Manila Prince Hotel v. Government Service Insurance System

Posted Feb 3, 1997

By Anonymous

6 min read

Case Title and Citation

MANILA PRINCE HOTEL, petitioner, vs. GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION AND OFFICE OF THE GOVERNMENT CORPORATE COUNSEL, respondents.
G.R. No. 122156, February 3, 1997
Supreme Court - Second Division
Ponente: Justice Bellosillo

Facts

The Filipino First Policy, Sec. 10, par. 2, Art. XII of the 1987 Constitution, urges preference for qualified Filipinos in rights, privileges, and concessions covering the national economy and patrimony. Petitioner contends Manila Hotel is part of national patrimony and national economy.
Respondents GSIS, under Proclamation No. 50 (December 8, 1986), privatized Manila Hotel Corporation (MHC) by selling 30% to 51% of MHC’s issued and outstanding shares through public bidding; the winning bidder would provide management expertise, marketing, and financial support.
In a bidding held on September 18, 1995, two bids were submitted: Manila Prince Hotel Corporation (Filipino) for 51% at P41.58 per share; Renong Berhad (Malaysia) for 51% at P44.00 per share.
GSIS rules required the Highest Bidder to negotiate and execute contracts (Management Contract, International Marketing/Reservation System) and the Stock Purchase Agreement; approvals from GSIS/MHC and COP/OGCC were required.
On September 28, 1995, petitioner offered to match Renong’s bid at P44.00 per share; on October 10, 1995, petitioner sent a manager’s check for P33,000,000 as bid security to match.
GSIS refused to accept the matching bid. On October 17–18, 1995, petitioner sought prohibition and mandamus; a TRO was issued on October 18, 1995.
The case was accepted by the Court En Banc on September 10, 1996, for consideration; arguments included that Manila Hotel is a historic national icon reflecting Philippine heritage and culture, and constitutes part of the national patrimony and economy.
Respondents argued Sec. 10 is non-self-executing and that Manila Hotel (as 51% of MHC) does not automatically constitute patrimony; they also argued that the state’s mandate is to regulate foreign investments and that the sale of 51% of a corporation does not involve transfer of land or buildings.
The Court examined the constitutional text, legislative debates, and the concept of state action, clarifying that a constitutional mandate directed to the State applies to executive actions involving privatization and that the Filipino First Policy is self-executing and enforceable by the courts.
The Manila Hotel has historic and cultural significance; the Court found that 51% of MHC’s equity cannot be dissociated from the hotel and its land, thus falling within the national patrimony and economy.
The Court held that if a Filipino bidder matches a higher foreign bid, the award should go to the Filipino in order to give effect to the Filipino First Policy, and that GSIS’s refusal to recognize the matching bid and to award to petitioner constituted grave abuse of discretion.

Issues

Is Sec. 10, second paragraph of Article XII, 1987 Constitution self-executing and judicially enforceable without implementing legislation?
Does the sale of 51% of Manila Hotel Corporation fall within the national economy and patrimony such that the Filipino First Policy applies to require preference for a Filipino bidder?
Did the Government Service Insurance System commit grave abuse of discretion in refusing to accept petitioner’s matching bid and in proceeding to sell to Renong Berhad?

Ruling

Yes — Sec. 10, second par., Art. XII is self-executing and creates enforceable rights; the Constitution mandates preference for qualified Filipinos in the grant of rights, privileges, and concessions covering national economy and patrimony, and does not require enabling legislation to operate.
Yes — The 51% equity in Manila Hotel Corporation constitutes part of the national patrimony and national economy; the hotel is a historic national landmark and its patrimony includes both the building and the land; thus the Filipino First Policy applies.
Yes — GSIS’s refusal to accept the matching bid and its decision to proceed with sale to Renong Berhad violated the constitutional mandate; the Court directed GSIS to cease and desist from selling to Renong and to accept the matching bid, thereby upholding the Filipino First Policy.

Reasoning / Ratio Decidendi

The Constitution is the supreme law; when a provision is self-executing, it creates immediate rights and remedies; a contrary interpretation would allow the legislature to erode constitutional commands.
Sec. 10, second paragraph, Art. XII was designed to ensure a pro-Filipino bias in economic activities affecting the national economy and patrimony; even though some interpret it as requiring implementing legislation, the Court held it is complete in itself and judicially enforceable.
The national patrimony is not limited to natural resources but includes cultural heritage and national identity; Manila Hotel embodies Philippine heritage and history, making its 51% equity a matter of national patrimony.
In a privatization context, government action involved in selling a national patrimony must comply with the constitutional directive to prioritize qualified Filipinos; the sale to Renong Berhad, if not matched by a Filipino bidder, would contravene the Constitution.
The doctrine of state action applies since GSIS’s involvement in privatization is a state function; the sale is not merely a private transaction but a government-facilitated disposition of a national asset.

Doctrine / Legal Principle

Constitutional supremacy: all laws and contracts must conform to the Constitution; violations render them void.
Self-executing provisions: a constitutional mandate complete in itself may be judicially enforceable without implementing legislation.
Filipino First Policy: in the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos (including Filipino-controlled corporations).
National patrimony includes cultural heritage and national identity, not only natural resources.
State action: government involvement in privatization triggers constitutional constraints on private transactions involving national assets.

Disposition

Respondents are directed to cease and desist from selling 51% of Manila Hotel Corporation to Renong Berhad and to accept the matching bid of Manila Prince Hotel Corporation at P44.00 per share; to execute the necessary agreements and documents to effect the sale; to issue the necessary clearances; and to do all acts required to complete the sale to the Filipino bidder.

Concurring / Dissenting Opinions

Concurring opinions: Padilla, Vitug, Mendoza, and Torres (with separate concurrence).
Dissenting opinions: Puno (joined by Narvasa, J., Chief Justice, and Melo, J., in part) and Panganiban (with separate dissent).
The decision reflects a majority ruling but notes substantial concurrence and dissent among individual justices concerning the interpretation of constitutional self-execution and the scope of national patrimony.

Significance / Notes

Reaffirms that constitutional provisions, especially nationalist economic provisions, may be self-executing and judicially enforceable without additional implementing statutes.
Establishes that national patrimony includes iconic cultural assets and landmarks, not solely lands or natural resources.
Emphasizes the duty of the judiciary to uphold constitutional commands in privatization and foreign investment contexts, even when nationalist policies may appear to impede immediate economic interests.
Clarifies that in public bidding for national assets, the matching bid by a Filipino bidder should be given effect when a foreign bidder offers the highest price, to preserve the Filipino First Policy.
Influences future privatization procedures by underscoring constitutional constraints on sales of national assets and the need to consider nationality when determining winning bidders.

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