For July 31 Proj Dev Lecture

Proj Dev Notes for July 31
Thursday, July 01, 2004

12:04 AM
I. Background
A. General Concept of Project Finance – An Overview
1. Project Financing Defined

Read: Nevitt, Peter K., Project Financing (7 th ed), pp. 1-27 (Handout No.
1)
2. Typical Structures and Trends

Read: The Guide to Financing Power Projects, Baker & Mckenzie, pp.
1-20
B. Philippine Laws Governing Project Development and Finance in General
1. 1987 Philippine Constitution

Read: Article II, secs. 19-20[1]
2. Anti-Dummy Law Issues
Read: ● Commonwealth Act No. 108

● Presidential Decree No. 715
Read: ● Palacios vs. Ramirez, L-27952, Feb. 15, 1982

● PBC v. Lui She, 21 SCRA 52 (1967).
● Soriano v. Ong Hoo, et al., 103 Phil. 829 (1958).
● Halili v. CA, 287 SCRA 465 (1998).
Read: Article XII, secs. 2, 3, 5, 7, 10, 16
Read: ● Chavez vs. Public Estates Authority and Amari Coastal Bay
Development Authority, G.R. 133250, July 9, 2002.
● Manila Prince Hotel vs. GSIS, et al., G.R. 122156, February 3,
1997.
● La Bugal B’laan Tribal Association, et al. vs. Ramos, WMC, et al.,
G.R. 127882, (final decision after motion for reconsideration),
December 2004.
● Chavez vs. NHA, G.R. No. 164527, August 15, 2007.
3. Corporation Code of the Philippines

Read: Sections 2-6, 10-15, 17(2), 23, 24, 25, 140
4. Republic Act No. 6957 (An Act Authorizing the Financing, Construction,
Operation and Maintenance of Infrastructure Projects by the Private
Sector, and for Other Purposes) and Implementing Rules and Regulations
(“IRR”) of R.A. 6957, as amended.
Read: ● Tatad vs. Garcia, Jr., 243 SCRA 436-493 (1995).

● MMDA vs. Jancom, G.R. No. 147465, Jan. 30, 2002. (Original
Decision)
● MMDA vs. Jancom, supra (Resolution on Motion for
Reconsideration)
● Chavez vs. NHA, G.R. No. 164527, August 15, 2007.
5. Republic Act No. 7718, amending R.A. No. 6957
For July 31 Lecture Page 1

5. Republic Act No. 7718, amending R.A. No. 6957
Read: ● Sec. 2 (Definitions) and corresponding provisions of IRR
● Comparative Analysis (Handout No. 3)
6. Foreign Investments Act of 1991
a. What is a Philippine national?
b. “Doing Business” in the Philippines
● B. Van Zuiden Bros. vs. GTVL Manufacturing, G.R. No.

147905. May 28, 2007.
● Agilent Technologies Singapore vs. Integrated Technology

Phil. Corp., G.R. No. 154618. April 14, 2004.
● Hahn vs. Court of Appeals, G.R. No. 113074. January 22,

1997.
[1] These sections are flagship provisions for the Philippine economy recognizing the role of private initiative and
enterprise in a self-reliant and independent national economy effectively controlled by Filipinos.

Article II, secs. 19-20
12:06 AM
State Policies
Section 19. The State shall develop a self-reliant and independent national economy effectively
controlled by Filipinos.
Section 20. The State recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments.

Commonwealth Act No. 108
12:13 AM
COMMONWEALTH ACT No. 108

AN ACT TO PUNISH ACTS OF EVASION OF THE LAWS ON THE NATIONALIZATION OF
CERTAIN RIGHTS, FRANCHISES OR PRIVILEGES
Be it enacted by the National Assembly of the Philippines
Section 1. Penalty — In all cases in which any constitutional or legal provisions requires Philippine
or any other specific citizenship as a requisite for the exercise or enjoyment of a right, franchise or
privilege, any citizen of the Philippines or of any other specific country who allows his name or
citizenship to be used for the purpose of evading such provision, and any alien or foreigner profiting
thereby, shall be punished by imprisonment for not less than five nor more than fifteen years, and by
a fine of not less than the value of the right franchise or privilege, which is enjoyed or acquired in
violation of the provisions hereof but in no case less than five thousand pesos.
The fact that the citizen of the Philippines or of any specific country charged with a violation of this
Act had, at the time of the acquisition of his holdings in the corporations or associations referred to in
section two of this Act, no real or personal property, credit or other assets the value of which shall at
least be equivalent to said holdings, shall be evidence of a violation of this Act. 1
Section 2. Simulation of minimum capital stock — In all cases in which a constitutional or legal
provision requires that, in order that a corporation or association may exercise or enjoy a right,
franchise or privilege, not less than a certain per centum of its capital must be owned by citizens of
the Philippines or of any other specific country, it shall be unlawful to falsely simulate the existence
of such minimum stock or capital as owned by such citizens, for the purpose of evading said
provision. The president or managers and directors or trustees of corporations or associations
convicted of a violation of this section shall be punished by imprisonment of not less than five nor
more than fifteen years, and by a fine not less than the value of the right, franchise or privilege,
enjoyed or acquired in violation of the provisions hereof but in no case less than five thousand
pesos.2
Section 2-A. Unlawful use, Exploitation or enjoyment — Any person, corporation, or association
which, having in its name or under its control, a right, franchise, privilege, property or business, the
exercise or enjoyment of which is expressly reserved by the Constitution or the laws to citizens of
the Philippines or of any other specific country, or to corporations or associations at least sixty per
centum of the capital of which is owned by such citizens, permits or allows the use, exploitation or
enjoyment thereof by a person, corporation or association not possessing the requisites prescribed
by a the Constitution or the laws of the Philippines; or leases, or in any other way, transfers or
conveys said right, franchise, privilege, property or business to a person, corporation or association
not otherwise qualified under the Constitution, or the provisions of the existing laws; or in any
manner permits or allows any person, not possessing the qualifications required by the Constitution,
or existing laws to acquire, use, exploit or enjoy a right, franchise, privilege, property or business, the
exercise and enjoyment of which are expressly reserved by the Constitution or existing laws to
citizens of the Philippines or of any other specific country, to intervene in the management,
operation, administration or control thereof, whether as an officer, employee or laborer therein with
or without remuneration except technical personnel whose employment may be specifically
authorized by the Secretary of Justice, and any person who knowingly aids, assists or abets in the
planning consummation or perpetration of any of the acts herein above enumerated shall be
punished by imprisonment for not less than five nor more than fifteen years and by a fine of not less
than the value of the right, franchise or privilege enjoyed or acquired in violation of the provisions
hereof but in no case less than five thousand pesos: Provided, however, That the president,
managers or persons in charge of corporations, associations or partnerships violating the provisions
of this section shall be criminally liable in lieu thereof: Provided, further, That any person, corporation
or association shall, in addition to the penalty imposed herein, forfeit such right, franchise, privilege,
and the property or business enjoyed or acquired in violation of the provisions of this Act: And
provided, finally, That the election of aliens as members of the board of directors or governing body
of corporations or associations engaging in partially nationalized activities shall be allowed in
proportion to their allowable participation or share in the capital of such entities. 3
Section 2-B. Any violation of the provisions of this Act by the spouse of any public official, if both live
together, shall be cause for the dismissal of such public official. 4
i t c@l awp
hil
Section 2-C. The exercise, possession or control by a Filipino citizen having a common-law
relationship with an alien of a right, privilege, property or business, the exercise or enjoyment of
which is expressly reserved by the Constitution or the laws to citizens of the Philippines, shall

which is expressly reserved by the Constitution or the laws to citizens of the Philippines, shall
constitute a prima facie evidence of violation of the provisions of Section 2-A hereof.5
Section 3. Any corporation or association violating any of the provisions of this Act shall, upon
proper court proceedings, be dissolved.
Section 3-A. Reward to informer. — In case of conviction under the provisions of this Act, twenty-
five per centum of any fine imposed shall accrue to the benefit of the informer who furnishes to the
Government original information leading to said conviction and who shall be ascertained and named
in the judgment of the court. If the informer is a dummy, who shall voluntarily take the initiative of
reporting to the proper authorities any violation of the provisions of this Act and assist in the
prosecution, resulting in the conviction of any person or corporation profiting thereby or involved
therein, he shall be entitled to the reward hereof in the sum equivalent to twenty-five per centum of
the fine actually paid to or received by the Government, and shall be exempted from the penal
liabilities provided for in this Act. 6
Section 4. This Act shall take effect upon its approval.
i t c- alf
Approved, October 30, 1936.
Footnotes
*As amended by RA 421, RA 134, RA 6084, and PD 715.
1
Words in bold in the text above are amendments introduced by RA 134, section 1, approved June
14, 1947.
Statutory History of section 1:
Original text —
SEC. 1. In all cases in which any constitutional or legal provision requires Philippine or [United
States] citizenship as requisite for the exercise or enjoyment of a right, franchise or privilege, any
citizen of the Philippines or [the United States] who allows his name or citizenship to be used for the
purpose of evading such provision, and any alien or foreigner profiting thereby, shall be punished by
imprisonment for not less than [two] nor more than [ten] years, and by, fine of not less than [two
thousand nor more than ten thousand pesos.]
The fact that the citizen of the Philippines or of [the United States] charged with, violation of this Act
had, at the time of acquisition of his holdings in the corporations or association referred to in section
two of this Act, no real or personal property, credit or other assets the value of which shall at least be
equivalent to said holdings, shall be admissible as circumstantial evidence of, violation of this act.
(Ed. Note: Words in brackets were deleted in RA 134, supra)
2
Words in bold in the text above are amendments introduced by RA 134, section 1, approved June
14, 1947.
Statutory History of section 2:
Original text
SEC. 2. In all cases in which a constitutional or legal provisions requires that, in order that a
corporation or association may exercise or enjoy a right, franchise or privilege, not less than a
certain per centum of its capital must be owned by citizens of the Philippines or [the United States,
or both.] It shall be unlawful to falsely simulate the existence of such minimum of stock or capital as
owned by such citizens of the Philippines [or the United States or both,] for the purpose of evading
said provision. The president or managers and directors or trustees of corporations or associations
convicted of a violation of this section shall be punished by imprisonment [for] not less than [two] nor
more than [ten] years, and by a fine of not less than [two thousand nor more than ten thousand
pesos.] (Ed. Note: Words in brackets were deleted in RA 134, supra.)
3Words in bold in the text above are amendments introduced by PD 715, section 1, promulgated May
28, 1975.
Statutory History of section 2-A:
a) Original text — (inserted by CA 421)
SEC. 2-A. Any person, corporation or association which, having in its name or under its control, a
right, franchise, privilege, property or business, the exercise or enjoyment of which is expressly
reserved by the constitution or the laws [of the Philippines] to citizens of the Philippines or of [the
United States,] or to corporations or associations at least sixty per centum of the capital of which is
owned by such citizens, permits or allows the use, exploitation or enjoyment thereof by a person,
corporation or association not possessing the requisites prescribed by the Constitution or the laws of
the Philippines; or leases, or in any other way transfers or conveys said right, franchise, privilege,
property or business to a person, corporation or association not otherwise qualified under the
Constitution, or the provisions of the existing [Acts,] any person who knowingly aids, assists, or
abets in the planning, consummation or perpetuation of any of the acts herein above enumerated,
shall be punished by imprisonment for not less than [two] nor more than [ten] years, and by a fine of

shall be punished by imprisonment for not less than [two] nor more than [ten] years, and by a fine of
not less than [two thousand nor more than ten thousand pesos:] Provided, however, That presidents,
managers, or persons in charge of corporations, associations or partnerships violating the provisions
of this section shall be criminally liable in lieu thereof. (Ed, Note: Words in brackets were deleted in
RA 134, infra.)
b) Words in bold in the next immediately following are amendments introduced by RA 134, section 2,
approved June 14, 1947.
SEC. 2-A. Any person, corporation, or association which, having in its name or under its control, a
right franchise, privilege, property or business, the exercise or enjoyment of which is expressly
reserved by the Constitution or the laws to citizens of the Philippines or of any other specific country,
or to corporations or associations at least sixty per centum of the capital of which is owned by such
citizens, permits or allows the use, exploitation or enjoyment thereof by a person, corporation or
association not possessing the requisites prescribed by the Constitution or the laws of the
Philippines; or leases, or in any other way transfers or conveys said right, franchise, privilege,
constitution, or the provisions of the existing laws; or in any manner permits or allows any person,
not possessing the qualifications required by the Constitution or existing laws to acquire, use, exploit
or enjoy a right, franchise, privilege, property or business, the exercise and enjoyment of which are
expressly reserved by the constitution or existing laws to citizens of the Philippines or of any other
specific country, to intervene in the management, operation, administration or control thereof,
whether as an officer, employee or laborer therein, with or without remuneration except technical
personnel whose employment may be specifically authorized by the [President of the Philippines
upon recommendation of the Department Head concerned, if any,] and any person who knowingly
aids, assists or abets in the planning, consummation or perpetration of any of the acts hereinabove
enumerated shall be punished by imprisonment for not less than five nor more than fifteen years and
by a fine of not less than the value of the right, franchise, or privilege enjoyed or acquired in violation
of the provisions hereof but in no case less than five thousand pesos: Provided, however, That the
president, managers, or persons in charge of corporations, associations, or partnerships violating
the provisions of this section shall be criminally liable in Lieu thereof: Provided further, That any
person, corporation or association shall, in addition to the penalty imposed herein, forfeit such right,
franchise, privilege, and the property or business enjoyed or acquired in violation of the provisions of
this Act. (Ed. Note: Words in brackets were deleted in PD 715, supra.)
4Inserted by CA 421, section 1, approved May 31, 1939.
5Inserted by RA 6084, section 1, approved August 4, 1969.
6
. Inserted by RA 134, section 3, approved June 14, 1947.
Pasted from <http://www.lawphil.net/statutes/comacts/ca_108_1936.html>

Presidential Decree No. 715
12:14 AM
PRESIDENTIAL DECREE No. 715 May 28, 1975

AMENDING COMMONWEALTH ACT NO. 108, AS AMENDED, OTHERWISE KNOWN AS "THE
ANTI-DUMMY LAW"
WHEREAS, there have been conflicting interpretations as to whether Section 2-A of Commonwealth
Act No. 108, as amended, otherwise known as the Anti-Dummy Law, allows aliens to become
members of the board of directors or governing body of corporations or associations engaging in
partially nationalized activities;
WHEREAS, it is fair and equitable and in line with the constitutional policy expressed in Article XIV,
Section 5 of the Constitution, that foreign investors be allowed limited representation in the
governing board or body of corporations or associations in proportion to their allowable participation
in the equity of the said entities;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the
powers vested in me by the Constitution, do hereby order and decree:
Section 1. Section 2-A of Commonwealth Act No. 108, as amended, is hereby further amended to
read as follows:
"Section 2-A. Any person, corporation, or association, which, having in its name or under its control,
a right, franchise, privilege, property or business, the exercise or enjoyment of which is expressly
reserved by the Constitution or the laws to citizens of the Philippines or of any other specific country,
or to corporations or associations at least sixty per centum of the capital of which is owned by such
citizens, permits or allows the use, exploitation or enjoyment thereof by a person, corporation or
association not possessing the requisites prescribed by the Constitution or the laws of the
Philippines; or leases, or in any other way, transfers or conveys said right, franchise, privilege,
Constitution, or the provisions of the existing laws; or in any manner permits or allows any person,
not possessing the qualifications required by the Constitution, or existing laws to acquire, use,
exploit or enjoy a right, franchise, privilege, property or business, the exercise and enjoyment of
which are expressly reserved by the Constitution or existing laws to citizens of the Philippines or of
any other specific country, to intervene in the management, operation, administration or control
thereof, whether as an officer, employee or laborer therein with or without remuneration except
technical personnel whose employment may be specifically authorized by the Secretary of Justice,
and any person who knowingly aids, assists, or abets in the planning, consummation or perpetration
of any of the acts herein above enumerated shall be punished by imprisonment for not less than five
nor more than fifteen years and by a fine of not less than the value of the right, franchise or privilege
enjoyed or acquired in violation of the provisions hereof but in no case less than five thousand
pesos: Provided, however, that the president, managers or persons in violating the provisions of this
section shall be criminally liable in lieu thereof: Provided, further, That any person, corporation or
association shall, in addition to the penalty imposed herein, forfeit such right, franchise, privilege and
the property provisions of this Act; and Provided, finally, That the election of aliens as members of
the board of directors or governing body of corporations or associations engaging in partially
nationalized activities shall be allowed in proportion to their allowable participation or share in the
capital of such entities.
Section 2. This Decree shall take effect immediately.
DONE in the City of Manila, this 28th day of May, in the year of Our Lord, nineteen hundred and
seventy-five.
Pasted from <http://www.lawphil.net/statutes/presdecs/pd1975/pd_715_1975.html>

Palacios vs. Ramirez, L-27952, Feb. 15, 1982
12:15 AM
RAMIREZ V VDA. DE RAMIREZ

ABAD-SANTOS; February 15, 1982
FACTS
- APPEAL for the partitioning of testate estate of Jose Eugenio Ramirez (a Filipino national, died in Spain on December 11, 1964) among principal beneficiaries:
Marcelle Demoron de Ramirez
- w idow
- French w ho lives in Paris
- receiv ed ½ (as spouse) and usufructuary rights over 1/3 of the free portion
Roberto and Jorge Ramirez
- tw o grandnephews
- liv es in Malate
- receiv ed the ½ (free portion)
Wanda de Wrobleski
- companion
- Austrian w ho liv es in Spain
- receiv ed usufructuary rights of 2/3 of the free portion
- v ulgar substitution in fav or of Juan Pablo Jankowski and Horacio Ramirez
- Maria Luisa Palacios - adminis tratix
- Jorge and Roberto Ramirez opposed because
a. v ulgar substitution in fav or of Wanda w rt widow’s usufruct and in fav or of Juan Pablo Jankowski and Horacio Ramirez, wrt to Wanda’s usufruct is INVALID
because first heirs (Marcelle and Wanda) survived the testator
b. fideicommissary substitutions are INVALID because first heirs not related to the second heirs or substitutes within the first degree as provided in Art 863 CC
c. grant of usufruct of real property in fav or of an alien, Wanda, violated Art XIII Sec 5
d. proposed partition of the testator’’s interest in the Santa Cruz Building betw een widow and appellants violates testators express will to give this property to
them
- LC: approv ed partition
ISSUE
WON the partition is v alid insofar as
a. w idow’s legitime
b. substitutions
c. usufruct of Wanda
HELD
[1]
a. YES, appellants do not question ½ because Marcelle is the widow and over which he could impose no burden, encumbrance, condition or substitution of
[2]
any kind whatsoever
- the proposed creation by the admininstratix in fav or of the testator’s w idow of a usufruct over 1/3 of the free portion of the testator’s estate cannot be made
w here it w ill run counter to the testator’s ex press will. The Court erred for Marcelle who is entitled to ½ of the estate “enpleno dominio” as her legitime and which
is more than w hat she is given under the w ill is not entitled to hav e any additional share in the estate. To give Marcelle more than her legitime will run counter to
the testator’s intention for as stated abov e his disposition even impaired her legitime and tended to fav or Wanda.
b. Vulgar substitutions are v alid because dying before the testator is not the only case where a v ulgar substitution can be made. Also, according to Art 859 CC,
cases also include refusal or incapacity to accept inheritance therefore it is VALID.
BUT fideicommissary substitutions are VOID because Juan Pablo Jankowski and Horace Ramirez are not related to Wande and according to Art 863 CC, it
v alidates a fideicommissary substitution provided that such substitution does not go beyond one degree from the heir originally instituted. Another is that there
is no absolute duty imposed on Wanda to transmit the usufructuary to the substitutes and in fact the apellee agrees that the testator contradicts the establishment
of the fideicommissary substitution when he permits the properties be subject to usufruct to be sold upon mutual agreement ofthe usufructuaries and naked
ow ners.
c. YES, usufruct of Wanda is VALID
[3]
- Art XIII Sec 5 (1935): Sav e in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations,
[4]
or associations qualified to acquire or hold land of the public domain in the Philippines.
The low er court upheld the usufruct thinking that the Constitution covers not only succession by operation of law but also testamentary succession BUT SC is of
the opinion that this prov ision does not apply to testamentary succession for otherwise the prohibition will be for naught and meaningless. Any alien would
circumvent the prohibition by paying money to a Philippine landowner in exchange for a dev is e of a piece of land BUT an alien may be bestowed
USUFRUCTUARY RIGHTS over a parcel of land in the Philippines. Therefore, the usufruct in fav or of Wanda, although a real right, is upheld because it does not
v est title to the land in the usufructuary (Wanda) and it is the vesting of title to land in favor of aliens which is proscribed by the Constitution.
Decision: ½ Marcelle (as legitime), ½ Jorge and Roberto Ramirez (free portion) in naked ownership and the usufruct to Wanda de Wrobleski with simple
substitution in fav or of Juan Pablo Jankowski and Horace Ramirez
[1] Art 900 CC: If the only survivor is the widow or widower, she or he shall be entitled to ½ of the hereditary estate
[2] Art 904 (2) CC
[3] Art XIII (1935): Conservation and Utilization of Natural Resources
[4] Art XII Sec 7 (1987): Save in cases of hereditary succession, no private [removed agricultural] lands shall be transferred or conveyed [1935: assigned] except to individuals, corporations, or associations qualified to
acquire or hold lands of the public domain [removed in the Philippines].
G.R. No. L-27952 February 15, 1982

TESTATE ESTATE OF JOSE EUGENIO RAMIREZ, MARIA LUISA PALACIOS,
Administratrix, petitioner-appellee,

Administratrix, petitioner-appellee,
vs.
MARCELLE D. VDA. DE RAMIREZ, ET AL., oppositors, JORGE and ROBERTO
RAMIREZ, legatees, oppositors- appellants.
ABAD SANTOS, J.:

The main issue in this appeal is the manner of partitioning the testate estate of Jose Eugenio
Ramirez among the principal beneficiaries, namely: his widow Marcelle Demoron de Ramirez; his
two grandnephews Roberto and Jorge Ramirez; and his companion Wanda de Wrobleski.
The task is not trouble-free because the widow Marcelle is a French who lives in Paris, while the
companion Wanda is an Austrian who lives in Spain. Moreover, the testator provided for
substitutions.
Jose Eugenio Ramirez, a Filipino national, died in Spain on December 11, 1964, with only his widow
as compulsory heir. His will was admitted to probate by the Court of First Instance of Manila, Branch
X, on July 27, 1965. Maria Luisa Palacios was appointed administratrix of the estate. In due time she
submitted an inventory of the estate as follows:
INVENTARIO
Una sexta parte (1/6) proindiviso de un te
rreno, con sus mejoras y edificaciones, situadoen
la Escolta, Manila............................................................. P500,000.00
Una sexta parte (1/6) proindiviso de dos
parcelas de terreno situadas en Antipolo, Rizal................... 658.34
Cuatrocientos noventa y uno (491) acciones
de la 'Central Azucarera de la Carlota a P17.00
por accion ................................................................................8,347.00
Diez mil ochocientos seize (10,806) acciones
de la 'Central Luzon Milling Co.', disuelta y en
liquidacion a P0.15 por accion ..............................................1,620.90
Cuenta de Ahorros en el Philippine Trust
Co.............................................................................................. 2,350.73
TOTAL.............................................................. P512,976.97
MENOS:
Deuda al Banco de las Islas Filipinas, garan-
tizada con prenda de las acciones de La Carlota ......... P 5,000,00
VALOR LIQUIDO........................................... P507,976.97
The testamentary dispositions are as follows:
A.—En nuda propiedad, a D. Roberto y D. Jorge Ramirez, ambas menores de edad, residentes en
Manila, I.F., calle 'Alright, No. 1818, Malate, hijos de su sobrino D. Jose Ma. Ramirez, con
sustitucion vulgar a favor de sus respectivos descendientes, y, en su defecto, con sustitucion vulgar
reciprocal entre ambos.
El precedente legado en nuda propiedad de la participacion indivisa de la finca Santa Cruz Building,
lo ordena el testador a favor de los legatarios nombrados, en atencion a que dicha propiedad fue
creacion del querido padre del otorgante y por ser aquellos continuadores del apellido Ramirez,
B.—Y en usufructo a saber: —
a. En cuanto a una tercera parte, a favor de la esposa del testador, Da. Marcelle Ramirez,
domiciliada en IE PECO, calle del General Gallieni No. 33, Seine Francia, con sustitucion vulgar u
fideicomisaria a favor de Da. Wanda de Wrobleski, de Palma de Mallorca, Son Rapina Avenida de
los Reyes 13,
b.—Y en cuanto a las dos terceras partes restantes, a favor de la nombrada Da. Wanda de
Nrobleski con sustitucion vulgar v fideicomisaria a saber:—
En cuanto a la mitad de dichas dos terceras partes, a favor de D. Juan Pablo Jankowski, de Son
Rapina Palma de Mallorca; y encuanto a la mitad restante, a favor de su sobrino, D. Horace V.
Ramirez, San Luis Building, Florida St. Ermita, Manila, I.F.
A pesar de las sustituciones fideiconiisarias precedentemente ordinadas, las usufiructuarias
nombradas conjuntamente con los nudo propietarios, podran en cualquier memento vender a
tercero los bienes objeto delegado, sin intervencion alguna de los titulares fideicomisaarios.
On June 23, 1966, the administratrix submitted a project of partition as follows: the property of the
deceased is to be divided into two parts. One part shall go to the widow 'en pleno dominio" in
satisfaction of her legitime; the other part or "free portion" shall go to Jorge and Roberto Ramirez "en
nuda propriedad." Furthermore, one third (1/3) of the free portion is charged with the widow's
usufruct and the remaining two-thirds (2/3) with a usufruct in favor of Wanda.
Jorge and Roberto opposed the project of partition on the grounds: (a) that the provisions for vulgar
substitution in favor of Wanda de Wrobleski with respect to the widow's usufruct and in favor of Juan

substitution in favor of Wanda de Wrobleski with respect to the widow's usufruct and in favor of Juan
Pablo Jankowski and Horacio V. Ramirez, with respect to Wanda's usufruct are invalid because the
first heirs Marcelle and Wanda) survived the testator; (b) that the provisions for fideicommissary
substitutions are also invalid because the first heirs are not related to the second heirs or substitutes
within the first degree, as provided in Article 863 of the Civil Code; (c) that the grant of a usufruct
over real property in the Philippines in favor of Wanda Wrobleski, who is an alien, violates Section 5,
Article III of the Philippine Constitution; and that (d) the proposed partition of the testator's interest in
the Santa Cruz (Escolta) Building between the widow Marcelle and the appellants, violates the
testator's express win to give this property to them Nonetheless, the lower court approved the project
of partition in its order dated May 3, 1967. It is this order which Jorge and Roberto have appealed to
this Court.
1. The widow's legitime.
The appellant's do not question the legality of giving Marcelle one-half of the estate in full ownership.
They admit that the testator's dispositions impaired his widow's legitime. Indeed, under Art. 900 of
the Civil Code "If the only survivor is the widow or widower, she or he shall be entitled to one-half of
the hereditary estate." And since Marcelle alone survived the deceased, she is entitled to one-half of
his estate over which he could impose no burden, encumbrance, condition or substitution of any kind
whatsoever. (Art. 904, par. 2, Civil Code.)
It is the one-third usufruct over the free portion which the appellants question and justifiably so. It
appears that the court a quo approved the usufruct in favor of Marcelle because the testament
provides for a usufruct in her favor of one-third of the estate. The court a quo erred for Marcelle who
is entitled to one-half of the estate "en pleno dominio" as her legitime and which is more than what
she is given under the will is not entitled to have any additional share in the estate. To give Marcelle
more than her legitime will run counter to the testator's intention for as stated above his dispositions
even impaired her legitime and tended to favor Wanda.
2. The substitutions.
It may be useful to recall that "Substitution is the appoint- judgment of another heir so that he may
enter into the inheritance in default of the heir originally instituted." (Art. 857, Civil Code. And that
there are several kinds of substitutions, namely: simple or common, brief or compendious,
reciprocal, and fideicommissary (Art. 858, Civil Code.) According to Tolentino, "Although the Code
enumerates four classes, there are really only two principal classes of substitutions: the simple and
the fideicommissary. The others are merely variations of these two." (111 Civil Code, p. 185 [1973].)
The simple or vulgar is that provided in Art. 859 of the Civil Code which reads:
ART. 859. The testator may designate one or more persons to substitute the heir or heirs instituted
in case such heir or heirs should die before him, or should not wish, or should be incapacitated to
accept the inheritance.
A simple substitution, without a statement of the cases to which it refers, shall comprise the three
mentioned in the preceding paragraph, unless the testator has otherwise provided.
The fideicommissary substitution is described in the Civil Code as follows:
ART. 863. A fideicommissary substitution by virtue of which the fiduciary or first heir instituted is
entrusted with the obligation to preserve and to transmit to a second heir the whole or part of
inheritance, shall be valid and shall take effect, provided such substitution does not go beyond one
degree from the heir originally instituted, and provided further that the fiduciary or first heir and the
second heir are living at time of the death of the testator.
It will be noted that the testator provided for a vulgar substitution in respect of the legacies of
Roberto and Jorge Ramirez, the appellants, thus: con sustitucion vulgar a favor de sus respectivos
descendientes, y, en su defecto, con substitution vulgar reciprocal entre ambos.
The appellants do not question the legality of the substitution so provided. The appellants question
the sustitucion vulgar y fideicomisaria a favor de Da. Wanda de Wrobleski" in connection with the
one-third usufruct over the estate given to the widow Marcelle However, this question has become
moot because as We have ruled above, the widow is not entitled to any usufruct.
The appellants also question the sustitucion vulgar y fideicomisaria in connection with Wanda's
usufruct over two thirds of the estate in favor of Juan Pablo Jankowski and Horace v. Ramirez.
They allege that the substitution in its vulgar aspect as void because Wanda survived the testator or
stated differently because she did not predecease the testator. But dying before the testator is not
the only case for vulgar substitution for it also includes refusal or incapacity to accept the inheritance
as provided in Art. 859 of the Civil Code, supra. Hence, the vulgar substitution is valid.
As regards the substitution in its fideicommissary aspect, the appellants are correct in their claim that
it is void for the following reasons:
(a) The substitutes (Juan Pablo Jankowski and Horace V. Ramirez) are not related to Wanda, the
heir originally instituted. Art. 863 of the Civil Code validates a fideicommissary substitution "provided
such substitution does not go beyond one degree from the heir originally instituted."
What is meant by "one degree" from the first heir is explained by Tolentino as follows:

What is meant by "one degree" from the first heir is explained by Tolentino as follows:
Scaevola Maura, and Traviesas construe "degree" as designation, substitution, or transmission. The
Supreme Court of Spain has decidedly adopted this construction. From this point of view, there can
be only one tranmission or substitution, and the substitute need not be related to the first heir.
Manresa, Morell and Sanchez Roman, however, construe the word "degree" as generation, and the
present Code has obviously followed this interpretation. by providing that the substitution shall not go
beyond one degree "from the heir originally instituted." The Code thus clearly indicates that the
second heir must be related to and be one generation from the first heir.
From this, it follows that the fideicommissary can only be either a child or a parent of the first heir.
These are the only relatives who are one generation or degree from the fiduciary (Op. cit., pp.
193-194.)
(b) There is no absolute duty imposed on Wanda to transmit the usufruct to the substitutes as
required by Arts. 865 and 867 of the Civil Code. In fact, the appellee admits "that the testator
contradicts the establishment of a fideicommissary substitution when he permits the properties
subject of the usufruct to be sold upon mutual agreement of the usufructuaries and the naked
owners." (Brief, p. 26.)
3. The usufruct of Wanda.
The appellants claim that the usufruct over real properties of the estate in favor of Wanda is void
because it violates the constitutional prohibition against the acquisition of lands by aliens.
The 1935 Constitution which is controlling provides as follows:
SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or
assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the
public domain in the Philippines. (Art. XIII.)
The court a quo upheld the validity of the usufruct given to Wanda on the ground that the
Constitution covers not only succession by operation of law but also testamentary succession. We
are of the opinion that the Constitutional provision which enables aliens to acquire private lands does
not extend to testamentary succession for otherwise the prohibition will be for naught and
meaningless. Any alien would be able to circumvent the prohibition by paying money to a Philippine
landowner in exchange for a devise of a piece of land.
This opinion notwithstanding, We uphold the usufruct in favor of Wanda because a usufruct, albeit a
real right, does not vest title to the land in the usufructuary and it is the vesting of title to land in favor
of aliens which is proscribed by the Constitution.
IN VIEW OF THE FOREGOING, the estate of Jose Eugenio Ramirez is hereby ordered distributed
as follows:
One-half (1/2) thereof to his widow as her legitime;
One-half (1/2) thereof which is the free portion to Roberto and Jorge Ramirez in naked ownership
and the usufruct to Wanda de Wrobleski with a simple substitution in favor of Juan Pablo Jankowski
and Horace V. Ramirez.
The distribution herein ordered supersedes that of the court a quo. No special pronouncement as to
costs.
SO ORDERED.
Barredo (Chairman), Concepcion, Jr., De Castro, Ericta and Escolin, JJ., concur.
Aquino J., took no part.
Pasted from <http://www.lawphil.net/judjuris/juri1982/feb1982/gr_l_27952_1982.html>

PBC v. Lui She, 21 SCRA 52 (1967).
12:20 AM
G.R. No. L-17587 December 18, 1967

PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINIA SANTOS Y
CANON FAUSTINO, deceased, plaintiff-appellant,
vs.
LUI SHE, in her own behalf and as administratrix of the intestate estate of Wong Heng,
deceased,defendant-appellant.
Nicanor S. Sison for plaintiff-appellant.
Ozaeta, Gibbs and Ozaeta for defendant-appellant.
RESO L U TI O N
CASTRO, J.:
This is the second motion that the defendant-appellant has filed relative to this Court's decision of
September 12, 1967. The first was a motion for reconsideration. Accepting the nullity of the other
contracts (Plff Exhs. 4-7), the defendant-appellant nevertheless contended that the lease contract
(Plff Exh. 3) is so separable from the rest of the contracts that it should be saved from invalidation.l awphi l
In denying the motion, we pointed to the circumstances —

that on November 15, 1957, the parties entered into the lease contract for 50 years: that ten days
after, that is on November 25, they amended the contract so as to make it cover the entire property
of Justina Santos; that on December 21, less than a month after, they entered into another contract
giving Wong Heng the option to buy the leased premises should his pending petition for
naturalization be granted; that on November 18, 1958, after failing to secure naturalization and after
finding that adoption does not confer the citizenship of the adopting parent on the adopted, the
parties entered into two other contracts extending the lease to 99 years and fixing the period of the
option to buy at 50 years.
which indubitably demonstrate that each of the contracts in question was designed to carry out
Justina Santos' expressed wish to give the land to Wong and thereby in effect place its ownership in
alien hands,1 about which we shall have something more to say toward the end of this resolution. We
concluded that "as the lease contract was part of a scheme to violate the Constitution it suffers from
the same infirmity that renders the other contracts void and can no more be saved from illegality
than the rest of the contracts."
The present motion is for a new trial and is based on three documents executed by Justina Santos
which, so it is claimed, constitute newly-discovered material evidence. These documents are a
codicil dated November 11, 1957 and two wills executed on August 24 and August 29, 1959. In the
codicil Justina Santos not only named Tita Yaptinchay LaO the administratrix of her estate with the
right to buy the properties of the estate, but also provided that if the said LaO was legally disqualified
from buying (as she really was under article 1491 (3) of the Civil Code), she was to be her sole heir.
In either case, the codicil imposed on the administratrix the obligation to have masses said for the
soul of the testatrix and those of the latter's sister and parent. On the other hand, in both her 1959
wills Justina Santos enjoined her heirs to respect the lease contract made, and the conditional option
given, in favor of Wong.
These documents form part of the records of civil case 59470 of the Court of First Instance of Manila
in which the settlement of the estate of Justina Santos is pending, and so it is now claimed that they
could not have been produced at the trial of this case which was concluded on August 6, 1960
because they were presented in the probate court only after the death of Justina Santos on
December 28, 1964. i t c- alf
This is a misrepresentation of the grossest sort. The documents were known to the defendant-
appellant and her counsel even before the death of Justina Santos. As a matter of fact, the wills
executed on August 24 and August 29, 1959 were presented in this case as Exhibits 285 and 279,
respectively, for the defendant-appellant, and were considered and expressly referred to in the
decision of the lower court and in our decision. As for the codicil of November 11, 1957, the
i t c- alf
defendant-appellant can hardly feign ignorance of its essence even when this case was being tried
in the lower court considering that its provisions were substantially adverted to in the testimony of
one of her witnesses2 and were in fact recited in the decision a own a quo.3 By no means can the
documents in question be considered newly-discovered evidence so as to warrant a reopening of
this case.4
Nor is there anything in the documents that is likely to alter the result we have already reached in
this case. With respect to the 1957 codicil, it is claimed that Justina Santos could not have intended
by the 99-year lease to give Wong the ownership of the land considering that she had earlier (the

by the 99-year lease to give Wong the ownership of the land considering that she had earlier (the
codicil was made on November 11, 1957 while the lease contract was executed on November 15,
1957) devised the property to Tita Yaptinchay LaO.
Without passing on the validity of her testamentary disposition since the issue is one pending before
the probate court, it suffices to state here that even granting that Justina Santos had devised the
land in dispute to LaO, Justina Santos was not thereby barred or precluded from subsequently giving
the land to Wong. The execution of the lease contract which, together with the other contracts,
amount to a transfer of ownership to Wong, constitutes an implied revocation of her codicil, at least
insofar as the disposition of the land is concerned. 5
As for the 1959 wills, it is said that they manifest a desire to abide by the law, as is evident from the
statement therein that Wong's right to buy the land be allowed "anytime he or his children should be
entitled to buy lands in the Philippines (i.e., upon becoming Filipino citizens)". it seems obvious,
l awphi l
however, that this is nothing but a reiteration of the substance of the lease contract and conditional
option to buy which in compensation, as our decision demonstrates, amount to a conveyance, the
protestation of compliance with the law notwithstanding. In cases like the one at bar, motives are
seldom avowed and avowals are not always candid. The problem is not, however, insuperable,
especially as in this case the very witnesses for the defendant-appellant testified that —
Considering her age, ninety (90) years old at the time and her condition, she is a wealthy woman, it
is just natural when she said. "This is what I want and this will be done." In particular reference to
this contract of lease, when I said "This is not proper, she said — 'you just go ahead, you prepare
that, I am the owner, and if there is illegality, I am the only one that can question the illegality.'"6
The ambition of the old woman before her death, according to her revelation to me, was to see to it
that these properties be enjoyed, even to own them, by Wong Heng because Doña Justina told me
that she did not have any relatives, near or far, and she considered Wong Heng as a son and his
children her grandchildren; especially her consolation in life was when she would hear the children
reciting prayers in Tagalog.7
She was very emphatic in the care of the seventeen (17) dogs and of the maids who helped her
much, and she told me to see to it that no one could disturb Wong Heng from those properties. That
is why we thought of adoption, believing that thru adoption Wong Heng might acquired Filipino
citizenship, being the adopted child of a Filipino citizen. 8 l awphi l
The other points raised in the motion for new trial either have already been disposed of in our
decision or are so insubstantial to merit any attention.
ACCORDINGLY, the motion for new trial is denied.
Concepcion, C.J., Reyes J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Angeles and
Fernando, JJ.,concur.
Footnotes
1 Resolution, Oct. 5, 1967.
2 T.s.n., p. 82, June 20, 1960.
3
Decision, Sept. 16, 1960, Rec. on Appeal 208, 212 n. 1.
4 Cf . Bersabal v. Bernal, 13 Phil. 463 (1909).
5 Civ Code arts. 830(l) and 957.
6
Testimony of Atty. Tomas Yumol, T.s.n., p. 86, June 20, 1960 (emphasis added).
7
Testimony of Atty. Benjamin Alonzo, t.s.n, p. 79, July 6, 1960 (emphasis added).
8 Id., t.s.n., p. 121, June 20, 1960.
Pasted from <http://www.lawphil.net/judjuris/juri1967/dec1967/gr_17587_1967.html>

Soriano v. Ong Hoo, et al., 103 Phil. 829 (1958)
12:20 AM
G.R. No. L-10931 May 28, 1958

FLORENCIA R. SORIANO, assisted by her husband MANUEL A. Q. SORIANO, plaintiff-
appellant,
vs.
ONG HOO, ET AL., defendants-appellees.
Gatchalian and Padilla for appellant.
Sycip, Quisumbing, Salazar and Associates for appellees.
LABRADOR, J.:
Appeal from a judgment of the Court of First Instance of Manila, Hon. Edilberto Barot, presiding,
dismissing the action which was brought to recover two lots sold by plaintiff and her co-owner to the
defendants.
On and before November 29, 1943, Florencia R. Soriano and her brother Teodoro R. Soriano were
the registered co-owners, and their father Ramon Soriano (widower), the registered usufructuary of
Lots Nos. 16 and 17, Block No. 1881 of the cadastral survey of Manila, covered by Transfer
Certificate of Title No. 6147 of the Registry of Deeds of Manila. On November 29, 1943, the above
co-owners and usufructuary sold the said lots to Ong Hoo for P160,000, of which P90,000 was paid
at the time of the sale and P70,000 on December 4, 1943. On January 17, 1944, Ong Hoo
registered the deed of sale executed in his favor and, thereupon, Transfer Certificate of Title No.
70030 was issued in his name. Ramon Soriano, died on September 15, 1944 and Teodoro R.
Soriano on September 5, 1946 and as they both died instate, Florencia R. Soriano as their sole heir
succeeded in their rights to said properties.
On January 16, 1946, Ong Hoo sold the land to defendants Chung Te, Ching Leng and Ching Tan.
The sale was registered on January 22, 1946 and, thereupon, Transfer Certificate of Title No. 9597
of Manila was issued in their name.
The above facts appear in the stipulation of facts submitted by the parties in this case. The complaint
alleges that both the original sale and the subsequent transfer made are null and void because the
vendee and transferees are Chinese citizens and cannot acquire ownership of private agricultural
lands. It is therefore, prayed that the sale executed in favor of the defendant be declared null and
void and that the plaintiff be declared owner of the lots upon reimbursement by her of the price of the
sale. The defendant in their answer allege that the complaint states no cause of action, inasmuch as
the plaintiff had participated in the execution of an illegal contract and they maintain an action to
recover what they had conveyed by virtue thereof; that defendants are innocent purchasers of the
property for value; and that the sale was executed during the Japanese regime, at which time the
Constitution of the Philippines was not in force.
The Court of First Instance of Manila held that the sale cannot be annulled at the instance of the
vendor or vendors citing the cases of Cabauatan, et al., vs. Uy Hoo, 88 Phil., 103; Ricarmara, et
al. vs. Ngo Ki G.R. NO. L-5836 April 29, 1953; and especially Rellosa vs. Gaw Chee Hun, 93 Phil.,
827; 49 Off. Gaz., [10], 4345.
It is argued on this appeal that the principle of in pari delicto is not applicable to the vendors for the
reason that the provision of law support to have been violated is not a very clear provision but is a
doubtful one, and its interpretation could have been the subject of mistake on the part of any of the
parties. The constitutional prohibition against the acquisition of agricultural lands by alien in absolute
and unconditional; it contains no saving clause in favor of those who were not aware of its meaning
or implications. The argument of the appellant is a contrary to the general rule of law that knowledge
thereof is to be presumed. The claim that the principle of in pari delicto does not apply to the
plaintiffs is, therefore, without merit.
It is also claimed that, in consonance with the policy of the State to retain lands in favor of its citizens
and prohibiting aliens from acquiring them the vendor in the case at bar should be allowed to recover
back the property in the same manner as holders of homesteads who have disposed of the same as
decided by Us in the case of Eugenio et al. vs. Perdido, et al.1 G. R. No. L-7083, May 19, 1955.
Distinction should be made between the prohibition against the disposition of homesteads and the
prohibition made in the Constitution against the acquisition of lands by aliens. The evident purpose
of the Public Land Law, especially the provisions thereof in relation to homesteads, is to conserve
ownership of lands acquired as homesteads in the homesteader or his heirs. (De los
Santos vs. Roman Catholic Church of Midsayap2 50 Off. Gaz., [4], 1588; Acierto vs. De los
Santos,3G.R. No. L-5828, Sept. 29, 1954; Eugenio et al. vs. Perdido, et al., supra; Angeles, et
al. vs. The Court of Appeals,4 G.R. No. L-11024, Jan. 31, 1958.) This is evident from the provisions

al. vs. The Court of Appeals,4 G.R. No. L-11024, Jan. 31, 1958.) This is evident from the provisions
of the law, such as the prohibition against sale of the homestead within a period of five years from
and after the date of the issuance of the patent or grant, and after five years and before 25 years
after issuance of title without the consent of the Secretary of Agriculture and Natural Resources (C.
A. No. 141, section 118), and the permission granted the homesteader or his legal heirs to
repurchase the land within five years from the date of the conveyance (Id., Sec. 119). In the case of
the constitutional prohibition, the law is silent; it merely prohibits acquisition of land by foreigners.
The prohibition stops there; as to the effects or results of a violation of the prohibition, both with
respect to the citizen selling his land and the alien purchasing or acquiring the same, the
Constitution is silent. If the citizen voluntarily disposes of his property, it would seem too much to
expect that the law should order the return of the property to him. In the United States where a
prohibition similar to our, constitutional prohibition exists, it has been held that the vendor has no
recourse against the vendee despite the alien's disability to hold the property, and that it is only the
State that is entitled by proceedings in the nature of office found to have a forfeiture or escheat
declared against the vendee who is incapable of holding title. (Vasquez vs. Li Seng Giap, et
al.,5 G.R. No. L-3676, January 31, 1955.) As the Constitution is silent as to the effects or
consequences of a sale by a citizen of his land to an alien, and as both the citizen and the alien have
violated the law, none of them should have a recourse against, the other, and it should only be the
State that should be allowed to intervene and determine what is to be done with the property subject
of the violation. We have said that what the State should do or could do in such matters is a matter
of public policy, entirely beyond the scope of judicial authority. (Dinglasan, et al. vs. Lee Bun Ting, et
al.,6 G.R. No. L-5996, June 27, 1956.) While the legislature has not definitely decided what policy
should be followed in cages of violations against, the constitutional prohibition, courts of justice
cannot go beyond by declaring the disposition to be null and void as violative of the Constitution.
We, therefore, feel We are not in a position to concede the remedy prayed for, for which reason the
judgment dismissing the action should be, as it hereby is, affirmed, with costs against the plaintiffs.
Paras, Bengzon, Montemayor, Bautista Angelo, Endencia and Felix, JJ., concur.
Separate Opinions
REYES, J.B.L., J., dissenting:
While the opinion of Justice Labrador is fully supported by authority, I believe the time is ripe for a
revision of the position of the Court in cases of alien land tenures.
For thirteen years since liberation, the Legislature has failed to enact a statute for the escheat of
agricultural lands acquired by aliens in violation of the Constitution. Between this apparent
reluctance of the legislative branch to implement the prohibition embodied in section 5 of Art. XIII of
our fundamental charter, and the strict application by the courts of the pari delicto rule, the result has
been that aliens continue to hold and enjoy lands admittedly acquired contrary to constitutional
prohibitions, just as if the inhibition did not exist.
In view of the prolonged legislative inaction, it is up to the courts to vindicate the Constitution by
declaring the pari delicto rule not applicable to these Transactions. After all, the rule is but an
instrument of the public policy, and its application is justified only in so far as it enforces that policy.
Therefore, where its continued application to a given set of cases leads to results plainly contrary to
the wording and spirit of the Constitution, there is every reason to discard it. Otherwise, the express
rule against alien land tenures will speedily become the object of mockery and derision.
It may be that Filipinos who parted with their lands in favor of aliens morally do not deserve
protection; but they are in no worse case than the alien purchasers, and moreover the Constitution is
clearly in their favor.
I submit that it is more important that the constitutional inhibition be enforced than to wait for another
branch of the government to take the initiative.
Concepcion, J., concurs.
Footnotes
1
97 Phil., 41
2 94 Phil., 405.
3 95 Phil., 887.
4
102 Phil., 1006.
5
96 Phil., 447, 51 Off. Gaz., [2], 717.
6 99 Phil., 427, 52 Off. Gaz, [7], 3566.
Pasted from <http://www.lawphil.net/judjuris/juri1958/may1958/gr_l-10931_1958.html>

Halili v. CA, 287 SCRA 465 (1998)
12:23 AM
Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 113539 March 12, 1998

CELSO R. HALILI and ARTHUR R. HALILI, petitioners,
vs.
COURT OF APPEALS, HELEN MEYERS GUZMAN, DAVID REY GUZMAN and
EMILIANO CATANIAG,respondents.
PANGANIBAN, J.:
The factual findings of a trial court, when affirmed by the Court of Appeals, may no
longer be reviewed and reversed by this Court in a petition for review under Rule 45 of
the Rules of Court. The transfer of an interest in a piece of land to an alien may no longer
be assailed on constitutional grounds after the entire parcel has been sold to a qualified
citizen.
The Case
These familiar and long-settled doctrines are applied by this Court in denying this petition
under Rule 45 to set aside the Decision 1 of the Court of Appeals 2 in CA-GR CV No.
37829 promulgated on September 14, 1993, the dispositive portion of which states: 3
WHEREFORE, and upon all the foregoing, the Decision of the court below dated March
10, 1992 dismissing the complaint for lack of merit is AFFIRMED without pronouncement
as to costs.
The Facts
The factual antecedents, as narrated by Respondent Court, are not disputed by the
parties. We reproduce them in part, as follows:
Simeon de Guzman, an American citizen, died sometime in 1968, leaving real properties
in the Philippines. His forced heirs were his widow, defendant appellee [herein private
respondent] Helen Meyers Guzman, and his son, defendant appellee [also herein private
respondent] David Rey Guzman, both of whom are also American citizens. On August 9,
1989, Helen executed a deed of quitclaim (Annex A-Complaint), assigning [,] transferring
and conveying to David Rey all her rights, titles and interests in and over six parcels of
land which the two of them inherited from Simeon.
Among the said parcels of land is that now in litigation, . . . situated in Bagbaguin, Sta.
Maria, Bulacan, containing an area of 6,695 square meters, covered by Transfer
Certificate of Title No. T-170514 of the Registry of Deeds of Bulacan. The quitclaim
having been registered, TCT No. T-170514 was cancelled and TCT No. T-120259 was
issued in the name of appellee David Rey Guzman.
On February 5, 1991, David Rey Guzman sold said parcel of land to defendant -appellee [also
herein private respondent] Emiliano Cataniag, upon which TCT No. T-120259 was cancelled
and TCT No. T-130721(M) was issued in the latter's name. 4
Petitioners, who are owners of the adjoining lot, filed a complaint before the Regional
Trial Court of Malolos, Bulacan, questioning the constitutionality and validity of the two
conveyances — between Helen Guzman and David Rey Guzman, and between the
latter and Emiliano Cataniag — and claiming ownership thereto based on their right of
legal redemption under Art. 1621 5 of the Civil Code.
In its decision 6 dated March 10, 1992, 7 the trial court dismissed the complaint. It ruled
that Helen Guzman's waiver of her inheritance in favor of her son was not contrary to the
constitutional prohibition against the sale of land to an alien, since the purpose of the
waiver was simply authorize David Rey Guzman to dispose of their properties in
accordance with the Constitution and the laws of the Philippines, and not to subvert
them. On the second issue, it held that the subject land was urban; hence, petitioners
had no reason to invoke their right of redemption under Art. 1621 of the Civil Code.
The Halilis sought a reversal from the Court of Appeals which, however, denied their

appeal. Respondent Court affirmed the factual finding of the trial court that the subject
land was urban. Citing Tejido vs. Zamacoma, 8 andYap vs. Grageda, 9 it further held that,
although the transfer of the land to David Rey may have been invalid for being contrary
to the Constitution, there was no more point in allowing herein petitioners to recover the
property, since it has passed on to and was thus already owned by a qualified person.
Hence, this petition. 10
Issues
The petition submits the following assignment of errors:
. . . the Honorable Court of Appeals —
1. Erred in affirming the conclusion of the trial court that the land in question is urban, not
rural
2. Erred in denying petitioners' right of redemption under Art. 1621 of the Civil Code
3. Having considered the conveyance from Helen Meyers Guzman to her son David Rey
Guzman illegal, erred in not declaring the same null and void[.] 11
The Court's Ruling
The petition has no merit.
First Issue: The Land Is Urban;
Thus, No Right of Redemption
The first two errors assigned by petitioners being interrelated — the determination of the
first being a prerequisite to the resolution of the second — shall be discussed together
Subject Land Is Urban
Whether the land in dispute is rural or urban is a factual question which, as a rule, is not
reviewable by this Court. 12 Basic and long-settled is the doctrine that findings of fact of a
trial judge, when affirmed by the Court of Appeals, are binding upon the Supreme Court.
This admits of only a few exceptions, such as when the findings are grounded entirely on
speculation, surmises or conjectures; when an inference made by the appellate court
from its factual findings is manifestly mistaken, absurd or impossible; when there is grave
abuse of discretion in the appreciation of facts; when the findings of the appellate court
go beyond the issues of the case, run contrary to the admissions of the parties to the
case or fail to notice certain relevant facts which, if properly considered, will justify a
different conclusion; when there is a misappreciation of facts; when the findings of fact
are conclusions without mention of the specific evidence on which they are based, are
premised on the absence of evidence or are contradicted by evidence on record. 13
The instant case does not fall within any of the aforecited exceptions. In fact, the
conclusion of the trial court — that the subject property is urban land — is based on clear
and convincing evidence, as shown in its decision which disposed thus:
. . . As observed by the court, almost all the roadsides along the national ghighway [ sic] of
Bagbaguin, Sta. Maria, Bulacan, are lined up with residential, commercial or industrial
establishments. Lined up along the Bagbaguin Road are factories of feeds, woodcrafts [ sic]
and garments, commercial stores for tires, upholstery materials, feeds supply and spare
parts. Located therein likewise were the Pepsi-Cola Warehouse, the Cruz Hospital, three
gasoline stations, apartment buildings for commercial purposes and construction firms. There
is no doubt, therefore, that the community is a commercial area thriving in business activities.
Only a short portion of said road [is] vacant. It is to be noted that in the Tax Declaration in the
name of Helen Meyers Guzman[,] the subject land is termed agricultural[,] while in the letter
addressed to defendant Emiliano Cataniag, dated October 3, 1991, the Land Regulatory
Board attested that the subject property is commercial and the trend of development along
the road is commercial. The Board's classification is based on the present condition of the
property and the community thereat. Said classification is far more later [ sic] than the tax
declaration. 14
No Ground to Invoke
Right of Redemption
In view of the finding that the subject land is urban in character, petitioners have indeed
no right to invoke Art. 1621 of the Civil Code, which presupposes that the land sought to
be redeemed is rural. The provision is clearly worded and admits of no ambiguity in
construction:
Art. 1621. The owners of adjoining lands shall also have the right of redemption when a
piece of rural land, the area of which does not exceed one hectare, is alienated, unless
the grantee does not own any rural land.
xxx xxx xxx
Under this article, both lands — that sought to be redeemed and the adjacent lot
belonging to the person exercising the right of redemption — must be rural. If one or both
are urban, the right cannot be invoked. 15 The purpose of this provision, which is limited in

are urban, the right cannot be invoked. 15 The purpose of this provision, which is limited in
scope to rural lands not exceeding one hectare, is to favor agricultural
development. 16 The subject land not being rural and, therefore, not agricultural, this
purpose would not be served if petitioners are granted the right of redemption under Art.
1621. Plainly, under the circumstances, they cannot invoke it.
Second Issue: Sale to Cataniag Valid
Neither do we find any reversible error in the appellate court's holding that the sale of the
subject land to Private Respondent Cataniag renders moot any question on the
constitutionally of the prior transfer made by Helen Guzman to her son David Rey.
True, Helen Guzman's deed of quitclaim — in which she assigned, transferred and
conveyed to David Rey all her rights, titles and interests over the property she had
inherited from her husband — collided with the Constitution, Article XII, Section 7 of
which provides:
Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or
conveyed except to individuals, corporations, or associations qualified to acquire or hold
lands of the public domain.
The landmark case of Krivenko vs. Register of Deeds 17 settled the issue as to who are
qualified (and disqualified) to own public as well as private lands in the Philippines.
Following a long discourse maintaining that the "public agricultural lands" mentioned in
Section 1, Article XIII of the 1935 Constitution, include residential, commercial and
industrial lands, the Court then stated:
Under section 1 of Article XIII [now Sec. 2, Art. XII] of the Constitution, "natural
resources, with the exception of public agricultural land, shall not be alienated," and with
respect to public agricultural lands, their alienation is limited to Filipino citizens. But this
constitutional purpose conserving agricultural resources in the hands of Filipino citizens
may easily be defeated by the Filipino citizens themselves who may alienate their
agricultural lands in favor of aliens. It is partly to prevent this result that section 5 is
included in Article XIII, and it reads as follows:
Sec. 5. Save in cases of hereditary succession, no private agricultural land will be
transferred or assigned except to individuals, corporations or associations qualified to
acquire or hold lands of the public domain in the Philippines.
This constitutional provision closes the only remaining avenue through which agricultural
resources may leak into aliens' hands. It would certainly be futile to prohibit the alienation of
public agricultural lands to aliens if, after all, they may be freely so alienated upon their
becoming private agricultural lands in the hands of Filipino citizens. Undoubtedly, as above
indicated, section 5 [now Sec. 7] is intended to insure the policy of nationalization contained
in section 1 [now Sec. 2]. Both sections must, therefore, be read together for they have the
same purpose and the same subject matter. It must be noticed that the persons against
whom the prohibition is directed in section 5 [now Sec. 7] are the very same persons who
under section 1 [now Sec. 2] are disqualified "to acquire or hold lands of the public domain in
the Philippines." And the subject matter of both sections is the same, namely, the non
transferability of "agricultural land" to aliens . . . . 18
The Krivenko rule was recently reiterated in Ong Ching Po vs. Court of Appeals, 19 which
involves a sale of land to a Chinese citizen. The Court sad:
The capacity to acquire private land is made dependent upon the capacity to acquire or
hold lands of the public domain. Private land may be transferred or conveyed only to
individuals or entities "qualified to acquire lands of the public domain" (II Bernas, The
Constitution of the Philippines 439-440 [1988 ed.]).
The 1935 Constitution reserved the right to participate in the "disposition, exploitation,
development and utilization" of all "lands of the public domain and other natural resources of
the Philippines" for Filipino citizens or corporations at least sixty percent of the capital of
which was owned by Filipinos. Aliens, whether individuals or corporations, have been
disqualified from acquiring public lands; hence, they have also been disqualified from
acquiring private lands. 20
In fine, non-Filipinos cannot acquire or hold title to private lands or to lands of the public
domain, except only by way of legal succession. 21
But what is the effect of a subsequent sale by the disqualified alien vendee to a qualified
Filipino citizen? This is not a novel question. Jurisprudence is consistent that "if land is
invalidly transferred to an alien who subsequently becomes a citizen or transfers it to a
citizen, the flaw in the original transaction is considered cured and the title of the
transferee is rendered valid." 22
Thus, in United Church Board of Word Ministries vs. Sebastian, 23 in which an alien
resident who owned properties in the Philippines devised to an American non -stock

resident who owned properties in the Philippines devised to an American non -stock
corporation part of his shares of stock in a Filipino corporation that owned a tract of land
in Davao del Norte, the Court sustained the invalidity of such legacy. However, upon
proof that ownership of the American corporation has passed on to a 100 percent Filipino
corporation, the Court ruled that the defect in the will was "rectified by the subsequent
transfer of the property."
The present case is similar to De Castro vs. Tan. 24 In that case, a residential lot was
sold to a Chinese. Upon his death, his widow and children executed an extrajudicial
settlement, whereby said lot was allotted to one of his sons who became a naturalized
Filipino. The Court did not allow the original vendor to have the sale annulled and to
recover the property, for the reason that the land has since become the property of a
naturalized Filipino citizen who is constitutionally qualified to own land.
Likewise, in the cases of Sarsosa vs. Cuenco, 25 Godinez vs. Pak Luen, 26 Vasquez vs. Li
Seng Giap 27 andHerrera vs. Luy Kim Guan, 28 which similarly involved the sale of land to
an alien who thereafter sold the same to a Filipino citizen, the Court again applied the
rule that the subsequent sale can no longer be impugned on the basis of the invalidity of
the initial transfer.
The rationale of this principle was explained in Vasquez vs. Li Seng Giap thus:
. . . [I]f the ban on aliens from acquiring not only agricultural but also urban lands, as
construed by this Court in the Krivenko case, is to preserve the nation's lands for future
generations of Filipinos, that aim or purpose would not be thwarted but achieved by making
29
lawful the acquisition of real estate by aliens who became Filipino citizens by naturalization.
Accordingly, since the disputed land is now owned by Private Respondent Cataniag, a
Filipino citizen, the prior invalid transfer can no longer be assailed. The objective of the
constitutional provision — to keep our land in Filipino hands — has been served.
WHEREFORE, the petition is hereby DENIED. The challenged Decision is AFFIRMED.
Costs against petitioner.
SO ORDERED.
Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.
Footnotes
1 Rollo, pp. 19-30.
2 Ninth Division, composed of JJ. Cezar D. Francisco, ponente; Gloria C. Paras
(chairman) and Buenaventura J. Guerrero, concurring.
3 Assailed Decision, p. 12; rollo, p. 30.
4 Assailed Decision, p. 2; rollo, p. 20.
5 Art. 1621. The owners of adjoining lands shall also have the right of redemption when a
piece of rural land, the area of which does not exceed one hectare, is alienated, unless
the grantee does not own any rural land.
This right is not applicable to adjacent lands which are separated by brooks, drains,
ravines, roads and other apparent servitudes for the benefit of other estates.
If two or more adjoining owners desire to exercise the right of redemption at the same
time, the owner of the adjoining land of smaller area shall be preferred; and should both
lands have the same area, the one who first requested the redemption.
6 CA Rollo, pp. 29-31.
7 Penned by Judge Valentin R. Cruz.
8 138 SCRA 78, August 7, 1985.
9 121 SCRA 244, March 28, 1983.
10 This case was considered submitted for resolution upon receipt by this Court of
petitioners' memorandum on November 8, 1996.
11 Petition, p. 6; rollo, p. 12.
12 First Philippine International Bank vs. Court of Appeals, 252 SCRA 259, January 24,
1996.
13 Fuentes vs. Court of Appeals, 268 SCRA 703, February 26, 1997; Geronimo vs.
Court of Appeals, 224 SCRA 494, July 5, 1993. See also Lacanilao vs. Court of Appeals,
262 SCRA 486, September 26, 1996; Verendia vs. Court of Appeals, 217 SCRA 417,
January 22, 1993.
14 RTC decision, p.3; CA rollo, p. 31.
15 Tolentino, ibid.; Cortes vs. Flores, 47 Phil 1992, September 6, 1924.
16 Tolentino, Civil Code of the Philippines, 1992 ed., Vol. V, p. 182; Del Pilar vs.
Catindig, 35 Phil 263, November 4, 1916.
17 79 Phil 461, November 15, 1947, per Moran, CJ.
18 Ibid., pp. 473-474.

18 Ibid., pp. 473-474.
19 239 SCRA 341, December 20, 1994, per Quiason, J.
20 At p. 346.
21 Cf. Ramirez vs. Vda. de Ramirez, 111 SCRA 704, February 15, 1982.
22 United Church Board of World Ministries vs. Sebastian, 159 SCRA 446, 451 -452,
March 30, 1988; per Cruz, J. See also Tejido vs. Zamacoma, 138 SCRA 78, August 7,
1985; Sarsosa vda. de Barsobia vs. Cuenco, 113 SCRA 547, April 16, 1982; Godinez vs
Fong Pak Luen, 120 SCRA 223, January 27, 1983; Yap vs. Maravillas, 121 SCRA 244,
March 28, 1983; De Castro vs. Tan, 129 SCRA 85, April 30, 1984.
23 Ibid.
24 Supra.
25 Supra.
26 Supra.
27 96 Phil 447, January 31, 1955, per Padilla, J.
28 1 SCRA 406, January 31, 1961, per Barrera, J.
29 Supra, p. 453.
Pasted from <http://www.lawphil.net/judjuris/juri1998/mar1998/gr_113539_1998.html>

Article XII, secs. 2, 3, 5, 7, 10, 16
12:36 AM
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,
all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and utilization of natural resources
shall be under the full control and supervision of the State. The State may directly undertake such
activities, or it may enter into co-production, joint venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at least 60 per centum of whose capital is owned by
such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for
not more than twenty-five years, and under such terms and conditions as may provided by law. In
cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the
development of waterpower, beneficial use may be the measure and limit of the grant.
The State shall protect the nations marine wealth in its archipelagic waters, territorial sea, and
exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as
well as cooperative fish farming, with priority to subsistence fishermen and fish workers in rivers,
lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned corporations involving either technical
or financial assistance for large-scale exploration, development, and utilization of minerals,
petroleum, and other mineral oils according to the general terms and conditions provided by law,
based on real contributions to the economic growth and general welfare of the country. In such
agreements, the State shall promote the development and use of local scientific and technical
resources.
The President shall notify the Congress of every contract entered into in accordance with this
provision, within thirty days from its execution.
Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands
and national parks. Agricultural lands of the public domain may be further classified by law according
to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to
agricultural lands. Private corporations or associations may not hold such alienable lands of the
public domain except by lease, for a period not exceeding twenty-five years, renewable for not more
than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines
may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof,
by purchase, homestead, or grant.
Taking into account the requirements of conservation, ecology, and development, and subject to the
requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public
domain which may be acquired, developed, held, or leased and the conditions therefor.
Section 5. The State, subject to the provisions of this Constitution and national development policies
and programs, shall protect the rights of indigenous cultural communities to their ancestral lands to
ensure their economic, social, and cultural well-being.
The Congress may provide for the applicability of customary laws governing property rights or
relations in determining the ownership and extent of ancestral domain.
Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed
except to individuals, corporations, or associations qualified to acquire or hold lands of the public
domain.
Section 10. The Congress shall, upon recommendation of the economic and planning agency, when
the national interest dictates, reserve to citizens of the Philippines or to corporations or associations
at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as

at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as
Congress may prescribe, certain areas of investments. The Congress shall enact measures that will
encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy and patrimony, the
State shall give preference to qualified Filipinos.
The State shall regulate and exercise authority over foreign investments within its national
jurisdiction and in accordance with its national goals and priorities.
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.

Chavez vs. Public Estates Authority and Amari Coastal Bay
Development Authority, G.R. 133250, July 9, 2002.
12:41 AM
CHAVEZ V PEA and AMARI (2002)
Ow nership by a private corporation

Right to Information
CHAVEZ V PUBLIC ESTATES AUTHORITY AND AMARI COASTAL BAY

CARPIO; July 9, 2002
FACTS
- Nature original Petition for Mandamus with prayer for writ of preliminary injunction and a temporary restraining order. Petition also seeks to compel the Public
Estates Authority (PEA) to disclose all facts on PEA’s then on-going renegotiations with Amari Coastal Bay and Development Corporation to reclaim portions of
Manila Bay . The petition further seeks to enjoin PEA from signing a new agreement with AMARI involv ing such recalamtion.
- 1973-The gov ernment through the Commission of Public Highways signed a contract with the Construction and Development Corporation of the Philippines
(CDCP) to reclaim certain foreshore and offshore areas of Manila Bay
- 1977-President Marcos issued Presidential Decree No. 1084 creating the PEA. And was tasked to reclaim land, including foreshore and submerged areas and
to dev elop, improve, acquire x x x lease and sell any and all kinds of lands. On the same date, President Marcos issued PD. 1085 transferring to PEA the lands
reclaimed in the foreshore and offshore of the Manila Bay under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP)
- 1981-Pres. Marcos issued a memorandum ordering PEA to amend its contract with CDCP whic h stated that CDCP shall transfer in favor of PEA the areas
reclaimed by CDCP in the MCCRRP
- 1988-President Aquino issued Special Patent granting and transferring to PEA parcels of land so reclaimed under the MCCRRP. Subsequently she transferred
in the name of PEA the three reclaimed islands known as the “Freedom Islands”
- 1995-PEA entered into a Joint Venture Agreement (JVA) w ith AMARI, a private corporation, to develop the Freedom Islands and this was done without public
bidding
- President Ramos through Executive Secretary Ruben Torres approved the JVA
- 1996-Senate President Maceda delivered a privileged speech in the Senate and denounced the JVA as the “grandmother of all scams”. As a result,
inv estigations were conducted by the Senate. Among the conclusions were: (1) the reclaimed lands PEA seeks to transfer to AMARI under the JVA are lands of
the public domain w hich the government has not classified as alienable lands and therefore PEA cannot alienate these lands; (2) the certificates of the title
cov ering the Freedom Islands are thus void, and (3) the JVA itself is illegal
- 1997-President Ramos created the Legal Task Force to conduct a study on the legality of the JVA in v iew of the Senate Committee report.1998-The Philippine
Daily Inquirer published reports on on-going renegotiations between PEA and AMARI
- PEA Director Nestor Kalaw and PEA Chairman Arsenio Yulo and former navy officer Sergio Cruz were members of the negotiating panel
- Frank Chav ez filed petition for Mandamus stating that the gov ernment stands to lose billions of pesos in the sale by PEA of the reclaimed lands to AMARI and
pray s that PEA publicly disclose the terms of the renegotiations of JVA. He cited that the sale to AMARI is in v iolation of Article 12, Sec. 3 prohibiting sale of
alienable lands of the public domain to priv ate corporations and Article 2 Section 28 and Article 3 Sec. 7 of the Constitution on the right to information on matters
of public concern
- 1999-PEA and AMARI signed Amended JVA which Pres. Estrada approved
ISSUES
1. WON the principal reliefs pray ed for in the petition are moot and academic because subsequent events
2. WON the petition merits dismissal for failure to observe the principle governing the hierarchy of courts
3. WON the petition merits dismissal for non-exhaustion of administrative-remedies
4. WON petitioner has locus standi to bring this suit
5. WON the constitutional right to information includes official information on on-going negotiations before a final agreement
6. WON the stipulations in the amended joint v enture agreement for the transfer to amari of certain lands, reclaimed and still to be reclaimed, violate the 1987
consitution; and
7. WON the court is the proper forum for raising the issue of w hether the amended joint v enture agreement is grossly disadvantageuos to the gov ernment.
o threshold issue: whether amari, a private corporation, can acquire and own under the amended jv a 367.5 hectares of reclaimedfroeshore and
submerged area in manila bay in view of sections 2 and 3, article 12 of the 1987 constitution
HELD
(1) The pray er to enjoin the signing of the Amended JVA on constitutional grounds necessarily includes preventing its implementation if in the meantime PEA and
AMARI hav e signed one in violation of the Constitution and if already implemented, to annul the effects of an unconstitutional contract
(2) The principle of hierarchy of courts applies generally to cases involv ing factual questions
Reasoning the instant case raises constitutional issues of transcendental importance to the public
(3) The principle of ex haustion of administrative remedies does not apply when the issue involv ed is a purely legal or constitutional question
(4) Petitioner has standing if petition is of transcendental public importance and as such, there is the right of a citizen to bring a tax payer’s suit on these matters
of transcendental public importance
(5) The constitutional right to information includes official information on on-going negotiations before a final contract and must therefore constitute definite
propositions by the government and should not cover recognized exceptions like priv ileged information, military and diplomatic secrets and similar matters
affecting national security and public order
Reasoning The State policy of full transparency in all transactions involv ing public interest reinforces the people’s right to information on matters of public
concern. PEA must prepare all the data and disclose them to the public at the start of the disposition process, long before the consummation of the contract.
While the ev aluation or rev iew is on-going, there are no “official acts, transactions, or decisions” on the bids or proposals but once the committee makes its
official recommendation, there arises a definite proposition on the part of the gov ernment
(6) In a form of a summary :
o The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are
alienable lands of the public domain. PEA may lease these lands to private corporations but may not sell or transfer ow nership of
these lands to priv ate corporations. PEA may only sell these lands to Philippine citizens, subject to ow nership limitations in the 1987

these lands to priv ate corporations. PEA may only sell these lands to Philippine citizens, subject to ow nership limitations in the 1987
Constitution and ex isting laws.
o The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain and outside the
commerce of man until classified as alienable or disposable lands open to disposition and declared no longer needed for public
serv ice. The government can make such classification and declaration only after PEA has reclaimed these submerged areas. Only
then can these lands qualify as agricultural lands of the public domain, which are the only natural resources the government can
alienate.
o Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34 hectares of the Freedom Islands,
such transfer is v oid for being contrary to Section 3, Article 12 of the 1987 Constitution w hich prohibits private corporations from
acquiring any kind of alienable land of the public domain
o Since the Amended JVA also seeks to transfer to AMARI ow nership of 290.156 hectares of still submerged areas of Manila Bay,
such transfer is v oid for being contrary to Section 2, Article 12 of the 1987 Constitution w hich prohibits the alienation of natural
resources other than agricultural lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the gov ernment
can classify the reclaimed lands as alienable or disposable, and further declare them no longer needed for public services. Still, the
transfer of such reclaimed alienable lands of the public domain to AMARI will be void in view of Section 3, Article 12 which prohibits
priv ate corporations from acquiring any kind of alienable land of the public domain.
Reasoning Commonwealth Act 141 of the Philippine National Assembly empowers the president to classify lands of the public domain into alienable or
disposable” sec. 6. The President, upon recommendation of the Secretary of Agriculture and Commerce, shall from time to time classify the lands of the public
domain into—(a) Alienable of disposable, (b) timber, and (c) mineral lands.-The President must first officially classify these lands as alienable or disposable, and
then declare them open to disposition or concession.
-Sec. 59 states that the lands disposable under this title shall be classified as follows: (a) Lands reclaim ed by the Government by dredging, filling, or other
means; (b) Foreshore; (c) Marshy lands (d) Lands not included in any of the foregoing classes. -Sec. 61 states that the lands comprised in classes (a), (b) and (c)
of section 59 shall be disposed f to private parties by lease only and not otherwise
-After the effectiv ity of the 1935 Constitution, gov ernment reclaimed and marshy disposable lands of the public domain continued to be only leased and not sold
to priv ate parties. These lands remained suis generic as the only alienable or disposable lands of the public domain the government could not sell to priv ate
parties. The only way that the gov ernment can sell to private parties government reclaimed and marshy disposable lands of the public domain is for the
legislature to pass a law authorizing such sale.
-in case of sale or lease of disposable lands of the public domain, a public bidding is required
-1987 Constitution declares that all natural resources are owned by the State. With the ex ception of agricultural lands, all other natural resources shall not be
alienated. Article 12, Sec. 3 states that alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not
hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and
not to exceed one thousand hectares in area.
-ration behind the ban on corporations from acquiring except through lease is not well understood. If the purpose is to equitably diffuse lands ownership then the
Consti could hav e simply limited the size of alienable lands of the public domain that corporations could acquire. If the intent w as to encourage “owner-
cultiv atorship and the economic family-size farm and to prevent a recurrence of cases like the instant case, then placing the land in the name of a corporation
w ould be more effective in preventing the break-up of farmlands. If the farmland is registered in the name of a corporation, upon the death of the ow ner, his heirs
w ould inherit shares in the corporation instead of subdivided parcels of the farmland. This would prevent the continuing break-up of farmlands into smaller and
smaller plots from one generation to the nex t. In actual practice then, this ban strengthens the consti limitation on individuals from acquiring more than the
allow ed area of alienable lands of the public domain. Without the ban, indiv iduals who already acquired the maximum area of alienable lands of the public
domain could easily set up corporations to acquire more alienable public lands. An individual could own as many corporations as his means would allow him. He
could ev en hide his ownership of a corporation by putting his nominees as stockholders of the corporation.

SUPREME COURT
Manila
EN BANC
G.R. No. 133250 July 9, 2002
FRANCISCO I. CHAVEZ, petitioner,
vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents.
CARPIO, J.:
This is an original Petition for Mandamus with prayer for a writ of preliminary injunction and a
temporary restraining order. The petition seeks to compel the Public Estates Authority ("PEA" for
brevity) to disclose all facts on PEA's then on-going renegotiations with Amari Coastal Bay and
Development Corporation ("AMARI" for brevity) to reclaim portions of Manila Bay. The petition
further seeks to enjoin PEA from signing a new agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the Commissioner of Public Highways, signed a
contract with the Construction and Development Corporation of the Philippines ("CDCP" for brevity)
to reclaim certain foreshore and offshore areas of Manila Bay. The contract also included the
construction of Phases I and II of the Manila-Cavite Coastal Road. CDCP obligated itself to carry out
all the works in consideration of fifty percent of the total reclaimed land.
On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. 1084
creating PEA. PD No. 1084 tasked PEA "to reclaim land, including foreshore and submerged areas,"
and "to develop, improve, acquire, x x x lease and sell any and all kinds of lands." 1 On the same
date, then President Marcos issued Presidential Decree No. 1085 transferring to PEA the "lands
reclaimed in the foreshore and offshore of the Manila Bay" 2 under the Manila-Cavite Coastal Road
and Reclamation Project (MCCRRP).
On December 29, 1981, then President Marcos issued a memorandum directing PEA to amend its

and Reclamation Project (MCCRRP).
On December 29, 1981, then President Marcos issued a memorandum directing PEA to amend its
contract with CDCP, so that "[A]ll future works in MCCRRP x x x shall be funded and owned by
PEA." Accordingly, PEA and CDCP executed a Memorandum of Agreement dated December 29,
1981, which stated:
"(i) CDCP shall undertake all reclamation, construction, and such other works in the MCCRRP as
may be agreed upon by the parties, to be paid according to progress of works on a unit price/lump
sum basis for items of work to be agreed upon, subject to price escalation, retention and other terms
and conditions provided for in Presidential Decree No. 1594. All the financing required for such
works shall be provided by PEA.
xx x
(iii) x x x CDCP shall give up all its development rights and hereby agrees to cede and transfer in
favor of PEA, all of the rights, title, interest and participation of CDCP in and to all the areas of land
reclaimed by CDCP in the MCCRRP as of December 30, 1981 which have not yet been sold,
transferred or otherwise disposed of by CDCP as of said date, which areas consist of approximately
Ninety-Nine Thousand Four Hundred Seventy Three (99,473) square meters in the Financial Center
Area covered by land pledge No. 5 and approximately Three Million Three Hundred Eighty Two
Thousand Eight Hundred Eighty Eight (3,382,888) square meters of reclaimed areas at varying
elevations above Mean Low Water Level located outside the Financial Center Area and the First
Neighborhood Unit."3
On January 19, 1988, then President Corazon C. Aquino issued Special Patent No. 3517, granting
and transferring to PEA "the parcels of land so reclaimed under the Manila-Cavite Coastal Road and
Reclamation Project (MCCRRP) containing a total area of one million nine hundred fifteen thousand
eight hundred ninety four (1,915,894) square meters." Subsequently, on April 9, 1988, the Register
of Deeds of the Municipality of Parañaque issued Transfer Certificates of Title Nos. 7309, 7311, and
7312, in the name of PEA, covering the three reclaimed islands known as the "Freedom Islands"
located at the southern portion of the Manila-Cavite Coastal Road, Parañaque City. The Freedom
Islands have a total land area of One Million Five Hundred Seventy Eight Thousand Four Hundred
and Forty One (1,578,441) square meters or 157.841 hectares.
On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for brevity) with AMARI, a
private corporation, to develop the Freedom Islands. The JVA also required the reclamation of an
additional 250 hectares of submerged areas surrounding these islands to complete the configuration
in the Master Development Plan of the Southern Reclamation Project-MCCRRP. PEA and AMARI
entered into the JVA through negotiation without public bidding. 4 On April 28, 1995, the Board of
Directors of PEA, in its Resolution No. 1245, confirmed the JVA.5 On June 8, 1995, then President
Fidel V. Ramos, through then Executive Secretary Ruben Torres, approved the JVA. 6
On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege speech in the
Senate and denounced the JVA as the "grandmother of all scams." As a result, the Senate
Committee on Government Corporations and Public Enterprises, and the Committee on
Accountability of Public Officers and Investigations, conducted a joint investigation. The Senate
Committees reported the results of their investigation in Senate Committee Report No. 560 dated
September 16, 1997.7 Among the conclusions of their report are: (1) the reclaimed lands PEA seeks
to transfer to AMARI under the JVA are lands of the public domain which the government has not
classified as alienable lands and therefore PEA cannot alienate these lands; (2) the certificates of
title covering the Freedom Islands are thus void, and (3) the JVA itself is illegal.
On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative Order No.
365 creating a Legal Task Force to conduct a study on the legality of the JVA in view of Senate
Committee Report No. 560. The members of the Legal Task Force were the Secretary of
Justice,8 the Chief Presidential Legal Counsel,9 and the Government Corporate Counsel.10 The Legal
Task Force upheld the legality of the JVA, contrary to the conclusions reached by the Senate
Committees.11
On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that there were on-
going renegotiations between PEA and AMARI under an order issued by then President Fidel V.
Ramos. According to these reports, PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and
retired Navy Officer Sergio Cruz composed the negotiating panel of PEA.
On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition with Application
for the Issuance of a Temporary Restraining Order and Preliminary Injunction docketed as G.R. No.
132994 seeking to nullify the JVA. The Court dismissed the petition "for unwarranted disregard of
judicial hierarchy, without prejudice to the refiling of the case before the proper court." 12
On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer, filed the
instant Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction and
Temporary Restraining Order. Petitioner contends the government stands to lose billions of pesos in
the sale by PEA of the reclaimed lands to AMARI. Petitioner prays that PEA publicly disclose the
terms of any renegotiation of the JVA, invoking Section 28, Article II, and Section 7, Article III, of the

terms of any renegotiation of the JVA, invoking Section 28, Article II, and Section 7, Article III, of the
1987 Constitution on the right of the people to information on matters of public concern. Petitioner
assails the sale to AMARI of lands of the public domain as a blatant violation of Section 3, Article XII
of the 1987 Constitution prohibiting the sale of alienable lands of the public domain to private
corporations. Finally, petitioner asserts that he seeks to enjoin the loss of billions of pesos in
properties of the State that are of public dominion.
After several motions for extension of time,13 PEA and AMARI filed their Comments on October 19,
1998 and June 25, 1998, respectively. Meanwhile, on December 28, 1998, petitioner filed an
Omnibus Motion: (a) to require PEA to submit the terms of the renegotiated PEA-AMARI contract;
(b) for issuance of a temporary restraining order; and (c) to set the case for hearing on oral
argument. Petitioner filed a Reiterative Motion for Issuance of a TRO dated May 26, 1999, which the
Court denied in a Resolution dated June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave due course to the petition and required the
parties to file their respective memoranda.
On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement ("Amended
JVA," for brevity). On May 28, 1999, the Office of the President under the administration of then
President Joseph E. Estrada approved the Amended JVA.
Due to the approval of the Amended JVA by the Office of the President, petitioner now prays that on
"constitutional and statutory grounds the renegotiated contract be declared null and void." 14
The Issues
The issues raised by petitioner, PEA15 and AMARI16 are as follows:
I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE MOOT AND
ACADEMIC BECAUSE OF SUBSEQUENT EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO OBSERVE THE PRINCIPLE
GOVERNING THE HIERARCHY OF COURTS;
III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION OF
ADMINISTRATIVE REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT;
V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES OFFICIAL
INFORMATION ON ON-GOING NEGOTIATIONS BEFORE A FINAL AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE AGREEMENT FOR
THE TRANSFER TO AMARI OF CERTAIN LANDS, RECLAIMED AND STILL TO BE RECLAIMED,
VIOLATE THE 1987 CONSTITUTION; AND
VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE ISSUE OF WHETHER
THE AMENDED JOINT VENTURE AGREEMENT IS GROSSLY DISADVANTAGEOUS TO THE
GOVERNMENT.
The Court's Ruling
First issue: whether the principal reliefs prayed for in the petition are moot and academic
because of subsequent events.
The petition prays that PEA publicly disclose the "terms and conditions of the on-going negotiations
for a new agreement." The petition also prays that the Court enjoin PEA from "privately entering into,
perfecting and/or executing any new agreement with AMARI."
PEA and AMARI claim the petition is now moot and academic because AMARI furnished petitioner
on June 21, 1999 a copy of the signed Amended JVA containing the terms and conditions agreed
upon in the renegotiations. Thus, PEA has satisfied petitioner's prayer for a public disclosure of the
renegotiations. Likewise, petitioner's prayer to enjoin the signing of the Amended JVA is now moot
because PEA and AMARI have already signed the Amended JVA on March 30, 1999. Moreover, the
Office of the President has approved the Amended JVA on May 28, 1999.
Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply fast-tracking
the signing and approval of the Amended JVA before the Court could act on the issue. Presidential
approval does not resolve the constitutional issue or remove it from the ambit of judicial review.
We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the President
cannot operate to moot the petition and divest the Court of its jurisdiction. PEA and AMARI have still
to implement the Amended JVA. The prayer to enjoin the signing of the Amended JVA on
constitutional grounds necessarily includes preventing its implementation if in the meantime PEA
and AMARI have signed one in violation of the Constitution. Petitioner's principal basis in assailing
the renegotiation of the JVA is its violation of Section 3, Article XII of the Constitution, which prohibits
the government from alienating lands of the public domain to private corporations. If the Amended
JVA indeed violates the Constitution, it is the duty of the Court to enjoin its implementation, and if
already implemented, to annul the effects of such unconstitutional contract.
The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title and
ownership to 367.5 hectares of reclaimed lands and submerged areas of Manila Bay to a
single private corporation. It now becomes more compelling for the Court to resolve the issue to

single private corporation. It now becomes more compelling for the Court to resolve the issue to
insure the government itself does not violate a provision of the Constitution intended to safeguard
the national patrimony. Supervening events, whether intended or accidental, cannot prevent the
Court from rendering a decision if there is a grave violation of the Constitution. In the instant case, if
the Amended JVA runs counter to the Constitution, the Court can still prevent the transfer of title and
ownership of alienable lands of the public domain in the name of AMARI. Even in cases where
supervening events had made the cases moot, the Court did not hesitate to resolve the legal or
constitutional issues raised to formulate controlling principles to guide the bench, bar, and the
public.17
Also, the instant petition is a case of first impression. All previous decisions of the Court involving
Section 3, Article XII of the 1987 Constitution, or its counterpart provision in the 1973
Constitution,18 covered agricultural lands sold to private corporations which acquired the lands from
private parties. The transferors of the private corporations claimed or could claim the right to judicial
confirmation of their imperfect titles19 under Title II of Commonwealth Act. 141 ("CA No. 141" for
brevity). In the instant case, AMARI seeks to acquire from PEA, a public corporation, reclaimed
lands and submerged areas for non-agricultural purposes by purchase under PD No. 1084
(charter of PEA) and Title III of CA No. 141. Certain undertakings by AMARI under the Amended
JVA constitute the consideration for the purchase. Neither AMARI nor PEA can claim judicial
confirmation of their titles because the lands covered by the Amended JVA are newly reclaimed or
still to be reclaimed. Judicial confirmation of imperfect title requires open, continuous, exclusive and
notorious occupation of agricultural lands of the public domain for at least thirty years since June 12,
1945 or earlier. Besides, the deadline for filing applications for judicial confirmation of imperfect title
expired on December 31, 1987.20
Lastly, there is a need to resolve immediately the constitutional issue raised in this petition because
of the possible transfer at any time by PEA to AMARI of title and ownership to portions of the
reclaimed lands. Under the Amended JVA, PEA is obligated to transfer to AMARI the latter's seventy
percent proportionate share in the reclaimed areas as the reclamation progresses. The Amended
JVA even allows AMARI to mortgage at any time the entire reclaimed area to raise financing for the
reclamation project.21
Second issue: whether the petition merits dismissal for failing to observe the principle
governing the hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly from the
Court. The principle of hierarchy of courts applies generally to cases involving factual questions. As
it is not a trier of facts, the Court cannot entertain cases involving factual issues. The instant case,
however, raises constitutional issues of transcendental importance to the public. 22 The Court can
resolve this case without determining any factual issue related to the case. Also, the instant case is a
petition for mandamus which falls under the original jurisdiction of the Court under Section 5, Article
VIII of the Constitution. We resolve to exercise primary jurisdiction over the instant case.
Third issue: whether the petition merits dismissal for non-exhaustion of administrative
remedies.
PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly certain
information without first asking PEA the needed information. PEA claims petitioner's direct resort to
the Court violates the principle of exhaustion of administrative remedies. It also violates the rule that
mandamus may issue only if there is no other plain, speedy and adequate remedy in the ordinary
course of law.
PEA distinguishes the instant case from Tañada v. Tuvera 23 where the Court granted the petition for
mandamus even if the petitioners there did not initially demand from the Office of the President the
publication of the presidential decrees. PEA points out that in Tañada, the Executive Department
had an affirmative statutory duty under Article 2 of the Civil Code 24 and Section 1 of
Commonwealth Act No. 63825 to publish the presidential decrees. There was, therefore, no need for
the petitioners in Tañada to make an initial demand from the Office of the President. In the instant
case, PEA claims it has no affirmative statutory duty to disclose publicly information about its
renegotiation of the JVA. Thus, PEA asserts that the Court must apply the principle of exhaustion of
administrative remedies to the instant case in view of the failure of petitioner here to demand initially
from PEA the needed information.
The original JVA sought to dispose to AMARI public lands held by PEA, a government corporation.
Under Section 79 of the Government Auditing Code,26 the disposition of government lands to private
parties requires public bidding. PEA was under a positive legal duty to disclose to the public the
terms and conditions for the sale of its lands. The law obligated PEA to make this public
disclosure even without demand from petitioner or from anyone. PEA failed to make this public
disclosure because the original JVA, like the Amended JVA, was the result of a negotiated
contract, not of a public bidding. Considering that PEA had an affirmative statutory duty to make the
public disclosure, and was even in breach of this legal duty, petitioner had the right to seek direct

public disclosure, and was even in breach of this legal duty, petitioner had the right to seek direct
judicial intervention.
Moreover, and this alone is determinative of this issue, the principle of exhaustion of administrative
remedies does not apply when the issue involved is a purely legal or constitutional question. 27 The
principal issue in the instant case is the capacity of AMARI to acquire lands held by PEA in view of
the constitutional ban prohibiting the alienation of lands of the public domain to private corporations.
We rule that the principle of exhaustion of administrative remedies does not apply in the instant
case.
Fourth issue: whether petitioner has locus standi to bring this suit
PEA argues that petitioner has no standing to institute mandamus proceedings to enforce his
constitutional right to information without a showing that PEA refused to perform an affirmative duty
imposed on PEA by the Constitution. PEA also claims that petitioner has not shown that he will
suffer any concrete injury because of the signing or implementation of the Amended JVA. Thus,
there is no actual controversy requiring the exercise of the power of judicial review.
The petitioner has standing to bring this taxpayer's suit because the petition seeks to compel PEA to
comply with its constitutional duties. There are two constitutional issues involved here. First is the
right of citizens to information on matters of public concern. Second is the application of a
constitutional provision intended to insure the equitable distribution of alienable lands of the public
domain among Filipino citizens. The thrust of the first issue is to compel PEA to disclose publicly
information on the sale of government lands worth billions of pesos, information which the
Constitution and statutory law mandate PEA to disclose. The thrust of the second issue is to prevent
PEA from alienating hundreds of hectares of alienable lands of the public domain in violation of the
Constitution, compelling PEA to comply with a constitutional duty to the nation.
Moreover, the petition raises matters of transcendental importance to the public. In Chavez v.
PCGG,28 the Court upheld the right of a citizen to bring a taxpayer's suit on matters of transcendental
importance to the public, thus -
"Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the Marcoses is an
issue of 'transcendental importance to the public.' He asserts that ordinary taxpayers have a right to
initiate and prosecute actions questioning the validity of acts or orders of government agencies or
instrumentalities, if the issues raised are of 'paramount public interest,' and if they 'immediately affect
the social, economic and moral well being of the people.'
Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest, when the
proceeding involves the assertion of a public right, such as in this case. He invokes several
decisions of this Court which have set aside the procedural matter of locus standi, when the subject
of the case involved public interest.
xx x
In Tañada v. Tuvera, the Court asserted that when the issue concerns a public right and the object
of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real
parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in
the execution of the laws, he need not show that he has any legal or special interest in the result of
the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on
matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution, in
connection with the rule that laws in order to be valid and enforceable must be published in the
Official Gazette or otherwise effectively promulgated. In ruling for the petitioners' legal standing, the
Court declared that the right they sought to be enforced 'is a public right recognized by no less than
the fundamental law of the land.'
Legaspi v. Civil Service Commission, while reiterating Tañada, further declared that 'when a
mandamus proceeding involves the assertion of a public right, the requirement of personal interest is
satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general 'public' which
possesses the right.'
Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been
involved under the questioned contract for the development, management and operation of the
Manila International Container Terminal, 'public interest [was] definitely involved considering the
important role [of the subject contract] . . . in the economic development of the country and the
magnitude of the financial consideration involved.' We concluded that, as a consequence, the
disclosure provision in the Constitution would constitute sufficient authority for upholding the
petitioner's standing.
Similarly, the instant petition is anchored on the right of the people to information and access to
official records, documents and papers — a right guaranteed under Section 7, Article III of the 1987
Constitution. Petitioner, a former solicitor general, is a Filipino citizen. Because of the satisfaction of
the two basic requisites laid down by decisional law to sustain petitioner's legal standing, i.e. (1) the
enforcement of a public right (2) espoused by a Filipino citizen, we rule that the petition at bar should
be allowed."

be allowed."
We rule that since the instant petition, brought by a citizen, involves the enforcement of constitutional
rights - to information and to the equitable diffusion of natural resources - matters of transcendental
public importance, the petitioner has the requisite locus standi.
Fifth issue: whether the constitutional right to information includes official information on on-
going negotiations before a final agreement.
Section 7, Article III of the Constitution explains the people's right to information on matters of public
concern in this manner:
"Sec. 7. The right of the people to information on matters of public concern shall be recognized.
Access to official records, and to documents, and papers pertaining to official acts,
transactions, or decisions, as well as to government research data used as basis for policy
development, shall be afforded the citizen, subject to such limitations as may be provided by law."
(Emphasis supplied)
The State policy of full transparency in all transactions involving public interest reinforces the
people's right to information on matters of public concern. This State policy is expressed in Section
28, Article II of the Constitution, thus:
"Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements
a policy of full public disclosure of all its transactions involving public interest." (Emphasis
supplied)
These twin provisions of the Constitution seek to promote transparency in policy-making and in the
operations of the government, as well as provide the people sufficient information to exercise
effectively other constitutional rights. These twin provisions are essential to the exercise of freedom
of expression. If the government does not disclose its official acts, transactions and decisions to
citizens, whatever citizens say, even if expressed without any restraint, will be speculative and
amount to nothing. These twin provisions are also essential to hold public officials "at all times x x x
accountable to the people,"29 for unless citizens have the proper information, they cannot hold public
officials accountable for anything. Armed with the right information, citizens can participate in public
discussions leading to the formulation of government policies and their effective implementation. An
informed citizenry is essential to the existence and proper functioning of any democracy. As
explained by the Court in Valmonte v. Belmonte, Jr.30 –
"An essential element of these freedoms is to keep open a continuing dialogue or process of
communication between the government and the people. It is in the interest of the State that the
channels for free political discussion be maintained to the end that the government may perceive
and be responsive to the people's will. Yet, this open dialogue can be effective only to the extent that
the citizenry is informed and thus able to formulate its will intelligently. Only when the participants in
the discussion are aware of the issues and have access to information relating thereto can such
bear fruit."
PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the right to information
is limited to "definite propositions of the government." PEA maintains the right does not include
access to "intra-agency or inter-agency recommendations or communications during the stage when
common assertions are still in the process of being formulated or are in the 'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage or before
the closing of the transaction. To support its contention, AMARI cites the following discussion in the
1986 Constitutional Commission:
"Mr. Suarez. And when we say 'transactions' which should be distinguished from contracts,
agreements, or treaties or whatever, does the Gentleman refer to the steps leading to the
consummation of the contract, or does he refer to the contract itself?
Mr. Ople: The 'transactions' used here, I suppose is generic and therefore, it can cover both
steps leading to a contract and already a consummated contract, Mr. Presiding Officer.
Mr. Suarez: This contemplates inclusion of negotiations leading to the consummation of the
transaction.
Mr. Ople: Yes, subject only to reasonable safeguards on the national interest.
Mr. Suarez: Thank you."32 (Emphasis supplied)
AMARI argues there must first be a consummated contract before petitioner can invoke the right.
Requiring government officials to reveal their deliberations at the pre-decisional stage will degrade
the quality of decision-making in government agencies. Government officials will hesitate to express
their real sentiments during deliberations if there is immediate public dissemination of their
discussions, putting them under all kinds of pressure before they decide.
We must first distinguish between information the law on public bidding requires PEA to disclose
publicly, and information the constitutional right to information requires PEA to release to the public.
Before the consummation of the contract, PEA must, on its own and without demand from anyone,
disclose to the public matters relating to the disposition of its property. These include the size,
location, technical description and nature of the property being disposed of, the terms and conditions

location, technical description and nature of the property being disposed of, the terms and conditions
of the disposition, the parties qualified to bid, the minimum price and similar information. PEA must
prepare all these data and disclose them to the public at the start of the disposition process, long
before the consummation of the contract, because the Government Auditing Code requires public
bidding. If PEA fails to make this disclosure, any citizen can demand from PEA this information at
any time during the bidding process.
Information, however, on on-going evaluation or review of bids or proposals being undertaken by
the bidding or review committee is not immediately accessible under the right to information. While
the evaluation or review is still on-going, there are no "official acts, transactions, or decisions" on the
bids or proposals. However, once the committee makes its official recommendation, there arises
a "definite proposition" on the part of the government. From this moment, the public's right to
information attaches, and any citizen can access all the non-proprietary information leading to such
definite proposition. In Chavez v. PCGG,33 the Court ruled as follows:
"Considering the intent of the framers of the Constitution, we believe that it is incumbent upon the
PCGG and its officers, as well as other government representatives, to disclose sufficient public
information on any proposed settlement they have decided to take up with the ostensible owners
and holders of ill-gotten wealth. Such information, though, must pertain to definite propositions of
the government, not necessarily to intra-agency or inter-agency recommendations or
communications during the stage when common assertions are still in the process of being
formulated or are in the "exploratory" stage. There is need, of course, to observe the same
restrictions on disclosure of information in general, as discussed earlier – such as on matters
involving national security, diplomatic or foreign relations, intelligence and other classified
information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of the 1986 Constitutional Commission
understood that the right to information "contemplates inclusion of negotiations leading to the
consummation of the transaction." Certainly, a consummated contract is not a requirement for the
exercise of the right to information. Otherwise, the people can never exercise the right if no contract
is consummated, and if one is consummated, it may be too late for the public to expose its defects. 1âwphi 1.n
êt
Requiring a consummated contract will keep the public in the dark until the contract, which may be
grossly disadvantageous to the government or even illegal, becomes a fait accompli. This negates
the State policy of full transparency on matters of public concern, a situation which the framers of the
Constitution could not have intended. Such a requirement will prevent the citizenry from participating
in the public discussion of any proposed contract, effectively truncating a basic right enshrined in
the Bill of Rights. We can allow neither an emasculation of a constitutional right, nor a retreat by the
State of its avowed "policy of full disclosure of all its transactions involving public interest."
The right covers three categories of information which are "matters of public concern," namely: (1)
official records; (2) documents and papers pertaining to official acts, transactions and decisions; and
(3) government research data used in formulating policies. The first category refers to any document
that is part of the public records in the custody of government agencies or officials. The second
category refers to documents and papers recording, evidencing, establishing, confirming, supporting,
justifying or explaining official acts, transactions or decisions of government agencies or officials.
The third category refers to research data, whether raw, collated or processed, owned by the
government and used in formulating government policies.
The information that petitioner may access on the renegotiation of the JVA includes evaluation
reports, recommendations, legal and expert opinions, minutes of meetings, terms of reference and
other documents attached to such reports or minutes, all relating to the JVA. However, the right to
information does not compel PEA to prepare lists, abstracts, summaries and the like relating to the
renegotiation of the JVA.34 The right only affords access to records, documents and papers, which
means the opportunity to inspect and copy them. One who exercises the right must copy the
records, documents and papers at his expense. The exercise of the right is also subject to
reasonable regulations to protect the integrity of the public records and to minimize disruption to
government operations, like rules specifying when and how to conduct the inspection and copying. 35
The right to information, however, does not extend to matters recognized as privileged information
under the separation of powers.36 The right does not also apply to information on military and
diplomatic secrets, information affecting national security, and information on investigations of
crimes by law enforcement agencies before the prosecution of the accused, which courts have long
recognized as confidential.37 The right may also be subject to other limitations that Congress may
impose by law.
There is no claim by PEA that the information demanded by petitioner is privileged information
rooted in the separation of powers. The information does not cover Presidential conversations,
correspondences, or discussions during closed-door Cabinet meetings which, like internal
deliberations of the Supreme Court and other collegiate courts, or executive sessions of either house
of Congress,38 are recognized as confidential. This kind of information cannot be pried open by a co-

of Congress,38 are recognized as confidential. This kind of information cannot be pried open by a co-
equal branch of government. A frank exchange of exploratory ideas and assessments, free from the
glare of publicity and pressure by interested parties, is essential to protect the independence of
decision-making of those tasked to exercise Presidential, Legislative and Judicial power. 39 This is not
the situation in the instant case.
We rule, therefore, that the constitutional right to information includes official information on on-
going negotiations before a final contract. The information, however, must constitute definite
propositions by the government and should not cover recognized exceptions like privileged
information, military and diplomatic secrets and similar matters affecting national security and public
order.40 Congress has also prescribed other limitations on the right to information in several
legislations.41
Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of lands,
reclaimed or to be reclaimed, violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and submerged areas is rooted in the Regalian
doctrine which holds that the State owns all lands and waters of the public domain. Upon the
Spanish conquest of the Philippines, ownership of all "lands, territories and possessions" in the
Philippines passed to the Spanish Crown.42 The King, as the sovereign ruler and representative of
the people, acquired and owned all lands and territories in the Philippines except those he disposed
of by grant or sale to private individuals.
The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting, however, the
State, in lieu of the King, as the owner of all lands and waters of the public domain. The Regalian
doctrine is the foundation of the time-honored principle of land ownership that "all lands that were not
acquired from the Government, either by purchase or by grant, belong to the public domain." 43 Article
339 of the Civil Code of 1889, which is now Article 420 of the Civil Code of 1950, incorporated the
Regalian doctrine.
Ownership and Disposition of Reclaimed Lands
The Spanish Law of Waters of 1866 was the first statutory law governing the ownership and
disposition of reclaimed lands in the Philippines. On May 18, 1907, the Philippine Commission
enacted Act No. 1654 which provided for the lease, but not the sale, of reclaimed lands of the
government to corporations and individuals. Later, on November 29, 1919, the Philippine
Legislature approved Act No. 2874, the Public Land Act, which authorized the lease, but not the
sale, of reclaimed lands of the government to corporations and individuals. On November 7,
1936, the National Assembly passed Commonwealth Act No. 141, also known as the Public Land
Act, whichauthorized the lease, but not the sale, of reclaimed lands of the government to
corporations and individuals. CA No. 141 continues to this day as the general law governing the
classification and disposition of lands of the public domain.
The Spanish Law of Waters of 1866 and the Civil Code of 1889
Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters within the
maritime zone of the Spanish territory belonged to the public domain for public use. 44 The Spanish
Law of Waters of 1866 allowed the reclamation of the sea under Article 5, which provided as follows:
"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the
provinces, pueblos or private persons, with proper permission, shall become the property of the
party constructing such works, unless otherwise provided by the terms of the grant of authority."
Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party undertaking
the reclamation, provided the government issued the necessary permit and did not reserve
ownership of the reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property of public dominion as follows:
"Art. 339. Property of public dominion is –
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed
by the State, riverbanks, shores, roadsteads, and that of a similar character;
2. That belonging exclusively to the State which, without being of general public use, is employed in
some public service, or in the development of the national wealth, such as walls, fortresses, and
other works for the defense of the territory, and mines, until granted to private individuals."
Property devoted to public use referred to property open for use by the public. In contrast, property
devoted to public service referred to property used for some specific public service and open only to
those authorized to use the property.
Property of public dominion referred not only to property devoted to public use, but also to property
not so used but employed to develop the national wealth. This class of property constituted
property of public dominion although employed for some economic or commercial activity to increase
the national wealth.
Article 341 of the Civil Code of 1889 governed the re-classification of property of public dominion into
private property, to wit:

private property, to wit:
"Art. 341. Property of public dominion, when no longer devoted to public use or to the defense of the
territory, shall become a part of the private property of the State."
This provision, however, was not self-executing. The legislature, or the executive department
pursuant to law, must declare the property no longer needed for public use or territorial defense
before the government could lease or alienate the property to private parties. 45
Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the lease of
reclaimed and foreshore lands. The salient provisions of this law were as follows:
"Section 1. The control and disposition of the foreshore as defined in existing law, and the title
to all Government or public lands made or reclaimed by the Government by dredging or
filling or otherwise throughout the Philippine Islands, shall be retained by the Government without
prejudice to vested rights and without prejudice to rights conceded to the City of Manila in the Luneta
Extension.
Section 2. (a) The Secretary of the Interior shall cause all Government or public lands made or
reclaimed by the Government by dredging or filling or otherwise to be divided into lots or blocks, with
the necessary streets and alleyways located thereon, and shall cause plats and plans of such
surveys to be prepared and filed with the Bureau of Lands.
(b) Upon completion of such plats and plans the Governor-General shall give notice to the public
that such parts of the lands so made or reclaimed as are not needed for public purposes will
be leased for commercial and business purposes, x x x.
xx x
(e) The leases above provided for shall be disposed of to the highest and best
bidder therefore, subject to such regulations and safeguards as the Governor-General may by
executive order prescribe." (Emphasis supplied)
Act No. 1654 mandated that the government should retain title to all lands reclaimed by the
government. The Act also vested in the government control and disposition of foreshore lands.
Private parties could lease lands reclaimed by the government only if these lands were no longer
needed for public purpose. Act No. 1654 mandated public bidding in the lease of government
reclaimed lands. Act No. 1654 made government reclaimed lands sui generis in that unlike other
public lands which the government could sell to private parties, these reclaimed lands were available
only for lease to private parties.
Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866. Act No. 1654
did not prohibit private parties from reclaiming parts of the sea under Section 5 of the Spanish Law
of Waters. Lands reclaimed from the sea by private parties with government permission remained
private lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public Land Act. 46 The
salient provisions of Act No. 2874, on reclaimed lands, were as follows:
"Sec. 6. The Governor-General, upon the recommendation of the Secretary of Agriculture and
Natural Resources, shall from time to time classify the lands of the public domain into –
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands, x x x.
Sec. 7. For the purposes of the government and disposition of alienable or disposable public
lands, the Governor-General, upon recommendation by the Secretary of Agriculture and
Natural Resources, shall from time to time declare what lands are open to disposition or
concession under this Act."
Sec. 8. Only those lands shall be declared open to disposition or concession which have
been officially delimited or classified x x x.
xx x
Sec. 55. Any tract of land of the public domain which, being neither timber nor mineral land, shall be
classified as suitable for residential purposes or for commercial, industrial, or other
productive purposes other than agricultural purposes, and shall be open to disposition or
concession, shall be disposed of under the provisions of this chapter, and not otherwise.
Sec. 56. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable
lakes or rivers;
(d) Lands not included in any of the foregoing classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six shall be disposed

Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six shall be disposed
of to private parties by lease only and not otherwise, as soon as the Governor-General, upon
recommendation by the Secretary of Agriculture and Natural Resources, shall declare that
the same are not necessary for the public service and are open to disposition under this
chapter. The lands included in class (d) may be disposed of by sale or lease under the
provisions of this Act." (Emphasis supplied)
Section 6 of Act No. 2874 authorized the Governor-General to "classify lands of the public domain
into x x x alienable or disposable"47 lands. Section 7 of the Act empowered the Governor-General to
"declare what lands are open to disposition or concession." Section 8 of the Act limited alienable or
disposable lands only to those lands which have been "officially delimited and classified."
Section 56 of Act No. 2874 stated that lands "disposable under this title 48 shall be classified" as
government reclaimed, foreshore and marshy lands, as well as other lands. All these lands,
however, must be suitable for residential, commercial, industrial or other productive non-
agricultural purposes. These provisions vested upon the Governor-General the power to classify
inalienable lands of the public domain into disposable lands of the public domain. These provisions
also empowered the Governor-General to classify further such disposable lands of the public domain
into government reclaimed, foreshore or marshy lands of the public domain, as well as other non-
agricultural lands.
Section 58 of Act No. 2874 categorically mandated that disposable lands of the public domain
classified as government reclaimed, foreshore and marshy lands "shall be disposed of to private
parties by lease only and not otherwise." The Governor-General, before allowing the lease of
these lands to private parties, must formally declare that the lands were "not necessary for the public
service." Act No. 2874 reiterated the State policy to lease and not to sell government reclaimed,
foreshore and marshy lands of the public domain, a policy first enunciated in 1907 in Act No. 1654.
Government reclaimed, foreshore and marshy lands remained sui generis, as the only alienable or
disposable lands of the public domain that the government could not sell to private parties.
The rationale behind this State policy is obvious. Government reclaimed, foreshore and marshy
public lands for non-agricultural purposes retain their inherent potential as areas for public service.
This is the reason the government prohibited the sale, and only allowed the lease, of these lands to
private parties. The State always reserved these lands for some future public service.
Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore and marshy
lands into other non-agricultural lands under Section 56 (d). Lands falling under Section 56 (d) were
the only lands for non-agricultural purposes the government could sell to private parties. Thus, under
Act No. 2874, the government could not sell government reclaimed, foreshore and marshy lands to
private parties, unless the legislature passed a law allowing their sale.49
Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to Section 5 of
the Spanish Law of Waters of 1866. Lands reclaimed from the sea by private parties with
government permission remained private lands.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino people. The
1935 Constitution, in adopting the Regalian doctrine, declared in Section 1, Article XIII, that –
"Section 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy and other natural resources of the
Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be
limited to citizens of the Philippines or to corporations or associations at least sixty per centum of the
capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession
at the time of the inauguration of the Government established under this Constitution. Natural
resources, with the exception of public agricultural land, shall not be alienated, and no license,
concession, or lease for the exploitation, development, or utilization of any of the natural resources
shall be granted for a period exceeding twenty-five years, renewable for another twenty-five years,
except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, in which cases beneficial use may be the measure and limit of the
grant." (Emphasis supplied)
The 1935 Constitution barred the alienation of all natural resources except public agricultural lands,
which were the only natural resources the State could alienate. Thus, foreshore lands, considered
part of the State's natural resources, became inalienable by constitutional fiat, available only for
lease for 25 years, renewable for another 25 years. The government could alienate foreshore lands
only after these lands were reclaimed and classified as alienable agricultural lands of the public
domain. Government reclaimed and marshy lands of the public domain, being neither timber nor
mineral lands, fell under the classification of public agricultural lands. 50 However, government
reclaimed and marshy lands, although subject to classification as disposable public agricultural
lands, could only be leased and not sold to private parties because of Act No. 2874.
The prohibition on private parties from acquiring ownership of government reclaimed and marshy

The prohibition on private parties from acquiring ownership of government reclaimed and marshy
lands of the public domain was only a statutory prohibition and the legislature could therefore
remove such prohibition. The 1935 Constitution did not prohibit individuals and corporations from
acquiring government reclaimed and marshy lands of the public domain that were classified as
agricultural lands under existing public land laws. Section 2, Article XIII of the 1935 Constitution
provided as follows:
"Section 2. No private corporation or association may acquire, lease, or hold public
agricultural lands in excess of one thousand and twenty four hectares, nor may any
individual acquire such lands by purchase in excess of one hundred and forty hectares, or by
lease in excess of one thousand and twenty-four hectares, or by homestead in excess of twenty-
four hectares. Lands adapted to grazing, not exceeding two thousand hectares, may be leased to an
individual, private corporation, or association." (Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58 of Act No.
2874 to open for sale to private parties government reclaimed and marshy lands of the public
domain. On the contrary, the legislature continued the long established State policy of retaining for
the government title and ownership of government reclaimed and marshy lands of the public domain.
Commonwealth Act No. 141 of the Philippine National Assembly
On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, also known as
the Public Land Act, which compiled the then existing laws on lands of the public domain. CA No.
141, as amended, remains to this day the existing general law governing the classification and
disposition of lands of the public domain other than timber and mineral lands. 51
Section 6 of CA No. 141 empowers the President to classify lands of the public domain into
"alienable or disposable"52 lands of the public domain, which prior to such classification are
inalienable and outside the commerce of man. Section 7 of CA No. 141 authorizes the President to
"declare what lands are open to disposition or concession." Section 8 of CA No. 141 states that the
government can declare open for disposition or concession only lands that are "officially delimited
and classified." Sections 6, 7 and 8 of CA No. 141 read as follows:
"Sec. 6. The President, upon the recommendation of the Secretary of Agriculture and
Commerce, shall from time to time classify the lands of the public domain into –
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer such lands from one class to another, 53 for the
purpose of their administration and disposition.
Sec. 7. For the purposes of the administration and disposition of alienable or disposable public
lands, the President, upon recommendation by the Secretary of Agriculture and Commerce,
shall from time to time declare what lands are open to disposition or concession under this
Act.
Sec. 8. Only those lands shall be declared open to disposition or concession which have
been officially delimited and classified and, when practicable, surveyed,and which have not
been reserved for public or quasi-public uses, nor appropriated by the Government, nor in any
manner become private property, nor those on which a private right authorized and recognized by
this Act or any other valid law may be claimed, or which, having been reserved or appropriated, have
ceased to be so. x x x."
Thus, before the government could alienate or dispose of lands of the public domain, the President
must first officially classify these lands as alienable or disposable, and then declare them open to
disposition or concession. There must be no law reserving these lands for public or quasi-public
uses.
The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of the
public domain, are as follows:
"Sec. 58. Any tract of land of the public domain which, being neither timber nor mineral land,
is intended to be used for residential purposes or for commercial, industrial, or other
productive purposes other than agricultural, and is open to disposition or concession, shall
be disposed of under the provisions of this chapter and not otherwise.
Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable
lakes or rivers;
(d) Lands not included in any of the foregoing classes.
Sec. 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to
any person, corporation, or association authorized to purchase or lease public lands for agricultural
purposes. x x x.

purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine shall be disposed
of to private parties by lease only and not otherwise, as soon asthe President, upon
recommendation by the Secretary of Agriculture, shall declare that the same are not necessary
for the public service and are open to disposition under this chapter. The lands included in class
(d) may be disposed of by sale or lease under the provisions of this Act." (Emphasis supplied)
Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution, Section 58 of Act
No. 2874 prohibiting the sale of government reclaimed, foreshore and marshy disposable lands of
the public domain. All these lands are intended for residential, commercial, industrial or other non-
agricultural purposes. As before, Section 61 allowed only the lease of such lands to private parties.
The government could sell to private parties only lands falling under Section 59 (d) of CA No. 141, or
those lands for non-agricultural purposes not classified as government reclaimed, foreshore and
marshy disposable lands of the public domain. Foreshore lands, however, became inalienable under
the 1935 Constitution which only allowed the lease of these lands to qualified private parties.
Section 58 of CA No. 141 expressly states that disposable lands of the public domain intended for
residential, commercial, industrial or other productive purposes other than agricultural "shall be
disposed of under the provisions of this chapter and not otherwise." Under Section 10 of CA
No. 141, the term "disposition" includes lease of the land. Any disposition of government reclaimed,
foreshore and marshy disposable lands for non-agricultural purposes must comply with Chapter IX,
Title III of CA No. 141,54 unless a subsequent law amended or repealed these provisions.
In his concurring opinion in the landmark case of Republic Real Estate Corporation v. Court of
Appeals,55 Justice Reynato S. Puno summarized succinctly the law on this matter, as follows:
"Foreshore lands are lands of public dominion intended for public use. So too are lands reclaimed by
the government by dredging, filling, or other means. Act 1654 mandated that the control and
disposition of the foreshore and lands under water remained in the national government. Said law
allowed only the 'leasing' of reclaimed land. The Public Land Acts of 1919 and 1936 also declared
that the foreshore and lands reclaimed by the government were to be "disposed of to private parties
by lease only and not otherwise." Before leasing, however, the Governor-General, upon
recommendation of the Secretary of Agriculture and Natural Resources, had first to determine that
the land reclaimed was not necessary for the public service. This requisite must have been met
before the land could be disposed of. But even then, the foreshore and lands under water were
not to be alienated and sold to private parties. The disposition of the reclaimed land was only
by lease. The land remained property of the State." (Emphasis supplied)
As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141 has remained
in effect at present."
The State policy prohibiting the sale to private parties of government reclaimed, foreshore and
marshy alienable lands of the public domain, first implemented in 1907 was thus reaffirmed in CA
No. 141 after the 1935 Constitution took effect. The prohibition on the sale of foreshore lands,
however, became a constitutional edict under the 1935 Constitution. Foreshore lands became
inalienable as natural resources of the State, unless reclaimed by the government and classified as
agricultural lands of the public domain, in which case they would fall under the classification of
government reclaimed lands.
After the effectivity of the 1935 Constitution, government reclaimed and marshy disposable lands of
the public domain continued to be only leased and not sold to private parties. 56 These lands
remained sui generis, as the only alienable or disposable lands of the public domain the
government could not sell to private parties.
Since then and until now, the only way the government can sell to private parties government
reclaimed and marshy disposable lands of the public domain is for the legislature to pass a law
authorizing such sale. CA No. 141 does not authorize the President to reclassify government
reclaimed and marshy lands into other non-agricultural lands under Section 59 (d). Lands classified
under Section 59 (d) are the only alienable or disposable lands for non-agricultural purposes that the
government could sell to private parties.
Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands under
Section 59 that the government previously transferred to government units or entities could be sold
to private parties. Section 60 of CA No. 141 declares that –
"Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment of the Secretary of
Agriculture and Natural Resources, be reasonably necessary for the purposes for which such sale or
lease is requested, and shall not exceed one hundred and forty-four hectares: Provided, however,
That this limitation shall not apply to grants, donations, or transfers made to a province, municipality
or branch or subdivision of the Government for the purposes deemed by said entities conducive to
the public interest; but the land so granted, donated, or transferred to a province, municipality
or branch or subdivision of the Government shall not be alienated, encumbered, or otherwise
disposed of in a manner affecting its title, except when authorized by Congress: x x x."

disposed of in a manner affecting its title, except when authorized by Congress: x x x."
(Emphasis supplied)
The congressional authority required in Section 60 of CA No. 141 mirrors the legislative authority
required in Section 56 of Act No. 2874.
One reason for the congressional authority is that Section 60 of CA No. 141 exempted government
units and entities from the maximum area of public lands that could be acquired from the State.
These government units and entities should not just turn around and sell these lands to private
parties in violation of constitutional or statutory limitations. Otherwise, the transfer of lands for non-
agricultural purposes to government units and entities could be used to circumvent constitutional
limitations on ownership of alienable or disposable lands of the public domain. In the same manner,
such transfers could also be used to evade the statutory prohibition in CA No. 141 on the sale of
government reclaimed and marshy lands of the public domain to private parties. Section 60 of CA
No. 141 constitutes by operation of law a lien on these lands. 57
In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA No.
141, Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA No. 141 provide as
follows:
"Sec. 63. Whenever it is decided that lands covered by this chapter are not needed for public
purposes, the Director of Lands shall ask the Secretary of Agriculture and Commerce (now the
Secretary of Natural Resources) for authority to dispose of the same. Upon receipt of such authority,
the Director of Lands shall give notice by public advertisement in the same manner as in the case of
leases or sales of agricultural public land, x x x.
Sec. 67. The lease or sale shall be made by oral bidding; and adjudication shall be made to
the highest bidder. x x x." (Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to public auction all leases or sales of alienable
or disposable lands of the public domain. 58
Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the Spanish
Law of Waters of 1866. Private parties could still reclaim portions of the sea with government
permission. However, the reclaimed land could become private land only if classified as
alienable agricultural land of the public domain open to disposition under CA No. 141. The 1935
Constitution prohibited the alienation of all natural resources except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of property of public dominion found in
the Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950 state that –
"Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth.
x x x.
Art. 422. Property of public dominion, when no longer intended for public use or for public service,
shall form part of the patrimonial property of the State."
Again, the government must formally declare that the property of public dominion is no longer
needed for public use or public service, before the same could be classified as patrimonial property
of the State.59 In the case of government reclaimed and marshy lands of the public domain, the
declaration of their being disposable, as well as the manner of their disposition, is governed by the
applicable provisions of CA No. 141.
Like the Civil Code of 1889, the Civil Code of 1950 included as property of public dominion those
properties of the State which, without being for public use, are intended for public service or the
"development of the national wealth." Thus, government reclaimed and marshy lands of the State,
even if not employed for public use or public service, if developed to enhance the national wealth,
are classified as property of public dominion.
The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the Regalian
doctrine. Section 8, Article XIV of the 1973 Constitution stated that –
"Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, wildlife, and other natural resources of the Philippines belong to
the State. With the exception of agricultural, industrial or commercial, residential, and
resettlement lands of the public domain, natural resources shall not be alienated, and no
license, concession, or lease for the exploration, development, exploitation, or utilization of any of
the natural resources shall be granted for a period exceeding twenty-five years, renewable for not
more than twenty-five years, except as to water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water power, in which cases, beneficial use may be
the measure and the limit of the grant." (Emphasis supplied)

the measure and the limit of the grant." (Emphasis supplied)
The 1973 Constitution prohibited the alienation of all natural resources with the exception of
"agricultural, industrial or commercial, residential, and resettlement lands of the public domain." In
contrast, the 1935 Constitution barred the alienation of all natural resources except "public
agricultural lands." However, the term "public agricultural lands" in the 1935 Constitution
encompassed industrial, commercial, residential and resettlement lands of the public domain. 60 If the
land of public domain were neither timber nor mineral land, it would fall under the classification of
agricultural land of the public domain. Both the 1935 and 1973 Constitutions, therefore,
prohibited the alienation of all natural resources except agricultural lands of the public
domain.
The 1973 Constitution, however, limited the alienation of lands of the public domain to individuals
who were citizens of the Philippines. Private corporations, even if wholly owned by Philippine
citizens, were no longer allowed to acquire alienable lands of the public domain unlike in the 1935
Constitution. Section 11, Article XIV of the 1973 Constitution declared that –
"Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and development
requirements of the natural resources, shall determine by law the size of land of the public domain
which may be developed, held or acquired by, or leased to, any qualified individual, corporation, or
association, and the conditions therefor. No private corporation or association may hold
alienable lands of the public domain except by lease not to exceed one thousand hectares in
area nor may any citizen hold such lands by lease in excess of five hundred hectares or acquire by
purchase, homestead or grant, in excess of twenty-four hectares. No private corporation or
association may hold by lease, concession, license or permit, timber or forest lands and other timber
or forest resources in excess of one hundred thousand hectares. However, such area may be
increased by the Batasang Pambansa upon recommendation of the National Economic and
Development Authority." (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations could hold alienable lands of the public
domain only through lease. Only individuals could now acquire alienable lands of the public domain,
and private corporations became absolutely barred from acquiring any kind of alienable land
of the public domain. The constitutional ban extended to all kinds of alienable lands of the public
domain, while the statutory ban under CA No. 141 applied only to government reclaimed, foreshore
and marshy alienable lands of the public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No. 1084
creating PEA, a wholly government owned and controlled corporation with a special charter.
Sections 4 and 8 of PD No. 1084, vests PEA with the following purposes and powers:
"Sec. 4. Purpose. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other
means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all
kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled
and/or operated by the government;
(c) To provide for, operate or administer such service as may be necessary for the efficient,
economical and beneficial utilization of the above properties.
Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out the purposes for
which it is created, have the following powers and functions:
(a)To prescribe its by-laws.
xx x
(i) To hold lands of the public domain in excess of the area permitted to private corporations by
statute.
(j) To reclaim lands and to construct work across, or otherwise, any stream, watercourse, canal,
ditch, flume x x x.
xx x
(o) To perform such acts and exercise such functions as may be necessary for the attainment of the
purposes and objectives herein specified." (Emphasis supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the public domain.
Foreshore areas are those covered and uncovered by the ebb and flow of the tide. 61 Submerged
areas are those permanently under water regardless of the ebb and flow of the tide. 62 Foreshore and
submerged areas indisputably belong to the public domain 63 and are inalienable unless reclaimed,
classified as alienable lands open to disposition, and further declared no longer needed for public
service.
The ban in the 1973 Constitution on private corporations from acquiring alienable lands of the public
domain did not apply to PEA since it was then, and until today, a fully owned government
corporation. The constitutional ban applied then, as it still applies now, only to "private corporations

corporation. The constitutional ban applied then, as it still applies now, only to "private corporations
and associations." PD No. 1084 expressly empowers PEA "to hold lands of the public domain"
even "in excess of the area permitted to private corporations by statute." Thus, PEA can hold title
to private lands, as well as title to lands of the public domain.
In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the public domain,
there must be legislative authority empowering PEA to sell these lands. This legislative authority is
necessary in view of Section 60 of CA No.141, which states –
"Sec. 60. x x x; but the land so granted, donated or transferred to a province, municipality, or branch
or subdivision of the Government shall not be alienated, encumbered or otherwise disposed of in a
manner affecting its title, except when authorized by Congress; x x x." (Emphasis supplied)
Without such legislative authority, PEA could not sell but only lease its reclaimed foreshore and
submerged alienable lands of the public domain. Nevertheless, any legislative authority granted to
PEA to sell its reclaimed alienable lands of the public domain would be subject to the constitutional
ban on private corporations from acquiring alienable lands of the public domain. Hence, such
legislative authority could only benefit private individuals.
The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the Regalian
doctrine. The 1987 Constitution declares that all natural resources are "owned by the State," and
except for alienable agricultural lands of the public domain, natural resources cannot be alienated.
Sections 2 and 3, Article XII of the 1987 Constitution state that –
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils,
all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the exception of agricultural lands, all other
natural resources shall not be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. x x x.
Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands,
and national parks. Agricultural lands of the public domain may be further classified by law according
to the uses which they may be devoted. Alienable lands of the public domain shall be limited to
agricultural lands. Private corporations or associations may not hold such alienable lands of
the public domain except by lease, for a period not exceeding twenty-five years, renewable
for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens
of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve
hectares thereof by purchase, homestead, or grant.
Taking into account the requirements of conservation, ecology, and development, and subject to the
requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public
domain which may be acquired, developed, held, or leased and the conditions therefor." (Emphasis
supplied)
The 1987 Constitution continues the State policy in the 1973 Constitution banning private
corporations from acquiring any kind of alienable land of the public domain. Like the 1973
Constitution, the 1987 Constitution allows private corporations to hold alienable lands of the public
domain only through lease. As in the 1935 and 1973 Constitutions, the general law governing the
lease to private corporations of reclaimed, foreshore and marshy alienable lands of the public
domain is still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations from acquiring, except through lease,
alienable lands of the public domain is not well understood. During the deliberations of the 1986
Constitutional Commission, the commissioners probed the rationale behind this ban, thus:
"FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which says:
`No private corporation or association may hold alienable lands of the public domain except by
lease, not to exceed one thousand hectares in area.'
If we recall, this provision did not exist under the 1935 Constitution, but this was introduced in the
1973 Constitution. In effect, it prohibits private corporations from acquiring alienable public
lands. But it has not been very clear in jurisprudence what the reason for this is. In some of the
cases decided in 1982 and 1983, it was indicated that the purpose of this is to prevent large
landholdings. Is that the intent of this provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were instances where the
Iglesia ni Cristo was not allowed to acquire a mere 313-square meter land where a chapel stood
because the Supreme Court said it would be in violation of this." (Emphasis supplied)
In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional ban in this way:
"Indeed, one purpose of the constitutional prohibition against purchases of public agricultural lands
by private corporations is to equitably diffuse land ownership or to encourage 'owner-cultivatorship
and the economic family-size farm' and to prevent a recurrence of cases like the instant case. Huge

and the economic family-size farm' and to prevent a recurrence of cases like the instant case. Huge
landholdings by corporations or private persons had spawned social unrest."
However, if the constitutional intent is to prevent huge landholdings, the Constitution could have
simply limited the size of alienable lands of the public domain that corporations could acquire. The
Constitution could have followed the limitations on individuals, who could acquire not more than 24
hectares of alienable lands of the public domain under the 1973 Constitution, and not more than 12
hectares under the 1987 Constitution.
If the constitutional intent is to encourage economic family-size farms, placing the land in the name
of a corporation would be more effective in preventing the break-up of farmlands. If the farmland is
registered in the name of a corporation, upon the death of the owner, his heirs would inherit shares
in the corporation instead of subdivided parcels of the farmland. This would prevent the continuing
break-up of farmlands into smaller and smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the constitutional limitation on individuals from
acquiring more than the allowed area of alienable lands of the public domain. Without the
constitutional ban, individuals who already acquired the maximum area of alienable lands of the
public domain could easily set up corporations to acquire more alienable public lands. An individual
could own as many corporations as his means would allow him. An individual could even hide his
ownership of a corporation by putting his nominees as stockholders of the corporation. The
corporation is a convenient vehicle to circumvent the constitutional limitation on acquisition by
individuals of alienable lands of the public domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a
limited area of alienable land of the public domain to a qualified individual. This constitutional intent
is safeguarded by the provision prohibiting corporations from acquiring alienable lands of the public
domain, since the vehicle to circumvent the constitutional intent is removed. The available alienable
public lands are gradually decreasing in the face of an ever-growing population. The most effective
way to insure faithful adherence to this constitutional intent is to grant or sell alienable lands of the
public domain only to individuals. This, it would seem, is the practical benefit arising from the
constitutional ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its second Whereas clause, consists of three
properties, namely:
1. "[T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo Boulevard in
Paranaque and Las Pinas, Metro Manila, with a combined titled area of 1,578,441 square meters;"
2. "[A]nother area of 2,421,559 square meters contiguous to the three islands;" and
3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares more or less to regularize
the configuration of the reclaimed area." 65
PEA confirms that the Amended JVA involves "the development of the Freedom Islands and further
reclamation of about 250 hectares x x x," plus an option "granted to AMARI to subsequently reclaim
another 350 hectares x x x."66
In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of the
750-hectare reclamation project have been reclaimed, and the rest of the 592.15 hectares are
still submerged areas forming part of Manila Bay.
Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for PEA's
"actual cost" in partially reclaiming the Freedom Islands. AMARI will also complete, at its own
expense, the reclamation of the Freedom Islands. AMARI will further shoulder all the reclamation
costs of all the other areas, totaling 592.15 hectares, still to be reclaimed. AMARI and PEA will
share, in the proportion of 70 percent and 30 percent, respectively, the total net usable area which is
defined in the Amended JVA as the total reclaimed area less 30 percent earmarked for common
areas. Title to AMARI's share in the net usable area, totaling 367.5 hectares, will be issued in the
name of AMARI. Section 5.2 (c) of the Amended JVA provides that –
"x x x, PEA shall have the duty to execute without delay the necessary deed of transfer or
conveyance of the title pertaining to AMARI's Land share based on the Land Allocation Plan. PEA,
when requested in writing by AMARI, shall then cause the issuance and delivery of the proper
certificates of title covering AMARI's Land Share in the name of AMARI, x x x; provided, that if
more than seventy percent (70%) of the titled area at any given time pertains to AMARI, PEA shall
deliver to AMARI only seventy percent (70%) of the titles pertaining to AMARI, until such time when
a corresponding proportionate area of additional land pertaining to PEA has been titled." (Emphasis
supplied)
Indisputably, under the Amended JVA AMARI will acquire and own a maximum of 367.5
hectares of reclaimed land which will be titled in its name.
To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint venture
PEA's statutory authority, rights and privileges to reclaim foreshore and submerged areas in Manila
Bay. Section 3.2.a of the Amended JVA states that –

Bay. Section 3.2.a of the Amended JVA states that –
"PEA hereby contributes to the joint venture its rights and privileges to perform Rawland
Reclamation and Horizontal Development as well as own the Reclamation Area, thereby granting
the Joint Venture the full and exclusive right, authority and privilege to undertake the Project in
accordance with the Master Development Plan."
The Amended JVA is the product of a renegotiation of the original JVA dated April 25, 1995 and its
supplemental agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private corporation, can acquire and own under the
Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas in Manila Bay in view of
Sections 2 and 3, Article XII of the 1987 Constitution which state that:
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,
all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. x x x.
xx x
Section 3. x x x Alienable lands of the public domain shall be limited to agricultural lands. Private
corporations or associations may not hold such alienable lands of the public domain except
by lease, x x x."(Emphasis supplied)
Classification of Reclaimed Foreshore and Submerged Areas
PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila Bay are
alienable or disposable lands of the public domain. In its Memorandum, 67 PEA admits that –
"Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as alienable
and disposable lands of the public domain:
'Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the government by dredging, filling, or other means;
x x x.'" (Emphasis supplied)
Likewise, the Legal Task Force68 constituted under Presidential Administrative Order No. 365
admitted in its Report and Recommendation to then President Fidel V. Ramos,"[R]eclaimed lands
are classified as alienable and disposable lands of the public domain."69 The Legal Task Force
concluded that –
"D. Conclusion
Reclaimed lands are lands of the public domain. However, by statutory authority, the rights of
ownership and disposition over reclaimed lands have been transferred to PEA, by virtue of which
PEA, as owner, may validly convey the same to any qualified person without violating the
Constitution or any statute.
The constitutional provision prohibiting private corporations from holding public land, except by lease
(Sec. 3, Art. XVII,70 1987 Constitution), does not apply to reclaimed lands whose ownership has
passed on to PEA by statutory grant."
Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila
Bay are part of the "lands of the public domain, waters x x x and other natural resources" and
consequently "owned by the State." As such, foreshore and submerged areas "shall not be
alienated," unless they are classified as "agricultural lands" of the public domain. The mere
reclamation of these areas by PEA does not convert these inalienable natural resources of the State
into alienable or disposable lands of the public domain. There must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable or disposable and open to
disposition or concession. Moreover, these reclaimed lands cannot be classified as alienable or
disposable if the law has reserved them for some public or quasi-public use.71
Section 8 of CA No. 141 provides that "only those lands shall be declared open to disposition or
concession which have been officially delimited and classified."72 The President has the authority
to classify inalienable lands of the public domain into alienable or disposable lands of the public
domain, pursuant to Section 6 of CA No. 141. In Laurel vs. Garcia,73 the Executive Department
attempted to sell the Roppongi property in Tokyo, Japan, which was acquired by the Philippine
Government for use as the Chancery of the Philippine Embassy. Although the Chancery had
transferred to another location thirteen years earlier, the Court still ruled that, under Article 422 74 of
the Civil Code, a property of public dominion retains such character until formally declared
otherwise. The Court ruled that –
"The fact that the Roppongi site has not been used for a long time for actual Embassy service does
not automatically convert it to patrimonial property. Any such conversion happens only if the property
is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A
property continues to be part of the public domain, not available for private appropriation or
ownership 'until there is a formal declaration on the part of the government to withdraw it
from being such' (Ignacio v. Director of Lands, 108 Phil. 335 [1960]." (Emphasis supplied)

from being such' (Ignacio v. Director of Lands, 108 Phil. 335 [1960]." (Emphasis supplied)
PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents for lands
reclaimed by PEA from the foreshore or submerged areas of Manila Bay. On January 19, 1988 then
President Corazon C. Aquino issued Special Patent No. 3517 in the name of PEA for the 157.84
hectares comprising the partially reclaimed Freedom Islands. Subsequently, on April 9, 1999 the
Register of Deeds of the Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the
name of PEA pursuant to Section 103 of PD No. 1529 authorizing the issuance of certificates of title
corresponding to land patents. To this day, these certificates of title are still in the name of PEA.
PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the
Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as
alienable or disposable lands of the public domain. PD No. 1085 and President Aquino's issuance of
a land patent also constitute a declaration that the Freedom Islands are no longer needed for public
service. The Freedom Islands are thus alienable or disposable lands of the public domain,
open to disposition or concession to qualified parties.
At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed the
Freedom Islands although subsequently there were partial erosions on some areas. The government
had also completed the necessary surveys on these islands. Thus, the Freedom Islands were no
longer part of Manila Bay but part of the land mass. Section 3, Article XII of the 1987 Constitution
classifies lands of the public domain into "agricultural, forest or timber, mineral lands, and national
parks." Being neither timber, mineral, nor national park lands, the reclaimed Freedom Islands
necessarily fall under the classification of agricultural lands of the public domain. Under the 1987
Constitution, agricultural lands of the public domain are the only natural resources that the State may
alienate to qualified private parties. All other natural resources, such as the seas or bays, are
"waters x x x owned by the State" forming part of the public domain, and are inalienable pursuant to
Section 2, Article XII of the 1987 Constitution.
AMARI claims that the Freedom Islands are private lands because CDCP, then a private
corporation, reclaimed the islands under a contract dated November 20, 1973 with the
Commissioner of Public Highways. AMARI, citing Article 5 of the Spanish Law of Waters of 1866,
argues that "if the ownership of reclaimed lands may be given to the party constructing the works,
then it cannot be said that reclaimed lands are lands of the public domain which the State may not
alienate."75 Article 5 of the Spanish Law of Waters reads as follows:
"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the
provinces, pueblos or private persons, with proper permission, shall become the property of the
party constructing such works, unless otherwise provided by the terms of the grant of
authority." (Emphasis supplied)
Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea only
with "proper permission" from the State. Private parties could own the reclaimed land only if not
"otherwise provided by the terms of the grant of authority." This clearly meant that no one could
reclaim from the sea without permission from the State because the sea is property of public
dominion. It also meant that the State could grant or withhold ownership of the reclaimed land
because any reclaimed land, like the sea from which it emerged, belonged to the State. Thus, a
private person reclaiming from the sea without permission from the State could not acquire
ownership of the reclaimed land which would remain property of public dominion like the sea it
replaced.76 Article 5 of the Spanish Law of Waters of 1866 adopted the time-honored principle of
land ownership that "all lands that were not acquired from the government, either by purchase or by
grant, belong to the public domain."77
Article 5 of the Spanish Law of Waters must be read together with laws subsequently enacted on the
disposition of public lands. In particular, CA No. 141 requires that lands of the public domain must
first be classified as alienable or disposable before the government can alienate them. These lands
must not be reserved for public or quasi-public purposes.78 Moreover, the contract between CDCP
and the government was executed after the effectivity of the 1973 Constitution which barred private
corporations from acquiring any kind of alienable land of the public domain. This contract could not
have converted the Freedom Islands into private lands of a private corporation.
Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the
reclamation of areas under water and revested solely in the National Government the power to
reclaim lands. Section 1 of PD No. 3-A declared that –
"The provisions of any law to the contrary notwithstanding, the reclamation of areas under
water, whether foreshore or inland, shall be limited to the National Government or any person
authorized by it under a proper contract. (Emphasis supplied)
x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because reclamation of areas
under water could now be undertaken only by the National Government or by a person contracted by
the National Government. Private parties may reclaim from the sea only under a contract with the

the National Government. Private parties may reclaim from the sea only under a contract with the
National Government, and no longer by grant or permission as provided in Section 5 of the Spanish
Law of Waters of 1866.
Executive Order No. 525, issued on February 14, 1979, designated PEA as the National
Government's implementing arm to undertake "all reclamation projects of the government," which
"shall be undertaken by the PEA or through a proper contract executed by it with any person
or entity." Under such contract, a private party receives compensation for reclamation services
rendered to PEA. Payment to the contractor may be in cash, or in kind consisting of portions of the
reclaimed land, subject to the constitutional ban on private corporations from acquiring alienable
lands of the public domain. The reclaimed land can be used as payment in kind only if the reclaimed
land is first classified as alienable or disposable land open to disposition, and then declared no
longer needed for public service.
The Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares
which are still submerged and forming part of Manila Bay. There is no legislative or Presidential
act classifying these submerged areas as alienable or disposable lands of the public domain
open to disposition. These submerged areas are not covered by any patent or certificate of title.
There can be no dispute that these submerged areas form part of the public domain, and in their
present state are inalienable and outside the commerce of man. Until reclaimed from the sea,
these submerged areas are, under the Constitution, "waters x x x owned by the State," forming part
of the public domain and consequently inalienable. Only when actually reclaimed from the sea can
these submerged areas be classified as public agricultural lands, which under the Constitution are
the only natural resources that the State may alienate. Once reclaimed and transformed into public
agricultural lands, the government may then officially classify these lands as alienable or disposable
lands open to disposition. Thereafter, the government may declare these lands no longer needed for
public service. Only then can these reclaimed lands be considered alienable or disposable lands of
the public domain and within the commerce of man.
The classification of PEA's reclaimed foreshore and submerged lands into alienable or disposable
lands open to disposition is necessary because PEA is tasked under its charter to undertake public
services that require the use of lands of the public domain. Under Section 5 of PD No. 1084, the
functions of PEA include the following: "[T]o own or operate railroads, tramways and other kinds of
land transportation, x x x; [T]o construct, maintain and operate such systems of sanitary sewers as
may be necessary; [T]o construct, maintain and operate such storm drains as may be necessary."
PEA is empowered to issue "rules and regulations as may be necessary for the proper use by
private parties ofany or all of the highways, roads, utilities, buildings and/or any of its
properties and to impose or collect fees or tolls for their use." Thus, part of the reclaimed foreshore
and submerged lands held by the PEA would actually be needed for public use or service since
many of the functions imposed on PEA by its charter constitute essential public services.
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of the National
Government." The same section also states that "[A]ll reclamation projects shall be approved by the
President upon recommendation of the PEA, and shall be undertaken by the PEA or through a
proper contract executed by it with any person or entity; x x x." Thus, under EO No. 525, in relation
to PD No. 3-A and PD No.1084, PEA became the primary implementing agency of the National
Government to reclaim foreshore and submerged lands of the public domain. EO No. 525
recognized PEA as the government entity "to undertake the reclamation of lands and ensure their
maximum utilization in promoting public welfare and interests."79 Since large portions of these
reclaimed lands would obviously be needed for public service, there must be a formal declaration
segregating reclaimed lands no longer needed for public service from those still needed for public
service.1âwphi1.nê
t
Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or be owned
by the PEA," could not automatically operate to classify inalienable lands into alienable or disposable
lands of the public domain. Otherwise, reclaimed foreshore and submerged lands of the public
domain would automatically become alienable once reclaimed by PEA, whether or not classified as
alienable or disposable.
The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No. 525, vests
in the Department of Environment and Natural Resources ("DENR" for brevity) the following powers
and functions:
"Sec. 4. Powers and Functions. The Department shall:
(1) x x x
xx x
(4) Exercise supervision and control over forest lands, alienable and disposable public lands,
mineral resources and, in the process of exercising such control, impose appropriate taxes, fees,
charges, rentals and any such form of levy and collect such revenues for the exploration,

charges, rentals and any such form of levy and collect such revenues for the exploration,
development, utilization or gathering of such resources;
xx x
(14) Promulgate rules, regulations and guidelines on the issuance of licenses, permits,
concessions, lease agreements and such other privileges concerning the development,
exploration and utilization of the country's marine, freshwater, and brackish water and over
all aquatic resources of the country and shall continue to oversee, supervise and police our
natural resources; cancel or cause to cancel such privileges upon failure, non-compliance or
violations of any regulation, order, and for all other causes which are in furtherance of the
conservation of natural resources and supportive of the national interest;
(15) Exercise exclusive jurisdiction on the management and disposition of all lands of the
public domain and serve as the sole agency responsible for classification, sub-classification,
surveying and titling of lands in consultation with appropriate agencies." 80 (Emphasis supplied)
As manager, conservator and overseer of the natural resources of the State, DENR exercises
"supervision and control over alienable and disposable public lands." DENR also exercises
"exclusive jurisdiction on the management and disposition of all lands of the public domain." Thus,
DENR decides whether areas under water, like foreshore or submerged areas of Manila Bay, should
be reclaimed or not. This means that PEA needs authorization from DENR before PEA can
undertake reclamation projects in Manila Bay, or in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain.
Hence, DENR decides whether reclaimed lands of PEA should be classified as alienable under
Sections 681 and 782 of CA No. 141. Once DENR decides that the reclaimed lands should be so
classified, it then recommends to the President the issuance of a proclamation classifying the lands
as alienable or disposable lands of the public domain open to disposition. We note that then DENR
Secretary Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the
Revised Administrative Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under water, while
PEA is vested with the power to undertake the physical reclamation of areas under water, whether
directly or through private contractors. DENR is also empowered to classify lands of the public
domain into alienable or disposable lands subject to the approval of the President. On the other
hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public domain.
Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas does not
make the reclaimed lands alienable or disposable lands of the public domain, much less patrimonial
lands of PEA. Likewise, the mere transfer by the National Government of lands of the public domain
to PEA does not make the lands alienable or disposable lands of the public domain, much less
patrimonial lands of PEA.
Absent two official acts – a classification that these lands are alienable or disposable and open to
disposition and a declaration that these lands are not needed for public service, lands reclaimed by
PEA remain inalienable lands of the public domain. Only such an official classification and formal
declaration can convert reclaimed lands into alienable or disposable lands of the public domain,
open to disposition under the Constitution, Title I and Title III83 of CA No. 141 and other applicable
laws.84
PEA's Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public domain,
the reclaimed lands shall be disposed of in accordance with CA No. 141, the Public Land Act. PEA,
citing Section 60 of CA No. 141, admits that reclaimed lands transferred to a branch or subdivision of
the government "shall not be alienated, encumbered, or otherwise disposed of in a manner affecting
its title, except when authorized by Congress: x x x."85 (Emphasis by PEA)
In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code of 1987, which
states that –
"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following: x x x."
Thus, the Court concluded that a law is needed to convey any real property belonging to the
Government. The Court declared that -
"It is not for the President to convey real property of the government on his or her own sole will. Any
such conveyance must be authorized and approved by a law enacted by the Congress. It
requires executive and legislative concurrence." (Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority allowing PEA to
sell its reclaimed lands. PD No. 1085, issued on February 4, 1977, provides that –
"The land reclaimed in the foreshore and offshore area of Manila Bay pursuant to the contract
for the reclamation and construction of the Manila-Cavite Coastal Road Project between the
Republic of the Philippines and the Construction and Development Corporation of the Philippines

Republic of the Philippines and the Construction and Development Corporation of the Philippines
dated November 20, 1973 and/or any other contract or reclamation covering the same area is
hereby transferred, conveyed and assigned to the ownership and administration of the Public
Estates Authorityestablished pursuant to PD No. 1084; Provided, however, That the rights and
interests of the Construction and Development Corporation of the Philippines pursuant to the
aforesaid contract shall be recognized and respected.
Henceforth, the Public Estates Authority shall exercise the rights and assume the obligations of the
Republic of the Philippines (Department of Public Highways) arising from, or incident to, the
aforesaid contract between the Republic of the Philippines and the Construction and Development
Corporation of the Philippines.
In consideration of the foregoing transfer and assignment, the Public Estates Authority shall issue in
favor of the Republic of the Philippines the corresponding shares of stock in said entity with an
issued value of said shares of stock (which) shall be deemed fully paid and non-assessable.
The Secretary of Public Highways and the General Manager of the Public Estates Authority shall
execute such contracts or agreements, including appropriate agreements with the Construction and
Development Corporation of the Philippines, as may be necessary to implement the above.
Special land patent/patents shall be issued by the Secretary of Natural Resources in favor of
the Public Estates Authority without prejudice to the subsequent transfer to the contractor or
his assignees of such portion or portions of the land reclaimed or to be reclaimed as
provided for in the above-mentioned contract. On the basis of such patents, the Land
Registration Commission shall issue the corresponding certificate of title." (Emphasis
supplied)
On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that -
"Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the PEA which shall be
responsible for its administration, development, utilization or disposition in accordance with the
provisions of Presidential Decree No. 1084. Any and all income that the PEA may derive from the
sale, lease or use of reclaimed lands shall be used in accordance with the provisions of Presidential
Decree No. 1084."
There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its reclaimed
lands. PD No. 1085 merely transferred "ownership and administration" of lands reclaimed from
Manila Bay to PEA, while EO No. 525 declared that lands reclaimed by PEA "shall belong to or be
owned by PEA." EO No. 525 expressly states that PEA should dispose of its reclaimed lands "in
accordance with the provisions of Presidential Decree No. 1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer, deal in,
subdivide, dispose, lease and sell any and all kinds of lands x x x owned, managed, controlled
and/or operated by the government."87 (Emphasis supplied) There is, therefore, legislative
authority granted to PEA to sell its lands, whether patrimonial or alienable lands of the public
domain. PEA may sell to private parties its patrimonial properties in accordance with the PEA
charter free from constitutional limitations. The constitutional ban on private corporations from
acquiring alienable lands of the public domain does not apply to the sale of PEA's patrimonial lands.
PEA may also sell its alienable or disposable lands of the public domain to private individuals
since, with the legislative authority, there is no longer any statutory prohibition against such sales
and the constitutional ban does not apply to individuals. PEA, however, cannot sell any of its
alienable or disposable lands of the public domain to private corporations since Section 3, Article XII
of the 1987 Constitution expressly prohibits such sales. The legislative authority benefits only
individuals. Private corporations remain barred from acquiring any kind of alienable land of the public
domain, including government reclaimed lands.
The provision in PD No. 1085 stating that portions of the reclaimed lands could be transferred by
PEA to the "contractor or his assignees" (Emphasis supplied) would not apply to private corporations
but only to individuals because of the constitutional ban. Otherwise, the provisions of PD No. 1085
would violate both the 1973 and 1987 Constitutions.
The requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of PEA are classified as alienable or disposable lands open to
disposition, and further declared no longer needed for public service, PEA would have to conduct a
public bidding in selling or leasing these lands. PEA must observe the provisions of Sections 63 and
67 of CA No. 141 requiring public auction, in the absence of a law exempting PEA from holding a
public auction.88 Special Patent No. 3517 expressly states that the patent is issued by authority of
the Constitution and PD No. 1084, "supplemented by Commonwealth Act No. 141, as amended."
This is an acknowledgment that the provisions of CA No. 141 apply to the disposition of reclaimed
alienable lands of the public domain unless otherwise provided by law. Executive Order No.
654,89 which authorizes PEA "to determine the kind and manner of payment for the transfer" of its
assets and properties, does not exempt PEA from the requirement of public auction. EO No. 654
merely authorizes PEA to decide the mode of payment, whether in kind and in installment, but does

merely authorizes PEA to decide the mode of payment, whether in kind and in installment, but does
not authorize PEA to dispense with public auction.
Moreover, under Section 79 of PD No. 1445, otherwise known as the Government Auditing Code,
the government is required to sell valuable government property through public bidding. Section 79
of PD No. 1445 mandates that –
"Section 79. When government property has become unserviceable for any cause, or is no longer
needed, it shall, upon application of the officer accountable therefor, be inspected by the head of the
agency or his duly authorized representative in the presence of the auditor concerned and, if found
to be valueless or unsaleable, it may be destroyed in their presence. If found to be valuable, it may
be sold at public auction to the highest bidder under the supervision of the proper committee on
award or similar body in the presence of the auditor concerned or other authorized representative of
the Commission, after advertising by printed notice in the Official Gazette, or for not less than
three consecutive days in any newspaper of general circulation, or where the value of the
property does not warrant the expense of publication, by notices posted for a like period in at least
three public places in the locality where the property is to be sold. In the event that the public
auction fails, the property may be sold at a private sale at such price as may be fixed by the
same committee or body concerned and approved by the Commission."
It is only when the public auction fails that a negotiated sale is allowed, in which case the
Commission on Audit must approve the selling price.90 The Commission on Audit implements
Section 79 of the Government Auditing Code through Circular No. 89-29691 dated January 27, 1989.
This circular emphasizes that government assets must be disposed of only through public auction,
and a negotiated sale can be resorted to only in case of "failure of public auction."
At the public auction sale, only Philippine citizens are qualified to bid for PEA's reclaimed foreshore
and submerged alienable lands of the public domain. Private corporations are barred from bidding at
the auction sale of any kind of alienable land of the public domain.
PEA originally scheduled a public bidding for the Freedom Islands on December 10, 1991. PEA
imposed a condition that the winning bidder should reclaim another 250 hectares of submerged
areas to regularize the shape of the Freedom Islands, under a 60-40 sharing of the additional
reclaimed areas in favor of the winning bidder.92 No one, however, submitted a bid. On December
23, 1994, the Government Corporate Counsel advised PEA it could sell the Freedom Islands
through negotiation, without need of another public bidding, because of the failure of the public
bidding on December 10, 1991.93
However, the original JVA dated April 25, 1995 covered not only the Freedom Islands and the
additional 250 hectares still to be reclaimed, it also granted an option to AMARI to reclaim another
350 hectares. The original JVA, a negotiated contract, enlarged the reclamation area to 750
hectares.94 The failure of public bidding on December 10, 1991, involving only 407.84 hectares, 95 is
not a valid justification for a negotiated sale of 750 hectares, almost double the area publicly
auctioned. Besides, the failure of public bidding happened on December 10, 1991, more than three
years before the signing of the original JVA on April 25, 1995. The economic situation in the country
had greatly improved during the intervening period.
Reclamation under the BOT Law and the Local Government Code
The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute and clear:
"Private corporations or associations may not hold such alienable lands of the public domain except
by lease, x x x." Even Republic Act No. 6957 ("BOT Law," for brevity), cited by PEA and AMARI as
legislative authority to sell reclaimed lands to private parties, recognizes the constitutional ban.
Section 6 of RA No. 6957 states –
"Sec. 6. Repayment Scheme. - For the financing, construction, operation and maintenance of any
infrastructure projects undertaken through the build-operate-and-transfer arrangement or any of its
variations pursuant to the provisions of this Act, the project proponent x x x may likewise be repaid in
the form of a share in the revenue of the project or other non-monetary payments, such as, but not
limited to, the grant of a portion or percentage of the reclaimed land, subject to the constitutional
requirements with respect to the ownership of the land: x x x." (Emphasis supplied)
A private corporation, even one that undertakes the physical reclamation of a government BOT
project, cannot acquire reclaimed alienable lands of the public domain in view of the constitutional
ban.
Section 302 of the Local Government Code, also mentioned by PEA and AMARI, authorizes local
governments in land reclamation projects to pay the contractor or developer in kind consisting of a
percentage of the reclaimed land, to wit:
"Section 302. Financing, Construction, Maintenance, Operation, and Management of Infrastructure
Projects by the Private Sector. x x x
xx x
In case of land reclamation or construction of industrial estates, the repayment plan may consist of
the grant of a portion or percentage of the reclaimed land or the industrial estate constructed."

the grant of a portion or percentage of the reclaimed land or the industrial estate constructed."
Although Section 302 of the Local Government Code does not contain a proviso similar to that of the
BOT Law, the constitutional restrictions on land ownership automatically apply even though not
expressly mentioned in the Local Government Code.
Thus, under either the BOT Law or the Local Government Code, the contractor or developer, if a
corporate entity, can only be paid with leaseholds on portions of the reclaimed land. If the contractor
or developer is an individual, portions of the reclaimed land, not exceeding 12 hectares 96 of non-
agricultural lands, may be conveyed to him in ownership in view of the legislative authority allowing
such conveyance. This is the only way these provisions of the BOT Law and the Local Government
Code can avoid a direct collision with Section 3, Article XII of the 1987 Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the "act of conveying the ownership of the reclaimed lands to public
respondent PEA transformed such lands of the public domain to private lands." This theory is
echoed by AMARI which maintains that the "issuance of the special patent leading to the eventual
issuance of title takes the subject land away from the land of public domain and converts the
property into patrimonial or private property." In short, PEA and AMARI contend that with the
issuance of Special Patent No. 3517 and the corresponding certificates of titles, the 157.84 hectares
comprising the Freedom Islands have become private lands of PEA. In support of their theory, PEA
and AMARI cite the following rulings of the Court:
1. Sumail v. Judge of CFI of Cotabato,97 where the Court held –
"Once the patent was granted and the corresponding certificate of title was issued, the land ceased
to be part of the public domain and became private property over which the Director of Lands has
neither control nor jurisdiction."
2. Lee Hong Hok v. David,98 where the Court declared -
"After the registration and issuance of the certificate and duplicate certificate of title based on a
public land patent, the land covered thereby automatically comes under the operation of Republic
Act 496 subject to all the safeguards provided therein."3. Heirs of Gregorio Tengco v. Heirs of Jose
Aliwalas,99 where the Court ruled -
"While the Director of Lands has the power to review homestead patents, he may do so only so long
as the land remains part of the public domain and continues to be under his exclusive control; but
once the patent is registered and a certificate of title is issued, the land ceases to be part of the
public domain and becomes private property over which the Director of Lands has neither control nor
jurisdiction."
4. Manalo v. Intermediate Appellate Court,100 where the Court held –
"When the lots in dispute were certified as disposable on May 19, 1971, and free patents were
issued covering the same in favor of the private respondents, the said lots ceased to be part of the
public domain and, therefore, the Director of Lands lost jurisdiction over the same."
5.Republic v. Court of Appeals,101 where the Court stated –
"Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally effected a land grant
to the Mindanao Medical Center, Bureau of Medical Services, Department of Health, of the whole lot,
validly sufficient for initial registration under the Land Registration Act. Such land grant is constitutive
of a 'fee simple' title or absolute title in favor of petitioner Mindanao Medical Center. Thus, Section
122 of the Act, which governs the registration of grants or patents involving public lands, provides
that 'Whenever public lands in the Philippine Islands belonging to the Government of the United
States or to the Government of the Philippines are alienated, granted or conveyed to persons or to
public or private corporations, the same shall be brought forthwith under the operation of this Act
(Land Registration Act, Act 496) and shall become registered lands.'"
The first four cases cited involve petitions to cancel the land patents and the corresponding
certificates of titles issued to private parties. These four cases uniformly hold that the Director of
Lands has no jurisdiction over private lands or that upon issuance of the certificate of title the land
automatically comes under the Torrens System. The fifth case cited involves the registration under
the Torrens System of a 12.8-hectare public land granted by the National Government to Mindanao
Medical Center, a government unit under the Department of Health. The National Government
transferred the 12.8-hectare public land to serve as the site for the hospital buildings and other
facilities of Mindanao Medical Center, which performed a public service. The Court affirmed the
registration of the 12.8-hectare public land in the name of Mindanao Medical Center under Section
122 of Act No. 496. This fifth case is an example of a public land being registered under Act No. 496
without the land losing its character as a property of public dominion.
In the instant case, the only patent and certificates of title issued are those in the name of PEA, a
wholly government owned corporation performing public as well as proprietary functions. No patent
or certificate of title has been issued to any private party. No one is asking the Director of Lands to
cancel PEA's patent or certificates of title. In fact, the thrust of the instant petition is that PEA's
certificates of title should remain with PEA, and the land covered by these certificates, being

certificates of title should remain with PEA, and the land covered by these certificates, being
alienable lands of the public domain, should not be sold to a private corporation.
Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or
public ownership of the land. Registration is not a mode of acquiring ownership but is merely
evidence of ownership previously conferred by any of the recognized modes of acquiring ownership.
Registration does not give the registrant a better right than what the registrant had prior to the
registration.102 The registration of lands of the public domain under the Torrens system, by itself,
cannot convert public lands into private lands.103
Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the
alienable land of the public domain automatically becomes private land cannot apply to government
units and entities like PEA. The transfer of the Freedom Islands to PEA was made subject to the
provisions of CA No. 141 as expressly stated in Special Patent No. 3517 issued by then President
Aquino, to wit:
"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the Philippines and in
conformity with the provisions of Presidential Decree No. 1084, supplemented by Commonwealth
Act No. 141, as amended, there are hereby granted and conveyed unto the Public Estates
Authority the aforesaid tracts of land containing a total area of one million nine hundred fifteen
thousand eight hundred ninety four (1,915,894) square meters; the technical description of which are
hereto attached and made an integral part hereof." (Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD No.
1084. Section 60 of CA No. 141 prohibits, "except when authorized by Congress," the sale of
alienable lands of the public domain that are transferred to government units or entities. Section 60
of CA No. 141 constitutes, under Section 44 of PD No. 1529, a "statutory lien affecting title" of the
registered land even if not annotated on the certificate of title. 104 Alienable lands of the public domain
held by government entities under Section 60 of CA No. 141 remain public lands because they
cannot be alienated or encumbered unless Congress passes a law authorizing their disposition.
Congress, however, cannot authorize the sale to private corporations of reclaimed alienable lands of
the public domain because of the constitutional ban. Only individuals can benefit from such law.
The grant of legislative authority to sell public lands in accordance with Section 60 of CA No. 141
does not automatically convert alienable lands of the public domain into private or patrimonial lands.
The alienable lands of the public domain must be transferred to qualified private parties, or to
government entities not tasked to dispose of public lands, before these lands can become private or
patrimonial lands. Otherwise, the constitutional ban will become illusory if Congress can declare
lands of the public domain as private or patrimonial lands in the hands of a government agency
tasked to dispose of public lands. This will allow private corporations to acquire directly from
government agencies limitless areas of lands which, prior to such law, are concededly public lands.
Under EO No. 525, PEA became the central implementing agency of the National Government to
reclaim foreshore and submerged areas of the public domain. Thus, EO No. 525 declares that –
"EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the Agency Primarily Responsible for all Reclamation
Projects
Whereas, there are several reclamation projects which are ongoing or being proposed to be
undertaken in various parts of the country which need to be evaluated for consistency with national
programs;
Whereas, there is a need to give further institutional support to the Government's declared policy to
provide for a coordinated, economical and efficient reclamation of lands;
Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall be limited to the
National Government or any person authorized by it under proper contract;
Whereas, a central authority is needed to act on behalf of the National Government which
shall ensure a coordinated and integrated approach in the reclamation of lands;
Whereas, Presidential Decree No. 1084 creates the Public Estates Authority as a government
corporation to undertake reclamation of lands and ensure their maximum utilization in
promoting public welfare and interests; and
Whereas, Presidential Decree No. 1416 provides the President with continuing authority to
reorganize the national government including the transfer, abolition, or merger of functions and
offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the
powers vested in me by the Constitution and pursuant to Presidential Decree No. 1416, do hereby
order and direct the following:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible for integrating,
directing, and coordinating all reclamation projects for and on behalf of the National
Government. All reclamation projects shall be approved by the President upon recommendation of
the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any

the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any
person or entity; Provided, that, reclamation projects of any national government agency or entity
authorized under its charter shall be undertaken in consultation with the PEA upon approval of the
President.
x x x ."
As the central implementing agency tasked to undertake reclamation projects nationwide, with
authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged
with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or
sold by PEA are not private lands, in the same manner that DENR, when it disposes of other
alienable lands, does not dispose of private lands but alienable lands of the public domain. Only
when qualified private parties acquire these lands will the lands become private lands. In the hands
of the government agency tasked and authorized to dispose of alienable of disposable lands
of the public domain, these lands are still public, not private lands.
Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as
well as "any and all kinds of lands." PEA can hold both lands of the public domain and private lands.
Thus, the mere fact that alienable lands of the public domain like the Freedom Islands are
transferred to PEA and issued land patents or certificates of title in PEA's name does not
automatically make such lands private.
To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands
will sanction a gross violation of the constitutional ban on private corporations from acquiring any
kind of alienable land of the public domain. PEA will simply turn around, as PEA has now done
under the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to
be reclaimed lands to a single private corporation in only one transaction. This scheme will
effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was
intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos,
now numbering over 80 million strong.
This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain
since PEA can "acquire x x x any and all kinds of lands." This will open the floodgates to
corporations and even individuals acquiring hundreds of hectares of alienable lands of the public
domain under the guise that in the hands of PEA these lands are private lands. This will result in
corporations amassing huge landholdings never before seen in this country - creating the very evil
that the constitutional ban was designed to prevent. This will completely reverse the clear direction
of constitutional development in this country. The 1935 Constitution allowed private corporations to
acquire not more than 1,024 hectares of public lands. 105 The 1973 Constitution prohibited private
corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally
reiterated this prohibition.
The contention of PEA and AMARI that public lands, once registered under Act No. 496 or PD No.
1529, automatically become private lands is contrary to existing laws. Several laws authorize lands
of the public domain to be registered under the Torrens System or Act No. 496, now PD No. 1529,
without losing their character as public lands. Section 122 of Act No. 496, and Section 103 of PD No.
1529, respectively, provide as follows:
Act No. 496
"Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x Government of the
Philippine Islands are alienated, granted, or conveyed to persons or the public or private
corporations, the same shall be brought forthwith under the operation of this Act and shall become
registered lands."
PD No. 1529
"Sec. 103. Certificate of Title to Patents. Whenever public land is by the Government alienated,
granted or conveyed to any person, the same shall be brought forthwith under the operation of this
Decree." (Emphasis supplied)
Based on its legislative history, the phrase "conveyed to any person" in Section 103 of PD No. 1529
includes conveyances of public lands to public corporations.
Alienable lands of the public domain "granted, donated, or transferred to a province, municipality, or
branch or subdivision of the Government," as provided in Section 60 of CA No. 141, may be
registered under the Torrens System pursuant to Section 103 of PD No. 1529. Such registration,
however, is expressly subject to the condition in Section 60 of CA No. 141 that the land "shall not be
alienated, encumbered or otherwise disposed of in a manner affecting its title, except when
authorized by Congress." This provision refers to government reclaimed, foreshore and marshy
lands of the public domain that have been titled but still cannot be alienated or encumbered unless
expressly authorized by Congress. The need for legislative authority prevents the registered land of
the public domain from becoming private land that can be disposed of to qualified private parties.
The Revised Administrative Code of 1987 also recognizes that lands of the public domain may be
registered under the Torrens System. Section 48, Chapter 12, Book I of the Code states –

registered under the Torrens System. Section 48, Chapter 12, Book I of the Code states –
"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
(1) x x x
(2) For property belonging to the Republic of the Philippines, but titled in the name of any
political subdivision or of any corporate agency or instrumentality, by the executive head of the
agency or instrumentality." (Emphasis supplied)
Thus, private property purchased by the National Government for expansion of a public wharf may
be titled in the name of a government corporation regulating port operations in the country. Private
property purchased by the National Government for expansion of an airport may also be titled in the
name of the government agency tasked to administer the airport. Private property donated to a
municipality for use as a town plaza or public school site may likewise be titled in the name of the
municipality.106 All these properties become properties of the public domain, and if already registered
under Act No. 496 or PD No. 1529, remain registered land. There is no requirement or provision in
any existing law for the de-registration of land from the Torrens System.
Private lands taken by the Government for public use under its power of eminent domain become
unquestionably part of the public domain. Nevertheless, Section 85 of PD No. 1529 authorizes the
Register of Deeds to issue in the name of the National Government new certificates of title covering
such expropriated lands. Section 85 of PD No. 1529 states –
"Sec. 85. Land taken by eminent domain. Whenever any registered land, or interest therein, is
expropriated or taken by eminent domain, the National Government, province, city or municipality, or
any other agency or instrumentality exercising such right shall file for registration in the proper
Registry a certified copy of the judgment which shall state definitely by an adequate description, the
particular property or interest expropriated, the number of the certificate of title, and the nature of the
public use. A memorandum of the right or interest taken shall be made on each certificate of title by
the Register of Deeds, and where the fee simple is taken, a new certificate shall be issued in
favor of the National Government, province, city, municipality, or any other agency or
instrumentality exercising such right for the land so taken. The legal expenses incident to the
memorandum of registration or issuance of a new certificate of title shall be for the account of the
authority taking the land or interest therein." (Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively private or
patrimonial lands. Lands of the public domain may also be registered pursuant to existing laws.
AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the Freedom Islands
or of the lands to be reclaimed from submerged areas of Manila Bay. In the words of AMARI, the
Amended JVA "is not a sale but a joint venture with a stipulation for reimbursement of the original
cost incurred by PEA for the earlier reclamation and construction works performed by the CDCP
under its 1973 contract with the Republic." Whether the Amended JVA is a sale or a joint venture,
the fact remains that the Amended JVA requires PEA to "cause the issuance and delivery of the
certificates of title conveying AMARI's Land Share in the name of AMARI."107
This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which provides that
private corporations "shall not hold such alienable lands of the public domain except by lease." The
transfer of title and ownership to AMARI clearly means that AMARI will "hold" the reclaimed lands
other than by lease. The transfer of title and ownership is a "disposition" of the reclaimed lands, a
transaction considered a sale or alienation under CA No. 141, 108 the Government Auditing
Code,109 and Section 3, Article XII of the 1987 Constitution.
The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas
form part of the public domain and are inalienable. Lands reclaimed from foreshore and submerged
areas also form part of the public domain and are also inalienable, unless converted pursuant to law
into alienable or disposable lands of the public domain. Historically, lands reclaimed by the
government are sui generis, not available for sale to private parties unlike other alienable public
lands. Reclaimed lands retain their inherent potential as areas for public use or public service.
Alienable lands of the public domain, increasingly becoming scarce natural resources, are to be
distributed equitably among our ever-growing population. To insure such equitable distribution, the
1973 and 1987 Constitutions have barred private corporations from acquiring any kind of alienable
land of the public domain. Those who attempt to dispose of inalienable natural resources of the
State, or seek to circumvent the constitutional ban on alienation of lands of the public domain to
private corporations, do so at their own risk.
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by
certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease
these lands to private corporations but may not sell or transfer ownership of these lands to private
corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership

corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership
limitations in the 1987 Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of
the public domain until classified as alienable or disposable lands open to disposition and declared
no longer needed for public service. The government can make such classification and declaration
only after PEA has reclaimed these submerged areas. Only then can these lands qualify as
agricultural lands of the public domain, which are the only natural resources the government can
alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and
outside the commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34
hectares110 of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of
the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land
of the public domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares111 of still
submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of
the 1987 Constitution which prohibits the alienation of natural resources other than agricultural lands
of the public domain. PEA may reclaim these submerged areas. Thereafter, the government can
classify the reclaimed lands as alienable or disposable, and further declare them no longer needed
for public service. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI
will be void in view of Section 3, Article XII of the 1987 Constitution which prohibits private
corporations from acquiring any kind of alienable land of the public domain.
Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution.
Under Article 1409112 of the Civil Code, contracts whose "object or purpose is contrary to law," or
whose "object is outside the commerce of men," are "inexistent and void from the beginning." The
Court must perform its duty to defend and uphold the Constitution, and therefore declares the
Amended JVA null and void ab initio.
Seventh issue: whether the Court is the proper forum to raise the issue of whether the
Amended JVA is grossly disadvantageous to the government.
Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on this last
issue. Besides, the Court is not a trier of facts, and this last issue involves a determination of factual
matters.
WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari Coastal Bay
Development Corporation are PERMANENTLY ENJOINED from implementing the Amended Joint
Venture Agreement which is hereby declared NULL and VOID ab initio.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Ynares-
Santiago, Sandoval-Gutierrez, Austria-Martinez, and Corona, JJ., concur.
Footnote
1
Section 4 of PD No. 1084.
2 PEA's Memorandum dated August 4, 1999, p. 3.
3 PEA's Memorandum, supra note 2 at 7. PEA's Memorandum quoted extensively, in its Statement
of Facts and the Case, the Statement of Facts in Senate Committee Report No. 560 dated
September 16, 1997.
4 In Opinion No. 330 dated December 23, 1994, the Government Corporate Counsel, citing COA
Audit Circular No. 89-296, advised PEA that PEA could negotiate the sale of the 157.84-hectare
Freedom Islands in view of the failure of the public bidding held on December 10, 1991 where there
was not a single bidder. See also Senate Committee Report No. 560, p. 12.
5 PEA's Memorandum, supra note 2 at 9.
6 Ibid.
7
The existence of this report is a matter of judicial notice pursuant to Section 1, Rule 129 of the
Rules of Court which provides, "A court shall take judicial notice, without the introduction of
evidence, of x x x the official acts of the legislature x x x."
8
Teofisto Guingona, Jr.
9
Renato Cayetano.
10 Virgilio C. Abejo.
11 Report and Recommendation of the Legal Task Force, Annex "C", AMARI's Memorandum dated
June 19, 1999.

12
AMARI's Comment dated June 24, 1998, p. 3; Rollo, p. 68.
13 AMARI filed three motions for extension of time to file comment (Rollo, pp. 32, 38, 48), while PEA
filed nine motions for extension of time (Rollo, pp. 127, 139).
14
Petitioner's Memorandum dated July 6, 1999, p. 42.
15 Represented by the Office of the Solicitor General, with Solicitor General Ricardo P. Galvez,
Assistant Solicitor General Azucena R. Balanon-Corpuz, and Associate Solicitor Raymund I.

Assistant Solicitor General Azucena R. Balanon-Corpuz, and Associate Solicitor Raymund I.
Rigodon signing PEA's Memorandum.
16 Represented by Azcuna Yorac Arroyo & Chua Law Offices, and Romulo Mabanta Sayoc & De los
Angeles Law Offices.

17
Salonga v. Paño, 134 SCRA 438 (1985); Gonzales v. Marcos, 65 SCRA 624 (1975 ); Aquino v.
Enrile, 59 SCRA 183 (1974 ); Dela Camara v. Enage, 41 SCRA 1 (1971 ).
18 Section 11, Article XIV.
19
Manila Electric Co. v. Judge F. Castro-Bartolome, 114 SCRA 799 (1982); Republic v. CA and
Iglesia, and Republic v. Cendana and Iglesia ni Cristo, 119 SCRA 449 (1982); Republic v. Villanueva
and Iglesia ni Cristo, 114 SCRA 875 (1982); Director of Lands v. Lood, 124 SCRA 460 (1983);
Republic v. Iglesia ni Cristo, 128 SCRA 44 (1984); Director of Lands v. Hermanos y Hermanas de
Sta. Cruz de Mayo, Inc., 141 SCRA 21 (1986); Director of Lands v. IAC and Acme Plywood &
Veneer Co., 146 SCRA 509 (1986); Republic v. IAC and Roman Catholic Bishop of Lucena, 168
SCRA 165 (1988); Natividad v. CA, 202 SCRA 493 (1991); Villaflor v. CA and Nasipit Lumber Co.,
280 SCRA 297 (1997). In Ayog v. Cusi, 118 SCRA 492 (1982), the Court did not apply the
constitutional ban in the 1973 Constitution because the applicant corporation, Biñan Development
Co., Inc., had fully complied with all its obligations and even paid the full purchase price before the
effectivity of the 1973 Constitution, although the sales patent was issued after the 1973 Constitution
took effect.
20
PD No. 1073.
21 Annex "B", AMARI's Memorandum dated June 19, 1999, Section 5.2 (c) and (e) of the Amended
JVA, pp. 16-17.

22
Chavez v. PCGG, 299 SCRA 744 (1998).
23
136 SCRA 27 (1985).
24 Article 2 of the Civil Code (prior to its amendment by EO No. 200) provided as follows: "Laws shall
take effect after fifteen days following the completion of their publication in the Official Gazette,
unless it is provided otherwise, x x x."
25
Section 1 of CA No. 638 provides as follows: "There shall be published in the Official Gazette all
important legislative acts and resolutions of the Congress of the Philippines; all executive and
administrative orders and proclamations, except such as have no general applicability; x x x."
26
Section 79 of the Government Auditing Codes provides as follows: "When government
property has become unserviceable for any cause, or is no longer needed, it shall, upon
application of the officer accountable therefor, be inspected by the head of the agency or his duly
authorized representative in the presence of the auditor concerned and, if found to be valueless or
unsaleable, it may be destroyed in their presence. If found to be valuable, it may be sold at public
auction to the highest bidder under the supervision of the proper committee on award or similar
body in the presence of the auditor concerned or other authorized representative of the
Commission, after advertising by printed notice in the Official Gazette, or for not less than
three consecutive days in any newspaper of general circulation, or where the value of the
property does not warrant the expense of publication, by notices posted for a like period in at least
three public places in the locality where the property is to be sold. In the event that the public
auction fails, the property may be sold at a private sale at such price as may be fixed by the
same committee or body concerned and approved by the Commission."
27 Paat v. Court of Appeals, 266 SCRA 167 (1997); Quisumbing v. Judge Gumban, 193 SCRA 520
(1991); Valmonte v. Belmonte, Jr., 170 SCRA 256 (1989).

28
See note 22.
29
Section 1, Article XI of the 1987 Constitution states as follows: "Public office is a public trust.
Public officers and employees must at all times be accountable to the people, serve them with
utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead
modest lives."
30 170 SCRA 256 (1989).
31 See note 22.
32
Record of the Constitutional Commission, Vol. V, pp. 24-25, (1986).
33
Supra, Note 22.
34 Ibid.
35 Legaspi v. Civil Service Commission, 150 SCRA 530 (1987).
36
Almonte v. Vasquez, 244 SCRA 286 (1995).
37 See Note 22.
38 Chavez v. PCGG, see note 22; Aquino-Sarmiento v. Morato, 203 SCRA 515 (1991).
39
Almonte v. Vasquez, see note 36.
40
People's Movement for Press Freedom, et al. v. Hon. Raul Manglapus, G.R. No. 84642, En Banc
Resolution dated April 13, 1988; Chavez v. PCGG, see note 22.
41 Section 270 of the National Internal Revenue Code punishes any officer or employee of the

41
Section 270 of the National Internal Revenue Code punishes any officer or employee of the
Bureau of Internal Revenue who divulges to any person, except as allowed by law, information
regarding the business, income, or estate of any taxpayer, the secrets, operation, style of work, or
apparatus of any manufacturer or producer, or confidential information regarding the business of any
taxpayer, knowledge of which was acquired by him in the discharge of his official duties. Section 14
of R.A. No. 8800 (Safeguard Measures Act) prohibits the release to the public of confidential
information submitted in evidence to the Tariff Commission. Section 3 (n) of R.A. No. 8504
(Philippine AIDS Prevention and Control Act) classifies as confidential the medical records of HIV
patients. Section 6 (j) of R.A. No. 8043 (Inter-Country Adoption Act) classifies as confidential the
records of the adopted child, adopting parents, and natural parents. Section 94 (f) of R.A. No. 7942
(Philippine Mining Act) requires the Department of Environment and Natural Resources to maintain
the confidentiality of confidential information supplied by contractors who are parties to mineral
agreements or financial and technical assistance agreements.
42 The Recopilacion de Leyes de las Indias declared that: "We, having acquired full sovereignty over
the Indies, and all lands, territories, and possessions not heretofore ceded away by our royal
predecessors, or by us, or in our name, still pertaining to the royal crown and patrimony, it is our will
that all lands which are held without proper and true deeds of grant be restored to us according as
they belong to us, in order that after reserving before all what to us or to our viceroys, audiencias,
and governors may seem necessary for public squares, ways, pastures, and commons in those
places which are peopled, taking into consideration not only their present condition, but also their
future and their probable increase, and after distributing to the natives what may be necessary for
tillage and pasturage, confirming them in what they now have and giving them more if necessary, all
the rest of said lands may remain free and unencumbered for us to dispose of as we may
wish." See concurring opinion of Justice Reynato S. Puno in Republic Real Estate Corporation v.
Court of Appeals, 299 SCRA 199 (1998).
43 Cariño v. Insular Government, 41 Phil. 935 (1909). The exception mentioned in Cariño, referring to
lands in the possession of an occupant and of his predecessors-in-interest, since time immemorial,
is actually a species of a grant by the State. The United States Supreme Court, speaking through
Justice Oliver Wendell Holmes, Jr., declared in Cariño: "Prescription is mentioned again in the royal
cedula of October 15, 1754, cited in 3 Philippine, 546; 'Where such possessors shall not be able to
produce title deeds, it shall be sufficient if they shall show that ancient possession, as a valid title by
prescription.' It may be that this means possession from before 1700; but, at all events, the principle
is admitted. As prescription, even against the Crown lands, was recognized by the laws of Spain, we
see no sufficient reason for hesitating to admit that it was recognized in the Philippines in regard to
lands over which Spain had only a paper sovereignty." See also Republic v. Lee, 197 SCRA 13
(1991).
44 Article 1 of the Spanish Law of Waters of 1866.
45
Ignacio v. Director of Lands, 108 Phil. 335 (1960); Joven v. Director of Lands, 93 Phil. 134 (1953);
Laurel v. Garcia, 187 SCRA 797 (1990). See concurring opinion of Justice Reynato S. Puno in
Republic Real Estate Corporation v. Court of Appeals, 299 SCRA 199 (1998).
46 Act No. 926, enacted on October 7, 1903, was also titled the Public Land Act. This Act, however,
did not cover reclaimed lands. Nevertheless, Section 23 of this Act provided as follows: "x x x In no
case may lands leased under the provisions of this chapter be taken so as to gain control of adjacent
land, water, stream, shore line, way, roadstead, or other valuable right which in the opinion of the
Chief of the Bureau of Public Lands would be prejudicial to the interests of the public."
47
Section 10 of Act No. 2874 provided as follows: "The words "alienation," "disposition," or
"concession" as used in this Act, shall mean any of the methods authorized by this Act for the
acquisition, lease, use, or benefit of the lands of the public domain other than timber or mineral
lands."
48
Title II of Act No. 2874 governed alienable lands of the public domain for agricultural purposes,
while Title III of the same Act governed alienable lands of the public domain for non-agricultural
purposes.
49 Section 57 of Act No. 2874 provided as follows: "x x x; but the land so granted, donated, or
transferred to a province, municipality, or branch or subdivision of the Government shall not be

alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when
authorized by the legislature; x x x."
50
Krivenko v. Register of Deeds, 79 Phil. 461 (1947).
51
Section 2 of CA No. 141 states as follows: "The provisions of this Act shall apply to the lands of the
public domain; but timber and mineral lands shall be governed by special laws and nothing in this
Act provided shall be understood or construed to change or modify the administration and
disposition of the lands commonly called "friar lands" and those which, being privately owned, have
reverted to or become the property of the Commonwealth of the Philippines, which administration
and disposition shall be governed by the laws at present in force or which may hereafter be

and disposition shall be governed by the laws at present in force or which may hereafter be
enacted."
52 Like Act No. 2874, Section 10 of CA No. 141 defined the terms "alienation" and "disposition" as
follows: "The words "alienation," "disposition," or "concession" as used in this Act, shall mean any of
the methods authorized by this Act for the acquisition, lease, use, or benefit of the lands of the public
domain other than timber or mineral lands."
53 R.A. No. 6657 has suspended the authority of the President to reclassify forest or mineral lands
into agricultural lands. Section 4 (a) of RA No. 6657 (Comprehensive Agrarian Reform Law of 1988)
states, "No reclassification of forest or mineral lands to agricultural lands shall be undertaken after
the approval of this Act until Congress, taking into account ecological, developmental and equity
considerations, shall have delimited by law, the specific limits of the public domain."
54
Covering Sections 58 to 68 of CA No. 141.
55 299 SCRA 199 (1998).
56 Section 1, Article XIII of the 1935 Constitution limited the disposition and utilization of public
agricultural lands to Philippine citizens or to corporations at least sixty percent owned by Philippine
citizens. This was, however, subject to the original Ordinance appended to the 1935 Constitution
stating, among others, that until the withdrawal of United States sovereignty in the Philippines,
"Citizens and corporations of the United States shall enjoy in the Commonwealth of the Philippines
all the civil rights of the citizens and corporations, respectively, thereof."
57
Section 44 of PD No. 1529 (previously Section 39 of Act No. 496) provides that "liens, claims or
rights arising or existing under the laws and the Constitution of the Philippines which are not by law
required to appear of record in the Registry of Deeds in order to be valid against subsequent
purchasers or encumbrancers of record" constitute statutory liens affecting the title.1âwphi1.n
êt
58
RA No. 730, which took effect on June 18, 1952, authorized the private sale of home lots to actual
occupants of public lands not needed for public service. Section 1 of RA No. 730 provided as
follows: "Notwithstanding the provisions of Sections 61 and 67 of Commonwealth Act No. 141, as
amended by RA No. 293, any Filipino citizen of legal age who is not the owner of a home lot in the
municipality or city in which he resides and who had in good faith established his residence on a
parcel of land of the Republic of the Philippines which is not needed for public service, shall be given
preference to purchase at a private sale of which reasonable notice shall be given to him, not more
than one thousand square meters at a price to be fixed by the Director of Lands with the approval of
the Secretary of Agriculture and Natural Resources. x x x." In addition, on June 16, 1948, Congress
enacted R.A. No. 293 allowing the private sale of marshy alienable or disposable lands of the public
domain to lessees who have improved and utilized the same as farms, fishponds or other similar
purposes for at least five years from the date of the lease contract with the government. R.A. No.
293, however, did not apply to marshy lands under Section 56 (c), Title III of CA No. 141 which
refers to marshy lands leased for residential, commercial, industrial or other non-agricultural
purposes.
59
See note 49.
60 See note 60.
61 Republic Real Estate Corporation v. Court of Appeals, see note 56.
62
Ibid.
63 Insular Government v. Aldecoa, 19 Phil. 505 (1911); Government v. Cabangis, 53 Phil. 112 (1929).
64 118 SCRA 492 (1982).
65
Annex "B", AMARI's Memorandum, see note 2 at 1 & 2.
66
PEA's Memorandum, see note 6.
67 Ibid., p. 44.
68 See notes 9, 10 & 11.
69
Annex "C", p. 3, AMARI's Memorandum, see note 12 at 3.
70 This should read Article XII.
71 Section 8 of CA No. 141.
72
Emphasis supplied.
73
187 SCRA 797 (1990).
74 Article 422 of the Civil Code states as follows: "Property of public dominion, when no longer
needed for public use or public service, shall form part of the patrimonial property of the State."
75
AMARI's Comment dated June 24, 1998, p. 20; Rollo, p. 85.
76 Dizon v. Rodriguez, 13 SCRA 705 (1965); Republic v. Lat Vda. de Castillo, 163 SCRA 286 (1988).
77 Cariño v. Insular Government, 41 Phil. 935 (1909).
78
Proclamation No. 41, issued by President Ramon Magsaysay on July 5, 1954, reserved for
"National Park purposes" 464.66 hectares of the public domain in Manila Bay "situated in the cities
of Manila and Pasay and the municipality of Paranaque, Province of Rizal, Island of Luzon," which
area, as described in detail in the Proclamation, is "B]ounded on the North, by Manila Bay; on the
East, by Dewey Boulevard; and on the south and west, by Manila Bay." See concurring opinion of

East, by Dewey Boulevard; and on the south and west, by Manila Bay." See concurring opinion of
Justice Reynato S. Puno in Republic Real Estate Corporation v. Court of Appeals, 299 SCRA 1999
(1998). Under Sections 2 and 3, Article XII of the 1987 Constitution, "national parks" are inalienable
natural resources of the State.
79
Fifth Whereas clause of EO No. 525.
80 Section 4, Chapter I, Title XIV, Book IV.
81 Section 6 of CA No 141 provides as follows: "The President, upon the recommendation of the
Secretary of Agriculture and Commerce, shall from time to time classify the lands of the public
domain into – (a) Alienable or disposable, x x x."
82 Section 7 of CA No. 141 provides as follows: "For purposes of the administration and disposition of
alienable or disposable public lands, the President, upon recommendation by the Secretary of
Agriculture and Commerce, shall from time to time declare what lands are open to disposition or
concession under this Act."
83 On "Lands for Residential, Commercial, or Industrial and other Similar Purposes."
84
RA No. 293, enacted on June 16, 1948, authorized the sale of marshy lands under certain
conditions. Section 1 of RA No. 293 provided as follows: "The provisions of section sixty-one of
Commonwealth Act Numbered One hundred and forty-one to the contrary notwithstanding, marshy
lands and lands under water bordering on shores or banks or navigable lakes or rivers which are
covered by subsisting leases or leases which may hereafter be duly granted under the provisions of
the said Act and are already improved and have been utilized for farming, fishpond, or similar
purposes for at least five years from the date of the contract of lease, may be sold to the lessees
thereof under the provisions of Chapter Five of the said Act as soon as the President, upon
recommendation of the Secretary of Agriculture and Natural Resources, shall declare that the same
are not necessary for the public service."
85 PEA's Memorandum, see note 2 at 45.
86 See note 73.
87
Section 4 (b) of PD No. 1084
88 R.A. No. 730 allows the private sale of home lots to actual occupants of public lands. See note 63.
89 Issued on February 26, 1981.
90
While PEA claims there was a failure of public bidding on December 10, 1991, there is no showing
that the Commission on Audit approved the price or consideration stipulated in the negotiated
Amended JVA as required by Section 79 of the Government Auditing Code. Senate Committee
Report No. 560 did not discuss this issue.
91
Paragraph 2 (a) of COA Circular No. 89-296, on "Sale Thru Negotiation," states that disposal
through negotiated sale may be resorted to if "[T]here was a failure of public auction."
92 Senate Committee Report No. 560, Statement of Facts, p. 7, citing PEA Board Resolution No.
835, as appearing in the Minutes of the PEA Board of Directors Meeting held on May 30, 1991, per
Certification of Jaime T. De Veyra, Corporate Secretary, dated June 11, 1991.
93 Opinion No. 330, citing COA Audit Circular No. 89-296. See note 5.
94 PEA's Memorandum, see note 2.
95
Senate Committee Report No. 560, pp. 7-8, citing the Minutes of Meeting of the PEA Board of
Directors held on December 19, 1991.
96 Section 3, Article XII of the 1987 Constitution provides as follows: "x x x Citizens of the Philippines
may x x x acquire not more than twelve hectares thereof by purchase, homestead or grant."
However, Section 6 of R.A. No. 6657 (Comprehensive Agrarian Reform Law) limits the ownership of
"public or private agricultural land" to a maximum of five hectares per person.
97 96 Phil. 946 (1955).
98 48 SCRA 372 (1977).
99
168 SCRA 198 (1988).
100 172 SCRA 795 (1989).
101 73 SCRA 146 (1976).
102
Avila v. Tapucar, 201 SCRA 148 (1991).
103
Republic v. Ayala Cia, et al., 14 SCRA 259 (1965); Dizon v. Rodriguez, 13 SCRA 705 (1965).
104 Section 44 of PD No. 1529 states as follows: "Every registered owner receiving a certificate of title
in pursuance of a decree of registration, and every subsequent purchaser of registered land taking a
certificate of title for value and in good faith, shall hold the same free from all encumbrances except
those noted on said certificate and any of the following encumbrances which may be subsisting,
namely: First. Liens, claims or rights arising or existing under the laws and Constitution of the
Philippines which are not by law required to appear of record in the Registry of Deeds in
order to be valid against subsequent purchasers or encumbrancers of record. x x x." Under
Section 103 of PD No. 1529, Section 44 applies to certificates of title issued pursuant to a land
patent granted by the government.
105 Section 2, Article XIII of the 1935 Constitution.

patent granted by the government.
105
Section 2, Article XIII of the 1935 Constitution.
106 Harty v. Municipality of Victoria, 13 Phil. 152 (1909).
107 Annex "B", AMARI's Memorandum, see note 21 at 16, Section 5.2 (c) of the Amended JVA.
108
Section 10 of CA No. 141 provides as follows: "Sec. 10. The words "alienation," "disposition," or
"concession" as used in this Act, shall mean any of the methods authorized by this Act for
the acquisition, lease, use, or benefit of the lands of the public domain other than timber or mineral
lands."
109
Section 79 of the Government Auditing Code, which requires public auction in the sale of
government assets, includes all kinds of disposal or divestment of government assets. Thus, COA
Audit Circular No. 86-264 dated October 16, 1986 speaks of "guidelines (which) shall govern the
general procedures on the divestment or disposal of assets of government-owned and/or
controlled corporations and their subsidiaries." Likewise, COA Audit Circular No. 89-296 dated
January 27, speaks of "guidelines (which) shall be observed and adhered to in the divestment or
disposal of property and other assets of all government entities/instrumentalities" and that
"divestment shall refer to the manner or scheme of taking away, depriving, withdrawing of an
authority, power or title." These COA Circulars implement Section 79 of the Government Auditing
Code.
110 The share of AMARI in the Freedom Islands is 77.34 hectares, which is 70 percent of the net
usable area of 110.49 hectares. The net usable area is the total land area of the Freedom Islands
less 30 percent allocated for common areas.
111 The share of AMARI in the submerged areas for reclamation is 290.129 hectares, which is 70
percent of the net usable area of 414.47 hectares.

112
Article 1409 of the Civil Code provides as follows: "The following contracts are inexistent and void
from the beginning: (1) Those whose cause, object or purpose is contrary to law; x x x; (4) Those
whose object is outside the commerce of men; x x x."

Manila Prince Hotel vs. GSIS, et al., G.R. 122156, February 3, 1997.
12:45 AM
Manila Prince Hotel v GSIS [1997]

National patrimony
Self-executing provisions
Dissent of Puno re self-executing provisions:

"Sec. 10. T he Congress shall, upon recommendation of the economic and planning agency,
when the national interest dictates, reserve to citizens of the Philippines or to corporations or
associations at least sixty per centum of whose capital is owned by such citizens, or such higher
percentage as Congress may prescribe, certain areas of investments. The Congress shall enact
m easures that will encourage the formation and operation of enterprises whose capital is
wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy and
patrimony, the State shall give preference to qualified Filipinos.
T he State shall regulate and exercise authority over foreign investments within its national
jurisdiction and in accordance with its national goals and priorities."
The first paragraph directs Congress to reserve certain areas of investments in the country 25 to Filipino
citizens or to corporations sixty per cent 26 of whose capital stock is owned by Filipinos. It further commands
Congress to enact laws that will encourage the formation and operation of one hundred percent Filipino-owned
enterprises. In checkered contrast, the second paragraph orders the entire State to give preference to qualified
Filipinos in the grant of rights and privileges covering the national economy and patrimony. The third
paragraph also directs the State to regulate foreign investments in line with our national goals and well-set
priorities.
T he first paragraph of Section 10 is not self-executing. By its express text, there is a categorical
command for Congress to enact laws restricting foreign ownership in certain areas of
investments in the country and to encourage the formation and operation of wholly-owned
Filipino enterprises. The right granted by the provision is clearly still in esse. Congress has to
breathe life to the right by means of legislation. Parenthetically, this paragraph was plucked from section 3,
Article XIV of the 1973 Constitution. 27 The provision in the 1 973 Constitution affirmed our ruling in the
landmark case of Lao Ichong v. Hernandez, 28 where we upheld the discretionary authority of Congress to
Filipinize certain areas of investments. 29 By reenacting the 1973 provision, the first paragraph of section 1 0
affirmed the power of Congress to nationalize certain areas of investments in favor of Filipinos.
The second and third paragraphs of Section 1 0 are different. They are directed to the State and not to
Congress alone which is but one of the three great branches of our government.Their coverage is
also broader for they cover "the national economy and patrimony" and "foreign investments within [the]
national jurisdiction" and not merely "certain areas of investments." Bey ond debate, they cannot be read as
granting Congress the exclusive power to implement by law the policy of giving preference to qualified Filipinos
in the conferral of rights and privileges covering our national economy and patrimony. Their language does not
suggest that any of the State agency or instrumentality has the privilege to hedge or to refuse its
implementation for any reason whatsoever. Their duty to implement is unconditional and it is now. The
second and the third paragraphs of Section 10, Article XII are thus self-executing.
MANILA PRINCE HOTEL V GSIS

BELLOSILLO; February 3, 1997
FACTS
- Respondent GSIS, pursuant to the priv atization program of the Philippine Government under Proclamation No. 50 dated 8 December 1986, decided to sell
through public bidding 30% to 51% of the issued and outstanding shares of respondent MHC whic h owns the historic Manila Hotel. In a closed bidding held on 18
September 1995 only two (2) bidders participated: petitioner Manila Prince Hotel Corporation, a Filipino corporation, which offered to buy 51 % of the MHC or
15,300,000 shares at P41.58 per share, and Renong Berhad, a Malaysian firm, with ITT Sheraton as its hotel operator, which bid for the same number of shares
at P44.00 per share, or P2.42 more than the bid of petitioner.
- Pending the declaration of Renong Berhard as the w inning bidder and the execution of the necessary contracts, petitioner in a letter to respondent GSIS dated
28 September 1995 matched the bid price of P44.00 per share tendered by Renong Berhad. In a subsequent letter dated 10 October 1995 petitioner sent a
manager's check issued by Philtrust Bank for Thirty-three Million Pesos (P33-000,000.00) as Bid Security to match the bid of the Malaysian Group, Messrs.
Renong Berhad w hich respondent GSIS refused to accept.
- On 17 October 1995, perhaps apprehensiv e that respondent GSIS has disregarded the tender of the matching bid and that the sale of 51% of the MHC may be
hastened by respondent GSIS and consummated with Renong Berhad, petitioner came to this Court on prohibition and mandamus. On 18 October 1995 the
Court issued a temporary restraining order enjoining respondents from perfecting and consummating the sale to the Malay sian firm. On 10 September 1996 the

Court issued a temporary restraining order enjoining respondents from perfecting and consummating the sale to the Malay sian firm. On 10 September 1996 the
instant case w as accepted by the Court En Banc after it w as referred to it by the First Division.
- The petitioner argues the follow ing:
1. Petitioner inv okes Sec. 10, second Par., Art. XII, of the 1987 Constitution and submits that the Manila Hotel has been identified w ith the Filipino nation and has
practically become a historical monument which reflects the vibrancy of Philippines heritage and culture. To all intents and purpose, it has become a part of the
national patrimony .
2. Petitioner also argues that since 51% of the shares of the MHC carries with it the ow nership of the business of the hotel w hich is owned by respondent GSIS,
the hotel business of respondent GSIS being a part of the tourism industry is unquestionably a part of the national economy. Thus, any transaction involv ing 51%
of the shares of stock of the MHC is clearly covered by the term national economy, to w hich Sec. 10, second par., Art. XII, 1987 Constitution, applies.
3. It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony and its business also unquestionably part of the national economy
petitioner should be preferred after it has matched the bid offer of the Malay sian firm. For the bidding rules mandate that if for any reason, the Highest Bidder
cannot be aw arded the Block of Shares, GSIS may offer this to the other Qualified Bidders that hav e v alidly submitted bids provided that these Qualified Bidders
are w illing to match the highest bid in terms of price per share.
- Respondents maintain that:
1. Sec. 10, second par., Art. XII, of the 1987 Constitution is merely a statement of principle and policy since it is not a self-executing provision and requires
implementing legislation(s). Thus, for the said provision to operate, there must be existing laws "to lay down conditions under which business may be done."
2. Granting that this prov ision is self-executing, Manila Hotel does not fall under the term national patrimony which only refers to lands of the public domain,
w aters, minerals, coal, petroleum and other mineral oils, all forces of potential energy , fisheries, forests or timber, wildlife, flora and fauna and all marine wealth in
its territorial sea, and ex clusive marine zone as cited in the first and second paragraphs of Sec. 2, Art. XII, 1987 Constitution. While petitioner speaks of the
guests w ho have slept in the hotel and the ev ents that hav e transpired therein which make the hotel historic, these alone do not make the hotel fall under the
patrimony of the nation. What is more, the mandate of the Constitution is addressed to the State, not to respondent GSIS w hich possesses a personality of its
ow n separate and distinct from the Philippines as a State.
3. Granting that the Manila Hotel forms part of the national patrimony , the constitutional provision invoked is still inapplicable since what is being sold is only 51%
of the outstanding shares of the corporation, not the hotel building nor the land upon w hich the building stands. Certainly , 51% of the equity of the MHC cannot
be considered part of the national patrimony . Moreover, if the disposition of the shares of the MHC is really contrary to the Constitution, petitioner should have
questioned it right from the beginning and not after it had lost in the bidding.
4. The reliance by petitioner on par. V., subpar. J. I., of the bidding rules which provides that if for any reason, the Highest Bidder cannot be awarded the Block of
Shares, GSIS may offer this to the other Qualified Bidders that hav e v alidly submitted bids provided that these Qualified Bidders are willing to match the highest
bid in terms of price per share, is misplaced. Respondents postulate that the priv ilege of submitting a matching bid has not yet arisen since it only takes place if
for any reason, the Highest Bidder cannot be awarded the Block of Shares.
5. The pray er for prohibition grounded on grave abuse of discretion should fail since respondent GSIS did not ex ercise its discretion in a capricious, whimsical
manner, and if ev er it did abuse its discretion it w as not so patent and gross as to amount to an ev asion of a positive duty or a virtual refusal to perform a duty
enjoined by law. Similarly , the petition for mandamus should fail as petitioner has no clear legal right to w hat it demands and respondents do not have an
imperativ e duty to perform the act required of them by petitioner.
ISSUES
1. WON Sec. 10, 2nd par., Art. XII, of the 1987 Constitution is non-self-executing
2. WON the Manila Hotel falls under the term national patrimony
3. WON 51% of the equity of MHC can be considered part of national patrimony
4. WON petitioner should be allow ed to match the highest bid
5. WON GSIS committed grav e abuse of discretion
HELD
1. NO. A prov ision whic h is complete in itself and becomes operative without the aid of supplementary or enabling legislation, or that w hich supplies sufficient rule
by means of which the right it grants may be enjoyed or protected, is self-executing. Unless the contrary is clearly intended, the provisions of the Constitution
should be considered self-executing, as a contrary rule would give the legislature discretion to determine when, or whether, they shall be effective. Sec. 10,
second par., of Art. XII is couched in such a way as not to make it appear that it is non-self-ex ecuting but simply for purposes of sty le. The argument of
respondents that the non-self-ex ecuting nature of Sec. 10, second par. of Art. XII is implied from the tenor of the first and third paragraphs of the same section
w hich undoubtedly are not self-executing is flawed. If the first and third paragraphs are not self-ex ecuting because Congress is still to enact measures to
encourage the formation and operation of enterprises fully owned by Filipinos, as in the first paragraph, and the State still needs legislation to regulate and
ex ercise authority over foreign investments within its national jurisdiction, as in the third paragraph, then a fortiori, by the same logic, the second paragraph can
only be self-executing as it does not by its language require any legislation in order to give preference to qualified Filipinos in the grant of rights, privileges and
concessions covering the national economy and patrimony. A constitutional provision may be self-executing in one part and non-self-executing in another. Sec.
10, second par., Art. XII of the 1987 Constitution is a mandatory , positive command whic h is complete in itself and w hich needs no further guidelines or
implementing law s or rules for its enforcement. From its very words the provision does not require any legislation to put it in operation. It is per se judicially
enforceable.
2. YES. In its plain and ordinary meaning, the term patrimony pertains to heritage. When the Constitution speaks of national patrimony, it refers not only to the
natural resources of the Philippines, as the Constitution could have very well used the term natural resources, but also to the cultural heritage of the Filipinos.
Manila Hotel has become a landmark - a liv ing testimonial of Philippine heritage. Its ex istence is impressed with public interest; its own historicity associated with
our struggle for sov ereignty, independence and nationhood. Verily , Manila Hotel has become part of our national economy and patrimony.
3. YES. 51% of the equity of the MHC comes within the purview of the constitutional shelter for it comprises the majority andcontrolling stock, so that anyone
w ho acquires or owns the 51% will have actual control and management of the hotel. In this instance, 51% of the MHC cannot be disassociated from the hotel
and the land on w hich the hotel edifice stands. Respondents further argue that the constitutional prov ision is addressed to the State, not to respondent GSIS
w hich by itself possesses a separate and distinct personality . In constitutional jurisprudence, the acts of persons distinct from the gov ernment are considered
"state action" cov ered by the Constitution (1) when the activity it engages in is a "public function"; (2) when the government is so significantly involv ed with the
priv ate actor as to make the government responsible for his action; and, (3) when the government has approved or authorized the action. It is ev ident that the act
of respondent GSIS in selling 51% of its share in respondent MHC comes under the second and third categories of "state action." Therefore the transaction,
although entered into by respondent GSIS, is in fact a transaction of the State and therefore subject to the constitutional command.
4. YES. It should be stressed that w hile the Malaysian firm offered the higher bid it is not y et the w inning bidder. The bidding rules expressly provide that the
highest bidder shall only be declared the winning bidder after it has negotiated and ex ecuted the necessary contracts, and secured the requisite approvals. Since
the Filipino First Policy provision of the Constitution bestows preference on qualified Filipinos the mere tending of the highest bid is not an assurance that the
highest bidder w ill be declared the winning bidder. Resultantly, respondents are not bound to make the award yet, nor are they under obligation to enter into one
w ith the highest bidder. For in choosing the awardee respondents are mandated to abide by the dictates of the 1987 Constitution the prov isions of w hich are
presumed to be know n to all the bidders and other interested parties. Paragraph V. J. I of the bidding rules provides that [i]f for any reason the Highest Bidder
cannot be aw arded the Block of Shares, GSIS may offer this to other Qualified Bidders that hav e v alidly submitted bids provided that these Qualified Bidders are
w illing to match the highest bid in terms of price per share. The constitutional mandate itself is reason enough not to aw ard the block of shares immediately to the
foreign bidder notw ithstanding its submission of a higher, or even the highest, bid. Where a foreign firm submits the highestbid in a public bidding concerning the
grant of rights, priv ileges and concessions covering the national economy and patrimony, thereby exceeding the bid of a Filipino, there is no question that the
Filipino w ill have to be allowed to match the bid of the foreign entity . And if the Filipino matches the bid of a foreign firm the aw ard should go to the Filipino. It
must be so if w e are to giv e life and meaning to the Filipino First Policy provision of the 1987 Constitution. The argument of respondents that petitioner is now
estopped from questioning the sale to Renong Berhad since petitioner w as well aware from the beginning that a foreigner could participate in the bidding is

estopped from questioning the sale to Renong Berhad since petitioner w as well aware from the beginning that a foreigner could participate in the bidding is
meritless. Undoubtedly, Filipinos and foreigners alike were invited to the bidding. But foreigners may be awarded the sale only if no Filipino qualifies, or if the
qualified Filipino fails to match the highest bid tendered by the foreign entity . In the case before us, while petitioner was already preferred at the inception of the
bidding because of the constitutional mandate, petitioner had not y et matched the bid offered by Renong Berhad. Only after ithad matched the bid of the foreign
firm and the apparent disregard by respondent GSIS of petitioner's matching bid did the latter hav e a cause of action.
5. YES. Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to the bidding rules, respondent GSIS is left w ith no alternativ e
but to aw ard to petitioner the block of shares of MHC and to ex ecute the necessary agreements and documents to effect the sale in accordance not only with the
bidding guidelines and procedures but with the Constitution as well. The refusal of respondent GSIS to ex ecute the corresponding documents with petitioner as
prov ided in the bidding rules after the latter has matched the bid of the Malay sian firm clearly constitutes grave abuse of discretion.
Voting Regalado, Davide, Jr., Romero, Kapunan, Francisco, and Hermosisima, Jr., JJ., concur with the main opinion.
Narv asa, C.J, joins Justice Puno in his dissent.
SEPARATE OPINION
PADILLA [concur]
- Under the 1987 Constitution, "national patrimony " consists of the natural resources provided by Almighty God (Preamble) in our territory (Article 1) consisting of
land, sea, and air. The concept of national patrimony has been viewed as referring not only to our rich natural resources butalso to the cultural heritage of our
race. The Manila Hotel is very much a part of our national patrimony and, as such, deserves constitutional protection as to who shall own it and benefit from its
operation. This institution has played an important role in our nation's history, having been the v enue of many a historical event, and serving as it did, and as it
does, as the Philippine Guest House for v isiting foreign heads of state, dignitaries, celebrities, and others.
- "Preference to qualified Filipinos," to be meaningful, must refer not only to things that are peripheral, collateral, or tangential. It must touch and affect the v ery
"heart of the ex isting order." In the field of public bidding in the acquisition of things that pertain to the national patrim ony , preference to qualified Filipinos must
allow a qualified Filipino to match or equal the higher bid of a non-Filipino; the preference shall not operate only when the bids of the qualified Filipino and the
non-Filipino are equal in w hich case, the aw ard should undisputedly be made to the qualified Filipino. The Constitutional preference should giv e the qualified
Filipino an opportunity to match or equal the higher bid of the non-Filipino bidder if the preference of the qualified Filipino bidder is to be significant at all.
VITUG [separate]
- The prov ision in our fundamental law which provides that "(i)n the grant of rights, priv ileges, and concessions covering the national economy and patrimony, the
State shall giv e preference to qualified Filipinos" is self-executory. The provision does not need, although it can obviously be amplified or regulated by, an
enabling law or a set of rules.
- The term "patrimony " does not merely refer to the country 's natural resources but also to its cultural heritage. A "historical landmark”, Manila Hotel has now
indeed become part of Philippine heritage.
- The act of the GSIS, a gov ernment entity which deriv es its authority from the State, in selling 51% of its share in MHC should be considered an act of the State
subject to the Constitutional mandate.
- On the piv otal issue of the degree of "preference to qualified Filipinos," the only meaningful preference would really be to allow the qualified Filipino to match the
foreign bid. The magnitude of the bids is such that it becomes hardly possible for the competing bids to stand exactly "equal" which alone, under the dissenting
v iew, could trigger the right of preference.
MENDOZA [separate opinion in the judgment]

- The only w ay to enforce the constitutional mandate that "[i]n the grant of rights, priv ileges and concessions covering the national patrimony the State shall give
preference to qualified Filipinos" is to allow petitioner Philippine corporation to equal the bid of the Malay sian firm Renong Berhad for the purchase of the
controlling shares of stocks in the Manila Hotel Corporation.
- We are dealing here not w ith common trades or common means of liv elihood whic h are open to aliens in our midst, but with the sale of gov ernment property,
w hich is like the grant of gov ernment largess or benefits. Therefore no one should begrudge us if w e giv e preferential treatment to our citizens.
- Nor is there any basis for the suggestion that to allow a Filipino bidder to match the highest bid of an alien could encourage speculation, since all the Filipino
entity w ould then do would be not to make a bid or make only a token one and, after it is known that a foreign bidder has submitted the highest bid, make an offer
matching that of the foreign firm. This is not possible under the rules on public bidding of the GSIS. Under these rules there is a minimum bid required. If the
Filipino entity , after passing the prequalification process, does not submit a bid, he will not be allowed to match the highest bid of the foreign firm because this is
a priv ilege allowed only to those w ho have "validly submitted bids."
TORRES [separate]
- History , culture, heritage, and tradition are not legislated and is the product of ev ents, customs, usages and practices. It is actually a product of grow th and
acceptance by the collectiv e mores of a race. It is the spirit and soul of a people. The Manila Hotel is part of our history , culture and heritage. The Manila Hotel is
w itness to historic events which shaped our history for almost 84 years. The history of the Manila Hotel should not be placed in the auction block of a purely
business transaction, where profit subverts the cherished historical values of our people.
PUNO [dissent]
- The v ital issues can be summed up as follows:
1. Whether Sec. 10, Par. 2 of Art. XII of the Constitution is a self-ex ecuting provision and does not need implementing legislation to carry it into effect;
2. Assuming Sec. 10, Par. 2 of Art. XII is self ex ecuting, whether the controlling shares of the Manila Hotel Corporation form part of our patrimony as a
nation;
3. Whether GSIS is included in the term "State," hence, mandated to implement Sec. 10, Par. 2 of Art. XII of the Constitution;
4. Assuming GSIS is part of the State, w hether it failed to giv e preference to petitioner, a qualified Filipino corporation, over and above Renong Berhad, a
foreign corporation, in the sale of the controlling shares of the Manila Hotel Corporation;
5. Whether petitioner is estopped from questioning the sale of the shares to Renong Berhad, a foreign corporation.
- 1st issue: courts as a rule consider the provisions of the Constitution as self executing, rather than as requiring future legislation for their enforcement. If they are
not treated as self-ex ecuting, the mandate of the fundamental law ratified by the sovereign people can be easily ignored and nullified by Congress. Case law also
lay s down the rule that a constitutional prov ision is not self-executing where it merely announces a policy and its language empowers the Legislature to prescribe
the means by which the policy shall be carried into effect. The first paragraph of Section 10 is not self-ex ecuting. By its express text, there is a categorical
command for Congress to enact laws restricting foreign ownership in certain areas of inv estments in the country and to encourage the formation and operation of
w holly-owned Filipino enterprises. The second and third paragraphs of Section 10 are different. They are directed to the State and not to Congress alone w hich is
but one of the three great branches of our gov ernment. Their coverage is also broader for they cover "the national economy and patrimony" and "foreign

but one of the three great branches of our gov ernment. Their coverage is also broader for they cover "the national economy and patrimony" and "foreign
inv estments within [the] national jurisdiction" and not merely "certain areas of inv estments." Their language does not suggest that any of the State agency or
instrumentality has the privilege to hedge or to refuse its implementation for any reason whatsoever. Their duty to implementis unconditional and it is now.
- The second issue is whether the sale of a majority of the stocks of the Manila Hotel Corporation involv es the disposition of part of our national patrimony . The
records of the Constitutional Commission show that the Commissioners entertained the same view as to its meaning. According to Commissioner Nolledo,
"patrimony " refers not only to our rich natural resources but also to the cultural heritage of our race. The unique value of the Manila Hotel to our history and
culture cannot be v iewed with a myopic eye. The value of the hotel goes bey ond pesos and centavos. The Hotel may not, as yet,have been declared a national
cultural treasure pursuant to Republic Act No. 4846 but that does not ex clude it from our national patrimony.
- The third issue is w hether the constitutional command to the State includes the respondent GSIS. The GSIS is not a pure private corporation. It is essentially a
public corporation created by Congress and granted an original charter to serve a public purpose. As a state-owned and controlled corporation, it is skin-bound to
adhere to the policies spelled out in the Constitution especially those designed to promote the general welfare of the people. One of these policies is the Filipino
First policy which the people elevated as a constitutional command.
- To date, Congress has not enacted a law defining the degree of the preferential right. Consequently, we must turn to the rules and regulations of respondents
Committee on Priv atization and GSIS to determine the degree of preference that petitioner is entitled to as a qualified Filipino in the subject sale. A look at the
rules and regulations w ill show that they are silent on the degree of preferential right to be accorded a qualified Filipino bidder. However, they cannot be read to
mean that they do not grant any degree of preference to petitioner for Par. 2, Sec. 10, Art. XII of the Constitution is deemed part of said rules and regulations. I
submit that the right of preference of petitioner arises only if it tied the bid of Renong Berhad. In that instance, all things stand equal, and petitioner, as a qualified
Filipino bidder should be preferred. Under the rules, the right to match the highest bid arises only "if for any reason, the highest bidder cannot be aw arded the
block of shares" No reason has arisen that w ill prevent the aw ard to Renong Berhad. It qualified as a bidder. It complied with the procedure of bidding. It w as
declared as the highest bidder by the GSIS and the rules say this decision is final. It deserves the aw ard as a matter of right for the rules clearly did not give to
the petitioner as a qualified Filipino the priv ilege to match the higher bid of a foreigner. What the rules did not grant, petitioner cannot demand.
- Petitioner is estopped from assailing the w inning bid of Renong Berhad. It knew that the rules and regulations do not provide that qualified Filipino bidder can
match the w inning bid after submitting an inferior bid. It knew that the bid w as open to foreigners and that foreigners qualified ev en during the first bidding.
Petitioner cannot be allow ed to obey the rules when it w ins and disregard them when it loses.
PANGANIBAN [dissent]
- The majority contends the Constitution should be interpreted to mean that, after a bidding process is concluded, the losing Filipino bidder should be given the
right to equal the highest foreign bid, and thus to w in. No statute empowers a losing Filipino bidder to increase his bid andequal that of the w inning foreigner. In
the absence of such empowering law, the majority's strained interpretation, I respectfully submit, constitutes unadulterated judicial legislation, which makes
bidding a ridiculous sham where no Filipino can lose and where no foreigner can win.
- Aside from being prohibited by the Constitution, such judicial legislation is short-sighted and, viewed properly , gravely prejudicial to long-term Filipino interests.
It encourages other countries - in the guise of rev erse comity or worse, unabashed retaliation - to discriminate against us in their own jurisdictions by authorizing
their ow n nationals to similarly equal and defeat the higher bids of Filipino enterprises solely , while on the other hand, allowing similar bids of other foreigners to
remain unchallenged by their nationals.
- In the absence of a law specifying the degree or extent of the "Filipino First" policy of the Constitution, the constitutional preference for the "qualified Filipinos"
may be allowed only where all the bids are equal. The Constitution mandates a victory for the qualified Filipino only when the scores are tied. But not w hen the
ballgame is ov er and the foreigner clearly posted the highest score.

SUPREME COURT
Manila
EN BANC
G.R. No. 122156 February 3, 1997

MANILA PRINCE HOTEL petitioner,
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL CORPORATION,
COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT
CORPORATE COUNSEL, respondents.
BELLOSILLO, J.:
The FiIipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights,
privileges, and concessions covering the national economy and patrimony, the State
shall give preference to qualified Filipinos, 1 is in oked by petitioner in its bid to acquire
51% of the shares of the Manila Hotel Corporation (MHC) which owns the historic Manila
Hotel. Opposing, respondents maintain that the provision is not self-executing but
requires an implementing legislation for its enforcement. Corollarily, they ask whether the
51% shares form part of the national economy and patrimony covered by the protective
mantle of the Constitution.
The controversy arose when respondent Government Service Insurance System (GSIS),
pursuant to the privatization program of the Philippine Government under Proclamation
No. 50 dated 8 December 1986, decided to sell through public bidding 30% to 51% of the
issued and outstanding shares of respondent MHC. The winning bidder, or the eventual
"strategic partner," is to provide management expertise and/or an international
marketing/reservation system, and financial support to strengthen the profitability and
performance of the Manila Hotel. 2 In a close bidding held on 18 September 1995 only
two (2) bidders participated: petitioner Manila Prince Hotel Corporation, a Filipino
corporation, which offered to buy 51% of the MHC or 15,300,000 shares at P41.58 per

share, and Renong Berhad, a Malaysian firm, with ITT-Sheraton as its hotel operator,
which bid for the same number of shares at P44.00 per share, or P2.42 more than the
bid of petitioner.
Pertinent provisions of the bidding rules prepared by respondent GSIS state —
I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC —
1. The Highest Bidder must comply with the conditions set forth below by October 23,
1995 (reset to November 3, 1995) or the Highest Bidder will lose the right to purchase
the Block of Shares and GSIS will instead offer the Block of Shares to the other Qualified
Bidders:
a. The Highest Bidder must negotiate and execute with the GSIS/MHC the Management
Contract, International Marketing/Reservation System Contract or other type of contract
specified by the Highest Bidder in its strategic plan for the Manila Hotel. . . .
b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with
GSIS . . . .
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER —
The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the
following conditions are met:
a. Execution of the necessary contracts with GSIS/MHC not later than October 23, 1995
(reset to November 3, 1995); and
b. Requisite approvals from the GSIS/MHC and COP (Committee on Privatization)/OGCC
(Office of the Government Corporate Counsel) are obtained. 3
Pending the declaration of Renong Berhad as the winning bidder/strategic partner and
the execution of the necessary contracts, petitioner in a letter to respondent GSIS dated
28 September 1995 matched the bid price of P44.00 per share tendered by Renong
Berhad. 4 In a subsequent letter dated 10 October 1995 petitioner sent a manager's
check issued by Philtrust Bank for Thirty-three Million Pesos (P33.000.000.00) as Bid
Security to match the bid of the Malaysian Group, Messrs. Renong Berhad . . . 5 which
respondent GSIS refused to accept.
On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the
tender of the matching bid and that the sale of 51% of the MHC may be hastened by
respondent GSIS and consummated with Renong Berhad, petitioner came to this Court
on prohibition and mandamus. On 18 October 1995 the Court issued a temporary
restraining order enjoining respondents from perfecting and consummating the sale to
the Malaysian firm.
On 10 September 1996 the instant case was accepted by the Court En Banc after it was
referred to it by the First Division. The case was then set for oral arguments with former
Chief Justice Enrique M. Fernando and Fr. Joaquin G. Bernas, S.J., as amici curiae.
In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and
submits that the Manila Hotel has been identified with the Filipino nation and has
practically become a historical monument which reflects the vibrancy of Philippine
heritage and culture. It is a proud legacy of an earlier generation of Filipinos who
believed in the nobility and sacredness of independence and its power and capacity to
release the full potential of the Filipino people. To all intents and purposes, it has become
a part of the national patrimony. 6 Petitioner also argues that since 51% of the shares of
the MHC carries with it the ownership of the business of the hotel which is owned by
respondent GSIS, a government-owned and controlled corporation, the hotel business of
respondent GSIS being a part of the tourism industry is unquestionably a part of the
national economy. Thus, any transaction involving 51% of the shares of stock of the
MHC is clearly covered by the term national economy, to which Sec. 10, second par.,
Art. XII, 1987 Constitution, applies. 7
It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony
and its business also unquestionably part of the national economy petitioner should be
preferred after it has matched the bid offer of the Malaysian firm. For the bidding rules
mandate that if for any reason, the Highest Bidder cannot be awarded the Block of
Shares, GSIS may offer this to the other Qualified Bidders that have validly submitted
bids provided that these Qualified Bidders are willing to match the highest bid in terms of
price per share. 8
Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the 1987
Constitution is merely a statement of principle and policy since it is not a self-executing
provision and requires implementing legislation(s) . . . Thus, for the said provision to
Operate, there must be existing laws "to lay down conditions under which business may
be done." 9

Second, granting that this provision is self-executing, Manila Hotel does not fall under the
term national patrimony which only refers to lands of the public domain, waters, minerals,
coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna and all marine wealth in its territorial sea, and exclusive
marine zone as cited in the first and second paragraphs of Sec. 2, Art. XII, 1987
Constitution. According to respondents, while petitioner speaks of the guests who have
slept in the hotel and the events that have transpired therein which make the hotel
historic, these alone do not make the hotel fall under the patrimonyof the nation. What is
more, the mandate of the Constitution is addressed to the State, not to respondent GSIS
which possesses a personality of its own separate and distinct from the Philippines as a
State.
Third, granting that the Manila Hotel forms part of the national patrimony, the
constitutional provision invoked is still inapplicable since what is being sold is only 51%
of the outstanding shares of the corporation, not the hotel building nor the land upon
which the building stands. Certainly, 51% of the equity of the MHC cannot be considered
part of the national patrimony. Moreover, if the disposition of the shares of the MHC is
really contrary to the Constitution, petitioner should have questioned it right from the
beginning and not after it had lost in the bidding.
Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which
provides that if for any reason, the Highest Bidder cannot be awarded the Block of
Shares, GSIS may offer this to the other Qualified Bidders that have validly submitted
bids provided that these Qualified Bidders are willing to match the highest bid in terms of
price per share, is misplaced. Respondents postulate that the privilege of submitting a
matching bid has not yet arisen since it only takes place if for any reason, the Highest
Bidder cannot be awarded the Block of Shares. Thus the submission by petitioner of a
matching bid is premature since Renong Berhad could still very well be awarded the
block of shares and the condition giving rise to the exercise of the privilege to submit a
matching bid had not yet taken place.
Finally, the prayer for prohibition grounded on grave abuse of discretion should fail since
respondent GSIS did not exercise its discretion in a capricious, whimsical manner, and if
ever it did abuse its discretion it was not 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. Similarly, the
petition for mandamus should fail as petitioner has no clear legal right to what it demands
and respondents do not have an imperative duty to perform the act required of them by
petitioner.
We now resolve. A constitution is a system of fundamental laws for the governance and
administration of a nation. It is supreme, imperious, absolute and unalterable except by
the authority from which it emanates. It has been defined as the fundamental and
paramount law of the nation. 10 It prescribes the permanent framework of a system of
government, assigns to the different departments their respective powers and duties, and
establishes certain fixed principles on which government is founded. The fundamental
conception in other words is that it is a supreme law to which all other laws must conform
and in accordance with which all private rights must be determined and all public
authority administered. 11 Under the doctrine of constitutional supremacy, if a law or
contract violates any norm of the constitution that law or contract whether promulgated
by the legislative or by the executive branch or entered into by private persons for private
purposes is null and void and without any force and effect. Thus, since the Constitution is
the fundamental, paramount and supreme law of the nation, it is deemed written in every
statute and contract.
Admittedly, some constitutions are merely declarations of policies and principles. Their
provisions command the legislature to enact laws and carry out the purposes of the
framers who merely establish an outline of government providing for the different
departments of the governmental machinery and securing certain fundamental and
inalienable rights of citizens. 12 A provision which lays down a general principle, such as
those found in Art. II of the 1987 Constitution, is usually not self-executing. But a
provision which is complete in itself and becomes operative without the aid of
supplementary or enabling legislation, or that which supplies sufficient rule by means of
which the right it grants may be enjoyed or protected, is self-executing. Thus a
constitutional provision is self-executing if the nature and extent of the right conferred
and the liability imposed are fixed by the constitution itself, so that they can be
determined by an examination and construction of its terms, and there is no language
indicating that the subject is referred to the legislature for action. 13
As against constitutions of the past, modern constitutions have been generally drafted

As against constitutions of the past, modern constitutions have been generally drafted
upon a different principle and have often become in effect extensive codes of laws
intended to operate directly upon the people in a manner similar to that of statutory
enactments, and the function of constitutional conventions has evolved into one more
like that of a legislative body. Hence, unless it is expressly provided that a legislative act
is necessary to enforce a constitutional mandate, the presumption now is that all
provisions of the constitution are self-executing If the constitutional provisions are treated
as requiring legislation instead of self-executing, the legislature would have the power to
ignore and practically nullify the mandate of the fundamental law. 14 This can be
cataclysmic. That is why the prevailing view is, as it has always been, that —
. . . in case of doubt, the Constitution should be considered self-executing rather than non-
self-executing . . . . Unless the contrary is clearly intended, the provisions of the Constitution
should be considered self-executing, as a contrary rule would give the legislature discretion to
determine when, or whether, they shall be effective. These provisions would be subordinated
to the will of the lawmaking body, which could make them entirely meaningless by simply
refusing to pass the needed implementing statute. 15
Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is clearly
not self-executing, as they quote from discussions on the floor of the 1986 Constitutional
Commission —
MR. RODRIGO. Madam President, I am asking this question as the Chairman of the
Committee on Style. If the wording of "PREFERENCE" is given to QUALIFIED
FILIPINOS," can it be understood as a preference to qualified Filipinos vis-a-vis Filipinos
who are not qualified. So, why do we not make it clear? To qualified Filipinos as against
aliens?
THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to remove the
word "QUALIFIED?".
MR. RODRIGO. No, no, but say definitely "TO QUALIFIED FILIPINOS" as against
whom? As against aliens or over aliens?
MR. NOLLEDO. Madam President, I think that is understood. We use the word
"QUALIFIED" because the existing laws or prospective laws will always lay down
conditions under which business may be done. For example, qualifications on the setting
up of other financial structures, et cetera (emphasis supplied by respondents)
MR. RODRIGO. It is just a matter of style.
MR. NOLLEDO Yes, 16
Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to
make it appear that it is non-self-executing but simply for purposes of style. But,
certainly, the legislature is not precluded from enacting other further laws to enforce the
constitutional provision so long as the contemplated statute squares with the
Constitution. Minor details may be left to the legislature without impairing the self-
executing nature of constitutional provisions.
In self-executing constitutional provisions, the legislature may still enact legislation to
facilitate the exercise of powers directly granted by the constitution, further the operation
of such a provision, prescribe a practice to be used for its enforcement, provide a
convenient remedy for the protection of the rights secured or the determination thereof,
or place reasonable safeguards around the exercise of the right. The mere fact that
legislation may supplement and add to or prescribe a penalty for the violation of a self-
executing constitutional provision does not render such a provision ineffective in the
absence of such legislation. The omission from a constitution of any express provision
for a remedy for enforcing a right or liability is not necessarily an indication that it was not
intended to be self-executing. The rule is that a self-executing provision of the
constitution does not necessarily exhaust legislative power on the subject, but any
legislation must be in harmony with the constitution, further the exercise of constitutional
right and make it more available. 17 Subsequent legislation however does not necessarily
mean that the subject constitutional provision is not, by itself, fully enforceable.
Respondents also argue that the non-self-executing nature of Sec. 10, second par., of
Art. XII is implied from the tenor of the first and third paragraphs of the same section
which undoubtedly are not self-executing. 18 The argument is flawed. If the first and third
paragraphs are not self-executing because Congress is still to enact measures to
encourage the formation and operation of enterprises fully owned by Filipinos, as in the
first paragraph, and the State still needs legislation to regulate and exercise authority
over foreign investments within its national jurisdiction, as in the third paragraph, then
a fortiori, by the same logic, the second paragraph can only be self-executing as it does
not by its language require any legislation in order to give preference to qualified Filipinos

not by its language require any legislation in order to give preference to qualified Filipinos
in the grant of rights, privileges and concessions covering the national economy and
patrimony. A constitutional provision may be self-executing in one part and non-self-
executing in another. 19
Even the cases cited by respondents holding that certain constitutional provisions are
merely statements of principles and policies, which are basically not self-executing and
only placed in the Constitution as moral incentives to legislation, not as judicially
enforceable rights — are simply not in point. Basco v. Philippine Amusements and
Gaming Corporation 20 speaks of constitutional provisions on personal dignity, 21 the
sanctity of family life, 22 the vital role of the youth in nation-building 23 the promotion of
social justice, 24 and the values of education. 25 Tolentino v. Secretary of Finance 26 refers
to the constitutional provisions on social justice and human rights 27 and on
education. 28 Lastly, Kilosbayan, Inc. v. Morato 29 cites provisions on the promotion of
general welfare, 30 the sanctity of family life, 31 the vital role of the youth in nation-
building 32 and the promotion of total human liberation and development. 33 A reading of
these provisions indeed clearly shows that they are not judicially enforceable
constitutional rights but merely guidelines for legislation. The very terms of the provisions
manifest that they are only principles upon which the legislations must be based. Res
ipsa loquitur.
On the other hand, Sec. 10, second par., Art. XII of the of the 1987 Constitution is a
mandatory, positive command which is complete in itself and which needs no further
guidelines or implementing laws or rules for its enforcement. From its very words the
provision does not require any legislation to put it in operation. It is per se judicially
enforceable When our Constitution mandates that [i]n the grant of rights, privileges, and
concessions covering national economy and patrimony, the State shall give preference
to qualified Filipinos, it means just that — qualified Filipinos shall be preferred. And when
our Constitution declares that a right exists in certain specified circumstances an action
may be maintained to enforce such right notwithstanding the absence of any legislation
on the subject; consequently, if there is no statute especially enacted to enforce such
constitutional right, such right enforces itself by its own inherent potency and puissance,
and from which all legislations must take their bearings. Where there is a right there is a
remedy. Ubi jus ibi remedium.
As regards our national patrimony, a member of the 1986 Constitutional
Commission 34 explains —
The patrimony of the Nation that should be conserved and developed refers not only to
out rich natural resources but also to the cultural heritage of out race. It also refers to our
intelligence in arts, sciences and letters. Therefore, we should develop not only our
lands, forests, mines and other natural resources but also the mental ability or faculty of
our people.
We agree. In its plain and ordinary meaning, the term patrimony pertains to
heritage. 35 When the Constitution speaks of national patrimony, it refers not only to the
natural resources of the Philippines, as the Constitution could have very well used the
term natural resources, but also to the cultural heritage of the Filipinos.
Manila Hotel has become a landmark — a living testimonial of Philippine heritage. While
it was restrictively an American hotel when it first opened in 1912, it immediately evolved
to be truly Filipino, Formerly a concourse for the elite, it has since then become the
venue of various significant events which have shaped Philippine history. It was called
the Cultural Center of the 1930's. It was the site of the festivities during the inauguration
of the Philippine Commonwealth. Dubbed as the Official Guest House of the Philippine
Government. it plays host to dignitaries and official visitors who are accorded the
traditional Philippine hospitality. 36
The history of the hotel has been chronicled in the book The Manila Hotel: The Heart and
Memory of a City. 37During World War II the hotel was converted by the Japanese Military
Administration into a military headquarters. When the American forces returned to
recapture Manila the hotel was selected by the Japanese together with Intramuros as the
two (2) places fro their final stand. Thereafter, in the 1950's and 1960's, the hotel became
the center of political activities, playing host to almost every political convention. In 1970
the hotel reopened after a renovation and reaped numerous international recognitions,
an acknowledgment of the Filipino talent and ingenuity. In 1986 the hotel was the site of
a failed coup d' etat where an aspirant for vice-president was "proclaimed" President of
the Philippine Republic.
For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and
failures, loves and frustrations of the Filipinos; its existence is impressed with public

failures, loves and frustrations of the Filipinos; its existence is impressed with public
interest; its own historicity associated with our struggle for sovereignty, independence
and nationhood. Verily, Manila Hotel has become part of our national economy and
patrimony. For sure, 51% of the equity of the MHC comes within the purview of the
constitutional shelter for it comprises the majority and controlling stock, so that anyone
who acquires or owns the 51% will have actual control and management of the hotel. In
this instance, 51% of the MHC cannot be disassociated from the hotel and the land on
which the hotel edifice stands. Consequently, we cannot sustain respondents' claim that
theFilipino First Policy provision is not applicable since what is being sold is only 51% of
the outstanding shares of the corporation, not the Hotel building nor the land upon which
the building stands. 38
The argument is pure sophistry. The term qualified Filipinos as used in Our Constitution
also includes corporations at least 60% of which is owned by Filipinos. This is very clear
from the proceedings of the 1986 Constitutional Commission
THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I would like to introduce an amendment to the Nolledo amendment. And
the amendment would consist in substituting the words "QUALIFIED FILIPINOS" with the
following: "CITIZENS OF THE PHILIPPINES OR CORPORATIONS OR
ASSOCIATIONS WHOSE CAPITAL OR CONTROLLING STOCK IS WHOLLY OWNED
BY SUCH CITIZENS.
xxx xxx xxx
MR. MONSOD. Madam President, apparently the proponent is agreeable, but we have
to raise a question. Suppose it is a corporation that is 80-percent Filipino, do we not give
it preference?
MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino. What about
a corporation wholly owned by Filipino citizens?
MR. MONSOD. At least 60 percent, Madam President.
MR. DAVIDE. Is that the intention?
MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that the
preference should only be 100-percent Filipino.
MR: DAVIDE. I want to get that meaning clear because "QUALIFIED FILIPINOS" may
refer only to individuals and not to juridical personalities or entities.
39
MR. MONSOD. We agree, Madam President.
xxx xxx xxx
MR. RODRIGO. Before we vote, may I request that the amendment be read again.
MR. NOLLEDO. The amendment will read: "IN THE GRANT OF RIGHTS, PRIVILEGES AND
CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE STATE
SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS." And the word "Filipinos" here, as
intended by the proponents, will include not only individual Filipinos but also Filipino-
controlled entities or entities fully-controlled by Filipinos. 40
The phrase preference to qualified Filipinos was explained thus —
MR. FOZ. Madam President, I would like to request Commissioner Nolledo to please
restate his amendment so that I can ask a question.
MR. NOLLEDO. "IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS
COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL GIVE
PREFERENCE TO QUALIFIED FILIPINOS."
MR FOZ. In connection with that amendment, if a foreign enterprise is qualified and a
Filipino enterprise is also qualified, will the Filipino enterprise still be given a preference?
MR. NOLLEDO. Obviously.
MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino enterprise,
will the Filipino still be preferred?
MR. NOLLEDO. The answer is "yes."
MR. FOZ. Thank you, 41
Expounding further on the Filipino First Policy provision Commissioner Nolledo

continues —
MR. NOLLEDO. Yes, Madam President. Instead of "MUST," it will be "SHALL — THE STATE
SHALL GlVE PREFERENCE TO QUALIFIED FILIPINOS. This embodies the so-called
"Filipino First" policy. That means that Filipinos should be given preference in the grant of
concessions, privileges and rights covering the national patrimony. 42
The exchange of views in the sessions of the Constitutional Commission regarding the
subject provision was still further clarified by Commissioner Nolledo 43 —
Paragraph 2 of Section 10 explicitly mandates the "Pro-Filipino" bias in all economic
concerns. It is better known as the FILIPINO FIRST Policy . . . This provision was never

concerns. It is better known as the FILIPINO FIRST Policy . . . This provision was never
found in previous Constitutions . . . .
The term "qualified Filipinos" simply means that preference shall be given to those
citizens who can make a viable contribution to the common good, because of credible
competence and efficiency. It certainly does NOT mandate the pampering and
preferential treatment to Filipino citizens or organizations that are incompetent or
inefficient, since such an indiscriminate preference would be counter productive and
inimical to the common good.
In the granting of economic rights, privileges, and concessions, when a choice has to be
made between a "qualified foreigner" end a "qualified Filipino," the latter shall be chosen
over the former."
Lastly, the word qualified is also determinable. Petitioner was so considered by
respondent GSIS and selected as one of the qualified bidders. It was pre-qualified by
respondent GSIS in accordance with its own guidelines so that the sole inference here is
that petitioner has been found to be possessed of proven management expertise in the
hotel industry, or it has significant equity ownership in another hotel company, or it has
an overall management and marketing proficiency to successfully operate the Manila
Hotel. 44
The penchant to try to whittle away the mandate of the Constitution by arguing that the
subject provision is not self-executory and requires implementing legislation is quite
disturbing. The attempt to violate a clear constitutional provision — by the government
itself — is only too distressing. To adopt such a line of reasoning is to renounce the duty
to ensure faithfulness to the Constitution. For, even some of the provisions of the
Constitution which evidently need implementing legislation have juridical life of their own
and can be the source of a judicial remedy. We cannot simply afford the government a
defense that arises out of the failure to enact further enabling, implementing or guiding
legislation. In fine, the discourse of Fr. Joaquin G. Bernas, S.J., on constitutional
government is apt —
The executive department has a constitutional duty to implement laws, including the
Constitution, even before Congress acts — provided that there are discoverable legal
standards for executive action. When the executive acts, it must be guided by its own
understanding of the constitutional command and of applicable laws. The responsibility for
reading and understanding the Constitution and the laws is not the sole prerogative of
Congress. If it were, the executive would have to ask Congress, or perhaps the Court, for an
interpretation every time the executive is confronted by a constitutional command. That is not
how constitutional government operates. 45
Respondents further argue that the constitutional provision is addressed to the State, not
to respondent GSIS which by itself possesses a separate and distinct personality. This
argument again is at best specious. It is undisputed that the sale of 51% of the MHC
could only be carried out with the prior approval of the State acting through respondent
Committee on Privatization. As correctly pointed out by Fr. Joaquin G. Bernas, S.J., this
fact alone makes the sale of the assets of respondents GSIS and MHC a "state action."
In constitutional jurisprudence, the acts of persons distinct from the government are
considered "state action" covered by the Constitution (1) when the activity it engages in
is a "public function;" (2) when the government is so significantly involved with the private
actor as to make the government responsible for his action; and, (3) when the
government has approved or authorized the action. It is evident that the act of
respondent GSIS in selling 51% of its share in respondent MHC comes under the second
and third categories of "state action." Without doubt therefore the transaction. although
entered into by respondent GSIS, is in fact a transaction of the State and therefore
subject to the constitutional command. 46
When the Constitution addresses the State it refers not only to the people but also to the
government as elements of the State. After all, government is composed of three (3)
divisions of power — legislative, executive and judicial. Accordingly, a constitutional
mandate directed to the State is correspondingly directed to the three(3) branches of
government. It is undeniable that in this case the subject constitutional injunction is
addressed among others to the Executive Department and respondent GSIS, a
government instrumentality deriving its authority from the State.
It should be stressed that while the Malaysian firm offered the higher bid it is not yet the
winning bidder. The bidding rules expressly provide that the highest bidder shall only be
declared the winning bidder after it has negotiated and executed the necessary
contracts, and secured the requisite approvals. Since the "Filipino First Policy provision

of the Constitution bestows preference on qualified Filipinos the mere tending of the
highest bid is not an assurance that the highest bidder will be declared the winning
bidder. Resultantly, respondents are not bound to make the award yet, nor are they
under obligation to enter into one with the highest bidder. For in choosing the awardee
respondents are mandated to abide by the dictates of the 1987 Constitution the
provisions of which are presumed to be known to all the bidders and other interested
parties.
Adhering to the doctrine of constitutional supremacy, the subject constitutional provision
is, as it should be, impliedly written in the bidding rules issued by respondent GSIS, lest
the bidding rules be nullified for being violative of the Constitution. It is a basic principle in
constitutional law that all laws and contracts must conform with the fundamental law of
the land. Those which violate the Constitution lose their reason for being.
Paragraph V. J. 1 of the bidding rules provides that [if] for any reason the Highest Bidder
cannot be awarded the Block of Shares, GSIS may offer this to other Qualified Bidders
that have validly submitted bids provided that these Qualified Bidders are willing to match
the highest bid in terms of price per
share. 47 Certainly, the constitutional mandate itself is reason enough not to award the
block of shares immediately to the foreign bidder notwithstanding its submission of a
higher, or even the highest, bid. In fact, we cannot conceive of a stronger reason than
the constitutional injunction itself.
In the instant case, where a foreign firm submits the highest bid in a public bidding
concerning the grant of rights, privileges and concessions covering the national economy
and patrimony, thereby exceeding the bid of a Filipino, there is no question that the
Filipino will have to be allowed to match the bid of the foreign entity. And if the Filipino
matches the bid of a foreign firm the award should go to the Filipino. It must be so if we
are to give life and meaning to the Filipino First Policy provision of the 1987 Constitution.
For, while this may neither be expressly stated nor contemplated in the bidding rules, the
constitutional fiat is, omnipresent to be simply disregarded. To ignore it would be to
sanction a perilous skirting of the basic law.
This Court does not discount the apprehension that this policy may discourage foreign
investors. But the Constitution and laws of the Philippines are understood to be always
open to public scrutiny. These are given factors which investors must consider when
venturing into business in a foreign jurisdiction. Any person therefore desiring to do
business in the Philippines or with any of its agencies or instrumentalities is presumed to
know his rights and obligations under the Constitution and the laws of the forum.
The argument of respondents that petitioner is now estopped from questioning the sale
to Renong Berhad since petitioner was well aware from the beginning that a foreigner
could participate in the bidding is meritless. Undoubtedly, Filipinos and foreigners alike
were invited to the bidding. But foreigners may be awarded the sale only if no Filipino
qualifies, or if the qualified Filipino fails to match the highest bid tendered by the foreign
entity. In the case before us, while petitioner was already preferred at the inception of the
bidding because of the constitutional mandate, petitioner had not yet matched the bid
offered by Renong Berhad. Thus it did not have the right or personality then to compel
respondent GSIS to accept its earlier bid. Rightly, only after it had matched the bid of the
foreign firm and the apparent disregard by respondent GSIS of petitioner's matching bid
did the latter have a cause of action.
Besides, there is no time frame for invoking the constitutional safeguard unless perhaps
the award has been finally made. To insist on selling the Manila Hotel to foreigners when
there is a Filipino group willing to match the bid of the foreign group is to insist that
government be treated as any other ordinary market player, and bound by its mistakes or
gross errors of judgment, regardless of the consequences to the Filipino people. The
miscomprehension of the Constitution is regrettable. Thus we would rather remedy the
indiscretion while there is still an opportunity to do so than let the government develop
the habit of forgetting that the Constitution lays down the basic conditions and
parameters for its actions.
Since petitioner has already matched the bid price tendered by Renong Berhad pursuant
to the bidding rules, respondent GSIS is left with no alternative but to award to petitioner
the block of shares of MHC and to execute the necessary agreements and documents to
effect the sale in accordance not only with the bidding guidelines and procedures but
with the Constitution as well. The refusal of respondent GSIS to execute the
corresponding documents with petitioner as provided in the bidding rules after the latter
has matched the bid of the Malaysian firm clearly constitutes grave abuse of discretion.
The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987

The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987
Constitution not merely to be used as a guideline for future legislation but primarily to be
enforced; so must it be enforced. This Court as the ultimate guardian of the Constitution
will never shun, under any reasonable circumstance, the duty of upholding the majesty of
the Constitution which it is tasked to defend. It is worth emphasizing that it is not the
intention of this Court to impede and diminish, much less undermine, the influx of foreign
investments. Far from it, the Court encourages and welcomes more business
opportunities but avowedly sanctions the preference for Filipinos whenever such
preference is ordained by the Constitution. The position of the Court on this matter could
have not been more appropriately articulated by Chief Justice Narvasa —
As scrupulously as it has tried to observe that it is not its function to substitute its
judgment for that of the legislature or the executive about the wisdom and feasibility of
legislation economic in nature, the Supreme Court has not been spared criticism for
decisions perceived as obstacles to economic progress and development . . . in
connection with a temporary injunction issued by the Court's First Division against the
sale of the Manila Hotel to a Malaysian Firm and its partner, certain statements were
published in a major daily to the effect that injunction "again demonstrates that the
Philippine legal system can be a major obstacle to doing business here.
Let it be stated for the record once again that while it is no business of the Court to intervene
in contracts of the kind referred to or set itself up as the judge of whether they are viable or
attainable, it is its bounden duty to make sure that they do not violate the Constitution or the
laws, or are not adopted or implemented with grave abuse of discretion amounting to lack or
excess of jurisdiction. It will never shirk that duty, no matter how buffeted by winds of unfair
and ill-informed criticism. 48
Privatization of a business asset for purposes of enhancing its business viability and
preventing further losses, regardless of the character of the asset, should not take
precedence over non-material values. A commercial, nay even a budgetary, objective
should not be pursued at the expense of national pride and dignity. For the Constitution
enshrines higher and nobler non-material values. Indeed, the Court will always defer to
the Constitution in the proper governance of a free society; after all, there is nothing so
sacrosanct in any economic policy as to draw itself beyond judicial review when the
Constitution is involved. 49
Nationalism is inherent, in the very concept of the Philippines being a democratic and
republican state, with sovereignty residing in the Filipino people and from whom all
government authority emanates. In nationalism, the happiness and welfare of the people
must be the goal. The nation-state can have no higher purpose. Any interpretation of any
constitutional provision must adhere to such basic concept. Protection of foreign
investments, while laudible, is merely a policy. It cannot override the demands of
nationalism. 50
The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be
sold to the highest bidder solely for the sake of privatization. We are not talking about an
ordinary piece of property in a commercial district. We are talking about a historic relic
that has hosted many of the most important events in the short history of the Philippines
as a nation. We are talking about a hotel where heads of states would prefer to be
housed as a strong manifestation of their desire to cloak the dignity of the highest state
function to their official visits to the Philippines. Thus the Manila Hotel has played and
continues to play a significant role as an authentic repository of twentieth century
Philippine history and culture. In this sense, it has become truly a reflection of the Filipino
soul — a place with a history of grandeur; a most historical setting that has played a part
in the shaping of a country. 51
This Court cannot extract rhyme nor reason from the determined efforts of respondents
to sell the historical landmark — this Grand Old Dame of hotels in Asia — to a total
stranger. For, indeed, the conveyance of this epic exponent of the Filipino psyche to
alien hands cannot be less than mephistophelian for it is, in whatever manner viewed, a
veritable alienation of a nation's soul for some pieces of foreign silver. And so we ask:
What advantage, which cannot be equally drawn from a qualified Filipino, can be gained
by the Filipinos Manila Hotel — and all that it stands for — is sold to a non-Filipino? How
much of national pride will vanish if the nation's cultural heritage is entrusted to a foreign
entity? On the other hand, how much dignity will be preserved and realized if the national
patrimony is safekept in the hands of a qualified, zealous and well-meaning Filipino? This
is the plain and simple meaning of the Filipino First Policy provision of the Philippine
Constitution. And this Court, heeding the clarion call of the Constitution and accepting
the duty of being the elderly watchman of the nation, will continue to respect and protect

the duty of being the elderly watchman of the nation, will continue to respect and protect
the sanctity of the Constitution.
WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM,
MANILA HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF
THE GOVERNMENT CORPORATE COUNSEL are directed to CEASE and DESIST
from selling 51% of the shares of the Manila Hotel Corporation to RENONG BERHAD,
and to ACCEPT the matching bid of petitioner MANILA PRINCE HOTEL
CORPORATION to purchase the subject 51% of the shares of the Manila Hotel
Corporation at P44.00 per share and thereafter to execute the necessary clearances and
to do such other acts and deeds as may be necessary for purpose.
SO ORDERED.
Regalado, Davide, Jr., Romero, Kapunan, Francisco and Hermosisima, Jr., JJ., concur.
Separate Opinions
PADILLA, J., concurring:

I concur with the ponencia of Mr. Justice Bellosillo. At the same time, I would like to
expound a bit more on the concept of national patrimony as including within its scope
and meaning institutions such as the Manila Hotel.
It is argued by petitioner that the Manila Hotel comes under "national patrimony" over
which qualified Filipinos have the preference, in ownership and operation. The
Constitutional provision on point states:
xxx xxx xxx
patrimony, the State shall Give preference to qualified Filipinos. 1
Petitioner's argument, I believe, is well taken. Under the 1987 Constitution, "national
patrimony" consists of the natural resources provided by Almighty God (Preamble) in our
territory (Article I) consisting of land, sea, and air. 2study of the 1935 Constitution, where
the concept of "national patrimony" originated, would show that its framers decided to
adopt the even more comprehensive expression "Patrimony of the Nation" in the belief
that the phrase encircles a concept embracing not only their natural resources of the
country but practically everything that belongs to the Filipino people, the tangible and the
material as well as the intangible and the spiritual assets and possessions of the people.
It is to be noted that the framers did not stop with conservation. They knew that
conservation alone does not spell progress; and that this may be achieved only through
development as a correlative factor to assure to the people not only the exclusive
ownership, but also the exclusive benefits of their national patrimony). 3
Moreover, the concept of national patrimony has been viewed as referring not only to our
rich natural resources but also to the cultural heritage of our
race. 4
There is no doubt in my mind that the Manila Hotel is very much a part of our national
patrimony and, as such, deserves constitutional protection as to who shall own it and
benefit from its operation. This institution has played an important role in our nation's
history, having been the venue of many a historical event, and serving as it did, and as it
does, as the Philippine Guest House for visiting foreign heads of state, dignitaries,
celebrities, and others. 5
It is therefore our duty to protect and preserve it for future generations of Filipinos. As
President Manuel L. Quezon once said, we must exploit the natural resources of our
country, but we should do so with. an eye to the welfare of the future generations. In
other words, the leaders of today are the trustees of the patrimony of our race. To
preserve our national patrimony and reserve it for Filipinos was the intent of the
distinguished gentlemen who first framed our Constitution. Thus, in debating the need for
nationalization of our lands and natural resources, one expounded that we should "put
more teeth into our laws, and; not make the nationalization of our lands and natural
resources a subject of ordinary legislation but of constitutional enactment" 6 To quote
further: "Let not our children be mere tenants and trespassers in their own country. Let
us preserve and bequeath to them what is rightfully theirs, free from all foreign liens and
encumbrances". 7
Now, a word on preference. In my view "preference to qualified Filipinos", to be
meaningful, must refer not only to things that are peripheral, collateral, or tangential. It
must touch and affect the very "heart of the existing order." In the field of public bidding in

the acquisition of things that pertain to the national patrimony, preference to qualified
Filipinos must allow a qualified Filipino to match or equal the higher bid of a non-Filipino;
the preference shall not operate only when the bids of the qualified Filipino and the non-
Filipino are equal in which case, the award should undisputedly be made to the qualified
Filipino. The Constitutional preference should give the qualified Filipino an opportunity to
match or equal the higher bid of the non-Filipino bidder if the preference of the qualified
Filipino bidder is to be significant at all.
It is true that in this present age of globalization of attitude towards foreign investments in
our country, stress is on the elimination of barriers to foreign trade and investment in the
country. While government agencies, including the courts should re-condition their
thinking to such a trend, and make it easy and even attractive for foreign investors to
come to our shores, yet we should not preclude ourselves from reserving to us Filipinos
certain areas where our national identity, culture and heritage are involved. In the hotel
industry, for instance, foreign investors have established themselves creditably, such as
in the Shangri-La, the Nikko, the Peninsula, and Mandarin Hotels. This should not stop
us from retaining 51% of the capital stock of the Manila Hotel Corporation in the hands of
Filipinos. This would be in keeping with the intent of the Filipino people to preserve our
national patrimony, including our historical and cultural heritage in the hands of Filipinos.
VITUG, J., concurring:
I agree with Mr. Justice Josue N. Bellosillo on his clear-cut statements, shared by Mr.
Justice Reynato S. Puno in a well written separate (dissenting) opinion, that:
First, the provision in our fundamental law which provides that "(I)n the grant of rights,
shall give preference to qualified Filipinos" 1 is self-executory. The provision verily does
not need, although it can obviously be amplified or regulated by, an enabling law or a set
of rules.
Second, the term "patrimony" does not merely refer to the country's natural resources but
also to its cultural heritage. A "historical landmark," to use the words of Mr. Justice Justo
P. Torres, Jr., Manila Hotel has now indeed become part of Philippine heritage.
Third, the act of the Government Service Insurance System ("GSIS"), a government
entity which derives its authority from the State, in selling 51% of its share in MHC should
be considered an act of the State subject to the Constitutional mandate.
On the pivotal issue of the degree of "preference to qualified Filipinos," I find it somewhat
difficult to take the same path traversed by the forceful reasoning of Justice Puno. In the
particular case before us, the only meaningful preference, it seems, would really be to
allow the qualified Filipino to match the foreign bid for, as a particular matter, I cannot
see any bid that literally calls for millions of dollars to be at par (to the last cent) with
another. The magnitude of the magnitude of the bids is such that it becomes hardly
possible for the competing bids to stand exactly "equal" which alone, under the
dissenting view, could trigger the right of preference.
It is most unfortunate that Renong Berhad has not been spared this great
disappointment, a letdown that it did not deserve, by a simple and timely advise of the
proper rules of bidding along with the peculiar constitutional implications of the proposed
transaction. It is also regrettable that the Court at time is seen, to instead, be the refuge
for bureaucratic inadequate which create the perception that it even takes on non-
justiciable controversies.
All told, I am constrained to vote for granting the petition.
MENDOZA, J., concurring in the judgment:
I take the view that in the context of the present controversy the only way to enforce the
constitutional mandate that "[i]n the grant of rights, privileges and concessions covering
the national patrimony the State shall give preference to qualified Filipinos" 1 is to allow
petitioner Philippine corporation to equal the bid of the Malaysian firm Renong Berhad for
the purchase of the controlling shares of stocks in the Manila Hotel Corporation. Indeed,
it is the only way a qualified Filipino of Philippine corporation can be given preference in
the enjoyment of a right, privilege or concession given by the State, by favoring it over a
foreign national corporation.
Under the rules on public bidding of the Government Service and Insurance System, if
petitioner and the Malaysian firm had offered the same price per share, "priority [would
be given] to the bidder seeking the larger ownership interest in MHC," 2 so that petitioner
bid for more shares, it would be preferred to the Malaysian corporation for that reason
and not because it is a Philippine corporation. Consequently, it is only in cases like the
present one, where an alien corporation is the highest bidder, that preferential treatment

of the Philippine corporation is mandated not by declaring it winner but by allowing it "to
match the highest bid in terms of price per share" before it is awarded the shares of
stocks. 3 That, to me, is what "preference to qualified Filipinos" means in the context of
this case — by favoring Filipinos whenever they are at a disadvantage vis-a-
vis foreigners.
This was the meaning given in Co Chiong v. Cuaderno 4 to a 1947 statute giving
"preference to Filipino citizens in the lease of public market stalls." 5 This Court upheld
the cancellation of existing leases covering market stalls occupied by persons who were
not Filipinos and the award thereafter of the stalls to qualified Filipino vendors as ordered
by the Department of Finance. Similarly, in Vda. de Salgado v. De la Fuente, 6 this Court
sustained the validity of a municipal ordinance passed pursuant to the statute (R.A. No.
37), terminating existing leases of public market stalls and granting preference to Filipino
citizens in the issuance of new licenses for the occupancy of the stalls. In Chua Lao
v. Raymundo, 7 the preference granted under the statute was held to apply to cases in
which Filipino vendors sought the same stalls occupied by alien vendors in the public
markets even if there were available other stalls as good as those occupied by aliens.
"The law, apparently, is applicable whenever there is a conflict of interest between
Filipino applicants and aliens for lease of stalls in public markets, in which situation the
right to preference immediately arises." 8
Our legislation on the matter thus antedated by a quarter of a century efforts began only
in the 1970s in America to realize the promise of equality, through affirmative action and
reverse discrimination programs designed to remedy past discrimination against colored
people in such areas as employment, contracting and licensing. 9Indeed, in vital areas of
our national economy, there are situations in which the only way to place Filipinos in
control of the national economy as contemplated in the Constitution 10 is to give them
preferential treatment where they can at least stand on equal footing with aliens.
There need be no fear that thus preferring Filipinos would either invite foreign retaliation
or deprive the country of the benefit of foreign capital or know-how. We are dealing here
not with common trades of common means of livelihood which are open to aliens in our
midst, 11 but with the sale of government property, which is like the grant of government
largess of benefits and concessions covering the national economy" and therefore no
one should begrudge us if we give preferential treatment to our citizens. That at any rate
is the command of the Constitution. For the Manila Hotel is a business owned by the
Government. It is being privatized. Privatization should result in the relinquishment of the
business in favor of private individuals and groups who are Filipino citizens, not in favor
of aliens.
Nor should there be any doubt that by awarding the shares of stocks to petitioner we
would be trading competence and capability for nationalism. Both petitioner and the
Malaysian firm are qualified, having hurdled the prequalification process. 12 It is only the
result of the public bidding that is sought to be modified by enabling petitioner to up its
bid to equal the highest bid.
Nor, finally, is there any basis for the suggestion that to allow a Filipino bidder to match
the highest bid of an alien could encourage speculation, since all that a Filipino entity
would then do would be not to make a bid or make only a token one and, after it is known
that a foreign bidder has submitted the highest bid, make an offer matching that of the
foreign firm. This is not possible under the rules on public bidding of the GSIS. Under
these rules there is a minimum bid required (P36.87 per share for a range of 9 to 15
million shares). 13 Bids below the minimum will not be considered. On the other hand, if
the Filipino entity, after passing the prequalification process, does not submit a bid, he
will not be allowed to match the highest bid of the foreign firm because this is a privilege
allowed only to those who have "validly submitted bids." 14 The suggestion is, to say the
least, fanciful and has no basis in fact.
For the foregoing reasons, I vote to grant the petition.
TORRES, JR., J., separate opinion:
Constancy in law is not an attribute of a judicious mind. I say this as we are not
confronted in the case at bar with legal and constitutional issues — and yet I am driven
so to speak on the side of history. The reason perhaps is due to the belief that in the
words of Justice Oliver Wendell Holmes, Jr., a "page of history is worth a volume of
logic."
I will, however, attempt to share my thoughts on whether the Manila Hotel has a
historical and cultural aspect within the meaning of the constitution and thus, forming part
of the "patrimony of the nation".

Section 10, Article XII of the 1987 Constitution provides:
xxx xxx xxx
The State shall regulate and exercise authority over foreign investments within its
national goals and priorities.
The foregoing provisions should be read in conjunction with Article II of the same
Constitution pertaining to "Declaration of Principles and State Policies" which ordain —
The State shall develop a self-reliant and independent national economy effectively by
Filipinos. (Sec. 19).
Interestingly, the matter of giving preference to "qualified Filipinos" was one of the
highlights in the 1987 Constitution Commission proceedings thus:
xxx xxx xxx
MR. NOLLEDO. The Amendment will read: "IN THE GRANT OF RIGHTS, PRIVILEGES
AND CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY,
THE STATE SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS". And the word
"Filipinos" here, as intended by the proponents, will include not only individual Filipinos
but also Filipino-Controlled entities fully controlled by Filipinos (Vol. III, Records of the
Constitutional Commission, p. 608).
MR. MONSOD. We also wanted to add, as Commissioner Villegas said, this committee
and this body already approved what is known as the Filipino First policy which was
suggested by Commissioner de Castro. So that it is now in our Constitution (Vol. IV,
Records of the Constitutional Commission, p. 225).
Commissioner Jose Nolledo explaining the provision adverted to above, said:
MR. NOLLEDO. In the grant of rights, privileges and concessions covering the national
economy and patrimony, the State shall give preference to qualified Filipinos.
MR. FOZ. In connection with that amendment, if a foreign enterprise is qualified and the
Filipinos enterprise is also qualified, will the Filipino enterprise still be given a
preference?
will the Filipino still be preferred:?
MR. NOLLEDO. The answer is "yes". (Vol. III, p. 616, Records of the Constitutional
Commission).
The nationalistic provisions of the 1987 Constitution reflect the history and spirit of the
Malolos Constitution of 1898, the 1935 Constitution and the 1973 Constitutions. That we
have no reneged on this nationalist policy is articulated in one of the earliest case, this
Court said —
The nationalistic tendency is manifested in various provisions of the Constitution. . . . It
cannot therefore be said that a law imbued with the same purpose and spirit underlying
many of the provisions of the Constitution is unreasonable, invalid or unconstitutional
(Ichong, et al. vs. Hernandez, et al., 101 Phil. 1155).
I subscribe to the view that history, culture, heritage, and traditions are not legislated and
is the product of events, customs, usages and practices. It is actually a product of growth
and acceptance by the collective mores of a race. It is the spirit and soul of a people.
The Manila Hotel is part of our history, culture and heritage. Every inch of the Manila
Hotel is witness to historic events (too numerous to mention) which shaped our history
for almost 84 years.
As I intimated earlier, it is not my position in this opinion, to examine the single instances
of the legal largese which have given rise to this controversy. As I believe that has been
exhaustively discussed in the ponencia. Suffice it to say at this point that the history of
the Manila Hotel should not be placed in the auction block of a purely business
transaction, where profits subverts the cherished historical values of our people.
As a historical landmark in this "Pearl of the Orient Seas", it has its enviable tradition
which, in the words of the philosopher Salvador de Madarriaga tradition is "more of a
river than a stone, it keeps flowing, and one must view the flowing , and one must view
the flow of both directions. If you look towards the hill from which the river flows, you see
tradition in the form of forceful currents that push the river or people towards the future,
and if you look the other way, you progress."
Indeed, tradition and progress are the same, for progress depends on the kind of
tradition. Let us not jettison the tradition of the Manila Hotel and thereby repeat our
colonial history.

colonial history.
I grant, of course the men of the law can see the same subject in different lights.
I remember, however, a Spanish proverb which says — "He is always right who suspects
that he makes mistakes". On this note, I say that if I have to make a mistake, I would
rather err upholding the belief that the Filipino be first under his Constitution and in his
own land.
I vote GRANT the petition.
PUNO, J., dissenting:

This is a. petition for prohibition and mandamus filed by the Manila Prince Hotel
Corporation, a domestic corporation, to stop the Government Service Insurance System
(GSIS) from selling the controlling shares of the Manila Hotel Corporation to a foreign
corporation. Allegedly, the sale violates the second paragraph of section 10, Article XII of
the Constitution.
Respondent GSIS is a government-owned and controlled corporation. It is the sole
owner of the Manila Hotel which it operates through its subsidiary, the Manila Hotel
Corporation. Manila Hotel was included in the privatization program of the government.
In 1995, GSIS proposed to sell to interested buyers 30% to 51% of its shares, ranging
from 9,000,000 to 15,300,000 shares, in the Manila Hotel Corporation. After the absence
of bids at the first public bidding, the block of shares offered for sale was increased from
a maximum of 30% to 51%. Also, the winning bidder, or the eventual "strategic partner"
of the GSIS was required to "provide management expertise and/or an international
performance of the Manila Hotel" 1 The proposal was approved by respondent Committee
on Privatization.
In July 1995, a conference was held where prequalification documents and the bidding
rules were furnished interested parties. Petitioner Manila Prince Hotel, a domestic
corporation, and Renong Berhad, Malaysian firm with ITT Sheraton as operator,
prequalified. 2
The bidding rules and procedures entitled "Guidelines and Procedures: Second
Prequalification and Public Bidding of the MHC Privatization" provide:
I INTRODUCTION AND HIGHLIGHTS
DETERMINING THE WINNING BIDDER/STRATEGIC PARTNER
The party that accomplishes the steps set forth below will be declared the Winning
Bidder/Strategic Partner and will be awarded the Block of Shares:
First — Pass the prequalification process;
Second — Submit the highest bid on a price per share basis for the Block of Shares;
Third — Negotiate and execute the necessary contracts with GSIS/MHC not later than
October 23, 1995;
xxx xxx xxx
IV GUIDELINES FOR PREQUALIFICATION
A. PARTIES WHO MAP APPLY FOR PREQUALIFICATION
The Winning Bidder/Strategic Partner will be expected to provide management expertise
and/or an international marketing reservation system, and financial support to strengthen
the profitability and performance of The Manila Hotel. In this context, the GSIS is inviting
to the prequalification process any local and/or foreign corporation, consortium/joint
venture or juridical entity with at least one of the following qualifications:
a. Proven management .expertise in the hotel industry; or
b. Significant equity ownership (i.e. board representation) in another hotel company; or
c. Overall management and marketing expertise to successfully operate the Manila
Hotel.
Parties interested in bidding for MHC should be able to provide access to the requisite
management expertise and/or international marketing/reservation system for The Manila
Hotel.
xxx xxx xxx
D. PREQUALIFICATION DOCUMENTS
xxx xxx xxx
E. APPLICATION PROCEDURE
1. DOCUMENTS AVAILABLE AT THE REGISTRATION OFFICE
The prequalification documents can be secured at the Registration Office between 9:00
AM to 4:00 PM during working days within the period specified in Section III. Each set of
documents consists of the following:
a. Guidelines and Procedures: Second Prequalification and Public Bidding of the MHC

Privatization
b. Confidential Information Memorandum: The Manila Hotel Corporation
c. Letter of Invitation. to the Prequalification and Bidding Conference
xxx xxx xxx
4. PREQUALIFICATION AND BIDDING CONFERENCE
A prequalification and bidding conference will be held at The Manila Hotel on the date
specified in Section III to allow the Applicant to seek clarifications and further information
regarding the guidelines and procedures. Only those who purchased the prequalification
documents will be allowed in this conference. Attendance to this conference is strongly
advised, although the Applicant will not be penalized if it does not attend.
5. SUBMISSION OF PREQUALIFICATION DOCUMENTS
The applicant should submit 5 sets of the prequalification documents (1 original set plus
4 copies) at the Registration Office between 9:00 AM to 4:00 PM during working days
within the period specified in Section III.
F. PREQUALIFICATION PROCESS
1. The Applicant will be evaluated by the PBAC with the assistance of the TEC based on
the Information Package and other information available to the PBAC.
2. If the Applicant is a Consortium/Joint Venture, the evaluation will consider the overall
qualifications of the group, taking into account the contribution of each member to the
venture.
3. The decision of the PBAC with respect to the results of the PBAC evaluation will be
final.
4. The Applicant shall be evaluated according to the criteria set forth below:
a. Business management expertise, track record, and experience
b. Financial capability.
c. Feasibility and acceptability of the proposed strategic plan for the Manila Hotel
5. The PBAC will shortlist such number of Applicants as it may deem appropriate.
6. The parties that prequalified in the first MHC public bidding — ITT Sheraton, Marriot
International Inc., Renaissance Hotels International Inc., consortium of RCBC
Capital/Ritz Carlton — may participate in the Public Bidding without having to undergo
the prequalification process again.
G. SHORTLIST OF QUALIFIED BIDDERS
1. A notice of prequalification results containing the shortlist of Qualified Bidders will be
posted at the Registration Office at the date specified in Section III.
2. In the case of a Consortium/Joint Venture, the withdrawal by member whose
qualification was a material consideration for being included in the shortlist is ground for
disqualification of the Applicant.
V. GUIDELINES FOR THE PUBLIC BIDDING
A. PARTIES WHO MAY PARTICIPATE IN THE PUBLIC BIDDING
All parties in the shortlist of Qualified Bidders will be eligible to participate in the Public
Bidding.
B. BLOCK OF SHARES
A range of Nine Million (9,000,000) to Fifteen Million Three Hundred Thousand
(15,300,000) shares of stock representing Thirty Percent to Fifty-One Percent
(30%-51%) of the issued and outstanding shares of MHC, will be offered in the Public
Bidding by the GSIS. The Qualified Bidders will have the Option of determining the
number of shares within the range to bid for. The range is intended to attract bidders with
different preferences and objectives for the operation and management of The Manila
Hotel.
C. MINIMUM BID REQUIRED ON A PRICE PER SHARE BASIS
1. Bids will be evaluated on a price per share basis. The minimum bid required on a price
per share basis for the Block of Shares is Thirty-Six Pesos and Sixty-Seven Centavos
(P36.67).
2. Bids should be in the Philippine currency payable to the GSIS.
3. Bids submitted with an equivalent price per share below the minimum required will not
considered.
D. TRANSFER COSTS
xxx xxx xxx
E. OFFICIAL BID FORM
1. Bids must be contained in the prescribed Official Bid Form, a copy of which is attached
as Annex IV. The Official Bid Form must be properly accomplished in all details; improper
accomplishment may be a sufficient basis for disqualification.

2. During the Public Bidding, the Qualified Bidder will submit the Official Bid Form, which
will indicate the offered purchase price, in a sealed envelope marked "OFFICIAL BID."
F. SUPPORTING DOCUMENTS
During the Public Bidding, the following documents should be submitted along with the
bid in a separate envelop marked "SUPPORTING DOCUMENTS":
1. WRITTEN AUTHORITY TO BID (UNDER OATH).
If the Qualified Bidder is a corporation, the representative of the Qualified Bidder should
submit a Board resolution which adequately authorizes such representative to bid for and
in behalf of the corporation with full authority to perform such acts necessary or requisite
to bind the Qualified Bidder.
If the Qualified Bidder is a Consortium/Joint Venture, each member of the
Consortium/Joint venture should submit a Board resolution authorizing one of its
members and such member's representative to make the bid on behalf of the group with
full authority to perform such acts necessary or requisite to bind the Qualified Bidder.
2. BID SECURITY
a. The Qualified Bidder should deposit Thirty-Three Million Pesos (P33,000,00), in
Philippine currency as Bid Security in the form of:
i. Manager's check or unconditional demand draft payable to the "Government Service
Insurance System" and issued by a reputable banking institution duly licensed to do
business in the Philippines and acceptable to GSIS; or
ii. Standby-by letter of credit issued by a reputable banking institution acceptable to the
GSIS.
b. The GSIS will reject a bid if:
i. The bid does not have Bid Security; or
ii. The Bid Security accompanying the bid is for less than the required amount.
c. If the Bid Security is in the form of a manager's check or unconditional demand draft,
the interest earned on the Bid Security will be for the account of GSIS.
d. If the Qualified Bidder becomes the winning Bidder/Strategic Partner, the Bid Security
will be applied as the downpayment on the Qualified Bidder's offered purchase price.
e. The Bid Security of the Qualified Bidder will be returned immediately after the Public
Bidding if the Qualified Bidder is not declared the Highest Bidder.
f. The Bid Security will be returned by October 23, 1995 if the Highest Bidder is unable to
negotiate and execute with GSIS/MHC the Management Contract, International
Marketing/Reservation System Contract or other types of contract specified by the
Highest Bidder in its strategic plan for The Manila Hotel.
g. The Bid Security of the Highest Bidder will be forfeited in favor of GSIS if the Highest
Bidder, after negotiating and executing the Management Contract, International
Marketing/Reservation System Contract specified by the Highest Bidder or other types of
contract in its strategic plan for The Manila Hotel, fails or refuses to:
i. Execute the Stock Purchase and Sale Agreement with GSIS not later than October 23,
1995; or
ii. Pay the full amount of the offered purchase price not later than October 23, 1995; or
iii. Consummate the sale of the Block of Shares for any other reason.
G. SUBMISSION OF BIDS
1. The Public Bidding will be held on September 7, 1995 at the following location:
New GSIS Headquarters Building
Financial Center, Reclamation Area
Roxas Boulevard, Pasay City, Metro Manila.
2. The Secretariat of the PBAC will be stationed at the Public Bidding to accept any and
all bids and supporting requirements. Representatives from the Commission on Audit
and COP will be invited to witness the proceedings.
3. The Qualified Bidder should submit its bid using the Official Bid Form. The
accomplished Official Bid Form should be submitted in a sealed envelope marked
"OFFICIAL BID."
4. The Qualified Bidder should submit the following documents in another sealed
envelope marked "SUPPORTING BID DOCUMENTS"
a. Written Authority Bid
b. Bid Security
5. The two sealed envelopes marked "OFFICIAL BID" and "SUPPORTING BID
DOCUMENTS" must be submitted simultaneously to the Secretariat between 9:00 AM
and 2:00 PM, Philippine Standard Time, on the date of the Public Bidding. No bid shall
be accepted after the closing time. Opened or tampered bids shall not be accepted.

6. The Secretariat will log and record the actual time of submission of the two sealed
envelopes. The actual time of submission will also be indicated by the Secretariat on the
face of the two envelopes.
7. After Step No. 6, the two sealed envelopes will be dropped in the corresponding bid
boxes provided for the purpose. These boxes will be in full view of the invited public.
H. OPENING AND READING OF BIDS
1. After the closing time of 2:00 PM on the date of the Public Bidding, the PBAC will open
all sealed envelopes marked "SUPPORTING BID DOCUMENTS" for screening,
evaluation and acceptance. Those who submitted incomplete/insufficient documents or
document/s which is/are not substantially in the form required by PBAC will be
disqualified. The envelope containing their Official Bid Form will be immediately returned
to the disqualified bidders.
2. The sealed envelopes marked "OFFICIAL BID" will be opened at 3:00 PM. The name
of the bidder and the amount of its bid price will be read publicly as the envelopes are
opened.
3. Immediately following the reading of the bids, the PBAC will formally announce the
highest bid and the Highest Bidder.
4. The highest bid will be, determined on a price per share basis. In the event of a tie
wherein two or more bids have the same equivalent price per share, priority will be given
to the bidder seeking the larger ownership interest in MHC.
5. The Public Bidding will be declared a failed bidding in case:
a. No single bid is submitted within the prescribed period; or
b. There is only one (1) bid that is submitted and acceptable to the PBAC.
I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC
1995 or the Highest Bidder will lose the right to purchase the Block of Shares and GSIS
will instead offer the Block of Shares to the other Qualified Bidders:
a. The Highest Bidder must negotiate and execute with GSIS/MHC the Management
Contract, International Marketing Reservation System Contract or other type of contract
specified by the Highest Bidder in its strategic plan for The Manila Hotel. If the Highest
Bidder is intending to provide only financial support to The Manila Hotel, a separate
institution may enter into the aforementioned contract/s with GSIS/MHC.
b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with GSIS,
a copy of which will be distributed to each of the Qualified Bidder after the
prequalification process is completed.
2. In the event that the Highest Bidder chooses a Management Contract for The Manila
Hotel, the maximum levels for the management fee structure that GSIS/MHC are
prepared to accept in the Management Contract are as follows:
a. Basic management fee: Maximum of 2.5% of gross revenues.(1)
b. Incentive fee: Maximum of 8.0% of gross operating profit(1) after deducting
undistributed overhead expenses and the basic management fee.
c. Fixed component of the international marketing/reservation system fee: Maximum of
2.0% of gross room revenues.(1) The Applicant should indicate in its Information
Package if it is wishes to charge this fee.
Note (1): As defined in the uniform system of account for hotels.
The GSIS/MHC have indicated above the acceptable parameters for the hotel
management fees to facilitate the negotiations with the Highest Bidder for the
Management Contract after the Public Bidding.
A Qualified Bidder envisioning a Management Contract for The Manila Hotel should
determine whether or not the management fee structure above is acceptable before
submitting their prequalification documents to GSIS.
J. BLOCK SALE TO THE OTHER QUALIFIED BIDDERS
1. If for any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS
may offer this to the other Qualified Bidders that have validly submitted bids provided
that these Qualified are willing to match the highest bid in terms of price per share.
2. The order of priority among the interested Qualified Bidders will be in accordance wit
the equivalent price per share of their respective bids in their public Bidding, i.e., first and
second priority will be given to the Qualified Bidders that submitted the second and third
highest bids on the price per share basis, respectively, and so on.
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER

a. Execution of the necessary contract with GSIS/MHC not later than October 23, 1995;
and
b. Requisite approvals from the GSIS/MHC and COP/OGCC are obtained.
I. FULL PAYMENT FOR THE BLOCK OF SHARES
1. Upon execution of the necessary contracts with GSIS/MHC, the Winning
Bidder/Strategic Partner must fully pay, not later than October 23, 1995, the offered
purchase price for the Block of Shares after deducting the Bid Security applied as
downpayment.
2. All payments should be made in the form of a Manager's Check or unconditional
Demand Draft, payable to the "Government Service Insurance System," issued by a
reputable banking institution licensed to do business in the Philippines and acceptable to
GSIS.
M. GENERAL CONDITIONS
1. The GSIS unconditionally reserves the right to reject any or all applications, waive any
formality therein, or accept such application as maybe considered most advantageous to
the GSIS. The GSIS similarly reserves the right to require the submission of any
additional information from the Applicant as the PBAC may deem necessary.
2. The GSIS further reserves the right to call off the Public Bidding prior to acceptance of
the bids and call for a new public bidding under amended rules, and without any liability
whatsoever to any or all the Qualified Bidders, except the obligation to return the Bid
Security.
3. The GSIS reserves the right to reset the date of the prequalification/bidding
conference, the deadline for the submission of the prequalification documents, the date
of the Public Bidding or other pertinent activities at least three (3) calendar days prior to
the respective deadlines/target dates.
4. The GSIS sells only whatever rights, interest and participation it has on the Block of
Shares.
5. All documents and materials submitted by the Qualified Bidders, except the Bid
Security, may be returned upon request.
6. The decision of the PBAC/GSIS on the results of the Public Bidding is final. The
Qualified Bidders, by participating in the Public Bidding, are deemed to have agreed to
accept and abide by these results.
7. The GSIS will be held free and harmless form any liability, suit or allegation arising out of
the Public Bidding by the Qualified Bidders who have participated in the Public Bidding. 3
The second public bidding was held on September 18, 1995. Petitioner bidded P41.00
per share for 15,300,000 shares and Renong Berhad bidded P44.00 per share also for
15,300,000 shares. The GSIS declared Renong Berhad the highest bidder and
immediately returned petitioner's bid security.
On September 28, 1995, ten days after the bidding, petitioner wrote to GSIS offering to
match the bid price of Renong Berhad. It requested that the award be made to itself
citing the second paragraph of Section 10, Article XII of the Constitution. It sent a
manager's check for thirty-three million pesos (P33,000,000.00) as bid security.
Respondent GSIS, then in the process of negotiating with Renong Berhad the terms and
conditions of the contract and technical agreements in the operation of the hotel, refused
to entertain petitioner's request.
Hence, petitioner filed the present petition. We issued a temporary restraining order on
October 18, 1995.
Petitioner anchors its plea on the second paragraph of Article XII, Section 10 of the
Constitution 4 on the "National Economy and Patrimony" which provides:
xxx xxx xxx
xxx xxx xxx
The vital issues can be summed up as follows:
(1) Whether section 10, paragraph 2 of Article XII of the Constitution is a self-executing
provision and does not need implementing legislation to carry it into effect;
(2) Assuming section 10 paragraph 2 of Article XII is self-executing whether the
controlling shares of the Manila Hotel Corporation form part of our patrimony as a nation;
(3) Whether GSIS is included in the term "State," hence, mandated to implement section
10, paragraph 2 of Article XII of the Constitution;
(4) Assuming GSIS is part of the State, whether it failed to give preference to petitioner, a

qualified Filipino corporation, over and above Renong Berhad, a foreign corporation, in
the sale of the controlling shares of the Manila Hotel Corporation;
(5) Whether petitioner is estopped from questioning the sale of the shares to Renong
Berhad, a foreign corporation.
Anent the first issue, it is now familiar learning that a Constitution provides the guiding
policies and principles upon which is built the substantial foundation and general
framework of the law and government. 5 As a rule, its provisions are deemed self-
executing and can be enforced without further legislative action. 6 Some of its provisions,
however, can be implemented only through appropriate laws enacted by the Legislature,
hence not self-executing.
To determine whether a particular provision of a Constitution is self-executing is a hard
row to hoe. The key lies on the intent of the framers of the fundamental law oftentimes
submerged in its language. A searching inquiry should be made to find out if the
provision is intended as a present enactment, complete in itself as a definitive law, or if it
needs future legislation for completion and enforcement. 7 The inquiry demands a micro-
analysis of the text and the context of the provision in question. 8
Courts as a rule consider the provisions of the Constitution as self-executing, 9 rather
than as requiring future legislation for their enforcement. 10 The reason is not difficult to
discern. For if they are not treated as self-executing, the mandate of the fundamental law
ratified by the sovereign people can be easily ignored and nullified by
Congress. 11 Suffused with wisdom of the ages is the unyielding rule that legislative
actions may give breath to constitutional rights but congressional in action should not
suffocate them. 12
Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests,
searches and seizures, 13the rights of a person under custodial investigation, 14 the rights
of an accused, 15 and the privilege against self-incrimination, 16 It is recognize a that
legislation is unnecessary to enable courts to effectuate constitutional provisions
guaranteeing the fundamental rights of life, liberty and the protection of property. 17 The
same treatment is accorded to constitutional provisions forbidding the taking or
damaging of property for public use without just compensation. 18
Contrariwise, case law lays down the rule that a constitutional provision is not self-
executing where it merely announces a policy and its language empowers the
Legislature to prescribe the means by which the policy shall be carried into
effect. 19 Accordingly, we have held that the provisions in Article II of our Constitution
entitled "Declaration of Principles and State Policies" should generally be construed as
mere statements of principles of the State. 20 We have also ruled that some provisions of
Article XIII on "Social Justice and Human Rights," 21 and Article XIV on "Education
Science and Technology, Arts, Culture end Sports" 22 cannot be the basis of judicially
enforceable rights. Their enforcement is addressed to the discretion of Congress though
they provide the framework for legislation 23 to effectuate their policy content. 24
Guided by this map of settled jurisprudence, we now consider whether Section 10, Article
XII of the 1987 Constitution is self-executing or not. It reads:
Sec. 10. The Congress shall, upon recommendation of the economic and planning
agency, when the national interest dictates, reserve to citizens of the Philippines or to
corporations or associations at least sixty per centum of whose capital is owned by such
citizens, or such higher percentage as Congress may prescribe, certain areas of
investments. The Congress shall enact measures that will encourage the formation and
operation of enterprises whose capital is wholly owned by Filipinos.
national jurisdiction and in accordance with its national goals and priorities.
The first paragraph directs Congress to reserve certain areas of investments in the
country 25 to Filipino citizens or to corporations sixty per
cent 26 of whose capital stock is owned by Filipinos. It further commands Congress to
enact laws that will encourage the formation and operation of one hundred percent
Filipino-owned enterprises. In checkered contrast, the second paragraph orders the
entire State to give preference to qualified Filipinos in the grant of rights and privileges
covering the national economy and patrimony. The third paragraph also directs the State
to regulate foreign investments in line with our national goals and well-set priorities.
The first paragraph of Section 10 is not self-executing. By its express text, there is a
categorical command for Congress to enact laws restricting foreign ownership in certain
areas of investments in the country and to encourage the formation and operation of

wholly-owned Filipino enterprises. The right granted by the provision is clearly still in
esse. Congress has to breathe life to the right by means of legislation. Parenthetically,
this paragraph was plucked from section 3, Article XIV of the 1973 Constitution. 27 The
provision in the 1973 Constitution affirmed our ruling in the landmark case of Lao Ichong
v. Hernandez, 28where we upheld the discretionary authority of Congress to Filipinize
certain areas of investments. 29 By reenacting the 1973 provision, the first paragraph of
section 10 affirmed the power of Congress to nationalize certain areas of investments in
favor of Filipinos.
The second and third paragraphs of Section 10 are different. They are directed to the
State and not to Congress alone which is but one of the three great branches of our
government. Their coverage is also broader for they cover "the national economy and
patrimony" and "foreign investments within [the] national jurisdiction" and not merely
"certain areas of investments." Beyond debate, they cannot be read as granting
Congress the exclusive power to implement by law the policy of giving preference to
qualified Filipinos in the conferral of rights and privileges covering our national economy
and patrimony. Their language does not suggest that any of the State agency or
instrumentality has the privilege to hedge or to refuse its implementation for any reason
whatsoever. Their duty to implement is unconditional and it is now. The second and the
third paragraphs of Section 10, Article XII are thus self-executing.
This submission is strengthened by Article II of the Constitution entitled "Declaration of
Principles and State Policies." Its Section 19 provides that "[T]he State shall develop a
self-reliant and independent national economy effectively controlled by Filipinos." It
engrafts the all-important Filipino First policy in our fundamental law and by the use of
the mandatory word "shall," directs its enforcement by the whole State without any pause
or a half- pause in time.
The second issue is whether the sale of a majority of the stocks of the Manila Hotel
Corporation involves the disposition of part of our national patrimony. The records of the
Constitutional Commission show that the Commissioners entertained the same view as
to its meaning. According to Commissioner Nolledo, "patrimony" refers not only to our
rich natural resources but also to the cultural heritage of our race. 30 By this yardstick, the
sale of Manila Hotel falls within the coverage of the constitutional provision giving
preferential treatment to qualified Filipinos in the grant of rights involving our national
patrimony. The unique value of the Manila Hotel to our history and culture cannot be
viewed with a myopic eye. The value of the hotel goes beyond pesos and centavos. As
chronicled by Beth Day Romulo, 31 the hotel first opened on July 4, 1912 as a first-class
hotel built by the American Insular Government for Americans living in, or passing
through, Manila while traveling to the Orient. Indigenous materials and Filipino
craftsmanship were utilized in its construction, For sometime, it was exclusively used by
American and Caucasian travelers and served as the "official guesthouse" of the
American Insular Government for visiting foreign dignitaries. Filipinos began coming to
the Hotel as guests during the Commonwealth period. When the Japanese occupied
Manila, it served as military headquarters and lodging for the highest-ranking officers
from Tokyo. It was at the Hotel and the Intramuros that the Japanese made their last
stand during the Liberation of Manila. After the war, the Hotel again served foreign
guests and Filipinos alike. Presidents and kings, premiers and potentates, as well as
glamorous international film and sports celebrities were housed in the Hotel. It was also
the situs of international conventions and conferences. In the local scene, it was the
venue of historic meetings, parties and conventions of political parties. The Hotel has
reaped and continues reaping numerous recognitions and awards from international
hotel and travel award-giving bodies, a fitting acknowledgment of Filipino talent and
ingenuity. These are judicially cognizable facts which cannot be bent by a biased mind.
The Hotel may not, as yet, have been declared a national cultural treasure pursuant to
Republic Act No. 4846 but that does not exclude it from our national patrimony. Republic
Act No. 4846, "The Cultural Properties Preservation and Protection Act," merely provides
a procedure whereby a particular cultural property may be classified a "national cultural
treasure" or an "important cultural property. 32 Approved on June 18, 1966 and amended
by P.D. 374 in 1974, the law is limited in its reach and cannot be read as the exclusive
law implementing section 10, Article XII of the 1987 Constitution. To be sure, the law
does not equate cultural treasure and cultural property as synonymous to the phrase
"patrimony of the nation."
The third issue is whether the constitutional command to the State includes the
respondent GSIS. A look at its charter will reveal that GSIS is a government-owned and

controlled corporation that administers funds that come from the monthly contributions of
government employees and the government. 33 The funds are held in trust for a distinct
purpose which cannot be disposed of indifferently. 34 They are to be used to finance the
retirement, disability and life insurance benefits of the employees and the administrative
and operational expenses of the GSIS, 35 Excess funds, however, are allowed to be
invested in business and other ventures for the benefit of the employees. 36 It is thus
contended that the GSIS investment in the Manila Hotel Corporation is a simple business
venture, hence, an act beyond the contemplation of section 10, paragraph 2 of Article XII
of the Constitution.
The submission is unimpressive. The GSIS is not a pure private corporation. It is
essentially a public corporation created by Congress and granted an original charter to
serve a public purpose. It is subject to the jurisdictions of the Civil Service
Commission 37 and the Commission on Audit. 38 As state-owned and controlled
corporation, it is skin-bound to adhere to the policies spelled out in the general welfare of
the people. One of these policies is the Filipino First policy which the people elevated as
a constitutional command.
The fourth issue demands that we look at the content of phrase "qualified Filipinos" and
their "preferential right." The Constitution desisted from defining their contents. This is as
it ought to be for a Constitution only lays down flexible policies and principles which can
bent to meet today's manifest needs and tomorrow's unmanifested demands. Only a
constitution strung with elasticity can grow as a living constitution.
Thus, during the deliberations in the Constitutional Commission, Commissioner Nolledo
to define the phrase brushed aside a suggestion to define the phrase "qualified Filipinos."
He explained that present and prospective "laws" will take care of the problem of its
interpretation, viz:
xxx xxx xxx
THE PRESIDENT. What is the suggestion of Commissioner Rodrigo? Is it to remove the
word "QUALIFIED?"
whom? As against aliens over aliens?
"QUALIFIED" because the existing laws or the prospective laws will always lay down
conditions under which business map be done, for example, qualifications on capital,
qualifications on the setting up of other financial structures, et cetera.
MR. NOLLEDO Yes.
MR. RODRIGO. If we say, "PREFERENCE TO QUALIFIED FILIPINOS," it can be
understood as giving preference to qualified Filipinos as against Filipinos who are not
qualified.
MR. NOLLEDO. Madam President, that was the intention of the proponents. The
committee has accepted the amendment.
xxx xxx xxx
As previously discussed, the constitutional command to enforce the Filipino First policy is
addressed to the State and not to Congress alone. Hence, the word "laws" should not be
understood as limited to legislations but all state actions which include applicable rules
and regulations adopted by agencies and instrumentalities of the State in the exercise of
their rule-making power. In the case at bar, the bidding rules and regulations set forth the
standards to measure the qualifications of bidders Filipinos and foreigners alike. It is not
seriously disputed that petitioner qualified to bid as did Renong Berhad. 39
Thus, we come to the critical issue of the degree of preference which GSIS should have
accorded petitioner, a qualified Filipino, over Renong Berhad, a foreigner, in the
purchase of the controlling shares of the Manila Hotel. Petitioner claims that after losing
the bid, this right of preference gives it a second chance to match the highest bid of
Renong Berhad.
With due respect, I cannot sustain petitioner's submission. I prescind from the premise
that the second paragraph of section 10, Article XII of the Constitution is pro-Pilipino but
not anti-alien. It is pro-Filipino for it gives preference to Filipinos. It is not, however, anti-
alien per se for it does not absolutely bar aliens in the grant of rights, privileges and
concessions covering the national economy and patrimony. Indeed, in the absence of
qualified Filipinos, the State is not prohibited from granting these rights, privileges and
concessions to foreigners if the act will promote the weal of the nation.
In implementing the policy articulated in section 10, Article XII of the Constitution, the

stellar task of our State policy-makers is to maintain a creative tension between two
desiderata — first, the need to develop our economy and patrimony with the help of
foreigners if necessary, and, second, the need to keep our economy controlled by
Filipinos. Rightfully, the framers of the Constitution did not define the degree of the right
of preference to be given to qualified Filipinos. They knew that for the right to serve the
general welfare, it must have a malleable content that can be adjusted by our policy-
makers to meet the changing needs of our people. In fine, the right of preference of
qualified Filipinos is to be determined by degree as time dictates and circumstances
warrant. The lesser the need for alien assistance, the greater the degree of the right of
preference can be given to Filipinos and vice verse.
Again, it should be stressed that the right and the duty to determine the degree of this
privilege at any given time is addressed to the entire State. While under our constitutional
scheme, the right primarily belongs to Congress as the lawmaking department of our
government, other branches of government, and all their agencies and instrumentalities,
share the power to enforce this state policy. Within the limits of their authority, they can
act or promulgate rules and regulations defining the degree of this right of preference in
cases where they have to make grants involving the national economy and judicial duty.
On the other hand, our duty is to strike down acts of the state that violate the policy.
To date, Congress has not enacted a law defining the degree of the preferential right.
Consequently, we must turn to the rules and regulations of on respondents Committee
Privatization and GSIS to determine the degree of preference that petitioner is entitled to
as a qualified Filipino in the subject sale. A tearless look at the rules and regulations will
show that they are silent on the degree of preferential right to be accorded qualified
Filipino bidder. Despite their silence, however, they cannot be read to mean that they do
not grant any degree of preference to petitioner for paragraph 2, section 10, Article XII of
the Constitution is deemed part of said rules and regulations. Pursuant to legal
hermeneutics which demand that we interpret rules to save them from unconstitutionality,
I submit that the right of preference of petitioner arises only if it tied the bid of Benong
Berhad. In that instance, all things stand equal, and bidder, as a qualified Pilipino bidder,
should be preferred.
It is with deep regret that I cannot subscribe to the view that petitioner has a right to
match the bid of Renong Berhad. Petitioner's submission must be supported by the rules
but even if we examine the rules inside-out .thousand times, they can not justify the
claimed right. Under the rules, the right to match the highest bid arises only "if for any
reason, the highest bidder cannot be awarded block of shares . . ." No reason has arisen
that will prevent the award to Renong Berhad. It qualified as bidder. It complied with the
procedure of bidding. It tendered the highest bid. It was declared as the highest bidder by
the GSIS and the rules say this decision is final. It deserves the award as a matter of
right for the rules clearly did not give to the petitioner as a qualified Filipino privilege to
match the higher bid of a foreigner. What the rules did not grant, petitioner cannot
demand. Our symphaties may be with petitioner but the court has no power to extend the
latitude and longtitude of the right of preference as defined by the rules. The parameters
of the right of preference depend on galaxy of facts and factors whose determination
belongs to the province of the policy-making branches and agencies of the State. We are
duty-bound to respect that determination even if we differ with the wisdom of their
judgment. The right they grant may be little but we must uphold the grant for as long as
the right of preference is not denied. It is only when a State action amounts to a denial of
the right that the Court can come in and strike down the denial as unconstitutional.
Finally, I submit that petitioner is estopped from assailing the winning bid of Renong
Berhad. Petitioner was aware of the rules and regulations of the bidding. It knew that the
rules and regulations do not provide that a qualified Filipino bidder can match the winning
bid submitting an inferior bid. It knew that the bid was open to foreigners and that
foreigners qualified even during the first bidding. Petitioner cannot be allowed to
repudiate the rules which it agreed to respect. It cannot be allowed to obey the rules
when it wins and disregard them when it loses. If sustained, petitioners' stance will wreak
havoc on he essence of bidding. Our laws, rules and regulations require highest bidding
to raise as much funds as possible for the government to maximize its capacity to deliver
essential services to our people. This is a duty that must be discharged by Filipinos and
foreigners participating in a bidding contest and the rules are carefully written to attain
this objective. Among others, bidders are prequalified to insure their financial capability.
The bidding is secret and the bids are sealed to prevent collusion among the parties.
This objective will be undermined if we grant petitioner that privilege to know the winning

bid and a chance to match it. For plainly, a second chance to bid will encourage a bidder
not to strive to give the highest bid in the first bidding.
We support the Filipino First policy without any reservation. The visionary nationalist Don
Claro M. Recto has warned us that the greatest tragedy that can befall a Filipino is to be
an alien in his own land. The Constitution has embodied Recto's counsel as a state
policy. But while the Filipino First policy requires that we incline to a Filipino, it does not
demand that we wrong an alien. Our policy makers can write laws and rules giving
favored treatment to the Filipino but we are not free to be unfair to a foreigner after
writing the laws and the rules. After the laws are written, they must be obeyed as written,
by Filipinos and foreigners alike. The equal protection clause of the Constitution protects
all against unfairness. We can be pro-Filipino without unfairness to foreigner.
I vote to dismiss the petition.
Narvasa, C.J., and Melo, J., concur.
PANGANIBAN, J., dissenting:

I regret I cannot join the majority. To the incisive Dissenting Opinion of Mr. Justice
Reynato S. Puno, may I just add
1. The majority contends the Constitution should be interpreted to mean that, after a
bidding process is concluded, the losing Filipino bidder should be given the right to equal
the highest foreign bid, and thus to win. However, the Constitution [Sec. 10 (2), Art. XII]
simply states that "in the grant of rights . . . covering the national economy and
patrimony, the State shall give preference to qualified Filipinos." The majority concedes
that there is no law defining the extent or degree of such preference. Specifically, no
statute empowers a losing Filipino bidder to increase his bid and equal that of the
winning foreigner. In the absence of such empowering law, the majority's strained
interpretation, I respectfully submit constitutes unadulterated judicial legislation, which
makes bidding a ridiculous sham where no Filipino can lose and where no foreigner can
win. Only in the Philippines!.
2. Aside from being prohibited by the Constitution, such judicial is short-sighted and,
viewed properly, gravely prejudicial to long-term Filipino interest. It encourages other
countries — in the guise of reverse comity or worse, unabashed retaliation — to
discriminate against us in their own jurisdictions by authorizing their own nationals to
similarly equal and defeat the higher bids of Filipino enterprises solely, while on the other
hand, allowing similar bids of other foreigners to remain unchallenged by their
nationals. The majority's thesis will thus marginalize Filipinos as pariahs in the global
marketplace with absolute no chance of winning any bidding outside our country. Even
authoritarian regimes and hermit kingdoms have long ago found out unfairness, greed
and isolation are self-defeating and in the long-term, self-destructing.
The moral lesson here is simple: Do not do unto other what you dont want other to do
unto you.
3. In the absence of a law specifying the degree or extent of the "Filipino First" policy of
the Constitution, the constitutional preference for the "qualified Filipinos" may be allowed
only where all the bids are equal. In this manner, we put the Filipino ahead without self-
destructing him and without being unfair to the foreigner.
In short, the Constitution mandates a victory for the qualified Filipino only when the
scores are tied. But not when the ballgame is over and the foreigner clearly posted the
highest score.
Separate Opinions
I concur with the ponencia of Mr. Justice Bellosillo. At the same time, I would like to
expound a bit more on the concept of national patrimony as including within its scope
and meaning institutions such as the Manila Hotel.
It is argued by petitioner that the Manila Hotel comes under "national patrimony" over
which qualified Filipinos have the preference, in ownership and operation. The
Constitutional provision on point states:
xxx xxx xxx
patrimony, the State shall Give preference to qualified Filipinos. 1
Petitioner's argument, I believe, is well taken. Under the 1987 Constitution, "national
patrimony" consists of the natural resources provided by Almighty God (Preamble) in our

the concept of "national patrimony" originated, would show that its framers decided to
adopt the even more comprehensive expression "Patrimony of the Nation" in the belief
that the phrase encircles a concept embracing not only their natural resources of the
country but practically everything that belongs to the Filipino people, the tangible and the
material as well as the intangible and the spiritual assets and possessions of the people.
It is to be noted that the framers did not stop with conservation. They knew that
conservation alone does not spell progress; and that this may be achieved only through
development as a correlative factor to assure to the people not only the exclusive
ownership, but also the exclusive benefits of their national patrimony). 3
Moreover, the concept of national patrimony has been viewed as referring not only to our
rich natural resources but also to the cultural heritage of our
race. 4
There is no doubt in my mind that the Manila Hotel is very much a part of our national
patrimony and, as such, deserves constitutional protection as to who shall own it and
benefit from its operation. This institution has played an important role in our nation's
history, having been the venue of many a historical event, and serving as it did, and as it
does, as the Philippine Guest House for visiting foreign heads of state, dignitaries,
celebrities, and others. 5
It is therefore our duty to protect and preserve it for future generations of Filipinos. As
President Manuel L. Quezon once said, we must exploit the natural resources of our
country, but we should do so with. an eye to the welfare of the future generations. In
other words, the leaders of today are the trustees of the patrimony of our race. To
preserve our national patrimony and reserve it for Filipinos was the intent of the
distinguished gentlemen who first framed our Constitution. Thus, in debating the need for
nationalization of our lands and natural resources, one expounded that we should "put
more teeth into our laws, and; not make the nationalization of our lands and natural
resources a subject of ordinary legislation but of constitutional enactment" 6 To quote
further: "Let not our children be mere tenants and trespassers in their own country. Let
us preserve and bequeath to them what is rightfully theirs, free from all foreign liens and
encumbrances". 7
Now, a word on preference. In my view "preference to qualified Filipinos", to be
meaningful, must refer not only to things that are peripheral, collateral, or tangential. It
the acquisition of things that pertain to the national patrimony, preference to qualified
Filipinos must allow a qualified Filipino to match or equal the higher bid of a non-Filipino;
the preference shall not operate only when the bids of the qualified Filipino and the non-
Filipino are equal in which case, the award should undisputedly be made to the qualified
Filipino. The Constitutional preference should give the qualified Filipino an opportunity to
match or equal the higher bid of the non-Filipino bidder if the preference of the qualified
Filipino bidder is to be significant at all.
It is true that in this present age of globalization of attitude towards foreign investments in
our country, stress is on the elimination of barriers to foreign trade and investment in the
country. While government agencies, including the courts should re-condition their
thinking to such a trend, and make it easy and even attractive for foreign investors to
come to our shores, yet we should not preclude ourselves from reserving to us Filipinos
certain areas where our national identity, culture and heritage are involved. In the hotel
industry, for instance, foreign investors have established themselves creditably, such as
in the Shangri-La, the Nikko, the Peninsula, and Mandarin Hotels. This should not stop
us from retaining 51% of the capital stock of the Manila Hotel Corporation in the hands of
Filipinos. This would be in keeping with the intent of the Filipino people to preserve our
national patrimony, including our historical and cultural heritage in the hands of Filipinos.
I agree with Mr. Justice Josue N. Bellosillo on his clear-cut statements, shared by Mr.
Justice Reynato S. Puno in a well written separate (dissenting) opinion, that:
First, the provision in our fundamental law which provides that "(I)n the grant of rights,
shall give preference to qualified Filipinos" 1 is self-executory. The provision verily does
not need, although it can obviously be amplified or regulated by, an enabling law or a set
of rules.
Second, the term "patrimony" does not merely refer to the country's natural resources but
also to its cultural heritage. A "historical landmark," to use the words of Mr. Justice Justo

Third, the act of the Government Service Insurance System ("GSIS"), a government
entity which derives its authority from the State, in selling 51% of its share in MHC should
be considered an act of the State subject to the Constitutional mandate.
On the pivotal issue of the degree of "preference to qualified Filipinos," I find it somewhat
difficult to take the same path traversed by the forceful reasoning of Justice Puno. In the
particular case before us, the only meaningful preference, it seems, would really be to
allow the qualified Filipino to match the foreign bid for, as a particular matter, I cannot
see any bid that literally calls for millions of dollars to be at par (to the last cent) with
another. The magnitude of the magnitude of the bids is such that it becomes hardly
possible for the competing bids to stand exactly "equal" which alone, under the
dissenting view, could trigger the right of preference.
It is most unfortunate that Renong Berhad has not been spared this great
disappointment, a letdown that it did not deserve, by a simple and timely advise of the
proper rules of bidding along with the peculiar constitutional implications of the proposed
transaction. It is also regrettable that the Court at time is seen, to instead, be the refuge
for bureaucratic inadequate which create the perception that it even takes on non-
justiciable controversies.
All told, I am constrained to vote for granting the petition.
MENDOZA, J., concurring in the judgment:
I take the view that in the context of the present controversy the only way to enforce the
constitutional mandate that "[i]n the grant of rights, privileges and concessions covering
the national patrimony the State shall give preference to qualified Filipinos" 1 is to allow
petitioner Philippine corporation to equal the bid of the Malaysian firm Renong Berhad for
the purchase of the controlling shares of stocks in the Manila Hotel Corporation. Indeed,
it is the only way a qualified Filipino of Philippine corporation can be given preference in
the enjoyment of a right, privilege or concession given by the State, by favoring it over a
foreign national corporation.
Under the rules on public bidding of the Government Service and Insurance System, if
petitioner and the Malaysian firm had offered the same price per share, "priority [would
be given] to the bidder seeking the larger ownership interest in MHC," 2 so that petitioner
bid for more shares, it would be preferred to the Malaysian corporation for that reason
and not because it is a Philippine corporation. Consequently, it is only in cases like the
of the Philippine corporation is mandated not by declaring it winner but by allowing it "to
match the highest bid in terms of price per share" before it is awarded the shares of
stocks. 3 That, to me, is what "preference to qualified Filipinos" means in the context of
this case — by favoring Filipinos whenever they are at a disadvantage vis-a-
vis foreigners.
This was the meaning given in Co Chiong v. Cuaderno 4 to a 1947 statute giving
"preference to Filipino citizens in the lease of public market stalls." 5 This Court upheld
the cancellation of existing leases covering market stalls occupied by persons who were
not Filipinos and the award thereafter of the stalls to qualified Filipino vendors as ordered
by the Department of Finance. Similarly, in Vda. de Salgado v. De la Fuente, 6 this Court
sustained the validity of a municipal ordinance passed pursuant to the statute (R.A. No.
37), terminating existing leases of public market stalls and granting preference to Filipino
citizens in the issuance of new licenses for the occupancy of the stalls. In Chua Lao
v. Raymundo, 7 the preference granted under the statute was held to apply to cases in
which Filipino vendors sought the same stalls occupied by alien vendors in the public
markets even if there were available other stalls as good as those occupied by aliens.
"The law, apparently, is applicable whenever there is a conflict of interest between
Filipino applicants and aliens for lease of stalls in public markets, in which situation the
right to preference immediately arises." 8
Our legislation on the matter thus antedated by a quarter of a century efforts began only
in the 1970s in America to realize the promise of equality, through affirmative action and
reverse discrimination programs designed to remedy past discrimination against colored
people in such areas as employment, contracting and licensing. 9Indeed, in vital areas of
our national economy, there are situations in which the only way to place Filipinos in
control of the national economy as contemplated in the Constitution 10 is to give them
preferential treatment where they can at least stand on equal footing with aliens.
There need be no fear that thus preferring Filipinos would either invite foreign retaliation
or deprive the country of the benefit of foreign capital or know-how. We are dealing here

midst, 11 but with the sale of government property, which is like the grant of government
largess of benefits and concessions covering the national economy" and therefore no
one should begrudge us if we give preferential treatment to our citizens. That at any rate
is the command of the Constitution. For the Manila Hotel is a business owned by the
Government. It is being privatized. Privatization should result in the relinquishment of the
business in favor of private individuals and groups who are Filipino citizens, not in favor
of aliens.
Nor should there be any doubt that by awarding the shares of stocks to petitioner we
would be trading competence and capability for nationalism. Both petitioner and the
Malaysian firm are qualified, having hurdled the prequalification process. 12 It is only the
result of the public bidding that is sought to be modified by enabling petitioner to up its
bid to equal the highest bid.
Nor, finally, is there any basis for the suggestion that to allow a Filipino bidder to match
the highest bid of an alien could encourage speculation, since all that a Filipino entity
would then do would be not to make a bid or make only a token one and, after it is known
that a foreign bidder has submitted the highest bid, make an offer matching that of the
foreign firm. This is not possible under the rules on public bidding of the GSIS. Under
these rules there is a minimum bid required (P36.87 per share for a range of 9 to 15
million shares). 13 Bids below the minimum will not be considered. On the other hand, if
the Filipino entity, after passing the prequalification process, does not submit a bid, he
will not be allowed to match the highest bid of the foreign firm because this is a privilege
allowed only to those who have "validly submitted bids." 14 The suggestion is, to say the
least, fanciful and has no basis in fact.
For the foregoing reasons, I vote to grant the petition.
TORRES, JR., J., separate opinion:
Constancy in law is not an attribute of a judicious mind. I say this as we are not
confronted in the case at bar with legal and constitutional issues — and yet I am driven
so to speak on the side of history. The reason perhaps is due to the belief that in the
words of Justice Oliver Wendell Holmes, Jr., a "page of history is worth a volume of
logic."
I will, however, attempt to share my thoughts on whether the Manila Hotel has a
historical and cultural aspect within the meaning of the constitution and thus, forming part
Section 10, Article XII of the 1987 Constitution provides:
xxx xxx xxx
national goals and priorities.
The foregoing provisions should be read in conjunction with Article II of the same
Constitution pertaining to "Declaration of Principles and State Policies" which ordain —
The State shall develop a self-reliant and independent national economy effectively by
Filipinos. (Sec. 19).
Interestingly, the matter of giving preference to "qualified Filipinos" was one of the
highlights in the 1987 Constitution Commission proceedings thus:
xxx xxx xxx
MR. NOLLEDO. The Amendment will read: "IN THE GRANT OF RIGHTS, PRIVILEGES
AND CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY,
THE STATE SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS". And the word
"Filipinos" here, as intended by the proponents, will include not only individual Filipinos
but also Filipino-Controlled entities fully controlled by Filipinos (Vol. III, Records of the
Constitutional Commission, p. 608).
MR. MONSOD. We also wanted to add, as Commissioner Villegas said, this committee
and this body already approved what is known as the Filipino First policy which was
suggested by Commissioner de Castro. So that it is now in our Constitution (Vol. IV,
Records of the Constitutional Commission, p. 225).
Commissioner Jose Nolledo explaining the provision adverted to above, said:
MR. NOLLEDO. In the grant of rights, privileges and concessions covering the national
economy and patrimony, the State shall give preference to qualified Filipinos.
MR. FOZ. In connection with that amendment, if a foreign enterprise is qualified and the
Filipinos enterprise is also qualified, will the Filipino enterprise still be given a
preference?

preference?
will the Filipino still be preferred:?
MR. NOLLEDO. The answer is "yes". (Vol. III, p. 616, Records of the Constitutional
Commission).
The nationalistic provisions of the 1987 Constitution reflect the history and spirit of the
Malolos Constitution of 1898, the 1935 Constitution and the 1973 Constitutions. That we
have no reneged on this nationalist policy is articulated in one of the earliest case, this
Court said —
The nationalistic tendency is manifested in various provisions of the Constitution. . . . It
cannot therefore be said that a law imbued with the same purpose and spirit underlying
many of the provisions of the Constitution is unreasonable, invalid or unconstitutional
(Ichong, et al. vs. Hernandez, et al., 101 Phil. 1155).
I subscribe to the view that history, culture, heritage, and traditions are not legislated and
is the product of events, customs, usages and practices. It is actually a product of growth
and acceptance by the collective mores of a race. It is the spirit and soul of a people.
The Manila Hotel is part of our history, culture and heritage. Every inch of the Manila
Hotel is witness to historic events (too numerous to mention) which shaped our history
for almost 84 years.
As I intimated earlier, it is not my position in this opinion, to examine the single instances
of the legal largese which have given rise to this controversy. As I believe that has been
exhaustively discussed in the ponencia. Suffice it to say at this point that the history of
the Manila Hotel should not be placed in the auction block of a purely business
transaction, where profits subverts the cherished historical values of our people.
As a historical landmark in this "Pearl of the Orient Seas", it has its enviable tradition
which, in the words of the philosopher Salvador de Madarriaga tradition is "more of a
river than a stone, it keeps flowing, and one must view the flowing , and one must view
the flow of both directions. If you look towards the hill from which the river flows, you see
tradition in the form of forceful currents that push the river or people towards the future,
and if you look the other way, you progress."
Indeed, tradition and progress are the same, for progress depends on the kind of
tradition. Let us not jettison the tradition of the Manila Hotel and thereby repeat our
colonial history.
I grant, of course the men of the law can see the same subject in different lights.
I remember, however, a Spanish proverb which says — "He is always right who suspects
that he makes mistakes". On this note, I say that if I have to make a mistake, I would
rather err upholding the belief that the Filipino be first under his Constitution and in his
own land.
I vote GRANT the petition.

This is a. petition for prohibition and mandamus filed by the Manila Prince Hotel
Corporation, a domestic corporation, to stop the Government Service Insurance System
(GSIS) from selling the controlling shares of the Manila Hotel Corporation to a foreign
corporation. Allegedly, the sale violates the second paragraph of section 10, Article XII of
the Constitution.
Respondent GSIS is a government-owned and controlled corporation. It is the sole
owner of the Manila Hotel which it operates through its subsidiary, the Manila Hotel
Corporation. Manila Hotel was included in the privatization program of the government.
In 1995, GSIS proposed to sell to interested buyers 30% to 51% of its shares, ranging
from 9,000,000 to 15,300,000 shares, in the Manila Hotel Corporation. After the absence
of bids at the first public bidding, the block of shares offered for sale was increased from
a maximum of 30% to 51%. Also, the winning bidder, or the eventual "strategic partner"
of the GSIS was required to "provide management expertise and/or an international
performance of the Manila Hotel" 1 The proposal was approved by respondent Committee
on Privatization.
In July 1995, a conference was held where prequalification documents and the bidding
rules were furnished interested parties. Petitioner Manila Prince Hotel, a domestic
corporation, and Renong Berhad, Malaysian firm with ITT Sheraton as operator,
prequalified. 2

Prequalification and Public Bidding of the MHC Privatization" provide:
I INTRODUCTION AND HIGHLIGHTS
DETERMINING THE WINNING BIDDER/STRATEGIC PARTNER
The party that accomplishes the steps set forth below will be declared the Winning
Bidder/Strategic Partner and will be awarded the Block of Shares:
First — Pass the prequalification process;
Second — Submit the highest bid on a price per share basis for the Block of Shares;
Third — Negotiate and execute the necessary contracts with GSIS/MHC not later than
October 23, 1995;
xxx xxx xxx
IV GUIDELINES FOR PREQUALIFICATION
A. PARTIES WHO MAP APPLY FOR PREQUALIFICATION
The Winning Bidder/Strategic Partner will be expected to provide management expertise
and/or an international marketing reservation system, and financial support to strengthen
the profitability and performance of The Manila Hotel. In this context, the GSIS is inviting
to the prequalification process any local and/or foreign corporation, consortium/joint
venture or juridical entity with at least one of the following qualifications:
a. Proven management .expertise in the hotel industry; or
b. Significant equity ownership (i.e. board representation) in another hotel company; or
c. Overall management and marketing expertise to successfully operate the Manila
Hotel.
Parties interested in bidding for MHC should be able to provide access to the requisite
management expertise and/or international marketing/reservation system for The Manila
Hotel.
xxx xxx xxx
D. PREQUALIFICATION DOCUMENTS
xxx xxx xxx
E. APPLICATION PROCEDURE
1. DOCUMENTS AVAILABLE AT THE REGISTRATION OFFICE
The prequalification documents can be secured at the Registration Office between 9:00
AM to 4:00 PM during working days within the period specified in Section III. Each set of
documents consists of the following:
Privatization
b. Confidential Information Memorandum: The Manila Hotel Corporation
c. Letter of Invitation. to the Prequalification and Bidding Conference
xxx xxx xxx
4. PREQUALIFICATION AND BIDDING CONFERENCE
A prequalification and bidding conference will be held at The Manila Hotel on the date
specified in Section III to allow the Applicant to seek clarifications and further information
regarding the guidelines and procedures. Only those who purchased the prequalification
documents will be allowed in this conference. Attendance to this conference is strongly
advised, although the Applicant will not be penalized if it does not attend.
5. SUBMISSION OF PREQUALIFICATION DOCUMENTS
The applicant should submit 5 sets of the prequalification documents (1 original set plus
4 copies) at the Registration Office between 9:00 AM to 4:00 PM during working days
within the period specified in Section III.
F. PREQUALIFICATION PROCESS
1. The Applicant will be evaluated by the PBAC with the assistance of the TEC based on
the Information Package and other information available to the PBAC.
2. If the Applicant is a Consortium/Joint Venture, the evaluation will consider the overall
qualifications of the group, taking into account the contribution of each member to the
venture.
3. The decision of the PBAC with respect to the results of the PBAC evaluation will be
final.
4. The Applicant shall be evaluated according to the criteria set forth below:
a. Business management expertise, track record, and experience
b. Financial capability.
c. Feasibility and acceptability of the proposed strategic plan for the Manila Hotel
5. The PBAC will shortlist such number of Applicants as it may deem appropriate.
6. The parties that prequalified in the first MHC public bidding — ITT Sheraton, Marriot

Capital/Ritz Carlton — may participate in the Public Bidding without having to undergo
the prequalification process again.
G. SHORTLIST OF QUALIFIED BIDDERS
1. A notice of prequalification results containing the shortlist of Qualified Bidders will be
posted at the Registration Office at the date specified in Section III.
2. In the case of a Consortium/Joint Venture, the withdrawal by member whose
qualification was a material consideration for being included in the shortlist is ground for
disqualification of the Applicant.
V. GUIDELINES FOR THE PUBLIC BIDDING
A. PARTIES WHO MAY PARTICIPATE IN THE PUBLIC BIDDING
All parties in the shortlist of Qualified Bidders will be eligible to participate in the Public
Bidding.
B. BLOCK OF SHARES
A range of Nine Million (9,000,000) to Fifteen Million Three Hundred Thousand
(15,300,000) shares of stock representing Thirty Percent to Fifty-One Percent
(30%-51%) of the issued and outstanding shares of MHC, will be offered in the Public
Bidding by the GSIS. The Qualified Bidders will have the Option of determining the
number of shares within the range to bid for. The range is intended to attract bidders with
different preferences and objectives for the operation and management of The Manila
Hotel.
C. MINIMUM BID REQUIRED ON A PRICE PER SHARE BASIS
1. Bids will be evaluated on a price per share basis. The minimum bid required on a price
per share basis for the Block of Shares is Thirty-Six Pesos and Sixty-Seven Centavos
(P36.67).
2. Bids should be in the Philippine currency payable to the GSIS.
3. Bids submitted with an equivalent price per share below the minimum required will not
considered.
D. TRANSFER COSTS
xxx xxx xxx
E. OFFICIAL BID FORM
1. Bids must be contained in the prescribed Official Bid Form, a copy of which is attached
as Annex IV. The Official Bid Form must be properly accomplished in all details; improper
2. During the Public Bidding, the Qualified Bidder will submit the Official Bid Form, which
will indicate the offered purchase price, in a sealed envelope marked "OFFICIAL BID."
F. SUPPORTING DOCUMENTS
During the Public Bidding, the following documents should be submitted along with the
bid in a separate envelop marked "SUPPORTING DOCUMENTS":
1. WRITTEN AUTHORITY TO BID (UNDER OATH).
If the Qualified Bidder is a corporation, the representative of the Qualified Bidder should
submit a Board resolution which adequately authorizes such representative to bid for and
in behalf of the corporation with full authority to perform such acts necessary or requisite
to bind the Qualified Bidder.
If the Qualified Bidder is a Consortium/Joint Venture, each member of the
Consortium/Joint venture should submit a Board resolution authorizing one of its
members and such member's representative to make the bid on behalf of the group with
full authority to perform such acts necessary or requisite to bind the Qualified Bidder.
2. BID SECURITY
a. The Qualified Bidder should deposit Thirty-Three Million Pesos (P33,000,00), in
Philippine currency as Bid Security in the form of:
i. Manager's check or unconditional demand draft payable to the "Government Service
Insurance System" and issued by a reputable banking institution duly licensed to do
business in the Philippines and acceptable to GSIS; or
ii. Standby-by letter of credit issued by a reputable banking institution acceptable to the
GSIS.
b. The GSIS will reject a bid if:
i. The bid does not have Bid Security; or
ii. The Bid Security accompanying the bid is for less than the required amount.
c. If the Bid Security is in the form of a manager's check or unconditional demand draft,
the interest earned on the Bid Security will be for the account of GSIS.
d. If the Qualified Bidder becomes the winning Bidder/Strategic Partner, the Bid Security

e. The Bid Security of the Qualified Bidder will be returned immediately after the Public
Bidding if the Qualified Bidder is not declared the Highest Bidder.
f. The Bid Security will be returned by October 23, 1995 if the Highest Bidder is unable to
negotiate and execute with GSIS/MHC the Management Contract, International
Marketing/Reservation System Contract or other types of contract specified by the
Highest Bidder in its strategic plan for The Manila Hotel.
g. The Bid Security of the Highest Bidder will be forfeited in favor of GSIS if the Highest
Bidder, after negotiating and executing the Management Contract, International
Marketing/Reservation System Contract specified by the Highest Bidder or other types of
contract in its strategic plan for The Manila Hotel, fails or refuses to:
i. Execute the Stock Purchase and Sale Agreement with GSIS not later than October 23,
1995; or
ii. Pay the full amount of the offered purchase price not later than October 23, 1995; or
iii. Consummate the sale of the Block of Shares for any other reason.
G. SUBMISSION OF BIDS
1. The Public Bidding will be held on September 7, 1995 at the following location:
New GSIS Headquarters Building
Financial Center, Reclamation Area
Roxas Boulevard, Pasay City, Metro Manila.
2. The Secretariat of the PBAC will be stationed at the Public Bidding to accept any and
all bids and supporting requirements. Representatives from the Commission on Audit
and COP will be invited to witness the proceedings.
3. The Qualified Bidder should submit its bid using the Official Bid Form. The
accomplished Official Bid Form should be submitted in a sealed envelope marked
"OFFICIAL BID."
4. The Qualified Bidder should submit the following documents in another sealed
envelope marked "SUPPORTING BID DOCUMENTS"
a. Written Authority Bid
b. Bid Security
5. The two sealed envelopes marked "OFFICIAL BID" and "SUPPORTING BID
DOCUMENTS" must be submitted simultaneously to the Secretariat between 9:00 AM
and 2:00 PM, Philippine Standard Time, on the date of the Public Bidding. No bid shall
6. The Secretariat will log and record the actual time of submission of the two sealed
envelopes. The actual time of submission will also be indicated by the Secretariat on the
face of the two envelopes.
7. After Step No. 6, the two sealed envelopes will be dropped in the corresponding bid
boxes provided for the purpose. These boxes will be in full view of the invited public.
H. OPENING AND READING OF BIDS
1. After the closing time of 2:00 PM on the date of the Public Bidding, the PBAC will open
all sealed envelopes marked "SUPPORTING BID DOCUMENTS" for screening,
evaluation and acceptance. Those who submitted incomplete/insufficient documents or
document/s which is/are not substantially in the form required by PBAC will be
disqualified. The envelope containing their Official Bid Form will be immediately returned
to the disqualified bidders.
2. The sealed envelopes marked "OFFICIAL BID" will be opened at 3:00 PM. The name
of the bidder and the amount of its bid price will be read publicly as the envelopes are
opened.
3. Immediately following the reading of the bids, the PBAC will formally announce the
highest bid and the Highest Bidder.
4. The highest bid will be, determined on a price per share basis. In the event of a tie
wherein two or more bids have the same equivalent price per share, priority will be given
to the bidder seeking the larger ownership interest in MHC.
5. The Public Bidding will be declared a failed bidding in case:
a. No single bid is submitted within the prescribed period; or
b. There is only one (1) bid that is submitted and acceptable to the PBAC.
I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC
1995 or the Highest Bidder will lose the right to purchase the Block of Shares and GSIS
will instead offer the Block of Shares to the other Qualified Bidders:
a. The Highest Bidder must negotiate and execute with GSIS/MHC the Management

specified by the Highest Bidder in its strategic plan for The Manila Hotel. If the Highest
Bidder is intending to provide only financial support to The Manila Hotel, a separate
institution may enter into the aforementioned contract/s with GSIS/MHC.
b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with GSIS,
a copy of which will be distributed to each of the Qualified Bidder after the
prequalification process is completed.
2. In the event that the Highest Bidder chooses a Management Contract for The Manila
Hotel, the maximum levels for the management fee structure that GSIS/MHC are
prepared to accept in the Management Contract are as follows:
a. Basic management fee: Maximum of 2.5% of gross revenues.(1)
b. Incentive fee: Maximum of 8.0% of gross operating profit(1) after deducting
undistributed overhead expenses and the basic management fee.
c. Fixed component of the international marketing/reservation system fee: Maximum of
2.0% of gross room revenues.(1) The Applicant should indicate in its Information
Package if it is wishes to charge this fee.
Note (1): As defined in the uniform system of account for hotels.
The GSIS/MHC have indicated above the acceptable parameters for the hotel
management fees to facilitate the negotiations with the Highest Bidder for the
Management Contract after the Public Bidding.
A Qualified Bidder envisioning a Management Contract for The Manila Hotel should
determine whether or not the management fee structure above is acceptable before
submitting their prequalification documents to GSIS.
J. BLOCK SALE TO THE OTHER QUALIFIED BIDDERS
1. If for any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS
may offer this to the other Qualified Bidders that have validly submitted bids provided
that these Qualified are willing to match the highest bid in terms of price per share.
2. The order of priority among the interested Qualified Bidders will be in accordance wit
the equivalent price per share of their respective bids in their public Bidding, i.e., first and
second priority will be given to the Qualified Bidders that submitted the second and third
highest bids on the price per share basis, respectively, and so on.
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER
a. Execution of the necessary contract with GSIS/MHC not later than October 23, 1995;
and
b. Requisite approvals from the GSIS/MHC and COP/OGCC are obtained.
I. FULL PAYMENT FOR THE BLOCK OF SHARES
1. Upon execution of the necessary contracts with GSIS/MHC, the Winning
Bidder/Strategic Partner must fully pay, not later than October 23, 1995, the offered
purchase price for the Block of Shares after deducting the Bid Security applied as
downpayment.
2. All payments should be made in the form of a Manager's Check or unconditional
Demand Draft, payable to the "Government Service Insurance System," issued by a
reputable banking institution licensed to do business in the Philippines and acceptable to
GSIS.
M. GENERAL CONDITIONS
1. The GSIS unconditionally reserves the right to reject any or all applications, waive any
formality therein, or accept such application as maybe considered most advantageous to
the GSIS. The GSIS similarly reserves the right to require the submission of any
additional information from the Applicant as the PBAC may deem necessary.
2. The GSIS further reserves the right to call off the Public Bidding prior to acceptance of
the bids and call for a new public bidding under amended rules, and without any liability
whatsoever to any or all the Qualified Bidders, except the obligation to return the Bid
Security.
3. The GSIS reserves the right to reset the date of the prequalification/bidding
conference, the deadline for the submission of the prequalification documents, the date
of the Public Bidding or other pertinent activities at least three (3) calendar days prior to
the respective deadlines/target dates.
4. The GSIS sells only whatever rights, interest and participation it has on the Block of
Shares.
5. All documents and materials submitted by the Qualified Bidders, except the Bid

6. The decision of the PBAC/GSIS on the results of the Public Bidding is final. The
Qualified Bidders, by participating in the Public Bidding, are deemed to have agreed to
accept and abide by these results.
7. The GSIS will be held free and harmless form any liability, suit or allegation arising out of
the Public Bidding by the Qualified Bidders who have participated in the Public Bidding. 3
The second public bidding was held on September 18, 1995. Petitioner bidded P41.00
per share for 15,300,000 shares and Renong Berhad bidded P44.00 per share also for
15,300,000 shares. The GSIS declared Renong Berhad the highest bidder and
immediately returned petitioner's bid security.
On September 28, 1995, ten days after the bidding, petitioner wrote to GSIS offering to
match the bid price of Renong Berhad. It requested that the award be made to itself
citing the second paragraph of Section 10, Article XII of the Constitution. It sent a
manager's check for thirty-three million pesos (P33,000,000.00) as bid security.
Respondent GSIS, then in the process of negotiating with Renong Berhad the terms and
conditions of the contract and technical agreements in the operation of the hotel, refused
to entertain petitioner's request.
Hence, petitioner filed the present petition. We issued a temporary restraining order on
October 18, 1995.
Petitioner anchors its plea on the second paragraph of Article XII, Section 10 of the
Constitution 4 on the "National Economy and Patrimony" which provides:
xxx xxx xxx
xxx xxx xxx
The vital issues can be summed up as follows:
(1) Whether section 10, paragraph 2 of Article XII of the Constitution is a self-executing
provision and does not need implementing legislation to carry it into effect;
(2) Assuming section 10 paragraph 2 of Article XII is self-executing whether the
controlling shares of the Manila Hotel Corporation form part of our patrimony as a nation;
(3) Whether GSIS is included in the term "State," hence, mandated to implement section
10, paragraph 2 of Article XII of the Constitution;
(4) Assuming GSIS is part of the State, whether it failed to give preference to petitioner, a
qualified Filipino corporation, over and above Renong Berhad, a foreign corporation, in
the sale of the controlling shares of the Manila Hotel Corporation;
(5) Whether petitioner is estopped from questioning the sale of the shares to Renong
Berhad, a foreign corporation.
Anent the first issue, it is now familiar learning that a Constitution provides the guiding
policies and principles upon which is built the substantial foundation and general
framework of the law and government. 5 As a rule, its provisions are deemed self-
executing and can be enforced without further legislative action. 6 Some of its provisions,
however, can be implemented only through appropriate laws enacted by the Legislature,
hence not self-executing.
To determine whether a particular provision of a Constitution is self-executing is a hard
row to hoe. The key lies on the intent of the framers of the fundamental law oftentimes
submerged in its language. A searching inquiry should be made to find out if the
provision is intended as a present enactment, complete in itself as a definitive law, or if it
needs future legislation for completion and enforcement. 7 The inquiry demands a micro-
analysis of the text and the context of the provision in question. 8
Courts as a rule consider the provisions of the Constitution as self-executing, 9 rather
than as requiring future legislation for their enforcement. 10 The reason is not difficult to
discern. For if they are not treated as self-executing, the mandate of the fundamental law
ratified by the sovereign people can be easily ignored and nullified by
Congress. 11 Suffused with wisdom of the ages is the unyielding rule that legislative
actions may give breath to constitutional rights but congressional in action should not
suffocate them. 12
Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests,
searches and seizures, 13the rights of a person under custodial investigation, 14 the rights
of an accused, 15 and the privilege against self-incrimination, 16 It is recognize a that
legislation is unnecessary to enable courts to effectuate constitutional provisions
guaranteeing the fundamental rights of life, liberty and the protection of property. 17 The
same treatment is accorded to constitutional provisions forbidding the taking or

damaging of property for public use without just compensation. 18
Contrariwise, case law lays down the rule that a constitutional provision is not self-
executing where it merely announces a policy and its language empowers the
Legislature to prescribe the means by which the policy shall be carried into
effect. 19 Accordingly, we have held that the provisions in Article II of our Constitution
entitled "Declaration of Principles and State Policies" should generally be construed as
mere statements of principles of the State. 20 We have also ruled that some provisions of
Article XIII on "Social Justice and Human Rights," 21 and Article XIV on "Education
Science and Technology, Arts, Culture end Sports" 22 cannot be the basis of judicially
enforceable rights. Their enforcement is addressed to the discretion of Congress though
they provide the framework for legislation 23 to effectuate their policy content. 24
Guided by this map of settled jurisprudence, we now consider whether Section 10, Article
XII of the 1987 Constitution is self-executing or not. It reads:
Sec. 10. The Congress shall, upon recommendation of the economic and planning
agency, when the national interest dictates, reserve to citizens of the Philippines or to
corporations or associations at least sixty per centum of whose capital is owned by such
citizens, or such higher percentage as Congress may prescribe, certain areas of
investments. The Congress shall enact measures that will encourage the formation and
operation of enterprises whose capital is wholly owned by Filipinos.
national jurisdiction and in accordance with its national goals and priorities.
The first paragraph directs Congress to reserve certain areas of investments in the
country 25 to Filipino citizens or to corporations sixty per
cent 26 of whose capital stock is owned by Filipinos. It further commands Congress to
enact laws that will encourage the formation and operation of one hundred percent
Filipino-owned enterprises. In checkered contrast, the second paragraph orders the
entire State to give preference to qualified Filipinos in the grant of rights and privileges
covering the national economy and patrimony. The third paragraph also directs the State
to regulate foreign investments in line with our national goals and well-set priorities.
The first paragraph of Section 10 is not self-executing. By its express text, there is a
categorical command for Congress to enact laws restricting foreign ownership in certain
wholly-owned Filipino enterprises. The right granted by the provision is clearly still in
esse. Congress has to breathe life to the right by means of legislation. Parenthetically,
this paragraph was plucked from section 3, Article XIV of the 1973 Constitution. 27 The
provision in the 1973 Constitution affirmed our ruling in the landmark case of Lao Ichong
v. Hernandez, 28where we upheld the discretionary authority of Congress to Filipinize
certain areas of investments. 29 By reenacting the 1973 provision, the first paragraph of
section 10 affirmed the power of Congress to nationalize certain areas of investments in
favor of Filipinos.
The second and third paragraphs of Section 10 are different. They are directed to the
State and not to Congress alone which is but one of the three great branches of our
government. Their coverage is also broader for they cover "the national economy and
patrimony" and "foreign investments within [the] national jurisdiction" and not merely
"certain areas of investments." Beyond debate, they cannot be read as granting
Congress the exclusive power to implement by law the policy of giving preference to
qualified Filipinos in the conferral of rights and privileges covering our national economy
and patrimony. Their language does not suggest that any of the State agency or
instrumentality has the privilege to hedge or to refuse its implementation for any reason
whatsoever. Their duty to implement is unconditional and it is now. The second and the
third paragraphs of Section 10, Article XII are thus self-executing.
This submission is strengthened by Article II of the Constitution entitled "Declaration of
Principles and State Policies." Its Section 19 provides that "[T]he State shall develop a
self-reliant and independent national economy effectively controlled by Filipinos." It
engrafts the all-important Filipino First policy in our fundamental law and by the use of
the mandatory word "shall," directs its enforcement by the whole State without any pause
or a half- pause in time.
The second issue is whether the sale of a majority of the stocks of the Manila Hotel
Corporation involves the disposition of part of our national patrimony. The records of the
Constitutional Commission show that the Commissioners entertained the same view as

rich natural resources but also to the cultural heritage of our race. 30 By this yardstick, the
sale of Manila Hotel falls within the coverage of the constitutional provision giving
preferential treatment to qualified Filipinos in the grant of rights involving our national
patrimony. The unique value of the Manila Hotel to our history and culture cannot be
viewed with a myopic eye. The value of the hotel goes beyond pesos and centavos. As
chronicled by Beth Day Romulo, 31 the hotel first opened on July 4, 1912 as a first-class
hotel built by the American Insular Government for Americans living in, or passing
through, Manila while traveling to the Orient. Indigenous materials and Filipino
craftsmanship were utilized in its construction, For sometime, it was exclusively used by
American and Caucasian travelers and served as the "official guesthouse" of the
American Insular Government for visiting foreign dignitaries. Filipinos began coming to
the Hotel as guests during the Commonwealth period. When the Japanese occupied
Manila, it served as military headquarters and lodging for the highest-ranking officers
from Tokyo. It was at the Hotel and the Intramuros that the Japanese made their last
stand during the Liberation of Manila. After the war, the Hotel again served foreign
guests and Filipinos alike. Presidents and kings, premiers and potentates, as well as
glamorous international film and sports celebrities were housed in the Hotel. It was also
the situs of international conventions and conferences. In the local scene, it was the
venue of historic meetings, parties and conventions of political parties. The Hotel has
reaped and continues reaping numerous recognitions and awards from international
hotel and travel award-giving bodies, a fitting acknowledgment of Filipino talent and
ingenuity. These are judicially cognizable facts which cannot be bent by a biased mind.
The Hotel may not, as yet, have been declared a national cultural treasure pursuant to
Republic Act No. 4846 but that does not exclude it from our national patrimony. Republic
Act No. 4846, "The Cultural Properties Preservation and Protection Act," merely provides
a procedure whereby a particular cultural property may be classified a "national cultural
treasure" or an "important cultural property. 32 Approved on June 18, 1966 and amended
by P.D. 374 in 1974, the law is limited in its reach and cannot be read as the exclusive
law implementing section 10, Article XII of the 1987 Constitution. To be sure, the law
does not equate cultural treasure and cultural property as synonymous to the phrase
"patrimony of the nation."
The third issue is whether the constitutional command to the State includes the
controlled corporation that administers funds that come from the monthly contributions of
government employees and the government. 33 The funds are held in trust for a distinct
purpose which cannot be disposed of indifferently. 34 They are to be used to finance the
retirement, disability and life insurance benefits of the employees and the administrative
and operational expenses of the GSIS, 35 Excess funds, however, are allowed to be
invested in business and other ventures for the benefit of the employees. 36 It is thus
contended that the GSIS investment in the Manila Hotel Corporation is a simple business
venture, hence, an act beyond the contemplation of section 10, paragraph 2 of Article XII
of the Constitution.
The submission is unimpressive. The GSIS is not a pure private corporation. It is
essentially a public corporation created by Congress and granted an original charter to
serve a public purpose. It is subject to the jurisdictions of the Civil Service
Commission 37 and the Commission on Audit. 38 As state-owned and controlled
corporation, it is skin-bound to adhere to the policies spelled out in the general welfare of
the people. One of these policies is the Filipino First policy which the people elevated as
a constitutional command.
The fourth issue demands that we look at the content of phrase "qualified Filipinos" and
their "preferential right." The Constitution desisted from defining their contents. This is as
it ought to be for a Constitution only lays down flexible policies and principles which can
bent to meet today's manifest needs and tomorrow's unmanifested demands. Only a
constitution strung with elasticity can grow as a living constitution.
Thus, during the deliberations in the Constitutional Commission, Commissioner Nolledo
to define the phrase brushed aside a suggestion to define the phrase "qualified Filipinos."
He explained that present and prospective "laws" will take care of the problem of its
interpretation, viz:
xxx xxx xxx
THE PRESIDENT. What is the suggestion of Commissioner Rodrigo? Is it to remove the
word "QUALIFIED?"

whom? As against aliens over aliens?
"QUALIFIED" because the existing laws or the prospective laws will always lay down
conditions under which business map be done, for example, qualifications on capital,
qualifications on the setting up of other financial structures, et cetera.
MR. NOLLEDO Yes.
MR. RODRIGO. If we say, "PREFERENCE TO QUALIFIED FILIPINOS," it can be
understood as giving preference to qualified Filipinos as against Filipinos who are not
qualified.
MR. NOLLEDO. Madam President, that was the intention of the proponents. The
committee has accepted the amendment.
xxx xxx xxx
As previously discussed, the constitutional command to enforce the Filipino First policy is
addressed to the State and not to Congress alone. Hence, the word "laws" should not be
understood as limited to legislations but all state actions which include applicable rules
and regulations adopted by agencies and instrumentalities of the State in the exercise of
their rule-making power. In the case at bar, the bidding rules and regulations set forth the
standards to measure the qualifications of bidders Filipinos and foreigners alike. It is not
seriously disputed that petitioner qualified to bid as did Renong Berhad. 39
Thus, we come to the critical issue of the degree of preference which GSIS should have
accorded petitioner, a qualified Filipino, over Renong Berhad, a foreigner, in the
purchase of the controlling shares of the Manila Hotel. Petitioner claims that after losing
the bid, this right of preference gives it a second chance to match the highest bid of
Renong Berhad.
With due respect, I cannot sustain petitioner's submission. I prescind from the premise
that the second paragraph of section 10, Article XII of the Constitution is pro-Pilipino but
not anti-alien. It is pro-Filipino for it gives preference to Filipinos. It is not, however, anti-
alien per se for it does not absolutely bar aliens in the grant of rights, privileges and
concessions covering the national economy and patrimony. Indeed, in the absence of
qualified Filipinos, the State is not prohibited from granting these rights, privileges and
concessions to foreigners if the act will promote the weal of the nation.
stellar task of our State policy-makers is to maintain a creative tension between two
desiderata — first, the need to develop our economy and patrimony with the help of
foreigners if necessary, and, second, the need to keep our economy controlled by
Filipinos. Rightfully, the framers of the Constitution did not define the degree of the right
of preference to be given to qualified Filipinos. They knew that for the right to serve the
general welfare, it must have a malleable content that can be adjusted by our policy-
makers to meet the changing needs of our people. In fine, the right of preference of
qualified Filipinos is to be determined by degree as time dictates and circumstances
warrant. The lesser the need for alien assistance, the greater the degree of the right of
preference can be given to Filipinos and vice verse.
Again, it should be stressed that the right and the duty to determine the degree of this
privilege at any given time is addressed to the entire State. While under our constitutional
scheme, the right primarily belongs to Congress as the lawmaking department of our
government, other branches of government, and all their agencies and instrumentalities,
share the power to enforce this state policy. Within the limits of their authority, they can
act or promulgate rules and regulations defining the degree of this right of preference in
cases where they have to make grants involving the national economy and judicial duty.
On the other hand, our duty is to strike down acts of the state that violate the policy.
To date, Congress has not enacted a law defining the degree of the preferential right.
Consequently, we must turn to the rules and regulations of on respondents Committee
Privatization and GSIS to determine the degree of preference that petitioner is entitled to
as a qualified Filipino in the subject sale. A tearless look at the rules and regulations will
show that they are silent on the degree of preferential right to be accorded qualified
Filipino bidder. Despite their silence, however, they cannot be read to mean that they do
not grant any degree of preference to petitioner for paragraph 2, section 10, Article XII of
the Constitution is deemed part of said rules and regulations. Pursuant to legal
hermeneutics which demand that we interpret rules to save them from unconstitutionality,
I submit that the right of preference of petitioner arises only if it tied the bid of Benong

should be preferred.
It is with deep regret that I cannot subscribe to the view that petitioner has a right to
match the bid of Renong Berhad. Petitioner's submission must be supported by the rules
but even if we examine the rules inside-out .thousand times, they can not justify the
claimed right. Under the rules, the right to match the highest bid arises only "if for any
reason, the highest bidder cannot be awarded block of shares . . ." No reason has arisen
that will prevent the award to Renong Berhad. It qualified as bidder. It complied with the
procedure of bidding. It tendered the highest bid. It was declared as the highest bidder by
the GSIS and the rules say this decision is final. It deserves the award as a matter of
right for the rules clearly did not give to the petitioner as a qualified Filipino privilege to
match the higher bid of a foreigner. What the rules did not grant, petitioner cannot
demand. Our symphaties may be with petitioner but the court has no power to extend the
latitude and longtitude of the right of preference as defined by the rules. The parameters
of the right of preference depend on galaxy of facts and factors whose determination
belongs to the province of the policy-making branches and agencies of the State. We are
duty-bound to respect that determination even if we differ with the wisdom of their
judgment. The right they grant may be little but we must uphold the grant for as long as
the right of preference is not denied. It is only when a State action amounts to a denial of
the right that the Court can come in and strike down the denial as unconstitutional.
Finally, I submit that petitioner is estopped from assailing the winning bid of Renong
Berhad. Petitioner was aware of the rules and regulations of the bidding. It knew that the
rules and regulations do not provide that a qualified Filipino bidder can match the winning
bid submitting an inferior bid. It knew that the bid was open to foreigners and that
foreigners qualified even during the first bidding. Petitioner cannot be allowed to
repudiate the rules which it agreed to respect. It cannot be allowed to obey the rules
when it wins and disregard them when it loses. If sustained, petitioners' stance will wreak
havoc on he essence of bidding. Our laws, rules and regulations require highest bidding
to raise as much funds as possible for the government to maximize its capacity to deliver
essential services to our people. This is a duty that must be discharged by Filipinos and
foreigners participating in a bidding contest and the rules are carefully written to attain
this objective. Among others, bidders are prequalified to insure their financial capability.
The bidding is secret and the bids are sealed to prevent collusion among the parties.
bid and a chance to match it. For plainly, a second chance to bid will encourage a bidder
not to strive to give the highest bid in the first bidding.
We support the Filipino First policy without any reservation. The visionary nationalist Don
Claro M. Recto has warned us that the greatest tragedy that can befall a Filipino is to be
an alien in his own land. The Constitution has embodied Recto's counsel as a state
policy. But while the Filipino First policy requires that we incline to a Filipino, it does not
demand that we wrong an alien. Our policy makers can write laws and rules giving
favored treatment to the Filipino but we are not free to be unfair to a foreigner after
writing the laws and the rules. After the laws are written, they must be obeyed as written,
by Filipinos and foreigners alike. The equal protection clause of the Constitution protects
all against unfairness. We can be pro-Filipino without unfairness to foreigner.
I vote to dismiss the petition.
Narvasa, C.J., and Melo, J., concur.
PANGANIBAN, J., dissenting:

I regret I cannot join the majority. To the incisive Dissenting Opinion of Mr. Justice
Reynato S. Puno, may I just add
1. The majority contends the Constitution should be interpreted to mean that, after a
bidding process is concluded, the losing Filipino bidder should be given the right to equal
the highest foreign bid, and thus to win. However, the Constitution [Sec. 10 (2), Art. XII]
simply states that "in the grant of rights . . . covering the national economy and
patrimony, the State shall give preference to qualified Filipinos." The majority concedes
that there is no law defining the extent or degree of such preference. Specifically, no
statute empowers a losing Filipino bidder to increase his bid and equal that of the
winning foreigner. In the absence of such empowering law, the majority's strained
interpretation, I respectfully submit constitutes unadulterated judicial legislation, which
makes bidding a ridiculous sham where no Filipino can lose and where no foreigner can

2. Aside from being prohibited by the Constitution, such judicial is short-sighted and,
viewed properly, gravely prejudicial to long-term Filipino interest. It encourages other
countries — in the guise of reverse comity or worse, unabashed retaliation — to
discriminate against us in their own jurisdictions by authorizing their own nationals to
similarly equal and defeat the higher bids of Filipino enterprises solely, while on the other
hand, allowing similar bids of other foreigners to remain unchallenged by their
nationals. The majority's thesis will thus marginalize Filipinos as pariahs in the global
marketplace with absolute no chance of winning any bidding outside our country. Even
authoritarian regimes and hermit kingdoms have long ago found out unfairness, greed
and isolation are self-defeating and in the long-term, self-destructing.
The moral lesson here is simple: Do not do unto other what you dont want other to do
unto you.
3. In the absence of a law specifying the degree or extent of the "Filipino First" policy of
the Constitution, the constitutional preference for the "qualified Filipinos" may be allowed
only where all the bids are equal. In this manner, we put the Filipino ahead without self-
destructing him and without being unfair to the foreigner.
In short, the Constitution mandates a victory for the qualified Filipino only when the
scores are tied. But not when the ballgame is over and the foreigner clearly posted the
highest score.
Footnotes
1 See Sec. 10, par. 2, Art. XII, 1987 Constitution
2 Par I. Introduction and Highlights; Guidelines and Procedures: Second
Prequailifications and Public Bidding of the MHC Privatization; Annex "A," Consolidated
Reply to Comments of Respondents; Rollo, p. 142.
3 Par. V. Guidelines for the Public Bidding, id., pp. 153-154.
4 Annex "A," Petition for Prohibition and Mandamus with Temporary Restraining
Order; Rollo, pp. 13-14.
5 Annex "B," Petition for Prohibition and Mandamus with Temporary Restraining
Order; id., p. 15.
6 Petition for Prohibition and Mandamus with Temporary Restraining Order, pp. 5-6; id.,
pp. 6-7.
7 Consolidated Reply to Comments of Respondents, p. 17; id., p. 133.
8 Par. V.J. 1, Guidelines for Public Bidding, Guidelines and Procedures: second
Prequalifications and Public Bidding of the MHC Privatization, Annex "A," Consolidated
Reply to Comments of Respondents; id., p. 154.
9 Respondents' Joint Comment with Urgent Motion to Lift Temporary Restraining Order,
p. 9; Rollo, p. 44.
10 Marbury v. Madison, 5, U.S. 138 (1803).
11 Am Jur. 606.
12 16 Am Jur. 2d 281.
13 Id., p. 282.
14 See Note 12.
15 Cruz, Isagani A., Constitutional Law, 1993 ed., pp. 8-10.
16 Record of the Constitutional Commission, Vol. 3, 22 August 1986, p. 608.
17 16 Am Jur 2d 283-284.
18 Sec. 10, first par., reads: The Congress shall, upon recommendation of the economic
and planning agency, when the national interest dictates, reserve to citizens of the
Philippines or to corporations or associations at least sixty per centum of whose capital is
owned by such citizens, or such higher percentage as Congress may prescribe, certain
areas of investments. The Congress shall enact measures that will encourage the
formation and operation of enterprises whose capital is wholly owned by Filipinos.
Sec. 10, third par., reads: The State shall regulate and exercise authority over foreign
investments within its national jurisdiction and in accordance with its national goals and
priorities.
19 State ex rel. Miller v. O'Malley, 342 Mo. 641, 117 SW2d 319.
20 G.R. No. 91649, 14 May 1991, 197 SCRA 52.
21 Sec. 11, Art. II (Declaration of Principles and State Policies), provides that [t]he State
values the dignity of every human person and guarantees full respect for human rights.
22 Sec. 12, Art. II, provides that [t]he State recognizes the sanctity of family life and shall
protect and strengthen the family as a basic autonomous social institution. It shall equally
protect the life of the mother and the life of the unborn from conception. The natural and
primary right and duty of parents in the rearing of the youth for civic efficiency and the

primary right and duty of parents in the rearing of the youth for civic efficiency and the
development of moral character shall receive the support of the government.
23 Sec. 13, Art. II, provides that [t]he State recognizes the vital role of the youth in
nation-building and shall promote and protect their physical, moral, spiritual, intellectual,
and social well-being. It shall inculcate in the youth patriotism and nationalism, and
encourage their involvement in public and civic affairs.
24 Sec. 1, Art. XIII (Social Justice and Human Rights), provides that [t]he Congress shall
give highest priority to the enactment of measures that protect and enhance the right of
all the people to human dignity, reduce social, economic and political inequalities, and
remove cultural inequities by equitably diffusing wealth and political power for the
common good.
To this end, the State shall regulate the acquisition, ownership, use, and disposition of
property and its increments.
Sec. 2, Art. XIII, provides that [t]he promotion of social justice shall include the
commitment to create economic opportunities based on freedom of initiative and self-
reliance.
25 Sec. 2, Art. XIV (Education, Science and Technology, Arts, Culture, and Sports),
provides that [t]he State shall:
(1) Establish, maintain, and support a complete, adequate, and integrated system of
education relevant to the needs of the people and society;
(2) Establish and maintain a system of free public education in the elementary and high
school levels. Without limiting the natural right of parents to rear their children,
elementary education is compulsory for all children of school age;
(3) Establish and maintain a system of scholarship grants, student loan programs,
subsidies, and other incentives which shall be available to deserving students in both
public and private schools, especially to the underprivileged.
(4) Encourage non-formal, informal, and indegenous learning, independent, and out-of-
school study programs particularly those that respond to community needs; and
(5) Provide adult citizens, the disabled, and out-of-school youth with training in civics,
vocational efficiency, and other skills.
26 G.R. 115455, 25 August 1994, 235 SCRA 630.
27 See Note 25.
28 Sec. 1 Art. XIV, provides that [t]he State shall protect and promote the right of all
citizens to quality education at all levels of education and shall take appropriate steps to
make such education accessible to all.
29 G.R. No. 118910, 17 July 1995.
30 Sec. 5 Art. II (Declaration of Principles and State Policies), provides that [t]he
maintenance of peace and order, the protection of life, liberty, and property, and the
promotion of the general welfare are essential for the enjoyment by all the people of the
blessings of democracy.
31 See Note 23.
32 See Note 24.
33 Sec. 17, Art II, provides that [t]he State shall give priority to education, science and
technology, arts, culture, and sports to foster patriotism and nationalism, accelerate
social progress, and promote total human liberation and development.
34 Nolledo, Jose N., The New Constitution of the Philippines Annotated, 1990 ed., p. 72.
35 Webster's Third New International Dictionary, 1986 ed., p. 1656.
36 The guest list of the Manila Hotel includes Gen. Douglas MacArthur, the Duke of
Windsor, President Richard Nixon of U.S.A., Emperor Akihito of Japan, President Dwight
Eisenhower of U.S.A, President Nguyen Van Thieu of Vietnam, President Park Chung
Hee of Korea, Prime Minister Richard Holt of Australia, Prime Minister Keith Holyoake of
New Zealand, President Lyndon Johnson of U.S.A., President Jose Lopez Portillo of
Mexico, Princess Margaret of England, Prime Minister Malcolm Fraser of Australia, Prime
Minister Yasuhiro Nakasone of Japan, Prime Minister Pierre Elliot Trudeau of Canada,
President Raul Alfonsin of Argentina, President Felipe Gonzalez of Spain, Prime Minister
Noboru Takeshita of Japan, Prime Minister Hussain Muhammad Ershad of Bangladesh,
Prime Minister Bob Hawke of Australia, Prime Minister Yasuhiro Nakasone of Japan,
Premier Li Peng of China, Sultan Hassanal Bolkiah of Brunei, President Ramaswani
Venkataraman of India, Prime Minister Go Chok Tong of Singapore, Prime Minister
Enrique Silva Cimma of Chile, Princess Chulaborn and Mahacharri Sirindhorn of
Thailand, Prime Minister Tomiichi Murayama of Japan, Sultan Azlan Shah and Raja
Permaisuri Agong of Malaysia, President Kim President Young Sam of Korea, Princess
Infanta Elena of Spain, President William Clinton of U.S.A., Prime Minister Mahathir

Infanta Elena of Spain, President William Clinton of U.S.A., Prime Minister Mahathir
Mohamad of Malaysia, King Juan Carlos I and Queen Sofia of Spain, President Carlos
Saul Menem of Argentina, Prime Ministers Chatichai Choonvan and Prem Tinsulanonda
of Thailand, Prime Minister Benazir Bhutto of Pakistan, President Vaclav Havel of Czech
Republic, Gen. Norman Schwarzcopf of U.S.A, President Ernesto Perez Balladares of
Panama, Prime Minister Adolfas Slezevicius of Lithuania, President Akbar Hashemi
Rafsanjani of Iran, President Frei Ruiz Tagle of Chile, President Le Duc Anh of Vietnam,
and Prime Minister Julius Chan of Papua New Guinea, see Memorandum for Petitioner,
pp. 16-19.
37 Authored by Beth Day Romulo.
38 See Note 9, pp. 15-16; Rollo, pp. 50-51.
39 Record of the Constitutional Commission. Vol. 3, 22 August 1986. p. 607.
40 Id., p. 612.
41 Id., p. 616.
42 Id., p. 606.
43 Nolledo, J.N., The New Constitution of the Philippines Annotated, 1990 ed., pp.
930-931.
44 Bidders were required to have at least one of the these qualifications to be able to
participate in the bidding process; see Note 2.
45 Memorandum of Fr. Joaquin G. Bernas, S.J., p. 6.
46 Id., pp. 3-4.
47 See Note 8.
48 Keynote Address at the ASEAN Regional Symposium of Enforcement of Industrial
Property Rights held 23 October 1995 at New World Hotel, Makati City.
49 Speech of Senior Associate Justice Teodoro R. Padilla at the Induction of Officers
and Directors of the PHILCONSA for 1996 held 16 January 1996 at the Sky-Top, Hotel
Intercontinental, Makati City.
50 Memorandum of Authorities submitted by former Chief Justice Enrique M. Fernando,
p. 5.
51 8 March 1996 issue of Philippine Daily Inquirer, p. B13.
1 Article XII, Section 10, par. 2, 1987 Constitution.
2 Padilla, The 1987 Constitution of the Republic of the Philippines, Volume III, p. 89.
3 Sinco, Philippine Political Law, 11th ed, p. 112.
4 Nolledo, The New Constitution of the Philippines, Announced, 1990 ed., p. 72.
5 Memorandum for Petitioner, p. 1.
6 Laurel, Proceedings of the Philippine Constitutional Convention (1934-1935), p. 507.
7 Id., p. 562.
1 Second par. Section 10, Art. XII, 1987 Constitution.
MENDOZA, J., concurring:
1 Art. XII, §10, second paragraph.
2 GUIDELINES AND PROCEDURES: SECOND PREQUALIFICATION AND PUBLIC
BIDDING OF THE MHC PRIVATIZATION (hereafter referred to as GUIDELINES), Part.
V, par. H(4)..
3 Id.
4 83 Phil. 242 (1949).
5 R.A. No. 37, §1.
6 87 Phil. 343 (1950).
7 104 Phil. 302 (1958).
8 Id, at 309.
9 For an excellent analysis of American cases on reverse discrimination in these
areas, see GERALD GUNTHER, CONSTITUTIONAL LAW 780-819 (1991).
10 Art. II, §19: "The State shall develop a self-reliant and independent national
economy effectively controlled by Filipinos." (Emphasis added)
11 See Villegas v. Hiu Chiung Tsai Pao Ho, 86 SCRA 270 (1978) (invalidating an
ordinance imposing a flat fee of P500 on aliens for the privilege of earning a livelihood).
12 Petitioner passed the criteria set forth in the GUIDELINES, Part IV, par. F(4), of the
GSIS, relating to the following:
a. Business management expertise, tract record, and experience
b. Financial capability
c. Feasibility and acceptability of the proposed strategic plan for the Manila Hotel.
13 GUIDELINES, Part V, par. (1)(3), in relation to Part. I.

c. Feasibility and acceptability of the proposed strategic plan for the Manila Hotel.
13 GUIDELINES, Part V, par. (1)(3), in relation to Part. I.
14 Id., Part V, par. V (1).
1 Introduction and Highlights, Guidelines and Procedures: Second Prequalification and
Public Bidding of the MHC Privatization, Annex "A" to Petitioner's Consolidated Reply to
Comments of Respondents,Rollo, p. 142.
2 The four bidders who previously prequalified for the first bidding, namely, ITT Sheraton,
Marriot International, Inc., Renaissance Hotel International, Inc., and the consortium of
RCBC and the Ritz Carlton, were deemed prequalified for the second bidding.
3 Annex "A" to the Consolidated Reply to Comments of Respondents, Rollo, pp.
140-155.
4 Former Chief Justice Enrique Fernando and Commissioner Joaquin Bernas were
invited by the Court as amicus curiae to shed light on its meaning.
5 Lopez v. de los Reyes, 55 Phil. 170, 190 [1930].
6 16 Am Jur 2d, Constitutional Law, Sec. 139 p. 510 [1979 ed. ]; 6 R.C.L. Sec. 52 p. 57
[1915]; see also Willis v. St. Paul Sanitation Co. 48 Minn. 140, 50 N.W. 1110, 31 A.J.R.
626, 16 L.R.A. 281 [1892]; State ex rel. Schneider v. Kennedy, 587 P. 2d 844, 225 Kan
[1978].
7 Willis v. St. Paul Sanitation, supra, at 1110-1111; see also Cooley, A Treatise on
Constitutional Limitations 167, vol. 1 [1927].
8 16 C.J.S., Constitutional Law, Sec. 48, p. 100.
9 Cooley, supra, at 171; 6 R.C.L. Sec. 53, pp. 57-58; Brice v. McDow, 116 S.C. 324, 108
S.E. 84, 87 [1921]; see also Gonzales, Philippine Constitutional Law p. 26 [1969].
10 16 C.J.S., Constitutional Law, Sec. 48, p. 101.
11 Way v. Barney, 116 Minn. 285, 133 N.W. 801, 804 38 L.R.A. (N.S.) 648, Ann. Cas.
1913 A, 719 [1911]; Brice v. McDow, supra, at 87; Morgan v. Board of Supervisors, 67
Ariz. 133, 192 P. 2d 236, 241 [1948]; Gonzales, supra..
12 Ninth Decennial Digest Part I, Constitutional Law, (Key No. 28), p. 1638.
13 Article III, Section 2; see Webb v. de Leon, 247 SCRA 652 [1995]; People v. Saycon,
236 SCRA 325 (1994]; Allado v. Diokno, 232 SCRA 192 (1994]; Burgos v. Chief of Staff,
133 SCRA 800 [1984]; Yee Sue Kuy v. Almeda, 70 Phil. 141 [1940]; Pasion Vda. de
Garcia v. Locsin, 65 Phil. 689 [1938]; and a host of other cases.
14 Article III, Section 12, pars. 1 to 3; People v. Alicando, 251 SCRA 293 [1995]; People
v. Bandula 232 SCRA 566 [1994]; People v. Nito 228 SCRA 442 [1993]; People v.
Duero, 104 SCRA 379 [1981]; People v. Galit, 135 SCRA 465 [1985]; and a host of other
cases.
15 Article III, Section 14; People v. Digno, 250 SCRA 237 [1995]; People v. Godoy, 250
SCRA 676 [1995]; People v. Colcol 219 SCRA [1993]; Borja v. Mendoza, 77 SCRA 422
[1977]; People v. Dramayo, 42 SCRA 59 [1971]; and a host of other cases.
16 Galman v. Pamaran, 138 SCRA 274 [1985]; Chavez v. Court of Appeals 24 SCRA
663 [1968]; People v. Otadura, 86 Phil. 244 [1950]; Bermudez v. Castillo, 64 Phil, 485
[1937]; and a host of other cases.
17 Harley v. Schuylkill County, 476 F. Supp, 191, 195-196 [1979]; Erdman v. Mitchell,
207 Pa. St. 79, 56 Atl. 327, 99 A.S.R. 783 63 L.R.A. 534 [1903]; see Ninth Decennial
Digest Part I, Constitutional Law, (Key No. 28), pp. 1638-1639.
18 City of Chicago v. George F. Harding Collection, 217 N.E. 2d 381, 383, 70 Ill. App. 2d
254 [1966]; People v. Buellton Dev. Co., 136 P. 2d 793, 796, 58 Cal. App. 2d 178 [1943];
Bordy v. State, 7 N.W. 2d 632, 635, 142 Neb. 714 [1943]; Cohen v. City of Chicago, 36
N.E. 2d 220, 224, 377 Ill 221 [1941].
19 16 Am Jur 2d, Constitutional Law, Sec. 143, p. 514; 16 C.J.S. Constitutional Law,
Sec. 48, p. 100; 6 R.C.L. Sec. 54, p. 59; see also State ex rel. Noe v. Knop La. App. 190
So. 135, 142 [1939]; State ex rel. Walker v. Board of Comm'rs. for Educational Lands
and Funds, 3 N.W. 2d 196, 200, 141 Neb. 172 [1942]; Maddox v. Hunt, 83 P. 2d 553,
556, 83 Okl. 465 [1938].
20 Article II, Sections 11, 12 and 13 (Basco v. Phil. Amusements and Gaming
Corporation, 197 SCRA 52, 68 [1991]); Sections 5, 12, 13 and 17 (Kilosbayan, Inc. v.
Morato, 246 SCRA 540, 564 [1995]).
21 Article XIII, Section 13 (Basco, supra).
22 Article XIV, Section 2 (Basco, supra).
23 Kilosbayan v. Morato, supra, at 564.
24 Basco v. Phil. Amusements and Gaming Corporation, supra, at 68.
25 Congress had previously passed the Retail Trade Act (R.A. 1180); the Private
Security Agency Act (R.A. 5487; the law on engaging in the rice and corn industry (R.A.

Security Agency Act (R.A. 5487; the law on engaging in the rice and corn industry (R.A.
3018, P.D. 194), etc.
26 Or such higher percentage as Congress may prescribe.
27 Article XIV, section 3 of the 1973 Constitution reads:
"Sec. 3. The Batasang Pambansa shall, upon recommendation of the National Economic
and Development Authority, reserve to citizens of the Philippines or to corporations or
associations wholly owned by such citizens, certain traditional areas of investments
when the national interest so dictates,"
28 101 Phil. 1155 [1957].
29 See Bernas, The Constitution of the Republic of the Philippines 450, vol. II [1988].
The Lao Ichongcase upheld the Filipinization of the retail trade and implied that particular
areas of business may be Filipinized without doing violence to the equal protection
clause of the Constitution.
30 Nolledo The New Constitution of the Philippines, Annotated, 1990 ed., p. 72. The
word "patrimony" first appeared in the preamble of the 1935 Constitution and was
understood to cover everything that belongs to the Filipino people, the tangible and the
material as well as the intangible and the spiritual assets and possessions of the nation
(Sinco, Philippine Political Law, Principles and Concepts [1962 ed.], p. 112; Speech of
Delegate of Conrado Benitez defending the draft preamble of the 1935 Constitution in
Laurel, Proceedings of the Constitutional Convention, vol. III, p. 325 [1966]).
31 Commissioned by the Manila Hotel Corporation for the Diamond Jubilee celebration
of the Hotel in 1987; see The Manila Hotel: The Heart and Memory of a City.any
32 Section 7 of R.A. 4846 provides:
Sec. 7. In the designation of a particular cultural property as a .national cultural treasure,"
the following procedure shall be observed:
(a) Before the actual designation, the owner, if the property is privately owned, shall be
notified at least fifteen days prior to the intended designation, and he shall be invited to
attend the deliberation and given a chance to be heard. Failure on the part of the owner
to attend the deliberation shall not bar the panel to render its decision. Decision shall be
given by the panel within a week after its deliberation. In the event that the owner desires
to seek reconsideration of the designation made by the panel, he may do so within thirty
days from the date that the decision has been rendered. If no request for reconsideration
is filed after this period, the designation is then considered final and executory. Any
request for reconsideration filed within thirty days and subsequently again denied by the
panel, may be further appealed to another panel chairmanned by the Secretary of
Education with two experts as members appointed by the Secretary of Education. Their
decision shall final and binding.
(b) Within each kind or class of objects, only the rare and unique objects may be
designated as "National Cultural Treasures." The remainder, if any shall be treated as
cultural property.
xxx xxx xxx
33 P.D. 1146, Sec, 5; P.D, 1146, known as "The Revised Government Service Insurance
Act of 1977" amended Commonwealth Act No. 186, the "Government Service Insurance
Act" of 1936.
34 Beronilla v. Government Service Insurance System, 36 SCRA 44, 53 [1970]; Social
Security System Employees Association v. Soriano, 7 SCRA 1016, 1023 [1963].
35 Id., secs. 28 and 29.
36 Id., Sec. 30.
37 Constitution, Article IX (B), section 2 (1).
38 Constitution, Article IX (D), section 2 (1).
39 It is meet to note that our laws do not debar foreigners from engaging in the hotel
business. Republic Act No. 7042, entitled the "Foreign Investments Act of 1991" was
enacted by Congress to "attract, promote and welcome . . . foreign investments . . . in
activities which significantly contribute to national industrialization and socio-economic
development to the extent that foreign investment is allowed by the Constitution and
relevant laws." The law contains a list, called the Negative List specifying areas of
economic activity where foreign participation is limited or prohibited. Areas of economic
activity not included in the Negative List are open to foreign participation up to one
hundred per cent (Sees. 6 and 7). Foreigners now own and run a great number of our
five-star hotels.

La Bugal B’laan Tribal Association, et al. vs. Ramos, WMC, et al.,
G.R. 127882, (final decision after motion for reconsideration),
December 2004.
12:50 AM
LA BUGAL TRIBAL ASSOCIATION V WESTERN MINING CORPORATION PHILIPPINES

CARPIO-MORALES; January 29, 2004
FACTS
- Mariv ic M.V.F. Leonen, et. al for petitioners
- SPECIAL CIVIL ACTION in Supreme Court. Mandamus and Prohibition.
- Assailed is the constitutionality of RA 7942, otherwise known as the PHILIPPINE MINING ACT OF 1995, along with the Implementing Rules and Regulations
issued pursuant thereto, Department of Env ironment and Natural Resources (DENR) Administrative Order 96-40, and of the Financial and Technical Assistance
Agreement (FTAA) entered into on March 30, 1995 by the Republic of the Philippines and Western Mining Corporation (Philippines), Inc. (WMCP), a corporation
organized under Philippine laws.
- July 25, 1987 –President Aquino issued EO 279 authorizing the DENR Secretary to accept, consider and evaluate proposals from foreign-owned corporations
or foreign inv estors for contracts of agreements involv ing either technical or financial assistance for large-scale exploration, development, and utilization of
minerals, which, upon appropriate recommendation of the Secretary, the President may execute with the foreign proponent. In entering into such proposals, the
President shall consider the real contributions to the economic growth and general welfare of the country that w ill be realized, as well as the development and
use of local scientific and technical resources that w ill be promoted by the proposed contract or agreement. Until Congress shall determine otherwise, large-scale
mining, for purpose of this Section, shall mean those proposals for contracts or agreements for mineral resources exploration, development, and utilization
inv olving a committed capital in a single mining unit project of at least Fifty Million Dollars in United States currency (US$50,000,000.00).
- March 3, 1995 –President Ramos approved 7942 to gov ern the ex ploration, development, utilization and processing of all mineral resources. RA 7942 defines
modes of mineral agreements for mining operations, outlines the procedure for filing and approv al, assignment/transfer, and withdrawal, and fixes their terms.
These also apply to FTAAs.
- The law also prescribes the contractor’s qualifications, grants certain rights such as timber, water, easement rights and right to possess explosives. Surface
ow ners or occupants are forbidden from preventing holders of mining rights from entering priv ate lands and concession areas. A procedure for settlement of
conflicts is also provided for.
- The Act restricts conditions for ex ploration, quarry and other permits. It regulates the transport, sale and processing of minerals, and promotes the development
of mining communities, science and mining technology, and safety and environmental protection.
- The gov ernment’s share in the agreements is spelled out and allocated, taxes and fees are imposed, incentives granted. Aside from penalizing certain acts, the
law likewise specifies grounds for the cancellation, revocation and termination of agreements and permits.
- April 9, 1995 –RA 7942 took effect.
- March 30, 1995 –Shortly before RA 7942 took effect, the President entered into and FTAA with WMCP covering 99,387 hectares of land in South Cotabato,
Sultan Kudarat, Dav ao del Sur and North Cotabato.
- August 15, 1995 –DENR Secretary Ramos issued DENR Administrative Order (DAO) 95-23, s. 1995, otherwise known as the Implementing Rules and
Regulations of RA 7942. This was later repealed by DAO 96-40, s. 1996 which was adopted on December 20, 1996.
- January 10, 1997 –Counsels for petitioners sent letter to DENR Secretary demanding that they stop the implementation of RA 7942 and DAO 96-40, giving
them 15 day s from receipt to act thereon. DENR has yet to respond or act on petitioners’ letter.
- Hence, this petition for prohibition and mandamus, with a prayer for a temporary restraining order.
- Petitioners claim that the DENR Secretary without or in excess of jurisdiction:
1) In signing and promulgating DAO 96-40 implementing RA 7942, the latter being unconstitutional in that:
It allow s fully foreign owned corporations to ex plore, develop, utilize and exploit mineral resources in a manner contrary to Art. XII,
sec. 2, par. 4, 1987 Constitution
It allow s the taking of priv ate property without the determination of public use and for just compensation
It v iolates Art. III, sec. 1
It allow s enjoy ment by foreign citizens as well as fully foreign owned corporations of the nation’s marine wealth contrary to Art. XII,
sec. 2, par. 2
It allow s priority to foreign and fully foreign owned corporations in the ex ploration, development and utilization of mineral resources
contrary to Art. XII
2) In recommending approval of and implementing the FTAA between the President and WMCP because the same is illegal and constitutional
- They pray that the Court issue an order permanently enjoining the respondents from acting on any application for an FTAA; declaring RA 7942, DAO 96-40 and
all other similar administrative issuances as unconstitutional and null and void; and, canceling the FTAA issued to WMCP as unconstitutional, illegal and null and
v oid.
- Respondents, aside from meeting petitioners’ contentions, argue that the requisites for judicial inquiry have not been met, the petition does not comply with the
criteria for prohibition and mandamus, and there has been a violation of the rule on hierarchy of courts.
- WMCP subsequently filed a Manifestation dated September 25, 2002 alleging that on January 23, 2001 WMC sold all its shares in WMCP to Sagittarius Mines,
Inc. (Sagittarius), a corporation organized under Philippine laws, 60% of the equity of which is owned by Filipinos and/or Filipino-owned corporations while about
40% is ow ned by Indophil Resources NL, an Australian company.
- Because of this, the DENR Secretary, by Order of December 18, 2001, approved the transfer and registration of the subject FTAA from WMCP to Sagittarius.
Said Order, how ever, was appealed by Lepanto Consolidated Mining Co. (Lepanto). Because there is no final judgment yet, the case cannot be considered moot.
ISSUES
1. WON case is justiciable
2. WON EO 279 took effect
3. WON the WMCP FTAA is constitutional
4. WON RA 7942 is constitutional
HELD
1. Case is justiciable.
Ratio In cases involving constitutional questions, the Court is not concerned with whether petitioners are real parties in interest, but with whether they have legal

Ratio In cases involving constitutional questions, the Court is not concerned with whether petitioners are real parties in interest, but with whether they have legal
standing.
- Petitioners trav erse a w ide range of sectors. Among them are La Bugal B’Laan Tribal Association, Inc., a farmers and indigenous people’s cooperative
organized under Philippine laws representing a community actually affected by the mining activities of WMCP, members of said cooperative, as well as other
residents of areas also affected by the mining activ ities of WMCP. Even if they are not the actual parties in the contract, they claim that they will suffer
“irremediable displacement” as a result of the FTAA allowing WMCP to conduct mining activ ities in their area of residence.
- And although RA 7942 and DAO 96-40 w ere not in force w hen the subject FTAA was entered into, the question as to their v alidity is ripe for adjudication. RA
7942 ex plicitly makes certain provisions apply to pre-existing arrangements. The WMCP FTAA also provides that any term and condition fav orable to FTAA
contractors resulting from a law or regulation shall be considered part of the agreement.
- The petition for prohibition and mandamus is also the appropriate remedy. Public respondents, in behalf of the Gov ernment, have obligations to fulfill under said
contract. Petitioners seek to prevent them from fulfilling such obligations on the theory that the contract is unconstitutional and, therefore, void.
- The contention that the filing of the petition v iolates the rule on hierarchy of courts does not likewise lie. The repercussions of the issues in this case on the
Philippine mining industry, if not the national economy, as well as the novelty thereof, constitute exceptional and compelling circumstances to justify resort to this
Court in the first instance. Indeed, w hen the issues raised are of paramount importance to the public, this Court may brush aside technicalities of procedure.
2. YES.
Ratio When the issues raised are of paramount importance to the public, the Court may brush aside technicalities of procedure.
- Petitioners contend that EO 279 did not take effect because its supposed date of effectiv ity came after President Aquino had already lost her legislative powers
under the Prov isional Constitution. But it w as explained that the conv ening of the first Congress merely precluded the exercise of legislative powers by the
President –it did not prev ent the effectiv ity of law s she had previously enacted.
3. NO.
Ratio The convening of the first Congress merely precluded the exercise of legislative powers by the President and did not prev ent the effectiv ity of laws she had
prev iously enacted.
In accordance w ith Art. XII, sec. 2 of the constitution, FTAAs should be limited to “technical or financial assistance” only . However, contrary to the language of the
Constitution, the WMCP FTAA allows WMCP, a fully foreign-owned mining corporation, to ex tend more than mere financial or technic al assistance to the State,
for it permits WMCP to manage and operate ev ery aspect of the mining activity.
- WMCP nev ertheless submits that the w ord “technical” encompasses a broad number of possible services, perhaps, scientific and/or technological in basis. It
thus posits that it may w ell include the area of management and operations. The Court is not persuaded. Casus omisus pro omisso habendus est –a person,
object or thing omitted from an enumeration must be held to hav e been omitted intentionally . Moreover, the management or operation of mining activities by
foreign contractors, w hich is the primary feature of serv ice contracts, was precisely the ev il that the drafters of the 1987 Constitution sought to eradicate.
- Respondents insist that “agreements involv ing technical or financial assistance” is just another term for service contracts. The proceedings of the CONCOM
indicate that the members used the terms interchangeably . The Court is likewis e not persuaded. While certain commissioners may have mentioned the term
“service contracts”, they may have been using the term loosely and not in the context of the 1973 Constitution. Also, the phrase “servic e contracts” has been
deleted in the 1987 Constitution’s Article on National Economy and Patrimony. If the CONCOM intended to retain the concept ofservice contracts under the 1973
Constitution, it could hav e simply adapted the old terminology instead of employing new and unfamiliar terms (“agreements… involving either technical or
financial assistance”).
- The UP Law Draft and Article XII, as adopted, uses the same terminologies. And the UP Law draft proponents viewed service contracts under the 1973
Constitution as grants of beneficial ow nership of the country’s natural resources to foreign owned corporations. While, in theory, the State ow ns these natural
resources –and Filipino citizens, their beneficiaries –service contracts actually vested foreigners with the right to dispose, explore for, develop, exploit, and utilize
the same. This arrangement is clearly incompatible with the constitutional ideal of nationalization of natural resources. Butthe proponents nevertheless
acknow ledged the need for capital and technical know-how in the large-scale exploitation, development and utilization of natural resources. Hence, they
proposed a compromise –technical or financial agreements.
4. NO, insofar as said Act authorizes service contracts.
Ratio Financial or technical agreements as contemplated in Art. XII, sec. 2 shall refer to financial agreements and/or technical agreements only and not to
serv ice contracts.
- Although the statute employ s the phrase “financial and technical agreements”, it actually treats these agreements as service contracts that grant beneficial
ow nership to foreign contractors contrary to fundamental law.
Decision WHEREFORE, the petition is granted. The Court hereby declares unconstitutional and v oid:
1) The follow ing provision of RA 7942
a) The prov iso in Section 3 (aq)
b) Section 23,
c) Section 33 to 41,
d) Section 56,
e) The second and third paragraphs of Section 81, and
f) Section 90.
2) All prov isions of DAO 96-40, s. 1996 which are not in conformity with this Decision, and
3) The FTAA betw een the Government of the Republic of the Philippines and WMC Philippines, Inc.
Voting 8 concur –including ponente, 5 dissent, 1 took no part
SEPARATE OPINION
VITUG
- It could not hav e been the object of the framers of the Charter to limit the contracts w hich the President may enter into, to mere “agreements for financial and
technical assistance; The Constitution has not prohibited the State from itself ex ploring, developing, or utilizing the country’s natural resources, and, for this
purpose, it may , enter into the necessary agreements with individuals or entities in the pursuit of a feasible operation.”
PANGANIBAN
- The petition should be dismissed on the ground of mootness. The dispute claiming the right to purchase the foreign shares in WMCP is between two Filipino
companies (Sagittarius and Lepanto). So regardless of which side wins, the FTAA would still be in the hands of a qualified Filipino company.
- The w ord “involv ing” signifies the possibility of inclusion of other activ ities. If the intention of the drafters w ere strictly to confine foreign corporations to financial
or technical assistance and nothing more, their language would have been unmistakably restrictiv e and stringent.
- The present Constitution still recognizes and allows service contracts (and has not rendered them taboo), albeit subject to sev eral restrictions and modifications
aimed at av oiding pitfalls of the past.
- In the minds of the commissioners, the concept of technical and financial assistance agreements did not exist at all apart from the concept of service contracts
duly modified to prev ent abuses –“technical and financial agreements” were understood by the delegates to include service contracts duly modified to prev ent
abuses.

abuses.
- Current business practices often require borrowers seeking huge loans to allow creditors access to financial records and other data, and probably a seat or tw o
on the former’s board of directors, or at least some participation in certain management decis ions that may have an impact on the financial health or the long-
term v iability of the debtor, which of course will directly affect the latter’s capacity to repay it’s loans.
- If the Supreme Court closes its doors to international realities and unilaterally sets up its own concepts of strict technical and financial assistance, then it may
unw ittingly make the country a virtual hermit –an economic isolationist –in the real w orld of finance.
- The commissioners fully realized that their w ork would have to w ithstand the test of time, that the Charter, though crafted with the w isdom born of past
ex periences and lessons painfully learned, would have to be a liv ing document that w ould answer the needs of the nation w ell into the future.
RESOLUTION
PANGANIBAN; December 1, 2004
FACTS
- Mariv ic M.V.F. Leonen, et. al for petitioners
- SPECIAL CIVIL ACTION in Supreme Court. Mandamus and Prohibition
- Ponente: Panganiban, J. (take note: major dissenter in part1)
- All mineral resources are owned by the State. Their exploration, development and utilization (EDU) must always be subject to the full control and superv ision of
the State. More specifically, giv en the inadequacy of Filipino capital and technology in large-scale EDU activities, the State may secure the help of foreign
companies in all relevant matters –especially financial and technical assistance –provided that, at all times, the State maintains its right of full control. The foreign
assistor or contractor assumes all financial, technical and entrepreneurial risks in the EDU activities; hence it may be given reasonable management, operational,
marketing, audit and other prerogativ es to protect its inv estments and enable the business to succeed.
- The Constitution should be read in broad, life-giving strokes. It should not be used to strangulate economic growth or to serve narrow, parochial interests.
Rather, it should be construed to grant the President and Congress sufficient discretion and reasonable leeway to enable them to attract foreign inv estments and
ex pertise, as well as to secure for our people and our posterity the blessings of prosperity and peace.
- On the basis of this control standard, this Court upholds the constitutionality of the Philippine Mining Law, its Implementing Rules and Regulations –insofar as
they relate to financial and technical agreements –as well as the subject Financial and Technical Assis tance Agreement (FTAA).
ISSUES
1. WON the case been rendered moot by the sale of the WMC shares in WMCP to Sagittarius and by the subsequent transfer and registration of the FTAA from
WMCP to Sagittarius
2. Assuming that the case has been rendered moot, WON it would still be proper to resolv e the constitutionality of the assailed provisions of the Mining Law,
DAO 96-40 and the WMCP FTAA
3. What is the proper interpretation of the phrase Agreements Inv olving Either Technical or Financial Assistance contained in paragraph 4 of Section 2 of Article
XII of the Constitution?
HELD
1. YES.
Ratio The courts will decide a question –otherwise moot and academic –if it is capable of repetition, yet evading review.
- The dispute claiming the right to purchase the foreign shares in WMCP is between two Filipino companies (Sagittarius and Lepanto). So regardless of w hich
side w ins, the FTAA would still be in the hands of a qualified Filipino company. The plea to nullify the Mining Law has become a virtual petition for declaratory
relief, ov er w hich this Court has no original jurisdiction.
- Petitioners argue that the sale of shares and transfer of the FTAA is inv alid. Government cannot enter into FTAA with Filipinos.
- It does not take deep know ledge of law and logic to understand that w hat the Constitution grants to foreigners should be equally available to Filipinos.
2. Ratio FTAAs are service contracts. But unlike those of the 1973 v ariety , the grant thereof is subject to several safeguards.
- Petitioners stress the follow ing points. First, while a case becomes moot and academic when there is no more actual controversy between the parties or no
useful purpose can be served in passing upon the merits, what is at issue is not only the validity of the WMCP FTAA but also the constitutionality of RA 7942 and
its Implementing Rules and Regulations. Second, the acts of private respondent cannot operate to cure the law of its alleged unconstitutionality or to div est this
Court of its jurisdiction to decide. Third, the Constitution imposes upon the Supreme Court the duty to declare invalid any law that offends the Constitution.
- But of equal if not greater significance is the cloud of uncertainty hanging over the mining industry, which is even now scaring away foreign investments. It is
ev ident that strong reasons of public policy demand that the constitutionality issue be resolv ed now. And citing Acop v. Guingona, the courts will decide a
question –otherw ise moot and academic –if it is “capable of repetition, yet evading review.”
3. Citing Francisco v. House of Representatives, the ponencia reiterated the well settled principles of constitutional construction:
Verba legis, that is, w herever possible, the words used in the Constitution must be given their ordinary meaning except where technicalterms
are employ ed.
Where there is ambiguity , ratio legis est anima. The words of the Constitution should be interpreted in accordance with the intent of its framers.
Ut magis valeat quam pereat. The Constitution is to be interpreted as a w hole.
- Petitioners claim that the phrase “agreements… involv ing either technical or financial assistance” sim ply means technical assistance or financial assistance
agreements, nothing more and nothing else.
- But if that w as the intention, then w hat is the point of requiring that they be based on real contributions to the economic growth and general welfare of the
country ?
- It is also unclear how a verba legis approach leads to the conclusion that “the management or operation of mining activities by foreign contractors, which is the
primary feature of service contracts, was precisely the evil that the drafters of the 1987 Constitution sought to eradicate. If the framers had intended to put an end
to serv ice contracts, they would have at least left some transitory guidelines.
- The drafters w ill hav e to be credited w ith enough pragmatism and savvy to know that these foreign entities w ill not enter into such “agreements involving
assistance” without requiring arrangements for the protection of their inv estments, gains and benefits.
- Using ratio legis est anima, we may now examine the CONCOM deliberations. It may be observed that the members use the terms “financial and technical
assistance agreements” and “service contracts” interchangeably . From their statements, it may be concluded that FTAAs are service contracts. But unlike those
of the 1973 v ariety , the grant thereof is subject to sev eral safeguards (in accordance with law, President as signatory, reporting to Congress…)
- With ut magis v aleat quam pereat, we may notice a contradiction between the State’s full control and supervision and the safeguarded service contracts with
foreign contractors. It must be pointed out that the full control and superv ision cannot be taken literally to mean that the State controls and superv ises everything
inv olved, down to the minutest details, and makes all decisions required in the mining operations. Control by State may be onthe macro level –establishment of
policies, guidelines, regulations, industry standards, etc.
- To further disabuse the notion of these “new service contracts”, the government’s share in these operations will not be limited to tax es, duties and fees to be
imposed. Those only consis t of the basic government share. The law provides for an additional gov ernment share to be determined using formulas presented in
DAO 96-40, either of w hich results to at least 50% of the net benefits from the mining.
Decision WHEREFORE, the Court RESOLVES to GRANT the respondents’ and the intervenors’ Motions for Reconsideration; to REVERSE and SET ASIDE
this Court’s January 27, 2004 Decision; to DISMISS the Petition; and to issue this new judgment declaring CONSTITUTIONAL 1) RA 7942 (Phil. Mining Law), 2)
its Implementing Rules and Regulations contained in DAO 96-40 –insofar as they relate to financial and technical assistance agreements referred to in par. 4 of
Section 2 of Art. XII of the Constitution; and 3) the FTAA dated March 30, 1995 ex ecuted by the government and WMCP, except Sections 7.8 and 7.9 of the

Section 2 of Art. XII of the Constitution; and 3) the FTAA dated March 30, 1995 ex ecuted by the government and WMCP, except Sections 7.8 and 7.9 of the
subject FTAA which are hereby INVALIDATED for being contrary to public policy and for being grossly disadvantageous to the gov ernment.
Voting 10 concur –including ponente, 4 dissent, 1 took no part
SEPARATE OPINION
CARPIO
- Prov isions of RA 7942 abdicate the State’s constitutional duty to control and supervise fully the ex ploitation of mineral resources.
- The change in language in the Constitution w as a clear rejection of the old system of “license, concession or lease.”
- The State as ow ner of the natural resources must receive income from its exploitation –taxes, fees and charges cannot substitute.
- State must receiv e at least 60% of the net proceeds in FTAAs, which share is equivalent to the Filipino equity requirement.
- The majority opinion refused to accept that the State is entitled to w hat the entire mining industry is willing to pay the State.
CARPIO-MORALES [part 1 ponente]
- The phrase “natural resources are owned by the State” simultaneously vests the legal title to the nation’s natural resources to the Gov ernment, and the
beneficial ow nership of these resources in the sovereign Filipino people.
- In the EDU of natural resources, Gov ernment acts as trustee. So it cannot, without v iolating its sacred trust, enter into any agreement or arrangement which
effectiv ely depriv es the Filipino people of their beneficial ownership of these resources.
- Art. XII, sec. 2 in mentioning “based on real contributions to the economic growth and general welfare of the country articulates the value which the Constitution
places on natural resources, and recognizes their potential benefits.
- Real benefits are intergenerational benefits because the motherland’s natural resources are the birthright not only of the present generation of Filipinos but of
future generations as w ell.
- “Inv olving” as the majority construes it runs counter to the restrictiv e spirit of the prov ision.
- “Either” refers to one of tw o items and “any” is required when more than tw o items are involved.
- “Either” is not merely descriptiv e but restrictive.
- Casus omisus pro omisso habendus est –a person, object or thing omitted from an enumeration must be held to hav e been omitted intentionally.
- It is understandable, how ever regrettable, that a gov ernment, strapped for cash and in the midst of a self proclaimed fiscal crisis, would be inclined to turn a
blind ey e to the consequences of unconstitutional legislation in the hope, however false or empty , of obtaining fabulous amounts of hard currency; As alw ays, the
one ov erriding the consideration of this Court should be will of the sovereign Filipino people as embodied in their Constitution.
- The task of reclaiming Filipino control over Philippine natural resources now belongs to another generation.

Chavez vs. NHA, G.R. No. 164527, August 15, 2007.
12:54 AM

SUPREME COURT
Manila
EN BANC
FRANCISCO I. CHAVEZ, G.R. No. 164527

Petitioner,
Present:
PUNO, CJ,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
- versus - CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
GARCIA,
NATIONAL HOUSING VELASCO,
AUTHORITY, R-II BUILDERS, NACHURA, and
INC., R-II HOLDINGS, INC., REYES, JJ.
HARBOUR CENTRE PORT
TERMINAL, INC., and Promulgated:
MR. REGHIS ROMERO II,
Respondents. August 15, 2007
x-----------------------------------------------------------------------------------------x
DE C I S I ON
VELASCO, JR., J.:
In this Petition for Prohibition and Mandamus with Prayer for Temporary
Restraining Order and/or Writ of Preliminary Injunction under Rule 65, petitioner,
in his capacity as taxpayer, seeks:
to declare NULL AND VOID the Joint Venture Agreement (JVA) dated March 9, 1993
between the National Housing Authority and R-II Builders, Inc. and the Smokey Mountain

between the National Housing Authority and R-II Builders, Inc. and the Smokey Mountain
Development and Reclamation Project embodied therein; the subsequent amendments to
the said JVA; and all other agreements signed and executed in relation thereto – including,
but not limited to the Smokey Mountain Asset Pool Agreement dated 26 September 1994
and the separate agreements for Phase I and Phase II of the Project––as well as all other
transactions which emanated therefrom, for
being UNCONSTITUTIONAL and INVALID;
to enjoin respondents—particularly respondent NHA—from further implementing and/or

enforcing the said project and other agreements related thereto, and from further deriving
and/or enjoying any rights, privileges and interest therefrom x x x; and
to compel respondents to disclose all documents and information relating to the project––
including, but not limited to, any subsequent agreements with respect to the different
phases of the project, the revisions over the original plan, the additional works incurred
thereon, the current financial condition of respondent R-II Builders, Inc., and the
transactions made respecting the project.[1]
The Facts
On March 1, 1988, then President Corazon C. Aquino issued Memorandum

Order No. (MO) 161[2] approving and directing the implementation of the
Comprehensive and Integrated Metropolitan Manila Waste Management Plan (the
Plan). The Metro Manila Commission, in coordination with various government
agencies, was tasked as the lead agency to implement the Plan as formulated by the
Presidential Task Force on Waste Management created by Memorandum Circular
No. 39. A day after, on March 2, 1988, MO 161-A[3] was issued, containing the
guidelines which prescribed the functions and responsibilities of fifteen (15)
various government departments and offices tasked to implement the Plan,
namely: Department of Public Works and Highway (DPWH), Department of
Health (DOH), Department of Environment and Natural Resources (DENR),
Department of Transportation and Communication, Department of Budget and
Management, National Economic and Development Authority (NEDA), Philippine
Constabulary Integrated National Police, Philippine Information Agency and the
Local Government Unit (referring to the City of Manila), Department of Social
Welfare and Development, Presidential Commission for Urban Poor, National
Housing Authority (NHA), Department of Labor and Employment, Department of
Education, Culture and Sports (now Department of Education), and Presidential
Management Staff.
Specifically, respondent NHA was ordered to ―conduct feasibility studies

and develop low-cost housing projects at the dumpsite and absorb scavengers in
NHA resettlement/low-cost housing projects.‖[4] On the other hand, the DENR
was tasked to ―review and evaluate proposed projects under the Plan with regard to
their environmental impact, conduct regular monitoring of activities of the Plan to
ensure compliance with environmental standards and assist DOH in the conduct of
the study on hospital waste management.‖[5]
At the time MO 161-A was issued by President

At the time MO 161-A was issued by President
Aquino, Smokey Mountain was a wasteland in Balut, Tondo, Manila, where
numerous Filipinos resided in subhuman conditions, collecting items that may have
some monetary value from the garbage. The Smokey Mountain dumpsite is
bounded on the north by the Estero Marala, on the south by the property of the
National Government, on the east by the property of B and I Realty Co., and on the
west by Radial Road 10 (R-10).
Pursuant to MO 161-A, NHA prepared the feasibility studies of the Smokey

Mountain low-cost housing project which resulted in the formulation of the
―Smokey Mountain Development Plan and Reclamation of the Area Across R-10‖
or the Smokey Mountain Development and Reclamation Project (SMDRP; the
Project). The Project aimed to convert the Smokey Mountain dumpsite into a
habitable housing project, inclusive of the reclamation of the area across R-10,
adjacent to the Smokey Mountain as the enabling component of the
project.[6] Once finalized, the Plan was submitted to President Aquino for her
approval.
On July 9, 1990, the Build-Operate-and-Transfer (BOT) Law (Republic Act

No. [RA] 6957) was enacted.[7] Its declared policy under Section 1 is ―[t]o
recognize the indispensable role of the private sector as the main engine for
national growth and development and provide the most appropriate favorable
incentives to mobilize private resources for the purpose.‖ Sec. 3 authorized and
empowered ―[a]ll government infrastructure agencies, including government-
owned and controlled corporations and local government units x x x to enter into
contract with any duly pre-qualified private contractor for the financing,
construction, operation and maintenance of any financially viable infrastructure
facilities through the build-operate-transfer or build and transfer scheme.‖
RA 6957 defined ―build-and-transfer‖ scheme as ―[a] contractual

arrangement whereby the contractor undertakes the construction, including
financing, of a given infrastructure facility, and its turnover after the completion to
the government agency or local government unit concerned which shall pay the
contractor its total investment expended on the project, plus reasonable rate of
return thereon.‖ The last paragraph of Sec. 6 of the BOT Law provides that the
repayment scheme in the case of ―land reclamation or the building of industrial
estates‖ may consist of ―[t]he grant of a portion or percentage of the reclaimed land
or industrial estate built, subject to the constitutional requirements with respect to
the ownership of lands.‖
On February 10, 1992, Joint Resolution No. 03[8] was passed by both houses
of Congress. Sec. 1 of this resolution provided, among other things, that:
Section 1. There is hereby approved the following national infrastructure projects

for implementation under the provisions of Republic Act No. 6957 and its implementing
rules and regulations:
xxxx

xxxx
(d) Port infrastructure like piers, wharves, quays, storage handling, ferry service
and related facilities;
xxxx
(k) Land reclamation, dredging and other related development facilities;
(l) Industrial estates, regional industrial centers and export processing zones
including steel mills, iron-making and petrochemical complexes and related infrastructure
and utilities;
xxxx
(p) Environmental and solid waste management-related facilities such as

collection equipment, composting plants, incinerators, landfill and tidal barriers, among
others; and
(q) Development of new townsites and communities and related facilities.
This resolution complied with and conformed to Sec. 4 of the BOT Law
requiring the approval of all national infrastructure projects by the Congress.
On January 17, 1992, President Aquino proclaimed MO 415[9] approving

and directing the implementation of the SMDRP. Secs. 3 and 4 of the
Memorandum Order stated:
Section 3. The National Housing Authority is hereby directed to implement the

Smokey Mountain Development Plan and Reclamation of the Area Across R-10 through a
private sector joint venture scheme at the least cost to the government.
Section 4. The land area covered by the Smokey Mountain dumpsite is hereby
conveyed to the National Housing Authority as well as the area to be reclaimed across
R-10. (Emphasis supplied.)
In addition, the Public Estates Authority (PEA) was directed to assist in the
evaluation of proposals regarding the technical feasibility of reclamation, while the
DENR was directed to (1) facilitate titling of Smokey Mountain and of the area to
be reclaimed and (2) assist in the technical evaluation of proposals regarding
environmental impact statements.[10]
In the same MO 415, President Aquino created an Executive Committee

(EXECOM) to oversee the implementation of the Plan, chaired by the National
Capital Region-Cabinet Officer for Regional Development (NCR-CORD) with the
heads of the NHA, City of Manila, DPWH, PEA, Philippine Ports Authority
(PPA), DENR, and Development Bank of the Philippines (DBP) as
members.[11] The NEDA subsequently became a member of the
EXECOM. Notably, in a September 2, 1994Letter,[12] PEA General Manager
EXECOM. Notably, in a September 2, 1994Letter,[12] PEA General Manager
Amado Lagdameo approved the plans for the reclamation project prepared by the
NHA.
In conformity with Sec. 5 of MO 415, an inter-agency technical committee

(TECHCOM) was created composed of the technical representatives of the
EXECOM ―[t]o assist the NHA in the evaluation of the project proposals, assist in
the resolution of all issues and problems in the project to ensure that all aspects of
the development from squatter relocation, waste management, reclamation,
environmental protection, land and house construction meet governing regulation
of the region and to facilitate the completion of the project.‖[13]
Subsequently, the TECHCOM put out the Public Notice and Notice to Pre-
Qualify and Bid for the right to become NHA’s joint venture partner in the
implementation of the SMDRP. The notices were published in newspapers of
general circulation on January 23 and 26 and February 1, 14, 16, and 23, 1992,
respectively. Out of the thirteen (13) contractors who responded, only five (5)
contractors fully complied with the required pre-qualification documents. Based
on the evaluation of the pre-qualification documents, the EXECOM declared the
New San Jose Builders, Inc. and R-II Builders, Inc. (RBI) as the top two
contractors.[14]
Thereafter, the TECHCOM evaluated the bids (which include the Pre-
feasibility Study and Financing Plan) of the top two (2) contractors in this manner:
(1) The DBP, as financial advisor to the Project, evaluated their Financial
Proposals;
(2) The DPWH, PPA, PEA and NHA evaluated the Technical Proposals
for the Housing Construction and Reclamation;
(3) The DENR evaluated Technical Proposals on Waste Management and

Disposal by conducting the Environmental Impact Analysis; and
(4) The NHA and the City of Manila evaluated the socio-economic
benefits presented by the proposals.
On June 30, 1992, Fidel V. Ramos assumed the Office of the President (OP)
of the Philippines.
On August 31, 1992, the TECHCOM submitted its recommendation to the

EXECOM to approve the R-II Builders, Inc. (RBI) proposal which garnered the
highest score of 88.475%.
Subsequently, the EXECOM made a Project briefing to President Ramos. As

a result, President Ramos issued Proclamation No. 39[15] on September 9,
1992, which reads:
1992, which reads:
WHEREAS, the National Housing Authority has presented a viable conceptual plan
to convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of the
reclamation of the area across Road Radial 10 (R-10) adjacent to the Smokey Mountain as
the enabling component of the project;
xxxx
These parcels of land of public domain are hereby placed under the
administration and disposition of the National Housing Authority to develop,
subdivide and dispose to qualified beneficiaries, as well as its development for mix
land use (commercial/industrial) to provide employment opportunities to on-site
families and additional areas for port-related activities.
In order to facilitate the early development of the area for disposition, the
Department of Environment and Natural Resources, through the Lands and Management
Bureau, is hereby directed to approve the boundary and subdivision survey and to issue a
special patent and title in the name of the National Housing Authority, subject to final
survey and private rights, if any there be. (Emphasis supplied.)
On October 7, 1992, President Ramos authorized NHA to enter into a Joint

Venture Agreement with RBI ―[s]ubject to final review and approval of the Joint
Venture Agreement by the Office of the President.‖[16]
On March 19, 1993, the NHA and RBI entered into a Joint Venture
Agreement[17] (JVA) for the development of the Smokey Mountain dumpsite and
the reclamation of the area across R-10 based on Presidential Decree No. (PD)
757[18] which mandated NHA ―[t]o undertake the physical and socio-economic
upgrading and development of lands of the public domain identified for housing,‖
MO 161-A which required NHA to conduct the feasibility studies and develop a
low-cost housing project at the Smokey Mountain, and MO 415 as amended by
MO 415-A which approved the Conceptual Plan for Smokey Mountain and
creation of the EXECOM and TECHCOM. Under the JVA, the Project ―involves
the clearing of Smokey Mountain for eventual development into a low cost
medium rise housing complex and industrial/commercial site with the reclamation
of the area directly across [R-10] to act as the enabling component of the Project.‖
[19]
The JVA covered a lot in Tondo, Manila with an area of two hundred twelve
thousand two hundred thirty-four (212,234) square meters and another lot to be
reclaimed also in Tondo with an area of four hundred thousand (400,000) square
meters.
The Scope of Work of RBI under Article II of the JVA is as follows:
a) To fully finance all aspects of development of Smokey Mountain and

reclamation of no more than 40 hectares of Manila Bay area across Radial Road 10.
b) To immediately commence on the preparation of feasibility report and

detailed engineering with emphasis to the expedient acquisition of the Environmental
Clearance Certificate (ECC) from the DENR.

Clearance Certificate (ECC) from the DENR.
c) The construction activities will only commence after the acquisition of the
ECC, and
d) Final details of the contract, including construction, duration and delivery

timetables, shall be based on the approved feasibility report and detailed engineering.
Other obligations of RBI are as follows:
2.02 The [RBI] shall develop the PROJECT based on the Final Report and
Detailed Engineering as approved by the Office of the President. All costs and expenses for
hiring technical personnel, date gathering, permits, licenses, appraisals, clearances, testing
and similar undertaking shall be for the account of the [RBI].
2.03 The [RBI] shall undertake the construction of 3,500 temporary housing units
complete with basic amenities such as plumbing, electrical and sewerage facilities within
the temporary housing project as staging area to temporarily house the squatter families
from the Smokey Mountain while development is being undertaken. These temporary
housing units shall be turned over to the [NHA] for disposition.
2.04 The [RBI] shall construct 3,500 medium rise low cost permanent housing
units on the leveled Smokey Mountain complete with basic utilities and amenities, in
accordance with the plans and specifications set forth in the Final Report approved by the
[NHA]. Completed units ready for mortgage take out shall be turned over by the [RBI] to
NHA on agreed schedule.
2.05 The [RBI] shall reclaim forty (40) hectares of Manila Bay area directly
across [R-10] as contained in Proclamation No. 39 as the enabling component of the project
and payment to the [RBI] as its asset share.
2.06 The [RBI] shall likewise furnish all labor materials and equipment necessary
to complete all herein development works to be undertaken on a phase to phase basis in
accordance with the work program stipulated therein.
The profit sharing shall be based on the approved pre-feasibility report

submitted to the EXECOM, viz:
For the developer (RBI):
1. To own the forty (40) hectares of reclaimed land.
2. To own the commercial area at the Smokey Mountain area composed of 1.3
hectares, and
3. To own all the constructed units of medium rise low cost permanent housing
units beyond the 3,500 units share of the [NHA].
For the NHA:

For the NHA:
1. To own the temporary housing consisting of 3,500 units.
2. To own the cleared and fenced incinerator site consisting of 5 hectares

situated at the Smokey Mountain area.
3. To own the 3,500 units of permanent housing to be constructed by [RBI] at

the Smokey Mountain area to be awarded to qualified on site residents.
4. To own the Industrial Area site consisting of 3.2 hectares, and
5. To own the open spaces, roads and facilities within

the Smokey Mountain area.
In the event of ―extraordinary increase in labor, materials, fuel and non-

recoverability of total project expenses,‖[20] the OP, upon recommendation of the
NHA, may approve a corresponding adjustment in the enabling component.
The functions and responsibilities of RBI and NHA are as follows:
For RBI:
4.01 Immediately commence on the preparation of the FINAL REPORT with

emphasis to the expedient acquisition, with the assistance of the [NHA] of Environmental
Compliance Certificate (ECC) from the Environmental Management Bureau (EMB) of the
[DENR]. Construction shall only commence after the acquisition of the ECC. The
Environment Compliance Certificate (ECC) shall form part of the FINAL REPORT.
The FINAL REPORT shall provide the necessary subdivision and housing plans,
detailed engineering and architectural drawings, technical specifications and other related
and required documents relative to the Smokey Mountain area.
With respect to the 40-hectare reclamation area, the [RBI] shall have the discretion
to develop the same in a manner that it deems necessary to recover the [RBI’s] investment,
subject to environmental and zoning rules.
4.02 Finance the total project cost for land development, housing construction
and reclamation of the PROJECT.
4.03 Warrant that all developments shall be in compliance with the requirements
of the FINAL REPORT.
4.04 Provide all administrative resources for the submission of project

accomplishment reports to the [NHA] for proper evaluation and supervision on the actual
implementation.
4.05 Negotiate and secure, with the assistance of the [NHA] the grant of rights of
way to the PROJECT, from the owners of the adjacent lots for access road, water, electrical
power connections and drainage facilities.
4.06 Provide temporary field office and transportation vehicles (2 units), one (1)

complete set of computer and one (1) unit electric typewriter for the [NHA’s] field
personnel to be charged to the PROJECT.
For the NHA:
4.07 The [NHA] shall be responsible for the removal and relocation of all
squatters within Smokey Mountain to the Temporary Housing Complex or to other areas
prepared as relocation areas with the assistance of the [RBI]. The [RBI] shall be
responsible in releasing the funds allocated and committed for relocation as detailed in the
FINAL REPORT.
4.08 Assist the [RBI] and shall endorse granting of exemption fees in the
acquisition of all necessary permits, licenses, appraisals, clearances and accreditations for
the PROJECT subject to existing laws, rules and regulations.
4.09 The [NHA] shall inspect, evaluate and monitor all works at
the Smokey Mountain and Reclamation Area while the land development and construction
of housing units are in progress to determine whether the development and construction
works are undertaken in accordance with the FINAL REPORT. If in its judgment, the
PROJECT is not pursued in accordance with the FINAL REPORT, the [NHA] shall require
the [RBI] to undertake necessary remedial works. All expenses, charges and penalties
incurred for such remedial, if any, shall be for the account of the [RBI].
4.10 The [NHA] shall assist the [RBI] in the complete electrification of the
PROJECT. x x x
4.11 Handle the processing and documentation of all sales transactions related to
its assets shares from the venture such as the 3,500 units of permanent housing and the
allotted industrial area of 3.2 hectares.
4.12 All advances outside of project costs made by the [RBI] to the [NHA] shall
be deducted from the proceeds due to the [NHA].
4.13 The [NHA] shall be responsible for the acquisition of the Mother Title for
the Smokey Mountain and Reclamation Area within 90 days upon submission of Survey
returns to the Land Management Sector. The land titles to the 40-hectare reclaimed land,
the 1.3 hectare commercial area at the Smokey Mountain area and the constructed units of
medium-rise permanent housing units beyond the 3,500 units share of the [NHA] shall be
issued in the name of the [RBI] upon completion of the project. However, the [RBI] shall
have the authority to pre-sell its share as indicated in this agreement.
The final details of the JVA, which will include the construction duration,
costs, extent of reclamation, and delivery timetables, shall be based on the FINAL
REPORT which will be contained in a Supplemental Agreement to be executed
later by the parties.
The JVA may be modified or revised by written agreement between the

NHA and RBI specifying the clauses to be revised or modified and the
corresponding amendments.
If the Project is revoked or terminated by the Government through no fault

If the Project is revoked or terminated by the Government through no fault
of RBI or by mutual agreement, the Government shall compensate RBI for its
actual expenses incurred in the Project plus a reasonable rate of return not
exceeding that stated in the feasibility study and in the contract as of the date of
such revocation, cancellation, or termination on a schedule to be agreed upon by
both parties.
As a preliminary step in the project implementation, consultations and

dialogues were conducted with the settlers of the Smokey Mountain Dumpsite
Area. At the same time, DENR started processing the application for the
Environmental Clearance Certificate (ECC) of the SMDRP. As a result however
of the consultative dialogues, public hearings, the report on the on-site field
conditions, the Environmental Impact Statement (EIS) published on April 29 and
May 12, 1993 as required by the Environmental Management Bureau of DENR,
the evaluation of the DENR, and the recommendations from other government
agencies, it was discovered that design changes and additional work have to be
undertaken to successfully implement the Project.[21]
Thus, on February 21, 1994, the parties entered into another agreement
denominated as the Amended and Restated Joint Venture Agreement[22] (ARJVA)
which delineated the different phases of the Project. Phase I of the Project
involves the construction of temporary housing units for the current residents of
the SmokeyMountain dumpsite, the clearing and leveling-off of the dumpsite, and
the construction of medium-rise low-cost housing units at the cleared and leveled
dumpsite.[23] Phase II of the Project involves the construction of an incineration
area for the on-site disposal of the garbage at the dumpsite.[24] The enabling
component or consideration for Phase I of the Project was increased from 40
hectares of reclaimed lands across R-10 to 79 hectares.[25] The revision also
provided for the enabling component for Phase II of 119 hectares of reclaimed
lands contiguous to the 79 hectares of reclaimed lands for Phase I.[26] Furthermore,
the amended contract delineated the scope of works and the terms and conditions
of Phases I and II, thus:
The PROJECT shall consist of Phase I and Phase II.
Phase I shall involve the following:
a. the construction of 2,992 units of temporary housing for the affected residents
while clearing and development of Smokey Mountain [are] being undertaken
b. the clearing of Smokey Mountain and the subsequent construction of 3,520 units
of medium rise housing and the development of the industrial/commercial site
within theSmokey Mountain area
c. the reclamation and development of a 79 hectare area directly across Radial Road
10 to serve as the enabling component of Phase I
Phase II shall involve the following:
a. the construction and operation of an incinerator plant that will conform to the

emission standards of the DENR
b. the reclamation and development of 119-hectare area contiguous to that to be

reclaimed under Phase I to serve as the enabling component of Phase II.
Under the ARJVA, RBI shall construct 2,992 temporary housing units, a
reduction from 3,500 units under the JVA.[27] However, it was required to
construct 3,520 medium-rise low-cost permanent housing units instead of 3,500
units under the JVA. There was a substantial change in the design of the
permanent housing units such that a ―loft shall be incorporated in each unit so as to
increase the living space from 20 to 32 square meters. The additions and changes
in the Original Project Component are as follows:
ORIGINAL CHANGES/REVISIONS
1. TEMPORARY HOUSING
Wood/Plywood, ga. 31 G.I. Concrete/Steel Frame Structure Sheet usable life of

3 years, gauge 26 G.I. roofing sheets future 12 SM
floor area. use as permanent structures
for factory and warehouses mixed 17 sm & 12 sm
floor area.
2. MEDIUM RISE MASS

HOUSING
Box type precast Shelter Conventional and precast component 20 square

meter concrete structures, 32 square
floor area with 2.4 meter meter floor area with loft
floor height; bare type, 160 units/ (sleeping quarter)
3.6 m. floor
building. height, painted and improved
architectural façade, 80 units/
building.
3. MITIGATING MEASURES
3.1 For reclamation work Use of clean dredgefill material below the MLLW
and SM material mixed with dredgefill above MLLW.
a. 100% use of Smokey

Mountain material as
dredgefill Use of Steel Sheet Piles needed
for longer depth of embedment.
b. Concrete Sheet Piles
short depth of
embedment
c. Silt removal approximately Need to remove more than 3.0

1.0 meter only meters of silt after sub-soil investigation.[28]
These material and substantial modifications served as justifications for the

increase in the share of RBI from 40 hectares to 79 hectares of reclaimed land.

increase in the share of RBI from 40 hectares to 79 hectares of reclaimed land.
Under the JVA, the specific costs of the Project were not
stipulated but under the ARJVA, the stipulated cost for Phase I was pegged at six
billion six hundred ninety-three million three hundred eighty-seven thousand three
hundred sixty-four pesos (PhP 6,693,387,364).
In his February 10, 1994 Memorandum, the Chairperson of the SMDRP

EXECOM submitted the ARJVA for approval by the OP. After review of
said agreement, the OP directed that certain terms and conditions of the
ARJVA be further clarified or amended preparatory to its approval. Pursuant
to the President’s directive, the parties reached an agreement on the
clarifications and amendments required to be made on the ARJVA.
On August 11, 1994, the NHA and RBI executed an Amendment To the
Amended and Restated Joint Venture Agreement (AARJVA)[29] clarifying certain
terms and condition of the ARJVA, which was submitted to President Ramos for
approval, to wit:
Phase II shall involve the following:
emission standards of the DENR
b. the reclamation and development of 119-hectare area contiguous to that to be reclaimed

under Phase I to serve as the enabling component of Phase II, the exact size and
configuration of which shall be approved by the SMDRP Committee [30]
Other substantial amendments are the following:
4. Paragraph 2.05 of Article II of the ARJVA is hereby amended to read as follows:
2.05. The DEVELOPER shall reclaim seventy nine (79) hectares of the Manila
Bay area directly across Radial Road 10 (R-10) to serve as payment to the
DEVELOPER as its asset share for Phase I and to develop such land into commercial
area with port facilities; provided, that the port plan shall be integrated with the
Philippine Port Authority’s North Harbor plan for the Manila Bay area and provided
further, that the final reclamation and port plan for said reclaimed area shall be
submitted for approval by the Public Estates Authority and the Philippine Ports
Authority, respectively: provided finally, that subject to par. 2.02 above, actual
reclamation work may commence upon approval of the final reclamation plan by the
Public Estates Authority.
xxxx
9. A new paragraph to be numbered 5.05 shall be added to Article V of the ARJVA,

and shall read as follows:
5.05. In the event this Agreement is revoked, cancelled or terminated by the

5.05. In the event this Agreement is revoked, cancelled or terminated by the
AUTHORITY through no fault of the DEVELOPER, the AUTHORITY shall
compensate the DEVELOPER for the value of the completed portions of, and
actual expenditures on the PROJECT plus a reasonable rate of return thereon,
not exceeding that stated in the Cost Estimates of Items of Work previously
approved by the SMDRP Executive Committee and the AUTHORITY and
stated in this Agreement, as of the date of such revocation, cancellation, or
termination, on a schedule to be agreed upon by the parties, provided that said
completed portions of Phase I are in accordance with the approved FINAL
REPORT.
Afterwards, President Ramos issued Proclamation No. 465 dated August 31,
1994[31] increasing the proposed area for reclamation across R-10 from 40
hectares to 79 hectares,[32] to wit:
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the

Philippines, by virtue of the powers vested in me by the law, and as recommended by
the SMDRP Executive Committee, do hereby authorize the increase of the area of
foreshore or submerged lands of Manila Bay to be reclaimed, as previously
authorized under Proclamation No. 39 (s. 1992) and Memorandum Order No. 415 (s.
1992), from Four Hundred Thousand (400,000) square meters, more or less, to Seven
Hundred Ninety Thousand (790,000) square meters, more or less.
On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued

Special Patent No. 3591 conveying in favor of NHA an area of 211,975
square meters covering the Smokey Mountain Dumpsite.
In its September 7, 1994 letter to the EXECOM, the OP through then

Executive Secretary Teofisto T. Guingona, Jr., approved the ARJVA as
amended by the AARJVA.
On September 8, 1994, the DENR issued Special Patent 3592 pursuant to

Proclamation No. 39, conveying in favor of NHA a 401,485-square meter
area.
On September 26, 1994, the NHA, RBI, Home Insurance and Guaranty
Corporation (HIGC), now known as the Home Guaranty Corporation, and the
Philippine National Bank (PNB)[33] executed the Smokey Mountain Asset
Pool Formation Trust Agreement (Asset Pool Agreement).[34] Thereafter, a
Guaranty Contract was entered into by NHA, RBI, and HIGC.
On June 23, 1994, the Legislature passed the Clean Air Act.[35] The Act made
the establishment of an incinerator illegal and effectively barred the
implementation of the planned incinerator project under Phase II. Thus, the
off-site disposal of the garbage at the Smokey Mountain became necessary.[36]
The land reclamation was completed in August 1996.[37]

Sometime later in 1996, pursuant likewise to Proclamation No. 39, the DENR
issued Special Patent No. 3598 conveying in favor of NHA an additional
390,000 square meter area.
During the actual construction and implementation of Phase I of the SMDRP,

the Inter-Agency Technical Committee found and recommended to the
EXECOM on December 17, 1997 that additional works were necessary for the
completion and viability of the Project. The EXECOM approved the
recommendation and so, NHA instructed RBI to implement the change orders
or necessary works.[38]
Such necessary works comprised more than 25% of the original contract price
and as a result, the Asset Pool incurred direct and indirect costs. Based on C1
12 A of the Implementing Rules and Regulations of PD 1594, a supplemental
agreement is required for ―all change orders and extra work orders, the total
aggregate cost of which being more than twenty-five (25%) of the escalated
original contract price.‖
The EXECOM requested an opinion from the Department of Justice (DOJ) to

determine whether a bidding was required for the change orders and/or
necessary works. The DOJ, through DOJ Opinion Nos. 119 and 155 dated
August 26, 1993 and November 12, 1993, opined that ―a rebidding, pursuant
to the aforequoted provisions of the implementing rules (referring to PD 1594)
would not be necessary where the change orders inseparable from the original
scope of the project, in which case, a negotiation with the incumbent
contractor may be allowed.‖
Thus, on February 19, 1998, the EXECOM issued a resolution directing NHA
to enter into a supplemental agreement covering said necessary works.
On March 20, 1998, the NHA and RBI entered into a Supplemental
Agreement covering the aforementioned necessary works and submitted it to
the President onMarch 24, 1998 for approval.
Outgoing President Ramos decided to endorse the consideration of the

Supplemental Agreement to incoming President Joseph E. Estrada. On June
30, 1998, Estrada became the 13th Philippine President.
However, the approval of the Supplemental Agreement was unacted upon for
five months. As a result, the utilities and the road networks were constructed
to cover only the 79-hectare original enabling component granted under the
ARJVA. The 220-hectare extension of the 79-hectare area was no longer
technically feasible. Moreover, the financial crises and unreliable real estate
situation made it difficult to sell the remaining reclaimed lots. The
devaluation of the peso and the increase in interest cost led to the substantial
increase in the cost of reclamation.

On August 1, 1998, the NHA granted RBI’s request to suspend work on the
SMDRP due to ―the delay in the approval of the Supplemental Agreement, the
consequent absence of an enabling component to cover the cost of the
necessary works for the project, and the resulting inability to replenish the
Asset Pool funds partially used for the completion of the necessary works.‖[39]
As of August 1, 1998 when the project was suspended, RBI had ―already
accomplished a portion of the necessary works and change orders which
resulted in [RBI] and the Asset Pool incurring advances for direct and indirect
cost which amount can no longer be covered by the 79-hectare enabling
component under the ARJVA.‖[40]
Repeated demands were made by RBI in its own capacity and on behalf of the
asset pool on NHA for payment for the advances for direct and indirect costs
subject to NHA validation.
In November 1998, President Estrada issued Memorandum Order No. 33

reconstituting the SMDRP EXECOM and further directed it to review the
Supplemental Agreement and submit its recommendation on the completion
of the SMDRP.
The reconstituted EXECOM conducted a review of the project and

recommended the amendment of the March 20, 1998 Supplemental
Agreement ―to make it more feasible and to identify and provide new sources
of funds for the project and provide for a new enabling component to cover
the payment for the necessary works that cannot be covered by the 79-hectare
enabling component under the ARJVA.‖[41]
The EXECOM passed Resolution Nos. 99-16-01 and 99-16-02[42] which

approved the modification of the Supplemental Agreement, to wit:
a) Approval of 150 hectares additional reclamation in order to make the

reclamation feasible as part of the enabling component.
b) The conveyance of the 15-hectare NHA Vitas property (actually 17 hectares

based on surveys) to the SMDRP Asset Pool.
c) The inclusion in the total development cost of other additional, necessary and
indispensable infrastructure works and the revision of the original cost stated in the
Supplemental Agreement dated March 20, 1998 from PhP 2,953,984,941.40 to PhP
2,969,134,053.13.
d) Revision in the sharing agreement between the parties.
In the March 23, 2000 OP Memorandum, the EXECOM was authorized to

proceed and complete the SMDRP subject to certain guidelines and directives.

After the parties in the case at bar had complied with the March 23, 2000
Memorandum, the NHA November 9, 2000 Resolution No. 4323 approved
―the conveyance of the 17-hectare Vitas property in favor of the existing or a
newly created Asset Pool of the project to be developed into a mixed
commercial-industrial area, subject to certain conditions.‖
On January 20, 2001, then President Estrada was considered resigned. On the
same day, President Gloria M. Arroyo took her oath as the 14th President of
thePhilippines.
As of February 28, 2001, ―the estimated total project cost of the SMDRP has
reached P8.65 billion comprising of P4.78 billion in direct cost and P3.87
billion in indirect cost,‖[43] subject to validation by the NHA.
On August 28, 2001, NHA issued Resolution No. 4436 to pay for ―the various
necessary works/change orders to SMDRP, to effect the corresponding
enabling component consisting of the conveyance of the NHA’s Vitas
Property and an additional 150-hectare reclamation area‖ and to authorize the
release by NHA of PhP 480 million ―as advance to the project to make the
Permanent Housing habitable, subject to reimbursement from the proceeds of
the expanded enabling component.‖[44]
On November 19, 2001, the Amended Supplemental Agreement (ASA) was

signed by the parties, and on February 28, 2002, the Housing and Urban
Development Coordinating Council (HUDCC) submitted the agreement to the
OP for approval.
In the July 20, 2002 Cabinet Meeting, HUDCC was directed ―to submit the
works covered by the PhP 480 million [advance to the Project] and the ASA
to public bidding.‖[45] On August 28, 2002, the HUDCC informed RBI of the
decision of the Cabinet.
In its September 2, 2002 letter to the HUDCC Chairman, RBI lamented the
decision of the government ―to bid out the remaining works under the ASA
thereby unilaterally terminating the Project with RBI and all the agreements
related thereto.‖ RBI demanded the payment of just compensation ―for all
accomplishments and costs incurred in developing the SMDRP plus a
reasonable rate of return thereon pursuant to Section 5.05 of the ARJVA and
Section 6.2 of the ASA.‖[46]
Consequently, the parties negotiated the terms of the termination of the JVA
and other subsequent agreements.
On August 27, 2003, the NHA and RBI executed a Memorandum of

Agreement (MOA) whereby both parties agreed to terminate the JVA and
other subsequent agreements, thus:

1. TERMINATION
1.1 In compliance with the Cabinet directive dated 30 July 2002 to submit the
works covered by the P480 Million and the ASA to public bidding, the following
agreements executed by and between the NHA and the DEVELOPER are hereby
terminated, to wit:
a. Joint Venture Agreement (JVA) dated 19 March 1993

b. Amended and Restated Joint Venture Agreement (ARJVA)
dated 21 February 1994
c. Amendment and Restated Joint Venture Agreement dated 11
August 1994
d. Supplemental Agreement dated 24 March 1998
e. Amended Supplemental Agreement (ASA) dated 19 November
2001.
xx x x
5. SETTLEMENT OF CLAIMS
5.1 Subject to the validation of the DEVELOPER’s claims, the NHA hereby
agrees to initially compensate the Developer for the abovementioned costs as follows:
a. Direct payment to DEVELOPER of the amounts herein listed in the

following manner:
a.1 P250 Million in cash from the escrow account in accordance

with Section 2 herewith;
a.2 Conveyance of a 3 hectare portion of the Vitas Industrial area

immediately after joint determination of the appraised value of the
said property in accordance with the procedure herein set forth in the
last paragraph of Section 5.3. For purposes of all payments to be
made through conveyance of real properties, the parties shall secure
from the NHA Board of Directors all documents necessary and
sufficient to effect the transfer of title over the properties to be
conveyed to RBI, which documents shall be issued within a
reasonable period.
5.2 Any unpaid balance of the DEVELOPERS claims determined after the
validation process referred to in Section 4 hereof, may be paid in cash, bonds or
through the conveyance of properties or any combination thereof. The manner, terms
and conditions of payment of the balance shall be specified and agreed upon later
within a period of three months from the time a substantial amount representing the
unpaid balance has been validated pursuant hereto including, but not limited to the
programming of quarterly cash payments to be sourced by the NHA from its budget
for debt servicing, from its income or from any other sources.
5.3 In any case the unpaid balance is agreed to be paid, either partially or totally
through conveyance of properties, the parties shall agree on which properties shall be
subject to conveyance. The NHA and DEVELOPER hereby agree to determine the
valuation of the properties to be conveyed by getting the average of the appraisals to
be made by two (2) mutually acceptable independent appraisers.

Meanwhile, respondent Harbour Centre Port Terminal, Inc. (HCPTI) entered
into an agreement with the asset pool for the development and operations of a port
in the Smokey Mountain Area which is a major component of SMDRP to provide
a source of livelihood and employment for Smokey Mountain residents and spur
economic growth. A Subscription Agreement was executed between the Asset
Pool and HCPTI whereby the asset pool subscribed to 607 million common shares
and 1,143 million preferred shares of HCPTI. The HCPTI preferred shares had a
premium and penalty interest of 7.5% per annum and a mandatory redemption
feature. The asset pool paid the subscription by conveying to HCPTI a 10-hectare
land which it acquired from the NHA being a portion of the reclaimed land of the
SMDRP. Corresponding certificates of titles were issued to HCPTI, namely: TCT
Nos. 251355, 251356, 251357, and 251358.
Due to HCPTI’s failure to obtain a license to handle foreign containerized

cargo from PPA, it suffered a net income loss of PhP 132,621,548 in 2002 and a
net loss of PhP 15,540,063 in 2003. The Project Governing Board of the Asset
Pool later conveyed by way of dacion en pago a number of HCPTI shares to RBI
in lieu of cash payment for the latter’s work in SMDRP.
On August 5, 2004, former Solicitor General Francisco I. Chavez, filed the

instant petition which impleaded as respondents the NHA, RBI, R-II Holdings, Inc.
(RHI), HCPTI, and Mr. Reghis Romero II, raising constitutional issues.
The NHA reported that thirty-four (34) temporary housing structures and
twenty-one (21) permanent housing structures had been turned over by respondent
RBI. It claimed that 2,510 beneficiary-families belonging to the poorest of the
poor had been transferred to their permanent homes and benefited from the Project.
The Issues
The grounds presented in the instant petition are:

I
NEITHER RESPONDENT NHA NOR RESPONDENT R-II BUILDERS MAY

VALIDLY RECLAIM FORESHORE AND SUBMERGED LAND BECAUSE:
1. RESPONDENT NHA AND R-II BUILDERS WERE NEVER GRANTED

ANY POWER AND AUTHORITY TO RECLAIM LANDS OF THE PUBLIC
DOMAIN AS THIS POWER IS VESTED EXCLUSIVELY WITH THE PEA.
2. EVEN ASSUMING THAT RESPONDENTS NHA AND R-II BUILDERS

WERE GIVEN THE POWER AND AUTHORITY TO RECLAIM FORESHORE AND
SUBMERGED LAND, THEY WERE NEVER GIVEN THE AUTHORITY BY
THE DENR TO DO SO.
II

II
RESPONDENT R-II BUILDERS CANNOT ACQUIRE THE RECLAIMED

FORESHORE AND SUBMERGED LAND AREAS BECAUSE:
1. THE RECLAIMED FORESHORE AND SUBMERGED PARCELS OF

LAND ARE INALIENABLE PUBLIC LANDS WHICH ARE BEYOND THE
COMMERCE OF MAN.
2. ASSUMING ARGUENDO THAT THE SUBJECT RECLAIMED FORESHORE

AND SUBMERGED PARCELS OF LAND WERE ALREADY DECLARED
ALIENABLE LANDS OF THE PUBLIC DOMAIN, RESPONDENT R-II BUILDERS
STILL COULD NOT ACQUIRE THE SAME BECAUSE THERE WAS NEVER ANY
DECLARATION THAT THE SAID LANDS WERE NO LONGER NEEDED FOR
PUBLIC USE.
3. EVEN ASSUMING THAT THE SUBJECT RECLAIMED LANDS ARE

ALIENABLE AND NO LONGER NEEDED FOR PUBLIC USE, RESPONDENT R-
II BUILDERS STILL CANNOT ACQUIRE THE SAME BECAUSE THERE
WAS NEVER ANY LAW AUTHORIZING THE SALE THEREOF.
4. THERE WAS NEVER ANY PUBLIC BIDDING

AWARDING OWNERSHIP OF THE SUBJECT LAND TO
RESPONDENT R-II BUILDERS.
5. ASSUMING THAT ALL THE REQUIREMENTS FOR A VALID TRANSFER

OF ALIENABLE PUBLIC HAD BEEN PERFORMED, RESPONDENT R-II
BUILDERS, BEING PRIVATE CORPORATION IS NONETHELESS
EXPRESSLYPROHIBITED BY THE PHILIPPINE CONSTITUTION TO ACQUIRE
LANDS OF THE PUBLIC DOMAIN.
III
RESPONDENT HARBOUR, BEING A PRIVATE CORPORATION WHOSE

MAJORITY STOCKS ARE OWNED AND CONTROLLED BY RESPONDENT
ROMERO’S CORPORATIONS – R-II BUILDERS AND R-II HOLDINGS – IS
DISQUALIFIED FROM BEING A TRANSFEREE OF PUBLIC LAND.
IV
RESPONDENTS MUST BE COMPELLED TO DISCLOSE ALL INFORMATION

RELATED TO THE SMOKEY MOUNTAIN DEVELOPMENT AND RECLAMATION
PROJECT.
The Court’s Ruling
Before we delve into the substantive issues raised in this petition, we will
first deal with several procedural matters raised by respondents.
Whether petitioner has the requisite locus standi to file this case
Respondents argue that petitioner Chavez has no legal standing to file the
petition.
Only a person who stands to be benefited or injured by the judgment in the

Only a person who stands to be benefited or injured by the judgment in the
suit or entitled to the avails of the suit can file a complaint or
petition.[47] Respondents claim that petitioner is not a proper party-in-interest
as he was unable to show that ―he has sustained or is in immediate or
imminent danger of sustaining some direct and personal injury as a result of
the execution and enforcement of the assailed contracts or agreements.‖
[48]
Moreover, they assert that not all government contracts can justify a
taxpayer’s suit especially when no public funds were utilized in contravention
of the Constitution or a law.
We explicated in Chavez v. PCGG[49] that in cases where issues of
transcendental public importance are presented, there is no necessity to show
that petitioner has experienced or is in actual danger of suffering direct and
personal injury as the requisite injury is assumed. We find our ruling
in Chavez v. PEA[50] as conclusive authority on locus standi in the case at bar
since the issues raised in this petition are averred to be in breach of the fair
diffusion of the country’s natural resources and the constitutional right of a
citizen to information which have been declared to be matters of
transcendental public importance. Moreover, the pleadings especially those of
respondents readily reveal that public funds have been indirectly utilized in
the Project by means of Smokey Mountain Project Participation Certificates
(SMPPCs) bought by some government agencies.
Hence, petitioner, as a taxpayer, is a proper party to the instant petition

before the court.
Whether petitioner’s direct recourse to this Court was proper
Respondents are one in asserting that petitioner circumvents the principle of

hierarchy of courts in his petition. Judicial hierarchy was made clear in the case
ofPeople v. Cuaresma, thus:
There is after all a hierarchy of courts. That hierarchy is determinative of the venue of
appeals, and should also serve as a general determinant of the appropriate forum for
petitions for the extraordinary writs. A becoming regard for 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
established policy. It is a policy that is 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.[51] x x x
The OSG claims that the jurisdiction over petitions for prohibition and
mandamus is concurrent with other lower courts like the Regional Trial
Courts and the Court of Appeals. Respondent NHA argues that the instant
petition is misfiled because it does not introduce special and important reasons
or exceptional and compelling circumstances to warrant direct recourse to this
Court and that the lower courts are more equipped for factual issues since this

Court and that the lower courts are more equipped for factual issues since this
Court is not a trier of facts. Respondents RBI and RHI question the filing of
the petition as this Court should not be unduly burdened with ―repetitions,
invocation of jurisdiction over constitutional questions it had previously
resolved and settled.‖
In the light of existing jurisprudence, we find paucity of merit in

respondents’ postulation.
While direct recourse to this Court is generally frowned upon and

discouraged, we have however ruled in Santiago v. Vasquez that such resort to us
may be allowed in certain situations, wherein this Court ruled that petitions for
certiorari, prohibition, or mandamus, though cognizable by other courts, may
directly be filed with us if ―the redress desired cannot be obtained in the
appropriate courts or where exceptional compelling circumstances justify
availment of a remedy within and calling for the exercise of [this Court’s] primary
jurisdiction.‖[52]
The instant petition challenges the constitutionality and legality of the

SMDRP involving several hectares of government land and hundreds of millions
of funds of several government agencies. Moreover, serious constitutional
challenges are made on the different aspects of the Project which allegedly affect
the right of Filipinos to the distribution of natural resources in the country and the
right to information of a citizen—matters which have been considered to be of
extraordinary significance and grave consequence to the public in general. These
concerns in the instant action compel us to turn a blind eye to the judicial structure
meant to provide an orderly dispensation of justice and consider the instant petition
as a justified deviation from an established precept.
Core factual matters undisputed
Respondents next challenge the projected review by this Court of the alleged
factual issues intertwined in the issues propounded by petitioner. They listed a
copious number of questions seemingly factual in nature which would make this
Court a trier of facts.[53]
We find the position of respondents bereft of merit.
For one, we already gave due course to the instant petition in our January 18,
2005 Resolution.[54] In said issuance, the parties were required to make clear and
concise statements of established facts upon which our decision will be based.
Secondly, we agree with petitioner that there is no necessity for us to make

any factual findings since the facts needed to decide the instant petition are well
established from the admissions of the parties in their pleadings[55] and those
derived from the documents appended to said submissions. Indeed, the core facts

which are the subject matter of the numerous issues raised in this petition are
undisputed.
Now we will tackle the issues that prop up the instant petition.
Since petitioner has cited our decision in PEA as basis for his postulations in a
number of issues, we first resolve the query—is PEA applicable to the case at
bar?
A juxtaposition of the facts in the two cases constrains the Court to rule in
the negative.
The Court finds that PEA is not a binding precedent to the instant petition
because the facts in said case are substantially different from the facts and
circumstances in the case at bar, thus:
(1) The reclamation project in PEA was undertaken through a JVA entered
into between PEA and AMARI. The reclamation project in the instant NHA case
was undertaken by the NHA, a national government agency in consultation with
PEA and with the approval of two Philippine Presidents;
(2) In PEA, AMARI and PEA executed a JVA to develop

the Freedom Islands and reclaim submerged areas without public bidding on April
25, 1995. In the instant NHA case, the NHA and RBI executed a JVA after RBI
was declared the winning bidder on August 31, 1992 as the JVA partner of the
NHA in the SMDRP after compliance with the requisite public bidding.
(3) In PEA, there was no law or presidential proclamation classifying the

lands to be reclaimed as alienable and disposal lands of public domain. In this RBI
case, MO 415 of former President Aquino and Proclamation No. 39 of then
President Ramos, coupled with Special Patents Nos. 3591, 3592, and 3598,
classified the reclaimed lands as alienable and disposable;
(4) In PEA, the Chavez petition was filed before the amended JVA was
executed by PEA and AMARI. In this NHA case, the JVA and subsequent
amendments were already substantially implemented. Subsequently, the Project
was terminated through a MOA signed on August 27, 2003. Almost one year later
onAugust 5, 2004, the Chavez petition was filed;
(5) In PEA, AMARI was considered to be in bad faith as it signed the

amended JVA after the Chavez petition was filed with the Court and after Senate
Committee Report No. 560 was issued finding that the subject lands are inalienable
lands of public domain. In the instant petition, RBI and other respondents are
considered to have signed the agreements in good faith as the Project was
terminated even before the Chavez petition was filed;
(6) The PEA-AMARI JVA was executed as a result of direct negotiation

between the parties and not in accordance with the BOT Law. The NHA-RBI JVA
between the parties and not in accordance with the BOT Law. The NHA-RBI JVA
and subsequent amendments constitute a BOT contract governed by the BOT Law;
and
(7) In PEA, the lands to be reclaimed or already reclaimed were

transferred to PEA, a government entity tasked to dispose of public lands under
Executive Order No. (EO) 525.[56] In the NHA case, the reclaimed lands were
transferred to NHA, a government entity NOT tasked to dispose of public land and
therefore said alienable lands were converted to patrimonial lands upon their
transfer to NHA.[57]
Thus the PEA Decision[58] cannot be considered an authority or precedent to

the instant case. The principle of stare decisis[59] has no application to the
different factual setting of the instant case.
We will now dwell on the substantive issues raised by petitioner. After a

perusal of the grounds raised in this petition, we find that most of these issues
are moored on our PEA Decision which, as earlier discussed, has no
application to the instant petition. For this reason alone, the petition can
already be rejected. Nevertheless, on the premise of the applicability of said
decision to the case at bar, we will proceed to resolve said issues.
First Issue: Whether respondents NHA and RBI have been granted
the power and authority to reclaim lands of the public domain as
this power is vested exclusively in PEA as claimed by petitioner
Petitioner contends that neither respondent NHA nor respondent RBI may
validly reclaim foreshore and submerged land because they were not given any
power and authority to reclaim lands of the public domain as this power was
delegated by law to PEA.
Asserting that existing laws did not empower the NHA and RBI to reclaim
lands of public domain, the Public Estates Authority (PEA), petitioner claims, is
―the primary authority for the reclamation of all foreshore and submerged lands of
public domain,‖ and relies on PEA where this Court held:
Moreover, Section 1 of Executive Order No. 525 provides that PEA ―shall be
primarily responsible for integrating, directing, and coordinating all reclamation projects
for and on behalf of the National Government.‖ The same section also states that ―[A]ll
reclamation projects shall be approved by the President upon recommendation of the PEA,
and shall be undertaken by the PEA or through a proper contract executed by it with any
person or entity; x x x.‖ Thus, under EO No. 525, in relation to PD No. 3-A and PD No.
1084, PEA became the primary implementing agency of the National Government to
reclaim foreshore and submerged lands of the public domain. EO No. 525 recognized PEA
as the government entity ―to undertake the reclamation of lands and ensure their maximum
utilization in promoting public welfare and interests.‖ Since large portions of these

utilization in promoting public welfare and interests.‖ Since large portions of these
reclaimed lands would obviously be needed for public service, there must be a formal
declaration segregating reclaimed lands no longer needed for public service from those still
needed for public service.[60]
In the Smokey Mountain Project, petitioner clarifies that the reclamation was
not done by PEA or through a contract executed by PEA with another person
or entity but by the NHA through an agreement with respondent
RBI. Therefore, he concludes that the reclamation is null and void.
Petitioner’s contention has no merit.
EO 525 reads:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of the
National Government. All reclamation projects shall be approved by the President upon
recommendation of the PEA, and shall be undertaken by the PEA or through a proper
contract executed by it with any person or entity; Provided, that, reclamation projects of
any national government agency or entity authorized under its charter shall be
undertaken in consultation with the PEA upon approval of the President. (Emphasis
supplied.)
The aforequoted provision points to three (3) requisites for a legal and valid
reclamation project, viz:
(1) approval by the President;

(2) favorable recommendation of PEA; and
(3) undertaken by any of the following:
a. by PEA
b. by any person or entity pursuant to a contract it
executed with PEA
c. by the National Government agency or entity
authorized under its charter to reclaim lands subject to
consultation with PEA
Without doubt, PEA under EO 525 was designated as the agency primarily
responsible for integrating, directing, and coordinating all reclamation projects.
Primarily means ―mainly, principally, mostly, generally.‖ Thus, not all reclamation
projects fall under PEA’s authority of supervision, integration, and
coordination. The very charter of PEA, PD 1084,[61] does not mention that PEA
has the exclusive and sole power and authority to reclaim lands of public
domain. EO 525 even reveals the exception—reclamation projects by a national
government agency or entity authorized by its charter to reclaim land. One
example is EO 405 which authorized the Philippine Ports Authority (PPA) to
reclaim and develop submerged areas for port related purposes. Under its charter,

reclaim and develop submerged areas for port related purposes. Under its charter,
PD 857, PPA has the power ―to reclaim, excavate, enclose or raise any of the
lands‖ vested in it.
Thus, while PEA under PD 1084 has the power to reclaim land and under
EO 525 is primarily responsible for integrating, directing and coordinating
reclamation projects, such authority is NOT exclusive and such power to reclaim
may be granted or delegated to another government agency or entity or may even
be undertaken by the National Government itself, PEA being only an agency and a
part of the National Government.
Let us apply the legal parameters of Sec. 1, EO 525 to the reclamation phase
of SMDRP. After a scrutiny of the facts culled from the records, we find that the
project met all the three (3) requirements, thus:
1. There was ample approval by the President of the Philippines; as a

matter of fact, two Philippine Presidents approved the same, namely: Presidents
Aquino and Ramos. President Aquino sanctioned the reclamation of both the
SMDRP housing and commercial-industrial sites through MO 415 (s. 1992) which
approved the SMDRP under Sec. 1 and directed NHA ―x x x to implement the
Smokey Mountain Development Plan and Reclamation of the Area across
R-10through a private sector joint venture scheme at the least cost to government‖
under Section 3.
For his part, then President Ramos issued Proclamation No. 39 (s. 1992)
which expressly reserved the Smokey Mountain Area and the Reclamation Area
for a housing project and related commercial/industrial development.
Moreover, President Ramos issued Proclamation No. 465 (s. 1994) which
authorized the increase of the Reclamation Area from 40 hectares of
foreshore and submerged land of the Manila Bay to 79 hectares. It speaks
of the reclamation of 400,000 square meters, more or less, of the foreshore
and submerged lands of Manila Bay adjoining R-10 as an enabling
component of the SMDRP.
As a result of Proclamations Nos. 39 and 465, Special Patent No. 3591

covering 211,975 square meters of Smokey Mountain, Special Patent No. 3592
covering 401,485 square meters of reclaimed land, and Special Patent No. 3598
covering another 390,000 square meters of reclaimed land were issued by the
DENR.
Thus, the first requirement of presidential imprimatur on the SMDRP has

been satisfied.
2. The requisite favorable endorsement of the reclamation phase was

impliedly granted by PEA. President Aquino saw to it that there was coordination
of the project with PEA by designating its general manager as member of the
of the project with PEA by designating its general manager as member of the
EXECOM tasked to supervise the project implementation. The assignment was
made in Sec. 2 of MO 415 which provides:
Section 2. An Executive Committee is hereby created to oversee the

implementation of the Plan, chaired by the NCR-CORD, with the heads of the following
agencies as members: The National Housing Authority, the City of Manila, the Department
of Public Works and Highways, the Public Estates Authority, the Philippine Ports
Authority, the Department of Environment and Natural Resources and the Development
Bank of the Philippines. (Emphasis supplied.)
The favorable recommendation by PEA of the JVA and subsequent

amendments were incorporated as part of the recommendations of the EXECOM
created under MO 415. While there was no specific recommendation on the
SMDRP emanating solely from PEA, we find that the approbation of the Project
and the land reclamation as an essential component by the EXECOM of which
PEA is a member, and its submission of the SMDRP and the agreements on the
Project to the President for approval amply met the second requirement of EO 525.
3. The third element was also present—the reclamation was undertaken

either by PEA or any person or entity under contract with PEA or by the National
Government agency or entity authorized under its charter to reclaim lands subject
to consultation with PEA. It cannot be disputed that the reclamation phase was not
done by PEA or any person or entity under contract with PEA. However, the
reclamation was implemented by the NHA, a national government agency whose
authority to reclaim lands under consultation with PEA is derived from its
charter—PD 727 and other pertinent laws—RA 7279[62] and RA 6957 as amended
by RA 7718.
While the authority of NHA to reclaim lands is challenged by petitioner, we

find that the NHA had more than enough authority to do so under existing
laws. While PD 757, the charter of NHA, does not explicitly mention
―reclamation‖ in any of the listed powers of the agency, we rule that the NHA has
an implied power to reclaim land as this is vital or incidental to effectively,
logically, and successfully implement an urban land reform and housing program
enunciated in Sec. 9 of Article XIII of the 1987 Constitution.
Basic in administrative law is the doctrine that a government agency or

office has express and implied powers based on its charter and other pertinent
statutes. Express powers are those powers granted, allocated, and delegated to a
government agency or office by express provisions of law. On the other hand,
implied powers are those that can be inferred or are implicit in the wordings of the
law[63] or conferred by necessary or fair implication in the enabling
act.[64] In Angara v. Electoral Commission, the Court clarified and stressed that
when a general grant of power is conferred or duty enjoined, every particular
power necessary for the exercise of the one or the performance of the other is also
conferred by necessary implication.[65] It was also explicated that when the statute
does not specify the particular method to be followed or used by a government
does not specify the particular method to be followed or used by a government
agency in the exercise of the power vested in it by law, said agency has the
authority to adopt any reasonable method to carry out its functions.[66]
The power to reclaim on the part of the NHA is implicit from PD 757, RA
7279, MO 415, RA 6957, and PD 3-A,[67] viz:
1. NHA’s power to reclaim derived from PD 757 provisions:
a. Sec. 3 of PD 757 implies that reclamation may be resorted to in order

to attain the goals of NHA:
Section 3. Progress and Objectives. The Authority shall have the following
purposes and objectives:
xxxx
b) To undertake housing, development, resettlement or other activities as would

enhance the provision of housing to every Filipino;
c) To harness and promote private participation in housing ventures in terms of

capital expenditures, land, expertise, financing and other facilities for the sustained growth
of the housing industry. (Emphasis supplied.)
Land reclamation is an integral part of the development of resources for

some of the housing requirements of the NHA. Private participation in housing
projects may also take the form of land reclamation.
b. Sec. 5 of PD 757 serves as proof that the NHA, as successor of the

Tondo Foreshore Development Authority (TFDA), has the power to reclaim, thus:
Section 5. Dissolution of Existing Housing Agencies. The People's Homesite and
Housing Corporation (PHHC), the Presidential Assistant on Housing Resettlement
Agency (PAHRA), the Tondo Foreshore Development Authority (TFDA), the
Central Institute for the Training and Relocation of Urban Squatters (CITRUS), the
Presidential Committee for Housing and Urban Resettlement (PRECHUR), Sapang
Palay Development Committee, Inter-Agency Task Force to Undertake the
Relocation of Families in Barrio Nabacaan, Villanueva, Misamis Oriental and all
other existing government housing and resettlement agencies, task forces and ad-hoc
committees, are hereby dissolved. Their powers and functions, balance of
appropriations, records, assets, rights, and choses in action, are transferred to,
vested in, and assumed by the Authority. x x x (Emphasis supplied.)
PD 570 dated October 30, 1974 created the TFDA, which defined its
objectives, powers, and functions. Sec. 2 provides:
Section 2. Objectives and Purposes. The Authority shall have the following
purposes and objectives:

a) To undertake all manner of activity, business or development projects for the
establishment of harmonious, comprehensive, integrated and healthy living community in
the Tondo Foreshoreland and its resettlement site;
b) To undertake and promote the physical and socio-economic amelioration of

the Tondo Foreshore residents in particular and the nation in general (Emphasis
supplied.)
The powers and functions are contained in Sec. 3, to wit:
a) To develop and implement comprehensive and integrated urban renewal

programs for the Tondo Foreshore and Dagat-dagatan lagoon and/or any other
additional/alternative resettlement site and to formulate and enforce general and specific
policies for its development which shall ensure reasonable degree of compliance with
environmental standards.
b) To prescribe guidelines and standards for the reservation, conservation

and utilization of public lands covering the Tondo Foreshore land and its resettlement
sites;
c) To construct, acquire, own, lease, operate and maintain infrastructure facilities,

housing complex, sites and services;
d) To determine, regulate and supervise the establishment and operation of housing,

sites, services and commercial and industrial complexes and any other enterprises to be
constructed or established within the Tondo Foreshore and its resettlement sites;
e) To undertake and develop, by itself or through joint ventures with other public or
private entities, all or any of the different phases of development of the Tondo
Foreshore land and its resettlement sites;
f) To acquire and own property, property-rights and interests, and encumber or

otherwise dispose of the same as it may deem appropriate (Emphasis supplied.)
From the foregoing provisions, it is readily apparent that the TFDA has the
explicit power to develop public lands covering the Tondo foreshore land and any
other additional and alternative resettlement sites under letter b, Sec. 3 of PD
570. Since the additional and/or alternative sites adjacent to Tondo foreshore land
cover foreshore and submerged areas, the reclamation of said areas is necessary in
order to convert them into a comprehensive and integrated resettlement housing
project for the slum dwellers and squatters of Tondo. Since the powers of TFDA
were assumed by the NHA, then the NHA has the power to reclaim lands in the
Tondo foreshore area which covers the 79-hectare land subject of Proclamations
Nos. 39 and 465 and Special Patents Nos. 3592 and 3598.
c. Sec. 6 of PD 757 delineates the functions and powers of the NHA

which embrace the authority to reclaim land, thus:
Sec. 6. Powers and functions of the Authority.—The Authority shall have the

Sec. 6. Powers and functions of the Authority.—The Authority shall have the
following powers and functions to be exercised by the Board in accordance with its
established national human settlements plan prepared by the Human Settlements
Commission:
(a) Develop and implement the comprehensive and integrated housing

program provided for in Section hereof;
xxxx
(c) Prescribe guidelines and standards for the reservation, conservation

and utilization of public lands identified for housing and resettlement;
xxxx
(e) Develop and undertake housing development and/or resettlement

projects through joint ventures or other arrangements with public and private entities;
xxxx
(k) Enter into contracts whenever necessary under such terms and conditions as
it may deem proper and reasonable;
(l) Acquire property rights and interests and encumber or otherwise dispose
the same as it may deem appropriate;
xxxx
(s) Perform such other acts not inconsistent with this Decree, as may be
necessary to effect the policies and objectives herein declared. (Emphasis supplied.)
The NHA’s authority to reclaim land can be inferred from the aforequoted
provisions. It can make use of public lands under letter (c) of Sec. 6 which
includes reclaimed land as site for its comprehensive and integrated housing
projects under letter (a) which can be undertaken through joint ventures with
private entities under letter (e). Taken together with letter (s) which
authorizes NHA to perform such other activities ―necessary to effect the
policies and objectives‖ of PD 757, it is safe to conclude that the NHA’s
power to reclaim lands is a power that is implied from the exercise of its
explicit powers under Sec. 6 in order to effectively accomplish its policies and
objectives under Sec. 3 of its charter. Thus, the reclamation of land is an
indispensable component for the development and construction of the
SMDRP housing facilities.
2. NHA’s implied power to reclaim land is enhanced by RA 7279.
PD 757 identifies NHA’s mandate to ―[d]evelop and undertake housing

development and/or resettlement projects through joint ventures or other
arrangements with public and private entities.‖
The power of the NHA to undertake reclamation of land can be inferred

from Secs. 12 and 29 of RA 7279, which provide:
from Secs. 12 and 29 of RA 7279, which provide:
Section 12. Disposition of Lands for Socialized Housing.—The National Housing

Authority, with respect to lands belonging to the National Government, and the local
government units with respect to other lands within their respective localities, shall
coordinate with each other to formulate and make available various alternative schemes
for the disposition of lands to the beneficiaries of the Program. These schemes shall not
be limited to those involving transfer of ownership in fee simple but shall include lease,
with option to purchase, usufruct or such other variations as the local government units or
the National Housing Authority may deem most expedient in carrying out the purposes of
this Act.
xxxx
Section 29. Resettlement.—With two (2) years from the effectivity of this Act, the
local government units, in coordination with the National Housing Authority, shall
implement therelocation and resettlement of persons living in danger areas such as
esteros, railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and in other
public places as sidewalks, roads, parks, and playgrounds. The local government unit, in
coordination with the National Housing Authority, shall provide relocation or resettlement
sites with basic services and facilities and access to employment and livelihood
opportunities sufficient to meet the basic needs of the affected families. (Emphasis
supplied.)
Lands belonging to the National Government include foreshore and

submerged lands which can be reclaimed to undertake housing development and
resettlement projects.
3. MO 415 explains the undertaking of the NHA in SMDRP:
WHEREAS, Memorandum Order No. 161-A mandated the National Housing

Authority to conduct feasibility studies and develop low-cost housing projects at the
dumpsites of Metro Manila;
WHEREAS, the National Housing Authority has presented a viable Conceptual

Plan to convert the Smokey Mountain dumpsite into a habitable housing project inclusive
of the reclamation area across R-10 as enabling component of the Project;
WHEREAS, the said Plan requires the coordinated and synchronized efforts of the
City of Manila and other government agencies and instrumentalities to ensure effective
and efficient implementation;
WHEREAS, the government encourages private sector initiative in the

implementation of its projects. (Emphasis supplied.)
Proceeding from these ―whereas‖ clauses, it is unequivocal that reclamation of

land in the Smokey Mountain area is an essential and vital power of the NHA
to effectively implement its avowed goal of developing low-cost housing units
to effectively implement its avowed goal of developing low-cost housing units
at the Smokey Mountain dumpsites. The interpretation made by no less than
the President of the Philippines as Chief of the Executive Branch, of which the
NHA is a part, must necessarily command respect and much weight and
credit.
4. RA 6957 as amended by RA 7718—the BOT Law—serves as an exception

to PD 1084 and EO 525.
Based on the provisions of the BOT Law and Implementing Rules and
Regulations, it is unequivocal that all government infrastructure agencies like
the NHA can undertake infrastructure or development projects using the
contractual arrangements prescribed by the law, and land reclamation is one of
the projects that can be resorted to in the BOT project implementation under
the February 10, 1992 Joint Resolution No. 3 of the 8th Congress.
From the foregoing considerations, we find that the NHA has ample implied
authority to undertake reclamation projects.
Even without an implied power to reclaim lands under NHA’s charter, we

rule that the authority granted to NHA, a national government agency, by the
President under PD 3-A reinforced by EO 525 is more than sufficient statutory
basis for the reclamation of lands under the SMDRP.
PD 3-A is a law issued by then President Ferdinand E. Marcos under his

martial law powers on September 23, 1972. It provided that ―[t]he provisions of
any law to the contrary notwithstanding, the reclamation of areas, underwater,
whether foreshore or inland, shall be limited to the National Government or any
person authorized by it under the proper contract.‖ It repealed, in effect, RA 1899
which previously delegated the right to reclaim lands to municipalities and
chartered cities and revested it to the National Government.[68] Under PD 3-A,
―national government‖ can only mean the Executive Branch headed by the
President. It cannot refer to Congress as it was dissolved and abolished at the time
of the issuance of PD 3-A on September 23, 1972. Moreover, the Executive
Branch is the only implementing arm in the government with the equipment,
manpower, expertise, and capability by the very nature of its assigned powers and
functions to undertake reclamation projects. Thus, under PD 3-A, the Executive
Branch through the President can implement reclamation of lands through any of
its departments, agencies, or offices.
Subsequently, on February 4, 1977, President Marcos issued PD 1084

creating the PEA, which was granted, among others, the power ―to reclaim land,
including foreshore and submerged areas by dredging, filling or other means or to
acquire reclaimed lands.‖ The PEA’s power to reclaim is not however exclusive as
can be gleaned from its charter, as the President retained his power under PD 3-A
to designate another agency to reclaim lands.
On February 14, 1979, EO 525 was issued. It granted PEA primary

On February 14, 1979, EO 525 was issued. It granted PEA primary
responsibility for integrating, directing, and coordinating reclamation projects for
and on behalf of the National Government although other national government
agencies can be designated by the President to reclaim lands in coordination with
the PEA. Despite the issuance of EO 525, PD 3-A remained valid and
subsisting. Thus, the National Government through the President still retained the
power and control over all reclamation projects in the country.
The power of the National Government through the President over

reclamation of areas, that is, underwater whether foreshore or inland, was made
clear in EO 543[69] which took effect on June 24, 2006. Under EO 543, PEA was
renamed the Philippine Reclamation Authority (PRA) and was granted the
authority to approve reclamation projects, a power previously reposed in the
President under EO 525. EO 543 reads:
Section 1. The power of the President to approve reclamation projects is

hereby delegated to the Philippine Reclamation Authority [formerly PEA], through its
governing board, subject to compliance with existing laws and rules and subject to the
condition that reclamation contracts to be executed with any person or entity go through
public bidding.
Section 2. Nothing in the Order shall be construed as diminishing the

President’s authority to modify, amend or nullify PRA’s action.
Section 3. All executive issuances inconsistent with this Executive Order are
hereby repealed or amended accordingly. (Emphasis supplied.)
Sec. 2 of EO 543 strengthened the power of control and supervision of the

President over reclamation of lands as s/he can modify, amend, or nullify the
action of PEA (now PRA).
From the foregoing issuances, we conclude that the President’s delegation to

NHA, a national government agency, to reclaim lands under the SMDRP, is
legal and valid, firmly anchored on PD 3-A buttressed by EO 525
notwithstanding the absence of any specific grant of power under its charter,
PD 757.
Second Issue: Whether respondents NHA and RBI were given the
power and authority by DENR to reclaim foreshore and submerged
lands
Petitioner Chavez puts forth the view that even if the NHA and RBI were
granted the authority to reclaim, they were not authorized to do so by the DENR.
Again, reliance is made on our ruling in PEA where it was held that the
DENR’s authority is necessary in order for the government to validly reclaim
foreshore and submerged lands. In PEA, we expounded in this manner:

foreshore and submerged lands. In PEA, we expounded in this manner:
As manager, conservator and overseer of the natural resources of the State, DENR
exercises ―supervision and control over alienable and disposable public lands.‖ DENR also
exercises ―exclusive jurisdiction on the management and disposition of all lands of the
public domain.‖ Thus, DENR decides whether areas under water, like foreshore or
submerged areas ofManila Bay, should be reclaimed or not. This means that PEA needs
authorization from DENR before PEA can undertake reclamation projects in Manila Bay,
or in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the
public domain. Hence, DENR decides whether reclaimed lands of PEA should be
classified as alienable under Sections 6 and 7 of CA No. 141. Once DENR decides that the
reclaimed lands should be so classified, it then recommends to the President the issuance of
a proclamation classifying the lands as alienable or disposable lands of the public domain
open to disposition. We note that then DENR Secretary Fulgencio S. Factoran, Jr.
countersigned Special Patent No. 3517 in compliance with the Revised Administrative
Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under
water, while PEA is vested with the power to undertake the physical reclamation of areas
under water, whether directly or through private contractors. DENR is also empowered to
classify lands of the public domain into alienable or disposable lands subject to the
approval of the President. On the other hand, PEA is tasked to develop, sell or lease the
reclaimed alienable lands of the public domain.[70]
Despite our finding that PEA is not a precedent to the case at bar, we find after
all that under existing laws, the NHA is still required to procure DENR’s
authorization before a reclamation project in Manila Bay or in any part of
the Philippines can be undertaken. The requirement applies to PEA, NHA, or
any other government agency or office granted with such power under the
law.
Notwithstanding the need for DENR permission, we nevertheless find

petitioner’s position bereft of merit.
The DENR is deemed to have granted the authority to reclaim in the Smokey
Mountain Project for the following reasons:
1. Sec. 17, Art. VII of the Constitution provides that ―the President shall
have control of all executive departments, bureaus and offices.‖ The President is
assigned the task of seeing to it that all laws are faithfully executed. ―Control,‖ in
administrative law, means ―the power of an officer to alter, modify, nullify or set
aside what a subordinate officer has done in the performance of his duties and to
substitute the judgment of the former for that of the latter.‖[71]
As such, the President can exercise executive power motu proprio and can
supplant the act or decision of a subordinate with the President’s own. The DENR
is a department in the executive branch under the President, and it is only an alter

is a department in the executive branch under the President, and it is only an alter
ego of the latter. Ordinarily the proposed action and the staff work are initially
done by a department like the DENR and then submitted to the President for
approval. However, there is nothing infirm or unconstitutional if the President
decides on the implementation of a certain project or activity and requires said
department to implement it. Such is a presidential prerogative as long as it
involves the department or office authorized by law to supervise or execute the
Project. Thus, as in this case, when the President approved and ordered the
development of a housing project with the corresponding reclamation work,
making DENR a member of the committee tasked to implement the project, the
required authorization from the DENR to reclaim land can be deemed satisfied. It
cannot be disputed that the ultimate power over alienable and disposable public
lands is reposed in the President of the Philippines and not the DENR
Secretary. To still require a DENR authorization on the Smokey Mountain when
the President has already authorized and ordered the implementation of the Project
would be a derogation of the powers of the President as the head of the executive
branch. Otherwise, any department head can defy or oppose the implementation of
a project approved by the head of the executive branch, which is patently illegal
and unconstitutional.
In Chavez v. Romulo, we stated that when a statute imposes a specific duty on

the executive department, the President may act directly or order the said
department to undertake an activity, thus:
[A]t the apex of the entire executive officialdom is the President. Section 17,
Article VII of the Constitution specifies [her] power as Chief executive departments,
bureaus and offices. [She] shall ensure that the laws be faithfully executed. As Chief
Executive, President Arroyo holds the steering wheel that controls the course of her
government. She lays down policies in the execution of her plans and programs. Whatever
policy she chooses, she has her subordinates to implement them. In short, she has the
power of control. Whenever a specific function is entrusted by law or regulation to her
subordinate, she may act directly or merely direct the performance of a duty x x
x. Such act is well within the prerogative of her office(emphasis supplied).[72]
Moreover, the power to order the reclamation of lands of public domain is

reposed first in the Philippine President. The Revised Administrative Code of 1987
grants authority to the President to reserve lands of public domain for settlement
for any specific purpose, thus:
Section 14. Power to Reserve Lands of the Public and Private Domain of the
Government.—(1) The President shall have the power to reserve for settlement or public
use, and for specific public purposes, any of the lands of the public domain, the use of
which is not otherwise directed by law. The reserved land shall thereafter remain subject to
the specific public purpose indicated until otherwise provided by law or
proclamation. (Emphasis supplied.)

President Aquino reserved the area of the Smokey Mountain dumpsite for
settlement and issued MO 415 authorizing the implementation of the Smokey
Mountain Development Project plus the reclamation of the area across
R-10. Then President Ramos issued Proclamation No. 39 covering the 21-
hectare dumpsite and the 40-hectare commercial/industrial area, and
Proclamation No. 465 and MO 415 increasing the area of foreshore and
submerged lands of Manila Bay to be reclaimed from 40 to 79
hectares. Having supervision and control over the DENR, both Presidents
directly assumed and exercised the power granted by the Revised
Administrative Code to the DENR Secretary to authorize the NHA to reclaim
said lands. What can be done indirectly by the DENR can be done directly by
the President. It would be absurd if the power of the President cannot be
exercised simply because the head of a department in the executive branch has
not acted favorably on a project already approved by the President. If such
arrangement is allowed then the department head will become more powerful
than the President.
2. Under Sec. 2 of MO 415, the DENR is one of the members of the

EXECOM chaired by the NCR-CORD to oversee the implementation of the
Project. The EXECOM was the one which recommended approval of the project
plan and the joint venture agreements. Clearly, the DENR retained its power of
supervision and control over the laws affected by the Project since it was tasked to
―facilitate the titling of the Smokey Mountain and of the area to be reclaimed,‖
which shows that it had tacitly given its authority to the NHA to undertake the
reclamation.
3. Former DENR Secretary Angel C. Alcala issued Special Patents Nos.

3591 and 3592 while then Secretary Victor O. Ramos issued Special Patent No.
3598 that embraced the areas covered by the reclamation. These patents conveyed
the lands to be reclaimed to the NHA and granted to said agency the administration
and disposition of said lands for subdivision and disposition to qualified
beneficiaries and for development for mix land use (commercial/industrial) ―to
provide employment opportunities to on-site families and additional areas for port
related activities.‖ Such grant of authority to administer and dispose of lands of
public domain under the SMDRP is of course subject to the powers of the
EXECOM of SMDRP, of which the DENR is a member.
4. The issuance of ECCs by the DENR for SMDRP is but an exercise of

its power of supervision and control over the lands of public domain covered by
the Project.
Based on these reasons, it is clear that the DENR, through its acts and
issuances, has ratified and confirmed the reclamation of the subject lands for the
purposes laid down in Proclamations Nos. 39 and 465.
Third Issue: Whether respondent RBI can acquire reclaimed

Third Issue: Whether respondent RBI can acquire reclaimed
foreshore and submerged lands considered as inalienable and
outside the commerce of man
Petitioner postulates that respondent RBI cannot acquire the reclaimed

foreshore and submerged areas as these are inalienable public lands beyond the
commerce of man based on Art. 1409 of the Civil Code which provides:
Article 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good
customs, public order or public policy;
xxxx
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived.
Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources
are owned by the State and they cannot be alienated except for alienable
agricultural lands of the public domain. One of the State’s natural resources are
lands of public domain which include reclaimed lands.
Petitioner contends that for these reclaimed lands to be alienable, there must
be a law or presidential proclamation officially classifying these reclaimed
lands as alienable and disposable and open to disposition or
concession. Absent such law or proclamation, the reclaimed lands cannot be
the enabling component or consideration to be paid to RBI as these are
beyond the commerce of man.
We are not convinced of petitioner’s postulation.
The reclaimed lands across R-10 were classified alienable and disposable
lands of public domain of the State for the following reasons, viz:
First, there were three (3) presidential proclamations classifying the

reclaimed lands across R-10 as alienable or disposable hence open to disposition or
concession, to wit:
(1) MO 415 issued by President Aquino, of which Sec. 4 states that ―[t]he
land covered by the Smokey Mountain Dumpsite is hereby conveyed to the
National Housing Authority as well as the area to be reclaimed across R-10.‖
The directive to transfer the lands once reclaimed to the NHA implicitly
carries with it the declaration that said lands are alienable and
disposable. Otherwise, the NHA cannot effectively use them in its housing and
disposable. Otherwise, the NHA cannot effectively use them in its housing and
resettlement project.
(2) Proclamation No. 39 issued by then President Ramos by which the

reclaimed lands were conveyed to NHA for subdivision and disposition to
qualified beneficiaries and for development into a mixed land use
(commercial/industrial) to provide employment opportunities to on-site families
and additional areas for port-related activities. Said directive carries with it the
pronouncement that said lands have been transformed to alienable and disposable
lands. Otherwise, there is no legal way to convey it to the beneficiaries.
(3) Proclamation No. 465 likewise issued by President Ramos enlarged

the reclaimed area to 79 hectares to be developed and disposed of in the
implementation of the SMDRP. The authority put into the hands of the NHA to
dispose of the reclaimed lands tacitly sustains the conversion to alienable and
disposable lands.
Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR
anchored on Proclamations Nos. 39 and 465 issued by President Ramos, without
doubt, classified the reclaimed areas as alienable and disposable.
Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465

are explicit declarations that the lands to be reclaimed are classified as alienable
and disposable. We find however that such conclusion is derived and implicit
from the authority given to the NHA to transfer the reclaimed lands to qualified
beneficiaries.
The query is, when did the declaration take effect? It did so only after the
special patents covering the reclaimed areas were issued. It is only on such date
that the reclaimed lands became alienable and disposable lands of the public
domain. This is in line with the ruling in PEA where said issue was clarified and
stressed:
PD No. 1085, coupled with President Aquino’s actual issuance of a special

patent covering the Freedom Islands, is equivalent to an official proclamation
classifying the Freedom Islands as alienable or disposable lands of the public
domain. PD No. 1085 and President Aquino’s issuance of a land patent also constitute a
declaration that theFreedom Islands are no longer needed for public
service. The Freedom Islands are thus alienable or disposable lands of the public domain,
open to disposition or concession to qualified parties.[73] (Emphasis supplied.)
Thus, MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly
taken together with Special Patent Nos. 3591, 3592, and 3598 more than
satisfy the requirement in PEA that ―[t]here must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable or
disposable and open to disposition or concession (emphasis supplied).‖[74]
Apropos the requisite law categorizing reclaimed land as alienable or

Apropos the requisite law categorizing reclaimed land as alienable or
disposable, we find that RA 6957 as amended by RA 7718 provides ample
authority for the classification of reclaimed land in the SMDRP for the repayment
scheme of the BOT project as alienable and disposable lands of public
domain. Sec. 6 of RA 6957 as amended by RA 7718 provides:
For the financing, construction, operation and maintenance of any infrastructure

projects undertaken through the build-operate-and transfer arrangement or any of its
variations pursuant to the provisions of this Act, the project proponent x x x may likewise
be repaid in the form of a share in the revenue of the project or other non-monetary
payments, such as, but not limited to,the grant of a portion or percentage of the
reclaimed land, subject to the constitutional requirements with respect to the ownership of
the land. (Emphasis supplied.)
While RA 6957 as modified by RA 7718 does not expressly declare that the
reclaimed lands that shall serve as payment to the project proponent have become
alienable and disposable lands and opened for disposition; nonetheless, this
conclusion is necessarily implied, for how else can the land be used as the enabling
component for the Project if such classification is not deemed made?
It may be argued that the grant of authority to sell public lands, pursuant
to PEA, does not convert alienable lands of public domain into private or
patrimonial lands. We ruled in PEA that ―alienable lands of public domain must
be transferred to qualified private parties, or to government entities not
tasked to dispose of public lands, before these lands can become private or
patrimonial lands (emphasis supplied).‖[75] To lands reclaimed by PEA or
through a contract with a private person or entity, such reclaimed lands still remain
alienable lands of public domain which can be transferred only to Filipino citizens
but not to a private corporation. This is because PEA under PD 1084 and EO 525
is tasked to hold and dispose of alienable lands of public domain and it is only
when it is transferred to Filipino citizens that it becomes patrimonial property. On
the other hand, the NHA is a government agency not tasked to dispose of public
lands under its charter—The Revised Administrative Code of 1987. The NHA is
an ―end-user agency‖ authorized by law to administer and dispose of reclaimed
lands. The moment titles over reclaimed lands based on the special patents are
transferred to the NHA by the Register of Deeds, they are automatically converted
to patrimonial properties of the State which can be sold to Filipino citizens and
private corporations, 60% of which are owned by Filipinos. The reason is
obvious: if the reclaimed land is not converted to patrimonial land once transferred
to NHA, then it would be useless to transfer it to the NHA since it cannot legally
transfer or alienate lands of public domain. More importantly, it cannot attain its
avowed purposes and goals since it can only transfer patrimonial lands to qualified
beneficiaries and prospective buyers to raise funds for the SMDRP.
From the foregoing considerations, we find that the 79-hectare reclaimed

land has been declared alienable and disposable land of the public domain; and in
the hands of NHA, it has been reclassified as patrimonial property.

Petitioner, however, contends that the reclaimed lands were inexistent prior
to the three (3) Presidential Acts (MO 415 and Proclamations Nos. 39 and 465) and
hence, the declaration that such areas are alienable and disposable land of the
public domain, citing PEA, has no legal basis.
Petitioner’s contention is not well-taken.
Petitioner’s sole reliance on Proclamations Nos. 39 and 465 without taking

into consideration the special patents issued by the DENR demonstrates the
inherent weakness of his proposition. As was ruled in PEA cited by petitioner
himself, ―PD No. 1085, coupled with President Aquino’s actual issuance of a
special patent covering the Freedom Islands is equivalent to an official
proclamation classifying the Freedom islands as alienable or disposable lands of
public domain.‖ In a similar vein, the combined and collective effect of
Proclamations Nos. 39 and 465 with Special Patents Nos. 3592 and 3598 is
tantamount to and can be considered to be an official declaration that the reclaimed
lots are alienable or disposable lands of the public domain.
The reclaimed lands covered by Special Patents Nos. 3591, 3592, and 3598,
which evidence transfer of ownership of reclaimed lands to the NHA, are
official acts of the DENR Secretary in the exercise of his power of supervision
and control over alienable and disposable public lands and his exclusive
jurisdiction over the management and disposition of all lands of public
domain under the Revised Administrative Code of 1987. Special Patent No.
3592 speaks of the transfer of Lots 1 and 2, and RI-003901-000012-D with an
area of 401,485 square meters based on the survey and technical description
approved by the Bureau of Lands. Lastly, Special Patent No. 3598 was issued
in favor of the NHA transferring to said agency a tract of land described in
Plan RL-00-000013 with an area of 390,000 square meters based on the
survey and technical descriptions approved by the Bureau of Lands.
The conduct of the survey, the preparation of the survey plan, the
computation of the technical description, and the processing and preparation of the
special patent are matters within the technical area of expertise of administrative
agencies like the DENR and the Land Management Bureau and are generally
accorded not only respect but at times even finality.[76] Preparation of special
patents calls for technical examination and a specialized review of calculations and
specific details which the courts are ill-equipped to undertake; hence, the latter
defer to the administrative agency which is trained and knowledgeable on such
matters.[77]
Subsequently, the special patents in the name of the NHA were submitted to
the Register of Deeds of the City of Manila for registration, and corresponding
certificates of titles over the reclaimed lots were issued based on said special
patents. The issuance of certificates of titles in NHA’s name automatically
converts the reclaimed lands to patrimonial properties of the NHA. Otherwise, the
lots would not be of use to the NHA’s housing projects or as payment to the BOT
lots would not be of use to the NHA’s housing projects or as payment to the BOT
contractor as the enabling component of the BOT contract. The laws of the land
have to be applied and interpreted depending on the changing conditions and
times. Tempora mutantur et legis mutantur in illis (time changes and laws change
with it). One such law that should be treated differently is the BOT Law (RA
6957) which brought about a novel way of implementing government contracts by
allowing reclaimed land as part or full payment to the contractor of a government
project to satisfy the huge financial requirements of the undertaking. The NHA
holds the lands covered by Special Patents Nos. 3592 and 3598 solely for the
purpose of the SMDRP undertaken by authority of the BOT Law and for
disposition in accordance with said special law. The lands become alienable and
disposable lands of public domain upon issuance of the special patents and become
patrimonial properties of the Government from the time the titles are issued to the
NHA.
As early as 1999, this Court in Baguio v. Republic laid down the
jurisprudence that:
It is true that, once a patent is registered and the corresponding certificate of title is
issued, the land covered by them ceases to be part of the public domain and becomes
private property, and the Torrens Title issued pursuant to the patent becomes indefeasible
upon the expiration of one year from the date of issuance of such patent. [78]
The doctrine was reiterated in Republic v. Heirs of Felipe Alijaga,

Sr.,[79] Heirs of Carlos Alcaraz v. Republic,[80] and the more recent case of Doris
Chiongbian-Oliva v. Republic of the Philippines.[81] Thus, the 79-hectare
reclaimed land became patrimonial property after the issuance of certificates of
titles to the NHA based on Special Patents Nos. 3592 and 3598.
One last point. The ruling in PEA cannot even be applied retroactively to the
lots covered by Special Patents Nos. 3592 (40 hectare reclaimed land) and 3598
(39-hectare reclaimed land). The reclamation of the land under SMDRP was
completed in August 1996 while the PEA decision was rendered on July 9,
2002. In the meantime, subdivided lots forming parts of the reclaimed land were
already sold to private corporations for value and separate titles issued to the
buyers. The Project was terminated through a Memorandum of Agreement signed
on August 27, 2003. The PEA decision became final through the November 11,
2003 Resolution. It is a settled precept that decisions of the Supreme Court can
only be applied prospectively as they may prejudice vested rights if applied
retroactively.
In Benzonan v. Court of Appeals, the Court trenchantly elucidated the

prospective application of its decisions based on considerations of equity and fair
play, thus:
At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as
amended was that enunciated in Monge and Tupas cited above. The petitioners
Benzonan and respondent Pe and the DBP are bound by these decisions for pursuant
to Article 8 of the Civil Code ―judicial decisions applying or interpreting the laws of
the Constitution shall form a part of the legal system of the Philippines.‖ But while

the Constitution shall form a part of the legal system of the Philippines.‖ But while
our decisions form part of the law of the land, they are also subject to Article 4 of the
Civil Code which provides that ―laws shall have no retroactive effect unless the
contrary is provided.‖ This is expressed in the familiar legal maxim lex prospicit, non
respicit, the law looks forward not backward. The rationale against retroactivity is
easy to perceive. The retroactive application of a law usually divests rights that have
already become vested or impairs the obligations of contract and hence, is
unconstitutional.
The same consideration underlies our rulings giving only prospective effect to
decisions enunciating new doctrines. Thus, we emphasized in People v. Jabinal, 55 SCRA
607 [1974] ―x x x when a doctrine of this Court is overruled and a different view is
adopted, the new doctrine should be applied prospectively and should not apply to parties
who had relied on the old doctrine and acted on the faith thereof. [82]
Fourth Issue: Whether respondent RBI can acquire reclaimed

lands when there was no declaration that said lands are no
longer needed for public use
Petitioner Chavez avers that despite the declaration that the reclaimed areas
are alienable lands of the public domain, still, the reclamation is flawed for there
was never any declaration that said lands are no longer needed for public use.
We are not moved by petitioner’s submission.
Even if it is conceded that there was no explicit declaration that the lands are
no longer needed for public use or public service, there was however an implicit
executive declaration that the reclaimed areas R-10 are not necessary anymore for
public use or public service when President Aquino through MO 415 conveyed the
same to the NHA partly for housing project and related commercial/industrial
development intended for disposition to and enjoyment of certain beneficiaries and
not the public in general and partly as enabling component to finance the project.
President Ramos, in issuing Proclamation No. 39, declared, though indirectly,

that the reclaimed lands of the Smokey Mountain project are no longer
required for public use or service, thus:
These parcels of land of public domain are hereby placed under the administration
and disposition of the National Housing Authority to develop, subdivide and dispose to
qualified beneficiaries, as well as its development for mix land use
(commercial/industrial) to provide employment opportunities to on-site families and
additional areas for port related activities. (Emphasis supplied.)
While numerical count of the persons to be benefited is not the determinant

whether the property is to be devoted to public use, the declaration in Proclamation
No. 39 undeniably identifies only particular individuals as beneficiaries to whom
the reclaimed lands can be sold, namely—the Smokey Mountain dwellers. The

rest of the Filipinos are not qualified; hence, said lands are no longer essential for
the use of the public in general.
In addition, President Ramos issued on August 31, 1994 Proclamation No.

465 increasing the area to be reclaimed from forty (40) hectares to seventy-
nine (79) hectares, elucidating that said lands are undoubtedly set aside for the
beneficiaries of SMDRP and not the public—declaring the power of NHA to
dispose of land to be reclaimed, thus: ―The authority to administer,
develop, or dispose lands identified and reserved by this Proclamation and
Proclamation No. 39 (s.1992), in accordance with the SMDRP, as enhance, is
vested with the NHA, subject to the provisions of existing laws.‖ (Emphasis
supplied.)
MO 415 and Proclamations Nos. 39 and 465 are declarations that proclaimed
the non-use of the reclaimed areas for public use or service as the Project cannot be
successfully implemented without the withdrawal of said lands from public use or
service. Certainly, the devotion of the reclaimed land to public use or service
conflicts with the intended use of the Smokey Mountain areas for housing and
employment of the Smokey Mountain scavengers and for financing the Project
because the latter cannot be accomplished without abandoning the public use of the
subject land. Without doubt, the presidential proclamations on SMDRP together
with the issuance of the special patents had effectively removed the reclaimed
lands from public use.
More decisive and not in so many words is the ruling in PEA which we
earlier cited, that ―PD No. 1085 and President Aquino’s issuance of a land patent
also constitute a declaration that the Freedom Islands are no longer needed for
public service.‖ Consequently, we ruled in that case that the reclaimed lands are
―open to disposition or concession to qualified parties.‖[83]
In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with the
special patents have classified the reclaimed lands as alienable and disposable and
open to disposition or concession as they would be devoted to units
for Smokey Mountain beneficiaries. Hence, said lands are no longer intended for
public use or service and shall form part of the patrimonial properties of the State
under Art. 422 of the Civil Code.[84] As discussed a priori, the lands were
classified as patrimonial properties of the NHA ready for disposition when the
titles were registered in its name by the Register of Deeds.
Moreover, reclaimed lands that are made the enabling components of a BOT
infrastructure project are necessarily reclassified as alienable and disposable lands
under the BOT Law; otherwise, absurd and illogical consequences would naturally
result. Undoubtedly, the BOT contract will not be accepted by the BOT contractor
since there will be no consideration for its contractual obligations. Since reclaimed
land will be conveyed to the contractor pursuant to the BOT Law, then there is an
implied declaration that such land is no longer intended for public use or public
service and, hence, considered patrimonial property of the State.

service and, hence, considered patrimonial property of the State.
Fifth Issue: Whether there is a law authorizing sale of

reclaimed lands
Petitioner next claims that RBI cannot acquire the reclaimed lands because
there was no law authorizing their sale. He argues that unlike PEA, no legislative
authority was granted to the NHA to sell reclaimed land.
This position is misplaced.
Petitioner relies on Sec. 60 of Commonwealth Act (CA) 141 to support his

view that the NHA is not empowered by any law to sell reclaimed land, thus:
Section 60. Any tract of land comprised under this title may be leased or sold, as
the case may be, to any person, corporation or association authorized to purchase or lease
public lands for agricultural purposes. The area of the land so leased or sold shall be such
as shall, in the judgment of the Secretary of Agriculture and Natural Resources, be
reasonably necessary for the purposes for which such sale or lease if requested and shall in
no case exceed one hundred and forty-four hectares: Provided, however, That this
limitation shall not apply to grants, donations, transfers, made to a province, municipality
or branch or subdivision of the Government for the purposes deemed by said entities
conducive to the public interest; but the land so granted donated or transferred to a
province, municipality, or branch or subdivision of the Government shall not be
alienated, encumbered, or otherwise disposed of in a manner affecting its title, except
when authorized by Congress; Provided, further, That any person, corporation,
association or partnership disqualified from purchasing public land for agricultural
purposes under the provisions of this Act, may lease land included under this title suitable
for industrial or residential purposes, but the lease granted shall only be valid while such
land is used for the purposes referred to. (Emphasis supplied.)
Reliance on said provision is incorrect as the same applies only to ―a

province, municipality or branch or subdivision of the Government.‖ The NHA is
not a government unit but a government corporation performing governmental and
proprietary functions.
In addition, PD 757 is clear that the NHA is empowered by law to transfer

properties acquired by it under the law to other parties, thus:
Section 6. Powers and functions of the Authority. The Authority shall have the
following powers and functions to be exercised by the Boards in accordance with the
established national human settlements plan prepared by the Human Settlements
Commission:
xxxx
(k) Enter into contracts whenever necessary under such terms and conditions as
it may deem proper and reasonable;

(l) Acquire property rights and interests, and encumber or otherwise dispose
the same as it may deem appropriate (Emphasis supplied.)
Letter (l) is emphatic that the NHA can acquire property rights and interests
and encumber or otherwise dispose of them as it may deem appropriate. The
transfer of the reclaimed lands by the National Government to the NHA for
housing, commercial, and industrial purposes transformed them into patrimonial
lands which are of course owned by the State in its private or proprietary
capacity. Perforce, the NHA can sell the reclaimed lands to any Filipino citizen or
qualified corporation.
Sixth Issue: Whether the transfer of reclaimed lands to RBI

was done by public bidding
Petitioner also contends that there was no public bidding but an awarding of
ownership of said reclaimed lands to RBI. Public bidding, he says, is required
under Secs. 63 and 67 of CA 141 which read:
Section 63. Whenever it is decided that lands covered by this chapter are not needed
for public purposes, the Director of Lands shall ask the Secretary of Agriculture and
Commerce for authority to dispose of the same. Upon receipt of such authority, the
Director of Lands shall give notice by public advertisement in the same manner as in
the case of leases or sales of agricultural public land, that the Government will lease
or sell, as the case may be, the lots or blocks specified in the advertisement, for the
purpose stated in the notice and subject to the conditions specified in this chapter.
xxxx
Section 67. The lease or sale shall be made through oral bidding; and adjudication
shall be made to the highest bidder. However, where an applicant has made improvements
on the land by virtue of a permit issued to him by competent authority, the sale or lease
shall be made by sealed bidding as prescribed in section twenty-six of this Act, the
provisions of which shall be applied whenever applicable. If all or part of the lots remain
unleased or unsold, the Director of Lands shall from time to time announce in the Official
Gazette or in any other newspapers of general circulation, the lease of sale of those lots, if
necessary.
He finds that the NHA and RBI violated Secs. 63 and 67 of CA 141, as the
reclaimed lands were conveyed to RBI by negotiated contract and not by public
bidding as required by law.
This stand is devoid of merit.
There is no doubt that respondent NHA conducted a public bidding of the

There is no doubt that respondent NHA conducted a public bidding of the
right to become its joint venture partner in the Smokey Mountain Project. Notices
or Invitations to Bid were published in the national dailies on January 23 and 26,
1992 and February 1, 14, 16, and 23, 1992. The bidding proper was done by the
Bids and Awards Committee (BAC) on May 18, 1992. On August 31, 1992, the
Inter-Agency Techcom made up of the NHA, PEA, DPWH, PPA, DBP, and
DENR opened the bids and evaluated them, resulting in the award of the contract
to respondent RBI on October 7, 1992.
On March 19, 1993, respondents NHA and RBI signed the

JVA. On February 23, 1994, said JVA was amended and restated into the
ARJVA. On August 11, 1994, the ARJVA was again amended. On September 7,
1994, the OP approved the ARJVA and the amendments to the ARJVA. From
these factual settings, it cannot be gainsaid that there was full compliance with the
laws and regulations governing public biddings involving a right, concession, or
property of the government.
Petitioner concedes that he does not question the public bidding on the right
to be a joint venture partner of the NHA, but the absence of bidding in the sale of
alienable and disposable lands of public domain pursuant to CA 141 as amended.
Petitioner’s theory is incorrect.
Secs. 63 and 67 of CA 141, as amended, are in point as they refer to

government sale by the Director of Lands of alienable and disposable lands of
public domain. This is not present in the case at bar. The lands reclaimed by and
conveyed to the NHA are no longer lands of public domain. These lands became
proprietary lands or patrimonial properties of the State upon transfer of the titles
over the reclaimed lands to the NHA and hence outside the ambit of CA 141. The
NHA can therefore legally transfer patrimonial land to RBI or to any other
interested qualified buyer without any bidding conducted by the Director of Lands
because the NHA, unlike PEA, is a government agency not tasked to sell lands of
public domain. Hence, it can only hold patrimonial lands and can dispose of such
lands by sale without need of public bidding.
Petitioner likewise relies on Sec. 79 of PD 1445 which requires public bidding

―when government property has become unserviceable for any cause or is no
longer needed.‖ It appears from the Handbook on Property and Supply
Management System, Chapter 6, that reclaimed lands which have become
patrimonial properties of the State, whose titles are conveyed to government
agencies like the NHA, which it will use for its projects or programs, are not
within the ambit of Sec. 79. We quote the determining factors in the Disposal
of Unserviceable Property, thus:
Determining Factors in the Disposal of Unserviceable Property
• Property, which can no longer be repaired or reconditioned;

•
• Property whose maintenance costs of repair more than outweigh the benefits and services
that will be derived from its continued use;
• Property that has become obsolete or outmoded because of changes in technology;
• Serviceable property that has been rendered unnecessary due to change in the agency’s
function or mandate;
• Unused supplies, materials and spare parts that were procured in excess of requirements;
and
• Unused supplies and materials that [have] become dangerous to use because of long storage
or use of which is determined to be hazardous.[85]
Reclaimed lands cannot be considered unserviceable properties. The

reclaimed lands in question are very much needed by the NHA for the
Smokey Mountain Project because without it, then the projects will not be
successfully implemented. Since the reclaimed lands are not unserviceable
properties and are very much needed by NHA, then Sec. 79 of PD 1445 does
not apply.
More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial

properties like reclaimed lands transferred to a government agency like the NHA
which has entered into a BOT contract with a private firm. The reason is
obvious. If the patrimonial property will be subject to public bidding as the only
way of disposing of said property, then Sec. 6 of RA 6957 on the repayment
scheme is almost impossible or extremely difficult to implement considering the
uncertainty of a winning bid during public auction. Moreover, the repayment
scheme of a BOT contract may be in the form of non-monetary payment like the
grant of a portion or percentage of reclaimed land. Even if the BOT partner
participates in the public bidding, there is no assurance that he will win the bid and
therefore the payment in kind as agreed to by the parties cannot be performed or
the winning bid prize might be below the estimated valuation of the land. The only
way to harmonize Sec. 79 of PD 1445 with Sec. 6 of RA 6957 is to consider Sec.
79 of PD 1445 as inapplicable to BOT contracts involving patrimonial lands. The
law does not intend anything impossible (lex non intendit aliquid impossibile).
Seventh Issue: Whether RBI, being a private corporation,

is barred by the Constitution to acquire lands of public domain
Petitioner maintains that RBI, being a private corporation, is expressly

prohibited by the 1987 Constitution from acquiring lands of public domain.
Petitioner’s proposition has no legal mooring for the following reasons:
1. RA 6957 as amended by RA 7718 explicitly states that a contractor

1. RA 6957 as amended by RA 7718 explicitly states that a contractor
can be paid ―a portion as percentage of the reclaimed land‖ subject to the
constitutional requirement that only Filipino citizens or corporations with at least
60% Filipino equity can acquire the same. It cannot be denied that RBI is a private
corporation, where Filipino citizens own at least 60% of the stocks. Thus, the
transfer to RBI is valid and constitutional.
2. When Proclamations Nos. 39 and 465 were issued, inalienable lands
covered by said proclamations were converted to alienable and disposable
lands of public domain. When the titles to the reclaimed lands were
transferred to the NHA, said alienable and disposable lands of public domain
were automatically classified as lands of the private domain or patrimonial
properties of the State because the NHA is an agency NOT tasked to dispose
of alienable or disposable lands of public domain. The only way it can
transfer the reclaimed land in conjunction with its projects and to attain its
goals is when it is automatically converted to patrimonial properties of the
State. Being patrimonial or private properties of the State, then it has the
power to sell the same to any qualified person—under the Constitution,
Filipino citizens as private corporations, 60% of which is owned by Filipino
citizens like RBI.
3. The NHA is an end-user entity such that when alienable lands of

public domain are transferred to said agency, they are automatically classified as
patrimonial properties. The NHA is similarly situated as BCDA which was
granted the authority to dispose of patrimonial lands of the government under RA
7227. The nature of the property holdings conveyed to BCDA is elucidated and
stressed in the May 6, 2003 Resolution in Chavez v. PEA, thus:
BCDA is an entirely different government entity. BCDA is authorized by law to

sell specific government lands that have long been declared by presidential
proclamations as military reservations for use by the different services of the armed
forces under the Department of National Defense. BCDA’s mandate is specific and
limited in area, while PEA’s mandate is general and national. BCDA holds
government lands that have been granted to end-user government entities––the
military services of the armed forces. In contrast, under Executive Order No. 525,
PEA holds the reclaimed public lands, not as an end-user entity, but as the
government agency “primarily responsible for integrating, directing, and
coordinating all reclamation projects for and on behalf of the National Government.‖
x x x Well-settled is the doctrine that public land granted to an end-user government

agency for a specific public use may subsequently be withdrawn by Congress from public
use and declared patrimonial property to be sold to private parties. R.A. No. 7227 creating
the BCDA is a law that declares specific military reservations no longer needed for
defense or military purposes and reclassifies such lands as patrimonial property for
sale to private parties.
Government owned lands, as long as they are patrimonial property, can be

sold to private parties, whether Filipino citizens or qualified private
corporations. Thus, the so-called Friar Lands acquired by the government under Act No.
1120 are patrimonial property which even private corporations can acquire by
purchase. Likewise, reclaimed alienable lands of the public domain if sold or transferred to

purchase. Likewise, reclaimed alienable lands of the public domain if sold or transferred to
a public or municipal corporation for a monetary consideration become patrimonial
property in the hands of the public or municipal corporation. Once converted to patrimonial
property, the land may be sold by the public or municipal corporation to private parties,
whether Filipino citizens or qualified private corporations.[86] (Emphasis supplied.)
The foregoing Resolution makes it clear that the SMDRP was a program
adopted by the Government under Republic Act No. 6957 (An Act Authorizing the
Financing, Construction, Operation and Maintenance of Infrastructure Projects by
the Private Sector, and For Other Purposes), as amended by RA 7718, which is a
special law similar to RA 7227. Moreover, since the implementation was assigned
to the NHA, an end-user agency under PD 757 and RA 7279, the reclaimed lands
registered under the NHA are automatically classified as patrimonial lands ready
for disposition to qualified beneficiaries.
The foregoing reasons likewise apply to the contention of petitioner that

HCPTI, being a private corporation, is disqualified from being a transferee of
public land. What was transferred to HCPTI is a 10-hectare lot which is already
classified as patrimonial property in the hands of the NHA. HCPTI, being a
qualified corporation under the 1987 Constitution, the transfer of the subject lot to
it is valid and constitutional.
Eighth Issue: Whether respondents can be compelled to disclose

all information related to the SMDRP
Petitioner asserts his right to information on all documents such as contracts,

reports, memoranda, and the like relative to SMDRP.
Petitioner asserts that matters relative to the SMDRP have not been disclosed
to the public like the current stage of the Project, the present financial capacity of
RBI, the complete list of investors in the asset pool, the exact amount of
investments in the asset pool and other similar important information regarding the
Project.
He prays that respondents be compelled to disclose all information regarding

the SMDRP and furnish him with originals or at least certified true copies of
all relevant documents relating to the said project including, but not limited to,
the original JVA, ARJVA, AARJVA, and the Asset Pool Agreement.
This relief must be granted.
The right of the Filipino people to information on matters of public concern is

enshrined in the 1987 Constitution, thus:
ARTICLE II

xxxx
SEC. 28. Subject to reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public interest.
ARTICLE III
SEC. 7. The right of the people to information on matters of public concern shall
be recognized. Access to official records, and to documents, and papers pertaining to
official acts, transactions, or decisions, as well as to government research data used as basis
for policy development, shall be afforded the citizen, subject to such limitations as may be
provided by law.
In Valmonte v. Belmonte, Jr., this Court explicated this way:
[A]n essential element of these freedoms is to keep open a continuing dialogue or

process of communication between the government and the people. It is in the interest of
the State that the channels for free political discussion be maintained to the end that the
government may perceive and be responsive to the people’s will. Yet, this open dialogue
can be effective only to the extent that the citizenry is informed and thus able to formulate
its will intelligently. Only when the participants in the discussion are aware of the issues
and have access to information relating thereto can such bear fruit.[87]
In PEA, this Court elucidated the rationale behind the right to information:
These twin provisions of the Constitution seek to promote transparency in policy-

making and in the operations of the government, as well as provide the people sufficient
information to exercise effectively other constitutional rights. These twin provisions are
essential to the exercise of freedom of expression. If the government does not disclose its
official acts, transactions and decisions to citizens, whatever citizens say, even if expressed
without any restraint, will be speculative and amount to nothing. These twin provisions are
also essential to hold public officials ―at all times x x x accountable to the people,‖ for
unless citizens have the proper information, they cannot hold public officials accountable
for anything. Armed with the right information, citizens can participate in public
discussions leading to the formulation of government policies and their effective
implementation. An informed citizenry is essential to the existence and proper functioning
of any democracy.[88]
Sec. 28, Art. II compels the State and its agencies to fully disclose ―all of its
transactions involving public interest.‖ Thus, the government agencies,
without need of demand from anyone, must bring into public view all the
steps and negotiations leading to the consummation of the transaction and the
contents of the perfected contract.[89] Such information must pertain to
―definite propositions of the government,‖ meaning official recommendations
or final positions reached on the different matters subject of negotiation. The
government agency, however, need not disclose ―intra-agency or inter-agency
recommendations or communications during the stage when common
recommendations or communications during the stage when common
assertions are still in the process of being formulated or are in the exploratory
stage.‖ The limitation also covers privileged communication like information
on military and diplomatic secrets; information affecting national security;
information on investigations of crimes by law enforcement agencies before
the prosecution of the accused; information on foreign relations, intelligence,
and other classified information.
It is unfortunate, however, that after almost twenty (20) years from birth of the
1987 Constitution, there is still no enabling law that provides the mechanics
for the compulsory duty of government agencies to disclose information on
government transactions. Hopefully, the desired enabling law will finally see
the light of day if and when Congress decides to approve the proposed
―Freedom of Access to Information Act.‖ In the meantime, it would suffice
that government agencies post on their bulletin boards the documents
incorporating the information on the steps and negotiations that produced the
agreements and the agreements themselves, and if finances permit, to upload
said information on their respective websites for easy access by interested
parties. Without any law or regulation governing the right to disclose
information, the NHA or any of the respondents cannot be faulted if they were
not able to disclose information relative to the SMDRP to the public in
general.
The other aspect of the people’s right to know apart from the duty to disclose
is the duty to allow access to information on matters of public concern under
Sec. 7, Art. III of the Constitution. The gateway to information opens to the
public the following: (1) official records; (2) documents and papers pertaining
to official acts, transactions, or decisions; and (3) government research data
used as a basis for policy development.
Thus, the duty to disclose information should be differentiated from the duty
to permit access to information. There is no need to demand from the government
agency disclosure of information as this is mandatory under the Constitution;
failing that, legal remedies are available. On the other hand, the interested party
must first request or even demand that he be allowed access to documents and
papers in the particular agency. A request or demand is required; otherwise, the
government office or agency will not know of the desire of the interested party to
gain access to such papers and what papers are needed. The duty to disclose
covers only transactions involving public interest, while the duty to allow access
has a broader scope of information which embraces not only transactions involving
public interest, but any matter contained in official communications and public
documents of the government agency.
We find that although petitioner did not make any demand on the NHA to
allow access to information, we treat the petition as a written request or
demand. We order the NHA to allow petitioner access to its official records,
documents, and papers relating to official acts, transactions, and decisions that are
relevant to the said JVA and subsequent agreements relative to the SMDRP.
relevant to the said JVA and subsequent agreements relative to the SMDRP.
Ninth Issue: Whether the operative fact doctrine applies to the

instant petition
Petitioner postulates that the ―operative fact‖ doctrine is inapplicable to the

present case because it is an equitable doctrine which could not be used to
countenance an inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence
of the various agreements implementing the SMDRP is an operative fact that can
no longer be disturbed or simply ignored, citing Rieta v. People of
the Philippines.[90]
The argument of the Solicitor General is meritorious.
The ―operative fact‖ doctrine is embodied in De Agbayani v. Court of

Appeals, wherein it is stated that a legislative or executive act, prior to its being
declared as unconstitutional by the courts, is valid and must be complied with,
thus:
As the new Civil Code puts it: ―When the courts declare a law to be inconsistent with the
Constitution, the former shall be void and the latter shall govern. Administrative or
executive acts, orders and regulations shall be valid only when they are not contrary to the
laws of the Constitution.‖ It is understandable why it should be so, the Constitution being
supreme and paramount. Any legislative or executive act contrary to its terms cannot
survive.
Such a view has support in logic and possesses the merit of simplicity. It may not
however be sufficiently realistic. It does not admit of doubt that prior to the
declaration of nullity such challenged legislative or executive act must have been in
force and had to be complied with. This is so as until after the judiciary, in an
appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may
have acted under it and may have changed their positions. What could be more fitting than
that in a subsequent litigation regard be had to what has been done while such legislative or
executive act was in operation and presumed to be valid in all respects. It is now accepted
as a doctrine that prior to its being nullified, its existence as a fact must be reckoned
with. This is merely to reflect awareness that precisely because the judiciary is the
governmental organ which has the final say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed before it can exercise the power of
judicial review that may lead to a declaration of nullity. It would be to deprive the law of
its quality of fairness and justice then, if there be no recognition of what had transpired
prior to such adjudication.
In the language of an American Supreme Court decision: “The actual existence of

a statute, prior to such a determination [of unconstitutionality], is an operative fact
and may have consequences which cannot justly be ignored. The past cannot always
be erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, with respect to particular relations,
individual and corporate, and particular conduct, private and official.‖ This language has
been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila

been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila
Motor Co., Inc. v. Flores. An even more recent instance is the opinion of Justice Zaldivar
speaking for the Court inFernandez v. Cuerva and Co.[91] (Emphasis supplied.)
This doctrine was reiterated in the more recent case of City of Makati v. Civil
Service Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government’s order of suspension,

as we have no reason to do so, much less retroactively apply such nullification to deprive
private respondent of a compelling and valid reason for not filing the leave
application. For as we have held, a void act though in law a mere scrap of paper
nonetheless confers legitimacy upon past acts or omissions done in reliance
thereof. Consequently, the existence of a statute or executive order prior to its being
adjudged void is an operative fact to which legal consequences are attached. It would
indeed be ghastly unfair to prevent private respondent from relying upon the order of
suspension in lieu of a formal leave application.[92] (Emphasis supplied.)
The principle was further explicated in the case of Rieta v. People of

the Philippines, thus:
In similar situations in the past this Court had taken the pragmatic and realistic course set
forth in Chicot County Drainage District vs. Baxter Bank to wit:
The courts below have proceeded on the theory that the Act of Congress, having
been found to be unconstitutional, was not a law; that it was inoperative, conferring
no rights and imposing no duties, and hence affording no basis for the challenged
decree. x x x It is quite clear, however, that such broad statements as to the effect of a
determination of unconstitutionality must be taken with qualifications. The actual
existence of a statute, prior to [the determination of its invalidity], is an operative fact
and may have consequences which cannot justly be ignored. The past cannot always
be erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects –with respect to particular
conduct, private and official. Questions of rights claimed to have become vested, of
status, of prior determinations deemed to have finality and acted upon accordingly, of
public policy in the light of the nature both of the statute and of its previous
application, demand examination. These questions are among the most difficult of
those which have engaged the attention of courts, state and federal, and it is manifest
from numerous decisions that an all-inclusive statement of a principle of absolute
retroactive invalidity cannot be justified.
In the May 6, 2003 Resolution in Chavez v. PEA,[93] we ruled that De

Agbayani[94] is not applicable to the case considering that the prevailing law did not
authorize private corporations from owning land. The prevailing law at the time
was the 1935 Constitution as no statute dealt with the same issue.
In the instant case, RA 6957 was the prevailing law at the time that the joint
venture agreement was signed. RA 6957, entitled ―An Act Authorizing The
Financing, Construction, Operation And Maintenance Of Infrastructure

Financing, Construction, Operation And Maintenance Of Infrastructure
Projects By The Private Sector And For Other Purposes,‖ which was passed
by Congress onJuly 24, 1989, allows repayment to the private contractor of
reclaimed lands.[95] Such law was relied upon by respondents, along with the
above-mentioned executive issuances in pushing through with the
Project. The existence of such law and issuances is an ―operative fact‖ to
which legal consequences have attached. This Court is constrained to give
legal effect to the acts done in consonance with such executive and legislative
acts; to do otherwise would work patent injustice on respondents.
Further, in the May 6, 2003 Resolution in Chavez v. PEA, we ruled that in

certain cases, the transfer of land, although illegal or unconstitutional, will not be
invalidated on considerations of equity and social justice. However, in that case,
we did not apply the same considering that PEA, respondent in said case, was not
entitled to equity principles there being bad faith on its part, thus:
There are, moreover, special circumstances that disqualify Amari from invoking
equity principles. Amari cannot claim good faith because even before Amari signed the
Amended JVA on March 30, 1999, petitioner had already filed the instant case on April 27,
1998 questioning precisely the qualification of Amari to acquire
the Freedom Islands. Even before the filing of this petition, two Senate Committees had
already approved on September 16, 1997 Senate Committee Report No. 560. This Report
concluded, after a well-publicized investigation into PEA’s sale of the Freedom Islands to
Amari, that the Freedom Islands are inalienable lands of the public domain. Thus, Amari
signed the Amended JVA knowing and assuming all the attendant risks, including the
annulment of the Amended JVA.[96]
Such indicia of bad faith are not present in the instant case. When the ruling
in PEA was rendered by this Court on July 9, 2002, the JVAs were all
executed. Furthermore, when petitioner filed the instant case against respondents
on August 5, 2004, the JVAs were already terminated by virtue of the MOA
between the NHA and RBI. The respondents had no reason to think that their
agreements were unconstitutional or even questionable, as in fact, the concurrent
acts of the executive department lent validity to the implementation of the
Project. The SMDRP agreements have produced vested rights in favor of the slum
dwellers, the buyers of reclaimed land who were issued titles over said land, and
the agencies and investors who made investments in the project or who bought
SMPPCs. These properties and rights cannot be disturbed or questioned after the
passage of around ten (10) years from the start of the SMDRP implementation.
Evidently, the ―operative fact‖ principle has set in. The titles to the lands in the
hands of the buyers can no longer be invalidated.
The Court’s Dispositions
Based on the issues raised in this petition, we find that the March 19, 1993
JVA between NHA and RBI and the SMDRP embodied in the JVA, the
subsequent amendments to the JVA and all other agreements signed and executed
in relation to it, including, but not limited to, the September 26, 1994 Smokey

Mountain Asset Pool Agreement and the agreement on Phase I of the Project as
well as all other transactions which emanated from the Project, have been shown to
be valid, legal, and constitutional. Phase II has been struck down by the Clean Air
Act.
With regard to the prayer for prohibition, enjoining respondents particularly

respondent NHA from further implementing and/or enforcing the said Project and
other agreements related to it, and from further deriving and/or enjoying any rights,
privileges and interest from the Project, we find the same prayer meritless.
Sec. 2 of Rule 65 of the 1997 Rules of Civil Procedure provides:
Sec. 2. Petition for prohibition.—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.
It has not been shown that the NHA exercised judicial or quasi-judicial
functions in relation to the SMDRP and the agreements relative to it.
Likewise, it has not been shown what ministerial functions the NHA has with
regard to the SMDRP.
A ministerial duty is one which is so clear and specific as to leave no room

for the exercise of discretion in its performance. It is a duty which an officer
performs in a given state of facts in a prescribed manner in obedience to the
mandate of legal authority, without regard to the exercise of his/her own judgment
upon the propriety of the act done.[97]
Whatever is left to be done in relation to the August 27, 2003 MOA,

terminating the JVA and other related agreements, certainly does not involve
ministerial functions of the NHA but instead requires exercise of judgment. In
fact, Item No. 4 of the MOA terminating the JVAs provides for validation of the
developer’s (RBI’s) claims arising from the termination of the SMDRP through the
various government agencies.[98] Such validation requires the exercise of
discretion.
In addition, prohibition does not lie against the NHA in view of petitioner’s
failure to avail and exhaust all administrative remedies. Clear is the rule that
prohibition is only available when there is no adequate remedy in the ordinary
course of law.
More importantly, prohibition does not lie to restrain an act which is already
a fait accompli. The ―operative fact‖ doctrine protecting vested rights bars the

a fait accompli. The ―operative fact‖ doctrine protecting vested rights bars the
grant of the writ of prohibition to the case at bar. It should be remembered that
petitioner was the Solicitor General at the time SMDRP was formulated and
implemented. He had the opportunity to question the SMDRP and the agreements
on it, but he did not. The moment to challenge the Project had passed.
On the prayer for a writ of mandamus, petitioner asks the Court to compel
respondents to disclose all documents and information relating to the project,
including, but not limited to, any subsequent agreements with respect to the
different phases of the Project, the revisions of the original plan, the additional
works incurred on the Project, the current financial condition of respondent
RBI, and the transactions made with respect to the project. We earlier ruled
that petitioner will be allowed access to official records relative to the
SMDRP. That would be adequate relief to satisfy petitioner’s right to the
information gateway.
WHEREFORE, the petition is PARTIALLY GRANTED.
The prayer for a writ of prohibition is DENIED for lack of merit.
The prayer for a writ of mandamus is GRANTED. Respondent NHA is

ordered to allow access to petitioner to all public documents and official records
relative to the SMDRP—including, but not limited to, the March 19, 1993 JVA
between the NHA and RBI and subsequent agreements related to the JVA, the
revisions over the original plan, and the additional works incurred on and the
transactions made with respect to the Project.
No costs.
SO ORDERED.
PRESBITERO J. VELASCO, JR.

Associate Justice
WE CONCUR:

REYNATO S. PUNO
Chief Justice
LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO

Associate Justice Associate Justice
ANGELINA SANDOVAL-GUTIERREZ ANTONIO T. CARPIO

MA. ALICIA AUSTRIA-MARTINEZ RENATO C.

CORONA Associate Justice Associate
Justice
CONCHITA CARPIO MORALES ADOLFO S. AZCUNA

DANTE O. TINGA MINITA V. CHICO-NAZARIO

CANCIO C. GARCIA ANTONIO EDUARDO B. NACHURA

RUBEN T. REYES
Associate Justice

CE R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified

that the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Court.
REYNATO S. PUNO
Chief Justice
[1] Rollo, pp. 3-4.

[2] Id. at 513.
[3] Id. at 513-514.
[4] Id. at 515.
[5] Id. at 513.
[6] Id. at 297; Proclamation No. 39 dated September 9, 1992.
[7] RA 7718 was later enacted on May 5, 1994, amending certain sections of the BOT Law.
[8] ―Joint Resolution Approving the List of National Projects to be Undertaken by the Private Sector
Pursuant to Republic Act No. 6957.‖

[9] Rollo, pp. 519-521.
[10] Id. at 296.
[11] Id. at 295.
[12] Id. at 436.
[13] Id. at 476.
[14] Id. at 477.
[15] Id. at 297-298.
[16] Id. at 479.
[17] Id. at 69-79.
[18] ―Creating the National Housing Authority and Dissolving the Existing Housing Agencies, Defining its
Powers and Functions, Providing Funds Therefor, and for Other Purposes‖ (1975).
[19] Rollo, p. 70.
[20] Id. at 73.
[21] Id. at 479.
[22] Id. at 80-94.
[23] Id. at 83.
[24] Id.
[25] Id.
[26] Id.
[27] Id. at 84.
[28] Id. at 93.
[29] Id. at 95-104.
[30] Id. at 98.
[31] Id. at 526-533.
[32] Id. at 435.
[33] The PNB was later replaced by the Planters Development Bank.
[34] Rollo, p. 105.
[35] Id. at 18. RA 8749, ―The Clean Air Act of 1999.‖
[36] Id.
[37] Id. at 244.
[38] Id. at 747-751.
[39] Id. at 858.
[40] Id. at 860.

[40] Id. at 860.
[41] Id. at 859.
[42] Id.
[43] Id. at 860.
[44] Id.
[45] Id. at 861.
[46] Id.
[47] 1997 RULES OF CIVIL PROCEDURE, Rule 3, Sec. 2.
[48] Bayan (Bagong Alyansang Makabayan) v. Zamora, G.R. Nos. 138570, 138572, 138587, 138680 &
138698, October 10, 2000, 342 SCRA 449, 478.
[49] G.R. No. 130716, December 9, 1998, 299 SCRA 744.
[50] G.R. No. 133250, July 9, 2002, 384 SCRA 152.
[51] G.R. No. 67787, April 18, 1989, 172 SCRA 415, 424.
[52] G.R. Nos. 99289-90, January 27, 1993, 217 SCRA 633, 652.
[53] 1. Petitioner claimed that NHA awarded the Smokey Mountain project to R-II Builders through contract
negotiations and that there was no public bidding awarding ownership of the subject land to respondent R-II
Builders, while respondents alleged that NHA publicly bidded out the right to become NHA’s joint venture
partner in the prosecution of the SMDRP;
2. Petitioner averred that ―PEA had no participation whatsoever in the reclamation of
the subject lands‖ while respondents stated PEA had a name therein;
3. Petitioner alleged that ―neither respondent NHA nor respondent R-II Builders was given
the authority [by DENR] to reclaim the subject lands‖ while respondents claimed such authority
was granted;
4. Mr. Chavez claimed ―that there is no legislative or Presidential act classifying the submerged
areas around Smokey Mountain as alienable or disposable lands of the public domain open to disposition‖
while respondents said that Presidents Aquino and Ramos made the classification;
5. Whether respondent R-II Builders complied with its obligation to ―fully finance‖ the Project;
6. Whether the Project has been terminated by agreements of the parties;
7. Whether respondents Harbour Centre and Romero fraudulently caused the dilution of the Asset
Pool’s Holdings in HCPTI;
8. Whether Harbour Centre contracts attached to the Petition are genuine.
[54] Rollo, p. 871.
[55] Petition, Comments, Reply, and Memoranda.
[56] ―Designating the Public Estates Authority as the Agency Primarily Responsible for All Reclamation
Projects‖ (1979).
[57] Rollo, p. 235.
[58] The July 9, 2002 Decision entitled Chavez v. PEA was concurred in by 13 members of this Court who
voted to grant the petition. However, in the May 6, 2003 Resolution, the Court was divided when it voted 8-5
to affirm the Decision. And in the most recent November 11, 2003 Resolution of this Court, a 7-7 vote was
arrived at. Thus, the July 9, 2002 Decision is still the valid case law.
[59] The doctrine of stare decisis provides that a conclusion reached in one case should, for the sake of
certainty, be applied to those which follow if the facts are substantially the same even though the parties may
be different.
[60] Supra note 50, at 221.
[61] ―Creating the Public Estates Authority, Defining its Power and Functions, Providing Funds Therefor and
for Other Purposes‖ (1977).

[62] ―An Act to Provide for a Comprehensive and Continuing Urban Development and Housing Program,
Establish the Mechanism for its Implementation, and for Other Purposes‖ (1992).
[63] Radio Communications of the Philippines, Inc. v. Santiago, Nos. L-29236 & L-29247, 58 SCRA
493, August 21, 1974, 58 SCRA 493, 497.

[64] Azarcon v. Sandiganbayan, G.R. No. 116033, February 26, 1997, 268 SCRA 747, 761.
[65] 63 Phil. 139, 177 (1936).
[66] Provident Tree Farms, Inc. v. Batario, Jr., G.R. No. 92285, March 28, 1994, 231 SCRA 463, 469;
cited in Agpalo, ADMINISTRATIVE CODE 14.

[67] ―Amending Section 7 of Presidential Decree No. 3 dated September 26, 1972, by Providing for the
Exclusive Prosecution by Administration or by Contract of Reclamation Projects‖ (2005).

[68] Republic v. Court of Appeals, G.R. No. 103882, November 25, 1998, 299 SCRA 199, 303.
[69] ―Delegating to the Philippine Reclamation Authority the Power to Approve Reclamation Projects‖ (2006).
[70] Supra note 50, at 222-223.
[71] Taule v. Santos, G.R. No. 90336, August 12, 1991, 200 SCRA 512, 521-522.
[72] G.R. No. 157036, June 9, 2004, 431 SCRA 534, 555; citing EO 292, Book IV, Chapter 7.
[74] Id. at 216.
[75] Id. at 235.
[76] Republic of the Philippines v. Manila Electric Company, G.R. No. 141314, April 9, 2003, 401 SCRA
130, 141.

130, 141.
[77] Id. at 142.
[78] G.R. No. 119682, January 21, 1999, 301 SCRA 450, 454-455.
[79] G.R. No. 146030, December 3, 2002, 393 SCRA 361, 373.
[80] G.R. No. 131667, July 28, 2005, 464 SCRA 280, 291.
[81] G.R. No. 163118, April 27, 2007.
[82] G.R. No. 97973, January 27, 1992, 205 SCRA 515, 527.
[83] Supra note 73.
[84] Article 422. Property of public dominion, when no longer intended for public use or public service,
shall form part of the patrimonial property of the State.

[85] Commission on Audit, Professional Development Center, HANDBOOK ON PROPERTY & SUPPLY
MANAGEMENT SYSTEM 91-92 (2003).

[86] G.R. No. 133250, May 6, 2003, 403 SCRA 1, 31-32.
[87] G.R. No. 74930, February 13, 1989, 170 SCRA 256, 265.
[89] Id. at 185; citing V RECORD OF THE CONSTITUTIONAL COMMISSION 24-25 (1986).
[90] G.R. No. 147817, August 12, 2004, 436 SCRA 273, 291-292.
[91] No. L-23127, April 29, 1971, 38 SCRA 429, 434-435.
[92] G.R. No. 131392, February 6, 2002, 376 SCRA 248, 257.
[94] Supra note 91.
[95] RA 6957, Sec. 6 provides:
Section 6. Repayment Scheme.—For the financing, construction, operation, and maintenance of

any infrastructure project undertaken pursuant to the provisions of this Act, the constructor shall be entitled
to a reasonable return of its investment and operating and maintenance costs in accordance with its bid
proposal as accepted by the concerned contracting infrastructure agency or local government unit and
incorporated in the contract’s terms and conditions. In the case of a build-operate-and-transfer arrangement, this
repayment scheme is to be affected by authorizing the contractor to charge for the use of the project facility
not exceeding those proposed in the bid and incorporated in the contract: Provided, That the government
infrastructure agency or local government unit concerned shall approve the fairness and equity of the tolls,
fees, rentals and charges except in case of tolls for national highways, roads, bridges and public
thoroughfares which shall be approved by the Toll Regulatory Board: Provided, further, That the imposition
and collection of tolls, fees, rentals and charges shall be for a fixed term as proposed in the bid
and incorporated in the contract but in no case shall this term exceed fifty (50) years: Provided,
finally, That during the lifetime of the franchise, the contractor shall undertake the necessary maintenance and
repair of the facility in accordance with standards prescribed in the bidding documents and in the contract. In
the case of a build-and-transfer arrangements, the repayment scheme is to be affected through amortization
payments by the government unit concerned to the contractor according to the scheme proposed in the bid
and incorporated in the contract.
In the case of land reclamation or the building of industrial estates, the repayment
scheme may consist of the grant of a portion of percentage of the reclaimed land or industrial estate
built, subject to the constitutional requirements with respect to the ownership of lands.
[96] Supra note 86, at 29-30.
[97] Symaco v. Hon. Aquino, etc., 106 Phil. 1130, 1135 (1960).
[98] Rollo, p. 866.
Pasted from <http://sc.judiciary.gov.ph/jurisprudence/2007/august2007/164527.htm>

Sections 2-6, 10-15, 17(2), 23, 24, 25, 140
1:34 AM
Section 2. Corporation defined. - A corporation is an artificial being created by operation of law,

having the right of succession and the powers, attributes and properties expressly authorized by law
or incident to its existence. (2)
Section 3. Classes of corporations. - Corporations formed or organized under this Code may be
stock or non-stock corporations. Corporations which have capital stock divided into shares and are
authorized to distribute to the holders of such shares dividends or allotments of the surplus profits on
the basis of the shares held are stock corporations. All other corporations are non-stock
corporations. (3a)
Section 4. Corporations created by special laws or charters. - Corporations created by special laws
or charters shall be governed primarily by the provisions of the special law or charter creating them
or applicable to them, supplemented by the provisions of this Code, insofar as they are applicable.
(n)
Section 5. Corporators and incorporators, stockholders and members. - Corporators are those who
compose a corporation, whether as stockholders or as members. Incorporators are those
stockholders or members mentioned in the articles of incorporation as originally forming and
composing the corporation and who are signatories thereof.
Corporators in a stock corporation are called stockholders or shareholders. Corporators in a non-
stock corporation are called members. (4a)
Section 6. Classification of shares. - The shares of stock of stock corporations may be divided into
classes or series of shares, or both, any of which classes or series of shares may have such rights,
privileges or restrictions as may be stated in the articles of incorporation: Provided, That no share
may be deprived of voting rights except those classified and issued as "preferred" or "redeemable"
shares, unless otherwise provided in this Code: Provided, further, That there shall always be a class
or series of shares which have complete voting rights. Any or all of the shares or series of shares
may have a par value or have no par value as may be provided for in the articles of incorporation:
Provided, however, That banks, trust companies, insurance companies, public utilities, and building
and loan associations shall not be permitted to issue no-par value shares of stock.
Preferred shares of stock issued by any corporation may be given preference in the distribution of
the assets of the corporation in case of liquidation and in the distribution of dividends, or such other
preferences as may be stated in the articles of incorporation which are not violative of the provisions
of this Code: Provided, That preferred shares of stock may be issued only with a stated par value.
The board of directors, where authorized in the articles of incorporation, may fix the terms and
conditions of preferred shares of stock or any series thereof: Provided, That such terms and
conditions shall be effective upon the filing of a certificate thereof with the Securities and Exchange
Commission.
Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and
the holder of such shares shall not be liable to the corporation or to its creditors in respect thereto:
Provided; That shares without par value may not be issued for a consideration less than the value of
five (P5.00) pesos per share: Provided, further, That the entire consideration received by the
corporation for its no-par value shares shall be treated as capital and shall not be available for
distribution as dividends.
A corporation may, furthermore, classify its shares for the purpose of insuring compliance with
constitutional or legal requirements.
Except as otherwise provided in the articles of incorporation and stated in the certificate of stock,
each share shall be equal in all respects to every other share.
Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code,
the holders of such shares shall nevertheless be entitled to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the
corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another corporation or other corporations;
7. Investment of corporate funds in another corporation or business in accordance with this Code;
and
8. Dissolution of the corporation.

8. Dissolution of the corporation.
Except as provided in the immediately preceding paragraph, the vote necessary to approve a
particular corporate act as provided in this Code shall be deemed to refer only to stocks with voting
rights. (5a)
TITLE II - INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS

Section 10. Number and qualifications of incorporators. - Any number of natural persons not less
than five (5) but not more than fifteen (15), all of legal age and a majority of whom are residents of
the Philippines, may form a private corporation for any lawful purpose or purposes. Each of the
incorporators of s stock corporation must own or be a subscriber to at least one (1) share of the
capital stock of the corporation. (6a)
Section 11. Corporate term. - A corporation shall exist for a period not exceeding fifty (50) years
from the date of incorporation unless sooner dissolved or unless said period is extended. The
corporate term as originally stated in the articles of incorporation may be extended for periods not
exceeding fifty (50) years in any single instance by an amendment of the articles of incorporation, in
accordance with this Code; Provided, That no extension can be made earlier than five (5) years prior
to the original or subsequent expiry date(s) unless there are justifiable reasons for an earlier
extension as may be determined by the Securities and Exchange Commission. (6)
Section 12. Minimum capital stock required of stock corporations. - Stock corporations incorporated
under this Code shall not be required to have any minimum authorized capital stock except as
otherwise specifically provided for by special law, and subject to the provisions of the following
section.
Section 13. Amount of capital stock to be subscribed and paid for the purposes of incorporation. - At
least twenty-five percent (25%) of the authorized capital stock as stated in the articles of
incorporation must be subscribed at the time of incorporation, and at least twenty-five (25%) per cent
of the total subscription must be paid upon subscription, the balance to be payable on a date or
dates fixed in the contract of subscription without need of call, or in the absence of a fixed date or
dates, upon call for payment by the board of directors: Provided, however, That in no case shall the
paid-up capital be less than five Thousand (P5,000.00) pesos. (n)
Section 14. Contents of the articles of incorporation. - All corporations organized under this code
shall file with the Securities and Exchange Commission articles of incorporation in any of the official
languages duly signed and acknowledged by all of the incorporators, containing substantially the
following matters, except as otherwise prescribed by this Code or by special law:
1. The name of the corporation;
2. The specific purpose or purposes for which the corporation is being incorporated. Where a
corporation has more than one stated purpose, the articles of incorporation shall state which is the
primary purpose and which is/are the secondary purpose or purposes: Provided, That a non-stock
corporation may not include a purpose which would change or contradict its nature as such;
3. The place where the principal office of the corporation is to be located, which must be within the
Philippines;
4. The term for which the corporation is to exist;
5. The names, nationalities and residences of the incorporators;
6. The number of directors or trustees, which shall not be less than five (5) nor more than fifteen
(15);
7. The names, nationalities and residences of persons who shall act as directors or trustees until the
first regular directors or trustees are duly elected and qualified in accordance with this Code;
8. If it be a stock corporation, the amount of its authorized capital stock in lawful money of the
Philippines, the number of shares into which it is divided, and in case the share are par value
shares, the par value of each, the names, nationalities and residences of the original subscribers,
and the amount subscribed and paid by each on his subscription, and if some or all of the shares are
without par value, such fact must be stated;
9. If it be a non-stock corporation, the amount of its capital, the names, nationalities and residences
of the contributors and the amount contributed by each; and
10. Such other matters as are not inconsistent with law and which the incorporators may deem
necessary and convenient.
The Securities and Exchange Commission shall not accept the articles of incorporation of any stock
corporation unless accompanied by a sworn statement of the Treasurer elected by the subscribers
showing that at least twenty-five (25%) percent of the authorized capital stock of the corporation has
been subscribed, and at least twenty-five (25%) of the total subscription has been fully paid to him in
actual cash and/or in property the fair valuation of which is equal to at least twenty-five (25%)
percent of the said subscription, such paid-up capital being not less than five thousand (P5,000.00)

pesos.
Section 15. Forms of Articles of Incorporation. - Unless otherwise prescribed by special law, articles
of incorporation of all domestic corporations shall comply substantially with the following form:
ARTICLES OF INCORPORATION OF
__________________________
(Name of Corporation)
KNOW ALL MEN BY THESE PRESENTS:
The undersigned incorporators, all of legal age and a majority of whom are residents of the
Philippines, have this day voluntarily agreed to form a (stock) (non-stock) corporation under the laws
of the Republic of the Philippines;
AND WE HEREBY CERTIFY:
FIRST: That the name of said corporation shall be "_____________________, INC. or
CORPORATION";
SECOND: That the purpose or purposes for which such corporation is incorporated are: (If there is
more than one purpose, indicate primary and secondary purposes);
THIRD: That the principal office of the corporation is located in the City/Municipality of
________________________, Province of _______________________, Philippines;
FOURTH: That the term for which said corporation is to exist is _____________ years from and after
the date of issuance of the certificate of incorporation;
FIFTH: That the names, nationalities and residences of the incorporators of the corporation are as
follows:
NAME NATIONALITY RESIDENCE
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
SIXTH: That the number of directors or trustees of the corporation shall be _______; and the names,
nationalities and residences of the first directors or trustees of the corporation are as follows:
NAME NATIONALITY RESIDENCE
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
___________________ ___________________ ___________________
SEVENTH: That the authorized capital stock of the corporation is ______________________
(P___________) PESOS in lawful money of the Philippines, divided into __________ shares with
the par value of ____________________ (P_____________) Pesos per share.
(In case all the share are without par value):
That the capital stock of the corporation is ______________ shares without par value. (In case some
shares have par value and some are without par value): That the capital stock of said corporation
consists of _____________ shares of which ______________ shares are of the par value of
_________________ (P____________) PESOS each, and of which _________________ shares
are without par value.
EIGHTH: That at least twenty five (25%) per cent of the authorized capital stock above stated has
been subscribed as follows:
Name of Subscriber Nationality No of Shares Amount
Subscribed Subscribed
_________________ __________ ____________ ____________
_________________ __________ ____________ ____________
_________________ __________ ____________ ____________
_________________ __________ ____________ ____________
_________________ __________ ____________ ____________
NINTH: That the above-named subscribers have paid at least twenty-five (25%) percent of the total
subscription as follows:
Name of Subscriber Amount Subscribed Total Paid-In
_________________ ___________________ _______________
_________________ ___________________ _______________
_________________ ___________________ _______________
_________________ ___________________ _______________
_________________ ___________________ _______________
(Modify Nos. 8 and 9 if shares are with no par value. In case the corporation is non-stock, Nos. 7, 8
and 9 of the above articles may be modified accordingly, and it is sufficient if the articles state the

and 9 of the above articles may be modified accordingly, and it is sufficient if the articles state the
amount of capital or money contributed or donated by specified persons, stating the names,
nationalities and residences of the contributors or donors and the respective amount given by each.)
TENTH: That _____________________ has been elected by the subscribers as Treasurer of the
Corporation to act as such until his successor is duly elected and qualified in accordance with the
by-laws, and that as such Treasurer, he has been authorized to receive for and in the name and for
the benefit of the corporation, all subscription (or fees) or contributions or donations paid or given by
the subscribers or members.
ELEVENTH: (Corporations which will engage in any business or activity reserved for Filipino citizens
shall provide the following):
"No transfer of stock or interest which shall reduce the ownership of Filipino citizens to less than the
required percentage of the capital stock as provided by existing laws shall be allowed or permitted to
be recorded in the proper books of the corporation and this restriction shall be indicated in all stock
certificates issued by the corporation."
IN WITNESS WHEREOF, we have hereunto signed these Articles of Incorporation, this __________
day of ________________, 19 ______ in the City/Municipality of ____________________, Province
of ________________________, Republic of the Philippines.
_______________________ _______________________
_______________________ _______________________
________________________________
(Names and signatures of the incorporators)
SIGNED IN THE PRESENCE OF:
_______________________ _______________________
(Notarial Acknowledgment)
TREASURER'S AFFIDAVIT
REPUBLIC OF THE PHILIPPINES )
CITY/MUNICIPALITY OF ) S.S.
PROVINCE OF )
I, ____________________, being duly sworn, depose and say:
That I have been elected by the subscribers of the corporation as Treasurer thereof, to act as such
until my successor has been duly elected and qualified in accordance with the by-laws of the
corporation, and that as such Treasurer, I hereby certify under oath that at least 25% of the
authorized capital stock of the corporation has been subscribed and at least 25% of the total
subscription has been paid, and received by me, in cash or property, in the amount of not less than
P5,000.00, in accordance with the Corporation Code.
____________________
(Signature of Treasurer)
SUBSCRIBED AND SWORN to before me, a Notary Public, for and in the City/Municipality of
___________________ Province of _____________________, this _______ day of ___________,
19 _____; by __________________ with Res. Cert. No. ___________ issued at
_______________________ on ____________, 19 ______
NOTARY PUBLIC
My commission expires on
_________, 19 _____
Doc. No. _________;
Page No. _________;
Book No. ________;
Series of 19____ (7a)
Pasted from <http://www.lawphil.net/statutes/bataspam/bp1980/bp_68_1980.html>
Section 17. Grounds when articles of incorporation or amendment may be rejected or

disapproved. - The Securities and Exchange Commission may reject the articles of incorporation or
disapprove any amendment thereto if the same is not in compliance with the requirements of this
Code: Provided, That the Commission shall give the incorporators a reasonable time within which to
correct or modify the objectionable portions of the articles or amendment. The following are grounds
for such rejection or disapproval:
xxx
2. That the purpose or purposes of the corporation are patently unconstitutional, illegal, immoral, or
contrary to government rules and regulations;

Xxx
TITLE III - BOARD OF DIRECTORS/TRUSTEES AND OFFICERS

Section 23. The board of directors or trustees. - Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held by the board of directors or
trustees to be elected from among the holders of stocks, or where there is no stock, from among the
members of the corporation, who shall hold office for one (1) year until their successors are elected
and qualified. (28a)
Every director must own at least one (1) share of the capital stock of the corporation of which he is a
director, which share shall stand in his name on the books of the corporation. Any director who
ceases to be the owner of at least one (1) share of the capital stock of the corporation of which he is
a director shall thereby cease to be a director. Trustees of non-stock corporations must be members
thereof. A majority of the directors or trustees of all corporations organized under this Code must be
residents of the Philippines.
Section 24. Election of directors or trustees. - At all elections of directors or trustees, there must be
present, either in person or by representative authorized to act by written proxy, the owners of a
majority of the outstanding capital stock, or if there be no capital stock, a majority of the members
entitled to vote. The election must be by ballot if requested by any voting stockholder or member. In
stock corporations, every stockholder entitled to vote shall have the right to vote in person or by
proxy the number of shares of stock standing, at the time fixed in the by-laws, in his own name on
the stock books of the corporation, or where the by-laws are silent, at the time of the election; and
said stockholder may vote such number of shares for as many persons as there are directors to be
elected or he may cumulate said shares and give one candidate as many votes as the number of
directors to be elected multiplied by the number of his shares shall equal, or he may distribute them
on the same principle among as many candidates as he shall see fit: Provided, That the total
number of votes cast by him shall not exceed the number of shares owned by him as shown in the
books of the corporation multiplied by the whole number of directors to be elected: Provided,
however, That no delinquent stock shall be voted. Unless otherwise provided in the articles of
incorporation or in the by-laws, members of corporations which have no capital stock may cast as
many votes as there are trustees to be elected but may not cast more than one vote for one
candidate. Candidates receiving the highest number of votes shall be declared elected. Any meeting
of the stockholders or members called for an election may adjourn from day to day or from time to
time but not sine die or indefinitely if, for any reason, no election is held, or if there are not present or
represented by proxy, at the meeting, the owners of a majority of the outstanding capital stock, or if
there be no capital stock, a majority of the member entitled to vote. (31a)
Section 25. Corporate officers, quorum. - Immediately after their election, the directors of a
corporation must formally organize by the election of a president, who shall be a director, a treasurer
who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines,
and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be
held concurrently by the same person, except that no one shall act as president and secretary or as
president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties enjoined on them by law
and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a
greater majority, a majority of the number of directors or trustees as fixed in the articles of
incorporation shall constitute a quorum for the transaction of corporate business, and every decision
of at least a majority of the directors or trustees present at a meeting at which there is a quorum
shall be valid as a corporate act, except for the election of officers which shall require the vote of a
majority of all the members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings. (33a)
ection 140. Stock ownership in certain corporations. - Pursuant to the duties specified by Article XIV
of the Constitution, the National Economic and Development Authority shall, from time to time, make
a determination of whether the corporate vehicle has been used by any corporation or by business
or industry to frustrate the provisions thereof or of applicable laws, and shall submit to the Batasang
Pambansa, whenever deemed necessary, a report of its findings, including recommendations for
their prevention or correction.
Maximum limits may be set by the Batasang Pambansa for stockholdings in corporations declared
by it to be vested with a public interest pursuant to the provisions of this section, belonging to
individuals or groups of individuals related to each other by consanguinity or affinity or by close

individuals or groups of individuals related to each other by consanguinity or affinity or by close
business interests, or whenever it is necessary to achieve national objectives, prevent illegal
monopolies or combinations in restraint or trade, or to implement national economic policies
declared in laws, rules and regulations designed to promote the general welfare and foster economic
development.
In recommending to the Batasang Pambansa corporations, businesses or industries to be declared
vested with a public interest and in formulating proposals for limitations on stock ownership, the
National Economic and Development Authority shall consider the type and nature of the industry, the
size of the enterprise, the economies of scale, the geographic location, the extent of Filipino
ownership, the labor intensity of the activity, the export potential, as well as other factors which are
germane to the realization and promotion of business and industry.

Republic Act No. 6957 (An Act Authorizing the Financing,
Construction, Operation and Maintenance of Infrastructure
Projects by the Private Sector, and for Other Purposes) and
Implementing Rules and Regulations (“IRR”) of R.A. 6957, as
amended.
1:38 AM
Republic Act No. 6957 July 9, 1990

AN ACT AUTHORIZING THE FINANCING, CONSTRUCTION, OPERATION AND MAINTENANCE
OF INFRASTRUCTURE PROJECTS BY THE PRIVATE SECTOR, AND FOR THE OTHER
PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled::
Section 1. Declaration of Policy. – It is the declared policy of the State to recognize the
indispensable role of the private sector as the main engine for national growth and development and
provide the most appropriate favorable incentives to mobilize private resources for the purpose.
Section 2. Definition of Terms. – The following terms used in this Act shall have the meanings
stated below:
(a) Build-operate-and-transfer scheme. – A contractual arrangement whereby the contractor
undertakes the construction, including financing, of a given infrastructure facility, and the operation
and maintenance thereof. The contractor operates the facility over a fixed term during which it is
allowed to charge facility users appropriate tolls, fees, rentals, and charges sufficient to enable the
contractor to recover its operating and maintenance expenses and its investment in the project plus
a reasonable rate of return thereon. The contractor transfers the facility to the government agency or
local government unit concerned at the end of the fixed term which shall not exceed fifty (50) years.
For the construction stage, the contractor may obtain financing from foreign and/or domestic sources
and/or engage the services of a foreign and/or Filipino constructor: provided, that the ownership
structure of the contractor of an infrastructure facility whose operation requires a public utility
franchise must be in accordance with the Constitution: provided, however, that, in the case of
corporate investors in the build-operate-and-transfer corporation, the citizenship of each stockholder
in the corporate investors shall be the basis for the computation of Filipino equity in the said
corporation: provided, further, that, in the case of foreign constructors, Filipino labor shall be
employed or hired in the different phases of the construction where Filipino skills are available:
provided, furthermore, that the financing of a foreign or foreign-controlled contractor from Philippine
government financing institutions shall not exceed twenty percent (20%) of the total cost of the
infrastructure facility of project: provided, finally, that financing from foreign sources shall not require
a guarantee by the Government or by government-owned or controlled corporations. The build-
operate-and-transfer scheme shall include a supply-and-operate situation which is a contractual
arrangement whereby the supplier of equipment and machinery for a given infrastructure facility, if
the interest of the Government so requires, operates the facility providing in the process technology
transfer and training to Filipino nationals.
(b) Build-and-transfer scheme. – A contractual arrangement whereby the contractor undertakes the
construction, including financing, of a given infrastructure facility, and its turnover after completion to
the government agency or local government unit concerned which shall pay the contractor its total
investment expended on the project, plus a reasonable rate of return thereon. This arrangement may
be employed in the construction of any infrastructure project including critical facilities which, for
security or strategic reasons, must be operated directly by the Government.
Section 3. Private Initiative in Infrastructure. – All government infrastructure agencies, including
government-owned and controlled corporations and local government units, are hereby authorized to
enter into contract with any duly prequalified private contractor for the financing, construction,
operation and maintenance of any financially viable infrastructure facilities through the build-operate-
and-transfer or build-and-transfer scheme, subject to the terms and conditions hereinafter set forth.
Section 4. Priority Projects. – All concerned infrastructure agencies, including government-owned
and controlled corporations and local government units, shall include in their infrastructure programs
those priority projects that may be financed, constructed, operated and maintained by the private
sector under the provisions of this Act.t shall be the duty of all concerned infrastructure agencies to

sector under the provisions of this Act.t shall be the duty of all concerned infrastructure agencies to
give wide publicity to all projects eligible for financing under this Act, including publication in national
newspapers of general circulation once every six (6) months and official notification of contractors
registered with them. The lists of all such national projects must be part of the medium-term
infrastructure programs of the agencies concerned and must be duly approved by Congress. Local
projects funded and implemented by the local government units concerned shall be submitted to the
local development councils for confirmation or approval.
Section 5. Public Bidding of Projects. – Upon approval of the projects mentioned in Section 4 of
this Act, the concerned head of the infrastructure agency or local government unit shall forthwith
cause to be published, once every week for three (3) consecutive weeks, in at least two (2)
newspapers of general circulation and in at least one (1) local newspaper which is circulated in the
region, province, city or municipality in which the project is to be constructed a notice inviting all duly
prequalified infrastructure contractors to participate in a public bidding for the projects so approved.n
the case of a build-operate-and-transfer arrangement, the contract shall be awarded to the lowest
complying bidder based on the present value of its proposed tolls, fees, rentals, and charges over a
fixed term or the facility to be constructed, operated, and maintained according to the prescribed
minimum design and performance standards, plans, and specifications. For this purpose, the
winning contractor shall be automatically granted by the infrastructure agency or local government
unit the franchise to operate and maintain the facility, including the collection of tools, fees, rentals,
and charges in accordance with Section 6 hereof.
In the case of build-and-transfer arrangement, the contract shall be awarded to the lowest complying
bidder based on the present value of its proposed schedule of amortization payments for the facility
to be constructed according to the prescribed minimum design and performance standards, plans
and specifications: provided, however, that a Filipino constructor who submits an equally
advantageous bid shall be given preference.
A copy of each build-operate-and-transfer or build-and-transfer contract shall forthwith be submitted
to Congress for its information.
Section 6. Repayment Scheme. – For the financing, construction, operation, and maintenance of
any infrastructure project undertaken pursuant to the provisions of this Act, the contractor shall be
entitled to a reasonable return of its investment and operating and maintenance costs in accordance
with its bid proposal as accepted by the concerned contracting infrastructure agency or local
government unit and incorporated in the contract's terms and conditions.n the case of a build-
operate-and-transfer arrangement, this repayment scheme is to be effected by authorizing the
contractor to charge and collect reasonable tools, fees, rentals, and charges for the use of the
project facility not exceeding those proposed in the bid and incorporated in the contract: provided,
that the government infrastructure agency or local government unit concerned shall approve the
fairness and equity of the tolls, fees, rentals and charges except in case of tolls for national
highways, roads, bridges and public thoroughfares which shall be approved by the Toll Regulatory
Board: provided, further, that the imposition and collection of tolls, fees, rentals and charges shall be
for a fixed term as proposed in the bid and incorporated in the contract but in no case shall this term
exceed fifty (50) years: provided, finally, that during the lifetime of the franchise, the contractor shall
undertake the necessary maintenance and repair of the facility in accordance with standards
prescribed in the bidding documents and in the contract.n the case of a build-and-transfer
arrangement, the repayment scheme is to be effected through amortization payments by the
government infrastructure agency or local government unit concerned to the contractor according to
the scheme proposed in the bid and incorporated in the contract.
In the case of land reclamation or the building of industrial estates, the repayment scheme may
consist of the grant of a portion or percentage of the reclaimed land or industrial estate built, subject
to the constitutional requirements with respect to the ownership of lands.
Section 7. Contract Termination and Adjustment. – In the event that a project is revoked,
cancelled or terminated by the Government through no fault of the contractor or by mutual
agreement, the Government shall compensate the said contractor for its actual expenses incurred in
the project plus a reasonable rate of return thereon not exceeding that stated in the bidding
documents and in the contract as of the date of such revocation, cancellation or termination:
provided, that the interest of the Government in these instances 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. The tolls, fees, rentals and
charges on the facility are subject to adjustment according to a formula related to official government
price indices which shall be defined before the bidding, through the bidding documents, and
incorporated in the contract.
Section 8. Toll Regulatory Board. – The Toll Regulatory Board is hereby attached to the
Department of Public Works and Highways with the Secretary of Public Works and Highways as

Department of Public Works and Highways with the Secretary of Public Works and Highways as
Chairman.
Section 9. Project Supervision. – Every infrastructure project undertaken under the provisions of
this Act shall be constructed, operated and maintained by the contractor concerned in accordance
with the plans, specifications, standards, and costs approved by the concerned government
infrastructure agency and under the technical supervision of the said agency.
Section 10. Implementing Rules and Regulations. – A committee composed and representatives
from the Department of Public Works and Highways, the Department of Finance, the Department of
Local Government, the National Economic and Development Authority, and duly accredited
organizations representing the private Philippine construction industry shall formulate and prescribe,
after public hearing and publication as required by law, the implementing rules and regulations,
including, among others, the criteria and guidelines for evaluation of bid proposals, provisions to
subject the facility collections to audit by the Commission on Audit, and conditions for the
cancellation of contracts, in order to carry out the provisions of this Act.
Section 11. Repealing Clause. – All laws or parts of any law inconsistent with the provisions of this
Act are hereby repealed or modified accordingly.
Section 12. Separability Clause. – If any provision of this Act is held invalid, the other provisions
not affected thereby shall continue in operation.
Section 13. Effectivity. – This Act shall take effect fifteen (15) days after its publication in at least
two (2) newspapers of general circulation.
Approved: July 9, 1990
Pasted from <http://www.lawphil.net/statutes/repacts/ra1990/ra_6957_1990.html>

Tatad vs. Garcia, Jr., 243 SCRA 436-493 (1995).
1:39 AM
The C onstitution, in no uncertain terms, requires a franchise for the operation of a public utility; however, it
does not requires a franchise before one can own the facilities needed to operate a public utility so long as it
does not operate them to serve the public. In law there is a clear distinction between the “operation” of a public
utility and the ownership of the facilities and equipment used to serve the public. Tatad v. Garcia, Jr., 243 SC RA
436 (1995)

SUPREME COURT
Manila
EN BANC
G.R. No. 114222 April 6, 1995

FRANCISCO S. TATAD, JOHN H. OSMENA and RODOLFO G. BIAZON, petitioners,
vs.
HON. JESUS B. GARCIA, JR., in his capacity as the Secretary of the Department of
Transportation and Communications, and EDSA LRT CORPORATION,
LTD., respondents.
QUIASON, J.:
This is a petition under Rule 65 of the Revised Rules of Court to prohibit respondents
from further implementing and enforcing the "Revised and Restated Agreement to Build,
Lease and Transfer a Light Rail Transit System for EDSA" dated April 22, 1992, and the
"Supplemental Agreement to the 22 April 1992 Revised and Restated Agreement To
Build, Lease and Transfer a Light Rail Transit System for EDSA" dated May 6, 1993.
Petitioners Francisco S. Tatad, John H. Osmena and Rodolfo G. Biazon are members of
the Philippine Senate and are suing in their capacities as Senators and as taxpayers.
Respondent Jesus B. Garcia, Jr. is the incumbent Secretary of the Department of
Transportation and Communications (DOTC), while private respondent EDSA LRT
Corporation, Ltd. is a private corporation organized under the laws of Hongkong.
I
In 1989, DOTC planned to construct a light railway transit line along EDSA, a major
thoroughfare in Metropolitan Manila, which shall traverse the cities of Pasay, Quezon,
Mandaluyong and Makati. The plan, referred to as EDSA Light Rail Transit III (EDSA LRT
III), was intended to provide a mass transit system along EDSA and alleviate the
congestion and growing transportation problem in the metropolis.
On March 3, 1990, a letter of intent was sent by the Eli Levin Enterprises, Inc.,
represented by Elijahu Levin to DOTC Secretary Oscar Orbos, proposing to construct the
EDSA LRT III on a Build-Operate-Transfer (BOT) basis.
On March 15, 1990, Secretary Orbos invited Levin to send a technical team to discuss
the project with DOTC.
On July 9, 1990, Republic Act No. 6957 entitled "An Act Authorizing the Financing,
Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector,
and For Other Purposes," was signed by President Corazon C. Aquino. Referred to as
the Build-Operate-Transfer (BOT) Law, it took effect on October 9, 1990.
Republic Act No. 6957 provides for two schemes for the financing, construction and
operation of government projects through private initiative and investment: Build-
Operate-Transfer (BOT) or Build-Transfer (BT).
In accordance with the provisions of R.A. No. 6957 and to set the EDSA LRT III project
underway, DOTC, on January 22, 1991 and March 14, 1991, issued Department Orders
Nos. 91-494 and 91-496, respectively creating the Prequalification Bids and Awards
Committee (PBAC) and the Technical Committee.
After its constitution, the PBAC issued guidelines for the prequalification of contractors for

After its constitution, the PBAC issued guidelines for the prequalification of contractors for
the financing and implementation of the project The notice, advertising the
prequalification of bidders, was published in three newspapers of general circulation once
a week for three consecutive weeks starting February 21, 1991.
The deadline set for submission of prequalification documents was March 21, 1991, later
extended to April 1, 1991. Five groups responded to the invitation namely, ABB Trazione
of Italy, Hopewell Holdings Ltd. of Hongkong, Mansteel International of Mandaue, Cebu,
Mitsui & Co., Ltd. of Japan, and EDSA LRT Consortium, composed of ten foreign and
domestic corporations: namely, Kaiser Engineers International, Inc., ACER Consultants
(Far East) Ltd. and Freeman Fox, Tradeinvest/CKD Tatra of the Czech and Slovak
Federal Republics, TCGI Engineering All Asia Capital and Leasing Corporation, The
Salim Group of Jakarta, E. L. Enterprises, Inc., A.M. Oreta & Co. Capitol Industrial
Construction Group, Inc, and F. F. Cruz & co., Inc.
On the last day for submission of prequalification documents, the prequalification criteria
proposed by the Technical Committee were adopted by the PBAC. The criteria totalling
100 percent, are as follows: (a) Legal aspects — 10 percent; (b)
Management/Organizational capability — 30 percent; and (c) Financial capability — 30
percent; and (d) Technical capability — 30 percent (Rollo, p. 122).
On April 3, 1991, the Committee, charged under the BOT Law with the formulation of the
Implementation Rules and Regulations thereof, approved the same.
After evaluating the prequalification, bids, the PBAC issued a Resolution on May 9, 1991
declaring that of the five applicants, only the EDSA LRT Consortium "met the
requirements of garnering at least 21 points per criteria [sic], except for Legal Aspects,
and obtaining an over-all passing mark of at least 82 points" (Rollo, p. 146). The Legal
Aspects referred to provided that the BOT/BT contractor-applicant meet the requirements
specified in the Constitution and other pertinent laws (Rollo, p. 114).
Subsequently, Secretary Orbos was appointed Executive Secretary to the President of
the Philippines and was replaced by Secretary Pete Nicomedes Prado. The latter sent to
President Aquino two letters dated May 31, 1991 and June 14, 1991, respectively
recommending the award of the EDSA LRT III project to the sole complying bidder, the
EDSA LRT Consortium, and requesting for authority to negotiate with the said firm for the
contract pursuant to paragraph 14(b) of the Implementing Rules and Regulations of the
BOT Law (Rollo, pp. 298-302).
In July 1991, Executive Secretary Orbos, acting on instructions of the President, issued a
directive to the DOTC to proceed with the negotiations. On July 16, 1991, the EDSA LRT
Consortium submitted its bid proposal to DOTC.
Finding this proposal to be in compliance with the bid requirements, DOTC and
respondent EDSA LRT Corporation, Ltd., in substitution of the EDSA LRT Consortium,
entered into an "Agreement to Build, Lease and Transfer a Light Rail Transit System for
EDSA" under the terms of the BOT Law (Rollo, pp. 147-177).
Secretary Prado, thereafter, requested presidential approval of the contract.
In a letter dated March 13, 1992, Executive Secretary Franklin Drilon, who replaced
Executive Secretary Orbos, informed Secretary Prado that the President could not grant
the requested approval for the following reasons: (1) that DOTC failed to conduct actual
public bidding in compliance with Section 5 of the BOT Law; (2) that the law authorized
public bidding as the only mode to award BOT projects, and the prequalification
proceedings was not the public bidding contemplated under the law; (3) that Item 14 of
the Implementing Rules and Regulations of the BOT Law which authorized negotiated
award of contract in addition to public bidding was of doubtful legality; and (4) that
congressional approval of the list of priority projects under the BOT or BT Scheme
provided in the law had not yet been granted at the time the contract was awarded (Rollo,
pp. 178-179).
In view of the comments of Executive Secretary Drilon, the DOTC and private
respondents re-negotiated the agreement. On April 22, 1992, the parties entered into a
"Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit
System for EDSA" (Rollo, pp. 47-78) inasmuch as "the parties [are] cognizant of the fact
the DOTC has full authority to sign the Agreement without need of approval by the
President pursuant to the provisions of Executive Order No. 380 and that certain events
[had] supervened since November 7, 1991 which necessitate[d] the revision of the
Agreement" (Rollo, p. 51). On May 6, 1992, DOTC, represented by Secretary Jesus
Garcia vice Secretary Prado, and private respondent entered into a "Supplemental
Agreement to the 22 April 1992 Revised and Restated Agreement to Build, Lease and
Transfer a Light Rail Transit System for EDSA" so as to "clarify their respective rights and

Transfer a Light Rail Transit System for EDSA" so as to "clarify their respective rights and
responsibilities" and to submit [the] Supplemental Agreement to the President, of the
Philippines for his approval" (Rollo, pp. 79-80).
Secretary Garcia submitted the two Agreements to President Fidel V. Ramos for his
consideration and approval. In a Memorandum to Secretary Garcia on May 6, 1993,
approved the said Agreements, (Rollo, p. 194).
According to the agreements, the EDSA LRT III will use light rail vehicles from the Czech
and Slovak Federal Republics and will have a maximum carrying capacity of 450,000
passengers a day, or 150 million a year to be achieved-through 54 such vehicles
operating simultaneously. The EDSA LRT III will run at grade, or street level, on the mid-
section of EDSA for a distance of 17.8 kilometers from F.B. Harrison, Pasay City to North
Avenue, Quezon City. The system will have its own power facility (Revised and Restated
Agreement, Sec. 2.3 (ii); Rollo p. 55). It will also have thirteen (13) passenger stations
and one depot in 16-hectare government property at North Avenue (Supplemental
Agreement, Sec. 11; Rollo, pp. 91-92).
Private respondents shall undertake and finance the entire project required for a
complete operational light rail transit system (Revised and Restated Agreement, Sec.
4.1; Rollo, p. 58). Target completion date is 1,080 days or approximately three years from
the implementation date of the contract inclusive of mobilization, site works, initial and
final testing of the system (Supplemental Agreement, Sec. 5; Rollo, p. 83). Upon full or
partial completion and viability thereof, private respondent shall deliver the use and
possession of the completed portion to DOTC which shall operate the same
(Supplemental Agreement, Sec. 5; Revised and Restated Agreement, Sec. 5.1; Rollo,
pp. 61-62, 84). DOTC shall pay private respondent rentals on a monthly basis through an
Irrevocable Letter of Credit. The rentals shall be determined by an independent and
internationally accredited inspection firm to be appointed by the parties (Supplemental
Agreement, Sec. 6; Rollo, pp. 85-86) As agreed upon, private respondent's capital shall
be recovered from the rentals to be paid by the DOTC which, in turn, shall come from the
earnings of the EDSA LRT III (Revised and Restated Agreement, Sec. 1, p. 5; Rollo, p.
54). After 25 years and DOTC shall have completed payment of the rentals, ownership of
the project shall be transferred to the latter for a consideration of only U.S. $1.00
(Revised and Restated Agreement, Sec. 11.1; Rollo, p. 67).
On May 5, 1994, R.A. No. 7718, an "Act Amending Certain Sections of Republic Act No.
6957, Entitled "An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes"
was signed into law by the President. The law was published in two newspapers of
general circulation on May 12, 1994, and took effect 15 days thereafter or on May 28,
1994. The law expressly recognizes BLT scheme and allows direct negotiation of BLT
contracts.
II
In their petition, petitioners argued that:
(1) THE AGREEMENT OF APRIL 22, 1992, AS AMENDED BY THE SUPPLEMENTAL
AGREEMENT OF MAY 6, 1993, INSOFAR AS IT GRANTS EDSA LRT CORPORATION,
LTD., A FOREIGN CORPORATION, THE OWNERSHIP OF EDSA LRT III, A PUBLIC
UTILITY, VIOLATES THE CONSTITUTION AND, HENCE, IS UNCONSTIT UTIONAL;
(2) THE BUILD-LEASE-TRANSFER SCHEME PROVIDED IN THE AGREEMENTS IS
NOT DEFINED NOR RECOGNIZED IN R.A. NO. 6957 OR ITS IMPLEMENTING RULES
AND REGULATIONS AND, HENCE, IS ILLEGAL;
(3) THE AWARD OF THE CONTRACT ON A NEGOTIATED BASIS VIOLATES R; A.
NO. 6957 AND, HENCE, IS UNLAWFUL;
(4) THE AWARD OF THE CONTRACT IN FAVOR OF RESPONDENT EDSA LRT
CORPORATION, LTD. VIOLATES THE REQUIREMENTS PROVIDED IN THE
IMPLEMENTING RULES AND REGULATIONS OF THE BOT LAW AND, HENCE, IS
ILLEGAL;
(5) THE AGREEMENTS VIOLATE EXECUTIVE ORDER NO 380 FOR THEIR FAILURE
TO BEAR PRESIDENTIAL APPROVAL AND, HENCE, ARE ILLEGAL AND
INEFFECTIVE; AND
(6) THE AGREEMENTS ARE GROSSLY DISADVANTAGEOUS TO THE
GOVERNMENT (Rollo, pp. 15-16).
Secretary Garcia and private respondent filed their comments separately and claimed
that:
(1) Petitioners are not the real parties-in-interest and have no legal standing to institute
the present petition;

the present petition;
(2) The writ of prohibition is not the proper remedy and the petition requires
ascertainment of facts;
(3) The scheme adopted in the Agreements is actually a build-transfer scheme allowed
by the BOT Law;
(4) The nationality requirement for public utilities mandated by the Constitution does not
apply to private respondent;
(5) The Agreements executed by and between respondents have been approved by
President Ramos and are not disadvantageous to the government;
(6) The award of the contract to private respondent through negotiation and not public
bidding is allowed by the BOT Law; and
(7) Granting that the BOT Law requires public bidding, this has been amended by R.A
No. 7718 passed by the Legislature On May 12, 1994, which provides for direct
negotiation as a mode of award of infrastructure projects.
III
Respondents claimed that petitioners had no legal standing to initiate the instant action.
Petitioners, however, countered that the action was filed by them in their capacity as
Senators and as taxpayers.
The prevailing doctrines in taxpayer's suits are to allow taxpayers to question contracts
entered into by the national government or government-owned or controlled corporations
allegedly in contravention of the law (Kilosbayan, Inc. v. Guingona, 232 SCRA 110
[1994]) and to disallow the same when only municipal contracts are involved (Bugnay
Construction and Development Corporation v. Laron, 176 SCRA. 240 [1989]).
For as long as the ruling in Kilosbayan on locus standi is not reversed, we have no
choice but to follow it and uphold the legal standing of petitioners as taxpayers to institute
the present action.
IV
In the main, petitioners asserted that the Revised and Restated Agreement of April 22,
1992 and the Supplemental Agreement of May 6, 1993 are unconstitutional and invalid
for the following reasons:
(1) the EDSA LRT III is a public utility, and the ownership and operation thereof is limited
by the Constitution to Filipino citizens and domestic corporations, not foreign corporations
like private respondent;
(2) the Build-Lease-Transfer (BLT) scheme provided in the agreements is not the BOT or
BT Scheme under the law;
(3) the contract to construct the EDSA LRT III was awarded to private respondent not
through public bidding which is the only mode of awarding infrastructure projects under
the BOT law; and
(4) the agreements are grossly disadvantageous to the government.
1. Private respondent EDSA LRT Corporation, Ltd. to whom the contract to construct the
EDSA LRT III was awarded by public respondent, is admittedly a foreign corporation
"duly incorporated and existing under the laws of Hongkong" (Rollo, pp. 50, 79). There is
also no dispute that once the EDSA LRT III is constructed, private respondent, as lessor,
will turn it over to DOTC, as lessee, for the latter to operate the system and pay rentals
for said use.
The question posed by petitioners is:
Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III; a
public utility? (Rollo, p. 17).
The phrasing of the question is erroneous; it is loaded. What private respondent owns
are the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power
plant, not a public utility. While a franchise is needed to operate these facilities to serve
the public, they do not by themselves constitute a public utility. What constitutes a public
utility is not their ownership but their use to serve the public (Iloilo Ice & Cold Storage Co.
v. Public Service Board, 44 Phil. 551, 557 558 [1923]).
The Constitution, in no uncertain terms, requires a franchise for the operation of a public
utility. However, it does not require a franchise before one can own the facilities needed
to operate a public utility so long as it does not operate them to serve the public.
Section 11 of Article XII of the Constitution provides:
No franchise, certificate or any other form of authorization for the operation of a public
utility shall be granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines at least sixty per centum of
whose capital is owned by such citizens, nor shall such franchise, certificate or
authorization be exclusive character or for a longer period than fifty years . . . (Emphasis

authorization be exclusive character or for a longer period than fifty years . . . (Emphasis
supplied).
In law, there is a clear distinction between the "operation" of a public utility and the
ownership of the facilities and equipment used to serve the public.
Ownership is defined as a relation in law by virtue of which a thing pertaining to one
person is completely subjected to his will in everything not prohibited by law or the
concurrence with the rights of another (Tolentino, II Commentaries and Jurisprudence on
the Civil Code of the Philippines 45 [1992]).
The exercise of the rights encompassed in ownership is limited by law so that a property
cannot be operated and used to serve the public as a public utility unless the operator
has a franchise. The operation of a rail system as a public utility includes the
transportation of passengers from one point to another point, their loading and unloading
at designated places and the movement of the trains at pre-scheduled times (cf. Arizona
Eastern R.R. Co. v. J.A.. Matthews, 20 Ariz 282, 180 P.159, 7 A.L.R. 1149 [1919] ;United
States Fire Ins. Co. v. Northern P.R. Co., 30 Wash 2d. 722, 193 P. 2d 868, 2 A.L.R. 2d
1065 [1948]).
The right to operate a public utility may exist independently and separately from the
ownership of the facilities thereof. One can own said facilities without operating them as a
public utility, or conversely, one may operate a public utility without owning the facilities
used to serve the public. The devotion of property to serve the public may be done by the
owner or by the person in control thereof who may not necessarily be the owner thereof.
This dichotomy between the operation of a public utility and the ownership of the facilities
used to serve the public can be very well appreciated when we consider the
transportation industry. Enfranchised airline and shipping companies may lease their
aircraft and vessels instead of owning them themselves.
While private respondent is the owner of the facilities necessary to operate the EDSA.
LRT III, it admits that it is not enfranchised to operate a public utility (Revised and
Restated Agreement, Sec. 3.2; Rollo, p. 57). In view of this incapacity, private respondent
and DOTC agreed that on completion date, private respondent will immediately deliver
possession of the LRT system by way of lease for 25 years, during which period DOTC
shall operate the same as a common carrier and private respondent shall provide
technical maintenance and repair services to DOTC (Revised and Restated Agreement,
Secs. 3.2, 5.1 and 5.2; Rollo, pp. 57-58, 61-62). Technical maintenance consists of
providing (1) repair and maintenance facilities for the depot and rail lines, services for
routine clearing and security; and (2) producing and distributing maintenance manuals
and drawings for the entire system (Revised and Restated Agreement, Annex F).
Private respondent shall also train DOTC personnel for familiarization with the operation,
use, maintenance and repair of the rolling stock, power plant, substations, electrical,
signaling, communications and all other equipment as supplied in the agreement
(Revised and Restated Agreement, Sec. 10; Rollo, pp. 66-67). Training consists of
theoretical and live training of DOTC operational personnel which includes actual driving
of light rail vehicles under simulated operating conditions, control of operations, dealing
with emergencies, collection, counting and securing cash from the fare collection system
(Revised and Restated Agreement, Annex E, Secs. 2-3). Personnel of DOTC will work
under the direction and control of private respondent only during training (Revised and
Restated Agreement, Annex E, Sec. 3.1). The training objectives, however, shall be such
that upon completion of the EDSA LRT III and upon opening of normal revenue
operation, DOTC shall have in their employ personnel capable of undertaking training of
all new and replacement personnel (Revised and Restated Agreement, Annex E Sec.
5.1). In other words, by the end of the three-year construction period and upon
commencement of normal revenue operation, DOTC shall be able to operate the EDSA
LRT III on its own and train all new personnel by itself.
Fees for private respondent' s services shall be included in the rent, which likewise
includes the project cost, cost of replacement of plant equipment and spare parts,
investment and financing cost, plus a reasonable rate of return thereon (Revised and
Restated Agreement, Sec. 1; Rollo, p. 54).
Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and
liabilities of a common carrier. For this purpose, DOTC shall indemnify and hold harmless
private respondent from any losses, damages, injuries or death which may be claimed in
the operation or implementation of the system, except losses, damages, injury or death
due to defects in the EDSA LRT III on account of the defective condition of equipment or
facilities or the defective maintenance of such equipment facilities (Revised and Restated
Agreement, Secs. 12.1 and 12.2; Rollo, p. 68).

Agreement, Secs. 12.1 and 12.2; Rollo, p. 68).
In sum, private respondent will not run the light rail vehicles and collect fees from the
riding public. It will have no dealings with the public and the public will have no right to
demand any services from it.
It is well to point out that the role of private respondent as lessor during the lease period
must be distinguished from the role of the Philippine Gaming Management Corporation
(PGMC) in the case of Kilosbayan Inc. v. Guingona, 232 SCRA 110 (1994). Therein, the
Contract of Lease between PGMC and the Philippine Charity Sweepstakes Office
(PCSO) was actually a collaboration or joint venture agreement prescribed under the
charter of the PCSO. In the Contract of Lease; PGMC, the lessor obligated itself to build,
at its own expense, all the facilities necessary to operate and maintain a nationwide on-
line lottery system from whom PCSO was to lease the facilities and operate the same.
Upon due examination of the contract, the Court found that PGMC's participation was not
confined to the construction and setting up of the on-line lottery system. It spilled over to
the actual operation thereof, becoming indispensable to the pursuit, conduct,
administration and control of the highly technical and sophisticated lottery system. In
effect, the PCSO leased out its franchise to PGMC which actually operated and managed
the same.
Indeed, a mere owner and lessor of the facilities used by a public utility is not a public
utility (Providence and W.R. Co. v. United States, 46 F. 2d 149, 152 [1930]; Chippewa
Power Co. v. Railroad Commission of Wisconsin, 205 N.W. 900, 903, 188 Wis. 246
[1925]; Ellis v. Interstate Commerce Commission, Ill 35 S. Ct. 645, 646, 237 U.S. 434, 59
L. Ed. 1036 [1914]). Neither are owners of tank, refrigerator, wine, poultry and beer cars
who supply cars under contract to railroad companies considered as public utilities
(Crystal Car Line v. State Tax Commission, 174 p. 2d 984, 987 [1946]).
Even the mere formation of a public utility corporation does not ipso facto characterize
the corporation as one operating a public utility. The moment for determining the requisite
Filipino nationality is when the entity applies for a franchise, certificate or any other form
of authorization for that purpose (People v. Quasha, 93 Phil. 333 [1953]).
2. Petitioners further assert that the BLT scheme under the Agreements in question is not
recognized in the BOT Law and its Implementing Rules and Regulations.
Section 2 of the BOT Law defines the BOT and BT schemes as follows:
(a) Build-operate-and-transfer scheme — A contractual arrangement whereby the
contractor undertakes the construction including financing, of a given infrastructure
facility, and the operation and maintenance thereof. The contractor operates the facility
over a fixed term during which it is allowed to charge facility users appropriate tolls, fees,
rentals and charges sufficient to enable the contractor to recover its operating and
maintenance expenses and its investment in the project plus a reasonable rate of return
thereon. The contractor transfers the facility to the government agency or local
government unit concerned at the end of the fixed term which shall not exceed fifty (50)
years. For the construction stage, the contractor may obtain financing from foreign and/or
domestic sources and/or engage the services of a foreign and/or Filipino constructor [sic]:
Provided, That the ownership structure of the contractor of an infrastructure facility whose
operation requires a public utility franchise must be in accordance with the Constitution:
Provided, however, That in the case of corporate investors in the build-operate-and-
transfer corporation, the citizenship of each stockholder in the corporate investors shall
be the basis for the computation of Filipino equity in the said corporation: Provided,
further, That, in the case of foreign constructors [sic], Filipino labor shall be employed or
hired in the different phases of the construction where Filipino skills are available:
Provided, furthermore, that the financing of a foreign or foreign-controlled contractor from
Philippine government financing institutions shall not exceed twenty percent (20%) of the
total cost of the infrastructure facility or project: Provided, finally, That financing from
foreign sources shall not require a guarantee by the Government or by government-
owned or controlled corporations. The build-operate-and-transfer scheme shall include a
supply-and-operate situation which is a contractual agreement whereby the supplier of
equipment and machinery for a given infrastructure facility, if the interest of the
Government so requires, operates the facility providing in the process technology transfer
and training to Filipino nationals.
(b) Build-and-transfer scheme — "A contractual arrangement whereby the contractor
undertakes the construction including financing, of a given infrastructure facility, and its
turnover after completion to the government agency or local government unit concerned
which shall pay the contractor its total investment expended on the project, plus a
reasonable rate of return thereon. This arrangement may be employed in the

reasonable rate of return thereon. This arrangement may be employed in the
construction of any infrastructure project including critical facilities which for security or
strategic reasons, must be operated directly by the government (Emphasis supplied).
The BOT scheme is expressly defined as one where the contractor undertakes the
construction and financing in infrastructure facility, and operates and maintains the same.
The contractor operates the facility for a fixed period during which it may recover its
expenses and investment in the project plus a reasonable rate of return thereon. After the
expiration of the agreed term, the contractor transfers the ownership and operation of the
project to the government.
In the BT scheme, the contractor undertakes the construction and financing of the facility,
but after completion, the ownership and operation thereof are turned over to the
government. The government, in turn, shall pay the contractor its total investment on the
project in addition to a reasonable rate of return. If payment is to be effected through
amortization payments by the government infrastructure agency or local government unit
concerned, this shall be made in accordance with a scheme proposed in the bid and
incorporated in the contract (R.A. No. 6957, Sec. 6).
Emphasis must be made that under the BOT scheme, the owner of the infrastructure
facility must comply with the citizenship requirement of the Constitution on the operation
of a public utility. No such a requirement is imposed in the BT scheme.
There is no mention in the BOT Law that the BOT and BT schemes bar any other
arrangement for the payment by the government of the project cost. The law must not be
read in such a way as to rule out or unduly restrict any variation within the context of the
two schemes. Indeed, no statute can be enacted to anticipate and provide all the fine
points and details for the multifarious and complex situations that may be encountered in
enforcing the law (Director of Forestry v. Munoz, 23 SCRA 1183 [1968]; People v.
Exconde, 101 Phil. 1125 [1957]; United States v. Tupasi Molina, 29 Phil. 119 [1914]).
The BLT scheme in the challenged agreements is but a variation of the BT scheme under
the law.
As a matter of fact, the burden on the government in raising funds to pay for the project is
made lighter by allowing it to amortize payments out of the income from the operation of
the LRT System.
In form and substance, the challenged agreements provide that rentals are to be paid on
a monthly basis according to a schedule of rates through and under the terms of a
confirmed Irrevocable Revolving Letter of Credit (Supplemental Agreement, Sec. 6; Rollo,
p. 85). At the end of 25 years and when full payment shall have been made to and
received by private respondent, it shall transfer to DOTC, free from any lien or
encumbrances, all its title to, rights and interest in, the project for only U.S. $1.00
(Revised and Restated Agreement, Sec. 11.1; Supplemental Agreement, Sec; 7; Rollo,
pp. 67, .87).
A lease is a contract where one of the parties binds himself to give to another the
enjoyment or use of a thing for a certain price and for a period which may be definite or
indefinite but not longer than 99 years (Civil Code of the Philippines, Art. 1643). There is
no transfer of ownership at the end of the lease period. But if the parties stipulate that title
to the leased premises shall be transferred to the lessee at the end of the lease period
upon the payment of an agreed sum, the lease becomes a lease-purchase agreement.
Furthermore, it is of no significance that the rents shall be paid in United States currency,
not Philippine pesos. The EDSA LRT III Project is a high priority project certified by
Congress and the National Economic and Development Authority as falling under the
Investment Priorities Plan of Government (Rollo, pp. 310-311). It is, therefore, outside the
application of the Uniform Currency Act (R.A. No. 529), which reads as follows:
Sec. 1. — Every provision contained in, or made with respect to, any domestic obligation
to wit, any obligation contracted in the Philippines which provisions purports to give the
obligee the right to require payment in gold or in a particular kind of coin or currency
other than Philippine currency or in an amount of money of the Philippines measured
thereby, be as it is hereby declared against public policy, and null, void, and of no effect,
and no such provision shall be contained in, or made with respect to, any obligation
hereafter incurred. The above prohibition shall not apply to (a) . . .; (b) transactions
affecting high-priority economic projects for agricultural, industrial and power
development as may be determined by
the National Economic Council which are financed by or through foreign funds; . . . .
3. The fact that the contract for the construction of the EDSA LRT III was awarded
through negotiation and before congressional approval on January 22 and 23, 1992 of
the List of National Projects to be undertaken by the private sector pursuant to the BOT

the List of National Projects to be undertaken by the private sector pursuant to the BOT
Law (Rollo, pp. 309-312) does not suffice to invalidate the award.
Subsequent congressional approval of the list including "rail-based projects packaged
with commercial development opportunities" (Rollo, p. 310) under which the EDSA LRT
III projects falls, amounts to a ratification of the prior award of the EDSA LRT III contract
under the BOT Law.
Petitioners insist that the prequalifications process which led to the negotiated award of
the contract appears to have been rigged from the very beginning to do away with the
usual open international public bidding where qualified internationally known applicants
could fairly participate.
The records show that only one applicant passed the prequalification process. Since only
one was left, to conduct a public bidding in accordance with Section 5 of the BOT Law for
that lone participant will be an absurb and pointless exercise (cf. Deloso v.
Sandiganbayan, 217 SCRA 49, 61 [1993]).
Contrary to the comments of the Executive Secretary Drilon, Section 5 of the BOT Law in
relation to Presidential Decree No. 1594 allows the negotiated award of government
infrastructure projects.
Presidential Decree No. 1594, "Prescribing Policies, Guidelines, Rules and Regulations
for Government Infrastructure Contracts," allows the negotiated award of government
projects in exceptional cases. Sections 4 of the said law reads as follows:
Bidding. — Construction projects shall generally be undertaken by contract after
competitive public bidding. Projects may be undertaken by administration or force
account or by negotiated contract only in exceptional cases where time is of the essence,
or where there is lack of qualified bidders or contractors, or where there is conclusive
evidence that greater economy and efficiency would be achieved through this
arrangement, and in accordance with provision of laws and acts on the matter, subject to
the approval of the Minister of Public Works and Transportation and Communications, the
Minister of Public Highways, or the Minister of Energy, as the case may be, if the project
cost is less than P1 Million, and the President of the Philippines, upon recommendation
of the Minister, if the project cost is P1 Million or more (Emphasis supplied).
xxx xxx xxx
Indeed, where there is a lack of qualified bidders or contractors, the award of government
infrastructure contracts may he made by negotiation. Presidential Decree No. 1594 is the
general law on government infrastructure contracts while the BOT Law governs particular
arrangements or schemes aimed at encouraging private sector participation in
government infrastructure projects. The two laws are not inconsistent with each other but
are inpari materia and should be read together accordingly.
In the instant case, if the prequalification process was actually tainted by foul play, one
wonders why none of the competing firms ever brought the matter before the PBAC, or
intervened in this case before us (cf. Malayan Integrated Industries Corp. v. Court of
Appeals, 213 SCRA 640 [1992]; Bureau Veritas v. Office of the President, 205 SCRA 705
[1992]).
The challenged agreements have been approved by President Ramos himself. Although
then Executive Secretary Drilon may have disapproved the "Agreement to Build, Lease
and Transfer a Light Rail Transit System for EDSA," there is nothing in our laws that
prohibits parties to a contract from renegotiating and modifying in good faith the terms
and conditions thereof so as to meet legal, statutory and constitutional requirements.
Under the circumstances, to require the parties to go back to step one of the
prequalification process would just be an idle ceremony. Useless bureaucratic "red tape"
should be eschewed because it discourages private sector participation, the "main
engine" for national growth and development (R.A. No. 6957, Sec. 1), and renders the
BOT Law nugatory.
Republic Act No. 7718 recognizes and defines a BLT scheme in Section 2 thereof as:
(e) Build-lease-and-transfer — A contractual arrangement whereby a project proponent is
authorized to finance and construct an infrastructure or development facility and upon its
completion turns it over to the government agency or local government unit concerned on
a lease arrangement for a fixed period after which ownership of the facility is
automatically transferred to the government unit concerned.
Section 5-A of the law, which expressly allows direct negotiation of contracts, provides:
Direct Negotiation of Contracts. — Direct negotiation shall be resorted to when there is
only one complying bidder left as defined hereunder.
(a) If, after advertisement, only one contractor applies for prequalification and it meets the
prequalification requirements, after which it is required to submit a bid proposal which is

prequalification requirements, after which it is required to submit a bid proposal which is
subsequently found by the agency/local government unit (LGU) to be complying.
(b) If, after advertisement, more than one contractor applied for prequalification but only
one meets the prequalification requirements, after which it submits bid/proposal which is
found by the agency/local government unit (LGU) to be complying.
(c) If, after prequalification of more than one contractor only one submits a bid which is
found by the agency/LGU to be complying.
(d) If, after prequalification, more than one contractor submit bids but only one is found by
the agency/LGU to be complying. Provided, That, any of the disqualified prospective
bidder [sic] may appeal the decision of the implementing agency, agency/LGUs
prequalification bids and awards committee within fifteen (15) working days to the head
of the agency, in case of national projects or to the Department of the Interior and Local
Government, in case of local projects from the date the disqualification was made known
to the disqualified bidder: Provided, furthermore, That the implementing agency/LGUs
concerned should act on the appeal within forty-five (45) working days from receipt
thereof.
Petitioners' claim that the BLT scheme and direct negotiation of contracts are not
contemplated by the BOT Law has now been rendered moot and academic by R.A. No.
7718. Section 3 of this law authorizes all government infrastructure agencies,
government-owned and controlled corporations and local government units to enter into
contract with any duly prequalified proponent for the financing, construction, operation
and maintenance of any financially viable infrastructure or development facility through a
BOT, BT, BLT, BOO (Build-own-and-operate), CAO (Contract-add-operate), DOT
(Develop-operate-and-transfer), ROT (Rehabilitate-operate-and-transfer), and ROO
(Rehabilitate-own-operate) (R.A. No. 7718, Sec. 2 [b-j]).
From the law itself, once and applicant has prequalified, it can enter into any of the
schemes enumerated in Section 2 thereof, including a BLT arrangement, enumerated
and defined therein (Sec. 3).
Republic Act No. 7718 is a curative statute. It is intended to provide financial incentives
and "a climate of minimum government regulations and procedures and specific
government undertakings in support of the private sector" (Sec. 1). A curative statute
makes valid that which before enactment of the statute was invalid. Thus, whatever
doubts and alleged procedural lapses private respondent and DOTC may have
engendered and committed in entering into the questioned contracts, these have now
been cured by R.A. No. 7718 (cf. Development Bank of the Philippines v. Court of
Appeals, 96 SCRA 342 [1980]; Santos V. Duata, 14 SCRA 1041 [1965]; Adong V.
Cheong Seng Gee, 43 Phil. 43 [1922].
4. Lastly, petitioners claim that the agreements are grossly disadvantageous to the
government because the rental rates are excessive and private respondent's
development rights over the 13 stations and the depot will rob DOTC of the best terms
during the most productive years of the project.
It must be noted that as part of the EDSA LRT III project, private respondent has been
granted, for a period of 25 years, exclusive rights over the depot and the air space above
the stations for development into commercial premises for lease, sublease, transfer, or
advertising (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92). For and in
consideration of these development rights, private respondent shall pay DOTC in
Philippine currency guaranteed revenues generated therefrom in the amounts set forth in
the Supplemental Agreement (Sec. 11;Rollo, p. 93). In the event that DOTC shall be
unable to collect the guaranteed revenues, DOTC shall be allowed to deduct any
shortfalls from the monthly rent due private respondent for the construction of the EDSA
LRT III (Supplemental Agreement, Sec. 11; Rollo, pp. 93-94). All rights, titles, interests
and income over all contracts on the commercial spaces shall revert to DOTC upon
expiration of the 25-year period. (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92).
The terms of the agreements were arrived at after a painstaking study by DOTC. The
determination by the proper administrative agencies and officials who have acquired
expertise, specialized skills and knowledge in the performance of their functions should
be accorded respect absent any showing of grave abuse of discretion (Felipe Ysmael, Jr.
& Co. v. Deputy Executive Secretary, 190 SCRA 673 [1990]; Board of Medical Education
v. Alfonso, 176 SCRA 304 [1989]).
Government officials are presumed to perform their functions with regularity and strong
evidence is necessary to rebut this presumption. Petitioners have not presented evidence
on the reasonable rentals to be paid by the parties to each other. The matter of valuation
is an esoteric field which is better left to the experts and which this Court is not eager to

is an esoteric field which is better left to the experts and which this Court is not eager to
undertake.
That the grantee of a government contract will profit therefrom and to that extent the
government is deprived of the profits if it engages in the business itself, is not worthy of
being raised as an issue. In all cases where a party enters into a contract with the
government, he does so, not out of charity and not to lose money, but to gain pecuniarily.
5. Definitely, the agreements in question have been entered into by DOTC in the exercise
of its governmental function. DOTC is the primary policy, planning, programming,
regulating and administrative entity of the Executive branch of government in the
promotion, development and regulation of dependable and coordinated networks of
transportation and communications systems as well as in the fast, safe, efficient and
reliable postal, transportation and communications services (Administrative Code of
1987, Book IV, Title XV, Sec. 2). It is the Executive department, DOTC in particular that
has the power, authority and technical expertise determine whether or not a specific
transportation or communication project is necessary, viable and beneficial to the people.
The discretion to award a contract is vested in the government agencies entrusted with
that function (Bureau Veritas v. Office of the President, 205 SCRA 705 [1992]).
WHEREFORE, the petition is DISMISSED.
SO ORDERED
Bellosillo and Kapunan, JJ., concur.
Padilla and Regalado, JJ., concurs in the result.
Romero, J., is on leave.
Separate Opinions

I concur in all but Part III of the majority opinion. Because I hold that petitioners do not
have standing to sue, I join to dismiss the petition in this case. I write only to set forth
what I understand the grounds for our decisions on the doctrine of standing are and, why
in accordance with these decisions, petitioners do not have the rights to sue, whether as
legislators, taxpayers or citizens. As members of Congress, because they allege no
infringement of prerogative as legislators. 1 As taxpayers because petitioners allege
neither an unconstitutional exercise of the taxing or spending powers of Congress (Art VI,
§§24-25 and 29) 2 nor an illegal disbursement of public money. 3As this Court pointed out
in Bugnay Const. and Dev. Corp. v. Laron, 4 a party suing as taxpayer "must specifically
prove that he has sufficient interest in preventing the illegal expenditure of money raised
by taxation and that he will sustain a direct injury as a result of the enforcement of the
questioned statute or contract. It is not sufficient that he has merely a general interest
common to all members of the public." In that case, it was held that a contract, whereby a
local government leased property to a private party with the understanding that the latter
would build a market building and at the end of the lease would transfer the building of
the lessor, did not involve a disbursement of public funds so as to give taxpayer standing
to question the legality of the contract. I see no substantial difference, as far as the
standing is of taxpayers to question public contracts is concerned, between the contract
there and the build-lease-transfer (BLT) contract being questioned by petitioners in this
case.
Nor do petitioners have standing to bring this suit as citizens. In the cases 5 in which
citizens were authorized to sue, this Court found standing because it thought the
constitutional claims pressed for decision to be of "transcendental importance," as in fact
it subsequently granted relief to petitioners by invalidating the challenged statutes or
governmental actions. Thus in the Lotto case 6 relied upon by the majority for upholding
petitioners standing, this Court took into account the "paramount public interest" involved
which "immeasurably affect[ed] the social, economic, and moral well-being of the
people . . . and the counter-productive and retrogressive effects of the envisioned on-line
lottery system:" 7 Accordingly, the Court invalidated the contract for the operation of
lottery.
But in the case at bar, the Court precisely finds the opposite by finding petitioners'
substantive contentions to be without merit To the extent therefore that a party's standing
is affected by a determination of the substantive merit of the case or a preliminary
estimate thereof, petitioners in the case at bar must be held to be without standing. This
is in line with our ruling in Lawyers League for a Better Philippines v. Aquino 8 and In

is in line with our ruling in Lawyers League for a Better Philippines v. Aquino 8 and In
re Bermudez 9 where we dismissed citizens' actions on the ground that petitioners had no
personality to sue and their petitions did not state a cause of action. The holding that
petitioners did not have standing followed from the finding that they did not have a cause
of action.
In order that citizens' actions may be allowed a party must show that he personally has
suffered some actual or threatened injury as a result of the allegedly illegal conduct of the
government; the injury is fairly traceable to the challenged action; and the injury is likely
to be redressed by a favorable action. 10 As the U.S. Supreme Court has held:
Typically, . . . the standing inquiry requires careful judicial examination of a complaint's
allegation to ascertain whether the particular plaintiff is entitled to an adjudication of the
particular claims asserted. Is the injury too abstract, or otherwise not appropriate, to be
considered judicially cognizable? Is the line of causation between the illegal conduct and
injury too attenuated? Is the prospect of obtaining relief from the injury as a result of a
favorable ruling too speculative? These questions and any others relevant to the standing
inquiry must be answered by reference to the Art III notion that federal courts may exercise
power only "in the last resort, and as a necessity, Chicago & Grand Trunk R. Co. v. Wellman,
143 US 339, 345, 36 L Ed 176,12 S Ct 400 (1892), and only when adjudication is "consistent
with a system of separated powers and [the dispute is one] traditionally thought to be capable
of resolution through the judicial process," Flast v Cohen, 392 US 83, 97, 20 L Ed 2d 947, 88
S Ct 1942 (1968). See Valley Forge, 454 US, at 472-473, 70 L Ed 2d 700, 102 S Ct 752. 11
Today's holding that a citizen, qua citizen, has standing to question a government
contract unduly expands the scope of public actions and sweeps away the case and
controversy requirement so carefully embodied in Art. VIII, §5 in defining the jurisdiction
of this Court. The result is to convert the Court into an office of ombudsman for the
ventilation of generalized grievances. Consistent with the view that this case has no merit
I submit with respect that petitioners, as representatives of the public interest, have no
standing.
Narvasa, C.J., Bidin, Melo, Puno, Vitug and Francisco, JJ., concur.
DAVIDE, JR., J., dissenting:
After wading through the record of the vicissitudes of the challenged contract and
evaluating the issues raised and the arguments adduced by the parties, I find myself
unable to joint majority in the well-written ponencia of Mr. Justice Camilo P. Quiason.
I most respectfully submit that the challenged contract is void for at least two reasons: (a)
it is an-ultra-vires act of the Department of Transportation and Communications (DOTC)
since under R.A. 6957 the DOTC has no authority to enter into a Build-Lease-and-
Transfer (BLT) contract; and (b) even assuming arguendo that it has, the contract was
entered into without complying with the mandatory requirement of public bidding.
I
Respondents admit that the assailed contract was entered into under R.A. 6957. This
law, fittingly entitled "An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, and For Other Purposes,"
recognizes only two (2) kinds of contractual arrangements between the private sector
and government infrastructure agencies: (a) the Build-Operate-and-Transfer (BOT)
scheme and (b) the Build-and-Transfer (BT) scheme. This conclusion finds support in
Section 2 thereof which defines only the BOT and BT schemes, in Section 3 which
explicitly provides for said schemes thus:
Sec. 3 Private Initiative in Infrastructure. — All government infrastructure agencies,
including government-owned and controlled corporations and local government units, are
hereby authorized to enter into contract with any duly prequalified private contractor for
the financing, construction, operation and maintenance of any financially viable
infrastructure facilities through the build-operate-and transfer or build-and-transfer
scheme, subject to the terms and conditions hereinafter set forth; (Emphasis supplied).
and in Section 5 which requires public bidding of projects under both schemes.
All prior acts and negotiations leading to the perfection of the challenged contract were
clearly intended and pursued for such schemes.
A Build-Lease-and-Transfer (BLT) scheme is not authorized under the said law, and
none of the aforesaid prior acts and negotiations were designed for such unauthorized
scheme. Hence, the DOTC is without any power or authority to enter into the BLT
contract in question.
The majority opinion maintains, however, that since "[t]here is no mention in the BOT
Law that the BOT and the BT schemes bar any other arrangement for the payment by
the government of the project cost," then "[t]he law must not be read in such a way as to

rule outer unduly restrict any variation within the context of the two schemes." This
interpretation would be correct if the law itself provides a room for flexibility. We find no
such provisions in R.A. No. 6957 if it intended to include a BLT scheme, then it should
have so stated, for contracts of lease are not unknown in our jurisdiction, and Congress
has enacted several laws relating to leases. That the BLT scheme was never intended as
a permissible variation "within the context" of the BOT and BT schemes is conclusively
established by the passage of R.A. No. 7718 which amends:
a. Section 2 by adding to the original BOT and BT schemes the following schemes:
(1) Build-own-and-operate (BOO)

(2) Build-Lease-and-trans fer (BLT)
(3) Build-transfer-and-operat e (BTO)
(4) Contract-add-and-operate (CAO)
(5) Develop-operat e-and-transfer (DOT)
(6) Rehabilitate-operate-and-transfer (ROT)
(7) Rehabilitate-own-and-operat e (ROO).
b) Section 3 of R.A. No. 6957 by deleting therefrom the phrase "through the build-
operate-and-transfer or build-and-transfer scheme."
II
Public bidding is mandatory in R.A. No. 6957. Section 5 thereof reads as follows:
Sec. 5 Public Bidding of Projects. — Upon approval of the projects mentioned in Section
4 of this Act, the concerned head of the infrastructure agency or local government unit
shall forthwith cause to be published, once every week for three (3) consecutive weeks,
in at least two (2) newspapers of general circulation and in at least one (1) local
newspaper which is circulated in the region, province, city or municipality in which the
project is to be constructed a notice inviting all duly prequalified infrastructure contractors
to participate in the public bidding for the projects so approved. In the case of a build-
operate-and-transfer arrangement, the contract shall be awarded to the lowest complying
bidder based on the present value of its proposed tolls, fees, rentals, and charges over a
fixed term for the facility to be constructed, operated, and maintained according to the
prescribed minimum design and performance standards plans, and specifications. For
this purpose, the winning contractor shall be automatically granted by the infrastructure
agency or local government unit the franchise to operate and maintain the facility,
including the collection of tolls, fees, rentals; and charges in accordance with Section 6
hereof.
In the case of a build-and-transfer arrangement, the contract shall be awarded to the
lowest complying bidder based on the present value of its proposed, schedule of
amortization payments for the facility to be constructed according to the prescribed
minimum design and performance standards, plans and specifications: Provided,
however, That a Filipino constructor who submits an equally advantageous bid shall be
given preference.
A copy of each build-operate-and-transfer or build-and-transfer contract shall forthwith be
submitted to Congress for its information.
The requirement of public bidding is not an idle ceremony. It has been aptly said that in
our jurisdiction "public bidding is the policy and medium adhered to in Government
procurement and construction contracts under existing laws and regulations. It is the
accepted method for arriving at a fair and reasonable price and ensures that overpricing,
favoritism, and other anomalous practices are eliminated or minimized. And any
Government contract entered into without the required bidding is null and void and
cannot adversely affect the rights of third parties." (Bartolome C. Fernandez, Jr., A
TREATISE ON GOVERNMENT CONTRACTS UNDER PHILIPPINE LAW 25 [rev. ed.
1991], citing Caltex vs. Delgado Bros., 96 Phil. 368 [1954]).
The Office of the President, through then Executive Secretary Franklin Drilon Correctly
disapproved the contract because no public bidding is strict compliance with Section 5 of
R.A. No. 6957 was conducted. Secretary Drilon Further bluntly stated that the provision
of the Implementing Rules of said law authorizing negotiated contracts was of doubtful
legality. Indeed, it is null and void because the law itself does not recognize or allow
negotiated contracts.
However the majority opinion posits the view that since only private respondent EDSA

LRT was prequalified, then a public bidding would be "an absurd and pointless exercise."
I submit that the mandatory requirement of public bidding cannot be legally dispensed
with simply because only one was qualified to bid during the prequalification proceedings.
Section 5 mandates that the BOT or BT contract should be awarded "to the lowest
complying bidder," which logically means that there must at least be two (2) bidders. If
this minimum requirement is not met, then the proposed bidding should be deferred and
a new prequalification proceeding be scheduled. Even those who were earlier
disqualified may by then have qualified because they may have, in the meantime,
exerted efforts to meet all the qualifications.
This view of the majority would open the floodgates to the rigging of prequalification
proceedings or to unholy conspiracies among prospective bidders, which would even
include dishonest government officials. They could just agree, for a certain consideration,
that only one of them qualify in order that the latter would automatically corner the
contract and obtain the award.
That section 5 admits of no exception and that no bidding could be validly had with only
one bidder is likewise conclusively shown by the amendments introduced by R.A. No.
7718 Per section 7 thereof, a new section denominated as Section 5-A was introduced in
R.A. No. 6957 to allow direct negotiation contracts. This new section reads:
Sec. 5-A. Direct Negotiation Of Contracts — Direct negotiation, shall be resorted to when
there is only one complying bidder left as defined hereunder.
(a) If, after advertisement, only one contractor applies for prequalification requirements,
after which it is required to submit a bid/proposal which subsequently found by the
agency/local government unit (LGU) to be complying.
one meets the prequalification requirements, after which it submits bid/proposal which is
found by the agency/local government unit (LGU) to be complying,
(c) If after prequalification of more than one contractor only one submits a bid which is
(d) If, after prequalification, more than one contractor, only one submit bids but only one
is found by the agency/LGU to be complying: Provided, That, any of the disqualified
prospective bidder may appeal the decision contractor of the implementing agency/LGUs
prequalification bids an award committee within fifteen (15) working days to the head of
the agency, in case of national projects or to the Department of the Interior and Local
to the disqualified bidder Provided, That the implementing agency/LGUs concerned
should act on the appeal within forty-five (45) working days from receipt thereof.
Can this amendment be given retroactive effect to the challenged contract so that it may
now be considered a permissible negotiated contract? I submit that it cannot be R.A. No.
7718 does not provide that it should be given retroactive effect to pre-existing contracts.
Section 18 thereof says that it "shall take effect fifteen (15) days after its publication in at
least two (2) newspapers of general circulation." If it were the intention of Congress to
give said act retroactive effect then it would have so expressly provided. Article 4 of the
Civil Code provides that "[l]aws shall have no retroactive effect, unless the contrary is
provided."
The presumption is that all laws operate prospectively, unless the contrary clearly
appears or is clearly, plainly, and unequivocally expressed or necessarily implied. In
every case of doubt, the doubt will be resolved against the retroactive application of laws.
(Ruben E Agpalo, STATUTORY CONSTRUCTION 225 [2d ed. 1990]). As to amendatory
acts, or acts which change an existing statute, Sutherland states:
In accordance with the rule applicable to original acts, it is presumed that provisions
added by the amendment affecting substantive rights are intended to operate
prospectively. Provisions added by the amendment that affect substantive rights will not
be construed to apply to transactions and events completed prior to its enactment unless
the legislature has expressed its intent to that effect or such intent is clearly implied by
the language of the amendment or by the circumstances surrounding its enactment. (1
Frank E. Horack, Jr., SUTHERLAND'S STATUTES AND STATUTORY
CONSTRUCTION 434-436 [1943 ed.]).
I vote then to grant the instant petition and to declare void the challenged contract and its
supplement.
FELICIANO, J., dissenting:
After considerable study and effort, and with much reluctance, I find I must dissent in the
instant case. I agree with many of the things set out in the majority opinion written by my

distinguished brother in the Court Quiason, J. At the end of the day, however, I find
myself unable to join in the result reached by the majority.
I join in the dissenting opinion written by Mr. Justice. Davide, Jr; which is appropriately
drawn on fairly narrow grounds. At the same time; I wish to address briefly one of the
points made by Justice Quiason in the majority opinion in his effort to meet the difficulties
posed by Davide Jr., J.
I refer to the invocation of the provisions of presidential Decree No. 1594 dated 11 June
1978 entitled: "Prescribing policies, Guidelines, Rules and Regulations for Government
Infrastructure Contracts·" More specifically, the majority opinion invokes paragraph 1 of
Section 4 of this Degree which reads as follows:
Sec. 4. Bidding. — Construction projects shall, generally be undertaken by contract after
or where there is lack of qualified bidders or contractors, or where there is a conclusive
arrangement, and in accordance with provisions of laws and acts on the matter, subject
to the approval of the Ministry of public Works, Transportation and Communications, the
cost is less than P1 Million, and of the President of the Philippines, upon the
recommendation of the Minister, if the project cost is P1 Million or more.
xxx xxx xxx
I understand the unspoken theory in the majority opinion to be that above Section 4 and
presumably the rest of Presidential Decree No. 1594 continue to exist and to run parallel
to the provisions of Republic Act No. 6957, whether in its original form or as amended by
Republic Act No. 7718.
A principal difficulty with this approach is that Presidential Decree No. 1594 purports to
apply to all "government contracts for infrastructure and other construction projects." But
Republic Act No. 6957 as amended by Republic Act No. 7718, relates only to
"infrastructure projects" which are financed, constructed, operated and maintained "by
the private sector" "through the build/operate-and-transfer or build-and-transfer scheme"
under Republic Act No. 6597 and under a series of other comparable schemes under
Republic Act No. 7718. In other words, Republic Act No. 6957 and Republic Act. No.
7718 must be held, in my view, to be special statutes applicable to a more limited field of
"infrastructure projects" than the wide-ranging scope of application of the general
statute i.e., Presidential Decree No. 1594. Thus, the high relevance of the point made by
Mr. Justice Davide that Republic Act No. 6957 in specific connection with BCT- and BLT
type and BLT type of contracts imposed an unqualifiedrequirement of public bidding set
out in Section 5 thereof.
It should also be pointed out that under Presidential Decree No. 1594, projects may be
undertaken "by administration or force account or by negotiated contract only"
(1) in exceptional cases where time is of the essence; or
(2) where there is lack of bidders or contractors; or
(3) where there is a conclusive evidence that greater economy and efficiency would be
achieved through these arrangements, and in accordance with provision[s] of laws and
acts on the matter.
It must, upon the one hand, be noted that the special law Republic Act No. 6957 made
absolutely no mention of negotiated contracts being permitted to displace the
requirement of public bidding. Upon the other hand, Section 5-a, inserted in Republic Act
No. 6957 by the amending statute Republic Act No. 7718, does not purport to authorize
direct negotiation of contracts situations where there is a lack of pre-qualified contractors
or, complying bidders. Thus, even under the amended special statute, entering into
contracts by negotiation is not permissible in the other (2) categories of cases referred to
in Section 4 of Presidential Decree No. 1594, i.e., "in exceptional cases where time is of
the essence" and "when there is conclusive evidence that greater economy and
efficiency would be achieved through these arrangements, etc."
The result I reach is that insofar as BOT, etc.-types of contracts are concerned, the
applicable public bidding requirement is that set out in Republic Act No. 6957 and, with
respect to such type of contracts opened for pre-qualification and bidding after the date of
effectivity of Republic Act No. 7718, The provision of Republic Act No. 7718. The
assailed contract was entered into before Republic Act. No. 7718 was enacted.
The difficulties. of applying the provisions of Presidential Degree No. 1594 to the Edsa
LRT-type of contracts are aggravated when one considers the detailed "Implementing

LRT-type of contracts are aggravated when one considers the detailed "Implementing
Rules and Regulations as amended April 1988" issued under that Presidential
Decree. 1 For instance:
IB [2.5.2] 2.4.2 By Negotiated Contract
xxx xxx xxx
a. In times of emergencies arising from natural calamities where immediate action is
necessary to prevent imminent loss of life and/or property.
b. Failure to award the contract after competitive public bidding for valid cause or causes
[such as where the prices obtained through public bidding are all above the AAE and the
bidders refuse to reduce their prices to the AAE].
In these cases, bidding may be undertaken through sealed canvass of at least three (3)
qualified contractors. Authority to negotiate contracts for projects under these exceptional
cases shall be subject to prior approval by heads of agencies within their limits of
approving authority.
c. Where the subject project is adjacent or contiguous to an on-going project and it could
be economically prosecuted by the same contractor provided that he has no negative
slippage and has demonstrated a satisfactory performance. (Emphasis supplied).
Note that there is no reference at all in these Presidential Decree No. 1594 Implementing
Rules and Regulations to absence of pre-qualified applicants and bidders as justifying
negotiation of contracts as distinguished from requiring public bidding or a second public
bidding.
Note also the following provision of the same Implementing Rules and Regulations:
IB 1 Prequalification
The following may be become contractors for government projects:
1 Filipino
a. Citizens (single proprietorship)
b. Partnership of corporation duly organized under the laws of the Philippines, and at
least seventy five percent (75%) of the capital stock of which belongs to Filipino citizens.
2. Contractors forming themselves into a joint venture, i.e., a group of two or more
contractors that intend to be jointly and severally responsible for a particular contract,
shall for purposes of bidding/tendering comply with LOI 630, and, aside from being
currently and properly accredited by the Philippine Contractors Accreditation Board, shall
comply with the provisions of R.A. 4566, provided that joint ventures in which Filipino
ownership is less than seventy five percent ( 75%) may be prequalified where the
structures to be built require the application of techniques and/or technologies which
are not adequately possessed by a Filipino entity as defined above.
[The foregoing shall not negate any existing and future commitments with respect to the
bidding and aware of contracts financed partly or wholly with funds from international
lending institutions like the Asian Development Bank and the Worlds Bank as well as
from bilateral and other similar sources.(Emphases supplied)
The record of this case is entirely silent on the extent of Philippine equity in the Edsa LRT
Corporation; there is no suggestion that this corporation is organized under Philippine law
and is at least seventy-five (75%) percent owned by Philippine citizens.
Public bidding is the normal method by which a government keeps contractors honest
and is able to assure itself that it would be getting the best possible value for its money in
any construction or similar project. It is not for nothing that multilateral financial
organizations like the World Bank and the Asian Development Bank uniformly require
projects financed by them to be implemented and carried out by public bidding. Public
bidding is much too important a requirement casually to loosen by a latitudinarian
exercise in statutory construction.
The instant petition should be granted and the challenged contract and its supplement
should be nullified and set aside. A true public bidding, complete with a new
prequalification proceeding, should be required for the Edsa LRT Project.
Separate Opinions
I concur in all but Part III of the majority opinion. Because I hold that petitioners do not
have standing to sue, I join to dismiss the petition in this case. I write only to set forth
what I understand the grounds for our decisions petitioners do not have the rights to sue,
whether as legislators, taxpayers or citizens. As members of Congress, because they
allege no infringement of prerogative as legislators. 1 As taxpayers because petitioners
allege neither an unconstitutional exercise of the taxing or spending powers of Congress
(Art VI, §§24-25 and 29) 2 nor an illegal disbursement of public money. 3 As this Court

(Art VI, §§24-25 and 29) 2 nor an illegal disbursement of public money. 3 As this Court
pointed out in Bugnay Const. and Dev. Corp. v. Laron, 4 a party suing as taxpayer "must
specifically prove that he has sufficient interest in preventing the illegal expenditure of
money raised by taxation and that he will sustain a direct injury as a result of the
enforcement of the questioned statute or contract, It is not sufficient that has merely a
general interest common to all members of the public." In that case, it was held that a
contract, whereby a local government leased property to a private party with the
understanding that the latter would build a market building and at the end of the lease
would transfer the building of the lessor, did not involve a disbursement of public funds so
as to give taxpayer standing to question the legality of the contract contracts I see no
substantial difference, as far as the standing is of taxpayers is concerned, between the
contract there and the build-lease-transfer (BLT) contract being questioned by petitioners
in this case.
Nor do petitioners have standing to bring this suit as citizens. In the cases 5 in which
citizens were authorized to sue, this Court found standing because it thought the
constitutional claims pressed for decision to be of "transcendental importance," as in fact
it subsequently granted relief to petitioners by invalidating the challenged statutes or
governmental actions. Thus in the Lotto case 6 relied upon by the majority for upholding
petitioners standing, this Court took into account the "paramount public interest" involved
which "immeasurably affect[ed] the social, economic, and moral well-being of the
people . . . and the counter-productive and retrogressive effects of the envisioned on-line
lottery system:" 7 Accordingly, the Court invalidated the contract for the operation of
lottery.
But in the case at bar, the Court precisely finds the opposite by finding petitioners'
substantive contentions to be without merit To the extent therefore that a party's standing
is affected by a determination of the substantive merit of the case or a preliminary
estimate thereof, petitioners in the case at bar must be held to be without standing. This
is in line with our ruling in Lawyers League for a Better Philippines v. Aquino 8 and In re
Bermudez 9 where we dismissed citizens' actions on the ground that petitioners had no
personality to sue and their petitions did not state a cause of action. The holding that
petitioners did not have standing followed from the finding that they did not have a cause
of action.
In order that citizens' actions may be allowed a party must show that he personally has
suffered some actual or threatened injury as a result of the allegedly illegal conduct of the
government; the injury is fairly traceable to the challenged action; and the injury is likely
to be redressed by a favorable action. 10 As the U.S. Supreme Court has held:
Typically, . . . the standing inquiry requires careful judicial examination of a complaint's
allegation to ascertain whether the particular plaintiff is entitled to an adjudication of the
particular claims asserted. Is the injury too abstract, or otherwise not appropriate, to be
considered judicially cognizable? Is the line of causation between the illegal conduct and
injury too attenuated? Is the prospect of obtaining relief from the injury as a result of a
favorable ruling too speculative? These questions and any others relevant to the standing
inquiry must be answered by reference to the Art III notion that federal courts may exercise
power only "in the last resort, and as a necessity, Chicago & Grand Trunk R. Co. v. Wellman,
143 US 339, 345, 36 L Ed 176,12 S Ct 400 (1892), and only when adjudication is "consistent
with a system of separated powers and [the dispute is one] traditionally thought to be capable
of resolution through the judicial process," Flast v Cohen, 392 US 83, 97, 20 L Ed 2d 947, .88
S Ct 1942 (1968). See Valley Forge, 454 US, at 472-473, 70 L Ed 2d 700, 102 S Ct 752. 11
Today's holding that a citizen, qua citizen, has standing to question a government
contract unduly expands the scope of public actions and sweeps away the case and
controversy requirement so carefully embodied in Art. VIII, §5 in defining the jurisdiction
of this Court. The result is to convert the Court into an office of ombudsman for the
ventilation of generalized grievances. Consistent with the view that this case has no merit
I submit with respect that petitioners, as representatives of the public interest, have no
standing.
Narvasa, C.J., Bidin, Melo, Puno, Vitug and Francisco, JJ., concur.
DAVIDE, JR., J., dissenting:
After wading through the record of the vicissitudes of the challenged contract and
evaluating the issues raised and the arguments adduced by the parties, I find myself
unable to joint majority in the well-written ponencia of Mr. Justice Camilo P. Quiason.
I most respectfully submit that the challenged contract is void for at least two reasons: (a)
it is an-ultra-vires act of the Department of Transportation and Communications (DOTC)

Transfer (BLT) contract; and (b) even assuming arguendo that it has, the contract was
entered into without complying with the mandatory requirement of public bidding.
I
Respondents admit that the assailed contract was entered into under R.A. 6957. This
law, fittingly entitled "An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, and For Other Purposes,"
recognizes only two (2) kinds of contractual arrangements between the private sector
and government infrastructure agencies: (a) the Build-Operate-and-Transfer (BOT)
scheme and (b) the Build-and-Transfer (BT) scheme. This conclusion finds support in
Section 2 thereof which defines only the BOT and BT schemes, in Section 3 which
explicitly provides for said schemes thus:
Sec. 3 Private Initiative in Infrastructure. — All government infrastructure agencies,
including government-owned and controlled corporations and local government units, are
hereby authorized to enter into contract with any duly prequalified private contractor for
the financing, construction, operation and maintenance of any financially viable
infrastructure facilities through the build-operate-and transfer or build-and-transfer
scheme, subject to the terms and conditions hereinafter set forth; (Emphasis supplied).
and in Section 5 which requires public bidding of projects under both schemes.
All prior acts and negotiations leading to the perfection of the challenged contract were
clearly intended and pursued for such schemes.
A Build-Lease-and-Transfer (BLT) scheme is not authorized under the said law, and
none of the aforesaid prior acts and negotiations were designed for such unauthorized
scheme. Hence, the DOTC is without any power or authority to enter into the BLT
contract in question.
The majority opinion maintains, however, that since "[t]here is no mention in the BOT
Law that the BOT and the BT schemes bar any other arrangement for the payment by
rule outer unduly restrict any variation within the context of the two schemes." This
interpretation would be correct if the law itself provides a room for flexibility. We find no
such provisions in R.A. No. 6957 if it intended to include a BLT scheme, then it should
have so stated, for contracts of lease are not unknown in our jurisdiction, and Congress
has enacted several laws relating to leases. That the BLT scheme was never intended as
a permissible variation "within the context" of the BOT and BT schemes is conclusively
established by the passage of R.A. No. 7718 which amends:
a. Section. 2 by adding to the original BOT and BT schemes the following schemes:
1) Build-own-and-operate (BOO)
2) Build-Lease-and-trans fer (BLT)
3) Build-transfer-and-operat e (BTO)
4) Contract-add-and-operate (CAO)
5) Develop-operat e-and-transfer (DOT)
6) Rehabilitate-operate-and-transfer (ROT)
7) Rehabilitate-own-and-operat e (ROO).
b) Section 3 of R.A. No. 6957 by deleting therefrom the phrase "through the build-
operate-and-transfer or build-and-transfer scheme.
II
Public bidding is mandatory in R.A. No. 6957. Section 5 thereof reads as follows:
Sec. 5 Public Bidding of Projects. — Upon approval of the projects mentioned in Section
4 of this Act, the concerned head of the infrastructure agency or local government unit
shall forthwith cause to be published, once every week for three (3) consecutive weeks,
in at least two (2) newspapers of general circulation and in at least one (1) local
newspaper which is circulated in the region, province, city or municipality in which the
project is to be constructed a notice inviting all duly prequalified infrastructure contractors
to participate in the public bidding for the projects so approved. In the case of a build-
operate-and-transfer arrangement, the contract shall be awarded to the lowest complying
bidder based on the present value of its proposed tolls, fees, rentals, and charges over a
fixed term for the facility to be constructed, operated, and maintained according to the
prescribed minimum design and performance standards plans, and specifications. For

agency or local government unit the franchise to operate and maintain the facility,
including the collection of tolls, fees, rentals; and charges in accordance with Section 6
hereof.
In the case of a build-and-transfer arrangement, the contract shall be awarded to the
lowest complying bidder based on the present value of its proposed, schedule of
amortization payments for the facility to be constructed according to the prescribed
minimum design and performance standards, plans and specifications: Provided,
however, That a Filipino constructor who submits an equally advantageous bid shall be
given preference.
A copy of each build-operate-and-transfer or build-and-transfer contract shall forthwith be
submitted to Congress for its information.
The requirement of public bidding is not an idle ceremony. It has been aptly said that in
our jurisdiction "public bidding is the policy and medium adhered to in Government
procurement and construction contracts under existing laws and regulations. It is the
accepted method for arriving at a fair and reasonable price and ensures that overpricing,
favoritism, and other anomalous practices are eliminated or minimized. And any
Government contract entered into without the required bidding is null and void and
cannot adversely affect the rights of third parties." (Bartolome C. Fernandez, Jr., A
TREATISE ON GOVERNMENT CONTRACTS UNDER PHILIPPINE LAW 25 [rev. ed.
1991], citing Caltex vs. Delgado Bros., 96 Phil. 368 [1954]).
The Office of the president secretary through then Executive Secretary Franklin Drilon
Correctly disapproved the contract because no public bidding is strict compliance with
Section 5 of R.A. No. 6957 was conducted. Secretary Drilon Further bluntly stated that
the provision of the Implementing Rules of said law authorizing negotiated contracts was
of doubtful legality. Indeed, it is null and void because the law itself does not recognize or
allow negotiated contracts.
LRT was prequalified, then a public bidding would be "an absurd and pointless exercise."
I submit that the mandatory requirement of public bidding cannot be legally dispensed
with simply because only one was qualified to bid during the prequalification proceedings.
Section 5 mandates that the BOT or BT contract should be awarded "to the lowest
complying bidder," which logically means that there must at least be two (2) bidders. If
this minimum requirement is not met, then the proposed bidding should be deferred and
a new prequalification proceeding be scheduled. Even those who were earlier
disqualified may by then have qualified because they may have, in the meantime,
exerted efforts to meet all the qualifications.
This view of the majority would open the floodgates to the rigging of prequalification
proceedings or to unholy conspiracies among prospective bidders, which would even
include dishonest government officials. They could just agree, for a certain consideration,
that only one of them qualify in order that the latter would automatically corner the
contract and obtain the award.
That section 5 admits of no exception and that no bidding could be validly had with only
one bidder is likewise conclusively shown by the amendments introduced by R.A. No.
7718 Per section 7 thereof, a new section denominated as Section 5-A was introduced in
R.A. No. 6957 to allow direct negotiation contracts. This new section reads:
Sec. 5-A. Direct Negotiation Of Contracts — Direct negotiation, shall be resorted to when
there is only one complying bidder left as defined hereunder.
(a) If, after advertisement, only one contractor applies for prequalification requirements
submit a bid/proposal which subsequently found by the agency/local government unit
(LGU) to be complying.
one meets the prequalification .requirements, after which it submits bid/proposal which is
found by the agency/local government unit (LGU) to be complying,
(c) If after prequalification of more than one contractor only one submits a bid which is
(d) If, after prequalification, more than one contractor, only one submit bids but only one
is found by the agency/LGU to be complying: Provided, That, any of the disqualified
prospective bidder may appeal the decision contractor of the implementing agency/LGUs
prequalification bids an award committee within fifteen (15) working days to the head of
the agency of national projects or to the Department of the Interior and Local

should act on the appeal within forty-five (45) working days from receipt thereof.
Can this amendment be given retroactive effect to the challenged contract so that it may
now be considered a permissible negotiated contract? I submit that it cannot be R.A. No.
7718 does not provide that it should be given retroactive effect to pre-existing contracts.
Section 18 thereof says that it "shall take effect fifteen (15) after its publication in at least
two (2) newspapers of general circulation." If it were the intention of Congress to give
said act retroactive effect then it would have so expressly provided. Article 4 of the Civil
Code provides that "[l]aws shall have no retroactive effect, unless the contrary is
provided."
The presumption is that all laws operate prospectively, unless the contrary clearly
appears or is clearly, plainly, and unequivocally expressed or necessarily implied. In
every case of doubt, the doubt will be resolved against the retroactive application of laws.
(Ruben E Agpalo, STATUTORY CONSTRUCTION 225 [2d ed. 1990]). As to amendatory
acts, or acts which change an existing statute, Sutherland states:
In accordance with the rule applicable to original acts, it is presumed that provisions
added by the amendment affecting substantive rights are intended to operate
prospectively. Provisions added by the amendment that affect substantive rights will not
be construed to apply to transactions and events completed prior to its enactment unless
the legislature has expressed its intent to that effect or such intent is clearly implied by
the language of the amendment or by the circumstances surrounding its enactment. (1
Frank E. Horack, Jr., SUTHERLAND'S STATUTES AND STATUTORY
CONSTRUCTION 434-436 [1943 ed.]).
I vote then to grant the instant petition and to declare void the challenged contract and its
supplement.
After considerable study and effort, and with much reluctance, I find I must dissent in the
distinguished brother in the Court Quiason, J. At the end of the day, however, I find
myself unable to join in the result reached by the majority.
I join in the dissenting opinion written by Mr. Justice. Davide, Jr; which is appropriately
drawn on fairly narrow grounds. At the same time; I wish to address briefly one of Justice
Quiason in the majority opinion in his effort to meet the difficulties posed by Davide Jr., J.
I refer to the invocation of the provisions of presidential Decree No. 1594 dated 11 June
1978 entitled: "Prescribing policies, Guidelines, Rules and Regulations for Government
Infrastructure Contracts·" More specifically, the majority opinion invokes paragraph 1 of
Section 4 of this Degree which reads as follows:
Sec. 4. Bidding. — Construction projects shall, generally be undertaken by contract after
or where there is lack of qualified bidders or contractors, or where there is a conclusive
arrangement, and in accordance with provisions of laws and acts on the matter, subject
to the approval of the Ministry of public Works, Transportation and Communications, the
cost is less than P1 Million, and of the president of the Philippines, upon the
recommendation of the Minister, if the project cost is P1 Million or more.
xxx xxx xxx
I understand the unspoken theory in the majority opinion utility and the ownership of the
facilities used to serve the public can be very w1594 continue to exist and to run parallel
to the provisions of Republic Act No. 6957, whether in its original form or as amended by
Republic Act No. 7718.
A principal difficulty with this approach is that Presidential Decree No. 1594 purports to
apply to all "government contracts for infrastructure and other construction projects" But
Republic Act No. 6957 as amended by Republic Act No. 7718, relates on to
"infrastructure projects" which are financed, constructed, operated and maintained "by
the private sector" "through the build/operate-and-transfer or build-and-transfer scheme"
under Republic Act No. 6597 and under a series of other comparable schemes under
Republic Act No. 7718. In other words, Republic Act No. 6957 and Republic Act. No:
7718 must be held, in my view, to be special statutes applicable to a more limited field of
"infrastructure projects" than the wide-ranging scope of application of the general
statute i.e., Presidential Decree No. 1594. Thus, the high relevance of the point made by

type and BLT type of contracts imposed an unqualified requirement of public bidding set
out in Section 5 thereof.
It should also be pointed out that under Presidential Decree No. 1594, projects may be
undertaken "by administration or force account or by negotiated contract only "
(1) in exceptional cases where time is of the essence; or
(2) where there is lack of bidders or contractors; or
(3) where there is a conclusive evidence that greater economy and efficiency would be
achieved through these arrangements, and in accordance with provision[s] of laws and
acts on the matter.
It must, upon the one hand, be noted that the special law Republic Act- No. 6957 made
absolutely no mention ofnegotiated contracts being permitted to displace the requirement
of public bidding. Upon the other hand, Section 5-a, inserted in Republic Act No. 6957 by
the amending statute Republic Act No. 7718, does not purport to authorize direct
negotiation of contracts situations where there is a lack of pre-qualified contractors or,
complying bidders. Thus, even under the amended special statute, entering into
contracts by negotiation is not permissible in the other (2) categories of cases referred to
in Section 4 of Presidential Decree No. 1594, i.e., "in exceptional cases where time is of
the essence" and "when there is conclusive evidence that greater economy and
efficiency would be achieved through these arrangements, etc."
The result I reach is that insofar as BOT, etc.-types of contracts are concerned, the
applicable public bidding requirement is that set out in Republic Act No. 6957 and, with
respect to such type of contracts opened for pre-qualification and bidding after the date of
effectivity of Republic Act No. 7718. The provision of Republic Act No. 7718. The
assailed contract was entered into before Republic Act. No. 7718 was enacted.
The difficulties. of applying the provisions of presidential Degree No. 1594 to the Edsa
LRT-type of contracts are aggravated when one considers the detailed" Implementing
Rules and Regulations as amended April 1988" issued under that Presidential
Decree. 1 For instance:
IB [2.5.2] 2.4.2 By Negotiated Contract
xxx xxx xxx
a. In times of emergencies arising from natural calamities where immediate action is
necessary to prevent imminent loss of life and/or property.
b. Failure to award the contract after competitive public bidding for valid cause or causes
[such as where the prices obtained through public bidding are all above the AAE and the
bidders refuse to reduce their prices to the AAE].
In these cases, bidding may be undertaken through sealed canvass of at least three (3)
qualified contractors. Authority to negotiate contracts for projects under these exceptional
cases shall be subject to prior approval by heads of agencies within their limits of
approving authority.
c. Where the subject project is adjacent or contiguous to an on-going project and it could
be economically prosecuted by the same contractor provided that he has no negative
slippage and has demonstrated a satisfactory performance. (Emphasis supplied).
Note that there is no reference at all in these presidential Decree No. 1594 Implementing
Rules and Regulations to absence of pre-qualified applicants and bidders as justifying
negotiation of contracts as distinguished from requiring public bidding or a second public
bidding.
Note also the following provision of the same Implementing Rules and Regulations:
IB 1 Prequalification
The following may be become contractors for government projects:
1 Filipino
a. Citizens (single proprietorship)
b. Partnership of corporation duly organized under the laws of the Philippines, and at
least seventy five percent (75%) of the capital stock of which belongs to Filipino citizens.
2. Contractors forming themselves into a joint venture, i.e., a group of two or more
contractors that intend to be jointly and severally responsible for a particular contract,
shall for purposes of bidding/tendering comply with LOI 630, and, aside from being
currently and properly accredited by the Philippine Contractors Accreditation Board, shall
comply with the provisions of R.A. 4566, provided that joint ventures in which Filipino
ownership is less than seventy five percent ( 75%) may be prequalified where the
structures to be built require the application of techniques and/or technologies which
are not adequately possessed by a Filipino entity as defined above.

bidding and aware of contracts financed partly or wholly with funds from international
lending institutions like the Asian Development Bank and the Worlds Bank as well as
from bilateral and other similar sources.(Emphases supplied)
The record of this case is entirely silent on the extent of Philippine equity in the Edsa LRT
Corporation; there is no suggestion that this corporation is organized under Philippine law
and is at least seventy-five (75%) percent owned by Philippine citizens.
Public bidding is the normal method by which a government keeps contractors honest
and is able to assure itself that it would be getting the best possible value for its money in
any construction or similar project. It is not for nothing that multilateral financial
organizations like the World Bank and the Asian Development Bank uniformly require
projects financed by them to be implemented and carried out by public bidding. Public
bidding is much too important a requirement casually to loosen by a latitudinarian
exercise in statutory construction.
The instant petition should be granted and the challenged contract and its supplement
should be nullified and set aside. A true public bidding, complete with a new
prequalification proceeding, should be required for the Edsa LRT Project.
Footnotes
1 Philconsa v. Enriquez, 235 SCRA 506 (1994); Gonzales v. Macaraig, 191 SCRA 452
(1990); Tolentino v. Comelec, 41 SCRA 702 (1971).
2 Flast v. Cohen, 392 U.S. 83, 20 L. Ed. 2d 947 (1968), cited in Igot v. Comelec, 95
SCRA 392 (1980).
3 Pascual v. Secretary of Public Works, 110 Phil 331 (1960); Sanidad v Comelec, 73
SCRA 333 (1976).
4 176 SCRA 240, 251-2 (1989).
5 Emergency Powers Cases [Araneta v. Dinglasan]. 84 Phil. 368 (1949), Iloilo Palay and
Corn Planters Ass'n. v. Feliciano, 121 Phil. 358 (1965); Philconsa v. Gimenez. 122 Phil.
894 (1965); CLU v. Executive Secretary, 194 SCRA 317 (1991).
6 Kilosbayan, Inc. v. Guingona, 232 SCRA 110 (1994).
7 Id. at 139.
8 G.R Nos. 73748, 73972, and 73990, May 22, 1986. (Questioning the legitimacy of the
Provisional Government of President Aquino).
9 145 SCRA 160 (1986). (Questioning whether President Aquino and Vice President
Laurel were the "President and Vice-President elected in the February 7, 1986 election"
within the meaning of Art XVIII, §5 of the Constitution.
10 Valley Forge College v. Americans United, 454 U.S. 464, 70 L. Ed. 2d 700 (1982);
Bugnay Const. and Dev. Corp. v. Laron, supra, note 4.
11 Allen v. Wright, 468 U.S. 737, 752, 82 L. Ed. 2d 556, 170 (1984).
1 Text in 84 Official Gazette, No. 23, pp. 33-37, et seq. (June 1988).

MMDA vs. Jancom, G.R. No. 147465, Jan. 30, 2002. (Original
Decision)
1:49 AM
METROPOLITAN MANILA DEV ELOPMENT AUTHORITY V S. JANCOM ENV IRONMENTAL

CORPORATION
GR No. 1 47 465, January 30, 2002
Facts: A build-Operate-Transfer Contract for the waste-to energy project was signed between JANCOM and
the Philippine Government. The BOT Contract was submitted to President Ramos for approval but was then
too close to the end of his term that his term expired without him signing the contract. He, however,
endorsed the same to incoming President Estrada. With the change in administration came changes in policy
and economic environment, thus the BOT contract was not pursued and implemented. JANCOM appealed to
the President for reconsideration and despite the pendency of the appeal, MMDA caused the publication of
an inv itation to pre-qualify and submit proposals for solid waste management.
Issue: Whether or not there is a v alid and binding contract between the Republic of the Philippines and
JANCOM.
Held: There is a v alid and binding contract between JANCOM and the Republic of the Philippines. Under
Articles 1 305 of the Civil Code, “A contract is a meeting of the minds between two persons whereby one
binds himself, with respect to the other, to give something or to render some service.” Art. 1 315 of the Civ il
Code provides that a contract is perfected by mere consent. Consent, on the other hand, is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract
(Art. 1 319, Civ il Code). In the case at bar, the signing and execution of the contract by the parties clearly
show that, as between the parties, there was a concurrence of offer and acceptance with respect to the
material details of the contract, thereby giving rise to the perfection of the absence of President’s signature is
untenable. Significantly, the contract itself provides that the signature of the President is necessary only for
its effectivity, not its perfection.
There being a perfected contract, MMDA cannot revoke or renounce the same without the consent of the
other. From the moment of perfection, the parties are bound not only to the fulfillment of what has been
ex pressly stipulated but also to all the consequences which, according to their nature, may be in keeping with
good faith, usage and law. (Art. 1 315) It is a general principle of law that no one may be permitted to change
hid mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the
other party.
Republic of the Philipppines

SUPREME COURT
Manila
THIRD DIVISION
[G.R. No. 147465. January 30, 2002]
METROPOLITAN MANILA DEVELOPMENT
AUTHORITY, Petitioner, vs. JANCOMENVIRONMENTAL CORPORATION
and JANCOM INTERNATIONAL DEVELOPMENT PROJECTS PTY. LIMITED OF
AUSTRALIA, Respondents.
DE C I SI O N
MELO, J.:chanroblesvirtuallawlibrary
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Civil Procedure filed by petitioner Metropolitan Manila Development Authority
(MMDA), seeking to reverse and set aside the November 13, 2000 decision of the
Court of Appeals declaring valid and perfected the waste management contract
entered into by the Republic of the Philippines, represented by the Secretary of
National Resources and the Executive Committee to oversee the build-operate-
transfer implementation of solid waste management projects,
and JANCOM Environmental Corporation.chanroblesvirtuallawlibrary

and JANCOM Environmental Corporation.chanroblesvirtuallawlibrary
The pertinent facts are as follows:chanroblesvirtuallawlibrary
In 1994, then President Fidel V. Ramos issued Presidential Memorandum Order No.
202 creating the Executive Committee (EXECOM) to oversee the BOT
implementation of solid waste management projects, headed by the Chairman of
the MMDA and the Cabinet Officer for Regional Development-National Capital
Region (CORD-NCR). The EXECOM was to oversee and develop waste-to-energy
projects for the waste disposal sites in San Mateo, Rizal and Carmona, Caviteunder
the build-operate-transfer (BOT) scheme. The terms of reference for the waste-to-
energy projects provided that its proponents should have the capability to establish
municipal solid waste thermal plants using incineration technology. This type of
technology was selected because of its alleged advantages of greatly reduced waste
volume, prolongation of the service life of the disposal site, and generation of
electricity.chanroblesvirtuallawlibrary
While eleven (11) proponents submitted their pre-qualification documents, most
failed to comply with the requirements under Section 5.4 of the Implementing Rules
and Regulations (IRR) of Republic Act No. 6957, otherwise known as the Build-
Operate-Transfer Law. On July 21, 1995, the Pre-qualification, Bids and Awards
Committee (PBAC) recommended the pre-qualification of three proponents,
namely: i) JANCOM International Pty. Ltd.; ii) First Philippine International W-E
Managers; and iii) PACTECH Development Corporation. On July 26, 1995, the
EXECOM approved the recommendation of the PBAC. On July 27,
1995, MMDA forwarded to the Investment Coordinating Committee (ICC)
Secretariat the pre-feasibility study on the privatization of the Carmona and San
Mateo landfill sites. The project was later presented to the ICC-Technical Board
(ICC-TB) and then endorsed to the ICC-Cabinet Committee (ICC-
CC).chanroblesvirtuallawlibrary
On May 2, 1996, the PBAC conducted a pre-bid conference where it required the
three pre-qualified bidders to submit, within ninety (90) days, their bid
proposals. On August 2, 1996,JANCOM and First Philippines requested for an
extension of time to submit their bids. PACTECH, on the other hand, withdrew from
the bidding.chanroblesvirtuallawlibrary
Subsequently, JANCOM entered into a partnership with Asea Brown Boveri (ABB)
to formJANCOM Environmental Corporation while First Philippines formed a
partnership with OGDEN. Due to the change in the composition of the proponents,
particularly in their technology partners and contractors, the PBAC conducted a post
pre-qualification evaluation.chanroblesvirtuallawlibrary
During the second bid conference, the bid proposals of First Philippines for the
Carmona site andJANCOM for the San Mateo site were found to be complete and
responsive. Consequently, onFebruary 12, 1997, JANCOM and First Philippines
were declared the winning bidders, respectively, for the San Mateo and the
Carmona projects.chanroblesvirtuallawlibrary
In a letter dated February 27, 1997, then MMDA Chairman Prospero I. Oreta
informed JANCOMs Chief Executive Officer Jay Alparslan that the EXECOM had
approved the PBAC recommendation to award to JANCOM the San Mateo Waste-
to-Energy Project on the basis of the final Evaluation Report
declaring JANCOM International Ltd., Pty., together with Asea Brown Boveri (ABB),
as the sole complying (winning) bidder for the San Mateo Waste Disposal site,
subject to negotiation and mutual approval of the terms and conditions of the
contract of award. The letter also notified Alparslan that the EXECOM had created a
negotiating team composed of Secretary General Antonio Hidalgo of the Housing
and Urban Development Coordinating Council, Director Ronald G. Fontamillas,
General Manager Roberto Nacianceno of MMDA, and Atty. Eduardo Torres of the
host local government unit to work out and finalize the contract award. Chairman
Oreta requestedJANCOM to submit to the EXECOM the composition of its own

Oreta requestedJANCOM to submit to the EXECOM the composition of its own
negotiating team.chanroblesvirtuallawlibrary
Thereafter, after a series of meetings and consultations between the negotiating
teams of EXECOM and JANCOM, a draft BOT contract was prepared and presented
to the Presidential Task Force on Solid Waste
Management.chanroblesvirtuallawlibrary
On December 19, 1997, the BOT Contract for the waste-to-energy project was
signed betweenJANCOM and the Philippine Government, represented by the
Presidential Task Force on Solid Waste Management through DENR Secretary Victor
Ramos, CORD-NCR Chairman Dionisio dela Serna, and MMDA Chairman Prospero
Oreta.chanroblesvirtuallawlibrary
On March 5, 1998, the BOT contract was submitted to President Ramos for approval
but this was too close to the end of his term which expired without him signing the
contract. President Ramos, however, endorsed the contract to incoming President
Joseph E. Estrada.chanroblesvirtuallawlibrary
With the change of administration, the composition of the EXECOM also changed.
Memorandum Order No. 19 appointed the Chairman of the Presidential Committee
on Flagship Programs and Project to be the EXECOM chairman. Too, Republic
Act No. 8749, otherwise known as the Clean Air Act of 1999, was passed by
Congress. And due to the clamor of residents of Rizal province, President Estrada
had, in the interim, also ordered the closure of the San Mateo landfill. Due to these
circumstances, the Greater Manila Solid Waste Management Committee adopted a
resolution not to pursue the BOT contract with JANCOM. Subsequently, in a letter
dated November 4, 1999, Roberto Aventajado, Chairman of the Presidential
Committee on Flagship Programs and Project informed Mr. Jay Alparslan, Chairman
of JANCOM, that due to changes in policy and economic environment (Clean Air
Act and non-availability of the San Mateo landfill), the implementation of the BOT
contract executed and signed between JANCOM and the Philippine Government
would no longer be pursued. The letter stated that other alternative
implementation arrangements for solid waste management for Metro Manila would
be considered instead.chanroblesvirtuallawlibrary
JANCOM appealed to President Joseph Estrada the position taken by the EXECOM
not to pursue the BOT Contract executed and signed between JANCOM and the
Philippine Government, refuting the cited reasons for non-implementation. Despite
the pendency of the appeal, MMDA, onFebruary 22, 2000, caused the publication in
a newspaper of an invitation to pre-qualify and to submit proposals for solid waste
management projects for Metro Manila. JANCOM thus filed with the Regional Trial
Court of Pasig a petition for certiorari to declare i) the resolution of the Greater
Metropolitan Manila Solid Waste Management Committee disregarding the BOT
Contract and ii) the acts of MMDA calling for bids and authorizing a new contract
for Metro Manila waste management, as illegal, unconstitutional, and void; and for
prohibition to enjoin the Greater Metropolitan Manila Solid Waste Management
Committee and MMDA from implementing the assailed resolution and disregarding
the Award to, and the BOT contract with, JANCOM, and from making another
award in its place. On May 29, 2000, the trial court rendered a decision, the
dispositive portion of which reads:chanroblesvirtuallawlibrary
WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor
of petitionersJANCOM ENVIRONMENTAL CORPORATION,
and JANCOM INTERNATIONAL DEVELOPMENT PROJECTS PTY., LIMITED OF
AUSTRALIA, and against respondent GREATER METROPOLITAN MANILA SOLID
WASTE MANAGEMENT COMM., and HON. ROBERTO N. AVENTAJADO, in his Capacity
as Chairman of the said Committee, METRO MANILA DEVELOPMENT AUTHORITY
and HON. JEJOMAR C. BINAY, in his capacity as Chairman of said Authority,
declaring the Resolution of respondent Greater Metropolitan Manila Solid Waste
Management Committee disregarding petitioners BOT Award Contract and calling

Management Committee disregarding petitioners BOT Award Contract and calling
for bids for and authorizing a new contract for the Metro Manila waste management
ILLEGAL and VOID.chanroblesvirtuallawlibrary
Moreover, respondents and their agents are hereby PROHIBITED and ENJOINED
from implementing the aforesaid Resolution and disregarding petitioners BOT Award
Contract and from making another award in its place.chanroblesvirtuallawlibrary
Let it be emphasized that this Court is not preventing or stopping the government
from implementing infrastructure projects as it is aware of the proscription under
PD 1818. On the contrary, the Court is paving the way for the necessary and
modern solution to the perennial garbage problem that has been the major
headache of the government and in the process would serve to attract more
investors in the country.chanroblesvirtuallawlibrary
(Rollo,p. 159.)chanroblesvirtuallawlibrary
Instead of appealing the decision, MMDA filed a special civil action
for certiorari with prayer for a temporary restraining order with the Court of
Appeals which was later docketed therein as CA-G.R. SP No. 59021. The appellate
court not only required JANCOM to comment on the petition, it also granted
MMDAs prayer for a temporary restraining order. During the pendency of the
petition for certiorari, JANCOM moved for the execution of the RTC decision, which
was opposed by MMDA. However, the RTC granted the motion for execution on the
ground that its decision had become final since MMDA had not appealed the same
to the Court of Appeals.MMDA moved to declare respondents and the RTC judge in
contempt of court, alleging that the RTCs grant of execution was abuse of and
interference with judicial rules and processes.chanroblesvirtuallawlibrary
On November 13, 2001, the Court of Appeals dismissed the petition in CA-G.R.
SP No. 59021 and a companion case, CA-G.R. SP No.
60303.chanroblesvirtuallawlibrary
MMDAs motion for reconsideration of said decision having been denied, MMDA filed
the instant petition, alleging that the Court of Appeals gravely erred in finding
that:chanroblesvirtuallawlibrary
1) There is a valid and binding contract between the Republic of the Philippines
and JANCOMgiven that: a) the contract does not bear the signature of the
President of the Philippines; b) the conditions precedent specified in the contract
were not complied with; and c) there was no valid notice of
award.chanroblesvirtuallawlibrary
2) The MMDA had not seasonably appealed the Decision of the lower court via a
petition for certiorari.chanroblesvirtuallawlibrary
Before taking up the substantive issue in question, we shall first dispose of the
question as to whether it is fatal to petitioners cause, that rather than appealing the
trial courts decision to the Court of Appeals, it instead filed a petition
for certiorari. While petitioner claims that the trial courts decision never became
final by virtue of its having appealed by certiorari to the Court of Appeals, the trial
court ruled that petitioners failure to file an appeal has made its decision final and
executory. At bottom, the question involves a determination of the propriety of
petitioners choice of the remedy of certiorari in questioning the decision of the trial
court.chanroblesvirtuallawlibrary
Section 1, Rule 65 of the 1997 Rules of Civil Procedure
provides:chanroblesvirtuallawlibrary
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,

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.chanroblesvirtuallawlibrary
The petition shall be accompanied by a certified true copy of the judgment, order,
or resolution subject thereof, copies of all pleadings and documents relevant and
pertinent thereto, and a sworn certification of non-forum shopping as provided in
the third paragraph of section 3, Rule 46.chanroblesvirtuallawlibrary
Plain it is from a reading of the above provision that certiorari will lie only where a
court has acted without or in excess of jurisdiction or with grave abuse of
discretion. If the court has jurisdiction over the subject matter and of the person,
its rulings upon all questions involved are within its jurisdiction, however irregular
or erroneous these may be, they cannot be corrected bycertiorari. Correction may
be obtained only by an appeal from the final decision.chanroblesvirtuallawlibrary
Verily, Section 1, Rule 41 of the 1997 Rules of Civil Procedure
provides:chanroblesvirtuallawlibrary
SEC. 1. Subject of appeal. An appeal may be taken from a judgment or final order
that completely disposes of the case or of a particular matter therein when declared
by these Rules to be appealable.
xxx xxx xxxchanroblesvirtuallawlibrary
In all the above instances where the judgment or final order is not appealable, the
aggrieved party may file an appropriate special civil action under Rule
65.chanroblesvirtuallawlibrary
There can be no dispute that the trial courts May 29, 2000 decision was a final
order or judgment which MMDA should have appealed, had it been so minded. In
its decision, the trial court disposed of the main controversy by declaring the
Resolution of respondent Greater Metropolitan Manila Solid Waste Management
Committee disregarding petitioners BOT Award Contract and calling for bids for and
authorizing a new contract for the Metro Manila waste management ILLEGAL and
VOID. This ruling completely disposed of the controversy
between MMDA andJANCOM. In BA Finance Corporation vs. CA (229 SCRA 5667
[1994]), we held that a final order or judgment is one which disposes of the whole
subject matter or terminates a particular proceeding or action, leaving nothing to
be done but to enforce by execution what has been determined. An order or
judgment is deemed final when it finally disposes of the pending action so that
nothing more can be done with it in the trial court. In other words, a final order is
that which gives an end to the litigation. A final order or judgment finally disposes
of, adjudicates, or determines the rights, or some right or rights of the parties,
either on the entire controversy or on some definite and separate branch thereof,
and concludes them until it is reversed or set aside. Where no issue is left for
future consideration, except the fact of compliance or non-compliance with the
terms of the judgment or doer, such judgment or order is final and
appealable (Investments, Inc. vs. Court of Appeals, 147 SCRA 334
[1987]).chanroblesvirtuallawlibrary
However, instead of appealing the decision, MMDA resorted to the extraordinary
remedy ofcertiorari, as a mode of obtaining reversal of the judgment. This cannot
be done. The judgment was not in any sense null and void ab initio, incapable of
producing any legal effects whatever, which could be resisted at any time and in
any court it was attempted. It was a judgment which could or may have suffered
from some substantial error in procedure or in findings of fact or of law, and on that
account, it could have been reversed or modified on appeal. But since it was not
appealed, it became final and has thus gone beyond the reach of any court to
modify in any substantive aspect. The remedy to obtain reversal or modification of
the judgment on the merits is appeal. This is true even if the error, or one of the
errors, ascribed to the court rendering the judgment is its lack of jurisdiction over
the subject matter, or the exercise of power in excess thereof, or grave abuse of

the subject matter, or the exercise of power in excess thereof, or grave abuse of
discretion in the findings of fact or of law set out in the decision. The existence and
availability of the right of appeal proscribes a resort to certiorari, because one of
the requirements for availment of the latter remedy is precisely that there should
be no appeal(Mercado vs. CA, 162 SCRA 75 [1988]). As incisively observed by the
Court of Appeals:chanroblesvirtuallawlibrary
The special civil action for certiorari is available only when there is no appeal nor
any plain, speedy and adequate remedy in the ordinary course of law (Sec. 1, rule
65, id.)chanroblesvirtuallawlibrary
Admittedly, appeal could have been taken from the assailed RTC decision. However,
petitioners maintain that appeal is not a speedy remedy because the RTC decision
prohibiting them from conducting a bidding for a new waste disposal project has
adverse and serious effects on the citys garbage
situation.chanroblesvirtuallawlibrary
Nevertheless, the RTC decision is not immediately executory. Only judgments in
actions for injunction, receivership, accounting and support and such other
judgments as are now or may hereafter be declared to be immediately executory
shall be enforced after their rendition and shall not be stayed by an appeal
therefrom, unless otherwise ordered by the trial court (Sec. 4, rule
39,id.).chanroblesvirtuallawlibrary
Since the RTC decision is not immediately executory, appeal would have stayed its
execution.Consequently, the adverse effects of said decision will not visit upon
petitioners during the appeal. In other words, appeal is a plain, speedy and
adequate remedy in the ordinary course of the law.chanroblesvirtuallawlibrary
But as no appeal was taken within the reglementary period, the RTC decision had
become final and executory. Well-settled is the rule that the special civil action for
certiorari may not be invoked as a substitute for the remedy of appeal (BF
Corporation vs. Court of Appeals, 288 SCRA 267). Therefore, the extraordinary
remedy of certiorari does not lie.chanroblesvirtuallawlibrary
Moreover, petitioners instituted the instant action without filing a motion for
reconsideration of the RTC decision. Doctrinal is the rule that certiorari will not lie
unless a motion for reconsideration is first filed before the respondent tribunal to
allow it an opportunity to correct its errors (Zapanta vs. NLRC, 292 SCRA
580).chanroblesvirtuallawlibrary
(Rollo, p. 47-48.)chanroblesvirtuallawlibrary
Admittedly, there are instances where the extraordinary remedy of certiorari may
be resorted to despite the availability of an appeal. In Ruiz, Jr. vs. Court of
Appeals (220 SCRA 490 [1993]), we held:chanroblesvirtuallawlibrary
Considered extraordinary, [certiorari] is made available only when there
is no appeal, nor any plain, speedy or adequate remedy in the ordinary course of
the law (Rule 65, Rules of Court, Section 1). The long line of decisions denying the
petition for certiorari, either before appeal was availed or specially in instances
where the appeal period has lapsed, far outnumbers the instances when certiorari
was given due course. The few significant exceptions were: when public welfare and
the advancement of public policy dictate; or when the broader interests of justice
so require, or when the writs issued are null . . . or when the questioned order
amounts to an oppressive exercise of judicial authority.chanroblesvirtuallawlibrary
In the instant case, however, MMDA has not sufficiently established the existence
of any fact or reason to justify its resort to the extraordinary remedy
of certiorari. Neither does the record show that the instant case, indeed, falls under
any of the exceptions aforementioned.chanroblesvirtuallawlibrary
The Court thus holds that the Court of Appeals did not err in declaring that the trial
courts decision has become final due to the failure of MMDA to perfect an appeal
within the reglementary period.chanroblesvirtuallawlibrary
With the foregoing disquisition, it would appear unnecessarily to discuss and resolve

With the foregoing disquisition, it would appear unnecessarily to discuss and resolve
the substantive issue posed before the Court. However, the procedural flaw
notwithstanding, the Court deems it judicious to take cognizance of the substantive
question, if only to put petitioners mind to rest.chanroblesvirtuallawlibrary
In its second assignment of errors, petitioner MMDA contends that there is no valid
and binding contract between the Republic of the Philippines and respondents
because: a) the BOT contract does not bear the signature of the President of the
Philippines; b) the conditions precedent specified in the contract were not complied
with; and that c) there was no valid notice of award.chanroblesvirtuallawlibrary
These contentions hold no water.chanroblesvirtuallawlibrary
Under Article 1305 of the Civil Code, [a] contract is a meeting of minds between
two persons whereby one binds himself, with respect to the other, to give
something or to render some service. A contract undergoes three distinct stages
preparation or negotiation, its perfection, and finally, its
consummation. Negotiation begins from the time the prospective contracting
parties manifest their interest in the contract and ends at the moment of
agreement of the parties. Theperfection or birth of the contract takes place when
the parties agree upon the essential elements of the contract. The last stage is
the consummation of the contract wherein the parties fulfill or perform the terms
agreed upon in the contract, culminating in the extinguishment thereof(Bugatti vs.
CA, 343 SCRA 335 [2000]). Article 1315 of the Civil Code, provides that a contract
is perfected by mere consent. Consent, on the other hand, is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract (See Article 1319, Civil Code). In the case at bar, the
signing and execution of the contract by the parties clearly show that, as between
the parties, there was a concurrence of offer and acceptance with respect to the
material details of the contract, thereby giving rise to the perfection of the
contract. The execution and signing of the contract is not disputed by the
parties. As the Court of Appeals aptly held:chanroblesvirtuallawlibrary
[C]ontrary to petitioners insistence that there was no perfected contract, the
meeting of the offer and acceptance upon the thing and the cause, which are to
constitute the contract (Arts. 1315 and 1319, New Civil Code), is borne out by the
records.chanroblesvirtuallawlibrary
Admittedly, when petitioners accepted private respondents bid proposal (offer),
there was, in effect, a meeting of the minds upon the object (waste management
project) and the cause (BOT scheme). Hence, the perfection of the contract. In City
of Cebu vs. Heirs of Candido Rubi (306 SCRA 108), the Supreme Court held that
the effect of an unqualified acceptance of the offer or proposal of the bidder is to
perfect a contract, upon notice of the award to the
bidder.chanroblesvirtuallawlibrary
In fact, in asserting that there is no valid and binding contract between the
parties, MMDA can only allege that there was no valid notice of award; that the
contract does not bear the signature of the President of the Philippines; and that
the conditions precedent specified in the contract were not complied
with.chanroblesvirtuallawlibrary
In asserting that the notice of award to JANCOM is not a proper notice of
award, MMDA points to the Implementing Rules and Regulations of Republic
Act No. 6957, otherwise known as the BOT Law, which require that i) prior to the
notice of award, an Investment Coordinating Committee clearance must first be
obtained; and ii) the notice of award indicate the time within which the awardee
shall submit the prescribed performance security, proof of commitment of equity
contributions and indications of financing resources.chanroblesvirtuallawlibrary
Admittedly, the notice of award has not complied with these
requirements. However, the defect was cured by the subsequent execution of the

requirements. However, the defect was cured by the subsequent execution of the
contract entered into and signed by authorized representatives of the parties;
hence, it may not be gainsaid that there is a perfected contract existing between
the parties giving to them certain rights and obligations (conditions precedents) in
accordance with the terms and conditions thereof. We borrow the words of the
Court of Appeals:chanroblesvirtuallawlibrary
Petitioners belabor the point that there was no valid notice of award as to
constitute acceptance of private respondents offer. They maintain that
former MMDA Chairman Oretas letter toJANCOM EC dated February 27,
1997 cannot be considered as a valid notice of award as it does not comply with the
rules implementing Rep. Act No. 6957, as amended. The argument is
untenable.chanroblesvirtuallawlibrary
The fact that Chairman Oretas letter informed JANCOM EC that it was the sole
complying (winning) bidder for the San Mateo project leads to no other conclusion
than that the project was being awarded to it. But assuming that said notice of
award did not comply with the legal requirements, private respondents cannot
be faulted therefore as it was the government representatives duty to
issue the proper notice.chanroblesvirtuallawlibrary
In any event, petitioners, as successors of those who previously acted for the
government (Chairman Oreta, et al), are estopped from assailing the validity of the
notice of award issued by the latter. As private respondents correctly observed, in
negotiating on the terms and conditions of the BOT contract and eventually signing
said contract, the government had led private respondents to believe that the
notice of award given to them satisfied all the requirement of the
law.chanroblesvirtuallawlibrary
While the government cannot be estopped by the erroneous acts of its agents,
nevertheless, petitioners may not now assail the validity of the subject notice of
award to the prejudice of private respondents. Until the institution of the original
action before the RTC, invalidity of the notice of award was never invoked as a
ground for termination of the BOT contract. In fact, the reasons cited for
terminating the San Mateo project, per Chairman Aventajados letter to JANCOMEC
dated November 4, 1999, were its purported non-implementability and non-viability
on account of supervening events, e.g., passage of the Clean Air Act,
etc.chanroblesvirtuallawlibrary
MMDA also points to the absence of the Presidents signature as proof that the
same has not yet been perfected. Not only that, the authority of the signatories to
bind the Republic has even been put to question. Firstly, it is pointed out that
Memorandum Order No. 202 creating the Executive Committee to oversee the BOT
implementation of solid waste management projects only charged the officials
thereof with the duty of recommending to the President the specific project to be
implemented under the BOT scheme for both San Mateo and Carmona sites. Hence,
it is concluded that the signatories, CORD-NCR Chairman Dionisio dela Serna
and MMDA Chairman Prospero Oreta, had no authority to enter into any waste
management project for and in behalf of the Government. Secondly, Section 59 of
Executive Order No. 292 is relied upon as authority for the proposition that
presidential approval is necessary for the validity of the
contract.chanroblesvirtuallawlibrary
The first argument conveniently overlooks the fact that then Secretary of
Environment and Natural Resources Victor Ramos was likewise a signatory to the
contract. While dela Serna and Oreta may not have had any authority to sign, the
Secretary of Environment and Natural Resources has such an authority. In fact, the
authority of the signatories to the contract was not denied by the Solicitor
General. Moreover, as observed by the Court of Appeals, [i]t was not alleged, much
less shown, that those who signed in behalf of the Republic had acted beyond the

less shown, that those who signed in behalf of the Republic had acted beyond the
scope of their authority.chanroblesvirtuallawlibrary
In truth, the argument raised by MMDA does not focus on the lack of authority of
the signatories, but on the amount involved as placing the contract beyond the
authority of the signatories to approve. Section 59 of Executive Order No. 292
reads:chanroblesvirtuallawlibrary
Section 59. Contracts for Approval by the President. Contracts for infrastructure
projects, including contracts for the supply of materials and equipment to be used
in said projects, which involve amounts above the ceilings provided in the preceding
section shall be approved by the President:Provided, That the President may, when
conditions so warrant, and upon recommendation of the National Economic and
Development Authority, revise the aforesaid ceilings of approving
authority.chanroblesvirtuallawlibrary
However, the Court of Appeals trenchantly observed in this
connection:chanroblesvirtuallawlibrary
As regards the Presidents approval of infrastructure projects required under Section
59 of Executive Order No. 292, said section does not apply to the BOT contract in
question. Sec. 59should be correlated with Sec. 58 of Exec. Order No. 292. Said
sections read:chanroblesvirtuallawlibrary
SECTION 58. Ceiling for Infrastructure Contracts. The following shall be the ceilings
for all civil works, construction and other contracts for infrastructure projects,
including supply contracts for said projects, awarded through public bidding or
through negotiation, which may be approved by the Secretaries of Public Works and
Highways, Transportation and Communications, Local Government with respect to
Rural Road improvement Project and governing boards of government-owned or
controlled corporations:
xxx xxx xxxchanroblesvirtuallawlibrary
Save as provided for above, the approval ceilings assigned to the
departments/agencies involved in national infrastructure and construction projects
shall remain at the levels provided in existing laws, rules and
regulations.chanroblesvirtuallawlibrary
Contrary to petitioners claim that all infrastructure contracts require the Presidents
approval (Petition, p. 16), Sec. 59 provides that such approval is required only in
infrastructure contracts involving amounts exceeding the ceilings set in Sec.
58. Significantly, the infrastructure contracts treated in Sec. 58 pertain only to
those which may be approved by the Secretaries of Public Works and Highways,
Transportation and Communications, Local Government (with respect to Rural Road
Improvement Project) and the governing boards of certain government-owned or
controlled corporations. Consequently, the BOT contract in question, which was
approved by the DENR Secretary and the EXCOM Chairman and Co-Chairman, is
not covered by Exec. Order No. 292.chanroblesvirtuallawlibrary
The provision pertinent to the authority of the Secretary of Environment and
Natural Resources would actually be Section 1 of Executive Order No. 380, Series
of 1989 which provides that The Secretaries of all Departments and Governing
Boards of government-owned or controlled corporations [except the Secretaries of
Public Works and Highways, Transportation and Communication, and Local
Government with respect to Rural Road Improvement projects] can enter into
publicly bidded contracts regardless of amount (See also Section
515, Government Accounting and Auditing Manual Volume I).
Consequently, MMDA may not claim that the BOT contract is not valid and binding
due to the lack of presidential approval.chanroblesvirtuallawlibrary
Significantly, the contract itself provides that the signature of the President is
necessary only for its effectivity (not perfection), pursuant to Article 19 of the
contract, which reads:chanroblesvirtuallawlibrary

contract, which reads:chanroblesvirtuallawlibrary
This contract shall become effective upon approval by the President of the Republic
of thePhilippines pursuant to existing laws subject to the condition, precedent in
Article 18. This contract shall remain in full force and effect for twenty-five
(25) years subject to renewal for another twenty-five (25) years from the date of
Effectivity. Such renewal will be subject to mutual agreement of the parties and
approval of the President of the Republic of
thePhilippines.chanroblesvirtuallawlibrary
(Rollo, p. 94.)chanroblesvirtuallawlibrary
Stated differently, while the twenty-five year effectivity period of the contract has
not yet started to run because of the absence of the Presidents signature, the
contract has, nonetheless, already been perfected.chanroblesvirtuallawlibrary
As to the contention that there is no perfected contract due to JANCOMs failure to
comply with several conditions precedent, the same is, likewise,
unmeritorious. Article 18 of the BOT contract reads:chanroblesvirtuallawlibrary
ARTICLE 18chanroblesvirtuallawlibrary
CONDITIONS PRECEDENT
xxxchanroblesvirtuallawlibrary
18.2.1. The BOT COMPANY hereby undertakes to provide the following within 2
months from execution of this Contract as an effective
document:chanroblesvirtuallawlibrary
a) sufficient proof of the actual equity contributions from the proposed shareholders
of the BOT COMPANY in a total amount not less than PHP500,000,000 in
accordance with the BOT Law and the implementing rules and
regulations;chanroblesvirtuallawlibrary
b) sufficient proof of financial commitment from a lending institution sufficient to
cover total project cost in accordance with the BOT Law and the implementing rules
and regulations;chanroblesvirtuallawlibrary
c) to support its obligation under this Contract, the BOT COMPANY shall submit a
security bond to the CLIENT in accordance with the form and amount required
under the BOT Law.
xxxchanroblesvirtuallawlibrary
18.2.3 Completion of Documentary Requirements as per Schedule 4 by the BOT
Companychanroblesvirtuallawlibrary
As clearly stated in Article 18, JANCOM undertook to comply with the stated
conditions within 2 months from execution of the Contract as an effective
document. Since the President of thePhilippines has not yet affixed his signature on
the contract, the same has not yet become an effective document. Thus, the two-
month period within which JANCOM should comply with the conditions has not yet
started to run. It cannot thus be said that JANCOM has already failed to comply
with the conditions precedent mandated by the contract. By arguing that failure
[ofJANCOM] to comply with the conditions results in the failure of a contract or
prevents the judicial relation from coming into existence, MMDA reads into the
contract something which is not contemplated by the parties. If the terms of a
contract are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulations shall control (Art. 1370, Civil
Code).chanroblesvirtuallawlibrary
We, therefore, hold that the Court of Appeals did not err when it declared the
existence of a valid and perfected contract between the Republic of
the Philippines and JANCOM. There being a perfected contract, MMDA cannot
revoke or renounce the same without the consent of the other.From the moment of
perfection, the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which, according to their
nature, may be in keeping with good faith, usage, and law (Article 1315, Civil
Code). The contract has the force of law between the parties and they are expected

Code). The contract has the force of law between the parties and they are expected
to abide in good faith by their respective contractual commitments, not weasel out
of them. Just as nobody can be forced to enter into a contract, in the same manner,
once a contract is entered into, no party can renounce it unilaterally or without the
consent of the other. It is a general principle of law that no one may be permitted
to change his mind or disavow and go back upon his own acts, or to proceed
contrary thereto, to the prejudice of the other party. Nonetheless, it has to be
repeated that although the contract is a perfected one, it is still ineffective or
unimplementable until and unless it is approved by the
President.chanroblesvirtuallawlibrary
Moreover, if after a perfected and binding contract has been executed between the
parties, it occurs to one of them to allege some defect therein as reason for
annulling it, the alleged defect must be conclusively proven, since the validity and
the fulfillment of contracts cannot be left to the will of one of the contracting
parties. In the case at bar, the reasons cited by MMDA for not pushing through
with the subject contract were: 1) the passage of the Clean Air Act, which allegedly
bans incineration; 2) the closure of the San Mateo landfill site; and 3) the costly
tipping fee. These reasons are bereft of meritchanroblesvirtuallawlibrary
Once again, we make reference to the insightful declarations of the Court of
Appeals:chanroblesvirtuallawlibrary
Sec. 20 of the Clean Air Act pertinently reads:chanroblesvirtuallawlibrary
SECTION 20. Ban on Incineration. Incineration, hereby defined as the burning of
municipal, bio-chemical and hazardous wastes, which process emits poisonous and
toxic fumes, is hereby prohibited: x x x.chanroblesvirtuallawlibrary
Section 20 does not absolutely prohibit incineration as a mode of waste disposal;
rather only those burning processes which emit poisonous and toxic fumes are
banned.chanroblesvirtuallawlibrary
As regards the projected closure of the San Mateo landfill vis--vis the
implementability of the contract, Art. 2.3 thereof expressly states that [i]n the
event the project Site is not delivered x x x, the Presidential task Force on Solid
Waste Management (PTFSWM) and the Client, shall provide within a reasonable
period of time, a suitable alternative acceptable to the BOT
COMPANY.chanroblesvirtuallawlibrary
With respect to the alleged financial non-viability of the project because
the MMDA and the local government units cannot afford the tipping fees under the
contract, this circumstance cannot, by itself, abrogate the entire
agreement.chanroblesvirtuallawlibrary
Doctrinal is the rule that neither the law nor the courts will extricate a party from
an unwise or undesirable contract, or stipulation for that matter, he or she entered
into with full awareness of its consequences (Opulencia vs. CA, 293 SCRA
385). Indeed, the terms and conditions of the subject contract were arrived at after
due negotiations between the parties thereto.chanroblesvirtuallawlibrary
(Rollo, p. 54.)chanroblesvirtuallawlibrary
WHEREFORE, premises considered, the petition is hereby DISMISSED for lack of
merit and the decision of the Court of Appeals in CA-G.R. SP No. 59021
dated November 13, 2001 AFFIRMED.No costs.chanroblesvirtuallawlibrary
SO ORDERED.chanroblesvirtuallawlibrary
Vitug, Panganiban, and Sandoval-Gutierrez, JJ.,
concur.chanroblesvirtuallawlibrary
Carpio, J., no part. I was former counsel to a foreign partner
of Jancom Environmental Corporation.
Pasted from <http://webcache.googleusercontent.com/search?

q=cache:oLZ5WzwAd24J:www.chanrobles.com/scdecisions/jurisprudence2002/jan2002/147465.php+MMDA+vs.+Jancom,+G.R.
+No.+147465,+Jan.+30,+2002&cd=12&hl=tl&ct=clnk&gl=ph>

+No.+147465,+Jan.+30,+2002&cd=12&hl=tl&ct=clnk&gl=ph>

MMDA vs. Jancom, supra (Resolution on Motion for
Reconsideration)
1:49 AM
Summary: MMDA vs. Jancom Environmental Corp. (GR 147465, 10 April 2002)
MMDA vs. Jancom Environmental Corp. et al.
[GR 147465, 10 April 2002]
Third Division Resolution
Facts: [Per Decision of 30 January 2002] In 1994, then President Fidel V. Ramos issued Presidential
Memorandum Order 202 creating the Executive Committee (EXECOM) to oversee the BOT implementation
of solid waste management projects, headed by the Chairman of the Metropolitan Manila Development
Authority (MMDA) and the Cabinet Officer for Regional Development-National Capital Region (CORD-NCR).
The EXECOM was to oversee and develop waste-to-energy projects for the waste disposal sites in San
Mateo, Rizal and Carmona, Cavite under the build-operate-transfer (BOT) scheme. The terms of reference
for the waste-to-energy projects provided that its proponents should have the capability to establish
municipal solid waste thermal plants using incineration technology. This type of technology was selected
because of its alleged advantages of greatly reduced waste volume, prolongation of the service life of the
disposal site, and generation of electricity. While 11 proponents submitted their pre-qualification documents,
most failed to comply with the requirements under Section 5.4 of the Implementing Rules and Regulations
(IRR) of Republic Act No. 6957, otherwise known as the Build-Operate-Transfer Law. On 21 July 1995, the
Pre-qualification, Bids and Awards Committee (PBAC) recommended the pre-qualification of three
proponents, namely: i) JANCOM International Pty. Ltd.; ii) First Philippine International W-E Managers; and
iii) PACTECH Development Corporation. On 26 July 1995, the EXECOM approved the recommendation of
the PBAC. On 27 July 1995, MMDA forwarded to the Investment Coordinating Committee (ICC) Secretariat
the pre-feasibility study on the privatization of the Carmona and San Mateo landfill sites. The project was
later presented to the ICC-Technical Board (ICC-TB) and then endorsed to the ICC-Cabinet Committee
(ICC-CC). On 2 May 1996, the PBAC conducted a pre-bid conference where it required the three pre-
qualified bidders to submit, within 90 days, their bid proposals. On August 2, 1996, JANCOM and First
Philippines requested for an extension of time to submit their bids. PACTECH, on the other hand, withdrew
from the bidding. Subsequently, JANCOM entered into a partnership with Asea Brown Boveri (ABB) to form
JANCOM Environmental Corporation while First Philippines formed a partnership with OGDEN. Due to the
change in the composition of the proponents, particularly in their technology partners and contractors, the
PBAC conducted a post pre-qualification evaluation. During the second bid conference, the bid proposals of
First Philippines for the Carmona site and JANCOM for the San Mateo site were found to be complete and
responsive. Consequently, on 12 February 1997, JANCOM and First Philippines were declared the winning
bidders, respectively, for the San Mateo and the Carmona projects. In a letter dated 27 February 1997, then
MMDA Chairman Prospero I. Oreta informed JANCOM’s Chief Executive Officer Jay Alparslan that the
EXECOM had approved the PBAC recommendation to award to JANCOM the San Mateo Waste-to-Energy
Project on the basis of the final Evaluation Report declaring JANCOM International Ltd., Pty., together with
Asea Brown Boveri (ABB), as the sole complying (winning) bidder for the San Mateo Waste Disposal site,
subject to negotiation and mutual approval of the terms and conditions of the contract of award. The letter
also notified Alparslan that the EXECOM had created a negotiating team — composed of Secretary General
Antonio Hidalgo of the Housing and Urban Development Coordinating Council, Director Ronald G.
Fontamillas, General Manager Roberto Nacianceno of MMDA, and Atty. Eduardo Torres of the host local
government unit — to work out and finalize the contract award. Chairman Oreta requested JANCOM to
submit to the EXECOM the composition of its own negotiating team. Thereafter, after a series of meetings
and consultations between the negotiating teams of EXECOM and JANCOM, a draft BOT contract was
prepared and presented to the Presidential Task Force on Solid Waste Management. On 19 December
1997, the BOT Contract for the waste-to-energy project was signed between JANCOM and the Philippine
Government, represented by the Presidential Task Force on Solid Waste Management through DENR
Secretary Victor Ramos, CORD-NCR Chairman Dionisio dela Serna, and MMDA Chairman Prospero Oreta.
On 5 March 1998, the BOT contract was submitted to President Ramos for approval but this was too close
to the end of his term which expired without him signing the contract. President Ramos, however, endorsed
the contract to incoming President Joseph E. Estrada. With the change of administration, the composition of
the EXECOM also changed. Memorandum Order 19 appointed the Chairman of the Presidential Committee
on Flagship Programs and Project to be the EXECOM chairman. Too, Republic Act 8749, otherwise known
as the Clean Air Act of 1999, was passed by Congress. And due to the clamor of residents of Rizal province,
President Estrada had, in the interim, also ordered the closure of the San Mateo landfill. Due to these
circumstances, the Greater Manila Solid Waste Management Committee adopted a resolution not to pursue
the BOT contract with JANCOM. Subsequently, in a letter dated 4 November 1999, Roberto Aventajado,
Chairman of the Presidential Committee on Flagship Programs and Project informed Mr. Jay Alparslan,
Chairman of JANCOM, that due to changes in policy and economic environment (Clean Air Act and non-
availability of the San Mateo landfill), the implementation of the BOT contract executed and signed between
JANCOM and the Philippine Government would no longer be pursued. The letter stated that other
alternative implementation arrangements for solid waste management for Metro Manila would be considered

alternative implementation arrangements for solid waste management for Metro Manila would be considered
instead. JANCOM appealed to President Joseph Estrada the position taken by the EXECOM not to pursue
the BOT Contract executed and signed between JANCOM and the Philippine Government, refuting the cited
reasons for non-implementation. Despite the pendency of the appeal, MMDA, on 22 February 2000, caused
the publication in a newspaper of an invitation to pre-qualify and to submit proposals for solid waste
management projects for Metro Manila. JANCOM thus filed with the Regional Trial Court of Pasig a petition
for certiorari to declare i) the resolution of the Greater Metropolitan Manila Solid Waste Management
Committee disregarding the BOT Contract and ii) the acts of MMDA calling for bids and authorizing a new
contract for Metro Manila waste management, as illegal, unconstitutional, and void; and for prohibition to
enjoin the Greater Metropolitan Manila Solid Waste Management Committee and MMDA from implementing
the assailed resolution and disregarding the Award to, and the BOT contract with, JANCOM, and from
making another award in its place. On 29 May 2000, the trial court rendered a decision in favor of Jancom.
Instead of appealing the decision, MMDA filed a special civil action for certiorari with prayer for a temporary
restraining order with the Court of Appeals (CA-GR SP 59021). The appellate court not only required
JANCOM to comment on the petition, it also granted MMDA’s prayer for a temporary restraining order.
During the pendency of the petition for certiorari, JANCOM moved for the execution of the RTC decision,
which was opposed by MMDA. However, the RTC granted the motion for execution on the ground that its
decision had become final since MMDA had not appealed the same to the Court of Appeals. MMDA moved
to declare Jancom and the RTC judge in contempt of court, alleging that the RTC’s grant of execution was
abuse of and interference with judicial rules and processes. On 13 November 2001, the Court of Appeals
dismissed the petition in CA-GR SP 59021 and a companion case, CA-GR SP 60303. MMDA’s motion for
reconsideration of said decision having been denied, MMDA filed the petition for review on certiorari.
On 30 January 2002, the Supreme Court dismissed the petition for lack of merit and affirmed the decision of
the Court of Appeals in CA-GR SP 59021 dated 13 November 2001. MMDA filed a motion for
reconsideration of the Court's decision, declaring that there is a valid and perfected waste management
contract between the Republic of the Philippines and JANCOM Environmental Corporation. MMDA has
likewise filed a motion that the case at bar be heard and resolved by the Court en banc.
Issue: Whether the case merit review by the Supreme Court en banc.
Held: NO. Firstly, Circular 2-89 governing referral of cases to the Court en banc states that “[t]he Court en
banc is not an Appellate Court to which decisions or resolutions of a Division may be appealed.” A decision
of a Division of the Court is a decision of the Supreme Court. That much is clear. Secondly, the question as
to whether or not a perfected contract exists between the parties can hardly be characterized as novel.
Thirdly, when this case was passed on to Mr. Justice Antonio T. Carpio upon the retirement of Mme. Justice
Minerva Gonzaga-Reyes to whom the case had been initially assigned, the Division thought it wise to refer
the case en consulta to the Court en banc, suggesting or inquiring if the Court en banc should take over and
whether the case should be re-raffled courtwide due to the inhibition of Justice Carpio. The Court en banc,
however, declined to take over the case and returned it to the Third Division with instructions that it be re-
raffled among the other members of the Division. Fourthly, Circular 2-89 further pertinently provides that “[n]
o motion for reconsideration of the action of the Court en banc declining to take cognizance of a referral by a
Division, shall be entertained.” Verily, to refer the instant case to the Court en banc anew would be
equivalent to allowing a motion for reconsideration of the previous denial of the referral. This
notwithstanding, the Third Division acting on MMDA’s motion for referral of the motion for reconsideration to
the Court en banc, once again consulted the Court en banc, inquiring if the banc desired to take over the
resolution of MMDA’s motion for reconsideration. The Court en banc declined, and again instructed the Third
Division to accordingly act on the motion for reconsideration. Withal, the Court en banc has denied MMDA’s
motion that its motion for reconsideration be resolved by the Court en banc.
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Republic Act No. 7718, amending R.A. No. 6957
4:02 AM
SEC. 2. Section 2 of the same Act is hereby amended to read as follows:

"SEC. 2. Definition of Terms. - The following terms used in this Act shall have the
meaning stated below:
"[a] Private sector infrastructure or development projects. - The general description of
infrastructure or development projects normally financed and operated by the
public sector but which will now be wholly or partly implemented by the private
sector, including bit not limited to, power plants, highways, ports, airports,
canals, dams, hydropower projects, water supply, irrigation,
telecommunications, railroads and railways, transport systems, land reclamation
projects, industrial estates or townships, housing, government buildings, tourism
projects, markets, slaughterhouses, warehouses, solid waste management,
information technology networks and database infrastructure, education and
health facilities, sewerage, drainage, dredging, and other infrastructure and
development projects as may be authorized by the appropriate agency pursuant
to this Act. Such projects shall be undertaken through contractual arrangements
as defined hereunder and such other variations as may be approved by the
President of the Philippines.
"For the construction stage of these infrastructure projects, the project proponent
may obtain financing from foreign and/or domestic sources and/or engage the
services of a foreign and/or Filipino contractor. Provided, That, in case an
infrastructure or a development facility's operation requires a public utility
franchise, the facility operator must be Filipino or if a corporation, it must be
duly registered with the Securities and Exchange Commission and owned up to
at least sixty percent (60%) by Filipinos: Provided, further, That in the case of
foreign contractors, Filipino labor shall be employed or hired in the different
phases of the construction where Filipino skills are available: Provided, finally,
That projects which would have difficulty in sourcing funds may be financed
partly from direct government appropriations and/or from Official
Development Assistance [ODA] of foreign governments or institutions not
exceeding fifty percent [50%] of the project cost, and the balance to be provided
by the project proponent.
"[b] Build-operate-and-transfer. - A contractual arrangement whereby the project
proponent undertakes the construction, including financing, of a given
infrastructure facility, and the operation and maintenance thereof. The project
proponent operates the facility over a fixed term during which it is allowed to
charge facility users appropriate tolls, fees, rentals, and charges not exceeding
these proposed in its bid or as negotiated and incorporated in the contract to
enable the project proponent to recover its investment, and operating and
maintenance expenses in the project. The project proponent transfers the facility
to the government agency or local government unit concerned at the end of the
fixed term which shall not exceed fifty [50] years: Provided, That in case of an
infrastructure or development facility whose operation requires a public utility
franchise, the proponent must be Filipino or, if a corporation, must be duly
registered with the Securities and Exchange Commission and owned up to at
least sixty percent [60%] by Filipinos.
"The build-operate-and-transfer shall include a supply-and-operate situation
which is a contractual arrangement whereby the supplier of equipment and

which is a contractual arrangement whereby the supplier of equipment and
machinery for a given infrastructure facility, if the interest of the Government so
requires, operates the facility providing in the process technology transfer and
training to Filipino nationals.
"[c] Build-and-transfer. - A contractual arrangement whereby the project
proponent undertakes the financing and construction of a given infrastructure or
development facility and after its completion turns it over to the government
agency or local government unit concerned, which shall pay the proponent on an
agreed schedule its total investments expended on the project, plus a reasonable
rate of return thereon. This arrangement may be employed in the construction of
any infrastructure or development project, including critical facilities which, for
security or strategic reasons, must be operated directly by the Government.
"[d] Build-own-and-operate. - A contractual arrangement whereby a project
proponent is authorized to finance, construct, own, operate and maintain an
infrastructure or development facility from which the proponent is allowed to
recover its total investment, operating and maintenance costs plus a reasonable
return thereon by collecting tolls, fees, rentals or other charges from facility
users: Provided, That all such projects, upon recommendation of the Investment
Coordination Committee [ICC] of the National Economic and Development
Authority [NEDA], shall be approved by the President of the Philippines. Under
this project, the proponent which owns the assets of the facility may assign its
operation and maintenance to a facility operator.
"[e] Build-lease-and-transfer. - A contractual arrangement whereby a project
proponent is authorized to finance and construct an infrastructure or
development facility and upon its completion turns it over to the government
agency or local government unit concerned on a lease arrangement for a fixed
period after which ownership of the facility is automatically transferred to the
government agency or local government unit concerned.
"[f] Build-transfer-and-operate. - A contractual arrangement whereby the public
sector contracts out the building of an infrastructure facility to a private entity
such that the contractor builds the facility on a turn-key basis, assuming cost
overrun, delay and specified performance risks.
"Once the facility is commissioned satisfactorily, title is transferred to the
implementing agency. The private entity however, operates the facility on behalf
of the implementing agency under an agreement.
"[g] Contract-add-and-operate. - A contractual arrangement whereby the project
proponent adds to an existing infrastructure facility which it is renting from the
government. It operates the expanded project over an agreed franchise period.
There may, or may not be, a transfer arrangement in regard to the facility.
"[h] Develop-operate-and-transfer. - A contractual arrangement whereby favorable
conditions external to a new infrastructure project which is to be built by a
private project proponent are integrated into the arrangement by giving that
entity the right to develop adjoining property, and thus, enjoy some of the
benefits the investment creates such as higher property or rent values.
"[i] Rehabilitate-operate-and-transfer. - A contractual arrangement whereby an
existing facility is turned over to the private sector to refurbish, operate and
maintain for a franchise period, at the expiry of which the legal title to the facility
is turned over to the government. The term is also used to describe the purchase
of an existing facility from abroad, importing, refurbishing, erecting and
consuming it within the host country.
"[j] Rehabilitate-own-and-operate. - A contractual arrangement whereby an existing
facility is turned over to the private sector to refurbish and operate with no time
limitation imposed on ownership. As long as the operator is not in violation of its
franchise, it can continue to operate the facility in perpetuity.

franchise, it can continue to operate the facility in perpetuity.
"[k] Project proponent. - The private sector entity which shall have contractual
responsibility for the project and which shall have an adequate financial base to
implement said project consisting of equity and firm commitments from
reputable financial institutions to provide, upon award, sufficient credit lines to
cover the total estimated cost of the project.
"[l] Contractor. - Any entity accredited under Philippine laws which may or may
not be the project proponent and which shall undertake the actual construction
and/or supply of equipment for the project.
"[m] Facility operator. - A company registered with the Securities and Exchange
Commission, which may or may not be the project proponent, and which is
responsible for all aspects of operation and maintenance of the infrastructure or
development facility, including but not limited to the collection of tolls, fees,
rentals or charges from facility users: Provided, That in case the facility requires a
public utility franchise, the facility operator shall be Filipino or at least sixty per
centum [60%] owned by Filipinos.
"[n] Direct government guarantee. - An agreement whereby the government or any
of its agencies or local government units assume responsibility for the repayment
of debt directly incurred by the project proponent in implementing the project in
case of a loan default.
"[o] Reasonable rate of return on investments and operating and maintenance cost. - The
rate of return that reflects the prevailing cost of capital in the domestic and
international markets: Provided, That, in case of negotiated contracts, such rate
of return shall be determined by the ICC of the NEDA prior to the negotiation
and/or call for proposals: Provided, further, That for negotiated contracts for
public utility projects which are monopolies, the rate of return on rate base shall
be determined by existing laws, which in no case shall exceed twelve per centum
[12%].
"[p] Construction. - Refers to new construction, rehabilitation, improvement,
expansion, alteration and related works and activities including the necessary
supply of equipment, materials, labor and services and related items."
IRR on Section 2
SECTION 1.3 - DEFINITION OF TERMS
For purposes of these Implementing Rules and Regulations, the terms and phrases
hereunder shall be understood as follows:
a. Act - shall mean Republic Act No. 6957, as amended by Republic Act No.
7718.
b. Agency - Refers to any department, bureau, office, commission, authority or
agency of the national government, including Government-Owned or
-Controlled Corporations (GOCCs), Government Financial Institutions (GFIs),
and State Universities and Colleges (SUCs) authorized by law or their
respective charters to contract for or undertake Infrastructure or Development
Projects.
c. Amortization - The regular, periodic repayment of principal and payment of
interest of a debt for a definite period of time, at the maturity of which the
entire indebtedness is paid in full.
d. Approving Body - The entity authorized to approve projects proposed under
this Act and in accordance with Sections 2.7 and 2.8 of these Revised IRR.
e. BOT Center - The successor of the Coordinating Council of the Philippine
Assistance Program (CCPAP), the agency mandated under Section 12 of the
Act, to coordinate and monitor projects implemented under the Act, pursuant
to Administrative Order No. 67 (s. 1999), as amended by Administrative Order
No. 103 (s. 2000) and Executive Order No. 144 (s. 2002).

No. 103 (s. 2000) and Executive Order No. 144 (s. 2002).
f. Contractual Arrangements - Refers to any of the following contractual
arrangements or schemes, as well as other variations thereof, as may be
approved by the President, by which infrastructure and/or development
projects may be undertaken pursuant to the provisions of these Revised IRR:
i. Build-and-transfer (BT) - A contractual arrangement whereby the Project
Proponent undertakes the financing and Construction of a given
infrastructure or development facility and after its completion turns it over
to the Agency or LGU concerned, which shall pay the Project Proponent
on an agreed schedule its total investment expended on the project, plus
a Reasonable Rate of Return thereon. This arrangement may be employed
in the Construction of any Infrastructure or Development Projects,
including critical facilities which, for security or strategic reasons, must be
operated directly by the Government.
ii. Build-lease-and-transfer (BLT) - A contractual arrangement whereby a
Project Proponent is authorized to finance and construct an infrastructure
or development facility and upon its completion turns it over to the
Agency/LGU concerned on a lease arrangement for a fixed period, after
which ownership of the facility is automatically transferred to the
Agency/LGU concerned.
iii. Build-operate-and-transfer (BOT) - A contractual arrangement whereby
the Project Proponent undertakes the Construction, including financing, of
a given infrastructure facility, and the operation and maintenance thereof.
BOT Law Implementing Rules & Regulations
3
The Project Proponent operates the facility over a fixed term during which
it 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 to enable the Project Proponent to recover its
investment, and operating and maintenance expenses in the project. The
Project Proponent transfers the facility to the Agency/LGU concerned at
the end of the fixed term that shall not exceed fifty (50) years. This buildoperate -
and-transfer contractual arrangement shall include a
supply-and-operate scheme which is a contractual arrangement whereby
the supplier of equipment and machinery for a given infrastructure facility,
if the interest of the Government so requires, operates the facility
providing in the process technology transfer and training to Filipino
nationals.
iv. Build-own-and-operate (BOO) - A contractual arrangement whereby a
Project Proponent is authorized to finance, construct, own, operate and
maintain an infrastructure or development facility from which the Project
Proponent is allowed to recover its total investment, operating and
maintenance costs plus a reasonable return thereon by collecting tolls,
fees, rentals or other charges from facility users; provided, That all such
projects upon recommendation of the Investment Coordination Committee
(ICC) of the National Economic and Development Authority (NEDA), shall
be approved by the President of the Philippines. Under this project, the
proponent who owns the assets of the facility may assign its operation
and maintenance to a Facility operator.
v. Build-transfer-and-operate (BTO) - A contractual arrangement whereby
the Agency/LGU contracts out the Construction of an infrastructure facility
to a private entity such that the Contractor builds the facility on a turnkey
basis, assuming cost overruns, delays, and specified performance risks.
Once the facility is commissioned satisfactorily, title is transferred to the

Once the facility is commissioned satisfactorily, title is transferred to the
implementing Agency/LGU. The private entity however operates the
facility on behalf of the implementing Agency/LGU under an agreement.
vi. Contract-add-and-operate (CAO) - A contractual arrangement whereby
the Project Proponent adds to an existing infrastructure facility which it is
renting from the Government and operates the expanded project over an
agreed Franchise period. There may or may not be a transfer
arrangement with regard to the added facility provided by the Project
Proponent.
vii. Develop-operate-and-transfer (DOT) - A contractual arrangement
whereby favorable conditions external to a new infrastructure project
which is to be built by a Project Proponent are integrated into the
arrangement by giving that entity the right to develop adjoining property,
and thus, enjoy some of the benefits the investment creates such as
higher property or rent values.
viii. Rehabilitate-operate-and-transfer (ROT) - A contractual arrangement
whereby an existing facility is turned over to the Project Proponent to
refurbish, operate and maintain for a Franchise period, at the expiry of
which the legal title to the facility is turned over to the Government. The
term is also used to describe the purchase of an existing facility from
4
abroad, importing, refurbishing, erecting and consuming it within the host
country.
ix. Rehabilitate-own-and-operate (ROO) - A contractual arrangement
whereby an existing facility is turned over to the Project Proponent to
refurbish and operate with no time limitation imposed on ownership. As
long as the operator is not in violation of its Franchise, it can continue to
operate the facility in perpetuity.
g. Construction - Refers to new construction, rehabilitation, improvement,
expansion, alteration, and related works and activities including the
necessary design, supply, installation, testing and commissioning of
equipment, systems, plants, materials, labor and services and related items
needed to build or rehabilitate an infrastructure or development facility.
h. Contractor - Refers to any entity accredited under Philippine laws, or that
should be accredited under Philippine laws in accordance with Section 5.4
(a.v) hereof, which may or may not be the Project Proponent and which shall
undertake the actual Construction and/or supply of equipment for the project.
i. Development Program - Refers to national, regional or local government
plans or programs included in, but not limited to, the Medium-Term Philippine
Development Plan (MTPDP), the Regional Development Plans and Local
Development Plans.
j. Direct Government Guarantee - Refers to an agreement whereby the
Government or any of its Agencies/LGUs guarantees to assume responsibility
for the repayment of debt directly incurred by the Project Proponent in
implementing the project in case of a loan default.
k. Facility Operator - Refers to a company registered with the Securities and
Exchange Commission (SEC), which may or may not be the Project
Proponent, and which is responsible for all aspects of operation and
maintenance of the infrastructure or development facility, including but not
limited to the collection of tolls, fees, rentals or charges from facility users;
provided, that in case the facility requires a public utility Franchise, the
Facility Operator shall, no later than the commencement of operation of the
facility, comply with the nationality and ownership requirements under the

facility, comply with the nationality and ownership requirements under the
Constitution and other applicable laws and jurisprudence.
l. Franchise - Refers to a certificate, permit or other form of authorization
required to be obtained by a Facility Operator from a Regulator prior to
operating a Public Utility Project.
m. Government Undertakings - Refers to any form of contribution and/or
support provided under Section 13.3 of these Revised IRR, which the
Government or any of its Agencies/LGUs may extend to a Project Proponent.
n. Head of Agency/LGU - Shall be defined as: (i) the head of the agency or
body, for national government agencies (NGAs) and the constitutional
commissions or offices, and branches of government; (ii) the Governing
Board or its authorized official/managing head/Chief Executive Officer of
5
GOCCs, GFIs, or SUCs; or (iii) the Sanggunian or its authorized official or
the local chief executive, for LGUs.
o. ICC - Refers to the Investment Coordination Committee of the National
Economic and Development Authority (NEDA) Board.
p. Investment Incentives - Refers to any form of contribution and/or support,
which the Government or any of its Agencies/LGUs including GOCCs may
extend to the Project Proponent in accordance with Section 13.2 of these
Revised IRR.
q. IRR - Shall mean these Revised Implementing Rules and Regulations.
r. List of Priority Projects - Refers to the list of Private Sector Infrastructure
or Development Projects approved in accordance with Section 2.3.
s. Local Government Units (LGUs) - Refer to provincial, city, municipal and/or
barangay government entities.
t. Negotiated Contracts - Refers to contracts entered into by the Government
for convenience even if broader tendering would have been possible. This
type of contract may be resorted to only in cases prescribed under Rule 9.
u. PBAC - Refers to the Pre-qualifications, Bids, and Awards Committee
established in accordance with Rule 3 of these Revised IRR.
v. Private Sector Infrastructure or Development Projects - The general
description of Infrastructure or Development Projects normally financed, and
operated by the public sector but which will now be wholly or partly financed,
constructed and operated by the private sector, including but not limited to,
power plants, highways, ports, airports, canals, dams, hydropower projects,
water supply, irrigation, telecommunications, railroad and railways, transport
systems, land reclamation projects, industrial estates or townships, housing,
government buildings, tourism projects, public markets, slaughterhouses,
warehouses, solid waste management, information technology networks and
database infrastructure, education and health facilities, sewerage, drainage,
dredging, and other infrastructure and development projects as may
otherwise be authorized by the appropriate Agency/LGU pursuant to the Act
or these Revised IRR. Such projects shall be undertaken through Contractual
Arrangements as defined herein, including such other variations as may be
approved by the President of the Philippines.
w. Project Cost - Refers to the total cost to be expended by the proponent to
plan, develop and construct the project to completion stage including but not
limited to cost of feasibility studies engineering and design, Construction,
equipment, land and right-of-way, taxes imposed on said cost, and
development cost.
x. Project Loan - Refers to all loans and/or credit facilities extended by
financial institutions, multi-lateral lenders, export credit agencies, and all

financial institutions, multi-lateral lenders, export credit agencies, and all
other third party lenders to the project company and/or Project Proponent for
the development and/or operation of the project.
6
Foreign loans/foreign currency loans to be incurred by the project company
shall be in accordance with prevailing Bangko Sentral ng Pilipinas (BSP)
regulations.
y. Project Proponent - Refers to the private sector entity which shall have
contractual responsibility for the project and which shall have an adequate
track record in the concerned industry as well as technical capability and
financial base consisting of equity and firm commitments from reputable
financial institutions to provide, upon award, sufficient credit lines to cover
the total estimated cost of the project to implement the said project.
z. Public Utility Projects - Refers to projects or facilities that provide public
services as defined under the Public Services Act, as amended, and for which
a Franchise is required.
a.a. Reasonable Rate of Return - Refers to the rate of return that a Project
Proponent shall be entitled to, as determined by the Approving Body taking
into account, among others, the prevailing cost of capital (equity and
borrowings) in the domestic and international markets, risks being assumed
by the Project Proponent and the level of Government Undertakings extended
for the project; provided, further, that in the case of Negotiated Contracts,
such rate of return shall be determined by the Approving Body prior to call for
proposals; provided further, that for Negotiated Contracts for public utilities
projects which are monopolies, the rate of return on rate base shall be
determined by existing laws, which in no case shall exceed twelve per centum
(12%), as provided by the Act.
b.b. Regulator - Refers to the agency, body or commission empowered by law to
fix the rates of a provider of a particular public service as defined by the
Commonwealth Act No. 146, as amended (Public Service Act, as amended)
and for which a Franchise is required to operate the same.
c.c. Unsolicited Proposals - Refer to project proposals submitted by the private
sector, not in response to a formal solicitation or request issued by an
Agency/LGU, to undertake Infrastructure or Development Projects which may
be entered into by Agency/LGU subject to the requirements/conditions
prescribed under Rule 10.

B. Van Zuiden Bros. vs. GTVL Manufacturing, G.R. No. 147905. May
28, 2007.
4:04 AM
PHILIPPINE JURISPRUDENCE – FULL TEXT

The Lawphil Project - Arellano Law Foundation
G.R. No. 147905 May 28, 2007
B. VAN ZUIDEN BROS., LTD. VS. GTVL MANUFACTURING INDUSTRIES, INC.,

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 147905 May 28, 2007
B. VAN ZUIDEN BROS., LTD., Petitioner,
vs.
GTVL MANUFACTURING INDUSTRIES, INC., Respondent.
DEC I SI O N
CARPIO, J.:
The Case
Before the Court is a petition for review1 of the 18 April 2001 Decision 2 of the Court of Appeals in CA-
G.R. CV No. 66236. The Court of Appeals affirmed the Order 3 of the Regional Trial Court, Branch
258, Parañaque City (trial court) dismissing the complaint for sum of money filed by B. Van Zuiden
Bros., Ltd. (petitioner) against GTVL Manufacturing Industries, Inc. (respondent).
The Facts
On 13 July 1999, petitioner filed a complaint for sum of money against respondent, docketed as Civil
Case No. 99-0249. The pertinent portions of the complaint read:
1. Plaintiff, ZUIDEN, is a corporation, incorporated under the laws of Hong Kong. x x x ZUIDEN is
not engaged in business in the Philippines, but is suing before the Philippine Courts, for the reasons
hereinafter stated.
xx x x
3. ZUIDEN is engaged in the importation and exportation of several products, including lace
products.
4. On several occasions, GTVL purchased lace products from [ZUIDEN].
5. The procedure for these purchases, as per the instructions of GTVL, was that ZUIDEN delivers
the products purchased by GTVL, to a certain Hong Kong corporation, known as Kenzar Ltd.
(KENZAR), x x x and the products are then considered as sold, upon receipt by KENZAR of the
goods purchased by GTVL.
KENZAR had the obligation to deliver the products to the Philippines and/or to follow whatever
instructions GTVL had on the matter.
Insofar as ZUIDEN is concerned, upon delivery of the goods to KENZAR in Hong Kong, the
transaction is concluded; and GTVL became obligated to pay the agreed purchase price.
xx x x
7. However, commencing October 31, 1994 up to the present, GTVL has failed and refused to pay
the agreed purchase price for several deliveries ordered by it and delivered by ZUIDEN, as above-
mentioned.
xx x x
9. In spite [sic] of said demands and in spite [sic] of promises to pay and/or admissions of liability,
GTVL has failed and refused, and continues to fail and refuse, to pay the overdue amount of U.S.
$32,088.02 [inclusive of interest].4
Instead of filing an answer, respondent filed a Motion to Dismiss 5 on the ground that petitioner has
no legal capacity to sue. Respondent alleged that petitioner is doing business in the Philippines
without securing the required license. Accordingly, petitioner cannot sue before Philippine courts.
After an exchange of several pleadings6 between the parties, the trial court issued an Order on 10
November 1999 dismissing the complaint.
On appeal, the Court of Appeals sustained the trial court’s dismissal of the complaint.
Hence, this petition.

Hence, this petition.
The Court of Appeals’ Ruling
In affirming the dismissal of the complaint, the Court of Appeals relied on Eriks Pte., Ltd. v. Court of
Appeals.7 In that case, Eriks, an unlicensed foreign corporation, sought to collect US$41,939.63 from
a Filipino businessman for goods which he purchased and received on several occasions from
January to May 1989. The transfers of goods took place in Singapore, for the Filipino’s account,
F.O.B. Singapore, with a 90-day credit term. Since the transactions involved were not isolated, this
Court found Eriks to be doing business in the Philippines. Hence, this Court upheld the dismissal of
the complaint on the ground that Eriks has no capacity to sue.
The Court of Appeals noted that in Eriks, while the deliveries of the goods were perfected in
Singapore, this Court still found Eriks to be engaged in business in the Philippines. Thus, the Court
of Appeals concluded that the place of delivery of the goods (or the place where the transaction took
place) is not material in determining whether a foreign corporation is doing business in the
Philippines. The Court of Appeals held that what is material are the proponents to the transaction, as
well as the parties to be benefited and obligated by the transaction.
In this case, the Court of Appeals found that the parties entered into a contract of sale whereby
petitioner sold lace products to respondent in a series of transactions. While petitioner delivered the
goods in Hong Kong to Kenzar, Ltd. (Kenzar), another Hong Kong company, the party with whom
petitioner transacted was actually respondent, a Philippine corporation, and not Kenzar. The Court of
Appeals believed Kenzar is merely a shipping company. The Court of Appeals concluded that the
delivery of the goods in Hong Kong did not exempt petitioner from being considered as doing
business in the Philippines.
The Issue
The sole issue in this case is whether petitioner, an unlicensed foreign corporation, has legal
capacity to sue before Philippine courts. The resolution of this issue depends on whether petitioner
is doing business in the Philippines.
The Ruling of the Court
The petition is meritorious.
Section 133 of the Corporation Code provides:
Doing business without license. — No foreign corporation transacting business in the Philippines
without a license, or its successors or assigns, shall be permitted to maintain or intervene in any
action, suit or proceeding in any court or administrative agency of the Philippines; but such
corporation may be sued or proceeded against before Philippine courts or administrative tribunals on
any valid cause of action recognized under Philippine laws.
The law is clear. An unlicensed foreign corporation doing business in the Philippines cannot sue
before Philippine courts. On the other hand, an unlicensed foreign corporationnot doing business in
the Philippines can sue before Philippine courts.
In the present controversy, petitioner is a foreign corporation which claims that it is not doing
business in the Philippines. As such, it needs no license to institute a collection suit against
respondent before Philippine courts.
Respondent argues otherwise. Respondent insists that petitioner is doing business in the Philippines
without the required license. Hence, petitioner has no legal capacity to sue before Philippine courts.
Under Section 3(d) of Republic Act No. 7042 (RA 7042) or "The Foreign Investments Act of 1991,"
the phrase "doing business" includes:
x x x soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches;
appointing representatives or distributors domiciled in the Philippines or who in any calendar year
stay in the country for a period or periods totalling one hundred eighty (180) days or more;
participating in the management, supervision or control of any domestic business, firm, entity or
corporation in the Philippines; and any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the performance of acts or works, or the
exercise of some of the functions normally incident to, and in progressive prosecution of, commercial
gain or of the purpose and object of the business organization: Provided, however, That the phrase
"doing business" shall not be deemed to include mere investment as a shareholder by a foreign
entity in domestic corporations duly registered to do business, and/or the exercise of rights as such
investor; nor having a nominee director or officer to represent its interests in such corporation; nor
appointing a representative or distributor domiciled in the Philippines which transacts business in its
own name and for its own account.
The series of transactions between petitioner and respondent cannot be classified as "doing
business" in the Philippines under Section 3(d) of RA 7042. An essential condition to be considered
as "doing business" in the Philippines is the actual performance of specific commercial acts within
the territory of the Philippines for the plain reason that the Philippines has no jurisdiction over
commercial acts performed in foreign territories. Here, there is no showing that petitioner performed
within the Philippine territory the specific acts of doing business mentioned in Section 3(d) of RA

within the Philippine territory the specific acts of doing business mentioned in Section 3(d) of RA
7042. Petitioner did not also open an office here in the Philippines, appoint a representative or
distributor, or manage, supervise or control a local business. While petitioner and respondent
entered into a series of transactions implying a continuity of commercial dealings, the perfection and
consummation of these transactions were done outside the Philippines. 8
In its complaint, petitioner alleged that it is engaged in the importation and exportation of several
products, including lace products. Petitioner asserted that on several occasions, respondent
purchased lace products from it. Petitioner also claimed that respondent instructed it to deliver the
purchased goods to Kenzar, which is a Hong Kong company based in Hong Kong. Upon Kenzar’s
receipt of the goods, the products were considered sold. Kenzar, in turn, had the obligation to deliver
the lace products to the Philippines. In other words, the sale of lace products was consummated in
Hong Kong.
As earlier stated, the series of transactions between petitioner and respondent transpired and were
consummated in Hong Kong.9 We also find no single activity which petitioner performed here in the
Philippines pursuant to its purpose and object as a business organization. 10 Moreover, petitioner’s
desire to do business within the Philippines is not discernible from the allegations of the complaint or
from its attachments. Therefore, there is no basis for ruling that petitioner is doing business in the
Philippines.
In Eriks, respondent therein alleged the existence of a distributorship agreement between him and
the foreign corporation. If duly established, such distributorship agreement could support
respondent’s claim that petitioner was indeed doing business in the Philippines. Here, there is no
such or similar agreement between petitioner and respondent.
We disagree with the Court of Appeals’ ruling that the proponents to the transaction determine
whether a foreign corporation is doing business in the Philippines, regardless of the place of delivery
or place where the transaction took place. To accede to such theory makes it possible to classify, for
instance, a series of transactions between a Filipino in the United States and an American company
based in the United States as "doing business in the Philippines," even when these transactions are
negotiated and consummated only within the United States.
An exporter in one country may export its products to many foreign importing countries without
performing in the importing countries specific commercial acts that would constitute doing business
in the importing countries. The mere act of exporting from one’s own country, without doing any
specific commercial act within the territory of the importing country, cannot be deemed as doing
business in the importing country. The importing country does not acquire jurisdiction over the
foreign exporter who has not performed any specific commercial act within the territory of the
importing country. Without jurisdiction over the foreign exporter, the importing country cannot compel
the foreign exporter to secure a license to do business in the importing country.
Otherwise, Philippine exporters, by the mere act alone of exporting their products, could be
considered by the importing countries to be doing business in those countries. This will require
Philippine exporters to secure a business license in every foreign country where they usually export
their products, even if they do not perform any specific commercial act within the territory of such
importing countries. Such a legal concept will have a deleterious effect not only on Philippine
exports, but also on global trade.
To be doing or "transacting business in the Philippines" for purposes of Section 133 of the
Corporation Code, the foreign corporation must actually transact business in the Philippines, that is,
perform specific business transactions within the Philippine territory on a continuing basis in its own
name and for its own account. Actual transaction of business within the Philippine territory is an
essential requisite for the Philippines to acquire jurisdiction over a foreign corporation and thus
require the foreign corporation to secure a Philippine business license. If a foreign corporation does
not transact such kind of business in the Philippines, even if it exports its products to the Philippines,
the Philippines has no jurisdiction to require such foreign corporation to secure a Philippine business
license.
Considering that petitioner is not doing business in the Philippines, it does not need a license in
order to initiate and maintain a collection suit against respondent for the unpaid balance of
respondent’s purchases.
WHEREFORE, we GRANT the petition. We REVERSE the Decision dated 18 April 2001 of the
Court of Appeals in CA-G.R. CV No. 66236. No costs.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson

Chairperson
CONCHITA CARPIO MORALES DANTE O. TINGA
Associate Justice Asscociate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice
ATT EST A TI O N
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CER T IF I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
Footnotes
1 Under Rule 45 of the Rules of Court.
2 Rollo, pp. 24-33. Penned by Associate Justice Fermin A. Martin, Jr., with Associate Justices Portia
Aliño-Hormachuelos and Mercedes Gozo-Dadole, concurring.

3
Id. at 34. Penned by Judge Raul E. De Leon.
4 Records, pp. 1-3.
5 Id. at 47-56.
6
The last pleading filed was a sur-rejoinder.
7
G.R. No. 118843, 6 February 1997, 267 SCRA 567.
8 See Villanueva, Philippine Corporate Law 813 (2001).
9 See Pacific Vegetable Oil Corporation v. Singzon, G.R. No. L-7917, 29 April 1955 (unreported).
10
See Communication Materials and Design, Inc. v. Court of Appeals, G.R. No. 102223, 22 August
1996, 260 SCRA 673.
Pasted from <http://www.lawphil.net/judjuris/juri2007/may2007/gr_147905_2007.html>

Agilent Technologies Singapore vs. Integrated Technology Phil.
Corp., G.R. No. 154618. April 14, 2004.
4:04 AM
PHILIPPINE JURISPRUDENCE - FULL TEXT

G.R. No. 154618 April 14, 2004
AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD., vs. INTEGRATED SILICON TECHNOLOGY PHILIPPINES CORPORATION, ET AL.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 154618 April 14, 2004
AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD., petitioner,
vs.
INTEGRATED SILICON TECHNOLOGY PHILIPPINES CORPORATION, TEOH KIANG HONG,
TEOH KIANG SENG, ANTHONY CHOO, JOANNE KATE M. DELA CRUZ, JEAN KAY M. DELA
CRUZ and ROLANDO T. NACILLA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the Decision dated August 12, 2002 of the Court of Appeals in CA-
G.R. SP No. 66574, which dismissed Civil Case No. 3123-2001-C and annulled and set aside the
Order dated September 4, 2001 issued by the Regional Trial Court of Calamba, Laguna, Branch 92.
Petitioner Agilent Technologies Singapore (Pte.), Ltd. ("Agilent") is a foreign corporation, which, by
its own admission, is not licensed to do business in the Philippines. 1Respondent Integrated Silicon
Technology Philippines Corporation ("Integrated Silicon") is a private domestic corporation, 100%
foreign owned, which is engaged in the business of manufacturing and assembling electronics
components.2 Respondents Teoh Kiang Hong, Teoh Kiang Seng and Anthony Choo, Malaysian
nationals, are current members of Integrated Silicon’s board of directors, while Joanne Kate M. dela
Cruz, Jean Kay M. dela Cruz, and Rolando T. Nacilla are its former members. 3
The juridical relation among the various parties in this case can be traced to a 5-year Value Added
Assembly Services Agreement ("VAASA"), entered into on April 2, 1996 between Integrated Silicon
and the Hewlett-Packard Singapore (Pte.) Ltd., Singapore Components Operation ("HP-
Singapore").4 Under the terms of the VAASA, Integrated Silicon was to locally manufacture and
assemble fiber optics for export to HP-Singapore. HP-Singapore, for its part, was to consign raw
materials to Integrated Silicon; transport machinery to the plant of Integrated Silicon; and pay
Integrated Silicon the purchase price of the finished products. 5 The VAASA had a five-year term,
beginning on April 2, 1996, with a provision for annual renewal by mutual written consent. 6 On
September 19, 1999, with the consent of Integrated Silicon, 7 HP-Singapore assigned all its rights
and obligations in the VAASA to Agilent.8
On May 25, 2001, Integrated Silicon filed a complaint for "Specific Performance and Damages"
against Agilent and its officers Tan Bian Ee, Lim Chin Hong, Tey Boon Teck and Francis Khor,
docketed as Civil Case No. 3110-01-C. It alleged that Agilent breached the parties’ oral agreement
to extend the VAASA. Integrated Silicon thus prayed that defendant be ordered to execute a written
extension of the VAASA for a period of five years as earlier assured and promised; to comply with
the extended VAASA; and to pay actual, moral, exemplary damages and attorney’s fees. 9
On June 1, 2001, summons and a copy of the complaint were served on Atty. Ramon Quisumbing,
who returned these processes on the claim that he was not the registered agent of Agilent. Later, he
entered a special appearance to assail the court’s jurisdiction over the person of Agilent.
On July 2, 2001, Agilent filed a separate complaint against Integrated Silicon, Teoh Kang Seng,
Teoh Kiang Gong, Anthony Choo, Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz and Rolando
T. Nacilla,10 for "Specific Performance, Recovery of Possession, and Sum of Money with Replevin,
Preliminary Mandatory Injunction, and Damages", before the Regional Trial Court, Calamba,
Laguna, Branch 92, docketed as Civil Case No. 3123-2001-C. Agilent prayed that a writ of replevin
or, in the alternative, a writ of preliminary mandatory injunction, be issued ordering defendants to
immediately return and deliver to plaintiff its equipment, machineries and the materials to be used for

immediately return and deliver to plaintiff its equipment, machineries and the materials to be used for
fiber-optic components which were left in the plant of Integrated Silicon. It further prayed that
defendants be ordered to pay actual and exemplary damages and attorney’s fees. 11
Respondents filed a Motion to Dismiss in Civil Case No. 3123-2001-C,12 on the grounds of lack of
Agilent’s legal capacity to sue;13 litis pendentia;14 forum shopping;15 and failure to state a cause of
action.16
On September 4, 2001, the trial court denied the Motion to Dismiss and granted petitioner Agilent’s
application for a writ of replevin.17
Without filing a motion for reconsideration, respondents filed a petition for certiorari with the Court of
Appeals.18
In the meantime, upon motion filed by respondents, Judge Antonio S. Pozas of Branch 92 voluntarily
inhibited himself in Civil Case No. 3123-2001-C. The case was re-raffled and assigned to Branch 35,
the same branch where Civil Case No. 3110-2001-C is pending.
On August 12, 2002, the Court of Appeals granted respondents’ petition for certiorari, set aside the
assailed Order of the trial court dated September 4, 2001, and ordered the dismissal of Civil Case
No. 3123-2001-C.
Hence, the instant petition raising the following errors:
I.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT DISMISSING
RESPONDENTS’ PETITION FOR CERTIORARI FOR RESPONDENTS’ FAILURE TO FILE A
MOTION FOR RECONSIDERATION BEFORE RESORTING TO THE REMEDY OF
CERTIORARI.
II.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ANNULLING AND
SETTING ASIDE THE TRIAL COURT’S ORDER DATED 4 SEPTEMBER 2001 AND
ORDERING THE DISMISSAL OF CIVIL CASE NO. 3123-2001-C BELOW ON THE GROUND
OF LITIS PENDENTIA, ON ACCOUNT OF THE PENDENCY OF CIVIL CASE NO.
3110-2001-C.
III.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ANNULLING AND
SETTING ASIDE THE TRIAL COURT’S ORDER DATED 4 SEPTEMBER 2001 AND
ORDERING THE DISMISSAL OF CIVIL CASE NO. 3123-2001-C BELOW ON THE GROUND
OF FORUM SHOPPING, ON ACCOUNT OF THE PENDENCY OF CIVIL CASE NO.
3110-2001-C.
IV.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ORDERING THE
DISMISSAL OF CIVIL CASE NO. 323-2001-C BELOW INSTEAD OF ORDERING IT
CONSOLIDATED WITH CIVIL CASE NO. 3110-2001-C.19
The two primary issues raised in this petition: (1) whether or not the Court of Appeals committed
reversible error in giving due course to respondents’ petition, notwithstanding the failure to file a
Motion for Reconsideration of the September 4, 2001 Order; and (2) whether or not the Court of
Appeals committed reversible error in dismissing Civil Case No. 3123-2001-C.
We find merit in the petition.
The Court of Appeals, citing the case of Malayang Manggagawa sa ESSO v. ESSO Standard
Eastern, Inc.,20 held that the lower court had no jurisdiction over Civil Case No. 3123-2001-C
because of the pendency of Civil Case No. 3110-2001-C and, therefore, a motion for reconsideration
was not necessary before resort to a petition for certiorari. This was error.
Jurisdiction is fixed by law. Batas Pambansa Blg. 129 vests jurisdiction over the subject matter of
Civil Case No. 3123-2001-C in the RTC.21
The Court of Appeals’ ruling that the assailed Order issued by the RTC of Calamba, Branch 92, was
a nullity for lack of jurisdiction due to litis pendentia and forum shopping, has no legal basis. The
pendency of another action does not strip a court of the jurisdiction granted by law.
The Court of Appeals further ruled that a Motion for Reconsideration was not necessary in view of
the urgent necessity in this case. We are not convinced. In the case of Bache and Co. (Phils.), Inc. v.
Ruiz,22 relied on by the Court of Appeals, it was held that "time is of the essence in view of the tax
assessments sought to be enforced by respondent officers of the Bureau of Internal Revenue
against petitioner corporation, on account of which immediate and more direct action becomes
necessary." Tax assessments in that case were based on documents seized by virtue of an illegal
search, and the deprivation of the right to due process tainted the entire proceedings with illegality.
Hence, the urgent necessity of preventing the enforcement of the tax assessments was patent.
Respondents, on the other hand, cite the case of Geronimo v. Commission on Elections,23where the
urgent necessity of resolving a disqualification case for a position in local government warranted the
expeditious resort to certiorari. In the case at bar, there is no analogously urgent circumstance which

expeditious resort to certiorari. In the case at bar, there is no analogously urgent circumstance which
would necessitate the relaxation of the rule on a Motion for Reconsideration.
Indeed, none of the exceptions for dispensing with a Motion for Reconsideration is present here.
None of the following cases cited by respondents serves as adequate basis for their procedural
lapse.
In Vigan Electric Light Co., Inc. v. Public Service Commission,24 the questioned order was null and
void for failure of respondent tribunal to comply with due process requirements; in Matanguihan v.
Tengco,25 the questioned order was a patent nullity for failure to acquire jurisdiction over the
defendants, which fact the records plainly disclosed; and in National Electrification Administration v.
Court of Appeals,26 the questioned orders were void for vagueness. No such patent nullity is evident
in the Order issued by the trial court in this case. Finally, while urgency may be a ground for
dispensing with a Motion for Reconsideration, in the case of Vivo v. Cloribel,27 cited by respondents,
the slow progress of the case would have rendered the issues moot had a motion for reconsideration
been availed of. We find no such urgent circumstance in the case at bar.
Respondents, therefore, availed of a premature remedy when they immediately raised the matter to
the Court of Appeals on certiorari; and the appellate court committed reversible error when it took
cognizance of respondents’ petition instead of dismissing the same outright.
Pasted from <http://www.lawphil.net/judjuris/juri2004/apr2004/gr_154618_2004.html>

Hahn vs. Court of Appeals, G.R. No. 113074. January 22, 1997.
4:05 AM
G.R. No. 113074 January 22, 1997

ALFRED HAHN, petitioner,
vs.
COURT OF APPEALS and BAYERSCHE MOTOREN WERKE AKTIENGSELLSCHAF T
(BMW), respondents.
MENDOZA, J.:
This is a petition for review of the decision 1 of the Court of Appeals dismissing a complaint for
specific performance which petitioner had filed against private respondent on the ground that the
Regional Trial Court of Quezon City did not acquire jurisdiction over private respondent, a
nonresident foreign corporation, and of the appellate court's order denying petitioner's motion for
reconsideration.
The following are the facts:
Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style "Hahn-Manila."
On the other hand, private respondent Bayerische Motoren Werke Aktiengesellschaft (BMW) is a
nonresident foreign corporation existing under the laws of the former Federal Republic of Germany,
with principal office at Munich, Germany.
On March 7, 1967, petitioner executed in favor of private respondent a "Deed of Assignment with
Special Power of Attorney," which reads in full as follows:
WHEREAS, the ASSIGNOR is the present owner and holder of the BMW trademark and device in
the Philippines which ASSIGNOR uses and has been using on the products manufactured by
ASSIGNEE, and for which ASSIGNOR is the authorized exclusive Dealer of the ASSIGNEE in the
Philippines, the same being evidenced by certificate of registration issued by the Director of Patents
on 12 December 1963 and is referred to as Trademark No. 10625;
WHEREAS, the ASSIGNOR has agreed to transfer and consequently record said transfer of the said
BMW trademark and device in favor of the ASSIGNEE herein with the Philippines Patent Office;
NOW THEREFORE, in view of the foregoing and in consideration of the stipulations hereunder
stated, the ASSIGNOR hereby affirms the said assignment and transfer in favor of the ASSIGNEE
under the following terms and conditions:
1. The ASSIGNEE shall take appropriate steps against any user other than ASSIGNOR or infringer
of the BMW trademark in the Philippines; for such purpose, the ASSIGNOR shall inform the
ASSIGNEE immediately of any such use or infringement of the said trademark which comes to his
knowledge and upon such information the ASSIGNOR shall automatically act as Attorney-In-Fact of
the ASSIGNEE for such case, with full power, authority and responsibility to prosecute unilaterally or
in concert with ASSIGNEE, any such infringer of the subject mark and for purposes hereof the
ASSIGNOR is hereby named and constituted as ASSIGNEE's Attorney-In-Fact, but any such suit
without ASSIGNEE's consent will exclusively be the responsibility and for the account of the
ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE shall continue business relations as has been usual in
the past without a formal contract, and for that purpose, the dealership of ASSIGNOR shall cover the
ASSIGNEE's complete production program with the only limitation that, for the present, in view of
ASSIGNEE's limited production, the latter shall not be able to supply automobiles to ASSIGNOR.
Per the agreement, the parties "continue[d] business relations as has been usual in the past without
a formal contract." But on February 16, 1993, in a meeting with a BMW representative and the
president of Columbia Motors Corporation (CMC), Jose Alvarez, petitioner was informed that BMW
was arranging to grant the exclusive dealership of BMW cars and products to CMC, which had
expressed interest in acquiring the same. On February 24, 1993, petitioner received confirmation of
the information from BMW which, in a letter, expressed dissatisfaction with various aspects of
petitioner's business, mentioning among other things, decline in sales, deteriorating services, and
inadequate showroom and warehouse facilities, and petitioner's alleged failure to comply with the
standards for an exclusive BMW dealer. 2 Nonetheless, BMW expressed willingness to continue
business relations with the petitioner on the basis of a "standard BMW importer" contract, otherwise,
it said, if this was not acceptable to petitioner, BMW would have no alternative but to terminate
petitioner's exclusive dealership effective June 30, 1993.
Petitioner protested, claiming that the termination of his exclusive dealership would be a breach of
the Deed of Assignment. 3 Hahn insisted that as long as the assignment of its trademark and device
subsisted, he remained BMW's exclusive dealer in the Philippines because the assignment was

subsisted, he remained BMW's exclusive dealer in the Philippines because the assignment was
made in consideration of the exclusive dealership. In the same letter petitioner explained that the
decline in sales was due to lower prices offered for BMW cars in the United States and the fact that
few customers returned for repairs and servicing because of the durability of BMW parts and the
efficiency of petitioner's service.
Because of Hahn's insistence on the former business relation, BMW withdrew on March 26, 1993 its
offer of a "standard importer contract" and terminated the exclusive dealer relationship effective June
30, 1993. 4 At a conference of BMW Regional Importers held on April 26, 1993 in Singapore, Hahn
was surprised to find Alvarez among those invited from the Asian region. On April 29, 1993, BMW
proposed that Hahn and CMC jointly import and distribute BMW cars and parts.
Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for specific
performance and damages against BMW to compel it to continue the exclusive dealership. Later he
filed an amended complaint to include an application for temporary restraining order and for writs of
preliminary, mandatory and prohibitory injunction to enjoin BMW from terminating his exclusive
dealership. Hahn's amended complaint alleged in pertinent parts:
2. Defendant [BMW] is a foreign corporation doing business in the Philippines with principal offices
at Munich, Germany. It may be served with summons and other court processes through the
Secretary of the Department of Trade and Industry of the Philippines. . . .
xxx xxx xxx
5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a Deed of Assignment with
Special Power of Attorney covering the trademark and in consideration thereof, under its first
whereas clause, Plaintiff was duly acknowledged as the "exclusive Dealer of the Assignee in the
Philippines. . . .
xxx xxx xxx
8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up
to the present, Plaintiff, through its firm name "HAHN MANILA" and without any monetary
contribution from defendant BMW, established BMW's goodwill and market presence in the
Philippines. Pursuant thereto, Plaintiff has invested a lot of money and resources in order to single-
handedly compete against other motorcycle and car companies. . . . Moreover, Plaintiff has built
buildings and other infrastructures such as service centers and showrooms to maintain and promote
the car and products of defendant BMW.
xxx xxx xxx
10. In a letter dated February 24, 1993, defendant BMW advised Plaintiff that it was willing to
maintain with Plaintiff a relationship but only "on the basis of a standard BMW importer contract as
adjusted to reflect the particular situation in the Philippines" subject to certain conditions, otherwise,
defendant BMW would terminate Plaintiffs exclusive dealership and any relationship for cause
effective June 30, 1993. . . .
xxx xxx xxx
15. The actuations of defendant BMW are in breach of the assignment agreement between itself and
plaintiff since the consideration for the assignment of the BMW trademark is the continuance of the
exclusive dealership agreement. It thus, follows that the exclusive dealership should continue for so
long as defendant BMW enjoys the use and ownership of the trademark assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to Branch 104 of the Quezon City
Regional Trial Court, which on June 14, 1993 issued a temporary restraining order. Summons and
copies of the complaint and amended complaint were thereafter served on the private respondent
through the Department of Trade and Industry, pursuant to Rule 14, §14 of the Rules of Court. The
order, summons and copies of the complaint and amended complaint were later sent by the DTI to
BMW via registered mail on June 15, 1993 5 and received by the latter on June 24, 1993.
On June 17, 1993, without proof of service on BMW, the hearing on the application for the writ of
preliminary injunction proceeded ex parte, with petitioner Hahn testifying. On June 30, 1993, the trial
court issued an order granting the writ of preliminary injunction upon the filing of a bond of
P100,000.00. On July 13, 1993, following the posting of the required bond, a writ of preliminary
injunction was issued.
On July 1, 1993, BMW moved to dismiss the case, contending that the trial court did not acquire
jurisdiction over it through the service of summons on the Department of Trade and Industry,
because it (BMW) was a foreign corporation and it was not doing business in the Philippines. It
contended that the execution of the Deed of Assignment was an isolated transaction; that Hahn was
not its agent because the latter undertook to assemble and sell BMW cars and products without the
participation of BMW and sold other products; and that Hahn was an indentor or middleman
transacting business in his own name and for his own account.
Petitioner Alfred Hahn opposed the motion. He argued that BMW was doing business in the
Philippines through him as its agent, as shown by the fact that BMW invoices and order forms were
used to document his transactions; that he gave warranties as exclusive BMW dealer; that BMW

used to document his transactions; that he gave warranties as exclusive BMW dealer; that BMW
officials periodically inspected standards of service rendered by him; and that he was described in
service booklets and international publications of BMW as a "BMW Importer" or "BMW Trading
Company" in the Philippines.
The trial court 6 deferred resolution of the motion to dismiss until after trial on the merits for the
reason that the grounds advanced by BMW in its motion did not seem to be indubitable.
Without seeking reconsideration of the aforementioned order, BMW filed a petition for certiorari with
the Court of Appeals alleging that:
I. THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE OR OTHERWISE INJUDICIOUSLY
IN PROCEEDINGS LEADING TOWARD THE ISSUANCE OF THE WRIT OF PRELIMINARY
INJUNCT ION, AND IN PRESCRIBING THE TERMS FOR THE ISSUANCE THEREOF.
II. THE RESPONDENT JUDGE PATENTLY ERRED IN DEFERRING RESOLUTION OF THE
MOTION TO DISMISS ON THE GROUND OF LACK OF JURISDICT ION, AND THEREBY FAILING
TO IMMEDIATELY DISMISS THE CASE A QUO.
BMW asked for the immediate issuance of a temporary restraining order and, after hearing, for a writ
of preliminary injunction, to enjoin the trial court from proceeding further in Civil Case No.
Q-93-15933. Private respondent pointed out that, unless the trial court's order was set aside, it would
be forced to submit to the jurisdiction of the court by filing its answer or to accept judgment in default,
when the very question was whether the court had jurisdiction over it.
The Court of Appeals enjoined the trial court from hearing petitioner's complaint. On December 20,
1993, it rendered judgment finding the trial court guilty of grave abuse of discretion in deferring
resolution of the motion to dismiss. It stated:
Going by the pleadings already filed with the respondent court before it came out with its questioned
order of July 26, 1993, we rule and so hold that petitioner's (BMW) motion to dismiss could be
resolved then and there, and that the respondent judge's deferment of his action thereon until after
trial on the merit constitutes, to our mind, grave abuse of discretion.
xxx xxx xxx
. . . [T]here is not much appreciable disagreement as regards the factual matters relating to the
motion to dismiss. What truly divide (sic) the parties and to which they greatly differ is the legal
conclusions they respectively draw from such facts, (sic) with Hahn maintaining that on the basis
thereof, BMW is doing business in the Philippines while the latter asserts that it is not.
Then, after stating that any ruling which the trial court might make on the motion to dismiss would
anyway be elevated to it on appeal, the Court of Appeals itself resolved the motion. It ruled that
BMW was not doing business in the country and, therefore, jurisdiction over it could not be acquired
through service of summons on the DTI pursuant to Rule 14, §14. 'The court upheld private
respondent's contention that Hahn acted in his own name and for his own account and
independently of BMW, based on Alfred Hahn's allegations that he had invested his own money and
resources in establishing BMW's goodwill in the Philippines and on BMW's claim that Hahn sold
products other than those of BMW. It held that petitioner was a mere indentor or broker and not an
agent through whom private respondent BMW transacted business in the Philippines. Consequently,
the Court of Appeals dismissed petitioner's complaint against BMW.
Hence, this appeal. Petitioner contends that the Court of Appeals erred (1) in finding that the trial
court gravely abused its discretion in deferring action on the motion to dismiss and (2) in finding that
private respondent BMW is not doing business in the Philippines and, for this reason, dismissing
petitioner's case.
Petitioner's appeal is well taken. Rule 14, §14 provides:
§14. Service upon private foreign corporations. — If the defendant is a foreign corporation, or a
nonresident joint stock company or association, doing business in the Philippines, service may be
made on its resident agent designated in accordance with law for that purpose, or, if there be no
such agent, on the government official designated by law to that effect, or on any of its officers or
agents within the Philippines. (Emphasis added).
What acts are considered "doing business in the Philippines" are enumerated in §3(d) of the Foreign
Investments Act of 1991 (R.A. No. 7042) as follows: 7
d) the phrase "doing business" shall include soliciting orders, service contracts, opening offices,
whether called "liaison" offices or branches; appointing representatives or distributors domiciled in
the Philippines or who in any calendar year stay in the country for a period or periods totalling one
hundred eighty (180) days or more; participating in the management, supervision or control of any
domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply
a continuity of commercial dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and object of the business
organization: Provided, however, That the phrase "doing business" shall not be deemed to
include mere investment as a shareholder by a foreign entity in domestic corporations duly

include mere investment as a shareholder by a foreign entity in domestic corporations duly
registered to do business, and/or the exercise of rights as such investor; nor having a nominee
director or officer to represent its interests in such corporation; nor appointing a representative or
distributor domiciled in the Philippines which transacts business in its own name and for its own
account. (Emphasis supplied)
Thus, the phrase includes "appointing representatives or distributors in the Philippines" but not when
the representative or distributor "transacts business in its name and for its own account." In addition,
§1(f)(1) of the Rules and Regulations implementing (IRR) the Omnibus Investment Code of 1987
(E.O. No. 226) provided:
(f) "Doing business" shall be any act or combination of acts, enumerated in Article 44 of the Code. In
particular, "doing business" includes:
(1) . . . A foreign firm which does business through middlemen acting in their own names, such as
indentors, commercial brokers or commission merchants, shall not be deemed doing business in the
Philippines. But such indentors, commercial brokers or commission merchants shall be the ones
deemed to be doing business in the Philippines.
The question is whether petitioner Alfred Hahn is the agent or distributor in the Philippines of private
respondent BMW. If he is, BMW may be considered doing business in the Philippines and the trial
court acquired jurisdiction over it (BMW) by virtue of the service of summons on the Department of
Trade and Industry. Otherwise, if Hahn is not the agent of BMW but an independent dealer, albeit of
BMW cars and products, BMW, a foreign corporation, is not considered doing business in the
Philippines within the meaning of the Foreign Investments Act of 1991 and the IRR, and the trial
court did not acquire jurisdiction over it (BMW).
The Court of Appeals held that petitioner Alfred Hahn acted in his own name and for his own
account and not as agent or distributor in the Philippines of BMW on the ground that "he alone had
contacts with individuals or entities interested in acquiring BMW vehicles. Independence
characterizes Hahn's undertakings, for which reason he is to be considered, under governing
statutes, as doing business." (p. 13) In support of this conclusion, the appellate court cited the
following allegations in Hahn's amended complaint:
8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up
to the present, Plaintiff, through its firm name "HAHN MANILA" and without any monetary
contributions from defendant BMW, established BMW's goodwill and market presence in the
Philippines. Pursuant thereto, Plaintiff invested a lot of money and resources in order to single-
handedly compete against other motorcycle and car companies. . . . Moreover, Plaintiff has built
buildings and other infrastructures such as service centers and showrooms to maintain and promote
the car and products of defendant BMW.
As the above quoted allegations of the amended complaint show, however, there is nothing to
support the appellate court's finding that Hahn solicited orders alone and for his own account and
without "interference from, let alone direction of, BMW." (p. 13) To the contrary, Hahn claimed he
took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed the
downpayment and pricing charges, notified Hahn of the scheduled production month for the orders,
and reconfirmed the orders by signing and returning to Hahn the acceptance sheets. Payment was
made by the buyer directly to BMW. Title to cars purchased passed directly to the buyer and Hahn
never paid for the purchase price of BMW cars sold in the Philippines. Hahn was credited with a
commission equal to 14% of the purchase price upon the invoicing of a vehicle order by BMW. Upon
confirmation in writing that the vehicles had been registered in the Philippines and serviced by him,
Hahn received an additional 3% of the full purchase price. Hahn performed after-sale services,
including warranty services, for which he received reimbursement from BMW. All orders were on
invoices and forms of BMW. 8
These allegations were substantially admitted by BMW which, in its petition for certiorari before the
Court of Appeals, stated: 9
9.4. As soon as the vehicles are fully manufactured and full payment of the purchase prices are
made, the vehicles are shipped to the Philippines. (The payments may be made by the purchasers
or third-persons or even by Hahn.) The bills of lading are made up in the name of the purchasers,
but Hahn-Manila is therein indicated as the person to be notified.
9.5. It is Hahn who picks up the vehicles from the Philippine ports, for purposes of conducting pre-
delivery inspections. Thereafter, he delivers the vehicles to the purchasers.
9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited with a commission of fourteen
percent (14%) of the full purchase price thereof, and as soon as he confirms in writing that the
vehicles have been registered in the Philippines and have been serviced by him, he will receive an
additional three percent (3%) of the full purchase prices as commission.
Contrary to the appellate court's conclusion, this arrangement shows an agency. An agent receives
a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay
merely by bringing the buyer and the seller together, even if no sale is eventually made.

merely by bringing the buyer and the seller together, even if no sale is eventually made.
As to the service centers and showrooms which he said he had put up at his own expense, Hahn
said that he had to follow BMW specifications as exclusive dealer of BMW in the Philippines.
According to Hahn, BMW periodically inspected the service centers to see to it that BMW standards
were maintained. Indeed, it would seem from BMW's letter to Hahn that it was for Hahn's alleged
failure to maintain BMW standards that BMW was terminating Hahn's dealership.
The fact that Hahn invested his own money to put up these service centers and showrooms does not
necessarily prove that he is not an agent of BMW. For as already noted, there are facts in the record
which suggest that BMW exercised control over Hahn's activities as a dealer and made regular
inspections of Hahn's premises to enforce compliance with BMW standards and specifications. 10 For
example, in its letter to Hahn dated February 23, 1996, BMW stated:
In the last years we have pointed out to you in several discussions and letters that we have to tackle the
Philippine market more professionally and that we are through your present activities not adequately
prepared to cope with the forthcoming challenges. 11
In effect, BMW was holding Hahn accountable to it under the 1967 Agreement.
This case fits into the mould of Communications Materials, Inc. v. Court of Appeals, 12 in which the
foreign corporation entered into a "Representative Agreement" and a "Licensing Agreement" with a
domestic corporation, by virtue of which the latter was appointed "exclusive representative" in the
Philippines for a stipulated commission. Pursuant to these contracts, the domestic corporation sold
products exported by the foreign corporation and put up a service center for the products sold
locally. This Court held that these acts constituted doing business in the Philippines. The
arrangement showed that the foreign corporation's purpose was to penetrate the Philippine market
and establish its presence in the Philippines.
In addition, BMW held out private respondent Hahn as its exclusive distributor in the Philippines,
even as it announced in the Asian region that Hahn was the "official BMW agent" in the
Philippines. 13
The Court of Appeals also found that petitioner Alfred Hahn dealt in other products, and not
exclusively in BMW products, and, on this basis, ruled that Hahn was not an agent of BMW. (p. 14)
This finding is based entirely on allegations of BMW in its motion to dismiss filed in the trial court and
in its petition for certiorari before the Court of Appeals. 14 But this allegation was denied by
Hahn 15 and therefore the Court of Appeals should not have cited it as if it were the fact.
Indeed this is not the only factual issue raised, which should have indicated to the Court of Appeals
the necessity of affirming the trial court's order deferring resolution of BMW's motion to dismiss.
Petitioner alleged that whether or not he is considered an agent of BMW, the fact is that BMW did
business in the Philippines because it sold cars directly to Philippine buyers. 16 This was denied by
BMW, which claimed that Hahn was not its agent and that, while it was true that it had sold cars to
Philippine buyers, this was done without solicitation on its part. 17
It is not true then that the question whether BMW is doing business could have been resolved simply
by considering the parties' pleadings. There are genuine issues of facts which can only be
determined on the basis of evidence duly presented. BMW cannot short circuit the process on the
plea that to compel it to go to trial would be to deny its right not to submit to the jurisdiction of the trial
court which precisely it denies. Rule 16, §3 authorizes courts to defer the resolution of a motion to
dismiss until after the trial if the ground on which the motion is based does not appear to be
indubitable. Here the record of the case bristles with factual issues and it is not at all clear whether
some allegations correspond to the proof.
Anyway, private respondent need not apprehend that by responding to the summons it would be
waiving its objection to the trial court's jurisdiction. It is now settled that, for purposes of having
summons served on a foreign corporation in accordance with Rule 14, §14, it is sufficient that it be
alleged in the complaint that the foreign corporation is doing business in the Philippines. The court
need not go beyond the allegations of the complaint in order to determine whether it has
Jurisdiction. 18 A determination that the foreign corporation is doing business is only tentative and is
made only for the purpose of enabling the local court to acquire jurisdiction over the foreign
corporation through service of summons pursuant to Rule 14, §14. Such determination does not
foreclose a contrary finding should evidence later show that it is not transacting business in the
country. As this Court has explained:
This is not to say, however, that the petitioner's right to question the jurisdiction of the court over its
person is now to be deemed a foreclosed matter. If it is true, as Signetics claims, that its only involvement
in the Philippines was through a passive investment in Sigfil, which it even later disposed of, and that
TEAM Pacific is not its agent, then it cannot really be said to be doing business in the Philippines. It is a
defense, however, that requires the contravention of the allegations of the complaint, as well as a full
ventilation, in effect, of the main merits of the case, which should not thus be within the province of a
mere motion to dismiss. So, also, the issue posed by the petitioner as to whether a foreign corporation
which has done business in the country, but which has ceased to do business at the time of the filing of a

which has done business in the country, but which has ceased to do business at the time of the filing of a
complaint, can still be made to answer for a cause of action which accrued while it was doing business, is
another matter that would yet have to await the reception and admission of evidence. Since these points
have seasonably been raised by the petitioner, there should be no real cause for what may
understandably be its apprehension, i.e., that by its participation during the trial on the merits, it may,
absent an invocation of separate or independent reliefs of its own, be considered to have voluntarily
submitted itself to the court's jurisdiction. 19
Far from committing an abuse of discretion, the trial court properly deferred resolution of the motion
to dismiss and thus avoided prematurely deciding a question which requires a factual basis, with the
same result if it had denied the motion and conditionally assumed jurisdiction. It is the Court of
Appeals which, by ruling that BMW is not doing business on the basis merely of uncertain
allegations in the pleadings, disposed of the whole case with finality and thereby deprived petitioner
of his right to be heard on his cause of action. Nor was there justification for nullifying the writ of
preliminary injunction issued by the trial court. Although the injunction was issued ex parte, the fact
is that BMW was subsequently heard on its defense by filing a motion to dismiss.
WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is REMANDED to
the trial court for further proceedings.
SO ORDERED.
Regalado, Romero, Puno and Torres, Jr., JJ., concur.
Footnotes
1 Per Justice Cancio C. Garcia and concurred in by Justice Ramon U. Mabutas and Antonio M.
Martinez, chairman.
2 Rollo, pp. 75-78.
3 Rollo, pp. 79-82.
4 Rollo, pp. 83-84.
5 Rollo, p. 593.
6 Per Judge Maximiano Asuncion.
7 The Foreign Investments Act of 1991 superseded Arts. 44-56 of the Omnibus Investments Code.
8 Rollo, pp. 96, 140-141.
9 Id., p. 141.
10 Wang Laboratories, Inc. v. Mendoza, 156 SCRA 44 (1987).
11 Rollo, p. 75.
12 G.R. No. 102223, Aug. 22, 1996.
13 Rollo, p. 213.
14 Rollo, pp. 91, 163.
15 Rollo, p. 124.
16 Rollo, pp. 245; 292.
17 Rollo, pp. 177, 284, 600.
18 Litton Mills, Inc. v. Court of Appeals, G.R. No. 94980, May 15, 1996; Signetics Corp. v. Court of
Appeals, 225 SCRA 737 (1993).
19 Signetics Corp. v. Court of Appeals, 225 SCRA at 746.
Pasted from <http://www.lawphil.net/judjuris/juri1997/jan1997/gr_113074_1997.html>

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Proj Dev Notes for July 31

Thursday, July 01, 2004

1. Project Financing Defined

2. Typical Structures and Trends

B. Philippine Laws Governing Project Development and Finance in General

1. 1987 Philippine Constitution

2. Anti-Dummy Law Issues

Read: ● Commonwealth Act No. 108

Read: ● Palacios vs. Ramirez, L-27952, Feb. 15, 1982

Read: Article XII, secs. 2, 3, 5, 7, 10, 16

3. Corporation Code of the Philippines

Read: ● Tatad vs. Garcia, Jr., 243 SCRA 436-493 (1995).

5. Republic Act No. 7718, amending R.A. No. 6957

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6. Foreign Investments Act of 1991

a. What is a Philippine national?

b. “Doing Business” in the Philippines

● B. Van Zuiden Bros. vs. GTVL Manufacturing, G.R. No.

● Agilent Technologies Singapore vs. Integrated Technology

● Hahn vs. Court of Appeals, G.R. No. 113074. January 22,

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COMMONWEALTH ACT No. 108

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Approved, October 30, 1936.

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Pasted from <http://www.lawphil.net/statutes/comacts/ca_108_1936.html>

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PRESIDENTIAL DECREE No. 715 May 28, 1975

Pasted from <http://www.lawphil.net/statutes/presdecs/pd1975/pd_715_1975.html>

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RAMIREZ V VDA. DE RAMIREZ

acquire or hold lands of the public domain [removed in the Philippines].

G.R. No. L-27952 February 15, 1982

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ABAD SANTOS, J.:

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Pasted from <http://www.lawphil.net/judjuris/juri1982/feb1982/gr_l_27952_1982.html>

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G.R. No. L-17587 December 18, 1967

In denying the motion, we pointed to the circumstances —

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Pasted from <http://www.lawphil.net/judjuris/juri1967/dec1967/gr_17587_1967.html>

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G.R. No. L-10931 May 28, 1958

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Pasted from <http://www.lawphil.net/judjuris/juri1958/may1958/gr_l-10931_1958.html>

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Republic of the Philippines

G.R. No. 113539 March 12, 1998

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Pasted from <http://www.lawphil.net/judjuris/juri1998/mar1998/gr_113539_1998.html>

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CHAVEZ V PEA and AMARI (2002)

Ow nership by a private corporation

CHAVEZ V PUBLIC ESTATES AUTHORITY AND AMARI COASTAL BAY

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Republic of the Philippines