G.R. No.

109248 July 3, 1995

GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN
T. BACORRO, petitioners,
vs.
HON. COURT OF APPEALS, SECURITIES AND EXCHANGE
COMMISSION and JOAQUIN L. MISA, respondents.

VITUG, J.:
The instant petition seeks a review of the decision rendered by the
Court of Appeals, dated 26 February 1993, in CA-G.R. SP No. 24638
and No. 24648 affirming in toto that of the Securities and Exchange
Commission ("SEC") in SEC AC 254.
The antecedents of the controversy, summarized by respondent
Commission and quoted at length by the appellate court in its
decision, are hereunder restated.
The law firm of ROSS, LAWRENCE, SELPH and
CARRASCOSO was duly registered in the Mercantile
Registry on 4 January 1937 and reconstituted with the
Securities and Exchange Commission on 4 August 1948.
The SEC records show that there were several subsequent
amendments to the articles of partnership on 18
September 1958, to change the firm [name] to ROSS,
SELPH and CARRASCOSO; on 6 July 1965 . . . to ROSS,
SELPH, SALCEDO, DEL ROSARIO, BITO & MISA; on 18 April
1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA;
on 4 December 1972 to SALCEDO, DEL ROSARIO, BITO,
MISA & LOZADA; on 11 March 1977 to DEL ROSARIO,
BITO, MISA & LOZADA; on 7 June 1977 to BITO, MISA &
LOZADA; on 19 December 1980, [Joaquin L. Misa]
appellees Jesus B. Bito and Mariano M. Lozada associated
themselves together, as senior partners with respondents-
appellees Gregorio F. Ortega, Tomas O. del Castillo, Jr.,
and Benjamin Bacorro, as junior partners.
On February 17, 1988, petitioner-appellant wrote the
respondents-appellees a letter stating:
I am withdrawing and retiring from
the firm of Bito, Misa and Lozada,
effective at the end of this month.
"I trust that the accountants will be
instructed to make the proper
liquidation of my participation in
the firm."
On the same day, petitioner-appellant wrote respondents-
appellees another letter stating:
"Further to my letter to you today, I
would like to have a meeting with
all of you with regard to the
mechanics of liquidation, and more
particularly, my interest in the two
floors of this building. I would like to
have this resolved soon because it
has to do with my own plans."
On 19 February 1988, petitioner-appellant wrote
respondents-appellees another letter stating:
"The partnership has ceased to be
mutually satisfactory because of the
working conditions of our
employees including the assistant
attorneys. All my efforts to
ameliorate the below subsistence
level of the pay scale of our
employees have been thwarted by
the other partners. Not only have
they refused to give meaningful
increases to the employees, even
attorneys, are dressed down
publicly in a loud voice in a manner
that deprived them of their self-
respect. The result of such policies is
the formation of the union,
including the assistant attorneys."
On 30 June 1988, petitioner filed with this Commission's
Securities Investigation and Clearing Department (SICD) a
petition for dissolution and liquidation of partnership,
docketed as SEC Case No. 3384 praying that the
Commission:
"1. Decree the formal dissolution
and order the immediate liquidation
of (the partnership of) Bito, Misa &
Lozada;
"2. Order the respondents to deliver
or pay for petitioner's share in the
partnership assets plus the profits,
rent or interest attributable to the
use of his right in the assets of the
dissolved partnership;
"3. Enjoin respondents from using
the firm name of Bito, Misa &
Lozada in any of their
correspondence, checks and
pleadings and to pay petitioners
damages for the use thereof despite
the dissolution of the partnership in
the amount of at least P50,000.00;
"4. Order respondents jointly and
severally to pay petitioner
attorney's fees and expense of
litigation in such amounts as maybe
proven during the trial and which
the Commission may deem just and
equitable under the premises but in
no case less than ten (10%) per cent
of the value of the shares of
petitioner or P100,000.00;
"5. Order the respondents to pay
petitioner moral damages with the
amount of P500,000.00 and
exemplary damages in the amount
of P200,000.00.
"Petitioner likewise prayed for such
other and further reliefs that the
Commission may deem just and
equitable under the premises."
On 13 July 1988, respondents-appellees filed their
opposition to the petition.
On 13 July 1988, petitioner filed his Reply to the
Opposition.
On 31 March 1989, the hearing officer rendered a decision
ruling that:
"[P]etitioner's withdrawal from the
law firm Bito, Misa & Lozada did not
dissolve the said law partnership.
Accordingly, the petitioner and
respondents are hereby enjoined to
abide by the provisions of the
Agreement relative to the matter
governing the liquidation of the
shares of any retiring or
withdrawing partner in the
partnership interest."
1

On appeal, the SEC en banc reversed the decision of the Hearing
Officer and held that the withdrawal of Attorney Joaquin L. Misa had
dissolved the partnership of "Bito, Misa & Lozada." The Commission
ruled that, being a partnership at will, the law firm could be dissolved
by any partner at anytime, such as by his withdrawal therefrom,
regardless of good faith or bad faith, since no partner can be forced
to continue in the partnership against his will. In its decision, dated
17 January 1990, the SEC held:
WHEREFORE, premises considered the appealed order of
31 March 1989 is hereby REVERSED insofar as it concludes
that the partnership of Bito, Misa & Lozada has not been
dissolved. The case is hereby REMANDED to the Hearing
Officer for determination of the respective rights and
obligations of the parties.
2

The parties sought a reconsideration of the above decision. Attorney
Misa, in addition, asked for an appointment of a receiver to take over
the assets of the dissolved partnership and to take charge of the
winding up of its affairs. On 4 April 1991, respondent SEC issued an
order denying reconsideration, as well as rejecting the petition for
receivership, and reiterating the remand of the case to the Hearing
Officer.
The parties filed with the appellate court separate appeals (docketed
CA-G.R. SP No. 24638 and CA-G.R. SP No. 24648).
During the pendency of the case with the Court of Appeals, Attorney
Jesus Bito and Attorney Mariano Lozada both died on, respectively,
05 September 1991 and 21 December 1991. The death of the two
partners, as well as the admission of new partners, in the law firm
prompted Attorney Misa to renew his application for receivership (in
CA G.R. SP No. 24648). He expressed concern over the need to
preserve and care for the partnership assets. The other partners
opposed the prayer.
The Court of Appeals, finding no reversible error on the part of
respondent Commission, AFFIRMED in toto the SEC decision and
order appealed from. In fine, the appellate court held, per its decision
of 26 February 1993, (a) that Atty. Misa's withdrawal from the
partnership had changed the relation of the parties and inevitably
caused the dissolution of the partnership; (b) that such withdrawal
was not in bad faith; (c) that the liquidation should be to the extent
of Attorney Misa's interest or participation in the partnership which
could be computed and paid in the manner stipulated in the
partnership agreement; (d) that the case should be remanded to the
SEC Hearing Officer for the corresponding determination of the value
of Attorney Misa's share in the partnership assets; and (e) that the
appointment of a receiver was unnecessary as no sufficient proof had
been shown to indicate that the partnership assets were in any such
danger of being lost, removed or materially impaired.
In this petition for review under Rule 45 of the Rules of Court,
petitioners confine themselves to the following issues:
1. Whether or not the Court of Appeals has erred in
holding that the partnership of Bito, Misa & Lozada (now
Bito, Lozada, Ortega & Castillo) is a partnership at will;
2. Whether or not the Court of Appeals has erred in
holding that the withdrawal of private respondent
dissolved the partnership regardless of his good or bad
faith; and
3. Whether or not the Court of Appeals has erred in
holding that private respondent's demand for the
dissolution of the partnership so that he can get a physical
partition of partnership was not made in bad faith;
to which matters we shall, accordingly, likewise limit ourselves.
A partnership that does not fix its term is a partnership at will. That
the law firm "Bito, Misa & Lozada," and now "Bito, Lozada, Ortega
and Castillo," is indeed such a partnership need not be unduly
belabored. We quote, with approval, like did the appellate court, the
findings and disquisition of respondent SEC on this matter; viz:
The partnership agreement (amended articles of 19
August 1948) does not provide for a specified period or
undertaking. The "DURATION" clause simply states:
"5. DURATION. The partnership shall
continue so long as mutually
satisfactory and upon the death or
legal incapacity of one of the
partners, shall be continued by the
surviving partners."
The hearing officer however opined that the partnership is
one for a specific undertaking and hence not a partnership
at will, citing paragraph 2 of the Amended Articles of
Partnership (19 August 1948):
"2. Purpose. The purpose for which
the partnership is formed, is to act
as legal adviser and representative
of any individual, firm and
corporation engaged in commercial,
industrial or other lawful businesses
and occupations; to counsel and
advise such persons and entities
with respect to their legal and other
affairs; and to appear for and
represent their principals and client
in all courts of justice and
government departments and
offices in the Philippines, and
elsewhere when legally authorized
to do so."
The "purpose" of the partnership is not the specific
undertaking referred to in the law. Otherwise, all
partnerships, which necessarily must have a purpose,
would all be considered as partnerships for a definite
undertaking. There would therefore be no need to provide
for articles on partnership at will as none would so exist.
Apparently what the law contemplates, is a specific
undertaking or "project" which has a definite or definable
period of completion.
3

The birth and life of a partnership at will is predicated on the mutual
desire and consent of the partners. The right to choose with whom a
person wishes to associate himself is the very foundation and
essence of that partnership. Its continued existence is, in turn,
dependent on the constancy of that mutual resolve, along with each
partner's capability to give it, and the absence of a cause for
dissolution provided by the law itself. Verily, any one of the partners
may, at his sole pleasure, dictate a dissolution of the partnership at
will. He must, however, act in good faith, not that the attendance of
bad faith can prevent the dissolution of the partnership
4
but that it
can result in a liability for damages.
5

In passing, neither would the presence of a period for its specific
duration or the statement of a particular purpose for its creation
prevent the dissolution of any partnership by an act or will of a
partner.
6
Among partners,
7
mutual agency arises and the doctrine of
delectus personae allows them to have the power, although not
necessarily the right, to dissolve the partnership. An unjustified
dissolution by the partner can subject him to a possible action for
damages.
The dissolution of a partnership is the change in the relation of the
parties caused by any partner ceasing to be associated in the carrying
on, as might be distinguished from the winding up of, the business.
8

Upon its dissolution, the partnership continues and its legal
personality is retained until the complete winding up of its business
culminating in its termination.
9

The liquidation of the assets of the partnership following its
dissolution is governed by various provisions of the Civil Code;
10

however, an agreement of the partners, like any other contract, is
binding among them and normally takes precedence to the extent
applicable over the Code's general provisions. We here take note of
paragraph 8 of the "Amendment to Articles of Partnership" reading
thusly:
. . . In the event of the death or retirement of any partner,
his interest in the partnership shall be liquidated and paid
in accordance with the existing agreements and his
partnership participation shall revert to the Senior
Partners for allocation as the Senior Partners may
determine; provided, however, that with respect to the
two (2) floors of office condominium which the
partnership is now acquiring, consisting of the 5th and the
6th floors of the Alpap Building, 140 Alfaro Street, Salcedo
Village, Makati, Metro Manila, their true value at the time
of such death or retirement shall be determined by two
(2) independent appraisers, one to be appointed (by the
partnership and the other by the) retiring partner or the
heirs of a deceased partner, as the case may be. In the
event of any disagreement between the said appraisers a
third appraiser will be appointed by them whose decision
shall be final. The share of the retiring or deceased
partner in the aforementioned two (2) floor office
condominium shall be determined upon the basis of the
valuation above mentioned which shall be paid monthly
within the first ten (10) days of every month in
installments of not less than P20,000.00 for the Senior
Partners, P10,000.00 in the case of two (2) existing Junior
Partners and P5,000.00 in the case of the new Junior
Partner.
11

The term "retirement" must have been used in the articles, as we so
hold, in a generic sense to mean the dissociation by a partner,
inclusive of resignation or withdrawal, from the partnership that
thereby dissolves it.
On the third and final issue, we accord due respect to the appellate
court and respondent Commission on their common factual finding,
i.e., that Attorney Misa did not act in bad faith. Public respondents
viewed his withdrawal to have been spurred by "interpersonal
conflict" among the partners. It would not be right, we agree, to let
any of the partners remain in the partnership under such an
atmosphere of animosity; certainly, not against their will.
12
Indeed,
for as long as the reason for withdrawal of a partner is not contrary
to the dictates of justice and fairness, nor for the purpose of unduly
visiting harm and damage upon the partnership, bad faith cannot be
said to characterize the act. Bad faith, in the context here used, is no
different from its normal concept of a conscious and intentional
design to do a wrongful act for a dishonest purpose or moral
obliquity.
WHEREFORE, the decision appealed from is AFFIRMED. No
pronouncement on costs.
SO ORDERED.


G.R. No. 127405 October 4, 2000
MARJORIE TOCAO and WILLIAM T. BELO, petitioners,
vs.
COURT OF APPEALS and NENITA A. ANAY, respondents.
D E C I S I O N
YNARES-SANTIAGO, J.:
This is a petition for review of the Decision of the Court of Appeals in
CA-G.R. CV No. 41616,
1
affirming the Decision of the Regional Trial
Court of Makati, Branch 140, in Civil Case No. 88-509.
2

Fresh from her stint as marketing adviser of Technolux in Bangkok,
Thailand, private respondent Nenita A. Anay met petitioner William
T. Belo, then the vice-president for operations of Ultra Clean Water
Purifier, through her former employer in Bangkok. Belo introduced
Anay to petitioner Marjorie Tocao, who conveyed her desire to enter
into a joint venture with her for the importation and local distribution
of kitchen cookwares. Belo volunteered to finance the joint venture
and assigned to Anay the job of marketing the product considering
her experience and established relationship with West Bend
Company, a manufacturer of kitchen wares in Wisconsin, U.S.A.
Under the joint venture, Belo acted as capitalist, Tocao as president
and general manager, and Anay as head of the marketing department
and later, vice-president for sales. Anay organized the administrative
staff and sales force while Tocao hired and fired employees,
determined commissions and/or salaries of the employees, and
assigned them to different branches. The parties agreed that Belos
name should not appear in any documents relating to their
transactions with West Bend Company. Instead, they agreed to use
Anays name in securing distributorship of cookware from that
company. The parties agreed further that Anay would be entitled to:
(1) ten percent (10%) of the annual net profits of the business; (2)
overriding commission of six percent (6%) of the overall weekly
production; (3) thirty percent (30%) of the sales she would make; and
(4) two percent (2%) for her demonstration services. The agreement
was not reduced to writing on the strength of Belos assurances that
he was sincere, dependable and honest when it came to financial
commitments.
Anay having secured the distributorship of cookware products from
the West Bend Company and organized the administrative staff and
the sales force, the cookware business took off successfully. They
operated under the name of Geminesse Enterprise, a sole
proprietorship registered in Marjorie Tocaos name, with office at
712 Rufino Building, Ayala Avenue, Makati City. Belo made good his
monetary commitments to Anay. Thereafter, Roger Muencheberg of
West Bend Company invited Anay to the distributor/dealer meeting
in West Bend, Wisconsin, U.S.A., from July 19 to 21, 1987 and to the
southwestern regional convention in Pismo Beach, California, U.S.A.,
from July 25-26, 1987. Anay accepted the invitation with the consent
of Marjorie Tocao who, as president and general manager of
Geminesse Enterprise, even wrote a letter to the Visa Section of the
U.S. Embassy in Manila on July 13, 1987. A portion of the letter reads:
"Ms. Nenita D. Anay (sic), who has been patronizing and supporting
West Bend Co. for twenty (20) years now, acquired the
distributorship of Royal Queen cookware for Geminesse Enterprise, is
the Vice President Sales Marketing and a business partner of our
company, will attend in response to the invitation." (Italics supplied.)
3

Anay arrived from the U.S.A. in mid-August 1987, and immediately
undertook the task of saving the business on account of the
unsatisfactory sales record in the Makati and Cubao offices. On
August 31, 1987, she received a plaque of appreciation from the
administrative and sales people through Marjorie Tocao
4
for her
excellent job performance. On October 7, 1987, in the presence of
Anay, Belo signed a memo
5
entitling her to a thirty-seven percent
(37%) commission for her personal sales "up Dec 31/87." Belo
explained to her that said commission was apart from her ten
percent (10%) share in the profits. On October 9, 1987, Anay learned
that Marjorie Tocao had signed a letter
6
addressed to the Cubao sales
office to the effect that she was no longer the vice-president of
Geminesse Enterprise. The following day, October 10, she received a
note from Lina T. Cruz, marketing manager, that Marjorie Tocao had
barred her from holding office and conducting demonstrations in
both Makati and Cubao offices.
7
Anay attempted to contact Belo. She
wrote him twice to demand her overriding commission for the period
of January 8, 1988 to February 5, 1988 and the audit of the company
to determine her share in the net profits. When her letters were not
answered, Anay consulted her lawyer, who, in turn, wrote Belo a
letter. Still, that letter was not answered.
Anay still received her five percent (5%) overriding commission up to
December 1987. The following year, 1988, she did not receive the
same commission although the company netted a gross sales of
P13,300,360.00.
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a
complaint for sum of money with damages
8
against Marjorie D.
Tocao and William Belo before the Regional Trial Court of Makati,
Branch 140.
In her complaint, Anay prayed that defendants be ordered to pay her,
jointly and severally, the following: (1) P32,00.00 as unpaid overriding
commission from January 8, 1988 to February 5, 1988; (2)
P100,000.00 as moral damages, and (3) P100,000.00 as exemplary
damages. The plaintiff also prayed for an audit of the finances of
Geminesse Enterprise from the inception of its business operation
until she was "illegally dismissed" to determine her ten percent (10%)
share in the net profits. She further prayed that she be paid the five
percent (5%) "overriding commission" on the remaining 150 West
Bend cookware sets before her "dismissal."
In their answer,
9
Marjorie Tocao and Belo asserted that the "alleged
agreement" with Anay that was "neither reduced in writing, nor
ratified," was "either unenforceable or void or inexistent." As far as
Belo was concerned, his only role was to introduce Anay to Marjorie
Tocao. There could not have been a partnership because, as Anay
herself admitted, Geminesse Enterprise was the sole proprietorship
of Marjorie Tocao. Because Anay merely acted as marketing
demonstrator of Geminesse Enterprise for an agreed remuneration,
and her complaint referred to either her compensation or dismissal,
such complaint should have been lodged with the Department of
Labor and not with the regular court.
Petitioners (defendants therein) further alleged that Anay filed the
complaint on account of "ill-will and resentment" because Marjorie
Tocao did not allow her to "lord it over in the Geminesse Enterprise."
Anay had acted like she owned the enterprise because of her
experience and expertise. Hence, petitioners were the ones who
suffered actual damages "including unreturned and unaccounted
stocks of Geminesse Enterprise," and "serious anxiety, besmirched
reputation in the business world, and various damages not less than
P500,000.00." They also alleged that, to "vindicate their names," they
had to hire counsel for a fee of P23,000.00.
At the pre-trial conference, the issues were limited to: (a) whether or
not the plaintiff was an employee or partner of Marjorie Tocao and
Belo, and (b) whether or not the parties are entitled to damages.
10

In their defense, Belo denied that Anay was supposed to receive a
share in the profit of the business. He, however, admitted that the
two had agreed that Anay would receive a three to four percent (3-
4%) share in the gross sales of the cookware. He denied contributing
capital to the business or receiving a share in its profits as he merely
served as a guarantor of Marjorie Tocao, who was new in the
business. He attended and/or presided over business meetings of the
venture in his capacity as a guarantor but he never participated in
decision-making. He claimed that he wrote the memo granting the
plaintiff thirty-seven percent (37%) commission upon her dismissal
from the business venture at the request of Tocao, because Anay had
no other income.
For her part, Marjorie Tocao denied having entered into an oral
partnership agreement with Anay. However, she admitted that Anay
was an expert in the cookware business and hence, they agreed to
grant her the following commissions: thirty-seven percent (37%) on
personal sales; five percent (5%) on gross sales; two percent (2%) on
product demonstrations, and two percent (2%) for recruitment of
personnel. Marjorie denied that they agreed on a ten percent (10%)
commission on the net profits. Marjorie claimed that she got the
capital for the business out of the sale of the sewing machines used
in her garments business and from Peter Lo, a Singaporean friend-
financier who loaned her the funds with interest. Because she
treated Anay as her "co-equal," Marjorie received the same amounts
of commissions as her. However, Anay failed to account for stocks
valued at P200,000.00.
On April 22, 1993, the trial court rendered a decision the dispositive
part of which is as follows:
"WHEREFORE, in view of the foregoing, judgment is hereby rendered:
1. Ordering defendants to submit to the Court a formal account as to
the partnership affairs for the years 1987 and 1988 pursuant to Art.
1809 of the Civil Code in order to determine the ten percent (10%)
share of plaintiff in the net profits of the cookware business;
2. Ordering defendants to pay five percent (5%) overriding
commission for the one hundred and fifty (150) cookware sets
available for disposition when plaintiff was wrongfully excluded from
the partnership by defendants;
3. Ordering defendants to pay plaintiff overriding commission on the
total production which for the period covering January 8, 1988 to
February 5, 1988 amounted to P32,000.00;
4. Ordering defendants to pay P100,000.00 as moral damages and
P100,000.00 as exemplary damages, and
5. Ordering defendants to pay P50,000.00 as attorneys fees and
P20,000.00 as costs of suit.
SO ORDERED."
The trial court held that there was indeed an "oral partnership
agreement between the plaintiff and the defendants," based on the
following: (a) there was an intention to create a partnership; (b) a
common fund was established through contributions consisting of
money and industry, and (c) there was a joint interest in the profits.
The testimony of Elizabeth Bantilan, Anays cousin and the
administrative officer of Geminesse Enterprise from August 21, 1986
until it was absorbed by Royal International, Inc., buttressed the fact
that a partnership existed between the parties. The letter of Roger
Muencheberg of West Bend Company stating that he awarded the
distributorship to Anay and Marjorie Tocao because he was
convinced that with Marjories financial contribution and Anays
experience, the combination of the two would be invaluable to the
partnership, also supported that conclusion. Belos claim that he was
merely a "guarantor" has no basis since there was no written
evidence thereof as required by Article 2055 of the Civil Code.
Moreover, his acts of attending and/or presiding over meetings of
Geminesse Enterprise plus his issuance of a memo giving Anay 37%
commission on personal sales belied this. On the contrary, it
demonstrated his involvement as a partner in the business.
The trial court further held that the payment of commissions did not
preclude the existence of the partnership inasmuch as such practice
is often resorted to in business circles as an impetus to bigger sales
volume. It did not matter that the agreement was not in writing
because Article 1771 of the Civil Code provides that a partnership
may be "constituted in any form." The fact that Geminesse Enterprise
was registered in Marjorie Tocaos name is not determinative of
whether or not the business was managed and operated by a sole
proprietor or a partnership. What was registered with the Bureau of
Domestic Trade was merely the business name or style of Geminesse
Enterprise.
The trial court finally held that a partner who is excluded wrongfully
from a partnership is an innocent partner. Hence, the guilty partner
must give him his due upon the dissolution of the partnership as well
as damages or share in the profits "realized from the appropriation of
the partnership business and goodwill." An innocent partner thus
possesses "pecuniary interest in every existing contract that was
incomplete and in the trade name of the co-partnership and assets at
the time he was wrongfully expelled."
Petitioners appeal to the Court of Appeals
11
was dismissed, but the
amount of damages awarded by the trial court were reduced to
P50,000.00 for moral damages and P50,000.00 as exemplary
damages. Their Motion for Reconsideration was denied by the Court
of Appeals for lack of merit.
12
Petitioners Belo and Marjorie Tocao are
now before this Court on a petition for review on certiorari, asserting
that there was no business partnership between them and herein
private respondent Nenita A. Anay who is, therefore, not entitled to
the damages awarded to her by the Court of Appeals.
Petitioners Tocao and Belo contend that the Court of Appeals
erroneously held that a partnership existed between them and
private respondent Anay because Geminesse Enterprise "came into
being" exactly a year before the "alleged partnership" was formed,
and that it was very unlikely that petitioner Belo would invest the
sum of P2,500,000.00 with petitioner Tocao contributing nothing,
without any "memorandum whatsoever regarding the alleged
partnership."
13

The issue of whether or not a partnership exists is a factual matter
which are within the exclusive domain of both the trial and appellate
courts. This Court cannot set aside factual findings of such courts
absent any showing that there is no evidence to support the
conclusion drawn by the court a quo.
14
In this case, both the trial
court and the Court of Appeals are one in ruling that petitioners and
private respondent established a business partnership. This Court
finds no reason to rule otherwise.
To be considered a juridical personality, a partnership must fulfill
these requisites: (1) two or more persons bind themselves to
contribute money, property or industry to a common fund; and (2)
intention on the part of the partners to divide the profits among
themselves.
15
It may be constituted in any form; a public instrument
is necessary only where immovable property or real rights are
contributed thereto.
16
This implies that since a contract of
partnership is consensual, an oral contract of partnership is as good
as a written one. Where no immovable property or real rights are
involved, what matters is that the parties have complied with the
requisites of a partnership. The fact that there appears to be no
record in the Securities and Exchange Commission of a public
instrument embodying the partnership agreement pursuant to Article
1772 of the Civil Code
17
did not cause the nullification of the
partnership. The pertinent provision of the Civil Code on the matter
states:
Art. 1768. The partnership has a juridical personality separate and
distinct from that of each of the partners, even in case of failure to
comply with the requirements of article 1772, first paragraph.
Petitioners admit that private respondent had the expertise to
engage in the business of distributorship of cookware. Private
respondent contributed such expertise to the partnership and hence,
under the law, she was the industrial or managing partner. It was
through her reputation with the West Bend Company that the
partnership was able to open the business of distributorship of that
companys cookware products; it was through the same efforts that
the business was propelled to financial success. Petitioner Tocao
herself admitted private respondents indispensable role in putting
up the business when, upon being asked if private respondent held
the positions of marketing manager and vice-president for sales, she
testified thus:
"A: No, sir at the start she was the marketing manager because there
were no one to sell yet, its only me there then her and then two (2)
people, so about four (4). Now, after that when she recruited already
Oscar Abella and Lina Torda-Cruz these two (2) people were given the
designation of marketing managers of which definitely Nita as
superior to them would be the Vice President."
18

By the set-up of the business, third persons were made to believe
that a partnership had indeed been forged between petitioners and
private respondents. Thus, the communication dated June 4, 1986 of
Missy Jagler of West Bend Company to Roger Muencheberg of the
same company states:
"Marge Tocao is president of Geminesse Enterprises. Geminesse will
finance the operations. Marge does not have cookware experience.
Nita Anay has started to gather former managers, Lina Torda and
Dory Vista. She has also gathered former demonstrators, Betty
Bantilan, Eloisa Lamela, Menchu Javier. They will continue to gather
other key people and build up the organization. All they need is the
finance and the products to sell."
19

On the other hand, petitioner Belos denial that he financed the
partnership rings hollow in the face of the established fact that he
presided over meetings regarding matters affecting the operation of
the business. Moreover, his having authorized in writing on October
7, 1987, on a stationery of his own business firm, Wilcon Builders
Supply, that private respondent should receive thirty-seven (37%) of
the proceeds of her personal sales, could not be interpreted
otherwise than that he had a proprietary interest in the business. His
claim that he was merely a guarantor is belied by that personal act of
proprietorship in the business. Moreover, if he was indeed a
guarantor of future debts of petitioner Tocao under Article 2053 of
the Civil Code,
20
he should have presented documentary evidence
therefor. While Article 2055 of the Civil Code simply provides that
guaranty must be "express," Article 1403, the Statute of Frauds,
requires that "a special promise to answer for the debt, default or
miscarriage of another" be in writing.
21

Petitioner Tocao, a former ramp model,
22
was also a capitalist in the
partnership. She claimed that she herself financed the business. Her
and petitioner Belos roles as both capitalists to the partnership with
private respondent are buttressed by petitioner Tocaos admissions
that petitioner Belo was her boyfriend and that the partnership was
not their only business venture together. They also established a firm
that they called "Wiji," the combination of petitioner Belos first
name, William, and her nickname, Jiji.
23
The special relationship
between them dovetails with petitioner Belos claim that he was
acting in behalf of petitioner Tocao. Significantly, in the early stage of
the business operation, petitioners requested West Bend Company
to allow them to "utilize their banking and trading facilities in
Singapore" in the matter of importation and payment of the
cookware products.
24
The inevitable conclusion, therefore, was that
petitioners merged their respective capital and infused the amount
into the partnership of distributing cookware with private
respondent as the managing partner.
The business venture operated under Geminesse Enterprise did not
result in an employer-employee relationship between petitioners and
private respondent. While it is true that the receipt of a percentage
of net profits constitutes only prima facie evidence that the recipient
is a partner in the business,
25
the evidence in the case at bar
controverts an employer-employee relationship between the parties.
In the first place, private respondent had a voice in the management
of the affairs of the cookware distributorship,
26
including selection of
people who would constitute the administrative staff and the sales
force. Secondly, petitioner Tocaos admissions militate against an
employer-employee relationship. She admitted that, like her who
owned Geminesse Enterprise,
27
private respondent received only
commissions and transportation and representation allowances
28
and
not a fixed salary.
29
Petitioner Tocao testified:
"Q: Of course. Now, I am showing to you certain documents already
marked as Exhs. X and Y. Please go over this. Exh. Y is
denominated `Cubao overrides 8-21-87 with ending August 21, 1987,
will you please go over this and tell the Honorable Court whether you
ever came across this document and know of your own knowledge
the amount ---
A: Yes, sir this is what I am talking about earlier. Thats the one I am
telling you earlier a certain percentage for promotions, advertising,
incentive.
Q: I see. Now, this promotion, advertising, incentive, there is a figure
here and words which I quote: Overrides Marjorie Ann Tocao
P21,410.50 this means that you have received this amount?
A: Oh yes, sir.
Q: I see. And, by way of amplification this is what you are saying as
one representing commission, representation, advertising and
promotion?
A: Yes, sir.
Q: I see. Below your name is the words and figure and I quote Nita D.
Anay P21,410.50, what is this?
A: Thats her overriding commission.
Q: Overriding commission, I see. Of course, you are telling this
Honorable Court that there being the same P21,410.50 is merely by
coincidence?
A: No, sir, I made it a point that we were equal because the way I look
at her kasi, you know in a sense because of her expertise in the
business she is vital to my business. So, as part of the incentive I offer
her the same thing.
Q: So, in short you are saying that this you have shared together, I
mean having gotten from the company P21,140.50 is your way of
indicating that you were treating her as an equal?
A: As an equal.
Q: As an equal, I see. You were treating her as an equal?
A: Yes, sir.
Q: I am calling again your attention to Exh. Y Overrides Makati the
other one is ---
A: That is the same thing, sir.
Q: With ending August 21, words and figure Overrides Marjorie Ann
Tocao P15,314.25 the amount there you will acknowledge you have
received that?
A: Yes, sir.
Q: Again in concept of commission, representation, promotion, etc.?
A: Yes, sir.
Q: Okey. Below your name is the name of Nita Anay P15,314.25 that
is also an indication that she received the same amount?
A: Yes, sir.
Q: And, as in your previous statement it is not by coincidence that
these two (2) are the same?
A: No, sir.
Q: It is again in concept of you treating Miss Anay as your equal?
A: Yes, sir." (Italics supplied.)
30

If indeed petitioner Tocao was private respondents employer, it is
difficult to believe that they shall receive the same income in the
business. In a partnership, each partner must share in the profits and
losses of the venture, except that the industrial partner shall not be
liable for the losses.
31
As an industrial partner, private respondent
had the right to demand for a formal accounting of the business and
to receive her share in the net profit.
32

The fact that the cookware distributorship was operated under the
name of Geminesse Enterprise, a sole proprietorship, is of no
moment. What was registered with the Bureau of Domestic Trade on
August 19, 1987 was merely the name of that enterprise.
33
While it is
true that in her undated application for renewal of registration of
that firm name, petitioner Tocao indicated that it would be engaged
in retail of "kitchenwares, cookwares, utensils, skillet,"
34
she also
admitted that the enterprise was only "60% to 70% for the cookware
business," while 20% to 30% of its business activity was devoted to
the sale of water sterilizer or purifier.
35
Indubitably then, the business
name Geminesse Enterprise was used only for practical reasons - it
was utilized as the common name for petitioner Tocaos various
business activities, which included the distributorship of cookware.
Petitioners underscore the fact that the Court of Appeals did not
return the "unaccounted and unremitted stocks of Geminesse
Enterprise amounting to P208,250.00."
36
Obviously a ploy to offset
the damages awarded to private respondent, that claim, more than
anything else, proves the existence of a partnership between them.
In Idos v. Court of Appeals, this Court said:
"The best evidence of the existence of the partnership, which was
not yet terminated (though in the winding up stage), were the unsold
goods and uncollected receivables, which were presented to the trial
court. Since the partnership has not been terminated, the petitioner
and private complainant remained as co-partners. x x x."
37

It is not surprising then that, even after private respondent had been
unceremoniously booted out of the partnership in October 1987, she
still received her overriding commission until December 1987.
Undoubtedly, petitioner Tocao unilaterally excluded private
respondent from the partnership to reap for herself and/or for
petitioner Belo financial gains resulting from private respondents
efforts to make the business venture a success. Thus, as petitioner
Tocao became adept in the business operation, she started to assert
herself to the extent that she would even shout at private
respondent in front of other people.
38
Her instruction to Lina Torda
Cruz, marketing manager, not to allow private respondent to hold
office in both the Makati and Cubao sales offices concretely spoke of
her perception that private respondent was no longer necessary in
the business operation,
39
and resulted in a falling out between the
two. However, a mere falling out or misunderstanding between
partners does not convert the partnership into a sham organization.
40

The partnership exists until dissolved under the law. Since the
partnership created by petitioners and private respondent has no
fixed term and is therefore a partnership at will predicated on their
mutual desire and consent, it may be dissolved by the will of a
partner. Thus:
"x x x. The right to choose with whom a person wishes to associate
himself is the very foundation and essence of that partnership. Its
continued existence is, in turn, dependent on the constancy of that
mutual resolve, along with each partners capability to give it, and
the absence of cause for dissolution provided by the law itself. Verily,
any one of the partners may, at his sole pleasure, dictate a
dissolution of the partnership at will. He must, however, act in good
faith, not that the attendance of bad faith can prevent the dissolution
of the partnership but that it can result in a liability for damages."
41

An unjustified dissolution by a partner can subject him to action for
damages because by the mutual agency that arises in a partnership,
the doctrine of delectus personae allows the partners to have the
power, although not necessarily the right to dissolve the
partnership.
42

In this case, petitioner Tocaos unilateral exclusion of private
respondent from the partnership is shown by her memo to the Cubao
office plainly stating that private respondent was, as of October 9,
1987, no longer the vice-president for sales of Geminesse
Enterprise.
43
By that memo, petitioner Tocao effected her own
withdrawal from the partnership and considered herself as having
ceased to be associated with the partnership in the carrying on of the
business. Nevertheless, the partnership was not terminated thereby;
it continues until the winding up of the business.
44

The winding up of partnership affairs has not yet been undertaken by
the partnership.1wphi1 This is manifest in petitioners claim for
stocks that had been entrusted to private respondent in the pursuit
of the partnership business.
The determination of the amount of damages commensurate with
the factual findings upon which it is based is primarily the task of the
trial court.
45
The Court of Appeals may modify that amount only
when its factual findings are diametrically opposed to that of the
lower court,
46
or the award is palpably or scandalously and
unreasonably excessive.
47
However, exemplary damages that are
awarded "by way of example or correction for the public good,"
48

should be reduced to P50,000.00, the amount correctly awarded by
the Court of Appeals. Concomitantly, the award of moral damages of
P100,000.00 was excessive and should be likewise reduced to
P50,000.00. Similarly, attorneys fees that should be granted on
account of the award of exemplary damages and petitioners evident
bad faith in refusing to satisfy private respondents plainly valid, just
and demandable claims,
49
appear to have been excessively granted
by the trial court and should therefore be reduced to P25,000.00.
WHEREFORE, the instant petition for review on certiorari is DENIED.
The partnership among petitioners and private respondent is ordered
dissolved, and the parties are ordered to effect the winding up and
liquidation of the partnership pursuant to the pertinent provisions of
the Civil Code. This case is remanded to the Regional Trial Court for
proper proceedings relative to said dissolution. The appealed
decisions of the Regional Trial Court and the Court of Appeals are
AFFIRMED with MODIFICATIONS, as follows ---
1. Petitioners are ordered to submit to the Regional Trial
Court a formal account of the partnership affairs for the
years 1987 and 1988, pursuant to Article 1809 of the Civil
Code, in order to determine private respondents ten
percent (10%) share in the net profits of the partnership;
2. Petitioners are ordered, jointly and severally, to pay
private respondent five percent (5%) overriding
commission for the one hundred and fifty (150) cookware
sets available for disposition since the time private
respondent was wrongfully excluded from the partnership
by petitioners;
3. Petitioners are ordered, jointly and severally, to pay
private respondent overriding commission on the total
production which, for the period covering January 8, 1988
to February 5, 1988, amounted to P32,000.00;
4. Petitioners are ordered, jointly and severally, to pay
private respondent moral damages in the amount of
P50,000.00, exemplary damages in the amount of
P50,000.00 and attorneys fees in the amount of
P25,000.00.
SO ORDERED.


G.R. No. 124293 September 24, 2003
JG SUMMIT HOLDINGS, INC., Petitioner,
vs.
COURT OF APPEALS, COMMITTEE ON PRIVATIZATION, its Chairman
and Members; ASSET PRIVATIZATION TRUST and PHILYARDS
HOLDINGS, INC., Respondents.
R E S O L U T I O N
PUNO, J.:
The core issue posed by the Motions for Reconsideration is whether
a shipyard is a public utility whose capitalization must be sixty
percent (60%) owned by Filipinos. Our resolution of this issue will
determine the fate of the shipbuilding and ship repair industry. It can
either spell the industrys demise or breathe new life to the
struggling but potentially healthy partner in the countrys bid for
economic growth. It can either kill an initiative yet in its infancy, or
harness creativity in the productive disposition of government assets.
The facts are undisputed and can be summarized briefly as follows:
On January 27, 1977, the National Investment and Development
Corporation (NIDC), a government corporation, entered into a Joint
Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of
Kobe, Japan (KAWASAKI) for the construction, operation and
management of the Subic National Shipyard, Inc. (SNS) which
subsequently became the Philippine Shipyard and Engineering
Corporation (PHILSECO). Under the JVA, the NIDC and KAWASAKI will
contribute P330 million for the capitalization of PHILSECO in the
proportion of 60%-40% respectively.
1
One of its salient features is the
grant to the parties of the right of first refusal should either of them
decide to sell, assign or transfer its interest in the joint venture, viz:
1.4 Neither party shall sell, transfer or assign all or any part of its
interest in SNS [PHILSECO] to any third party without giving the other
under the same terms the right of first refusal. This provision shall
not apply if the transferee is a corporation owned or controlled by
the GOVERNMENT or by a KAWASAKI affiliate.
2

On November 25, 1986, NIDC transferred all its rights, title and
interest in PHILSECO to the Philippine National Bank (PNB). Such
interests were subsequently transferred to the National Government
pursuant to Administrative Order No. 14. On December 8, 1986,
President Corazon C. Aquino issued Proclamation No. 50 establishing
the Committee on Privatization (COP) and the Asset Privatization
Trust (APT) to take title to, and possession of, conserve, manage and
dispose of non-performing assets of the National Government.
Thereafter, on February 27, 1987, a trust agreement was entered
into between the National Government and the APT wherein the
latter was named the trustee of the National Governments share in
PHILSECO. In 1989, as a result of a quasi-reorganization of PHILSECO
to settle its huge obligations to PNB, the National Governments
shareholdings in PHILSECO increased to 97.41% thereby reducing
KAWASAKIs shareholdings to 2.59%.
3

In the interest of the national economy and the government, the COP
and the APT deemed it best to sell the National Governments share
in PHILSECO to private entities. After a series of negotiations
between the APT and KAWASAKI, they agreed that the latters right
of first refusal under the JVA be "exchanged" for the right to top by
five percent (5%) the highest bid for the said shares. They further
agreed that KAWASAKI would be entitled to name a company in
which it was a stockholder, which could exercise the right to top. On
September 7, 1990, KAWASAKI informed APT that Philyards Holdings,
Inc. (PHI) would exercise its right to top.
4

At the pre-bidding conference held on September 18, 1993,
interested bidders were given copies of the JVA between NIDC and
KAWASAKI, and of the Asset Specific Bidding Rules (ASBR) drafted for
the National Governments 87.6% equity share in PHILSECO.
5
The
provisions of the ASBR were explained to the interested bidders who
were notified that the bidding would be held on December 2, 1993. A
portion of the ASBR reads:
1.0 The subject of this Asset Privatization Trust (APT) sale
through public bidding is the National Governments
equity in PHILSECO consisting of 896,869,942 shares of
stock (representing 87.67% of PHILSECOs outstanding
capital stock), which will be sold as a whole block in
accordance with the rules herein enumerated.
. . .
2.0 The highest bid, as well as the buyer, shall be subject
to the final approval of both the APT Board of Trustees
and the Committee on Privatization (COP).
2.1 APT reserves the right in its sole discretion, to reject
any or all bids.
3.0 This public bidding shall be on an Indicative Price
Bidding basis. The Indicative price set for the National
Governments 87.67% equity in PHILSECO is PESOS: ONE
BILLION THREE HUNDRED MILLION (P1,300,000,000.00).
. . .
6.0 The highest qualified bid will be submitted to the APT
Board of Trustees at its regular meeting following the
bidding, for the purpose of determining whether or not it
should be endorsed by the APT Board of Trustees to the
COP, and the latter approves the same. The APT shall
advise Kawasaki Heavy Industries, Inc. and/or its nominee,
Philyards Holdings, Inc., that the highest bid is acceptable
to the National Government. Kawasaki Heavy Industries,
Inc. and/or Philyards Holdings, Inc. shall then have a
period of thirty (30) calendar days from the date of receipt
of such advice from APT within which to exercise their
"Option to Top the Highest Bid" by offering a bid
equivalent to the highest bid plus five (5%) percent
thereof.
6.1 Should Kawasaki Heavy Industries, Inc. and/or
Philyards Holdings, Inc. exercise their "Option to Top the
Highest Bid," they shall so notify the APT about such
exercise of their option and deposit with APT the amount
equivalent to ten percent (10%) of the highest bid plus
five percent (5%) thereof within the thirty (30)-day period
mentioned in paragraph 6.0 above. APT will then serve
notice upon Kawasaki Heavy Industries, Inc. and/or
Philyards Holdings, Inc. declaring them as the preferred
bidder and they shall have a period of ninety (90) days
from the receipt of the APTs notice within which to pay
the balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or
Philyards Holdings, Inc. fail to exercise their "Option to
Top the Highest Bid" within the thirty (30)-day period, APT
will declare the highest bidder as the winning bidder.
. . .
12.0 The bidder shall be solely responsible for examining
with appropriate care these rules, the official bid forms,
including any addenda or amendments thereto issued
during the bidding period. The bidder shall likewise be
responsible for informing itself with respect to any and all
conditions concerning the PHILSECO Shares which may, in
any manner, affect the bidders proposal. Failure on the
part of the bidder to so examine and inform itself shall be
its sole risk and no relief for error or omission will be given
by APT or COP. . ..
6

At the public bidding on the said date, petitioner J.G. Summit
Holdings, Inc. submitted a bid of Two Billion and Thirty Million Pesos
(P2,030,000,000.00) with an acknowledgement of
KAWASAKI/Philyards right to top, viz:
4. I/We understand that the Committee on Privatization (COP) has up
to thirty (30) days to act on APTs recommendation based on the
result of this bidding. Should the COP approve the highest bid, APT
shall advise Kawasaki Heavy Industries, Inc. and/or its nominee,
Philyards Holdings, Inc. that the highest bid is acceptable to the
National Government. Kawasaki Heavy Industries, Inc. and/or
Philyards Holdings, Inc. shall then have a period of thirty (30)
calendar days from the date of receipt of such advice from APT
within which to exercise their "Option to Top the Highest Bid" by
offering a bid equivalent to the highest bid plus five (5%) percent
thereof.
7

As petitioner was declared the highest bidder, the COP approved the
sale on December 3, 1993 "subject to the right of Kawasaki Heavy
Industries, Inc./Philyards Holdings, Inc. to top JGSMIs bid by 5% as
specified in the bidding rules."
8

On December 29, 1993, petitioner informed APT that it was
protesting the offer of PHI to top its bid on the grounds that: (a) the
KAWASAKI/PHI consortium composed of Kawasaki, Philyards, Mitsui,
Keppel, SM Group, ICTSI and Insular Life violated the ASBR because
the last four (4) companies were the losing bidders thereby
circumventing the law and prejudicing the weak winning bidder; (b)
only KAWASAKI could exercise the right to top; (c) giving the same
option to top to PHI constituted unwarranted benefit to a third party;
(d) no right of first refusal can be exercised in a public bidding or
auction sale; and (e) the JG Summit consortium was not estopped
from questioning the proceedings.
9

On February 2, 1994, petitioner was notified that PHI had fully paid
the balance of the purchase price of the subject bidding. On February
7, 1994, the APT notified petitioner that PHI had exercised its option
to top the highest bid and that the COP had approved the same on
January 6, 1994. On February 24, 1994, the APT and PHI executed a
Stock Purchase Agreement.
10
Consequently, petitioner filed with this
Court a Petition for Mandamus under G.R. No. 114057. On May 11,
1994, said petition was referred to the Court of Appeals. On July 18,
1995, the Court of Appeals denied the same for lack of merit. It ruled
that the petition for mandamus was not the proper remedy to
question the constitutionality or legality of the right of first refusal
and the right to top that was exercised by KAWASAKI/PHI, and that
the matter must be brought "by the proper party in the proper forum
at the proper time and threshed out in a full blown trial." The Court
of Appeals further ruled that the right of first refusal and the right to
top are prima facie legal and that the petitioner, "by participating in
the public bidding, with full knowledge of the right to top granted to
KASAWASAKI/Philyards is . . .estopped from questioning the validity
of the award given to Philyards after the latter exercised the right to
top and had paid in full the purchase price of the subject shares,
pursuant to the ASBR." Petitioner filed a Motion for Reconsideration
of said Decision which was denied on March 15, 1996. Petitioner thus
filed a Petition for Certiorari with this Court alleging grave abuse of
discretion on the part of the appellate court.
11

On November 20, 2000, this Court rendered the now assailed
Decision ruling among others that the Court of Appeals erred when it
dismissed the petition on the sole ground of the impropriety of the
special civil action of mandamus because the petition was also one of
certiorari.
12
It further ruled that a shipyard like PHILSECO is a public
utility whose capitalization must be sixty percent (60%) Filipino-
owned.
13
Consequently, the right to top granted to KAWASAKI under
the Asset Specific Bidding Rules (ASBR) drafted for the sale of the
87.67% equity of the National Government in PHILSECO is illegal---
not only because it violates the rules on competitive bidding--- but
more so, because it allows foreign corporations to own more than
40% equity in the shipyard.
14
It also held that "although the petitioner
had the opportunity to examine the ASBR before it participated in the
bidding, it cannot be estopped from questioning the
unconstitutional, illegal and inequitable provisions thereof."
15
Thus,
this Court voided the transfer of the national governments 87.67%
share in PHILSECO to Philyard Holdings, Inc., and upheld the right of
JG Summit, as the highest bidder, to take title to the said shares, viz:
Wherefore, the instant petition for review on certiorari is GRANTED.
The assailed Decision and Resolution of the Court of Appeals are
REVERSED and SET ASIDE. Petitioner is ordered to pay to APT its bid
price of Two Billion Thirty Million Pesos (P2,030,000,000.00 ), less its
bid deposit plus interests upon the finality of this Decision. In turn,
APT is ordered to:
(a) accept the said amount of P2,030,000,000.00 less bid
deposit and interests from petitioner;
(b) execute a Stock Purchase Agreement with petitioner;
(c) cause the issuance in favor of petitioner of the
certificates of stocks representing 87.6% of PHILSECOs
total capitalization;
(d) return to private respondent PHGI the amount of Two
Billion One Hundred Thirty-One Million Five Hundred
Thousand Pesos (P2,131,500,000.00); and
(e) cause the cancellation of the stock certificates issued
to PHI.
SO ORDERED.
16

In separate Motions for Reconsideration,
17
respondents submit three
basic issues for our resolution: (1) Whether PHILSECO is a public
utility; (2) Whether under the 1977 JVA, KAWASAKI can exercise its
right of first refusal only up to 40% of the total capitalization of
PHILSECO; and (3) Whether the right to top granted to KAWASAKI
violates the principles of competitive bidding.
I.
Whether PHILSECO is a Public Utility.
After carefully reviewing the applicable laws and jurisprudence, we
hold that PHILSECO is not a public utility for the following reasons:
First. By nature, a shipyard is not a public utility.
A "public utility" is "a business or service engaged in regularly
supplying the public with some commodity or service of public
consequence such as electricity, gas, water, transportation,
telephone or telegraph service."
18
To constitute a public utility, the
facility must be necessary for the maintenance of life and occupation
of the residents. However, the fact that a business offers services or
goods that promote public good and serve the interest of the public
does not automatically make it a public utility. Public use is not
synonymous with public interest. As its name indicates, the term
"public utility" implies public use and service to the public. The
principal determinative characteristic of a public utility is that of
service to, or readiness to serve, an indefinite public or portion of the
public as such which has a legal right to demand and receive its
services or commodities. Stated otherwise, the owner or person in
control of a public utility must have devoted it to such use that the
public generally or that part of the public which has been served and
has accepted the service, has the right to demand that use or service
so long as it is continued, with reasonable efficiency and under
proper charges.
19
Unlike a private enterprise which independently
determines whom it will serve, a "public utility holds out generally
and may not refuse legitimate demand for service."
20
Thus, in Iloilo
Ice and Cold Storage Co. vs. Public Utility Board,
21
this Court defined
"public use," viz:
"Public use" means the same as "use by the public." The essential
feature of the public use is that it is not confined to privileged
individuals, but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining
whether a use is public, we must look not only to the character of the
business to be done, but also to the proposed mode of doing it. If the
use is merely optional with the owners, or the public benefit is
merely incidental, it is not a public use, authorizing the exercise of
jurisdiction of the public utility commission. There must be, in
general, a right which the law compels the owner to give to the
general public. It is not enough that the general prosperity of the
public is promoted. Public use is not synonymous with public interest.
The true criterion by which to judge the character of the use is
whether the public may enjoy it by right or only by permission.
22

(emphasis supplied)
Applying the criterion laid down in Iloilo to the case at bar, it is crystal
clear that a shipyard cannot be considered a public utility.
A "shipyard" is "a place or enclosure where ships are built or
repaired."
23
Its nature dictates that it serves but a limited clientele
whom it may choose to serve at its discretion. While it offers its
facilities to whoever may wish to avail of its services, a shipyard is not
legally obliged to render its services indiscriminately to the public. It
has no legal obligation to render the services sought by each and
every client. The fact that it publicly offers its services does not give
the public a legal right to demand that such services be rendered.
There can be no disagreement that the shipbuilding and ship repair
industry is imbued with public interest as it involves the maintenance
of the seaworthiness of vessels dedicated to the transportation of
either persons or goods. Nevertheless, the fact that a business is
affected with public interest does not imply that it is under a duty to
serve the public. While the business may be regulated for public
good, the regulation cannot justify the classification of a purely
private enterprise as a public utility. The legislature cannot, by its
mere declaration, make something a public utility which is not in fact
such; and a private business operated under private contracts with
selected customers and not devoted to public use cannot, by
legislative fiat or by order of a public service commission, be declared
a public utility, since that would be taking private property for public
use without just compensation, which cannot be done consistently
with the due process clause.
24

It is worthy to note that automobile and aircraft manufacturers,
which are of similar nature to shipyards, are not considered public
utilities despite the fact that their operations greatly impact on land
and air transportation. The reason is simple. Unlike commodities or
services traditionally regarded as public utilities such as electricity,
gas, water, transportation, telephone or telegraph service,
automobile and aircraft manufacturing---and for that matter ship
building and ship repair--- serve the public only incidentally.
Second. There is no law declaring a shipyard as a public utility.
History provides us hindsight and hindsight ought to give us a better
view of the intent of any law. The succession of laws affecting the
status of shipyards ought not to obliterate, but rather, give us full
picture of the intent of the legislature. The totality of the
circumstances, including the contemporaneous interpretation
accorded by the administrative bodies tasked with the enforcement
of the law all lead to a singular conclusion: that shipyards are not
public utilities.
Since the enactment of Act No. 2307 which created the Public Utility
Commission (PUC) until its repeal by Commonwealth Act No. 146,
establishing the Public Service Commission (PSC), a shipyard, by
legislative declaration, has been considered a public utility.
25
A
Certificate of Public Convenience (CPC) from the PSC to the effect
that the operation of the said service and the authorization to do
business will promote the public interests in a proper and suitable
manner is required before any person or corporation may operate a
shipyard.
26
In addition, such persons or corporations should abide by
the citizenship requirement provided in Article XIII, section 8 of the
1935 Constitution,
27
viz:
Sec. 8. No franchise, certificate, or any other form or authorization
for the operation of a public utility shall be granted except to citizens
of the Philippines or to corporations or other entities organized
under the laws of the Philippines, sixty per centum of the capital of
which is owned by citizens of the Philippines, nor shall such franchise,
certificate or authorization be exclusive in character or for a longer
period than fifty years. No franchise or right shall be granted to any
individual, firm or corporation, except under the condition that it
shall be subject to amendment, alteration, or repeal by the National
Assembly when the public interest so requires. (emphasis supplied)
To accelerate the development of shipbuilding and ship repair
industry, former President Ferdinand E. Marcos issued P.D. No. 666
granting the following incentives:
SECTION 1. Shipbuilding and ship repair yards duly registered with
the Maritime Industry Authority shall be entitled to the following
incentive benefits:
(a) Exemption from import duties and taxes.- The
importation of machinery, equipment and materials for
shipbuilding, ship repair and/or alteration, including
indirect import, as well as replacement and spare parts for
the repair and overhaul of vessels such as steel plates,
electrical machinery and electronic parts, shall be exempt
from the payment of customs duty and compensating tax:
Provided, however, That the Maritime Industry Authority
certifies that the item or items imported are not produced
locally in sufficient quantity and acceptable quality at
reasonable prices, and that the importation is directly and
actually needed and will be used exclusively for the
construction, repair, alteration, or overhaul of merchant
vessels, and other watercrafts; Provided, further, That if
the above machinery, equipment, materials and spare
parts are sold to non-tax exempt persons or entities, the
corresponding duties and taxes shall be paid by the
original importer; Provided, finally, That local dealers
and/or agents who sell machinery, equipment, materials
and accessories to shipyards for shipbuilding and ship
repair are entitled to tax credits, subject to approval by
the total tariff duties and compensating tax paid for said
machinery, equipment, materials and accessories.
(b) Accelerated depreciation.- Industrial plant and
equipment may, at the option of the shipbuilder and ship
repairer, be depreciated for any number of years between
five years and expected economic life.
(c) Exemption from contractors percentage tax.- The
gross receipts derived by shipbuilders and ship repairers
from shipbuilding and ship repairing activities shall be
exempt from the Contractors Tax provided in Section 91
of the National Internal Revenue Code during the first ten
years from registration with the Maritime Industry
Authority, provided that such registration is effected not
later than the year 1990; Provided, That any and all
amounts which would otherwise have been paid as
contractors tax shall be set aside as a separate fund, to be
known as "Shipyard Development Fund", by the
contractor for the purpose of expansion, modernization
and/or improvement of the contractors own shipbuilding
or ship repairing facilities; Provided, That, for this purpose,
the contractor shall submit an annual statement of its
receipts to the Maritime Industry Authority; and Provided,
further, That any disbursement from such fund for any of
the purposes hereinabove stated shall be subject to
approval by the Maritime Industry Authority.
In addition, P.D. No. 666 removed the shipbuilding and
ship repair industry from the list of public utilities, thereby
freeing the industry from the 60% citizenship requirement
under the Constitution and from the need to obtain
Certificate of Public Convenience pursuant to section 15 of
C.A No. 146. Section 1 (d) of P.D. 666 reads:
(d) Registration required but not as a Public Utility.- The
business of constructing and repairing vessels or parts
thereof shall not be considered a public utility and no
Certificate of Public Convenience shall be required
therefor. However, no shipyard, graving dock, marine
railway or marine repair shop and no person or enterprise
shall engage in construction and/or repair of any vessel, or
any phase or part thereof, without a valid Certificate of
Registration and license for this purpose from the
Maritime Industry Authority, except those owned or
operated by the Armed Forces of the Philippines or by
foreign governments pursuant to a treaty or agreement.
(emphasis supplied)
Any law, decree, executive order, or rules and regulations
inconsistent with P.D. No. 666 were repealed or modified
accordingly.
28
Consequently, sections 13 (b) and 15 of C.A. No. 146
were repealed in so far as the former law included shipyards in the
list of public utilities and required the certificate of public
convenience for their operation. Simply stated, the repeal was due to
irreconcilable inconsistency, and by definition, this kind of repeal falls
under the category of an implied repeal.
29

On April 28, 1983, Batas Pambansa Blg. 391, also known as the
"Investment Incentive Policy Act of 1983," was enacted. It laid down
the general policy of the government to encourage private domestic
and foreign investments in the various sectors of the economy, to
wit:
Sec. 2. Declaration of Investment Policy.- It is the policy of the State
to encourage private domestic and foreign investments in industry,
agriculture, mining and other sectors of the economy which shall:
provide significant employment opportunities relative to the amount
of the capital being invested; increase productivity of the land,
minerals, forestry, aquatic and other resources of the country, and
improve utilization of the products thereof; improve technical skills
of the people employed in the enterprise; provide a foundation for
the future development of the economy; accelerate development of
less developed regions of the country; and result in increased volume
and value of exports for the economy.
It is the policy of the State to extend to projects which will
significantly contribute to the attainment of these objectives, fiscal
incentives without which said projects may not be established in the
locales, number and/or pace required for optimum national
economic development. Fiscal incentive systems shall be devised to
compensate for market imperfections, reward performance of
making contributions to economic development, cost-efficient and be
simple to administer.
The fiscal incentives shall be extended to stimulate establishment
and assist initial operations of the enterprise, and shall terminate
after a period of not more than 10 years from registration or start-up
of operation unless a special period is otherwise stated.
The foregoing declaration shall apply to all investment incentive
schemes and in particular will supersede article 2 of Presidential
Decree No. 1789. (emphases supplied)
With the new investment incentive regime, Batas Pambansa Blg. 391
repealed the following laws, viz:
Sec. 20. The following provisions are hereby repealed:
1) Section 53, P.D. 463 (Mineral Resources Development
Decree);
2.) Section 1, P.D. 666 (Shipbuilding and Ship Repair
Industry);
3) Section 6, P.D. 1101 (Radioactive Minerals);
4) LOI 508 extending P.D. 791 and P.D. 924 (Sugar); and
5) The following articles of Presidential Decree 1789: 2,
18, 19, 22, 28, 30, 39, 49 (d), 62, and 77. Articles 45, 46
and 48 are hereby amended only with respect to domestic
and export producers.
All other laws, decrees, executive orders, administrative orders, rules
and regulations or parts thereof which are inconsistent with the
provisions of this Act are hereby repealed, amended or modified
accordingly.
All other incentive systems which are not in any way affected by the
provisions of this Act may be restructured by the President so as to
render them cost-efficient and to make them conform with the other
policy guidelines in the declaration of policy provided in Section 2 of
this Act. (emphasis supplied)
From the language of the afore-quoted provision, the whole of P.D.
No. 666, section 1 was expressly and categorically repealed. As a
consequence, the provisions of C.A. No. 146, which were impliedly
repealed by P.D. No. 666, section 1 were revived.
30
In other words,
with the enactment of Batas Pambansa Blg. 391, a shipyard reverted
back to its status as a public utility and as such, requires a CPC for its
operation.
The crux of the present controversy is the effect of the express repeal
of Batas Pambansa Blg. 391 by Executive Order No. 226 issued by
former President Corazon C. Aquino under her emergency powers.
We rule that the express repeal of Batas Pambansa Blg. 391 by E.O.
No. 226 did not revive Section 1 of P.D. No. 666. But more
importantly, it also put a period to the existence of sections 13 (b)
and 15 of C.A. No. 146. It bears emphasis that sections 13 (b) and 15
of C.A. No. 146, as originally written, owed their continued existence
to Batas Pambansa Blg. 391. Had the latter not repealed P.D. No. 666,
the former should have been modified accordingly and shipyards
effectively removed from the list of public utilities. Ergo, with the
express repeal of Batas Pambansa Blg. 391 by E.O. No. 226, the
revival of sections 13 (b) and 15 of C.A. No. 146 had no more leg to
stand on. A law that has been expressly repealed ceases to exist and
becomes inoperative from the moment the repealing law becomes
effective.
31
Hence, there is simply no basis in the conclusion that
shipyards remain to be a public utility. A repealed statute cannot be
the basis for classifying shipyards as public utilities.
In view of the foregoing, there can be no other conclusion than to
hold that a shipyard is not a pubic utility. A shipyard has been
considered a public utility merely by legislative declaration. Absent
this declaration, there is no more reason why it should continuously
be regarded as such. The fact that the legislature did not clearly and
unambiguously express its intention to include shipyards in the list of
public utilities indicates that that it did not intend to do so. Thus, a
shipyard reverts back to its status as non-public utility prior to the
enactment of the Public Service Law.
This interpretation is in accord with the uniform interpretation placed
upon it by the Board of Investments (BOI), which was entrusted by
the legislature with the preparation of annual Investment Priorities
Plan (IPPs). The BOI has consistently classified shipyards as part of the
manufacturing sector and not of the public utilities sector. The
enactment of Batas Pambansa Blg. 391 did not alter the treatment of
the BOI on shipyards. It has been, as at present, classified as part of
the manufacturing and not of the public utilities sector.
32

Furthermore, of the 441 Ship Building and Ship Repair (SBSR) entities
registered with the MARINA,
33
none appears to have an existing
franchise. If we continue to hold that a shipyard is a pubic utility, it is
a necessary consequence that all these entities should have obtained
a franchise as was the rule prior to the enactment of P.D. No. 666.
But MARINA remains without authority, pursuant to P.D. No. 474
34
to
issue franchises for the operation of shipyards. Surely, the legislature
did not intend to create a vacuum by continuously treating a shipyard
as a public utility without giving MARINA the power to issue a
Certificate of Public Convenience (CPC) or a Certificate of Public
Convenience and Necessity (CPCN) as required by section 15 of C.A.
No. 146.
II.
Whether under the 1977 Joint Venture Agreement,
KAWASAKI can purchase only a maximum of 40%
of PHILSECOs total capitalization.
A careful reading of the 1977 Joint Venture Agreement reveals that
there is nothing that prevents KAWASAKI from acquiring more than
40% of PHILSECOs total capitalization. Section 1 of the 1977 JVA
states:
1.3 The authorized capital stock of Philseco shall be P330 million. The
parties shall thereafter increase their subscription in Philseco as may
be necessary and as called by the Board of Directors, maintaining a
proportion of 60%-40% for NIDC and KAWASAKI respectively, up to a
total subscribed and paid-up capital stock of P312 million.
1.4 Neither party shall sell, transfer or assign all or any part of its
interest in SNS [renamed PHILSECO] to any third party without giving
the other under the same terms the right of first refusal. This
provision shall not apply if the transferee is a corporation owned and
controlled by the GOVERMENT [of the Philippines] or by a Kawasaki
affiliate.
1.5 The By-Laws of SNS [PHILSECO] shall grant the parties preemptive
rights to unissued shares of SNS [PHILSECO].
35

Under section 1.3, the parties agreed to the amount of P330 million
as the total capitalization of their joint venture. There was no
mention of the amount of their initial subscription. What is clear is
that they are to infuse the needed capital from time to time until the
total subscribed and paid-up capital reaches P312 million. The phrase
"maintaining a proportion of 60%-40%" refers to their respective
share of the burden each time the Board of Directors decides to
increase the subscription to reach the target paid-up capital of P312
million. It does not bind the parties to maintain the sharing scheme
all throughout the existence of their partnership.
The parties likewise agreed to arm themselves with protective
mechanisms to preserve their respective interests in the partnership
in the event that (a) one party decides to sell its shares to third
parties; and (b) new Philseco shares are issued. Anent the first
situation, the non-selling party is given the right of first refusal under
section 1.4 to have a preferential right to buy or to refuse the selling
partys shares. The right of first refusal is meant to protect the
original or remaining joint venturer(s) or shareholder(s) from the
entry of third persons who are not acceptable to it as co-venturer(s)
or co-shareholder(s). The joint venture between the Philippine
Government and KAWASAKI is in the nature of a partnership
36
which,
unlike an ordinary corporation, is based on delectus personae.
37
No
one can become a member of the partnership association without
the consent of all the other associates. The right of first refusal thus
ensures that the parties are given control over who may become a
new partner in substitution of or in addition to the original partners.
Should the selling partner decide to dispose all its shares, the non-
selling partner may acquire all these shares and terminate the
partnership. No person or corporation can be compelled to remain or
to continue the partnership. Of course, this presupposes that there
are no other restrictions in the maximum allowable share that the
non-selling partner may acquire such as the constitutional restriction
on foreign ownership in public utility. The theory that KAWASAKI can
acquire, as a maximum, only 40% of PHILSECOs shares is correct only
if a shipyard is a public utility. In such instance, the non-selling
partner who is an alien can acquire only a maximum of 40% of the
total capitalization of a public utility despite the grant of first refusal.
The partners cannot, by mere agreement, avoid the constitutional
proscription. But as afore-discussed, PHILSECO is not a public utility
and no other restriction is present that would limit the right of
KAWASAKI to purchase the Governments share to 40% of Philsecos
total capitalization.
Furthermore, the phrase "under the same terms" in section 1.4
cannot be given an interpretation that would limit the right of
KAWASAKI to purchase PHILSECO shares only to the extent of its
original proportionate contribution of 40% to the total capitalization
of the PHILSECO. Taken together with the whole of section 1.4, the
phrase "under the same terms" means that a partner to the joint
venture that decides to sell its shares to a third party shall make a
similar offer to the non-selling partner. The selling partner cannot
make a different or a more onerous offer to the non-selling partner.
The exercise of first refusal presupposes that the non-selling partner
is aware of the terms of the conditions attendant to the sale for it to
have a guided choice. While the right of first refusal protects the non-
selling partner from the entry of third persons, it cannot also deprive
the other partner the right to sell its shares to third persons if, under
the same offer, it does not buy the shares.
Apart from the right of first refusal, the parties also have preemptive
rights under section 1.5 in the unissued shares of Philseco. Unlike the
former, this situation does not contemplate transfer of a partners
shares to third parties but the issuance of new Philseco shares. The
grant of preemptive rights preserves the proportionate shares of the
original partners so as not to dilute their respective interests with the
issuance of the new shares. Unlike the right of first refusal, a
preemptive right gives a partner a preferential right over the newly
issued shares only to the extent that it retains its original
proportionate share in the joint venture.
The case at bar does not concern the issuance of new shares but the
transfer of a partners share in the joint venture. Verily, the operative
protective mechanism is the right of first refusal which does not
impose any limitation in the maximum shares that the non-selling
partner may acquire.
III.
Whether the right to top granted to KAWASAKI
in exchange for its right of first refusal violates
the principles of competitive bidding.
We also hold that the right to top granted to KAWASAKI and
exercised by private respondent did not violate the rules of
competitive bidding.
The word "bidding" in its comprehensive sense means making an
offer or an invitation to prospective contractors whereby the
government manifests its intention to make proposals for the
purpose of supplies, materials and equipment for official business or
public use, or for public works or repair.
38
The three principles of
public bidding are: (1) the offer to the public; (2) an opportunity for
competition; and (3) a basis for comparison of bids.
39
As long as these
three principles are complied with, the public bidding can be
considered valid and legal. It is not necessary that the highest bid be
automatically accepted. The bidding rules may specify other
conditions or the bidding process be subjected to certain reservation
or qualification such as when the owner reserves to himself openly at
the time of the sale the right to bid upon the property, or openly
announces a price below which the property will not be sold. Hence,
where the seller reserves the right to refuse to accept any bid made,
a binding sale is not consummated between the seller and the bidder
until the seller accepts the bid. Furthermore, where a right is
reserved in the seller to reject any and all bids received, the owner
may exercise the right even after the auctioneer has accepted a bid,
and this applies to the auction of public as well as private property.
40

Thus:
It is a settled rule that where the invitation to bid contains a
reservation for the Government to reject any or all bids, the lowest or
the highest bidder, as the case may be, is not entitled to an award as
a matter of right for it does not become a ministerial duty of the
Government to make such an award. Thus, it has been held that
where the right to reject is so reserved, the lowest bid or any bid for
that matter may be rejected on a mere technicality, that all bids may
be rejected, even if arbitrarily and unwisely, or under a mistake, and
that in the exercise of a sound discretion, the award may be made to
another than the lowest bidder. And so, where the Government as
advertiser, availing itself of that right, makes its choice in rejecting
any or all bids, the losing bidder has no cause to complain nor right to
dispute that choice, unless an unfairness or injustice is shown.
Accordingly, he has no ground of action to compel the Government
to award the contract in his favor, nor compel it to accept his bid.
41

In the instant case, the sale of the Government shares in PHILSECO
was publicly known. All interested bidders were welcomed. The basis
for comparing the bids were laid down. All bids were accepted sealed
and were opened and read in the presence of the COAs official
representative and before all interested bidders. The only question
that remains is whether or not the existence of KAWASAKIs right to
top destroys the essence of competitive bidding so as to say that the
bidders did not have an opportunity for competition. We hold that it
does not.
The essence of competition in public bidding is that the bidders are
placed on equal footing. This means that all qualified bidders have an
equal chance of winning the auction through their bids. In the case at
bar, all of the bidders were exposed to the same risk and were
subjected to the same condition, i.e., the existence of KAWASAKIs
right to top. Under the ASBR, the Government expressly reserved the
right to reject any or all bids, and manifested its intention not to
accept the highest bid should KAWASAKI decide to exercise its right
to top under the ABSR. This reservation or qualification was made
known to the bidders in a pre-bidding conference held on September
28, 1993. They all expressly accepted this condition in writing without
any qualification. Furthermore, when the Committee on Privatization
notified petitioner of the approval of the sale of the National
Government shares of stock in PHILSECO, it specifically stated that
such approval was subject to the right of KAWASAKI Heavy Industries,
Inc./Philyards Holdings, Inc. to top JGSMIs bid by 5% as specified in
the bidding rules. Clearly, the approval of the sale was a conditional
one. Since Philyards eventually exercised its right to top petitioners
bid by 5%, the sale was not consummated. Parenthetically, it cannot
be argued that the existence of the right to top "set for naught the
entire public bidding." Had Philyards Holdings, Inc. failed or refused
to exercise its right to top, the sale between the petitioner and the
National Government would have been consummated. In like
manner, the existence of the right to top cannot be likened to a
second bidding, which is countenanced, except when there is failure
to bid as when there is only one bidder or none at all. A prohibited
second bidding presupposes that based on the terms and conditions
of the sale, there is already a highest bidder with the right to demand
that the seller accept its bid. In the instant case, the highest bidder
was well aware that the acceptance of its bid was conditioned upon
the non-exercise of the right to top.
To be sure, respondents did not circumvent the requirements for
bidding by granting KAWASAKI, a non-bidder, the right to top the
highest bidder. The fact that KAWASAKIs nominee to exercise the
right to top has among its stockholders some losing bidders cannot
also be deemed "unfair."
It must be emphasized that none of the parties questions the
existence of KAWASAKIs right of first refusal, which is concededly the
basis for the grant of the right to top. Under KAWASAKIs right of first
refusal, the National Government is under the obligation to give
preferential right to KAWASAKI in the event it decides to sell its
shares in PHILSECO. It has to offer to KAWASAKI the shares and give it
the option to buy or refuse under the same terms for which it is
willing to sell the said shares to third parties. KAWASAKI is not a mere
non-bidder. It is a partner in the joint venture; the incidents of which
are governed by the law on contracts and on partnership.
It is true that properties of the National Government, as a rule, may
be sold only after a public bidding is held. Public bidding is the
accepted method in arriving at a fair and reasonable price and
ensures that overpricing, favoritism and other anomalous practices
are eliminated or minimized.
42
But the requirement for public bidding
does not negate the exercise of the right of first refusal. In fact, public
bidding is an essential first step in the exercise of the right of first
refusal because it is only after the public bidding that the terms upon
which the Government may be said to be willing to sell its shares to
third parties may be known. It is only after the public bidding that the
Government will have a basis with which to offer KAWASAKI the
option to buy or forego the shares.
Assuming that the parties did not swap KAWASAKIs right of first
refusal with the right to top, KAWASAKI would have been able to buy
the National Governments shares in PHILSECO under the same terms
as offered by the highest bidder. Stated otherwise, by exercising its
right of first refusal, KAWASAKI could have bought the shares for only
P2.03 billion and not the higher amount of P2.1315 billion. There is,
thus, no basis in the submission that the right to top unfairly favored
KAWASAKI. In fact, with the right to top, KAWASAKI stands to pay
higher than it should had it settled with its right of first refusal. The
obvious beneficiary of the scheme is the National Government.
If at all, the obvious consideration for the exchange of the right of
first refusal with the right to top is that KAWASAKI can name a
nominee, which it is a shareholder, to exercise the right to top. This is
a valid contractual stipulation; the right to top is an assignable right
and both parties are aware of the full legal consequences of its
exercise. As aforesaid, all bidders were aware of the existence of the
right to top, and its possible effects on the result of the public bidding
was fully disclosed to them. The petitioner, thus, cannot feign
ignorance nor can it be allowed to repudiate its acts and question the
proceedings it had fully adhered to.
43

The fact that the losing bidder, Keppel Consortium (composed of
Keppel, SM Group, Insular Life Assurance, Mitsui and ICTSI), has
joined Philyards in the latters effort to raise P2.131 billion necessary
in exercising the right to top is not contrary to law, public policy or
public morals. There is nothing in the ASBR that bars the losing
bidders from joining either the winning bidder (should the right to
top is not exercised) or KAWASAKI/PHI (should it exercise its right to
top as it did), to raise the purchase price. The petitioner did not
allege, nor was it shown by competent evidence, that the
participation of the losing bidders in the public bidding was done
with fraudulent intent. Absent any proof of fraud, the formation by
Philyards of a consortium is legitimate in a free enterprise system.
The appellate court is thus correct in holding the petitioner estopped
from questioning the validity of the transfer of the National
Governments shares in PHILSECO to respondent.
Finally, no factual basis exists to support the view that the drafting of
the ASBR was illegal because no prior approval was given by the COA
for it, specifically the provision on the right to top the highest bidder
and that the public auction on December 2, 1993 was not witnessed
by a COA representative. No evidence was proffered to prove these
allegations and the Court cannot make legal conclusions out of mere
allegations. Regularity in the performance of official duties is
presumed
44
and in the absence of competent evidence to rebut this
presumption, this Court is duty bound to uphold this presumption.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration is
hereby GRANTED. The impugned Decision and Resolution of the
Court of Appeals are AFFIRMED.
SO ORDERED.