G.R. No. 122156, February 3, 1997
Manila Prince Hotel, Petitioner, vs. Government Service Insurance System, Manila Hotel Corporation, Committee on Privatization and Office of the Government Corporate Counsel, Respondents.

FACTS

The Government Service Insurance System (GSIS), a government-owned corporation, initiated the privatization of the Manila Hotel by offering for public bidding a controlling block of shares (30% to 51%) of the Manila Hotel Corporation. The bidding rules required the winning bidder to provide management expertise, an international marketing system, and financial support. After a first failed bidding, a second bidding was held where petitioner Manila Prince Hotel (a domestic corporation) and Renong Berhad (a Malaysian firm) prequalified. Renong Berhad submitted the highest bid and was declared the winning bidder, subject to the execution of final contracts.
Petitioner Manila Prince Hotel, invoking a right under the Constitution, matched Renong Berhad’s bid and demanded the award of the shares. When respondents refused, petitioner filed this petition for prohibition and mandamus. It argued that the sale to a foreign entity violated the constitutional mandate giving Filipino citizens preference in the grant of rights, privileges, and concessions covering the national economy and patrimony, as the Manila Hotel is a national historical landmark and part of the national patrimony.

ISSUE

Whether the sale of the controlling interest in the Manila Hotel Corporation to a foreign bidder violates the Filipino First policy enshrined in Section 10, Article XII of the 1987 Constitution.

RULING

Yes. The Supreme Court granted the petition, ruling that the sale to a foreign entity was unconstitutional. The legal logic centers on the interpretation of Section 10, Article XII of the Constitution, which states that in the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos. The Court held that this provision is a mandatory, positive command which is self-executing and does not require implementing legislation to become operative.
The Court determined that the Manila Hotel is not just a commercial enterprise but a cultural treasure and part of the national patrimony. Its privatization falls squarely under the constitutional coverage of “the grant of rights, privileges, and concessions.” Consequently, the State, through its instrumentalities like GSIS, is constitutionally bound to give preference to qualified Filipino citizens or entities. Since petitioner, a domestic corporation, matched the highest bid, the constitutional preference was triggered. The respondents’ duty to award the shares to the Filipino bidder became ministerial. The Court emphasized that the constitutional provision is designed to conserve and develop the national patrimony for Filipino benefit, a policy that prevails over mere financial considerations in a privatization sale.