G.R. No.

114222 April 6, 1995

FRANCISCO S. TATAD, JOHN H. OSMENA
and RODOLFO G. BIAZON, petitioners,
vs.
HON. JESUS B. GARCIA, JR., in his
capacity as the Secretary of the
Department of Transportation and
Communications, and EDSA LRT
CORPORATION, LTD., respondents.
FACTS:
The
DOTC
(Department
of
Transportation and Communication planned to
construct a light railway transit line along
EDSA, referred to as EDSA Light Rail Transit III
(EDSA LRT III), was intended to provide a mass
transit system.
Thereafter, Republic Act No. 6957 entitled "An
Act Authorizing the Financing, Construction,
Operation and Maintenance of Infrastructure
Projects by the Private Sector, and For Other
Purposes," was signed by President Corazon C.
Aquino.
In accordance with the provisions of R.A. No.
6957 and to set the EDSA LRT III project
underway, DOTC, on January 22, 1991 and
March 14, 1991, issued Department Orders
Nos. 91-494 and 91-496, respectively creating
the
Prequalification
Bids
and
Awards
Committee
(PBAC)
and
the
Technical
Committee.
EDSA LRT Consortium submitted its bid
proposal to DOTC. Finding this proposal to be
in compliance with the bid requirements, DOTC
and respondent EDSA LRT Corporation, Ltd., in
substitution of the EDSA LRT Consortium,
entered into an "Agreement to Build, Lease
and Transfer a Light Rail Transit System for
EDSA" under the terms of the BOT Law.
According
to
the
agreements,
Private
respondents shall undertake and finance the
entire project required for a complete
operational light rail transit system.
On April 22, 1992, the agreement was renegotiated. the parties entered into a Revised
and Restated Agreement to Build, Lease and
Transfer and Light Rail Transit System for
EDSA. On May 6, 1992, DOTC, represented by
Sec. Jesus Garcia, Sec. Prado and private
respondent entered into a Supplemental
Agreement to the April Revised Agreement so

as to clarify their
responsibilities.

respective

rights

and

According to the agreements, the EDSA LRT III

will use light rail vehicles from the Czech and
Slovak Federal Republics and will have a
maximum carrying capacity of 450,000
passengers a day. The system will have its
own power facility. It will also have 13
passenger stations and one depot in 16hectare government property at North Avenue.
Private respondents shall undertake and
finance the entire project required for a
complete operational light rail transit system.
Target completion date is approximately 3
years from the implementation date of the
contract. Upon full and partial completion and
viability thereof, private respondent shall
deliver the use and possession of the
completed portion to DOTC which shall
operate the same. DOTC shall pay private
respondent rentals on aj monthly basis
through an Irrevocable Letter of Credit. The
rentals shall be determined by an independent
and internationally accredited inspection firm
to be appointed by the parties.
As agreed upon, private respondents capital
shall be recovered from the rentals to be paid
by the DOTC which, in turn, shall come from
the earnings of the EDSA LRT III. After 25 years
and DOTC shall have completed payment of
the rentals, ownership of the project shall be
transferred to the latter for a consideration of
only US $1.00.
In their petition, petitioners argued that the
agreement of April 22, 1992, as amended by
the Supplemental Agreement of May 6, 1993,
in so far as it grants EDSA LRT COPORTATION,
LTD., a foreign corporation, the ownership of
EDSA LRT III, a public utility, violates the
constitution, and hence, is unconstitutional.
They contend that the EDSA LRT III is a public
utility, and the ownership and operation
thereof is limited by the Constitution to Filipino
citizens and domestic corporations, not foreign
corporations like private respondent.
Petitioners argued that: the grant to Edsa
Lrt Corporation, Ltd., a foreign corporation, the
ownership Of Edsa LRT III, a public utility,
violates the constitution and, hence, is
unconstitutional.

The EDSA LRT III is a public utility, and the

ownership and operation thereof is limited by
the Constitution to Filipino citizens and
domestic
corporations,
not
foreign
corporations like private respondent;
The respondent argued that:
The
nationality requirement for public utilities
mandated by the Constitution does not apply
to private respondent.
ISSUE: WON, respondent EDSA LRT
Corporation, Ltd., a foreign corporation
own EDSA LRT III; a public utility?
HELD: EDSA LRT Corporation, Ltd. Is
admittedly a foreign corporation duly
incorporated and existing under the laws of
Hong Kong. However, there is no dispute that
once the EDSA LRT III is constructed, the
private respondent, as lessor, will turn it over
to DOTC as lessee, for the latter to operate the
system and pay rentals for the said use. What
private respondent owns are the rail tracks,
rolling stocks, rail stations, terminals and the
power plant, not a public utility. While a
franchise is needed to operate these facilities
to serve the public, they do not themselves
constitute a public utility. What constitutes a
public utility in not their ownership but their
use to serve the public. The Constitution, in no
uncertain terms, requires a franchise for the
operation of a public utility. However, it does
not require a franchise before one can own the
facilities needed to operate a public utility so
long as it does not operate them to serve the
public. In law, there is a clear distinction
between the operation of a public utility and
the ownership of the facilities and the
equipment used to serve the public.
DISPOSITION: WHEREFORE, the petition is
DISMISSED.
HOME INSURANCE VS. AMEARICAN
STEAMSHIP (23 SCRA 24)
Facts: The Consorcio Pesquero del Peru of
South America shipped jute bags of Peruvian
fishmeal through SS Crowborough, consigned
to San Miguel Brewery, Inc. The cargo, which
was insured by Home Insurance Company,
arrived at the port of Manila and was
discharged to the lighters of the Luzon
Stevedoring Corporation. When the same was
delivered to the consignee, there were
shortages amounting to P 12, 033.85,

prompting the latter to pay against Luzon

Stevedoring Co.
Because the others denied liability, Home
Insurance paid San Miguel the insurance value
loss. This cost was brought by the former to
recover indemnity from Luzon Stevedoring and
the ship owner. Luzon Stevedoring raised the
defense that it deliver with due diligence in
the same from the carrier. Mexican Steamship
Agencies denied liability on the ground that
the charter party referred to in the bills of
lading, the charter, not the ship owner, was
responsible for any loss or damage of the
cargo. Furthermore, it claimed to have
exercised due diligence in stowing the goods
and as a mere forwarding agent, it was not
responsible for losses or damages to the
cargo.
Issue: Whether or not the stipulation in the
charter party to owners non-liability was valid
as to absolve the American Steamship from
liability loss?
Held: The Civil Code provision on common
carriers should not be applied where the
carrier is not acting as such but as a private
carrier. The stipulation in the charter party
absolving the owner from liability for loss due
to the negligence of its agent is void only if the
strict public policy governing common carriers
is applied. Such policy has no force where the
public at large is not involved, as in the case of
a ship totally chartered for the use of a single
party.
Disposition: WHEREFORE, the judgment
appealed from is hereby reversed and
appellant is absolved from liability to plaintiff.
Insurance Co. vs. Phil Ports Terminal
97 Phil 288
FACTS: The Insurance Company of North
America filed a complaint against the
Philippine Ports Terminals, Inc., alleging,
among other things, that: the defendant
Philippine Ports Terminals, Inc., was the
contractor and operator of the arrastre service
in the Port of Manila, and as such, was charged
with the custody and care of all cargoes
discharged at the government piers at Manila
with the duty to deliver same to their
respective owners upon presentation by the

latter of release papers from the agents or

owners of vessels and the Bureau of Custom.
In September1949, the steamship "PRESIDENT
VAN BUREN" discharged into the custody of
the Philippine Ports Terminals, Inc., one case of
machine knives consigned to the Central Saw
Mill, but said merchandise was never delivered
by the defendant to said consignee; that the
defendant admits the non-delivery of the said
merchandise to the consignee, Central Saw
Mills, Inc.
The court below dismissed the complaint.
The defendant-appellee filed a motion for
dismissal based on the provisions of Public Act
No. 521 of the 74th U.S. Congress more
commonly known as "Carriage of Goods by
Sea Act". This Act was expressly made
applicable
to
the
Philippines
by
Commonwealth Act No. 65 which was
approved and took effect on October 22, 1936.
The pertinent provision of said "Carriage of
Goods by Sea Act" regarding the time for
bringing action reads as follows:
In any event the carrier and the ship
shall be discharged from all liability in
respect of loss or damage unless suit
is brought within one year after
delivery of the goods or the date when
the goods should have been delivered:
Provided, That if a notice of loss or
damage,
either
apparent
or
concealed, is not given as provided for
in this section, that fact shall not
affect or prejudice the right of the
shipper to bring suit within one year
after the delivery of the goods or the
date when the goods should have
been delivered.
It is evident, however, that the defendant
Philippine Ports Terminals, Inc., is not a
carrier. Section 1 (a) and (d) of "Carriage of
Goods by Sea Act" defines the terms "carrier"
and "ship" as follows:
The term "carrier" includes the owner or the
charterer who enters into a contract of
carriage with a shipper.
The term "ship" means any vessel used for
the carriage of goods by sea.

The defendant-appellee, Philippine Ports

Terminals, Inc., is neither a charterer nor a
ship. Consequently the "Carriage of Goods by
Sea Act" does not apply to it. However, the
ordinary period of four years fixed by the
Code of Civil Procedure will apply. The action
in this case has been brought within that
time.
DISPOSITION: In view of the foregoing, the
order of the lower court dismissing the
complaint is hereby reversed and the case is
remanded to the court of origin for further
proceedings, with costs against the appellee. It
is so ordered.