G.R. No. 212686 , September 28, 2015
SERGIO R. OSMENA III, PETITIONER, VS. POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION, EMMANUEL R. LEDESMA, JR., SPC POWER CORPORATION AND THERMA POWER VISAYAS, INC., RESPONDENTS.

FACTS

The Power Sector Assets and Liabilities Management Corporation (PSALM), a government corporation created under the EPIRA Law, privatized the 55-MW Naga Land-Based Gas Turbine (LBGT) power plant in 2009 through a negotiated sale after a failed bidding. SPC Power Corporation (SPC) acquired the LBGT and entered into a Land Lease Agreement (LBGT-LLA) for the underlying land, expiring on January 29, 2020. The LBGT-LLA contained a provision granting SPC a “right to top” any sale or lease of property in the vicinity not part of the leased premises.
In 2013, PSALM commenced the bidding for the sale of the separate 153.1-MW Naga Power Plant Complex (NPPC), located in the same compound. Therma Power Visayas, Inc. (TPVI) was declared the highest bidder. PSALM notified SPC of TPVI’s winning bid and advised that SPC could exercise its right to top under the LBGT-LLA, with the lease term to be governed by the LBGT-LLA (i.e., expiring in 2020). SPC exercised its right to top but argued the lease term should be 25 years as stipulated in the draft NPPC Land Lease Agreement provided in the bid documents. The Office of the Government Corporate Counsel initially upheld PSALM’s position but later recommended that the right to top on a sale should be governed by the NPPC transaction documents.
PSALM’s Board subsequently declared SPC as the winning bidder for the NPPC, issued a Notice of Award, executed the sale and lease agreements, and turned over the properties to SPC. Senator Sergio R. Osmeña III filed a petition directly with the Supreme Court seeking to enjoin the sale to SPC and to declare the “right to top” provision in the LBGT-LLA void for being contrary to public policy.

ISSUE

1. Whether the petitioner has legal standing to file the petition.
2. Whether the “right to top” provision in the LBGT-LLA is void for being contrary to law and public policy.

RULING

1. On Legal Standing: The Supreme Court held that the petitioner, as a Senator, has legal standing to file the petition. The Court recognized that legislators have a cognizable interest in restraining officials from enforcing laws allegedly passed in contravention of the Constitution or statutes. Furthermore, the petition raises issues of transcendental importance involving the privatization of government assets and the observance of statutory mandates like the EPIRA Law, which justifies relaxing the procedural requirement of standing.
2. On the Validity of the “Right to Top” Provision: The Supreme Court upheld the validity of the “right to top” provision. The Court ruled that:
* The provision is not a mere gratuitous option but an integral part of the reciprocal obligations in the LBGT-LLA, supported by the consideration for the entire lease contract. It is a valid contractual stipulation that binds the parties.
* The provision does not violate the policy of public bidding under the EPIRA Law. The right was granted as a result of a prior public bidding (for the LBGT) and its exercise was subject to the condition that SPC matches the highest bid in the subsequent public bidding for the NPPC. This process ensures the government receives the same price and terms obtained through competitive bidding.
* The right of first refusal (or right to top) is not per se void, especially when the holder has an existing interest in the property. SPC, as the lessee of the adjacent land and operator of the LBGT plant within the same compound, has a legitimate interest in the contiguous NPPC property, making the preferential right reasonable.
The petition was dismissed. The Court found no grave abuse of discretion on the part of PSALM in implementing the right to top provision, which was a valid contractual right exercised in accordance with the bidding rules.