MIPT, INC. vs. PPA [G.R. No. 196199. December 07, 2021]

MIPT, INC. vs. PPA [G.R. No. 196199. December 07, 2021] ⚖️ HERNANDO, J

 FACTS

In this case, the Defendant-Appellant, the Philippine Ports Authority (PPA), is a government corporation responsible for overseeing the Manila International Port Terminal Complex (MIPTC). The Plaintiff-Appellee, Manila International Ports Terminal, Inc. (MIPTI), is a private domestic corporation engaged in port-related services.

The dispute dates back to the 1970s when MIPTI was granted a franchise to operate container terminals and related services at North Harbor. However, in the mid-1980s, issues arose concerning MIPTI's alleged violations and poor performance. PPA, citing these concerns, recommended the revocation of MIPTI's franchise, which was ultimately revoked by an executive order issued by then President Corazon C. Aquino.

The then President Corazon C. Aquino issued Executive Order (EO) No. 30 revoking MIPTI's franchise due to substantial violations of the MOA, which resulted in the deterioration of port services, and authorizing PPA to undertake, on its own, the cargo-handling operation at North Harbor. Consequently, PPA sent a letter to MIPTI informing it of its plan to take over its business and properties.

Following the revocation, PPA took over MIPTI's operations, and Metrostar Port and Allied Services, Inc. briefly assumed control of port operations. Subsequently, International Container Terminal Services, Inc. (ICTSI) took over the management and operation of MIPTC.

MIPTI filed a civil action for damages against PPA, claiming violations of due process and non-impairment of contract. PPA defended its actions, asserting that they were necessary to protect public interests and the efficient operation of MIPTC.

During the trial, witnesses from MIPTI testified about the value of the seized properties and the profitability of MIPTI's operations before the takeover.

Later in the case, PPA and ICTSI reached a compromise agreement, resulting in the dismissal of PPA's third-party complaint against ICTSI.

The case revolves around whether PPA's actions in revoking MIPTI's franchise and taking over its operations were justified or if they constituted a breach of contract and violation of MIPTI's rights.

ISSUE

Whether or not EO 30 is constitutional.

HELD

I. EO 30 is unconstitutional for violating MIPTI's right to procedural due process.

In upholding the RTC Decision, the CA held that MIPTI was deprived of due process when its franchise was unceremoniously revoked and its properties, facilities, and equipment unjustly seized. It noted that MIPTI was not given adequate notice of the revocation since EO 30, which was a legislative act, was not published.

First, there is no doubt that President Corazon C. Aquino (President Aquino) had the power to repeal or revoke MIPTI's franchise. As head of the revolutionary government, she was empowered by the 1986 Freedom Constitution to exercise legislative powers, including the power to amend, alter, or repeal the franchise of a public utility. This legislative prerogative is broad and plenary, stemming from the most essential, insistent, and illimitable of government powers – police power. Thus, courts are generally reluctant to interfere with it.

Second, while the power to repeal a franchise is broad and plenary, it cannot be exercised arbitrarily or at whim. The Constitution expressly limits such power in that its exercise must be necessitated by "common good" or "public interest."

Third, as will be the focus of this Decision, the exercise of this power is further limited by the due process clause of the Constitution. Thus, a franchise cannot be revoked or forfeited without due process of law. 

The revocation of franchise requires the observance of due process. |

More importantly, PLDT's allegation partakes of a collateral attack on a franchise (Rep. Act No. 2090), which is not allowed. A franchise is a property right and cannot be revoked or forfeited without due process of law. The determination of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, is more properly the subject of the prerogative writ of quo warranto, the right to assert which, as a rule, belongs to the State "upon complaint or otherwise" (Sections 1, 2 and 3, Rule 66, Rules of Court), the reason being that the abuse of a franchise is a public wrong and not a private injury. A forfeiture of a franchise will have to be declared in a direct proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful exercise is primarily a concern of Government.

Thus, even if the grant of franchise is broad and plenary, and even if courts do not ordinarily interfere with the exercise of legislative prerogatives, this is not the case when there is a "a clear, patent or palpable arbitrary and unreasonable abuse of the legislative prerogative:"

RE: Due process in general

x x x If the law itself unreasonably deprives a person of his life, liberty, or property, he is denied the protection of due process. If the enjoyment of his rights is conditioned on an unreasonable requirement, due process is likewise violated. Whatsoever be the source of such rights, be it the Constitution itself or merely a statute, its unjustified withholding would also be a violation of due process. Any government act that militates against the ordinary norms of justice or fair play is considered an infraction of the great guaranty of due process; and this is true whether the denial involves violation merely of the procedure prescribed by the law or affects the very validity of the law itself.

[...] having established that EO 30 is a legislative act, it is required to published to satisfy the requirement of notice as part of procedural due process:

Publication is a necessary component of proedural due process to give as wide publicity as possible so that all persons having an interest in the proceedings may be notified thereof. The requirement of publication is intended to satisfy the basic requirements of due process. It is imperative for it will be the height of injustice to punish or otherwise burden a citizen for the transgressions of a law or rule of which he had no notice whatsoever.86 (Citations omitted)

In Tañada v. Tuvera, the Court held that all statutes, including those of local application and private laws, must be published for their effectivity. Included in these are "presidential decrees and executive orders promulgated by the President in the exercise of legislative powers whenever the same are validly delegated by the legislature or, at present, directly conferred by the Constitution."

Here, the CA affirmed the trial court's ruling that there was no proper notice to MIPTI considering that EO 30 was not published.90 However, a review of the Official Gazette shows that EO 30 was actually published. This was done on July 21, 1986, the same day that PPA implemented the order. Considering that EO 30 expressly provides for immediate effectivity, and considering further that jurisprudence recognizes the effectivity of laws that provide for immediate effectivity upon publication,91 the publication requirement was deemed satisfied when EO 30 was enforced on July 21, 1986. Thus, the appellate court erred in ruling that EO 30 is unconstitutional for not being published.

Nevertheless, even though EO 30 was published, the revocation of MIPTI's franchise was still unconstitutional as it was done without regard to the rudiments of fair play and the standard of freedom from arbitrariness. 

The standards of fair play and freedom from arbitrariness have not been observed, in violation of MIPTI's constitutional right to due process

As discussed, due process guarantees protection against any form of arbitrariness on the part of the government, including the Legislature.92 Any government act that militates against the ordinary norms of justice or fair play is considered a violation of the guaranty of due process.93 This is consistent with the nature of due process as dependent on the circumstances and the necessities of the situation,94 and is anchored on fairness and equity.

It is undisputed that PPA has the power to recommend the revocation of MIPTI's franchise. This is based on Section 4(c) of PD 1284:

Section 4. The Philippine Ports Authority shall in addition have the following powers, functions and responsibilities:

x x x x

(c) Conduct periodic inspections and audit of the operation and management of the International Port Complex by MIPTI to determine the latter's compliance with the prescribed standards, rates fixed, and guidelines promulgated, and if warranted, recommend to the President of [sic] suspension or revocation of MIPTI's franchise. 

While PPA may recommend the revocation of MIPTI's franchise, it is not absolute. It is limited in that PPA can only make the recommendation if "warranted," which ordinarily means with "ground," "justification," "confirmation," or "proof."100 Thus, PPA cannot make the recommendation arbitrarily or out of thin air.

WHEREFORE, the September 22, 2010 Decision and the March 16, 2011 Resolution of the Court of Appeals in CA-G.R. CV No. 80775 are AFFIRMED with MODIFICATION:

1) DECLARING Executive Order No. 30, issued on July 19, 1986, UNCONSTITUTIONAL;

2) DECLARING the takeover by Philippine Ports Authority of the properties of the Manila International Ports Terminal, Inc. ILLEGAL;

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