Case Digest: FRANCISCO S. TATAD, et al. vs. Secretary of DOTC JESUS B. GARCIA, JR., EDSA LRT CORPORATION, LTD.

G.R. No. 114222                 06 April 1995

Facts:

In 1989, the government planned to build a railway transit line along EDSA. No bidding was made but certain corporations were invited to prequalify. The only corporation to qualify was the EDSA LRT Consortium which was obviously formed for this particular undertaking. An agreement was then made between the government, through the Department of Transportation and Communication (DOTC), and EDSA LRT Consortium. The agreement was based on the Build-Operate-Transfer scheme provided for by law (RA 6957, amended by RA 7718). Under the agreement, EDSA LRT Consortium shall build the facilities, i.e., railways, and shall supply the train cabs. Every phase that is completed shall be turned over to the DOTC and the latter shall pay rent for the same for 25 years. By the end of 25 years, it was projected that the government shall have fully paid EDSA LRT Consortium. Thereafter, EDSA LRT Consortium shall sell the facilities to the government for $1.00.

However, Senators Francisco Tatad, John Osmeña, and Rodolfo Biazon opposed the implementation of said agreement as they averred that EDSA LRT Consortium is a foreign corporation as it was organized under Hongkong laws; that as such, it cannot own a public utility such as the EDSA railway transit because this falls under the nationalized areas of activities. The petition was filed against Jesus Garcia, Jr. in his capacity as DOTC Secretary.

Issue: 

Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III; a public utility? 

Ruling:

What private respondent owns are the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant, not a public utility. While a franchise is needed to operate these facilities to serve the public, they do not by themselves constitute a public utility. What constitutes a public utility is not their ownership but their use to serve the public.

In law, there is a clear distinction between the "operation" of a public utility and the ownership of the facilities and equipment used to serve the public. The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One can own said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning the facilities used to serve the public. The devotion of property to serve the public may be done by the owner or by the person in control thereof who may not necessarily be the owner thereof.