JG Summit Holdings, Inc. vs. CA [G.R. No. 124293 Nov. 20, 2000] (Digest)

II. STATUTES > J. Repeals > 8. Effect of Repeal or Declaration of Unconstitutionality Unconstitutionality of Repealing Law > JG Summit Holdings, Inc. vs. CA [G.R. No. 124293 Nov. 20, 2000]

Re: "Effect of Repeal or Declaration of Unconstitutionality of Repealing Law " JG Summit Holdings, Inc. vs. CA [G.R. No. 124293 Nov. 20, 2000]

FACTS:       

National Investment and Development Corporation (NIDC) Kawasaki Heavy Industries, Ltd. of Kobe, Japan (Kawasaki) Philippine Shipyard and Engineering Corporation (PHILSECO) Philippine National Bank (PNB) National Government Philyards Holdings, Inc. (PHI) JG Summit Holdings, Inc.

On January 27, 1977, NIDC, a government corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki for the construction, operation and management of PHILSECO. It was provided under paragraph 1.4 of the JVA that: "Neither party shall sell, transfer or assign all or any part of its interest in SNS to any third party without giving the other under the same terms the right of first refusal. This provision shall not apply if the transferee is a corporation owned or controlled by the GOVERNMENT or by a KAWASAKI affiliate." On November 25, 1986, NIDC transferred all of its rights, title and interest in PHILSECO to PNB and subsequently transferred transferred to the National Government upon the issuance Administrative Order No. 14. But then, President Corazon C. Aquino issued a proclamation to sell and privatize those nonperforming assets of the National Government. She established two committees; Committee on Privatization (COP) and the Asset Privatization Trust (APT) . The COP and APT then wanted to privatize PHILSECO for the best interest of the government and decided to sell their 87.67% interest. What happened was, instead of invoking the right of first refusal under the JVA, the Kawasaki negotiated that they be given the right to top by 5% the highest bid for said shares. One of Kawasaki's businesses is the PHI and the former informed the APT that PHI will be the one who will exercise its right to top by 5%. At the public bidding, the consortium composed of JG Summit Holdings, Inc., Sembawang Shipyard Ltd. of Singapore (Sembawang), and Jurong Shipyard Limited of Malaysia (Jurong), was declared the highest bidder. But considering the previous negotiation between the APT and Kawasaki, the former notified the consortium (JG, Sembawang, & Jurong) Jurong) that the PH I will top the bid by 5%. But JG Summit Holdings, Inc. protested and contended that PHILSECO, as a shipyard, is a public utility and, hence, could be operated only by a corporation at least 60% of whose capital is owned by Filipino citizens, in accordance with Article XII, Section 10 of the Constitution. Petitioner asserts that a shipyard is a public utility pursuant to Section 13 (b) of Commonwealth Act No. 146. 146 . On the other hand, Kawasaki consortium contended that shipyards are no longer public utilities by express provision of Presidential Decree No. 666, 666, which provided incentives to the shipbuilding and ship repair industry. Indeed, P.D. No. 666 dated March 5, 1975 explicitly stated that a shipyard was not a public utility. Section 1 thereof provide as follows:


Registration required but not as Public Utility. The business of constructing and repairing vessels or parts thereof shall not be considered a public utility and no Certificate of Public Convenience shall be required therefor. However, no shipyard, graving dock, marine railway or marine repair shop and no person or enterprise shall engage in the construction and/or repair of any vessel, or any phase or part thereof, without a valid Certificate of Registration and license for this purpose from the Maritime Industry Authority, except those owned or operated by the Armed Forces of the Philippines or by foreign governments pursuant to a treaty or agreement. However, Section 1 of P.D. No. 666 was expressly repealed by Section 20 of Batas Pambansa Blg. 391, 391, the Investment Incentive Policy Act of 1983. Subsequently, Executive Order No. 226, 226 , the Omnibus Investments Code of 1987, was issued and Section 85 thereof expressly repealed B.P. Blg. 391. ISSUE: 

Whether or not the repeal of a repealing law revives the previous law repealed by the latter.

HELD: Per Resolution dated November 20, 2000: The express repeal of B.P. Blg. 391 by E.O. No. 226 did not revive Section 1 of P.D. No. 666, declassifying the shipbuilding and ship repair industry as a public utility, as said executive order did not provide otherwise. When a law which expressly repeals a prior law is itself repealed, the law first repealed shall not be thereby revived unless expressly so provided. Consequently, when the APT drafted the ASBR sometime in 1993, P.D. No. 666 no longer existed in our statute books. While it is true that the repeal of a statute does not operate to impair rights that have become vested or accrued while the statute was in force, there are no vested rights of the parties that should be protected in the case at bar. The reason is simple: said decree was already inexistent when the ASBR was issued. Per Resolution dated September 24, 2003: The Court ruled that shipyard is not a public utility. When Batas Pambansa Blg. 391 expressly repealed P.D. 666 which impliedly repealed the provisions of C.A. 146, the B.P. Blg 391 actually revives the C.A. 146 making a shipyard classified as public utility which is bound by the provisions under Article XII of the Constitution which states: Sec. 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association shall be citizens of t he Philippines.


In other words, with the enactment of Batas Pambansa Blg. 391, a shipyard reverted back to its status as a public utility. When Executive Order No. 226 was issued repealing B.P. Blg. 391, the provisions under C.A. 146 ceases to operate since the revival of the provisions under C.A. 146 is highly dependent upon the existence of B.P. Blg. 391. Per Resolution dated January 31, 2005: The SC said said that even if Kawasaki’s shareholdings in PHILSECO exceed 40%, it would not necessarily affect its standing as a shareholder; it would most likely affect PHILSECO itself and disqualify it from owning land. This finds support under the basic corporate law principle that the corporation corporation and its stockholders stockholders are separate juridical entities. In this vein, the right of first refusal over shares pertains to the shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land. This is the clear import of the relevant provisions under the constitution. Finally, the court debunked JG Summit’s argument that an option to buy land (by a foreigner/foreign corporation) being void itself, the right of first refusal granted to Kawasaki, a Japanese corporation, and the right to top, which is sourced from the right of first refusal, are also void. In arguing in this manner, JG Summit relied in the case of Philippine Banking Corporation v. Lui She. The SC said that nothing in the above decision absolutely barred an alien from ever having the capacity to acquire land in the Philippines. He can be given an option to buy real property, which he can exercise on condition that he is granted Philippine citizenship. What was barred by the above ruling was a situation where an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50 years, because by then it becomes clear that the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages not only of the right to enjoy the land, but also of the right to dispose of it — rights the sum total of which make up ownership. Such a situation is not present in the c ase at bar. Notes: "A repeal is the removal or reversal of a law. The effect of repealing a statute was to obliterate it completely from the records of Parliament as though it had never been passed." "There are two views on the effects of a declaration of the unconstitutionality of a statute: first is the orthodox view and the modern view. Under the orthodox view, an unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, inoperativem as if it had not been passed. It is therefore stricken from the statute books and considered never to have existed at all. Not only the parties but all persons are bound by the declaration of unconstitutionality, which means that no one may thereafter invoke it nor may the courts be permitted to apply it in subsequent cases. It is, in other words, a total nullity. Under the modern view, the court in passing upon the question of constitutionality does not annul or repeal the statute if it finds it in conflict with the Constitution. It simply refuses to recognize it and determines the rights of the parties as just as if such statute had no existence. The court may give its reasons for ignoring or disregarding the law, but the decision affects the parties only. The opinion or


reasons of the court may operate as a precedent for the determination other similar cases, but it does not strike the statute from the statute books; it does not repeal, supersede, revoke, or annul the statute. The parties to the suit are concluded by the judgment, but no one else is bound."

JG Summit Holdings, Inc. vs. CA [G.R. No. 124293 Nov. 20, 2000] (Digest)

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