JG Summit Summit Holdings Holdings v. v. CA G.R. No. 124293 January 31, 2005 J. Puno Cadorna Holdings, n!. petitioner JG Summit Holdings, responden Court o" #$$%als& Committ%% on Pri'ati(ation, its C)airman and *%m+%rs& #ss%t ts Pri'ati(ation rust& and P)ilyards Holdings, n!.
summary
JG Summit is is -u%stioning -u%stioning t)% rig)t rig)t o" rst r%"usal r%"usal o" a Ja$an%s% Ja$an%s% !or$oration, !or$oration, /)i!) o/ns s)ar%s s)ar%s in a P)ili$$in% Cor$oration. t su+mits t)at su!) rig)t, /)i!) /as %'%ntually !on'%rt%d into a rig)t to to$ t)% +id in t)% +idding $ro!%ss t)at o!!urr%d to s%ll t)% go'%rnm%nts s)ar%s in t)% said P)ili$$in% !or$oration, /ould allo/ t)% Ja$an%s% !or$oration to a!-uir% mor% t)an t)% allo/a+l% 40 %-uity allo/%d +y la/ "or !or$orations t)at o/n land. Court rul%d, among ot)%r t)ings, t)at t)% rig)t its%l" do%s not 'iolat% t)% !onstitutional limit and t)at in any !as%, i" t)% Ja$an%s% !or$orations s)ar%)oldings in!r%as% +%yond 40, it /ould only dis-uali"y t)% !or$oration "rom o/ning land. )is is +%!aus% t)% s)ar%)old%rs and t)% !or$oration )a'% s%$arat% %ntiti%s, and t)% rig)t o" rst r%"usal r%"%rs to t)% s)ar%)old%r ind%$%nd%ntly o" t)% !a$a!ity or la! t)%r%o" to o/n land $%rtaining to t)% !or$oration
facts of the case
(sorry mahaba, pero lam niyo naman madetalye si sir :p
Original JVA between NIDC and Kawasaki )% National n'%stm%nt n'%stm%nt and %'%lo$m%nt %'%lo$m%nt Cor$oration Cor$oration NC, a go'%rnm%nt !or$oration, %nt%r%d into a Joint 6%ntur% #gr%%m%nt J6# /it) 7a/asai H%a'y ndustri%s, 8td. o" 7o+%, Ja$an 7a/asai "or t)% !onstru!tion, o$%ration and manag%m%nt o" t)% Su+i! National S)i$yard, n!. SNS /)i!) su+s%-u%ntly +%!am% t)% P)ili$$in% S)i$yard and ngin%%ring Cor$oration PH8SC:. ;nd%r t)% J6#, NC and 7a/asai /ill !ontri+ut% P330 million "or t)% !a$itali(ation !a$itali(ation o" PH8SC: in t)% $ro$ortion o" <0=40, r%s$%!ti'%ly. J!A grants to "#$C and %a&asa'i %a&asa'i the right right of rst rst :n% o" t)% sali%nt "%atur%s in t)% J!A refusal should either of them decide to sell, assign or transfer its interest in the J!A , unl%ss t)% trans"%r%% is a G:CC or a 7a/asai a>liat%. Transfer of NIDC shares in PHILSCO to the go!ern"ent "#$C transferred all its interests in )H#*S+C to the )hilippine "ational -an' ()"-, and the latter transferred the same to the national government, pursuant to A "o. /. / . PCory issu%d Pro!lamation No. 50 %sta+lis)ing t)% Committ%% on Pri'ati(ation C:P and t)% #ss%t Pri'ati(ation rust rust #P to ta% ta% o'%r t)% non=$%r"ormin non=$%r"orming g ass%ts o" t)% national national go'%rnm%nt go'%rnm%nt "or "or $ur$os%s $ur$os%s o" !ons%r'ation, !ons%r'ation, manag%m%nts and dis$osal. Pursuant to t)is, t)% go'%rnm%nt and #P %nt%r%d into a trust agr%%m%nt /)%r% #P /as nam%d t)% trust%% o" t)% go'%rnm%nts s)ar% in PH8SC:. #$$ar%ntly, PH8SC:, at t)% tim%, o/%d PN? )ug% amounts, so t)at a -uasi=r%organi(ation o" PH8SC: o!!urr%d 12./3 . *%an/)il%, 7a/asais s)ar%)oldings t)at rais%d t)% government0s shareholdings in )H#*S+C to 12./3. dro$$%d to 2.59.
Sale of go!ern"ent e#$it% in PHILSCO to &ri!ate entities C) and A)4 decided to sell the national government0s share in )H#*S+C to private entities. A)4 entered into an agreement &ith %a&asa'i in &hich the latter0s right of rst refusal under the J!A J!A &as converted into the latter0s right to top by 53, &hatever &ould be the highest bid for the said shares . n addition, %a&asa'i &as entitled to name a company in &hich it &as a stoc'holder, &hich could e6ercise the right to top. %a&asa'i informed informed A)4 that )hilyards Holdings, Holdings, #nc. ()H# &ould be the one e6ercising %a&asa'i0s right to top . )% #ss%t S$%!i! S$%!i! ?idding ?idding Rul%s Rul%s #S?R !ontain%d !ontain%d t)% m%!)ani!s m%!)ani!s "or t)% t)% +idding +idding $ro!%ss $ro!%ss o" t)% go'%rnm%nts go'%rnm%nts @A.< %-uity s)ar% in PH8SC:. ;nd%r t)% rul%s, t)% )ig)%st +id, as /%ll as t)% +uy%r, s)all +% su+B%!t to t)% nal a$$ro'al o" +ot) t)% #P ?oard o" rust%%s and t)% C:P. )% #P s)all also ad'is% 7a/asai andor its nomin%%, PH, t)at t)% )ig)%st +id is a!!%$ta+l% to t)% go'%rnm%nt, and t)%r%a"t%r, gi'% 7a/asai andor PH a $%riod o" 30 !al%ndar days "rom t)% dat% o" r%!%i$t o" su!) ad'i!% /it)in /)i!) to %D%r!is% t)%ir rig)t to to$. S)ould 7a/asai andor PH %D%r!is% t)is rig)t, t)%y s)all so noti"y t)% #P and ma% t)%ir d%$osit /it)in t)% sam% 30=day $%riod. S)ould t)%y "ail to %D%r!is% t)is rig)t /it)in t)% $%riod, #P /ill d%!lar% t)% )ig)%st +idd%r as t)% /inning +idd%r.
The 'on(i't) J* S$""it+s &rotest of Kawasaki,PHI+s right to to& JG Summit &on &on the public public bidding bidding /it) a +id o" P2,030,000,000.00. t a!no/l%dg%d 7a/asai andor PHs rig)t to to$. C:P a$$ro'%d t)% sal% o" t)% s)ar%s to JG Summit, su+B%!t to 7a/asai andor PHs rig)t to to$. Subse7uently, JG Summit informed A)4 that it &as protesting the o8er of )H# to top its bid on the grounds that: a 7a/asaiPH 7a/asaiPH !onsortium !onsortium !om$os%d !om$os%d o" 7a/asai, 7a/asai, PH, *itsui, *itsui, 7%$$%l, 7%$$%l, S* Grou$, CS and and nsular nsular 8i"% 'iolat%d t)% +idding $ro!%ss +%!aus% t)% last "our !om$ani%s /%r% t)% losing +idd%rs& + :nly 7a/asai 7a/asai !ould %D%r! %D%r!is% is% t)% rig)t to to$ sin!% gi'ing gi'ing t)% sam% sam% o$tion to to$ to PH !onstitut%d un/arrant%d +%n%t to a t)ird $arty& ! No rig)t o" rst r%"usal r%"usal !an !an +% %D%r!is%d %D%r!is%d in a $u+li! $u+li! +idding +idding or au!tion sal%& sal%& d JG Summit Summit /as not %sto$$ %sto$$%d %d "rom "rom -u%stioni -u%stioning ng t)% $ro!%% $ro!%%din dings. gs.
#P noti%d JG Summit t)at PH )ad %D%r!is%d %D%r!is%d its o$tion to to$ t)% )ig)%st +id and t)at t)% C:P )ad a$$ro'%d t)% sam%. )us, #P and PH %D%!ut%d a Sto! Pur!)as% #gr%%m%nt.
The ens$ing 'ases Cons%-u%ntly, JG Summit l%d a !as% "or mandamus, +ut t)is /as d%ni%d +y t)% C# "or la! o" m%rit. C# also d%ni%d t)% *R. JG Summit t)%n t)%n %l%'at%d t)% !as% !as% to t)% SC, /)i!) /)i!) r%'%rs%d r%'%rs%d t)% C# and and rul%d t)at t)at a shi&%ard like PHILSCO is a &$bli' $tilit% whose 'a&itali-ation "$st be ./0 1ili&ino2owned . Cons%-u%ntly, t)% rig)t to to$ grant%d to 7a/asai "or t)% sal% o" t)% @A.
issue 1. :N t)%r% ar% su>!i%nt su>!i%nt +as%s to %l%'at% t)% !as% at +ar to t)% Court %n +an! ". 2. :N t)% motion "or r%!onsid%ration s)ould +% grant%d ". A/N: A/N: See specifc specifc issues raised raised in each number. number.
9atio 3otion to ele!ate the 'ase to the SC en ban' SummitI )% main issu% R t)% $ro$ri%ty o" t)% +idding $ro!%ss /as !on"us%d /it) t)% $oli!y issu% o" t)% 1. JG SummitI su$$os%d "at% o" t)% s)i$$ing industry /)i!) )as n%'%r +%%n an issu% t)at is d%t%rminati'% o" t)is !as%. SCI SCI )% SC !l%arly and d%niti'%ly rul%d on t)% $ro$ri%ty o" t)% +idding $ro!%ss +y %D)austi'%ly dis!ussing t)% rul%s and $rin!i$l%s o" $u+li! +idding and d%t%rmining /)%t)%r 7a/asais rig)t to to$ grant%d to it in %D!)ang% "or its rig)t o" rst r%"usal 'iolat%s t)%s% $rin!i$l%s. )% s)i$+uilding industry /as m%r%ly m%ntion%d in r%lation to t)% im$a!t t)at it may r%!%i'% as a r%sult o" t)% Courts ruling t)at a s)i$yard is not a $u+li! utility /)i!) s)ould maintain a <0=40 Fili$ino="or%ign %-uity ratio. SummitI )% $r%s%nt !as% in'ol'%s a no'%l -u%stion o" la/. 2. JG SummitI SCI SCI )%r% is no no'%l -u%stion o" la/. n "a!t, t)% !as% /as r%sol'%d +as%d on +asi! $rin!i$l%s o" t)% rig)t o" rst r%"usal in !omm%r!ial la/ and %sto$$%l in !i'il la/. Contra!tual o+ligations arising "rom rig)ts o" rst r%"usal ar% not n%/ in t)is Burisdi!tion and )a'% +%%n r%!ogni(%d in num%rous !as%s. sto$$%l is too no/n a !i'il la/ !on!%$t to r%-uir% an %longat%d dis!ussion. Fundam%ntal $rin!i$l%s on $u+li! +idding /%r% li%/is% us%d to r%sol'% t)% issu%s. )%r% is also not)ing n%/ a+out t)% rig)t to to$, /)i!) /as m%r%ly a !ondition or a r%s%r'ation mad% in t)% +idding rul%s "ully dis!los%d to all +idding $arti%s.
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SummitI )%r% /as !l%ar %D%!uti'% int%r"%r%n!% in t)% Budi!ial "un!tions o" t)% SC /)%n t)% S%!r%tary o" 3. JG SummitI Finan!% "or/ard%d to CJ a'id% a m%morandum, atta!)ing a !o$y o" t)% For%ign C)am+%rs R%$ort, /)i!) matt%r /as $la!%d in t)% ag%nda o" t)% Court and not%d +y it in a "ormal r%solution. SCI SCI )%r% /as no %D%!uti'% int%r"%r%n!% in t)% "un!tions o" t)% SC +y t)% m%r% ling o" a m%morandum +y t)% S%!r%tary o" Finan!%. Su!) m%morandum /as m%r%ly not%d to a!no/l%dg% its ling. t )ad no "urt)%r l%gal signi!an!%. )% SC %m$)asi(%d %m$)asi(%d t)at t)% t)% SC %n +an! is is not an a$$%llat% a$$%llat% !ourt to /)i!) /)i!) d%!isions d%!isions or r%solutions r%solutions o" o" a di'ision may may +% a$$%al%d.
3otion for 4e'onsideration 5I think the 6rd ite" is the one that is "ost rele!ant to the to&i' of 'or&orate entit%7 Summit: )% !ontra!ts do not aut)ori(% t)% rig)t to to$ to +% d%ri'%d "rom t)% rig)t o" rst r%"usal. 1. JG Summit: )% SC: Not)ing SC: Not)ing in t)% J6# or in t)% +idding rul%s +ars t)% !on'%rsion o" t)% rig)t o" rst r%"usal to t)% rig)t to to$. Summit: N%it)%r t)% rig)t o" rst r%"usal nor t)% rig)t to to$ !an +% l%gally %D%r!is%d +y t)% !onsortium 2. JG Summit: N%it)%r /)i!) is not t)% $ro$%r $arty grant%d su!) rig)t. SCI SCI )% "a!t t)at t)% losing +idd%r )as Boin%d PH in t)% latt%rs %Kort to rais% t)% P2.131 +illion n%!%ssary in %D%r!ising t)% rig)t to to$ is not !ontrary to la/, $u+li! $oli!y or $u+li! morals. 4here is nothing in the bidding rules that bars the losing bidders from =oining either the &inning bidder or %a&asa'i>)H# to raise the purchase price. 4here &as also no allegation or proof that the participation of the losing bidders in the public bidding &as done &ith fraudulent intent. intent . #+s%nt any $roo" o" "raud, t)% "ormation +y PH o" a !onsortium is l%gitimat% in a "r%% %nt%r$ris% syst%m, unli% in a !ontra!t "or t)% o$%ration o" or !onstru!tion o" a go'%rnm%nt in"rastru!tur% /)%r% t)% id%ntity o" t)% +uy%r+idd%r or nan!i%r !onstitut%s an im$ortant !onsid%ration. n t)% latt%r !as%, t)% go'%rnm%nt /ould )a'% to ta% utmost $r%!aution to $rot%!t $u+li! int%r%st +y %nsuring t)at t)% $arti%s /it) /)i!) it is !ontra!ting )a'% t)% a+ility to satis"a!torily !onstru!t or o$%rat% t)% in"rastru!tur%.
3. JG SummitI )% mutual rig)t o" rst r%"usal and t)% rig)t to to$ d%ri'%d "rom it +%t/%%n NC and 7a/asai 'iolat%s t)%ir !ontra!t and t)% Constitution, +ot) o" /)i!) r%-uir% t)%m to maintain a <0=40 !a$itali(ation ratio. )is is +%!aus% it /ould allo/ 7a/asai to o/n mor% t)an t)% allo/a+l% 40 o" PH8SC:, a land)olding !or$oration, !or$oration, /)i!) is +ound +y t)% <0=40 !onstitutional !onstitutional limitation. A/N: A/N: Apparently, Apparently, somewhere along along the way, JG Summit dropped its public utility argument, which the SC already debuned in the earlier cases and is not mentioned in the present one, and !ocused on this landholding argument to insist on the "#$%&#$ capitali'ation ratio .
SC: PH admitt%d t)at )H#*S+C o&ned land until the time of the bidding . Ho/%'%r, PH ass%rts t)at this wo$ld not a8e't the right of 9rst ref$sal b$t onl% the e:er'ise thereof , m%aningI 1 i" t)% land is r%tain%d, t)% rig)t o" rst r%"usal, +%ing a $ro$%rty rig)t, !ould +% assign%d to a -uali%d $arty& or 2 t)% land !ould +% di'%st%d +%"or% t)% %D%r!is% o" t)% rig)t o" rst r%"usal. Ho/%'%r )%r%, the right of rst refusal &as validly converted into a right to top, &hich &as e6ercised not by %a&asa'i but by )H#, a ?ilipino corporation. As such, there is no violation of the Constitution. )% SC u$)%ld u$)%ld PHs argum%nt argum%nt and d%!lar%d d%!lar%d t)at the mutual right of rst refusal of "#$C and %a&asa'i in the J!A &as valid . First, it )%ld t)at said rig)t !onsist%d o" NC and 7a/asais $ro$%rty $ro$%rty rig)t gi'%n to t)%m +y t)%ir !ontra!t. )is agr%%m%nt, +y its%l", do%s not !onstitut% a 'iolation o" t)% $ro'isions o" t)% Constitution limiting land o/n%rs)i$ to Fili$inos and Fili$ino !or$orations. )% SC sustain%d t)% a+o'%m%ntion%d alt%rnati'% o$tions gi'%n +y PH to a'oid a 'iolation o" t)% !onstitution. !onstitution. t "urt)%r )%ld t)at i" 7a/asai, /)il% PH8SC: still o/ns land, assigns its rig)t to a -uali%d Fili$ino %ntity in @
ord%r to maintain t)% <0=40 ratio, t)is trans"%r /ould not n%!%ssarily amount to a 'iolation o" t)% #nti=ummy 8a/s, a+s%nt $roo" o" any "raudul%nt int%nt. Furt)%r, t)% SC said t)at even if %a&asa'i0s shareholdings in )H#*S+C e6ceed /3, it &ould not necessarily a8ect its standing as a shareholder it &ould most li'ely a8ect )H#*S+C itself and dis7ualify it from o&ning land . )is nds su$$ort und%r t)% +asi! !or$orat% la/ $rin!i$l% t)at the corporation and its stoc'holders are separate =uridical entities . n t)is '%in, the right of rst refusal over shares pertains to the shareholders &hereas the capacity to o&n land pertains to the corporation. H%n!%, the fact that )H#*S+C o&ns land cannot deprive stoc'holders of their right of rst refusal . "o la& dis7ualies a person from purchasing shares in a landholding corporation even if the latter &ill e6ceed the allo&ed foreign e7uity, &hat the la& dis7ualies is the corporation from o&ning land. )is is t)% !l%ar im$ort o" t)% r%l%'ant $ro'isions und%r t)% !onstitution. 1 Finally, t)% !ourt d%+un%d JG Summits argum%nt t)at an o$tion to +uy land +y a "or%ign%r"or%ign !or$oration +%ing 'oid its%l", t)% rig)t o" rst r%"usal grant%d to 7a/asai, a Ja$an%s% !or$oration, and t)% rig)t to to$, /)i!) is sour!%d "rom t)% rig)t o" rst r%"usal, ar% also 'oid. n arguing in t)is mann%r, JG Summit r%li%d in t)% !as% o" (hilippine )aning Corporation *. +ui She . )% SC said t)at t)at not)ing in t)% a+o'% d%!ision d%!ision a+solut%ly a+solut%ly +arr%d +arr%d an ali%n "rom "rom %'%r )a'ing t)% !a$a!ity to a!-uir% land in t)% P)ili$$in%s. H% !an +% gi'%n an o$tion to +uy r%al $ro$%rty, /)i!) )% !an %D%r!is% on !ondition t)at )% is grant%d P)ili$$in% !iti(%ns)i$. )at /as +arr%d +y t)% a+o'% ruling /as a situation /)%r% an ali%n is gi'%n not only a l%as% o", +ut also an o$tion to +uy, a $i%!% o" land, +y 'irtu% o" /)i!) t)% Fili$ino o/n%r !annot s%ll or ot)%r/is% dis$os% o" )is $ro$%rty, t)is to last "or 50 y%ars, +%!aus% +y t)%n it +%!om%s !l%ar t)at t)% arrang%m%nt is a 'irtual trans"%r o" o/n%rs)i$ /)%r%+y t)% o/n%r di'%sts )ims%l" in stag%s not only o" t)% rig)t to %nBoy t)% land, +ut also o" t)% rig)t to dis$os% o" it E rig)ts t)% sum total o" /)i!) ma% u$ o/n%rs)i$. Su!) a situation is not $r%s%nt in t)% !as% at +ar. SummitI )%r% is a 'iolation o" t)% rul%s on !om$%titi'% +idding. 4. JG SummitI SC: )% SC: )% dis!r%tion to a!!%$t or r%B%!t a +id and a/ard !ontra!ts is '%st%d in t)% go'%rnm%nt ag%n!i%s %ntrust%d /it) t)at "un!tion. )% dis!r%tion gi'%n to t)% aut)oriti%s on t)is matt%r is o" su!) /id% latitud% t)at t)% !ourts /ill not int%r"%r% t)%r%/it), unl%ss it is a$$ar%nt t)at it is us%d as a s)i%ld to a "raudul%nt a/ard. t is only u$on a !l%ar s)o/ing o" gra'% a+us% o" dis!r%tion t)at t)% !ourts /ill s%t asid% t)% a/ard o" a !ontra!t mad% +y a go'%rnm%nt %ntity.
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S%!tion 2. #ll lands o" t)% $u+li! domain, /at%rs, min%rals, !oal, $%trol%um, $%trol%um, and ot)%r min%ral oils, all "or!%s o" $ot%ntial %n%rgy, s)%ri%s, "or%sts or tim+%r, /ildli"%, Lora and "auna, and ot)%r natural r%sour!%s ar% o/n%d +y t)% Stat%. it) t)% %D!%$tion o" agri!ultural lands, all ot)%r natural r%sour!%s s)all not +% ali%nat%d. )% %D$loration, d%'%lo$m%nt, and utili(ation o" natural r%sour!%s s)all +% und%r t)% "ull !ontrol and su$%r'ision o" t)% Stat%. )% Stat% may dir%!tly und%rta% und%rta% su!) a!ti'iti%s, or it may %nt%r into !o=$rodu!tion, Boint '%ntur%, or $rodu!tion=s)aring agr%%m%nts agr%%m%nts &ith ?ilipino citi;ens, or corporations or associations at least si6ty per centum of &hose capital is o&ned by such citi;ens . Su!) agr%%m%nts may +% "or a $%riod not %D!%%ding t/%nty='% y%ars, r%n%/a+l% r%n%/a+l% "or not mor% t)an t/%nty='% y%ars, and und%r su!) t%rms and !onditions as may +% $ro'id%d +y la/. n !as%s o" /at%r rig)ts "or irrigation, /at%r su$$ly, s)%ri%s, or industrial us%s ot)%r t)an t)% d%'%lo$m%nt o" /at%r $o/%r, +%n%!ial us% may +% t)% m%asur% and limit o" t)% grant.S%!tion A. Sa'% in !as%s o" )%r%ditary su!!%ssion, no private lands shall be transferred or conveyed e6cept to individuals, corporations, or associations 7ualied to ac7uire or hold lands of the public domain .
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)% "a!ts in t)is t)is !as% do not not indi!at% any any su!) gra'% gra'% a+us% o" dis!r%tion dis!r%tion.. )% rig)t to to$ to$ /as a !ondition !ondition im$os%d +y t)% go'%rnm%nt in t)% +idding rul%s /)i!) /as mad% no/n to all $arti%s. t /as a !ondition im$os%d on all +idd%rs %-ually, +as%d on t)% #Ps %D%r!is% o" its dis!r%tion in d%!iding on )o/ +%st to $ri'ati(% t)% go'%rnm%nts s)ar%s in PH8SC:. t /as not a /)imsi!al or ar+itrary !ondition. )% rig)t to to$ )ad its )istory in t)% mutual rig)t o" rst r%"usal in t)% J6# and /as r%a!)%d +y agr%%m%nt o" t)% go'%rnm%nt and 7##S#7. Summit: % ar% not %sto$$%d "rom -u%stioning t)%s% issu%s alt)oug) /% $arti!i$at%d in t)% +idding 5. JG Summit: % $ro!%ss. SC: SC: A/N: A/N: t wasn-t wasn-t really discussed discussed in the the present case, case, but guess because because in entering entering its bid, bid, JG Summit epressed that it acnowledged awasai/(0-s right to top. top.
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