EN BANC

[G.R. No. 122156. February 3, 1997]

MANILA PRINCE HOTEL, petitioner, vs. GOVERNMENT SERVICE

DECISION
BELLOSILLO, J.:

The Filipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights,
privileges, and concessions covering the national economy and patrimony, the State shall give
preference to qualified Filipinos,[1] is invoked by petitioner in its bid to acquire 51% of the shares
of the Manila Hotel Corporation (MHC) which owns the historic Manila Hotel. Opposing,
respondents maintain that the provision is not self-executing but requires an implementing
legislation for its enforcement. Corollarily, they ask whether the 51% shares form part of the
national economy and patrimony covered by the protective mantle of the Constitution.
The controversy arose when respondent Government Service Insurance System (GSIS),
pursuant to the privatization program of the Philippine Government under Proclamation No. 50
dated 8 December 1986, decided to sell through public bidding 30% to 51% of the issued and
outstanding shares of respondent MHC. The winning bidder, or the eventual strategic partner, is
to provide management expertise and/or an international marketing/reservation system, and
financial support to strengthen the profitability and performance of the Manila Hotel.[2] In a close
bidding held on 18 September 1995 only two (2) bidders participated: petitioner Manila Prince
Hotel Corporation, a Filipino corporation, which offered to buy 51% of the MHC or 15,300,000
shares at P41.58 per share, and Renong Berhad, a Malaysian firm, with ITT-Sheraton as its
hotel operator, which bid for the same number of shares at P44.00 per share, or P2.42 more
than the bid of petitioner.
Pertinent provisions of the bidding rules prepared by respondent GSIS state -

I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC -

1. The Highest Bidder must comply with the conditions set forth below by October 23, 1995 (reset to
November 3, 1995) or the Highest Bidder will lose the right to purchase the Block of Shares and GSIS
will instead offer the Block of Shares to the other Qualified Bidders:

a. The Highest Bidder must negotiate and execute with the GSIS/MHC the Management Contract,
International Marketing/Reservation System Contract or other type of contract specified by the Highest
Bidder in its strategic plan for the Manila Hotel x x x x

b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with GSIS x x x x

K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER -

The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the following conditions
are met:

a. Execution of the necessary contracts with GSIS/MHC not later than October 23, 1995 (reset to
November 3, 1995); and

b. Requisite approvals from the GSIS/MHC and COP (Committee on Privatization)/ OGCC (Office of the
Government Corporate Counsel) are obtained.[3]

Pending the declaration of Renong Berhard as the winning bidder/strategic partner and the
execution of the necessary contracts, petitioner in a letter to respondent GSIS dated 28
September 1995 matched the bid price of P44.00 per share tendered by Renong Berhad.[4] In a
subsequent letter dated 10 October 1995 petitioner sent a managers check issued by Philtrust
Bank for Thirty-three Million Pesos (P33,000,000.00) as Bid Security to match the bid of the
Malaysian Group, Messrs. Renong Berhad x x x x[5] which respondent GSIS refused to accept.
On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the
tender of the matching bid and that the sale of 51% of the MHC may be hastened by respondent
GSIS and consummated with Renong Berhad, petitioner came to this Court on prohibition and
mandamus. On 18 October 1995 the Court issued a temporary restraining order enjoining
respondents from perfecting and consummating the sale to the Malaysian firm.
On 10 September 1996 the instant case was accepted by the Court En Banc after it was
referred to it by the First Division. The case was then set for oral arguments with former Chief
Justice Enrique M. Fernando and Fr. Joaquin G. Bernas, S.J., as amici curiae.
In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and
submits that the Manila Hotel has been identified with the Filipino nation and has practically
become a historical monument which reflects the vibrancy of Philippine heritage and culture. It is
a proud legacy of an earlier generation of Filipinos who believed in the nobility and sacredness
of independence and its power and capacity to release the full potential of the Filipino people. To
all intents and purposes, it has become a part of the national patrimony.[6] Petitioner also argues
that since 51% of the shares of the MHC carries with it the ownership of the business of the
hotel which is owned by respondent GSIS, a government-owned and controlled corporation, the
hotel business of respondent GSIS being a part of the tourism industry is unquestionably a part
of the national economy. Thus, any transaction involving 51% of the shares of stock of the MHC
is clearly covered by the term national economy, to which Sec. 10, second par., Art. XII, 1987
Constitution, applies.[7]
It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony and
its business also unquestionably part of the national economy petitioner should be preferred
after it has matched the bid offer of the Malaysian firm. For the bidding rules mandate that if for
any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to
the other Qualified Bidders that have validly submitted bids provided that these Qualified
Bidders are willing to match the highest bid in terms of price per share.[8]
Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the 1987
Constitution is merely a statement of principle and policy since it is not a self-executing provision
and requires implementing legislation(s) x x x x Thus, for the said provision to operate, there
must be existing laws to lay down conditions under which business may be done.[9]
Second, granting that this provision is self-executing, Manila Hotel does not fall under the
term national patrimony which only refers to lands of the public domain, waters, minerals, coal,
petroleum and other mineral oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna and all marine wealth in its territorial sea, and exclusive marine zone as
cited in the first and second paragraphs of Sec. 2, Art. XII, 1987 Constitution. According to
respondents, while petitioner speaks of the guests who have slept in the hotel and the events
that have transpired therein which make the hotel historic, these alone do not make the hotel fall
under the patrimony of the nation. What is more, the mandate of the Constitution is addressed to
the State, not to respondent GSIS which possesses a personality of its own separate and
distinct from the Philippines as a State.
Third, granting that the Manila Hotel forms part of the national patrimony, the constitutional
provision invoked is still inapplicable since what is being sold is only 51% of the outstanding
shares of the corporation, not the hotel building nor the land upon which the building stands.
Certainly, 51% of the equity of the MHC cannot be considered part of the national patrimony.
Moreover, if the disposition of the shares of the MHC is really contrary to the Constitution,
petitioner should have questioned it right from the beginning and not after it had lost in the
bidding.
Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which provides
that if for any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may
offer this to the other Qualified Bidders that have validly submitted bids provided that these
Qualified Bidders are willing to match the highest bid in terms of price per share, is misplaced.
Respondents postulate that the privilege of submitting a matching bid has not yet arisen since it
only takes place if for any reason, the Highest Bidder cannot be awarded the Block of Shares.
Thus the submission by petitioner of a matching bid is premature since Renong Berhad could
still very well be awarded the block of shares and the condition giving rise to the exercise of the
privilege to submit a matching bid had not yet taken place.
Finally, the prayer for prohibition grounded on grave abuse of discretion should fail since
respondent GSIS did not exercise its discretion in a capricious, whimsical manner, and if ever it
did abuse its discretion it was not so patent and gross as to amount to an evasion of a positive
duty or a virtual refusal to perform a duty enjoined by law. Similarly, the petition for mandamus
should fail as petitioner has no clear legal right to what it demands and respondents do not have
an imperative duty to perform the act required of them by petitioner.
We now resolve. A constitution is a system of fundamental laws for the governance and
administration of a nation. It is supreme, imperious, absolute and unalterable except by the
authority from which it emanates. It has been defined as the fundamental and paramount law of
the nation.[10] It prescribes the permanent framework of a system of government, assigns to the
different departments their respective powers and duties, and establishes certain fixed principles
on which government is founded. The fundamental conception in other words is that it is a
supreme law to which all other laws must conform and in accordance with which all private rights
must be determined and all public authority administered.[11] Under the doctrine of constitutional
supremacy, if a law or contract violates any norm of the constitution that law or contract whether
promulgated by the legislative or by the executive branch or entered into by private persons for
private purposes is null and void and without any force and effect. Thus, since the Constitution is
the fundamental, paramount and supreme law of the nation, it is deemed written in every statute
and contract.
Admittedly, some constitutions are merely declarations of policies and principles. Their
provisions command the legislature to enact laws and carry out the purposes of the framers who
merely establish an outline of government providing for the different departments of the
governmental machinery and securing certain fundamental and inalienable rights of citizens.[12]
A provision which lays down a general principle, such as those found in Art. II of the 1987
Constitution, is usually not self-executing. But a provision which is complete in itself and
becomes operative without the aid of supplementary or enabling legislation, or that which
supplies sufficient rule by means of which the right it grants may be enjoyed or protected, is self-
executing. Thus a constitutional provision is self-executing if the nature and extent of the right
conferred and the liability imposed are fixed by the constitution itself, so that they can be
determined by an examination and construction of its terms, and there is no language indicating
that the subject is referred to the legislature for action.[13]
 As against constitutions of the past, modern constitutions have been generally drafted upon
a different principle and have often become in effect extensive codes of laws intended to operate
directly upon the people in a manner similar to that of statutory enactments, and the function of
constitutional conventions has evolved into one more like that of a legislative body. Hence,
unless it is expressly provided that a legislative act is necessary to enforce a constitutional
mandate, the presumption now is that all provisions of the constitution are self-executing. If the
constitutional provisions are treated as requiring legislation instead of self-executing, the
legislature would have the power to ignore and practically nullify the mandate of the fundamental
law.[14] This can be cataclysmic. That is why the prevailing view is, as it has always been, that -

x x x x in case of doubt, the Constitution should be considered self-executing rather than non-self-
executing x x x x Unless the contrary is clearly intended, the provisions of the Constitution should be
considered self-executing, as a contrary rule would give the legislature discretion to determine when, or
whether, they shall be effective. These provisions would be subordinated to the will of the lawmaking
body, which could make them entirely meaningless by simply refusing to pass the needed implementing
statute.[15]

Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is clearly not
self-executing, as they quote from discussions on the floor of the 1986 Constitutional
Commission -
MR. RODRIGO. Madam President, I am asking this question as the Chairman of the
Committee on Style. If the wording of PREFERENCE is given to QUALIFIED FILIPINOS,
can it be understood as a preference to qualified Filipinos vis-a-vis Filipinos who are not
qualified. So, why do we not make it clear? To qualified Filipinos as against aliens?
THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to remove the word
QUALIFIED?
MR. RODRIGO. No, no, but say definitely TO QUALIFIED FILIPINOS as against whom? As
against aliens or over aliens ?
MR. NOLLEDO. Madam President, I think that is understood. We use the word QUALIFIED
because the existing laws or prospective laws will always lay down conditions under
which business may be done. For example, qualifications on capital, qualifications on the
setting up of other financial structures, et cetera (underscoring supplied by respondents).
MR. RODRIGO. It is just a matter of style.
MR. NOLLEDO. Yes.[16]
Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to make it
appear that it is non-self-executing but simply for purposes of style. But, certainly, the legislature
is not precluded from enacting further laws to enforce the constitutional provision so long as the
contemplated statute squares with the Constitution. Minor details may be left to the legislature
without impairing the self-executing nature of constitutional provisions.
In self-executing constitutional provisions, the legislature may still enact legislation to
facilitate the exercise of powers directly granted by the constitution, further the operation of such
a provision, prescribe a practice to be used for its enforcement, provide a convenient remedy for
the protection of the rights secured or the determination thereof, or place reasonable safeguards
around the exercise of the right. The mere fact that legislation may supplement and add to or
prescribe a penalty for the violation of a self-executing constitutional provision does not render
such a provision ineffective in the absence of such legislation. The omission from a constitution
of any express provision for a remedy for enforcing a right or liability is not necessarily an
indication that it was not intended to be self-executing. The rule is that a self-executing provision
of the constitution does not necessarily exhaust legislative power on the subject, but any
legislation must be in harmony with the constitution, further the exercise of constitutional right
and make it more available.[17] Subsequent legislation however does not necessarily mean that
the subject constitutional provision is not, by itself, fully enforceable.
Respondents also argue that the non-self-executing nature of Sec. 10, second par., of Art.
XII is implied from the tenor of the first and third paragraphs of the same section which
undoubtedly are not self-executing.[18] The argument is flawed. If the first and third paragraphs
are not self-executing because Congress is still to enact measures to encourage the formation
and operation of enterprises fully owned by Filipinos, as in the first paragraph, and the State still
needs legislation to regulate and exercise authority over foreign investments within its national
jurisdiction, as in the third paragraph, then a fortiori, by the same logic, the second paragraph
can only be self-executing as it does not by its language require any legislation in order to give
preference to qualified Filipinos in the grant of rights, privileges and concessions covering the
national economy and patrimony. A constitutional provision may be self-executing in one part
and non-self-executing in another.[19]
Even the cases cited by respondents holding that certain constitutional provisions are
merely statements of principles and policies, which are basically not self-executing and only
placed in the Constitution as moral incentives to legislation, not as judicially enforceable rights -
are simply not in point. Basco v. Philippine Amusements and Gaming Corporation[20] speaks of
constitutional provisions on personal dignity,[21] the sanctity of family life,[22] the vital role of the
youth in nation-building,[23] the promotion of social justice,[24] and the values of education.[25]
Tolentino v. Secretary of Finance[26] refers to constitutional provisions on social justice and
human rights[27] and on education.[28] Lastly, Kilosbayan, Inc. v. Morato[29] cites provisions on the
promotion of general welfare,[30] the sanctity of family life,[31] the vital role of the youth in nation-
building[32] and the promotion of total human liberation and development.[33] A reading of these
provisions indeed clearly shows that they are not judicially enforceable constitutional rights but
merely guidelines for legislation. The very terms of the provisions manifest that they are only
principles upon which legislations must be based. Res ipsa loquitur.
On the other hand, Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory,
positive command which is complete in itself and which needs no further guidelines or
implementing laws or rules for its enforcement. From its very words the provision does not
require any legislation to put it in operation. It is per se judicially enforceable. When our
Constitution mandates that [i]n the grant of rights, privileges, and concessions covering national
economy and patrimony, the State shall give preference to qualified Filipinos, it means just that -
qualified Filipinos shall be preferred. And when our Constitution declares that a right exists in
certain specified circumstances an action may be maintained to enforce such right
notwithstanding the absence of any legislation on the subject; consequently, if there is no statute
especially enacted to enforce such constitutional right, such right enforces itself by its own
inherent potency and puissance, and from which all legislations must take their bearings. Where
there is a right there is a remedy. Ubi jus ibi remedium.
As regards our national patrimony, a member of the 1986 Constitutional Commission[34]
explains -

The patrimony of the Nation that should be conserved and developed refers not only to our rich
natural resources but also to the cultural heritage of our race. It also refers to our intelligence in
arts, sciences and letters. Therefore, we should develop not only our lands, forests, mines and
other natural resources but also the mental ability or faculty of our people.

We agree. In its plain and ordinary meaning, the term patrimony pertains to heritage.[35]
When the Constitution speaks of national patrimony, it refers not only to the natural resources of
the Philippines, as the Constitution could have very well used the term natural resources, but
also to the cultural heritage of the Filipinos.
 Manila Hotel has become a landmark - a living testimonial of Philippine heritage. While it
was restrictively an American hotel when it first opened in 1912, it immediately evolved to be
truly Filipino. Formerly a concourse for the elite, it has since then become the venue of various
significant events which have shaped Philippine history. It was called the Cultural Center of the
1930s. It was the site of the festivities during the inauguration of the Philippine Commonwealth.
Dubbed as the Official Guest House of the Philippine Government it plays host to dignitaries and
official visitors who are accorded the traditional Philippine hospitality.[36]
The history of the hotel has been chronicled in the book The Manila Hotel: The Heart and
Memory of a City.[37] During World War II the hotel was converted by the Japanese Military
Administration into a military headquarters. When the American forces returned to recapture
Manila the hotel was selected by the Japanese together with Intramuros as the two (2) places
for their final stand. Thereafter, in the 1950s and 1960s, the hotel became the center of political
activities, playing host to almost every political convention. In 1970 the hotel reopened after a
renovation and reaped numerous international recognitions, an acknowledgment of the Filipino
talent and ingenuity. In 1986 the hotel was the site of a failed coup d etat where an aspirant for
vice-president was proclaimed President of the Philippine Republic.
For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and
failures, loves and frustrations of the Filipinos; its existence is impressed with public interest; its
own historicity associated with our struggle for sovereignty, independence and nationhood.
Verily, Manila Hotel has become part of our national economy and patrimony. For sure, 51% of
the equity of the MHC comes within the purview of the constitutional shelter for it comprises the
majority and controlling stock, so that anyone who acquires or owns the 51% will have actual
control and management of the hotel. In this instance, 51% of the MHC cannot be disassociated
from the hotel and the land on which the hotel edifice stands. Consequently, we cannot sustain
respondents claim that the Filipino First Policy provision is not applicable since what is being
sold is only 51% of the outstanding shares of the corporation, not the Hotel building nor the land
upon which the building stands.[38]
The argument is pure sophistry. The term qualified Filipinos as used in our Constitution also
includes corporations at least 60% of which is owned by Filipinos. This is very clear from the
proceedings of the 1986 Constitutional Commission -
THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I would like to introduce an amendment to the Nolledo amendment. And the
amendment would consist in substituting the words QUALIFIED FILIPINOS with the
following: CITIZENS OF THE PHILIPPINES OR CORPORATIONS OR ASSOCIATIONS
WHOSE CAPITAL OR CONTROLLING STOCK IS WHOLLY OWNED BY SUCH
CITIZENS.
xxxx
MR. MONSOD. Madam President, apparently the proponent is agreeable, but we have to
raise a question. Suppose it is a corporation that is 80-percent Filipino, do we not give it
preference?
MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino. What about a
corporation wholly owned by Filipino citizens?
MR. MONSOD. At least 60 percent, Madam President.
MR. DAVIDE. Is that the intention?
MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that the preference
should only be 100-percent Filipino.
MR. DAVIDE. I want to get that meaning clear because QUALIFIED FILIPINOS may refer only
to individuals and not to juridical personalities or entities.
 MR. MONSOD. We agree, Madam President.[39]
xxxx
MR. RODRIGO. Before we vote, may I request that the amendment be read again.
MR. NOLLEDO. The amendment will read: IN THE GRANT OF RIGHTS, PRIVILEGES AND
CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE
STATE SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS. And the word Filipinos
here, as intended by the proponents, will include not only individual Filipinos but also
Filipino-controlled entities or entities fully-controlled by Filipinos.[40]
The phrase preference to qualified Filipinos was explained thus -
MR. FOZ. Madam President, I would like to request Commissioner Nolledo to please restate
his amendment so that I can ask a question.
MR. NOLLEDO. IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS
COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL GIVE
PREFERENCE TO QUALIFIED FILIPINOS.
MR. FOZ. In connection with that amendment, if a foreign enterprise is qualified and a Filipino
enterprise is also qualified, will the Filipino enterprise still be given a preference?
MR. NOLLEDO. Obviously.
MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino enterprise, will
the Filipino still be preferred?
MR. NOLLEDO. The answer is yes.
MR. FOZ. Thank you.[41]
Expounding further on the Filipino First Policy provision Commissioner Nolledo continues
MR. NOLLEDO. Yes, Madam President. Instead of MUST, it will be SHALL - THE STATE
SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS. This embodies the so-called
Filipino First policy. That means that Filipinos should be given preference in the grant of
concessions, privileges and rights covering the national patrimony.[42]
The exchange of views in the sessions of the Constitutional Commission regarding the
subject provision was still further clarified by Commissioner Nolledo[43] -

Paragraph 2 of Section 10 explicitly mandates the Pro-Filipino bias in all economic concerns. It is better
known as the FILIPINO FIRST Policy x x x x This provision was never found in previous Constitutions x
xxx

The term qualified Filipinos simply means that preference shall be given to those citizens who can make a
viable contribution to the common good, because of credible competence and efficiency. It certainly does
NOT mandate the pampering and preferential treatment to Filipino citizens or organizations that are
incompetent or inefficient, since such an indiscriminate preference would be counterproductive and
inimical to the common good.

In the granting of economic rights, privileges, and concessions, when a choice has to be made between a
qualified foreigner and a qualified Filipino, the latter shall be chosen over the former.

Lastly, the word qualified is also determinable. Petitioner was so considered by respondent
GSIS and selected as one of the qualified bidders. It was pre-qualified by respondent GSIS in
accordance with its own guidelines so that the sole inference here is that petitioner has been
found to be possessed of proven management expertise in the hotel industry, or it has significant
equity ownership in another hotel company, or it has an overall management and marketing
proficiency to successfully operate the Manila Hotel.[44]
The penchant to try to whittle away the mandate of the Constitution by arguing that the
subject provision is not self-executory and requires implementing legislation is quite disturbing.
The attempt to violate a clear constitutional provision - by the government itself - is only too
distressing. To adopt such a line of reasoning is to renounce the duty to ensure faithfulness to
the Constitution. For, even some of the provisions of the Constitution which evidently need
implementing legislation have juridical life of their own and can be the source of a judicial
remedy. We cannot simply afford the government a defense that arises out of the failure to enact
further enabling, implementing or guiding legislation. In fine, the discourse of Fr. Joaquin G.
Bernas, S.J., on constitutional government is apt -

The executive department has a constitutional duty to implement laws, including the Constitution, even
before Congress acts - provided that there are discoverable legal standards for executive action. When the
executive acts, it must be guided by its own understanding of the constitutional command and of
applicable laws. The responsibility for reading and understanding the Constitution and the laws is not the
sole prerogative of Congress. If it were, the executive would have to ask Congress, or perhaps the Court,
for an interpretation every time the executive is confronted by a constitutional command. That is not how
constitutional government operates.[45]

Respondents further argue that the constitutional provision is addressed to the State, not to
respondent GSIS which by itself possesses a separate and distinct personality. This argument
again is at best specious. It is undisputed that the sale of 51% of the MHC could only be carried
out with the prior approval of the State acting through respondent Committee on Privatization.
As correctly pointed out by Fr. Joaquin G. Bernas, S.J., this fact alone makes the sale of the
assets of respondents GSIS and MHC a state action. In constitutional jurisprudence, the acts of
persons distinct from the government are considered state action covered by the Constitution (1)
when the activity it engages in is a public function; (2) when the government is so significantly
involved with the private actor as to make the government responsible for his action; and, (3)
when the government has approved or authorized the action. It is evident that the act of
respondent GSIS in selling 51% of its share in respondent MHC comes under the second and
third categories of state action. Without doubt therefore the transaction, although entered into by
respondent GSIS, is in fact a transaction of the State and therefore subject to the constitutional
command.[46]
When the Constitution addresses the State it refers not only to the people but also to the
government as elements of the State. After all, government is composed of three (3) divisions of
power - legislative, executive and judicial. Accordingly, a constitutional mandate directed to the
State is correspondingly directed to the three (3) branches of government. It is undeniable that
in this case the subject constitutional injunction is addressed among others to the Executive
Department and respondent GSIS, a government instrumentality deriving its authority from the
State.
It should be stressed that while the Malaysian firm offered the higher bid it is not yet the
winning bidder. The bidding rules expressly provide that the highest bidder shall only be
declared the winning bidder after it has negotiated and executed the necessary contracts, and
secured the requisite approvals. Since the Filipino First Policy provision of the Constitution
bestows preference on qualified Filipinos the mere tending of the highest bid is not an
assurance that the highest bidder will be declared the winning bidder. Resultantly, respondents
are not bound to make the award yet, nor are they under obligation to enter into one with the
highest bidder. For in choosing the awardee respondents are mandated to abide by the dictates
of the 1987 Constitution the provisions of which are presumed to be known to all the bidders and
other interested parties.
Adhering to the doctrine of constitutional supremacy, the subject constitutional provision is,
as it should be, impliedly written in the bidding rules issued by respondent GSIS, lest the bidding
rules be nullified for being violative of the Constitution. It is a basic principle in constitutional law
that all laws and contracts must conform with the fundamental law of the land. Those which
violate the Constitution lose their reason for being.
Paragraph V. J. 1 of the bidding rules provides that [i]f for any reason the Highest Bidder
cannot be awarded the Block of Shares, GSIS may offer this to other Qualified Bidders that have
validly submitted bids provided that these Qualified Bidders are willing to match the highest bid
in terms of price per share.[47] Certainly, the constitutional mandate itself is reason enough not to
award the block of shares immediately to the foreign bidder notwithstanding its submission of a
higher, or even the highest, bid. In fact, we cannot conceive of a stronger reason than the
constitutional injunction itself.
In the instant case, where a foreign firm submits the highest bid in a public bidding
concerning the grant of rights, privileges and concessions covering the national economy and
patrimony, thereby exceeding the bid of a Filipino, there is no question that the Filipino will have
to be allowed to match the bid of the foreign entity. And if the Filipino matches the bid of a
foreign firm the award should go to the Filipino. It must be so if we are to give life and meaning
to the Filipino First Policy provision of the 1987 Constitution. For, while this may neither be
expressly stated nor contemplated in the bidding rules, the constitutional fiat is omnipresent to
be simply disregarded. To ignore it would be to sanction a perilous skirting of the basic law.
This Court does not discount the apprehension that this policy may discourage foreign
investors. But the Constitution and laws of the Philippines are understood to be always open to
public scrutiny. These are given factors which investors must consider when venturing into
business in a foreign jurisdiction. Any person therefore desiring to do business in the Philippines
or with any of its agencies or instrumentalities is presumed to know his rights and obligations
under the Constitution and the laws of the forum.
The argument of respondents that petitioner is now estopped from questioning the sale to
Renong Berhad since petitioner was well aware from the beginning that a foreigner could
participate in the bidding is meritless. Undoubtedly, Filipinos and foreigners alike were invited to
the bidding. But foreigners may be awarded the sale only if no Filipino qualifies, or if the
qualified Filipino fails to match the highest bid tendered by the foreign entity. In the case before
us, while petitioner was already preferred at the inception of the bidding because of the
constitutional mandate, petitioner had not yet matched the bid offered by Renong Berhad. Thus
it did not have the right or personality then to compel respondent GSIS to accept its earlier bid.
Rightly, only after it had matched the bid of the foreign firm and the apparent disregard by
respondent GSIS of petitioners matching bid did the latter have a cause of action.
Besides, there is no time frame for invoking the constitutional safeguard unless perhaps the
award has been finally made. To insist on selling the Manila Hotel to foreigners when there is a
Filipino group willing to match the bid of the foreign group is to insist that government be treated
as any other ordinary market player, and bound by its mistakes or gross errors of judgment,
regardless of the consequences to the Filipino people. The miscomprehension of the
Constitution is regrettable. Thus we would rather remedy the indiscretion while there is still an
opportunity to do so than let the government develop the habit of forgetting that the Constitution
lays down the basic conditions and parameters for its actions.
Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to
the bidding rules, respondent GSIS is left with no alternative but to award to petitioner the block
of shares of MHC and to execute the necessary agreements and documents to effect the sale in
accordance not only with the bidding guidelines and procedures but with the Constitution as
well. The refusal of respondent GSIS to execute the corresponding documents with petitioner as
provided in the bidding rules after the latter has matched the bid of the Malaysian firm clearly
constitutes grave abuse of discretion.
The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987
Constitution not merely to be used as a guideline for future legislation but primarily to be
enforced; so must it be enforced. This Court as the ultimate guardian of the Constitution will
never shun, under any reasonable circumstance, the duty of upholding the majesty of the
Constitution which it is tasked to defend. It is worth emphasizing that it is not the intention of this
Court to impede and diminish, much less undermine, the influx of foreign investments. Far from
it, the Court encourages and welcomes more business opportunities but avowedly sanctions the
preference for Filipinos whenever such preference is ordained by the Constitution. The position
of the Court on this matter could have not been more appropriately articulated by Chief Justice
Narvasa -

As scrupulously as it has tried to observe that it is not its function to substitute its judgment for that of the
legislature or the executive about the wisdom and feasibility of legislation economic in nature, the
Supreme Court has not been spared criticism for decisions perceived as obstacles to economic progress
and development x x x x in connection with a temporary injunction issued by the Courts First Division
against the sale of the Manila Hotel to a Malaysian Firm and its partner, certain statements were published
in a major daily to the effect that that injunction again demonstrates that the Philippine legal system can
be a major obstacle to doing business here.

Let it be stated for the record once again that while it is no business of the Court to intervene in contracts
of the kind referred to or set itself up as the judge of whether they are viable or attainable, it is its bounden
duty to make sure that they do not violate the Constitution or the laws, or are not adopted or implemented
with grave abuse of discretion amounting to lack or excess of jurisdiction. It will never shirk that duty, no
matter how buffeted by winds of unfair and ill-informed criticism.[48]

Privatization of a business asset for purposes of enhancing its business viability and
preventing further losses, regardless of the character of the asset, should not take precedence
over non-material values. A commercial, nay even a budgetary, objective should not be pursued
at the expense of national pride and dignity. For the Constitution enshrines higher and nobler
non-material values. Indeed, the Court will always defer to the Constitution in the proper
governance of a free society; after all, there is nothing so sacrosanct in any economic policy as
to draw itself beyond judicial review when the Constitution is involved.[49]
Nationalism is inherent in the very concept of the Philippines being a democratic and
republican state, with sovereignty residing in the Filipino people and from whom all government
authority emanates. In nationalism, the happiness and welfare of the people must be the goal.
The nation-state can have no higher purpose. Any interpretation of any constitutional provision
must adhere to such basic concept. Protection of foreign investments, while laudible, is merely a
policy. It cannot override the demands of nationalism.[50]
The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to
the highest bidder solely for the sake of privatization. We are not talking about an ordinary piece
of property in a commercial district. We are talking about a historic relic that has hosted many of
the most important events in the short history of the Philippines as a nation. We are talking
about a hotel where heads of states would prefer to be housed as a strong manifestation of their
desire to cloak the dignity of the highest state function to their official visits to the Philippines.
Thus the Manila Hotel has played and continues to play a significant role as an authentic
repository of twentieth century Philippine history and culture. In this sense, it has become truly a
reflection of the Filipino soul - a place with a history of grandeur; a most historical setting that
has played a part in the shaping of a country.[51]
This Court cannot extract rhyme nor reason from the determined efforts of respondents to
sell the historical landmark - this Grand Old Dame of hotels in Asia - to a total stranger. For,
indeed, the conveyance of this epic exponent of the Filipino psyche to alien hands cannot be
less than mephistophelian for it is, in whatever manner viewed, a veritable alienation of a
nations soul for some pieces of foreign silver. And so we ask: What advantage, which cannot be
equally drawn from a qualified Filipino, can be gained by the Filipinos if Manila Hotel - and all
that it stands for - is sold to a non-Filipino? How much of national pride will vanish if the nations
cultural heritage is entrusted to a foreign entity? On the other hand, how much dignity will be
preserved and realized if the national patrimony is safekept in the hands of a qualified, zealous
and well-meaning Filipino? This is the plain and simple meaning of the Filipino First Policy
provision of the Philippine Constitution. And this Court, heeding the clarion call of the
Constitution and accepting the duty of being the elderly watchman of the nation, will continue to
respect and protect the sanctity of the Constitution.
WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA
HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE
GOVERNMENT CORPORATE COUNSEL are directed to CEASE and DESIST from selling 51%
of the shares of the Manila Hotel Corporation to RENONG BERHAD, and to ACCEPT the
matching bid of petitioner MANILA PRINCE HOTEL CORPORATION to purchase the subject
51% of the shares of the Manila Hotel Corporation at P44.00 per share and thereafter to execute
the necessary agreements and documents to effect the sale, to issue the necessary clearances
and to do such other acts and deeds as may be necessary for the purpose.
SO ORDERED.
Regalado, Davide, Jr., Romero, Kapunan, Francisco, and Hermosisima, Jr., JJ, concur.
Narvasa, C.J., (Chairman), and Melo, J., joins J. Puno in his dissent.
Padilla, J., see concurring opinion.
Vitug, J., see separate concurring opinion
Mendoza, J., see concurring opinion
Torres, J., with separate opinion
Puno, J., see dissent.
Panganiban J., with separate dissenting opinion.

[1] See Sec. 10, par. 2, Art. XII, 1987 Constitution.

[2] Par. I. Introduction and Highlights, Guidelines and Procedures: Second Prequalifications and Public Bidding of the
MHC Privatization; Annex A, Consolidated Reply to Comments of Respondents; Rollo, p.142.
[3] Par. V. Guidelines for the Public Bidding, Id., pp. 153-154.

[4] Annex A, Petition for Prohibition and Mandamus with Temporary Restraining Order; Rollo, pp.13-14.

[5] Annex B, Petition for Prohibition and Mandamus with Temporary Restraining Order; Id., p.15.

[6] Petition for Prohibition and Mandamus with Temporary Restraining Order, pp. 5-6; Id., pp.6-7.

[7] Consolidated Reply to Comments of Respondents, p. 17; Id., p.133.

[8] Par. V. J. 1,Guidelines for Public Bidding, Guidelines and Procedures: Second Prequalifications and Public Bidding
of the MHC Privatization, Annex A, Consolidated Reply to Comments of Respondents; Id., p. 154.
[9] Respondents Joint Comment with Urgent Motion to Lift Temporary Restraining Order, p.9; Rollo, p. 44.

[10] Marbury v. Madison, 5 U.S. 138 (1803).

[11] 11 Am Jur. 606.

[12] 16 Am Jur. 2d 281.

[13] Id., p. 282.

[14] See Note 12.

[15] Cruz, Isagani A., Constitutional Law, 1993 ed., pp. 8-10.

[16] Record of the Constitutional Commission, Vol. 3, 22 August 1986, p. 608.

[18]
Sec. 10, first par., reads: The Congress shall, upon recommendation of the economic and planning agency, when
the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per
centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain
areas of investments. The Congress shall enact measures that will encourage the formation and operation of
enterprises whose capital is wholly owned by Filipinos.
Sec. 10, third par., reads: The State shall regulate and exercise authority over foreign investments within its national
jurisdiction and in accordance with its national goals and priorities.
[19] State ex rel. Miller v. OMalley, 342 Mo 641, 117 SW2d 319.

[20] G.R. No. 91649, 14 May 1991, 197 SCRA 52.

[21] Sec. 11, Art. II (Declaration of Principles and State Policies), provides that [t]he State values the dignity of every
human person and guarantees full respect for human rights.
[22] Sec. 12, Art. II, provides that [t]he State recognizes the sanctity of family life and shall protect and strengthen the
family as a basic autonomous social institution. It shall equally protect the life of the mother and the life of the
unborn from conception. The natural and primary right and duty of parents in the rearing of the youth for civic
efficiency and the development of moral character shall receive the support of the government.
[23] Sec. 13, Art. II, provides that [t]he State recognizes the vital role of the youth in nation-building and shall promote
and protect their physical, moral, spiritual, intellectual, and social well-being. It shall inculcate in the youth
patriotism and nationalism, and encourage their involvement in public and civic affairs.
[24]
Sec. 1, Art. XIII (Social Justice and Human Rights), provides that [t]he Congress shall give highest priority to the
enactment of measures that protect and enhance the right of all the people to human dignity, reduce social, economic
and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the
common good.
To this end, the State shall regulate the acquisition, ownership, use, and disposition of property and its increments.
Sec. 2, Art. XIII, provides that [t]he promotion of social justice shall include the commitment to create economic
opportunities based on freedom of initiative and self-reliance.
[25]
Sec. 2, Art. XIV (Education, Science and Technology, Arts, Culture, and Sports), provides that [t]he State shall:
(1) Establish, maintain, and support a complete, adequate, and integrated system of education relevant to the needs of
the people and society;
(2) Establish and maintain a system of free public education in the elementary and high school levels. Without limiting
the natural right of parents to rear their children, elementary education is compulsory for all children of school age;
(3) Establish and maintain a system of scholarship grants, student loan programs, subsidies, and other incentives
which shall be available to deserving students in both public and private schools, especially to the underprivileged;
(4) Encourage non-formal, informal, and indigenous learning, independent, and out-of-school study programs
particularly those that respond to community needs; and
(5) Provide adult citizens, the disabled, and out-of-school youth with training in civics, vocational efficiency, and other
skills.
[26] G.R. No. 115455, 25 August 1994, 235 SCRA 630.

[27] See Note 25.

[28] Sec. 1, Art. XIV, provides that [t]he State shall protect and promote the right of all citizens to quality education at all
levels of education and shall take appropriate steps to make such education accessible to all.
[29] G.R. No. 118910, 17 July 1995.

[30] Sec. 5, Art. II (Declaration of Principles and State Policies), provides that [t]he maintenance of peace and order,
the protection of life, liberty, and property, and the promotion of the general welfare are essential for the
enjoyment by all the people of the blessings of democracy.
[31] See Note 23.

[32] See Note 24.

[33] Sec. 17, Art. II, provides that [t]he State shall give priority to education, science and technology, arts, culture, and
 sports to foster patriotism and nationalism, accelerate social progress, and promote total human liberation and
development.
[34] Nolledo, Jose N., The New Constitution of the Philippines Annotated, 1990 ed., p. 72.

[35] Websters Third New International Dictionary, 1986 ed., p. 1656.

[36] The guest list of the Manila Hotel includes Gen. Douglas MacArthur, the Duke of Windsor, President Richard Nixon
of U.S.A., Emperor Akihito of Japan, President Dwight Eisenhower of U.S.A, President Nguyen Van Thieu of
Vietnam, President Park Chung Hee of Korea, Prime Minister Richard Holt of Australia, Prime Minister Keith
Holyoake of New Zealand, President Lyndon Johnson of U.S.A., President Jose Lopez Portillo of Mexico,
Princess Margaret of England, Prime Minister Malcolm Fraser of Australia, Prime Minister Yasuhiro Nakasone
of Japan, Prime Minister Pierre Elliot Trudeau of Canada, President Raul Alfonsin of Argentina, President
Felipe Gonzalez of Spain, Prime Minister Noboru Takeshita of Japan, Prime Minister Hussain Muhammad
Ershad of Bangladesh, Prime Minister Bob Hawke of Australia, Prime Minister Yasuhiro Nakasone of Japan,
Premier Li Peng of China, Sultan Hassanal Bolkiah of Brunei, President Ramaswami Venkataraman of India,
Prime Minister Go Chok Tong of Singapore, Prime Minister Enrique Silva Cimma of Chile, Princess Chulaborn
and Mahacharri Sirindhorn of Thailand, Prime Minister Tomiichi Murayama of Japan, Sultan Azlan Shah and
Raja Permaisuri Agong of Malaysia, President Kim Young Sam of Korea, Princess Infanta Elena of Spain,
President William Clinton of U.S.A., Prime Minister Mahathir Mohamad of Malaysia, King Juan Carlos I and
Queen Sofia of Spain, President Carlos Saul Menem of Argentina, Prime Ministers Chatichai Choonhavan and
Prem Tinsulanonda of Thailand, Prime Minister Benazir Bhutto of Pakistan, President Vaclav Havel of Czech
Republic, Gen. Norman Schwarzkopf of U.S.A., President Ernesto Perez Balladares of Panama, Prime
Minister Adolfas Slezevicius of Lithuania, President Akbar Hashemi Rafsanjani of Iran, President Askar
Akayev of Kyrgyztan, President Ong Teng Cheong of Singapore, President Frei Ruiz Tagle of Chile, President
Le Duc Anh of Vietnam, and Prime Minister Julius Chan of Papua New Guinea, see Memorandum for
Petitioner, pp. 16-19.
[37] Authored by Beth Day Romulo.

[38] See Note 9, pp.15-16; Rollo, pp. 50-51.

[39] Record of the Constitutional Commission, Vol. 3, 22 August 1986, p. 607.

[40] Id., p. 612.

[41] Id., p. 616.

[42] Id., p. 606.

[43] Nolledo, J.N., The New Constitution of the Philippines Annotated, 1990 ed., pp.930-931.

[44] Bidders were required to have at least one of the these qualifications to be able to participate in the bidding
process; see Note 2.
[45] Memorandum of Fr. Joaquin G. Bernas, S.J., p.6.

[46] Id., pp. 3-4.

[47] See Note 8.

[48] Keynote Address at the ASEAN Regional Symposium on Enforcement of Industrial Property Rights held 23
October 1995 at New World Hotel, Makati City.
[49] Speech of Senior Associate Justice Teodoro R. Padilla at the Induction of Officers and Directors of the
PHILCONSA for 1996 held 16 January 1996 at the Sky-Top, Hotel Intercontinental, Makati City.
[50] Memorandum of Authorities submitted by former Chief Justice Enrique M. Fernando, p.5.

[51] 8 March 1996 issue of Philippine Daily Inquirer, p. B13.