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Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 166785               July 28, 2008

OROPORT CARGOHANDLING SERVICES, INC., represented by its President FRANKLIN U. SIAO, Petitioner,
vs.
PHIVIDEC INDUSTRIAL AUTHORITY, Respondent.

D E C I S I O N

QUISUMBING, J.:

Can Phividec¹ Industrial Authority (PIA) temporarily operate as a seaport cargo-handler upon agreement with the Philippine Ports Authority (PPA)² sans a franchise or a license from Congress or PPA?

Petitioner Oroport Cargohandling Services, Inc. (Oroport) impugns in this petition for review on certiorari the Decision³ dated January 5, 2005 of the Court of Appeals in CA-G.R. SP No. 84147 annulling the orders⁴ of the Regional Trial Court (RTC) of Cagayan de Oro City, Branch 39 which enjoined the cargo-handling operations of respondent PIA at the Mindanao Container Terminal (MCT).

Oroport is a cargo-handling contractor⁵ at the Cagayan de Oro International Port (CDOIP) while PIA is a Phividec subsidiary created to uplift the socio-economic condition of war veterans, military retirees and their children by allowing them to participate in its development undertakings as employees, developers and business partners with the mission to establish, develop and professionally administer industrial areas, ports and utilities.⁶

In 2003, Oroport bid for the management and operation of MCT, a ₱3.24 billion government infrastructure project at Phividec Industrial Estate in Tagoloan, Misamis Oriental. MCT was funded by a loan contracted by the Philippine government with the Japan Bank for International Cooperation (JBIC).⁷ It was later renamed Mindanao Container Terminal Sub-Port and placed under the jurisdiction of the Bureau of Customs as a sub-port entry.⁸

As no bidder won in the two public biddings, PIA took over MCT operations.

On April 19, 2004, Oroport sued PIA and Phividec in the RTC for injunction and damages. It accused PIA of illegally operating MCT without a license from PPA or a franchise from Congress. It also alleged unfair competition since PIA handled cargoes of the general public. It further invoked unlawful deprivation of property as it stands to incur investment losses with PIA’s take over of MCT operations. It contended that PIA’s operation of MCT will cause it damage and irreparable injury as PIA would eventually siphon the cargo traffic of CDOIP to MCT. It prayed that PIA be stopped from handling cargoes not owned or consigned to its industrial estate locators.⁹

During the hearings for its application for preliminary injunction, Oroport claimed that PIA’s operation of MCT is highly adverse to the country since it does not have experience in seaport cargo-handling. It contended that since the core business of PIA and Phividec is the establishment and operation of industrial estates, their authority to build and operate ports should be construed merely as a complement of their primary function. Thus, the ports they built should accommodate only cargoes owned or consigned to its industrial estate locators or else it can build ports and handle cargoes anywhere, directly competing with PPA.

PIA and Phividec invoked Republic Act No. 8975¹⁰ which prohibits lower courts from issuing temporary restraining orders or preliminary injunctions on government infrastructure projects especially where an injunction in this case would mean wasting ₱3.24 billion resulting in a loan default. They highlighted the fact that PIA’s operation of MCT is endorsed by the government and by various groups.¹¹ They added that preventing PIA from operating MCT will aggravate the huge financial deficit of the national government and contribute to the collapse of the economy.

On April 27, 2004, the RTC enjoined PIA and Phividec from handling cargoes not owned or consigned to its industrial estate locators.¹² PIA sought to reverse the order and dismiss the complaint which Oroport opposed.

On May 11, 2004, the RTC issued the two orders, thus:

WHEREFORE, in view of the foregoing and for lack of merit, the Motion for Reconsideration filed by defendants of the Order of this Court dated April 27, 2004 … with Urgent Motion for the Dismissal of the instant complaint, is hereby DENIED.

SO ORDERED.¹³

. . .

WHEREFORE, in view of the foregoing, the injunctive writ prayed for by plaintiff is hereby GRANTED for being meritorious. Accordingly, defendants PHILIPPINE VETERANS INVESTMENT DEVELOPMENT CORP. (PHIVIDEC) and PHIVIDEC INDUSTRIAL AUTHORITY (PIA), and any or all persons acting for and in its behalf, [are] hereby ordered to CEASE and DESIST from engaging in cargo handling operations of cargoes at the Mindanao Container Terminal which are not owned or consigned to locators inside the Phividec Industrial Estate, until further orders from this Court.

To answer for whatever damages that defendants may sustain by reason of this preliminary injunction, if the Court should finally decide that plaintiff is not entitled thereto, plaintiff is hereby ordered to put up a bond of TWO MILLION (2,000,000.00) PESOS.

SO ORDERED.¹⁴

The RTC ruled that Rep. Act No. 8975 is inapplicable as Oroport does not seek to restrain the operation of MCT but that it must be operated legally since PIA’s right to operate is limited to cargoes owned or consigned to its industrial estate locators. The RTC emphasized that before PIA could operate as a public utility, it should be properly authorized by PPA since cargo-handling is a regulated activity. In imposing low tariff rates and accepting third-party cargoes, PIA unlawfully deprived Oroport of its property.¹⁵ The RTC explained that the act sought to be enjoined will cause Oroport prejudice and serious damage as the existing cargo-handling operations at the CDOIP will be adversely affected if PIA is allowed to operate MCT.¹⁶

On May 18, 2004, PIA sought to dismiss the complaint and filed a ₱30 million-counterclaim.¹⁷ On May 28, 2004, PIA moved to lift and dissolve the preliminary injunction due to the alleged defective and invalid plaintiff’s bond and insufficiency of the ₱2 million bond to cover for its projected damage.¹⁸ Oroport opposed.¹⁹ The RTC upheld the opposition.²⁰

On June 1, 2004, PIA filed with the Court of Appeals a Petition for Certiorari and Prohibition²¹ invoking Section 3²² of Rep. Act No. 8975, arguing that the RTC had no jurisdiction to issue writs of preliminary injunction against operations of government infrastructure projects. Assuming it had, it issued the writ without hearing and Oroport was not entitled thereto. It prayed ex parte for a TRO.²³ Oroport countered that Rep. Act No. 8975 exempts urgent constitutional issues from the prohibition to issue injunctive relief.²⁴

On January 5, 2005, the Court of Appeals annulled the subject orders, ruling that the RTC committed grave abuse of discretion in issuing them. Hence, this petition, raising two issues:

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS HAD ERRED IN RULING THAT THE REGIONAL TRIAL COURT, BRANCH 39, HAD NO JURISDICTION TO ISSUE THE TWO (2) ORDERS OF MAY 11, 2004; AND

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS HAD ERRED IN GRANTING THE RELIEF IN FAVOR OF PIA DESPITE THE FACT THAT IT HAD NOT SHOWN ANY CLEAR RIGHT TO THE RELIEF PRAYED FOR.²⁵

Simply, the issues are: (1) Did the Court of Appeals err in ruling that the RTC had no jurisdiction to issue the writ of preliminary injunction? and (2) Can PIA temporarily operate as a seaport cargo-handler upon agreement with PPA sans a franchise or a license?

Oroport contends that PIA’s operation of MCT is illegal as it has no license or franchise to operate as a public utility. It also constitutes unfair competition because PIA offered lower tariff rates than those recommended at the failed public biddings, prejudicing the loan agreement with JBIC to the disadvantage of the taxpayers. PIA likewise engaged a third-party in hiring stevedores, which is prohibited under PPA rules and regulations. Oroport also argues that PIA’s operation of MCT constitutes unlawful deprivation of property due to potential investment losses in modernizing CDOIP as required by its two-year probationary contract with PPA. It contends that the appellate court erred in reversing the RTC’s finding of fact which is a mere error of judgment, not an error of jurisdiction, and which is reviewable by ordinary appeal and not by certiorari as it is not necessarily equivalent to grave abuse of discretion. Oroport stresses that the appellate court did not categorically rule that the RTC acted without or in excess of jurisdiction or with grave abuse of discretion.

PIA counters that it does not need a license from PPA to be a port operator or cargo-handler due to their Memoranda of Agreement (MOA) dated October 20, 1980 and October 16, 1995, which provide as follows:

x x x x

5. CARGO-HANDLING SERVICES. – All cargo handling services on and off vessel shall be under the control, regulation and supervision of the PIA as well as rates and charges in connection therewith using as basis the PPA approved rates in Macabalan Wharf, Cagayan de Oro City or in private ports as the case may be but in no case shall said charges be higher than the rates prescribed by PPA. (MOA dated October 20, 1980).

x x x x

4. CARGO-HANDLING SERVICES. – All cargo handling services, on and off vessel shall be under the control, regulation and supervision of the PIA as well as the rates and charges in connection therewith using as basis the rates prescribed by PPA. ([Amended] MOA dated October 16, 1995. …)²⁶

It claims that it operated MCT after the failed public biddings since the loan agreement with JBIC specified non-operation of MCT as a cause for default that will render the entire loan due and demandable. PIA argues that the RTC had no jurisdiction to issue a writ of preliminary injunction against the operation of MCT considering that such power and authority resides exclusively with this Court. Hence, the act of the RTC must be corrected by certiorari considering that it is an error of jurisdiction, not a mere error of judgment. It also argues that the MOA and its amendment embody PPA’s concurrence with the exercise of PIA’s power and authority to operate ports inside its estate that would cater to any client. PIA swears that its operation of MCT is only temporary to prevent being declared in default by JBIC.²⁷

After painstakingly weighing the pros and cons presented in the records and the parties’ memoranda, we deny the petition.1awphil

First. A preliminary injunction is an order granted at any stage of an action prior to the judgment or final order, requiring a party, court, agency or person to refrain from a particular act or acts.²⁸ A preservative remedy, its issuance lies upon the existence of a claimed emergency or extraordinary situation which should be avoided; otherwise, the outcome of litigation would be useless as far as the party applying for the writ is concerned. There must be a clear and material right to be protected and that the facts against which the injunction is to be directed violate said right.

In annulling the subject orders, the Court of Appeals explained that while Section 3 of Rep. Act No. 8975 exempts urgent constitutional issues from the prohibition to issue injunctive relief, it does not follow that a claim of unlawful deprivation of property involves such an issue in the same manner that a robbery victim unlawfully deprived of property cannot claim that his case involves a constitutional issue. It reasoned that Rep. Act No. 8975 is clear that it is not within the RTC’s jurisdiction to issue an injunctive writ against the operation of a government infrastructure project. Since Oroport failed to specify what property was robbed of it, the appellate court ruled that PIA does not need a license from PPA to operate because the MOA²⁹ and its amendment granted PIA exclusive control and supervision of MCT on all cargo-handling services, including the discretion to impose rates and charges not higher than those PPA-prescribed.

Rep. Act No. 8975 reserves the power to issue injunctive writs on government infrastructure projects exclusively with this Court and the RTC cannot issue an injunctive writ to stop the cargo-handling operations at MCT. The issues presented by Oroport can hardly be considered constitutional, much more constitutional issues of extreme urgency. Hence, the appellate court did not err in annulling the writ of preliminary injunction and in ruling that the RTC had no jurisdiction to enjoin the operation of this multi-billion government infrastructure project.

Second. PPA was created for the purpose of, among others, promoting the growth of regional port bodies. In furtherance of this objective, PPA is empowered, after consultation with relevant government agencies, to make port regulations particularly to make rules or regulation for the planning, development, construction, maintenance, control, supervision and management of any port or port district in the country. With this mandate, the decision to bid out cargo-handling services is within the province and discretion of PPA which necessarily required prior study and evaluation. This task is best left to the judgment of PPA and cannot be set aside absent grave abuse of discretion on its part.³⁰ As long as the standards are set in determining the contractor and such standards are reasonable and related to the purpose for which they are used, courts should not inquire into the wisdom of PPA’s choice.³¹ In Philippine Ports Authority v. Court of Appeals³² where PPA hired rival contractors to operate in a major port, we held:

Entering into a contract for the operation of a floating grains terminal, notwithstanding the existence of other stevedoring contracts pertaining to the South Harbor, is undoubtedly an exercise of discretion on the part of the PPA. The exercise of such discretion is a policy decision that necessitates such procedures as prior inquiry, investigation, comparison, evaluation and deliberation. No other persons or agencies are in a better position to gauge the need for the floating grains terminal than the PPA; certainly, not the courts.³³

Since PPA has given PIA the right to manage and operate MCT, we cannot simply abrogate it.

PIA properly took over MCT operations sans a franchise or license as it was necessary, temporary and beneficial to the public. We have ruled that franchises from Congress are not required before each and every public utility may operate because the law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities. Article XII, Section 11³⁴ of the Constitution does not necessarily imply that only Congress can grant such authorization. The determination of whether the winning bidder is qualified to undertake the contracted service should be left to the sound judgment of PPA or PIA as these agencies are in the best position to evaluate the feasibility of the projections of the bidders and to decide which bid is compatible with the project’s development plans. Neither the Court nor Congress has the time and the technical know-how to look into this matter.³⁵ Furthermore, Section 4(e) of Presidential Decree No. 538, gives PIA the legal authority to construct, operate and maintain port facilities including stevedoring and port terminal services even without PPA’s authority. The MOA granting PIA the exclusive control and supervision of all ports, wharves, piers and services within the industrial area, recognizing its power to collect port fees, dues and charges, makes PIA’s authority over MCT operations more secure.

After the two public biddings failed, PIA was left with no other option but to take over MCT operations so that it could earn, pending the award to a qualified bidder, some amount to pay the loan to JBIC and to avoid being declared in default. During the September 27, 2004 hearing before the Court of Appeals-Mindanao, Atty. Raul Ragandang of PIA stressed that decision when Justice Punzalan-Castillo asked him if Phividec will permanently engage in cargo-handling services by citing failure of bidding as excuse. Atty. Ragandang replied that Phividec will not permanently engage in cargo-handling considering that it has no capacity to operate MCT:

x x x x

ATTY. RAGANDANG:

… [Phividec] was just forced to operate temporarily considering that the port will be left unused and the Japanese requires that non-usage of the port is a violation of the loan agreement. In fact, the representative of the Japan Bank for International Cooperation talked to the PIA administrator and the Secretary of Finance advising the two . . . that the non-operation of the port is a violation of the loan agreement, which will result, according to the JBIC, in non-extension of other loans, pending before the JBIC. So it will greatly hamper the government infrastructural projects considering that the government now has no money to sustain these infrastructure projects and JBIC extends a loan of 40 years to pay and less than 1% of interest in the repayment of 10 years, Your Honor. So, you just imagine the magnitude of the deprivation of the government or its infrastructure projects because of the non-operation of this port. JBIC will declare that [it] has violated the loan agreement and the subsequent, finding of other government projects will no longer be entertained.³⁶

Notably, Oroport is estopped from questioning PIA’s authority because it participated in the two public biddings. As a cargo-handling contractor at the CDOIP, it is not a real party-in-interest in this case as only PPA may protest PIA’s operation of MCT. As Oroport admitted, PPA is amenable to PIA’s operation of MCT as they entered into an exclusive agreement. Even assuming that Oroport is a real party-in-interest, it is not entitled to an injunction as the alleged damage or threat of damage is speculative and factually baseless. Cargo-handling in a different, though adjacent, port will not necessarily result in revenue loss since CDOIP is already congested.

Moreover, Oroport failed to convince us that it has a clear and actual right to be enforced and protected. Oroport has no right to manage MCT since it has no contractual relations with PIA, Phividec or PPA. It has no statutory grant of authority. Clearly, it has no right in esse to be protected by an injunctive writ.³⁷ Even if Oroport won the public bidding and obtained an exclusive contract for port operations at MCT, it has no vested right to operate MCT because contract clauses are not inflexible barriers to public regulations.³⁸ Business permits may be terminated by authorities any time based on policy guidelines and statutes because what is given is not a property right but a mere privilege.³⁹ In fact, the right of PPA or its anointed government agencies like PIA to take over port facilities from operators whose contracts have expired is indubitable.⁴⁰ The law authorizing PPA to take over arrastre and stevedoring services in government-owned ports and cancel permits issued to private operators is a valid exercise of police power; it does not violate due process of law as the exercise of police power is paramount over the right against non-impairment of contracts. Moreover, a regulated monopoly is not proscribed in industries affected with public interest such as in port rendition of arrastre/stevedoring services in Philippine ports.⁴¹

Oroport’s allegation of unfair competition also fails because private monopolies are not necessarily prohibited by the Constitution. Certain public utilities must be given franchises for public interest and these franchises do not violate the law against monopolies.⁴² PIA’s policy decision to handle the cargo operation itself enjoys presumption of regularity as it did not violate any relevant law, rules, regulations, ordinance or issuances in so doing. Even so, there is no unfair competition as PIA (1) is not a competitor of Oroport; (2) imposes the same tariff rates as Oroport; and (3) is operating in an entirely separate and distinct port. As PIA argues, the public deserves alternative and better facilities. MCT is not exclusive to the industrial estate locators as the feasibility study of MCT prepared by PIA and approved by the National Economic Development Authority emphasized that MCT will cater not only to locator firms but also to outside clients and prospective users. Addressing CDOIP congestion, MCT is beneficial to shipping lines and the general public.

WHEREFORE, the petition is DENIED and the assailed Decision dated January 5, 2005 of the Court of Appeals in CA-G.R. SP No. 84147 is hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES
Associate Justice

DANTE O. TINGA Associate Justice

PRESBITERO J. VELASCO, JR. Associate Justice

ARTURO D. BRION
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes

¹ Philippine Veterans Investment Development Corporation, a government-owned and controlled corporation.

² Created under Presidential Decree No. 857 (1975).

³ Rollo, pp. 24-44. Penned by Associate Justice Arturo G. Tayag, with Associate Justices Edgardo A. Camello and Rodrigo F. Lim, Jr. concurring.

⁴ Records, Vol. I, pp. 309-317, 327-351.

⁵ Id. at 12-19. Probationary Contract For Cargo-Handling Services.

⁶ Presidential Decree No. 538 (Creating and Establishing the Phividec Industrial Authority and Making it a Subsidiary Agency of the Philippine Veterans Investment Development Corporation Defining its Powers, Functions and Responsibilities, and for Other Purposes, done on August 13, 1974), as amended by Presidential Decree No. 1491 (Amending Section 8 of Presidential Decree Numbered Five Hundred Thirty-Eight, done on June 11, 1978).

⁷ Records, Vol. I, pp. 98-106. See Loan Agreement for Mindanao Container Terminal Project Between Japan Bank for International Cooperation and the Government of the Republic of the Philippines dated April 7, 2000.

⁸ Executive Order No. 542 (Declaring the Mindanao Container Terminal as a Sub-Port of Entry to be Known as the Mindanao Container Terminal Sub-Port, Pursuant to Section 606 of the Tariff and Customs Code of the Philippines, as Amended, done on July 14, 2006).

⁹ Records, Vol. I, pp. 5-11.

¹⁰ An Act to Ensure the Expeditious Implementation and Completion of Government Infrastructure Projects by Prohibiting Lower Courts from Issuing Temporary Restraining Orders, Preliminary Injunctions or Preliminary Mandatory Injunctions, Providing Penalties for Violations Thereof, and for Other Purposes, approved on November 7, 2000.

¹¹ Records, Vol. I, pp. 107-137. By Representatives Oscar S. Moreno and Augusto H. Baculio of the First and Second Districts, respectively, of Misamis Oriental; Department of Transportation and Communications Secretary Vicente C. Rivera, Jr.; National Economic and Development Authority Assistant Director-General and Officer-in-Charge, NDO Augusto B. Santos; Department of Trade and Industry Secretary Jose Trinidad Pardo; Department of National Defense Secretary Orlando S. Mercado; Senate President Marcelo B. Fernan; Regional Development Council-10 of Northern Mindanao; Mindanao Economic Development Council; Provincial Governments of Misamis Oriental and Bukidnon; Cagayan de Oro City Government; Tagoloan Municipal Government; Northern Mindanao Shippers Association; Confederation of Philippine Exporters Foundation; Office of the Government Corporate Counsel.

¹² Id. at 243-246.

¹³ Id. at 351.

¹⁴ Id. at 317.

¹⁵ Id. at 342-343, 345.

¹⁶ Id. at 315.

¹⁷ Id. at 456-474.

¹⁸ Records, Vol. II, pp. 27-34.

¹⁹ Id. at 207-209.

²⁰ Id. at 242-243.

²¹ Id. at 53-78.

²² SEC. 3 Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory Injunctions. – No court, except the Supreme Court, shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the government, or any of its subdivisions, officials or any person or entity, whether public or private, acting under the government’s direction, to restrain, prohibit or compel the following acts:

x x x x

(c) Commencement, prosecution, execution, implementation, operation of any such contract or project;

x x x x

This prohibition shall apply in all cases, disputes or controversies instituted by a private party, including but not limited to cases filed by bidders or those claiming to have rights through such bidders involving such contract/project. …

x x x x

²³ Records, Vol. II, pp. 232-237.

²⁴ Id. at 250-275.

²⁵ Rollo, p. 358.

²⁶ Id. at 324-325; Records, Vol. I, pp. 138-145.

²⁷ Rollo, pp. 209-213, 216-217.

²⁸ Revised Rules of Court (1997), Rule 58, Section 1.

²⁹ Records, Vol. I, pp. 138-145.

³⁰ Philippine Ports Authority v. Cipres Stevedoring & Arrastre, Inc., G.R. No. 145742, July 14, 2005, 463 SCRA 358, 376.

³¹ Anglo-Fil Trading Corporation v. Lazaro, Nos. L-54958 and L-54966, September 2, 1983, 124 SCRA 494, 523.

³² G.R. Nos. 115786-87, February 5, 1996, 253 SCRA 212.

³³ Id. at 234.

³⁴ Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.

³⁵ Albano v. Reyes, G.R. No. 83551, July 11, 1989, 175 SCRA 264, 271-272, 274.

³⁶ Rollo, pp. 42-43.

³⁷ Philippine Ports Authority v. Pier 8 Arrastre & Stevedoring Services, Inc., G.R. Nos. 147861 and 155252, November 18, 2005, 475 SCRA 426, 435-436.

³⁸ Anglo-Fil Trading Corporation v. Lazaro, supra note 31, at 518.

³⁹ Id. at 520-522.

⁴⁰ Philippine Ports Authority v. Pier 8 Arrastre & Stevedoring Services, Inc., supra at 437.

⁴¹ Pernito Arrastre Services, Inc. v. Mendoza, No. L-53492, December 29, 1986, 146 SCRA 430, 439-440, 444.

⁴² Anglo-Fil Trading Corporation v. Lazaro, supra note 31, at 522.

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