G.R. No.

96541 August 24, 1993
DEAN JOSE JOYA, CARMEN GUERRERO NAKPIL, ARMIDA SIGUION REYNA, PROF.
RICARTE M. PURUGANAN, IRMA POTENCIANO, ADRIAN CRISTOBAL, INGRID
SANTAMARIA, CORAZON FIEL, AMBASSADOR E. AGUILAR CRUZ, FLORENCIO R.
JACELA, JR., MAURO MALANG, FEDERICO AGUILAR ALCUAZ, LUCRECIA R. URTULA,
SUSANO GONZALES, STEVE SANTOS, EPHRAIM SAMSON, SOLER SANTOS, ANG KIU
KOK, KERIMA POLOTAN, LUCRECIA KASILAG, LIGAYA DAVID PEREZ, VIRGILIO
ALMARIO, LIWAYWAY A. ARCEO, CHARITO PLANAS, HELENA BENITEZ, ANNA
MARIA L. HARPER, ROSALINDA OROSA, SUSAN CALO MEDINA, PATRICIA RUIZ,
BONNIE RUIZ, NELSON NAVARRO, MANDY NAVASERO, ROMEO SALVADOR,
JOSEPHINE DARANG, and PAZ VETO PLANAS, petitioners,
vs.
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG), CATALINO
MACARAIG, JR., in his official capacity, and/or the Executive Secretary, and
CHAIRMAN MATEO A.T. CAPARAS, respondents.
On 15 August 1990, PCGG, through Chairman Caparas, representing the Government
of the Republic of the Philippines, signed the Consignment Agreement with Christie's
of New York. According to the agreement, PCGG shall consign to CHRISTIE'S for sale
at public auction the eighty-two (82) Old Masters Paintings then found at the
Metropolitan Museum of Manila as well as the silverware contained in seventy-one
(71) cartons in the custody of the Central Bank of the Philippines, and such other
property as may subsequently be identified by PCGG and accepted by CHRISTIE'S to
be subject to the provisions of the agreement. 1
On 26 October 1990, the Commission on Audit (COA) through then Chairman Eufemio
C. Domingo submitted to President Aquino the audit findings and observations of
COA on the Consignment Agreement of 15 August 1990 to the effect that: (a) the
authority of former PCGG Chairman Caparas to enter into the Consignment
Agreement was of doubtful legality; (b) the contract was highly disadvantageous to
the government; (c) PCGG had a poor track record in asset disposal by auction in the
U.S.; and, (d) the assets subject of auction were historical relics and had cultural
significance, hence, their disposal was prohibited by law. 2

BELLOSILLO, J.:
All thirty-five (35) petitioners in this Special Civil Action for Prohibition and
Mandamus with Prayer for Preliminary Injunction and/or Restraining Order seek to
enjoin the Presidential Commission on Good Government (PCGG) from proceeding
with the auction sale scheduled on 11 January 1991 by Christie's of New York of the
Old Masters Paintings and 18th and 19th century silverware seized from Malacañang
and the Metropolitan Museum of Manila and placed in the custody of the Central
Bank.
The antecedents: On 9 August 1990, Mateo A.T. Caparas, then Chairman of PCGG,
wrote then President Corazon C. Aquino, requesting her for authority to sign the
proposed Consignment Agreement between the Republic of the Philippines through
PCGG and Christie, Manson and Woods International, Inc. (Christie's of New York, or
CHRISTIE'S) concerning the scheduled sale on 11 January 1991 of eighty-two (82) Old
Masters Paintings and antique silverware seized from Malacañang and the
Metropolitan Museum of Manila alleged to be part of the ill-gotten wealth of the late
President Marcos, his relatives and cronies.
On 14 August 1990, then President Aquino, through former Executive Secretary
Catalino Macaraig, Jr., authorized Chairman Caparas to sign the Consignment
Agreement allowing Christie's of New York to auction off the subject art pieces for
and in behalf of the Republic of the Philippines.
On 15 November 1990, PCGG through its new Chairman David M. Castro, wrote
President Aquino defending the Consignment Agreement and refuting the allegations
of COA Chairman Domingo.3 On the same date, Director of National Museum Gabriel
S. Casal issued a certification that the items subject of the Consignment Agreement
did not fall within the classification of protected cultural properties and did not
specifically qualify as part of the Filipino cultural heritage. 4 Hence, this petition
originally filed on 7 January 1991 by Dean Jose Joya, Carmen Guerrero Nakpil, Armida
Siguion Reyna, Prof. Ricarte M. Puruganan, Irma Potenciano, Adrian Cristobal, Ingrid
Santamaria, Corazon Fiel, Ambassador E. Aguilar Cruz, Florencio R. Jacela, Jr., Mauro
Malang, Federico Aguilar Alcuaz, Lucrecia R. Urtula, Susano Gonzales, Steve Santos,
Ephraim Samson, Soler Santos, Ang Kiu Kok, Kerima Polotan, Lucrecia Kasilag, Ligaya
David Perez, Virgilio Almario and Liwayway A. Arceo.
After the oral arguments of the parties on 9 January 1991, we issued immediately our
resolution denying the application for preliminary injunction to restrain the
scheduled sale of the artworks on the ground that petitioners had not presented a
clear legal right to a restraining order and that proper parties had not been
impleaded.
On 11 January 1991, the sale at public auction proceeded as scheduled and the
proceeds of $13,302,604.86 were turned over to the Bureau of Treasury.5
On 5 February 1991, on motion of petitioners, the following were joined as additional
petitioners: Charito Planas, Helena Benitez, Ana Maria L. Harper, Rosalinda Orosa,
Susan Carlo Medina, Patricia Ruiz, Bonnie Ruiz, Nelson Navarro, Mandy Navasero,
Romeo Salvador, Josephine Darang and Paz Veto Planas.
On the other hand, Catalino Macaraig, Jr., in his capacity as former Executive
Secretary, the incumbent Executive Secretary, and Chairman Mateo A.T. Caparas
were impleaded as additional respondents.
Petitioners raise the following issues: (a) whether petitioners have legal standing to
file the instant petition; (b) whether the Old Masters Paintings and antique silverware
are embraced in the phrase "cultural treasure of the nation" which is under the
protection of the state pursuant to the 1987 Constitution and/or "cultural properties"
contemplated under R.A. 4846, otherwise known as "The Cultural Properties
Preservation and Protection Act;" (c) whether the paintings and silverware are
properties of public dominion on which can be disposed of through the joint
concurrence of the President and Congress;
(d) whether respondent, PCGG has the jurisdiction and authority to enter into an
agreement with Christie's of New York for the sale of the artworks; (e) whether, PCGG
has complied with the due process clause and other statutory requirements for the
exportation and sale of the subject items; and, (f) whether the petition has become
moot and academic, and if so, whether the above issues warrant resolution from this
Court.
The issues being interrelated, they will be discussed jointly hereunder. However,
before proceeding, we wish to emphasize that we admire and commend petitioners'
zealous concern to keep and preserve within the country great works of art by well-
known old masters. Indeed, the value of art cannot be gainsaid. For, by serving as a
creative medium through which man can express his innermost thoughts and
unbridled emotions while, at the same time, reflecting his deep-seated ideals, art has
become a true expression of beauty, joy, and life itself. Such artistic creations give us
insights into the artists' cultural heritage — the historic past of the nation and the era
to which they belong — in their triumphant, glorious, as well as troubled and
turbulent years. It must be for this reason that the framers of the 1987 Constitution
mandated in Art. XIV, Sec. 14, that is the solemn duty of the state to "foster the
preservation, enrichment, and dynamic evolution of a Filipino national culture based
on the principle of unity in diversity in a climate of free artistic and intellectual
expression." And, in urging this Court to grant their petition, petitioners invoke this
policy of the state on the protection of the arts.
But, the altruistic and noble purpose of the petition notwithstanding, there is that
basic legal question which must first be resolved: whether the instant petition
complies with the legal requisites for this Court to exercise its power of judicial review
over this case.
The rule is settled that no question involving the constitutionality or validity of a law
or governmental act may be heard and decided by the court unless there is
compliance with the legal requisites for judicial inquiry, namely: that the question
must be raised by the proper party; that there must be an actual case or controversy;
that the question must be raised at the earliest possible opportunity; and, that the
decision on the constitutional or legal question must be necessary to the
determination of the case itself.6 But the most important are the first two (2)
requisites.
On the first requisite, we have held that one having no right or interest to protect
cannot invoke the jurisdiction of the court as party-plaintiff in an
action.7 This is premised on Sec. 2, Rule 3, of the Rules of Court which provides that
every action must be prosecuted and defended in the name of the real party-in-
interest, and that all persons having interest in the subject of the action and in
obtaining the relief demanded shall be joined as plaintiffs. The Court will exercise its
power of judicial review only if the case is brought before it by a party who has the
legal standing to raise the constitutional or legal question. "Legal standing" means a
personal and substantial interest in the case such that the party has sustained or will
sustain direct injury as a result of the governmental act that is being challenged. The
term "interest" is material interest, an interest in issue and to be affected by the
decree, as distinguished from mere interest in the question involved, or a mere
incidental interest.8 Moreover, the interest of the party plaintiff must be personal
and not one based on a desire to vindicate the constitutional right of some third and
related party. 9
There are certain instances however when this Court has allowed exceptions to the
rule on legal standing, as when a citizen brings a case for mandamus to procure the
enforcement of a public duty for the fulfillment of a public right recognized by the
Constitution, 10 and when a taxpayer questions the validity of a governmental act
authorizing the disbursement of public funds. 11
Petitioners claim that as Filipino citizens, taxpayers and artists deeply concerned with
the preservation and protection of the country's artistic wealth, they have the legal
personality to restrain respondents Executive Secretary and PCGG from acting
contrary to their public duty to conserve the artistic creations as mandated by the
1987 Constitution, particularly Art. XIV, Secs. 14 to 18, on Arts and Culture, and R.A.
4846 known as "The Cultural Properties Preservation and Protection Act," governing
the preservation and disposition of national and important cultural properties.
Petitioners also anchor their case on the premise that the paintings and silverware
are public properties collectively owned by them and by the people in general to view
and enjoy as great works of art. They allege that with the unauthorized act of PCGG
in selling the art pieces, petitioners have been deprived of their right to public
property without due process of law in violation of the Constitution. 12
Petitioners' arguments are devoid of merit. They lack basis in fact and in law. They
themselves allege that the paintings were donated by private persons from different
parts of the world to the Metropolitan Museum of Manila Foundation, which is a non-
profit and non-stock corporations established to promote non-Philippine arts. The
foundation's chairman was former First Lady Imelda R. Marcos, while its president
was Bienvenido R. Tantoco. On this basis, the ownership of these paintings legally
belongs to the foundation or corporation or the members thereof, although the
public has been given the opportunity to view and appreciate these paintings when
they were placed on exhibit.
Similarly, as alleged in the petition, the pieces of antique silverware were given to the
Marcos couple as gifts from friends and dignitaries from foreign countries on their
silver wedding and anniversary, an occasion personal to them. When the Marcos
administration was toppled by the revolutionary government, these paintings and
silverware were taken from Malacañang and the Metropolitan Museum of Manila
and transferred to the Central Bank Museum. The confiscation of these properties by
the Aquino administration however should not be understood to mean that the
ownership of these paintings has automatically passed on the government without
complying with constitutional and statutory requirements of due process and just
compensation. If these properties were already acquired by the government, any
constitutional or statutory defect in their acquisition and their subsequent
disposition must be raised only by the proper parties — the true owners thereof —
whose authority to recover emanates from their proprietary rights which are
protected by statutes and the Constitution. Having failed to show that they are the
legal owners of the artworks or that the valued pieces have become publicly owned,
petitioners do not possess any clear legal right whatsoever to question their alleged
unauthorized disposition.
Further, although this action is also one of mandamus filed by concerned citizens, it
does not fulfill the criteria for a mandamus suit. In Legaspi v. Civil Service
Commission, 13 this Court laid down the rule that a writ of mandamus may be issued
to a citizen only when the public right to be enforced and the concomitant duty of
the state are unequivocably set forth in the Constitution. In the case at bar,
petitioners are not after the fulfillment of a positive duty required of respondent
officials under the 1987 Constitution. What they seek is the enjoining of an official
act because it is constitutionally infirmed. Moreover, petitioners' claim for the
continued enjoyment and appreciation by the public of the artworks is at most a
privilege and is unenforceable as a constitutional right in this action for mandamus.
Neither can this petition be allowed as a taxpayer's suit. Not every action filed by a
taxpayer can qualify to challenge the legality of official acts done by the government.
A taxpayer's suit can prosper only if the governmental acts being questioned involve
disbursement of public funds upon the theory that the expenditure of public funds
by an officer of the state for the purpose of administering an unconstitutional act
constitutes a misapplication of such funds, which may be enjoined at the request of
a taxpayer. 14 Obviously, petitioners are not challenging any expenditure involving
public funds but the disposition of what they allege to be public properties. It is
worthy to note that petitioners admit that the paintings and antique silverware were
acquired from private sources and not with public money.
Anent the second requisite of actual controversy, petitioners argue that this case
should be resolved by this Court as an exception to the rule on moot and academic
cases; that although the sale of the paintings and silver has long been consummated
and the possibility of retrieving the treasure trove is nil, yet the novelty and
importance of the issues raised by the petition deserve this Court's attention. They
submit that the resolution by the Court of the issues in this case will establish future
guiding principles and doctrines on the preservation of the nation's priceless artistic
and cultural possessions for the benefit of the public as a whole. 15
For a court to exercise its power of adjudication, there must be an actual case of
controversy — one which involves a conflict of legal rights, an assertion of opposite
legal claims susceptible of judicial resolution; the case must not be moot or academic
or based on extra-legal or other similar considerations not cognizable by a court of
justice. 16 A case becomes moot and academic when its purpose has become
stale, 17 such as the case before us. Since the purpose of this petition for prohibition
is to enjoin respondent public officials from holding the auction sale of the artworks
on a particular date — 11 January 1991 — which is long past, the issues raised in the
petition have become moot and academic.
At this point, however, we need to emphasize that this Court has the discretion to
take cognizance of a suit which does not satisfy the requirements of an actual case
or legal standing when paramount public interest is involved. 18We find however that
there is no such justification in the petition at bar to warrant the relaxation of the
rule.
Section 2 of R.A. 4846, as amended by P.D. 374, declares it to be the policy of the
state to preserve and protect the important cultural properties and national cultural
treasures of the nation and to safeguard their intrinsic value. As to what kind of
artistic and cultural properties are considered by the State as involving public interest
which should therefore be protected, the answer can be gleaned from reading of the
reasons behind the enactment of R.A. 4846:
WHEREAS, the National Museum has the difficult task, under
existing laws and regulations, of preserving and protecting the
cultural properties of the nation;
 WHEREAS, inumerable sites all over the country have since been
excavated for cultural relics, which have passed on to private
hands, representing priceless cultural treasure that properly
belongs to the Filipino people as their heritage;
WHEREAS, it is perhaps impossible now to find an area in the
Philippines, whether government or private property, which has
not been disturbed by commercially-minded diggers and collectors,
literally destroying part of our historic past;
WHEREAS, because of this the Philippines has been charged as
incapable of preserving and protecting her cultural legacies;
registration, designation or classification, with the aid of competent experts, of
important cultural properties and national cultural treasures. 21 Findings of
administrative officials and agencies who have acquired expertise because their
jurisdiction is confined to specific matters are generally accorded not only respect
but at times even finality if such findings are supported by substantial evidence and
are controlling on the reviewing authorities because of their acknowledged expertise
in the fields of specialization to which they are assigned. 22
In view of the foregoing, this Court finds no compelling reason to grant the petition.
Petitioners have failed to show that respondents Executive Secretary and PCGG
exercised their functions with grave abuse of discretion or in excess of their
jurisdiction.

WHEREAS, the commercialization of Philippine relics from the WHEREFORE, for lack of merit, the petition for prohibition and mandamus
contact period, the Neolithic Age, and the Paleolithic Age, has is DISMISSED.
reached a point perilously placing beyond reach of savants the
study and reconstruction of Philippine prehistory; and SO ORDERED.

WHEREAS, it is believed that more stringent regulation on Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr.,
movement and a limited form of registration of important cultural Romero, Nocon, Melo, Quiason, Puno and Vitug, JJ., concur.
properties and of designated national cultural treasures is
necessary, and that regardless of the item, any cultural property
exported or sold locally must be registered with the National
Museum to control the deplorable situation regarding our national
cultural properties and to implement the Cultural Properties Law
(emphasis supplied).

Clearly, the cultural properties of the nation which shall be under the protection of
the state are classified as the "important cultural properties" and the "national
cultural treasures." "Important cultural properties" are cultural properties which
have been singled out from among the innumerable cultural properties as having
exceptional historical cultural significance to the Philippines but are not sufficiently
outstanding to merit the classification of national cultural treasures. 19 On the other
hand, a "national cultural treasures" is a unique object found locally, possessing
outstanding historical, cultural, artistic and/or scientific value which is highly
significant and important to this country and nation. 20 This Court takes note of the
certification issued by the Director of the Museum that the Italian paintings and
silverware subject of this petition do not constitute protected cultural properties and
are not among those listed in the Cultural Properties Register of the National
Museum.

We agree with the certification of the Director of the Museum. Under the law, it is
the Director of the Museum who is authorized to undertake the inventory,
G.R. No. 155001 | May 5, 2003
DEMOSTHENES P. AGAN, JR., JOSEPH B. CATAHAN, JOSE MARI B. REUNILLA, MANUEL
ANTONIO B. BOÑE, MAMERTO S. CLARA, REUEL E. DIMALANTA, MORY V. DOMALAON,
CONRADO G. DIMAANO, LOLITA R. HIZON, REMEDIOS P. ADOLFO, BIENVENIDO C. HILARIO,
MIASCOR WORKERS UNION - NATIONAL LABOR UNION (MWU-NLU), and PHILIPPINE
AIRLINES EMPLOYEES ASSOCIATION (PALEA), petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT
AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS and SECRETARY
LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and
Communications, respondents,
MIASCOR GROUNDHANDLING CORPORATION, DNATA-WINGS AVIATION SYSTEMS
CORPORATION, MACROASIA-EUREST SERVICES, INC., MACROASIA-MENZIES AIRPORT
SERVICES CORPORATION, MIASCOR CATERING SERVICES CORPORATION, MIASCOR
AIRCRAFT MAINTENANCE CORPORATION, and MIASCOR LOGISTICS
CORPORATION, petitioners-in-intervention,
PUNO, J.:
Petitioners and petitioners-in-intervention filed the instant petitions for prohibition under Rule
65 of the Revised Rules of Court seeking to prohibit the Manila International Airport Authority
(MIAA) and the Department of Transportation and Communications (DOTC) and its Secretary
from implementing the following agreements executed by the Philippine Government through
the DOTC and the MIAA and the Philippine International Air Terminals Co., Inc. (PIATCO): (1)
the Concession Agreement signed on July 12, 1997, (2) the Amended and Restated Concession
Agreement dated November 26, 1999, (3) the First Supplement to the Amended and Restated
Concession Agreement dated August 27, 1999, (4) the Second Supplement to the Amended
and Restated Concession Agreement dated September 4, 2000, and (5) the Third Supplement
to the Amended and Restated Concession Agreement dated June 22, 2001 (collectively, the
PIATCO Contracts).
The facts are as follows:
In August 1989, the DOTC engaged the services of Aeroport de Paris (ADP) to conduct
a comprehensive study of the Ninoy Aquino International Airport (NAIA) and
determine whether the present airport can cope with the traffic development up to
the year 2010. The study consisted of two parts: first, traffic forecasts, capacity of
existing facilities, NAIA future requirements, proposed master plans and
development plans; and second, presentation of the preliminary design of the
passenger terminal building. The ADP submitted a Draft Final Report to the DOTC in
December 1989.
Some time in 1993, six business leaders consisting of John Gokongwei, Andrew
Gotianun, Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with then
President Fidel V. Ramos to explore the possibility of investing in the construction
and operation of a new international airport terminal. To signify their commitment
to pursue the project, they formed the Asia's Emerging Dragon Corp. (AEDC) which
was registered with the Securities and Exchange Commission (SEC) on September 15,
1993.
On October 5, 1994, AEDC submitted an unsolicited proposal to the Government
through the DOTC/MIAA for the development of NAIA International Passenger
Terminal III (NAIA IPT III) under a build-operate-and-transfer arrangement pursuant
to RA 6957 as amended by RA 7718 (BOT Law).1
On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting the
Prequalification Bids and Awards Committee (PBAC) for the implementation of the NAIA IPT III
project.
On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal of AEDC to the
National Economic and Development Authority (NEDA). A revised proposal, however, was
forwarded by the DOTC to NEDA on December 13, 1995. On January 5, 1996, the NEDA
Investment Coordinating Council (NEDA ICC) – Technical Board favorably endorsed the project
to the ICC – Cabinet Committee which approved the same, subject to certain conditions, on
January 19, 1996. On February 13, 1996, the NEDA passed Board Resolution No. 2 which
approved the NAIA IPT III project.
On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of an
invitation for competitive or comparative proposals on AEDC's unsolicited proposal, in
accordance with Sec. 4-A of RA 6957, as amended. The alternative bidders were required to
submit three (3) sealed envelopes on or before 5:00 p.m. of September 20, 1996. The first
envelope should contain the Prequalification Documents, the second envelope the Technical
Proposal, and the third envelope the Financial Proposal of the proponent.
On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing the availment of the Bid
Documents and the submission of the comparative bid proposals. Interested firms were
permitted to obtain the Request for Proposal Documents beginning June 28, 1996, upon
submission of a written application and payment of a non-refundable fee of P50,000.00
(US$2,000).
The Bid Documents issued by the PBAC provided among others that the proponent must have
adequate capability to sustain the financing requirement for the detailed engineering, design,
construction, operation, and maintenance phases of the project. The proponent would be
evaluated based on its ability to provide a minimum amount of equity to the project, and its
capacity to secure external financing for the project.
On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders to a pre-bid
conference on July 29, 1996.
On August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents. The
following amendments were made on the Bid Documents:
 a. Aside from the fixed Annual Guaranteed Payment, the proponent shall include in
its financial proposal an additional percentage of gross revenue share of the
Government, as follows:
i. First 5 years
ii. Next 10 years
iii. Next 10 years
b. The amount of the fixed Annual Guaranteed Payment shall be subject of the price
challenge. Proponent may offer an Annual Guaranteed Payment which need not be
of equal amount, but payment of which shall start upon site possession.
c. The project proponent must have adequate capability to sustain the financing
requirement for the detailed engineering, design, construction, and/or operation
and maintenance phases of the project as the case may be. For purposes of pre-
qualification, this capability shall be measured in terms of:
i. Proof of the availability of the project proponent and/or the consortium
to provide the minimum amount of equity for the project; and
ii. a letter testimonial from reputable banks attesting that the project
proponent and/or the members of the consortium are banking with them,
that the project proponent and/or the members are of good financial
standing, and have adequate resources.
d. The basis for the prequalification shall be the proponent's compliance with the
minimum technical and financial requirements provided in the Bid Documents and
the IRR of the BOT Law. The minimum amount of equity shall be 30% of the Project
Cost.
e. Amendments to the draft Concession Agreement shall be issued from time to time.
Said amendments shall only cover items that would not materially affect the
preparation of the proponent's proposal.
On August 29, 1996, the Second Pre-Bid Conference was held where certain clarifications were
made. Upon the request of prospective bidder People's Air Cargo & Warehousing Co., Inc
(Paircargo), the PBAC warranted that based on Sec. 11.6, Rule 11 of the Implementing Rules
and Regulations of the BOT Law, only the proposed Annual Guaranteed Payment submitted by
the challengers would be revealed to AEDC, and that the challengers' technical and financial
proposals would remain confidential. The PBAC also clarified that the list of revenue sources
contained in Annex 4.2a of the Bid Documents was merely indicative and that other revenue
sources may be included by the proponent, subject to approval by DOTC/MIAA. Furthermore,
the PBAC clarified that only those fees and charges denominated as Public Utility Fees would
be subject to regulation, and those charges which would be actually deemed Public Utility Fees
could still be revised, depending on the outcome of PBAC's query on the matter with the
Department of Justice.
In September 1996, the PBAC issued Bid Bulletin No. 5, entitled "Answers to the Queries of
5.0% PAIRCARGO as Per Letter Dated September 3 and 10, 1996." Paircargo's queries and the PBAC's
responses were as follows:
7.5%
10.0% 1. It is difficult for Paircargo and Associates to meet the required minimum equity
requirement as prescribed in Section 8.3.4 of the Bid Documents considering that the
capitalization of each member company is so structured to meet the requirements
and needs of their current respective business undertaking/activities. In order to
comply with this equity requirement, Paircargo is requesting PBAC to just allow each
member of (sic) corporation of the Joint Venture to just execute an agreement that
embodies a commitment to infuse the required capital in case the project is awarded
to the Joint Venture instead of increasing each corporation's current authorized
capital stock just for prequalification purposes.
In prequalification, the agency is interested in one's financial capability at the time
of prequalification, not future or potential capability.
A commitment to put up equity once awarded the project is not enough to establish
that "present" financial capability. However, total financial capability of all member
companies of the Consortium, to be established by submitting the respective
companies' audited financial statements, shall be acceptable.
2. At present, Paircargo is negotiating with banks and other institutions for the
extension of a Performance Security to the joint venture in the event that the
Concessions Agreement (sic) is awarded to them. However, Paircargo is being
required to submit a copy of the draft concession as one of the documentary
requirements. Therefore, Paircargo is requesting that they'd (sic) be furnished copy
of the approved negotiated agreement between the PBAC and the AEDC at the
soonest possible time.
A copy of the draft Concession Agreement is included in the Bid Documents. Any
material changes would be made known to prospective challengers through bid
bulletins. However, a final version will be issued before the award of contract.
The PBAC also stated that it would require AEDC to sign Supplement C of the Bid Documents
(Acceptance of Criteria and Waiver of Rights to Enjoin Project) and to submit the same with
the required Bid Security.
On September 20, 1996, the consortium composed of People's Air Cargo and Warehousing Co.,
Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security
Bank) (collectively, Paircargo Consortium) submitted their competitive proposal to the PBAC.
On September 23, 1996, the PBAC opened the first envelope containing the prequalification
documents of the Paircargo Consortium. On the following day, September 24, 1996, the PBAC
prequalified the Paircargo Consortium.
On September 26, 1996, AEDC informed the PBAC in writing of its reservations as regards the
Paircargo Consortium, which include:
a. The lack of corporate approvals and financial capability of PAIRCARGO;
b. The lack of corporate approvals and financial capability of PAGS;
c. The prohibition imposed by RA 337, as amended (the General Banking Act) on the
amount that Security Bank could legally invest in the project;
d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for
prequalification purposes; and
e. The appointment of Lufthansa as the facility operator, in view of the Philippine
requirement in the operation of a public utility.
The PBAC gave its reply on October 2, 1996, informing AEDC that it had considered the issues
raised by the latter, and that based on the documents submitted by Paircargo and the
established prequalification criteria, the PBAC had found that the challenger, Paircargo, had
prequalified to undertake the project. The Secretary of the DOTC approved the finding of the
PBAC.
The PBAC then proceeded with the opening of the second envelope of the Paircargo
Consortium which contained its Technical Proposal.
On October 3, 1996, AEDC reiterated its objections, particularly with respect to Paircargo's
financial capability, in view of the restrictions imposed by Section 21-B of the General Banking
Act and Sections 1380 and 1381 of the Manual Regulations for Banks and Other Financial
Intermediaries. On October 7, 1996, AEDC again manifested its objections and requested that
it be furnished with excerpts of the PBAC meeting and the accompanying technical evaluation
report where each of the issues they raised were addressed.
On October 16, 1996, the PBAC opened the third envelope submitted by AEDC and the
Paircargo Consortium containing their respective financial proposals. Both proponents offered
to build the NAIA Passenger Terminal III for at least $350 million at no cost to the government
and to pay the government: 5% share in gross revenues for the first five years of operation,
7.5% share in gross revenues for the next ten years of operation, and 10% share in gross
revenues for the last ten years of operation, in accordance with the Bid Documents. However,
in addition to the foregoing, AEDC offered to pay the government a total of P135 million as
guaranteed payment for 27 years while Paircargo Consortium offered to pay the government
a total of P17.75 billion for the same period.
Thus, the PBAC formally informed AEDC that it had accepted the price proposal submitted by
the Paircargo Consortium, and gave AEDC 30 working days or until November 28, 1996 within
which to match the said bid, otherwise, the project would be awarded to Paircargo.
As AEDC failed to match the proposal within the 30-day period, then DOTC Secretary Amado
Lagdameo, on December 11, 1996, issued a notice to Paircargo Consortium regarding AEDC's
failure to match the proposal.
On February 27, 1997, Paircargo Consortium incorporated into Philippine International Airport
Terminals Co., Inc. (PIATCO).
AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated its
objections as regards the prequalification of PIATCO.
On April 11, 1997, the DOTC submitted the concession agreement for the second-pass approval
of the NEDA-ICC.
On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a Petition for Declaration
of Nullity of the Proceedings, Mandamus and Injunction against the Secretary of the DOTC, the
Chairman of the PBAC, the voting members of the PBAC and Pantaleon D. Alvarez, in his
capacity as Chairman of the PBAC Technical Committee.
On April 17, 1997, the NEDA-ICC conducted an ad referendum to facilitate the approval, on a
no-objection basis, of the BOT agreement between the DOTC and PIATCO. As the ad
referendum gathered only four (4) of the required six (6) signatures, the NEDA merely noted
the agreement.
On July 9, 1997, the DOTC issued the notice of award for the project to PIATCO.
On July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and PIATCO,
through its President, Henry T. Go, signed the "Concession Agreement for the Build-Operate-
and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III"
(1997 Concession Agreement). The Government granted PIATCO the franchise to operate and
maintain the said terminal during the concession period and to collect the fees, rentals and
other charges in accordance with the rates or schedules stipulated in the 1997 Concession
Agreement. The Agreement provided that the concession period shall be for twenty-five (25)
years commencing from the in-service date, and may be renewed at the option of the
Government for a period not exceeding twenty-five (25) years. At the end of the concession
period, PIATCO shall transfer the development facility to MIAA.
On November 26, 1998, the Government and PIATCO signed an Amended and Restated
Concession Agreement (ARCA). Among the provisions of the 1997 Concession Agreement that
were amended by the ARCA were: Sec. 1.11 pertaining to the definition of "certificate of
completion"; Sec. 2.05 pertaining to the Special Obligations of GRP; Sec. 3.02 (a) dealing with
the exclusivity of the franchise given to the Concessionaire; Sec. 4.04 concerning the
assignment by Concessionaire of its interest in the Development Facility; Sec. 5.08 (c) dealing
with the proceeds of Concessionaire's insurance; Sec. 5.10 with respect to the temporary take-
over of operations by GRP; Sec. 5.16 pertaining to the taxes, duties and other imposts that may
be levied on the Concessionaire; Sec. 6.03 as regards the periodic adjustment of public utility
fees and charges; the entire Article VIII concerning the provisions on the termination of the
contract; and Sec. 10.02 providing for the venue of the arbitration proceedings in case a
dispute or controversy arises between the parties to the agreement.
Subsequently, the Government and PIATCO signed three Supplements to the ARCA. The First
Supplement was signed on August 27, 1999; the Second Supplement on September 4, 2000;
and the Third Supplement on June 22, 2001 (collectively, Supplements).
The First Supplement to the ARCA amended Sec. 1.36 of the ARCA defining "Revenues" or
"Gross Revenues"; Sec. 2.05 (d) of the ARCA referring to the obligation of MIAA to provide
sufficient funds for the upkeep, maintenance, repair and/or replacement of all airport facilities
and equipment which are owned or operated by MIAA; and further providing additional special
obligations on the part of GRP aside from those already enumerated in Sec. 2.05 of the ARCA.
The First Supplement also provided a stipulation as regards the construction of a surface road
to connect NAIA Terminal II and Terminal III in lieu of the proposed access tunnel crossing
Runway 13/31; the swapping of obligations between GRP and PIATCO regarding the
improvement of Sales Road; and the changes in the timetable. It also amended Sec. 6.01 (c) of
the ARCA pertaining to the Disposition of Terminal Fees; Sec. 6.02 of the ARCA by inserting an
introductory paragraph; and Sec. 6.02 (a) (iii) of the ARCA referring to the Payments of
Percentage Share in Gross Revenues.
The Second Supplement to the ARCA contained provisions concerning the clearing, removal,
demolition or disposal of subterranean structures uncovered or discovered at the site of the
construction of the terminal by the Concessionaire. It defined the scope of works; it provided
for the procedure for the demolition of the said structures and the consideration for the same
which the GRP shall pay PIATCO; it provided for time extensions, incremental and
consequential costs and losses consequent to the existence of such structures; and it provided
for some additional obligations on the part of PIATCO as regards the said structures.
Finally, the Third Supplement provided for the obligations of the Concessionaire as regards the
construction of the surface road connecting Terminals II and III.
Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA
Terminals I and II, had existing concession contracts with various service providers to offer
international airline airport services, such as in-flight catering, passenger handling, ramp and
ground support, aircraft maintenance and provisions, cargo handling and warehousing, and
other services, to several international airlines at the NAIA. Some of these service providers
are the Miascor Group, DNATA-Wings Aviation Systems Corp., and the MacroAsia Group.
Miascor, DNATA and MacroAsia, together with Philippine Airlines (PAL), are the dominant
players in the industry with an aggregate market share of 70%.
On September 17, 2002, the workers of the international airline service providers, claiming
that they stand to lose their employment upon the implementation of the questioned
agreements, filed before this Court a petition for prohibition to enjoin the enforcement of said
agreements.2
On October 15, 2002, the service providers, joining the cause of the petitioning workers, filed
a motion for intervention and a petition-in-intervention.
On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and Constantino Jaraula
filed a similar petition with this Court.3
On November 6, 2002, several employees of the MIAA likewise filed a petition assailing the
legality of the various agreements.4
On December 11, 2002. another group of Congressmen, Hon. Jacinto V. Paras, Rafael P. Nantes,
Eduardo C. Zialcita, Willie B. Villarama, Prospero C. Nograles, Prospero A. Pichay, Jr., Harlin
Cast Abayon and Benasing O. Macaranbon, moved to intervene in the case as Respondents-
Intervenors. They filed their Comment-In-Intervention defending the validity of the assailed
agreements and praying for the dismissal of the petitions.
During the pendency of the case before this Court, President Gloria Macapagal Arroyo, on
November 29, 2002, in her speech at the 2002 Golden Shell Export Awards at Malacañang
Palace, stated that she will not "honor (PIATCO) contracts which the Executive Branch's legal
offices have concluded (as) null and void."5
Respondent PIATCO filed its Comments to the present petitions on November 7 and 27, 2002.
The Office of the Solicitor General and the Office of the Government Corporate Counsel filed
their respective Comments in behalf of the public respondents.
On December 10, 2002, the Court heard the case on oral argument. After the oral argument,
the Court then resolved in open court to require the parties to file simultaneously their
respective Memoranda in amplification of the issues heard in the oral arguments within 30
days and to explore the possibility of arbitration or mediation as provided in the challenged
contracts.
In their consolidated Memorandum, the Office of the Solicitor General and the Office of the
Government Corporate Counsel prayed that the present petitions be given due course and that
judgment be rendered declaring the 1997 Concession Agreement, the ARCA and the
Supplements thereto void for being contrary to the Constitution, the BOT Law and its
Implementing Rules and Regulations.
On March 6, 2003, respondent PIATCO informed the Court that on March 4, 2003 PIATCO
commenced arbitration proceedings before the International Chamber of Commerce,
International Court of Arbitration (ICC) by filing a Request for Arbitration with the Secretariat
of the ICC against the Government of the Republic of the Philippines acting through the DOTC
and MIAA.
In the present cases, the Court is again faced with the task of resolving complicated issues
made difficult by their intersecting legal and economic implications. The Court is aware of the
far reaching fall out effects of the ruling which it makes today. For more than a century and
whenever the exigencies of the times demand it, this Court has never shirked from its solemn
duty to dispense justice and resolve "actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction."6 To be sure, this Court will not begin to
do otherwise today.
We shall first dispose of the procedural issues raised by respondent PIATCO which they allege
will bar the resolution of the instant controversy.
Petitioners' Legal Standing to File
the present Petitions
a. G.R. Nos. 155001 and 155661
In G.R. No. 155001 individual petitioners are employees of various service providers7 having
separate concession contracts with MIAA and continuing service agreements with various
international airlines to provide in-flight catering, passenger handling, ramp and ground
support, aircraft maintenance and provisions, cargo handling and warehousing and other
services. Also included as petitioners are labor unions MIASCOR Workers Union-National Labor
Union and Philippine Airlines Employees Association. These petitioners filed the instant action
for prohibition as taxpayers and as parties whose rights and interests stand to be violated by
the implementation of the PIATCO Contracts.
Petitioners-Intervenors in the same case are all corporations organized and existing under
Philippine laws engaged in the business of providing in-flight catering, passenger handling,
ramp and ground support, aircraft maintenance and provisions, cargo handling and
warehousing and other services to several international airlines at the Ninoy Aquino
International Airport. Petitioners-Intervenors allege that as tax-paying international airline and
airport-related service operators, each one of them stands to be irreparably injured by the
implementation of the PIATCO Contracts. Each of the petitioners-intervenors have separate
and subsisting concession agreements with MIAA and with various international airlines which
they allege are being interfered with and violated by respondent PIATCO.
In G.R. No. 155661, petitioners constitute employees of MIAA and Samahang Manggagawa sa
Paliparan ng Pilipinas - a legitimate labor union and accredited as the sole and exclusive
bargaining agent of all the employees in MIAA. Petitioners anchor their petition for prohibition
on the nullity of the contracts entered into by the Government and PIATCO regarding the build-
operate-and-transfer of the NAIA IPT III. They filed the petition as taxpayers and persons who
have a legitimate interest to protect in the implementation of the PIATCO Contracts.
Petitioners in both cases raise the argument that the PIATCO Contracts contain stipulations
which directly contravene numerous provisions of the Constitution, specific provisions of the
BOT Law and its Implementing Rules and Regulations, and public policy. Petitioners contend
that the DOTC and the MIAA, by entering into said contracts, have committed grave abuse of
discretion amounting to lack or excess of jurisdiction which can be remedied only by a writ of
prohibition, there being no plain, speedy or adequate remedy in the ordinary course of law.
In particular, petitioners assail the provisions in the 1997 Concession Agreement and the ARCA
which grant PIATCO the exclusive right to operate a commercial international passenger
terminal within the Island of Luzon, except those international airports already existing at the
time of the execution of the agreement. The contracts further provide that upon the
commencement of operations at the NAIA IPT III, the Government shall cause the closure of
Ninoy Aquino International Airport Passenger Terminals I and II as international passenger
terminals. With respect to existing concession agreements between MIAA and international
airport service providers regarding certain services or operations, the 1997 Concession
Agreement and the ARCA uniformly provide that such services or operations will not be carried
over to the NAIA IPT III and PIATCO is under no obligation to permit such carry over except
through a separate agreement duly entered into with PIATCO.8
With respect to the petitioning service providers and their employees, upon the
commencement of operations of the NAIA IPT III, they allege that they will be effectively barred
from providing international airline airport services at the NAIA Terminals I and II as all
international airlines and passengers will be diverted to the NAIA IPT III. The petitioning service
providers will thus be compelled to contract with PIATCO alone for such services, with no
assurance that subsisting contracts with MIAA and other international airlines will be
respected. Petitioning service providers stress that despite the very competitive market, the
substantial capital investments required and the high rate of fees, they entered into their
respective contracts with the MIAA with the understanding that the said contracts will be in
force for the stipulated period, and thereafter, renewed so as to allow each of the petitioning
service providers to recoup their investments and obtain a reasonable return thereon.
Petitioning employees of various service providers at the NAIA Terminals I and II and of MIAA
on the other hand allege that with the closure of the NAIA Terminals I and II as international
passenger terminals under the PIATCO Contracts, they stand to lose employment.
The question on legal standing is whether such parties have "alleged such a personal stake in
the outcome of the controversy as to assure that concrete adverseness which sharpens the
presentation of issues upon which the court so largely depends for illumination of difficult
constitutional questions."9 Accordingly, it has been held that the interest of a person assailing
the constitutionality of a statute must be direct and personal. He must be able to show, not
only that the law or any government act is invalid, but also that he sustained or is in imminent
danger of sustaining some direct injury as a result of its enforcement, and not merely that he
suffers thereby in some indefinite way. It must appear that the person complaining has been
or is about to be denied some right or privilege to which he is lawfully entitled or that he is
about to be subjected to some burdens or penalties by reason of the statute or act complained
of.10
We hold that petitioners have the requisite standing. In the above-mentioned cases,
petitioners have a direct and substantial interest to protect by reason of the implementation
of the PIATCO Contracts. They stand to lose their source of livelihood, a property right which
is zealously protected by the Constitution. Moreover, subsisting concession agreements
between MIAA and petitioners-intervenors and service contracts between international
airlines and petitioners-intervenors stand to be nullified or terminated by the operation of the
NAIA IPT III under the PIATCO Contracts. The financial prejudice brought about by the PIATCO
Contracts on petitioners and petitioners-intervenors in these cases are legitimate interests
sufficient to confer on them the requisite standing to file the instant petitions.
b. G.R. No. 155547
In G.R. No. 155547, petitioners filed the petition for prohibition as members of the House of
Representatives, citizens and taxpayers. They allege that as members of the House of
Representatives, they are especially interested in the PIATCO Contracts, because the contracts
compel the Government and/or the House of Representatives to appropriate funds necessary
to comply with the provisions therein.11 They cite provisions of the PIATCO Contracts which
require disbursement of unappropriated amounts in compliance with the contractual
obligations of the Government. They allege that the Government obligations in the PIATCO
Contracts which compel government expenditure without appropriation is a curtailment of
their prerogatives as legislators, contrary to the mandate of the Constitution that "[n]o money
shall be paid out of the treasury except in pursuance of an appropriation made by law."12
Standing is a peculiar concept in constitutional law because in some cases, suits are not
brought by parties who have been personally injured by the operation of a law or any other
government act but by concerned citizens, taxpayers or voters who actually sue in the public
interest. Although we are not unmindful of the cases of Imus Electric Co. v. Municipality of
Imus13 and Gonzales v. Raquiza14 wherein this Court held that appropriation must be made
only on amounts immediately demandable, public interest demands that we take a more
liberal view in determining whether the petitioners suing as legislators, taxpayers and
citizens have locus standi to file the instant petition. In Kilosbayan, Inc. v. Guingona,15 this
Court held "[i]n line with the liberal policy of this Court on locus standi, ordinary taxpayers,
members of Congress, and even association of planters, and non-profit civic organizations
were allowed to initiate and prosecute actions before this Court to question the
constitutionality or validity of laws, acts, decisions, rulings, or orders of various government
agencies or instrumentalities."16 Further, "insofar as taxpayers' suits are concerned . . . (this
Court) is not devoid of discretion as to whether or not it should be entertained."17 As such ". .
. even if, strictly speaking, they [the petitioners] are not covered by the definition, it is still
within the wide discretion of the Court to waive the requirement and so remove the
impediment to its addressing and resolving the serious constitutional questions raised."18 In
view of the serious legal questions involved and their impact on public interest, we resolve to
grant standing to the petitioners.
Other Procedural Matters
Respondent PIATCO further alleges that this Court is without jurisdiction to review the instant
cases as factual issues are involved which this Court is ill-equipped to resolve. Moreover,
PIATCO alleges that submission of this controversy to this Court at the first instance is a
violation of the rule on hierarchy of courts. They contend that trial courts have concurrent
jurisdiction with this Court with respect to a special civil action for prohibition and hence,
following the rule on hierarchy of courts, resort must first be had before the trial courts.
After a thorough study and careful evaluation of the issues involved, this Court is of the view
that the crux of the instant controversy involves significant legal questions. The facts necessary
to resolve these legal questions are well established and, hence, need not be determined by a
trial court.
The rule on hierarchy of courts will not also prevent this Court from assuming jurisdiction over
the cases at bar. The said rule may be relaxed when the redress desired cannot be obtained in
the appropriate courts or where exceptional and compelling circumstances justify availment
of a remedy within and calling for the exercise of this Court's primary jurisdiction.19
It is easy to discern that exceptional circumstances exist in the cases at bar that call for the
relaxation of the rule. Both petitioners and respondents agree that these cases are
of transcendental importance as they involve the construction and operation of the country's
premier international airport. Moreover, the crucial issues submitted for resolution are of first
impression and they entail the proper legal interpretation of key provisions of the Constitution,
the BOT Law and its Implementing Rules and Regulations. Thus, considering the nature of the
controversy before the Court, procedural bars may be lowered to give way for the speedy
disposition of the instant cases.
Legal Effect of the Commencement
of Arbitration Proceedings by
PIATCO
There is one more procedural obstacle which must be overcome. The Court is aware that
arbitration proceedings pursuant to Section 10.02 of the ARCA have been filed at the instance
of respondent PIATCO. Again, we hold that the arbitration step taken by PIATCO will not oust
this Court of its jurisdiction over the cases at bar.
In Del Monte Corporation-USA v. Court of Appeals,20 even after finding that the arbitration
clause in the Distributorship Agreement in question is valid and the dispute between the
parties is arbitrable, this Court affirmed the trial court's decision denying petitioner's Motion
to Suspend Proceedings pursuant to the arbitration clause under the contract. In so ruling, this
Court held that as contracts produce legal effect between the parties, their assigns and heirs,
only the parties to the Distributorship Agreement are bound by its terms, including the
arbitration clause stipulated therein. This Court ruled that arbitration proceedings could be
called for but only with respect to the parties to the contract in question. Considering that
there are parties to the case who are neither parties to the Distributorship Agreement nor
heirs or assigns of the parties thereto, this Court, citing its previous ruling in Salas, Jr. v. Laperal
Realty Corporation,21 held that to tolerate the splitting of proceedings by allowing arbitration
as to some of the parties on the one hand and trial for the others on the other hand would, in
effect, result in multiplicity of suits, duplicitous procedure and unnecessary delay.22 Thus, we
ruled that the interest of justice would best be served if the trial court hears and adjudicates
the case in a single and complete proceeding.
It is established that petitioners in the present cases who have presented legitimate interests
in the resolution of the controversy are not parties to the PIATCO Contracts. Accordingly, they
cannot be bound by the arbitration clause provided for in the ARCA and hence, cannot be
compelled to submit to arbitration proceedings. A speedy and decisive resolution of all the
critical issues in the present controversy, including those raised by petitioners, cannot be
made before an arbitral tribunal. The object of arbitration is precisely to allow an expeditious
determination of a dispute. This objective would not be met if this Court were to allow the
parties to settle the cases by arbitration as there are certain issues involving non-parties to the
PIATCO Contracts which the arbitral tribunal will not be equipped to resolve.
Now, to the merits of the instant controversy.
I financial, technical, organizational and legal standards" required by the law, has
Is PIATCO a qualified bidder?
Public respondents argue that the Paircargo Consortium, PIATCO's predecessor, was not a duly
pre-qualified bidder on the unsolicited proposal submitted by AEDC as the Paircargo
Consortium failed to meet the financial capability required under the BOT Law and the Bid
Documents. They allege that in computing the ability of the Paircargo Consortium to meet the
minimum equity requirements for the project, the entire net worth of Security Bank, a
member of the consortium, should not be considered.
PIATCO relies, on the other hand, on the strength of the Memorandum dated October 14, 1996
issued by the DOTC Undersecretary Primitivo C. Cal stating that the Paircargo Consortium is
found to have a combined net worth of P3,900,000,000.00, sufficient to meet the equity
requirements of the project. The said Memorandum was in response to a letter from Mr.
Antonio Henson of AEDC to President Fidel V. Ramos questioning the financial capability of the
Paircargo Consortium on the ground that it does not have the financial resources to put up the
required minimum equity of P2,700,000,000.00. This contention is based on the restriction
under R.A. No. 337, as amended or the General Banking Act that a commercial bank cannot
invest in any single enterprise in an amount more than 15% of its net worth. In the said
Memorandum, Undersecretary Cal opined:
The Bid Documents, as clarified through Bid Bulletin Nos. 3 and 5, require that
financial capability will be evaluated based on total financial capability of all the
member companies of the [Paircargo] Consortium. In this connection, the Challenger
was found to have a combined net worth of P3,926,421,242.00 that could support a
project costing approximately P13 Billion.
It is not a requirement that the net worth must be "unrestricted." To impose that as
a requirement now will be nothing less than unfair.
The financial statement or the net worth is not the sole basis in establishing financial
capability. As stated in Bid Bulletin No. 3, financial capability may also be established
by testimonial letters issued by reputable banks. The Challenger has complied with
this requirement.
To recap, net worth reflected in the Financial Statement should not be taken as the
amount of the money to be used to answer the required thirty percent (30%) equity
of the challenger but rather to be used in establishing if there is enough basis to
believe that the challenger can comply with the required 30% equity. In fact, proof
of sufficient equity is required as one of the conditions for award of contract (Section
12.1 IRR of the BOT Law) but not for pre-qualification (Section 5.4 of the same
document).23
Under the BOT Law, in case of a build-operate-and-transfer arrangement, the
contract shall be awarded to the bidder "who, having satisfied the minimum
submitted the lowest bid and most favorable terms of the project.24 Further, the
1994 Implementing Rules and Regulations of the BOT Law provide:
Section 5.4 Pre-qualification Requirements.
xxx xxx xxx
c. Financial Capability: The project proponent must have adequate capability to
sustain the financing requirements for the detailed engineering design, construction
and/or operation and maintenance phases of the project, as the case may be. For
purposes of pre-qualification, this capability shall be measured in terms of (i) proof
of the ability of the project proponent and/or the consortium to provide a
minimum amount of equity to the project, and (ii) a letter testimonial from
reputable banks attesting that the project proponent and/or members of the
consortium are banking with them, that they are in good financial standing, and
that they have adequate resources. The government agency/LGU concerned shall
determine on a project-to-project basis and before pre-qualification, the minimum
amount of equity needed. (emphasis supplied)
Pursuant to this provision, the PBAC issued PBAC Bulletin No. 3 dated August 16, 1996
amending the financial capability requirements for pre-qualification of the project proponent
as follows:
6. Basis of Pre-qualification
The basis for the pre-qualification shall be on the compliance of the proponent to
the minimum technical and financial requirements provided in the Bid Documents
and in the IRR of the BOT Law, R.A. No. 6957, as amended by R.A. 7718.
 The minimum amount of equity to which the proponent's financial capability will be percent (35%) of the voting stock in that enterprise; and (d) the equity investment in
based shall be thirty percent (30%) of the project cost instead of the twenty percent other banks shall be deducted from the investing bank's net worth for purposes of
(20%) specified in Section 3.6.4 of the Bid Documents. This is to correlate with the computing the prescribed ratio of net worth to risk assets.
required debt-to-equity ratio of 70:30 in Section 2.01a of the draft concession
agreement. The debt portion of the project financing should not exceed 70% of the xxx xxx xxx
actual project cost.
Further, the 1993 Manual of Regulations for Banks provides:
Accordingly, based on the above provisions of law, the Paircargo Consortium or any challenger
to the unsolicited proposal of AEDC has to show that it possesses the requisite financial
SECTION X383. Other Limitations and Restrictions. — The following limitations and
capability to undertake the project in the minimum amount of 30% of the project
restrictions shall also apply regarding equity investments of banks.
cost through (i) proof of the ability to provide a minimum amount of equity to the project, and
(ii) a letter testimonial from reputable banks attesting that the project proponent or members
of the consortium are banking with them, that they are in good financial standing, and that a. In any single enterprise. — The equity investments of banks in any single
they have adequate resources. enterprise shall not exceed at any time fifteen percent (15%) of the net worth of the
investing bank as defined in Sec. X106 and Subsec. X121.5.
As the minimum project cost was estimated to be US$350,000,000.00 or roughly
P9,183,650,000.00,25 the Paircargo Consortium had to show to the satisfaction of the PBAC Thus, the maximum amount that Security Bank could validly invest in the Paircargo Consortium
that it had the ability to provide the minimum equity for the project in the amount of at is only P528,525,656.55, representing 15% of its entire net worth. The total net worth
least P2,755,095,000.00. therefore of the Paircargo Consortium, after considering the maximum amounts that may be
validly invested by each of its members is P558,384,871.55 or only 6.08% of the project
cost,29 an amount substantially less than the prescribed minimum equity investment required
Paircargo's Audited Financial Statements as of 1993 and 1994 indicated that it had a net worth
for the project in the amount of P2,755,095,000.00 or 30% of the project cost.
of P2,783,592.00 and P3,123,515.00 respectively.26 PAGS' Audited Financial Statements as of
1995 indicate that it has approximately P26,735,700.00 to invest as its equity for the
project.27 Security Bank's Audited Financial Statements as of 1995 show that it has a net worth The purpose of pre-qualification in any public bidding is to determine, at the earliest
equivalent to its capital funds in the amount of P3,523,504,377.00.28 opportunity, the ability of the bidder to undertake the project. Thus, with respect to the
bidder's financial capacity at the pre-qualification stage, the law requires the government
agency to examine and determine the ability of the bidder to fund the entire cost of the
We agree with public respondents that with respect to Security Bank, the entire amount of its
project by considering the maximum amounts that each bidder may invest in the project at
net worth could not be invested in a single undertaking or enterprise, whether allied or non-
the time of pre-qualification.
allied in accordance with the provisions of R.A. No. 337, as amended or the General Banking
Act:
The PBAC has determined that any prospective bidder for the construction, operation and
maintenance of the NAIA IPT III project should prove that it has the ability to provide equity in
Sec. 21-B. The provisions in this or in any other Act to the contrary notwithstanding,
the minimum amount of 30% of the project cost, in accordance with the 70:30 debt-to-equity
the Monetary Board, whenever it shall deem appropriate and necessary to further
ratio prescribed in the Bid Documents. Thus, in the case of Paircargo Consortium, the PBAC
national development objectives or support national priority projects, may
should determine the maximum amounts that each member of the consortium may commit
authorize a commercial bank, a bank authorized to provide commercial banking
for the construction, operation and maintenance of the NAIA IPT III project at the time of pre-
services, as well as a government-owned and controlled bank, to operate under an
qualification. With respect to Security Bank, the maximum amount which may be invested by
expanded commercial banking authority and by virtue thereof exercise, in addition
it would only be 15% of its net worth in view of the restrictions imposed by the General Banking
to powers authorized for commercial banks, the powers of an Investment House
Act. Disregarding the investment ceilings provided by applicable law would not result in a
as provided in Presidential Decree No. 129, invest in the equity of a non-allied
proper evaluation of whether or not a bidder is pre-qualified to undertake the project as for
undertaking, or own a majority or all of the equity in a financial intermediary other
all intents and purposes, such ceiling or legal restriction determines the true maximum
than a commercial bank or a bank authorized to provide commercial banking
amount which a bidder may invest in the project.
services: Provided, That (a) the total investment in equities shall not exceed fifty
percent (50%) of the net worth of the bank; (b) the equity investment in any one
enterprise whether allied or non-allied shall not exceed fifteen percent (15%) of Further, the determination of whether or not a bidder is pre-qualified to undertake the project
the net worth of the bank; (c) the equity investment of the bank, or of its wholly or requires an evaluation of the financial capacity of the said bidder at the time the bid is
majority-owned subsidiary, in a single non-allied undertaking shall not exceed thirty- submitted based on the required documents presented by the bidder. The PBAC should not
five percent (35%) of the total equity in the enterprise nor shall it exceed thirty-five be allowed to speculate on the future financial ability of the bidder to undertake the project
on the basis of documents submitted. This would open doors to abuse and defeat the very
purpose of a public bidding. This is especially true in the case at bar which involves the
investment of billions of pesos by the project proponent. The relevant government authority
is duty-bound to ensure that the awardee of the contract possesses the minimum required
financial capability to complete the project. To allow the PBAC to estimate the bidder's future
financial capability would not secure the viability and integrity of the project. A restrictive and
conservative application of the rules and procedures of public bidding is necessary not only to
protect the impartiality and regularity of the proceedings but also to ensure the financial and
technical reliability of the project. It has been held that:
The basic rule in public bidding is that bids should be evaluated based on the required
documents submitted before and not after the opening of bids. Otherwise, the
foundation of a fair and competitive public bidding would be defeated. Strict
observance of the rules, regulations, and guidelines of the bidding process is the
only safeguard to a fair, honest and competitive public bidding.30
Thus, if the maximum amount of equity that a bidder may invest in the project at the time the
bids are submittedfalls short of the minimum amounts required to be put up by the bidder,
said bidder should be properly disqualified. Considering that at the pre-qualification stage, the
maximum amounts which the Paircargo Consortium may invest in the project fell short of the
minimum amounts prescribed by the PBAC, we hold that Paircargo Consortium was not a
qualified bidder. Thus the award of the contract by the PBAC to the Paircargo Consortium, a
disqualified bidder, is null and void.
While it would be proper at this juncture to end the resolution of the instant controversy, as
the legal effects of the disqualification of respondent PIATCO's predecessor would come into
play and necessarily result in the nullity of all the subsequent contracts entered by it in
pursuance of the project, the Court feels that it is necessary to discuss in full the pressing issues
of the present controversy for a complete resolution thereof.
II
Is the 1997 Concession Agreement valid?
Petitioners and public respondents contend that the 1997 Concession Agreement is invalid as
it contains provisions that substantially depart from the draft Concession Agreement included
in the Bid Documents. They maintain that a substantial departure from the draft Concession
Agreement is a violation of public policy and renders the 1997 Concession Agreement null and
void.
PIATCO maintains, however, that the Concession Agreement attached to the Bid Documents is
intended to be a draft, i.e., subject to change, alteration or modification, and that this
intention was clear to all participants, including AEDC, and DOTC/MIAA. It argued further that
said intention is expressed in Part C (6) of Bid Bulletin No. 3 issued by the PBAC which states:
6. Amendments to the Draft Concessions Agreement
Amendments to the Draft Concessions Agreement shall be issued from time to time.
Said amendments shall only cover items that would not materially affect the
preparation of the proponent's proposal.
By its very nature, public bidding aims to protect the public interest by giving the public the
best possible advantages through open competition. Thus:
Competition must be legitimate, fair and honest. In the field of government contract
law, competition requires, not only `bidding upon a common standard, a common
basis, upon the same thing, the same subject matter, the same undertaking,' but also
that it be legitimate, fair and honest; and not designed to injure or defraud the
government.31
An essential element of a publicly bidded contract is that all bidders must be on equal footing.
Not simply in terms of application of the procedural rules and regulations imposed by the
relevant government agency, but more importantly, on the contract bidded upon. Each bidder
must be able to bid on the same thing. The rationale is obvious. If the winning bidder is allowed
to later include or modify certain provisions in the contract awarded such that the contract is
altered in any material respect, then the essence of fair competition in the public bidding is
destroyed. A public bidding would indeed be a farce if after the contract is awarded, the
winning bidder may modify the contract and include provisions which are favorable to it that
were not previously made available to the other bidders. Thus:
It is inherent in public biddings that there shall be a fair competition among the
bidders. The specifications in such biddings provide the common ground or basis for
the bidders. The specifications should, accordingly, operate equally or
indiscriminately upon all bidders.32
The same rule was restated by Chief Justice Stuart of the Supreme Court of Minnesota:
The law is well settled that where, as in this case, municipal authorities can only let
a contract for public work to the lowest responsible bidder, the proposals and
specifications therefore must be so framed as to permit free and full competition.
Nor can they enter into a contract with the best bidder containing substantial
provisions beneficial to him, not included or contemplated in the terms and
specifications upon which the bids were invited.33
In fact, in the PBAC Bid Bulletin No. 3 cited by PIATCO to support its argument that the draft
concession agreement is subject to amendment, the pertinent portion of which was quoted
above, the PBAC also clarified that "[s]aid amendments shall only cover items that would not
materially affect the preparation of the proponent's proposal."
While we concede that a winning bidder is not precluded from modifying or amending certain
provisions of the contract bidded upon, such changes must not constitute substantial or
material amendments that would alter the basic parameters of the contract and would
constitute a denial to the other bidders of the opportunity to bid on the same terms. Hence,
the determination of whether or not a modification or amendment of a contract bidded out
constitutes a substantial amendment rests on whether the contract, when taken as a whole,
would contain substantially different terms and conditions that would have the effect of
altering the technical and/or financial proposals previously submitted by other bidders. The
alterations and modifications in the contract executed between the government and the
winning bidder must be such as to render such executed contract to be an entirely different
contract from the one that was bidded upon.
In the case of Caltex (Philippines), Inc. v. Delgado Brothers, Inc.,34 this Court quoted with
approval the ruling of the trial court that an amendment to a contract awarded through public
bidding, when such subsequent amendment was made without a new public bidding, is null
and void:
The Court agrees with the contention of counsel for the plaintiffs that the due
execution of a contract after public bidding is a limitation upon the right of the
contracting parties to alter or amend it without another public bidding, for
otherwise what would a public bidding be good for if after the execution of a
contract after public bidding, the contracting parties may alter or amend the
contract, or even cancel it, at their will?Public biddings are held for the protection
of the public, and to give the public the best possible advantages by means of open
competition between the bidders. He who bids or offers the best terms is awarded
the contract subject of the bid, and it is obvious that such protection and best
possible advantages to the public will disappear if the parties to a contract executed
after public bidding may alter or amend it without another previous public bidding.35
Hence, the question that comes to fore is this: is the 1997 Concession Agreement the same
agreement that was offered for public bidding, i.e., the draft Concession Agreement attached
to the Bid Documents? A close comparison of the draft Concession Agreement attached to the
Bid Documents and the 1997 Concession Agreement reveals that the documents differ in at
least two material respects:
a. Modification on the Public
Utility Revenues and Non-Public
Utility Revenues that may be
collected by PIATCO
The fees that may be imposed and collected by PIATCO under the draft Concession Agreement
and the 1997 Concession Agreement may be classified into three distinct categories: (1) fees
which are subject to periodic adjustment of once every two years in accordance with a
prescribed parametric formula and adjustments are made effective only upon written approval
by MIAA; (2) fees other than those included in the first category which maybe adjusted by
PIATCO whenever it deems necessary without need for consent of DOTC/MIAA; and (3) new
fees and charges that may be imposed by PIATCO which have not been previously imposed or
collected at the Ninoy Aquino International Airport Passenger Terminal I, pursuant to
Administrative Order No. 1, Series of 1993, as amended. The glaring distinctions between the
draft Concession Agreement and the 1997 Concession Agreement lie in the types of fees
included in each category and the extent of the supervision and regulation which MIAA is
allowed to exercise in relation thereto.
For fees under the first category, i.e., those which are subject to periodic adjustment in
accordance with a prescribed parametric formula and effective only upon written approval by
MIAA, the draft Concession Agreementincludes the following:36
(1) aircraft parking fees;
(2) aircraft tacking fees;
(3) groundhandling fees;
(4) rentals and airline offices;
(5) check-in counter rentals; and
(6) porterage fees.
Under the 1997 Concession Agreement, fees which are subject to adjustment and effective
upon MIAA approval are classified as "Public Utility Revenues" and include:37
(1) aircraft parking fees;
(2) aircraft tacking fees;
(3) check-in counter fees; and
(4) Terminal Fees.
The implication of the reduced number of fees that are subject to MIAA approval is best
appreciated in relation to fees included in the second category identified above. Under
the 1997 Concession Agreement, fees which PIATCO may adjust whenever it deems necessary
without need for consent of DOTC/MIAA are "Non-Public Utility Revenues" and is defined as
"all other income not classified as Public Utility Revenues derived from operations of the
Terminal and the Terminal Complex."38 Thus, under the 1997 Concession Agreement, ground
handling fees, rentals from airline offices and porterage fees are no longer subject to MIAA
regulation.
Further, under Section 6.03 of the draft Concession Agreement, MIAA reserves the right to
regulate (1) lobby and vehicular parking fees and (2) other new fees and charges that may be
imposed by PIATCO. Such regulation may be made by periodic adjustment and is effective only
upon written approval of MIAA. The full text of said provision is quoted below:
Section 6.03. Periodic Adjustment in Fees and Charges. Adjustments in the aircraft
parking fees, aircraft tacking fees, groundhandling fees, rentals and airline offices,
check-in-counter rentals and porterage fees shall be allowed only once every two
years and in accordance with the Parametric Formula attached hereto as Annex F.
Provided that adjustments shall be made effective only after the written express
approval of the MIAA. Provided, further, that such approval of the MIAA, shall be
contingent only on the conformity of the adjustments with the above said parametric
formula. The first adjustment shall be made prior to the In-Service Date of the
Terminal.
The MIAA reserves the right to regulate under the foregoing terms and conditions
the lobby and vehicular parking fees and other new fees and charges as
contemplated in paragraph 2 of Section 6.01 if in its judgment the users of the
airport shall be deprived of a free option for the services they cover.39
On the other hand, the equivalent provision under the 1997 Concession Agreement reads:
Section 6.03 Periodic Adjustment in Fees and Charges.
xxx xxx xxx
(c) Concessionaire shall at all times be judicious in fixing fees and charges constituting
Non-Public Utility Revenues in order to ensure that End Users are not unreasonably
deprived of services. While the vehicular parking fee, porterage fee and
greeter/well wisher fee constitute Non-Public Utility Revenues of Concessionaire,
GRP may intervene and require Concessionaire to explain and justify the fee it may
set from time to time, if in the reasonable opinion of GRP the said fees have become
exorbitant resulting in the unreasonable deprivation of End Users of such services. 40
Thus, under the 1997 Concession Agreement, with respect to (1) vehicular parking fee, (2)
porterage fee and (3) greeter/well wisher fee, all that MIAA can do is to require PIATCO
to explain and justify the fees set by PIATCO. In the draft Concession Agreement, vehicular
parking fee is subject to MIAA regulation and approval under the second paragraph of Section
6.03 thereof while porterage fee is covered by the first paragraph of the same provision. There
is an obvious relaxation of the extent of control and regulation by MIAA with respect to the
particular fees that may be charged by PIATCO.
Moreover, with respect to the third category of fees that may be imposed and collected by
PIATCO, i.e., new fees and charges that may be imposed by PIATCO which have not been
previously imposed or collected at the Ninoy Aquino International Airport Passenger Terminal
I, under Section 6.03 of the draft Concession Agreement MIAA has reserved the right to
regulate the same under the same conditions that MIAA may regulate fees under the first
category, i.e., periodic adjustment of once every two years in accordance with a prescribed
parametric formula and effective only upon written approval by MIAA. However, under
the 1997 Concession Agreement, adjustment of fees under the third category is not subject to
MIAA regulation.
With respect to terminal fees that may be charged by PIATCO,41 as shown earlier, this was
included within the category of "Public Utility Revenues" under the 1997 Concession
Agreement. This classification is significant because under the 1997 Concession
Agreement, "Public Utility Revenues" are subject to an "Interim Adjustment" of fees upon the
occurrence of certain extraordinary events specified in the agreement.42 However, under
the draft Concession Agreement, terminal fees are not included in the types of fees that may
be subject to "Interim Adjustment."43
Finally, under the 1997 Concession Agreement, "Public Utility Revenues," except terminal
fees, are denominated in US Dollars44 while payments to the Government are in Philippine
Pesos. In the draft Concession Agreement,no such stipulation was included. By stipulating that
"Public Utility Revenues" will be paid to PIATCO in US Dollars while payments by PIATCO to the
Government are in Philippine currency under the 1997 Concession Agreement, PIATCO is able
to enjoy the benefits of depreciations of the Philippine Peso, while being effectively insulated
from the detrimental effects of exchange rate fluctuations.
When taken as a whole, the changes under the 1997 Concession Agreement with respect to
reduction in the types of fees that are subject to MIAA regulation and the relaxation of such
regulation with respect to other fees are significant amendments that substantially distinguish
the draft Concession Agreement from the 1997 Concession Agreement. The 1997 Concession
Agreement, in this respect, clearly gives PIATCO more favorable terms than what was
available to other bidders at the time the contract was bidded out. It is not very difficult to
see that the changes in the 1997 Concession Agreement translate to direct and concrete
financial advantages for PIATCO which were not available at the time the contract was offered
for bidding. It cannot be denied that under the 1997 Concession Agreement only "Public Utility
Revenues" are subject to MIAA regulation. Adjustments of all other fees imposed and collected
by PIATCO are entirely within its control. Moreover, with respect to terminal fees, under the
1997 Concession Agreement, the same is further subject to "Interim Adjustments" not
previously stipulated in the draft Concession Agreement. Finally, the change in the currency
stipulated for "Public Utility Revenues" under the 1997 Concession Agreement, except
terminal fees, gives PIATCO an added benefit which was not available at the time of bidding.
b. Assumption by the
Government of the liabilities of
PIATCO in the event of the latter's
default thereof
Under the draft Concession Agreement, default by PIATCO of any of its obligations to creditors
who have provided, loaned or advanced funds for the NAIA IPT III project does not result in the
assumption by the Government of these liabilities. In fact, nowhere in the said contract does
default of PIATCO's loans figure in the agreement. Such default does not directly result in any
concomitant right or obligation in favor of the Government.
However, the 1997 Concession Agreement provides:
Section 4.04 Assignment.
xxx xxx xxx
(b) In the event Concessionaire should default in the payment of an Attendant
Liability, and the default has resulted in the acceleration of the payment due date of
the Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and
Concessionaire shall immediately inform GRP in writing of such default. GRP shall,
within one hundred eighty (180) Days from receipt of the joint written notice of the
Unpaid Creditors and Concessionaire, either (i) take over the Development Facility
and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified,
to be substituted as concessionaire and operator of the Development Facility in
accordance with the terms and conditions hereof, or designate a qualified operator
acceptable to GRP to operate the Development Facility, likewise under the terms and
conditions of this Agreement; Provided that if at the end of the 180-day period GRP
shall not have served the Unpaid Creditors and Concessionaire written notice of its
choice, GRP shall be deemed to have elected to take over the Development Facility
with the concomitant assumption of Attendant Liabilities.
(c) If GRP should, by written notice, allow the Unpaid Creditors to be substituted as
concessionaire, the latter shall form and organize a concession company qualified to
take over the operation of the Development Facility. If the concession company
should elect to designate an operator for the Development Facility, the concession
company shall in good faith identify and designate a qualified operator acceptable
to GRP within one hundred eighty (180) days from receipt of GRP's written notice. If
the concession company, acting in good faith and with due diligence, is unable to
designate a qualified operator within the aforesaid period, then GRP shall at the end
of the 180-day period take over the Development Facility and assume Attendant
Liabilities.
The term "Attendant Liabilities" under the 1997 Concession Agreement is defined as:
Attendant Liabilities refer to all amounts recorded and from time to time outstanding
in the books of the Concessionaire as owing to Unpaid Creditors who have
provided, loaned or advanced funds actually used for the Project, including all
interests, penalties, associated fees, charges, surcharges, indemnities,
reimbursements and other related expenses, and further including amounts owed
by Concessionaire to its suppliers, contractors and sub-contractors.
Under the above quoted portions of Section 4.04 in relation to the definition of "Attendant
Liabilities," default by PIATCO of its loans used to finance the NAIA IPT III project triggers the
occurrence of certain events that leads to the assumption by the Government of the liability
for the loans. Only in one instance may the Government escape the assumption of PIATCO's
liabilities, i.e., when the Government so elects and allows a qualified operator to take over as
Concessionaire. However, this circumstance is dependent on the existence and availability of
a qualified operator who is willing to take over the rights and obligations of PIATCO under
the contract, a circumstance that is not entirely within the control of the Government.
Without going into the validity of this provision at this juncture, suffice it to state that Section
4.04 of the 1997 Concession Agreement may be considered a form of security for the loans
PIATCO has obtained to finance the project, an option that was not made available in the draft
Concession Agreement. Section 4.04 is an important amendment to the 1997 Concession
Agreement because it grants PIATCO a financial advantage or benefit which was not
previously made available during the bidding process. This financial advantage is a significant
modification that translates to better terms and conditions for PIATCO.
PIATCO, however, argues that the parties to the bidding procedure acknowledge that the draft
Concession Agreement is subject to amendment because the Bid Documents permit financing
or borrowing. They claim that it was the lenders who proposed the amendments to the draft
Concession Agreement which resulted in the 1997 Concession Agreement.
We agree that it is not inconsistent with the rationale and purpose of the BOT Law to allow the
project proponent or the winning bidder to obtain financing for the project, especially in this
case which involves the construction, operation and maintenance of the NAIA IPT III.
Expectedly, compliance by the project proponent of its undertakings therein would involve a
substantial amount of investment. It is therefore inevitable for the awardee of the contract to
seek alternate sources of funds to support the project. Be that as it may, this Court maintains
that amendments to the contract bidded upon should always conform to the general policy on
public bidding if such procedure is to be faithful to its real nature and purpose. By its very
nature and characteristic, competitive public bidding aims to protect the public interest by
giving the public the best possible advantages through open competition. 45 It has been held
that the three principles in public bidding are (1) the offer to the public; (2) opportunity for
competition; and (3) a basis for the exact comparison of bids. A regulation of the matter which
excludes any of these factors destroys the distinctive character of the system and thwarts the
purpose of its adoption.46 These are the basic parameters which every awardee of a contract
bidded out must conform to, requirements of financing and borrowing notwithstanding. Thus,
upon a concrete showing that, as in this case, the contract signed by the government and the
contract-awardee is an entirely different contract from the contract bidded, courts should not
hesitate to strike down said contract in its entirety for violation of public policy on public
bidding. A strict adherence on the principles, rules and regulations on public bidding must be
sustained if only to preserve the integrity and the faith of the general public on the procedure.
Public bidding is a standard practice for procuring government contracts for public service and
for furnishing supplies and other materials. It aims to secure for the government the lowest
possible price under the most favorable terms and conditions, to curtail favoritism in the award
of government contracts and avoid suspicion of anomalies and it places all bidders in equal
footing.47 Any government action which permits any substantial variance between the
conditions under which the bids are invited and the contract executed after the award
thereof is a grave abuse of discretion amounting to lack or excess of jurisdiction which
warrants proper judicial action.
In view of the above discussion, the fact that the foregoing substantial amendments were
made on the 1997 Concession Agreement renders the same null and void for being contrary
to public policy. These amendments convert the 1997 Concession Agreement to an entirely
different agreement from the contract bidded out or the draft Concession Agreement. It is not
difficult to see that the amendments on (1) the types of fees or charges that are subject to
MIAA regulation or control and the extent thereof and (2) the assumption by the Government,
under certain conditions, of the liabilities of PIATCO directly translates concrete financial
advantages to PIATCO that were previously not available during the bidding process. These
amendments cannot be taken as merely supplements to or implementing provisions of those
already existing in the draft Concession Agreement. The amendments discussed above present
new terms and conditions which provide financial benefit to PIATCO which may have altered
the technical and financial parameters of other bidders had they known that such terms were
available.
III
Direct Government Guarantee
Article IV, Section 4.04(b) and (c), in relation to Article 1.06, of the 1997 Concession Agreement
provides:
Section 4.04 Assignment
xxx xxx xxx
(b) In the event Concessionaire should default in the payment of an Attendant
Liability, and the default resulted in the acceleration of the payment due date of the
Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and
Concessionaire shall immediately inform GRP in writing of such default. GRP shall
within one hundred eighty (180) days from receipt of the joint written notice of the
Unpaid Creditors and Concessionaire, either (i) take over the Development Facility
and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified
to be substituted as concessionaire and operator of the Development facility in
accordance with the terms and conditions hereof, or designate a qualified operator
acceptable to GRP to operate the Development Facility, likewise under the terms and
conditions of this Agreement; Provided, that if at the end of the 180-day period GRP
shall not have served the Unpaid Creditors and Concessionaire written notice of its
choice, GRP shall be deemed to have elected to take over the Development Facility
with the concomitant assumption of Attendant Liabilities.
(c) If GRP, by written notice, allow the Unpaid Creditors to be substituted as
concessionaire, the latter shall form and organize a concession company qualified to
takeover the operation of the Development Facility. If the concession company
should elect to designate an operator for the Development Facility, the concession
company shall in good faith identify and designate a qualified operator acceptable
to GRP within one hundred eighty (180) days from receipt of GRP's written notice. If
the concession company, acting in good faith and with due diligence, is unable to
designate a qualified operator within the aforesaid period, then GRP shall at the end
of the 180-day period take over the Development Facility and assume Attendant
Liabilities.
….
Section 1.06. Attendant Liabilities
Attendant Liabilities refer to all amounts recorded and from time to time
outstanding in the books of the Concessionaire as owing to Unpaid Creditors who
have provided, loaned or advanced funds actually used for the Project, including all
interests, penalties, associated fees, charges, surcharges, indemnities,
reimbursements and other related expenses, and further including amounts owed
by Concessionaire to its suppliers, contractors and sub-contractors.48
It is clear from the above-quoted provisions that Government, in the event that PIATCO
defaults in its loan obligations, is obligated to pay "all amounts recorded and from time to
time outstanding from the books" of PIATCO which the latter owes to its creditors. 49 These
amounts include "all interests, penalties, associated fees, charges, surcharges, indemnities,
reimbursements and other related expenses." 50 This obligation of the Government to pay
PIATCO's creditors upon PIATCO's default would arise if the Government opts to take over
NAIA IPT III. It should be noted, however, that even if the Government chooses the second
option, which is to allow PIATCO's unpaid creditors operate NAIA IPT III, the Government is still
at a risk of being liable to PIATCO's creditors should the latter be unable to designate a qualified
operator within the prescribed period.51 In effect, whatever option the Government chooses
to take in the event of PIATCO's failure to fulfill its loan obligations, the Government is still
at a risk of assuming PIATCO's outstanding loans. This is due to the fact that the Government
would only be free from assuming PIATCO's debts if the unpaid creditors would be able to
designate a qualified operator within the period provided for in the contract. Thus, the
Government's assumption of liability is virtually out of its control. The Government under the
circumstances provided for in the 1997 Concession Agreement is at the mercy of the existence,
availability and willingness of a qualified operator. The above contractual provisions constitute
a direct government guarantee which is prohibited by law.
One of the main impetus for the enactment of the BOT Law is the lack of government funds to
construct the infrastructure and development projects necessary for economic growth and
development. This is why private sector resources are being tapped in order to finance these
projects. The BOT law allows the private sector to participate, and is in fact encouraged to do
so by way of incentives, such as minimizing the unstable flow of returns,52 provided that the
government would not have to unnecessarily expend scarcely available funds for the project
itself. As such, direct guarantee, subsidy and equity by the government in these projects are
strictly prohibited.53 This is but logical for if the government would in the end still be at a risk
of paying the debts incurred by the private entity in the BOT projects, then the purpose of
the law is subverted.
Section 2(n) of the BOT Law defines direct guarantee as follows:
(n) Direct government guarantee — An agreement whereby the government or any
of its agencies or local government units assume responsibility for the repayment of
debt directly incurred by the project proponent in implementing the project in case
of a loan default.
Clearly by providing that the Government "assumes" the attendant liabilities, which consists
of PIATCO's unpaid debts, the 1997 Concession Agreement provided for a direct government
guarantee for the debts incurred by PIATCO in the implementation of the NAIA IPT III project.
It is of no moment that the relevant sections are subsumed under the title of "assignment".
The provisions providing for direct government guarantee which is prohibited by law is clear
from the terms thereof.
The fact that the ARCA superseded the 1997 Concession Agreement did not cure this fatal
defect. Article IV, Section 4.04(c), in relation to Article I, Section 1.06, of the ARCA provides:
Section 4.04 Security
xxx xxx xxx
(c) GRP agrees with Concessionaire (PIATCO) that it shall negotiate in good faith and
enter into direct agreement with the Senior Lenders, or with an agent of such Senior
Lenders (which agreement shall be subject to the approval of the Bangko Sentral ng
Pilipinas), in such form as may be reasonably acceptable to both GRP and Senior
Lenders, with regard, inter alia, to the following parameters:
xxx xxx xxx
(iv) If the Concessionaire [PIATCO] is in default under a payment
obligation owed to the Senior Lenders, and as a result thereof the Senior
Lenders have become entitled to accelerate the Senior Loans, the Senior
Lenders shall have the right to notify GRP of the same, and without
prejudice to any other rights of the Senior Lenders or any Senior Lenders'
agent may have (including without limitation under security interests
granted in favor of the Senior Lenders), to either in good faith identify and
designate a nominee which is qualified under sub-clause (viii)(y) below to
operate the Development Facility [NAIA Terminal 3] or transfer the
Concessionaire's [PIATCO] rights and obligations under this Agreement to
a transferee which is qualified under sub-clause (viii) below;
xxx xxx xxx
(vi) if the Senior Lenders, acting in good faith and using reasonable efforts,
are unable to designate a nominee or effect a transfer in terms and
conditions satisfactory to the Senior Lenders within one hundred eighty
(180) days after giving GRP notice as referred to respectively in (iv) or (v)
above, then GRP and the Senior Lenders shall endeavor in good faith to
enter into any other arrangement relating to the Development Facility
[NAIA Terminal 3] (other than a turnover of the Development Facility [NAIA
Terminal 3] to GRP) within the following one hundred eighty (180) days. If
no agreement relating to the Development Facility [NAIA Terminal 3] is
arrived at by GRP and the Senior Lenders within the said 180-day period,
then at the end thereof the Development Facility [NAIA Terminal 3] shall
be transferred by the Concessionaire [PIATCO] to GRP or its designee and
GRP shall make a termination payment to Concessionaire [PIATCO] equal
to the Appraised Value (as hereinafter defined) of the Development
Facility [NAIA Terminal 3] or the sum of the Attendant Liabilities, if
greater. Notwithstanding Section 8.01(c) hereof, this Agreement shall be
deemed terminated upon the transfer of the Development Facility [NAIA
Terminal 3] to GRP pursuant hereto;
xxx xxx xxx
Section 1.06. Attendant Liabilities
Attendant Liabilities refer to all amounts in each case supported by verifiable
evidence from time to time owed or which may become owing by Concessionaire
[PIATCO] to Senior Lenders or any other persons or entities who have provided,
loaned, or advanced funds or provided financial facilities to Concessionaire
[PIATCO] for the Project [NAIA Terminal 3], including, without limitation, all
principal, interest, associated fees, charges, reimbursements, and other related
expenses (including the fees, charges and expenses of any agents or trustees of such
persons or entities), whether payable at maturity, by acceleration or otherwise, and
further including amounts owed by Concessionaire [PIATCO] to its professional
consultants and advisers, suppliers, contractors and sub-contractors.54
It is clear from the foregoing contractual provisions that in the event that PIATCO fails to fulfill
its loan obligations to its Senior Lenders, the Government is obligated to directly negotiate and
enter into an agreement relating to NAIA IPT III with the Senior Lenders, should the latter fail
to appoint a qualified nominee or transferee who will take the place of PIATCO. If the Senior
Lenders and the Government are unable to enter into an agreement after the prescribed
period, the Government must then pay PIATCO, upon transfer of NAIA IPT III to the
Government, termination payment equal to the appraised value of the project or the value of
the attendant liabilities whichever is greater. Attendant liabilities as defined in the ARCA
includes all amounts owed or thereafter may be owed by PIATCO not only to the Senior
Lenders with whom PIATCO has defaulted in its loan obligations but to all other persons who
may have loaned, advanced funds or provided any other type of financial facilities to PIATCO
for NAIA IPT III. The amount of PIATCO's debt that the Government would have to pay as a
result of PIATCO's default in its loan obligations -- in case no qualified nominee or transferee
is appointed by the Senior Lenders and no other agreement relating to NAIA IPT III has been
reached between the Government and the Senior Lenders -- includes, but is not limited to, "all
principal, interest, associated fees, charges, reimbursements, and other related expenses . . .
whether payable at maturity, by acceleration or otherwise." 55
It is clear from the foregoing that the ARCA provides for a direct guarantee by the
government to pay PIATCO's loans not only to its Senior Lenders but all other entities who
provided PIATCO funds or services upon PIATCO's default in its loan obligation with its Senior
Lenders. The fact that the Government's obligation to pay PIATCO's lenders for the latter's
obligation would only arise after the Senior Lenders fail to appoint a qualified nominee or
transferee does not detract from the fact that, should the conditions as stated in the contract
occur, the ARCA still obligates the Government to pay any and all amounts owed by PIATCO to
its lenders in connection with NAIA IPT III. Worse, the conditions that would make the
Government liable for PIATCO's debts is triggered by PIATCO's own default of its loan
obligations to its Senior Lenders to which loan contracts the Government was never a party to.
The Government was not even given an option as to what course of action it should take in
case PIATCO defaulted in the payment of its senior loans. The Government, upon PIATCO's
default, would be merely notified by the Senior Lenders of the same and it is the Senior Lenders
who are authorized to appoint a qualified nominee or transferee. Should the Senior Lenders
fail to make such an appointment, the Government is then automatically obligated to "directly
deal and negotiate" with the Senior Lenders regarding NAIA IPT III. The only way the
Government would not be liable for PIATCO's debt is for a qualified nominee or transferee to
be appointed in place of PIATCO to continue the construction, operation and maintenance of
NAIA IPT III. This "pre-condition", however, will not take the contract out of the ambit of a
direct guarantee by the government as the existence, availability and willingness of a qualified
nominee or transferee is totally out of the government's control. As such the Government is
virtually at the mercy of PIATCO (that it would not default on its loan obligations to its Senior
Lenders), the Senior Lenders (that they would appoint a qualified nominee or transferee or
agree to some other arrangement with the Government) and the existence of a qualified
nominee or transferee who is able and willing to take the place of PIATCO in NAIA IPT III.
The proscription against government guarantee in any form is one of the policy
considerations behind the BOT Law. Clearly, in the present case, the ARCA obligates the
Government to pay for all loans, advances and obligations arising out of financial facilities
extended to PIATCO for the implementation of the NAIA IPT III project should PIATCO default
in its loan obligations to its Senior Lenders and the latter fails to appoint a qualified nominee
or transferee. This in effect would make the Government liable for PIATCO's loans should the
conditions as set forth in the ARCA arise. This is a form of direct government guarantee.
The BOT Law and its implementing rules provide that in order for an unsolicited proposal for a
BOT project may be accepted, the following conditions must first be met: (1) the project
involves a new concept in technology and/or is not part of the list of priority projects, (2) no
direct government guarantee, subsidy or equity is required, and (3) the government agency
or local government unit has invited by publication other interested parties to a public bidding
and conducted the same.56 The failure to meet any of the above conditions will result in the
denial of the proposal. It is further provided that the presence of direct government guarantee,
subsidy or equity will "necessarily disqualify a proposal from being treated and accepted as an
unsolicited proposal."57 The BOT Law clearly and strictly prohibits direct government
guarantee, subsidy and equity in unsolicited proposals that the mere inclusion of a provision
to that effect is fatal and is sufficient to deny the proposal. It stands to reason therefore that
if a proposal can be denied by reason of the existence of direct government guarantee, then
its inclusion in the contract executed after the said proposal has been accepted is likewise
sufficient to invalidate the contract itself. A prohibited provision, the inclusion of which would
result in the denial of a proposal cannot, and should not, be allowed to later on be inserted in
the contract resulting from the said proposal. The basic rules of justice and fair play alone
militate against such an occurrence and must not, therefore, be countenanced particularly in
this instance where the government is exposed to the risk of shouldering hundreds of million
of dollars in debt.
This Court has long and consistently adhered to the legal maxim that those that cannot be
done directly cannot be done indirectly.58 To declare the PIATCO contracts valid despite the
clear statutory prohibition against a direct government guarantee would not only make a
mockery of what the BOT Law seeks to prevent -- which is to expose the government to the
risk of incurring a monetary obligation resulting from a contract of loan between the project
proponent and its lenders and to which the Government is not a party to -- but would also
render the BOT Law useless for what it seeks to achieve –- to make use of the resources of
the private sector in the "financing, operation and maintenance of infrastructure and
development projects"59which are necessary for national growth and development but
which the government, unfortunately, could ill-afford to finance at this point in time.
IV
Temporary takeover of business affected with public interest
Article XII, Section 17 of the 1987 Constitution provides:
Section 17. In times of national emergency, when the public interest so requires, the
State may, during the emergency and under reasonable terms prescribed by it,
temporarily take over or direct the operation of any privately owned public utility or
business affected with public interest.
The above provision pertains to the right of the State in times of national emergency, and in
the exercise of its police power, to temporarily take over the operation of any business affected
with public interest. In the 1986 Constitutional Commission, the term "national emergency"
was defined to include threat from external aggression, calamities or national disasters, but
not strikes "unless it is of such proportion that would paralyze government service."60 The
duration of the emergency itself is the determining factor as to how long the temporary
takeover by the government would last.61 The temporary takeover by the government extends
only to the operation of the business and not to the ownership thereof. As such
the government is not required to compensate the private entity-owner of the said business
as there is no transfer of ownership, whether permanent or temporary. The private entity-
owner affected by the temporary takeover cannot, likewise, claim just compensation for the
use of the said business and its properties as the temporary takeover by the government is in
exercise of its police power and not of its power of eminent domain.
Article V, Section 5.10 (c) of the 1997 Concession Agreement provides:
 Section 5.10 Temporary Take-over of operations by GRP.
….
(c) In the event the development Facility or any part thereof and/or the operations
of Concessionaire or any part thereof, become the subject matter of or be included
in any notice, notification, or declaration concerning or relating to acquisition,
seizure or appropriation by GRP in times of war or national emergency, GRP shall, by
written notice to Concessionaire, immediately take over the operations of the
Terminal and/or the Terminal Complex. During such take over by GRP, the
Concession Period shall be suspended; provided, that upon termination of war,
hostilities or national emergency, the operations shall be returned to
Concessionaire, at which time, the Concession period shall commence to run
again. Concessionaire shall be entitled to reasonable compensation for the
duration of the temporary take over by GRP, which compensation shall take into
account the reasonable cost for the use of the Terminal and/or Terminal Complex,
(which is in the amount at least equal to the debt service requirements of
Concessionaire, if the temporary take over should occur at the time when
Concessionaire is still servicing debts owed to project lenders), any loss or damage
to the Development Facility, and other consequential damages. If the parties cannot
agree on the reasonable compensation of Concessionaire, or on the liability of GRP
as aforesaid, the matter shall be resolved in accordance with Section 10.01
[Arbitration]. Any amount determined to be payable by GRP to Concessionaire shall
be offset from the amount next payable by Concessionaire to GRP.62
PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision on
temporary government takeover and obligate the government to pay "reasonable cost for
the use of the Terminal and/or Terminal Complex."63 Article XII, section 17 of the 1987
Constitution envisions a situation wherein the exigencies of the times necessitate the
government to "temporarily take over or direct the operation of any privately owned public
utility or business affected with public interest." It is the welfare and interest of the public
which is the paramount consideration in determining whether or not to temporarily take over
a particular business. Clearly, the State in effecting the temporary takeover is exercising its
police power. Police power is the "most essential, insistent, and illimitable of powers."64 Its
exercise therefore must not be unreasonably hampered nor its exercise be a source of
obligation by the government in the absence of damage due to arbitrariness of its
exercise.65 Thus, requiring the government to pay reasonable compensation for the reasonable
use of the property pursuant to the operation of the business contravenes the Constitution.
V agency authorized to operate the NAIA complex, as well as DOTC, the department to which
Regulation of Monopolies
A monopoly is "a privilege or peculiar advantage vested in one or more persons or companies,
consisting in the exclusive right (or power) to carry on a particular business or trade,
manufacture a particular article, or control the sale of a particular commodity."66 The
1987 Constitution strictly regulates monopolies, whether private or public, and even provides
for their prohibition if public interest so requires. Article XII, Section 19 of the 1987
Constitution states:
Sec. 19. The state shall regulate or prohibit monopolies when the public interest so
requires. No combinations in restraint of trade or unfair competition shall be
allowed.
Clearly, monopolies are not per se prohibited by the Constitution but may be permitted to exist
to aid the government in carrying on an enterprise or to aid in the performance of various
services and functions in the interest of the public.67 Nonetheless, a determination must first
be made as to whether public interest requires a monopoly. As monopolies are subject to
abuses that can inflict severe prejudice to the public, they are subject to a higher level of State
regulation than an ordinary business undertaking.
In the cases at bar, PIATCO, under the 1997 Concession Agreement and the ARCA, is granted
the "exclusive rightto operate a commercial international passenger terminal within the Island
of Luzon" at the NAIA IPT III.68 This is with the exception of already existing international
airports in Luzon such as those located in the Subic Bay Freeport Special Economic Zone
("SBFSEZ"), Clark Special Economic Zone ("CSEZ") and in Laoag City.69 As such, upon
commencement of PIATCO's operation of NAIA IPT III, Terminals 1 and 2 of NAIA would cease
to function as international passenger terminals. This, however, does not prevent MIAA to use
Terminals 1 and 2 as domestic passenger terminals or in any other manner as it may deem
appropriate except those activities that would compete with NAIA IPT III in the latter's
operation as an international passenger terminal.70 The right granted to PIATCO to exclusively
operate NAIA IPT III would be for a period of twenty-five (25) years from the In-Service
Date71 and renewable for another twenty-five (25) years at the option of the
government.72 Both the 1997 Concession Agreement and the ARCA further provide that, in
view of the exclusive right granted to PIATCO, the concession contracts of the service
providers currently servicing Terminals 1 and 2 would no longer be renewed and those
concession contracts whose expiration are subsequent to the In-Service Date would cease to
be effective on the said date.73
The operation of an international passenger airport terminal is no doubt an undertaking
imbued with public interest. In entering into a Build–Operate-and-Transfer contract for the
construction, operation and maintenance of NAIA IPT III, the government has determined that
public interest would be served better if private sector resources were used in its construction
and an exclusive right to operate be granted to the private entity undertaking the said project,
in this case PIATCO. Nonetheless, the privilege given to PIATCO is subject to reasonable
regulation and supervision by the Government through the MIAA, which is the government
MIAA is attached.74
This is in accord with the Constitutional mandate that a monopoly which is not prohibited must
be regulated.75 While it is the declared policy of the BOT Law to encourage private sector
participation by "providing a climate of minimum government regulations,"76 the same does
not mean that Government must completely surrender its sovereign power to protect public
interest in the operation of a public utility as a monopoly. The operation of said public utility
can not be done in an arbitrary manner to the detriment of the public which it seeks to serve.
The right granted to the public utility may be exclusive but the exercise of the right cannot run
riot. Thus, while PIATCO may be authorized to exclusively operate NAIA IPT III as an
international passenger terminal, the Government, through the MIAA, has the right and the
duty to ensure that it is done in accord with public interest. PIATCO's right to operate NAIA IPT
III cannot also violate the rights of third parties.
Section 3.01(e) of the 1997 Concession Agreement and the ARCA provide:
3.01 Concession Period
xxx xxx xxx
(e) GRP confirms that certain concession agreements relative to certain services
and operations currently being undertaken at the Ninoy Aquino International Airport
passenger Terminal I have a validity period extending beyond the In-Service Date.
GRP through DOTC/MIAA, confirms that these services and operations shall not be
carried over to the Terminal and the Concessionaire is under no legal obligation to
permit such carry-over except through a separate agreement duly entered into with
Concessionaire. In the event Concessionaire becomes involved in any litigation
initiated by any such concessionaire or operator, GRP undertakes and hereby holds
Concessionaire free and harmless on full indemnity basis from and against any loss
and/or any liability resulting from any such litigation, including the cost of litigation
and the reasonable fees paid or payable to Concessionaire's counsel of choice, all
such amounts shall be fully deductible by way of an offset from any amount which
the Concessionaire is bound to pay GRP under this Agreement.
During the oral arguments on December 10, 2002, the counsel for the petitioners-in-
intervention for G.R. No. 155001 stated that there are two service providers whose
contracts are still existing and whose validity extends beyond the In-Service Date.
One contract remains valid until 2008 and the other until 2010.77
We hold that while the service providers presently operating at NAIA Terminal 1 do not have
an absolute right for the renewal or the extension of their respective contracts, those contracts
whose duration extends beyond NAIA IPT III's In-Service-Date should not be unduly prejudiced.
These contracts must be respected not just by the parties thereto but also by third parties.
PIATCO cannot, by law and certainly not by contract, render a valid and binding contract
nugatory. PIATCO, by the mere expedient of claiming an exclusive right to operate, cannot
require the Government to break its contractual obligations to the service providers. In
contrast to the arrastre and stevedoring service providers in the case of Anglo-Fil Trading
Corporation v. Lazaro78 whose contracts consist of temporary hold-over permits, the affected
service providers in the cases at bar, have a valid and binding contract with the Government,
through MIAA, whose period of effectivity, as well as the other terms and conditions thereof,
cannot be violated.
In fine, the efficient functioning of NAIA IPT III is imbued with public interest. The provisions of
the 1997 Concession Agreement and the ARCA did not strip government, thru the MIAA, of its
right to supervise the operation of the whole NAIA complex, including NAIA IPT III. As the
primary government agency tasked with the job,79 it is MIAA's responsibility to ensure that
whoever by contract is given the right to operate NAIA IPT III will do so within the bounds of
the law and with due regard to the rights of third parties and above all, the interest of the
public.
VI
CONCLUSION
In sum, this Court rules that in view of the absence of the requisite financial capacity of the
Paircargo Consortium, predecessor of respondent PIATCO, the award by the PBAC of the
contract for the construction, operation and maintenance of the NAIA IPT III is null and void.
Further, considering that the 1997 Concession Agreement contains material and substantial
amendments, which amendments had the effect of converting the 1997 Concession
Agreement into an entirely different agreement from the contract bidded upon, the 1997
Concession Agreement is similarly null and void for being contrary to public policy. The
provisions under Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997 Concession
Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA, which constitute a
direct government guarantee expressly prohibited by, among others, the BOT Law and its
Implementing Rules and Regulations are also null and void. The Supplements, being accessory
contracts to the ARCA, are likewise null and void.
WHEREFORE, the 1997 Concession Agreement, the Amended and Restated Concession
Agreement and the Supplements thereto are set aside for being null and void.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Corona,
and Carpio-Morales, JJ., concur.
Vitug, J., see separate (dissenting) opinion.
Panganiban, J., please see separate opinion.
Quisumbing, J., no jurisdiction, please see separate opinion of J. Vitug in which he concurs.
Carpio, J., no part.
Callejo, Sr., J., also concur in the separate opinion of J. Panganiban.
Azcuna, J., joins the separate opinion of J. Vitug.
SEPARATE OPINIONS
VITUG, J.:
This Court is bereft of jurisdiction to hear the petitions at bar. The Constitution provides that
the Supreme Court shall exercise original jurisdiction over, among other actual controversies,
petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.1 The cases
in question, although denominated to be petitions for prohibition, actually pray for the
nullification of the PIATCO contracts and to restrain respondents from implementing said
agreements for being illegal and unconstitutional.
Section 2, Rule 65 of the Rules of Court states:
"When the proceedings of any tribunal, corporation, board, officer or person,
whether exercising judicial, quasi-judicial or ministerial functions, are without or in
excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack
or excess of jurisdiction, and there is no appeal or any other plain, speedy and
adequate remedy in the ordinary course of law, a person aggrieved thereby may file
a verified petition in the proper court, alleging the facts with certainty and praying
that judgment be rendered commanding the respondent to desist from further
proceedings in the action or matter specified therein, or otherwise granting such
incidental reliefs as law and justice may require."
The rule is explicit. A petition for prohibition may be filed against a tribunal, corporation, board,
officer or person, exercising judicial, quasi-judicial or ministerial functions. What the petitions
seek from respondents do not involve judicial, quasi-judicial or ministerial functions. In
prohibition, only legal issues affecting the jurisdiction of the tribunal, board or officer involved
may be resolved on the basis of undisputed facts.2 The parties allege, respectively, contentious
evidentiary facts. It would be difficult, if not anomalous, to decide the jurisdictional issue on
the basis of the contradictory factual submissions made by the parties.3 As the Court has so
often exhorted, it is not a trier of facts.
The petitions, in effect, are in the nature of actions for declaratory relief under Rule 63 of the
Rules of Court. The Rules provide that any person interested under a contract may, before
breach or violation thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a declaration of his rights or
duties thereunder.4 The Supreme Court assumes no jurisdiction over petitions for declaratory
relief which are cognizable by regional trial courts.5
As I have so expressed in Tolentino vs. Secretary of Finance,6 reiterated in Santiago vs.
Guingona, Jr.7 , the Supreme Court should not be thought of as having been tasked with the
awesome responsibility of overseeing the entire bureaucracy. Pervasive and limitless, such as
it may seem to be under the 1987 Constitution, judicial power still succumbs to the paramount
doctrine of separation of powers. The Court may not at good liberty intrude, in the guise of
sovereign imprimatur, into every affair of government. What significance can still then remain
of the time-honored and widely acclaimed principle of separation of powers if, at every turn,
the Court allows itself to pass upon at will the disposition of a co-equal, independent and
coordinate branch in our system of government. I dread to think of the so varied uncertainties
that such an undue interference can lead to.
Accordingly, I vote for the dismissal of the petition.
Quisumbing, and Azcuna, JJ., concur.
PANGANIBAN, J.:
The five contracts for the construction and the operation of Ninoy Aquino International Airport
(NAIA) Terminal III, the subject of the consolidated Petitions before the Court, are replete with
outright violations of law, public policy and the Constitution. The only proper thing to do is
declare them all null and void ab initio and let the chips fall where they may. Fiat iustitia ruat
coelum.
The facts leading to this controversy are already well presented in the ponencia. I shall not
burden the readers with a retelling thereof. Instead, I will cut to the chase and directly address
the two sets of gut issues:
1. The first issue is procedural: Does the Supreme Court have original jurisdiction to hear and
decide the Petitions? Corollarily, do petitioners have locus standi and should this Court decide
the cases without any mandatory referral to arbitration?
2. The second one is substantive in character: Did the subject contracts violate the
Constitution, the laws, and public policy to such an extent as to render all of them void and
inexistent?
My answer to all the above questions is a firm "Yes."
The Procedural Issue:
Jurisdiction, Standing and Arbitration
Definitely and surely, the issues involved in these Petitions are clearly of transcendental
importance and of national interest. The subject contracts pertain to the construction and the
operation of the country's premiere international airport terminal - an ultramodern world-
class public utility that will play a major role in the country's economic development and serve
to project a positive image of our country abroad. The five build-operate-&-transfer (BOT)
contracts, while entailing the investment of billions of pesos in capital and the availment of
several hundred millions of dollars in loans, contain provisions that tend to establish a
monopoly, require the disbursements of public funds sans appropriations, and provide
government guarantees in violation of statutory prohibitions, as well as other provisions
equally offensive to law, public policy and the Constitution. Public interest will inevitably be
affected thereby.
Thus, objections to these Petitions, grounded upon (a) the hierarchy of courts, (b) the need for
arbitration prior to court action, and (c) the alleged lack of sufficient personality, standing or
interest, being in the main procedural matters, must now be set aside, as they have been in
past cases. This Court must be permitted to perform its constitutional duty of determining
whether the other agencies of government have acted within the limits of the Constitution and
the laws, or if they have gravely abused the discretion entrusted to them.1
Hierarchy of Courts
The Court has, in the past, held that questions relating to gargantuan government contracts
ought to be settled without delay.2 This holding applies with greater force to the instant cases.
Respondent Piatco is partly correct in averring that petitioners can obtain relief from the
regional trial courts via an action to annul the contracts.
Nevertheless, the unavoidable consequence of having to await the rendition and the finality
of any such judgment would be a prolonged state of uncertainty that would be prejudicial to
the nation, the parties and the general public. And, in light of the feared loss of jobs of the
petitioning workers, consequent to the inevitable pretermination of contracts of the
petitioning service providers that will follow upon the heels of the impending opening of NAIA
Terminal III, the need for relief is patently urgent, and therefore, direct resort to this Court
through the special civil action of prohibition is thus justified.3
Contrary to Piatco's argument that the resolution of the issues raised in the Petitions will
require delving into factual questions,4 I submit that their disposition ultimately turns on
questions of law.5 Further, many of the significant and relevant factual questions can be easily
addressed by an examination of the documents submitted by the parties. In any event, the
Petitions raise some novel questions involving the application of the amended BOT Law, which
this Court has seen fit to tackle.
Arbitration
Should the dispute be referred to arbitration prior to judicial recourse? Respondent Piatco
claims that Section 10.02 of the Amended and Restated Concession Agreement (ARCA)
provides for arbitration under the auspices of the International Chamber of Commerce to
settle any dispute or controversy or claim arising in connection with the Concession
Agreement, its amendments and supplements. The government disagrees, however, insisting
that there can be no arbitration based on Section 10.02 of the ARCA, since all the Piatco
contracts are void ab initio. Therefore, all contractual provisions, including Section 10.02 of the
ARCA, are likewise void, inexistent and inoperative. To support its stand, the government
cites Chavez v. Presidential Commission on Good Government:6"The void agreement will not be
rendered operative by the parties' alleged performance (partial or full) of their respective
prestations. A contract that violates the Constitution and the law is null and void ab initio and
vests no rights and creates no obligations. It produces no legal effect at all."
As will be discussed at length later, the Piatco contracts are indeed void in their entirety; thus,
a resort to the aforesaid provision on arbitration is unavailing. Besides, petitioners and
petitioners-in-intervention have pointed out that, even granting arguendo that the arbitration
clause remained a valid provision, it still cannot bind them inasmuch as they are not parties to
the Piatco contracts. And in the final analysis, it is unarguable that the arbitration process
provided for under Section 10.02 of the ARCA, to be undertaken by a panel of three (3)
arbitrators appointed in accordance with the Rules of Arbitration of the International Chamber
of Commerce, will not be able to address, determine and definitively resolve the constitutional
and legal questions that have been raised in the Petitions before us.
Locus Standi
Given this Court's previous decisions in cases of similar import, no one will seriously doubt that,
being taxpayers and members of the House of Representatives, Petitioners Baterina et al.
have locus standi to bring the Petition in GR No. 155547. In Albano v. Reyes,7 this Court held
that the petitioner therein, suing as a citizen, taxpayer and member of the House of
Representatives, was sufficiently clothed with standing to bring the suit questioning the
validity of the assailed contract. The Court cited the fact that public interest was involved, in
view of the important role of the Manila International Container Terminal (MICT) in the
country's economic development and the magnitude of the financial consideration. This,
notwithstanding the fact that expenditure of public funds was not required under the assailed
contract.
In the cases presently under consideration, petitioners' personal and substantial interest in the
controversy is shown by the fact that certain provisions in the Piatco contracts create
obligations on the part of government (through the DOTC and the MIAA) to disburse public
funds without prior congressional appropriations.
Petitioners thus correctly assert that the injury to them has a twofold aspect: (1) they are
adversely affected as taxpayers on account of the illegal disbursement of public funds; and (2)
they are prejudiced qua legislators, since the contractual provisions requiring the government
to incur expenditures without appropriations also operate as limitations upon the exclusive
power and prerogative of Congress over the public purse. As members of the House of
Representatives, they are actually deprived of discretion insofar as the inclusion of those items
of expenditure in the budget is concerned. To prevent such encroachment upon the legislative
privilege and obviate injury to the institution of which they are members, petitioners-
legislators have locus standi to bring suit.
Messrs. Agan et al. and Lopez et al., are likewise taxpayers and thus possessed of standing to
challenge the illegal disbursement of public funds. Messrs. Agan et al., in particular, are
employees (or representatives of employees) of various service providers that have (1) existing
concession agreements with the MIAA to provide airport services necessary to the operation
of the NAIA and (2) service agreements to furnish essential support services to the
international airlines operating at the NAIA.
On the other hand, Messrs. Lopez et al. are employees of the MIAA. These petitioners (Messrs.
Agan et al. and Messrs. Lopez et al.) are confronted with the prospect of being laid off from
their jobs and losing their means of livelihood when their employer-companies are forced to
shut down or otherwise retrench and cut back on manpower. Such development would result
from the imminent implementation of certain provisions in the contracts that tend toward the
creation of a monopoly in favor of Piatco, its subsidiaries and related companies.
Petitioners-in-intervention are service providers in the business of furnishing airport-related
services to international airlines and passengers in the NAIA and are therefore competitors of
Piatco as far as that line of business is concerned. On account of provisions in the Piatco
contracts, petitioners-in-intervention have to enter into a written contract with Piatco so as
not to be shut out of NAIA Terminal III and barred from doing business there. Since there is no
provision to ensure or safeguard free and fair competition, they are literally at its mercy. They
claim injury on account of their deprivation of property (business) and of the liberty to
contract, without due process of law.
And even if petitioners and petitioners-in-intervention were not sufficiently clothed with legal
standing, I have at the outset already established that, given its impact on the public and on
national interest, this controversy is laden with transcendental importance and constitutional
significance. Hence, I do not hesitate to adopt the same position as was enunciated
in Kilosbayan v. Guingona Jr.8 that "in cases of transcendental importance, the Court may relax
the standing requirements and allow a suit to prosper even when there is no direct injury to the
party claiming the right of judicial review."9
The Substantive Issue:
Violations of the Constitution and the Laws
From the Outset, the Bidding Process Was Flawed and Tainted
After studying the documents submitted and arguments advanced by the parties, I have no
doubt that, right at the outset, Piatco was not qualified to participate in the bidding process
for the Terminal III project, but was nevertheless permitted to do so. It even won the bidding
and was helped along by what appears to be a series of collusive and corrosive acts.
The build-operate-and-transfer (BOT) project for the NAIA Passenger Terminal III comes under
the category of an "unsolicited proposal," which is the subject of Section 4-A of the BOT
Law.10 The unsolicited proposal was originally submitted by the Asia's Emerging Dragon
Corporation (AEDC) to the Department of Transportation and Communications (DOTC) and the
Manila International Airport Authority (MIAA), which reviewed and approved the proposal.
The draft of the concession agreement as negotiated between AEDC and DOTC/MIAA was
endorsed to the National Economic Development Authority (NEDA-ICC), which in turn
reviewed it on the basis of its scope, economic viability, financial indicators and risks; and
thereafter approved it for bidding.
The DOTC/MIAA then prepared the Bid Documents, incorporating therein the negotiated Draft
Concession Agreement, and published invitations for public bidding, i.e., for the submission of
comparative or competitive proposals. Piatco's predecessor-in-interest, the Paircargo
Consortium, was the only company that submitted a competitive bid or price challenge.
At this point, I must emphasize that the law requires the award of a BOT project to the bidder
that has satisfied the minimum requirements; and met the technical, financial, organizational
and legal standards provided in the BOT Law. Section 5 of this statute states:
"Sec. 5. Public bidding of projects. - . . .
"In the case of a build-operate-and-transfer arrangement, the contract shall be
awarded to the bidder who, having satisfied the minimum financial, technical,
organizational and legal standards required by this Act, has submitted the lowest
bid and most favorable terms for the project, based on the present value of its
proposed tolls, fees, rentals and charges over a fixed term for the facility to be
constructed, rehabilitated, operated and maintained according to the prescribed
minimum design and performance standards, plans and specifications. . . ."
(Emphasis supplied.)
The same provision requires that the price challenge via public bidding "must be conducted
under a two-envelope/two-stage system: the first envelope to contain the technical proposal
and the second envelope to contain the financial proposal." Moreover, the 1994 Implementing
Rules and Regulations (IRR) provide that only those bidders that have passed the
prequalification stage are permitted to have their two envelopes reviewed.
In other words, prospective bidders must prequalify by submitting their prequalification
documents for evaluation; and only the pre-qualified bidders would be entitled to have their
bids opened, evaluated and appreciated. On the other hand, disqualified bidders are to be
informed of the reason for their disqualification. This procedure was confirmed and reiterated
in the Bid Documents, which I quote thus: "Prequalified proponents will be considered eligible
to move to second stage technical proposal evaluation. The second and third envelopes of pre-
disqualified proponents will be returned."11
Aside from complying with the legal and technical requirements (track record or experience of
the firm and its key personnel), a project proponent desiring to prequalify must also
demonstrate its financial capacity to undertake the project. To establish such capability, a
proponent must prove that it is able to raise the minimum amount of equity required for the
project and to procure the loans or financing needed for it. Section 5.4(c) of the 1994 IRR
provides:
"Sec. 5.4. Prequalification Requirements. - To pre-qualify, a project proponent must
comply with the following requirements:
xxx xxx xxx
"c. Financial Capability. The project proponent must have adequate capability to
sustain the financing requirements for the detailed engineering design, construction,
and/or operation and maintenance phases of the project, as the case may be. For
purposes of prequalification, this capability shall be measured in terms of: (i) proof
of the ability of the project proponent and/or the consortium to provide a minimum
amount of equity to the project, and (ii) a letter testimonial from reputable banks
attesting that the project proponent and/or members of the consortium are banking
with them, that they are in good financial standing, and that they have adequate
resources. The government Agency/LGU concerned shall determine on a project-to-
project basis, and before prequalification, the minimum amount of equity needed. .
. . ." (Italics supplied)
Since the minimum amount of equity for the project was set at 30 percent12 of the minimum
project cost of US$350 million, the minimum amount of equity required of any proponent
stood at US$105 million. Converted to pesos at the exchange rate then of P26.239 to US$1.00
(as quoted by the Bangko Sentral ng Pilipinas), the peso equivalent of the minimum equity was
P2,755,095,000.
However, the combined equity or net worth of the Paircargo consortium stood at only
P558,384,871.55.13 This amount was only slightly over 6 percent of the minimum project cost
and very much short of the required minimum equity, which was equivalent to 30 percent of
the project cost. Such deficiency should have immediately caused the disqualification of the
Paircargo consortium. This matter was brought to the attention of the Prequalification and
Bidding Committee (PBAC).
Notwithstanding the glaring deficiency, DOTC Undersecretary Primitivo C. Cal, concurrent chair
of the PBAC, declared in a Memorandum dated 14 October 1996 that "the Challenger
(Paircargo consortium) was found to have a combined net worth of P3,926,421,242.00 that
could support a project costing approximately P13 billion." To justify his conclusion, he
asserted: "It is not a requirement that the networth must be `unrestricted'. To impose this as a
requirement now will be nothing less than unfair."
He further opined, "(T)he networth reflected in the Financial Statement should not be taken as
the amount of money to be used to answer the required thirty (30%) percent equity of the
challenger but rather to be used in establishing if there is enough basis to believe that the
challenger can comply with the required 30% equity. In fact, proof of sufficient equity is required
as one of the conditions for award of contract (Sec. 12.1 of IRR of the BOT Law) but not for
prequalification (Sec. 5.4 of same document)."
On the basis of the foregoing dubious declaration, the Paircargo consortium was deemed
prequalified and thus permitted to proceed to the other stages of the bidding process.
By virtue of the prequalified status conferred upon the Paircargo, Undersecretary Cal's findings
in effect relieved the consortium of the need to comply with the financial capability
requirement imposed by the BOT Law and IRR. This position is unmistakably and squarely at
odds with the Supreme Court's consistent doctrine emphasizing the strict application of
pertinent rules, regulations and guidelines for the public bidding process, in order to place each
bidder - actual or potential - on the same footing. Thus, it is unarguably irregular and contrary
to the very concept of public bidding to permit a variance between the conditions under which
bids are invited and those under which proposals are submitted and approved.
Republic v. Capulong,14 teaches that if one bidder is relieved from having to conform to the
conditions that impose some duty upon it, that bidder is not contracting in fair competition
with those bidders that propose to be bound by all conditions. The essence of public bidding
is, after all, an opportunity for fair competition and a basis for the precise comparison of
bids.15 Thus, each bidder must bid under the same conditions; and be subject to the same
guidelines, requirements and limitations. The desired result is to be able to determine the best
offer or lowest bid, all things being equal.
Inasmuch as the Paircargo consortium did not possess the minimum equity equivalent to 30
percent of the minimum project cost, it should not have been prequalified or allowed to
participate further in the bidding. The Prequalification and Bidding Committee (PBAC) should
therefore not have opened the two envelopes of the consortium containing its technical and
financial proposals; required AEDC to match the consortium's bid; 16 or awarded the
Concession Agreement to the consortium's successor-in-interest, Piatco.
As there was effectively no public bidding to speak of, the entire bidding process having been
flawed and tainted from the very outset, therefore, the award of the concession to Paircargo's
successor Piatco was void, and the Concession Agreement executed with the latter was
likewise void ab initio. For this reason, Piatco cannot and should not be allowed to benefit from
that Agreement.17
AEDC Was Deprived of the Right to Match PIATCO's Price Challenge
In DOTC PBAC Bid Bulletin No. 4 (par. 3), Undersecretary Cal declared that, for purposes of
matching the price challenge of Piatco, AEDC as originator of the unsolicited proposal would
be permitted access only to the schedule of proposed Annual Guaranteed Payments submitted
by Piatco, and not to the latter's financial and technical proposals that constituted the basis
for the price challenge in the first place. This was supposedly in keeping with Section 11.6 of
the 1994 IRR, which provides that proprietary information is to be respected, protected and
treated with utmost confidentiality, and is therefore not to form part of the bidding/tender
and related documents.
This pronouncement, I believe, was a grievous misapplication of the mentioned provision. The
"proprietary information" referred to in Section 11.6 of the IRR pertains only to the proprietary
information of the originator of an unsolicited proposal, and not to those belonging to
a challenger. The reason for the protection accorded proprietary information at all is the fact
that, according to Section 4-A of the BOT Law as amended, a proposal qualifies as an
"unsolicited proposal" when it pertains to a project that involves "a new concept or
technology", and/or a project that is not on the government's list of priority projects.
To be considered as utilizing a new concept or technology, a project must involve the
possession of exclusive rights (worldwide or regional) over a process; or possession of
intellectual property rights over a design, methodology or engineering concept.18 Patently, the
intent of the BOT Law is to encourage individuals and groups to come up with creative
innovations, fresh ideas and new technology. Hence, the significance and necessity of
protecting proprietary information in connection with unsolicited proposals. And to make the
encouragement real, the law also extends to such individuals and groups what amounts to a
"right of first refusal" to undertake the project they conceptualized, involving the use of new
technology or concepts, through the mechanism of matching a price challenge.
A competing bid is never just any figure conjured from out of the blue; it is arrived at after
studying economic, financial, technical and other, factors; it is likewise based on certain
assumptions as to the nature of the business, the market potentials, the probable demand for
the product or service, the future behavior of cost items, political and other risks, and so on. It
is thus self-evident that in order to be able to intelligently match a bid or price challenge, a
bidder must be given access to the assumptions and the calculations that went into crafting
the competing bid.
In this instance, the financial and technical proposals of Piatco would have provided AEDC with
the necessary information to enable it to make a reasonably informed matching bid. To put it
more simply, a bidder unable to access the competitor's assumptions will never figure out how
the competing bid came about; requiring him to "counter-propose" is like having him shoot at
a target in the dark while blindfolded.
By withholding from AEDC the challenger's financial and technical proposals containing the
critical information it needed, Undersecretary Cal actually and effectively deprived AEDC of the
ability to match the price challenge. One could say that AEDC did not have the benefit of a
"level playing field." It seems to me, though, that AEDC was actually shut out of the game
altogether.
At the end of the day, the bottom line is that the validity and the propriety of the award to
Piatco had been irreparably impaired.
Delayed Issuance of the Notice of Award Violated the BOT Law and the IRR
Section 9.5 of the IRR requires that the Notice of Award must indicate the time frame within
which the winner of the bidding (and therefore the prospective awardee) shall submit the
prescribed performance security, proof of commitment of equity contributions, and
indications of sources of financing (loans); and, in the case of joint ventures, an agreement
showing that the members are jointly and severally responsible for the obligations of the
project proponent under the contract.
The purpose of having a definite and firm timetable for the submission of the aforementioned
requirements is not only to prevent delays in the project implementation, but also to expose
and weed out unqualified proponents, who might have unceremoniously slipped through the
earlier prequalification process, by compelling them to put their money where their mouths
are, so to speak.
Nevertheless, this provision can be easily circumvented by merely postponing the actual
issuance of the Notice of Award, in order to give the favored proponent sufficient time to
comply with the requirements. Hence, to avert or minimize the manipulation of the post-
bidding process, the IRR not only set out the precise sequence of events occurring between
the completion of the evaluation of the technical bids and the issuance of the Notice of Award,
but also specified the timetables for each such event. Definite allowable extensions of time
were provided for, as were the consequences of a failure to meet a particular deadline.
In particular, Section 9.1 of the 1994 IRR prescribed that within 30 calendar days from the time
the second-stage evaluation shall have been completed, the Committee must come to a
decision whether or not to award the contract and, within 7 days therefrom, the Notice of
Award must be approved by the head of agency or local government unit (LGU) concerned,
and its issuance must follow within another 7 days thereafter.
Section 9.2 of the IRR set the procedure applicable to projects involving substantial
government undertakings as follows: Within 7 days after the decision to award is made, the
draft contract shall be submitted to the ICC for clearance on a no-objection basis. If the draft
contract includes government undertakings already previously approved, then the submission
shall be for information only.
However, should there be additional or new provisions different from the original government
undertakings, the draft shall have to be reviewed and approved. The ICC has 15 working days
to act thereon, and unless otherwise specified, its failure to act on the contract within the
specified time frame signifies that the agency or LGU may proceed with the award. The head
of agency or LGU shall approve the Notice of Award within seven days of the clearance by the
ICC on a no-objection basis, and the Notice itself has to be issued within seven days thereafter.
The highly regulated time-frames within which the agents of government were to act evinced
the intent to impose upon them the duty to act expeditiously throughout the process, to the
end that the project be prosecuted and implemented without delay. This regulated scenario
was likewise intended to discourage collusion and substantially reduce the opportunity for
agents of government to abuse their discretion in the course of the award process.
Despite the clear timetables set out in the IRR, several lengthy and still-unexplained delays
occurred in the award process, as can be observed from the presentation made by the counsel
for public respondents,19 quoted hereinbelow:
"11 Dec. 1996 - The Paircargo Joint Venture was informed by the PBAC that AEDC
failed to match and that negotiations preparatory to Notice of Award should be
commenced. This was the decision to award that should have commenced the
running of the 7-day period to approve the Notice of Award, as per Section 9.1 of the
IRR, or to submit the draft contract to the ICC for approval conformably with Section
9.2.
"01 April 1997 - The PBAC resolved that a copy of the final draft of the Concession
Agreement be submitted to the NEDA for clearance on a no-objection basis. This
resolution came more than 3 months too late as it should have been made on the
20th of December 1996 at the latest.
"16 April 1997 - The PBAC resolved that the period of signing the Concession
Agreement be extended by 15 days.
"18 April 1997 - NEDA approved the Concession Agreement. Again this is more than
3 months too late as the NEDA's decision should have been released on the 16th of
January 1997 or fifteen days after it should have been submitted to it for review.
"09 July 1997 - The Notice of Award was issued to PIATCO. Following the provisions
of the IRR, the Notice of Award should have been issued fourteen days after NEDA's
approval, or the 28th of January 1997. In any case, even if it were to be assumed that
the release of NEDA's approval on the 18th of April was timely, the Notice of Award
should have been issued on the 9th of May 1997. In both cases, therefore, the
release of the Notice of Award occurred in a decidedly less than timely fashion."
This chronology of events bespeaks an unmistakable disregard, if not disdain, by the persons
in charge of the award process for the time limitations prescribed by the IRR. Their attitude
flies in the face of this Court's solemn pronouncement in Republic v. Capulong,20 that "strict
observance of the rules, regulations and guidelines of the bidding process is the only safeguard
to a fair, honest and competitive public bidding."
From the foregoing, the only conclusion that can possibly be drawn is that the BOT law and its
IRR were repeatedly violated with unmitigated impunity - and by agents of government, no
less! On account of such violation, the award of the contract to Piatco, which undoubtedly
gained time and benefited from the delays, must be deemed null and void from the beginning.
Further Amendments Resulted in a Substantially Different Contract, Awarded Without Public
Bidding
But the violations and desecrations did not stop there. After the PBAC made its decision on
December 11, 1996 to award the contract to Piatco, the latter negotiated changes to the
Contract bidded out and ended up with what amounts to a substantially new contract without
any public bidding. This Contract was subsequently further amended four more times through
negotiation and without any bidding. Thus, the contract actually executed between Piatco and
DOTC/MIAA on July 12, 1997 (the Concession Agreement or "CA") differed from the contract
bidded out (the draft concession agreement or "DCA") in the following very significant
respects:
1. The CA inserted stipulations creating a monopoly in favor of Piatco in the business
of providing airport-related services for international airlines and passengers.21
2. The CA provided that government is to answer for Piatco's unpaid loans and debts
(lumped under the term Attendant Liabilities) in the event Piatco fails to pay its
senior lenders.22
3. The CA provided that in case of termination of the contract due to the fault of
government, government shall pay all expenses that Piatco incurred for the project
plus the appraised value of the Terminal.23
4. The CA imposed new and special obligations on government, including delivery of
clean possession of the site for the terminal; acquisition of additional land at the
government's expense for construction of road networks required by Piatco's
approved plans and specifications; and assistance to Piatco in securing site utilities,
as well as all necessary permits, licenses and authorizations.24
5. Where Section 3.02 of the DCA requires government to refrain from competing
with the contractor with respect to the operation of NAIA Terminal III, Section
3.02(b) of the CA excludes and prohibits everyone, including government, from
directly or indirectly competing with Piatco, with respect to the operation of, as well
as operations in, NAIA Terminal III. Operations in is sufficiently broad to encompass
all retail and other commercial business enterprises operating within Terminal III,
inclusive of the businesses of providing various airport-related services to
international airlines, within the scope of the prohibition.
6. Under Section 6.01 of the DCA, the following fees are subject to the written
approval of MIAA: lease/rental charges, concession privilege fees for passenger
services, food services, transportation utility concessions, groundhandling, catering
and miscellaneous concession fees, porterage fees, greeter/well-wisher fees,
carpark fees, advertising fees, VIP facilities fees and others. Moreover, adjustments
to the groundhandling fees, rentals and porterage fees are permitted only once
every two years and in accordance with a parametric formula, per DCA Section 6.03.
However, the CA as executed with Piatco provides in Section 6.06 that all the
aforesaid fees, rentals and charges may be adjusted without MIAA's approval or
intervention. Neither are the adjustments to these fees and charges subject to or
limited by any parametric formula.25
7. Section 1.29 of the DCA provides that the terminal fees, aircraft tacking fees,
aircraft parking fees, check-in counter fees and other fees are to be quoted and paid
in Philippine pesos. But per Section 1.33 of the CA, all the aforesaid fees save the
terminal fee are denominated in US Dollars.
8. Under Section 8.07 of the DCA, the term attendant liabilities refers to liabilities
pertinent to NAIA Terminal III, such as payment of lease rentals and performance of
other obligations under the Land Lease Agreement; the obligations under the Tenant
Agreements; and payment of all taxes, fees, charges and assessments of whatever
kind that may be imposed on NAIA Terminal III or parts thereof. But in Section 1.06
of the CA, Attendant Liabilities refers to unpaid debts of Piatco: "All amounts
recorded and from time to time outstanding in the books of (Piatco) as owing to
Unpaid Creditors who have provided, loaned or advanced funds actually used for the
Project, including all interests, penalties, associated fees, charges, surcharges,
indemnities, reimbursements and other related expenses, and further including
amounts owed by [Piatco] to its suppliers, contractors and subcontractors."
9. Per Sections 8.04 and 8.06 of the DCA, government may, on account of the
contractors breach, rescind the contract and select one of four options: (a) take over
the terminal and assume all its attendant liabilities; (b) allow the contractor's
creditors to assign the Project to another entity acceptable to DOTC/MIAA; (c) pay
the contractor rent for the facilities and equipment the DOTC may utilize; or (d)
purchase the terminal at a price established by independent appraisers. Depending
on the option selected, government may take immediate possession and control of
the terminal and its operations. Government will be obligated to compensate the
contractor for the "equivalent or proportionate contract costs actually disbursed,"
but only where government is the one in breach of the contract. But under Section
8.06(a) of the CA, whether on account of Piatco's breach of contract or its inability
to pay its creditors, government is obliged to either (a) take over Terminal III and
assume all of Piatco's debts or (b) permit the qualified unpaid creditors to be
substituted in place of Piatco or to designate a new operator. And in the event of
government's breach of contract, Piatco may compel it to purchase the terminal at
fair market value, per Section 8.06(b) of the CA.
 10. Under the DCA, any delay by Piatco in the payment of the amounts due the
government constitutes breach of contract. However, under the CA, such delay does
not necessarily constitute breach of contract, since Piatco is permitted to suspend
payments to the government in order to first satisfy the claims of its secured
creditors, per Section 8.04(d) of the CA.
It goes without saying that the amendment of the Contract bidded out (the DCA or draft
concession agreement) - in such substantial manner, without any public bidding, and after the
bidding process had been concluded on December 11, 1996 - is violative of public policy on
public biddings, as well as the spirit and intent of the BOT Law. The whole point of going
through the public bidding exercise was completely lost. Its very rationale was totally subverted
by permitting Piatco to amend the contract for which public bidding had already been
concluded. Competitive bidding aims to obtain the best deal possible by fostering transparency
and preventing favoritism, collusion and fraud in the awarding of contracts. That is the reason
why procedural rules pertaining to public bidding demand strict observance.26
In a relatively early case, Caltex v. Delgado Brothers,27 this Court made it clear that substantive
amendments to a contract for which a public bidding has already been finished should only be
awarded after another public bidding:
"The due execution of a contract after public bidding is a limitation upon the right of
the contracting parties to alter or amend it without another public bidding, for
otherwise what would a public bidding be good for if after the execution of a contract
after public bidding, the contracting parties may alter or amend the contract, or even
cancel it, at their will? Public biddings are held for the protection of the public, and
to give the public the best possible advantages by means of open competition
between the bidders. He who bids or offers the best terms is awarded the contract
subject of the bid, and it is obvious that such protection and best possible advantages
to the public will disappear if the parties to a contract executed after public bidding
may alter or amend it without another previous public bidding." 28
The aforementioned case dealt with the unauthorized amendment of a contract executed after
public bidding; in the situation before us, the amendments were made also after the bidding,
but prior to execution. Be that as it may, the same rationale underlying Caltex applies to the
present situation with equal force. Allowing the winning bidder to renegotiate the contract for
which the bidding process has ended is tantamount to permitting it to put in anything it wants.
Here, the winning bidder (Piatco) did not even bother to wait until after actual execution of
the contract before rushing to amend it. Perhaps it believed that if the changes were made to
a contract already won through bidding (DCA) instead of waiting until it is executed, the
amendments would not be noticed or discovered by the public.
In a later case, Mata v. San Diego,29 this Court reiterated its ruling as follows:
"It is true that modification of government contracts, after the same had been
awarded after a public bidding, is not allowed because such modification serves to
nullify the effects of the bidding and whatever advantages the Government had
secured thereby and may also result in manifest injustice to the other bidders. This
prohibition, however, refers to a change in vital and essential particulars of the
agreement which results in a substantially new contract."
Piatco's counter-argument may be summed up thus: There was nothing in the 1994 IRR that
prohibited further negotiations and eventual amendments to the DCA even after the bidding
had been concluded. In fact, PBAC Bid Bulletin No. 3 states: "[A]mendments to the Draft
Concession Agreement shall be issued from time to time. Said amendments will only cover items
that would not materially affect the preparation of the proponent's proposal."
I submit that accepting such warped argument will result in perverting the policy underlying
public bidding. The BOT Law cannot be said to allow the negotiation of contractual stipulations
resulting in a substantially new contract after the bidding process and price challenge had been
concluded. In fact, the BOT Law, in recognition of the time, money and effort invested in an
unsolicited proposal, accords its originator the privilege of matching the challenger's bid.
Section 4-A of the BOT Law specifically refers to a "lower price proposal" by a competing
bidder; and to the right of the original proponent "to match the price" of the challenger. Thus,
only the price proposals are in play. The terms, conditions and stipulations in the contract for
which public bidding has been concluded are understood to remain intact and not be subject
to further negotiation. Otherwise, the very essence of public bidding will be destroyed - there
will be no basis for an exact comparison between bids.
Moreover, Piatco misinterpreted the meaning behind PBAC Bid Bulletin No. 3. The
phrase amendments . . . from time to time refers only to those amendments to the draft
concession agreement issued by the PBAC prior to the submission of the price challenge; it
certainly does not include or permit amendments negotiated for and introduced after the
bidding process, has been terminated.
Piatco's Concession Agreement Was Further Amended, (ARCA) Again Without Public Bidding
Not satisfied with the Concession Agreement, Piatco - once more without bothering with public
bidding - negotiated with government for still more substantial changes. The result was the
Amended and Restated Concession Agreement (ARCA) executed on November 26, 1998. The
following changes were introduced:
1. The definition of Attendant Liabilities was further amended with the result that
the unpaid loans of Piatco, for which government may be required to answer, are no
longer limited to only those loans recorded in Piatco's books or loans whose
proceeds were actually used in the Terminal III project.30
2. Although the contract may be terminated due to breach by Piatco, it will not be
liable to pay the government any Liquidated Damages if a new operator is designated
to take over the operation of the terminal.31
3. The Liquidated Damages which government becomes liable for in case of its
breach of contract were substantially increased.32
4. Government's right to appoint a comptroller for Piatco in case the latter
encounters liquidity problems was deleted.33
5. Government is made liable for Incremental and Consequential Costs and Losses in
case it fails to comply or cause any third party under its direct or indirect control to
comply with the special obligations imposed on government.34
6. The insurance policies obtained by Piatco covering the terminal are now required
to be assigned to the Senior Lenders as security for the loans; previously, their
proceeds were to be used to repair and rehabilitate the facility in case of damage.35
7. Government bound itself to set the initial rate of the terminal fee, to be charged
when Terminal III begins operations, at an amount higher than US$20.36
8. Government waived its defense of the illegality of the contract and even agreed
to be liable to pay damages to Piatco in the event the contract was declared illegal.37
9. Even though government may be entitled to terminate the ARCA on account of
breach by Piatco, government is still liable to pay Piatco the appraised value of
Terminal III or the Attendant Liabilities, if the termination occurs before the In-
Service Date.38 This condition contravenes the BOT Law provision on termination
compensation.
10. Government is obligated to take the administrative action required for Piatco's
imposition, collection and application of all Public Utility Revenues. 39 No such
obligation existed previously.
11. Government is now also obligated to perform and cause other persons and
entities under its direct or indirect control to perform all acts necessary to perfect
the security interests to be created in favor of Piatco's Senior Lenders. 40 No such
obligation existed previously.
12. DOTC/MIAA's right of intervention in instances where Piatco's Non-Public Utility
Revenues become exorbitant or excessive has been removed.41
13. The illegality and unenforceability of the ARCA or any of its material provisions
was made an event of default on the part of government only, thus constituting a
ground for Piatco to terminate the ARCA.42
14. Amounts due from and payable by government under the contract were made
payable on demand - net of taxes, levies, imposts, duties, charges or fees of any kind
except as required by law.43
15. The Parametric Formula in the contract, which is utilized to compute for
adjustments/increases to the public utility revenues (i.e., aircraft parking and tacking
fees, check-in counter fee and terminal fee), was revised to permit Piatco to input its
more costly short-term borrowing rates instead of the longer-terms rates in the
computations for adjustments, with the end result that the changes will redound to
its greater financial benefit.
16. The Certificate of Completion simply deleted the successful performance-testing
of the terminal facility in accordance with defined performance standards as a pre-
condition for government's acceptance of the terminal facility.44
In sum, the foregoing revisions and amendments as embodied in the ARCA constitute very
material alterations of the terms and conditions of the CA, and give further manifestly undue
advantage to Piatco at the expense of government. Piatco claims that the changes to the CA
were necessitated by the demands of its foreign lenders. However, no proof whatsoever has
been adduced to buttress this claim.
In any event, it is quite patent that the sum total of the aforementioned changes resulted
in drastically weakening the position of government to a degree that seems quite excessive,
even from the standpoint of a businessperson who regularly transacts with banks and foreign
lenders, is familiar with their mind-set, and understands what motivates them. On the other
hand, whatever it was that impelled government officials concerned to accede to those grossly
disadvantageous changes, I can only hazard a guess.
There is no question in my mind that the ARCA was unauthorized and illegal for lack of public
bidding and for being patently disadvantageous to government.
The Three Supplements Imposed New Obligations on Government, Also Without Prior Public
Bidding
After Piatco had managed to breach the protective rampart of public bidding, it recklessly went
on a rampage of further assaults on the ARCA.
The First Supplement Is as Void as the ARCA
In the First Supplement ("FS") executed on August 27, 1999, the following changes were made
to the ARCA:
1. The amounts payable by Piatco to government were reduced by allowing
additional exceptions to the Gross Revenues in which government is supposed to
participate.45
2. Made part of the properties which government is obliged to construct and/or
maintain and keep in good repair are (a) the access road connecting Terminals II and
III - the construction of this access road is the obligation of Piatco, in lieu of its
obligation to construct an Access Tunnel connecting Terminals II and III; and (b) the
taxilane and taxiway - these are likewise part of Piatco's obligations, since they are
part and parcel of the project as described in Clause 1.3 of the Bid Documents .46
 3. The MIAA is obligated to provide funding for the maintenance and repair of the
airports and facilities owned or operated by it and by third persons under its control.
It will also be liable to Piatco for the latter's losses, expenses and damages as well as
liability to third persons, in case MIAA fails to perform such obligations. In addition,
MIAA will also be liable for the incremental and consequential costs of the remedial
work done by Piatco on account of the former's default.47
4. The FS also imposed on government ten (10) "Additional Special Obligations,"
including the following:
(a) Working for the removal of the general aviation traffic from the NAIA
airport complex48
(b) Providing through MIAA the land required by Piatco for the taxilane and
one taxiway at no cost to Piatco49
(c) Implementing the government's existing storm drainage master plan50
(d) Coordinating with DPWH the financing, the implementation and the
completion of the following works before the In-Service Date: three left-
turning overpasses (EDSA to Tramo St., Tramo to Andrews Ave., and
Manlunas Road to Sales Ave.);51 and a road upgrade and improvement
program involving widening, repair and resurfacing of Sales Road, Andrews
Avenue and Manlunas Road; improvement of Nichols Interchange; and
removal of squatters along Andrews Avenue.52
(e) Dealing directly with BCDA and the Phil. Air Force in acquiring additional
land or right of way for the road upgrade and improvement program.53
5. Government is required to work for the immediate reversion to MIAA of
the Nayong Pilipino National Park.54
6. Government's share in the terminal fees collected was revised from a flat rate of
P180 to 36 percent thereof; together with government's percentage share in the
gross revenues of Piatco, the amount will be remitted to government in pesos
instead of US dollars.55 This amendment enables Piatco to benefit from the further
erosion of the peso-dollar exchange rate, while preventing government from
building up its foreign exchange reserves.
7. All payments from Piatco to government are now to be invoiced to MIAA, and
payments are to accrue to the latter's exclusive benefit. 56 This move appears to be
in support of the funds MIAA advanced to DPWH.
I must emphasize that the First Supplement is void in two respects. First, it is merely an
amendment to the ARCA, upon which it is wholly dependent; therefore, since the ARCA is void,
inexistent and not capable of being ratified or amended, it follows that the FS too is void,
inexistent and inoperative. Second, even assuming arguendo that the ARCA is somehow
remotely valid, nonetheless the FS, in imposing significant new obligations upon government,
altered the fundamental terms and stipulations of the ARCA, thus necessitating a public
bidding all over again. That the FS was entered into sans public bidding renders it utterly void
and inoperative.
The Second Supplement Is Similarly Void and Inexistent
The Second Supplement ("SS") was executed between the government and Piatco on
September 4, 2000. It calls for Piatco, acting not as concessionaire of NAIA Terminal III but as
a public works contractor, to undertake - in the government's stead - the clearing, removal,
demolition and disposal of improvements, subterranean obstructions and waste materials at
the project site.57
The scope of the works, the procedures involved, and the obligations of the contractor are
provided for in Parts II and III of the SS. Section 4.1 sets out the compensation to be paid, listing
specific rates per cubic meter of materials for each phase of the work - excavation, leveling,
removal and disposal, backfilling and dewatering. The amounts collectible by Piatco are to be
offset against the Annual Guaranteed Payments it must pay government.
Though denominated as Second Supplement, it was nothing less than an entirely new public
works contract. Yet it, too, did not undergo any public bidding, for which reason it is also void
and inoperative.
Not surprisingly, Piatco had to subcontract the works to a certain Wintrack Builders, a firm
reputedly owned by a former high-ranking DOTC official. But that is another story altogether.
The Third Supplement Is Likewise Void and Inexistent
The Third Supplement ("TS"), executed between the government and Piatco on June 22, 2001,
passed on to the government certain obligations of Piatco as Terminal III concessionaire, with
respect to the surface road connecting Terminals II and III.
By way of background, at the inception of and forming part of the NAIA Terminal III project
was the proposed construction of an access tunnel crossing Runway 13/31, which. would
connect Terminal III to Terminal II. The Bid Documents in Section 4.1.2.3[B][i] declared that the
said access tunnel was subject to further negotiation; but for purposes of the bidding, the
proponent should submit a bid for it as well. Therefore, the tunnel was supposed to be part
and parcel of the Terminal III project.
However, in Section 5 of the First Supplement, the parties declared that the access tunnel was
not economically viable at that time. In lieu thereof, the parties agreed that a surface access
road (now called the T2-T3 Road) was to be constructed by Piatco to connect the two
terminals. Since it was plainly in substitution of the tunnel, the surface road construction
should likewise be considered part and parcel of the same project, and therefore part of
Piatco's obligation as well. While the access tunnel was estimated to cost about P800 million,
the surface road would have a price tag in the vicinity of about P100 million, thus producing
significant savings for Piatco.
Yet, the Third Supplement, while confirming that Piatco would construct the T2-T3 Road,
nevertheless shifted to government some of the obligations pertaining to the former, as
follows:
1. Government is now obliged to remove at its own expense all tenants, squatters,
improvements and/or waste materials on the site where the T2-T3 road is to be
constructed.58 There was no similar obligation on the part of government insofar as
the access tunnel was concerned.
2. Should government fail to carry out its obligation as above described, Piatco may
undertake it on government's behalf, subject to the terms and conditions (including
compensation payments) contained in the Second Supplement.59
3. MIAA will answer for the operation, maintenance and repair of the T2-T3 Road.60
The TS depends upon and is intended to supplement the ARCA as well as the First Supplement,
both of which are void and inexistent and not capable of being ratified or amended. It follows
that the TS is likewise void, inexistent and inoperative. And even if, hypothetically speaking,
both ARCA and FS are valid, still, the Third Supplement - imposing as it does significant new
obligations upon government - would in effect alter the terms and stipulations of the ARCA in
material respects, thus necessitating another public bidding. Since the TS was not subjected to
public bidding, it is consequently utterly void as well. At any rate, the TS created new monetary
obligations on the part of government, for which there were no prior appropriations. Hence it
follows that the same is void ab initio.
In patiently tracing the progress of the Piatco contracts from their inception up to the present,
I noted that the whole process was riddled with significant lapses, if not outright irregularity
and wholesale violations of law and public policy. The rationale of beginning at the beginning,
so to speak, will become evident when the question of what to do with the five Piatco contracts
is discussed later on.
In the meantime, I shall take up specific, provisions or changes in the contracts and highlight
the more prominent objectionable features.
Government Directly Guarantees Piatco Debts
Certainly the most discussed provision in the parties' arguments is the one creating an
unauthorized, direct government guarantee of Piatco's obligations in favor of the lenders.
Section 4-A of the BOT Law as amended states that unsolicited proposals, such as the NAIA
Terminal III Project, may be accepted by government provided inter alia that no
direct government guarantee, subsidy or equity is required. In short, such guarantee is
prohibited in unsolicited proposals. Section 2(n) of the same legislation defines direct
government guarantee as "an agreement whereby the government or any of its agencies or
local government units (will) assume responsibility for the repayment of debt directly incurred
by the project proponent in implementing the project in case of a loan default."
Both the CA and the ARCA have provisions that undeniably create such prohibited government
guarantee. Section 4.04 (c)(iv) to (vi) of the ARCA, which is similar to Section 4.04 of the CA,
provides thus:
"(iv) that if Concessionaire is in default under a payment obligation owed to the
Senior Lenders, and as a result thereof the Senior Lenders have become entitled to
accelerate the Senior Loans, the Senior Lenders shall have the right to notify GRP of
the same . . .;
(v) . . . the Senior Lenders may after written notification to GRP, transfer the
Concessionaire's rights and obligations to a transferee . . .;
(vi) if the Senior Lenders . . . are unable to . . . effect a transfer . . ., then GRP and the
Senior Lenders shall endeavor . . . to enter into any other arrangement relating to
the Development Facility . . . If no agreement relating to the Development Facility is
arrived at by GRP and the Senior Lenders within the said 180-day period, then at the
end thereof the Development Facility shall be transferred by the Concessionaire to
GRP or its designee and GRP shall make a termination payment to Concessionaire
equal to the Appraised Value (as hereinafter defined) of the Development Facility or
the sum of the Attendant Liabilities, if greater. . . ."
In turn, the term Attendant Liabilities is defined in Section 1.06 of the ARCA as follows:
"Attendant Liabilities refer to all amounts in each case supported by verifiable
evidence from time to time owed or which may become, owing by Concessionaire to
Senior Lenders or any other persons or entities who have provided, loaned or
advanced funds or provided financial facilities to Concessionaire for the Project,
including, without limitation, all principal, interest, associated fees, charges,
reimbursements, and other related expenses (including the fees, charges and
expenses of any agents or trustees of such persons or entities), whether payable at
maturity, by acceleration or otherwise, and further including amounts owed by
Concessionaire to its professional consultants and advisers, suppliers, contractors
and sub-contractors."
Government's agreement to pay becomes effective in the event of a default by Piatco on any
of its loan obligations to the Senior Lenders, and the amount to be paid by government is the
greater of either the Appraised Value of Terminal III or the aggregate amount of the moneys
owed by Piatco - whether to the Senior Lenders or to other entities, including its suppliers,
contractors and subcontractors. In effect, therefore, this agreement already constitutes the
prohibited assumption by government of responsibility for repayment of Piatco's debts in case
of a loan default. In fine, a direct government guarantee.
It matters not that there is a roundabout procedure prescribed by Section 4.04(c)(iv), (v) and
(vi) that would require, first, an attempt (albeit unsuccessful) by the Senior Lenders to transfer
Piatco's rights to a transferee of their choice; and, second, an effort (equally unsuccessful) to
"enter into any other arrangement" with the government regarding the Terminal III facility,
before government is required to make good on its guarantee. What is abundantly clear is the
fact that, in the devious labyrinthine process detailed in the aforesaid section, it is entirely
within the Senior Lenders' power, prerogative and control - exercisable via a mere refusal or
inability to agree upon "a transferee" or "any other arrangement" regarding the terminal
facility - to push the process forward to the ultimate contractual cul-de-sac, wherein
government will be compelled to abjectly surrender and make good on its guarantee of
payment.
Piatco also argues that there is no proviso requiring government to pay the Senior Lenders in
the event of Piatco's default. This is literally true, in the sense that Section 4.04(c)(vi) of ARCA
speaks of government making the termination payment to Piatco, not to the lenders. However,
it is almost a certainty that the Senior Lenders will already have made Piatco sign over to them,
ahead of time, its right to receive such payments from government; and/or they may already
have had themselves appointed its attorneys-in-fact for the purpose of collecting and receiving
such payments.
Nevertheless, as petitioners-in-intervention pointed out in their Memorandum,61 the
termination payment is to be made to Piatco, not to the lenders; and there is no provision
anywhere in the contract documents to prevent it from diverting the proceeds to its own
benefit and/or to ensure that it will necessarily use the same to pay off the Senior Lenders and
other creditors, in order to avert the foreclosure of the mortgage and other liens on the
terminal facility. Such deficiency puts the interests of government at great risk. Indeed, if the
unthinkable were to happen, government would be paying several hundreds of millions of
dollars, but the mortgage liens on the facility may still be foreclosed by the Senior Lenders just
the same.
Consequently, the Piatco contracts are also objectionable for grievously failing to adequately
protect government's interests. More accurately, the contracts would consistently weaken and
do away with protection of government interests. As such, they are therefore grossly lopsided
in favor of Piatco and/or its Senior Lenders.
While on this subject, it is well to recall the earlier discussion regarding a particularly noticeable
alteration of the concept of "Attendant Liabilities." In Section 1.06 of the CA defining the term,
the Piatco debts to be assumed/paid by government were qualified by the phrases recorded
and from time to time outstanding in the books of the Concessionaire and actually used for the
project. These phrases were eliminated from the ARCA's definition of Attendant Liabilities.
Since no explanation has been forthcoming from Piatco as to the possible justification for such
a drastic change, the only conclusion, possible is that it intends to have all of its debts covered
by the guarantee, regardless of whether or not they are disclosed in its books. This has
particular reference to those borrowings which were obtained in violation of the loan
covenants requiring Piatco to maintain a minimum 70:30 debt-to-equity ratio, and even if the
loan proceeds were not actually used for the project itself.
This point brings us back to the guarantee itself. In Section 4.04(c)(vi) of ARCA, the amount
which government has guaranteed to pay as termination payment is the greater of either (i)
the Appraised Value of the terminal facility or (ii) the aggregate of the Attendant Liabilities.
Given that the Attendant Liabilities may include practically any Piatco debt under the sun, it is
highly conceivable that their sum may greatly exceed the appraised value of the facility, and
government may end up paying very much more than the real worth of Terminal III. (So why
did government have to bother with public bidding anyway?)
In the final analysis, Section 4.04(c)(iv) to (vi) of the ARCA is diametrically at odds with the spirit
and the intent of the BOT Law. The law meant to mobilize private resources (the private sector)
to take on the burden and the risks of financing the construction, operation and maintenance
of relevant infrastructure and development projects for the simple reason that government is
not in a position to do so. By the same token, government guarantee was prohibited, since it
would merely defeat the purpose and raison d'être of a build-operate-and-transfer project to
be undertaken by the private sector.
To the extent that the project proponent is able to obtain loans to fund the project, those risks
are shared between the project proponent on the one hand, and its banks and other lenders
on the other. But where the proponent or its lenders manage to cajol or coerce the
government into extending a guarantee of payment of the loan obligations, the risks assumed
by the lenders are passed right back to government. I cannot understand why, in the instant
case, government cheerfully assented to re-assuming the risks of the project when it gave the
prohibited guarantee and thus simply negated the very purpose of the BOT Law and the
protection it gives the government.
Contract Termination Provisions in the Piatco Contracts Are Void
The BOT Law as amended provides for contract termination as follows:
"Sec. 7. Contract Termination. - In the event that a project is revoked, cancelled or
terminated by the government through no fault of the project proponent or by
mutual agreement, the Government shall compensate the said project proponent
for its actual expenses incurred in the project plus a reasonable rate of return
thereon not exceeding that stated in the contract as of the date of such revocation,
cancellation or termination: Provided, That the interest of the Government in this
instances [sic] shall be duly insured with the Government Service Insurance System
or any other insurance entity duly accredited by the Office of the Insurance
Commissioner: Provided, finally, That the cost of the insurance coverage shall be
included in the terms and conditions of the bidding referred to above.
"In the event that the government defaults on certain major obligations in the
contract and such failure is not remediable or if remediable shall remain unremedied
for an unreasonable length of time, the project proponent/contractor may, by prior
notice to the concerned national government agency or local government unit
specifying the turn-over date, terminate the contract. The project
proponent/contractor shall be reasonably compensated by the Government for
equivalent or proportionate contract cost as defined in the contract."
The foregoing statutory provision in effect provides for the following limited instances when
termination compensation may be allowed:
1. Termination by the government through no fault of the project proponent
2. Termination upon the parties' mutual agreement
3. Termination by the proponent due to government's default on certain major
contractual obligations
To emphasize, the law does not permit compensation for the project proponent when contract
termination is due to the proponent's own fault or breach of contract.
This principle was clearly violated in the Piatco Contracts. The ARCA stipulates that government
is to pay termination compensation to Piatco even when termination is initiated by
government for the following causes:
"(i) Failure of Concessionaire to finish the Works in all material respects in
accordance with the Tender Design and the Timetable;
(ii) Commission by Concessionaire of a material breach of this Agreement . . .;
(iii) . . . a change in control of Concessionaire arising from the sale, assignment,
transfer or other disposition of capital stock which results in an ownership structure
violative of statutory or constitutional limitations;
(iv) A pattern of continuing or repeated non-compliance, willful violation, or non-
performance of other terms and conditions hereof which is hereby deemed a
material breach of this Agreement . . ."62
As if that were not bad enough, the ARCA also inserted into Section 8.01 the phrase "Subject
to Section 4.04." The effect of this insertion is that in those instances where government may
terminate the contract on account of Piatco's breach, and it is nevertheless required under the
ARCA to make termination compensation to Piatco even though unauthorized by law, such
compensation is to be equivalent to the payment amount guaranteed by government - either
a) the Appraised Value of the terminal facility or (b) the aggregate of the Attendant Liabilities,
whichever amount is greater!
Clearly, this condition is not in line with Section 7 of the BOT Law. That provision permits a
project proponent to recover the actual expenses it incurred in the prosecution of the project
plus a reasonable rate of return not in excess of that provided in the contract; or to be
compensated for the equivalent or proportionate contract cost as defined in the contract, in
case the government is in default on certain major contractual obligations.
Furthermore, in those instances where such termination compensation is authorized by the
BOT Law, it is indispensable that the interest of government be duly insured. Section 5.08 the
ARCA mandates insurance coverage for the terminal facility; but all insurance policies are to
be assigned, and all proceeds are payable, to the Senior Lenders. In brief, the interest being
secured by such coverage is that of the Senior Lenders, not that of government. This can hardly
be considered compliance with law.
In essence, the ARCA provisions on termination compensation result in another unauthorized
government guarantee, this time in favor of Piatco.
A Prohibited Direct Government Subsidy, Which at the Same Time Is an Assault on the
National Honor
Still another contractual provision offensive to law and public policy is Section 8.01(d) of the
ARCA, which is a "bolder and badder" version of Section 8.04(d) of the CA.
It will be recalled that Section 4-A of the BOT Law as amended prohibits not only direct
government guarantees, but likewise a direct government subsidy for unsolicited proposals.
Section 13.2. b. iii. of the 1999 IRR defines a direct government subsidy as encompassing "an
agreement whereby the Government . . . will . . . postpone any payments due from the
proponent."
Despite the statutory ban, Section 8.01 (d) of the ARCA provides thus:
"(d) The provisions of Section 8.01(a) notwithstanding, and for the purpose of
preventing a disruption of the operations in the Terminal and/or Terminal Complex,
in the event that at any time Concessionaire is of the reasonable opinion that it shall
be unable to meet a payment obligation owed to the Senior Lenders, Concessionaire
shall give prompt notice to GRP, through DOTC/MIAA and to the Senior Lenders. In
such circumstances, the Senior Lenders (or the Senior Lenders' Representative) may
ensure that after making provision for administrative expenses and depreciation, the
cash resources of Concessionaire shall first be used and applied to meet all payment
obligations owed to the Senior Lenders. Any excess cash, after meeting such payment
obligations, shall be earmarked for the payment of all sums payable by
Concessionaire to GRP under this Agreement. If by reason of the foregoing GRP
should be unable to collect in full all payments due to GRP under this Agreement,
then the unpaid balance shall be payable within a 90-day grace period counted from
the relevant due date, with interest per annum at the rate equal to the average 91-
day Treasury Bill Rate as of the auction date immediately preceding the relevant due
date. If payment is not effected by Concessionaire within the grace period, then a
spread of five (5%) percent over the applicable 91-day Treasury Bill Rate shall be
added on the unpaid amount commencing on the expiry of the grace period up to
the day of full payment. When the temporary illiquidity of Concessionaire shall have
been corrected and the cash position of Concessionaire should indicate its ability to
meet its maturing obligations, then the provisions set forth under this Section 8.01(d)
shall cease to apply. The foregoing remedial measures shall be applicable only while
 there remains unpaid and outstanding amounts owed to the Senior Lenders."
(Emphasis supplied)
By any manner of interpretation or application, Section 8.01(d) of the ARCA clearly mandates
the indefinitepostponement of payment of all of Piatco's obligations to the government, in
order to ensure that Piatco's obligations to the Senior Lenders are paid in full first. That is
nothing more or less than the direct government subsidy prohibited by the BOT Law and the
IRR. The fact that Piatco will pay interest on the unpaid amounts owed to government does
not change the situation or render the prohibited subsidy any less unacceptable.
But beyond the clear violations of law, there are larger issues involved in the ARCA. Earlier, I
mentioned that Section 8.01(d) of the ARCA completely eliminated the proviso in Section
8.04(d) of the CA which gave government the right to appoint a financial controller to manage
the cash position of Piatco during situations of financial distress. Not only has government
been deprived of any means of monitoring and managing the situation; worse, as can be seen
from Section 8.01(d) above-quoted, the Senior Lenders have effectively locked in on the right
to exercise financial controllership over Piatco and to allocate its cash resources to the
payment of all amounts owed to the Senior Lenders before allowing any payment to be made
to government.
In brief, this particular provision of the ARCA has placed in the hands of foreign lenders the
power and the authority to determine how much (if at all) and when the Philippine government
(as grantor of the franchise) may be allowed to receive from Piatco. In that situation,
government will be at the mercy of the foreign lenders. This is a situation completely contrary
to the rationale of the BOT Law and to public policy.
The aforesaid provision rouses mixed emotions - shame and disgust at the parties' (especially
the government officials') docile submission and abject servitude and surrender to the
imperious and excessive demands of the foreign lenders, on the one hand; and vehement
outrage at the affront to the sovereignty of the Republic and to the national honor, on the
other. It is indeed time to put an end to such an unbearable, dishonorable situation.
The Piatco Contracts Unarguably Violate Constitutional Injunctions
I will now discuss the manner in which the Piatco Contracts offended the Constitution.
The Exclusive Right Granted to Piatco to Operate a Public Utility Is Prohibited by the
Constitution
While Section 2.02 of the ARCA spoke of granting to Piatco "a franchise to operate and
maintain the Terminal Complex," Section 3.02(a) of the same ARCA granted to Piatco, for the
entire term of the concession agreement, "the exclusive right to operate a commercial
international passenger terminal within the Island of Luzon" with the exception of those three
terminals already existing63 at the time of execution of the ARCA.
Section 11 of Article XII of the Constitution prohibits the grant of a "franchise, certificate, or
any other form of authorization for the operation of a public utility" that is "exclusive in
character."
In its Opinion No. 078, Series of 1995, the Department of justice held that "the NAIA Terminal
III which . . . is a 'terminal for public use' is a public utility." Consequently, the constitutional
prohibition against the exclusivity of a franchise applies to the franchise for the operation of
NAIA Terminal III as well.
What was granted to Piatco was not merely a franchise, but an "exclusive right" to operate an
international passenger terminal within the "Island of Luzon." What this grant effectively
means is that the government is now estopped from exercising its inherent power to award
any other person another franchise or a right to operate such a public utility, in the event public
interest in Luzon requires it. This restriction is highly detrimental to government and to the
public interest. Former Secretary of Justice Hernando B. Perez expressed this point well in his
Memorandum for the President dated 21 May 2002:
"Section 3.02 on 'Exclusivity'
"This provision gives to PIATCO (the Concessionaire) the exclusive right to operate a
commercial international airport within the Island of Luzon with the exception of
those already existing at the time of the execution of the Agreement, such as the
airports at Subic, Clark and Laoag City. In the case of the Clark International Airport,
however, the provision restricts its operation beyond its design capacity of 850,000
passengers per annum and the operation of new terminal facilities therein until after
the new NAIA Terminal III shall have consistently reached or exceeded its design
capacity of ten (10) million passenger capacity per year for three (3) consecutive
years during the concession period.
"This is an onerous and disadvantageous provision. It effectively grants PIATCO
a monopoly in Luzon and ties the hands of government in the matter of developing
new airports which may be found expedient and necessary in carrying out any future
plan for an inter-modal transportation system in Luzon.
"Additionally, it imposes an unreasonable restriction on the operation of the Clark
International Airport which could adversely affect the operation and development
of the Clark Special Economic Zone to the economic prejudice of the local
constituencies that are being benefited by its operation." (Emphasis supplied)
While it cannot be gainsaid that an enterprise that is a public utility may happen to constitute
a monopoly on account of the very nature of its business and the absence of competition, such
a situation does not however constitute justification to violate the constitutional prohibition
and grant an exclusive franchise or exclusive right to operate a public utility.
Piatco's contention that the Constitution does not actually prohibit monopolies is beside the
point. As correctly argued,64 the existence of a monopoly by a public utility is a situation
created by circumstances that do not encourage competition. This situation is different from
the grant of a franchise to operate a public utility, a privilege granted by government. Of
course, the grant of a franchise may result in a monopoly. But making such
franchise exclusive is what is expressly proscribed by the Constitution.
Actually, the aforementioned Section 3.02 of the ARCA more than just guaranteed exclusivity;
it also guaranteed that the government will not improve or expand the facilities at Clark - and
in fact is required to put a cap on the latter's operations - until after Terminal III shall have
been operated at or beyond its peak capacity for three consecutive years.65 As counsel for
public respondents pointed out, in the real world where the rate of influx of international
passengers can fluctuate substantially from year to year, it may take many years before
Terminal III sees three consecutive years' operations at peak capacity. The Diosdado
Macapagal International Airport may thus end up stagnating for a long time. Indeed, in order
to ensure greater profits for Piatco, the economic progress of a region has had to be sacrificed.
The Piatco Contracts Violate the Time Limitation on Franchises
Section 11 of Article XII of the Constitution also provides that "no franchise, certificate or any
other form of authorization for the operation of a public utility shall be . . . for a longer period
than fifty years." After all, a franchise held for an unreasonably long time would likely give rise
to the same evils as a monopoly.
The Piatco Contracts have come up with an innovative way to circumvent the prohibition and
obtain an extension. This fact can be gleaned from Section 8.03(b) of the ARCA, which I quote
thus:
"Sec. 8.03. Termination Procedure and Consequences of Termination. -
a) x x x xxx xxx
b) In the event the Agreement is terminated pursuant to Section 8.01 (b)
hereof, Concessionaire shall be entitled to collect the Liquidated Damages
specified in Annex 'G'. The full payment by GRP to Concessionaire of the
Liquidated Damages shall be a condition precedent to the transfer by
Concessionaire to GRP of the Development Facility. Prior to the full
payment of the Liquidated Damages, Concessionaire shall to the extent
practicable continue to operate the Terminal and the Terminal Complex
and shall be entitled to retain and withhold all payments to GRP for the
purpose of offsetting the same against the Liquidated Damages. Upon full
payment of the Liquidated Damages, Concessionaire shall immediately
transfer the Development Facility to GRP on 'as-is-where-is' basis."
The aforesaid easy payment scheme is less beneficial than it first appears. Although it enables
government to avoid having to make outright payment of an obligation that will likely run into
billions of pesos, this easy payment plan will nevertheless cost government considerable loss
of income, which it would earn if it were to operate Terminal III by itself. Inasmuch as payments
to the concessionaire (Piatco) will be on "installment basis," interest charges on the remaining
unpaid balance would undoubtedly cause the total outstanding balance to swell. Piatco would
thus be entitled to remain in the driver's seat and keep operating the terminal for an indefinite
length of time.
The Contracts Create Two Monopolies for Piatco
By way of background, two monopolies were actually created by the Piatco contracts. The first
and more obvious one refers to the business of operating an international passenger terminal
in Luzon, the business end of which involves providing international airlines with parking space
for their aircraft, and airline passengers with the use of departure and arrival areas, check-in
counters, information systems, conveyor systems, security equipment and paraphernalia,
immigrations and customs processing areas; and amenities such as comfort rooms, restaurants
and shops.
In furtherance of the first monopoly, the Piatco Contracts stipulate that the NAIA Terminal III
will be the only facility to be operated as an international passenger terminal;66 that NAIA
Terminals I and II will no longer be operated as such; 67 and that no one (including the
government) will be allowed to compete with Piatco in the operation of an international
passenger terminal in the NAIA Complex.68 Given that, at this time, the government and Piatco
are the only ones engaged in the business of operating an international passenger terminal, I
am not acutely concerned with this particular monopolistic situation.
There was however another monopoly within the NAIA created by the subject contracts for
Piatco - in the business of providing international airlines with the following: groundhandling,
in-flight catering, cargo handling, and aircraft repair and maintenance services. These are lines
of business activity in which are engaged many service providers (including the petitioners-in-
intervention), who will be adversely affected upon full implementation of the Piatco Contracts,
particularly Sections 3.01(d)69 and (e)70 of both the ARCA and the CA.
On the one hand, Section 3.02(a) of the ARCA makes Terminal III the only international
passenger terminal at the NAIA, and therefore the only place within the NAIA Complex where
the business of providing airport-related services to international airlines may be conducted.
On the other hand, Section 3.01(d) of the ARCA requires government, through the MIAA, not
to allow service providers with expired MIAA contracts to renew or extend their contracts to
render airport-related services to airlines. Meanwhile, Section 3.01(e) of the ARCA requires
government, through the DOTC and MIAA, not to allow service providers - those with
subsisting concession agreements for services and operations being conducted at Terminal I -
to carry over their concession agreements, services and operations to Terminal III, unless they
first enter into a separate agreement with Piatco.
The aforementioned provisions vest in Piatco effective and exclusive control over which service
provider may and may not operate at Terminal III and render the airport-related services
needed by international airlines. It thereby possesses the power to exclude competition. By
necessary implication, it also has effective control over the fees and charges that will be
imposed and collected by these service providers.
This intention is exceedingly clear in the declaration by Piatco that it is "completely within its
rights to exclude any party that it has not contracted with from NAIA Terminal III."71
Worse, there is nothing whatsoever in the Piatco Contracts that can serve to restrict, control
or regulate the concessionaire's discretion and power to reject any service provider and/or
impose any term or condition it may see fit in any contract it enters into with a service provider.
In brief, there is no safeguard whatsoever to ensure free and fair competition in the service-
provider sector.
In the meantime, and not surprisingly, Piatco is first in line, ready to exploit the unique business
opportunity. It announced72 that it has accredited three groundhandlers for Terminal III. Aside
from the Philippine Airlines, the other accredited entities are the Philippine Airport and Ground
Services Globeground, Inc. ("PAGSGlobeground") and the Orbit Air Systems, Inc. ("Orbit").
PAGSGlobeground is a wholly-owned subsidiary of the Philippine Airport and Ground Services,
Inc. or PAGS,73 while Orbit is a wholly-owned subsidiary of Friendship Holdings, Inc.,74 which is
in turn owned 80 percent by PAGS.75 PAGS is a service provider owned 60 percent by the Cheng
Family;76 it is a stockholder of 35 percent of Piatco77 and is the latter's designated contractor-
operator for NAIA Terminal III.78
Such entry into and domination of the airport-related services sector appear to be very much
in line with the following provisions contained in the First Addendum to the Piatco
Shareholders Agreement,79 executed on July 6, 1999, which appear to constitute a sort of
master plan to create a monopoly and combinations in restraint of trade:
"11. The Shareholders shall ensure:
a. x x x xxx x x x.;
b. That (Phil. Airport and Ground Services, Inc.) PAGS and/or its designated Affiliates
shall, at all times during the Concession Period, be exclusively authorized by (PIATCO)
to engage in the provision of ground-handling, catering and fueling services within
the Terminal Complex.
c. That PAIRCARGO and/or its designated Affiliate shall, during the Concession
Period, be the only entities authorized to construct and operate a warehouse for all
cargo handling and related services within the Site."
Precisely, proscribed by our Constitution are the monopoly and the restraint of trade being
fostered by the Piatco Contracts through the erection of barriers to the entry of other service
providers into Terminal III. In Tatad v. Secretary of the Department of Energy,80 the Court ruled:
". . . [S]ection 19 of Article XII of the Constitution . . . mandates: 'The State shall
regulate or prohibit monopolies when the public interest so requires. No
combinations in restraint of trade or unfair competition shall be allowed.'
"A monopoly is a privilege or peculiar advantage vested in one or more persons or
companies, consisting in the exclusive right or power to carry on a particular business
or trade, manufacture a particular article, or control the sale or the whole supply of
a particular commodity. It is a form of market structure in which one or only a few
firms dominate the total sales of a product or service. On the other hand, a
combination in restraint of trade is an agreement or understanding between two or
more persons, in the form of a contract, trust, pool, holding company, or other form
of association, for the purpose of unduly restricting competition, monopolizing trade
and commerce in a certain commodity, controlling its production, distribution and
price, or otherwise interfering with freedom of trade without statutory authority.
Combination in restraint of trade refers to the means while monopoly refers to the
end.
"x x x xxx xxx
"Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It
espouses competition. The desirability of competition is the reason for the
prohibition against restraint of trade, the reason for the interdiction of unfair
competition, and the reason for regulation of unmitigated monopolies. Competition
is thus the underlying principle of [S]ection 19, Article XII of our Constitution, . . ."81
Gokongwei Jr. v. Securities and Exchange Commission82 elucidates the criteria to be employed:
"A 'monopoly' embraces any combination the tendency of which is to prevent competition in
the broad and general sense, or to control prices to the detriment of the public. In short, it is
the concentration of business in the hands of a few. The material consideration in determining
its existence is not that prices are raised and competition actually excluded, but that power
exists to raise prices or exclude competition when desired."83 (Emphasis supplied)
The Contracts Encourage Monopolistic Pricing, Too
Aside from creating a monopoly, the Piatco contracts also give the concessionaire virtually
limitless power over the charging of fees, rentals and so forth. What little "oversight function"
the government might be able and minded to exercise is less than sufficient to protect the
public interest, as can be gleaned from the following provisions:
"Sec. 6.06. Adjustment of Non-Public Utility Fees and Charges
"For fees, rentals and charges constituting Non-Public Utility Revenues,
Concessionaire may make any adjustments it deems appropriate without need for
the consent of GRP or any government agency subject to Sec. 6.03(c)."
Section 6.03(c) in turn provides:
"(c) Concessionaire shall at all times be judicious in fixing fees and charges
constituting Non-Public Utility Revenues in order to ensure that End Users are not
unreasonably deprived of services. While the vehicular parking fee, porterage fee
 and greeter/wellwisher fee constitute Non-Public Utility Revenues of
Concessionaire, GRP may require Concessionaire to explain and justify the fee it may
set from time to time, if in the reasonable opinion of GRP the said fees have become
exorbitant resulting in the unreasonable deprivation of End Users of such services."
It will be noted that the above-quoted provision has no teeth, so the concessionaire can defy
the government without fear of any sanction. Moreover, Section 6.06 - taken together with
Section 6.03(c) of the ARCA - falls short of the standard set by the BOT Law as amended, which
expressly requires in Section 2(b) that the project proponent is "allowed to charge facility users
appropriate tolls, fees, rentals and charges not exceeding those proposed in its bid or as
negotiated and incorporated in the contract x x x."
The Piatco Contracts Violate Constitutional Prohibitions Against
Impairment of Contracts and Deprivation of Property Without Due Process
Earlier, I discussed how Section 3.01(e)84 of both the CA and the ARCA requires government,
through DOTC/MIAA, not to permit the carry-over to Terminal III of the services and operations
of certain service providers currently operating at Terminal I with subsisting contracts.
By the In-Service Date, Terminal III shall be the only facility to be operated as an international
passenger terminal at the NAIA;85 thus, Terminals I and II shall no longer operate as such,86 and
no one shall be allowed to compete with Piatco in the operation of an international passenger
terminal in the NAIA.87 The bottom line is that, as of the In-Service Date, Terminal III will be the
only terminal where the business of providing airport-related services to international airlines
and passengers may be conducted at all.
Consequently, government through the DOTC/MIAA will be compelled to cease honoring
existing contracts with service providers after the In-Service Date, as they cannot be allowed
to operate in Terminal III.
In short, the CA and the ARCA obligate and constrain government to break its existing contracts
with these service providers.
Notably, government is not in a position to require Piatco to accommodate the displaced
service providers, and it would be unrealistic to think that these service providers can perform
their service contracts in some other international airport outside Luzon. Obviously, then,
these displaced service providers are - to borrow a quaint expression - up the river without a
paddle. In plainer terms, they will have lost their businesses entirely, in the blink of an eye.
What we have here is a set of contractual provisions that impair the obligation of contracts
and contravene the constitutional prohibition against deprivation of property without due
process of law.88
Moreover, since the displaced service providers, being unable to operate, will be forced to
close shop, their respective employees - among them Messrs. Agan and Lopez et al. - have very
grave cause for concern, as they will find themselves out of employment and bereft of their
means of livelihood. This situation comprises still another violation of the constitution
prohibition against deprivation of property without due process.
True, doing business at the NAIA may be viewed more as a privilege than as a right.
Nonetheless, where that privilege has been availed of by the petitioners-in-intervention
service providers for years on end, a situation arises, similar to that in American Inter-fashion
v. GTEB.89 We held therein that a privilege enjoyed for seven years "evolved into some form of
property right which should not be removed x x x arbitrarily and without due process." Said
pronouncement is particularly relevant and applicable to the situation at bar because the
livelihood of the employees of petitioners-intervenors are at stake.
The Piatco Contracts Violate Constitutional Prohibition
Against Deprivation of Liberty Without Due Process
The Piatco Contracts by locking out existing service providers from entry into Terminal III and
restricting entry of future service providers, thereby infringed upon the freedom - guaranteed
to and heretofore enjoyed by international airlines - to contract with local service providers of
their choice, and vice versa.
Both the service providers and their client airlines will be deprived of the right to liberty, which
includes the right to enter into all contracts,90 and/or the right to make a contract in relation
to one's business.91
By Creating New Financial Obligations for Government,
Supplements to the ARCA Violate the Constitutional
Ban on Disbursement of Public Funds Without Valid Appropriation
Clearly prohibited by the Constitution is the disbursement of public funds out of the treasury,
except in pursuance of an appropriation made by law.92 The immediate effect of this
constitutional ban is that all the various agencies of government are constrained to limit their
expenditures to the amounts appropriated by law for each fiscal year; and to carefully count
their cash before taking on contractual commitments. Giving flesh and form to the injunction
of the fundamental law, Sections 46 and 47 of Executive Order 292, otherwise known as the
Administrative Code of 1987, provide as follows:
"Sec. 46. Appropriation Before Entering into Contract. - (1) No contract involving the
expenditure of public funds shall be entered into unless there is an appropriation
therefor, the unexpended balance of which, free of other obligations, is sufficient to
cover the proposed expenditure; and . .
"Sec. 47. Certificate Showing Appropriation to Meet Contract. - Except in the case of
a contract for personal service, for supplies for current consumption or to be carried
in stock not exceeding the estimated consumption for three (3) months, or banking
transactions of government-owned or controlled banks, no contract involving the
expenditure of public funds by any government agency shall be entered into or
authorized unless the proper accounting official of the agency concerned shall have
 certified to the officer entering into the obligation that funds have been duly
appropriated for the purpose and that the amount necessary to cover the proposed
contract for the current calendar year is available for expenditure on account
thereof, subject to verification by the auditor concerned. The certificate signed by
the proper accounting official and the auditor who verified it, shall be attached to
and become an integral part of the proposed contract, and the sum so certified shall
not thereafter be available for expenditure for any other purpose until the obligation
of the government agency concerned under the contract is fully extinguished."
Referring to the aforequoted provisions, this Court has held that "(I)t is quite evident from the
tenor of the language of the law that the existence of appropriations and the availability of
funds are indispensable pre-requisites to or conditions sine qua non for the execution of
government contracts. The obvious intent is to impose such conditions as a priori requisites to
the validity of the proposed contract."93
Notwithstanding the constitutional ban, statutory mandates and Jurisprudential precedents,
the three Supplements to the ARCA, which were not approved by NEDA, imposed on
government the additional burden of spending public moneys without prior appropriation.
In the First Supplement ("FS") dated August 27, 1999, the following requirements were
imposed on the government:
• To construct, maintain and keep in good repair and operating condition all airport
support services, facilities, equipment and infrastructure owned and/or operated by
MIAA, which are not part of the Project or which are located outside the Site, even
though constructed by Concessionaire - including the access road connecting
Terminals II and III and the taxilane, taxiways and runways
• To obligate the MIAA to provide funding for the upkeep, maintenance and repair
of the airports and facilities owned or operated by it and by third persons under its
control in order to ensure compliance with international standards; and holding
MIAA liable to Piatco for the latter's losses, expenses and damages as well as for the
latter's liability to third persons, in case MIAA fails to perform such obligations; in
addition, MIAA will also be liable for the incremental and consequential costs of the
remedial work done by Piatco on account of the former's default.
• Section 4 of the FS imposed on government ten (10) "Additional Special
Obligations," including the following:
o Providing thru MIAA the land required by Piatco for the taxilane and one
taxiway, at no cost to Piatco
o Implementing the government's existing storm drainage master plan
o Coordinating with DPWH the financing, implementation and completion of
the following works before the In-Service Date: three left-turning
overpasses (Edsa to Tramo St., Tramo to Andrews Ave., and Manlunas
Road to Sales Ave.) and a road upgrade and improvement program
involving widening, repair and resurfacing of Sales Road, Andrews Avenue
and Manlunas Road; improvement of Nichols Interchange; and removal of
squatters along Andrews Avenue
o Dealing directly with BCDA and the Philippine Air Force in acquiring
additional land or right of way for the road upgrade and improvement
program
o Requiring government to work for the immediate reversion to MIAA of the
Nayong Pilipino National Park, in order to permit the building of the second
west parallel taxiway
• Section 5 of the FS also provides that in lieu of the access tunnel, a surface access
road (T2-T3) will be constructed. This provision requires government to expend
funds to purchase additional land from Nayong Pilipino and to clear the same in
order to be able to deliver clean possession of the site to Piatco, as required in
Section 5(c) of the FS.
On the other hand, the Third Supplement ("TS") obligates the government to deliver, within
120 days from date thereof, clean possession of the land on which the T2-T3 Road is to be
constructed.
The foregoing contractual stipulations undeniably impose on government the expenditures of
public funds not included in any congressional appropriation or authorized by any other
statute. Piatco however attempts to take these stipulations out of the ambit of Sections 46 and
47 of the Administrative Code by characterizing them as stipulations for compliance on a "best-
efforts basis" only.
To determine whether the additional obligations under the Supplements may really be
undertaken on a best-efforts basis only, the nature of each of these obligations must be
examined in the context of its relevance and significance to the Terminal III Project, as well as
of any adverse impact that may result if such obligation is not performed or undertaken on
time. In short, the criteria for determining whether the best-efforts basis will apply is whether
the obligations are critical to the success of the Project and, accordingly, whether failure to
perform them (or to perform them on time) could result in a material breach of the contract.
Viewed in this light, the "Additional Special Obligations" set out in Section 4 of the FS take on
a different aspect. In particular, each of the following may all be deemed to play a major role
in the successful and timely prosecution of the Terminal III Project: the obtention of land
required by PIATCO for the taxilane and taxiway; the implementation of government's existing
storm drainage master plan; and coordination with DPWH for the completion of the three left-
turning overpasses before the In-Service Date, as well as acquisition and delivery of additional
land for the construction of the T2-T3 access road.
Conversely, failure to deliver on any of these obligations may conceivably result in substantial
prejudice to the concessionaire, to such an extent as to constitute a material breach of the
Piatco Contracts. Whereupon, the concessionaire may outrightly terminate the Contracts
pursuant to Section 8.01(b)(i) and (ii) of the ARCA and seek payment of Liquidated Damages in
accordance with Section 8.02(a) of the ARCA; or the concessionaire may instead require
government to pay the Incremental and Consequential Losses under Section 1.23 of the
ARCA.94The logical conclusion then is that the obligations in the Supplements are not to be
performed on a best-efforts basis only, but are unarguably mandatory in character.
Regarding MIAA's obligation to coordinate with the DPWH for the complete implementation
of the road upgrading and improvement program for Sales, Andrews and Manlunas Roads
(which provide access to the Terminal III site) prior to the In-Service Date, it is essential to take
note of the fact that there was a pressing need to complete the program before the opening
of Terminal III.95 For that reason, the MIAA was compelled to enter into a memorandum of
agreement with the DPWH in order to ensure the timely completion of the road widening and
improvement program. MIAA agreed to advance the total amount of P410.11 million to DPWH
for the works, while the latter was committed to do the following:
"2.2.8. Reimburse all advance payments to MIAA including but not limited to
interest, fees, plus other costs of money within the periods CY2004 and CY2006 with
payment of no less than One Hundred Million Pesos (PhP100M) every year.
"2.2.9. Perform all acts necessary to include in its CY2004 to CY2006 budget
allocation the repayments for the advances made by MIAA, to ensure that the
advances are fully repaid by CY2006. For this purpose, DPWH shall include the
amounts to be appropriated for reimbursement to MIAA in the "Not Needing
Clearance" column of their Agency Budget Matrix (ABM) submitted to the
Department of Budget and Management."
It can be easily inferred, then, that DPWH did not set aside enough funds to be able to complete
the upgrading program for the crucially situated access roads prior to the targeted opening
date of Terminal III; and that, had MIAA not agreed to lend the P410 Million, DPWH would not
have been able to complete the program on time. As a consequence, government would have
been in breach of a material obligation. Hence, this particular undertaking of government may
likewise not be construed as being for best-efforts compliance only.
They also Infringe on the Legislative Prerogative and Power Over the Public Purse
But the particularly sad thing about this transaction between MIAA and DPWH is the fact that
both agencies were maneuvered into (or allowed themselves to be maneuvered into) an
agreement that would ensure delivery of upgraded roads for Piatco's benefit, using funds not
allocated for that purpose. The agreement would then be presented to Congress as a done
deal. Congress would thus be obliged to uphold the agreement and support it with the
necessary allocations and appropriations for three years, in order to enable DPWH to deliver
on its committed repayments to MIAA. The net result is an infringement on the legislative
power over the public purse and a diminution of Congress' control over expenditures of public
funds - a development that would not have come about, were it not for the Supplements. Very
clever but very illegal!
EPILOGUE
What Do We Do Now?
In the final analysis, there remains but one ultimate question, which I raised during the Oral
Argument on December 10, 2002: What do we do with the Piatco Contracts and Terminal
III?96 (Feeding directly into the resolution of the decisive question is the other nagging issue:
Why should we bother with determining the legality and validity of these contracts, when the
Terminal itself has already been built and is practically complete?)
Prescinding from all the foregoing disquisition, I find that all the Piatco contracts, without
exception, are void ab initio, and therefore inoperative. Even the very process by which the
contracts came into being - the bidding and the award - has been riddled with irregularities
galore and blatant violations of law and public policy, far too many to ignore. There is thus no
conceivable way, as proposed by some, of saving one (the original Concession Agreement)
while junking all the rest.
Neither is it possible to argue for the retention of the Draft Concession Agreement (referred
to in the various pleadings as the Contract Bidded Out) as the contract that should be kept in
force and effect to govern the situation, inasmuch as it was never executed by the parties.
What Piatco and the government executed was the Concession Agreement which is entirely
different from the Draft Concession Agreement.
Ultimately, though, it would be tantamount to an outrageous, grievous and unforgivable
mutilation of public policy and an insult to ourselves if we opt to keep in place a contract - any
contract - for to do so would assume that we agree to having Piatco continue as the
concessionaire for Terminal III.
Despite all the insidious contraventions of the Constitution, law and public policy Piatco
perpetrated, keeping Piatco on as concessionaire and even rewarding it by allowing it to
operate and profit from Terminal III - instead of imposing upon it the stiffest sanctions
permissible under the laws - is unconscionable.
It is no exaggeration to say that Piatco may not really mind which contract we decide to keep
in place. For all it may care, we can do just as well without one, if we only let it continue and
operate the facility. After all, the real money will come not from building the Terminal, but
from actually operating it for fifty or more years and charging whatever it feels like, without
any competition at all. This scenario must not be allowed to happen.
If the Piatco contracts are junked altogether as I think they should be, should not AEDC
automatically be considered the winning bidder and therefore allowed to operate the facility?
My answer is a stone-cold 'No'. AEDC never won the bidding, never signed any contract, and
never built any facility. Why should it be allowed to automatically step in and benefit from the
greed of another?
Should government pay at all for reasonable expenses incurred in the construction of the
Terminal? Indeed it should, otherwise it will be unjustly enriching itself at the expense of Piatco
and, in particular, its funders, contractors and investors - both local and foreign. After all, there
is no question that the State needs and will make use of Terminal III, it being part and parcel
of the critical infrastructure and transportation-related programs of government.
In Melchor v. Commission on Audit,97 this Court held that even if the contract therein was void,
the principle of payment by quantum meruit was found applicable, and the contractor was
allowed to recover the reasonable value of the thing or services rendered (regardless of any
agreement as to the supposed value), in order to avoid unjust enrichment on the part of
government. The principle of quantum meruit was likewise applied in Eslao v. Commission on
Audit,98 because to deny payment for a building almost completed and already occupied would
be to permit government to unjustly enrich itself at the expense of the contractor. The same
principle was applied in Republic v. Court of Appeals.99

One possible practical solution would be for government - in view of the nullity of the Piatco
contracts and of the fact that Terminal III has already been built and is almost finished - to bid
out the operation of the facility under the same or analogous principles as build-operate-and-
transfer projects. To be imposed, however, is the condition that the winning bidder must pay
the builder of the facility a price fixed by government based on quantum meruit; on the real,
reasonable - not inflated - value of the built facility.

How the payment or series of payments to the builder, funders, investors and contractors will
be staggered and scheduled, will have to be built into the bids, along with the annual
guaranteed payments to government. In this manner, this whole sordid mess could result in
something truly beneficial for all, especially for the Filipino people.

WHEREFORE, I vote to grant the Petitions and to declare the subject contracts NULL and VOID.
[G.R. No. 155336. November 25, 2004]
COMMISSION ON HUMAN RIGHTS EMPLOYEES ASSOCIATION (CHREA) Represented by its
President, MARCIAL A. SANCHEZ, JR., petitioner, vs. COMMISSION ON HUMAN
RIGHTS, respondent.
DECISION
CHICO-NAZARIO, J.:
Can the Commission on Human Rights lawfully implement an upgrading and
reclassification of personnel positions without the prior approval of the Department of Budget
and Management?
Before this Court is a petition for review filed by petitioner Commission on Human Rights
Employees Association (CHREA) challenging the Decision[1] dated 29 November 2001 of the
Court of Appeals in CA-G.R. SP No. 59678 affirming the Resolutions[2] dated 16 December 1999
and 09 June 2000 of the Civil Service Commission (CSC), which sustained the validity of the
upgrading and reclassification of certain personnel positions in the Commission on Human
Rights (CHR) despite the disapproval thereof by the Department of Budget and Management
(DBM). Also assailed is the resolution dated 11 September 2002 of the Court of Appeals
denying the motion for reconsideration filed by petitioner.
The antecedent facts which spawned the present controversy are as follows:
On 14 February 1998, Congress passed Republic Act No. 8522, otherwise known as the
General Appropriations Act of 1998. It provided for Special Provisions Applicable to All
Constitutional Offices Enjoying Fiscal Autonomy. The last portion of Article XXXIII covers the
appropriations of the CHR. These special provisions state:
1. Organizational Structure. Any provision of law to the contrary notwithstanding and within
the limits of their respective appropriations as authorized in this Act, the Constitutional
Commissions and Offices enjoying fiscal autonomy are authorized to formulate and implement
the organizational structures of their respective offices, to fix and determine the salaries,
allowances, and other benefits of their personnel, and whenever public interest so requires,
make adjustments in their personal services itemization including, but not limited to, the
transfer of item or creation of new positions in their respective offices: PROVIDED, That officers
and employees whose positions are affected by such reorganization or adjustments shall be
granted retirement gratuities and separation pay in accordance with existing laws, which shall
be payable from any unexpended balance of, or savings in the appropriations of their
respective offices: PROVIDED, FURTHER, That the implementation hereof shall be in
accordance with salary rates, allowances and other benefits authorized under compensation
standardization laws.
2. Use of Savings. The Constitutional Commissions and Offices enjoying fiscal autonomy are
hereby authorized to use savings in their respective appropriations for: (a) printing and/or
publication of decisions, resolutions, and training information materials; (b) repair,
maintenance and improvement of central and regional offices, facilities and equipment; (c)
purchase of books, journals, periodicals and equipment; (d) necessary expenses for the
employment of temporary, contractual and casual employees; (e) payment of extraordinary
and miscellaneous expenses, commutable representation and transportation allowances, and
fringe benefits for their officials and employees as may be authorized by law; and (f) other
official purposes, subject to accounting and auditing rules and regulations. (Emphases
supplied)
On the strength of these special provisions, the CHR, through its then Chairperson Aurora
P. Navarette-Recia and Commissioners Nasser A. Marohomsalic, Mercedes V. Contreras,
Vicente P. Sibulo, and Jorge R. Coquia, promulgated Resolution No. A98-047 on 04 September
1998, adopting an upgrading and reclassification scheme among selected positions in the
Commission, to wit:
WHEREAS, the General Appropriations Act, FY 1998, R.A. No. 8522 has provided special
provisions applicable to all Constitutional Offices enjoying Fiscal Autonomy, particularly on
organizational structures and authorizes the same to formulate and implement the
organizational structures of their respective offices to fix and determine the salaries,
allowances and other benefits of their personnel and whenever public interest so requires,
make adjustments in the personnel services itemization including, but not limited to, the
transfer of item or creation of new positions in their respective offices: PROVIDED, That officers
and employees whose positions are affected by such reorganization or adjustments shall be
granted retirement gratuities and separation pay in accordance with existing laws, which shall
be payable from any unexpanded balance of, or savings in the appropriations of their
respective offices;
WHEREAS, the Commission on Human Rights is a member of the Constitutional Fiscal
Autonomy Group (CFAG) and on July 24, 1998, CFAG passed an approved Joint Resolution No.
49 adopting internal rules implementing the special provisions heretoforth mentioned;
NOW THEREFORE, the Commission by virtue of its fiscal autonomy hereby approves and
authorizes the upgrading and augmentation of the commensurate amount generated from
savings under Personal Services to support the implementation of this resolution effective
Calendar Year 1998;
Let the Human Resources Development Division (HRDD) prepare the necessary Notice of Salary
Adjustment and other appropriateP documents to implement this resolution; . . . .[3](Emphasis
supplied)
Annexed to said resolution is the proposed creation of ten additional plantilla positions,
namely: one Director IV position, with Salary Grade 28 for the Caraga Regional Office, four
Security Officer II with Salary Grade 15, and five Process Servers, with Salary Grade 5 under the
Office of the Commissioners. [4]
On 19 October 1998, CHR issued Resolution No. A98-055[5] providing for the
upgrading or raising of salary grades of the following positions in the Commission:
 Position Salary Grade
Number Total Salary
of Requirements
Title
Positions
From To From To
12 Attorney VI Director IV 26 28 P229,104.00
(In the
Regional Field
Offices)
4 Director III 27 28 38,928.00
Director IV
1 24 28 36,744.00
Financial & Director IV
Management
Officer II
1 18 24 51,756.00
Budget Budget
Officer III Officer IV
1 18 24 51,756.00
Accountant Chief
III Accountant
1 18 24 51,756.00
Cashier III Cashier V
1 24 28 36,744.00[6]
Information Director IV
Officer V
 It, likewise, provided for the creation and upgrading of the following positions:

A. Creation

Position Title Salary Grade Total Salary

Number of
Requirements
Positions
4 15 684,780.00
Security Officer II
(Coterminous)

B. Upgrading

Number of Position Title Salary Grade Total Salary

Positions Requirements
From To From To
1 Attorney V Director IV 25 28 P28,092.00
2 Security 11 15 57,456.00
Security
Officer I
Officer II
------------------

Total 3 P 85,548.00[7]

To support the implementation of such scheme, the CHR, in the same resolution, authorized
the augmentation of a commensurate amount generated from savings under Personnel
Services.
By virtue of Resolution No. A98-062 dated 17 November 1998, the CHR collapsed the
vacant positions in the body to provide additional source of funding for said staffing
modification. Among the positions collapsed were: one Attorney III, four Attorney IV, one
Chemist III, three Special Investigator I, one Clerk III, and one Accounting Clerk II.[8]
The CHR forwarded said staffing modification and upgrading scheme to the DBM with a
request for its approval, but the then DBM secretary Benjamin Diokno denied the request on
the following justification:
Based on the evaluations made the request was not favorably considered as it effectively
involved the elevation of the field units from divisions to services.
The present proposal seeks further to upgrade the twelve (12) positions of Attorney VI, SG-26
to Director IV, SG-28. This would elevate the field units to a bureau or regional office, a level
even higher than the one previously denied.
The request to upgrade the three (3) positions of Director III, SG-27 to Director IV, SG-28, in
the Central Office in effect would elevate the services to Office and change the context from
support to substantive without actual change in functions.
In the absence of a specific provision of law which may be used as a legal basis to elevate the
level of divisions to a bureau or regional office, and the services to offices, we reiterate our
previous stand denying the upgrading of the twelve (12) positions of Attorney VI, SG-26 to
Director III, SG-27 or Director IV, SG-28, in the Field Operations Office (FOO) and three (3)
Director III, SG-27 to Director IV, SG-28 in the Central Office.
As represented, President Ramos then issued a Memorandum to the DBM Secretary dated 10
December 1997, directing the latter to increase the number of Plantilla positions in the CHR
both Central and Regional Offices to implement the Philippine Decade Plan on Human Rights
Education, the Philippine Human Rights Plan and Barangay Rights Actions Center in accordance
with existing laws. (Emphasis in the original)
Pursuant to Section 78 of the General Provisions of the General Appropriations Act (GAA) FY
1998, no organizational unit or changes in key positions shall be authorized unless provided by
law or directed by the President, thus, the creation of a Finance Management Office and a
Public Affairs Office cannot be given favorable recommendation.
Moreover, as provided under Section 2 of RA No. 6758, otherwise known as the Compensation
Standardization Law, the Department of Budget and Management is directed to establish and
administer a unified compensation and position classification system in the government. The
Supreme Court ruled in the case of Victorina Cruz vs. Court of Appeals, G.R. No. 119155, dated
January 30, 1996, that this Department has the sole power and discretion to administer the
compensation and position classification system of the National Government.
Being a member of the fiscal autonomy group does not vest the agency with the authority to
reclassify, upgrade, and create positions without approval of the DBM. While the members of
the Group are authorized to formulate and implement the organizational structures of their
respective offices and determine the compensation of their personnel, such authority is not
absolute and must be exercised within the parameters of the Unified Position Classification and
Compensation System established under RA 6758 more popularly known as the Compensation
Standardization Law. We therefore reiterate our previous stand on the matter.[9] (Emphases
supplied)
In light of the DBMs disapproval of the proposed personnel modification scheme, the
CSC-National Capital Region Office, through a memorandum dated 29 March 1999,
recommended to the CSC-Central Office that the subject appointments be rejected owing to
the DBMs disapproval of the plantilla reclassification.
Meanwhile, the officers of petitioner CHREA, in representation of the rank and file
employees of the CHR, requested the CSC-Central Office to affirm the recommendation of the
CSC-Regional Office. CHREA stood its ground in saying that the DBM is the only agency with
appropriate authority mandated by law to evaluate and approve matters of reclassification
and upgrading, as well as creation of positions.
The CSC-Central Office denied CHREAs request in a Resolution dated 16 December 1999,
and reversed the recommendation of the CSC-Regional Office that the upgrading scheme be
censured. The decretal portion of which reads:
WHEREFORE, the request of Ronnie N. Rosero, Hubert V. Ruiz, Flordeliza A. Briones, George Q.
Dumlao [and], Corazon A. Santos-Tiu, is hereby denied.[10]
CHREA filed a motion for reconsideration, but the CSC-Central Office denied the same on
09 June 2000.
Given the cacophony of judgments between the DBM and the CSC, petitioner CHREA
elevated the matter to the Court of Appeals. The Court of Appeals affirmed the
pronouncement of the CSC-Central Office and upheld the validity of the upgrading, retitling,
and reclassification scheme in the CHR on the justification that such action is within the ambit
of CHRs fiscal autonomy. The fallo of the Court of Appeals decision provides:
IN VIEW OF ALL THE FOREGOING, the instant petition is ordered DISMISSED and the questioned
Civil Service Commission Resolution No. 99-2800 dated December 16, 1999 as well as No.
001354 dated June 9, 2000, are hereby AFFIRMED. No cost.[11]
Unperturbed, petitioner filed this petition in this Court contending that:
A.
THE COURT OF APPEALS GRAVELY ERRED WHEN IT HELD THAT UNDER THE 1987
CONSTITUTION, THE COMMISSION ON HUMAN RIGHTS ENJOYS FISCAL AUTONOMY.
B.
THE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING THE CONSTRUCTION OF THE
COMMISSION ON HUMAN RIGHTS OF REPUBLIC ACT NO. 8522 (THE GENERAL
APPROPRIATIONS ACT FOR THE FISCAL YEAR 1998) DESPITE ITS BEING IN SHARP CONFLICT
WITH THE 1987 CONSTITUTION AND THE STATUTE ITSELF.
C.
THE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN AFFIRMING THE VALIDITY OF THE
CIVIL SERVICE COMMISSION RESOLUTION NOS. 992800 AND 001354 AS WELL AS THAT OF THE
OPINION OF THE DEPARTMENT OF JUSTICE IN STATING THAT THE COMMISSION ON HUMAN
RIGHTS ENJOYS FISCAL AUTONOMY UNDER THE 1987 CONSTITUTION AND THAT THIS FISCAL
AUTONOMY INCLUDES THE ACTION TAKEN BY IT IN COLLAPSING, UPGRADING AND
RECLASSIFICATION OF POSITIONS THEREIN.[12]
The central question we must answer in order to resolve this case is: Can the Commission
on Human Rights validly implement an upgrading, reclassification, creation, and collapsing
of plantilla positions in the Commission without the prior approval of the Department of
Budget and Management?
Petitioner CHREA grouses that the Court of Appeals and the CSC-Central Office both
erred in sanctioning the CHRs alleged blanket authority to upgrade, reclassify, and create
positions inasmuch as the approval of the DBM relative to such scheme is still indispensable.
Petitioner bewails that the CSC and the Court of Appeals erroneously assumed that CHR enjoys
fiscal autonomy insofar as financial matters are concerned, particularly with regard to the
upgrading and reclassification of positions therein.
Respondent CHR sharply retorts that petitioner has no locus standi considering that
there exists no official written record in the Commission recognizing petitioner as a bona
fide organization of its employees nor is there anything in the records to show that its
president, Marcial A. Sanchez, Jr., has the authority to sue the CHR. The CHR contends that it
has the authority to cause the upgrading, reclassification, plantilla creation, and collapsing
scheme sans the approval of the DBM because it enjoys fiscal autonomy.
After a thorough consideration of the arguments of both parties and an assiduous
scrutiny of the records in the case at bar, it is the Courts opinion that the present petition is
imbued with merit.
On petitioners personality to bring this suit, we held in a multitude of cases that a proper
party is one who has sustained or is in immediate danger of sustaining an injury as a result of
the act complained of.[13] Here, petitioner, which consists of rank and file employees of
respondent CHR, protests that the upgrading and collapsing of positions benefited only a select
few in the upper level positions in the Commission resulting to the demoralization of the rank
and file employees. This sufficiently meets the injury test. Indeed, the CHRs upgrading scheme,
if found to be valid, potentially entails eating up the Commissions savings or that portion of its
budgetary pie otherwise allocated for Personnel Services, from which the benefits of the
employees, including those in the rank and file, are derived.
Further, the personality of petitioner to file this case was recognized by the CSC when it
took cognizance of the CHREAs request to affirm the recommendation of the CSC-National
Capital Region Office. CHREAs personality to bring the suit was a non-issue in the Court of
Appeals when it passed upon the merits of this case. Thus, neither should our hands be tied by
this technical concern. Indeed, it is settled jurisprudence that an issue that was neither raised
in the complaint nor in the court below cannot be raised for the first time on appeal, as to do
so would be offensive to the basic rules of fair play, justice, and due process.[14]
We now delve into the main issue of whether or not the approval by the DBM is a
condition precedent to the enactment of an upgrading, reclassification, creation and collapsing
of plantilla positions in the CHR.
Germane to our discussion is Rep. Act No. 6758, An Act Prescribing a Revised
Compensation and Position Classification System in the Government and For Other Purposes,
or the Salary Standardization Law, dated 01 July 1989, which provides in Sections 2 and 4
thereof that it is the DBM that shall establish and administer a unified Compensation and
Position Classification System. Thus:
SEC. 2. Statement of Policy. -- It is hereby declared the policy of the State to provide equal pay
for substantially equal work and to base differences in pay upon substantive differences in
duties and responsibilities, and qualification requirements of the positions. In determining
rates of pay, due regard shall be given to, among others, prevailing rates in the private sector
for comparable work. For this purpose, the Department of Budget and Management (DBM) is
hereby directed to establish and administer a unified Compensation and Position Classification
System, hereinafter referred to as the System as provided for in Presidential Decree No. 985, as
amended, that shall be applied for all government entities, as mandated by the
Constitution. (Emphasis supplied.)
SEC. 4. Coverage. The Compensation and Position Classification System herein provided shall
apply to all positions, appointive or elective, on full or part-time basis, now existing or hereafter
created in the government, including government-owned or controlled corporations and
government financial institutions.
The term government refers to the Executive, the Legislative and the Judicial Branches and the
Constitutional Commissions and shall include all, but shall not be limited to, departments,
bureaus, offices, boards, commissions, courts, tribunals, councils, authorities, administrations,
centers, institutes, state colleges and universities, local government units, and the armed
forces. The term government-owned or controlled corporations and financial institutions shall
include all corporations and financial institutions owned or controlled by the National
Government, whether such corporations and financial institutions perform governmental or
proprietary functions. (Emphasis supplied.)
The disputation of the Court of Appeals that the CHR is exempt from the long arm of the
Salary Standardization Law is flawed considering that the coverage thereof, as defined above,
encompasses the entire gamut of government offices, sans qualification.
This power to administer is not purely ministerial in character as erroneously held by the
Court of Appeals. The word to administer means to control or regulate in behalf of others; to
direct or superintend the execution, application or conduct of; and to manage or conduct public
affairs, as to administer the government of the state.[15]
 The regulatory power of the DBM on matters of compensation is encrypted not only in
law, but in jurisprudence as well. In the recent case of Philippine Retirement Authority (PRA) v.
Jesusito L. Buag,[16] this Court, speaking through Mr. Justice Reynato Puno, ruled that
compensation, allowances, and other benefits received by PRA officials and employees
without the requisite approval or authority of the DBM are unauthorized and irregular. In the
words of the Court
Despite the power granted to the Board of Directors of PRA to establish and fix a compensation
and benefits scheme for its employees, the same is subject to the review of the Department
of Budget and Management. However, in view of the express powers granted to PRA under its
charter, the extent of the review authority of the Department of Budget and Management is
limited. As stated in Intia, the task of the Department of Budget and Management is simply to
review the compensation and benefits plan of the government agency or entity concerned and
determine if the same complies with the prescribed policies and guidelines issued in this
regard. The role of the Department of Budget and Management is supervisorial in nature, its
main duty being to ascertain that the proposed compensation, benefits and other incentives
to be given to PRA officials and employees adhere to the policies and guidelines issued in
accordance with applicable laws.
In Victorina Cruz v. Court of Appeals,[17] we held that the DBM has the sole power and
discretion to administer the compensation and position classification system of the national
government.
In Intia, Jr. v. Commission on Audit,[18] the Court held that although the charter[19] of the
Philippine Postal Corporation (PPC) grants it the power to fix the compensation and benefits
of its employees and exempts PPC from the coverage of the rules and regulations of the
Compensation and Position Classification Office, by virtue of Section 6 of P.D. No. 1597, the
compensation system established by the PPC is, nonetheless, subject to the review of the DBM.
This Court intoned:
It should be emphasized that the review by the DBM of any PPC resolution affecting the
compensation structure of its personnel should not be interpreted to mean that the DBM can
dictate upon the PPC Board of Directors and deprive the latter of its discretion on the matter.
Rather, the DBMs function is merely to ensure that the action taken by the Board of Directors
complies with the requirements of the law, specifically, that PPCs compensation system
conforms as closely as possible with that provided for under R.A. No. 6758. (Emphasis supplied.)
As measured by the foregoing legal and jurisprudential yardsticks, the imprimatur of the
DBM must first be sought prior to implementation of any reclassification or upgrading of
positions in government. This is consonant to the mandate of the DBM under the Revised
Administrative Code of 1987, Section 3, Chapter 1, Title XVII, to wit:
SEC. 3. Powers and Functions. The Department of Budget and Management shall assist the
President in the preparation of a national resources and expenditures budget, preparation,
execution and control of the National Budget, preparation and maintenance of accounting
systems essential to the budgetary process, achievement of more economy and efficiency in
the management of government operations, administration of compensation and position
classification systems, assessment of organizational effectiveness and review and evaluation
of legislative proposals having budgetary or organizational implications. (Emphasis supplied.)
Irrefragably, it is within the turf of the DBM Secretary to disallow the upgrading,
reclassification, and creation of additional plantilla positions in the CHR based on its finding
that such scheme lacks legal justification.
Notably, the CHR itself recognizes the authority of the DBM to deny or approve
the proposed reclassification of positions as evidenced by its three letters to the DBM
requesting approval thereof. As such, it is now estopped from now claiming that the nod of
approval it has previously sought from the DBM is a superfluity.
The Court of Appeals incorrectly relied on the pronouncement of the CSC-Central Office
that the CHR is a constitutional commission, and as such enjoys fiscal autonomy.[20]
Palpably, the Court of Appeals Decision was based on the mistaken premise that the CHR
belongs to the species of constitutional commissions. But, Article IX of the Constitution states
in no uncertain terms that only the CSC, the Commission on Elections, and the Commission on
Audit shall be tagged as Constitutional Commissions with the appurtenant right to fiscal
autonomy. Thus:
Sec. 1. The Constitutional Commissions, which shall be independent, are the Civil Service
Commission, the Commission on Elections, and the Commission on Audit.
Sec. 5. The Commission shall enjoy fiscal autonomy. Their approved annual appropriations
shall be automatically and regularly released.
Along the same vein, the Administrative Code, in Chapter 5, Sections 24 and 26 of Book
II on Distribution of Powers of Government, the constitutional commissions shall include only
the Civil Service Commission, the Commission on Elections, and the Commission on Audit,
which are granted independence and fiscal autonomy. In contrast, Chapter 5, Section 29
thereof, is silent on the grant of similar powers to the other bodies including the CHR. Thus:
SEC. 24. Constitutional Commissions. The Constitutional Commissions, which shall be
independent, are the Civil Service Commission, the Commission on Elections, and the
Commission on Audit.
SEC. 26. Fiscal Autonomy. The Constitutional Commissions shall enjoy fiscal autonomy. The
approved annual appropriations shall be automatically and regularly released.
SEC. 29. Other Bodies. There shall be in accordance with the Constitution, an Office of the
Ombudsman, a Commission on Human Rights, and independent central monetary authority,
and a national police commission. Likewise, as provided in the Constitution, Congress may
establish an independent economic and planning agency. (Emphasis ours.)
From the 1987 Constitution and the Administrative Code, it is abundantly clear that the
CHR is not among the class of Constitutional Commissions. As expressed in the oft-repeated
maxim expressio unius est exclusio alterius, the express mention of one person, thing, act or
consequence excludes all others. Stated otherwise, expressium facit cessare tacitum what is
expressed puts an end to what is implied.[21]
Nor is there any legal basis to support the contention that the CHR enjoys fiscal
autonomy. In essence, fiscal autonomy entails freedom from outside control and limitations,
other than those provided by law. It is the freedom to allocate and utilize funds granted by
law, in accordance with law, and pursuant to the wisdom and dispatch its needs may require
from time to time.[22] In Blaquera v. Alcala and Bengzon v. Drilon,[23] it is understood that it is
only the Judiciary, the Civil Service Commission, the Commission on Audit, the Commission on
Elections, and the Office of the Ombudsman, which enjoy fiscal autonomy. Thus,
in Bengzon,[24] we explained:
As envisioned in the Constitution, the fiscal autonomy enjoyed by the Judiciary, the Civil Service
Commission, the Commission on Audit, the Commission on Elections, and the Office of the
Ombudsman contemplates a guarantee of full flexibility to allocate and utilize their resources
with the wisdom and dispatch that their needs require. It recognizes the power and authority
to levy, assess and collect fees, fix rates of compensation not exceeding the highest rates
authorized by law for compensation and pay plans of the government and allocate and
disburse such sums as may be provided by law or prescribed by them in the course of the
discharge of their functions.
...
The Judiciary, the Constitutional Commissions, and the Ombudsman must have the
independence and flexibility needed in the discharge of their constitutional duties. The
imposition of restrictions and constraints on the manner the independent constitutional
offices allocate and utilize the funds appropriated for their operations is anathema to fiscal
autonomy and violative not only of the express mandate of the Constitution but especially as
regards the Supreme Court, of the independence and separation of powers upon which the
entire fabric of our constitutional system is based. In the interest of comity and cooperation,
the Supreme Court, [the] Constitutional Commissions, and the Ombudsman have so far limited
their objections to constant reminders. We now agree with the petitioners that this grant of
autonomy should cease to be a meaningless provision. (Emphasis supplied.)
Neither does the fact that the CHR was admitted as a member by the Constitutional Fiscal
Autonomy Group (CFAG) ipso facto clothed it with fiscal autonomy. Fiscal autonomy is a
constitutional grant, not a tag obtainable by membership.
We note with interest that the special provision under Rep. Act No. 8522, while cited
under the heading of the CHR, did not specifically mention CHR as among those offices to which
the special provision to formulate and implement organizational structures apply, but merely
states its coverage to include Constitutional Commissions and Offices enjoying fiscal autonomy.
In contrast, the Special Provision Applicable to the Judiciary under Article XXVIII of the General
Appropriations Act of 1998 specifically mentions that such special provision applies to the
judiciary and had categorically authorized the Chief Justice of the Supreme Court to formulate
and implement the organizational structure of the Judiciary, to wit:
1. Organizational Structure. Any provision of law to the contrary notwithstanding and within
the limits of their respective appropriations authorized in this Act, the Chief Justice of the
Supreme Court is authorized to formulate and implement organizational structure of the
Judiciary, to fix and determine the salaries, allowances, and other benefits of their personnel,
and whenever public interest so requires, make adjustments in the personal services
itemization including, but not limited to, the transfer of item or creation of new positions in
the Judiciary; PROVIDED, That officers and employees whose positions are affected by such
reorganization or adjustments shall be granted retirement gratuities and separation pay in
accordance with existing law, which shall be payable from any unexpended balance of, or
savings in the appropriations of their respective offices: PROVIDED, FURTHER, That the
implementation hereof shall be in accordance with salary rates, allowances and other benefits
authorized under compensation standardization laws. (Emphasis supplied.)
All told, the CHR, although admittedly a constitutional creation is, nonetheless, not
included in the genus of offices accorded fiscal autonomy by constitutional or legislative fiat.
Even assuming en arguendo that the CHR enjoys fiscal autonomy, we share the stance of
the DBM that the grant of fiscal autonomy notwithstanding, all government offices must, all
the same, kowtow to the Salary Standardization Law. We are of the same mind with the DBM
on its standpoint, thus-
Being a member of the fiscal autonomy group does not vest the agency with the authority to
reclassify, upgrade, and create positions without approval of the DBM. While the members of
the Group are authorized to formulate and implement the organizational structures of their
respective offices and determine the compensation of their personnel, such authority is not
absolute and must be exercised within the parameters of the Unified Position Classification and
Compensation System established under RA 6758 more popularly known as the Compensation
Standardization Law.[25] (Emphasis supplied.)
The most lucid argument against the stand of respondent, however, is the provision of
Rep. Act No. 8522 that the implementation hereof shall be in accordance with salary rates,
allowances and other benefits authorized under compensation standardization laws.[26]
Indeed, the law upon which respondent heavily anchors its case upon has expressly
provided that any form of adjustment in the organizational structure must be within the
parameters of the Salary Standardization Law.
The Salary Standardization Law has gained impetus in addressing one of the basic causes
of discontent of many civil servants.[27] For this purpose, Congress has delegated to the DBM
the power to administer the Salary Standardization Law and to ensure that the spirit behind it
is observed. This power is part of the system of checks and balances or system of restraints in
our government. The DBMs exercise of such authority is not in itself an arrogation inasmuch
as it is pursuant to the paramount law of the land, the Salary Standardization Law and the
Administrative Code.
In line with its role to breathe life into the policy behind the Salary Standardization Law
of providing equal pay for substantially equal work and to base differences in pay upon
substantive differences in duties and responsibilities, and qualification requirements of the
positions, the DBM, in the case under review, made a determination, after a thorough
evaluation, that the reclassification and upgrading scheme proposed by the CHR lacks legal
rationalization.

The DBM expounded that Section 78 of the general provisions of the General
Appropriations Act FY 1998, which the CHR heavily relies upon to justify its reclassification
scheme, explicitly provides that no organizational unit or changes in key positions shall be
authorized unless provided by law or directed by the President. Here, the DBM discerned that
there is no law authorizing the creation of a Finance Management Office and a Public Affairs
Office in the CHR. Anent CHRs proposal to upgrade twelve positions of Attorney VI, SG-26 to
Director IV, SG-28, and four positions of Director III, SG-27 to Director IV, SG-28, in the Central
Office, the DBM denied the same as this would change the context from support to substantive
without actual change in functions.

This view of the DBM, as the laws designated body to implement and administer a unified
compensation system, is beyond cavil. The interpretation of an administrative government
agency, which is tasked to implement a statute is accorded great respect and ordinarily
controls the construction of the courts. In Energy Regulatory Board v. Court of Appeals,[28] we
echoed the basic rule that the courts will not interfere in matters which are addressed to the
sound discretion of government agencies entrusted with the regulation of activities coming
under the special technical knowledge and training of such agencies.

To be sure, considering his expertise on matters affecting the nations coffers, the
Secretary of the DBM, as the Presidents alter ego, knows from where he speaks inasmuch as
he has the front seat view of the adverse effects of an unwarranted upgrading or creation of
positions in the CHR in particular and in the entire government in general.

WHEREFORE, the petition is GRANTED, the Decision dated 29 November 2001 of the
Court of Appeals in CA-G.R. SP No. 59678 and its Resolution dated 11 September 2002 are
hereby REVERSED and SET ASIDE. The ruling dated 29 March 1999 of the Civil Service
Commision-National Capital Region is REINSTATED. The Commission on Human Rights
Resolution No. A98-047 dated 04 September 1998, Resolution No. A98-055 dated 19 October
1998 and Resolution No. A98-062 dated 17 November 1998 without the approval of the
Department of Budget and Management are disallowed. No pronouncement as to costs.

SO ORDERED.

Puno, Acting C.J., Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.
G.R. No. 157509 | January 18, 2005
AUTOMOTIVE INDUSTRY WORKERS ALLIANCE (AIWA) and its Affiliated Unions:
Mitsubishi Motors Workers Phils. Union; Mitsubishi Motors Phils. Supervisors
Union, Nissan Motors Phils., Inc. Workers Union, Toyota Motors Phils. Workers
Union, DURASTEEL WORKERS UNION, FILSHUTTERS EMPLOYEES & WORKERS
UNION, NATIONAL LABOR UNION, PEPSI-COLA SUPERVISORS AND EMPLOYEES
UNION, PSBA FACULTY ASSOCIATION, PLDT SECURITY PERSONNEL UNION,
PUREFOODS UNIFIED LABOR ORGANIZATION, SAMAHANG MANGGAGAWA NG
BICUTAN CONTAINERS CORP., SAMAHANG MANGGAGAWA NG CINDERELLA,
SAMAHANG MANGGAGAWA NG LAURA’S FOOD PRODUCTS, petitioners,
vs.
HON. ALBERTO ROMULO, in his capacity as Executive Secretary, and HON. PATRICIA
STO. TOMAS, in her capacity as Secretary of Labor and Employment, respondents.
DECISION
CHICO-NAZARIO, J.:
Petitioners, composed of ten (10) labor unions, call upon this Court to exercise its
power of judicial review to declare as unconstitutional an executive order assailed to
be in derogation of the constitutional doctrine of separation of powers.
In an original action for certiorari, petitioners invoke their status as labor unions and
as taxpayers whose rights and interests are allegedly violated and prejudiced by
Executive Order No. 185 dated 10 March 2003 whereby administrative supervision
over the National Labor Relations Commission (NLRC), its regional branches and all
its personnel including the executive labor arbiters and labor arbiters was transferred
from the NLRC Chairperson to the Secretary of Labor and Employment. In support of
their position,1 petitioners argue that the NLRC -- created by Presidential Decree No.
442, otherwise known as the Labor Code, during Martial Law – was an integral part
of the Department (then Ministry) of Labor and Employment (DOLE) under the
administrative supervision of the Secretary of Justice. During the time of President
Corazon C. Aquino, and while she was endowed with legislative functions after EDSA
I, Executive Order No. 2922 was issued whereby the NLRC became an agency attached
to the DOLE for policy and program coordination and for administrative supervision.
On 02 March 1989, Article 213 of the Labor Code was expressly amended by Republic
Act No. 6715 declaring that the NLRC was to be attached to the DOLE for program
and policy coordination only while the administrative supervision over the NLRC, its
regional branches and personnel, was turned over to the NLRC Chairman. The subject
E.O. No. 185, in authorizing the Secretary of Labor to exercise administrative
supervision over the NLRC, its regional branches and personnel, allegedly reverted to
the pre-Rep. Act No. 6715 set-up, amending the latter law which only Congress can
do.
The respondents herein, as represented by the Office of the Solicitor General,
opposed the petition on procedural3and substantive4 grounds. Procedurally, it is
alleged that the petition does not pose an actual case or controversy upon which
judicial review may be exercised as petitioners have not specifically cited how E.O.
No. 185 has prejudiced or threatened to prejudice their rights and existence as labor
unions and as taxpayers. Closely intertwined therewith, respondents further argue
that petitioners have no locus standi to assail the validity of E.O. No. 185, not even in
their capacity as taxpayers, considering that labor unions are exempt from paying
taxes, citing Sec. 30 of the Tax Reform Act of 1997. Even assuming that their individual
members are taxpayers, respondents maintain that a taxpayer suit will not prosper
as E.O. No. 185 does not require additional appropriation for its implementation. As
the petition can be decided without passing on the validity of the subject executive
order, respondents conclude that the same should be forthwith dismissed.
Even on the merits, respondents advance the view that the petition must fail as the
administrative supervision granted by the Labor Code to the NLRC Chairman over the
NLRC, its regional branches and personnel, does not place them beyond the
President’s broader power of control and supervision, a power conferred no less than
by the Constitution in Section 17, Article VII thereof. Thus, in the exercise of the
President’s power of control and supervision, he can generally oversee the
operations of the NLRC, its regional branches and personnel thru his alter ego, the
Secretary of Labor, pursuant to the doctrine of qualified political agency.
In their Reply,5 petitioners affirm their locus standi contending that they are suing for
and in behalf of their members – estimated to be more or less fifty thousand (50,000)
workers – who are the real parties to be affected by the resolution of this Court. They
likewise maintain that they are suing in behalf of the employees of the NLRC who
have pending cases for dismissal. Thus, possessed of the necessary standing,
petitioners theorize that the issue before this Court must necessarily be decided as it
involves an act of the Chief Executive amending a provision of law.
For clarity, E.O. No. 185 is hereby quoted:
EXECUTIVE ORDER NO. 185
AUTHORIZING THE SECRETARY OF LABOR AND EMPLOYMENT TO EXERCISE
ADMINISTRATIVE SUPERVISION OVER THE NATIONAL LABOR RELATIONS
COMMISSION
WHEREAS, Section 17, Article VII of the Constitution provides that the President shall
have control of all executive departments, bureaus and offices and shall ensure that
the laws be faithfully executed;
WHEREAS, the National Labor Relations Commission (NLRC) which was created by
virtue of Presidential Decree No. 442, otherwise known as the "Labor Code of the
Philippines," is an agency under the Executive Department and was originally
envisaged as being an integral part of the Department (then Ministry) of Labor and
Employment (DOLE) under the administrative supervision of the Secretary of Labor
and Employment ("Secretary of Labor");
WHEREAS, upon the issuance of Executive Order No. 292, otherwise known as the
"Revised Administrative Code of 1987" (the "Administrative Code"), the NLRC, by
virtue of Section 25, Chapter 6, Title VII, Book IV thereof, became an agency attached
to the DOLE for policy and program coordination and administrative supervision;
WHEREAS, Article 213 of the Labor Code and Section 25, Chapter 6, Title VII, Book IV
of the Administrative Code were amended by Republic Act. No. 6715 approved on
March 2, 1989, which provides that the NLRC shall be attached to the DOLE for
program and policy coordination only and transferred administrative supervision
over the NLRC, all its regional branches and personnel to the NLRC Chairman;
WHEREAS, Section 16, Article III of the Constitution guarantees the right of all persons
to a speedy disposition of their cases before all judicial, quasi-judicial and
administrative bodies;
WHEREAS, the Secretary of Labor, after evaluating the NLRC’s performance record in
the last five (5) years, including the rate of disposition of pending cases before it, has
informed the President that there is a need to expedite the disposition of labor cases
pending before the NLRC and all its regional and sub-regional branches or provincial
extension units and initiate potent measures to prevent graft and corruption therein
so as to reform its systems and personnel, as well as infuse the organization with a
sense of public service in consonance with the imperative of change for the greater
interest of the people;
WHEREAS, after consultations with the relevant sectors, the Secretary of Labor has
recommended that the President, pursuant to her powers under the Constitution and
existing laws, authorize the Secretary of Labor to exercise administrative supervision
over the NLRC and all its regional and sub-regional branches or provincial extension
units with the objective of improving the rate of disposition of pending cases and
institute adequate measures for the prevention of graft and corruption within the
said agency;
NOW, THEREFORE, I, GLORIA MACAPAGAL ARROYO, President of the Republic of the
Philippines, by virtue of the powers vested in me by the Constitution and existing
laws, do hereby order:
SECTION 1. Authority To Exercise Administrative Supervision. – The Secretary of Labor
is hereby authorized to exercise administrative supervision over the NLRC, its
regional branches and all its personnel, including the Executive Labor Arbiters and
Labor Arbiters, with the objective of improving the rate of disposition of cases
pending before it and its regional and sub-regional branches or provincial extension
units and to institute adequate measures for the prevention of graft and corruption
within the said agency.
For this purpose, the Secretary of Labor shall, among others:
a. Generally oversee the operations of the NLRC and its regional and sub-
regional branches or provincial extension units for the purpose of ensuring
that cases pending before them are decided or resolved expeditiously;
b. Require the submission of reports as the Secretary of Labor may deem
necessary;
c. Initiate measures within the agency to prevent graft and corruption,
including but not limited to, the conduct of management audits,
performance evaluations and inspections to determine compliance with
established policies, standards and guidelines;
d. To take such action as may be necessary for the proper performance of
official functions, including rectification of violations, abuses and other
forms of mal-administration; and
e. Investigate, on its own or upon complaint, matters involving disciplinary
action against any of the NLRC’s personnel, including Presidential
appointees, in accordance with existing laws, rules and regulations. After
completing his/her investigation, the Secretary of Labor shall submit a
report to the President on the investigation conducted with a
recommendation as to the penalty to be imposed or other action to be
taken, including referral to the Presidential Anti-Graft Commission (PAGC),
the Office of the Ombudsman or any other office, committee, commission,
agency, department, instrumentality or branch of the government for
appropriate action.
The authority conferred herein upon the Secretary of Labor shall not extend to the
power to review, reverse, revise, or modify the decisions of the NLRC in the exercise
of its quasi-judicial functions (cf. Section 38(2) (b), Chapter 7, Book IV, Administrative
Code).
SECTION 2. Report to the Secretary of Labor. – The NLRC, through its Chairman, shall
submit a report to the Secretary of Labor within thirty (30) days from issuance of this
Executive Order, on the following matters:
a. Performance Report/Audit for the last five (5) years, including list of
pending cases and cases disposed of within the said period by the NLRC en
banc, by Division and by the Labor Arbiters in each of its regional and sub-
regional branches or provincial extension units;
b. Detailed Master Plan on how to liquidate its backlog of cases with clear
timetables to clean up its dockets within six (6) months from the issuance
hereof;
c. Complete inventory of its assets and list of personnel indicating their
present positions and stations; and
d. Such other matters as may be required by the Secretary of Labor.
SECTION 3. Rules and Regulations. – The Secretary of Labor, in consultation with the
Chairman of the NLRC, is hereby authorized to issue rules and regulations for the
effective implementation of the provisions of this Executive Order.
SECTION 4. Repealing Clause. All laws, executive issuances, rules and regulations or
parts thereof which are inconsistent with the provisions of this Executive Order are
hereby repealed, amended, or modified accordingly.
SECTION 5. Effectivity. – This Executive Order shall take effect immediately upon the
completion of its publication in the Official Gazette or in a newspaper of general
circulation in the country.
City of Manila, March 10, 2003.6
The constitutionality of a governmental act having been challenged, it comes as no
surprise that the first line of defense is to question the standing of petitioners and
the justiciability of herein case.
It is hornbook doctrine that the exercise of the power of judicial review requires the
concurrence of the following requisites, namely: (1) the existence of an appropriate
case; (2) an interest personal and substantial by the party raising the constitutional
question; (3) the plea that the function be exercised at the earliest opportunity; and
(4) the necessity that the constitutional question be passed upon in order to decide
the case.71awphi1.nét
As correctly pointed out by respondents, judicial review cannot be exercised in vacuo.
The function of the courts is to determine controversies between litigants and not to
give advisory opinions.8 The power of judicial review can only be exercised in
connection with a bona fide case or controversy which involves the statute sought to
be reviewed.9
Even with the presence of an actual case or controversy, the Court may refuse to
exercise judicial review unless the constitutional question is brought before it by a
party having the requisite standing to challenge it.10 Legal standing or locus standi is
defined as a "personal and substantial interest in the case such that the party has
sustained or will sustain direct injury as a result of the governmental act that is being
challenged."11 For a citizen to have standing, he must establish that he has suffered
some actual or threatened injury as a result of the allegedly illegal conduct of the
government; the injury is fairly traceable to the challenged action; and the injury is
likely to be redressed by a favorable action.12
Petitioners have not shown that they have sustained or are in danger of sustaining
any personal injury attributable to the enactment of E.O. No. 185. As labor unions
representing their members, it cannot be said that E.O. No. 185 will prejudice their
rights and interests considering that the scope of the authority conferred upon the
Secretary of Labor does not extend to the power to review, reverse, revise or modify
the decisions of the NLRC in the exercise of its quasi-judicial functions.13 Thus, only
NLRC personnel who may find themselves the subject of the Secretary of Labor’s
disciplinary authority, conferred by Section 1(d) of the subject executive order, may
be said to have a direct and specific interest in raising the substantive issue herein.
Moreover, and if at all, only Congress, and not petitioners, can claim any injury14 from
the alleged executive encroachment of the legislative function to amend, modify
and/or repeal laws.
Neither can standing be conferred on petitioners as taxpayers since petitioners have
not established disbursement of public funds in contravention of law or the
Constitution.15 A taxpayer’s suit is properly brought only when there is an exercise of
the spending or taxing power of Congress.16 As correctly pointed out by respondents,
E.O. No. 185 does not even require for its implementation additional appropriation.
All told, if we were to follow the strict rule on locus standi, this petition should be
forthwith dismissed on that score. The rule on standing, however, is a matter of
procedure, hence, can be relaxed for nontraditional plaintiffs like ordinary citizens,
taxpayers and legislators when the public interest so requires, such as when the
matter is of transcendental importance, of overarching significance to society, or of A lesser but not insignificant reason for screening the standing of persons who desire
paramount public interest.171awphi1.nét to litigate constitutional issues is economic in character. Given the sparseness of our
resources, the capacity of courts to render efficient judicial service to our people is
The question is, does the issue posed in this petition meet the exacting standard severely limited. For courts to indiscriminately open their doors to all types of suits
required for this Court to take the liberal approach and recognize the standing of and suitors is for them to unduly overburden their dockets, and ultimately render
herein petitioners? themselves ineffective dispensers of justice. To be sure, this is an evil that clearly
confronts our judiciary today.
The instant petition fails to persuade us.
All things considered, whether or not E.O. No. 185 is indeed unconstitutional will have
The subject matter of E.O. No. 185 is the grant of authority by the President to the to await the proper party in a proper case to assail its validity.
Secretary of Labor to exercise administrative supervision over the NLRC, its regional
branches and all its personnel, including the Executive Labor Arbiters and Labor WHEREFORE, premises considered, the instant petition dated 27 March 2003 is
Arbiters. Its impact, sans the challenge to its constitutionality, is thereby limited to hereby DISMISSED for lack of merit. No costs.
the departments to which it is addressed. Taking our cue from the early case of Olsen
v. Herstein and Rafferty,18 the subject executive order can be considered as nothing SO ORDERED.
more or less than a command from a superior to an inferior. It creates no relation
except between the official who issued it and the officials who received it. It has for
its object simply the efficient and economical administration of the affairs of the
department to which it is issued in accordance with the law governing the subject
matter. Administrative in its nature, the subject order does not pass beyond the limits
of the departments to which it is directed, hence, it has not created any rights in third
persons, not even in the fifty thousand or so union members being represented by
petitioners who may or may not have pending cases before the labor arbiters or the
NLRC.

In fine, considering that the governmental act being questioned has a limited reach,
its impact confined to corridors of the executive department, this is not one of those
exceptional occasions where the Court is justified in sweeping aside a critical
procedural requirement, rooted as it is in the constitutionally enshrined principle of
separation of powers. As succinctly put by Mr. Justice Reynato S. Puno in his
dissenting opinion in the first Kilosbayan case:19

. . . [C]ourts are neither free to decide all kinds of cases dumped into their laps nor
are they free to open their doors to all parties or entities claiming a grievance. The
rationale for this constitutional requirement of locus standi is by no means trifle. It is
intended "to assure a vigorous adversary presentation of the case, and, perhaps more
importantly to warrant the judiciary’s overruling the determination of a coordinate,
democratically elected organ of government." 20 It thus goes to the very essence of
representative democracies.

...
G.R. No. 133250 | July 9, 2002
FRANCISCO I. CHAVEZ, petitioner,
vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents.
CARPIO, J.:
This is an original Petition for Mandamus with prayer for a writ of preliminary
injunction and a temporary restraining order. The petition seeks to compel the Public
Estates Authority ("PEA" for brevity) to disclose all facts on PEA's then on-going
renegotiations with Amari Coastal Bay and Development Corporation ("AMARI" for
brevity) to reclaim portions of Manila Bay. The petition further seeks to enjoin PEA
from signing a new agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the Commissioner of Public
Highways, signed a contract with the Construction and Development Corporation of
the Philippines ("CDCP" for brevity) to reclaim certain foreshore and offshore areas
of Manila Bay. The contract also included the construction of Phases I and II of the
Manila-Cavite Coastal Road. CDCP obligated itself to carry out all the works in
consideration of fifty percent of the total reclaimed land.
On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree
No. 1084 creating PEA. PD No. 1084 tasked PEA "to reclaim land, including foreshore
and submerged areas," and "to develop, improve, acquire, x x x lease and sell any and
all kinds of lands."1 On the same date, then President Marcos issued Presidential
Decree No. 1085 transferring to PEA the "lands reclaimed in the foreshore and
offshore of the Manila Bay"2 under the Manila-Cavite Coastal Road and Reclamation
Project (MCCRRP).
On December 29, 1981, then President Marcos issued a memorandum directing PEA
to amend its contract with CDCP, so that "[A]ll future works in MCCRRP x x x shall be
funded and owned by PEA." Accordingly, PEA and CDCP executed a Memorandum of
Agreement dated December 29, 1981, which stated:
"(i) CDCP shall undertake all reclamation, construction, and such other
works in the MCCRRP as may be agreed upon by the parties, to be paid
according to progress of works on a unit price/lump sum basis for items of
work to be agreed upon, subject to price escalation, retention and other
terms and conditions provided for in Presidential Decree No. 1594. All the
financing required for such works shall be provided by PEA.
xxx
(iii) x x x CDCP shall give up all its development rights and hereby agrees to
cede and transfer in favor of PEA, all of the rights, title, interest and
participation of CDCP in and to all the areas of land reclaimed by CDCP in the
MCCRRP as of December 30, 1981 which have not yet been sold, transferred
or otherwise disposed of by CDCP as of said date, which areas consist of
approximately Ninety-Nine Thousand Four Hundred Seventy Three (99,473)
square meters in the Financial Center Area covered by land pledge No. 5 and
approximately Three Million Three Hundred Eighty Two Thousand Eight
Hundred Eighty Eight (3,382,888) square meters of reclaimed areas at
varying elevations above Mean Low Water Level located outside the
Financial Center Area and the First Neighborhood Unit." 3
On January 19, 1988, then President Corazon C. Aquino issued Special Patent No.
3517, granting and transferring to PEA "the parcels of land so reclaimed under the
Manila-Cavite Coastal Road and Reclamation Project (MCCRRP) containing a total
area of one million nine hundred fifteen thousand eight hundred ninety four
(1,915,894) square meters." Subsequently, on April 9, 1988, the Register of Deeds of
the Municipality of Parañaque issued Transfer Certificates of Title Nos. 7309, 7311,
and 7312, in the name of PEA, covering the three reclaimed islands known as the
"Freedom Islands" located at the southern portion of the Manila-Cavite Coastal Road,
Parañaque City. The Freedom Islands have a total land area of One Million Five
Hundred Seventy Eight Thousand Four Hundred and Forty One (1,578,441) square
meters or 157.841 hectares.
On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for brevity)
with AMARI, a private corporation, to develop the Freedom Islands. The JVA also
required the reclamation of an additional 250 hectares of submerged areas
surrounding these islands to complete the configuration in the Master Development
Plan of the Southern Reclamation Project-MCCRRP. PEA and AMARI entered into the
JVA through negotiation without public bidding. 4 On April 28, 1995, the Board of
Directors of PEA, in its Resolution No. 1245, confirmed the JVA.5 On June 8, 1995,
then President Fidel V. Ramos, through then Executive Secretary Ruben Torres,
approved the JVA.6
On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege
speech in the Senate and denounced the JVA as the "grandmother of all scams." As a
result, the Senate Committee on Government Corporations and Public Enterprises,
and the Committee on Accountability of Public Officers and Investigations, conducted
a joint investigation. The Senate Committees reported the results of their
investigation in Senate Committee Report No. 560 dated September 16,
1997.7 Among the conclusions of their report are: (1) the reclaimed lands PEA seeks
to transfer to AMARI under the JVA are lands of the public domain which the
government has not classified as alienable lands and therefore PEA cannot alienate
these lands; (2) the certificates of title covering the Freedom Islands are thus void,
and (3) the JVA itself is illegal.
On December 5, 1997, then President Fidel V. Ramos issued Presidential
Administrative Order No. 365 creating a Legal Task Force to conduct a study on the
legality of the JVA in view of Senate Committee Report No. 560. The members of the
Legal Task Force were the Secretary of Justice,8 the Chief Presidential Legal
Counsel,9 and the Government Corporate Counsel.10 The Legal Task Force upheld the
legality of the JVA, contrary to the conclusions reached by the Senate Committees. 11
On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that
there were on-going renegotiations between PEA and AMARI under an order issued
by then President Fidel V. Ramos. According to these reports, PEA Director Nestor
Kalaw, PEA Chairman Arsenio Yulo and retired Navy Officer Sergio Cruz composed the
negotiating panel of PEA.
On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition
with Application for the Issuance of a Temporary Restraining Order and Preliminary
Injunction docketed as G.R. No. 132994 seeking to nullify the JVA. The Court
dismissed the petition "for unwarranted disregard of judicial hierarchy, without
prejudice to the refiling of the case before the proper court."12
On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer,
filed the instant Petition for Mandamus with Prayer for the Issuance of a Writ of
Preliminary Injunction and Temporary Restraining Order. Petitioner contends the
government stands to lose billions of pesos in the sale by PEA of the reclaimed lands
to AMARI. Petitioner prays that PEA publicly disclose the terms of any renegotiation
of the JVA, invoking Section 28, Article II, and Section 7, Article III, of the 1987
Constitution on the right of the people to information on matters of public concern.
Petitioner assails the sale to AMARI of lands of the public domain as a blatant
violation of Section 3, Article XII of the 1987 Constitution prohibiting the sale of
alienable lands of the public domain to private corporations. Finally, petitioner
asserts that he seeks to enjoin the loss of billions of pesos in properties of the State
that are of public dominion.
After several motions for extension of time, 13 PEA and AMARI filed their Comments
on October 19, 1998 and June 25, 1998, respectively. Meanwhile, on December 28,
1998, petitioner filed an Omnibus Motion: (a) to require PEA to submit the terms of
the renegotiated PEA-AMARI contract; (b) for issuance of a temporary restraining
order; and (c) to set the case for hearing on oral argument. Petitioner filed a
Reiterative Motion for Issuance of a TRO dated May 26, 1999, which the Court denied
in a Resolution dated June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave due course to the petition and
required the parties to file their respective memoranda.
On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement
("Amended JVA," for brevity). On May 28, 1999, the Office of the President under the
administration of then President Joseph E. Estrada approved the Amended JVA.
Due to the approval of the Amended JVA by the Office of the President, petitioner
now prays that on "constitutional and statutory grounds the renegotiated contract
be declared null and void."14
The Issues
The issues raised by petitioner, PEA15 and AMARI16 are as follows:
I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE
MOOT AND ACADEMIC BECAUSE OF SUBSEQUENT EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO OBSERVE
THE PRINCIPLE GOVERNING THE HIERARCHY OF COURTS;
III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION OF
ADMINISTRATIVE REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT;
V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES
OFFICIAL INFORMATION ON ON-GOING NEGOTIATIONS BEFORE A FINAL
AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE
AGREEMENT FOR THE TRANSFER TO AMARI OF CERTAIN LANDS, RECLAIMED
AND STILL TO BE RECLAIMED, VIOLATE THE 1987 CONSTITUTION; AND
VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE ISSUE
OF WHETHER THE AMENDED JOINT VENTURE AGREEMENT IS GROSSLY
DISADVANTAGEOUS TO THE GOVERNMENT.
The Court's Ruling
First issue: whether the principal reliefs prayed for in the petition are moot and
academic because of subsequent events.
The petition prays that PEA publicly disclose the "terms and conditions of the on-
going negotiations for a new agreement." The petition also prays that the Court
enjoin PEA from "privately entering into, perfecting and/or executing any new
agreement with AMARI."
PEA and AMARI claim the petition is now moot and academic because AMARI
furnished petitioner on June 21, 1999 a copy of the signed Amended JVA containing
the terms and conditions agreed upon in the renegotiations. Thus, PEA has satisfied
petitioner's prayer for a public disclosure of the renegotiations. Likewise, petitioner's
prayer to enjoin the signing of the Amended JVA is now moot because PEA and
AMARI have already signed the Amended JVA on March 30, 1999. Moreover, the
Office of the President has approved the Amended JVA on May 28, 1999.
Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by
simply fast-tracking the signing and approval of the Amended JVA before the Court
could act on the issue. Presidential approval does not resolve the constitutional issue
or remove it from the ambit of judicial review.
We rule that the signing of the Amended JVA by PEA and AMARI and its approval by
the President cannot operate to moot the petition and divest the Court of its
jurisdiction. PEA and AMARI have still to implement the Amended JVA. The prayer to
enjoin the signing of the Amended JVA on constitutional grounds necessarily includes
preventing its implementation if in the meantime PEA and AMARI have signed one in
violation of the Constitution. Petitioner's principal basis in assailing the renegotiation
of the JVA is its violation of Section 3, Article XII of the Constitution, which prohibits
the government from alienating lands of the public domain to private corporations.
If the Amended JVA indeed violates the Constitution, it is the duty of the Court to
enjoin its implementation, and if already implemented, to annul the effects of such
unconstitutional contract.
The Amended JVA is not an ordinary commercial contract but one which seeks
to transfer title and ownership to 367.5 hectares of reclaimed lands and submerged
areas of Manila Bay to a single private corporation. It now becomes more
compelling for the Court to resolve the issue to insure the government itself does not
violate a provision of the Constitution intended to safeguard the national patrimony.
Supervening events, whether intended or accidental, cannot prevent the Court from
rendering a decision if there is a grave violation of the Constitution. In the instant
case, if the Amended JVA runs counter to the Constitution, the Court can still prevent
the transfer of title and ownership of alienable lands of the public domain in the name
of AMARI. Even in cases where supervening events had made the cases moot, the
Court did not hesitate to resolve the legal or constitutional issues raised to formulate
controlling principles to guide the bench, bar, and the public. 17
Also, the instant petition is a case of first impression. All previous decisions of the
Court involving Section 3, Article XII of the 1987 Constitution, or its counterpart
provision in the 1973 Constitution,18 covered agricultural lands sold to private
corporations which acquired the lands from private parties. The transferors of the
private corporations claimed or could claim the right to judicial confirmation of their
imperfect titles19 under Title II of Commonwealth Act. 141 ("CA No. 141" for brevity).
In the instant case, AMARI seeks to acquire from PEA, a public corporation, reclaimed
lands and submerged areas for non-agricultural purposes by purchase under PD No.
1084 (charter of PEA) and Title III of CA No. 141. Certain undertakings by AMARI
under the Amended JVA constitute the consideration for the purchase. Neither
AMARI nor PEA can claim judicial confirmation of their titles because the lands
covered by the Amended JVA are newly reclaimed or still to be reclaimed. Judicial
confirmation of imperfect title requires open, continuous, exclusive and notorious
occupation of agricultural lands of the public domain for at least thirty years since
June 12, 1945 or earlier. Besides, the deadline for filing applications for judicial
confirmation of imperfect title expired on December 31, 1987.20
Lastly, there is a need to resolve immediately the constitutional issue raised in this
petition because of the possible transfer at any time by PEA to AMARI of title and
ownership to portions of the reclaimed lands. Under the Amended JVA, PEA is
obligated to transfer to AMARI the latter's seventy percent proportionate share in
the reclaimed areas as the reclamation progresses. The Amended JVA even allows
AMARI to mortgage at any time the entire reclaimed area to raise financing for the
reclamation project.21
Second issue: whether the petition merits dismissal for failing to observe the
principle governing the hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief
directly from the Court. The principle of hierarchy of courts applies generally to cases
involving factual questions. As it is not a trier of facts, the Court cannot entertain
cases involving factual issues. The instant case, however, raises constitutional issues
of transcendental importance to the public.22 The Court can resolve this case without
determining any factual issue related to the case. Also, the instant case is a petition
for mandamus which falls under the original jurisdiction of the Court under Section
5, Article VIII of the Constitution. We resolve to exercise primary jurisdiction over the
instant case.
Third issue: whether the petition merits dismissal for non-exhaustion of
administrative remedies.
PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose
publicly certain information without first asking PEA the needed information. PEA
claims petitioner's direct resort to the Court violates the principle of exhaustion of
administrative remedies. It also violates the rule that mandamus may issue only if
there is no other plain, speedy and adequate remedy in the ordinary course of law.
PEA distinguishes the instant case from Tañada v. Tuvera23 where the Court granted
the petition for mandamus even if the petitioners there did not initially demand from
the Office of the President the publication of the presidential decrees. PEA points out
that in Tañada, the Executive Department had an affirmative statutory duty under
Article 2 of the Civil Code24 and Section 1 of Commonwealth Act No. 63825 to publish
the presidential decrees. There was, therefore, no need for the petitioners in Tañada
to make an initial demand from the Office of the President. In the instant case, PEA
claims it has no affirmative statutory duty to disclose publicly information about its
renegotiation of the JVA. Thus, PEA asserts that the Court must apply the principle of
exhaustion of administrative remedies to the instant case in view of the failure of
petitioner here to demand initially from PEA the needed information.
The original JVA sought to dispose to AMARI public lands held by PEA, a government
corporation. Under Section 79 of the Government Auditing Code,26 the disposition of
government lands to private parties requires public bidding. PEA was under a
positive legal duty to disclose to the public the terms and conditions for the sale of
its lands. The law obligated PEA to make this public disclosure even without demand
from petitioner or from anyone. PEA failed to make this public disclosure because the
original JVA, like the Amended JVA, was the result of a negotiated contract, not of a
public bidding. Considering that PEA had an affirmative statutory duty to make the
public disclosure, and was even in breach of this legal duty, petitioner had the right
to seek direct judicial intervention.
Moreover, and this alone is determinative of this issue, the principle of exhaustion of
administrative remedies does not apply when the issue involved is a purely legal or
constitutional question.27 The principal issue in the instant case is the capacity of
AMARI to acquire lands held by PEA in view of the constitutional ban prohibiting the
alienation of lands of the public domain to private corporations. We rule that the
principle of exhaustion of administrative remedies does not apply in the instant case.
Fourth issue: whether petitioner has locus standi to bring this suit
PEA argues that petitioner has no standing to institute mandamus proceedings to
enforce his constitutional right to information without a showing that PEA refused to
perform an affirmative duty imposed on PEA by the Constitution. PEA also claims that
petitioner has not shown that he will suffer any concrete injury because of the signing
or implementation of the Amended JVA. Thus, there is no actual controversy
requiring the exercise of the power of judicial review.
The petitioner has standing to bring this taxpayer's suit because the petition seeks to
compel PEA to comply with its constitutional duties. There are two constitutional
issues involved here. First is the right of citizens to information on matters of public
concern. Second is the application of a constitutional provision intended to insure the
equitable distribution of alienable lands of the public domain among Filipino citizens.
The thrust of the first issue is to compel PEA to disclose publicly information on the
sale of government lands worth billions of pesos, information which the Constitution
and statutory law mandate PEA to disclose. The thrust of the second issue is to
prevent PEA from alienating hundreds of hectares of alienable lands of the public
domain in violation of the Constitution, compelling PEA to comply with a
constitutional duty to the nation.
Moreover, the petition raises matters of transcendental importance to the public.
In Chavez v. PCGG,28 the Court upheld the right of a citizen to bring a taxpayer's suit
on matters of transcendental importance to the public, thus -
"Besides, petitioner emphasizes, the matter of recovering the ill-gotten
wealth of the Marcoses is an issue of 'transcendental importance to the
public.' He asserts that ordinary taxpayers have a right to initiate and
prosecute actions questioning the validity of acts or orders of government
agencies or instrumentalities, if the issues raised are of 'paramount public
interest,' and if they 'immediately affect the social, economic and moral well
being of the people.'
Moreover, the mere fact that he is a citizen satisfies the requirement of
personal interest, when the proceeding involves the assertion of a public
right, such as in this case. He invokes several decisions of this Court which
have set aside the procedural matter of locus standi, when the subject of
the case involved public interest.
xxx
In Tañada v. Tuvera, the Court asserted that when the issue concerns a
public right and the object of mandamus is to obtain the enforcement of a
public duty, the people are regarded as the real parties in interest; and
because it is sufficient that petitioner is a citizen and as such is interested in
the execution of the laws, he need not show that he has any legal or special
interest in the result of the action. In the aforesaid case, the petitioners
 sought to enforce their right to be informed on matters of public concern, a
right then recognized in Section 6, Article IV of the 1973 Constitution, in
connection with the rule that laws in order to be valid and enforceable must
be published in the Official Gazette or otherwise effectively promulgated. In
ruling for the petitioners' legal standing, the Court declared that the right
they sought to be enforced 'is a public right recognized by no less than the
fundamental law of the land.'
Legaspi v. Civil Service Commission, while reiterating Tañada, further
declared that 'when a mandamus proceeding involves the assertion of a
public right, the requirement of personal interest is satisfied by the mere
fact that petitioner is a citizen and, therefore, part of the general 'public'
which possesses the right.'
Further, in Albano v. Reyes, we said that while expenditure of public funds
may not have been involved under the questioned contract for the
development, management and operation of the Manila International
Container Terminal, 'public interest [was] definitely involved considering the
important role [of the subject contract] . . . in the economic development of
the country and the magnitude of the financial consideration involved.' We
concluded that, as a consequence, the disclosure provision in the
Constitution would constitute sufficient authority for upholding the
petitioner's standing.
Similarly, the instant petition is anchored on the right of the people to
information and access to official records, documents and papers — a right
guaranteed under Section 7, Article III of the 1987 Constitution. Petitioner,
a former solicitor general, is a Filipino citizen. Because of the satisfaction of
the two basic requisites laid down by decisional law to sustain petitioner's
legal standing, i.e. (1) the enforcement of a public right (2) espoused by a
Filipino citizen, we rule that the petition at bar should be allowed."
We rule that since the instant petition, brought by a citizen, involves the enforcement
of constitutional rights - to information and to the equitable diffusion of natural
resources - matters of transcendental public importance, the petitioner has the
requisite locus standi.
Fifth issue: whether the constitutional right to information includes official
information on on-going negotiations before a final agreement.
Section 7, Article III of the Constitution explains the people's right to information on
matters of public concern in this manner:
"Sec. 7. The right of the people to information on matters of public concern
shall be recognized. Access to official records, and to documents, and
papers pertaining to official acts, transactions, or decisions, as well as to
government research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be provided by law."
(Emphasis supplied)
The State policy of full transparency in all transactions involving public interest
reinforces the people's right to information on matters of public concern. This State
policy is expressed in Section 28, Article II of the Constitution, thus:
"Sec. 28. Subject to reasonable conditions prescribed by law, the State
adopts and implements a policy of full public disclosure of all its
transactions involving public interest." (Emphasis supplied)
These twin provisions of the Constitution seek to promote transparency in policy-
making and in the operations of the government, as well as provide the people
sufficient information to exercise effectively other constitutional rights. These twin
provisions are essential to the exercise of freedom of expression. If the government
does not disclose its official acts, transactions and decisions to citizens, whatever
citizens say, even if expressed without any restraint, will be speculative and amount
to nothing. These twin provisions are also essential to hold public officials "at all times
x x x accountable to the people,"29 for unless citizens have the proper information,
they cannot hold public officials accountable for anything. Armed with the right
information, citizens can participate in public discussions leading to the formulation
of government policies and their effective implementation. An informed citizenry is
essential to the existence and proper functioning of any democracy. As explained by
the Court in Valmonte v. Belmonte, Jr.30 –
"An essential element of these freedoms is to keep open a continuing
dialogue or process of communication between the government and the
people. It is in the interest of the State that the channels for free political
discussion be maintained to the end that the government may perceive and
be responsive to the people's will. Yet, this open dialogue can be effective
only to the extent that the citizenry is informed and thus able to formulate
its will intelligently. Only when the participants in the discussion are aware
of the issues and have access to information relating thereto can such bear
fruit."
PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the right
to information is limited to "definite propositions of the government." PEA maintains
the right does not include access to "intra-agency or inter-agency recommendations
or communications during the stage when common assertions are still in the process
of being formulated or are in the 'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional
stage or before the closing of the transaction. To support its contention, AMARI cites
the following discussion in the 1986 Constitutional Commission:
"Mr. Suarez. And when we say 'transactions' which should be distinguished
from contracts, agreements, or treaties or whatever, does the Gentleman
refer to the steps leading to the consummation of the contract, or does he
refer to the contract itself?
Mr. Ople: The 'transactions' used here, I suppose is generic and therefore,
it can cover both steps leading to a contract and already a consummated
contract, Mr. Presiding Officer.
Mr. Suarez: This contemplates inclusion of negotiations leading to the
consummation of the transaction.
Mr. Ople: Yes, subject only to reasonable safeguards on the national
interest.
Mr. Suarez: Thank you."32 (Emphasis supplied)
AMARI argues there must first be a consummated contract before petitioner can
invoke the right. Requiring government officials to reveal their deliberations at the
pre-decisional stage will degrade the quality of decision-making in government
agencies. Government officials will hesitate to express their real sentiments during
deliberations if there is immediate public dissemination of their discussions, putting
them under all kinds of pressure before they decide.
We must first distinguish between information the law on public bidding requires PEA
to disclose publicly, and information the constitutional right to information requires
PEA to release to the public. Before the consummation of the contract, PEA must, on
its own and without demand from anyone, disclose to the public matters relating to
the disposition of its property. These include the size, location, technical description
and nature of the property being disposed of, the terms and conditions of the
disposition, the parties qualified to bid, the minimum price and similar information.
PEA must prepare all these data and disclose them to the public at the start of the
disposition process, long before the consummation of the contract, because the
Government Auditing Code requires public bidding. If PEA fails to make this
disclosure, any citizen can demand from PEA this information at any time during the
bidding process.
Information, however, on on-going evaluation or review of bids or proposals being
undertaken by the bidding or review committee is not immediately accessible under
the right to information. While the evaluation or review is still on-going, there are no
"official acts, transactions, or decisions" on the bids or proposals. However, once the
committee makes its official recommendation, there arises a "definite
proposition" on the part of the government. From this moment, the public's right to
information attaches, and any citizen can access all the non-proprietary information
leading to such definite proposition. In Chavez v. PCGG,33 the Court ruled as follows:
"Considering the intent of the framers of the Constitution, we believe that
it is incumbent upon the PCGG and its officers, as well as other government
representatives, to disclose sufficient public information on any proposed
settlement they have decided to take up with the ostensible owners and
holders of ill-gotten wealth. Such information, though, must pertain
to definite propositions of the government, not necessarily to intra-agency
or inter-agency recommendations or communications during the stage
when common assertions are still in the process of being formulated or are
in the "exploratory" stage. There is need, of course, to observe the same
restrictions on disclosure of information in general, as discussed earlier –
such as on matters involving national security, diplomatic or foreign
relations, intelligence and other classified information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of the 1986 Constitutional
Commission understood that the right to information "contemplates inclusion of
negotiations leading to the consummation of the transaction."Certainly, a
consummated contract is not a requirement for the exercise of the right to
information. Otherwise, the people can never exercise the right if no contract is
consummated, and if one is consummated, it may be too late for the public to expose
its defects.1âwphi1.nêt
Requiring a consummated contract will keep the public in the dark until the contract,
which may be grossly disadvantageous to the government or even illegal, becomes
a fait accompli. This negates the State policy of full transparency on matters of public
concern, a situation which the framers of the Constitution could not have intended.
Such a requirement will prevent the citizenry from participating in the public
discussion of any proposed contract, effectively truncating a basic right enshrined in
the Bill of Rights. We can allow neither an emasculation of a constitutional right, nor
a retreat by the State of its avowed "policy of full disclosure of all its transactions
involving public interest."
The right covers three categories of information which are "matters of public
concern," namely: (1) official records; (2) documents and papers pertaining to official
acts, transactions and decisions; and (3) government research data used in
formulating policies. The first category refers to any document that is part of the
public records in the custody of government agencies or officials. The second
category refers to documents and papers recording, evidencing, establishing,
confirming, supporting, justifying or explaining official acts, transactions or decisions
of government agencies or officials. The third category refers to research data,
whether raw, collated or processed, owned by the government and used in
formulating government policies.
The information that petitioner may access on the renegotiation of the JVA includes
evaluation reports, recommendations, legal and expert opinions, minutes of
meetings, terms of reference and other documents attached to such reports or
minutes, all relating to the JVA. However, the right to information does not compel
PEA to prepare lists, abstracts, summaries and the like relating to the renegotiation
of the JVA.34 The right only affords access to records, documents and papers, which
means the opportunity to inspect and copy them. One who exercises the right must
copy the records, documents and papers at his expense. The exercise of the right is
also subject to reasonable regulations to protect the integrity of the public records
and to minimize disruption to government operations, like rules specifying when and
how to conduct the inspection and copying.35
The right to information, however, does not extend to matters recognized as
privileged information under the separation of powers. 36 The right does not also
apply to information on military and diplomatic secrets, information affecting
national security, and information on investigations of crimes by law enforcement
agencies before the prosecution of the accused, which courts have long recognized
as confidential.37 The right may also be subject to other limitations that Congress may
impose by law.
There is no claim by PEA that the information demanded by petitioner is privileged
information rooted in the separation of powers. The information does not cover
Presidential conversations, correspondences, or discussions during closed-door
Cabinet meetings which, like internal deliberations of the Supreme Court and other
collegiate courts, or executive sessions of either house of Congress, 38 are recognized
as confidential. This kind of information cannot be pried open by a co-equal branch
of government. A frank exchange of exploratory ideas and assessments, free from
the glare of publicity and pressure by interested parties, is essential to protect the
independence of decision-making of those tasked to exercise Presidential, Legislative
and Judicial power.39 This is not the situation in the instant case.
We rule, therefore, that the constitutional right to information includes official
information on on-going negotiationsbefore a final contract. The information,
however, must constitute definite propositions by the government and should not
cover recognized exceptions like privileged information, military and diplomatic
secrets and similar matters affecting national security and public order. 40 Congress
has also prescribed other limitations on the right to information in several
legislations.41
Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of
lands, reclaimed or to be reclaimed, violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and submerged areas is rooted in
the Regalian doctrine which holds that the State owns all lands and waters of the
public domain. Upon the Spanish conquest of the Philippines, ownership of all "lands,
territories and possessions" in the Philippines passed to the Spanish Crown.42 The
King, as the sovereign ruler and representative of the people, acquired and owned all
lands and territories in the Philippines except those he disposed of by grant or sale
to private individuals.
The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting,
however, the State, in lieu of the King, as the owner of all lands and waters of the
public domain. The Regalian doctrine is the foundation of the time-honored principle
of land ownership that "all lands that were not acquired from the Government, either
by purchase or by grant, belong to the public domain."43 Article 339 of the Civil Code
of 1889, which is now Article 420 of the Civil Code of 1950, incorporated the Regalian
doctrine.
Ownership and Disposition of Reclaimed Lands
The Spanish Law of Waters of 1866 was the first statutory law governing the
ownership and disposition of reclaimed lands in the Philippines. On May 18, 1907,
the Philippine Commission enacted Act No. 1654 which provided for the lease, but
not the sale, of reclaimed lands of the government to corporations and individuals.
Later, on November 29, 1919, the Philippine Legislature approved Act No. 2874, the
Public Land Act, which authorized the lease, but not the sale, of reclaimed lands of
the government to corporations and individuals. On November 7, 1936, the National
Assembly passed Commonwealth Act No. 141, also known as the Public Land Act,
which authorized the lease, but not the sale, of reclaimed lands of the government
to corporations and individuals. CA No. 141 continues to this day as the general law
governing the classification and disposition of lands of the public domain.
The Spanish Law of Waters of 1866 and the Civil Code of 1889
Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all
waters within the maritime zone of the Spanish territory belonged to the public
domain for public use.44 The Spanish Law of Waters of 1866 allowed the reclamation
of the sea under Article 5, which provided as follows:
"Article 5. Lands reclaimed from the sea in consequence of works
constructed by the State, or by the provinces, pueblos or private persons,
with proper permission, shall become the property of the party constructing
such works, unless otherwise provided by the terms of the grant of
authority."
Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party
undertaking the reclamation, provided the government issued the necessary permit
and did not reserve ownership of the reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property of public dominion as follows:
"Art. 339. Property of public dominion is –
1. That devoted to public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, riverbanks, shores, roadsteads, and
that of a similar character;
2. That belonging exclusively to the State which, without being of general
public use, is employed in some public service, or in the development of the
national wealth, such as walls, fortresses, and other works for the defense
of the territory, and mines, until granted to private individuals."
Property devoted to public use referred to property open for use by the public. In
contrast, property devoted to public service referred to property used for some
specific public service and open only to those authorized to use the property.
Property of public dominion referred not only to property devoted to public use, but
also to property not so used but employed to develop the national wealth. This class
of property constituted property of public dominion although employed for some
economic or commercial activity to increase the national wealth.
Article 341 of the Civil Code of 1889 governed the re-classification of property of
public dominion into private property, to wit:
"Art. 341. Property of public dominion, when no longer devoted to public
use or to the defense of the territory, shall become a part of the private
property of the State."
This provision, however, was not self-executing. The legislature, or the executive
department pursuant to law, must declare the property no longer needed for public
use or territorial defense before the government could lease or alienate the property
to private parties.45
Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated
the lease of reclaimed and foreshore lands. The salient provisions of this law were as
follows:
"Section 1. The control and disposition of the foreshore as defined in
existing law, and the title to all Government or public lands made or
reclaimed by the Government by dredging or filling or otherwise
throughout the Philippine Islands, shall be retained by the
Government without prejudice to vested rights and without prejudice to
rights conceded to the City of Manila in the Luneta Extension.
Section 2. (a) The Secretary of the Interior shall cause all Government or
public lands made or reclaimed by the Government by dredging or filling or
otherwise to be divided into lots or blocks, with the necessary streets and
alleyways located thereon, and shall cause plats and plans of such surveys
to be prepared and filed with the Bureau of Lands.
(b) Upon completion of such plats and plans the Governor-General shall
give notice to the public that such parts of the lands so made or reclaimed
as are not needed for public purposes will be leased for commercial and
business purposes, x x x.
xxx
(e) The leases above provided for shall be disposed of to the highest and
best bidder therefore, subject to such regulations and safeguards as the
Governor-General may by executive order prescribe." (Emphasis supplied)
Act No. 1654 mandated that the government should retain title to all lands
reclaimed by the government. The Act also vested in the government control and
disposition of foreshore lands. Private parties could lease lands reclaimed by the
government only if these lands were no longer needed for public purpose. Act No.
1654 mandated public bidding in the lease of government reclaimed lands. Act No.
1654 made government reclaimed lands sui generis in that unlike other public lands
which the government could sell to private parties, these reclaimed lands were
available only for lease to private parties.
Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866.
Act No. 1654 did not prohibit private parties from reclaiming parts of the sea under
Section 5 of the Spanish Law of Waters. Lands reclaimed from the sea by private
parties with government permission remained private lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public
Land Act.46 The salient provisions of Act No. 2874, on reclaimed lands, were as
follows:
"Sec. 6. The Governor-General, upon the recommendation of the Secretary
of Agriculture and Natural Resources, shall from time to time classify the
lands of the public domain into –
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands, x x x.
Sec. 7. For the purposes of the government and disposition of alienable or
disposable public lands, the Governor-General, upon recommendation by
the Secretary of Agriculture and Natural Resources, shall from time to time
declare what lands are open to disposition or concession under this Act."
Sec. 8. Only those lands shall be declared open to disposition or concession
which have been officially delimited or classified x x x.
xxx
Sec. 55. Any tract of land of the public domain which, being neither timber
nor mineral land, shall be classified as suitable for residential purposes or
for commercial, industrial, or other productive purposes other than
agricultural purposes, and shall be open to disposition or concession, shall
be disposed of under the provisions of this chapter, and not otherwise.
Sec. 56. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or
other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the
shores or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six
shall be disposed of to private parties by lease only and not otherwise, as
soon as the Governor-General, upon recommendation by the Secretary of
Agriculture and Natural Resources, shall declare that the same are not
necessary for the public service and are open to disposition under this
chapter. The lands included in class (d) may be disposed of by sale or lease
under the provisions of this Act." (Emphasis supplied)
Section 6 of Act No. 2874 authorized the Governor-General to "classify lands of the
public domain into x x x alienable or disposable" 47 lands. Section 7 of the Act
empowered the Governor-General to "declare what lands are open to disposition or
concession." Section 8 of the Act limited alienable or disposable lands only to those
lands which have been "officially delimited and classified."
Section 56 of Act No. 2874 stated that lands "disposable under this title48 shall be
classified" as government reclaimed, foreshore and marshy lands, as well as other
lands. All these lands, however, must be suitable for residential, commercial,
industrial or other productive non-agricultural purposes. These provisions vested
upon the Governor-General the power to classify inalienable lands of the public
domain into disposable lands of the public domain. These provisions also empowered
the Governor-General to classify further such disposable lands of the public domain
into government reclaimed, foreshore or marshy lands of the public domain, as well
as other non-agricultural lands.
Section 58 of Act No. 2874 categorically mandated that disposable lands of the public
domain classified as government reclaimed, foreshore and marshy lands "shall be
disposed of to private parties by lease only and not otherwise." The Governor-
General, before allowing the lease of these lands to private parties, must formally
declare that the lands were "not necessary for the public service." Act No. 2874
reiterated the State policy to lease and not to sell government reclaimed, foreshore
and marshy lands of the public domain, a policy first enunciated in 1907 in Act No.
1654. Government reclaimed, foreshore and marshy lands remained sui generis, as
the only alienable or disposable lands of the public domain that the government
could not sell to private parties.
The rationale behind this State policy is obvious. Government reclaimed, foreshore
and marshy public lands for non-agricultural purposes retain their inherent potential
as areas for public service. This is the reason the government prohibited the sale, and
only allowed the lease, of these lands to private parties. The State always reserved
these lands for some future public service.
Act No. 2874 did not authorize the reclassification of government reclaimed,
foreshore and marshy lands into other non-agricultural lands under Section 56 (d).
Lands falling under Section 56 (d) were the only lands for non-agricultural purposes
the government could sell to private parties. Thus, under Act No. 2874, the
government could not sell government reclaimed, foreshore and marshy lands to
private parties, unless the legislature passed a law allowing their sale.49
Act No. 2874 did not prohibit private parties from reclaiming parts of the sea
pursuant to Section 5 of the Spanish Law of Waters of 1866. Lands reclaimed from
the sea by private parties with government permission remained private lands.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect upon its ratification by the
Filipino people. The 1935 Constitution, in adopting the Regalian doctrine, declared in
Section 1, Article XIII, that –
"Section 1. All agricultural, timber, and mineral lands of the public domain,
waters, minerals, coal, petroleum, and other mineral oils, all forces of
potential energy and other natural resources of the Philippines belong to
the State, and their disposition, exploitation, development, or utilization
shall be limited to citizens of the Philippines or to corporations or
associations at least sixty per centum of the capital of which is owned by
such citizens, subject to any existing right, grant, lease, or concession at the
time of the inauguration of the Government established under this
Constitution. Natural resources, with the exception of public agricultural
land, shall not be alienated, and no license, concession, or lease for the
exploitation, development, or utilization of any of the natural resources shall
be granted for a period exceeding twenty-five years, renewable for another
twenty-five years, except as to water rights for irrigation, water supply,
fisheries, or industrial uses other than the development of water power, in
which cases beneficial use may be the measure and limit of the grant."
(Emphasis supplied)
The 1935 Constitution barred the alienation of all natural resources except public
agricultural lands, which were the only natural resources the State could alienate.
Thus, foreshore lands, considered part of the State's natural resources, became
inalienable by constitutional fiat, available only for lease for 25 years, renewable for
another 25 years. The government could alienate foreshore lands only after these
lands were reclaimed and classified as alienable agricultural lands of the public
domain. Government reclaimed and marshy lands of the public domain, being
neither timber nor mineral lands, fell under the classification of public agricultural
lands.50 However, government reclaimed and marshy lands, although subject to
classification as disposable public agricultural lands, could only be leased and not sold
to private parties because of Act No. 2874.
The prohibition on private parties from acquiring ownership of government
reclaimed and marshy lands of the public domain was only a statutory prohibition
and the legislature could therefore remove such prohibition. The 1935 Constitution
did not prohibit individuals and corporations from acquiring government reclaimed
and marshy lands of the public domain that were classified as agricultural lands under
existing public land laws. Section 2, Article XIII of the 1935 Constitution provided as
follows:
"Section 2. No private corporation or association may acquire, lease, or
hold public agricultural lands in excess of one thousand and twenty four
hectares, nor may any individual acquire such lands by purchase in excess
of one hundred and forty hectares, or by lease in excess of one thousand
and twenty-four hectares, or by homestead in excess of twenty-four
hectares. Lands adapted to grazing, not exceeding two thousand hectares,
may be leased to an individual, private corporation, or association."
(Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the legislature did not repeal
Section 58 of Act No. 2874 to open for sale to private parties government reclaimed
and marshy lands of the public domain. On the contrary, the legislature continued
the long established State policy of retaining for the government title and ownership
of government reclaimed and marshy lands of the public domain.
Commonwealth Act No. 141 of the Philippine National Assembly
On November 7, 1936, the National Assembly approved Commonwealth Act No. 141,
also known as the Public Land Act, which compiled the then existing laws on lands of
the public domain. CA No. 141, as amended, remains to this day the existing general
law governing the classification and disposition of lands of the public domain other
than timber and mineral lands.51
Section 6 of CA No. 141 empowers the President to classify lands of the public domain
into "alienable or disposable"52 lands of the public domain, which prior to such
classification are inalienable and outside the commerce of man. Section 7 of CA No.
141 authorizes the President to "declare what lands are open to disposition or
concession." Section 8 of CA No. 141 states that the government can declare open
for disposition or concession only lands that are "officially delimited and classified."
Sections 6, 7 and 8 of CA No. 141 read as follows:
"Sec. 6. The President, upon the recommendation of the Secretary of
Agriculture and Commerce, shall from time to time classify the lands of the
public domain into –
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer such lands from one class
to another,53 for the purpose of their administration and disposition.
Sec. 7. For the purposes of the administration and disposition of alienable
or disposable public lands, the President, upon recommendation by the
Secretary of Agriculture and Commerce, shall from time to time declare
what lands are open to disposition or concession under this Act.
Sec. 8. Only those lands shall be declared open to disposition or concession
which have been officially delimited and classified and, when practicable,
surveyed, and which have not been reserved for public or quasi-public uses,
nor appropriated by the Government, nor in any manner become private
property, nor those on which a private right authorized and recognized by
this Act or any other valid law may be claimed, or which, having been
reserved or appropriated, have ceased to be so. x x x."
Thus, before the government could alienate or dispose of lands of the public domain,
the President must first officially classify these lands as alienable or disposable, and
then declare them open to disposition or concession. There must be no law reserving
these lands for public or quasi-public uses.
The salient provisions of CA No. 141, on government reclaimed, foreshore and
marshy lands of the public domain, are as follows:
"Sec. 58. Any tract of land of the public domain which, being neither timber
nor mineral land, is intended to be used for residential purposes or for
commercial, industrial, or other productive purposes other than
agricultural, and is open to disposition or concession, shall be disposed of
under the provisions of this chapter and not otherwise.
Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or
other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the
shores or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
Sec. 60. Any tract of land comprised under this title may be leased or sold,
as the case may be, to any person, corporation, or association authorized to
purchase or lease public lands for agricultural purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine
shall be disposed of to private parties by lease only and not otherwise, as
soon as the President, upon recommendation by the Secretary of
Agriculture, shall declare that the same are not necessary for the public
service and are open to disposition under this chapter. The lands included
in class (d) may be disposed of by sale or lease under the provisions of this
Act." (Emphasis supplied)
Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution,
Section 58 of Act No. 2874 prohibiting the sale of government reclaimed, foreshore
and marshy disposable lands of the public domain. All these lands are intended for
residential, commercial, industrial or other non-agricultural purposes. As before,
Section 61 allowed only the lease of such lands to private parties. The government
could sell to private parties only lands falling under Section 59 (d) of CA No. 141, or
those lands for non-agricultural purposes not classified as government reclaimed,
foreshore and marshy disposable lands of the public domain. Foreshore lands,
however, became inalienable under the 1935 Constitution which only allowed the
lease of these lands to qualified private parties.
Section 58 of CA No. 141 expressly states that disposable lands of the public domain
intended for residential, commercial, industrial or other productive purposes other
than agricultural "shall be disposed of under the provisions of this chapter and not
otherwise." Under Section 10 of CA No. 141, the term "disposition" includes lease of
the land. Any disposition of government reclaimed, foreshore and marshy disposable
lands for non-agricultural purposes must comply with Chapter IX, Title III of CA No.
141,54 unless a subsequent law amended or repealed these provisions.
In his concurring opinion in the landmark case of Republic Real Estate Corporation v.
Court of Appeals,55Justice Reynato S. Puno summarized succinctly the law on this
matter, as follows:
"Foreshore lands are lands of public dominion intended for public use. So
too are lands reclaimed by the government by dredging, filling, or other
means. Act 1654 mandated that the control and disposition of the foreshore
and lands under water remained in the national government. Said law
allowed only the 'leasing' of reclaimed land. The Public Land Acts of 1919
and 1936 also declared that the foreshore and lands reclaimed by the
government were to be "disposed of to private parties by lease only and not
otherwise." Before leasing, however, the Governor-General, upon
recommendation of the Secretary of Agriculture and Natural Resources, had
first to determine that the land reclaimed was not necessary for the public
service. This requisite must have been met before the land could be
disposed of. But even then, the foreshore and lands under water were not
to be alienated and sold to private parties. The disposition of the reclaimed
land was only by lease. The land remained property of the State."
(Emphasis supplied)
As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141
has remained in effect at present."
The State policy prohibiting the sale to private parties of government reclaimed,
foreshore and marshy alienable lands of the public domain, first implemented in 1907
was thus reaffirmed in CA No. 141 after the 1935 Constitution took effect. The
prohibition on the sale of foreshore lands, however, became a constitutional edict
under the 1935 Constitution. Foreshore lands became inalienable as natural
resources of the State, unless reclaimed by the government and classified as
agricultural lands of the public domain, in which case they would fall under the
classification of government reclaimed lands.
After the effectivity of the 1935 Constitution, government reclaimed and marshy
disposable lands of the public domain continued to be only leased and not sold to
private parties.56 These lands remained sui generis, as the only alienable or
disposable lands of the public domain the government could not sell to private
parties.
Since then and until now, the only way the government can sell to private parties
government reclaimed and marshy disposable lands of the public domain is for the
legislature to pass a law authorizing such sale. CA No. 141 does not authorize the
President to reclassify government reclaimed and marshy lands into other non-
agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the
only alienable or disposable lands for non-agricultural purposes that the government
could sell to private parties.
Moreover, Section 60 of CA No. 141 expressly requires congressional authority
before lands under Section 59 that the government previously transferred to
government units or entities could be sold to private parties. Section 60 of CA No.
141 declares that –
"Sec. 60. x x x The area so leased or sold shall be such as shall, in the
judgment of the Secretary of Agriculture and Natural Resources, be
reasonably necessary for the purposes for which such sale or lease is
requested, and shall not exceed one hundred and forty-four hectares:
Provided, however, That this limitation shall not apply to grants, donations,
or transfers made to a province, municipality or branch or subdivision of the
Government for the purposes deemed by said entities conducive to the
public interest; but the land so granted, donated, or transferred to a
province, municipality or branch or subdivision of the Government shall not
be alienated, encumbered, or otherwise disposed of in a manner affecting
its title, except when authorized by Congress: x x x." (Emphasis supplied)
The congressional authority required in Section 60 of CA No. 141 mirrors the
legislative authority required in Section 56 of Act No. 2874.
One reason for the congressional authority is that Section 60 of CA No. 141 exempted
government units and entities from the maximum area of public lands that could be
acquired from the State. These government units and entities should not just turn
around and sell these lands to private parties in violation of constitutional or
statutory limitations. Otherwise, the transfer of lands for non-agricultural purposes
to government units and entities could be used to circumvent constitutional
limitations on ownership of alienable or disposable lands of the public domain. In the
same manner, such transfers could also be used to evade the statutory prohibition in
CA No. 141 on the sale of government reclaimed and marshy lands of the public
domain to private parties. Section 60 of CA No. 141 constitutes by operation of law a
lien on these lands.57
In case of sale or lease of disposable lands of the public domain falling under Section
59 of CA No. 141, Sections 63 and 67 require a public bidding. Sections 63 and 67 of
CA No. 141 provide as follows:
 "Sec. 63. Whenever it is decided that lands covered by this chapter are not
needed for public purposes, the Director of Lands shall ask the Secretary of
Agriculture and Commerce (now the Secretary of Natural Resources) for
authority to dispose of the same. Upon receipt of such authority, the
Director of Lands shall give notice by public advertisement in the same
manner as in the case of leases or sales of agricultural public land, x x x.
Sec. 67. The lease or sale shall be made by oral bidding; and adjudication
shall be made to the highest bidder. x x x." (Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to public auction all leases or
sales of alienable or disposable lands of the public domain.58
Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of
the Spanish Law of Waters of 1866. Private parties could still reclaim portions of the
sea with government permission. However, the reclaimed land could become
private land only if classified as alienable agricultural land of the public
domain open to disposition under CA No. 141. The 1935 Constitution prohibited the
alienation of all natural resources except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of property of public
dominion found in the Civil Code of 1889. Articles 420 and 422 of the Civil Code of
1950 state that –
"Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads, and
others of similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth.
x x x.
Art. 422. Property of public dominion, when no longer intended for public
use or for public service, shall form part of the patrimonial property of the
State."
Again, the government must formally declare that the property of public dominion is
no longer needed for public use or public service, before the same could be classified
as patrimonial property of the State.59 In the case of government reclaimed and
marshy lands of the public domain, the declaration of their being disposable, as well
as the manner of their disposition, is governed by the applicable provisions of CA No.
141.
Like the Civil Code of 1889, the Civil Code of 1950 included as property of public
dominion those properties of the State which, without being for public use, are
intended for public service or the "development of the national wealth." Thus,
government reclaimed and marshy lands of the State, even if not employed for public
use or public service, if developed to enhance the national wealth, are classified as
property of public dominion.
Dispositions under the 1973 Constitution
The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the
Regalian doctrine. Section 8, Article XIV of the 1973 Constitution stated that –
"Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and
other mineral oils, all forces of potential energy, fisheries, wildlife, and other
natural resources of the Philippines belong to the State. With the exception
of agricultural, industrial or commercial, residential, and resettlement
lands of the public domain, natural resources shall not be alienated, and
no license, concession, or lease for the exploration, development,
exploitation, or utilization of any of the natural resources shall be granted
for a period exceeding twenty-five years, renewable for not more than
twenty-five years, except as to water rights for irrigation, water supply,
fisheries, or industrial uses other than the development of water power, in
which cases, beneficial use may be the measure and the limit of the grant."
(Emphasis supplied)
The 1973 Constitution prohibited the alienation of all natural resources with the
exception of "agricultural, industrial or commercial, residential, and resettlement
lands of the public domain." In contrast, the 1935 Constitution barred the alienation
of all natural resources except "public agricultural lands." However, the term "public
agricultural lands" in the 1935 Constitution encompassed industrial, commercial,
residential and resettlement lands of the public domain.60 If the land of public domain
were neither timber nor mineral land, it would fall under the classification of
agricultural land of the public domain. Both the 1935 and 1973 Constitutions,
therefore, prohibited the alienation of all natural resources except agricultural
lands of the public domain.
The 1973 Constitution, however, limited the alienation of lands of the public domain
to individuals who were citizens of the Philippines. Private corporations, even if
wholly owned by Philippine citizens, were no longer allowed to acquire alienable
lands of the public domain unlike in the 1935 Constitution. Section 11, Article XIV of
the 1973 Constitution declared that –
"Sec. 11. The Batasang Pambansa, taking into account conservation,
ecological, and development requirements of the natural resources, shall
determine by law the size of land of the public domain which may be
developed, held or acquired by, or leased to, any qualified individual,
corporation, or association, and the conditions therefor. No private
corporation or association may hold alienable lands of the public domain
except by lease not to exceed one thousand hectares in area nor may any
citizen hold such lands by lease in excess of five hundred hectares or acquire
by purchase, homestead or grant, in excess of twenty-four hectares. No
private corporation or association may hold by lease, concession, license or
permit, timber or forest lands and other timber or forest resources in excess
of one hundred thousand hectares. However, such area may be increased
by the Batasang Pambansa upon recommendation of the National Economic
and Development Authority." (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations could hold alienable lands of
the public domain only through lease. Only individuals could now acquire alienable
lands of the public domain, and private corporations became absolutely barred from
acquiring any kind of alienable land of the public domain. The constitutional ban
extended to all kinds of alienable lands of the public domain, while the statutory ban
under CA No. 141 applied only to government reclaimed, foreshore and marshy
alienable lands of the public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree
No. 1084 creating PEA, a wholly government owned and controlled corporation with
a special charter. Sections 4 and 8 of PD No. 1084, vests PEA with the following
purposes and powers:
"Sec. 4. Purpose. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging,
filling or other means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide,
dispose, lease and sell any and all kinds of lands, buildings, estates and
other forms of real property, owned, managed, controlled and/or operated
by the government;
(c) To provide for, operate or administer such service as may be necessary
for the efficient, economical and beneficial utilization of the above
properties.
Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying
out the purposes for which it is created, have the following powers and
functions:
(a)To prescribe its by-laws.
xxx
(i) To hold lands of the public domain in excess of the area permitted to
private corporations by statute.
(j) To reclaim lands and to construct work across, or otherwise, any stream,
watercourse, canal, ditch, flume x x x.
xxx
(o) To perform such acts and exercise such functions as may be necessary
for the attainment of the purposes and objectives herein specified."
(Emphasis supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the
public domain. Foreshore areas are those covered and uncovered by the ebb and
flow of the tide.61 Submerged areas are those permanently under water regardless
of the ebb and flow of the tide.62 Foreshore and submerged areas indisputably belong
to the public domain63 and are inalienable unless reclaimed, classified as alienable
lands open to disposition, and further declared no longer needed for public service.
The ban in the 1973 Constitution on private corporations from acquiring alienable
lands of the public domain did not apply to PEA since it was then, and until today, a
fully owned government corporation. The constitutional ban applied then, as it still
applies now, only to "private corporations and associations." PD No. 1084 expressly
empowers PEA "to hold lands of the public domain" even "in excess of the area
permitted to private corporations by statute." Thus, PEA can hold title to private
lands, as well as title to lands of the public domain.
In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the
public domain, there must be legislative authority empowering PEA to sell these
lands. This legislative authority is necessary in view of Section 60 of CA No.141, which
states –
"Sec. 60. x x x; but the land so granted, donated or transferred to a province,
municipality, or branch or subdivision of the Government shall not be
alienated, encumbered or otherwise disposed of in a manner affecting its
title, except when authorized by Congress; x x x." (Emphasis supplied)
Without such legislative authority, PEA could not sell but only lease its reclaimed
foreshore and submerged alienable lands of the public domain. Nevertheless, any
legislative authority granted to PEA to sell its reclaimed alienable lands of the public
domain would be subject to the constitutional ban on private corporations from
acquiring alienable lands of the public domain. Hence, such legislative authority could
only benefit private individuals.
Dispositions under the 1987 Constitution
The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted
the Regalian doctrine. The 1987 Constitution declares that all natural resources are
"owned by the State," and except for alienable agricultural lands of the public
domain, natural resources cannot be alienated. Sections 2 and 3, Article XII of the
1987 Constitution state that –
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum
and other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other natural resources are owned by
the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and
utilization of natural resources shall be under the full control and
supervision of the State. x x x.
Section 3. Lands of the public domain are classified into agricultural, forest
or timber, mineral lands, and national parks. Agricultural lands of the public
domain may be further classified by law according to the uses which they
may be devoted. Alienable lands of the public domain shall be limited to
agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, for a period not
exceeding twenty-five years, renewable for not more than twenty-five
years, and not to exceed one thousand hectares in area. Citizens of the
Philippines may lease not more than five hundred hectares, or acquire not
more than twelve hectares thereof by purchase, homestead, or grant.
Taking into account the requirements of conservation, ecology, and
development, and subject to the requirements of agrarian reform, the
Congress shall determine, by law, the size of lands of the public domain
which may be acquired, developed, held, or leased and the conditions
therefor." (Emphasis supplied)
The 1987 Constitution continues the State policy in the 1973 Constitution banning
private corporations from acquiring any kind of alienable land of the public domain.
Like the 1973 Constitution, the 1987 Constitution allows private corporations to hold
alienable lands of the public domain only through lease. As in the 1935 and 1973
Constitutions, the general law governing the lease to private corporations of
reclaimed, foreshore and marshy alienable lands of the public domain is still CA No.
141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations from acquiring, except
through lease, alienable lands of the public domain is not well understood. During
the deliberations of the 1986 Constitutional Commission, the commissioners probed
the rationale behind this ban, thus:
"FR. BERNAS: Mr. Vice-President, my questions have reference to page 3,
line 5 which says:
`No private corporation or association may hold alienable lands of the public
domain except by lease, not to exceed one thousand hectares in area.'
If we recall, this provision did not exist under the 1935 Constitution, but this
was introduced in the 1973 Constitution. In effect, it prohibits private
corporations from acquiring alienable public lands. But it has not been very
clear in jurisprudence what the reason for this is. In some of the cases
decided in 1982 and 1983, it was indicated that the purpose of this is to
prevent large landholdings. Is that the intent of this provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were
instances where the Iglesia ni Cristo was not allowed to acquire a mere 313-
square meter land where a chapel stood because the Supreme Court said it
would be in violation of this." (Emphasis supplied)
In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional ban in
this way:
"Indeed, one purpose of the constitutional prohibition against purchases of
public agricultural lands by private corporations is to equitably diffuse land
ownership or to encourage 'owner-cultivatorship and the economic family-
size farm' and to prevent a recurrence of cases like the instant case. Huge
landholdings by corporations or private persons had spawned social unrest."
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its second Whereas clause,
consists of three properties, namely:
1. "[T]hree partially reclaimed and substantially eroded islands along Emilio
Aguinaldo Boulevard in Paranaque and Las Pinas, Metro Manila, with a
combined titled area of 1,578,441 square meters;"

However, if the constitutional intent is to prevent huge landholdings, the Constitution
could have simply limited the size of alienable lands of the public domain that
corporations could acquire. The Constitution could have followed the limitations on
individuals, who could acquire not more than 24 hectares of alienable lands of the
public domain under the 1973 Constitution, and not more than 12 hectares under
the 1987 Constitution.
If the constitutional intent is to encourage economic family-size farms, placing the
land in the name of a corporation would be more effective in preventing the break-
up of farmlands. If the farmland is registered in the name of a corporation, upon the
death of the owner, his heirs would inherit shares in the corporation instead of
subdivided parcels of the farmland. This would prevent the continuing break-up of
farmlands into smaller and smaller plots from one generation to the next.
2. "[A]nother area of 2,421,559 square meters contiguous to the three
islands;" and
3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares
more or less to regularize the configuration of the reclaimed area."65
PEA confirms that the Amended JVA involves "the development of the Freedom
Islands and further reclamation of about 250 hectares x x x," plus an option "granted
to AMARI to subsequently reclaim another 350 hectares x x x."66
In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84
hectares of the 750-hectare reclamation project have been reclaimed, and the rest
of the 592.15 hectares are still submerged areas forming part of Manila Bay.

In actual practice, the constitutional ban strengthens the constitutional limitation on

Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00
individuals from acquiring more than the allowed area of alienable lands of the public
for PEA's "actual cost" in partially reclaiming the Freedom Islands. AMARI will also
domain. Without the constitutional ban, individuals who already acquired the
complete, at its own expense, the reclamation of the Freedom Islands. AMARI will
maximum area of alienable lands of the public domain could easily set up
further shoulder all the reclamation costs of all the other areas, totaling 592.15
corporations to acquire more alienable public lands. An individual could own as many
hectares, still to be reclaimed. AMARI and PEA will share, in the proportion of 70
corporations as his means would allow him. An individual could even hide his
percent and 30 percent, respectively, the total net usable area which is defined in the
ownership of a corporation by putting his nominees as stockholders of the
Amended JVA as the total reclaimed area less 30 percent earmarked for common
corporation. The corporation is a convenient vehicle to circumvent the constitutional
areas. Title to AMARI's share in the net usable area, totaling 367.5 hectares, will be
limitation on acquisition by individuals of alienable lands of the public domain.
issued in the name of AMARI. Section 5.2 (c) of the Amended JVA provides that –

The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer
"x x x, PEA shall have the duty to execute without delay the necessary deed
ownership of only a limited area of alienable land of the public domain to a qualified
of transfer or conveyance of the title pertaining to AMARI's Land share
individual. This constitutional intent is safeguarded by the provision prohibiting
based on the Land Allocation Plan. PEA, when requested in writing by
corporations from acquiring alienable lands of the public domain, since the vehicle to
AMARI, shall then cause the issuance and delivery of the proper certificates
circumvent the constitutional intent is removed. The available alienable public lands
of title covering AMARI's Land Share in the name of AMARI, x x x; provided,
are gradually decreasing in the face of an ever-growing population. The most
that if more than seventy percent (70%) of the titled area at any given time
effective way to insure faithful adherence to this constitutional intent is to grant or
pertains to AMARI, PEA shall deliver to AMARI only seventy percent (70%)
sell alienable lands of the public domain only to individuals. This, it would seem, is
of the titles pertaining to AMARI, until such time when a corresponding
the practical benefit arising from the constitutional ban.
proportionate area of additional land pertaining to PEA has been titled."
(Emphasis supplied)
Indisputably, under the Amended JVA AMARI will acquire and own a maximum of
367.5 hectares of reclaimed land which will be titled in its name.
To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI
joint venture PEA's statutory authority, rights and privileges to reclaim foreshore and
submerged areas in Manila Bay. Section 3.2.a of the Amended JVA states that –
"PEA hereby contributes to the joint venture its rights and privileges to
perform Rawland Reclamation and Horizontal Development as well as own
the Reclamation Area, thereby granting the Joint Venture the full and
exclusive right, authority and privilege to undertake the Project in
accordance with the Master Development Plan."
The Amended JVA is the product of a renegotiation of the original JVA dated April 25,
1995 and its supplemental agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private corporation, can acquire and own
under the Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas
in Manila Bay in view of Sections 2 and 3, Article XII of the 1987 Constitution which
state that:
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other natural resources are owned by
the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. x x x.
xxx
Section 3. x x x Alienable lands of the public domain shall be limited to
agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, x x x."(Emphasis
supplied)
Classification of Reclaimed Foreshore and Submerged Areas
PEA readily concedes that lands reclaimed from foreshore or submerged areas of
Manila Bay are alienable or disposable lands of the public domain. In its
Memorandum,67 PEA admits that –
"Under the Public Land Act (CA 141, as amended), reclaimed lands are
classified as alienable and disposable lands of the public domain:
'Sec. 59. The lands disposable under this title shall be classified as
follows:
(a) Lands reclaimed by the government by dredging, filling, or other
means;
x x x.'" (Emphasis supplied)
Likewise, the Legal Task Force68 constituted under Presidential Administrative Order
No. 365 admitted in its Report and Recommendation to then President Fidel V.
Ramos, "[R]eclaimed lands are classified as alienable and disposable lands of the
public domain."69 The Legal Task Force concluded that –
"D. Conclusion
Reclaimed lands are lands of the public domain. However, by statutory
authority, the rights of ownership and disposition over reclaimed lands have
been transferred to PEA, by virtue of which PEA, as owner, may validly
convey the same to any qualified person without violating the Constitution
or any statute.
The constitutional provision prohibiting private corporations from holding
public land, except by lease (Sec. 3, Art. XVII,70 1987 Constitution), does not
apply to reclaimed lands whose ownership has passed on to PEA by
statutory grant."
Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged
areas of Manila Bay are part of the "lands of the public domain, waters x x x and other
natural resources" and consequently "owned by the State." As such, foreshore and
submerged areas "shall not be alienated," unless they are classified as "agricultural
lands" of the public domain. The mere reclamation of these areas by PEA does not
convert these inalienable natural resources of the State into alienable or disposable
lands of the public domain. There must be a law or presidential proclamation officially
classifying these reclaimed lands as alienable or disposable and open to disposition
or concession. Moreover, these reclaimed lands cannot be classified as alienable or
disposable if the law has reserved them for some public or quasi-public use.71
Section 8 of CA No. 141 provides that "only those lands shall be declared open to
disposition or concession which have been officially delimited and classified."72 The
President has the authority to classify inalienable lands of the public domain into
alienable or disposable lands of the public domain, pursuant to Section 6 of CA No.
141. In Laurel vs. Garcia,73 the Executive Department attempted to sell the Roppongi
property in Tokyo, Japan, which was acquired by the Philippine Government for use
as the Chancery of the Philippine Embassy. Although the Chancery had transferred to
another location thirteen years earlier, the Court still ruled that, under Article
42274 of the Civil Code, a property of public dominion retains such character until
formally declared otherwise. The Court ruled that –
"The fact that the Roppongi site has not been used for a long time for actual
Embassy service does not automatically convert it to patrimonial property.
Any such conversion happens only if the property is withdrawn from public
use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A
property continues to be part of the public domain, not available for
private appropriation or ownership 'until there is a formal declaration on
the part of the government to withdraw it from being such' (Ignacio v.
Director of Lands, 108 Phil. 335 [1960]." (Emphasis supplied)
PD No. 1085, issued on February 4, 1977, authorized the issuance of special land
patents for lands reclaimed by PEA from the foreshore or submerged areas of Manila
Bay. On January 19, 1988 then President Corazon C. Aquino issued Special Patent No.
3517 in the name of PEA for the 157.84 hectares comprising the partially reclaimed
Freedom Islands. Subsequently, on April 9, 1999 the Register of Deeds of the
Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA
pursuant to Section 103 of PD No. 1529 authorizing the issuance of certificates of title
corresponding to land patents. To this day, these certificates of title are still in the
name of PEA.
PD No. 1085, coupled with President Aquino's actual issuance of a special patent
covering the Freedom Islands, is equivalent to an official proclamation classifying the
Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085
and President Aquino's issuance of a land patent also constitute a declaration that
the Freedom Islands are no longer needed for public service. The Freedom Islands
are thus alienable or disposable lands of the public domain, open to disposition or
concession to qualified parties.
At the time then President Aquino issued Special Patent No. 3517, PEA had already
reclaimed the Freedom Islands although subsequently there were partial erosions on
some areas. The government had also completed the necessary surveys on these
islands. Thus, the Freedom Islands were no longer part of Manila Bay but part of the
land mass. Section 3, Article XII of the 1987 Constitution classifies lands of the public
domain into "agricultural, forest or timber, mineral lands, and national parks." Being
neither timber, mineral, nor national park lands, the reclaimed Freedom Islands
necessarily fall under the classification of agricultural lands of the public domain.
Under the 1987 Constitution, agricultural lands of the public domain are the only
natural resources that the State may alienate to qualified private parties. All other
natural resources, such as the seas or bays, are "waters x x x owned by the State"
forming part of the public domain, and are inalienable pursuant to Section 2, Article
XII of the 1987 Constitution.
AMARI claims that the Freedom Islands are private lands because CDCP, then a
private corporation, reclaimed the islands under a contract dated November 20, 1973
with the Commissioner of Public Highways. AMARI, citing Article 5 of the Spanish Law
of Waters of 1866, argues that "if the ownership of reclaimed lands may be given to
the party constructing the works, then it cannot be said that reclaimed lands are lands
of the public domain which the State may not alienate."75 Article 5 of the Spanish Law
of Waters reads as follows:
"Article 5. Lands reclaimed from the sea in consequence of works
constructed by the State, or by the provinces, pueblos or private
persons, with proper permission, shall become the property of the party
constructing such works, unless otherwise provided by the terms of the
grant of authority." (Emphasis supplied)
Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim
from the sea only with "proper permission" from the State. Private parties could own
the reclaimed land only if not "otherwise provided by the terms of the grant of
authority." This clearly meant that no one could reclaim from the sea without
permission from the State because the sea is property of public dominion. It also
meant that the State could grant or withhold ownership of the reclaimed land
because any reclaimed land, like the sea from which it emerged, belonged to the
State. Thus, a private person reclaiming from the sea without permission from the
State could not acquire ownership of the reclaimed land which would remain
property of public dominion like the sea it replaced.76 Article 5 of the Spanish Law of
Waters of 1866 adopted the time-honored principle of land ownership that "all lands
that were not acquired from the government, either by purchase or by grant, belong
to the public domain."77
Article 5 of the Spanish Law of Waters must be read together with laws subsequently
enacted on the disposition of public lands. In particular, CA No. 141 requires that
lands of the public domain must first be classified as alienable or disposable before
the government can alienate them. These lands must not be reserved for public or
quasi-public purposes.78 Moreover, the contract between CDCP and the government
was executed after the effectivity of the 1973 Constitution which barred private
corporations from acquiring any kind of alienable land of the public domain. This
contract could not have converted the Freedom Islands into private lands of a private
corporation.
Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing
the reclamation of areas under water and revested solely in the National Government
the power to reclaim lands. Section 1 of PD No. 3-A declared that –
the State may alienate. Once reclaimed and transformed into public agricultural
lands, the government may then officially classify these lands as alienable or
disposable lands open to disposition. Thereafter, the government may declare these
lands no longer needed for public service. Only then can these reclaimed lands be
considered alienable or disposable lands of the public domain and within the
commerce of man.

"The provisions of any law to the contrary notwithstanding, the
reclamation of areas under water, whether foreshore or inland, shall
be limited to the National Government or any person authorized by it
under a proper contract. (Emphasis supplied)
x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because
reclamation of areas under water could now be undertaken only by the National
Government or by a person contracted by the National Government. Private parties
may reclaim from the sea only under a contract with the National Government, and
no longer by grant or permission as provided in Section 5 of the Spanish Law of
Waters of 1866.
The classification of PEA's reclaimed foreshore and submerged lands into alienable
or disposable lands open to disposition is necessary because PEA is tasked under its
charter to undertake public services that require the use of lands of the public
domain. Under Section 5 of PD No. 1084, the functions of PEA include the following:
"[T]o own or operate railroads, tramways and other kinds of land transportation, x x
x; [T]o construct, maintain and operate such systems of sanitary sewers as may be
necessary; [T]o construct, maintain and operate such storm drains as may be
necessary." PEA is empowered to issue "rules and regulations as may be necessary
for the proper use by private parties of any or all of the highways, roads, utilities,
buildings and/or any of its properties and to impose or collect fees or tolls for their
use." Thus, part of the reclaimed foreshore and submerged lands held by the PEA
would actually be needed for public use or service since many of the functions
imposed on PEA by its charter constitute essential public services.

Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily
Executive Order No. 525, issued on February 14, 1979, designated PEA as the National
responsible for integrating, directing, and coordinating all reclamation projects for
Government's implementing arm to undertake "all reclamation projects of the
and on behalf of the National Government." The same section also states that "[A]ll
government," which "shall be undertaken by the PEA or through a proper contract
reclamation projects shall be approved by the President upon recommendation of
executed by it with any person or entity." Under such contract, a private party
the PEA, and shall be undertaken by the PEA or through a proper contract executed
receives compensation for reclamation services rendered to PEA. Payment to the
by it with any person or entity; x x x." Thus, under EO No. 525, in relation to PD No.
contractor may be in cash, or in kind consisting of portions of the reclaimed land,
3-A and PD No.1084, PEA became the primary implementing agency of the National
subject to the constitutional ban on private corporations from acquiring alienable
Government to reclaim foreshore and submerged lands of the public domain. EO No.
lands of the public domain. The reclaimed land can be used as payment in kind only
525 recognized PEA as the government entity "to undertake the reclamation of lands
if the reclaimed land is first classified as alienable or disposable land open to
and ensure their maximum utilization in promoting public welfare and
disposition, and then declared no longer needed for public service.
interests."79 Since large portions of these reclaimed lands would obviously be needed
for public service, there must be a formal declaration segregating reclaimed lands no
The Amended JVA covers not only the Freedom Islands, but also an additional 592.15
longer needed for public service from those still needed for public
hectares which are still submerged and forming part of Manila Bay. There is no
service.1âwphi1.nêt
legislative or Presidential act classifying these submerged areas as alienable or
disposable lands of the public domain open to disposition. These submerged areas
Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to
are not covered by any patent or certificate of title. There can be no dispute that
or be owned by the PEA," could not automatically operate to classify inalienable lands
these submerged areas form part of the public domain, and in their present state
into alienable or disposable lands of the public domain. Otherwise, reclaimed
are inalienable and outside the commerce of man. Until reclaimed from the sea,
foreshore and submerged lands of the public domain would automatically become
these submerged areas are, under the Constitution, "waters x x x owned by the
alienable once reclaimed by PEA, whether or not classified as alienable or disposable.
State," forming part of the public domain and consequently inalienable. Only when
actually reclaimed from the sea can these submerged areas be classified as public
agricultural lands, which under the Constitution are the only natural resources that
The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO
No. 525, vests in the Department of Environment and Natural Resources ("DENR" for
brevity) the following powers and functions:
"Sec. 4. Powers and Functions. The Department shall:
(1) x x x
xxx
(4) Exercise supervision and control over forest lands, alienable and
disposable public lands, mineral resources and, in the process of exercising
such control, impose appropriate taxes, fees, charges, rentals and any such
form of levy and collect such revenues for the exploration, development,
utilization or gathering of such resources;
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public
domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as
alienable under Sections 681 and 782 of CA No. 141. Once DENR decides that the
reclaimed lands should be so classified, it then recommends to the President the
issuance of a proclamation classifying the lands as alienable or disposable lands of
the public domain open to disposition. We note that then DENR Secretary Fulgencio
S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised
Administrative Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under
water, while PEA is vested with the power to undertake the physical reclamation of
areas under water, whether directly or through private contractors. DENR is also
empowered to classify lands of the public domain into alienable or disposable lands
subject to the approval of the President. On the other hand, PEA is tasked to develop,
sell or lease the reclaimed alienable lands of the public domain.

Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas
xxx
does not make the reclaimed lands alienable or disposable lands of the public
domain, much less patrimonial lands of PEA. Likewise, the mere transfer by the
(14) Promulgate rules, regulations and guidelines on the issuance of
National Government of lands of the public domain to PEA does not make the lands
licenses, permits, concessions, lease agreements and such other privileges
alienable or disposable lands of the public domain, much less patrimonial lands of
concerning the development, exploration and utilization of the country's
PEA.
marine, freshwater, and brackish water and over all aquatic resources of
the country and shall continue to oversee, supervise and police our natural
Absent two official acts – a classification that these lands are alienable or disposable
resources; cancel or cause to cancel such privileges upon failure, non-
and open to disposition and a declaration that these lands are not needed for public
compliance or violations of any regulation, order, and for all other causes
service, lands reclaimed by PEA remain inalienable lands of the public domain. Only
which are in furtherance of the conservation of natural resources and
such an official classification and formal declaration can convert reclaimed lands into
supportive of the national interest;
alienable or disposable lands of the public domain, open to disposition under the
Constitution, Title I and Title III83 of CA No. 141 and other applicable laws.84
(15) Exercise exclusive jurisdiction on the management and disposition of
all lands of the public domain and serve as the sole agency responsible for
PEA's Authority to Sell Reclaimed Lands
classification, sub-classification, surveying and titling of lands in
consultation with appropriate agencies."80 (Emphasis supplied)
PEA, like the Legal Task Force, argues that as alienable or disposable lands of the
public domain, the reclaimed lands shall be disposed of in accordance with CA No.
As manager, conservator and overseer of the natural resources of the State, DENR
141, the Public Land Act. PEA, citing Section 60 of CA No. 141, admits that reclaimed
exercises "supervision and control over alienable and disposable public lands." DENR
lands transferred to a branch or subdivision of the government "shall not be
also exercises "exclusive jurisdiction on the management and disposition of all lands
alienated, encumbered, or otherwise disposed of in a manner affecting its
of the public domain." Thus, DENR decides whether areas under water, like foreshore
title, except when authorized by Congress: x x x."85 (Emphasis by PEA)
or submerged areas of Manila Bay, should be reclaimed or not. This means that PEA
needs authorization from DENR before PEA can undertake reclamation projects in
Manila Bay, or in any part of the country. In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code
of 1987, which states that –
 "Sec. 48. Official Authorized to Convey Real Property. Whenever real
property of the Government is authorized by law to be conveyed, the deed
of conveyance shall be executed in behalf of the government by the
following: x x x."
Thus, the Court concluded that a law is needed to convey any real property belonging
to the Government. The Court declared that -
"It is not for the President to convey real property of the government on his
or her own sole will. Any such conveyance must be authorized and
approved by a law enacted by the Congress. It requires executive and
legislative concurrence." (Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority
allowing PEA to sell its reclaimed lands. PD No. 1085, issued on February 4, 1977,
provides that –
"The land reclaimed in the foreshore and offshore area of Manila
Bay pursuant to the contract for the reclamation and construction of the
Manila-Cavite Coastal Road Project between the Republic of the Philippines
and the Construction and Development Corporation of the Philippines dated
November 20, 1973 and/or any other contract or reclamation covering the
same area is hereby transferred, conveyed and assigned to the ownership
and administration of the Public Estates Authority established pursuant to
PD No. 1084; Provided, however, That the rights and interests of the
Construction and Development Corporation of the Philippines pursuant to
the aforesaid contract shall be recognized and respected.
Henceforth, the Public Estates Authority shall exercise the rights and assume
the obligations of the Republic of the Philippines (Department of Public
Highways) arising from, or incident to, the aforesaid contract between the
Republic of the Philippines and the Construction and Development
Corporation of the Philippines.
In consideration of the foregoing transfer and assignment, the Public Estates
Authority shall issue in favor of the Republic of the Philippines the
corresponding shares of stock in said entity with an issued value of said
shares of stock (which) shall be deemed fully paid and non-assessable.
The Secretary of Public Highways and the General Manager of the Public
Estates Authority shall execute such contracts or agreements, including
appropriate agreements with the Construction and Development
Corporation of the Philippines, as may be necessary to implement the
above.
Special land patent/patents shall be issued by the Secretary of Natural
Resources in favor of the Public Estates Authority without prejudice to the
subsequent transfer to the contractor or his assignees of such portion or
portions of the land reclaimed or to be reclaimed as provided for in the
above-mentioned contract. On the basis of such patents, the Land
Registration Commission shall issue the corresponding certificate of title."
(Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides
that -
"Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the
PEA which shall be responsible for its administration, development,
utilization or disposition in accordance with the provisions of Presidential
Decree No. 1084. Any and all income that the PEA may derive from the sale,
lease or use of reclaimed lands shall be used in accordance with the
provisions of Presidential Decree No. 1084."
There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell
its reclaimed lands. PD No. 1085 merely transferred "ownership and administration"
of lands reclaimed from Manila Bay to PEA, while EO No. 525 declared that lands
reclaimed by PEA "shall belong to or be owned by PEA." EO No. 525 expressly states
that PEA should dispose of its reclaimed lands "in accordance with the provisions of
Presidential Decree No. 1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to develop, improve, acquire,
administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands x x x
owned, managed, controlled and/or operated by the government." 87(Emphasis
supplied) There is, therefore, legislative authority granted to PEA to sell its lands,
whether patrimonial or alienable lands of the public domain. PEA may sell to private
parties its patrimonial propertiesin accordance with the PEA charter free from
constitutional limitations. The constitutional ban on private corporations from
acquiring alienable lands of the public domain does not apply to the sale of PEA's
patrimonial lands.
PEA may also sell its alienable or disposable lands of the public domain to private
individuals since, with the legislative authority, there is no longer any statutory
prohibition against such sales and the constitutional ban does not apply to
individuals. PEA, however, cannot sell any of its alienable or disposable lands of the
public domain to private corporations since Section 3, Article XII of the 1987
Constitution expressly prohibits such sales. The legislative authority benefits only
individuals. Private corporations remain barred from acquiring any kind of alienable
land of the public domain, including government reclaimed lands.
The provision in PD No. 1085 stating that portions of the reclaimed lands could be
transferred by PEA to the "contractor or his assignees" (Emphasis supplied) would
not apply to private corporations but only to individuals because of the constitutional
ban. Otherwise, the provisions of PD No. 1085 would violate both the 1973 and 1987
Constitutions.
The requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of PEA are classified as alienable or disposable lands
open to disposition, and further declared no longer needed for public service, PEA
would have to conduct a public bidding in selling or leasing these lands. PEA must
observe the provisions of Sections 63 and 67 of CA No. 141 requiring public auction,
in the absence of a law exempting PEA from holding a public auction.88 Special Patent
No. 3517 expressly states that the patent is issued by authority of the Constitution
and PD No. 1084, "supplemented by Commonwealth Act No. 141, as amended." This
is an acknowledgment that the provisions of CA No. 141 apply to the disposition of
reclaimed alienable lands of the public domain unless otherwise provided by law.
Executive Order No. 654,89 which authorizes PEA "to determine the kind and manner
of payment for the transfer" of its assets and properties, does not exempt PEA from
the requirement of public auction. EO No. 654 merely authorizes PEA to decide the
mode of payment, whether in kind and in installment, but does not authorize PEA to
dispense with public auction.
Moreover, under Section 79 of PD No. 1445, otherwise known as the Government
Auditing Code, the government is required to sell valuable government property
through public bidding. Section 79 of PD No. 1445 mandates that –
"Section 79. When government property has become unserviceable for any
cause, or is no longer needed, it shall, upon application of the officer
accountable therefor, be inspected by the head of the agency or his duly
authorized representative in the presence of the auditor concerned and, if
found to be valueless or unsaleable, it may be destroyed in their presence. If
found to be valuable, it may be sold at public auction to the highest
bidder under the supervision of the proper committee on award or similar
body in the presence of the auditor concerned or other authorized
representative of the Commission, after advertising by printed notice in the
Official Gazette, or for not less than three consecutive days in any
newspaper of general circulation, or where the value of the property does
not warrant the expense of publication, by notices posted for a like period
in at least three public places in the locality where the property is to be
sold. In the event that the public auction fails, the property may be sold at
a private sale at such price as may be fixed by the same committee or body
concerned and approved by the Commission."
It is only when the public auction fails that a negotiated sale is allowed, in which case
the Commission on Audit must approve the selling price.90 The Commission on Audit
implements Section 79 of the Government Auditing Code through Circular No. 89-
29691 dated January 27, 1989. This circular emphasizes that government assets must
be disposed of only through public auction, and a negotiated sale can be resorted to
only in case of "failure of public auction."
At the public auction sale, only Philippine citizens are qualified to bid for PEA's
reclaimed foreshore and submerged alienable lands of the public domain. Private
corporations are barred from bidding at the auction sale of any kind of alienable land
of the public domain.
PEA originally scheduled a public bidding for the Freedom Islands on December 10,
1991. PEA imposed a condition that the winning bidder should reclaim another 250
hectares of submerged areas to regularize the shape of the Freedom Islands, under
a 60-40 sharing of the additional reclaimed areas in favor of the winning bidder.92 No
one, however, submitted a bid. On December 23, 1994, the Government Corporate
Counsel advised PEA it could sell the Freedom Islands through negotiation, without
need of another public bidding, because of the failure of the public bidding on
December 10, 1991.93
However, the original JVA dated April 25, 1995 covered not only the Freedom Islands
and the additional 250 hectares still to be reclaimed, it also granted an option to
AMARI to reclaim another 350 hectares. The original JVA, a negotiated contract,
enlarged the reclamation area to 750 hectares.94 The failure of public bidding on
December 10, 1991, involving only 407.84 hectares,95 is not a valid justification for a
negotiated sale of 750 hectares, almost double the area publicly auctioned. Besides,
the failure of public bidding happened on December 10, 1991, more than three years
before the signing of the original JVA on April 25, 1995. The economic situation in the
country had greatly improved during the intervening period.
Reclamation under the BOT Law and the Local Government Code
The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is
absolute and clear: "Private corporations or associations may not hold such alienable
lands of the public domain except by lease, x x x." Even Republic Act No. 6957 ("BOT
Law," for brevity), cited by PEA and AMARI as legislative authority to sell reclaimed
lands to private parties, recognizes the constitutional ban. Section 6 of RA No. 6957
states –
"Sec. 6. Repayment Scheme. - For the financing, construction, operation and
maintenance of any infrastructure projects undertaken through the build-
operate-and-transfer arrangement or any of its variations pursuant to the
provisions of this Act, the project proponent x x x may likewise be repaid in
the form of a share in the revenue of the project or other non-monetary
payments, such as, but not limited to, the grant of a portion or percentage
of the reclaimed land, subject to the constitutional requirements with
respect to the ownership of the land: x x x." (Emphasis supplied)
A private corporation, even one that undertakes the physical reclamation of a
government BOT project, cannot acquire reclaimed alienable lands of the public
domain in view of the constitutional ban.
Section 302 of the Local Government Code, also mentioned by PEA and AMARI,
authorizes local governments in land reclamation projects to pay the contractor or
developer in kind consisting of a percentage of the reclaimed land, to wit:
"Section 302. Financing, Construction, Maintenance, Operation, and
Management of Infrastructure Projects by the Private Sector. x x x
xxx
In case of land reclamation or construction of industrial estates, the
repayment plan may consist of the grant of a portion or percentage of the
reclaimed land or the industrial estate constructed."
Although Section 302 of the Local Government Code does not contain a proviso
similar to that of the BOT Law, the constitutional restrictions on land ownership
automatically apply even though not expressly mentioned in the Local Government
Code.
Thus, under either the BOT Law or the Local Government Code, the contractor or
developer, if a corporate entity, can only be paid with leaseholds on portions of the
reclaimed land. If the contractor or developer is an individual, portions of the
reclaimed land, not exceeding 12 hectares96 of non-agricultural lands, may be
conveyed to him in ownership in view of the legislative authority allowing such
conveyance. This is the only way these provisions of the BOT Law and the Local
Government Code can avoid a direct collision with Section 3, Article XII of the 1987
Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the "act of conveying the ownership of the reclaimed lands
to public respondent PEA transformed such lands of the public domain to private
lands." This theory is echoed by AMARI which maintains that the "issuance of the
special patent leading to the eventual issuance of title takes the subject land away
from the land of public domain and converts the property into patrimonial or private
property." In short, PEA and AMARI contend that with the issuance of Special Patent
No. 3517 and the corresponding certificates of titles, the 157.84 hectares comprising
the Freedom Islands have become private lands of PEA. In support of their theory,
PEA and AMARI cite the following rulings of the Court:
1. Sumail v. Judge of CFI of Cotabato,97 where the Court held –
"Once the patent was granted and the corresponding certificate of title was
issued, the land ceased to be part of the public domain and became private
property over which the Director of Lands has neither control nor
jurisdiction."
2. Lee Hong Hok v. David,98 where the Court declared -
"After the registration and issuance of the certificate and duplicate
certificate of title based on a public land patent, the land covered thereby
automatically comes under the operation of Republic Act 496 subject to all
the safeguards provided therein."3. Heirs of Gregorio Tengco v. Heirs of Jose
Aliwalas,99 where the Court ruled -
"While the Director of Lands has the power to review homestead patents,
he may do so only so long as the land remains part of the public domain and
continues to be under his exclusive control; but once the patent is registered
and a certificate of title is issued, the land ceases to be part of the public
domain and becomes private property over which the Director of Lands has
neither control nor jurisdiction."
4. Manalo v. Intermediate Appellate Court,100 where the Court held –
"When the lots in dispute were certified as disposable on May 19, 1971, and
free patents were issued covering the same in favor of the private
respondents, the said lots ceased to be part of the public domain and,
therefore, the Director of Lands lost jurisdiction over the same."
5.Republic v. Court of Appeals,101 where the Court stated –
 "Proclamation No. 350, dated October 9, 1956, of President Magsaysay
legally effected a land grant to the Mindanao Medical Center, Bureau of
Medical Services, Department of Health, of the whole lot, validly sufficient
for initial registration under the Land Registration Act. Such land grant is
constitutive of a 'fee simple' title or absolute title in favor of petitioner
Mindanao Medical Center. Thus, Section 122 of the Act, which governs the
registration of grants or patents involving public lands, provides that
'Whenever public lands in the Philippine Islands belonging to the
Government of the United States or to the Government of the Philippines
are alienated, granted or conveyed to persons or to public or private
corporations, the same shall be brought forthwith under the operation of
this Act (Land Registration Act, Act 496) and shall become registered lands.'"
The first four cases cited involve petitions to cancel the land patents and the
corresponding certificates of titles issued to private parties. These four cases
uniformly hold that the Director of Lands has no jurisdiction over private lands or that
upon issuance of the certificate of title the land automatically comes under the
Torrens System. The fifth case cited involves the registration under the Torrens
System of a 12.8-hectare public land granted by the National Government to
Mindanao Medical Center, a government unit under the Department of Health. The
National Government transferred the 12.8-hectare public land to serve as the site for
the hospital buildings and other facilities of Mindanao Medical Center, which
performed a public service. The Court affirmed the registration of the 12.8-hectare
public land in the name of Mindanao Medical Center under Section 122 of Act No.
496. This fifth case is an example of a public land being registered under Act No. 496
without the land losing its character as a property of public dominion.
In the instant case, the only patent and certificates of title issued are those in the
name of PEA, a wholly government owned corporation performing public as well as
proprietary functions. No patent or certificate of title has been issued to any private
party. No one is asking the Director of Lands to cancel PEA's patent or certificates of
title. In fact, the thrust of the instant petition is that PEA's certificates of title should
remain with PEA, and the land covered by these certificates, being alienable lands of
the public domain, should not be sold to a private corporation.
Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant
private or public ownership of the land. Registration is not a mode of acquiring
ownership but is merely evidence of ownership previously conferred by any of the
recognized modes of acquiring ownership. Registration does not give the registrant
a better right than what the registrant had prior to the registration. 102 The
registration of lands of the public domain under the Torrens system, by itself, cannot
convert public lands into private lands.103
Jurisprudence holding that upon the grant of the patent or issuance of the certificate
of title the alienable land of the public domain automatically becomes private land
cannot apply to government units and entities like PEA. The transfer of the Freedom
Islands to PEA was made subject to the provisions of CA No. 141 as expressly stated
in Special Patent No. 3517 issued by then President Aquino, to wit:
"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the
Philippines and in conformity with the provisions of Presidential Decree No.
1084, supplemented by Commonwealth Act No. 141, as amended, there
are hereby granted and conveyed unto the Public Estates Authority the
aforesaid tracts of land containing a total area of one million nine hundred
fifteen thousand eight hundred ninety four (1,915,894) square meters; the
technical description of which are hereto attached and made an integral
part hereof." (Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not
covered by PD No. 1084. Section 60 of CA No. 141 prohibits, "except when authorized
by Congress," the sale of alienable lands of the public domain that are transferred to
government units or entities. Section 60 of CA No. 141 constitutes, under Section 44
of PD No. 1529, a "statutory lien affecting title" of the registered land even if not
annotated on the certificate of title. 104Alienable lands of the public domain held by
government entities under Section 60 of CA No. 141 remain public lands because they
cannot be alienated or encumbered unless Congress passes a law authorizing their
disposition. Congress, however, cannot authorize the sale to private corporations of
reclaimed alienable lands of the public domain because of the constitutional ban.
Only individuals can benefit from such law.
The grant of legislative authority to sell public lands in accordance with Section 60 of
CA No. 141 does not automatically convert alienable lands of the public domain into
private or patrimonial lands. The alienable lands of the public domain must be
transferred to qualified private parties, or to government entities not tasked to
dispose of public lands, before these lands can become private or patrimonial lands.
Otherwise, the constitutional ban will become illusory if Congress can declare lands
of the public domain as private or patrimonial lands in the hands of a government
agency tasked to dispose of public lands. This will allow private corporations to
acquire directly from government agencies limitless areas of lands which, prior to
such law, are concededly public lands.
Under EO No. 525, PEA became the central implementing agency of the National
Government to reclaim foreshore and submerged areas of the public domain. Thus,
EO No. 525 declares that –
"EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the Agency Primarily Responsible
for all Reclamation Projects
Whereas, there are several reclamation projects which are ongoing or being
proposed to be undertaken in various parts of the country which need to be
evaluated for consistency with national programs;
Whereas, there is a need to give further institutional support to the
Government's declared policy to provide for a coordinated, economical and
efficient reclamation of lands;
Whereas, Presidential Decree No. 3-A requires that all reclamation of areas
shall be limited to the National Government or any person authorized by it
under proper contract;
Whereas, a central authority is needed to act on behalf of the National
Government which shall ensure a coordinated and integrated approach in
the reclamation of lands;
Whereas, Presidential Decree No. 1084 creates the Public Estates Authority
as a government corporation to undertake reclamation of lands and
ensure their maximum utilization in promoting public welfare and
interests; and
Whereas, Presidential Decree No. 1416 provides the President with
continuing authority to reorganize the national government including the
transfer, abolition, or merger of functions and offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers vested in me by the Constitution and pursuant to
Presidential Decree No. 1416, do hereby order and direct the following:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible
for integrating, directing, and coordinating all reclamation projects for and
on behalf of the National Government. All reclamation projects shall be
approved by the President upon recommendation of the PEA, and shall be
undertaken by the PEA or through a proper contract executed by it with any
person or entity; Provided, that, reclamation projects of any national
government agency or entity authorized under its charter shall be
undertaken in consultation with the PEA upon approval of the President.
x x x ."
As the central implementing agency tasked to undertake reclamation projects
nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the
government agency charged with leasing or selling reclaimed lands of the public
domain. The reclaimed lands being leased or sold by PEA are not private lands, in the
same manner that DENR, when it disposes of other alienable lands, does not dispose
of private lands but alienable lands of the public domain. Only when qualified private
parties acquire these lands will the lands become private lands. In the hands of the
government agency tasked and authorized to dispose of alienable of disposable
lands of the public domain, these lands are still public, not private lands.
Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public
domain" as well as "any and all kinds of lands." PEA can hold both lands of the public
domain and private lands. Thus, the mere fact that alienable lands of the public
domain like the Freedom Islands are transferred to PEA and issued land patents or
certificates of title in PEA's name does not automatically make such lands private.
To allow vast areas of reclaimed lands of the public domain to be transferred to PEA
as private lands will sanction a gross violation of the constitutional ban on private
corporations from acquiring any kind of alienable land of the public domain. PEA will
simply turn around, as PEA has now done under the Amended JVA, and transfer
several hundreds of hectares of these reclaimed and still to be reclaimed lands to a
single private corporation in only one transaction. This scheme will effectively nullify
the constitutional ban in Section 3, Article XII of the 1987 Constitution which was
intended to diffuse equitably the ownership of alienable lands of the public domain
among Filipinos, now numbering over 80 million strong.
This scheme, if allowed, can even be applied to alienable agricultural lands of the
public domain since PEA can "acquire x x x any and all kinds of lands." This will open
the floodgates to corporations and even individuals acquiring hundreds of hectares
of alienable lands of the public domain under the guise that in the hands of PEA these
lands are private lands. This will result in corporations amassing huge landholdings
never before seen in this country - creating the very evil that the constitutional ban
was designed to prevent. This will completely reverse the clear direction of
constitutional development in this country. The 1935 Constitution allowed private
corporations to acquire not more than 1,024 hectares of public lands. 105 The 1973
Constitution prohibited private corporations from acquiring any kind of public land,
and the 1987 Constitution has unequivocally reiterated this prohibition.
The contention of PEA and AMARI that public lands, once registered under Act No.
496 or PD No. 1529, automatically become private lands is contrary to existing laws.
Several laws authorize lands of the public domain to be registered under the Torrens
System or Act No. 496, now PD No. 1529, without losing their character as public
lands. Section 122 of Act No. 496, and Section 103 of PD No. 1529, respectively,
provide as follows:
Act No. 496
"Sec. 122. Whenever public lands in the Philippine Islands belonging to the
x x x Government of the Philippine Islands are alienated, granted, or
conveyed to persons or the public or private corporations, the same shall
be brought forthwith under the operation of this Act and shall become
registered lands."
PD No. 1529
"Sec. 103. Certificate of Title to Patents. Whenever public land is by the
Government alienated, granted or conveyed to any person, the same shall
be brought forthwith under the operation of this Decree." (Emphasis
supplied)
Based on its legislative history, the phrase "conveyed to any person" in Section 103
of PD No. 1529 includes conveyances of public lands to public corporations.
Alienable lands of the public domain "granted, donated, or transferred to a province,
municipality, or branch or subdivision of the Government," as provided in Section 60
of CA No. 141, may be registered under the Torrens System pursuant to Section 103
of PD No. 1529. Such registration, however, is expressly subject to the condition in
Section 60 of CA No. 141 that the land "shall not be alienated, encumbered or
otherwise disposed of in a manner affecting its title, except when authorized by
Congress." This provision refers to government reclaimed, foreshore and marshy
lands of the public domain that have been titled but still cannot be alienated or
encumbered unless expressly authorized by Congress. The need for legislative
authority prevents the registered land of the public domain from becoming private
land that can be disposed of to qualified private parties.
The Revised Administrative Code of 1987 also recognizes that lands of the public
domain may be registered under the Torrens System. Section 48, Chapter 12, Book I
of the Code states –
"Sec. 48. Official Authorized to Convey Real Property. Whenever real
property of the Government is authorized by law to be conveyed, the deed
of conveyance shall be executed in behalf of the government by the
following:
(1) x x x
(2) For property belonging to the Republic of the Philippines, but titled in
the name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality."
(Emphasis supplied)
Thus, private property purchased by the National Government for expansion of a
public wharf may be titled in the name of a government corporation regulating port
operations in the country. Private property purchased by the National Government
for expansion of an airport may also be titled in the name of the government agency
tasked to administer the airport. Private property donated to a municipality for use
as a town plaza or public school site may likewise be titled in the name of the
municipality.106 All these properties become properties of the public domain, and if
already registered under Act No. 496 or PD No. 1529, remain registered land. There
is no requirement or provision in any existing law for the de-registration of land from
the Torrens System.
Private lands taken by the Government for public use under its power of eminent
domain become unquestionably part of the public domain. Nevertheless, Section 85
of PD No. 1529 authorizes the Register of Deeds to issue in the name of the National
Government new certificates of title covering such expropriated lands. Section 85 of
PD No. 1529 states –
"Sec. 85. Land taken by eminent domain. Whenever any registered land, or
interest therein, is expropriated or taken by eminent domain, the National
Government, province, city or municipality, or any other agency or
instrumentality exercising such right shall file for registration in the proper
Registry a certified copy of the judgment which shall state definitely by an
adequate description, the particular property or interest expropriated, the
number of the certificate of title, and the nature of the public use. A
memorandum of the right or interest taken shall be made on each certificate
of title by the Register of Deeds, and where the fee simple is taken, a new
certificate shall be issued in favor of the National Government, province,
city, municipality, or any other agency or instrumentality exercising such
right for the land so taken. The legal expenses incident to the memorandum
of registration or issuance of a new certificate of title shall be for the account
of the authority taking the land or interest therein." (Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively
private or patrimonial lands. Lands of the public domain may also be registered
pursuant to existing laws.
AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the
Freedom Islands or of the lands to be reclaimed from submerged areas of Manila Bay.
In the words of AMARI, the Amended JVA "is not a sale but a joint venture with a
stipulation for reimbursement of the original cost incurred by PEA for the earlier
reclamation and construction works performed by the CDCP under its 1973 contract
with the Republic." Whether the Amended JVA is a sale or a joint venture, the fact
remains that the Amended JVA requires PEA to "cause the issuance and delivery of
the certificates of title conveying AMARI's Land Share in the name of AMARI." 107
This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which
provides that private corporations "shall not hold such alienable lands of the public
domain except by lease." The transfer of title and ownership to AMARI clearly means
that AMARI will "hold" the reclaimed lands other than by lease. The transfer of title
and ownership is a "disposition" of the reclaimed lands, a transaction considered a
sale or alienation under CA No. 141,108 the Government Auditing Code,109 and Section
3, Article XII of the 1987 Constitution.
The Regalian doctrine is deeply implanted in our legal system. Foreshore and
submerged areas form part of the public domain and are inalienable. Lands reclaimed
from foreshore and submerged areas also form part of the public domain and are
also inalienable, unless converted pursuant to law into alienable or disposable lands
of the public domain. Historically, lands reclaimed by the government are sui generis,
not available for sale to private parties unlike other alienable public lands. Reclaimed
lands retain their inherent potential as areas for public use or public service. Alienable
lands of the public domain, increasingly becoming scarce natural resources, are to be
distributed equitably among our ever-growing population. To insure such equitable
distribution, the 1973 and 1987 Constitutions have barred private corporations from
acquiring any kind of alienable land of the public domain. Those who attempt to
dispose of inalienable natural resources of the State, or seek to circumvent the
constitutional ban on alienation of lands of the public domain to private corporations,
do so at their own risk.
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands,
now covered by certificates of title in the name of PEA, are alienable lands
of the public domain. PEA may lease these lands to private corporations but
may not sell or transfer ownership of these lands to private corporations.
PEA may only sell these lands to Philippine citizens, subject to the ownership
limitations in the 1987 Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable
natural resources of the public domain until classified as alienable or
disposable lands open to disposition and declared no longer needed for
public service. The government can make such classification and declaration
only after PEA has reclaimed these submerged areas. Only then can these
lands qualify as agricultural lands of the public domain, which are the only
natural resources the government can alienate. In their present state, the
592.15 hectares of submerged areas are inalienable and outside the
commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a private corporation,
ownership of 77.34 hectares110of the Freedom Islands, such transfer is void
for being contrary to Section 3, Article XII of the 1987 Constitution which
prohibits private corporations from acquiring any kind of alienable land of
the public domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of
290.156 hectares111 of still submerged areas of Manila Bay, such transfer is
void for being contrary to Section 2, Article XII of the 1987 Constitution
which prohibits the alienation of natural resources other than agricultural
lands of the public domain. PEA may reclaim these submerged areas.
Thereafter, the government can classify the reclaimed lands as alienable or
disposable, and further declare them no longer needed for public service.
Still, the transfer of such reclaimed alienable lands of the public domain to
AMARI will be void in view of Section 3, Article XII of the 1987 Constitution
which prohibits private corporations from acquiring any kind of alienable
land of the public domain.
Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987
Constitution. Under Article 1409112 of the Civil Code, contracts whose "object or
purpose is contrary to law," or whose "object is outside the commerce of men," are
"inexistent and void from the beginning." The Court must perform its duty to defend
and uphold the Constitution, and therefore declares the Amended JVA null and void
ab initio.
Seventh issue: whether the Court is the proper forum to raise the issue of whether
the Amended JVA is grossly disadvantageous to the government.
Considering that the Amended JVA is null and void ab initio, there is no necessity to
rule on this last issue. Besides, the Court is not a trier of facts, and this last issue
involves a determination of factual matters.
WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari Coastal Bay
Development Corporation are PERMANENTLY ENJOINED from implementing the Amended
Joint Venture Agreement which is hereby declared NULL and VOID ab initio.
G.R. No. 115381 December 23, 1994
KILUSANG MAYO UNO LABOR CENTER, petitioner,
vs.
HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION FRANCHISING AND
REGULATORY BOARD, and the PROVINCIAL BUS OPERATORS ASSOCIATION OF
THE PHILIPPINES, respondents.
Potenciano A. Flores for petitioner.
Robert Anthony C. Sison, Cesar B. Brillantes and Jose Z. Galsim for private respondent.
Jose F. Miravite for movants.
KAPUNAN, J.:
Public utilities are privately owned and operated businesses whose service are
essential to the general public. They are enterprises which specially cater to the
needs of the public and conduce to their comfort and convenience. As such, public
utility services are impressed with public interest and concern. The same is true with
respect to the business of common carrier which holds such a peculiar relation to the
public interest that there is superinduced upon it the right of public regulation when
private properties are affected with public interest, hence, they cease to be juris
privati only. When, therefore, one devotes his property to a use in which the public
has an interest, he, in effect grants to the public an interest in that use, and must
submit to the control by the public for the common good, to the extent of the interest
he has thus created.1
An abdication of the licensing and regulatory government agencies of their functions
as the instant petition seeks to show, is indeed lamentable. Not only is it an unsound
administrative policy but it is inimical to public trust and public interest as well.
The instant petition for certiorari assails the constitutionality and validity of certain
memoranda, circulars and/or orders of the Department of Transportation and
Communications (DOTC) and the Land Transportation Franchising and Regulatory
Board LTFRB)2 which, among others, (a) authorize provincial bus and jeepney
operators to increase or decrease the prescribed transportation fares without
application therefor with the LTFRB and without hearing and approval thereof by said
agency in violation of Sec. 16(c) of Commonwealth Act No. 146, as amended,
otherwise known as the Public Service Act, and in derogation of LTFRB's duty to fix
and determine just and reasonable fares by delegating that function to bus operators,
and (b) establish a presumption of public need in favor of applicants for certificates
of public convenience (CPC) and place on the oppositor the burden of proving that
there is no need for the proposed service, in patent violation not only of Sec. 16(c) of
CA 146, as amended, but also of Sec. 20(a) of the same Act mandating that fares
should be "just and reasonable." It is, likewise, violative of the Rules of Court which
places upon each party the burden to prove his own affirmative allegations.3 The
offending provisions contained in the questioned issuances pointed out by petitioner,
have resulted in the introduction into our highways and thoroughfares thousands of
old and smoke-belching buses, many of which are right-hand driven, and have
exposed our consumers to the burden of spiraling costs of public transportation
without hearing and due process.
The following memoranda, circulars and/or orders are sought to be nullified by the
instant petition, viz: (a) DOTC Memorandum Order 90-395, dated June 26, 1990
relative to the implementation of a fare range scheme for provincial bus services in
the country; (b) DOTC Department Order No.
92-587, dated March 30, 1992, defining the policy framework on the regulation of
transport services; (c) DOTC Memorandum dated October 8, 1992, laying down rules
and procedures to implement Department Order No. 92-587; (d) LTFRB
Memorandum Circular No. 92-009, providing implementing guidelines on the DOTC
Department Order No. 92-587; and (e) LTFRB Order dated March 24, 1994 in Case
No. 94-3112.
The relevant antecedents are as follows:
On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued Memorandum
Circular No. 90-395 to then LTFRB Chairman, Remedios A.S. Fernando allowing
provincial bus operators to charge passengers rates within a range of 15% above and
15% below the LTFRB official rate for a period of one (1) year. The text of the
memorandum order reads in full:
One of the policy reforms and measures that is in line with the
thrusts and the priorities set out in the Medium-Term Philippine
Development Plan (MTPDP) 1987 — 1992) is the liberalization of
regulations in the transport sector. Along this line, the Government
intends to move away gradually from regulatory policies and make
progress towards greater reliance on free market forces.
Based on several surveys and observations, bus companies are
already charging passenger rates above and below the official fare
declared by LTFRB on many provincial routes. It is in this context
 that some form of liberalization on public transport fares is to be
tested on a pilot basis.
In view thereof, the LTFRB is hereby directed to immediately
publicize a fare range scheme for all provincial bus routes in
country (except those operating within Metro Manila). Transport
Operators shall be allowed to charge passengers within a range of
fifteen percent (15%) above and fifteen percent (15%) below the
LTFRB official rate for a period of one year.
Guidelines and procedures for the said scheme shall be prepared
by LTFRB in coordination with the DOTC Planning Service.
The implementation of the said fare range scheme shall start on 6
August 1990.
For compliance. (Emphasis ours.)
Finding the implementation of the fare range scheme "not legally feasible," Remedios
A.S. Fernando submitted the following memorandum to Oscar M. Orbos on July 24,
1990, to wit:
With reference to DOTC Memorandum Order No. 90-395 dated 26
June 1990 which the LTFRB received on 19 July 1990, directing the
Board "to immediately publicize a fare range scheme for all
provincial bus routes in the country (except those operating within
Metro Manila)" that will allow operators "to charge passengers
within a range of fifteen percent (15%) above and fifteen percent
(15%) below the LTFRB official rate for a period of one year" the
undersigned is respectfully adverting the Secretary's attention to
the following for his consideration:
1. Section 16(c) of the Public Service Act
prescribes the following for the fixing and
determination of rates — (a) the rates to be
approved should be proposed by public service
operators; (b) there should be a publication and
notice to concerned or affected parties in the
territory affected; (c) a public hearing should be
held for the fixing of the rates; hence,
implementation of the proposed fare range
scheme on August 6 without complying with the
requirements of the Public Service Act may not
be legally feasible.
2. To allow bus operators in the country to charge
fares fifteen (15%) above the present LTFRB fares
in the wake of the devastation, death and
suffering caused by the July 16 earthquake will
not be socially warranted and will be politically
unsound; most likely public criticism against the
DOTC and the LTFRB will be triggered by the
untimely motu propioimplementation of the
proposal by the mere expedient of publicizing the
fare range scheme without calling a public
hearing, which scheme many as early as during
the Secretary's predecessor know through
newspaper reports and columnists' comments to
be Asian Development Bank and World Bank
inspired.
3. More than inducing a reduction in bus fares by
fifteen percent (15%) the implementation of the
proposal will instead trigger an upward
adjustment in bus fares by fifteen percent (15%)
at a time when hundreds of thousands of people
in Central and Northern Luzon, particularly in
Central Pangasinan, La Union, Baguio City, Nueva
Ecija, and the Cagayan Valley are suffering from
the devastation and havoc caused by the recent
earthquake.
4. In lieu of the said proposal, the DOTC with its
agencies involved in public transportation can
consider measures and reforms in the industry
that will be socially uplifting, especially for the
people in the areas devastated by the recent
earthquake.
In view of the foregoing considerations, the undersigned
respectfully suggests that the implementation of the proposed fare
range scheme this year be further studied and evaluated.
On December 5, 1990, private respondent Provincial Bus Operators Association of
the Philippines, Inc. (PBOAP) filed an application for fare rate increase. An across-the-
board increase of eight and a half centavos (P0.085) per kilometer for all types of
provincial buses with a minimum-maximum fare range of fifteen (15%) percent over
and below the proposed basic per kilometer fare rate, with the said minimum-
maximum fare range applying only to ordinary, first class and premium class buses
and a fifty-centavo (P0.50) minimum per kilometer fare for aircon buses, was sought.
On March 30, 1992, then Secretary of the Department of Transportation and
Communications Pete Nicomedes Prado issued Department Order No.
92-587 defining the policy framework on the regulation of transport services. The full
text of the said order is reproduced below in view of the importance of the provisions
contained therein:

On December 6, 1990, private respondent PBOAP reduced its applied proposed fare
to an across-the-board increase of six and a half (P0.065) centavos per kilometer for
ordinary buses. The decrease was due to the drop in the expected price of diesel.
The application was opposed by the Philippine Consumers Foundation, Inc. and Perla
C. Bautista alleging that the proposed rates were exorbitant and unreasonable and
that the application contained no allegation on the rate of return of the proposed
increase in rates.
On December 14, 1990, public respondent LTFRB rendered a decision granting the
fare rate increase in accordance with the following schedule of fares on a straight
computation method, viz:
AUTHORIZED FARES
WHEREAS, Executive Order No. 125 as amended, designates the
Department of Transportation and Communications (DOTC) as the
primary policy, planning, regulating and implementing agency on
transportation;
WHEREAS, to achieve the objective of a viable, efficient, and
dependable transportation system, the transportation regulatory
agencies under or attached to the DOTC have to harmonize their
decisions and adopt a common philosophy and direction;
WHEREAS, the government proposes to build on the successful
liberalization measures pursued over the last five years and bring
the transport sector nearer to a balanced longer term regulatory
framework;

LUZON NOW, THEREFORE, pursuant to the powers granted by laws to the

MIN. OF 5 KMS. SUCCEEDING KM. DOTC, the following policies and principles in the economic
regulation of land, air, and water transportation services are
REGULAR P1.50 P0.37 hereby adopted:
STUDENT P1.15 P0.28
1. Entry into and exit out of the industry. Following the
VISAYAS/MINDANAO Constitutional dictum against monopoly, no franchise holder shall
be permitted to maintain a monopoly on any route. A minimum of
two franchise holders shall be permitted to operate on any route.
REGULAR P1.60 P0.375
STUDENT P1.20 P0.285
FIRST CLASS (PER KM.) The requirements to grant a certificate to operate, or certificate of
LUZON P0.385 public convenience, shall be: proof of Filipino citizenship, financial
VISAYAS/ capability, public need, and sufficient insurance cover to protect
MINDANAO P0.395 the riding public.
PREMIERE CLASS (PER KM.)
LUZON P0.395 In determining public need, the presumption of need for a service
VISAYAS/ shall be deemed in favor of the applicant. The burden of proving
MINDANAO P0.405 that there is no need for a proposed service shall be with the
oppositor(s).
AIRCON (PER KM.) P0.415.4
In the interest of providing efficient public transport services, the
use of the "prior operator" and the "priority of filing" rules shall be
discontinued. The route measured capacity test or other similar
tests of demand for vehicle/vessel fleet on any route shall be used
only as a guide in weighing the merits of each franchise application
and not as a limit to the services offered.
Where there are limitations in facilities, such as congested road
space in urban areas, or at airports and ports, the use of demand
management measures in conformity with market principles may
be considered.
The right of an operator to leave the industry is recognized as a
business decision, subject only to the filing of appropriate notice
and following a phase-out period, to inform the public and to
minimize disruption of services.
2. Rate and Fare Setting. Freight rates shall be freed gradually from
government controls. Passenger fares shall also be deregulated,
except for the lowest class of passenger service (normally third class
passenger transport) for which the government will fix indicative or
reference fares. Operators of particular services may fix their own
fares within a range 15% above and below the indicative or
reference rate.
Where there is lack of effective competition for services, or on
specific routes, or for the transport of particular commodities,
maximum mandatory freight rates or passenger fares shall be set
temporarily by the government pending actions to increase the
level of competition.
For unserved or single operator routes, the government shall
contract such services in the most advantageous terms to the
public and the government, following public bids for the services.
The advisability of bidding out the services or using other kinds of
incentives on such routes shall be studied by the government.
3. Special Incentives and Financing for Fleet Acquisition. As a
matter of policy, the government shall not engage in special
financing and incentive programs, including direct subsidies for
fleet acquisition and expansion. Only when the market situation
warrants government intervention shall programs of this type be
considered. Existing programs shall be phased out gradually.
The Land Transportation Franchising and Regulatory Board, the
Civil Aeronautics Board, the Maritime Industry Authority are
hereby directed to submit to the Office of the Secretary, within
forty-five (45) days of this Order, the detailed rules and procedures
for the Implementation of the policies herein set forth. In the
formulation of such rules, the concerned agencies shall be guided
by the most recent studies on the subjects, such as the Provincial
Road Passenger Transport Study, the Civil Aviation Master Plan, the
Presidential Task Force on the Inter-island Shipping Industry, and
the Inter-island Liner Shipping Rate Rationalization Study.
For the compliance of all concerned. (Emphasis ours)
On October 8, 1992, public respondent Secretary of the Department of
Transportation and Communications Jesus B. Garcia, Jr. issued a memorandum to the
Acting Chairman of the LTFRB suggesting swift action on the adoption of rules and
procedures to implement above-quoted Department Order No. 92-587 that laid
down deregulation and other liberalization policies for the transport sector. Attached
to the said memorandum was a revised draft of the required rules and procedures
covering (i) Entry Into and Exit Out of the Industry and (ii) Rate and Fare Setting, with
comments and suggestions from the World Bank incorporated therein. Likewise,
resplendent from the said memorandum is the statement of the DOTC Secretary that
the adoption of the rules and procedures is a pre-requisite to the approval of the
Economic Integration Loan from the World Bank.5
On February 17, 1993, the LTFRB issued Memorandum Circular
No. 92-009 promulgating the guidelines for the implementation of DOTC
Department Order No. 92-587. The Circular provides, among others, the following
challenged portions:
xxx xxx xxx
IV. Policy Guidelines on the Issuance of Certificate of Public
Convenience.
The issuance of a Certificate of Public Convenience is determined
by public need. The presumption of public need for a service shall
be deemed in favor of the applicant, while burden of proving that
there is no need for the proposed service shall be the oppositor'(s).
xxx xxx xxx
V. Rate and Fare Setting
 The control in pricing shall be liberalized to introduce price
competition complementary with the quality of service, subject to
prior notice and public hearing. Fares shall not be provisionally
authorized without public hearing.
A. On the General Structure of Rates
1. The existing authorized fare range system of plus or minus 15 per
cent for provincial buses and jeepneys shall be widened to 20% and
-25% limit in 1994 with the authorized fare to be replaced by an
indicative or reference rate as the basis for the expanded fare
range.
2. Fare systems for aircon buses are liberalized to cover first class
and premier services.
xxx xxx xxx
(Emphasis ours).
Sometime in March, 1994, private respondent PBOAP, availing itself of the
deregulation policy of the DOTC allowing provincial bus operators to collect plus 20%
and minus 25% of the prescribed fare without first having filed a petition for the
purpose and without the benefit of a public hearing, announced a fare increase of
twenty (20%) percent of the existing fares. Said increased fares were to be made
effective on March 16, 1994.
On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the
upward adjustment of bus fares.
On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the
petition for lack of merit. The dispositive portion reads:
PREMISES CONSIDERED, this Board after considering the
arguments of the parties, hereby DISMISSES FOR LACK OF MERIT
the petition filed in the above-entitled case. This petition in this
case was resolved with dispatch at the request of petitioner to
enable it to immediately avail of the legal remedies or options it is
entitled under existing laws.
SO ORDERED.6
Hence, the instant petition for certiorari with an urgent prayer for issuance of a
temporary restraining order.
The Court, on June 20, 1994, issued a temporary restraining order enjoining,
prohibiting and preventing respondents from implementing the bus fare rate
increase as well as the questioned orders and memorandum circulars. This meant
that provincial bus fares were rolled back to the levels duly authorized by the LTFRB
prior to March 16, 1994. A moratorium was likewise enforced on the issuance of
franchises for the operation of buses, jeepneys, and taxicabs.
Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by
respondent LTFRB to provincial bus operators to set a fare range of plus or minus
fifteen (15%) percent, later increased to plus twenty (20%) and minus twenty-five (-
25%) percent, over and above the existing authorized fare without having to file a
petition for the purpose, is unconstitutional, invalid and illegal. Second, the
establishment of a presumption of public need in favor of an applicant for a proposed
transport service without having to prove public necessity, is illegal for being violative
of the Public Service Act and the Rules of Court.
In its Comment, private respondent PBOAP, while not actually touching upon the
issues raised by the petitioner, questions the wisdom and the manner by which the
instant petition was filed. It asserts that the petitioner has no legal standing to sue or
has no real interest in the case at bench and in obtaining the reliefs prayed for.
In their Comment filed by the Office of the Solicitor General, public respondents
DOTC Secretary Jesus B. Garcia, Jr. and the LTFRB asseverate that the petitioner does
not have the standing to maintain the instant suit. They further claim that it is within
DOTC and LTFRB's authority to set a fare range scheme and establish a presumption
of public need in applications for certificates of public convenience.
We find the instant petition impressed with merit.
At the outset, the threshold issue of locus standi must be struck. Petitioner KMU has
the standing to sue.
The requirement of locus standi inheres from the definition of judicial power. Section
1 of Article VIII of the Constitution provides:
xxx xxx xxx
Judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable
 and enforceable, and to determine whether or not there has been
a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the
Government.
In Lamb v. Phipps,7 we ruled that judicial power is the power to hear and decide
causes pending between parties who have the right to sue in the courts of law and
equity. Corollary to this provision is the principle of locus standi of a party litigant.
One who is directly affected by and whose interest is immediate and substantial in
the controversy has the standing to sue. The rule therefore requires that a party must
show a personal stake in the outcome of the case or an injury to himself that can be
redressed by a favorable decision so as to warrant an invocation of the court's
jurisdiction and to justify the exercise of the court's remedial powers in his behalf. 8
In the case at bench, petitioner, whose members had suffered and continue to suffer
grave and irreparable injury and damage from the implementation of the questioned
memoranda, circulars and/or orders, has shown that it has a clear legal right that was
violated and continues to be violated with the enforcement of the challenged
memoranda, circulars and/or orders. KMU members, who avail of the use of buses,
trains and jeepneys everyday, are directly affected by the burdensome cost of
arbitrary increase in passenger fares. They are part of the millions of commuters who
comprise the riding public. Certainly, their rights must be protected, not neglected
nor ignored.
Assuming arguendo that petitioner is not possessed of the standing to sue, this court
is ready to brush aside this barren procedural infirmity and recognize the legal
standing of the petitioner in view of the transcendental importance of the issues
raised. And this act of liberality is not without judicial precedent. As early as
the Emergency Powers Cases, this Court had exercised its discretion and waived the
requirement of proper party. In the recent case of Kilosbayan, Inc., et al. v. Teofisto
Guingona, Jr., et al.,9 we ruled in the same lines and enumerated some of the cases
where the same policy was adopted, viz:
. . . A party's standing before this Court is a procedural technicality
which it may, in the exercise of its discretion, set aside in view of
the importance of the issues raised. In the landmark Emergency
Powers Cases, [G.R. No. L-2044 (Araneta v. Dinglasan); G.R. No. L-
2756 (Araneta
v. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de Filipinas);
G.R. No. L-3055 (Guerrero v. Commissioner of Customs); and G.R.
No. L-3056 (Barredo v. Commission on Elections), 84 Phil. 368
(1949)], this Court brushed aside this technicality because "the
transcendental importance to the public of these cases demands
that they be settled promptly and definitely, brushing aside, if we
must, technicalities of procedure. (Avelino vs. Cuenco, G.R. No. L-
2621)." Insofar as taxpayers' suits are concerned, this Court had
declared that it "is not devoid of discretion as to whether or not it
should be entertained," (Tan v. Macapagal, 43 SCRA 677, 680
[1972]) or that it "enjoys an open discretion to entertain the same
or not." [Sanidad v. COMELEC, 73 SCRA 333 (1976)].
xxx xxx xxx
In line with the liberal policy of this Court on locus standi, ordinary
taxpayers, members of Congress, and even association of planters,
and
non-profit civic organizations were allowed to initiate and
prosecute actions before this court to question the
constitutionality or validity of laws, acts, decisions, rulings, or
orders of various government agencies or instrumentalities.
Among such cases were those assailing the constitutionality of (a)
R.A. No. 3836 insofar as it allows retirement gratuity and
commutation of vacation and sick leave to Senators and
Representatives and to elective officials of both Houses of Congress
(Philippine Constitution Association, Inc. v. Gimenez, 15 SCRA 479
[1965]); (b) Executive Order No. 284, issued by President Corazon
C. Aquino on 25 July 1987, which allowed members of the cabinet,
their undersecretaries, and assistant secretaries to hold other
government offices or positions (Civil Liberties Union v. Executive
Secretary, 194 SCRA 317 [1991]); (c) the automatic appropriation
for debt service in the General Appropriations Act (Guingona v.
Carague, 196 SCRA 221 [1991]; (d) R.A. No. 7056 on the holding of
desynchronized elections (Osmeña v. Commission on Elections, 199
SCRA 750 [1991]); (e) P.D. No. 1869 (the charter of the Philippine
Amusement and Gaming Corporation) on the ground that it is
contrary to morals, public policy, and order (Basco v. Philippine
Amusement and Gaming Corp., 197 SCRA 52 [1991]); and (f) R.A.
No. 6975, establishing the Philippine National Police. (Carpio v.
Executive Secretary, 206 SCRA 290 [1992]).
Other cases where we have followed a liberal policy regarding locus
standi include those attacking the validity or legality of (a) an order
allowing the importation of rice in the light of the prohibition
imposed by R.A. No. 3452 (Iloilo Palay and Corn Planters
Association, Inc. v. Feliciano, 13 SCRA 377 [1965]; (b) P.D. Nos. 991
and 1033 insofar as they proposed amendments to the
Constitution and P.D. No. 1031 insofar as it directed the COMELEC
to supervise, control, hold, and conduct the referendum-plebiscite
on 16 October 1976 (Sanidad v. Commission on Elections, supra);
(c) the bidding for the sale of the 3,179 square meters of land at
Roppongi, Minato-ku, Tokyo, Japan (Laurel v. Garcia, 187 SCRA 797
[1990]); (d) the approval without hearing by the Board of
Investments of the amended application of the Bataan
Petrochemical Corporation to transfer the site of its plant from
Bataan to Batangas and the validity of such transfer and the shift of
feedstock from naphtha only to naphtha and/or liquefied
petroleum gas (Garcia v. Board of Investments, 177 SCRA 374
[1989]; Garcia v. Board of Investments, 191 SCRA 288 [1990]); (e)
the decisions, orders, rulings, and resolutions of the Executive
Secretary, Secretary of Finance, Commissioner of Internal Revenue,
Commissioner of Customs, and the Fiscal Incentives Review Board
exempting the National Power Corporation from indirect tax and
duties (Maceda v. Macaraig, 197 SCRA 771 [1991]); (f) the orders of
the Energy Regulatory Board of 5 and 6 December 1990 on the
ground that the hearings conducted on the second provisional
increase in oil prices did not allow the petitioner substantial cross-
examination; (Maceda v. Energy Regulatory Board, 199 SCRA 454
[1991]); (g) Executive Order No. 478 which levied a special duty of
P0.95 per liter of imported oil products (Garcia v. Executive
Secretary, 211 SCRA 219 [1992]); (h) resolutions of the Commission
on Elections concerning the apportionment, by district, of the
number of elective members of Sanggunians (De Guia vs.
Commission on Elections, 208 SCRA 420 [1992]); and (i)
memorandum orders issued by a Mayor affecting the Chief of
Police of Pasay City (Pasay Law and Conscience Union, Inc. v.
Cuneta, 101 SCRA 662 [1980]).
In the 1975 case of Aquino v. Commission on Elections (62 SCRA 275
[1975]), this Court, despite its unequivocal ruling that the
petitioners therein had no personality to file the petition, resolved
nevertheless to pass upon the issues raised because of the far-
reaching implications of the petition. We did no less in De Guia v.
COMELEC (Supra) where, although we declared that De Guia "does
not appear to have locus standi, a standing in law, a personal or
substantial interest," we brushed aside the procedural infirmity
"considering the importance of the issue involved, concerning as it
does the political exercise of qualified voters affected by the
apportionment, and petitioner alleging abuse of discretion and
violation of the Constitution by respondent."
Now on the merits of the case.
On the fare range scheme.
Section 16(c) of the Public Service Act, as amended, reads:
Sec. 16. Proceedings of the Commission, upon notice and hearing.
— The Commission shall have power, upon proper notice and
hearing in accordance with the rules and provisions of this Act,
subject to the limitations and exceptions mentioned and saving
provisions to the contrary:
xxx xxx xxx
(c) To fix and determine individual or joint rates, tolls, charges,
classifications, or schedules thereof, as well as commutation,
mileage kilometrage, and other special rates which shall be
imposed, observed, and followed thereafter by any public
service: Provided, That the Commission may, in its discretion,
approve rates proposed by public services provisionally and
without necessity of any hearing; but it shall call a hearing thereon
within thirty days thereafter, upon publication and notice to the
concerns operating in the territory affected: Provided, further, That
in case the public service equipment of an operator is used
principally or secondarily for the promotion of a private business,
the net profits of said private business shall be considered in
relation with the public service of such operator for the purpose of
fixing the rates. (Emphasis ours).
xxx xxx xxx
Under the foregoing provision, the Legislature delegated to the defunct
Public Service Commission the power of fixing the rates of public services.
Respondent LTFRB, the existing regulatory body today, is likewise vested
with the same under Executive Order No. 202 dated June 19, 1987. Section
5(c) of the said executive order authorizes LTFRB "to determine, prescribe,
approve and periodically review and adjust, reasonable fares, rates and
other related charges, relative to the operation of public land transportation
services provided by motorized vehicles."
Such delegation of legislative power to an administrative agency is permitted in order
to adapt to the increasing complexity of modern life. As subjects for governmental
regulation multiply, so does the difficulty of administering the laws. Hence,
specialization even in legislation has become necessary. Given the task of
determining sensitive and delicate matters as
route-fixing and rate-making for the transport sector, the responsible regulatory
body is entrusted with the power of subordinate legislation. With this authority, an
administrative body and in this case, the LTFRB, may implement broad policies laid
down in a statute by "filling in" the details which the Legislature may neither have
time or competence to provide. However, nowhere under the aforesaid provisions of
law are the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that
power to a common carrier, a transport operator, or other public service.
In the case at bench, the authority given by the LTFRB to the provincial bus operators
to set a fare range over and above the authorized existing fare, is illegal and invalid
as it is tantamount to an undue delegation of legislative authority. Potestas delegata
non delegari potest. What has been delegated cannot be delegated. This doctrine is
based on the ethical principle that such a delegated power constitutes not only a right
but a duty to be performed by the delegate through the instrumentality of his own
judgment and not through the intervening mind of another.10 A further delegation of
such power would indeed constitute a negation of the duty in violation of the trust
reposed in the delegate mandated to discharge it directly. 11 The policy of allowing
the provincial bus operators to change and increase their fares at will would result
not only to a chaotic situation but to an anarchic state of affairs. This would leave the
riding public at the mercy of transport operators who may increase fares every hour,
every day, every month or every year, whenever it pleases them or whenever they
deem it "necessary" to do so. In Panay Autobus Co. v. Philippine Railway Co.,12 where
respondent Philippine Railway Co. was granted by the Public Service Commission the
authority to change its freight rates at will, this Court categorically declared that:
In our opinion, the Public Service Commission was not authorized
by law to delegate to the Philippine Railway Co. the power of
altering its freight rates whenever it should find it necessary to do
so in order to meet the competition of road trucks and autobuses,
or to change its freight rates at will, or to regard its present rates
as maximum rates, and to fix lower rates whenever in the opinion
of the Philippine Railway Co. it would be to its advantage to do so.
The mere recital of the language of the application of the Philippine
Railway Co. is enough to show that it is untenable. The Legislature
has delegated to the Public Service Commission the power of fixing
the rates of public services, but it has not authorized the Public
Service Commission to delegate that power to a common carrier or
other public service. The rates of public services like the Philippine
Railway Co. have been approved or fixed by the Public Service
Commission, and any change in such rates must be authorized or
approved by the Public Service Commission after they have been
shown to be just and reasonable. The public service may, of course,
propose new rates, as the Philippine Railway Co. did in case No.
31827, but it cannot lawfully make said new rates effective without
the approval of the Public Service Commission, and the Public
Service Commission itself cannot authorize a public service to
enforce new rates without the prior approval of said rates by the
commission. The commission must approve new rates when they
are submitted to it, if the evidence shows them to be just and
reasonable, otherwise it must disapprove them. Clearly, the
commission cannot determine in advance whether or not the new
rates of the Philippine Railway Co. will be just and reasonable,
because it does not know what those rates will be.
In the present case the Philippine Railway Co. in effect asked for
permission to change its freight rates at will. It may change them
every day or every hour, whenever it deems it necessary to do so
in order to meet competition or whenever in its opinion it would
be to its advantage. Such a procedure would create a most
unsatisfactory state of affairs and largely defeat the purposes of the
public service law.13(Emphasis ours).
One veritable consequence of the deregulation of transport fares is a compounded
fare. If transport operators will be authorized to impose and collect an additional
amount equivalent to 20% over and above the authorized fare over a period of time,
this will unduly prejudice a commuter who will be made to pay a fare that has been
computed in a manner similar to those of compounded bank interest rates.
Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus
operators to collect a thirty-seven (P0.37) centavo per kilometer fare for ordinary
buses. At the same time, they were allowed to impose and collect a fare range of plus
or minus 15% over the authorized rate. Thus P0.37 centavo per kilometer authorized
fare plus P0.05 centavos (which is 15% of P0.37 centavos) is equivalent to P0.42
centavos, the allowed rate in 1990. Supposing the LTFRB grants another five (P0.05)
centavo increase per kilometer in 1994, then, the base or reference for computation
would have to be P0.47 centavos (which is P0.42 + P0.05 centavos). If bus operators
will exercise their authority to impose an additional 20% over and above the
authorized fare, then the fare to be collected shall amount to P0.56 (that is, P0.47
authorized LTFRB rate plus 20% of P0.47 which is P0.29). In effect, commuters will be
continuously subjected, not only to a double fare adjustment but to a compounding
fare as well. On their part, transport operators shall enjoy a bigger chunk of the pie.
Aside from fare increase applied for, they can still collect an additional amount by
virtue of the authorized fare range. Mathematically, the situation translates into the
following:
Year** LTFRB authorized Fare Range Fare to be
rate*** collected per
kilometer
1990 P0.37 15% (P0.05) P0.42
1994 P0.42 + 0.05 = 0.47 20% (P0.09) P0.56
1998 P0.56 + 0.05 = 0.61 20% (P0.12) P0.73
2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94
Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive
government function that requires dexterity of judgment and sound discretion with
the settled goal of arriving at a just and reasonable rate acceptable to both the public
utility and the public. Several factors, in fact, have to be taken into consideration
before a balance could be achieved. A rate should not be confiscatory as would place
an operator in a situation where he will continue to operate at a loss. Hence, the rate
should enable public utilities to generate revenues sufficient to cover operational
costs and provide reasonable return on the investments. On the other hand, a rate
which is too high becomes discriminatory. It is contrary to public interest. A rate,
therefore, must be reasonable and fair and must be affordable to the end user who
will utilize the services.
Given the complexity of the nature of the function of rate-fixing and its far-reaching
effects on millions of commuters, government must not relinquish this important
function in favor of those who would benefit and profit from the industry. Neither
should the requisite notice and hearing be done away with. The people, represented
by reputable oppositors, deserve to be given full opportunity to be heard in their
opposition to any fare increase.
14
The present administrative procedure, to our mind, already mirrors an orderly and
satisfactory arrangement for all parties involved. To do away with such a procedure
and allow just one party, an interested party at that, to determine what the rate
should be, will undermine the right of the other parties to due process. The purpose
of a hearing is precisely to determine what a just and reasonable rate is.15 Discarding
such procedural and constitutional right is certainly inimical to our fundamental law
and to public interest.
On the presumption of public need.
A certificate of public convenience (CPC) is an authorization granted by the LTFRB for
the operation of land transportation services for public use as required by law.
Pursuant to Section 16(a) of the Public Service Act, as amended, the following
requirements must be met before a CPC may be granted, to wit: (i) the applicant must
be a citizen of the Philippines, or a corporation or co-partnership, association or joint-
stock company constituted and organized under the laws of the Philippines, at least
60 per centum of its stock or paid-up capital must belong entirely to citizens of the
Philippines; (ii) the applicant must be financially capable of undertaking the proposed
service and meeting the responsibilities incident to its operation; and (iii) the
applicant must prove that the operation of the public service proposed and the
authorization to do business will promote the public interest in a proper and suitable
manner. It is understood that there must be proper notice and hearing before the
PSC can exercise its power to issue a CPC.
While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB
Memorandum Circular No. 92-009, Part IV, provides for yet incongruous and
contradictory policy guideline on the issuance of a CPC. The guidelines states:
The issuance of a Certificate of Public Convenience is determined
by public need. The presumption of public need for a service shall
be deemed in favor of the applicant, while the burden of proving
that there is no need for the proposed service shall be the
oppositor's. (Emphasis ours).
The above-quoted provision is entirely incompatible and inconsistent with Section
16(c)(iii) of the Public Service Act which requires that before a CPC will be issued, the
applicant must prove by proper notice and hearing that the operation of the public
service proposed will promote public interest in a proper and suitable manner. On
the contrary, the policy guideline states that the presumption of public need for a
public service shall be deemed in favor of the applicant. In case of conflict between a
statute and an administrative order, the former must prevail.
By its terms, public convenience or necessity generally means something fitting or
suited to the public need.16 As one of the basic requirements for the grant of a CPC,
public convenience and necessity exists when the proposed facility or service meets
a reasonable want of the public and supply a need which the existing facilities do not
adequately supply. The existence or
non-existence of public convenience and necessity is therefore a question of fact that
must be established by evidence, real and/or testimonial; empirical data; statistics
and such other means necessary, in a public hearing conducted for that purpose. The
object and purpose of such procedure, among other things, is to look out for, and
protect, the interests of both the public and the existing transport operators.
Verily, the power of a regulatory body to issue a CPC is founded on the condition that
after full-dress hearing and investigation, it shall find, as a fact, that the proposed
operation is for the convenience of the public.17 Basic convenience is the primary
consideration for which a CPC is issued, and that fact alone must be consistently
borne in mind. Also, existing operators in subject routes must be given an opportunity
to offer proof and oppose the application. Therefore, an applicant must, at all times,
be required to prove his capacity and capability to furnish the service which he has
undertaken
render. 18 And all this will be possible only if a public hearing were conducted for that
purpose.
Otherwise stated, the establishment of public need in favor of an applicant reverses
well-settled and institutionalized judicial, quasi-judicial and administrative
procedures. It allows the party who initiates the proceedings to prove, by mere
application, his affirmative allegations. Moreover, the offending provisions of the
LTFRB memorandum circular in question would in effect amend the Rules of Court by
adding another disputable presumption in the enumeration of 37 presumptions
under Rule 131, Section 5 of the Rules of Court. Such usurpation of this Court's
authority cannot be countenanced as only this Court is mandated by law to
promulgate rules concerning pleading, practice and procedure. 19
hereby DECLARED contrary to law and invalid insofar as they affect provisions therein
(a) delegating to provincial bus and jeepney operators the authority to increase or
decrease the duly prescribed transportation fares; and (b) creating a presumption of
public need for a service in favor of the applicant for a certificate of public
convenience and placing the burden of proving that there is no need for the proposed
to service to the oppositor.
The Temporary Restraining Order issued on June 20, 1994 is hereby MADE
PERMANENT insofar as it enjoined the bus fare rate increase granted under the
provisions of the aforementioned administrative circulars, memoranda and/or orders
declared invalid.
No pronouncement as to costs.
SO ORDERED.

Deregulation, while it may be ideal in certain situations, may not be ideal at all in our
country given the present circumstances. Advocacy of liberalized franchising and
regulatory process is tantamount to an abdication by the government of its inherent
right to exercise police power, that is, the right of government to regulate public
utilities for protection of the public and the utilities themselves.

While we recognize the authority of the DOTC and the LTFRB to issue administrative
orders to regulate the transport sector, we find that they committed grave abuse of
discretion in issuing DOTC Department Order
No. 92-587 defining the policy framework on the regulation of transport services and
LTFRB Memorandum Circular No. 92-009 promulgating the implementing guidelines
on DOTC Department Order No. 92-587, the said administrative issuances being
amendatory and violative of the Public Service Act and the Rules of Court.
Consequently, we rule that the twenty (20%) per centum fare increase imposed by
respondent PBOAP on March 16, 1994 without the benefit of a petition and a public
hearing is null and void and of no force and effect. No grave abuse of discretion
however was committed in the issuance of DOTC Memorandum Order No. 90-395
and DOTC Memorandum dated October 8, 1992, the same being merely internal
communications between administrative officers.

WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and
the challenged administrative issuances and orders, namely: DOTC Department
Order No. 92-587, LTFRB Memorandum Circular
No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are
G.R. No. 141284 | August 15, 2000
INTEGRATED BAR OF THE PHILIPPINES, petitioner,
vs.
HON. RONALDO B. ZAMORA, GEN. PANFILO M. LACSON, GEN. EDGAR B. AGLIPAY, and GEN.
ANGELO REYES, respondents.
DECISION
KAPUNAN, J.:
At bar is a special civil action for certiorari and prohibition with prayer for issuance of a
temporary restraining order seeking to nullify on constitutional grounds the order of
President Joseph Ejercito Estrada commanding the deployment of the Philippine Marines
(the "Marines") to join the Philippine National Police (the "PNP") in visibility patrols around
the metropolis.
In view of the alarming increase in violent crimes in Metro Manila, like robberies, kidnappings
and carnappings, the President, in a verbal directive, ordered the PNP and the Marines to
conduct joint visibility patrols for the purpose of crime prevention and suppression. The
Secretary of National Defense, the Chief of Staff of the Armed Forces of the Philippines (the
"AFP"), the Chief of the PNP and the Secretary of the Interior and Local Government were
tasked to execute and implement the said order. In compliance with the presidential
mandate, the PNP Chief, through Police Chief Superintendent Edgar B. Aglipay, formulated
Letter of Instruction 02/20001 (the "LOI") which detailed the manner by which the joint
visibility patrols, called Task Force Tulungan, would be conducted.2 Task Force Tulungan was
placed under the leadership of the Police Chief of Metro Manila.
Subsequently, the President confirmed his previous directive on the deployment of the
Marines in a Memorandum, dated 24 January 2000, addressed to the Chief of Staff of the
AFP and the PNP Chief.3 In the Memorandum, the President expressed his desire to improve
the peace and order situation in Metro Manila through a more effective crime prevention
program including increased police patrols.4 The President further stated that to heighten
police visibility in the metropolis, augmentation from the AFP is necessary.5 Invoking his
powers as Commander-in-Chief under Section 18, Article VII of the Constitution, the
President directed the AFP Chief of Staff and PNP Chief to coordinate with each other for the
proper deployment and utilization of the Marines to assist the PNP in preventing or
suppressing criminal or lawless violence.6 Finally, the President declared that the services of
the Marines in the anti-crime campaign are merely temporary in nature and for a reasonable
period only, until such time when the situation shall have improved.7
The LOI explains the concept of the PNP-Philippine Marines joint visibility patrols as follows:
xxx
2. PURPOSE:
The Joint Implementing Police Visibility Patrols between the PNP NCRPO and the Philippine
Marines partnership in the conduct of visibility patrols in Metro Manila for the suppression of
crime prevention and other serious threats to national security.
3. SITUATION:
Criminal incidents in Metro Manila have been perpetrated not only by ordinary criminals but
also by organized syndicates whose members include active and former police/military
personnel whose training, skill, discipline and firepower prove well-above the present
capability of the local police alone to handle. The deployment of a joint PNP NCRPO-Philippine
Marines in the conduct of police visibility patrol in urban areas will reduce the incidence of
crimes specially those perpetrated by active or former police/military personnel.
4. MISSION:
The PNP NCRPO will organize a provisional Task Force to conduct joint NCRPO-PM visibility
patrols to keep Metro Manila streets crime-free, through a sustained street patrolling to
minimize or eradicate all forms of high-profile crimes especially those perpetrated by
organized crime syndicates whose members include those that are well-trained, disciplined
and well-armed active or former PNP/Military personnel.
5. CONCEPT IN JOINT VISIBILITY PATROL OPERATIONS:
a. The visibility patrols shall be conducted jointly by the NCRPO [National Capital
Regional Police Office] and the Philippine Marines to curb criminality in Metro
Manila and to preserve the internal security of the state against insurgents and
other serious threat to national security, although the primary responsibility over
Internal Security Operations still rests upon the AFP.
b. The principle of integration of efforts shall be applied to eradicate all forms of
high-profile crimes perpetrated by organized crime syndicates operating in Metro
Manila. This concept requires the military and police to work cohesively and unify
efforts to ensure a focused, effective and holistic approach in addressing crime
prevention. Along this line, the role of the military and police aside from
neutralizing crime syndicates is to bring a wholesome atmosphere wherein delivery
of basic services to the people and development is achieved. Hand-in-hand with this
joint NCRPO-Philippine Marines visibility patrols, local Police Units are responsible
for the maintenance of peace and order in their locality.
c. To ensure the effective implementation of this project, a provisional Task Force
"TULUNGAN" shall be organized to provide the mechanism, structure, and
procedures for the integrated planning, coordinating, monitoring and assessing the
security situation.
xxx.8
The selected areas of deployment under the LOI are: Monumento Circle, North Edsa (SM
City), Araneta Shopping Center, Greenhills, SM Megamall, Makati Commercial Center,
LRT/MRT Stations and the NAIA and Domestic Airport.9
On 17 January 2000, the Integrated Bar of the Philippines (the "IBP") filed the instant petition
to annul LOI 02/2000 and to declare the deployment of the Philippine Marines, null and void
and unconstitutional, arguing that:
I First, petitioner failed to sufficiently show that it is in possession of the requisites of standing
THE DEPLOYMENT OF THE PHILIPPINE MARINES IN METRO MANILA IS VIOLATIVE OF THE
CONSTITUTION, IN THAT:
A) NO EMERGENCY SITUATION OBTAINS IN METRO MANILA AS WOULD JUSTIFY,
EVEN ONLY REMOTELY, THE DEPLOYMENT OF SOLDIERS FOR LAW ENFORCEMENT
WORK; HENCE, SAID DEPLOYMENT IS IN DEROGATION OF ARTICLE II, SECTION 3 OF
THE CONSTITUTION;
B) SAID DEPLOYMENT CONSTITUTES AN INSIDIOUS INCURSION BY THE MILITARY IN
A CIVILIAN FUNCTION OF GOVERNMENT (LAW ENFORCEMENT) IN DEROGATION OF
ARTICLE XVI, SECTION 5 (4), OF THE CONSTITUTION;
C) SAID DEPLOYMENT CREATES A DANGEROUS TENDENCY TO RELY ON THE
MILITARY TO PERFORM THE CIVILIAN FUNCTIONS OF THE GOVERNMENT.
II
IN MILITARIZING LAW ENFORCEMENT IN METRO MANILA, THE ADMINISTRATION IS
UNWITTINGLY MAKING THE MILITARY MORE POWERFUL THAN WHAT IT SHOULD REALLY BE
UNDER THE CONSTITUTION.10
Asserting itself as the official organization of Filipino lawyers tasked with the bounden duty
to uphold the rule of law and the Constitution, the IBP questions the validity of the
deployment and utilization of the Marines to assist the PNP in law enforcement.
Without granting due course to the petition, the Court in a Resolution, 11 dated 25 January
2000, required the Solicitor General to file his Comment on the petition. On 8 February 2000,
the Solicitor General submitted his Comment.
The Solicitor General vigorously defends the constitutionality of the act of the President in
deploying the Marines, contending, among others, that petitioner has no legal standing; that
the question of deployment of the Marines is not proper for judicial scrutiny since the same
involves a political question; that the organization and conduct of police visibility patrols,
which feature the team-up of one police officer and one Philippine Marine soldier, does not
violate the civilian supremacy clause in the Constitution.
The issues raised in the present petition are: (1) Whether or not petitioner has legal standing;
(2) Whether or not the President’s factual determination of the necessity of calling the armed
forces is subject to judicial review; and, (3) Whether or not the calling of the armed forces to
assist the PNP in joint visibility patrols violates the constitutional provisions on civilian
supremacy over the military and the civilian character of the PNP.
The petition has no merit.
to raise the issues in the petition. Second, the President did not commit grave abuse of
discretion amounting to lack or excess of jurisdiction nor did he commit a violation of the
civilian supremacy clause of the Constitution.
The power of judicial review is set forth in Section 1, Article VIII of the Constitution, to wit:
Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts
as may be established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine whether or
not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the Government.
When questions of constitutional significance are raised, the Court can exercise its power of
judicial review only if the following requisites are complied with, namely: (1) the existence of
an actual and appropriate case; (2) a personal and substantial interest of the party raising the
constitutional question; (3) the exercise of judicial review is pleaded at the earliest
opportunity; and (4) the constitutional question is the lis mota of the case.12
The IBP has not sufficiently complied with the requisites of standing in this case.
"Legal standing" or locus standi has been defined as a personal and substantial interest in the
case such that the party has sustained or will sustain direct injury as a result of the
governmental act that is being challenged.13 The term "interest" means a material interest,
an interest in issue affected by the decree, as distinguished from mere interest in the
question involved, or a mere incidental interest.14 The gist of the question of standing is
whether a party alleges "such personal stake in the outcome of the controversy as to assure
that concrete adverseness which sharpens the presentation of issues upon which the court
depends for illumination of difficult constitutional questions."15
In the case at bar, the IBP primarily anchors its standing on its alleged responsibility to uphold
the rule of law and the Constitution. Apart from this declaration, however, the IBP asserts no
other basis in support of its locus standi. The mere invocation by the IBP of its duty to
preserve the rule of law and nothing more, while undoubtedly true, is not sufficient to clothe
it with standing in this case. This is too general an interest which is shared by other groups
and the whole citizenry. Based on the standards above-stated, the IBP has failed to present a
specific and substantial interest in the resolution of the case. Its fundamental purpose which, the calling of the Marines. Thus, the IBP prays that this Court "review the sufficiency of the
under Section 2, Rule 139-A of the Rules of Court, is to elevate the standards of the law factual basis for said troop [Marine] deployment."19
profession and to improve the administration of justice is alien to, and cannot be affected by
the deployment of the Marines. It should also be noted that the interest of the National The Solicitor General, on the other hand, contends that the issue pertaining to the necessity
President of the IBP who signed the petition, is his alone, absent a formal board resolution of calling the armed forces is not proper for judicial scrutiny since it involves a political
authorizing him to file the present action. To be sure, members of the BAR, those in the question and the resolution of factual issues which are beyond the review powers of this
judiciary included, have varying opinions on the issue. Moreover, the IBP, assuming that it Court.
has duly authorized the National President to file the petition, has not shown any specific
injury which it has suffered or may suffer by virtue of the questioned governmental act.
As framed by the parties, the underlying issues are the scope of presidential powers and
Indeed, none of its members, whom the IBP purportedly represents, has sustained any form
limits, and the extent of judicial review. But, while this Court gives considerable weight to the
of injury as a result of the operation of the joint visibility patrols. Neither is it alleged that any
parties’ formulation of the issues, the resolution of the controversy may warrant a creative
of its members has been arrested or that their civil liberties have been violated by the
approach that goes beyond the narrow confines of the issues raised. Thus, while the parties
deployment of the Marines. What the IBP projects as injurious is the supposed
are in agreement that the power exercised by the President is the power to call out the
"militarization" of law enforcement which might threaten Philippine democratic institutions
armed forces, the Court is of the view that the power involved may be no more than the
and may cause more harm than good in the long run. Not only is the presumed "injury" not
maintenance of peace and order and promotion of the general welfare.20 For one, the
personal in character, it is likewise too vague, highly speculative and uncertain to satisfy the
realities on the ground do not show that there exist a state of warfare, widespread civil
requirement of standing. Since petitioner has not successfully established a direct and
unrest or anarchy. Secondly, the full brunt of the military is not brought upon the citizenry, a
personal injury as a consequence of the questioned act, it does not possess the personality to
point discussed in the latter part of this decision. In the words of the late Justice Irene Cortes
assail the validity of the deployment of the Marines. This Court, however, does not
in Marcos v. Manglapus:
categorically rule that the IBP has absolutely no standing to raise constitutional issues now or
in the future. The IBP must, by way of allegations and proof, satisfy this Court that it has
sufficient stake to obtain judicial resolution of the controversy. More particularly, this case calls for the exercise of the President’s powers as protector of the
peace. [Rossiter, The American Presidency]. The power of the President to keep the peace is
not limited merely to exercising the commander-in-chief powers in times of emergency or to
Having stated the foregoing, it must be emphasized that this Court has the discretion to take
leading the State against external and internal threats to its existence. The President is not
cognizance of a suit which does not satisfy the requirement of legal standing when
only clothed with extraordinary powers in times of emergency, but is also tasked with
paramount interest is involved.16 In not a few cases, the Court has adopted a liberal attitude
attending to the day-to-day problems of maintaining peace and order and ensuring domestic
on the locus standi of a petitioner where the petitioner is able to craft an issue of
tranquility in times when no foreign foe appears on the horizon. Wide discretion, within the
transcendental significance to the people.17 Thus, when the issues raised are of paramount
bounds of law, in fulfilling presidential duties in times of peace is not in any way diminished
importance to the public, the Court may brush aside technicalities of procedure.18 In this
by the relative want of an emergency specified in the commander-in-chief provision. For in
case, a reading of the petition shows that the IBP has advanced constitutional issues which
making the President commander-in-chief the enumeration of powers that follow cannot be
deserve the attention of this Court in view of their seriousness, novelty and weight as
said to exclude the President’s exercising as Commander-in-Chief powers short of the calling
precedents. Moreover, because peace and order are under constant threat and lawless
of the armed forces, or suspending the privilege of the writ of habeas corpus or declaring
violence occurs in increasing tempo, undoubtedly aggravated by the Mindanao insurgency
martial law, in order to keep the peace, and maintain public order and security.
problem, the legal controversy raised in the petition almost certainly will not go away. It will
stare us in the face again. It, therefore, behooves the Court to relax the rules on standing and
to resolve the issue now, rather than later. xxx21

The President did not commit grave abuse of discretion in calling out the Marines.
In the case at bar, the bone of contention concerns the factual determination of the
President of the necessity of calling the armed forces, particularly the Marines, to aid the PNP
in visibility patrols. In this regard, the IBP admits that the deployment of the military
personnel falls under the Commander-in-Chief powers of the President as stated in Section
18, Article VII of the Constitution, specifically, the power to call out the armed forces to
prevent or suppress lawless violence, invasion or rebellion. What the IBP questions, however,
is the basis for the calling of the Marines under the aforestated provision. According to the
IBP, no emergency exists that would justify the need for the calling of the military to assist
the police force. It contends that no lawless violence, invasion or rebellion exist to warrant
Nonetheless, even if it is conceded that the power involved is the President’s power to call
out the armed forces to prevent or suppress lawless violence, invasion or rebellion, the
resolution of the controversy will reach a similar result.
We now address the Solicitor General’s argument that the issue involved is not susceptible to
review by the judiciary because it involves a political question, and thus, not justiciable.
As a general proposition, a controversy is justiciable if it refers to a matter which is
appropriate for court review.22 It pertains to issues which are inherently susceptible of being
decided on grounds recognized by law. Nevertheless, the Court does not automatically
assume jurisdiction over actual constitutional cases brought before it even in instances that
are ripe for resolution. One class of cases wherein the Court hesitates to rule on are "political
questions." The reason is that political questions are concerned with issues dependent upon
the wisdom, not the legality, of a particular act or measure being assailed. Moreover, the
political question being a function of the separation of powers, the courts will not normally
interfere with the workings of another co-equal branch unless the case shows a clear need
for the courts to step in to uphold the law and the Constitution.
As Tañada v. Cuenco23 puts it, political questions refer "to those questions which, under the
Constitution, are to be decided by the people in their sovereign capacity, or in regard to
which full discretionary authority has been delegated to the legislative or executive branch of
government." Thus, if an issue is clearly identified by the text of the Constitution as matters
for discretionary action by a particular branch of government or to the people themselves
then it is held to be a political question. In the classic formulation of Justice Brennan in Baker
v. Carr,24 "[p]rominent on the surface of any case held to involve a political question is found
a textually demonstrable constitutional commitment of the issue to a coordinate political
department; or a lack of judicially discoverable and manageable standards for resolving it; or
the impossibility of deciding without an initial policy determination of a kind clearly for
nonjudicial discretion; or the impossibility of a court’s undertaking independent resolution
without expressing lack of the respect due coordinate branches of government; or an
unusual need for unquestioning adherence to a political decision already made; or the
potentiality of embarassment from multifarious pronouncements by various departments on
the one question."
The 1987 Constitution expands the concept of judicial review by providing that "(T)he Judicial
power shall be vested in one Supreme Court and in such lower courts as may be established
by law. Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine whether or
not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the Government."25 Under this definition, the
Court cannot agree with the Solicitor General that the issue involved is a political question
beyond the jurisdiction of this Court to review. When the grant of power is qualified,
conditional or subject to limitations, the issue of whether the prescribed qualifications or
conditions have been met or the limitations respected, is justiciable - the problem being one
of legality or validity, not its wisdom.26 Moreover, the jurisdiction to delimit constitutional
boundaries has been given to this Court.27 When political questions are involved, the
Constitution limits the determination as to whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the official whose action
is being questioned.28
By grave abuse of discretion is meant simply capricious or whimsical exercise of judgment
that is patent and gross as to amount to an evasion of positive duty or a virtual refusal to
perform a duty enjoined by law, or to act at all in contemplation of law, as where the power
is exercised in an arbitrary and despotic manner by reason of passion or hostility.29 Under this
definition, a court is without power to directly decide matters over which full discretionary
authority has been delegated. But while this Court has no power to substitute its judgment
for that of Congress or of the President, it may look into the question of whether such
exercise has been made in grave abuse of discretion.30A showing that plenary power is
granted either department of government, may not be an obstacle to judicial inquiry, for the
improvident exercise or abuse thereof may give rise to justiciable controversy.31
When the President calls the armed forces to prevent or suppress lawless violence, invasion
or rebellion, he necessarily exercises a discretionary power solely vested in his wisdom. This
is clear from the intent of the framers and from the text of the Constitution itself. The Court,
thus, cannot be called upon to overrule the President’s wisdom or substitute its own.
However, this does not prevent an examination of whether such power was exercised within
permissible constitutional limits or whether it was exercised in a manner constituting grave
abuse of discretion. In view of the constitutional intent to give the President full discretionary
power to determine the necessity of calling out the armed forces, it is incumbent upon the
petitioner to show that the President’s decision is totally bereft of factual basis. The present
petition fails to discharge such heavy burden as there is no evidence to support the assertion
that there exist no justification for calling out the armed forces. There is, likewise, no
evidence to support the proposition that grave abuse was committed because the power to
call was exercised in such a manner as to violate the constitutional provision on civilian
supremacy over the military. In the performance of this Court’s duty of "purposeful
hesitation"32 before declaring an act of another branch as unconstitutional, only where such
grave abuse of discretion is clearly shown shall the Court interfere with the President’s
judgment. To doubt is to sustain.
There is a clear textual commitment under the Constitution to bestow on the President full
discretionary power to call out the armed forces and to determine the necessity for the
exercise of such power. Section 18, Article VII of the Constitution, which embodies the
powers of the President as Commander-in-Chief, provides in part:
The President shall be the Commander-in-Chief of all armed forces of the Philippines and
whenever it becomes necessary, he may call out such armed forces to prevent or suppress
lawless violence, invasion or rebellion. In case of invasion or rebellion, when the public safety
requires it, he may, for a period not exceeding sixty days, suspend the privilege of the writ
of habeas corpus, or place the Philippines or any part thereof under martial law.
xxx
The full discretionary power of the President to determine the factual basis for the exercise
of the calling out power is also implied and further reinforced in the rest of Section 18, Article
VII which reads, thus:
xxx
Within forty-eight hours from the proclamation of martial law or the suspension of the
privilege of the writ of habeas corpus, the President shall submit a report in person or in
writing to the Congress. The Congress, voting jointly, by a vote of at least a majority of all its
Members in regular or special session, may revoke such proclamation or suspension, which
revocation shall not be set aside by the President. Upon the initiative of the President, the
Congress may, in the same manner, extend such proclamation or suspension for a period to
be determined by the Congress, if the invasion or rebellion shall persist and public safety
requires it.
The Congress, if not in session, shall within twenty-four hours following such proclamation or
suspension, convene in accordance with its rules without need of a call.
The Supreme Court may review, in an appropriate proceeding filed by any citizen, the
sufficiency of the factual basis of the proclamation of martial law or the suspension of the
privilege of the writ or the extension thereof, and must promulgate its decision thereon
within thirty days from its filing.
A state of martial law does not suspend the operation of the Constitution, nor supplant the
functioning of the civil courts or legislative assemblies, nor authorize the conferment of
jurisdiction on military courts and agencies over civilians where civil courts are able to
function, nor automatically suspend the privilege of the writ.
The suspension of the privilege of the writ shall apply only to persons judicially charged for
rebellion or offenses inherent in or directly connected with invasion.
During the suspension of the privilege of the writ, any person thus arrested or detained shall
be judicially charged within three days, otherwise he shall be released.
Under the foregoing provisions, Congress may revoke such proclamation or suspension and
the Court may review the sufficiency of the factual basis thereof. However, there is no such
equivalent provision dealing with the revocation or review of the President’s action to call
out the armed forces. The distinction places the calling out power in a different category
from the power to declare martial law and the power to suspend the privilege of the writ
of habeas corpus, otherwise, the framers of the Constitution would have simply lumped
together the three powers and provided for their revocation and review without any
qualification. Expressio unius est exclusio alterius. Where the terms are expressly limited to
certain matters, it may not, by interpretation or construction, be extended to other
matters.33 That the intent of the Constitution is exactly what its letter says, i.e., that the
power to call is fully discretionary to the President, is extant in the deliberation of the
Constitutional Commission, to wit:
FR. BERNAS. It will not make any difference. I may add that there is a graduated power of the
President as Commander-in-Chief. First, he can call out such Armed Forces as may be
necessary to suppress lawless violence; then he can suspend the privilege of the writ
of habeas corpus, then he can impose martial law. This is a graduated sequence.
When he judges that it is necessary to impose martial law or suspend the privilege of the writ
of habeas corpus, his judgment is subject to review. We are making it subject to review by
the Supreme Court and subject to concurrence by the National Assembly. But when he
exercises this lesser power of calling on the Armed Forces, when he says it is necessary, it is
my opinion that his judgment cannot be reviewed by anybody.
xxx
FR. BERNAS. Let me just add that when we only have imminent danger, the matter can be
handled by the first sentence: "The President may call out such armed forces to prevent or
suppress lawless violence, invasion or rebellion." So we feel that that is sufficient for handling
imminent danger.
MR. DE LOS REYES. So actually, if a President feels that there is imminent danger, the matter
can be handled by the First Sentence: "The President....may call out such Armed Forces to
prevent or suppress lawless violence, invasion or rebellion." So we feel that that is sufficient
for handling imminent danger, of invasion or rebellion, instead of imposing martial law or
suspending the writ of habeas corpus, he must necessarily have to call the Armed Forces of
the Philippines as their Commander-in-Chief. Is that the idea?
MR. REGALADO. That does not require any concurrence by the legislature nor is it subject to
judicial review.34
The reason for the difference in the treatment of the aforementioned powers highlights the
intent to grant the President the widest leeway and broadest discretion in using the power to
call out because it is considered as the lesser and more benign power compared to the power
to suspend the privilege of the writ of habeas corpus and the power to impose martial law,
both of which involve the curtailment and suppression of certain basic civil rights and
individual freedoms, and thus necessitating safeguards by Congress and review by this Court.
Moreover, under Section 18, Article VII of the Constitution, in the exercise of the power to
suspend the privilege of the writ of habeas corpus or to impose martial law, two conditions
must concur: (1) there must be an actual invasion or rebellion and, (2) public safety must
require it. These conditions are not required in the case of the power to call out the armed
forces. The only criterion is that "whenever it becomes necessary," the President may call the
armed forces "to prevent or suppress lawless violence, invasion or rebellion." The implication
is that the President is given full discretion and wide latitude in the exercise of the power to
call as compared to the two other powers.
If the petitioner fails, by way of proof, to support the assertion that the President acted
without factual basis, then this Court cannot undertake an independent investigation beyond
the pleadings. The factual necessity of calling out the armed forces is not easily quantifiable
and cannot be objectively established since matters considered for satisfying the same is a
combination of several factors which are not always accessible to the courts. Besides the
absence of textual standards that the court may use to judge necessity, information
necessary to arrive at such judgment might also prove unmanageable for the courts. Certain
pertinent information might be difficult to verify, or wholly unavailable to the courts. In many
instances, the evidence upon which the President might decide that there is a need to call
out the armed forces may be of a nature not constituting technical proof.
On the other hand, the President as Commander-in-Chief has a vast intelligence network to
gather information, some of which may be classified as highly confidential or affecting the
security of the state. In the exercise of the power to call, on-the-spot decisions may be
imperatively necessary in emergency situations to avert great loss of human lives and mass
destruction of property. Indeed, the decision to call out the military to prevent or suppress
lawless violence must be done swiftly and decisively if it were to have any effect at all. Such a
scenario is not farfetched when we consider the present situation in Mindanao, where the
insurgency problem could spill over the other parts of the country. The determination of the
necessity for the calling out power if subjected to unfettered judicial scrutiny could be a
veritable prescription for disaster, as such power may be unduly straitjacketed by an
injunction or a temporary restraining order every time it is exercised.
Thus, it is the unclouded intent of the Constitution to vest upon the President, as
Commander-in-Chief of the Armed Forces, full discretion to call forth the military when in his
judgment it is necessary to do so in order to prevent or suppress lawless violence, invasion or
rebellion. Unless the petitioner can show that the exercise of such discretion was gravely
abused, the President’s exercise of judgment deserves to be accorded respect from this
Court.
The President has already determined the necessity and factual basis for calling the armed
forces. In his Memorandum, he categorically asserted that, "[V]iolent crimes like bank/store
robberies, holdups, kidnappings and carnappings continue to occur in Metro Manila..."35 We
do not doubt the veracity of the President’s assessment of the situation, especially in the
light of present developments. The Court takes judicial notice of the recent bombings
perpetrated by lawless elements in the shopping malls, public utilities, and other public
places. These are among the areas of deployment described in the LOI 2000. Considering all
these facts, we hold that the President has sufficient factual basis to call for military aid in
law enforcement and in the exercise of this constitutional power.
The deployment of the Marines does not violate the civilian supremacy clause nor does it
infringe the civilian character of the police force.
Prescinding from its argument that no emergency situation exists to justify the calling of the
Marines, the IBP asserts that by the deployment of the Marines, the civilian task of law
enforcement is "militarized" in violation of Section 3, Article II36 of the Constitution.
We disagree. The deployment of the Marines does not constitute a breach of the civilian
supremacy clause. The calling of the Marines in this case constitutes permissible use of
military assets for civilian law enforcement. The participation of the Marines in the conduct
of joint visibility patrols is appropriately circumscribed. The limited participation of the
Marines is evident in the provisions of the LOI itself, which sufficiently provides the metes
and bounds of the Marines’ authority. It is noteworthy that the local police forces are the
ones in charge of the visibility patrols at all times, the real authority belonging to the PNP. In
fact, the Metro Manila Police Chief is the overall leader of the PNP-Philippine Marines joint
visibility patrols.37 Under the LOI, the police forces are tasked to brief or orient the soldiers
on police patrol procedures.38 It is their responsibility to direct and manage the deployment
of the Marines.39 It is, likewise, their duty to provide the necessary equipment to the Marines
and render logistical support to these soldiers.40 In view of the foregoing, it cannot be
properly argued that military authority is supreme over civilian authority. Moreover, the
deployment of the Marines to assist the PNP does not unmake the civilian character of the
police force. Neither does it amount to an "insidious incursion" of the military in the task of
law enforcement in violation of Section 5(4), Article XVI of the Constitution.41
In this regard, it is not correct to say that General Angelo Reyes, Chief of Staff of the AFP, by
his alleged involvement in civilian law enforcement, has been virtually appointed to a civilian
post in derogation of the aforecited provision. The real authority in these operations, as
stated in the LOI, is lodged with the head of a civilian institution, the PNP, and not with the
military. Such being the case, it does not matter whether the AFP Chief actually participates
in the Task Force Tulungan since he does not exercise any authority or control over the same.
Since none of the Marines was incorporated or enlisted as members of the PNP, there can be
no appointment to civilian position to speak of. Hence, the deployment of the Marines in the
joint visibility patrols does not destroy the civilian character of the PNP.
Considering the above circumstances, the Marines render nothing more than assistance
required in conducting the patrols. As such, there can be no "insidious incursion" of the
military in civilian affairs nor can there be a violation of the civilian supremacy clause in the
Constitution.
It is worth mentioning that military assistance to civilian authorities in various forms persists
in Philippine jurisdiction. The Philippine experience reveals that it is not averse to requesting
the assistance of the military in the implementation and execution of certain traditionally
"civil" functions. As correctly pointed out by the Solicitor General, some of the multifarious
activities wherein military aid has been rendered, exemplifying the activities that bring both
the civilian and the military together in a relationship of cooperation, are:
1. Elections;42
2. Administration of the Philippine National Red Cross;43
3. Relief and rescue operations during calamities and disasters;44
4. Amateur sports promotion and development;45
5. Development of the culture and the arts;46
6. Conservation of natural resources;47
7. Implementation of the agrarian reform program;48
8. Enforcement of customs laws;49
9. Composite civilian-military law enforcement activities;50
10. Conduct of licensure examinations;51
 11. Conduct of nationwide tests for elementary and high school students;52
12. Anti-drug enforcement activities;53
13. Sanitary inspections;54
14. Conduct of census work;55
15. Administration of the Civil Aeronautics Board;56
16. Assistance in installation of weather forecasting devices;57
17. Peace and order policy formulation in local government units. 58
This unquestionably constitutes a gloss on executive power resulting from a systematic,
unbroken, executive practice, long pursued to the knowledge of Congress and, yet, never
before questioned.59 What we have here is mutual support and cooperation between the
military and civilian authorities, not derogation of civilian supremacy.
In the United States, where a long tradition of suspicion and hostility towards the use of
military force for domestic purposes has persisted,60 and whose Constitution, unlike ours,
does not expressly provide for the power to call, the use of military personnel by civilian law
enforcement officers is allowed under circumstances similar to those surrounding the
present deployment of the Philippine Marines. Under the Posse Comitatus Act61 of the US,
the use of the military in civilian law enforcement is generally prohibited, except in certain
allowable circumstances. A provision of the Act states:
§ 1385. Use of Army and Air Force as posse comitatus
Whoever, except in cases and under circumstances expressly authorized by the Constitution
or Act of Congress, willfully uses any part of the Army or the Air Force as posse comitatus or
otherwise to execute the laws shall be fined not more than $10,000 or imprisoned not more
than two years, or both.62
To determine whether there is a violation of the Posse Comitatus Act in the use of military
personnel, the US courts63 apply the following standards, to wit:
Were Army or Air Force personnel used by the civilian law enforcement officers at Wounded
Knee in such a manner that the military personnel subjected the citizens to the exercise of
military power which was regulatory, proscriptive, or compulsory64 George Washington Law
Review, pp. 404-433 (1986), which discusses the four divergent standards for assessing
acceptable involvement of military personnel in civil law enforcement. See likewise
HONORED IN THE BREECH: PRESIDENTIAL AUTHORITY TO EXECUTE THE LAWS WITH
MILITARY FORCE, 83 Yale Law Journal, pp. 130-152, 1973. 64 in nature, either presently or
prospectively?
xxx
When this concept is transplanted into the present legal context, we take it to mean
that military involvement, even when not expressly authorized by the Constitution or a
statute, does not violate the Posse Comitatus Act unless it actually regulates, forbids or
compels some conduct on the part of those claiming relief.1âwphi1 A mere threat of some
future injury would be insufficient. (emphasis supplied)
Even if the Court were to apply the above rigid standards to the present case to determine
whether there is permissible use of the military in civilian law enforcement, the conclusion is
inevitable that no violation of the civilian supremacy clause in the Constitution is committed.
On this point, the Court agrees with the observation of the Solicitor General:
3. The designation of tasks in Annex A65 does not constitute the exercise of regulatory,
proscriptive, or compulsory military power. First, the soldiers do not control or direct the
operation. This is evident from Nos. 6,66 8(k)67 and 9(a)68of Annex A. These soldiers, second,
also have no power to prohibit or condemn. In No. 9(d)69 of Annex A, all arrested persons are
brought to the nearest police stations for proper disposition. And last, these soldiers apply no
coercive force. The materials or equipment issued to them, as shown in No. 8(c)70 of Annex A,
are all low impact and defensive in character. The conclusion is that there being no exercise
of regulatory, proscriptive or compulsory military power, the deployment of a handful of
Philippine Marines constitutes no impermissible use of military power for civilian law
enforcement.71
It appears that the present petition is anchored on fear that once the armed forces are
deployed, the military will gain ascendancy, and thus place in peril our cherished liberties.
Such apprehensions, however, are unfounded. The power to call the armed forces is just that
- calling out the armed forces. Unless, petitioner IBP can show, which it has not, that in the
deployment of the Marines, the President has violated the fundamental law, exceeded his
authority or jeopardized the civil liberties of the people, this Court is not inclined to overrule
the President’s determination of the factual basis for the calling of the Marines to prevent or
suppress lawless violence.
One last point. Since the institution of the joint visibility patrol in January, 2000, not a single
citizen has complained that his political or civil rights have been violated as a result of the
deployment of the Marines. It was precisely to safeguard peace, tranquility and the civil
liberties of the people that the joint visibility patrol was conceived. Freedom and democracy
will be in full bloom only when people feel secure in their homes and in the streets, not when
the shadows of violence and anarchy constantly lurk in their midst.
WHEREFORE, premises considered, the petition is hereby DISMISSED.
SO ORDERED.
SEPARATE OPINION
VITUG, J.:
In the equation of judicial power, neither of two extremes - one totalistic and the other
bounded - is acceptable nor ideal. The 1987 Constitution has introduced its definition of the
term "judicial power" to be that which -
"x x x includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has
been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government."1
It is not meant that the Supreme Court must be deemed vested with the awesome power of
overseeing the entire bureaucracy, let alone of institutionalizing judicial absolutism, under its
mandate. But while this Court does not wield unlimited authority to strike down an act of its
two co-equal branches of government, it must not wither under technical guise on its
constitutionally ordained task to intervene, and to nullify if need be, any such act as and when
it is attended by grave abuse of discretion amounting to lack or excess of jurisdiction. The
proscription then against an interposition by the Court into purely political questions,
heretofore known, no longer holds within that context.
Justice Feria, in the case of Avelino vs. Cuenco,2 has aptly elucidated in his concurring opinion:
"x x x [I] concur with the majority that this Court has jurisdiction over cases like the present x
x x so as to establish in this country the judicial supremacy, with the Supreme Court as the final
arbiter, to see that no one branch or agency of the government transcends the Constitution,
not only in justiceable but political questions as well."3
It is here when the Court must have to depart from the broad principle of separation of powers
that disallows an intrusion by it in respect to the purely political decisions of its independent
and coordinate agencies of government.
The term grave abuse of discretion is long understood in our jurisprudence as being, and
confined to, a capricious and whimsical or despotic exercise of judgment amounting to lack or
excess of jurisdiction. Minus the not-so-unusual exaggerations often invoked by litigants in the
duel of views, the act of the President in simply calling on the Armed Forces of the Philippines,
an executive prerogative, to assist the Philippine National Police in "joint visibility patrols" in
the metropolis does not, I believe, constitute grave abuse of discretion that would now warrant
an exercise by the Supreme Court of its extraordinary power as so envisioned by the
fundamental law.
Accordingly, I vote for the dismissal of the petition.
SEPARATE OPINION
PUNO, J.:
If the case at bar is significant, it is because of the government attempt to foist
the political question doctrine to shield an executive act done in the exercise of the
commander-in-chief powers from judicial scrutiny. If the attempt succeeded, it would
have diminished the power of judicial review and weakened the checking
authority of this Court over the Chief Executive when he exercises his
commander-in-chief powers. The attempt should remind us of the tragedy that
befell the country when this Court sought refuge in the political question doctrine
and forfeited its most important role as protector of the civil and political rights
of our people. The ongoing conflict in Mindanao may worsen and can force the
Chief Executive to resort to the use of his greater commander-in-chief powers,
hence, this Court should be extra cautious in assaying similar attempts. A laid
back posture may not sit well with our people considering that the 1987
Constitution strengthened the checking powers of this Court and expanded its
jurisdiction precisely to stop any act constituting "xxx grave abuse of jurisdiction
xxx on the part of any branch or instrumentality of the Government." 1
The importance of the issue at bar includes this humble separate opinion. We can best
perceive the different intersecting dimensions of the political question doctrine by
viewing them from the broader canvass of history. Political questions are defined as
"those questions which under the Constitution, are to be decided by the people in their
sovereign capacity, or in regard to which full discretionary authority has been delegated
to the legislative or executive branch of government." 2 They have two aspects: (1) those
matters that are to be exercised by the people in their primary political capacity and (2)
matters which have been specifically delegated to some other department or particular
office of the government, with discretionary power to act. 3 The exercise of the
discretionary power of the legislative or executive branch of government was often the
area where the Court had to wrestle with the political question doctrine. 4
A brief review of some of our case law will thus give us a sharper perspective of the
political question doctrine. This question confronted the Court as early as 1905 in the
case of Barcelon v. Baker.5 The Governor-General of the Philippine Islands, pursuant
to a resolution of the Philippine Commission, suspended the privilege of the writ of
habeas corpus in Cavite and Batangas based on a finding of open insurrection in said
provinces. Felix Barcelon, who was detained by constabulary officers in Batangas, filed
a petition for the issuance of a writ of habeas corpus alleging that there was no open
insurrection in Batangas. The issue to resolve was whether or not the judicial
department may investigate the facts upon which the legislative (the Philippine
Commission) and executive (the Governor-General) branches of government acted in
suspending the privilege of the writ.
The Court ruled that under our form of government, one department has no authority
to inquire into the acts of another, which acts are performed within the discretion of the
other department.6 Surveying American law and jurisprudence, it held that whenever a
statute gives discretionary power to any person, to be exercised by him upon his own
opinion of certain facts, the statute constitutes him the sole judge of the existence of
those facts.7 Since the Philippine Bill of 1902 empowered the Philippine Commission
and the Governor-General to suspend the privilege of the writ of habeas corpus, this
power is exclusively within the discretion of the legislative and executive branches of
government. The exercise of this discretion is conclusive upon the courts.8
The Court further held that once a determination is made by the executive and
legislative departments that the conditions justifying the assailed acts exists, it will
presume that the conditions continue until the same authority decide that they no longer
exist.9 It adopted the rationale that the executive branch, thru its civil and military
branches, are better situated to obtain information about peace and order from every
corner of the nation, in contrast with the judicial department, with its very limited
machinery.10 The seed of the political question doctrine was thus planted in
Philippine soil.
The doctrine barring judicial review because of the political question doctrine
was next applied to the internal affairs of the legislature. The Court refused to
interfere in the legislative exercise of disciplinary power over its own members. In the
1924 case of Alejandrino v. Quezon,11 Alejandrino, who was appointed Senator by
the Governor-General, was declared by Senate Resolution as guilty of disorderly
conduct for assaulting another Senator in the course of a debate, and was suspended
from office for one year. Senator Alejandrino filed a petition for mandamus and
injunction to compel the Senate to reinstate him. The Court held that under the Jones
Law, the power of the Senate to punish its members for disorderly behavior does not
authorize it to suspend an appointive member from the exercise of his office. While the
Court found that the suspension was illegal, it refused to issue the writ of mandamus
on the ground that "the Supreme Court does not possess the power of coercion to make
the Philippine Senate take any particular action. [T]he Philippine Legislature or any
branch thereof cannot be directly controlled in the exercise of their legislative powers
by any judicial process."12
The issue revisited the Court twenty-two (22) years later. In 1946, in Vera v.
Avelino,13 three senators-elect who had been prevented from taking their oaths of
office by a Senate resolution repaired to this Court to compel their colleagues to allow
them to occupy their seats contending that only the Electoral Tribunal had jurisdiction
over contests relating to their election, returns and qualifications. Again, the Court
refused to intervene citing Alejandrino and affirmed the inherent right of the legislature
to determine who shall be admitted to its membership.
In the 1947 case of Mabanag v. Lopez-Vito,14 three Senators and eight
representatives who were proclaimed elected by Comelec were not allowed by
Congress to take part in the voting for the passage of the Parity amendment to the
Constitution. If their votes had been counted, the affirmative votes in favor of the
proposed amendment would have been short of the necessary three-fourths vote in
either House of Congress to pass the amendment. The amendment was eventually
submitted to the people for ratification. The Court declined to intervene and held that a
proposal to amend the Constitution is a highly political function performed by Congress
in its sovereign legislative capacity.15
In the 1955 case of Arnault v. Balagtas,16 petitioner, a private citizen, assailed the
legality of his detention ordered by the Senate for his refusal to answer questions put
to him by members of one of its investigating committees. This Court refused to order
his release holding that the process by which a contumacious witness is dealt with by
the legislature is a necessary concomitant of the legislative process and the
legislature's exercise of its discretionary authority is not subject to judicial interference.
In the 1960 case of Osmena v. Pendatun,17 the Court followed the traditional line.
Congressman Sergio Osmena, Jr. was suspended by the House of Representatives
for serious disorderly behavior for making a privilege speech imputing "malicious
charges" against the President of the Philippines. Osmena, Jr. invoked the power of
review of this Court but the Court once more did not interfere with Congress' power to
discipline its members.
The contours of the political question doctrine have always been tricky. To be sure, the
Court did not always stay its hand whenever the doctrine is invoked. In the 1949 case
of Avelino v. Cuenco,18 Senate President Jose Avelino, who was deposed and
replaced, questioned his successor's title claiming that the latter had been elected
without a quorum. The petition was initially dismissed on the ground that the selection
of Senate President was an internal matter and not subject to judicial review. 19 On
reconsideration, however, the Court ruled that it could assume jurisdiction over the
controversy in light of subsequent events justifying intervention among which was the
existence of a quorum.20 Though the petition was ultimately dismissed, the Court
declared respondent Cuenco as the legally elected Senate President.
In the 1957 case of Tanada v. Cuenco,21 the Court assumed jurisdiction over a dispute
involving the formation and composition of the Senate Electoral Tribunal. It rejected the
Solicitor General's claim that the dispute involved a political question. Instead, it
declared that the Senate is not clothed with "full discretionary authority" in the choice
of members of the Senate Electoral Tribunal and the exercise of its power thereon is
subject to constitutional limitations which are mandatory in nature. 22 It held that under
the Constitution, the membership of the Senate Electoral Tribunal was designed to
insure the exercise of judicial impartiality in the disposition of election contests affecting
members of the lawmaking body.23 The Court then nullified the election to the Senate
Electoral Tribunal made by Senators belonging to the party having the largest number
of votes of two of their party members but purporting to act on behalf of the party having
the second highest number of votes.
In the 1962 case of Cunanan v. Tan, Jr.,24 the Court passed judgment on whether
Congress had formed the Commission on Appointments in accordance with the
Constitution and found that it did not. It declared that the Commission on Appointments
is a creature of the Constitution and its power does not come from Congress but from
the Constitution.
The 1967 case of Gonzales v. Comelec25 and the 1971 case of Tolentino v.
Comelec26 abandoned Mabanag v. Lopez-Vito. The question of whether or not
Congress, acting as a constituent assembly in proposing amendments to the
Constitution violates the Constitution was held to be a justiciable and not a political
issue. In Gonzales, the Court ruled:
"It is true that in Mabanag v. Lopez-Vito, this Court characterizing the issue submitted
thereto as a political one, declined to pass upon the question whether or not a given
number of votes cast in Congress in favor of a proposed amendment to the
Constitution-which was being submitted to the people for ratification-satisfied the three-
fourths vote requirement of the fundamental law. The force of this precedent has been
weakened, however, by Suanes v. Chief Accountant of the Senate, Avelino v. Cuenco,
Tanada v. Cuenco, and Macias v. Commission on Elections. In the first, we held that
the officers and employees of the Senate Electoral Tribunal are under its supervision
and control, not of that of the Senate President, as claimed by the latter; in the second,
this Court proceeded to determine the number of Senators necessary for a quorum in
the Senate; in the third, we nullified the election, by Senators belonging to the party
having the largest number of votes in said chamber, purporting to act on behalf of the
party having the second largest number of votes therein, of two (2) Senators belonging
to the first party, as members, for the second party, of the Senate Electoral Tribunal;
and in the fourth, we declared unconstitutional an act of Congress purporting to
apportion the representative districts for the House of Representatives upon the ground
that the apportionment had not been made as may be possible according to the number
of inhabitants of each province. Thus, we rejected the theory, advanced in these four
cases, that the issues therein raised were political questions the determination of which
is beyond judicial review."27
The Court explained that the power to amend the Constitution or to propose
amendments thereto is not included in the general grant of legislative powers to
Congress. As a constituent assembly, the members of Congress derive their authority
from the fundamental law and they do not have the final say on whether their acts are
within or beyond constitutional limits.28 This ruling was reiterated in Tolentino which
held that acts of a constitutional convention called for the purpose of proposing
amendments to the Constitution are at par with acts of Congress acting as a constituent
assembly.29
In sum, this Court brushed aside the political question doctrine and assumed
jurisdiction whenever it found constitutionally-imposed limits on the exercise of
powers conferred upon the Legislature.30
The Court hewed to the same line as regards the exercise of Executive
power. Thus, the respect accorded executive discretion was observed in Severino v.
Governor-General,31 where it was held that the Governor-General, as head of the
executive department, could not be compelled by mandamus to call a special election
in the town of Silay for the purpose of electing a municipal president. Mandamus and
injunction could not lie to enforce or restrain a duty which is discretionary. It was held
that when the Legislature conferred upon the Governor-General powers and duties, it
did so for the reason that he was in a better position to know the needs of the country
than any other member of the executive department, and with full confidence that he
will perform such duties as his best judgment dictates. 32
Similarly, in Abueva v. Wood,33 the Court held that the Governor-General could not be
compelled by mandamus to produce certain vouchers showing the various
expenditures of the Independence Commission. Under the principle of separation of
powers, it ruled that it was not intended by the Constitution that one branch of
government could encroach upon the field of duty of the other. Each department has
an exclusive field within which it can perform its part within certain discretionary
limits.34 It observed that "the executive and legislative departments of government are
frequently called upon to deal with what are known as political questions, with which
the judicial department of government has no intervention. In all such questions, the
courts uniformly refused to intervene for the purpose of directing or controlling the
actions of the other department; such questions being many times reserved to those
departments in the organic law of the state."35
In Forties v. Tiaco,36 the Court also refused to take cognizance of a case enjoining the
Chief Executive from deporting an obnoxious alien whose continued presence in the
Philippines was found by him to be injurious to the public interest. It noted that sudden
and unexpected conditions may arise, growing out of the presence of untrustworthy
aliens, which demand immediate action. The President's inherent power to deport
undesirable aliens is universally denominated as political, and this power continues to
exist for the preservation of the peace and domestic tranquility of the nation. 37
In Manalang v. Quitoriano,38 the Court also declined to interfere in the exercise of the
President's appointing power. It held that the appointing power is the exclusive
prerogative of the President, upon which no limitations may be imposed by Congress,
except those resulting from the need of securing concurrence of the Commission on
Appointments and from the exercise of the limited legislative power to prescribe
qualifications to a given appointive office.
We now come to the exercise by the President of his powers as Commander-in-
Chief vis-a-vis the political question doctrine. In the 1940's, this Court has held that as
Commander-in-Chief of the Armed Forces, the President has the power to determine
whether war, in the legal sense, still continues or has terminated. It ruled that it is within
the province of the political department and not of the judicial department of government
to determine when war is at end.39
In 1952, the Court decided the landmark case of Montenegro v.
Castaneda.40 President Quirino suspended the privilege of the writ of habeas corpus
for persons detained or to be detained for crimes of sedition, insurrection or rebellion.
The Court, citing Barcelon, declared that the authority to decide whether the exigency
has arisen requiring the suspension of the privilege belongs to the President and his
decision is final and conclusive on the courts.41
Barcelon was the ruling case law until the 1971 case of Lansang v.
Garcia came.42 Lansang reversed the previous cases and held that the suspension
of the privilege of the writ of habeas corpus was not a political question. According to
the Court, the weight of Barcelon was diluted by two factors: (1) it relied heavily
on Martin v. Mott, which involved the U.S. President's power to call out the militia which
is a much broader power than suspension of the privilege of the writ; and (2) the
privilege was suspended by the American Governor-General whose act, as
representative of the sovereign affecting the freedom of its subjects, could not be
equated with that of the President of the Philippines dealing with the freedom of the
sovereign Filipino people.
The Court declared that the power to suspend the privilege of the writ of habeas
corpus is neither absolute nor unqualified because the Constitution sets limits
on the exercise of executive discretion on the matter.These limits are: (1) that the
privilege must not be suspended except only in cases of invasion, insurrection or
rebellion or imminent danger thereof; and (2) when the public safety requires it, in any
of which events the same may be suspended wherever during such period the
necessity for the suspension shall exist. The extent of the power which may be inquired
into by courts is defined by these limitations.43
On the vital issue of how the Court may inquire into the President's exercise of power,
it ruled that the function of the Court is not to supplant but merely to check the
Executive; to ascertain whether the President has gone beyond the constitutional limits
of his jurisdiction, not to exercise the power vested in him or to determine the wisdom
of his act. Judicial inquiry is confined to the question of whether the President did not
act arbitrarily.44 Using this yardstick, the Court found that the President did not.
The emergency period of the 1970's flooded the Court with cases which raised the
political question defense. The issue divided the Court down the middle. Javellana v.
Executive Secretary45 showed that while a majority of the Court held that the issue of
whether or not the 1973 Constitution had been ratified in accordance with the 1935
Constitution was justiciable, a majority also ruled that the decisive issue of whether the
1973 Constitution had come into force and effect, with or without constitutional
ratification, was a political question.46
The validity of the declaration of martial law by then President Marcos was next litigated
before the Court. In Aquino, Jr. v. Enrile,47 it upheld the President's declaration of
martial law. On whether the validity of the imposition of martial law was a political or
justiciable question, the Court was almost evenly divided. One-half embraced the
political question position and the other half subscribed to the justiciable position in
Lansang. Those adhering to the political question doctrine used different methods of
approach to it.48
In 1983, the Lansang ruling was weakened by the Court in Garcia-Padilla v.
Enrile.49 The petitioners therein were arrested and detained by the Philippine
Constabulary by virtue of a Presidential Commitment Order (PCO). Petitioners sought
the issuance of a writ of habeas corpus. The Court found that the PCO had the function
of validating a person's detention for any of the offenses covered in Proclamation No.
2045 which continued in force the suspension of the privilege of the writ of habeas
corpus. It held that the issuance of the PCO by the President was not subject to judicial
inquiry.50 It went further by declaring that there was a need to re-examine Lansang with
a view to reverting to Barcelon and Montenegro. It observed that in times of war or
national emergency, the President must be given absolute control for the very life of
the nation and government is in great peril. The President, it intoned, is answerable
only to his conscience, the people, and God.51
But barely six (6) days after Garcia-Padilla, the Court promulgated Morales, Jr. v.
Enrile52 reiterating Lansang. It held that by the power of judicial review, the Court must
inquire into every phase and aspect of a person's detention from the moment he was
taken into custody up to the moment the court passes upon the merits of the petition.
Only after such a scrutiny can the court satisfy itself that the due process clause of the
Constitution has been met.53
It is now history that the improper reliance by the Court on the political question
doctrine eroded the people's faith in its capacity to check abuses committed by
the then Executive in the exercise of his commander-in-chief powers, particularly
violations against human rights. The refusal of courts to be pro-active in the
exercise of its checking power drove the people to the streets to resort to
extralegal remedies. They gave birth to EDSA.
Two lessons were not lost to the members of the Constitutional Commission that
drafted the 1987 Constitution. The first was the need to grant this Court the express
power to review the exercise of the powers as commander-in-chief by the President
and deny it of any discretion to decline its exercise. The second was the need to
compel the Court to be pro-active by expanding its jurisdiction and, thus, reject its laid
back stance against acts constituting grave abuse of discretion on the part of any
branch or instrumentality of government. Then Chief Justice Roberto Concepcion, a
member of the Constitutional Commission, worked for the insertion of the second
paragraph of Section 1, Article VIII in the draft Constitution,54 which reads:
"Sec. 1. x x x.
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the
Government."
The language of the provision clearly gives the Court the power to strike down acts
amounting to grave abuse of discretion of both the legislative and executive branches
of government.
We should interpret Section 18, Article VII of the 1987 Constitution in light of our
constitutional history. The provision states:
"Sec. 18. The President shall be the Commander-in-Chief of all armed forces of
the Philippines and whenever it becomes necessary, he may call out such armed
forces to prevent or suppress lawless violence, invasion or rebellion. In case of
invasion or rebellion, when the public safety requires it, he may, for a period not
exceeding sixty days, suspend the privilege of the writ of habeas corpus or place
the Philippines or any part thereof under martial law. Within forty-eight hours from
the proclamation of martial law or the suspension of the privilege of the writ of habeas
corpus, the President shall submit a report in person or in writing to Congress. The
Congress, voting jointly, by a vote of at least a majority of all its Members in regular or
special session, may revoke such proclamation or suspension, which revocation shall
not be set aside by the President. Upon the initiative of the President, the Congress
may, in the same manner, extend such proclamation or suspension for a period to be
determined by Congress, if the invasion or rebellion shall persist and public safety
requires it.
The Congress, if not in session, shall, within twenty-four hours following such
proclamation or suspension, convene in accordance with its rules without need of a
call.
The Supreme Court may review, in an appropriate proceeding filed by any citizen,
the sufficiency of the factual basis of the proclamation of martial law or the
suspension of the privilege of the writ or the extension thereof, and must
promulgate its decision thereon within thirty days from its filing.
x x x."
It is clear from the foregoing that the President, as Commander-in-Chief of the
armed forces of thePhilippines, may call out the armed forces subject to two
conditions: (1) whenever it becomes necessary; and (2) to prevent or suppress
lawless violence, invasion or rebellion. Undeniably, these conditions lay down
the sine qua requirement for the exercise of the power and the objective sought
to be attained by the exercise of the power. They define the constitutional
parameters of the calling out power. Whether or not there is compliance with
these parameters is a justiciable issue and is not a political question.
I am not unaware that in the deliberations of the Constitutional Commission,
Commissioner Bernas opined that the President's exercise of the "calling out power,"
unlike the suspension of the privilege of the writ of habeas corpus and the declaration
of martial law, is not a justiciable issue but a political question and therefore not subject
to judicial review.
It must be borne in mind, however, that while a member's opinion expressed on the
floor of the Constitutional Convention is valuable, it is not necessarily expressive of the
people's intent.55 The proceedings of the Convention are less conclusive on the proper
construction of the fundamental law than are legislative proceedings of the proper
construction of a statute, for in the latter case it is the intent of the legislature the courts
seek, while in the former, courts seek to arrive at the intent of the people through the
discussions and deliberations of their representatives. 56The conventional wisdom is
that the Constitution does not derive its force from the convention which framed it, but
from the people who ratified it, the intent to be arrived at is that of the people. 57
It is true that the third paragraph of Section 18, Article VII of the 1987 Constitution
expressly gives the Court the power to review the sufficiency of the factual bases
used by the President in the suspension of the privilege of the writ of habeas
corpus and the declaration of martial law. It does not follow, however, that just
because the same provision did not grant to this Court the power to review the
exercise of the calling out power by the President, ergo, this Court cannot pass
upon the validity of its exercise.
Given the light of our constitutional history, this express grant of power merely
means that the Court cannot decline the exercise of its power because of the
political question doctrine as it did in the past. In fine, the express grant simply
stresses the mandatory duty of this Court to check the exercise of the
commander-in-chief powers of the President. It eliminated the discretion of the
Court not to wield its power of review thru the use of the political question
doctrine.
It may be conceded that the calling out power may be a "lesser power" compared to
the power to suspend the privilege of the writ of habeas corpus and the power to declare
martial law. Even then, its exercise cannot be left to the absolute discretion of the Chief
Executive as Commander-in-Chief of the armed forces, as its impact on the rights of
our people protected by the Constitution cannot be downgraded. We cannot hold that
acts of the commander-in-chief cannot be reviewed on the ground that they have lesser
impact on the civil and political rights of our people. The exercise of the calling out
power may be "benign" in the case at bar but may not be so in future cases.
The counsel of Mr. Chief Justice Enrique M. Fernando, in his Dissenting and Concurring
Opinion in Lansang that it would be dangerous and misleading to push the political
question doctrine too far, is apropos. It will not be complementary to the Court if it
handcuffs itself to helplessness when a grievously injured citizen seeks relief from a
palpably unwarranted use of presidential or military power, especially when the
question at issue falls in the penumbra between the "political" and the "justiciable. " 58
We should not water down the ruling that deciding whether a matter has been
committed by the Constitution to another branch of government, or whether the action
of that branch exceeds whatever authority has been committed, is a delicate exercise
in constitutional interpretation, and is a responsibility of the Court as ultimate
interpreter of the fundamental law.59 When private justiciable rights are involved in a
suit, the Court must not refuse to assume jurisdiction even though questions of
extreme political importance are necessarily involved.60Every officer under a
constitutional government must act according to law and subject to the controlling
power of the people, acting through the courts, as well as through the executive and
legislative. One department is just as representative of the other, and the judiciary is
the department which is charged with the special duty of determining the limitations
which the law places upon all official action.61 This historic role of the Court is the
foundation stone of a government of laws and not of men.62
I join the Decision in its result.
G.R. No. 131719 | May 25, 2004
THE EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE SECRETARY OF LABOR AND
EMPLOYMENT, AND THE SECRETARY OF FOREIGN AFFAIRS, OWWA PUNO,
ADMINISTRATOR, and POEA ADMINISTRATOR, petitioners,
vs.
THE HON. COURT OF APPEALS and ASIAN RECRUITMENT COUNCIL PHILIPPINE CHAPTER
(ARCO-PHIL.), INC., representing its members: Worldcare Services Internationale, Inc.,
Steadfast
International Recruitment Corporation, Dragon International Manpower Services
Corporation, Verdant Manpower Mobilization Corporation, Brent Overseas Personnel, Inc.,
ARL Manpower Services, Inc., Dahlzhen International Services, Inc., Interworld Placement
Center, Inc., Lakas Tao Contract Services, Ltd. Co., and SSC Multiservices, respondents.
DECISION
CALLEJO, SR., J.:
In this petition for review on certiorari, the Executive Secretary of the President of the
Philippines, the Secretary of Justice, the Secretary of Foreign Affairs, the Secretary of Labor
and Employment, the POEA Administrator and the OWWA Administrator, through the Office
of the Solicitor General, assail the Decision1 of the Court of Appeals in CA-G.R. SP No. 38815
affirming the Order2 of the Regional Trial Court of Quezon City dated August 21, 1995 in Civil
Case No. Q-95-24401, granting the plea of the petitioners therein for a writ of preliminary
injunction and of the writ of preliminary injunction issued by the trial court on August 24, 1995.
The Antecedents
Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of
1995, took effect on July 15, 1995. The Omnibus Rules and Regulations Implementing the
Migrant Workers and Overseas Filipino Act of 1995 was, thereafter, published in the April 7,
1996 issue of the Manila Bulletin. However, even before the law took effect, the Asian
Recruitment Council Philippine Chapter, Inc. (ARCO-Phil.) filed, on July 17, 1995, a petition for
declaratory relief under Rule 63 of the Rules of Court with the Regional Trial Court of Quezon
City to declare as unconstitutional Section 2, paragraph (g), Section 6, paragraphs (a) to (j), (l)
and (m), Section 7, paragraphs (a) and (b), and Sections 9 and 10 of the law, with a plea for the
issuance of a temporary restraining order and/or writ of preliminary injunction enjoining the
respondents therein from enforcing the assailed provisions of the law.
In a supplement to its petition, the ARCO-Phil. alleged that Rep. Act No. 8042 was self-
executory and that no implementing rules were needed. It prayed that the court issue a
temporary restraining order to enjoin the enforcement of Section 6, paragraphs (a) to (m) on
illegal recruitment, Section 7 on penalties for illegal recruitment, and Section 9 on venue of
criminal actions for illegal recruitments, viz:
Viewed in the light of the foregoing discussions, there appears to be urgent an
imperative need for this Honorable Court to maintain the status quo by enjoining the
implementation or effectivity of the questioned provisions of RA 8042, by way of a
restraining order otherwise, the member recruitment agencies of the petitioner will
suffer grave or irreparable damage or injury. With the effectivity of RA 8042, a great
majority of the duly licensed recruitment agencies have stopped or suspended their
operations for fear of being prosecuted under the provisions of a law that are unjust
and unconstitutional. This Honorable Court may take judicial notice of the fact that
processing of deployment papers of overseas workers for the past weeks have come
to a standstill at the POEA and this has affected thousands of workers everyday just
because of the enactment of RA 8042. Indeed, this has far reaching effects not only
to survival of the overseas manpower supply industry and the active participating
recruitment agencies, the country’s economy which has survived mainly due to the
dollar remittances of the overseas workers but more importantly, to the poor and
the needy who are in dire need of income-generating jobs which can only be
obtained from abroad. The loss or injury that the recruitment agencies will suffer will
then be immeasurable and irreparable. As of now, even foreign employers have
already reduced their manpower requirements from the Philippines due to their
knowledge that RA 8042 prejudiced and adversely affected the local recruitment
agencies.3
On August 1, 1995, the trial court issued a temporary restraining order effective for a period
of only twenty (20) days therefrom.
After the petitioners filed their comment on the petition, the ARCO-Phil. filed an amended
petition, the amendments consisting in the inclusion in the caption thereof eleven (11) other
corporations which it alleged were its members and which it represented in the suit, and a plea
for a temporary restraining order enjoining the respondents from enforcing Section 6
subsection (i), Section 6 subsection (k) and paragraphs 15 and 16 thereof, Section 8, Section
10, paragraphs 1 and 2, and Sections 11 and 40 of Rep. Act No. 8042.
The respondent ARCO-Phil. assailed Section 2(g) and (i), Section 6 subsection (a) to (m), Section
7(a) to (b), and Section 10 paragraphs (1) and (2), quoted as follows:
(g) THE STATE RECOGNIZES THAT THE ULTIMATE PROTECTION TO ALL MIGRANT
WORKERS IS THE POSSESSION OF SKILLS. PURSUANT TO THIS AND AS SOON AS
PRACTICABLE, THE GOVERNMENT SHALL DEPLOY AND/OR ALLOW THE
DEPLOYMENT ONLY OF SKILLED FILIPINO WORKERS.4
Sec. 2 subsection (i, 2nd par.)
Nonetheless, the deployment of Filipino overseas workers, whether land-based or
sea-based, by local service contractors and manning agents employing them shall be
encourages (sic). Appropriate incentives may be extended to them.
…
II. ILLEGAL RECRUITMENT
SEC. 6. Definition. – For purposes of this Act, illegal recruitment shall mean any act
of canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring
workers and includes referring, contract services, promising or advertising for
employment abroad, whether for profit or not, when undertaken by a non-licensee
or non-holder of authority contemplated under Article 13(f) of Presidential Decree
No. 442, as amended, otherwise known as the Labor Code of the Philippines:
Provided, That any such non-licensee or non-holder who, in any manner, offers or
promises for a fee employment abroad to two or more persons shall be deemed so
engaged. It shall, likewise, include the following acts, whether committed by any
person, whether a non-licensee, non-holder, licensee or holder of authority:
(a) To charge or accept directly or indirectly any amount greater than that
specified in the schedule of allowable fees prescribed by the Secretary of
Labor and Employment, or to make a worker pay any amount greater than
that actually received by him as a loan or advance;
(b) To furnish or publish any false notice or information or document in
relation to recruitment or employment;
(c) To give any false notice, testimony, information or document or commit
any act of misrepresentation for the purpose of securing a license or
authority under the Labor Code;
(d) To induce or attempt to induce a worker already employed to quit his
employment in order to offer him another unless the transfer is designed
to liberate a worker from oppressive terms and conditions of employment;
(e) To influence or attempt to influence any person or entity not to employ
any worker who has not applied for employment through his agency;
(f) To engage in the recruitment or placement of workers in jobs harmful
to public health or morality or to the dignity of the Republic of the
Philippines;
(g) To obstruct or attempt to obstruct inspection by the Secretary of Labor
and Employment or by his duly authorized representative;
(h) To fail to submit reports on the status of employment, placement
vacancies, remittance of foreign exchange earnings, separation from jobs,
departures and such other matters or information as may be required by
the Secretary of Labor and Employment;
(i) To substitute or alter to the prejudice of the worker, employment
contracts approved and verified by the Department of Labor and
Employment from the time of actual signing thereof by the parties up to
and including the period of the expiration of the same without the
approval of the Department of Labor and Employment;
(j) For an officer or agent of a recruitment or placement agency to become
an officer or member of the Board of any corporation engaged in travel
agency or to be engaged directly or indirectly in the management of a
travel agency;
(k) To withhold or deny travel documents from applicant workers before
departure for monetary or financial considerations other than those
authorized under the Labor Code and its implementing rules and
regulations;
(l) Failure to actually deploy without valid reason as determined by the
Department of Labor and Employment; and
(m) Failure to reimburse expenses incurred by the worker in connection
with his documentation and processing for purposes of deployment, in
cases where the deployment does not actually take place without the
worker’s fault. Illegal recruitment when committed by a syndicate or in
large scale shall be considered an offense involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of
three (3) or more persons conspiring or confederating with one another. It is deemed
committed in large scale if committed against three (3) or more persons individually
or as a group.
The persons criminally liable for the above offenses are the principals, accomplices
and accessories. In case of juridical persons, the officers having control, management
or direction of their business shall be liable.
…
SEC. 7. Penalties. –
(a) Any person found guilty of illegal recruitment shall suffer the penalty of
imprisonment of not less than six (6) years and one (1) day but not more than twelve
(12) years and a fine of not less than two hundred thousand pesos (₱200,000.00) nor
more than five hundred thousand pesos (₱500,000.00).
(b) The penalty of life imprisonment and a fine of not less than five hundred thousand
pesos (₱500,000.00) nor more than one million pesos (₱1,000,000.00) shall be
imposed if illegal recruitment constitutes economic sabotage as defined herein.
Provided, however, That the maximum penalty shall be imposed if the person
illegally recruited is less than eighteen (18) years of age or committed by a non-
licensee or non-holder of authority.
Sec. 8.
Prohibition on Officials and Employees. – It shall be unlawful for any official or
employee of the Department of Labor and Employment, the Philippine Overseas
Employment Administration (POEA), or the Overseas Workers Welfare
Administration (OWWA), or the Department of Foreign Affairs, or other government
agencies involved in the implementation of this Act, or their relatives within the
fourth civil degree of consanguinity or affinity, to engage, directly or indirectly, in the
business of recruiting migrant workers as defined in this Act. The penalties provided
in the immediate preceding paragraph shall be imposed upon them. (underscoring
supplied)
…
Sec. 10, pars. 1 & 2.
Money Claims. – Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original
and exclusive jurisdiction to hear and decide, within ninety (90) calendar days after
the filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and other forms of
damages.
The liability of the principal/employer and the recruitment/placement agency for
any and all claims under this section shall be joint and several. This provision shall be
incorporated in the contract for overseas employment and shall be a condition
precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all
money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves be jointly and solidarily
liable with the corporation or partnership for the aforesaid claims and damages.
…
SEC. 11. Mandatory Periods for Resolution of Illegal Recruitment Cases. – The
preliminary investigations of cases under this Act shall be terminated within a period
of thirty (30) calendar days from the date of their filing. Where the preliminary
investigation is conducted by a prosecution officer and a prima facie case is
established, the corresponding information shall be filed in court within twenty-four
(24) hours from the termination of the investigation. If the preliminary investigation
is conducted by a judge and a prima facie case is found to exist, the corresponding
information shall be filed by the proper prosecution officer within forty-eight (48)
hours from the date of receipt of the records of the case.
The respondent averred that the aforequoted provisions of Rep. Act No. 8042 violate Section
1, Article III of the Constitution.5 According to the respondent, Section 6(g) and (i)
discriminated against unskilled workers and their families and, as such, violated the equal
protection clause, as well as Article II, Section 126 and Article XV, Sections 17 and 3(3) of the
Constitution.8 As the law encouraged the deployment of skilled Filipino workers, only overseas
skilled workers are granted rights. The respondent stressed that unskilled workers also have
the right to seek employment abroad. According to the respondent, the right of unskilled
workers to due process is violated because they are prevented from finding employment and
earning a living abroad. It cannot be argued that skilled workers are immune from abuses by
employers, while unskilled workers are merely prone to such abuses. It was pointed out that
both skilled and unskilled workers are subjected to abuses by foreign employers. Furthermore,
the prohibition of the deployment of unskilled workers abroad would only encourage fly-by-
night illegal recruiters.
According to the respondent, the grant of incentives to service contractors and manning
agencies to the exclusion of all other licensed and authorized recruiters is an invalid
classification. Licensed and authorized recruiters are thus deprived of their right to property
and due process and to the "equality of the person." It is understandable for the law to prohibit
illegal recruiters, but to discriminate against licensed and registered recruiters is
unconstitutional.
The respondent, likewise, alleged that Section 6, subsections (a) to (m) is unconstitutional
because licensed and authorized recruitment agencies are placed on equal footing with illegal
recruiters. It contended that while the Labor Code distinguished between recruiters who are
holders of licenses and non-holders thereof in the imposition of penalties, Rep. Act No. 8042
does not make any distinction. The penalties in Section 7(a) and (b) being based on an invalid
classification are, therefore, repugnant to the equal protection clause, besides being excessive;
hence, such penalties are violative of Section 19(1), Article III of the Constitution. 9 It was also
pointed out that the penalty for officers/officials/employees of recruitment agencies who are
found guilty of economic sabotage or large-scale illegal recruitment under Rep. Act No. 8042
is life imprisonment. Since recruitment agencies usually operate with a manpower of more
than three persons, such agencies are forced to shut down, lest their officers and/or
employees be charged with large scale illegal recruitment or economic sabotage and
sentenced to life imprisonment. Thus, the penalty imposed by law, being disproportionate to
the prohibited acts, discourages the business of licensed and registered recruitment agencies.
The respondent also posited that Section 6(m) and paragraphs (15) and (16), Sections 8, 9 and
10, paragraph 2 of the law violate Section 22, Article III of the Constitution10 prohibiting ex-
post facto laws and bills of attainder. This is because the provisions presume that a licensed
and registered recruitment agency is guilty of illegal recruitment involving economic sabotage,
upon a finding that it committed any of the prohibited acts under the law. Furthermore,
officials, employees and their relatives are presumed guilty of illegal recruitment involving
economic sabotage upon such finding that they committed any of the said prohibited acts.
The respondent further argued that the 90-day period in Section 10, paragraph (1) within
which a labor arbiter should decide a money claim is relatively short, and could deprive
licensed and registered recruiters of their right to due process. The period within which the
summons and the complaint would be served on foreign employees and, thereafter, the filing
of the answer to the complaint would take more than 90 days. This would thereby shift on
local licensed and authorized recruiters the burden of proving the defense of foreign
employers. Furthermore, the respondent asserted, Section 10, paragraph 2 of the law, which
provides for the joint and several liability of the officers and employees, is a bill of attainder
and a violation of the right of the said corporate officers and employees to due process.
Considering that such corporate officers and employees act with prior approval of the board
of directors of such corporation, they should not be liable, jointly and severally, for such
corporate acts.
The respondent asserted that the following provisions of the law are unconstitutional:
SEC. 9. Venue. – A criminal action arising from illegal recruitment as defined herein
shall be filed with the Regional Trial Court of the province or city where the offense
was committed or where the offended party actually resides at the time of the
commission of the offense: Provided, That the court where the criminal action is first
filed shall acquire jurisdiction to the exclusion of other courts: Provided, however,
That the aforestated provisions shall also apply to those criminal actions that have
already been filed in court at the time of the effectivity of this Act.
… … Section 2, subsections (g) and (i, 2nd par.); Section 6, subsections (a) to (m), and
SEC. 10. Money Claims. – Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within ninety (90) calendar
days after the filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and other forms of
damages.
Sec. 40.
The departments and agencies charged with carrying out the provisions of this Act
shall, within ninety (90) days after the effectiviy of this Act, formulate the necessary
rules and regulations for its effective implementation.
According to the respondent, the said provisions violate Section 5(5), Article VIII of the
Constitution11 because they impair the power of the Supreme Court to promulgate rules of
procedure.
In their answer to the petition, the petitioners alleged, inter alia, that (a) the respondent has
no cause of action for a declaratory relief; (b) the petition was premature as the rules
implementing Rep. Act No. 8042 not having been released as yet; (c) the assailed provisions do
not violate any provisions of the Constitution; and, (d) the law was approved by Congress in
the exercise of the police power of the State. In opposition to the respondent’s plea for
injunctive relief, the petitioners averred that:
As earlier shown, the amended petition for declaratory relief is devoid of merit for failure of
petitioner to demonstrate convincingly that the assailed law is unconstitutional, apart from
the defect and impropriety of the petition. One who attacks a statute, alleging
unconstitutionality must prove its invalidity beyond reasonable doubt (Caleon v. Agus
Development Corporation, 207 SCRA 748). All reasonable doubts should be resolved in favor
of the constitutionality of a statute (People v. Vera, 65 Phil. 56). This presumption of
constitutionality is based on the doctrine of separation of powers which enjoin upon each
department a becoming respect for the acts of the other departments (Garcia vs. Executive
Secretary, 204 SCRA 516 [1991]). Necessarily, the ancillary remedy of a temporary restraining
order and/or a writ of preliminary injunction prayed for must fall. Besides, an act of legislature
approved by the executive is presumed to be within constitutional bounds (National Press Club
v. Commission on Elections, 207 SCRA 1).12
After the respective counsels of the parties were heard on oral arguments, the trial court
issued on August 21, 1995, an order granting the petitioner’s plea for a writ of preliminary
injunction upon a bond of ₱50,000. The petitioner posted the requisite bond and on August
24, 1995, the trial court issued a writ of preliminary injunction enjoining the enforcement of
the following provisions of Rep. Act No. 8042 pending the termination of the proceedings:
pars. 15 & 16; Section 7, subsections (a) & (b); Section 8; Section 9; Section 10; pars.
1 & 2; Section 11; and Section 40 of Republic Act No. 8042, otherwise known as the
Migrant Workers and Overseas Filipinos Act of 1995. …13
The petitioners filed a petition for certiorari with the Court of Appeals assailing the order and
the writ of preliminary injunction issued by the trial court on the following grounds:
1. Respondent ARCO-PHIL. had utterly failed to show its clear right/s or that of its
member-agencies to be protected by the injunctive relief and/or violation of said
rights by the enforcement of the assailed sections of R.A. 8042;
2. Respondent Judge fixed a ₱50,000 injunction bond which is grossly inadequate to
answer for the damage which petitioner-officials may sustain, should respondent
ARCO-PHIL. be finally adjudged as not being entitled thereto.14
The petitioners asserted that the respondent is not the real party-in-interest as petitioner in
the trial court. It is inconceivable how the respondent, a non-stock and non-profit corporation,
could sustain direct injury as a result of the enforcement of the law. They argued that if, at all,
any damage would result in the implementation of the law, it is the licensed and registered
recruitment agencies and/or the unskilled Filipino migrant workers discriminated against who
would sustain the said injury or damage, not the respondent. The respondent, as petitioner in
the trial court, was burdened to adduce preponderant evidence of such irreparable injury, but
failed to do so. The petitioners further insisted that the petition a quo was premature since
the rules and regulations implementing the law had yet to be promulgated when such petition
was filed. Finally, the petitioners averred that the respondent failed to establish the requisites
for the issuance of a writ of preliminary injunction against the enforcement of the law and the
rules and regulations issued implementing the same.
On December 5, 1997, the appellate court came out with a four-page decision dismissing the
petition and affirming the assailed order and writ of preliminary injunction issued by the trial
court. The appellate court, likewise, denied the petitioners’ motion for reconsideration of the
said decision.
The petitioners now come to this Court in a petition for review on certiorari on the following
grounds:
1. Private respondent ARCO-PHIL. had utterly failed to show its clear right/s or that
of its member-agencies to be protected by the injunctive relief and/or violation of
said rights by the enforcement of the assailed sections of R.A. 8042;
2. The ₱50,000 injunction bond fixed by the court a quo and sustained by the Court
of Appeals is grossly inadequate to answer for the damage which petitioners-officials
may sustain, should private respondent ARCO-PHIL. be finally adjudged as not being
entitled thereto.15
On February 16, 1998, this Court issued a temporary restraining order enjoining the
respondents from enforcing the assailed order and writ of preliminary injunction.
The Issues
The core issue in this case is whether or not the trial court committed grave abuse of its
discretion amounting to excess or lack of jurisdiction in issuing the assailed order and the writ
of preliminary injunction on a bond of only ₱50,000 and whether or not the appellate court
erred in affirming the trial court’s order and the writ of preliminary injunction issued by it.
The petitioners contend that the respondent has no locus standi. It is a non-stock, non-profit
organization; hence, not the real party-in-interest as petitioner in the action. Although the
respondent filed the petition in the Regional Trial Court in behalf of licensed and registered
recruitment agencies, it failed to adduce in evidence a certified copy of its Articles of
Incorporation and the resolutions of the said members authorizing it to represent the said
agencies in the proceedings. Neither is the suit of the respondent a class suit so as to vest in it
a personality to assail Rep. Act No. 8042; the respondent is service-oriented while the
recruitment agencies it purports to represent are profit-oriented. The petitioners assert that
the law is presumed constitutional and, as such, the respondent was burdened to make a case
strong enough to overcome such presumption and establish a clear right to injunctive relief.
The petitioners bewail the ₱50,000 bond fixed by the trial court for the issuance of a writ of
preliminary injunction and affirmed by the appellate court. They assert that the amount is
grossly inadequate to answer for any damages that the general public may suffer by reason of
the non-enforcement of the assailed provisions of the law. The trial court committed a grave
abuse of its discretion in granting the respondent’s plea for injunctive relief, and the appellate
court erred in affirming the order and the writ of preliminary injunction issued by the trial
court.
The respondent, for its part, asserts that it has duly established its locus standi and its right to
injunctive relief as gleaned from its pleadings and the appendages thereto. Under Section 5,
Rule 58 of the Rules of Court, it was incumbent on the petitioners, as respondents in the RTC,
to show cause why no injunction should issue. It avers that the injunction bond posted by the
respondent was more than adequate to answer for any injury or damage the petitioners may
suffer, if any, by reason of the writ of preliminary injunction issued by the RTC. In any event,
the assailed provisions of Rep. Act No. 8042 exposed its members to the immediate and
irreparable damage of being deprived of their right to a livelihood without due process, a
property right protected under the Constitution.
The respondent contends that the commendable purpose of the law to eradicate illegal
recruiters should not be done at the expense and to the prejudice of licensed and authorized
recruitment agencies. The writ of preliminary injunction was necessitated by the great number
of duly licensed recruitment agencies that had stopped or suspended their business operations
for fear that their officers and employees would be indicted and prosecuted under the assailed
oppressive penal provisions of the law, and meted excessive penalties. The respondent,
likewise, urges that the Court should take judicial notice that the processing of deployment
papers of overseas workers have come to a virtual standstill at the POEA.
The Court’s Ruling
The petition is meritorious.
The Respondent Has Locus Standi
To File the Petition in the RTC in Representation of the Eleven Licensed and Registered
Recruitment Agencies Impleaded in the Amended Petition
The modern view is that an association has standing to complain of injuries to its members.
This view fuses the legal identity of an association with that of its members. 16 An association
has standing to file suit for its workers despite its lack of direct interest if its members are
affected by the action. An organization has standing to assert the concerns of its constituents.17
In Telecommunications and Broadcast Attorneys of the Philippines v. Commission on
Elections,18 we held that standing jus tertii would be recognized only if it can be shown that
the party suing has some substantial relation to the third party, or that the right of the third
party would be diluted unless the party in court is allowed to espouse the third party’s
constitutional claims.
In this case, the respondent filed the petition for declaratory relief under Rule 64 of the Rules
of Court for and in behalf of its eleven (11) licensed and registered recruitment agencies which
are its members, and which approved separate resolutions expressly authorizing the
respondent to file the said suit for and in their behalf. We note that, under its Articles of
Incorporation, the respondent was organized for the purposes inter alia of promoting and
supporting the growth and development of the manpower recruitment industry, both in the
local and international levels; providing, creating and exploring employment opportunities for
the exclusive benefit of its general membership; enhancing and promoting the general welfare
and protection of Filipino workers; and, to act as the representative of any individual,
company, entity or association on matters related to the manpower recruitment industry, and
to perform other acts and activities necessary to accomplish the purposes embodied therein.
The respondent is, thus, the appropriate party to assert the rights of its members, because it
and its members are in every practical sense identical. The respondent asserts that the assailed
provisions violate the constitutional rights of its members and the officers and employees
thereof. The respondent is but the medium through which its individual members seek to make
more effective the expression of their voices and the redress of their grievances.19
However, the respondent has no locus standi to file the petition for and in behalf of unskilled
workers. We note that it even failed to implead any unskilled workers in its petition.
Furthermore, in failing to implead, as parties-petitioners, the eleven licensed and registered
recruitment agencies it claimed to represent, the respondent failed to comply with Section 2
of Rule 6320 of the Rules of Court. Nevertheless, since the eleven licensed and registered
recruitment agencies for which the respondent filed the suit are specifically named in the
petition, the amended petition is deemed amended to avoid multiplicity of suits.21
The Assailed Order and Writ of
Preliminary Injunction Is Mooted
By Case Law
The respondent justified its plea for injunctive relief on the allegation in its amended petition
that its members are exposed to the immediate and irreparable danger of being deprived of
their right to a livelihood and other constitutional rights without due process, on its claim that
a great number of duly licensed recruitment agencies have stopped or suspended their
operations for fear that (a) their officers and employees would be prosecuted under the unjust
and unconstitutional penal provisions of Rep. Act No. 8042 and meted equally unjust and
excessive penalties, including life imprisonment, for illegal recruitment and large scale illegal
recruitment without regard to whether the recruitment agencies involved are licensed and/or
authorized; and, (b) if the members of the respondent, which are licensed and authorized,
decide to continue with their businesses, they face the stigma and the curse of being labeled
"illegal recruiters." In granting the respondent’s plea for a writ of preliminary injunction, the
trial court held, without stating the factual and legal basis therefor, that the enforcement of
Rep. Act No. 8042, pendente lite, would cause grave and irreparable injury to the respondent
until the case is decided on its merits.
We note, however, that since Rep. Act No. 8042 took effect on July 15, 1995, the Court had, in
a catena of cases, applied the penal provisions in Section 6, including paragraph (m) thereof,
and the last two paragraphs therein defining large scale illegal recruitment committed by
officers and/or employees of recruitment agencies by themselves and in connivance with
private individuals, and imposed the penalties provided in Section 7 thereof, including the
penalty of life imprisonment.22 The Informations therein were filed after preliminary
investigations as provided for in Section 11 of Rep. Act No. 8042 and in venues as provided for
in Section 9 of the said act. In People v. Chowdury,23 we held that illegal recruitment is a crime
of economic sabotage and must be enforced.
In People v. Diaz,24 we held that Rep. Act No. 8042 is but an amendment of the Labor Code of
the Philippines and is not an ex-post facto law because it is not applied retroactively. In JMM
Promotion and Management, Inc. v. Court of Appeals,25 the issue of the extent of the police
power of the State to regulate a business, profession or calling vis-à-vis the equal protection
clause and the non-impairment clause of the Constitution were raised and we held, thus:
A profession, trade or calling is a property right within the meaning of our
constitutional guarantees. One cannot be deprived of the right to work and the right
to make a living because these rights are property rights, the arbitrary and
unwarranted deprivation of which normally constitutes an actionable wrong.
Nevertheless, no right is absolute, and the proper regulation of a profession, calling,
business or trade has always been upheld as a legitimate subject of a valid exercise
of the police power by the state particularly when their conduct affects either the
execution of legitimate governmental functions, the preservation of the State, the
public health and welfare and public morals. According to the maxim, sic utere tuo
ut alienum non laedas, it must of course be within the legitimate range of legislative
action to define the mode and manner in which every one may so use his own
property so as not to pose injury to himself or others.
In any case, where the liberty curtailed affects at most the rights of property, the
permissible scope of regulatory measures is certainly much wider. To pretend that
licensing or accreditation requirements violates the due process clause is to ignore
the settled practice, under the mantle of the police power, of regulating entry to the
practice of various trades or professions. Professionals leaving for abroad are
required to pass rigid written and practical exams before they are deemed fit to
practice their trade. Seamen are required to take tests determining their
seamanship. Locally, the Professional Regulation Commission has begun to require
previously licensed doctors and other professionals to furnish documentary proof
that they had either re-trained or had undertaken continuing education courses as a
requirement for renewal of their licenses. It is not claimed that these requirements
pose an unwarranted deprivation of a property right under the due process clause.
So long as professionals and other workers meet reasonable regulatory standards no
such deprivation exists.
Finally, it is a futile gesture on the part of petitioners to invoke the non-impairment
clause of the Constitution to support their argument that the government cannot
enact the assailed regulatory measures because they abridge the freedom to
contract. In Philippine Association of Service Exporters, Inc. vs. Drilon, we held that
"[t]he non-impairment clause of the Constitution … must yield to the loftier purposes
 targeted by the government." Equally important, into every contract is read
provisions of existing law, and always, a reservation of the police power for so long
as the agreement deals with a subject impressed with the public welfare.
A last point. Petitioners suggest that the singling out of entertainers and performing
artists under the assailed department orders constitutes class legislation which
violates the equal protection clause of the Constitution. We do not agree.
The equal protection clause is directed principally against undue favor and individual
or class privilege. It is not intended to prohibit legislation which is limited to the
object to which it is directed or by the territory in which it is to operate. It does not
require absolute equality, but merely that all persons be treated alike under like
conditions both as to privileges conferred and liabilities imposed. We have held, time
and again, that the equal protection clause of the Constitution does not forbid
classification for so long as such classification is based on real and substantial
differences having a reasonable relation to the subject of the particular legislation.
If classification is germane to the purpose of the law, concerns all members of the
class, and applies equally to present and future conditions, the classification does
not violate the equal protection guarantee.26
The validity of Section 6 of R.A. No. 8042 which provides that employees of recruitment
agencies may be criminally liable for illegal recruitment has been upheld in People v.
Chowdury:27
As stated in the first sentence of Section 6 of RA 8042, the persons who may be held
liable for illegal recruitment are the principals, accomplices and accessories. An
employee of a company or corporation engaged in illegal recruitment may be held
liable as principal, together with his employer, if it is shown that he actively and
consciously participated in illegal recruitment. It has been held that the existence of
the corporate entity does not shield from prosecution the corporate agent who
knowingly and intentionally causes the corporation to commit a crime. The
corporation obviously acts, and can act, only by and through its human agents, and
it is their conduct which the law must deter. The employee or agent of a corporation
engaged in unlawful business naturally aids and abets in the carrying on of such
business and will be prosecuted as principal if, with knowledge of the business, its
purpose and effect, he consciously contributes his efforts to its conduct and
promotion, however slight his contribution may be. …28
By its rulings, the Court thereby affirmed the validity of the assailed penal and procedural
provisions of Rep. Act No. 8042, including the imposable penalties therefor. Until the Court, by
final judgment, declares that the said provisions are unconstitutional, the enforcement of the
said provisions cannot be enjoined.
The RTC Committed Grave Abuse of Its Discretion Amounting to Excess or Lack of Jurisdiction
in Issuing the Assailed Order and the Writ of Preliminary Injunction
The matter of whether to issue a writ of preliminary injunction or not is addressed to the sound
discretion of the trial court. However, if the court commits grave abuse of its discretion in
issuing the said writ amounting to excess or lack of jurisdiction, the same may be nullified via
a writ of certiorari and prohibition.
In Social Security Commission v. Judge Bayona,29 we ruled that a law is presumed constitutional
until otherwise declared by judicial interpretation. The suspension of the operation of the law
is a matter of extreme delicacy because it is an interference with the official acts not only of
the duly elected representatives of the people but also of the highest magistrate of the land.
In Younger v. Harris, Jr.,30 the Supreme Court of the United States emphasized, thus:
Federal injunctions against state criminal statutes, either in their entirety or with
respect to their separate and distinct prohibitions, are not to be granted as a matter
of course, even if such statutes are unconstitutional. No citizen or member of the
community is immune from prosecution, in good faith, for his alleged criminal acts.
The imminence of such a prosecution even though alleged to be unauthorized and,
hence, unlawful is not alone ground for relief in equity which exerts its extraordinary
powers only to prevent irreparable injury to the plaintiff who seeks its aid. 752 Beal
v. Missouri Pacific Railroad Corp., 312 U.S. 45, 49, 61 S.Ct. 418, 420, 85 L.Ed. 577.
And similarly, in Douglas, supra, we made clear, after reaffirming this rule, that:
"It does not appear from the record that petitioners have been threatened with any
injury other than that incidental to every criminal proceeding brought lawfully and
in good faith …" 319 U.S., at 164, 63 S.Ct., at 881.31
The possible unconstitutionality of a statute, on its face, does not of itself justify an injunction
against good faith attempts to enforce it, unless there is a showing of bad faith, harassment,
or any other unusual circumstance that would call for equitable relief. 32 The "on its face"
invalidation of statutes has been described as "manifestly strong medicine," to be employed
"sparingly and only as a last resort," and is generally disfavored.33
To be entitled to a preliminary injunction to enjoin the enforcement of a law assailed to be
unconstitutional, the party must establish that it will suffer irreparable harm in the absence of
injunctive relief and must demonstrate that it is likely to succeed on the merits, or that there
are sufficiently serious questions going to the merits and the balance of hardships tips
decidedly in its favor.34 The higher standard reflects judicial deference toward "legislation or
regulations developed through presumptively reasoned democratic processes." Moreover, an
injunction will alter, rather than maintain, the status quo, or will provide the movant with
substantially all the relief sought and that relief cannot be undone even if the defendant
prevails at a trial on the merits.35 Considering that injunction is an exercise of equitable relief
and authority, in assessing whether to issue a preliminary injunction, the courts must
sensitively assess all the equities of the situation, including the public interest.36 In litigations
between governmental and private parties, courts go much further both to give and withhold
relief in furtherance of public interest than they are accustomed to go when only private
interests are involved.37 Before the plaintiff may be entitled to injunction against future
enforcement, he is burdened to show some substantial hardship. 38
The fear or chilling-effect of the assailed penal provisions of the law on the members of the
respondent does not by itself justify prohibiting the State from enforcing them against those
whom the State believes in good faith to be punishable under the laws:
… Just as the incidental "chilling effect" of such statutes does not automatically
render them unconstitutional, so the chilling effect that admittedly can result from
the very existence of certain laws on the statute books does not in itself justify
prohibiting the State from carrying out the important and necessary task of enforcing
these laws against socially harmful conduct that the State believes in good faith to
be punishable under its laws and the Constitution. 39
It must be borne in mind that subject to constitutional limitations, Congress is empowered to
define what acts or omissions shall constitute a crime and to prescribe punishments
therefor.40 The power is inherent in Congress and is part of the sovereign power of the State
to maintain peace and order. Whatever views may be entertained regarding the severity of
punishment, whether one believes in its efficiency or its futility, these are peculiarly questions
of legislative policy.41 The comparative gravity of crimes and whether their consequences are
more or less injurious are matters for the State and Congress itself to
determine.42 Specification of penalties involves questions of legislative policy.43
There is no allegation in the amended petition or evidence adduced by the respondent that
the officers and/or employees of its members had been threatened with any indictments for
violations of the penal provisions of Rep. Act No. 8042. Neither is there any allegation therein
that any of its members and/or their officers and employees committed any of the acts
enumerated in Section 6(a) to (m) of the law for which they could be indicted. Neither did the
respondent adduce any evidence in the RTC that any or all of its members or a great number
of other duly licensed and registered recruitment agencies had to stop their business
operations because of fear of indictments under Sections 6 and 7 of Rep. Act No. 8042. The
respondent merely speculated and surmised that licensed and registered recruitment agencies
would close shop and stop business operations because of the assailed penal provisions of the
law. A writ of preliminary injunction to enjoin the enforcement of penal laws cannot be based
on such conjectures or speculations. The Court cannot take judicial notice that the processing
of deployment papers of overseas workers have come to a virtual standstill at the POEA
because of the assailed provisions of Rep. Act No. 8042. The respondent must adduce evidence
to prove its allegation, and the petitioners accorded a chance to adduce controverting
evidence.
The respondent even failed to adduce any evidence to prove irreparable injury because of the
enforcement of Section 10(1)(2) of Rep. Act No. 8042. Its fear or apprehension that, because
of time constraints, its members would have to defend foreign employees in cases before the
Labor Arbiter is based on speculations. Even if true, such inconvenience or difficulty is hardly
irreparable injury.

The trial court even ignored the public interest involved in suspending the enforcement of Rep.
Due process prohibits criminal stability from shifting the burden of proof to the accused,
Act No. 8042 vis-à-vis the eleven licensed and registered recruitment agencies represented by
punishing wholly passive conduct, defining crimes in vague or overbroad language and failing
the respondent. In People v. Gamboa,50we emphasized the primary aim of Rep. Act No. 8042:
to grant fair warning of illegal conduct.44 Class legislation is such legislation which denies rights
to one which are accorded to others, or inflicts upon one individual a more severe penalty than
is imposed upon another in like case offending.45 Bills of attainder are legislative acts which Preliminarily, the proliferation of illegal job recruiters and syndicates preying on
inflict punishment on individuals or members of a particular group without a judicial trial. innocent people anxious to obtain employment abroad is one of the primary
Essential to a bill of attainder are a specification of certain individuals or a group of individuals, considerations that led to the enactment of The Migrant Workers and Overseas
the imposition of a punishment, penal or otherwise, and the lack of judicial trial.46 Filipinos Act of 1995. Aimed at affording greater protection to overseas Filipino
workers, it is a significant improvement on existing laws in the recruitment and
placement of workers for overseas employment. Otherwise known as the Magna
Penalizing unlicensed and licensed recruitment agencies and their officers and employees and
Carta of OFWs, it broadened the concept of illegal recruitment under the Labor Code
their relatives employed in government agencies charged with the enforcement of the law for
and provided stiffer penalties thereto, especially those that constitute economic
illegal recruitment and imposing life imprisonment for those who commit large scale illegal
sabotage, i.e., Illegal Recruitment in Large Scale and Illegal Recruitment Committed
recruitment is not offensive to the Constitution. The accused may be convicted of illegal
by a Syndicate.51
recruitment and large scale illegal recruitment only if, after trial, the prosecution is able to
prove all the elements of the crime charged.47
By issuing the writ of preliminary injunction against the petitioners sans any evidence, the trial
court frustrated, albeit temporarily, the prosecution of illegal recruiters and allowed them to
The possibility that the officers and employees of the recruitment agencies, which are
continue victimizing hapless and innocent people desiring to obtain employment abroad as
members of the respondent, and their relatives who are employed in the government agencies
overseas workers, and blocked the attainment of the salutary policies52 embedded in Rep. Act
charged in the enforcement of the law, would be indicted for illegal recruitment and, if
No. 8042. It bears stressing that overseas workers, land-based and sea-based, had been
convicted sentenced to life imprisonment for large scale illegal recruitment, absent proof of
remitting to the Philippines billions of dollars which over the years had propped the economy.
irreparable injury, is not sufficient on which to base the issuance of a writ of preliminary
injunction to suspend the enforcement of the penal provisions of Rep. Act No. 8042 and avert
any indictments under the law.48The normal course of criminal prosecutions cannot be blocked In issuing the writ of preliminary injunction, the trial court considered paramount the interests
on the basis of allegations which amount to speculations about the future.49 of the eleven licensed and registered recruitment agencies represented by the respondent,
and capriciously overturned the presumption of the constitutionality of the assailed provisions
on the barefaced claim of the respondent that the assailed provisions of Rep. Act No. 8042 are
unconstitutional. The trial court committed a grave abuse of its discretion amounting to excess
or lack of jurisdiction in issuing the assailed order and writ of preliminary injunction. It is for
this reason that the Court issued a temporary restraining order enjoining the enforcement of
the writ of preliminary injunction issued by the trial court.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed decision of the
appellate court is REVERSED AND SET ASIDE. The Order of the Regional Trial Court dated
August 21, 1995 in Civil Case No. Q-95-24401 and the Writ of Preliminary Injunction issued by
it in the said case on August 24, 1995 are NULLIFIED. No costs.

SO ORDERED.
G.R. No. 113375 May 5, 1994
KILOSBAYAN, INCORPORATED, JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA,
EMILIO C. CAPULONG, JR., JOSE T. APOLO, EPHRAIM TENDERO, FERNANDO SANTIAGO,
JOSE ABCEDE, CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G. FERNANDO, RAOUL V.
VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, SEN. FREDDIE WEBB, SEN. WIGBERTO
TAÑADA, and REP. JOKER P. ARROYO, petitioners,
vs.
TEOFISTO GUINGONA, JR., in his capacity as Executive Secretary, Office of the President;
RENATO CORONA, in his capacity as Assistant Executive Secretary and Chairman of the
Presidential review Committee on the Lotto, Office of the President; PHILIPPINE CHARITY
SWEEPSTAKES OFFICE; and PHILIPPINE GAMING MANAGEMENT CORPORATION,
respondents.
DAVIDE, JR., J.:
This is a special civil action for prohibition and injunction, with a prayer for a temporary
restraining order and preliminary injunction, which seeks to prohibit and restrain the
implementation of the "Contract of Lease" executed by the Philippine Charity Sweepstakes
Office (PCSO) and the Philippine Gaming Management Corporation (PGMC) in connection with
the on- line lottery system, also known as "lotto."
Petitioner Kilosbayan, Incorporated (KILOSBAYAN) avers that it is a non-stock domestic
corporation composed of civic-spirited citizens, pastors, priests, nuns, and lay leaders who are
committed to the cause of truth, justice, and national renewal. The rest of the petitioners,
except Senators Freddie Webb and Wigberto Tañada and Representative Joker P. Arroyo, are
suing in their capacities as members of the Board of Trustees of KILOSBAYAN and as taxpayers
and concerned citizens. Senators Webb and Tañada and Representative Arroyo are suing in
their capacities as members of Congress and as taxpayers and concerned citizens of the
Philippines.
The pleadings of the parties disclose the factual antecedents which triggered off the filing of
this petition.
Pursuant to Section 1 of the charter of the PCSO (R.A. No. 1169, as amended by B.P. Blg. 42)
which grants it the authority to hold and conduct "charity sweepstakes races, lotteries and
other similar activities," the PCSO decided to establish an on- line lottery system for the
purpose of increasing its revenue base and diversifying its sources of funds. Sometime before
March 1993, after learning that the PCSO was interested in operating an on-line lottery system,
the Berjaya Group Berhad, "a multinational company and one of the ten largest public
companies in Malaysia," long "engaged in, among others, successful lottery operations in Asia,
running both Lotto and Digit games, thru its subsidiary, Sports Toto Malaysia," with its
"affiliate, the International Totalizator Systems, Inc., . . . an American public company engaged
in the international sale or provision of computer systems, softwares, terminals, training and
other technical services to the gaming industry," "became interested to offer its services and
resources to PCSO." As an initial step, Berjaya Group Berhad (through its individual nominees)
organized with some Filipino investors in March 1993 a Philippine corporation known as the
Philippine Gaming Management Corporation (PGMC), which "was intended to be the medium
through which the technical and management services required for the project would be
offered and delivered to PCSO." 1
Before August 1993, the PCSO formally issued a Request for Proposal (RFP) for the Lease
Contract of an on-line lottery system for the PCSO. 2 Relevant provisions of the RFP are the
following:
1. EXECUTIVE SUMMARY
xxx xxx xxx
1.2. PCSO is seeking a suitable contractor which shall build, at its own
expense, all the facilities ('Facilities') needed to operate and maintain a
nationwide on-line lottery system. PCSO shall lease the Facilities for a fixed
percentage ofquarterly gross receipts. All receipts from ticket sales shall be
turned over directly to PCSO. All capital, operating expenses and expansion
expenses and risks shall be for the exclusive account of the Lessor.
xxx xxx xxx
1.4. The lease shall be for a period not exceeding fifteen (15) years.
1.5. The Lessor is expected to submit a comprehensive nationwide lottery
development plan ("Development Plan") which will include the game, the
marketing of the games, and the logistics to introduce the games to all the
cities and municipalities of the country within five (5) years.
xxx xxx xxx
1.7. The Lessor shall be selected based on its technical expertise, hardware
and software capability, maintenance support, and financial resources.
The Development Plan shall have a substantial bearing on the choice of the
Lessor. The Lessor shall be a domestic corporation, with at least sixty
percent (60%) of its shares owned by Filipino shareholders.
xxx xxx xxx
The Office of the President, the National Disaster Control Coordinating
Council, the Philippine National Police, and the National Bureau of
Investigation shall be authorized to use the nationwide
telecommunications system of the Facilities Free of Charge.
1.8. Upon expiration of the lease, the Facilities shall be owned by PCSO
without any additional consideration. 3
xxx xxx xxx
2.2. OBJECTIVES
The objectives of PCSO in leasing the Facilities from a private entity are as
follows:
xxx xxx xxx
2.2.2. Enable PCSO to operate a nationwide on-line Lottery system at no
expense or risk to the government.
xxx xxx xxx
2.4. DUTIES AND RESPONSIBILITIES OF THE LESSOR
xxx xxx xxx
2.4.2. THE LESSOR
The Proponent is expected to furnish and maintain the Facilities, including
the personnel needed to operate the computers, the communications
network and sales offices under a build-lease basis. The printing of tickets
shall be undertaken under the supervision and control of PCSO. The
Facilities shall enable PCSO to computerize the entire gaming system.
The Proponent is expected to formulate and design consumer-oriented
Master Games Plan suited to the marketplace, especially geared to Filipino
gaming habits and preferences. In addition, the Master Games Plan is
expected to include a Product Plan for each game and explain how each
will be introduced into the market. This will be an integral part of the
Development Plan which PCSO will require from the Proponent.
xxx xxx xxx
The Proponent is expected to provide upgrades to modernize the entire
gaming system over the life ofthe lease contract.
The Proponent is expected to provide technology transfer to PCSO
technical personnel. 4
7. GENERAL GUIDELINES FOR PROPONENTS
xxx xxx xxx
Finally, the Proponent must be able to stand the acid test of proving that
it is an entity able to take on the role of responsible maintainer of the on-
line lottery system, and able to achieve PSCO's goal of formalizing an on-
line lottery system to achieve its mandated objective. 5
xxx xxx xxx
16. DEFINITION OF TERMS
Facilities: All capital equipment, computers, terminals, software,
nationwide telecommunication network, ticket sales offices, furnishings,
and fixtures; printing costs; cost of salaries and wages; advertising and
promotion expenses; maintenance costs; expansion and replacement
costs; security and insurance, and all other related expenses needed to
operate nationwide on-line lottery system.6
Considering the above citizenship requirement, the PGMC claims that the Berjaya Group
"undertook to reduce its equity stakes in PGMC to 40%," by selling 35% out of the original 75%
foreign stockholdings to local investors.
On 15 August 1993, PGMC submitted its bid to the PCSO.7
The bids were evaluated by the Special Pre-Qualification Bids and Awards Committee (SPBAC)
for the on-line lottery and its Bid Report was thereafter submitted to the Office of the
President. 8 The submission was preceded by complaints by the Committee's Chairperson, Dr.
Mita Pardo de Tavera. 9
On 21 October 1993, the Office of the President announced that it had given the respondent
PGMC the go-signal to operate the country's on-line lottery system and that the corresponding
implementing contract would be submitted not later than 8 November 1993 "for final
clearance and approval by the Chief Executive." 10 This announcement was published in the
Manila Standard, Philippine Daily Inquirer, and the Manila Times on 29 October 1993. 11
On 4 November 1993, KILOSBAYAN sent an open letter to Presidential Fidel V. Ramos strongly
opposing the setting up to the on-line lottery system on the basis of serious moral and ethical
considerations. 12
At the meeting of the Committee on Games and Amusements of the Senate on 12 November
1993, KILOSBAYAN reiterated its vigorous opposition to the on-line lottery on account of its
immorality and illegality. 13
On 19 November 1993, the media reported that despite the opposition, "Malacañang will push
through with the operation of an on-line lottery system nationwide" and that it is actually the
respondent PCSO which will operate the lottery while the winning corporate bidders are
merely "lessors." 14
On 1 December 1993, KILOSBAYAN requested copies of all documents pertaining to the lottery
award from Executive Secretary Teofisto Guingona, Jr. In his answer of 17 December 1993, the
Executive Secretary informed KILOSBAYAN that the requested documents would be duly
transmitted before the end of the month. 15. However, on that same date, an agreement
denominated as "Contract of Lease" was finally executed by respondent PCSO and respondent
PGMC. 16 The President, per the press statement issued by the Office of the President,
approved it on 20 December 1993.17
In view of their materiality and relevance, we quote the following salient provisions of the
Contract of Lease:
1. DEFINITIONS
The following words and terms shall have the following respective
meanings:
1.1 Rental Fee — Amount to be paid by PCSO to the LESSOR as
compensation for the fulfillment of the obligations of the LESSOR under
this Contract, including, but not limited to the lease of the Facilities.
xxx xxx xxx
1.3 Facilities — All capital equipment, computers, terminals, software
(including source codes for the On-Line Lottery application software for the
terminals, telecommunications and central systems), technology,
intellectual property rights, telecommunications network, and furnishings
and fixtures.
1.4 Maintenance and Other Costs — All costs and expenses relating to
printing, manpower, salaries and wages, advertising and promotion,
maintenance, expansion and replacement, security and insurance, and all
other related expenses needed to operate an On-Line Lottery System,
which shall be for the account of the LESSOR. All expenses relating to the
setting-up, operation and maintenance of ticket sales offices of dealers and
retailers shall be borne by PCSO's dealers and retailers.
1.5 Development Plan — The detailed plan of all games, the marketing
thereof, number of players, value of winnings and the logistics required to
introduce the games, including the Master Games Plan as approved by
PCSO, attached hereto as Annex "A", modified as necessary by the
provisions of this Contract.
xxx xxx xxx
1.8 Escrow Deposit — The proposal deposit in the sum of Three Hundred
Million Pesos (P300,000,000.00) submitted by the LESSOR to PCSO
pursuant to the requirements of the Request for Proposals.
2. SUBJECT MATTER OF THE LEASE
The LESSOR shall build, furnish and maintain at its own expense and risk
the Facilities for the On-Line Lottery System of PCSO in the Territory on an
exclusive basis. The LESSOR shall bear all Maintenance and Other Costs as
defined herein.
xxx xxx xxx
3. RENTAL FEE
For and in consideration of the performance by the LESSOR of its
obligations herein, PCSO shall pay LESSOR a fixed Rental Fee equal to four
point nine percent (4.9%) of gross receipts from ticket sales, payable net
of taxes required by law to be withheld, on a semi-monthly basis. Goodwill,
franchise and similar fees shall belong to PCSO.
4. LEASE PERIOD
The period of the lease shall commence ninety (90) days from the date of
effectivity of this Contract and shall run for a period of eight (8) years
thereafter, unless sooner terminated in accordance with this Contract.
5. RIGHTS AND OBLIGATIONS OF PCSO AS OPERATOR OF THE ON-LINE
LOTTERY SYSTEM
PCSO shall be the sole and individual operator of the On-Line Lottery
System. Consequently:
5.1 PCSO shall have sole responsibility to decide whether to implement,
fully or partially, the Master Games Plan of the LESSOR. PCSO shall have
the sole responsibility to determine the time for introducing new games to
the market. The Master Games Plan included in Annex "A" hereof is hereby
approved by PCSO.
5.2 PCSO shall have control over revenues and receipts of whatever nature
from the On-Line Lottery System. After paying the Rental Fee to the
LESSOR, PCSO shall have exclusive responsibility to determine the Revenue
Allocation Plan; Provided, that the same shall be consistent with the
requirement of R.A. No. 1169, as amended, which fixes a prize fund of fifty
five percent (55%) on the average.
5.3 PCSO shall have exclusive control over the printing of tickets, including
but not limited to the design, text, and contents thereof.
5.4 PCSO shall have sole responsibility over the appointment of dealers or
retailers throughout the country. PCSO shall appoint the dealers and
retailers in a timely manner with due regard to the implementation
timetable of the On-Line Lottery System. Nothing herein shall preclude the
LESSOR from recommending dealers or retailers for appointment by PCSO,
which shall act on said recommendation within forty-eight (48) hours.
5.5 PCSO shall designate the necessary personnel to monitor and audit the
daily performance of the On-Line Lottery System. For this purpose, PCSO
designees shall be given, free of charge, suitable and adequate space,
furniture and fixtures, in all offices of the LESSOR, including but not limited
to its headquarters, alternate site, regional and area offices.
5.6 PCSO shall have the responsibility to resolve, and exclusive jurisdiction
over, all matters involving the operation of the On-Line Lottery System not
otherwise provided in this Contract.
5.7 PCSO shall promulgate procedural and coordinating rules governing all
activities relating to the On-Line Lottery System.
5.8 PCSO will be responsible for the payment of prize monies, commissions
to agents and dealers, and taxes and levies (if any) chargeable to the
operator of the On-Line Lottery System. The LESSOR will bear all other
Maintenance and Other Costs, except as provided in Section 1.4.
5.9 PCSO shall assist the LESSOR in the following:
5.9.1 Work permits for the LESSOR's staff;
5.9.2 Approvals for importation of the Facilities;
5.9.3 Approvals and consents for the On-Line Lottery
System; and
5.9.4 Business and premises licenses for all offices of
the LESSOR and licenses for the telecommunications
network.
5.10 In the event that PCSO shall pre-terminate this Contract or suspend
the operation of the On-Line Lottery System, in breach of this Contract and
through no fault of the LESSOR, PCSO shall promptly, and in any event not
later than sixty (60) days, reimburse the LESSOR the amount of its total
investment cost associated with the On-Line Lottery System, including but
not limited to the cost of the Facilities, and further compensate the LESSOR
for loss of expected net profit after tax, computed over the unexpired term
of the lease.
6. DUTIES AND RESPONSIBILITIES OF THE LESSOR
The LESSOR is one of not more than three (3) lessors of similar facilities for
the nationwide On-Line Lottery System of PCSO. It is understood that the
rights of the LESSOR are primarily those of a lessor of the Facilities, and
consequently, all rights involving the business aspects of the use of the
Facilities are within the jurisdiction of PCSO. During the term of the lease,
the LESSOR shall.
6.1 Maintain and preserve its corporate existence, rights and privileges,
and conduct its business in an orderly, efficient, and customary manner.
6.2 Maintain insurance coverage with insurers acceptable to PCSO on all
Facilities.
6.3 Comply with all laws, statues, rules and regulations, orders and
directives, obligations and duties by which it is legally bound.
6.4 Duly pay and discharge all taxes, assessments and government charges
now and hereafter imposed of whatever nature that may be legally levied
upon it.
6.5 Keep all the Facilities in fail safe condition and, if necessary, upgrade,
replace and improve the Facilities from time to time as new technology
develops, in order to make the On-Line Lottery System more cost-effective
and/or competitive, and as may be required by PCSO shall not impose such
requirements unreasonably nor arbitrarily.
6.6 Provide PCSO with management terminals which will allow real-time
monitoring of the On-Line Lottery System.
6.7 Upon effectivity of this Contract, commence the training of PCSO and
other local personnel and the transfer of technology and expertise, such
that at the end of the term of this Contract, PCSO will be able to effectively
take-over the Facilities and efficiently operate the On-Line Lottery System.
6.8 Undertake a positive advertising and promotions campaign for both
institutional and product lines without engaging in negative advertising
against other lessors.
6.9 Bear all expenses and risks relating to the Facilities including, but not
limited to, Maintenance and Other Costs and:
xxx xxx xxx
6.10 Bear all risks if the revenues from ticket sales, on an annualized basis,
are insufficient to pay the entire prize money.
6.11 Be, and is hereby, authorized to collect and retain for its own account,
a security deposit from dealers and retailers, in an amount determined
with the approval of PCSO, in respect of equipment supplied by the
LESSOR. PCSO's approval shall not be unreasonably withheld.
xxx xxx xxx
6.12 Comply with procedural and coordinating rules issued by PCSO.
7. REPRESENTATIONS AND WARRANTIES
The LESSOR represents and warrants that:
7.1 The LESSOR is corporation duly organized and existing under the laws
of the Republic of the Philippines, at least sixty percent (60%) of the
outstanding capital stock of which is owned by Filipino shareholders. The
minimum required Filipino equity participation shall not be impaired
through voluntary or involuntary transfer, disposition, or sale of shares of
stock by the present stockholders.
7.2 The LESSOR and its Affiliates have the full corporate and legal power
and authority to own and operate their properties and to carry on their
business in the place where such properties are now or may be conducted.
...
7.3 The LESSOR has or has access to all the financing and funding
requirements to promptly and effectively carry out the terms of this
Contract. . . .
7.4 The LESSOR has or has access to all the managerial and technical
expertise to promptly and effectively carry out the terms of this Contract.
...
xxx xxx xxx
10. TELECOMMUNICATIONS NETWORK
The LESSOR shall establish a telecommunications network that will
connect all municipalities and cities in the Territory in accordance with, at
the LESSOR's option, either of the LESSOR's proposals (or a combinations
of both such proposals) attached hereto as Annex "B," and under the
following PCSO schedule:
xxx xxx xxx
PCSO may, at its option, require the LESSOR to establish the
telecommunications network in accordance with the above Timetable in
provinces where the LESSOR has not yet installed terminals. Provided, that
such provinces have existing nodes. Once a municipality or city is serviced
by land lines of a licensed public telephone company, and such lines are
connected to Metro Manila, then the obligation of the LESSOR to connect
such municipality or city through a telecommunications network shall
cease with respect to such municipality or city. The voice facility will cover
the four offices of the Office of the President, National Disaster Control
Coordinating Council, Philippine National Police and the National Bureau
of Investigation, and each city and municipality in the Territory except
Metro Manila, and those cities and municipalities which have easy
telephone access from these four offices. Voice calls from the four offices
shall be transmitted via radio or VSAT to the remote municipalities which
will be connected to this voice facility through wired network or by radio.
The facility shall be designed to handle four private conversations at any
one time.
xxx xxx xxx
13. STOCK DISPERSAL PLAN
Within two (2) years from the effectivity of this Contract, the LESSOR shall
cause itself to be listed in the local stock exchange and offer at least twenty
five percent (25%) of its equity to the public.
14. NON-COMPETITION
The LESSOR shall not, directly or indirectly, undertake any activity or
business in competition with or adverse to the On-Line Lottery System of
PCSO unless it obtains the latter's prior written consent thereto.
15. HOLD HARMLESS CLAUSE
15.1 The LESSOR shall at all times protect and defend, at its cost and
expense, PCSO from and against any and all liabilities and claims for
damages and/or suits for or by reason of any deaths of, or any injury or
injuries to any person or persons, or damages to property of any kind
whatsoever, caused by the LESSOR, its subcontractors, its authorized
agents or employees, from any cause or causes whatsoever.
15.2 The LESSOR hereby covenants and agrees to indemnify and hold PCSO xxx xxx xxx
harmless from all liabilities, charges, expenses (including reasonable
counsel fees) and costs on account of or by reason of any such death or 20. OWNERSHIP OF THE FACILITIES
deaths, injury or injuries, liabilities, claims, suits or losses caused by the
LESSOR's fault or negligence.
After expiration of the term of the lease as provided in Section 4, the
Facilities directly required for the On-Line Lottery System mentioned in
15.3 The LESSOR shall at all times protect and defend, at its own cost and Section 1.3 shall automatically belong in full ownership to PCSO without
expense, its title to the facilities and PCSO's interest therein from and any further consideration other than the Rental Fees already paid during
against any and all claims for the duration of the Contract until transfer to the effectivity of the lease.
PCSO of ownership of the serviceable Facilities.
21. TERMINATION OF THE LEASE
16. SECURITY
PCSO may terminate this Contract for any breach of the material provisions
16.1 To ensure faithful compliance by the LESSOR with the terms of the of this Contract, including the following:
Contract, the LESSOR shall secure a Performance Bond from a reputable
insurance company or companies acceptable to PCSO.
21.1 The LESSOR is insolvent or bankrupt or unable to pay its debts, stops
or suspends or threatens to stop or suspend payment of all or a material
16.2 The Performance Bond shall be in the initial amount of Three Hundred part of its debts, or proposes or makes a general assignment or an
Million Pesos (P300,000,000.00), to its U.S. dollar equivalent, and shall be arrangement or compositions with or for the benefit of its creditors; or
renewed to cover the duration of the Contract. However, the Performance
Bond shall be reduced proportionately to the percentage of
21.2 An order is made or an effective resolution passed for the winding up
unencumbered terminals installed; Provided, that the Performance Bond
or dissolution of the LESSOR or when it ceases or threatens to cease to
shall in no case be less than One Hundred Fifty Million Pesos
carry on all or a material part of its operations or business; or
(P150,000,000.00).

21.3 Any material statement, representation or warranty made or

16.3 The LESSOR may at its option maintain its Escrow Deposit as the
furnished by the LESSOR proved to be materially false or misleading;
Performance Bond. . . .

said termination to take effect upon receipt of written

17. PENALTIES
notice of termination by the LESSOR and failure to take
remedial action within seven (7) days and cure or
17.1 Except as may be provided in Section 17.2, should the LESSOR fail to remedy the same within thirty (30) days from notice.
take remedial measures within seven (7) days, and rectify the breach
within thirty (30) days, from written notice by PCSO of any wilfull or grossly
Any suspension, cancellation or termination of this
negligent violation of the material terms and conditions of this Contract,
Contract shall not relieve the LESSOR of any liability
all unencumbered Facilities shall automatically become the property of
that may have already accrued hereunder.
PCSO without consideration and without need for further notice or
demand by PCSO. The Performance Bond shall likewise be forfeited in
favor of PCSO. xxx xxx xxx

17.2 Should the LESSOR fail to comply with the terms of the Timetables
provided in Section 9 and 10, it shall be subject to an initial Penalty of
Twenty Thousand Pesos (P20,000.00), per city or municipality per every
month of delay; Provided, that the Penalty shall increase, every ninety (90)
days, by the amount of Twenty Thousand Pesos (P20,000.00) per city or
municipality per month, whilst shall failure to comply persists. The penalty
shall be deducted by PCSO from the rental fee.
Considering the denial by the Office of the President of its protest and the statement of
Assistant Executive Secretary Renato Corona that "only a court injunction can stop
Malacañang," and the imminent implementation of the Contract of Lease in February 1994,
KILOSBAYAN, with its co-petitioners, filed on 28 January 1994 this petition.
In support of the petition, the petitioners claim that:
 . . . X X THE OFFICE OF THE PRESIDENT, ACTING
THROUGH RESPONDENTS EXECUTIVE SECRETARY
AND/OR ASSISTANT EXECUTIVE SECRETARY FOR LEGAL
AFFAIRS, AND THE PCSO GRAVELY ABUSE[D] THEIR
DISCRETION AND/OR FUNCTIONS TANTAMOUNT TO
LACK OF JURISDICTION AND/OR AUTHORITY IN
RESPECTIVELY: (A) APPROVING THE AWARD OF THE
CONTRACT TO, AND (B) ENTERING INTO THE SO-
CALLED "CONTRACT OF LEASE" WITH, RESPONDENT
PGMC FOR THE INSTALLATION, ESTABLISHMENT AND
OPERATION OF THE ON-LINE LOTTERY AND
TELECOMMUNICATION SYSTEMS REQUIRED AND/OR
AUTHORIZED UNDER THE SAID CONTRACT,
CONSIDERING THAT:
a) Under Section 1 of the Charter of the PCSO, the PCSO is prohibited from
holding and conducting lotteries "in collaboration, association or joint
venture with any person, association, company or entity";
b) Under Act No. 3846 and established jurisprudence, a Congressional
franchise is required before any person may be allowed to establish and
operate said telecommunications system;
c) Under Section 11, Article XII of the Constitution, a less than 60% Filipino-
owned and/or controlled corporation, like the PGMC, is disqualified from
operating a public service, like the said telecommunications system; and
d) Respondent PGMC is not authorized by its charter and under the Foreign
Investment Act (R.A. No. 7042) to install, establish and operate the on-line
lotto and telecommunications systems.18
Petitioners submit that the PCSO cannot validly enter into the assailed Contract of Lease with
the PGMC because it is an arrangement wherein the PCSO would hold and conduct the on-line
lottery system in "collaboration" or "association" with the PGMC, in violation of Section 1(B)
of R.A. No. 1169, as amended by B.P. Blg. 42, which prohibits the PCSO from holding and
conducting charity sweepstakes races, lotteries, and other similar activities "in collaboration,
association or joint venture with any person, association, company or entity, foreign or
domestic." Even granting arguendo that a lease of facilities is not within the contemplation of
"collaboration" or "association," an analysis, however, of the Contract of Lease clearly shows
that there is a "collaboration, association, or joint venture between respondents PCSO and
PGMC in the holding of the On-Line Lottery System," and that there are terms and conditions
of the Contract "showing that respondent PGMC is the actual lotto operator and not
respondent PCSO."19
The petitioners also point out that paragraph 10 of the Contract of Lease requires or authorizes
PGMC to establish a telecommunications network that will connect all the municipalities and
cities in the territory. However, PGMC cannot do that because it has no franchise from
Congress to construct, install, establish, or operate the network pursuant to Section 1 of Act
No. 3846, as amended. Moreover, PGMC is a 75% foreign-owned or controlled corporation
and cannot, therefore, be granted a franchise for that purpose because of Section 11, Article
XII of the 1987 Constitution. Furthermore, since "the subscribed foreign capital" of the PGMC
"comes to about 75%, as shown by paragraph EIGHT of its Articles of Incorporation," it cannot
lawfully enter into the contract in question because all forms of gambling — and lottery is one
of them — are included in the so-called foreign investments negative list under the Foreign
Investments Act (R.A. No. 7042) where only up to 40% foreign capital is allowed. 20
Finally, the petitioners insist that the Articles of Incorporation of PGMC do not authorize it to
establish and operate an on-line lottery and telecommunications systems.21
Accordingly, the petitioners pray that we issue a temporary restraining order and a writ of
preliminary injunction commanding the respondents or any person acting in their places or
upon their instructions to cease and desist from implementing the challenged Contract of
Lease and, after hearing the merits of the petition, that we render judgment declaring the
Contract of Lease void and without effect and making the injunction permanent. 22
We required the respondents to comment on the petition.
In its Comment filed on 1 March 1994, private respondent PGMC asserts that "(1) [it] is merely
an independent contractor for a piece of work, (i.e., the building and maintenance of a lottery
system to be used by PCSO in the operation of its lottery franchise); and (2) as such
independent contractor, PGMC is not a co-operator of the lottery franchise with PCSO, nor is
PCSO sharing its franchise, 'in collaboration, association or joint venture' with PGMC — as such
statutory limitation is viewed from the context, intent, and spirit of Republic Act 1169, as
amended by Batas Pambansa 42." It further claims that as an independent contractor for a
piece of work, it is neither engaged in "gambling" nor in "public service" relative to the
telecommunications network, which the petitioners even consider as an "indispensable
requirement" of an on-line lottery system. Finally, it states that the execution and
implementation of the contract does not violate the Constitution and the laws; that the issue
on the "morality" of the lottery franchise granted to the PCSO is political and not judicial or
legal, which should be ventilated in another forum; and that the "petitioners do not appear to
have the legal standing or real interest in the subject contract and in obtaining the reliefs
sought." 23
In their Comment filed by the Office of the Solicitor General, public respondents Executive
Secretary Teofisto Guingona, Jr., Assistant Executive Secretary Renato Corona, and the PCSO
maintain that the contract of lease in question does not violate Section 1 of R.A. No. 1169, as
amended by B.P. Blg. 42, and that the petitioner's interpretation of the phrase "in
collaboration, association or joint venture" in Section 1 is "much too narrow, strained and
utterly devoid of logic" for it "ignores the reality that PCSO, as a corporate entity, is vested with
the basic and essential prerogative to enter into all kinds of transactions or contracts as may
be necessary for the attainment of its purposes and objectives." What the PCSO charter "seeks
to prohibit is that arrangement akin to a "joint venture" or partnership where there is
"community of interest in the business, sharing of profits and losses, and a mutual right of
control," a characteristic which does not obtain in a contract of lease." With respect to the
challenged Contract of Lease, the "role of PGMC is limited to that of a lessor of the facilities"
for the on-line lottery system; in "strict technical and legal sense," said contract "can be
categorized as a contract for a piece of work as defined in Articles 1467, 1713 and 1644 of the
Civil Code."
They further claim that the establishment of the telecommunications system stipulated in the
Contract of Lease does not require a congressional franchise because PGMC will not operate a
public utility; moreover, PGMC's "establishment of a telecommunications system is not
intended to establish a telecommunications business," and it has been held that where the
facilities are operated "not for business purposes but for its own use," a legislative franchise is
not required before a certificate of public convenience can be granted. 24 Even
granting arguendo that PGMC is a public utility, pursuant to Albano S.
Reyes, 25 "it can establish a telecommunications system even without a legislative franchise
because not every public utility is required to secure a legislative franchise before it could
establish, maintain, and operate the service"; and, in any case, "PGMC's establishment of the
telecommunications system stipulated in its contract of lease with PCSO falls within the
exceptions under Section 1 of Act No. 3846 where a legislative franchise is not necessary for
the establishment of radio stations."
They also argue that the contract does not violate the Foreign Investment Act of 1991; that the
Articles of Incorporation of PGMC authorize it to enter into the Contract of Lease; and that the
issues of "wisdom, morality and propriety of acts of the executive department are beyond the
ambit of judicial review."
Finally, the public respondents allege that the petitioners have no standing to maintain the
instant suit, citing our resolution in Valmonte vs. Philippine Charity Sweepstakes Office. 26
Several parties filed motions to intervene as petitioners in this case, 27 but only the motion of
Senators Alberto Romulo, Arturo Tolentino, Francisco Tatad, Gloria Macapagal-Arroyo, Vicente
Sotto III, John Osmeña, Ramon Revilla, and Jose Lina 28 was granted, and the respondents were
required to comment on their petition in intervention, which the public respondents and
PGMC did.
In the meantime, the petitioners filed with the Securities and Exchange Commission on 29
March 1994 a petition against PGMC for the nullification of the latter's General Information
Sheets. That case, however, has no bearing in this petition.
On 11 April 1994, we heard the parties in oral arguments. Thereafter, we resolved to consider
the matter submitted for resolution and pending resolution of the major issues in this case, to
issue a temporary restraining order commanding the respondents or any person acting in their
place or upon their instructions to cease and desist from implementing the challenged Contract
of Lease.
In the deliberation on this case on 26 April 1994, we resolved to consider only these issues: (a)
the locus standi of the petitioners, and (b) the legality and validity of the Contract of Lease in
the light of Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, which prohibits the PCSO
from holding and conducting lotteries "in collaboration, association or joint venture with any
person, association, company or entity, whether domestic or foreign." On the first issue, seven
Justices voted to sustain the locus standi of the petitioners, while six voted not to. On the
second issue, the seven Justices were of the opinion that the Contract of Lease violates the
exception to Section 1(B) of R.A. No. 1169, as amended by B.P. Blg. 42, and is, therefore, invalid
and contrary to law. The six Justices stated that they wished to express no opinion thereon in
view of their stand on the first issue. The Chief Justice took no part because one of the Directors
of the PCSO is his brother-in-law.
This case was then assigned to this ponente for the writing of the opinion of the Court.
The preliminary issue on the locus standi of the petitioners should, indeed, be resolved in their
favor. A party's standing before this Court is a procedural technicality which it may, in the
exercise of its discretion, set aside in view of the importance of the issues raised. In the
landmark Emergency Powers Cases, 29 this Court brushed aside this technicality because "the
transcendental importance to the public of these cases demands that they be settled promptly
and definitely, brushing aside, if we must, technicalities of procedure. (Avelino vs. Cuenco, G.R.
No. L-2821)." Insofar as taxpayers' suits are concerned, this Court had declared that it "is not
devoid of discretion as to whether or not it should be entertained," 30 or that it "enjoys an open
discretion to entertain the same or not." 31 In De La Llana vs. Alba, 32 this Court declared:
1. The argument as to the lack of standing of petitioners is easily resolved.
As far as Judge de la Llana is concerned, he certainly falls within the
principle set forth in Justice Laurel's opinion in People vs. Vera [65 Phil. 56
(1937)]. Thus: "The unchallenged rule is that the person who impugns the
validity of a statute must have a personal and substantial interest in the
case such that he has sustained, or will sustain, direct injury as a result of
its enforcement [Ibid, 89]. The other petitioners as members of the bar and
officers of the court cannot be considered as devoid of "any personal and
substantial interest" on the matter. There is relevance to this excerpt from
a separate opinion in Aquino, Jr. v. Commission on Elections [L-40004,
January 31, 1975, 62 SCRA 275]: "Then there is the attack on the standing
of petitioners, as vindicating at most what they consider a public right and
not protecting their rights as individuals. This is to conjure the specter of
the public right dogma as an inhibition to parties intent on keeping public
officials staying on the path of constitutionalism. As was so well put by
Jaffe; "The protection of private rights is an essential constituent of public
interest and, conversely, without a well-ordered state there could be no
enforcement of private rights. Private and public interests are, both in a
substantive and procedural sense, aspects of the totality of the legal
order." Moreover, petitioners have convincingly shown that in their
capacity as taxpayers, their standing to sue has been amply demonstrated.
There would be a retreat from the liberal approach followed in Pascual v.
Secretary of Public Works, foreshadowed by the very decision of People v.
Vera where the doctrine was first fully discussed, if we act differently now.
I do not think we are prepared to take that step. Respondents, however,
would hard back to the American Supreme Court doctrine in Mellon v.
Frothingham, with their claim that what petitioners possess "is an interest
which is shared in common by other people and is comparatively so minute
 and indeterminate as to afford any basis and assurance that the judicial
process can act on it." That is to speak in the language of a bygone era,
even in the United States. For as Chief Justice Warren clearly pointed out
in the later case of Flast v. Cohen, the barrier thus set up if not breached
has definitely been lowered.
In Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan, 33 reiterated
in Basco vs. Philippine Amusements and Gaming Corporation,34 this Court stated:
Objections to taxpayers' suits for lack of sufficient personality standing or
interest are, however, in the main procedural matters. Considering the
importance to the public of the cases at bar, and in keeping with the
Court's duty, under the 1987 Constitution, to determine whether or not
the other branches of government have kept themselves within the limits
of the Constitution and the laws and that they have not abused the
discretion given to them, this Court has brushed aside technicalities of
procedure and has taken cognizance of these petitions.
and in Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian
Reform,35 it declared:
With particular regard to the requirement of proper party as applied in the
cases before us, we hold that the same is satisfied by the petitioners and
intervenors because each of them has sustained or is in danger of
sustaining an immediate injury as a result of the acts or measures
complained of. [Ex ParteLevitt, 303 US 633]. And even if, strictly speaking,
they are not covered by the definition, it is still within the wide discretion of
the Court to waive the requirement and so remove the impediment to its
addressing and resolving the serious constitutional questions raised.
In the first Emergency Powers Cases, ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued
by President Quirino although they were invoking only an indirect and
general interest shared in common with the public. The Court dismissed
the objective that they were not proper parties and ruled that the
transcendental importance to the public of these cases demands that they
be settled promptly and definitely, brushing aside, if we must,
technicalities of procedure. We have since then applied this exception in
many other cases. (Emphasis supplied)
In Daza vs. Singson, 36 this Court once more said:
. . . For another, we have early as in the Emergency Powers Cases that
where serious constitutional questions are involved, "the transcendental
importance to the public of these cases demands that they be settled
promptly and definitely, brushing aside, if we must, technicalities of
procedure." The same policy has since then been consistently followed by
the Court, as in Gonzales vs. Commission on Elections [21 SCRA 774] . . .
The Federal Supreme Court of the United States of America has also expressed its discretionary
power to liberalize the rule on locus standi. In United States vs. Federal Power
Commission and Virginia Rea Association vs. Federal Power Commission,37 it held:
We hold that petitioners have standing. Differences of view, however,
preclude a single opinion of the Court as to both petitioners. It would not
further clarification of this complicated specialty of federal jurisdiction, the
solution of whose problems is in any event more or less determined by the
specific circumstances of individual situations, to set out the divergent
grounds in support of standing in these cases.
In line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of
Congress, and even association of planters, and non-profit civic organizations were allowed to
initiate and prosecute actions before this Court to question the constitutionality or validity of
laws, acts, decisions, rulings, or orders of various government agencies or instrumentalities.
Among such cases were those assailing the constitutionality of (a) R.A. No. 3836 insofar as it
allows retirement gratuity and commutation of vacation and sick leave to Senators and
Representatives and to elective officials of both Houses of Congress;38 (b) Executive Order No.
284, issued by President Corazon C. Aquino on 25 July 1987, which allowed members of the
cabinet, their undersecretaries, and assistant secretaries to hold other government offices or
positions; 39 (c) the automatic appropriation for debt service in the General Appropriations
Act; 40 (d) R.A. No. 7056 on the holding of desynchronized elections; 41 (d) R.A. No. 1869 (the
charter of the Philippine Amusement and Gaming Corporation) on the ground that it is contrary
to morals, public policy, and order; 42 and (f) R.A. No. 6975, establishing the Philippine National
Police. 43
Other cases where we have followed a liberal policy regarding locus standi include those
attacking the validity or legality of (a) an order allowing the importation of rice in the light of
the prohibition imposed by R.A. No. 3452; 44 (b) P.D. Nos. 991 and 1033 insofar as they
proposed amendments to the Constitution and P.D. No. 1031 insofar as it directed the
COMELEC to supervise, control, hold, and conduct the referendum-plebiscite on 16 October
1976; 45(c) the bidding for the sale of the 3,179 square meters of land at Roppongi, Minato-ku,
Tokyo, Japan; 46 (d) the approval without hearing by the Board of Investments of the amended
application of the Bataan Petrochemical Corporation to transfer the site of its plant from
Bataan to Batangas and the validity of such transfer and the shift of feedstock from naphtha
only to naphtha and/or liquefied petroleum gas; 47 (e) the decisions, orders, rulings, and
resolutions of the Executive Secretary, Secretary of Finance, Commissioner of Internal
Revenue, Commissioner of Customs, and the Fiscal Incentives Review Board exempting the
National Power Corporation from indirect tax and duties; 48 (f) the orders of the Energy
Regulatory Board of 5 and 6 December 1990 on the ground that the hearings conducted on
the second provisional increase in oil prices did not allow the petitioner substantial cross-
examination; 49 (g) Executive Order No. 478 which levied a special duty of P0.95 per liter or
P151.05 per barrel of imported crude oil and P1.00 per liter of imported oil products; 50 (h)
resolutions of the Commission on Elections concerning the apportionment, by district, of the
number of elective members of Sanggunians; 51 and (i) memorandum orders issued by a
Mayor affecting the Chief of Police of Pasay City.52
In the 1975 case of Aquino vs. Commission on Elections, 53 this Court, despite its unequivocal
ruling that the petitioners therein had no personality to file the petition, resolved nevertheless
to pass upon the issues raised because of the far-reaching implications of the petition. We did
no less in De Guia vs. COMELEC 54 where, although we declared that De Guia "does not appear
to have locus standi, a standing in law, a personal or substantial interest," we brushed aside
the procedural infirmity "considering the importance of the issue involved, concerning as it
does the political exercise of qualified voters affected by the apportionment, and petitioner
alleging abuse of discretion and violation of the Constitution by respondent."
We find the instant petition to be of transcendental importance to the public. The issues it
raised are of paramount public interest and of a category even higher than those involved in
many of the aforecited cases. The ramifications of such issues immeasurably affect the social,
economic, and moral well-being of the people even in the remotest barangays of the country
and the counter-productive and retrogressive effects of the envisioned on-line lottery system
are as staggering as the billions in pesos it is expected to raise. The legal standing then of the
petitioners deserves recognition and, in the exercise of its sound discretion, this Court hereby
brushes aside the procedural barrier which the respondents tried to take advantage of.
And now on the substantive issue.
Section 1 of R.A. No. 1169, as amending by B.P. Blg. 42, prohibits the PCSO from holding and
conducting lotteries "in collaboration, association or joint venture with any person,
association, company or entity, whether domestic or foreign." Section 1 provides:
Sec. 1. The Philippine Charity Sweepstakes Office. — The Philippine Charity
Sweepstakes Office, hereinafter designated the Office, shall be the
principal government agency for raising and providing for funds for health
programs, medical assistance and services and charities of national
character, and as such shall have the general powers conferred in section
thirteen of Act Numbered One thousand four hundred fifty-nine, as
amended, and shall have the authority:
A. To hold and conduct charity sweepstakes races,
lotteries and other similar activities, in such frequency
and manner, as shall be determined, and subject to
such rules and regulations as shall be promulgated by
the Board of Directors.
B. Subject to the approval of the Minister of Human
Settlements, to engage in health and welfare-related
investments, programs, projects and activities which
may be profit-oriented, by itself or in collaboration,
association or joint venture with any person,
association, company or entity, whether domestic or
foreign, except for the activities mentioned in the
preceding paragraph (A), for the purpose of providing
for permanent and continuing sources of funds for
health programs, including the expansion of existing
ones, medical assistance and services, and/or
charitable grants: Provided, That such investment will
not compete with the private sector in areas where
investments are adequate as may be determined by
the National Economic and Development Authority.
(emphasis supplied)
The language of the section is indisputably clear that with respect to its franchise or privilege
"to hold and conduct charity sweepstakes races, lotteries and other similar activities," the
PCSO cannot exercise it "in collaboration, association or joint venture" with any other party.
This is the unequivocal meaning and import of the phrase "except for the activities mentioned
in the preceding paragraph (A)," namely, "charity sweepstakes races, lotteries and other similar
activities."
B.P. Blg. 42 originated from Parliamentary Bill No. 622, which was covered by Committee
Report No. 103 as reported out by the Committee on Socio-Economic Planning and
Development of the Interim Batasang Pambansa. The original text of paragraph B, Section 1 of
Parliamentary Bill No. 622 reads as follows:
To engage in any and all investments and related profit-oriented projects
or programs and activities by itself or in collaboration, association or joint
venture with any person, association, company or entity, whether
domestic or foreign, for the main purpose of raising funds for health and
medical assistance and services and charitable grants. 55
During the period of committee amendments, the Committee on Socio-Economic Planning and
Development, through Assemblyman Ronaldo B. Zamora, introduced an amendment by
substitution to the said paragraph B such that, as amended, it should read as follows:
Subject to the approval of the Minister of Human Settlements, to engage
in health-oriented investments, programs, projects and activities which
may be profit- oriented, by itself or in collaboration, association, or joint
venture with any person, association, company or entity, whether
domestic or foreign, for the purpose of providing for permanent and
continuing sources of funds for health programs, including the expansion
of existing ones, medical assistance and services and/or charitable
grants. 56
Before the motion of Assemblyman Zamora for the approval of the amendment could be acted
upon, Assemblyman Davide introduced an amendment to the amendment:
MR. DAVIDE.
 Mr. Speaker.
THE SPEAKER.
The gentleman from Cebu is recognized.
MR. DAVIDE.
May I introduce an amendment to
the committee amendment? The
amendment would be to insert
after "foreign" in the amendment
just read the following: EXCEPT
FOR THE ACTIVITY IN LETTER (A)
ABOVE.
When it is joint venture or in
collaboration with any entity such
collaboration or joint venture must
not include activity activity letter
(a) which is the holding and
conducting of sweepstakes races,
lotteries and other similar acts.
MR. ZAMORA.
We accept the amendment, Mr. Speaker.
MR. DAVIDE.
Thank you, Mr. Speaker.
THE SPEAKER.
Is there any objection to the
amendment? (Silence) The
amendment, as amended, is
approved. 57
Further amendments to paragraph B were introduced and approved. When Assemblyman
Zamora read the final text of paragraph B as further amended, the earlier approved
amendment of Assemblyman Davide became "EXCEPT FOR THE ACTIVITIES MENTIONED IN
PARAGRAPH (A)"; and by virtue of the amendment introduced by Assemblyman Emmanuel
Pelaez, the word PRECEDING was inserted before PARAGRAPH. Assemblyman Pelaez
introduced other amendments. Thereafter, the new paragraph B was approved. 58
This is now paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42.
No interpretation of the said provision to relax or circumvent the prohibition can be allowed
since the privilege to hold or conduct charity sweepstakes races, lotteries, or other similar
activities is a franchise granted by the legislature to the PCSO. It is a settled rule that "in all
grants by the government to individuals or corporations of rights, privileges and franchises, the
words are to be taken most strongly against the grantee .... [o]ne who claims a franchise or
privilege in derogation of the common rights of the public must prove his title thereto by a
grant which is clearly and definitely expressed, and he cannot enlarge it by equivocal or
doubtful provisions or by probable inferences. Whatever is not unequivocally granted is
withheld. Nothing passes by mere implication." 59
In short then, by the exception explicitly made in paragraph B, Section 1 of its charter, the PCSO
cannot share its franchise with another by way of collaboration, association or joint venture.
Neither can it assign, transfer, or lease such franchise. It has been said that "the rights and
privileges conferred under a franchise may, without doubt, be assigned or transferred when
the grant is to the grantee and assigns, or is authorized by statute. On the other hand, the right
of transfer or assignment may be restricted by statute or the constitution, or be made subject
to the approval of the grantor or a governmental agency, such as a public utilities commission,
exception that an existing right of assignment cannot be impaired by subsequent
legislation." 60
It may also be pointed out that the franchise granted to the PCSO to hold and conduct lotteries
allows it to hold and conduct a species of gambling. It is settled that "a statute which authorizes
the carrying on of a gambling activity or business should be strictly construed and every
reasonable doubt so resolved as to limit the powers and rights claimed under its authority." 61
Does the challenged Contract of Lease violate or contravene the exception in Section 1 of R.A.
No. 1169, as amended by B.P. Blg. 42, which prohibits the PCSO from holding and conducting
lotteries "in collaboration, association or joint venture with" another?
We agree with the petitioners that it does, notwithstanding its denomination or designation
as a (Contract of Lease). We are neither convinced nor moved or fazed by the insistence and
forceful arguments of the PGMC that it does not because in reality it is only an independent
contractor for a piece of work, i.e., the building and maintenance of a lottery system to be used
by the PCSO in the operation of its lottery franchise. Whether the contract in question is one
of lease or whether the PGMC is merely an independent contractor should not be decided on
the basis of the title or designation of the contract but by the intent of the parties, which may
be gathered from the provisions of the contract itself. Animus hominis est anima scripti. The
intention of the party is the soul of the instrument. In order to give life or effect to an
instrument, it is essential to look to the intention of the individual who executed it. 62 And,
pursuant to Article 1371 of the Civil Code, "to determine the intention of the contracting
parties, their contemporaneous and subsequent acts shall be principally considered." To put it
more bluntly, no one should be deceived by the title or designation of a contract.
A careful analysis and evaluation of the provisions of the contract and a consideration of the
contemporaneous acts of the PCSO and PGMC indubitably disclose that the contract is not in
reality a contract of lease under which the PGMC is merely an independent contractor for a
piece of work, but one where the statutorily proscribed collaboration or association, in the
least, or joint venture, at the most, exists between the contracting parties. Collaboration is
defined as the acts of working together in a joint project. 63 Association means the act of a
number of persons in uniting together for some special purpose or business. 64 Joint venture is
defined as an association of persons or companies jointly undertaking some commercial
enterprise; generally all contribute assets and share risks. It requires a community of interest
in the performance of the subject matter, a right to direct and govern the policy in connection
therewith, and duty, which may be altered by agreement to share both in profit and
losses.65
The contemporaneous acts of the PCSO and the PGMC reveal that the PCSO had neither funds
of its own nor the expertise to operate and manage an on-line lottery system, and that
although it wished to have the system, it would have it "at no expense or risks to the
government." Because of these serious constraints and unwillingness to bear expenses and
assume risks, the PCSO was candid enough to state in its RFP that it is seeking for "a suitable
contractor which shall build, at its own expense, all the facilities needed to operate and
maintain" the system; exclusively bear "all capital, operating expenses and expansion expenses
and risks"; and submit "a comprehensive nationwide lottery development plan . . . which will
include the game, the marketing of the games, and the logistics to introduce the game to all
the cities and municipalities of the country within five (5) years"; and that the operation of the
on-line lottery system should be "at no expense or risk to the government" — meaning itself,
since it is a government-owned and controlled agency. The facilities referred to means "all
capital equipment, computers, terminals, software, nationwide telecommunications network,
ticket sales offices, furnishings and fixtures, printing costs, costs of salaries and wages,
advertising and promotions expenses, maintenance costs, expansion and replacement costs,
security and insurance, and all other related expenses needed to operate a nationwide on-line
lottery system."
In short, the only contribution the PCSO would have is its franchise or authority to operate the
on-line lottery system; with the rest, including the risks of the business, being borne by the
proponent or bidder. It could be for this reason that it warned that "the proponent must be
able to stand to the acid test of proving that it is an entity able to take on the role of responsible
maintainer of the on-line lottery system." The PCSO, however, makes it clear in its RFP that the
proponent can propose a period of the contract which shall not exceed fifteen years, during
which time it is assured of a "rental" which shall not exceed 12% of gross receipts. As admitted
by the PGMC, upon learning of the PCSO's decision, the Berjaya Group Berhad, with its
affiliates, wanted to offer its services and resources to the PCSO. Forthwith, it organized the
PGMC as "a medium through which the technical and management services required for the
project would be offered and delivered to PCSO." 66
Undoubtedly, then, the Berjaya Group Berhad knew all along that in connection with an on-
line lottery system, the PCSO had nothing but its franchise, which it solemnly guaranteed it had
in the General Information of the RFP. 67Howsoever viewed then, from the very inception, the
PCSO and the PGMC mutually understood that any arrangement between them would
necessarily leave to the PGMC the technical, operations, and managementaspects of the on-
line lottery system while the PCSO would, primarily, provide the franchise. The
words Gaming andManagement in the corporate name of respondent Philippine Gaming
Management Corporation could not have been conceived just for euphemistic purposes. Of
course, the RFP cannot substitute for the Contract of Lease which was subsequently executed
by the PCSO and the PGMC. Nevertheless, the Contract of Lease incorporates their intention
and understanding.
The so-called Contract of Lease is not, therefore, what it purports to be. Its denomination as
such is a crafty device, carefully conceived, to provide a built-in defense in the event that the
agreement is questioned as violative of the exception in Section 1 (B) of the PCSO's charter.
The acuity or skill of its draftsmen to accomplish that purpose easily manifests itself in the
Contract of Lease. It is outstanding for its careful and meticulous drafting designed to give an
immediate impression that it is a contract of lease. Yet, woven therein are provisions which
negate its title and betray the true intention of the parties to be in or to have a joint venture for
a period of eight years in the operation and maintenance of the on-line lottery system.
Consistent with the above observations on the RFP, the PCSO has only its franchise to offer,
while the PGMC represents and warrants that it has access to all managerial and technical
expertise to promptly and effectively carry out the terms of the contract. And, for a period of
eight years, the PGMC is under obligation to keep all the Facilitiesin safe condition and if
necessary, upgrade, replace, and improve them from time to time as new technology develops
to make the on-line lottery system more cost-effective and competitive; exclusively bear all
costs and expenses relating to the printing, manpower, salaries and wages, advertising and
promotion, maintenance, expansion and replacement, security and insurance, and all other
related expenses needed to operate the on-line lottery system; undertake a positive
advertising and promotions campaign for both institutional and product lines without engaging
in negative advertising against other lessors; bear the salaries and related costs of skilled and
qualified personnel for administrative and technical operations; comply with procedural and
coordinating rulesissued by the PCSO; and to train PCSO and other local personnel and to effect
the transfer of technology and other expertise, such that at the end of the term of the contract,
the PCSO will be able to effectively take over the Facilities and efficiently operate the on-line
lottery system. The latter simply means that, indeed, the managers, technicians or employees
who shall operate the on-line lottery system are not managers, technicians or employees of
the PCSO, but of the PGMC and that it is only after the expiration of the contract that the PCSO
will operate the system. After eight years, the PCSO would automatically become the owner
of the Facilities without any other further consideration.
For these reasons, too, the PGMC has the initial prerogative to prepare the detailed plan of all
games and the marketing thereof, and determine the number of players, value of winnings,
and the logistics required to introduce the games, including the Master Games Plan. Of course,
the PCSO has the reserved authority to disapprove them. 68 And, while the PCSO has the sole
responsibility over the appointment of dealers and retailers throughout the country, the PGMC
may, nevertheless, recommend for appointment dealers and retailers which shall be acted
upon by the PCSO within forty-eight hours and collect and retain, for its own account, a security
deposit from dealers and retailers in respect of equipment supplied by it.
This joint venture is further established by the following:
(a) Rent is defined in the lease contract as the amount to be paid to the PGMC as compensation
for the fulfillment of its obligations under the contract, including, but not limited to the lease
of the Facilities. However, this rent is not actually a fixed amount. Although it is stated to be
4.9% of gross receipts from ticket sales, payable net of taxes required by law to be withheld, it
may be drastically reduced or, in extreme cases, nothing may be due or demandable at all
because the PGMC binds itself to "bear all risks if the revenue from the ticket sales, on an
annualized basis, are insufficient to pay the entire prize money." This risk-bearing provision is
unusual in a lessor-lessee relationship, but inherent in a joint venture.
(b) In the event of pre-termination of the contract by the PCSO, or its suspension of operation
of the on-line lottery system in breach of the contract and through no fault of the PGMC, the
PCSO binds itself "to promptly, and in any event not later than sixty (60) days, reimburse the
Lessor the amount of its total investment cost associated with the On-Line Lottery System,
including but not limited to the cost of the Facilities, and further compensate the LESSOR for
loss of expected net profit after tax, computed over the unexpired term of the lease." If the
contract were indeed one of lease, the payment of the expected profits or rentals for the
unexpired portion of the term of the contract would be enough.
(c) The PGMC cannot "directly or indirectly undertake any activity or business in competition
with or adverse to the On-Line Lottery System of PCSO unless it obtains the latter's prior
written consent." If the PGMC is engaged in the business of leasing equipment and technology
for an on-line lottery system, we fail to see any acceptable reason why it should allow a
restriction on the pursuit of such business.
All of the foregoing unmistakably confirm the indispensable role of the PGMC in the pursuit,
operation, conduct, and management of the On-Line Lottery System. They exhibit and
demonstrate the parties' indivisible community of interest in the conception, birth and growth
of the on-line lottery, and, above all, in its profits, with each having a right in the formulation
and implementation of policies related to the business and sharing, as well, in the losses —
with the PGMC bearing the greatest burden because of its assumption of expenses and risks,
and the PCSO the least, because of its confessed unwillingness to bear expenses and risks. In a
manner of speaking, each is wed to the other for better or for worse. In the final analysis,
however, in the light of the PCSO's RFP and the above highlighted provisions, as well as the
"Hold Harmless Clause" of the Contract of Lease, it is even safe to conclude that the
actual lessor in this case is the PCSO and the subject matter thereof is its franchise to hold and
conduct lotteries since it is, in reality, the PGMC which operates and manages the on-line
lottery system for a period of eight years.
We thus declare that the challenged Contract of Lease violates the exception provided for in
paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, and is, therefore, invalid
for being contrary to law. This conclusion renders unnecessary further discussion on the other
issues raised by the petitioners.
WHEREFORE, the instant petition is hereby GRANTED and the challenged Contract of Lease
executed on 17 December 1993 by respondent Philippine Charity Sweepstakes Office (PCSO)
and respondent Philippine Gaming Management Corporation (PGMC) is hereby DECLARED
contrary to law and invalid.

(d) The PGMC shall provide the PCSO the audited Annual Report sent to its stockholders, and The Temporary Restraining Order issued on 11 April 1994 is hereby MADE PERMANENT.
within two years from the effectivity of the contract, cause itself to be listed in the local stock
exchange and offer at least 25% of its equity to the public. If the PGMC is merely a lessor, this No pronouncement as to costs.
imposition is unreasonable and whimsical, and could only be tied up to the fact that the PGMC
will actually operate and manage the system; hence, increasing public participation in the
SO ORDERED.
corporation would enhance public interest.

(e) The PGMC shall put up an Escrow Deposit of P300,000,000.00 pursuant to the requirements
of the RFP, which it may, at its option, maintain as its initial performance bond required to
ensure its faithful compliance with the terms of the contract.

(f) The PCSO shall designate the necessary personnel to monitor and audit the daily
performance of the on-line lottery system; and promulgate procedural and coordinating
rules governing all activities relating to the on-line lottery system. The first further confirms
that it is the PGMC which will operate the system and the PCSO may, for the protection of its
interest, monitor and audit the daily performance of the system. The second admits
the coordinating and cooperative powers and functions of the parties.

(g) The PCSO may validly terminate the contract if the PGMC becomes insolvent or bankrupt
or is unable to pay its debts, or if it stops or suspends or threatens to stop or suspend payment
of all or a material part of its debts.
[G.R. No. 159139. January 13, 2004]
INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINES, MA. CORAZON M. AKOL, MIGUEL
UY, EDUARDO H. LOPEZ, AUGUSTO C. LAGMAN, REX C. DRILON, MIGUEL HILADO, LEY
SALCEDO, and MANUEL ALCUAZ JR., petitioners, vs. COMMISSION ON ELECTIONS; COMELEC
CHAIRMAN BENJAMIN ABALOS SR.; COMELEC BIDDING and AWARD COMMITTEE CHAIRMAN
EDUARDO D. MEJOS and MEMBERS GIDEON DE GUZMAN, JOSE F. BALBUENA, LAMBERTO P. LLAMAS,
and BARTOLOME SINOCRUZ JR.; MEGA PACIFIC eSOLUTIONS, INC.; and MEGA PACIFIC
CONSORTIUM, respondents.
DECISION
PANGANIBAN, J.:
There is grave abuse of discretion (1) when an act is done contrary to the Constitution,
the law or jurisprudence;[1] or (2) when it is executed whimsically, capriciously or arbitrarily
out of malice, ill will or personal bias.[2] In the present case, the Commission on Elections
approved the assailed Resolution and awarded the subject Contract not only in clear violation
of law and jurisprudence, but also in reckless disregard of its own bidding rules and
procedure. For the automation of the counting and canvassing of the ballots in the 2004
elections, Comelec awarded the Contract to Mega Pacific Consortium an entity that had not
participated in the bidding. Despite this grant, the poll body signed the actual automation
Contract with Mega Pacific eSolutions, Inc., a company that joined the bidding but had not met
the eligibility requirements.
Comelec awarded this billion-peso undertaking with inexplicable haste, without
adequately checking and observing mandatory financial, technical and legal requirements. It
also accepted the proferred computer hardware and software even if, at the time of the award,
they had undeniably failed to pass eight critical requirements designed to safeguard the
integrity of elections, especially the following three items:
They failed to achieve the accuracy rating criteria of 99.9995 percent
set-up by the Comelec itself
They were not able to detect previously downloaded results at various
canvassing or consolidation levels and to prevent these from being
inputted again
They were unable to print the statutorily required audit trails of the
count/canvass at different levels without any loss of data
Because of the foregoing violations of law and the glaring grave abuse of discretion
committed by Comelec, the Court has no choice but to exercise its solemn constitutional
duty[3] to void the assailed Resolution and the subject Contract. The illegal, imprudent and
hasty actions of the Commission have not only desecrated legal and jurisprudential norms, but
have also cast serious doubts upon the poll bodys ability and capacity to conduct automated
elections. Truly, the pith and soul of democracy -- credible, orderly, and peaceful elections --
has been put in jeopardy by the illegal and gravely abusive acts of Comelec.
The Case
Before us is a Petition[4] under Rule 65 of the Rules of Court, seeking (1) to declare null
and void Resolution No. 6074 of the Commission on Elections (Comelec), which awarded Phase
II of the Modernization Project of the Commission to Mega Pacific Consortium (MPC); (2) to
enjoin the implementation of any further contract that may have been entered into by
Comelec either with Mega Pacific Consortium and/or Mega Pacific eSolutions, Inc. (MPEI); and
(3) to compel Comelec to conduct a re-bidding of the project.
The Facts
The following facts are not disputed. They were culled from official documents, the
parties pleadings, as well as from admissions during the Oral Argument on October 7, 2003.
On June 7, 1995, Congress passed Republic Act 8046,[5] which authorized Comelec to
conduct a nationwide demonstration of a computerized election system and allowed the poll
body to pilot-test the system in the March 1996 elections in the Autonomous Region in Muslim
Mindanao (ARMM).
On December 22, 1997, Congress enacted Republic Act 8436[6] authorizing Comelec to
use an automated election system (AES) for the process of voting, counting votes and
canvassing/consolidating the results of the national and local elections. It also mandated the
poll body to acquire automated counting machines (ACMs), computer equipment, devices and
materials; and to adopt new electoral forms and printing materials.
Initially intending to implement the automation during the May 11, 1998 presidential
elections, Comelec -- in its Resolution No. 2985 dated February 9, 1998[7] -- eventually decided
against full national implementation and limited the automation to the Autonomous Region in
Muslim Mindanao (ARMM). However, due to the failure of the machines to read correctly
some automated ballots in one town, the poll body later ordered their manual count for the
entire Province of Sulu.[8]
In the May 2001 elections, the counting and canvassing of votes for both national and
local positions were also done manually, as no additional ACMs had been acquired for that
electoral exercise allegedly because of time constraints.
On October 29, 2002, Comelec adopted in its Resolution 02-0170 a modernization
program for the 2004 elections. It resolved to conduct biddings for the three (3) phases of its
Automated Election System; namely, Phase I - Voter Registration and Validation System; Phase
II - Automated Counting and Canvassing System; and Phase III - Electronic Transmission.
On January 24, 2003, President Gloria Macapagal-Arroyo issued Executive Order No. 172,
which allocated the sum of P2.5 billion to fund the AES for the May 10, 2004 elections. Upon
the request of Comelec, she authorized the release of an additional P500 million.
On January 28, 2003, the Commission issued an Invitation to Apply for Eligibility and to
Bid, which we quote as follows:
INVITATION TO APPLY FOR ELIGIBILITY AND TO BID
The Commission on Elections (COMELEC), pursuant to the mandate of Republic Act Nos. 8189
and 8436, invites interested offerors, vendors, suppliers or lessors to apply for eligibility and
to bid for the procurement by purchase, lease, lease with option to purchase, or otherwise,
supplies, equipment, materials and services needed for a comprehensive Automated Election
System, consisting of three (3) phases: (a) registration/verification of voters, (b) automated
counting and consolidation of votes, and (c) electronic transmission of election results, with
an approved budget of TWO BILLION FIVE HUNDRED MILLION (Php2,500,000,000) Pesos.
Only bids from the following entities shall be entertained:
a. Duly licensed Filipino citizens/proprietorships;
b. Partnerships duly organized under the laws of the Philippines and of which at
least sixty percent (60%) of the interest belongs to citizens of the
Philippines;
c. Corporations duly organized under the laws of the Philippines, and of which at
least sixty percent (60%) of the outstanding capital stock belongs to
citizens of the Philippines;
d. Manufacturers, suppliers and/or distributors forming themselves into a joint
venture, i.e., a group of two (2) or more manufacturers, suppliers and/or
distributors that intend to be jointly and severally responsible or liable for
a particular contract, provided that Filipino ownership thereof shall be at
least sixty percent (60%); and
e. Cooperatives duly registered with the Cooperatives Development Authority.
Bid documents for the three (3) phases may be obtained starting 10 February 2003, during
office hours from the Bids and Awards Committee (BAC) Secretariat/Office of Commissioner
Resurreccion Z. Borra, 7th Floor, Palacio del Governador, Intramuros, Manila, upon payment
at the Cash Division, Commission on Elections, in cash or cashiers check, payable to the
Commission on Elections, of a non-refundable amount of FIFTEEN THOUSAND PESOS
(Php15,000.00) for each phase. For this purpose, interested offerors, vendors, suppliers or
lessors have the option to participate in any or all of the three (3) phases of the
comprehensive Automated Election System.
A Pre-Bid Conference is scheduled on 13 February 2003, at 9:00 a.m. at the Session Hall,
Commission on Elections, Postigo Street, Intramuros, Manila. Should there be questions on
the bid documents, bidders are required to submit their queries in writing to the BAC
Secretariat prior to the scheduled Pre-Bid Conference.
Deadline for submission to the BAC of applications for eligibility and bid envelopes for the
supply of the comprehensive Automated Election System shall be at the Session Hall,
Commission on Elections, Postigo Street, Intramuros, Manila on 28 February 2003 at 9:00
a.m.
The COMELEC reserves the right to review the qualifications of the bidders after the bidding
and before the contract is executed. Should such review uncover any misrepresentation
made in the eligibility statements, or any changes in the situation of the bidder to materially
downgrade the substance of such statements, the COMELEC shall disqualify the bidder upon
due notice without any obligation whatsoever for any expenses or losses that may be
incurred by it in the preparation of its bid.[9]
On February 11, 2003, Comelec issued Resolution No. 5929 clarifying certain eligibility
criteria for bidders and the schedule of activities for the project bidding, as follows:
1.) Open to Filipino and foreign corporation duly registered and licensed to do
business and is actually doing business in the Philippines, subject to Sec.
43 of RA 9184 (An Act providing In the Modernization Standardization
and Regulation of the Procurement Activities of the Government and for
other purposes etc.)
2.) Track Record:
a) For counting machines should have been used in at least one (1) political
exercise with no less than Twenty Million Voters;
b) For verification of voters the reference site of an existing data base
installation using Automated Fingerprint Identification System (AFIS)
with at least Twenty Million.
3.) Ten percent (10%) equity requirement shall be based on the total project cost;
and
4.) Performance bond shall be twenty percent (20%) of the bid offer.
RESOLVED moreover, that:
1) A. Due to the decision that the eligibility requirements and the rest of the Bid
documents shall be released at the same time, and the memorandum of
Comm. Resurreccion Z. Borra dated February 7, 2003, the documents to
be released on Friday, February 14, 2003 at 2:00 oclock p.m. shall be the
eligibility criteria, Terms of Reference (TOR) and other pertinent
documents;
B. Pre-Bid conference shall be on February 18, 2003; and
 C. Deadline for the submission and receipt of the Bids shall be on March 5,
2003.
2) The aforementioned documents will be available at the following offices:
a) Voters Validation: Office of Comm. Javier
b) Automated Counting Machines: Office of Comm. Borra
c) Electronic Transmission: Office of Comm. Tancangco[10]
On February 17, 2003, the poll body released the Request for Proposal (RFP) to procure
the election automation machines. The Bids and Awards Committee (BAC) of Comelec
convened a pre-bid conference on February 18, 2003 and gave prospective bidders until March
10, 2003 to submit their respective bids.
Among others, the RFP provided that bids from manufacturers, suppliers and/or
distributors forming themselves into a joint venture may be entertained, provided that the
Philippine ownership thereof shall be at least 60 percent. Joint venture is defined in the RFP as
a group of two or more manufacturers, suppliers and/or distributors that intend to be jointly
and severally responsible or liable for a particular contract.[11]
Basically, the public bidding was to be conducted under a two-envelope/two stage
system. The bidders first envelope or the Eligibility Envelope should establish the bidders
eligibility to bid and its qualifications to perform the acts if accepted. On the other hand, the
second envelope would be the Bid Envelope itself. The RFP outlines the bidding procedures as
follows:
25. Determination of Eligibility of Prospective Bidders
25.1 The eligibility envelopes of prospective Bidders shall be opened first to
determine their eligibility. In case any of the requirements specified in Clause 20
is missing from the first bid envelope, the BAC shall declare said prospective
Bidder as ineligible to bid. Bid envelopes of ineligible Bidders shall be
immediately returned unopened.
25.2 The eligibility of prospective Bidders shall be determined using simple
pass/fail criteria and shall be determined as either eligible or ineligible. If the
prospective Bidder is rated passed for all the legal, technical and financial
requirements, he shall be considered eligible. If the prospective Bidder is rated
failed in any of the requirements, he shall be considered ineligible.
26. Bid Examination/Evaluation
26.1 The BAC will examine the Bids to determine whether they are complete,
whether any computational errors have been made, whether required securities
have been furnished, whether the documents have been properly signed, and
whether the Bids are generally in order.
26.2 The BAC shall check the submitted documents of each Bidder against the
required documents enumerated under Clause 20, to ascertain if they are all
present in the Second bid envelope (Technical Envelope). In case one (1) or more
of the required documents is missing, the BAC shall rate the Bid concerned as
failed and immediately return to the Bidder its Third bid envelope (Financial
Envelope) unopened. Otherwise, the BAC shall rate the first bid envelope as
passed.
26.3 The BAC shall immediately open the Financial Envelopes of the Bidders
whose Technical Envelopes were passed or rated on or above the passing
score. Only Bids that are determined to contain all the bid requirements for both
components shall be rated passed and shall immediately be considered for
evaluation and comparison.
26.4 In the opening and examination of the Financial Envelope, the BAC shall
announce and tabulate the Total Bid Price as calculated. Arithmetical errors will
be rectified on the following basis: If there is a discrepancy between words and
figures, the amount in words will prevail. If there is a discrepancy between the
unit price and the total price that is obtained by multiplying the unit price and
the quantity, the unit price shall prevail and the total price shall be corrected
accordingly. If there is a discrepancy between the Total Bid Price and the sum of
the total prices, the sum of the total prices prevail and the Total Bid Price shall be
corrected accordingly.
26.5 Financial Proposals which do not clearly state the Total Bid Price shall be
rejected. Also, Total Bid Price as calculated that exceeds the approved budget for
the contract shall also be rejected.
27. Comparison of Bids
27.1 The bid price shall be deemed to embrace all costs, charges and fees
associated with carrying out all the elements of the proposed Contract, including
but not limited to, license fees, freight charges and taxes.
27.2 The BAC shall establish the calculated prices of all Bids rated passed and
rank the same in ascending order.
xxxxxxxxx
29. Postqualification
29.1 The BAC will determine to its satisfaction whether the Bidder selected as
having submitted the lowest calculated bid is qualified to satisfactorily perform
the Contract.
 29.2 The determination will take into account the Bidders financial, technical and
production capabilities/resources. It will be based upon an examination of the
documentary evidence of the Bidders qualification submitted by the Bidder as
well as such other information as the BAC deems necessary and appropriate.
29.3 A bid determined as not substantially responsive will be rejected by the BAC
and may not subsequently be made responsive by the Bidder by correction of
the non-conformity.
29.4 The BAC may waive any informality or non-conformity or irregularity in a bid
which does not constitute a material deviation, provided such waiver does not
prejudice or affect the relative ranking of any Bidder.
29.5 Should the BAC find that the Bidder complies with the legal, financial and
technical requirements, it shall make an affirmative determination which shall be
a prerequisite for award of the Contract to the Bidder. Otherwise, it will make a
negative determination which will result in rejection of the Bidders bid, in which
event the BAC will proceed to the next lowest calculated bid to make a similar
determination of that Bidders capabilities to perform satisfactorily.[12]
Out of the 57 bidders,[13] the BAC found MPC and the Total Information Management
Corporation (TIMC) eligible. For technical evaluation, they were referred to the BACs Technical
Working Group (TWG) and the Department of Science and Technology (DOST).
In its Report on the Evaluation of the Technical Proposals on Phase II, DOST said that
both MPC and TIMC had obtained a number of failed marks in the technical
evaluation. Notwithstanding these failures, Comelec en banc, on April 15, 2003, promulgated
Resolution No. 6074 awarding the project to MPC. The Commission publicized this Resolution
and the award of the project to MPC on May 16, 2003.
On May 29, 2003, five individuals and entities (including the herein Petitioners
Information Technology Foundation of the Philippines, represented by its president, Alfredo
M. Torres; and Ma. Corazon Akol) wrote a letter [14] to Comelec Chairman Benjamin Abalos
Sr. They protested the award of the Contract to Respondent MPC due to glaring irregularities
in the manner in which the bidding process had been conducted. Citing therein the
noncompliance with eligibility as well as technical and procedural requirements (many of
which have been discussed at length in the Petition), they sought a re-bidding.
In a letter-reply dated June 6, 2003,[15] the Comelec chairman -- speaking through Atty.
Jaime Paz, his head executive assistant -- rejected the protest and declared that the award
would stand up to the strictest scrutiny.
Hence, the present Petition.[16]
The Issues
In their Memorandum, petitioners raise the following issues for our consideration:
1. The COMELEC awarded and contracted with a non-eligible entity; x x x
2. Private respondents failed to pass the Technical Test as required in the RFP.
Notwithstanding, such failure was ignored. In effect, the COMELEC
changed the rules after the bidding in effect changing the nature of the
contract bidded upon.
3. Petitioners have locus standi.
4. Instant Petition is not premature. Direct resort to the Supreme Court is
justified.[17]
In the main, the substantive issue is whether the Commission on Elections, the agency
vested with the exclusive constitutional mandate to oversee elections, gravely abused its
discretion when, in the exercise of its administrative functions, it awarded to MPC the contract
for the second phase of the comprehensive Automated Election System.
Before discussing the validity of the award to MPC, however, we deem it proper to first
pass upon the procedural issues: the legal standing of petitioners and the alleged prematurity
of the Petition.
This Courts Ruling
The Petition is meritorious.
First Procedural Issue:
Locus Standi of Petitioners
Respondents chorus that petitioners do not possess locus standi, inasmuch as they are
not challenging the validity or constitutionality of RA 8436. Moreover, petitioners supposedly
admitted during the Oral Argument that no law had been violated by the award of the
Contract. Furthermore, they allegedly have no actual and material interest in the Contract and,
hence, do not stand to be injured or prejudiced on account of the award.
On the other hand, petitioners -- suing in their capacities as taxpayers, registered voters
and concerned citizens -- respond that the issues central to this case are of transcendental
importance and of national interest. Allegedly, Comelecs flawed bidding and questionable
award of the Contract to an unqualified entity would impact directly on the success or the
failure of the electoral process. Thus, any taint on the sanctity of the ballot as the expression
of the will of the people would inevitably affect their faith in the democratic system of
government. Petitioners further argue that the award of any contract for automation involves
disbursement of public funds in gargantuan amounts; therefore, public interest requires that
the laws governing the transaction must be followed strictly.
We agree with petitioners. Our nations political and economic future virtually hangs in
the balance, pending the outcome of the 2004 elections. Hence, there can be no serious doubt
that the subject matter of this case is a matter of public concern and imbued with public
interest;[18] in other words, it is of paramount public interest[19] and transcendental
importance.[20] This fact alone would justify relaxing the rule on legal standing, following the
liberal policy of this Court whenever a case involves an issue of overarching significance to our
society.[21] Petitioners legal standing should therefore be recognized and upheld.
Moreover, this Court has held that taxpayers are allowed to sue when there is a claim of
illegal disbursement of public funds,[22] or if public money is being deflected to any improper
purpose;[23] or when petitioners seek to restrain respondent from wasting public funds
through the enforcement of an invalid or unconstitutional law.[24] In the instant case, individual
petitioners, suing as taxpayers, assert a material interest in seeing to it that public funds are
properly and lawfully used. In the Petition, they claim that the bidding was defective, the
winning bidder not a qualified entity, and the award of the Contract contrary to law and
regulation.Accordingly, they seek to restrain respondents from implementing the Contract
and, necessarily, from making any unwarranted expenditure of public funds pursuant
thereto. Thus, we hold that petitioners possess locus standi.
Second Procedural Issue:
Alleged Prematurity Due to Non-Exhaustion
of Administrative Remedies
Respondents claim that petitioners acted prematurely, since they had not first utilized
the protest mechanism available to them under RA 9184, the Government Procurement
Reform Act, for the settlement of disputes pertaining to procurement contracts.
Section 55 of RA 9184 states that protests against decisions of the Bidding and Awards
Committee in all stages of procurement may be lodged with the head of the procuring entity
by filing a verified position paper and paying a protest fee. Section 57 of the same law
mandates that in no case shall any such protest stay or delay the bidding process, but it must
first be resolved before any award is made.
On the other hand, Section 58 provides that court action may be resorted to only after
the protests contemplated by the statute shall have been completed. Cases filed in violation
of this process are to be dismissed for lack of jurisdiction. Regional trial courts shall have
jurisdiction over final decisions of the head of the procuring entity, and court actions shall be
instituted pursuant to Rule 65 of the 1997 Rules of Civil Procedure.
Respondents assert that throughout the bidding process, petitioners never questioned
the BAC Report finding MPC eligible to bid and recommending the award of the Contract to it
(MPC). According to respondents, the Report should have been appealed to the Comelec en
banc, pursuant to the aforementioned sections of RA 9184. In the absence of such appeal, the
determination and recommendation of the BAC had become final.
The Court is not persuaded.
Respondent Comelec came out with its en banc Resolution No. 6074 dated April 15,
2003, awarding the project to Respondent MPC even before the BAC managed to issue its
written report and recommendation on April 21, 2003. Thus, how could petitioners have
appealed the BACs recommendation or report to the head of the procuring entity (the
chairman of Comelec), when the Comelec en banc had already approved the award of the
contract to MPC even before petitioners learned of the BAC recommendation?
It is claimed[25] by Comelec that during its April 15, 2003 session, it received and
approved the verbal report and recommendation of the BAC for the award of the Contract to
MPC, and that the BAC subsequently re-affirmed its verbal report and recommendation by
submitting it in writing on April 21, 2003. Respondents insist that the law does not require that
the BAC Report be in writing before Comelec can act thereon; therefore, there is allegedly
nothing irregular about the Report as well as the en banc Resolution.
However, it is obvious that petitioners could have appealed the BACs report and
recommendation to the head of the procuring entity (the Comelec chair) only upon
their discovery thereof, which at the very earliest would have been on April 21, 2003, when
the BAC actually put its report in writing and finally released it. Even then, what would have
been the use of protesting/appealing the report to the Comelec chair, when by that time the
Commission en banc (including the chairman himself) had already approved the BAC Report
and awarded the Contract to MPC?
And even assuming arguendo that petitioners had somehow gotten wind of the verbal
BAC report on April 15, 2003 (immediately after the en banc session), at that point the
Commission en banc had already given its approval to the BAC Report along with the award to
MPC. To put it bluntly, the Comelec en banc itself made it legally impossible for petitioners to
avail themselves of the administrative remedy that the Commission is so impiously harping
on. There is no doubt that they had not been accorded the opportunity to avail themselves of
the process provided under Section 55 of RA 9184, according to which a protest against a
decision of the BAC may be filed with the head of the procuring entity. Nemo tenetur ad
impossible,[26] to borrow private respondents favorite Latin excuse.[27]
Some Observations on the
BAC Report to the Comelec
We shall return to this issue of alleged prematurity shortly, but at this interstice, we
would just want to put forward a few observations regarding the BAC Report and the Comelec
en bancs approval thereof.
First, Comelec contends that there was nothing unusual about the fact that the Report
submitted by the BAC came only after the former had already awarded the Contract, because
the latter had been asked to render its report and recommendation orally during the
Commissions en banc session on April 15, 2003. Accordingly, Comelec supposedly acted upon
such oral recommendation and approved the award to MPC on the same day, following which
the recommendation was subsequently reduced into writing on April 21, 2003. While not
entirely outside the realm of the possible, this interesting and unique spiel does not speak well
of the process that Comelec supposedly went through in making a critical decision with respect (4) when there is estoppel on the part of the administrative agency concerned,
to a multi-billion-peso contract.

We can imagine that anyone else standing in the shoes of the Honorable Commissioners (5) when there is irreparable injury,
would have been extremely conscious of the overarching need for utter transparency. They
would have scrupulously avoided the slightest hint of impropriety, preferring to maintain an (6) when the respondent is a department secretary whose acts as an alter ego of
exacting regularity in the performance of their duties, instead of trying to break a speed record the President bears the implied and assumed approval of the latter,
in the award of multi-billion-peso contracts. After all, between April 15 and April 21 were a
mere six (6) days. Could Comelec not have waited out six more days for the written report of (7) when to require exhaustion of administrative remedies would be
the BAC, instead of rushing pell-mell into the arms of MPC? Certainly, respondents never cared unreasonable,
to explain the nature of the Commissions dire need to act immediately without awaiting the
formal, written BAC Report.
(8) when it would amount to a nullification of a claim,
In short, the Court finds it difficult to reconcile the uncommon dispatch with which
Comelec acted to approve the multi-billion-peso deal, with its claim of having been impelled (9) when the subject matter is a private land in land case proceedings,
by only the purest and most noble of motives.

At any rate, as will be discussed later on, several other factors combine to
lend negative credence to Comelecs tale.
Second, without necessarily ascribing any premature malice or premeditation on the part
of the Comelec officials involved, it should nevertheless be conceded that this cart-before-the-
horse maneuver (awarding of the Contract ahead of the BACs written report) would definitely
serve as a clever and effective way of averting and frustrating any impending protest under
Section 55.
Having made the foregoing observations, we now go back to the question of exhausting
administrative remedies. Respondents may not have realized it, but the letter addressed to
Chairman Benjamin Abalos Sr. dated May 29, 2003[28] serves to eliminate the prematurity issue
as it was an actual written protest against the decision of the poll body to award the
Contract. The letter was signed by/for, inter alia, two of herein petitioners: the Information
Technology Foundation of the Philippines, represented by its president, Alfredo M. Torres; and
Ma. Corazon Akol.
Such letter-protest is sufficient compliance with the requirement to exhaust
administrative remedies particularly because it hews closely to the procedure outlined in
Section 55 of RA 9184.
(10) when the rule does not provide a plain, speedy and adequate remedy, and
(11) when there are circumstances indicating the urgency of judicial
intervention.[30]
The present controversy precisely falls within the exceptions listed as Nos. 7, 10 and
11: (7) when to require exhaustion of administrative remedies would be unreasonable; (10)
when the rule does not provide a plain, speedy and adequate remedy, and (11) when there are
circumstances indicating the urgency of judicial intervention. As already stated, Comelec itself
made the exhaustion of administrative remedies legally impossible or, at the very least,
unreasonable.
In any event, the peculiar circumstances surrounding the unconventional rendition of
the BAC Report and the precipitate awarding of the Contract by the Comelec en banc -- plus
the fact that it was racing to have its Contract with MPC implemented in time for the elections
in May 2004 (barely four months away) -- have combined to bring about the urgent need for
judicial intervention, thus prompting this Court to dispense with the procedural exhaustion of
administrative remedies in this case.

And even without that May 29, 2003 letter-protest, the Court still holds that petitioners
need not exhaust administrative remedies in the light of Paat v. Court of Main Substantive Issue:
Appeals.[29] Paat enumerates the instances when the rule on exhaustion of administrative Validity of the Award to MPC
remedies may be disregarded, as follows:

We come now to the meat of the controversy. Petitioners contend that the award
(1) when there is a violation of due process,
is invalid, since Comelec gravely abused its discretion when it did the following:

(2) when the issue involved is purely a legal question, 1. Awarded the Contract to MPC though it did not even participate in the bidding

2. Allowed MPEI to participate in the bidding despite its failure to meet the mandatory
(3) when the administrative action is patently illegal amounting to lack or excess eligibility requirements
of jurisdiction,
 3. Issued its Resolution of April 15, 2003 awarding the Contract to MPC despite the
issuance by the BAC of its Report, which formed the basis of the assailed Resolution, only on
April 21, 2003[31]
4. Awarded the Contract, notwithstanding the fact that during the bidding process, there
were violations of the mandatory requirements of RA 8436 as well as those set forth in
Comelecs own Request for Proposal on the automated election system
5. Refused to declare a failed bidding and to conduct a re-bidding despite the failure of
the bidders to pass the technical tests conducted by the Department of Science and
Technology
6. Failed to follow strictly the provisions of RA 8436 in the conduct of the bidding for the
automated counting machines
After reviewing the slew of pleadings as well as the matters raised during the Oral
Argument, the Court deems it sufficient to focus discussion on the following major areas of
concern that impinge on the issue of grave abuse of discretion:
A. Matters pertaining to the identity, existence and eligibility of MPC as a bidder
B. Failure of the automated counting machines (ACMs) to pass the DOST technical tests
C. Remedial measures and re-testings undertaken by Comelec and DOST after the award, and
their effect on the present controversy
A.
Failure to Establish the Identity,
Existence and Eligibility of the
Alleged Consortium as a Bidder
On the question of the identity and the existence of the real bidder, respondents insist
that, contrary to petitioners allegations, the bidder was not Mega Pacific eSolutions, Inc.
(MPEI), which was incorporated only on February 27, 2003, or 11 days prior to the bidding
itself. Rather, the bidder was Mega Pacific Consortium (MPC), of which MPEI was but a part. As
proof thereof, they point to the March 7, 2003 letter of intent to bid, signed by the president
of MPEI allegedly for and on behalf of MPC. They also call attention to the official receipt issued
to MPC, acknowledging payment for the bidding documents, as proof that it was the
consortium that participated in the bidding process.
We do not agree. The March 7, 2003 letter, signed by only one signatory -- Willy U. Yu,
President, Mega Pacific eSolutions, Inc., (Lead Company/ Proponent) For: Mega Pacific
Consortium -- and without any further proof, does not by itself prove the existence of the
consortium. It does not show that MPEI or its president have been duly pre-authorized by the
other members of the putative consortium to represent them, to bid on their collective behalf
and, more important, to commit them jointly and severally to the bid undertakings. The letter
is purely self-serving and uncorroborated.
Neither does an official receipt issued to MPC, acknowledging payment for the bidding
documents, constitute proof that it was the purported consortium that participated in the
bidding. Such receipts are issued by cashiers without any legally sufficient inquiry as to the real
identity or existence of the supposed payor.
To assure itself properly of the due existence (as well as eligibility and qualification) of
the putative consortium, Comelecs BAC should have examined the bidding documents
submitted on behalf of MPC. They would have easily discovered the following fatal flaws.
Two-Envelope,
Two-Stage System
As stated earlier in our factual presentation, the public bidding system designed by
Comelec under its RFP (Request for Proposal for the Automation of the 2004 Election)
mandated the use of a two-envelope, two-stage system. A bidders first envelope (Eligibility
Envelope) was meant to establish its eligibility to bid and its qualifications and capacity to
perform the contract if its bid was accepted, while the second envelope would be the Bid
Envelope itself.
The Eligibility Envelope was to contain legal documents such as articles of incorporation,
business registrations, licenses and permits, mayors permit, VAT certification, and so
forth; technical documents containing documentary evidence to establish the track record of
the bidder and its technical and production capabilities to perform the contract; and financial
documents, including audited financial statements for the last three years, to establish the
bidders financial capacity.
In the case of a consortium or joint venture desirous of participating in the bidding, it
goes without saying that the Eligibility Envelope would necessarily have to include a copy of
the joint venture agreement, the consortium agreement or memorandum of agreement -- or
a business plan or some other instrument of similar import -- establishing the due existence,
composition and scope of such aggrupation. Otherwise, how would Comelec know who it was
dealing with, and whether these parties are qualified and capable of delivering the products
and services being offered for bidding?[32]
In the instant case, no such instrument was submitted to Comelec during the bidding
process. This fact can be conclusively ascertained by scrutinizing the two-inch thick Eligibility
Requirements file submitted by Comelec last October 9, 2003, in partial compliance with this
Courts instructions given during the Oral Argument. This file purports to replicate the eligibility
documents originally submitted to Comelec by MPEI allegedly on behalf of MPC, in connection
with the bidding conducted in March 2003. Included in the file are the incorporation papers
and financial statements of the members of the supposed consortium and certain certificates,
licenses and permits issued to them.
However, there is no sign whatsoever of any joint venture agreement, consortium
agreement, memorandum of agreement, or business plan executed among the members of the
purported consortium.
 The only logical conclusion is that no such agreement was ever submitted to the Comelec
for its consideration, as part of the bidding process.
It thus follows that, prior the award of the Contract, there was no documentary or other
basis for Comelec to conclude that a consortium had actually been formed amongst MPEI, SK
C&C and WeSolv, along with Election.com and ePLDT.[33] Neither was there anything to
indicate the exact relationships between and among these firms; their diverse roles,
undertakings and prestations, if any, relative to the prosecution of the project, the extent of
their respective investments (if any) in the supposed consortium or in the project; and the
precise nature and extent of their respective liabilities with respect to the contract being
offered for bidding. And apart from the self-serving letter of March 7, 2003, there was not even
any indication that MPEI was the lead company duly authorized to act on behalf of the others.
So, it necessarily follows that, during the bidding process, Comelec had no basis at all for
determining that the alleged consortium really existed and was eligible and qualified; and that
the arrangements among the members were satisfactory and sufficient to ensure delivery on
the Contract and to protect the governments interest.
Notwithstanding such deficiencies, Comelec still deemed the consortium eligible to
participate in the bidding, proceeded to open its Second Envelope, and eventually awarded
the bid to it, even though -- per the Comelecs own RFP -- the BAC should have declared the
MPC ineligible to bid and returned the Second (Bid) Envelope unopened.
Inasmuch as Comelec should not have considered MPEI et al. as comprising a consortium
or joint venture, it should not have allowed them to avail themselves of the provision in Section
5.4 (b) (i) of the IRR for RA 6957 (the Build-Operate-Transfer Law), as amended by RA 7718. This
provision states in part that a joint venture/consortium proponent shall be evaluated based on
the individual or collective experience of the member-firms of the joint venture or consortium
and of the contractor(s) that it has engaged for the project. Parenthetically, respondents have
uniformly argued that the said IRR of RA 6957, as amended, have suppletory application to the
instant case.
Hence, had the proponent MPEI been evaluated based solely on its own experience,
financial and operational track record or lack thereof, it would surely not have qualified and
would have been immediately considered ineligible to bid, as respondents readily admit.
At any rate, it is clear that Comelec gravely abused its discretion in arbitrarily failing to
observe its own rules, policies and guidelines with respect to the bidding process, thereby
negating a fair, honest and competitive bidding.
Commissioners Not
Aware of Consortium
In this regard, the Court is beguiled by the statements of Commissioner Florentino
Tuason Jr., given in open court during the Oral Argument last October 7, 2003.The good
commissioner affirmed that he was aware, of his own personal knowledge, that there had
indeed been a written agreement among the consortium members,[34] although it was an
internal matter among them,[35] and of the fact that it would be presented by counsel for
private respondent.[36]
However, under questioning by Chief Justice Hilario G. Davide Jr. and Justice Jose C.
Vitug, Commissioner Tuason in effect admitted that, while he was the commissioner-in-charge
of Comelecs Legal Department, he had never seen, even up to that late date, the agreement he
spoke of.[37] Under further questioning, he was likewise unable to provide any information
regarding the amounts invested into the project by several members of the claimed
consortium.[38] A short while later, he admitted that the Commission had not taken a look at
the agreement (if any).[39]
He tried to justify his position by claiming that he was not a member of the BAC. Neither
was he the commissioner-in-charge of the Phase II Modernization project (the automated
election system); but that, in any case, the BAC and the Phase II Modernization Project Team
did look into the aspect of the composition of the consortium.
It seems to the Court, though, that even if the BAC or the Phase II Team had taken charge
of evaluating the eligibility, qualifications and credentials of the consortium-bidder, still, in all
probability, the former would have referred the task to Commissioner Tuason, head of
Comelecs Legal Department. That task was the appreciation and evaluation of the legal effects
and consequences of the terms, conditions, stipulations and covenants contained in any joint
venture agreement, consortium agreement or a similar document -- assuming of course that
any of these was available at the time. The fact that Commissioner Tuason was barely aware
of the situation bespeaks the complete absence of such document, or the utter failure or
neglect of the Comelec to examine it -- assuming it was available at all -- at the time the award
was made on April 15, 2003.
In any event, the Court notes for the record that Commissioner Tuason basically
contradicted his statements in open court about there being one written agreement among all
the consortium members, when he subsequently referred[40] to the four (4) Memoranda of
Agreement (MOAs) executed by them.[41]
At this juncture, one might ask: What, then, if there are four MOAs instead of one or
none at all? Isnt it enough that there are these corporations coming together to carry out the
automation project? Isnt it true, as respondent aver, that nowhere in the RFP issued by
Comelec is it required that the members of the joint venture execute a single written
agreement to prove the existence of a joint venture. Indeed, the intention to be jointly and
severally liable may be evidenced not only by a single joint venture agreement, but also by
supplementary documents executed by the parties signifying such intention. What then is the
big deal?
The problem is not that there are four agreements instead of only one. The problem is
that Comelec never bothered to check. It never based its decision on documents or other proof
that would concretely establish the existence of the claimed consortium or joint venture or
agglomeration. It relied merely on the self-serving representation in an uncorroborated letter
signed by only one individual, claiming that his company represented a consortium of several
different corporations. It concluded forthwith that a consortium indeed existed, composed of
such and such members, and thereafter declared that the entity was eligible to bid.
True, copies of financial statements and incorporation papers of the alleged consortium
members were submitted. But these papers did not establish the existence of a consortium,
as they could have been provided by the companies concerned for purposes other than to
prove that they were part of a consortium or joint venture.For instance, the papers may have
been intended to show that those companies were each qualified to be a sub-contractor (and
nothing more) in a major project.Those documents did not by themselves support the
assumption that a consortium or joint venture existed among the companies.
In brief, despite the absence of competent proof as to the existence and eligibility of the
alleged consortium (MPC), its capacity to deliver on the Contract, and the members joint and
several liability therefor, Comelec nevertheless assumed that such consortium existed and was
eligible. It then went ahead and considered the bid of MPC, to which the Contract was
eventually awarded, in gross violation of the formers own bidding rules and procedures
contained in its RFP. Therein lies Comelecs grave abuse of discretion.
Sufficiency of the
Four Agreements
Instead of one multilateral agreement executed by, and effective and binding on, all the
five consortium members -- as earlier claimed by Commissioner Tuason in open court -- it turns
out that what was actually executed were four (4) separate and distinct bilateral
Agreements.[42] Obviously, Comelec was furnished copies of these Agreements only after the
bidding process had been terminated, as these were not included in the Eligibility
Documents. These Agreements are as follows:
A Memorandum of Agreement between MPEI and SK C&C
A Memorandum of Agreement between MPEI and WeSolv
A Teaming Agreement between MPEI and Election.com Ltd.
A Teaming Agreement between MPEI and ePLDT.
In sum, each of the four different and separate bilateral Agreements is valid and binding
only between MPEI and the other contracting party, leaving the other consortium members
total strangers thereto. Under this setup, MPEI dealt separately with each of the members,
and the latter (WeSolv, SK C&C, Election.com, and ePLDT) in turn had nothing to do with one
another, each dealing only with MPEI.
Respondents assert that these four Agreements were sufficient for the purpose of
enabling the corporations to still qualify (even at that late stage) as a consortium or joint
venture, since the first two Agreements had allegedly set forth the joint and several
undertakings among the parties, whereas the latter two clarified the parties respective roles
with regard to the Project, with MPEI being the independent contractor and Election.com and
ePLDT the subcontractors.
Additionally, the use of the phrase particular contract in the Comelecs Request for
Proposal (RFP), in connection with the joint and several liabilities of companies in a joint
venture, is taken by them to mean that all the members of the joint venture need not be
solidarily liable for the entire project or joint venture, because it is sufficient that the lead
company and the member in charge of a particular contract or aspect of the joint venture agree
to be solidarily liable.
At this point, it must be stressed most vigorously that the submission of the four bilateral
Agreements to Comelec after the end of the bidding process did nothing to eliminate the grave
abuse of discretion it had already committed on April 15, 2003.
Deficiencies Have
Not Been Cured
In any event, it is also claimed that the automation Contract awarded by Comelec
incorporates all documents executed by the consortium members, even if these documents
are not referred to therein. The basis of this assertion appears to be the passages from Section
1.4 of the Contract, which is reproduced as follows:
All Contract Documents shall form part of the Contract even if they or any one of them is not
referred to or mentioned in the Contract as forming a part thereof. Each of the Contract
Documents shall be mutually complementary and explanatory of each other such that what
is noted in one although not shown in the other shall be considered contained in all, and
what is required by any one shall be as binding as if required by all, unless one item is a
correction of the other.
The intent of the Contract Documents is the proper, satisfactory and timely execution and
completion of the Project, in accordance with the Contract Documents. Consequently, all
items necessary for the proper and timely execution and completion of the Project shall be
deemed included in the Contract.
Thus, it is argued that whatever perceived deficiencies there were in the supplementary
contracts -- those entered into by MPEI and the other members of the consortium as regards
their joint and several undertakings -- have been cured. Better still, such deficiencies have
supposedly been prevented from arising as a result of the above-quoted provisions, from
which it can be immediately established that each of the members of MPC assumes the same
joint and several liability as the other members.
The foregoing argument is unpersuasive. First, the contract being referred to, entitled
The Automated Counting and Canvassing Project Contract, is between Comelec and MPEI, not
the alleged consortium, MPC. To repeat, it is MPEI -- not MPC -- that is a party to the
Contract. Nowhere in that Contract is there any mention of a consortium or joint venture, of
members thereof, much less of joint and several liability. Supposedly executed sometime in
May 2003,[43] the Contract bears a notarization date of June 30, 2003, and contains the
signature of Willy U. Yu signing as president of MPEI (not for and on behalf of MPC), along with
that of the Comelec chair. It provides in Section 3.2 that MPEI (not MPC) is to supply the
Equipment and perform the Services under the Contract, in accordance with the appendices
thereof; nothing whatsoever is said about any consortium or joint venture or partnership.
 Second, the portions of Section 1.4 of the Contract reproduced above do not have the
effect of curing (much less preventing) deficiencies in the bilateral agreements entered into by
MPEI with the other members of the consortium, with respect to their joint and several
liabilities. The term Contract Documents, as used in the quoted passages of Section 1.4, has a
well-defined meaning and actually refers only to the following documents:
The Contract itself along with its appendices
The Request for Proposal (also known as Terms of Reference) issued by the
Comelec, including the Tender Inquiries and Bid Bulletins
The Tender Proposal submitted by MPEI
In other words, the term Contract Documents cannot be understood as referring to or
including the MOAs and the Teaming Agreements entered into by MPEI with SK C&C, WeSolv,
Election.com and ePLDT. This much is very clear and admits of no debate. The attempt to use
the provisions of Section 1.4 to shore up the MOAs and the Teaming Agreements is simply
unwarranted.
Third and last, we fail to see how respondents can arrive at the conclusion that, from the
above-quoted provisions, it can be immediately established that each of the members of MPC
assumes the same joint and several liability as the other members. Earlier, respondents
claimed exactly the opposite -- that the two MOAs (between MPEI and SK C&C, and between
MPEI and WeSolv) had set forth the joint and several undertakings among the parties; whereas
the two Teaming Agreements clarified the parties respective roles with regard to the Project,
with MPEI being the independent contractor and Election.com and ePLDT the subcontractors.
Obviously, given the differences in their relationships, their respective liabilities cannot
be the same. Precisely, the very clear terms and stipulations contained in the MOAs and the
Teaming Agreements -- entered into by MPEI with SK C&C, WeSolv, Election.com and ePLDT -
- negate the idea that these members are on a par with one another and are, as such, assuming
the same joint and several liability.
Moreover, respondents have earlier seized upon the use of the term particular contract
in the Comelecs Request for Proposal (RFP), in order to argue that all the members of the joint
venture did not need to be solidarily liable for the entire project or joint venture. It was
sufficient that the lead company and the member in charge of a particular contract or aspect
of the joint venture would agree to be solidarily liable. The glaring lack of consistency leaves
us at a loss. Are respondents trying to establish the same joint and solidary liability among all
the members or not?
Enforcement of
Liabilities Problematic
Next, it is also maintained that the automation Contract between Comelec and the
MPEI confirms the solidary undertaking of the lead company and the consortium member
concerned for each particular Contract, inasmuch as the position of MPEI and anyone else
performing the services contemplated under the Contract is described therein as that of an
independent contractor.
The Court does not see, however, how this conclusion was arrived at. In the first place,
the contractual provision being relied upon by respondents is Article 14, Independent
Contractors, which states: Nothing contained herein shall be construed as establishing or
creating between the COMELEC and MEGA the relationship of employee and employer or
principal and agent, it being understood that the position of MEGA and of anyone performing
the Services contemplated under this Contract, is that of an independent contractor.
Obviously, the intent behind the provision was simply to avoid the creation of an
employer-employee or a principal-agent relationship and the complications that it would
produce. Hence, the Article states that the role or position of MPEI, or anyone else performing
on its behalf, is that of an independent contractor. It is obvious to the Court that respondents
are stretching matters too far when they claim that, because of this provision, the Contract in
effect confirms the solidary undertaking of the lead company and the consortium member
concerned for the particular phase of the project. This assertion is an absolute non sequitur.
Enforcement of Liabilities
Under the Civil Code Not Possible
In any event, it is claimed that Comelec may still enforce the liability of the consortium
members under the Civil Code provisions on partnership, reasoning that MPEI et
al. represented themselves as partners and members of MPC for purposes of bidding for the
Project. They are, therefore, liable to the Comelec to the extent that the latter relied upon such
representation. Their liability as partners is solidary with respect to everything chargeable to
the partnership under certain conditions.
The Court has two points to make with respect to this argument. First, it must be recalled
that SK C&C, WeSolv, Election.com and ePLDT never represented themselves as partners and
members of MPC, whether for purposes of bidding or for something else. It was
MPEI alone that represented them to be members of a consortium it supposedly
headed. Thus, its acts may not necessarily be held against the other members.
Second, this argument of the OSG in its Memorandum[44] might possibly apply in the
absence of a joint venture agreement or some other writing that discloses the relationship of
the members with one another. But precisely, this case does not deal with a situation in which
there is nothing in writing to serve as reference, leaving Comelec to rely on mere
representations and therefore justifying a falling back on the rules on partnership. For, again,
the terms and stipulations of the MOAs entered into by MPEI with SK C&C and WeSolv, as well
as the Teaming Agreements of MPEI with Election.com and ePLDT (copies of which have been
furnished the Comelec) are very clear with respect to the extent and the limitations of the
firms respective liabilities.
In the case of WeSolv and SK C&C, their MOAs state that their liabilities, while joint and
several with MPEI, are limited only to the particular areas of work wherein their services are
engaged or their products utilized. As for Election.com and ePLDT, their separate Teaming
Agreements specifically ascribe to them the role of subcontractor vis--vis MPEI as contractor
and, based on the terms of their particular agreements, neither Election.com nor ePLDT is, with undertaking that would normally apply to a joint venture or consortium: that it is a commercial
MPEI, jointly and severally liable to Comelec.[45] It follows then that in the instant case, there is enterprise involving a community of interest, a sharing of risks, profits and losses, and so on.
no justification for anyone, much less Comelec, to resort to the rules on partnership and
partners liabilities. Now let us consider the four bilateral Agreements, starting with the Memorandum of
Agreement between MPEI and WeSolv Open Computing, Inc., dated March 5, 2003. The body
of the MOA consists of just seven (7) short paragraphs that would easily fit in one page. It reads
as follows:
Eligibility of a Consortium
Based on the Collective 1. The parties agree to cooperate in successfully implementing the Project in the substance
Qualifications of Its Members and form as may be most beneficial to both parties and other subcontractors involved in the
Project.

Respondents declare that, for purposes of assessing the eligibility of the bidder, the
members of MPC should be evaluated on a collective basis. Therefore, they contend, the 2. Mega Pacific shall be responsible for any contract negotiations and signing with the
failure of MPEI to submit financial statements (on account of its recent incorporation) should COMELEC and, subject to the latters approval, agrees to give WeSolv an opportunity to be
not by itself disqualify MPC, since the other members of the consortium could meet the criteria present at meetings with the COMELEC concerning WeSolvs portion of the Project.
set out in the RFP.
3. WeSolv shall be jointly and severally liable with Mega Pacific only for the particular
Thus, according to respondents, the collective nature of the undertaking of the members products and/or services supplied by the former for the Project.
of MPC, their contribution of assets and sharing of risks, and the community of their interest
in the performance of the Contract lead to these reasonable conclusions: (1) that
4. Each party shall bear its own costs and expenses relative to this agreement unless
their collective qualifications should be the basis for evaluating their eligibility; (2) that the
otherwise agreed upon by the parties.
sheer enormity of the project renders it improbable to expect any single entity to be able to
comply with all the eligibility requirements and undertake the project by itself; and (3) that, as
argued by the OSG, the RFP allows bids from manufacturers, suppliers and/or distributors that 5. The parties undertake to do all acts and such other things incidental to, necessary or
have formed themselves into a joint venture, in recognition of the virtual impossibility of a desirable or the attainment of the objectives and purposes of this Agreement.
single entitys ability to respond to the Invitation to Bid.
6. In the event that the parties fail to agree on the terms and conditions of the supply of the
Additionally, argues the Comelec, the Implementing Rules and Regulations of RA 6957 products and services including but not limited to the scope of the products and services to
(the Build-Operate-Transfer Law) as amended by RA 7718 would be applicable, as proponents be supplied and payment terms, WeSolv shall cease to be bound by its obligations stated in
of BOT projects usually form joint ventures or consortiums. Under the IRR, a joint the aforementioned paragraphs.
venture/consortium proponent shall be evaluated based on the individual or the collective
experience of the member-firms of the joint venture/consortium and of the contractors the
proponent has engaged for the project. 7. Any dispute arising from this Agreement shall be settled amicably by the parties whenever
possible. Should the parties be unable to do so, the parties hereby agree to settle their
Unfortunately, this argument seems to assume that the collective nature of the dispute through arbitration in accordance with the existing laws of the Republic of the
undertaking of the members of MPC, their contribution of assets and sharing of risks, and the Philippines. (Underscoring supplied.)
community of their interest in the performance of the Contract entitle MPC to be treated as a
joint venture or consortium; and to be evaluated accordingly on the basis of the members Even shorter is the Memorandum of Agreement between MPEI and SK C&C Co. Ltd.,
collective qualifications when, in fact, the evidence before the Court suggest otherwise. dated March 9, 2003, the body of which consists of only six (6) paragraphs, which we quote:
This Court in Kilosbayan v. Guingona[46] defined joint venture as an association of
persons or companies jointly undertaking some commercial enterprise; generally, all 1. All parties agree to cooperate in achieving the Consortiums objective of successfully
contribute assets and share risks. It requires a community of interest in the performance of implementing the Project in the substance and form as may be most beneficial to the
the subject matter, a right to direct and govern the policy in connection therewith, and [a] Consortium members and in accordance w/ the demand of the RFP.
duty, which may be altered by agreement to share both in profit and losses.
2. Mega Pacific shall have full powers and authority to represent the Consortium with the
Going back to the instant case, it should be recalled that the automation Contract with
Comelec, and to enter and sign, for and in behalf of its members any and all agreement/s
Comelec was not executed by the consortium MPC -- or by MPEI for and on behalf of MPC --
which maybe required in the implementation of the Project.
but by MPEI, period. The said Contract contains no mention whatsoever of any consortium or
members thereof. This fact alone seems to contradict all the suppositions about a joint
3. Each of the individual members of the Consortium shall be jointly and severally liable with
the Lead Firm for the particular products and/or services supplied by such individual member
for the project, in accordance with their respective undertaking or sphere of responsibility.
4. Each party shall bear its own costs and expenses relative to this agreement unless
otherwise agreed upon by the parties.
5. The parties undertake to do all acts and such other things incidental to, necessary or
desirable for the attainment of the objectives and purposes of this Agreement.
6. Any dispute arising from this Agreement shall be settled amicably by the parties whenever
possible. Should the parties be unable to do so, the parties hereby agree to settle their
dispute through arbitration in accordance with the existing laws of the Republic of the
Philippines. (Underscoring supplied.)
It will be noted that the two Agreements quoted above are very similar in
wording. Neither of them contains any specifics or details as to the exact nature and scope of
the parties respective undertakings, performances and deliverables under the Agreement with
respect to the automation project. Likewise, the two Agreements are quite bereft of pesos-
and-centavos data as to the amount of investments each party contributes, its respective share
in the revenues and/or profit from the Contract with Comelec, and so forth -- all of which are
normal for agreements of this nature. Yet, according to public and private respondents, the
participation of MPEI, WeSolv and SK C&C comprises fully 90 percent of the entire undertaking
with respect to the election automation project, which is worth about P1.3 billion.
As for Election.com and ePLDT, the separate Teaming Agreements they entered into with
MPEI for the remaining 10 percent of the entire project undertaking are ironically much longer
and more detailed than the MOAs discussed earlier. Although specifically ascribing to them the
role of subcontractor vis--vis MPEI as contractor, these Agreements are, however, completely
devoid of any pricing data or payment terms. Even the appended Schedules supposedly
containing prices of goods and services are shorn of any price data. Again, as mentioned
earlier, based on the terms of their particular Agreements, neither Election.com nor ePLDT -
- with MPEI -- is jointly and severally liable to Comelec.
It is difficult to imagine how these bare Agreements -- especially the first two -- could be
implemented in practice; and how a dispute between the parties or a claim by Comelec against
them, for instance, could be resolved without lengthy and debilitating litigations. Absent any
clear-cut statement as to the exact nature and scope of the parties respective undertakings,
commitments, deliverables and covenants, one party or another can easily dodge its obligation
and deny or contest its liability under the Agreement; or claim that it is the other party that
should have delivered but failed to.
Likewise, in the absence of definite indicators as to the amount of investments to be
contributed by each party, disbursements for expenses, the parties respective shares in the
profits and the like, it seems to the Court that this situation could readily give rise to all kinds
of misunderstandings and disagreements over money matters.
Under such a scenario, it will be extremely difficult for Comelec to enforce the supposed
joint and several liabilities of the members of the consortium. The Court is not even mentioning
the possibility of a situation arising from a failure of WeSolv and MPEI to agree on the scope,
the terms and the conditions for the supply of the products and services under the
Agreement. In that situation, by virtue of paragraph 6 of its MOA, WeSolv would perforce
cease to be bound by its obligations -- including its joint and solidary liability with MPEI under
the MOA -- and could forthwith disengage from the project. Effectively, WeSolv could at any
time unilaterally exit from its MOA with MPEI by simply failing to agree. Where would that
outcome leave MPEI and Comelec?
To the Court, this strange and beguiling arrangement of MPEI with the other companies
does not qualify them to be treated as a consortium or joint venture, at least of the type that
government agencies like the Comelec should be dealing with. With more reason is it unable
to agree to the proposal to evaluate the members of MPC on a collective basis.
In any event, the MPC members claim to be a joint venture/consortium; and respondents
have consistently been arguing that the IRR for RA 6957, as amended, should be applied to the
instant case in order to allow a collective evaluation of consortium members. Surprisingly,
considering these facts, respondents have not deemed it necessary for MPC members to
comply with Section 5.4 (a) (iii) of the IRR for RA 6957 as amended.
According to the aforementioned provision, if the project proponent is a joint venture or
consortium, the members or participants thereof are required to submit a sworn statement
that, if awarded the contract, they shall bind themselves to be jointly, severally and solidarily
liable for the project proponents obligations thereunder.This provision was supposed to mirror
Section 5 of RA 6957, as amended, which states: In all cases, a consortium that participates in
a bid must present proof that the members of the consortium have bound themselves jointly
and severally to assume responsibility for any project. The withdrawal of any member of the
consortium prior to the implementation of the project could be a ground for the cancellation of
the contract.
The Court has certainly not seen any joint and several undertaking by the MPC members
that even approximates the tenor of that which is described above. We fail to see why
respondents should invoke the IRR if it is for their benefit, but refuse to comply with it
otherwise.
B.
DOST Technical Tests Flunked by the
Automated Counting Machines
Let us now move to the second subtopic, which deals with the substantive issue: the
ACMs failure to pass the tests of the Department of Science and Technology (DOST).
After respondent consortium and the other bidder, TIM, had submitted their respective
bids on March 10, 2003, the Comelecs BAC -- through its Technical Working Group (TWG) and
the DOST -- evaluated their technical proposals. Requirements that were highly technical in
nature and that required the use of certain equipment in the evaluation process were referred
to the DOST for testing. The Department reported thus:
 TEST RESULTS MATRIX[47]
[Technical Evaluation of Automated Counting Machine]

KEY REQUIREMENTS
MEGA-PACIFIC CONSORTIUM TOTAL INFORMATION MANAGEMENT
[QUESTIONS]
YES NO YES NO
1. Does the machine have an accuracy rating of at
least 99.995 percent

At COLD environmental condition

√ √
At NORMAL environmental conditions

At HARSH environmental conditions

√ √

√ √
2. Accurately records and reports the date and
time of the start and end of counting of ballots √ √
per precinct?
3. Prints election returns without any loss of date
√ √
during generation of such reports?
4. Uninterruptible back-up power system, that
will engage immediately to allow operation of
√ √
at least 10 minutes after outage, power surge
or abnormal electrical occurrences?
√

5. Machine reads two-sided ballots in one pass? √

Note: This particular
requirement needs further
verification
6. Machine can detect previously counted ballots
and prevent previously counted ballots from √ √
being counted more than once?
√

7. Stores results of counted votes by precinct in

√ Note: This particular
external (removable) storage device?
requirement needs further
verification
√

8. Data stored in external media is encrypted? √

Note: This particular
requirement needs further
verification
9. Physical key or similar device allows, limits,
√ √
or restricts operation of the machine?
√

10. CPU speed is at least 400mHz? √

Note: This particular
requirement needs further
verification
11. Port to allow use of dot-matrix printers? √ √
12. Generates printouts of the election returns in a
format specified by the COMELEC?

Generates printouts

√ √
In format specified by COMELEC

√ √

13. Prints election returns without any loss of data

√ √
during generation of such report?
14. Generates an audit trail of the counting machine,
both hard copy and soft copy?

Hard copy

√ √

Soft copy

Note: This particular

requirement needs further
verification

√
15. Does the City/Municipal Canvassing System
consolidate results from all precincts within it
using the encrypted soft copy of the data √
Note: This particular
generated by the counting machine and stored
requirement needs further
on the removable data storage device?
verification
16. Does the City/Municipal Canvassing System √ √
consolidate results from all precincts within it
using the encrypted soft copy of the data
generated by the counting machine and Note: This particular Note: This particular
transmitted through an electronic transmission requirement needs further requirement needs further
media? verification verification
17. Does the system output a Zero City/Municipal √
Canvass Report, which is printed on election
day prior to the conduct of the actual canvass
√
operation, that shows that all totals for all the Note: This particular
votes for all the candidates and other requirement needs further
information, are indeed zero or null? verification
√
18. Does the system consolidate results from all
precincts in the city/municipality using the
√
data storage device coming from the counting Note: This particular
machine? requirement needs further
verification
 √

19. Is the machine 100% accurate? √

Note: This particular
requirement needs further
verification
√
20. Is the Program able to detect previously
downloaded precinct results and prevent these √
Note: This particular
from being inputted again into the System?
requirement needs further
verification
21. The System is able to print the specified reports
and the audit trail without any loss of data
during generation of the above-mentioned
reports?

Prints specified reports

Audit Trail
√

Note: This particular

requirement needs further
verification
√
22. Can the result of the city/municipal
consolidation be stored in a data storage √ Note: This particular
device?
requirement needs further
verification
√ √
23. Does the system consolidate results from all
precincts in the provincial/district/ national
using the data storage device from different Note: This particular
levels of consolidation? requirement needs further
verification
24. Is the system 100% accurate? √

Note: This particular

requirement needs further
verification

√
25. Is the Program able to detect previously
downloaded precinct results and prevent these
Note: This particular
from being inputted again into the System?
requirement needs further
verification
26. The System is able to print the specified reports
and the audit trail without any loss of data
during generation of the abovementioned
reports?

Prints specified reports

Audit Trail

√ √

Note: This particular

requirement needs further
verification

√
27. Can the results of the provincial/district/national
consolidation be stored in a data storage √ Note: This particular
device?
requirement needs further
verification
 According to respondents, it was only after the TWG and the DOST had conducted their
separate tests and submitted their respective reports that the BAC, on the basis of these
reports formulated its comments/recommendations on the bids of the consortium and TIM.
The BAC, in its Report dated April 21, 2003, recommended that the Phase II project
involving the acquisition of automated counting machines be awarded to MPEI.It said:
After incisive analysis of the technical reports of the DOST and the Technical Working Group
for Phase II Automated Counting Machine, the BAC considers adaptability to advances in
modern technology to ensure an effective and efficient method, as well as the security and
integrity of the system.
The results of the evaluation conducted by the TWG and that of the DOST (14 April 2003
report), would show the apparent advantage of Mega-Pacific over the other competitor, TIM.
The BAC further noted that both Mega-Pacific and TIM obtained some failed marks in the
technical evaluation. In general, the failed marks of Total Information Management as
enumerated above affect the counting machine itself which are material in nature,
constituting non-compliance to the RFP. On the other hand, the failed marks of Mega-Pacific
are mere formalities on certain documentary requirements which the BAC may waive as
clearly indicated in the Invitation to Bid.
In the DOST test, TIM obtained 12 failed marks and mostly attributed to the counting
machine itself as stated earlier. These are requirements of the RFP and therefore the BAC
cannot disregard the same.
Mega-Pacific failed in 8 items however these are mostly on the software which can be
corrected by reprogramming the software and therefore can be readily corrected.
The BAC verbally inquired from DOST on the status of the retest of the counting machines of
the TIM and was informed that the report will be forthcoming after the holy week. The BAC
was informed that the retest is on a different parameters theyre being two different
machines being tested. One purposely to test if previously read ballots will be read again and
the other for the other features such as two sided ballots.
The said machine and the software therefore may not be considered the same machine and
program as submitted in the Technical proposal and therefore may be considered an
enhancement of the original proposal.
Advance information relayed to the BAC as of 1:40 PM of 15 April 2003 by Executive Director
Ronaldo T. Viloria of DOST is that the result of the test in the two counting machines of TIM
contains substantial errors that may lead to the failure of these machines based on the
specific items of the RFP that DOST has to certify.
OPENING OF FINANCIAL BIDS
The BAC on 15 April 2003, after notifying the concerned bidders opened the financial bids in
their presence and the results were as follows:
Mega-Pacific:
Option 1 Outright purchase: Bid Price of Php1,248,949,088.00
Option 2 Lease option:
70% Down payment of cost of hardware or Php642,755,757.07
Remainder payable over 50 months or a total of Php642,755,757.07
Discount rate of 15% p.a. or 1.2532% per month.
Total Number of Automated Counting Machine 1,769 ACMs (Nationwide)
TIM:
Total Bid Price Php1,297,860,560.00
Total Number of Automated Counting Machine 2,272 ACMs (Mindanao and NCR
only)
Premises considered, it appears that the bid of Mega Pacific is the lowest calculated
responsive bid, and therefore, the Bids and Awards Committee (BAC) recommends that the
Phase II project re Automated Counting Machine be awarded to Mega Pacific eSolutions,
Inc.[48]
The BAC, however, also stated on page 4 of its Report: Based on the 14 April 2003 report
(Table 6) of the DOST, it appears that both Mega-Pacific and TIM (Total Information
Management Corporation) failed to meet some of the requirements. Below is a comparative
presentation of the requirements wherein Mega-Pacific or TIM or both of them failed: x x
x. What followed was a list of key requirements, referring to technical requirements, and an
indication of which of the two bidders had failed to meet them.
Failure to Meet the
Required Accuracy Rating
The first of the key requirements was that the counting machines were to have
an accuracy rating of at least 99.9995 percent. The BAC Report indicates that both Mega
Pacific and TIM failed to meet this standard.
The key requirement of accuracy rating happens to be part and parcel of the Comelecs
Request for Proposal (RFP). The RFP, on page 26, even states that the ballot counting machines
and ballot counting software must have an accuracy rating of 99.9995% (not merely
99.995%) or better as certified by a reliable independent testing agency.
 When questioned on this matter during the Oral Argument, Commissioner Borra tried to
wash his hands by claiming that the required accuracy rating of 99.9995 percent had been set
by a private sector group in tandem with Comelec. He added that the Commission had merely
adopted the accuracy rating as part of the groups recommended bid requirements, which it
had not bothered to amend even after being advised by DOST that such standard was
unachievable. This excuse, however, does not in any way lessen Comelecs responsibility to
adhere to its own published bidding rules, as well as to see to it that the consortium indeed
meets the accuracy standard. Whichever accuracy rating is the right standard -- whether
99.995 or 99.9995 percent -- the fact remains that the machines of the so-called consortium
failed to even reach the lesser of the two. On this basis alone, it ought to have been disqualified
and its bid rejected outright.
At this point, the Court stresses that the essence of public bidding is violated by the
practice of requiring very high standards or unrealistic specifications that cannot be met -- like
the 99.9995 percent accuracy rating in this case -- only to water them down after the bid has
been award. Such scheme, which discourages the entry of prospective bona fide bidders, is in
fact a sure indication of fraud in the bidding, designed to eliminate fair competition. Certainly,
if no bidder meets the mandatory requirements, standards or specifications, then no award
should be made and a failed bidding declared.
Failure of Software to Detect
Previously Downloaded Data
Furthermore, on page 6 of the BAC Report, it appears that the consortium as well as TIM
failed to meet another key requirement -- for the counting machines software program to
be able to detect previously downloaded precinct results and to prevent these from being
entered again into the counting machine. This same deficiency on the part of both bidders
reappears on page 7 of the BAC Report, as a result of the recurrence of their failure to meet
the said key requirement.
That the ability to detect previously downloaded data at different canvassing or
consolidation levels is deemed of utmost importance can be seen from the fact that it is
repeated three times in the RFP. On page 30 thereof, we find the requirement that
the city/municipal canvassing system software must be able to detect previously downloaded
precinct results and prevent these from being inputted again into the system. Again, on page
32 of the RFP, we read that the provincial/district canvassing system software must be able to
detect previously downloaded city/municipal results and prevent these from being inputted
again into the system. And once more, on page 35 of the RFP, we find the requirement that
the national canvassing system software must be able to detect previously downloaded
provincial/district results and prevent these from being inputted again into the system.
Once again, though, Comelec chose to ignore this crucial deficiency, which should have
been a cause for the gravest concern. Come May 2004, unscrupulous persons may take
advantage of and exploit such deficiency by repeatedly downloading and feeding into the
computers results favorable to a particular candidate or candidates. We are thus confronted
with the grim prospect of election fraud on a massive scale by means of just a few key
strokes. The marvels and woes of the electronic age!
Inability to Print
the Audit Trail
But that grim prospect is not all. The BAC Report, on pages 6 and 7, indicate that the
ACMs of both bidders were unable to print the audit trail without any loss of data. In the case
of MPC, the audit trail system was not yet incorporated into its ACMs.
This particular deficiency is significant, not only to this bidding but to the cause of free
and credible elections. The purpose of requiring audit trails is to enable Comelec to trace and
verify the identities of the ACM operators responsible for data entry and downloading, as well
as the times when the various data were downloaded into the canvassing system, in order to
forestall fraud and to identify the perpetrators.
Thus, the RFP on page 27 states that the ballot counting machines and ballot counting
software must print an audit trail of all machine operations for documentation and verification
purposes. Furthermore, the audit trail must be stored on the internal storage device and be
available on demand for future printing and verifying. On pages 30-31, the RFP also requires
that the city/municipal canvassing system software be able to print an audit trail of the
canvassing operations, including therein such data as the date and time the canvassing
program was started, the log-in of the authorized users (the identity of the machine operators),
the date and time the canvass data were downloaded into the canvassing system, and so on
and so forth. On page 33 of the RFP, we find the same audit trail requirement with respect to
the provincial/district canvassing system software; and again on pages 35-36 thereof, the
same audit trail requirement with respect to the national canvassing system software.
That this requirement for printing audit trails is not to be lightly brushed aside by the
BAC or Comelec itself as a mere formality or technicality can be readily gleaned from the
provisions of Section 7 of RA 8436, which authorizes the Commission to use an automated
system for elections.
The said provision which respondents have quoted several times, provides that ACMs
are to possess certain features divided into two classes: those that the statute itself
considers mandatory and other features or capabilities that the law deems optional. Among
those considered mandatory are provisions for audit trails!Section 7 reads as follows: The
System shall contain the following features: (a) use of appropriate ballots; (b) stand-alone
machine which can count votes and an automated system which can consolidate the results
immediately; (c) with provisions for audit trails; (d) minimum human intervention; and (e)
adequate safeguard/security measures. (Italics and emphases supplied.)
In brief, respondents cannot deny that the provision requiring audit trails is indeed
mandatory, considering the wording of Section 7 of RA 8436. Neither can Respondent Comelec
deny that it has relied on the BAC Report, which indicates that the machines or the software
was deficient in that respect. And yet, the Commission simply disregarded this shortcoming
and awarded the Contract to private respondent, thereby violating the very law it was
supposed to implement.
C.
Inadequacy of Post Facto
 Remedial Measures
Respondents argue that the deficiencies relating to the detection of previously
downloaded data, as well as provisions for audit trails, are mere shortcomings or minor
deficiencies in software or programming, which can be rectified. Perhaps Comelec simply
relied upon the BAC Report, which states on page 8 thereof that Mega Pacific failed in 8
items[;] however these are mostly on the software which can be corrected by re-programming
x x x and therefore can be readily corrected.
The undersigned ponentes questions, some of which were addressed to Commissioner
Borra during the Oral Argument, remain unanswered to this day. First of all, who made the
determination that the eight fail marks of Mega Pacific were on account of the software -- was
it DOST or TWG? How can we be sure these failures were not the results of machine
defects? How was it determined that the software could actually be re-programmed and
thereby rectified? D i d a q ua li fi e d te c hn ic a l e xp er t r ea d a n d a n al yz e t h e s our ce
c ode [ 4 9 ] for the programs and conclude that these could be saved and remedied? (Such
determination cannot be done by any other means save by the examination and analysis of
the source code.)
Who was this qualified technical expert? When did he carry out the study? Did he
prepare a written report on his findings? Or did the Comelec just make a wild guess? It does
not follow that all defects in software programs can be rectified, and the programs saved. In
the information technology sector, it is common knowledge that there are many badly written
programs, with significant programming errors written into them; hence it does not make
economic sense to try to correct the programs; instead, programmers simply abandon them
and just start from scratch. Theres no telling if any of these programs is unrectifiable, unless a
qualified programmer reads the source code.
And if indeed a qualified expert reviewed the source code, did he also determine how
much work would be needed to rectify the programs? And how much time and money would
be spent for that effort? Who would carry out the work? After the rectification process, who
would ascertain and how would it be ascertained that the programs have indeed been properly
rectified, and that they would work properly thereafter? And of course, the most important
question to ask: could the rectification be done in time for the elections in 2004?
Clearly, none of the respondents bothered to think the matter through. Comelec simply
took the word of the BAC as gospel truth, without even bothering to inquire from DOST
whether it was true that the deficiencies noted could possibly be remedied by re-programming
the software. Apparently, Comelec did not care about the software, but focused only on
purchasing the machines.
What really adds to the Courts dismay is the admission made by Commissioner Borra
during the Oral Argument that the software currently being used by Comelec was merely the
demo version, inasmuch as the final version that would actually be used in the elections was
still being developed and had not yet been finalized.
It is not clear when the final version of the software would be ready for testing and
deployment. It seems to the Court that Comelec is just keeping its fingers crossed and hoping
the final product would work. Is there a Plan B in case it does not? Who knows? But all these
software programs are part and parcel of the bidding and the Contract awarded to the
Consortium. Why is it that the machines are already being brought in and paid for, when there
is as yet no way of knowing if the final version of the software would be able to run them
properly, as well as canvass and consolidate the results in the manner required?
The counting machines, as well as the canvassing system, will never work
properly without the correct software programs. There is an old adage that is still valid to this
day: Garbage in, garbage out. No matter how powerful, advanced and sophisticated the
computers and the servers are, if the software being utilized is defective or has been
compromised, the results will be no better than garbage. And to think that what is at stake
here is the 2004 national elections -- the very basis of our democratic life.
Correction of Defects?
To their Memorandum, public respondents proudly appended 19 Certifications issued
by DOST declaring that some 285 counting machines had been tested and had passed the
acceptance testing conducted by the Department on October 8-18, 2003. Among those tested
were some machines that had failed previous tests, but had undergone adjustments and thus
passed re-testing.
Unfortunately, the Certifications from DOST fail to divulge in what manner and by what
standards or criteria the condition, performance and/or readiness of the machines were re-
evaluated and re-appraised and thereafter given the passing mark. Apart from that fact, the
remedial efforts of respondents were, not surprisingly, apparently focused again on the
machines -- the hardware. Nothing was said or done about the software -- the deficiencies as
to detection and prevention of downloading and entering previously downloaded data, as well
as the capability to print an audit trail. No matter how many times the machines were tested
and re-tested, if nothing was done about the programming defects and deficiencies, the same
danger of massive electoral fraud remains. As anyone who has a modicum of knowledge of
computers would say, Thats elementary!
And only last December 5, 2003, an Inq7.net news report quoted the Comelec chair as
saying that the new automated poll system would be used nationwide in May 2004, even as
the software for the system remained unfinished. It also reported that a certain Titus Manuel
of the Philippine Computer Society, which was helping Comelec test the hardware and
software, said that the software for the counting still had to be submitted on December 15,
while the software for the canvassing was due in early January.
Even as Comelec continues making payments for the ACMs, we keep asking ourselves:
who is going to ensure that the software would be tested and would work properly?
At any rate, the re-testing of the machines and/or the 100 percent testing of all machines
(testing of every single unit) would not serve to eradicate the grave abuse of discretion already
committed by Comelec when it awarded the Contract on April 15, 2003, despite the obvious
and admitted flaws in the bidding process, the failure of the winning bidder to qualify, and the
inability of the ACMs and the intended software to meet the bid requirements and rules.
Comelecs Latest
Assurances Are
Unpersuasive
Even the latest pleadings filed by Comelec do not serve to allay our apprehensions. They
merely affirm and compound the serious violations of law and gravely abusive acts it has
committed. Let us examine them.
The Resolution issued by this Court on December 9, 2003 required respondents to inform
it as to the number of ACMs delivered and paid for, as well as the total payment made to date
for the purchase thereof. They were likewise instructed to submit a certification from the DOST
attesting to the number of ACMs tested, the number found to be defective; and whether the
reprogrammed software has been tested and found to have complied with the requirements
under Republic Act No. 8436.[50]
In its Partial Compliance and Manifestation dated December 29, 2003, Comelec informed
the Court that 1,991 ACMs had already been delivered to the Commission as of that date. It
further certified that it had already paid the supplier the sum of P849,167,697.41, which
corresponded to 1,973 ACM units that had passed the acceptance testing procedures
conducted by the MIRDC-DOST[51] and which had therefore been accepted by the poll body.
In the same submission, for the very first time, Comelec also disclosed to the Court the
following:
The Automated Counting and Canvassing Project involves not only the manufacturing of the
ACM hardware but also the development of three (3) types of software, which are intended
for use in the following:
1. Evaluation of Technical Bids
2. Testing and Acceptance Procedures
3. Election Day Use.
Purchase of the First Type of
Software Without Evaluation
In other words, the first type of software was to be developed solely for the purpose of
enabling the evaluation of the bidders technical bid. Comelec explained thus: In addition to the
presentation of the ACM hardware, the bidders were required to develop a base software
program that will enable the ACM to function properly. Since the software program utilized
during the evaluation of bids is not the actual software program to be employed on election
day, there being two (2) other types of software program that will still have to be developed
and thoroughly tested prior to actual election day use, defects in the base software that can be
readily corrected by reprogramming are considered minor in nature, and may therefore be
waived.
In short, Comelec claims that it evaluated the bids and made the decision to award the
Contract to the winning bidder partly on the basis of the operation of the ACMs running a base
software. That software was therefore nothing but a sample or demo software, which would
not be the actual one that would be used on election day. Keeping in mind that the Contract
involves the acquisition of not just the ACMs or the hardware, but also the software that would
run them, it is now even clearer that the Contract was awarded without Comelec having seen,
much less evaluated, the final product -- the software that would finally be utilized come
election day.(Not even the near-final product, for that matter).
What then was the point of conducting the bidding, when the software that was the
subject of the Contract was still to be created and could conceivably undergo innumerable
changes before being considered as being in final form? And that is not all!
No Explanation for Lapses
in the Second Type of Software
The second phase, allegedly involving the second type of software, is simply
denominated Testing and Acceptance Procedures. As best as we can construe, Comelec is
claiming that this second type of software is also to be developed and delivered by the supplier
in connection with the testing and acceptance phase of the acquisition process. The previous
pleadings, though -- including the DOST reports submitted to this Court -- have not heretofore
mentioned any statement, allegation or representation to the effect that a particular set of
software was to be developed and/or delivered by the supplier in connection with the testing
and acceptance of delivered ACMs.
What the records do show is that the imported ACMs were subjected to the testing and
acceptance process conducted by the DOST. Since the initial batch delivered included a high
percentage of machines that had failed the tests, Comelec asked the DOST to conduct a 100
percent testing; that is, to test every single one of the ACMs delivered. Among the machines
tested on October 8 to 18, 2003, were some units that had failed previous tests but had
subsequently been re-tested and had passed. To repeat, however, until now, there has never
been any mention of a second set or type of software pertaining to the testing and acceptance
process.
In any event, apart from making that misplaced and uncorroborated claim, Comelec in
the same submission also professes (in response to the concerns expressed by this Court)
that the reprogrammed software has been tested and found to have complied with the
requirements of RA 8436. It reasoned thus: Since the software program is an inherent element
in the automated counting system, the certification issued by the MIRDC-DOST that one
thousand nine hundred seventy-three (1,973) units passed the acceptance test procedures is an
official recognition by the MIRDC-DOST that the software component of the automated election
system, which has been reprogrammed to comply with the provisions of Republic Act No. 8436
as prescribed in the Ad Hoc Technical Evaluation Committees ACM Testing and Acceptance
Manual, has passed the MIRDC-DOST tests.
 The facts do not support this sweeping statement of Comelec. A scrutiny of the MIRDC- How Comelec came to believe that such reprogramming had been undertaken is
DOST letter dated December 15, 2003,[52] which it relied upon, does not justify its grand unclear. In any event, the Commission is not forthright and candid with the factual details. If
conclusion. For claritys sake, we quote in full the letter-certification, as follows: reprogramming has been done, who performed it and when? What exactly did the process
involve? How can we be assured that it was properly performed?Since the facts attendant to
15 December 2003 the alleged reprogramming are still shrouded in mystery, the Court cannot give any weight to
HON. RESURRECCION Z. BORRA Comelecs bare allegations.
Commissioner-in-Charge The fact that a total of 1,973 of the machines has ultimately passed the MIRDC-DOST
Phase II, Modernization Project tests does not by itself serve as an endorsement of the soundness of the software program,
Commission on Elections much less as a proof that it has been reprogrammed. In the first place, nothing on record shows
Intramuros, Manila that the tests and re-tests conducted on the machines were intended to address the serious
deficiencies noted earlier. As a matter of fact, the MIRDC-DOST letter does not even indicate
Attention: Atty. Jose M. Tolentino, Jr. what kinds of tests or re-tests were conducted, their exact nature and scope, and the specific
Project Director objectives thereof.[53] The absence of relevant supporting documents, combined with the utter
vagueness of the letter, certainly fails to inspire belief or to justify the expansive confidence
Dear Commissioner Borra: displayed by Comelec. In any event, it goes without saying that remedial measures such as the
alleged reprogramming cannot in any way mitigate the grave abuse of discretion already
committed as early as April 15, 2003.
We are pleased to submit 11 DOST Test Certifications representing 11 lots and covering 158
units of automated counting machines (ACMs) that we have tested from 02-12 December
2003.
Rationale of Public Bidding Negated
To date, we have tested all the 1,991 units of ACMs, broken down as follow: (sic) by the Third Type of Software

1st batch - 30 units 4th batch - 438 units

2nd batch - 288 units 5th batch - 438 units
3rd batch - 414 units 6th batch - 383 units
It should be noted that a total of 18 units have failed the test. Out of these 18 units, only one
(1) unit has failed the retest.
Thank you and we hope you will find everything in order.
Very truly yours,
ROLANDO T. VILORIA, CESO III
Executive Director cum
Chairman, DOST-Technical Evaluation Committee
Even a cursory glance at the foregoing letter shows that it is completely bereft of
anything that would remotely support Comelecs contention that the software component of
the automated election system x x x has been reprogrammed to comply with RA 8436, and has
passed the MIRDC-DOST tests. There is no mention at all of any software reprogramming. If
the MIRDC-DOST had indeed undertaken the supposed reprogramming and the process turned
out to be successful, that agency would have proudly trumpeted its singular achievement.
Respondent Comelec tries to assuage this Courts anxiety in these words: The
reprogrammed software that has already passed the requirements of Republic Act No. 8436
during the MIRDC-DOST testing and acceptance procedures will require further customization
since the following additional elements, among other things, will have to be considered before
the final software can be used on election day: 1. Final Certified List of Candidates x x x 2.
Project of Precincts x x x 3. Official Ballot Design and Security Features x x x 4. Encryption,
digital certificates and digital signatures x x x. The certified list of candidates for national
elective positions will be finalized on or before 23 January 2004 while the final list of projects
of precincts will be prepared also on the same date. Once all the above elements are
incorporated in the software program, the Test Certification Group created by the Ad Hoc
Technical Evaluation Committee will conduct meticulous testing of the final software before
the same can be used on election day. In addition to the testing to be conducted by said Test
Certification Group, the Comelec will conduct mock elections in selected areas nationwide not
only for purposes of public information but also to further test the final election day
program. Public respondent Comelec, therefore, requests that it be given up to 16 February
2004 to comply with this requirement.
The foregoing passage shows the imprudent approach adopted by Comelec in the
bidding and acquisition process. The Commission says that before the software can be utilized
on election day, it will require customization through addition of data -- like the list of
candidates, project of precincts, and so on. And inasmuch as such data will become available
only in January 2004 anyway, there is therefore no perceived need on Comelecs part to rush
the supplier into producing the final (or near-final) version of the software before that time. In
any case, Comelec argues that the software needed for the electoral exercise can be
continuously developed, tested, adjusted and perfected, practically all the way up to election
day, at the same time that the Commission is undertaking all the other distinct and diverse
activities pertinent to the elections.
Given such a frame of mind, it is no wonder that Comelec paid little attention to the
counting and canvassing software during the entire bidding process, which took place in
February-March 2003. Granted that the software was defective, could not detect and prevent
the re-use of previously downloaded data or produce the audit trail -- aside from its other
shortcomings -- nevertheless, all those deficiencies could still be corrected down the road. At
any rate, the software used for bidding purposes would not be the same one that will be used
on election day, so why pay any attention to its defects? Or to the Comelecs own bidding rules
for that matter?
Clearly, such jumbled ratiocinations completely negate the rationale underlying the
bidding process mandated by law.
At the very outset, the Court has explained that Comelec flagrantly violated the public
policy on public biddings (1) by allowing MPC/MPEI to participate in the bidding even though
it was not qualified to do so; and (2) by eventually awarding the Contract to MPC/MPEI. Now,
with the latest explanation given by Comelec, it is clear that the Commission further
desecrated the law on public bidding by permitting the winning bidder to change and alter the
subject of the Contract (the software), in effect allowing a substantive amendment without
public bidding.
This stance is contrary to settled jurisprudence requiring the strict application of
pertinent rules, regulations and guidelines for public bidding for the purpose of placing each
bidder, actual or potential, on the same footing. The essence of public bidding is, after all, an
opportunity for fair competition, and a fair basis for the precise comparison of bids. In common
parlance, public bidding aims to level the playing field. That means each bidder must bid under
the same conditions; and be subject to the same guidelines, requirements and limitations, so
that the best offer or lowest bid may be determined, all other things being equal.
Thus, it is contrary to the very concept of public bidding to permit a variance between
the conditions under which bids are invited and those under which proposals are submitted
and approved; or, as in this case, the conditions under which the bid is won and those under
which the awarded Contract will be complied with. The substantive amendment of the
contract bidded out, without any public bidding -- after the bidding process had been
concluded -- is violative of the public policy on public biddings, as well as the spirit and intent
of RA 8436. The whole point in going through the public bidding exercise was completely
lost. The very rationale of public bidding was totally subverted by the Commission.
From another perspective, the Comelec approach also fails to make sense. Granted that,
before election day, the software would still have to be customized to each precinct,
municipality, city, district, and so on, there still was nothing at all to prevent Comelec from
requiring prospective suppliers/bidders to produce, at the very start of the bidding process, the
next-to-final versions of the software (the best software the suppliers had) -- pre-tested and
ready to be customized to the final list of candidates and project of precincts, among others,
and ready to be deployed thereafter. The satisfaction of such requirement would probably
have provided far better bases for evaluation and selection, as between suppliers, than the so-
called demo software.
Respondents contend that the bidding suppliers counting machines were previously
used in at least one political exercise with no less than 20 million voters. If so, it stands to
reason that the software used in that past electoral exercise would probably still be available
and, in all likelihood, could have been adopted for use in this instance. Paying for machines
and software of that category (already tried and proven in actual elections and ready to be
adopted for use) would definitely make more sense than paying the same hundreds of millions
of pesos for demo software and empty promises of usable programs in the future.
But there is still another gut-level reason why the approach taken by Comelec is
reprehensible. It rides on the perilous assumption that nothing would go wrong; and that,
come election day, the Commission and the supplier would have developed, adjusted and re-
programmed the software to the point where the automated system could function as
envisioned. But what if such optimistic projection does not materialize? What if, despite all
their herculean efforts, the software now being hurriedly developed and tested for the
automated system performs dismally and inaccurately or, worse, is hacked and/or
manipulated?[54] What then will we do with all the machines and defective software already
paid for in the amount of P849 million of our tax money? Even more important, what will
happen to our country in case of failure of the automation?
The Court cannot grant the plea of Comelec that it be given until February 16, 2004 to
be able to submit a certification relative to the additional elements of the software that will be
customized, because for us to do so would unnecessarily delay the resolution of this case and
would just give the poll body an unwarranted excuse to postpone the 2004 elections. On the
other hand, because such certification will not cure the gravely abusive actions complained of
by petitioners, it will be utterly useless.
Is this Court being overly pessimistic and perhaps even engaging in
speculation? Hardly. Rather, the Court holds that Comelec should not have gambled on the
unrealistic optimism that the suppliers software development efforts would turn out well. The
Commission should have adopted a much more prudent and judicious approach to ensure the
delivery of tried and tested software, and readied alternative courses of action in case of
failure. Considering that the nations future is at stake here, it should have done no less.
Epilogue
Once again, the Court finds itself at the crossroads of our nations history. At stake in this
controversy is not just the business of a computer supplier, or a questionable proclamation by
Comelec of one or more public officials. Neither is it about whether this country should switch
from the manual to the automated system of counting and canvassing votes. At its core is the
ability and capacity of the Commission on Elections to perform properly, legally and prudently
its legal mandate to implement the transition from manual to automated elections.
Unfortunately, Comelec has failed to measure up to this historic task. As stated at the
start of this Decision, Comelec has not merely gravely abused its discretion in awarding the
Contract for the automation of the counting and canvassing of the ballots. It has also put at
grave risk the holding of credible and peaceful elections by shoddily accepting electronic
hardware and software that admittedly failed to pass legally mandated technical
requirements. Inadequate as they are, the remedies it proffers post facto do not cure the grave
abuse of discretion it already committed (1) on April 15, 2003, when it illegally made the award;
and (2) sometime in May 2003 when it executed the Contract for the purchase of defective
machines and non-existent software from a non-eligible bidder.
For these reasons, the Court finds it totally unacceptable and unconscionable to place its
imprimatur on this void and illegal transaction that seriously endangers the breakdown of our
electoral system. For this Court to cop-out and to close its eyes to these illegal transactions,
while convenient, would be to abandon its constitutional duty of safeguarding public interest.
As a necessary consequence of such nullity and illegality, the purchase of the machines
and all appurtenances thereto including the still-to-be-produced (or in Comelecs words, to be
reprogrammed) software, as well as all the payments made therefor, have no basis whatsoever
in law. The public funds expended pursuant to the void Resolution and Contract must
therefore be recovered from the payees and/or from the persons who made possible the illegal
disbursements, without prejudice to possible criminal prosecutions against them.
Furthermore, Comelec and its officials concerned must bear full responsibility for the
failed bidding and award, and held accountable for the electoral mess wrought by their grave
abuse of discretion in the performance of their functions. The State, of course, is not bound by
the mistakes and illegalities of its agents and servants.
True, our country needs to transcend our slow, manual and archaic electoral process. But
before it can do so, it must first have a diligent and competent electoral agency that can
properly and prudently implement a well-conceived automated election system.
At bottom, before the country can hope to have a speedy and fraud-free automated
election, it must first be able to procure the proper computerized hardware and software
legally, based on a transparent and valid system of public bidding. As in any democratic system,
the ultimate goal of automating elections must be achieved by a legal, valid and above-
board process of acquiring the necessary tools and skills therefor. Though the Philippines
needs an automated electoral process, it cannot accept just any system shoved into its bosom
through improper and illegal methods. As the saying goes, the end never justifies the
means. Penumbral contracting will not produce enlightened results.
WHEREFORE, the Petition is GRANTED. The Court hereby
declares NULL and VOID Comelec Resolution No. 6074 awarding the contract for Phase II of
the CAES to Mega Pacific Consortium (MPC). Also declared null and void is the subject Contract
executed between Comelec and Mega Pacific eSolutions (MPEI).[55]Comelec is
further ORDERED to refrain from implementing any other contract or agreement entered into
with regard to this project.
Let a copy of this Decision be furnished the Office of the Ombudsman which shall
determine the criminal liability, if any, of the public officials (and conspiring private individuals,
if any) involved in the subject Resolution and Contract. Let the Office of the Solicitor General
also take measures to protect the government and vindicate public interest from the ill effects
of the illegal disbursements of public funds made by reason of the void Resolution and
Contract.
SO ORDERED.
SEPARATE OPINION
VITUG, J.:
While the Supreme Court exercises original jurisdiction over petitions for certiorari and
prohibition (along with petitions for prohibition, mandamus, quo warranto, habeas corpus and
injunction), that jurisdiction, however, is not exclusive. [1] A direct recourse to the Supreme
Court, for the issuance of these writs, in disregard of the rule on hierarchy, should be
appropriate only when, besides the attendance of clearly exceptional and compelling reasons
clearly set out in the petition,[2] there are no contentious factual assertions of the parties that
need to be threshed out before any objective and definitive conclusion can be reached.
What appears to be a significant issue in the instant petition is the legality of
respondent COMELECs award of the contract relative to the procurement of automated
counting machines to respondent Mega Pacific under alleged questionable circumstances. The
Supreme Court is not a trier of facts; indeed, a review of the evidence is not the proper office
of a petition for certiorari, prohibition or mandamus.[3] These proceedings are availed of only
when there can be no other plain, adequate and speedy remedy in the ordinary course of law.
In certiorari or prohibition, issues affecting the jurisdiction of the tribunal, board and
officers involved may be resolved solely on the basis of undisputed facts.[4]The enormity of the
factual disputes in the instant petition, among which include the eligibility of Mega Pacific to
participate in the bidding process, the veracity and effectivity of the testing, and the technical
evaluation conducted by the Department of Science and Technology (DOST) on the automated
counting machine of the bidders, would essentially require an extensive inquiry into the facts.
An insistence that it be resolved despite unsettled factual points would be inadequate to allow
an intrusion by the Court.[5]
The Supreme Court is not expected, whenever one is simply minded to pass judgment
on an action of a government agency upon which authority, as well as corresponding duty,
devolves. The Court neither controls nor supervises the exercise of authority and the discharge
of function by another government office. If it were otherwise, the act of governance and the
responsibility that thereto attaches are then effectively shifted from where they belong over
to where they should not be. The Court is bound merely to construe and to apply the law,
regardless of its wisdom and salutariness, and to strike it down only when constitutional
proscriptions are disregarded. It is what the fundamental law mandates, and it is what the
Court must do.
The electoral process, it is true, should be of paramount and immediate concern to every
Filipino. It is also probably true that the computerization/automation of our electoral process,
as well as the progress that it brings, is just as important. Nevertheless, it could also be unwise
for the Court, for that sake alone, to precipitately take on the case; after all, we have been
without it for decades. The opinions expressed by my colleagues, collectively and individually,
should indeed give compelling reasons for the Commission on Elections to perhaps take notice
and, on its own, to forthwith reexamine the assailed bidding process.
Accordingly, at this stage, I am constrained to vote against the Courts taking cognizance
of the case.
[G.R. No. 148334. January 21, 2004]
ARTURO M. TOLENTINO and ARTURO C. MOJICA, petitioners, vs. COMMISSION ON
ELECTIONS, SENATOR RALPH G. RECTO and SENATOR GREGORIO B.
HONASAN, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for prohibition to set aside Resolution No. NBC 01-005 dated 5 June
2001 (Resolution No. 01-005) and Resolution No. NBC 01-006 dated 20 July 2001 (Resolution
No. 01-006) of respondent Commission on Elections (COMELEC). Resolution No. 01-005
proclaimed the 13 candidates elected as Senators in the 14 May 2001 elections while
Resolution No. 01-006 declared official and final the ranking of the 13 Senators proclaimed in
Resolution No. 01-005.
The Facts
Shortly after her succession to the Presidency in January 2001, President Gloria
Macapagal-Arroyo nominated then Senator Teofisto T. Guingona, Jr. (Senator Guingona) as
Vice-President. Congress confirmed the nomination of Senator Guingona who took his oath as
Vice-President on 9 February 2001.
Following Senator Guingonas confirmation, the Senate on 8 February 2001 passed
Resolution No. 84 (Resolution No. 84) certifying to the existence of a vacancy in the Senate.
Resolution No. 84 called on COMELEC to fill the vacancy through a special election to be held
simultaneously with the regular elections on 14 May 2001. Twelve Senators, with a 6-year term
each, were due to be elected in that election.[1] Resolution No. 84 further provided that the
Senatorial candidate garnering the 13th highest number of votes shall serve only for the
unexpired term of former Senator Teofisto T. Guingona, Jr., which ends on 30 June 2004. [2]
On 5 June 2001, after COMELEC had canvassed the election results from all the provinces
but one (Lanao del Norte), COMELEC issued Resolution No. 01-005 provisionally proclaiming
13 candidates as the elected Senators. Resolution No. 01-005 also provided that the first
twelve (12) Senators shall serve for a term of six (6) years and the thirteenth (13th) Senator shall
serve the unexpired term of three (3) years of Senator Teofisto T. Guingona, Jr. who was
appointed Vice-President.[3]Respondents Ralph Recto (Recto) and Gregorio Honasan
(Honasan) ranked 12th and 13th, respectively, in Resolution No. 01-005.
On 20 June 2001, petitioners Arturo Tolentino and Arturo Mojica (petitioners), as voters
and taxpayers, filed the instant petition for prohibition, impleading only COMELEC as
respondent. Petitioners sought to enjoin COMELEC from proclaiming with finality the
candidate for Senator receiving the 13th highest number of votes as the winner in the special
election for a single three-year term seat. Accordingly, petitioners prayed for the nullification
of Resolution No. 01-005 in so far as it makes a proclamation to such effect.
Petitioners contend that COMELEC issued Resolution No. 01-005 without jurisdiction
because: (1) it failed to notify the electorate of the position to be filled in the special election
as required under Section 2 of Republic Act No. 6645 (R.A. No. 6645); [4] (2) it failed to require
senatorial candidates to indicate in their certificates of candidacy whether they seek election
under the special or regular elections as allegedly required under Section 73 of Batas Pambansa
Blg. 881;[5] and, consequently, (3) it failed to specify
in the Voters Information Sheet the candidates seeking election under the special or regular
senatorial elections as purportedly required under Section 4, paragraph 4 of Republic Act No.
6646 (R.A. No. 6646).[6] Petitioners add that because of these omissions, COMELEC canvassed
all the votes cast for the senatorial candidates in the 14 May 2001 elections without distinction
such that there were no two separate Senate elections held simultaneously but just a single
election for thirteen seats, irrespective of term.[7]
Stated otherwise, petitioners claim that if held simultaneously, a special and a regular
election must be distinguished in the documentation as well as in the canvassing of their
results. To support their claim, petitioners cite the special elections simultaneously held with
the regular elections of 13 November 1951 and 8 November 1955 to fill the seats vacated by
Senators Fernando Lopez and Carlos P. Garcia, respectively, who became Vice-Presidents
during their tenures in the Senate.[8] Petitioners point out that in those elections, COMELEC
separately canvassed the votes cast for the senatorial candidates running under the regular
elections from the votes cast for the candidates running under the special elections. COMELEC
also separately proclaimed the winners in each of those elections.[9]
Petitioners sought the issuance of a temporary restraining order during the pendency of
their petition.
Without issuing any restraining order, we required COMELEC to Comment on the
petition.
On 20 July 2001, after COMELEC had canvassed the results from all the provinces, it
issued Resolution No. 01-006 declaring official and final the ranking of the 13 Senators
proclaimed in Resolution No. 01-005. The 13 Senators took their oaths of office on 23 July
2001.
In view of the issuance of Resolution No. 01-006, the Court required petitioners to file
an amended petition impleading Recto and Honasan as additional respondents. Petitioners
accordingly filed an amended petition in which they reiterated the contentions raised in their
original petition and, in addition, sought the nullification of Resolution No. 01-006.
In their Comments, COMELEC, Honasan, and Recto all claim that a special election to fill
the seat vacated by Senator Guingona was validly held on 14 May 2001.COMELEC and Honasan
further raise preliminary issues on the mootness of the petition and on petitioners standing to
litigate. Honasan also claims that the petition, which seeks the nullity of his proclamation as
Senator, is actually a quo warranto petition and the Court should dismiss the same for lack of
jurisdiction. For his part, Recto, as the 12th ranking Senator, contends he is not a proper party
to this case because the petition only involves the validity of the proclamation of the 13th placer
in the 14 May 2001 senatorial elections.
 The Issues
The following are the issues presented for resolution:
(1) Procedurally
(a) whether the petition is in fact a petition for quo warranto over which the Senate Electoral
Tribunal is the sole judge;
(b) whether the petition is moot; and
(c) whether petitioners have standing to litigate.
(2) On the merits, whether a special election to fill a vacant three-year term Senate seat
was validly held on 14 May 2001.
The Ruling of the Court
The petition has no merit.
On the Preliminary Matters
The Nature of the Petition and the Courts Jurisdiction
A quo warranto proceeding is, among others, one to determine the right of a public
officer in the exercise of his office and to oust him from its enjoyment if his claim is not well-
founded.[10] Under Section 17, Article VI of the Constitution, the Senate Electoral Tribunal is
the sole judge of all contests relating to the qualifications of the members of the Senate.
A perusal of the allegations contained in the instant petition shows, however, that what
petitioners are questioning is the validity of the special election on 14 May 2001 in which
Honasan was elected. Petitioners various prayers are, namely: (1) a declaration that no special
election was held simultaneously with the general elections on 14 May 2001; (2) to enjoin
COMELEC from declaring anyone as having won in the special election; and (3) to annul
Resolution Nos. 01-005 and 01-006 in so far as these Resolutions proclaim Honasan as the
winner in the special election. Petitioners anchor their prayers on COMELECs alleged failure to
comply with certain requirements pertaining to the conduct of that special election. Clearly
then, the petition does not seek to determine Honasans right in the exercise of his office as
Senator. Petitioners prayer for the annulment of Honasans proclamation and, ultimately,
election is merely incidental to petitioners cause of action. Consequently, the Court can
properly exercise jurisdiction over the instant petition.
On the Mootness of the Petition
COMELEC contends that its proclamation on 5 June 2001 of the 13 Senators and its
subsequent confirmation on 20 July 2001 of the ranking of the 13 Senators render the instant
petition to set aside Resolutions Nos. 01-005 and 01-006 moot and academic.
Admittedly, the office of the writ of prohibition is to command a tribunal or board to
desist from committing an act threatened to be done without jurisdiction or with grave abuse
of discretion amounting to lack or excess of jurisdiction. [11] Consequently, the writ will not lie
to enjoin acts already done.[12] However, as an exception to the rule on mootness, courts will
decide a question otherwise moot if it is capable of repetition yet evading review. [13] Thus,
in Alunan III v. Mirasol,[14] we took cognizance of a petition to set aside an order canceling the
general elections for the Sangguniang Kabataan (SK) on 4 December 1992 despite that at the
time the petition was filed, the SK election had already taken place. We noted in Alunan that
since the question of the validity of the order sought to be annulled is likely to arise in every
SK elections and yet the question may not be decided before the date of such elections, the
mootness of the petition is no bar to its resolution. This observation squarely applies to the
instant case. The question of the validity of a special election to fill a vacancy in the Senate in
relation to COMELECs failure to comply with requirements on the conduct of such special
election is likely to arise in every such election. Such question, however, may not be decided
before the date of the election.
On Petitioners Standing
Honasan questions petitioners standing to bring the instant petition as taxpayers and
voters because petitioners do not claim that COMELEC illegally disbursed public funds. Neither
do petitioners claim that they sustained personal injury because of the issuance of Resolution
Nos. 01-005 and 01-006.
Legal standing or locus standi refers to a personal and substantial interest in a case such
that the party has sustained or will sustain direct injury because of the challenged
governmental act.[15] The requirement of standing, which necessarily sharpens the
presentation of issues,[16] relates to the constitutional mandate that this Court settle only
actual cases or controversies.[17] Thus, generally, a party will be allowed to litigate only when
(1) he can show that he has personally suffered some actual or threatened injury because of
the allegedly illegal conduct of the government; (2) the injury is fairly traceable to the
challenged action; and (3) the injury is likely to be redressed by a favorable action.[18]
Applied strictly, the doctrine of standing to litigate will indeed bar the instant petition.
In questioning, in their capacity as voters, the validity of the special election on 14 May 2001,
petitioners assert a harm classified as a generalized grievance. This generalized grievance is
shared in substantially equal measure by a large class of voters, if not all the voters, who voted
in that election.[19] Neither have petitioners alleged, in their capacity as taxpayers, that the
Court should give due course to the petition because in the special election held on 14 May
2001 tax money [was] x x x extracted and spent in violation of specific constitutional
protections against abuses of legislative power or that there [was] misapplication of such funds
by COMELEC or that public money [was] deflected to any improper purpose.[20]
On the other hand, we have relaxed the requirement on standing and exercised our
discretion to give due course to voters suits involving the right of suffrage.[21]Also, in the recent
case of Integrated Bar of the Philippines v. Zamora,[22] we gave the same liberal treatment to
a petition filed by the Integrated Bar of the Philippines (IBP). The IBP questioned the validity of
a Presidential directive deploying elements of the Philippine National Police and the Philippine
Marines in Metro Manila to conduct patrols even though the IBP presented too general an
interest. We held:
[T]he IBP primarily anchors its standing on its alleged responsibility to uphold the rule of law
and the Constitution. Apart from this declaration, however, the IBP asserts no other basis in
support of its locus standi. The mere invocation by the IBP of its duty to preserve the rule of
law and nothing more, while undoubtedly true, is not sufficient to clothe it with standing in
this case. This is too general an interest which is shared by other groups and the whole
citizenry x x x.
Having stated the foregoing, this Court has the discretion to take cognizance of a suit which
does not satisfy the requirement of legal standing when paramount interest is involved. In
not a few cases, the court has adopted a liberal attitude on the locus standi of a petitioner
where the petitioner is able to craft an issue of transcendental significance to the
people. Thus, when the issues raised are of paramount importance to the public, the Court
may brush aside technicalities of procedure. In this case, a reading of the petition shows that
the IBP has advanced constitutional issues which deserve the attention of this Court in view
of their seriousness, novelty and weight as precedents. Moreover, because peace and order
are under constant threat and lawless violence occurs in increasing tempo, undoubtedly
aggravated by the Mindanao insurgency problem, the legal controversy raised in the petition
almost certainly will not go away. It will stare us in the face again. It, therefore, behooves the
Court to relax the rules on standing and to resolve the issue now, rather than
later.[23] (Emphasis supplied)
We accord the same treatment to petitioners in the instant case in their capacity as
voters since they raise important issues involving their right of suffrage, considering that the
issue raised in this petition is likely to arise again.
Whether a Special Election for a Single, Three-Year Term
Senatorial Seat was Validly Held on 14 May 2001
Under Section 9, Article VI of the Constitution, a special election may be called to fill any
vacancy in the Senate and the House of Representatives in the manner prescribed by law, thus:
In case of vacancy in the Senate or in the House of Representatives, a special election may be
called to fill such vacancy in the manner prescribed by law, but the Senator or Member of the
House of Representatives thus elected shall serve only for the unexpired term. (Emphasis
supplied)
To implement this provision of the Constitution, Congress passed R.A. No. 6645, which
provides in pertinent parts:
SECTION 1. In case a vacancy arises in the Senate at least eighteen (18) months or in the
House of Representatives at least one (1) year before the next regular election for Members
of Congress, the Commission on Elections, upon receipt of a resolution of the Senate or the
House of Representatives, as the case may be, certifying to the existence of such vacancy and
calling for a special election, shall hold a special election to fill such vacancy. If Congress is in
recess, an official communication on the existence of the vacancy and call for a special
election by the President of the Senate or by the Speaker of the House of Representatives, as
the case may be, shall be sufficient for such purpose. The Senator or Member of the House of
Representatives thus elected shall serve only for the unexpired term.
SECTION 2. The Commission on Elections shall fix the date of the special election, which shall
not be earlier than forty-five (45) days nor later than ninety (90) days from the date of such
resolution or communication, stating among other things the office or offices to be voted
for: Provided, however, That if within the said period a general election is scheduled to be
held, the special election shall be held simultaneously with such general election. (Emphasis
supplied)
Section 4 of Republic Act No. 7166 subsequently amended Section 2 of R.A. No. 6645, as
follows:
Postponement, Failure of Election and Special Elections. x x x In case a permanent vacancy
shall occur in the Senate or House of Representatives at least one (1) year before the
expiration of the term, the Commission shall call and hold a special election to fill the vacancy
not earlier than sixty (60) days nor longer than ninety (90) days after the occurrence of the
vacancy. However, in case of such vacancy in the Senate, the special election shall be held
simultaneously with the next succeeding regular election. (Emphasis supplied)
Thus, in case a vacancy arises in Congress at least one year before the expiration of the
term, Section 2 of R.A. No. 6645, as amended, requires COMELEC: (1) to call a special election
by fixing the date of the special election, which shall not be earlier than sixty (60) days nor later
than ninety (90) after the occurrence of the vacancy but in case of a vacancy in the Senate, the
special election shall be held simultaneously with the next succeeding regular election; and (2)
to give notice to the voters of, among other things, the office or offices to be voted for.
Did COMELEC, in conducting the special senatorial election simultaneously with the 14
May 2001 regular elections, comply with the requirements in Section 2 of R.A. No. 6645?
A survey of COMELECs resolutions relating to the conduct of the 14 May 2001 elections
reveals that they contain nothing which would amount to a compliance, either strict or
substantial, with the requirements in Section 2 of R.A. No. 6645, as amended. Thus, nowhere
in its resolutions[24] or even in its press releases[25] did COMELEC state that it would hold a
special election for a single three-year term Senate seat simultaneously with the regular
elections on 14 May 2001. Nor did COMELEC give formal notice that it would proclaim as
winner the senatorial candidate receiving the 13th highest number of votes in the special
election.
The controversy thus turns on whether COMELECs failure, assuming it did fail, to comply
with the requirements in Section 2 of R.A. No. 6645, as amended, invalidated the conduct of
the special senatorial election on 14 May 2001 and accordingly rendered Honasans
proclamation as the winner in that special election void. More precisely, the question is
whether the special election is invalid for lack of a call for such election and for lack of notice
as to the office to be filled and the manner by which the winner in the special election is to be
determined. For reasons stated below, the Court answers in the negative.
COMELECs Failure to Give Notice
of the Time of the Special Election Did Not
Negate the Calling of such Election
The calling of an election, that is, the giving notice of the time and place of its occurrence,
whether made by the legislature directly or by the body with the duty to give such call, is
indispensable to the elections validity.[26] In a general election, where the law fixes the date of
the election, the election is valid without any call by the body charged to administer the
election.[27]
In a special election to fill a vacancy, the rule is that a statute that expressly provides that
an election to fill a vacancy shall be held at the next general elections fixes the date at which
the special election is to be held and operates as the call for that election. Consequently, an
election held at the time thus prescribed is not invalidated by the fact that the body charged
by law with the duty of calling the election failed to do so.[28] This is because the right and duty
to hold the election emanate from the statute and not from any call for the election by some
authority[29] and the law thus charges voters with knowledge of the time and place of the
election.[30]
Conversely, where the law does not fix the time and place for holding a special election
but empowers some authority to fix the time and place after the happening of a condition
precedent, the statutory provision on the giving of notice is considered mandatory, and failure
to do so will render the election a nullity.[31]
In the instant case, Section 2 of R.A. No. 6645 itself provides that in case of vacancy in
the Senate, the special election to fill such vacancy shall be held simultaneously with the next
succeeding regular election. Accordingly, the special election to fill the vacancy in the Senate
arising from Senator Guingonas appointment as Vice-President in February 2001 could not be
held at any other time but must be held simultaneously with the next succeeding regular
elections on 14 May 2001.The law charges the voters with knowledge of this statutory notice
and COMELECs failure to give the additional notice did not negate the calling of such special
election, much less invalidate it.
Our conclusion might be different had the present case involved a special election to fill
a vacancy in the House of Representatives. In such a case, the holding of the special election is
subject to a condition precedent, that is, the vacancy should take place at least one year before
the expiration of the term. The time of the election is left to the discretion of COMELEC subject
only to the limitation that it holds the special election within the range of time provided in
Section 2 of R.A. No. 6645, as amended. This makes mandatory the requirement in Section 2
of R.A. No. 6645, as amended, for COMELEC to call x x x a special election x x x not earlier than
60 days nor longer than 90 days after the occurrence of the vacancy and give notice of the
office to be filled. The COMELECs failure to so call and give notice will nullify any attempt to
hold a special election to fill the vacancy. Indeed, it will be well-nigh impossible for the voters
in the congressional district involved to know the time and place of the special election and
the office to be filled unless the COMELEC so notifies them.
No Proof that COMELECs
Failure to Give Notice of the Office
to be Filled and the Manner of
Determining the Winner in the Special
Election Misled Voters
The test in determining the validity of a special election in relation to the failure to give
notice of the special election is whether the want of notice has resulted in misleading a
sufficient number of voters as would change the result of the special election. If the lack of
official notice misled a substantial number of voters who wrongly believed that there was no
special election to fill a vacancy, a choice by a small percentage of voters would be void.[32]
The required notice to the voters in the 14 May 2001 special senatorial election covers
two matters. First, that COMELEC will hold a special election to fill a vacant single three-year
term Senate seat simultaneously with the regular elections scheduled on the same
date. Second, that COMELEC will proclaim as winner the senatorial candidate receiving the
13th highest number of votes in the special election. Petitioners have neither claimed nor
proved that COMELECs failure to give this required notice misled a sufficient number of voters
as would change the result of the special senatorial election or led them to believe that there
was no such special election.
Instead, what petitioners did is conclude that since COMELEC failed to give such notice,
no special election took place. This bare assertion carries no value.Section 2 of R.A. No. 6645,
as amended, charged those who voted in the elections of 14 May 2001 with the knowledge
that the vacancy in the Senate arising from Senator Guingonas appointment as Vice-President
in February 2001 was to be filled in the next succeeding regular election of 14 May 2001.
Similarly, the absence of formal notice from COMELEC does not preclude the possibility that
the voters had actual notice of the special election, the office to be voted in that election, and
the manner by which COMELEC would determine the winner. Such actual notice could come
from many sources, such as media reports of the enactment of R.A. No. 6645 and election
propaganda during the campaign.[33]
More than 10 million voters cast their votes in favor of Honasan, the party who stands
most prejudiced by the instant petition. We simply cannot disenfranchise those who voted for
Honasan, in the absence of proof that COMELECs omission prejudiced voters in the exercise of
their right of suffrage so as to negate the holding of the special election. Indeed, this Court is
loathe to annul elections and will only do so when it is impossible to distinguish what votes are
lawful and what are unlawful, or to arrive at any certain result whatever, or that the great body
of the voters have been prevented by violence, intimidation, and threats from exercising their
franchise.[34]
Otherwise, the consistent rule has been to respect the electorates will and let the results
of the election stand, despite irregularities that may have attended the conduct of the
elections.[35] This is but to acknowledge the purpose and role of elections in a democratic
society such as ours, which is:
to give the voters a direct participation in the affairs of their government, either in
determining who shall be their public officials or in deciding some question of public interest;
and for that purpose all of the legal voters should be permitted, unhampered and
unmolested, to cast their ballot. When that is done and no frauds have been committed, the
ballots should be counted and the election should not be declared null. Innocent voters should
not be deprived of their participation in the affairs of their government for mere irregularities
on the part of the election officers, for which they are in no way responsible. A different rule
would make the manner and method of performing a public duty of greater importance than
the dutyitself.[36] (Emphasis in the original)
Separate Documentation and Canvassing
not Required under Section 2 of R.A. No. 6645,
Neither is there basis in petitioners claim that the manner by which COMELEC conducted
the special senatorial election on 14 May 2001 is a nullity because COMELEC failed to
document separately the candidates and to canvass separately the votes cast for the special
election. No such requirements exist in our election laws. What is mandatory under Section 2
of R.A. No. 6645 is that COMELEC fix the date of the election, if necessary, and state, among
others, the office or offices to be voted for. Similarly, petitioners reliance on Section 73 of B.P.
Blg. 881 on the filing of certificates of candidacy, and on Section 4(4) of R.A. No. 6646 on the
printing of election returns and tally sheets, to support their claim is misplaced. These
provisions govern elections in general and in no way require separate documentation of
candidates or separate canvass of votes in a jointly held regular and special elections.
Significantly, the method adopted by COMELEC in conducting the special election on 14
May 2001 merely implemented the procedure specified by the Senate in Resolution No.
84. Initially, the original draft of Resolution No. 84 as introduced by Senator Francisco Tatad
(Senator Tatad) made no mention of the manner by which the seat vacated by former Senator
Guingona would be filled. However, upon the suggestion of Senator Raul Roco (Senator Roco),
the Senate agreed to amend Resolution No. 84 by providing, as it now appears, that the
senatorial candidate garnering the thirteenth (13th) highest number of votes shall serve only
for the unexpired term of former Senator Teofisto T. Guingona, Jr. Senator Roco introduced
the amendment to spare COMELEC and the candidates needless expenditures and the voters
further inconvenience, thus:
S[ENATOR] T[ATAD]. Mr. President, I move that we now consider Proposed Senate Resolution
No. 934 [later converted to Resolution No. 84].
T[HE] P[RESIDENT]. Is there any objection? [Silence] There being none, the motion is
approved.
Consideration of Proposed Senate Resolution No. 934 is now in order. With the permission of
the Body, the Secretary will read only the title and text of the resolution.
T[HE] S[ECRETARY]. Proposed Senate Resolution No. 934 entitled
RESOLUTION CERTIFYING TO THE EXISTENCE OF A VACANCY IN THE SENATE AND CALLING
ON THE COMMISSION ON ELECTIONS (COMELEC) TO FILL UP SUCH VACANCY THROUGH
ELECTION TO BE HELD SIMULTANEOUSLY WITH THE REGULAR ELECTION ON MAY 14, 2001
AND THE SENATOR THUS ELECTED TO SERVE ONLY FOR THE UNEXPIRED TERM
WHEREAS, the Honorable Teofisto T. Guingona, Jr. was elected Senator of the Philippines in
1998 for a term which will expire on June 30, 2004;
WHEREAS, on February 6, 2001, Her Excellency President Gloria Macapagal Arroyo
nominated Senator Guingona as Vice-President of the Philippines;
WHEREAS, the nomination of Senator Guingona has been confirmed by a majority vote of all
the members of both House of Congress, voting separately;
WHEREAS, Senator Guingona will take his Oath of Office as Vice-President of
the Philippines on February 9, 2001;
WHEREAS, Republic Act No. 7166 provides that the election for twelve (12) Senators, all
elective Members of the House of Representatives, and all elective provincial city and
municipal officials shall be held on the second Monday and every three years thereafter;
Now, therefore, be it
RESOLVED by the Senate, as it is hereby resolved, to certify, as it hereby certifies, the
existence of a vacancy in the Senate and calling the Commission on Elections (COMELEC) to
fill up such vacancy through election to be held simultaneously with the regular election on
May 14, 2001 and the Senator thus elected to serve only for the unexpired term.
Adopted,
(Sgd.) FRANCISCO S. TATAD
Senator
S[ENATOR] T[ATAD]. Mr. President, I move for the adoption of this resolution.
S[ENATOR] O[SMEA] (J). Mr. President.
T[HE] P[RESIDENT]. Sen. John H. Osmea is recognized.
S[ENATOR] O[SMEA] (J). Thank you, Mr. President. Will the distinguished Majority Leader,
Chairman of the Committee on Rules, author of this resolution, yield for a few questions?
S[ENATOR] T[ATAD]. With trepidation, Mr. President. [Laughter]
S[ENATOR] O[SMEA] (J). What a way of flattery. [Laughter]
Mr. President, I think I recall that sometime in 1951 or 1953, there was a special election for
a vacant seat in the Senate. As a matter of fact, the one who was elected in that special
election was then Congressman, later Senator Feli[s]berto Verano.
In that election, Mr. President, the candidates contested the seat. In other words, the
electorate had to cast a vote for a ninth senator because at that time there were only eight
to elect a member or rather, a candidate to that particular seat.
Then I remember, Mr. President, that when we ran after the EDSA revolution, twice there
were 24 candidates and the first 12 were elected to a six-year term and the next 12 were
elected to a three-year term.
My question therefore is, how is this going to be done in this election? Is the candidate with
the 13th largest number of votes going to be the one to take a three-year term? Or is there
going to be an election for a position of senator for the unexpired term of Sen. Teofisto
Guingona?
S[ENATOR] T[ATAD]. Mr. President, in this resolution, we are leaving the mechanics to the
Commission on Elections. But personally, I would like to suggest that probably, the candidate
obtaining the 13th largest number of votes be declared as elected to fill up the unexpired
term of Senator Guingona.
S[ENATOR] O[SMEA] (J). Is there a law that would allow the Comelec to conduct such an
election? Is it not the case that the vacancy is for a specific office? I am really at a loss. I am
rising here because I think it is something that we should consider. I do not know if we can
No, this is not a Concurrent Resolution.
S[ENATOR] T[ATAD]. May we solicit the legal wisdom of the Senate President.
T[HE] P[RESIDENT]. May I share this information that under Republic Act No. 6645, what is
needed is a resolution of this Chamber calling attention to the need for the holding of a
special election to fill up the vacancy created, in this particular case, by the appointment of
our colleague, Senator Guingona, as Vice President.
It can be managed in the Commission on Elections so that a slot for the particular candidate
to fill up would be that reserved for Mr. Guingonas unexpired term. In other words, it can be
arranged in such a manner.
xxxx
S[ENATOR] R[OCO]. Mr. President.
T[HE] P[RESIDENT]. Sen. Raul S. Roco is recognized.
S[ENATOR] R[OCO]. May we suggest, subject to a one-minute caucus, wordings to the effect
that in the simultaneous elections, the 13th placer be therefore deemed to be the special
election for this purpose. So we just nominate 13 and it is good for our colleagues. It is better
for the candidates. It is also less expensive because the ballot will be printed and there will be
less disfranchisement.
T[HE] P[RESIDENT]. That is right.
S[ENATOR] R[OCO]. If we can just deem it therefore under this resolution to be such a special
election, maybe, we satisfy the requirement of the law.
T[HE] P[RESIDENT]. Yes. In other words, this shall be a guidance for the Comelec.
S[ENATOR] R[OCO]. Yes.
T[HE] P[RESIDENT]. to implement.
S[ENATOR] R[OCO]. Yes. The Comelec will not have the flexibility.
T[HE] P[RESIDENT]. That is right.
S[ENATOR] R[OCO]. We will already consider the 13th placer of the forthcoming elections that
will be held simultaneously as a special election under this law as we understand it.
T[HE] P[RESIDENT]. Yes. That will be a good compromise, Senator Roco.
S[ENATOR] R[OCO]. Yes. So if the sponsor can introduce that later, maybe it will be better,
Mr. President.
T[HE] P[RESIDENT]. What does the sponsor say?
S[ENATOR] T[ATAD]. Mr. President, that is a most satisfactory proposal because I do not
believe that there will be anyone running specifically
T[HE] P[RESIDENT]. Correct.
S[ENATOR] T[ATAD]. to fill up this position for three years and campaigning nationwide.
T[HE] P[RESIDENT]. Actually, I think what is going to happen is the 13th candidate will be
running with specific groups.
S[ENATOR] T[ATAD]. Yes. Whoever gets No. 13.
T[HE] P[RESIDENT]. I think we can specifically define that as the intent of this resolution.
S[ENATOR] T[ATAD]. Subject to style, we accept that amendment and if there will be no
other amendment, I move for the adoption of this resolution.
xxxx
ADOPTION OF S. RES. NO. 934
If there are no other proposed amendments, I move that we adopt this resolution.
T[HE] P[RESIDENT]. There is a motion to adopt this resolution. Is there any
objection? [Silence] There being none, the motion is approved.[37]
Evidently, COMELEC, in the exercise of its discretion to use means and methods to
conduct the special election within the confines of R.A. No. 6645, merely chose to adopt the
Senates proposal, as embodied in Resolution No. 84. This Court has consistently acknowledged
and affirmed COMELECs wide latitude of discretion in adopting means to carry out its mandate
of ensuring free, orderly, and honest elections subject only to the limitation that the means so
adopted are not illegal or do not constitute grave abuse of discretion.[38] COMELECs decision
to abandon the means it employed in the 13 November 1951 and 8 November 1955 special
elections and adopt the method embodied in Resolution No. 84 is but a legitimate exercise of
its discretion. Conversely, this Court will not interfere should COMELEC, in subsequent special
senatorial elections, choose to revert to the means it followed in the 13 November 1951 and
8 November 1955 elections. That COMELEC adopts means that are novel or even disagreeable
is no reason to adjudge it liable for grave abuse of discretion. As we have earlier noted:
The Commission on Elections is a constitutional body. It is intended to play a distinct and
important part in our scheme of government. In the discharge of its functions, it should not
be hampered with restrictions that would be fully warranted in the case of a less responsible
organization. The Commission may err, so may this Court also. It should be allowed
considerable latitude in devising means and methods that will insure the accomplishment of
the great objective for which it was created free, orderly and honest elections. We may not
agree fully with its choice of means, but unless these are clearly illegal or constitute gross
abuse of discretion, this court should not interfere.[39]
A Word to COMELEC
The calling of a special election, if necessary, and the giving of notice to the electorate of
necessary information regarding a special election, are central to an informed exercise of the
right of suffrage. While the circumstances attendant to the present case have led us to
conclude that COMELECs failure to so call and give notice did not invalidate the special
senatorial election held on 14 May 2001, COMELEC should not take chances in future
elections. We remind COMELEC to comply strictly with all the requirements under applicable
laws relative to the conduct of regular elections in general and special elections in particular.
WHEREFORE, we DISMISS the petition for lack of merit.
SO ORDERED.
Panganiban, Quisumbing, Sandoval-Gutierrez, Austria-Martinez, Corona, Carpio-
Morales, Callejo, Sr., and Azcuna, JJ., concur.
Davide, Jr., C.J., joins Mr. Justice Puno in his dissent.
Puno, J., please see dissenting opinion.
Vitug, J., joins the dissent.
Ynares-Santiago, J., joins J. Punos dissent.
Tinga, J., joins Justice Punos dissent.
[1] As provided under Section 2 of Republic Act. No. 7166, as amended.
[2] Resolution No. 84 reads:
WHEREAS, the Honorable Teofisto Guingona, Jr. was elected Senator of the Philippines in 1998
for a term which will expire on June 30, 2004;
WHEREAS, on February 6, 2001, Her Excellency President Gloria Macapagal-Arroyo nominated
Senator Guingona as Vice-President of the Philippines;
WHEREAS, the nomination of Senator Guingona has been conferred by a majority vote of all
the members of both Houses of Congress, voting separately;
WHEREAS, Senator Guingona will take his Oath of Office as Vice-President of the Philippines on
February 9, 2001;
WHEREAS, Republic Act No. 7166 provides that the election for twelve (12) Senators, all
elective Members of the House of Representatives, and all elective provincial, city
and municipal officials shall be held on the second Monday of May and every three
years thereafter. Now, therefore be it Resolved by the Senate, as it is hereby resolved
to certify as it hereby certifies, the existence of a vacancy in the Senate and calling
the Commission on Elections (COMELEC) to fill up said vacancy through election to
be held simultaneously with the regular election on May 14, 2001 and the senatorial
candidate garnering the thirteenth (13th) highest number of votes shall serve only for
the unexpired term of former Senator Teofisto T. Guingona, Jr. (Emphasis supplied)
[3] Resolution No. 01-005 reads:
WHEREAS, the Commission on Elections, sitting [E]n [B]anc as the National Board of
Canvassers for the election of Senators of the Philippines, officially canvassed in
open and public proceedings the certificates of canvass of votes cast nationwide for
senators in the national and local elections conducted on May 14, 2001.
Based on the canvass of the Certificates of Canvass submitted by seventy-eight (78) out of
seventy-nine (79) Provincial Boards of Canvassers, twenty (20) City Boards of
Canvassers of cities comprising one (1) or more legislative districts, two (2) District
Boards of Canvassers of Metro Manila, and one (1) Absentee Voting, and the
remaining uncanvassed certificate of canvass which will not anymore affect the
results, the Commission on Elections sitting En Banc as the National Board of
Canvassers finds that the following candidates for senators in said elections obtained
as of June 04, 2001 the following number of votes as indicated opposite their names:
NOW, THEREFORE, by virtue of the powers vested in it under the Constitution, the Omnibus
Election Code and other election laws, the Commission on Elections sitting En
Banc as the National Board of Canvassers hereby PROCLAIMS the above-named
thirteen (13) candidates as the duly elected Senators of the Philippines in the May
14, 2001 elections. Based on the certificates of canvass finally tabulated, the first
twelve (12) Senators shall serve for a term of six (6) years and the thirteenth (13 th)
Senator shall serve the unexpired term of three (3) years of Senator Teofisto T.
Guingona, Jr. who was appointed Vice-President of the Philippines pursuant to
Section 9, Article VII of the Constitution, in relation to Section 9, Article VI thereof,
as implemented under Republic Act No. 6645. (Emphasis supplied)

Name Votes Garnered

(as of 4 June 2001)

NOLI DE CASTRO 16,157,811

JUAN M. FLAVIER 11,676,129

SERGIO R. OSMEA, III 11,531,427

FRANKLIN M. DRILON 11,223,020

RAMON B. MAGSAYSAY, JR. 11,187,447

JOKER P. ARROYO 11,163,801

MANUEL B. VILLAR, JR. 11,084,884

FRANCIS N. PANGILINAN 10,877,989

EDGARDO J. ANGARA 10,746,843

PANFILO M. LACSON 10,481,755

LUISA P. EJERCITO ESTRADA 10,456,674

RALPH G. RECTO 10,387,108

GREGORIO G. HONASAN 10,364,272

G.R. No. 127685 July 23, 1998
BLAS F. OPLE, petitioner,
vs.
RUBEN D. TORRES, ALEXANDER AGUIRRE, HECTOR VILLANUEVA, CIELITO HABITO, ROBERT
BARBERS, CARMENCITA REODICA, CESAR SARINO, RENATO VALENCIA, TOMAS P. AFRICA,
HEAD OF THE NATIONAL COMPUTER CENTER and CHAIRMAN OF THE COMMISSION ON
AUDIT, respondents.
PUNO, J.:
The petition at bar is a commendable effort on the part of Senator Blas F. Ople to prevent the
shrinking of the right to privacy, which the revered Mr. Justice Brandeis considered as "the
most comprehensive of rights and the right most valued by civilized men." 1 Petitioner Ople
prays that we invalidate Administrative Order No. 308 entitled "Adoption of a National
Computerized Identification Reference System" on two important constitutional grounds, viz:
one, it is a usurpation of the power of Congress to legislate, and two, it impermissibly intrudes
on our citizenry's protected zone of privacy. We grant the petition for the rights sought to be
vindicated by the petitioner need stronger barriers against further erosion.
A.O. No. 308 was issued by President Fidel V. Ramos On December 12, 1996 and reads as
follows:
ADOPTION OF A NATIONAL COMPUTERIZED
IDENTIFICATION REFERENCE SYSTEM
WHEREAS, there is a need to provide Filipino citizens and foreign residents
with the facility to conveniently transact business with basic service and
social security providers and other government instrumentalities;
WHEREAS, this will require a computerized system to properly and
efficiently identify persons seeking basic services on social security and
reduce, if not totally eradicate fraudulent transactions and
misrepresentations;
WHEREAS, a concerted and collaborative effort among the various basic
services and social security providing agencies and other government
intrumentalities is required to achieve such a system;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the
Philippines, by virtue of the powers vested in me by law, do hereby direct
the following:
Sec. 1. Establishment of a National Compoterized Identification Reference
System. A decentralized Identification Reference System among the key
basic services and social security providers is hereby established.
Sec. 2. Inter-Agency Coordinating Committee. An Inter-Agency
Coordinating Committee (IACC) to draw-up the implementing guidelines
and oversee the implementation of the System is hereby created, chaired
by the Executive Secretary, with the following as members:
Head, Presidential Management Staff
Secretary, National Economic Development Authority
Secretary, Department of the Interior and Local Government
Secretary, Department of Health
Administrator, Government Service Insurance System,
Administrator, Social Security System,
Administrator, National Statistics Office
Managing Director, National Computer Center.
Sec. 3. Secretariat. The National Computer Center (NCC) is hereby
designated as secretariat to the IACC and as such shall provide
administrative and technical support to the IACC.
Sec. 4. Linkage Among Agencies. The Population Reference Number (PRN)
generated by the NSO shall serve as the common reference number to
establish a linkage among concerned agencies. The IACC Secretariat shall
coordinate with the different Social Security and Services Agencies to
establish the standards in the use of Biometrics Technology and in
computer application designs of their respective systems.
Sec. 5. Conduct of Information Dissemination Campaign. The Office of the
Press Secretary, in coordination with the National Statistics Office, the GSIS
and SSS as lead agencies and other concerned agencies shall undertake a
massive tri-media information dissemination campaign to educate and
 raise public awareness on the importance and use of the PRN and the
Social Security Identification Reference.
Sec. 6. Funding. The funds necessary for the implementation of the system
shall be sourced from the respective budgets of the concerned agencies.
Sec. 7. Submission of Regular Reports. The NSO, GSIS and SSS shall submit
regular reports to the Office of the President through the IACC, on the
status of implementation of this undertaking.
Sec. 8. Effectivity. This Administrative Order shall take effect immediately.
DONE in the City of Manila, this 12th day of December in the year of Our
Lord, Nineteen Hundred and Ninety-Six.
(SGD.) FIDEL V. RAMOS
A.O. No. 308 was published in four newspapers of general circulation on January 22, 1997 and
January 23, 1997. On January 24, 1997, petitioner filed the instant petition against
respondents, then Executive Secretary Ruben Torres and the heads of the government
agencies, who as members of the Inter-Agency Coordinating Committee, are charged with the
implementation of A.O. No. 308. On April 8, 1997, we issued a temporary restraining order
enjoining its implementation.
Petitioner contends:
A. THE ESTABLISNMENT OF A NATIONAL COMPUTERIZED IDENTIFICATION
REFERENCE SYSTEM REQUIRES A LEGISLATIVE ACT. THE ISSUANCE OF A.O.
NO. 308 BY THE PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES IS,
THEREFORE, AN UNCONSTITUTIONAL USURPATION OF THE LEGISLATIVE
POWERS OF THE CONGRESS OF THE REPUBLIC OF THE PHILIPPINES.
B. THE APPROPRIATION OF PUBLIC FUNDS BY THE PRESIDENT FOR THE
IMPLEMENTATION OF A.O. NO. 308 IS AN UNCONSTITUTIONAL
USURPATION OF THE EXCLUSIVE RIGHT OF CONGRESS TO APPROPRIATE
PUBLIC FUNDS FOR EXPENDITURE.
C. THE IMPLEMENTATION OF A.O. NO. 308 INSIDIOUSLY LAYS THE
GROUNDWORK FOR A SYSTEM WHICH WILL VIOLATE THE BILL OF RIGHTS
ENSHRINED IN THE CONSTITUTION. 2
Respondents counter-argue:
A. THE INSTANT PETITION IS NOT A JUSTICIABLE CASE AS WOULD
WARRANT A JUDICIAL REVIEW;
B. A.O. NO. 308 [1996] WAS ISSUED WITHIN THE EXECUTIVE AND
ADMINISTRATIVE POWERS OF THE PRESIDENT WITHOUT ENCROACHING
ON THE LEGISLATIVE POWERS OF CONGRESS;
C. THE FUNDS NECESSARY FOR THE IMPLEMENTATION OF THE
IDENTIFICATION REFERENCE SYSTEM MAY BE SOURCED FROM THE
BUDGETS OF THE CONCERNED AGENCIES;
D. A.O. NO. 308 [1996] PROTECTS AN INDIVIDUAL'S INTEREST IN PRIVACY. 3
We now resolve.
I
As is usual in constitutional litigation, respondents raise the threshold issues relating to the
standing to sue of the petitioner and the justiciability of the case at bar. More specifically,
respondents aver that petitioner has no legal interest to uphold and that the implementing
rules of A.O. No. 308 have yet to be promulgated.
These submissions do not deserve our sympathetic ear. Petitioner Ople is a distinguished
member of our Senate. As a Senator, petitioner is possessed of the requisite standing to bring
suit raising the issue that the issuance of A.O. No. 308 is a usurpation of legislative power. 4 As
taxpayer and member of the Government Service Insurance System (GSIS), petitioner can also
impugn the legality of the misalignment of public funds and the misuse of GSIS funds to
implement A.O. No. 308. 5
The ripeness for adjudication of the Petition at bar is not affected by the fact that the
implementing rules of A.O. No. 308 have yet to be promulgated. Petitioner Ople assails A.O.
No. 308 as invalid per se and as infirmed on its face. His action is not premature for the rules
yet to be promulgated cannot cure its fatal defects. Moreover, the respondents themselves
have started the implementation of A.O. No. 308 without waiting for the rules. As early as
January 19, 1997, respondent Social Security System (SSS) caused the publication of a notice
to bid for the manufacture of the National Identification (ID) card. 6 Respondent Executive
Secretary Torres has publicly announced that representatives from the GSIS and the SSS have
completed the guidelines for the national identification system. 7 All signals from the
respondents show their unswerving will to implement A.O. No. 308 and we need not wait for
the formality of the rules to pass judgment on its constitutionality. In this light, the dissenters
insistence that we tighten the rule on standing is not a commendable stance as its result would
be to throttle an important constitutional principle and a fundamental right.
II
We now come to the core issues. Petitioner claims that A.O. No. 308 is not a mere
administrative order but a law and hence, beyond the power of the President to issue. He
alleges that A.O. No. 308 establishes a system of identification that is all-encompassing in
scope, affects the life and liberty of every Filipino citizen and foreign resident, and more
particularly, violates their right to privacy.
Petitioner's sedulous concern for the Executive not to trespass on the lawmaking domain of
Congress is understandable. The blurring of the demarcation line between the power of the
Legislature to make laws and the power of the Executive to execute laws will disturb their
delicate balance of power and cannot be allowed. Hence, the exercise by one branch of
government of power belonging to another will be given a stricter scrutiny by this Court.
The line that delineates Legislative and Executive power is not indistinct. Legislative power is
"the authority, under the Constitution, to make laws, and to alter and repeal them." 8 The
Constitution, as the will of the people in their original, sovereign and unlimited capacity, has
vested this power in the Congress of the Philippines. 9 The grant of legislative power to
Congress is broad, general and comprehensive. 10 The legislative body possesses plenary
power for all purposes of civil government. 11 Any power, deemed to be legislative by usage
and tradition, is necessarily possessed by Congress, unless the Constitution has lodged it
elsewhere. 12 In fine, except as limited by the Constitution, either expressly or impliedly,
legislative power embraces all subjects and extends to matters of general concern or common
interest. 13
While Congress is vested with the power to enact laws, the President executes the laws. 14 The
executive power is vested in the Presidents. 15 It is generally defined as the power to enforce
and administer the laws. 16 It is the power of carrying the laws into practical operation and
enforcing their due observance. 17
As head of the Executive Department, the President is the Chief Executive. He represents the
government as a whole and sees to it that all laws are enforced by the officials and employees
of his department. 18 He has control over the executive department, bureaus and offices. This
means that he has the authority to assume directly the functions of the executive department,
bureau and office or interfere with the discretion of its officials.19 Corollary to the power of
control, the President also has the duty of supervising the enforcement of laws for the
maintenance of general peace and public order. Thus, he is granted administrative power over
bureaus and offices under his control to enable him to discharge his duties effectively. 20
Administrative power is concerned with the work of applying policies and enforcing orders as
determined by proper governmental organs. 21 It enables the President to fix a uniform
standard of administrative efficiency and check the official conduct of his agents. 22 To this end,
he can issue administrative orders, rules and regulations.
Prescinding from these precepts, we hold that A.O. No. 308 involves a subject that is not
appropriate to be covered by an administrative order. An administrative order is:
Sec. 3. Administrative Orders. — Acts of the President which relate to
particular aspects of governmental operation in pursuance of his duties as
administrative head shall be promulgated in administrative orders. 23
An administrative order is an ordinance issued by the President which relates to
specific aspects in the administrative operation of government. It must be in
harmony with the law and should be for the sole purpose of implementing the law
and carrying out the legislative policy. 24 We reject the argument that A.O. No. 308
implements the legislative policy of the Administrative Code of 1987. The Code is a
general law and "incorporates in a unified document the major structural, functional
and procedural principles of governance." 25 and "embodies changes in
administrative structure and procedures designed to serve the
people." 26 The Code is divided into seven (7) Books: Book I deals with Sovereignty
and General Administration, Book II with the Distribution of Powers of the three
branches of Government, Book III on the Office of the President, Book IV on the
Executive Branch, Book V on Constitutional Commissions, Book VI on National
Government Budgeting, and Book VII on Administrative Procedure. These Books
contain provisions on the organization, powers and general administration of the
executive, legislative and judicial branches of government, the organization and
administration of departments, bureaus and offices under the executive branch, the
organization and functions of the Constitutional Commissions and other
constitutional bodies, the rules on the national government budget, as well as
guideline for the exercise by administrative agencies of quasi-legislative and quasi-
judicial powers. The Code covers both the internal administration of
government, i.e, internal organization, personnel and recruitment, supervision and
discipline, and the effects of the functions performed by administrative officials on
private individuals or parties outside government. 27
It cannot be simplistically argued that A.O. No. 308 merely implements the Administrative
Code of 1987. It establishes for the first time a National Computerized Identification Reference
System. Such a System requires a delicate adjustment of various contending state policies —
the primacy of national security, the extent of privacy interest against dossier-gathering by
government, the choice of policies, etc. Indeed, the dissent of Mr. Justice Mendoza states that
the A.O. No. 308 involves the all-important freedom of thought. As said administrative order
redefines the parameters of some basic rights of our citizenry vis-a-vis the State as well as the
line that separates the administrative power of the President to make rules and the legislative
power of Congress, it ought to be evident that it deals with a subject that should be covered
by law.
Nor is it correct to argue as the dissenters do that A.D. No. 308 is not a law because it confers
no right, imposes no duty, affords no proctection, and creates no office. Under A.O. No. 308, a
citizen cannot transact business with government agencies delivering basic services to the
people without the contemplated identification card. No citizen will refuse to get this
identification card for no one can avoid dealing with government. It is thus clear as daylight
that without the ID, a citizen will have difficulty exercising his rights and enjoying his privileges.
Given this reality, the contention that A.O. No. 308 gives no right and imposes no duty cannot
stand.
Again, with due respect, the dissenting opinions unduly expand the limits of administrative
legislation and consequently erodes the plenary power of Congress to make laws. This is
contrary to the established approach defining the traditional limits of administrative
legislation. As well stated by Fisher: ". . . Many regulations however, bear directly on the public.
It is here that administrative legislation must he restricted in its scope and application.
Regulations are not supposed to be a substitute for the general policy-making that Congress
enacts in the form of a public law. Although administrative regulations are entitled to respect,
the authority to prescribe rules and regulations is not an independent source of power to make
laws." 28
III
Assuming, arguendo, that A.O. No. 308 need not be the subject of a law, still it cannot pass
constitutional muster as an administrative legislation because facially it violates the right to
privacy. The essence of privacy is the "right to be let alone." 29 In the 1965 case of Griswold v.
Connecticut, 30 the United States Supreme Court gave more substance to the right of privacy
when it ruled that the right has a constitutional foundation. It held that there is a right of
privacy which can be found within the penumbras of the First, Third, Fourth, Fifth and Ninth
Amendments, 31 viz:
Specific guarantees in the Bill of Rights have penumbras formed by
Indeed, if we extend our judicial gaze we will find that the right of privacy is recognized and
emanations from these guarantees that help give them life and substance
enshrined in several provisions of our Constitution. 33 It is expressly recognized in section 3 (1)
. . . various guarantees create zones of privacy. The right of association
of the Bill of Rights:
contained in the penumbra of the First Amendment is one, as we have
seen. The Third Amendment in its prohibition against the quartering of
soldiers "in any house" in time of peace without the consent of the owner
is another facet of that privacy. The Fourth Amendment explicitly affirms
the ''right of the people to be secure in their persons, houses and effects,
against unreasonable searches and seizures." The Fifth Amendment in its
Self-Incrimination Clause enables the citizen to create a zone of privacy
which government may not force him to surrender to his detriment. The
Ninth Amendment provides: "The enumeration in the Constitution, of
certain rights, shall not be construed to deny or disparage others retained
by the people."
In the 1968 case of Morfe v. Mutuc, 32 we adopted the Griswold ruling that there is a
constitutional right to privacy. Speaking thru Mr. Justice, later Chief Justice, Enrique
Fernando, we held:
xxx xxx xxx
The Griswold case invalidated a Connecticut statute which made the use
of contraceptives a criminal offence on the ground of its amounting to an
unconstitutional invasion of the right of privacy of married persons;
rightfully it stressed "a relationship lying within the zone of privacy created
by several fundamental constitutional guarantees." It has wider
implications though. The constitutional right to privacy has come into its
own.
So it is likewise in our jurisdiction. The right to privacy as such is accorded
recognition independently of its identification with liberty; in itself, it is
fully deserving of constitutional protection. The language of Prof. Emerson
is particularly apt: "The concept of limited government has always included
the idea that governmental powers stop short of certain intrusions into the
personal life of the citizen. This is indeed one of the basic distinctions
between absolute and limited government. Ultimate and pervasive control
of the individual, in all aspects of his life, is the hallmark of the absolute
state. In contrast, a system of limited government safeguards a private
sector, which belongs to the individual, firmly distinguishing it from the
public sector, which the state can control. Protection of this private sector
— protection, in other words, of the dignity and integrity of the individual
— has become increasingly important as modern society has developed.
All the forces of a technological age — industrialization, urbanization, and
organization — operate to narrow the area of privacy and facilitate
intrusion into it. In modern terms, the capacity to maintain and support
this enclave of private life marks the difference between a democratic and
a totalitarian society."
Sec. 3. (1) The privacy of communication and correspondence shall be
inviolable except upon lawful order of the court, or when public safety or
order requires otherwise as prescribed by law.
Other facets of the right to privacy are protectad in various provisions of the Bill of
Rights, viz: 34
Sec. 1. No person shall be deprived of life, liberty, or property without due
process of law, nor shall any person be denied the equal protection of the
laws.
Sec. 2. The right of the people to be secure in their persons, houses papers,
and effects against unreasonable searches and seizures of whatever nature
and for any purpose shall be inviolable, and no search warrant or warrant
of arrest shall issue except upon probable cause to be determined
personally by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly
describing the place to be searched and the persons or things to be seized.
xxx xxx xxx
Sec. 6. The liberty of abode and of changing the same within the limits
prescribed by law shall not be impaired except upon lawful order of the
court. Neither shall the right to travel be impaired except in the interest of
national security, public safety, or public health as may be provided by law.
 xxx xxx xxx
Sec. 8. The right of the people, including those employed in the public and
private sectors, to form unions, associations, or societies for purposes not
contrary to law shall not be abridged.
Sec. 17. No person shall be compelled to be a witness against himself.
Zones of privacy are likewise recognized and protected in our laws. The Civil Code provides
that "[e]very person shall respect the dignity, personality, privacy and peace of mind of his
neighbors and other persons" and punishes as actionable torts several acts by a person of
meddling and prying into the privacy of another. 35 It also holds a public officer or employee or
any private individual liable for damages for any violation of the rights and liberties of another
person, 36 and recognizes the privacy of letters and other private communications. 37 The
Revised Penal Code makes a crime the violation of secrets by an officer, 38the revelation of
trade and industrial secrets, 39 and trespass to dwelling. 40 Invasion of privacy is an offense in
special laws like the Anti-Wiretapping Law, 41 the Secrecy of Bank Deposits Act 42 and the
Intellectual Property Code. 43 The Rules of Court on privileged communication likewise
recognize the privacy of certain information. 44
Unlike the dissenters, we prescind from the premise that the right to privacy is a fundamental
right guaranteed by the Constitution, hence, it is the burden of government to show that A.O.
No. 308 is justified by some compelling state interest and that it is narrowly drawn. A.O. No.
308 is predicated on two considerations: (1) the need to provides our citizens and foreigners
with the facility to conveniently transact business with basic service and social security
providers and other government instrumentalities and (2) the need to reduce, if not totally
eradicate, fraudulent transactions and misrepresentations by persons seeking basic services.
It is debatable whether these interests are compelling enough to warrant the issuance of A.O.
No. 308. But what is not arguable is the broadness, the vagueness, the overbreadth of A.O. No.
308 which if implemented will put our people's right to privacy in clear and present danger.
The heart of A.O. No. 308 lies in its Section 4 which provides for a Population Reference
Number (PRN) as a "common reference number to establish a linkage among concerned
agencies" through the use of "Biometrics Technology" and "computer application designs."
Biometry or biometrics is "the science of the applicatin of statistical methods to biological
facts; a mathematical analysis of biological data." 45 The term "biometrics" has evolved into a
broad category of technologies which provide precise confirmation of an individual's identity
through the use of the individual's own physiological and behavioral characteristics. 46 A
physiological characteristic is a relatively stable physical characteristic such as a fingerprint,
retinal scan, hand geometry or facial features. A behavioral characteristic is influenced by the
individual's personality and includes voice print, signature and keystroke. 47 Most biometric
idenfication systems use a card or personal identificatin number (PIN) for initial identification.
The biometric measurement is used to verify that the individual holding the card or entering
the PIN is the legitimate owner of the card or PIN. 48
A most common form of biological encoding is finger-scanning where technology scans a
fingertip and turns the unique pattern therein into an individual number which is called a
biocrypt. The biocrypt is stored in computer data banks 49 and becomes a means of identifying
an individual using a service. This technology requires one's fingertip to be scanned every time
service or access is provided. 50 Another method is the retinal scan. Retinal scan technology
employs optical technology to map the capillary pattern of the retina of the eye. This
technology produces a unique print similar to a finger print. 51 Another biometric method is
known as the "artificial nose." This device chemically analyzes the unique combination of
substances excreted from the skin of people. 52 The latest on the list of biometric achievements
is the thermogram. Scientists have found that by taking pictures of a face using infra-red
cameras, a unique heat distribution pattern is seen. The different densities of bone, skin, fat
and blood vessels all contribute to the individual's personal "heat signature." 53
In the last few decades, technology has progressed at a galloping rate. Some science fictions
are now science facts. Today, biometrics is no longer limited to the use of fingerprint to identify
an individual. It is a new science that uses various technologies in encoding any and all
biological characteristics of an individual for identification. It is noteworthy that A.O. No. 308
does not state what specific biological characteristics and what particular biometrics
technology shall be used to identify people who will seek its coverage. Considering the
banquest of options available to the implementors of A.O. No. 308, the fear that it threatens
the right to privacy of our people is not groundless.
A.O. No. 308 should also raise our antennas for a further look will show that it does not state
whether encoding of data is limited to biological information alone for identification purposes.
In fact, the Solicitor General claims that the adoption of the Identification Reference System
will contribute to the "generation of population data for development planning." 54 This is an
admission that the PRN will not be used solely for identification but the generation of other
data with remote relation to the avowed purposes of A.O. No. 308. Clearly, the indefiniteness
of A.O. No. 308 can give the government the roving authority to store and retrieve information
for a purpose other than the identification of the individual through his PRN.
The potential for misuse of the data to be gathered under A.O. No. 308 cannot be undarplayed
as the dissenters do. Pursuant to said administrative order, an individual must present his PRN
everytime he deals with a government agency to avail of basic services and security. His
transactions with the government agency will necessarily be recorded — whether it be in the
computer or in the documentary file of the agency. The individual's file may include his
transactions for loan availments, income tax returns, statement of assets and liabilities,
reimbursements for medication, hospitalization, etc. The more frequent the use of the PRN,
the better the chance of building a huge formidable informatin base through the electronic
linkage of the files. 55 The data may be gathered for gainful and useful government purposes;
but the existence of this vast reservoir of personal information constitutes a covert invitation
to misuse, a temptation that may be too great for some of our authorities to resist. 56
We can even grant, arguendo, that the computer data file will be limited to the name, address
and other basic personal infomation about the individual. 57 Even that hospitable assumption
will not save A.O. No. 308 from constitutional infirmity for again said order does not tell us in
clear and categorical terms how these information gathered shall he handled. It does not
provide who shall control and access the data, under what circumstances and for what
purpose. These factors are essential to safeguard the privacy and guaranty the integrity of the
information. 58 Well to note, the computer linkage gives other government agencies access to
the information. Yet, there are no controls to guard against leakage of information. When the
access code of the control programs of the particular computer system is broken, an intruder,
without fear of sanction or penalty, can make use of the data for whatever purpose, or worse,
manipulate the data stored within the system. 59
It is plain and we hold that A.O. No. 308 falls short of assuring that personal information which
will be gathered about our people will only be processed for unequivocally specified
purposes. 60 The lack of proper safeguards in this regard of A.O. No. 308 may interfere with the
individual's liberty of abode and travel by enabling authorities to track down his movement; it
may also enable unscrupulous persons to access confidential information and circumvent the
right against self-incrimination; it may pave the way for "fishing expeditions" by government
authorities and evade the right against unreasonable searches and seizures. 61 The possibilities
of abuse and misuse of the PRN, biometrics and computer technology are accentuated when
we consider that the individual lacks control over what can be read or placed on his ID, much
less verify the correctness of the data encoded. 62 They threaten the very abuses that the Bill
of Rights seeks to prevent. 63
The ability of sophisticated data center to generate a comprehensive cradle-to-grave dossier
on an individual and transmit it over a national network is one of the most graphic threats of
the computer revolution. 64 The computer is capable of producing a comprehensive dossier on
individuals out of information given at different times and for varied purposes. 65 It can
continue adding to the stored data and keeping the information up to date. Retrieval of stored
date is simple. When information of a privileged character finds its way into the computer, it
can be extracted together with other data on the subject. 66Once extracted, the information is
putty in the hands of any person. The end of privacy begins.
Though A.O. No. 308 is undoubtedly not narrowly drawn, the dissenting opinions would
dismiss its danger to the right to privacy as speculative and hypothetical. Again, we cannot
countenance such a laidback posture. The Court will not be true to its role as the ultimate
guardian of the people's liberty if it would not immediately smother the sparks that endanger
their rights but would rather wait for the fire that could consume them.
We reject the argument of the Solicitor General that an individual has a reasonable expectation
of privacy with regard to the Natioal ID and the use of biometrics technology as it stands on
quicksand. The reasonableness of a person's expectation of privacy depends on a two-part
test: (1) whether by his conduct, the individual has exhibited an expectation of privacy; and (2)
whether this expectation is one that society recognizes as reasonable. 67 The factual
circumstances of the case determines the reasonableness of the expectation. 68 However,
other factors, such as customs, physical surroundings and practices of a particular activity, may
serve to create or diminish this expectation. 69 The use of biometrics and computer technology
in A.O. No. 308 does not assure the individual of a reasonable expectation of privacy. 70 As
technology advances, the level of reasonably expected privacy decreases. 71 The measure of
protection granted by the reasonable expectation diminishes as relevant technology becomes
more widely accepted. 72 The security of the computer data file depends not only on the
physical inaccessibility of the file but also on the advances in hardware and software computer
technology. A.O. No. 308 is so widely drawn that a minimum standard for a reasonable
expectation of privacy, regardless of technology used, cannot be inferred from its provisions.
The rules and regulations to be by the IACC cannot remedy this fatal defect. Rules and
regulations merely implement the policy of the law or order. On its face, A.O. No. gives the
IACC virtually infettered discretion to determine the metes and bounds of the ID System.
Nor do your present laws prvide adequate safeguards for a reasonable expectation of privacy.
Commonwealth Act. No. 591 penalizes the disclosure by any person of data furnished by the
individual to the NSO with imprisonment and fine. 73 Republic Act. No. 1161 prohibits public
disclosure of SSS employment records and reports. 74 These laws, however, apply to records
and data with the NSO and the SSS. It is not clear whether they may be applied to data with
the other government agencies forming part of the National ID System. The need to clarify the
penal aspect of A.O. No. 308 is another reason why its enactment should be given to Congress.
Next, the Solicitor General urges us to validate A.O. No. 308's abridgment of the right of privacy
by using the rational relationship test. 75 He stressed that the purposes of A.O. No. 308 are: (1)
to streamline and speed up the implementation of basic government services, (2) eradicate
fraud by avoiding duplication of services, and (3) generate population data for development
planning. He cocludes that these purposes justify the incursions into the right to privacy for
the means are rationally related to the end. 76
We are not impressed by the argument. In Morfe v. Mutuc, 77 we upheld the constitutionality
of R.A. 3019, the Anti-Graft and Corrupt Practices Act, as a valid police power measure. We
declared that the law, in compelling a public officer to make an annual report disclosing his
assets and liabilities, his sources of income and expenses, did not infringe on the individual's
right to privacy. The law was enacted to promote morality in public administration by curtailing
and minimizing the opportunities for official corruption and maintaining a standard of honesty
in the public service. 78
The same circumstances do not obtain in the case at bar. For one, R.A. 3019 is a statute, not
an administrative order. Secondly, R.A. 3019 itself is sufficiently detailed. The law is clear on
what practices were prohibited and penalized, and it was narrowly drawn to avoid abuses. IN
the case at bar, A.O. No. 308 may have been impelled by a worthy purpose, but, it cannot pass
constitutional scrutiny for it is not narrowly drawn. And we now hod that when the integrity
of a fundamental right is at stake, this court will give the challenged law, administrative order,
rule or regulation a stricter scrutiny. It will not do for the authorities to invoke the presumption
of regularity in the performance of official duties. Nor is it enough for the authorities to prove
that their act is not irrational for a basic right can be diminished, if not defeated, even when
the government does not act irrationally. They must satisfactorily show the presence of
compelling state interests and that the law, rule or regulation is narrowly drawn to preclude
abuses. This approach is demanded by the 1987 Constitution whose entire matrix is designed
to protect human rights and to prevent authoritarianism. In case of doubt, the least we can do
is to lean towards the stance that will not put in danger the rights protected by the
Constitutions.
The case of Whalen v. Roe 79 cited by the Solicitor General is also off-line. In Whalen, the United
States Supreme Court was presented with the question of whether the State of New York could
keep a centralized computer record of the names and addresses of all persons who obtained
certain drugs pursuant to a doctor's prescription. The New York State Controlled Substance Act
of 1972 required physicians to identify parties obtaining prescription drugs enumerated in the
statute, i.e., drugs with a recognized medical use but with a potential for abuse, so that the
names and addresses of the patients can be recorded in a centralized computer file of the State
Department of Health. The plaintiffs, who were patients and doctors, claimed that some
people might decline necessary medication because of their fear that the computerized data
may be readily available and open to public disclosure; and that once disclosed, it may
stigmatize them as drug addicts. 80 The plaintiffs alleged that the statute invaded a
constitutionally protected zone of privacy, i.e., the individual interest in avoiding disclosure of
personal matters, and the interest in independence in making certain kinds of important
decisions. The U.S. Supreme Court held that while an individual's interest in avoiding disclosuer
of personal matter is an aspect of the right to privacy, the statute did not pose a grievous threat
to establish a constitutional violation. The Court found that the statute was necessary to aid in
the enforcement of laws designed to minimize the misuse of dangerous drugs. The patient-
identification requirement was a product of an orderly and rational legislative decision made
upon recommmendation by a specially appointed commission which held extensive hearings
on the matter. Moreover, the statute was narrowly drawn and contained numerous safeguards
against indiscriminate disclosure. The statute laid down the procedure and requirements for
the gathering, storage and retrieval of the informatin. It ebumerated who were authorized to
access the data. It also prohibited public disclosure of the data by imposing penalties for its
violation. In view of these safeguards, the infringement of the patients' right to privacy was
justified by a valid exercise of police power. As we discussed above, A.O. No. 308 lacks these
vital safeguards.
Even while we strike down A.O. No. 308, we spell out in neon that the Court is not per se agains
the use of computers to accumulate, store, process, retvieve and transmit data to improve our
bureaucracy. Computers work wonders to achieve the efficiency which both government and
private industry seek. Many information system in different countries make use of the
computer to facilitate important social objective, such as better law enforcement, faster
delivery of public services, more efficient management of credit and insurance programs,
improvement of telecommunications and streamlining of financial activities. 81 Used wisely,
data stored in the computer could help good administration by making accurate and
comprehensive information for those who have to frame policy and make key decisions. 82 The
benefits of the computer has revolutionized information technology. It developed the
internet, 83 introduced the concept of cyberspace 84 and the information superhighway where
the individual, armed only with his personal computer, may surf and search all kinds and
classes of information from libraries and databases connected to the net.
In no uncertain terms, we also underscore that the right to privacy does not bar all incursions
into individual privacy. The right is not intended to stifle scientific and technological
advancements that enhance public service and the common good. It merely requires that the
law be narrowly focused 85 and a compelling interest justify such intrusions. 86 Intrusions into
the right must be accompanied by proper safeguards and well-defined standards to prevent
unconstitutional invasions. We reiterate that any law or order that invades individual privacy
will be subjected by this Court to strict scrutiny. The reason for this stance was laid down
in Morfe v. Mutuc, to wit:
The concept of limited government has always included the idea that
governmental powers stop short of certain intrusions into the personal life
of the citizen. This is indeed one of the basic disctinctions between
absolute and limited government. Ultimate and pervasive control of the
individual, in all aspects of his life, is the hallmark of the absolute state. In
contrast, a system of limited government safeguards a private sector,
which belongs to the individual, firmly distinguishing it from the public
sector, which the state can control. Protection of this private sector —
protection, in other words, of the dignity and integrity of the individual —
has become increasingly important as modern society has developed. All
the forces of a technological age — industrialization, urbanization, and
organization — operate to narrow the area of privacy and facilitate
intrusion into it. In modern terms, the capacity to maintain and support
this enclave of private life marks the difference between a democratic and
a totalitarian society. 87
IV
The right to privacy is one of the most threatened rights of man living in a mass society. The
threats emanate from various sources — governments, journalists, employers, social
scientists, etc. 88 In th case at bar, the threat comes from the executive branch of government
which by issuing A.O. No. 308 pressures the people to surrender their privacy by giving
information about themselves on the pretext that it will facilitate delivery of basic services.
Given the record-keeping power of the computer, only the indifferent fail to perceive the
danger that A.O. No. 308 gives the government the power to compile a devastating dossier
against unsuspecting citizens. It is timely to take note of the well-worded warning of Kalvin, Jr.,
"the disturbing result could be that everyone will live burdened by an unerasable record of his
past and his limitations. In a way, the threat is that because of its record-keeping, the society
will have lost its benign capacity to forget." 89 Oblivious to this counsel, the dissents still say we
should not be too quick in labelling the right to privacy as a fundamental right. We close with
the statement that the right to privacy was not engraved in our Constitution for flattery.
IN VIEW WHEREOF, the petition is granted and Adminisrative Order No. 308 entitled "Adoption
of a National Computerized Identification Reference System" declared null and void for being
unconstitutional.
SO ORDERED.
G.R. No. L-45685 | November 16, 1937
THE PEOPLE OF THE PHILIPPINE ISLANDS and HONGKONG & SHANGHAI BANKING
CORPORATION,petitioners,
vs.
JOSE O. VERA, Judge . of the Court of First Instance of Manila, and MARIANO CU
UNJIENG, respondents.
LAUREL, J.:
This is an original action instituted in this court on August 19, 1937, for the issuance
of the writ of certiorari and of prohibition to the Court of First Instance of Manila so
that this court may review the actuations of the aforesaid Court of First Instance in
criminal case No. 42649 entitled "The People of the Philippine Islands vs. Mariano Cu
Unjieng, et al.", more particularly the application of the defendant Mariano Cu
Unjieng therein for probation under the provisions of Act No. 4221, and thereafter
prohibit the said Court of First Instance from taking any further action or entertaining
further the aforementioned application for probation, to the end that the defendant
Mariano Cu Unjieng may be forthwith committed to prison in accordance with the
final judgment of conviction rendered by this court in said case (G. R. No. 41200). 1
Petitioners herein, the People of the Philippine and the Hongkong and Shanghai
Banking Corporation, are respectively the plaintiff and the offended party, and the
respondent herein Mariano Cu Unjieng is one of the defendants, in the criminal case
entitled "The People of the Philippine Islands vs. Mariano Cu Unjieng, et al.", criminal
case No. 42649 of the Court of First Instance of Manila and G.R. No. 41200 of this
court. Respondent herein, Hon. Jose O. Vera, is the Judge ad interim of the seventh
branch of the Court of First Instance of Manila, who heard the application of the
defendant Mariano Cu Unjieng for probation in the aforesaid criminal case.
The information in the aforesaid criminal case was filed with the Court of First
Instance of Manila on October 15, 1931, petitioner herein Hongkong and Shanghai
Banking Corporation intervening in the case as private prosecutor. After a protracted
trial unparalleled in the annals of Philippine jurisprudence both in the length of time
spent by the court as well as in the volume in the testimony and the bulk of the
exhibits presented, the Court of First Instance of Manila, on January 8, 1934,
rendered a judgment of conviction sentencing the defendant Mariano Cu Unjieng to
indeterminate penalty ranging from four years and two months of prision
correccional to eight years of prision mayor, to pay the costs and with reservation of
civil action to the offended party, the Hongkong and Shanghai Banking Corporation.
Upon appeal, the court, on March 26, 1935, modified the sentence to an
indeterminate penalty of from five years and six months of prision correccional to
seven years, six months and twenty-seven days of prision mayor, but affirmed the
judgment in all other respects. Mariano Cu Unjieng filed a motion for reconsideration
and four successive motions for new trial which were denied on December 17, 1935,
and final judgment was accordingly entered on December 18, 1935. The defendant
thereupon sought to have the case elevated on certiorari to the Supreme Court of
the United States but the latter denied the petition for certiorari in November,
1936. This court, on November 24, 1936, denied the petition subsequently
filed by the defendant for leave to file a second alternative motion for
reconsideration or new trial and thereafter remanded the case to the court of origin
for execution of the judgment.
The instant proceedings have to do with the application for probation filed by the
herein respondent Mariano Cu Unjieng on November 27, 1936, before the trial
court, under the provisions of Act No. 4221 of the defunct Philippine Legislature.
Herein respondent Mariano Cu Unjieng states in his petition, inter alia, that he is
innocent of the crime of which he was convicted, that he has no criminal record and
that he would observe good conduct in the future. The Court of First Instance of
Manila, Judge Pedro Tuason presiding, referred the application for probation of the
Insular Probation Office which recommended denial of the same June 18, 1937.
Thereafter, the Court of First Instance of Manila, seventh branch, Judge Jose O. Vera
presiding, set the petition for hearing on April 5, 1937.
On April 2, 1937, the Fiscal of the City of Manila filed an opposition to the granting of
probation to the herein respondent Mariano Cu Unjieng. The private prosecution also
filed an opposition on April 5, 1937, alleging, among other things, that Act No. 4221,
assuming that it has not been repealed by section 2 of Article XV of the Constitution,
is nevertheless violative of section 1, subsection (1), Article III of the Constitution
guaranteeing equal protection of the laws for the reason that its applicability is not
uniform throughout the Islands and because section 11 of the said Act endows the
provincial boards with the power to make said law effective or otherwise in their
respective or otherwise in their respective provinces. The private prosecution also
filed a supplementary opposition on April 19, 1937, elaborating on the alleged
unconstitutionality on Act No. 4221, as an undue delegation of legislative power to
the provincial boards of several provinces (sec. 1, Art. VI, Constitution). The City Fiscal
concurred in the opposition of the private prosecution except with respect to the
questions raised concerning the constitutionality of Act No. 4221.
On June 28, 1937, herein respondent Judge Jose O. Vera promulgated a resolution
with a finding that "las pruebas no han establecido de unamanera concluyente la
culpabilidad del peticionario y que todos los hechos probados no son inconsistentes
o incongrentes con su inocencia" and concludes that the herein respondent Mariano
Cu Unjieng "es inocente por duda racional" of the crime of which he stands convicted
by this court in G.R. No. 41200, but denying the latter's petition for probation for the
reason that:
. . . Si este Juzgado concediera la poblacion solicitada por las circunstancias
y la historia social que se han expuesto en el cuerpo de esta resolucion, que
hacen al peticionario acreedor de la misma, una parte de la opinion publica,
atizada por los recelos y las suspicacias, podria levantarse indignada contra
un sistema de probacion que permite atisbar en los procedimientos
ordinarios de una causa criminal perturbando la quietud y la eficacia de las
decisiones ya recaidas al traer a la superficie conclusiones enteramente
differentes, en menoscabo del interes publico que demanda el respeto de
las leyes y del veredicto judicial.
On July 3, 1937, counsel for the herein respondent Mariano Cu Unjieng filed an
exception to the resolution denying probation and a notice of intention to file a
motion for reconsideration. An alternative motion for reconsideration or new trial
was filed by counsel on July 13, 1937. This was supplemented by an additional motion
for reconsideration submitted on July 14, 1937. The aforesaid motions were set for
hearing on July 31, 1937, but said hearing was postponed at the petition of counsel
for the respondent Mariano Cu Unjieng because a motion for leave to intervene in
the case as amici curiae signed by thirty-three (thirty-four) attorneys had just been
filed with the trial court. Attorney Eulalio Chaves whose signature appears in the
aforesaid motion subsequently filed a petition for leave to withdraw his appearance
as amicus curiae on the ground that the motion for leave to intervene as amici
curiae was circulated at a banquet given by counsel for Mariano Cu Unjieng on the
evening of July 30, 1937, and that he signed the same "without mature deliberation
and purely as a matter of courtesy to the person who invited me (him)."
On August 6, 1937, the Fiscal of the City of Manila filed a motion with the trial court
for the issuance of an order of execution of the judgment of this court in said case
and forthwith to commit the herein respondent Mariano Cu Unjieng to jail in
obedience to said judgment.
On August 7, 1937, the private prosecution filed its opposition to the motion for leave
to intervene as amici curiae aforementioned, asking that a date be set for a hearing
of the same and that, at all events, said motion should be denied with respect to
certain attorneys signing the same who were members of the legal staff of the several
counsel for Mariano Cu Unjieng. On August 10, 1937, herein respondent Judge Jose
O. Vera issued an order requiring all parties including the movants for intervention
as amici curiae to appear before the court on August 14, 1937. On the last-mentioned
date, the Fiscal of the City of Manila moved for the hearing of his motion for
execution of judgment in preference to the motion for leave to intervene as amici
curiae but, upon objection of counsel for Mariano Cu Unjieng, he moved for the
postponement of the hearing of both motions. The respondent judge thereupon set
the hearing of the motion for execution on August 21, 1937, but proceeded to
consider the motion for leave to intervene as amici curiae as in order. Evidence as to
the circumstances under which said motion for leave to intervene as amici curiae was
signed and submitted to court was to have been heard on August 19, 1937. But at
this juncture, herein petitioners came to this court on extraordinary legal process to
put an end to what they alleged was an interminable proceeding in the Court of First
Instance of Manila which fostered "the campaign of the defendant Mariano Cu
Unjieng for delay in the execution of the sentence imposed by this Honorable Court
on him, exposing the courts to criticism and ridicule because of the apparent inability
of the judicial machinery to make effective a final judgment of this court imposed on
the defendant Mariano Cu Unjieng."
The scheduled hearing before the trial court was accordingly suspended upon the
issuance of a temporary restraining order by this court on August 21, 1937.
To support their petition for the issuance of the extraordinary writs of certiorari and
prohibition, herein petitioners allege that the respondent judge has acted without
jurisdiction or in excess of his jurisdiction:
I. Because said respondent judge lacks the power to place respondent Mariano Cu
Unjieng under probation for the following reason:
(1) Under section 11 of Act No. 4221, the said of the Philippine
Legislature is made to apply only to the provinces of the
Philippines; it nowhere states that it is to be made applicable to
chartered cities like the City of Manila.
(2) While section 37 of the Administrative Code contains a proviso
to the effect that in the absence of a special provision, the term
"province" may be construed to include the City of Manila for the
purpose of giving effect to laws of general application, it is also true
that Act No. 4221 is not a law of general application because it is
made to apply only to those provinces in which the respective
provincial boards shall have provided for the salary of a probation
officer.
(3) Even if the City of Manila were considered to be a province, still,
Act No. 4221 would not be applicable to it because it has provided
for the salary of a probation officer as required by section 11
thereof; it being immaterial that there is an Insular Probation
Officer willing to act for the City of Manila, said Probation Officer
provided for in section 10 of Act No. 4221 being different and
 distinct from the Probation Officer provided for in section 11 of the
same Act.
II. Because even if the respondent judge originally had jurisdiction to entertain the
application for probation of the respondent Mariano Cu Unjieng, he nevertheless
acted without jurisdiction or in excess thereof in continuing to entertain the motion
for reconsideration and by failing to commit Mariano Cu Unjieng to prison after he
had promulgated his resolution of June 28, 1937, denying Mariano Cu Unjieng's
application for probation, for the reason that:
(1) His jurisdiction and power in probation proceedings is limited
by Act No. 4221 to the granting or denying of applications for
probation.
(2) After he had issued the order denying Mariano Cu Unjieng's
petition for probation on June 28, 1937, it became final and
executory at the moment of its rendition.
(3) No right on appeal exists in such cases.
(4) The respondent judge lacks the power to grant a rehearing of
said order or to modify or change the same.
III. Because the respondent judge made a finding that Mariano Cu Unjieng is innocent
of the crime for which he was convicted by final judgment of this court, which finding
is not only presumptuous but without foundation in fact and in law, and is
furthermore in contempt of this court and a violation of the respondent's oath of
office as ad interim judge of first instance.
IV. Because the respondent judge has violated and continues to violate his duty,
which became imperative when he issued his order of June 28, 1937, denying the
application for probation, to commit his co-respondent to jail.
Petitioners also avers that they have no other plain, speedy and adequate remedy in
the ordinary course of law.
In a supplementary petition filed on September 9, 1937, the petitioner Hongkong and
Shanghai Banking Corporation further contends that Act No. 4221 of the Philippine
Legislature providing for a system of probation for persons eighteen years of age or
over who are convicted of crime, is unconstitutional because it is violative of section
1, subsection (1), Article III, of the Constitution of the Philippines guaranteeing equal
protection of the laws because it confers upon the provincial board of its province
the absolute discretion to make said law operative or otherwise in their respective
provinces, because it constitutes an unlawful and improper delegation to the
provincial boards of the several provinces of the legislative power lodged by the Jones
Law (section 8) in the Philippine Legislature and by the Constitution (section 1, Art.
VI) in the National Assembly; and for the further reason that it gives the provincial
boards, in contravention of the Constitution (section 2, Art. VIII) and the Jones Law
(section 28), the authority to enlarge the powers of the Court of First Instance of
different provinces without uniformity. In another supplementary petition dated
September 14, 1937, the Fiscal of the City of Manila, in behalf of one of the
petitioners, the People of the Philippine Islands, concurs for the first time with the
issues raised by other petitioner regarding the constitutionality of Act No. 4221, and
on the oral argument held on October 6, 1937, further elaborated on the theory that
probation is a form of reprieve and therefore Act. No. 4221 is an encroachment on
the exclusive power of the Chief Executive to grant pardons and reprieves. On
October 7, 1937, the City Fiscal filed two memorandums in which he contended that
Act No. 4221 not only encroaches upon the pardoning power to the executive, but
also constitute an unwarranted delegation of legislative power and a denial of the
equal protection of the laws. On October 9, 1937, two memorandums, signed jointly
by the City Fiscal and the Solicitor-General, acting in behalf of the People of the
Philippine Islands, and by counsel for the petitioner, the Hongkong and Shanghai
Banking Corporation, one sustaining the power of the state to impugn the validity of
its own laws and the other contending that Act No. 4221 constitutes an unwarranted
delegation of legislative power, were presented. Another joint memorandum was
filed by the same persons on the same day, October 9, 1937, alleging that Act No.
4221 is unconstitutional because it denies the equal protection of the laws and
constitutes an unlawful delegation of legislative power and, further, that the whole
Act is void: that the Commonwealth is not estopped from questioning the validity of
its laws; that the private prosecution may intervene in probation proceedings and
may attack the probation law as unconstitutional; and that this court may pass upon
the constitutional question in prohibition proceedings.
Respondents in their answer dated August 31, 1937, as well as in their oral argument
and memorandums, challenge each and every one of the foregoing proposition
raised by the petitioners.
As special defenses, respondents allege:
(1) That the present petition does not state facts sufficient in law
to warrant the issuance of the writ of certiorari or of prohibition.
(2) That the aforesaid petition is premature because the remedy
sought by the petitioners is the very same remedy prayed for by
them before the trial court and was still pending resolution before
the trial court when the present petition was filed with this court.
(3) That the petitioners having themselves raised the question as to
the execution of judgment before the trial court, said trial court has
acquired exclusive jurisdiction to resolve the same under the
theory that its resolution denying probation is unappealable.
(4) That upon the hypothesis that this court has concurrent
jurisdiction with the Court of First Instance to decide the question
as to whether or not the execution will lie, this court nevertheless
cannot exercise said jurisdiction while the Court of First Instance
has assumed jurisdiction over the same upon motion of herein
petitioners themselves.
(5) That upon the procedure followed by the herein petitioners in
seeking to deprive the trial court of its jurisdiction over the case
and elevate the proceedings to this court, should not be tolerated
because it impairs the authority and dignity of the trial court which
court while sitting in the probation cases is "a court of limited
jurisdiction but of great dignity."
(6) That under the supposition that this court has jurisdiction to
resolve the question submitted to and pending resolution by the
trial court, the present action would not lie because the resolution
of the trial court denying probation is appealable; for although the
Probation Law does not specifically provide that an applicant for
probation may appeal from a resolution of the Court of First
Instance denying probation, still it is a general rule in this
jurisdiction that a final order, resolution or decision of an inferior
court is appealable to the superior court.
(7) That the resolution of the trial court denying probation of herein
respondent Mariano Cu Unjieng being appealable, the same had
not become final and executory for the reason that the said
respondent had filed an alternative motion for reconsideration and
new trial within the requisite period of fifteen days, which motion
the trial court was able to resolve in view of the restraining order
improvidently and erroneously issued by this court.lawphi1.net
(8) That the Fiscal of the City of Manila had by implication admitted
that the resolution of the trial court denying probation is not final
and unappealable when he presented his answer to the motion for
reconsideration and agreed to the postponement of the hearing of
the said motion.
(9) That under the supposition that the order of the trial court
denying probation is not appealable, it is incumbent upon the
accused to file an action for the issuance of the writ
of certiorari with mandamus, it appearing that the trial court,
although it believed that the accused was entitled to probation,
nevertheless denied probation for fear of criticism because the
accused is a rich man; and that, before a petition
for certiorari grounded on an irregular exercise of jurisdiction by
the trial court could lie, it is incumbent upon the petitioner to file a
motion for reconsideration specifying the error committed so that
the trial court could have an opportunity to correct or cure the
same.
(10) That on hypothesis that the resolution of this court is not
appealable, the trial court retains its jurisdiction within a
reasonable time to correct or modify it in accordance with law and
justice; that this power to alter or modify an order or resolution is
inherent in the courts and may be exercise either motu proprio or
upon petition of the proper party, the petition in the latter case
taking the form of a motion for reconsideration.
(11) That on the hypothesis that the resolution of the trial court is
appealable as respondent allege, said court cannot order execution
of the same while it is on appeal, for then the appeal would not be
availing because the doors of probation will be closed from the
moment the accused commences to serve his sentence (Act No.
4221, sec. 1; U.S. vs. Cook, 19 Fed. [2d], 827).
In their memorandums filed on October 23, 1937, counsel for the respondents
maintain that Act No. 4221 is constitutional because, contrary to the allegations of
the petitioners, it does not constitute an undue delegation of legislative power, does
not infringe the equal protection clause of the Constitution, and does not encroach
upon the pardoning power of the Executive. In an additional memorandum filed on
the same date, counsel for the respondents reiterate the view that section 11 of Act
No. 4221 is free from constitutional objections and contend, in addition, that the
private prosecution may not intervene in probation proceedings, much less question
the validity of Act No. 4221; that both the City Fiscal and the Solicitor-General are
estopped from questioning the validity of the Act; that the validity of Act cannot be
attacked for the first time before this court; that probation in unavailable; and that,
in any event, section 11 of the Act No. 4221 is separable from the rest of the Act. The
last memorandum for the respondent Mariano Cu Unjieng was denied for having
been filed out of time but was admitted by resolution of this court and filed anew
on November 5, 1937. This memorandum elaborates on some of the points
raised by the respondents and refutes those brought up by the petitioners.
In the scrutiny of the pleadings and examination of the various aspects of the present
case, we noted that the court below, in passing upon the merits of the application of
the respondent Mariano Cu Unjieng and in denying said application assumed the task
not only of considering the merits of the application, but of passing upon the
culpability of the applicant, notwithstanding the final pronouncement of guilt by this
court. (G.R. No. 41200.) Probation implies guilt be final judgment. While a probation
case may look into the circumstances attending the commission of the offense, this
does not authorize it to reverse the findings and conclusive of this court, either
directly or indirectly, especially wherefrom its own admission reliance was merely
had on the printed briefs, averments, and pleadings of the parties. As already
observed by this court in Shioji vs. Harvey ([1922], 43 Phil., 333, 337), and reiterated
in subsequent cases, "if each and every Court of First Instance could enjoy the
privilege of overruling decisions of the Supreme Court, there would be no end to
litigation, and judicial chaos would result." A becoming modesty of inferior courts
demands conscious realization of the position that they occupy in the interrelation
and operation of the intergrated judicial system of the nation.
After threshing carefully the multifarious issues raised by both counsel for the
petitioners and the respondents, this court prefers to cut the Gordian knot and take
up at once the two fundamental questions presented, namely, (1) whether or not the
constitutionality of Act No. 4221 has been properly raised in these proceedings; and
(2) in the affirmative, whether or not said Act is constitutional. Considerations of
these issues will involve a discussion of certain incidental questions raised by the
parties.
To arrive at a correct conclusion on the first question, resort to certain guiding
principles is necessary. It is a well-settled rule that the constitutionality of an act of
the legislature will not be determined by the courts unless that question is properly
raised and presented inappropriate cases and is necessary to a determination of the
case; i.e., the issue of constitutionality must be the very lis mota presented. (McGirr
vs. Hamilton and Abreu [1915], 30 Phil., 563, 568; 6 R. C. L., pp. 76, 77; 12 C. J., pp.
780-782, 783.)
The question of the constitutionality of an act of the legislature is frequently raised
in ordinary actions. Nevertheless, resort may be made to extraordinary legal
remedies, particularly where the remedies in the ordinary course of law even if
available, are not plain, speedy and adequate. Thus, in Cu Unjieng vs.
Patstone ([1922]), 42 Phil., 818), this court held that the question of the
constitutionality of a statute may be raised by the petitioner
in mandamus proceedings (see, also, 12 C. J., p. 783); and in Government of the
Philippine Islands vs. Springer ([1927], 50 Phil., 259 [affirmed in Springer vs.
Government of the Philippine Islands (1928), 277 U. S., 189; 72 Law. ed., 845]), this
court declared an act of the legislature unconstitutional in an action of quo
warranto brought in the name of the Government of the Philippines. It has also been
held that the constitutionality of a statute may be questioned in habeas
corpus proceedings (12 C. J., p. 783; Bailey on Habeas Corpus, Vol. I, pp. 97, 117),
although there are authorities to the contrary; on an application for injunction to
restrain action under the challenged statute (mandatory, see Cruz vs. Youngberg
[1931], 56 Phil., 234); and even on an application for preliminary injunction where
the determination of the constitutional question is necessary to a decision of the
case. (12 C. J., p. 783.) The same may be said as regards prohibition and certiorari.(Yu
Cong Eng vs. Trinidad [1925], 47 Phil., 385; [1926], 271 U. S., 500; 70 Law. ed., 1059;
Bell vs. First Judicial District Court [1905], 28 Nev., 280; 81 Pac., 875; 113 A. S. R., 854;
6 Ann. Cas., 982; 1 L. R. A. [N. S], 843, and cases cited). The case of Yu Cong Eng vs.
Trinidad, supra, decided by this court twelve years ago was, like the present one, an
original action for certiorari and prohibition. The constitutionality of Act No. 2972,
popularly known as the Chinese Bookkeeping Law, was there challenged by the
petitioners, and the constitutional issue was not met squarely by the respondent in
a demurrer. A point was raised "relating to the propriety of the constitutional
question being decided in original proceedings in prohibition." This court decided to
take up the constitutional question and, with two justices dissenting, held that Act
No. 2972 was constitutional. The case was elevated on writ of certiorari to the
Supreme Court of the United States which reversed the judgment of this court and
held that the Act was invalid. (271 U. S., 500; 70 Law. ed., 1059.) On the question of
jurisdiction, however, the Federal Supreme Court, though its Chief Justice, said:
By the Code of Civil Procedure of the Philippine Islands, section 516, the
Philippine supreme court is granted concurrent jurisdiction in prohibition
with courts of first instance over inferior tribunals or persons, and original
jurisdiction over courts of first instance, when such courts are exercising
functions without or in excess of their jurisdiction. It has been held by that
court that the question of the validity of the criminal statute must usually be
raised by a defendant in the trial court and be carried regularly in review to
the Supreme Court. (Cadwallader-Gibson Lumber Co. vs. Del Rosario, 26
Phil., 192). But in this case where a new act seriously affected numerous
persons and extensive property rights, and was likely to cause a multiplicity
of actions, the Supreme Court exercised its discretion to bring the issue to
the act's validity promptly before it and decide in the interest of the orderly
administration of justice. The court relied by analogy upon the cases of Ex
parte Young (209 U. S., 123;52 Law ed., 714; 13 L. R. A. [N. S.] 932; 28 Sup.
Ct. Rep., 441; 14 Ann. Ca., 764; Traux vs. Raich, 239 U. S., 33; 60 Law. ed.,
131; L. R. A. 1916D, 545; 36 Sup. Ct. Rep., 7; Ann. Cas., 1917B, 283; and
 Wilson vs. New, 243 U. S., 332; 61 Law. ed., 755; L. R. A. 1917E, 938; 37 Sup.
Ct. Rep., 298; Ann. Cas. 1918A, 1024). Although objection to the jurisdiction
was raise by demurrer to the petition, this is now disclaimed on behalf of
the respondents, and both parties ask a decision on the merits. In view of
the broad powers in prohibition granted to that court under the Island Code,
we acquiesce in the desire of the parties.
The writ of prohibition is an extraordinary judicial writ issuing out of a court of
superior jurisdiction and directed to an inferior court, for the purpose of preventing
the inferior tribunal from usurping a jurisdiction with which it is not legally vested.
(High, Extraordinary Legal Remedies, p. 705.) The general rule, although there is a
conflict in the cases, is that the merit of prohibition will not lie whether the inferior
court has jurisdiction independent of the statute the constitutionality of which is
questioned, because in such cases the interior court having jurisdiction may itself
determine the constitutionality of the statute, and its decision may be subject to
review, and consequently the complainant in such cases ordinarily has adequate
remedy by appeal without resort to the writ of prohibition. But where the inferior
court or tribunal derives its jurisdiction exclusively from an unconstitutional statute,
it may be prevented by the writ of prohibition from enforcing that statute. (50 C. J.,
670; Ex parte Round tree [1874, 51 Ala., 42; In re Macfarland, 30 App. [D. C.], 365;
Curtis vs. Cornish [1912], 109 Me., 384; 84 A., 799; Pennington vs. Woolfolk [1880],
79 Ky., 13; State vs. Godfrey [1903], 54 W. Va., 54; 46 S. E., 185; Arnold vs. Shields
[1837], 5 Dana, 19; 30 Am. Dec., 669.)
Courts of First Instance sitting in probation proceedings derived their jurisdiction
solely from Act No. 4221 which prescribes in detailed manner the procedure for
granting probation to accused persons after their conviction has become final and
before they have served their sentence. It is true that at common law the authority
of the courts to suspend temporarily the execution of the sentence is recognized and,
according to a number of state courts, including those of Massachusetts, Michigan,
New York, and Ohio, the power is inherent in the courts (Commonwealth vs.
Dowdican's Bail [1874], 115 Mass., 133; People vs. Stickel [1909], 156 Mich., 557; 121
N. W., 497; People ex rel. Forsyth vs. Court of Session [1894], 141 N. Y., 288; Weber
vs. State [1898], 58 Ohio St., 616). But, in the leading case of Ex parte United States
([1916], 242 U. S., 27; 61 Law. ed., 129; L. R. A., 1917E, 1178; 37 Sup. Ct. Rep., 72;
Ann. Cas. 1917B, 355), the Supreme Court of the United States expressed the opinion
that under the common law the power of the court was limited to temporary
suspension, and brushed aside the contention as to inherent judicial power saying,
through Chief Justice White:
Indisputably under our constitutional system the right to try offenses against
the criminal laws and upon conviction to impose the punishment provided
by law is judicial, and it is equally to be conceded that, in exerting the powers
vested in them on such subject, courts inherently possess ample right to
exercise reasonable, that is, judicial, discretion to enable them to wisely
exert their authority. But these concessions afford no ground for the
contention as to power here made, since it must rest upon the proposition
that the power to enforce begets inherently a discretion to permanently
refuse to do so. And the effect of the proposition urged upon the
distribution of powers made by the Constitution will become apparent when
it is observed that indisputable also is it that the authority to define and fix
the punishment for crime is legislative and includes the right in advance to
bring within judicial discretion, for the purpose of executing the statute,
elements of consideration which would be otherwise beyond the scope of
judicial authority, and that the right to relieve from the punishment, fixed
by law and ascertained according to the methods by it provided belongs to
the executive department.
Justice Carson, in his illuminating concurring opinion in the case of Director of Prisons
vs. Judge of First Instance of Cavite (29 Phil., 265), decided by this court in 1915, also
reached the conclusion that the power to suspend the execution of sentences
pronounced in criminal cases is not inherent in the judicial function. "All are agreed",
he said, "that in the absence of statutory authority, it does not lie within the power
of the courts to grant such suspensions." (at p. 278.) Both petitioner and respondents
are correct, therefore, when they argue that a Court of First Instance sitting in
probation proceedings is a court of limited jurisdiction. Its jurisdiction in such
proceedings is conferred exclusively by Act No. 4221 of the Philippine Legislature.
It is, of course, true that the constitutionality of a statute will not be considered on
application for prohibition where the question has not been properly brought to the
attention of the court by objection of some kind (Hill vs. Tarver [1901], 130 Ala., 592;
30 S., 499; State ex rel. Kelly vs. Kirby [1914], 260 Mo., 120; 168 S. W., 746). In the
case at bar, it is unquestionable that the constitutional issue has been squarely
presented not only before this court by the petitioners but also before the trial court
by the private prosecution. The respondent, Hon. Jose O Vera, however, acting as
judge of the court below, declined to pass upon the question on the ground that the
private prosecutor, not being a party whose rights are affected by the statute, may
not raise said question. The respondent judge cited Cooley on Constitutional
Limitations (Vol. I, p. 339; 12 C. J., sec. 177, pp. 760 and 762), and McGlue vs. Essex
County ([1916], 225 Mass., 59; 113 N. E., 742, 743), as authority for the proposition
that a court will not consider any attack made on the constitutionality of a statute by
one who has no interest in defeating it because his rights are not affected by its
operation. The respondent judge further stated that it may not motu proprio take up
the constitutional question and, agreeing with Cooley that "the power to declare a
legislative enactment void is one which the judge, conscious of the fallibility of the
human judgment, will shrink from exercising in any case where he can conscientiously
and with due regard to duty and official oath decline the responsibility"
(Constitutional Limitations, 8th ed., Vol. I, p. 332), proceeded on the assumption that
Act No. 4221 is constitutional. While therefore, the court a quo admits that the
constitutional question was raised before it, it refused to consider the question solely
because it was not raised by a proper party. Respondents herein reiterates this view.
The argument is advanced that the private prosecution has no personality to appear
in the hearing of the application for probation of defendant Mariano Cu Unjieng in
criminal case No. 42648 of the Court of First Instance of Manila, and hence the issue
of constitutionality was not properly raised in the lower court. Although, as a general
rule, only those who are parties to a suit may question the constitutionality of a
statute involved in a judicial decision, it has been held that since the decree
pronounced by a court without jurisdiction is void, where the jurisdiction of the court
depends on the validity of the statute in question, the issue of the constitutionality
will be considered on its being brought to the attention of the court by persons
interested in the effect to be given the statute.(12 C. J., sec. 184, p. 766.) And, even
if we were to concede that the issue was not properly raised in the court below by
the proper party, it does not follow that the issue may not be here raised in an original
action of certiorari and prohibitions. It is true that, as a general rule, the question of
constitutionality must be raised at the earliest opportunity, so that if not raised by
the pleadings, ordinarily it may not be raised at the trial, and if not raised in the trial
court, it will not considered on appeal. (12 C. J., p. 786. See, also, Cadwallader-Gibson
Lumber Co. vs. Del Rosario, 26 Phil., 192, 193-195.) But we must state that the general
rule admits of exceptions. Courts, in the exercise of sounds discretion, may determine
the time when a question affecting the constitutionality of a statute should be
presented. (In re Woolsey [1884], 95 N. Y., 135, 144.) Thus, in criminal cases, although
there is a very sharp conflict of authorities, it is said that the question may be raised
for the first time at any stage of the proceedings, either in the trial court or on appeal.
(12 C. J., p. 786.) Even in civil cases, it has been held that it is the duty of a court to
pass on the constitutional question, though raised for the first time on appeal, if it
appears that a determination of the question is necessary to a decision of the case.
(McCabe's Adm'x vs. Maysville & B. S. R. Co., [1910], 136 ky., 674; 124 S. W., 892;
Lohmeyer vs. St. Louis Cordage Co. [1908], 214 Mo., 685; 113 S. W. 1108; Carmody
vs. St. Louis Transit Co., [1905], 188 Mo., 572; 87 S. W., 913.) And it has been held
that a constitutional question will be considered by an appellate court at any time,
where it involves the jurisdiction of the court below (State vs. Burke [1911], 175 Ala.,
561; 57 S., 870.) As to the power of this court to consider the constitutional question
raised for the first time before this court in these proceedings, we turn again and
point with emphasis to the case of Yu Cong Eng vs. Trinidad, supra. And on the
hypotheses that the Hongkong & Shanghai Banking Corporation, represented by the
private prosecution, is not the proper party to raise the constitutional question here
— a point we do not now have to decide — we are of the opinion that the People of
the Philippines, represented by the Solicitor-General and the Fiscal of the City of
Manila, is such a proper party in the present proceedings. The unchallenged rule is
that the person who impugns the validity of a statute must have a personal and
substantial interest in the case such that he has sustained, or will sustained, direct
injury as a result of its enforcement. It goes without saying that if Act No. 4221 really
violates the constitution, the People of the Philippines, in whose name the present
action is brought, has a substantial interest in having it set aside. Of grater import
than the damage caused by the illegal expenditure of public funds is the mortal
wound inflicted upon the fundamental law by the enforcement of an invalid statute.
Hence, the well-settled rule that the state can challenge the validity of its own laws.
In Government of the Philippine Islands vs. Springer ([1927]), 50 Phil., 259 (affirmed
in Springer vs. Government of the Philippine Islands [1928], 277 U.S., 189; 72 Law.
ed., 845), this court declared an act of the legislature unconstitutional in an action
instituted in behalf of the Government of the Philippines. In Attorney General vs.
Perkins ([1889], 73 Mich., 303, 311, 312; 41 N. W. 426, 428, 429), the State of
Michigan, through its Attorney General, instituted quo warranto proceedings to test
the right of the respondents to renew a mining corporation, alleging that the statute
under which the respondents base their right was unconstitutional because it
impaired the obligation of contracts. The capacity of the chief law officer of the state
to question the constitutionality of the statute was though, as a general rule, only
those who are parties to a suit may question the constitutionality of a statute
involved in a judicial decision, it has been held that since the decree pronounced by
a court without jurisdiction in void, where the jurisdiction of the court depends on
the validity of the statute in question, the issue of constitutionality will be considered
on its being brought to the attention of the court by persons interested in the effect
to begin the statute. (12 C.J., sec. 184, p. 766.) And, even if we were to concede that
the issue was not properly raised in the court below by the proper party, it does not
follow that the issue may not be here raised in an original action of certiorari and
prohibition. It is true that, as a general rule, the question of constitutionality must be
raised at the earliest opportunity, so that if not raised by the pleadings, ordinarily it
may not be raised a the trial, and if not raised in the trial court, it will not be
considered on appeal. (12 C.J., p. 786. See, also, Cadwallader-Gibson Lumber Co. vs.
Del Rosario, 26 Phil., 192, 193-195.) But we must state that the general rule admits
of exceptions. Courts, in the exercise of sound discretion, may determine the time
when a question affecting the constitutionality of a statute should be presented. (In
re Woolsey [19884], 95 N.Y., 135, 144.) Thus, in criminal cases, although there is a
very sharp conflict of authorities, it is said that the question may be raised for the
first time at any state of the proceedings, either in the trial court or on appeal. (12
C.J., p. 786.) Even in civil cases, it has been held that it is the duty of a court to pass
on the constitutional question, though raised for first time on appeal, if it appears
that a determination of the question is necessary to a decision of the case. (McCabe's
Adm'x vs. Maysville & B. S. R. Co. [1910], 136 Ky., 674; 124 S. W., 892; Lohmeyer vs.
St. Louis, Cordage Co. [1908], 214 Mo. 685; 113 S. W., 1108; Carmody vs. St. Louis
Transit Co. [1905], 188 Mo., 572; 87 S. W., 913.) And it has been held that a
constitutional question will be considered by an appellate court at any time, where it
involves the jurisdiction of the court below (State vs. Burke [1911], 175 Ala., 561; 57
S., 870.) As to the power of this court to consider the constitutional question raised
for the first time before this court in these proceedings, we turn again and point with In State vs. Doane ([1916], 98 Kan., 435; 158 Pac., 38, 40), an original action
emphasis to the case of Yu Cong Eng. vs. Trinidad, supra. And on the hypothesis that (mandamus) was brought by the Attorney-General of Kansas to test the
the Hongkong & Shanghai Banking Corporation, represented by the private constitutionality of a statute of the state. In disposing of the question whether or not
prosecution, is not the proper party to raise the constitutional question here — a the state may bring the action, the Supreme Court of Kansas said:
point we do not now have to decide — we are of the opinion that the People of the
Philippines, represented by the Solicitor-General and the Fiscal of the City of Manila, . . . the state is a proper party — indeed, the proper party — to bring this
is such a proper party in the present proceedings. The unchallenged rule is that the action. The state is always interested where the integrity of its Constitution
person who impugns the validity of a statute must have a personal and substantial or statutes is involved.
interest in the case such that he has sustained, or will sustain, direct injury as a result
of its enforcement. It goes without saying that if Act No. 4221 really violates the "It has an interest in seeing that the will of the Legislature
Constitution, the People of the Philippines, in whose name the present action is is not disregarded, and need not, as an individual plaintiff
brought, has a substantial interest in having it set aside. Of greater import than the must, show grounds of fearing more specific injury. (State
damage caused by the illegal expenditure of public funds is the mortal wound vs. Kansas City 60 Kan., 518 [57 Pac., 118])." (State vs.
inflicted upon the fundamental law by the enforcement of an invalid statute. Hence, Lawrence, 80 Kan., 707; 103 Pac., 839.)
the well-settled rule that the state can challenge the validity of its own laws. In
Government of the Philippine Islands vs. Springer ([1927]), 50 Phil., 259 (affirmed in
Where the constitutionality of a statute is in doubt the state's law officer, its
Springer vs. Government of the Philippine Islands [1928], 277 U.S., 189; 72 Law. ed.,
Attorney-General, or county attorney, may exercise his bet judgment as to
845), this court declared an act of the legislature unconstitutional in an action
what sort of action he will bring to have the matter determined, either by
instituted in behalf of the Government of the Philippines. In Attorney General vs.
quo warranto to challenge its validity (State vs. Johnson, 61 Kan., 803; 60
Perkings([1889], 73 Mich., 303, 311, 312; 41 N.W., 426, 428, 429), the State of
Pac., 1068; 49 L.R.A., 662), by mandamus to compel obedience to its terms
Michigan, through its Attorney General, instituted quo warranto proceedings to test
(State vs. Dolley, 82 Kan., 533; 108 Pac., 846), or by injunction to restrain
the right of the respondents to renew a mining corporation, alleging that the statute
proceedings under its questionable provisions (State ex rel. vs. City of
under which the respondents base their right was unconstitutional because it
Neodesha, 3 Kan. App., 319; 45 Pac., 122).
impaired the obligation of contracts. The capacity of the chief law officer of the state
to question the constitutionality of the statute was itself questioned. Said the
Other courts have reached the same conclusion (See State vs. St. Louis S. W. Ry. Co.
Supreme Court of Michigan, through Champlin, J.:
[1917], 197 S. W., 1006; State vs. S.H. Kress & Co. [1934], 155 S., 823; State vs.
Walmsley [1935], 181 La., 597; 160 S., 91; State vs. Board of County Comr's [1934],
. . . The idea seems to be that the people are estopped from questioning the
39 Pac. [2d], 286; First Const. Co. of Brooklyn vs. State [1917], 211 N.Y., 295; 116 N.E.,
validity of a law enacted by their representatives; that to an accusation by
1020; Bush vs. State {1918], 187 Ind., 339; 119 N.E., 417; State vs. Watkins [1933],
the people of Michigan of usurpation their government, a statute enacted
176 La., 837; 147 S., 8, 10, 11). In the case last cited, the Supreme Court of Luisiana
by the people of Michigan is an adequate answer. The last proposition is
said:
true, but, if the statute relied on in justification is unconstitutional, it is
statute only in form, and lacks the force of law, and is of no more saving
It is contended by counsel for Herbert Watkins that a district attorney, being
effect to justify action under it than if it had never been enacted. The
charged with the duty of enforcing the laws, has no right to plead that a law
constitution is the supreme law, and to its behests the courts, the
is unconstitutional. In support of the argument three decisions are cited,
legislature, and the people must bow . . . The legislature and the
viz.: State ex rel. Hall, District Attorney, vs. Judge of Tenth Judicial District
respondents are not the only parties in interest upon such constitutional
(33 La. Ann., 1222); State ex rel. Nicholls, Governor vs. Shakespeare, Mayor
questions. As was remarked by Mr. Justice Story, in speaking of an
of New Orleans (41 Ann., 156; 6 So., 592); and State ex rel., Banking Co., etc.
acquiescence by a party affected by an unconstitutional act of the
vs. Heard, Auditor (47 La. Ann., 1679; 18 So., 746; 47 L. R. A., 512). These
legislature: "The people have a deep and vested interest in maintaining all
decisions do not forbid a district attorney to plead that a statute is
the constitutional limitations upon the exercise of legislative powers." (Allen
unconstitutional if he finds if in conflict with one which it is his duty to
vs. Mckeen, 1 Sum., 314.)
enforce. In State ex rel. Hall, District Attorney, vs. Judge, etc., the ruling was
the judge should not, merely because he believed a certain statute to be
 unconstitutional forbid the district attorney to file a bill of information
charging a person with a violation of the statute. In other words, a judge
should not judicially declare a statute unconstitutional until the question of
constitutionality is tendered for decision, and unless it must be decided in
order to determine the right of a party litigant. State ex rel. Nicholls,
Governor, etc., is authority for the proposition merely that an officer on
whom a statute imposes the duty of enforcing its provisions cannot avoid
the duty upon the ground that he considers the statute unconstitutional,
and hence in enforcing the statute he is immune from responsibility if the
statute be unconstitutional. State ex rel. Banking Co., etc., is authority for
the proposition merely that executive officers, e.g., the state auditor and
state treasurer, should not decline to perform ministerial duties imposed
upon them by a statute, on the ground that they believe the statute is
unconstitutional.
It is the duty of a district attorney to enforce the criminal laws of the state,
and, above all, to support the Constitution of the state. If, in the
performance of his duty he finds two statutes in conflict with each other, or
one which repeals another, and if, in his judgment, one of the two statutes
is unconstitutional, it is his duty to enforce the other; and, in order to do so,
he is compelled to submit to the court, by way of a plea, that one of the
statutes is unconstitutional. If it were not so, the power of the Legislature
would be free from constitutional limitations in the enactment of criminal
laws.
The respondents do not seem to doubt seriously the correctness of the general
proposition that the state may impugn the validity of its laws. They have not cited
any authority running clearly in the opposite direction. In fact, they appear to have
proceeded on the assumption that the rule as stated is sound but that it has no
application in the present case, nor may it be invoked by the City Fiscal in behalf of
the People of the Philippines, one of the petitioners herein, the principal reasons
being that the validity before this court, that the City Fiscal is estopped from attacking
the validity of the Act and, not authorized challenge the validity of the Act in its
application outside said city. (Additional memorandum of respondents, October 23,
1937, pp. 8,. 10, 17 and 23.)
The mere fact that the Probation Act has been repeatedly relied upon the past and
all that time has not been attacked as unconstitutional by the Fiscal of Manila but, on
the contrary, has been impliedly regarded by him as constitutional, is no reason for
considering the People of the Philippines estopped from nor assailing its validity. For
courts will pass upon a constitutional questions only when presented before it
in bona fide cases for determination, and the fact that the question has not been
raised before is not a valid reason for refusing to allow it to be raised later. The fiscal
and all others are justified in relying upon the statute and treating it as valid until it
is held void by the courts in proper cases.
It remains to consider whether the determination of the constitutionality of Act No.
4221 is necessary to the resolution of the instant case. For, ". . . while the court will
meet the question with firmness, where its decision is indispensable, it is the part of
wisdom, and just respect for the legislature, renders it proper, to waive it, if the case
in which it arises, can be decided on other points." (Ex parte Randolph [1833], 20 F.
Cas. No. 11, 558; 2 Brock., 447. Vide, also Hoover vs. wood [1857], 9 Ind., 286, 287.)
It has been held that the determination of a constitutional question is necessary
whenever it is essential to the decision of the case (12 C. J., p. 782, citing Long Sault
Dev. Co. vs. Kennedy [1913], 158 App. Div., 398; 143 N. Y. Supp., 454 [aff. 212 N.Y., 1:
105 N. E., 849; Ann. Cas. 1915D, 56; and app dism 242 U.S., 272]; Hesse vs. Ledesma,
7 Porto Rico Fed., 520; Cowan vs. Doddridge, 22 Gratt [63 Va.], 458; Union Line Co.,
vs. Wisconsin R. Commn., 146 Wis., 523; 129 N. W., 605), as where the right of a party
is founded solely on a statute the validity of which is attacked. (12 C.J., p. 782, citing
Central Glass Co. vs. Niagrara F. Ins. Co., 131 La., 513; 59 S., 972; Cheney vs. Beverly,
188 Mass., 81; 74 N.E., 306). There is no doubt that the respondent Cu Unjieng draws
his privilege to probation solely from Act No. 4221 now being assailed.
Apart from the foregoing considerations, that court will also take cognizance of the
fact that the Probation Act is a new addition to our statute books and its validity has
never before been passed upon by the courts; that may persons accused and
convicted of crime in the City of Manila have applied for probation; that some of
them are already on probation; that more people will likely take advantage of the
Probation Act in the future; and that the respondent Mariano Cu Unjieng has been at
large for a period of about four years since his first conviction. All wait the decision
of this court on the constitutional question. Considering, therefore, the importance
which the instant case has assumed and to prevent multiplicity of suits, strong
reasons of public policy demand that the constitutionality of Act No. 4221 be now
resolved. (Yu Cong Eng vs. Trinidad [1925], 47 Phil., 385; [1926], 271 U.S., 500; 70
Law. ed., 1059. See 6 R.C.L., pp. 77, 78; People vs. Kennedy [1913], 207 N.Y., 533; 101
N.E., 442, 444; Ann. Cas. 1914C, 616; Borginis vs. Falk Co. [1911], 147 Wis., 327; 133
N.W., 209, 211; 37 L.R.A. [N.S.] 489; Dimayuga and Fajardo vs. Fernandez [1922], 43
Phil., 304.) In Yu Cong Eng vs. Trinidad, supra, an analogous situation confronted us.
We said: "Inasmuch as the property and personal rights of nearly twelve thousand
merchants are affected by these proceedings, and inasmuch as Act No. 2972 is a new
law not yet interpreted by the courts, in the interest of the public welfare and for the
advancement of public policy, we have determined to overrule the defense of want
of jurisdiction in order that we may decide the main issue. We have here an
extraordinary situation which calls for a relaxation of the general rule." Our ruling on
this point was sustained by the Supreme Court of the United States. A more binding
authority in support of the view we have taken can not be found.
We have reached the conclusion that the question of the constitutionality of Act No.
4221 has been properly raised. Now for the main inquiry: Is the Act unconstitutional?
Under a doctrine peculiarly American, it is the office and duty of the judiciary to
enforce the Constitution. This court, by clear implication from the provisions of
section 2, subsection 1, and section 10, of Article VIII of the Constitution, may declare
an act of the national legislature invalid because in conflict with the fundamental lay.
It will not shirk from its sworn duty to enforce the Constitution. And, in clear cases, it
will not hesitate to give effect to the supreme law by setting aside a statute in conflict
therewith. This is of the essence of judicial duty.
This court is not unmindful of the fundamental criteria in cases of this nature that all
reasonable doubts should be resolved in favor of the constitutionality of a statute.
An act of the legislature approved by the executive, is presumed to be within
constitutional limitations. The responsibility of upholding the Constitution rests not
on the courts alone but on the legislature as well. "The question of the validity of
every statute is first determined by the legislative department of the government
itself." (U.S. vs. Ten Yu [1912], 24 Phil., 1, 10; Case vs. Board of Health and Heiser
[1913], 24 Phil., 250, 276; U.S. vs. Joson [1913], 26 Phil., 1.) And a statute finally
comes before the courts sustained by the sanction of the executive. The members of
the Legislature and the Chief Executive have taken an oath to support the
Constitution and it must be presumed that they have been true to this oath and that
in enacting and sanctioning a particular law they did not intend to violate the
Constitution. The courts cannot but cautiously exercise its power to overturn the
solemn declarations of two of the three grand departments of the governments. (6
R.C.L., p. 101.) Then, there is that peculiar political philosophy which bids the judiciary
to reflect the wisdom of the people as expressed through an elective Legislature and
an elective Chief Executive. It follows, therefore, that the courts will not set aside a
law as violative of the Constitution except in a clear case. This is a proposition too
plain to require a citation of authorities.
One of the counsel for respondents, in the course of his impassioned argument,
called attention to the fact that the President of the Philippines had already
expressed his opinion against the constitutionality of the Probation Act, adverting
that as to the Executive the resolution of this question was a foregone conclusion.
Counsel, however, reiterated his confidence in the integrity and independence of this
court. We take notice of the fact that the President in his message dated September
1, 1937, recommended to the National Assembly the immediate repeal of the
Probation Act (No. 4221); that this message resulted in the approval of Bill No. 2417
of the Nationality Assembly repealing the probation Act, subject to certain conditions
therein mentioned; but that said bill was vetoed by the President on September 13,
1937, much against his wish, "to have stricken out from the statute books of the
Commonwealth a law . . . unfair and very likely unconstitutional." It is sufficient to
observe in this connection that, in vetoing the bill referred to, the President exercised
his constitutional prerogative. He may express the reasons which he may deem
proper for taking such a step, but his reasons are not binding upon us in the
determination of actual controversies submitted for our determination. Whether or
not the Executive should express or in any manner insinuate his opinion on a matter
encompassed within his broad constitutional power of veto but which happens to be
at the same time pending determination in this court is a question of propriety for
him exclusively to decide or determine. Whatever opinion is expressed by him under
these circumstances, however, cannot sway our judgment on way or another and
prevent us from taking what in our opinion is the proper course of action to take in a
given case. It if is ever necessary for us to make any vehement affirmance during this
formative period of our political history, it is that we are independent of the Executive
no less than of the Legislative department of our government — independent in the
performance of our functions, undeterred by any consideration, free from politics,
indifferent to popularity, and unafraid of criticism in the accomplishment of our
sworn duty as we see it and as we understand it.
The constitutionality of Act No. 4221 is challenged on three principal grounds: (1)
That said Act encroaches upon the pardoning power of the Executive; (2) that its
constitutes an undue delegation of legislative power and (3) that it denies the equal
protection of the laws.
1. Section 21 of the Act of Congress of August 29, 1916, commonly known as the
Jones Law, in force at the time of the approval of Act No. 4221, otherwise known as
the Probation Act, vests in the Governor-General of the Philippines "the exclusive
power to grant pardons and reprieves and remit fines and forfeitures". This power is
now vested in the President of the Philippines. (Art. VII, sec. 11, subsec. 6.) The
provisions of the Jones Law and the Constitution differ in some respects. The
adjective "exclusive" found in the Jones Law has been omitted from the Constitution.
Under the Jones Law, as at common law, pardon could be granted any time after the
commission of the offense, either before or after conviction (Vide Constitution of the
United States, Art. II, sec. 2; In re Lontok [1922], 43 Phil., 293). The Governor-General
of the Philippines was thus empowered, like the President of the United States, to
pardon a person before the facts of the case were fully brought to light. The framers
of our Constitution thought this undesirable and, following most of the state
constitutions, provided that the pardoning power can only be exercised "after
conviction". So, too, under the new Constitution, the pardoning power does not
extend to "cases of impeachment". This is also the rule generally followed in the
United States (Vide Constitution of the United States, Art. II, sec. 2). The rule in
England is different. There, a royal pardon can not be pleaded in bar of an
impeachment; "but," says Blackstone, "after the impeachment has been solemnly
heard and determined, it is not understood that the king's royal grace is further
restrained or abridged." (Vide, Ex parte Wells [1856], 18 How., 307; 15 Law. ed., 421;
Com. vs. Lockwood [1872], 109 Mass., 323; 12 Am. Rep., 699; Sterling vs. Drake
[1876], 29 Ohio St., 457; 23 am. Rep., 762.) The reason for the distinction is obvious.
In England, Judgment on impeachment is not confined to mere "removal from office
and disqualification to hold and enjoy any office of honor, trust, or profit under the
Government" (Art. IX, sec. 4, Constitution of the Philippines) but extends to the whole
punishment attached by law to the offense committed. The House of Lords, on a
conviction may, by its sentence, inflict capital punishment, perpetual banishment,
perpetual banishment, fine or imprisonment, depending upon the gravity of the
offense committed, together with removal from office and incapacity to hold office.
(Com. vs. Lockwood, supra.) Our Constitution also makes specific mention of
"commutation" and of the power of the executive to impose, in the pardons he may
grant, such conditions, restrictions and limitations as he may deem proper. Amnesty
may be granted by the President under the Constitution but only with the
concurrence of the National Assembly. We need not dwell at length on the
significance of these fundamental changes. It is sufficient for our purposes to state
that the pardoning power has remained essentially the same. The question is: Has
the pardoning power of the Chief Executive under the Jones Law been impaired by
the Probation Act?
As already stated, the Jones Law vests the pardoning power exclusively in the Chief
Executive. The exercise of the power may not, therefore, be vested in anyone else.
". . . The benign prerogative of mercy reposed in the executive cannot be taken away
nor fettered by any legislative restrictions, nor can like power be given by the
legislature to any other officer or authority. The coordinate departments of
government have nothing to do with the pardoning power, since no person properly
belonging to one of the departments can exercise any powers appertaining to either
of the others except in cases expressly provided for by the constitution." (20 R.C.L.,
pp., , and cases cited.) " . . . where the pardoning power is conferred on the executive
without express or implied limitations, the grant is exclusive, and the legislature can
neither exercise such power itself nor delegate it elsewhere, nor interfere with or
control the proper exercise thereof, . . ." (12 C.J., pp. 838, 839, and cases cited.) If Act
No. 4221, then, confers any pardoning power upon the courts it is for that reason
unconstitutional and void. But does it?
In the famous Killitts decision involving an embezzlement case, the Supreme Court of
the United States ruled in 1916 that an order indefinitely suspending sentenced was
void. (Ex parte United States [1916], 242 U.S., 27; 61 Law. ed., 129; L.R.A. 1917E,
1178; 37 Sup. Ct. Rep., 72; Ann. Cas. 1917B, 355.) Chief Justice White, after an
exhaustive review of the authorities, expressed the opinion of the court that under
the common law the power of the court was limited to temporary suspension and
that the right to suspend sentenced absolutely and permanently was vested in the
executive branch of the government and not in the judiciary. But, the right of
Congress to establish probation by statute was conceded. Said the court through its
Chief Justice: ". . . and so far as the future is concerned, that is, the causing of the
imposition of penalties as fixed to be subject, by probation legislation or such other
means as the legislative mind may devise, to such judicial discretion as may be
adequate to enable courts to meet by the exercise of an enlarged but wise discretion
the infinite variations which may be presented to them for judgment, recourse must
be had Congress whose legislative power on the subject is in the very nature of things
adequately complete." (Quoted in Riggs vs. United States [1926], 14 F. [2d], 5, 6.) This
decision led the National Probation Association and others to agitate for the
enactment by Congress of a federal probation law. Such action was finally taken on
March 4, 1925 (chap. 521, 43 Stat. L. 159, U.S.C. title 18, sec. 724). This was followed
by an appropriation to defray the salaries and expenses of a certain number of
probation officers chosen by civil service. (Johnson, Probation for Juveniles and
Adults, p. 14.)
In United States vs. Murray ([1925], 275 U.S., 347; 48 Sup. Ct. Rep., 146; 72 Law. ed.,
309), the Supreme Court of the United States, through Chief Justice Taft, held that
when a person sentenced to imprisonment by a district court has begun to serve his
sentence, that court has no power under the Probation Act of March 4, 1925 to grant
him probation even though the term at which sentence was imposed had not yet
expired. In this case of Murray, the constitutionality of the probation Act was not
considered but was assumed. The court traced the history of the Act and quoted from
the report of the Committee on the Judiciary of the United States House of
Representatives (Report No. 1377, 68th Congress, 2 Session) the following
statement:
Prior to the so-called Killitts case, rendered in December, 1916, the district
courts exercised a form of probation either, by suspending sentence or by
placing the defendants under state probation officers or volunteers. In this
case, however (Ex parte United States, 242 U.S., 27; 61 L. Ed., 129; L.R.A.,
1917E, 1178; 37 Sup. Ct. Rep., 72 Ann. Cas. 1917B, 355), the Supreme Court
denied the right of the district courts to suspend sentenced. In the same
opinion the court pointed out the necessity for action by Congress if the
courts were to exercise probation powers in the future . . .
Since this decision was rendered, two attempts have been made to enact
probation legislation. In 1917, a bill was favorably reported by the Judiciary
Committee and passed the House. In 1920, the judiciary Committee again
favorably reported a probation bill to the House, but it was never reached
for definite action.
If this bill is enacted into law, it will bring the policy of the Federal
government with reference to its treatment of those convicted of violations
of its criminal laws in harmony with that of the states of the Union. At the
 present time every state has a probation law, and in all but twelve states the
law applies both to adult and juvenile offenders. (see, also, Johnson,
Probation for Juveniles and Adults [1928], Chap. I.)
The constitutionality of the federal probation law has been sustained by inferior
federal courts. In Riggs vs. United States supra, the Circuit Court of Appeals of the
Fourth Circuit said:
Since the passage of the Probation Act of March 4, 1925, the questions
under consideration have been reviewed by the Circuit Court of Appeals of
the Ninth Circuit (7 F. [2d], 590), and the constitutionality of the act fully
sustained, and the same held in no manner to encroach upon the pardoning
power of the President. This case will be found to contain an able and
comprehensive review of the law applicable here. It arose under the act we
have to consider, and to it and the authorities cited therein special reference
is made (Nix vs. James, 7 F. [2d], 590, 594), as is also to a decision of the
Circuit Court of Appeals of the Seventh Circuit (Kriebel vs. U.S., 10 F. [2d],
762), likewise construing the Probation Act.
We have seen that in 1916 the Supreme Court of the United States; in plain and
unequivocal language, pointed to Congress as possessing the requisite power to
enact probation laws, that a federal probation law as actually enacted in 1925, and
that the constitutionality of the Act has been assumed by the Supreme Court of the
United States in 1928 and consistently sustained by the inferior federal courts in a
number of earlier cases.
We are fully convinced that the Philippine Legislature, like the Congress of the United
States, may legally enact a probation law under its broad power to fix the punishment
of any and all penal offenses. This conclusion is supported by other authorities. In Ex
parte Bates ([1915], 20 N. M., 542; L.R.A. 1916A, 1285; 151 Pac., 698, the court said:
"It is clearly within the province of the Legislature to denominate and define all
classes of crime, and to prescribe for each a minimum and maximum punishment."
And in State vs. Abbott ([1910], 87 S.C., 466; 33 L.R.A. [N. S.], 112; 70 S. E., 6; Ann.
Cas. 1912B, 1189), the court said: "The legislative power to set punishment for crime
is very broad, and in the exercise of this power the general assembly may confer on
trial judges, if it sees fit, the largest discretion as to the sentence to be imposed, as
to the beginning and end of the punishment and whether it should be certain or
indeterminate or conditional." (Quoted in State vs. Teal [1918], 108 S. C., 455; 95 S.
E., 69.) Indeed, the Philippine Legislature has defined all crimes and fixed the
penalties for their violation. Invariably, the legislature has demonstrated the desire
to vest in the courts — particularly the trial courts — large discretion in imposing the
penalties which the law prescribes in particular cases. It is believed that justice can
best be served by vesting this power in the courts, they being in a position to best
determine the penalties which an individual convict, peculiarly circumstanced, should
suffer. Thus, while courts are not allowed to refrain from imposing a sentence merely
because, taking into consideration the degree of malice and the injury caused by the
offense, the penalty provided by law is clearly excessive, the courts being allowed in
such case to submit to the Chief Executive, through the Department of Justice, such
statement as it may deem proper (see art. 5, Revised Penal Code), in cases where
both mitigating and aggravating circumstances are attendant in the commission of a
crime and the law provides for a penalty composed of two indivisible penalties, the
courts may allow such circumstances to offset one another in consideration of their
number and importance, and to apply the penalty according to the result of such
compensation. (Art. 63, rule 4, Revised Penal Code; U.S. vs. Reguera and Asuategui
[1921], 41 Phil., 506.) Again, article 64, paragraph 7, of the Revised Penal Code
empowers the courts to determine, within the limits of each periods, in case the
penalty prescribed by law contains three periods, the extent of the evil produced by
the crime. In the imposition of fines, the courts are allowed to fix any amount within
the limits established by law, considering not only the mitigating and aggravating
circumstances, but more particularly the wealth or means of the culprit. (Art. 66,
Revised Penal Code.) Article 68, paragraph 1, of the same Code provides that "a
discretionary penalty shall be imposed" upon a person under fifteen but over nine
years of age, who has not acted without discernment, but always lower by two
degrees at least than that prescribed by law for the crime which he has committed.
Article 69 of the same Code provides that in case of "incomplete self-defense", i.e.,
when the crime committed is not wholly excusable by reason of the lack of some of
the conditions required to justify the same or to exempt from criminal liability in the
several cases mentioned in article 11 and 12 of the Code, "the courts shall impose
the penalty in the period which may be deemed proper, in view of the number and
nature of the conditions of exemption present or lacking." And, in case the
commission of what are known as "impossible" crimes, "the court, having in mind the
social danger and the degree of criminality shown by the offender," shall impose
upon him either arresto mayor or a fine ranging from 200 to 500 pesos. (Art. 59,
Revised Penal Code.)
Under our Revised Penal Code, also, one-half of the period of preventive
imprisonment is deducted form the entire term of imprisonment, except in certain
cases expressly mentioned (art. 29); the death penalty is not imposed when the guilty
person is more than seventy years of age, or where upon appeal or revision of the
case by the Supreme Court, all the members thereof are not unanimous in their
voting as to the propriety of the imposition of the death penalty (art. 47, see also,
sec. 133, Revised Administrative Code, as amended by Commonwealth Act No. 3);
the death sentence is not to be inflicted upon a woman within the three years next
following the date of the sentence or while she is pregnant, or upon any person over
seventy years of age (art. 83); and when a convict shall become insane or an imbecile
after final sentence has been pronounced, or while he is serving his sentenced, the
execution of said sentence shall be suspended with regard to the personal penalty
during the period of such insanity or imbecility (art. 79).
But the desire of the legislature to relax what might result in the undue harshness of
the penal laws is more clearly demonstrated in various other enactments, including
the probation Act. There is the Indeterminate Sentence Law enacted in 1933 as Act
No. 4103 and subsequently amended by Act No. 4225, establishing a system of parole
(secs. 5 to 100 and granting the courts large discretion in imposing the penalties of
the law. Section 1 of the law as amended provides; "hereafter, in imposing a prison
sentence for an offenses punished by the Revised Penal Code, or its amendments,
the court shall sentence the accused to an indeterminate sentence the maximum
term of which shall be that which, in view of the attending circumstances, could be
properly imposed under the rules of the said Code, and to a minimum which shall be
within the range of the penalty next lower to that prescribed by the Code for the
offense; and if the offense is punished by any other law, the court shall sentence the
accused to an indeterminate sentence, the maximum term of which shall not exceed
the maximum fixed by said law and the minimum shall not be less than the minimum
term prescribed by the same." Certain classes of convicts are, by section 2 of the law,
excluded from the operation thereof. The Legislature has also enacted the Juvenile
Delinquency Law (Act No. 3203) which was subsequently amended by Act No. 3559.
Section 7 of the original Act and section 1 of the amendatory Act have become article
80 of the Revised Penal Code, amended by Act No. 4117 of the Philippine Legislature
and recently reamended by Commonwealth Act No. 99 of the National Assembly. In
this Act is again manifested the intention of the legislature to "humanize" the penal
laws. It allows, in effect, the modification in particular cases of the penalties
prescribed by law by permitting the suspension of the execution of the judgment in
the discretion of the trial court, after due hearing and after investigation of the
particular circumstances of the offenses, the criminal record, if any, of the convict,
and his social history. The Legislature has in reality decreed that in certain cases no
punishment at all shall be suffered by the convict as long as the conditions of
probation are faithfully observed. It this be so, then, it cannot be said that the
Probation Act comes in conflict with the power of the Chief Executive to grant
pardons and reprieves, because, to use the language of the Supreme Court of New
Mexico, "the element of punishment or the penalty for the commission of a wrong,
while to be declared by the courts as a judicial function under and within the limits
of law as announced by legislative acts, concerns solely the procedure and conduct
of criminal causes, with which the executive can have nothing to do." (Ex
parteBates, supra.) In Williams vs. State ([1926], 162 Ga., 327; 133 S.E., 843), the
court upheld the constitutionality of the Georgia probation statute against the
contention that it attempted to delegate to the courts the pardoning power lodged
by the constitution in the governor alone is vested with the power to pardon after
final sentence has been imposed by the courts, the power of the courts to imposed
any penalty which may be from time to time prescribed by law and in such manner
as may be defined cannot be questioned."
We realize, of course, the conflict which the American cases disclose. Some cases
hold it unlawful for the legislature to vest in the courts the power to suspend the
operation of a sentenced, by probation or otherwise, as to do so would encroach
upon the pardoning power of the executive. (In re Webb [1895], 89 Wis., 354; 27
L.R.A., 356; 46 Am. St. Rep., 846; 62 N.W., 177; 9 Am. Crim., Rep., 702; State ex rel.
Summerfield vs. Moran [1919], 43 Nev., 150; 182 Pac., 927; Ex parte Clendenning
[1908], 22 Okla., 108; 1 Okla. Crim. Rep., 227; 19 L.R.A. [N.S.], 1041; 132 Am. St. Rep.,
628; 97 Pac., 650; People vs. Barrett [1903], 202 Ill, 287; 67 N.E., 23; 63 L.R.A., 82; 95
Am. St. Rep., 230; Snodgrass vs. State [1912], 67 Tex. Crim. Rep., 615; 41 L. R. A. [N.
S.], 1144; 150 S. W., 162; Ex parte Shelor [1910], 33 Nev., 361;111 Pac., 291; Neal vs.
State [1898], 104 Ga., 509; 42 L. R. A., 190; 69 Am. St. Rep., 175; 30 S. E. 858; State ex
rel. Payne vs. Anderson [1921], 43 S. D., 630; 181 N. W., 839; People vs. Brown, 54
Mich., 15; 19 N. W., 571; States vs. Dalton [1903], 109 Tenn., 544; 72 S. W., 456.)
Other cases, however, hold contra. (Nix vs. James [1925; C. C. A., 9th], 7 F. [2d], 590;
Archer vs. Snook [1926; D. C.], 10 F. [2d], 567; Riggs. vs. United States [1926; C. C. A.
4th], 14]) [2d], 5; Murphy vs. States [1926], 171 Ark., 620; 286 S. W., 871; 48 A. L. R.,
1189; Re Giannini [1912], 18 Cal. App., 166; 122 Pac., 831; Re Nachnaber [1928], 89
Cal. App., 530; 265 Pac., 392; Ex parte De Voe [1931], 114 Cal. App., 730; 300 Pac.,
874; People vs. Patrick [1897], 118 Cal., 332; 50 Pac., 425; Martin vs. People [1917],
69 Colo., 60; 168 Pac., 1171; Belden vs. Hugo [1914], 88 Conn., 50; 91 A., 369, 370,
371; Williams vs. State [1926], 162 Ga., 327; 133 S. E., 843; People vs. Heise [1913],
257 Ill., 443; 100 N. E., 1000; Parker vs. State [1893], 135 Ind., 534; 35 N. E., 179; 23
L. R. A., 859; St. Hillarie, Petitioner [1906], 101 Me., 522; 64 Atl., 882; People vs.
Stickle [1909], 156 Mich., 557; 121 N. W., 497; State vs. Fjolander [1914], 125 Minn.,
529; State ex rel. Bottomnly vs. District Court [1925], 73 Mont., 541; 237 Pac., 525;
State vs. Everitt [1913], 164 N. C., 399; 79 S. E., 274; 47 L. R. A. [N. S.], 848; State ex
rel. Buckley vs. Drew [1909], 75 N. H., 402; 74 Atl., 875; State vs. Osborne [1911], 79
N. J. Eq., 430; 82 Atl. 424; Ex parte Bates [1915], 20 N. M., 542; L. R. A., 1916 A. 1285;
151 Pac., 698; People vs. ex rel. Forsyth vs. Court of Session [1894], 141 N. Y., 288; 23
L. R. A., 856; 36 N. E., 386; 15 Am. Crim. Rep., 675; People ex rel. Sullivan vs. Flynn
[1907], 55 Misc., 639; 106 N. Y. Supp., 928; People vs. Goodrich [1914], 149 N. Y.
Supp., 406; Moore vs. Thorn [1935], 245 App. Div., 180; 281 N. Y. Supp., 49; Re
Hart [1914], 29 N. D., 38; L. R. A., 1915C, 1169; 149 N. W., 568; Ex parte Eaton [1925],
29 Okla., Crim. Rep., 275; 233 P., 781; State vs. Teal [1918], 108 S. C., 455; 95 S. E.,
69; State vs. Abbot [1910], 87 S. C., 466; 33 L.R.A., [N. S.], 112; 70 S. E., 6; Ann. Cas.,
1912B, 1189; Fults vs. States [1854],34 Tenn., 232; Woods vs. State [1814], 130 Tenn.,
100; 169 S. W., 558; Baker vs. State [1814], 130 Tenn., 100; 169 S. W., 558; Baker vs.
State [1913],70 Tex., Crim. Rep., 618; 158 S. W., 998; Cook vs. State [1914], 73 Tex.
Crim. Rep., 548; 165 S. W., 573; King vs. State [1914], 72 Tex. Crim. Rep., 394; 162 S.
W., 890; Clare vs. State [1932], 122 Tex. Crim. Rep., 394; 162 S. W., 890; Clare vs.
State [1932], 122 Tex. Crim. Rep., 211; 54 S. W. [2d], 127; Re Hall [1927], 100 Vt., 197;
136 A., 24; Richardson vs. Com. [1921], 131 Va., 802; 109 S.E., 460; State vs. Mallahan
[1911], 65 Wash., 287; 118 Pac., 42; State ex rel. Tingstand vs. Starwich [1922], 119
Wash., 561; 206 Pac., 29; 26 A. L. R., 393; 396.) We elect to follow this long catena of
authorities holding that the courts may be legally authorized by the legislature to
suspend sentence by the establishment of a system of probation however
characterized. State ex rel. Tingstand vs. Starwich ([1922], 119 Wash., 561; 206 Pac.,
29; 26 A. L. R., 393), deserved particular mention. In that case, a statute enacted in
1921 which provided for the suspension of the execution of a sentence until
otherwise ordered by the court, and required that the convicted person be placed
under the charge of a parole or peace officer during the term of such suspension, on
such terms as the court may determine, was held constitutional and as not giving the
court a power in violation of the constitutional provision vesting the pardoning power
in the chief executive of the state. (Vide, also, Re Giannini [1912], 18 Cal App., 166;
122 Pac., 831.)
Probation and pardon are not coterminous; nor are they the same. They are actually
district and different from each other, both in origin and in nature. In People ex rel.
Forsyth vs. Court of Sessions ([1894], 141 N. Y., 288, 294; 36 N. E., 386, 388; 23 L. R.
A., 856; 15 Am. Crim. Rep., 675), the Court of Appeals of New York said:
. . . The power to suspend sentence and the power to grant reprieves and
pardons, as understood when the constitution was adopted, are totally
distinct and different in their nature. The former was always a part of the
judicial power; the latter was always a part of the executive power. The
suspension of the sentence simply postpones the judgment of the court
temporarily or indefinitely, but the conviction and liability following it, and
the civil disabilities, remain and become operative when judgment is
rendered. A pardon reaches both the punishment prescribed for the offense
and the guilt of the offender. It releases the punishment, and blots out of
existence the guilt, so that in the eye of the law, the offender is as innocent
as if he had never committed the offense. It removes the penalties and
disabilities, and restores him to all his civil rights. It makes him, as it were, a
new man, and gives him a new credit and capacity. (Ex parte Garland, 71 U.
S., 4 Wall., 333; 18 Law. ed., 366; U. S. vs. Klein, 80 U. S., 13 Wall., 128; 20
Law. ed., 519; Knote vs. U. S., 95 U. S., 149; 24 Law. ed., 442.)
The framers of the federal and the state constitutions were perfectly familiar
with the principles governing the power to grant pardons, and it was
conferred by these instruments upon the executive with full knowledge of
the law upon the subject, and the words of the constitution were used to
express the authority formerly exercised by the English crown, or by its
representatives in the colonies. (Ex parte Wells, 59 U. S., 18 How., 307; 15
Law. ed., 421.) As this power was understood, it did not comprehend any
part of the judicial functions to suspend sentence, and it was never intended
that the authority to grant reprieves and pardons should abrogate, or in any
degree restrict, the exercise of that power in regard to its own judgments,
that criminal courts has so long maintained. The two powers, so distinct and
different in their nature and character, were still left separate and distinct,
the one to be exercised by the executive, and the other by the judicial
department. We therefore conclude that a statute which, in terms,
authorizes courts of criminal jurisdiction to suspend sentence in certain
cases after conviction, — a power inherent in such courts at common law,
which was understood when the constitution was adopted to be an ordinary
judicial function, and which, ever since its adoption, has been exercised of
legislative power under the constitution. It does not encroach, in any just
sense, upon the powers of the executive, as they have been understood and
practiced from the earliest times. (Quoted with approval in Directors of
Prisons vs. Judge of First Instance of Cavite [1915], 29 Phil., 265, Carson, J.,
concurring, at pp. 294, 295.)
In probation, the probationer is in no true sense, as in pardon, a free man. He is not
finally and completely exonerated. He is not exempt from the entire punishment
which the law inflicts. Under the Probation Act, the probationer's case is not
terminated by the mere fact that he is placed on probation. Section 4 of the Act
provides that the probation may be definitely terminated and the probationer finally
discharged from supervision only after the period of probation shall have been
terminated and the probation officer shall have submitted a report, and the court
shall have found that the probationer has complied with the conditions of probation.
The probationer, then, during the period of probation, remains in legal custody —
subject to the control of the probation officer and of the court; and, he may be
rearrested upon the non-fulfillment of the conditions of probation and, when
rearrested, may be committed to prison to serve the sentence originally imposed
upon him. (Secs. 2, 3, 5 and 6, Act No. 4221.)
The probation described in the act is not pardon. It is not complete liberty,
and may be far from it. It is really a new mode of punishment, to be applied
by the judge in a proper case, in substitution of the imprisonment and find
prescribed by the criminal laws. For this reason its application is as purely a
judicial act as any other sentence carrying out the law deemed applicable to
the offense. The executive act of pardon, on the contrary, is against the
criminal law, which binds and directs the judges, or rather is outside of and
above it. There is thus no conflict with the pardoning power, and no possible
unconstitutionality of the Probation Act for this cause. (Archer vs. Snook
[1926], 10 F. [2d], 567, 569.)
Probation should also be distinguished from reprieve and from commutation of the
sentence. Snodgrass vs. State ([1912], 67 Tex. Crim. Rep., 615;41 L. R. A. [N. S.], 1144;
150 S. W., 162), is relied upon most strongly by the petitioners as authority in support
of their contention that the power to grant pardons and reprieves, having been
vested exclusively upon the Chief Executive by the Jones Law, may not be conferred
by the legislature upon the courts by means of probation law authorizing the
indefinite judicial suspension of sentence. We have examined that case and found
that although the Court of Criminal Appeals of Texas held that the probation statute
of the state in terms conferred on the district courts the power to grant pardons to
persons convicted of crime, it also distinguished between suspensions sentence on
the one hand, and reprieve and commutation of sentence on the other. Said the
court, through Harper, J.:
That the power to suspend the sentence does not conflict with the power of
the Governor to grant reprieves is settled by the decisions of the various
courts; it being held that the distinction between a "reprieve" and a
suspension of sentence is that a reprieve postpones the execution of the
sentence to a day certain, whereas a suspension is for an indefinite time.
(Carnal vs. People, 1 Parker, Cr. R., 262; In re Buchanan, 146 N. Y., 264; 40
N. E., 883), and cases cited in 7 Words & Phrases, pp. 6115, 6116. This law
cannot be hold in conflict with the power confiding in the Governor to grant
commutations of punishment, for a commutations is not but to change the
punishment assessed to a less punishment.
In State ex rel. Bottomnly vs. District Court ([1925], 73 Mont., 541; 237 Pac., 525), the
Supreme Court of Montana had under consideration the validity of the adult
probation law of the state enacted in 1913, now found in sections 12078-12086,
Revised Codes of 1921. The court held the law valid as not impinging upon the
pardoning power of the executive. In a unanimous decision penned by Justice
Holloway, the court said:
. . . . the term "pardon", "commutation", and "respite" each had a well
understood meaning at the time our Constitution was adopted, and no one
of them was intended to comprehend the suspension of the execution of
the judgment as that phrase is employed in sections 12078-12086. A
"pardon" is an act of grace, proceeding from the power intrusted with the
execution of the laws which exempts the individual on whom it is bestowed
from the punishment the law inflicts for a crime he has committed (United
States vs. Wilson, 7 Pet., 150; 8 Law. ed., 640); It is a remission of guilt (State
vs. Lewis, 111 La., 693; 35 So., 816), a forgiveness of the offense (Cook vs.
Middlesex County, 26 N. J. Law, 326; Ex parte Powell, 73 Ala., 517; 49 Am.
Rep., 71). "Commutation" is a remission of a part of the punishment; a
substitution of a less penalty for the one originally imposed (Lee vs. Murphy,
22 Grat. [Va.] 789; 12 Am. Rep., 563; Rich vs. Chamberlain, 107 Mich., 381;
65 N. W., 235). A "reprieve" or "respite" is the withholding of the sentence
for an interval of time (4 Blackstone's Commentaries, 394), a postponement
of execution (Carnal vs. People, 1 Parker, Cr. R. [N. Y.], 272), a temporary
suspension of execution (Butler vs. State, 97 Ind., 373).
Few adjudicated cases are to be found in which the validity of a statute
similar to our section 12078 has been determined; but the same objections
have been urged against parole statutes which vest the power to parole in
persons other than those to whom the power of pardon is granted, and
these statutes have been upheld quite uniformly, as a reference to the
numerous cases cited in the notes to Woods vs. State (130 Tenn., 100; 169
S. W.,558, reported in L. R. A., 1915F, 531), will disclose. (See, also, 20 R. C.
L., 524.)
We conclude that the Probation Act does not conflict with the pardoning power of
the Executive. The pardoning power, in respect to those serving their probationary
sentences, remains as full and complete as if the Probation Law had never been
enacted. The President may yet pardon the probationer and thus place it beyond the
power of the court to order his rearrest and imprisonment. (Riggs vs. United States
[1926],
14 F. [2d], 5, 7.)
2. But while the Probation Law does not encroach upon the pardoning power of the
executive and is not for that reason void, does section 11 thereof constitute, as
contended, an undue delegation of legislative power?
Under the constitutional system, the powers of government are distributed among
three coordinate and substantially independent organs: the legislative, the executive
and the judicial. Each of these departments of the government derives its authority
from the Constitution which, in turn, is the highest expression of popular will. Each
has exclusive cognizance of the matters within its jurisdiction, and is supreme within
its own sphere.
The power to make laws — the legislative power — is vested in a bicameral
Legislature by the Jones Law (sec. 12) and in a unicamiral National Assembly by the
Constitution (Act. VI, sec. 1, Constitution of the Philippines). The Philippine
Legislature or the National Assembly may not escape its duties and responsibilities
by delegating that power to any other body or authority. Any attempt to abdicate the
power is unconstitutional and void, on the principle that potestas delegata non
delegare potest. This principle is said to have originated with the glossators, was
introduced into English law through a misreading of Bracton, there developed as a
principle of agency, was established by Lord Coke in the English public law in decisions
forbidding the delegation of judicial power, and found its way into America as an
enlightened principle of free government. It has since become an accepted corollary
of the principle of separation of powers. (5 Encyc. of the Social Sciences, p. 66.) The
classic statement of the rule is that of Locke, namely: "The legislative neither must
nor can transfer the power of making laws to anybody else, or place it anywhere but
where the people have." (Locke on Civil Government, sec. 142.) Judge Cooley
enunciates the doctrine in the following oft-quoted language: "One of the settled
maxims in constitutional law is, that the power conferred upon the legislature to
make laws cannot be delegated by that department to any other body or authority.
Where the sovereign power of the state has located the authority, there it must
remain; and by the constitutional agency alone the laws must be made until the
Constitution itself is charged. The power to whose judgment, wisdom, and patriotism
this high prerogative has been intrusted cannot relieve itself of the responsibilities by
choosing other agencies upon which the power shall be devolved, nor can it
substitute the judgment, wisdom, and patriotism of any other body for those to
which alone the people have seen fit to confide this sovereign trust." (Cooley on
Constitutional Limitations, 8th ed., Vol. I, p. 224. Quoted with approval in U. S. vs.
Barrias [1908], 11 Phil., 327.) This court posits the doctrine "on the ethical principle
that such a delegated power constitutes not only a right but a duty to be performed
by the delegate by the instrumentality of his own judgment acting immediately upon
the matter of legislation and not through the intervening mind of another. (U. S. vs.
Barrias, supra, at p. 330.)
The rule, however, which forbids the delegation of legislative power is not absolute
and inflexible. It admits of exceptions. An exceptions sanctioned by immemorial
practice permits the central legislative body to delegate legislative powers to local
authorities. (Rubi vs. Provincial Board of Mindoro [1919], 39 Phil., 660; U. S. vs.
Salaveria [1918], 39 Phil., 102; Stoutenburgh vs. Hennick [1889], 129 U. S., 141; 32
Law. ed., 637; 9 Sup. Ct. Rep., 256; State vs. Noyes [1855], 30 N. H., 279.) "It is a
cardinal principle of our system of government, that local affairs shall be managed by
local authorities, and general affairs by the central authorities; and hence while the
rule is also fundamental that the power to make laws cannot be delegated, the
creation of the municipalities exercising local self government has never been held
to trench upon that rule. Such legislation is not regarded as a transfer of general
legislative power, but rather as the grant of the authority to prescribed local
regulations, according to immemorial practice, subject of course to the interposition
of the superior in cases of necessity." (Stoutenburgh vs. Hennick, supra.) On quite the
same principle, Congress is powered to delegate legislative power to such agencies
in the territories of the United States as it may select. A territory stands in the same
relation to Congress as a municipality or city to the state government. (United States
vs. Heinszen [1907], 206 U. S., 370; 27 Sup. Ct. Rep., 742; 51 L. ed., 1098; 11 Ann. Cas.,
688; Dorr vs. United States [1904], 195 U.S., 138; 24 Sup. Ct. Rep., 808; 49 Law. ed.,
128; 1 Ann. Cas., 697.) Courts have also sustained the delegation of legislative power
to the people at large. Some authorities maintain that this may not be done (12 C. J.,
pp. 841, 842; 6 R. C. L., p. 164, citing People vs. Kennedy [1913], 207 N. Y., 533; 101
N. E., 442; Ann. Cas., 1914C, 616). However, the question of whether or not a state
has ceased to be republican in form because of its adoption of the initiative and
referendum has been held not to be a judicial but a political question (Pacific States
Tel. & Tel. Co. vs. Oregon [1912], 223 U. S., 118; 56 Law. ed., 377; 32 Sup. Cet. Rep.,
224), and as the constitutionality of such laws has been looked upon with favor by
certain progressive courts, the sting of the decisions of the more conservative courts
has been pretty well drawn. (Opinions of the Justices [1894], 160 Mass., 586; 36 N.
E., 488; 23 L. R. A., 113; Kiernan vs. Portland [1910], 57 Ore., 454; 111 Pac., 379; 1132
Pac., 402; 37 L. R. A. [N. S.], 332; Pacific States Tel. & Tel. Co. vs. Oregon, supra.)
Doubtless, also, legislative power may be delegated by the Constitution itself. Section
14, paragraph 2, of article VI of the Constitution of the Philippines provides that "The
National Assembly may by law authorize the President, subject to such limitations
and restrictions as it may impose, to fix within specified limits, tariff rates, import or
export quotas, and tonnage and wharfage dues." And section 16 of the same article
of the Constitution provides that "In times of war or other national emergency, the
National Assembly may by law authorize the President, for a limited period and
subject to such restrictions as it may prescribed, to promulgate rules and regulations
to carry out a declared national policy." It is beyond the scope of this decision to
determine whether or not, in the absence of the foregoing constitutional provisions,
the President could be authorized to exercise the powers thereby vested in him.
Upon the other hand, whatever doubt may have existed has been removed by the
Constitution itself.
The case before us does not fall under any of the exceptions hereinabove mentioned.
The challenged section of Act No. 4221 in section 11 which reads as follows:
This Act shall apply only in those provinces in which the respective provincial
boards have provided for the salary of a probation officer at rates not lower
than those now provided for provincial fiscals. Said probation officer shall
be appointed by the Secretary of Justice and shall be subject to the direction
of the Probation Office. (Emphasis ours.)
In testing whether a statute constitute an undue delegation of legislative power or
not, it is usual to inquire whether the statute was complete in all its terms and
provisions when it left the hands of the legislature so that nothing was left to the
judgment of any other appointee or delegate of the legislature. (6 R. C. L., p. 165.) In
the United States vs. Ang Tang Ho ([1922], 43 Phil., 1), this court adhered to the
foregoing rule when it held an act of the legislature void in so far as it undertook to
authorize the Governor-General, in his discretion, to issue a proclamation fixing the
price of rice and to make the sale of it in violation of the proclamation a crime.
(See and cf. Compañia General de Tabacos vs. Board of Public Utility Commissioners
[1916], 34 Phil., 136.) The general rule, however, is limited by another rule that to a
certain extent matters of detail may be left to be filled in by rules and regulations to
be adopted or promulgated by executive officers and administrative boards. (6 R. C.
L., pp. 177-179.)
For the purpose of Probation Act, the provincial boards may be regarded as
administrative bodies endowed with power to determine when the Act should take
effect in their respective provinces. They are the agents or delegates of the legislature
in this respect. The rules governing delegation of legislative power to administrative
and executive officers are applicable or are at least indicative of the rule which should
be here adopted. An examination of a variety of cases on delegation of power to
administrative bodies will show that the ratio decidendi is at variance but, it can be
broadly asserted that the rationale revolves around the presence or absence of a
standard or rule of action — or the sufficiency thereof — in the statute, to aid the
delegate in exercising the granted discretion. In some cases, it is held that the
standard is sufficient; in others that is insufficient; and in still others that it is entirely
lacking. As a rule, an act of the legislature is incomplete and hence invalid if it does
not lay down any rule or definite standard by which the administrative officer or
board may be guided in the exercise of the discretionary powers delegated to it.
(See Schecter vs. United States [1925], 295 U. S., 495; 79 L. ed., 1570; 55 Sup. Ct. Rep.,
837; 97 A.L.R., 947; People ex rel. Rice vs. Wilson Oil Co. [1936], 364 Ill., 406; 4 N. E.
[2d], 847; 107 A.L.R., 1500 and cases cited. See also R. C. L., title "Constitutional Law",
sec 174.) In the case at bar, what rules are to guide the provincial boards in the
exercise of their discretionary power to determine whether or not the Probation Act
shall apply in their respective provinces? What standards are fixed by the Act? We do
not find any and none has been pointed to us by the respondents. The probation Act
does not, by the force of any of its provisions, fix and impose upon the provincial
boards any standard or guide in the exercise of their discretionary power. What is
granted, if we may use the language of Justice Cardozo in the recent case of
Schecter, supra, is a "roving commission" which enables the provincial boards to
exercise arbitrary discretion. By section 11 if the Act, the legislature does not
seemingly on its own authority extend the benefits of the Probation Act to the
provinces but in reality leaves the entire matter for the various provincial boards to
determine. In other words, the provincial boards of the various provinces are to
determine for themselves, whether the Probation Law shall apply to their provinces
or not at all. The applicability and application of the Probation Act are entirely placed
in the hands of the provincial boards. If the provincial board does not wish to have
the Act applied in its province, all that it has to do is to decline to appropriate the
needed amount for the salary of a probation officer. The plain language of the Act is
not susceptible of any other interpretation. This, to our minds, is a virtual surrender
of legislative power to the provincial boards.
"The true distinction", says Judge Ranney, "is between the delegation of power to
make the law, which necessarily involves a discretion as to what it shall be, and
conferring an authority or discretion as to its execution, to be exercised under and in
pursuance of the law. The first cannot be done; to the latter no valid objection can
be made." (Cincinnati, W. & Z. R. Co. vs. Clinton County Comrs. [1852]; 1 Ohio St., 77,
88. See also, Sutherland on Statutory Construction, sec 68.) To the same effect are
the decision of this court in Municipality of Cardona vs. Municipality of
Binangonan ([1917], 36 Phil., 547); Rubi vs. Provincial Board of Mindoro ([1919],39
Phil., 660) and Cruz vs. Youngberg ([1931], 56 Phil., 234). In the first of these cases,
this court sustained the validity of the law conferring upon the Governor-General
authority to adjust provincial and municipal boundaries. In the second case, this court
held it lawful for the legislature to direct non-Christian inhabitants to take up their
habitation on unoccupied lands to be selected by the provincial governor and
approved by the provincial board. In the third case, it was held proper for the
legislature to vest in the Governor-General authority to suspend or not, at his
discretion, the prohibition of the importation of the foreign cattle, such prohibition
to be raised "if the conditions of the country make this advisable or if deceased
among foreign cattle has ceased to be a menace to the agriculture and livestock of
the lands."
It should be observed that in the case at bar we are not concerned with the simple
transference of details of execution or the promulgation by executive or
administrative officials of rules and regulations to carry into effect the provisions of
a law. If we were, recurrence to our own decisions would be sufficient. (U. S. vs.
Barrias [1908], 11 Phil., 327; U.S. vs. Molina [1914], 29 Phil., 119; Alegre vs. Collector
of Customs [1929], 53 Phil., 394; Cebu Autobus Co. vs. De Jesus [1931], 56 Phil., 446;
U. S. vs. Gomez [1915], 31 Phil., 218; Rubi vs. Provincial Board of Mindoro [1919], 39
Phil., 660.)
It is connected, however, that a legislative act may be made to the effect as law after
it leaves the hands of the legislature. It is true that laws may be made effective on
certain contingencies, as by proclamation of the executive or the adoption by the
people of a particular community (6 R. C. L., 116, 170-172; Cooley, Constitutional
Limitations, 8th ed., Vol. I, p. 227). In Wayman vs. Southard ([1825], 10 Wheat. 1; 6
Law. ed., 253), the Supreme Court of the United State ruled that the legislature may
delegate a power not legislative which it may itself rightfully exercise.(Vide, also,
Dowling vs. Lancashire Ins. Co. [1896], 92 Wis., 63; 65 N. W., 738; 31 L. R. A., 112.)
The power to ascertain facts is such a power which may be delegated. There is
nothing essentially legislative in ascertaining the existence of facts or conditions as
the basis of the taking into effect of a law. That is a mental process common to all
branches of the government. (Dowling vs. Lancashire Ins. Co., supra; In re Village of
North Milwaukee [1896], 93 Wis., 616; 97 N.W., 1033; 33 L.R.A., 938; Nash vs. Fries
[1906], 129 Wis., 120; 108 N.W., 210; Field vs. Clark [1892], 143 U.S., 649; 12 Sup. Ct.,
495; 36 Law. ed., 294.) Notwithstanding the apparent tendency, however, to relax
the rule prohibiting delegation of legislative authority on account of the complexity
arising from social and economic forces at work in this modern industrial age
(Pfiffner, Public Administration [1936] ch. XX; Laski, "The Mother of Parliaments",
foreign Affairs, July, 1931, Vol. IX, No. 4, pp. 569-579; Beard, "Squirt-Gun Politics", in
Harper's Monthly Magazine, July, 1930, Vol. CLXI, pp. 147, 152), the orthodox
pronouncement of Judge Cooley in his work on Constitutional Limitations finds
restatement in Prof. Willoughby's treatise on the Constitution of the United States in
the following language — speaking of declaration of legislative power to
administrative agencies: "The principle which permits the legislature to provide that
the administrative agent may determine when the circumstances are such as require
the application of a law is defended upon the ground that at the time this authority
is granted, the rule of public policy, which is the essence of the legislative act, is
determined by the legislature. In other words, the legislature, as it its duty to do,
determines that, under given circumstances, certain executive or administrative
action is to be taken, and that, under other circumstances, different of no action at
all is to be taken. What is thus left to the administrative official is not the legislative
determination of what public policy demands, but simply the ascertainment of what
the facts of the case require to be done according to the terms of the law by which
he is governed." (Willoughby on the Constitution of the United States, 2nd ed., Vol.
II, p. 1637.) In Miller vs. Mayer, etc., of New York [1883], 109 U.S., 3 Sup. Ct. Rep.,
228; 27 Law. ed., 971, 974), it was said: "The efficiency of an Act as a declaration of
legislative will must, of course, come from Congress, but the ascertainment of the
contingency upon which the Act shall take effect may be left to such agencies as it
may designate." (See, also, 12 C.J., p. 864; State vs. Parker [1854], 26 Vt., 357;
Blanding vs. Burr [1859], 13 Cal., 343, 258.) The legislature, then may provide that a
contingencies leaving to some other person or body the power to determine when
the specified contingencies has arisen. But, in the case at bar, the legislature has not
made the operation of the Prohibition Act contingent upon specified facts or
conditions to be ascertained by the provincial board. It leaves, as we have already
said, the entire operation or non-operation of the law upon the provincial board. the
discretion vested is arbitrary because it is absolute and unlimited. A provincial board
need not investigate conditions or find any fact, or await the happening of any
specified contingency. It is bound by no rule, — limited by no principle of expendiency
announced by the legislature. It may take into consideration certain facts or
conditions; and, again, it may not. It may have any purpose or no purpose at all. It
need not give any reason whatsoever for refusing or failing to appropriate any funds
for the salary of a probation officer. This is a matter which rest entirely at its pleasure.
The fact that at some future time — we cannot say when — the provincial boards
may appropriate funds for the salaries of probation officers and thus put the law into
operation in the various provinces will not save the statute. The time of its taking into
effect, we reiterate, would yet be based solely upon the will of the provincial boards
and not upon the happening of a certain specified contingency, or upon the
ascertainment of certain facts or conditions by a person or body other than
legislature itself.
The various provincial boards are, in practical effect, endowed with the power of
suspending the operation of the Probation Law in their respective provinces. In some
jurisdiction, constitutions provided that laws may be suspended only by the
legislature or by its authority. Thus, section 28, article I of the Constitution of Texas
provides that "No power of suspending laws in this state shall be exercised except by
the legislature"; and section 26, article I of the Constitution of Indiana provides "That
the operation of the laws shall never be suspended, except by authority of the
General Assembly." Yet, even provisions of this sort do not confer absolute power of
suspension upon the legislature. While it may be undoubted that the legislature may
suspend a law, or the execution or operation of a law, a law may not be suspended
as to certain individuals only, leaving the law to be enjoyed by others. The suspension
must be general, and cannot be made for individual cases or for particular localities.
In Holden vs. James ([1814], 11 Mass., 396; 6 Am. Dec., 174, 177, 178), it was said:
By the twentieth article of the declaration of rights in the constitution of this
commonwealth, it is declared that the power of suspending the laws, or the
execution of the laws, ought never to be exercised but by the legislature, or
by authority derived from it, to be exercised in such particular cases only as
the legislature shall expressly provide for. Many of the articles in that
declaration of rights were adopted from the Magna Charta of England, and
from the bill of rights passed in the reign of William and Mary. The bill of
rights contains an enumeration of the oppressive acts of James II, tending to
subvert and extirpate the protestant religion, and the laws and liberties of
the kingdom; and the first of them is the assuming and exercising a power
of dispensing with and suspending the laws, and the execution of the laws
without consent of parliament. The first article in the claim or declaration of
rights contained in the statute is, that the exercise of such power, by legal
authority without consent of parliament, is illegal. In the tenth section of the
same statute it is further declared and enacted, that "No dispensation
by non obstante of or to any statute, or part thereof, should be allowed; but
the same should be held void and of no effect, except a dispensation be
allowed of in such statute." There is an implied reservation of authority in
the parliament to exercise the power here mentioned; because, according
to the theory of the English Constitution, "that absolute despotic power,
which must in all governments reside somewhere," is intrusted to the
parliament: 1 Bl. Com., 160.
The principles of our government are widely different in this particular. Here
the sovereign and absolute power resides in the people; and the legislature
can only exercise what is delegated to them according to the constitution. It
is obvious that the exercise of the power in question would be equally
oppressive to the subject, and subversive of his right to protection,
"according to standing laws," whether exercised by one man or by a number
 of men. It cannot be supposed that the people when adopting this general
principle from the English bill of rights and inserting it in our constitution,
intended to bestow by implication on the general court one of the most
odious and oppressive prerogatives of the ancient kings of England. It is
manifestly contrary to the first principles of civil liberty and natural justice,
and to the spirit of our constitution and laws, that any one citizen should
enjoy privileges and advantages which are denied to all others under like
circumstances; or that ant one should be subject to losses, damages, suits,
or actions from which all others under like circumstances are exempted.
To illustrate the principle: A section of a statute relative to dogs made the owner of
any dog liable to the owner of domestic animals wounded by it for the damages
without proving a knowledge of it vicious disposition. By a provision of the act, power
was given to the board of supervisors to determine whether or not during the current
year their county should be governed by the provisions of the act of which that
section constituted a part. It was held that the legislature could not confer that
power. The court observed that it could no more confer such a power than to
authorize the board of supervisors of a county to abolish in such county the days of
grace on commercial paper, or to suspend the statute of limitations. (Slinger vs.
Henneman [1875], 38 Wis., 504.) A similar statute in Missouri was held void for the
same reason in State vs. Field ([1853, 17 Mo., 529;59 Am. Dec., 275.) In that case a
general statute formulating a road system contained a provision that "if the county
court of any county should be of opinion that the provisions of the act should not be
enforced, they might, in their discretion, suspend the operation of the same for any
specified length of time, and thereupon the act should become inoperative in such
county for the period specified in such order; and thereupon order the roads to be
opened and kept in good repair, under the laws theretofore in force." Said the court:
". . . this act, by its own provisions, repeals the inconsistent provisions of a former
act, and yet it is left to the county court to say which act shall be enforce in their
county. The act does not submit the question to the county court as an original
question, to be decided by that tribunal, whether the act shall commence its
operation within the county; but it became by its own terms a law in every county
not excepted by name in the act. It did not, then, require the county court to do any
act in order to give it effect. But being the law in the county, and having by its
provisions superseded and abrogated the inconsistent provisions of previous laws,
the county court is . . . empowered, to suspend this act and revive the repealed
provisions of the former act. When the question is before the county court for that
tribunal to determine which law shall be in force, it is urge before us that the power
then to be exercised by the court is strictly legislative power, which under our
constitution, cannot be delegated to that tribunal or to any other body of men in the
state. In the present case, the question is not presented in the abstract; for the county
court of Saline county, after the act had been for several months in force in that
county, did by order suspend its operation; and during that suspension the offense
was committed which is the subject of the present indictment . . . ." (See Mitchell vs.
State [1901], 134 Ala., 392; 32 S., 687.)
True, the legislature may enact laws for a particular locality different from those
applicable to other localities and, while recognizing the force of the principle
hereinabove expressed, courts in may jurisdiction have sustained the
constitutionality of the submission of option laws to the vote of the people. (6 R.C.L.,
p. 171.) But option laws thus sustained treat of subjects purely local in character
which should receive different treatment in different localities placed under different
circumstances. "They relate to subjects which, like the retailing of intoxicating drinks,
or the running at large of cattle in the highways, may be differently regarded in
different localities, and they are sustained on what seems to us the impregnable
ground, that the subject, though not embraced within the ordinary powers of
municipalities to make by-laws and ordinances, is nevertheless within the class of
public regulations, in respect to which it is proper that the local judgment should
control." (Cooley on Constitutional Limitations, 5th ed., p. 148.) So that, while we do
not deny the right of local self-government and the propriety of leaving matters of
purely local concern in the hands of local authorities or for the people of small
communities to pass upon, we believe that in matters of general of general legislation
like that which treats of criminals in general, and as regards the general subject of
probation, discretion may not be vested in a manner so unqualified and absolute as
provided in Act No. 4221. True, the statute does not expressly state that the
provincial boards may suspend the operation of the Probation Act in particular
provinces but, considering that, in being vested with the authority to appropriate or
not the necessary funds for the salaries of probation officers, they thereby are given
absolute discretion to determine whether or not the law should take effect or
operate in their respective provinces, the provincial boards are in reality empowered
by the legislature to suspend the operation of the Probation Act in particular
provinces, the Act to be held in abeyance until the provincial boards should decide
otherwise by appropriating the necessary funds. The validity of a law is not tested by
what has been done but by what may be done under its provisions. (Walter E. Olsen
& Co. vs. Aldanese and Trinidad [1922], 43 Phil., 259; 12 C. J., p. 786.)
It in conceded that a great deal of latitude should be granted to the legislature not
only in the expression of what may be termed legislative policy but in the elaboration
and execution thereof. "Without this power, legislation would become oppressive
and yet imbecile." (People vs. Reynolds, 5 Gilman, 1.) It has been said that popular
government lives because of the inexhaustible reservoir of power behind it. It is
unquestionable that the mass of powers of government is vested in the
representatives of the people and that these representatives are no further
restrained under our system than by the express language of the instrument
imposing the restraint, or by particular provisions which by clear intendment, have
that effect. (Angara vs. Electoral Commission [1936], 35 Off. Ga., 23;
Schneckenburger vs. Moran [1936], 35 Off. Gaz., 1317.) But, it should be borne in
mind that a constitution is both a grant and a limitation of power and one of these
time-honored limitations is that, subject to certain exceptions, legislative power shall
not be delegated.
We conclude that section 11 of Act No. 4221 constitutes an improper and unlawful
delegation of legislative authority to the provincial boards and is, for this reason,
unconstitutional and void.
3. It is also contended that the Probation Act violates the provisions of our Bill of
Rights which prohibits the denial to any person of the equal protection of the
laws (Act. III, sec. 1 subsec. 1. Constitution of the Philippines.)
This basic individual right sheltered by the Constitution is a restraint on all the tree
grand departments of our government and on the subordinate instrumentalities and
subdivision thereof, and on many constitutional power, like the police power,
taxation and eminent domain. The equal protection of laws, sententiously observes
the Supreme Court of the United States, "is a pledge of the protection of equal laws."
(Yick Wo vs. Hopkins [1886], 118 U. S., 356; 30 Law. ed., 220; 6 Sup. Ct. Rep., 10464;
Perley vs. North Carolina, 249 U. S., 510; 39 Sup. Ct. Rep., 357; 63 Law. ed., 735.) Of
course, what may be regarded as a denial of the equal protection of the laws in a
question not always easily determined. No rule that will cover every case can be
formulated. (Connolly vs. Union Sewer Pipe Co. [1902], 184, U. S., 540; 22 Sup. Ct.,
Rep., 431; 46 Law. ed., 679.) Class legislation discriminating against some and
favoring others in prohibited. But classification on a reasonable basis, and nor made
arbitrarily or capriciously, is permitted. (Finely vs. California [1911], 222 U. S., 28; 56
Law. ed., 75; 32 Sup. Ct. Rep., 13; Gulf. C. & S. F. Ry Co. vs. Ellis [1897], 165 U. S., 150;
41 Law. ed., 666; 17 Sup. Ct. Rep., 255; Smith, Bell & Co. vs. Natividad [1919], 40 Phil.,
136.) The classification, however, to be reasonable must be based on substantial
distinctions which make real differences; it must be germane to the purposes of the
law; it must not be limited to existing conditions only, and must apply equally to each
member of the class. (Borgnis vs. Falk. Co. [1911], 147 Wis., 327, 353; 133 N. W., 209;
3 N. C. C. A., 649; 37 L. R. A. [N. S.], 489; State vs. Cooley, 56 Minn., 540; 530-552; 58
N. W., 150; Lindsley vs. Natural Carbonic Gas Co.[1911], 220 U. S., 61, 79, 55 Law. ed.,
369, 377; 31 Sup. Ct. Rep., 337; Ann. Cas., 1912C, 160; Lake Shore & M. S. R. Co. vs.
Clough [1917], 242 U.S., 375; 37 Sup. Ct. Rep., 144; 61 Law. ed., 374; Southern Ry. Co.
vs. Greene [1910], 216 U. S., 400; 30 Sup. Ct. Rep., 287; 54 Law. ed., 536; 17 Ann. Cas.,
1247; Truax vs. Corrigan [1921], 257 U. S., 312; 12 C. J., pp. 1148, 1149.)
In the case at bar, however, the resultant inequality may be said to flow from the
unwarranted delegation of legislative power, although perhaps this is not necessarily
the result in every case. Adopting the example given by one of the counsel for the
petitioners in the course of his oral argument, one province may appropriate the
necessary fund to defray the salary of a probation officer, while another province
may refuse or fail to do so. In such a case, the Probation Act would be in operation in
the former province but not in the latter. This means that a person otherwise coming
within the purview of the law would be liable to enjoy the benefits of probation in
one province while another person similarly situated in another province would be
denied those same benefits. This is obnoxious discrimination. Contrariwise, it is also
possible for all the provincial boards to appropriate the necessary funds for the
salaries of the probation officers in their respective provinces, in which case no
inequality would result for the obvious reason that probation would be in operation
in each and every province by the affirmative action of appropriation by all the
provincial boards. On that hypothesis, every person coming within the purview of the
Probation Act would be entitled to avail of the benefits of the Act. Neither will there
be any resulting inequality if no province, through its provincial board, should
appropriate any amount for the salary of the probation officer — which is the
situation now — and, also, if we accept the contention that, for the purpose of the
Probation Act, the City of Manila should be considered as a province and that the
municipal board of said city has not made any appropriation for the salary of the
probation officer. These different situations suggested show, indeed, that while
inequality may result in the application of the law and in the conferment of the
benefits therein provided, inequality is not in all cases the necessary result. But
whatever may be the case, it is clear that in section 11 of the Probation Act creates a
situation in which discrimination and inequality are permitted or allowed. There are,
to be sure, abundant authorities requiring actual denial of the equal protection of the
law before court should assume the task of setting aside a law vulnerable on that
score, but premises and circumstances considered, we are of the opinion that section
11 of Act No. 4221 permits of the denial of the equal protection of the law and is on
that account bad. We see no difference between a law which permits of such denial.
A law may appear to be fair on its face and impartial in appearance, yet, if it permits
of unjust and illegal discrimination, it is within the constitutional prohibitions. (By
analogy, Chy Lung vs. Freeman [1876], 292 U. S., 275; 23 Law. ed., 550; Henderson
vs. Mayor [1876], 92 U. S., 259; 23 Law. ed., 543; Ex parte Virginia [1880], 100 U. S.,
339; 25 Law. ed., 676; Neal vs. Delaware [1881], 103 U. S., 370; 26 Law. ed., 567; Soon
Hing vs. Crowley [1885], 113 U. S., 703; 28 Law. ed., 1145, Yick Wo vs. Hopkins
[1886],118 U. S., 356; 30 Law. ed., 220; Williams vs. Mississippi [1897], 170 U. S., 218;
18 Sup. Ct. Rep., 583; 42 Law. ed., 1012; Bailey vs. Alabama [1911], 219 U. S., 219; 31
Sup. Ct. Rep. 145; 55 Law. ed., Sunday Lake Iron Co. vs. Wakefield [1918], 247 U. S.,
450; 38 Sup. Ct. Rep., 495; 62 Law. ed., 1154.) In other words, statutes may be
adjudged unconstitutional because of their effect in operation (General Oil Co. vs.
Clain [1907], 209 U. S., 211; 28 Sup. Ct. Rep., 475; 52 Law. ed., 754; State vs. Clement
Nat. Bank [1911], 84 Vt., 167; 78 Atl., 944; Ann. Cas., 1912D, 22). If the law has the
effect of denying the equal protection of the law it is unconstitutional. (6 R. C. L. p.
372; Civil Rights Cases, 109 U. S., 3; 3 Sup. Ct. Rep., 18; 27 Law. ed., 835; Yick Wo vs.
Hopkins, supra; State vs. Montgomery, 94 Me., 192; 47 Atl., 165; 80 A. S. R., 386;
State vs. Dering, 84 Wis., 585; 54 N. W., 1104; 36 A. S. R., 948; 19 L. R. A., 858.) Under
section 11 of the Probation Act, not only may said Act be in force in one or several
provinces and not be in force in other provinces, but one province may appropriate
for the salary of the probation officer of a given year — and have probation during
that year — and thereafter decline to make further appropriation, and have no
probation is subsequent years. While this situation goes rather to the abuse of
discretion which delegation implies, it is here indicated to show that the Probation
Act sanctions a situation which is intolerable in a government of laws, and to prove
how easy it is, under the Act, to make the guaranty of the equality clause but "a rope
of sand". (Brewer, J. Gulf C. & S. F. Ry. Co. vs. Ellis [1897], 165 U. S., 150 154; 41 Law.
ed., 666; 17 Sup. Ct. Rep., 255.)lawph!1.net
Great reliance is placed by counsel for the respondents on the case of Ocampo vs.
United States ([1914], 234 U. S., 91; 58 Law. ed., 1231). In that case, the Supreme
Court of the United States affirmed the decision of this court (18 Phil., 1) by declining
to uphold the contention that there was a denial of the equal protection of the laws
because, as held in Missouri vs. Lewis (Bowman vs. Lewis) decided in 1880 (101 U. S.,
220; 25 Law. ed., 991), the guaranty of the equality clause does not require territorial
uniformity. It should be observed, however, that this case concerns the right to
preliminary investigations in criminal cases originally granted by General Orders No.
58. No question of legislative authority was involved and the alleged denial of the
equal protection of the laws was the result of the subsequent enactment of Act No.
612, amending the charter of the City of Manila (Act No. 813) and providing in section
2 thereof that "in cases triable only in the court of first instance of the City of Manila,
the defendant . . . shall not be entitled as of right to a preliminary examination in any
case where the prosecuting attorney, after a due investigation of the facts . . . shall
have presented an information against him in proper form . . . ." Upon the other hand,
an analysis of the arguments and the decision indicates that the investigation by the
prosecuting attorney — although not in the form had in the provinces — was
considered a reasonable substitute for the City of Manila, considering the peculiar
conditions of the city as found and taken into account by the legislature itself.
Reliance is also placed on the case of Missouri vs. Lewis, supra. That case has
reference to a situation where the constitution of Missouri permits appeals to the
Supreme Court of the state from final judgments of any circuit court, except those in
certain counties for which counties the constitution establishes a separate court of
appeals called St. Louis Court of Appeals. The provision complained of, then, is found
in the constitution itself and it is the constitution that makes the apportionment of
territorial jurisdiction.
We are of the opinion that section 11 of the Probation Act is unconstitutional and
void because it is also repugnant to equal-protection clause of our Constitution.
Section 11 of the Probation Act being unconstitutional and void for the reasons
already stated, the next inquiry is whether or not the entire Act should be avoided.
In seeking the legislative intent, the presumption is against any mutilation
of a statute, and the courts will resort to elimination only where an
unconstitutional provision is interjected into a statute otherwise valid, and
is so independent and separable that its removal will leave the constitutional
features and purposes of the act substantially unaffected by the process.
(Riccio vs. Hoboken, 69 N. J. Law., 649, 662; 63 L. R. A., 485; 55 Atl., 1109,
quoted in Williams vs. Standard Oil Co. [1929], 278 U.S., 235, 240; 73 Law.
ed., 287, 309; 49 Sup. Ct. Rep., 115; 60 A. L. R., 596.) In Barrameda vs.
Moir ([1913], 25 Phil., 44, 47), this court stated the well-established rule
concerning partial invalidity of statutes in the following language:
. . . where part of the a statute is void, as repugnant to the Organic Law,
while another part is valid, the valid portion, if separable from the valid, may
stand and be enforced. But in order to do this, the valid portion must be in
so far independent of the invalid portion that it is fair to presume that the
Legislative would have enacted it by itself if they had supposed that they
could not constitutionally enact the other. (Mutual Loan Co. vs. Martell, 200
Mass., 482; 86 N. E., 916; 128 A. S. R., 446; Supervisors of Holmes Co. vs.
Black Creek Drainage District, 99 Miss., 739; 55 Sou., 963.) Enough must
remain to make a complete, intelligible, and valid statute, which carries out
the legislative intent. (Pearson vs. Bass. 132 Ga., 117; 63 S. E., 798.) The void
provisions must be eliminated without causing results affecting the main
purpose of the Act, in a manner contrary to the intention of the Legislature.
(State vs. A. C. L. R., Co., 56 Fla., 617, 642; 47 Sou., 969; Harper vs. Galloway,
58 Fla., 255; 51 Sou., 226; 26 L. R. A., N. S., 794; Connolly vs. Union Sewer
Pipe Co., 184 U. S., 540, 565; People vs. Strassheim, 240 Ill., 279, 300; 88 N.
E., 821; 22 L. R. A., N. S., 1135; State vs. Cognevich, 124 La., 414; 50 Sou.,
439.) The language used in the invalid part of a statute can have no legal
force or efficacy for any purpose whatever, and what remains must express
the legislative will, independently of the void part, since the court has no
power to legislate. (State vs. Junkin, 85 Neb., 1; 122 N. W., 473; 23 L. R. A.,
N. S., 839; Vide, also,. U. S., vs. Rodriguez [1918], 38 Phil., 759; Pollock vs.
Farmers' Loan and Trust Co. [1895], 158 U. S., 601, 635; 39 Law. ed., 1108,
1125; 15 Sup. Ct. Rep., 912; 6 R.C.L., 121.)
It is contended that even if section 11, which makes the Probation Act applicable only
in those provinces in which the respective provincial boards provided for the salaries
of probation officers were inoperative on constitutional grounds, the remainder of
the Act would still be valid and may be enforced. We should be inclined to accept the
suggestions but for the fact that said section is, in our opinion, is inseparably linked
with the other portions of the Act that with the elimination of the section what would
be left is the bare idealism of the system, devoid of any practical benefit to a large
number of people who may be deserving of the intended beneficial result of that
system. The clear policy of the law, as may be gleaned from a careful examination of
the whole context, is to make the application of the system dependent entirely upon
the affirmative action of the different provincial boards through appropriation of the
salaries for probation officers at rates not lower than those provided for provincial
fiscals. Without such action on the part of the various boards, no probation officers
would be appointed by the Secretary of Justice to act in the provinces. The Philippines
is divided or subdivided into provinces and it needs no argument to show that if not
one of the provinces — and this is the actual situation now — appropriate the
necessary fund for the salary of a probation officer, probation under Act No. 4221
would be illusory. There can be no probation without a probation officer. Neither can
there be a probation officer without the probation system.
Section 2 of the Acts provides that the probation officer shall supervise and visit the
probationer. Every probation officer is given, as to the person placed in probation
under his care, the powers of the police officer. It is the duty of the probation officer
to see that the conditions which are imposed by the court upon the probationer
under his care are complied with. Among those conditions, the following are
enumerated in section 3 of the Act:
That the probationer (a) shall indulge in no injurious or vicious habits;
(b) Shall avoid places or persons of disreputable or harmful character;
(c) Shall report to the probation officer as directed by the court or probation
officers;
(d) Shall permit the probation officer to visit him at reasonable times at his
place of abode or elsewhere;
(e) Shall truthfully answer any reasonable inquiries on the part of the
probation officer concerning his conduct or condition; "(f) Shall endeavor to
be employed regularly; "(g) Shall remain or reside within a specified place or
locality;
(f) Shall make reparation or restitution to the aggrieved parties for actual
damages or losses caused by his offense;
(g) Shall comply with such orders as the court may from time to time make;
and
(h) Shall refrain from violating any law, statute, ordinance, or any by-law or
regulation, promulgated in accordance with law.
The court is required to notify the probation officer in writing of the period and terms
of probation. Under section 4, it is only after the period of probation, the submission
of a report of the probation officer and appropriate finding of the court that the
probationer has complied with the conditions of probation that probation may be
definitely terminated and the probationer finally discharged from supervision. Under
section 5, if the court finds that there is non-compliance with said conditions, as
reported by the probation officer, it may issue a warrant for the arrest of the
probationer and said probationer may be committed with or without bail. Upon
arraignment and after an opportunity to be heard, the court may revoke, continue or
modify the probation, and if revoked, the court shall order the execution of the
sentence originally imposed. Section 6 prescribes the duties of probation officers: "It
shall be the duty of every probation officer to furnish to all persons placed on
probation under his supervision a statement of the period and conditions of their
probation, and to instruct them concerning the same; to keep informed concerning
their conduct and condition; to aid and encourage them by friendly advice and
admonition, and by such other measures, not inconsistent with the conditions
imposed by court as may seem most suitable, to bring about improvement in their
conduct and condition; to report in writing to the court having jurisdiction over said
probationers at least once every two months concerning their conduct and condition;
to keep records of their work; make such report as are necessary for the information
of the Secretary of Justice and as the latter may require; and to perform such other
duties as are consistent with the functions of the probation officer and as the court
or judge may direct. The probation officers provided for in this Act may act as parole
officers for any penal or reformatory institution for adults when so requested by the
authorities thereof, and, when designated by the Secretary of Justice shall act as
parole officer of persons released on parole under Act Number Forty-one Hundred
and Three, without additional compensation."
It is argued, however, that even without section 11 probation officers maybe
appointed in the provinces under section 10 of Act which provides as follows:
There is hereby created in the Department of Justice and subject to its
supervision and control, a Probation Office under the direction of a Chief
Probation Officer to be appointed by the Governor-General with the advise
and consent of the Senate who shall receive a salary of four eight hundred
pesos per annum. To carry out this Act there is hereby appropriated out of
any funds in the Insular Treasury not otherwise appropriated, the sum of
fifty thousand pesos to be disbursed by the Secretary of Justice, who is
hereby authorized to appoint probation officers and the administrative
personnel of the probation officer under civil service regulations from
 among those who possess the qualifications, training and experience
prescribed by the Bureau of Civil Service, and shall fix the compensation of
such probation officers and administrative personnel until such positions
shall have been included in the Appropriation Act.
But the probation officers and the administrative personnel referred to in the
foregoing section are clearly not those probation officers required to be appointed
for the provinces under section 11. It may be said, reddendo singula singulis, that the
probation officers referred to in section 10 above-quoted are to act as such, not in
the various provinces, but in the central office known as the Probation Office
established in the Department of Justice, under the supervision of the Chief
Probation Officer. When the law provides that "the probation officer" shall
investigate and make reports to the court (secs. 1 and 4); that "the probation officer"
shall supervise and visit the probationer (sec. 2; sec. 6, par. d); that the probationer
shall report to the "probationer officer" (sec. 3, par. c.), shall allow "the probationer
officer" to visit him (sec. 3, par. d), shall truthfully answer any reasonable inquiries
on the part of "the probation officer" concerning his conduct or condition (sec. 3, par.
4); that the court shall notify "the probation officer" in writing of the period and terms
of probation (sec. 3, last par.), it means the probation officer who is in charge of a
particular probationer in a particular province. It never could have been intention of
the legislature, for instance, to require the probationer in Batanes, to report to a
probationer officer in the City of Manila, or to require a probation officer in Manila
to visit the probationer in the said province of Batanes, to place him under his care,
to supervise his conduct, to instruct him concerning the conditions of his probation
or to perform such other functions as are assigned to him by law.
That under section 10 the Secretary of Justice may appoint as many probation officers
as there are provinces or groups of provinces is, of course possible. But this would be
arguing on what the law may be or should be and not on what the law is. Between is
and ought there is a far cry. The wisdom and propriety of legislation is not for us to
pass upon. We may think a law better otherwise than it is. But much as has been said
regarding progressive interpretation and judicial legislation we decline to amend the
law. We are not permitted to read into the law matters and provisions which are not
there. Not for any purpose — not even to save a statute from the doom of invalidity.
Upon the other hand, the clear intention and policy of the law is not to make the
Insular Government defray the salaries of probation officers in the provinces but to
make the provinces defray them should they desire to have the Probation Act apply
thereto. The sum of P50,000, appropriated "to carry out the purposes of this Act", is
to be applied, among other things, for the salaries of probation officers in the central
office at Manila. These probation officers are to receive such compensations as the
Secretary of Justice may fix "until such positions shall have been included in the
Appropriation Act". It was the intention of the legislature to empower the Secretary
of Justice to fix the salaries of the probation officers in the provinces or later on to
include said salaries in an appropriation act. Considering, further, that the sum of
P50,000 appropriated in section 10 is to cover, among other things, the salaries of
the administrative personnel of the Probation Office, what would be left of the
amount can hardly be said to be sufficient to pay even nominal salaries to probation
officers in the provinces. We take judicial notice of the fact that there are 48
provinces in the Philippines and we do not think it is seriously contended that, with
the fifty thousand pesos appropriated for the central office, there can be in each
province, as intended, a probation officer with a salary not lower than that of a
provincial fiscal. If this a correct, the contention that without section 11 of Act No.
4221 said act is complete is an impracticable thing under the remainder of the Act,
unless it is conceded that in our case there can be a system of probation in the
provinces without probation officers.
Probation as a development of a modern penology is a commendable system.
Probation laws have been enacted, here and in other countries, to permit what
modern criminologist call the "individualization of the punishment", the adjustment
of the penalty to the character of the criminal and the circumstances of his particular
case. It provides a period of grace in order to aid in the rehabilitation of a penitent
offender. It is believed that, in any cases, convicts may be reformed and their
development into hardened criminals aborted. It, therefore, takes advantage of an
opportunity for reformation and avoids imprisonment so long as the convicts gives
promise of reform. (United States vs. Murray [1925], 275 U. S., 347 357, 358; 72 Law.
ed., 309; 312, 313; 48 Sup. Ct. Rep., 146; Kaplan vs. Hecht, 24 F. [2d], 664, 665.) The
Welfare of society is its chief end and aim. The benefit to the individual convict is
merely incidental. But while we believe that probation is commendable as a system
and its implantation into the Philippines should be welcomed, we are forced by our
inescapable duty to set the law aside because of the repugnancy to our fundamental
law.
In arriving at this conclusion, we have endeavored to consider the different aspects
presented by able counsel for both parties, as well in their memorandums as in their
oral argument. We have examined the cases brought to our attention, and others we
have been able to reach in the short time at our command for the study and
deliberation of this case. In the examination of the cases and in then analysis of the
legal principles involved we have inclined to adopt the line of action which in our
opinion, is supported better reasoned authorities and is more conducive to the
general welfare. (Smith, Bell & Co. vs. Natividad [1919], 40 Phil., 136.) Realizing the
conflict of authorities, we have declined to be bound by certain adjudicated cases
brought to our attention, except where the point or principle is settled directly or by
clear implication by the more authoritative pronouncements of the Supreme Court
of the United States. This line of approach is justified because:
 (a) The constitutional relations between the Federal and the State
governments of the United States and the dual character of the American
Government is a situation which does not obtain in the Philippines;

(b) The situation of s state of the American Union of the District of Columbia
with reference to the Federal Government of the United States is not the
situation of the province with respect to the Insular Government (Art. I, sec.
8 cl. 17 and 10th Amendment, Constitution of the United States; Sims vs.
Rives, 84 Fed. [2d], 871),

(c) The distinct federal and the state judicial organizations of the United
States do not embrace the integrated judicial system of the Philippines
(Schneckenburger vs. Moran [1936], 35 Off. Gaz., p. 1317);

(d) "General propositions do not decide concrete cases" (Justice Holmes in

Lochner vs. New York [1904], 198 U. S., 45, 76; 49 Law. ed., 937, 949) and,
"to keep pace with . . . new developments of times and circumstances"
(Chief Justice Waite in Pensacola Tel. Co. vs. Western Union Tel. Co. [1899],
96 U. S., 1, 9; 24 Law. ed., 708; Yale Law Journal, Vol. XXIX, No. 2, Dec. 1919,
141, 142), fundamental principles should be interpreted having in view
existing local conditions and environment.

Act No. 4221 is hereby declared unconstitutional and void and the writ of prohibition
is, accordingly, granted. Without any pronouncement regarding costs. So ordered.

Avanceña, C.J., Imperial, Diaz and Concepcion, JJ., concur.

Villa-real and Abad Santos, JJ., concur in the result.
[G.R. No. 148560. November 19, 2001]
JOSEPH EJERCITO ESTRADA, petitioner, vs. SANDIGANBAYAN (Third Division) and PEOPLE
OF THE PHILIPPINES, respondents.
DECISION
BELLOSILLO, J.:
JOHN STUART MILL, in his essay On Liberty, unleashes the full fury of his pen in defense
of the rights of the individual from the vast powers of the State and the inroads of societal
pressure. But even as he draws a sacrosanct line demarcating the limits on individuality beyond
which the State cannot tread - asserting that "individual spontaneity" must be allowed to
flourish with very little regard to social interference - he veritably acknowledges that the
exercise of rights and liberties is imbued with a civic obligation, which society is justified in
enforcing at all cost, against those who would endeavor to withhold fulfillment. Thus he says -
The sole end for which mankind is warranted, individually or collectively, in interfering with
the liberty of action of any of their number, is self-protection. The only purpose for which
power can be rightfully exercised over any member of a civilized community, against his will,
is to prevent harm to others.
Parallel to individual liberty is the natural and illimitable right of the State to self-
preservation. With the end of maintaining the integrity and cohesiveness of the body politic,
it behooves the State to formulate a system of laws that would compel obeisance to its
collective wisdom and inflict punishment for non-observance.
The movement from Mill's individual liberalism to unsystematic collectivism wrought
changes in the social order, carrying with it a new formulation of fundamental rights and duties
more attuned to the imperatives of contemporary socio-political ideologies. In the process, the
web of rights and State impositions became tangled and obscured, enmeshed in threads of
multiple shades and colors, the skein irregular and broken. Antagonism, often outright
collision, between the law as the expression of the will of the State, and the zealous attempts
by its members to preserve their individuality and dignity, inevitably followed. It is when
individual rights are pitted against State authority that judicial conscience is put to its severest
test.
Petitioner Joseph Ejercito Estrada, the highest-ranking official to be prosecuted under
RA 7080 (An Act Defining and Penalizing the Crime of Plunder),[1] as amended by RA
7659,[2] wishes to impress upon us that the assailed law is so defectively fashioned that it
crosses that thin but distinct line which divides the valid from the constitutionally infirm. He
therefore makes a stringent call for this Court to subject the Plunder Law to the crucible of
constitutionality mainly because, according to him, (a) it suffers from the vice of vagueness;
(b) it dispenses with the "reasonable doubt" standard in criminal prosecutions; and, (c) it
abolishes the element of mens rea in crimes already punishable under The Revised Penal
Code,all of which are purportedly clear violations of the fundamental rights of the accused to
due process and to be informed of the nature and cause of the accusation against him.
Specifically, the provisions of the Plunder Law claimed by petitioner to have transgressed
constitutional boundaries are Secs. 1, par. (d), 2 and 4 which are reproduced hereunder:
Section 1. x x x x (d) "Ill-gotten wealth" means any asset, property, business, enterprise or
material possession of any person within the purview of Section Two (2) hereof, acquired by
him directly or indirectly through dummies, nominees, agents, subordinates and/or business
associates by any combination or series of the following means or similar schemes:
(1) Through misappropriation, conversion, misuse, or malversation of public funds or raids on
the public treasury;
(2) By receiving, directly or indirectly, any commission, gift, share, percentage, kickbacks or
any other form of pecuniary benefit from any person and/or entity in connection with any
government contract or project or by reason of the office or position of the public office
concerned;
(3) By the illegal or fraudulent conveyance or disposition of assets belonging to the National
Government or any of its subdivisions, agencies or instrumentalities, or government owned or
controlled corporations and their subsidiaries;
(4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any
other form of interest or participation including the promise of future employment in any
business enterprise or undertaking;
(5) By establishing agricultural, industrial or commercial monopolies or other combinations
and/or implementation of decrees and orders intended to benefit particular persons or special
interests; or
(6) By taking advantage of official position, authority, relationship, connection or influence to
unjustly enrich himself or themselves at the expense and to the damage and prejudice of the
Filipino people and the Republic of the Philippines.
Section 2. Definition of the Crime of Plunder, Penalties. - Any public officer who, by himself or
in connivance with members of his family, relatives by affinity or consanguinity, business
associates, subordinates or other persons, amasses, accumulates or acquires ill-gotten wealth
through a combination or series of overt or criminal acts as described in Section 1 (d) hereof,
in the aggregate amount or total value of at least fifty million pesos (P50,000,000.00) shall be
guilty of the crime of plunder and shall be punished by reclusion perpetua to death. Any
person who participated with the said public officer in the commission of an offense
contributing to the crime of plunder shall likewise be punished for such offense. In the
imposition of penalties, the degree of participation and the attendance of mitigating and
extenuating circumstances as provided by the Revised Penal Code shall be considered by the
court. The court shall declare any and all ill-gotten wealth and their interests and other
incomes and assets including the properties and shares of stocks derived from the deposit or
investment thereof forfeited in favor of the State (underscoring supplied).
Section 4. Rule of Evidence. - For purposes of establishing the crime of plunder, it shall not be
necessary to prove each and every criminal act done by the accused in furtherance of the
scheme or conspiracy to amass, accumulate or acquire ill-gotten wealth, it being sufficient
to establish beyond reasonable doubt a pattern of overt or criminal acts indicative of the
overall unlawful scheme or conspiracy (underscoring supplied).
On 4 April 2001 the Office of the Ombudsman filed before the Sandiganbayan eight (8)
separate Informations, docketed as: (a) Crim. Case No. 26558, for violation of RA 7080, as
amended by RA 7659; (b) Crim. Cases Nos. 26559 to 26562, inclusive, for violation of Secs. 3,
par. (a), 3, par. (a), 3, par. (e) and 3, par. (e), of RA 3019 (Anti-Graft and Corrupt Practices
Act), respectively; (c) Crim. Case No. 26563, for violation of Sec. 7, par. (d), of RA 6713
(The Code of Conduct and Ethical Standards for Public Officials and Employees); (d) Crim. Case
No. 26564, for Perjury (Art. 183 of The Revised Penal Code); and, (e) Crim. Case No. 26565, for
Illegal Use Of An Alias (CA No. 142, as amended by RA 6085).
On 11 April 2001 petitioner filed an Omnibus Motion for the remand of the case to the
Ombudsman for preliminary investigation with respect to specification "d" of the charges in
the Information in Crim. Case No. 26558; and, for reconsideration/reinvestigation of the
offenses under specifications "a," "b," and "c" to give the accused an opportunity to file
counter-affidavits and other documents necessary to prove lack of probable cause. Noticeably,
the grounds raised were only lack of preliminary investigation, reconsideration/reinvestigation
of offenses, and opportunity to prove lack of probable cause. The purported ambiguity of the
charges and the vagueness of the law under which they are charged were never raised in
that Omnibus Motion thus indicating the explicitness and comprehensibility of the Plunder
Law.
On 25 April 2001 the Sandiganbayan, Third Division, issued a Resolution in Crim. Case
No. 26558 finding that "a probable cause for the offense of PLUNDER exists to justify the
issuance of warrants for the arrest of the accused." On 25 June 2001 petitioner's motion for
reconsideration was denied by the Sandiganbayan.
On 14 June 2001 petitioner moved to quash the Information in Crim. Case No. 26558 on
the ground that the facts alleged therein did not constitute an indictable offense since the law
on which it was based was unconstitutional for vagueness, and that the Amended Information
for Plunder charged more than one (1) offense. On 21 June 2001 the Government filed
its Opposition to the Motion to Quash, and five (5) days later or on 26 June 2001 petitioner
submitted his Reply to the Opposition. On 9 July 2001 the Sandiganbayan denied
petitioner's Motion to Quash.
As concisely delineated by this Court during the oral arguments on 18 September 2001,
the issues for resolution in the instant petition for certiorari are: (a) The Plunder Law is
unconstitutional for being vague; (b) The Plunder Law requires less evidence for proving the
predicate crimes of plunder and therefore violates the rights of the accused to due process;
and, (c) Whether Plunder as defined in RA 7080 is a malum prohibitum, and if so, whether it is
within the power of Congress to so classify it.
Preliminarily, the whole gamut of legal concepts pertaining to the validity of legislation
is predicated on the basic principle that a legislative measure is presumed to be in harmony
with the Constitution.[3] Courts invariably train their sights on this fundamental rule whenever
a legislative act is under a constitutional attack, for it is the postulate of constitutional
adjudication. This strong predilection for constitutionality takes its bearings on the idea that it
is forbidden for one branch of the government to encroach upon the duties and powers of
another. Thus it has been said that the presumption is based on the deference the judicial
branch accords to its coordinate branch - the legislature.
If there is any reasonable basis upon which the legislation may firmly rest, the courts
must assume that the legislature is ever conscious of the borders and edges of its plenary
powers, and has passed the law with full knowledge of the facts and for the purpose of
promoting what is right and advancing the welfare of the majority. Hence in determining
whether the acts of the legislature are in tune with the fundamental law, courts should
proceed with judicial restraint and act with caution and forbearance. Every intendment of the
law must be adjudged by the courts in favor of its constitutionality, invalidity being a measure
of last resort. In construing therefore the provisions of a statute, courts must first ascertain
whether an interpretation is fairly possible to sidestep the question of constitutionality.
In La Union Credit Cooperative, Inc. v. Yaranon[4] we held that as
long as there is some basis for the decision of the court, the constitutionality of the
challenged law will not be touched and the case will be decided on other available grounds. Yet
the force of the presumption is not sufficient to catapult a fundamentally deficient law into
the safe environs of constitutionality. Of course, where the law clearly and palpably
transgresses the hallowed domain of the organic law, it must be struck down on sight lest the
positive commands of the fundamental law be unduly eroded.
Verily, the onerous task of rebutting the presumption weighs heavily on the party
challenging the validity of the statute. He must demonstrate beyond any tinge of doubt that
there is indeed an infringement of the constitution, for absent such a showing, there can be
no finding of unconstitutionality. A doubt, even if well-founded, will hardly suffice. As tersely
put by Justice Malcolm, "To doubt is to sustain."[5] And petitioner has miserably failed in the
instant case to discharge his burden and overcome the presumption of constitutionality of the
Plunder Law.
As it is written, the Plunder Law contains ascertainable standards and well-defined
parameters which would enable the accused to determine the nature of his violation. Section
2 is sufficiently explicit in its description of the acts, conduct and conditions required or
forbidden, and prescribes the elements of the crime with reasonable certainty and
particularity. Thus -
1. That the offender is a public officer who acts by himself or in connivance with members of
his family, relatives by affinity or consanguinity, business associates, subordinates or other
persons;
2. That he amassed, accumulated or acquired ill-gotten wealth through a combination or
series of the following overt or criminal acts: (a) through misappropriation,
conversion,misuse, or malversation of public funds or raids on the public treasury; (b) by
receiving, directly or indirectly, any commission, gift, share, percentage, kickback or any other
form of pecuniary benefits from any person and/or entity in connection with any government
contract or project or by reason of the office or position of the public officer; (c) by the illegal
or fraudulent conveyance or disposition of assets belonging to the National Government or
any of its subdivisions, agencies or instrumentalities of Government owned or controlled
corporations or their subsidiaries; (d) by obtaining, receiving or accepting directly or indirectly
any shares of stock, equity or any other form of interest or participation including the promise
of future employment in any business enterprise or undertaking; (e) by establishing
agricultural, industrial or commercial monopolies or other combinations and/or
implementation of decrees and orders intended to benefit particular persons or special
interests; or (f) by taking advantage of official position, authority, relationship, connection or
influence to unjustly enrich himself or themselves at the expense and to the damage and
prejudice of the Filipino people and the Republic of the Philippines; and,
3. That the aggregate amount or total value of the ill-gotten wealth amassed, accumulated or
acquired is at least P50,000,000.00.
As long as the law affords some comprehensible guide or rule that would inform those
who are subject to it what conduct would render them liable to its penalties, its validity will be
sustained. It must sufficiently guide the judge in its application; the counsel, in defending one
charged with its violation; and more importantly, the accused, in identifying the realm of the
proscribed conduct. Indeed, it can be understood with little difficulty that what the assailed
statute punishes is the act of a public officer in amassing or accumulating ill-gotten wealth of
at least P50,000,000.00 through a series or combination of acts enumerated in Sec. 1, par. (d),
of the Plunder Law.
In fact, the amended Information itself closely tracks the language of the law, indicating
with reasonable certainty the various elements of the offense which petitioner is alleged to
have committed:
"The undersigned Ombudsman, Prosecutor and OIC-Director, EPIB, Office of the
Ombudsman, hereby accuses former PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES,
Joseph Ejercito Estrada, a.k.a. 'ASIONG SALONGA' and a.k.a. 'JOSE VELARDE,' together with
Jose 'Jinggoy' Estrada, Charlie 'Atong' Ang, Edward Serapio, Yolanda T. Ricaforte, Alma Alfaro,
JOHN DOE a.k.a. Eleuterio Tan OR Eleuterio Ramos Tan or Mr. Uy, Jane Doe a.k.a. Delia Rajas,
and John DOES & Jane Does, of the crime of Plunder, defined and penalized under R.A. No.
7080, as amended by Sec. 12 of R.A. No. 7659, committed as follows:
That during the period from June, 1998 to January 2001, in the Philippines, and within the
jurisdiction of this Honorable Court, accused Joseph Ejercito Estrada, THEN A PRESIDENT OF
THE REPUBLIC OF THE PHILIPPINES, by himself AND/OR in CONNIVANCE/CONSPIRACY with
his co-accused, WHO ARE MEMBERS OF HIS FAMILY, RELATIVES BY AFFINITY OR
CONSANGUINITY, BUSINESS ASSOCIATES, SUBORDINATES AND/OR OTHER PERSONS, BY
TAKING UNDUE ADVANTAGE OF HIS OFFICIAL POSITION, AUTHORITY, RELATIONSHIP,
CONNECTION, OR INFLUENCE, did then and there willfully, unlawfully and criminally amass,
accumulate and acquire BY HIMSELF, DIRECTLY OR INDIRECTLY, ill-gotten wealth in the
aggregate amount or TOTAL VALUE of FOUR BILLION NINETY SEVEN MILLION EIGHT
HUNDRED FOUR THOUSAND ONE HUNDRED SEVENTY THREE PESOS AND SEVENTEEN
CENTAVOS (P4,097,804,173.17), more or less, THEREBY UNJUSTLY ENRICHING HIMSELF OR
THEMSELVES AT THE EXPENSE AND TO THE DAMAGE OF THE FILIPINO PEOPLE AND THE
REPUBLIC OF THE PHILIPPINES, through ANY OR A combination OR A series of
overt OR criminal acts, OR SIMILAR SCHEMES OR MEANS, described as follows:
(a) by receiving OR collecting, directly or indirectly, on SEVERAL INSTANCES, MONEY IN THE
AGGREGATE AMOUNT OF FIVE HUNDRED FORTY-FIVE MILLION PESOS (P545,000,000.00),
MORE OR LESS, FROM ILLEGAL GAMBLING IN THE FORM OF GIFT, SHARE, PERCENTAGE,
KICKBACK OR ANY FORM OF PECUNIARY BENEFIT, BY HIMSELF AND/OR in connection with
co-accused CHARLIE 'ATONG' ANG, Jose 'Jinggoy' Estrada, Yolanda T. Ricaforte, Edward
Serapio, AND JOHN DOES AND JANE DOES, in consideration OF TOLERATION OR
PROTECTION OF ILLEGAL GAMBLING;
(b) by DIVERTING, RECEIVING, misappropriating, converting OR misusing DIRECTLY OR
INDIRECTLY, for HIS OR THEIR PERSONAL gain and benefit, public funds in the amount of
ONE HUNDRED THIRTY MILLION PESOS (P130,000,000.00), more or less, representing a
portion of the TWO HUNDRED MILLION PESOS (P200,000,000.00)tobacco excise tax share
allocated for the province of Ilocos Sur under R.A. No. 7171, by himself and/or in connivance
with co-accused Charlie 'Atong' Ang, Alma Alfaro, JOHN DOE a.k.a. Eleuterio Ramos Tan or
Mr. Uy, Jane Doe a.k.a. Delia Rajas, AND OTHER JOHN DOES & JANE DOES; (italic supplied).
(c) by directing, ordering and compelling, FOR HIS PERSONAL GAIN AND BENEFIT, the
Government Service Insurance System (GSIS) TO PURCHASE 351,878,000 SHARES OF
STOCKS, MORE OR LESS, and the Social Security System (SSS), 329,855,000 SHARES OF
STOCK, MORE OR LESS, OF THE BELLE CORPORATION IN THE AMOUNT OF MORE OR LESS
ONE BILLION ONE HUNDRED TWO MILLION NINE HUNDRED SIXTY FIVE THOUSAND SIX
HUNDRED SEVEN PESOS AND FIFTY CENTAVOS (P1,102,965,607.50) AND MORE OR LESS
SEVEN HUNDRED FORTY FOUR MILLION SIX HUNDRED TWELVE THOUSAND AND FOUR
HUNDRED FIFTY PESOS (P744,612,450.00), RESPECTIVELY, OR A TOTAL OF MORE OR LESS
ONE BILLION EIGHT HUNDRED FORTY SEVEN MILLION FIVE HUNDRED SEVENTY EIGHT
THOUSAND FIFTY SEVEN PESOS AND FIFTY CENTAVOS (P1,847,578,057.50); AND BY
COLLECTING OR RECEIVING, DIRECTLY OR INDIRECTLY, BY HIMSELF AND/OR IN
CONNIVANCE WITH JOHN DOES AND JANE DOES, COMMISSIONS OR PERCENTAGES BY
REASON OF SAID PURCHASES OF SHARES OF STOCK IN THE AMOUNT OF ONE HUNDRED
EIGHTY NINE MILLION SEVEN HUNDRED THOUSAND PESOS (P189,700,000.00) MORE OR
LESS, FROM THE BELLE CORPORATION WHICH BECAME PART OF THE DEPOSIT IN THE
EQUITABLE-PCI BANK UNDER THE ACCOUNT NAME 'JOSE VELARDE;'
(d) by unjustly enriching himself FROM COMMISSIONS, GIFTS, SHARES, PERCENTAGES,
KICKBACKS, OR ANY FORM OF PECUNIARY BENEFITS, IN CONNIVANCE WITH JOHN DOES
AND JANE DOES, in the amount of MORE OR LESS THREE BILLION TWO HUNDRED THIRTY
THREE MILLION ONE HUNDRED FOUR THOUSAND ONE HUNDRED SEVENTY THREE PESOS
AND SEVENTEEN CENTAVOS (P3,233,104,173.17) AND DEPOSITING THE SAME UNDER HIS
ACCOUNT NAME 'JOSE VELARDE' AT THE EQUITABLE-PCI BANK."
We discern nothing in the foregoing that is vague or ambiguous - as there is obviously
none - that will confuse petitioner in his defense. Although subject to proof, these factual
assertions clearly show that the elements of the crime are easily understood and provide
adequate contrast between the innocent and the prohibited acts. Upon such unequivocal
assertions, petitioner is completely informed of the accusations against him as to enable him
to prepare for an intelligent defense.
Petitioner, however, bewails the failure of the law to provide for the statutory definition
of the terms "combination" and "series" in the key phrase "a combination or series of overt or
criminal acts" found in Sec. 1, par. (d), and Sec. 2, and the word "pattern" in Sec.
4. These omissions, according to petitioner, render the Plunder Law unconstitutional for being REP. GARCIA: Yes.
impermissibly vague and overbroad and deny him the right to be informed of the nature and
cause of the accusation against him, hence, violative of his fundamental right to due process. REP. ISIDRO: When we say combination, it seems that -

The rationalization seems to us to be pure sophistry. A statute is not rendered uncertain REP. GARCIA: Two.
and void merely because general terms are used therein, or because of the employment of REP. ISIDRO: Not only two but we seem to mean that two of the enumerated means not
terms without defining them;[6] much less do we have to define every word we use. Besides, twice of one enumeration.
there is no positive constitutional or statutory command requiring the legislature to define
each and every word in an enactment. Congress is not restricted in the form of expression of REP. GARCIA: No, no, not twice.
its will, and its inability to so define the words employed in a statute will not necessarily result
in the vagueness or ambiguity of the law so long as the legislative will is clear, or at least, can REP. ISIDRO: Not twice?
be gathered from the whole act, which is distinctly expressed in the Plunder Law. REP. GARCIA: Yes. Combination is not twice - but combination, two acts.
Moreover, it is a well-settled principle of legal hermeneutics that words of a statute will REP. ISIDRO: So in other words, thats it. When we say combination, we mean, two
be interpreted in their natural, plain and ordinary acceptation and signification,[7] unless it is different acts. It cannot be a repetition of the same act.
evident that the legislature intended a technical or special legal meaning to those words.[8] The
intention of the lawmakers - who are, ordinarily, untrained philologists and lexicographers - to REP. GARCIA: That be referred to series, yeah.
use statutory phraseology in such a manner is always presumed. Thus, Webster's New
REP. ISIDRO: No, no. Supposing one act is repeated, so there are two.
Collegiate Dictionary contains the following commonly accepted definition of the words
"combination" and "series:" REP. GARCIA: A series.

Combination - the result or product of combining; the act or process of
combining. To combine is to bring into such close relationship as to obscure individual
characters.
Series - a number of things or events of the same class coming one after another in spatial
and temporal succession.
That Congress intended the words "combination" and "series" to be understood in their
popular meanings is pristinely evident from the legislative deliberations on the bill which
eventually became RA 7080 or the Plunder Law:
REP. ISIDRO: Thats not series. Its a combination. Because when we say combination or
series, we seem to say that two or more, di ba?
REP. GARCIA: Yes, this distinguishes it really from ordinary crimes. That is why, I said, that
is a very good suggestion because if it is only one act, it may fall under ordinary
crime but we have here a combination or series of overt or criminal acts. So x x x x
REP. GARCIA: Series. One after the other eh di....
SEN. TANADA: So that would fall under the term series?
REP. GARCIA: Series, oo.

REP. ISIDRO: Now, if it is a combination, ano, two misappropriations....

DELIBERATIONS OF THE BICAMERAL COMMITTEE ON JUSTICE, 7 May 1991
REP. GARCIA: Its not... Two misappropriations will not be combination. Series.
REP. ISIDRO: I am just intrigued again by our definition of plunder. We say THROUGH A REP. ISIDRO: So, it is not a combination?
COMBINATION OR SERIES OF OVERT OR CRIMINAL ACTS AS MENTIONED IN SECTION ONE
HEREOF. Now when we say combination, we actually mean to say, if there are two or more REP. GARCIA: Yes.
means, we mean to say that number one and two or number one and something else are
REP. ISIDRO: When you say combination, two different?
included, how about a series of the same act? For example, through misappropriation,
conversion, misuse, will these be included also? REP. GARCIA: Yes.

SEN. TANADA: Two different.

REP. GARCIA: Yeah, because we say a series.
REP. ISIDRO: Two different acts.
REP. ISIDRO: Series.
REP. GARCIA: For example, ha...
REP. GARCIA: Yeah, we include series.
REP. ISIDRO: Now a series, meaning, repetition...
REP. ISIDRO: But we say we begin with a combination.
DELIBERATIONS ON SENATE BILL NO. 733, 6 June 1989
 SENATOR MACEDA: In line with our interpellations that sometimes one or maybe even
two acts may already result in such
a big amount, on line 25, would the Sponsor consider deleting the words a series of
overt or, to read, therefore: or conspiracy COMMITTED by criminal acts such as.
Remove the idea of necessitating a series. Anyway, the criminal acts are in the
plural.
SENATOR TANADA: That would mean a combination of two or more of the acts
mentioned in this.
THE PRESIDENT: Probably two or more would be....
SENATOR MACEDA: Yes, because a series implies several or many; two or more.
SENATOR TANADA: Accepted, Mr. President x x x x
THE PRESIDENT: If there is only one, then he has to be prosecuted under the particular
crime. But when we say acts of plunder there should be, at least, two or more.
SENATOR ROMULO: In other words, that is already covered by existing laws, Mr.
President.
Thus when the Plunder Law speaks of "combination," it is referring to at least two (2)
acts falling under different categories of enumeration provided in Sec. 1, par. (d), e.g., raids on
the public treasury in Sec. 1, par. (d), subpar. (1), and fraudulent conveyance of assets
belonging to the National Government under Sec. 1, par. (d), subpar. (3).
On the other hand, to constitute a series" there must be two (2) or more overt or criminal
acts falling under the same category of enumeration found in Sec. 1, par. (d), say,
misappropriation, malversation and raids on the public treasury, all of which fall under Sec. 1,
par. (d), subpar. (1). Verily, had the legislature intended a technical or distinctive meaning for
"combination" and "series," it would have taken greater pains in specifically providing for it in
the law.
As for "pattern," we agree with the observations of the Sandiganbayan[9] that this term
is sufficiently defined in Sec. 4, in relation to Sec. 1, par. (d), and Sec. 2 -
x x x x under Sec. 1 (d) of the law, a 'pattern' consists of at least a combination or series of
overt or criminal acts enumerated in subsections (1) to (6) of Sec. 1 (d). Secondly, pursuant to
Sec. 2 of the law, the pattern of overt or criminal acts is directed towards a common purpose
or goal which is to enable the public officer to amass, accumulate or acquire ill-gotten
wealth. And thirdly, there must either be an 'overall unlawful scheme' or 'conspiracy' to
achieve said common goal. As commonly understood, the term 'overall unlawful scheme'
indicates a 'general plan of action or method' which the principal accused and public officer
and others conniving with him follow to achieve the aforesaid common goal. In the
alternative, if there is no such overall scheme or where the schemes or methods used by
multiple accused vary, the overt or criminal acts must form part of a conspiracy to attain a
common goal.
Hence, it cannot plausibly be contended that the law does not give a fair warning and
sufficient notice of what it seeks to penalize. Under the circumstances, petitioner's reliance on
the "void-for-vagueness" doctrine is manifestly misplaced. The doctrine has been formulated
in various ways, but is most commonly stated to the effect that a statute establishing a criminal
offense must define the offense with sufficient definiteness that persons of ordinary
intelligence can understand what conduct is prohibited by the statute. It can only be invoked
against that specie of legislation that is utterly vague on its face, i.e., that which cannot be
clarified either by a saving clause or by construction.
A statute or act may be said to be vague when it lacks comprehensible standards that men of
common intelligence must necessarily guess at its meaning and differ in its application. In
such instance, the statute is repugnant to the Constitution in two (2) respects - it violates due
process for failure to accord persons, especially the parties targeted by it, fair notice of what
conduct to avoid; and, it leaves law enforcers unbridled discretion in carrying out its provisions
and becomes an arbitrary flexing of the Government muscle. [10] But the doctrine does not
apply as against legislations that are merely couched in imprecise language but which
nonetheless specify a standard though defectively phrased; or to those that are apparently
ambiguous yet fairly applicable to certain types of activities. The first may be "saved" by proper
construction, while no challenge may be mounted as against the second whenever directed
against such activities.[11] With more reason, the doctrine cannot be invoked where the
assailed statute is clear and free from ambiguity, as in this case.
The test in determining whether a criminal statute is void for uncertainty is whether the
language conveys a sufficiently definite warning as to the proscribed conduct when measured
by common understanding and practice.[12] It must be stressed, however, that the "vagueness"
doctrine merely requires a reasonable degree of certainty for the statute to be upheld - not
absolute precision or mathematical exactitude, as petitioner seems to suggest. Flexibility,
rather than meticulous specificity, is permissible as long as the metes and bounds of the statute
are clearly delineated. An act will not be held invalid merely because it might have been more
explicit in its wordings or detailed in its provisions, especially where, because of the nature of
the act, it would be impossible to provide all the details in advance as in all other statutes.
Moreover, we agree with, hence we adopt, the observations of Mr. Justice Vicente V.
Mendoza during the deliberations of the Court that the allegations that the Plunder Law is
vague and overbroad do not justify a facial review of its validity -
The void-for-vagueness doctrine states that "a statute which either forbids or requires the
doing of an act in terms so vague that men of common intelligence must necessarily guess at
its meaning and differ as to its application, violates the first essential of due process of
law."[13] The overbreadth doctrine, on the other hand, decrees that "a governmental purpose
may not be achieved by means which sweep unnecessarily broadly and thereby invade the
area of protected freedoms."[14]
A facial challenge is allowed to be made to a vague statute and to one which is overbroad
because of possible "chilling effect" upon protected speech. The theory is that "[w]hen
statutes regulate or proscribe speech and no readily apparent construction suggests itself as
a vehicle for rehabilitating the statutes in a single prosecution, the transcendent value to all
society of constitutionally protected expression is deemed to justify allowing attacks on
overly broad statutes with no requirement that the person making the attack demonstrate
that his own conduct could not be regulated by a statute drawn with narrow
specificity."[15] The possible harm to society in permitting some unprotected speech to go
unpunished is outweighed by the possibility that the protected speech of others may be
deterred and perceived grievances left to fester because of possible inhibitory effects of
overly broad statutes.
This rationale does not apply to penal statutes. Criminal statutes have general in
terrorem effect resulting from their very existence, and, if facial challenge is allowed for this
reason alone, the State may well be prevented from enacting laws against socially harmful
conduct. In the area of criminal law, the law cannot take chances as in the area of free
speech.
The overbreadth and vagueness doctrines then have special application only to free speech
cases. They are inapt for testing the validity of penal statutes. As the U.S. Supreme Court put
it, in an opinion by Chief Justice Rehnquist, "we have not recognized an 'overbreadth'
doctrine outside the limited context of the First Amendment."[16] In Broadrick v.
Oklahoma,[17]the Court ruled that "claims of facial overbreadth have been entertained in
cases involving statutes which, by their terms, seek to regulate only spoken words" and,
again, that "overbreadth claims, if entertained at all, have been curtailed when invoked
against ordinary criminal laws that are sought to be applied to protected conduct." For this
reason, it has been held that "a facial challenge to a legislative act is the most difficult
challenge to mount successfully, since the challenger must establish that no set of
circumstances exists under which the Act would be valid." [18] As for the vagueness doctrine, it
is said that a litigant may challenge a statute on its face only if it is vague in all its possible
applications. "A plaintiff who engages in some conduct that is clearly proscribed cannot
complain of the vagueness of the law as applied to the conduct of others."[19]
In sum, the doctrines of strict scrutiny, overbreadth, and vagueness are analytical tools
developed for testing "on their faces" statutes in free speech cases or, as they are called in
American law, First Amendment cases. They cannot be made to do service when what is
involved is a criminal statute. With respect to such statute, the established rule is that "one
to whom application of a statute is constitutional will not be heard to attack the statute on
the ground that impliedly it might also be taken as applying to other persons or other
situations in which its application might be unconstitutional."[20] As has been pointed out,
"vagueness challenges in the First Amendment context, like overbreadth challenges typically
produce facial invalidation, while statutes found vague as a matter of due process typically
are invalidated [only] 'as applied' to a particular defendant."[21] Consequently, there is no
basis for petitioner's claim that this Court review the Anti-Plunder Law on its face and in its
entirety.
Indeed, "on its face" invalidation of statutes results in striking them down entirely on the
ground that they might be applied to parties not before the Court whose activities are
constitutionally protected.[22] It constitutes a departure from the case and controversy
requirement of the Constitution and permits decisions to be made without concrete factual
settings and in sterile abstract contexts.[23] But, as the U.S. Supreme Court pointed out
in Younger v. Harris[24]
[T]he task of analyzing a proposed statute, pinpointing its deficiencies, and requiring
correction of these deficiencies before the statute is put into effect, is rarely if ever an
appropriate task for the judiciary. The combination of the relative remoteness of the
controversy, the impact on the legislative process of the relief sought, and above all the
speculative and amorphous nature of the required line-by-line analysis of detailed statutes, . .
. ordinarily results in a kind of case that is wholly unsatisfactory for deciding constitutional
questions, whichever way they might be decided.
For these reasons, "on its face" invalidation of statutes has been described as "manifestly
strong medicine," to be employed "sparingly and only as a last resort,"[25] and is generally
disfavored.[26] In determining the constitutionality of a statute, therefore, its provisions which
are alleged to have been violated in a case must be examined in the light of the conduct with
which the defendant is charged.[27]
In light of the foregoing disquisition, it is evident that the purported ambiguity of the
Plunder Law, so tenaciously claimed and argued at length by petitioner, is more imagined than
real. Ambiguity, where none exists, cannot be created by dissecting parts and words in the
statute to furnish support to critics who cavil at the want of scientific precision in the law.Every
provision of the law should be construed in relation and with reference to every other part. To
be sure, it will take more than nitpicking to overturn the well-entrenched presumption of
constitutionality and validity of the Plunder Law. A fortiori, petitioner cannot feign ignorance
of what the Plunder Law is all about. Being one of the Senators who voted for its passage,
petitioner must be aware that the law was extensively deliberated upon by the Senate and its
appropriate committees by reason of which he even registered his affirmative vote with full
knowledge of its legal implications and sound constitutional anchorage.
The parallel case of Gallego v. Sandiganbayan[28] must be mentioned if only to illustrate
and emphasize the point that courts are loathed to declare a statute void for uncertainty unless
the law itself is so imperfect and deficient in its details, and is susceptible of no reasonable
construction that will support and give it effect. In that case,
petitioners Gallego and Agoncillo challenged the constitutionality of Sec. 3, par. (e),
of The Anti-Graft and Corrupt Practices Act for being vague. Petitioners posited, among others,
that the term "unwarranted" is highly imprecise and elastic with no common law meaning or
settled definition by prior judicial or administrative precedents; that, for its vagueness, Sec. 3,
par. (e), violates due process in that it does not give fair warning or sufficient notice of what it
seeks to penalize. Petitioners further argued that the Information charged them with three (3)
distinct offenses, to wit: (a) giving of "unwarranted" benefits through manifest partiality; (b)
giving of "unwarranted" benefits through evident bad faith; and, (c) giving of
"unwarranted" benefits through gross inexcusable negligence while in the discharge of their
official function and that their right to be informed of the nature and cause of the accusation
against them was violated because they were left to guess which of the three (3) offenses, if
not all, they were being charged and prosecuted.
In dismissing the petition, this Court held that Sec. 3, par. (e), of The Anti-Graft and
Corrupt Practices Act does not suffer from the constitutional defect of vagueness. The phrases
"manifest partiality," "evident bad faith," and "gross and inexcusable negligence" merely
describe the different modes by which the offense penalized in Sec. 3, par. (e), of the statute
may be committed, and the use of all these phrases in the same Information does not mean
that the indictment charges three (3) distinct offenses.
The word 'unwarranted' is not uncertain. It seems lacking adequate or official support;
unjustified; unauthorized (Webster, Third International Dictionary, p. 2514); or without
justification or adequate reason (Philadelphia Newspapers, Inc. v. US Dept. of Justice, C.D.
Pa., 405 F. Supp. 8, 12, cited in Words and Phrases, Permanent Edition, Vol. 43-A 1978,
Cumulative Annual Pocket Part, p. 19).
The assailed provisions of the Anti-Graft and Corrupt Practices Act consider a corrupt practice
and make unlawful the act of the public officer in:
x x x or giving any private party any unwarranted benefits, advantage or preference in the
discharge of his official, administrative or judicial functions through manifest partiality,
evident bad faith or gross inexcusable negligence, x x x (Section 3 [e], Rep. Act 3019, as
amended).
It is not at all difficult to comprehend that what the aforequoted penal provisions penalize is
the act of a public officer, in the discharge of his official, administrative or judicial functions,
in giving any private party benefits, advantage or preference which is unjustified,
unauthorized or without justification or adequate reason, through manifest partiality,
evident bad faith or gross inexcusable negligence.
In other words, this Court found that there was nothing vague or ambiguous in the use
of the term "unwarranted" in Sec. 3, par. (e), of The Anti-Graft and Corrupt Practices Act, which
was understood in its primary and general acceptation. Consequently, in that case, petitioners'
objection thereto was held inadequate to declare the section unconstitutional.
On the second issue, petitioner advances the highly stretched theory that Sec. 4 of the
Plunder Law circumvents the immutable obligation of the prosecution to prove beyond
reasonable doubt the predicate acts constituting the crime of plunder when it requires only
proof of a pattern of overt or criminal acts showing unlawful scheme or conspiracy -
SEC. 4. Rule of Evidence. - For purposes of establishing the crime of plunder, it shall not be
necessary to prove each and every criminal act done by the accused in furtherance of the
scheme or conspiracy to amass, accumulate or acquire ill-gotten wealth, it being sufficient to
establish beyond reasonable doubt a pattern of overt or criminal acts indicative of the overall
unlawful scheme or conspiracy.
The running fault in this reasoning is obvious even to the simplistic mind. In a criminal
prosecution for plunder, as in all other crimes, the accused always has in his favor the
presumption of innocence which is guaranteed by the Bill of Rights, and unless the State
succeeds in demonstrating by proof beyond reasonable doubt that culpability lies, the accused
is entitled to an acquittal.[29] The use of the "reasonable doubt" standard is indispensable to
command the respect and confidence of the community in the application of criminal law. It is
critical that the moral force of criminal law be not diluted by a standard of proof that leaves
people in doubt whether innocent men are being condemned. It is also important in our free
society that every individual going about his ordinary affairs has confidence that his
government cannot adjudge him guilty of a criminal offense without convincing a proper
factfinder of his guilt with utmost certainty. This "reasonable doubt" standard has acquired
such exalted stature in the realm of constitutional law as it gives life to the Due Process
Clause which protects the accused against conviction except upon proof beyond reasonable
doubt of every fact necessary to constitute the crime with which he is charged.[30] The
following exchanges between Rep. Rodolfo Albano and Rep. Pablo Garcia on this score during
the deliberations in the floor of the House of Representatives are elucidating -
DELIBERATIONS OF THE HOUSE OF REPRESENTATIVES ON RA 7080, 9 October 1990
MR. ALBANO: Now, Mr. Speaker, it is also elementary in our criminal law that what is
alleged in the information must be proven beyond reasonable doubt. If we will
prove only one act and find him guilty of the other acts enumerated in the
information, does that not work against the right of the accused especially so if the
amount committed, say, by falsification is less than P100 million, but the totality of
the crime committed is P100 million since there is malversation, bribery,
falsification of public document, coercion, theft?
MR. GARCIA: Mr. Speaker, not everything alleged in the information needs to be proved
beyond reasonable doubt. What is required to be proved beyond reasonable doubt
is every element of the crime charged. For example, Mr. Speaker, there is
an enumeration of the things taken by the robber in the information three pairs of
pants, pieces of jewelry. These need not be proved beyond reasonable doubt, but
these will not prevent the conviction of a crime for which he was charged just
because, say, instead of 3 pairs of diamond earrings the prosecution proved
two. Now, what is required to be proved beyond reasonable doubt is the element of
the offense.
MR. ALBANO: I am aware of that, Mr. Speaker, but considering that in the crime of
plunder the totality of the amount is very important, I feel that such a series of overt
criminal acts has to be taken singly. For instance, in the act of bribery, he was able
to accumulate only P50,000 and in the crime of extortion, he was only able to
accumulate P1 million. Now, when we add the totality of the other acts as required
under this bill through the interpretation on the rule of evidence, it is just one single
act, so how can we now convict him?
MR. GARCIA: With due respect, Mr. Speaker, for purposes of proving an essential element
of the crime, there is a need to prove that element beyond reasonable doubt. For
example, one essential element of the crime is that the amount involved is P100
million. Now, in a series of defalcations and other acts of corruption in the
enumeration the total amount would be P110 or P120 million, but there are certain
acts that could not be proved, so, we will sum up the amounts involved in those
transactions which were proved. Now, if the amount involved in these transactions,
proved beyond reasonable doubt, is P100 million, then there is a crime of
plunder (underscoring supplied).
It is thus plain from the foregoing that the legislature did not in any manner refashion
the standard quantum of proof in the crime of plunder. The burden still remains with the
prosecution to prove beyond any iota of doubt every fact or element necessary to constitute
the crime.
 The thesis that Sec. 4 does away with proof of each and every component of the crime
suffers from a dismal misconception of the import of that provision. What the prosecution
needs to prove beyond reasonable doubt is only a number of acts sufficient to form a
combination or series which would constitute a pattern and involving an amount of at
least P50,000,000.00. There is no need to prove each and every other act alleged in the
Information to have been committed by the accused in furtherance of the overall unlawful
scheme or conspiracy to amass, accumulate or acquire ill-gotten wealth. To illustrate,
supposing that the accused is charged in an Information for plunder with having committed
fifty (50) raids on the public treasury. The prosecution need not prove all these fifty (50) raids,
it being sufficient to prove by pattern at least two (2) of the raids beyond reasonable doubt
provided only that they amounted to at least P50,000,000.00.[31]
A reading of Sec. 2 in conjunction with Sec. 4, brings us to the logical conclusion
that "pattern of overt or criminal acts indicative of the overall unlawful scheme or conspiracy"
inheres in the very acts of accumulating, acquiring or amassing hidden wealth. Stated
otherwise, such pattern arises where the prosecution is able to prove beyond reasonable
doubt the predicate acts as defined in Sec. 1, par. (d). Pattern is merely a by-product of the
proof of the predicate acts. This conclusion is consistent with reason and common sense. There
would be no other explanation for a combination or series of
overt or criminal acts to stash P50,000,000.00 or more, than "a scheme or conspiracy to amass,
accumulate or acquire ill gotten wealth." The prosecution is therefore not required to make a
deliberate and conscious effort to prove pattern as it necessarily follows with the
establishment of a series or combination of the predicate acts.
Relative to petitioner's contentions on the purported defect of Sec. 4 is his submission
that "pattern" is "a very important element of the crime of plunder;" and that Sec. 4 is "two
pronged, (as) it contains a rule of evidence and a substantive element of the crime," such that
without it the accused cannot be convicted of plunder -
JUSTICE BELLOSILLO: In other words, cannot an accused be convicted under the Plunder
Law without applying Section 4 on the Rule of Evidence if there is proof beyond
reasonable doubt of the commission of the acts complained of?
ATTY. AGABIN: In that case he can be convicted of individual crimes enumerated in the
Revised Penal Code, but not plunder.
JUSTICE BELLOSILLO: In other words, if all the elements of the crime are proved beyond
reasonable doubt without applying Section 4, can you not have a conviction under
the Plunder Law?
ATTY. AGABIN: Not a conviction for plunder, your Honor.
JUSTICE BELLOSILLO: Can you not disregard the application of Sec. 4 in convicting an
accused charged for violation of the Plunder Law?
ATTY. AGABIN: Well, your Honor, in the first place Section 4 lays down a substantive
element of the law x x x x
JUSTICE BELLOSILLO: What I said is - do we have to avail of Section 4 when there is proof
beyond reasonable doubt on the acts charged constituting plunder?
ATTY. AGABIN: Yes, your Honor, because Section 4 is two pronged, it contains a rule of
evidence and it contains a substantive element of the crime of plunder. So, there is
no way by which we can avoid Section 4.
JUSTICE BELLOSILLO: But there is proof beyond reasonable doubt insofar as the predicate
crimes charged are concerned that you do not have to go that far by applying
Section 4?
ATTY. AGABIN: Your Honor, our thinking is that Section 4 contains a very important
element of the crime of plunder and that cannot be avoided by the prosecution.[32]
We do not subscribe to petitioner's stand. Primarily, all the essential elements of plunder
can be culled and understood from its definition in Sec. 2, in relation to Sec. 1, par. (d), and
"pattern" is not one of them. Moreover, the epigraph and opening clause of Sec. 4 is clear and
unequivocal:
SEC. 4. Rule of Evidence. - For purposes of establishing the crime of plunder x x x x
It purports to do no more than prescribe a rule of procedure for the prosecution of a
criminal case for plunder. Being a purely procedural measure, Sec. 4 does not define or
establish any substantive right in favor of the accused but only operates in furtherance of a
remedy. It is only a means to an end, an aid to substantive law. Indubitably, even without
invoking Sec. 4, a conviction for plunder may be had, for what is crucial for the prosecution is
to present sufficient evidence to engender that moral certitude exacted by the fundamental
law to prove the guilt of the accused beyond reasonable doubt. Thus, even granting for the
sake of argument that Sec. 4 is flawed and vitiated for the reasons advanced by petitioner, it
may simply be severed from the rest of the provisions without necessarily resulting in the
demise of the law; after all, the existing rules on evidence can supplant Sec. 4 more than
enough. Besides, Sec. 7 of RA 7080 provides for a separability clause -
Sec. 7. Separability of Provisions. - If any provisions of this Act or the application thereof to
any person or circumstance is held invalid, the remaining provisions of this Act and the
application of such provisions to other persons or circumstances shall not be affected
thereby.
Implicit in the foregoing section is that to avoid the whole act from being declared invalid
as a result of the nullity of some of its provisions, assuming that to be the case although it is
not really so, all the provisions thereof should accordingly be treated independently of each
other, especially if by doing so, the objectives of the statute can best be achieved.
As regards the third issue, again we agree with Justice Mendoza that plunder is a malum
in se which requires proof of criminal intent. Thus, he says, in his Concurring Opinion -
x x x Precisely because the constitutive crimes are mala in se the element of mens rea must
be proven in a prosecution for plunder. It is noteworthy that the amended information
alleges that the crime of plunder was committed "willfully, unlawfully and criminally." It thus
alleges guilty knowledge on the part of petitioner.
In support of his contention that the statute eliminates the requirement of mens rea and that
is the reason he claims the statute is void, petitioner cites the following remarks of Senator
Taada made during the deliberation on S.B. No. 733:
SENATOR TAADA . . . And the evidence that will be required to convict him would not be
evidence for each and every individual criminal act but only evidence sufficient to establish
the conspiracy or scheme to commit this crime of plunder. [33]
However, Senator Taada was discussing 4 as shown by the succeeding portion of the
transcript quoted by petitioner:
SENATOR ROMULO: And, Mr. President, the Gentleman feels that it is contained in Section 4,
Rule of Evidence, which, in the Gentleman's view, would provide for a speedier and faster
process of attending to this kind of cases?
SENATOR TAADA: Yes, Mr. President . . .[34]
Senator Taada was only saying that where the charge is conspiracy to commit plunder, the
prosecution need not prove each and every criminal act done to further the scheme or
conspiracy, it being enough if it proves beyond reasonable doubt a pattern of overt or ciminal
acts indicative of the overall unlawful scheme or conspiracy. As far as the acts constituting
the pattern are concerned, however, the elements of the crime must be proved and the
requisite mens rea must be shown.
Indeed, 2 provides that -
Any person who participated with the said public officer in the commission of an offense
contributing to the crime of plunder shall likewise be punished for such offense. In the
imposition of penalties, the degree of participation and the attendance of mitigating and
extenuating circumstances, as provided by the Revised Penal Code, shall be considered by
the court.
The application of mitigating and extenuating circumstances in the Revised Penal Code to
prosecutions under the Anti-Plunder Law indicates quite clearly that mens rea is an element
of plunder since the degree of responsibility of the offender is determined by his criminal
intent. It is true that 2 refers to "any person who participates with the said public officer in
the commission of an offense contributing to the crime of plunder." There is no reason to
believe, however, that it does not apply as well to the public officer as principal in the
crime. As Justice Holmes said: "We agree to all the generalities about not supplying criminal
laws with what they omit, but there is no canon against using common sense in construing
laws as saying what they obviously mean."[35]
Finally, any doubt as to whether the crime of plunder is a malum in se must be deemed to
have been resolved in the affirmative by the decision of Congress in 1993 to include it among
the heinous crimes punishable by reclusion perpetua to death. Other heinous crimes are
punished with death as a straight penalty in R.A. No. 7659. Referring to these groups of
heinous crimes, this Court held in People v. Echegaray:[36]
The evil of a crime may take various forms. There are crimes that are, by their very nature,
despicable, either because life was callously taken or the victim is treated like an animal and
utterly dehumanized as to completely disrupt the normal course of his or her growth as a
human being . . . . Seen in this light, the capital crimes of kidnapping and serious illegal
detention for ransom resulting in the death of the victim or the victim is raped, tortured, or
subjected to dehumanizing acts; destructive arson resulting in death; and drug offenses
involving minors or resulting in the death of the victim in the case of other crimes; as well as
murder, rape, parricide, infanticide, kidnapping and serious illegal detention, where the
victim is detained for more than three days or serious physical injuries were inflicted on the
victim or threats to kill him were made or the victim is a minor, robbery with homicide, rape
or intentional mutilation, destructive arson, and carnapping where the owner, driver or
occupant of the carnapped vehicle is killed or raped, which are penalized by reclusion
perpetua to death, are clearly heinous by their very nature.
There are crimes, however, in which the abomination lies in the significance and implications
of the subject criminal acts in the scheme of the larger socio-political and economic context
in which the state finds itself to be struggling to develop and provide for its poor and
underprivileged masses. Reeling from decades of corrupt tyrannical rule that bankrupted the
government and impoverished the population, the Philippine Government must muster the
political will to dismantle the culture of corruption, dishonesty, greed and syndicated
criminality that so deeply entrenched itself in the structures of society and the psyche of the
populace. [With the government] terribly lacking the money to provide even the most basic
services to its people, any form of misappropriation or misapplication of government funds
translates to an actual threat to the very existence of government, and in turn, the very
survival of the people it governs over. Viewed in this context, no less heinous are the effects
and repercussions of crimes like qualified bribery, destructive arson resulting in death, and
drug offenses involving government officials, employees or officers, that their perpetrators
must not be allowed to cause further destruction and damage to society.
The legislative declaration in R.A. No. 7659 that plunder is a heinous offense implies that it is
a malum in se. For when the acts punished are inherently immoral or inherently wrong, they
are mala in se[37] and it does not matter that such acts are punished in a special law,
especially since in the case of plunder the predicate crimes are mainly mala in se. Indeed, it
would be absurd to treat prosecutions for plunder as though they are mere prosecutions for
violations of the Bouncing Check Law (B.P. Blg. 22) or of an ordinance against jaywalking,
without regard to the inherent wrongness of the acts.
To clinch, petitioner likewise assails the validity of RA 7659, the amendatory law of RA
7080, on constitutional grounds. Suffice it to say however that it is now too late in the day for
him to resurrect this long dead issue, the same having been eternally consigned by People v.
Echegaray[38] to the archives of jurisprudential history. The declaration of this Court therein
that RA 7659 is constitutionally valid stands as a declaration of the State, and becomes, by
necessary effect, assimilated in the Constitution now as an integral part of it.
 Our nation has been racked by scandals of corruption and obscene profligacy of officials
in high places which have shaken its very foundation. The anatomy of graft and corruption has
become more elaborate in the corridors of time as unscrupulous people relentlessly contrive
more and more ingenious ways to bilk the coffers of the government. Drastic and radical
measures are imperative to fight the increasingly sophisticated, extraordinarily methodical and
economically catastrophic looting of the national treasury. Such is the Plunder Law, especially
designed to disentangle those ghastly tissues of grand-scale corruption which, if left
unchecked, will spread like a malignant tumor and ultimately consume the moral and
institutional fiber of our nation. The Plunder Law, indeed, is a living testament to the will of
the legislature to ultimately eradicate this scourge and thus secure society against the avarice
and other venalities in public office.

These are times that try men's souls. In the checkered history of this nation, few issues
of national importance can equal the amount of interest and passion generated by petitioner's
ignominious fall from the highest office, and his eventual prosecution and trial under a virginal
statute. This continuing saga has driven a wedge of dissension among our people that may
linger for a long time. Only by responding to the clarion call for patriotism, to rise above
factionalism and prejudices, shall we emerge triumphant in the midst of ferment.

PREMISES CONSIDERED, this Court holds that RA 7080 otherwise known as the Plunder
Law, as amended by RA 7659, is CONSTITUTIONAL. Consequently, the petition to declare the
law unconstitutional is DISMISSED for lack of merit.

SO ORDERED.