Anglo-Fil Trading Corporation vs. Lazaro

An exclusive stevedoring management contract awarded by a government agency pursuant to its statutory mandate is valid where it is reasonably related to public welfare, and operators holding mere hold-over permits have no vested property rights protected by the due process or non-impairment clauses; an ex-parte dissolution of an ex-parte restraining order does not constitute grave abuse of discretion.

The Philippine Ports Authority (PPA), created under Presidential Decree No. 505 (July 11, 1974) and later superseded by Presidential Decree No. 857 (December 23, 1975), is the government agency charged with the management and control of all ports throughout the country, with powers, duties, and jurisdiction over arrastre operations transferred from the Bureau of Customs. Stevedoring—the handling of cargo from the hold of a ship to the dock or barge, and the loading of outgoing cargo—is conducted by private contractors at government-approved rates. Prior to the controversy, twenty-three contractors competed at the Manila South Harbor under licenses that had long expired but were continued through temporary hold-over permits issued by PPA. PPA adopted a policy of horizontal and vertical integration, placing responsibility for stevedoring in one port on a single operator, pursuant to Letter of Instruction No. 1005-A (April 11, 1980) directing PPA to evaluate all recognized cargo-handling contractors and determine the most qualified.

The Manila South Harbor is a public port owned and operated by the State, where stevedoring services—the handling of cargo from the hold of a ship to the dock or barge, and the loading of outgoing cargo—are performed by private contractors at government-approved rates. Prior to the controversy, twenty-three contractors competed at the South Harbor, including petitioner Philippine Integrated Port Services, Inc. (PIPSI) and petitioners Anglo-Fil Trading Corporation, Aduana Stevedoring Corporation, Anda Stevedoring Corporation, Ben Paz Port Service, Inc., Manila Stevedoring and Arrastre Services, Inc., Waterfront Stevedoring and Arrastre Services, Inc., Vanguard Stevedoring and Arrastre Services, Inc., and Luvimin Stevedoring/Arrastre & Development Corporation (collectively Anglo-Fil, et al.). The licenses of these contractors had long expired before the Philippine Ports Authority (PPA) assumed control of ports under P.D. No. 505 and its successor P.D. No. 857, but they continued to operate on the strength of temporary hold-over permits issued by PPA pursuant to Memorandum Order No. 1 dated January 19, 1977, which allowed continuance of services "until such time when the PPA implements its own pertinent policy guidelines on the matter."

On May 4, 1976, the PPA Board of Directors passed Resolution No. 10 adopting policies on port administration, management, and operation, including the policy of horizontal and vertical integration of existing operators at each port, with the ultimate objective of having only one stevedoring contractor per port. This policy was reiterated in PPA Memorandum Order No. 21, series of 1977. On April 11, 1980, President Marcos issued Letter of Instruction No. 1005-A directing PPA to expeditiously evaluate all recognized cargo-handling contractors and determine the qualified contractor to ensure effective utilization of port facilities, prevent pilferage, and provide optimum services. The LOI was prompted by experience showing that "procedures of voluntary mergers, consolidation and/or bidding for the awarding or contracting of cargo-handling and other port-related services have heretofore proven ineffective and resulted in prolonged and unproductive wrangling, all to the detriment of efficient port operations and development." A subsequent presidential memorandum dated April 18, 1980 directed PPA to submit a report on the integration of stevedoring operations in Manila South Harbor, emphasizing the need for integration and citing heavy losses suffered by shippers and smuggling of textiles at the South Harbor.

In compliance, PPA created a Special Evaluation Committee on April 25, 1980, composed of officials from PPA's Legal Department, Commercial Development Division, and Harbor Operations Division, to evaluate existing operators and select the most qualified. The committee took into account factors with corresponding percentage weights: Productivity (25%), Equipment Requirement Capability (25%), Financial Capability (15%), Promptness in Paying Government Share (25%), and Compliance with Other PPA Requirements (20%). On April 28, 1980, the committee submitted its report recommending the award of an exclusive stevedoring contract to respondent Ocean Terminal Services, Inc. (OTSI), which received the highest rating of 95%. The recommendation was indorsed by respondent Primitivo Solis, Jr., Port Manager of Manila, to respondent Col. Eustaquio Baclig, Jr., who approved it on May 14, 1980. The President approved the recommendation on May 24, 1980.

On June 27, 1980, PPA and OTSI executed a management contract providing for a five-year exclusive operation of stevedoring services at the South Harbor, renewable for another five years, with OTSI to pay PPA ten percent (10%) of its gross stevedoring revenue. The contract's commencement was subject to PPA's determination, not earlier than two months from PPA Board approval, which was given on June 27, 1980. The President approved the contract on August 19, 1980. PIPSI and Anglo-Fil, et al. were informed by letters dated July 13 and 14, 1980 that OTSI would commence exclusive operations beginning August 27, 1980.

On July 23, 1980, PIPSI filed Civil Case No. 133477 in the Court of First Instance of Manila, Branch XXV, presided by respondent Judge Alfredo Lazaro, seeking nullification of the PPA-OTSI contract, annulment of the 10% gross revenue collection, and injunction with preliminary injunction. On July 29, 1980, the respondent court issued an ex-parte restraining order enjoining PPA and OTSI from implementing the contract, finding the allegations in the complaint sufficient in form and substance and directing maintenance of the status quo "until further orders from this court." On August 22, 1980, after Anglo-Fil, et al. filed their complaint in intervention, the court issued another ex-parte restraining order extending coverage to them. On August 30, 1980, PPA filed an urgent motion to lift the restraining orders citing long delay and countervailing public interest. On September 1, 1980, the respondent judge issued an order ex-parte dissolving and lifting the restraining orders "without prejudice to the Court's resolution on the propriety of issuing the writ of preliminary injunction." On September 5, 1980, PPA informed PIPSI that its hold-over authority was withdrawn effective September 7, 1980. On September 15, 1980, the respondent court denied the application for a writ of preliminary injunction and affirmed its September 1 order. Petitioners then filed the present petitions for certiorari, and KAMADA, a labor federation with thirteen member labor organizations, filed a petition to intervene, alleging its members would lose their jobs if the contract was implemented.

• Grave Abuse of Discretion: Petitioners argued that the lifting of the restraining orders ex-parte by the respondent judge was clearly affected with grave abuse of discretion amounting to lack of jurisdiction.
• Mootness of Injunction Suit: Petitioners contended that the lifting of the restraining order had rendered moot and academic the injunction case in the trial court.
• Absence of Public Interest: Petitioner PIPSI maintained that there were no considerations of public interest supporting the lifting; on the contrary, the lifting allegedly permitted a situation palpably against public interest, that is, confiscation of petitioners' business and those similarly situated.
• Non-Impairment Clause: Petitioners invoked the non-impairment clause, arguing that contracts entered into with local and foreign clients or customers would be impaired by the exclusive contract.
• Due Process: Anglo-Fil, et al. argued that although a permit to operate is a privilege, its withdrawal must comply with due process of law, and that not only property rights are involved but their very livelihood and right to live.
• Lulled into Complacency: Petitioner PIPSI asserted that the certification issued by PPA dated August 30, 1979 showed they were not only kept in the dark as to PPA's move to award OTSI an exclusive contract, but were actually lulled into believing their temporary permits were being given pending issuance of a Permit to Operate.
• Monopolies: Petitioners invoked the constitutional provision on monopolies and combinations in restraint of trade, seeking nullification of the management contract as violative thereof.
• Contempt: Anglo-Fil, et al. filed an urgent motion to cite PPA and OTSI in contempt on grounds including issuance of PPA-POM Memorandum No. 23, a letter denying a "non-existing" request for permission to operate, and refusal of PPA authorities to issue gate passes to KAMADA-affiliated stevedores.

• Proper Dissolution: PPA argued that the lifting of the restraining orders was intended to preserve the status quo pending resolution of the preliminary injunction, and that since the orders were issued without hearing or bond, dissolution was proper given they had been in force for one month with no early resolution in sight.
• No Jurisdictional Error in Dissolution: PPA contended that in dissolving an injunction already issued, the court cannot be considered as having acted without jurisdiction or in excess thereof even if dissolution was made without previous notice to the adverse party and without a hearing.
• No Notice and Hearing Required for Privileges: PPA argued that when the purpose of an administrative determination is to decide whether a right or privilege which an applicant does not possess shall be granted in the exercise of statutory discretion, notice and hearing are not necessary.
• Public Interest vs. Private Right: PPA maintained that the policy of integration in the award to OTSI is impressed with public interest, while what is involved as far as petitioners are concerned is merely their alleged right to operate stevedoring services—a property right the denial of which could easily be restored if the court decided petitioners are entitled to it.
• Assurance of No Displacement: OTSI and PPA assured the Court that none of the legitimate stevedores who had joined KAMADA would be displaced from work provided he joined PWUP, and that the CBA signed by OTSI with PWUP represented the best employment terms ever offered to stevedores at the South Harbor.

• Grave Abuse of Discretion: Whether the respondent judge acted with grave abuse of discretion when he lifted ex-parte the temporary restraining orders he had earlier issued also ex-parte.
• Validity of the Management Contract: Whether the PPA has the power and authority to award an exclusive stevedoring contract in favor of OTSI, and whether the PPA-OTSI Management Contract executed pursuant to P.D. No. 857 and LOI No. 1005-A is valid.
• Non-Impairment Clause: Whether the management contract violates the non-impairment clause by impairing contracts entered into by petitioners with local and foreign clients.
• Due Process: Whether the award of the exclusive contract to OTSI violated due process, resulting in a confiscatory effect on private property.
• Monopolies: Whether the management contract violates the constitutional provision on monopolies and combinations in restraint of trade.
• Anti-Graft Law: Whether the management contract is violative of the Anti-Graft Law.
• Contempt: Whether PPA and OTSI should be cited in contempt for alleged violations of the Court's October 21, 1980 order.

• Grave Abuse of Discretion: No. The ex-parte lifting of ex-parte restraining orders does not constitute grave abuse of discretion, as the orders were temporary in nature, issued without bond, and expressly terminable "until further orders from the court."
• Validity of the Management Contract: Yes. The PPA-OTSI Management Contract is valid and devoid of constitutional or legal infirmity, having been executed pursuant to P.D. No. 857 and LOI No. 1005-A in pursuit of public welfare through the rationalization and integration of port services.
• Non-Impairment Clause: No. The non-impairment clause does not override the police power of the State to enact regulations reasonably necessary for the general welfare, and petitioners' hold-over permits did not constitute protected contractual rights.
• Due Process: No. Petitioners operated on mere hold-over permits that were temporary and subject to subsequent PPA policy guidelines, constituting privileges rather than property rights; the selection procedure was non-arbitrary and received presidential approval.
• Monopolies: No. Private monopolies are not necessarily prohibited by the Constitution and may be allowed under state regulation when public interest requires, as in the case of exclusive franchises for public services and utilities.
• Anti-Graft Law: No. The contract was executed pursuant to law and presidential instructions to carry out government objectives; it caused no undue injury to petitioners who had no vested property rights, nor to the government, and OTSI's selection was based on reasonable, relevant criteria.
• Contempt: No. The October 21, 1980 order clearly referred only to KAMADA workers and did not specifically include the stevedoring operators; a party cannot be punished for contempt unless the forbidden or required act is clearly and exactly defined.

• Grave Abuse of Discretion: A restraining order is an order to maintain the subject of controversy in status quo until the hearing of an application for a temporary injunction. Unless extended, it ceases to be operative at the expiration of the time fixed by its terms. Where granted ex-parte, it may be dissolved upon motion before answer. The restraining orders here were issued ex-parte and without bond, and their duration was expressly "until further orders from the court." In lifting them, the respondent judge merely exercised the prerogative he had earlier reserved to himself. The need for notice and hearing in regard to such lifting was neither necessary nor mandatory. The subsequent hearing on the application for preliminary injunction, which was denied, confirmed that the trial court proceeded with the main suit. Precedents establish that dissolving ex-parte a restraining order also issued ex-parte is not grave abuse of discretion (Calaya vs. Ramos; Clarke vs. Philippine Ready Mix Concrete Co.; Larap Labor Union vs. Victoriano).

• Validity of the Management Contract: The Manila South Harbor is public property, and stevedoring operations are affected with public interest, subject to regulation for the public good. PPA enjoys the presumption of validity in favor of its official acts implementing its statutory charter. The integration of port services is reasonably related to the governmental objective of rationalizing cargo-handling, preventing pilferage, ensuring effective utilization of port facilities, and providing optimum services. A single contractor achieves economy of scale, maximum utilization of equipment and manpower, and easier supervision and revenue collection. The multiple-contractor system had bred cut-throat competition, inability to acquire modern facilities, non-observance of labor standards, and non-payment of PPA dues. The selection procedure was non-arbitrary: a special committee evaluated existing contractors using defined criteria (Productivity, Equipment Capability, Financial Capability, Promptness in Paying Government Share, Compliance with PPA Requirements), and OTSI received the highest rating of 95%. The award received explicit presidential approval, which further fortified its presumption of validity. Courts should not inquire into the wisdom of PPA's choice as long as the standards are reasonable and related to the purpose. The discretion in choosing the stevedoring contractor belongs by law to PPA.

• Non-Impairment Clause: The non-impairment clause is subservient to the police power of the State enacting public regulations for the general welfare. The laissez faire philosophy has no place in the Philippine constitutional scheme. The State may interfere with personal liberty, property, and business to promote the general welfare. Petitioners' hold-over permits were temporary by nature and subject to subsequent PPA policy guidelines, and thus did not constitute protected contracts whose impairment could be invoked.

• Due Process: Petitioners were operating on hold-over permits that were explicitly temporary and subject to subsequent policy guidelines, as stated in PPA Memorandum Order No. 1 dated January 19, 1977. The certification dated August 30, 1979 expressly stated that continued operation was "in accordance with PPA Memo Circular No. I, dated January 9, 1977," which reserved PPA's right to implement its own guidelines. What was given to petitioners was not a property right but a mere privilege, withdrawable when public welfare deems it best. The absence of arbitrariness or bad faith is manifest in the evaluation procedure, which used defined criteria and resulted in OTSI receiving the highest rating. The presidential approval of the award further negates any finding of due process violation.

• Monopolies: Section 2, Article XIV of the Constitution provides that the State shall regulate or prohibit private monopolies when the public interest so requires, and that no combinations in restraint of trade or unfair competition shall be allowed. Private monopolies are not necessarily prohibited; they may be allowed to exist under State regulation. A distinction prevails as regards combinations in restraint of trade and unfair competition, which are prohibited outright. By their nature, certain public services or public utilities must be given exclusive franchises if public interest is to be served, and such exclusive franchises are not violative of the law against monopolies.

• Anti-Graft Law: The contract was executed in pursuance of law and presidential instructions to carry out government objectives promoting public interest. It caused no "undue injury" to petitioners, who had no vested property rights entitled to protection. There was no undue injury to the government, nor any unwarranted benefit to OTSI, as the 10% gross revenue payment to PPA was a legitimate consideration. The rationalization and effective utilization of port facilities is to the advantage of the Government.

• Contempt: The October 21, 1980 order allowed "petitioners-intervenors" (meaning KAMADA workers) to work at the South Harbor pending resolution. There was no mention of the stevedoring operators and contractors being included and allowed to resume operations. The petitioners read into the order something which was not there. A party cannot be punished for contempt unless the act forbidden or required is clearly and exactly defined, so that there can be no reasonable doubt as to what specific act is forbidden or required.

• Nature of Restraining Orders — A restraining order is an order to maintain the subject of controversy in status quo until the hearing of an application for a temporary injunction. Unless extended by the court, it ceases to be operative at the expiration of the time fixed by its terms. Where granted ex-parte, it may be dissolved upon motion before answer. The grant, denial, or lifting of a restraining order does not pre-empt the court's power to decide the main action.

• Police Power and the Non-Impairment Clause — The non-impairment clause is subservient to the police power of the State. Public welfare lies at the bottom of regulatory enactments, and the State may interfere with personal liberty, property, and business to promote the general welfare. The laissez faire philosophy has no place in the Philippine constitutional scheme. All contract and property rights are held subject to the fair exercise of police power.

• Privilege vs. Property Right in Government Permits — A hold-over permit to operate a public service, being temporary and subject to subsequent policy guidelines of the issuing authority, constitutes a mere privilege and not a vested property right. Its withdrawal does not require notice and hearing when the purpose of the administrative determination is to decide whether a privilege shall be granted or withheld in the exercise of statutory discretion.

• Private Monopolies Under State Regulation — Private monopolies are not necessarily prohibited by the Constitution. They may be allowed to exist under State regulation when public interest requires. Exclusive franchises for public services and utilities are not violative of the law against monopolies. A distinction prevails between private monopolies (subject to regulation or prohibition) and combinations in restraint of trade and unfair competition (prohibited outright).

• Non-Interference in Administrative Matters — Unless the case justifies it, the judiciary will not interfere in purely administrative matters. Discretionary power vested in an administrative body, in the absence of arbitrariness and grave abuse going beyond statutory authority, is not subject to the contrary judgment of the courts. Courts have no supervisory power over administrative proceedings involving the exercise of judgment or discretion and findings of fact.

• Presumption of Validity of Presidential Approvals — When a challenged administrative action is encased in the armor of explicit presidential approval, the burden of persuasion becomes much heavier. If overturning a department head's decision is attended with difficulty, overturning one with presidential approval is even more so.

• Protection of Labor as Social Justice — The absorption of bona fide displaced workers is an act of social justice. When a person has no property, his job may be his only possession or means of livelihood, and he should be protected against arbitrary and unjust deprivation of his job. No bona fide stevedore or worker should be deprived of employment he used to enjoy simply because of the execution and implementation of a management contract.

• "A restraining order is an order to maintain the subject of controversy in status quo until the hearing of an application for a temporary injunction. Unless extended by the court, it ceases to be operative at the expiration of the time fixed by its terms. In cases where it has been granted ex-parte, it may be dissolved upon motion before answer." — This passage defines the nature and duration of restraining orders, establishing the doctrinal basis for the Court's finding that ex-parte dissolution of an ex-parte restraining order is not grave abuse of discretion.

• "Public welfare, then, lies at the bottom of the enactment of said law, and the state in order to promote the general welfare may interfere with personal liberty, with property, and with business and occupations." — This formulation articulates the supremacy of police power over the non-impairment clause and individual property and contract rights, drawing on Philippine and American jurisprudence.

• "Clearly, all hold-over permits were by nature temporary and subject to subsequent policy guidelines as may be implemented by PPA. Such should have served as sufficient notice to petitioners that, at any time, their authorities may be terminated." — This passage establishes the distinction between a privilege (hold-over permit) and a property right, and the consequences for due process analysis when the government withdraws such a privilege in the exercise of statutory discretion.

• "This absorption of bona fide workers is an act of social justice. When a person has no property, his job may possibly be his only possession or means of livelihood. Therefore, he should be protected against any arbitrary and unjust deprivation of his job." — This articulates the constitutional policy of protection to labor and social justice, anchoring the Court's directive that bona fide stevedores must not be displaced by the exclusive contract's implementation.

• Calaya vs. Ramos, 79 Phil. 640 — Followed. Establishes that dissolving ex-parte a restraining order also issued ex-parte is not grave abuse of discretion.
• Clarke vs. Philippine Ready Mix Concrete Co., 88 Phil. 460 — Followed. Same principle regarding ex-parte dissolution of ex-parte restraining orders.
• Larap Labor Union vs. Victoriano, 97 Phil. 435 — Followed. Same principle regarding ex-parte dissolution.
• Alalayan vs. National Power Corporation, 24 SCRA 172 — Followed. Police power may interfere with personal liberty, property, and business for general welfare.
• Ermita-Malate Hotel and Motel Owners Association vs. City Mayor, 20 SCRA 849 — Followed. Same principle on police power and public welfare.
• Angara vs. Electoral Commission, 63 Phil. 139 — Cited. Defines judicial review as the power to determine conflicting claims of authority and establish constitutional rights, not superiority over other departments.
• Agricultural Credit and Cooperative Financing Administration vs. Confederation of Unions, 30 SCRA 649 — Cited. The laissez faire philosophy has no place in the Philippine constitutional scheme; government enjoys wide latitude in promoting public welfare.
• Lim vs. Secretary, 34 SCRA 751 — Cited. The burden of persuasion is heavier when a challenged action bears explicit presidential approval.
• Monark International, Inc. vs. Noriel, 83 SCRA 114 — Cited. Courts will not interfere in purely administrative matters unless justified.
• Meralco Securities Corporation vs. Savellano, 117 SCRA 804 — Cited. Discretionary power of administrative bodies is not subject to contrary judicial control absent arbitrariness or grave abuse.
• Pajo vs. Ago and Ortiz, 108 Phil. 905 — Cited. Courts have no supervisory power over administrative proceedings involving exercise of judgment or discretion.
• Bondoc vs. People's Bank and Trust Company, 103 SCRA 599 — Cited. A worker's job may be his only possession and should be protected against arbitrary deprivation.
• Lee Yick Hon vs. Collector of Customs, 41 Phil. 548 — Cited. Contempt requires that the forbidden or required act be clearly and exactly defined.
• City of Manila vs. Chinese Community of Manila, 40 Phil. 340 — Cited. Courts have authority to inquire whether expropriation serves public purpose.

• Presidential Decree No. 505 (July 11, 1974) — Created the Philippine Ports Authority, charged with management and control of all ports. Superseded by P.D. No. 857.
• Presidential Decree No. 857 (December 23, 1975) — Superseded P.D. No. 505; transferred the powers, duties, and jurisdiction of the Bureau of Customs concerning arrastre operations to PPA. Served as the statutory basis for PPA's authority to award the exclusive management contract.
• Letter of Instruction No. 1005-A (April 11, 1980) — Directed PPA to expeditiously evaluate all recognized cargo-handling contractors and determine the qualified contractor to ensure effective utilization of port facilities, prevent pilferage, and provide optimum services. Its whereas clauses articulated the public interest justifying integration of port services.
• Section 2, Article XIV, 1973 Constitution — Provides that the State shall regulate or prohibit private monopolies when the public interest so requires, and that no combinations in restraint of trade or unfair competition shall be allowed. Applied to hold that private monopolies are not necessarily prohibited and may be allowed under state regulation.
• Section 9, Article II, 1973 Constitution — Protection to labor and security of tenure. Applied to mandate absorption of bona fide displaced port workers in the integration scheme as an act of social justice.

Concepcion, Jr., Guerrero, Abad Santos, Melencio-Herrera, Plana, Escolin, and Relova, JJ., concurred. Fernando, C.J., concurred and added a brief statement emphasizing that the constitutional rights of laborers belonging to other labor organizations must be accorded full respect, reaffirming the resolution of December 9, 1980 requiring that KAMADA workers continue rendering stevedoring services irrespective of union affiliation. Makasiar and Aquino, JJ., concurred in the result. De Castro, J., was on leave. Vasquez, J., took no part.

• Teehankee, J. — Dissented on the ground that the majority judgment prematurely pre-judged, in a special civil action of certiorari limited to whether the respondent judge acted with grave abuse of discretion in lifting the temporary restraining order, the serious and substantive questions raised by petitioners regarding nullification of the exclusive stevedoring contract. The dissent noted that these serious questions involve factual matters requiring presentation and evaluation of evidence and determination of facts and figures, which appear to have been preempted and foreclosed by the majority when the only issue properly before the Court was the propriety of the judge's ex-parte lifting of the restraining order. The dissent reserved the right to file an extended opinion.