Tatad v. Garcia, Jr.

G.R. No. 114222, 6 April 1995, 243 SCRA 436

FACTS:

In 1989, DOTC planned to construct a light railway transit line along EDSA, a major thoroughfare in Metropolitan Manila. The plan, referred to as EDSA Light Rail Transit III (EDSA LRT III), was intended to provide a mass transit system along EDSA and alleviate the congestion and growing transportation problem in the metropolis. RA 6957 was enacted allowing for the financing, construction and operation of government projects through private initiative and investment. Accordingly, prequalification and bidding was made and EDSA LRT Corporation (organized under HK laws) was recommended to be awarded with the contract. The President approved the awarding of the contract. Petitioners are senators praying for the prohibition of respondents from further implementing and enforcing the contract.

ISSUE:

Whether the agreement granting EDSA LRT Corporation LTD, a foreign corporation, the ownership of EDSA LRT III, a public utility, violates constitution.

RULING:

No. What private respondent owns are the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant, not a public utility. While a franchise is needed to operate these facilities to serve the public, they do not by themselves constitute a public utility. What constitutes a public utility is not their ownership but their use to serve the public (Iloilo Ice & Cold Storage Co. v. Public Service Board, 44 Phil. 551, 557 558 [1923]).

The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However, it does not require a franchise before one can own the facilities needed to operate a public utility so long as it does not operate them to serve the public.

The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One can own said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning the facilities used to serve the public. The devotion of property to serve the public may be done by the owner or by the person in control thereof who may not necessarily be the owner thereof.

In law, there is a clear distinction between the “operation” of a public utility and the ownership of the facilities and equipment used to serve the public. Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is completely subjected to his will in everything not prohibited by law or the concurrence with the rights of another. The exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated and used to serve the public as a public utility unless the operator has a franchise. The operation of a rail system as a public utility includes the transportation of passengers from one point to another point, their loading and unloading at designated places and the movement of the trains at pre-scheduled times.

Even the mere formation of a public utility corporation does not ipso facto characterize the corporation as one operating a public utility. The moment for determining the requisite Filipino nationality is when the entity applies for a franchise, certificate or any other form of authorization for that purpose (People v. Quasha, 93 Phil. 333 [1953]).

*Case digest by Em Epsan M. Batoon, LLB-IV, Andres Bonifacio Law School, SY 2018-2019

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