applied for one. On the
administrative side, as noted by Mr. Justice Puno, the Maritime Industry Authority
(MARINA) has not been empowered to issue franchise for shipyard operation. It is
authorized under Executive Orders No. 124 and No. 125-A, effective as of January 10
and April 13, 1987, respectively, to issue certi cates of public convenience to domestic
and water carriers. But the presidential issuances have no similar provision with
respect to shipyard operation.
2. ID.; ID.; PUBLIC SERVICE DIFFERENTIATED FROM PUBLIC UTILITY. — True,
"shipyard" is mentioned along with other business operations in the course of the
de nition by enumeration of "public service" in the Public Service Act. The terms "public
service" and "public utility," however, do not have the same legal meaning. at least since
the enactment of C.A. No. 454. The terms are related though. The de nition of "public
service" in the Public Service Act, as last amended by Republic Act No. 2677, includes
every person who owns, operates, manages or controls, for hire or compensation, and
done for general business purposes, any common carrier, railroad, street railway,
traction railway, sub-way motor vehicle, either for freight of passenger, or both with or
without xed route and whatever may be its classi cation, freight or carrier service of
any class, express service, steamboat, or steamship line, pontines, ferries, and water
craft, engaged in the transportation of passengers or freight, or both, shipyard, marine
railway, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and power,
petroleum, sewerage system, wire or wireless communications system, broadcasting
stations and other similar public services. A "public utility," on the other hand, is a
business or service engaged in regularly supplying the public with some commodity or
service of public consequence such as electricity, gas, water, transportation, telephone
or telegraph service. Simply stated, a public utility provides a service or facility needed
for present day living which cannot be denied to anyone who is willing to pay for it. . . .
Another dissimilarity is that a public utility requires a franchise, aside from a certi cate
of public necessity and convenience, for its operation, while a public service which is
not a public utility requires only a certi cate of public convenience. The dichotomy in
requirements ows from the enforced indeterminacy of the market for the service
provided by a public utility. Thus, it may be pointed out that all public utilities are public
services but the converse is not true. This is so because the term "public utility"
connotes public use and service to the public.
3. ID.; ID.; CATEGORIZATION OF BUSINESS OR SERVICE AS PUBLIC UTILITY OR
OTHERWISE IS A JUDICIAL PREROGATIVE. — A legislative declaration such as the
de nition by enumeration in the Public Service Act does not ipso facto render a
business or service a public utility. For, as this Court held in North Negros Sugar Co. v.
Hidalgo, whether or not one is a public utility is a matter of judicial, not legislative
determination. " . . Whether or not a given business, industry, or service is a public utility
does not depend upon legislative de nition, but upon the nature of the business or
service rendered, and an attempt to declare a company or enterprise to be a public
utility, where it is inherently not such, is, by virtue of the guaranties of the federal
constitution, void whenever it interferes with private rights of property or contract. So a
legislature cannot by mere at or regulatory order convert a private business or
enterprise into a public utility, and the question whether or not a particular company or
service is a public utility is a judicial one, and must be determined as such by a court of
competent jurisdiction; . . ." (51 C.J., Sec. 3, p.5) Paraphrasing a decision of the United
States Supreme Court, a private enterprise doing business under private contracts with
customers of its choice and therefore not devoted to public use cannot by legislative
enactment or administrative order be converted into a public utility, for that would
constitute taking of private property for public use without just compensation in
derogation of the Constitution. Again, the categorization of a business or service as a
public utility or otherwise is a judicial prerogative. Hence, this Court held in a signi cant
number of cases that the businesses or services involved were not public utilities
despite contradicting legislative classifications.
RESOLUTION
PUNO , J : p
The core issue posed by the Motions for Reconsideration is whether a shipyard
is a public utility whose capitalization must be sixty percent (60%) owned by Filipinos.
Our resolution of this issue will determine the fate of the shipbuilding and ship repair
industry. It can either spell the industry's demise or breathe new life to the struggling
but potentially healthy partner in the country's bid for economic growth. It can either kill
an initiative yet in its infancy, or harness creativity in the productive disposition of
government assets. aIAHcE
The facts are undisputed and can be summarized briefly as follows:

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, the NIDC and KAWASAKI will contribute P330 million for
the capitalization of PHILSECO in the proportion of 60%-40% respectively. 1 One of its
salient features is the grant to the parties of the right of rst 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 rst refusal. This provision shall not apply if the transferee is a
corporation owned or controlled by the GOVERNMENT or by a KAWASAKI
affiliate. 2
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 non-
performing 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 quasi-reorganization 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%. 3
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 rst refusal under the JVA be "exchanged" for the right to top by ve
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) would exercise its right to top. 4
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 Speci c
Bidding Rules (ASBR) drafted for the National Government's 87.6% equity share in
PHILSECO. 5 The provisions of the ASBR were explained to the interested bidders who
were noti ed 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 nal
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 quali ed 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 ve
(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 ve 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 o cial 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. . . . 6
At the public bidding on the said date, petitioner J.G. Summit Holdings, 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: DEHaTC
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. 7
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." 8
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 bene t to a third party; (d) no right of rst refusal can be exercised in a
public bidding or auction sale; and (e) the JG Summit consortium was not estopped
from questioning the proceedings. 9
On February 2, 1994, petitioner was noti ed that PHI had fully paid the balance of
the purchase price of the subject bidding. On February 7, 1994, the APT noti ed
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. 1 0 Consequently, petitioner led 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 rst 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 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." Petitioner led a Motion for Reconsideration of said Decision
which was denied on March 15, 1996. Petitioner thus led a Petition for Certiorari with
this Court alleging grave abuse of discretion on the part of the appellate court. 1 1
On November 20, 2000, this Court rendered the now assailed 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. 1 2 It further ruled that a shipyard like PHILSECO is a
public utility whose capitalization must be sixty percent (60%) Filipino-owned. 1 3
Consequently, the right to top granted to KAWASAKI under the Asset Speci c 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. 1 4 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." 1 5 Thus, this Court voided
the transfer of the national government's 87.67% share in PHILSECO to Philyard
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 nality 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 certi cates of stocks
representing 87.6% of PHILSECO's total capitalization;
(d) return to private respondent PHGI 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. 1 6
In separate Motions for Reconsideration, 1 7 respondents submit three basic

issues for our resolution: (1) Whether PHILSECO is a public utility; (2) Whether under
the 1977 JVA, KAWASAKI can exercise its right of rst 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.
I.
Whether PHILSECO is a Public Utility.
After carefully reviewing the applicable laws and jurisprudence, we hold that
PHILSECO is not a public utility for the following reasons:
First. By nature, a shipyard is not a public utility.
A "public utility" is "a business or service engaged in regularly supplying the public
with some commodity or service of public consequence such as electricity, gas, water,
transportation, telephone or telegraph service." 1 8 To constitute a public utility, the
facility must be necessary for the maintenance of life and occupation of the residents.
However, the fact that a business offers services or goods that promote public good
and serve the interest of the public does not automatically make it a public utility.
Public use is not synonymous with public interest. As its name indicates, the term
"public utility" implies public use and service to the public. The principal determinative
characteristic of a public utility is that of service to, or readiness to serve, an inde nite
public or portion of the public as such which has a legal right to demand and receive its
services or commodities. Stated otherwise, the owner or person in control of a public
utility must have devoted it to such use that the public generally or that part of the
public which has been served and has accepted the service, has the right to demand
that use or service so long as it is continued, with reasonable e ciency and under
proper charges. 1 9 Unlike a private enterprise which independently determines whom it
will serve, a "public utility holds out generally and may not refuse legitimate demand for
service." 2 0 Thus, in Iloilo Ice and Cold Storage Co. vs. Public Utility Board, 2 1 this Court
defined "public use," viz:
"Public use" means the same as "use by the public." The essential feature
of the public use is that it is not con ned to privileged individuals, but is open to
the inde nite public. It is this inde nite or unrestricted quality that gives it its
public character. In determining whether a use is public, we must look not only to
the character of the business to be done, but also to the proposed mode of doing
it. If the use is merely optional with the owners, or the public bene t is merely
incidental, it is not a public use, authorizing the exercise of jurisdiction of the
public utility commission. There must be, in general, a right which the law
compels the owner to give to the general public. It is not enough that the general
prosperity of the public is promoted. Public use is not synonymous with public
interest. The true criterion by which to judge the character of the use is whether
the public may enjoy it by right or only by permission. 2 2 (emphasis supplied)
Applying the criterion laid down in Iloilo to the case at bar, it is crystal clear that a
shipyard cannot be considered a public utility.
A "shipyard" is "a place or enclosure where ships are built or repaired." 2 3 Its
nature dictates that it serves but a limited clientele whom it may choose to serve at its
discretion. While it offers its facilities to whoever may wish to avail of its services, a
shipyard is not legally obliged to render its services indiscriminately to the public. It has
no legal obligation to render the services sought by each and every client. The fact that
it publicly offers its services does not give the public a legal right to demand that such
services be rendered. SDAcaT
There can be no disagreement that the shipbuilding and ship repair industry is
imbued with public interest as it involves the maintenance of the seaworthiness of
vessels dedicated to the transportation of either persons or goods. Nevertheless, the
fact that a business is affected with public interest does not imply that it is under a duty
to serve the public. While the business may be regulated for public good, the regulation
cannot justify the classi cation of a purely private enterprise as a public utility. The
legislature cannot, by its mere declaration, make something a public utility which is not
in fact such; and a private business operated under private contracts with selected
customers and not devoted to public use cannot, by legislative at or by order of a
public service commission, be declared a public utility, since that would be taking
private property for public use without just compensation, which cannot be done
consistently with the due process clause. 2 4
It is worthy to note that automobile and aircraft manufacturers, which are of
similar nature to shipyards, are not considered public utilities despite the fact that their
operations greatly impact on land and air transportation. The reason is simple. Unlike
commodities or services traditionally regarded as public utilities such as electricity,
gas, water, transportation, telephone or telegraph service, automobile and aircraft
manufacturing — and for that matter ship building and ship repair — serve the public
only incidentally.
Second. There is no law declaring a shipyard as a public utility.
History provides us hindsight and hindsight ought to give us a better view of the
intent of any law. The succession of laws affecting the status of shipyards ought not to
obliterate, but rather, give us full picture of the intent of the legislature. The totality of
the circumstances, including the contemporaneous interpretation accorded by the
administrative bodies tasked with the enforcement of the law all lead to a singular
conclusion: that shipyards are not public utilities.
Since the enactment of Act No. 2307 which created the Public Utility
Commission (PUC) until its repeal by Commonwealth Act No. 146, establishing the
Public Service Commission (PSC), a shipyard, by legislative declaration, has been
considered a public utility. 2 5 A Certificate of Public Convenience (CPC) from the PSC to
the effect that the operation of the said service and the authorization to do business
will promote the public interests in a proper and suitable manner is required before any
person or corporation may operate a shipyard. 2 6 In addition, such persons or
corporations should abide by the citizenship requirement provided in Article XIII,
section 8 of the 1935 Constitution, 2 7 viz:
Sec. 8. No franchise, certi cate, or any other form or authorization for the
operation of a public utility shall be granted except to citizens of the Philippines
or to corporations or other entities organized under the laws of the Philippines,
sixty per centum of the capital of which is owned by citizens of the Philippines,
nor shall such franchise, certi cate or authorization be exclusive in character or
for a longer period than fty years. No franchise or right shall be granted to any
individual, rm or corporation, except under the condition that it shall be subject
to amendment, alteration, or repeal by the National Assembly when the public
interest so requires. (emphasis supplied)
To accelerate the development of shipbuilding and ship repair industry, former

President Ferdinand E. Marcos issued P.D. No. 666 granting the following incentives:
SECTION 1. Shipbuilding and ship repair yards duly registered with the
Maritime Industry Authority shall be entitled to the following incentive benefits:
(a) Exemption from import duties and taxes. — The importation of

machinery, equipment and materials for shipbuilding, ship repair and/or
alteration, including indirect import, as well as replacement and spare parts for
the repair and overhaul of vessels such as steel plates, electrical machinery and
electronic parts, shall be exempt from the payment of customs duty and
compensating tax: Provided, however, That the Maritime Industry Authority
certi es that the item or items imported are not produced locally in su cient
quantity and acceptable quality at reasonable prices, and that the importation is
directly and actually needed and will be used exclusively for the construction,
repair, alteration, or overhaul of merchant vessels, and other watercrafts; Provided,
further, That if the above machinery, equipment, materials and spare parts are
sold to non-tax exempt persons or entities, the corresponding duties and taxes
shall be paid by the original importer; Provided, nally, That local dealers and/or
agents who sell machinery, equipment, materials and accessories to shipyards for
shipbuilding and ship repair are entitled to tax credits, subject to approval by the
total tariff duties and compensating tax paid for said machinery, equipment,
materials and accessories.
(b) Accelerated depreciation. — Industrial plant and equipment may, at the
option of the shipbuilder and ship repairer, be depreciated for any number of
years between five years and expected economic life.
(c) Exemption from contractor's percentage tax . — The gross receipts

derived by shipbuilders and ship repairers from shipbuilding and ship repairing
activities shall be exempt from the Contractor's Tax provided in Section 91 of the
National Internal Revenue Code during the rst ten years from registration with
the Maritime Industry Authority, provided that such registration is effected not
later than the year 1990; Provided, That any and all amounts which would
otherwise have been paid as contractor's tax shall be set aside as a separate
fund, to be known as "Shipyard Development Fund", by the contractor for the
purpose of expansion, modernization and/or improvement of the contractor's
own shipbuilding or ship repairing facilities; Provided, That, for this purpose, the
contractor shall submit an annual statement of its receipts to the Maritime
Industry Authority; and Provided, further, That any disbursement from such fund
for any of the purposes hereinabove stated shall be subject to approval by the
Maritime Industry Authority.
In addition, P.D. No. 666 removed the shipbuilding and ship repair industry from
the list of public utilities, thereby freeing the industry from the 60% citizenship
requirement under the Constitution and from the need to obtain Certi cate of Public
Convenience pursuant to section 15 of C.A. No. 146. Section 1 (d) of P.D. 666 reads:
(d) Registration required but not as a Public Utility . — The business of
constructing and repairing vessels or parts thereof shall not be considered a
public utility and no Certi cate 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 construction and/or repair of any vessel, or
any phase or part thereof, without a valid Certi cate 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. (emphasis supplied)
Any law, decree, executive order, or rules and regulations inconsistent with P.D.
No. 666 were repealed or modi ed accordingly. 2 8 Consequently, sections 13 (b) and
15 of C.A. No. 146 were repealed in so far as the former law included shipyards in the
list of public utilities and required the certi cate of public convenience for their
operation. Simply stated, the repeal was due to irreconcilable inconsistency, and by
definition, this kind of repeal falls under the category of an implied repeal. 2 9
On April 28, 1983, Batas Pambansa Blg. 391, also known as the "Investment
Incentive Policy Act of 1983," was enacted. It laid down the general policy of the
government to encourage private domestic and foreign investments in the various
sectors of the economy, to wit:
Sec. 2. Declaration of Investment Policy . — It is the policy of the State to
encourage private domestic and foreign investments in industry, agriculture,
mining and other sectors of the economy which shall: provide signi cant
employment opportunities relative to the amount of the capital being invested;
increase productivity of the land, minerals, forestry, aquatic and other resources
of the country, and improve utilization of the products thereof; improve technical
skills of the people employed in the enterprise; provide a foundation for the future
development of the economy; accelerate development of less developed regions
of the country; and result in increased volume and value of exports for the
economy.
It is the policy of the State to extend to projects which will signi cantly
contribute to the attainment of these objectives, scal incentives without which
said projects may not be established in the locales, number and/or pace required
for optimum national economic development. Fiscal incentive systems shall be
devised to compensate for market imperfections, reward performance of making
contributions to economic development, cost-e cient and be simple to
administer.
The scal incentives shall be extended to stimulate establishment and
assist initial operations of the enterprise, and shall terminate after a period of not
more than 10 years from registration or start-up of operation unless a special
period is otherwise stated.
The foregoing declaration shall apply to all investment incentive schemes

and in particular will supersede article 2 of Presidential Decree No. 1789.
(emphases supplied)
With the new investment incentive regime, Batas Pambansa Blg. 391 repealed
the following laws, viz:
Sec. 20. The following provisions are hereby repealed:
1) Section 53, P.D. 463 (Mineral Resources Development Decree);
2) Section 1, P.D. 666 (Shipbuilding and Ship Repair Industry) ;
3) Section 6, P.D. 1101 (Radioactive Minerals);

4) LOI 508 extending P.D. 791 and P.D. 924 (Sugar); and
5) The following articles of Presidential Decree 1789: 2, 18, 19, 22, 28, 30,
39, 49 (d), 62, and 77. Articles 45, 46 and 48 are hereby amended
only with respect to domestic and export producers.
All other laws, decrees, executive orders, administrative orders, rules and
regulations or parts thereof which are inconsistent with the provisions of this Act
are hereby repealed, amended or modified accordingly.
All other incentive systems which are not in any way affected by the
provisions of this Act may be restructured by the President so as to render them
cost-e cient and to make them conform with the other policy guidelines in the
declaration of policy provided in Section 2 of this Act. (emphasis supplied)
From the language of the afore-quoted provision, the whole of P.D. No. 666,
section 1 was expressly and categorically repealed. As a consequence, the provisions
of C.A. No. 146, which were impliedly repealed by P.D. No. 666, section 1 were revived.
3 0 In other words, with the enactment of Batas Pambansa Blg. 391, a shipyard reverted
back to its status as a public utility and as such, requires a CPC for its operation.
The crux of the present controversy is the effect of the express repeal of Batas
Pambansa Blg. 391 by Executive Order No. 226 issued by former President Corazon C.
Aquino under her emergency powers.
We rule that the express repeal of Batas Pambansa Blg. 391 by E.O. No. 226 did
not revive Section 1 of P.D. No. 666. But more importantly, it also put a period to the
existence of sections 13 (b) and 15 of C.A. No. 146. It bears emphasis that sections 13
(b) and 15 of C.A. No. 146, as originally written, owed their continued existence to Batas
Pambansa Blg. 391. Had the latter not repealed P.D. No. 666, the former should have
been modi ed accordingly and shipyards effectively removed from the list of public
utilities. Ergo, with the express repeal of Batas Pambansa Blg. 391 by E.O. No. 226, the
revival of sections 13 (b) and 15 of C.A. No. 146 had no more leg to stand on. A law that
has been expressly repealed ceases to exist and becomes inoperative from the
moment the repealing law becomes effective. 3 1 Hence, there is simply no basis in the
conclusion that shipyards remain to be a public utility. A repealed statute cannot be the
basis for classifying shipyards as public utilities.
In view of the foregoing, there can be no other conclusion than to hold that a
shipyard is not a public utility. A shipyard has been considered a public utility merely by
legislative declaration. Absent this declaration, there is no more reason why it should
continuously be regarded as such. The fact that the legislature did not clearly and
unambiguously express its intention to include shipyards in the list of public utilities
indicates that that it did not intend to do so. Thus, a shipyard reverts back to its status
as non-public utility prior to the enactment of the Public Service Law.
This interpretation is in accord with the uniform interpretation placed upon it by
the Board of Investments (BOI), which was entrusted by the legislature with the
preparation of annual Investment Priorities Plan (IPPs). The BOI has consistently
classi ed shipyards as part of the manufacturing sector and not of the public utilities
sector. The enactment of Batas Pambansa Blg. 391 did not alter the treatment of the
BOI on shipyards. It has been, as at present, classi ed as part of the manufacturing and
not of the public utilities sector. 3 2
Furthermore, of the 441 Ship Building and Ship Repair (SBSR) entities registered
with the MARINA, 3 3 none appears to have an existing franchise. If we continue to hold
that a shipyard is a public utility, it is a necessary consequence that all these entities
should have obtained a franchise as was the rule prior to the enactment of P.D. No. 666.
But MARINA remains without authority, pursuant to P.D. No. 474 3 4 to issue franchises
for the operation of shipyards. Surely, the legislature did not intend to create a vacuum
by continuously treating a shipyard as a public utility without giving MARINA the power
to issue a Certi cate of Public Convenience (CPC) or a Certi cate of Public
Convenience and Necessity (CPCN) as required by section 15 of C.A. No. 146.
II.
Whether under the 1977 Joint Venture Agreement,
KAWASAKI can purchase only a maximum of 40%
of PHILSECO's total capitalization.
A careful reading of the 1977 Joint Venture Agreement reveals that there is
nothing that prevents KAWASAKI from acquiring more than 40% of PHILSECO's total
capitalization. Section 1 of the 1977 JVA states:
1.3 The authorized capital stock of Philseco shall be P330 million. 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.
1.4 Neither party shall sell, transfer or assign all or any part of its interest in
SNS [renamed PHILSECO] to any third party without giving the other under the
same terms the right of rst refusal. This provision shall not apply if the
transferee is a corporation owned and controlled by the GOVERNMENT [of the
Philippines] or by a Kawasaki affiliate.
1.5 The By-Laws of SNS [PHILSECO] shall grant the parties preemptive
rights to unissued shares of SNS [PHILSECO]. 3 5
Under section 1.3, the parties agreed to the amount of P330 million as the total
capitalization of their joint venture. There was no mention of the amount of their initial
subscription. What is clear is that they are to infuse the needed capital from time to
time until the total subscribed and paid-up capital reaches P312 million. The phrase
"maintaining a proportion of 60%-40%" refers to their respective share of the burden
each time the Board of Directors decides to increase the subscription to reach the
target paid-up capital of P312 million. It does not bind the parties to maintain the
sharing scheme all throughout the existence of their partnership.
The parties likewise agreed to arm themselves with protective mechanisms to
preserve their respective interests in the partnership in the event that (a) one party
decides to sell its shares to third parties; and (b) new Philseco shares are issued. Anent
the rst situation, the non-selling party is given the right of rst refusal under section
1.4 to have a preferential right to buy or to refuse the selling party's shares. The right of
rst refusal is meant to protect the original or remaining joint venturer(s) or
shareholder(s) from the entry of third persons who are not acceptable to it as co-
venturer(s) or co-shareholder(s). The joint venture between the Philippine Government
and KAWASAKI is in the nature of a partnership 3 6 which, unlike an ordinary corporation,
is based on delectus personae. 3 7 No one can become a member of the partnership
association without the consent of all the other associates. The right of rst refusal
thus ensures that the parties are given control over who may become a new partner in
substitution of or in addition to the original partners. Should the selling partner decide
to dispose all its shares, the non-selling partner may acquire all these shares and
terminate the partnership. No person or corporation can be compelled to remain or to
continue the partnership. Of course, this presupposes that there are no other
restrictions in the maximum allowable share that the non-selling partner may acquire
such as the constitutional restriction on foreign ownership in public utility. The theory
that KAWASAKI can acquire, as a maximum, only 40% of PHILSECO's shares is correct
only if a shipyard is a public utility. In such instance, the non-selling partner who is an
alien can acquire only a maximum of 40% of the total capitalization of a public utility
despite the grant of rst refusal. The partners cannot, by mere agreement, avoid the
constitutional proscription. But as afore-discussed, PHILSECO is not a public utility and
no other restriction is present that would limit the right of KAWASAKI to purchase the
Government's share to 40% of Philseco's total capitalization.
Furthermore, the phrase "under the same terms" in section 1.4 cannot be given an
interpretation that would limit the right of KAWASAKI to purchase PHILSECO shares
only to the extent of its original proportionate contribution of 40% to the total
capitalization of the PHILSECO. Taken together with the whole of section 1.4, the
phrase "under the same terms" means that a partner to the joint venture that decides to
sell its shares to a third party shall make a similar offer to the non-selling partner. The
selling partner cannot make a different or a more onerous offer to the non-selling
partner.
The exercise of rst refusal presupposes that the non-selling partner is aware of
the terms of the conditions attendant to the sale for it to have a guided choice. While
the right of rst refusal protects the non-selling partner from the entry of third persons,
it cannot also deprive the other partner the right to sell its shares to third persons if,
under the same offer, it does not buy the shares.
Apart from the right of first refusal, the parties also have preemptive rights under
section 1.5 in the unissued shares of Philseco. Unlike the former, this situation does not
contemplate transfer of a partner's shares to third parties but the issuance of new
Philseco shares. The grant of preemptive rights preserves the proportionate shares of
the original partners so as not to dilute their respective interests with the issuance of
the new shares. Unlike the right of rst refusal, a preemptive right gives a partner a
preferential right over the newly issued shares only to the extent that it retains its
original proportionate share in the joint venture.
The case at bar does not concern the issuance of new shares but the transfer of
a partner's share in the joint venture. Verily, the operative protective mechanism is the
right of rst refusal which does not impose any limitation in the maximum shares that
the non-selling partner may acquire.
III.
Whether the right to top granted to KAWASAKI
in exchange for its right of first refusal violates
the principles of competitive bidding.
We also hold that the right to top granted to KAWASAKI and exercised by private
respondent did not violate the rules of competitive bidding. cCESaH
The word "bidding" in its comprehensive sense means making an offer or an

invitation to prospective contractors whereby the government manifests its intention to
make proposals for the purpose of supplies, materials and equipment for o cial
business or public use, or for public works or repair. 3 8 The three principles of public
bidding are: (1) the offer to the public; (2) an opportunity for competition; and (3) a
basis for comparison of bids. 3 9 As long as these three principles are complied with,
the public bidding can be considered valid and legal. It is not necessary that the highest
bid be automatically accepted. The bidding rules may specify other conditions or the
bidding process be subjected to certain reservation or quali cation such as when the
owner reserves to himself openly at the time of the sale the right to bid upon the
property, or openly announces a price below which the property will not be sold. Hence,
where the seller reserves the right to refuse to accept any bid made, a binding sale is
not consummated between the seller and the bidder until the seller accepts the bid.
Furthermore, where a right is reserved in the seller to reject any and all bids received,
the owner may exercise the right even after the auctioneer has accepted a bid, and this
applies to the auction of public as well as private property. 4 0 Thus:
It is a settled rule that where the invitation to bid contains a reservation for
the Government to reject any or all bids, the lowest or the highest bidder, as the
case may be, is not entitled to an award as a matter of right for it does not
become a ministerial duty of the Government to make such an award. Thus, it has
been held that where the right to reject is so reserved, the lowest bid or any bid for
that matter may be rejected on a mere technicality, that all bids may be rejected,
even if arbitrarily and unwisely, or under a mistake, and that in the exercise of a
sound discretion, the award may be made to another than the lowest bidder. And
so, where the Government as advertiser, availing itself of that right, makes its
choice in rejecting any or all bids, the losing bidder has no cause to complain nor
right to dispute that choice, unless an unfairness or injustice is shown.
Accordingly, he has no ground of action to compel the Government to award the
contract in his favor, nor compel it to accept his bid. 4 1
In the instant case, the sale of the Government shares in PHILSECO was publicly
known. All interested bidders were welcomed. The basis for comparing the bids were
laid down. All bids were accepted sealed and were opened and read in the presence of
the COA's o cial representative and before all interested bidders. The only question
that remains is whether or not the existence of KAWASAKI's right to top destroys the
essence of competitive bidding so as to say that the bidders did not have an
opportunity for competition. We hold that it does not.
The essence of competition in public bidding is that the bidders are placed on
equal footing. This means that all quali ed bidders have an equal chance of winning the
auction through their bids. In the case at bar, all of the bidders were exposed to the
same risk and were subjected to the same condition, i.e., the existence of KAWASAKI's
right to top. Under the ASBR, the Government expressly reserved the right to reject any
or all bids, and manifested its intention not to accept the highest bid should KAWASAKI
decide to exercise its right to top under the ABSR. This reservation or quali cation was
made known to the bidders in a pre-bidding conference held on September 28, 1993.
They all expressly accepted this condition in writing without any quali cation.
Furthermore, when the Committee on Privatization noti ed petitioner of the approval of
the sale of the National Government shares of stock in PHILSECO, it speci cally stated
that such approval was subject to the right of KAWASAKI Heavy Industries,
Inc./Philyards Holdings, Inc. to top JGSMI's bid by 5% as speci ed in the bidding rules.
Clearly, the approval of the sale was a conditional one. Since Philyards eventually
exercised its right to top petitioner's bid by 5%, the sale was not consummated.
Parenthetically, it cannot be argued that the existence of the right to top "set for naught
the entire public bidding." Had Philyards Holdings, Inc. failed or refused to exercise its
right to top, the sale between the petitioner and the National Government would have
been consummated. In like manner, the existence of the right to top cannot be likened
to a second bidding, which is countenanced, except when there is failure to bid as when
there is only one bidder or none at all. A prohibited second bidding presupposes that
based on the terms and conditions of the sale, there is already a highest bidder with the
right to demand that the seller accept its bid. In the instant case, the highest bidder was
well aware that the acceptance of its bid was conditioned upon the non-exercise of the
right to top.
To be sure, respondents did not circumvent the requirements for bidding by
granting KAWASAKI, a non-bidder, the right to top the highest bidder. The fact that
KAWASAKI's nominee to exercise the right to top has among its stockholders some
losing bidders cannot also be deemed "unfair."
It must be emphasized that none of the parties questions the existence of
KAWASAKI's right of rst refusal, which is concededly the basis for the grant of the
right to top. Under KAWASAKI's right of rst refusal, the National Government is under
the obligation to give preferential right to KAWASAKI in the event it decides to sell its
shares in PHILSECO. It has to offer to KAWASAKI the shares and give it the option to
buy or refuse under the same terms for which it is willing to sell the said shares to third
parties. KAWASAKI is not a mere non-bidder. It is a partner in the joint venture; the
incidents of which are governed by the law on contracts and on partnership.
It is true that properties of the National Government, as a rule, may be sold only
after a public bidding is held. Public bidding is the accepted method in arriving at a fair
and reasonable price and ensures that overpricing, favoritism and other anomalous
practices are eliminated or minimized. 4 2 But the requirement for public bidding does
not negate the exercise of the right of rst refusal. In fact, public bidding is an essential
rst step in the exercise of the right of rst refusal because it is only after the public
bidding that the terms upon which the Government may be said to be willing to sell its
shares to third parties may be known. It is only after the public bidding that the
Government will have a basis with which to offer KAWASAKI the option to buy or forego
the shares.
Assuming that the parties did not swap KAWASAKI's right of first refusal with the
right to top, KAWASAKI would have been able to buy the National Government's shares
in PHILSECO under the same terms as offered by the highest bidder. Stated otherwise,
by exercising its right of rst refusal, KAWASAKI could have bought the shares for only
P2.03 billion and not the higher amount of P2.1315 billion. There is, thus, no basis in the
submission that the right to top unfairly favored KAWASAKI. In fact, with the right to
top, KAWASAKI stands to pay higher than it should had it settled with its right of rst
refusal. The obvious beneficiary of the scheme is the National Government. HAaScT
If at all, the obvious consideration for the exchange of the right of rst refusal
with the right to top is that KAWASAKI can name a nominee, which it is a shareholder, to
exercise the right to top. This is a valid contractual stipulation; the right to top is an
assignable right and both parties are aware of the full legal consequences of its
exercise. As aforesaid, all bidders were aware of the existence of the right to top, and
its possible effects on the result of the public bidding was fully disclosed to them. The
petitioner, thus, cannot feign ignorance nor can it be allowed to repudiate its acts and
question the proceedings it had fully adhered to. 4 3
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 PHILSECO to respondent.
Finally, no factual basis exists to support the view that the drafting of the ASBR
was illegal because no prior approval was given by the COA for it, speci cally the
provision on the right to top the highest bidder and that the public auction on December
2, 1993 was not witnessed by a COA representative. No evidence was proffered to
prove these allegations and the Court cannot make legal conclusions out of mere
allegations. Regularity in the performance of o cial duties is presumed 4 4 and in the
absence of competent evidence to rebut this presumption, this Court is duty bound to
uphold this presumption.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration is hereby
GRANTED. The impugned Decision and Resolution of the Court of Appeals are
AFFIRMED.
SO ORDERED.
Davide, Jr., C .J ., Ynares-Santiago and Corona, JJ ., concur.
Separate Opinions
TINGA, J.:
Whether a shipyard is a public utility is at the heart of the present controversy.

Although I take a different route, I reach the same result as Mr. Justice Puno.
Since the enactment of Commonwealth Act No. 454 on June 8, 1939, shipyards
have never been considered public utilities, whether by legislative declaration or
executive fiat, or even in administrative practice.
True, "shipyard" is mentioned along with other business operations in the course
of the de nition by enumeration of "public service" in the Public Service Act. 1 The terms
"public service" and "public utility," however, do not have the same legal meaning, at
least since the enactment of C.A. No. 454. 2 The terms are related though. TEDHaA
The de nition of "public service" in the Public Service Act, as last amended by
Republic Act No. 2677, includes every person who owns, operates, manages or
controls, for hire or compensation, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, sub-way motor vehicle, either
for freight or passenger, or both with or without xed route and whatever may be its
classi cation, freight or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries, and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine railway, marine repair shop, wharf or
dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat
and power, water supply and power, petroleum, sewerage system, wire or wireless
communications systems, broadcasting stations and other similar public services. 3 A
"public utility," on the other hand, is a business or service engaged in regularly supplying
the public with some commodity or service of public consequence such as electricity,
gas, water, transportation, telephone or telegraph service . 4 Simply stated, a public
utility provides a service or facility needed for present day living which cannot be denied
to anyone who is willing to pay for it. 5
Formerly, there was a statutory de nition of "public utility," but it was abandoned
in C.A. No. 454. 6 The de nition was instead solely applied to "public service" apparently
because it did not exactly t the concept of public utility. It is signi cant in this regard
that while the 1935 Constitution which took effect on February 2, 1935 speci cally
mentioned "public utility," 7 C.A. No. 454 shifted from "public utility" to "public service" as
the sole reference term in the Public Service Act.
Another dissimilarity is that a public utility requires a franchise, aside from a
certi cate of public necessity and convenience, for its operation, while a public service
which is not a public utility requires only a certi cate of public convenience. 8 The
dichotomy in requirements ows from the enforced indeterminacy of the market for
the service provided by a public utility. Thus, it may be pointed out that all public utilities
are public services but the converse is not true. This is so because the term "public
utility" connotes public use and service to the public. 9
A legislative declaration such as the de nition by enumeration in the Public
Service Act 1 0 does not ipso facto render a business or service a public utility. For, as
this Court held in North Negros Sugar Co. v. Hidalgo , 1 1 whether or not one is a public
utility is a matter of judicial, not legislative determination.
". . . Whether or not a given business, industry, or service is a public utility
does not depend upon legislative de nition, but upon the nature of the business
or service rendered, and an attempt to declare a company or enterprise to be a
public utility, where it is inherently not such, is, by virtue of the guaranties of the
federal constitution, void whenever it interferes with private rights of property or
contract. So a legislature cannot by mere at or regulatory order convert a private
business or enterprise into a public utility, and the question whether or not a
particular company or service is a public utility is a judicial one, and must be
determined as such by a court of competent jurisdiction; . . . ." (51 CJ., sec. 3, p. 5)
1 2 [Emphasis supplied.]
Paraphrasing a decision 1 3 of the United States Supreme Court, a private

enterprise doing business under private contracts with customers of its choice and
therefore not devoted to public use cannot by legislative enactment or administrative
order be converted into a public utility, for that would constitute taking of private
property for public use without just compensation in derogation of the Constitution.
Again, the categorization of a business or service as a public utility or otherwise
is a judicial prerogative. Hence, this Court held in a signi cant number of cases that the
businesses or services involved were not public utilities despite contradicting
legislative classifications.
In one case, 1 4 we declared that an oil company is n o t a public utility,
notwithstanding the law 1 5 which categorizes petroleum operation, including refining, as
a public utility:
A "public utility" under the Constitution and the Public Service Law is one
organized "for hire or compensation" to serve the public, which is given the right to
demand its service. PETRON is not engaged in oil re ning to process the oil of
other parties. 1 6
In another case, 1 7 we intimated that a "wharf" or "dock" as contemplated under

the Public Service Act is not necessarily a public utility. 1 8
An operator of trucks who furnished service under special agreements to carry
particular persons and property was held to be not a public utility as he did not hold
himself out to serve any and all persons. 1 9 So is a mere owner and lessor of the
equipment and facilities needed to operate a rail system not a public utility since the
right to operate a public utility may exist independently of and separately from the
ownership of the facilities thereof. 2 0
An ice plant, although included in the de nition of a public service under Act No.
2307, 2 1 is not a public utility if it is organized solely for particular persons under strictly
private contracts, and never was devoted by its owner to public use. However, it is
treated as a public utility if the ice it produces is sold to the public. 2 2
The test, therefore, in determining if a service is a public utility, is whether the
public may enjoy it by right or only by permission. 2 3 A shipyard fails this test. As
Justice Puno points out, a shipyard is not, by nature or tradition, a public utility in much
the same way as automobile or airplane manufacturers are not public utilities. 2 4
Apart from shipyards, marine repair shops, wharves or docks, canals, irrigation
systems, petroleum supply and wire or wireless broadcasting stations, although
included in the de nition of "public service" in the Public Service Act, as amended, are
clearly not public utilities. Services which were once included in the de nition of "public
service" were later on excluded from the statutory enumeration, 2 5 indicating the
impermanence of "public service" as a concept in the law on utilities.
Still on the legislative side, to the best of my knowledge, 2 6 no person or rm has
secured a legislative franchise to operate a shipyard or even applied for one. On the
administrative side, as noted by Mr. Justice Puno, 2 7 the Maritime Industry Authority
(MARINA) has not been empowered to issue franchise for shipyard operation. It is
authorized under Executive Orders No. 124 and No. 125-A, effective as of January 10
and April 13, 1987, respectively, to issue certi cates of public convenience to domestic
and water carriers. 2 8 But the presidential issuances have no similar provision with
respect to shipyard operation.
To reiterate, shipyards have never been in legal contemplation considered as
public utilities. The promulgation of P.D. No. 666 in 1975 which required, in Section 1(d)
2 9 thereof, the registration of shipyards merely as such, de nitely not as public utilities,
served simply to remove any doubt as to their non-public utility status. Note in this
regard that MARINA was created by P.D. No. 474 3 0 on June 1, 1974, or prior to the
promulgation of P.D. No. 666. And P.D. No. 474 did not authorize MARINA to issue
franchise for shipyard operation, not unlike E.O. Nos. 125 and 125-A which were
promulgated after it.
The repeal of Section 1 of P.D. No. 666 by Batas Pambansa Blg . 391, enacted in
1983, did not convert shipyards into public utilities. Of course, the subsequent repeal of
Batas Pambansa Blg. 391 by E.O. No. 226 3 1 in 1987 has effectively laid the issue to
rest once and for all.
Except for this divergence, I concur in Mr. Justice Puno's well-reasoned opinion.
I vote to GRANT respondents' motions for reconsideration.
Footnotes
1. JG Summit Holdings, Inc. v. Court of Appeals, et al ., 345 SCRA 143, 145 (2000). The Decision
was penned by Associate Justice Consuelo Ynares-Santiago and concurred in by Chief
Justice Hilario G. Davide, Jr. and Associate Justices Reynato S. Puno, Santiago M.
Kapunan and Bernardo P. Pardo.
2. Ibid.
3. Id. at 146.
4. Ibid.
5. The heading of the ASBR states that the rules were speci cally set up for "97.4 equity of the
national government in Philippine Shipyard & Engineering Corporation (PHILSECO),"
Rollo, p. 1146. However, only 87.67% of the shares were offered for sale since "the
remaining 9.73% of the National Government's equity in PHILSECO will be offered
separately to PHILSECO's employees and to local small investors," Id. at par. 1.1.
6. Rollo, pp. 1146–1151.
7. Id. at 1144–1145. The bid, as well as the acknowledgment of its conformity with the ASBR
was signed by Johnson Robert I. Go, Executive Vice President of J.G. Summit Holdings,
Inc.
8. Supra note 1 at 148.
9. Id. at 147–148.
10. Id. at 148.
11. Id. at 148–149.
12. Id. at 153.

13. Id. at 156.
14. Id. at 157–158.
15. Id. at 166.
16. Ibid.
17. Private respondent Philyard Holdings, Inc., through counsel led its Motion for
Reconsideration on December 28, 2000, Rollo, pp. 936–980. On the other hand, public
respondents Committee on Privatization (COP) and Asset Privatization Trust (APT),
represented by the O ce of the Solicitor General, jointly led their Motions for
Reconsideration on January 2, 2001, Rollo, pp. 1053–1068.
18. Almario, Generoso O., "Transportation and the Public Service Law," 3rd ed. (1977), p. 267
citing 73 CJS 990–991; Albano v. Reyes, 175 SCRA 264 (1989) citing Am Jur. 2d v. 64, p.
549; NAPOCOR v. Court of Appeals, 279 SCRA 506 (1997).
19. Ibid.
20. Commonwealth v. Lafferty , 426 Pa 541, 233 A2d 256.

21. Iloilo Ice and Cold Storage Co. vs. Public Utility Board, 44 Phil. 551, 557 (1923).
22. Id. at 557–558.
23. Webster's Third New International Dictionary (1993), p. 2098.

25. Act No. 2307 was amended by Act No. 2694. It was subsequently repealed by Act No. 3108.
Later however, Act No. 3108 was also repealed by Commonwealth Act No. 146. The
series of amendments and repeals did not alter the character of shipyards as public
utilities. Section 13 (b) of C.A. No. 146 provides that:
"The term 'public service' includes every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or without xed route and whatever
may be its classi cation, freight or carrier service of any class, express service,
steamboat, or steamship, or steamship line, pontines, ferries and water craft, engaged in
the transportation of passengers or freight or both, shipyard, marine railway, marine
repair shop, wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power petroleum, sewerage system, wire
or wireless communications systems, wire or wireless broadcasting stations and other
similar public services. . . ." (Emphasis supplied).
26. See C.A. No. 146, section 15.

27. This provision is substantially reproduced in Article XIV, section 5 of the 1973 Constitution
and in Article XII, section 11 of the 1987 Constitution.
28. See Section 4, P.D. No. 666.
29. A declaration in the statute, usually in its repealing clause, that a particular and speci c law,
identi ed by its number of title, is repealed is an express repeal; all other repeals are
implied repeals. See Mecano v. Commission on Audit , 216 SCRA 500 (1992) citing
Agpalo, Statutory Construction, 289 (1986).
30. Book I, Chapter 5, section 22 provides: "Revival of Law Impliedly Repealed. When a law
which impliedly repeals a prior law is itself repealed, the prior law shall thereby be
revived, unless the repealing law provides otherwise."
31. Agpalo, Statutory Construction (1995), p. 330.

32. Annexes 1–5 of the Motion for Reconsideration, Rollo, pp. 982–1043.
33. Industry Profile, Shipbuilding and Ship Repair Industry 2001, p. 3; Rollo, p. 1721.
34. "An Act for the Reorganization of Maritime functions in the Philippines, creating the
Maritime Industry Authority, and for other purposes," June 1, 1974.
35. 1977 Joint Venture Agreement as amended by Addendum No. 2 dated December 8, 1983.
36. Supra note 1 at 157–158. The assailed Decision reads: "A joint venture is an association of
persons or companies jointly undertaking some commercial enterprise with all of them
generally contributing assets and 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 pro t or losses.
Persons and business enterprises enter into a joint venture because it is exempt from
corporate income tax. Considered more of a partnership, a joint venture is governed by
the laws on contracts and on partnership."
37. Literally, choice of person(s).

39. Ibid.
40. 7 Am Jur 2d § 21, p. 238.
41. B. Fernandez, Treatise on Government Contracts Under Philippine Law (1991), p. 26, citing
Gutierrez v. Ins. Life Assurance Co., Ltd ., 102 Phil. 524 (1957); C & C Commercial Corp. v.
Menor, 120 SCRA 112 (1982); A.C. Esguerra v. Sons Aytona, 4 SCRA 1245 (1962).
42. Fernandez, supra at 25.
43. Medina v. Patcho, 132 SCRA 551 (1984).
44. Rules of Court, Rule 131, section 3(m).
TINGA, J.:
1. C.A. No. 146, as amended.
2. "Public utility" was used in Act No. 2307, Act No. 269 and Act No. 3108. "Public service" and
"public utility" were interchangeably used in C.A. No. 146. "Public utility" was abandoned
and "public service" used in its place in CA No. 454. The subsequent enactments, R.A.
No. 1270 and R.A. No. 2677, also defined "public service" only.
3. Sec. 1, R.A. No. 2677, amending Sec. 13(b), C.A. No. 146 as amended.
4. National Power Corporation v. Court of Appeals , 345 Phil. 9 (1997), citing Albano v. Reyes ,
G.R. No. 83551, July 11, 1989, 175 SCRA 264, and 64 Am. Jur. 2d, p. 549.
5. A more comprehensive de nition of "public utility" has been offered by a noted American
author:
In its most extended sense the term public utilities is designed to cover certain industries which
in the course of time have been classi ed apart from industry in general and have
likewise been distinguished from governmental services with which, however, they often
are intimately related. The basis of the classi cation is essentially economic and
technological, although the meaning of the term is derived from the law.
(Martin G. Glaeser, PUBLIC UTILITIES IN AMERICAN CAPITALISM [New York: The MacMillan
Co., 1957], p. 8)
6. See note 2, supra.

7. 1935 CONST., Art. XIV, Sec. 8.
8. See Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines,
1972 ed. Vol. 4, p. 307; Sec. 14(i), Act No. 3108.
9. 64 Am Jur 2d, p. 549, cited in Albano v. Reyes and National Power Corporation v. Court of
Appeals, supra, note 4.
10. See note 3, supra.
11. 63 Phil. 664 (1936).
12. Id. at 691.
13. Pipe Line Cases, 234 U.S. 548, cited in Iloilo Ice and Cold Storage Co. v. Public Utility Board ,
44 Phil. 551, at 560 (1923).
14. Bagatsing v. Committee on Privatization , G.R. No. 112399, Gonzales v. Lazaro , G.R. No.
115334, July 14, 1995, 246 SCRA 334.
15. R.A. No. 387, otherwise known as the Petroleum Act of 1949. Act No. 3108 and C.A. No. 146,
included "oil" in the de nition of "public utility" while the de nition of "public service" in
C.A. No. 146 and No. 454, R.A. No. 1270 and No. 2677 covered "petroleum."
16. Supra note 13, at 358.

17. Albano v. Reyes, supra 8.
18. Id. at 270–271.
19. United States v. Tan Piaco , 40 Phil. 853, 855 (1949). Under Sec. 13 (b), C.A. No. 146, as
amended, a "freight or carrier service of any class . . . engaged in the transportation of
passenger or freight or both" is a public service.
20. Tatad v. Garcia , G.R. No. 114222, April 6, 1995, 243 SCRA 436. Also under Sec. 13(b), C.A.
No. 146, as amended, a railway "engaged in the transportation of passengers or freight
or both" is a public service.
21. This Act is one of the precursors of C.A. No. 146.
22. La Paz Ice Plant & Cold Storage Co., Inc. v. John Bordman and Iloilo Commercial & Ice Co .,
65 Phil. 401 (1938).
23. United States v. Tan Piaco, supra, note 16.

24. Resolution, J. Puno, p. 13.
25. E.g., Warehouses, radio companies, small watercraft, plant or equipment.
26. This writer was the chairman of the House Committee on Corporations and Franchises in
the Eighth Congress (1987–1992).
27. Resolution, J. Puno, p. 21.

28. Sec. 14(c), E.O. No. 125; Sec. 3, E.O. No. 125-A, amending Sec. 14, E.O. No. 125.
29. Sec. 1(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
Certi cate 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 Certi cate 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 (P.D. No. 666).
30. "An Act for the Reorganization of Maritime Functions in the Philippines," creating the
Maritime Industry Authority, and for other purposes.
31. This Order, otherwise known as the "Omnibus Investments Code of 1987," was promulgated
by then President Corazon C. Aquino in the exercise of her residual legislative powers.

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SPECIAL FIRST DIVISION

[G.R. No. 124293. September 24, 2003.]

JG SUMMIT HOLDINGS, INC. , petitioner, vs . COURT OF APPEALS,

Romulo Mabanta Buenaventura Sayoc & Delos Angeles for petitioner.

1. MERCANTILE LAW; CORPORATION LAW; PUBLIC UTILITY; ELUCIDATED. — A

The facts are undisputed and can be summarized briefly as follows:

xxx xxx xxx

4. I/We understand that the Committee on Privatization (COP) has up to

(b) execute a Stock Purchase Agreement with petitioner;

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In separate Motions for Reconsideration, 1 7 respondents submit three basic

To accelerate the development of shipbuilding and ship repair industry, former

(a) Exemption from import duties and taxes. — The importation of

(c) Exemption from contractor's percentage tax . — The gross receipts

The foregoing declaration shall apply to all investment incentive schemes

2) Section 1, P.D. 666 (Shipbuilding and Ship Repair Industry) ;

3) Section 6, P.D. 1101 (Radioactive Minerals);

The word "bidding" in its comprehensive sense means making an offer or an

Whether a shipyard is a public utility is at the heart of the present controversy.

Paraphrasing a decision 1 3 of the United States Supreme Court, a private

In another case, 1 7 we intimated that a "wharf" or "dock" as contemplated under

12. Id. at 153.

20. Commonwealth v. Lafferty , 426 Pa 541, 233 A2d 256.

24. Supra note 20 at 560.

26. See C.A. No. 146, section 15.

31. Agpalo, Statutory Construction (1995), p. 330.

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6. See note 2, supra.

16. Supra note 13, at 358.

23. United States v. Tan Piaco, supra, note 16.

27. Resolution, J. Puno, p. 21.

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