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SUPREME COURT OF THE PH!UPPINES

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,iffilanila

EN BANC

BAGONG ALYANSANG G.R. No. 221190

MAKABA YAN (BAY AN),
represented by its secretary-general, Present:
RENATO M. REYES, JR.;
REPRESENTATIVE NERI
GESMUNDO, C.J.,
JAVIER COLMENARES; TRAIN
LEONEN,
RIDERS NETWORK (TREN),
CAGUIOA,
represented by its spokesperson, .HERNANDO,
JAMES BERNARD ECHANO
LAZARO-JAVIER,
RELATIVO, and members,
INTING*,
ANGELO VILLANUEVA
ZALAMEDA,
SUAREZ AND MARIA DONNA
LOPEZ, M·*,
GREY MIRANDA; MARIA
GAERLAN,
FINESA ALCANTARA COSICO;
ROSARIO*,
SAMMY T. MALUNES;
LOPEZ, J.*,
FERDINAND RIMANDO GAITE;
DIMAAMPAO,
and MARIA KRISTINA CASSION,
MARQUEZ,
Petitioners,
KHO, JR., and
SINGH*, JJ
-versus-

HON. JOSEPH EMILIO A.

ABAYA, in his ca pa city as secretary
of the Department of Transportation
and Cmnmunications and as
chairman of the Light Rail Transit
Authority Board of Directors;
DEPARTMENT OF
TRANSPORTATION AND
corvtJVIUNlCATIONS; HON.
HONORITO D. CHANECO, in his
capacity as administrator of the
Light • Rail Trausit Authority;
I
LIGHT RAIL TRANSIT

•· On official business.
Decision 2 G.R. No. 221190

AUTHORITY; . and LIGHT RAIL

MANILA CORPORATION, Promulgated:
_ Respondents. October 8, 2024
x--------------------------------------------

DECISION

LEONEN,J.:

The Supreme Court's jurisdiction to issue writs of certiorari and

prohibition is shared with the Regional Trial Courts and Court of Appeals.
This shared jurisdiction is, however, subject to the principle of hierarchy of
courts which prohibits litigants to seek direct and immediate recourse to this
Court. A direct invocation of the Court's original jurisdiction may only be
permitted when there exist "special· and important reasons" involving
questions of law.

Before this Court is a Petition for Certiorari and Prohibition assailing

the validity of the concession agreement for the Manila Light Rail Transit 1
(LRT 1) Extension, Operations and Maintenance Project (Concession
Agreement). Petitioners Bagong Alyansang Makabayan (BAYAN), Bayan
Muna Party-list Representative Neri Javier Colmenares (Colmenares), Train
Riders Network (TREN), MariaFinesaAlcantara Cosico; Sammy T. Malunes,
Ferdinand Rimando Gaite, and Maria Kristina Cassion pray for the
nullification and enjoinment of the implementation of the Concession
Agreement, which according to them have been entered into with grave abuse
of discretion amounting to lack or excess of jurisdiction. 1

Sometime _in November 2010, the Philippine Government adopted a

Public-Private Partnership (PPP) program for its infrastructure projects. 2 The
program involves "a contractual agreement between the Government and a
private firm targeted towards financing, designing, implementing[,] and
operating infrastructure facilities and services that were traditionally provided
by the public sector." 3

Among the PPP priority projects was the Manila LRT l Extension,
Operations and l\1aintenance Project (LRT 1 Extension Project), pertaining to,
among others, the extension of LRT 1 from Baclaran to Bacoor, Cavite. The
LRT 1 Extension Project, which was sponsored by the Department of
Transportation and. Communications (DOTC) and the Light Rail Transit
Authority (LRTA), was initially approved by the National Economic and

Rollo; ·pp. 3-86.

Id. at 1163
Public-Private Partnership Center, What is PPP?, available at https:i/ppp.gov.ph/ppp-program/what-is-
ppp (last accessed on March 8, 2023).
Decision 3 G.R. No. 221190

Development Authority (NEDA) Board on March 22, 2012. 4

In June 2012, the Invitation to Qualify and Bid (Invitation to Qualify)

for the LRT 1 Extension Project was published in several newspapers. 5

In a December 27, 2012 Notice, the Special Bids and Awards

Committee (Awards Committee), composed of representatives from DOTC
and LRTA, proclaimed the following as pre-qualified bidders: (1) Light Rail
Manila Consortium (LRMC); (2) SMC Infra Resources, Incorporated; (3)
DMCI Holdings, Incorporated; and (4) MTD-Samsung Consortium. 6

On the scheduled date for bid proposal submissions, only LRMC

submitted. However, its proposal was rejected by the Awards Committee for
failure to comply with the conditions indicated in the Instructions to Bidders.
Accordingly, the Awards Committee declared a failure of bidding for the LRT
1 Extension Project. 7

Following a failed bidding, the government modified the terms of the

LRT 1 Extension Project. The revised tenns were approved by the NEDA
Board in November 2013. 8

On December 3, 2013, the Invitation to Qualify and Bid for the LRT 1
Extension Project was again announced in several newspapers. The
Instructions to Bidders were likewise made available. 9

Subsequently, DOTC and LRTA (collectively, grantors) met with

prospective bidders to explain the bidding process. Following several
meetings between them and the prospective bidders, the terms of the
Concession Agreement were amended, and the final version was approved and
released on April 27, 2014. 10

On May 28, 2014, the scheduled date for the submission of the bid
proposals, only LRMC-composed of the Metro Pacific Light Rail
Corporation, Ayala Corporation's AC Infrastructure Holdings Corporation,
and the Philippine Investment Alliance for Infrastructure's Macquarie
Infrastructure Holdings PTE Limited-submitted a bid proposal. 11

I
4
Rollo, pp. 1163-1164.
5
Id at 1164.
6
Id
7
Id. at I 3 17.
3
Id. at 1164-1165.
9
/d.ntl!65.
10 Id.
Ii Id.
Decision 4 G.R. No. 221190

On September 12, 2014, a Notice of Award was issued to LRMC. 12

On October 2, 2014, the grantors and LRMC executed the Concession

Agreement, 13 under which LRMC was authorized to: (1) construct the LRT
Line 1 extension from Baclaran to Bacoor, Cavite; and (2) "operate and
maintain the existing LRT Line I" for 32 years. 14

Petitioners then filed the present Petition, alleging that the Concession
Agreement was unconstitutional and detrimental to the Filipino people. 15

According to petitioners, this Court has recognized that a rule 65

petition is an appropriate remedy to question the Concession Agreement's ·
constitutionality. They stress that Araullo v. Aquino 11116 held that petitions
for certiorari and prohibition may be used to invoke this Court's power of
expanded judicial review and challenge acts of both legislative and executive
officials. 17 They assert that the allegations in their petition demonstrate that
the Concession Agreement's execution was tainted with grave abuse of
discretion warranting the institution of a rule 65 petition. 18

Petitioners justify their direct resort to this Court on the ground that
they raise pure questions of law. They contend that the constitutional issues
involved may be resolved without delving on the factual assertions stated in
their petition. They also insist that direct resort to the Supreme Court is proper
since they advance "serious and important" constitutional issues of
transcendental significance. 19

On the substantive issues, pet1t10ners submit that the Concession

Agreement and the Schedules between respondents DOTC, LRTA, and
LRMC should be declared null and void based on the following:

First, respondents violated the constitutional right to information on

matters of public concern when they refused to furnish petitioners with copies
of the Concession Agreement, its annexes, and the documents relating to the
Concession Agreement's negotiations. 20

Second, permitting respondents to p~riodically adjust the LRT fare

without notice and hearing, as required under the Public Service Law,

12
ld.atll65--1166.
13
Id. at 87-746.
14
Id. at 1166.
15
Id. at 5.
16
752 Phil. 716 (2014) [Per J. Bersamin, En Banc].
17
Rollo, pp. 1242-1244.
18
Id. at 1244-1245.
19
Id at 1245-1248.
20
Id at 1252-1262.
Decision 5 G.R. No. 221190

constitutes a violation of the public's right to due process. 21

Third, the Concession Agreement infringes on LRTA employees'

constitutional right to security of tenure. Petitioners claim that under the
Concession Agreement, the concessionaire has the absolute discretion to
dismiss a transferring employee due to economic reasons. 22 Petitioners also
insist that the Concession Agreement fails to provide guidelines to be followed
by transferring employees to prevent them from being disch_arged. 23 •

Fourth, taking into consideration the LRT 1 Extension Project's

significance, the Concession Agreement cannot be considered an act of
coordination between respondents. 24 According to petitioners, the Concession
Agreement is essentially a public utility franchise which can only be granted
by Congress. With respect to the construction and maintenance of a light rail
system, petitioners stress that the franchise or authority was granted to LRTA
through Executive Order No. 603 25 , which contains no provisions allowing
LRTA to delegate its function to another entity. 26

Lastly, the Department of Transportation's27 (DOTr) powers and

functions over railways do not include the authority to grant a anchise for
the LRT's construction, operation, and maintenance. 28

Petitioners also assert that the Concession Agreemfnt contains

unconscionable stipulations which violate constitutional a d statutory
provisions. 29

They stress that the Commission on Audit (COA), in its, 017 Annual
1

Audit Report (AAR), discussed issues raised by the Office ofthe Government
Corporate Counsel (OGCC) during its contract review, particularly on the
following matters: ( l) differential generation cost; (2) viability ghp financing;

21
22

23
24
Id. at 1262-1267.
Id. at 1290-1292.
Id.
Id. at 1303.
I
25
F;xecutive Order No. 603 (! 980), Creating a Light Rail Transit Authority, Vesting the Same with
Authority to Construct and Operate the Light Rail Transit (LRT) Project and Providing Funds Therefor.
26
Rollo, pp. 1293-1303.
27
Republic Act No. 10844 (2015), Department of Information and Communications Technology Act of
2015, sec. 15(a)(6) provides:
SEC. 15. Transfer of Agencies and Personnel. -
(a) The following ager.cies are hereby abolished, and their powers and functions, applicable funds and
appropriations, records, equipment, prope1iy, and personnel transferred to the Department:

(6) All operating units of the Depaiiment of Transportation and Communications (DOTC) with functions
and responsibilities dealing with communications.
All offices, services. divisions, units and personnel not otherwise covered by this Act for transfer to the
Department shall be retained under the DOTC which is hereby renamed the Depaiiment of
Transportation.
28
Rollo, pp. 1300-1301.
29
Id at 1267.
Decision 6 G.R. No. 221190

and (3) provisio'n:s on variations and adjustments. 30 These issues, according

to petitioners, have yet to be addressed by respondents. 31

Likewise, they aver that the Concession Agreement's balancing

payment method proves that the contract is disadvantageous to the
government. They assert that while the Build-Operate-Transfer (BOT) Law32
does not prohibit installment delivery of the concession payment, the
balancing payment method renders the concession payment contingent on the
grantors' liabilities to the concessiona_ire. Petitioners then stress that under
this scheme, the amount of concession payment to be received by the grantors
is not guaranteed. 33

Additionally, pet1t10ners question the arrangement permitting the

concessionaire to offset from the concession fee the deficit payment; and
recover differential generation costs through fare adjustment, which allegedly
allows the concessionaire to profit from the agreement without needing to pay
for anything. 34 In relation, petitioners also assail the Concession Agreement's
provision on differential generation cost, which allegedly passes on to the
grantors the liability for power fluctuations. They emphasize that the
inclusion of this provision did not go through public hearing and will therefore
be detrimental to the grantors and, ultimately, to the public. 35

They also claim that the grantors assumed substantial financial risks
equating to unconscionable financial guarantees in favor of the
concessionaire. They claim that the securities which the concessionaire is
required to set up are negligible compared to the grantors' financial
obligations under the Concession Agreement. They likewise stress that the
liability of the concessionaire, should it not perform its obligations in relation
to the operation and maintenance of the LRTl system, are comparably lesser
than the grantors' liabilities should they fail to "increase the Notional Fare",
fund the Blocked Account, and acquire the identified intermediate right of
way, among others. On this note, petitioners presented a table of financial
risks and its indicative amounts, which the grantors allegedly assumed under
the Concession Agreement: 36

I
30
Id. at 1269--1270.
31 id.
32
Republic Act No. 6957 ( 1990). An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, and For Other Purposes.
33
Id. at 1270-1274.
34
Id. at 52.
35 Id.
36
id. at 1274---!282.
Decision 7 G.R. No. 221190

Failure to comply with obligations relating to the

Operations and Maintenance of the Existing LRTl system

When Liability will

Item Indicative Amount
(or commence to) Attach
Restoration of Existing
System to meet Existing Within 5 days after Effective Date -
system Requirements of Concessionaire to give notice of
(a) 100 operational light intention to claim; Within 40 days 2,600,000,000.00
rail vehicles ("LRVS") thereafter - Concessionaire to present
and (b) 106-minute detailed estimate of cost
cycle time
282,666,667.00
On Effective Date - Grantors should (2 quarters, where
LRV Shortfall
meet the Existing System 1st quarter shall be
Payments
Requirements from September 5
to September 30)

Replenishment of
strategic spare parts,
tools. Equipment and On Effective Date - Level as of Bid
consumables to meet Estimate to be
Proposals Sub.mission Date should
the levels as of Bid provided by LRTA
be met
Proposals Submission
Date (April 28, 2014)

Within 30 days after Effective Date -

Rectification of Concessionaire to give notice of
Seismic/Fire Defects belief that seismic/fire protection 2,000,000,000.00
elements of Existing System do not
comply with Legal Requirements

Restoration Co st s for Within the later of October 2, 2016 or

Structural ·Defects (for 1st anniversary of Effective Date -
2 015-Q4, liability cap Concessionaire to conduct Structural 500,000,000.00
of [PHP] 2 Billion Defect Survey and submit Structural
spread over four Defect Report; Within 10 days from
i-_g~ua_r_te_r_s~)_ _ _ _ ___, receipt of Structural Defect Report - 1 - - - - - - - - - - 1
Compensation for Independent Consultant to approve
shutdown of Station/s and issue Structural Defect Notice;
during restoration work Within 60 days from the issuance of
to cure Structural Structural Defect Notice -
Defects (assuming at Concessionaire to provide Detailed 27,000,000.00
least one station will be Design to cure structural Defects;
shutdown, at [PHP] Within 10 days from receipt of
300.00/day for 90 days) Detailed Design - Independent
i-------------1 Consultant to issue Structural Defect 1 - - - - - - - - - - - ,
Compensation for Design Acceptance Certificate;
shutdown of sections of Concessionaire to implement No estimate since
the Track during restoration works according to there is no data
restoration work to cure Structural Defect Notice and Detailed available
Structural Defects · Design

Indicative Total Amount Needed 5,409,666,667.00

I
Decision 8 G.R. No. 221190

Failure to Increase the Initial Notional Fare

to the equivalent of the Approved Fare

When Liability will

Item Indicative Amount
(or commence to) attach

October 30, 2015 - Concessionaire

80,000,000.00
Fare Deficit Payment to deliver invoice on fare deficit
per quarter
from September

106,667,000.00
(2 quarters where
Indicative Total Amount Needed 1st quarter shall be
from September 5
to September 30)

'
Funding of the Blocked Account

When Liability will

Item Indicative Amount
(or commence to) attach

Minimum funding for

June 30, 2016 500,000,000.00
Blocked Account
Indicative Total Amount Needed 500,000,000.00

Amounts paid pursuant to dispute

When Liability will

Item Indicative Amount
(or commence to) attach

Procurement for depot works on the

Land reclamation of
satellite depot will commence on
intermodal station
September 1, 2015 111 order to 1,014,000,000.00
(adjacent to the satellite
complete the construction of the
depot)
satellite depot by March 15, 2016
Procurement for LRVs will
commence on September 1, 2015, in
Tetra radio system on order to ensure that 120 LRV s have
120 light rail vehicles been designed, procured, delivered, 45,000,000.00
(LRVs) commissioned and are ready for
integrated testing 011 October 31,
2017
Indicative Total Amount Needed 1,059,000,000.00
Decision 9 G.R. No. 221190

Acquisition of Identified Intermediate ROW

.When Liability will

Item Indicative Amount
(or commence to) attach

Acquisition of
Identified Intermediate
Acquisition of the Identified
Right-of-Way (5.438 m2
Intermediate Right-of-Way will
in Paranaque City at
commence within the third quarter of
[PHP] 40,000/m2 ; 8.400 397,445,000.00
2015 in order to fully acquire the
m2 in Paranaque City at
properties by January 30, 2017 - or
[PHP] 20,000/m2 [;] and
two years from its identification
477 m2 in Bacoor City
at rPHPl 25,000/m2 )
Once the Secretary of Transportation
and Communications and LRTA
Acquisition of right of
Administrator have approved the
way for change in MIA 16,650,000.00
variation, an additional 422 sq.m
station
property, valued at [PHP] 50, 000.00
/sq.m will be acquired.

Once the Secretary of Transportation

and Communications and LRTA
Acquisition of right of Administrator have approved the
30,000,000.00
way for Aseana Station variation, an additional 600 sq.m.
property, valued at [PHP]
50,000.00/sq.m. will be acquired.

Indicative Total Amount Needed 444,095,000.00

Total Indicative Amount (in IPHP]) 7,519,428,667.00

Petitioners also assail the grantors' assumption of real property tax

liabilities for the rail project assets, arguing that this arrangement renders the
grantors liable to pay real prope1iy taxes without the ability to protest tax
assessments. 37

Petitioners then insist that all these financial guarantees constitute

government subsidies which effectively render useless the BOT Law's
objective. 38

Finally, petitioners claim that the grantors' financial guarantees and the
parties' failure to conduct public hearings prior to a fare increase confirm that
the Concession Agreement unjustly enriches the concessionaire, •to the
prejudice of the Government and, ultimately, the taxpayers. Petitioners aver /
that the excessive risks assumed by the grantors warrant the invalidation of

37
Id. at 1282-1284.
38
Id at 1285--1286.
Decision 10 G.R. No. 221190

the Concession Agreement. 39

Based on these assertions and due to the alleged patent

unconstitutionality of the Concession Agreement, petitioners pray for the
issuance of a preliminary injunction and/or a temporary restraining order
enjoining the implementation of the agreement. 40

For its part, respondents DOTr41 and former DOTC Secretary Joseph
Emilio A. Abaya (Secretary Abaya) counter that the Petition should be
dismissed outright on account of the following procedural infirmities:

Fir:st, acts performed in the exercise of an executive prerogative, as in

this case, are not covered by a Rule 65 petition. They claim that a writ of
certiorari only covers judicial or quasi-judicial functions while a petition for
prohibition may only be instituted against officers or persons exerc1smg
judicial, quasi-judicial, or ministerial functions. 42

Second, none of the petitioners have the legal standing to sue. While
claiming to have instituted the present Petition as taxpayers, petitioners failed
to demonstrate that they have sustained, or will sustain, direct injury by reason
of the Concession Agreement's implementation. 43 Similarly, petitioner
Colmenares made no mention of the legislative prerogative allegedly violated
by the execution of the Concession Agreement. 44

Finally, petitioners' assertions failed to establish that the issue is of

transcendental importance. 45

As to the merits, respondents contend that no constitutional or statutory

provision was violated by the execution of the Concession Agreement. They
raise the following contentions:

First, respondents complied with the constitutional guarantee to

information when it posted, published, and advertised in its websites and
bulletin boards the invitation to qualify and bid, as well as several general and
special bid bulletins. Additionally, they stress that they conducted a pre-bid
conference where all prospective bidders were informed of the bidding /}
procedure for the project. 46 .,f"

39
Id at 1286-1289.
40
Id. at 67-7 l.
41
See Republic Act No. 10844 (2015), sec. l5(a)(6).
42
Rollo, pp. 1166--1 I 69.
43
Id.atll69-117l.
44
Id. at 1171.
45
Id at 1171-1173.
46
Id. at 1173-1176.
Decision 11 G.R. No. 221190

Second, the Concession Agreement is not a lopsided contract

considering that the concessionaire had also assumed substantial financial
obligations. According to respondents, the concessionaire undertook to pay
the concession payment notwithstanding that it was not a requirement under
the BOT Law. 47 Further, respondents aver that pursuant to the Revised
Implementing Rules and Regulations of the BOT Law (Revised IRR), the
concessionaire's performance securities may be used to settle liquidated
damages due to the grantors should the former be found guilty of delay. 48

Third, Republic Act Nos. 8974 and 8975 permit the grantor's
acquisition of the right of way for the LRT 1 Extension Project. They also
argue that the government's acquisition ofthe right of way ensures the prompt
completion of the project. 49

Fourth, the grantors' obligation to set up a blocked account does not

guarantee profit payments in concessionaire's favor. They maintain that not
all components of the concessionaire revenue may be charged against the
blocked account as it only covers the deficit and grantor's compensation
payments. so

Fifth, the nature of a value added tax (VAT) as an indirect tax allows
the concessionaire to shift the burden of paying it to the buyer or by including
. it in the LRT fare. 51

Sixth, the grantors' assumption of the liability to pay real property taxes
for the rail project assets is valid and reasonable. Citing National Power Corp.
v. Province of Quezon, 52 respondents contend that the BOT Law permits the
government's assumption of taxes to entice private entities to participate in
BOT projects.

Seventh, the balancing of payment arrangement does not constitute

unjust enrichment on the concessionaire's part. Respondents insist that the
arrangement only pertains to the "netting off of certain payments owed to
either party[,]" 53 which is equivalent to compensation under Article 1278 of
the Civil Code. 54 That there is no unjust enrichment is further demonstrated
by the nature of a BOT project where the concessionaire shoulders the full
cost of construction, without requiring cash outlay from the government. 55 /

47
Id. at 1177-1192.
48
/d.atl193-1194.
49
Id. at I 195-1196.
50
/datll96-1!98.
51
Id at I 199-1200.
52
610 Phil. 456 (2009) LPer J. Brion, Second Division].
53
Rollo, pp. 1202-1203.
54
Id. at 1203.
55
Id. at 1204-1205.
Decision 12 G.R. No. 221190

Eighth, the differential generation cost and deficit payments are

reasonable measures for the purpose of cancelling out parties' losses or
gains. 56 According to respondents, the amount of these obligations are
computed using a predetermined formula which considers "extreme
fluctuations in generation costs" 57 and differences between the notional and
approved fares. 58

Ninth, the government's contribution on the project did not exceed the
50% limitation under the BOT Law. Respondents state that since the
Concession Agreement does not specify any valuation of the assets
contributed, there was no basis for petitioners to conclude that the 50%
limitation was violated. 59 Respondents stress further that being the agency
having technical expertise of determining a transportation project's viability,
respondents' exercise of its administrative discretion in entering into the
Concession Agreement should be respected by this Court. 60

Tenth, LRTA did not unduly delegate its powers to the DOTr. LRTA is
primarily responsible for the construction of the country's light rail transit
system; DOTr is the government agency primarily tasked with the
development and regulation of the country's transport system. Respondents
contend that nothing in LRTA's charter prohibits DOTr and LRTA from
cooperating in the implementation of the LRT 1 Extension Project. 61

Finally, congressional approval or franchise need not be obtained for

the LRT 1 Extension Project, as the 1987 Administrative Code and Executive
Order No. 125-A both recognize respondent DOTr's power to authorize the
concessionaire to operate the LRT 1. 62

Like the DOTr, respondents LRTA and its administrator, Hon. Honorito
D. Chaneco, argue that there was no violation of the constitutional right to
information. They maintain that with the publication of the invitation to
qualify and the various bid bulletins, "[p]etitioners had all opport1.mities to
participate in the bidding as well as be informed of the transactions concerning
the Project." 63

They also contend that the notice and hearing requirements under the
Public Service Act do not apply to the fixing or adjustment of the LRT rate.
They insist that LRTA' s authority to fix the LRT rate is conferred by Executive
Order No. 603, which only requires consultation with the Board of
Transportation, now the Land Transportation Franchising and Regulatory
56
Id. at !206-1209.
57
Id at 1208.
58
Id at 1206-1209.
59
Id. at 1209-1210.
60
id at 1211-12!2.
61
Id. at 1213-1216.
<, 2 Id at 1216--1220.
63
Id at l 3 19.
Decision 13 G.R. No. 221190

Board (LTFRB). 64 That no notice and hearing is required is further supported

by LRTA's lack of quasi-judicial functions and this Court's ruling in
Philippine Conswners Foundation, Inc. v. Secretary of Education, Culture
and Sports. 65

As to the alleged undue delegation of the LRT l's operation and

maintenance, they aver that Executive Order No. 603 explicitly permits LRTA
to perform its functions through an agent or a private entity without the need
for the latter to obtain a separate franchise. 66 They also assert that in LRTA v.
Comnzission on Audit, 67 this Court recognized the authority of LRTA to
delegate to a private entity the operation and maintenance of the light rail
transit system. 68

They also emphasize that the BOT Law does not prohibit the grantors
from granting support or contributing to a project. They aver that the Revised
IRR has enumerated certain forms of support which may be granted to a
project, including but not limited to cost sharing and direct government
subsidy. 69

Lastly, respondents stress that the Department of Finance (DOF)

reviewed the terms of the Concession Agreement, which not only include the
contract's financial risks but the contingent liabilities as well. 70

As for respondent LRM.C, it maintains that determining whether the

Concession Agreement is lopsided is a question of fact which should be raised
before a trial court. 71 In relation, it claims that the Petition should be
dismissed outright since petitioners' direct filing with this Court violates the
doctrine of hierarchy of courts. 72 That it should be dismissed is further
supported by this Court's ruling in Tatad v. Garcia, 73 which involved a petition
to prohibit the implementation of the "Revised and Restated Agreement to
Build, Lease and Transfer a Light Rail Transit System for EDSA[.]" 74

Respondent LRMC further stresses that the Concession Agreement had

been reviewed by the OGCC and DOF, which have the technical expertise to
evaluate the viability and necessity of highly technical contracts. According
to LRMC, the assessment made by these agencies and the subsequent

I
approvals of LRTA, DOTr, and NEDA should be respected by this Court

64
Id. at 1319-1321.
65
23 7 Phil. 606 ( I 987) [Per J. Gancayco, En Banc: l See also rollo, pp. 1321--1322.
c,6 Rollo, pp. I325-1328.
67
• G.R. No. 88365, January 9, 1990 [Notice, En Banc]. See also rol!o, p. 1328.
68
Id. at 1328-1329.
19
' id. at 1323-1325.
70
Id. at 1322-1323.
71
Id. at 1082--1083.
72 Id. at 1085-1086.
73
313 Phil. 296 (] 995) [Per J. Quiason, En Banc].
74 Id
Decision 14 G.R. No. 221190

pursuant to the principle of separation ofpowers. 75

On the matter of the Concession Agreement's alleged

unconstitutionality, LRMC raises the following contentions:

First, as with public respondents, LRMC also maintain that there was
no violation of the constitutional right to information. It claims that DOTr
and LRTA complied with the guidelines laid down in Chavez v. Public Estates
Authority76 since they published the details of the project through the
invitation to qualify and numerous bid bulletins. Accordingly, it states that
"the public had access to information relating to the Project from the very
beginning[. ]" 77

LRMC further contends that the right to information as to negotiations

leading to a contract's execution requires that demands have been made for
the disclosure of these information. Here, while petitioners claimed that their
request for information was refused by respondents, the Petition failed to
narrate the circumstances surrounding petitioners' request. LRMC stresses
that petitioners did not specify that they "submitted any specific request to
access any particular information or documents related to the bidding, the
meetings between the DOTC, the LRTA, and the potential bidders, or internal
meetings of the DOTC and the LRTA." 78

LRMC also claims that infringement of the constitutional right to

information is not a ground for the invalidation of the Concession
Agreement. 79

Second, the installment delivery of the concession payment is not

prohibited by the BOT Law and its Revised IRR. The adoption of this
installment scheme is considered an incentive for the concessionaire's
assumption of the LRT 1 Extension Project. 80

LRMC insists that the delivery of the concession payment is a separate

and distinct undertaking from the concessionaire's obligation to finance the
project. It stresses that while concession payment is not a requirement under
the BOT Law, the concessionaire assumed the obligation as payment for the
government's grant of the project to LRMC. 81

75
Ro!!o, pp. I090-1091.
76
433 Phil. 506 (2002) [Per J. Carpio, En Banc].
77
Rollo, pp. I 075-! 079.
78
Id at 1079-1080.
7
') Id. at 1080--1082.
80
Id. at 1095-1097.
s; /d.atl097--1099.
Decision 15 G.R. No. 221190

It further emphasizes that Section 26.2.e of the Concession Agreement

is a mere representation to the concessionaire, which does not invalidate the
ceiling on the liability of the grantors. 82

Third, the government's delivery of the right of way is a form of support

or contribution to solicited projects permitted under Section 13.3(a) of the
Revised IRR. 83

Further, the concessionaire, as a private entity, has no authority to

exercise the power of eminent domain. 84

Fourth, the creation and transfer of funds to the blocked account shall
be subject to legal requirements, which includes but is not limited to
applicable domestic laws, ordinances, •or regulations. 85 Additionally, it
emphasizes that payments to the concessionaire from the blocked account are
contingent in nature, in that, it shall only occur upon the happening of certain
events indicated in the Concession Agreement. 86

Fifth, the obligations assumed by the grantors-in particular the

restoration of the existing system, LRV shortfall payments, rectification of fire
defects, and structural defects' restoration costs-are not financial guarantees,
but contingent liabilities dependent on the occurrence of certain events. 87

LRMC also denies that these alleged financial guarantees constitute

direct government subsidy, emphasizing that "direct government subsidy"
refers to the government's contribution to the project for which the project
proponent is not obliged to compensate. Contrarily, it maintains that the
concessionaire is liable to deliver concession payment and ownership of the
project assets at no cost to the grantors. 88 Neither does the balancing payment
scheme render contingent the delivery of the concession payment, since this
mechanism merely constitutes "contractual setting off ofliabilities" permitted
under the Civil Code. 89

LRMC also questions the indicative amounts of the grantors' liabilities

for being unfounded and inconclusive estimates. It stresses that petitioners
presented rio basis nor calculation for these amounts. 90

As to the alleged invalidity of the provisions on variation payments, /

32
Id. at I099-1100.
83
id. at i 100.
84
Id. at l l Ol.
85
ld.atll0l-1102.
86
ld.atll02-1103.
87
Id. at 1103-1105.
88
Id. at l 106-1107.
89
Id at I 104-1105.
90
Id. at I 105.
Decision 16 G.R. No. 221190

respondent LRMC maintains that all variation proposals under the Concession
Agreement are subject to the grantors' approval and compliance with legal
requirements. 91

Sixth, VAT is an indirect tax which may be passed on to the buyers,

which in this case are the LRT 1 passengers. 92

Seventh, the grantors' assumption of real property taxes for the rail
project assets is a form of government support or contribution permitted under
the Revised IRR. 93

Eighth, neither the COA nor the OGCC reported any findings on the
alleged invalidity of the Concession Agreement. In its 2017 AAR, the COA
merely noted that its review of the Concession Agreement was yet to be
completed due to the absence of certain documents. However, COA's
recommendations have been partially implemented as indicated in the COA's
2018 and 2019 AARs. 94 As to the OGCC's observations, LRMC stresses that
these were made prior to the execution of the final version of the Concession
Agreement, and that these were mere recommendations which do not relate
the agreement's validity. 95 LRMC also notes that LRTA is being represented
by the OGCC in this case, which has consistently insisted on the agreement's
validity. 96

Ninth, there is no proof that the 50% limitation on the government's

share of the capital expenses was violated by the Concession Agreement. 97
LRMC claims that the question of which items are included in the project cost
necessitates presentation of evidence that must be made before the trial
court. 98 Besides, it insists that the 50% limitation under Section 13.3 of the
Revised IRR has no basis in law, and thus, adopted in excess of the
administrative rule-making power. 99

Tenth, petitioners cannot assert violation of the right to security of

tenure since none of them are available employees as defined in the
Concession Agreement. Accordingly, the petitioners are not considered as
°
real parties-in-interest with respect to this claim. 10 Further, LRMC maintains
that the Concession Agreement is not an employment contract which defines
the relationship between the concessionaire and its employees. 101
I
,., ✓,

91
ld.atl107.
92
ld.atll07-1108.
93
Id. at I I 08-11 I l.
94
/datllll.
95
ld.atlill-1!13.
96
Id. at 1 I 13.
97
/datll13-lll6.
98
Id at l I 16.
99
Id. at 1118-! 122.
100
Id. at I 122.
101
Id. at 1122-i 123.
Decision 17 G.R. No. 221190

Additionally, Section 6.3.c of the Concession Agreement states that the

dismissal of a transferring employee shall be "in accordance with the Relevant
Rules and Procedures" 102 which includes but is not limited to the Constitution
and the Labor Code. On this note, LRMC asserts that the Labor Code
recognizes economic cause as a valid ground for the dismissal of an employee
and provides the procedure for its implementation. 103

Eleventh, the Concession Agreement provides that adjustments in the

approved fare shall be subject to compliance with applicable laws. Section
20.3.b, in particular, states that in granting the adjustment of approved fares,
grantors are first required to obtain all legally mandated relevant consents,
including the consent of third parties such as the public. LRMC then adds that
there have been no increases to the LRT 1 fare since 2015, 104 and that contrary
to petitioners' assertion, the Concession Agreement takes into consideration
various factors to ensure that the fare imposed allows for a reasonable rate of
return. 105

Twelfth, the grantors may validly award the Concession Agreement

without the need of a legislative approval. Citing Albano v. Reyes, 106 LRMC
maintains that the authority to operate public utilities emanates not only from
franchises issued by Congress but also from administrative agencies. It avers
that under the Administrative Code 107 and Executive Order No. 125-A 108
DOTr is vested with the authority to issue franchises for the operation of rail
transportation utilities. This interpretation, according to LRMC, has been
confirmed by the Depaiiment of Justice in its July 4, 2013 Opinion. 109

Finally, nowhere in Executive Order No. 603 does it state that LRTA is
prohibited from granting a private entity the administrative franchise to
operate a light rail transit system 110 nor is it proscribed from cooperating with
DOTr in implementing a light rail project. 111

The issues for this Court's resolution are:

First, whether the Concession Agreement may be validly assailed

through a petition for certiorari and prohibition;

102

103
104
id. at 1124.
id. at 1123-1125.
id. at I 128--1131.
I
105
Id. at 1131.
106
256 Phil. 718 (1989) [Per J. Paras, En Banc].
107
Executive Order No. 292 ( 1987), Administrative Code of 1987.
10s Executive Order No. 125-A (1987), Reorganizing the Ministry of Transportation and Communications,
Defining ltc; Powers and Function, and For Other Purposes.
109
Rollo, pp. 1132--1 i36.
110
Id. at l 136.
Ill icf. at 1137--1 ]38.
Decision 18 G.R. No. 221190

Second, whether the petition complies with the requisites for a judicial
review;

Third, whether petitioners violated the doctrine of hierarchy of courts;

Fourth, whether the Concession Agreement's provision on the periodic

adjustment of LRT fares violates the public's right to due process;

Fifth, whether VAT may be included in the cost of fare collected from
LRT 1 passengers;

Sixth, whether grantors may assume the liability to pay real property
taxes for the rail project assets;

Seventh, whether the Concession Agreement violates the Constitutional

right to security of tenure;

Eighth, whether the Concession Agreement was validly awarded to

respondent LRMC;

Ninth, whether respondents violated the constitutional guarantees to

information and full disclosure of transactions involving public interest; and

Finally, whether the Concession Agreement is a lopsided contract

which only favors respondent LRMC.

The Petition is unmeritorious.

The Court's power of judicial review is an authority vested by the 1987

Constitution. It is enshrined in Article VIII, Section 1, which provides:

SECTION 1. The judicial power shall be vested in one Supreme

Court and in such lower courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle

I
actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government.
Decision 19 G.R. No. 221190

Apaii from settling "actual controversies involving rights 11vhich are

legally demandable and enforceable," the Court's power of judicial review
also includes the authority to determine if any branch or instrumentality of the
Government gravely abused its discretion.

Under the Rules of Court, acts committed with grave abuse of

discretion may be corrected either through a special civil action for certiorari
or prohibition. 112 Both remedies are governed by Rule 65, which states:

SECTION 1. Petition for certiorari. -When any tribunal, board or

officer exercising judicial or quasi-judicial functions has acted without or in
excess of its or his jurisdiction, or with grave abuse of discretion amounting
to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy,
and adequate remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts
with certainty and praying that judgment be rendered annulling or
modifying the proceedings of such tribunal, board or officer, and granting
such incidental reliefs as law and justice may require.

The petition shall be accompanied by a certified true copy of the

judgment, order or resolution subject thereof, copies of all pleadings and
documents relevant and pertinent thereto, and a sworn certification of non-
forum shopping as provided in the third paragraph of section 3, Rule 46.

SECTION 2. Petition for prohibition. -When the proceedings of

any tribunal, corporation, board, officer or person, whether exercising
judicial, quasi-judicial or ministerial functions, are without or in excess of
its or his jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction, and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered commanding the
respondent to desist from further proceedings in the action or matter
specified therein, or otherwise granting such incidental reliefs as law and
justice may require.

The petition shall likewise be accompanied by a certified true copy

of the judgment, order or resolution subject thereof, copies of all pleadings
and documents relevant and pertinent thereto, and a sworn certification of
non-forum shopping as provided in the third paragraph of section 3, Rule
46.

Notwithstanding the limitations under the Rules of Court, we have

recognized that certiorari and prohibition are remedies which may also be
used to question acts of the executive and legislative departments. Arau/lo v.
Aquino 1111 13 teaches:

With respect to the Court, however, the remedies of certiorari and

prohibition are necessarily broader in scope and reach, and the writ of
I
112
Araullo v. Aquino Ill, 737 Phil. 457, 53! (2014) [Per.I. Bersamin, En Banc].
113
737 Phil. 457 (2014) [Per J. Bersamin, En Banc].
Decision 20 G.R. No. 221190

certiorari or prohibition may be issued to correct errors of jurisdiction

committed not only by a tribunal, corporation, board or officer exercising
judicial, quasi-judicial or ministerial functions but also to set right, undo and
restrain any act of grave abuse of discretion amounting to lack or excess of
jurisdiction by any branch or instrumentality of the Government, even if the
latter does noLexercise judicial, quasi-judicial or ministerial functions. This
application is expressly authorized by the text of the second paragraph of
Section 1, supra.

Thus, petitions for certiorari and prohibition are appropriate

remedies to raise constitutional issues and to review and/or prohibit or
nullify the acts of legislative and executive officials. 114

Likewise, Jfitrung v. Carpio-Morales 115 held:

Fundamental is the rule that grave abuse of discretion arises when a

lower court or tribunal patently violates the Constitution, the law, or existing
jurisprudence. We have already ruled that petitions for certiorari and
prohibition filed before the Court "are the remedies by which the grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of
any branch or instrumentality of the Government may be determined under
the Constitution,'' and explained that "[w]ith respect to the Court, xx x the
remedies of certiorari and prohibition are necessarily broader in scope and
reach, and the writ of certiorari or prohibition may be issued to correct
errors of jurisdiction committed not only by a tribunal, corporation, board
or officer exercising judicial, quasi-judicial or ministerial functions, but also
to set right, undo[,] and restrain any act of grave abuse of discretion
amounting to lack or excess of jurisdiction by any branch or instrumentality
of the Government, even if the latter does not exercise judicial, quasi-
judicial or ministerial functions." 116 (Citations omitted)

That certiorari and prohibition may be used to assail acts of "any

branch or instrumentality of the government, even if the latter does not
exercise judicial, quasi-judicial or ministerial functions" was also reiterated in
Jardeleza v. Sereno, 117 Samahan ng mga Progresibong Kabataan v. Quezon
City, 118 Inmates of the New Bilibid Prison v. De Lima, 119 and Kilusang
Magbubukid ng Pi!ipinas v. Aurora Economic Zone and Freeport Authority. 120

With these pronouncements, this Court finds proper petitioners' resort

to a petition for certiorari and prohibition to assail the validity of the
Concession Agreement.

114
Id. at 53 l.
115
83 I Phil. 135 (20 ! 8) [Per J. Martires, En Banc].
116
Id at 151-152.
117
74 l Phil. 460 (20 i4) [Per J. Mendoza. En Banc].
118
8 I 5 Phil. I 067 (20 I 7) [Per J. Perlas-Bernabe, En Banc:].
119
854 Phi!. 675 (2019) [Per J. Peralta, En Banc].
2
i n 890 Phil. 944 (2020) [Per J. Leonen, En Banc:].
Decision 21 G.R. No. 221190

II

As with most constitutionally granted powers, the Supreme Court's

power ofjudicial review is subject to limitations. Jumamil v. Cafe 121 discussed
that it is imperative for a party invoking this Court's power of judicial review
to comply with certain requisites:

There is an unbending rule that courts will not assume jurisdiction over a
constitutional question unless the following requisites are satisfied: (1) there
must be an actual case calling for the exercise of judicial review; (2) the
question before the Court must be ripe for adjudication; (3) the person
challenging the validity of the act must have standing to do so; (4) the
question of constitutionality must have been raised at the earliest
opportunity[;] and (5) the issue of constitutionality must be the very lis mota
of the case. 122 (Citation omitted)

Among these requisites, respondents question the existence of

petitioners' legal standing to sue.

Legal standing or locus standi refers to the right of a party to "come to

a court of justice" and question the validity or constitutionality of a
governmental act. 123 There is compliance with the legal standing requirement
when the litigant has a "personal and substa{?.tial interest in the case such that
the party has sustained or will sustain direct injury as a result of the
governmental act that is being challenged." 124 The rules on legal standing
were clarified in Anak Mindanao Party-List Group v. Executive Secretary
Ermita: 125

Locus .s·tandi or legal standing has been defined as a personal and

substantial interest in a case such that the party has sustained or will sustain
direct injury as a result of the governmental act that is being challenged.
The gist of the question of standing is whether a party alleges such personal
stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the court
depends for illumination of difficult constitutional questions.

It has been held that a party who assails the constitutionality of a

statute must have a direct and personal interest. It must show not only that
the law or any governmental act is invalid, but also that it sustained or is in
immediate danger of sustaining some direct injury as a result of its
enforcement, and not merely that it suffers thereby in some indefinite way.
It must show that it has been or is about to be denied some right or privilege
to which it is lawfully entitled or that it is about to be subjected to some
burdens or penalties by reason of the statute or act cornplained of.

121
507 Phil. 455 (2005) [Per J. Corona, Third Division].
m id. at 464-465.
123
Espina v. Zamora, .Jr. 645 Phil. 269, 276 (2010) [Per J, Abad, En Banc].
124
integrated Bar ofthe Philippines v. Zamora, 392 Phii. 618, 632--633 (2000) [Per J. Kapunan, En Banc],
125
558 Phil. 338 (2007) [Per J. Carpio-Morales, En Banc].
Decision 22 G.R. No. 221190

For a concerned party to be allowed to raise a constitutional

question, it must show that (1) it has personally suffered some actual or
threatened injury as a result of the allegedly illegal conduct of the
government, (2) the injury is fairly traceable to the challenged action, and
(3) the injury is likely to be redressed by a favorable action. 126 (Citations
omitted)

Litigants are deemed to have legal standing when they have material,
real, and personal interest in the assailed act, such that they "sustained or [are]
in imminent danger of sustaining some direct injury as a result of its
enforcement, and not merely that they suffer thereby in some indefinite
way." 127 More particularly, they must demonstrate that "[they have] been or
[are] about to be denied some right or privilege to which [they are] lawfully
entitled or that [they are] about to be subjected to some burdens or penalties
by reason of the statute or act complained of." 128

There are two reasons for the rule on legal standing: first is the respect
for the principle of separation of powers, and second is the acknowledgement
that our resources are limited. Provincial Bus Operators Association of the
Philippines v. Department of Labor and Employment 129 discussed:

The requirements of legal standing and the recently discussed actual

case and controversy are both "built on the principle of separation of
powers, sparing as it does unnecessary interference or invalidation by the
judicial branch of the actions rendered by its co-equal branches of
government." In addition, economic reasons justify the rule. Thus:

A lesser but not insignificant reason for screening the

standing of persons who desire to litigate constitutional
issues is economic in character. Given the sparseness of our
resources, the capacity of courts to render efficient judicial
service to our people is severely limited. For courts to
indiscriminately open their doors to all types of suits and
suitors is for them to unduly overburden their dockets, and
ultimately render themselves ineffective dispensers of
justice. To be sure, this is an evil that clearly confronts our
judiciary today. 130 (Citations omitted)

Nonetheless, this Court has acted on cases filed by litigants "who have
no personal or substantial interest in the challenged governmental act but
whose petitions nevertheless raise 'constitutional issue[ s] of critical
significance." 131 In Puna v. Villar 132 we held:

126
127
Id. at 350°-351.
Agan, Jr. v. Philippine International Air Terminals Cu., Inc., 450 Phil. 744, 802 (2003) [Per J. Puno, En
Banc].
I
12s Id
129
836 Phil. 205 (2018) [Per J. Leonen, En Banc].
130
Id. at 249-250.
131
Id. at 250. (Citation omitted)
132
686 Phil. 571 (2012) !Per J. Velasco, Jr., En Banc].
Decision 23 G.R. No. 221190

To have legal standing, therefore, a suitor must show that he has

sustained or will sustain a "direct injury" as a result of a government action,
or have a "material interest" in the issue affected by the challenged official
act. However, the Court has time and again acted liberally on the locus
standi requirements and has accorded certain individuals, not othen;vise
directly injured, or with material interest affected, by a Government act,
standing to sue provided a constitutional issue of critical significance is at
stake. The rule on locus standi is after all a mere procedural technicali1y in
relation to which the Court, in a catena of cases involving a subject of
transcendental import, has waived, or relaxed, thus allowing non-traditional
plaintiffs, such as concerned citizens, taxpayers, voters or legislators, to sue
in the public interest, albeit they may not have been personally injured by
the operation of a law or any other government act. In David, the Court laid
out the bare minimum norm before the so-called "non-traditional suitors"
may be extended standing to sue, thusly:

1.) For taxpayers, there must be a claim of illegal

disbursement of public funds or that the tax measure is
unconstitutional;

2.) For voters, there must be a showing of obvious interest

in the validity of the election law in question;

3.) For concerned citizens, there must be a showing that the

issues raised are of transcendental importance which must
be settled early; and

4.) For legislators, there must be a claim that the official

action complained of infringes their prerogatives as
legislators. t 33 (Citations omitted, emphasis in the original)

Provincial Bus Operators expounded on the exceptions to the legal

standing requirement:

Like any rule, the rule on legal standing has exceptions. This Court
has taken cognizance of petitions filed by those who have no personal or
substantial interest in the challenged governmental act but whose petitions
nevertheless raise "constitutional issue[ s] of critical significance." This
Court summarized the requirements for granting legal standing to "non-
traditional suitors" in Funa v. Villar[.]

Another exception is the concept of third-party standing. Under this

concept, actions may be brought on behalf of third parties provided the
following criteria are met: first, "the [party bringing suit] must have suffered
an 'injury-in-fact,' thus giving him or her a 'sufficiently concrete interest' in
the outcome of the issue in dispute''; second, "the party must have a close
relation to the third party"; and third, ''there must exist some hindrance to
the third party·s ability to protect [their] own interests."

133
Id. at 585-586.
,.
Decision 24 G.R. No. 221190

Associations were likewise allowed to sue on behalf of their

members.

The liberality of this Court to grant standing for associations or

corporations whose members are those who suffer direct and substantial
.injury depends on a few factors.

In all these cases, there must be an actual controversy. Furthermore,

there should also be a clear and convincing demonstration of special reasons
why the truly injured parties may not be able to sue.

Alternatively, there must be a similarly clear and convincing

demonstration that the representation ofthe association is more efficient for
the petitioners to bring. They must further show that it is more efficient for
this Court to hear only one voice from the association. In other words, the
association should show special reasons for bringing the action themselves
rather than as a class suit, allowed when the subject matter of the
controversy is one of common or general interest to many persons. In a
class suit, a number of the members of the class are permitted to sue and to
defend for the benefit of all the members so long as they are sufficiently
numerous and representative of the class to which they belong.

In some circumstances similar to those in White Light, the third

parties represented by the petitioner would have special and legitimate
reasons why they may not bring the action themselves. Understandably, the
cost to patrons in the White Light case to bring the action themselves - i.e.,
the amount they would pay for the lease of the motels - will be too small
compared with the cost of the suit. But viewed in another way, whoever
among the patrons files the case even for its transcendental interest endows
benefits on a substantial number of interested parties without recovering
their costs. This is the free rider problem in economics. It is a negative
externality which operates as a disincentive to sue and assert a
transcendental right.

In addition to an actual controversy, special reasons to represent, and

disincentives for the injured party to bring the suit themselves, there must
be a showing of the transcendent nature of the right involved. 134 (Citations
omitted)

The characteristic common to these exceptions 1s the transcendental

significance of the issues raised.

"Transcendental importance is not defined in our jurisprudence[.]" 135

Whether a petition advances question of transcendental importance is a matter
dealt with on a case-to-case basis.
136
Representatives teaches:
Francisco, Jr. v. I-louse of
I
134
Provincial Bus Operators Association <!(the Philippines v. Department of Labor and Employment, 836
Phil. 205, 250-256(2018) [Per J. Leoncn, En Banc].
135
In re Save the Supreme Court Judicial Independence and Fiscal Autonomy Movement v. Abolition of
.!11diciarv Development Fund, 751 Phil. 30, 43 (2015) [Per J. Leon en, En Banc].
ur, 460 Phil. 830 (2003) [Per J. Carpio-Morales, En Banc].
Decision 25 G.R. No. 221190

There being no doctrinal definition of transcendental importance, the

following determinants formulated by former Supreme Court Justice
Florentino P. Feliciano are instructive: (1) the character of the funds or other
assets involved in the case; (2) the presence of a clear case of disregard of a
constitutional or statutory prohibition by the public respondent agency or
instrumentality of the government; and (3) the lack of any other party Twith
a more direct and specific interest in raising the questions being raised. 137
(Citation omitted)

Applying these guidelines, this Cc;)Urt finds that the issues raised are of
transcendental importance warranting the relaxation of the rule on legal
standing.

The Concession Agreement pertains to the extension and operation of

the LRT l. While LRMC unde1iook to finance the project, the grantors
allegedly assumed financial obligations which, according to petitioners, will
unduly burden the government, and ultimately the taxpayers.

Fmiher, the agreement provides for various provisions which include,

but are not. limited to, the financing of the project, creation of a biocked
account, delivery of basic right of way, adjustment of LRT fare, and payment
of taxes, among others. Petitioners assail these provisions on the ground of
violating public policy.

This Court also notes that the Concession Agreement will affect a great
number of people. As mentioned by LRMC, 400,000 individuals ride the LRT
1 on a daily basis. 138 Based on these circumstances, we deem it proper to relax
the rule on standing.

II (A)

To be justiciable, the issues raised must also be ripe for adjudication.

Fuertes v. Senate of the Philippines 139 discussed the importance of this
requirement:

An issue is ripe for adjudication when an assailed act has already

been accomplished or performed by a branch of government. Moreover, the
challenged act must have directly adversely affected the party challenging
it. In Philconsa v. Philippine Government:

For a case to be considered ripe for adjudication, it is a

prerequisite that an act had then been accomplished or
I
performed by either branch of government before a court

137
Id. at 899.
138
Rollo, p. l 063.
139
868 Phil. 117 (2020) [Per J. Leonen, En Banc].
Decision 26 G.R. No. 221190

may interfere, and the petitioner must allege the existence of

an immediate or threatened injury to himself as a result of
the challenged action. Petitioner must show that he has
sustained or is immediately in danger of sustaining some
direct injury as a result of the act complained of.

When matters are still pending or yet to be resolved by some other

competent court or body, then those matters are not yet ripe for this Court's
adjudication. This is especially true when there are facts that are actively
controverted or disputed. 140 (Citations omitted)

To be considered ripe for adjudication, the issues presented must not be

prematurely raised. Jurisprudence dictates that this condition is complied with
when party litigants observe the rules on exhaustion of administrative
remedies and hierarchy of courts. 141

II (B)

Article VIII, Section 5(1) of the Constitution provides for the Supreme
Court's original jurisdiction over petitions for certiorari, prohibition,
mandamus, quo warranto)'. and habeas corpus. This jurisdiction, however, is
not exclusive, and is shared with the Regional Trial Court and the Court of
Appeals. People v. Cuaresma 142 elaborated on the concurrent jurisdiction of
these courts:

This Court's original jurisdiction to issue wTits of certiorari (as well as •

prohibition, mandamus, quo vvarranto, habeas corpus and injunction) is not
exclusive. It is shared by this Court with Regional Trial Courts (formerly
Courts of First Instance), which may issue the writ, enforceable in any part
of their respective regions. It is also shared by this Court, and by the
Regional Trial Court, with the Court of Appeals (formerly, Intermediate
Appellate Court), although prior to the effectivity of Batas Pambansa
Bilang 129 on August 14, 1981, the latter's competence to issue the
extraordinary writs was restricted to those "in aid of its appellate
jurisdiction." 143 (Citations omitted)

Cuaresrna continued to clarify that the concurrence of jurisdiction does

not grant party iitigants unbridled discretion of seeking redress in any court of
.their choice: 144

This concurrence of jurisdiction is not, however; to be taken as according to

parties seeking any of the writs an absolute, unrestrained freedom of choice

140

141
Id. at 138.
A ala v. Uy, 803 Phil. 36(2017) [Per J. Leonen, En Banc]. See also J. Leonen, Separate Opinion in GIOS-
SAA1AR, Inc. v. Department of Transportation and Communications, 849 Phil. 120 (2019) [Per J.
I
Jardeleza, En Banc].
142
254 Phil. 418 (I 989) [Per J. Narva5a_ First Division].
14
:; Id at 426.
144
See also Vivas v. 1vlone1ary Board o/rhe Bangko s·entral ng Pi!ipinas, 716 Phil. 132 (2013) [Per J.
Mendoza, Third Division].
Decision 27 G.R. No. 221190

of the court to which application thdrefor will be directed. There is after all
a hierarchy of courts. That hierarchy is determinative of the venue of
appeals, and should also serve as a general determinant of the appropriate
forum for petitions for the extraordinary writs. A becoming regard for that
judicial hierarchy most certainly indicates that petitions for the issuance of
extraordinary writs against first level ("inferior") courts should be filed with
the Regional Trial Court, and those against the latter, with the Court of
Appeals. A direct invocation of the Supreme Court's original jurisdiction to
issue these writs should be allowed only when there are special and
important reasons therefor, clearly and specifically set out in the petition.
This is established policy. It is a policy that is necessary to prevent
inordinate demands upon the Court's time and attention which are better
devoted to those matters within its exclusive jurisdiction, and to prevent
further over-crowding of the Court's docket. Indeed, the removal of the
restriction on the jurisdiction of the Court of Appeals in this regard, supra
- resulting from the deletion of the qualifying phrase, "in aid of its
appellate jurisdiction" - was evidently intended precisely to relieve this
Court pro tanto of the burden of dealing with applications for the
extraordinary writs which, but for the expansion of the Appellate Court
corresponding jurisdiction, would have had to be filed with it.

The Court feels the need to reaffirm that policy at this time, and to
enjoin strict adherence thereto in the light of what it perceives to be a
growing tendency on the part of litigants and lawyers to have their
applications for the so-called extraordinary writs, and so~etime even their
appeals, passed upon and adjudicated directly and immediately by the
highest tribunal of the land. The proceeding at bar is a case in point. The
application for the writ of certiorari sought against a City Court was brought
directly to this Court although there is discernible special and important
reason for not presenting it to the Regional Trial Court. 145

The doctrine of hierarchy of courts is a recognition that "[t]here is an

ordained sequence of recourse to courts vested with concurrent jurisdiction,
beginning from the lowest, on to the next highest, and ultimately to the
highest." 146 It "guides litigants on the proper forum of their appeals as well
as the venue for the issuance of extraordinary writs." 147

Diocese of Bacolod v. Commission on Elections 148 explained the reason

for this rule:

The doctrine that requires respect for the hierarchy of courts was
created by this court to ensure that every level of the judiciary performs its
designated roles in an effective and efficient manner. Trial courts do not only
determine the facts from the evaluation of the evidence presented before
them. They are likewise competent to detem1ine issues of law which may
include the validity of an ordinance, statute, or even an executive issuance
in relation to the Constitution. To effectively perform these functions, they
are territorially organized into regions and then into branches. Their wTits
generally reach within those territorial boundaries. Necessarily, they mostly
f
145
People v. Cuaresma, 254 Phil. 418, 427-428 ( 1989) [Per J. Narvasa, First Division].
141
' Montes v. Court of Appeals, 523 Phil. 98, 109 (2006) [Per J. Tinga, Third Division].
147
Malingin v. Sandagan, 887 Phil. 922, 929 (2020) [Per J. lnting, Second Division].
148
751 Phil. 30 I (20 ! 5) rPer J. Leonen. En Banc].
Decision 28 G.R. No. 221190

perform the all-important task of inferring the facts from the evidence as
these are physically presented before them. In many instances, the facts
occur within their territorial jurisdiction, which properly present the 'actual
case' that makes ripe a determination of the constitutionality of such action.
The consequences, of course, would be national in scope. There are,
however, some cases where resort to courts at their level would not be
practical considering their decisions could still be appealed before the higher
courts, such as the Court of Appeals.

The Court of Appeals is primarily designed as an appellate court that

reviews the determination of facts and law made by the trial courts. It is
collegiate in nature. This nature ensures more standpoints in the review of
the actions of the trial court. But the Court of Appeals also has original
jurisdiction over most special civil actions. Unlike the trial courts, its vvrits
can have a nationwide scope. It is competent to detem1ine facts and, ideally,
should act on constitutional issues that may not necessarily be novel unless
there are factual questions to determine.

This [C]ourt, on the other hand, leads the judiciary by breaking new
ground or further reiterating - in the light of new circumstances or in the
light of some confusions of bench or bar- existing precedents. Rather than
a court of first instance or as a repetition of the actions of the Court of
Appeals, this [C]ourt promulgates these doctrinal devices in order that it
truly performs that role. 149 (Citation omitted)

GJOS-SA1vi4.R, Inc. v. Department of Transportation and

Communications 150 also acknowledged that the doctrine operates as a filtering
mechanism which produces the following effects:

( 1) [P]revent inordinate demands upon the Court's time and attention which
are better devoted to those matters within its exclusive jurisdiction; (2)
prevent further over-crowding of the Court's docket; and (3) prevent the
inevitable and resultant delay, intended or otherwise, in the adjudication of
cases which often have to be remanded or referred to the lower court as the
proper forum Lmder the rules of procedure, or as the court better equipped
to resolve factual questions. 151 (Citations omitted)

The policy of the Court is to enjoin strict observance of the hierarchy

of courts. We will not entertain a petition directly filed with this Court "when
relief can be obtained in the lower courts." 152

Yet, there are recognized exceptions:

Immediate resort to this Court may be allowed when any of the following
grounds are present: ( l) when genuine issues of constitutionality are raised
that must be addressed immediately; (2) when the case involves
transcendental importance; (3) when the case is novel; (4) when the
constitutional issues raised are better decided by this Court; (5) when time

149
Id. at 329-330.
:so 849 Phil. 120 (2019) [Per J. Jardeleza, En Banc].
151
/d.atl82-183.
152
A ala v. Uy, 803 Phil. 36, 56 (20 I 7) rrer J. Leonen, En Banc:]. (Citation omitted)
Decision 29 G.R. No. 221190

is of the essence; (6) when the subject of review involves acts of a

constitutional organ; (7) when there is no other plain, speedy, adequate
remedy in the ordinary course of law; (8) when the petition includes
questions that may affect public welfare, public policy, or demanded by the
broader interest of justice; (9) when the order complained of was a patent
nullity; and (10) when the appeal was considered as an inappropriate
remedy. 153 (Citation omitted)

GJOS-SAlvfAR clarified that before this Court may permit

noncompliance with the hierarchy of courts, it is imperative that the litigants
establish not only the existence of these exceptional circumstances but also
that they only raise pure questions of law:

A careful examination of the jurisprudential bases of the foregoing

exceptions would reveal a common denominator - the issues for resolution
of the Court are purely legal. Similarly, the Court in Diocese decided to
allow direct recourse in said case because, just like Angara, what was
involved was the resolution of a question of law, namely, whether the
limitation on the size of the tarpaulin in question violated the right to free
speech of the Bacolod Bishop.

We take this opportunity to clarify that the presence of one or more

of the so-called "special and important reasons" is not the decisive factor
considered by the Court in deciding whether to permit the invocation, at the
first instance, of its original jurisdiction over the issuance of extraordinary
writs. Rather, it is the nature of the question raised by the parties in those •
"exceptions" that enabled us to allow the direct action before us. 154 (Citation
omitted)

Here, while petitioners insist that they only raise pure questions of law,
we find that most, if not all of the issues raised require the resolution of
interrelated factual questions. As will be discussed later, there are factual
issues which much first be established before this Court can properly rule on
the issues raised.

III

Before delving on the questions requiring factual findings, we shall first

discuss issues which are purely legal in nature.

Among the prov1s10ns assailed by pet1t1oners is the stipulation

providing for the adjustments of the notional and approved fares. They claim
that the arrangement violates the public's right to due process since the
notional and approved fares may be adjusted without complying with the
notice and hearing requirements under the Public Service Act. 155 They stress /J
that the lack of a public hearing prior to a fare increase evinces not only the f'

153
Id. at 57.
154
849 Phil. 120. 173-175 (2019) [Per .l. Jardeleza, En Banc].
155
Rollo, pp. I263-1264.
Decision 30 G.R. No. 221190

government's relinquishment of "its rate-fixing function to the detriment of

the Filipino taxpayer[,]" 156 but also the unjust enrichment on the part of the
concessionaire. 157

Petitioners' arguments are unavailing.

Commonwealth Act No. 146, as amended, or the Public Service Act,

vests the Public Service Commission with jurisdiction and supervision over
public services such as common carrier, railroad, and motor vehicles, among
others. 158 In the exercise of its jurisdiction, Section 16(c) of this act permits
the Public Service Commission, after notice and hearing, to fix the rates to be
observed by these public services. It states:

SECTION 16. Proceedings of the Commission, upon notice and hearing.

- The Commission shall have power, upon proper notice and hearing in
accordance with the rules and provisions of this Act, subject to the
limitations and exception mentioned and saving provisions to the contrary:

(c) To fix and determine individual or joint rates, tolls, charges,

classifications, or schedules thereof, as well as commutation, mileage,
kilometrage, and other special rates which shall be imposed, observed, and
followed thereafter by any public service: Provided, That the Commission
may, in its discretion, approve rates proposed by public services
provisionally and without necessity of any hearing; but it shall call a hearing
thereon within thirty days thereafter, upon publication and notice to the
concerns operating in the territory affected: Provided, further, That in case
the public service equipment of an operator is used principally or
secondarily for the promotion of a private business, the net profits of said
private business shall be considered in relation with the public service of
such operator for the purpose of fixing the rates.

Following the implementation of the Integrated Reorganization Plan in

1972, the Public Service Commission was abolished and its functions
transferred to "the appropriate regulatory boards." 159 At present, the powers
and duties of the Public Service Commission are exercised by various
administrative agencies such as the DOTr. 160

156
Id. at 1288-1289.
157 Id.
158
Commonwealth Act No. 146 (l 936), sec. !3(b), as amended.
159
See Divinagracia v. Consolidated Broadcasting System, Inc., 602 Phil. 625 (2009) [Per J. Tinga, Second
Division].
100
See Republic Act No. 11659 (2022), sec. 3, which provides:
Section 3. Recognition of Transfer of Jurisdiction to Various Administrative Agencies. -All references
to the Public Service Commission in Commonwealth Act No. 146, as amended, shall pertain to any
Administrative Agency to which the powers and duties of the Public Service Commission were
transferred by subsequent laws, such as but not limited to:

(f) Department of Transportation (DOTr)[.J

Decision 31 G.R. No. 221190

The DOTr is the "the primary policy, planning, programming,

coordinating, implementing, regulating[,] and administrative entity of the
Executive Branch of the government in the promotion, development[,] and
regulation of dependable and coordinated networks of transportation[.]" 161 It
has various attached agencies, which includes LRTA. 162

The LRTA was created pursuant to Executive Order No. 603 and was
given the primary responsibility of constructing, operating, maintaining,
and/or leasing the country's light rail system. 163 To effectively perform its
functions, LRTA was vested with the authority to fix the fare for the use of the
light rail system. Section 4 of Executive Order No. 603 provides:

SECTION 4. General Powers. The Authority, through the Board of

Directors, may undertake such action as are expedient for or conducive to
the attainment of the purposes and objectives of the Authority, or of any
purpose reasonably incidental to or consequential upon any of these
purposes. As such, the Authority shall have the following general powers:

(5) To contract any obligation or enter into, assign or accept the

assignment oC and vary or rescind any agreement, contract of obligation
necessary or incidental to the proper management of the Authority;

(6) To borrow funds from any source, private or public, foreign or

domestic, and to issue bonds and other evidence of indebtedness, the
payment of which shall be guaranteed by the National Government, subject
to pertinent borrowing law;

( 13) To determine the fares payable by persons travelling on the light

rail system, in consultation with the Board of Transportation[.]

This power of LRTA to fix and determine the fares was likewise
recognized in the recent case of Syjuco, Jr. v. Abaya: 164

ic,i Executive Order No. 125 ( 1987), sec. 4.

162
Executive Order No. 125 ( 1987), sec. I 8.
I(,., Executive Order No. 603 ( 1980), sec. 2 provides:
SECTION 2. Creation of Authority. --- To can-y out the foregoing transportation policy, there is hereby
created a corporate body to be known as the LIGHT RAIL TRANSIT AUTHORITY, hereinafter called
the '--AUTHORITY", which shall be primarily responsible for the construction, operation, maintenance,
and/or lease of light rail transit systems in the Philippines, giving due re;gard to the reasonable
requirements of the public transportation system of the country. The principal office of the Authority
shall be in the l'v1etropolitan Manila /.\rea, but it may establish branches and agencies elsewhere within
the Philippines, as may be necessary for the proper conduct of its business and the discharge of its
functions. The Authority shall be attached to the Ministry ofTranspo1tation and Communication.
The Authority shall conduct its business, according to prudent commercial principies and shall ensure,
as far as possible, that its revenues for any given year are, at least sufficient to meet its expenditures.
Any excess of revenues over expenditure in any fiscai year may be applied by the Authority in any way
consistent with this Order, including such provisions for the renewal of capital assets and the repayment
of loans, as the Authority may consider prudent.
164
G.R. Nos. 2 I 5650 et al., March 28, 2023 fPer J. J. Lopez, En Banc].
Decision 32 G.R. No. 221190

Thus, it is clear that there is a valid delegation of legislative power

to the LRTA to fix the rates for the LRT-1 and the LRT-2. This power is
circumscribed by a standard that is found in the policy underlying the grant
to the President of the authority to reorganize the national government - to
effect economy and promote efficiency in the government, as well as in the
conduct of its functions, services and activities. To be sure, as early as the
case of Cervantes v. Auditor General, this Court already considered the
promotion of "simplicity, economy, and efficiency" in operations as
sufficient standard for the delegation of legislative power to the president to
create the defunct Government Enterprises Council in order to effect
reforms and changes in government owned and controlled corporations.

All told, the authority of the DOTC and the LRTA to impose and
regulate the fares for the MRT and the LRT, respectively, is beyond cavil. In
fact, this Court has ruled that the grant of rate-fixing powers to
administrative agencies is "now commonplace." In holding that the TRB,
LTFRB, National Telecommunications Commission, and Energy
Regulatory Commission (ERC) all exercise similar delegated rate-fixing
powers, this Court in Francisco, J,:, et al. v. Toll Regulatory Board, et al.
recognized the crucial role played by administrative bodies vested with
more expe11ise and specialized knowledge and even acknowledged their
position in the bureaucracy as the "fourth department of the governrnent." 165

Having established LRTA's authority to fix LRT 1 fare rates, this Court
shall now discuss whether there is a need to comply with the notice and
hearing requirements.

The power to fix rates is characterized to be generally legislative in

nature. It is a function which may be performed by the legislature itself or
delegated to an administrative agency. 166 Nonetheless, there are instances
when the administrative agency's fixing of rates is considered an adjudicative
function. Philippine Consumers Foundation, Inc. v. Secretary of Education,
Culture and Sports 167 teaches:

The function of prescribing rates by an administrative agency may

be either a legislative or an adjudicative function. If it were a legislative
function, the grant of prior notice and hearing to the affected parties is not a
requirement of due process. As regards rates prescribed by an
administrative agency in the exercise of its quasi-judicial function, prior
notice and hearing are essential to the validity of such rates. When the rules
and/or rates laid down by an administrative agency are meant to apply to all
enterprises of a given kind throughout the country, they may partake of a
legislative character. Where the rules and the rates imposed apply
exclusively to a particular party, based upon a finding of fact, then its
function is quasi-judicial in character. 168 (Citation omitted)

165
166
id. at 46. This pinpoint citation refers to the copy of the Decision uploaded to the Supreme Court website.
Association ofinrernationa! Shipping lines, inc. v. Philippine Ports Authority, 494 Phil. 664 (2005) [Per
I
J. Carpio-Morales, Third Division].
l{i? 237 Phil. 606 (I 987) rPer J. Gancayco, en Banc].
168
id at 6 I I.
 ,.,,.,
Decision .) .) G.R. No. 221190

In this case, the rates to be determined pursuant to the Concession

Agreement shall apply to all individuals using the LRT 1. Any fare increase
approved by the grantors are considered to have been issued in the exercise of
their legislative function.

Rates approved by the grantors do not, as a rule, necessitate compliance

with the notice and hearing requirements. However, Association of
International Shipping Lines, Inc. v. Philippine Ports Authority 169 introduced
an exception:

If the agency is in the exercise of its legislative functions or where

the rates are meant to apply to all enterprises of a given kind throughout the
country, however, the grant of prior notice and hearing to the affected parties ..
is not a requirement of due process except where the legislature itself
requires it. 170 (Citation omitted)

This exception was further elaborated in the recent case of Syjuco, Jr. :171

This Court is mindful of decisions pronouncing that notice and

hearing are not essential when an administrative agency acts pursuant to its
rule-making power or in the exercise of legislative functions. In the early
case of Vigan Electric Light Company, Inc. v. Public Service Commission,
this Court has delineated when the exercise of an administrative agency's
rate fixing-power paiiakes either of a legislative or quasi-judicial character.
When such rules and/or rates are meant to apply to all enterprises of a given
kind throughout the Philippines, they partake of a legislative character.
Meanwhile, when the rule applies exclusively to a specific party and a
predicated upon the finding of a fact, the function performed partakes of a
quasi-judicial character.

Vigan Electric further drew a line between when notice and hearing
are required and when they are not. When the administrative agency
performs a quasi-judicial function, notice and hearing are required.
Otherwise, when the administrative agency perfonns a legislative function,
notice and hearing are not required.

Here, the rate fixed by D.O. No. 2014-014 affects all Filipinos riding
the railway transit systems, without distinction. Undoubtedly, and as earlier
discussed, when the DOTC issued D.O. No. 2014-014, it exercised a
legislative fimction. Nevertheless, it must be clarified that the doctrine laid
down in Vigan Electric has since been modified by this Court when it comes
to the notice and hearing requirements. /\s it now stands, the rule that prior
notice and heai·ing are not requirements of due process when the
administrative rule was issued in the agency's exercise of legislative
function, does not apply where when the law itself expressly requires it, as

169
170
in this case. 172 (Citations omitted)

494 Phil. 664 (2005) [Per J. Carpio-Morales, Third Division].

Id. at 677.
I
171
G.R. Nos. 2 ! 5650 et al., March 28, 2023 [Per J. J. Lopez, En Banc].
172
Id. at 50. This pinpoint citation refers to the copy cf the Decision uploaded to the Supreme Court website.
Decision 34 G.R. No. 221190

To be sure, as with the Public Service Act, the Administrative Code

likewise mandates the grantors to comply with the notice and hearing
requirements. Syjuco, Jr. discussed:

Section 9, Chapter 2, Book VII of the Administrative Code of 1987

explicitly provides that when it comes to rate-fixing, the proposed rates must
have been published in a newspaper of general circulation at least two weeks
before the first hearing thereon. Hence:

SECTION 9. Public Participation.-(!) If not

otherwise required by law, an agency shall, as far as
practicable, publish or circulate notices of proposed rules
and afford interested parties the opportunity to submit their
views prior to the adoption of any rule.

(2) In the fixing of rates, no rule or final order shall

be valid unless the proposed rates shall have been published
in a newspaper ofgeneral circulation at least two (2) weeks
bejc)re the first hearing thereon.

(3) In case of opposition, the rules on contested cases

shall be observed.

The foregoing provision is clear, straightforward, and admits of no

room for interpretation. Rate-fixing requires notice and hearing, which
notice must come at least two weeks before the hearing.

In Manila International Airport Authority (MIAA) v. Airspan

Corporation, this Court rnled that MIAA, an agency attached of the DOTC,
cannot validly raise fees, charges, and rates without prior notice and public
hearing. As an attached agency, the MIAA is governed by the
Administrative Code of 1987, which specifically requires notice and public
hearing in the fixing of rates[.]

Despite having a larger measure of independence from the

department to which it is attached, MIAA has already established that
<'!,ttached agencies are still governed by the provisions of the Administrative
Code on notice and public hearing in the fixing of rates. This goes without
saying that as an attached agency of the DOTC, the LRTA should simillarly
follow the requirements in Section 9, Chapter 2, Book VII of the
Administrative Code of 1987. 173 (Emphasis in the original)

The foregoing discussion notwithstanding, we find that the Concession

Agreement does not violate the public's right to due process. It merely
provides for a mechanism through which the concessionaire may apply for an
increase of the LRT fare. Any increase shall still be subject to the grantors'
approval, who in turn are required to comply with the notice and hearing

171
I
Id. at 50---51, 54.
Decision 35 G.R. No. 221190

requirements.

Section 20.3 of the Concession Agreement provides for the guidelines

in the adjustment of the notional and approved fares:

20.3 Notional Fare, Approved Fare and Actual Fare

20.3.a The Notional Fare is set out in Part 1 of Schedule 9 (Financial

Matters) and shall be adjusted during the Concession Period as set out in
Part 1 of Schedule 9 (Financial Matters).

20.3.b The Approved Fare shall be the fares approved by the

Grantors (or other Government Authority having jurisdiction over fare
levels) from time to time. Whenever the Notional Fare is adjusted, the
Concessionaire shall apply to the Grantors for an adjustment of the
Approved Fare so that it is at least equal to the Notional Fare. The Grantors
shall seek to obtain necessary Relevant Consents for such adjustment. Once
approval to any adjustment of the Approved Fare has been obtained, the
Grantors shall, at the cost of the Concessionaire, publish such adjustment in
accordance with applicable Legal Requirements. This revision shall
become the Approved Fare upon obtaining the Relevant Consents to the
adjustment. For the avoidance of doubt, (i) a change to the structure of the
fares imposed by the Grantors (for example the imposition of a single
boarding charge for journeys across more than one system) shall, for the
purpose of this Concession Agreement, constitute a change in the Approved
Fare and (ii) pending introduction of AFCS, the stored value cards used on
the System incorporate a "last ride bonus" and this shall be considered part
of the Approved Fare.

20.3.c No later than the date sixty (60) days prior to any scheduled
adjustment to the Notional Fare, the Grantors and the Concessionaire shall
commence the taking of any steps required by Legal Requirements to obtain
an adjustment to the Approved Fare so as to make it equal to the increase in
•Notional Fare following such adjustment. 174

In relation, Schedule 9, Part 1 of the Concession Agreement outlines

the components of the notional fare, 175 formula for its computation, 176 and the
dates during which adjustments shall be made. 177 The notional fare has two
components: "a boarding fare component to be charged for each trip plus a
distance fare component corresponding to the distance travelled from the
originating/boarding station to the terminating/exiting station[.]" 178 The
Concession Agreement provides for a periodic adjustment of the notional fare.
When adjustment to the notional fare had been made, the concessionaire is
then permitted to apply to the grantors for an adjustment of the approved fare.

174
Rol!o, pp. 207---208.
175
Id. at 45 I.
176
Id. at 452--457.
111 Id
178
Id. at 451.
Decision 36 G.R. No. 221190

As conectly argued by LRMC, the adjustment of the approved fare is

not automatic. 179 Approved fare adjustment requires authorization from the
grantors, who in turn, are obligated to obtain the "relevant consents for such
adjustment." 180

The Concession Agreement defines "relevant consents" as:

... all national and local consents, permissions, approvals, authorisations,

acceptances, licences, exemptions, filings, registrations, notarisations and
other matters which are required (including any agreements with any
Government Authority) by any Legal Requirement or under the terms of or
in connection with this Concession Agreement (or which would, in
accordance with the standards of a reasonable and prudent person, normally
be obtained) in connection with the Project, including:

(a) the Railway Infrastructure Works, the Railway System Works

and the System Upgrades; or

(b) the operation, maintenance and renewal of the System and

performance of the Services,

of or from any Government Authority or third party and, where a

Government Authority or third party is authorised to prohibit a proposall, the
passing of the time limit for such prohibition without the proposal being
prohibited. 181 •

Meanwhile, "legal requirements", according to respondent LRMC,

refers to:

. . . any domestic law, statute, ordinance, rule, standard, administrative

interpretation or guideline, regulation, order, writ, injunction, directive,
judgment, decree, Relevant Consent and any requirement of any
Government Authority having jurisdiction over the person, or any of its
respective properties, assets or representatives, or the matter in question, and
in each case being of legally binding effect. 182

Based on the foregoing, the Concession Agreement merely provides for

a mechanism through which the concessionaire may apply to the grantors for
an increase of the LRT fare. In turn, the grantors, before approving any
adjustment to the fare, are required to comply with various statutory
requirements, including but not limited to the notice and hearing requirements
under the Public Service Act and the Administrative Code.

I
179
Id. at 1129.
180
Id. See aiso id at 208, Section 20.3.b of the Concession Agreement.
!SI Id. at 99, Section 1 of the Concession Agreement.
!82
Id at I i30. The copy ofthe 212-page Concession Agreement attached to the rollo is missing pages 10
to 24.
Decision 37 G.R. No. 221190

IV

Petitioners also question the grantors' obligation to deliver the basic

right of way. They claim that it is an unconscionable undertaking and violative
183
of the constitutional and statutory provisions on public policy.

This Court notes that while petitioners assail the validity of this
undertaking, they failed to identify the legal provisions allegedly violated.

Fmiher, we agree with respondents that by assuming the responsibility

of delivering the right of way, not only did the grantors acknowledge LRMC's
lack of authority to exercise the power of eminent domain, 184 but it also
ensured the expeditious completion of much needed transportation
facilities. t 35

Eminent domain refers to the power of "the [S]tate to acquire private

property for public use upon payment of just compensation." 186 It is an
indispensable attribute of sovereignty, which requires no constitutional
imperative. 187

The power of eminent domain is a function lodged in the legislative

branch of the government. The Congress, however, may delegate this function
"to local government units, other public entities and public utilities, although
the scope of this delegated legislative power is necessarily narrower than that
of the delegating authority and may only be exercised in strict compliance
with the terms of the delegating law." 188

Here, it is undisputed that LRMC is not vested with the authority to

exercise the power of eminent domain. This being the case, LRMC has no
po~er to expropriate property to be used as right of way for the project.

In addition, we stress that Section 4 of Republic Act No. 8974 189 states
that when there is a need to expropriate real prope1iy deemed necessary for
the right of way of a national government infrastructure project such as those
18 :;
184
185
186
lei. at 1267.
Jd.atl!0l.
Id. at 1195-1196.
J
Metropolitan Cebu Water District v. J. King and Son, Co., Inc., 603 Phil. 471, 480 (2009) [Per J. Tinga,
Second Division].
187
Heirs of Suguitan ,,_ City c~f Manda!uyong, 384 Phil. 676, 687 (2000) [Per J. Gonzaga-Reyes, Third
Division].
188
Id. at 689. (Citation omitted) See also Manapal v. Court of Appeals, 562 Phil. 31, 47 (2007) [Per J.
Nachura, Third Division].
189
Republic Act No. 8974 (2000). This has been repealed by Republic Act No. 10752 (2015), The Right-
of-Way Act, sec. l 6, which states:
SECTION 16. Repealing Clause. - Republic Act No. 8974 is hereby repealed and all other laws,
decrees, orders, mies and regulations or parts thereof inconsistent with this Act are hereby repealed or
amended accordingly.
Decision 38 G.R. No. 221190

implemented pursuant to the BOT Law, 190 the court proceedings shall be
initiated by the appropriate agency implementing the project. The provision
states:

Section 4. Guidelines for Expropriation Proceedings. - Whenever it is

necessary to acquire real property for the right-of-way or location for any
national government infrastructure project through expropriation, the
appropriate implementing agency shall initiate the expropriation
proceedings before the proper court under the following guidelines:

(a) Upon the filing of the complaint, and after due notice to the
defendant, the implementing agency shall immediately pay the owner of the
property the amount equivalent to the sum of (1) one hundred percent
(100%) of the value of the property based on the current relevant zonal
valuation of the Bureau ofintemal Revenue (BIR); and (2) the value of the
improvements and/or structures as determined under Section 7 hereof;

(b) In provinces, cities, municipalities and other areas where there

is no zonal valuation, the BIR is hereby mandated within the period of sixty
(60) days from the date of the expropriation case, to come up with a zonal
valuation for said area; and

(c) In case the completion of a government infrastructure project is

of utmost urgency and importance, and there is no existing valuation of the
area concerned, the implementing agency shall immediately pay the owner
of the property its proffered value .taking into consideration the standards
prescribed in Section 5 hereof.

Upon compliance with the guidelines abovementioned, the court

shall immediately issue to the implementing agency an order to take
possession of the property and start the implementation of the project.

Before the court can issue a Writ of Possession, the implementing agency
shall present to the court a certificate of availability of funds from the proper
official concerned.

In the event that the owner of the property contests the implementing
agency's proffered value, the court shall determine the just compensation to
be paid the owner within sixty (60) days from the date of filing of the
expropriation case. When the decision of the comi becomes final and
executory, the implementing agency shall pay the owner the difference
between the amount already paid and the just compensation as determilned
by the court.

Fmiher, it must be emphasized that it is the policy of the State to

recognize "the indispensable role of the private sector" in the national

190
Republic Act No. 8974 (2000), sec. 2 states:
/
Section 2. National Government Projects. - The term "national government projects" shall refer to all
national government infrastructure, engineering works and service contracts, including projects
undertaken by government-owned and -controlled corporations, all projects covered by Republic Act
No. 6957, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer
Law, and other related and necessary activities, such as site acquisition, supply and/or installation of
equipment and materials, implementation, construction, completion, operation, maintenance,
improvement, repair and rehabilitation, regardless of the source of funding.
Decision 39 G.R. No. 221190

economy. 191 On this note, Section 1 of the BOT Law, as amended by Republic
Act No. 7718 192,-provides:

Sec. 1. Declaration of Policy. - It is the declared policy of the State to

recognize the indispensable role of the private sector as the main engine for
national growth and development and provide the most appropriate
incentives to mobilize private resources for the purpose of financing the
construction, operation and maintenance of infrastructure and development
projects normally financed and undertaken by the Government. Such
incentives, aside from financial incentives as provided by law, shall include
providing a climate of minimum government regulations and procedures
and specific government undertakings in support of the private sector.

Similarly, its 2012 Revised IRR states:

SECTION 1.1 - Policy

It is the declared policy of the State to recognize the indispensable

role of the private sector as the main engine for national growth and
development and provide the most appropriate incentives to mobilize
private resources for the purpose of financing the Construction, operation
and maintenance of infrastructure and development projects normally
financed and undertaken by the Government.

In line with the foregoing, these Revised IRR seek to identify

specific incentives, support and undertakings, financial or otherwise, that
may be granted to Project Proponents, provide a climate of minimum
Government regulations, allow reasonable returns on investments made by
Project Proponents, provide procedures that will assure transparency and
competitiveness in the bidding and award of projects, ensure that
Contractual Arrangements reflect appropriate sharing of risks between the
Government and the Project Proponent, assure close coordination between
national government and Local Government Units (LGUs), and ensure strict
compliance by the Government and the Project Proponent of their respective
obligations and undertakings and the monitoring thereof, in connection v..rith
or relative to Private Sector Infrastructure or Development Projects to be
undertaken under this Act and these Revised IRR.

In recognition of this state policy, the Revised IRR lists down several
undertakings which the government may assume as a form of support to BOT
projects:

SECTION 13.3 - Government Undertakings.

Subject to existing laws, policies, rules a.11d regulations, the

Government may provide any form of support or contribution to solicited
projects, such as, but not limited, to the following:
I
191
CONST.; art. II, sec. 20.
192
An Act Amending Certain Secti,ms of Republic Act No. 6957, Entitled "An Act Authorizing the
Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector,
and For Other Purposes" ( J 994).
Decision 40 G.R. No. 221190

a. Cost Sharing - This shall refer to the Agency/LOU concerned

bearing a portion of capital expenses associated with the establishment of
an infrastructure development facility, such as, the provision of access
infrastructure, right-of-way, transfer of ownership over; or usufruct, or
possession of land, building or any other real or personal property for direct
use in the project and/or any partial financing of the project, or components
thereof: Provided, that such shall not exceed fifty percent (50%) of the
Project Cost, and the balance to be provided by the Project Proponent. Such
government share may be financed from direct government appropriations
and/or from Official Development Assistance (ODA) of foreign government
or institutions.

c. Direct Government Subsidy - This shall refer to an agreement

whereby the Government, or any of its Agencies/LGUs will: (a) defray, pay
for or shoulder a portion of the Project Cost or the expenses and costs in
operating or maintaining the project; (b) contribute any property or assets to
the project; (c) in the case of LGUs, waive or grant special rates on real
property taxes on the project during the term of the contractual arrangement;
and/or (d) waive charges or fees relative to business permits or licenses that
are to be obtained for the Constmction of the project, all without receiving
payment or value from the Project Proponent and/or Facility operator for
such payment, contribution or support.

Among the support which the government may provide is the delivery
of right of way associated with the infrastructure facility project.

The grantors, therefore, validly assumed the obligation to deliver the

basic right of way necessary for the implementation of the Concession
Agreement.

Petitioners next assail the alleged inconsistency between Section

20.11.b of the Concession Agreement and Schedule 9, Part 1, Section E of the
Schedules. According to petitioners, while Section 20.11.b of the Concession
Agreement states that the concessionaire is liable for all national and local
taxes which may accrue in connection with the project's implementation,
Schedule 9, Part 1, Section E permits the concessionaire to pass on to
passengers the Value-Added Tax (VAT) levied on the fares. 193

Contrary to petitioners' claim, there is no inconsistency between the

assailed provisions. Section 20.11.b of the Concession Agreement provides:

20.11.b General Taxes

I
Save as stated in Section 20.11.c (Responsibility for Real Property Tax), the
Concessionaire shall be liable for and shali be responsible for paying as and
193
Rollo, p. 45.
Decision 41 G.R. No. 221190

when the same shall become due, all national and local taxes, which are
payable at any time during the Concession Period in connection with the
implementation of the Project. 194

Meanwhile, Schedule 9, Part 1, Section Estates:

[I]f a sales tax or value-added tax (VAT) is levied on the fares, the
Concessionaire shall be allowed to pass this cost as part of the fare to be
collected from passengers of the LRTl. 195

VAT has been characterized as "a tax imposed on each sale of goods or
services in the course of trade or business, or importation of goods 'as they
pass along the production and distribution chain. "' 196 It is an indirect sales
tax, 197 the burden of which "may be shifted or passed on to the buyer,
transferee or lessee of the goods, properties or services." 198

Commissioner of Internal Revenue v. Philippine Long Distance

Telephone Co. 199 discussed the concept of VAT as an indirect tax:

Based on the possibility of shifting the incidence of taxation, or as to

who shall bear the burden of taxation, taxes may be classified into either
direct tax or indirect tax.

In context, direct taxes are those that are exacted from the very
person who, it is intended or desired, should pay them; they are impositions
for which a taxpayer is directly liable on the transaction or business he is
engaged in.

On the other hand, indirect taxes are those that are demanded, in the
first instance, from, or are paid by, one person in the expectation and
intention that he can shift the burden to someone else. Stated elsewise,
indirect taxes are taxes wherein the liability for the payment of the tax falls
on one person but the burden thereof can be shifted or passed on to another
person, such as when the tax is imposed upon goods before reaching the
consumer who ultimately pays for it. When the seller passes on the tax to
his buyer, he, in effect, shifts the tax burden, not the liability to pay it, to the
purchaser as part of the price of goods sold or services rendered.

To put the situation in graphic terms, by tacking the VAT due to the
selling price, the seller remains the person primarily and legally liable for
the payment of the tax. What is shifted only to the intermediate buyer and
ultimately to the final purchaser is the burden of the tax. Stated differently,
a seller who is directly and legally liable for payment of an indirect tax, such

194

t
95

196
Id. at 216.
id. at 456.
Team Energy Corp. v. Commissioner ofInternal Revenue, 828 Phii. 85, l l 0 (2018) [Per J. Leonen, Third
I
Division]. (Citation omitted)
197
See J. Abad, Separate Concun-ing Opinion in Fort Bon{facio Development Corp. v. Commissioner of
Internal Revenue, 694 Phii. 7 (2012) [Per J. Del Castillo, En Banc].
198
Commissioner of Internal Revenue v. Seagate Technology (Philippines), 491 Phil. 317, 332 (2005) [Per
J. Panganiban, Third Division]. (Citation omitted)
199
514 Phil. 255 (2005) [Per J. Garcia. Third Division].
Decision 42 G.R. No. 221190

as the VAT on goods or services, is not necessarily the person who ultimately
bears the burden of the same tax. It is the final purchaser or end-user of
such goods or services who, although not directly and legally liable for the
payment thereof, ultimately bears the burden of the tax. 200 (Citations
omitted)

Considering the nature of VAT as an indirect tax, we find that there is

no inconsistency between Section 20.11.b of the Concession Agreement and
Schedule 9, Part I, Section E of its Schedules. Under these provisions, the
LRMC remains the entity liable for paying VAT and only the burden of tax is
shifted to passengers of LRT 1.

VI

On the matter of real property taxes, Section 20.11.c of the Concession

Agreement provides that the liability to pay the real property tax on rail project
assets falls on the grantors. Meanwhile, the concessionaire shall be liable for
the real property tax on those considered as commercial assets. On this note,
the concessionaire is required to prepare a list enumerating the assets
considered as commercial and rail project:

20.11.c (3) No later than thirty (30) days after the Effective Date the
Concessionaire shall prepare and submit to the Granters for approval the
following lists:

20.11.c (3) (a) a list of the Commercial Assets;

20.11.c (3) (b) a list of those Rail Project Assets which are either
used exclusively for provision of the Services or where any use thereof for
the generation of Commercial Revenue is wholly incidental to their use for
the provision of the Services (such Rail Project Assets shall include all
LRVs, all Stations and all of the Railway Infrastructure and Railway
Systems); and

20.11.c (3) (c) in the case of other Rail Project Assets (such as
buildings used partly for the perfom1ance of the Services and partly for the
generation of Commercial Revenue) an estimate of the percentage of the
value of each such Rail Project Asset attributable to (1) the provision of the
Services and (2) to the generation of the Commercial Revenue.

Each such list shall be updated (i) annually and (ii) fifteen (15) days
after any· significant new asset is added to the System and/or to the
Commercial Business. Each such list shall be accompanied by supporting
documentation and in the case of this paragraph 20.11.c (iii) (Responsibility
for Real Property Tax) by a detailed, reasoned justification for the split.

20.11.c (4) The Gran tors shall have fifteen (15) days which to
approve or disapprove any list submitted by the Concessionaire. If the
Grantors disapprove any list. they shall provide supporting documents and
a detailed justification for the disapproval. If the Grantors disapprove any

200
Id. at 266--267.
Decision 43 G.R. No. 221190

list, the Parties shall negotiate together for fifteen ( 15) days to determine the
correct entry, failing which the matter may be referred to the Expert pursuant
to Section 35 (Dispute Resolution). Failure by the Grantors to respond on a
list submitted by the Concessionaire shall constitute deemed approval
thereof. Once a list has been approved (or deemed approved) it· shall be
installed by the Parties and thereafter shall be in the Agreed Forms.

20.11.c (5) If any Real Property Tax is assessed on and/or collected

from a Party who is not liable and/or responsible for paying the Real
Property Tax in accordance with this Section 20.11 (Taxes), then the Party
who is liable and responsible for paying the Real Property Tax in accordance
with this Section 20.11 (Taxes) shall either directly pay the Real Property
Tax to the Government Authority in the manner and within the period
required by law or reimburse the Real Property Tax paid or payable by the
other Party to the Government Authority upon the latter Party's demand. 201

Petitioners contend that under this arrangement, while local

government units may assess the grantors for real property tax on rail project
assets, the grantors will have no capacity to protest the assessment. 202 Further,
pursuant to this Court's ruling in National Power Corp. v. Province of
Quezon, 203 they claim that only the concessionaire-and not the local
government unit--can enforce the liability of the grantors for the real property
tax.204

Petitioners' reliance on National Power Corp. is misplaced. The main

issue in that case was "whether the National Power Corporation (NPC), as a
government-owned and controlled corporation, can claim tax exemption
under Section 234 of the Local Government Code (LGC) for the taxes due
from the Mirant Pagbilao Corporation (Mirant) whose tax liabilities the NPC
has contractually assumed." 205

The case involved the Energy Conversion Agreement (ECA) entered

into by Mirant and J\irrC, where the former agreed to build, finance, and
thereafter operate for 25 years a coal-fired thennal power plant on the lots
owned by the latter. After the end of the agreed term, Mirant will transfer to
NPC the power plant. Under the ECA, NPC agreed to pay all taxes, including
real property taxes, that the government will impose on Mirant.

Subsequently, the Municipality of Pagbilao sent a letter to Mirant

informing the latter of its real property tax liability for the power plant and
machineries. NPC was furnished a copy of the assessment letter.

NPC protested the assessment by filing a petition before the Local

Board of Assessment Appeals. It prayed that it be exempted from the payment

201
Rollo, pp. 217-2 i 8.
202
Id. at 1283-1284.
203
610 Phil. 456 (2009) LPer J. Brion, Second Division].
204
Rollo, p. 1283.
205
National Power Corp. v. Province of Quezon, 6 l 0 Phil. 456 (2009) [Per J. Brion, Second Division].
Decision 44 G.R. No. 221190

of"[p]roperty [t]ax on [m]achineries and [e]quipment [u]sed for [g]eneration

and [t]ransmission of [p ]ower... located at Pagbilao, Quezon[.]" 206 NPC
based its petition on the exemption provided under Section 234( c) of the Local
Government Code.

The Court decreed that since NPC "is neither the owner nor the
possessor/user of the subject machineries[,]" 207 it has no personality to protest
the tax assessment. It likewise noted that NPC's contractual assumption of
the liability to pay the real prope1iy tax was insufficient to clothe it with the
personality to protest the tax assessment against Mirant, thus:

On liability for taxes, the NPC does indeed assume responsibility for
the taxes due on the power plant and its machineries, specifically, "aH real
estate taxes and assessments, rates and other charges in respect of the site,
the buildings and improvements thereon and the [power plant]." At first
blush, this contractual provision would appear to make the NPC liable and
give it standing to protest the assessment. The tax liability we refer to above,
however, is the liability arising from law that the local government unit can
rightfully and successfully enforce, not the contractual liability that is
enforceable between the parties to a contract as discussed below. By law,
the tax liability rests on Mirant based on its ownership, use, and possession
of the plant and its machineries. 208

In any case, the Comi made no ruling on the validity of NPC's

contractual assumption to pay the real property tax:

By our above conclusion, we do not thereby pass upon the validity

of the contractual stipulation between the NPC and Mirant on the
assumption of liability that the NPC undertook. All we declare is that the
stipulation is entirely between the NPC and Mirant, and does not bind third
persons who are not privy to the contract between these parties. We say this
pursuant to the principle of relativity of contracts under Article 1311 of the
Civil Code which postulates that contracts take effect only between the
parties, their assigns and heirs. Quite obviously, there is no privity between
the respondent local government units and the NPC, even though both are
public corporations. The tax due will not come from one pocket and go to
another pocket of the same governmental entity. An LGU is independent
and autonomous in its taxing powers and this is clearly reflected in Section
130 of the LGC[.J

An exception to the rule on relativity of contracts is provided tmder

the same Article 1311 as follows:

If the contract should contain some stipulation in

favor of a third person, he may demand its fulfillment
provided he communicated his acceptance to the obligor

206
Id at 462.
207
Id. at 468.
208
Id. at 470.
Decision 45 G.R. No. 221190

before its revocation. A mere incidental benefit or interest

of a person is not sufficient. The contracting parties must
have clearly and deliberately conferred a favor upon a third
person.

The NPC's assumption of tax liability under Article I I. I of the ECA

does not appear, however, to be in any way for the benefit of the
Municipality of Pagbilao and the Province of Quezon. In fact, if the NPC
theory of the case were to be followed, the NPC's assumption of tax liability
will work against the interests of these LGUs. Besides, based on the
objectives of the BOT Law that underlie the parties' BOT agreement, the
assumption of taxes clause is an incentive for private corporations to take
part and invest in Philippine industries. Thus, the principle of relativity of
contracts applies with full force in the relationship between Mirant and
NPC, on the one hand, and the respondent LG Us, on the other.

To reiterate, only the parties to the ECA agreement can exact and
demand the enforcement of the rights and obligations it established - only
Mirant can demand compliance from the NPC for the payment of the real
property tax the NPC assumed to pay. The local government units (the
Municipality of Pagbilao and the Province of Quezon), as third parties to the
ECA, cannot demand payment from the NPC on the basis of Article 11.1 of
the ECA alone. Corollarily, the local government units can neither be
compelled to recognize the protest of a tax assessment from the NPC, an
entity against whom it cannot enforce the tax liability. 209

Accordingly, petitioners failed to establish that the grantors assumption

of the liability to pay the real prope1iy taxes for the rail project assets was
illegal or contrary to public policy.

VI (A)

Petitioners also claim that the grantors' financial obligations, which

include the assumption of the real property tax, are considered government
subsidies that would render useless the BOT Law's objective. They rely on
the ruling in Agan where this Court invalidated the agreements between
Philippine International Air Terminals Co., Inc. (PIATCO) and the
government, through Manila International Airport Authority (MIAA) and
Department of Transportation and Communications (DOTC).

In that case, the Court decreed that the agreements contained provisions
obligating the government to. pay the lenders of PIATCO should the latter
default on its loans, which are considered direct government guarantees
prohibited by the BOT Law and its implementing rules:

The proscription against government guarantee in any form is one of

the policy considerations behind the BOT Law. Clearly, in the present case,
the ARCA obligates the Government to pay for all loans, advances and
obligations arising out of financial facilities extended to PIATCO for the

209
Id at 472-473.
Decision 46 G.R. No. 221190

implementation of the NAIA IPT III project should PIATCO default in its
loan obligations to its Senior Lenders and the latter fails to appoint a
qualified nominee or transferee. This in effect would make the Government
liable for PIATCO's loans should the conditions as set forth in the ARCA
arise. This is a form of direct government guarantee.

The BOT Law and its implementing rules provide that in order for
an unsolicited proposal for a BOT project may be accepted, the following
conditions must first be met: (1) the project involves a new concept in
technology and/or is not part of the list of priority projects, (2) no direct
government guarantee, subsidy or equity is required, and (3) the government
agency or local government unit has invited by publication other interested
parties to a public bidding and conducted the same. The failure to meet any
of the above conditions will result in the denial of the proposal. It is further
provided that the presence of direct government guarantee, subsidy or equity
will "necessarily, disqualify a proposal from being treated and accepted as
an unsolicited proposal." The BOT Law clearly and strictly prohibits direct
government guarantee, subsidy and equity in unsolicited proposals that the
mere inclusion of a provision to that effect is fatal and is sufficient to deny
the proposal. It stands to reason therefore that if a proposal can be denied
by reason of the existence of direct government guarantee, then its inclusion
in the contract executed after the said proposal has been accepted is likewise
sufficient to invalidate the contract itself. A prohibited provision, the
inclusion of which would result in the denial of a proposal cannot, and
should not, be allowed to later on be inserted in the contract resulting from
the said proposal. The basic rules of justice and fair play alone militate
against such an occurrence and must not, therefore, be countenanced
particularly in this instance where the government is exposed to the risk of
shouldering hw1dreds of million[s] of dollars in debt.

This Court has long and consistently adhered to the legal maxim that
those that cannot be done directly cannot be done indirectly. To declare the
PIATCO contracts valid despite the clear statutory prohibition against a
direct government guarantee would not only make a mockery of what the
BOT Law seeks to prevent - which is to expose the government to the risk
of incurring a monetary obligation resulting from a contract of loan between
the project proponent and its lenders and to which the Government is not a
party to - but would also render the BOT Law useless for what it seeks to
achieve - to make use of the resources of the private sector in the
"financing, operation and maintenance of infrastructure and development
projects" which are necessary for national growth and development but
which the government, unfortunately, could ill-afford to finance at this point
in time. 210

The factual setting in Agan differs from this case.

First, the agreement in Agan emanated from an unsolicited proposal

/
"for the development of NAIA International Passenger Terminal III (NAIA
IPT III)[.]" Meanwhile, the Concession Agreement in this case pertains to a
priority infrastructure project of the government.

210
Agan, Jr. v. Philippine International Air Termina!.1· Co., Inc., 450 Phil. 744, 831-833 (2003) [Per J. Puno,
En Banc]. •
Decision 47 G.R. No. 221190

Second, while the agreement in Agan contained stipulations on direct

government guarantee, the petitioners in this case admit that the Concession
Agreement does not involve direct government guarantees.

Finally, unlike in unsolicited proposals where there is an express

prohibition against direct government guarantee, subsidy, or equity,
agreements covering priority infrastructure projects, as in this case, may
contain stipulations on direct government subsidy. To reiterate: among the
supports or contributions which the government may extend to solicited
projects are direct government subsidies as defined under Section 13.3 (c) of
the Revised IRR.

Based on the foregoing, the rulings in National Power Corp. and Agan
cannot be. used as bases to invalidate the Concession Agreement.

VII

One of the concessionaire's obligations under the Concession

Agreement is to offer employment to identified LRTA employees. Employees
who accept the offer of employment shall be considered transferring
employees subject to a probationary period of 180 days. Section 6.3 of the
Concession Agreement states:

6.3 Transferring Employees

6.3.a One (1) month prior to the Effective Date, the Concessionaire
shall make offers of employment to each of the employees of LRTA
identified in paragraph 1 of Schedule 4 (Grantors Responsibilities)
("Available Employees"). On the Effective Date, the Concessionaire shall
hire all those Available Employees who accept its offer of employment,
subject to a probationary period of one hundred and eighty (180) days
starting on the Effective Date, and with levels of compensation and
associated benefits no less favorable than those enjoyed by those employees
prior to the date the offer is made. The Available Employees who accept the
Concessiona_ire's offer of employment shall be the Transferring Employees.

6.3.b As at 00:01 on the Effective Date, the employment of the

Transferring Employees with the LRTA shall be terminated and each such
Transferring Employee shall execute and deliver a written release and
quitclaim to the LRTA, copies of which shall be provided to the
Concessionaire as soon as practicable after the Effective Date. Any
retirement and severance payments due to the Transferring Employees by
virtue of the termination of their employment with the LRTA shall be the
responsibility of the Gran tors. •

6.3.c Without limiting the foregoing, the Concessionaire may not

terminate the employment of any Transferring Employee due to economic
reasons such as the installation of labor-saving devices, redundancy, or
retrenchment to prevent losses ("Economic Causes") until the probationary
period of one hundred and eighty (180) days has expired. After the aforesaid
Decision 48 G.R. No. 221190

period, if the Concessionaire wishes to dismiss any employee due to

Economic Causes, then the Concessionaire may do so in accordance with
the Relevant Rules and Procedures.

6.3 .d Those Transferring Employees retained after the probationary

period of one hundred and eighty (180) days shall become regular
employees of the Concessionaire and shall be accorded all the rights and
benefits accorded to regular employees under the Relevant Rules and
Procedures. 21 I

Petitioners insist that this prov1s10n violates the employees' right to

tenurial security since it may be used to circumvent labor code provisions.
Particularly, they claim that the provision fails to provide reasonable standards
for the regularization of probationary employees, and that the dismissal of a
transferring employee due to economic causes rests on the concessionaire's
absolute discretion. 212

These contentions have no merit.

Security of tenure is a right guaranteed by the Constitution. 213 It ensures

that a worker's employment will not be tenninated except for just or
authorized causes. 214 This constitutional protection covers not only the
regular employees, but also workers whose employment are considered
probationary. 215

Jurisprudence dictates that there are three grounds by which the services
of a probationary employee may be terminated: first, a just cause; second, an
authorized cause; and third, when the worker "fails to qualify as a regular
employee in accordance with reasonable standards prescribed by the
~16 •
employer."L--)

As regards the third ground, Abbott Laboratories, Phils. v. Alcarai2 17

discussed:

211
Ro!fo,pp.131-132.
212
Id. at 1290-1292.
213
CONST., arr. XI I I, sec. 3 states:
SECTION 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate
in policy and decision-making processes affecting their rights and benefits as may be.provided by law.
The State shall promote the principle of shared responsibility between workers and employers and the /
preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their
mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor to
its just share in the fruits of production and the right of enterprises to reasonable returns on investments,
and to expansion and growth.
214
SME Bank, Inc. v. De Guzman, 719 Phil. 103, 114 (2013) [Per C.J. Sereno, En Banc].
215
Tams on 's Enterprises, Inc. v. Court c~/Appeals, 676 Phil. 384 (2011) [Per J. Mendoza, Third Division).
216
Abbott Laboratories, Phil.~. v. Alcara::., 714 Phil. 510. 533 (2013) [Per J. Perlas-Bernabe, En Banc].
217
714 Phil. 510(2013) [Per J. Perlas-Bernabe, En Banc].
Decision 49 G.R. No. 221190

Corollary thereto, Section 6 (d), Rule I, Book VI of the

Implementing Rules of the Labor Code provides that if the employer fails
to inform the probationary employee of the reasonable standards upon
which the regularization would be based on at the time of the engagement,
then the said employee shall be deemed a regular employee, viz.:

(d) In all cases of probationary employment, the employer

shall make known to the employee the standards under
which he will qualify as a regular employee at the time of his
engagement. Where no standards are made knovvn to the
employee at that time, he shall be deemed a regular
employee.

1n other words, the employer is made to comply with two (2)

•requirements when dealing with a probationary employee: first, the
employer must communicate the regularization standards to the
probationary employee; and second, the employer must make such
communication at the time of the probationary employee's engagement. If
the employer fails to comply with either, the employee is deemed as a
regular and not a probationary employee.

Keeping with these rules, an employer is deemed to have made

known the standards that would qualify a probationary employee to be a
regular employee when it has exerted reasonable efforts to apprise the
employee of what he is expected to do or accomplish during the trial period
of probation. This goes without saying that the employee is sufficiently
made aware of his probationary status as well as the length of time of the
probation. 218

As correctly argued by LRMC, the Concession Agreement is not an

employment contract which stipulates on the relationship between LRMC and
the transferring employees. It is a contract which governs the obligations of
the grantors and the concessionaire to one another. 219

Not being an employment contract, the Concession Agreement is not

intended to lay down the tasks that the transferring employees must undertake.
It is not meant to provide for the reasonable standards that the probationary
employees must conform to.

Just the same, the Concession Agreement is not a means to circumvent

the labor code. The concessionaire is not given the absolute prerogative of
dismissing a transferring employee due to economic causes. Economic causes
under the Concession Agreement pertain to "the installation of labor-saving
devices, redundancy, or retrenchment to prevent losses[.]"220 An examination /
of these instances reveals that they are similar to the authorized causes under
Article 298 of the Labor Code:

218
Id at 533.
219
Roilo~ pp. l 122-i 123.
220
Id. at 132, Section 6.3.c of the Concession Agreement.
Decision 50 G.R. No. 221190

ARTICLE 298. [283] Closure of Establishment and Reduction of

Personnel. - The employer may also terminate the employment of any
employee due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the
installation of labor-saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in cases
of closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.

The Concession Agreement states that the termination of a transferring

employee shall be "in accordance with the Relevant Rules and Procedures." 221
As discussed, these includes all domestic laws and statutes such as the labor
code. The inclusion of this qualification constitutes a recognition that while a
transferring employee may be terminated due to an economic cause, the
dismissal must be in conformity with the procedure provided under article
298.

Accordingly, we find that the Concession Agreement does not violate

the constitutional right to security of tenure. •

VIII

Congressional approval or legislative franchise is not a prerequisite for

the execution of the Concession Agreement.

The granting of authority to operate a public utility is a prerogative

generally belonging to the legislature. 222 This principle can be inferred from
Article XII, Section 11 of the Constitution, which provides:

Section 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
/
221 Id
222
Philippine Airlines, Inc. v. Civil Aeronautics Board, 337 Phil. 254 ( I 997) [Per J. Torres, Jr., Second
Division].
Decision 51 G.R. No. 221190

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
1n 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 must be citizens of the Philippines.

However, recognizing the increasing responsibilities that demand the

legislature's attention, "Congress has granted certain administrative agencies
the power to grant licenses for, or to authorize the operation of certain public
utilities." 223 Philippine Airlines, Inc. 1--: Civil Aeronautics Board224 teaches:

The power to authorize and control the operation of a public utility

is admittedly a prerogative of the legislature, since Congress is that branch
of government vested with plenary powers of legislation.

"The franchise is a legislative grant, whether made

directly by the legislature itself, or by any one of its properly
constituted instrumentalities. The grant, when made, binds
the public, and is, directly or indirectly, the act of the state."

The issue in this petition is whether or not Congress, in enacting

Republic Act 776, has delegated the authority to authorize the operation of
domestic air transport services to the respondent Board, such that
Congressional mandate for the approval of such authority is no longer
necessary.

Congress has granted certain administrative agencies the power to

grant licenses for, or to authorize the operation of certain public utilities.
With the growing complexity of modern life, the multiplication of the
subjects of governmental regulation, and the increased difficulty of
administering the laws, there is a constantly growing tendency towards the
delegation of greater powers by the legislature, and towards the approval of
the practice by the courts. It is generally recognized that a franchise may be
derived indirectly from the state through a duly designated agency, and to
this extent, the power to grant franchises has frequentiy been delegated, even
to agencies other than those of a legislative nature. In pursuance of this, it
has been held that privileges conferred by grant by local authorities as agents
for the state constitute as much a legislative franchise as though the grant
had been made by an act of the Legislature.

The trend of modern legislation is to vest the Public Service

Commissioner with the power to regulate and control the operation of public
services under reasonable rules and regulations, and as a general rule, courts
will not iriterfere with the exercise of that discretion when it is just and
reasonable arid founded upon a legal right. 225 (Citations omitted)

One of the administrative agencies delegated with the power to grant /

licenses or authority to operate public utilities is respondent DOTr.

223
id. at 265.
22 1
• 337 Phil. 254 { 1997) lPer J. T'orres~ Jr.~ Second' Division].
225 id. at 264-265.
Decision 52 G.R. No. 221190

Under Se_ction 5 of Executive Order No. 125-A, one of the powers and
functions of the DOTr pertains to the issuance of "certificates of public
convenience for the operation of public land and rail transportation utilities
and services[.]" This authority was restated in the Administrative Code of
1987226 which states:

SECTION 3. Powers and Functions. -To accomplish its mandate, the

Department shall:

(1) F onnulate and recommend national policies and guidelines for

the preparation and implementation of integrated and comprehensive
transportation and communications systems at the national, regional and
local levels;

(7) Issue certificates of public convenience for the operation of

public land and rail transp01iation utilities and services;

(11) Establish and prescribe rules and regulations for the issuance of
certificates of public convenience for public land transportation utilities,
such as motor vehicles, trimobiles and railways[.]

The DO Tr was granted these powers to accomplish its mandate of being

the primary administrative agency tasked of developing "dependable and
coordinated networks of transportation" in the country. 227

Based on the foregoing, it is undisputed that the DOTr is vested with

the power to grant or issue authorization for the operation of the light rail
system. In this case, the authority was granted through the Concession
Agreement wherein the LRMC was permitted to construct and operate the
LRT line 1. Thus, the Concession Agreement was validly executed
notwithstanding the absence of a legislative franchise.

VIII (A)

Neither did the LRTA invalidly delegated its powers and functions.

The declar~d policy of the BOT Law is "to mobilize private resources
for the purpose of financing the construction, operation and maintenance of
infrastructure and development projects normally financed and undertaken by
the Government." 228 To this end, the law authorizes government agencies to

126
Executive Order No. 292 ( 1987), Book IV, Title XV, Chapter I, sec. 3.
227
Executive Order No. \ 25 ( 1987), sec. 4.
228
Republic Act No. 6957 ( 1990), as amended by Republic Act No. 7718 ( l 994), sec. 1.
Decision 53 G.R. No. 221190

enter into contractual arrangements with private entities to undertake these

government infrastructure facilities. Section 3 of the BOT Law, as amended,
provides:

SEC. 3. Private Initiative in Infrastructure. -All government infrastructure

agencies, including government-owned and -controlled corporations and
local government units are hereby authorized to enter into contract with any
duly prequalified project proponent for the financing, construction,
operation and maintenance of any financially viable infrastructure or
development facility through any of the projects authorized in this Act. Said
agencies, when entering into such contracts, are enjoined to solicit the
expertise of individuals, groups, or corporations in the private sector who
have extensive experience in undertaking infrastructure or development
projects.

Under the law, "infrastructure or development projects" includes the

construction of railroads, railways, and transportation systems, among others.
These projects "shall be undertaken through contractual arrangements as
defined [under the BOT Law] and such other variations as may be approved
by the President of the Philippines." 229

Among the contractual arrangements which government agencies may

enter into with private entities are build-operate-and-transfer, build-and-
transfer, contract-add-and-operate, and rehabilitate-operate-and-transfer,
among others. 230

The LRTA is the government agency 231 primarily tasked with the
construction, operation, and maintenance of the country's light rail transit
system. 232 These activities are deemed infrastructure or development projects
which may be undertaken by the private sector through a contractual
agreement with LRTA.

Accordingly, the Concession Agreement does not constitute an invalid

delegation ofLRTA's franchise. It is an arrangement permitted undertheBOT
Law, which the parties entered into to effectuate LRTA's mandate of providing
transportation services to the people.

IX

Petitioners next question the alleged violation of their constitutional

right to information. They maintain that although the Concession Agreement /
is a matter of public concern, respondents rejected their request for a copy of

229
Repubiic Act No. 6957 ( 1990). as amended, sec. 2(a).
230 Republic Act No. 69':J7 (1990), as amended, sec. 2.
231
Light Raif Transit Authority v. City of Pasay, 924 Phil. 102 (2022) [Per J. Hernando, En Banc].
232
Executive Order No. 603 ( 1980), sec. 2.
Decision 54 G.R. No. 221190

the agreement and its annexes. 233 In addition, they stress that the State policy
of full transparency ·was rendered nugatory when respondents failed to
disclose the transactions and negotiations leading to the consummation of the
Concession Agreement. 234

Article III, Section 7 of the -1987 Constitution recognizes the people's

right to information on matters of public concern:

SECTION 7. The right of the people to infom1ation on matters of public

concern shall be recognized. Access to official records, and to documents,
and papers pertaining to official acts, transactions, or decisions, as well as
to government research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be provided by law.

The right to information is complemented by the constitutional policy

of full public disclosure expressed in Article II, Section 28, which requires
that the State "adopts and implements a policy of full public disclosure of all
its transactions involving public interest."

Both constitutional prov1s10ns promote "transparency in policy-

making."235 It aims to. increase the role of the people "in governmental
decision-making as well in checking abuse in govemment." 236 By providing
citizens with sufficient information, they are able to "participate in public
discussions leading to the formulation of government policies and their
effective implementation." 237 Chavez v. Public Estates Authority38 teaches:

These twin. prov1s10ns of the Constitution seek to promote

transparency in policy-making and in the operations of the government, as
well as provide the people sufficient information to exercise effectively
other constitutional rights. These twin provisions are essential to the
exercise of freedom of expression. If the government does not disclose its
official acts, transactions and decisions to citizens, whatever citizens say,
even if expressed without any restraint, will be speculative and amount to
nothing. These twin provisions are also essential to hold public officials "at
all times ... accountable to the people,'' for unless citizens have the proper
information, they cannot hold public officials accountable for anything.
Armed with the right information, citizens can participate in public
discussions leading to the formulation of government policies and their
effective implementation. An informed citizenry is essential to the existence
and proper functioning of any democracy. As explained by the Court in
Valmonte v. Belmonte, Jr. -

"An essential element of these freedoms is to keep open a

continuing dialogue or process of communication between

233
Rollo, p. 1262.
234
Id. at 1257-1262.
235
Chavez v. Public Estates Authority, 433 Phil. 506, 529 (2002) [Per J. Carpio, En Banc].
rn, Vaimonte v. Belmonte, Jr., 252 Phil. 264, 272 ( 1989) [Perl Cortes, En Banc],
237
Chavez v. Public Estcrtes Authority, 433 Phil. 506, 530 (2002) [Per J. Carpio, En Banc].
m 433 Phil. 506 (2002) [Per J. Carpio. En Banc].
Decision 55 G.R. No. 221190

the government and the people. It is in the interest of the

State that the channels for free political discussion be
maintained to the end that the government may perceive and
be responsive to the people's will. Yet, this open dialogue
can be effective only to the extent that the citizenry is
informed and thus able to formulate its will intelligently.
Only when the participants in the discussion are aware of the
issues and have access to information relating thereto can
such bear fruit." 239 (Citations omitted)

To emphasize, "[t]he freedom of information is the instrument that

empowers the people. The right to information is so central to a representative
government such as ours that it was integrated as an enforceable constitutional
right."240

Yet not all kinds of information are covered by these prov1s10ns.

Legaspi v. Civil Service Commission 241 clarified that these constitutional
guarantees only cover information that are of public concern, and those not
exempted by law from its operation.

In this case, respondents do not dispute that the information requested

are matters of public interest. Nor do they invoke any exception from the
provisions' coverage. Respondents, however, maintain that no constitutional
right was violated since they made the necessary disclosure through the
posting and publication of several bid bulletins. DOTr also stresses that a pre-
bid conference was conducted during which bidding procedures were
discussed to the prospective bidders. 242

Respondents' arguments are partly meritorious.

The policy of full disclosure and the right to information, while

generally intertwined, are two constitutional guarantees that differ in scope.
Chavez v. National Housing Authority43 discussed:

Sec. 28, Art. II compels the State and its agencies to fully disclose
"all of its transactions involving public interest." Thus, the government
agencies, without need of demand from anyone, must bring into public view
all the steps and negotiations leading to the consummation of the transaction
and the contents of the perfected contract. Such information must pertain to
"definite propositions of the government", meaning official
recommendations or final positions reached on the different matters subject

239
240
of negotiation. The government agency, however, need not disclose "intra-

id. at 529-530.
See J. Leonen, Separate Opinion in Colmenares v. Duterte, G.R. Nos. 245981 & 246594, August 9, 2022
I
[Per J. Lopez, En Banc] at 9. This pinpoint citation refers to the copy of the Opinion uploaded to the
Supreme Court website.
241
234 Phil. 521 (1987) [Per J. Cortes, En Banc].
242
Rollo, p. I 176.
243
557 Phil. 29 (2007) [Per J. Velasco, Jr., En Banc].
Decision 56 G.R. No. 221190

agency or inter-agency recommendations or communications during the

stage when common assertions are still in the process of being formulated
or are in the exploratory stage." The limitation also covers privileged
communication like information on military and diplomatic secrets;
information affecting national security; information on investigations of
crimes by law enforcement agencies before the prosecution of the accused;
information on foreign relations, intelligence, and other classified
information.

It is unfortunate, however, that after almost twenty (20) years from

birth of the 1987 Constitution, there is still no enabling law that provides the
mechanics for the compulsory duty of government agencies to disclose
information on government transactions. Hopefully, the desired enabling
law will finally see the light of day if and when Congress decides to approve
the proposed "Freedom of Access to Information Act". In the meantime, it
would suffice that government agencies post on their bulletin boards the
documents incorporating the information on the steps and negotiations that
produced the agreements and the agreements themselves, and if finances
permit, to upload said information on their respective websites for easy
access by interested parties. Without any law or regulation governing the
right to disclose information, the NHA or any of the respondents cannot be
faulted if they were not able to disclose information relative to the SMDRP
to the public in general.

The other aspect of the people's right to know apart from the duty to
disclose is the duty to allow access to infonnation on matters of public
concern under Sec. 7, Art. III of the Constitution. The gateway to
information opens to the public the following: (1) official records; (2)
documents and papers pertaining to official acts, transactions, or decisions;
and (3) government research data used as a basis for policy development.

Thus, the duty to disclose information should be differentiated from

the duty to permit access to information. There is no need to demand from
the government agency disclosure of infonnation as this is mandatory under
the Constitution; failirig that, legal remedies are available. On the other
hand, the interested party must first request or even demand that he be
allowed access to documents and papers in the particular agency. A request
or demand is required; otherwise, the government office or agency will not
know of the desire of the interested pai1y to gain access to such papers and
what papers are needed. The duty to disclose covers only transactions
involving public interest, while the duty to allow access has a broader scope
of infonnation which embraces not only transactions involving public
interest, but any matter contained in official communications and public
documents of the government agency. 244

IDEALS, Inc. v. PSALM Corp. 245 echoed this pronouncement:

The Court, however, distinguished the duty to disclose information

from the duty to permit access to information on matters of public concern
under [Art. III, Sec. 7] of the Constitution. Unlike the disclosure of
information which is mandatory under the Constitution, the other aspect of
the people's right to know requires a demand or request for one to gain
/
244
/d.atlll-113.
245
696 Phi!. 486 (2012) [Per J. Villarama, Jr., En Banc].
Decision 57 G.R. No. 221190

access to documents and paper of the particular agency. Moreover, the duty
to disclose covers only transactions involving public interest, while the duty
to allow access has a broader scope of information which embraces not only
transactions involving public interest, but any matter contained in official
communications and public documents of the government agency. Such
relief must be granted to the party requesting access to official records,
documents and papers relating to official acts, transactions, and decisions
that are relevant to a government contract. 246 (Citation omitted)

In both cases, the Court recognized that while Article II, Section 28
requires the government to make a full disclosure "of all its transactions
involving public interest[,]" 247 there is yet no law providing for the mechanics
regarding this compulsory duty of the government. The Court then held that
"pending the enactment of an enabling law, the release of information through
postings in public bulletin boards and government websites satisfies the
const1tutional requirement[. ]"248

Here,- respondents DOTr and LRTA posted in their respective websites

and bulletin boards the Invitation to Qualify and Bid for the LRT 1 Extension
Project. 249 The Invitation to Qualify, which was also advertised in various
newspapers, contained the following information relating to the project: first,
estimated cost; second, description and components; third, bidding process;
and fourth, bidders' qualifications. 250 They also posted and published various
bid bulletins detailing the information regarding the project. 251

Based on the foregoing, and in the absence of a law detailing the manner
for the discharge of this constitutional duty, we find that respondents complied
with their obligation under Article II, Section 28.

On the duty to permit access to information, this Court reiterates that

individuals seeking to access the documents of a particular agency are
required to submit a request or demand. This demand notifies the government
office or agency of the information or documents which the requesting party
needs. 252 •

In this case, we find that petitioners failed to allege the demands they
made for the requested documents.

Petitioners claim that respondents refused to provide them with

information relating to the Concession Agreement, 253 yet made no mention of

24 c) Id. at 524.
247
Id. at 520.
248
Id. at 523.
249
Rollo, pp. 1174.1319.
150
Id. at 937--939, l 174---1 !76.
251
fcLatll74-ll76.
252
Chavez v. National Housing Authority, 557 Phil. 29 (2007) [Per J. Velasco, Jr., En Banc].
253
Rollo, p. 1253.
Decision 58 G.R. No. 221190

the requests they submitted nor of the actions they took. Further, while they
sent the November 5, 2015 Letter to DOTr, there is no evidence on record that
would show whether the request was granted or not. This is a factual question
which is better addressed by the lower courts.

Similarly, the issue of whether the Concession Agreement is a lopsided

contract is a question of fact which requires the presentation of evidence.

To start with, pet1t10ners equate LRMC's obligation to deliver the

concession payment with its commitment to finance the construction,
operation, and maintenance of the LRT 1 Extension Project. 254 They then
contend that while the BOT Law does not prohibit the installment delivery of
the concession payment, it is a disadvantageous undertaking particularly when
read with the balancing payment provision of the agreement. 255 They stress
that with the application of the balancing payment scheme, the amount of the
concession payment to be received is not guaranteed. 256

Petitioners' arguments are unmeritorious.

The delivery of the concession payment is an undertaking different

from the obligation to finance the LRT I Extension Project. Section I 0.1 of
the Concession Agreement provides for the duty of the concessionaire to
finance the project. Pursuant to this, the concessionaire is obligated to execute
the necessary finance documents relating to the funding of the project. 257 The
concessionaire shall also pay the grantors PHP 9,350,103,900.00, representing
the concession payment, which shall be delivered in installment as laid down
in Schedule 9, Part 2258 of the Concession Agreement:

Part 2: Concession Payments

2. The .Concessionaire has, on or before the Signing Date, paid Nine

Hundred Thirty-five Million Ten Thousand Three Hundred Ninety Pesos
([PHP] 935,010,390.00), inclusive of VAT, to the Grantors which is the
equivalent of teri percent (I 0%) of the Total Concession Payments.

3. The Concessionaire shall on or before the Effective Date pay Nine

Fhmdred Thi11y-five Million Ten Thousand Three Huudred Ninetv., Pesos
([PHP] 935,010,390.00)_ inclusive of VAT, to the Grantors which is the

54
:! /dat.1271.
255
Id. at l 268.
:s 6 Id. at l273.
257
!d. at I 48---i 50:- Section I 0.2 of the (~oncession .A.grectnent.
258
Id. at 468-469.
Decision 59 G.R. No. 221190

equivalent often percent (10%) of the Total Concession Payments.

4. The remaining amount of the Total Concession Payments shall

be payable in equal quarterly instalments, inclusive of VAT, over the
Concession Period ("Quarterly CP"). The first of these instalments shall be
paid on the date of the Balancing Payment first occurring after the fourth
(4th) anniversary of the Effective Date. Each subsequent instalment shall be
paid on the next following date on which a Balancing Payment is made and
shall form a part of the Balancing Payment.

Quarterly CP = (80% x Total Concession Payments)/ 112 = [PHP]

66, 786,456.43 259

Based on the schedule of payments, the amount to be delivered is fixed

at PHP 66,786,456.43 per quarter. This amount shall then be subject to the
balancing payment system, which pertains to the netting off of certain
payments due to the concessionaire and the grantors. Section 20.6 of the
Concession Agreement provides for the guidelines on how the balancing
payment system shall be effectuated:

20.6 Balancing Payment

20.6.a Every quarter (which for this purpose shall be a calendar

quarter provided that the first (1st) such "quarter" be the period from and
including the Effective Date until the Calendar Quarter Date first occurring
thereafter), the Balancing Payment (reflecting a netting off of Deficit
Payments, Grantors Compensation Payments, Surplus Payments, KPI
Charges, Concession Payments, payments under Section .18.12 Variations
and Adjustments), and any other payment under this Concession Agreement
expressed to be paid through the Balancing Payments) shall be calculated
by the Concessionaire who shall deliver its calculation and statement to the
Grantors quarterly no later than thirtieth (30th) of each January, April, July
and October (i.e. in the month following the end of the quarter in question).
Each invoice shall attach reasonable suppo1iing evidence of all amounts
claimed and shall be determined as set out below.

20.6.b The calculation of the Balancing Payment ("BP") shall be as

foilows:

BP= (DP+GCmP+GOP) - (SP+KPIC+CCP+COP)

where

DP is the Deficit Payment (if any) payable in respect of the period in

question pursuant to Section 20.4.a (Deficit Paynient and Surplus Payment);

GCmP is the Grantors Compensation Payment (if any) payable in respect of

I
the period in question pursuant to Section 30 (Grantor_\' Compensation);

GOP is the aggregate of any other agreed payments payable by the Grantors
to the Concessionaire in the relevant three (3) month period pursuant to this
Concession Agreement;

259
Id. at 468.
Decisioi1 60 G.R. No. 221190

SP is the Surplus Payment (if any) payable in respect of the period in

question pursuant to Section 20.4.b (Deficit Paym,ent and Surplus Payment);

KPIC is the aggregate of KPI Charges payable in respect of the period in

question pursuant to Section 18.5 (Key Pe1jormance Indicators);

CCP is any Concession Payment in respect of the period in question

pursuant to Section 20.5 (Concession Payment); and

COP is the aggregate of any other agreed payments payable by the

Concessionaire to the Grantors in the relevant three (3) month period
pursuant to this Concessionaire Agreement.

20.6.c If IPB is a positive number the Grantors shall, subject to

Section 20,9 (Grantors Payment), pay that amount to the Concessionaire
("Grantors Balancing Payment"). If BP is a negative number, the
Concessionaire shall pay that amount to the Grantors ("Concessionaire
Balancing Payment").

20.6.d On receipt of the Concessionaire's statement under Section

20.6.a (Balancing Payment) and the reports required under Section
25.2.b(3) (Reports), the Grantors shall have twenty (20) days starting on the
date on which the reports required under Section 25.2.b(3) are delivered in
which to (i) approve or (ii) require recalculations and amendments. Both
parties shall maintain sufficient records to enable verification of all invoices.
Failure by the Grantors to comment on the invoice within the above twenty
(20)-day period shall be deemed to constitute approval. Payment shall be
made within seven (7) Business Days of approval (or deemed approval) of
the statement, subject to Section 20.9 (Granton; Payment).

20.6.e Where the Grantors have exercised their rights under Section
20.9 (Granton; Payment) to defer any payment then, notwithstanding the
exercise of such rights, the Concessionaire shall be entitled to set off any
amounts payable by it under this Section 20.6 (Balancing Payment) against
such amounts. -

20.6.Cl n addition to the Balancing Payment provided in this Section

20 (Concessionaire Revenues), there shall be a final Balancing Payment
made on the earlier of the Transfer Date or the Termination Date. This
Balancing Payment shall cover the period from the last Calendar Quarter
Date until th~ Transfer Date or the Termination Date as applicable). No
Concession Payment shall be payable in respect of the period covered by
this Balancing Payment. This Balancing Payment CFinal Balancing
Payment") shall be invoiced no later than twenty (20) days following the
Transfer Date_or Termination Date (as applicable). The payment under this
Final Balancing Payment shall be reconciled with any payments that may
be due pursuant to Schedule 10 (Financial Consequences of
Termination). 260

Apart from the concession payment, the obligations covered by this

arrangement are the "[ d]eficit [p Jayments, [g]rantors [c]ompensation
[p]ayments, [s]urpl:us [p]ayments, KPI Charges ... payments under Section
18.12 (Variations and Adjustments)" and those payments which are expressly
260
Id at:210-212.
I
Decision 61. G.R. No.221190

covered by the balancing payment method.

Deficit payment pertains to the amount the grantors shall pay to the
concessionaire in instances where the approved fare is lower than the notional
fare. Surplus payment, on the other hand, refers to the sum which the
concessionaire shall deliver to the grantors when the approved fare is higher
than the notional fare. Section 20.4 of the Concession Agreement governs the
computation and settlement of these figures, and states that the actual ridership
over a certain period shall be taken into account in determining the deficit and
surplus payments. 261

Meanwhile, Sectfon 30 262 of the Concession Agreement states that the

2 1
'' /cl. at 209-210. Section 20.4 of the Concession Agreement states:
20.4 Deficit Payment and Surplus Payment
20.4.a In any period, where the Approved Fare is lower than the Notional Fare, the Grantors shall pay to
the Concessionaire a Deficit Payment ("DP") (adjusted to take account ofridership when Concessionaire
introduced promoiional fares are in operation as indicated below), to reflect the difference between the
Notional Fare (NF) and the Approved Fare (AF), computed as follows:
DPn ·= Rnx (NFATn - AFATn)
where
DPn is the Deficit Payment for the three (3)-month period n to be paid by the Grantors to the
Concessionaire
Rn is the actual ridership (in terms of passenger journeys over period n) (but excluding for this purpose
(i) all journeys originating during the IDFRP and (ii) in respect of the second (2nd) and subsequent periods
after a Deficit Payment first (Pt) becomes due, all journeys made on promotional fares or special
discounts introduced by the Concessionaire)
NF,.,Tn is the Notional Fare computed on the basis of the actual Average Trip (AT) length over the period
n where AT is as determined below
AF,,Tn is the Approved Fare computed on the basis of the actual Average Trip (AT) length over the
period n where AT is as determined below
AT= TMn / Rn
where TMn is the actual total passenger-kilometres travelled over the period n
20.4.b In any period, where the Approved Fare is higher than the Notional Fare, the Concessionaire shall
pay to the Grantors a "Surplus Payment" ("SP"), computed as follows:
SI·\= 90% [Rnx (ACF,rn,- NFATa)]
where
SP11 is the Surplus Payment for the three (3) month period n to be paid by the Concessionaire to the
Grantors;
ACF ATn is the Actual Fare computed on the basis of the actual Average Trip (AT) length over the period
where AT is as determined in Section 20.4.a above; and
Rn, NFATn and TMn are as set out in Section 20.4a (Deficit Payment and Surplus Payment).
20.4.c For the purposes of the calculation above in respect of the first Balancing Payment to be made
and the Final Balancing Payment (as defined in Section 20.6. (Balancing Payment)) referenced above to
a "three (3) month period" shall be deemed to refer to the period covered by the relevant Balancing
Payment.
262
/cl. at 252-253. Section 30 of the Concession Agreement states:
Section 30 GRANTORS COMPENSATION
30. l If the Concessionaire is delayed in the completion of the Works or is prevented from operating any
part of the System or incurs additional cost or loss of revenue by reason of:
30. l .a a Material Adverse Government Action;
30.1.b a Grantors Delay Event;
I
30.1.c subject to Section 5.3(b) (Cranwrs Oh/igu1ions), the failure of the Existing System to meet the
Existing System Requirements on the Effective Date: or
30.1.J any other cause in respect of which this Concession Agreement provides for the provision of
Grantors Compensation,
the Grantors shall be liable (subject to Section 20.9 (Grantors Payment)) to provide compensation to the
Concessionaire ("Grantors Compensation").
30.2 The Grantors shall pay the mutually agreed Grantors Compensation (or in default of agreement as
determined pursuant to Section 35 (Dispute Resoluiion)), which shall be calculated on the principle that,
subject as provided below, it should restore the Concessionaire in the cashflow position to what it would
have been had above event not occun-ed, subject to the provisions of Section 20.9 (Grantors Payment).
Decision 62 G.R. No. 221190

grantors shall give the concessionaire compensation payments when the latter
incurs delay· in fulfilling its Concession Agreement duties by reason of
material adverse government action, or grantors delay events, among
others. 263 In determining the amount of compensation payments, the parties
shall be guided by the principle that "it should restore the [Concessionaire's]
cashflow position to what it would have been had ... [the reasons for delay]
not occurred[.]" 264

Key performance charges shall be imposed when the concessionaire

fails to meet the key performance indicators laid down in Schedule 6, Part 3
of the Concession Agreement. These indicators -relate to the system's
operational performance, and customer service, among others. Particularly
for operational performance, "KPI [c]harges shall be incurred where the
Concessionaire fails to achieve the target levels of performance established on
the KPis as fully described in paragraph 3 (Operation - Primary Key
Performance Indicators ('Primary KPls '.))[.]" 265 Whether key performance
charges shall be imposed depends on certain aspects such as the number of
actual trips completed as compared to the number of scheduled train trips. 266

Clearly, various factors need be considered in effectuating the balancing

of payment scheme. These factors pe1iain to the ridership, 267 cashflow
position of the concessionaire268 and number of actual train trips, 269 among
others. All these details require the presentation of evidence, the consideration
of which is a function best performed by trial courts and the appellate court.

Further, this Court notes that other than the general allegation that the
balancing payment method is disadvantageous, petitioners have failed to
allege the facts and the law on which this contention is based. GJOS-SAMAR
explained the consequence of a party's failure to allege the facts supporting
one's claim:

Here, petitioner has not alleged ultimate facts to support its claim
that bundling will create a monopoly, in violation of the Constitution. By
merely stating legal conclusions, petitioner did not present any sufficient
allegation upon which the Court could grant the relief petitioner prayed for.
ln Zuniga-S'antos v. Santos-Gran, we held that "[a] pleading should state the
ultimate facts essential to the rights of action or defense asserted, as

For this purpose the Grantors Compensation shall be through an adjustment to the Concession Payment
an increase in Notional Fares or Approved Fares, the making of additional payments to the
Concessionaire ("Gran tors Compensation Payment") or (by agreement between the Parties) an extension
to the Concession Period or a combination of the above. •
30.3 The Grantors shall determine the method in which Grantors Compensation is to be provided which
shall be subject to the principles set out in Section 30.2 (Grantors Compensation).
263
Id. at 252.
?.<>'-1 Id.
265
Id. at 344, Schedule 6, Part 3. sec. 1.1 of the Concession Agreement.
1 6
c' Id. at 350-354, Schedule 6, Part 3, sec. 3 of the Concession ..L\gree1nent.
21 7
' Id. at 209-210, Section 20.4 of the Concession Agreement.
268
Id. at 252-253, Section 30.2 of the Concession Agreement.
269
Id. at 350-354, Schedule 6, Part 3, sec. 3 of the Concession Agreement
Decision 63 G.R. No. 221190

distinguished from mere conclusions of Jact, or conclusions oflaw. General

allegations that a contract is valid or legal, or is just, fair, and reasonable,
are mere conclusions .of law. Likewise, allegations that a contract is void,
voidable, invalid, illegal, ultra vires, or against public policy, without stating
facts showing its invalidity, are mere conclusions of law." The present
action should thus be dismissed on the ground of failure to state cause of
action. 270

Likewise, while pet1t10ners contend that "the contract variation

payments contemplated by the Concession Agreement" are prohibited by the
Revised IRR, 271 they failed to allege the facts demonstrating the infraction.
Section 12.11 of the Revised IRR provides for the requisites for a valid
contract variation:

SECTION 12.11. Contract Variation. -

A contract variation may be allowed by the Head of the

Agency/LGU, Provided, that:

a. There is no impact on the basic parameters, terms and conditions

as approved by the Approving Body; or

b. There is no increase in the agreed fees, tolls and charges or a

decrease in the Agency/LGU's revenue or profit share derived from
the project, except as may be allowed under a parametric formula in
the contract itself; or

c. There is no reduction in the scope of works or performance

standards, or fundamental change in the contractual arrangement nor
extension in the contract term, except in cases of breach on the part
of the Agency/LOU of its obligations under the contract; or

d. There is no additional Government Undertaking, or increase in

the financial exposure of the Government under the project.

Upon due diligence and recommendation of the Head or

Agency/LGU, contract variations not covered by above shall undergo
approval by the Approving Body in terms of the impacts on government
undertakings/exposure, performance standards and service charges. Failure
to secure clearance/approval of the Head of Agency/LOU or Approving
Body as provided in this section shall render the contract variation void.

The Agency/LOU shall report to the Approving Body and the PPP
Center on any contract variations including those approved by the Head of
Agency/LOU.

In Ocampo v. A-fendoza, 272 this Court invalidated the Radio Frequency

Identification (RFID) Memorandum of Agreement entered into by Stradcom
Corporation and the Department of Transportation and Communication/ Land

270
G!OS-SAMAR, Inc. v. Department (~l Transportation and Communications, 849 Phii. 120, 142-143
I
(2019) [Per J. Jardeleza, En Banc].
271
Rollo, p. I 273.
272
804 Phil. 638(2017) [Per C.J. Sereno, E'n 13ancj.
Decision 64 G.R. No.221190

Transportation Office, noting that since the project will subject motor vehicles
to an additional charge of PHP 300.00, the RFID· project is a prohibited
contract variation involving "an increase in the agreed fees, tolls, and charges
to be exacted upon the public." 273 Unlike in Ocampo, however, petitioners in
this case failed to lay down the factual circumstances illustrating the claim
that the Concession Agreeinent's contract variation payments impose
additional government unde1iakings or increase the government's financial
exposure.

Finally, we stress that variation proposals are subject to "[r]elevant

[r]ules and [p]rocedures" 274 as well as "[l]egal [r]equirements," 275 which
include Section 12.11 of the Revised IRR on contract variation.

X(A)

According to petitioners, that the Concession Agreement is lopsided is

further demonstrated by the grantors' assumption of prejudicial financial risks
and its granting of unconscionable financial guarantees. Arr10ng these
guarantees, petitioners emphasize the establishment of a PHP 500,000,000.00
"Blocked Account" which allegedly ensures the payment of the
concessionaire's revenue under Section 20. l of the Agreement. They claim
that through this arrangement, the concessionaire has a guaranteed stream of
revenue which it can use to pay the concession payments and other liabilities
under the Concession Agreement. 276

As with the balancing payment method, petitioners also failed to state

the factual details supporting the claim that the blocked account will guarantee
the payment of the concessionaire's revenue, or that it will provide the
concessionaire a gua1·anteed stream of revenue. Their argument is a general
allegation unsupp01ied by factual and legal foundations.

Fmiher, we agree with respondent DOTr that not all components of the
concessionaire revenue may be collected from the blocked account. Section
20 .10 of the Concession Agreement states that the grantors are permitted to
make withdrav.rals from the blocked account only for the following:

(i) to make payments due to the Concessionaire under this Concession

Agreement; or (ii) with the Concessionaire's consent; or (it) .if after such
withdrawal the remaining balance on the Blocked .Account will be no less
than five hundred million Pesos ([PHP] 500,000,000) (Indexed); or (iv)
foliowing the Transfer Date or Payment Date; or (v) upon the posting of
I
273
Id. at 672.
274
Rollo, p. 20 l, Section 18. i 2.fofthe Concession Agreement.
275
Id. at 202, Section l 8.12.g of the Concession Agreement.
m, Id. at 1274--1276.
Decision 65 G.R. No. 221190

standby letters of credit as provided in Section 20.1 O.d (Blocked Account). 277

Section 20.1 provides that the concessionaire, during the concession

period, may collect and receive concessionaire revenue consisting of farebox
revenue, deficit payments, grantors compensation payments, and commercial
revenue. Among these components, only the deficit and grantors
compensation payments may be charged from the blocked account.

Farebox revenue refers to the profit generated from the fares paid for
using the light rail system. 278

Commercial revenue, on the other hand, pertains to profits which are

not considered as farebox revenue, deficit payments, or grantors
compensation payments, and are generated from: (1) utilizing "the System and
parts thereof to generate advertising and similar revenue streams"; (2) the
"payments (whether by way of rent, licence fee or otherwise) from shops,
stalls and other retail outlets or other enterprises at Stations"; (3) the
"payments made by telecommunications providers for use of the ROW arid/or
the System"; and (4) "property development on the Project[.]" 279

Based on this, farebox and commercial revenue cannot be collected

from the blocked account considering that these are revenues charged to
individuals who utilize the system and are not party to the Concession
Agreement.

Lastly, as discussed earlier, not only are the deficit and grantors
compensation payments subject to the balancing payment scheme, but their
amounts and payments are also contingent upon various factors which require
factual foundation.

X (B)

Similarly, that the prov1s1on on differential generation cost did not

undergo public hearing and therefore detrimental to the grantors is a factual
question which cannot be raised for the first time before this Court.

We stress that the process of calculating the differential generation cost

is influenced by factual components such as actual l\!Ianila Electricity
Company (Meralco) invoices and the parties' ridership projection, among
others.
I
277
/d.at215.
nx Id.. at 207, Section 20.2 of the Concession Agreement; 704, Schedule 22 of the Concession Agreement.
279
Id. at 96, Section I. I of the Concession Agreement.
Decision 66 G.R. No. 221190

Section 20.13.b of the Concession Agreement permits the

concessionaire to calculate and claim the differential generation cost for the
system. The arrangement aims to "take into account extreme fluctuations in
generation costs ... and allows as applicable a temporary upward adjustment
of the Notional Fare and Approved Fare to enable either the Concessionaire
to recover incremental costs or the Government to benefit from savings
resulting from such extreme fluctuations." 280

The principles and formulas for computing the differential generation

cost are laid down in Schedule 9, Part 3 of the Concession Agreement:

1. Introduction and Principles

1.2. A 5% annual increase, which is the effective annual increase to

the Notional Fare (the "Base Adjustment Index"), shall be applied over the
Concession Period, from the Year O(base) figures of the Lower Limit Index
and Upper Limit Index. The Lower Limit Index and Upper Limit Index
define the inclusive range of fluctuation of generation charges beyond which
extreme fluctuation shall be deemed to have occurred. The table in Section
3 in this Part 3 of Schedule 9, lists the Lower Limit Index and Upper Limit
Index applicable annually from Effective Date.

1.3. Notwithstanding the procurement of power by the

Concessionaire from a different power supplier and at a different cost,
Manila Electricity Company ("MERALCO") or its successor's power
generation selling price to the Concessionaire (the Concessionaire's
"Generation Cost", where the Concessionaire is purchasing power from
Meralco on actual Meralco invoices) shall be used in the calculation of the
Differential Generation Costs outlined in this Part 3 of Schedule 9. The
Concessionaire shall be compensated for Differential Generation Cost
through fare adjustment in accordance with this Part 3 Schedule 9 only in
relation to purchases of electric power from Meralco or its successor
·company on the basis of actual Meralco invoices, and not in relation to
electric power purchased from (a) Meralco or its successor company on a
bilateral supply contract and (b) suppliers other than Meralco. 281

Under Schedule 9, Paii 3, the period for computing the differential

generation cost shall be on every anniversary of the effective date. During
this time, the parties shall determine the lower, upper, and actual generation
charges which shall be used as bases to ascertain the amount of differential
generation cost, if any. Section 3 provides:
I
3. Differential Generation Cost

280
Id. at 470-475, Schedule 9, Part 3 of the Concession Agreement.
281
Id. at 470, Schedule 9, Part 3, sec. I of the Concession Agreement.
Decision 67 G.R. No. 221190

3 .1. On Power Cost Computation Daten, if the Actual Generation

Chargen falls on or within the range of the Notional Generation Chargesn
then no adjustments to the Notional Fare or Approved Fare shall be made.
Otherwise, a fare adjustment shall be applied in accordance with Section 4
below using the Differential Generation Cost that shall be computed as
follows[.] 282

Meanwhile, Section 4 dictates how the parties shall be indemnified for

the differential generation cost. Primarily, it states that the amount due to the
Concessionaire shall be satisfied "through an adjustment of the Notional Fare
and the Approved Fare," otherwise called the "Fare Adjustment Amount." On
the other hand, the amount due to the grantors shall be used "to offset against
future amounts that it could owe the Concessionaire through the Fare
Adjustment Amount[.]" 283 The provis_ion further provides:

4. Fare Adjustment Based on Differential Generation Cost

4.2. The Fare Adjustment Amount shall be calculated based on

ridership projections mutually agreed by the Grantors and the
Concessionaire. The maximum allowable Fare Adjustment Amount shall
be 5% of the Notional Fare. The new Notional Fare shall be the sum of the
existing Notional Fare and Fare Adjustment Amount. The new Approved
Fare shall be the sum of the existing Approved Fare and the Fare Adjustment
Amount For the avoidance of doubt, if the Concessionaire elects not to
increase the Actual Fare to the level of the Approved Fare, the
Concessionaire will be deemed to have recovered the full amount that it
would have recovered had it done so.

4.3 No later than sixty, (60) days after each Power Cost Computation
Date, the Concessionaire shall give a written notice to the Grantors with
supporting calculations and invoices stating if any Fare Adjustment Amount
is to be implemented, the amount (if any) of the Fare Adjustment Amount
and the revised Notional Fare and Approved Fare to be implemented. The
Grantors shall, no later than sixty (60) days after the above notice approve
the Fare Adjustment Amount and the revisions to the Notional Fare and the
Approved Fare. The revision to the Notional Fare shall take effect on the
earlier of (a) the actual implementation of the adjustment to the Approved
Fare or (b) the expiry of this sixty (60) day period. If the Grantors continue
to disagree with the Concessionaire's calculation of the Fare Adjustment
Amount they shall be entitled to refer the matter to the Expert pursuant to
Section 35 of this Concession Agreement and no adjustment to the Notional
Fare shall be made until the Expert has made his decision. Any such
adjustment to the Notional Fare and Approved Fare shall also take into
account any interest that would have accrued following the expiry of the
sixty (60) day period. Furthermore, any such adjustment to the Notional
Fare and Approved Fare shall not be made within a period of six (6) months
prior to or aHer a Periodic Adjustment of the Notional Fare.

281
Id at 472.
283
Id. at 474, Schedule 9, Part 3, sec. 4.1 of the Concession Agreement.
Decision 68 G.R. No. 221190

4.4. Actual compensation for the Differential Generation Cost shall

be determined monthly based on actual ridership multiplied by the
Approved Fare Adjustment. During the Differential Generation Cost
adjustment period, the Concessionaire shall provide the details of the total
Differential Generation Cost recovered during the month and the estimated
time period the Concessionaire will require to recover the outstanding
Differential Generation Cost and this information shall be submitted no later
than fifteen ( 15) days after the end of the relevant month.

4.5. The adjustment in the Approved Fare shall be in effect until the
Concessionaire has fully recovered the Differential Generation Cost.

4.6. Upon the recovery of the entire Differential Generation Cost,

the Concessionaire shall inform the Grantors and the Grantors may reduce
the Approved Fare and the Notional Fare, by no more than the deduction of
the Fare Adjustment Amount therefrom. Any such adjustment to the
Notional Fare and Approved Fare shall not be made within a period of six
(6) months prior to or after a Periodic Adjustment of the Notional Fare.

4. 7. If there remains an outstanding balance on any unpaid

Differential Generation Cost ("Remaining Differential Generation Cost")
on the Transfer Date or the Termination Date (as applicable) that is due to
the Concessionaire, the Grantors shall settle this outstanding amount
through the Final Balancing Payment. If there is an outstanding amour1t that
is due to the Grantors, the Concessionaire shall likewise compensate the
Grantors through the Final Balancing Payment. 284

Ascertaining whether the differential generation cost would injure the

grantors and the public requires the consideration of various factors which
necessitate supporting documents such as invoices from Meralco, "ridership
projections" agreed upon by both parties, and actual monthly ridership, among
others.

X(C)

Petitioners also compare the grantors' guarantees to those put up by the

concessionaire. According to them, the concessionaire's guarantees are
rendered nugatory by the PHP 600,000,000.00 limit on its duty to pay
damages for a concessionaire delay event. In essence, petitioners insist that
the securities set up by the concessionaire are negligible as compared to those
assumed by the grantors. 285

Petitioners' arguments are unavailing.

Section 9 .2 of the Concession Agreement provides for the

concessionaire's duty to deliver to the grantors "an executed original of the I
284
Id. at 473-475, Schedule 9~ Part 3~ sec. 4 of the Concession Agreement.
285
Id. at 33, 1274.
Decision 69 G.R. No. 221190

Operation Performance Security[.]" 286 This security serves as a guarantee for

the concessionaire's obligation under the Concession Agreement. Initially, the
amount shall be maintained at PHP 650,000,000.00, and will later be modified
upon the occwTence of the events stated in the agreement.

Among the obligations which may be enforced against the operation

performance security is the concessionaire's liability to pay damages caused
by "concessionaire delay event[.]" 287

Under Section 17.5 of the Concession Agreement, the grantors shall be

entitled to PHP 1,000,000.00 for each day of delay, though it cannot exceed
PI-IP 600,000,000.00. The amount of damages to be received pursuant to this
provision shall be "the Concessionaire's sole financial liability. for delay in
achieving the completion of the Cavite Extension[.]" 288 This notwithstanding,
the provision provides that the liability for a concessionaire delay event "shall
not affect any of the Grantors' rights or the Concessionailre's other
obligations" 289 under the agreement.

Therefore, while the Concession Agreement provides for a ceiling-as to

the amount of damages to be received in case of a concessionaire delay event,
this undertaking shall not alter the other obligations of the concessionaire
under the Concession Agreement.

Further, this Court notes that the paiiies put forward opposmg
contentions unsupported by evidentiary foundation.

For their paii, respondents DOTr and LRMC deny petitioners' assertion
and insist that the concessionaire had assumed substantiall financial
obligations. 290 They emphasize that petitioners disregarded the following
financial undertakings shouldered by the concessionaire: 291 (1) cost for the
operations of the existing system; 292 (2) share escrow; 293 (3) operation
performance security; 294 ( 4) construction performance security; 295 ( 5)
handback security;2 96 ( 6) concessionaire funding; 297 (7) cost of acquiring
additional right of way; 298 (8) damages for concessionaire delay event; 299 and

286
Id. at 145, Section 9.2.a of the Concession Agreement.
287
Id. at 188, Section 17.5 of the Concession Agreement.
2s8 Id.
289 Jd_
290
Id at I 092, 1178.
291
Id. at 1178--l t 92.
292
id. at I 15--116.
293
Id. at l42-i43.
294
Id. at 145--146.
295
!d at 146-147.
296
Id. at 148.
297 Id.
298
Id. at 153.
29
': id. at 188.
Decision 70 G.R. No. 221190

(9) charges for failure to meet the Key Performance Indicators,3° 0 among
others.

Notably, whether the financial guarantees extended by the grantors are

more significant than those shouldered by the concessionaire cannot be
determined by a mere comparison of the numerical amounts of the parties'
obligations. Various factors must be considered which require the
presentation of evidence.

The factual nature of this issue is further illustrated by the table

presented by petitioners, which laid down the indicative amounts of the
parties' financial obligations but failed to demonstrate how these amounts
were determined and computed. As correctly observed by respondent LRMC,
the values indicated in the table are mere estimates without any basis. Granting
that the Concession Agreement provides for the fonnula for these financial
obligations, the equation takes into consideration factual circ~stances which
petitioners failed to substantiate.

To be sure, the Concession Agreement provides that the assessment of

an independent consultant shall be considered in determining the "ability of
the Existing System to meet the Existing System Requirements." 301 Likewise,

300
301
/d.atl92-193.
Id at 118-122. Section 5.3 of the Concession Agreement states:
5.3 Grantors Obligations
5.3.a The relevant obligations of the Grantors prior to the Effective Date are set out in paragraphs I and
I
2 of Schedule 4 (Grantors' Responsibilities). All obligations of the Grantors shall be carried out in
accordance with this Concession Agreement, Relevant Rules and Procedures and Prudent Industry
Practice.
The achievement of all the conditions set out in this Section 5.3.a (Grantors Responsibilities) is a
condition precedent to the Effective Date.
5.3.b The Grantor shall operate and maintain the Existing System prior to the Effective Date with the
intent that the Existing System will, on the Effective Date, meet the Existing System Requirements.
No earlier than thirty (30) days prior to the then anticipated Effective Date and no later than ten (10)
days before the then anticipated Effective Date, the Concessionaire shall provide to the Grantors and the
Independent Consultant its assessment of the ability of the Existing System to meet the Existing System
Requirements including the number of LR Vs it reasonably believes are in good working condition and
its estimate of the Cycle Time. The Grantors shall procure that the Independent Consultant shall, within
a period of ten ( I 0) days of receipt of the assessment provided by the Concessionaire ce1iify whether or
not the Existing System will meet the Existing System Requirements on the Effective Date.
The Grantors must, between the Bid Submission Date and the Effective Date, continue to inspect,
maintain, monitor and report on the performance of the Existing System to !he same frequency and
quality and across the same indicators as undertaken prior to the Bid Submission Date.
The table set out below shall be used to assess the level of adherence by the Grantors to the existing
System Requirements from the Bid Submission Date to the Effective Date. The baseline Existing System
Requirement parameters will be set at midnight on 28 April 2014 and will be in accordance with
Schedule 4 (GrantorsRespor:.sibilities). The infonm:.tion used to establish the baseline measurement is
as detailed in the table below.
if the Existing System does not meet the baseiine Existing System Requirements parameters (as set out
in the Existing System Requirements table below), as certified by the Independent ConsultaJ1t, the
Grantors shall compensate the Concessionaire for the unavoidable incremental. cost (as determined by
agreement or failing agreement by the Expert) that the Concessionaire will incur to restore the Existing
System to the level necessary to meet all of the baseline Existing System Requirements taking into
consideration any Emergei1cy Upgrade Contract executed by the Grantors for the same purpose. (Id at
l i8--l l 9.)
Decision 71 G.R. No. 221190

the liability for Light Rail Vehicle (LRV) Shortfall'Payments depends on the
"average number of LRVs.available for revenue generating services[,]" 302 and
the system's average cycle time, factors which are derived from the parties'
operating reports certified by the independent consultant. 303 .

The same goes to the determination of other liabilities for

noncompliance with obligations relating to the existing system's operation
and . maintenance, 304 fare deficit payment, 305 land reclamation, 306 LRV
procurement, 307 and right of way acquisition, 308 among others. The amount to
be expended for these obligations depends on the presentation and evaluation
of evidence, which cannot be done for the first time before this Court. The
parties raise factual allegations which this Court cannot resolve at the first
instance. 309 •

X(D)

We likewise find unavailing the Concession Agreement's alleged

failure to address the issues raised in the CO A's 2017 AAR.

Among the significant observations made by COA in its 2017 AAR are
the absence of certain documents required in COA Circular No. 2009-001 and
the "non-clarification of the comments on the issues raised in the contract
review by the Office of the Government Counsel (OGCC) dated May 26,
2014[.]" The AAR provides:

6. The auditorial, legal and technical review of Concession Agreement for

the LRT 1 Cavite Extension and Operations and Maintenance Project with
contract amount of P65 billion could not be completed due to absence of
documents required in COA Circular No. 2009-001 and non-clarification of
the comments on the issues raised in the contract review by the Office of the
Government Counsel (OGCC) dated May 26, 2014.

6.1 LRTA the Grantor/Implementing Agency of the PPP Project has

no complete documentation of the project and all the related documents that
will ensure project history and better retention of information over the life
of the Concession Agreement of 32 years which during the project
implementation staff turnover and change of administration is inevitable.

6.2 On October 2, 2014, the Department of Transportation and

Communications (DOTC) and the LRTA entered into Concession
Agreement with the Light_ Rail Manila Corporation (LR.MC) for the P65 f
I
2
Jo Id. at 120-121.
303 Id.
30 1
' /d.at126-l31,22I.
305
Id. at 209-210.
306
Id. at 1280.
307
! cl at I 6 l.
308
Id. at 154-157
9
YJ GJ()S"t-t)AA1Al?., inc. v. Deparhnent qf· T'ransportation and Cornn1unication,s, 849 Phil. 120 (2019) [J.
Jarde!eza, En Banc].
Decision 72 G.R. No. 221190

billion Light Rail Transit Line 1 Cavite Extension and Operations and
Maintenance Project for a period of 32 years. The Concessionaire took over
the operations and maintenance of the Line 1 System on September 1, 2015.

6.3 In the initial review of the Concession Agreement, a

Memorandum dated July 22, 2015 was sent to the Office of the
Administrator requesting for the submission of the listed documents
required under COA Circular No. 2009-001 dated February 12, 2009 and
additional information/documents/comments on several Sections of the
Agreement, which we deemed necessary in the conduct of the auditorial and
legal review of the agreement; but as of this writing, no reply has. been
received:

6.5 In the same Memorandum, Management was requested to

comment on the issues raised in the contract review by the OGCC dated
May 26, 2014, particularly on the following items/issues:

a. On D[fjerential Generation Cost

"The Grantors shall be liable for the differential generation cost

(DOC) brought about by extreme fluctuations in power and the
Concessionaire is merely required to inform Grantors of these
events. Although the Grantors are given leeway to validate the
materiality of the Concessionaire's claim and computation of the
DGC, "extreme fluctuations in power" should be defined to
avoid arbitrariness in the determination of what it constitutes."

b. On the Allowance of Negative Bid and a Maximum Capital

Subsidy (Viability Gap Financing)

"It is assumed that the Revised Concession Agreement (RCA)

provisions on viability of the project are in consonance with the
BOT pertinent provisions (Section 1.(b ); Sec.6) of RA 6958 as
amended by RA 7718.

"There was reservation on the cost recovery scheme as provided

in the RCA in that it provided for Deficit Payments. Thus, where
the Approved Fare is lower than the Notional Fare, the Grantors
shall pay the concessionaire the difference, if any. Assuring the
Concessionaire that any variance shall be paid may be construed
as a government subsidy in the form of guarantee of revenue
during the entire concession period which the BOT Law did not
envision this."

c. Other h·sues •

"The provisions on Variations and Adjustments should be strictly

adhered to if only to obviate possible variations not within those
allowed under the BOT Law and the corresponding Revised IRR
on Variation Orders.''
I
Based on these findings, COA recommended the submission of the
following:
Decision 73 G.R. No. 221190

a) the documents required in COA Circular No. 2009-001; b) information/

documents/comments to clarify the issues raised in the following: bl) initial
auditorial and legal review; b2) contract review by the OGCC; b3) Special
Bulletin No. 06-2014 dated May 16, 2014 in order for us to complete the
review/evaluation of the Concession Agreement, and c) the required
additional documents to provide complete documentation of the project.
Management should have in their possession the complete documentation
of the project to ensure retention of information over the life cycle of the
PPP project and preserve the project history.

Notably, in COA's 2020 AAR of LRTA, it was reported that the

recommendations relating to the submission of the required contract review
documents have been fully implemented and referred to COA-DOTr. 310

Considering that COA's recommendations have been fully

implemented by the parties, this Comi need not address the allegations by
petitioners.

In any case, it must be stressed that the COA made no observation

regarding the validity of the agreement. The same applies to the OGCC's
statements, which observations, petitioners failed to prove to affect the
validity of the Concession Agreement.

ACCORDINGLY, the Petition for Certiorari and Prohibition 1s

DISl\tlISSED for lack of merit.

SO ORDERED.

Senior Associate Justice

m Commission on Audit, light Rail Transil Authority Annual Audit Report 2020, available at
https:!/www. coa. gov. ph/reports/ann uai-aud it-repmis/aar-govern m ent-own ed-and-or-contro lied-
corporat ions/# l 99-3839-light-rail-transit-authorit~-l 656752712 (last accessed, June 1, 2023).
 Decision 74 G.R. No. 221190

WE CONCUR:

1LF . _S. CAGUIOA 0

ice Associate Justice

(On official business)

AMY M ~ A V I E R HENRI JEAN PAUL B. INTING
Associate Justice Associate Justice

(On official business)

lVIARIO V. LOPEZ
Associate Justice

~---s (On official business)

s~uEL H.GA;;i::N RICARDO R. ROSARIO
Associate Justice Associate Justice

(On official business)

JI-IOSEP Y. LOPEZ 0
Associate .Justice

~ ~
X>f/Jlll?l'\Jv
J0~~1!D~S P. fYI~RQUEZ
-----;;r~ --~~
_______--~? T. K11:0,JR.
Associate Justice Associate Justice

(On official business)

lVIARIA FlL01\1ENA D. SINGH
Associate Justice
C

Decision 75 G.R. No. 221190

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, I certify that

the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the court.

' J.....-,,_,.,._...-...-.,

.GESMUNDO