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 specied 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 rst 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 Specic 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 oers 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 oers 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
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 eects 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 oers 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 indenite 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 eciency 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 dened "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
conned to privileged individuals, but is open to the indenite public. It is this
indenite 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 benet 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 oers 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 oers 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 aected 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 classication 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 modied accordingly and shipyards
eectively 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 eective. 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 classied
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, classied 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 Certicate of Public Convenience (CPC) or a
Certicate 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 rst situation, the nonselling 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 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 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
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 oer to the non-selling partner. The selling partner cannot make a dierent
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 oer or an
invitation to prospective contractors whereby the government manifests its
intention to make proposals for the purpose of supplies, materials and equipment
for ocial business or public use, or for public works or repair. The three principles of
public bidding are: (1) the oer 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 qualication
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 qualied 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 qualication 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 qualication. Furthermore, when the Committee on
Privatization notied petitioner of the approval of the sale of the National
Government shares of stock in PHILSECO, it specically 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 specied 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 oer 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 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 oer 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 oered 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 beneciary 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 eort 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, specically 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 proered to prove these
allegations and the Court cannot make legal conclusions out of mere allegations.
Regularity in the performance of ocial 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, eective as of January 10 and April 13, 1987, respectively, to issue
certicates 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
denition 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
denition 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
classication, 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

certicate of public necessity and convenience, for its operation, while a public
service which is not a public utility requires only a certicate 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
denition 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 denition, 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 signicant 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 nonperforming assets of the National Government. Thereafter, on February 27, 1987, a
trust agreement was entered into between the National Government and the APT
wherein the latter was named the trustee of the National Government's share in
PHILSECO. In 1989, as a result of a 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 Specic
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 notified that the bidding would be held on December 2, 1993. A portion of
the ASBR reads:
1.0
The subject of this Asset Privatization Trust (APT) sale through public
bidding is the National Government's equity in PHILSECO consisting of

896,869,942 shares of stock (representing 87.67% of PHILSECO's

outstanding capital stock), which will be sold as a whole block in accordance
with the rules herein enumerated.
xxx xxx xxx
2.0
The highest bid, as well as the buyer, shall be subject to the nal
approval of both the APT Board of Trustees and the Committee on
Privatization (COP).
2.1
bids.

APT reserves the right in its sole discretion, to reject any or all

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 qualied bid will be submitted to the APT Board of
Trustees at its regular meeting following the bidding, for the purpose of
determining whether or not it should be endorsed by the APT Board of
Trustees to the COP, and the latter approves the same. The APT shall advise
Kawasaki Heavy Industries, Inc. and/or its nominee, Philyards Holdings, Inc.,
that the highest bid is acceptable to the National Government. Kawasaki
Heavy Industries, Inc. and/or Philyards Holdings, Inc. shall then have a
period of thirty (30) calendar days from the date of receipt of such advice
from APT within which to exercise their "Option to Top the Highest Bid" by
offering a bid equivalent to the highest bid plus five (5%) percent thereof.
6.1
Should Kawasaki Heavy Industries, Inc. and/or Philyards Holdings,
Inc. exercise their "Option to Top the Highest Bid," they shall so notify the
APT about such exercise of their option and deposit with APT the amount
equivalent to ten percent (10%) of the highest bid plus 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 ocial 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,

aect 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 oering 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 oer 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 benet 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 notied that PHI had fully paid the balance of
the purchase price of the subject bidding. On February 7, 1994, the APT notied
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. 10 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. 11

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. 12 It further ruled that a shipyard like PHILSECO
is a public utility whose capitalization must be sixty percent (60%) Filipino-owned.
13 Consequently, the right to top granted to KAWASAKI under the Asset Specic
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. 14 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." 15 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 finality of this Decision. In turn, APT is ordered to:
(a)
(b)

accept the said amount of P2,030,000,000.00 less bid deposit

and interests from petitioner;
execute a Stock Purchase Agreement with petitioner;

(c)

cause the issuance in favor of petitioner of the certicates 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.

16

In separate Motions for Reconsideration, 17 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." 18 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 oers 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 indenite 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 eciency and under proper charges. 19 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." 20 Thus, in
Iloilo Ice and Cold Storage Co. vs. Public Utility Board, 21 this Court dened "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 conned to privileged individuals, but is open to
the indenite public. It is this indenite 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
benet 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. 22 (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." 23 Its nature
dictates that it serves but a limited clientele whom it may choose to serve at its
discretion. While it oers 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 oers 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 aected 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 classication 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. 24
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 aecting 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. 25 A Certicate of Public Convenience (CPC) from the PSC to the eect
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. 26 In addition, such persons or
corporations should abide by the citizenship requirement provided in Article XIII,
section 8 of the 1935 Constitution, 27 viz:
Sec. 8.
No franchise, certicate, 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, certicate 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 certifies that the item or items imported are not produced
locally in sucient 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 tari 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 eected 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 Certicate 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 Certicate 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 Certicate
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 modied accordingly. 28 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 certicate 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. 29
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 signicant
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 signicantly
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, costefficient 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 aected by the
provisions of this Act may be restructured by the President so as to render
them cost-ecient 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. 30
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 eect 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 modied accordingly and shipyards eectively 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 eective. 31 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
classied 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, classied as part of the
manufacturing and not of the public utilities sector. 32
Furthermore, of the 441 Ship Building and Ship Repair (SBSR) entities registered
with the MARINA, 33 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 34 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 Certicate of Public Convenience (CPC) or a
Certicate 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]. 35

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 first situation, the non-selling 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 co-venturer(s) or co-shareholder(s). The joint venture between the Philippine
Government and KAWASAKI is in the nature of a partnership 36 which, unlike an
ordinary corporation, is based on delectus personae. 37 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 oer to the non-selling
partner. The selling partner cannot make a dierent or a more onerous oer 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 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.
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 oer or an

invitation to prospective contractors whereby the government manifests its
intention to make proposals for the purpose of supplies, materials and equipment
for official business or public use, or for public works or repair. 38 The three principles
of public bidding are: (1) the oer to the public; (2) an opportunity for competition;
and (3) a basis for comparison of bids. 39 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
qualication 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. 40 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. 41

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 ocial 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 qualied 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 qualication 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 qualication. Furthermore, when the Committee on
Privatization notied petitioner of the approval of the sale of the National
Government shares of stock in PHILSECO, it specically 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 specied 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 oer 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. 42 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 oer KAWASAKI
the option to buy or forego the shares.
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 oered 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 beneciary 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 eects 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. 43
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 eort 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, specically 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
proered to prove these allegations and the Court cannot make legal conclusions
out of mere allegations. Regularity in the performance of ocial duties is presumed
44 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 denition 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 denition 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 classication, 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 denition of "public utility," but it was abandoned
in C.A. No. 454. 6 The denition was instead solely applied to "public service"
apparently because it did not exactly t the concept of public utility. It is signicant
in this regard that while the 1935 Constitution which took eect on February 2,
1935 specically 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
certicate of public necessity and convenience, for its operation, while a public
service which is not a public utility requires only a certicate 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 denition by enumeration in the Public Service
Act 10 does not ipso facto render a business or service a public utility. For, as this
Court held in North Negros Sugar Co. v. Hidalgo , 11 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 denition, 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) 12 [Emphasis supplied.]

Paraphrasing a decision 13 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 signicant number of cases that the
businesses or services involved were not public utilities despite contradicting
legislative classifications.

In one case, 14 we declared that an oil company is n o t a public utility,

notwithstanding the law 15 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 rening to process
the oil of other parties. 16

In another case, 17 we intimated that a "wharf" or "dock" as contemplated under

the Public Service Act is not necessarily a public utility. 18
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. 19 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. 20
An ice plant, although included in the denition of a public service under Act No.
2307, 21 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. 22
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. 23 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. 24
Apart from shipyards, marine repair shops, wharves or docks, canals, irrigation
systems, petroleum supply and wire or wireless broadcasting stations, although
included in the denition of "public service" in the Public Service Act, as amended,

are clearly not public utilities. Services which were once included in the denition of
"public service" were later on excluded from the statutory enumeration, 25
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, 26 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, 27 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, eective as of January
10 and April 13, 1987, respectively, to issue certicates of public convenience to
domestic and water carriers. 28 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) 29
thereof, the registration of shipyards merely as such, denitely 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 30 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 125A 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 31 in 1987 has eectively 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 specically 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 oered for

sale since "the remaining 9.73% of the National Government's equity in PHILSECO
will be oered separately to PHILSECO's employees and to local small investors,"
Id. at par. 1.1.
6.

Rollo, pp. 11461151.

7.

Id. at 11441145. 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 147148.

10.

Id. at 148.

11.

Id. at 148149.

12.

Id. at 153.

13.

Id. at 156.

14.

Id. at 157158.

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. 936980. On the other hand,
public respondents Committee on Privatization (COP) and Asset Privatization Trust
(APT), represented by the Oce of the Solicitor General, jointly led their Motions
for Reconsideration on January 2, 2001, Rollo, pp. 10531068.

18.

Almario, Generoso O., "Transportation and the Public Service Law," 3rd ed.
(1977), p. 267 citing 73 CJS 990991; 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 557558.

23.

Webster's Third New International Dictionary (1993), p. 2098.

24.

Supra note 20 at 560.

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 classication, 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.
27.
28.

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

This provision is substantially reproduced in Article XIV, section 5 of the 1973
Constitution and in Article XII, section 11 of the 1987 Constitution.

See Section 4, P.D. No. 666.

29.

A declaration in the statute, usually in its repealing clause, that a particular and
specic law, identied 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 15 of the Motion for Reconsideration, Rollo, pp. 9821043.

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 157158. 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 prot 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).

38.

Supra note 1 at 162.

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 dened "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 denition of "public utility" has been oered 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 classied 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 classication 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 denition of "public utility" while the denition 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 270271.

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.
22.

This Act is one of the precursors of C.A. No. 146.

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 (19871992).

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 Certicate 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 Certicate 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.