Tatad v. Garcia, Jr. (G.R. No. 114222)

Facts:

DOTC planned to construct a light railway transit line along EDSA (EDSA LRT III) to provide a mass transit system 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 or not the EDSA LRT III, a public utility, can be owned by a foreign corporation.

Ruling: YES.

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

In law, there is a clear distinction between the “operation” of a public utility and the ownership of the facilities and 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.

In sum, private respondent will not run the light rail vehicles and collect fees from the riding public. It will have no dealings with the public and the public will have no right to demand any services from it. 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.

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