I.

JURISDICTION
A. Classes of Jurisdiction
- Jurisdiction according to its nature: original, appellate
- Jurisdiction according to its object: corresponding principles
i. over the subject matter
ii. over the persons of the parties
iii. over the “res”
iv. over the issues
v. over the territory
B. Elements of Jurisdiction
C. Jurisdiction of Regular Courts
1. Supreme Court
2. Court of Appeals
3. Regional Trial Court
A. Intellectual Property Courts
B. Special Courts
4. Family Courts
5. Metropolitan Trial Courts
Municipal Trial Courts in cities
Municipal Trial Courts and
Municipal Circuit Courts
6. Sandiganbayan
7. Court of Tax-Appeals
8. Quasi-Judicial Bodies
9. Quasi-Courts
10. Sharia’h Courts: appellate, district, circuit
D. Discuss the concept, description and application of the following:
1. Delegated jurisdiction
2. Special jurisdiction
3. Limited jurisdiction
4. Primary jurisdiction
5. Residual jurisdiction
6. Equity jurisdiction
7. Universal jurisdiction
8. Epistolary jurisdiction
9. Expanded jurisdiction

Must Read:
1. Section 5, Article VIII, 1987 Constitution
2. Judiciary Reorganization Act of 1980
3. B.P. Blg. No. 129
4. RA 7691
5. RA 8369 (Family Courts Act)
6. SC-AO No. 113-95 - Intellectual Property Courts
 7. PD 1486; 1606 (Sandiganbayan)
8. RA 7975; 8249 (Sandiganbayan)
9. RA 9282 (Court of Tax Appeals)
10. RA 9054 (Sharia’h Courts)

Cases:
1. Duero vs. CA, G.R. No. 131282

SECOND DIVISION

[G.R. No. 131282. January 4, 2002.]

GABRIEL L. DUERO, petitioner, vs. HON. COURT OF APPEALS,

and BERNARDO A. ERADEL, respondents.

Sua & Alambra Law Offices for petitioner.

Gerardo M. Maglinte for private respondent.

SYNOPSIS

In a complaint for Recovery of Possession and Ownership filed by petitioner

Gabriel L. Duero against private respondent Bernardo A Eradel and two others,
private respondent was declared in default for failure to file his answer. As a
consequence, judgment was rendered in favor of the petitioner. Private
respondent filed a Motion for New Trial, but was denied by the trial court.
Subsequently, he filed a Petition for Relief from Judgment based on the same
ground as in his motion for new trial. But the said petition was denied by the trial
court. In a motion for reconsideration, he alleged that the Regional Trial Court
(RTC) had no jurisdiction over the case since the value of the land was only
P5,240. Again, it was denied by the trial court. Private respondent filed a Petition
for Certiorari before the Court of Appeals. The appellate court gave due course to
the petition by maintaining that private respondent was not estopped from
assailing the jurisdiction of the RTC. Hence, this petition.
The Court could not fault the Court of Appeals in overruling the RTC. The
fundamental rule is that, the lack of jurisdiction of the court over an action cannot
be waived by the parties, or even cured by their silence, acquiescence or even
by their express consent. Even if private respondent actively participated in the
proceedings before said court, the doctrine of estoppel cannot be properly
invoked against him because the question of lack of jurisdiction may be raised at
anytime and at any stage of the action.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; DOCUMENTARY EVIDENCE; XEROX

COPIES ARE WITHOUT EVIDENTIARY VALUE. — Petitioner through counsel
submitted to this Court pleadings that contain inaccurate statements. Thus, on
page 5 of his petition, we find that to bolster the claim that the appellate court
erred in holding that the RTC had no jurisdiction, petitioner pointed to Annex E of
his petition which supposedly is the Certification issued by the Municipal
Treasurer of San Miguel, Surigao, specifically containing the notation, "Note:
Subject for General Revision Effective 1994." But it appears that Annex E of his
petition is not a Certification but a xerox copy of a Declaration of Real Property.
Nowhere does the document contain a notation, "Note: Subject for General
Revision Effective 1994." Petitioner also asked this Court to refer to Annex
F, where he said the zonal value of the disputed land was P1.40 per sq.m., thus
placing the computed value of the land at the time the complaint was filed before
the RTC at P57,113.98, hence beyond the jurisdiction of the municipal court and
within the jurisdiction of the regional trial court. However, we find that these
annexes are both merely xerox copies. They are obviously without evidentiary
weight or value.
2. ID.; SPECIAL CIVIL ACTIONS; CERTIORARI; GRAVE ABUSE OF
DISCRETION; ELUCIDATED. — By "grave abuse of discretion" is meant such
capricious and whimsical exercise of judgment which is equivalent to an excess
or a lack of jurisdiction. The abuse of discretion must be so patent and gross as
to amount to an evasion of a 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.
3. ID.; ID.; ID.; ID.; NOT PRESENT IN CASE AT BAR. — But here we find that in
its decision holding that the municipal court has jurisdiction over the case and
that private respondent was not estopped from questioning the jurisdiction of the
RTC, respondent Court of Appeals discussed the facts on which its decision is
grounded as well as the law and jurisprudence on the matter. Its action was
neither whimsical nor capricious.
4. REMEDIAL LAW; JURISDICTION; DOCTRINE OF ESTOPPEL; AN
EQUITABLE DEFENSE THAT IS BOTH SUBSTANTIVE AND REMEDIAL. —
While participation in all stages of a case before the trial court, including
invocation of its authority in asking for affirmative relief, effectively bars a party by
estoppel from challenging the court's jurisdiction, we note that estoppel has
become an equitable defense that is both substantive and remedial and its
successful invocation can bar a right and not merely its equitable enforcement.
Hence, estoppel ought to be applied with caution. For estoppel to apply, the
action giving rise thereto must be unequivocal and intentional because, if
misapplied, estoppel may become a tool of injustice.
5. ID.; ID.; ID.; NOT APPLICABLE IN CASE AT BAR. — In the present case,
private respondent questions the jurisdiction of RTC in Tandag, Surigao del Sur,
on legal grounds. Recall that it was petitioner who filed the complaint against
private respondent and two other parties before the said court, believing that the
RTC had jurisdiction over his complaint. But by then, Republic Act
7691 amending BP 129 had become effective, such that jurisdiction already
belongs not to the RTC but to the MTC pursuant to said amendment. . . . Note
that private respondent raised the issue of lack of jurisdiction, not when the case
was already on appeal, but when the case was still before the RTC that ruled him
in default, denied his motion for new trial as well as for relief from judgment, and
denied likewise his two motions for reconsideration. After the RTC still refused to
reconsider the denial of private respondent's motion for relief from judgment, it
went on to issue the order for entry of judgment and a writ of execution. Under
these circumstances, we could not fault the Court of Appeals in overruling the
RTC and in holding that private respondent was not estopped from questioning
the jurisdiction of the regional trial court.
6. ID.; ID.; ID.; APPLICABLE IN EXCEPTIONAL CASES ONLY; NOT PRESENT
IN CASE AT BAR. — In holding that estoppel did not prevent private respondent
from questioning the RTC's jurisdiction, the appellate court reiterated the doctrine
that estoppel must be applied only in exceptional cases, as its misapplication
could result in a miscarriage of justice. Here, we find that petitioner, who claims
ownership of a parcel of land, filed his complaint before a court without
appropriate jurisdiction. Defendant, a farmer whose tenancy status is still pending
before the proper administrative agency concerned, could have moved for
dismissal of the case on jurisdictional grounds. But the farmer as defendant
therein could not be expected to know the nuances of jurisdiction and related
issues. This farmer, who is now the private respondent, ought not to be penalized
when he claims that he made an honest mistake when he initially submitted his
motions before the RTC, before he realized that the controversy was outside the
RTC's cognizance but within the jurisdiction of the municipal trial court. To hold
him in estoppel as the RTC did would amount to foreclosing his avenue to obtain
a proper resolution of his case. Furthermore, if the RTC's order were to be
sustained, he would be evicted from the land prematurely, while RED Conflict
Case No. 1029 would remain unresolved. Such eviction on a technicality if
allowed could result in an injustice, if it is later found that he has a legal right to till
the land he now occupies as tenant-lessee. AEScHa
7. ID.; ID.; NOT A QUESTION OF ACQUIESCENCE AS A MATTER OF FACT
BUT AN ISSUE OF CONFERMENT AS A MATTER OF LAW. — The
fundamental rule is that, the lack of jurisdiction of the court over an action cannot
be waived by the parties, or even cured by their silence, acquiescence or even
by their express consent. Further, a party may assail the jurisdiction of the court
over the action at any stage of the proceedings and even on appeal. The
appellate court did not err in saying that the RTC should have declared itself
barren of jurisdiction over the action. Even if private respondent actively
participated in the proceedings before said court, the doctrine of estoppel cannot
still be properly invoked against him because the question of lack of jurisdiction
may be raised at anytime and at any stage of the action. Precedents tell us that
as a general rule, the jurisdiction of a court is not a question of acquiescence as
a matter of fact, but an issue of conferment as a matter of law. Also, neither
waiver nor estoppel shall apply to confer jurisdiction upon a court, barring highly
meritorious and exceptional circumstances.
8. ID.; CIVIL PROCEDURE; JUDGMENT; DECISION OF A COURT WITHOUT
JURISDICTION IS NULL AND VOID. — Indeed, ". . . the trial court was duty-
bound to take judicial notice of the parameters of its jurisdiction and its failure to
do so, makes its decision a 'lawless' thing." Since a decision of a court without
jurisdiction is null and void, it could logically never become final and executory,
hence appeal therefrom by writ of error would be out of the question. Resort by
private respondent to a petition for certiorari before the Court of Appeals was in
order.
9. ID.; ID.; PLEADINGS; IF THE COURT HAS NO JURISDICTION OVER THE
CASE, DEFENDANT HAS JUSTIFIABLE REASON NOT TO FILE AN ANSWER.
— Suffice it to say that, given the circumstances in this case, no error was
committed on this score by respondent appellate court. Since the RTC had no
jurisdiction over the case, private respondent had justifiable reason in law not to
file an answer, aside from the fact that he believed the suit was properly his
landlord's concern.

DECISION

QUISUMBING, J : p

This petition for certiorari assails the Decision 1 dated September 17, 1997, of the
Court of Appeals in CA-G.R. No. SP No. 2340-UDK, entitled Bernardo Eradel vs.
Hon. Ermelino G. Andal, setting aside all proceedings in Civil Case No.
1075, Gabriel L. Duero vs. Bernardo Eradel, before the Branch 27 of the
Regional Trial Court of Tandang, Surigao del Sur.
The pertinent facts are as follows:
Sometime in 1988, according to petitioner, private respondent Bernardo
Eradel 2 entered and occupied petitioner's land covered by Tax Declaration No.
A-16-13-302, located in Baras, San Miguel, Surigao del Sur. As shown in the tax
declaration, the land had an assessed value of P5,240. When petitioner politely
informed private respondent that the land was his and requested the latter to
vacate the land, private respondent refused, but instead threatened him with
bodily harm. Despite repeated demands, private respondent remained steadfast
in his refusal to leave the land.
On June 16, 1995, petitioner filed before the RTC a complaint for Recovery of
Possession and Ownership with Damages and Attorney's Fees against private
respondent and two others, namely, Apolinario and Inocencio Ruena. Petitioner
appended to the complaint the aforementioned tax declaration. The counsel of
the Ruenas asked for extension to file their Answer and was given until July 18,
1995. Meanwhile, petitioner and the Ruenas executed a compromise agreement,
which became the trial court's basis for a partial judgment rendered on January
12, 1996. In this agreement, the Ruenas through their counsel, Atty. Eusebio
Avila, entered into a Compromise Agreement with herein petitioner, Gabriel
Duero. Inter alia, the agreement stated that the Ruenas recognized and bound
themselves to respect the ownership and possession of Duero. 3 Herein private
respondent Eradel was not a party to the agreement, and he was declared in
default for failure to file his answer to the complaint. 4
Petitioner presented his evidence ex parte on February 13, 1996. On May 8,
1996, judgment was rendered in his favor, and private respondent was ordered
to peacefully vacate and turn over Lot No. 1065 Cad. 537-D to petitioner; pay
petitioner P2,000 annual rental from 1988 up the time he vacates the land, and
P5,000 as attorney's fees and the cost of the suit. 5 Private respondent received
a copy of the decision on May 25, 1996.
On June 10, 1996, private respondent filed a Motion for New Trial, alleging that
he has been occupying the land as a tenant of Artemio Laurente, Sr., since 1958.
He explained that he turned over the complaint and summons to Laurente in the
honest belief that as landlord, the latter had a better right to the land and was
responsible to defend any adverse claim on it. However, the trial court denied the
motion for new trial.
Meanwhile, RED Conflict Case No. 1029, an administrative case between
petitioner and applicant-contestants Romeo, Artemio and Jury Laurente,
remained pending with the Office of the Regional Director of the Department of
Environment and Natural Resources in Davao City. Eventually, it was forwarded
to the DENR Regional Office in Prosperidad, Agusan del Sur.
On July 24, 1996, private respondent filed before the RTC a Petition for Relief
from Judgment, reiterating the same allegation in his Motion for New Trial. He
averred that unless there is a determination on who owned the land, he could not
be made to vacate the land. He also averred that the judgment of the trial court
was void inasmuch as the heirs of Artemio Laurente, Sr., who are indispensable
parties, were not impleaded.
On September 24, 1996, Josephine, Ana Soledad and Virginia, all surnamed
Laurente, grandchildren of Artemio who were claiming ownership of the land,
filed a Motion for Intervention. The RTC denied the motion.
On October 8, 1996, the trial court issued an order denying the Petition for Relief
from Judgment. In a Motion for Reconsideration of said order, private respondent
alleged that the RTC had no jurisdiction over the case, since the value of the land
was only P5,240 and therefore it was under the jurisdiction of the municipal trial
court. On November 22, 1996, the RTC denied the motion for reconsideration.
On January 22, 1997, petitioner filed a Motion for Execution, which the RTC
granted on January 28. On February 18, 1997, Entry of Judgment was made of
record and a writ of execution was issued by the RTC on February 27, 1997. On
March 12, 1997, private respondent filed his petition for certiorari before the
Court of Appeals.
The Court of Appeals gave due course to the petition, maintaining that
respondent is not estopped from assailing the jurisdiction of the RTC, Branch 27
in Tandag, Surigao del Sur, when private respondent filed with said court his
Motion for Reconsideration And/Or Annulment of Judgment. The Court of
Appeals decreed as follows:
IN THE LIGHT OF ALL THE FOREGOING, the Petition is GRANTED.
All proceedings in "Gabriel L. Duero vs. Bernardo Eradel, et al. Civil
Case 1075" filed in the Court a quo, including its Decision, Annex "E" of
the petition, and its Orders and Writ of Execution and the turn over of the
property to the Private Respondent by the Sheriff of the Court a quo, are
declared null and void and hereby SET ASIDE. No pronouncement as to
costs.
SO ORDERED. 6
Petitioner now comes before this Court, alleging that the Court of Appeals acted
with grave abuse of discretion amounting to lack or in excess of jurisdiction when
it held that:
I.
. . . THE LOWER COURT HAS NO JURISDICTION OVER THE SUBJECT MATTER
OF THE CASE.
II.
. . . PRIVATE RESPONDENT WAS NOT THEREBY ESTOPPED FROM
QUESTIONING THE JURISDICTION OF THE LOWER COURT EVEN AFTER IT
SUCCESSFULLY SOUGHT AFFIRMATIVE RELIEF THEREFROM.
III.
. . . THE FAILURE OF PRIVATE RESPONDENT TO FILE HIS ANSWER IS
JUSTIFIED. 7
The main issue before us is whether the Court of Appeals gravely abused its
discretion when it held that the municipal trial court had jurisdiction, and that
private respondent was not estopped from assailing the jurisdiction of the RTC
after he had filed several motions before it. The secondary issue is whether the
Court of Appeals erred in holding that private respondent's failure to file an
answer to the complaint was justified.
At the outset, however, we note that petitioner through counsel submitted to this
Court pleadings that contain inaccurate statements. Thus, on page 5 of his
petition, 8we find that to bolster the claim that the appellate court erred in holding
that the RTC had no jurisdiction, petitioner pointed to Annex E 9 of his petition
which supposedly is the Certification issued by the Municipal Treasurer of San
Miguel, Surigao, specifically containing the notation, "Note: Subject for General
Revision Effective 1994". But it appears that Annex E of his petition is not a
Certification but a xerox copy of a Declaration of Real Property. Nowhere does
the document contain a notation, "Note: Subject for General Revision Effective
1994". Petitioner also asked this Court to refer to Annex F, 10 where he said the
zonal value of the disputed land was P1.40 per sq.m., thus placing the computed
value of the land at the time the complaint was filed before the RTC at
P57,113.98, hence beyond the jurisdiction of the municipal court and within the
jurisdiction of the regional trial court. However, we find that these annexes are
both merely xerox copies. They are obviously without evidentiary weight or value.
Coming now to the principal issue, petitioner contends that respondent appellate
court acted with grave abuse of discretion. By "grave abuse of discretion" is
meant such capricious and whimsical exercise of judgment which is equivalent to
an excess or a lack of jurisdiction. The abuse of discretion must be so patent and
gross as to amount to an evasion of a 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. 11 But here we find that in its decision holding that the municipal court
has jurisdiction over the case and that private respondent was not estopped from
questioning the jurisdiction of the RTC, respondent Court of Appeals discussed
the facts on which its decision is grounded as well as the law and jurisprudence
on the matter. 12 Its action was neither whimsical nor capricious.
Was private respondent estopped from questioning that jurisdiction of the RTC?
In this case, we are in agreement with the Court of Appeals that he was not.
While participation in all stages of a case before the trial court, including
invocation of its authority in asking for affirmative relief, effectively bars a party by
estoppel from challenging the court's jurisdiction, 13 we note that estoppel has
become an equitable defense that is both substantive and remedial and its
successful invocation can bar a right and not merely its equitable
enforcement. 14 Hence, estoppel ought to be applied with caution. For estoppel to
apply, the action giving rise thereto must be unequivocal and intentional
because, if misapplied, estoppel may become a tool of injustice. 15
In the present case, private respondent questions the jurisdiction of RTC in
Tandag, Surigao del Sur, on legal grounds. Recall that it was petitioner who filed
the complaint against private respondent and two other parties before the said
court, 16 believing that the RTC had jurisdiction over his complaint. But by
then, Republic Act 7691 17 amending BP 129 had become effective, such that
jurisdiction already belongs not to the RTC but to the MTC pursuant to said
amendment. Private respondent, an unschooled farmer, in the mistaken belief
that since he was merely a tenant of the late Artemio Laurente Sr., his landlord,
gave the summons to a Hipolito Laurente, one of the surviving heirs of Artemio
Sr., who did not do anything about the summons. For failure to answer the
complaint, private respondent was declared in default. He then filed a Motion for
New Trial in the same court and explained that he defaulted because of his belief
that the suit ought to be answered by his landlord. In that motion he stated that
he had by then the evidence to prove that he had a better right than petitioner
over the land because of his long, continuous and uninterrupted possession
as bona fide tenant-lessee of the land. 18 But his motion was denied. He tried an
alternative recourse. He filed before the RTC a Motion for Relief from Judgment.
Again, the same court denied his motion, hence he moved for reconsideration of
the denial. In his Motion for Reconsideration, he raised for the first time the
RTC's lack of jurisdiction. This motion was again denied. Note that private
respondent raised the issue of lack of jurisdiction, not when the case was already
on appeal, but when the case was still before the RTC that ruled him in default,
denied his motion for new trial as well as for relief from judgment, and denied
likewise his two motions for reconsideration. After the RTC still refused to
reconsider that denial of private respondent's motion for relief from judgment, it
went on to issue the order for entry of judgment and a writ of execution.

Under these circumstances, we could not fault the Court of Appeals in overruling
the RTC and in holding that private respondent was not estopped from
questioning the jurisdiction of the regional trial court. The fundamental rule is
that, the lack of jurisdiction of the court over an action cannot be waived by the
parties, or even cured by their silence, acquiescence or even by their express
consent. 19 Further, a party may assail the jurisdiction of the court over the action
at any stage of the proceedings and even on appeal. 20 The appellate court did
not err in saying that the RTC should have declared itself barren of jurisdiction
over the action. Even if private respondent actively participated in the
proceedings before said court, the doctrine of estoppel cannot still be properly
invoked against him because the question of lack of jurisdiction may be raised at
anytime and at any stage of the action. 21 Precedents tell us that as a general
rule, the jurisdiction of a court is not a question of acquiescence as a matter of
fact, but an issue of conferment as a matter of law. 22 Also, neither waiver nor
estoppel shall apply to confer jurisdiction upon a court, barring highly meritorious
and exceptional circumstances. 23 The Court of Appeals found support for its
ruling in our decision in Javier vs. Court of Appeals, thus:
. . . The point simply is that when a party commits error in filing his suit or
proceeding in a court that lacks jurisdiction to take cognizance of the
same, such act may not at once be deemed sufficient basis of estoppel.
It could have been the result of an honest mistake, or of divergent
interpretations of doubtful legal provisions. If any fault is to be imputed to
a party taking such course of action, part of the blame should be placed
on the court which shall entertain the suit, thereby lulling the parties into
believing that they pursued their remedies in the correct forum. Under
the rules, it is the duty of the court to dismiss an action 'whenever it
appears that the court has no jurisdiction over the subject matter.' (Sec.
2, Rule 9, Rules of Court) Should the Court render a judgment without
jurisdiction, such judgment may be impeached or annulled for lack of
jurisdiction (Sec. 30, Rule 132, Ibid.), within ten (10) years from the
finality of the same. [Italics supplied] 24
Indeed, ". . . the trial court was duty-bound to take judicial notice of the
parameters of its jurisdiction and its failure to do so, makes its decision a
'lawless' thing." 25
Since a decision of a court without jurisdiction is null and void, it could logically
never become final and executory, hence appeal therefrom by writ of error would
be out of the question. Resort by private respondent to a petition
for certiorari before the Court of Appeals was in order.
In holding that estoppel did not prevent private respondent from questioning the
RTC's jurisdiction, the appellate court reiterated the doctrine that estoppel must
be applied only in exceptional cases, as its misapplication could result in a
miscarriage of justice. Here, we find that petitioner, who claims ownership of a
parcel of land, filed his complaint before a court without appropriate jurisdiction.
Defendant, a farmer whose tenancy status is still pending before the proper
administrative agency concerned, could have moved for dismissal of the case on
jurisdictional grounds. But the farmer as defendant therein could not be expected
to know the nuances of jurisdiction and related issues. This farmer, who is now
the private respondent, ought not to be penalized when he claims that he made
an honest mistake when he initially submitted his motions before the RTC, before
he realized that the controversy was outside the RTC's cognizance but within the
jurisdiction of the municipal trial court. To hold him in estoppel as the RTC did
would amount to foreclosing his avenue to obtain a proper resolution of his case.
Furthermore, if the RTC's order were to be sustained, he would be evicted from
the land prematurely, while RED Conflict Case No. 1029 would remain
unresolved. Such eviction on a technicality if allowed could result in an injustice,
if it is later found that he has a legal right to till the land he now occupies as
tenant-lessee.
Having determined that there was no grave abuse of discretion by the appellate
court in ruling that private respondent was not estopped from questioning the
jurisdiction of the RTC, we need not tarry to consider in detail the second issue.
Suffice it to say that, given the circumstances in this case, no error was
committed on this score by respondent appellate court. Since the RTC had no
jurisdiction over the case, private respondent had justifiable reason in law not to
file an answer, aside from the fact that he believed the suit was properly his
landlord's concern.
WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of
Appeals is AFFIRMED. The decision of the Regional Trial Court in Civil Case No.
1075 entitled Gabriel L. Duero vs. Bernardo Eradel, its Order that private
respondent turn over the disputed land to petitioner, and the Writ of Execution it
issued, are ANNULLED and SET ASIDE. Costs against petitioner. aCSDIc

SO ORDERED.
(Duero v. Court of Appeals, G.R. No. 131282, [January 4, 2002], 424 PHIL
|||

12-25)

2. Donato vs. CA, G.R. No.129638

SECOND DIVISION

[G.R. No. 129638. December 8, 2003.]

ANTONIO T. DONATO, petitioner, vs. COURT OF APPEALS,

FILOMENO ARCEPE, TIMOTEO BARCELONA, IGNACIO
BENDOL, THELMA P. BULICANO, ROSALINDA CAPARAS,
ROSITA DE COSTO, FELIZA DE GUZMAN, LETICIA DE LOS
 REYES, ROGELIO GADDI, PAULINO GAJARDO, GERONIMO
IMPERIAL, HOMER IMPERIAL, ELVIRA LESLIE, CEFERINO
LUGANA, HECTOR PIMENTEL, NIMFA PIMENTEL, AURELIO
G. ROCERO, ILUMINADA TARA, JUANITO VALLESPIN, AND
NARCISO YABUT, respondents.

DECISION

AUSTRIA-MARTINEZ, J : p

Before us is a "petition for review on certiorari" filed on July 17, 1997 which
should be a petition for certiorari under Rule 65 of the Rules of Court. It assails
the Resolutions 1 dated March 21, 1997 and June 23, 1997 issued by the Court
of Appeals in CA-G.R. SP No. 41394. 2
The factual background of the case is as follows:
Petitioner Antonio T. Donato is the registered owner of a real property located at
Ciriaco Tuason Street, San Andres, Manila, covered by Transfer Certificate of
Title No. 131793 issued by the Register of Deeds of the City of Manila on
November 24, 1978. On June 7, 1994, petitioner filed a complaint before the
Metropolitan Trial Court (Branch 26) of Manila (MeTC) for forcible entry and
unlawful detainer against 43 named defendants and "all unknown occupants" of
the subject property. 3
Petitioner alleges that: private respondents had oral contracts of lease that
expired at the end of each month but were impliedly renewed under the same
terms by mere acquiescence or tolerance; sometime in 1992, they stopped
paying rent; on April 7, 1994, petitioner sent them a written demand to vacate;
the non-compliance with said demand letter constrained him to file the ejectment
case against them. 4
Of the 43 named defendants, only 20 (private respondents, 5 for brevity) filed a
consolidated Answer dated June 29, 1994 wherein they denied non-payment of
rentals. They contend that they cannot be evicted because the Urban Land
Reform Law guarantees security of tenure and priority right to purchase the
subject property; and that there was a negotiation for the purchase of the lots
occupied by them but when the negotiation reached a passive stage, they
decided to continue payment of rentals and tendered payment to petitioner's
counsel and thereafter initiated a petition for consignation of the rentals in Civil
Case No. 144049 while they await the outcome of the negotiation to purchase.
Following trial under the Rule on Summary Procedure, the MeTC rendered
judgment on September 19, 1994 against the 23 non-answering defendants,
ordering them to vacate the premises occupied by each of them, and to pay
jointly and severally P10,000.00 per month from the date they last paid their rent
until the date they actually vacate, plus interest thereon at the legal rate allowed
by law, as well as P10,000.00 as attorney's fees and the costs of the suit. As to
the 20 private respondents, the MeTC issued a separate judgment 6 on the same
day sustaining their rights under the Land Reform Law, declaring petitioner's
cause of action as not duly warranted by the facts and circumstances of the case
and dismissing the case without prejudice.
Not satisfied with the judgment dismissing the complaint as against the private
respondents, petitioner appealed to the Regional Trial Court (Branch 47) of
Manila (RTC). 7 In a Decision 8 dated July 5, 1996, the RTC sustained the
decision of the MeTC.
Undaunted, petitioner filed a petition for review with the Court of Appeals (CA for
brevity), docketed as CA-G.R. SP No. 41394. In a Resolution dated March 21,
1997, the CA dismissed the petition on two grounds: (a) the certification of non-
forum shopping was signed by petitioner's counsel and not by petitioner himself,
in violation of Revised Circular No. 28-91; 9 and, (b) the only annex to the petition
is a certified copy of the questioned decision but copies of the pleadings and
other material portions of the record as would support the allegations of the
petition are not annexed, contrary to Section 3, paragraph b, Rule 6 of the
Revised Internal Rules of the Court of Appeals (RIRCA). 10
On April 17, 1997, petitioner filed a Motion for Reconsideration, 11 attaching
thereto a photocopy of the certification of non-forum shopping duly signed by
petitioner himself 12 and the relevant records of the MeTC and the RTC. 13 Five
days later, or on April 22, 1997, petitioner filed a Supplement 14 to his motion for
reconsideration submitting the duly authenticated original of the certification of
non-forum shopping signed by petitioner. 15
In a Resolution 16 dated June 23, 1997 the CA denied petitioner's motion for
reconsideration and its supplement, ruling that "petitioner's subsequent
compliance did not cure the defect in the instant petition." 17
Hence, the present petition anchored on the following grounds:
I.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
DISMISSING THE PETITION BASED ON HYPER-TECHNICAL
GROUNDS BECAUSE:
A. PETITIONER HAS SUBSTANTIALLY COMPLIED WITH
SUPREME COURT CIRCULAR NO. 28-91. MORE,
 PETITIONER SUBSEQUENTLY SUBMITTED DURING
THE PENDENCY OF THE PROCEEDINGS A DULY
AUTHENTICATED CERTIFICATE OF NON-FORUM
SHOPPING WHICH HE HIMSELF SIGNED AND
EXECUTED IN THE UNITED STATES.
B. PETITIONER HAS SUBSTANTIALLY COMPLIED WITH
SECTION 3, RULE 6 OF THE REVISED INTERNAL
RULES OF THE COURT OF APPEALS. MORE,
PETITIONER SUBSEQUENTLY SUBMITTED DURING
THE PENDENCY OF THE PROCEEDINGS COPIES OF
THE RELEVANT DOCUMENTS IN THE CASES BELOW.
C. PETITIONER HAS A MERITORIOUS APPEAL, AND HE
STANDS TO LOSE SUBSTANTIAL PROPERTY IF THE
APPEAL IS NOT GIVEN DUE COURSE. THE RULES OF
PROCEDURE MUST BE LIBERALLY CONSTRUED TO
DO SUBSTANTIAL JUSTICE.
II.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT
RULING THAT ALL THE ELEMENTS OF UNLAWFUL DETAINER ARE
PRESENT IN THE CASE AT BAR.
III.
RESPONDENT COURT OF APPEALS ERRED IN NOT RULING THAT
THE RTC MANILA, BRANCH 47, COMMITTED REVERSIBLE ERROR
IN AFFIRMING THE FINDING OF MTC MANILA, BRANCH 26, THAT
PRIVATE RESPONDENTS CANNOT BE EJECTED FROM THE
SUBJECT PROPERTY WITHOUT VIOLATING THEIR SECURITY OF
TENURE EVEN IF THE TERM OF THE LEASE IS MONTH-TO-MONTH
WHICH EXPIRES AT THE END OF EACH MONTH. IN THIS REGARD,
A. RESPONDENT COURT OF APPEALS SHOULD HAVE
RULED THAT THE RTC MANILA COMMITTED
REVERSIBLE ERROR IN NOT RULING THAT TENANTS
UNDERP.D. 1517 MAY BE EVICTED FOR NON-
PAYMENT OF RENT, TERMINATION OF LEASE OR
OTHER GROUNDS FOR EJECTMENT.
B. RESPONDENT COURT OF APPEALS SHOULD HAVE
RULED THAT THE RTC MANILA COMMITTED
REVERSIBLE ERROR IN NOT RULING THAT THE
ALLEGED "PRIORITY RIGHT TO BUY THE LOT THEY
OCCUPY" DOES NOT APPLY WHERE THE
LANDOWNER DOES NOT INTEND TO SELL THE
SUBJECT PROPERTY, AS IN THE CASE AT BAR.ScTaEA
 C. RESPONDENT COURT OF APPEALS SHOULD HAVE
RULED THAT THE RTC MANILA COMMITTED
REVERSIBLE ERROR IN RULING THAT THE SUBJECT
PROPERTY IS LOCATED WITHIN A ZONAL
IMPROVEMENT AREA OR APD.
D. RESPONDENT COURT OF APPEALS SHOULD HAVE
RULED THAT THE RTC MANILA COMMITTED
REVERSIBLE ERROR IN NOT RULING THAT PRIVATE
RESPONDENTS' NON-COMPLIANCE WITH THE
CONDITIONS UNDER THE LAW RESULT IN THE
WAIVER OF PROTECTION AGAINST EVICTION.
E. RESPONDENT COURT OF APPEALS SHOULD HAVE
RULED THAT THE RTC MANILA COMMITTED
REVERSIBLE ERROR IN NOT RULING THAT PRIVATE
RESPONDENTS CANNOT BE ENTITLED TO
PROTECTION UNDER P.D. 2016 SINCE THE
GOVERNMENT HAS NO INTENTION OF ACQUIRING
THE SUBJECT PROPERTY.
F. RESPONDENT COURT OF APPEALS SHOULD HAVE
RULED THAT THE RTC MANILA COMMITTED
REVERSIBLE ERROR IN FINDING THAT THERE IS AN
ON-GOING NEGOTIATION FOR THE SALE OF THE
SUBJECT PROPERTY AND THAT IT RENDERS THE
EVICTION OF PRIVATE RESPONDENTS PREMATURE.
G. RESPONDENT COURT OF APPEALS SHOULD HAVE
RULED THAT THE RTC MANILA COMMITTED
REVERSIBLE ERROR IN NOT RULING THAT THE
ALLEGED CASE FOR CONSIGNATION DOES NOT BAR
THE EVICTION OF PRIVATE RESPONDENTS.
IV.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT
FINDING THAT RESPONDENTS SHOULD PAY PETITIONER A
REASONABLE COMPENSATION FOR THEIR USE AND OCCUPANCY
OF THE SUBJECT PROPERTY IN THE AMOUNT OF AT LEAST
P10,000.00 PER MONTH FROM THE DATE THEY LAST PAID RENT
UNTIL THE TIME THEY ACTUALLY VACATE THE SAME, WITH
LEGAL INTEREST AT THE MAXIMUM RATE ALLOWED BY LAW
UNTIL PAID.
V.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT
FINDING THAT RESPONDENTS SHOULD PAY PETITIONER
 ATTORNEY'S FEES AND EXPENSES OF LITIGATION OF AT LEAST
P20,000.00, PLUS COSTS. 18
Petitioner submits that a relaxation of the rigid rules of technical procedure is
called for in view of the attendant circumstances showing that the objectives of
the rule on certification of non-forum shopping and the rule requiring material
portions of the record be attached to the petition have not been glaringly violated
and, more importantly, the petition is meritorious.
The proper recourse of an aggrieved party from a decision of the CA is a petition
for review on certiorari under Rule 45 of the Rules of Court. However, if the error,
subject of the recourse, is one of jurisdiction, or the act complained of was
perpetrated by a court with grave abuse of discretion amounting to lack or excess
of jurisdiction, the proper remedy available to the aggrieved party is a petition
for certiorari under Rule 65 of the said Rules. As enunciated by the Court
in Fortich vs.Corona: 19
Anent the first issue, in order to determine whether the recourse of
petitioners is proper or not, it is necessary to draw a line between an
error of judgment and an error of jurisdiction. An error of judgment is one
which the court may commit in the exercise of its jurisdiction, and which
error is reviewable only by an appeal. On the other hand, an error of
jurisdiction is one where the act complained of was issued by the court,
officer or a quasi-judicial body without or in excess of jurisdiction, orwith
grave abuse of discretion which is tantamount to lack or in excess of
jurisdiction. This error is correctible only by the extraordinary writ
of certiorari. 20 (Emphasis supplied).

Inasmuch as the present petition principally assails the dismissal of the

petition on ground of procedural flaws involving the jurisdiction of the court a
quo to entertain the petition, it falls within the ambit of a special civil action
for certiorari under Rule 65 of the Rules of Court.
At the time the instant petition for certiorari was filed, i.e., on July 17, 1997, the
prevailing rule is the newly promulgated 1997 Rules of Civil Procedure. However,
considering that the CA Resolution being assailed was rendered on March 21,
1997, the applicable rule is the three-month reglementary period, established by
jurisprudence. 21 Petitioner received notice of the assailed CA Resolution
dismissing his petition for review on April 4, 1997. He filed his motion
reconsideration on April 17, 1997, using up only thirteen days of the 90-day
period. Petitioner received the CA Resolution denying his motion on July 3, 1997
and fourteen days later, or on July 17, 1997, he filed a motion for 30-day
extension of time to file a "petition for review" which was granted by us; and
petitioner duly filed his petition on August 15, 1997, which is well-within the
period of extension granted to him.
We now go to the merits of the case.
We find the instant petition partly meritorious.
The requirement regarding the need for a certification of non-forum shopping in
cases filed before the CA and the corresponding sanction for non-compliance
thereto are found in the then prevailing Revised Circular No. 28-91. 22 It provides
that the petitioner himself must make the certification against forum shopping and
a violation thereof shall be a cause for the summary dismissal of the multiple
petition or complaint. The rationale for the rule of personal execution of the
certification by the petitioner himself is that it is only the petitioner who has actual
knowledge of whether or not he has initiated similar actions or proceedings in
other courts or tribunals; even counsel of record may be unaware of such
fact. 23 The Court has ruled that with respect to the contents of the certification,
the rule on substantial compliance may be availed of. This is so because the
requirement of strict compliance with the rule regarding the certification of non-
forum shopping simply underscores its mandatory nature in that the certification
cannot be altogether dispensed with or its requirements completely disregarded,
but it does not thereby interdict substantial compliance with its provisions under
justifiable circumstances. 24
The petition for review filed before the CA contains a certification against forum
shopping but said certification was signed by petitioner's counsel. In submitting
the certification of non-forum shopping duly signed by himself in his motion for
reconsideration, 25 petitioner has aptly drawn the Court's attention to the physical
impossibility of filing the petition for review within the 15-day reglementary period
to appeal considering that he is a resident of 1125 South Jefferson Street,
Roanoke, Virginia, U.S.A. were he to personally accomplish and sign the
certification.
We fully agree with petitioner that it was physically impossible for the petition to
have been prepared and sent to the petitioner in the United States, for him to
travel from Virginia, U.S.A. to the nearest Philippine Consulate in Washington,
D.C., U.S.A., in order to sign the certification before the Philippine Consul, and
for him to send back the petition to the Philippines within the 15-day
reglementary period. Thus, we find that petitioner has adequately explained his
failure to personally sign the certification which justifies relaxation of the rule.
We have stressed that the rules on forum shopping, which were precisely
designed to promote and facilitate the orderly administration of justice, should not
be interpreted with such absolute literalness as to subvert its own ultimate and
legitimate objective 26 which is simply to prohibit and penalize the evils of forum-
shopping.27 The subsequent filing of the certification duly signed by the petitioner
himself should thus be deemed substantial compliance, pro hac vice.
In like manner, the failure of the petitioner to comply with Section 3, paragraph b,
Rule 6 of the RIRCA, that is, to append to his petition copies of the pleadings and
other material portions of the records as would support the petition, does not
justify the outright dismissal of the petition. It must be emphasized that the
RIRCA gives the appellate court a certain leeway to require parties to submit
additional documents as may be necessary in the interest of substantial justice.
Under Section 3, paragraph d of Rule 3 of the RIRCA, 28 the CA may require the
parties to complete the annexes as the court deems necessary, and if the petition
is given due course, the CA may require the elevation of a complete record of the
case as provided for under Section 3(d)(5) of Rule 6 of the RIRCA. 29 At any rate,
petitioner attached copies of the pleadings and other material portions of the
records below with his motion for reconsideration. 30 In Jaro vs. Court of
Appeals, 31 the Court reiterated the doctrine laid down in Cusi-Hernandez
vs. Diaz 32 and Piglas-Kamao vs. National Labor Relations Commission 33 that
subsequent submission of the missing documents with the motion for
reconsideration amounts to substantial compliance which calls for the relaxation
of the rules of procedure. We find no cogent reason to depart from this doctrine.
Truly, in dismissing the petition for review, the CA had committed grave abuse of
discretion amounting to lack of jurisdiction in putting a premium on technicalities
at the expense of a just resolution of the case.
Needless to stress, "a litigation is not a game of technicalities." 34 When
technicality deserts its function of being an aid to justice, the Court is justified in
exempting from its operations a particular case. 35 Technical rules of procedure
should be used to promote, not frustrate justice. While the swift unclogging of
court dockets is a laudable objective, granting substantial justice is an even more
urgent ideal. 36
The Court's pronouncement in Republic vs. Court of Appeals 37 is worth echoing:
"cases should be determined on the merits, after full opportunity to all parties for
ventilation of their causes and defenses, rather than on technicality or some
procedural imperfections. In that way, the ends of justice would be better
served." 38 Thus, what should guide judicial action is that a party litigant is given
the fullest opportunity to establish the merits of his action or defense rather than
for him to lose life, honor or property on mere technicalities. 39 This guideline is
especially true when the petitioner has satisfactorily explained the lapse and
fulfilled the requirements in his motion for reconsideration, 40 as in this case.
In addition, petitioner prays that we decide the present petition on the merits
without need of remanding the case to the CA. He insists that all the elements of
unlawful detainer are present in the case. He further argues that the alleged
"priority right to buy the lot they occupy" does not apply where the landowner
does not intend to sell the subject property, as in the case; that respondents
cannot be entitled to protection under P.D. No. 2016 since the government has
no intention of acquiring the subject property, nor is the subject property located
within a zonal improvement area; and, that assuming that there is a negotiation
for the sale of the subject property or a pending case for consignation of rentals,
these do not bar the eviction of respondents.
We are not persuaded. We shall refrain from ruling on the foregoing issues in the
present petition for certiorari. The issues involved are factual issues which
inevitably require the weighing of evidence. These are matters that are beyond
the province of this Court in a special civil action for certiorari. These issues are
best addressed to the CA in the petition for review filed before it. As an appellate
court, it is empowered to require parties to submit additional documents, as it
may find necessary, or to receive evidence, to promote the ends of justice,
pursuant to the last paragraph of Section 9, B.P. Blg. 129, otherwise known
as The Judiciary Reorganization Act of 1980, to wit:
The Intermediate Appellate Court shall have the power to try cases and
conduct hearings, receive evidence and perform any and all acts
necessary to resolve factual issues raised in cases falling within its
original and appellate jurisdiction, including the power to grant and
conduct new trials or further proceedings.
WHEREFORE, the petition is PARTLY GRANTED. The Resolutions dated March
21, 1997 and June 23, 1997 of the Court of Appeals in CA-G.R. SP No. 41394
are REVERSED and SET ASIDE. The case is REMANDED to the Court of
Appeals for further proceedings in CA-G.R. No. 41394, entitled, "Antonio
T . Donato vs. Hon. Judge of the Regional Trial Court of Manila, Branch 47,
Filomeno Arcepe, et al."
SO ORDERED.
(Donato v. Court of Appeals, G.R. No. 129638, [December 8, 2003], 462
|||

PHIL 676-693)

3. Gonzaga vs. CA, G.R. No. 144025

THIRD DIVISION

[G.R. No. 144025. December 27, 2002.]

SPS. RENE GONZAGA and LERIO GONZAGA, petitioners, vs.

HON. COURT OF APPEALS, Second Division, Manila, HON.
QUIRICO G. DEFENSOR, Judge, RTC, Branch 36, Sixth
Judicial Region, Iloilo City, and LUCKY HOMES, INC.,
 represented by WILSON JESENA, JR., as
Manager, respondents.

Salvador T. Sabio for petitioners.

Marmen B. Daquilanea for private respondent.
The Solicitor General for public respondent.

SYNOPSIS

Petitioners purchased a parcel of land from private respondent Lucky Homes,

Inc., specifically denominated as Lot No. 19 and was mortgaged to the Social
Security Commission (SSS) as security for their housing loan. Petitioners then
started the construction of their house, not on Lot No. 19 but on Lot No. 18, as
private respondent mistakenly identified Lot No. 18 as Lot No. 19. Petitioners
offered to buy Lot No. 18 so they continued with the construction of their house.
However, petitioners defaulted in the payment of their housing loan from SSS.
Consequently, Lot No. 19 was foreclosed by SSS and after which petitioners
offered to swap Lot Nos. 18 and 19 and demanded from private respondent that
their contract of sale be reformed and another deed of sale be executed with
respect to Lot No. 18. Private respondent refused, so petitioners filed an action
for reformation of contract and damages with the Regional Trial Court. The trial
court dismissed the complaint and ordered petitioners to pay damages.
Thereafter, a writ of execution was issued by the trial court. Subsequently,
petitioners filed an urgent motion to recall writ of execution, alleging that the trial
court had no jurisdiction to try the case. Petitioners filed before the Court of
Appeals (CA) a petition for annulment of judgment premised on the ground that
the trial court had no jurisdiction to try and decide the case. The CA denied the
petition and the subsequent motion for reconsideration filed by petitioners.
Hence, this instant petition. CAHTIS

In denying the petition, the Supreme Court ruled that while an order or decision
rendered without jurisdiction is a total nullity and may be assailed at any stage,
active participation in the proceedings in the court which rendered the order or
decision will bar such party from attacking its jurisdiction. In the case at bar, it
was petitioners themselves who invoked the jurisdiction of the court a quo by
instituting an action for reformation of contract against private respondents. It
appeared that, in the proceedings before the trial court, petitioners vigorously
asserted their cause from the start to finish. Not even once did petitioners ever
raise the issue of the court's jurisdiction during the entire proceedings which
lasted for two years. It was only after the trial court rendered its decision and
issued a writ of execution against them did petitioners first raise the issue of
jurisdiction — and it was only because said decision was unfavorable to them.
Petitioners thus effectively waived their right to question the court's jurisdiction
over the case they themselves filed.

SYLLABUS

1. REMEDIAL LAW; ACTIONS; JURISDICTION; QUESTION THEREOF MAY

BE RAISED AT ANY STAGE OF THE CASE BUT ACTIVE PARTICIPATION IN
THE PROCEEDINGS IN THE COURT WHICH RENDERED THE DECISION
WILL BAR PARTIES FROM ATTACKING ITS JURISDICTION. — [W]hile an
order or decision rendered without jurisdiction is a total nullity and may be
assailed at any stage, active participation in the proceedings in the court which
rendered the order or decision will bar such party from attacking its jurisdiction.
As we held in the leading case of Tjam vs. Sibonghanoy: "A party may be
estopped or barred from raising a question in different ways and for different
reasons. Thus we speak of estoppel in pais, or estoppel by deed or by record,
and of estoppel by laches. . . . "It has been held that a party cannot invoke the
jurisdiction of a court to secure affirmative relief against his opponent and, after
obtaining or failing to obtain such relief, repudiate, or question that same
jurisdiction . . . [T]he question whether the court had jurisdiction either of the
subject matter of the action or of the parties was not important in such cases
because the party is barred from such conduct not because the judgment or
order of the court is valid and conclusive as an adjudication, but for the reason
that such a practice can not be tolerated — obviously for reasons of public
policy." Tijam has been reiterated in many succeeding cases. Thus, in Orosa
vs. Court of Appeals; Ang Ping vs. Court of Appeals; Salva vs. Court of
Appeals; National Steel Corporation vs. Court of Appeals; Province of Bulacan
vs. Court of Appeals; PNOC Shipping and Transport Corporation vs. Court of
Appeals, this Court affirmed the rule that a party's active participation in all
stages of the case before the trial court, which includes invoking the court's
authority to grant affirmative relief, effectively estops such party from later
challenging that same court's jurisdiction.
2. ID.; ID.; ID.; ID.; CASE AT BAR. — In the case at bar, it was petitioners
themselves who invoked the jurisdiction of the court a quo by instituting an action
for reformation of contract against private respondents. It appears that, in the
proceedings before the trial court, petitioners vigorously asserted their cause
from start to finish. Not even once did petitioners ever raise the issue of the
court's jurisdiction during the entire proceedings which lasted for two years. It
was only after the trial court rendered its decision and issued a writ of execution
against them in 1998 did petitioners first raise the issue of jurisdiction — and it
was only because said decision was unfavorable to them. Petitioners thus
effectively waived their right to question the court's jurisdiction over the case they
themselves filed. Petitioners should bear the consequence of their act. They
cannot be allowed to profit from their omission to the damage and prejudice of
the private respondent. This Court frowns upon the undesirable practice of a
party submitting his case for decision and then accepting the judge but only if
favorable, and attacking it for lack of jurisdiction if not.

DECISION

CORONA, J : p

Before this Court is a petition for review on certiorari seeking the reversal of the
decision 1 of the Court of Appeals dated December 29, 1999 and its resolution
dated June 1, 2000 in CA-G.R. SP No. 54587. ASTDCH

The records disclose that, sometime in 1970, petitioner-spouses purchased a

parcel of land from private respondent Lucky Homes, Inc., situated in Iloilo and
containing an area of 240 square meters. Said lot was specifically denominated
as Lot No. 19 under Transfer Certificate of Title (TCT) No. 28254 and was
mortgaged to the Social Security System (SSS) as security for their housing loan.
Petitioners then started the construction of their house, not on Lot No. 19 but on
Lot No. 18, as private respondent mistakenly identified Lot No. 18 as Lot No. 19.
Upon realizing its error, private respondent, through its general manager,
informed petitioners of such mistake but the latter offered to buy Lot No. 18 in
order to widen their premises. Thus, petitioners continued with the construction of
their house. However, petitioners defaulted in the payment of their housing loan
from SSS. Consequently, Lot No. 19 was foreclosed by SSS and petitioners'
certificate of title was cancelled and a new one was issued in the name of SSS.
After Lot No. 19 was foreclosed, petitioners offered to swap Lot Nos. 18 and 19
and demanded from private respondent that their contract of sale be reformed
and another deed of sale be executed with respect to Lot No. 18, considering
that their house was built therein. However, private respondent refused. This
prompted petitioners to file, on June 13, 1996, an action for reformation of
contract and damages with the Regional Trial Court of Iloilo City, Branch 36,
which was docketed as Civil Case No. 17115.
On January 15, 1998, the trial court 2 rendered its decision dismissing the
complaint for lack of merit and ordering herein petitioners to pay private
respondent the amount of P10,000 as moral damages and another P10,000 as
attorney's fees. The pertinent conclusion of the trial court reads as follows:
"Aware of such fact, the plaintiff nonetheless continued to stay in the
premises of Lot 18 on the proposal that he would also buy the same.
 Plaintiff however failed to buy Lot 18 and likewise defaulted in the
payment of his loan with the SSS involving Lot 19. Consequently Lot 19
was foreclosed and sold at public auction. Thereafter TCT No. T-29950
was cancelled and in lieu thereof TCT No. T-86612 (Exh. '9') was issued
in favor of SSS. This being the situation obtaining, the reformation of
instruments, even if allowed, or the swapping of Lot 18 and Lot 19 as
earlier proposed by the plaintiff, is no longer feasible considering that
plaintiff is no longer the owner of Lot 19, otherwise, defendant will be
losing Lot 18 without any substitute therefore (sic). Upon the other hand,
plaintiff will be unjustly enriching himself having in its favor both Lot 19
which was earlier mortgaged by him and subsequently foreclosed by
SSS, as well as Lot 18 where his house is presently standing.
"The logic and common sense of the situation lean heavily in favor of the
defendant. It is evident that what plaintiff had bought from the defendant
is Lot 19 covered by TCT No. 28254 which parcel of land has been
properly indicated in the instruments and not Lot 18 as claimed by the
plaintiff. The contracts being clear and unmistakable, they reflect the true
intention of the parties, besides the plaintiff failed to assail the contracts
on mutual mistake, hence the same need no longer be reformed." 3
On June 22, 1998, a writ of execution was issued by the trial court. Thus, on
September 17, 1998, petitioners filed an urgent motion to recall writ of execution,
alleging that the court a quo had no jurisdiction to try the case as it was vested in
the Housing and Land Use Regulatory Board (HLURB) pursuant to PD 957 (The
Subdivision and Condominium Buyers Protective Decree). Conformably,
petitioners filed a new complaint against private respondent with the HLURB.
Likewise, on June 30, 1999, petitioner-spouses filed before the Court of Appeals
a petition for annulment of judgment, premised on the ground that the trial court
had no jurisdiction to try and decide Civil Case No. 17115. HIDCTA

In a decision rendered on December 29, 1999, the Court of Appeals denied the
petition for annulment of judgment, relying mainly on the jurisprudential doctrine
of estoppel as laid down in the case of Tijam vs. Sibonghanoy. 4
Their subsequent motion for reconsideration having been denied, petitioners filed
this instant petition, contending that the Court of Appeals erred in dismissing the
petition by applying the principle of estoppel, even if the Regional Trial Court,
Branch 36 of Iloilo City had no jurisdiction to decide Civil Case No. 17115.
At the outset, it should be stressed that petitioners are seeking from us the
annulment of a trial court judgment based on lack of jurisdiction. Because it is not
an appeal, the correctness of the judgment is not in issue here. Accordingly,
there is no need to delve into the propriety of the decision rendered by the trial
court.
Petitioners claim that the recent decisions of this Court have already abandoned
the doctrine laid down in Tijam vs. Sibonghanoy. 5 We do not agree. In countless
decisions, this Court has consistently held that, while an order or decision
rendered without jurisdiction is a total nullity and may be assailed at any stage,
active participation in the proceedings in the court which rendered the order or
decision will bar such party from attacking its jurisdiction. As we held in the
leading case ofTijam vs. Sibonghanoy: 6
"A party may be estopped or barred from raising a question in different
ways and for different reasons. Thus we speak of estoppel in pais, or
estoppel by deed or by record, and of estoppel by laches.
xxx xxx xxx
"It has been held that a party cannot invoke the jurisdiction of a court to
secure affirmative relief against his opponent and, after obtaining or
failing to obtain such relief, repudiate, or question that same jurisdiction .
. . [T]he question whether the court had jurisdiction either of the subject
matter of the action or of the parties was not important in such cases
because the party is barred from such conduct not because the
judgment or order of the court is valid and conclusive as an adjudication,
but for the reason that such a practice can not be tolerated — obviously
for reasons of public policy."
Tijam has been reiterated in many succeeding cases. Thus, in Orosa vs. Court of
Appeals; 7 Ang Ping vs. Court of Appeals; 8 Salva vs. Court of Appeals; 9 National
Steel Corporation vs. Court of Appeals; 10 Province of Bulacan vs. Court of
Appeals; 11 PNOC Shipping and Transport Corporation vs. Court of
Appeals, 12 this Court affirmed the rule that a party's active participation in all
stages of the case before the trial court, which includes invoking the court's
authority to grant affirmative relief, effectively estops such party from later
challenging that same court's jurisdiction. HTAEIS

In the case at bar, it was petitioners themselves who invoked the jurisdiction of
the court a quo by instituting an action for reformation of contract against private
respondents. It appears that, in the proceedings before the trial court, petitioners
vigorously asserted their cause from start to finish. Not even once did petitioners
ever raise the issue of the court's jurisdiction during the entire proceedings which
lasted for two years. It was only after the trial court rendered its decision and
issued a writ of execution against them in 1998 did petitioners first raise the issue
of jurisdiction — and it was only because said decision was unfavorable to them.
Petitioners thus effectively waived their right to question the court's jurisdiction
over the case they themselves filed.
Petitioners should bear the consequence of their act. They cannot be allowed to
profit from their omission to the damage and prejudice of the private respondent.
This Court frowns upon the undesirable practice of a party submitting his case for
decision and then accepting the judgment but only if favorable, and attacking it
for lack of jurisdiction if not. 13
Public policy dictates that this Court must strongly condemn any double-dealing
by parties who are disposed to trifle with the courts by deliberately taking
inconsistent positions, in utter disregard of the elementary principles of justice
and good faith. 14 There is no denying that, in this case, petitioners never raised
the issue of jurisdiction throughout the entire proceedings in the trial court.
Instead, they voluntarily and willingly submitted themselves to the jurisdiction of
said court. It is now too late in the day for them to repudiate the jurisdiction they
were invoking all along. ETHIDa

WHEREFORE, the petition for review is hereby DENIED.

SO ORDERED.
(Sps. Gonzaga v. Court of Appeals, G.R. No. 144025, [December 27, 2002],
|||

442 PHIL 735-742)

4. Escobal vs. Garchitorena, G.R. No. 124644

SECOND DIVISION

[G.R. No. 124644. February 5, 2004.]

ARNEL ESCOBAL, petitioner, vs. HON. FRANCIS

GARCHITORENA, Presiding Justice of the Sandiganbayan,
Atty. Luisabel Alfonso-Cortez, Executive Clerk of Court IV of
the Sandiganbayan, Hon. David C. Naval, Presiding Judge of
the Regional Trial Court of Naga City, Branch 21, Luz N.
Nueca,respondents.

DECISION

CALLEJO, SR., J : p

This is a petition for certiorari with a prayer for the issuance of a temporary
restraining order and preliminary injunction filed by Arnel Escobal seeking the
nullification of the remand by the Presiding Justice of the Sandiganbayan of the
records of Criminal Case No. 90-3184 to the Regional Trial Court (RTC) of Naga
City, Branch 21.
The petition at bench arose from the following milieu:
The petitioner is a graduate of the Philippine Military Academy, a member of the
Armed Forces of the Philippines and the Philippine Constabulary, as well as the
Intelligence Group of the Philippine National Police. On March 16, 1990, the
petitioner was conducting surveillance operations on drug trafficking at the Sa
Harong Café Bar and Restaurant located along Barlin St., Naga City. He
somehow got involved in a shooting incident, resulting in the death of one
Rodney Rafael N. Nueca. On February 6, 1991, an amended Information was
filed with the RTC of Naga City, Branch 21, docketed as Criminal Case No. 90-
3184 charging the petitioner and a certain Natividad Bombita, Jr. alias "Jun
Bombita" with murder. The accusatory portion of the amended Information
reads: DcCITS

That on or about March 16, 1990, in the City of Naga, Philippines, and
within the jurisdiction of this Honorable Court by virtue of the Presidential
Waiver, dated June 1, 1990, with intent to kill, conspiring and
confederating together and mutually helping each other, did, then and
there, willfully, unlawfully and feloniously attack, assault and maul one
Rodney Nueca and accused 2Lt Arnel Escobal armed with a caliber .45
service pistol shoot said Rodney Nueca thereby inflicting upon him
serious, mortal and fatal wounds which caused his death, and as a
consequence thereof, complainant LUZ N. NUECA, mother of the
deceased victim, suffered actual and compensatory damages in the
amount of THREE HUNDRED SIXTY-SEVEN THOUSAND ONE
HUNDRED SEVEN & 95/100 (P367,107.95) PESOS, Philippine
Currency, and moral and exemplary damages in the amount of ONE
HUNDRED THIRTY-FIVE THOUSAND (P135,000.00) PESOS,
Philippine Currency. 1
On March 19, 1991, the RTC issued an Order preventively suspending the
petitioner from the service under Presidential Decree No. 971, as amended
by P.D. No. 1847. When apprised of the said order, the General Headquarters of
the PNP issued on October 6, 1992 Special Order No. 91, preventively
suspending the petitioner from the service until the case was terminated. 2
The petitioner was arrested by virtue of a warrant issued by the RTC, while
accused Bombita remained at large. The petitioner posted bail and was granted
temporary liberty.
When arraigned on April 9, 1991, 3 the petitioner, assisted by counsel, pleaded
not guilty to the offense charged. Thereafter, on December 23, 1991, the
petitioner filed a Motion to Quash 4 the Information alleging that as mandated
by Commonwealth Act No. 408, 5 in relation to Section 1, Presidential Decree
No. 1822 and Section 95 ofR.A. No. 6975, the court martial, not the RTC, had
jurisdiction over criminal cases involving PNP members and officers.
Pending the resolution of the motion, the petitioner on June 25, 1993 requested
the Chief of the PNP for his reinstatement. He alleged that under R.A. No. 6975,
his suspension should last for only 90 days, and, having served the same, he
should now be reinstated. On September 23, 1993, 6 the PNP Region V
Headquarters wrote Judge David C. Naval requesting information on whether he
issued an order lifting the petitioner's suspension. The RTC did not reply. Thus,
on February 22, 1994, the petitioner filed a motion in the RTC for the lifting of the
order of suspension. He alleged that he had served the 90-day preventive
suspension and pleaded for compassionate justice. The RTC denied the motion
on March 9, 1994. 7 Trial thereafter proceeded, and the prosecution rested its
case. The petitioner commenced the presentation of his evidence. On July 20,
1994, he filed a Motion to Dismiss 8 the case. Citing Republic of the Philippines v.
Asuncion, et al., 9 he argued that since he committed the crime in the
performance of his duties, the Sandiganbayan had exclusive jurisdiction over the
case.
On October 28, 1994, the RTC issued an Order 10 denying the motion to dismiss.
It, however, ordered the conduct of a preliminary hearing to determine whether or
not the crime charged was committed by the petitioner in relation to his office as
a member of the PNP.
In the preliminary hearing, the prosecution manifested that it was no longer
presenting any evidence in connection with the petitioner's motion. It reasoned
that it had already rested its case, and that its evidence showed that the
petitioner did not commit the offense charged in connection with the performance
of his duties as a member of the Philippine Constabulary. According to the
prosecution, they were able to show the following facts: (a) the petitioner was not
wearing his uniform during the incident; (b) the offense was committed just after
midnight; (c) the petitioner was drunk when the crime was committed; (d) the
petitioner was in the company of civilians; and, (e) the offense was committed in
a beerhouse called "Sa Harong Café Bar and Restaurant." 11
For his part, the petitioner testified that at about 10:00 p.m. on March 15, 1990,
he was at the Sa Harong Café Bar and Restaurant at Barlin St., Naga City, to
conduct surveillance on alleged drug trafficking, pursuant to Mission Order No.
03-04 issued by Police Superintendent Rufo R. Pulido. The petitioner adduced in
evidence the sworn statements of Benjamin Cariño and Roberto Fajardo who
corroborated his testimony that he was on a surveillance mission on the
aforestated date. 12
On July 31, 1995, the trial court issued an Order declaring that the petitioner
committed the crime charged while not in the performance of his official function.
The trial court added that upon the enactment of R.A. No. 7975, 13 the issue had
become moot and academic. The amendatory law transferred the jurisdiction
over the offense charged from the Sandiganbayan to the RTC since the
petitioner did not have a salary grade of "27" as provided for in or by Section
4(a)(1), (3) thereof. The trial court nevertheless ordered the prosecution to
amend the Information pursuant to the ruling in Republic v. Asuncion 14 and R.A.
No. 7975. The amendment consisted in the inclusion therein of an allegation that
the offense charged was not committed by the petitioner in the performance of
his duties/functions, nor in relation to his office.
The petitioner filed a motion for the reconsideration 15 of the said order,
reiterating that based on his testimony and those of Benjamin Cariño and
Roberto Fajardo, the offense charged was committed by him in relation to his
official functions. He asserted that the trial court failed to consider the exceptions
to the prohibition. He asserted that R.A. No. 7975, which was enacted on March
30, 1995, could not be applied retroactively. 16
The petitioner further alleged that Luz Nacario Nueca, the mother of the victim,
through counsel, categorically and unequivocably admitted in her complaint filed
with the People's Law Enforcement Board (PLEB) that he was on an official
mission when the crime was committed.
On November 24, 1995, the RTC made a volte face and issued an Order
reversing and setting aside its July 31, 1995 Order. It declared that based on the
petitioner's evidence, he was on official mission when the shooting occurred. It
concluded that the prosecution failed to adduce controverting evidence thereto. It
likewise considered Luz Nacario Nueca's admission in her complaint before the
PLEB that the petitioner was on official mission when the shooting happened.
The RTC ordered the public prosecutor to file a Re-Amended Information and to
allege that the offense charged was committed by the petitioner in the
performance of his duties/functions or in relation to his office; and, conformably
to R.A. No. 7975, to thereafter transmit the same, as well as the complete
records with the stenographic notes, to the Sandiganbayan, to wit:
WHEREFORE, the Order dated July 31, 1995 is hereby SET ASIDE and
RECONSIDERED, and it is hereby declared that after preliminary
hearing, this Court has found that the offense charged in the Information
herein was committed by the accused in his relation to his function and
duty as member of the then Philippine Constabulary.
Conformably with R.A. No. 7975 and the ruling of the Supreme Court
in Republic v. Asuncion, et al., G.R. No. 180208, March 11, 1994:
(1) The City Prosecutor is hereby ordered to file a Re-Amended
Information alleging that the offense charged was
committed by the Accused in the performance of his
 duties/functions or in relation to his office, within fifteen (15)
days from receipt hereof;
(2) After the filing of the Re-Amended Information, the complete
records of this case, together with the transcripts of the
stenographic notes taken during the entire proceedings
herein, are hereby ordered transmitted immediately to the
Honorable Sandiganbayan, through its Clerk of Court,
Manila, for appropriate proceedings. 17
On January 8, 1996, the Presiding Justice of the Sandiganbayan ordered the
Executive Clerk of Court IV, Atty. Luisabel Alfonso-Cortez, to return the records
of Criminal Case No. 90-3184 to the court of origin, RTC of Naga City, Branch
21. It reasoned that under P.D. No. 1606, as amended by R.A. No. 7975, 18 the
RTC retained jurisdiction over the case, considering that the petitioner had a
salary grade of "23." Furthermore, the prosecution had already rested its case
and the petitioner had commenced presenting his evidence in the RTC; following
the rule on continuity of jurisdiction, the latter court should continue with the case
and render judgment therein after trial.

Upon the remand of the records, the RTC set the case for trial on May 3, 1996,
for the petitioner to continue presenting his evidence. Instead of adducing his
evidence, the petitioner filed a petition for certiorari, assailing the Order of the
Presiding Justice of the Sandiganbayan remanding the records of the case to the
RTC.
The threshold issue for resolution is whether or not the Presiding Justice of the
Sandiganbayan committed a grave abuse of his discretion amounting to excess
or lack of jurisdiction in ordering the remand of the case to the RTC.
The petitioner contends that when the amended information was filed with the
RTC on February 6, 1991, P.D. No. 1606 was still in effect. Under Section 4(a) of
the decree, the Sandiganbayan had exclusive jurisdiction over the case against
him as he was charged with homicide with the imposable penalty of reclusion
temporal, and the crime was committed while in the performance of his duties.
He further asserts that although P.D. No. 1606, as amended by P.D. No.
1861 and by R.A. No. 7975provides that crimes committed by members and
officers of the PNP with a salary grade below "27" committed in relation to office
are within the exclusive jurisdiction of the proper RTC, the amendment thus
introduced by R.A. No. 7975 should not be applied retroactively. This is so, the
petitioner asserts, because under Section 7 ofR.A. No. 7975, only those cases
where trial has not begun in the Sandiganbayan upon the effectivity of the law
should be referred to the proper trial court.
The private complainant agrees with the contention of the petitioner. In contrast,
the Office of the Special Prosecutor contends that the Presiding Justice of the
Sandiganbayan acted in accordance with law when he ordered the remand of the
case to the RTC. It asserts that R.A. No. 7975 should be applied retroactively.
Although the Sandiganbayan had jurisdiction over the crime committed by the
petitioner when the amended information was filed with the RTC, by the time it
resolved petitioner's motion to dismiss on July 31, 1995, R.A. No. 7975 had
already taken effect. Thus, the law should be given retroactive effect. EHTIcD

The Ruling of the Court

The respondent Presiding Justice acted in accordance with law and the rulings of
this Court when he ordered the remand of the case to the RTC, the court of
origin.
The jurisdiction of the court over criminal cases is determined by the allegations
in the Information or the Complaint and the statute in effect at the time of the
commencement of the action, unless such statute provides for a retroactive
application thereof. The jurisdictional requirements must be alleged in the
Information. 19Such jurisdiction of the court acquired at the inception of the case
continues until the case is terminated. 20
Under Section 4(a) of P.D. No. 1606 as amended by P.D. No. 1861, the
Sandiganbayan had exclusive jurisdiction in all cases involving the following:
(1) Violations of Republic Act No. 3019, as amended, otherwise known
as the Anti-Graft and Corrupt Practices Act, Republic Act No.
1379, and Chapter II, Section 2, Title VII of the Revised Penal
Code;
(2) Other offenses or felonies committed by public officers and
employees in relation to their office, including those employed in
government-owned or controlled corporations, whether simple or
complexed with other crimes, where the penalty prescribed by law
is higher than prision correccional or imprisonment for six (6)
years, or a fine of P6,000.00 . . . . 21
However, for the Sandiganbayan to have exclusive jurisdiction under the said law
over crimes committed by public officers in relation to their office, it is essential
that the facts showing the intimate relation between the office of the offender and
the discharge of official duties must be alleged in the Information. It is not enough
to merely allege in the Information that the crime charged was committed by the
offender in relation to his office because that would be a conclusion of law. 22 The
amended Information filed with the RTC against the petitioner does not contain
any allegation showing the intimate relation between his office and the discharge
of his duties. Hence, the RTC had jurisdiction over the offense charged when on
November 24, 1995, it ordered the re-amendment of the Information to include
therein an allegation that the petitioner committed the crime in relation to office.
The trial court erred when it ordered the elevation of the records to the
Sandiganbayan. It bears stressing that R.A. No. 7975 amending P.D. No.
1606 was already in effect and under Section 2 of the law:
In cases where none of the principal accused are occupying positions
corresponding to salary grade "27" or higher, as prescribed in the
said Republic Act No. 6758, or PNP officers occupying the rank of
superintendent or higher, or their equivalent, exclusive jurisdiction
thereof shall be vested in the proper Regional Trial Court, Metropolitan
Trial Court, Municipal Trial Court, and Municipal Circuit Trial Court, as
the case may be, pursuant to their respective jurisdiction as provided
in Batas Pambansa Blg. 129.
Under the law, even if the offender committed the crime charged in relation to his
office but occupies a position corresponding to a salary grade below "27," the
proper Regional Trial Court or Municipal Trial Court, as the case may be, shall
have exclusive jurisdiction over the case. In this case, the petitioner was a Police
Senior Inspector, with salary grade "23." He was charged with homicide
punishable by reclusion temporal. Hence, the RTC had exclusive jurisdiction over
the crime charged conformably to Sections 20 and 32 of Batas Pambansa Blg.
129, as amended by Section 2 of R.A. No. 7691.
The petitioner's contention that R.A. No. 7975 should not be applied retroactively
has no legal basis. It bears stressing that R.A. No. 7975 is a substantive
procedural law which may be applied retroactively. 23
IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED. No
pronouncement as to costs.
SO ORDERED.
(Escobal v. Garchitorena, G.R. No. 124644, [February 5, 2004], 466 PHIL
|||

625-637)

5. Duncano v Sandiganbayan 762 SCRA 663

THIRD DIVISION

[G.R. No. 191894. July 15, 2015.]

DANILO A. DUNCANO, petitioner, vs. HON. SANDIGANBAYAN

(2nd DIVISION),and HON. OFFICE OF THE SPECIAL
PROSECUTOR, respondents.
 DECISION

PERALTA, J : p

This petition for certiorari under Rule 65 of the Rules of

Court (Rules) with prayer for issuance of preliminary injunction and/or
temporary restraining order seeks to reverse and set aside the August 18,
2009 Resolution 1 and February 8, 2010 Order 2 of respondent
Sandiganbayan Second Division in Criminal Case No. SB-09-CRM-0080,
which denied petitioner's Motion to Dismiss on the ground of lack of
jurisdiction.
The facts are plain and undisputed.
Petitioner Danilo A. Duncano is, at the time material to the case, the
Regional Director of the Bureau of Internal Revenue (BIR) with Salary Grade
26 as classified under Republic Act (R.A.) No. 6758. 3 On March 24,
2009, 4 the Office of the Special Prosecutor (OSP), Office of the Ombudsman,
filed a criminal case against him for violation of Section 8, in relation to
Section 11 of R.A. No. 6713, 5 allegedly committed as follows:
That on or about April 15, 2003, or sometime prior or
subsequent thereto, in Quezon City, Philippines, and within the
jurisdiction of this Honorable Court, accused DANILO DUNCANO y
ACIDO, a high ranking public officer, being the Regional Director of
Revenue Region No. 7, of the Bureau of Internal Revenue, Quezon
City, and as such is under an obligation to accomplish and submit
declarations under oath of his assets, liabilities and net worth and
financial and business interests, did then and there, wilfully, unlawfully
and criminally fail to disclose in his Sworn Statement of Assets and
Liabilities and Networth (SALN) for the year 2002, his financial and
business interests/connection in Documail Provides Corporation and
Don Plus Trading of which he and his family are the registered owners
thereof, and the 1993 Nissan Patrol motor vehicle registered in the
name of his son VINCENT LOUIS P. DUNCANO which are part of his
assets, to the damage and prejudice of public interest.
CONTRARY TO LAW. 6
Prior to his arraignment, petitioner filed a Motion to Dismiss with Prayer
to Defer the Issuance of Warrant of Arrest 7 before respondent
Sandiganbayan Second Division. As the OSP alleged, he admitted that he is
a Regional Director with Salary Grade 26. Citing Inding v.
Sandiganbayan 8 and Serana v. Sandiganbayan, et al.,9 he asserted that
under Presidential Decree (P.D.) No. 1606, as amended by Section 4 (A) (1)
of R.A. No. 8249, 10 the Sandiganbayan has no jurisdiction to try and hear the
case because he is an official of the executive branch occupying the position
of a Regional Director but with a compensation that is classified as below
Salary Grade 27.
In its Opposition, 11 the OSP argued that a reading of Section 4 (A) (1)
(a) to (g) of the subject law would clearly show that the qualification as to
Salary Grade 27 and higher applies only to officials of the executive branch
other than the Regional Director and those specifically enumerated. This is so
since the term "Regional Director" and "higher" are separated by the
conjunction "and," which signifies that these two positions are different, apart
and distinct, words but are conjoined together "relating one to the other" to
give effect to the purpose of the law. The fact that the position of Regional
Director was specifically mentioned without indication as to its salary grade
signifies the lawmakers' intention that officials occupying such position,
regardless of salary grade, fall within the original and exclusive jurisdiction of
the Sandiganbayan. This issue, it is claimed, was already resolved
in Inding.Finally, the OSP contended that the filing of the motion to dismiss is
premature considering that the Sandiganbayan has yet to acquire jurisdiction
over the person of the accused.
Still not to be outdone, petitioner invoked the applicability of Cuyco v.
Sandiganbayan 12 and Organo v. Sandiganbayan 13 in his rejoinder.
On August 18, 2009, the Sandiganbayan Second Division promulgated
its Resolution, disposing:
WHEREFORE,in the light of the foregoing, the Court
hereby DENIES the instant Motion to Dismiss for being devoid of merit.
Let a Warrant of Arrest be therefore issued against the accused.
SO ORDERED.14 ScHADI

The respondent court ruled that the position of Regional Director is one
of those exceptions where the Sandiganbayan has jurisdiction even if such
position is not Salary Grade 27. It was opined that Section 4 (A) (1) of R.A.
No. 8249 unequivocally provides that respondent court has jurisdiction over
officials of the executive branch of the government occupying the position of
regional director and higher, otherwise classified as Salary Grade 27 and
higher, of R.A. No. 6758, including those officials who are expressly
enumerated in subparagraphs (a) to (g). In support of the ruling, this Court's
pronouncements in Inding and Binay v. Sandiganbayan 15 were cited.
Petitioner filed a Motion for Reconsideration, but it was
denied; 16 Hence, this petition.
Instead of issuing a temporary restraining order or writ of preliminary
injunction, the Court required respondents to file a comment on the petition
without necessarily giving due course thereto. 17 Upon compliance of the
OSP, a Rejoinder (supposedly a Reply) was filed by petitioner.
 At the heart of the controversy is the determination of whether,
according to P.D. No. 1606, as amended by Section 4 (A) (1) of R.A. No.
8249, only Regional Directors with Salary Grade of 27 and higher, as
classified under R.A. No. 6758, fall within the exclusive jurisdiction of the
Sandiganbayan. Arguing that he is not included among the public officials
specifically enumerated in Section 4 (A) (1) (a) to (g) of the law and heavily
relying as well on Cuyco,petitioner insists that respondent court lacks
jurisdiction over him, who is merely a Regional Director with Salary Grade 26.
On the contrary, the OSP maintains that a Regional Director, irrespective of
salary grade, falls within the exclusive original jurisdiction of the
Sandiganbayan.
We find merit in the petition.
The creation of the Sandiganbayan was mandated by Section 5, Article
XIII of the 1973 Constitution. 18 By virtue of the powers vested in him by
theConstitution and pursuant to Proclamation No. 1081, dated September 21,
1972, former President Ferdinand E. Marcos issued P.D. No. 1486. 19 The
decree was later amended by P.D. No. 1606, 20 Section 20 of Batas
Pambansa Blg. 129, 21 P.D. No. 1860, 22 and P.D. No. 1861. 23
With the advent of the 1987 Constitution, the special court was retained
as provided for in Section 4, Article XI thereof. 24 Aside from Executive Order
Nos. 14 25and 14-a, 26 and R.A. 7080, 27 which expanded the jurisdiction of
the Sandiganbayan, P.D. No. 1606 was further modified by R.A. No.
7975, 28 R.A. No. 8249, 29 and just this year, R.A. No. 10660. 30
For the purpose of this case, the relevant provision is Section 4 of R.A.
No. 8249, which states:
SEC. 4. Section 4 of the same decree is hereby further
amended to read as follows:
"SEC. 4. Jurisdiction.— The Sandiganbayan shall
exercise exclusive original jurisdiction in all cases
involving:
"A. Violations of Republic Act No. 3019, as
amended, otherwise known as the Anti-Graft and Corrupt
Practices Act, Republic Act No. 1379, and Chapter II,
Section 2, Title VII, Book II of the Revised Penal Code,
where one or more of the accused are officials occupying
the following positions in the government, whether in a
permanent, acting or interim capacity, at the time of the
commission of the offense:
"(1) Officials of the executive branch occupying the
positions of regional director and higher, otherwise
classified as Grade '27' and higher, of the Compensation
and Position Classification Act of 1989 (Republic Act No.
6758), specifically including:
"(a) Provincial governors, vice-governors,
members of the sangguniang panlalawigan,and
provincial treasurers, assessors, engineers, and other
provincial department heads;
"(b) City mayor, vice-mayors, members of
the sangguniang panlungsod,city treasurers, assessors,
engineers, and other city department heads;
"(c) Officials of the diplomatic service occupying
the position of consul and higher;
"(d) Philippine army and air force colonels, naval
captains, and all officers of higher rank;
"(e) Officers of the Philippine National Police while
occupying the position of provincial director and those
holding the rank of senior superintendent or higher;
"(f) City and provincial prosecutors and their
assistants, and officials and prosecutors in the Office of
the Ombudsman and special prosecutor;
"(g) Presidents, directors or trustees, or managers
of government-owned or controlled corporations, state
universities or educational institutions or foundations.
"(2) Members of Congress and officials thereof
classified as Grade '27' and up under the Compensation
and Position Classification Act of 1989;
"(3) Members of the judiciary without prejudice to
the provisions of the Constitution;
"(4) Chairmen and members of Constitutional
Commission, without prejudice to the provisions of
the Constitution; and aICcHA

"(5) All other national and local officials classified

as Grade '27' and higher under the Compensation and
Position Classification Act of 1989.
"B. Other offenses or felonies whether simple or
complexed with other crimes committed by the public
officials and employees mentioned in subsection a of this
section in relation to their office.
"C. Civil and criminal cases filed pursuant to and in
connection with Executive Order Nos. 1, 2, 14 and 14-A,
issued in 1986.
 xxx xxx xxx"
Based on the afore-quoted, those that fall within the original jurisdiction
of the Sandiganbayan are: (1) officials of the executive branch with Salary
Grade 27 or higher, and (2) officials specifically enumerated in Section 4 (A)
(1) (a) to (g),regardless of their salary grades. 31 While the first part of Section
4 (A) covers only officials of the executive branch with Salary Grade 27 and
higher, its second part specifically includes other executive officials whose
positions may not be of Salary Grade 27 and higher but who are by express
provision of law placed under the jurisdiction of the Sandiganbayan. 32
That the phrase "otherwise classified as Grade '27' and higher" qualifies
"regional director and higher" is apparent from the Sponsorship Speech of
Senator Raul S. Roco on Senate Bill Nos. 1353 and 844, which eventually
became R.A. Nos. 7975 and 8249, respectively: HSCATc

As proposed by the Committee, the Sandiganbayan shall exercise

original jurisdiction over the cases assigned to it only in instances
where one or more of the principal accused are officials occupying the
positions of regional director and higher or are otherwise classified as
Grade 27 and higher by the Compensation and Position Classification
Act of 1989, whether in a permanent, acting or interim capacity at the
time of the commission of the offense. The jurisdiction, therefore,
refers to a certain grade upwards, which shall remain with the
Sandiganbayan.33 (Emphasis supplied)
To speed up trial in the Sandiganbayan, Republic Act No. 7975 was
enacted for that Court to concentrate on the "larger fish" and leave the
"small fry" to the lower courts. This law became effective on May 6,
1995 and it provided a two-pronged solution to the clogging of the
dockets of that court, to wit:
It divested the Sandiganbayan of jurisdiction over
public officials whose salary grades were at Grade
"26" or lower, devolving thereby these cases to the
lower courts, and retaining the jurisdiction of the
Sandiganbayan only over public officials whose
salary grades were at Grade "27" or higher and over
other specific public officials holding important
positions in government regardless of salary
grade;...34 (Emphasis supplied)
The legislative intent is to allow the Sandiganbayan to devote its time
and expertise to big-time cases involving the so-called "big fishes" in the
government rather than those accused who are of limited means who stand
trial for "petty crimes," the so-called "small fry," which, in turn, helps the court
decongest its dockets.35
 Yet, those that are classified as Salary Grade 26 and below may still fall
within the jurisdiction of the Sandiganbayan, provided that they hold the
positions enumerated by the law. 36 In this category, it is the position held, not
the salary grade, which determines the jurisdiction of the
Sandiganbayan. 37 The specific inclusion constitutes an exception to the
general qualification relating to "officials of the executive branch occupying the
positions of regional director and higher, otherwise classified as Grade '27'
and higher, of the Compensation and Position Classification Act of
1989." 38 As ruled in Inding:
Following this disquisition, the paragraph of Section 4 which
provides that if the accused is occupying a position lower than SG 27,
the proper trial court has jurisdiction, can only be properly interpreted
as applying to those cases where the principal accused is occupying a
position lower than SG 27 and not among those specifically included in
the enumeration in Section 4 a. (1) (a) to (g).Stated otherwise, except
for those officials specifically included in Section 4 a. (1) (a) to
(g),regardless of their salary grades,over whom the Sandiganbayan
has jurisdiction, all other public officials below SG 27 shall be under the
jurisdiction of the proper trial courts "where none of the principal
accused are occupying positions corresponding to SG 27 or higher."
By this construction, the entire Section 4 is given effect. The cardinal
rule, after all, in statutory construction is that the particular words,
clauses and phrases should not be studied as detached and isolated
expressions, but the whole and every part of the statute must be
considered in fixing the meaning of any of its parts and in order to
produce a harmonious whole. And courts should adopt a construction
that will give effect to every part of a statute, if at all possible. Ut magis
valeat quam pereat or that construction is to be sought which gives
effect to the whole of the statute — its every word. 39
Thus, to cite a few, We have held that a member of the Sangguniang
Panlungsod,40 a department manager of the Philippine Health Insurance
Corporation(Philhealth),41 a student regent of the University of the
Philippines, 42 and a Head of the Legal Department and Chief of the
Documentation with corresponding ranks of Vice-Presidents and Assistant
Vice-President of the Armed Forces of the Philippines Retirement and
Separation Benefits System (AFP-RSBS) 43 fall within the jurisdiction of the
Sandiganbayan.
Petitioner is not an executive official with Salary Grade 27 or higher.
Neither does he hold any position particularly enumerated in Section 4 (A) (1)
(a) to (g).As he correctly argues, his case is, in fact, on all fours
with Cuyco.Therein, the accused was the Regional Director of the Land
Transportation Office, Region IX, Zamboanga City, but at the time of the
commission of the crime in 1992, his position was classified as Director II with
Salary Grade 26. 44 It was opined:
Petitioner contends that at the time of the commission of the
offense in 1992, he was occupying the position of Director II, Salary
Grade 26, hence, jurisdiction over the cases falls with the Regional
Trial Court.
We sustain petitioner's contention.
The Sandiganbayan has no jurisdiction over violations of
Section 3(a) and (e), Republic Act No. 3019, as amended, unless
committed by public officials and employees occupying positions of
regional director and higher with Salary Grade "27" or higher, under
the Compensation and Position Classification Act of 1989(Republic Act
No. 6758) in relation to their office.
In ruling in favor of its jurisdiction, even though petitioner
admittedly occupied the position of Director II with Salary Grade "26"
under the Compensation and Position Classification Act of
1989 (Republic Act No. 6758), the Sandiganbayan incurred in serious
error of jurisdiction, and acted with grave abuse of discretion
amounting to lack of jurisdiction in suspending petitioner from office,
entitling petitioner to the reliefs prayed for. 45
IDTSEH

In the same way, a certification issued by the OIC - Assistant Chief,

Personnel Division of the BIR shows that, although petitioner is a Regional
Director of the BIR, his position is classified as Director II with Salary Grade
26. 46
There is no merit in the OSP's allegation that the petition was
prematurely filed on the ground that respondent court has not yet acquired
jurisdiction over the person of petitioner. Records disclose that when a
warrant of arrest was issued by respondent court, petitioner voluntarily
surrendered and posted a cash bond on September 17, 2009. Also, he was
arraigned on April 14, 2010, prior to the filing of the petition on April 30, 2010.
WHEREFORE,the foregoing considered, the instant petition
for certiorari is GRANTED.The August 18, 2009 Resolution and February 8,
2010 Order of the Sandiganbayan Second Division, which denied petitioner's
Motion to Dismiss on the ground of lack of jurisdiction, are REVERSED AND
SET ASIDE.
SO ORDERED.
(Duncano v. Sandiganbayan (2nd Division), G.R. No. 191894, [July 15,
|||

2015])

6. Agan Jr. vs. PIATCO, G.R. No. 155001

 EN BANC

[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,

[G.R. No. 155547. May 5, 2003.]

SALACNIB F. BATERINA, CLAVEL A. MARTINEZ and

CONSTANTINO G. JARAULA, petitioners, vs. PHILIPPINE
INTERNATIONAL AIR TERMINALS CO., INC., MANILA
INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF
TRANSPORTATION AND COMMUNICATIONS, DEPARTMENT
OF PUBLIC WORKS AND HIGHWAYS, SECRETARY LEANDRO
M. MENDOZA, in his capacity as Head of the Department of
Transportation and Communications, and SECRETARY
SIMEON A. DATUMANONG, in his capacity as Head of the
Department of Public Works and Highways, respondents,

JACINTO V. PARAS, RAFAEL P. NANTES, EDUARDO C.

ZIALCITA, WILLY BUYSON VILLARAMA, PROSPERO C.
 NOGRALES, PROSPERO A. PICHAY, JR., HARLIN CAST
ABAYON, and BENASING O. MACARANBON, respondents-
intervenors,

[G.R. No. 155661. May 5, 2003.]

CEFERINO C. LOPEZ, RAMON M. SALES, ALFREDO B.

VALENCIA, MA. TERESA V. GAERLAN, LEONARDO DE LA
ROSA, DINA C. DE LEON, VIRGIE CATAMIN RONALD
SCHLOBOM, ANGELITO SANTOS, MA. LUISA M. PALCON and
SAMAHANG MANGGAGAWA SA PALIPARAN NG PILIPINAS
(SMPP),petitioners, vs. PHILIPPINE INTERNATIONAL AIR
TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT
AUTHORITY, DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS, SECRETARY LEANDRO M. MENDOZA, in
his capacity as Head of the Department of Transportation and
Communications, respondents.

Salonga Hernandez & Mendoza for petitioners in G.R. No. 155001.

Jose A. Bernas for petitioners in G.R. No. 155547.
Erwin P. Erfe for petitioners in G.R. No. 155661.
Jose Espinas for MWU-NLU.
Jose E. Marigondon for PALEA.
Angara Abello Concepcion Regala and Cruz for petitioners-in-intervention.
Arthur D. Lim Law Office for Asia's Emerging Dragon etc.
Romulo Mabanta Buenaventura Sayoc & Delos Angeles, Chavez & Laureta &
Associate and Moises Tolentino, Jr. for PIATCO.
The Office of the Government Corporate Counsel for MIAA.
The Solicitor General for public respondents.
Mario E. Ongkiko, Fernando F. Manas, Jr. Raymund C. de Castro & Angelito S.
Lazaro, Jr. for respondents-intervenors.

SYNOPSIS

On October 5, 1994, Asia's Emerging Dragon Corp. (AEDC) submitted an

unsolicited proposal to the Government for the development of Ninoy Aquino
International Airport International Passenger Terminal III (NAIA IPT III) under a
build-operate-and-transfer arrangement pursuant to RA 6957, as amended. It
was endorsed to the National Economic Development Authority (NEDA), which,
in turn, reviewed and approved it for bidding. The Paircargo Consortium was the
only company that submitted a competitive proposal. AEDC questioned, among
others, the financial capability of Paircargo Consortium. However, the Pre-
Qualification Bids and Awards Committee (PBAC) had prequalified the Paircargo
Consortium to undertake the project. Later, Paircargo Consortium incorporated
into Philippine International Airport Terminals Co., (PIATCO). And for failure of
AEDC to match the price proposal submitted by PIATCO, the project was
awarded to PIATCO. On July 12, 1997, the Government signed the 1997
Concession Agreement. Thereafter, the Amended and Restated Concession
Agreement (ARCA) and three Supplements thereto were signed by the
Government and PIATCO. Consequently, the workers of the international airline
service providers, claiming that they stand to lose their employment upon the
implementation of the said agreements, filed before this Court a petition for
prohibition docketed as G.R. No. 155001. Later, the service providers joined their
cause. Congressmen Salacnib Baterina, Clavel Martinez and Constantino
Jaraula, alleging that the said contracts compelled government expenditure
without appropriation, filed a similar petition docketed as G.R. No. 155547. And
several employees of the MIAA likewise filed a petition docketed as G.R. No.
155661 assailing the legality of these agreements.
The Court ruled that in accordance with the provisions of R.A. No. 337, as
amended, the maximum amount that Security Bank, as one of the members of
the Paircargo Consortium could validly invest, is only 15% of its entire net worth.
The total net worth, therefore of the Paircargo Consortium, after considering the
maximum amounts that may be validly invested by each of its members, is only
6.08% of the project cost, which substantially less than the prescribed minimum
equity investment which is 30% of the project cost. Thus, the award of the
contract by the PBAC to the Paircargo Consortium, a disqualified bidder, is null
and void.
As to the validity of the agreements, 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 set forth in the ARCA arise. This is a
form of direct government guarantee and to declare the PIATCO contracts valid
despite the clear statutory prohibitions against a direct government guarantee
would only make a mockery of that the BOT Law seeks to prevent. The Court
also ruled that the operation of an international passenger airport terminal is no
doubt an undertaking imbued with public interest. Thus, the privilege given to
PIATCO is subject to reasonable regulation and supervision by the Government
through the MIAA. Another thing, 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. Accordingly, the 1997 Concession
Agreement, the Amended and Restated Concession Agreement and the
Supplements thereto were set aside for being null and void. TCEaDI

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; PARTIES; INTEREST OF PERSON

ASSAILING THE CONSTITUTIONALITY OF A STATUTE MUST BE DIRECT
AND PERSONAL. — 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." 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.
2. ID.; ID.; ID.; ID.; FINANCIAL PREJUDICE IS A LEGITIMATE INTEREST
SUFFICIENT TO CONFER THE REQUISITE STANDING. — [P]etitioners 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.
3. ID.; ID.; ID.; ID.; COURT MUST BE MORE LIBERAL IN DETERMINING
WHETHER THE PETITIONERS HAVE LOCUS STANDI TO FILE A PETITION.
— 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 Imus and Gonzales
v. Raquiza 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, 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,"
Further, "insofar as taxpayers' suits are concerned . . . (this Court) is not devoid
of discretion as to whether or not it should be entertained." 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." In view of the serious legal questions involved and their impact
on public interest, we resolve to grant standing to the petitioners.

4. ID.; ID.; JURISDICTION; HIERARCHY OF COURTS MAY BE RELAXED

WHEN THE REDRESS DESIRED CANNOT BE OBTAINED IN THE
APPROPRIATE COURTS. — 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. ATaDHC

5. ID.; ID.; ID.; PROCEDURAL BARS MAY BE LOWERED TO GIVE WAY FOR
THE SPEEDY DISPOSITION OF CASES OF TRANSCENDENTAL
IMPORTANCE. — 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 oftranscendental 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.
6. CIVIL LAW; OBLIGATIONS AND CONTRACTS; ARBITRATION CLAUSE;
NOT BINDING TO PERSONS NOT PARTIES TO THE CONTRACT. — It is
established thatpetitioners 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.
7. POLITICAL LAW; ADMINISTRATIVE LAW; REPUBLIC ACT NO. 6957
(BUILD-OPERATE-AND-TRANSFER or BOT LAW); CONTRACT SHALL BE
AWARDED TO THE BIDDER WHO SATISFIED THE. MINIMUM FINANCIAL,
TECHNICAL, ORGANIZATIONAL AND LEGAL STANDARDS REQUIRED BY
LAW. — 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 financial, technical, organizational and leg standards" required by
the law, has submitted the lowest bid and most favorable terms of the project. . . .
Accordingly, . . . the Paircargo Consortium or any challenger to the unsolicited
proposal of AEDC has to show that it possesses the requisite financial capability
to undertake the project in the minimum amount of 30% of the project
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 they have adequate resources.
8. ID.; ID.; ID.; ID.; TOTAL NET WORTH OF THE PAIRCARGO CONSORTIUM
IS LESS THAT THE PRESCRIBED MINIMUM EQUITY INVESTMENT
REQUIRED FOR THE PROJECT. — We agree with public respondents that with
respect to Security Bank, the entire amount of its net worth could not be invested
in a single undertaking or enterprise, whether allied or non-allied in accordance
with the provisions of R.A. No. 337, as amended or the General Banking Act[.] . .
. Thus, the maximum amount that Security Bank could validly invest in the
Paircargo Consortium is only P528,525,656.55, representing 15% of its entire net
worth. The total net worth 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, an amount
substantially less than the prescribed minimum equity investment required for the
project in the amount of P2,755,095,000.00 or 30% of the project cost. cHaADC

9. ID.; ID.; PUBLIC BIDDING; PRE-QUALIFICATION STAGE; GOVERNMENT

AGENCY MUST DETERMINE THE BIDDER'S FINANCIAL CAPACITY. — The
purpose of pre-qualification in any public bidding is to determine, at the earliest
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 project by considering the maximum amounts that each
bidder may invest in the project at the time of pre-qualification.
10. ID.; ID.; ID.; ID.; ID.; SHOULD DETERMINE THE MAXIMUM AMOUNT
THAT EACH MEMBER OF THE CONSORTIUM MAY COMMIT WITHOUT
DISREGARDING THE INVESTMENT CEILINGS PROVIDED BY APPLICABLE
LAW. — 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 the minimum amount of 30% of the
project cost, in accordance with the 70:30 debt-to-equity ratio prescribed in the
Bid Documents. Thus, in the case of Paircargo Consortium, the PBAC should
determine the maximum amounts that each member of the consortium may
commit for the construction, operation and maintenance of the NAIA IPT III
project at the time of pre-qualification. With respect to Security Bank, the
maximum amount which may be invested by it would only be 15% of its net worth
in view of the restrictions imposed by the General Banking Act. Disregarding the
investment ceilings provided by applicable law would not result in a proper
evaluation of whether or not a bidder is pre-qualified to undertake the project as
for all intents and purposes, such ceiling or legal restriction determines the true
maximum amount which a bidder may invest in the project.
11. ID.; ID.; ID.; ID.; ID.; EVALUATION OF THE FINANCIAL CAPACITY OF THE
BIDDER MUST BE AT THE TIME THE BID IS SUBMITTED. — [T]he
determination of whether or not a bidder is pre-qualified to undertake the project
requires an evaluation of the financial capacity of the said bidder at the time the
bid is submitted based on the required documents presented by the bidder. The
PBAC should not 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.
12. ID.; ID.; ID.; ID.; ID.; IF THE BIDDER FALLS SHORT OF THE MINIMUM
AMOUNTS REQUIRED, THE SAID BIDDER SHOULD BE DISQUALIFIED. —
Thus, if the maximum amount of equity that a bidder may invest in the project at
the time the bids are submitted falls 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.
13. ID.; ID.; ID.; RESTRICTIVE AND CONSERVATIVE APPLICATION OF THE
RULES AND PROCEDURE IS NECESSARY. — 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." ACIDSc

14. ID.; ID.; ID.; PURPOSE. — 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."
15. ID.; ID.; ID.; ALL BIDDERS MUST BE ON EQUAL FOOTING ON THE
CONTRACT RIDDED UPON. — 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.

16. ID.; ID.; ID.; AMENDMENTS TO CONTRACT BIDDED; WINNING BIDDER

IS NOT PRECLUDED FROM MODIFYING OR AMENDING CERTAIN
PROVISIONS OF THE CONTRACT THAT DOES NOT CONSTITUTE
SUBSTANTIAL OR MATERIAL AMENDMENTS. — 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.
17. ID.; ID.; ID.; ID.; SIGNIFICANT AMENDMENTS IN THE PIATCO'S DRAFT
CONCESSION AGREEMENT; TYPES OF FEES THAT MAY BE IMPOSED AND
COLLECTED BY PIATCO. — 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. acHCSD

18. ID.; ID.; ID.; ID.; ID.; ASSUMPTION BY THE GOVERNMENT OF THE
LIABILITIES OF PIATCO IN THE EVENT OF THE LATTER'S DEFAULT
TRANSLATES BETTER TERMS AND CONDITION FOR PIATCO. — 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 . . . [u]nder . . . 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.
19. ID.; ID.; ID.; ID.; SHOULD ALWAYS CONFORM TO THE GENERAL PUBLIC
POLICY. — [T]his 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. 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. 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.
20. ID.; ID.; ID.; ID.; ANY GOVERNMENT ACTION WHICH PERMITS ANY
SUBSTANTIAL VARIANCE THEREOF IS A GRAVE ABUSE OF DISCRETION.
— 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. 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. CaHcET
21. ID.; ID.; ID.; ID.; DIRECTLY TRANSLATES CONCRETE FINANCIAL
ADVANTAGES TO PIATCO THAT WERE PREVIOUSLY NOT AVAILABLE
DURING THE BIDDING PROCESS. — The fact that the . . . 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.
22. ID.; ID.; BOT LAW; PURPOSE. — 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, 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. 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.
23. ID.; ID.; ID.; CONDITIONS FOR THE ACCEPTANCE OF THE
UNSOLICITED PROPOSAL FOR A BOT PROJECT. — 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.
The failure to meet any of the above conditions will result in the denial of the
proposal.
24. ID.; ID.; ID.; STRICTLY PROHIBITS DIRECT GOVERNMENT GUARANTEE,
SUBSIDY AND EQUITY IN UNSOLICITED 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." 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. CSDcTA

25. ID.; ID.; ID.; ID.; VIOLATED IN CASE AT BAR. — 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. . . . This Court has
long and consistently adhered to the legal maxim that those that cannot be done
directly cannot be done indirectly. 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 Lawseeks 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" which are necessary for national growth and development
but which the government, unfortunately, could ill-afford to finance at this point in
time.
26. ID.; CONSTITUTIONAL LAW; POLICE POWER; TEMPORARY TAKEOVER
OF BUSINESS AFFECTED WITH PUBLIC INTEREST; GOVERNMENT IS NOT
REQUIRED TO COMPENSATE THE PRIVATE ENTITY-OWNER. — Article XII,
Section 17 of the 1987 Constitution . . . 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." The
duration of the emergency itself is the determining factor as to how long the
temporary takeover by the government would last. 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.
27. ID.; ID.; ID.; ID.; ID.; CANNOT BE CONTRAVENED BY MERE
CONTRACTUAL STIPULATION. — 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." 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." 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.
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.
28. ID.; ID.; NATIONAL ECONOMY AND
PATRIMONY; CONSTITUTION STRICTLY REGULATES 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." The 1987 Constitution strictly regulates monopolies,
whether private or public, and even provides for their prohibition if public interest
so requires. . . . 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. 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. ETHIDa

29. ID.; ID.; ID.; ID.; PRIVILEGE GIVEN TO PIATCO SHOULD BE SUBJECT TO
REASONABLE REGULATION AND SUPERVISION BY THE GOVERNMENT. —
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 agency authorized to operate the NAIA complex, as well as DOTC,
the department to which MIAA is attached. This is in accord with the
Constitutional mandate that a monopoly which is not prohibited must be
regulated.
30. ID.; ID.; ID.; ID.; OPERATION OF PUBLIC UTILITY CANNOT BE DONE IN
AN ARBITRARY MANNER TO THE DETRIMENT OF THE PUBLIC. — While it
is the declared policy of the BOT Law to encourage private sector participation by
"providing a climate of minimum government regulations," 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.
31. ID.; ID.; BILL OF RIGHTS NON-IMPAIRMENT OF OBLIGATIONS OF
CONTRACT; PIATCO, BY CLAIMING AN EXCLUSIVE RIGHT TO OPERATE,
CANNOT REQUIRE THE GOVERNMENT TO BREAK ITS CONTRACTUAL
OBLIGATIONS TO THE SERVICE PROVIDERS. — 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. Lazaro 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.
32. ID.; ID.; ID.; ID.; MIAA SHOULD ENSURE THAT WHOEVER BY
CONTRACT IS GIVEN THE RIGHT TO OPERATE NAIA IPT III WILL DO SO
WITHIN THE BOUNDS OF THE LAW. — 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, 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.
TSHIDa

PANGANIBAN, J., separate opinion:

1. REMEDIAL LAW; SPECIAL CIVIL ACTION; PROHIBITION; DIRECT
RESORT TO THE SUPREME COURT BY THE EMPLOYEES WHO FEARED
LOSS OF THEIR JOBS IS JUSTIFIED. — The Court has, in the past, held that
questions relating to gargantuan government contracts ought to be settled
without delay. 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.

2. ID.; ID.; ID.; DISPOSITION THEREOF ULTIMATELY RUNS ON QUESTIONS

OF LAW; CASE AT BAR. — Contrary to Piatco's argument that the resolution of
the issues raised in the Petitions will require delving into factual questions, I
submit that their disposition ultimately turns on questions of law. 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.
3. ID.; CIVIL PROCEDURE; ARBITRATION PROCEEDINGS; CANNOT
ADDRESS, DETERMINE AND DEFINITIVELY RESOLVE THE
CONSTITUTIONAL AND LEGAL QUESTIONS. — 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
Amended and Restated Concession Agreement (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.
4. ID.; ID.; LOCUS STANDI; CITIZEN, TAXPAYER AND MEMBERS OF THE
HOUSE OF REPRESENTATIVES ARE SUFFICIENTLY CLOTHED WITH
STANDING TO BRING SUIT QUESTIONING THE VALIDITY OF CONTRACT
AFFECTING PUBLIC INTEREST. — 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, 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. CcEHaI

5. ID.; ID.; ID.; MEMBERS OF HOUSE OF REPRESENTATIVES ARE

DEPRIVED OF DISCRETION; CASE AT BAR. — 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.
6. ID.; ID.; ID.; EMPLOYEES ARE CONFRONTED WITH THE PROSPECT OF
BEING LAID OFF FROM THEIR JOBS. — 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.
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.
7. ID.; ID.; ID.; SERVICE PROVIDERS CLAIM TO BE DEPRIVED OF THEIR
PROPERTY AND OF THE LIBERTY TO CONTRACT WITHOUT DUE
PROCESS OF LAW. — 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.
8. ID.; ID.; ID.; IN CASES OF TRANSCENDENTAL IMPORTANCE, THE
SUPREME COURT MAY RELAX THE STANDING REQUIREMENTS AND
ALLOW A SUIT TO PROSPER. — 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. 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. POLITICAL LAW; ADMINISTRATIVE LAW; REPUBLIC ACT NO. 6957
(BUILD-OPERATE-AND TRANSFER or BOT LAW); PUBLIC BIDDING; BIDDER
MUST SATISFY THE MINIMUM REQUIREMENTS AND MEET THE
TECHNICAL, FINANCIAL, ORGANIZATIONAL AND LEGAL STANDARDS. — 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. DAHaTc

10. ID.; ID.; ID.; ID.; MUST BE CONDUCTED UNDER A TWO-STAGE SYSTEM.
— Section 5 of this statute 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. ID.; ID.; ID.; ID.; PROPONENT MUST PROVE THAT IT IS ABLE TO RAISE
THE MINIMUM AMOUNT REQUIRED FOR THE PROJECT. — 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 projects. 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. Since the minimum amount of equity for the project was set at 30
percent 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.
12. ID.; ID.; ID.; ID.; ID.; NOT COMPLIED WITH IN CASE AT BAR. — However,
the combined equity or net worth of the Paircargo consortium stood at only
P558,384,871.55. 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.
13. ID.; ID.; ID.; ID.; RULES, REGULATIONS AND GUIDELINES MUST BE
STRICTLY APPLIED; VIOLATED IN CASE AT BAR. — 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.

14. ID.; ID.; ID.; ID.; ESSENCE. — Republic v. Capulong 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.
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.
15. ID.; ID.; ID.; ID.; SINCE THE ENTIRE BIDDING PROCESS WAS FLAWED.
AND TAINTED FROM THE VERY OUTSET, THE AWARD OF CONCESSION
WAS VOID. — 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; 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. ICDcEA

16. ID.; ID.; ID.; ID.; PROTECTION OF THE PROPRIETARY INFORMATION IS

APPLICABLE TO THE ORIGINATOR OF THE UNSOLICITED PROPOSAL
ONLY. — 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.
17. ID.; ID.; ID.; ID.; ID.; RATIONALE. — 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. 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.
18. ID.; ID.; ID.; ID.; BIDDER MUST BE GIVEN ACCESS TO THE
ASSUMPTION AND THE CALCULATIONS THAT WENT INTO CRAFTING THE
COMPETING BID. — 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.
19. ID.; ID.; ID.; DEFINITE AND FIRM TIMETABLE FOR THE SUBMISSION OF
THE REQUIREMENTS TO EXPOSE AND WEED OUT UNQUALIFIED
PROPONENTS. — The purpose of having a definite and firm timetable for the
submission of the 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.
20. ID.; ID.; ID.; ID.; EASILY CIRCUMVENTED BY MERELY POSTPONING
THE ACTUAL ISSUANCE OF THE NOTICE OF AWARD. — 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 aver 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.
21. ID.; ID.; ID.; ID.; TO DISCOURAGE COLLUSION AND REDUCE THE
OPPORTUNITY FOR AGENTS OF GOVERNMENT TO ABUSE THEIR
DISCRETION. — 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. DcTSHa

22. ID.; ID.; ID.; PROCEDURE FOR THE AWARD OF THE PROJECTS. — 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.
23. ID.; ID.; ID.; VIOLATED IN CASE AT BAR. — 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. [T]he 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 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.
24. ID.; ID.; ID.; CHANGES TO THE CONTRACT BIDDED OUT RESULTED IN
A SUBSTANTIALLY DIFFERENT CONTRACT. — 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[.] 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.

25. ID.; ID.; ID.; SUBSTANTIVE AMENDMENTS TO A CONTRACT FOR

WHICH A PUBLIC BIDDING HAS ALREADY BEEN FINISHED SHOULD ONLY
BE AWARDED AFTER ANOTHER PUBLIC BIDDING. — In a relatively early
case, Caltex v. Delgado Brothers, 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." EaIcAS

26. ID.; ID.; ID.; TERMS, CONDITIONS AND STIPULATIONS OF THE

CONTRACTS MUST REMAIN INTACT AND NOT BE SUBJECT TO FURTHER
NEGOTIATION. — 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 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.
27. ID.; ID.; ID.; REVISIONS AND AMENDMENTS IN THE CONTRACTS THAT
GIVE UNDUE ADVANTAGE TO THE GOVERNMENT IS ILLEGAL. — In sum,
the 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.
28. ID.; ID.; ID.; FIRST SUPPLEMENT TO VOID AND INEXISTENT ORIGINAL
CONCESSION AGREEMENT IS ALSO VOID AND INOPERATIVE; CASE AT
BAR. — I must emphasize that the First Supplement [FS] 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 arguendothat 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.
29. ID.; ID.; ID.; SECOND SUPPLEMENT IS ALSO VOID AND INOPERATIVE
AS IT DID NOT UNDERGO ANY PUBLIC BIDDING. — 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. 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.
AaSHED

30. ID.; ID.; ID.; THIRD SUPPLEMENT IS VOID AB INITIO AS IT CREATED A

NEW MONETARY OBLIGATION ON THE PART OF THE GOVERNMENT
WITHOUT PRIOR APPROPRIATIONS. — The Third Supplement (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.
31. ID.; ID.; ID.; DIRECT GOVERNMENT GUARANTEE IS PROHIBITED IN
UNSOLICITED PROPOSALS. — 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."
32. ID.; ID.; ID.; ID.; REASON. — 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.
33. ID.; ID.; ID.; ID.; THE AMOUNT TO BE PAID BY GOVERNMENT IS
GREATER OF EITHER THE APPRAISED VALUE OF THE PROJECT OR THE
AGGREGATE AMOUNT OF THE MONEYS OWED BY PIATCO; CASE AT BAR.
— 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.
34. ID.; ID.; ID.; ID.; PIATCO CONTRACTS ARE GROSSLY LOPSIDED IN
FAVOR OF PIATCO AND/OR ITS SENIOR LENDERS. — Piatco also argues
that there is no provisorequiring 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 tenders 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, 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. IAEcaH

35. ID.; ID.; ID.; ID.; AMENDED AND RESTATED CONCESSION AGREEMENT
(ARCA) INTENDS TO HAVE ALL PIATCO'S DEBTS COVERED BY THE
GUARANTEE. — 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?)
36. ID.; ID.; ID.; INSTANCES WHEN TERMINATION COMPENSATION MAY BE
ALLOWED. — Section 7 of the BOT Law as amended 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 and 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.
37. ID.; ID.; ID.; ID.; VIOLATED IN CASE AT BAR. — 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. 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.
38. ID.; ID.; ID.; ID.; IN TERMINATION COMPENSATION, IT IS
INDISPENSABLE THAT THE INTEREST OF GOVERNMENT BE DULY
INSURED; NOT PRESENT IN CASE AT BAR. — [I]n 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.
39. ID.; ID.; ID.; PROHIBITS A DIRECT GOVERNMENT SUBSIDY FOR
UNSOLICITED PROPOSALS. — 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." By any manner of interpretation or application, however, Section
8.01(d) of the ARCA clearly mandates the indefinite postponement 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. DTAIaH

40. ID.; ID.; ID.; GOVERNMENT WILL BE AT THE MERCY OF THE FOREIGN
LENDERS; CASE AT BAR. — 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.
41. ID.; CONSTITUTIONAL LAW; NATIONAL ECONOMY AND
PATRIMONY; CONSTITUTION EXPRESSLY PROSCRIBES MAKING A
FRANCHISE EXCLUSIVE; VIOLATED IN CASE AT BAR. — 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. 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, 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.
42. ID.; ID.; ID.; EASY PAYMENT PLAN OF PIATCO CONTRACTS VIOLATES
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 [.] The easy payment
scheme therein 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.

43. ID.; ID.; ID.; MONOPOLY; ELUCIDATED: — Gokongwei Jr. v. Securities and
Exchange Commission 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."
44. ID.; ID.; ID.; ID.; PIATCO CONTRACTS GIVE THE CONCESSIONAIRE
LIMITLESS POWER OVER THE CHARGING OF FEES, RENTALS AND SO
FORTH. — 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[.] It will be noted that
Sec. 6.06 (Adjustment of Non-Public Utility Fees and Charges) 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 . . ."
45. ID.; ID.; BILL OF RIGHTS; PROHIBITION AGAINST IMPAIRMENT OF
CONTRACTS; VIOLATED IN CASE AT BAR. — By the In-Service Date,
Terminal III shall be the only facility to be operated as an international passenger
terminal at the NAIA; thus, Terminal I and II shall no longer operate as such, and
no one shall be allowed to compete with Piatco in the operation of an
international passenger terminal in the NAIA. 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.
46. ID.; ID.; ID.; PROHIBITION AGAINST DEPRIVATION OF PROPERTY
WITHOUT DUE PROCESS; VIOLATED IN CASE AT BAR. — 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. 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. We held therein that a
privilege enjoyed for seven years "evolved into some form of property right which
should not be removed . . . 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.DaIACS

47. ID.; ID.; ID.; PROHIBITION AGAINST DEPRIVATION OF LIBERTY

WITHOUT DUE PROCESS; VIOLATED IN CASE AT BAR. — 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, and/or the right to make a
contract in relation to one's business.
48. ID.; LEGISLATIVE DEPARTMENT; PROHIBITION AGAINST
DISBURSEMENT OF PUBLIC FUNDS WITHOUT VALID APPROPRIATION;
EFFECT. — Clearly prohibited bythe Constitution is the disbursement of public
funds out of the treasury, except in pursuance of an appropriation made by law.
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.
49. ID.; ID.; ID.; EXISTENCE OF APPROPRIATIONS AND THE AVAILABILITY
OF FUNDS ARE INDISPENSABLE TO THE EXECUTION OF GOVERNMENT
CONTRACTS. — [T]his 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."
50. ID.; ID.; LEGISLATIVE POWER OVER THE PUBLIC PURSE; VIOLATED IN
CASE AT BAR. — 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!
51. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CRITERIA FOR
DETERMINING WHETHER THE BEST-EFFORTS BASIS WILL APPLY. — 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.
52. ID.; ID.; ID.; OBLIGATIONS IN THE SUPPLEMENTS ARE MANDATORY IN
CHARACTER AND NOT FOR BEST-EFFORTS COMPLIANCE ONLY. —
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. The
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.
53. ID.; ID.; PIATCO CONTRACTS ARE VOID AB INITIO AND INOPERATIVE.
— 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.
54. ID.; ID.; ID.; KEEPING PIATCO ON AS CONCESSIONAIRE IS
UNCONSCIONABLE. — 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 fromactually
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. EAHDac

55. ID.; ID.; ID.; AEDC SHOULD NOT BE ALLOWED TO OPERATE THE
TERMINAL III. — 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?
56. ID.; ID.; ID.; GOVERNMENT SHOULD PAY ALL REASONABLE EXPENSES
INCURRED IN THE CONSTRUCTION OF TERMINAL III. — 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, 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 ofquantum meruit was
likewise applied in Eslao v. Commission on Audit, 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.
57. ID.; ID.; ID.; POSSIBLE PRACTICAL SOLUTION IS TO BID OUT THE
OPERATION OF TERMINAL III. — 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.
VITUG, J., separate dissenting opinion:
1. REMEDIAL LAW; CIVIL PROCEDURE; JURISDICTION; SUPREME COURT
IS BEREFT OF JURISDICTION OVER CASES INVOLVING NULLIFICATION
OF CONTRACTS. — 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. 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.
2. ID.; ID.; ID.; SUPREME COURT IS NOT A TRIER OF FACTS. — 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. 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. As the Court has so often
exhorted, it is not a trier of facts.
3. ID.; ID.; ID.; PETITIONS FOR DECLARATORY RELIEF ARE COGNIZABLE
BY THE REGIONAL TRIAL COURT. — 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. The Supreme Court assumes no jurisdiction over
petitions for declaratory relief which are cognizable by regional trial courts.
4. POLITICAL LAW; SEPARATION OF POWERS; COURT MAY NOT INTRUDE
INTO EVERY AFFAIR OF GOVERNMENT. — As I have so expressed
in Tolentino vs. Secretary of Finance, reiterated in Santiago vs. Guingona, Jr.,
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.

DECISION

PUNO, J : p

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. CSaITD

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 5.0%
ii. Next 10 years 7.5%
iii. Next 10 years 10.0%
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. CSaITD

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 PAIRCARGO as Per Letter Dated September 3 and 10, 1996."
Paircargo's queries and the PBAC's responses were as follows:
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.SECAHa

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 theGeneral 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.CSaITD

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. CSaITD

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. CSaITD

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
providers 7 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 abovementioned
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.
CSaITD

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 Imus 13 and Gonzales
v. Raquiza 14 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
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.CSaITD

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
financial, technical, organizational and legal standards" required by the law, has
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.
(Italics 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 based shall be thirty percent (30%) of the project
cost instead of the twenty percent (20%) specified in Section 3.6.4
of the Bid Documents. This is to correlate with the 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 actual project cost.
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 capability to undertake the project in the minimum amount
of 30% of the project 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 they have adequate
resources.
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 that it had the ability to provide the minimum equity for the project in
the amount of at least P2,755,095,000.00.
Paircargo's Audited Financial Statements as of 1993 and 1994 indicated that it
had a net worth 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 equivalent to its
capital funds in the amount of P3,523,504,377.00. 28
We agree with public respondents that with respect to Security Bank, the entire
amount of its net worth could not be invested in a single undertaking or
enterprise, whether allied or non-allied in accordance with the provisions of R.A.
No. 337, as amended or the General Banking Act:
Sec. 21-B. The provisions in this or in any other Act to the contrary
notwithstanding, the Monetary Board, whenever it shall deem
appropriate and necessary to further national development objectives or
support national priority projects, may authorize a commercial bank, a
bank authorized to provide commercial banking services, as well as a
government-owned and controlled bank, to operate under an expanded
commercial banking authority and by virtue thereof exercise, in addition
to powers authorized for commercial banks, the powers of an Investment
House as provided in Presidential Decree No. 129, invest in the equity of
a non-allied undertaking, or own a majority or all of the equity in a
financial intermediary other than a commercial bank or a bank
authorized to provide commercial banking 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 the
net worth of the bank; (c) the equity investment of the bank, or of its
wholly or majority-owned subsidiary, in a single non-allied undertaking
shall not exceed thirty-five percent (35%) of the total equity in the
enterprise nor shall it exceed thirty-five percent (35%) of the voting stock
in that enterprise; and (d) the equity investment in other banks shall be
deducted from the investing bank's net worth for purposes of computing
the prescribed ratio of net worth to risk assets.
xxx xxx xxx
Further, the 1993 Manual of Regulations for Banks provides:
SECTION X383. Other Limitations and Restrictions. — The following
limitations and restrictions shall also apply regarding equity investments
of banks.
a. In any single enterprise. — The equity investments of banks in any
single 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. CSaITD
Thus, the maximum amount that Security Bank could validly invest in the
Paircargo Consortium is only P528,525,656.55, representing 15% of its entire net
worth. The total net worth 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 for the
project in the amount of P2,755,095,000.00 or 30% of the project cost.
The purpose of pre-qualification in any public bidding is to determine, at the
earliest 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 project by considering the maximum amounts
that each bidder may invest in the project at the time of pre-qualification.

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 the minimum amount of 30% of the project cost, in
accordance with the 70:30 debt-to-equity ratio prescribed in the Bid Documents.
Thus, in the case of Paircargo Consortium, the PBAC should determine
the maximum amounts that each member of the consortium may commit for the
construction, operation and maintenance of the NAIA IPT III project at the time of
pre-qualification. With respect to Security Bank, the maximum amount which may
be invested by it would only be 15% of its net worth in view of the restrictions
imposed by the General Banking Act. Disregarding the investment ceilings
provided by applicable law would not result in a proper evaluation of whether or
not a bidder is pre-qualified to undertake the project as for all intents and
purposes, such ceiling or legal restriction determines thetrue maximum
amount which a bidder may invest in the project.
Further, the determination of whether or not a bidder is pre-qualified to undertake
the project requires an evaluation of the financial capacity of the said bidder at
the time the bid is submitted based on the required documents presented by the
bidder. The PBAC should not 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 submitted falls 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. CSaITD

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 may be 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 Agreement includes 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." 38Thus, under the 1997 Concession Agreement, groundhandling 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. CSaITD

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 AgreementMIAA 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 Dollars 44 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. aSTAIH

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.
xxx xxx xxx
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 subcontractors. 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 therepayment 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 1, 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. 56The 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" 59 which 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.
xxx xxx xxx
(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. 65Thus, 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
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 right to 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 Date 71 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 agency authorized to operate the NAIA complex, as well as DOTC,
the department to which 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. Lazaro 78 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. TcEaAS

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., please see separate (dissenting) opinion
Panganiban, J., please see separate opinion
Quisumbing and Azcuna, JJ., concur with separate (dissenting) opinion of J.
Vitug.
Callejo, Sr., J., concurs with separate opinion of J. Panganiban.
Carpio, J., took no part.

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.CSTDIE

Accordingly, I vote for the dismissal of the petition.

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. .
. ." (Italics 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 percent 12 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 ofthe 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: IcaEDC

"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 complex 48
(b) Providing through MIAA the land required by Piatco for
the taxilane and one taxiway at no cost to Piatco 49
(c) Implementing the government's existing storm drainage
master plan 50
(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 arguendothat 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 thatno 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 haveall 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
thegreater 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." (Italics supplied)
By any manner of interpretation or application, Section 8.01(d) of the ARCA
clearly mandates the indefinite postponement 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 existing 63 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." (Italics 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) . . .
 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.ACaTIc

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 announced 72 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 Piatco 77 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. . . .
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.
"xxx 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 Commission 82 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 (Italics 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 . . . ."
 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 . . . 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:
 Providing thru MIAA the land required by Piatco for the
taxilane and one taxiway, at no cost to Piatco
Implementing the government's existing storm drainage
master plan
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
Dealing directly with BCDA and the Philippine Air Force in
acquiring additional land or right of way for the road
upgrade and improvement program
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. 94 The 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. aATESD

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 toautomatically 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.
(Agan, Jr. v. Philippine International Air Terminals Co., Inc., G.R. No.
|||

155001, 155547, 155661, [May 5, 2003], 450 PHIL 744-902)

EN BANC

[G.R. No. 155001. January 21, 2004.]

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,

FLORESTE ALCONIS, GINA ALNAS, REY AMPOLOQUIO,

ROSEMARIE ANG, EUGENE ARADA, NENETTE BARREIRO,
NOEL BARTOLOME, ALDRIN BASTADOR, ROLETTE DIVINE
BERNARDO, MINETTE BRAVO, KAREN BRECILLA, NIDA
CAILAO, ERWIN CALAR, MARIFEL CONSTANTINO, JANETTE
CORDERO, ARNOLD FELICITAS, MARISSA GAYAGOY, ALEX
GENERILLO, ELIZABETH GRAY, ZOILO HERICO,
JACQUELINE IGNACIO, THELMA INFANTE, JOEL JUMAO-AS,
MARIETTA LINCHOCO, ROLLY LORICO, FRANCIS AUGUSTO
MACATOL, MICHAEL MALIGAT, DENNIS MANALO, RAUL
MANGALIMAN, JOEL MANLANGIT, CHARLIE MENDOZA,
HAZNAH MENDOZA, NICHOLS MORALES, ALLEN OLAÑO,
CESAR ORTAL, MICHAEL ORTEGA, WAYNE PLAZA,
JOSELITO REYES, ROLANDO REYES, AILEEN SAPINA,
RAMIL TAMAYO, PHILLIPS TAN, ANDREW UY, WILLIAM
VELASCO, EMILIO VELEZ, NOEMI YUPANO, MARY JANE
ONG, RICHARD RAMIREZ, CHERYLE MARIE ALFONSO,
LYNDON BAUTISTA, MANUEL CABOCAN AND NEDY
LAZO,respondents-in-intervention,

NAGKAISANG MARALITA NG TAÑONG ASSOCIATION,

INC.,respondents-in-intervention,

[G.R. No. 155547. January 21, 2004.]

SALACNIB F. BATERINA, CLAVEL A. MARTINEZ and

CONSTANTINO G. JARAULA, petitioners,vs.PHILIPPINE
INTERNATIONAL AIR TERMINALS CO.,INC.,MANILA
INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF
TRANSPORTATION AND COMMUNICATIONS, DEPARTMENT
OF PUBLIC WORKS AND HIGHWAYS, SECRETARY LEANDRO
M. MENDOZA, in his capacity as Head of the Department of
Transportation and Communications, and SECRETARY
SIMEON A. DATUMANONG, in his capacity as Head of the
Department of Public Works and Highways, respondents,
JACINTO V. PARAS, RAFAEL P. NANTES, EDUARDO C.
ZIALCITA, WILLY BUYSON VILLARAMA, PROSPERO C.
NOGRALES, PROSPERO A. PICHAY, JR.,HARLIN CAST
ABAYON, and BENASING O. MACARANBON,respondents-
intervenors,

FLORESTE ALCONIS, GINA ALNAS, REY AMPOLOQUIO,

ROSEMARIE ANG, EUGENE ARADA, NENETTE BARREIRO,
NOEL BARTOLOME, ALDRIN BASTADOR, ROLETTE DIVINE
BERNARDO, MINETTE BRAVO, KAREN BRECILLA, NIDA
CAILAO, ERWIN CALAR, MARIFEL CONSTANTINO, JANETTE
CORDERO, ARNOLD FELICITAS, MARISSA GAYAGOY, ALEX
GENERILLO, ELIZABETH GRAY, ZOILO HERICO,
JACQUELINE IGNACIO, THELMA INFANTE, JOEL JUMAO-AS,
MARIETTA LINCHOCO, ROLLY LORICO, FRANCIS AUGUSTO
MACATOL, MICHAEL MALIGAT, DENNIS MANALO, RAUL
MANGALIMAN, JOEL MANLANGIT, CHARLIE MENDOZA,
HAZNAH MENDOZA, NICHOLS MORALES, ALLEN OLAÑO,
CESAR ORTAL, MICHAEL ORTEGA, WAYNE PLAZA,
JOSELITO REYES, ROLANDO REYES, AILEEN SAPINA,
RAMIL TAMAYO, PHILLIPS TAN, ANDREW UY, WILLIAM
VELASCO, EMILIO VELEZ, NOEMI YUPANO, MARY JANE
ONG, RICHARD RAMIREZ, CHERYLE MARIE ALFONSO,
LYNDON BAUTISTA, MANUEL CABOCAN AND NEDY
LAZO,respondents-in-intervention,

NAGKAISANG MARALITA NG TAÑONG ASSOCIATION,

INC.,respondents-in-intervention,

[G.R. No. 155661. January 21, 2004.]

CEFERINO C. LOPEZ, RAMON M. SALES, ALFREDO B.

VALENCIA, MA. TERESA V. GAERLAN, LEONARDO DE LA
ROSA, DINA C. DE LEON, VIRGIE CATAMIN, RONALD
SCHLOBOM, ANGELITO SANTOS, MA. LUISA M. PALCON and
SAMAHANG MANGGAGAWA SA PALIPARAN NG PILIPINAS
(SMPP),petitioners,vs. PHILIPPINE INTERNATIONAL AIR
TERMINALS CO.,INC.,MANILA INTERNATIONAL AIRPORT
AUTHORITY, DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS, SECRETARY LEANDRO M. MENDOZA, in
 his capacity as Head of the Department of Transportation and
Communications, respondents,

FLORESTE ALCONIS, GINA ALNAS, REY AMPOLOQUIO,

ROSEMARIE ANG, EUGENE ARADA, NENETTE BARREIRO,
NOEL BARTOLOME, ALDRIN BASTADOR, ROLETTE DIVINE
BERNARDO, MINETTE BRAVO, KAREN BRECILLA, NIDA
CAILAO, ERWIN CALAR, MARIFEL CONSTANTINO, JANETTE
CORDERO, ARNOLD FELICITAS, MARISSA GAYAGOY, ALEX
GENERILLO, ELIZABETH GRAY, ZOILO HERICO,
JACQUELINE IGNACIO, THELMA INFANTE, JOEL JUMAO-AS,
MARIETTA LINCHOCO, ROLLY LORICO, FRANCIS AUGUSTO
MACATOL, MICHAEL MALIGAT, DENNIS MANALO, RAUL
MANGALIMAN, JOEL MANLANGIT, CHARLIE MENDOZA,
HAZNAH MENDOZA, NICHOLS MORALES, ALLEN OLAÑO,
CESAR ORTAL, MICHAEL ORTEGA, WAYNE PLAZA,
JOSELITO REYES, ROLANDO REYES, AILEEN SAPINA,
RAMIL TAMAYO, PHILLIPS TAN, ANDREW UY, WILLIAM
VELASCO, EMILIO VELEZ, NOEMI YUPANO, MARY JANE
ONG, RICHARD RAMIREZ, CHERYLE MARIE ALFONSO,
LYNDON BAUTISTA, MANUEL CABOCAN AND NEDY
LAZO,respondents-in-intervention,

NAGKAISANG MARALITA NG TAÑONG ASSOCIATION,

INC.,respondents-in-intervention.

RESOLUTION

PUNO, J :p

Before this Court are the separate Motions for Reconsideration filed by
respondent Philippine International Air Terminals Co.,Inc.
(PIATCO),respondents-intervenors Jacinto V. Paras, Rafael P. Nantes, Eduardo
C. Zialcita, Willie Buyson Villarama, Prospero C. Nograles, Prospero A. Pichay,
Jr.,Harlin Cast Abayon and Benasing O. Macaranbon, all members of the House
of Representatives (Respondent Congressmen), 1 respondents-intervenors who
are employees of PIATCO and other workers of the Ninoy Aquino International
Airport International Passenger Terminal III (NAIA IPT III) (PIATCO
Employees) 2 and respondents-intervenors Nagkaisang Maralita ng Tañong
Association, Inc.,(NMTAI) 3 of the Decision of this Court dated May 5, 2003
declaring the contracts for the NAIA IPT III project null and void.
EICDSA

Briefly, the proceedings. On October 5, 1994, Asia's Emerging Dragon Corp.

(AEDC) submitted an unsolicited proposal to the Philippine Government through
the Department of Transportation and Communication (DOTC) and Manila
International Airport Authority (MIAA) for the construction and development of the
NAIA IPT III under a build-operate-and-transfer arrangement pursuant to R.A.
No. 6957, as amended by R.A. No. 7718 (BOT Law). 4 In accordance with
the BOT Law and its Implementing Rules and Regulations (Implementing Rules),
the DOTC/MIAA invited the public for submission of competitive and comparative
proposals to the unsolicited proposal of AEDC. On September 20, 1996 a
consortium composed of the 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 Prequalification Bids and Awards Committee (PBAC).
After finding that the Paircargo Consortium submitted a bid superior to the
unsolicited proposal of AEDC and after failure by AEDC to match the said bid,
the DOTC issued the notice of award for the NAIA IPT III project to the Paircargo
Consortium, which later organized into herein respondent PIATCO. Hence, 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).On
November 26, 1998, the 1997 Concession Agreement was superseded by the
Amended and Restated Concession Agreement (ARCA) containing certain
revisions and modifications from the original contract. A series of supplemental
agreements was also entered into by the Government and PIATCO. 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 1997 Concession Agreement, ARCA and the Supplements
collectively referred to as the PIATCO Contracts).
On September 17, 2002, various petitions were filed before this Court to annul
the 1997 Concession Agreement, the ARCA and the Supplements and to prohibit
the public respondents DOTC and MIAA from implementing them.
In a decision dated May 5, 2003, this Court granted the said petitions and
declared the 1997 Concession Agreement, the ARCA and the Supplements null
and void.
Respondent PIATCO, respondent-Congressmen and respondents-intervenors
now seek the reversal of the May 5, 2003 decision and pray that the petitions be
dismissed. In the alternative, PIATCO prays that the Court should not strike down
the entire 1997 Concession Agreement, the ARCA and its supplements in light of
their separability clause. Respondent-Congressmen and NMTAI also pray that in
the alternative, the cases at bar should be referred to arbitration pursuant to the
provisions of the ARCA. PIATCO-Employees pray that the petitions be dismissed
and remanded to the trial courts for trial on the merits or in the alternative that the
1997 Concession Agreement, the ARCA and the Supplements be declared valid
and binding.
I
Procedural Matters
a. Lack of Jurisdiction
Private respondents and respondents-intervenors reiterate a number of
procedural issues which they insist deprived this Court of jurisdiction to hear and
decide the instant cases on its merits. They continue to claim that the cases at
bar raise factual questions which this Court is ill-equipped to resolve, hence, they
must be remanded to the trial court for reception of evidence. Further, they allege
that although designated as petitions for certiorari and prohibition, the cases at
bar are actually actions for nullity of contracts over which the trial courts have
exclusive jurisdiction. Even assuming that the cases at bar are special civil
actions for certiorari and prohibition, they contend that the principle of hierarchy
of courts precludes this Court from taking primary jurisdiction over them.

We are not persuaded.

There is a question of fact when doubt or difference arises as to the truth or
falsity of the facts alleged. 5 Even a cursory reading of the cases at bar will show
that the Court decided them by interpreting and applying the Constitution,
the BOT Law, its Implementing Rules and other relevant legal principles on the
basis of clearly undisputed facts.All the operative facts were settled, hence, there
is no need for a trial type determination of their truth or falsity by a trial court.
We reject the unyielding insistence of PIATCO Employees that the following
factual issues are critical and beyond the capability of this Court to resolve, viz:
(a) whether the National Economic Development Authority - Investment
Coordinating Committee (NEDA-ICC) approved the Supplements; (b) whether
the First Supplement created ten (10) new financial obligations on the part of the
government; and (c) whether the 1997 Concession Agreement departed from the
draft Concession Agreement contained in the Bid Documents. 6 CAcEaS

The factual issue of whether the NEDA-ICC approved the Supplements is hardly
relevant. It is clear in our Decision that the PIATCO contracts were invalidated on
other and more substantial grounds. It did not rely on the presence or absence of
NEDA-ICC approval of the Supplements. On the other hand, the last two issues
do not involve disputed facts. Rather, they involve contractual provisions which
are clear and categorical and need only to be interpreted.The interpretation of
contracts and the determination of whether their provisions violate our laws or
contravene any public policy is a legal issue which this Court may properly pass
upon.
Respondents' corollary contention that this Court violated the hierarchy of
courts when it entertained the cases at bar must also fail. The rule on hierarchy
of courts in cases falling within the concurrent jurisdiction of the trial courts and
appellate courts generally applies to cases involving warring factual allegations.
For this reason, litigants are required to repair to the trial courts at the first
instance to determine the truth or falsity of these contending allegations on the
basis of the evidence of the parties. Cases which depend on disputed facts for
decision cannot be brought immediately before appellate courts as they are not
triers of facts.
It goes without saying that when cases brought before the appellate courts do not
involve factual but legal questions, a strict application of the rule of hierarchy of
courts is not necessary. As the cases at bar merely concern the construction of
the Constitution, the interpretation of the BOT Law and its Implementing Rules
and Regulations on undisputed contractual provisions and government actions,
and as the cases concern public interest,this Court resolved to take primary
jurisdiction over them. This choice of action follows the consistent stance of this
Court to settle any controversy with a high public interest component in a single
proceeding and to leave no root or branch that could bear the seeds of future
litigation. The suggested remand of the cases at bar to the trial court will stray
away from this policy. 7
b. Legal Standing
Respondent PIATCO stands pat with its argument that petitioners lack legal
personality to file the cases at bar as they are not real parties in interest who are
bound principally or subsidiarily to the PIATCO Contracts. Further, respondent
PIATCO contends that petitioners failed to show any legally demandable or
enforceable right to justify their standing to file the cases at bar.
These arguments are not difficult to deflect. The determination of whether a
person may institute an action or become a party to a suit brings to fore the
concepts of real party in interest, capacity to sue and standing to sue. To the
legally discerning, these three concepts are different although commonly directed
towards ensuring that only certain parties can maintain an action. 8 As defined in
the Rules of Court, a real party in interest is the party who stands to be benefited
or injured by the judgment in the suit or the party entitled to the avails of the
suit. 9 Capacity to sue deals with a situation where a person who may have a
cause of action is disqualified from bringing a suit under applicable law or is
incompetent to bring a suit or is under some legal disability that would prevent
him from maintaining an action unless represented by a guardian ad litem. Legal
standing is relevant in the realm of public law. In certain instances, courts have
allowed private parties to institute actions challenging the validity of
governmental action for violation of private rights or constitutional principles. 10 In
these cases, courts apply the doctrine of legal standing by determining whether
the party has a direct and personal interest in the controversy and whether such
party has sustained or is in imminent danger of sustaining an injury as a result of
the act complained of, a standard which is distinct from the concept of real party
in interest. 11 Measured by this yardstick, the application of the doctrine on legal
standing necessarily involves a preliminary consideration of the merits of the
case and is not purely a procedural issue. 12
Considering the nature of the controversy and the issues raised in the cases at
bar, this Court affirms its ruling that the petitioners have the requisite legal
standing. The petitioners in G.R. Nos. 155001 and 155661 are employees of
service providers operating at the existing international airports and employees of
MIAA while petitioners-intervenors are service providers with existing contracts
with MIAA and they will all sustain direct injury upon the implementation of the
PIATCO Contracts. The 1997 Concession Agreement and the ARCA both
provide that upon the commencement of operations at the NAIA IPT III, NAIA
Passenger Terminals I and II will cease to be used as international passenger
terminals. 13 Further, the ARCA provides: cSCADE

(d) For the purpose of an orderly transition, MIAA shall not renew any
expired concession agreement relative to any service or operation
currently being undertaken at the Ninoy Aquino International Airport
Passenger Terminal I, or extend any concession agreement which may
expire subsequent hereto, except to the extent that the continuation of
the existing services and operations shall lapse on or before the In-
Service Date. 14
Beyond iota of doubt, the implementation of the PIATCO Contracts, which the
petitioners and petitioners-intervenors denounce as unconstitutional and illegal,
would deprive them of their sources of livelihood. Under settled jurisprudence,
one's employment, profession, trade, or calling is a property right and is
protected from wrongful interference. 15 It is also self evident that the petitioning
service providers stand in imminent danger of losing legitimate business
investments in the event the PIATCO Contracts are upheld.
Over and above all these, constitutional and other legal issues with far-reaching
economic and social implications are embedded in the cases at bar, hence, this
Court liberally granted legal standing to the petitioning members of the House of
Representatives. First, at stake is the build-operate-and-transfer contract of the
country's premier international airport with a projected capacity of 10 million
passengers a year. Second, the huge amount of investment to complete the
project is estimated to be P13,000,000,000.00. Third, the primary issues posed in
the cases at bar demand a discussion and interpretation of the Constitution,
the BOT Law and its implementing rules which have not been passed upon by
this Court in previous cases. They can chart the future inflow of investment under
the BOT Law.
Before writing finis to the issue of legal standing, the Court notes the bid of new
parties to participate in the cases at bar as respondents-intervenors, namely, (1)
the PIATCO Employees and (2) NMTAI (collectively, the New Respondents-
Intervenors). After the Court's Decision, the New Respondents- Intervenors filed
separate Motions for Reconsideration-In-Intervention alleging prejudice and
direct injury. PIATCO employees claim that "they have a direct and personal
interest [in the controversy] . . . since they stand to lose their jobs should the
government's contract with PIATCO be declared null and void." 16 NMTAI, on the
other hand, represents itself as a corporation composed of responsible tax-
paying Filipino citizens with the objective of "protecting and sustaining the rights
of its members to civil liberties, decent livelihood, opportunities for social
advancement, and to a good, conscientious and honest government." 17
The Rules of Court govern the time of filing a Motion to Intervene. Section 2,
Rule 19 provides that a Motion to Intervene should be filed "before rendition of
judgment ..." The New Respondents-Intervenors filed their separate motions after
a decision has been promulgated in the present cases. They have not offered
any worthy explanation to justify their late intervention. Consequently, their
Motions for Reconsideration-In-Intervention are denied for the rules cannot be
relaxed to await litigants who sleep on their rights. In any event, a sideglance at
these late motions will show that they hoist no novel arguments.
c. Failure to Implead an Indispensable Party
PIATCO next contends that petitioners should have impleaded the Republic of
the Philippines as an indispensable party. It alleges that petitioners sued the
DOTC, MIAA and the DPWH in their own capacities or as implementors of the
PIATCO Contracts and not as a contract party or as representatives of the
Government of the Republic of the Philippines. It then leapfrogs to the conclusion
that the "absence of an indispensable party renders ineffectual all the
proceedings subsequent to the filing of the complaint including the judgment." 18

PIATCO's allegations are inaccurate. The petitions clearly bear out that public
respondents DOTC and MIAA were impleaded as parties to the PIATCO
Contracts and not merely as their implementors. The separate petitions filed by
the MIAA employees 19 and members of the House of Representatives 20 alleged
that "public respondents are impleaded herein because they either executed the
PIATCO Contracts or are undertaking acts which are related to the PIATCO
Contracts. They are interested and indispensable parties to this
Petition." 21 Thus, public respondents DOTC and MIAA were impleaded as
parties to the case for having executed the contracts.
More importantly, it is also too late in the day for PIATCO to raise this issue. If
PIATCO seriously views the non-inclusion of the Republic of the Philippines as
an indispensable party as fatal to the petitions at bar, it should have raised the
issue at the onset of the proceedings as a ground to dismiss. PIATCO cannot
litigate issues on a piecemeal basis, otherwise, litigations shall be like a shore
that knows no end. In any event, the Solicitor General, the legal counsel of the
Republic, appeared in the cases at bar in representation of the interest of the
government.
II
Pre-qualification of PIATCO
The Implementing Rules provide for the unyielding standards the PBAC should
apply to determine the financial capability of a bidder for pre- qualification
purposes: (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. 22 The evident intent of these standards is to
protect the integrity and insure the viability of the project by seeing to it that the
proponent has the financial capability to carry it out. As a further measure to
achieve this intent, it maintains a certain debt-to-equity ratio for the project.
At the pre-qualification stage, it is most important for a bidder to show that it has
the financial capacity to undertake the project by proving that it can fulfill the
requirement on minimum amount of equity. For this purpose, the Bid Documents
require in no uncertain terms:
The minimum amount of equity to which the proponent's financial
capability will be based shall be thirty percent (30%) of the project cost
instead of the twenty percent (20%) specified in Section 3.6.4 of the Bid
Documents.This is to correlate with the 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 actual
project cost. 23
In relation thereto, section 2.01(a) of the ARCA provides:
Section 2.01 Project Scope.
The scope of the project shall include:
(a) Financing the project at an actual Project cost of not less than Three
Hundred Fifty Million United States Dollars (US$350,000,000.00)
 while maintaining a debt-to-equity ratio of 70:30, provided that if
the actual Project costs should exceed the aforesaid amount,
Concessionaire shall ensure that the debt-to-equity ratio is
maintained; 24
Under the debt-to-equity restriction, a bidder may only seek financing of the NAIA
IPT III Project up to 70% of the project cost. Thirty percent (30%) of the cost must
come in the form of equity or investment by the bidder itself. It cannot be overly
emphasized that the rules require a minimum amount of equity to ensure that a
bidder is not merely an operator or implementor of the project but an investor
with a substantial interest in its success.The minimum equity requirement also
guarantees the Philippine government and the general public, who are the
ultimate beneficiaries of the project, that a bidder will not be indifferent to the
completion of the project. The discontinuance of the project will irreparably
damage public interest more than private interest. cICHTD

In the cases at bar, after applying the investment ceilings provided under the
General Banking Act and considering the maximum amounts that each member
of the consortium may validly invest in the project, it is daylight clear that the
Paircargo Consortium, at the time of pre-qualification, had a net worth equivalent
to only 6.08% of the total estimated project cost. 25 By any reckoning, a showing
by a bidder that at the time of pre-qualification its maximum funds available for
investment amount to only 6.08% of the project cost is insufficient to satisfy the
requirement prescribed by the Implementing Rules that the project proponent
must have the ability to provide at least 30% of the total estimated project cost. In
peso and centavo terms, at the time of pre-qualification, the Paircargo
Consortium had maximum funds available for investment to the NAIA IPT III
Project only in the amount of P558,384,871.55, when it had to show that it had
the ability to provide at least P2,755,095,000.00. The huge disparity cannot be
dismissed as of de minimis importance considering the high public interest at
stake in the project.
PIATCO nimbly tries to sidestep its failure by alleging that it submitted not only
audited financial statements but also testimonial letters from reputable banks
attesting to the good financial standing of the Paircargo Consortium. It contends
that in adjudging whether the Paircargo Consortium is a pre-qualified bidder, the
PBAC should have considered not only its financial statements but other factors
showing its financial capability.
Anent this argument, the guidelines provided in the Bid Documents are
instructive:
3.3.4 FINANCING AND FINANCIAL PREQUALIFICATIONS
REQUIREMENTS
• Minimum Amount of Equity
 Each member of the proponent entity is to provide evidence of
networth in cash and assets representing the proportionate share in the
proponent entity. Audited financial statements for the past five (5) years
as a company for each member are to be provided.
• Project Loan Financing SECcAI

Testimonial letters from reputable banks attesting that each of the

members of the ownership entity are banking with them, in good
financial standing and having adequate resources are to be provided. 26
It is beyond refutation that Paircargo Consortium failed to prove its ability to
provide the amount of at least P2,755,095,000.00, or 30% of the estimated
project cost.Its submission of testimonial letters attesting to its good financial
standing will not cure this failure. At best, the said letters merely establish its
credit worthiness or its ability to obtain loans to finance the project. They do not,
however, prove compliance with the aforesaid requirement of minimum amount
of equity in relation to the prescribed debt-to-equity ratio. This equity cannot be
satisfied through possible loans.
In sum, we again hold that given the glaring gap between the net worth of
Paircargo and PAGS combined with the amount of maximum funds that Security
Bank may invest by equity in a non-allied undertaking, Paircargo Consortium, at
the time of pre-qualification, failed to show that it had the ability to provide 30% of
the project cost and necessarily, its financial capability for the project cannot
pass muster.
III
1997 Concession Agreement
Again, we brightline the principle that in public bidding, bids are submitted in
accord with the prescribed terms, conditions and parameters laid down by
government and pursuant to the requirements of the project bidded upon. In light
of these parameters, bidders formulate competing proposals which are evaluated
to determine the bid most favorable to the government. Once the contract based
on the bid most favorable to the government is awarded, all that is left to be done
by the parties is to execute the necessary agreements and implement them.
There can be no substantial or material change to the parameters of the project,
including the essential terms and conditions of the contract bidded upon, after the
contract award. If there were changes and the contracts end up unfavorable to
government, the public bidding becomes a mockery and the modified contracts
must be struck down.
Respondents insist that there were no substantial or material amendments in the
1997 Concession Agreement as to the technical aspects of the project,
i.e.,engineering design, technical soundness, operational and maintenance
methods and procedures of the project or the technical proposal of PIATCO.
Further, they maintain that there was no modification of the financial features of
the project, i.e.,minimum project cost, debt-to-equity ratio, the operations and
maintenance budget, the schedule and amount of annual guaranteed payments,
or the financial proposal of PIATCO. A discussion of some of these changes to
determine whether they altered the terms and conditions upon which the bids
were made is again in order.
a. Modification on Fees and Charges to be collected by PIATCO
PIATCO clings to the contention that the removal of the groundhandling fees,
airline office rentals and porterage fees from the category of fees subject to MIAA
regulation in the 1997 Concession Agreement does not constitute a substantial
amendment as these fees are not really public utility fees. In other words,
PIATCO justifies the re-classification under the 1997 Concession Agreement on
the ground that these fees are non-public utility revenues.
We disagree. The removal of groundhandling fees, airline office rentals and
porterage fees from the category of "Public Utility Revenues" under the draft
Concession Agreement and its re-classification to "Non-Public Utility Revenues"
under the 1997 Concession Agreement is significant and has far reaching
consequence. The 1997 Concession Agreement provides that with respect to
Non-Public Utility Revenues, which include groundhandling fees, airline office
rentals and porterage fees, 27 "[PIATCO] may make any adjustments it deems
appropriate without need for the consent of GRP or any government
agency." 28 In contrast, the draft Concession Agreement specifies these fees as
part of Public Utility Revenues and can be adjusted "only once every two
years and in accordance with the Parametric Formula" and "the adjustments
shall be made effective only after the written express approval of the
MIAA." 29 The Bid Documents themselves clearly provide:

4.2.3 Mechanism for Adjustment of Fees and Charges

4.2.3.1 Periodic Adjustment in Fees and Charges
Adjustments in the fees and charges enumerated hereunder, whether or
not falling within the purview of public utility revenues,shall be allowed
only once every two years in accordance with the parametric formula
attached hereto as Annex 4.2f. Provided that the adjustments shall be
made effective only after the written express approval of MIAA.
Provided, further, that MIAA's approval, shall be contingent only on
conformity of the adjustments to the said parametric formula. ..
The fees and charges to be regulated in the above manner shall consist
of the following:
xxx xxx xxx
 (c) groundhandling fees;
(d) rentals on airline offices;
xxx xxx xxx
(f) porterage fees; DHSACT

xxx xxx xxx 30

The plain purpose in re-classifying groundhandling fees, airline office rentals and
porterage fees as non-public utility fees is to remove them from regulation by the
MIAA.In excluding these fees from government regulation, the danger to public
interest cannot be downplayed.
We are not impressed by the effort of PIATCO to depress this prejudice to public
interest by its contention that in the 1997 Concession Agreement governing Non-
Public Utility Revenues, it is provided that "[PIATCO] 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." 31 PIATCO then peddles the proposition that the said provision confers
upon MIAA " full regulatory powersto ensure that PIATCO is charging non-public
utility revenues at judicious rates." 32 To the trained eye, the argument will not fly
for it is obviously non sequitur.Fairly read, it is PIATCO that wields the power to
determine the judiciousness of the said fees and charges. In the draft
Concession Agreement the power was expressly lodged with the MIAA and any
adjustment can only be done once every two years. The changes are not
insignificant specks as interpreted by PIATCO. CSaHDT

PIATCO further argues that there is no substantial change in the 1997

Concession Agreement with respect to fees and charges PIATCO is allowed to
impose which are not covered by Administrative Order No. 1, Series of
1993 33 as the "relevant provision of the 1997 Concession Agreement is
practically identical with the draft Concession Agreement." 34
We are not persuaded. Under the draft Concession Agreement, PIATCO
may impose fees and charges other than those fees and charges previously
imposed or collected at the Ninoy Aquino International Airport Passenger
Terminal I, subject to the written approval of MIAA. 35 Further, the draft
Concession Agreement provides that MIAA reserves the right to regulate these
new fees and charges if in its judgment the users of the airport shall be deprived
of a free option for the services they cover. 36 In contrast, under the 1997
Concession Agreement, the MIAA merely retained the right to approve any
imposition of new fees and charges which were not previously collected at the
Ninoy Aquino International Airport Passenger Terminal I. The agreement did not
contain an equivalent provision allowing MIAA to reserve the right to regulate the
adjustments of these new fees and charges. 37 PIATCO justifies the amendment
by arguing that MIAA can establish terms before approval of new fees and
charges, inclusive of the mode for their adjustment.
PIATCO's stance is again a strained one. There would have been no need for an
amendment if there were no change in the power to regulate on the part of MIAA.
The deletion of MIAA’s reservation of its right to regulate the price adjustments of
new fees and charges can have no other purpose but to dilute the extent of
MIAA’s regulation in the collection of these fees. Again, the amendment
diminished the authority of MIAA to protect the public interest in case of abuse by
PIATCO.
b. Assumption by the Government of the liabilities
of PIATCO in the event of the latter's default
PIATCO posits the thesis that the new provisions in the 1997 Concession
Agreement in case of default by PIATCO on its loans were merely meant to
prescribe and limit the rights of PIATCO’s creditors with regard to the NAIA
Terminal III. PIATCO alleges that Section 4.04 of the 1997 Concession
Agreement simply provides that PIATCO’s creditors have no right to foreclose
the NAIA Terminal III.
We cannot concur. The pertinent provisions of the 1997 Concession Agreement
state:
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.
A plain reading of the above provision shows that it spells out in limpid language
the obligation of government in case of default by PIATCO on its loans. There
can be no blinking from the fact that in case of PIATCO’s default, the government
will assume PIATCO’s Attendant Liabilities as defined in the 1997 Concession
Agreement. 38This obligation is not found in the draft Concession Agreement and
the change runs roughshod to the spirit and policy of the BOT Law which was
crafted precisely to prevent government from incurring financial risk.
In any event, PIATCO pleads that the entire agreement should not be struck
down as the 1997 Concession Agreement contains a separability clause.
The plea is bereft of merit. The contracts at bar which made a mockery of the
bidding process cannot be upheld and must be annulled in their entirety for
violating law and public policy. As demonstrated, the contracts were substantially
amended after their award to the successful bidder on terms more beneficial to
PIATCO and prejudicial to public interest. If this flawed process would be
allowed, public bidding will cease to be competitive and worse, government
would not be favored with the best bid. Bidders will no longer bid on the basis of
the prescribed terms and conditions in the bid documents but will formulate their
bid in anticipation of the execution of a future contract containing new and better
terms and conditions that were not previously available at the time of the bidding.
Such a public bidding will not inure to the public good. The resulting contracts
cannot be given half a life but must be struck down as totally lawless.
IV.
Direct Government Guarantee
The respondents further contend that the PIATCO Contracts do not contain direct
government guarantee provisions. They assert that section 4.04 of the ARCA,
which superseded sections 4.04(b) and (c),Article IV of the 1997 Concession
Agreement, is but a "clarification and explanation" 39 of the securities allowed in
the bid documents. They allege that these provisions merely provide for
"compensation to PIATCO" 40 in case of a government buy-out or takeover of
NAIA IPT III. The respondents, particularly respondent PIATCO, also maintain
that the guarantee contained in the contracts, if any, is an indirect guarantee
allowed under the BOT Law, as amended. 41
We do not agree. Section 4.04(c), Article IV 42 of the ARCA should be read in
conjunction with section 1.06, Article I, 43 in the same manner that sections
4.04(b) and (c), Article IV of the 1997 Concession Agreement should be related
to Article 1.06 of the same contract. Section 1.06, Article I of the ARCA and its
counterpart provision in the 1997 Concession Agreement define in no uncertain
terms the meaning of "attendant liabilities." They tell us of the amounts that the
Government has to pay in the event respondent PIATCO defaults in its loan
payments to its Senior Lenders and no qualified transferee or nominee is chosen
by the Senior Lenders or is willing to take over from respondent PIATCO.
A reasonable reading of all these relevant provisions would reveal that the ARCA
made the Government liable to pay "all amounts ...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]." 44 These amounts include "without limitation, all principal, interest,
associated fees, charges, reimbursements, and other related
expenses ...whether payable at maturity, by acceleration or otherwise." 45 They
further include amounts owed by respondent PIATCO to its "professional
consultants and advisers, suppliers, contractors and sub-contractors" as well as
"fees, charges and expenses of any agents or trustees" of the Senior Lenders or
any other persons or entities who have provided loans or financial facilities to
respondent PIATCO in relation to NAIA IPT III. 46 The counterpart provision in the
1997 Concession Agreement specifying the attendant liabilities that the
Government would be obligated to pay should PIATCO default in its loan
obligations is equally onerous to the Government as those contained in the
ARCA. According to the 1997 Concession Agreement, in the event the
Government is forced to prematurely take over NAIA IPT III as a result of
respondent PIATCO’s default in the payment of its loan obligations to its Senior
Lenders, it would be liable to pay the following amounts as "attendant
liabilities":
DTAESI

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. 47
These provisions reject respondents’ contention that what the Government is
obligated to pay, in the event that respondent PIATCO defaults in the payment of
its loans, is merely termination payment or just compensation for its takeover of
NAIA IPT III. It is clear from said section 1.06 that what the Government would
pay is the sum total of all the debts, including all interest, fees and charges,that
respondent PIATCO incurred in pursuance of the NAIA IPT III Project. This
reading is consistent with section 4.04 of the ARCA itself which states that the
Government "shall make a termination payment to Concessionaire [PIATCO]
equal to the Appraised Value (as hereinafter defined) of the Development Facility
[NAIA Terminal III] or the sum of the Attendant Liabilities, if greater." For sure,
respondent PIATCO will not receive any amount less than sufficient to cover its
debts, regardless of whether or not the value of NAIA IPT III, at the time of its
turn over to the Government, may actually be less than the amount of PIATCO’s
debts. The scheme is a form of direct government guarantee for it is undeniable
that it leaves the government no option but to pay the "attendant liabilities" in the
event that the Senior Lenders are unable or unwilling to appoint a qualified
nominee or transferee as a result of PIATCO’s default in the payment of its
Senior Loans. As we stressed in our Decision, this Court cannot depart from the
legal maxim that "those that cannot be done directly cannot be done indirectly."
This is not to hold, however, that indirect government guarantee is not allowed
under the BOT Law, as amended. The intention to permit indirect government
guarantee is evident from the Senate deliberations on the amendments to
the BOT Law. The idea is to allow for reasonable government undertakings, such
as to authorize the project proponent to undertake related ventures within the
project area, in order to encourage private sector participation in development
projects. 48 An example cited by then Senator Gloria Macapagal-Arroyo, one of
the sponsors of R.A. No. 7718, is the Mandaluyong public market which was built
under the Build-and-Transfer ("BT") scheme wherein instead of the government
paying for the transfer, the project proponent was allowed to operate the upper
floors of the structure as a commercial mall in order to recoup their
investments. 49 It was repeatedly stressed in the deliberations that in allowing
indirect government guarantee, the law seeks to encourage both the government
and the private sector to formulate reasonable and innovative government
undertakings in pursuance of BOT projects. In no way, however, can the
government be made liable for the debts of the project proponent as this would
be tantamount to a direct government guarantee which is prohibited by the law.
Such liability would defeat the very purpose of the BOT Law which is to
encourage the use of private sector resources in the construction, maintenance
and/or operation of development projects with no, or at least minimal, capital
outlay on the part of the government.
The respondents again urge that should this Court affirm its ruling that the
PIATCO Contracts contain direct government guarantee provisions, the whole
contract should not be nullified. They rely on the separability clause in the
PIATCO Contracts.
We are not persuaded.
The BOT Law and its implementing rules provide that there are three (3)
essential requisites for an unsolicited proposal to be accepted: (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. 50 The
failure to fulfill any of the requisites will result in the denial of the proposal.
Indeed, it is further provided that a direct government guarantee, subsidy or
equity provision will "necessarily disqualify a proposal from being treated and
accepted as an unsolicited proposal." 51 In fine, the mere inclusion of a direct
government guarantee in an unsolicited proposal is fatal to the proposal. There is
more reason to invalidate a contract if a direct government guarantee provision is
inserted later in the contract via a backdoor amendment. Such an amendment
constitutes a crass circumvention of the BOT Law and renders the entire contract
void.
Respondent PIATCO likewise claims that in view of the fact that other BOT
contracts such as the JANCOM contract, the Manila Water contract and the MRT
contract had been considered valid, the PIATCO contracts should be held valid
as well. 52 There is no parity in the cited cases. For instance, a reading
of Metropolitan Manila Development Authority v. JANCOM Environmental
Corporation 53 will show that its issue is different from the issues in the cases at
bar. In the JANCOM case, the main issue is whether there is a perfected contract
between JANCOM and the Government. The resolution of the issue hinged on
the following: (1) whether the conditions precedent to the perfection of the
contract were complied with; (2) whether there is a valid notice of award; and (3)
whether the signature of the Secretary of the Department of Environment and
Natural Resources is sufficient to bind the Government. These issue and sub-
issues are clearly distinguishable and different. For one, the issue of direct
government guarantee was not considered by this Court when it held the
JANCOM contract valid, yet, it is a key reason for invalidating the PIATCO
Contracts. It is a basic principle in law that cases with dissimilar facts cannot
have similar disposition.
This Court, however, is not unmindful of the reality that the structures comprising
the NAIA IPT III facility are almost complete and that funds have been spent by
PIATCO in their construction. For the government to take over the said facility, it
has to compensate respondent PIATCO as builder of the said structures. The
compensation must be just and in accordance with law and equity for the
government can not unjustly enrich itself at the expense of PIATCO and its
investors.
II.
Temporary takeover of business affected with public
interest in times of national emergency
Section 17, Article XII of the 1987 Constitution grants the State in times of
national emergency the right to temporarily take over the operation of any
business affected with public interest. This right is an exercise of police power
which is one of the inherent powers of the State.
Police power has been defined as the "state authority to enact legislation that
may interfere with personal liberty or property in order to promote the general
welfare."54 It consists of two essential elements. First, it is an imposition of
restraint upon liberty or property. Second, the power is exercised for the benefit
of the common good. Its definition in elastic terms underscores its all-
encompassing and comprehensive embrace. 55 It is and still is the "most
essential, insistent, and illimitable" 56 of the State's powers. It is familiar
knowledge that unlike the power of eminent domain, police power is exercised
without provision for just compensation for its paramount consideration is public
welfare. 57IaDTES

It is also settled that public interest on the occasion of a national emergency is

the primary consideration when the government decides to temporarily take over
or direct the operation of a public utility or a business affected with public interest.
The nature and extent of the emergency is the measure of the duration of the
takeover as well as the terms thereof. It is the State that prescribes such
reasonable terms which will guide the implementation of the temporary takeover
as dictated by the exigencies of the time. As we ruled in our Decision, this power
of the State can not be negated by any party nor should its exercise be a source
of obligation for the State.
Section 5.10(c),Article V of the ARCA provides that respondent PIATCO "shall be
entitled to reasonable compensation for the duration of the temporary takeover
by GRP, which compensation shall take into account the reasonable cost for the
use of the Terminal and/or Terminal Complex." 58 It clearly obligates the
government in the exercise of its police power to compensate respondent
PIATCO and this obligation is offensive to the Constitution. Police power can not
be diminished, let alone defeated by any contract for its paramount consideration
is public welfare and interest. 59
Again, respondent PIATCO's reliance on the case of Heirs of Suguitan v. City of
Mandaluyong 60 to justify its claim for reasonable compensation for the
Government's temporary takeover of NAIA IPT III in times of national emergency
is erroneous. What was involved in Heirs of Suguitan is the exercise of the state's
power of eminent domain and not of police power, hence, just compensation was
awarded. The cases at bar will not involve the exercise of the power of eminent
domain.
III.
Monopoly
Section 19, Article XII of the 1987 Constitution mandates that the State prohibit
or regulate monopolies when public interest so requires. Monopolies are not per
seprohibited. Given its susceptibility to abuse, however, the State has the
bounden duty to regulate monopolies to protect public interest. Such regulation
may be called for, especially in sensitive areas such as the operation of the
country's premier international airport, considering the public interest at stake.

By virtue of the PIATCO contracts, NAIA IPT III would be the only international
passenger airport operating in the Island of Luzon, with the exception of those
already operating in Subic Bay Freeport Special Economic Zone
("SBFSEZ"),Clark Special Economic Zone ("CSEZ") and in Laoag City.
Undeniably, the contracts would create a monopoly in the operation of an
international commercial passenger airport at the NAIA in favor of PIATCO.
The grant to respondent PIATCO of the exclusive right to operate NAIA IPT III
should not exempt it from regulation by the government. The government has the
right, indeed the duty, to protect the interest of the public. Part of this duty is to
assure that respondent PIATCO’s exercise of its right does not violate the legal
rights of third parties. We reiterate our ruling that while the service providers
presently operating at NAIA Terminals I and II do not have the right to demand
for the renewal or extension of their contracts to continue their services in NAIA
IPT III, those who have subsisting contracts beyond the In-Service Date of NAIA
IPT III can not be arbitrarily or unreasonably treated.
Finally, the Respondent Congressmen assert that at least two (2) committee
reports by the House of Representatives found the PIATCO contracts valid and
contend that this Court, by taking cognizance of the cases at bar, reviewed an
action of a co-equal body. 61 They insist that the Court must respect the findings
of the said committees of the House of Representatives. 62 With due respect, we
cannot subscribe to their submission. There is a fundamental difference between
a case in court and an investigation of a congressional committee. The purpose
of a judicial proceeding is to settle the dispute in controversy by adjudicating the
legal rights and obligations of the parties to the case. On the other hand, a
congressional investigation is conducted in aid of legislation. 63 Its aim is to assist
and recommend to the legislature a possible action that the body may take with
regard to a particular issue, specifically as to whether or not to enact a new law
or amend an existing one. Consequently, this Court cannot treat the findings in a
congressional committee report as binding because the facts elicited in
congressional hearings are not subject to the rigors of the Rules of Court on
admissibility of evidence. The Court in assuming jurisdiction over the petitions at
bar simply performed its constitutional duty as the arbiter of legal disputes
properly brought before it, especially in this instance when public interest
requires nothing less.
WHEREFORE, the motions for reconsideration filed by the respondent PIATCO,
respondent Congressmen and the respondents-in-intervention are DENIED with
finality.
SO ORDERED.
(Agan, Jr. v. Philippine International Air Terminals Co., Inc., G.R. No.
|||

155001, 155547, 155661 (Resolution), [January 21, 2004], 465 PHIL 545-
586)

7. Liga ng mga Barangay vs. Atienza, G.R. No. 154599

EN BANC

[G.R. No. 154599. January 21, 2004.]

THE LIGA NG MGA BARANGAY NATIONAL, petitioner, vs. THE

CITY MAYOR OF MANILA, HON. JOSE ATIENZA, JR., and THE
CITY COUNCIL OF MANILA,respondents.

DECISION

DAVIDE, JR., C.J : p

This petition for certiorari under Rule 65 of the Rules of Court seeks the
nullification of Manila City Ordinance No. 8039, Series of 2002, 1 and respondent
City Mayor's Executive Order No. 011, Series of 2002, 2 dated 15 August 2002,
for being patently contrary to law.
The antecedents are as follows:
Petitioner Liga ng mga Barangay National (Liga for brevity) is the national
organization of all the barangays in the Philippines, which pursuant to Section
492 of Republic Act No. 7160, otherwise known as The Local Government Code
of 1991, constitutes the duly elected presidents of highly-urbanized cities,
provincial chapters, the metropolitan Manila Chapter, and metropolitan political
subdivision chapters.
Section 493 of that law provides that "[t]he liga at the municipal, city, provincial,
metropolitan political subdivision, and national levels directly elect a president, a
vice-president, and five (5) members of the board of directors." All other matters
not provided for in the law affecting the internal organization of the leagues of
local government units shall be governed by their respective constitution and by-
laws, which must always conform to the provisions of the Constitution and
existing laws. 3
On 16 March 2000, the Liga adopted and ratified its own Constitution and By-
laws to govern its internal organization. 4 Section 1, third paragraph, Article XI of
said Constitution and By-Laws states:
All other election matters not covered in this Article shall be governed by
the "Liga Election Code" or such other rules as may be promulgated by
the National Liga Executive Board in conformity with the provisions of
existing laws.
By virtue of the above-cited provision, the Liga adopted and ratified its own
Election Code. 5 Section 1.2, Article I of the Liga Election Code states:
1.2 Liga ng mga Barangay Provincial, Metropolitan, HUC/ICC Chapters.
There shall be nationwide synchronized elections for the provincial,
metropolitan, and HUC/ICC chapters to be held on the third Monday of
the month immediately after the month when the synchronized elections
in paragraph 1.1 above was held. The incumbent Liga chapter president
concerned duly assisted by the proper government agency, office or
department, e.g. Provincial/City/NCR/Regional Director, shall convene
all the duly elected Component City/Municipal Chapter Presidents and
all the current elected Punong Barangays (for HUC/ICC) of the
respective chapters in any public place within its area of jurisdiction for
the purpose of reorganizing and electing the officers and directors of the
provincial, metropolitan or HUC/ICC Liga chapters. Said president duly
assisted by the government officer aforementioned, shall notify, in
writing, all the above concerned at least fifteen (15) days before the
scheduled election meeting on the exact date, time, place and
requirements of the said meeting.
The Liga thereafter came out with its Calendar of Activities and Guidelines in the
Implementation of the Liga Election Code of 2002, 6 setting on 21 October 2002
the synchronized elections for highly urbanized city chapters, such as the Liga
Chapter of Manila, together with independent component city, provincial, and
metropolitan chapters.
On 28 June 2002, respondent City Council of Manila enacted Ordinance No.
8039, Series of 2002, providing, among other things, for the election of
representatives of the District Chapters in the City Chapter of Manila and setting
the elections for both chapters thirty days after the barangay elections. Section
3(A) and (B) of the assailed ordinance read:
SEC. 3. Representation Chapters. — Every Barangay shall be
represented in the said Liga Chapters . . . by the Punong Barangay . . .
or, in his absence or incapacity, by the kagawad duly elected for the
purpose among its members. . . .
A. District Chapter
All elected Barangay Chairman in each District shall elect from
among themselves the President, Vice-President and five (5)
members of the Board. . . .
B. City Chapter
The District Chapter representatives shall automatically become
members of the Board and they shall elect from among
themselves a President, Vice-President, Secretary, Treasurer,
Auditor and create other positions as it may deem necessary for
the management of the chapter.
The assailed ordinance was later transmitted to respondent City Mayor Jose L.
Atienza, Jr., for his signature and approval.
On 16 July 2002, upon being informed that the ordinance had been forwarded to
the Office of the City Mayor, still unnumbered and yet to be officially released, the
Liga sent respondent Mayor of Manila a letter requesting him that said ordinance
be vetoed considering that it encroached upon, or even assumed, the functions
of the Liga through legislation, a function which was clearly beyond the ambit of
the powers of the City Council. 7
Respondent Mayor, however, signed and approved the assailed city ordinance
and issued on 15 August 2002 Executive Order No. 011, Series of 2002, to
implement the ordinance.
Hence, on 27 August 2002, the Liga filed the instant petition raising the following
issues:
I
WHETHER OR NOT THE RESPONDENT CITY COUNCIL OF MANILA
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF OR IN EXCESS OF JURISDICTION, WHEN IT ENACTED
CITY ORDINANCE NO. 8039 S. 2002 PURPOSELY TO GOVERN THE
ELECTIONS OF THE MANILA CHAPTER OF THE LIGA NG MGA
BARANGAYS AND WHICH PROVIDES A DIFFERENT MANNER OF
 ELECTING ITS OFFICERS, DESPITE THE FACT THAT SAID
CHAPTER'S ELECTIONS, AND THE ELECTIONS OF ALL OTHER
CHAPTERS OF THE LIGA NG MGA BARANGAYS FOR THAT
MATTER, ARE BY LAW MANDATED TO BE GOVERNED BY THE
LIGA CONSTITUTION AND BY-LAWS AND THE LIGA ELECTION
CODE.
II
WHETHER OR NOT THE RESPONDENT CITY MAYOR OF MANILA
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF OR IN EXCESS OF JURISDICTION WHEN HE ISSUED
EXECUTIVE ORDER NO. 011 TO IMPLEMENT THE QUESTIONED
CITY ORDINANCE NO. 8039 S. 2002.
In support of its petition, the Liga argues that City Ordinance No. 8039, Series of
2002, and Executive Order No. 011, Series of 2002, contradict the Liga Election
Code and are therefore invalid. There exists neither rhyme nor reason, not to
mention the absence of legal basis, for the Manila City Council to encroach upon,
or even assume, the functions of the Liga by prescribing, through legislation, the
manner of conducting the Liga elections other than what has been provided for
by the Liga Constitution and By-laws and the Liga Election Code. Accordingly,
the subject ordinance is an ultra vires act of the respondents and, as such,
should be declared null and void.
As for its prayer for the issuance of a temporary restraining order, the petitioner
cites as reason therefor the fact that under Section 5 of the assailed city
ordinance, the Manila District Chapter elections would be held thirty days after
the regular barangay elections. Hence, it argued that the issuance of a temporary
restraining order and/or preliminary injunction would be imperative to prevent the
implementation of the ordinance and executive order.
On 12 September 2002, Barangay Chairman Arnel Peña, in his capacity as a
member of the Liga ng mga Barangay in the City Chapter of Manila, filed a
Complaint in Intervention with Urgent Motion for the Issuance of Temporary
Restraining Order and/or Preliminary Injunction. 8 He supports the position of the
Liga and prays for the declaration of the questioned ordinance and executive
order, as well as the elections of the Liga ng mga Barangay pursuant thereto, to
be null and void. The assailed ordinance prescribing for an "indirect manner of
election" amended, in effect, the provisions of the Local Government Code of
1991, which provides for the election of the Liga officers at large. It also violated
and curtailed the rights of the petitioner and intervenor, as well as the other 896
Barangay Chairmen in the City of Manila, to vote and be voted upon in a direct
election.ETDAaC

On 25 October 2002, the Office of the Solicitor General (OSG) filed a

Manifestation in lieu of Comment. 9 It supports the petition of the Liga, arguing
that the assailed city ordinance and executive order are clearly inconsistent with
the express public policy enunciated in R.A. No. 7160. Local political subdivisions
are able to legislate only by virtue of a valid delegation of legislative power from
the national legislature. They are mere agents vested with what is called the
power of subordinate legislation. Thus, the enactments in question, which are
local in origin, cannot prevail against the decree, which has the force and effect
of law.
On the issue of non-observance by the petitioners of the hierarchy-of-courts rule,
the OSG posits that technical rules of procedure should be relaxed in the instant
petition. While Batas Pambansa Blg. 129, as amended, grants original
jurisdiction over cases of this nature to the Regional Trial Court (RTC), the
exigency of the present petition, however, calls for the relaxation of this rule.
Section 496 (should be Section 491) of the Local Government Code of
1991 primarily intended that the Liga ng mga Barangay determine the
representation of the Liga in the sanggunians for the immediate ventilation,
articulation, and crystallization of issues affecting barangay government
administration. Thus, the immediate resolution of this petition is a must.
On the other hand, the respondents defend the validity of the assailed ordinance
and executive order and pray for the dismissal of the present petition on the
following grounds: (1) certiorari under Rule 65 of the Rules of Court is unavailing;
(2) the petition should not be entertained by this Court in view of the pendency
before the Regional Trial Court of Manila of two actions or petitions questioning
the subject ordinance and executive order; (3) the petitioner is guilty of forum
shopping; and (4) the act sought to be enjoined is fait accompli.

The respondents maintain that certiorari is an extraordinary remedy available to

one aggrieved by the decision of a tribunal, officer, or board exercising judicial or
quasi-judicial functions. The City Council and City Mayor of Manila are not the
"board" and "officer" contemplated in Rule 65 of the Rules of Court because both
do not exercise judicial functions. The enactment of the subject ordinance and
issuance of the questioned executive order are legislative and executive
functions, respectively, and thus, do not fall within the ambit of "judicial
functions." They are both within the prerogatives, powers, and authority of the
City Council and City Mayor of Manila, respectively. Furthermore, the petition
failed to show with certainty that the respondents acted without or in excess of
jurisdiction or with grave abuse of discretion.
The respondents also asseverate that the petitioner cannot claim that it has no
other recourse in addressing its grievance other than this petition for certiorari.
As a matter of fact, there are two cases pending before Branches 33 and 51 of
the RTC of Manila (one is for mandamus; the other, for declaratory relief) and
three in the Court of Appeals (one is for prohibition; the two other cases, for quo
warranto), which are all akin to the present petition in the sense that the relief
being sought therein is the declaration of the invalidity of the subject ordinance.
Clearly, the petitioner may ask the RTC or the Court of Appeals the relief being
prayed for before this Court. Moreover, the petitioner failed to prove discernible
compelling reasons attending the present petition that would warrant cognizance
of the present petition by this Court.
Besides, according to the respondents, the petitioner has transgressed the
proscription against forum-shopping in filing the instant suit. Although the parties
in the other pending cases and in this petition are different individuals or entities,
they represent the same interest.
With regard to petitioner's prayer for temporary restraining order and/ or
preliminary injunction in its petition, the respondents maintain that the same had
become moot and academic in view of the elections of officers of the City Liga ng
mga Barangay on 15 September 2002 and their subsequent assumption to their
respective offices. 10 Since the acts to be enjoined are now fait accompli, this
petition for certiorari with an application for provisional remedies must necessarily
fail. Thus, where the records show that during the pendency of the case certain
events or circumstances had taken place that render the case moot and
academic, the petition forcertiorari must be dismissed.
After due deliberation on the pleadings filed, we resolve to dismiss this petition
for certiorari.
First, the respondents neither acted in any judicial or quasi-judicial capacity nor
arrogated unto themselves any judicial or quasi-judicial prerogatives. A petition
forcertiorari under Rule 65 of the 1997 Rules of Civil Procedure is a special civil
action that may be invoked only against a tribunal, board, or officer exercising
judicial or quasi-judicial functions.
Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:
SECTION 1. Petition for certiorari. — When any tribunal, board or officer
exercising judicial or quasi-judicial functions has acted 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 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
annulling or modifying the proceedings of such tribunal, board or officer,
and granting such incidental reliefs as law and justice may require.
Elsewise stated, for a writ of certiorari to issue, the following requisites must
concur: (1) it must be directed against a tribunal, board, or officer exercising
judicial or quasi-judicial functions; (2) the tribunal, board, or officer must have
acted without or in excess of jurisdiction or with grave abuse of discretion
amounting lack or excess of jurisdiction; and (3) there is no appeal or any plain,
speedy, and adequate remedy in the ordinary course of law.
A respondent is said to be exercising judicial function where he has the power to
determine what the law is and what the legal rights of the parties are, and then
undertakes to determine these questions and adjudicate upon the rights of the
parties. 11
Quasi-judicial function, on the other hand, is "a term which applies to the actions,
discretion, etc., of public administrative officers or bodies . . . required to
investigate facts or ascertain the existence of facts, hold hearings, and draw
conclusions from them as a basis for their official action and to exercise
discretion of a judicial nature."12
Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is
necessary that there be a law that gives rise to some specific rights of persons or
property under which adverse claims to such rights are made, and the
controversy ensuing therefrom is brought before a tribunal, board, or officer
clothed with power and authority to determine the law and adjudicate the
respective rights of the contending parties. 13
The respondents do not fall within the ambit of tribunal, board, or officer
exercising judicial or quasi-judicial functions. As correctly pointed out by the
respondents, the enactment by the City Council of Manila of the assailed
ordinance and the issuance by respondent Mayor of the questioned executive
order were done in the exercise of legislative and executive functions,
respectively, and not of judicial or quasi-judicial functions. On this score
alone, certiorari will not lie.
Second, although the instant petition is styled as a petition for certiorari, in
essence, it seeks the declaration by this Court of the unconstitutionality or
illegality of the questioned ordinance and executive order. It, thus, partakes of the
nature of a petition for declaratory relief over which this Court has only appellate,
not original, jurisdiction. 14 Section 5, Article VIII of the Constitution provides:
Sec. 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting ambassadors, other
public ministers and consuls, and over petitions for certiorari, prohibition,
mandamus,quo warranto, and habeas corpus.
(2) Review, revise, reverse, modify, or affirm on appeal or certiorari as
the law or the Rules of Court may provide, final judgments and orders of
lower courts in:
(a) All cases in which the constitutionality or validity of any treaty,
international or executive agreement, law, presidential decree,
 proclamation, order, instruction, ordinance, or regulation is in
question. (Italics supplied).
As such, this petition must necessary fail, as this Court does not have original
jurisdiction over a petition for declaratory relief even if only questions of law are
involved.15
Third, even granting arguendo that the present petition is ripe for the
extraordinary writ of certiorari, there is here a clear disregard of the hierarchy of
courts. No special and important reason or exceptional and compelling
circumstance has been adduced by the petitioner or the intervenor why direct
recourse to this Court should be allowed.
We have held that this Court's original jurisdiction to issue a writ of certiorari (as
well as of prohibition, mandamus, quo warranto, habeas corpus and injunction) is
not exclusive, but is concurrent with the Regional Trial Courts and the Court of
Appeals in certain cases. As aptly stated in People v. Cuaresma: 16
This concurrence of jurisdiction is not, however, to be taken as according
to parties seeking any of the writs an absolute, unrestrained freedom of
choice of the court to which application therefore will be directed. There
is after all a hierarchy of courts. That hierarchy is determinative of the
venue of appeals, and also serves as a general determinant of the
appropriate forum for petitions for the extraordinary writs. A becoming
regard of that judicial hierarchy most certainly indicates that petitions for
the issuance of extraordinary writs against first level ("inferior") courts
should be filed with the Regional Trial Court, and those against the latter,
with the Court of Appeals. A direct invocation of the Supreme Court's
original jurisdiction to issue these writs should be allowed only when
there are special and important reasons therefor, clearly and specifically
set out in the petition. This is [an] established policy. It is a policy
necessary to prevent inordinate demands upon the Court's time and
attention which are better devoted to those matters within its exclusive
jurisdiction, and to prevent further over-crowding of the Court's docket.
As we have said in Santiago v. Vasquez, 17 the propensity of litigants and
lawyers to disregard the hierarchy of courts in our judicial system by seeking
relief directly from this Court must be put to a halt for two reasons: (1) it would be
an imposition upon the precious time of this Court; and (2) it would cause an
inevitable and resultant delay, intended or otherwise, in the adjudication of cases,
which in some instances had to be remanded or referred to the lower court as the
proper forum under the rules of procedure, or as better equipped to resolve the
issues because this Court is not a trier of facts.
Thus, we shall reaffirm the judicial policy that this Court will not entertain direct
resort to it unless the redress desired cannot be obtained in the appropriate
courts, and exceptional and compelling circumstances justify the availment of the
extraordinary remedy of writ of certiorari, calling for the exercise of its primary
jurisdiction.18
Petitioner's reliance on Pimentel v. Aguirre 19 is misplaced because the non-
observance of the hierarchy-of-courts rule was not an issue therein. Besides,
what was sought to be nullified in the petition for certiorari and prohibition therein
was an act of the President of the Philippines, which would have greatly affected
all local government units. We reiterated therein that when an act of the
legislative department is seriously alleged to have infringed the Constitution,
settling the controversy becomes the duty of this Court. The same is true when
what is seriously alleged to be unconstitutional is an act of the President, who in
our constitutional scheme is coequal with Congress.

We hesitate to rule that the petitioner and the intervenor are guilty of forum-
shopping. Forum-shopping exists where the elements of litis pendentia are
present or when a final judgment in one case will amount to res judicata in the
other. For litis pendentia to exist, the following requisites must be present: (1)
identity of parties, or at least such parties as are representing the same interests
in both actions; (2) identity of rights asserted and reliefs prayed for, the reliefs
being founded on the same facts; and (3) identity with respect to the two
preceding particulars in the two cases, such that any judgment that may be
rendered in the pending case, regardless of which party is successful, would
amount to res judicata in the other case. 20
In the instant petition, and as admitted by the respondents, the parties in this
case and in the alleged other pending cases are different individuals or entities;
thus, forum-shopping cannot be said to exist. Moreover, even assuming that
those five petitions are indeed pending before the RTC of Manila and the Court
of Appeals, we can only guess the causes of action and issues raised before
those courts, considering that the respondents failed to furnish this Court with
copies of the said petitions.
WHEREFORE, the petition is DISMISSED. IEAHca

SO ORDERED.
(Liga ng mga Barangay National v. City Mayor of Manila, G.R. No. 154599,
|||

[January 21, 2004], 465 PHIL 529-544)

8. Manila Bankers vs. Ng Kok Wei, G.R. No. 139791

THIRD DIVISION
 [G.R. No. 139791. December 12, 2003.]

MANILA BANKERS LIFE INSURANCE

CORPORATION, petitioner, vs. EDDY NG KOK WEI, respondent.

Roy, Enrico C. Santos for petitioner.

Rogelio Velarde for respondent.
SYNOPSIS
Respondent instituted before the Makati Regional Trial Court a complaint for
specific performance and damages against the petitioner. Petitioner allegedly
failed to deliver the condominium unit to the respondent on the date specified in
the Contract to Sell. After due trial, the trial court found the petitioner liable for
payment of damages due to unreasonable delay in the delivery of the
condominium unit to respondent. The decision of the trial court was affirmed in
toto by the Court of Appeals. Hence, this petition for review on certiorari where
petitioner assailed the jurisdiction of the trial court.cHCSDa

The Supreme Court has consistently held that complaints for specific
performance with damages by a lot owner or condominium buyer against the
owner or developer falls under the exclusive jurisdiction of the Housing and Land
Use Regulatory Board. However, while it is true that the trial court is without
jurisdiction over respondent's complaint, petitioner's active participation in the
proceedings estopped it from assailing such lack of it. Furthermore, petitioner
failed to raise the question of jurisdiction before the trial court and the appellate
court. In effect, petitioner confirmed and ratified the trial court's jurisdiction over
the case. Thus, it is now in estoppel and can no longer question the trial court's
jurisdiction. On petitioner's claim that it did not incur delay, this is a factual issue.
The Court ruled that the factual findings of the trial court are given weight when
supported by substantial evidence and carries more weight when affirmed by the
Court of Appeals. The Court affirmed in toto the decision of the Court of
Appeals. STcEIC

SYLLABUS

1. ADMINISTRATIVE LAW; ADMINISTRATIVE AGENCY; HOUSING AND LAND

USE REGULATORY BOARD; HAS EXCLUSIVE JURISDICTION OVER
COMPLAINTS FOR SPECIFIC PERFORMANCE WITH DAMAGES BY A LOT
OR CONDOMINIUM UNIT BUYER AGAINST THE OWNER OR DEVELOPER.
— Pursuant to Section 1 (c) of Presidential Decree No. 1344, as amended, it is
the HLURB which has jurisdiction over the instant case. We have consistently
held that complaints for specific performance with damages by a lot or
condominium unit buyer against the owner or developer falls under the exclusive
jurisdiction of the HLURB. IcCDAS

2. REMEDIAL LAW; COURTS; JURISDICTION; A PARTY WHO ACTIVELY

PARTICIPATED IN THE PROCEEDINGS IS ESTOPPED FROM ASSAILING
THE LACK THEREOF. — While it may be true that the trial court is without
jurisdiction over the case, petitioner's active participation in the proceedings
estopped it from assailing such lack of it. We have held that it is an undesirable
practice of a party participating in the proceedings and submitting its case for
decision and then accepting the judgment, only if favorable, and attacking it for
lack of jurisdiction, when adverse. Here, petitioner failed to raise the question of
jurisdiction before the trial court and the Appellate Court. In effect, petitioner
confirmed and ratified the trial court's jurisdiction over this case. Certainly, it is
now in estoppel and can no longer question the trial court's jurisdiction. IHDCcT

3. ID.; EVIDENCE; FACTUAL FINDINGS OF TRIAL COURT GIVEN WEIGHT

WHEN SUPPORTED BY SUBSTANTIAL EVIDENCE AND CARRIES MORE
WEIGHT WHEN AFFIRMED BY THE COURT OF APPEALS. — On petitioner's
claim that it did not incur delay, suffice it to say that this is a factual issue. Time
and again, we have ruled that "the factual findings of the trial court are given
weight when supported by substantial evidence and carries more weight when
affirmed by the Court of Appeals."Whether or not petitioner incurred delay and
thus, liable to pay damages as a result thereof are indeed factual questions.
4. ID.; APPEALS; PETITION FOR REVIEW ON CERTIORARI; LIMITED TO
REVIEW OF ERRORS OF LAW, NOT OF FACT. — The jurisdiction of this Court
in a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, is limited to reviewing only errors of law, not of fact,
unless the factual findings being assailed are not supported by evidence on
record or the impugned judgment is based on a misapprehension of facts. These
exceptions are not present here. TEHDIA

DECISION

SANDOVAL-GUTIERREZ, J : p

Before us is a petition for review on certiorari assailing the Decision 1 dated

March 26, 1999 and Resolution 2 dated August 5, 1999 of the Court of Appeals in
CA-G.R. CV No. 40504, entitled "Eddy Ng Kok Wei vs. Manila Bankers Life
Insurance Corporation."
The factual antecedents as borne by the records are:
Eddy Ng Kok Wei, respondent, is a Singaporean businessman who ventured into
investing in the Philippines. On November 29, 1988, respondent, in a Letter of
Intent addressed to Manila Bankers Life Insurance Corporation, petitioner,
expressed his intention to purchase a condominium unit at Valle Verde Terraces.
Subsequently or on December 5, 1988, respondent paid petitioner a reservation
fee of P50,000.00 for the purchase of a 46-square meter condominium unit (Unit
703) valued at P860,922.00. On January 16, 1989, respondent paid 90% of the
purchase price in the sum of P729,830.00.
Consequently, petitioner, through its President, Mr. Antonio G. Puyat, executed a
Contract to Sell in favor of the respondent. The contract expressly states that the
subject condominium unit "shall substantially be completed and delivered" to the
respondent "within fifteen (15) months" from February 8, 1989 or on May 8, 1990,
and that "(S)hould there be no substantial completion and fail(ure) to deliver the
unit on the date specified, a penalty of 1% of the total amount paid (by
respondent) shall be charged against (petitioner)."
Considering that the stipulated 15-month period was at hand, respondent
returned to the Philippines sometime in April, 1990.
In a letter dated April 5, 1990, petitioner, through its Senior Assistant Vice-
President, Mr. Mario G. Zavalla, informed respondent of the substantial
completion of his condominium unit, however, due to various uncontrollable
forces (such as coup d'etat attempts, typhoon and steel and cement shortage),
the final turnover is reset to May 31, 1990.
Meanwhile, on July 5, 1990, upon receipt of petitioner's notice of delivery dated
May 31, 1990, respondent again flew back to Manila. He found the unit still
uninhabitable for lack of water and electric facilities.
Once more, petitioner issued another notice to move-in addressed to its building
administrator advising the latter that respondent is scheduled to move in on
August 22, 1990.
On October 5, 1990, respondent returned to the Philippines only to find that his
condominium unit was still unlivable. Exasperated, he was constrained to send
petitioner a letter dated November 21, 1990 demanding payment for the
damages he sustained. But petitioner ignored such demand, prompting
respondent to file with the Regional Trial Court, Branch 150, Makati City, a
complaint against the former for specific performance and damages, docketed as
Civil Case No. 90-3440.
Meanwhile, during the pendency of the case, respondent finally accepted the
condominium unit and on April 12, 1991, occupied the same. Thus, respondent's
cause of action has been limited to his claim for damages.
On December 18, 1992, the trial court rendered a Decision 3 finding the petitioner
liable for payment of damages due to the delay in the performance of its
obligation to the respondent. The dispositive portion reads:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and
against defendant, ordering Manila Bankers Life Insurance Corporation
to pay plaintiff Eddy Ng Kok Wei the following:
1. One percent (1%) of the total amount plaintiff paid defendant;
2. P100,000.00 as moral damages;
3. P50,000.00 as exemplary damages;
4. P25,000.00 by way of attorney's fees; and
5. Cost of suit.
"SO ORDERED."
On appeal, the Court of Appeals, in a Decision dated March 26, 1999, affirmed in
toto the trial court's award of damages in favor of the respondent.
Unsatisfied, petitioner filed a motion for reconsideration but was denied by the
Appellate Court in a Resolution dated August 5, 1999.
Hence, this petition for review on certiorari. Petitioner contends that the trial court
has no jurisdiction over the instant case; and that the Court of Appeals erred in
affirming the trial court's finding that petitioner incurred unreasonable delay in the
delivery of the condominium unit to respondent.
On petitioner's contention that the trial court has no jurisdiction over the instant
case, Section 1(c) of Presidential Decree No. 1344, as amended, provides:
"SECTION 1. In the exercise of its functions to regulate the real estate
trade and business and in addition to its powers provided for
in Presidential Decree No. 957, the National Housing Authority [now
Housing and Land Use Regulatory Board (HLURB)] 4 shall
have exclusive jurisdiction to hear and decide cases of the following
nature:
xxx xxx xxx
"C. Cases involving specific performance of contractual and statutory
obligations filed by buyers of subdivision lots or condominium units
against the owner, developer, dealer, broker or salesman.
xxx xxx xxx."
Pursuant to the above provisions, it is the HLURB which has jurisdiction over the
instant case. We have consistently held that complaints for specific performance
with damages by a lot or condominium unit buyer against the owner or developer
falls under the exclusive jurisdiction of the HLURB. 5
While it may be true that the trial court is without jurisdiction over the case,
petitioner's active participation in the proceedings estopped it from assailing such
lack of it. We have held that it is an undesirable practice of a party participating in
the proceedings and submitting its case for decision and then accepting the
judgment, only if favorable, and attacking it for lack of jurisdiction, when
adverse. 6

Here, petitioner failed to raise the question of jurisdiction before the trial court
and the Appellate Court. In effect, petitioner confirmed and ratified the trial court's
jurisdiction over this case. Certainly, it is now in estoppel and can no longer
question the trial court's jurisdiction.
On petitioner's claim that it did not incur delay, suffice it to say that this is a
factual issue. Time and again, we have ruled that "the factual findings of the trial
court are given weight when supported by substantial evidence and carries more
weight when affirmed by the Court of Appeals." 7 Whether or not petitioner
incurred delay and thus, liable to pay damages as a result thereof, are indeed
factual questions.
The jurisdiction of this Court in a petition for review on certiorari under Rule 45 of
the 1997 Rules of Civil Procedure, as amended, is limited to reviewing only
errors of law, not of fact, unless the factual findings being assailed are not
supported by evidence on record or the impugned judgment is based on a
misapprehension of facts. 8These exceptions are not present here.
WHEREFORE, the petition is DENIED. The assailed Decision dated March 26,
1999 and Resolution dated August 5, 1999 of the Court of Appeals are hereby
AFFIRMED IN TOTO.
Costs against the petitioner.
SO ORDERED.
(Manila Bankers Life Insurance Corp. v. Eddy Ng Kok Wei, G.R. No. 139791,
|||

[December 12, 2003], 463 PHIL 871-878)

9. Office of the Court Administrator v Sardillo 401 SCRA 583

FIRST DIVISION
 [A.M. No. MTJ-01-1370. April 25, 2003.]
(formerly A.M. No. 00-11-238-MTC)

OFFICE OF THE COURT ADMINISTRATOR, complainant, vs.

JUDGE AGUSTIN T. SARDIDO, Municipal Trial Court of
Koronadal, South Cotabato,respondent.

SYNOPSIS

The Office of the Court Administrator charged respondent Agustin Sardido,

formerly presiding judge of the Municipal Trial Court of Koronadal, South
Cotabato, with gross ignorance of the law. Respondent allegedly excluded a
certain Judge Braulio Hurtado, Jr. of the Regional Trial Court of Kabacan, North
Cotabato as one of the accused in a case for Falsification and Use of Falsified
Document. In his Explanation, Judge Sardido reasoned out that he excluded
Judge Hurtado because Circular No. 3-89 directs the IBP to forward to the
Supreme Court for appropriate action all cases involving justices and judges of
lower courts. Judge Sardido claimed that the Circular likewise applies to courts in
cases involving justices or judges of the lower courts, especially so in this case
where Judge Hurtado was charged with falsification of public document as a
notary public while he was still the Clerk of Court of the Regional Trial Court,
Koronadal, South Cotabato.
The Supreme Court found respondent judge guilty of gross ignorance of the law.
According to the Court, Circular No. 3-89 does not refer to criminal cases against
erring justices of appellate courts or judges of lower courts. Trial courts retain
jurisdiction over the criminal aspect of offenses committed by justices of
appellate courts and judges of lower courts. It is clear from the Circular directing
the IBP, and not the trial courts, to refer all administrative cases filed against
justices of appellate courts and judges of lower courts to the Supreme Court. The
case filed against Judge Hurtado is not an administrative case filed with the IBP,
but a criminal case filed with the trial court under its jurisdiction. The Court further
ruled that whether the criminal case against Judge Hurtado relates to an act
committed before or after he became a judge is of no moment. Neither is it
material that an MTC judge will be trying an RTC judge in the criminal case. A
criminal case against an attorney or judge is distinct and separate from an
administrative case against him and the dismissal of the criminal case does not
warrant the dismissal of an administrative case arising from the same set of
facts. The quantum of evidence that is required in the latter is only
preponderance of evidence, and not proof beyond reasonable doubt which is
required in criminal cases. Respondent Judge Agustin T. Sardido was fined Ten
Thousand Pesos (P10,000.00).
 SYLLABUS

1. POLITICAL LAW; ADMINISTRATIVE LAW; PUBLIC OFFICERS; JUDGES;

CIRCULAR NO. 3-89 DOES NOT REFER TO CRIMINAL CASES AGAINST
ERRING JUSTICES OF APPELLATE COURTS OR JUDGES OF LOWER
COURTS; TRIAL COURTS RETAIN JURISDICTION OVER THE CRIMINAL
ASPECT OF THE OFFENSES COMMITTED. — Under Circular No. 3-89, the
Court has directed the IBP to refer to the Supreme Court for appropriate action
all administrative cases filed with IBP against justices of appellate courts and
judges of the lower courts. As mandated by the Constitution, the Court exercises
the exclusive power to discipline administratively justices of appellate courts and
judges of lower courts. Circular No. 3-89 does not refer to criminal cases against
erring justices of appellate courts or judges of lower courts. Trial courts retain
jurisdiction over the criminal aspect of offenses committed by justices of
appellate courts and judges of lower courts. This is clear from the Circular
directing the IBP, and not the trial courts, to refer all administrative cases filed
against justices of appellate courts and judges of lower courts to the Supreme
Court. The case filed against Judge Hurtado is not an administrative case filed
with the IBP. It is a criminal case filed with the trial court under its jurisdiction as
prescribed by law. aDSIHc

2. ID.; ID.; ID.; ID.; ID.; A CRIMINAL CASE AGAINST AN ATTORNEY OR

JUDGE IS DISTINCT AND SEPARATE FROM AN ADMINISTRATIVE CASE
AGAINST HIM; DISMISSAL OF THE CRIMINAL CASE DOES NOT WARRANT
THE DISMISSAL OF THE ADMINISTRATIVE CASE ARISING FROM THE
SAME SET OF FACTS. — The acts or omissions of a judge may well constitute
at the same time both a criminal act and an administrative offense. Whether the
criminal case against Judge Hurtado relates to an act committed before or after
he became a judge is of no moment. Neither is it material that an MTC judge will
be trying an RTC judge in the criminal case. A criminal case against an attorney
or judge is distinct and separate from an administrative case against him. The
dismissal of the criminal case does not warrant the dismissal of an administrative
case arising from the same set of facts. The quantum of evidence that is required
in the latter is only preponderance of evidence, and not proof beyond reasonable
doubt which is required in criminal cases.
3. ID.; ID.; ID.; ID.; IGNORANCE OF THE LAW: A judge is called upon to exhibit
more than just a cursory acquaintance with statutes and procedural rules. He
must be conversant with basic legal principles and well-settled doctrines. He
should strive for excellence and seek the truth with passion. Judge Sardido failed
in this regard. He erred in excluding Judge Hurtado as one of the accused in the
Amended Information and in forwarding the criminal case against Judge Hurtado
to the Court.
 DECISION

CARPIO, J : p

The Case
This is an administrative case against respondent Judge Agustin T. Sardido
("Judge Sardido"), formerly presiding judge of the Municipal Trial Court of
Koronadal, South Cotabato, for gross ignorance of the law. Judge Sardido issued
an Order dated 20 October 1998 excluding Judge Braulio Hurtado, Jr. ("Judge
Hurtado") of the Regional Trial Court of Kabacan, North Cotabato as one of the
accused in an Amended Information. 1 Judge Sardido ruled that Supreme Court
Circular No. 3-89 requires that Judge Hurtado be dropped from the Amended
Information and his case be forwarded to the Court. DIEACH

The Facts
Private complainant Teresita Aguirre Magbanua accused Oscar Pagunsan and
Danilo Ong of the crime of "Falsification by Private Individual and Use of Falsified
Document." 2 The Amended Information included Judge Hurtado. The case,
docketed as Criminal Case No. 14071, was raffled to Judge Sardido, then
presiding judge of the Municipal Trial Court of Koronadal, South Cotabato ("MTC-
Koronadal").
In a Deed of Absolute Sale dated 8 August 1993, private complainant Magbanua
and six other vendors allegedly sold two parcels of land, covered by TCT Nos.
47873 and 33633 and located at the commercial district of Koronadal, to Davao
Realty Development Corporation, represented by accused Ong, with co-accused
Pagunsan, as broker. Judge Hurtado, who at that time was the Clerk of Court of
RTC-Koronadal and ex-officio notary public, notarized the Deed of Absolute Sale.
However, private complainant Magbanua denies signing the Deed of Absolute
Sale dated 8 August 1993 which states that the consideration for the sale was
only P600,000.00. Private complainant asserts that what she and the other
vendors signed was a Deed of Absolute Sale dated 6 August 1996 for a
consideration of P16,000,000.00. Under the terms of the sale, the vendee agreed
to pay for the capital gains tax. The consideration in the 8 August 1993 Deed of
Absolute Sale was apparently undervalued. Subsequently, the Bureau of Internal
Revenue assessed the vendors a deficiency capital gains tax of P1,023,375.00.
Judge Hurtado filed a motion praying that the criminal complaint against him be
forwarded to the Supreme Court. Judge Hurtado claimed that Circular No. 3-89
dated 6 February 1989 requires "all cases involving justices and judges of the
lower courts, whether or not such complaints deal with acts apparently unrelated
to the discharge of their official functions, such as acts of immorality, estafa,
crimes against persons and property, etc." to be forwarded to the Supreme
Court. Judge Hurtado asserted that since the case against him is one involving a
judge of a lower court, the same should be forwarded to the Supreme Court
pursuant to Circular No. 3-89.
The Provincial Prosecutor opposed Judge Hurtado's motion, arguing that the
case against Judge Hurtado is not within the scope of Circular No. 3-89 since it is
not an IBP-initiated case. Moreover, the offense charged was committed in 1993
when Judge Hurtado was still a clerk of court and ex-officio notary public.
On 20 October 1998, Judge Sardido issued an Order, the pertinent portions of
which read:
The issue to be resolved in the instant case is, whether the case of
Judge Hurtado, who is charged for acts committed prior to his
appointment as an RTC Judge, falls within the purview of the afore-said
Circular No. 3-89.
It is the humble submission of the Court that the case of Judge Hurtado,
an RTC Judge of the Regional Trial Court of Kabacan, North Cotabato,
falls within the meaning and intent of the said circular.
For reasons being, firstly, the said circular provides that all cases
involving justices and judges of lower courts shall be forwarded to the
Supreme Court for appropriate action, whether or not such complaints
deal with acts apparently unrelated to the discharge of their official
functions, and regardless of the nature of the crime, without any
qualification whether the crime was committed before or during his
tenure of office. Under the law on Legal Hermeneutics, if the law does
not qualify we must not qualify. Secondly, it would sound, to the mind of
the Court, awkward for a first level court to be trying an incumbent judge
of a second level court.
For reasons afore-stated, this Court can not and shall not try this case as
against Judge Hurtado, unless the Honorable Supreme Court would
order otherwise.
Wherefore, the foregoing premises duly considered, the name of Judge
Braulio L. Hurtado, Jr. is ordered excluded from the amended
information and the case against him is ordered forwarded to the
Honorable Supreme Court, pursuant to the afore-said Circular No. 3-89
of the Supreme Court, dated February 9, 1989.

Accordingly, Maxima S. Borja ("Borja"), Stenographer I and Acting Clerk of Court

II of the MTC-Koronadal, South Cotabato, wrote a letter dated 21 July 1999
forwarding the criminal case against Judge Hurtado to the Court Administrator for
appropriate action.
Then Court Administrator Alfredo L. Benipayo issued a Memorandum dated 25
October 2000 pointing out that Circular No. 3-89 refers only to administrative
complaints filed with the IBP against justices and judges of lower courts. The
Circular does not apply to criminal cases filed before trial courts against such
justices and judges.
Thus, in the Resolution of 6 December 2000, the Court directed that the letter of
Acting Clerk of Court Borja be returned to the MTC-Koronadal together with the
records of the criminal case. The Court directed Judge Sardido to explain in
writing why he should not be held liable for gross ignorance of the law for
excluding Judge Hurtado from the Amended Information and for transmitting the
records of Judge Hurtado's case to the Court.
In his Explanation dated 26 January 2001, Judge Sardido reasoned out that he
excluded Judge Hurtado because Circular No. 3-89 directs the IBP to "forward to
the Supreme Court for appropriate action all cases involving justices and judges
of lower courts . . .." Judge Sardido claims that the Circular likewise "applies to
courts in cases involving justices or judges of the lower courts," especially so in
this case where "Judge Hurtado was charged with falsification of public
document as a notary public while he was still the Clerk of Court of the Regional
Trial Court of the 11th Judicial Region in Koronadal, South Cotabato."
In the Resolution of 28 March 2001, the Court referred this case to the Office of
the Court Administrator ("OCA") for evaluation, report and recommendation. On
10 July 2001, the OCA submitted a Memorandum recommending that this case
be re-docketed as a regular administrative matter.
Judge Sardido filed his Manifestation dated 20 September 2001 stating that he is
submitting the case for decision based on the pleadings and records already
filed. Judge Sardido insisted that he did "what he had done in all honesty and
good faith."
OCA's Findings and Conclusions
The OCA found that Judge Sardido erred in excluding Judge Hurtado as one of
the accused in the Amended Information in Criminal Case No. 14071. The OCA
held that Circular No. 3-89, which is Judge Sardido's basis in issuing the Order of
20 October 1998, refers to administrative complaints filed with the IBP against
justices and judges of lower courts. The Circular does not apply to criminal cases
filed against justices and judges of lower courts. The OCA recommended that a
fine of P5,000.00 be imposed on Judge Sardido for gross ignorance of the
law.HTSaEC

The Court's Ruling

The Court issued Circular No. 3-89 in response to a letter dated 19 December
1988 by then IBP President Leon M. Garcia, seeking clarification of the
Court's En BancResolution of 29 November 1998 in RE: Letter of then Acting
Presiding Justice Rodolfo A. Nocon 3 and Associate Justices Reynato
Puno 4 and Alfredo Marigomen 5 of the Court of Appeals.
A certain Atty. Eduardo R. Balaoing had filed a complaint against Court of
Appeals Justices Nocon, Puno and Marigomen relating to a petition filed before
their division. In its En Banc Resolution of 29 November 1988, the Court required
the IBP to refer to the Supreme Court for appropriate action the complaint 6 filed
by Atty. Balaoing with the IBP Commission on Bar Discipline. The Court stated
that the power to discipline justices and judges of the lower courts is within the
Court's exclusive power and authority as provided in Section 11, Article VII of
the 1987 Constitution. 7 The Court Administrator publicized the En
Banc Resolution of 29 November 1988 by issuing Circular No. 17 dated 20
December 1988.
The Court issued Circular No. 3-89 on 6 February 1989 clarifying the En
Banc Resolution of 29 November 1988. Circular No. 3-89 provides in part as
follows:
(1) The IBP (Board of Governors and Commission on Bar Discipline)
shall forward to the Supreme Court for appropriate action all cases
involving justices and judges of lower courts, whether or not such
complaints deal with acts apparently unrelated to the discharge of their
official functions, such as acts of immorality,estafa, crimes against
persons and property, etc. . . .. (Emphasis supplied)
Circular No. 3-89 clarified the second paragraph, Section 1 of Rule 139-B of the
Rules of Court which states that:
The IBP Board of Governors may, motu proprio or upon referral by the
Supreme Court or by a Chapter Board of Officers, or at the instance of
any person, initiate and prosecute proper charges against
erring attorneys including those in the government service. (Emphasis
supplied).
As clarified, the phrase "attorneys . . . in the government service" in Section 1
of Rule 139-B does not include justices of appellate courts and judges of
lower courts who are not subject to the disciplining authority of the IBP. All
administrative cases against justices of appellate courts and judges of lower
courts fall exclusively within the jurisdiction of the Supreme Court.
However, Rule 139-B refers to Disbarment and Discipline of Attorneys which is
administrative and not criminal in nature. The cases referred to in Circular No. 3-
89 are administrative cases for disbarment, suspension or discipline of attorneys,
including justices of appellate courts and judges of the lower courts. The Court
has vested the IBP with the power to initiate and prosecute administrative cases
against erring lawyers. 8 However, under Circular No. 3-89, the Court has
directed the IBP to refer to the Supreme Court for appropriate action all
administrative cases filed with IBP against justices of appellate courts and judges
of the lower courts. As mandated bythe Constitution, the Court exercises the
exclusive power to discipline administratively justices of appellate courts and
judges of lower courts. SHEIDC

Circular No. 3-89 does not refer to criminal cases against erring justices of
appellate courts or judges of lower courts. Trial courts retain jurisdiction over the
criminal aspect of offenses committed by justices of appellate courts 9 and judges
of lower courts. This is clear from the Circular directing the lBP, and not the trial
courts, to refer all administrative cases filed against justices of appellate courts
and judges of lower courts to the Supreme Court. The case filed against Judge
Hurtado is not an administrative case filed with the IBP. It is a criminal case filed
with the trial court under its jurisdiction as prescribed by law.
The acts or omissions of a judge may well constitute at the same time both a
criminal act and an administrative offense. Whether the criminal case against
Judge Hurtado relates to an act committed before or after he became a judge is
of no moment. Neither is it material that an MTC judge will be trying an RTC
judge in the criminal case. A criminal case against an attorney or judge is distinct
and separate from an administrative case against him. The dismissal of the
criminal case does not warrant the dismissal of an administrative case arising
from the same set of facts. The quantum of evidence that is required in the latter
is only preponderance of evidence, and not proof beyond reasonable doubt
which is required in criminal cases. 10 As held in Gatchalian Promotions Talents
Pool, Inc. v. Naldoza: 11
Administrative cases against lawyers belong to a class of their own.
They are distinct from and they may proceed independently of civil and
criminal cases.
The burden of proof for these types of cases differ. In a criminal case,
proof beyond reasonable doubt is necessary; in an administrative case
for disbarment or suspension, 'clearly preponderant evidence' is all that
is required. Thus, a criminal prosecution will not constitute a prejudicial
question even if the same facts and circumstances are attendant in the
administrative proceedings.
It should be emphasized that a finding of guilt in the criminal case will not
necessarily result in a finding of liability in the administrative case.
Conversely, respondent's acquittal does not necessarily exculpate him
administratively. In the same vein, the trial court's finding of civil liability
against the respondent will not inexorably lead to a similar finding in the
administrative action before this Court. Neither will a favorable
disposition in the civil action absolve the administrative liability of the
lawyer. The basic premise is that criminal and civil cases are altogether
different from administrative matters, such that the disposition in the first
 two will not inevitably govern the third and vice versa. For this reason, it
would be well to remember the Court's ruling in In re Almacen, which we
quote:
". . . Disciplinary proceedings against lawyers are sui generis.
Neither purely civil nor purely criminal, they do not involve a trial
of an action or a suit, but are rather investigations by the Court
into the conduct of one of its officers. Not being intended to inflict
punishment, [they are] in no sense a criminal prosecution.
Accordingly, there is neither a plaintiff nor a prosecutor therein.
[They] may be initiated by the Court motu proprio. Public interest
is [their] primary objective, and the real question for determination
is whether or not the attorney is still a fit person to be allowed the
privileges as such. Hence, in the exercise of its disciplinary
powers, the Court merely calls upon a member of the Bar to
account for his actuations as an officer of the Court with the end
in view of preserving the purity of the legal profession and the
proper and honest administration of justice by purging the
profession of members who by their misconduct have prove[n]
themselves no longer worthy to be entrusted with the duties and
responsibilities pertaining to the office of an attorney. . . ."

A judge is called upon to exhibit more than just a cursory acquaintance with
statutes and procedural rules. He must be conversant with basic legal principles
and well-settled doctrines. He should strive for excellence and seek the truth with
passion. 12 Judge Sardido failed in this regard. He erred in excluding Judge
Hurtado as one of the accused in the Amended Information and in forwarding the
criminal case against Judge Hurtado to the Court.
One last point. This administrative case against Judge Sardido started before the
amendment 13 of Rule 140 classifying gross ignorance of the law a serious
offense punishable by a fine of more than P20,000.00 but not exceeding
P40,000.00. The amendment cannot apply retroactively to Judge Sardido's case.
However, the fine of P5,000.00 recommended by the OCA is too light a penalty
considering that this is not the first offense of Judge Sardido.
In RE: Hold Departure Order Issued by Judge Agustin T. Sardido, 14 the Court
reprimanded Judge Sardido for issuing a hold-departure order contrary to
Circular No. 39-97. In Cabilao v. Judge Sardido, 15 the Court fined Judge Sardido
P5,000.00 for gross ignorance of the law, grave abuse of discretion and gross
misconduct. The Court gave a stern warning to Judge Sardido that a commission
of the same or similar act would be dealt with more severely. In Almeron v. Judge
Sardido, 16 the Court imposed on Judge Sardido a stiffer fine of P10,000,00 for
gross ignorance of the law. He was again sternly warned that the commission of
the same or similar act in the future would be dealt with more severely including,
if warranted, his dismissal from the service.
In a more recent administrative case, Torcende v. Judge Sardido, 17 the Court
found Judge Sardido again guilty of gross ignorance of the law and of gross
misconduct. This time the Court dismissed Judge Sardido from the service with
forfeiture of his retirement benefits, except accrued leave credits. The dismissal
was with prejudice to reemployment in any branch of the government or any of its
agencies or instrumentalities, including government-owned and controlled
corporations.
The records of the OCA further disclose that Judge Sardido has other similar
administrative complaints 18 still pending against him. Such an unflattering
service record erodes the people's faith and confidence in the judiciary. It is the
duty of every member of the bench to avoid any impression of impropriety to
protect the image and integrity of the judiciary. 19 The Court may still impose a
fine on Judge Sardido in the instant case despite his dismissal from the service.
WHEREFORE, respondent Judge Agustin T. Sardido is FINED Ten Thousand
Pesos (P10,000.00) for gross ignorance of the law. The fine may be deducted
from his accrued leave credits.
SO ORDERED.
(Office of the Court Administrator v. Sardido, A.M. No. MTJ-01-1370, [April
|||

25, 2003], 449 PHIL 619-631)

11. Katon vs. Palanca, G.R. No. 151149

THIRD DIVISION

[G.R. No. 151149. September 7, 2004.]

GEORGE KATON, petitioner, vs. MANUEL PALANCA JR.,

LORENZO AGUSTIN, JESUS GAPILANGO and JUAN
FRESNILLO, respondents.

DECISION

PANGANIBAN, J : p
 Where prescription, lack of jurisdiction or failure to state a cause of action
clearly appear from the complaint filed with the trial court, the action may be
dismissed motu proprio by the Court of Appeals, even if the case has been
elevated for review on different grounds. Verily, the dismissal of such cases
appropriately ends useless litigations.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court,
assailing the December 8, 2000 Decision 2 and the November 20, 2001
Resolution 3 of the Court of Appeals in CA-GR SP No. 57496. The assailed
Decision disposed as follows:
"Assuming that petitioner is correct in saying that he has the
exclusive right in applying for the patent over the land in question, it
appears that his action is already barred by laches because he slept on
his alleged right for almost 23 years from the time the original certificate
of title has been issued to respondent Manuel Palanca, Jr., or after 35
years from the time the land was certified as agricultural land. In
addition, the proper party in the annulment of patents or titles acquired
through fraud is the State; thus, the petitioner's action is deemed
misplaced as he really does not have any right to assert or protect. What
he had during the time he requested for the re-classification of the land
was the privilege of applying for the patent over the same upon the
land's conversion from forest to agricultural.
"WHEREFORE, the petition is hereby DISMISSED. No
pronouncement as to cost." 4
The assailed Resolution, on the other hand, denied the Motion for
Reconsideration filed by petitioner. It affirmed the RTC's dismissal of his
Complaint in Civil Case No. 3231, not on the grounds relied upon by the trial
court, but because of prescription and lack of jurisdiction. cSEaDA

The Antecedent Facts

The CA narrates the antecedent facts as follows:
"On August 2, 1963, herein [P]etitioner [George Katon] filed a
request with the District Office of the Bureau of Forestry in Puerto
Princesa, Palawan, for the re-classification of a piece of real property
known as Sombrero Island, located in Tagpait, Aborlan, Palawan, which
consists of approximately 18 hectares. Said property is within
Timberland Block of LC Project No. 10-C of Aborlan, Palawan, per BF
Map LC No. 1582.
"Thereafter, the Bureau of Forestry District Office, Puerto
Princesa, Palawan, ordered the inspection, investigation and survey of
the land subject of the petitioner's request for eventual conversion or re-
classification from forest to agricultural land, and thereafter for George
Katon to apply for a homestead patent.
"Gabriel Mandocdoc (now retired Land Classification Investigator)
undertook the investigation, inspection and survey of the area in the
presence of the petitioner, his brother Rodolfo Katon (deceased) and his
cousin, [R]espondent Manuel Palanca, Jr. During said survey, there
were no actual occupants on the island but there were some coconut
trees claimed to have been planted by petitioner and [R]espondent
Manuel Palanca, Jr. (alleged overseer of petitioner) who went to the
island from time to time to undertake development work, like planting of
additional coconut trees.
"The application for conversion of the whole Sombrero Island was
favorably endorsed by the Forestry District Office of Puerto Princesa to
its main office in Manila for appropriate action. The names of Felicisimo
Corpuz, Clemente Magdayao and Jesus Gapilango and Juan Fresnillo
were included in the endorsement as co-applicants of the petitioner.
"In a letter dated September 23, 1965, then Asst. Director of
Forestry R.J.L. Utleg informed the Director of Lands, Manila, that since
the subject land was no longer needed for forest purposes, the same is
therefore certified and released as agricultural land for disposition under
the Public Land Act.
"Petitioner contends that the whole area known as Sombrero
Island had been classified from forest land to agricultural land and
certified available for disposition upon his request and at his instance.
However, Mr. Lucio Valera, then [l]and investigator of the District Land
Office, Puerto Princesa, Palawan, favorably endorsed the request of
[R]espondents Manuel Palanca Jr. and Lorenzo Agustin, for authority to
survey on November 15, 1965. On November 22, a second
endorsement was issued by Palawan District Officer Diomedes De
Guzman with specific instruction to survey vacant portions of Sombrero
Island for the respondents consisting of five (5) hectares each. On
December 10, 1965, Survey Authority No. R III-342-65 was issued
authorizing Deputy Public Land Surveyor Eduardo Salvador to survey
ten (10) hectares of Sombrero Island for the respondents. On December
23, 1990, [R]espondent Lorenzo Agustin filed a homestead patent
application for a portion of the subject island consisting of an area of 4.3
hectares. STaHIC

"Records show that on November 8, 1996, [R]espondent Juan

Fresnillo filed a homestead patent application for a portion of the island
comprising 8.5 hectares. Records also reveal that [R]espondent Jesus
Gapilango filed a homestead application on June 8, 1972. Respondent
Manuel Palanca, Jr. was issued Homestead Patent No. 145927 and
OCT No. G-7089 on March 3, 1977 5 with an area of 6.84 hectares of
Sombrero Island.
 "Petitioner assails the validity of the homestead patents and
original certificates of title covering certain portions of Sombrero Island
issued in favor of respondents on the ground that the same were
obtained through fraud. Petitioner prays for the reconveyance of the
whole island in his favor.
"On the other hand, [R]espondent Manuel Palanca, Jr. claims that
he himself requested for the reclassification of the island in dispute and
that on or about the time of such request, [R]espondents Fresnillo,
Palanca and Gapilango already occupied their respective areas and
introduced numerous improvements. In addition, Palanca said that
petitioner never filed any homestead application for the island.
Respondents deny that Gabriel Mandocdoc undertook the inspection
and survey of the island.
"According to Mandocdoc, the island was uninhabited but the
respondents insist that they already had their respective occupancy and
improvements on the island. Palanca denies that he is a mere overseer
of the petitioner because he said he was acting for himself in developing
his own area and not as anybody's caretaker.
"Respondents aver that they are all bona fide and lawful
possessors of their respective portions and have declared said portions
for taxation purposes and that they have been faithfully paying taxes
thereon for twenty years.
"Respondents contend that the petitioner has no legal capacity to
sue insofar as the island is concerned because an action for
reconveyance can only be brought by the owner and not a mere
homestead applicant and that petitioner is guilty of estoppel by laches for
his failure to assert his right over the land for an unreasonable and
unexplained period of time.
"In the instant case, petitioner seeks to nullify the homestead
patents and original certificates of title issued in favor of the respondents
covering certain portions of the Sombrero Island as well as the
reconveyance of the whole island in his favor. The petitioner claims that
he has the exclusive right to file an application for homestead patent
over the whole island since it was he who requested for its conversion
from forest land to agricultural land." 6
Respondents filed their Answer with Special and/or Affirmative Defenses
and Counterclaim in due time. On June 30, 1999, they also filed a Motion to
Dismiss on the ground of the alleged defiance by petitioner of the trial court's
Order to amend his Complaint so he could thus effect a substitution by the legal
heirs of the deceased, Respondent Gapilango. The Motion to Dismiss was
granted by the RTC in its Order dated July 29, 1999.
 Petitioner's Motion for Reconsideration of the July 29, 1999 Order was
denied by the trial court in its Resolution dated December 17, 1999, for being a
third and prohibited motion. In his Petition for Certiorari before the CA, petitioner
charged the trial court with grave abuse of discretion on the ground that the
denied Motion was his first and only Motion for Reconsideration of the aforesaid
Order.
Ruling of the Court of Appeals
Instead of limiting itself to the allegation of grave abuse of discretion, the
CA ruled on the merits. It held that while petitioner had caused the
reclassification of Sombrero Island from forest to agricultural land, he never
applied for a homestead patent under the Public Land Act. Hence, he never
acquired title to that land.
The CA added that the annulment and cancellation of a homestead patent
and the reversion of the property to the State were matters between the latter
and the homestead grantee. Unless and until the government takes steps to
annul the grant, the homesteader's right thereto stands.
Finally, granting arguendo that petitioner had the exclusive right to apply
for a patent to the land in question, he was already barred by laches for having
slept on his right for almost 23 years from the time Respondent Palanca's title
had been issued.
In the Assailed Resolution, the CA acknowledged that it had erred when it
ruled on the merits of the case. It agreed with petitioner that the trial court had
acted without jurisdiction in perfunctorily dismissing his September 10, 1999
Motion for Reconsideration, on the erroneous ground that it was a third and
prohibited motion when it was actually only his first motion.
Nonetheless, the Complaint was dismissed motu proprio by the challenged
Resolution of the CA Special Division of five members — with two justices
dissenting — pursuant to its "residual prerogative" under Section 1 of Rule 9 of
the Rules of Court.

From the allegations of the Complaint, the appellate court opined that
petitioner clearly had no standing to seek reconveyance of the disputed land,
because he neither held title to it nor even applied for a homestead patent. It
reiterated that only the State could sue for cancellation of the title issued upon a
homestead patent, and for reversion of the land to the public domain. IAEcCT

Finally, it ruled that prescription had already barred the action for
reconveyance. First, petitioner's action was brought 24 years after the issuance
of Palanca's homestead patent. Under the Public Land Act, such action should
have been taken within ten years from the issuance of the homestead certificate
of title. Second, it appears from the submission (Annex "F" of the Complaint) of
petitioner himself that Respondents Fresnillo and Palanca had been occupying
six hectares of the island since 1965, or 33 years before he took legal steps to
assert his right to the property. His action was filed beyond the 30-year
prescriptive period under Articles 1141 and 1137 of the Civil Code.
Hence, this Petition. 7
Issues
In his Memorandum, petitioner raises the following issues:
"1. Is the Court of Appeals correct in resolving the Petition
for Certiorari based on an issue not raised (the merits of the case) in the
Petition?
"2. Is the Court of Appeals correct in invoking its alleged 'residual
prerogative' under Section 1, Rule 9 of the 1997 Rules of Civil Procedure
in resolving the Petition on an issue not raised in the Petition?" 8
The Court's Ruling
The Petition has no merit.
First Issue:
Propriety of Ruling on the Merits
This is not the first time that petitioner has taken issue with the propriety of
the CA's ruling on the merits. He raised it with the appellate court when he
moved for reconsideration of its December 8, 2000 Decision. The CA even
corrected itself in its November 20, 2001 Resolution, as follows:
"Upon another review of the case, the Court concedes that it may
indeed have lost its way and been waylaid by the variety, complexity and
seeming importance of the interests and issues involved in the case
below, the apparent reluctance of the judges, five in all, to hear the case,
and the volume of the conflicting, often confusing, submissions bearing
on incidental matters. We stand corrected." 9
That explanation should have been enough to settle the issue. The CA's
Resolution on this point has rendered petitioner's issue moot. Hence, there is no
need to discuss it further. Suffice it to say that the appellate court indeed
acted ultra jurisdictio in ruling on the merits of the case when the only issue that
could have been, and was in fact, raised was the alleged grave abuse of
discretion committed by the trial court in denying petitioner's Motion for
Reconsideration. Settled is the doctrine that the sole office of a writ of certiorari is
the correction of errors of jurisdiction. Such writ does not include a review of the
evidence, 10 more so when no determination of the merits has yet been made by
the trial court, as in this case.
Second Issue:
Dismissal for Prescription and Lack of Jurisdiction
Petitioner next submits that the CA erroneously invoked its "residual
prerogatives" under Section 1 of Rule 9 of the Rules of Court when it motu
propriodismissed the Petition for lack of jurisdiction and prescription. According to
him, residual prerogative refers to the power that the trial court, in the exercise of
its original jurisdiction, may still validly exercise even after perfection of an
appeal. It follows that such powers are not possessed by an appellate court.
Petitioner has confused what the CA adverted to as its "residual
prerogatives" under Section 1 of Rule 9 of the Rules of Court with the "residual
jurisdiction" of trial courts over cases appealed to the CA.
Under Section 1 of Rule 9 of the Rules of Court, defenses and objections
not pleaded either in a motion to dismiss or in the answer are deemed waived,
except when (1) lack of jurisdiction over the subject matter, (2) litis pendentia,
(3) res judicata and (4) prescription are evident from the pleadings or the
evidence on record. In the four excepted instances, the court shall motu
proprio dismiss the claim or action. In Gumabon v. Larin 11 we explained thus:
". . . [T]he motu proprio dismissal of a case was traditionally
limited to instances when the court clearly had no jurisdiction over the
subject matter and when the plaintiff did not appear during trial, failed to
prosecute his action for an unreasonable length of time or neglected to
comply with the rules or with any order of the court. Outside of these
instances, any motu proprio dismissal would amount to a violation of the
right of the plaintiff to be heard. Except for qualifying and expanding
Section 2, Rule 9, and Section 3, Rule 17, of the Revised Rules of Court,
the amendatory 1997 Rules of Civil Procedure brought about no radical
change. Under the new rules, a court may motu proprio dismiss a claim
when it appears from the pleadings or evidence on record that it has no
jurisdiction over the subject matter; when there is another cause of
action pending between the same parties for the same cause, or where
the action is barred by a prior judgment or by statute of limitations. . .
." 12 (Italics supplied)
On the other hand, "residual jurisdiction" is embodied in Section 9 of Rule
41 of the Rules of Court, as follows: cCTESa

"SEC. 9. Perfection of appeal; effect thereof . — A party's appeal

by notice of appeal is deemed perfected as to him upon the filing of the
notice of appeal in due time.
 "A party's appeal by record on appeal is deemed perfected as to
him with respect to the subject matter thereof upon the approval of the
record on appeal filed in due time.
"In appeals by notice of appeal, the court loses jurisdiction over
the case upon the perfection of the appeals filed in due time and the
expiration of the time to appeal of the other parties.
"In appeals by record on appeal, the court loses jurisdiction only
over the subject matter thereof upon the approval of the records on
appeal filed in due time and the expiration of the time to appeal of the
other parties.
"In either case, prior to the transmittal of the original record or the
record on appeal, the court may issue orders for the protection and
preservation of the rights of the parties which do not involve any matter
litigated by the appeal, approve compromises, permit appeals of indigent
litigants, order execution pending appeal in accordance with Section 2 of
Rule 39, and allow withdrawal of the appeal." (Italics supplied)
The "residual jurisdiction" of trial courts is available at a stage in which the
court is normally deemed to have lost jurisdiction over the case or the subject
matter involved in the appeal. This stage is reached upon the perfection of the
appeals by the parties or upon the approval of the records on appeal, but prior to
the transmittal of the original records or the records on appeal. 13 In either
instance, the trial court still retains its so-called residual jurisdiction to issue
protective orders, approve compromises, permit appeals of indigent litigants,
order execution pending appeal, and allow the withdrawal of the appeal.
The CA's motu proprio dismissal of petitioner's Complaint could not have
been based, therefore, on residual jurisdiction under Rule 41. Undeniably, such
order of dismissal was not one for the protection and preservation of the rights of
the parties, pending the disposition of the case on appeal. What the CA referred
to as residual prerogatives were the general residual powers of the courts to
dismiss an action motu proprio upon the grounds mentioned in Section 1 of Rule
9 of the Rules of Court and under authority of Section 2 of Rule 1 14 of the same
rules.
To be sure, the CA had the excepted instances in mind when it dismissed
the Complaint motu proprio "on more fundamental grounds directly bearing on
the lower court's lack of jurisdiction" 15 and for prescription of the action. Indeed,
when a court has no jurisdiction over the subject matter, the only power it has is
to dismiss the action. 16
Jurisdiction over the subject matter is conferred by law and is determined
by the allegations in the complaint and the character of the relief sought. 17 In his
Complaint for "Nullification of Applications for Homestead and Original Certificate
of Title No. G-7089 and for Reconveyance of Title," 18 petitioner averred:
 "2. That on November 10, 1965, without the knowledge of
[petitioner, Respondent] Manuel Palanca Jr., [petitioner's] cousin, in
connivance with his co-[respondent], Lorenzo Agustin, . . . fraudulently
and in bad faith:
2.1. . . . made the request for authority to survey as a pre-
requisite to the filing of an application for homestead patent in his
name and that of his Co-[Respondent] Agustin, [despite being]
fully aware that [Petitioner] KATON had previously applied or
requested for re-classification and certification of the same land
from forest land to agricultural land which request was favorably
acted upon and approved as mentioned earlier; a clear case of
intrinsic fraud and misrepresentation;
xxx xxx xxx
2.3. In stating in his application for homestead patent that
he was applying for the VACANT PORTION of Sombrero Island
where there was none, the same constituted another clear case of
fraud and misrepresentation;
"3. That the issuance of Homestead Patent No. 145927 and OCT
No. G-7089 in the name of [Respondent] Manuel Palanca Jr. and the
filing of Homestead Patent Applications in the names of [respondents],
Lorenzo Agustin, Jesus Gapilango and Juan Fresnillo[,] having been
done fraudulently and in bad faith, are ipso facto null and void and of no
effect whatsoever." 19
xxx xxx xxx
". . . By a wrongful act or a willful omission and intending the
effects with natural necessity arise knowing from such act or omission,
[Respondent Palanca] on account of his blood relation, first degree
cousins, trust, interdependence and intimacy is guilty of intrinsic fraud
[sic] . . ." 20

Thereupon, petitioner prayed, among others, for a judgment (1) nullifying

the homestead patent applications of Respondents Agustin, Fresnillo and
Gapilango as well as Homestead Patent No. 145927 and OCT No. G-7089 in the
name of Respondent Palanca; and (2) ordering the director of the Land
Management Bureau to reconvey the Sombrero Island to petitioner. 21
The question is, did the Complaint sufficiently allege an action for
declaration of nullity of the free patent and certificate of title or, alternatively, for
reconveyance? Or did it plead merely for reversion?
The Complaint did not sufficiently make a case for any of such actions,
over which the trial court could have exercised jurisdiction. HECTaA
 In an action for nullification of title or declaration of its nullity, the complaint
must contain the following allegations: 1) that the contested land was privately
owned by the plaintiff prior to the issuance of the assailed certificate of title to the
defendant; and 2) that the defendant perpetuated a fraud or committed a mistake
in obtaining a document of title over the parcel of land claimed by the
plaintiff. 22 In these cases, the nullity arises not from fraud or deceit, but from the
fact that the director of the Land Management Bureau had no jurisdiction to
bestow title; hence, the issued patent or certificate of title was void ab initio. 23
In an alternative action for reconveyance, the certificate of title is also
respected as incontrovertible, but the transfer of the property or title thereto is
sought to be nullified on the ground that it was wrongfully or erroneously
registered in the defendant's name. 24 As with an annulment of title, a complaint
must allege two facts that, if admitted, would entitle the plaintiff to recover title to
the disputed land: (1) that the plaintiff was the owner of the land, and (2) that the
defendant illegally dispossessed the plaintiff of the property. 25 Therefore, the
defendant who acquired the property through mistake or fraud is bound to hold
and reconvey to the plaintiff the property or the title thereto. 26
In the present case, nowhere in the Complaint did petitioner allege that he
had previously held title to the land in question. On the contrary, he
acknowledged that the disputed island was public land, 27 that it had never been
privately titled in his name, and that he had not applied for a homestead under
the provisions of the Public Land Act. 28 This Court has held that a complaint by a
private party who alleges that a homestead patent was obtained by fraudulent
means, and who consequently prays for its annulment, does not state a cause of
action; hence, such complaint must be dismissed. 29
Neither can petitioner's case be one for reversion. Section 101 of the
Public Land Act categorically declares that only the solicitor general or the officer
in his stead may institute such an action. 30 A private person may not bring an
action for reversion or any other action that would have the effect of canceling a
free patent and its derivative title, with the result that the land thereby covered
would again form part of the public domain. 31
Thus, when the plaintiff admits in the complaint that the disputed land will
revert to the public domain even if the title is canceled or amended, the action is
for reversion; and the proper party who may bring action is the government, to
which the property will revert. 32 A mere homestead applicant, not being the real
party in interest, has no cause of action in a suit for reconveyance. 33 As it is,
vested rights over the land applied for under a homestead may be validly claimed
only by the applicant, after approval by the director of the Land Management
Bureau of the former's final proof of homestead patent. 34
 Consequently, the dismissal of the Complaint is proper not only because of
lack of jurisdiction, but also because of the utter absence of a cause of
action, 35 a defense raised by respondents in their Answer. 36 Section 2 of Rule 3
of the Rules of Court 37 ordains that every action must be prosecuted or
defended in the name of the real party in interest, who stands to be benefited or
injured by the judgment in the suit. Indeed, one who has no right or interest to
protect has no cause of action by which to invoke, as a party-plaintiff, the
jurisdiction of the court. 38
Finally, assuming that petitioner is the proper party to bring the action for
annulment of title or its reconveyance, the case should still be dismissed for
being time-barred. 39 It is not disputed that a homestead patent and an Original
Certificate of Title was issued to Palanca on February 21, 1977, 40 while the
Complaint was filed only on October 6, 1998. Clearly, the suit was brought way
past ten years from the date of the issuance of the Certificate, the prescriptive
period for reconveyance of fraudulently registered real property. 41
It must likewise be stressed that Palanca's title — which attained the status
of indefeasibility one year from the issuance of the patent and the Certificate of
Title in February 1977 — is no longer open to review on the ground of actual
fraud. Ybanez v. Intermediate Appellate Court 42 ruled that a certificate of title,
issued under an administrative proceeding pursuant to a homestead patent, is as
indefeasible as one issued under a judicial registration proceeding one year from
its issuance; provided, however, that the land covered by it is disposable public
land, as in this case.
In Aldovino v. Alunan, 43 the Court has held that when the plaintiff's own
complaint shows clearly that the action has prescribed, such action may be
dismissed even if the defense of prescription has not been invoked by the
defendant. In Gicano v. Gegato, 44 we also explained thus:
". . . [T]rial courts have authority and discretion to dismiss an
action on the ground of prescription when the parties' pleadings or other
facts on record show it to be indeed time-barred; (Francisco v. Robles,
Feb. 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan.
28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC,
Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and
it may do so on the basis of a motion to dismiss (Sec. 1, f, Rule 16,
Rules of Court), or an answer which sets up such ground as an
affirmative defense (Sec. 5, Rule 16), or even if the ground is alleged
after judgment on the merits, as in a motion for reconsideration (Ferrer
v. Ericta, 84 SCRA 705); or even if the defense has not been asserted at
all, as where no statement thereof is found in the pleadings (Garcia
v.Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27 SCRA
766; Chua Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant
has been declared in default (PNB v. Perez, 16 SCRA 270). What is
 essential only, to repeat, is that the facts demonstrating the lapse of the
prescriptive period be otherwise sufficiently and satisfactorily apparent
on the record; either in the averments of the plaintiff's complaint, or
otherwise established by the evidence." 45 (Italics supplied)
Clearly then, the CA did not err in dismissing the present case. After all, if
and when they are able to do so, courts must endeavor to settle entire
controversies before them to prevent future litigations. 46
WHEREFORE, the Petition is hereby DENIED, and the assailed
Resolution AFFIRMED. The dismissal of the Complaint in Civil Case No. 3231 is
SUSTAINED on the grounds of lack of jurisdiction, failure to state a cause of
action and prescription. Costs against petitioner.
SO ORDERED.
(Katon v. Palanca, Jr., G.R. No. 151149, [September 7, 2004], 481 PHIL 168-
|||

188)

12. Figueroa v People 558 SCRA 63

THIRD DIVISION

[G.R. No. 147406. July 14, 2008.]

VENANCIO FIGUEROA y CERVANTES, 1 petitioner, vs. PEOPLE

OF THE PHILIPPINES, respondent.

DECISION

NACHURA, J : p

When is a litigant estopped by laches from assailing the jurisdiction of a

tribunal? This is the paramount issue raised in this petition for review of the
February 28, 2001 Decision 2 of the Court of Appeals (CA) in CA-G.R. CR No.
22697. DcCIAa

Pertinent are the following antecedent facts and proceedings:

On July 8, 1994, an information 3 for reckless imprudence resulting in
homicide was filed against the petitioner before the Regional Trial Court
(RTC) of Bulacan, Branch 18. 4 The case was docketed as Criminal Case No.
2235-M-94. 5 Trial on the merits ensued and on August 19, 1998, the trial
court convicted the petitioner as charged. 6 In his appeal before the CA, the
petitioner questioned, among others, for the first time, the trial court's
jurisdiction. 7
The appellate court, however, in the challenged decision, considered
the petitioner to have actively participated in the trial and to have belatedly
attacked the jurisdiction of the RTC; thus, he was already estopped by laches
from asserting the trial court's lack of jurisdiction. Finding no other ground to
reverse the trial court's decision, the CA affirmed the petitioner's conviction
but modified the penalty imposed and the damages awarded. 8
Dissatisfied, the petitioner filed the instant petition for review
on certiorari raising the following issues for our resolution:
a. Does the fact that the petitioner failed to raise the issue of jurisdiction
during the trial of this case, which was initiated and filed by the public
prosecutor before the wrong court, constitute laches in relation to the
doctrine laid down in Tijam v. Sibonghanoy, notwithstanding the fact that
said issue was immediately raised in petitioner's appeal to the Honorable
Court of Appeals? Conversely, does the active participation of the
petitioner in the trial of his case, which is initiated and filed not by him but
by the public prosecutor, amount to estoppel?
b. Does the admission of the petitioner that it is difficult
to immediately stop a bus while it is running at 40 kilometers per
hour for the purpose of avoiding a person who unexpectedly
crossed the road, constitute enough incriminating evidence to warrant
his conviction for the crime charged?
c. Is the Honorable Court of Appeals justified in considering the place of
accident as falling within Item 4 of Section 35 (b) of the Land
Transportation and Traffic Code, and subsequently ruling that the speed
limit thereto is only 20 kilometers per hour, when no evidence
whatsoever to that effect was ever presented by the prosecution during
the trial of this case?
d. Is the Honorable Court of Appeals justified in convicting the petitioner
for homicide through reckless imprudence (the legally correct
designation is "reckless imprudence resulting to homicide") with
violation of the Land Transportation and Traffic Code when the
prosecution did not prove this during the trial and, more importantly, the
information filed against the petitioner does not contain an allegation to
that effect?EcHAaS

e. Does the uncontroverted testimony of the defense witness Leonardo

Hernal that the victim unexpectedly crossed the road resulting in him
getting hit by the bus driven by the petitioner not enough evidence to
acquit him of the crime charged? 9
 Applied uniformly is the familiar rule that the jurisdiction of the court to
hear and decide a case is conferred by the law in force at the time of the
institution of the action, unless such statute provides for a retroactive
application thereof. 10 In this case, at the time the criminal information for
reckless imprudence resulting in homicide with violation of the Automobile
Law (now Land Transportation and Traffic Code) was filed, Section 32 (2)
of Batas Pambansa (B.P.) Blg. 129 11 had already been amended by Republic
Act No. 7691. 12 The said provision thus reads:
Sec. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts
and Municipal Circuit Trial Courts in Criminal Cases. — Except in cases
falling within the exclusive original jurisdiction of Regional Trial Courts
and the Sandiganbayan, the Metropolitan Trial Courts, Municipal Trial
Courts, and Municipal Circuit Trial Courts shall exercise:
xxx xxx xxx
(2) Exclusive original jurisdiction over all offenses punishable with
imprisonment not exceeding six (6) years irrespective of the amount of
fine, and regardless of other imposable accessory or other penalties,
including the civil liability arising from such offenses or predicated
thereon, irrespective of kind, nature, value or amount thereof: Provided,
however, That in offenses involving damage to property through criminal
negligence, they shall have exclusive original jurisdiction thereof.
As the imposable penalty for the crime charged herein is prision
correccional in its medium and maximum periods or imprisonment for 2 years,
4 months and 1 day to 6 years, 13 jurisdiction to hear and try the same is
conferred on the Municipal Trial Courts (MTCs). Clearly, therefore, the RTC of
Bulacan does not have jurisdiction over Criminal Case No. 2235-M-94.
While both the appellate court and the Solicitor General acknowledge
this fact, they nevertheless are of the position that the principle of estoppel by
laches has already precluded the petitioner from questioning the jurisdiction of
the RTC — the trial went on for 4 years with the petitioner actively
participating therein and without him ever raising the jurisdictional infirmity.
The petitioner, for his part, counters that the lack of jurisdiction of a court over
the subject matter may be raised at any time even for the first time on appeal.
As undue delay is further absent herein, the principle of laches will not be
applicable. aCTADI

To settle once and for all this problem of jurisdiction vis-à-vis estoppel
by laches, which continuously confounds the bench and the bar, we shall
analyze the various Court decisions on the matter.
As early as 1901, this Court has declared that unless jurisdiction has
been conferred by some legislative act, no court or tribunal can act on a
matter submitted to it. 14 We went on to state in U.S. v. De La Santa 15 that:
It has been frequently held that a lack of jurisdiction over the subject-
matter is fatal, and subject to objection at any stage of the proceedings,
either in the court below or on appeal (Ency. of Pl. & Pr., vol. 12, p. 189,
and large array of cases there cited), and indeed, where the subject-
matter is not within the jurisdiction, the court may dismiss the
proceeding ex mero motu. (4 Ill., 133; 190 Ind., 79; Chipman vs.
Waterbury, 59 Conn., 496).
Jurisdiction over the subject-matter in a judicial proceeding is conferred
by the sovereign authority which organizes the court; it is given only by
law and in the manner prescribed by law and an objection based on the
lack of such jurisdiction can not be waived by the parties. . . . 16
Later, in People v. Casiano, 17 the Court explained:
4. The operation of the principle of estoppel on the question of
jurisdiction seemingly depends upon whether the lower court
actually had jurisdiction or not. If it had no jurisdiction, but the case
was tried and decided upon the theory that it had jurisdiction, the
parties are not barred, on appeal, from assailing such jurisdiction,
for the same "must exist as a matter of law, and may not be
conferred by consent of the parties or by estoppel" (5 C.J.S., 861-
863). However, if the lower court had jurisdiction, and the case was
heard and decided upon a given theory, such, for instance, as that the
court had no jurisdiction, the party who induced it to adopt such theory
will not be permitted, on appeal, to assume an inconsistent position —
that the lower court had jurisdiction. Here, the principle of estoppel
applies. The rule that jurisdiction is conferred by law, and does not
depend upon the will of the parties, has no bearing thereon. Thus,
Corpus Juris Secundum says: DcaSIH

Where accused has secured a decision that the indictment is

void, or has been granted an instruction based on its defective
character directing the jury to acquit, he is estopped, when
subsequently indicted, to assert that the former indictment was
valid. In such case, there may be a new prosecution whether the
indictment in the former prosecution was good or
bad. Similarly, where, after the jury was impaneled and sworn, the
court on accused's motion quashed the information on the
erroneous assumption that the court had no jurisdiction, accused
cannot successfully plead former jeopardy to a new information. .
. . (22 C.J.S., sec. 252, pp. 388-389; italics ours).
Where accused procured a prior conviction to be set aside on the
ground that the court was without jurisdiction, he is
estopped subsequently to assert, in support of a defense of
previous jeopardy, that such court had jurisdiction." (22 C.J.S. p.
378). 18
 But in Pindañgan Agricultural Co., Inc. v. Dans, 19 the Court, in not
sustaining the plea of lack of jurisdiction by the plaintiff-appellee therein, made
the following observations:
It is surprising why it is only now, after the decision has been rendered,
that the plaintiff-appellee presents the question of this Court's jurisdiction
over the case.Republic Act No. 2613 was enacted on August 1, 1959.
This case was argued on January 29, 1960. Notwithstanding this fact,
the jurisdiction of this Court was never impugned until the adverse
decision of this Court was handed down. The conduct of counsel leads
us to believe that they must have always been of the belief that
notwithstanding said enactment of Republic Act 2613 this Court has
jurisdiction of the case, such conduct being born out of a conviction that
the actual real value of the properties in question actually exceeds the
jurisdictional amount of this Court (over P200,000). Our minute
resolution in G.R. No. L-10096, Hyson Tan, et al. vs. Filipinas Compaña
de Seguros, et al., of March 23, 1956, a parallel case, is applicable to
the conduct of plaintiff-appellee in this case, thus:DaIACS

. . . that an appellant who files his brief and submits his case to
the Court of Appeals for decision, without questioning the latter's
jurisdiction until decision is rendered therein, should be
considered as having voluntarily waived so much of his claim as
would exceed the jurisdiction of said Appellate Court; for the
reason that a contrary rule would encourage the undesirable
practice of appellants submitting their cases for decision to the
Court of Appeals in expectation of favorable judgment, but with
intent of attacking its jurisdiction should the decision be
unfavorable: . . . 20
Then came our ruling in Tijam v. Sibonghanoy 21 that a party may be
barred by laches from invoking lack of jurisdiction at a late hour for the
purpose of annulling everything done in the case with the active participation
of said party invoking the plea. We expounded, thus:
A party may be estopped or barred from raising a question in different
ways and for different reasons. Thus, we speak of estoppel in pais, of
estoppel by deed or by record, and of estoppel by laches.
Laches, in a general sense, is failure or neglect, for an unreasonable
and unexplained length of time, to do that which, by exercising due
diligence, could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or
declined to assert it.
The doctrine of laches or of "stale demands" is based upon grounds of
public policy which requires, for the peace of society, the
 discouragement of stale claims and, unlike the statute of limitations, is
not a mere question of time but is principally a question of the inequity or
unfairness of permitting a right or claim to be enforced or asserted.
It has been held that a party cannot invoke the jurisdiction of a court to
secure affirmative relief against his opponent and, after obtaining or
failing to obtain such relief, repudiate or question that same jurisdiction
(Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just cited, by
way of explaining the rule, it was further said that the question whether
the court had jurisdiction either of the subject matter of the action or of
the parties was not important in such cases because the party is barred
from such conduct not because the judgment or order of the court is
valid and conclusive as an adjudication, but for the reason that such a
practice cannot be tolerated — obviously for reasons of public policy.
Furthermore, it has also been held that after voluntarily submitting a
cause and encountering an adverse decision on the merits, it is too late
for the loser to question the jurisdiction or power of the court (Pease vs.
Rathbun-Jones etc., 243 U.S. 273, 61 L. Ed. 715, 37 S.Ct. 283; St. Louis
etc. vs. McBride, 141 U.S. 127, 35 L. Ed. 659). And in Littleton vs.
Burgess, 16 Wyo. 58, the Court said that it is not right for a party who
has affirmed and invoked the jurisdiction of a court in a particular matter
to secure an affirmative relief, to afterwards deny that same jurisdiction
to escape a penalty. DCScaT

Upon this same principle is what We said in the three cases mentioned
in the resolution of the Court of Appeals of May 20, 1963 (supra) — to
the effect that we frown upon the "undesirable practice" of a party
submitting his case for decision and then accepting the judgment, only if
favorable, and attacking it for lack of jurisdiction, when adverse — as
well as in Pindañgan etc. vs. Dans et al., G.R. L-14591, September 26,
1962; Montelibano et al. vs. Bacolod-Murcia Milling Co., Inc., G.R. L-
15092;Young Men Labor Union etc. vs. The Court of Industrial Relations
et al., G.R. L-20307, Feb. 26, 1965, and Mejia vs. Lucas, 100 Phil. p.
277.
The facts of this case show that from the time the Surety became a
quasi-party on July 31, 1948, it could have raised the question of the lack of
jurisdiction of the Court of First Instance of Cebu to take cognizance of the
present action by reason of the sum of money involved which, according to
the law then in force, was within the original exclusive jurisdiction of inferior
courts. It failed to do so. Instead, at several stages of the proceedings in the
court a quo, as well as in the Court of Appeals, it invoked the jurisdiction of
said courts to obtain affirmative relief and submitted its case for a final
adjudication on the merits. It was only after an adverse decision was rendered
by the Court of Appeals that it finally woke up to raise the question of
jurisdiction. Were we to sanction such conduct on its part, We would in effect
be declaring as useless all the proceedings had in the present case since it
was commenced on July 19, 1948 and compel the judgment creditors to go
up their Calvary once more. The inequity and unfairness of this is not only
patent but revolting. 22aTcIAS

For quite a time since we made this pronouncement

in Sibonghanoy, courts and tribunals, in resolving issues that involve the
belated invocation of lack of jurisdiction, have applied the principle of estoppel
by laches. Thus, in Calimlim v. Ramirez, 23 we pointed out
that Sibonghanoy was developing into a general rule rather than the
exception:
A rule that had been settled by unquestioned acceptance and upheld in
decisions so numerous to cite is that the jurisdiction of a court over the
subject-matter of the action is a matter of law and may not be conferred
by consent or agreement of the parties. The lack of jurisdiction of a court
may be raised at any stage of the proceedings, even on appeal. This
doctrine has been qualified by recent pronouncements which stemmed
principally from the ruling in the cited case of Sibonghanoy. It is to be
regretted, however, that the holding in said case had been applied to
situations which were obviously not contemplated therein. The
exceptional circumstance involved in Sibonghanoy which justified the
departure from the accepted concept of non-waivability of objection to
jurisdiction has been ignored and, instead a blanket doctrine had been
repeatedly upheld that rendered the supposed ruling in Sibonghanoy not
as the exception, but rather the general rule, virtually overthrowing
altogether the time-honored principle that the issue of jurisdiction is not
lost by waiver or by estoppel. DIcTEC

In Sibonghanoy, the defense of lack of jurisdiction of the court that

rendered the questioned ruling was held to be barred by estoppel by
laches. It was ruled that the lack of jurisdiction having been raised for the
first time in a motion to dismiss filed almost fifteen (15) years after the
questioned ruling had been rendered, such a plea may no longer be
raised for being barred by laches. As defined in said case, laches is
"failure or neglect, for an unreasonable and unexplained length of time,
to do that which, by exercising due diligence, could or should have been
done earlier; it is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to
assert has abandoned it or declined to assert it. 24
In Calimlim, despite the fact that the one who benefited from the plea of
lack of jurisdiction was the one who invoked the court's jurisdiction, and who
later obtained an adverse judgment therein, we refused to apply the ruling
in Sibonghanoy. The Court accorded supremacy to the time-honored
principle that the issue of jurisdiction is not lost by waiver or by
estoppel.
 Yet, in subsequent cases decided after Calimlim, which by sheer
volume are too plentiful to mention, the Sibonghanoy doctrine, as foretold
in Calimlim,became the rule rather than the exception. As such, in Soliven v.
Fastforms Philippines, Inc., 25 the Court ruled:
While it is true that jurisdiction may be raised at any time, "this rule
presupposes that estoppel has not supervened." In the instant case,
respondent actively participated in all stages of the proceedings before
the trial court and invoked its authority by asking for an affirmative relief.
Clearly, respondent is estopped from challenging the trial court's
jurisdiction, especially when an adverse judgment has been rendered.
In PNOC Shipping and Transport Corporation vs. Court of Appeals,we
held:
Moreover, we note that petitioner did not question at all the
jurisdiction of the lower court . . . in its answers to both the
amended complaint and the second amended complaint. It did so
only in its motion for reconsideration of the decision of the lower
court after it had received an adverse decision. As this Court held
in Pantranco North Express, Inc. vs. Court of Appeals (G.R. No.
105180, July 5, 1993, 224 SCRA 477, 491), participation in all
stages of the case before the trial court, that included invoking its
authority in asking for affirmative relief, effectively barred
petitioner by estoppel from challenging the court's jurisdiction.
Notably, from the time it filed its answer to the second amended
complaint on April 16, 1985, petitioner did not question the lower
court's jurisdiction. It was only on December 29, 1989 when it filed
its motion for reconsideration of the lower court's decision that
petitioner raised the question of the lower court's lack of
jurisdiction. Petitioner thus foreclosed its right to raise the issue of
jurisdiction by its own inaction. (italics ours)
cAaDCE

Similarly, in the subsequent case of Sta. Lucia Realty and Development,

Inc. vs. Cabrigas, we ruled:
In the case at bar, it was found by the trial court in its 30
September 1996 decision in LCR Case No. Q-60161(93) that
private respondents (who filed the petition for reconstitution of
titles) failed to comply with both sections 12 and 13 of RA 26 and
therefore, it had no jurisdiction over the subject matter of the
case. However, private respondents never questioned the trial
court's jurisdiction over its petition for reconstitution throughout
the duration of LCR Case No. Q-60161(93). On the contrary,
private respondents actively participated in the reconstitution
proceedings by filing pleadings and presenting its evidence. They
invoked the trial court's jurisdiction in order to obtain affirmative
relief — the reconstitution of their titles. Private respondents have
 thus foreclosed their right to raise the issue of jurisdiction by their
own actions. cAHIST

The Court has constantly upheld the doctrine that while

jurisdiction may be assailed at any stage, a litigant's participation
in all stages of the case before the trial court, including the
invocation of its authority in asking for affirmative relief, bars such
party from challenging the court's jurisdiction (PNOC Shipping
and Transport Corporation vs. Court of Appeals, 297 SCRA 402
[1998]). A party cannot invoke the jurisdiction of a court to secure
affirmative relief against his opponent and after obtaining or failing
to obtain such relief, repudiate or question that same
jurisdiction (Asset Privatization Trust vs. Court of Appeals, 300
SCRA 579 [1998]; Province of Bulacan vs. Court of Appeals, 299
SCRA 442 [1998]). The Court frowns upon the undesirable
practice of a party participating in the proceedings and submitting
his case for decision and then accepting judgment, only if
favorable, and attacking it for lack of jurisdiction, when
adverse(Producers Bank of the Philippines vs. NLRC, 298 SCRA
517 [1998], citing Ilocos Sur Electric Cooperative, Inc. vs.
NLRC, 241 SCRA 36 [1995]). (italics ours) 26
Noteworthy, however, is that, in the 2005 case of Metromedia Times
Corporation v. Pastorin, 27 where the issue of lack of jurisdiction was raised
only in the National Labor Relations Commission (NLRC) on appeal, we
stated, after examining the doctrines of jurisdiction vis-à-vis estoppel, that the
ruling in Sibonghanoystands as an exception, rather than the general rule.
Metromedia, thus, was not estopped from assailing the jurisdiction of the labor
arbiter before the NLRC on appeal. 28
Later, in Francel Realty Corporation v. Sycip, 29 the Court clarified that:
Petitioner argues that the CA's affirmation of the trial court's dismissal of
its case was erroneous, considering that a full-blown trial had already
been conducted. In effect, it contends that lack of jurisdiction could no
longer be used as a ground for dismissal after trial had ensued and
ended.
The above argument is anchored on estoppel by laches, which has been
used quite successfully in a number of cases to thwart dismissals based
on lack of jurisdiction.Tijam v. Sibonghanoy, in which this doctrine was
espoused, held that a party may be barred from questioning a court's
jurisdiction after being invoked to secure affirmative relief against its
opponent. In fine, laches prevents the issue of lack of jurisdiction from
being raised for the first time on appeal by a litigant whose purpose is to
annul everything done in a trial in which it has actively participated. TcEaAS

Laches is defined as the "failure or neglect for an unreasonable and

unexplained length of time, to do that which, by exercising due diligence,
 could or should have been done earlier; it is negligence or omission to
assert a right within a reasonable time, warranting a presumption that
the party entitled to assert it either has abandoned it or declined to
assert it."
The ruling in Sibonghanoy on the matter of jurisdiction is, however, the
exception rather than the rule. Estoppel by laches may be invoked to bar
the issue of lack of jurisdiction only in cases in which the factual milieu is
analogous to that in the cited case. In such controversies, laches should
be clearly present; that is, lack of jurisdiction must have been raised so
belatedly as to warrant the presumption that the party entitled to assert it
had abandoned or declined to assert it. ThatSibonghanoy applies only to
exceptional circumstances is clarified in Calimlim v. Ramirez, which we
quote:
A rule that had been settled by unquestioned acceptance and
upheld in decisions so numerous to cite is that the jurisdiction of a
court over the subject-matter of the action is a matter of law and
may not be conferred by consent or agreement of the parties. The
lack of jurisdiction of a court may be raised at any stage of the
proceedings, even on appeal. This doctrine has been qualified by
recent pronouncements which stemmed principally from the ruling
in the cited case ofSibonghanoy. It is to be regretted, however,
that the holding in said case had been applied to situations which
were obviously not contemplated therein. The exceptional
circumstance involved in Sibonghanoy which justified the
departure from the accepted concept of non-waivability of
objection to jurisdiction has been ignored and, instead a blanket
doctrine had been repeatedly upheld that rendered the supposed
ruling in Sibonghanoy not as the exception, but rather the general
rule, virtually overthrowing altogether the time-honored principle
that the issue of jurisdiction is not lost by waiver or by estoppel.
Indeed, the general rule remains: a court's lack of jurisdiction may be
raised at any stage of the proceedings, even on appeal. The reason is
that jurisdiction is conferred by law, and lack of it affects the very
authority of the court to take cognizance of and to render judgment on
the action. Moreover, jurisdiction is determined by the averments of the
complaint, not by the defenses contained in the answer. 30 HScDIC

Also, in Mangaliag v. Catubig-Pastoral, 31 even if the pleader of lack of

jurisdiction actively took part in the trial proceedings by presenting a witness
to seek exoneration, the Court, reiterating the doctrine in Calimlim, said:
Private respondent argues that the defense of lack of jurisdiction may be
waived by estoppel through active participation in the trial. Such,
however, is not the general rule but an exception, best characterized by
the peculiar circumstances in Tijam vs. Sibonghanoy.
In Sibonghanoy, the party invoking lack of jurisdiction did so only after
 fifteen years and at a stage when the proceedings had already been
elevated to the CA. Sibonghanoy is an exceptional case because of the
presence of laches, which was defined therein as failure or neglect for
an unreasonable and unexplained length of time to do that which, by
exercising due diligence, could or should have been done earlier; it is the
negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert has abandoned
it or declined to assert it. 32
And in the more recent Regalado v. Go, 33 the Court again emphasized
that laches should be clearly present for the Sibonghanoy doctrine to be
applicable, thus:TAIaHE

Laches is defined as the "failure or neglect for an unreasonable and

unexplained length of time, to do that which, by exercising due diligence,
could or should have been done earlier, it is negligence or omission to
assert a right within a reasonable length of time, warranting a
presumption that the party entitled to assert it either has abandoned it or
declined to assert it."
The ruling in People v. Regalario that was based on the landmark
doctrine enunciated in Tijam v. Sibonghanoy on the matter of jurisdiction
by estoppel is the exception rather than the rule. Estoppel by laches may
be invoked to bar the issue of lack of jurisdiction only in cases in which
the factual milieu is analogous to that in the cited case. In such
controversies, laches should have been clearly present; that is, lack of
jurisdiction must have been raised so belatedly as to warrant the
presumption that the party entitled to assert it had abandoned or
declined to assert it.
In Sibonghanoy, the defense of lack of jurisdiction was raised for the first
time in a motion to dismiss filed by the Surety almost 15 years after the
questioned ruling had been rendered. At several stages of the
proceedings, in the court a quo as well as in the Court of Appeals, the
Surety invoked the jurisdiction of the said courts to obtain affirmative
relief and submitted its case for final adjudication on the merits. It was
only when the adverse decision was rendered by the Court of Appeals
that it finally woke up to raise the question of jurisdiction.
Clearly, the factual settings attendant in Sibonghanoy are not present in
the case at bar. Petitioner Atty. Regalado, after the receipt of the Court
of Appeals resolution finding her guilty of contempt, promptly filed a
Motion for Reconsideration assailing the said court's jurisdiction based
on procedural infirmity in initiating the action. Her compliance with the
appellate court's directive to show cause why she should not be cited for
contempt and filing a single piece of pleading to that effect could not be
considered as an active participation in the judicial proceedings so as to
take the case within the milieu of Sibonghanoy. Rather, it is the natural
 fear to disobey the mandate of the court that could lead to dire
consequences that impelled her to comply. 34 cEaTHD

The Court, thus, wavered on when to apply the exceptional

circumstance in Sibonghanoy and on when to apply the general rule
enunciated as early as in De La Santa and expounded at length in Calimlim.
The general rule should, however, be, as it has always been, that the issue of
jurisdiction may be raised at any stage of the proceedings, even on appeal,
and is not lost by waiver or by estoppel. Estoppel by laches, to bar a litigant
from asserting the court's absence or lack of jurisdiction, only supervenes in
exceptional cases similar to the factual milieu of Tijam v. Sibonghanoy.
Indeed, the fact that a person attempts to invoke unauthorized jurisdiction of a
court does not estop him from thereafter challenging its jurisdiction over the
subject matter, since such jurisdiction must arise by law and not by mere
consent of the parties. This is especially true where the person seeking to
invoke unauthorized jurisdiction of the court does not thereby secure any
advantage or the adverse party does not suffer any harm. 35 ITScHa

Applying the said doctrine to the instant case, the petitioner is in no way
estopped by laches in assailing the jurisdiction of the RTC, considering that
he raised the lack thereof in his appeal before the appellate court. At that
time, no considerable period had yet elapsed for laches to attach. True, delay
alone, though unreasonable, will not sustain the defense of "estoppel by
laches" unless it further appears that the party, knowing his rights, has not
sought to enforce them until the condition of the party pleading laches has in
good faith become so changed that he cannot be restored to his former state,
if the rights be then enforced, due to loss of evidence, change of title,
intervention of equities, and other causes. 36 In applying the principle of
estoppel by laches in the exceptional case of Sibonghanoy,the Court therein
considered the patent and revolting inequity and unfairness of having the
judgment creditors go up their Calvary once more after more or less 15
years. 37 The same, however, does not obtain in the instant case.
We note at this point that estoppel, being in the nature of a forfeiture, is
not favored by law. It is to be applied rarely — only from necessity, and only in
extraordinary circumstances. The doctrine must be applied with great care
and the equity must be strong in its favor. 38 When misapplied, the doctrine of
estoppel may be a most effective weapon for the accomplishment of
injustice. 39 Moreover, a judgment rendered without jurisdiction over the
subject matter is void. 40Hence, the Revised Rules of Court provides for
remedies in attacking judgments rendered by courts or tribunals that have no
jurisdiction over the concerned cases. No laches will even attach when the
judgment is null and void for want of jurisdiction. 41 As we have stated in Heirs
of Julian Dela Cruz and Leonora Talaro v. Heirs of Alberto Cruz, 42
 It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial
officer or government agency, over the nature and subject matter of a
petition or complaint is determined by the material allegations therein
and the character of the relief prayed for, irrespective of whether the
petitioner or complainant is entitled to any or all such reliefs. Jurisdiction
over the nature and subject matter of an action is conferred by the
Constitution and the law, and not by the consent or waiver of the parties
where the court otherwise would have no jurisdiction over the nature or
subject matter of the action. Nor can it be acquired through, or waived
by, any act or omission of the parties. Moreover, estoppel does not apply
to confer jurisdiction to a tribunal that has none over the cause of action.
...
Indeed, the jurisdiction of the court or tribunal is not affected by the
defenses or theories set up by the defendant or respondent in his
answer or motion to dismiss. Jurisdiction should be determined by
considering not only the status or the relationship of the parties but also
the nature of the issues or questions that is the subject of the
controversy. . . . The proceedings before a court or tribunal without
jurisdiction, including its decision, are null and void, hence, susceptible
to direct and collateral attacks. 43cIADaC

With the above considerations, we find it unnecessary to resolve the

other issues raised in the petition.
WHEREFORE, premises considered, the petition for review
on certiorari is GRANTED. Criminal Case No. 2235-M-94 is hereby
DISMISSED without prejudice.
SO ORDERED.
(Figueroa y Cervantes v. People, G.R. No. 147406, [July 14, 2008], 580 PHIL
|||

58-78)

13. Hannah Serrana vs. Sandiganbayan, G.R. No. 162059

THIRD DIVISION

[G.R. No. 162059. January 22, 2008.]

HANNAH EUNICE D. SERANA, petitioner,vs.SANDIGANBAYAN

and PEOPLE OF THE PHILIPPINES, respondents.
 DECISION

REYES, R.T., J : p

CAN the Sandiganbayan try a government scholar ** accused, along

with her brother, of swindling government funds? AcHaTE

MAAARI bang litisin ng Sandiganbayan ang isang iskolar ng

bayan, at ang kanyang kapatid, na kapwa pinararatangan ng estafa ng
pera ng bayan?
The jurisdictional question is posed in this petition for certiorari assailing
the Resolutions 1 of the Sandiganbayan, Fifth Division, denying petitioner's
motion to quash the information and her motion for reconsideration.
The Antecedents
Petitioner Hannah Eunice D. Serana was a senior student of the
University of the Philippines-Cebu. A student of a state university is known as
a government scholar. She was appointed by then President Joseph Estrada
on December 21, 1999 as a student regent of UP, to serve a one-year term
starting January 1, 2000 and ending on December 31, 2000.
In the early part of 2000, petitioner discussed with President Estrada
the renovation of Vinzons Hall Annex in UP Diliman. 2 On September 4, 2000,
petitioner, with her siblings and relatives, registered with the Securities and
Exchange Commission the Office of the Student Regent Foundation, Inc.
(OSRFI). 3
One of the projects of the OSRFI was the renovation of the Vinzons
Hall Annex. 4 President Estrada gave Fifteen Million Pesos (P15,000,000.00)
to the OSRFI as financial assistance for the proposed renovation. The source
of the funds, according to the information, was the Office of the President.
The renovation of Vinzons Hall Annex failed to materialize. 5 The
succeeding student regent, Kristine Clare Bugayong, and Christine Jill de
Guzman, Secretary General of the KASAMA sa U.P., a system-wide alliance
of student councils within the state university, consequently filed a complaint
for Malversation of Public Funds and Property with the Office of the
Ombudsman. 6 aIAcCH

On July 3, 2003, the Ombudsman, after due investigation, found

probable cause to indict petitioner and her brother Jade Ian D. Serana
for estafa, docketed as Criminal Case No. 27819 of the Sandiganbayan. 7 The
Information reads:
 The undersigned Special Prosecution Officer III, Office of the
Special Prosecutor, hereby accuses HANNAH EUNICE D. SERANA
and JADE IAN D. SERANA of the crime of Estafa, defined and
penalized under Paragraph 2(a),Article 315 of the Revised Penal
Code, as amended committed as follows:
That on October, 24, 2000, or sometime prior or subsequent
thereto, in Quezon City, Metro Manila, Philippines, and within the
jurisdiction of this Honorable Court, above-named accused, HANNAH
EUNICE D. SERANA, a high-ranking public officer, being then the
Student Regent of the University of the Philippines, Diliman, Quezon
City,while in the performance of her official functions, committing the
offense in relation to her office and taking advantage of her position,
with intent to gain, conspiring with her brother,JADE IAN D. SERANA,
a private individual, did then and there wilfully, unlawfully and
feloniously defraud the government by falsely and fraudulently
representing to former President Joseph Ejercito Estrada that the
renovation of the Vinzons Hall of the University of the Philippines will
be renovated and renamed as "President Joseph Ejercito Estrada
Student Hall," and for which purpose accused HANNAH EUNICE D.
SERANA requested the amount of FIFTEEN MILLION PESOS
(P15,000,000.00),Philippine Currency, from the Office of the
President,and the latter relying and believing on said false pretenses
and misrepresentation gave and delivered to said accused Land Bank
Check No. 91353 dated October 24, 2000 in the amount of FIFTEEN
MILLION PESOS (P15,000,000.00),which check was subsequently
encashed by accused Jade Ian D. Serana on October 25, 2000 and
misappropriated for their personal use and benefit, and despite
repeated demands made upon the accused for them to return
aforesaid amount, the said accused failed and refused to do so to the
damage and prejudice of the government in the aforesaid amount.
CONTRARY TO LAW. (Underscoring supplied)
Petitioner moved to quash the information. She claimed that the
Sandiganbayan does not have any jurisdiction over the offense charged or
over her person, in her capacity as UP student regent. EcASIC

Petitioner claimed that Republic Act (R.A.) No. 3019, as amended

by R.A. No. 8249, enumerates the crimes or offenses over which the
Sandiganbayan has jurisdiction. 8 It has no jurisdiction over the crime
of estafa. 9 It only has jurisdiction over crimes covered by Title VII, Chapter II,
Section 2 (Crimes Committed by Public Officers),Book II of the Revised Penal
Code (RPC). Estafa falling under Title X, Chapter VI (Crimes Against
Property),Book II of the RPC is not within the Sandiganbayan's jurisdiction.
 She also argued that it was President Estrada, and not the government,
that was duped. Even assuming that she received the P15,000,000.00, that
amount came from Estrada, and not from the coffers of the government. 10
Petitioner likewise posited that the Sandiganbayan had no jurisdiction
over her person. As a student regent, she was not a public officer since she
merely represented her peers, in contrast to the other regents who held their
positions in an ex officio capacity. She added that she was a simple student
and did not receive any salary as a student regent.
She further contended that she had no power or authority to receive
monies or funds. Such power was vested with the Board of Regents (BOR) as
a whole. Since it was not alleged in the information that it was among her
functions or duties to receive funds, or that the crime was committed in
connection with her official functions, the same is beyond the jurisdiction of
the Sandiganbayan citing the case of Soller v. Sandiganbayan. 11
The Ombudsman opposed the motion. 12 It disputed petitioner's
interpretation of the law. Section 4 (b) of Presidential Decree (P.D.) No.
1606 clearly contains the catch-all phrase "in relation to office," thus, the
Sandiganbayan has jurisdiction over the charges against petitioner. In the
same breath, the prosecution countered that the source of the money is a
matter of defense. It should be threshed out during a full-blown trial. 13
According to the Ombudsman, petitioner, despite her protestations, was
a public officer. As a member of the BOR, she hads the general powers of
administration and exerciseds the corporate powers of UP. Based on
Mechem's definition of a public office, petitioner's stance that she was not
compensated, hence, not a public officer, is erroneous. Compensation is not
an essential part of public office. Parenthetically, compensation has been
interpreted to include allowances. By this definition, petitioner was
compensated. 14 IcDESA

Sandiganbayan Disposition
In a Resolution dated November 14, 2003, the Sandiganbayan denied
petitioner's motion for lack of merit. 15 It ratiocinated:
The focal point in controversy is the jurisdiction of the
Sandiganbayan over this case.
It is extremely erroneous to hold that only criminal offenses
covered by Chapter II, Section 2, Title VII, Book II of the Revised Penal
Code are within the jurisdiction of this Court. As correctly pointed out
by the prosecution, Section 4(b) of R.A. 8249 provides that the
Sandiganbayan also has jurisdiction over other offenses committed by
public officials and employees in relation to their office. From this
provision, there is no single doubt that this Court has jurisdiction over
the offense of estafa committed by a public official in relation to his
office.
Accused-movant's claim that being merely a member in
representation of the student body, she was never a public officer
since she never received any compensation nor does she fall under
Salary Grade 27, is of no moment, in view of the express provision of
Section 4 of Republic Act No. 8249 which provides:
Sec. 4. Jurisdiction — The Sandiganbayan shall exercise
exclusive original jurisdiction in all cases involving:
(A) ...
(1) Officials of the executive branch occupying the positions of
regional director and higher, otherwise classified as Grade "27" and
higher, of the Compensation and Position Classification Act of
1989 (Republic Act No. 6758), specifically including:
xxx xxx xxx
(g) Presidents, directors or trustees, or managers of
government-owned or controlled corporations, state universities or
educational institutions or foundations. (Italics supplied)
EcIDaA

It is very clear from the aforequoted provision that the

Sandiganbayan has original exclusive jurisdiction over all offenses
involving the officials enumerated in subsection (g),irrespective of their
salary grades, because the primordial consideration in the inclusion of
these officials is the nature of their responsibilities and functions.
Is accused-movant included in the contemplated provision of
law?
A meticulous review of the existing Charter of the University of
the Philippines reveals that the Board of Regents, to which accused-
movant belongs, exclusively exercises the general powers of
administration and corporate powers in the university, such as: 1) To
receive and appropriate to the ends specified by law such sums as
may be provided by law for the support of the university; 2) To
prescribe rules for its own government and to enact for the government
of the university such general ordinances and regulations, not contrary
to law, as are consistent with the purposes of the university; and 3) To
appoint, on recommendation of the President of the University,
professors, instructors, lecturers and other employees of the
University; to fix their compensation, hours of service, and such other
duties and conditions as it may deem proper; to grant to them in its
discretion leave of absence under such regulations as it may
promulgate, any other provisions of law to the contrary
notwithstanding, and to remove them for cause after an investigation
and hearing shall have been had.
 It is well-established in corporation law that the corporation can
act only through its board of directors, or board of trustees in the case
of non-stock corporations. The board of directors or trustees, therefore,
is the governing body of the corporation.
It is unmistakably evident that the Board of Regents of the
University of the Philippines is performing functions similar to those of
the Board of Trustees of a non-stock corporation. This draws to fore
the conclusion that being a member of such board, accused-movant
undoubtedly falls within the category of public officials upon whom this
Court is vested with original exclusive jurisdiction, regardless of the
fact that she does not occupy a position classified as Salary Grade 27
or higher under the Compensation and Position Classification Act of
1989.
Finally, this court finds that accused-movant's contention that
the same of P15 Million was received from former President Estrada
and not from the coffers of the government, is a matter a defense that
should be properly ventilated during the trial on the merits of this
case. 16CcAITa

On November 19, 2003, petitioner filed a motion for

reconsideration. 17 The motion was denied with finality in a Resolution dated
February 4, 2004. 18
Issue
Petitioner is now before this Court, contending that "THE
RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION IN NOT
QUASHING THE INFORMATION AND DISMISING THE CASE
NOTWITHSTANDING THAT IS HAS NO JURISDICTION OVER THE
OFFENSE CHARGED IN THE INFORMATION." 19
In her discussion, she reiterates her four-fold argument below, namely:
(a) the Sandiganbayan has no jurisdiction over estafa; (b) petitioner is not a
public officer with Salary Grade 27 and she paid her tuition fees; (c) the
offense charged was not committed in relation to her office; (d) the funds in
question personally came from President Estrada, not from the government.
Our Ruling
The petition cannot be granted.
Preliminarily, the denial of a motion to
quash is not correctible by certiorari.
We would ordinarily dismiss this petition for certiorari outright on
procedural grounds. Well-established is the rule that when a motion to quash
in a criminal case is denied, the remedy is not a petition for certiorari, but for
petitioners to go to trial, without prejudice to reiterating the special defenses
invoked in their motion to quash. 20 Remedial measures as regards
interlocutory orders, such as a motion to quash, are frowned upon and often
dismissed. 21 The evident reason for this rule is to avoid multiplicity of appeals
in a single action. 22HADTEC

In Newsweek, Inc. v. Intermediate Appellate Court, 23 the Court clearly

illustrated explained and illustrated the rule and the exceptions, thus:
As a general rule, an order denying a motion to dismiss is
merely interlocutory and cannot be subject of appeal until final
judgment or order is rendered. (Sec. 2 of Rule 41).The ordinary
procedure to be followed in such a case is to file an answer, go to trial
and if the decision is adverse, reiterate the issue on appeal from the
final judgment. The same rule applies to an order denying a motion to
quash, except that instead of filing an answer a plea is entered and no
appeal lies from a judgment of acquittal.
This general rule is subject to certain exceptions. If the court, in
denying the motion to dismiss or motion to quash, acts without or in
excess of jurisdiction or with grave abuse of discretion,
then certiorari or prohibition lies. The reason is that it would be unfair to
require the defendant or accused to undergo the ordeal and expense
of a trial if the court has no jurisdiction over the subject matter or
offense, or is not the court of proper venue, or if the denial of the
motion to dismiss or motion to quash is made with grave abuse of
discretion or a whimsical and capricious exercise of judgment. In such
cases, the ordinary remedy of appeal cannot be plain and adequate.
The following are a few examples of the exceptions to the general rule.
In de Jesus v. Garcia (19 SCRA 554),upon the denial of a
motion to dismiss based on lack of jurisdiction over the subject matter,
this Court granted the petition for certiorari and prohibition against the
City Court of Manila and directed the respondent court to dismiss the
case.
In Lopez v. City Judge (18 SCRA 616),upon the denial of a
motion to quash based on lack of jurisdiction over the offense, this
Court granted the petition for prohibition and enjoined the respondent
court from further proceeding in the case.
In Enriquez v. Macadaeg (84 Phil. 674),upon the denial of a
motion to dismiss based on improper venue, this Court granted the
petition for prohibition and enjoined the respondent judge from taking
cognizance of the case except to dismiss the same.
In Manalo v. Mariano (69 SCRA 80),upon the denial of a motion
to dismiss based on bar by prior judgment, this Court granted the
petition for certiorari and directed the respondent judge to dismiss the
case. aCHDAE
 In Yuviengco v. Dacuycuy (105 SCRA 668),upon the denial of a
motion to dismiss based on the Statute of Frauds, this Court granted
the petition for certiorariand dismissed the amended complaint.
In Tacas v. Cariaso (72 SCRA 527),this Court granted the
petition for certiorari after the motion to quash based on double
jeopardy was denied by respondent judge and ordered him to desist
from further action in the criminal case except to dismiss the same.
In People v. Ramos (83 SCRA 11),the order denying the motion
to quash based on prescription was set aside on certiorari and the
criminal case was dismissed by this Court. 24
We do not find the Sandiganbayan to have committed a grave abuse of
discretion.
The jurisdiction of the Sandiganbayan is
set by P.D. No. 1606, as amended, not by
R.A. No. 3019, as amended.
We first address petitioner's contention that the jurisdiction of the
Sandiganbayan is determined by Section 4 of R.A. No. 3019 (The Anti-Graft
and Corrupt Practices Act, as amended). We note that petitioner refers to
Section 4 of the said law yet quotes Section 4 of P.D. No. 1606, as amended,
in her motion to quash before the Sandiganbayan. 25 She repeats the
reference in the instant petition for certiorari 26 and in her memorandum of
authorities. 27
We cannot bring ourselves to write this off as a mere clerical or
typographical error. It bears stressing that petitioner repeated this claim twice
despite corrections made by the Sandiganbayan. 28
Her claim has no basis in law. It is P.D. No. 1606, as amended, rather
than R.A. No. 3019, as amended, that determines the jurisdiction of the
Sandiganbayan. A brief legislative history of the statute creating the
Sandiganbayan is in order. The Sandiganbayan was created by P.D. No.
1486,promulgated by then President Ferdinand E. Marcos on June 11, 1978.
It was promulgated to attain the highest norms of official conduct required of
public officers and employees, based on the concept that public officers and
employees shall serve with the highest degree of responsibility, integrity,
loyalty and efficiency and shall remain at all times accountable to the
people. 29HICATc

P.D. No. 1486 was, in turn, amended by P.D. No. 1606 which was
promulgated on December 10, 1978. P.D. No. 1606 expanded the jurisdiction
of the Sandiganbayan. 30
P.D. No. 1606 was later amended by P.D. No. 1861 on March 23, 1983,
further altering the Sandiganbayan jurisdiction. R.A. No. 7975 approved on
March 30, 1995 made succeeding amendments to P.D. No. 1606, which was
again amended on February 5, 1997 by R.A. No. 8249. Section 4 of R.A. No.
8249 further modified the jurisdiction of the Sandiganbayan. As it now stands,
the Sandiganbayan has jurisdiction over the following:
Sec. 4. Jurisdiction. — The Sandiganbayan shall exercise
exclusive original jurisdiction in all cases involving:
A. Violations of Republic Act No. 3019, as amended, other
known as the Anti-Graft and Corrupt Practices Act, Republic Act No.
1379, and Chapter II, Section 2, Title VII, Book II of the Revised Penal
Code, where one or more of the accused are officials occupying the
following positions in the government, whether in a permanent, acting
or interim capacity, at the time of the commission of the offense:
(1) Officials of the executive branch occupying the positions of
regional director and higher, otherwise classified as Grade "27" and
higher, of the Compensation and Position Classification Act of 989
(Republic Act No. 6758), specifically including:
(a) Provincial governors, vice-governors, members of
the sangguniang panlalawigan,and provincial treasurers, assessors,
engineers, and other city department heads;
(b) City mayor, vice-mayors, members of the sangguniang
panlungsod, city treasurers, assessors, engineers, and other city
department heads;
(c) Officials of the diplomatic service occupying the position of
consul and higher;
(d) Philippine army and air force colonels, naval captains, and
all officers of higher rank;
ACcTDS

(e) Officers of the Philippine National Police while occupying the

position of provincial director and those holding the rank of senior
superintended or higher;
(f) City and provincial prosecutors and their assistants, and
officials and prosecutors in the Office of the Ombudsman and special
prosecutor;
(g) Presidents, directors or trustees, or managers of
government-owned or controlled corporations, state universities or
educational institutions or foundations.
(2) Members of Congress and officials thereof classified as
Grade "27" and up under the Compensation and Position Classification
Act of 1989;
(3) Members of the judiciary without prejudice to the provisions
of the Constitution;
 (4) Chairmen and members of Constitutional Commission,
without prejudice to the provisions of the Constitution; and
(5) All other national and local officials classified as Grade "27"
and higher under the Compensation and Position Classification Act of
1989.

B. Other offenses of felonies whether simple or complexed with

other crimes committed by the public officials and employees
mentioned in subsection a of this section in relation to their office.
C. Civil and criminal cases filed pursuant to and in connection
with Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986.
In cases where none of the accused are occupying positions
corresponding to Salary Grade "27" or higher, as prescribed in the
said Republic Act No. 6758, or military and PNP officer mentioned
above, exclusive original jurisdiction thereof shall be vested in the
proper regional court, metropolitan trial court, municipal trial court, and
municipal circuit trial court, as the case may be, pursuant to their
respective jurisdictions as provided in Batas Pambansa Blg. 129, as
amended.
The Sandiganbayan shall exercise exclusive appellate
jurisdiction over final judgments, resolutions or order of regional trial
courts whether in the exercise of their own original jurisdiction or of
their appellate jurisdiction as herein provided.IaSAHC

The Sandiganbayan shall have exclusive original jurisdiction

over petitions for the issuance of the writs
of mandamus,prohibition, certiorari, habeas corpus,injunctions, and
other ancillary writs and processes in aid of its appellate jurisdiction
and over petitions of similar nature, including quo warranto, arising or
that may arise in cases filed or which may be filed under Executive
Order Nos. 1, 2, 14 and 14-A, issued in 1986: Provided, That the
jurisdiction over these petitions shall not be exclusive of the Supreme
Court.
The procedure prescribed in Batas Pambansa Blg. 129, as well
as the implementing rules that the Supreme Court has promulgated
and may thereafter promulgate, relative to appeals/petitions for review
to the Court of Appeals, shall apply to appeals and petitions for review
filed with the Sandiganbayan. In all cases elevated to the
Sandiganbayan and from the Sandiganbayan to the Supreme Court,
the Office of the Ombudsman, through its special prosecutor, shall
represent the People of the Philippines, except in cases filed pursuant
to Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986.
In case private individuals are charged as co-principals,
accomplices or accessories with the public officers or employees,
 including those employed in government-owned or controlled
corporations, they shall be tried jointly with said public officers and
employees in the proper courts which shall exercise exclusive
jurisdiction over them.
Any provisions of law or Rules of Court to the contrary
notwithstanding, the criminal action and the corresponding civil action
for the recovery of civil liability shall, at all times, be simultaneously
instituted with, and jointly determined in, the same proceeding by the
Sandiganbayan or the appropriate courts, the filing of the criminal
action being deemed to necessarily carry with it the filing of the civil
action, and no right to reserve the filing such civil action separately
from the criminal action shall be recognized: Provided, however, That
where the civil action had heretofore been filed separately but
judgment therein has not yet been rendered, and the criminal case is
hereafter filed with the Sandiganbayan or the appropriate court, said
civil action shall be transferred to the Sandiganbayan or the
appropriate court, as the case may be, for consolidation and joint
determination with the criminal action, otherwise the separate civil
action shall be deemed abandoned. caHCSD

Upon the other hand, R.A. No. 3019 is a penal statute approved on
August 17, 1960. The said law represses certain acts of public officers and
private persons alike which constitute graft or corrupt practices or which may
lead thereto. 31 Pursuant to Section 10 of R.A. No. 3019, all prosecutions for
violation of the said law should be filed with the Sandiganbayan. 32
R.A. No. 3019 does not contain an enumeration of the cases over
which the Sandiganbayan has jurisdiction. In fact, Section 4 of R.A. No.
3019 erroneously cited by petitioner, deals not with the jurisdiction of the
Sandiganbayan but with prohibition on private individuals. We quote:
Section 4. Prohibition on private individuals. — (a) It shall be
unlawful for any person having family or close personal relation with
any public official to capitalize or exploit or take advantage of such
family or close personal relation by directly or indirectly requesting or
receiving any present, gift or material or pecuniary advantage from any
other person having some business, transaction, application, request
or contract with the government, in which such public official has to
intervene. Family relation shall include the spouse or relatives by
consanguinity or affinity in the third civil degree. The word "close
personal relation" shall include close personal friendship, social and
fraternal connections, and professional employment all giving rise to
intimacy which assures free access to such public officer.
(b) It shall be unlawful for any person knowingly to induce or
cause any public official to commit any of the offenses defined in
Section 3 hereof.
 In fine, the two statutes differ in that P.D. No. 1606, as amended,
defines the jurisdiction of the Sandiganbayan while R.A. No. 3019, as
amended, defines graft and corrupt practices and provides for their penalties.
Sandiganbayan has jurisdiction over
the offense of estafa.
Relying on Section 4 of P.D. No. 1606, petitioner contends that estafa is
not among those crimes cognizable by the Sandiganbayan. We note that in
hoisting this argument, petitioner isolated the first paragraph of Section 4
of P.D. No. 1606, without regard to the succeeding paragraphs of the said
provision. SEIcAD

The rule is well-established in this jurisdiction that statutes should

receive a sensible construction so as to avoid an unjust or an absurd
conclusion. 33Interpretatio talis in ambiguis semper fienda est, ut evitetur
inconveniens et absurdum.Where there is ambiguity, such interpretation as
will avoid inconvenience and absurdity is to be adopted. Kung saan
mayroong kalabuan, ang pagpapaliwanag ay hindi dapat maging
mahirap at katawa-tawa.
Every section, provision or clause of the statute must be expounded by
reference to each other in order to arrive at the effect contemplated by the
legislature.34 The intention of the legislator must be ascertained from the
whole text of the law and every part of the act is to be taken into view. 35 In
other words, petitioner's interpretation lies in direct opposition to the rule that a
statute must be interpreted as a whole under the principle that the best
interpreter of a statute is the statute itself. 36 Optima statuti interpretatrix est
ipsum statutum. Ang isang batas ay marapat na bigyan ng kahulugan sa
kanyang kabuuan sa ilalim ng prinsipyo na ang pinakamainam na
interpretasyon ay ang mismong batas.
Section 4 (B) of P.D. No. 1606 reads:
B. Other offenses or felonies whether simple or complexed with
other crimes committed by the public officials and employees
mentioned in subsection a of this section in relation to their office.
Evidently, the Sandiganbayan has jurisdiction over other felonies
committed by public officials in relation to their office. We see no plausible or
sensible reason to exclude estafa as one of the offenses included in Section 4
(B) of P.D. No. 1606. Plainly, estafa is one of those other felonies. The
jurisdiction is simply subject to the twin requirements that (a) the offense is
committed by public officials and employees mentioned in Section 4 (A)
of P.D. No. 1606, as amended, and that (b) the offense is committed in
relation to their office.
 In Perlas, Jr. v. People, 37 the Court had occasion to explain that the
Sandiganbayan has jurisdiction over an indictment for estafa versus a director
of the National Parks Development Committee, a government instrumentality.
The Court held then: ADTEaI

The National Parks Development Committee was created

originally as an Executive Committee on January 14, 1963, for the
development of the Quezon Memorial, Luneta and other national parks
(Executive Order No. 30). It was later designated as the National Parks
Development Committee (NPDC) on February 7, 1974 (E.O. No. 69).
On January 9, 1966, Mrs. Imelda R. Marcos and Teodoro F. Valencia
were designated Chairman and Vice-Chairman respectively (E.O. No.
3). Despite an attempt to transfer it to the Bureau of Forest
Development, Department of Natural Resources, on December 1,
1975 (Letter of Implementation No. 39, issued pursuant to PD No. 830,
dated November 27, 1975), the NPDC has remained under the Office
of the President (E.O. No. 709, dated July 27, 1981).
Since 1977 to 1981, the annual appropriations decrees listed
NPDC as a regular government agency under the Office of the
President and allotments for its maintenance and operating expenses
were issued direct to NPDC (Exh. 10-A, Perlas, Item Nos. 2, 3).
The Sandiganbayan's jurisdiction over estafa was reiterated with
greater firmness in Bondoc v. Sandiganbayan. 38 Pertinent parts of the Court's
ruling in Bondoc read:
Furthermore, it is not legally possible to transfer Bondoc's cases
to the Regional Trial Court, for the simple reason that the latter would
not have jurisdiction over the offenses. As already above intimated, the
inability of the Sandiganbayan to hold a joint trial of Bondoc's cases
and those of the government employees separately charged for the
same crimes, has not altered the nature of the offenses charged,
as estafa thru falsification punishable by penalties higher than prision
correccional or imprisonment of six years, or a fine of P6,000.00,
committed by government employees in conspiracy with private
persons, including Bondoc. These crimes are within the exclusive,
original jurisdiction of the Sandiganbayan. They simply cannot be
taken cognizance of by the regular courts, apart from the fact that even
if the cases could be so transferred, a joint trial would nonetheless not
be possible.
Petitioner UP student regent
is a public officer.
Petitioner also contends that she is not a public officer. She does not
receive any salary or remuneration as a UP student regent. This is not the first
or likely the last time that We will be called upon to define a public officer.
In Khan, Jr. v. Office of the Ombudsman,We ruled that it is difficult to pin
down the definition of a public officer. 39 The 1987 Constitution does not define
who are public officers. Rather, the varied definitions and concepts are found
in different statutes and jurisprudence. cTCaEA

In Aparri v. Court of Appeals, 40 the Court held that:

A public office is the right, authority, and duty created and
conferred by law, by which for a given period, either fixed by law or
enduring at the pleasure of the creating power, an individual is
invested with some portion of the sovereign functions of the
government, to be exercise by him for the benefit of the public
([Mechem Public Offices and Officers,] Sec. 1).The right to hold a
public office under our political system is therefore not a natural right. It
exists, when it exists at all only because and by virtue of some law
expressly or impliedly creating and conferring it (Mechem Ibid., Sec.
64).There is no such thing as a vested interest or an estate in an office,
or even an absolute right to hold office. Excepting constitutional offices
which provide for special immunity as regards salary and tenure, no
one can be said to have any vested right in an office or its salary (42
Am. Jur. 881).
In Laurel v. Desierto, 41 the Court adopted the definition of Mechem of a
public office:
A public office is the right, authority and duty, created and
conferred by law, by which, for a given period, either fixed by law or
enduring at the pleasure of the creating power, an individual is
invested with some portion of the sovereign functions of the
government, to be exercised by him for the benefit of the public. The
individual so invested is a public officer. 42
Petitioner claims that she is not a public officer with Salary Grade 27;
she is, in fact, a regular tuition fee-paying student. This is likewise bereft of
merit. It is not only the salary grade that determines the jurisdiction of the
Sandiganbayan. The Sandiganbayan also has jurisdiction over other officers
enumerated in P.D. No. 1606. In Geduspan v. People, 43 We held that while
the first part of Section 4 (A) covers only officials with Salary Grade 27 and
higher, its second part specifically includes other executive officials whose
positions may not be of Salary Grade 27 and higher but who are by express
provision of law placed under the jurisdiction of the said court. Petitioner falls
under the jurisdiction of the Sandiganbayan as she is placed there by express
provision of law. 44HCaDET

Section 4 (A) (1) (g) of P.D. No. 1606 explictly vested the
Sandiganbayan with jurisdiction over Presidents, directors or trustees, or
managers of government-owned or controlled corporations, state universities
or educational institutions or foundations. Petitioner falls under this category.
As the Sandiganbayan pointed out, the BOR performs functions similar to
those of a board of trustees of a non-stock corporation. 45 By express
mandate of law, petitioner is, indeed, a public officer as contemplated by P.D.
No. 1606.
Moreover, it is well established that compensation is not an essential
element of public office. 46 At most, it is merely incidental to the public office. 47
Delegation of sovereign functions is essential in the public office. An
investment in an individual of some portion of the sovereign functions of the
government, to be exercised by him for the benefit of the public makes one a
public officer. 48
The administration of the UP is a sovereign function in line with Article
XIV of the Constitution. UP performs a legitimate governmental function by
providing advanced instruction in literature, philosophy, the sciences, and
arts, and giving professional and technical training. 49 Moreover, UP is
maintained by the Government and it declares no dividends and is not a
corporation created for profit. 50
The offense charged was committed
in relation to public office, according
to the Information.
Petitioner likewise argues that even assuming that she is a public
officer, the Sandiganbayan would still not have jurisdiction over the offense
because it was not committed in relation to her office.
According to petitioner, she had no power or authority to act without the
approval of the BOR. She adds there was no Board Resolution issued by the
BOR authorizing her to contract with then President Estrada; and that her acts
were not ratified by the governing body of the state university. Resultantly, her
act was done in a private capacity and not in relation to public office. ACETID

It is axiomatic that jurisdiction is determined by the averments in the

information. 51 More than that, jurisdiction is not affected by the pleas or the
theories set up by defendant or respondent in an answer, a motion to dismiss,
or a motion to quash. 52 Otherwise, jurisdiction would become dependent
almost entirely upon the whims of defendant or respondent. 53
In the case at bench, the information alleged, in no uncertain terms that
petitioner, being then a student regent of U.P.,"while in the performance of her
official functions, committing the offense in relation to her office and taking
advantage of her position,with intent to gain, conspiring with her brother,
JADE IAN D. SERANA, a private individual, did then and there wilfully,
unlawfully and feloniously defraud the government ...." (Underscoring
supplied)
 Clearly, there was no grave abuse of discretion on the part of the
Sandiganbayan when it did not quash the information based on this ground.
Source of funds is a defense that should
be raised during trial on the merits.
It is contended anew that the amount came from President Estrada's
private funds and not from the government coffers. Petitioner insists the
charge has no leg to stand on.
We cannot agree. The information alleges that the funds came from the
Office of the President and not its then occupant, President Joseph Ejercito
Estrada. Under the information, it is averred that "petitioner requested the
amount of Fifteen Million Pesos (P15,000,000.00),Philippine Currency, from
the Office of the President,and the latter relying and believing on said false
pretenses and misrepresentation gave and delivered to said accused Land
Bank Check No. 91353 dated October 24, 2000 in the amount of Fifteen
Million Pesos (P15,000,000.00)."
Again, the Court sustains the Sandiganbayan observation that the
source of the P15,000,000 is a matter of defense that should be ventilated
during the trial on the merits of the instant case. 54
A lawyer owes candor, fairness
and honesty to the Court.
As a parting note, petitioner's counsel, Renato G. dela Cruz,
misrepresented his reference to Section 4 of P.D. No. 1606 as a quotation
from Section 4 of R.A. No. 3019. A review of his motion to quash, the instant
petition for certiorari and his memorandum, unveils the misquotation. We urge
petitioner's counsel to observe Canon 10 of the Code of Professional
Responsibility, specifically Rule 10.02 of the Rules stating that "a lawyer shall
not misquote or misrepresent." DaTICc

The Court stressed the importance of this rule in Pangan v.

Ramos, 55 where Atty. Dionisio D. Ramos used the name Pedro D.D. Ramos
in connection with a criminal case. The Court ruled that Atty. Ramos resorted
to deception by using a name different from that with which he was
authorized. We severely reprimanded Atty. Ramos and warned that a
repetition may warrant suspension or disbarment. 56
We admonish petitioner's counsel to be more careful and accurate in
his citation. A lawyer's conduct before the court should be characterized by
candor and fairness. 57 The administration of justice would gravely suffer if
lawyers do not act with complete candor and honesty before the courts. 58
WHEREFORE, the petition is DENIED for lack of merit.
SO ORDERED.
 (Serana v. Sandiganbayan, G.R. No. 162059, [January 22, 2008], 566 PHIL
|||

224-252)

14. Pat-og Sr v Civil Service Commission 697 SCRA 567 (June 2013)

THIRD DIVISION

[G.R. No. 198755. June 5, 2013.]

ALBERTO PAT-OG, SR., petitioner, vs. CIVIL SERVICE

COMMISSION, respondent.

DECISION

MENDOZA, J : p

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules
of Court, which seeks to set aside the April 6, 2011 Decision 1 of the Court of
Appeals(CA) in CA-G.R. SP No. 101700, affirming the April 11, 2007
Decision 2 of the Civil Service Commission (CSC), which ordered the dismissal of
petitioner Alberto Pat-og, Sr.(Pat-og) from the service for grave misconduct.
The Facts
On September 13, 2003, Robert Bang-on (Bang-on), then a 14-year old second
year high school student of the Antadao National High School in Sagada,
Mountain Province, filed an affidavit-complaint against Pat-og, a third year high
school teacher of the same school, before the Civil Service Commission-
Cordillera Administrative Region (CSC-CAR).
Bang-on alleged that on the morning of August 26, 2003, he attended his class at
the basketball court of the school, where Pat-og and his third year students were
also holding a separate class; that he and some of his classmates joined Pat-og's
third year students who were practicing basketball shots; that Pat-og later
instructed them to form two lines; that thinking that three lines were to be formed,
he stayed in between the two lines; that Pat-og then held his right arm and
punched his stomach without warning for failing to follow instructions; and that as
a result, he suffered stomach pain for several days and was confined in a
hospital from September 10-12, 2003, as evidenced by a medico-legal certificate,
which stated that he sustained a contusion hematoma in the hypogastric area. cHAIES
Regarding the same incident, Bang-on filed a criminal case against Pat-og for the
crime of Less Serious Physical Injury with the Regional Trial Court (RTC) of
Bontoc, Mountain Province.
Taking cognizance of the administrative case, the CSC-CAR directed Pat-og to
file his counter-affidavit. He denied the charges hurled against him and claimed
that when he was conducting his Music, Arts, Physical Education and
Health (MAPEH) class, composed of third year students, he instructed the girls to
play volleyball and the boys to play basketball; that he later directed the boys to
form two lines; that after the boys failed to follow his repeated instructions, he
scolded them in a loud voice and wrested the ball from them; that while
approaching them, he noticed that there were male students who were not
members of his class who had joined the shooting practice; that one of those
male students was Bang-on, who was supposed to be having his own MAPEH
class under another teacher; that he then glared at them, continued scolding
them and dismissed the class for their failure to follow instructions; and that he
offered the sworn statement of other students to prove that he did not box Bang-
on.
On June 1, 2004, the CSC-CAR found the existence of a prima facie case for
misconduct and formally charged Pat-og.
While the proceedings of the administrative case were ongoing, the RTC
rendered its judgment in the criminal case and found Pat-og guilty of the offense
of slight physical injury. He was meted the penalty of imprisonment from eleven
(11) to twenty (20) days. Following his application for probation, the decision
became final and executory and judgment was entered.
Meanwhile, in the administrative case, a pre-hearing conference was conducted
after repeated postponement by Pat-og. With the approval of the CSC-CAR, the
prosecution submitted its position paper in lieu of a formal presentation of
evidence and formally offered its evidence, which included the decision in the
criminal case. It offered the affidavits of Raymund Atuban, a classmate of Bang-
on; and James Domanog, a third year high school student, who both witnessed
Pat-og hit Bang-on in the stomach. THIECD

For his defense, Pat-og offered the testimonies of his witnesses — Emiliano
Dontongan (Dontongan), a teacher in another school, who alleged that he was a
member of the Municipal Council for the Protection of Children, and that, in such
capacity, he investigated the incident and came to the conclusion that it did not
happen at all; and Ernest Kimmot, who testified that he was in the basketball
court at the time but did not see such incident. Pat-og also presented the
affidavits of thirteen other witnesses to prove that he did not punch Bang-on.
Ruling of the CSC-CAR
In its Decision, 3 dated September 19, 2006, the CSC-CAR found Pat-og guilty
and disposed as follows:
WHEREFORE, all premises told, respondent Alberto Pat-og, Sr.,
Teacher Antadao National High School, is hereby found guilty of Simple
Misconduct.
Under the Uniform Rules on Administrative Cases in the Civil Service,
the imposable penalty on the first offense of Simple Misconduct is
suspension of one (1) month and one (1) day to six (6) months.
Due to seriousness of the resulting injury to the fragile body of the minor
victim, the CSC-CAR hereby imposed upon respondent the maximum
penalty attached to the offense which is six months suspension without
pay. aHATDI

The CSC-CAR gave greater weight to the version posited by the prosecution,
finding that a blow was indeed inflicted by Pat-og on Bang-on. It found that Pat-
og had a motive for doing so — his students' failure to follow his repeated
instructions which angered him. Nevertheless, the CSC-CAR ruled that a motive
was not necessary to establish guilt if the perpetrator of the offense was
positively identified. The positive identification of Pat-og was duly proven by the
corroborative testimonies of the prosecution witnesses, who were found to be
credible and disinterested. The testimony of defense witness, Dontongan, was
not given credence considering that the students he interviewed for his
investigation claimed that Pat-og was not even angry at the time of the incident,
contrary to the latter's own admission.
The CSC-CAR held that the actions of Pat-og clearly transgressed the proper
norms of conduct required of a public official, and the gravity of the offense was
further magnified by the seriousness of the injury of Bang-on which required a
healing period of more than ten (10) days. It pointed out that, being his teacher,
Pat-og's substitute parental authority did not give him license to physically
chastise a misbehaving student. The CSC-CAR added that the fact that Pat-og
applied for probation in the criminal case, instead of filing an appeal, further
convinced it of his guilt.
The CSC-CAR believed that the act committed by Pat-og was sufficient to find
him guilty of Grave Misconduct. It, however, found the corresponding penalty of
dismissal from the service too harsh under the circumstances. Thus, it adjudged
petitioner guilty of Simple Misconduct and imposed the maximum penalty of
suspension for six (6) months.
On December 11, 2006, the motion for reconsideration filed by Pat-og was
denied for lack of merit. 4
The Ruling of the CSC
In its Resolution, 5 dated April 11, 2007, the CSC dismissed Pat-og's appeal and
affirmed with modification the decision of the CSC-CAR as follows: SEDICa

WHEREFORE, foregoing premises considered, the instant appeal is

hereby DISMISSED. The decision of the CSC-CAR is affirmed with the
modification that Alberto Pat-og, Sr., is adjudged guilty of grave
misconduct, for which he is meted out the penalty of dismissal from the
service with all its accessory penalties of cancellation of eligibilities,
perpetual disqualification from re-employment in the government service,
and forfeiture of retirement benefits. 6
After evaluating the records, the CSC sustained the CSC-CAR's conclusion that
there existed substantial evidence to sustain the finding that Pat-og did punch
Bang-on in the stomach. It gave greater weight to the positive statements of
Bang-on and his witnesses over the bare denial of Pat-og. It also highlighted the
fact that Pat-og failed to adduce evidence of any ill motive on the part of Bang-on
in filing the administrative case against him. It likewise gave credence to the
medico-legal certificate showing that Bang-on suffered a hematoma contusion in
his hypogastric area.
The CSC ruled that the affidavits of Bang-on's witnesses were not bereft of
evidentiary value even if Pat-og was not afforded a chance to cross-examine the
witnesses of Bang-on. It is of no moment because the cross-examination of
witnesses is not an indispensable requirement of administrative due process.
The CSC noted that Pat-og did not question but, instead, fully acquiesced in his
conviction in the criminal case for slight physical injury, which was based on the
same set of facts and circumstances, and involved the same parties and issues.
It, thus, considered his prior criminal conviction as evidence against him in the
administrative case.
Finding that his act of punching his student displayed a flagrant and wanton
disregard of the dignity of a person, reminiscent of corporal punishment that had
since been outlawed for being harsh, unjust, and cruel, the CSC upgraded Pat-
og's offense from Simple Misconduct to Grave Misconduct and ordered his
dismissal from the service. IHCacT

Pat-og filed a motion for reconsideration, questioning for the first time the
jurisdiction of CSC over the case. He contended that administrative charges
against a public school teacher should have been initially heard by a committee
to be constituted pursuant to the Magna Carta for Public School Teachers.
On November 5, 2007, the CSC denied his motion for reconsideration. 7 It ruled
that Pat-og was estopped from challenging its jurisdiction considering that he
actively participated in the administrative proceedings against him, raising the
issue of jurisdiction only after his appeal was dismissed by the CSC.
 Ruling of the Court of Appeals
In its assailed April 6, 2011 Decision, 8 the CA affirmed the resolutions of the
CSC. It agreed that Pat-og was estopped from questioning the jurisdiction of the
CSC as the records clearly showed that he actively participated in the
proceedings. It was of the view that Pat-og was not denied due process when he
failed to cross-examine Bang-on and his witnesses because he was given the
opportunity to be heard and present his evidence before the CSC-CAR and the
CSC.
The CA also held that the CSC committed no error in taking into account the
conviction of Pat-og in the criminal case. It stated that his conviction was not the
sole basis of the CSC for his dismissal from the service because there was
substantial evidence proving that Pat-og had indeed hit Bang-on.
In its assailed Resolution, 9 dated September 13, 2011, the CA denied the motion
for reconsideration filed by Pat-og.
Hence, the present petition with the following: DCSETa

Assignment of Errors
WHETHER OR NOT RESPONDENT COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT
AFFIRMED THE SUPREME PENALTY OF DISMISSAL FROM
SERVICE WITH FORFEITURE OF RETIREMENT BENEFITS
AGAINST THE PETITIONER WITHOUT CONSIDERING
PETITIONER'S LONG YEARS OF GOVERNMENT SERVICE?
WHETHER OR NOT RESPONDENT COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT RULED
THAT PETITIONER IS ESTOPPED FROM QUESTIONING THE
JURISDICTION OF THE CIVIL SERVICE COMMISSION TO HEAR
AND DECIDE THE ADMINISTRATIVE CASE AGAINST HIM?
WHETHER OR NOT RESPONDENT COURT OF APPEALS
SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION IN DISMISSING THE APPEAL DESPITE LACK OF
SUBSTANTIAL EVIDENCE?
On Jurisdiction
Pat-og contends that Section 9 of Republic Act (R.A.) No. 4670, otherwise known
as the Magna Carta for Public School Teachers, provides that administrative
charges against a public school teacher shall be heard initially by a committee
constituted under said section. As no committee was ever formed, the petitioner
posits that he was denied due process and that the CSC did not have the
jurisdiction to hear and decide his administrative case. He further argues that
notwithstanding the fact that the issue of jurisdiction was raised for the first time
on appeal, the rule remains that estoppel does not confer jurisdiction on a
tribunal that has no jurisdiction over the cause of action or subject matter of the
case.
The Court cannot sustain his position.
The petitioner's argument that the administrative case against him can only
proceed under R.A. No. 4670 is misplaced. HCITcA

In Puse v. Santos-Puse, 10 it was held that the CSC, the Department of

Education (DepEd) and the Board of Professional Teachers-Professional
Regulatory Commission(PRC) have concurrent jurisdiction over administrative
cases against public school teachers.
Under Article IX-B of the 1987 Constitution, the CSC is the body charged with the
establishment and administration of a career civil service which embraces all
branches and agencies of the government. 11 Executive Order (E.O.) No. 292
(the Administrative Code of 1987) 12 and Presidential Decree (P.D.) No. 807
(the Civil Service Decree of the Philippines) 13 expressly provide that the CSC
has the power to hear and decide administrative disciplinary cases instituted with
it or brought to it on appeal. Thus, the CSC, as the central personnel agency of
the government, has the inherent power to supervise and discipline all members
of the civil service, including public school teachers.
Indeed, under Section 9 of R.A. No. 4670, the jurisdiction over administrative
cases of public school teachers is lodged with the investigating committee
constituted therein. 14 Also, under Section 23 of R.A. No. 7836 (the Philippine
Teachers Professionalization Act of 1994), the Board of Professional Teachers is
given the power, after due notice and hearing, to suspend or revoke the
certificate of registration of a professional teacher for causes enumerated
therein. 15
Concurrent jurisdiction is that which is possessed over the same parties or
subject matter at the same time by two or more separate tribunals. When the law
bestows upon a government body the jurisdiction to hear and decide cases
involving specific matters, it is to be presumed that such jurisdiction is exclusive
unless it be proved that another body is likewise vested with the same
jurisdiction, in which case, both bodies have concurrent jurisdiction over the
matter. 16
Where concurrent jurisdiction exists in several tribunals, the body that first takes
cognizance of the complaint shall exercise jurisdiction to the exclusion of the
others. In this case, it was CSC which first acquired jurisdiction over the case
because the complaint was filed before it. Thus, it had the authority to proceed
and decide the case to the exclusion of the DepEd and the Board of Professional
Teachers. 17
In CSC v. Alfonso, 18 it was held that special laws, such as R.A. No. 4670, do not
divest the CSC of its inherent power to supervise and discipline all members of
the civil service, including public school teachers. Pat-og, as a public school
teacher, is first and foremost, a civil servant accountable to the people and
answerable to the CSC for complaints lodged against him as a public servant. To
hold that R.A. No. 4670 divests the CSC of its power to discipline public school
teachers would negate the very purpose for which the CSC was established and
would impliedly amend the Constitution itself. SAaTHc

To further drive home the point, it was ruled in CSC v. Macud 19 that R.A. No.
4670, in imposing a separate set of procedural requirements in connection with
administrative proceedings against public school teachers, should be construed
to refer only to the specific procedure to be followed in administrative
investigationsconducted by the DepEd. By no means, then, did R.A. No.
4670 confer an exclusive disciplinary authority over public school teachers on the
DepEd.
At any rate, granting that the CSC was without jurisdiction, the petitioner is
indeed estopped from raising the issue. Although the rule states that a
jurisdictional question may be raised at any time, such rule admits of the
exception where, as in this case, estoppel has supervened. 20 Here, instead of
opposing the CSC's exercise of jurisdiction, the petitioner invoked the same by
actively participating in the proceedings before the CSC-CAR and by even filing
his appeal before the CSC itself; only raising the issue of jurisdiction later in his
motion for reconsideration after the CSC denied his appeal. This Court has time
and again frowned upon the undesirable practice of a party submitting his case
for decision and then accepting the judgment only if favorable, but attacking it for
lack of jurisdiction when adverse. 21
On Administrative Due Process
On due process, Pat-og asserts that the affidavits of the complainant and his
witnesses are of questionable veracity having been subscribed in Bontoc, which
is nearly 30 kilometers from the residences of the parties. Furthermore, he
claimed that considering that the said affiants never testified, he was never
afforded the opportunity to cross-examine them. Therefore, their affidavits were
mere hearsay and insufficient to prove his guilt.
The petitioner does not persuade.
The essence of due process is simply to be heard, or as applied to administrative
proceedings, a fair and reasonable opportunity to explain one's side, or an
opportunity to seek a reconsideration of the action or ruling complained
of. 22 Administrative due process cannot be fully equated with due process in its
strict judicial sense. In administrative proceedings, a formal or trial-type hearing
is not always necessary 23 and technical rules of procedure are not strictly
applied. Hence, the right to cross-examine is not an indispensable aspect of
administrative due process. 24 The petitioner cannot, therefore, argue that the
affidavit of Bang-on and his witnesses are hearsay and insufficient to prove his
guilt.
TESDcA

At any rate, having actively participated in the proceedings before the CSC-CAR,
the CSC, and the CA, the petitioner was apparently afforded every opportunity to
explain his side and seek reconsideration of the ruling against him.
As to the issue of the veracity of the affidavits, such is a question of fact which
cannot now be raised before the Court under Rule 45 of the Rules of Court. The
CSC-CAR, the CSC and the CA did not, therefore, err in giving credence to the
affidavits of the complainants and his witnesses, and in consequently ruling that
there was substantial evidence to support the finding of misconduct on the part of
the petitioner.
On the Penalty
Assuming that he did box Bang-on, Pat-og argues that there is no substantial
evidence to prove that he did so with a clear intent to violate the law or in flagrant
disregard of the established rule, as required for a finding of grave misconduct.
He insists that he was not motivated by bad faith or ill will because he acted in
the belief that, as a teacher, he was exercising authority over Bang-on in loco
parentis, and was, accordingly, within his rights to discipline his student. Citing
his 33 years in the government service without any adverse record against him
and the fact that he is at the edge of retirement, being already 62 years old, the
petitioner prays that, in the name of substantial and compassionate justice, the
CSC-CAR's finding of simple misconduct and the concomitant penalty of
suspension should be upheld, instead of dismissal.
The Court agrees in part. THcEaS

Misconduct means intentional wrongdoing or deliberate violation of a rule of law

or standard of behaviour. To constitute an administrative offense, misconduct
should relate to or be connected with the performance of the official functions
and duties of a public officer. In grave misconduct, as distinguished from simple
misconduct, the elements of corruption, clear intent to violate the law or flagrant
disregard of an established rule must be manifest. 25
Teachers are duly licensed professionals who must not only be competent in the
practice of their noble profession, but must also possess dignity and a reputation
with high moral values. They must strictly adhere to, observe, and practice the
set of ethical and moral principles, standards, and values laid down in the Code
of Ethics of Professional Teachers, which apply to all teachers in schools in the
Philippines, whether public or private, as provided in the preamble of the said
Code. 26 Section 8 of Article VIII of the same Code expressly provides that "a
teacher shall not inflict corporal punishment on offending learners."
Clearly then, petitioner cannot argue that in punching Bang-on, he was
exercising his right as a teacher in loco parentis to discipline his student. It is
beyond cavil that the petitioner, as a public school teacher, deliberately violated
his Code of Ethics. Such violation is a flagrant disregard for the established rule
contained in the said Code tantamount to grave misconduct.
Under Section 52 (A) (2) of Rule IV of the Uniform Rules on Administrative Cases
in the Civil Service, the penalty for grave misconduct is dismissal from the
service, which carries with it the cancellation of eligibility, forfeiture of retirement
benefits and perpetual disqualification from reemployment in the government
service. 27 This penalty must, however, be tempered with compassion as there
was sufficient provocation on the part of Bang-on. Considering further the
mitigating circumstances that the petitioner has been in the government service
for 33 years, that this is his first offense and that he is at the cusp of retirement,
the Court finds the penalty of suspension for six months as appropriate under the
circumstances. cCaATD

WHEREFORE, the Court PARTIALLY GRANTS the petition and MODIFIES the
April 6, 2011 Decision of the Court of Appeals in CA-G.R. SP No. 101700.
Accordingly, Alberto Pat-og, Sr. is found GUILTY of Grave Misconduct, but the
penalty is reduced from dismissal from the service to SUSPENSION for SIX
MONTHS.
SO ORDERED.
(Pat-og, Sr. v. Civil Service Commission, G.R. No. 198755, [June 5, 2013], 710
|||

PHIL 501-518)

15. Boston Equity Resources Inc v CA 699 SCRA

SECOND DIVISION

[G.R. No. 173946. June 19, 2013.]

BOSTON EQUITY RESOURCES, INC., petitioner, vs. COURT OF

APPEALS AND LOLITA G. TOLEDO, respondents.

DECISION

PEREZ, J : p
Before the Court is a Petition for Review on Certiorari seeking to reverse and set
aside: (1) the Decision, 1 dated 28 February 2006 and (2) the Resolution, 2 dated
1 August 2006 of the Court of Appeals in CA-G.R. SP No. 88586. The challenged
decision granted herein respondent's petition for certiorari upon a finding that the
trial court committed grave abuse of discretion in denying respondent's motion to
dismiss the complaint against her. 3 Based on this finding, the Court of Appeals
reversed and set aside the Orders, dated 8 November 2004 4 and 22 December
2004, 5 respectively, of the Regional Trial Court (RTC) of Manila, Branch 24.
The Facts
On 24 December 1997, petitioner filed a complaint for sum of money with a
prayer for the issuance of a writ of preliminary attachment against the spouses
Manuel and Lolita Toledo. 6 Herein respondent filed an Answer dated 19 March
1998 but on 7 May 1998, she filed a Motion for Leave to Admit Amended
Answer 7 in which she alleged, among others, that her husband and co-
defendant, Manuel Toledo (Manuel), is already dead. 8 The death certificate 9 of
Manuel states "13 July 1995" as the date of death. As a result, petitioner filed a
motion, dated 5 August 1999, to require respondent to disclose the heirs of
Manuel. 10 In compliance with the verbal order of the court during the 11 October
1999 hearing of the case, respondent submitted the required names and
addresses of the heirs. 11 Petitioner then filed a Motion for Substitution, 12 dated
18 January 2000, praying that Manuel be substituted by his children as party-
defendants. It appears that this motion was granted by the trial court in an Order
dated 9 October 2000. 13
Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-trial
order containing, among others, the dates of hearing of the case. 14
The trial of the case then proceeded. Herein petitioner, as plaintiff, presented its
evidence and its exhibits were thereafter admitted.
On 26 May 2004, the reception of evidence for herein respondent was cancelled
upon agreement of the parties. On 24 September 2004, counsel for herein
respondent was given a period of fifteen days within which to file a demurrer to
evidence. 15 However, on 7 October 2004, respondent instead filed a motion to
dismiss the complaint, citing the following as grounds: (1) that the complaint
failed to implead an indispensable party or a real party in interest; hence, the
case must be dismissed for failure to state a cause of action; (2) that the trial
court did not acquire jurisdiction over the person of Manuel pursuant to Section 5,
Rule 86 of the Revised Rules of Court; (3) that the trial court erred in ordering the
substitution of the deceased Manuel by his heirs; and (4) that the court must also
dismiss the case against Lolita Toledo in accordance with Section 6, Rule 86 of
the Rules of Court. 16aHADTC
The trial court, in an Order dated 8 November 2004, denied the motion to dismiss
for having been filed out of time, citing Section 1, Rule 16 of the 1997 Rules of
Courtwhich states that: "[W]ithin the time for but before filing the answer to the
complaint or pleading asserting a claim, a motion to dismiss may be made . . . .
" 17Respondent's motion for reconsideration of the order of denial was likewise
denied on the ground that "defendants' attack on the jurisdiction of this Court is
now barred by estoppel by laches" since respondent failed to raise the issue
despite several chances to do so. 18
Aggrieved, respondent filed a petition for certiorari with the Court of Appeals
alleging that the trial court seriously erred and gravely abused its discretion in
denying her motion to dismiss despite discovery, during the trial of the case, of
evidence that would constitute a ground for dismissal of the case. 19
The Court of Appeals granted the petition based on the following grounds:
It is elementary that courts acquire jurisdiction over the person of the
defendant . . . only when the latter voluntarily appeared or submitted to
the court or by coercive process issued by the court to him, . . . In this
case, it is undisputed that when [petitioner] Boston filed the complaint
on December 24, 1997, defendant Manuel S. Toledo was already dead,
. . . Such being the case, the court a quo could not have acquired
jurisdiction over the person of defendant Manuel S. Toledo.
. . . the court a quo's denial of [respondent's] motion to dismiss was
based on its finding that [respondent's] attack on the jurisdiction of the
court was already barred by laches as [respondent] failed to raise the
said ground in its [sic] amended answer and during the pre-trial, despite
her active participation in the proceedings.
However, . . . it is well-settled that issue on jurisdiction may be raised at
any stage of the proceeding, even for the first time on appeal. By timely
raising the issue on jurisdiction in her motion to dismiss . . . [respondent]
is not estopped [from] raising the question on jurisdiction. Moreover,
when issue on jurisdiction was raised by [respondent], the court a
quo had not yet decided the case, hence, there is no basis for the
court a quo to invoke estoppel to justify its denial of the motion for
reconsideration; HcaDIA

It should be stressed that when the complaint was filed, defendant

Manuel S. Toledo was already dead. The complaint should have
impleaded the estate of Manuel S. Toledo as defendant, not only the
wife, considering that the estate of Manuel S. Toledo is an indispensable
party, which stands to be benefited or be injured in the outcome of the
case. . . .
xxx xxx xxx
 [Respondent's] motion to dismiss the complaint should have been
granted by public respondent judge as the same was in order.
Considering that the obligation of Manuel S. Toledo is solidary with
another debtor, . . . , the claim . . . should be filed against the estate of
Manuel S. Toledo, in conformity with the provision of Section 6, Rule 86
of the Rules of Court,. . . . 20
The Court of Appeals denied petitioner's motion for reconsideration. Hence, this
petition.
The Issues
Petitioner claims that the Court of Appeals erred in not holding that:
1. Respondent is already estopped from questioning the trial
court's jurisdiction;
2. Petitioner never failed to implead an indispensable party as the
estate of Manuel is not an indispensable party;
3. The inclusion of Manuel as party-defendant is a mere misjoinder
of party not warranting the dismissal of the case before the
lower court; and
4. Since the estate of Manuel is not an indispensable party, it is not
necessary that petitioner file its claim against the estate of
Manuel.
In essence, what is at issue here is the correctness of the trial court's orders
denying respondent's motion to dismiss.
The Ruling of the Court
We find merit in the petition.
Motion to dismiss filed out of time
To begin with, the Court of Appeals erred in granting the writ of certiorari in favor
of respondent. Well settled is the rule that the special civil action for certiorari is
not the proper remedy to assail the denial by the trial court of a motion to
dismiss. The order of the trial court denying a motion to dismiss is merely
interlocutory, as it neither terminates nor finally disposes of a case and still
leaves something to be done by the court before a case is finally decided on the
merits. 21 Therefore, "the proper remedy in such a case is to appeal after a
decision has been rendered. 22 aSTHDc

As the Supreme Court held in Indiana Aerospace University v. Comm. on Higher

Education: 23
A writ of certiorari is not intended to correct every controversial
interlocutory ruling; it is resorted only to correct a grave abuse of
 discretion or a whimsical exercise of judgment equivalent to lack of
jurisdiction. Its function is limited to keeping an inferior court within its
jurisdiction and to relieve persons from arbitrary acts — acts which
courts or judges have no power or authority in law to perform. It is not
designed to correct erroneous findings and conclusions made by
the courts.(Emphasis supplied)
Even assuming that certiorari is the proper remedy, the trial court did not commit
grave abuse of discretion in denying respondent's motion to dismiss. It, in fact,
acted correctly when it issued the questioned orders as respondent's motion to
dismiss was filed SIX YEARS AND FIVE MONTHS AFTER SHE FILED HER
AMENDED ANSWER. This circumstance alone already warranted the outright
dismissal of the motion for having been filed in clear contravention of the express
mandate of Section 1, Rule 16, of the Revised Rules of Court. Under this
provision, a motion to dismiss shall be filed within the time for but before the filing
of an answer to the complaint or pleading asserting a claim. 24
More importantly, respondent's motion to dismiss was filed after petitioner has
completed the presentation of its evidence in the trial court, 25 giving credence to
petitioner's and the trial court's conclusion that the filing of the motion to dismiss
was a mere ploy on the part of respondent to delay the prompt resolution of the
case against her.
Also worth mentioning is the fact that respondent's motion to dismiss under
consideration herein is not the first motion to dismiss she filed in the trial court. It
appears that she had filed an earlier motion to dismiss 26 on the sole ground of
the unenforceability of petitioner's claim under the Statute of Frauds, which
motion was denied by the trial court. More telling is the following narration of the
trial court in its Order denying respondent's motion for reconsideration of the
denial of her motion to dismiss:
As can be gleaned from the records, with the admission of plaintiff's
exhibits, reception of defendants' evidence was set on March 31, and
April 23, 2004 . . . . On motion of the defendant[s], the hearing on March
31, 2004 was cancelled.
On April 14, 2004, defendants sought the issuance of subpoena ad
testificandum and duces tecum to one Gina M. Madulid, to appear and
testify for the defendants on April 23, 2004. Reception of defendants'
evidence was again deferred to May 26, June 2 and June 30, 2004, . . . .
On May 13, 2004, defendants sought again the issuance of a
subpoena duces tecum and ad testificandum to the said Gina Madulid.
On May 26, 2004, reception of defendants [sic] evidence was cancelled
uponthe agreement of the parties. On July 28, 2004, in the absence of
defendants' witness, hearing was reset to September 24 and October 8,
2004 . . . .
 On September 24, 2004, counsel for defendants was given a period of
fifteen (15) days to file a demurrer to evidence. On October 7, 2004,
defendants filed instead a Motion to Dismiss . . . . 27
Respondent's act of filing multiple motions, such as the first and earlier motion to
dismiss and then the motion to dismiss at issue here, as well as several motions
for postponement, lends credibility to the position taken by petitioner, which is
shared by the trial court, that respondent is deliberately impeding the early
disposition of this case. The filing of the second motion to dismiss was, therefore,
"not only improper but also dilatory." 28 Thus, the trial court, "far from deviating or
straying off course from established jurisprudence on [the] matter, . . . had in fact
faithfully observed the law and legal precedents in this case." 29 The Court of
Appeals, therefore, erred not only in entertaining respondent's petition
for certiorari, it likewise erred in ruling that the trial court committed grave abuse
of discretion when it denied respondent's motion to dismiss. IECcAT

On whether or not respondent is estopped from

questioning the jurisdiction of the trial court
At the outset, it must be here stated that, as the succeeding discussions will
demonstrate, jurisdiction over the person of Manuel should not be an issue in this
case. A protracted discourse on jurisdiction is, nevertheless, demanded by the
fact that jurisdiction has been raised as an issue from the lower court, to the
Court of Appeals and, finally, before this Court. For the sake of clarity, and in
order to finally settle the controversy and fully dispose of all the issues in this
case, it was deemed imperative to resolve the issue of jurisdiction.
1.Aspects of Jurisdiction
Petitioner calls attention to the fact that respondent's motion to dismiss
questioning the trial court's jurisdiction was filed more than six years after her
amended answer was filed. According to petitioner, respondent had several
opportunities, at various stages of the proceedings, to assail the trial court's
jurisdiction but never did so for six straight years. Citing the doctrine laid down in
the case of Tijam, et al. v. Sibonghanoy, et al.30 petitioner claimed that
respondent's failure to raise the question of jurisdiction at an earlier stage bars
her from later questioning it, especially since she actively participated in the
proceedings conducted by the trial court.
Petitioner's argument is misplaced, in that, it failed to consider that the concept of
jurisdiction has several aspects, namely: (1) jurisdiction over the subject matter;
(2) jurisdiction over the parties; (3) jurisdiction over the issues of the case; and
(4) in cases involving property, jurisdiction over the res or the thing which is the
subject of the litigation. 31
The aspect of jurisdiction which may be barred from being assailed as a result of
estoppel by laches is jurisdiction over the subject matter. Thus, in Tijam, the
case relied upon by petitioner, the issue involved was the authority of the then
Court of First Instance to hear a case for the collection of a sum of money in the
amount of P1,908.00 which amount was, at that time, within the exclusive original
jurisdiction of the municipal courts.
In subsequent cases citing the ruling of the Court in Tijam, what was likewise at
issue was the jurisdiction of the trial court over the subject matter of the case.
Accordingly, in Spouses Gonzaga v. Court of Appeals, 32 the issue for
consideration was the authority of the regional trial court to hear and decide an
action for reformation of contract and damages involving a subdivision lot, it
being argued therein that jurisdiction is vested in the Housing and Land Use
Regulatory Board pursuant to PD 957 (The Subdivision and Condominium
Buyers Protective Decree). In Lee v. Presiding Judge, MTC, Legaspi
City, 33 petitioners argued that the respondent municipal trial court had no
jurisdiction over the complaint for ejectment because the issue of ownership was
raised in the pleadings. Finally, in People v. Casuga, 34 accused-appellant
claimed that the crime of grave slander, of which she was charged, falls within
the concurrent jurisdiction of municipal courts or city courts and the then courts of
first instance, and that the judgment of the court of first instance, to which she
had appealed the municipal court's conviction, should be deemed null and void
for want of jurisdiction as her appeal should have been filed with the Court of
Appeals or the Supreme Court. ADEacC

In all of these cases, the Supreme Court barred the attack on the jurisdiction of
the respective courts concerned over the subject matter of the case based on
estoppel by laches, declaring that parties cannot be allowed to belatedly adopt
an inconsistent posture by attacking the jurisdiction of a court to which they
submitted their cause voluntarily. 35
Here, what respondent was questioning in her motion to dismiss before the trial
court was that court's jurisdiction over the person of defendant Manuel. Thus, the
principle of estoppel by laches finds no application in this case. Instead, the
principles relating to jurisdiction over the person of the parties are pertinent
herein.
The Rules of Court provide:
RULE 9
EFFECT OF FAILURE TO PLEAD
Section 1. Deffenses and of objections not pleaded. — Defenses and
objections not pleaded either in a motion to dismiss or in the answer are
deemed waived. However, when it appears from the pleadings or the
evidence on record that the court has no jurisdiction over the subject
matter, that there is another action pending between the same parties for
 the same cause, or that the action is barred by a prior judgment or by
statute of limitations, the court shall dismiss the claim.
RULE 15 MOTIONS
Sec. 8. Omnibus motion. — Subject to the provisions of Section 1 of
Rule 9, a motion attacking a pleading, order, judgment, or proceeding
shall include all objections then available, and all objections not so
included shall be deemed waived.
Based on the foregoing provisions, the "objection on jurisdictional grounds which
is not waived even if not alleged in a motion to dismiss or the answer is lack of
jurisdiction over the subject matter. . . . Lack of jurisdiction over the subject
matter can always be raised anytime, even for the first time on appeal, since
jurisdictional issues cannot be waived . . . subject, however, to the principle of
estoppel by laches." 36 cHDAIS

Since the defense of lack of jurisdiction over the person of a party to a case is not
one of those defenses which are not deemed waived under Section 1 of Rule 9,
such defense must be invoked when an answer or a motion to dismiss is filed in
order to prevent a waiver of the defense. 37 If the objection is not raised either in
a motion to dismiss or in the answer, the objection to the jurisdiction over the
person of the plaintiff or the defendant is deemed waived by virtue of the first
sentence of the above-quoted Section 1 of Rule 9 of the Rules of Court. 38
The Court of Appeals, therefore, erred when it made a sweeping pronouncement
in its questioned decision, stating that "issue on jurisdiction may be raised at any
stage of the proceeding, even for the first time on appeal" and that, therefore,
respondent timely raised the issue in her motion to dismiss and is, consequently,
not estopped from raising the question of jurisdiction. As the question of
jurisdiction involved here is that over the person of the defendant Manuel, the
same is deemed waived if not raised in the answer or a motion to dismiss. In any
case, respondent cannot claim the defense since "lack of jurisdiction over the
person, being subject to waiver, is a personal defense which can only be
asserted by the party who can thereby waive it by silence." 39
2. Jurisdiction over the person of a defendant is acquired through a
valid service of summons; trial court did not acquire jurisdiction over
the person of Manuel Toledo
In the first place, jurisdiction over the person of Manuel was never acquired by
the trial court. A defendant is informed of a case against him when he receives
summons. "Summons is a writ by which the defendant is notified of the action
brought against him. Service of such writ is the means by which the court
acquires jurisdiction over his person." 40
In the case at bar, the trial court did not acquire jurisdiction over the person of
Manuel since there was no valid service of summons upon him, precisely
because he was already dead even before the complaint against him and his
wife was filed in the trial court. The issues presented in this case are similar to
those in the case ofSarsaba v. Vda. de Te. 41
In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was
illegally dismissed from employment and ordering the payment of his monetary
claims. To satisfy the claim, a truck in the possession of Sereno's employer was
levied upon by a sheriff of the NLRC, accompanied by Sereno and his lawyer,
Rogelio Sarsaba, the petitioner in that case. A complaint for recovery of motor
vehicle and damages, with prayer for the delivery of the truck pendente lite was
eventually filed against Sarsaba, Sereno, the NLRC sheriff and the NLRC by the
registered owner of the truck. After his motion to dismiss was denied by the trial
court, petitioner Sarsaba filed his answer. Later on, however, he filed an omnibus
motion to dismiss citing, as one of the grounds, lack of jurisdiction over one of the
principal defendants, in view of the fact that Sereno was already dead when the
complaint for recovery of possession was filed.
Although the factual milieu of the present case is not exactly similar to that
of Sarsaba, one of the issues submitted for resolution in both cases is similar:
whether or not a case, where one of the named defendants was already dead at
the time of its filing, should be dismissed so that the claim may be pursued
instead in the proceedings for the settlement of the estate of the deceased
defendant. The petitioner in the Sarsaba Case claimed, as did respondent
herein, that since one of the defendants died before summons was served on
him, the trial court should have dismissed the complaint against all the
defendants and the claim should be filed against the estate of the deceased
defendant. The petitioner in Sarsaba, therefore, prayed that the complaint be
dismissed, not only against Sereno, but as to all the defendants, considering that
the RTC did not acquire jurisdiction over the person of Sereno. 42 This is exactly
the same prayer made by respondent herein in her motion to dismiss.
The Court, in the Sarsaba Case, resolved the issue in this wise:
. . . We cannot countenance petitioner's argument that the complaint
against the other defendants should have been dismissed, considering
that the RTC never acquired jurisdiction over the person of
Sereno. The court's failure to acquire jurisdiction over one's
person is a defense which is personal to the person claiming
it. Obviously, it is now impossible for Sereno to invoke the same in
view of his death. Neither can petitioner invoke such ground, on
behalf of Sereno, so as to reap the benefit of having the case
dismissed against all of the defendants. Failure to serve summons
on Sereno's person will not be a cause for the dismissal of the
complaint against the other defendants, considering that they have
 been served with copies of the summons and complaints and have
long submitted their respective responsive pleadings. In fact, the other
defendants in the complaint were given the chance to raise all possible
defenses and objections personal to them in their respective motions
to dismiss and their subsequent answers. 43 (Emphasis supplied.) TCHcAE

Hence, the Supreme Court affirmed the dismissal by the trial court of the
complaint against Sereno only.
Based on the foregoing pronouncements, there is no basis for dismissing the
complaint against respondent herein. Thus, as already emphasized above, the
trial court correctly denied her motion to dismiss.
On whether or not the estate of Manuel
Toledo is an indispensable party
Rule 3, Section 7 of the 1997 Rules of Court states:
SEC. 7. Compulsory joinder of indispensable parties. — Parties-in-
interest without whom no final determination can be had of an action
shall be joined either as plaintiffs or defendants.
An indispensable party is one who has such an interest in the controversy or
subject matter of a case that a final adjudication cannot be made in his or her
absence, without injuring or affecting that interest. He or she is a party who has
not only an interest in the subject matter of the controversy, but "an interest of
such nature that a final decree cannot be made without affecting [that] interest or
leaving the controversy in such a condition that its final determination may be
wholly inconsistent with equity and good conscience. It has also been considered
that an indispensable party is a person in whose absence there cannot be a
determination between the parties already before the court which is effective,
complete or equitable." Further, an indispensable party is one who must be
included in an action before it may properly proceed. 44
On the other hand, a "person is not an indispensable party if his interest in the
controversy or subject matter is separable from the interest of the other parties,
so that it will not necessarily be directly or injuriously affected by a decree which
does complete justice between them. Also, a person is not an indispensable
party if his presence would merely permit complete relief between him or her and
those already parties to the action, or if he or she has no interest in the subject
matter of the action." It is not a sufficient reason to declare a person to be an
indispensable party simply because his or her presence will avoid multiple
litigations. 45
cEAaIS

Applying the foregoing pronouncements to the case at bar, it is clear that the
estate of Manuel is not an indispensable party to the collection case, for the
simple reason that the obligation of Manuel and his wife, respondent herein, is
solidary.
The contract between petitioner, on the one hand and respondent and
respondent's husband, on the other, states:
FOR VALUE RECEIVED, I/We jointly and severally 46 (in solemn)
promise to pay BOSTON EQUITY RESOURCES, INC. . . . the sum of
PESOS: [ONE MILLION FOUR HUNDRED (P1,400,000.00)] . . . . 47
The provisions and stipulations of the contract were then followed by the
respective signatures of respondent as "MAKER" and her husband as "CO-
MAKER." 48 Thus, pursuant to Article 1216 of the Civil Code,petitioner may
collect the entire amount of the obligation from respondent only. The
aforementioned provision states: "The creditor may proceed against any one of
the solidary debtors or some or all of them simultaneously. The demand made
against one of them shall not be an obstacle to those which may subsequently be
directed against the others, so long as the debt has not been fully collected."
In other words, the collection case can proceed and the demands of petitioner
can be satisfied by respondent only, even without impleading the estate of
Manuel. Consequently, the estate of Manuel is not an indispensable party to
petitioner's complaint for sum of money.
However, the Court of Appeals, agreeing with the contention of respondent, held
that the claim of petitioner should have been filed against the estate of Manuel in
accordance with Sections 5 and 6 of Rule 86 of the Rules of Court. The
aforementioned provisions provide:
SEC. 5. Claims which must be filed under the notice. If not filed, barred;
exceptions. — All claims for money against the decedent, arising from
contract, express or implied, whether the same be due, not due, or
contingent, all claims for funeral expenses and judgment for money
against the decedent, must be filed within the time limited in the notice;
otherwise, they are barred forever, except that they may be set forth as
counterclaims in any action that the executor or administrator may bring
against the claimants. . . . .
SEC. 6. Solidary obligation of decedent. — Where the obligation of the
decedent is solidary with another debtor, the claim shall be filed against
the decedent as if he were the only debtor, without prejudice to the right
of the estate to recover contribution from the other debtor. . . . .
The Court of Appeals erred in its interpretation of the above-quoted provisions.
In construing Section 6, Rule 87 of the old Rules of Court,the precursor of
Section 6, Rule 86 of the Revised Rules of Court, which latter provision has been
retained in the present Rules of Court without any revisions, the Supreme Court,
in the case of Manila Surety & Fidelity Co., Inc. v. Villarama, et al., 49 held: 50 aAHTDS

Construing Section 698 of the Code of Civil Procedure from whence

[Section 6, Rule 87] was taken, this Court held that where two persons
 are bound in solidum for the same debt and one of them dies, the whole
indebtedness can be proved against the estate of the latter, the
decedent's liability being absolute and primary; . . . It is evident from the
foregoing that Section 6 of Rule 87 provides the procedure should the
creditor desire to go against the deceased debtor, but there is certainly
nothing in the said provision making compliance with such procedure a
condition precedent before an ordinary action against the surviving
solidary debtors, should the creditor choose to demand payment from
the latter, could be entertained to the extent that failure to observe the
same would deprive the court jurisdiction to take cognizance of the
action against the surviving debtors. Upon the other hand, the Civil
Code expressly allows the creditor to proceed against any one of the
solidary debtors or some or all of them simultaneously. There is,
therefore, nothing improper in the creditor's filing of an action against the
surviving solidary debtors alone, instead of instituting a proceeding for
the settlement of the estate of the deceased debtor wherein his claim
could be filed.
The foregoing ruling was reiterated and expounded in the later case of Philippine
National Bank v. Asuncion 51 where the Supreme Court pronounced:
A cursory perusal of Section 6, Rule 86 of the Revised Rules of
Court reveals that nothing therein prevents a creditor from proceeding
against the surviving solidary debtors. Said provision merely sets up the
procedure in enforcing collection in case a creditor chooses to pursue
his claim against the estate of the deceased solidary debtor. The rule
has been set forth that a creditor (in a solidary obligation) has the option
whether to file or not to file a claim against the estate of the solidary
debtor. . . .
xxx xxx xxx
It is crystal clear that Article 1216 of the New Civil Code is the
applicable provision in this matter. Said provision gives the
creditor the right to "proceed against anyone of the solidary
debtors or some or all of them simultaneously." The choice is
undoubtedly left to the solidary creditor to determine against whom
he will enforce collection. In case of the death of one of the solidary
debtors, he (the creditor) may, if he so chooses, proceed against
the surviving solidary debtors without necessity of filing a claim in
the estate of the deceased debtors. It is not mandatory for him to
have the case dismissed as against the surviving debtors and file
its claim against the estate of the deceased solidary debtor, . . . For
to require the creditor to proceed against the estate, making it a
condition precedent for any collection action against the surviving
debtors to prosper, would deprive him of his substantive rights provided
by Article 1216 of theNew Civil Code. (Emphasis supplied.) EHDCAI
 As correctly argued by petitioner, if Section 6, Rule 86 of the Revised
Rules of Court were applied literally, Article 1216 of the New Civil
Code would, in effect, be repealed since under the Rules of
Court,petitioner has no choice but to proceed against the estate of [the
deceased debtor] only. Obviously, this provision diminishes the
[creditor's] right under the New Civil Code to proceed against any one,
some or all of the solidary debtors. Such a construction is not sanctioned
by principle, which is too well settled to require citation, that a
substantive law cannot be amended by a procedural rule. Otherwise
stated, Section 6, Rule 86 of the Revised Rules of Courtcannot be made
to prevail over Article 1216 of the New Civil Code, the former being
merely procedural, while the latter, substantive.
Based on the foregoing, the estate of Manuel is not an indispensable party and
the case can proceed as against respondent only. That petitioner opted to collect
from respondent and not from the estate of Manuel is evidenced by its opposition
to respondent's motion to dismiss asserting that the case, as against her, should
be dismissed so that petitioner can proceed against the estate of Manuel.
On whether or not the inclusion of Manuel as
party defendant is a misjoinder of party
Section 11 of Rule 3 of the Rules of Court states that "[n]either misjoinder nor
non-joinder of parties is ground for dismissal of an action. Parties may be
dropped or added by order of the court on motion of any party or on its own
initiative at any stage of the action and on such terms as are just. Any claim
against a misjoined party may be severed and proceeded with separately."
Based on the last sentence of the afore-quoted provision of law, a misjoined
party must have the capacity to sue or be sued in the event that the claim by or
against the misjoined party is pursued in a separate case. In this case, therefore,
the inclusion of Manuel in the complaint cannot be considered a misjoinder, as in
fact, the action would have proceeded against him had he been alive at the time
the collection case was filed by petitioner. This being the case, the remedy
provided by Section 11 of Rule 3 does not obtain here. The name of Manuel as
party-defendant cannot simply be dropped from the case. Instead, the procedure
taken by the Court in Sarsaba v. Vda. de Te, 52 whose facts, as mentioned
earlier, resemble those of this case, should be followed herein. There, the
Supreme Court agreed with the trial court when it resolved the issue of
jurisdiction over the person of the deceased Sereno in this wise: ICHcaD

As correctly pointed by defendants, the Honorable Court has not

acquired jurisdiction over the person of Patricio Sereno since there was
indeed no valid service of summons insofar as Patricio Sereno is
concerned. Patricio Sereno died before the summons, together with a
copy of the complaint and its annexes, could be served upon him.
 However, the failure to effect service of summons unto Patricio Sereno,
one of the defendants herein, does not render the action DISMISSIBLE,
considering that the three (3) other defendants, . . . , were validly served
with summons and the case with respect to the answering defendants
may still proceed independently. Be it recalled that the three (3)
answering defendants have previously filed a Motion to Dismiss the
Complaint which was denied by the Court.
Hence, only the case against Patricio Sereno will be
DISMISSED and the same may be filed as a claim against the estate of
Patricio Sereno, but the case with respect to the three (3) other accused
[sic] will proceed. (Emphasis supplied.) 53
As a result, the case, as against Manuel, must be dismissed.
In addition, the dismissal of the case against Manuel is further warranted by
Section 1 of Rule 3 of the Rules of Court,which states that: [o]nly natural or
juridical persons, or entities authorized by law may be parties in a civil action."
Applying this provision of law, the Court, in the case of Ventura v.
Militante, 54 held:
Parties may be either plaintiffs or defendants. . . . . In order to maintain
an action in a court of justice, the plaintiff must have an actual legal
existence, that is, he, she or it must be a person in law and possessed
of a legal entity as either a natural or an artificial person, and no suit can
be lawfully prosecuted save in the name of such a person.
The rule is no different as regards party defendants. It is incumbent upon
a plaintiff, when he institutes a judicial proceeding, to name the proper
party defendant to his cause of action. In a suit or proceeding in
personam of an adversary character, the court can acquire no
jurisdiction for the purpose of trial or judgment until a party defendant
who actually or legally exists and is legally capable of being sued, is
brought before it. It has even been held that the question of the legal
personality of a party defendant is a question of substance going to the
jurisdiction of the court and not one of procedure.
The original complaint of petitioner named the "estate of Carlos Ngo as
represented by surviving spouse Ms. Sulpicia Ventura" as the defendant.
Petitioner moved to dismiss the same on the ground that the defendant
as named in the complaint had no legal personality. We agree. cETCID

. . . Considering that capacity to be sued is a correlative of the capacity

to sue, to the same extent, a decedent does not have the capacity to
be sued and may not be named a party defendant in a court
action. (Emphases supplied.)
Indeed, where the defendant is neither a natural nor a juridical person or an
entity authorized by law, the complaint may be dismissed on the ground that the
pleading asserting the claim states no cause of action or for failure to state a
cause of action pursuant to Section 1(g) of Rule 16 of the Rules of
Court,because a complaint cannot possibly state a cause of action against one
who cannot be a party to a civil action. 55
Since the proper course of action against the wrongful inclusion of Manuel as
party-defendant is the dismissal of the case as against him, thus did the trial
court err when it ordered the substitution of Manuel by his heirs. Substitution is
proper only where the party to be substituted died during the pendency of the
case, as expressly provided for by Section 16, Rule 3 of the Rules of Court,which
states:
Death of party; duty of counsel. — Whenever a party to a pending
action dies, and the claim is not thereby extinguished, it shall be the
duty of his counsel to inform the court within thirty (30) days after such
death of the fact thereof, and to give the name and address of his legal
representative or representatives. . . .
The heirs of the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an executor or
administrator . . . .
The court shall forthwith order said legal representative or
representatives to appear and be substituted within a period of thirty (30)
days from notice. (Emphasis supplied.)
Here, since Manuel was already dead at the time of the filing of the complaint,
the court never acquired jurisdiction over his person and, in effect, there was no
party to be substituted.
WHEREFORE, the petition is GRANTED. The Decision dated 28 February 2006
and the Resolution dated 1 August 2006 of the Court of Appeals in CA-G.R. SP
No. 88586 are REVERSED and SET ASIDE. The Orders of the Regional Trial
Court dated 8 November 2004 and 22 December 2004, respectively, in Civil
Case No. 97-86672, areREINSTATED. The Regional Trial Court, Branch 24,
Manila is hereby DIRECTED to proceed with the trial of Civil Case No. 97-86672
against respondent Lolita G. Toledo only, in accordance with the above
pronouncements of the Court, and to decide the case with dispatch. HScAEC

SO ORDERED.
(Boston Equity Resources, Inc. v. Court of Appeals, G.R. No. 173946, [June 19,
|||

2013], 711 PHIL 451-477)

16. People v Henry T. Go March 25, 2014

 EN BANC

[G.R. No. 168539. March 25, 2014.]

PEOPLE OF THE
PHILIPPINES, petitioner, vs. HENRY T. GO, respondent.

DECISION

PERALTA, J : p

Before the Court is a petition for review on certiorari assailing the Resolution 1 of
the Third Division 2 of the Sandiganbayan (SB) dated June 2, 2005 which
quashed the Information filed against herein respondent for alleged violation of
Section 3 (g) of Republic Act No. 3019 (R.A. 3019), otherwise known as the Anti-
Graft and Corrupt Practices Act.
The Information filed against respondent is an offshoot of this Court's
Decision 3 in Agan, Jr. v. Philippine International Air Terminals Co., Inc. which
nullified the various contracts awarded by the Government, through the
Department of Transportation and Communications (DOTC), to Philippine Air
Terminals, Co., Inc. (PIATCO) for the construction, operation and maintenance of
the Ninoy Aquino International Airport International Passenger Terminal III (NAIA
IPT III). Subsequent to the above Decision, a certain Ma. Cecilia L. Pesayco filed
a complaint with the Office of the Ombudsman against several individuals for
alleged violation of R.A. 3019. Among those charged was herein respondent,
who was then the Chairman and President of PIATCO, for having supposedly
conspired with then DOTC Secretary Arturo Enrile(Secretary Enrile) in entering
into a contract which is grossly and manifestly disadvantageous to the
government.
On September 16, 2004, the Office of the Deputy Ombudsman for Luzon found
probable cause to indict, among others, herein respondent for violation of Section
3 (g) of R.A. 3019. While there was likewise a finding of probable cause against
Secretary Enrile, he was no longer indicted because he died prior to the issuance
of the resolution finding probable cause.
Thus, in an Information dated January 13, 2005, respondent was charged before
the SB as follows: DCcTHa

On or about July 12, 1997, or sometime prior or subsequent thereto, in

Pasay City, Metro Manila, Philippines and within the jurisdiction of this
Honorable Court, the late ARTURO ENRILE, then Secretary of the
 Department of Transportation and Communications (DOTC), committing
the offense in relation to his office and taking advantage of the same, in
conspiracy with accused, HENRY T. GO, Chairman and President of
the Philippine International Air Terminals, Co., Inc. (PIATCO), did
then and there, willfully, unlawfully and criminally enter into a
Concession Agreement, after the project for the construction of the
Ninoy Aquino International Airport International Passenger
Terminal III (NAIA IPT III) was awarded to Paircargo
Consortium/PIATCO, which Concession Agreement substantially
amended the draft Concession Agreement covering the
construction of the NAIA IPT III under Republic Act 6957, as
amended by Republic Act 7718 (BOT law), specifically the provision
on Public Utility Revenues, as well as the assumption by the
government of the liabilities of PIATCO in the event of the latter's
default under Article IV, Section 4.04 (b) and (c) in relation to Article
1.06 of the Concession Agreement, which terms are more beneficial
to PIATCO while manifestly and grossly disadvantageous to the
government of the Republic of the Philippines. 4
The case was docketed as Criminal Case No. 28090.
On March 10, 2005, the SB issued an Order, to wit:
The prosecution is given a period of ten (10) days from today within
which to show cause why this case should not be dismissed for lack of
jurisdiction over the person of the accused considering that the accused
is a private person and the public official Arturo Enrile, his alleged co-
conspirator, is already deceased, and not an accused in this case. 5
The prosecution complied with the above Order contending that the SB has
already acquired jurisdiction over the person of respondent by reason of his
voluntary appearance, when he filed a motion for consolidation and when he
posted bail. The prosecution also argued that the SB has exclusive jurisdiction
over respondent's case, even if he is a private person, because he was alleged
to have conspired with a public officer. 6
On April 28, 2005, respondent filed a Motion to Quash 7 the Information filed
against him on the ground that the operative facts adduced therein do not
constitute an offense under Section 3 (g) of R.A. 3019. Respondent, citing the
show cause order of the SB, also contended that, independently of the deceased
Secretary Enrile, the public officer with whom he was alleged to have conspired,
respondent, who is not a public officer nor was capacitated by any official
authority as a government agent, may not be prosecuted for violation of Section
3 (g) of R.A. 3019.
The prosecution filed its Opposition. 8
On June 2, 2005, the SB issued its assailed Resolution, pertinent portions of
which read thus: CHcTIA

Acting on the Motion to Quash filed by accused Henry T. Go dated April

22, 2005, and it appearing that Henry T. Go, the lone accused in this
case is a private person and his alleged co-conspirator-public official
was already deceased long before this case was filed in court, for lack of
jurisdiction over the person of the accused, the Court grants the Motion
to Quash and the Information filed in this case is hereby ordered
quashed and dismissed. 9
Hence, the instant petition raising the following issues, to wit:
I
WHETHER OR NOT THE COURT A QUO GRAVELY ERRED AND
DECIDED A QUESTION OF SUBSTANCE IN A MANNER NOT IN
ACCORD WITH LAW OR APPLICABLE JURISPRUDENCE IN
GRANTING THE DEMURRER TO EVIDENCE AND IN DISMISSING
CRIMINAL CASE NO. 28090 ON THE GROUND THAT IT HAS NO
JURISDICTION OVER THE PERSON OF RESPONDENT GO.
II
WHETHER OR NOT THE COURT A QUO GRAVELY ERRED AND
DECIDED A QUESTION OF SUBSTANCE IN A MANNER NOT IN
ACCORD WITH LAW OR APPLICABLE JURISPRUDENCE, IN
RULING THAT IT HAS NO JURISDICTION OVER THE PERSON OF
RESPONDENT GO DESPITE THE IRREFUTABLE FACT THAT HE
HAS ALREADY POSTED BAIL FOR HIS PROVISIONAL LIBERTY
III
WHETHER OR NOT THE COURT A QUO GRAVELY ERRED WHEN,
IN COMPLETE DISREGARD OF THE EQUAL PROTECTION
CLAUSE OF THE CONSTITUTION, IT QUASHED THE
INFORMATION AND DISMISSED CRIMINAL CASE NO. 28090 10
The Court finds the petition meritorious.
Section 3 (g) of R.A. 3019 provides:
Sec. 3. Corrupt practices of public officers. — In addition to acts or
omissions of public officers already penalized by existing law, the
following shall constitute corrupt practices of any public officer and are
hereby declared to be unlawful:
xxx xxx xxx
(g) Entering, on behalf of the Government, into any contract or
transaction manifestly and grossly disadvantageous to the same,
whether or not the public officer profited or will profit thereby.
The elements of the above provision are: ISDCaT

(1) that the accused is a public officer;

(2) that he entered into a contract or transaction on behalf of the
government; and
(3) that such contract or transaction is grossly and manifestly
disadvantageous to the government. 11
At the outset, it bears to reiterate the settled rule that private persons, when
acting in conspiracy with public officers, may be indicted and, if found guilty, held
liable for the pertinent offenses under Section 3 of R.A. 3019, in consonance with
the avowed policy of the anti-graft law to repress certain acts of public officers
and private persons alike constituting graft or corrupt practices act or which may
lead thereto. 12 This is the controlling doctrine as enunciated by this Court in
previous cases, among which is a case involving herein private respondent. 13
The only question that needs to be settled in the present petition is whether
herein respondent, a private person, may be indicted for conspiracy in violating
Section 3 (g) of R.A. 3019 even if the public officer, with whom he was alleged to
have conspired, has died prior to the filing of the Information.
Respondent contends that by reason of the death of Secretary Enrile, there is no
public officer who was charged in the Information and, as such, prosecution
against respondent may not prosper.
The Court is not persuaded.
It is true that by reason of Secretary Enrile's death, there is no longer any public
officer with whom respondent can be charged for violation of R.A. 3019. It does
not mean, however, that the allegation of conspiracy between them can no
longer be proved or that their alleged conspiracy is already expunged. The only
thing extinguished by the death of Secretary Enrile is his criminal liability. His
death did not extinguish the crime nor did it remove the basis of the charge of
conspiracy between him and private respondent. Stated differently, the death of
Secretary Enrile does not mean that there was no public officer who allegedly
violated Section 3 (g) of R.A. 3019. In fact, the Office of the Deputy Ombudsman
for Luzon found probable cause to indict Secretary Enrile for infringement of
Sections 3 (e) and (g) of R.A. 3019. 14 Were it not for his death, he should have
been charged.
The requirement before a private person may be indicted for violation of Section
3 (g) of R.A. 3019, among others, is that such private person must be alleged to
have acted in conspiracy with a public officer. The law, however, does not require
that such person must, in all instances, be indicted together with the public
officer. If circumstances exist where the public officer may no longer be charged
in court, as in the present case where the public officer has already died, the
private person may be indicted alone. SDHacT

Indeed, it is not necessary to join all alleged co-conspirators in an indictment for

conspiracy. 15 If two or more persons enter into a conspiracy, any act done by
any of them pursuant to the agreement is, in contemplation of law, the act of
each of them and they are jointly responsible therefor. 16 This means that
everything said, written or done by any of the conspirators in execution or
furtherance of the common purpose is deemed to have been said, done or
written by each of them and it makes no difference whether the actual actor is
alive or dead, sane or insane at the time of trial. 17 The death of one of two or
more conspirators does not prevent the conviction of the survivor or
survivors. 18 Thus, this Court held that:
. . . [a] conspiracy is in its nature a joint offense. One person cannot
conspire alone. The crime depends upon the joint act or intent of two or
more persons. Yet, it does not follow that one person cannot be
convicted of conspiracy. So long as the acquittal or death of a co-
conspirator does not remove the bases of a charge for conspiracy,
one defendant may be found guilty of the offense. 19
The Court agrees with petitioner's contention that, as alleged in the Information
filed against respondent, which is deemed hypothetically admitted in the latter's
Motion to Quash, he (respondent) conspired with Secretary Enrile in violating
Section 3 (g) of R.A. 3019 and that in conspiracy, the act of one is the act of all.
Hence, the criminal liability incurred by a co-conspirator is also incurred by the
other co-conspirators.
Moreover, the Court agrees with petitioner that the avowed policy of the State
and the legislative intent to repress "acts of public officers and private persons
alike, which constitute graft or corrupt practices," 20 would be frustrated if the
death of a public officer would bar the prosecution of a private person who
conspired with such public officer in violating the Anti-Graft Law.
In this regard, this Court's disquisition in the early case of People v. Peralta 21 as
to the nature of and the principles governing conspiracy, as construed under
Philippine jurisdiction, is instructive, to wit:
. . . A conspiracy exists when two or more persons come to an
agreement concerning the commission of a felony and decide to
commit it. Generally, conspiracy is not a crime except when the law
specifically provides a penalty therefor as in treason, rebellion and
sedition. The crime of conspiracy known to the common law is not an
indictable offense in the Philippines. An agreement to commit a crime
is a reprehensible act from the view-point of morality, but as long as
the conspirators do not perform overt acts in furtherance of their
malevolent design, the sovereignty of the State is not outraged and the
tranquility of the public remains undisturbed. However, when in
resolute execution of a common scheme, a felony is committed
by two or more malefactors, the existence of a conspiracy
assumes pivotal importance in the determination of the liability of
the perpetrators. In stressing the significance of conspiracy in criminal
law, this Court in U.S. vs. Infante and Barreto opined that SHcDAI

While it is true that the penalties cannot be imposed for the mere
act of conspiring to commit a crime unless the statute specifically
prescribes a penalty therefor, nevertheless the existence of a
conspiracy to commit a crime is in many cases a fact of vital
importance, when considered together with the other evidence of
record, in establishing the existence, of the consummated crime
and its commission by the conspirators.
Once an express or implied conspiracy is proved, all of the
conspirators are liable as co-principals regardless of the extent and
character of their respective active participation in the commission
of the crime or crimes perpetrated in furtherance of the conspiracy
because in contemplation of law the act of one is the act of all. The
foregoing rule is anchored on the sound principle that "when two
or more persons unite to accomplish a criminal object, whether
through the physical volition of one, or all, proceeding severally or
collectively, each individual whose evil will actively contributes to
the wrong-doing is in law responsible for the whole, the same as
though performed by himself alone." Although it is axiomatic that no
one is liable for acts other than his own, "when two or more persons
agree or conspire to commit a crime, each is responsible for all the acts
of the others, done in furtherance of the agreement or conspiracy." The
imposition of collective liability upon the conspirators is clearly explained
in one case where this Court held that
. . . it is impossible to graduate the separate liability of
each (conspirator) without taking into consideration the
close and inseparable relation of each of them with the
criminal act, for the commission of which they all acted by
common agreement . . . . The crime must therefore in
view of the solidarity of the act and intent which existed
between the . . . accused, be regarded as the act of the
band or party created by them, and they are all equally
responsible. . .
Verily, the moment it is established that the malefactors conspired and
confederated in the commission of the felony proved, collective liability of
the accused conspirators attaches by reason of the conspiracy, and the
court shall not speculate nor even investigate as to the actual degree of
participation of each of the perpetrators present at the scene of the
crime. Of course, as to any conspirator who was remote from the situs of
 aggression, he could be drawn within the enveloping ambit of the
conspiracy if it be proved that through his moral ascendancy over the
rest of the conspirators the latter were moved or impelled to carry out the
conspiracy.
In fine, the convergence of the wills of the conspirators in the
scheming and execution of the crime amply justifies the imputation
to all of them the act of any one of them. It is in this light that
conspiracy is generally viewed not as a separate indictable offense,
but a rule for collectivizing criminal liability.
aHTDAc

xxx xxx xxx

. . . A time-honored rule in the corpus of our jurisprudence is that once
conspiracy is proved, all of the conspirators who acted in furtherance
of the common design are liable as co-principals. This rule of collective
criminal liability emanates from the ensnaring nature of conspiracy.
The concerted action of the conspirators in consummating their
common purpose is a patent display of their evil partnership, and for
the consequences of such criminal enterprise they must be held
solidarity liable. 22
This is not to say, however, that private respondent should be found guilty of
conspiring with Secretary Enrile. It is settled that the absence or presence of
conspiracy is factual in nature and involves evidentiary matters. 23 Hence, the
allegation of conspiracy against respondent is better left ventilated before the trial
court during trial, where respondent can adduce evidence to prove or disprove its
presence.
Respondent claims in his Manifestation and Motion 24 as well as in his Urgent
Motion to Resolve 25 that in a different case, he was likewise indicted before the
SB for conspiracy with the late Secretary Enrile in violating the same Section 3
(g) of R.A. 3019 by allegedly entering into another agreement (Side Agreement)
which is separate from the Concession Agreement subject of the present case.
The case was docketed as Criminal Case No. 28091. Here, the SB, through a
Resolution, granted respondent's motion to quash the Information on the ground
that the SB has no jurisdiction over the person of respondent. The prosecution
questioned the said SB Resolution before this Court via a petition for review
on certiorari. The petition was docketed as G.R. No. 168919. In a minute
resolution dated August 31, 2005, this Court denied the petition finding no
reversible error on the part of the SB. This Resolution became final and
executory on January 11, 2006. Respondent now argues that this Court's
resolution in G.R. No. 168919 should be applied in the instant case.
The Court does not agree. Respondent should be reminded that prior to this
Court's ruling in G.R. No. 168919, he already posted bail for his provisional
liberty. In fact, he even filed a Motion for Consolidation 26 in Criminal Case No.
28091. The Court agrees with petitioner's contention that private respondent's act
of posting bail and filing his Motion for Consolidation vests the SB with
jurisdiction over his person. The rule is well settled that the act of an accused in
posting bail or in filing motions seeking affirmative relief is tantamount to
submission of his person to the jurisdiction of the court. 27
Thus, it has been held that:
When a defendant in a criminal case is brought before a competent court
by virtue of a warrant of arrest or otherwise, in order to avoid the
submission of his body to the jurisdiction of the court he must raise the
question of the court's jurisdiction over his person at the very earliest
opportunity. If he gives bail, demurs to the complaint or files any
dilatory plea or pleads to the merits, he thereby gives the court
jurisdiction over his person. (State ex rel. John Brown vs.
Fitzgerald, 51 Minn., 534)
xxx xxx xxx
As ruled in La Naval Drug vs. CA [236 SCRA 78, 86]:
"[L]ack of jurisdiction over the person of the defendant may be
waived either expressly or impliedly. When a defendant voluntarily
appears, he is deemed to have submitted himself to the
jurisdiction of the court. If he so wishes not to waive this defense,
he must do so seasonably by motion for the purpose of objecting
to the jurisdiction of the court; otherwise, he shall be deemed to
have submitted himself to that jurisdiction."DcCITS

Moreover, "[w]here the appearance is by motion for the purpose of

objecting to the jurisdiction of the court over the person, it must be for
the sole and separate purpose of objecting to said jurisdiction. If the
appearance is for any other purpose, the defendant is deemed to
have submitted himself to the jurisdiction of the court. Such an
appearance gives the court jurisdiction over the person."
Verily, petitioner's participation in the proceedings before the
Sandiganbayan was not confined to his opposition to the issuance of a
warrant of arrest but also covered other matters which called for
respondent court's exercise of its jurisdiction. Petitioner may not be
heard now to deny said court's jurisdiction over him. . . . .28
In the instant case, respondent did not make any special appearance to question
the jurisdiction of the SB over his person prior to his posting of bail and filing his
Motion for Consolidation. In fact, his Motion to Quash the Information in Criminal
Case No. 28090 only came after the SB issued an Order requiring the
prosecution to show cause why the case should not be dismissed for lack of
jurisdiction over his person.
As a recapitulation, it would not be amiss to point out that the instant case
involves a contract entered into by public officers representing the government.
More importantly, the SB is a special criminal court which has exclusive original
jurisdiction in all cases involving violations of R.A. 3019 committed by certain
public officers, as enumerated in P.D. 1606 as amended by R.A. 8249. This
includes private individuals who are charged as co-principals, accomplices or
accessories with the said public officers. In the instant case, respondent is being
charged for violation of Section 3 (g) of R.A. 3019, in conspiracy with then
Secretary Enrile. Ideally, under the law, both respondent and Secretary Enrile
should have been charged before and tried jointly by the Sandiganbayan.
However, by reason of the death of the latter, this can no longer be done.
Nonetheless, for reasons already discussed, it does not follow that the SB is
already divested of its jurisdiction over the person of and the case involving
herein respondent. To rule otherwise would mean that the power of a court to
decide a case would no longer be based on the law defining its jurisdiction but on
other factors, such as the death of one of the alleged offenders.
Lastly, the issues raised in the present petition involve matters which are mere
incidents in the main case and the main case has already been pending for over
nine (9) years. Thus, a referral of the case to the Regional Trial Court would
further delay the resolution of the main case and it would, by no means, promote
respondent's right to a speedy trial and a speedy disposition of his case.
WHEREFORE, the petition is GRANTED. The Resolution of the Sandiganbayan
dated June 2, 2005, granting respondent's Motion to Quash, is
hereby REVERSED and SET ASIDE. The Sandiganbayan is
forthwith DIRECTED to proceed with deliberate dispatch in the disposition of
Criminal Case No. 28090.
SO ORDERED.
||| (People v. Go, G.R. No. 168539, [March 25, 2014], 730 PHIL 362-377)

17. City of Manila v Judge Cuerdo, February 4, 2014

EN BANC

[G.R. No. 175723. February 4, 2014.]

THE CITY OF MANILA, represented by MAYOR JOSE L.

ATIENZA, JR., and MS. LIBERTY M. TOLEDO, in her capacity
as the City Treasurer of Manila,petitioners, vs. HON. CARIDAD
 H. GRECIA-CUERDO, in her capacity as Presiding Judge of
the Regional Trial Court, Branch 112, Pasay City; SM MART,
INC.; SM PRIME HOLDINGS, INC.; STAR APPLIANCES
CENTER; SUPERVALUE, INC.; ACE HARDWARE
PHILIPPINES, INC.; WATSON PERSONAL CARE STORES,
PHILS., INC.; JOLLIMART PHILS., CORP.; SURPLUS
MARKETING CORPORATION and SIGNATURE
LINES, respondents.

DECISION

PERALTA, J : p

Before the Court is a special civil action for certiorari under Rule 65 of the Rules
of Court seeking to reverse and set aside the Resolutions 1 dated April 6, 2006
and November 29, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 87948.
The antecedents of the case, as summarized by the CA, are as follows:
The record shows that petitioner City of Manila, through its treasurer,
petitioner Liberty Toledo, assessed taxes for the taxable period from
January to December 2002 against private. respondents SM Mart, Inc.,
SM Prime Holdings, Inc., Star Appliances Center, Supervalue, Inc., Ace
Hardware Philippines, Inc., Watsons Personal Care Stores Phils., Inc.,
Jollimart Philippines Corp., Surplus Marketing Corp. and Signature
Lines. In addition to the taxes purportedly due from private respondents
pursuant to Sections 14, 15, 16, 17 of the Revised Revenue Code of
Manila (RRCM), said assessment covered the local business taxes
petitioners were authorized to collect under Section 21 of the same
Code. Because payment of the taxes assessed was a precondition for
the issuance of their business permits, private respondents were
constrained to pay the P19,316,458.77 assessment under protest. cACEaI

On January 24, 2004, private respondents filed [with the Regional Trial
Court of Pasay City] the complaint denominated as one for "Refund or
Recovery of Illegally and/or Erroneously-Collected Local Business Tax,
Prohibition with Prayer to Issue TRO and Writ of Preliminary Injunction"
which was docketed as Civil Case No. 04-0019-CFM before public
respondent's sala [at Branch 112]. In the amended complaint they filed
on February 16, 2004, private respondents alleged that, in relation to
Section 21 thereof, Sections 14, 15, 16, 17, 18, 19 and 20 of the RRCM
were violative of the limitations and guidelines under Section 143 (h)
of Republic Act No. 7160[Local Government Code] on double taxation.
They further averred that petitioner city's Ordinance No. 8011 which
 amended pertinent portions of the RRCM had already been declared to
be illegal and unconstitutional by the Department of Justice. 2
In its Order 3 dated July 9, 2004, the RTC granted private respondents'
application for a writ of preliminary injunction.
Petitioners filed a Motion for Reconsideration 4 but the RTC denied it in its
Order 5 dated October 15, 2004.
Petitioners then filed a special civil action for certiorari with the CA assailing the
July 9, 2004 and October 15, 2004 Orders of the RTC. 6
In its Resolution promulgated on April 6, 2006, the CA dismissed petitioners'
petition for certiorari holding that it has no jurisdiction over the said petition. The
CA ruled that since appellate jurisdiction over private respondents' complaint for
tax refund, which was filed with the RTC, is vested in the Court of Tax Appeals
(CTA), pursuant to its expanded jurisdiction under Republic Act No. 9282 (RA
9282), it follows that a petition for certiorari seeking nullification of an
interlocutory order issued in the said case should, likewise, be filed with the CTA.
Petitioners filed a Motion for Reconsideration, 7 but the CA denied it in its
Resolution dated November 29, 2006.
Hence, the present petition raising the following issues: cDCSTA

I-Whether or not the Honorable Court of Appeals gravely erred in

dismissing the case for lack of jurisdiction.
II-Whether or not the Honorable Regional Trial Court gravely
abuse[d] its discretion amounting to lack or excess of jurisdiction
in enjoining by issuing a Writ of Injunction the petitioners[,] their
agents and/or authorized representatives from implementing
Section 21 of the Revised Revenue Code of Manila, as amended,
against private respondents.
III-Whether or not the Honorable Regional Trial Court gravely
abuse[d] its discretion amounting to lack or excess of jurisdiction
in issuing the Writ of Injunction despite failure of private
respondents to make a written claim for tax credit or refund with
the City Treasurer of Manila.
IV-Whether or not the Honorable Regional Trial Court gravely
abuse[d] its discretion amounting to lack or excess of jurisdiction
considering that under Section 21 of the Manila Revenue Code, as
amended, they are mere collecting agents of the City Government.
V-Whether or not the Honorable Regional Trial Court gravely
abuse[d] its discretion amounting to lack or excess of jurisdiction
in issuing the Writ of Injunction because petitioner City of Manila
 and its constituents would result to greater damage and prejudice
thereof. (sic) 8
Without first resolving the above issues, this Court finds that the instant petition
should be denied for being moot and academic.
Upon perusal of the original records of the instant case, this Court discovered
that a Decision 9 in the main case had already been rendered by the RTC on
August 13, 2007, the dispositive portion of which reads as follows:
WHEREFORE, in view of the foregoing, this Court hereby renders
JUDGMENT in favor of the plaintiff and against the defendant to grant a
tax refund or credit for taxes paid pursuant to Section 21 of the Revenue
Code of the City of Manila as amended for the year 2002 in the following
amounts: TCSEcI

To plaintiff SM Mart, Inc. - P11,462,525.02

To plaintiff SM Prime Holdings, Inc. - 3,118,104.63

To plaintiff Star Appliances Center - 2,152,316.54

To plaintiff Supervalue, Inc. - 1,362,750.34

To plaintiff Ace Hardware Phils., Inc. - 419,689.04

To plaintiff Watsons Personal Care - 231,453.62

Health Stores Phils., Inc.

To plaintiff Jollimart Phils., Corp. - 140,908.54

To plaintiff Surplus Marketing Corp. - 220,204.70

To plaintiff Signature Mktg. Corp. - 94,906.34

——————
TOTAL: - P19,316,458.77
===========
Defendants are further enjoined from collecting taxes under Section 21,
Revenue Code of Manila from herein plaintiff:
SO ORDERED. 10
The parties did not inform the Court but based on the records, the above
Decision had already become final and executory per the Certificate of
Finality 11 issued by the same trial court on October 20, 2008. In fact, a Writ of
Execution 12 was issued by the RTC on November 25, 2009.
In view of the foregoing, it clearly appears that the issues raised in the present
petition, which merely involve the incident on the preliminary injunction issued by
the RTC, have already become moot and academic considering that the trial
court, in its decision on the merits in the main case, has already ruled in favor of
respondents and that the same decision is now final and executory. Well
entrenched is the rule that where the issues have become moot and academic,
there is no justiciable controversy, thereby rendering the resolution of the same
of no practical use or value. 13
In any case, the Court finds it necessary to resolve the issue on jurisdiction
raised by petitioners owing to its significance and for future guidance of both
bench and bar. It is a settled principle that courts will decide a question otherwise
moot and academic if it is capable of repetition, yet evading review. 14
However, before proceeding, to resolve the question on jurisdiction, the Court
deems it proper to likewise address a procedural error which petitioners
committed. STIcaE

Petitioners availed of the wrong remedy when they filed the instant special civil
action for certiorari under Rule 65 of the Rules of Court in assailing the
Resolutions of the CA which dismissed their petition filed with the said court and
their motion for reconsideration of such dismissal. There is no dispute that the
assailed Resolutions of the CA are in the nature of a final order as they disposed
of the petition completely. It is settled that in cases where an assailed judgment
or order is considered final, the remedy of the aggrieved party is appeal. Hence,
in the instant case, petitioner should have filed a petition for review
on certiorari under Rule 45, which is a continuation of the appellate process over
the original case. 15
Petitioners should be reminded of the equally-settled rule that a special civil
action for certiorari under Rule 65 is an original or independent action based on
grave abuse of discretion amounting to lack or excess of jurisdiction and it will lie
only if there is no appeal or any other plain, speedy, and adequate remedy in the
ordinary course of law. 16 As such, it cannot be a substitute for a lost
appeal. 17 DaCEIc

Nonetheless, in accordance with the liberal spirit pervading the Rules of Court
and in the interest of substantial justice, this Court has, before, treated a petition
forcertiorari as a petition for review on certiorari, particularly (1) if the petition
for certiorari was filed within the reglementary period within which to file a petition
for review on certiorari; (2) when errors of judgment are averred; and (3) when
there is sufficient reason to justify the relaxation of the rules. 18 Considering that
the present petition was filed within the 15-day reglementary period for filing a
petition for review on certiorari under Rule 45, that an error of judgment is
averred, and because of the significance of the issue on jurisdiction, the Court
deems it proper and justified to relax the rules and, thus, treat the instant petition
for certiorari as a petition for review on certiorari.
Having disposed of the procedural aspect, we now turn to the central issue in this
case. The basic question posed before this Court is whether or not the CTA has
jurisdiction over a special civil action for certiorari assailing an interlocutory order
issued by the RTC in a local tax case.
This Court rules in the affirmative.
On June 16, 1954, Congress enacted Republic Act No. 1125 (RA 1125) creating
the CTA and giving to the said court jurisdiction over the following:
(1) Decisions of the Collector of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising
under the National Internal Revenue Code or other law or part of law
administered by the Bureau of Internal Revenue;
(2) Decisions of the Commissioner of Customs in cases involving
liability for customs duties, fees or other money charges; seizure,
detention or release of property affected fines, forfeitures or other
penalties imposed in relation thereto; or other matters arising under the
Customs Law or other law or part of law administered by the Bureau of
Customs; and
(3) Decisions of provincial or City Boards of Assessment Appeals in
cases involving the assessment and taxation of real property or other
matters arising under the Assessment Law, including rules and
regulations relative thereto.
On March 30, 2004, the Legislature passed into law Republic Act No. 9282 (RA
9282) amending RA 1125 by expanding the jurisdiction of the CTA, enlarging its
membership and elevating its rank to the level of a collegiate court with special
jurisdiction. Pertinent portions of the amendatory act provides thus:
Sec. 7. Jurisdiction. — The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as
herein provided:
1. Decisions of the Commissioner of Internal Revenue in
cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matters arising
under the National Internal Revenue or other laws
administered by the Bureau of Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in
cases involving disputed assessments, refunds of
 internal revenue taxes, fees or other charges,
penalties in relations thereto, or other matters
arising under the National Internal Revenue Code or
other laws administered by the Bureau of Internal
Revenue, where the National Internal Revenue
Code provides a specific period of action, in which
case the inaction shall be deemed a denial;
3. Decisions, orders or resolutions of the Regional
Trial Courts in local tax cases originally decided
or resolved by them in the exercise of their
original or appellate jurisdiction;
4. Decisions of the Commissioner of Customs in cases
involving liability for customs duties, fees or other
money charges, seizure, detention or release of
property affected, fines, forfeitures or other penalties
in relation thereto, or other matters arising under the
Customs Law or other laws administered by the
Bureau of Customs; CTDAaE

5. Decisions of the Central Board of Assessment Appeals

in the exercise of its appellate jurisdiction over
cases involving the assessment and taxation of real
property originally decided by the provincial or city
board of assessment appeals;
6. Decisions of the Secretary of Finance on customs
cases elevated to him automatically for review from
decisions of the Commissioner of Customs which
are adverse to the Government under Section 2315
of the Tariff and Customs Code;
7. Decisions of the Secretary of Trade and Industry, in the
case of nonagricultural product, commodity or
article, and the Secretary of Agriculture in the case
of agricultural product, commodity or article,
involving dumping and countervailing duties under
Sections 301 and 302, respectively, of the Tariff and
Customs Code, and safeguard measures
under Republic Act No. 8800, where either party
may appeal the decision to impose or not to impose
said duties.
b. Jurisdiction over cases involving criminal offenses as herein
provided:
1. Exclusive original jurisdiction over all criminal offenses
arising from violations of the National Internal
Revenue Code or Tariff and Customs Code and
 other laws administered by the Bureau of Internal
Revenue or the Bureau of Customs: Provided,
however, That offenses or felonies mentioned in this
paragraph where the principal amount of taxes and
fees, exclusive of charges and penalties, claimed is
less than One million pesos (P1,000,000.00) or
where there is no specified amount claimed shall be
tried by the regular Courts and the jurisdiction of the
CTA shall be appellate. Any provision of law or the
Rules of Court to the contrary notwithstanding, the
criminal action and the corresponding civil action for
the recovery of civil liability for taxes and penalties
shall at all times be simultaneously instituted with,
and jointly determined in the same proceeding by
the CTA, the filing of the criminal action being
deemed to necessarily carry with it the filing of the
civil action, and no right to reserve the filing of such
civil action separately from the criminal action will be
recognized.
2. Exclusive appellate jurisdiction in criminal offenses:
a. Over appeals from the judgments, resolutions or
orders of the Regional Trial Courts in tax
cases originally decided by them, in their
respected territorial jurisdiction.STHAaD

b. Over petitions for review of the judgments,

resolutions or orders of the Regional Trial
Courts in the exercise of their appellate
jurisdiction over tax cases originally decided
by the Metropolitan Trial Courts, Municipal
Trial Courts and Municipal Circuit Trial Courts
in their respective jurisdiction.
c. Jurisdiction over tax collection cases as herein
provided:
1. Exclusive original jurisdiction in tax
collection cases involving final and
executory assessments for taxes,
fees, charges and penalties: Provides,
however, that collection cases where
the principal amount of taxes and fees,
exclusive of charges and penalties,
claimed is less than One million pesos
(P1,000,000.00) shall be tried by the
proper Municipal Trial Court,
 Metropolitan Trial Court and Regional
Trial Court.
2. Exclusive appellate jurisdiction in tax
collection cases:
a. Over appeals from the judgments,
resolutions or orders of the
Regional Trial Courts in tax
collection cases originally
decided by them, in their
respective territorial jurisdiction.
b. Over petitions for review of the
judgments, resolutions or
orders of the Regional Trial
Courts in the Exercise of their
appellate jurisdiction over tax
collection cases originally
decided by the Metropolitan
Trial Courts, Municipal Trial
Courts and Municipal Circuit
Trial Courts, in their respective
jurisdiction. 19
A perusal of the above provisions would show that, while it is clearly stated that
the CTA has exclusive appellate jurisdiction over decisions, orders or resolutions
of the RTCs in local tax cases originally decided or resolved by them in the
exercise of their original or appellate jurisdiction, there is no categorical
statement under RA 1125as well as the amendatory RA 9282, which provides
that the CTA has jurisdiction over petitions for certiorari assailing interlocutory
orders issued by the RTC in local tax cases filed before it.
The prevailing doctrine is that the authority to issue writs of certiorari involves the
exercise of original jurisdiction which must be expressly conferred by the
Constitution or by law and cannot be implied from the mere existence of
appellate jurisdiction. 20 Thus, in the cases of Pimentel v. COMELEC, 21 Garcia v.
De Jesus, 22Veloria v. COMELEC, 23 Department of Agrarian Reform
Adjudication Board v. Lubrica, 24 and Garcia v. Sandiganbayan, 25 this Court has
ruled against the jurisdiction of courts or tribunals over petitions for certiorari on
the ground that there is no law which expressly gives these tribunals such
power. 26 It must be observed, however, that with the exception of Garcia v.
Sandiganbayan, 27 these rulings pertain not to regular courts but to tribunals
exercising quasi-judicial powers. With respect to the Sandiganbayan, Republic
Act No. 8249 28 now provides that the special criminal court has exclusive
original jurisdiction over petitions for the issuance of the writs of
mandamus, prohibition, certiorari, habeas corpus, injunctions, and other
ancillary writs and processes in aid of its appellate jurisdiction.TAacIE

In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants
power to the Supreme Court, in the exercise of its original jurisdiction, to issue
writs ofcertiorari, prohibition and mandamus. With respect to the Court of
Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the appellate
court, also in the exercise of its original jurisdiction, the power to issue, among
others, a writ of certiorari, whether or not in aid of its appellate jurisdiction. As to
Regional Trial Courts, the power to issue a writ of certiorari, in the exercise of
their original jurisdiction, is provided under Section 21 of BP 129.
The foregoing notwithstanding, while there is no express grant of such power,
with respect to the CTA, Section 1, Article VIII of the 1987 Constitution provides,
nonetheless, that judicial power shall be vested in one Supreme Court and in
such lower courts as may be established by law and that 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.
On the strength of the above constitutional provisions, it can be fairly interpreted
that the power of the CTA includes that of determining whether or not there has
been grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the RTC in issuing an interlocutory order in cases falling within the
exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA, by
constitutional mandate, is vested with jurisdiction to issue writs of certiorari in
these cases.
Indeed, in order for any appellate court, to effectively exercise its appellate
jurisdiction, it must have the authority to issue, among others, a writ
of certiorari. In transferring exclusive jurisdiction over appealed tax cases to the
CTA, it can reasonably be assumed that the law intended to transfer also such
power as is deemed necessary, if not indispensable, in aid of such appellate
jurisdiction. There is no perceivable reason why the transfer should only be
considered as partial, not total.
Consistent with the above pronouncement, this Court has held as early as the
case of J.M. Tuason & Co., Inc. v. Jaramillo, et al. 29 that "if a case may be
appealed to a particular court or judicial tribunal or body, then said court or
judicial tribunal or body has jurisdiction to issue the extraordinary writ
of certiorari, in aid of its appellate jurisdiction." 30 This principle was affirmed
in De Jesus v. Court of Appeals, 31 where the Court stated that "a court may
issue a writ of certiorari in aid of its appellate jurisdiction if said court has
jurisdiction to review, by appeal or writ of error, the final orders or decisions of the
lower court." 32 The rulings in J.M. Tuason and De Jesus were reiterated in the
more recent cases of Galang, Jr. v. Geronimo 33 and Bulilis v. Nuez. 34
Furthermore, Section 6, Rule 135 of the present Rules of Court provides that
when by law, jurisdiction is conferred on a court or judicial officer, all auxiliary
writs, processes and other means necessary to carry it into effect may be
employed by such court or officer. CHDAEc

If this Court were to sustain petitioners' contention that jurisdiction over

their certiorari petition lies with the CA, this Court would be confirming the
exercise by two judicial bodies, the CA and the CTA, of jurisdiction over basically
the same subject matter — precisely the split-jurisdiction situation which is
anathema to the orderly administration of justice. 35 The Court cannot accept that
such was the legislative motive, especially considering that the law expressly
confers on the CTA, the tribunal with the specialized competence over tax and
tariff matters, the role of judicial review over local tax cases without mention of
any other court that may exercise such power. Thus, the Court agrees with the
ruling of the CA that since appellate jurisdiction over private respondents'
complaint for tax refund is vested in the CTA, it follows that a petition
for certiorari seeking nullification of an interlocutory order issued in the said case
should, likewise, be filed with the same court. To rule otherwise would lead to an
absurd situation where one court decides an appeal in the main case while
another court rules on an incident in the very same case.
Stated differently, it would be somewhat incongruent with the pronounced judicial
abhorrence to split jurisdiction to conclude that the intention of the law is to divide
the authority over a local tax case filed with the RTC by giving to the CA or this
Court jurisdiction to issue a writ of certiorari against interlocutory orders of the
RTC but giving to the CTA the jurisdiction over the appeal from the decision of
the trial court in the same case. It is more in consonance with logic and legal
soundness to conclude that the grant of appellate jurisdiction to the CTA over tax
cases filed in and decided by the RTC carries with it the power to issue a writ
of certiorari when necessary in aid of such appellate jurisdiction. The supervisory
power or jurisdiction of the CTA to issue a writ of certiorari in aid of its appellate
jurisdiction should co-exist with, and be a complement to, its appellate jurisdiction
to review, by appeal, the final orders and decisions of the RTC, in order to have
complete supervision over the acts of the latter. 36
A grant of appellate jurisdiction implies that there is included in it the power
necessary to exercise it effectively, to make all orders that will preserve the
subject of the action, and to give effect to the final determination of the appeal. It
carries with it the power to protect that jurisdiction and to make the decisions of
the court thereunder effective. The court, in aid of its appellate jurisdiction, has
authority to control all auxiliary and incidental matters necessary to the efficient
and proper exercise of that jurisdiction. For this purpose, it may, when necessary,
prohibit or restrain the performance of any act which might interfere with the
proper exercise of its rightful jurisdiction in cases pending before it. 37
Lastly, it would not be amiss to point out that a court which is endowed with a
particular jurisdiction should have powers which are necessary to enable it to act
effectively within such jurisdiction. These should be regarded as powers which
are inherent in its jurisdiction and the court must possess them in order to
enforce its rules of practice and to suppress any abuses of its process and to
defeat any attempted thwarting of such process.
In this regard, Section 1 of RA 9282 states that the CTA shall be of the same
level as the CA and shall possess all the inherent powers of a court of justice. HTCDcS

Indeed, courts possess certain inherent powers which may be said to be implied
from a general grant of jurisdiction, in addition to those expressly conferred on
them. These inherent powers are such powers as are necessary for the ordinary
and efficient exercise of jurisdiction; or are essential to the existence, dignity and
functions of the courts, as well as to the due administration of justice; or are
directly appropriate, convenient and suitable to the execution of their granted
powers; and include the power to maintain the court's jurisdiction and render it
effective in behalf of the litigants. 38
Thus, this Court has held that "while a court may be expressly granted the
incidental powers necessary to effectuate its jurisdiction, a grant of jurisdiction, in
the absence of prohibitive legislation, implies the necessary and usual incidental
powers essential to effectuate it, and, subject to existing laws and constitutional
provisions, every regularly constituted court has power to do all things that are
reasonably necessary for the administration of justice within the scope of its
jurisdiction and for the enforcement of its judgments and mandates." 39 Hence,
demands, matters or questions ancillary or incidental to, or growing out of, the
main action, and coming within the above principles, may be taken cognizance of
by the court and determined, since such jurisdiction is in aid of its authority over
the principal matter, even though the court may thus be called on to consider and
decide matters which, as original causes of action, would not be within its
cognizance. 40
Based on the foregoing disquisitions, it can be reasonably concluded that the
authority of the CTA to take cognizance of petitions for certiorari questioning
interlocutory orders issued by the RTC in a local tax case is included in the
powers granted by the Constitution as well as inherent in the exercise of its
appellate jurisdiction.
Finally, it would bear to point out that this Court is not abandoning the rule that,
insofar as quasi-judicial tribunals are concerned, the authority to issue writs
ofcertiorari must still be expressly conferred by the Constitution or by law and
cannot be implied from the mere existence of their appellate jurisdiction. This
doctrine remains as it applies only to quasi-judicial bodies.
WHEREFORE, the petition is DENIED.
SO ORDERED.
(City of Manila v. Grecia-Cuerdo, G.R. No. 175723, [February 4, 2014], 726
|||

PHIL 9-28)

18. City of Lapu-Lapu v PEZA November 26, 2014

SECOND DIVISION

[G.R. No. 184203. November 26, 2014.]

CITY OF LAPU-LAPU, petitioner,vs.PHILIPPINE ECONOMIC

ZONE AUTHORITY, respondent.

[G.R. No. 187583. November 26, 2014.]

PROVINCE OF BATAAN, represented by GOVERNOR

ENRIQUE T. GARCIA, JR.,and EMERLINDA S. TALENTO, in
her capacity as Provincial
Treasurerof Bataan, petitioners, vs. PHILIPPINE ECONOMIC
ZONE AUTHORITY, respondent.

DECISION

LEONEN, J : p

The Philippine Economic Zone Authority is exempt from payment of real

property taxes.
These are consolidated 1 petitions for review
on certiorari the City of Lapu-Lapu and the Province of Bataan separately filed
against the Philippine Economic Zone Authority (PEZA).
In G.R. No. 184203, the City of Lapu-Lapu (the City) assails the
Court of Appeals' decision 2 dated January 11, 2008 and resolution 3 dated
August 6, 2008, dismissing the City's appeal for being the wrong
mode of appeal. The City appealed the Regional Trial Court, Branch 111,
Pasay City's decision finding the PEZA exempt from payment of real property
taxes.
In G.R. No. 187583, the Province of Bataan (the Province) assails the
Court of Appeals' decision 4 dated August 27, 2008 and resolution 5 dated
April 16, 2009, granting the PEZA's petition for certiorari.The Court of Appeals
ruled that the Regional Trial Court, Branch 115, Pasay City gravely abused its
discretion in finding the PEZA liable for real property taxes to the
Province of Bataan. EISCaD

Facts common to the consolidated petitions

In the exercise of his legislative powers, 6 President Ferdinand E.
Marcos issued Presidential Decree No. 66 in 1972, declaring as government
policy the establishment of export processing zones in strategic locations in
the Philippines. Presidential Decree No. 66 aimed "to encourage and promote
foreign commerce as a means of making the Philippines a
center of international trade, of strengthening our export trade and foreign
exchange position, of hastening industrialization,of reducing domestic
unemployment, and of accelerating the development of the country." 7
To carry out this policy, the Export Processing Zone Authority (EPZA)
was created to operate, administer, and manage the export processing zones
established in the Port of Mariveles, Bataan 8 and such other export
processing zones that may be created by virtue of the decree. 9
The decree declared the EPZA non-profit in character 10 with all its
revenues devoted to its development, improvement, and maintenance. 11 To
maintain this non-profit character, the EPZA was declared exempt from all
taxes that may be due to the Republic of the Philippines, its provinces, cities,
municipalities, and other government agencies and
instrumentalities. 12 Specifically, Section 21 of Presidential Decree No.
66 declared the EPZA exempt from payment of real property taxes:
Section 21. Non-profit Character of the Authority; Exemption from
Taxes. — The Authority shall be non-profit and shall devote and use all
its returns from its capital investment, as well as excess revenues from
its operations, for the development, improvement and maintenance and
other related expenditures of the Authority to pay its indebtedness and
obligations and in furtherance and effective implementation of the policy
enunciated in Section 1 of this Decree. In consonance therewith, the
Authority is hereby declared exempt: EHSTDA

xxx xxx xxx

 (b) From all income taxes, franchise taxes, realty taxes and all
other kinds of taxes and licenses to be paid to the National
Government, its provinces, cities, municipalities and other
government agencies and instrumentalities[.]
In 1979, President Marcos issued Proclamation No. 1811, establishing
the Mactan Export Processing Zone. Certain parcels of land of the public
domain located in the City of Lapu-Lapu in Mactan, Cebu were reserved to
serve as site of the Mactan Export Processing Zone.
In 1995, the PEZA was created by virtue of Republic Act No. 7916 or
"the Special Economic Zone Act of 1995" 13 to operate, administer, manage,
and develop economic zones in the country. 14 The PEZA was granted the
power to register, regulate, and supervise the enterprises located in the
economic zones. 15 By virtue ofthe law, the export processing zone in
Mariveles, Bataan became the Bataan Economic Zone 16 and
the Mactan Export Processing Zone the Mactan Economic Zone.17
As for the EPZA, the law required it to "evolve into the PEZA in
accordance with the guidelines and regulations set forth in an executive order
issued for [the] purpose." 18
EHSIcT

On October 30, 1995, President Fidel V. Ramos issued Executive

Order No. 282, directing the PEZA to assume and exercise all of the EPZA's
powers, functions, and responsibilities "as provided in Presidential Decree No.
66, as amended, insofar as they are not inconsistent with the powers,
functions, and responsibilities ofthe PEZA, as mandated under [the Special
Economic Zone Act of 1995]." 19 All of EPZA's properties, equipment, and
assets, among others, were ordered transferred to the PEZA. 20
Facts of G.R. No. 184203
In the letter 21 dated March 25, 1998, the City of Lapu-Lapu, through the
Office of the Treasurer, demanded from the PEZA P32,912,350.08 in real
property taxes for the period from 1992 to 1998 on the PEZA's properties
located in the Mactan Economic Zone.
The City reiterated its demand in the letter 22 dated May 21, 1998. It
cited Sections 193 and 234 of the Local Government Code of 1991 that
withdrew the real property tax exemptions previously granted to or presently
enjoyed by all persons. The City pointed out that no provision in the Special
Economic Zone Act of 1995specifically exempted the PEZA from
payment of real property taxes, unlike Section 21 of Presidential Decree No.
66 that explicitly provided for EPZA's exemption. Since no legal provision
explicitly exempted the PEZA from payment of real property taxes,
the City argued that it can tax the PEZA.
 The City made subsequent demands 23 on the PEZA. In its last
reminder 24 dated May 13, 2002, the City assessed the PEZA P86,843,503.48
as real property taxes for the period from 1992 to 2002.
On September 11, 2002, the PEZA filed a petition for declaratory
relief 25 with the Regional Trial Court of Pasay City, praying that the trial court
declare it exempt from payment of real property taxes. The case was raffled to
Branch 111.
The City answered 26 the petition, maintaining that the PEZA is liable for
real property taxes. To support its argument, the City cited a legal opinion
dated September 6, 1999 issued by the Department of Justice, 27 which
stated that the PEZA is not exempt from payment of real property taxes. The
Department of Justice based its opinion on Sections 193 and 234 of the Local
Government Code that withdrew the tax exemptions, including real property
tax exemptions, previously granted to all persons. DCcSHE

A reply 28 was filed by the PEZA to which the City filed a rejoinder. 29
Pursuant to Rule 63, Section 3 of Rules of Court, 30 the Office of the
Solicitor General filed a comment 31 on the PEZA's petition for declaratory
relief. It agreed that the PEZA is exempt from payment of real property taxes,
citing Sections 24 and 51 of the Special Economic Zone Act of 1995.
The trial court agreed with the Solicitor General. Section 24 of the
Special Economic Zone Act of 1995 provides:
SEC. 24. Exemption from National and Local Taxes. — Except for real
property taxes on land owned by developers, no taxes, local and
national, shall be imposed on business establishments operating within
the ECOZONE. In lieu thereof, five percent (5%) of the gross income
earned by all business enterprises within the ECOZONE shall be paid
and remitted as follows:
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the business
establishments to the treasurer's office of the municipality or city where
the enterprise is located.
Section 51 of the law, on the other hand, provides:
SEC. 51. Ipso-Facto Clause. — All privileges, benefits, advantages or
exemptions granted to special economic zones under Republic Act No.
7227, shall ipso-facto be accorded to special economic zones already
created or to be created under this Act. The free port status shall not be
vested upon new special economic zones.
Based on Section 51, the trial court held that all privileges, benefits,
advantages, or exemptions granted to special economic zones created
under the Bases Conversion and Development Act of 1992 apply to special
economic zones created under the Special Economic Zone Act of 1995. Since
these benefits include exemption from payment of national or local taxes,
these benefits apply to special economic zones owned by the PEZA.
According to the trial court, the PEZA remained tax-exempt
regardless of Section 24 of the Special Economic Zone Act of 1995. It ruled
that Section 24, which taxes real property owned by developers of economic
zones, only applies to private developers of economic zones, not to public
developers like the PEZA. The PEZA, therefore, is not liable for real property
taxes on the land it owns. HCEaDI

Characterizing the PEZA as an agency of the National Government, the

trial court ruled that the City had no authority to tax the PEZA under Sections
133 (o) and 234 (a) of the Local Government Code of 1991.
In the resolution 32 dated June 14, 2006, the trial court granted the
PEZA's petition for declaratory relief and declared it exempt from
payment of real property taxes.
The City filed a motion for reconsideration, 33 which the trial court
denied in its resolution 34 dated September 26, 2006.
The City then appealed 35 to the Court of Appeals.
The Court of Appeals noted the following issues the City raised in its
appellant's brief: (1) whether the trial court had jurisdiction over the PEZA's
petition for declaratory relief; (2) whether the PEZA is a government agency
performing governmental functions; and (3) whether the PEZA is exempt from
payment of real property taxes.
The issues presented by the City, according to the Court of Appeals, are pure
questions of law which should have been raised in a petition for review
on certioraridirectly filed before this court. Since the City availed itself of the
wrong mode of appeal, the Court of Appeals dismissed the City's appeal in
the decision 36 dated January 11, 2008.
The City filed a motion for extension of time to file a motion for
reconsideration, 37 which the Court of Appeals denied in the
resolution 38 dated April 11, 2008.
Despite the denial of its motion for extension, the City filed a motion for
reconsideration. 39 In the resolution 40 dated August 6, 2008, the
Court of Appeals denied that motion.
In its petition for review on certiorari with this court, 41 the City argues
that the Court of Appeals "hid under the skirts of technical rules" 42 in
resolving its appeal. The City maintains that its appeal involved mixed
questions of fact and law. According to the City, whether the PEZA performed
governmental functions "cannot completely be addressed by law but [by] the
factual and actual activities [the PEZA is] carrying out." 43EcASIC

Even assuming that the petition involves pure questions of law,

the City contends that the subject matter of the case "is of extreme
importance with [far-reaching] consequence that [its magnitude] would surely
shape and determine the course of our nation's future." 44 The
Court of Appeals, the City argues, should have resolved the case on the
merits.
The City insists that the trial court had no jurisdiction to hear the PEZA's
petition for declaratory relief. According to the City, the case involves real
property located in the City of Lapu-Lapu. The petition for declaratory relief
should have been filed before the Regional Trial Court of the City of Lapu-
Lapu. 45
Moreover, the Province of Bataan, the City of Baguio, and the
Province of Cavite allegedly demanded real property taxes from the PEZA.
The City argues that the PEZA should have likewise impleaded these local
government units as respondents in its petition for declaratory relief. For its
failure to do so, the PEZA violated Rule 63, Section 2 of the Rules of Court,
and the trial court should have dismissed the petition. 46
This court ordered the PEZA to comment on the City's petition for
review on certiorari.47
At the outset of its comment, the PEZA argues that the
Court of Appeals' decision dated January 11, 2008 had become final and
executory. After the Court ofAppeals had denied the City's appeal,
the City filed a motion for extension of time to file a motion for reconsideration.
Arguing that the time to file a motion for reconsideration is not extendible, the
PEZA filed its motion for reconsideration out of time. The City has no more
right to appeal to this court. 48
The PEZA maintains that the City availed itself of the wrong
mode of appeal before the Court of Appeals. Since the City raised pure
questions of law in its appeal, the PEZA argues that the proper remedy is a
petition for review on certiorari with this court, not an ordinary appeal before
the appellate court. The Court ofAppeals, therefore, correctly dismissed
outright the City's appeal under Rule 50, Section 2 of the Rules of Court. 49
On the merits, the PEZA argues that it is an agency and
instrumentality of the National Government. It is therefore exempt from
payment of real property taxes under Sections 133 (o) and 234 (a) of the
Local Government Code. 50 It adds that the tax privileges under Sections 24
and 51 of the Special Economic Zone Actof 1995 applied to it. 51 cIECaS
 Considering that the site of the Mactan Economic Zone is a reserved
land under Proclamation No. 1811, the PEZA claims that the properties
sought to be taxed are lands of public dominion exempt from real property
taxes. 52
As to the jurisdiction issue, the PEZA counters that the Regional Trial
Court of Pasay had jurisdiction to hear its petition for declaratory relief under
Rule 63, Section 1 of the Rules of Court. 53 It also argued that it need not
implead the Province of Bataan, the City of Baguio, and the
Province of Cavite as respondents considering that their demands came after
the PEZA had already filed the petition in court. 54
Facts of G.R. No. 187583
After the City of Lapu-Lapu had demanded payment of real property
taxes from the PEZA, the Province of Bataan followed suit. In its
letter 55 dated May 29, 2003, the Province, through the Office of the Provincial
Treasurer, informed the PEZA that it would be sending a real property tax
billing to the PEZA. Arguing that the PEZA is a developer of economic zones,
the Province claimed that the PEZA is liable for real property taxes under
Section 24 of the Special Economic Zone Act of1995.
In its reply letter 56 dated June 18, 2003, the PEZA requested the
Province to suspend the service of the real property tax billing. It cited its
petition for declaratory relief against the City of Lapu-Lapu pending before the
Regional Trial Court, Branch 111, Pasay City as basis.
The Province argued that serving a real property tax billing on the
PEZA "would not in any way affect [its] petition for declaratory relief before
[the Regional Trial Court] of Pasay City." 57 Thus, in its letter 58 dated June 27,
2003, the Province notified the PEZA of its real property tax liabilities for June
1, 1995 to December 31, 2002 totalling P110,549,032.55.
After having been served a tax billing, the PEZA again requested the
Province to suspend collecting its alleged real property tax liabilities until the
Regional Trial Court of Pasay City resolves its petition for declaratory relief. 59
The Province ignored the PEZA's request. On January 20, 2004, the
Province served on the PEZA a statement of unpaid real property tax for the
period from June 1995 to December 2004. 60
The PEZA again requested the Province to suspend collecting its
alleged real property taxes. 61 The Province denied the request in its
letter 62 dated January 29, 2004, then served on the PEZA a
warrant of levy 63 covering the PEZA's real properties located in Mariveles,
Bataan. CTacSE
 The PEZA's subsequent requests 64 for suspension of collection were
all denied by the Province. 65 The Province then served on the PEZA a
notice ofdelinquency in the payment of real property taxes 66 and a
notice of sale of real property for unpaid real property tax. 67 The Province
finally sent the PEZA a noticeof public auction of the latter's properties in
Mariveles, Bataan. 68
On June 14, 2004, the PEZA filed a petition for injunction 69 with prayer
for issuance of a temporary restraining order and/or writ of preliminary
injunction before the Regional Trial Court of Pasay City, arguing that it is
exempt from payment of real property taxes. It added that the notice of sale
issued by the Province was void because it was not published in a
newspaper of general circulation as required by Section 260 of the Local
Government Code. 70
The case was raffled to Branch 115. aTAEHc

In its order 71 dated June 18, 2004, the trial court issued a temporary
restraining order against the Province. After the PEZA had filed a
P100,000.00 bond, 72 the trial court issued a writ of preliminary
injunction, 73 enjoining the Province from selling the PEZA's real properties at
public auction.
On March 3, 2006, the PEZA and Province both manifested that each
would file a memorandum after which the case would be deemed submitted
for decision. The parties then filed their respective memoranda. 74
In the order 75 dated January 31, 2007, the trial court denied the PEZA's
petition for injunction. The trial court ruled that the PEZA is not exempt from
paymentof real property taxes. According to the trial court, Sections 193 and
234 of the Local Government Code had withdrawn the real property tax
exemptions previously granted to all persons, whether natural or
juridical. 76 As to the tax exemptions under Section 51 of the Special
Economic Zone Act of 1995, the trial court ruled that the provision only applies
to businesses operating within the economic zones, not to the PEZA. 77
The PEZA filed before the Court of Appeals a petition
for certiorari 78 with prayer for issuance of a temporary restraining order.
The Court of Appeals issued a temporary restraining order, enjoining
the Province and its Provincial Treasurer from selling PEZA's properties at
public auction scheduled on October 17, 2007. 79 It also ordered the Province
to comment on the PEZA's petition.
In its comment, 80 the Province alleged that it received a copy of the
temporary restraining order only on October 18, 2007 when it had already
sold the PEZA's properties at public auction. Arguing that the act sought to be
enjoined was already fait accompli, the Province prayed for the
dismissal of the petition for certiorari.
The PEZA then filed a supplemental petition for certiorari,prohibition,
and mandamus 81 against the Province, arguing that the Provincial
Treasurer of Bataan acted with grave abuse of discretion in issuing the
notice of delinquency and notice of sale. It maintained that it is exempt from
payment of real property taxes because it is a government instrumentality. It
added that its lands are property of public dominion which cannot be sold at
public auction.
The PEZA also filed a motion 82 for issuance of an order affirming the
temporary restraining order and a writ of preliminary injunction to enjoin the
Province from consolidating title over the PEZA's properties. LexLib

In its resolution 83 dated January 16, 2008, the Court of Appeals

admitted the supplemental petition for certiorari,prohibition, and mandamus.It
required the Province to comment on the supplemental petition and to file a
memorandum on the PEZA's prayer for issuance of temporary restraining
order.
The Province commented 84 on the PEZA's supplemental petition, to
which the PEZA replied. 85
The Province then filed a motion 86 for leave to admit attached rejoinder
with motion to dismiss. In the rejoinder with motion to dismiss, 87 the Province
argued for the first time that the Court of Appeals had no jurisdiction over the
subject matter of the action.
According to the Province, the PEZA erred in filing a petition
for certiorari.Arguing that the PEZA sought to reverse a Regional Trial Court
decision in a local tax case, the Province claimed that the court with appellate
jurisdiction over the action is the Court of Tax Appeals. The PEZA then
prayed that the Court of Appeals dismiss the petition for certiorari for
lack of jurisdiction over the subject matter of the action.
The Court of Appeals held that the issue before it was whether the trial
court judge gravely abused his discretion in dismissing the PEZA's petition for
prohibition. This issue, according to the Court of Appeals, is properly
addressed in a petition for certiorari over which it has jurisdiction to resolve. It,
therefore, maintained jurisdiction to resolve the PEZA's petition for certiorari.88
Although it admitted that appeal, not certiorari,was the PEZA's proper
remedy to reverse the trial court's decision, 89 the Court of Appeals proceeded
to decide the petition for certiorari in "the broader interest of justice." 90
The Court of Appeals ruled that the trial court judge gravely abused his
discretion in dismissing the PEZA's petition for prohibition. It held that Section
21 ofPresidential Decree No. 66 and Section 51 of the Special Economic
Zone Act of 1995 granted the PEZA exemption from payment of real property
taxes. 91 Based on the criteria set in Manila International Airport Authority v.
Court of Appeals,92 the Court of Appeals found that the PEZA is an
instrumentality of the national government. No taxes, therefore, could be
levied on it by local government units. 93
In the decision 94 dated August 27, 2008, the Court of Appeals granted
the PEZA's petition for certiorari.It set aside the trial court's decision and
nullified all the Province's proceedings with respect to the collection of real
property taxes from the PEZA.
The Province filed a motion for reconsideration, 95 which the
Court of Appeals denied in the resolution 96 dated April 16, 2009 for
lack of merit.
In its petition for review on certiorari with this court, 97 the
Province of Bataan insists that the Court of Appeals had no jurisdiction to take
cognizance of the PEZA's petition for certiorari.The Province maintains that
the Court of Tax Appeals had jurisdiction to hear the PEZA's petition since it
involved a local tax case decided by a Regional Trial Court. 98TSHEIc

The Province reiterates that the PEZA is not exempt from

payment of real property taxes. The Province points out that the EPZA, the
PEZA's predecessor, had to be categorically exempted from payment of real
property taxes. The EPZA, therefore, was not inherently exempt from
payment of real property taxes and so is the PEZA. Since Congress omitted
from the Special Economic Zone Act of 1995 a provision specifically
exempting the PEZA from payment of real property taxes, the Province
argues that the PEZA is a taxable entity. It cited the rule in statutory
construction that provisions omitted in revised statutes are deemed
repealed. 99
With respect to Sections 24 and 51 of the Special Economic Zone
Act of 1995 granting tax exemptions and benefits, the Province argues that
these provisions only apply to business establishments operating within
special economic zones, 100 not to the PEZA.
This court ordered the PEZA to comment on the Province's petition for
review on certiorari.101
In its comment, 102 the PEZA argues that the Court of Appeals had
jurisdiction to hear its petition for certiorari since the issue was whether the
trial court committed grave abuse of discretion in denying its petition for
injunction. The PEZA maintains that it is exempt from payment of real
property taxes under Section 21 of Presidential Decree No. 66 and Section
51 of the Special Economic Zone Act of 1995.
 The Province filed its reply, 103 reiterating its arguments in its petition for
review on certiorari.
On the PEZA's motion, 104 this court consolidated the petitions filed by
the City of Lapu-Lapu and the Province of Bataan. 105
The issues for our resolution are the following:
I. Whether the Court of Appeals erred in dismissing the City of Lapu-
Lapu's appeal for raising pure questions of law;
II. Whether the Regional Trial Court, Branch 111, Pasay City had
jurisdiction to hear, try, and decide the City of Lapu-Lapu's petition for
declaratory relief;EAISDH

III. Whether the petition for injunction filed before the Regional Trial
Court, Branch 115, Pasay City, is a local tax case appealable to the
Court of Tax Appeals; and
IV. Whether the PEZA is exempt from payment of real property taxes.
We deny the consolidated petitions.
I.
The Court of Appeals did not err in
dismissing the City of Lapu-Lapu's
appeal for raising pure questions of law
Under the Rules of Court, there are three modes of appeal from
Regional Trial Court decisions. The first mode is through an ordinary appeal
before the Courtof Appeals where the decision assailed was rendered in the
exercise of the Regional Trial Court's original jurisdiction. Ordinary appeals
are governed by Rule 41, Sections 3 to 13 of the Rules of Court. In ordinary
appeals, questions of fact or mixed questions of fact and law may be
raised. 106
The second mode is through a petition for review before the
Court of Appeals where the decision assailed was rendered by the Regional
Trial Court in the exercise of its appellate jurisdiction. Rule 42 of the
Rules of Court governs petitions for review before the Court of Appeals. In
petitions for review under Rule 42, questions of fact, of law, or mixed
questions of fact and law may be raised. 107 caEIDA

The third mode is through an appeal by certiorari before this court

under Rule 45 where only questions of law shall be raised. 108
A question of fact exists when there is doubt as to the truth or
falsity of the alleged facts. 109 On the other hand, there is a question of law if
the appeal raises doubt as to the applicable law on a certain set of facts. 110
 Under Rule 50, Section 2, an improper appeal before the
Court of Appeals is dismissed outright and shall not be referred to the proper
court:
SEC. 2. Dismissal of improper appeal to the Court of Appeals. — An
appeal under Rule 41 taken from the Regional Trial Court to the
Court of Appeals raising only questions of law shall be dismissed, issues
purely of law not being reviewable by said court. Similarly, an appeal by
notice of appeal instead of by petition for review from the appellate
judgment of a Regional Trial Court shall be dismissed.EIAaDC

An appeal erroneously taken to the Court of Appeals shall not be

transferred to the appropriate court but shall be dismissed outright.
Rule 50, Section 2 repealed Rule 50, Section 3 of the 1964
Rules of Court, which provided that improper appeals to the Court of Appeals
shall not be dismissed but shall be certified to the proper court for resolution:
Sec. 3. Where appealed case erroneously, brought. — Where the
appealed case has been erroneously brought to the Court of Appeals, it
shall not dismiss the appeal, but shall certify the case to the proper
court, with a specific and clear statement of the grounds therefor.
With respect to appeals by certiorari directly filed before this court but
which raise questions of fact, paragraph 4 (b) of Circular No. 2-90 dated
March 9, 1990 states that this court "retains the option, in the exercise of its
sound discretion and considering the attendant circumstances, either itself to
take cognizance of and decide such issues or to refer them to the
Court of Appeals for determination." cACTaI

In Indoyon, Jr. v. Court of Appeals,111 we said that this court "cannot

tolerate ignorance of the law on appeals." 112 It is not this court's task to
determine for litigants their proper remedies under the Rules. 113
We agree that the City availed itself of the wrong mode of appeal before
the Court of Appeals. The City raised pure questions of law in its appeal. The
issue ofwhether the Regional Trial Court of Pasay had jurisdiction over the
PEZA's petition for declaratory relief is a question of law, jurisdiction being a
matter of law. 114 The issue of whether the PEZA is a government
instrumentality exempt from payment of real property taxes is likewise a
question of law since this question is resolved by examining the
provisions of the PEZA's charter as well as other laws relating to the
PEZA. 115
The Court of Appeals, therefore, did not err in dismissing the City's
appeal pursuant to Rule 50, Section 2 of the Rules of Court.
 Nevertheless, considering the important questions involved in this case,
we take cognizance of the City's petition for review on certiorari in the
interest ofjustice.
In Municipality of Pateros v. The Honorable Court of Appeals,116 the
Municipality of Pateros filed an appeal under Rule 42 before the
Court of Appeals, which the Court of Appeals denied outright for raising pure
questions of law. This court agreed that the Municipality of Pateros
"committed a procedural infraction" 117 and should have directly filed a petition
for review on certiorari before this court. Nevertheless, "in the
interest of justice and in order to write finis to [the] controversy,"118 this court
"opt[ed] to relax the rules" 119 and proceeded to decide the case. This court
said:DcTSHa

While it is true that rules of procedure are intended to promote rather

than frustrate the ends of justice, and while the swift unclogging of the
dockets of the courts is a laudable objective, it nevertheless must not be
met at the expense of substantial justice.
The Court has allowed some meritorious cases to proceed despite
inherent procedural defects and lapses. This is in keeping with the
principle that rules of procedure are mere tools designed to facilitate the
attainment of justice, and that strict and rigid application of rules which
should result in technicalities that tend to frustrate rather than promote
substantial justice must always be avoided. It is a far better and more
prudent cause of action for the court to excuse a technical lapse and
afford the parties a review of the case to attain the ends of justice, rather
than dispose of the case on technicality and cause grave injustice to the
parties, giving a false impression of speedy disposal of cases while
actually resulting in more delay, if not a miscarriage of justice. 120
Similar to Municipality of Pateros,we opt to relax the rules in this case.
The PEZA operates or otherwise administers special economic zones all over
the country. Resolving the substantive issue of whether the PEZA is taxable
for real property taxes will clarify the taxing powers of all local government
units where special economic zones are operated. This case, therefore,
should be decided on the merits.
II.
The Regional Trial Court of Pasay had no
jurisdiction to hear, try, and decide the
PEZA's petition for declaratory relief
against the City of Lapu-Lapu
Rule 63 of the Rules of Court governs actions for declaratory relief.
Section 1 of Rule 63 provides:
 SECTION 1. Who may file petition. — Any person interested under a
deed, will, contract or other written instrument, or whose rights are
affected by a statute, executive order or regulation, ordinance, or any
other governmental regulation 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.
An action for reformation of an instrument, to quiet title to real property or
remove clouds therefrom, or to consolidate ownership under Article
1607 of the Civil Code, may be brought under this Rule.
The court with jurisdiction over petitions for declaratory relief is the
Regional Trial Court, the subject matter of litigation in an action for declaratory
relief being incapable of pecuniary estimation. 121 Section 19 of the Judiciary
Reorganization Act of 1980 provides: aHECST

SEC. 19. Jurisdiction in Civil Cases. — Regional Trial Courts shall

exercise exclusive original jurisdiction:
(1) In all civil actions in which the subject of litigation is
incapable of pecuniary estimation[.]
Consistent with the law, the Rules state that a petition for declaratory
relief is filed "in the appropriate Regional Trial Court." 122
A special civil action for declaratory relief is filed for a judicial
determination of any question of construction or validity arising from, and for a
declaration ofrights and duties, under any of the following subject matters: a
deed, will, contract or other written instrument, statute, executive order or
regulation, ordinance, or any other governmental regulation. 123 However, a
declaratory judgment may issue only if there has been "no breach of the
documents in question." 124 If the contract or statute subject matter of the
action has already been breached, the appropriate ordinary civil action must
be filed. 125 If adequate relief is available through another form of action or
proceeding, the other action must be preferred over an action for declaratory
relief. 126
In Ollada v. Central Bank of the Philippines,127 the Central Bank issued
CB-IED Form No. 5 requiring certified public accountants to submit an
accreditation under oath before they were allowed to certify financial
statements submitted to the bank. Among those financial statements the
Central Bank disallowed were those certified by accountant Felipe B.
Ollada. 128TEDaAc

Claiming that the requirement "restrained the legitimate pursuit of one's

trade," 129 Ollada filed a petition for declaratory relief against the Central Bank.
 This court ordered the dismissal of Ollada's petition "without prejudice
to [his] seeking relief in another appropriate action." 130 According to this
court, Ollada's right had already been violated when the Central Bank refused
to accept the financial statements he prepared. Since there was already a
breach, a petition for declaratory relief was not proper. Ollada must pursue the
"appropriate ordinary civil action or proceeding." 131 This court explained:
Petitioner commenced this action as, and clearly intended it to be one for
Declaratory Relief under the provisions of Rule 66 of the Rules of Court.
On the question ofwhen a special civil action of this nature would
prosper, we have already held that the complaint for declaratory relief
will not prosper if filed after a contract, statute or right has been
breached or violated. In the present case such is precisely the situation
arising from the facts alleged in the petition for declaratory relief. As
vigorously claimed by petitioner himself, respondent had already invaded
or violated his right and caused him injury — all these giving him a
complete cause of action enforceable in an appropriate ordinary civil
action or proceeding. The dismissal of the action was, therefore, proper
in the light of our ruling in De Borja vs. Villadolid,47 O.G. (5) p. 2315,
and Samson vs. Andal, G.R. No. L-3439, July 31, 1951, where we held
that an action for declaratory relief should be filed before there has been
a breach of a contract, statutes or right, and that it is sufficient to bar
such action, that there had been a breach — which would constitute
actionable violation. The rule is that an action for Declaratory Relief is
proper only if adequate relief is not available through the means of other
existing forms of action or proceeding (1 C.J.S. 1027-1028).132 cDHCAE

It is also required that the parties to the action for declaratory relief be
those whose rights or interests are affected by the contract or statute in
question. 133"There must be an actual justiciable controversy or the 'ripening
seeds' of one" 134 between the parties. The issue between the parties "must
be ripe for judicial determination." 135 An action for declaratory relief based on
theoretical or hypothetical questions cannot be filed for our courts are not
advisory courts. 136
In Republic v. Roque,137 this court dismissed respondents' petition for
declaratory relief for lack of justiciable controversy. According to this court,
"[the respondents'] fear of prospective prosecution [under the Human Security
Act] was solely based on remarks of certain government officials which were
addressed to the general public." 138
In Velarde v. Social Justice Society,139 this court refused to resolve the
issue of "whether or not [a religious leader's endorsement] of a candidate for
elective office or in urging or requiring the members of his flock to vote for a
specific candidate is violative [of the separation clause]." 140 According to the
court, there was no justiciable controversy and ordered the dismissal of the
Social Justice Society's petition for declaratory relief. This court explained:
Indeed, SJS merely speculated or anticipated without factual moorings
that, as religious leaders, the petitioner and his co-respondents below
had endorsed or threatened to endorse a candidate or candidates for
elective offices; and that such actual or threatened endorsement "will
enable [them] to elect men to public office who [would] in turn be forever
beholden to their leaders, enabling them to control the government"[;]
and "pos[ing] a clear and present danger of serious erosion ofthe
people's faith in the electoral process[;] and reinforc[ing] their belief that
religious leaders determine the ultimate result of elections," which would
then be violative of the separation clause.
Such premise is highly speculative and merely theoretical, to say the
least. Clearly, it does not suffice to constitute a justiciable controversy.
The Petition does not even allege any indication or manifest intent on the
part of any of the respondents below to champion an electoral candidate,
or to urge their so-called flock to vote for, or not to vote for, a particular
candidate. It is a time-honored rule that sheer speculation does not give
rise to an actionable right.IAcTaC

Obviously, there is no factual allegation that SJS' rights are being

subjected to any threatened, imminent and inevitable violation that
should be prevented by the declaratory relief sought. The judicial power
and duty of the courts to settle actual controversies involving rights that
are legally demandable and enforceable cannot be exercised when there
is no actual or threatened violation of a legal right.
All that the 5-page SJS Petition prayed for was "that the question raised
in paragraph 9 hereof be resolved." In other words, it merely sought an
opinion of the trial court on whether the speculated acts of religious
leaders endorsing elective candidates for political offices violated the
constitutional principle on the separation ofchurch and state. SJS did not
ask for a declaration of its rights and duties; neither did it pray for the
stoppage of any threatened violation of its declared rights. Courts,
however, are proscribed from rendering an advisory opinion. 141
In sum, a petition for declaratory relief must satisfy six requisites:
[F]irst, the subject matter of the controversy must be a deed, will,
contract or other written instrument, statute, executive order or
regulation, or ordinance; second, the terms of said documents and the
validity thereof are doubtful and require judicial construction; third, there
must have been no breach of the documents in question; fourth, there
must be an actual justiciable controversy or the "ripening seeds" of one
between persons whose interests are adverse; fifth, the issue must be
ripe for judicial determination; and sixth, adequate relief is not available
through other means or other forms of action or
proceeding. 142 (Emphases omitted) HTCAED
 We rule that the PEZA erred in availing itself of a petition for declaratory
relief against the City. The City had already issued demand letters and real
property tax assessment against the PEZA, in violation of the PEZA's alleged
tax-exempt status under its charter. The Special Economic Zone Act of 1995,
the subject matter ofPEZA's petition for declaratory relief, had already been
breached. The trial court, therefore, had no jurisdiction over the petition for
declaratory relief.
There are several aspects of jurisdiction. 143 Jurisdiction over the
subject matter is "the power to hear and determine cases of the general class
to which the proceedings in question belong." 144 It is conferred by law, which
may either be the Constitution or a statute. 145 Jurisdiction over the subject
matter means "the nature of the cause of action and the relief
sought." 146 Thus, the cause of action and character of the relief sought as
alleged in the complaint are examined to determine whether a court had
jurisdiction over the subject matter. 147 Any decision rendered by a court
without jurisdiction over the subject matter of the action is void. 148 TaDAHE

Another aspect of jurisdiction is jurisdiction over the person. It is "the

power of [a] court to render a personal judgment or to subject the parties in a
particular action to the judgment and other rulings rendered in the
action." 149 A court automatically acquires jurisdiction over the person of the
plaintiff upon the filing of the initiatory pleading. 150 With respect to the
defendant, voluntary appearance in court or a valid service of summons vests
the court with jurisdiction over the defendant's person. 151 Jurisdiction over the
person of the defendant is indispensable in actions in personam or those
actions based on a party's personal liability.152 The proceedings in an action in
personam are void if the court had no jurisdiction over the person of the
defendant. 153 DSacAE

Jurisdiction over the res or the thing under litigation is acquired either
"by the seizure of the property under legal process, whereby it is brought into
actual custody of the law; or as a result of the institution of legal proceedings,
in which the power of the court is recognized and made
effective." 154 Jurisdiction over theres is necessary in actions in rem or those
actions "directed against the thing or property or status of a person and seek
judgments with respect thereto as against the whole world." 155 The
proceedings in an action in rem are void if the court had no jurisdiction over
the thing under litigation. 156
In the present case, the Regional Trial Court had no jurisdiction over
the subject matter of the action, specifically, over the remedy sought. As this
court explained in Malana v. Tappa:157
...an action for declaratory relief presupposes that there has been no
actual breach of the instruments involved or of rights arising thereunder.
 Since the purpose of an action for declaratory relief is to secure an
authoritative statement of the rights and obligations of the parties under
a statute, deed, or contract for their guidance in the enforcement thereof,
or compliance therewith, and not to settle issues arising from an alleged
breach thereof, it may be entertained only before the breach or
violation of the statute, deed, or contract to which it refers. A petition for
declaratory relief gives a practical remedy for ending controversies that
have not reached the state where another relief is immediately available;
and supplies the need for a form of action that will set controversies at
rest before they lead to a repudiation ofobligations, an invasion of rights,
and a commission of wrongs. HSCATc

Where the law or contract has already been contravened prior to the
filing of an action for declaratory relief, the courts can no longer assume
jurisdiction over the action. In other words, a court has no more
jurisdiction over an action for declaratory relief if its subject has already
been infringed or transgressed before the institution of the
action.158 (Emphasis supplied)
The trial court should have dismissed the PEZA's petition for
declaratory relief for lack of jurisdiction.
Once an assessment has already been issued by the assessor, the
proper remedy of a taxpayer depends on whether the assessment was
erroneous or illegal.
An erroneous assessment "presupposes that the taxpayer is subject to
the tax but is disputing the correctness of the amount assessed." 159 With an
erroneous assessment, the taxpayer claims that the local assessor erred in
determining any of the items for computing the real property tax, i.e., the
value of the real property or the portion thereof subject to tax and the proper
assessment levels. In case of an erroneous assessment, the taxpayer must
exhaust the administrative remedies provided under the Local Government
Code before resorting to judicial action.
The taxpayer must first pay the real property tax under protest. Section
252 of the Local Government Code provides:
SECTION 252. Payment Under Protest. — (a) No protest shall be
entertained unless the taxpayer first pays the tax. There shall be
annotated on the tax receipts the words "paid under protest".The protest
in writing must be filed within thirty (30) days from payment of the tax to
the provincial, city treasurer or municipal treasurer, in the case of a
municipality within Metropolitan Manila Area, who shall decide the
protest within sixty (60) days from receipt.
(b) The tax or a portion thereof paid under protest, shall be held in trust
by the treasurer concerned.
 (c) In the event that the protest is finally decided in favor of the taxpayer,
the amount or portion of the tax protested shall be refunded to the
protestant, or applied as tax credit against his existing or future tax
liability.
(d) In the event that the protest is denied or upon the lapse of the sixty
day period prescribed in subparagraph (a),the taxpayer may avail of the
remedies as provided for in Chapter 3, Title II, Book II of this Code. aCcADT

Should the taxpayer find the action on the protest unsatisfactory, the
taxpayer may appeal with the Local Board of Assessment Appeals within 60
days from receipt of the decision on the protest:
SECTION 226. Local Board of Assessment Appeals. — Any owner or
person having legal interest in the property who is not satisfied with the
action of the provincial, city or municipal assessor in the
assessment of his property may, within sixty (60) days from the
date of receipt of the written notice of assessment, appeal to the
Board of Assessment Appeals of the provincial or city by filing a petition
under oath in the form prescribed for the purpose, together with
copies of the tax declarations and such affidavits or documents
submitted in support of the appeal. EICDSA

Payment under protest and appeal to the Local Board of Assessment

Appeals are "successive administrative remedies to a taxpayer who questions
the correctness of an assessment." 160 The Local Board Assessment Appeals
shall not entertain an appeal "without the action of the local assessor" 161 on
the protest.
If the taxpayer is still unsatisfied after appealing with the Local
Board of Assessment Appeals, the taxpayer may appeal with the Central
Board of Assessment Appeals within 30 days from receipt of the Local
Board's decision:
SECTION 229. Action by the Local Board of Assessment Appeals. — (a)
The Board shall decide the appeal within one hundred twenty (120) days
from the date ofreceipt of such appeal. The Board, after hearing, shall
render its decision based on substantial evidence or such relevant
evidence on record as a reasonable mind might accept as adequate to
support the conclusion.
(b) In the exercise of its appellate jurisdiction, the Board shall have the
power to summon witnesses, administer oaths, conduct ocular
inspection, take depositions, and issue subpoena and subpoena duces
tecum.The proceedings of the Board shall be conducted solely for the
purpose of ascertaining the facts without necessarily adhering to
technical rules applicable in judicial proceedings.
 (c) The secretary of the Board shall furnish the owner of the property or
the person having legal interest therein and the provincial
or city assessor with a copy ofthe decision of the Board. In case the
provincial or city assessor concurs in the revision or the assessment, it
shall be his duty to notify the owner of the property or the person having
legal interest therein of such fact using the form prescribed for the
purpose. The owner of the property or the person having legal interest
therein or the assessor who is not satisfied with the decision of the
Board, may, within thirty (30) days after receipt of the decision of said
Board, appeal to the Central Board ofAssessment Appeals, as herein
provided. The decision of the Central Board shall be final and executory.
(Emphasis supplied)
On the other hand, an assessment is illegal if it was made without
authority under the law. 162 In case of an illegal assessment, the taxpayer may
directly resort to judicial action without paying under protest the assessed tax
and filing an appeal with the Local and Central Board of Assessment Appeals.
In Ty v. Trampe,163 the Municipal Assessor of Pasig sent Alejandro B.
Ty a notice of assessment with respect to Ty's real properties in Pasig.
Without resorting to the administrative remedies under the Local Government
Code, Ty filed before the Regional Trial Court a petition, praying that the trial
court nullify the notice ofassessment. In assessing the real property taxes
due, the Municipal Assessor used a schedule of market values solely
prepared by him. This, Ty argued, was void for being contrary to the Local
Government Code requiring that the schedule of market values be jointly
prepared by the provincial, city, and municipal assessors of the municipalities
within the Metropolitan Manila Area. ETISAc

This court ruled that the assessment was illegal for having been issued
without authority of the Municipal Assessor. Reconciling provisions of the Real
PropertyTax Code and the Local Government Code, this court held that the
schedule of market values must be jointly prepared by the provincial, city, and
municipal assessors of the municipalities within the Metropolitan Manila Area.
As to the issue of exhaustion of administrative remedies, this court held
that Ty did not err in directly resorting to judicial action. According to this
court, payment under protest is required only "where there is a question as to
the reasonableness of the amount assessed." 164 As to appeals before the
Local and Central Board of Assessment Appeals, they are "fruitful only where
questions of fact are involved." 165 TCADEc

Ty raised the issue of the legality of the notice of assessment, an issue

that did not go into the reasonableness of the amount assessed. Neither did
the issue involve a question of fact. Ty raised a question of law and, therefore,
need not resort to the administrative remedies provided under the Local
Government Code.
 In the present case, the PEZA did not avail itself of any of the remedies
against a notice of assessment. A petition for declaratory relief is not the
proper remedy once a notice of assessment was already issued.
Instead of a petition for declaratory relief, the PEZA should have directly
resorted to a judicial action. The PEZA should have filed a complaint for
injunction, the "appropriate ordinary civil action" 166 to enjoin the City from
enforcing its demand and collecting the assessed taxes from the PEZA. After
all, a declaratory judgment as to the PEZA's tax-exempt status is useless
unless the City is enjoined from enforcing its demand.
Injunction "is a judicial writ, process or proceeding whereby a party is
ordered to do or refrain from doing a certain act." 167 "It may be the main
action or merely a provisional remedy for and as incident in the main
action." 168 The essential requisites of a writ of injunction are: "(1) there must
be a right in esse or the existence of a right to be protected; and (2) the act
against which the injunction is directed to constitute a violation of such
right." 169
aIcETS

We note, however, that the City confused the concepts of jurisdiction

and venue in contending that the Regional Trial Court of Pasay had no
jurisdiction because the real properties involved in this case are located in
the City of Lapu-Lapu.
On the one hand, jurisdiction is "the power to hear and determine
cases of the general class to which the proceedings in question
belong." 170 Jurisdiction is a matter of substantive law. 171 Thus, an action may
be filed only with the court or tribunal where the Constitution or a statute says
it can be brought. 172 Objections to jurisdiction cannot be waived and may be
brought at any stage of the proceedings, even on appeal. 173 When a case is
filed with a court which has no jurisdiction over the action, the court shall motu
proprio dismiss the case. 174
On the other hand, venue is "the place of trial or geographical location
in which an action or proceeding should be brought." 175 In civil cases, venue
is a matterof procedural law. 176 A party's objections to venue must be brought
at the earliest opportunity either in a motion to dismiss or in the answer;
otherwise the objection shall be deemed waived. 177 When the venue of a civil
action is improperly laid, the court cannot motu proprio dismiss the case. 178
The venue of an action depends on whether the action is a real or
personal action. Should the action affect title to or possession of real property,
or interest therein, it is a real action. The action should be filed in the proper
court which has jurisdiction over the area wherein the real property involved,
or a portion thereof, is situated. 179 If the action is a personal action, the action
shall be filed with the proper court where the plaintiff or any of the principal
plaintiffs resides, or where the defendant or any of the principal defendants
resides, or in the case of a non-resident defendant where he may be found, at
the election of the plaintiff. 180
AEIcTD

The City was objecting to the venue of the action, not to the
jurisdiction of the Regional Trial Court of Pasay. In essence, the City was
contending that the PEZA's petition is a real action as it affects title to or
possession of real property, and, therefore, the PEZA should have filed the
petition with the Regional Trial Courtof Lapu-Lapu City where the real
properties are located.
However, whatever objections the City has against the venue of the
PEZA's action for declaratory relief are already deemed waived. Objections to
venue must be raised at the earliest possible opportunity. 181 The City did not
file a motion to dismiss the petition on the ground that the venue was
improperly laid. Neither did the City raise this objection in its answer.
In any event, the law sought to be judicially interpreted in this case had
already been breached. The Regional Trial Court of Pasay, therefore, had no
jurisdiction over the PEZA's petition for declaratory relief against the City.
III.
The Court of Appeals had no jurisdiction
over the PEZA's petition for certiorari
against the Province of Bataan
Appeal is the remedy "to obtain a reversal or modification of a judgment
on the merits." 182 A judgment on the merits is one which "determines the
rights and liabilities of the parties based on the disclosed facts,
irrespective of the formal, technical or dilatory objections." 183 It is not even
necessary that the case proceeded to trial. 184 So long as the "judgment is
general" 185 and "the parties had a full legal opportunity to be heard on their
respective claims and contentions," 186 the judgment is on the merits. DaTICE

On the other hand, certiorari is a special civil action filed to annul or

modify a proceeding of a tribunal, board, or officer exercising judicial or quasi-
judicial functions. 187 Certiorari,which in Latin means "to be more fully
informed," 188 was originally a remedy in the common law. This court
discussed the history of the remedy of certiorari in Spouses Delos Santos v.
Metropolitan Bank and Trust Company:189 SDEHCc

In the common law, from which the remedy of certiorari evolved, the
writ of certiorari was issued out of Chancery, or the King's Bench,
commanding agents or officersof the inferior courts to return the
record of a cause pending before them, so as to give the party more
sure and speedy justice, for the writ would enable the superior court to
determine from an inspection of the record whether the inferior court's
 judgment was rendered without authority. The errors were of such a
nature that, if allowed to stand, they would result in a substantial injury to
the petitioner to whom no other remedy was available. If the inferior
court acted without authority, the record was then revised and corrected
in matters of law. The writ of certiorari was limited to cases in which the
inferior court was said to be exceeding its jurisdiction or was not
proceeding according to essential requirements of law and would lie only
to review judicial or quasi-judicial acts. 190
In our jurisdiction, the term "certiorari" is used in two ways. An appeal
before this court raising pure questions of law is commenced by filing a
petition forreview on certiorari under Rule 45 of the Rules of Court. An appeal
by certiorari,which continues the proceedings commenced before the lower
courts, 191 is filed to reverse or modify judgments or final orders. 192 Under the
Rules, an appeal by certiorari must be filed within 15 days from notice of the
judgment or final order, orof the denial of the appellant's motion for new trial or
reconsideration. 193
A petition for certiorari under Rule 65, on the other hand, is an
independent and original action filed to set aside proceedings conducted
without or in excessof jurisdiction or with grave abuse of discretion amounting
to lack or excess of jurisdiction. 194 Under the Rules, a petition
for certiorari may only be filed if there is no appeal or any plain, speedy, or
adequate remedy in the ordinary course of law. 195 The petition must be filed
within 60 days from notice of the judgment, order, or resolution. 196 DTSIEc

Because of the longer period to file a petition for certiorari,some litigants

attempt to file petitions for certiorari as substitutes for lost appeals
bycertiorari.However, Rule 65 is clear that a petition for certiorari will not
prosper if appeal is available. Appeal is the proper remedy even if the error, or
one of the errors, raised is grave abuse of discretion on the part of the court
rendering judgment. 197 If appeal is available, a petition for certiorari cannot be
filed.
In this case, the trial court's decision dated January 31, 2007 is a
judgment on the merits. Based on the facts disclosed by the parties, the trial
court declared the PEZA liable to the Province of Bataan for real property
taxes. The PEZA's proper remedy against the trial court's decision, therefore,
is appeal.
Since the PEZA filed a petition for certiorari against the trial court's
decision, it availed itself of the wrong remedy. As the Province of Bataan
contended, the trial court's decision dated January 31, 2007 "is only an
error of judgment appealable to the higher level court and may not be
corrected by filing a petition forcertiorari." 198 That the trial court judge
allegedly committed grave abuse of discretion does not make the petition
for certiorari the correct remedy. The PEZA should have raised this ground in
an appeal filed within 15 days from notice of the assailed resolution.
This court, "in the liberal spirit pervading the Rules of Court and in the
interest of substantial justice," 199 has treated petitions for certiorari as an
appeal: "(1) if the petition for certiorari was filed within the reglementary period
within which to file a petition for review on certiorari;(2) when
errors of judgment are averred; and (3) when there is sufficient reason to
justify the relaxation of the rules." 200 Considering that "the nature of an action
is determined by the allegations of the complaint or the petition and the
character of the relief sought," 201 a petition which "actually avers
errors of judgment rather than errors than that of jurisdiction"202 may be
considered a petition for review.
However, suspending the application of the Rules has its
disadvantages. Relaxing procedural rules may reduce the "effective
enforcement of substantive rights," 203 leading to "arbitrariness, caprice,
despotism, or whimsicality in the settlement of disputes." 204 Therefore, for this
court to suspend the application of the Rules, the
accomplishment of substantial justice must outweigh the
importance of predictability of court procedures.
The PEZA's petition for certiorari may be treated as an appeal. First, the
petition for certiorari was filed within the 15-day reglementary period for filing
an appeal. The PEZA filed its petition for certiorari before the Court of Appeals
on October 15, 2007, 205 which was 12 days from October 3, 2007 206 when
the PEZA had notice of the trial court's order denying the motion for
reconsideration. ECDaTI

Second, the petition for certiorari raised errors of judgment. The PEZA
argued that the trial court erred in ruling that it is not exempt from
payment of real property taxes given Section 21 of Presidential Decree No.
66 and Sections 11 and 51 of the Special Economic Zone Act of 1995. 207
Third, there is sufficient reason to relax the rules given the
importance of the substantive issue presented in this case.
However, the PEZA's petition for certiorari was filed before the wrong
court. The PEZA should have filed its petition before the Court of Tax
Appeals.
The Court of Tax Appeals has the exclusive appellate jurisdiction over
local tax cases decided by Regional Trial Courts. Section 7, paragraph (a)
(3) of Republic Act No. 1125, as amended by Republic Act No. 9282,
provides:
Sec. 7. Jurisdiction. — The [Court of Tax Appeals] shall exercise:
 a. Exclusive appellate jurisdiction to review by appeal, as herein
provided:
xxx xxx xxx
3. Decisions, orders or resolutions of the Regional Trial Courts in local
tax cases originally decided or resolved by them in the exercise of their
original or appellate jurisdiction[.]
ISCaDH

The local tax cases referred to in Section 7, paragraph (a)

(3) of Republic Act No. 1125, as amended, include cases involving real
property taxes. Real property taxation is governed by Book II of the Local
Government Code on "Local Taxation and Fiscal Matters." Real property
taxes are collected by the Local Treasurer, 208not by the Bureau of Internal
Revenue in charge of collecting national internal revenue taxes, fees, and
charges. 209
Section 7, paragraph (a) (5) of Republic Act No. 1125, as amended
by Republic Act No. 9282, separately provides for the exclusive appellate
jurisdiction of the Court of Tax Appeals over decisions of the Central
Board of Assessment Appeals involving the assessment or collection of real
property taxes: DTISaH

Sec. 7. Jurisdiction. — The [Court of Tax Appeals] shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein
provided:
xxx xxx xxx
5. Decisions of the Central Board of Assessment Appeals in the
exercise of its appellate jurisdiction over cases involving the assessment
and taxation of real property originally decided by the provincial
or city board of assessment appeals[.]
This separate provision, nevertheless, does not bar the Court of Tax
Appeals from taking cognizance of trial court decisions involving the
collection of real property tax cases. Sections 256 210 and 266 211 of the Local
Government Code expressly allow local government units to file "in any
court of competent jurisdiction" civil actions to collect basic real property
taxes. Should the trial court rule against them, local government units cannot
be barred from appealing before the Court ofTax Appeals — the "highly
specialized body specifically created for the purpose of reviewing tax
cases." 212
We have also ruled that the Court of Tax Appeals, not the
Court of Appeals, has the exclusive original jurisdiction over petitions
for certiorari assailing interlocutory orders issued by Regional Trial Courts in a
local tax case. We explained in The City of Manila v. Hon. Grecia-
Cuerdo 213 that while the Court of Tax Appeals has no express grant of power
to issue writs of certiorari under Republic Act No. 1125, 214 as amended, the
tax court's judicial power as defined in theConstitution 215 includes the power
to determine "whether or not there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the part ofthe [Regional Trial
Court] in issuing an interlocutory order of jurisdiction in cases falling within the
exclusive appellate jurisdiction of the tax court." 216 We further elaborated: AEDcIH

Indeed, in order for any appellate court to effectively exercise its

appellate jurisdiction, it must have the authority to issue, among others,
a writ of certiorari.In transferring exclusive jurisdiction over appealed tax
cases to the CTA, it can reasonably be assumed that the law intended to
transfer also such power as is deemed necessary, if not indispensable,
in aid of such appellate jurisdiction. There is no perceivable reason why
the transfer should only be considered as partial, not total.
xxx xxx xxx
If this Court were to sustain petitioners' contention that jurisdiction over
their certiorari petition lies with the CA, this Court would be confirming
the exercise by two judicial bodies, the CA and the CTA, of jurisdiction
over basically the same subject matter — precisely the split-jurisdiction
situation which is anathema to the orderly administration of justice. The
Court cannot accept that such was the legislative motive, especially
considering that the law expressly confers on the CTA, the tribunal with
the specialized competence over tax and tariff matters, the
role of judicial review over local tax cases without mention of any other
court that may exercise such power. Thus, the Court agrees with the
ruling of the CA that since appellate jurisdiction over private
respondents' complaint for tax refund is vested in the CTA, it follows that
a petition for certiorari seeking nullification of an interlocutory order
issued in the said case should, likewise, be filed with the same court. To
rule otherwise would lead to an absurd situation where one court
decides an appeal in the main case while another court rules on an
incident in the very same case. HAECID

Stated differently, it would be somewhat incongruent with the

pronounced judicial abhorrence to split jurisdiction to conclude that the
intention of the law is to divide the authority over a local tax case filed
with the RTC by giving to the CA or this Court jurisdiction to issue a
writ of certiorari against interlocutory orders of the RTC but giving to the
CTA the jurisdiction over the appeal from the decision of the trial court in
the same case. It is more in consonance with logic and legal soundness
to conclude that the grant of appellate jurisdiction to the CTA over tax
cases filed in and decided by the RTC carries with it the power to issue a
writ of certiorari when necessary in aid of such appellate jurisdiction. The
supervisory power or jurisdiction of the CTA to issue a writ of certiorari in
aid of its appellate jurisdiction should co-exist with, and be a complement
 to, its appellate jurisdiction to review, by appeal, the final orders and
decisions of the RTC, in order to have complete supervision over the
acts of the latter. 217 (Citations omitted)
In this case, the petition for injunction filed before the Regional Trial
Court of Pasay was a local tax case originally decided by the trial court in its
original jurisdiction. Since the PEZA assailed a judgment, not an interlocutory
order, of the Regional Trial Court, the PEZA's proper remedy was an appeal
to the Court of Tax Appeals.
Considering that the appellate jurisdiction of the Court of Tax Appeals is
to the exclusion of all other courts, the Court of Appeals had no jurisdiction to
take cognizance of the PEZA's petition. The Court of Appeals acted without
jurisdiction in rendering the decision in CA-G.R. SP No. 100984. Its decision
in CA-G.R. SP No. 100984 is void. 218 TAaEIc

The filing of appeal in the wrong court does not toll the period to appeal.
Consequently, the decision of the Regional Trial Court, Branch 115,
Pasay City, became final and executory after the lapse of the 15th day from
the PEZA's receipt of the trial court's decision. 219 The denial of the petition for
injunction became final and executory.
IV.
The remedy of a taxpayer depends on the
stage in which the local government unit
is enforcing its authority to impose real
property taxes
The proper remedy of a taxpayer depends on the stage in which the
local government unit is enforcing its authority to collect real property taxes.
For the guidance of the members of the bench and the bar, we reiterate the
taxpayer's remedies against the erroneous or illegal assessment of real
property taxes.
Exhaustion of administrative remedies under the Local Government
Code is necessary in cases of erroneous assessments where the
correctness of the amount assessed is assailed. The taxpayer must first pay
the tax then file a protest with the Local Treasurer within 30 days from
date of payment of tax. 220 If protest is denied or upon the lapse of the 60-day
period to decide the protest, the taxpayer may appeal to the Local
Board of Assessment Appeals within 60 days from the denial of the protest or
the lapse of the 60-day period to decide the protest. 221 The Local
Board of Assessment Appeals has 120 days to decide the appeal. 222
If the taxpayer is unsatisfied with the Local Board's decision, the
taxpayer may appeal before the Central Board of Assessment Appeals within
30 days from receipt of the Local Board's decision. 223
 The decision of the Central Board of Assessment Appeals is appealable
before the Court of Tax Appeals En Banc. 224 The appeal before the
Court of Tax Appeals shall be filed following the procedure under Rule
43 of the Rules of Court. 225
The Court of Tax Appeals' decision may then be appealed before this
court through a petition for review on certiorari under Rule 45 of the
Rules of Court raising pure questions of law. 226
In case of an illegal assessment where the assessment was issued
without authority, exhaustion of administrative remedies is not necessary and
the taxpayer may directly resort to judicial action. 227 The taxpayer shall file a
complaint for injunction before the Regional Trial Court 228 to enjoin the local
government unit from collecting real property taxes.
The party unsatisfied with the decision of the Regional Trial Court shall
file an appeal, not a petition for certiorari,before the Court of Tax Appeals, the
complaint being a local tax case decided by the Regional Trial Court. 229 The
appeal shall be filed within fifteen (15) days from notice of the trial court's
decision.HAECID

The Court of Tax Appeals' decision may then be appealed before this
court through a petition for review on certiorari under Rule 45 of the
Rules of Court raising pure questions of law. 230
In case the local government unit has issued a notice of delinquency,
the taxpayer may file a complaint for injunction to enjoin the impending
sale of the real property at public auction. In case the local government unit
has already sold the property at public auction, the taxpayer must first deposit
with the court the amount for which the real property was sold, together with
interest of 2% per month from the date of sale to the time of the
institution of action. The taxpayer may then file a complaint to assail the
validity of the public auction. 231 The decisions of the Regional Trial Court in
these cases shall be appealable before the Court of Tax Appeals, 232 and the
latter's decisions appealable before this court through a petition for review
on certiorari under Rule 45 of the Rules of Court. 233 cSCADE

V.
The PEZA is exempt from payment of
real property taxes
The jurisdictional errors in this case render these consolidated petitions
moot. We do not review void decisions rendered without jurisdiction.
However, the PEZA alleged that several local government units,
including the City of Baguio and the Province of Cavite, have issued their
respective real property tax assessments against the PEZA. Other local
government units will likely follow suit, and either the PEZA or the local
government units taxing the PEZA may file their respective actions against
each other.
In the interest of judicial economy 234 and avoidance of conflicting
decisions involving the same issues, 235 we resolve the substantive
issue of whether the PEZA is exempt from payment of real property taxes.
Real property taxes are annual taxes levied on real property such as
lands, buildings, machinery, and other improvements not otherwise
specifically exempted under the Local Government Code. 236 Real property
taxes are ad valorem,with the amount charged based on a fixed
proportion of the value of the property. 237Under the law, provinces, cities, and
municipalities within the Metropolitan Manila Area have the power to levy real
property taxes within their respective territories.238SCHTac

The general rule is that real properties are subject to real property
taxes. This is true especially since the Local Government Code has withdrawn
exemptions from real property taxes of all persons, whether natural or
juridical:
SEC. 234. Exemptions from Real Property Tax. — The following are
exempted from payment of real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, nonprofit or religious cemeteries and all
lands, buildings, and improvements actually, directly, and exclusively
used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned or -
controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided
under R.A. No. 6938; and CAaSHI

(e) Machinery and equipment used for pollution control and

environmental protection.
Except as provided herein, any exemption from payment of real property
taxes previously granted to, or presently enjoyed by, all persons,
whether natural or juridical, including government-owned or -controlled
corporations are hereby withdrawn upon the effectivity of this
Code. (Emphasis supplied)
 The person liable for real property taxes is the "taxable person who had
actual or beneficial use and possession [of the real property for the taxable
period,] whether or not [the person owned the property for the period he or
she is being taxed]." 239
The exceptions to the rule are provided in the Local Government Code.
Under Section 133 (o), local government units have no power to levy
taxes of any kind on the national government, its agencies and
instrumentalities and local government units:
SEC. 133. Common Limitations on the Taxing Powers of Local
Government Units. — Unless otherwise provided herein, the
exercise of taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
xxx xxx xxx
(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities and local government units.
Specifically on real property taxes, Section 234 enumerates the
persons and real property exempt from real property taxes:
SEC. 234. Exemptions from Real Property Tax. — The following are
exempted from payment of real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, nonprofit or religious cemeteries and all
lands, buildings, and improvements actually, directly, and exclusively
used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned or -
controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided
under R.A. No. 6938; and DECcAS

(e) Machinery and equipment used for pollution control and

environmental protection.
Except as provided herein, any exemption from payment of real property
tax previously granted to, or presently enjoyed by, all persons, whether
natural or juridical, including all government-owned or -controlled
corporations are hereby withdrawn upon the effectivity of this Code.
(Emphasis supplied)
 For persons granted tax exemptions or incentives before the
effectivity of the Local Government Code, Section 193 withdrew these tax
exemption privileges. These persons consist of both natural and juridical
persons, including government-owned or controlled corporations:
SEC. 193. Withdrawal of Tax Exemption Privileges. — Unless otherwise
provided in this code, tax exemptions or incentives granted to or
presently enjoyed by all persons, whether natural or juridical, including
government-owned or controlled corporations, except local water
districts, cooperatives duly registered under R.A. 6938, non stock and
non profit hospitals and educational institutions, are hereby withdrawn
upon effectivity of this Code.
As discussed, Section 234 withdrew all tax privileges with respect to
real property taxes.DTEIaC

Nevertheless, local government units may grant tax exemptions under

such terms and conditions as they may deem necessary:
SEC. 192. Authority to Grant Tax Exemption Privileges. — Local
government units may, through ordinances duly approved, grant tax
exemptions, incentives or reliefs under such terms and conditions as
they may deem necessary.
In Mactan Cebu International Airport Authority v. Hon. Marcos,240 this
court classified the exemptions from real property taxes into ownership,
character, and usage exemptions.
Ownership exemptions are exemptions based on the ownership of the
real property. The exemptions of real property owned by the Republic of the
Philippines, provinces, cities, municipalities, barangays,and registered
cooperatives fall under this classification. 241
Character exemptions are exemptions based on the character of the
real property. Thus, no real property taxes may be levied on charitable
institutions, houses and temples of prayer like churches, parsonages, or
convents appurtenant thereto, mosques, and non profit or religious
cemeteries. 242
Usage exemptions are exemptions based on the use of the real
property. Thus, no real property taxes may be levied on real property such as:
(1) lands and buildings actually, directly, and exclusively used for religious,
charitable or educational purpose; (2) machineries and equipment actually,
directly and exclusively used by local water districts or by government-owned
or controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power; and (3) machinery and
equipment used for pollution control and environmental protection. 243 TEHDIA
 Persons may likewise be exempt from payment of real properties if their
charters, which were enacted or reenacted after the effectivity of the Local
Government Code, exempt them payment of real property taxes. 244
V. (A)
The PEZA is an instrumentality of the national government
An instrumentality is "any agency of the National Government, not
integrated within the department framework, vested with special functions or
jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually
through a charter." 245
Examples of instrumentalities of the national government are the Manila
International Airport Authority, 246 the Philippine Fisheries Development
Authority, 247the Government Service Insurance System, 248 and the
Philippine Reclamation Authority. 249 These entities are not integrated within
the department framework but are nevertheless vested with special functions
to carry out a declared policy of the national government.
Similarly, the PEZA is an instrumentality of the national government. It
is not integrated within the department framework but is an agency attached
to the Department of Trade and Industry. 250 Book IV, Chapter 7, Section 38
(3) (a) of the Administrative Code of 1987 defines "attachment": DaTHAc

SEC. 38. Definition of Administrative Relationship. — Unless otherwise

expressly stated in the Code or in other laws defining the special
relationships of particular agencies, administrative relationships shall be
categorized and defined as follows:
xxx xxx xxx
(3) Attachment. — (a) This refers to the lateral relationship between the
department or its equivalent and the attached agency or corporation for
purposes ofpolicy and program coordination. The coordination may be
accomplished by having the department represented in the governing
board of the attached agency or corporation, either as chairman or as a
member, with or without voting rights, if this is permitted by the charter;
having the attached corporation or agency comply with a
system of periodic reporting which shall reflect the progress of the
programs and projects; and having the department or its equivalent
provide general policies through its representative in the board, which
shall serve as the framework for the internal policies of the attached
corporation or agency[.]
Attachment, which enjoys "a larger
measure of independence" 251 compared with other administrative
relationships such as supervision and control, is further explained in Beja, Sr.
v. Court of Appeals:252
An attached agency has a larger measure of independence from the
Department to which it is attached than one which is under departmental
supervision and control or administrative supervision. This is borne out
by the "lateral relationship" between the Department and the attached
agency. The attachment is merely for "policy and program coordination."
With respect to administrative matters, the independence of an attached
agency from Departmental control and supervision is further reinforced
by the fact that even an agency under a Department's administrative
supervision is free from Departmental interference with respect to
appointments and other personnel actions "in accordance with the
decentralization of personnel functions" under the Administrative
Code of 1987. Moreover, the Administrative Code explicitly provides that
Chapter 8 of Book IV on supervision and control shall not apply to
chartered institutions attached to a Department. 253 SAEHaC

With the PEZA as an attached agency to the Department of Trade and

Industry, the 13-person PEZA Board is chaired by the Department
Secretary. 254 Among the powers and functions of the PEZA is its ability to
coordinate with the Department of Trade and Industry for policy and program
formulation and implementation.255 In strategizing and prioritizing the
development of special economic zones, the PEZA coordinates with the
Department of Trade and Industry. 256
The PEZA also administers its own funds and operates autonomously,
with the PEZA Board formulating and approving the PEZA's annual
budget. 257Appointments and other personnel actions in the PEZA are also
free from departmental interference, with the PEZA Board having the
exclusive and final authority to promote, transfer, assign and reassign
officers of the PEZA. 258
As an instrumentality of the national government, the PEZA is vested
with special functions or jurisdiction by law. Congress created the PEZA to
operate, administer, manage and develop special economic zones in the
Philippines. 259 Special economic zones are areas with highly developed or
which have the potential to be developed into agro-industrial, industrial
tourist/recreational, commercial, banking, investment and financial
centers. 260 By operating, administering, managing, and developing special
economic zones which attract investments and promote use of domestic
labor, the PEZA carries out the following policy of the Government:
SECTION 2. Declaration of Policy. — It is the declared policy of the
government to translate into practical realities the following State policies
and mandates in the 1987 Constitution, namely:
 (a) "The State recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives to needed
investments." (Sec. 20, Art. II)CSDTac

(b) "The State shall promote the preferential use of Filipino labor,
domestic materials and locally produced goods, and adopt measures
that help make them competitive." (Sec. 12, Art. XII)
In pursuance of these policies, the government shall actively encourage,
promote, induce and accelerate a sound and balanced industrial,
economic and social development of the country in order to provide jobs
to the people especially those in the rural areas, increase their
productivity and their individual and family income, and thereby improve
the level and quality of their living condition through the establishment,
among others, of special economic zones in suitable and strategic
locations in the country and through measures that shall effectively
attract legitimate and productive foreign investments. 261
Being an instrumentality of the national government, the PEZA cannot
be taxed by local government units.
Although a body corporate vested with some corporate powers, 262 the
PEZA is not a government-owned or controlled corporation taxable for real
property taxes.
Section 2 (13) of the Introductory Provisions of the Administrative
Code of 1987 defines the term "government-owned or controlled corporation":
SEC. 2. General Terms Defined. — Unless the specific words of the text,
or the context as a whole, or a particular statute, shall require a different
meaning: aAHISE

xxx xxx xxx

(13) Government-owned or controlled corporation refers to any
agency organized as a stock or non-stock corporation, vested
with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or
through its instrumentalities either wholly, or, where applicable as
in the case of stock corporations, to the extent of at least fifty-one
(51) per cent of its capital stock: Provided, That government-
owned or controlled corporations may be further categorized by
the Department of the Budget, the Civil Service Commission, and
the Commission on Audit for purposes of the exercise and
discharge of their respective powers, functions and
responsibilities with respect to such corporations.
Government entities are created by law, specifically, by
the Constitution or by statute. In the case of government-owned or controlled
corporations, they are incorporated by virtue of special charters 263 to
participate in the market for special reasons which may be related to
dysfunctions or inefficiencies of the market structure. This is to adjust reality
as against the concept of full competition where all market players are price
takers. Thus, under the Constitution, government-owned or controlled
corporations are created in the interest of the common good and should
satisfy the test of economic viability. 264 Article XII, Section
16 of theConstitution provides:
Section 16. The Congress shall not, except by general law, provide for
the formation, organization, or regulation of private corporations.
Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and
subject to the test of economic viability.
Economic viability is "the capacity to function efficiently in
business." 265 To be economically viable, the entity "should not go into
activities which the private sector can do better." 266TCASIH

To be considered a government-owned or controlled corporation, the

entity must have been organized as a stock or non-stock corporation. 267
Government instrumentalities, on the other hand, are also created by
law but partake of sovereign functions. When a government entity performs
sovereign functions, it need not meet the test of economic viability. In Manila
International Airport Authority v. Court of Appeals,268 this court explained:
In contrast, government instrumentalities vested with corporate powers
and performing governmental or public functions need not meet the
test of economic viability. These instrumentalities perform essential
public services for the common good, services that every modern State
must provide its citizens. These instrumentalities need not be
economically viable since the government may even subsidize their
entire operations. These instrumentalities are not the "government-
owned or controlled corporations" referred to in Section 16, Article
XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates
government instrumentalities vested with corporate powers but
performing essential governmental or public functions. Congress has
plenary authority to create government instrumentalities vested with
corporate powers provided these instrumentalities perform essential
government functions or public services. However, when the legislature
creates through special charters corporations that perform economic or
commercial activities, such entities — known as "government-owned or
controlled corporations" — must meet the test of economic viability
because they compete in the market place.
xxx xxx xxx
 Commissioner Blas F. Ople, proponent of the test of economic viability,
explained to the Constitutional Commission the purpose of this test, as
follows:CSaITD

MR. OPLE: Madam President, the reason for this concern is really
that when the government creates a corporation, there is a sense
in which this corporation becomes exempt from the
test of economic performance. We know what happened in the
past. If a government corporation loses, then it makes its claim
upon the taxpayers' money through new equity infusions from the
government and what is always invoked is the common good.
That is the reason why this year, outof a budget of P115 billion for
the entire government, about P28 billion of this will go into equity
infusions to support a few government financial institutions. And
this is all taxpayers' money which could have been relocated to
agrarian reform, to social services like health and education, to
augment the salaries ofgrossly underpaid public employees. And
yet this is all going down the drain.
Therefore, when we insert the phrase "ECONOMIC VIABILITY"
together with the "common good," this becomes a restraint on
future enthusiasts for state capitalism to excuse themselves from
the responsibility of meeting the market test so that they become
viable. And so, Madam President, I reiterate, for the committee's
consideration and I am glad that I am joined in this proposal by
Commissioner Foz, the insertion of the standard of "ECONOMIC
VIABILITY OR THE ECONOMIC TEST," together with the
common good.
xxx xxx xxx
Clearly, the test of economic viability does not apply to government
entities vested with corporate powers and performing essential public
services. The State is obligated to render essential public services
regardless of the economic viability of providing such service. The non-
economic viability of rendering such essential public service does not
excuse the State from withholding such essential services from the
public. 269 (Emphases and citations omitted) SHcDAI

The law created the PEZA's charter. Under the Special Economic Zone
Act of 1995, the PEZA was established primarily to perform the governmental
function ofoperating, administering, managing, and developing special
economic zones to attract investments and provide opportunities for
preferential use of Filipino labor.
Under its charter, the PEZA was created a body corporate endowed
with some corporate powers. However, it was not organized as a stock 270 or
non-stock 271corporation. Nothing in the PEZA's charter provides that the
PEZA's capital is divided into shares. 272 The PEZA also has no members
who shall share in the PEZA's profits. DAEaTS

The PEZA does not compete with other economic zone authorities in
the country. The government may even subsidize the PEZA's operations.
Under Section 47 of the Special Economic Zone Act of 1995, "any sum
necessary to augment [the PEZA's] capital outlay shall be included in the
General Appropriations Act to be treated as an equity of the national
government." 273
The PEZA, therefore, need not be economically viable. It is not a
government-owned or controlled corporation liable for real property taxes.
V. (B)
The PEZA assumed the non-profit character, including the tax exempt
status, of the EPZA
The PEZA's predecessor, the EPZA, was declared non-profit in
character with all its revenues devoted for its development, improvement, and
maintenance. Consistent with this non-profit character, the EPZA was
explicitly declared exempt from real property taxes under its charter. Section
21 of Presidential Decree No. 66 provides: HEcSDa

Section 21. Non-profit Character of the Authority; Exemption from

Taxes. — The Authority shall be non-profit and shall devote and use all
its returns from its capital investment, as well as excess revenues from
its operations, for the development, improvement and maintenance and
other related expenditures of the Authority to pay its indebtedness and
obligations and in furtherance and effective implementation of the policy
enunciated in Section 1 of this Decree. In consonance therewith, the
Authority is hereby declared exempt:
xxx xxx xxx
(b) From all income taxes, franchise taxes, realty taxes and all
other kinds of taxes and licenses to be paid to the National
Government, its provinces, cities, municipalities and other
government agencies and instrumentalities[.] ADEaHT

The Special Economic Zone Act of 1995, on the other hand, does not
specifically exempt the PEZA from payment of real property taxes.
Nevertheless, we rule that the PEZA is exempt from real property taxes
by virtue of its charter. A provision in the Special Economic Zone
Act of 1995 explicitly exempting the PEZA is unnecessary. The PEZA
assumed the real property exemption of the EPZA under Presidential Decree
No. 66.
 Section 11 of the Special Economic Zone Act of 1995 mandated the
EPZA "to evolve into the PEZA in accordance with the guidelines and
regulations set forth in an executive order issued for this purpose." President
Ramos then issued Executive Order No. 282 in 1995, ordering the PEZA to
assume the EPZA's powers, functions, and responsibilities under Presidential
Decree No. 66 not inconsistent with the Special Economic Zone Act of 1995:
SECTION 1. Assumption of EPZA's Powers and Functions by PEZA. All
the powers, functions and responsibilities of EPZA as provided under its
Charter, Presidential Decree No. 66, as amended, insofar as they are
not inconsistent with the powers, functions and responsibilities of the
PEZA, as mandated under Republic Act No. 7916, shall hereafter be
assumed and exercised by the PEZA. Henceforth, the EPZA shall be
referred to as the PEZA. TICaEc

The following sections of the Special Economic Zone

Act of 1995 provide for the PEZA's powers, functions, and responsibilities:
SEC. 5. Establishment of ECOZONES. — To ensure the viability and
geographical dispersal of ECOZONES through a system of prioritization,
the following areas are initially identified as ECOZONES, subject to the
criteria specified in Section 6:
xxx xxx xxx
The metes and bounds of each ECOZONE are to be delineated and
more particularly described in a proclamation to be issued by the
President of the Philippines, upon the recommendation of the Philippine
Economic Zone Authority (PEZA),which shall be established under this
Act, in coordination with the municipal and/or city council, National Land
Use Coordinating Committee and/or the Regional Land Use Committee.
SEC. 6. Criteria for the Establishment of Other ECOZONES. — In
addition to the ECOZONES identified in Section 5 of this Act, other areas
may be established as ECOZONES in a proclamation to be issued by
the President of the Philippines subject to the evaluation and
recommendation of the PEZA, based on a detailed feasibility and
engineering study which must conform to the following criteria:
(a) The proposed area must be identified as a regional growth center in
the Medium-Term Philippine Development Plan or by the Regional
Development Council;
(b) The existence of required infrastructure in the proposed ECOZONE,
such as roads, railways, telephones, ports, airports, etc.,and the
suitability and capacity ofthe proposed site to absorb such
improvements; cSCTID

(c) The availability of water source and electric power supply for
use of the ECOZONE;
(d) The extent of vacant lands available for industrial and commercial
development and future expansion of the ECOZONE as well as of lands
adjacent to the ECOZONE available for development of residential areas
for the ECOZONE workers;
(e) The availability of skilled, semi-skilled and non-skilled trainable labor
force in and around the ECOZONE;
(f) The area must have a significant incremental advantage over the
existing economic zones and its potential profitability can be established;
(g) The area must be strategically located; and
(h) The area must be situated where controls can easily be established
to curtail smuggling activities.
Other areas which do not meet the foregoing criteria may be established
as ECOZONES: Provided, That the said area shall be developed only
through local government and/or private sector initiative under any of the
schemes allowed in Republic Act No. 6957 (the build-operate-transfer
law), and without any financial exposure on the part of the national
government: Provided, further, That the area can be easily secured to
curtail smuggling activities: Provided, finally, That after five (5) years the
area must have attained a substantial degree of development, the
indicators of which shall be formulated by the PEZA. AHDaET

SEC. 7. ECOZONE to be a Decentralized Agro-Industrial, Industrial,

Commercial/Trading, Tourist, Investment and Financial Community. —
Within the framework ofthe Constitution, the interest of national
sovereignty and territorial integrity of the Republic, ECOZONE shall be
developed, as much as possible, into a decentralized, self-reliant and
self-sustaining industrial, commercial/trading, agro-industrial, tourist,
banking, financial and investment center with minimum government
intervention. Each ECOZONE shall be provided with transportation,
telecommunications, and other facilities needed to generate linkage with
industries and employment opportunities for its own inhabitants and
those of nearby towns and cities. SaIEcA

The ECOZONE shall administer itself on economic, financial, industrial,

tourism development and such other matters within the exclusive
competence of the national government.
The ECOZONE may establish mutually beneficial economic relations
with other entities within the country, or, subject to the administrative
guidance of the Department of Foreign Affairs and/or the
Department of Trade and Industry, with foreign entities or enterprises.
Foreign citizens and companies owned by non-Filipinos in whatever
proportion may set up enterprises in the ECOZONE, either by
themselves or in joint venture with Filipinos in any sector of industry,
international trade and commerce within the ECOZONE. Their assets,
profits and other legitimate interests shall be protected: Provided, That
the ECOZONE through the PEZA may require a minimum investment for
any ECOZONE enterprises in freely convertible currencies: Provided,
further, That the new investment shall fall under the priorities, thrusts
and limits provided for in the Act.
SEC. 8. ECOZONE to be Operated and Managed as Separate Customs
Territory. — The ECOZONE shall be managed and operated by the
PEZA as separate customs territory.
The PEZA is hereby vested with the authority to issue certificate of origin
for products manufactured or processed in each ECOZONE in
accordance with the prevailing rules or origin, and the pertinent
regulations of the Department of Trade and Industry and/or the
Department of Finance.
SEC. 9. Defense and Security. — The defense of the ECOZONE and
the security of its perimeter fence shall be the responsibility of the
national government in coordination with the PEZA. Military forces sent
by the national government for the purpose of defense shall not interfere
in the internal affairs of any of the ECOZONE and expenditure for these
military forces shall be borne by the national government. The PEZA
may provide and establish the ECOZONES' internal security and
firefighting forces.
SEC. 10. Immigration. — Any investor within the ECOZONE whose
initial investment shall not be less than One Hundred Fifty Thousand
Dollars ($150,000.00),his/her spouse and dependent children under
twenty-one (21) years of age shall be granted permanent resident status
within the ECOZONE. They shall have freedom of ingress and egress to
and from the ECOZONE without any need of special authorization from
the Bureau of Immigration.
The PEZA shall issue working visas renewable every two (2) years to
foreign executives and other aliens, processing highly-technical skills
which no Filipino within the ECOZONE possesses, as certified by the
Department of Labor and Employment. The names of aliens granted
permanent resident status and working visas by the PEZA shall be
reported to the Bureau of Immigration within thirty (30) days after
issuance thereof.
SEC. 13. General Powers and Functions of the Authority. — The PEZA
shall have the following powers and functions:
(a) To operate, administer, manage and develop the ECOZONE
according to the principles and provisions set forth in this Act;
ADcEST

(b) To register, regulate and supervise the enterprises in the ECOZONE

in an efficient and decentralized manner;
(c) To coordinate with local government units and exercise general
supervision over the development, plans, activities and operations of the
ECOZONES, industrial estates, export processing zones, free trade
zones, and the like;
(d) In coordination with local government units concerned and
appropriate agencies, to construct, acquire, own, lease, operate and
maintain on its own or through contract, franchise, license, bulk
purchase from the private sector and build-operate-transfer scheme or
joint venture, adequate facilities and infrastructure, such as light and
power systems, water supply and distribution systems,
telecommunication and transportation, buildings, structures,
warehouses, roads, bridges, ports and other facilities for the operation
and development of the ECOZONE;
(e) To create, operate and/or contract to operate such agencies and
functional units or offices of the authority as it may deem necessary;
(f) To adopt, alter and use a corporate seal; make contracts, lease, own
or otherwise dispose of personal or real property; sue and be sued; and
otherwise carry out its duties and functions as provided for in this Act;
(g) To coordinate the formulation and preparation of the development
plans of the different entities mentioned above;
(h) To coordinate with the National Economic Development Authority
(NEDA),the Department of Trade and Industry (DTI),the
Department of Science and Technology (DOST),and the local
government units and appropriate government agencies for policy and
program formulation and implementation; and
(i) To monitor and evaluate the development and requirements of entities
in subsection (a) and recommend to the local government units or other
appropriate authorities the location, incentives, basic services, utilities
and infrastructure required or to be made available for said entities.
SEC. 17. Investigation and Inquiries. — Upon a written formal complaint
made under oath, which on its face provides reasonable basis to believe
that some anomaly or irregularity might have been committed, the PEZA
or the administrator of the ECOZONE concerned, shall have the power
to inquire into the conduct offirms or employees of the ECOZONE and to
conduct investigations, and for that purpose may subpoena witnesses,
administer oaths, and compel the production ofbooks, papers, and other
evidences: Provided, That to arrive at the truth, the investigator(s) may
grant immunity from prosecution to any person whose testimony or
whose possessions of documents or other evidence is necessary or
convenient to determine the truth in any investigation conducted by him
or under the authority ofthe PEZA or the administrator of the ECOZONE
concerned.
SEC. 21. Development Strategy of the ECOZONE. — The strategy and
priority of development of each ECOZONE established pursuant to this
Act shall be formulated by the PEZA, in coordination with the
Department of Trade and Industry and the National Economic and
Development Authority; Provided, That such development strategy is
consistent with the priorities of the national government as outlined in the
medium-term Philippine development plan. It shall be the policy ofthe
government and the PEZA to encourage and provide Incentives and
facilitate private sector participation in the construction and
operation of public utilities and infrastructure in the ECOZONE, using
any of the schemes allowed in Republic Act No. 6957 (the build-operate-
transfer law).AaHcIT

SEC. 22. Survey of Resources. — The PEZA shall, in coordination with

appropriate authorities and neighboring cities and municipalities,
immediately conduct a survey of the physical, natural assets and
potentialities of the ECOZONE areas under its jurisdiction.
SEC. 26. Domestic Sales. — Goods manufactured by an ECOZONE
enterprise shall be made available for immediate retail sales in the
domestic market, subject to payment of corresponding taxes on the raw
materials and other regulations that may be adopted by the Board of the
PEZA.
However, in order to protect the domestic industry, there shall be a
negative list of Industries that will be drawn up by the PEZA. Enterprises
engaged in the industries included in the negative list shall not be
allowed to sell their products locally. Said negative list shall be regularly
updated by the PEZA.
The PEZA, in coordination with the Department of Trade and Industry
and the Bureau of Customs, shall jointly issue the necessary
implementing rules and guidelines for the effective
Implementation of this section. THaDAE

SEC. 29. Eminent Domain. — The areas comprising an ECOZONE may

be expanded or reduced when necessary. For this purpose, the
government shall have the power to acquire, either by purchase,
negotiation or condemnation proceedings, any private lands within or
adjacent to the ECOZONE for:
a. Consolidation of lands for zone development purposes;
b. Acquisition of right of way to the ECOZONE; and
c. The protection of watershed areas and natural assets valuable to the
prosperity of the ECOZONE.
If in the establishment of a publicly-owned ECOZONE, any person or
group of persons who has been occupying a parcel of land within the
Zone has to be evicted, the PEZA shall provide the person or
group of persons concerned with proper disturbance compensation:
Provided, however, That in the case of displaced agrarian reform
beneficiaries, they shall be entitled to the benefits under the
Comprehensive Agrarian Reform Law, including but not limited to
Section 36 of Republic Act No. 3844, in addition to a homelot in the
relocation site and preferential employment in the project being
undertaken.
SEC. 32. Shipping and Shipping Register. — Private shipping and
related business including private container terminals may operate freely
in the ECOZONE, subject only to such minimum reasonable
regulations of local application which the PEZA may prescribe.
The PEZA shall, in coordination with the Department of Transportation
and Communications, maintain a shipping register for each ECOZONE
as a business register ofconvenience for ocean-going vessels and issue
related certification.
Ships of all sizes, descriptions and nationalities shall enjoy access to the
ports of the ECOZONE, subject only to such reasonable requirement as
may be prescribed by the PEZA in coordination with the appropriate
agencies of the national government.
SEC. 33. Protection of Environment. — The PEZA, in coordination with
the appropriate agencies, shall take concrete and appropriate steps and
enact the proper measure for the protection of the local environment. aSIAHC

SEC. 34. Termination of Business. — Investors in the ECOZONE who

desire to terminate business or operations shall comply with such
requirements and procedures which the PEZA shall set, particularly
those relating to the clearing of debts. The assets of the closed
enterprise can be transferred and the funds con be remitted out of the
ECOZONE subject to the rules, guidelines and procedures prescribed
jointly by the Bangko Sentral ng Pilipinas, the Department of Finance
and the PEZA.
SEC. 35. Registration of Business Enterprises. — Business enterprises
within a designated ECOZONE shall register with the PEZA to avail of all
incentives and benefits provided for in this Act.
SEC. 36. One Stop Shop Center. — The PEZA shall establish a one
stop shop center for the purpose of facilitating the registration of new
enterprises in the ECOZONE. Thus, all appropriate government
agencies that are involved in registering, licensing or issuing permits to
investors shall assign their representatives to the ECOZONE to attend to
Investor's requirements.
SEC. 39. Master Employment Contracts. — The PEZA, in coordination
with the Department of Labor and Employment, shall prescribe a master
employment contract for all ECOZONE enterprise staff members and
workers, the terms of which provide salaries and benefits not less than
those provided under this Act, the Philippine Labor Code, as amended,
and other relevant issuances of the national government.
SEC. 41. Migrant Worker. — The PEZA, in coordination with the
Department of Labor and Employment, shall promulgate appropriate
measures and programs leading to the expansion of the services of the
ECOZONE to help the local governments of nearby areas meet the
needs of the migrant workers. HCaDIS

SEC. 42. Incentive Scheme. — An additional deduction equivalent to

one-half (1/2) of the value of training expenses incurred in developing
skilled or unskilled labor or for managerial or other management
development programs incurred by enterprises in the ECOZONE can be
deducted from the national government's share ofthree percent (3%) as
provided in Section 24.
The PEZA, the Department of Labor and Employment, and the
Department of Finance shall jointly make a review of the incentive
scheme provided in this section every two (2) years or when
circumstances so warrant.
SEC. 43. Relationship with the Regional Development Council. — The
PEZA shall determine the development goals for the ECOZONE within
the framework ofnational development plans, policies and goals, and the
administrator shall, upon approval by the PEZA Board, submit the
ECOZONE plans, programs and projects to the regional development
council for inclusion in and as inputs to the overall regional development
plan.cHTCaI

SEC. 44. Relationship with the Local Government Units. — Except as

herein provided, the local government units comprising the ECOZONE
shall retain their basic autonomy and identity. The cities shall be
governed by their respective charters and the municipalities shall
operate and function in accordance with Republic Act No. 7160,
otherwise known as the Local Government Code of 1991.
SEC. 45. Relationship of PEZA to Privately-Owned Industrial Estates. —
Privately-owned industrial estates shall retain their autonomy and
independence and shall be monitored by the PEZA for the
implementation of incentives. HIaTDS

SEC. 46. Transfer of Resources. — The relevant functions of the

Board of Investments over industrial estates and agri-export processing
estates shall be transferred to the PEZA. The resources of government-
owned Industrial estates and similar bodies except the Bases
Conversion Development Authority and those areas identified
under Republic Act No. 7227, are hereby transferred to the PEZA as the
holding agency. They are hereby detached from their mother agencies
 and attached to the PEZA for policy, program and operational
supervision.
The Boards of the affected government-owned industrial estates shall be
phased out and only the management level and an appropriate
number of personnel shall be retained. ScTIAH

Government personnel whose services are not retained by the PEZA or

any government office within the ECOZONE shall be entitled to
separation pay and such retirement and other benefits they are entitled
to under the laws then in force at the time of their separation: Provided,
That in no case shall the separation pay be less than one and one-fourth
(1 1/4) month of every year of service.
The non-profit character of the EPZA under Presidential Decree No.
66 is not inconsistent with any of the powers, functions, and
responsibilities of the PEZA. The EPZA's non-profit character, including the
EPZA's exemption from real property taxes, must be deemed assumed by the
PEZA.
In addition, the Local Government Code exempting
instrumentalities of the national government from real property taxes was
already in force 274 when the PEZA's charter was enacted in 1995. It would
have been redundant to provide for the PEZA's exemption in its charter
considering that the PEZA is already exempt by virtue of Section 133
(o) of the Local Government Code.
As for the EPZA, Commonwealth Act No. 470 or the Assessment
Law was in force when the EPZA's charter was enacted. Unlike the Local
Government Code,Commonwealth Act No. 470 does not contain a provision
specifically exempting instrumentalities of the national government from
payment of real property taxes.275 It was necessary to put an exempting
provision in the EPZA's charter.
Contrary to the PEZA's claim, however, Section 24 of the Special
Economic Zone Act of 1995 is not a basis for the PEZA's exemption. Section
24 of the Special Economic Zone Act of 1995 provides: DEaCSA

Sec. 24. Exemption from National and Local Taxes. — Except for real
property taxes on land owned by developers, no taxes, local and
national, shall be imposedon business establishments operating within
the ECOZONE. In lieu thereof, five percent (5%) of the gross income
earned by all business enterprises within the ECOZONE shall be paid
and remitted as follows:
(a) Three percent (3%) to the National Government;
(b) Two percent (2%) which shall be directly remitted by the
business establishments to the treasurer's office of the
 municipality or city where the enterprise is located. (Emphasis
supplied)
Tax exemptions provided under Section 24 apply only to business
establishments operating within economic zones. Considering that the PEZA
is not a business establishment but an instrumentality performing
governmental functions, Section 24 is inapplicable to the PEZA.
Also, contrary to the PEZA's claim, developers of economic zones,
whether public or private developers, are liable for real property taxes on
lands they own. Section 24 does not distinguish between a public and private
developer. Thus, courts cannot distinguish. 276 Unless the public developer is
exempt under the Local Government Code or under its charter enacted
after the Local Government Code's effectivity, the public developer must pay
real property taxes on their land. HAIaEc

At any rate, the PEZA cannot be taxed for real property taxes even if it
acts as a developer or operator of special economic zones. The PEZA is an
instrumentality of the national government exempt from payment of real
property taxes under Section 133 (o) of the Local Government Code. As this
court said inManila International Airport Authority,"there must be express
language in the law empowering local governments to tax national
government instrumentalities. Any doubt whether such power exists is
resolved against local governments." 277
V. (C)
Real properties under the PEZA's title are owned by the Republic of the
Philippines
Under Section 234 (a) of the Local Government Code, real properties
owned by the Republic of the Philippines are exempt from real property taxes:
SEC. 234. Exemptions from Real Property Tax. — The following are
exempted from payment of real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has
been granted, for consideration or otherwise, to a taxable
person[.]
Properties owned by the state are either property of public dominion or
patrimonial property. Article 420 of the Civil Code of the
Philippines enumerates property of public dominion:
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 ofsimilar character; HcSDIE
 (2) Those which belong to the State, without belonging for public use,
and are intended for some public service or for the development of the
national wealth.
Properties of public dominion are outside the commerce of man. These
properties are exempt from "levy, encumbrance or disposition through public
or private sale." 278 As this court explained in Manila International Airport
Authority:
Properties of public dominion, being for public use, are not subject to
levy, encumbrance or disposition through public or private sale. Any
encumbrance, levy on execution or auction sale of any property of public
dominion is void for being contrary to public policy. Essential public
services will stop if properties of public dominion are subject to
encumbrances, foreclosures and auction sale[.] 279THAICD

On the other hand, all other properties of the state that are not intended
for public use or are not intended for some public service or for the
development ofthe national wealth are patrimonial properties. Article
421 of the Civil Code of the Philippines provides:
Art. 421. All other property of the State, which is not of the character
stated in the preceding article, is patrimonial property.
Patrimonial properties are also properties of the state, but the state may
dispose of its patrimonial property similar to private persons disposing of their
property. Patrimonial properties are within the commerce of man and are
susceptible to prescription, unless otherwise provided. 280
In this case, the properties sought to be taxed are located in publicly
owned economic zones. These economic zones are property of public
dominion. The Cityseeks to tax properties located within
the Mactan Economic Zone, 281 the site of which was reserved by President
Marcos under Proclamation No. 1811, Series of1979. Reserved lands are
lands of the public domain set aside for settlement or public use, and for
specific public purposes by virtue of a presidential proclamation.282 Reserved
lands are inalienable and outside the commerce of man, 283 and remain
property of the Republic until withdrawn from public use either by law or
presidential proclamation. 284 Since no law or presidential proclamation has
been issued withdrawing the site of the Mactan Economic Zone from public
use, the property remains reserved land.
As for the Bataan Economic Zone, the law consistently characterized
the property as a port. Under Republic Act No. 5490, Congress declared
Mariveles, Bataan "a principal port of entry" 285 to serve as site of a foreign
trade zone where foreign and domestic merchandise may be brought in
without being subject to customs and internal revenue laws and
regulations of the Philippines. 286 Section 4 of Republic Act No. 5490 provided
that the foreign trade zone in Mariveles, Bataan "shall at all times remain to be
owned by the Government": cAISTC

SEC. 4. Powers and Duties. — The Foreign Trade Zone Authority shall
have the following powers and duties:
a. To fix and delimit the site of the Zone which at all times remain
to be owned by the Government,and which shall have a
contiguous and adequate area with well defined and
policed boundaries, with adequate enclosures to segregate
the Zone from the customs territory for
protection of revenues, together with suitable provisions for
ingress and egress of persons, conveyance, vessels and
merchandise sufficient for the purpose of this Act[.]
(Emphasis supplied)
The port in Mariveles, Bataan then became the Bataan Economic Zone
under the Special Economic Zone Act of 1995. 287 Republic Act No. 9728 then
converted the Bataan Economic Zone into the Freeport Area of Bataan. 288
A port of entry, where imported goods are unloaded then introduced in
the market for public consumption, is considered property for public use.
Thus, Article 420 of the Civil Code classifies a port as property of public
dominion. The Freeport Area of Bataan, where the government allows tax and
duty-free importation ofgoods, 289 is considered property of public dominion.
The Freeport Area of Bataan is owned by the state and cannot be taxed under
Section 234 (a) of the Local Government Code. cTCaEA

Properties of public dominion, even if titled in the name of an

instrumentality as in this case, remain owned by the Republic of the
Philippines. If property registered in the name of an instrumentality is
conveyed to another person, the property is considered conveyed on
behalf of the Republic of the Philippines. Book I, Chapter 12, Section
48 of the Administrative Code of 1987 provides:
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:
xxx xxx xxx
(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)
In Manila International Airport Authority,this court explained:
 [The exemption under Section 234(a) of the Local Government Code]
should be read in relation with Section 133(o) of the same Code, which
prohibits local governments from imposing "[t]axes, fees or
charges of any kind on the National Government, its agencies
and instrumentalities ...." The real properties owned by the Republic
are titled either in the name of the Republic itself or in the
name of agencies or instrumentalities of the National Government. The
Administrative Code allows real property owned by the Republic to be
titled in the name of agencies or instrumentalities of the national
government. Such real properties remained owned by the
Republic of the Philippines and continue to be exempt from real estate
tax.aIcDCH

The Republic may grant the beneficial use of its real property to an
agency or instrumentality of the national government. This happens
when title of the real property is transferred to an agency or
instrumentality even as the Republic remains the owner of the real
property. Such arrangement does not result in the loss of the tax
exemption/Section 234(a) of the Local Government Code states that real
property owned by the Republic loses its tax exemption only if the
"beneficial use thereof has been granted, for consideration or otherwise,
to a taxable person." 290 (Emphasis in the original; italics supplied)
Even the PEZA's lands and buildings whose beneficial use have been
granted to other persons may not be taxed with real property taxes. The
PEZA may only lease its lands and buildings to PEZA-registered economic
zone enterprises and entities. 291 These PEZA-registered enterprises and
entities, which operate within economic zones, are not subject to real property
taxes. Under Section 24 of the Special Economic Zone Act of 1995, no taxes,
whether local or national, shall be imposed on all business establishments
operating within the economic zones:
SEC. 24. Exemption from National and Local Taxes. — Except for real
property on land owned by developers, no taxes, local and national, shall
be imposed on business establishments operating within the
ECOZONE. In lieu thereof, five percent (5%) of the gross income earned
by all business enterprises within the ECOZONE shall be paid and
remitted as follows:DTcHaA

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business
establishments to the treasurer's office of the municipality or city where
the enterprise is located. 292 (Emphasis supplied)
In lieu of revenues from real property taxes, the City of Lapu-
Lapu collects two-fifths of 5% final tax on gross income paid by all business
establishments operating within the Mactan Economic Zone:
 SEC. 24. Exemption from National and Local Taxes. — Except for real
property on land owned by developers, no taxes, local and national, shall
be imposed on business establishments operating within the ECOZONE.
In lieu thereof, five percent (5%) of the gross income earned by all
business enterprises within the ECOZONE shall be paid and remitted as
follows:CITaSA

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business
establishments to the treasurer's office of the municipality or city where
the enterprise is located. 293 (Emphasis supplied)
For its part, the Province of Bataan collects a fifth of the 5% final tax on
gross income paid by all business establishments operating within the
Freeport Area ofBataan:
Section 6. Imposition of a Tax Rate of Five Percent (5%) on Gross
Income Earned. — No taxes, local and national, shall be imposed on
business establishments operating within the FAB. In lieu thereof, said
business establishments shall pay a five percent (5%) final tax on their
gross income earned in the following percentages:
(a) One per centum (1%) to the National Government;
(b) One per centum (1%) to the Province of Bataan;
(c) One per centum (1%) to the treasurer's office of the
Municipality of Mariveles; and
(d) Two per centum (2%) to the Authority of the
Freeport of Area of Bataan. 294 (Emphasis supplied) ATcaEH

Petitioners, therefore, are not deprived of revenues from the

operations of economic zones within their respective territorial jurisdictions.
The national government ensured that local government units comprising
economic zones shall retain their basic autonomy and identity. 295
All told, the PEZA is an instrumentality of the national government.
Furthermore, the lands owned by the PEZA are real properties owned by the
Republic ofthe Philippines. The City of Lapu-Lapu and the Province of Bataan
cannot collect real property taxes from the PEZA.
WHEREFORE,the consolidated petitions are DENIED.
SO ORDERED.
(City of Lapu-Lapu v. Phil. Economic Zone Authority, G.R. Nos. 184203 &
|||

187583, [November 26, 2014])

19. St. Mary Crusade Foundation Inc v Riel 745 SCRA 73

 FIRST DIVISION

[G.R. No. 176508. January 12, 2015.]

SAINT MARY CRUSADE TO ALLEVIATE POVERTY OF

BRETHREN FOUNDATION, INC., petitioner, vs. HON.
TEODORO T. RIEL, ACTING PRESIDING JUDGE, REGIONAL
TRIAL COURT, NATIONAL CAPITAL JUDICIAL REGION,
BRANCH 85, QUEZON CITY, respondent.

UNIVERSITY OF THE PHILIPPINES, intervenor.

DECISION

BERSAMIN, J : p

A petition for the judicial reconstitution of a Torrens title must strictly comply with
the requirements prescribed in Republic Act No. 26; 1 otherwise, the petition
should be dismissed.
This case is a direct resort to the Court by petition for certiorari and mandamus.
The petitioner applied for the judicial reconstitution of Original Certificate of Title
(OCT) No. 1609 of the Register of Deeds of Quezon City, and for the issuance of
a new OCT in place thereof, docketed as L.R.C. Case No. Q-18987 (04), but
respondent Acting Presiding Judge of Branch 85 of the Regional Trial Court
(RTC) in Quezon City dismissed the petition for reconstitution through the
assailed order dated September 12, 2006. The petitioner alleges that the
respondent Judge thereby committed grave abuse of discretion and unlawful
neglect of performance of an act specifically enjoined upon him. Equally assailed
is the ensuing denial of its motion for reconsideration through the order dated
February 5, 2007.
The antecedents follow.
On October 28, 2004, the petitioner claimed in its petition for reconstitution that
the original copy of OCT No. 1609 had been burnt and lost in the fire that gutted
the Quezon City Register of Deeds in the late 80's. Initially, respondent Judge
gave due course to the petition, but after the preliminary hearing, he dismissed
the petition for reconstitution through the first assailed order of September 12,
2006, 2 to wit:
With the receipt of Report dated July 14, 2006 from Land Registration
Authority (LRA) recommending that the petition be dismissed, and
considering the Opposition filed by the Republic of the Philippines and
University of the Philippines, the above-entitled petition is hereby
ordered DISMISSED.
On October 11, 2006, the petitioner moved for reconsideration of the
dismissal, 3 attaching the following documents to support its petition for
reconstitution, namely: (1) the copy of the original application for registration
dated January 27, 1955; (2) the notice of initial hearing dated June 23, 1955; (3)
the letter of transmittal to the Court of First Instance in Quezon City; (4) the copy
of the Spanish Testimonial Title No. 3261054 dated March 25, 1977 in the name
of Eladio Tiburcio; (5) the copy of Tax Assessment No. 14238; and (6) the
approved Plan SWD-37457. SAaTHc

On February 5, 2007, the RTC denied the motion for reconsideration for lack of
any cogent or justifiable ground to reconsider. 4
Hence, on February 22, 2007, the petitioner came directly to the Court alleging
that respondent Judge had "unfairly abused his discretion and unlawfully
neglected the performance of an act which is specifically enjoined upon him as a
duly [sic] under Rule 7, Section 8, of the Revised Rules of Court;" 5 that "in finally
dismissing the herein subject Petition for Reconsideration, respondent Honorable
Acting Presiding Judge has acted without and in excess of his authority and with
grave abuse of discretion to the further damage and prejudice of the herein
petitioner;" 6 and that it had no other remedy in the course of law except through
the present petition forcertiorari and mandamus.
Issues
The Court directed respondent Judge and the Office of the Solicitor General
(OSG) to comment on the petition for certiorari and mandamus. Respondent
Judge submitted his comment on May 23, 2007, 7 and the OSG its comment on
July 19, 2007. 8 On November 13, 2007, the University of the Philippines (UP)
sought leave to intervene, attaching to its motion the intended
comment/opposition-in-intervention. 9 The motion for the UP's intervention was
granted on November 28, 2007. 10 In turn, the petitioner presented its
consolidated reply on February 8, 2008. 11 The parties, except respondent
Judge, then filed their memoranda in compliance with the Court's directive.
Respondent Judge justified the dismissal of the petition for reconstitution by
citing the opposition by the OSG and the UP, as well as the recommendation of
the Land Registration Authority (LRA). He pointed out that the petitioner did not
present its purported Torrens title to be reconstituted; that the petitioner's claim
was doubtful given the magnitude of 4,304,623 square meters as the land area
involved; 12 and that the UP's ownership of the portion of land covered by
petitioner's claim had long been settled by the Court in a long line of cases. 13
The OSG and the UP argued that by directly coming to the Court by petition
for certiorari and mandamus, the petitioner had availed itself of the wrong
remedies to substitute for its lost appeal; that the correct recourse for the
petitioner was an appeal considering that the two assailed orders already finally
disposed of the case; that the petitioner intended its petition
for certiorari and mandamus to reverse the final orders; 14 that the petitioner
further failed to observe the doctrine of hierarchy of courts, despite the Court of
Appeals (CA) having concurrent jurisdiction with the Court over special civil
actions under Rule 65; 15 that the RTC would have gravely erred had it
proceeded on the petition for reconstitution despite the petitioner not having
notified the adjoining owners of the land or other parties with interest over the
land; 16 that the petitioner had no factual and legal bases for reconstitution due to
its failure to prove the existence and validity of the certificate of title sought to be
reconstituted, in addition to the ownership of the land covered by the petition for
reconstitution being already settled in a long line of cases; that the petitioner's
claim over the land was derived from the Deed of Assignment executed by one
Marcelino Tiburcio — the same person whose claim had long been settled and
disposed of inTiburcio v. People's Homesite and Housing Corporation and
University of the Philippines (106 Phil. 477), which vested title in the UP, and
in Cañero v. University of the Philippines (437 SCRA 630); and that the Deed of
Transfer and Conveyance dated November 26, 1925 executed by Tiburcio in
favor of St. Mary Village Association, Inc. was not a basis for the judicial
reconstitution of title accepted under Section 2 of Republic Act No. 26. EICSTa

In its memorandum, the petitioner indicates that the RTC gravely abused its
discretion amounting to lack or excess of its jurisdiction in dismissing its petition
for reconstitution on the basis of the recommendation of the LRA and the
opposition of the Republic and the UP despite having initially given due course to
the petition for reconstitution. It urges that the dismissal should be overturned
because it was not given a chance to comment on the recommendation of the
LRA, or to controvert the oppositions filed. 17 It contends that the LRA report did
not substantiate the allegation of dismissal of the application for registration of
Marcelino Tiburcio on October 17, 1955, in addition to the veracity of the report
being questionable by virtue of its not having been under oath. 18
Ruling
The petition for certiorari and mandamus, being devoid of procedural and
substantive merit, is dismissed.
Firstly, certiorari,being an extraordinary remedy, is granted only under the
conditions defined by the Rules of Court. The conditions are that: (1) the
respondent tribunal, board or officer exercising judicial or quasi-judicial functions
has acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction; and (2) there is no appeal,
or any plain, speedy, and adequate remedy in the ordinary course of
law. 19 Without jurisdictionmeans that the court acted with absolute lack of
authority; there is excess of jurisdiction when the court transcends its power or
acts without any statutory authority;grave abuse of discretion implies such
capricious and whimsical exercise of judgment as to be equivalent to lack or
excess of jurisdiction; in other words, power is exercised in an arbitrary or
despotic manner by reason of passion, prejudice, or personal hostility; and such
exercise is so patent or so gross as to amount to an evasion of a positive duty or
to a virtual refusal either to perform the duty enjoined or to act at all in
contemplation of law. 20
The petition for certiorari and mandamus did not show how respondent Judge
could have been guilty of lacking or exceeding his jurisdiction, or could have
gravely abused his discretion amounting to lack or excess of jurisdiction. Under
Section 12 21 of Republic Act No. 26, the law on the judicial reconstitution of a
Torrens title, the Regional Trial Court (as the successor of the Court of First
Instance) had the original and exclusive jurisdiction to act on the petition for
judicial reconstitution of title. Hence, the RTC neither lacked nor exceeded its
authority in acting on and dismissing the petition. Nor did respondent Judge
gravely abuse his discretion amounting to lack or excess of jurisdiction
considering that the petition for reconstitution involved land already registered in
the name of the UP, as confirmed by the LRA. Instead, it would have been
contrary to law had respondent Judge dealt with and granted the petition for
judicial reconstitution of title of the petitioner.
Secondly, the petitioner did not present the duplicate or certified copy of OCT No.
1609. Thereby, it disobeyed Section 2 and Section 3 of Republic Act No. 26, the
provisions that expressly listed the acceptable bases for judicial reconstitution of
an existing Torrens title, to wit:
Sec. 2. Original certificates of title shall be reconstituted from such of the
sources hereunder enumerated as may be available, in the following
order:
(a) The owner's duplicate of the certificate of title;
(b) The co-owner's, mortgagee's, or lessee's duplicate of the certificate
of title;
(c) A certified copy of the certificate of title, previously issued by the
register of deeds or by a legal custodian thereof;
 (d) An authenticated copy of the decree of registration or patent, as the
case may be, pursuant to which the original certificate of title was
issued; aHcACI

(e) A document, on file in the registry of deeds, by which the property,

the description of which is given in said document, is mortgaged, leased
or encumbered, or an authenticated copy of said document showing that
its original had been registered; and
(f) Any other document which, in the judgment of the court, is sufficient
and proper basis for reconstituting the lost or destroyed certificate of title.
Sec. 3. Transfer certificates of title shall be reconstituted from such of
the sources hereunder enumerated as may be available, in the following
order:
(a) The owner's duplicate of the certificate of title;
(b) The co-owner's, mortgagee's, or lessee's duplicate of the certificate
of title;
(c) A certified copy of the certificate of title, previously issued by the
register of deeds or by a legal custodian thereof;
(d) The deed of transfer or other document, on file in the registry of
deeds, containing the description of the property, or an authenticated
copy thereof, showing that its original had been registered, and pursuant
to which the lost or destroyed transfer certificate of title was issued;
(e) A document, on file in the registry of deeds, by which the property,
the description of which is given in said document, is mortgaged, leased
or encumbered, or an authenticated copy of said document showing that
its original had been registered; and
(f) Any other document which, in the judgment of the court, is sufficient
and proper basis for reconstituting the lost or destroyed certificate of title.
Thirdly, with the questioned orders of the RTC having finally disposed of the
application for judicial reconstitution, nothing more was left for the RTC to do in
the case. As of then, therefore, the correct recourse for the petitioner was to
appeal to the Court of Appeals by notice of appeal within 15 days from notice of
the denial of its motion for reconsideration. By allowing the period of appeal to
elapse without taking action, it squandered its right to appeal. Its present resort
to certiorari is impermissible, for an extraordinary remedy like certiorari cannot be
a substitute for a lost appeal. That the extraordinary remedy of certiorari is not an
alternative to an available remedy in the ordinary course of law is clear from
Section 1 of Rule 65, which requires that there must be no appeal, or any plain,
speedy, and adequate remedy in the ordinary course of law. Indeed, no error of
judgment by a court will be corrected by certiorari, which corrects only
jurisdictional errors. 22
Fourthly, the filing of the instant special civil action directly in this Court is in
disregard of the doctrine of hierarchy of courts. Although the Court has
concurrent jurisdiction with the Court of Appeals in issuing the writ
of certiorari, direct resort is allowed only when there are special, extra-ordinary or
compelling reasons that justify the same. The Court enforces the observance of
the hierarchy of courts in order to free itself from unnecessary, frivolous and
impertinent cases and thus afford time for it to deal with the more fundamental
and more essential tasks that the Constitution has assigned to it. 23 There being
no special, important or compelling reason, the petitioner thereby violated the
observance of the hierarchy of courts, warranting the dismissal of the petition
for certiorari.
Finally, the land covered by the petition for judicial reconstitution related to the
same area that formed the UP campus. The UP's registered ownership of the
land comprising its campus has long been settled under the law. Accordingly, the
dismissal of the petition for judicial reconstitution by respondent Judge only
safeguarded the UP's registered ownership. In so doing, respondent Judge
actually heeded the clear warnings to the lower courts and the Law Profession in
general against mounting or abetting any attack against such ownership. One
such warning was that in Cañero v. University of the Philippines, 24 as follows: TACEDI

We strongly admonish courts and unscrupulous lawyers to stop

entertaining spurious cases seeking further to assail respondent UP's
title. These cases open the dissolute avenues of graft to unscrupulous
land-grabbers who prey like vultures upon the campus of respondent
UP. By such actions, they wittingly or unwittingly aid the hucksters who
want to earn a quick buck by misleading the gullible to buy the Philippine
counterpart of the proverbial London Bridge. It is well past time for courts
and lawyers to cease wasting their time and resources on these
worthless causes and take judicial notice of the fact that respondent
UP's title had already been validated countless times by this Court. Any
ruling deviating from such doctrine is to be viewed as a deliberate intent
to sabotage the rule of law and will no longer be countenanced. 25
WHEREFORE, the Court DISMISSES the petition
for certiorari and mandamus for lack of merit; and ORDERS the petitioner to pay
the costs of suit.
SO ORDERED.
(Saint Mary Crusade to Alleviate Poverty of Brethren Foundation, Inc. v. Riel,
|||

G.R. No. 176508, [January 12, 2015])

20. Lomondot v Balindong 762 SCRA 494

 THIRD DIVISION

[G.R. No. 192463. July 13, 2015.]

OMAIRA LOMONDOT and SARIPA LOMONDOT, petitioners, vs.

HON. RASAD G. BALINDONG, Presiding Judge, Shari'a
District Court, 4th Shari'a Judicial District, Marawi City, Lanao
Del Sur and AMBOG PANGANDAMUN and SIMBANATAO
DIACA, respondents.

DECISION

PERALTA, J : p

Before us is a petition for certiorari with prayer for the issuance of a writ
of demolition seeking to annul the Order 1 dated November 9, 2009 of the
Shari'a District Court (SDC), Fourth Shari'a Judicial District, Marawi City,
issued in Civil Case No. 055-91, denying petitioners' motion for the issuance
of a writ of demolition, and the Orders 2 dated January 5, 2010 and February
10, 2010 denying petitioners' first and second motions for reconsideration,
respectively.
The antecedent facts are as follows:
On August 16, 1991, petitioners Omaira and Saripa Lomondot filed with
the SDC, Marawi City, a complaint for recovery of possession and damages
with prayer for mandatory injunction and temporary restraining order against
respondents Ambog Pangandamun (Pangandamun) and Simbanatao Diaca
(Diaca). Petitioners claimed that they are the owners by succession of a
parcel of land located at Bangon, Marawi City, consisting an area of about
800 sq. meters; that respondent Pangandamun illegally entered and
encroached 100 sq. meter of their land, while respondent Diaca occupied 200
sq. meters, as indicated in Exhibits "A" and "K" submitted as evidence.
Respondents filed their Answer arguing that they are the owners of the land
alleged to be illegally occupied. Trial thereafter ensued.
On January 31, 2005, the SDC rendered a Decision, 3 the dispositive
portion of which reads:
WHEREFORE, judgment is rendered as follows:
1. DECLARING plaintiffs owners of the 800 square meter land
borrowed and turned over by BPI and described in the complaint and
Exhibits "A" and "K";
 2. ORDERING defendants to VACATE the portions or areas they
illegally encroached as indicated in Exhibits "A" and "K" and to
REMOVE whatever improvements thereat introduced; CAIHTE

3. ORDERING defendants to jointly and severally pay plaintiffs (a)

P50,000.00 as moral damages; (b) P30,000.00 as exemplary
damages; (c) P50,000.00 as attorney's fees and the costs of the suit.
SO ORDERED. 4
Respondents filed an appeal 5 with us and petitioners were required to
file their Comment thereto. In a Resolution 6 dated March 28, 2007, we
dismissed the petition for failure of respondents to sufficiently show that a
grave abuse of discretion was committed by the SDC as the decision was in
accord with the facts and the applicable law and jurisprudence. Respondents'
motion for reconsideration was denied with finality on September 17,
2007. 7 The SDC Decision dated January 31, 2005 became final and
executory on October 31, 2007 and an entry of judgment 8 was subsequently
made.
Petitioners filed a motion 9 for issuance of a writ of execution with
prayer for a writ of demolition.
On February 7, 2008, the SDC granted the motion 10 for a writ of
execution and the writ was issued with the following fallo:
NOW THEREFORE, you are hereby commanded to cause the
execution of the aforesaid judgment. If defendants do not vacate the
premises and remove the improvements, you must secure a special
order of the court to destroy, demolish or remove the improvements on
the property. The total amount awarded to and demanded by the
prevailing party is P150,000.00 (damages, attorney's fees and the
cost) which defendants must satisfy, pursuant to Section 8 (d) and (e),
Rule 39, Rules of Court. 11
The Sheriff then sent a demand letter 12 to respondents for their
compliance.
On February 3, 2009, petitioners filed a Motion 13 for the Issuance of a
Writ of Demolition to implement the SDC Decision dated January 31, 2005.
The motion was set for hearing.
On March 4, 2009, the SDC issued an Order 14 reading as follows:
The plaintiffs, the prevailing party, filed a Motion for Writ of
Demolition and the motion was set for hearing on February 16, 2009.
On this date, the plaintiffs, without counsel, appeared. The defendants
failed to appear. Thus, the court issued an order submitting the motion
for resolution.
 Resolution of the motion for issuance of a Writ of Demolition
should be held in abeyance. First, defendant Ambog Pangandamun
has filed on February 6, 2009 an Urgent Manifestation praying
deferment of the hearing on the motion for Writ of execution. Second,
Atty. Dimnatang T. Saro filed on February 13, 2009 a Notice of
Appearance with Motion to Postpone the hearing set on February 16,
2009 to study the records of the case as the records are not yet in his
possession. Third, the recent periodic report dated January 26, 2009 of
the Sheriff shows Sultan Alioden of Kabasaran is negotiating the
parties whereby the defendant Ambog Pangandamun will be made to
pay the five (5)-meter land of the plaintiffs encroached by him and that
what remains to be ironed out is the fixing of the amount.
WHEREFORE, the resolution on the Motion for Writ of
Demolition is HELD IN ABEYANCE. The Sheriff is DIRECTED to exert
efforts to bring the parties back to the negotiating table seeing to it that
Sultan Alioden of Kabasaran is involved in the negotiation. Atty. Saro is
REQUIRED to file his comment on the motion for writ of execution
within fifteen (15) days from notice to guide the court in resolving the
incident in the event the negotiation fails.
SO ORDERED. 15
On May 5, 2009, the SDC issued another Order 16 which held in
abeyance the resolution of the motion for issuance of a writ of demolition and
granted an ocular inspection or actual measurement of petitioners' 800-sq.-
meter land.
The SDC issued another Order 17 dated May 14, 2009, which stated,
among others, that:
While the decision has become final and executory and a Writ of
Execution has been issued, there are instances when a Writ of
Execution cannot be enforced as when there is a supervening event
that prevents the Sheriff to execute a Writ of Execution.
The defendants claimed they have not encroached as they have
already complied with the Writ or Execution and their buildings are not
within the area claimed by the plaintiffs. This to the Court is the
supervening event, thus the order granting the request of Atty. Jimmy
Saro, counsel for the defendants, to conduct a survey to determine
whether there is encroachment or not. Thus, the Order dated May 5,
2009.
WHEREFORE, Engr. Hakim Laut Balt is hereby commissioned
to conduct a survey of the 800 square meters claimed by the plaintiffs.
Said Engr. Balt is given a period of one (1) month from notice within
which to conduct the survey in the presence of the parties. 18
 On November 9, 2009, the SDC issued the assailed Order 19 denying
petitioners' motion for demolition. The Order reads in full:
It was on February 3, 2009 that the plaintiffs filed a Motion for
Issuance of a Writ of Demolition. The defendants filed their comment
thereto on March 24, 2009. They prayed that an ocular inspection
and/or actual measurement of the 800 square meter land of the
plaintiffs be made which the court granted, in the greater interest of
justice, considering that defendants claimed to have complied with the
writ of execution, hence there is no more encroachment of plaintiffs'
land.DETACa

The intercession of concerned leaders to effect amicable

settlement and the order to conduct a survey justified the holding in
abeyance of the resolution of the pending incident, motion for writ of
demolition.
After attempts for settlement failed and after the commissioned
Geodetic Engineer to conduct the needed survey asked for relief,
plaintiffs asked anew for a writ of demolition. Defendants opposed the
grant of the motion, alleging compliance with the writ of execution, and
prayed for appointment of another Geodetic Engineer to conduct a
survey and actual measurement of plaintiffs' 800 square meter land.
At this point in time, the court cannot issue a special order to
destroy, demolish or remove defendants' houses, considering their
claim that they no longer encroach any portion of plaintiffs' land.
Gleaned from Engineer Hakim Laut Balt's Narrative Report, he
could have conducted the required survey had not the plaintiffs
dictated him where to start the survey.
WHEREFORE, the motion for issuance of a writ of demolition is
DENIED. A survey is still the best way to find out if indeed defendants'
houses are within plaintiffs' 800 square meter land. Parties are,
therefore, directed to choose and submit to the court their preferred
Geodetic Engineer to conduct the survey within ten (10) days from
notice. 20
Petitioners filed their motion for reconsideration which the SDC denied
in an Order 21 dated January 5, 2010 saying that the motion failed to state the
timeliness of the filing of said motion and failed to comply with the
requirements of notice of hearing. Petitioners' second motion for
reconsideration was also denied in an Order 22 dated February 10, 2010. The
SDC directed the parties to choose and submit their preferred Geodetic
Engineer to conduct the survey within 15 days from notice.
Undaunted, petitioners filed with the CA-Cagayan de Oro City a petition
for certiorari assailing the Orders issued by the SDC on November 9, 2009,
January 5, 2010 and February 10, 2010.
 In a Resolution 23 dated April 27, 2010, the CA dismissed the petition
for lack of jurisdiction, saying, among others, that:
xxx xxx xxx
In pursuing the creation of Shari'a Appellate Court, the Supreme
Court En Banc even approved A.M. No. 99-4-06, otherwise known as
Resolution Authorizing the Organization of the Shari'a Appellate Court.
However, the Shari'a Appellate Court has not yet been
organized until the present. We, on our part, therefore, cannot take
cognizance of the instant case because it emanates from the Shari'a
Courts, which is not among those courts, bodies or tribunals
enumerated under Chapter 1, Section 9 of [Batas] Pambansa Bilang
129, as amended over which We can exercise appellate jurisdiction.
Thus, the instant Petition should be filed directly with the Supreme
Court. 24
Petitioners filed the instant petition for certiorari assailing the SDC
Orders, involving the following grounds:
RESPONDENT JUDGE, HONORABLE RASAD G.
BALINDONG, COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION OR IN EXCESS OF
JURISDICTION IN DENYING THE MOTION FOR ISSUANCE OF THE
WRIT OF DEMOLITION AFTER THE WRIT OF EXECUTION ISSUED
BY THE COURT COULD NOT BE IMPLEMENTED AND INSTEAD
DIRECT THE CONDUCT OF THE SURVEY.
RESPONDENT JUDGE HAD COMMITTED GRAVE ABUSE OF
DISCRETION IN MAKING IT APPEAR THAT HE WAS IN COURT AT
HIS SALA IN MARAWI CITY LAST JANUARY 28, 2010 WHEN THE
PARTIES WERE PRESENT AND HE WAS NOT THERE. 25
Preliminarily, we would deal with a procedural matter. Petitioners, after
receipt of the SDC Order denying their second motion for reconsideration of
the Order denying their motion for the issuance of a writ of demolition, filed a
petition for certiorari with the CA. The CA dismissed the petition for lack of
jurisdiction in a Resolution dated April 27, 2010 saying that, under RA 9054, it
is the Shari'a Appellate Court (SAC) which shall exercise jurisdiction over
petition for certiorari; that, however, since SAC has not yet been organized, it
cannot take cognizance of the case as it emanates from the Shari'a Courts,
which is not among those courts, bodies or tribunals enumerated under
Chapter 1, Section 9 of Batas Pambansa Bilang 129, as amended, over which
it can exercise appellate jurisdiction.
Under Republic Act No. 9054, An Act to Strengthen and Expand the
Organic Act for the Autonomous Region in Muslim Mindanao, amending for
the purposeRepublic Act No. 6734, entitled, "An Act Providing for the
Autonomous Region in Muslim Mindanao, as amended", the Shari'a Appellate
Court shall exercise appellate jurisdiction over petitions for certiorari of
decisions of the Shari'a District Courts. In Villagracia v. Fifth (5th) Shari'a
District Court, 26 we said:
. . . . We call for the organization of the court system created
under Republic Act No. 9054 to effectively enforce the Muslim legal
system in our country. After all, the Muslim legal system — a legal
system complete with its own civil, criminal, commercial, political,
international, and religious laws — is part of the law of the land, and
Shari'a courts are part of the Philippine judicial system.
The Shari'a Appellate Court created under Republic Act No.
9054 shall exercise appellate jurisdiction over all cases tried in the
Shari'a District Courts. It shall also exercise original jurisdiction over
petitions for certiorari, prohibition, mandamus, habeas corpus, and
other auxiliary writs and processes in aid of its appellate jurisdiction.
The decisions of the Shari'a Appellate Court shall be final and
executory, without prejudice to the original and appellate jurisdiction of
this court. 27
and
In Tomawis v. Hon. Balindong, 28 we stated that: aDSIHc

. . . [t]he Shari'a Appellate Court has yet to be organized with the

appointment of a Presiding Justice and two Associate Justices. Until
such time that the Shari'a Appellate Court shall have been organized,
however, appeals or petitions from final orders or decisions of the SDC
filed with the CA shall be referred to a Special Division to be organized
in any of the CA stations preferably composed of Muslim CA
Justices. 29
Notably, Tomawis case was decided on March 5, 2010, while the CA decision
was rendered on April 27, 2010. The CA's reason for dismissing the
petition, i.e., the decision came from SDC which the CA has no appellate
jurisdiction is erroneous for failure to follow the Tomawis ruling. However, we
need not remand the case, as we have, on several occasions, 30 passed upon
and resolved petitions and cases emanating from Shari'a courts.
Petitioners contend that their land was specific and shown by the areas
drawn in Exhibits "A" and "K" and by oral and documentary evidence on
record showing that respondents have occupied portions of their land, i.e.,
respondent Pangandamun's house encroached a 100 sq. meter portion, while
respondent Diaca occupied 200 sq. meters; and that the SDC had rendered a
decision ordering respondents to vacate the portions or areas they had
illegally encroached as indicated in Exhibits "A" and "K" and to remove
whatever improvements thereat introduced. Such decision had already
attained finality and a corresponding entry of judgment had been made and a
writ of execution was issued. Petitioners' claim that the SDC's order for a
conduct of a survey to determine whether respondents' land are within
petitioners' 800-sq.-meter land would, in effect, be amending a final and
executory decision.
Only respondent Pangandamun filed his Comment, arguing that
petitioners' motion for the issuance of a writ of demolition has no factual and
legal basis because his houses are clearly outside the 800-sq.-meter land of
petitioners; that his house had been constructed in 1964 within full view of the
petitioners but none of them ever questioned the same.
We find for the petitioners.
The SDC Decision dated January 31, 2005 ordered respondents to
vacate the portions or areas they had illegally encroached as indicated in
Exhibits "A" and "K" and to remove whatever improvements thereat
introduced. Thus, petitioners had established that they are recovering
possession of 100 sq. meters of their land which was occupied by respondent
Pangandamun's house as indicated in Exhibit "K-1", and 200 sq. meter
portion being occupied by Diaca as indicated in Exhibit "K-2". Such decision
had become final and executory after we affirmed the same and an entry of
judgment was made. Such decision can no longer be modified or amended.
In Dacanay v. Yrastorza, Sr., 31 we explained the concept of a final and
executory judgment, thus:
Once a judgment attains finality, it becomes immutable and
unalterable. A final and executory judgment may no longer be modified
in any respect, even if the modification is meant to correct what is
perceived to be an erroneous conclusion of fact or law and regardless
of whether the modification is attempted to be made by the court
rendering it or by the highest court of the land. This is the doctrine of
finality of judgment. It is grounded on fundamental considerations of
public policy and sound practice that, at the risk of occasional errors,
the judgments or orders of courts must become final at some definite
time fixed by law. Otherwise, there will be no end to litigations, thus
negating the main role of courts of justice to assist in the enforcement
of the rule of law and the maintenance of peace and order by settling
justiciable controversies with finality. 32
However, the SDC later found that while the decision has become final
and executory and a writ of execution has been issued, there are instances
when a writ of execution cannot be enforced as when there is a supervening
event that presents the sheriff to execute the writ of execution. It found that
respondents' claim that their buildings are not within the area claimed by
petitioners is a supervening event and ordered a survey of the land, hence,
denied the motion for a writ of demolition.
 We do not agree.
It is settled that there are recognized exceptions to the execution as a
matter of right of a final and immutable judgment, and one of which is a
supervening event.
In Abrigo v. Flores, 33 we said:
We deem it highly relevant to point out that a supervening event
is an exception to the execution as a matter of right of a final and
immutable judgment rule, only if it directly affects the matter already
litigated and settled, or substantially changes the rights or relations of
the parties therein as to render the execution unjust, impossible or
inequitable. A supervening event consists of facts that
transpire after the judgment became final and executory, or of new
circumstances that develop after the judgment attained finality,
including matters that the parties were not aware of prior to or during
the trial because such matters were not yet in existence at that time. In
that event, the interested party may properly seek the stay of execution
or the quashal of the writ of execution, or he may move the court to
modify or alter the judgment in order to harmonize it with justice and
the supervening event. The party who alleges a supervening event to
stay the execution should necessarily establish the facts by competent
evidence; otherwise, it would become all too easy to frustrate the
conclusive effects of a final and immutable judgment.34
In this case, the matter of whether respondents' houses intruded
petitioners' land is the issue in the recovery of possession complaint filed by
petitioners in the SDC which was already ruled upon, thus cannot be
considered a supervening event that would stay the execution of a final and
immutable judgment. To allow a survey as ordered by the SDC to determine
whether respondents' houses are within petitioners' land is tantamount to
modifying a decision which had already attained finality. ETHIDa

We find that the SDC committed grave abuse of discretion when it

denied petitioners' motion for the issuance a writ of demolition. The issuance
of a special order of demolition would certainly be the necessary and logical
consequence of the execution of the final and immutable decision. 35 Section
10 (d) of Rule 39, Rules of Court provides:
Section 10. Execution of judgments for specific act. —
xxx xxx xxx
(d) Removal of improvements on property subject of execution.
— when the property subject of the execution contains improvements
constructed or planted by the judgment obligor or his agent, the officer
shall not destroy, demolish or remove said improvements except upon
special order of the court, issued upon motion of the judgment obligee
 after due hearing and after the former has failed to remove the same
within a reasonable time fixed by the court.
Notably, this case was decided in 2005 and its execution has already
been delayed for years now. It is almost trite to say that execution is the fruit
and end of the suit and is the life of law. 36 A judgment, if left unexecuted,
would be nothing but an empty victory for the prevailing party. 37
WHEREFORE, the petition is GRANTED. The Orders dated November
9, 2009, January 5, 2010 and February 10, 2010, of the Shari'a District Court,
Fourth Shari'a Judicial District, Marawi City are
hereby CANCELLED and SET ASIDE. The Shari'a District Court is
hereby ORDERED to ISSUE a writ of demolition to enforce its Decision dated
January 31, 2005 in Civil Case No. 055-91.
Let a copy of this Decision be furnished the Presiding Justice of the
Court of Appeals for whatever action he may undertake in light of our
pronouncement in the Tomawis v. Hon. Balindong case quoted earlier on the
creation of a Special Division to handle appeals or petitions from trial orders
or decisions of the Shari'a District Court.
SO ORDERED.
||| (Lomondot v. Balindong, G.R. No. 192463, [July 13, 2015])

a. Municipal of Tangkal v Balindong January 11, 2017

THIRD DIVISION

[G.R. No. 193340. January 11, 2017.]

THE MUNICIPALITY OF TANGKAL, PROVINCE OF LANAO

DEL NORTE, petitioner, vs. HON. RASAD B. BALINDONG, in
his capacity as Presiding Judge, Shari'a District Court, 4th
Judicial District, Marawi City, and HEIRS OF THE LATE
MACALABO ALOMPO, represented by SULTAN DIMNANG B.
ALOMPO, respondents.

DECISION
JARDELEZA, J : p

The Code of Muslim Personal Laws of the Philippines 1 (Code of

Muslim Personal Laws) vests concurrent jurisdiction upon Shari'a district
courts over personal and real actions wherein the parties involved are
Muslims, except those for forcible entry and unlawful detainer. The question
presented is whether the Shari'a District Court of Marawi City has jurisdiction
in an action for recovery of possession filed by Muslim individuals against a
municipality whose mayor is a Muslim. The respondent judge held that it has.
We reverse.
I
The private respondents, heirs of the late Macalabo Alompo, filed a
Complaint 2 with the Shari'a District Court of Marawi City (Shari'a District
Court) against the petitioner, Municipality of Tangkal, for recovery of
possession and ownership of a parcel of land with an area of approximately
25 hectares located at Barangay Banisilon, Tangkal, Lanao del Norte. They
alleged that Macalabo was the owner of the land, and that in 1962, he entered
into an agreement with the Municipality of Tangkal allowing the latter to
"borrow" the land to pave the way for the construction of the municipal hall
and a health center building. The agreement allegedly imposed a condition
upon the Municipality of Tangkal to pay the value of the land within 35 years,
or until 1997; otherwise, ownership of the land would revert to Macalabo.
Private respondents claimed that the Municipality of Tangkal neither paid the
value of the land within the agreed period nor returned the land to its owner.
Thus, they prayed that the land be returned to them as successors-in-interest
of Macalabo.
The Municipality of Tangkal filed an Urgent Motion to Dismiss 3 on the
ground of improper venue and lack of jurisdiction. It argued that since it has
no religious affiliation and represents no cultural or ethnic tribe, it cannot be
considered as a Muslim under the Code of Muslim Personal Laws. Moreover,
since the complaint for recovery of land is a real action, it should have been
filed in the appropriate Regional Trial Court of Lanao del Norte.
In its Order 4 dated March 9, 2010, the Shari'a District Court denied the
Municipality of Tangkal's motion to dismiss. It held that since the mayor of
Tangkal, Abdulazis A.M. Batingolo, is a Muslim, the case "is an action
involving Muslims, hence, the court has original jurisdiction concurrently with
that of regular/civil courts." It added that venue was properly laid because the
Shari'a District Court has territorial jurisdiction over the provinces of Lanao del
Sur and Lanao del Norte, in addition to the cities of Marawi and Iligan.
Moreover, the filing of a motion to dismiss is a disallowed pleading under the
Special Rules of Procedure in Shari'a Courts. 5 cSEDTC
 The Municipality of Tangkal moved for reconsideration, which was
denied by the Shari'a District Court. The Shari'a District Court also ordered
the Municipality of Tangkal to file its answer within 10 days. 6 The Municipality
of Tangkal timely filed its answer 7 and raised as an affirmative defense the
court's lack of jurisdiction.
Within the 60-day reglementary period, the Municipality of Tangkal
elevated the case to us via petition for certiorari, prohibition,
and mandamus with prayer for a temporary restraining order 8 (TRO). It
reiterated its arguments in its earlier motion to dismiss and answer that the
Shari'a District Court has no jurisdiction since one party is a municipality
which has no religious affiliation.
In their Comment, 9 private respondents argue that under the Special
Rules of Procedure in Shari'a Courts, a petition for certiorari, mandamus, or
prohibition against any interlocutory order issued by the district court is a
prohibited pleading. Likewise, the Municipality of Tangkal's motion to dismiss
is disallowed by the rules. They also echo the reasoning of the Shari'a District
Court that since both the plaintiffs below and the mayor of defendant
municipality are Muslims, the Shari'a District Court has jurisdiction over the
case.
In the meantime, we issued a TRO 10 against the Shari'a District Court
and its presiding judge, Rasad Balindong, from holding any further
proceedings in the case below.
II
In its petition, the Municipality of Tangkal acknowledges that generally,
neither certiorari nor prohibition is an available remedy to assail a court's
interlocutory order denying a motion to dismiss. But it cites one of the
exceptions to the rule, i.e., when the denial is without or in excess of
jurisdiction to justify its remedial action. 11 In rebuttal, private respondents rely
on the Special Rules of Procedure in Shari'a Courts which expressly identifies
a motion to dismiss and a petition forcertiorari, mandamus, or prohibition
against any interlocutory order issued by the court as prohibited pleadings. 12
A
Although the Special Rules of Procedure in Shari'a Courts prohibits the
filing of a motion to dismiss, this procedural rule may be relaxed when the
ground relied on is lack of jurisdiction which is patent on the face of the
complaint. As we held in Rulona-Al Awadhi v. Astih: 13
Instead of invoking a procedural technicality, the respondent
court should have recognized its lack of jurisdiction over the parties
and promptly dismissed the action, for, without jurisdiction, all its
proceedings would be, as they were, a futile and invalid exercise. A
 summary rule prohibiting the filing of a motion to dismiss should not be
a bar to the dismissal of the action for lack of jurisdiction when the
jurisdictional infirmity is patent on the face of the complaint itself, in
view of the fundamental procedural doctrine that the jurisdiction of a
court may be challenged at anytime and at any stage of the action. 14
Indeed, when it is apparent from the pleadings that the court has no
jurisdiction over the subject matter, it is duty-bound to dismiss the case
regardless of whether the defendant filed a motion to dismiss. 15 Thus,
in Villagracia v. Fifth Shari'a District Court, 16 we held that once it became
apparent that the Shari'a court has no jurisdiction over the subject matter
because the defendant is not a Muslim, the court should have motu
proprio dismissed the case. 17
B
An order denying a motion to dismiss is an interlocutory order which
neither terminates nor finally disposes of a case as it leaves something to be
done by the court before the case is finally decided on the merits. Thus, as a
general rule, the denial of a motion to dismiss cannot be questioned in a
special civil action forcertiorari which is a remedy designed to correct errors of
jurisdiction and not errors of judgment. 18 As exceptions, however, the
defendant may avail of a petition for certiorari if the ground raised in the
motion to dismiss is lack of jurisdiction over the person of the defendant or
over the subject matter, 19 or when the denial of the motion to dismiss is
tainted with grave abuse of discretion. 20 SDAaTC

The reason why lack of jurisdiction as a ground for dismissal is treated

differently from others is because of the basic principle that jurisdiction is
conferred by law, and lack of it affects the very authority of the court to take
cognizance of and to render judgment on the action 21 — to the extent that all
proceedings before a court without jurisdiction are void. 22 We
grant certiorari on this basis. As will be shown below, the Shari'a District
Court's lack of jurisdiction over the subject matter is patent on the face of the
complaint, and therefore, should have been dismissed outright.
III
The matters over which Shari'a district courts have jurisdiction are
enumerated in the Code of Muslim Personal Laws, specifically in Article
143. 23 Consistent with the purpose of the law to provide for an effective
administration and enforcement of Muslim personal laws among Muslims, 24 it
has a catchall provision granting Shari'a district courts original jurisdiction over
personal and real actions except those for forcible entry and unlawful
detainer. 25 The Shari'a district courts' jurisdiction over these matters is
concurrent with regular civil courts, i.e., municipal trial courts and regional trial
courts. 26 There is, however, a limit to the general jurisdiction of Shari'a district
courts over matters ordinarily cognizable by regular courts: such jurisdiction
may only be invoked if both parties are Muslims. If one party is not a Muslim,
the action must be filed before the regular courts. 27
The complaint below, which is a real action 28 involving title to and
possession of the land situated at Barangay Banisilon, Tangkal, was filed by
private respondents before the Shari'a District Court pursuant to the general
jurisdiction conferred by Article 143 (2) (b). In determining whether the Shari'a
District Court has jurisdiction over the case, the threshold question is whether
both parties are Muslims. There is no disagreement that private respondents,
as plaintiffs below, are Muslims. The only dispute is whether the requirement
is satisfied because the mayor of the defendant municipality is also a Muslim.
When Article 143 (2) (b) qualifies the conferment of jurisdiction to
actions "wherein the parties involved are Muslims," the word "parties"
necessarily refers to the real parties in interest. Section 2 of Rule 3 of
the Rules of Court defines real parties in interest as those who stand to be
benefited or injured by the judgment in the suit, or are entitled to the avails of
the suit. In this case, the parties who will be directly benefited or injured are
the private respondents, as real party plaintiffs, and the Municipality of
Tangkal, as the real party defendant. In their complaint, private respondents
claim that their predecessor-in-interest, Macalabo, entered into an agreement
with the Municipality of Tangkal for the use of the land. Their cause of action
is based on the Municipality of Tangkal's alleged failure and refusal to return
the land or pay for its reasonable value in accordance with the agreement.
Accordingly, they pray for the return of the land or the payment of reasonable
rentals thereon. Thus, a judgment in favor of private respondents, either
allowing them to recover possession or entitling them to rentals, would
undoubtedly be beneficial to them; correlatively, it would be prejudicial to the
Municipality of Tangkal which would either be deprived possession of the land
on which its municipal hall currently stands or be required to allocate funds for
payment of rent. Conversely, a judgment in favor of the Municipality of
Tangkal would effectively quiet its title over the land and defeat the claims of
private respondents.
It is clear from the title and the averments in the complaint that Mayor
Batingolo was impleaded only in a representative capacity, as chief executive
of the local government of Tangkal. When an action is defended by a
representative, that representative is not — and neither does he become — a
real party in interest. The person represented is deemed the real party in
interest; 29 the representative remains to be a third party to the action. 30 That
Mayor Batingolo is a Muslim is therefore irrelevant for purposes of complying
with the jurisdictional requirement under Article 143 (2) (b) that both parties be
Muslims. To satisfy the requirement, it is the real party defendant, the
Municipality of Tangkal, who must be a Muslim. Such a proposition, however,
is a legal impossibility.
The Code of Muslim Personal Laws defines a "Muslim" as "a person
who testifies to the oneness of God and the Prophethood of Muhammad and
professes Islam." 31 Although the definition does not explicitly distinguish
between natural and juridical persons, it nonetheless connotes the exercise of
religion, which is a fundamental personal right. 32 The ability to testify to the
"oneness of God and the Prophethood of Muhammad" and to profess Islam
is, by its nature, restricted to natural persons. In contrast, juridical persons are
artificial beings with "no consciences, no beliefs, no feelings, no thoughts, no
desires." 33 They are considered persons only by virtue of legal fiction. The
Municipality of Tangkal falls under this category. Under the Local Government
Code, a municipality is a body politic and corporate that exercises powers as
a political subdivision of the national government and as a corporate entity
representing the inhabitants of its territory. 34
Furthermore, as a government instrumentality, the Municipality of
Tangkal can only act for secular purposes and in ways that have primarily
secular effects 35— consistent with the non-establishment clause. 36 Hence,
even if it is assumed that juridical persons are capable of practicing religion,
the Municipality of Tangkal is constitutionally proscribed from adopting, much
less exercising, any religion, including Islam.
The Shari'a District Court appears to have understood the foregoing
principles, as it conceded that the Municipality of Tangkal "is neither a Muslim
nor a Christian." 37 Yet it still proceeded to attribute the religious affiliation of
the mayor to the municipality. This is manifest error on the part of the Shari'a
District Court. It is an elementary principle that a municipality has a
personality that is separate and distinct from its mayor, vice-
mayor, sanggunian, and other officers composing it. 38 And under no
circumstances can this corporate veil be pierced on purely religious
considerations — as the Shari'a District Court has done — without running
afoul the inviolability of the separation of Church and State enshrined in
the Constitution. 39 acEHCD

In view of the foregoing, the Shari'a District Court had no jurisdiction

under the law to decide private respondents' complaint because not all of the
parties involved in the action are Muslims. Since it was clear from the
complaint that the real party defendant was the Municipality of Tangkal, the
Shari'a District Court should have simply applied the basic doctrine of
separate juridical personality and motu proprio dismissed the case.
WHEREFORE, the petition is GRANTED. The assailed orders of the
Shari'a District Court of Marawi City in Civil Case No. 201-09
 are REVERSED and SET ASIDE. Accordingly, Civil Case No. 201-09
is DISMISSED.
SO ORDERED.
(Municipality of Tangkal, Lanao Del Norte v. Balindong, G.R. No. 193340,
|||

[January 11, 2017])

21. Regulus Development Inc v Dela Cruz 781 SCRA 607 (January 25, 2016)

SECOND DIVISION

[G.R. No. 198172. January 25, 2016.]

REGULUS DEVELOPMENT, INC., petitioner, vs. ANTONIO

DELA CRUZ, respondent.

DECISION

BRION, J :p

Before us is a petition for review on certiorari filed by

petitioner Regulus Development, Inc. (petitioner) to challenge the November
23, 2010 decision 1 and August 10, 2011 resolution 2 of the Court of
Appeals (CA) in CA-G.R. SP No. 105290. CA Associate Justice Juan Q.
Enriquez, Jr. penned the rulings, concurred in by Associate Justices Ramon
M. Bato, Jr. and Florito S. Macalino.
ANTECEDENT FACTS
The petitioner is the owner of an apartment (San Juan
Apartments) located at San Juan Street, Pasay City. Antonio dela
Cruz (respondent) leased two units (Unit 2002-A and Unit 2002-B) of the San
Juan Apartments in 1993 and 1994. The contract of lease for each of the two
units similarly provides a lease period of one (1) month, subject to automatic
renewals, unless terminated by the petitioner upon written notice.
The petitioner sent the respondent a letter to terminate the lease of the
two subject units. Due to the respondent's refusal to vacate the units, the
petitioner filed a complaint 3 for ejectment before the Metropolitan Trial
Court (MTC) of Pasay City, Manila, on May 1, 2001.
 The MTC resolved the case in the petitioner's favor and ordered the
respondent to vacate the premises, and pay the rentals due until the
respondent actually complies. 4
The respondent appealed to the Regional Trial Court (RTC). Pending
appeal, the respondent consigned the monthly rentals to the RTC due to the
petitioner's refusal to receive the rentals.
The RTC affirmed 5 the decision of the MTC in toto and denied the
motion for reconsideration filed by the respondent.
CA-G.R. SP No. 69504: Dismissal of Ejectment Case
In a Petition for Review filed by the respondent, the CA reversed the
lower courts' decisions and dismissed the ejectment case. 6 On March
19, 2003, thedismissal of the case became final and executory. 7
Orders dated July 25, 2003 and November 28, 2003 for payment of
rentals due under lease contracts
The petitioner filed a motion (to withdraw funds deposited by the
defendant-appellant as lessee) 8 praying for the withdrawal of the rentals
consigned by the respondent with the RTC.
In an order dated July 25, 2003, 9 the RTC granted the petitioner's
motion. The RTC explained that the effect of the complaint's dismissal would
mean that there was no complaint filed at all. The petitioner, however, is
entitled to the amount of rentals for the use and occupation of the subject
units, as provided in the executed contracts of lease and on the basis of
justice and equity.
The court denied the respondent's motion for reconsideration 10 in
an order dated November 28, 2003. 11
On the petitioner's motion, the RTC issued a writ of execution on
December 18, 2003, to cause the enforcement of its order dated July 25,
2003. 12
CA-G.R. SP No. 81277: Affirmed RTC Orders
The respondent filed a petition for certiorari under Rule 65 before the
CA to assail the RTC Orders dated July 25, 2003 and November 28,
2003 (RTC orders), which granted the petitioner's motion to withdraw
funds.HSAcaE

The CA dismissed 13 the petition and held that the assailed RTC
Orders were issued pursuant to its equity jurisdiction, in accordance with
Section 5, Rule 39, 14 and Rules 5 15 and 6 16 of Rule 135 of the Rules of
Court. The respondent's motion for reconsideration was similarly denied.
G.R. SP No. 171429: Affirmed CA Ruling on RTC Orders
 The respondent filed a petition for review on certiorari before this Court
to assail the decision of the CA in CA-G.R. SP No. 81277. In a resolution
dated June 7, 2006, 17 we denied the petition for insufficiency in form and for
failure to show any reversible error committed by the CA.
Our resolution became final and executory and an entry of
judgment 18 was issued.
Execution of RTC Orders
The petitioner returned to the RTC and moved for the issuance of a writ
of execution to allow it to proceed against the supersedeas bond the
respondent posted, representing rentals for the leased properties from May
2001 to October 2001, and to withdraw the lease payments deposited by
respondent from November 2001 until August 2003. 19 The RTC granted the
motion. 20
The RTC issued an Alias Writ of Execution 21 dated April 26, 2007,
allowing the withdrawal of the rental deposits and the value of
the supersedeas bond.
The petitioner claimed that the withdrawn deposits, supersedeas bond,
and payments directly made by the respondent to the petitioner, were
insufficient to cover rentals due for the period of May 2001 to May 2004.
Hence, the petitioner filed a manifestation and motion 22 dated October 23,
2007, praying that the RTC levy upon the respondent's property covered by
Transfer Certificate of Title (TCT) No. 136829 to satisfy the judgment credit.
The RTC granted the petitioner's motion in an order dated June 30,
2008. 23 The respondent filed a motion for reconsideration which was denied
by the RTC in an order dated August 26, 2008. 24
CA-G.R. SP No. 105290: Assailed the levy of the respondent's property
On October 3, 2008, the respondent filed with the CA a Petition
for Certiorari 25 with application for issuance of a temporary restraining order.
The petition sought to nullify and set aside the orders of the RTC directing the
levy of the respondent's real property. The CA dismissed the petition.
Thereafter, the respondent filed a motion for reconsideration 26 dated
November 3, 2008.
Pursuant to the order dated June 30, 2008, a public auction for the
respondent's property covered by TCT No. 136829 was held on November 4,
2008, 27 where the petitioner was declared highest bidder. Subsequently, the
Certificate of Sale 28 in favor of the petitioner was registered.
Meanwhile, on January 7, 2010, the respondent redeemed the property
with the RTC Clerk of Court, paying the equivalent of the petitioner's bid price
with legal interest. The petitioner filed a motion to release funds 29 for the
release of the redemption price paid. The RTC granted 30 the motion.
On February 12, 2010, the respondent filed a manifestation and
motion 31 before the CA to withdraw the petition for the reason that the
redemption of the property and release of the price paid rendered the petition
moot and academic.
Thereafter, the petitioner received the CA decision dated November 23,
2010, which reversed and set aside the orders of the RTC directing the levy of
the respondent's property. The CA held that while the approval of the
petitioner's motion to withdraw the consigned rentals and the
posted supersedeas bond was within the RTC's jurisdiction, the RTC had no
jurisdiction to levy on the respondent's real property.
The CA explained that the approval of the levy on the respondent's real
property could not be considered as a case pending appeal, because the
decision of the MTC had already become final and executory. As such, the
matter of execution of the judgment lies with the MTC where the complaint for
ejectment was originally filed and presented.HESIcT

The CA ordered the RTC to remand the case to the MTC for execution.
The petitioner filed its motion for reconsideration which was denied 32 by the
CA.
THE PETITION
The petitioner filed the present petition for review on certiorari to
challenge the CA ruling in CA-G.R. SP No. 105290 which held that the RTC
had no jurisdiction to levy on the respondent's real property.
The petitioner argues: first, that the RTC's release of the consigned
rentals and levy were ordered in the exercise of its equity
jurisdiction; second, that the respondent's petition in CA-G.R. SP No. 105290
was already moot and academic with the conduct of the auction sale and
redemption of the respondent's real property; third, that the petition in CA-
G.R. SP No. 105290 should have been dismissed outright for lack of
signature under oath on the Verification and Certification against Forum
Shopping.
The respondent duly filed its comment 33 and refuted the petitioner's
arguments. On the first argument, respondent merely reiterated the CA's
conclusion that the RTC had no jurisdiction to order the levy on respondent's
real property as it no longer falls under the allowed execution pending appeal.
On the secondargument, the respondent contended that the levy on execution
and sale at public auction were null and void, hence the CA decision is not
moot and academic. On the third argument, the respondent simply argued
that it was too late to raise the alleged formal defect as an issue.
 THE ISSUE
The petitioner poses the core issue of whether the RTC had jurisdiction
to levy on the respondent's real property.
OUR RULING
We grant the petition.
Procedural issue: Lack of notarial seal on
the Verification and Certification against
Forum Shopping is not fatal to the
petition.
The petitioner alleged that the assailed CA petition should have been
dismissed since the notary public failed to affix his seal on the attached
Verification and Certification against Forum Shopping.
We cannot uphold the petitioner's argument.
The lack of notarial seal in the notarial certificate 34 is a defect in a
document that is required to be executed under oath.
Nevertheless, a defect in the verification does not necessarily render
the pleading fatally defective. The court may order its submission or
correction, or act on the pleading if the attending circumstances are such that
strict compliance with the Rule may be dispensed with in order that the ends
of justice may be served. 35
Noncompliance or a defect in a certification against forum shopping,
unlike in the case of a verification, is generally not curable by its subsequent
submission or correction, unless the covering Rule is relaxed on the ground of
"substantial compliance" or based on the presence of "special circumstances
or compelling reasons." 36 Although the submission of a certificate against
forum shopping is deemed obligatory, it is not however jurisdictional. 37
In the present case, the Verification and Certification against Forum
Shopping were in fact submitted. An examination of these documents shows
that the notary public's signature and stamp were duly affixed. Except for the
notarial seal, all the requirements for the verification and certification
documents were complied with.
The rule is that courts should not be unduly strict on procedural lapses
that do not really impair the proper administration of justice. The higher
objective of procedural rules is to ensure that the substantive rights of the
parties are protected. Litigations should, as much as possible, be decided on
the merits and not on technicalities. Every party-litigant must be afforded
ample opportunity for the proper and just determination of his case, free from
the unacceptable plea of technicalities. 38
 The CA correctly refused to dismiss and instead gave due course to the
petition as it substantially complied with the requirements on the Verification
and Certification against Forum Shopping.
An issue on jurisdiction prevents the
petition from becoming "moot and
academic."
The petitioner claims that the assailed CA petition should have been
dismissed because the subsequent redemption of the property by the
respondent and the release of the price paid to the petitioner rendered the
case moot and academic.
A case or issue is considered moot and academic when it ceases to
present a justiciable controversy because of supervening events, rendering
the adjudication of the case or the resolution of the issue without any practical
use or value. 39 Courts generally decline jurisdiction over such case or dismiss
it on the ground of mootness except when, among others, the case is capable
of repetition yet evades judicial review. 40
caITAC

The CA found that there is an issue on whether the RTC had

jurisdiction to issue the orders directing the levy of the respondent's property.
The issue on jurisdiction is a justiciable controversy that prevented the
assailed CA petition from becoming moot and academic.
It is well-settled in jurisprudence that jurisdiction is vested by law and
cannot be conferred or waived by the parties. "Even on appeal and even if the
reviewing parties did not raise the issue of jurisdiction, the reviewing court is
not precluded from ruling that the lower court had no jurisdiction over the
case." 41
Even assuming that the case has been rendered moot due to the
respondent's redemption of the property, the CA may still entertain the
jurisdictional issue since it poses a situation capable of repetition yet evading
judicial review.
Under this perspective, the CA correctly exercised its jurisdiction over
the petition.
Equity jurisdiction versus appellate
jurisdiction of the RTC
The appellate jurisdiction of courts is conferred by law. The appellate
court acquires jurisdiction over the subject matter and parties when an appeal
is perfected. 42
On the other hand, equity jurisdiction aims to provide complete justice
in cases where a court of law is unable to adapt its judgments to the special
circumstances of a case because of a resulting legal inflexibility when the law
is applied to a given situation. The purpose of the exercise of equity
jurisdiction, among others, is to prevent unjust enrichment and to ensure
restitution. 43
The RTC orders which allowed the withdrawal of the deposited funds
for the use and occupation of the subject units were issued pursuant to the
RTC's equity jurisdiction, as the CA held in the petition docketed as CA-G.R.
SP No. 81277.
The RTC's equity jurisdiction is separate and distinct from its appellate
jurisdiction on the ejectment case. The RTC could not have issued its orders
in the exercise of its appellate jurisdiction since there was nothing more to
execute on the dismissed ejectment case. As the RTC orders explained, the
dismissal of the ejectment case effectively and completely blotted out and
cancelled the complaint. Hence, the RTC orders were clearly issued in the
exercise of the RTC's equity jurisdiction, not on the basis of its appellate
jurisdiction.
This Court takes judicial notice 44 that the validity of the RTC Orders
has been upheld in a separate petition before this Court, under G.R. SP No.
171429 entitled Antonio Dela Cruz v. Regulus Development, Inc.
The levy of real property was ordered by
the RTC in the exercise of its equity
jurisdiction.
The levy of the respondent's property was made pursuant to the RTC
orders issued in the exercise of its equity jurisdiction, independent of the
ejectment case originally filed with the MTC.
An examination of the RTC order dated June 30, 2008, directing the
levy of the respondent's real property shows that it was based on the RTC
order dated July 25, 2003. The levy of the respondent's property was issued
to satisfy the amounts due under the lease contracts, and not as a result of
the decision in the ejectment case.
The CA erred when it concluded that the RTC exercised its appellate
jurisdiction in the ejectment case when it directed the levy of the respondent's
property.
Furthermore, the order to levy on the respondent's real property was
consistent with the first writ of execution issued by the RTC on December 18,
2003, to implement the RTC orders. The writ of execution states that:
. . . In case of [sic] sufficient personal property of the defendant cannot
be found whereof to satisfy the amount of the said judgment, you are
directed to levy [on] the real property of said defendant and to sell
the same or so much thereof in the manner provided by law for
the satisfaction of the said judgment and to make return of your
 proceedings together with this Writ within sixty (60) days from receipt
hereof. (emphasis supplied)
The subsequent order of the RTC to levy on the respondent's property
was merely a reiteration and an enforcement of the original writ of execution
issued.
Since the order of levy is clearly rooted on the RTC Orders, the only
question that needs to be resolved is which court has jurisdiction to order the
execution of the RTC orders. ICHDca

The RTC, as the court of origin, has

jurisdiction to order the levy of the
respondent's real property.
Execution shall be applied for in the court of origin, in accordance with
Section 1, 45 Rule 39 of the Rules of Court.
The court of origin with respect to the assailed RTC orders is the court
which issued these orders. The RTC is the court with jurisdiction to order the
execution of the issued RTC orders.
Hence, the petitioner correctly moved for the issuance of the writ of
execution and levy of the respondent's real property before the RTC as the
court of origin.
WHEREFORE, we hereby GRANT the petition for review on certiorari.
The decision dated November 23, 2010, and the resolution dated August 10,
2011, of the Court of Appeals in CA-G.R. SP No. 105290 are
hereby REVERSED and SET ASIDE. The orders dated June 30, 2008, and
August 26, 2008, of Branch 108 of the Regional Trial Court of Pasay City, are
hereby REINSTATED. Costs against respondent Antonio dela Cruz.
SO ORDERED.
||| (Regulus Development, Inc. v. Dela Cruz, G.R. No. 198172, [January 25, 2016])