JG Summit Holdings, Inc. v. CA

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.
RESOLUTION
PUNO, J.:
FACTS
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 ₱330 million for the
capitalization of PHILSECO in the proportion of 60%-40% respectively. One of its salient features is
1
the grant to the parties of the right of first refusal should either of them decide to sell, assign or
transfer its interest in the joint venture,
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. the Asset Privatization
Trust (APT) took over the non-performing assets of the National Government. Thereafter, , 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. 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
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 first refusal under the JVA be "exchanged" for the right to top by five 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 public bidding, petitioner J.G. Summit Holdings, Inc. submitted a bid with an
acknowledgement of KAWASAKI/Philyards’ right to top,
As petitioner was declared the highest bidder, the COP approved the sale
petitioner informed APT that it was protesting the offer of PHI to top its bid
petitioner was notified that PHI had fully paid the balance of the purchase price of the subject
bidding. the APT notified petitioner that PHI had exercised its option to top the highest bid and that
the COP had approved the same
petitioner filed with the SC a Petition for Mandamus. the Court of Appeals denied the same for lack
of merit. Petitioner thus filed a Petition for Certiorari.
SC rendered the now assailed Decision ruling that a shipyard like PHILSECO is a public utility
whose capitalization must be sixty percent (60%) Filipino-owned. Consequently, the right to top
13
granted to KAWASAKI under the Asset Specific 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
ISSUE
Whether PHILSECO is a Public Utility.
ruling
PHILSECO is not a public utility. By nature, a shipyard is not a public utility. 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
23
serves but a limited clientele whom it may choose to serve at its discretion. While it offers 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 offers its services does not give the public a legal right to
demand that such services be rendered.
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 affected 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 classification of a purely private enterprise
as a public utility.
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.
CONCLUSION
IN VIEW OF THE FOREGOING, the Motion for Reconsideration is hereby GRANTED. The
impugned Decision and Resolution of the Court of Appeals are AFFIRMED.

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G.R. No.

124293 September 24, 2003

JG SUMMIT HOLDINGS, INC., Petitioner,

Whether PHILSECO is a Public Utility.

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