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[G.R. No. 131282. January 4, 2002.] lack of jurisdiction of the court over an action cannot be
waived by the parties, or even cured by their silence,
GABRIEL L. DUERO, petitioner, vs. acquiescence or even by their express consent. Even if
HON. COURT OF APPEALS, and private respondent actively participated in the proceedings
BERNARDO A. ERADEL, respondents. before said court, the doctrine of estoppel cannot be
properly invoked against him because the
question of lack of jurisdiction may be raised at anytime
Sua & Alambra Law Offices for petitioner. and at any stage of the action.
Gerardo M. Maglinte for private respondent.
SYLLABUS
SYNOPSIS
1. REMEDIAL LAW; EVIDENCE; DOCUMENTARY
In a complaint for Recovery of Possession and Ownership EVIDENCE; XEROX COPIES ARE WITHOUT
filed by petitioner Gabriel L. Duero against private EVIDENTIARY VALUE. Petitioner through counsel
respondent Bernardo A Eradel and two others, private submitted to this Courtpleadings that contain inaccurate
respondent was declared in default for failure to file his statements. Thus, on page 5 of his petition, we find that to
answer. As a consequence, judgment was rendered in bolster the claim that the appellate court erred in holding
favor of the petitioner. Private respondent filed a Motion for that the RTC had no jurisdiction, petitioner pointed
New Trial, but was denied by the trial court. Subsequently, to Annex E of his petition which supposedly is the
he filed a Petition for Relief from Judgment based on the Certification issued by the Municipal Treasurer of San
same ground as in his motion for new trial. But the said Miguel, Surigao, specifically containing the notation, "Note:
petition was denied by the trial court. In a motion for Subject for General Revision Effective 1994." But it
reconsideration, he alleged that the Regional appears that Annex E of his petition is not a Certification
Trial Court (RTC) had no jurisdiction over the case since but a xerox copy of a Declaration of Real Property.
the value of the land was only P5,240. Again, it was denied Nowhere does the document contain a notation, "Note:
by the trial court. Private respondent filed a Petition Subject for General Revision Effective 1994." Petitioner
for Certiorari before the Court of Appeals. The also asked this Court to refer to Annex F, where he said
appellatecourt gave due course to the petition by the zonal value of the disputed land was P1.40 per sq.m.,
maintaining that private respondent was not estopped from thus placing the computed value of the land at the time the
assailing the jurisdiction of the RTC. Hence, this petition. complaint was filed before the RTC at P57,113.98, hence
beyond the jurisdiction of the municipal court and within the
The Court could not fault the Court of Appeals in overruling jurisdiction of the regional trial court. However, we find that
the RTC. The fundamental rule is that, the
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these annexes are both merely xerox copies. They are relief from judgment, it went on to issue the order for
obviously without evidentiary weight or value. entry ofjudgment and a writ of execution. Under these
circumstances, we could not fault the Court of Appeals in
4. REMEDIAL LAW; JURISDICTION;
overruling the RTC and in holding that private respondent
DOCTRINE OF ESTOPPEL; AN EQUITABLE DEFENSE
was not estopped from questioning the jurisdiction of the
THAT IS BOTH SUBSTANTIVE AND REMEDIAL. While
regional trial court.
participation in all stagesof a case before the trial court,
including invocation of its authority in asking for affirmative 6. ID.; ID.; ID.; APPLICABLE IN EXCEPTIONAL CASES
relief, effectively bars a party by estoppel from challenging ONLY; NOT PRESENT IN CASE AT BAR. In holding
the court's jurisdiction, we note that estoppel has become that estoppel did not prevent private respondent from
an equitable defense that is both substantive and remedial questioning the RTC's jurisdiction, the
and its successful invocation can bar a right and not merely appellate court reiterated the doctrine that estoppel must
its equitable enforcement. Hence, estoppel ought to be be applied only in exceptional cases, as its misapplication
applied with caution. For estoppel to apply, the action could result in a miscarriage of justice. Here, we find that
giving rise thereto must be unequivocal and intentional petitioner, who claims ownership of a parcel of land, filed
because, if misapplied, estoppel may become a his complaint before a court without appropriate
tool of injustice. jurisdiction. Defendant, a farmer whose tenancy status is
still pending before the proper administrative agency
5. ID.; ID.; ID.; NOT APPLICABLE IN CASE AT BAR. In
concerned, could have moved for dismissal of the case on
the present case, private respondent questions the
jurisdictional grounds. But the farmer as defendant therein
jurisdiction of RTC in Tandag, Surigao del Sur, on legal
could not be expected to know the nuances of jurisdiction
grounds. Recall that it was petitioner who filed the
and related issues. This farmer, who is now the private
complaint against private respondent and two other parties
respondent, ought not to be penalized when he claims that
before the said court, believing that the RTC had
he made an honest mistake when he initially submitted his
jurisdiction over his complaint. But by
motions before the RTC, before he realized that the
then, Republic Act 7691 amending BP 129 had become
controversy was outside the RTC's cognizance but within
effective, such that jurisdiction already belongs not to the
the jurisdiction of the municipal trial court. To hold him in
RTC but to the MTC pursuant to said amendment. . . . Note
estoppel as the RTC did would amount to foreclosing his
that private respondent raised the
avenue to obtain a proper resolution of his case.
issue of lack of jurisdiction, not when the case was already
Furthermore, if the RTC's order were to be sustained, he
on appeal, but when the case was still before the RTC that
would be evicted from the land prematurely, while RED
ruled him in default, denied his motion for new trial as well
Conflict Case No. 1029 would remain unresolved. Such
as for relief from judgment, and denied likewise his two
eviction on a technicality if allowed could result in an
motions for reconsideration. After the RTC still refused to
reconsider the denial of private respondent's motion for
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injustice, if it is later found that he has a legal right to till the 9. ID.; ID.; PLEADINGS; IF THE COURT HAS NO
land he now occupies as tenant-lessee. AEScHa JURISDICTION OVER THE CASE, DEFENDANT HAS
JUSTIFIABLE REASON NOT TO FILE AN ANSWER.
7. ID.; ID.; NOT A QUESTION OF ACQUIESCENCE AS A
Suffice it to say that, given the circumstances in this case,
MATTER OF FACT BUT AN ISSUE OF CONFERMENT
no error was committed on this score by respondent
AS A MATTER OF LAW. The fundamental rule is that,
appellate court. Since the RTC had no jurisdiction over the
the lack of jurisdiction of the court over an action cannot be
case, private respondent had justifiable reason in law not to
waived by the parties, or even cured by their silence,
file an answer, aside from the fact that he believed the suit
acquiescence or even by their express consent. Further, a
was properly his landlord's concern.
party may assail the jurisdiction of the court over the action
at any stage of the proceedings and even on appeal. The
appellate court did not err in saying that the RTC should
have declared itself barren of jurisdiction over the action. DECISION
Even if private respondent actively participated in the
proceedings before said court, the doctrine ofestoppel
cannot still be properly invoked against him because the QUISUMBING, J : p

question of lack of jurisdiction may be raised at anytime


and at any stage of the action. Precedents tell us that as a This petition for certiorari assails the Decision 1 dated
general rule, the jurisdiction of a court is not a September 17, 1997, of the Court of Appeals in CA-G.R.
question of acquiescence as a matter of fact, but an No. SP No. 2340-UDK, entitled Bernardo Eradel vs. Hon.
issue of conferment as a matter of law. Also, neither waiver Ermelino G. Andal, setting aside all proceedings in Civil
nor estoppel shall apply to confer jurisdiction upon a court, Case No. 1075, Gabriel L. Duero vs. Bernardo
barring highly meritorious and exceptional circumstances. Eradel, before the Branch 27 of the Regional
Trial Court ofTandang, Surigao del Sur.
8. ID.; CIVIL PROCEDURE; JUDGMENT;
DECISION OF A COURT WITHOUT JURISDICTION IS The pertinent facts are as follows:
NULL AND VOID. Indeed, ". . . the trial court was duty-
bound to take judicial notice of the parameters of its Sometime in 1988, according to petitioner, private
jurisdiction and its failure to do so, makes its decision a respondent Bernardo Eradel 2 entered and occupied
'lawless' thing." Since a decision of a court without petitioner's land covered by Tax Declaration No. A-16-13-
jurisdiction is null and void, it could logically never become 302, located in Baras, San Miguel, Surigao del Sur. As
final and executory, hence appeal therefrom by writ of error shown in the tax declaration, the land had an assessed
would be out of the question. Resort by private respondent value of P5,240. When petitioner politely informed private
to a petition for certiorari before the Court of Appeals was respondent that the land was his and requested the latter
in order. to vacate the land, private respondent refused, but instead
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threatened him with bodily harm. Despite repeated that he turned over the complaint and summons to
demands, private respondent remained steadfast in his Laurente in the honest belief that as landlord, the latter had
refusal to leave the land. a better right to the land and was responsible to defend any
adverse claim on it. However, the trial court denied the
On June 16, 1995, petitioner filed before the RTC a
motion for new trial.
complaint for Recovery of Possession and Ownership with
Damages and Attorney's Fees against private respondent Meanwhile, RED Conflict Case No. 1029, an administrative
and two others, namely, Apolinario and Inocencio Ruena. case between petitioner and applicant-contestants Romeo,
Petitioner appended to the complaint the aforementioned Artemio and Jury Laurente, remained pending with the
tax declaration. The counsel of the Ruenas asked for Office of the Regional Director of the
extension to file their Answer and was given until July 18, Department of Environment and Natural Resources in
1995. Meanwhile, petitioner and the Ruenas executed a Davao City. Eventually, it was forwarded to the DENR
compromise agreement, which became the trialcourt's Regional Office in Prosperidad, Agusan del Sur.
basis for a partial judgment rendered on January 12, 1996.
On July 24, 1996, private respondent filed before the RTC
In this agreement, the Ruenas through their counsel, Atty.
a Petition for Relief from Judgment, reiterating the same
Eusebio Avila, entered into a Compromise Agreement with
allegation in his Motion for New Trial. He averred that
herein petitioner, Gabriel Duero. Inter alia, the agreement
unless there is a determination on who owned the land, he
stated that the Ruenas recognized and bound themselves
could not be made to vacate the land. He also averred that
to respect the ownership and
the judgment of the trial court was void inasmuch as the
possession of Duero. 3 Herein private respondent Eradel
heirs of Artemio Laurente, Sr., who are indispensable
was not a party to the agreement, and he was declared in
parties, were not impleaded.
default for failure to file his answer to the complaint.4
On September 24, 1996, Josephine, Ana Soledad and
Petitioner presented his evidence ex parte on February 13,
Virginia, all surnamed Laurente, grandchildren of Artemio
1996. On May 8, 1996, judgment was rendered in his favor,
who were claiming ownership of the land, filed a Motion for
and private respondent was ordered to peacefully vacate
Intervention. The RTC denied the motion.
and turn over Lot No. 1065 Cad. 537-D to petitioner; pay
petitioner P2,000 annual rental from 1988 up the time he On October 8, 1996, the trial court issued an order denying
vacates the land, and P5,000 as attorney's fees and the the Petition for Relief from Judgment. In a Motion for
cost of the suit. 5 Private respondent received a copy of the Reconsideration of said order, private respondent alleged
decision on May 25, 1996. that the RTC had no jurisdiction over the case, since the
value of the land was only P5,240 and therefore it was
On June 10, 1996, private respondent filed a Motion for
under the jurisdiction of the municipal trial court. On
New Trial, alleging that he has been occupying the land as
November 22, 1996, the RTC denied the motion for
a tenant of Artemio Laurente, Sr., since 1958. He explained
reconsideration.
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On January 22, 1997, petitioner filed a Motion for II.


Execution, which the RTC granted on January 28. On . . . PRIVATE RESPONDENT WAS NOT THEREBY
February 18, 1997, Entry of Judgment was made of record ESTOPPED FROM QUESTIONING THE
and a writ of execution was issued by the RTC on February JURISDICTION OF THE LOWER COURT EVEN AFTER IT
27, 1997. On March 12, 1997, private respondent filed his SUCCESSFULLY SOUGHT AFFIRMATIVE RELIEF
petition for certiorari before the Court of Appeals. THEREFROM.
The Court of Appeals gave due course to the petition, III.
maintaining that respondent is not estopped from assailing . . . THE FAILURE OF PRIVATE RESPONDENT TO FILE HIS
the jurisdiction of the RTC, Branch 27 in Tandag, Surigao ANSWER IS JUSTIFIED. 7
del Sur, when private respondent filed with said court his
Motion for Reconsideration And/Or The main issue before us is whether
Annulment of Judgment. The Court of Appeals decreed as the Court of Appeals gravely abused its discretion when it
follows: held that the municipal trial court had jurisdiction, and that
private respondent was not estopped from assailing the
IN THE LIGHT OF ALL THE FOREGOING, the jurisdiction of the RTC after he had filed several motions
Petition is GRANTED. All proceedings in
before it. The secondary issue is whether
"Gabriel L. Duero vs. Bernardo Eradel, et al. Civil
Case 1075" filed in the Court a quo, including its the Court of Appealserred in holding that private
Decision, Annex "E" of the petition, and its respondent's failure to file an answer to the complaint was
Orders and Writ of Execution and the turn justified.
over of the property to the Private Respondent At the outset, however, we note that petitioner through
by the Sheriff of theCourt a quo, are declared
counsel submitted to this Court pleadings that contain
null and void and hereby SET ASIDE. No
pronouncement as to costs.
inaccurate statements. Thus, on page 5 of his petition, 8we
find that to bolster the claim that the appellate court erred
SO ORDERED. 6 in holding that the RTC had no jurisdiction, petitioner
Petitioner now comes before this Court, alleging that pointed to Annex E 9 of his petition which supposedly is the
the Court of Appeals acted with grave abuse of discretion Certification issued by the Municipal Treasurer of San
amounting to lack or in excess of jurisdiction when it held Miguel, Surigao, specifically containing the notation, "Note:
that: Subject for General Revision Effective 1994". But it
appears that Annex E of his petition is not a Certification
I. but a xerox copy of a Declaration of Real Property.
. . . THE LOWER COURT HAS NO JURISDICTION OVER THE Nowhere does the document contain a notation, "Note:
SUBJECT MATTER OF THE CASE. Subject for General Revision Effective 1994". Petitioner
also asked this Court to refer to Annex F, 10 where he said
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the zonal value of the disputed land was P1.40 per sq.m., remedial and its successful invocation can bar a right and
thus placing the computed value of the land at the time the not merely its equitable enforcement. 14 Hence, estoppel
complaint was filed before the RTC at P57,113.98, hence ought to be applied with caution. For estoppel to apply, the
beyond the jurisdiction of the municipal court and within the action giving rise thereto must be unequivocal and
jurisdiction of the regional trial court. However, we find that intentional because, if misapplied, estoppel may become a
these annexes are both merely xerox copies. They are tool of injustice. 15
obviously without evidentiary weight or value.
In the present case, private respondent questions the
Coming now to the principal issue, petitioner contends that jurisdiction of RTC in Tandag, Surigao del Sur, on legal
respondent appellate court acted with grave grounds. Recall that it was petitioner who filed the
abuse of discretion. By "grave abuse of discretion" is complaint against private respondent and two other parties
meant such capricious and whimsical exercise of judgment before the said court, 16 believing that the RTC had
which is equivalent to an excess or a lack of jurisdiction. jurisdiction over his complaint. But by
The abuse of discretion must be so patent and gross as to then, Republic Act7691 17 amending BP 129 had become
amount to an evasion of a positive duty or a virtual refusal effective, such that jurisdiction already belongs not to the
to perform a duty enjoined by law, or to act at all in RTC but to the MTC pursuant to said amendment. Private
contemplation of law as where the power is exercised in an respondent, an unschooled farmer, in the mistaken belief
arbitrary and despotic manner by reason of passion or that since he was merely a tenant of the late Artemio
hostility. 11 But here we find that in its decision holding that Laurente Sr., his landlord, gave the summons to a Hipolito
the municipal court has jurisdiction over the case and that Laurente, one of the surviving heirs of Artemio Sr., who did
private respondent was not estopped from questioning the not do anything about the summons. For failure to answer
jurisdiction of the RTC, the complaint, private respondent was declared in default.
respondent Court of Appeals discussed the facts on which He then filed a Motion for New Trial in the same court and
its decision is grounded as well as the law and explained that he defaulted because of his belief that the
jurisprudence on the matter. 12 Its action was neither suit ought to be answered by his landlord. In that motion he
whimsical nor capricious. stated that he had by then the evidence to prove that he
had a better right than petitioner over the land
Was private respondent estopped from questioning that
because of his long, continuous and uninterrupted
jurisdiction of the RTC? In this case, we are in agreement
possession as bona fide tenant-lessee of the land. 18 But
with the Court of Appeals that he was not. While
his motion was denied. He tried an alternative recourse. He
participation in all stages of a case before the trial court,
filed before the RTC a Motion for Relief from Judgment.
including invocation of its authority in asking for affirmative
Again, the same court denied his motion, hence he moved
relief, effectively bars a party by estoppel from challenging
for reconsideration of the denial. In his Motion for
the court's jurisdiction, 13 we note that estoppel has
Reconsideration, he raised for the first time the RTC's
become an equitable defense that is both substantive and
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lack of jurisdiction. This motion was again denied. Note that circumstances. 23 The Court of Appeals found support for
private respondent raised the issue of lack of jurisdiction, its ruling in our decision
not when the case was already on appeal, but when the in Javier vs. Court of Appeals, thus:
case was still before the RTC that ruled him in default, . . . The point simply is that when a party
denied his motion for new trial as well as for relief from commits error in filing his suit or proceeding in
judgment, and denied likewise his two motions for a court that lacks jurisdiction to take
reconsideration. After the RTC still refused to reconsider cognizance of the same, such act may not at
that denial of private respondent's motion for relief from once be deemed sufficient basis of estoppel. It
judgment, it went on to issue the order for could have been the result of an honest mistake,
entry of judgment and a writ of execution. or of divergent interpretations of doubtful legal
provisions. If any fault is to be imputed to a party
taking such course of action, part of the blame
Under these circumstances, we could not fault should be placed on the court which shall
the Court of Appeals in overruling the RTC and in holding entertain the suit, thereby lulling the parties into
believing that they pursued their remedies in the
that private respondent was not estopped from questioning
correct forum. Under the rules, it is the
the jurisdiction of the regional trial court. The fundamental duty of the court to dismiss an action 'whenever
rule is that, the lack of jurisdiction of the court over an it appears that the courthas no jurisdiction over
action cannot be waived by the parties, or even cured by the subject matter.' (Sec. 2, Rule 9,
their silence, acquiescence or even by their express Rules of Court) Should the Court render a
consent. 19 Further, a party may assail the judgment without jurisdiction, such judgment
jurisdiction of the court over the action at any stage of the may be impeached or annulled for
proceedings and even on appeal. 20 The appellate court did lack of jurisdiction (Sec. 30, Rule 132, Ibid.),
not err in saying that the RTC should have declared itself within ten (10) years from the finality of the
barren of jurisdiction over the action. Even if private same. [Italics supplied] 24
respondent actively participated in the proceedings before Indeed, ". . . the trial court was duty-bound to take judicial
said court, the doctrine of estoppel cannot still be properly notice of the parameters of its jurisdiction and its failure to
invoked against him because the do so, makes its decision a 'lawless' thing." 25
question of lack ofjurisdiction may be raised at anytime and
at any stage of the action. 21 Precedents tell us that as a Since a decision of a court without jurisdiction is null and
general rule, the jurisdiction of a court is not a void, it could logically never become final and executory,
question ofacquiescence as a matter of fact, but an hence appeal therefrom by writ of error would be outof the
issue of conferment as a matter of law. 22 Also, neither question. Resort by private respondent to a petition
waiver nor estoppel shall apply to confer jurisdiction upon for certiorari before the Court of Appeals was in order.
a court, barring highly meritorious and exceptional
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In holding that estoppel did not prevent private respondent jurisdiction over the case, private respondent had justifiable
from questioning the RTC's jurisdiction, the reason in law not to file an answer, aside from the fact that
appellate court reiterated the doctrine that estoppel must he believed the suit was properly his landlord's concern.
be applied only in exceptional cases, as its misapplication
WHEREFORE, the petition is DISMISSED. The assailed
could result in a miscarriage of justice. Here, we find that
decision of the Court of Appeals is AFFIRMED. The
petitioner, who claims ownership of a parcel of land, filed
decision of the Regional Trial Court in Civil Case No. 1075
his complaint before a court without appropriate
entitled Gabriel L. Duero vs. Bernardo Eradel, its Order that
jurisdiction. Defendant, a farmer whose tenancy status is
private respondent turn over the disputed land to petitioner,
still pending before the proper administrative agency
and the Writ of Execution it issued, are ANNULLED and
concerned, could have moved for dismissal of the case on
SET ASIDE. Costs against petitioner. aCSDIc
jurisdictional grounds. But the farmer as defendant therein
could not be expected to know the nuances ofjurisdiction SO ORDERED.
and related issues. This farmer, who is now the private
Bellosillo, Mendoza and De Leon, Jr., JJ., concur.
respondent, ought not to be penalized when he claims that
he made an honest mistake when he initially submitted his |||

motions before the RTC, before he realized that the


controversy was outside the RTC's cognizance but within
the jurisdiction of the municipal trialcourt. To hold him in
estoppel as the RTC did would amount to foreclosing his
avenue to obtain a proper resolution of his case.
Furthermore, if the RTC's order were to be sustained, he
would be evicted from the land prematurely, while RED
Conflict Case No. 1029 would remain unresolved. Such
eviction on a technicality if allowed could result in an
injustice, if it is later found that he has a legal right to till the
land he now occupies as tenant-lessee.
Having determined that there was no grave
abuse of discretion by the appellate court in ruling that
private respondent was not estopped from questioning the
jurisdiction of the RTC, we need not tarry to consider in
detail the second issue. Suffice it to say that, given the
circumstances in this case, no error was committed on this
score by respondent appellate court. Since the RTC had no
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[G.R. No. 129638. December 8, 2003.] November 24, 1978. On June 7, 1994, petitioner filed a
complaint before the Metropolitan Trial Court(Branch
ANTONIO 26) of Manila (MeTC) for forcible entry and unlawful
T. DONATO, petitioner, vs. COURT OF APP detainer against 43 named defendants and "all unknown
EALS, FILOMENO ARCEPE, TIMOTEO occupants" of the subject property. 3
BARCELONA, IGNACIO BENDOL, Petitioner alleges that: private respondents had oral
THELMA P. BULICANO, ROSALINDA contracts of lease that expired at the end of each month
CAPARAS, ROSITA DE COSTO, FELIZA but were impliedly renewed under the same terms by mere
DE GUZMAN, LETICIA DE LOS REYES, acquiescence or tolerance; sometime in 1992, they
ROGELIO GADDI, PAULINO GAJARDO, stopped paying rent; on April 7, 1994, petitioner sent them
GERONIMO IMPERIAL, HOMER a written demand to vacate; the non-compliance with said
IMPERIAL, ELVIRA LESLIE, CEFERINO demand letter constrained him to file the ejectment case
LUGANA, HECTOR PIMENTEL, NIMFA against them. 4
PIMENTEL, AURELIO G. ROCERO,
ILUMINADA TARA, JUANITO VALLESPIN, Of the 43 named defendants, only 20 (private
AND NARCISO YABUT, respondents. respondents, 5 for brevity) filed a consolidated Answer
dated June 29, 1994 wherein they denied non-
payment of rentals. They contend that they cannot be
DECISION evicted because the Urban Land Reform Law guarantees
security of tenure and priority right to purchase the subject
property; and that there was a negotiation for the
purchase of the lots occupied by them but when the
AUSTRIA-MARTINEZ, J : p

negotiation reached a passive stage, they decided to


Before us is a "petition for review on certiorari" filed on July continue payment ofrentals and tendered payment to
17, 1997 which should be a petition for certiorari under petitioner's counsel and thereafter initiated a petition for
Rule 65 of the Rules of Court. It assails the consignation of the rentals in Civil Case No. 144049 while
Resolutions 1 dated March 21, 1997 and June 23, 1997 they await the outcome of the negotiation to purchase.
issued by the Court of Appeals in CA-G.R. SP No. 41394. 2 Following trial under the Rule on Summary Procedure, the
The factual background of the case is as follows: MeTC rendered judgment on September 19, 1994 against
the 23 non-answering defendants, ordering them to vacate
Petitioner Antonio T. Donato is the registered owner of a the premises occupied by each of them, and to pay jointly
real property located at Ciriaco Tuason Street, San Andres, and severally P10,000.00 per month from the date they last
Manila, covered by Transfer Certificate of Title No. 131793 paid their rent until the date they actually vacate, plus
issued by the Register of Deeds of the City of Manila on
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interest thereon at the legal rate allowed by law, as well as reconsideration submitting the duly authenticated
P10,000.00 as attorney's fees and the costs of the suit. As original of the certification of non-forum shopping signed by
to the 20 private respondents, the MeTC issued a separate petitioner. 15
judgment 6 on the same day sustaining their rights under
In a Resolution 16 dated June 23, 1997 the CA denied
the Land Reform Law, declaring petitioner's cause of action
petitioner's motion for reconsideration and its supplement,
as not duly warranted by the facts and
ruling that "petitioner's subsequent compliance did not cure
circumstances of the case and dismissing the case without
the defect in the instant petition." 17
prejudice.
Hence, the present petition anchored on the following
Not satisfied with the judgment dismissing the complaint as
grounds:
against the private respondents, petitioner appealed to the
Regional Trial Court (Branch 47) of Manila (RTC).7 In a I.
Decision 8 dated July 5, 1996, the RTC sustained the RESPONDENT COURT OF APPEALS GRAVEL
decision of the MeTC. Y ERRED IN DISMISSING THE PETITION
Undaunted, petitioner filed a petition for review with BASED ON HYPER-TECHNICAL GROUNDS
the Court of Appeals (CA for brevity), docketed as CA-G.R. BECAUSE:
SP No. 41394. In a Resolution dated March 21, 1997, A. PETITIONER HAS SUBSTANTIALLY
theCA dismissed the petition on two grounds: (a) the COMPLIED WITH
certification of non-forum shopping was signed by SUPREME COURT CIRCULAR
petitioner's counsel and not by petitioner himself, in NO. 28-91. MORE, PETITIONER
violation ofRevised Circular No. 28-91; 9 and, (b) the only SUBSEQUENTLY SUBMITTED
annex to the petition is a certified copy of the questioned DURING THE
PENDENCY OF THE
decision but copies of the pleadings and other material
PROCEEDINGS A DULY
portionsof the record as would support the
AUTHENTICATED
allegations of the petition are not annexed, contrary CERTIFICATE OF NON-FORUM
to Section 3, paragraph b, Rule 6 of the Revised Internal SHOPPING WHICH HE HIMSELF
Rules of the Court ofAppeals (RIRCA). 10 SIGNED AND EXECUTED IN THE
On April 17, 1997, petitioner filed a Motion for UNITED STATES.
Reconsideration, 11 attaching thereto a photocopy of the B. PETITIONER HAS SUBSTANTIALLY
certification of non-forum shopping duly signed by COMPLIED WITH SECTION 3,
petitioner himself 12 and the relevant records of the MeTC RULE 6 OF THE REVISED
and the RTC. 13 Five days later, or on April 22, 1997, INTERNAL
petitioner filed a Supplement 14 to his motion for RULES OF THE COURT OF APPE
ALS. MORE, PETITIONER
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SUBSEQUENTLY SUBMITTED THE RTC MANILA COMMITTED


DURING THE REVERSIBLE ERROR IN NOT
PENDENCY OF THE RULING THAT TENANTS
PROCEEDINGS COPIES OF THE UNDERP.D. 1517 MAY BE
RELEVANT DOCUMENTS IN THE EVICTED FOR NON-
CASES BELOW. PAYMENT OF RENT,
TERMINATION OF LEASE OR
C. PETITIONER HAS A MERITORIOUS
OTHER GROUNDS FOR
APPEAL, AND HE STANDS TO
EJECTMENT.
LOSE SUBSTANTIAL PROPERTY
IF THE APPEAL IS NOT GIVEN B. RESPONDENT COURT OF APPEALS
DUE COURSE. THE SHOULD HAVE RULED THAT
RULES OFPROCEDURE MUST THE RTC MANILA COMMITTED
BE LIBERALLY CONSTRUED TO REVERSIBLE ERROR IN NOT
DO SUBSTANTIAL JUSTICE. RULING THAT THE ALLEGED
"PRIORITY RIGHT TO BUY THE
II.
LOT THEY OCCUPY" DOES NOT
RESPONDENT COURT OF APPEALS GRAVEL APPLY WHERE THE
Y ERRED IN NOT RULING THAT ALL THE LANDOWNER DOES NOT
ELEMENTS OF UNLAWFUL DETAINER ARE INTEND TO SELL THE SUBJECT
PRESENT IN THE CASE AT BAR. PROPERTY, AS IN THE CASE AT
BAR.ScTaEA

III.
C. RESPONDENT COURT OF APPEALS
RESPONDENT COURT OF APPEALS ERRED SHOULD HAVE RULED THAT
IN NOT RULING THAT THE RTC MANILA, THE RTC MANILA COMMITTED
BRANCH 47, COMMITTED REVERSIBLE REVERSIBLE ERROR IN RULING
ERROR IN AFFIRMING THE FINDING OF MTC THAT THE SUBJECT PROPERTY
MANILA, BRANCH 26, THAT PRIVATE IS LOCATED WITHIN A ZONAL
RESPONDENTS CANNOT BE EJECTED IMPROVEMENT AREA OR APD.
FROM THE SUBJECT PROPERTY WITHOUT
VIOLATING THEIR SECURITY OF TENURE D. RESPONDENT COURT OF APPEALS
EVEN IF THE TERM OF THE LEASE IS SHOULD HAVE RULED THAT
MONTH-TO-MONTH WHICH EXPIRES AT THE THE RTC MANILA COMMITTED
END OF EACH MONTH. IN THIS REGARD, REVERSIBLE ERROR IN NOT
RULING THAT PRIVATE
A. RESPONDENT COURT OF APPEALS RESPONDENTS' NON-
SHOULD HAVE RULED THAT COMPLIANCE WITH THE
Page 12 of 458

CONDITIONS UNDER THE LAW IV.


RESULT IN THE
RESPONDENT COURT OF APPEALS GRAVEL
WAIVER OF PROTECTION
Y ERRED IN NOT FINDING THAT
AGAINST EVICTION.
RESPONDENTS SHOULD PAY PETITIONER A
E. RESPONDENT COURT OF APPEALS REASONABLE COMPENSATION FOR THEIR
SHOULD HAVE RULED THAT USE AND OCCUPANCY OF THE SUBJECT
THE RTC MANILA COMMITTED PROPERTY IN THE AMOUNT OF AT LEAST
REVERSIBLE ERROR IN NOT P10,000.00 PER MONTH FROM THE DATE
RULING THAT PRIVATE THEY LAST PAID RENT UNTIL THE TIME
RESPONDENTS CANNOT BE THEY ACTUALLY VACATE THE SAME, WITH
ENTITLED TO PROTECTION LEGAL INTEREST AT THE MAXIMUM RATE
UNDER P.D. 2016 SINCE THE ALLOWED BY LAW UNTIL PAID.
GOVERNMENT HAS NO
V.
INTENTION OF ACQUIRING THE
SUBJECT PROPERTY. RESPONDENT COURT OF APPEALS GRAVEL
Y ERRED IN NOT FINDING THAT
F. RESPONDENT COURT OF APPEALS
RESPONDENTS SHOULD PAY PETITIONER
SHOULD HAVE RULED THAT
ATTORNEY'S FEES AND
THE RTC MANILA COMMITTED
EXPENSES OF LITIGATIONOF AT LEAST
REVERSIBLE ERROR IN
P20,000.00, PLUS COSTS. 18
FINDING THAT THERE IS AN ON-
GOING NEGOTIATION FOR THE Petitioner submits that a relaxation of the rigid
SALE OF THE SUBJECT rules of technical procedure is called for in view of the
PROPERTY AND THAT IT attendant circumstances showing that the objectives of the
RENDERS THE rule on certification of non-forum shopping and the rule
EVICTION OF PRIVATE
requiring material portions of the record be attached to the
RESPONDENTS PREMATURE.
petition have not been glaringly violated and, more
G. RESPONDENT COURT OF APPEALS importantly, the petition is meritorious.
SHOULD HAVE RULED THAT
THE RTC MANILA COMMITTED The proper recourse of an aggrieved party from a
REVERSIBLE ERROR IN NOT decision of the CA is a petition for review
RULING THAT THE ALLEGED on certiorari under Rule 45 of the Rules of Court. However,
CASE FOR CONSIGNATION if the error, subject of the recourse, is one of jurisdiction, or
DOES NOT BAR THE the act complained of was perpetrated by a court with
EVICTION OF PRIVATE grave abuse of discretion amounting to lack or
RESPONDENTS. excess ofjurisdiction, the proper remedy available to the
Page 13 of 458

aggrieved party is a petition for certiorari under Rule April 17, 1997, using up only thirteen days of the 90-day
65 of the said Rules. As enunciated by period. Petitioner received the CA Resolution denying his
the Court in Fortich vs.Corona: 19 motion on July 3, 1997 and fourteen days later, or on July
Anent the first issue, in order to determine
17, 1997, he filed a motion for 30-day extension of time to
whether the recourse of petitioners is proper or file a "petition for review" which was granted by us; and
not, it is necessary to draw a line between an petitioner duly filed his petition on August 15, 1997, which
error of judgment and an error of jurisdiction. is well-within the period of extension granted to him.
An error of judgment is one which the court may We now go to the merits of the case.
commit in the exercise of its jurisdiction, and
which error is reviewable only by an appeal. On We find the instant petition partly meritorious.
the other hand, an error of jurisdiction is one
where the act complained of was issued by The requirement regarding the need for a
the court, officer or a quasi-judicial certification of non-forum shopping in cases filed before
body without or in excess of jurisdiction, orwith the CA and the corresponding sanction for non-compliance
grave abuse of discretion which is tantamount to thereto are found in the then prevailing Revised Circular
lack or in excess of jurisdiction. This error is No. 28-91. 22 It provides that the petitioner himself must
correctible only by the extraordinary make the certification against forum shopping and a
writ of certiorari. 20 (Emphasis supplied). violation thereof shall be a cause for the summary
dismissal of the multiple petition or complaint. The rationale
for the rule of personal execution of the certification by the
Inasmuch as the present petition principally assails the petitioner himself is that it is only the petitioner who has
dismissal of the petition on ground of procedural flaws actual knowledge of whether or not he has initiated similar
involving the jurisdiction of the court a quo to entertain actions or proceedings in other courts or tribunals; even
the petition, it falls within the ambit of a special civil counsel of record may be unaware of such
action for certiorari under Rule 65 of the Rules of Court. fact. 23 The Court has ruled that with respect to the
At the time the instant petition for certiorari was filed, i.e., contents of the certification, the rule on substantial
on July 17, 1997, the prevailing rule is the newly compliance may be availed of. This is so because the
promulgated 1997 Rules of Civil Procedure. However, requirement of strict compliance with the rule regarding the
considering that the CA Resolution being assailed was certification of non-forum shopping simply underscores its
rendered on March 21, 1997, the applicable rule is the mandatory nature in that the certification cannot be
three-month reglementary period, established by altogether dispensed with or its requirements completely
jurisprudence. 21 Petitioner received notice of the disregarded, but it does not thereby interdict substantial
assailed CA Resolution dismissing his petition for review compliance with its provisions under justifiable
on April 4, 1997. He filed his motion reconsideration on circumstances. 24
Page 14 of 458

The petition for review filed before the CA contains a append to his petition copies of the pleadings and other
certification against forum shopping but said certification material portions of the records as would support the
was signed by petitioner's counsel. In submitting the petition, does not justify the outright dismissal of the
certification of non-forum shopping duly signed by himself petition. It must be emphasized that the RIRCA gives the
in his motion for reconsideration, 25 petitioner has aptly appellate court a certain leeway to require parties to submit
drawn the Court's attention to the physical additional documents as may be necessary in the
impossibility of filing the petition for review within the 15- interest of substantial justice. Under Section 3, paragraph
day reglementary period to appeal considering that he is a d of Rule 3 of the RIRCA, 28 the CA may require the parties
resident of 1125 South Jefferson Street, Roanoke, Virginia, to complete the annexes as the court deems necessary,
U.S.A. were he to personally accomplish and sign the and if the petition is given due course, the CA may require
certification. the elevation of a complete record of the case as provided
for under Section 3(d)(5) of Rule 6 of the RIRCA. 29 At any
We fully agree with petitioner that it was physically
rate, petitioner attached copies of the pleadings and other
impossible for the petition to have been prepared and sent
material portions of the records below with his motion for
to the petitioner in the United States, for him to travel from
reconsideration. 30 In Jaro vs. Court of Appeals, 31 the Cour
Virginia, U.S.A. to the nearest Philippine Consulate in
t reiterated the doctrine laid down in Cusi-
Washington, D.C., U.S.A., in order to sign the certification
Hernandez vs. Diaz 32 and Piglas-Kamao vs. National
before the Philippine Consul, and for him to send back the
Labor Relations Commission 33 that subsequent
petition to the Philippines within the 15-day reglementary
submission of the missing documents with the motion for
period. Thus, we find that petitioner has adequately
reconsideration amounts to substantial compliance which
explained his failure to personally sign the certification
calls for the relaxation of the rules of procedure. We find no
which justifies relaxation of the rule.
cogent reason to depart from this doctrine.
We have stressed that the rules on forum shopping, which
Truly, in dismissing the petition for review, the CA had
were precisely designed to promote and facilitate the
committed grave abuse of discretion amounting to
orderly administration of justice, should not be interpreted
lack of jurisdiction in putting a premium on technicalities at
with such absolute literalness as to subvert its own ultimate
the expense of a just resolution of the case.
and legitimate objective 26 which is simply to prohibit and
penalize the evils of forum-shopping.27 The subsequent Needless to stress, "a litigation is not a
filing of the certification duly signed by the petitioner game of technicalities." 34 When technicality deserts its
himself should thus be deemed substantial compliance, pro function of being an aid to justice, the Court is justified in
hac vice. exempting from its operations a particular
case. 35 Technical rules of procedure should be used to
In like manner, the failure of the petitioner to comply with
promote, not frustrate justice. While the swift
Section 3, paragraph b, Rule 6 of the RIRCA, that is, to
Page 15 of 458

unclogging of court dockets is a laudable objective, issues involved are factual issues which inevitably require
granting substantial justice is an even more urgent ideal. 36 the weighing of evidence. These are matters that are
beyond the province of this Court in a special civil action
The Court's pronouncement
for certiorari. These issues are best addressed to the CA in
in Republic vs. Court of Appeals 37 is worth echoing: "cases
the petition for review filed before it. As an appellate court,
should be determined on the merits, after full opportunity to
it is empowered to require parties to submit additional
all parties for ventilation of their causes and defenses,
documents, as it may find necessary, or to receive
rather than on technicality or some procedural
evidence, to promote the ends of justice, pursuant to
imperfections. In that way, the ends of justice would be
the last paragraph of Section 9, B.P. Blg. 129, otherwise
better served." 38 Thus, what should guide judicial action is
known as The Judiciary Reorganization Act of 1980, to wit:
that a party litigant is given the fullest opportunity to
establish the merits of his action or defense rather than for The Intermediate Appellate Court shall have the
him to lose life, honor or property on mere power to try cases and conduct hearings, receive
technicalities. 39 This guideline is especially true when the evidence and perform any and all acts necessary
petitioner has satisfactorily explained the lapse and fulfilled to resolve factual issues raised in cases falling
the requirements in his motion for reconsideration, 40 as in within its original and appellate jurisdiction,
including the power to grant and conduct new
this case.
trials or further proceedings.
In addition, petitioner prays that we decide the present
WHEREFORE, the petition is PARTLY GRANTED. The
petition on the merits without need of remanding the case
Resolutions dated March 21, 1997 and June 23,
to the CA. He insists that all the elements of unlawful
1997 of the Court of Appeals in CA-G.R. SP No. 41394 are
detainer are present in the case. He further argues that the
REVERSED and SET ASIDE. The case is REMANDED to
alleged "priority right to buy the lot they occupy" does not
the Court of Appeals for further proceedings in CA-G.R.
apply where the landowner does not intend to sell the
No. 41394, entitled, "Antonio
subject property, as in the case; that respondents cannot
T . Donato vs. Hon. Judge of the Regional
be entitled to protection under P.D. No. 2016 since the
Trial Court of Manila, Branch 47, Filomeno Arcepe, et al."
government has no intention of acquiring the subject
property, nor is the subject property located within a zonal (Donato v. Court of Appeals, G.R. No. 129638,
|||

improvement area; and, that assuming that there is a [December 8, 2003], 462 PHIL 676-693)
negotiation for the sale of the subject property or a pending
case for consignation of rentals, these do not bar the
eviction of respondents.
We are not persuaded. We shall refrain from ruling on the
foregoing issues in the present petition for certiorari. The
Page 16 of 458

[G.R. No. 144025. December 27, 2002.] executed with respect to Lot No. 18. Private respondent
refused, so petitioners filed an action for
SPS. RENE GONZAGA and reformation of contract and damages with the Regional
LERIO GONZAGA, petitioners, vs. Trial Court. The trial court dismissed the complaint and
HON. COURT OF APPEALS, Second ordered petitioners to pay damages. Thereafter, a
Division, Manila, HON. QUIRICO G. writ of execution was issued by the trial court.
DEFENSOR, Judge, RTC, Branch 36, Sixth Subsequently, petitioners filed an urgent motion to recall
Judicial Region, Iloilo City, and LUCKY writ of execution, alleging that the trial court had no
HOMES, INC., represented by WILSON jurisdiction to try the case. Petitioners filed before
JESENA, JR., as Manager, respondents. the Court of Appeals (CA) a petition for
annulment of judgment premised on the ground that the
trial court had no jurisdiction to try and decide the case.
Salvador T. Sabio for petitioners. The CA denied the petition and the subsequent motion for
Marmen B. Daquilanea for private respondent. reconsideration filed by petitioners. Hence, this instant
petition.CAHTIS

The Solicitor General for public respondent.


In denying the petition, the Supreme Court ruled that while
an order or decision rendered without jurisdiction is a total
SYNOPSIS nullity and may be assailed at any stage, active
participation in the proceedings in the court which rendered
Petitioners purchased a parcel of land from private the order or decision will bar such party from attacking its
respondent Lucky Homes, Inc., specifically denominated as jurisdiction. In the case at bar, it was petitioners
Lot No. 19 and was mortgaged to the Social Security themselves who invoked the jurisdiction of the court a
Commission (SSS) as security for their housing loan. quo by instituting an action for reformation of contract
Petitioners then started the construction of their house, not against private respondents. It appeared that, in the
on Lot No. 19 but on Lot No. 18, as private respondent proceedings before the trial court, petitioners vigorously
mistakenly identified Lot No. 18 as Lot No. 19. Petitioners asserted their cause from the start to finish. Not even once
offered to buy Lot No. 18 so they continued with the did petitioners ever raise the issue of the court's jurisdiction
construction of their house. However, petitioners defaulted during the entire proceedings which lasted for two years. It
in the payment of their housing loan from SSS. was only after the trial court rendered its decision and
Consequently, Lot No. 19 was foreclosed by SSS and after issued a writ of execution against them did petitioners first
which petitioners offered to swap Lot Nos. 18 and 19 and raise the issue of jurisdiction and it was only because
demanded from private respondent that their said decision was unfavorable to them. Petitioners thus
contract of sale be reformed and another deed of sale be
Page 17 of 458

effectively waived their right to question the court's nal Steel


jurisdiction over the case they themselves filed. Corporation vs. Court of Appeals; Province of Bulacan vs.
Court of Appeals; PNOC Shipping and Transport
Corporation vs. Court ofAppeals, this Court affirmed the
SYLLABUS
rule that a party's active participation in all stages of the
case before the trial court, which includes invoking
1. REMEDIAL LAW; ACTIONS; JURISDICTION; the court's authority to grant affirmative relief, effectively
QUESTION THEREOF MAY BE RAISED AT ANY estops such party from later challenging that same court's
STAGE OF THE CASE BUT ACTIVE PARTICIPATION IN jurisdiction.
THE PROCEEDINGS IN THE COURT WHICH
RENDERED THE DECISION WILL BAR PARTIES FROM 2. ID.; ID.; ID.; ID.; CASE AT BAR. In the case at bar, it
ATTACKING ITS JURISDICTION. [W]hile an order or was petitioners themselves who invoked the
decision rendered without jurisdiction is a total nullity and jurisdiction of the court a quo by instituting an action for
may be assailed at any stage, active participation in the reformation of contract against private respondents. It
proceedings in the court which rendered the order or appears that, in the proceedings before the trial court,
decision will bar such party from attacking its jurisdiction. petitioners vigorously asserted their cause from start to
As we held in the leading case of Tjam vs. Sibonghanoy: finish. Not even once did petitioners ever raise the
"A party may be estopped or barred from raising a question issue of the court's jurisdiction during the entire
in different ways and for different reasons. Thus we proceedings which lasted for two years. It was only after
speak of estoppel in pais, or estoppel by deed or by record, the trialcourt rendered its decision and issued a
and of estoppel by laches. . . . "It has been held that a writ of execution against them in 1998 did petitioners first
party cannot invoke the jurisdictionof a court to secure raise the issue of jurisdiction and it was only because
affirmative relief against his opponent and, after obtaining said decision was unfavorable to them. Petitioners thus
or failing to obtain such relief, repudiate, or question that effectively waived their right to question the court's
same jurisdiction . . . [T]he question whether the court had jurisdiction over the case they themselves filed. Petitioners
jurisdiction either of the subject matter of the action should bear the consequence of their act. They cannot be
or of the parties was not important in such cases because allowed to profit from their omission to the damage and
the party is barred from such conduct not because the prejudice of the private respondent. This Courtfrowns upon
judgment or order of the court is valid and conclusive as an the undesirable practice of a party submitting his case for
adjudication, but for the reason that such a practice can not decision and then accepting the judge but only if favorable,
be tolerated obviously for reasons of public policy." and attacking it for lack ofjurisdiction if not.
Tijam has been reiterated in many succeeding cases.
Thus, in Orosa vs. Court of Appeals; Ang
Ping vs. Court of Appeals; Salva vs.Court of Appeals; Natio DECISION
Page 18 of 458

CORONA, J : p with the Regional Trial Court of Iloilo City, Branch 36, which
was docketed as Civil Case No. 17115.
Before this Court is a petition for review
on certiorari seeking the reversal of the On January 15, 1998, the trial court 2 rendered its decision
decision 1 of the Court of Appeals dated December 29, dismissing the complaint for lack of merit and ordering
1999 and its resolution dated June 1, 2000 in CA-G.R. SP herein petitioners to pay private respondent the
No. 54587. ASTDCH
amount of P10,000 as moral damages and another
P10,000 as attorney's fees. The pertinent conclusion of the
The records disclose that, sometime in 1970, petitioner- trial court reads as follows:
spouses purchased a parcel of land from private
respondent Lucky Homes, Inc., situated in Iloilo and "Aware of such fact, the plaintiff nonetheless
continued to stay in the premises of Lot 18 on
containing an area of 240 square meters. Said lot was
the proposal that he would also buy the same.
specifically denominated as Lot No. 19 under Transfer Plaintiff however failed to buy Lot 18 and
Certificate of Title (TCT) No. 28254 and was mortgaged to likewise defaulted in the payment of his loan with
the Social Security System (SSS) as security for their the SSS involving Lot 19. Consequently Lot 19
housing loan. Petitioners then started the was foreclosed and sold at public auction.
construction of their house, not on Lot No. 19 but on Lot Thereafter TCT No. T-29950 was cancelled and
No. 18, as private respondent mistakenly identified Lot No. in lieu thereof TCT No. T-86612 (Exh. '9') was
18 as Lot No. 19. Upon realizing its error, private issued in favor of SSS. This being the situation
respondent, through its general manager, informed obtaining, the reformation ofinstruments, even if
petitioners of such mistake but the latter offered to buy Lot allowed, or the swapping of Lot 18 and Lot 19 as
No. 18 in order to widen their premises. Thus, petitioners earlier proposed by the plaintiff, is no longer
continued with the construction of their house. However, feasible considering that plaintiff is no longer the
owner of Lot 19, otherwise, defendant will be
petitioners defaulted in the payment of their housing loan
losing Lot 18 without any substitute therefore
from SSS. Consequently, Lot No. 19 was foreclosed by (sic). Upon the other hand, plaintiff will be
SSS and petitioners' certificate of title was cancelled and a unjustly enriching himself having in its favor both
new one was issued in the name of SSS. After Lot No. 19 Lot 19 which was earlier mortgaged by him and
was foreclosed, petitioners offered to swap Lot Nos. 18 and subsequently foreclosed by SSS, as well as Lot
19 and demanded from private respondent that their 18 where his house is presently standing.
contract of sale be reformed and another deed of sale be
"The logic and common sense of the situation
executed with respect to Lot No. 18, considering that their
lean heavily in favor of the defendant. It is
house was built therein. However, private respondent evident that what plaintiff had bought from the
refused. This prompted petitioners to file, on June 13, defendant is Lot 19 covered by TCT No. 28254
1996, an action for reformation of contract and damages which parcel of land has been properly indicated
Page 19 of 458

in the instruments and not Lot 18 as claimed by At the outset, it should be stressed that petitioners are
the plaintiff. The contracts being clear and seeking from us the annulment of a trial court judgment
unmistakable, they reflect the true based on lack of jurisdiction. Because it is not an appeal,
intention of the parties, besides the plaintiff failed the correctness of the judgment is not in issue here.
to assail the contracts on mutual mistake, hence Accordingly, there is no need to delve into the
the same need no longer be reformed." 3
propriety of the decision rendered by the trial court.
On June 22, 1998, a writ of execution was issued by the
Petitioners claim that the recent
trial court. Thus, on September 17, 1998, petitioners filed
decisions of this Court have already abandoned the
an urgent motion to recall writ of execution, alleging that
doctrine laid down in Tijam vs. Sibonghanoy. 5 We do not
the court a quo had no jurisdiction to try the case as it was
agree. In countless decisions, this Court has consistently
vested in the Housing and Land Use Regulatory Board
held that, while an order or decision rendered without
(HLURB) pursuant to PD 957 (The Subdivision and
jurisdiction is a total nullity and may be assailed at any
Condominium Buyers Protective Decree). Conformably,
stage, active participation in the proceedings in
petitioners filed a new complaint against private respondent
the court which rendered the order or decision will bar such
with the HLURB. Likewise, on June 30, 1999, petitioner-
party from attacking its jurisdiction. As we held in the
spouses filed before the Court of Appeals a petition for
leading case ofTijam vs. Sibonghanoy: 6
annulment of judgment, premised on the ground that the
trial court had no jurisdiction to try and decide Civil Case "A party may be estopped or barred from raising
No. 17115. HIDCTA
a question in different ways and for different
reasons. Thus we speak of estoppel in pais, or
estoppel by deed or by record, and of estoppel
In a decision rendered on December 29, 1999, by laches.
the Court of Appeals denied the petition for
annulment of judgment, relying mainly on the xxx xxx xxx
jurisprudential doctrine ofestoppel as laid down in the "It has been held that a party cannot invoke the
case of Tijam vs. Sibonghanoy. 4 jurisdiction of a court to secure affirmative relief
against his opponent and, after obtaining or
Their subsequent motion for reconsideration having been failing to obtain such relief, repudiate, or
denied, petitioners filed this instant petition, contending that question that same jurisdiction . . . [T]he question
the Court of Appeals erred in dismissing the petition by whether the court had jurisdiction either of the
applying the principle of estoppel, even if the Regional subject matter of the action or of the parties was
Trial Court, Branch 36 of Iloilo City had no jurisdiction to not important in such cases because the party is
decide Civil Case No. 17115. barred from such conduct not because the
judgment or order of the court is valid and
conclusive as an adjudication, but for the reason
Page 20 of 458

that such a practice can not be tolerated submitting his case for decision and then accepting the
obviously for reasons of public policy." judgment but only if favorable, and attacking it for
Tijam has been reiterated in many succeeding cases. lack ofjurisdiction if not. 13
Thus, in Orosa vs. Court of Appeals; 7 Ang Public policy dictates that this Court must strongly
Ping vs. Court of Appeals; 8 Salva vs. Court of Appeals; 9 N condemn any double-dealing by parties who are disposed
ational Steel to trifle with the courts by deliberately taking inconsistent
Corporation vs. Court of Appeals; 10 Province of Bulacan vs positions, in utter disregard of the elementary
. Court of Appeals; 11 PNOC Shipping and Transport principles of justice and good faith. 14 There is no denying
Corporation vs. Court of Appeals, 12 this Court affirmed the that, in this case, petitioners never raised the
rule that a party's active participation in all stages of the issue ofjurisdiction throughout the entire proceedings in the
case before the trial court, which includes invoking trial court. Instead, they voluntarily and willingly submitted
the court's authority to grant affirmative relief, effectively themselves to the jurisdiction of said court. It is now too
estops such party from later challenging that same court's late in the day for them to repudiate the jurisdiction they
jurisdiction.
HTAEIS
were invoking all along. ETHIDa

In the case at bar, it was petitioners themselves who WHEREFORE, the petition for review is hereby DENIED.
invoked the jurisdiction of the court a quo by instituting an
action for reformation of contract against private SO ORDERED.
respondents. It appears that, in the proceedings before the Puno, Panganiban, Sandoval-Gutierrez and Carpio-
trial court, petitioners vigorously asserted their cause from Morales, JJ., concur.
start to finish. Not even once did petitioners ever raise the
issue of the court's jurisdiction during the entire (Sps. Gonzaga v. Court of Appeals, G.R. No. 144025,
|||

proceedings which lasted for two years. It was only after [December 27, 2002], 442 PHIL 735-742)
the trial court rendered its decision and issued a
writof execution against them in 1998 did petitioners first
raise the issue of jurisdiction and it was only because
said decision was unfavorable to them. Petitioners thus
effectively waived their right to question the court's
jurisdiction over the case they themselves filed.
Petitioners should bear the consequence of their act. They
cannot be allowed to profit from their omission to the
damage and prejudice of the private respondent.
ThisCourt frowns upon the undesirable practice of a party
Page 21 of 458

[G.R. No. 124644. February 5, 2004.] 1991, an amended Information was filed with the RTC of
Naga City, Branch 21, docketed as Criminal Case No. 90-
ARNEL ESCOBAL, petitioner, vs. HON. 3184 charging the petitioner and a certain Natividad
FRANCIS GARCHITORENA, Presiding Bombita, Jr. alias "Jun Bombita" with murder. The
Justice of the Sandiganbayan, Atty. accusatory portion of the amended Information reads: DcCITS

Luisabel Alfonso-Cortez, Executive Clerk That on or about March 16, 1990, in the City of
of Court IV of the Sandiganbayan, Hon. Naga, Philippines, and within the jurisdiction of
David C. Naval, Presiding Judge of the this Honorable Court by virtue of the Presidential
Regional Trial Court of Naga City, Branch Waiver, dated June 1, 1990, with intent to kill,
21, Luz N. Nueca,respondents. conspiring and confederating together and
mutually helping each other, did, then and there,
willfully, unlawfully and feloniously attack, assault
and maul one Rodney Nueca and accused 2Lt
DECISION
Arnel Escobal armed with a caliber .45 service
pistol shoot said Rodney Nueca thereby inflicting
upon him serious, mortal and fatal wounds which
CALLEJO, SR., J : p caused his death, and as a consequence
thereof, complainant LUZ N. NUECA, mother of
This is a petition for certiorari with a prayer for the issuance the deceased victim, suffered actual and
of a temporary restraining order and preliminary injunction compensatory damages in the amount of
filed by Arnel Escobal seeking the nullification of the THREE HUNDRED SIXTY-SEVEN THOUSAND
remand by the Presiding Justice of the Sandiganbayan of ONE HUNDRED SEVEN & 95/100
the records of Criminal Case No. 90-3184 to the Regional (P367,107.95) PESOS, Philippine Currency, and
Trial Court (RTC) of Naga City, Branch 21. moral and exemplary damages in the amount of
ONE HUNDRED THIRTY-FIVE THOUSAND
The petition at bench arose from the following milieu: (P135,000.00) PESOS, Philippine Currency. 1
The petitioner is a graduate of the Philippine Military On March 19, 1991, the RTC issued an Order preventively
Academy, a member of the Armed Forces of the suspending the petitioner from the service
Philippines and the Philippine Constabulary, as well as the under Presidential Decree No. 971, as amended by P.D.
Intelligence Group of the Philippine National Police. On No. 1847. When apprised of the said order, the General
March 16, 1990, the petitioner was conducting surveillance Headquarters of the PNP issued on October 6, 1992
operations on drug trafficking at the Sa Harong Caf Bar Special Order No. 91, preventively suspending the
and Restaurant located along Barlin St., Naga City. He petitioner from the service until the case was terminated. 2
somehow got involved in a shooting incident, resulting in
the death of one Rodney Rafael N. Nueca. On February 6,
Page 22 of 458

The petitioner was arrested by virtue of a warrant issued by On October 28, 1994, the RTC issued an Order 10 denying
the RTC, while accused Bombita remained at large. The the motion to dismiss. It, however, ordered the conduct of a
petitioner posted bail and was granted temporary liberty. preliminary hearing to determine whether or not the crime
charged was committed by the petitioner in relation to his
When arraigned on April 9, 1991, 3 the petitioner, assisted
office as a member of the PNP.
by counsel, pleaded not guilty to the offense charged.
Thereafter, on December 23, 1991, the petitioner filed a In the preliminary hearing, the prosecution manifested that
Motion to Quash 4 the Information alleging that as it was no longer presenting any evidence in connection
mandated by Commonwealth Act No. 408, 5 in relation with the petitioner's motion. It reasoned that it had already
to Section 1, Presidential Decree No. 1822 and Section 95 rested its case, and that its evidence showed that the
ofR.A. No. 6975, the court martial, not the RTC, had petitioner did not commit the offense charged in connection
jurisdiction over criminal cases involving PNP members with the performance of his duties as a member of the
and officers. Philippine Constabulary. According to the prosecution, they
were able to show the following facts: (a) the petitioner was
Pending the resolution of the motion, the petitioner on June
not wearing his uniform during the incident; (b) the offense
25, 1993 requested the Chief of the PNP for his
was committed just after midnight; (c) the petitioner was
reinstatement. He alleged that under R.A. No. 6975, his
drunk when the crime was committed; (d) the petitioner
suspension should last for only 90 days, and, having
was in the company of civilians; and, (e) the offense was
served the same, he should now be reinstated. On
committed in a beerhouse called "Sa Harong Caf Bar and
September 23, 1993, 6 the PNP Region V Headquarters
Restaurant." 11
wrote Judge David C. Naval requesting information on
whether he issued an order lifting the petitioner's For his part, the petitioner testified that at about 10:00 p.m.
suspension. The RTC did not reply. Thus, on February 22, on March 15, 1990, he was at the Sa Harong Caf Bar and
1994, the petitioner filed a motion in the RTC for the lifting Restaurant at Barlin St., Naga City, to conduct surveillance
of the order of suspension. He alleged that he had served on alleged drug trafficking, pursuant to Mission Order No.
the 90-day preventive suspension and pleaded for 03-04 issued by Police Superintendent Rufo R. Pulido. The
compassionate justice. The RTC denied the motion on petitioner adduced in evidence the sworn statements of
March 9, 1994. 7 Trial thereafter proceeded, and the Benjamin Cario and Roberto Fajardo who corroborated
prosecution rested its case. The petitioner commenced the his testimony that he was on a surveillance mission on the
presentation of his evidence. On July 20, 1994, he filed a aforestated date. 12
Motion to Dismiss 8 the case. Citing Republic of the
On July 31, 1995, the trial court issued an Order declaring
Philippines v. Asuncion, et al., 9 he argued that since he
that the petitioner committed the crime charged while not in
committed the crime in the performance of his duties, the
the performance of his official function. The trial court
Sandiganbayan had exclusive jurisdiction over the case.
added that upon the enactment of R.A. No. 7975, 13 the
Page 23 of 458

issue had become moot and academic. The amendatory PLEB that the petitioner was on official mission when the
law transferred the jurisdiction over the offense charged shooting happened.
from the Sandiganbayan to the RTC since the petitioner did
The RTC ordered the public prosecutor to file a Re-
not have a salary grade of "27" as provided for in or
Amended Information and to allege that the offense
by Section 4(a)(1), (3) thereof. The trial court nevertheless
charged was committed by the petitioner in the
ordered the prosecution to amend the Information pursuant
performance of his duties/functions or in relation to his
to the ruling in Republic v. Asuncion 14 and R.A. No. 7975.
office; and, conformably to R.A. No. 7975, to thereafter
The amendment consisted in the inclusion therein of an
transmit the same, as well as the complete records with the
allegation that the offense charged was not committed by
stenographic notes, to the Sandiganbayan, to wit:
the petitioner in the performance of his duties/functions, nor
in relation to his office. WHEREFORE, the Order dated July 31, 1995 is
hereby SET ASIDE and RECONSIDERED, and
The petitioner filed a motion for the reconsideration 15 of it is hereby declared that after preliminary
the said order, reiterating that based on his testimony and hearing, this Court has found that the offense
those of Benjamin Cario and Roberto Fajardo, the offense charged in the Information herein was committed
charged was committed by him in relation to his official by the accused in his relation to his function and
functions. He asserted that the trial court failed to consider duty as member of the then Philippine
the exceptions to the prohibition. He asserted that R.A. No. Constabulary.
7975, which was enacted on March 30, 1995, could not be Conformably with R.A. No. 7975 and the ruling of
applied retroactively. 16 the Supreme Court in Republic v. Asuncion, et
The petitioner further alleged that Luz Nacario Nueca, the al., G.R. No. 180208, March 11, 1994:
mother of the victim, through counsel, categorically and (1) The City Prosecutor is hereby ordered
unequivocably admitted in her complaint filed with the to file a Re-Amended Information
People's Law Enforcement Board (PLEB) that he was on alleging that the offense charged
an official mission when the crime was committed. was committed by the Accused in
the performance of his
On November 24, 1995, the RTC made a volte face and duties/functions or in relation to his
issued an Order reversing and setting aside its July 31, office, within fifteen (15) days from
1995 Order. It declared that based on the petitioner's receipt hereof;
evidence, he was on official mission when the shooting
(2) After the filing of the Re-Amended
occurred. It concluded that the prosecution failed to adduce Information, the complete records
controverting evidence thereto. It likewise considered Luz of this case, together with the
Nacario Nueca's admission in her complaint before the transcripts of the stenographic
notes taken during the entire
Page 24 of 458

proceedings herein, are hereby of the decree, the Sandiganbayan had exclusive
ordered transmitted immediately to jurisdiction over the case against him as he was charged
the Honorable Sandiganbayan, with homicide with the imposable penalty of reclusion
through its Clerk of Court, Manila, temporal, and the crime was committed while in the
for appropriate proceedings. 17 performance of his duties. He further asserts that
On January 8, 1996, the Presiding Justice of the although P.D. No. 1606, as amended by P.D. No. 1861 and
Sandiganbayan ordered the Executive Clerk of Court IV, by R.A. No. 7975provides that crimes committed by
Atty. Luisabel Alfonso-Cortez, to return the records of members and officers of the PNP with a salary grade below
Criminal Case No. 90-3184 to the court of origin, RTC of "27" committed in relation to office are within the exclusive
Naga City, Branch 21. It reasoned that under P.D. No. jurisdiction of the proper RTC, the amendment thus
1606, as amended by R.A. No. 7975, 18 the RTC retained introduced by R.A. No. 7975 should not be applied
jurisdiction over the case, considering that the petitioner retroactively. This is so, the petitioner asserts, because
had a salary grade of "23." Furthermore, the prosecution under Section 7 ofR.A. No. 7975, only those cases where
had already rested its case and the petitioner had trial has not begun in the Sandiganbayan upon the
commenced presenting his evidence in the RTC; following effectivity of the law should be referred to the proper trial
the rule on continuity of jurisdiction, the latter court should court.
continue with the case and render judgment therein after The private complainant agrees with the contention of the
trial. petitioner. In contrast, the Office of the Special Prosecutor
contends that the Presiding Justice of the Sandiganbayan
acted in accordance with law when he ordered the remand
Upon the remand of the records, the RTC set the case for of the case to the RTC. It asserts that R.A. No.
trial on May 3, 1996, for the petitioner to continue 7975 should be applied retroactively. Although the
presenting his evidence. Instead of adducing his evidence, Sandiganbayan had jurisdiction over the crime committed
the petitioner filed a petition for certiorari, assailing the by the petitioner when the amended information was filed
Order of the Presiding Justice of the Sandiganbayan with the RTC, by the time it resolved petitioner's motion to
remanding the records of the case to the RTC. dismiss on July 31, 1995, R.A. No. 7975 had already taken
The threshold issue for resolution is whether or not the effect. Thus, the law should be given retroactive effect.EHTIcD

Presiding Justice of the Sandiganbayan committed a grave The Ruling of the Court
abuse of his discretion amounting to excess or lack of
jurisdiction in ordering the remand of the case to the RTC. The respondent Presiding Justice acted in accordance with
law and the rulings of this Court when he ordered the
The petitioner contends that when the amended remand of the case to the RTC, the court of origin.
information was filed with the RTC on February 6,
1991, P.D. No. 1606 was still in effect. Under Section 4(a)
Page 25 of 458

The jurisdiction of the court over criminal cases is the offender in relation to his office because that would be
determined by the allegations in the Information or the a conclusion of law. 22 The amended Information filed with
Complaint and the statute in effect at the time of the the RTC against the petitioner does not contain any
commencement of the action, unless such statute provides allegation showing the intimate relation between his office
for a retroactive application thereof. The jurisdictional and the discharge of his duties. Hence, the RTC had
requirements must be alleged in the Information. 19Such jurisdiction over the offense charged when on November
jurisdiction of the court acquired at the inception of the 24, 1995, it ordered the re-amendment of the Information to
case continues until the case is terminated. 20 include therein an allegation that the petitioner committed
the crime in relation to office. The trial court erred when it
Under Section 4(a) of P.D. No. 1606 as amended by P.D.
ordered the elevation of the records to the
No. 1861, the Sandiganbayan had exclusive jurisdiction in
Sandiganbayan. It bears stressing that R.A. No.
all cases involving the following:
7975 amending P.D. No. 1606 was already in effect and
(1) Violations of Republic Act No. 3019, as under Section 2 of the law:
amended, otherwise known as the Anti-
Graft and Corrupt Practices Act, Republic In cases where none of the principal accused are
Act No. 1379, and Chapter II, Section 2, occupying positions corresponding to salary
Title VII of the Revised Penal Code; grade "27" or higher, as prescribed in the
said Republic Act No. 6758, or PNP officers
(2) Other offenses or felonies committed by occupying the rank of superintendent or higher,
public officers and employees in relation or their equivalent, exclusive jurisdiction thereof
to their office, including those employed in shall be vested in the proper Regional Trial
government-owned or controlled Court, Metropolitan Trial Court, Municipal Trial
corporations, whether simple or Court, and Municipal Circuit Trial Court, as the
complexed with other crimes, where the case may be, pursuant to their respective
penalty prescribed by law is higher jurisdiction as provided in Batas Pambansa Blg.
than prision correccional or imprisonment 129.
for six (6) years, or a fine of P6,000.00 . . .
. 21 Under the law, even if the offender committed the crime
charged in relation to his office but occupies a position
However, for the Sandiganbayan to have exclusive corresponding to a salary grade below "27," the proper
jurisdiction under the said law over crimes committed by Regional Trial Court or Municipal Trial Court, as the case
public officers in relation to their office, it is essential that may be, shall have exclusive jurisdiction over the case. In
the facts showing the intimate relation between the office of this case, the petitioner was a Police Senior Inspector, with
the offender and the discharge of official duties must be salary grade "23." He was charged with homicide
alleged in the Information. It is not enough to merely allege punishable by reclusion temporal. Hence, the RTC had
in the Information that the crime charged was committed by exclusive jurisdiction over the crime charged conformably
Page 26 of 458

to Sections 20 and 32 of Batas Pambansa Blg. 129, as [G.R. No. 155001. May 5, 2003.]
amended by Section 2 of R.A. No. 7691.
The petitioner's contention that R.A. No. 7975 should not DEMOSTHENES P. AGAN, JR., JOSEPH
be applied retroactively has no legal basis. It bears B. CATAHAN, JOSE MARI B. REUNILLA,
stressing that R.A. No. 7975 is a substantive procedural MANUEL ANTONIO B. BOE, MAMERTO
law which may be applied retroactively. 23 S. CLARA, REUEL E. DIMALANTA, MORY
V. DOMALAON, CONRADO G. DIMAANO,
IN LIGHT OF ALL THE FOREGOING, the petition is LOLITA R. HIZON, REMEDIOS P.
DISMISSED. No pronouncement as to costs. ADOLFO, BIENVENIDO C. HILARIO,
SO ORDERED. MIASCOR WORKERS UNION-NATIONAL
LABOR UNION (MWU-NLU), and
Puno, Quisumbing, Austria-Martinez and Tinga, PHILIPPINE AIRLINES EMPLOYEES
JJ., concur. ASSOCIATION (PALEA), petitioners, vs.
PHILIPPINE INTERNATIONAL AIR
TERMINALS CO., INC., MANILA
INTERNATIONAL AIRPORT AUTHORITY,
DEPARTMENT OF TRANSPORTATION
AND COMMUNICATIONS and
SECRETARY LEANDRO M. MENDOZA, in
his capacity as Head of the Department of
Transportation and
Communications,respondents.

MIASCOR GROUNDHANDLING
CORPORATION, DNATA-WINGS
AVIATION SYSTEMS CORPORATION,
MACROASIA-EUREST SERVICES, INC.,
MACROASIA-MENZIES AIRPORT
SERVICES CORPORATION, MIASCOR
CATERING SERVICES CORPORATION,
MIASCOR AIRCRAFT MAINTENANCE
CORPORATION, and MIASCOR
Page 27 of 458

LOGISTICS CORPORATION, petitioners-in- CEFERINO C. LOPEZ, RAMON M. SALES,


intervention, ALFREDO B. VALENCIA, MA. TERESA V.
GAERLAN, LEONARDO DE LA ROSA,
DINA C. DE LEON, VIRGIE CATAMIN
[G.R. No. 155547. May 5, 2003.]
RONALD SCHLOBOM, ANGELITO
SANTOS, MA. LUISA M. PALCON and
SALACNIB F. BATERINA, CLAVEL A. SAMAHANG MANGGAGAWA SA
MARTINEZ and CONSTANTINO G. PALIPARAN NG PILIPINAS
JARAULA, petitioners, vs. PHILIPPINE (SMPP),petitioners, vs. PHILIPPINE
INTERNATIONAL AIR TERMINALS CO., INTERNATIONAL AIR TERMINALS CO.,
INC., MANILA INTERNATIONAL AIRPORT INC., MANILA INTERNATIONAL AIRPORT
AUTHORITY, DEPARTMENT OF AUTHORITY, DEPARTMENT OF
TRANSPORTATION AND TRANSPORTATION AND
COMMUNICATIONS, DEPARTMENT OF COMMUNICATIONS, SECRETARY
PUBLIC WORKS AND HIGHWAYS, LEANDRO M. MENDOZA, in his capacity
SECRETARY LEANDRO M. MENDOZA, in as Head of the Department of
his capacity as Head of the Department of Transportation and
Transportation and Communications, and Communications, respondents.
SECRETARY SIMEON A. DATUMANONG,
in his capacity as Head of the Department
of Public Works and Salonga Hernandez & Mendoza for petitioners in G.R.
Highways, respondents, No. 155001.
Jose A. Bernas for petitioners in G.R. No. 155547.
JACINTO V. PARAS, RAFAEL P. NANTES, Erwin P. Erfe for petitioners in G.R. No. 155661.
EDUARDO C. ZIALCITA, WILLY BUYSON
VILLARAMA, PROSPERO C. NOGRALES, Jose Espinas for MWU-NLU.
PROSPERO A. PICHAY, JR., HARLIN Jose E. Marigondon for PALEA.
CAST ABAYON, and BENASING O.
MACARANBON, respondents-intervenors, Angara Abello Concepcion Regala and Cruz for petitioners-
in-intervention.

[G.R. No. 155661. May 5, 2003.] Arthur D. Lim Law Office for Asia's Emerging Dragon etc.
Page 28 of 458

Romulo Mabanta Buenaventura Sayoc & Delos Angeles, signed by the Government and PIATCO. Consequently, the
Chavez & Laureta & Associate and Moises Tolentino, workers of the international airline service providers,
Jr. for PIATCO. claiming that they stand to lose their employment upon the
implementation of the said agreements, filed before this
The Office of the Government Corporate Counsel for MIAA.
Court a petition for prohibition docketed as G.R.
The Solicitor General for public respondents. No. 155001. Later, the service providers joined their cause.
Congressmen Salacnib Baterina, Clavel Martinez and
Mario E. Ongkiko, Fernando F. Manas, Jr. Raymund C. de
Constantino Jaraula, alleging that the said contracts
Castro & Angelito S. Lazaro, Jr. for respondents-
compelled government expenditure without appropriation,
intervenors.
filed a similar petition docketed as G.R. No. 155547. And
several employees of the MIAA likewise filed a petition
SYNOPSIS docketed as G.R. No. 155661 assailing the legality of these
agreements.
On October 5, 1994, Asia's Emerging Dragon Corp. The Court ruled that in accordance with the provisions
(AEDC) submitted an unsolicited proposal to the of R.A. No. 337, as amended, the maximum amount that
Government for the development of Ninoy Aquino Security Bank, as one of the members of the Paircargo
International Airport International Passenger Terminal III Consortium could validly invest, is only 15% of its entire net
(NAIA IPT III) under a build-operate-and-transfer worth. The total net worth, therefore of the Paircargo
arrangement pursuant to RA 6957, as amended. It was Consortium, after considering the maximum amounts that
endorsed to the National Economic Development Authority may be validly invested by each of its members, is only
(NEDA), which, in turn, reviewed and approved it for 6.08% of the project cost, which substantially less than the
bidding. The Paircargo Consortium was the only company prescribed minimum equity investment which is 30% of the
that submitted a competitive proposal. AEDC questioned, project cost. Thus, the award of the contract by the PBAC
among others, the financial capability of Paircargo to the Paircargo Consortium, a disqualified bidder, is null
Consortium. However, the Pre-Qualification Bids and and void.
Awards Committee (PBAC) had prequalified the Paircargo
Consortium to undertake the project. Later, Paircargo As to the validity of the agreements, the ARCA obligates
Consortium incorporated into Philippine International the Government to pay for all loans, advances and
Airport Terminals Co., (PIATCO). And for failure of AEDC obligations arising out of financial facilities extended to
to match the price proposal submitted by PIATCO, the PIATCO for the implementation of the NAIA IPT III project
project was awarded to PIATCO. On July 12, 1997, the should PIATCO default in its loan obligations to its Senior
Government signed the 1997 Concession Agreement. Lenders and the latter fails to appoint a qualified nominee
Thereafter, the Amended and Restated Concession or transferee. This in effect would make the Government
Agreement (ARCA) and three Supplements thereto were liable for PIATCO's loans should the conditions set forth in
Page 29 of 458

the ARCA arise. This is a form of direct government direct injury as a result of its enforcement, and not merely
guarantee and to declare the PIATCO contracts valid that he suffers thereby in some indefinite way. It must
despite the clear statutory prohibitions against a direct appear that the person complaining has been or is about to
government guarantee would only make a mockery of be denied some right or privilege to which he is lawfully
that the BOT Law seeks to prevent. The Court also ruled entitled or that he is about to be subjected to some burdens
that the operation of an international passenger airport or penalties by reason of the statute or act complained of.
terminal is no doubt an undertaking imbued with public
2. ID.; ID.; ID.; ID.; FINANCIAL PREJUDICE IS A
interest. Thus, the privilege given to PIATCO is subject to
LEGITIMATE INTEREST SUFFICIENT TO CONFER THE
reasonable regulation and supervision by the Government
REQUISITE STANDING. [P]etitioners have a direct and
through the MIAA. Another thing, PIATCO, by the mere
substantial interest to protect by reason of the
expedient of claiming an exclusive right to operate, cannot
implementation of the PIATCO Contracts. They stand to
require the Government to break its contractual obligations
lose their source of livelihood, a property right which is
to the service providers. Accordingly, the 1997 Concession
zealously protected by the Constitution. Moreover,
Agreement, the Amended and Restated Concession
subsisting concession agreements between MIAA and
Agreement and the Supplements thereto were set aside for
petitioners-intervenors and service contracts between
being null and void.TCEaDI
international airlines and petitioners-intervenors stand to be
nullified or terminated by the operation of the NAIA IPT III
SYLLABUS under the PIATCO Contracts. The financial prejudice
brought about by the PIATCO Contracts on petitioners and
1. REMEDIAL LAW; CIVIL PROCEDURE; PARTIES; petitioners-intervenors in these cases are legitimate
INTEREST OF PERSON ASSAILING THE interests sufficient to confer on them the requisite standing
CONSTITUTIONALITY OF A STATUTE MUST BE to file the instant petitions.
DIRECT AND PERSONAL. The question on legal 3. ID.; ID.; ID.; ID.; COURT MUST BE MORE LIBERAL IN
standing is whether such parties have "alleged such a DETERMINING WHETHER THE PETITIONERS HAVE
personal stake in the outcome of the controversy as to LOCUS STANDI TO FILE A PETITION. Standing is a
assure that concrete adverseness which sharpens the peculiar concept in constitutional law because in some
presentation of issues upon which the court so largely cases, suits are not brought by parties who have been
depends for illumination of difficult constitutional personally injured by the operation of a law or any other
questions." Accordingly, it has been held that the interest of government act but by concerned citizens, taxpayers or
a person assailing the constitutionality of a statute must be voters who actually sue in the public interest. Although we
direct and personal. He must be able, to show, not only are not unmindful of the cases of Imus Electric Co. v.
that the law or any government act is invalid, but also that Municipality of Imus and Gonzales v. Raquiza wherein this
he sustained or is in imminent danger of sustaining some Court held that appropriation must be made only on
Page 30 of 458

amounts immediately demandable, public interest 5. ID.; ID.; ID.; PROCEDURAL BARS MAY BE LOWERED
demands that we take a more liberal view in determining TO GIVE WAY FOR THE SPEEDY DISPOSITION OF
whether the petitioners suing as legislators, taxpayers and CASES OF TRANSCENDENTAL IMPORTANCE. It is
citizens have locus standi to file the instant petition. easy to discern that exceptional circumstances exist in the
In Kilosbayan, Inc. v. Guingona, this Court held "[i]n line cases at bar that call for the relaxation of the rule. Both
with the liberal policy of this Court on locus standi, ordinary petitioners and respondents agree that these cases are
taxpayers, members of Congress, and even association of oftranscendental importance as they involve the
planters, and non-profit civic organizations were allowed to construction and operation of the country's premier
initiate and prosecute actions before this Court to question international airport. Moreover, the crucial issues submitted
the constitutionality or validity of laws, acts, decisions, for resolution are of first impression and they entail the
rulings, or orders of various government agencies or proper legal interpretation of key provisions of the
instrumentalities," Further, "insofar as taxpayers' suits are Constitution, the BOT Law and its Implementing Rules and
concerned . . . (this Court) is not devoid of discretion as to Regulations. Thus, considering the nature of the
whether or not it should be entertained." As such ". . . even controversy before the Court, procedural bars may be
if, strictly speaking, they [the petitioners] are not covered by lowered to give way for the speedy disposition of the
the definition, it is still within the wide discretion of the instant cases.
Court to waive the requirement and so remove the
6. CIVIL LAW; OBLIGATIONS AND CONTRACTS;
impediment to its addressing and resolving the serious
ARBITRATION CLAUSE; NOT BINDING TO PERSONS
constitutional questions raised." In view of the serious legal
NOT PARTIES TO THE CONTRACT. It is established
questions involved and their impact on public interest, we
thatpetitioners in the present cases who have presented
resolve to grant standing to the petitioners.
legitimate interests in the resolution of the controversy
are not parties to the PIATCO Contracts. Accordingly, they
cannot be bound by the arbitration clause provided for in
4. ID.; ID.; JURISDICTION; HIERARCHY OF COURTS
the ARCA and hence, cannot be compelled to submit to
MAY BE RELAXED WHEN THE REDRESS DESIRED
arbitration proceedings. A speedy and decisive resolution
CANNOT BE OBTAINED IN THE APPROPRIATE
of all the critical issues in the present controversy, including
COURTS. The rule on hierarchy of courts will not also
those raised by petitioners, cannot be made before an
prevent this Court from assuming jurisdiction over the
arbitral tribunal. The object of arbitration is precisely to
cases at bar. The said rule may be relaxed when the
allow an expeditious determination of a dispute. This
redress desired cannot be obtained in the appropriate
objective would not be met if this Court were to allow the
courts or where exceptional and compelling circumstances
parties to settle the cases by arbitration as there are certain
justify availment of a remedy within and calling for the
issues involving non-parties to the PIATCO Contracts
exercise of this Court's primary jurisdiction. ATaDHC
which the arbitral tribunal will not be equipped to resolve.
Page 31 of 458

7. POLITICAL LAW; ADMINISTRATIVE LAW; REPUBLIC therefore of the Paircargo Consortium, after considering
ACT NO. 6957 (BUILD-OPERATE-AND-TRANSFER or the maximum amounts that may be validly invested by
BOT LAW); CONTRACT SHALL BE AWARDED TO THE each of its members is P558,384,871.55 or only 6.08% of
BIDDER WHO SATISFIED THE. MINIMUM FINANCIAL, the project cost, an amount substantially less than the
TECHNICAL, ORGANIZATIONAL AND LEGAL prescribed minimum equity investment required for the
STANDARDS REQUIRED BY LAW. Under the BOT project in the amount of P2,755,095,000.00 or 30% of the
Law, in case of a build-operate-and-transfer arrangement, project cost.cHaADC

the contract shall be awarded to the bidder "who, having


9. ID.; ID.; PUBLIC BIDDING; PRE-QUALIFICATION
satisfied the minimum financial, technical, organizational
STAGE; GOVERNMENT AGENCY MUST DETERMINE
and leg standards" required by the law, has submitted the
THE BIDDER'S FINANCIAL CAPACITY. The purpose of
lowest bid and most favorable terms of the project. . . .
pre-qualification in any public bidding is to determine, at the
Accordingly, . . . the Paircargo Consortium or any
earliest opportunity, the ability of the bidder to undertake
challenger to the unsolicited proposal of AEDC has to show
the project. Thus, with respect to the bidder's financial
that it possesses the requisite financial capability to
capacity at the pre-qualification stage, the law requires the
undertake the project in the minimum amount of 30% of the
government agency to examine and determine the ability of
project cost through (i) proof of the ability to provide a
the bidder to fund the entire cost of the project by
minimum amount of equity to the project, and (ii) a letter
considering the maximum amounts that each bidder may
testimonial from reputable banks attesting that the project
invest in the project at the time of pre-qualification.
proponent or members of the consortium are banking with
them, that they are in good financial standing, and that they 10. ID.; ID.; ID.; ID.; ID.; SHOULD DETERMINE THE
have adequate resources. MAXIMUM AMOUNT THAT EACH MEMBER OF THE
CONSORTIUM MAY COMMIT WITHOUT
8. ID.; ID.; ID.; ID.; TOTAL NET WORTH OF THE
DISREGARDING THE INVESTMENT CEILINGS
PAIRCARGO CONSORTIUM IS LESS THAT THE
PROVIDED BY APPLICABLE LAW. The PBAC has
PRESCRIBED MINIMUM EQUITY INVESTMENT
determined that any prospective bidder, for the
REQUIRED FOR THE PROJECT. We agree with public
construction, operation and maintenance of the NAIA IPT
respondents that with respect to Security Bank, the entire
III project should prove that it has the ability to provide
amount of its net worth could not be invested in a single
equity in the minimum amount of 30% of the project cost, in
undertaking or enterprise, whether allied or non-allied in
accordance with the 70:30 debt-to-equity ratio prescribed in
accordance with the provisions of R.A. No. 337, as
the Bid Documents. Thus, in the case of Paircargo
amended or the General Banking Act[.] . . . Thus, the
Consortium, the PBAC should determine the maximum
maximum amount that Security Bank could validly invest in
amounts that each member of the consortium may commit
the Paircargo Consortium is only P528,525,656.55,
for the construction, operation and maintenance of the
representing 15% of its entire net worth. The total net worth
NAIA IPT III project at the time of pre-qualification. With
Page 32 of 458

respect to Security Bank, the maximum amount which may the minimum amounts required to be put up by the bidder,
be invested by it would only be 15% of its net worth in view said bidder should be properly disqualified. Considering
of the restrictions imposed by the General Banking Act. that at the pre-qualification stage, the maximum amounts
Disregarding the investment ceilings provided by applicable which the Paircargo Consortium may invest in the project
law would not result in a proper evaluation of whether or fell short of the minimum amounts prescribed by the PBAC,
not a bidder is pre-qualified to undertake the project as for we hold that Paircargo Consortium was not a qualified
all intents and purposes, such ceiling or legal restriction bidder. Thus the award of the contract by the PBAC to the
determines the true maximum amount which a bidder may Paircargo Consortium, a disqualified bidder, is null and
invest in the project. void.
11. ID.; ID.; ID.; ID.; ID.; EVALUATION OF THE 13. ID.; ID.; ID.; RESTRICTIVE AND CONSERVATIVE
FINANCIAL CAPACITY OF THE BIDDER MUST BE AT APPLICATION OF THE RULES AND PROCEDURE IS
THE TIME THE BID IS SUBMITTED. [T]he NECESSARY. A restrictive and conservative application
determination of whether or not a bidder is pre-qualified to of the rules and procedures of public bidding is necessary
undertake the project requires an evaluation of the financial not only to protect the impartiality and regularity of the
capacity of the said bidder at the time the bid is proceedings but also to ensure the financial and technical
submitted based on the required documents presented by reliability of the project. It has been held that: "The basic
the bidder. The PBAC should not be allowed to speculate rule in public bidding is that bids should be evaluated
on the future financial ability of the bidder to undertake the based on the required documents submitted before and not
project on the basis of documents submitted. This would after the opening of bids. Otherwise, the foundation of a fair
open doors to abuse and defeat the very purpose of a and competitive public bidding would be defeated. Strict
public bidding. This is especially true in the case at bar observance of the rules, regulations, and guidelines of the
which involves the investment of billions of pesos by the bidding process is the only safeguard to a fair, honest and
project proponent. The relevant government authority is competitive public bidding." ACIDSc

duty-bound to ensure that the awardee of the contract


14. ID.; ID.; ID.; PURPOSE. By its very nature, public
possesses the minimum required financial capability to
bidding aims to protect the public interest by giving the
complete the project. To allow the PBAC to estimate the
public the best possible advantages through open
bidder's future financial capability would not secure the
competition. Thus: "Competition must be legitimate, fair
viability and integrity of the project.
and honest. In the field of government contract law,
12. ID.; ID.; ID.; ID.; ID.; IF THE BIDDER FALLS SHORT competition requires, not only bidding upon a common
OF THE MINIMUM AMOUNTS REQUIRED, THE SAID standard, a common basis, upon the same thing, the same
BIDDER SHOULD BE DISQUALIFIED. Thus, if subject matter, the same undertaking,' but also that it be
the maximum amount of equity that a bidder may invest in legitimate, fair and honest; and not designed to injure or
the project at the time the bids are submitted falls short of defraud the government."
Page 33 of 458

15. ID.; ID.; ID.; ALL BIDDERS MUST BE ON EQUAL proposals previously submitted by other bidders. The
FOOTING ON THE CONTRACT RIDDED UPON. An alterations and modifications in the contract executed
essential element of a publicly bidded contract is that all between the government and the winning bidder must be
bidders must be on equal footing. Not simply in terms of such as to render such executed contract to be an entirely
application of the procedural rules and regulations imposed different contract from the one that was bidded upon.
by the relevant government agency, but more importantly,
17. ID.; ID.; ID.; ID.; SIGNIFICANT AMENDMENTS IN THE
on the contract bidded upon. Each bidder must be able to
PIATCO'S DRAFT CONCESSION AGREEMENT; TYPES
bid on the same thing. The rationale is obvious. If the
OF FEES THAT MAY BE IMPOSED AND COLLECTED
winning bidder is allowed to later include or modify certain
BY PIATCO. When taken as a whole, the changes
provisions in the contract awarded such that the contract is
under the 1997 Concession Agreement with respect to
altered in any material respect, then the essence of fair
reduction in the types of fees that are subject to MIAA
competition in the public bidding is destroyed. A public
regulation and the relaxation of such regulation with
bidding would indeed be a farce if after the contract is
respect to other fees are significant amendments that
awarded, the winning bidder may modify the contract and
substantially distinguish the draft Concession Agreement
include provisions which are favorable to it that were not
from the 1997 Concession Agreement. The 1997
previously made available to the other bidders.
Concession Agreement, in this respect, clearly gives
PIATCO more favorable terms than what was available to
16. ID.; ID.; ID.; AMENDMENTS TO CONTRACT BIDDED; other bidders at the time the contract was bidded out. It is
WINNING BIDDER IS NOT PRECLUDED FROM not very difficult to see that the changes in the 1997
MODIFYING OR AMENDING CERTAIN PROVISIONS OF Concession Agreement translate to direct and concrete
THE CONTRACT THAT DOES NOT CONSTITUTE financial advantages for PIATCO which were not available
SUBSTANTIAL OR MATERIAL AMENDMENTS. While at the time the contract was offered for bidding. It cannot
we concede that a winning bidder is not precluded from be denied that under the 1997 Concession Agreement only
modifying or amending certain provisions of the contract "Public Utility Revenues" are subject to MIAA regulation.
bidded upon, such changes must not constitute substantial Adjustments of all other fees imposed and collected by
or material amendments that would alter the basic PIATCO are entirely within its control. Moreover, with
parameters of the contract and would constitute a denial to respect to terminal fees, under the 1997 Concession
the other bidders of the opportunity to bid on the same Agreement, the same is further subject to "Interim
terms. Hence, the determination of whether or not a Adjustments" not previously stipulated in the draft
modification or amendment of a contract bidded out Concession Agreement. Finally, the change in the currency
constitutes a substantial amendment rests on whether the stipulated for "Public Utility Revenues" under the 1997
contract, when taken as a whole, would contain Concession Agreement, except terminal fees, gives
substantially different terms and conditions that would have
the effect of altering the technical and/or financial
Page 34 of 458

PIATCO an added benefit which was not available at the amendment to the 1997 Concession Agreement because it
time of bidding. acHCSD grants PIATCO a financial advantage or benefit which was
not previously made available during the bidding process.
18. ID.; ID.; ID.; ID.; ID.; ASSUMPTION BY THE
This financial advantage is a significant modification that
GOVERNMENT OF THE LIABILITIES OF PIATCO IN THE
translates to better terms and conditions for PIATCO.
EVENT OF THE LATTER'S DEFAULT TRANSLATES
BETTER TERMS AND CONDITION FOR PIATCO. 19. ID.; ID.; ID.; ID.; SHOULD ALWAYS CONFORM TO
Under the draft Concession Agreement, default by PIATCO THE GENERAL PUBLIC POLICY. [T]his Court
of any of its obligations to creditors who have provided, maintains that amendments to the contract bidded upon
loaned or advanced funds for the NAIA IPT III project does should always conform to the general policy on public
not result in the assumption by the Government of these bidding if such procedure is to be faithful to its real nature
liabilities. In fact, nowhere in the said contract does default and purpose. By its very nature and characteristic,
of PIATCO's loans figure in the agreement. Such default competitive public bidding aims to protect the public
does not directly result in any concomitant right or interest by giving the public the best possible advantages
obligation in favor of the Government. However, the 1997 through open competition. It has been held that the three
Concession Agreement . . . [u]nder . . . Section 4.04 in principles in public bidding are (1) the offer to the public; (2)
relation to the definition of "Attendant Liabilities," default by opportunity for competition; and (3) a basis for the exact
PIATCO of its loans used to finance the NAIA IPT III comparison of bids. A regulation of the matter which
project triggers the occurrence of certain events that leads excludes any of these factors destroys the distinctive
to the assumption by the Government of the liability for the character of the system and thwarts the purpose of its
loans. Only in one instance may the Government escape adoption. These are the basic parameters which every
the assumption of PIATCO's liabilities, i.e., when the awardee of a contract bidded out must conform to,
Government so elects and allows a qualified operator to requirements of financing and borrowing notwithstanding.
take over as Concessionaire. However, this circumstance Thus, upon a concrete showing that, as in this case, the
is dependent on the existence and availability of a qualified contract signed by the government and the contract
operator who is willing to take over the rights and awardee is an entirely different contract from the contract
obligations of PIATCO under the contract, a circumstance bidded, courts should not hesitate to strike down said
that is not entirely within the control of the Government. contract in its entirety for violation of public policy on public
Without going into the validity of this provision at this bidding. A strict adherence on the principles, rules and
juncture, suffice it to state that Section 4.04 of the 1997 regulations on public bidding must be sustained if only to
Concession Agreement may be considered a form of preserve the integrity and the faith of the general public on
security for the loans PIATCO has obtained to finance the the procedure.
project, an option that was not made available in the draft
20. ID.; ID.; ID.; ID.; ANY GOVERNMENT ACTION WHICH
Concession Agreement. Section 4.04 is an important
PERMITS ANY SUBSTANTIAL VARIANCE THEREOF IS
Page 35 of 458

A GRAVE ABUSE OF DISCRETION. Public bidding is a financial benefit to PIATCO which may have altered the
standard practice for procuring government contracts for technical and financial parameters of other bidders had
public service and for furnishing supplies and other they known that such terms were available.
materials. It aims to secure for the government the lowest
22. ID.; ID.; BOT LAW; PURPOSE. One of the main
possible price under the most favorable terms and
impetus for the enactment of the BOT Law is the lack of
conditions, to curtail favoritism in the award of government
government funds to construct the infrastructure and
contracts and avoid suspicion of anomalies and it places all
development projects necessary for economic growth and
bidders in equal footing. Any government action which
development. This is why private sector resources are
permits any substantial variance between the conditions
being tapped in order to finance these projects. The BOT
under which the bids are invited and the contract executed
law allows the private sector to participate, and is in fact
after the award thereof is a grave abuse of discretion
encouraged to do so by way of incentives, such as
amounting to lack or excess of jurisdiction which warrants
minimizing, the unstable flow of returns, provided that the
proper judicial action.
CaHcET
government would not have to unnecessarily expend
21. ID.; ID.; ID.; ID.; DIRECTLY TRANSLATES scarcely available funds for the project itself. As such,
CONCRETE FINANCIAL ADVANTAGES TO PIATCO direct guarantee, subsidy and equity by the government in
THAT WERE PREVIOUSLY NOT AVAILABLE DURING these projects are strictly prohibited. This is but logical for if
THE BIDDING PROCESS. The fact that the . . . the government would in the end still be at a risk of paying
substantial amendments were made on the 1997 the debts incurred by the private entity in the BOT projects,
Concession Agreement renders the same null and void for then the purpose of the law is subverted.
being contrary to public policy. These amendments convert
23. ID.; ID.; ID.; CONDITIONS FOR THE ACCEPTANCE
the 1997 Concession Agreement to an entirely different
OF THE UNSOLICITED PROPOSAL FOR A BOT
agreement from the contract bidded out or the draft
PROJECT. The BOT Law and its implementing rules
Concession Agreement. It is not difficult to see that the
provide that in order for an unsolicited proposal for a BOT
amendments on (1) the types of fees or charges that are
project may be accepted, the following conditions must first
subject to MIAA regulation or control and the extent thereof
be met: (1) the project involves a new concept in
and (2) the assumption by the Government, under certain
technology and/or is not part of the list of priority
conditions, of the liabilities of PIATCO directly translates
projects, (2) no direct government guarantee, subsidy or
concrete financial advantages to PIATCO that were
equity is required, and (3) the government agency or local
previously not available during the bidding process. These
government unit has invited by publication other interested
amendments cannot be taken as merely supplements to or
parties to a public bidding and conducted the same. The
implementing provisions of those already existing in the
failure to meet any of the above conditions will result in the
draft Concession Agreement. The amendments discussed
denial of the proposal.
above present new terms and conditions which provide
Page 36 of 458

24. ID.; ID.; ID.; STRICTLY PROHIBITS DIRECT This is a form of direct government guarantee. . . . This
GOVERNMENT GUARANTEE, SUBSIDY AND EQUITY IN Court has long and consistently adhered to the legal maxim
UNSOLICITED PROPOSAL. It is further provided that that those that cannot be done directly cannot be done
the presence of direct government guarantee, subsidy or indirectly. To declare the PIATCO contracts valid despite
equity will "necessarily, disqualify a proposal from being the clear statutory prohibition against a direct government
treated and accepted as an unsolicited proposal." The BOT guarantee would not only make a mockery of what the BOT
Law clearly and strictly prohibits direct government Law seeks to prevent which is to expose the
guarantee, subsidy and equity in unsolicited proposals that government to the risk of incurring a monetary obligation
the mere inclusion of a provision to that effect is fatal and is resulting from a contract of loan between the project
sufficient to deny the proposal. It stands to reason proponent and its lenders and to which the Government is
therefore that if a proposal can be denied by reason of the not a party to but would also render the BOT
existence of direct government guarantee, then its Law useless for what it seeks to achieve to make use of
inclusion in the contract executed after the said proposal the resources of the private sector in the "financing,
has been accepted is likewise sufficient to invalidate the operation and maintenance of infrastructure and
contract itself. A prohibited provision, the inclusion of which development projects" which are necessary for national
would result in the denial of a proposal cannot, and should growth and development but which the government,
not, be allowed to later on be inserted in the contract unfortunately, could ill-afford to finance at this point in time.
resulting from the said proposal. The basic rules of justice
26. ID.; CONSTITUTIONAL LAW; POLICE POWER;
and fair play alone militate against such an occurrence and
TEMPORARY TAKEOVER OF BUSINESS AFFECTED
must not, therefore, be countenanced particularly in this
WITH PUBLIC INTEREST; GOVERNMENT IS NOT
instance where the government is exposed to the risk of
REQUIRED TO COMPENSATE THE PRIVATE ENTITY-
shouldering hundreds of million of dollars in debt.
OWNER. Article XII, Section 17 of the 1987
CSDcTA

Constitution . . . pertains to the right of the State in times of


25. ID.; ID.; ID.; ID.; VIOLATED IN CASE AT BAR. The national emergency, and in the exercise of its police power,
proscription against government guarantee in any form is to temporarily take over the operation of any business
one of the policy considerations behind the BOT Law. affected with public interest. In the 1986 Constitutional
Clearly, in the present case, the ARCA obligates the Commission, the term "national emergency" was defined to
Government to pay for all loans, advances and obligations include threat from external aggression, calamities or
arising out of financial facilities extended to PIATCO for the national disasters, but not strikes "unless it is of such
implementation of the NAIA IPT III project should PIATCO proportion that would paralyze government service." The
default in its loan obligations to its Senior Lenders and the duration of the emergency itself is the determining factor as
latter fails to appoint a qualified nominee or transferee. This to how long the temporary takeover by the government
in effect would make the Government liable for PIATCO's would last. The temporary takeover by the government
loans should the conditions as set forth in the ARCA arise.
Page 37 of 458

extends only to the operation of the business and not to the 28. ID.; ID.; NATIONAL ECONOMY AND
ownership thereof. As such the government is not required PATRIMONY; CONSTITUTION STRICTLY REGULATES
to compensate the private entity-owner of the said MONOPOLIES. A monopoly is "a privilege or peculiar
business as there is no transfer of ownership, whether advantage vested in one or more persons or companies,
permanent or temporary. The private entity-owner affected consisting in the exclusive right (or power) to carry on a
by the temporary takeover cannot, likewise, claim just particular business or trade, manufacture a particular
compensation for the use of the said business and its article, or control the sale of a particular commodity." The
properties as the temporary takeover by the government is 1987 Constitution strictly regulates monopolies, whether
in exercise of its police power and not of its power of private or public, and even provides for their prohibition if
eminent domain. public interest so requires. . . . Clearly, monopolies are
not per se prohibited by the Constitution but may be
27. ID.; ID.; ID.; ID.; ID.; CANNOT BE CONTRAVENED BY
permitted to exist to aid the government in carrying on an
MERE CONTRACTUAL STIPULATION. PIATCO
enterprise or to aid in the performance of various services
cannot, by mere contractual stipulation, contravene the
and functions in the interest of the public. Nonetheless, a
Constitutional provision on temporary government takeover
determination must first be made as to whether public
and obligate the government to pay "reasonable cost for
interest requires a monopoly. As monopolies are subject to
the use of the Terminal and/or Terminal Complex." Article
abuses that can inflict severe prejudice to the public, they
XII, Section 17 of the 1987 Constitution envisions a
are subject to a higher level of State regulation than an
situation wherein the exigencies of the times necessitate
ordinary business undertaking. ETHIDa
the government to "temporarily take over or direct the
operation of any privately owned public utility or business 29. ID.; ID.; ID.; ID.; PRIVILEGE GIVEN TO PIATCO
affected with public interest." It is the welfare and interest SHOULD BE SUBJECT TO REASONABLE REGULATION
of the public which is the paramount consideration in AND SUPERVISION BY THE GOVERNMENT. The
determining whether or not to temporarily take over a operation of an international passenger airport terminal is
particular business. Clearly, the State in effecting the no doubt an undertaking imbued with public interest. In
temporary takeover is exercising its police power. Police entering into a Build-Operate-and-Transfer contract for the
power is the "most essential, insistent, and illimitable of construction, operation and maintenance of NAIA IPT III,
powers." Its exercise therefore must not be unreasonably the government has determined that public interest would
hampered nor its exercise be a source of obligation by the be served better if private sector resources were used in its
government in the absence of damage due to arbitrariness construction and an exclusive right to operate be granted to
of its exercise. Thus, requiring the government to pay the private entity undertaking the said project, in this case
reasonable compensation for the reasonable use of the PIATCO. Nonetheless, the privilege given to PIATCO is
property pursuant to the operation of the business subject to reasonable regulation and supervision by the
contravenes the Constitution. Government through the MIAA, which is the government
Page 38 of 458

agency authorized to operate the NAIA complex, as well as not just by the parties thereto but also by third parties.
DOTC, the department to which MIAA is attached. This is PIATCO cannot, by law and certainly not by contract,
in accord with the Constitutional mandate that a monopoly render a valid and binding contract nugatory. PIATCO, by
which is not prohibited must be regulated. the mere expedient of claiming an exclusive right to
operate, cannot require the Government to break its
30. ID.; ID.; ID.; ID.; OPERATION OF PUBLIC UTILITY
contractual obligations to the service providers. In contrast
CANNOT BE DONE IN AN ARBITRARY MANNER TO
to the arrastre and stevedoring service providers in the
THE DETRIMENT OF THE PUBLIC. While it is the
case of Anglo-Fil Trading Corporation v. Lazaro whose
declared policy of the BOT Law to encourage private sector
contracts consist of temporary hold-over permits, the
participation by "providing a climate of minimum
affected service providers in the cases at bar, have a valid
government regulations," the same does not mean that
and binding contract with the Government, through MIAA,
Government must completely surrender its sovereign
whose period of effectivity, as well as the other terms and
power to protect public interest in the operation of a public
conditions thereof cannot be violated.
utility as a monopoly. The operation of said public utility
can not be done in an arbitrary manner to the detriment of 32. ID.; ID.; ID.; ID.; MIAA SHOULD ENSURE THAT
the public which it seeks to serve. The right granted to the WHOEVER BY CONTRACT IS GIVEN THE RIGHT TO
public utility may be exclusive but the exercise of the right OPERATE NAIA IPT III WILL DO SO WITHIN THE
cannot run riot. Thus, while PIATCO may be authorized to BOUNDS OF THE LAW. In fine, the efficient functioning
exclusively operate NAIA IPT III as an international of NAIA IPT III is imbued with public interest. The
passenger terminal, the Government, through the MIAA, provisions of the 1997 Concession Agreement and the
has the right and the duty to ensure that it is done in accord ARCA did not strip government, thru the MIAA, of its right
with public interest. PIATCO's right to operate NAIA IPT III to supervise the operation of the whole NAIA complex,
cannot also violate the rights of third parties. including NAIA IPT III. As the primary government agency
tasked with the job, it is MIAA's responsibility to ensure that
31. ID.; ID.; BILL OF RIGHTS NON-IMPAIRMENT OF
whoever by contract is given the right to operate NAIA IPT
OBLIGATIONS OF CONTRACT; PIATCO, BY CLAIMING
III will do so within the bounds of the law and with due
AN EXCLUSIVE RIGHT TO OPERATE, CANNOT
regard to the rights of third parties and above all, the
REQUIRE THE GOVERNMENT TO BREAK ITS
interest of the public.
TSHIDa
CONTRACTUAL OBLIGATIONS TO THE SERVICE
PROVIDERS. We hold that while the service providers PANGANIBAN, J., separate opinion:
presently operating at NAIA Terminal 1 do not have an
1. REMEDIAL LAW; SPECIAL CIVIL ACTION;
absolute right for the renewal or the extension of their
PROHIBITION; DIRECT RESORT TO THE SUPREME
respective contracts, those contracts whose duration
COURT BY THE EMPLOYEES WHO FEARED LOSS OF
extends beyond NAIA IPT III's In-Service-Date should not
THEIR JOBS IS JUSTIFIED. The Court has, in the past,
be unduly prejudiced. These contracts must be respected
Page 39 of 458

held that questions relating to gargantuan government LEGAL QUESTIONS. As will be discussed at length
contracts ought to be settled without delay. This holding later, the Piatco contracts are indeed void in their entirety;
applies with greater force to the instant cases. Respondent thus, a resort to the aforesaid provision on arbitration is
Piatco is partly correct in averring that petitioners can unavailing. Besides, petitioners and petitioners-in-
obtain relief from the regional trial courts via an action to intervention have pointed out that, even
annul the contracts. Nevertheless, the unavoidable granting arguendo that the arbitration clause remained a
consequence of having to await the rendition and the valid provision, it still cannot bind them inasmuch as they
finality of any such judgment would be a prolonged state of are not parties to the Piatco contracts. And in the final
uncertainty that would be prejudicial to the nation, the analysis, it is unarguable that the arbitration process
parties and the general public. And, in light of the feared provided for under Section 10.02 of the Amended and
loss of jobs of the petitioning workers, consequent to the Restated Concession Agreement (ARCA), to be
inevitable pretermination of contracts of the petitioning undertaken by a panel of three (3) arbitrators appointed in
service providers that will follow upon the heels of the accordance with the Rules of Arbitration of the International
impending opening of NAIA Terminal III, the need for relief Chamber of Commerce, will not be able to address,
is patently urgent, and therefore, direct resort to this Court determine and definitively resolve the constitutional and
through the special civil action of prohibition is thus legal questions that have been raised in the Petitions
justified. before us.
4. ID.; ID.; LOCUS STANDI; CITIZEN, TAXPAYER AND
MEMBERS OF THE HOUSE OF REPRESENTATIVES
2. ID.; ID.; ID.; DISPOSITION THEREOF ULTIMATELY
ARE SUFFICIENTLY CLOTHED WITH STANDING TO
RUNS ON QUESTIONS OF LAW; CASE AT BAR.
BRING SUIT QUESTIONING THE VALIDITY OF
Contrary to Piatco's argument that the resolution of the
CONTRACT AFFECTING PUBLIC INTEREST. Given
issues raised in the Petitions will require delving into factual
this Court's previous decisions in cases of similar import,
questions, I submit that their disposition ultimately turns on
no one will seriously doubt that, being taxpayers and
questions of law. Further, many of the significant and
members of the House of Representatives, Petitioners
relevant factual questions can be easily addressed by an
Baterina et al. have locus standi to bring the Petition in GR
examination of the documents submitted by the parties. In
No. 155547. In Albano v. Reyes, this Court held that the
any event, the Petitions raise some novel questions
petitioner therein, suing as a citizen, taxpayer and member
involving the application of the amended BOT Law, which
of the House of Representatives, was sufficiently clothed
this Court has seen fit to tackle.
with standing to bring the suit questioning the validity of the
3. ID.; CIVIL PROCEDURE; ARBITRATION assailed contract. The Court cited the fact that public
PROCEEDINGS; CANNOT ADDRESS, DETERMINE AND interest was involved, in view of the important role of the
DEFINITIVELY RESOLVE THE CONSTITUTIONAL AND Manila International Container Terminal (MICT) in the
Page 40 of 458

country's economic development and the magnitude of the employees) of various service providers that have (1)
financial consideration. This, notwithstanding the fact that existing concession agreements with the MIAA to provide
expenditure of public funds was not required under the airport services necessary to the operation of the NAIA and
assailed contract. CcEHaI (2) service agreements to furnish essential support
services to the international airlines operating at the NAIA.
5. ID.; ID.; ID.; MEMBERS OF HOUSE OF
Messrs. Lopez et al. are employees of the MIAA. These
REPRESENTATIVES ARE DEPRIVED OF DISCRETION;
petitioners (Messrs. Agan et al. and Messrs. Lopez et al.)
CASE AT BAR. In the cases presently under
are confronted with the prospect of being laid off from their
consideration, petitioners' personal and substantial interest
jobs and losing their means of livelihood when their
in the controversy is shown by the fact that certain
employer-companies are forced to shut down or otherwise
provisions in the Piatco contracts create obligations on the
retrench and cut back on manpower. Such development
part of government (through the DOTC and the MIAA) to
would result from the imminent implementation of certain
disburse public funds without prior congressional
provisions in the contracts that tend toward the creation of
appropriations. Petitioners thus correctly assert that the
a monopoly in favor of Piatco, its subsidiaries and related
injury to them has a twofold aspect: (1) they are adversely
companies.
affected as taxpayers on account of the illegal
disbursement of public funds; and (2) they are 7. ID.; ID.; ID.; SERVICE PROVIDERS CLAIM TO BE
prejudiced qua legislators, since the contractual provisions DEPRIVED OF THEIR PROPERTY AND OF THE
requiring the government to incur expenditures without LIBERTY TO CONTRACT WITHOUT DUE PROCESS OF
appropriations also operate as limitations upon the LAW. Petitioners-in-intervention are service providers in
exclusive power and prerogative of Congress over the the business of furnishing airport-related services to
public purse. As members of the House of international airlines and passengers in the NAIA and are
Representatives, they are actually deprived of discretion therefore competitors of Piatco as far as that line of
insofar as the inclusion of those items of expenditure in the business is concerned. On account of provisions in the
budget is concerned. To prevent such encroachment upon Piatco contracts, petitioners-in-intervention have to enter
the legislative privilege and obviate injury to the institution into a written contract with Piatco so as not to be shut out
of which they are members, petitioners-legislators of NAIA Terminal III and barred from doing business there.
have locus standi to bring suit. Since there is no provision to ensure or safeguard free and
fair competition, they are literally at its mercy. They claim
6. ID.; ID.; ID.; EMPLOYEES ARE CONFRONTED WITH
injury on account of their deprivation of property (business)
THE PROSPECT OF BEING LAID OFF FROM THEIR
and of the liberty to contract, without due process of law.
JOBS. Messrs. Agan et al. and Lopez et al., are likewise
taxpayers and thus possessed of standing to challenge the 8. ID.; ID.; ID.; IN CASES OF TRANSCENDENTAL
illegal disbursement of public funds. Messrs. Agan et al., in IMPORTANCE, THE SUPREME COURT MAY RELAX
particular, are employees (or representatives of THE STANDING REQUIREMENTS AND ALLOW A SUIT
Page 41 of 458

TO PROSPER. And even if petitioners and petitioners- bidders would be entitled to have their bids opened,
in-intervention were not sufficiently clothed with legal evaluated and appreciated. On the other hand, disqualified
standing, I have at the outset already established that, bidders are to be informed of the reason for their
given its impact on the public and on national interest, this disqualification. This procedure was confirmed and
controversy is laden with transcendental importance and reiterated in the Bid Documents, which I quote thus:
constitutional significance. Hence, I do not hesitate to "Prequalified proponents will be considered eligible to
adopt the same position as was enunciated in Kilosbayan move to second stage technical proposal evaluation. The
v. Guingona Jr. that "in cases of transcendental second and third envelopes of pre-disqualified proponents
importance, the Court may relax the standing requirements will be returned."
and allow a suit to prosper even when there is no direct
11. ID.; ID.; ID.; ID.; PROPONENT MUST PROVE THAT IT
injury to the party claiming the right of judicial review."
IS ABLE TO RAISE THE MINIMUM AMOUNT REQUIRED
9. POLITICAL LAW; ADMINISTRATIVE LAW; REPUBLIC FOR THE PROJECT. Aside from complying with the
ACT NO. 6957 (BUILD-OPERATE-AND TRANSFER or legal and technical requirements (track record or
BOT LAW); PUBLIC BIDDING; BIDDER MUST SATISFY experience of the firm and its key personnel), a project
THE MINIMUM REQUIREMENTS AND MEET THE proponent desiring to prequalify must also demonstrate its
TECHNICAL, FINANCIAL, ORGANIZATIONAL AND financial capacity to undertake the projects. To establish
LEGAL STANDARDS. I must emphasize that the law such capability, a proponent must prove that it is able to
requires the award of a BOT project to the bidder that has raise the minimum amount of equity required for the project
satisfied the minimum requirements; and met the technical, and to procure the loans or financing needed for it. Since
financial, organizational and legal standards provided in the the minimum amount of equity for the project was set at 30
BOT Law. DAHaTc percent of the minimum project cost of US$350 million, the
minimum amount of equity required of any proponent stood
10. ID.; ID.; ID.; ID.; MUST BE CONDUCTED UNDER A
at US$105 million. Converted to pesos at the exchange
TWO-STAGE SYSTEM. Section 5 of this statute
rate then of P26.239 to US$1.00 (as quoted by the Bangko
requires that the price challenge via public bidding "must
Sentral ng Pilipinas), the peso equivalent of the minimum
be conducted under a two-envelope/two-stage system: the
equity was P2,755,095,000.
first envelope to contain the technical proposal and the
second envelope to contain the financial proposal." 12. ID.; ID.; ID.; ID.; ID.; NOT COMPLIED WITH IN CASE
Moreover, the 1994 Implementing Rules and Regulations AT BAR. However, the combined equity or net worth of
(IRR) provide that only those bidders that have passed the the Paircargo consortium stood at only P558,384,871.55.
prequalification stage are permitted to have their two This amount was only slightly over 6 percent of the
envelopes reviewed. In other words, prospective bidders minimum project cost and very much short of the required
must prequalify by submitting their prequalification minimum equity, which was equivalent to 30 percent of the
documents for evaluation; and only the pre-qualified
Page 42 of 458

project cost. Such deficiency should have immediately VERY OUTSET, THE AWARD OF CONCESSION WAS
caused the disqualification of the Paircargo consortium. VOID. Inasmuch as the Paircargo consortium did not
possess the minimum equity equivalent to 30 percent of
13. ID.; ID.; ID.; ID.; RULES, REGULATIONS AND
the minimum project cost, it should not have been
GUIDELINES MUST BE STRICTLY APPLIED; VIOLATED
prequalified or allowed to participate further in the bidding.
IN CASE AT BAR. By virtue of the prequalified status
The Prequalification and Bidding Committee (PBAC)
conferred upon the Paircargo, Undersecretary Cal's
should therefore not have opened the two envelopes of the
findings in effect relieved the consortium of the need to
consortium containing its technical and financial proposals;
comply with the financial capability requirement imposed
required AEDC to match the consortium's bid; or awarded
by the BOT Law and IRR. This position is unmistakably
the Concession Agreement to the consortium's successor-
and squarely at odds with the Supreme Court's consistent
in-interest, Piatco. As there was effectively no public
doctrine emphasizing the strict application of pertinent
bidding to speak of, the entire bidding process having been
rules, regulations and guidelines for the public bidding
flawed and tainted from the very outset, therefore, the
process, in order to place each bidder actual or potential
award of the concession to Paircargo's successor Piatco
on the same footing. Thus, it is unarguably irregular and
was void, and the Concession Agreement executed with
contrary to the very concept of public bidding to permit a
the latter was likewise void ab initio. For this reason, Piatco
variance between the conditions under which bids are
cannot and should not be allowed to benefit from that
invited and those under which proposals are submitted and
Agreement. ICDcEA
approved.
16. ID.; ID.; ID.; ID.; PROTECTION OF THE
PROPRIETARY INFORMATION IS APPLICABLE TO THE
14. ID.; ID.; ID.; ID.; ESSENCE. Republic v. ORIGINATOR OF THE UNSOLICITED PROPOSAL
Capulong teaches that if one bidder is relieved from having ONLY. The "proprietary information" referred to in
to conform to the conditions that impose some duty upon it, Section 11.6 of the IRR pertains only to the proprietary
that bidder is not contracting in fair competition with those information of the originator of an unsolicited proposal, and
bidders that propose to be bound by all conditions. The not to those belonging to a challenger. The reason for the
essence of public bidding is, after all, an opportunity for fair protection accorded proprietary information at all is the fact
competition and a basis for the precise comparison of bids. that, according to Section 4-A of the BOT Law as
Thus, each bidder must bid under the same conditions; and amended, a proposal qualifies as an "unsolicited proposal"
be subject to the same guidelines, requirements and when it pertains to a project that involves "a new concept
limitations. The desired result is to be able to determine the or technology," and/or a project that is not on the
best offer or lowest bid, all things being equal. government's list of priority projects.
15. ID.; ID.; ID.; ID.; SINCE THE ENTIRE BIDDING 17. ID.; ID.; ID.; ID.; ID.; RATIONALE. To be considered
PROCESS WAS FLAWED. AND TAINTED FROM THE as utilizing a new concept or technology, a project must
Page 43 of 458

involve the possession of exclusive rights (worldwide or 19. ID.; ID.; ID.; DEFINITE AND FIRM TIMETABLE FOR
regional) over a process; or possession of intellectual THE SUBMISSION OF THE REQUIREMENTS TO
property rights over a design, methodology or engineering EXPOSE AND WEED OUT UNQUALIFIED
concept. Patently, the intent of the BOT Law is to PROPONENTS. The purpose of having a definite and
encourage individuals and groups to come up with creative firm timetable for the submission of the requirements is not
innovations, fresh ideas and new technology. Hence, the only to prevent delays in the project implementation, but
significance and necessity of protecting proprietary also to expose and weed out unqualified proponents, who
information in connection with unsolicited proposals. And to might have unceremoniously slipped through the earlier
make the encouragement real, the law also extends to prequalification process, by compelling them to put their
such individuals and groups what amounts to a "right of money where their mouths are, so to speak.
first refusal" to undertake the project they conceptualized,
20. ID.; ID.; ID.; ID.; EASILY CIRCUMVENTED BY
involving the use of new technology or concepts, through
MERELY POSTPONING THE ACTUAL ISSUANCE OF
the mechanism of matching a price challenge.
THE NOTICE OF AWARD. Nevertheless, this provision
18. ID.; ID.; ID.; ID.; BIDDER MUST BE GIVEN ACCESS can be easily circumvented by merely postponing the
TO THE ASSUMPTION AND THE CALCULATIONS THAT actual issuance of the Notice of Award, in order to give the
WENT INTO CRAFTING THE COMPETING BID. A favored proponent sufficient time to comply with the
competing bid is never just any figure conjured from out of requirements. Hence, to aver or minimize the manipulation
the blue; it is arrived at after studying economic, financial, of the post-bidding process, the IRR not only set out the
technical and other factors; it is likewise based on certain precise sequence of events occurring between the
assumptions as to the nature of the business, the market completion of the evaluation of the technical bids and the
potentials, the probable demand for the product or service, issuance of the Notice of Award, but also specified the
the future behavior of cost items, political and other risks, timetables for each such event. Definite allowable
and so on. It is thus self-evident that in order to be able to extensions of time were provided for, as were the
intelligently match a bid or price challenge, a bidder must consequences of a failure to meet a particular deadline.
be given access to the assumptions and the calculations
21. ID.; ID.; ID.; ID.; TO DISCOURAGE COLLUSION AND
that went into crafting the competing bid. In this instance,
REDUCE THE OPPORTUNITY FOR AGENTS OF
the financial and technical proposals of Piatco would have
GOVERNMENT TO ABUSE THEIR DISCRETION. The
provided AEDC with the necessary information to enable it
highly regulated time-frames within which the agents of
to make a reasonably informed matching bid. To put it
government were to act evinced the intent to impose upon
more simply, a bidder unable to access the competitor's
them the duty to act expeditiously throughout the process,
assumptions will never figure out how the competing bid
to the end that the project be prosecuted and implemented
came about; requiring him to "counter-propose" is like
without delay. This regulated scenario was likewise
having him shoot at a target in the dark while blindfolded.
intended to discourage collusion and substantially reduce
Page 44 of 458

the opportunity for agents of government to abuse their bespeaks an unmistakable disregard, if not disdain, by the
discretion in the course of the award process. DcTSHa persons in charge of the award process for the time
limitations prescribed by the IRR. Their attitude flies in the
22. ID.; ID.; ID.; PROCEDURE FOR THE AWARD OF THE
face of this Court's solemn pronouncement in Republic v.
PROJECTS. In particular, Section 9.1 of the 1994 IRR
Capulong that "strict observance of the rules, regulations
prescribed that within 30 calendar days from the time the
and guidelines of the bidding process is the only safeguard
second-stage evaluation shall have been completed, the
to a fair, honest and competitive public bidding." From the
Committee must come to a decision whether or not to
foregoing, the only conclusion that can possibly be drawn
award the contract and, within 7 days therefrom, the Notice
is that the BOT law and its IRR were repeatedly violated
of Award must be approved by the head of agency or local
with unmitigated impunity and by agents of government,
government unit (LGU) concerned, and its issuance must
no less! On account of such violation, the award of the
follow within another 7 days thereafter. Section 9.2 of the
contract to Piatco, which undoubtedly gained time and
IRR set the procedure applicable to projects involving
benefited from the delays, must be deemed null and void
substantial government undertakings as follows: Within 7
from the beginning.
days after the decision to award is made, the draft contract
shall be submitted to the ICC for clearance on a no- 24. ID.; ID.; ID.; CHANGES TO THE CONTRACT BIDDED
objection basis. If the draft contract includes government OUT RESULTED IN A SUBSTANTIALLY DIFFERENT
undertakings already previously approved, then the CONTRACT. After the PBAC made its decision on
submission shall be for information only. However, should December 11, 1996 to award the contract to Piatco, the
there be additional or new provisions different from the latter negotiated changes to the Contract bidded out and
original government undertakings, the draft shall have to be ended up with what amounts to a substantially new
reviewed and approved. The ICC has 15 working days to contractwithout any public bidding. This Contract was
act thereon, and unless otherwise specified, its failure to subsequently further amended four more times through
act on the contract within the specified time frame signifies negotiation and without any bidding. Thus, the contract
that the agency or LGU may proceed with the award. The actually executed between Piatco and DOTC/MIAA on July
head of agency or LGU shall approve the Notice of Award 12, 1997 (the Concession Agreement or "CA") differed
within seven days of the clearance by the ICC on a no- from the contract bidded out[.] It goes without saying that
objection basis, and the Notice itself has to be issued the amendment of the Contract bidded out (the DCA or
within seven days thereafter. draft concession agreement) in such substantial
manner, without any public bidding, and after the bidding
23. ID.; ID.; ID.; VIOLATED IN CASE AT BAR. Despite
process had been concluded on December 11, 1996 is
the clear timetables set out in the IRR, several lengthy and
violative of public policy on public biddings, as well as the
still-unexplained delays occurred in the award process, as
spirit and intent of the BOT Law. The whole point of going
can be observed from the presentation made by the
through the public bidding exercise was completely lost. Its
counsel for public respondents. [T]he chronology of events
Page 45 of 458

very rationale was totally subverted by permitting Piatco to INTACT AND NOT BE SUBJECT TO FURTHER
amend the contract for which public bidding had already NEGOTIATION. The BOT Law cannot be said to allow
been concluded. Competitive bidding aims to obtain the the negotiation of contractual stipulations resulting in a
best deal possible by fostering transparency and substantially new contract after the bidding process and
preventing favoritism, collusion and fraud in the awarding price challenge had been concluded. In fact, the BOT Law,
of contracts. That is the reason why procedural rules in recognition of the time, money and effort invested in an
pertaining to public bidding demand strict observance. unsolicited proposal, accords its originator the privilege of
matching the challenger's bid. Section 4-A of the BOT
Law specifically refers to a "lower price proposal" by a
25. ID.; ID.; ID.; SUBSTANTIVE AMENDMENTS TO A competing bidder; and to the right of the original proponent
CONTRACT FOR WHICH A PUBLIC BIDDING HAS "to match the price" of the challenger. Thus, only the price
ALREADY BEEN FINISHED SHOULD ONLY BE proposals are in play. The terms, conditions and
AWARDED AFTER ANOTHER PUBLIC BIDDING. In a stipulations in the contract for which public bidding has
relatively early case, Caltex v. Delgado Brothers, this Court been concluded are understood to remain intact and not be
made it clear that substantive amendments to a contract for subject to further negotiation. Otherwise, the very essence
which a public bidding has already been finished should of public bidding will be destroyed there will no basis for
only be awarded after another public bidding: "The due an exact comparison between bids. Moreover, Piatco
execution of a contract after public bidding is a limitation misinterpreted the meaning behind PBAC Bid Bulletin No.
upon the right of the contracting parties to alter or amend it 3. The phrase amendments . . . from time to time refers
without another public bidding, for otherwise what would a only to those amendments to the draft concession
public bidding be good for if after the execution of a agreement issued by the PBAC prior to the submission of
contract after public bidding, the contracting parties may the price challenge; it certainly does not include or permit
alter or amend the contract, or even cancel it, at their will? amendments negotiated for and introduced after the
Public biddings are held for the protection of the public, and bidding process, has been terminated.
to give the public the best possible advantages by means
27. ID.; ID.; ID.; REVISIONS AND AMENDMENTS IN THE
of open competition between the bidders. He who bids or
CONTRACTS THAT GIVE UNDUE ADVANTAGE TO THE
offers the best terms is awarded the contract subject of the
GOVERNMENT IS ILLEGAL. In sum, the revisions and
bid, and it is obvious that such protection and best possible
amendments as embodied in the ARCA constitute very
advantages to the public will disappear if the parties to a
material alterations of the terms and conditions of the CA,
contract executed after public bidding may alter or amend it
and give further manifestly undue advantage to Piatcoat
without another previous public bidding." EaIcAS
the expense of government. Piatco claims that the changes
26. ID.; ID.; ID.; TERMS, CONDITIONS AND to the CA were necessitated by the demands of its foreign
STIPULATIONS OF THE CONTRACTS MUST REMAIN lenders. However, no proof whatsoever has been adduced
Page 46 of 458

to buttress this claim. In any event, it is quite patent that the concessionaire of NAIA Terminal III but as a public works
sum total of the aforementioned changes resulted contractor, to undertake in the government's stead
in drastically weakening the position of government to a the clearing, removal, demolition and disposal of
degree that seems quite excessive, even from the improvements, subterranean obstructions and waste
standpoint of a businessperson who regularly transacts materials at the project site. The scope of the works, the
with banks and foreign lenders, is familiar with their mind- procedures involved, and the obligations of the contractor
set, and understands what motivates them. On the other are provided for in Parts II and III of the SS. Section 4.1
hand, whatever it was that impelled government officials sets out the compensation to be paid, listing specific rates
concerned to accede to those grossly disadvantageous per cubic meter of materials for each phase of the work
changes, I can only hazard a guess. There is no question excavation, leveling, removal and disposal, backfilling and
in my mind that the ARCA was unauthorized and illegal for dewatering. The amounts collectible by Piatco are to be
lack of public bidding and for being patently offset against the Annual Guaranteed Payments it must
disadvantageous to government. pay government. Though denominated as Second
Supplement, it was nothing less than an entirely new public
28. ID.; ID.; ID.; FIRST SUPPLEMENT TO VOID AND
works contract. Yet it, too, did not undergo any public
INEXISTENT ORIGINAL CONCESSION AGREEMENT IS
bidding, for which reason it is also void and inoperative.
ALSO VOID AND INOPERATIVE; CASE AT BAR. I
Not surprisingly, Piatco had to subcontract the works to a
must emphasize that the First Supplement [FS] is void in
certain Wintrack Builders, a firm reputedly owned by a
two respects. First, it is merely an amendment to the
former high-ranking DOTC official. But that is another story
ARCA, upon which it is wholly dependent; therefore, since
altogether.AaSHED
the ARCA is void, inexistent and not capable of being
ratified or amended, it follows that the FS too is void, 30. ID.; ID.; ID.; THIRD SUPPLEMENT IS VOID AB INITIO
inexistent and inoperative. Second, even AS IT CREATED A NEW MONETARY OBLIGATION ON
assuming arguendo that the ARCA is somehow remotely THE PART OF THE GOVERNMENT WITHOUT PRIOR
valid, nonetheless the FS, in imposing significant new APPROPRIATIONS. The Third Supplement (TS)
obligations upon government, altered the fundamental depends upon and is intended to supplement the ARCA as
terms and stipulations of the ARCA, thus necessitating a well as the First Supplement, both of which are void and
public bidding all over again. That the FS was entered into inexistent and not capable of being ratified or amended. It
sans public bidding renders it utterly void and inoperative. follows that the TS is likewise void, inexistent and
inoperative. And even if, hypothetically speaking, both
29. ID.; ID.; ID.; SECOND SUPPLEMENT IS ALSO VOID
ARCA and FS are valid, still, the Third Supplement
AND INOPERATIVE AS IT DID NOT UNDERGO ANY
imposing as it does significant new obligations upon
PUBLIC BIDDING. The Second Supplement ("SS") was
government would in effect alter the terms and
executed between the government and Piatco on
stipulations of the ARCA in material respects, thus
September 4, 2000. It calls for Piatco, acting not as
Page 47 of 458

necessitating another public bidding. Since the TS was not and its banks and other lenders on the other. But where the
subjected to public bidding, it is consequently utterly void proponent or its lenders manage to cajol or coerce the
as well. At any rate, the TS created new monetary government into extending a guarantee of payment of the
obligations on the part of government, for which there were loan obligations, the risks assumed by the lenders are
no prior appropriations. Hence, it follows that the same is, passed right back to government. I cannot understand why,
void ab initio. in the instant case, government cheerfully assented to re-
assuming the risks of the project when it gave the
31. ID.; ID.; ID.; DIRECT GOVERNMENT GUARANTEE IS
prohibited guarantee and thus simply negated the very
PROHIBITED IN UNSOLICITED PROPOSALS. Section
purpose of the BOT Law and the protection it gives the
4-A of the BOT Law as amended states that unsolicited
government.
proposals, such as the NAIA Terminal III Project, may be
accepted by government provided inter alia that no direct 33. ID.; ID.; ID.; ID.; THE AMOUNT TO BE PAID BY
government guarantee, subsidy or equity is required. In GOVERNMENT IS GREATER OF EITHER THE
short, such guarantee is prohibited in unsolicited proposals. APPRAISED VALUE OF THE PROJECT OR THE
Section 2(n) of the same legislation defines direct AGGREGATE AMOUNT OF THE MONEYS OWED BY
government guarantee as "an agreement whereby the PIATCO; CASE AT BAR. Government's agreement to
government or any of its agencies or local government pay becomes effective in the event of a default by Piatco
units (will) assume responsibility for the repayment of debt on any of its loan obligations to the Senior Lenders, and
directly incurred by the project proponent in implementing the amount to be paid by government is the greater of
the project in case of a loan default." either the Appraised Value of Terminal III or the aggregate
amount of the moneys owed by Piatco whether to the
32. ID.; ID.; ID.; ID.; REASON. In the final analysis,
Senior Lenders or to other entities, including its suppliers,
Section 4.04(c)(iv) to (vi) of the ARCA is diametrically at
contractors and subcontractors. In effect, therefore, this
odds with the spirit and the intent of the BOT Law. The law
agreement already constitutes the prohibited assumption
meant to mobilize private resources (the private sector) to
by government of responsibility for repayment of Piatco's
take on the burden and the risks of financing the
debts in case of a loan default. In fine, a direct government
construction, operation and maintenance of relevant
guarantee. It matters not that there is a roundabout
infrastructure and development projects for the simple
procedure prescribed by Section 4.04(c)(iv), (v) and (vi)
reason that government is not in a position to do so. By the
that would require, first, an attempt (albeit unsuccessful) by
same token, government guarantee was prohibited, since it
the Senior Lenders to transfer Piatco's rights to a
would merely defeat the purpose and raison d'tre of a
transferee of their choice; and, second, an effort (equally
build-operate-and-transfer project to be undertaken by the
unsuccessful) to "enter into any other arrangement" with
private sector. To the extent that the project proponent is
the government regarding the Terminal III facility, before
able to obtain loans to fund the project, those risks are
government is required to make good on its guarantee.
shared between the project proponent on the one hand,
Page 48 of 458

What is abundantly clear is the fact that, in the devious government would be paying several hundreds of millions
labyrinthine process detailed in the aforesaid section, it is of dollars, but the mortgage liens on the facility may still be
entirely within the Senior Lenders' power, prerogative and foreclosed by the Senior Lenders just the same.
control exercisable via a mere refusal or inability to Consequently, the Piatco contracts are also objectionable
agree upon "a transferee" or "any other arrangement" for grievously failing to adequately protect government's
regarding the terminal facility to push the process interests. More accurately, the contracts would consistently
forward to the ultimate contractual cul-de-sac, wherein weaken and do away with protection of government
government will be compelled to abjectly surrender and interests. As such, they are therefore grossly lopsided in
make good on its guarantee of payment. favor of Piatco and/or its Senior Lenders. IAEcaH

35. ID.; ID.; ID.; ID.; AMENDED AND RESTATED


CONCESSION AGREEMENT (ARCA) INTENDS TO
34. ID.; ID.; ID.; ID.; PIATCO CONTRACTS ARE
HAVE ALL PIATCO'S DEBTS COVERED BY THE
GROSSLY LOPSIDED IN FAVOR OF PIATCO AND/OR
GUARANTEE. While on this subject, it is well to recall
ITS SENIOR LENDERS. Piatco also argues that there is
the earlier discussion regarding a particularly noticeable
no provisorequiring government to pay the Senior Lenders
alteration of the concept of "Attendant Liabilities." In
in the event of Piatco's default. This is literally true, in the
Section 1.06 of the CA defining the term, the Piatco debts
sense that Section 4.04(c)(vi) of ARCA speaks of
to be assumed/paid by government were qualified by the
government making the termination payment to Piatco, not
phrases recorded and from time to time outstanding in the
to the lenders. However, it is almost a certainty that the
books of the Concessionaire and actually used for the
Senior tenders will already have made Piatco sign over to
project. These phrases were eliminated from the ARCA's
them, ahead of time, its right to receive such payments
definition of Attendant Liabilities. Since no explanation has
from government; and/or they may already have had
been forthcoming from Piatco as to the possible
themselves appointed its attorneys-in-fact for the purpose
justification for such a drastic change, the only conclusion
of collecting and receiving such payments. Nevertheless,
possible is that it intends to have all of its debts covered by
as petitioners-in-intervention pointed out in their
the guarantee, regardless of whether or not they are
Memorandum, the termination payment is to be made to
disclosed in its books. This has particular reference to
Piatco, not to the lenders; and there is no provision
those borrowings which were obtained in violation of the
anywhere in the contract documents to prevent it from
loan covenants requiring Piatco to maintain a minimum
diverting the proceeds to its own benefit and/or to ensure
70:30 debt-to-equity ratio, and even if the loan proceeds
that it will necessarily use the same to pay off the Senior
were not actually used for the project itself. This point
Lenders and other creditors, in order to avert the
brings us back to the guarantee itself. In Section 4.04(c)(vi)
foreclosure of the mortgage and other liens on the terminal
of ARCA, the amount which government has guaranteed to
facility. Such deficiency puts the interests of government at
pay as termination payment is the greater of either (i) the
great risk. Indeed, if the unthinkable were to happen,
Page 49 of 458

Appraised Value of the terminal facility or (ii) the aggregate 38. ID.; ID.; ID.; ID.; IN TERMINATION COMPENSATION,
of the Attendant Liabilities. Given that the Attendant IT IS INDISPENSABLE THAT THE INTEREST OF
Liabilities may include practically any Piatco debt under the GOVERNMENT BE DULY INSURED; NOT PRESENT IN
sun, it is highly conceivable that their sum may greatly CASE AT BAR. [I]n those instances where such
exceed the appraised value of the facility, and government termination compensation is authorized by the BOT Law, it
may end up paying very much more than the real worth of is indispensable that the interest of government be duly
Terminal III. (So why did government have to bother with insured. Section 5.08 the ARCA mandates insurance
public bidding anyway?) coverage for the terminal facility; but all insurance policies
are to be assigned, and all proceeds are payable, to the
36. ID.; ID.; ID.; INSTANCES WHEN TERMINATION
Senior Lenders. In brief, the interest being secured by such
COMPENSATION MAY BE ALLOWED. Section 7 of the
coverage is that of the Senior Lenders, not that of
BOT Law as amended in effect provides for the following
government. This can hardly be considered compliance
limited instances when termination compensation may be
with law.
allowed: 1. Termination by the government through no fault
of the project proponent 2. Termination upon the parties' 39. ID.; ID.; ID.; PROHIBITS A DIRECT GOVERNMENT
mutual agreement and 3. Termination by the proponent SUBSIDY FOR UNSOLICITED PROPOSALS. It will be
due to government's default on certain major contractual recalled that Section 4-A of the BOT Law as amended
obligations. To emphasize, the law does not permit prohibits not only direct government guarantees, but
compensation for the project proponent when contract likewise a direct government subsidy for unsolicited
termination is due to the proponent's own fault or breach of proposals. Section 13.2. b iii. of the 1999 IRR defines
contract. a direct government subsidy as encompassing "an
agreement whereby the Government . . . will . . . postpone
37. ID.; ID.; ID.; ID.; VIOLATED IN CASE AT BAR. This
any payments due from the proponent." By any manner of
principle was clearly violated in the Piatco Contracts. The
interpretation or application, however, Section 8.01(d) of
ARCA stipulates that government is to pay termination
the ARCA clearly mandates the indefinite postponement of
compensation to Piatco even when termination is initiated
payment of all of Piatco's obligations to the government, in
by government. Clearly, this condition is not in line with
order to ensure that Piatco's obligations to the Senior
Section 7 of the BOT Law. That provision permits a project
Lenders are paid in full first. That is nothing more or less
proponent to recover the actual expenses it incurred in the
than the direct government subsidy prohibited by the BOT
prosecution of the project plus a reasonable rate of return
Law and the IRR. The fact that Piatco will pay interest on
not in excess of that provided in the contract; or to be
the unpaid amounts owed to government does not change
compensated for the equivalent or proportionate contract
the situation or render the prohibited subsidy any less
cost as defined in the contract, in case the government is in
unacceptable. DTAIaH
default on certain major contractual obligations.
Page 50 of 458

40. ID.; ID.; ID.; GOVERNMENT WILL BE AT THE MERCY Piatco was not merely a franchise, but an "exclusive right"
OF THE FOREIGN LENDERS; CASE AT BAR. Earlier; I to operate an international passenger terminal within the
mentioned that Section 8.01(d) of the ARCA completely "Island of Luzon." What this grant effectively means is that
eliminated the proviso in Section 8.04(d) of the CA which the government is now estopped from exercising its
gave government the right to appoint a financial controller inherent power to award any other person another
to manage the cash position of Piatco during situations of franchise or a right to operate such a public utility, in the
financial distress. Not only has government been deprived event public interest in Luzon requires it. This restriction is
of any means of monitoring and managing the situation; highly detrimental to government and to the public interest.
worse, as can be seen from Section 8.01(d) above-quoted, While it cannot be gainsaid that an enterprise that is a
the Senior Lenders have effectively locked in on the right to public utility may happen to constitute a monopoly on
exercise financial controllership over Piatco and to allocate account of the very nature of its business and the absence
its cash resources to the payment of all amounts owed to of competition, such a situation does not however
the Senior Lenders before allowing any payment to be constitute justification to violate the constitutional
made to government. In brief, this particular provision of prohibition and grant an exclusive franchise or exclusive.
the ARCA has placed in the hands of foreign lenders the right to operate a public utility. Piatco's contention that the
power and the authority to determine how much (if at all) Constitution does not actually prohibit monopolies is beside
and when the Philippine government (as grantor of the the point. As correctly argued, the existence of a monopoly
franchise) may be allowed to receive from Piatco. In that by a public utility is a situation created by circumstances
situation, government will be at the mercy of the foreign that do not encourage competition. This situation is
lenders. This is a situation completely contrary to the different from the grant of a franchise to operate a public
rationale of the BOT Law and to public policy. The utility, a privilege granted by government. Of course, the
aforesaid provision rouses mixed emotions shame and grant of a franchise may result in a monopoly. But making
disgust at the parties' (especially the government officials') such franchise exclusive is what is expressly proscribed
docile submission and abject servitude and surrender to by the Constitution.
the imperious and excessive demands of the foreign
42. ID.; ID.; ID.; EASY PAYMENT PLAN OF PIATCO
lenders, on the one hand; and vehement outrage at the
CONTRACTS VIOLATES THE TIME LIMITATION ON
affront to the sovereignty of the Republic and to the
FRANCHISES. Section 11 of Article XII of the
national honor, on the other. It is indeed time to put an end
Constitution also provides that "no franchise, certificate or
to such an unbearable, dishonorable situation.
any other form of authorization for the operation of a public
41. ID.; CONSTITUTIONAL LAW; NATIONAL ECONOMY utility shall be . . . for a longer period than fifty years." After
AND PATRIMONY; CONSTITUTION EXPRESSLY all, a franchise held for an unreasonably long time would
PROSCRIBES MAKING A FRANCHISE EXCLUSIVE; likely give rise to the same evils as a monopoly. The Piatco
VIOLATED IN CASE AT BAR. What was granted to Contracts have come up with an innovative way to
Page 51 of 458

circumvent the prohibition and obtain an extension. This exercise is less than sufficient to protect the public
fact can be gleaned from Section 8.03(b) of the ARCA [.] interest[.] It will be noted that Sec. 6.06 (Adjustment of
The easy payment scheme therein is less beneficial than it Non-Public Utility Fees and Charges) has no teeth, so the
first appears. Although it enables government to avoid concessionaire can defy the government without fear of
having to make outright payment of an obligation that will any sanction. Moreover, Section 6.06 taken together
likely run into billions of pesos, this easy payment plan will with Section 6.03(c) of the ARCA falls short of the
nevertheless cost government considerable loss of income, standard set by the BOT Law as amended, which
which it would earn if it were to operate Terminal III by expressly requires in Section 2(b) that the project
itself. Inasmuch as payments to the concessionaire proponent is "allowed to charge facility users appropriate
(Piatco) will be on "installment basis," interest charges on tolls, fees, rentals and charges, not exceeding those
the remaining unpaid balance would undoubtedly cause proposed in its bid or as negotiated and incorporated in the
the total outstanding balance to swell. Piatco would thus be contract . . ."
entitled to remain in the driver's seat and keep operating
45. ID.; ID.; BILL OF RIGHTS; PROHIBITION AGAINST
the terminal for an indefinite length of time.
IMPAIRMENT OF CONTRACTS; VIOLATED IN CASE AT
BAR. By the In-Service Date, Terminal III shall be the
43. ID.; ID.; ID.; MONOPOLY; ELUCIDATED: only facility to be operated as an international passenger
Gokongwei Jr. v. Securities and Exchange terminal at the NAIA; thus, Terminal I and II shall no longer
Commission elucidates the criteria to be employed: "A operate as such, and no one shall be allowed to compete
'monopoly' embraces any combination the tendency of with Piatco in the operation of an international passenger
which is to prevent competition in the broad and general terminal in the NAIA. The bottom line is that, as of the In-
sense, or to control prices to the detriment of the public. In Service Date, Terminal III will be the only terminal where
short, it is the concentration of business in the hands of a the business of providing airport-related services to
few. The material consideration in determining its existence international airlines and passengers may be conducted at
is not that prices are raised and competition actually all. Consequently, government through the DOTC/MIAA
excluded, but that power exists to raise prices or exclude will be compelled to cease honoring existing contracts with
competition when desired." service providers after the In-Service Date, as they cannot
44. ID.; ID.; ID.; ID.; PIATCO CONTRACTS GIVE THE be allowed to operate in Terminal III. In short, the CA and
CONCESSIONAIRE LIMITLESS POWER OVER THE the ARCA obligate and constrain government to break its
CHARGING OF FEES, RENTALS AND SO FORTH. existing contracts with these service providers.
Aside from creating a monopoly, the Piatco contracts also 46. ID.; ID.; ID.; PROHIBITION AGAINST DEPRIVATION
give the concessionaire virtually limitless power over the OF PROPERTY WITHOUT DUE PROCESS; VIOLATED
charging of fees, rentals and so forth. What little "oversight IN CASE AT BAR. Notably, government is not in a
function" the government might be able and minded to position to require Piatco to accommodate the displaced
Page 52 of 458

service providers, and it would be unrealistic to think that Both the service providers and their client airlines will be
these service providers can perform their service contracts deprived of the right to liberty, which includes the right to
in some other international airport outside Luzon. enter into all contracts, and/or the right to make a contract
Obviously, then, these displaced service providers are in relation to one's business.
to borrow a quaint expression up the river without a
48. ID.; LEGISLATIVE DEPARTMENT; PROHIBITION
paddle. In plainer terms, they will have lost their
AGAINST DISBURSEMENT OF PUBLIC FUNDS
businesses entirely, in the blink of an eye. Moreover, since
WITHOUT VALID APPROPRIATION; EFFECT. Clearly
the displaced service providers, being unable to operate,
prohibited bythe Constitution is the disbursement of public
will be forced to close shop, their respective employees
funds out of the treasury, except in pursuance of an
among them Messrs. Agan and Lopez et al. have very
appropriation made by law. The immediate effect of this
grave cause for concern, as they will find themselves out of
constitutional ban is that all the various agencies of
employment and bereft of their means of livelihood. This
government are constrained to limit their expenditures to
situation comprises still another violation of the
the amounts appropriated by law for each fiscal year; and
constitution prohibition against deprivation of property
to carefully count their cash before taking on contractual
without due process. True, doing business at the NAIA may
commitments.
be viewed more as a privilege than as a right. Nonetheless,
where that privilege has been availed of by the petitioners- 49. ID.; ID.; ID.; EXISTENCE OF APPROPRIATIONS AND
in-intervention service providers for years on end, a THE AVAILABILITY OF FUNDS ARE INDISPENSABLE
situation arises, similar to that in American Inter-fashion v. TO THE EXECUTION OF GOVERNMENT CONTRACTS.
GTEB. We held therein that a privilege enjoyed for seven [T]his Court has held that "(I)t is quite evident from the
years "evolved into some form of property right which tenor of the language of the law that the existence of
should not be removed . . . arbitrarily and without due appropriations and the availability of funds are
process." Said pronouncement is particularly relevant and indispensable pre-requisites to or conditions sine qua
applicable to the situation at bar because the livelihood of non for the execution of government contracts. The
the employees of petitioners-intervenors are at stake. DaIACS obvious intent is to impose such conditions as a
priori requisites to the validity of the proposed contract."
47. ID.; ID.; ID.; PROHIBITION AGAINST DEPRIVATION
OF LIBERTY WITHOUT DUE PROCESS; VIOLATED IN 50. ID.; ID.; LEGISLATIVE POWER OVER THE PUBLIC
CASE AT BAR. The Piatco Contracts by locking out PURSE; VIOLATED IN CASE AT BAR. But the
existing service providers from entry into Terminal III and particularly sad thing about this transaction between MIAA
restricting entry of future service providers, thereby and DPWH is the fact that both agencies were maneuvered
infringed upon the freedom guaranteed to and into (or allowed themselves to be maneuvered into) an
heretofore enjoyed by international airlines to contract agreement that would ensure delivery of upgraded roads
with local service providers of their choice, and vice versa. for Piatco's benefit, using funds not allocated for that
Page 53 of 458

purpose. The agreement would then be presented to existing storm drainage master plan; and coordination with
Congress as a done deal. Congress would thus be obliged DPWH for the completion of the three left-turning
to uphold the agreement and support it with the necessary overpasses before the In-Service Date, as well as
allocations and appropriations for three years, in order to acquisition and delivery of additional land for the
enable DPWH to deliver on its committed repayments to construction of the T2-T3 access road. Conversely, failure
MIAA. The net result is an infringement on the legislative to deliver on any of these obligations may conceivably
power over the public purse and a diminution of Congress' result in substantial prejudice to the concessionaire, to
control over expenditures of public funds a development such an extent as to constitute a material breach of the
that would not have come about, were it not for the Piatco Contracts. Whereupon, the concessionaire may
Supplements. Very clever but very illegal! outrightly terminate the Contracts pursuant to Section 8.01
(b)(i) and (ii) of the ARCA and seek payment of Liquidated
51. CIVIL LAW; OBLIGATIONS AND CONTRACTS;
Damages in accordance with Section 8.02(a) of the ARCA;
CRITERIA FOR DETERMINING WHETHER THE BEST-
or the concessionaire may instead require government to
EFFORTS BASIS WILL APPLY. To determine whether
pay the Incremental and Consequential Losses under
the additional obligations under the Supplements may
Section 1.23 of the ARCA. The logical conclusion then is
really be undertaken on a best-efforts basis only, the
that the obligations in the Supplements are not to be
nature of each of these obligations must be examined in
performed on a best-efforts basis only, but are unarguably
the context of its relevance and significance to the Terminal
mandatory in character.
III Project, as well as of any adverse impact that may result
if such obligation is not performed or undertaken on time. 53. ID.; ID.; PIATCO CONTRACTS ARE VOID AB INITIO
In short, the criteria for determining whether the best-efforts AND INOPERATIVE. I find that all the Piatco contracts,
basis will apply is whether the obligations are critical to the without exception, are void ab initio, and therefore
success of the Project and, accordingly, whether failure to inoperative. Even the very process by which the contracts
perform them (or to perform them on time) could result in a came into being the bidding and the award has been
material breach of the contract. riddled with irregularities galore and blatant violations of
law and public policy, far too many to ignore. There is thus
52. ID.; ID.; ID.; OBLIGATIONS IN THE SUPPLEMENTS
no conceivable way, as proposed by some, of saving one
ARE MANDATORY IN CHARACTER AND NOT FOR
(the original Concession Agreement) while junking all the
BEST-EFFORTS COMPLIANCE ONLY. Viewed in this
rest. Neither is it possible to argue for the retention of the
light, the "Additional Special Obligations" set out in Section
Draft Concession Agreement (referred to in the various
4 of the FS take on a different aspect. In particular, each of
pleadings as the Contract Bidded Out) as the contract that
the following may all be deemed to play a major role in the
should be kept in force and effect to govern the situation,
successful and timely prosecution of the Terminal III
inasmuch as it was never executed by the parties. What
Project: the obtention of land required by PIATCO for the
Piatco and the government executed was the Concession
taxilane and taxiway; the implementation of government's
Page 54 of 458

Agreement which is entirely different from the Draft 56. ID.; ID.; ID.; GOVERNMENT SHOULD PAY ALL
Concession Agreement. REASONABLE EXPENSES INCURRED IN THE
CONSTRUCTION OF TERMINAL III. Should
54. ID.; ID.; ID.; KEEPING PIATCO ON AS
government pay at all for reasonable expenses incurred in
CONCESSIONAIRE IS UNCONSCIONABLE.
the construction of the Terminal? Indeed it should,
Ultimately, though, it would be tantamount to an
otherwise it will be unjustly enriching itself at the expense
outrageous, grievous and unforgivable mutilation of public
of Piatco and, in particular, its funders, contractors and
policy and an insult to ourselves if we opt to keep in place a
investors both local and foreign. After all, there is no
contract any contract for to do so would assume that
question that the State needs and will make use of
we agree to having Piatco continue as the concessionaire
Terminal III, it being part and parcel of the critical
for Terminal III. Despite all the insidious contraventions
infrastructure and transportation-related programs of
of the Constitution, law and public policy Piatco
government. In Melchor v. Commission on Audit, this Court
perpetrated, keeping Piatco on as concessionaire and even
held that even if the contract therein was void, the principle
rewarding it by allowing it to operate and profit from
of payment by quantum meruit was found applicable, and
Terminal III instead of imposing upon it the stiffest
the contractor was allowed to recover the reasonable value
sanctions permissible under the laws is unconscionable.
of the thing or services rendered (regardless of any
It is no exaggeration to say that Piatco may not really mind
agreement as to the supposed value), in order to avoid
which contract we decide to keep in place. For all it may
unjust enrichment on the part of government. The principle
care, we can do just as well without one, if we only let it
ofquantum meruit was likewise applied in Eslao v.
continue and operate the facility. After all, the real money
Commission on Audit, because to deny payment for a
will come not from building the Terminal, but fromactually
building almost completed and already occupied would be
operating it for fifty or more years and charging whatever it
to permit government to unjustly enrich itself at the
feels like, without any competition at all. This scenario must
expense of the contractor. The same principle was applied
not be allowed to happen. EAHDac
in Republic v. Court of Appeals.

55. ID.; ID.; ID.; AEDC SHOULD NOT BE ALLOWED TO 57. ID.; ID.; ID.; POSSIBLE PRACTICAL SOLUTION IS TO
OPERATE THE TERMINAL III. If the Piatco contracts BID OUT THE OPERATION OF TERMINAL III. One
are junked altogether as I think they should be, should not possible practical solution would be for government in
AEDC automatically be considered the winning bidder and view of the nullity of the Piatco contracts and of the fact
therefore allowed to operate the facility? My answer is a that Terminal III has already been built and is almost
stone-cold 'No.' AEDC never won the bidding, never signed finished to bid out the operation of the facility under the
any contract, and never built any facility. Why should it be same or analogous principles as build-operate-and-transfer
allowed to automatically step in and benefit from the greed projects. To be imposed, however, is the condition that the
of another? winning bidder must pay the builder of the facility a price
Page 55 of 458

fixed by government based on quantum meruit; on the real, of the contradictory factual submissions made by the
reasonable not inflated value of the built facility. How parties. As the Court has so often exhorted, it is not a trier
the payment or series of payments to the builder, funders, of facts.
investors and contractors will be staggered and scheduled,
3. ID.; ID.; ID.; PETITIONS FOR DECLARATORY RELIEF
will have to be built into the bids, along with the annual
ARE COGNIZABLE BY THE REGIONAL TRIAL COURT.
guaranteed payments to government. In this manner, this
The petitions, in effect, are in the nature of actions for
whole sordid mess could result in something truly beneficial
declaratory relief under Rule 63 of the Rules of Court. The
for all, especially for the Filipino people.
Rules provide that any person interested under a contract
VITUG, J., separate dissenting opinion: may, before breach or violation thereof, bring an action in
the appropriate Regional Trial Court to determine any
1. REMEDIAL LAW; CIVIL PROCEDURE; JURISDICTION;
question of construction or validity arising, and for a
SUPREME COURT IS BEREFT OF JURISDICTION OVER
declaration of his rights or duties thereunder. The Supreme
CASES INVOLVING NULLIFICATION OF CONTRACTS.
Court assumes no jurisdiction over petitions for declaratory
This Court is bereft of jurisdiction to hear the petitions at
relief which are cognizable by regional trial courts.
bar. The Constitution provides that the Supreme Court
shall exercise original jurisdiction over, among other actual 4. POLITICAL LAW; SEPARATION OF POWERS; COURT
controversies, petitions for certiorari, prohibition, MAY NOT INTRUDE INTO EVERY AFFAIR OF
mandamus, quo warranto, and habeas corpus. The cases GOVERNMENT. As I have so expressed in Tolentino
in question, although denominated to be petitions for vs. Secretary of Finance, reiterated in Santiago vs.
prohibition, actually pray for the nullification of the PIATCO Guingona, Jr., the Supreme Court should not be thought of
contracts and to restrain respondents from implementing as having been tasked with the awesome responsibility of
said agreements for being illegal and unconstitutional. overseeing the entire bureaucracy. Pervasive and limitless,
such as it may seem to be under the 1987 Constitution,
2. ID.; ID.; ID.; SUPREME COURT IS NOT A TRIER OF
judicial power still succumbs to the paramount doctrine of
FACTS. The rule is explicit. A petition for prohibition
separation of powers. The Court may not at good liberty
may be filed against a tribunal, corporation, board, officer
intrude, in the guise of sovereign imprimatur, into every
or person, exercising judicial, quasi-judicial or ministerial
affair of government. What significance can still then
functions. What the petitions seek from respondents do not
remain of the time-honored and widely acclaimed principle
involve judicial, quasi-judicial or ministerial functions. In
of separation of powers if, at every turn, the Court allows
prohibition, only legal issues affecting the jurisdiction of the
itself to pass upon at will the disposition of a co-equal,
tribunal, board or officer involved may be resolved on the
independent and coordinate branch in our system of
basis of undisputed facts. The parties allege, respectively,
government. I dread to think of the so varied uncertainties
contentious evidentiary facts. It would be difficult, if not
that such an undue interference can lead to.
anomalous, to decide the jurisdictional issue on the basis
Page 56 of 458

DECISION terminal building. The ADP submitted a Draft Final Report


to the DOTC in December 1989.
Some time in 1993, six business leaders consisting of John
PUNO, J :p
Gokongwei, Andrew Gotianun, Henry Sy, Sr., Lucio Tan,
George Ty and Alfonso Yuchengco met with then President
Petitioners and petitioners-in-intervention filed the instant
Fidel V. Ramos to explore the possibility of investing in the
petitions for prohibition under Rule 65 of the Revised Rules
construction and operation of a new international airport
of Court seeking to prohibit the Manila International Airport
terminal. To signify their commitment to pursue the project,
Authority (MIAA) and the Department of Transportation and
they formed the Asia's Emerging Dragon Corp. (AEDC)
Communications (DOTC) and its Secretary from
which was registered with the Securities and Exchange
implementing the following agreements executed by the
Commission (SEC) on September 15, 1993. CSaITD
Philippine Government through the DOTC and the MIAA
and the Philippine International Air Terminals Co., Inc. On October 5, 1994, AEDC submitted an unsolicited
(PIATCO): (1) the Concession Agreement signed on July proposal to the Government through the DOTC/MIAA for
12, 1997, (2) the Amended and Restated Concession the development of NAIA International Passenger Terminal
Agreement dated November 26, 1999, (3) the First III (NAIA IPT III) under a build-operate-and-transfer
Supplement to the Amended and Restated Concession arrangement pursuant to RA 6957 as amended by RA
Agreement dated August 27, 1999, (4) the Second 7718 (BOT Law). 1
Supplement to the Amended and Restated Concession
On December 2, 1994, the DOTC issued Dept. Order No.
Agreement dated September 4, 2000, and (5) the Third
94-832 constituting the Prequalification Bids and Awards
Supplement to the Amended and Restated Concession
Committee (PBAC) for the implementation of the NAIA IPT
Agreement dated June 22, 2001 (collectively, the PIATCO
III project.
Contracts).
On March 27, 1995, then DOTC Secretary Jose Garcia
The facts are as follows:
endorsed the proposal of AEDC to the National Economic
In August 1989, the DOTC engaged the services of and Development Authority (NEDA). A revised proposal,
Aeroport de Paris (ADP) to conduct a comprehensive study however, was forwarded by the DOTC to NEDA on
of the Ninoy Aquino International Airport (NAIA) and December 13, 1995. On January 5, 1996, the NEDA
determine whether the present airport can cope with the Investment Coordinating Council (NEDA ICC) Technical
traffic development up to the year 2010. The study Board favorably endorsed the project to the ICC Cabinet
consisted of two parts: first, traffic forecasts, capacity of Committee which approved the same, subject to certain
existing facilities, NAIA future requirements, proposed conditions, on January 19, 1996. On February 13, 1996,
master plans and development plans; and second, the NEDA passed Board Resolution No. 2 which approved
presentation of the preliminary design of the passenger the NAIA IPT III Project.
Page 57 of 458

On June 7, 14, and 21, 1996, DOTC/MIAA caused the On August 16, 1996, the PBAC issued PBAC Bulletin No. 3
publication in two daily newspapers of an invitation for amending the Bid Documents. The following amendments
competitive or comparative proposals on AEDC's were made on the Bid Documents:
unsolicited proposal, in accordance with Sec. 4-A of RA
a. Aside from the fixed Annual Guaranteed
6957, as amended. The alternative bidders were required
Payment, the proponent shall include
to submit three (3) sealed envelopes on or before 5:00 p.m.
in its financial proposal an additional
of September 20, 1996. The first envelope should contain
percentage of gross revenue share of
the Prequalification Documents, the second envelope the
the Government, as follows:
Technical Proposal, and the third envelope the Financial
Proposal of the proponent. i. First 5 years 5.0%
On June 20, 1996, PBAC Bulletin No. 1 was issued, ii. Next 10 years 7.5%
postponing the availment of the Bid Documents and the iii. Next 10 years 10.0%
submission of the comparative bid proposals. Interested
firms were permitted to obtain the Request for Proposal b. The amount of the fixed Annual
Documents beginning June 28, 1996, upon submission of a Guaranteed Payment shall be subject
written application and payment of a non-refundable fee of of the price challenge. Proponent may
P50,000.00 (US$2,000). offer an Annual Guaranteed Payment
which need not be of equal amount,
The Bid Documents issued by the PBAC provided among but payment of which shall start upon
others that the proponent must have adequate capability to site possession.
sustain the financing requirement for the detailed
engineering, design, construction, operation, and c. The project proponent must have
maintenance phases of the project. The proponent would adequate capability to sustain the
be evaluated based on its ability to provide a minimum financing requirement for the detailed
amount of equity to the project, and its capacity to secure engineering, design, construction,
external financing for the project. and/or operation and maintenance
phases of the project as the case may
be. For purposes of pre-qualification,
On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 this capability shall be measured in
inviting all bidders to a pre-bid conference on July 29, terms of:
1996. i. Proof of the availability of the project
proponent and/or the consortium
to provide the minimum amount
of equity for the project; and
Page 58 of 458

ii. a letter testimonial from reputable indicative and that other revenue sources may be included
banks attesting that the project by the proponent, subject to approval by DOTC/MIAA.
proponent and/or the members Furthermore, the PBAC clarified that only those fees and
of the consortium are banking charges denominated as Public Utility Fees would be
with them, that the project subject to regulation, and those charges which would be
proponent and/or the members actually deemed Public Utility Fees could still be revised,
are of good financial standing, depending on the outcome of PBAC's query on the matter
and have adequate resources. with the Department of Justice.
d. The basis for the prequalification shall be In September 1996, the PBAC issued Bid Bulletin No. 5,
the proponent's compliance with the entitled "Answers to the Queries of PAIRCARGO as Per
minimum technical and financial Letter Dated September 3 and 10, 1996." Paircargo's
requirements provided in the Bid queries and the PBAC's responses were as follows:
Documents and the IRR of the BOT 1. It is difficult for Paircargo and Associates to
Law. The minimum amount of equity meet the required minimum equity requirement
shall be 30% of the Project Cost. CSaITD
as prescribed in Section 8.3.4 of the Bid
e. Amendments to the draft Concession Documents considering that the capitalization of
Agreement shall be issued from time each member company is so structured to meet
the requirements and needs of their current
to time. Said amendments shall only
respective business undertaking/activities. In
cover items that would not materially order to comply with this equity requirement,
affect the preparation of the Paircargo is requesting PBAC to just allow each
proponent's proposal. member of (sic) corporation of the joint Venture
On August 29, 1996, the Second Pre-Bid Conference was to just execute an agreement that embodies a
commitment to infuse the required capital in case
held where certain clarifications were made. Upon the
the project is awarded to the Joint Venture
request of prospective bidder People's Air Cargo & instead of increasing each corporation's current
Warehousing Co., Inc (Paircargo), the PBAC warranted authorized capital stock just for prequalification
that based on Sec. 11.6, Rule 11 of the Implementing purposes.
Rules and Regulations of the BOT Law, only the proposed
Annual Guaranteed Payment submitted by the challengers In prequalification, the agency is interested in
would be revealed to AEDC, and that the challengers' one's financial capability at the time of
prequalification, not future or potential capability.
technical and financial proposals would remain confidential.
The PBAC also clarified that the list of revenue sources A commitment to put up equity once awarded the
contained in Annex 4.2a of the Bid Documents was merely project is not enough to establish that "present"
financial capability. However, total financial
Page 59 of 458

capability of all member companies of the Paircargo Consortium. On the following day, September
Consortium, to be established by submitting the 24, 1996, the PBAC prequalified the Paircargo Consortium.
respective companies' audited financial
statements, shall be acceptable. On September 26, 1996, AEDC informed the PBAC in
writing of its reservations as regards the Paircargo
2. At present, Paircargo is negotiating with banks Consortium, which include:
and other institutions for the extension of a
Performance Security to the joint venture in the a. The lack of corporate approvals and
event that the Concessions Agreement (sic) is financial capability of PAIRCARGO;
awarded to them. However, Paircargo is being
required to submit a copy of the draft concession b. The lack of corporate approvals and
as one of the documentary financial capability of PAGS;
requirements. Therefore, Paircargo is requesting
c. The prohibition imposed by RA 337, as
that they'd (sic) be furnished copy of the
approved negotiated agreement between the
amended (the General Banking Act)
PBAC and the AEDC at the soonest possible on the amount that Security Bank
time. could legally invest in the project;
A copy of the draft Concession Agreement is d. The inclusion of Siemens as a contractor
included in the Bid Documents. Any material of the PAIRCARGO Joint Venture, for
changes would be made known to prospective prequalification purposes; and
challengers through bid bulletins. However, a
final version will be issued before the award of e. The appointment of Lufthansa as the
contract.SECAHa
facility operator, in view of the
Philippine requirement in the operation
The PBAC also stated that it would require AEDC to sign of a public utility.
Supplement C of the Bid Documents (Acceptance of
Criteria and Waiver of Rights to Enjoin Project) and to The PBAC gave its reply on October 2, 1996, informing
submit the same with the required Bid Security. AEDC that it had considered the issues raised by the latter,
and that based on the documents submitted by Paircargo
On September 20, 1996, the consortium composed of and the established prequalification criteria, the PBAC had
People's Air Cargo and Warehousing Co., Inc. (Paircargo), found that the challenger, Paircargo, had prequalified to
Phil. Air and Grounds Services, Inc. (PAGS) and Security undertake the project. The Secretary of the DOTC
Bank Corp. (Security Bank) (collectively, Paircargo approved the finding of the PBAC.
Consortium) submitted their competitive proposal to the
PBAC. On September 23, 1996, the PBAC opened the first The PBAC then proceeded with the opening of the second
envelope containing the prequalification documents of the envelope of the Paircargo Consortium which contained its
Technical Proposal.
Page 60 of 458

On October 3, 1996, AEDC reiterated its objections, Consortium regarding AEDC's failure to match the
particularly with respect to Paircargo's financial capability, proposal.
in view of the restrictions imposed by Section 21-B of
On February 27, 1997, Paircargo Consortium incorporated
theGeneral Banking Act and Sections 1380 and 1381 of
into Philippine International Airport Terminals Co., Inc.
the Manual Regulations for Banks and Other Financial
(PIATCO).
Intermediaries. On October 7, 1996, AEDC again
manifested its objections and requested that it be furnished AEDC subsequently protested the alleged undue
with excerpts of the PBAC meeting and the accompanying preference given to PIATCO and reiterated its objections
technical evaluation report where each of the issues they as regards the prequalification of PIATCO.
raised were addressed.
On April 11, 1997, the DOTC submitted the concession
On October 16, 1996, the PBAC opened the third envelope agreement for the second-pass approval of the NEDA-ICC,
submitted by AEDC and the Paircargo Consortium
On April 16, 1997, AEDC filed with the Regional Trial Court
containing their respective financial proposals. Both
of Pasig a Petition for Declaration of Nullity of the
proponents offered to build the NAIA Passenger Terminal
Proceedings, Mandamus and Injunction against the
III for at least $350 million at no cost to the government and
Secretary of the DOTC, the Chairman of the PBAC, the
to pay the government: 5% share in gross revenues for the
voting members of the PBAC and Pantaleon D. Alvarez, in
first five years of operation, 7.5% share in gross revenues
his capacity as Chairman of the PBAC Technical
for the next ten years of operation, and 10%. share in gross
Committee.
revenues for the last ten years of operation, in accordance
with the Bid Documents. However, in addition to the On April 17, 1997, the NEDA-ICC conducted an ad
foregoing, AEDC offered to pay the government a total of referendum to facilitate the approval, on a no-objection
P135 million as guaranteed payment for 27 years while basis, of the BOT agreement between the DOTC and
Paircargo Consortium offered to pay the government a total PIATCO. As the ad referendum gathered only four (4) of
of P17.75 billion for the same period. CSaITD the required six (6) signatures, the NEDA merely noted the
agreement.
Thus, the PBAC formally informed AEDC that it had
accepted the price proposal submitted by the Paircargo On July 9, 1997, the DOTC issued the notice of award for
Consortium, and gave AEDC 30 working days or until the project to PIATCO.
November 28, 1996 within which to match the said bid,
On July 12, 1997, the Government, through then DOTC
otherwise, the project would be awarded to Paircargo.
Secretary Arturo T. Enrile, and PIATCO, through its
As AEDC failed to match the proposal within the 30-day President, Henry T. Go, signed the "Concession
period, then DOTC Secretary Amado Lagdameo, on Agreement for the Build-Operate-and-Transfer
December 11, 1996, issued a notice to Paircargo Arrangement of the Ninoy Aquino International Airport
Page 61 of 458

Passenger Terminal III" (1997 Concession Agreement). Subsequently, the Government and PIATCO signed three
The Government granted PIATCO the franchise to operate Supplements to the ARCA. The First Supplement was
and maintain the said terminal during the concession signed on August 27, 1999; the Second Supplement on
period and to collect the fees, rentals and other charges in September 4, 2000; and the Third Supplement on June 22,
accordance with the rates or schedules stipulated in the 2001 (collectively, Supplements).
1997 Concession Agreement. The Agreement provided
The First Supplement to the ARCA amended Sec. 1.36 of
that the concession period shall be for twenty-five (25)
the ARCA defining "Revenues" or "Gross Revenues"; Sec.
years commencing from the in-service date, and may be
2.05 (d) of the ARCA referring to the obligation of MIAA to
renewed at the option of the Government for a period not
provide sufficient funds for the upkeep, maintenance, repair
exceeding twenty-five (25) years. At the end of the
and/or replacement of all airport facilities and equipment
concession period, PIATCO shall transfer the development
which are owned or operated by MIAA; and further
facility to MIAA.
providing additional special obligations on the part of GRP
aside from those already enumerated in Sec. 2.05 of the
ARCA. The First Supplement also provided a stipulation as
On November 26, 1998, the Government and PIATCO
regards the construction of a surface road to connect NAIA
signed an Amended and Restated Concession Agreement
Terminal II and Terminal III in lieu of the proposed access
(ARCA). Among the provisions of the 1997 Concession
tunnel crossing Runway 13/31; the swapping of obligations
Agreement that were amended by the ARCA were: Sec.
between GRP and PIATCO regarding the improvement of
1.11 pertaining to the definition of "certificate of
Sales Road; and the changes in the timetable. It also
completion"; Sec. 2.05 pertaining to the Special Obligations
amended Sec. 6.01 (c) of the ARCA pertaining to the
of GRP; Sec. 3.02 (a) dealing with the exclusivity of the
Disposition of Terminal Fees; Sec. 6.02 of the ARCA by
franchise given to the Concessionaire; Sec. 4.04
inserting an introductory paragraph; and Sec. 6.02 (a) (iii)
concerning the assignment by Concessionaire of its
of the ARCA referring to the Payments of Percentage,
interest in the Development Facility; Sec. 5.08 (c) dealing
Share in Gross Revenues. CSaITD
with the proceeds of Concessionaire's insurance; Sec. 5.10
with respect to the temporary take-over of operations by The Second Supplement to the ARCA contained provisions
GRP; Sec. 5.16 pertaining to the taxes, duties and other concerning the clearing, removal, demolition or disposal of
imposts that may be levied on the Concessionaire; Sec. subterranean structures uncovered or discovered at the
6.03 as regards the periodic adjustment of public utility fees site of the construction of the terminal by the
and charges; the entire Article VIII concerning the Concessionaire. It defined the scope of works; it provided
provisions on the termination of the contract; and Sec. for the procedure for the demolition of the said structures
10.02 providing for the venue of the arbitration proceedings and the consideration for the same which the GRP shall
in case a dispute or controversy arises between the parties pay PIATCO; it provided for time extensions, incremental
to the agreement. and consequential costs and losses consequent to the
Page 62 of 458

existence of such structures; and it provided for some On November 6, 2002, several employees of the MIAA
additional obligations on the part of PIATCO as regards the likewise filed a petition assailing the legality of the various
said structures. agreements. 4
Finally, the Third Supplement provided for the obligations On December 11, 2002. another group of Congressmen,
of the Concessionaire as regards the construction of the Hon. Jacinto V. Paras, Rafael P. Nantes, Eduardo C.
surface road connecting Terminals II and III. Zialcita, Willie B. Villarama, Prospero C. Nograles,
Prospero A. Pichay, Jr., Harlin Cast Abayon and Benasing
Meanwhile, the MIAA which is charged with the
O. Macaranbon, moved to intervene in the case as
maintenance and operation of the NAIA Terminals I and II,
Respondents-Intervenors. They filed their Comment-In-
had existing concession contracts with various service
Intervention defending the validity of the assailed
providers to offer international airline airport services, such
agreements and praying for the dismissal of the petitions.
as in-flight catering, passenger handling, ramp and ground
support, aircraft maintenance and provisions, cargo During the pendency of the case before this Court,
handling and warehousing, and other services, to several President Gloria Macapagal Arroyo, on November 29,
international airlines at the NAIA. Some of these service 2002, in her speech at the 2002 Golden Shell Export
providers are the Miascor Group, DNATA-Wings Aviation Awards at Malacaang Palace, stated that she will not
Systems Corp., and the MacroAsia Group. Miascor, "honor (PIATCO) contracts which the Executive Branch's
DNATA and MacroAsia, together with Philippine Airlines legal offices have concluded (as) null and void." 5
(PAL), are the dominant players in the industry with an
Respondent PIATCO filed its Comments to the present
aggregate market share of 70%.
petitions on November 7 and 27, 2002. The Office of the
On September 17, 2002, the workers of the international Solicitor General and the Office of the Government
airline service providers, claiming that they stand to lose Corporate Counsel filed their respective Comments in
their employment upon the implementation of the behalf of the public respondents.
questioned agreements, filed before this Court a petition for
On December 10, 2002, the Court heard the case on oral
prohibition to enjoin the enforcement of said agreements. 2
argument. After the oral argument, the Court then resolved
On October 15, 2002, the service providers, joining the in open court to require the parties to file simultaneously
cause of the petitioning workers, filed a motion for their respective Memoranda in amplification of the issues
intervention and a petition-in-intervention. heard in the oral arguments within 30 days and to explore
the possibility of arbitration or mediation as provided in the
On October 24, 2002, Congressmen Salacnib Baterina,
challenged contracts. CSaITD
Clavel Martinez and Constantino Jaraula filed a similar
petition with this Court. 3 In their consolidated Memorandum, the Office of the
Solicitor General and the Office of the Government
Page 63 of 458

Corporate Counsel prayed that the present petitions be In G.R. No. 155001 individual petitioners are employees of
given due course and that judgment be rendered declaring various service providers 7 having separate concession
the 1997 Concession Agreement, the ARCA and the contracts with MIAA and continuing service agreements
Supplements thereto void for being contrary to the with various international airlines to provide in-flight
Constitution, the BOT Law and its Implementing Rules and catering, passenger handling, ramp and ground support,
Regulations. aircraft maintenance and provisions, cargo handling and
warehousing and other services. Also included as
On March 6, 2003, respondent PIATCO informed the Court
petitioners are labor unions MIASCOR Workers Union-
that on March 4, 2003 PIATCO commenced arbitration
National Labor Union and Philippine Airlines Employees
proceedings before the International Chamber of
Association, These petitioners filed the instant action for
Commerce, International Court of Arbitration (ICC) by filing
prohibition as taxpayers and as parties whose rights and
a Request for Arbitration with the Secretariat of the ICC
interests stand to be violated by the implementation of the
against the Government of the Republic of the Philippines
PIATCO Contracts.
acting through the DOTC and MIAA.
Petitioners-Intervenors in the same case are all
In the present cases, the Court is again faced with the task
corporations organized and existing under Philippine laws
of resolving complicated issues made difficult by their
engaged in the business of providing in-flight catering,
intersecting legal and economic implications. The Court is
passenger handling, ramp and ground support, aircraft
aware of the far reaching fall out effects of the ruling which
maintenance and provisions, cargo handling and
it makes today. For more than a century and whenever the
warehousing and other services to several international
exigencies of the times demand it, this Court has never
airlines at the Ninoy Aquino International Airport.
shirked from its solemn duty to dispense justice and
Petitioners-Intervenors allege that as tax-paying
resolve "actual controversies involving rights which are
international airline and airport-related service operators,
legally demandable and enforceable, and to determine
each one of them stands to be irreparably injured by the
whether or not there has been grave abuse of discretion
implementation of the PIATCO Contracts. Each of the
amounting to lack or excess of jurisdiction." 6 To be sure,
petitioners-intervenors have separate and subsisting
this Court will not begin to do otherwise today.
concession agreements with MIAA and with various
We shall first dispose of the procedural issues raised by international airlines which they allege are being interfered
respondent PIATCO which they allege will bar the with and violated by respondent PIATCO.
resolution of the instant controversy.
In G.R. No. 155661, petitioners constitute employees of
Petitioners' Legal Standing to File MIAA and Samahang Manggagawa sa Paliparan ng
the present Petitions Pilipinas a legitimate labor union and accredited as the
a. G.R. Nos. 155001 and 155661 sole and exclusive bargaining agent of all the employees in
MIAA. Petitioners anchor their petition for prohibition on the
Page 64 of 458

nullity of the contracts entered into by the Government and except through a separate agreement duly entered into
PIATCO regarding the build-operate-and-transfer of the with PIATCO. 8
NAIA IPT III. They filed the petition as taxpayers and
With respect to the petitioning service providers and their
persons who have a legitimate interest to protect in the
employees, upon the commencement of operations of the
implementation of the PIATCO Contracts.
NAIA IPT III, they allege that they will be effectively barred
Petitioners in both cases raise the argument that the from providing international airline airport services at the
PIATCO Contracts contain stipulations which directly NAIA Terminals I and II as all international airlines and
contravene numerous provisions of the Constitution, passengers will be diverted to the NAIA IPT III. The
specific provisions of the BOT Law and its Implementing petitioning service providers will thus be compelled to
Rules and Regulations, and public policy. Petitioners contract with PIATCO alone for such services, with no
contend that the DOTC and the MIAA, by entering into said assurance that subsisting contracts with MIAA and other
contracts, have committed grave abuse of discretion international airlines will be respected. Petitioning service
amounting to lack or excess of jurisdiction which can be providers stress that despite the very competitive market,
remedied only by a writ of prohibition, there being no plain, the substantial capital investments required and the high
speedy or adequate remedy in the ordinary course of law. rate of fees, they entered into their respective contracts
with the MIAA with the understanding that the said
contracts will be in force for the stipulated period, and
In particular, petitioners assail the provisions in the 1997 thereafter, renewed so as to allow each of the petitioning
Concession Agreement and the ARCA which grant service providers to recoup their investments and obtain a
PIATCO the exclusive right to operate a commercial reasonable return thereon.
international passenger terminal within the Island of Luzon,
Petitioning employees of various service providers at the
except those international airports already existing at the
NAIA Terminals I and II and of MIAA on the other hand
time of the execution of the agreement. The contracts
allege that with the closure of the NAIA Terminals I and II
further provide that upon the commencement of operations
as international passenger terminals under the PIATCO
at the NAIA IPT III, the Government shall cause the closure
Contracts, they stand to lose employment.
of Ninoy Aquino International Airport Passenger Terminals
I and II as international passenger terminals. With respect The question on legal standing is whether such parties
to existing concession agreements between MIAA and have "alleged such a personal stake in the outcome of the
international airport service providers regarding certain controversy as to assure that concrete adverseness which
services or operations, the 1997 Concession Agreement sharpens the presentation of issues upon which the court
and the ARCA uniformly provide that such services or so largely depends for illumination of difficult constitutional
operations will not be carried over to the NAIA IPT III and questions." 9 Accordingly, it has been held that the interest
PIATCO is under no obligation to permit such carry over of a person assailing the constitutionality of a statute must
Page 65 of 458

be direct and personal. He must be able, to show, not only appropriate funds necessary to comply with the provisions
that the law or any government act is invalid, but also that therein. 11 They cite provisions of the PIATCO Contracts
he sustained or is in imminent danger of sustaining some which require disbursement of unappropriated amounts in
direct injury as a result of its enforcement, and not merely compliance with the contractual obligations of the
that he suffers thereby in some indefinite way. It must Government. They allege that the Government obligations
appear that the person complaining has been or is about to in the PIATCO Contracts which compel government
be denied some right or privilege to which he is lawfully expenditure without appropriation is a curtailment of their
entitled or that he is about to be subjected to some burdens prerogatives as legislators, contrary to the mandate of
or penalties by reason of the statute or act complained the Constitution that "[n]o money shall be paid out of the
of. 10 treasury except in pursuance of an appropriation made by
law." 12
We hold that petitioners have the requisite standing. In the
abovementioned cases, petitioners have a direct and Standing is a peculiar concept in constitutional law
substantial interest to protect by reason of the because in some cases, suits are not brought by parties
implementation of the PIATCO Contracts. They stand to who have been personally injured by the operation of a law
lose their source of livelihood, a property right which is or any other government act but by concerned citizens,
zealously protected by the Constitution. Moreover, taxpayers or voters who actually sue in the public interest.
subsisting concession agreements between MIAA and Although we are not unmindful of the cases of Imus Electric
petitioners-intervenors and service contracts between Co. v. Municipality of Imus 13 and Gonzales
international airlines and petitioners-intervenors stand to be v. Raquiza 14 wherein this Court held that appropriation
nullified or terminated by the operation of the NAIA IPT III must be made only on amounts immediately
under the PIATCO Contracts. The financial prejudice demandable,public interest demands that we take a more
brought about by the PIATCO Contracts on petitioners and liberal view in determining whether the petitioners suing as
petitioners-intervenors in these cases are legitimate legislators, taxpayers and citizens have locus standi to file
interests sufficient to confer on them the requisite standing the instant petition. In Kilosbayan, Inc. v. Guingona, 15 this
to file the instant petitions.
CSaITD Court held "[i]n line with the liberal policy of this Court
on locus standi, ordinary taxpayers, members of Congress,
b. G.R. No. 155547
and even association of planters, and non-profit civic
In G.R. No. 155547, petitioners filed the petition for organizations were allowed to initiate and prosecute
prohibition as members of the House of Representatives, actions before this Court to question the constitutionality or
citizens and taxpayers. They allege that as members of the validity of laws, acts, decisions, rulings, or orders of various
House of Representatives, they are especially interested in government agencies or instrumentalities," 16 Further,
the PIATCO Contracts, because the contracts compel the "insofar as taxpayers' suits are concerned . . . (this Court)
Government and/or the House of Representatives to is not devoid of discretion as to whether or not it should be
Page 66 of 458

entertained." 17 As such ". . . even if, strictly speaking, they It is easy to discern that exceptional circumstances exist in
[the petitioners] are not covered by the definition, it is still the cases at bar that call for the relaxation of the rule. Both
within the wide discretion of the Court to waive the petitioners and respondents agree that these cases are
requirement and so remove the impediment to its of transcendental importance as they involve the
addressing and resolving the serious constitutional construction and operation of the country's premier
questions raised." 18 In view of the serious legal questions international airport. Moreover, the crucial issues submitted
involved and their impact on public interest, we resolve to for resolution are of first impression and they entail the
grant standing to the petitioners. proper legal interpretation of key provisions of the
Constitution, the BOT Law and its Implementing Rules and
Other Procedural Matters
Regulations. Thus, considering the nature of the
Respondent PIATCO further alleges that this Court is controversy before the Court, procedural bars may be
without jurisdiction to review the instant cases as factual lowered to give way for the speedy disposition of the
issues are involved which this Court is ill-equipped to instant cases.
resolve. Moreover, PIATCO alleges that submission of this
controversy to this Court at the first instance is a violation Legal Effect of the Commencement
of the rule on hierarchy of courts. They contend that trial of Arbitration Proceedings by
courts have concurrent jurisdiction with this Court with PIATCO
respect to a special civil action for prohibition and hence, There is one more procedural obstacle which must be
following the rule on hierarchy of courts, resort must first be overcome. The Court is aware that arbitration proceedings
had before the trial courts. pursuant to Section 10.02 of the ARCA have been filed at
the instance of respondent PIATCO. Again, we hold that
After a thorough study and careful evaluation of the issues
the arbitration step taken by PIATCO will not oust this
involved, this Court is of the view that the crux of the
Court of its jurisdiction over the cases at bar.
instant controversy involves significant legal questions. The
facts necessary to resolve these legal questions are well In Del Monte Corporation-USA v. Court of Appeals, 20 even
established and, hence, need not be determined by a trial after finding that the arbitration clause in the Distributorship
court. Agreement in question is valid and the dispute between the
parties is arbitrable, this Court affirmed the trial court's
The rule on hierarchy of courts will not also prevent this
decision denying petitioner's Motion to Suspend
Court from assuming jurisdiction over the cases at bar. The
Proceedings pursuant to the arbitration clause under the
said rule may be relaxed when the redress desired cannot
contract. In so ruling, this Court held that as contracts
be obtained in the appropriate courts or where exceptional
produce legal effect between the parties, their assigns and
and compelling circumstances justify availment of a
heirs, only the parties to the Distributorship Agreement are
remedy within and calling for the exercise of this Court's
bound by its terms, including the arbitration clause
primary jurisdiction. 19
Page 67 of 458

stipulated therein. This Court ruled that arbitration Is PIATCO a qualified bidder?
proceedings could be called for but only with respect to the Public respondents argue that the Paircargo Consortium,
parties to the contract in question. Considering that there PIATCO's predecessor, was not a duly pre-qualified bidder
are parties to the case who are neither parties to the on the unsolicited proposal submitted by AEDC as the
Distributorship Agreement nor heirs or assigns of the Paircargo Consortium failed to meet the financial capability
parties thereto, this Court, citing its previous ruling in Salas, required under the BOT Law and the Bid Documents. They
Jr. v. Laperal Realty Corporation, 21 held that to tolerate allege that in computing the ability of the Paircargo
the splitting of proceedings by allowing arbitration as to Consortium to meet the minimum equity requirements for
some of the parties on the one hand and trial for the others the project, the entire net worth of Security Bank, a
on the other hand would, in effect, result in multiplicity of member of the consortium, should not be considered.
suits, duplicitous procedure and unnecessary
delay. 22 Thus, we ruled that the interest of justice would PIATCO relies, on the other hand, on the strength of the
best be served if the trial court hears and adjudicates the Memorandum dated October 14, 1996 issued by the DOTC
case in a single and complete proceeding. Undersecretary Primitivo C. Cal stating that the Paircargo
Consortium is found to have a combined net worth of
P3,900,000,000.00, sufficient to meet the equity
It is established that petitioners in the present cases who
requirements of the project. The said Memorandum was in
have presented legitimate interests in the resolution of the
response to a letter from Mr. Antonio Henson of AEDC to
controversy are not parties to the PIATCO Contracts.
President Fidel V. Ramos questioning the financial
Accordingly, they cannot be bound by the arbitration clause
capability of the Paircargo Consortium on the ground that it
provided for in the ARCA and hence, cannot be compelled
does not have the financial resources to put up the
to submit to arbitration proceedings. A speedy and decisive
required minimum equity of P2,700,000,000.00. This
resolution of all the critical issues in the present
contention is based on the restriction under R.A. No. 337,
controversy, including those raised by petitioners, cannot
as amended or the General Banking Act that a commercial
be made before an arbitral tribunal. The object of
bank cannot invest in any single enterprise in an amount
arbitration is precisely to allow an expeditious
more than 15% of its net worth. In the said Memorandum,
determination of a dispute. This objective would not be met
Undersecretary Cal opined:
if this Court were to allow the parties to settle the cases by
arbitration as there are certain issues involving non-parties The Bid Documents, as clarified through Bid
to the PIATCO Contracts which the arbitral tribunal will not Bulletin Nos. 3 and 5, require that financial
be equipped to resolve. capability will be evaluated based on total
financial capability of all the member companies
Now, to the merits of the instant controversy. of the [Paircargo] Consortium. In this connection,
the Challenger was found to have a combined
I
net worth of P3,926,421,242.00 that could
Page 68 of 458

support a project costing approximately P13 c. Financial Capability: The project proponent
Billion.
CSaITD must have adequate capability to sustain the
financing requirements for the detailed
It is not a requirement that the net worth must be
engineering design, construction and/or
"unrestricted." To impose that as a requirement
operation and maintenance phases of the
now will be nothing less than unfair.
project, as the case may be. For purposes of
The financial statement or the net worth is not pre-qualification, this capability shall be
the sole basis in establishing financial capability. measured in terms of (i) proof of the ability of the
As stated in Bid Bulletin No. 3, financial project proponent and/or the consortium to
capability may also be established by testimonial provide a minimum amount of equity to the
letters issued by reputable banks. The project, and (ii) a letter testimonial from reputable
Challenger has complied with this requirement. banks attesting that the project proponent and/or
members of the consortium are banking with
To recap, net worth reflected in the Financial them, that they are in good financial standing,
Statement should not be taken as the amount of and that they have adequate resources. The
the money to be used to answer the required government agency/LGU concerned shall
thirty percent (30%) equity of the challenger but determine on a project-to-project basis and
rather to be used in establishing if there is before pre-qualification, the minimum amount of
enough basis to believe that the challenger can equity needed. (Italics supplied)
comply with the required 30% equity. In fact,
proof of sufficient equity is required as one of the Pursuant to this provision, the PBAC issued PBAC Bulletin
conditions for award of contract (Section 12.1 No. 3 dated August 16, 1996 amending the financial
IRR of the BOT Law) but not for pre-qualification capability requirements for pre-qualification of the project
(Section 5.4 of the same document). 23 proponent as follows:
Under the BOT Law, in case of a build-operate-and- 6. Basis of Pre-qualification
transfer arrangement, the contract shall be awarded to the
bidder "who, having satisfied the minimum financial, The basis for the pre-qualification shall be on
technical, organizational and legal standards" required by the compliance of the proponent to the
the law, has submitted the lowest bid and most favorable minimum technical and financial
terms of the project, 24 Further, the 1994 Implementing requirements provided in the Bid Documents
Rules and Regulations of the BOT Law provide: and in the IRR of the BOT Law, R.A. No.
6957, as amended by R.A. 7718.
Section 5.4 Pre-qualification Requirements.
The minimum amount of equity to which the
xxx xxx xxx proponent's financial capability will be based
shall be thirty percent (30%) of the project
Page 69 of 458

cost instead of the twenty percent (20%) We agree with public respondents that with respect to
specified in Section 3.6.4 of the Bid Security Bank, the entire amount of its net worth could not
Documents. This is to correlate with the be invested in a single undertaking or enterprise, whether
required debt-to-equity ratio of 70:30 in allied or non-allied in accordance with the provisions
Section 2.01a of the draft concession of R.A. No. 337, as amended or the General Banking Act:
agreement, The debt portion of the project Sec. 21-B. The provisions in this or in any other
financing should not exceed 70% of the Act to the contrary notwithstanding, the Monetary
actual project cost. Board, whenever it shall deem appropriate and
Accordingly, based on the above provisions of law, the necessary to further national development
Paircargo Consortium or any challenger to the unsolicited objectives or support national priority
projects, may authorize a commercial bank, a
proposal of AEDC has to show that it possesses the
bank authorized to provide commercial banking
requisite financial capability to undertake the project in the services, as well as a government-owned and
minimum amount of 30% of the project cost through (i) controlled bank, to operate under an expanded
proof of the ability to provide a minimum amount of equity commercial banking authority and by virtue
to the project, and (ii) a letter testimonial from reputable thereof exercise, in addition to powers
banks attesting that the project proponent or members of authorized for commercial banks, the powers of
the consortium are banking with them, that they are in good an Investment House as provided in Presidential
financial standing, and that they have adequate resources. Decree No. 129, invest in the equity of a non-
allied undertaking, or own a majority or all of the
As the minimum project cost was estimated to be equity in a financial intermediary other than a
US$350,000,000.00 or roughly P9,183,650,000.00, 25 the commercial bank or a bank authorized to provide
Paircargo Consortium had to show to the satisfaction of the commercial banking services; Provided, That (a)
PBAC that it had the ability to provide the minimum equity the total investment in equities shall not exceed
for the project in the amount of at least P2,755,095,000.00. fifty percent (50%) of the net worth of the
bank; (b) the equity investment in any one
Paircargo's Audited Financial Statements as of 1993 and enterprise whether allied or non-allied shall not
1994 indicated that it had a net worth of P2,783,592,00 and exceed fifteen percent (15%) of the net worth of
P3,123,515,00 respectively. 26 PAGS' Audited Financial the bank; (c) the equity investment of the bank,
Statements as of 1995 indicate that it has approximately or of its wholly or majority-owned subsidiary, in a
P26,735,700.00 to invest as its equity for the single non-allied undertaking shall not exceed
project. 27 Security Bank's Audited Financial Statements as thirty-five percent (35%) of the total equity in the
of 1995 show that it has a net worth equivalent to its capital enterprise nor shall it exceed thirty-five percent
funds in the amount of P3,523,504,377.00. 28 (35%) of the voting stock in that enterprise; and
(d) the equity investment in other banks shall be
deducted from the investing bank's net worth for
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purposes of computing the prescribed ratio of net bidder may invest in the project at the time of pre-
worth to risk assets. qualification.
xxx xxx xxx
Further, the 1993 Manual of Regulations for Banks The PBAC has determined that any prospective bidder, for
provides: the construction, operation and maintenance of the NAIA
SECTION X383. Other Limitations and IPT III project should prove that it has the ability to provide
Restrictions. The following limitations and equity in the minimum amount of 30% of the project cost, in
restrictions shall also apply regarding equity accordance with the 70:30 debt-to-equity ratio prescribed in
investments of banks. the Bid Documents. Thus, in the case of Paircargo
a. In any single enterprise. The equity Consortium, the PBAC should determine the maximum
investments of banks in any single enterprise amounts that each member of the consortium may commit
shall not exceed at any time fifteen percent for the construction, operation and maintenance of the
(15%) of the net worth of the 'investing bank as NAIA IPT III project at the time of pre-qualification. With
defined in Sec. X106 and Subsec. X121.5. CSaITD respect to Security Bank, the maximum amount which may
be invested by it would only be 15% of its net worth in view
Thus, the maximum amount that Security Bank could of the restrictions imposed by the General Banking Act.
validly invest in the Paircargo Consortium is only Disregarding the investment ceilings provided by applicable
P528,525,656.55, representing 15% of its entire net worth. law would not result in a proper evaluation of whether or
The total net worth therefore of the Paircargo Consortium, not a bidder is pre-qualified to undertake the project as for
after considering the maximum amounts that may be all intents and purposes, such ceiling or legal restriction
validly invested by each of its members is P558,384,871.55 determines thetrue maximum amount which a bidder may
or only 6.08% of the project cost, 29 an amount invest in the project.
substantially less than the prescribed minimum equity
investment required for the project in the amount of Further, the determination of whether or not a bidder is pre-
P2,755,095,000.00 or 30% of the project cost. qualified to undertake the project requires an evaluation of
the financial capacity of the said bidder at the time the bid
The purpose of pre-qualification in any public bidding is to is submitted based on the required documents presented
determine, at the earliest opportunity, the ability of the by the bidder. The PBAC should not be allowed to
bidder to undertake the project. Thus, with respect to the speculate on the future financial ability of the bidder to
bidder's financial capacity at the pre-qualification stage, the undertake the project on the basis of documents submitted.
law requires the government agency to examine and This would open doors to abuse and defeat the very
determine the ability of the bidder to fund the entire cost of purpose of a public bidding. This is especially true in the
the project by considering the maximum amounts that each case at bar which involves the investment of billions of
Page 71 of 458

pesos by the project proponent. The relevant government the disqualification of respondent PIATCO's predecessor
authority is duty-bound to ensure that the awardee of the would come into play and necessarily result in the nullity of
contract possesses the minimum required financial all the subsequent contracts entered by it in pursuance of
capability to complete the project. To allow the PBAC to the project, the Court feels that it is necessary to discuss in
estimate the bidder's future financial capability would not full the pressing issues of the present controversy for a
secure the viability and integrity of the project. A restrictive complete resolution thereof.
and conservative application of the rules and procedures of
II
public bidding is necessary not only to protect the
impartiality and regularity of the proceedings but also to Is the 1997 Concession Agreement valid?
ensure the financial and technical reliability of the project. It Petitioners and public respondents contend that the 1997
has been held that: Concession Agreement is invalid as it contains provisions
The basic rule in public bidding is that bids that substantially depart from the draft Concession
should be evaluated based on the required Agreement included in the Bid Documents. They maintain
documents submitted before and not after the that a substantial departure from the draft Concession
opening of bids. Otherwise, the foundation of a Agreement is a violation of public policy and renders the
fair and competitive public bidding would be 1997 Concession Agreement null and void.
defeated. Strict observance of the rules,
regulations, and guidelines of the bidding PIATCO maintains, however, that the Concession
process is the only safeguard to a fair, honest Agreement attached to the Bid Documents is intended to
and competitive public bidding. 30 be a draft, i.e., subject to change, alteration or modification,
and that this intention was clear to all participants, including
Thus, if the maximum amount of equity that a bidder may AEDC, and DOTC/MIAA. It argued further that said
invest in the project at the time the bids are submitted falls intention is expressed in Part C (6) of Bid Bulletin No. 3
short of the minimum amounts required to be put up by the issued by the PBAC which states:
bidder, said bidder should be properly disqualified.
Considering that at the pre-qualification stage, the 6. Amendments to the Draft Concessions
maximum amounts which the Paircargo Consortium may Agreement
invest in the project fell short of the minimum amounts Amendments to the Draft Concessions
prescribed by the PBAC, we hold that Paircargo Agreement shall be issued from time to
Consortium was not a qualified bidder. Thus the award of time. Said amendments shall only cover
the contract by the PBAC to the Paircargo Consortium, a items that would not materially affect the
disqualified bidder, is null and void. preparation of the proponent's proposal.

While it would be proper at this juncture to end the


resolution of the instant controversy, as the legal effects of
Page 72 of 458

By its very nature, public bidding aims to protect the public The law is well settled that where, as in this
interest by giving the public the best possible advantages case, municipal authorities can only let a
through open competition. Thus: contract for public work to the lowest responsible
bidder, the proposals and specifications
Competition must be legitimate, fair and honest. therefore must be so framed as to permit free
In the field of government contract law, and full competition. Nor can they enter into a
competition requires, not only bidding upon a contract with the best bidder containing
common standard, a common basis, upon the substantial provisions beneficial to him, not
same thing, the same subject matter, the same included or contemplated in the terms and
undertaking,' but also that it be legitimate, fair specifications upon which the bids were
and honest; and not designed to injure or invited. 33
defraud the government. 31
In fact, in the PBAC Bid Bulletin No. 3 cited by PIATCO to
An essential element of a publicly bidded contract is that all support its argument that the draft concession agreement
bidders must be on equal footing. Not simply in terms of is subject to amendment, the pertinent portion of which was
application of the procedural rules and regulations imposed quoted above, the PBAC also clarified that "[s]aid
by the relevant government agency, but more importantly, amendments shall only cover items that would not
on the contract bidded upon. Each bidder must be able to materially affect the preparation of the proponent's
bid on the same thing. The rationale is obvious. If the proposal."
winning bidder is allowed to later include or modify certain
provisions in the contract awarded such that the contract is While we concede that a winning bidder is not precluded
altered in any material respect, then the essence of fair from modifying or amending certain provisions of the
competition in the public bidding is destroyed. A public contract bidded upon, such changes must not constitute
bidding would indeed be a farce if after the contract is substantial or material amendments that would alter the
awarded, the winning bidder may modify the contract and basic parameters of the contract and would constitute a
include provisions which are favorable to it that were not denial to the other bidders of the opportunity to bid on the
previously made available to the other bidders. Thus: same terms. Hence, the determination of whether or not a
modification or amendment of a contract bidded out
It is inherent in public biddings that there shall be constitutes a substantial amendment rests on whether the
a fair competition among the bidders. The
contract, when taken as a whole, would contain
specifications in such biddings provide the
common ground or basis for the bidders. The
substantially different terms and conditions that would have
specifications should, accordingly, operate the effect of altering the technical and/or financial
equally or indiscriminately upon all bidders. 32 proposals previously submitted by other bidders. The
alterations and modifications in the contract executed
The same rule was restated by Chief Justice Stuart of the between the government and the winning bidder must be
Supreme Court of Minnesota:
Page 73 of 458

such as to render such executed contract to be an entirely a. Modification on the Public


different contract from the one that was bidded upon. CSaITD Utility Revenues and Non-Public
Utility Revenues that may be
In the case of Caltex (Philippines), Inc. v. Delgado
collected by PIATCO
Brothers, Inc., 34 this Court quoted with approval the ruling
of the trial court that an amendment to a contract awarded The fees that may be, imposed and collected by PIATCO
through public bidding, when such subsequent amendment under the draft Concession Agreement and the 1997
was made without a new public bidding, is null and void: Concession Agreement may be classified into three distinct
categories: (1) fees which are subject to periodic
The Court agrees with the contention of counsel adjustment of once every two years in accordance with a
for the plaintiffs that the due execution of a
prescribed parametric formula and adjustments are made
contract after public bidding is a limitation upon
the right of the contracting parties to alter or effective only upon written approval by MIAA; (2) fees other
amend it without another public bidding, for than those included in the first category which may be
otherwise what would a public bidding be good adjusted by PIATCO whenever it deems necessary without
for if after the execution of a contract after public need for consent of DOTC/MIAA; and (3) new fees and
bidding, the contracting parties may alter or charges that may be imposed by PIATCO which have not
amend the contract, or even cancel it, at their been previously imposed or collected at the Ninoy Aquino
will? Public biddings are held for the protection of International Airport Passenger Terminal I, pursuant
the public, and to give the public the best to Administrative Order No. 1, Series of 1993, as amended.
possible advantages by means of open The glaring distinctions between the draft Concession
competition between the bidders. He who bids or Agreement and the 1997 Concession Agreement lie in the
offers the best terms is awarded the contract
types of fees included in each category and the extent of
subject of the bid, and it is obvious that such
the supervision and regulation which MIAA is allowed to
protection and best possible advantages to the
public will disappear if the parties to a contract exercise in relation thereto.
executed after public bidding may alter or amend
it without another previous public bidding. 35
For fees under the first category, i.e., those which are
Hence, the question that comes to fore is this: is the 1997 subject to periodic adjustment in accordance with a
Concession Agreement the same agreement that was prescribed parametric formula and effective only upon
offered for public bidding, i.e., the draft Concession written approval by MIAA, the draft Concession
Agreement attached to the Bid Documents? A close Agreement includes the following: 36
comparison of the draft Concession Agreement attached to
the Bid Documents and the 1997 Concession Agreement (1) aircraft parking fees;
reveals that the documents differ in at least two material (2) aircraft tacking fees;
respects:
Page 74 of 458

(3) groundhandling fees; upon written approval of MIAA. The full text of said
(4) rentals and airline offices; provision is quoted below:

(5) check-in counter rentals; and Section 6.03. Periodic Adjustment in Fees and
Charges. Adjustments in the aircraft parking
(6) porterage fees. fees, aircraft tacking fees, groundhandling fees,
rentals and airline offices, check-in-counter
Under the 1997 Concession Agreement, fees which are rentals and porterage fees shall be allowed only
subject to adjustment and effective upon MIAA approval once every two years and in accordance with the
are classified as "Public Utility Revenues" and include: 37 Parametric Formula attached hereto as Annex F.
(1) aircraft parking fees; Provided that adjustments shall be made
effective only after the written express approval
(2) aircraft tacking fees; of the MIAA. Provided, further, that such
(3) check-in counter fees; and approval of the MIAA, shall be contingent only on
the conformity of the adjustments with the above
(4) Terminal Fees. said parametric formula. The first adjustment
shall be made prior to the In-Service Date of the
The implication of the reduced number of fees that are
Terminal.
subject to MIAA approval is best appreciated in relation to
fees included in the second category identified above. The MIAA reserves the right to regulate under
Under the 1997 Concession Agreement, fees which the foregoing terms and conditions the lobby and
PIATCO may adjust whenever it deems necessary without vehicular parking fees and other new fees and
need for consent of DOTC/MIAA are "Non-Public Utility charges as contemplated in paragraph 2 of
Section 6.01 if in its judgment the users of the
Revenues" and is defined as "all other income not
airport shall be deprived of a free option for the
classified as Public Utility Revenues derived from services they cover. 39
operations of the Terminal and the Terminal
Complex." 38 Thus, under the 1997 Concession On the other hand, the equivalent provision under the 1997
Agreement, groundhandling fees, rentals from airline Concession Agreement reads:
offices and porterage fees are no longer subject to MIAA Section 6.03 Periodic Adjustment in Fees, and Charges.
regulation.
xxx xxx xxx
Further, under Section 6.03 of the draft Concession
Agreement; MIAA reserves the right to regulate (1) lobby (c) Concessionaire shall at all times be judicious
in fixing fees and charges constituting Non-
and vehicular parking fees and (2) other new fees and
Public Utility Revenues in order to ensure that
charges that may be imposed by PIATCO. Such regulation End Users are not unreasonably deprived of
may be made by periodic adjustment and is effective only services. While the vehicular parking fee,
Page 75 of 458

porterage fee and greeter/well wisher fee With respect to terminal fees that may be charged by
constitute Non-Public Utility Revenues of PIATCO, 41 as shown earlier, this was included within the
Concessionaire, GRP may intervene and require category of "Public Utility Revenues" under the 1997
Concessionaire to explain and justify the fee it Concession Agreement. This classification is significant
may set from time to time, if in the reasonable because under the 1997 Concession Agreement, "Public
opinion of GRP the said fees have become
Utility Revenues" are subject to an "Interim Adjustment" of
exorbitant resulting in the unreasonable
deprivation of End Users of such services. 40 fees upon the occurrence of certain extraordinary events
specified in the agreement. 42 However, under the draft
Thus, under the 1997 Concession Agreement, with respect Concession Agreement, terminal fees are not included in
to (1) vehicular parking fee, (2) porterage fee and (3) the types of fees that may be subject to "Interim
greeter/well wisher fee, all that MIAA can do is to require Adjustment." 43
PIATCO to explain and justify the fees set by PIATCO. In
the draft Concession Agreement, vehicular parking fee is Finally, under the 1997 Concession Agreement, "Public
subject to MIAA regulation and approval under the second Utility Revenues," except terminal fees, are denominated in
paragraph of Section 6.03 thereof while porterage fee is US Dollars 44 while payments to the Government are in
covered by the first paragraph of the same provision. There Philippine Pesos. In the draft Concession Agreement, no
is an obvious relaxation of the extent of control and such stipulation was included. By stipulating that "Public
regulation by MIAA with respect to the particular fees that Utility Revenues" will be paid to PIATCO in US Dollars
may be charged by PIATCO. CSaITD
while payments by PIATCO to the Government are in
Philippine currency under the 1997 Concession
Moreover, with respect to the third category of fees that Agreement, PIATCO is able to enjoy the benefits of
may be imposed and collected by PIATCO, i.e., new fees depreciations of the Philippine Peso, while being effectively
and charges that may be imposed by PIATCO which have insulated from the detrimental effects of exchange rate
not been previously imposed or collected at the Ninoy fluctuations.
Aquino International Airport Passenger Terminal I, under
Section 6.03 of the draft Concession AgreementMIAA has When taken as a whole, the changes under the 1997
reserved the right to regulate the same under the same Concession Agreement with respect to reduction in the
conditions that MIAA may regulate fees under the first types of fees that are subject to MIAA regulation and the
category, i.e., periodic adjustment of once every two years relaxation of such regulation with respect to other fees are
in accordance with a prescribed parametric formula and significant amendments that substantially distinguish the
effective only upon written approval by MIAA. However, draft Concession Agreement from the 1997 Concession
under the 1997 Concession Agreement, adjustment of fees Agreement. The 1997 Concession Agreement, in this
under the third category is not subject to MIAA regulation. respect, clearly gives PIATCO more favorable terms than
what was available to other bidders at the time the contract
was bidded out. It is not very difficult to see that the
Page 76 of 458

changes in the 1997 Concession Agreement translate xxx xxx xxx


to direct and concrete financial advantages for (b) In the event Concessionaire should default in
PIATCO which were not available at the time the contract the payment of an Attendant Liability, and the
was offered for bidding. It cannot be denied that under the default has resulted in the acceleration of the
1997 Concession Agreement only "Public Utility Revenues" payment due date of the Attendant Liability prior
are subject to MIAA regulation. Adjustments of all other to its stated date of maturity, the Unpaid
fees imposed and collected by PIATCO are entirely within Creditors and Concessionaire shall immediately
its control. Moreover, with respect to terminal fees, under inform GRP in writing of such default. GRP shall,
the 1997 Concession Agreement, the same is further within one hundred eighty (180) Days from
subject to "Interim Adjustments" not previously stipulated in receipt of the joint written notice of the Unpaid
the draft Concession Agreement. Finally, the change in the Creditors and Concessionaire, either (i) take
over the Development Facility and assume the
currency stipulated for "Public Utility Revenues" under the
Attendant Liabilities, or (ii) allow the Unpaid
1997 Concession Agreement, except terminal fees, gives Creditors, if qualified, to be substituted as
PIATCO an added benefit which was not available at the concessionaire and operator of the Development
time of bidding. aSTAIH
Facility in accordance with the terms and
b. Assumption by conditions hereof, or designate a qualified
the Government operator acceptable to GRP to operate the
Development Facility, likewise under the terms
of the liabilities of
and conditions of this Agreement; Provided that
PIATCO in the if at the end of the 180-day period GRP shall not
event have served the Unpaid Creditors and
of the latter's default Concessionaire written notice of its choice, GRP
thereof shall be deemed to have elected to take over the
Under the draft Concession Agreement, default by PIATCO Development Facility with the concomitant
of any of its obligations to creditors who have provided, assumption of Attendant Liabilities.
loaned or advanced funds for the NAIA IPT III project does (c) If GRP should, by written notice, allow the
not result in the assumption by the Government of these Unpaid Creditors to be substituted as
liabilities. In fact, nowhere in the said contract does default concessionaire, the latter shall form and
of PIATCO's loans figure in the agreement. Such default organize a concession company qualified to take
does not directly result in any concomitant right or over the operation of the Development Facility. If
obligation in favor of the Government. the concession company should elect to
designate an operator for the Development
However, the 1997 Concession Agreement provides: Facility, the concession company shall in good
faith identify and designate a qualified operator
Section 4.04 Assignment.
acceptable to GRP within one hundred eighty
Page 77 of 458

(180) days from receipt of GRP's written notice. Without going into the validity of this provision at this
If the concession company, acting in good faith juncture, suffice it to state that Section 4.04 of the 1997
and with due diligence, is unable to designate a Concession Agreement may be considered a form of
qualified operator within the aforesaid period, security for the loans PIATCO has obtained to finance the
then GRP shall at the end of the 180-day period project, an option that was not made available in the draft
take over the Development Facility and assume
Concession Agreement. Section 4.04 is an important
Attendant Liabilities.
amendment to the 1997 Concession Agreement because it
The term "Attendant Liabilities" under the 1997 Concession grants PIATCO a financial advantage or benefit which was
Agreement is defined as: not previously made available during the bidding process.
This financial advantage is a significant modification that
translates to better terms and conditions for PIATCO.
Attendant Liabilities refer to all amounts recorded
and from time to time outstanding in the books of PIATCO, however, argues that the parties to the bidding
the Concessionaire as owing to Unpaid Creditors procedure acknowledge that the draft Concession
who have provided, loaned or advanced funds Agreement is subject to amendment because the Bid
actually used for the Project, including all Documents permit financing or borrowing. They claim that
interests, penalties, associated fees, charges, it was the lenders who proposed the amendments to the
surcharges, indemnities, reimbursements and draft Concession Agreement which resulted in the 1997
other related expenses, and further including Concession Agreement.
amounts owed by Concessionaire to its
suppliers, contractors and sub-contractors. We agree that it is not inconsistent with the rationale and
purpose of the BOT Law to allow the project proponent or
Under the above quoted portions of Section 4.04 in relation the winning bidder to obtain financing for the project,
to the definition of "Attendant Liabilities," default by especially in this case which involves the construction,
PIATCO of its loans used to finance the NAIA IPT III operation and maintenance of the NAIA IPT III. Expectedly,
project triggers the occurrence of certain events that leads compliance by the project proponent of its undertakings
to the assumption by the Government of the liability for the therein would involve a substantial amount of investment. It
loans. Only in one instance may the Government escape is therefore inevitable for the awardee of the contract to
the assumption of PIATCO's liabilities, i.e., when the seek alternate sources of funds to support the project. Be
Government so elects and allows a qualified operator to that as it may, this Court maintains that amendments to the
take over as Concessionaire. However, this circumstance contract bidded upon should always conform to the general
is dependent on the existence and availability of a qualified policy on public bidding if such procedure is to be faithful to
operator who is willing to take over the rights and its real nature and purpose. By its very nature and
obligations of PIATCO under the contract, a circumstance characteristic, competitive public bidding aims to protect
that is not entirely within the control of the Government. the public interest by giving the public the best possible
Page 78 of 458

advantages through open competition. 45 It has been held being contrary to public policy. These amendments convert
that the three principles in public bidding are (1) the offer to the 1997 Concession Agreement to an entirely different
the public; (2) opportunity for competition; and (3) a basis agreement from the contract bidded out or the draft
for the exact comparison of bids. A regulation of the matter Concession Agreement. It is not difficult to see that the
which excludes any of these factors destroys the distinctive amendments on (1) the types of fees or charges that are
character of the system and thwarts the purpose of its subject to MIAA regulation or control and the extent thereof
adoption. 46 These are the basic parameters which every and (2) the assumption by the Government, under certain
awardee of a contract bidded out must conform to, conditions, of the liabilities of PIATCO directly translates
requirements of financing and borrowing notwithstanding. concrete financial advantages to PIATCO that were
Thus, upon a concrete showing that, as in this case, the previously not available during the bidding process. These
contract signed by the government and the contract amendments cannot be taken as merely supplements to or
awardee is an entirely different contract from the contract implementing provisions of those already existing in the
bidded, courts should not hesitate to strike down said draft Concession Agreement. The amendments discussed
contract in its entirety for violation of public policy on public above present new terms and conditions which provide
bidding. A strict adherence on the principles, rules and financial benefit to PIATCO which may have altered the
regulations on public bidding must be sustained if only to technical and financial parameters of other bidders had
preserve the integrity and the faith of the general public on they known that such terms were available.
the procedure.
III
Public bidding is a standard practice for procuring Direct Government Guarantee
government contracts for public service and for furnishing
supplies and other materials. It aims to secure for the Article IV, Section 4.04(b) and (c), in relation to Article 1.06,
government the lowest possible price under the most of the 1997 Concession Agreement provides:
favorable terms and conditions, to curtail favoritism in the Section 4.04 Assignment
award of government contracts and avoid suspicion of
xxx xxx xxx
anomalies and it places all bidders in equal footing. 47 Any
government action which permits any substantial variance (b) In the event Concessionaire should default in
between the conditions under which the bids are invited the payment of an Attendant Liability, and the
and the contract executed after the award thereof is a default resulted in the acceleration of the
grave abuse of discretion amounting to lack or excess of payment due date of the Attendant Liability prior
jurisdiction which warrants proper judicial action. to its stated date of maturity, the Unpaid
Creditors and Concessionaire shall immediately
In view of the above discussion, the fact that the foregoing inform GRP in writing of such default. GRP shall
substantial amendments were made on the 1997 within one hundred eighty (180) days from
Concession Agreement renders the same null and void for receipt of the joint written notice of the Unpaid
Page 79 of 458

Creditors and Concessionaire, either (i) take Attendant Liabilities refer to all amounts recorded
over the Development Facility andassume the and from time to time outstanding in the books of
Attendant Liabilities, or (ii) allow the Unpaid the Concessionaire as owing to Unpaid
Creditors, if qualified to be substituted as Creditors who have provided, loaned or
concessionaire and operator of the Development advanced funds actually used for the
facility in accordance with the terms and Project, including all interests, penalties,
conditions hereof, or designate a qualified associated fees, charges, surcharges,
operator acceptable to GRP to operate the indemnities, reimbursements and other related
Development Facility, likewise under the terms expenses, and further including amounts owed
and conditions of this Agreement; Provided, that by Concessionaire to its suppliers, contractors
if at the end of the 180-day period GRP shall not and subcontractors. 48
have served the Unpaid Creditors and
Concessionaire written notice of its choice, GRP It is clear from the above-quoted provisions
shall be deemed to have elected to take over the that Government, in the event that PIATCO defaults in its
Development Facility with the concomitant loan obligations, is obligated to pay "all amounts recorded
assumption of Attendant Liabilities. and from time to time outstanding from the books" of
PIATCO which the latter owes to its creditors. 49 These
(c) If GRP, by written notice, allow the Unpaid
amounts include "all interests, penalties, associated fees,
Creditors to be substituted as concessionaire,
the latter shall form and organize a concession charges, surcharges, indemnities, reimbursements and
company qualified to takeover the operation of other related expenses." 50 This obligation of the
the Development Facility. If the concession Government to pay PIATCO's creditors upon PIATCO's
company should elect to designate an operator default would arise if the Government opts to take over
for the Development Facility, the concession NAIA IPT III. It should be noted, however, that even if the
company shall in good faith identify and Government chooses the second option, which is to allow
designate a qualified operator acceptable to PIATCO's unpaid creditors operate NAIA IPT III, the
GRP within one hundred eighty (180) days from Government is still at a risk of being liable to PIATCO's
receipt of GRP's written notice. If the concession creditors should the latter be unable to designate a
company, acting in good faith and with due qualified operator within the prescribed period. 51 In
diligence, is unable to designate a qualified effect, whatever option the Government chooses to take in
operator within the aforesaid period, then
the event of PIATCO's failure to fulfill its loan obligations,
GRP shall at the end of the 180-day period take
over the Development Facility and assume the Government is still at a risk of assuming PIATCO's
Attendant Liabilities. outstanding loans. This is due to the fact that the
Government would only be free from assuming PIATCO's
xxx xxx xxx debts if the unpaid creditors would be able to designate a
Section 1.06. Attendant Liabilities qualified operator within the period provided for in the
Page 80 of 458

contract. Thus, the Government's assumption of liability is implementing the project in case of a loan
virtually out of its control. The Government under the default.
circumstances provided for in the 1997 Concession Clearly by providing that the Government "assumes" the
Agreement is at the mercy of the existence, availability and attendant liabilities, which consists of PIATCO's unpaid
willingness of a qualified operator. The above contractual debts, the 1997 Concession Agreement provided for a
provisions constitute a direct government guarantee which direct government guarantee for the debts incurred by
is prohibited by law. PIATCO in the implementation of the NAIA IPT III project. It
is of no moment that the relevant sections are subsumed
under the title of "assignment". The provisions providing for
One of the main impetus for the enactment of the BOT direct government guarantee which is prohibited by law is
Law is the lack of government funds to construct the clear from the terms thereof.
infrastructure and development projects necessary for
economic growth and development. This is why private The fact that the ARCA superseded the 1997 Concession
sector resources are being tapped in order to finance these Agreement did not cure this fatal defect. Article IV, Section
projects. The BOT law allows the private sector to 4.04(c), in relation to Article 1, Section 1.06, of the ARCA
participate, and is in fact encouraged to do so by way of provides:
incentives, such as minimizing, the unstable flow of Section 4.04 Security
returns, 52 provided that the government would not have to
unnecessarily expend scarcely available funds for the xxx xxx xxx
project itself. As such, direct guarantee, subsidy and equity (c) GRP agrees with Concessionaire (PIATCO)
by the government in these projects are strictly that it shall negotiate in good faith and enter into
prohibited. 53 This is but logical for if the government would direct agreement with the Senior Lenders, or
in the end still be at a risk of paying the debts incurred by with an agent of such Senior Lenders (which
the private entity in the BOT projects, then the purpose of agreement shall be subject to the approval of the
the law is subverted. Bangko Sentral ng Pilipinas), in such form as
may be reasonably acceptable to both GRP and
Section 2(n) of the BOT Law defines direct guarantee as Senior Lenders, with regard, inter alia, to the
follows: following parameters:
(n) Direct government guarantee An xxx xxx xxx
agreement whereby the government or any of its
(iv) If the Concessionaire [PIATCO] is in default
agencies or local government units assume
under a payment obligation owed to the Senior
responsibility for therepayment of debt directly
Lenders, and as a result thereof the Senior
incurred by the project proponent in
Lenders have become entitled to accelerate the
Senior Loans, the Senior Lenders shall have the
Page 81 of 458

right to notify GRP of the same, and without Liabilities, if greater. Notwithstanding Section
prejudice to any other rights of the Senior 8.01 (c) hereof, this Agreement shall be deemed
Lenders or any Senior Lenders' agent may have terminated upon the transfer of the Development
(including without limitation under security Facility [NAIA Terminal 3] to GRP pursuant
interests granted in favor of the Senior Lenders), hereto;
to either in good faith identify and designate a
xxx xxx xxx
nominee which is qualified under sub-clause
(viii)(y) below to operate the Development Section 1.06. Attendant Liabilities
Facility [NAIA Terminal 3] or transfer the
Concessionaire's [PIATCO] rights and Attendant Liabilities refer to all amounts in each
obligations under this Agreement to a transferee case supported by verifiable evidence from time
which is qualified under sub-clause (viii) below; to time owed or which may become owing by
Concessionaire [PIATCO] to Senior Lenders or
xxx xxx xxx any other persons or entities who have provided,
loaned, or advanced funds or provided financial
(vi) if the Senior Lenders, acting in good faith
facilities to Concessionaire [PIATCO]for the
and using reasonable efforts, are unable to
Project [NAIA Terminal 3], including, without
designate a nominee or effect a transfer in terms
limitation, all principal, interest, associated fees,
and conditions satisfactory to the Senior Lenders
charges, reimbursements, and other related
within one hundred eighty (180) days after giving
expenses (including the fees, charges and
GRP notice as referred to respectively in (iv) or
expenses of any agents or trustees of such
(v) above, then GRP and the Senior Lenders
persons or entities), whether payable at maturity,
shall endeavor in good faith to enter into any
by acceleration or otherwise, and further
other arrangement relating to the Development
including amounts owed by Concessionaire
Facility [NAIA Terminal 3] (other than a turnover
[PIATCO] to its professional consultants and
of the Development Facility [NAIA Terminal 3] to
advisers, suppliers, contractors and sub-
GRP) within the following one hundred eighty
contractors. 54
(180) days. If no agreement relating to the
Development Facility [NAIA Terminal 3] is It is clear from the foregoing contractual provisions that in
arrived at by GRP and the Senior Lenders within the event that PIATCO fails to fulfill its loan obligations to
the said 180-day period, then at the end thereof its Senior Lenders, the Government is obligated to directly
the Development Facility [NAIA Terminal 3] shall negotiate and enter into an agreement relating to NAIA IPT
be transferred by the Concessionaire [PIATCO]
III with the Senior Lenders, should the latter fail to appoint
to GRP or its designee and GRP shall make a
termination payment to Concessionaire a qualified nominee or transferee who will take the place of
[PIATCO] equal to the Appraised Value (as PIATCO. If the Senior Lenders and the Government are
hereinafter defined) of the Development Facility unable to enter into an agreement after the prescribed
[NAIA Terminal 3] or the sum of the Attendant period, the Government must then pay PIATCO, upon
Page 82 of 458

transfer of NAIA IPT III to the Government, termination contracts the Government was never a party to. The
payment equal to the appraised value of the project or the Government was not even given an option as to what
value of the attendant liabilities whichever is greater. course of action it should take in case PIATCO defaulted in
Attendant liabilities as defined in the ARCA includes all the payment of its senior loans. The Government, upon
amounts owed or thereafter may be owed by PIATCO not PIATCO's default, would be merely notified by the Senior
only to the Senior Lenders with whom PIATCO has Lenders of the same and it is the Senior Lenders who are
defaulted in its loan obligations but to all other persons who authorized to appoint a qualified nominee or transferee.
may have loaned, advanced funds or provided any other Should the Senior Lenders fail to make such an
type of financial facilities to PIATCO for NAIA IPT III. The appointment, the Government is then automatically
amount of PIATCO's debt that the Government would have obligated to "directly deal and negotiate" with the Senior
to pay as a result of PIATCO's default in its loan obligations Lenders regarding NAIA IPT III. The only way the
in case no qualified nominee or transferee is appointed Government would not be liable for PIATCO's debt is for a
by the Senior Lenders and no other agreement relating to qualified nominee or transferee to be appointed in place of
NAIA IPT III has been reached between the Government PIATCO to continue the construction, operation and
and the Senior Lenders includes, but is not limited to, maintenance of NAIA IPT III. This "pre-condition", however,
"all principal, interest, associated fees, charges, will not take the contract out of the ambit of a direct
reimbursements, and other related expenses . . . whether guarantee by the government as the existence, availability
payable at maturity, by acceleration or otherwise." 55 and willingness of a qualified nominee or transferee is
totally out of the government's control. As such the
It is clear from the foregoing that the ARCA provides for a
Government is virtually at the mercy of PIATCO (that it
direct guarantee by the government to pay PIATCO's loans
would not default on its loan obligations to its Senior
not only to its Senior Lenders but all other entities who
Lenders), the Senior Lenders (that they would appoint a
provided PIATCO funds or services upon PIATCO's default
qualified nominee or transferee or agree to some other
in its loan obligation with its Senior Lenders. The fact that
arrangement with the Government) and the existence of a
the Government's obligation to pay PIATCO's lenders for
qualified nominee or transferee who is able and willing to
the latter's obligation would only arise after the Senior
take the place of PIATCO in NAIA IPT III.
Lenders fail to appoint a qualified nominee or transferee
does not detract from the fact that, should the conditions as The proscription against government guarantee in any form
stated in the contract occur, the ARCA still obligates the is one of the policy considerations behind the BOT Law.
Government to pay any and all amounts owed by PIATCO Clearly, in the present case, the ARCA obligates the
to its lenders in connection with NAIA IPT III. Worse, the Government to pay for all loans, advances and obligations
conditions that would make the Government liable for arising out of financial facilities extended to PIATCO for the
PIATCO's debts is triggered by PIATCO's own default of its implementation of the NAIA IPT III project should PIATCO
loan obligations to its Senior Lenders to which loan default in its loan obligations to its Senior Lenders and the
Page 83 of 458

latter fails to appoint a qualified nominee or transferee. This exposed to the risk of shouldering hundreds of million of
in effect would make the Government liable for PIATCO's dollars in debt.
loans should the conditions as set forth in the ARCA arise.
This is a form of direct government guarantee.
This Court has long and consistently adhered to the legal
The BOT Law and its implementing rules provide that in
maxim that those that cannot be done directly cannot be
order for an unsolicited proposal for a BOT project may be
done indirectly. 58 To declare the PIATCO contracts valid
accepted, the following conditions must first be met: (1) the
despite the clear statutory prohibition against a direct
project involves a new concept in technology and/or is not
government guarantee would not only make a mockery of
part of the list of priority projects, (2) no direct government
what the BOT Law seeks to prevent which is to expose
guarantee, subsidy or equity is required, and (3) the
the government to the risk of incurring a monetary
government agency or local government unit has invited by
obligation resulting from a contract of loan between the
publication other interested parties to a public bidding and
project proponent and its lenders and to which the
conducted the same. 56 The failure to meet any of the
Government is not a party to but would also render the
above conditions will result in the denial of the proposal. It
BOT Law useless for what it seeks to achieve to make
is further provided that the presence of direct government
use of the resources of the private sector in the "financing,
guarantee, subsidy or equity will "necessarily, disqualify a
operation and maintenance of infrastructure and
proposal from being treated and accepted as an unsolicited
development projects" 59 which are necessary for national
proposal." 57 The BOT Law clearly and strictly prohibits
growth and development but which the government,
direct government guarantee, subsidy and equity in
unfortunately, could ill-afford to finance at this point in time.
unsolicited proposals that the mere inclusion of a provision
to that effect is fatal and is sufficient to deny the proposal. It IV
stands to reason therefore that if a proposal can be denied Temporary takeover of business affected with public
by reason of the existence of direct government guarantee, interest
then its inclusion in the contract executed after the said
proposal has been accepted is likewise sufficient to Article XII, Section 17 of the 1987 Constitution provides:
invalidate the contract itself. A prohibited provision, the Section 17. In times of national emergency,
inclusion of which would result in the denial of a proposal when the public interest so requires, the State
cannot, and should not, be allowed to later on be inserted may, during the emergency and under
in the contract resulting from the said proposal. The basic reasonable terms prescribed by it, temporarily
rules of justice and fair play alone militate against such an take over or direct the operation of any privately
occurrence and must not, therefore, be countenanced owned public utility or business affected with
particularly in this instance where the government is public interest.
Page 84 of 458

The above provision pertains to the right of the State in by written notice to Concessionaire, immediately
times of national emergency, and in the exercise of its take over the operations of the Terminal and/or
police power, to temporarily take over the operation of any the Terminal Complex. During such take over by
business affected with public interest. In the 1986 GRP, the Concession Period shall be
Constitutional Commission, the term "national emergency" suspended; provided, that upon termination of
war, hostilities or national emergency, the
was defined to include threat from external aggression,
operations shall be returned to Concessionaire,
calamities or national disasters, but not strikes "unless it is at which time, the Concession period shall
of such proportion that would paralyze government commence to run again. Concessionaire shall be
service." 60 The duration of the emergency itself is the entitled to reasonable compensation for the
determining factor as to how long the temporary takeover duration of the temporary take over by GRP,
by the government would last. 61 The temporary takeover which compensation shall take into account the
by the government extends only to the operation of the reasonable cost for the use of the Terminal
business and not to the ownership thereof. As such and/or Terminal Complex, (which is in the
the government is not required to compensate the private amount at least equal to the debt service
entity-owner of the said business as there is no transfer of requirements of Concessionaire, if the temporary
ownership, whether permanent or temporary. The private take over should occur at the time when
entity-owner affected by the temporary takeover cannot, Concessionaire is still servicing debts owed to
project lenders), any loss or damage to the
likewise, claim just compensation for the use of the said
Development Facility, and other consequential
business and its properties as the temporary takeover by damages. If the parties cannot agree on the
the government is in exercise of its police power and not of reasonable compensation of Concessionaire, or
its power of eminent domain. on the liability of GRP as aforesaid, the matter
Article V, Section 5.10 (c) of the 1997 Concession shall be resolved in accordance with Section
10.01 [Arbitration]. Any amount determined to be
Agreement provides:
payable by GRP to Concessionaire shall be
Section 5.10 Temporary Take-over of operations offset from the amount next payable by
by GRP. Concessionaire to GRP. 62
xxx xxx xxx PIATCO cannot, by mere contractual stipulation,
(c) In the event the development Facility or any contravene the Constitutional provision on temporary
part thereof and/or the operations of government takeover and obligate the government to pay
Concessionaire or any part thereof, become the "reasonable cost for the use of the Terminal and/or
subject matter of or be included in any notice, Terminal Complex." 63 Article XII, section 17 of the 1987
notification, or declaration concerning or relating Constitution envisions a situation wherein the exigencies of
to acquisition, seizure or appropriation by GRP in the times necessitate the government to "temporarily take
times of war or national emergency, GRP shall,
Page 85 of 458

over or direct the operation of any privately owned public performance of various services and functions in the
utility or business affected with public interest." It is the interest of the public. 67 Nonetheless, a determination must
welfare and interest of the public which is the paramount first be made as to whether public interest requires a
consideration in determining whether or not to temporarily monopoly. As monopolies are subject to abuses that can
take over a particular business. Clearly, the State in inflict severe prejudice to the public, they are subject to a
effecting the temporary takeover is exercising its police higher level of State regulation than an ordinary business
power. Police power is the "most essential, insistent, and undertaking.
illimitable of powers." 64 Its exercise therefore must not be
In the cases at bar, PIATCO, under the 1997 Concession
unreasonably hampered nor its exercise be a source of
Agreement and the ARCA, is granted the "exclusive right to
obligation by the government in the absence of damage
operate a commercial international passenger terminal
due to arbitrariness of its exercise. 65 Thus, requiring the
within the Island of Luzon" at the NAIA IPT III. 68 This is
government to pay reasonable compensation for the
with the exception of already existing international airports
reasonable use of the property pursuant to the operation of
in Luzon such as those located in the Subic Bay Freeport
the business contravenes the Constitution.
Special Economic Zone ("SBFSEZ"), Clark Special
V Economic Zone ("CSEZ") and in Laoag City. 69 As such,
Regulation of Monopolies upon commencement of PIATCO's operation of NAIA IPT
III, Terminals 1 and 2 of NAIA would cease to function as
A monopoly is "a privilege or peculiar advantage vested in international passenger terminals. This, however, does not
one or more persons or companies, consisting in the prevent MIAA to use Terminals 1 and 2 as domestic
exclusive right (or power) to carry on a particular business passenger terminals or in any other manner as it may
or trade, manufacture a particular article, or control the sale deem appropriate except those activities that would
of a particular commodity." 66 The 1987 Constitution strictly compete with NAIA IPT III in the latter's operation as an
regulates monopolies, whether private or public, and even international passenger terminal. 70 The right granted to
provides for their prohibition if public interest so PIATCO to exclusively operate NAIA IPT III would be for a
requires. Article XII, Section 19 of the 1987 period of twenty-five (25) years from the In-Service
Constitution states: Date 71 and renewable for another twenty-five (25) years at
Sec. 19. The state shall regulate or prohibit the option of the government. 72 Both the 1997 Concession
monopolies when the public interest so requires. Agreement and the ARCA further provide that, in view of
No combinations in restraint of trade or unfair the exclusive right granted to PIATCO, the concession
competition shall be allowed. contracts of the service providers currently servicing
Clearly, monopolies are not per se prohibited by the Terminals 1 and 2 would no longer be renewed and those
Constitution but may be permitted to exist to aid the concession contracts whose expiration are subsequent to
government in carrying on an enterprise or to aid in the
Page 86 of 458

the In-Service Date would cease to be effective on the said Section 3.01(e) of the 1997 Concession Agreement and
date. 73 the ARCA provide:
The operation of an international passenger airport terminal
is no doubt an undertaking imbued with public interest. In
3.01 Concession Period
entering into a Build-Operate-and-Transfer contract for the
construction, operation and maintenance of NAIA IPT III, xxx xxx xxx
the government has determined that public interest would (e) GRP confirms that certain concession
be served better if private sector resources were used in its agreements relative to certain services and
construction and an exclusive right to operate be granted to operations currently being undertaken at the
the private entity undertaking the said project, in this case Ninoy Aquino International Airport passenger
PIATCO. Nonetheless, the privilege given to PIATCO is Terminal I have a validity period extending
subject to reasonable regulation and supervision by the beyond the In-Service Date. GRP through
Government through the MIAA, which is the government DOTC/MIAA, confirms that these services and
agency authorized to operate the NAIA complex, as well as operations shall not be carried over to the
DOTC, the department to which MIAA is attached. 74 Terminal and the Concessionaire is under no
legal obligation to permit such carry-over except
This is in accord with the Constitutional mandate that a through a separate agreement duly entered into
monopoly which is not prohibited must be with Concessionaire. In the event
regulated. 75 While it is the declared policy of the BOT Concessionaire becomes involved in any
Law to encourage private sector participation by "providing litigation initiated by any such concessionaire or
a climate of minimum government regulations," 76 the same operator, GRP undertakes and hereby holds
does not mean that Government must completely Concessionaire free and harmless on full
indemnity basis from and against any loss and/or
surrender its sovereign power to protect public interest in
any liability resulting from any such litigation,
the operation of a public utility as a monopoly. The including the cost of litigation and the reasonable
operation of said public utility can not be done in an fees paid or payable to Concessionaire's counsel
arbitrary manner to the detriment of the public which it of choice, all such amounts shall be fully
seeks to serve. The right granted to the public utility may deductible by way of an offset from any amount
be exclusive but the exercise of the right cannot run riot. which the Concessionaire is bound to pay GRP
Thus, while PIATCO may be authorized to exclusively under this Agreement.
operate NAIA IPT III as an international passenger
During the oral arguments on December 10, 2002, the
terminal, the Government, through the MIAA, has the right
counsel for the petitioners-in-intervention for G.R.
and the duty to ensure that it is done in accord with public
No. 155001 stated that there are two service providers
interest. PIATCO's right to operate NAIA IPT III cannot also
whose contracts are still existing and whose validity
violate the rights of third parties.
Page 87 of 458

extends beyond the In-Service Date. One contract remains CONCLUSION


valid until 2008 and the other until 2010. 77 In sum, this Court rules that in view of the absence of the
We hold that while the service providers presently requisite financial capacity of the Paircargo Consortium,
operating at NAIA Terminal 1 do not have an absolute right predecessor of respondent PIATCO, the award by the
for the renewal or the extension of their respective PBAC of the contract for the construction, operation and
contracts, those contracts whose duration extends beyond maintenance of the NAIA IPT III is null and void. Further,
NAIA IPT III's In-Service-Date should not be unduly considering that the 1997 Concession Agreement contains
prejudiced. These contracts must be respected not just by material and substantial amendments, which amendments
the parties thereto but also by third parties. PIATCO had the effect of converting the 1997 Concession
cannot, by law and certainly not by contract, render a valid Agreement into an entirely different agreement from the
and binding contract nugatory. PIATCO, by the mere contract bidded upon, the 1997 Concession Agreement is
expedient of claiming an exclusive right to operate, cannot similarly null and void for being contrary to public policy.
require the Government to break its contractual obligations The provisions under Sections 4.04(b) and (c) in relation to
to the service providers. In contrast to the arrastre and Section 1.06 of the 1997 Concession Agreement and
stevedoring service providers in the case of Anglo-Fil Section 4.04(c) in relation to Section 1.06 of the ARCA,
Trading Corporation v. Lazaro 78 whose contracts consist of which constitute a direct government guarantee expressly
temporary hold-over permits, the affected service providers prohibited by, among others, the BOT Law and its
in the cases at bar, have a valid and binding contract with Implementing Rules and Regulations are also null and
the Government, through MIAA, whose period of effectivity, void. The Supplements, being accessory contracts to the
as well as the other terms and conditions thereof cannot be ARCA, are likewise null and void. TcEaAS

violated. WHEREFORE, the 1997 Concession Agreement, the


In fine, the efficient functioning of NAIA IPT III is imbued Amended and Restated Concession Agreement and the
with public interest. The provisions of the 1997 Concession Supplements thereto are set aside for being null and void.
Agreement and the ARCA did not strip government, thru SO ORDERED.
the MIAA, of its right to supervise the operation of the
whole NAIA complex, including NAIA IPT III. As the primary Davide, Jr., C.J., Bellosillo, Ynares-Santiago, Sandoval-
government agency tasked with the job, 79 it is MIAA's Gutierrez, Austria Martinez, Corona and Carpio Morales,
responsibility to ensure that whoever by contract is given JJ., concur.
the right to operate NAIA IPT III will do so within the Vitug, J., please see separate (dissenting) opinion
bounds of the law and with due regard to the rights of third
parties and above all, the interest of the public. Panganiban, J., please see separate opinion
VI
Page 88 of 458

Quisumbing and Azcuna, JJ., concur with separate further proceedings in the action or matter
(dissenting) opinion of J. Vitug. specified therein, or otherwise granting such
incidental reliefs as law and justice may require."
Callejo, Sr., J., concurs with separate opinion of J.
Panganiban. The rule is explicit. A petition for prohibition may be filed
against a tribunal, corporation, board, officer or person,
Carpio, J., took no part. exercising judicial, quasi-judicial or ministerial functions.
What the petitions seek from respondents do not involve
judicial, quasi-judicial or ministerial functions. In prohibition,
Separate Opinions only legal issues affecting the jurisdiction of the tribunal,
board or officer involved may be resolved on the basis
VITUG, J.: of undisputed facts. 2 The parties allege, respectively,
contentious evidentiary facts. It would be difficult, if not
This Court is bereft of jurisdiction to hear the petitions at anomalous, to decide the jurisdictional issue on the basis
bar. The Constitution provides that the Supreme Court of the contradictory factual submissions made by the
shall exercise original jurisdiction over, among other actual parties. 3 As the Court has so often exhorted, it is not a trier
controversies, petitions for certiorari, prohibition, of facts.
mandamus, quo warranto, and habeas corpus. 1 The cases
in question, although denominated to be petitions for The petitions, in effect, are in the nature of actions for
prohibition, actually pray for the nullification of the PIATCO declaratory relief under Rule 63 of the Rules of Court. The
contracts and to restrain respondents from implementing Rules provide that any person interested under a contract
said agreements for being illegal and unconstitutional. may, before breach or violation thereof, bring an action in
the appropriate Regional Trial Court to determine any
Section 2, Rule 65 of the Rules of Court states: question of construction or validity arising, and for a
"When the proceedings of any tribunal, declaration of his rights or duties thereunder. 4 The
corporation, board, officer or person, whether Supreme Court assumes no jurisdiction over petitions for
exercising judicial, quasi-judicial or ministerial declaratory relief which are cognizable by regional trial
functions, are without or in excess of its or his courts. 5
jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and As I have so expressed in Tolentino vs. Secretary of
there is no appeal or any other plain, speedy and Finance, 6 reiterated in Santiago vs. Guingona, Jr., 7 the
adequate remedy in the ordinary course of law, a Supreme Court should not be thought of as having been
person aggrieved thereby may file a verified tasked with the awesome responsibility of overseeing the
petition in the proper court, alleging the facts with entire bureaucracy. Pervasive and limitless, such as it may
certainty and praying that judgment be rendered seem to be under the 1987 Constitution, judicial power still
commanding the respondent to desist from succumbs to the paramount doctrine of separation of
Page 89 of 458

powers. The Court may not at good liberty intrude, in the public policy to such an extent as to render all of them void
guise of sovereign imprimatur, into every affair of and inexistent?
government. What significance can still then remain of the
My answer to all the above questions is a firm "Yes."
time-honored and widely acclaimed principle of separation
of powers if, at every turn, the Court allows itself to pass The Procedural Issue:
upon at will the disposition of a co-equal, independent and
Jurisdiction, Standing and Arbitration
coordinate branch in our system of government. I dread to
think of the so varied uncertainties that such an undue Definitely and surely, the issues involved in these Petitions
interference can lead to. CSTDIE
are clearly of transcendental importance and of national
interest. The subject contracts pertain to the construction
Accordingly, I vote for the dismissal of the petition. and the operation of the country's premiere international
airport terminal an ultramodern world-class public utility
PANGANIBAN, J.:
that will play a major role in the country's economic
The five contracts for the construction and the operation of development and serve to project a positive image of our
Ninoy Aquino International Airport (NAIA) Terminal III, the country abroad. The five build-operate-&-transfer (BOT)
subject of the consolidated Petitions before the Court, are contracts, while entailing the investment of billions of pesos
replete with outright violations of law, public policy and the in capital and the availment of several hundred millions of
Constitution. The only proper thing to do is declare them all dollars in loans, contain provisions that tend to establish a
null and void ab initio and let the chips fall where they monopoly, require the disbursements of public funds sans
may. Fiat iustitia ruat coelum. appropriations, and provide government guarantees in
violation of statutory prohibitions, as well as other
The facts leading to this controversy are already well provisions equally offensive to law, public policy and the
presented in the ponencia. I shall not burden the readers Constitution. Public interest will inevitably be affected
with a retelling thereof. Instead, I will cut to the chase and thereby.
directly address the two sets of gut issues:
1. The first issue is procedural: Does the Supreme Court
have original jurisdiction to hear and decide the Petitions? Thus, objections to these Petitions, grounded upon (a) the
Corollarily, do petitioners have locus standi and should this hierarchy of courts, (b) the need for arbitration prior to court
Court decide the cases without any mandatory referral to action, and (c) the alleged lack of sufficient personality,
arbitration? standing or interest, being in the main procedural matters,
must now be set aside, as they have been in past cases.
2. The second one is substantive in character: Did the This Court must be permitted to perform its constitutional
subject contracts violate the Constitution, the laws, and duty of determining whether the other agencies of
government have acted within the limits of the Constitution
Page 90 of 458

and the laws, or if they have gravely abused the discretion Should the dispute be referred to arbitration prior to judicial
entrusted to them. 1 recourse? Respondent Piatco claims that Section 10.02 of
the Amended and Restated Concession Agreement
Hierarchy of Courts
(ARCA) provides for arbitration under the auspices of the
The Court has, in the past, held that questions relating to International Chamber of Commerce to settle any dispute
gargantuan government contracts ought to be settled or controversy or claim arising in connection with the
without delay. 2 This holding applies with greater force to Concession Agreement, its amendments and supplements.
the instant cases. Respondent Piatco is partly correct in The government disagrees, however, insisting that there
averring that petitioners can obtain relief from the regional can be no arbitration based on Section 10.02 of the ARCA,
trial courts via an action to annul the contracts. since all the Piatco contracts are void ab initio. Therefore,
Nevertheless, the unavoidable consequence of having to all contractual provisions, including Section 10.02 of the
await the rendition and the finality of any such judgment ARCA, are likewise void, inexistent and inoperative. To
would be a prolonged state of uncertainty that would be support its stand, the government cites Chavez
prejudicial to the nation, the parties and the general public. v. Presidential Commission on Good Government: 6 "The
And, in light of the feared loss of jobs of the petitioning void agreement will not be rendered operative by the
workers, consequent to the inevitable pretermination of parties' alleged performance (partial or full) of their
contracts of the petitioning service providers that will follow respective prestations. A contract that violates
upon the heels of the impending opening of NAIA Terminal the Constitution and the law is null and void ab initio and
III, the need for relief is patently urgent, and therefore, vests no rights and creates no obligations. It produces no
direct resort to this Court through the special civil action of legal effect at all."
prohibition is thus justified. 3 As will be discussed at length later, the Piatco contracts
Contrary to Piatco's argument that the resolution of the are indeed void in their entirety; thus, a resort to the
issues raised in the Petitions will require delving into factual aforesaid provision on arbitration is unavailing. Besides,
questions, 4 I submit that their disposition ultimately turns petitioners and petitioners-in-intervention have pointed out
on questions of law. 5 Further, many of the significant and that, even granting arguendo that the arbitration clause
relevant factual questions can be easily addressed by an remained a valid provision, it still cannot bind them
examination of the documents submitted by the parties. In inasmuch as they are not parties to the Piatco contracts.
any event, the Petitions raise some novel questions And in the final analysis, it is unarguable that the arbitration
involving the application of the amended BOT Law, which process provided for under Section 10.02 of the ARCA, to
this Court has seen fit to tackle. be undertaken by a panel of three (3) arbitrators appointed
in accordance with the Rules of Arbitration of the
Arbitration International Chamber of Commerce, will not be able to
address, determine and definitively resolve the
Page 91 of 458

constitutional and legal questions that have been raised in of Representatives, they are actually deprived of discretion
the Petitions before us. insofar as the inclusion of those items of expenditure in the
budget is concerned. To prevent such encroachment upon
Locus Standi
the legislative privilege and obviate injury to the institution
Given this Court's previous decisions in cases of similar of which they are members, petitioners-legislators
import, no one will seriously doubt that, being taxpayers have locus standi to bring suit.
and members of the House of Representatives, Petitioners
Baterina et al., have locus standi to bring the Petition in GR Messrs. Agan et al and Lopez et al., are likewise taxpayers
No. 155547. In Albano v. Reyes, 7 this Court held that the and thus possessed of standing to challenge the illegal
petitioner therein, suing as a citizen, taxpayer and member disbursement of public funds. Messrs. Agan et al., in
of the House of Representatives, was sufficiently clothed particular, are employees (or representatives of
with standing to bring the suit questioning the validity of the employees) of various service providers that have (1)
assailed contract. The Court cited the fact that public existing concession agreements with the MIAA to provide
interest was involved, in view of the important role of the airport services necessary to the operation of the NAIA and
Manila International Container Terminal (MICT) in the (2) service agreements to furnish essential support
country's economic development and the magnitude of the services to the international airlines operating at the NAIA.
financial consideration. This, notwithstanding the fact that On the other hand, Messrs. Lopez et al. are employees of
expenditure of public funds was not required under the the MIAA. These petitioners (Messrs. Agan et al. and
assailed contract. Messrs. Lopez et al.) are confronted with the prospect of
In the cases presently under consideration, petitioners' being laid off from their jobs and losing their means of
personal and substantial interest in the controversy is livelihood when their employer-companies are forced to
shown by the fact that certain provisions in the Piatco shut down or otherwise retrench and cut back on
contracts create obligations on the part of government manpower. Such development would result from the
(through the DOTC and the MIAA) to disburse public funds imminent implementation of certain provisions in the
without prior congressional appropriations. contracts that tend toward the creation of a monopoly in
favor of Piatco, its subsidiaries and related companies.
Petitioners thus correctly assert that the injury to them has
a twofold aspect: (1) they are adversely affected as Petitioners-in-intervention are service providers in the
taxpayers on account of the illegal disbursement of public business of furnishing airport-related services to
funds; and (2) they are prejudiced qua legislators, since the international airlines and passengers in the NAIA and are
contractual provisions requiring the government to incur therefore competitors of Piatco as far as that line of
expenditures without appropriations also operate as business is concerned. On account of provisions in the
limitations upon the exclusive power and prerogative of Piatco contracts, petitioners-in-intervention have to enter
Congress over the public purse. As members of the House into a written contract with Piatco so as not to be shut out
Page 92 of 458

of NAIA Terminal III and barred from doing business there. submitted by the Asia's Emerging Dragon Corporation
Since there is no provision to ensure or safeguard free and (AEDC) to the Department of Transportation and
fair competition, they are literally at its mercy. They claim Communications (DOTC) and the Manila International
injury on account of their deprivation of property (business) Airport Authority (MIAA), which reviewed and approved the
and of the liberty to contract, without due process of law. proposal.
And even if petitioners and petitioners-in-intervention were The draft of the concession agreement as negotiated
not sufficiently clothed with legal standing, I have at the between AEDC and DOTC/MIAA was endorsed to the
outset already established that, given its impact on the National Economic Development Authority (NEDA-ICC),
public and on national interest, this controversy is laden which in turn reviewed it on the basis of its scope,
with transcendental importance and constitutional economic viability, financial indicators and risks; and
significance. Hence, I do not hesitate to adopt the same thereafter approved it for bidding.
position as was enunciated in Kilosbayan v. Guingona
The DOTC/MIAA then prepared the Bid Documents,
Jr. 8 that "in cases of transcendental importance, the Court
incorporating therein the negotiated Draft Concession
may relax the standing requirements and allow a suit to
Agreement, and published invitations for public bidding,
prosper even when there is no direct injury to the party
i.e., for the submission of comparative or competitive
claiming the right of judicial review." 9
proposals. Piatco's predecessor-in-interest, the Paircargo
The Substantive Issue: Consortium, was the only company that submitted a
competitive bid or price challenge.
Violations of the Constitution and the Laws
From the Outset, the Bidding At this point, I must emphasize that the law requires the
Process Was Flawed and Tainted award of a BOT project to the bidder that has satisfied the
minimum requirements; and met the technical, financial,
After studying the documents submitted and arguments organizational and legal standards provided in the BOT
advanced by the parties, I have no doubt that, right at the Law. Section 5 of this statute states:
outset, Piatco was not qualified to participate in the bidding
process for the Terminal III project, but was nevertheless
permitted to do so. It even won the bidding and was helped "Sec. 5. Public bidding of projects. - . . .
along by what appears to be a series of collusive and
corrosive acts. "In the case of a build-operate-and-transfer
arrangement, the contract shall be awarded to
The build-operate-and-transfer (BOT) project for the NAIA the bidder who, having satisfied the minimum
Passenger Terminal III comes under the category of an financial, technical, organizational and legal
"unsolicited proposal," which is the subject of Section 4-A standards required by this Act, has submitted the
of the BOT Law. 10 The unsolicited proposal was originally lowest bid and most favorable terms for the
Page 93 of 458

project, based on the present value of its financing needed for it. Section 5.4(c) of the 1994 IRR
proposed tolls, fees, rentals and charges over a provides:
fixed term for the facility to be constructed,
rehabilitated, operated and maintained according "Sec. 5.4. Prequalification Requirements. To
to the prescribed minimum design and pre-qualify, a project proponent must comply
performance standards, plans and specifications. with the following requirements:
. . ." (Italics supplied.) xxx xxx xxx
The same provision requires that the price challenge via "c. Financial Capability. The project proponent
public bidding "must be conducted under a two- must have adequate capability to sustain the
envelope/two-stage system: the first envelope to contain financing requirements for the detailed
the technical proposal and the second envelope to contain engineering design, construction, and/or
the financial proposal." Moreover, the 1994 Implementing operation and maintenance phases of the
Rules and Regulations (IRR) provide that only those project, as the case may be. For purposes of
bidders that have passed the prequalification stage are prequalification, this capability shall be measured
permitted to have their two envelopes reviewed. in terms of: (i) proof of the ability of the project
proponent and/or the consortium to provide a
In other words, prospective bidders must prequalify by minimum amount of equity to the project, and (ii)
submitting their prequalification documents for evaluation; a letter testimonial from reputable banks
and only the pre-qualified bidders would be entitled to have attesting that the project proponent and/or
their bids opened, evaluated and appreciated. On the other members of the consortium are banking with
hand, disqualified bidders are to be informed of the reason them, that they are in good financial standing,
and that they have adequate resources. The
for their disqualification. This procedure was confirmed and
government Agency/LGU concerned shall
reiterated in the Bid Documents, which I quote thus: determine on a project-to-project basis, and
"Prequalified proponents will be considered eligible to before prequalification, the minimum amount of
move to second stage technical proposal evaluation. The equity needed. . . .." (Italics supplied)
second and third envelopes of pre-disqualified proponents
will be returned." 11 Since the minimum amount of equity for the project was set
at 30 percent 12 of the minimum project cost of US$350
Aside from complying with the legal and technical million, the minimum amount of equity required of any
requirements (track record or experience of the firm and its proponent stood at US$105 million. Converted to pesos at
key personnel), a project proponent desiring to prequalify the exchange rate then of P26.239 to US$1.00 (as quoted
must also demonstrate its financial capacity to undertake by the Bangko Sentral ng Pilipinas), the peso equivalent of
the project. To establish such capability, a proponent must the minimum equity was P2,755,095,000.
prove that it is able to raise the minimum amount of equity
required for the project and to procure the loans or
Page 94 of 458

However, the combined equity or net worth of the By virtue of the prequalified status conferred upon the
Paircargo consortium stood at only Paircargo, Undersecretary Cal's findings in effect relieved
P558,384,871.55. 13 This amount was only slightly over 6 the consortium of the need to comply with the financial
percent of the minimum project cost and very much short of capability requirement imposed by the BOT Law and IRR.
the required minimum equity, which was equivalent to 30 This position is unmistakably and squarely at odds with the
percent of the project cost. Such deficiency should have Supreme Court's consistent doctrine emphasizing the strict
immediately caused the disqualification of the Paircargo application of pertinent rules, regulations and guidelines for
consortium. This matter was brought to the attention of the the public bidding process, in order to place each bidder
Prequalification and Bidding Committee (PBAC). actual or potential on the same footing. Thus, it is
unarguably irregular and contrary to the very concept of
Notwithstanding the glaring deficiency, DOTC
public bidding to permit a variance between the conditions
Undersecretary Primitivo C. Cal, concurrent chair of the
under which bids are invited and those under which
PBAC, declared in a Memorandum dated 14 October 1996
proposals are submitted and approved.
that "the Challenger (Paircargo consortium) was found to
have a combined net worth of P3,926,421,242.00 that Republic v. Capulong 14 teaches that if one bidder is
could support a project costing approximately P13 billion." relieved from having to conform to the conditions that
To justify his conclusion, he asserted: "It is not a impose some duty upon it, that bidder is not contracting in
requirement that the networth must be `unrestricted.' To fair competition with those bidders that propose to be
impose this as a requirement now will be nothing less than bound by all conditions. The essence of public bidding is,
unfair." after all, an opportunity for fair competition and a basis for
the precise comparison of bids. 15 Thus, each bidder must
He further opined, "(T)he networth reflected in the Financial
bid under the same conditions; and be subject to the same
Statement should not be taken as the amount of money to
guidelines, requirements and limitations. The desired result
be used to answer the required thirty (30%) percent equity
is to be able to determine the best offer or lowest bid, all
of the challenger but rather to be used in establishing if
things being equal.
there is enough basis to believe that the challenger can
comply with the required 30% equity. In fact, proof of Inasmuch as the Paircargo consortium did not possess the
sufficient equity is required as one of the conditions for minimum equity equivalent to 30 percent of the minimum
award of contract (Sec. 12.1 of IRR of the BOT Law) but project cost, it should not have been prequalified or allowed
not for prequalification (Sec. 5.4 of same document)." to participate further in the bidding. The Prequalification
and Bidding Committee (PBAC) should therefore not have
On the basis of the foregoing dubious declaration, the
opened the two envelopes of the consortium containing its
Paircargo consortium was deemed prequalified and thus
technical and financial proposals; required AEDC to match
permitted to proceed to the other stages of the bidding
the consortium's bid; 16 or awarded the Concession
process.
Page 95 of 458

Agreement to the consortium's successor-in-interest, qualifies as an "unsolicited proposal" when it pertains to a


Piatco. project that involves "a new concept or technology," and/or
a project that is not on the government's list of priority
As there was effectively no public bidding to speak of, the
projects.
entire bidding process having been flawed and tainted from
the very outset, therefore, the award of the concession to To be considered as utilizing a new concept or technology,
Paircargo's successor Piatco was void, and the a project must involve the possession of exclusive rights
Concession Agreement executed with the latter was (worldwide or regional) over a process; or possession of
likewise void ab initio. For this reason, Piatco cannot and intellectual property rights over a design, methodology or
should not be allowed to benefit from that Agreement. 17 engineering concept. 18 Patently, the intent of the BOT
Law is to encourage individuals and groups to come up
AEDC Was Deprived of the
with creative innovations, fresh ideas and new technology.
Right to Match PIATCO's
Hence, the significance and necessity of protecting
Price Challenge
proprietary information in connection with unsolicited
In DOTC PBAC Bid Bulletin No. 4 (par. 3), Undersecretary proposals. And to make the encouragement real, the law
Cal declared that, for purposes of matching the price also extends to such individuals and groups what amounts
challenge of Piatco, AEDC as originator of the unsolicited to a "right of first refusal" to undertake the project they
proposal would be permitted access only to the schedule of conceptualized, involving the use of new technology or
proposed Annual Guaranteed Payments submitted by concepts, through the mechanism of matching a price
Piatco, and not to the latter's financial and technical challenge.
proposals that constituted the basis for the price challenge
in the first place. This was supposedly in keeping with A competing bid is never just any figure conjured from out
Section 11.6 of the 1994 IRR, which provides that of the blue; it is arrived at after studying economic,
proprietary information is to be respected, protected and financial, technical and other, factors; it is likewise based
treated with utmost confidentiality, and is therefore not to on certain assumptions as to the nature of the business,
form part of the bidding/tender and related documents. the market potentials, the probable demand for the product
or service, the future behavior of cost items, political and
This pronouncement, I believe, was a grievous other risks, and so on. It is thus self-evident that in order to
misapplication of the mentioned provision. The "proprietary be able to intelligently match a bid or price challenge, a
information" referred to in Section 11.6 of the IRR pertains bidder must be given access to the assumptions and the
only to the proprietary information of the originator of an calculations that went into crafting the competing bid.
unsolicited proposal, and not to those belonging to
a challenger. The reason for the protection accorded
proprietary information at all is the fact that, according to In this instance, the financial and technical proposals of
Section 4-A of the BOT Law as amended, a proposal Piatco would have provided AEDC with the necessary
Page 96 of 458

information to enable it to make a reasonably informed expose and weed out unqualified proponents, who might
matching bid. To put it more simply, a bidder unable to have unceremoniously slipped through the earlier
access the competitor's assumptions will never figure out prequalification process, by compelling them to put their
how the competing bid came about; requiring him to money where their mouths are, so to speak.
"counter-propose" is like having him shoot at a target in the
Nevertheless, this provision can be easily circumvented by
dark while blindfolded.
merely postponing the actual issuance of the Notice of
By withholding from AEDC the challenger's financial and Award, in order to give the favored proponent sufficient
technical proposals containing the critical information it time to comply with the requirements. Hence, to avert or
needed, Undersecretary Cal actually and effectively minimize the manipulation of the post-bidding process, the
deprived AEDC of the ability to match the price challenge. IRR not only set out the precise sequence of events
One could say that AEDC did not have the benefit of a occurring between the completion of the evaluation of the
"level playing field." It seems to me, though, that AEDC technical bids and the issuance of the Notice of Award, but
was actually shut out of the game altogether. also specified the timetables for each such event. Definite
allowable extensions of time were provided for, as were the
At the end of the day, the bottom line is that the validity and
consequences of a failure to meet a particular deadline.
the propriety of the award to Piatco had been irreparably
impaired. In particular, Section 9.1 of the 1994 IRR prescribed that
within 30 calendar days from the time the second-stage
Delayed Issuance of the
evaluation shall have been completed, the Committee must
Notice of Award Violated
come to a decision whether or not to award the contract
the BOT Law and the IRR
and, within 7 days therefrom, the Notice of Award must be
Section 9.5 of the IRR requires that the Notice of Award approved by the head of agency or local government unit
must indicate the time frame within which the winner of the (LGU) concerned, and its issuance must follow within
bidding (and therefore the prospective awardee) shall another 7 days thereafter.
submit the prescribed performance security, proof of
commitment of equity contributions, and indications of Section 9.2 of the IRR set the procedure applicable to
sources of financing (loans); and, in the case of joint projects involving substantial government undertakings as
ventures, an agreement showing that the members are follows: Within 7 days after the decision to award is made,
jointly and severally responsible for the obligations of the the draft contract shall be submitted to the ICC for
project proponent under the contract. clearance on a no-objection basis. If the draft contract
includes government undertakings already previously
The purpose of having a definite and firm timetable for the approved, then the submission shall be for information
submission of the aforementioned requirements is not only only.
to prevent delays in the project implementation, but also to
Page 97 of 458

However, should there be additional or new provisions "01 April 1997 The PBAC resolved that a
different from the original government undertakings, the copy of the final draft of the Concession
draft shall have to be reviewed and approved. The ICC has Agreement be submitted to the NEDA for
15 working days to act thereon, and unless otherwise clearance on a no-objection basis. This
specified, its failure to act on the contract within the resolution came more than 3 months too late as
it should have been made on the 20th of
specified time frame signifies that the agency or LGU may
December 1996 at the latest.
proceed with the award. The head of agency or LGU shall
approve the Notice of Award within seven days of the "16 April 1997 The PBAC resolved that the
clearance by the ICC on a no-objection basis, and the period of signing the Concession Agreement be
Notice itself has to be issued within seven days thereafter. extended by 15 days.

The highly regulated time-frames within which the agents "18 April 1997 NEDA approved the
Concession Agreement. Again this is more than
of government were to act evinced the intent to impose
3 months too late as the NEDA's decision should
upon them the duty to act expeditiously throughout the
have been released on the 16th of January 1997
process, to the end that the project be prosecuted and or fifteen days after it should have been
implemented without delay. This regulated scenario was submitted to it for review.
likewise intended to discourage collusion and substantially
reduce the opportunity for agents of government to abuse "09 July 1997 The Notice of Award was
their discretion in the course of the award process. issued to PIATCO. Following the provisions of
the IRR, the Notice of Award should have been
Despite the clear timetables set out in the IRR, several issued fourteen days after NEDA's approval, or
lengthy and still-unexplained delays occurred in the award the 28th of January 1997. In any case, even if it
process, as can be observed from the presentation made were to be assumed that the release of NEDA's
by the counsel for public respondents, 19 quoted approval on the 18th of April was timely, the
hereinbelow: Notice of Award should have been issued on the
9th of May 1997. In both cases, therefore, the
"11 Dec. 1996 The Paircargo Joint Venture release of the Notice of Award occurred in a
was informed by the PBAC that AEDC failed to decidedly less than timely fashion."
match and that negotiations preparatory to
Notice of Award should be commenced. This This chronology of events bespeaks an unmistakable
was the decision to award that should have disregard, if not disdain, by the persons in charge of the
commenced the running of the 7-day period to award process for the time limitations prescribed by the
approve the Notice of Award, as per Section 9.1 IRR. Their attitude flies in the face of this Court's solemn
of the IRR, or to submit the draft contract to the pronouncement in Republic v. Capulong 20 that "strict
ICC for approval conformably with Section 9.2. observance of the rules, regulations and guidelines of the
Page 98 of 458

bidding process is the only safeguard to a fair, honest and 2. The CA provided that government is to
competitive public bidding." answer for Piatco's unpaid loans and
debts (lumped under the
From the foregoing, the only conclusion that can possibly
term Attendant Liabilities) in the event
be drawn is that the BOT law and its IRR were repeatedly
Piatco fails to pay its senior lenders. 22
violated with unmitigated impunity and by agents of
government, no less! On account of such violation, the 3. The CA provided that in case of
award of the contract to Piatco, which undoubtedly gained termination of the contract due to the
time and benefited from the delays, must be deemed null fault of government, government shall
and void from the beginning. pay all expenses that Piatco incurred
for the project plus the appraised value
Further Amendments Resulted
of the Terminal. 23
in a Substantially Different
Contract, Awarded Without 4. The CA imposed new and special
Public Bidding obligations on government, including
But the violations and desecrations did not stop there. After delivery of clean possession of the site
the PBAC made its decision on December 11, 1996 to for the terminal; acquisition of
award the contract to Piatco, the latter negotiated changes additional land at the government's
to the Contract bidded out and ended up with what expense for construction of road
amounts to a substantially new contract without any public networks required by Piatco's
bidding. This Contract was subsequently further amended approved plans and specifications; and
four more times through negotiation and without any assistance to Piatco in securing site
bidding. Thus, the contract actually executed between utilities, as well as all necessary
Piatco and DOTC/MIAA on July 12, 1997 (the Concession permits, licenses and authorizations. 24
Agreement or "CA") differed from the contract bidded out 5. Where Section 3.02 of the DCA
(the draft concession agreement or "DCA") in the following requires government to refrain from
very significant respects: competing with the contractor with
1. The CA inserted stipulations creating a respect to the operation of NAIA
monopoly in favor of Piatco in the Terminal III, Section 3.02(b) of the CA
business of providing airport-related excludes and prohibits everyone,
services for international airlines and including government, from directly or
passengers. 21 indirectly competing with Piatco, with
respect to the operation of, as well
as operations in, NAIA Terminal
Page 99 of 458

III. Operations in is sufficiently broad to


encompass all retail and other
7. Section 1.29 of the DCA provides that the
commercial business enterprises
terminal fees, aircraft tacking fees,
operating within Terminal III, inclusive
aircraft parking fees, check-in counter
of the businesses of providing various
fees and other fees are to be quoted
airport-related services to international
and paid in Philippine pesos. But per
airlines, within the scope of the
Section 1.33 of the CA, all the
prohibition.
aforesaid fees save the terminal fee
6. Under Section 6.01 of the DCA, the are denominated in US Dollars.
following fees are subject to the written
8. Under Section 8.07 of the DCA, the
approval of MIAA: lease/rental
term attendant liabilities refers
charges, concession privilege fees for
to liabilities pertinent to NAIA Terminal
passenger services, food services,
III, such as payment of lease rentals
transportation utility concessions,
and performance of other obligations
groundhandling, catering and
under the Land Lease Agreement; the
miscellaneous concession fees,
obligations under the Tenant
porterage fees, greeter/well-wisher
Agreements; and payment of all taxes,
fees, carpark fees, advertising fees,
fees, charges and assessments of
VIP facilities fees and others.
whatever kind that may be imposed on
Moreover, adjustments to the
NAIA Terminal III or parts thereof. But
groundhandling fees, rentals and
in Section 1.06 of the CA, Attendant
porterage fees are permitted only once
Liabilities refers to unpaid debts of
every two years and in accordance
Piatco: "All amounts recorded and
with a parametric formula, per DCA
from time to time outstanding in the
Section 6.03. However, the CA as
books of (Piatco) as owing to Unpaid
executed with Piatco provides in
Creditors who have provided, loaned
Section 6.06 that all the aforesaid fees,
or advanced funds actually used for
rentals and charges may be
the Project, including all interests,
adjusted without MIAA's approval or
penalties, associated fees, charges,
intervention. Neither are the
surcharges, indemnities,
adjustments to these fees and charges
reimbursements and other related
subject to or limited by any parametric
expenses, and further including
formula. 25
amounts owed by [Piatco] to its
Page 100 of 458

suppliers, contractors and event of government's breach of


subcontractors." contract, Piatco may compel it to
purchase the terminal at fair market
9. Per Sections 8.04 and 8.06 of the DCA,
value, per Section 8.06(b) of the CA.
government may, on account of the
contractors breach, rescind the 10. Under the DCA, any delay by Piatco in
contract and select one of four options: the payment of the amounts due the
(a) take over the terminal and assume government constitutes breach of
all its attendant liabilities; (b) allow the contract. However, under the CA, such
contractor's creditors to assign the delay does not necessarily constitute
Project to another entity acceptable to breach of contract, since Piatco is
DOTC/MIAA; (c) pay the contractor permitted to suspend payments to the
rent for the facilities and equipment the government in order to first satisfy the
DOTC may utilize; or (d) purchase the claims of its secured creditors, per
terminal at a price established by Section 8.04(d) of the CA.
independent appraisers. Depending on
It goes without saying that the amendment of the Contract
the option selected, government may
bidded out (the DCA or draft concession agreement) in
take immediate possession and control
such substantial manner, without any public bidding,
of the terminal and its operations.
and after the bidding process had been concluded on
Government will be obligated to
December 11, 1996 is violative of public policy on public
compensate the contractor for the
biddings, as well as the spirit and intent of the BOT
"equivalent or proportionate contract
Law. The whole point of going through the public bidding
costs actually disbursed," but only
exercise was completely lost. Its very rationale was totally
where government is the one in breach
subverted by permitting Piatco to amend the contract for
of the contract. But under Section
which public bidding had already been
8.06(a) of the CA, whether on account
concluded. Competitive bidding aims to obtain the best
of Piatco's breach of contract or its
deal possible by fostering transparency and preventing
inability to pay its creditors,
favoritism, collusion and fraud in the awarding of contracts.
government is obliged to either (a)
That is the reason why procedural rules pertaining to public
take over Terminal III and assume all
bidding demand strict observance. 26
of Piatco's debts or (b) permit the
qualified unpaid creditors to be In a relatively early case, Caltex v. Delgado
substituted in place of Piatco or to Brothers, 27 this Court made it clear that substantive
designate a new operator. And in the amendments to a contract for which a public bidding has
Page 101 of 458

already been finished should only be awarded after another amendments would not be noticed or discovered by the
public bidding: public.
"The due execution of a contract after public In a later case, Mata v. San Diego, 29 this Court reiterated
bidding is a limitation upon the right of the its ruling as follows:
IcaEDC

contracting parties to alter or amend it without


another public bidding, for otherwise what would "It is true that modification of government
a public bidding be good for if after the execution contracts, after the same had been awarded
of a contract after public bidding, the contracting after a public bidding, is not allowed because
parties may alter or amend the contract, or even such modification serves to nullify the effects of
cancel it, at their will? Public biddings are held the bidding and whatever advantages the
for the protection of the public, and to give the Government had secured thereby and may also
public the best possible advantages by means of result in manifest injustice to the other bidders.
open competition between the bidders. He who This prohibition, however, refers to a change in
bids or offers the best terms is awarded the vital and essential particulars of the agreement
contract subject of the bid, and it is obvious that which results in a substantially new contract."
such protection and best possible advantages to Piatco's counter-argument may be summed up thus: There
the public will disappear if the parties to a was nothing in the 1994 IRR that prohibited further
contract executed after public bidding may alter
negotiations and eventual amendments to the DCA even
or amend it without another previous public
bidding." 28 after the bidding had been concluded. In fact, PBAC Bid
Bulletin No. 3 states: "[A]mendments to the Draft
The aforementioned case dealt with the unauthorized Concession Agreement shall be issued from time to
amendment of a contract executed after public bidding; in time. Said amendments will only cover items that would not
the situation before us, the amendments were made also materially affect the preparation of the proponent's
after the bidding, but prior to execution. Be that as it may, proposal."
the same rationale underlying Caltex applies to the present
situation with equal force. Allowing the winning bidder to I submit that accepting such warped argument will result in
renegotiate the contract for which the bidding process has perverting the policy underlying public bidding. The BOT
ended is tantamount to permitting it to put in anything it Law cannot be said to allow the negotiation of contractual
wants. Here, the winning bidder (Piatco) did not even stipulations resulting in a substantially new
bother to wait until after actual execution of the contract contract after the bidding process and price challenge had
before rushing to amend it. Perhaps it believed that if the been concluded. In fact, the BOT Law, in recognition of the
changes were made to a contract already won through time, money and effort invested in an unsolicited proposal,
bidding (DCA) instead of waiting until it is executed, the accords its originator the privilege of matching the
challenger's bid.
Page 102 of 458

Section 4-A of the BOT Law specifically refers to a those loans recorded in Piatco's books
"lower price proposal" by a competing bidder; and to the or loans whose proceeds were actually
right of the original proponent "to match the price" of the used in the Terminal III project.30
challenger. Thus, only the price proposals are in play.
2. Although the contract may be terminated
The terms, conditions and stipulations in the contract for
due to breach by Piatco, it will not be
which public bidding has been concluded are understood
liable to pay the government any
to remain intact and not be subject to further
Liquidated Damages if a new operator
negotiation. Otherwise, the very essence of public bidding
is designated to take over the
will be destroyed there will be no basis for an exact
operation of the terminal. 31
comparison between bids.
3. The Liquidated Damages which
Moreover, Piatco misinterpreted the meaning behind PBAC
government becomes liable for in case
Bid Bulletin No. 3. The phrase amendments . . . from time
of its breach of contract were
to time refers only to those amendments to the draft
substantially increased. 32
concession agreement issued by the PBAC prior to the
submission of the price challenge; it certainly does not 4. Government's right to appoint a
include or permit amendments negotiated for and comptroller for Piatco in case the latter
introduced after the bidding process, has been terminated. encounters liquidity problems was
deleted. 33
Piatco's Concession
Agreement Was Further 5. Government is made liable for Incremental
Amended, (ARCA) Again and Consequential Costs and Losses
Without Public Bidding in case it fails to comply or cause any
Not satisfied with the Concession Agreement, Piatco third party under its direct or indirect
once more without bothering with public bidding control to comply with the special
negotiated with government for still more substantial obligations imposed on government. 34
changes. The result was the Amended and Restated 6. The insurance policies obtained by Piatco
Concession Agreement (ARCA) executed on November covering the terminal are now required
26, 1998. The following changes were introduced: to be assigned to the Senior Lenders
1. The definition of Attendant Liabilities was as security for the loans; previously,
further amended with the result that their proceeds were to be used to
the unpaid loans of Piatco, for which repair and rehabilitate the facility in
government may be required to case of damage. 35
answer, are no longer limited to only
Page 103 of 458

7. Government bound itself to set the initial created in favor of Piatco's Senior
rate of the terminal fee, to be charged Lenders. 40 No such obligation existed
when Terminal III begins operations, at previously.
an amount higher than US$20. 36
12. DOTC/MIAA's right of intervention in
8. Government waived its defense of the instances where Piatco's Non-Public
illegality of the contract and even Utility Revenues become exorbitant or
agreed to be liable to pay damages to excessive has been removed. 41
Piatco in the event the contract was
13. The illegality and unenforceability of the
declared illegal. 37
ARCA or any of its material provisions
was made an event of default on the
part of government only, thus
9. Even though government may be entitled
constituting a ground for Piatco to
to terminate the ARCA on account of
terminate the ARCA. 42
breach by Piatco, government is still
liable to pay Piatco the appraised 14. Amounts due from and payable by
value of Terminal III or the Attendant government under the contract were
Liabilities, if the termination occurs made payable on demand net of
before the In-Service Date. 38 This taxes, levies, imposts, duties, charges
condition contravenes the BOT or fees of any kind except as required
Law provision on termination by law. 43
compensation.
15. The Parametric Formula in the contract,
10. Government is obligated to take the which is utilized to compute for
administrative action required for adjustments/increases to the public
Piatco's imposition, collection and utility revenues (i.e., aircraft parking
application of all Public Utility and tacking fees, check-in counter fee
Revenues.39 No such obligation and terminal fee), was revised to
existed previously. permit Piatco to input its more costly
short-term borrowing rates instead of
11. Government is now also obligated to
the longer-terms rates in the
perform and cause other persons and
computations for adjustments, with the
entities under its direct or indirect
end result that the changes will
control to perform all acts necessary to
redound to its greater financial benefit.
perfect the security interests to be
Page 104 of 458

16. The Certificate of Completion simply After Piatco had managed to breach the protective rampart
deleted the successful performance- of public bidding, it recklessly went on a rampage of further
testing of the terminal facility in assaults on the ARCA.
accordance with defined performance
The First Supplement Is
standards as a pre-condition for
as Void as the ARCA
government's acceptance of the
terminal facility. 44 In the First Supplement ("FS") executed on August 27,
1999, the following changes were made to the ARCA:
In sum, the foregoing revisions and amendments as
embodied in the ARCA constitute very material 1. The amounts payable by Piatco to
alterations of the terms and conditions of the CA, and give government were reduced by allowing
further manifestly undue advantage to Piatco at the additional exceptions to the Gross
expense of government. Piatco claims that the changes to Revenues in which government is
the CA were necessitated by the demands of its foreign supposed to participate. 45
lenders. However, no proof whatsoever has been adduced 2. Made part of the properties which
to buttress this claim. government is obliged to construct
In any event, it is quite patent that the sum total of the and/or maintain and keep in good
aforementioned changes resulted in drastically repair are (a) the access road
weakening the position of government to a degree that connecting Terminals II and III the
seems quite excessive, even from the standpoint of a construction of this access road is the
businessperson who regularly transacts with banks and obligation of Piatco, in lieu of its
foreign lenders, is familiar with their mind-set, and obligation to construct an Access
understands what motivates them. On the other hand, Tunnel connecting Terminals II and III;
whatever it was that impelled government officials and (b) the taxilane and taxiway
concerned to accede to those grossly disadvantageous these are likewise part of Piatco's
changes, I can only hazard a guess. obligations, since they are part and
parcel of the project as described in
There is no question in my mind that the ARCA was Clause 1.3 of the Bid Documents. 46
unauthorized and illegal for lack of public bidding and for
being patently disadvantageous to government. 3. The MIAA is obligated to provide funding
for the maintenance and repair of the
The Three Supplements airports and facilities owned or
Imposed New Obligations on operated by it and by third persons
Government, Also Without under its control. It will also be liable to
Prior Public Bidding
Page 105 of 458

Piatco for the latter's losses, expenses involving widening, repair and
and damages as well as liability to resurfacing of Sales Road,
third persons, in case MIAA fails to Andrews Avenue and Manlunas
perform such obligations. In addition, Road; improvement of Nichols
MIAA will also be liable for the Interchange; and removal of
incremental and consequential costs of squatters along Andrews
the remedial work done by Piatco on Avenue. 52
account of the former's default. 47
(e) Dealing directly with BCDA and the
4. The FS also imposed on government ten Phil. Air Force in acquiring
(10) "Additional Special Obligations," additional land or right of way for
including the following: the road upgrade and
improvement program.53
(a) Working for the removal of the
general aviation traffic from the 5. Government is required to work for the
NAIA airport complex 48 immediate reversion to MIAA of
the Nayong Pilipino National Park. 54
(b) Providing through MIAA the land
required by Piatco for the 6. Government's share in the terminal fees
taxilane and one taxiway at no collected was revised from a flat rate
cost to Piatco 49 of P180 to 36 percent thereof; together
with government's percentage share in
(c) Implementing the government's
the gross revenues of Piatco, the
existing storm drainage master
amount will be remitted to government
plan 50
in pesos instead of US dollars. 55 This
(d) Coordinating with DPWH the amendment enables Piatco to benefit
financing, the implementation from the further erosion of the peso-
and the completion of the dollar exchange rate, while preventing
following works before the In- government from building up its foreign
Service Date: three left-turning exchange reserves.
overpasses (EDSA to Tramo St.,
7. All payments from Piatco to government
Tramo to Andrews Ave., and
are now to be invoiced to MIAA, and
Manlunas Road to Sales
payments are to accrue to the latter's
Ave.); 51 and a road upgrade
exclusive benefit. 56 This move
and improvement program
Page 106 of 458

appears to be in support of the funds Though denominated as Second Supplement, it was


MIAA advanced to DPWH. nothing less than an entirely new public works contract. Yet
it, too, did not undergo any public bidding, for which reason
I must emphasize that the First Supplement is void in two
it is also void and inoperative.
respects. First, it is merely an amendment to the ARCA,
upon which it is wholly dependent; therefore, since the Not surprisingly, Piatco had to subcontract the works to a
ARCA is void, inexistent and not capable of being ratified certain Wintrack Builders, a firm reputedly owned by a
or amended, it follows that the FS too is void, inexistent former high-ranking DOTC official. But that is another story
and inoperative. Second, even assuming arguendo that the altogether.
ARCA is somehow remotely valid, nonetheless the FS, in
The Third Supplement Is
imposing significant new obligations upon government,
Likewise Void and Inexistent
altered the fundamental terms and stipulations of the
ARCA, thus necessitating a public bidding all over again. The Third Supplement ("TS"), executed between the
That the FS was entered into sans public bidding renders it government and Piatco on June 22, 2001, passed on to the
utterly void and inoperative. government certain obligations of Piatco as Terminal III
concessionaire, with respect to the surface road connecting
The Second Supplement Is Terminals II and III.
Similarly Void and Inexistent
By way of background, at the inception of and forming part
The Second Supplement ("SS") was executed between the
of the NAIA Terminal III project was the proposed
government and Piatco on September 4, 2000. It calls for
construction of an access tunnel crossing Runway 13/31,
Piatco, acting not as concessionaire of NAIA Terminal III
which would connect Terminal III to Terminal II. The Bid
but as a public works contractor, to undertake in the
Documents in Section 4.1.2.3[B][i] declared that the said
government's stead the clearing, removal, demolition
access tunnel was subject to further negotiation; but for
and disposal of improvements, subterranean obstructions
purposes of the bidding, the proponent should submit a bid
and waste materials at the project site. 57
for it as well. Therefore, the tunnel was supposed to be part
The scope of the works, the procedures involved, and the and parcel of the Terminal III project.
obligations of the contractor are provided for in Parts II and
However, in Section 5 of the First Supplement, the parties
III of the SS. Section 4.1 sets out the compensation to be
declared that the access tunnel was not economically
paid, listing specific rates per cubic meter of materials for
viable at that time. In lieu thereof, the parties agreed that a
each phase of the work excavation, leveling, removal
surface access road (now called the T2-T3 Road) was to
and disposal, backfilling and dewatering. The amounts
be constructed by Piatco to connect the two terminals.
collectible by Piatco are to be offset against the Annual
Since it was plainly in substitution of the tunnel, the surface
Guaranteed Payments it must pay government.
road construction should likewise be considered part and
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parcel of the same project, and therefore part of Piatco's amended. It follows that the TS is likewise void, inexistent
obligation as well. While the access tunnel was estimated and inoperative. And even if, hypothetically speaking, both
to cost about P800 million, the surface road would have a ARCA and FS are valid, still, the Third Supplement
price tag in the vicinity of about P100 million, thus imposing as it does significant new obligations upon
producing significant savings for Piatco. government would in effect alter the terms and
stipulations of the ARCA in material respects, thus
necessitating another public bidding. Since the TS was not
Yet, the Third Supplement, while confirming that Piatco subjected to public bidding, it is consequently utterly void
would construct the T2-T3 Road, nevertheless shifted to as well. At any rate, the TS created new monetary
government some of the obligations pertaining to the obligations on the part of government, for which there were
former, as follows: no prior appropriations. Hence it follows that the same is
void ab initio.
1. Government is now obliged to remove at
its own expense all tenants, squatters, In patiently tracing the progress of the Piatco contracts
improvements and/or waste materials from their inception up to the present, I noted that the
on the site where the T2-T3 road is to whole process was riddled with significant lapses, if not
be constructed. 58 There was no outright irregularity and wholesale violations of law and
similar obligation on the part of public policy. The rationale of beginning at the beginning,
government insofar as the access so to speak, will become evident when the question of what
tunnel was concerned. to do with the five Piatco contracts is discussed later on.
2. Should government fail to carry out its In the meantime, I shall take up specific, provisions or
obligation as above described, Piatco changes in the contracts and highlight the more prominent
may undertake it on government's objectionable features.
behalf, subject to the terms and
Government Directly
conditions (including compensation
Guarantees Piatco Debts
payments) contained in the Second
Supplement. 59 Certainly the most discussed provision in the parties'
arguments is the one creating an unauthorized, direct
3. MIAA will answer for the operation, government guarantee of Piatco's obligations in favor of
maintenance and repair of the T2-T3 the lenders.
Road. 60
Section 4-A of the BOT Law as amended states
The TS depends upon and is intended to supplement the that unsolicited proposals, such as the NAIA Terminal III
ARCA as well as the First Supplement, both of which are Project, may be accepted by government provided inter
void and inexistent and not capable of being ratified or
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alia thatno direct government guarantee, subsidy or equity shall make a termination payment to
is required. In short, such guarantee is prohibited in Concessionaire equal to the Appraised Value (as
unsolicited proposals. Section 2(n) of the same legislation hereinafter defined) of the Development Facility
defines direct government guarantee as "an agreement or the sum of the Attendant Liabilities, if greater .
whereby the government or any of its agencies or local . . ."
government units (will) assume responsibility for the In turn, the term Attendant Liabilities is defined in Section
repayment of debt directly incurred by the project 1.06 of the ARCA as follows:
proponent in implementing the project in case of a loan
"Attendant Liabilities refer to all amounts in each
default."
case supported by verifiable evidence from time
Both the CA and the ARCA have provisions that to time owed or which may become, owing by
undeniably create such prohibited government guarantee. Concessionaire to Senior Lenders or any other
Section 4.04 (c)(iv) to (vi) of the ARCA, which is similar to persons or entities who have provided, loaned or
Section 4.04 of the CA, provides thus: advanced funds or provided financial facilities to
Concessionaire for the Project, including, without
"(iv) that if Concessionaire is in default under a limitation, all principal, interest, associated fees,
payment obligation owed to the Senior Lenders, charges, reimbursements, and other related
and as a result thereof the Senior Lenders have expenses (including the fees, charges and
become entitled to accelerate the Senior Loans, expenses of any agents or trustees of such
the Senior Lenders shall have the right to notify persons or entities), whether payable at maturity,
GRP of the same . . .; by acceleration or otherwise, and further
including amounts owed by Concessionaire to its
(v) . . . the Senior Lenders may after written
professional consultants and advisers, suppliers,
notification to GRP, transfer the
contractors and sub-contractors."
Concessionaire's rights and obligations to a
transferee . . .; Government's agreement to pay becomes effective in the
(vi) if the Senior Lenders . . . are unable to . . . event of a default by Piatco on any of its loan obligations to
effect a transfer . . ., then GRP and the Senior the Senior Lenders, and the amount to be paid by
Lenders shall endeavor . . . to enter into any government is the greater of either the Appraised Value of
other arrangement relating to the Development Terminal III or the aggregate amount of the moneys owed
Facility. . . . If no agreement relating to the by Piatco whether to the Senior Lenders or to other
Development Facility is arrived at by GRP and entities, including its suppliers, contractors and
the Senior Lenders within the said 180-day subcontractors. In effect, therefore, this agreement already
period, then at the end thereof the Development constitutes the prohibited assumption by government of
Facility shall be transferred by the responsibility for repayment of Piatco's debts in case of a
Concessionaire to GRP or its designee and GRP
loan default. In fine, a direct government guarantee.
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It matters not that there is a roundabout procedure ensure that it will necessarily use the same to pay off the
prescribed by Section 4.04(c)(iv), (v) and (vi) that would Senior Lenders and other creditors, in order to avert the
require, first, an attempt (albeit unsuccessful) by the Senior foreclosure of the mortgage and other liens on the terminal
Lenders to transfer Piatco's rights to a transferee of their facility. Such deficiency puts the interests of government at
choice; and, second, an effort (equally unsuccessful) to great risk. Indeed, if the unthinkable were to happen,
"enter into any other arrangement" with the government government would be paying several hundreds of millions
regarding the Terminal III facility, before government is of dollars, but the mortgage liens on the facility may still be
required to make good on its guarantee. What is foreclosed by the Senior Lenders just the same.
abundantly clear is the fact that, in the devious labyrinthine
Consequently, the Piatco contracts are also objectionable
process detailed in the aforesaid section, it is entirely within
for grievously failing to adequately protect government's
the Senior Lenders' power, prerogative and control
interests. More accurately, the contracts would consistently
exercisable via a mere refusal or inability to agree upon "a
weaken and do away with protection of government
transferee" or "any other arrangement" regarding the
interests. As such, they are therefore grossly lopsided in
terminal facility to push the process forward to the
favor of Piatco and/or its Senior Lenders.
ultimate contractual cul-de-sac, wherein government will be
compelled to abjectly surrender and make good on its While on this subject, it is well to recall the earlier
guarantee of payment. discussion regarding a particularly noticeable alteration of
the concept of "Attendant Liabilities." In Section 1.06 of the
Piatco also argues that there is no proviso requiring
CA defining the term, the Piatco debts to be assumed/paid
government to pay the Senior Lenders in the event of
by government were qualified by the phrases recorded and
Piatco's default. This is literally true, in the sense that
from time to time outstanding in the books of the
Section 4.04(c)(vi) of ARCA speaks of government making
Concessionaire and actually used for the project. These
the termination payment to Piatco, not to the lenders.
phrases were eliminated from the ARCA's definition of
However, it is almost a certainty that the Senior Lenders
Attendant Liabilities.
will already have made Piatco sign over to them, ahead of
time, its right to receive such payments from government; Since no explanation has been forthcoming from Piatco as
and/or they may already have had themselves appointed to the possible justification for such a drastic change, the
its attorneys-in-fact for the purpose of collecting and only conclusion, possible is that it intends to haveall of its
receiving such payments. debts covered by the guarantee, regardless of whether or
not they are disclosed in its books. This has particular
Nevertheless, as petitioners-in-intervention pointed out in
reference to those borrowings which were obtained in
their Memorandum, 61 the termination payment is to be
violation of the loan covenants requiring Piatco to maintain
made to Piatco, not to the lenders; and there is no
a minimum 70:30 debt-to-equity ratio, and even if the loan
provision anywhere in the contract documents to prevent it
proceeds were not actually used for the project itself.
from diverting the proceeds to its own benefit and/or to
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This point brings us back to the guarantee itself. In Section the project when it gave the prohibited guarantee and thus
4.04(c)(vi) of ARCA, the amount which government has simply negated the very purpose of the BOT Law and the
guaranteed to pay as termination payment is thegreater of protection it gives the government.
either (i) the Appraised Value of the terminal facility or (ii)
Contract Termination
the aggregate of the Attendant Liabilities. Given that the
Provisions in the Piatco
Attendant Liabilities may include practically any Piatco debt
Contracts Are Void
under the sun, it is highly conceivable that their sum may
greatly exceed the appraised value of the facility, and The BOT Law as amended provides for contract
government may end up paying very much more than the termination as follows:
real worth of Terminal III. (So why did government have to "Sec. 7. Contract Termination. In the event
bother with public bidding anyway?) that a project is revoked, cancelled or terminated
In the final analysis, Section 4.04(c)(iv) to (vi) of the ARCA by the government through no fault of the project
proponent or by mutual agreement, the
is diametrically at odds with the spirit and the intent of the
Government shall compensate the said project
BOT Law. The law meant to mobilize private resources (the proponent for its actual expenses incurred in the
private sector) to take on the burden and the risks of project plus a reasonable rate of return thereon
financing the construction, operation and maintenance of not exceeding that stated in the contract as of
relevant infrastructure and development projects for the the date of such revocation, cancellation or
simple reason that government is not in a position to do so. termination: Provided, That the interest of the
By the same token, government guarantee was prohibited, Government in this instances [sic] shall be duly
since it would merely defeat the purpose and raison insured with the Government Service Insurance
d'tre of a build-operate-and-transfer project to be System or any other insurance entity duly
undertaken by the private sector. 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
To the extent that the project proponent is able to obtain
above.
loans to fund the project, those risks are shared between
the project proponent on the one hand, and its banks and "In the event that the government defaults on
other lenders on the other. But where the proponent or its certain major obligations in the contract and such
lenders manage to cajol or coerce the government into failure is not remediable or if remediable shall
extending a guarantee of payment of the loan obligations, remain unremedied for an unreasonable length
of time, the project proponent/contractor may, by
the risks assumed by the lenders are passed right back to
prior notice to the concerned national
government. I cannot understand why, in the instant case, government agency or local government unit
government cheerfully assented to re-assuming the risks of specifying the turn-over date, terminate the
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contract. The project proponent/contractor shall an ownership structure violative of statutory or


be reasonably compensated by the Government constitutional limitations;
for equivalent or proportionate contract cost as
(iv) A pattern of continuing or repeated non-
defined in the contract."
compliance, willful violation, or non-performance
The foregoing statutory provision in effect provides for the of other terms and conditions hereof which is
following limited instances when termination hereby deemed a material breach of this
compensation may be allowed: Agreement . . ." 62

1. Termination by the government through no As if that were not bad enough, the ARCA also inserted
fault of the project proponent into Section 8.01 the phrase "Subject to Section 4.04." The
effect of this insertion is that in those instances where
2. Termination upon the parties' mutual government may terminate the contract on account of
agreement Piatco's breach, and it is nevertheless required under the
3. Termination by the proponent due to ARCA to make termination compensation to Piatco even
government's default on certain major though unauthorized by law, such compensation is to be
contractual obligations equivalent to the payment amount guaranteed by
government either a) the Appraised Value of the
To emphasize, the law does not permit compensation for terminal facility or (b) the aggregate of the Attendant
the project proponent when contract termination is due to Liabilities, whichever amount is greater!
the proponent's own fault or breach of contract.
Clearly, this condition is not in line with Section 7 of the
This principle was clearly violated in the Piatco Contracts. BOT Law. That provision permits a project proponent to
The ARCA stipulates that government is to pay termination recover the actual expenses it incurred in the prosecution
compensation to Piatco even when termination is initiated of the project plus a reasonable rate of return not in excess
by government for the following causes: of that provided in the contract; or to be compensated for
"(i) Failure of Concessionaire to finish the Works the equivalent or proportionate contract cost as defined in
in all material respects in accordance with the the contract, in case the government is in default on certain
Tender Design and the Timetable; major contractual obligations.
(ii) Commission by Concessionaire of a material Furthermore, in those instances where such termination
breach of this Agreement . . .; compensation is authorized by the BOT Law, it is
(iii) . . . a change in control of Concessionaire indispensable that the interest of government be duly
arising from the sale, assignment, transfer or insured. Section 5.08 the ARCA mandates insurance
other disposition of capital stock which results in coverage for the terminal facility; but all insurance policies
are to be assigned, and all proceeds are payable, to the
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Senior Lenders. In brief, the interest being secured by such Senior Lenders (or the Senior Lenders'
coverage is that of the Senior Lenders, not that of Representative) may ensure that after making
government. This can hardly be considered compliance provision for administrative expenses and
with law. depreciation, the cash resources of
Concessionaire shall first be used and applied to
In essence, the ARCA provisions on termination meet all payment obligations owed to the Senior
compensation result in another unauthorized government Lenders. Any excess cash, after meeting such
guarantee, this time in favor of Piatco. payment obligations, shall be earmarked for the
payment of all sums payable by Concessionaire
A Prohibited Direct Government Subsidy, to GRP under this Agreement. If by reason of the
Which at the Same Time Is an Assault foregoing GRP should be unable to collect in full
on the National Honor all payments due to GRP under this Agreement,
Still another contractual provision offensive to law and then the unpaid balance shall be payable within
a 90-day grace period counted from the relevant
public policy is Section 8.01(d) of the ARCA, which is a
due date, with interest per annum at the rate
"bolder and badder" version of Section 8.04(d) of the CA.
equal to the average 91-day Treasury Bill Rate
It will be recalled that Section 4-A of the BOT Law as as of the auction date immediately preceding the
amended prohibits not only direct government guarantees, relevant due date. If payment is not effected by
but likewise a direct government subsidy for unsolicited Concessionaire within the grace period, then a
proposals. Section 13.2. b. iii. of the 1999 IRR defines spread of five (5%) percent over the applicable
91-day Treasury Bill Rate shall be added on the
a direct government subsidy as encompassing "an
unpaid amount commencing on the expiry of the
agreement whereby the Government . . . will . . . postpone grace period up to the day of full payment. When
any payments due from the proponent." the temporary illiquidity of Concessionaire shall
Despite the statutory ban, Section 8.01 (d) of the ARCA have been corrected and the cash position of
provides thus: Concessionaire should indicate its ability to meet
its maturing obligations, then the provisions set
"(d) The provisions of Section 8.01(a) forth under this Section 8.01(d) shall cease to
notwithstanding, and for the purpose of apply. The foregoing remedial measures shall be
preventing a disruption of the operations in the applicable only while there remains unpaid and
Terminal and/or Terminal Complex, in the event outstanding amounts owed to the Senior
that at any time Concessionaire is of the Lenders." (Italics supplied)
reasonable opinion that it shall be unable to
meet a payment obligation owed to the Senior By any manner of interpretation or application, Section
Lenders, Concessionaire shall give prompt 8.01(d) of the ARCA clearly mandates
notice to GRP, through DOTC/MIAA and to the the indefinite postponement of payment of all of Piatco's
Senior Lenders. In such circumstances, the obligations to the government, in order to ensure that
Page 113 of 458

Piatco's obligations to the Senior Lenders are paid in full surrender to the imperious and excessive demands of the
first. That is nothing more or less than the direct foreign lenders, on the one hand; and vehement outrage at
government subsidy prohibited by the BOT Law and the the affront to the sovereignty of the Republic and to the
IRR. The fact that Piatco will pay interest on the unpaid national honor, on the other. It is indeed time to put an end
amounts owed to government does not change the to such an unbearable, dishonorable situation.
situation or render the prohibited subsidy any less
unacceptable.
The Piatco Contracts Unarguably
But beyond the clear violations of law, there are larger
Violate Constitutional Injunctions
issues involved in the ARCA. Earlier, I mentioned that
Section 8.01(d) of the ARCA completely eliminated the I will now discuss the manner in which the Piatco Contracts
proviso in Section 8.04(d) of the CA which gave offended the Constitution.
government the right to appoint a financial controller to The Exclusive Right Granted to Piatco
manage the cash position of Piatco during situations of to Operate a Public Utility Is Prohibited
financial distress. Not only has government been deprived by the Constitution
of any means of monitoring and managing the situation;
worse, as can be seen from Section 8.01(d) above-quoted, While Section 2.02 of the ARCA spoke of granting to Piatco
the Senior Lenders have effectively locked in on the right to "a franchise to operate and maintain the Terminal
exercise financial controllership over Piatco and to allocate Complex," Section 3.02(a) of the same ARCA granted to
its cash resources to the payment of all amounts owed to Piatco, for the entire term of the concession agreement,
the Senior Lenders before allowing any payment to be "the exclusive right to operate a commercial international
made to government. passenger terminal within the Island of Luzon" with the
exception of those three terminals already existing 63 at the
In brief, this particular provision of the ARCA has placed in time of execution of the ARCA.
the hands of foreign lenders the power and the authority to
determine how much (if at all) and when the Philippine Section 11 of Article XII of the Constitution prohibits the
government (as grantor of the franchise) may be allowed to grant of a "franchise, certificate, or any other form of
receive from Piatco. In that situation, government will be at authorization for the operation of a public utility" that is
the mercy of the foreign lenders. This is a situation "exclusive in character."
completely contrary to the rationale of the BOT Law and to In its Opinion No. 078, Series of 1995, the Department of
public policy. justice held that "the NAIA Terminal III which . . . is a
The aforesaid provision rouses mixed emotions shame 'terminal for public use' is a public utility." Consequently,
and disgust at the parties' (especially the government the constitutional prohibition against the exclusivity of a
officials') docile submission and abject servitude and franchise applies to the franchise for the operation of NAIA
Terminal III as well.
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What was granted to Piatco was not merely a franchise, necessary in carrying out any future plan for an
but an "exclusive right" to operate an international inter-modal transportation system in Luzon.
passenger terminal within the "Island of Luzon." What this "Additionally, it imposes an unreasonable
grant effectively means is that the government is now restriction on the operation of the Clark
estopped from exercising its inherent power to award any International Airport which could adversely affect
other person another franchise or a right to operate such a the operation and development of the Clark
public utility, in the event public interest in Luzon requires Special Economic Zone to the economic
it. This restriction is highly detrimental to government and prejudice of the local constituencies that are
to the public interest. Former Secretary of Justice being benefited by its operation." (Italics
Hernando B. Perez expressed this point well in his supplied)
Memorandum for the President dated 21 May 2002: While it cannot be gainsaid that an enterprise that is a
"Section 3.02 on 'Exclusivity' public utility may happen to constitute a monopoly on
account of the very nature of its business and the absence
"This provision gives to PIATCO (the of competition, such a situation does not however
Concessionaire) the exclusive right to operate a
constitute justification to violate the constitutional
commercial international airport within the Island
of Luzon with the exception of those already prohibition and grant an exclusive franchise or exclusive
existing at the time of the execution of the right to operate a public utility.
Agreement, such as the airports at Subic, Clark Piatco's contention that the Constitution does not actually
and Laoag City. In the case of the Clark prohibit monopolies is beside the point. As correctly
International Airport, however, the provision
argued, 64 the existence of a monopoly by a public utility is
restricts its operation beyond its design capacity
of 850,000 passengers per annum and the
a situation created by circumstances that do not encourage
operation of new terminal facilities therein until competition. This situation is different from the grant of a
after the new NAIA Terminal III shall have franchise to operate a public utility, a privilege granted by
consistently reached or exceeded its design government. Of course, the grant of a franchise may result
capacity of ten (10) million passenger capacity in a monopoly. But making such franchise exclusive is what
per year for three (3) consecutive years during is expressly proscribed by the Constitution.
the concession period.
Actually, the aforementioned Section 3.02 of the ARCA
"This is an onerous and disadvantageous more than just guaranteed exclusivity; it also guaranteed
provision. It effectively grants PIATCO that the government will not improve or expand the facilities
a monopoly in Luzon and ties the hands of at Clark and in fact is required to put a cap on the
government in the matter of developing new latter's operations until after Terminal III shall have been
airports which may be found expedient and
operated at or beyond its peak capacity for three
consecutive years. 65 As counsel for public respondents
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pointed out, in the real world where the rate of influx of Concessionaire shall to the extent practicable
international passengers can fluctuate substantially from continue to operate the Terminal and the
year to year, it may take many years before Terminal III Terminal Complex and shall be entitled to retain
sees three consecutive years' operations at peak capacity. and withhold all payments to GRP for the
The Diosdado Macapagal International Airport may thus purpose of offsetting the same against the
Liquidated Damages. Upon full payment of the
end up stagnating for a long time. Indeed, in order to
Liquidated Damages, Concessionaire shall
ensure greater profits for Piatco, the economic progress of immediately transfer the Development Facility to
a region has had to be sacrificed. GRP on 'as-is-where-is' basis."
The Piatco Contracts Violate The aforesaid easy payment scheme is less beneficial than
the Time Limitation on Franchises it first appears. Although it enables government to avoid
Section 11 of Article XII of the Constitution also provides having to make outright payment of an obligation that will
that "no franchise, certificate or any other form of likely run into billions of pesos, this easy payment plan will
authorization for the operation of a public utility shall be . . . nevertheless cost government considerable loss of income,
for a longer period than fifty years." After all, a franchise which it would earn if it were to operate Terminal III by
held for an unreasonably long time would likely give rise to itself. Inasmuch as payments to the concessionaire
the same evils as a monopoly. (Piatco) will be on "installment basis," interest charges on
the remaining unpaid balance would undoubtedly cause
The Piatco Contracts have come up with an innovative way
the total outstanding balance to swell. Piatco would thus be
to circumvent the prohibition and obtain an extension. This
entitled to remain in the driver's seat and keep operating
fact can be gleaned from Section 8.03(b) of the ARCA,
the terminal for an indefinite length of time.
which I quote thus:
The Contracts Create Two
"Sec. 8.03. Termination Procedure and
Consequences of Termination. Monopolies for Piatco
By way of background, two monopolies were actually
a) . . .
created by the Piatco contracts. The first and more obvious
b) In the event the Agreement is terminated one refers to the business of operating an international
pursuant to Section 8.01 (b) hereof, passenger terminal in Luzon, the business end of which
Concessionaire shall be entitled to collect the involves providing international airlines with parking space
Liquidated Damages specified in Annex 'G'. The for their aircraft, and airline passengers with the use of
full payment by GRP to Concessionaire of the
departure and arrival areas, check-in counters, information
Liquidated Damages shall be a condition
systems, conveyor systems, security equipment and
precedent to the transfer by Concessionaire to
GRP of the Development Facility. Prior to the full paraphernalia, immigrations and customs processing
payment of the Liquidated Damages,
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areas; and amenities such as comfort rooms, restaurants providers with expired MIAA contracts to renew or extend
and shops. their contracts to render airport-related services to airlines.
Meanwhile, Section 3.01(e) of the ARCA requires
In furtherance of the first monopoly, the Piatco Contracts
government, through the DOTC and MIAA, not to allow
stipulate that the NAIA Terminal III will be the only facility to
service providers those with subsisting concession
be operated as an international passenger terminal; 66 that
agreements for services and operations being conducted at
NAIA Terminals I and II will no longer be operated as
Terminal I to carry over their concession agreements,
such; 67 and that no one (including the government) will be
services and operations to Terminal III, unless they first
allowed to compete with Piatco in the operation of an
enter into a separate agreement with Piatco. ACaTIc
international passenger terminal in the NAIA
Complex. 68 Given that, at this time, the government and The aforementioned provisions vest in Piatco effective and
Piatco are the only ones engaged in the business of exclusive control over which service provider may and may
operating an international passenger terminal, I am not not operate at Terminal III and render the airport-related
acutely concerned with this particular monopolistic services needed by international airlines. It thereby
situation. possesses the power to exclude competition. By necessary
implication, it also has effective control over the fees and
There was however another monopoly within the NAIA
charges that will be imposed and collected by these service
created by the subject contracts for Piatco in the
providers.
business of providing international airlines with the
following: groundhandling, in-flight catering, cargo
handling, and aircraft repair and maintenance services. This intention is exceedingly clear in the declaration by
These are lines of business activity in which are engaged Piatco that it is "completely within its rights to exclude any
many service providers (including the petitioners-in- party that it has not contracted with from NAIA Terminal
intervention), who will be adversely affected upon full III." 71
implementation of the Piatco Contracts, particularly Worse, there is nothing whatsoever in the Piatco Contracts
Sections 3.01(d) 69 and (e) 70 of both the ARCA and the that can serve to restrict, control or regulate the
CA. concessionaire's discretion and power to reject any service
On the one hand, Section 3.02(a) of the ARCA makes provider and/or impose any term or condition it may see fit
Terminal III the only international passenger terminal at the in any contract it enters into with a service provider. In
NAIA, and therefore the only place within the NAIA brief, there is no safeguard whatsoever to ensure free and
Complex where the business of providing airport-related fair competition in the service-provider sector.
services to international airlines may be conducted. On the In the meantime, and not surprisingly, Piatco is first in line,
other hand, Section 3.01(d) of the ARCA requires ready to exploit the unique business opportunity. It
government, through the MIAA, not to allow service announced 72 that it has accredited three groundhandlers
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for Terminal III. Aside from the Philippine Airlines, the other Precisely, proscribed by our Constitution are the monopoly
accredited entities are the Philippine Airport and Ground and the restraint of trade being fostered by the Piatco
Services Globeground, Inc. ("PAGSGlobeground") and the Contracts through the erection of barriers to the entry of
Orbit Air Systems, Inc. ("Orbit"). PAGSGlobeground is a other service providers into Terminal III. In Tatad
wholly-owned subsidiary of the Philippine Airport and v. Secretary of the Department of Energy, 80 the Court
Ground Services, Inc. or PAGS, 73 while Orbit is a wholly- ruled:
owned subsidiary of Friendship Holdings, Inc., 74 which is in
". . . [S]ection 19 of Article XII of the
turn owned 80 percent by PAGS. 75 PAGS is a service Constitution . . . mandates: 'The State shall
provider owned 60 percent by the Cheng Family; 76 it is a regulate or prohibit monopolies when the public
stockholder of 35 percent of Piatco 77 and is the latter's interest so requires. No combinations in restraint
designated contractor-operator for NAIA Terminal III. 78 of trade or unfair competition shall be allowed.'
Such entry into and domination of the airport-related "A monopoly is a privilege or peculiar advantage
services sector appear to be very much in line with the vested in one or more persons or companies,
following provisions contained in the First Addendum to the consisting in the exclusive right or power to carry
Piatco Shareholders Agreement, 79 executed on July 6, on a particular business or trade, manufacture a
1999, which appear to constitute a sort of master plan to particular article, or control the sale or the whole
create a monopoly and combinations in restraint of trade: supply of a particular commodity. It is a form of
market structure in which one or only a few firms
"11. The Shareholders shall ensure: dominate the total sales of a product or service.
On the other hand, a combination in restraint of
a. . . .
trade is an agreement or understanding between
b. That (Phil. Airport and Ground two or more persons, in the form of a contract,
Services, Inc.) PAGS and/or its trust, pool, holding company, or other form of
designated Affiliates shall, at all times association, for the purpose of unduly restricting
during the Concession Period, be competition, monopolizing trade and commerce
exclusively authorized by (PIATCO) to in a certain commodity, controlling its production,
engage in the provision of ground- distribution and price, or otherwise interfering
handling, catering and fueling services with freedom of trade without statutory authority.
within the Terminal Complex. Combination in restraint of trade refers to the
means while monopoly refers to the end.
c. That PAIRCARGO and/or its
designated Affiliate shall, during the "xxx xxx xxx
Concession Period, be the only entities
"Section 19, Article XII of our Constitution is anti-
authorized to construct and operate a
trust in history and in spirit. It espouses
warehouse for all cargo handling and
competition. The desirability of competition is the
related services within the Site."
Page 118 of 458

reason for the prohibition against restraint of "(c) Concessionaire shall at all times be judicious
trade, the reason for the interdiction of unfair in fixing fees and charges constituting Non-
competition, and the reason for regulation of Public Utility Revenues in order to ensure that
unmitigated monopolies. Competition is thus the End Users are not unreasonably deprived of
underlying principle of [S]ection 19, Article XII of services. While the vehicular parking fee,
our Constitution,. . ." 81 porterage fee and greeter/wellwisher fee
constitute Non-Public Utility Revenues of
Gokongwei Jr. v. Securities and Exchange Concessionaire, GRP may require
Commission 82 elucidates the criteria to be employed: "A Concessionaire to explain and justify the fee it
'monopoly' embraces any combination the tendency of may set from time to time, if in the reasonable
which is to prevent competition in the broad and general opinion of GRP the said fees have become
sense, or to control prices to the detriment of the public. In exorbitant resulting in the unreasonable
short, it is the concentration of business in the hands of a deprivation of End Users of such services."
few.The material consideration in determining its existence
It will be noted that the above-quoted provision has no
is not that prices are raised and competition actually
teeth, so the concessionaire can defy the government
excluded, but that power exists to raise prices or exclude
without fear of any sanction. Moreover, Section 6.06
competition when desired." 83 (Italics supplied)
taken together with Section 6.03(c) of the ARCA falls
The Contracts Encourage Monopolistic Pricing, Too short of the standard set by the BOT Law as amended,
Aside from creating a monopoly, the Piatco contracts also which expressly requires in Section 2(b) that the project
give the concessionaire virtually limitless power over the proponent is "allowed to charge facility users appropriate
charging of fees, rentals and so forth. What little "oversight tolls, fees, rentals and charges not exceeding those
function" the government might be able and minded to proposed in its bid or as negotiated and incorporated in the
exercise is less than sufficient to protect the public interest, contract . . . ."
as can be gleaned from the following provisions: The Piatco Contracts Violate
"Sec. 6.06. Adjustment of Non-Public Utility Fees Constitutional Prohibitions
and Charges Against Impairment of Contracts
and Deprivation of Property Without
"For fees, rentals and charges constituting Non- Due Process
Public Utility Revenues, Concessionaire may
make any adjustments it deems appropriate Earlier, I discussed how Section 3.01(e) 84 of both the CA
without need for the consent of GRP or any and the ARCA requires government, through DOTC/MIAA,
government agency subject to Sec. 6.03(c)." not to permit the carry-over to Terminal III of the services
and operations of certain service providers currently
Section 6.03(c) in turn provides:
operating at Terminal I with subsisting contracts.
Page 119 of 458

By the In-Service Date, Terminal III shall be the only facility respective employees among them Messrs. Agan and
to be operated as an international passenger terminal at Lopez et al. have very grave cause for concern, as they
the NAIA; 85 thus, Terminals I and II shall no longer operate will find themselves out of employment and bereft of their
as such, 86 and no one shall be allowed to compete with means of livelihood. This situation comprises still another
Piatco in the operation of an international passenger violation of the constitution prohibition against deprivation
terminal in the NAIA. 87 The bottom line is that, as of the In- of property without due process.
Service Date, Terminal III will be the only terminal where
True, doing business at the NAIA may be viewed more as
the business of providing airport-related services to
a privilege than as a right. Nonetheless, where that
international airlines and passengers may be conducted at
privilege has been availed of by the petitioners-in-
all.
intervention service providers for years on end, a situation
Consequently, government through the DOTC/MIAA will be arises, similar to that in American Inter-fashion
compelled to cease honoring existing contracts with service v. GTEB. 89 We held therein that a privilege enjoyed for
providers after the In-Service Date, as they cannot be seven years "evolved into some form of property right
allowed to operate in Terminal III. which should not be removed . . . arbitrarily and without
due process." Said pronouncement is particularly relevant
In short, the CA and the ARCA obligate and constrain
and applicable to the situation at bar because the livelihood
government to break its existing contracts with these
of the employees of petitioners-intervenors are at stake.
service providers.
The Piatco Contracts Violate
Notably, government is not in a position to require Piatco to
Constitutional Prohibition Against
accommodate the displaced service providers, and it would
Deprivation of Liberty Without
be unrealistic to think that these service providers can
Due Process
perform their service contracts in some other international
airport outside Luzon. Obviously, then, these displaced The Piatco Contracts by locking out existing service
service providers are to borrow a quaint expression providers from entry into Terminal III and restricting entry of
up the river without a paddle. In plainer terms, they will future service providers, thereby infringed upon the
have lost their businesses entirely, in the blink of an eye. freedom guaranteed to and heretofore enjoyed by
international airlines to contract with local service
What we have here is a set of contractual provisions that providers of their choice, and vice versa.
impair the obligation of contracts and contravene the
constitutional prohibition against deprivation of property
without due process of law. 88 Both the service providers and their client airlines will be
Moreover, since the displaced service providers, being deprived of the right to liberty, which includes the right to
unable to operate, will be forced to close shop, their
Page 120 of 458

enter into all contracts, 90 and/or the right to make a or authorized unless the proper accounting
contract in relation to one's business. 91 official of the agency concerned shall have
certified to the officer entering into the obligation
By Creating New Financial Obligations for Government, that funds have been duly appropriated for the
Supplements to the ARCA Violate the Constitutional purpose and that the amount necessary to cover
Ban on Disbursement of Public Funds Without Valid the proposed contract for the current calendar
Appropriation year is available for expenditure on account
thereof, subject to verification by the auditor
Clearly prohibited by the Constitution is the disbursement
concerned. The certificate signed by the proper
of public funds out of the treasury, except in pursuance of accounting official and the auditor who verified it,
an appropriation made by law. 92 The immediate effect of shall be attached to and become an integral part
this constitutional ban is that all the various agencies of of the proposed contract, and the sum so
government are constrained to limit their expenditures to certified shall not thereafter be available for
the amounts appropriated by law for each fiscal year; and expenditure for any other purpose until the
to carefully count their cash before taking on contractual obligation of the government agency concerned
commitments. Giving flesh and form to the injunction of the under the contract is fully extinguished."
fundamental law, Sections 46 and 47 of Executive Order
Referring to the aforequoted provisions, this Court has held
292, otherwise known as the Administrative Code of 1987,
that "(I)t is quite evident from the tenor of the language of
provide as follows: the law that the existence of appropriations and the
"Sec. 46. Appropriation Before Entering into availability of funds are indispensable pre-requisites to or
Contract. (1) No contract involving the conditions sine qua non for the execution of government
expenditure of public funds shall be entered into contracts. The obvious intent is to impose such conditions
unless there is an appropriation therefor, the as a priori requisites to the validity of the proposed
unexpended balance of which, free of other contract." 93
obligations, is sufficient to cover the proposed
expenditure; and . . . Notwithstanding the constitutional ban, statutory mandates
and Jurisprudential precedents, the three Supplements to
"Sec. 47. Certificate Showing Appropriation to
Meet Contract. Except in the case of a the ARCA, which were not approved by NEDA, imposed on
contract for personal service, for supplies for government the additional burden of spending public
current consumption or to be carried in stock not moneys without prior appropriation.
exceeding the estimated consumption for three In the First Supplement ("FS") dated August 27, 1999, the
(3) months, or banking transactions of
following requirements were imposed on the government:
government-owned or controlled banks, no
contract involving the expenditure of public funds To construct, maintain and keep in good
by any government agency shall be entered into repair and operating condition all
Page 121 of 458

airport support services, facilities, taxilane and one taxiway, at no


equipment and infrastructure owned cost to Piatco
and/or operated by MIAA, which are
Implementing the government's
not part of the Project or which are
existing storm drainage master
located outside the Site, even though
plan
constructed by Concessionaire
including the access road connecting Coordinating with DPWH the
Terminals II and III and the taxilane, financing, implementation and
taxiways and runways completion of the following
works before the In-Service
To obligate the MIAA to provide funding for
Date: three left-turning
the upkeep, maintenance and repair of
overpasses (Edsa to Tramo St.,
the airports and facilities owned or
Tramo to Andrews Ave., and
operated by it and by third persons
Manlunas Road to Sales Ave.)
under its control in order to ensure
and a road upgrade and
compliance with international
improvement program involving
standards; and holding MIAA liable to
widening, repair and resurfacing
Piatco for the latter's losses, expenses
of Sales Road, Andrews Avenue
and damages as well as for the latter's
and Manlunas Road;
liability to third persons, in case MIAA
improvement of Nichols
fails to perform such obligations; in
Interchange; and removal of
addition, MIAA will also be liable for
squatters along Andrews
the incremental and consequential
Avenue
costs of the remedial work done by
Piatco on account of the former's Dealing directly with BCDA and the
default. Philippine Air Force in acquiring
additional land or right of way for
Section 4 of the FS imposed on
the road upgrade and
government ten (10) "Additional
improvement program
Special Obligations," including the
following: Requiring government to work for
the immediate reversion to MIAA
Providing thru MIAA the land
of the Nayong Pilipino National
required by Piatco for the
Park, in order to permit the
Page 122 of 458

building of the second west accordingly, whether failure to perform them (or to perform
parallel taxiway them on time) could result in a material breach of the
contract.
Section 5 of the FS also provides that in
lieu of the access tunnel, a surface Viewed in this light, the "Additional Special Obligations" set
access road (T2-T3) will be out in Section 4 of the FS take on a different aspect. In
constructed. This provision requires particular, each of the following may all be deemed to play
government to expend funds to a major role in the successful and timely prosecution of the
purchase additional land from Nayong Terminal III Project: the obtention of land required by
Pilipino and to clear the same in order PIATCO for the taxilane and taxiway; the implementation of
to be able to deliver clean possession government's existing storm drainage master plan; and
of the site to Piatco, as required in coordination with DPWH for the completion of the three
Section 5(c) of the FS. left-turning overpasses before the In-Service Date, as well
as acquisition and delivery of additional land for the
On the other hand, the Third Supplement ("TS") obligates
construction of the T2-T3 access road.
the government to deliver, within 120 days from date
thereof, clean possession of the land on which the T2-T3 Conversely, failure to deliver on any of these obligations
Road is to be constructed. may conceivably result in substantial prejudice to the
concessionaire, to such an extent as to constitute a
The foregoing contractual stipulations undeniably impose
material breach of the Piatco Contracts. Whereupon, the
on government the expenditures of public funds not
concessionaire may outrightly terminate the Contracts
included in any congressional appropriation or authorized
pursuant to Section 8.01(b)(i) and (ii) of the ARCA and
by any other statute. Piatco however attempts to take these
seek payment of Liquidated Damages in accordance with
stipulations out of the ambit of Sections 46 and 47 of the
Section 8.02(a) of the ARCA; or the concessionaire may
Administrative Code by characterizing them as stipulations
instead require government to pay the Incremental and
for compliance on a "best-efforts basis" only.
Consequential Losses under Section 1.23 of the
To determine whether the additional obligations under the ARCA. 94 The logical conclusion then is that the obligations
Supplements may really be undertaken on a best-efforts in the Supplements are not to be performed on a best-
basis only, the nature of each of these obligations must be efforts basis only, but are unarguably mandatory in
examined in the context of its relevance and significance to character.
the Terminal III Project, as well as of any adverse impact
Regarding MIAA's obligation to coordinate with the DPWH
that may result if such obligation is not performed or
for the complete implementation of the road upgrading and
undertaken on time. In short, the criteria for determining
improvement program for Sales, Andrews and Manlunas
whether the best-efforts basis will apply is whether the
Roads (which provide access to the Terminal III site) prior
obligations are critical to the success of the Project and,
Page 123 of 458

to the In-Service Date, it is essential to take note of the fact government may likewise not be construed as being for
that there was a pressing need to complete the program best-efforts compliance only.
before the opening of Terminal III. 95 For that reason, the
MIAA was compelled to enter into a memorandum of
agreement with the DPWH in order to ensure the timely They also Infringe on the Legislative
completion of the road widening and improvement Prerogative and Power Over the Public Purse
program. MIAA agreed to advance the total amount of But the particularly sad thing about this transaction
P410.11 million to DPWH for the works, while the latter between MIAA and DPWH is the fact that both agencies
was committed to do the following: were maneuvered into (or allowed themselves to be
"2.2.8. Reimburse all advance payments to maneuvered into) an agreement that would ensure delivery
MIAA including but not limited to interest, fees, of upgraded roads for Piatco's benefit, using funds not
plus other costs of money within the periods allocated for that purpose. The agreement would then be
CY2004 and CY2006 with payment of no less presented to Congress as a done deal. Congress would
than One Hundred Million Pesos (PhP100M) thus be obliged to uphold the agreement and support it with
every year. the necessary allocations and appropriations for three
"2.2.9. Perform all acts necessary to include in years, in order to enable DPWH to deliver on its committed
its CY2004 to CY2006 budget allocation the repayments to MIAA. The net result is an infringement on
repayments for the advances made by MIAA, to the legislative power over the public purse and a diminution
ensure that the advances are fully repaid by of Congress' control over expenditures of public funds a
CY2006. For this purpose, DPWH shall include development that would not have come about, were it not
the amounts to be appropriated for for the Supplements. Very clever but very illegal!
reimbursement to MIAA in the "Not Needing
Clearance" column of their Agency Budget EPILOGUE
Matrix (ABM) submitted to the Department of What Do We Do Now?
Budget and Management."
In the final analysis, there remains but one ultimate
It can be easily inferred, then, that DPWH did not set aside question, which I raised during the Oral Argument on
enough funds to be able to complete the upgrading December 10, 2002: What do we do with the Piatco
program for the crucially situated access roads prior to the Contracts and Terminal III? 96 (Feeding directly into the
targeted opening date of Terminal III; and that, had MIAA resolution of the decisive question is the other nagging
not agreed to lend the P410 Million, DPWH would not have issue: Why should we bother with determining the legality
been able to complete the program on time. As a and validity of these contracts, when the Terminal itself has
consequence, government would have been in breach of a already been built and is practically complete?)
material obligation. Hence, this particular undertaking of
Page 124 of 458

Prescinding from all the foregoing disquisition, I find that all continue and operate the facility. After all, the real money
the Piatco contracts, without exception, are void ab initio, will come not from building the Terminal, but from actually
and therefore inoperative. Even the very process by which operating it for fifty or more years and charging whatever it
the contracts came into being the bidding and the award feels like, without any competition at all. This scenario must
has been riddled with irregularities galore and blatant not be allowed to happen. aATESD

violations of law and public policy, far too many to ignore.


If the Piatco contracts are junked altogether as I think they
There is thus no conceivable way, as proposed by some, of
should be, should not AEDC automatically be considered
saving one (the original Concession Agreement) while
the winning bidder and therefore allowed to operate the
junking all the rest.
facility? My answer is a stone-cold 'No'. AEDC never won
Neither is it possible to argue for the retention of the Draft the bidding, never signed any contract, and never built any
Concession Agreement (referred to in the various facility. Why should it be allowed toautomatically step in
pleadings as the Contract Bidded Out) as the contract that and benefit from the greed of another?
should be kept in force and effect to govern the situation,
Should government pay at all for reasonable expenses
inasmuch as it was never executed by the parties. What
incurred in the construction of the Terminal? Indeed it
Piatco and the government executed was the Concession
should, otherwise it will be unjustly enriching itself at the
Agreement which is entirely different from the Draft
expense of Piatco and, in particular, its funders, contractors
Concession Agreement.
and investors both local and foreign. After all, there is no
Ultimately, though, it would be tantamount to an question that the State needs and will make use of
outrageous, grievous and unforgivable mutilation of public Terminal III, it being part and parcel of the critical
policy and an insult to ourselves if we opt to keep in place a infrastructure and transportation-related programs of
contract any contract for to do so would assume that government.
we agree to having Piatco continue as the concessionaire
In Melchor v. Commission on Audit, 97 this Court held that
for Terminal III.
even if the contract therein was void, the principle of
Despite all the insidious contraventions of the Constitution, payment by quantum meruit was found applicable, and the
law and public policy Piatco perpetrated, keeping Piatco on contractor was allowed to recover the reasonable value of
as concessionaire and even rewarding it by allowing it to the thing or services rendered (regardless of any
operate and profit from Terminal III instead of imposing agreement as to the supposed value), in order to avoid
upon it the stiffest sanctions permissible under the laws unjust enrichment on the part of government. The principle
is unconscionable. of quantum meruit was likewise applied in Eslao
v. Commission on Audit, 98 because to deny payment for a
It is no exaggeration to say that Piatco may not really mind
building almost completed and already occupied would be
which contract we decide to keep in place. For all it may
to permit government to unjustly enrich itself at the
care, we can do just as well without one, if we only let it
Page 125 of 458

expense of the contractor. The same principle was applied


in Republic v. Court of Appeals. 99
One possible practical solution would be for government
in view of the nullity of the Piatco contracts and of the fact G.R. No. 154599. January 21, 2004.]
that Terminal III has already been built and is almost
finished to bid out the operation of the facility under the THE LIGA NG MGA BARANGAY
same or analogous principles as build-operate-and-transfer NATIONAL, petitioner, vs. THE CITY
projects. To be imposed, however, is the condition that the MAYOR OF MANILA, HON. JOSE
winning bidder must pay the builder of the facility a price ATIENZA, JR., and THE CITY COUNCIL
fixed by government based on quantum meruit; on the real, OF MANILA,respondents.
reasonable not inflated value of the built facility.
How the payment or series of payments to the builder,
funders, investors and contractors will be staggered and DECISION
scheduled, will have to be built into the bids, along with the
annual guaranteed payments to government. In this
manner, this whole sordid mess could result in something DAVIDE, JR., C.J :p

truly beneficial for all, especially for the Filipino people.


This petition for certiorari under Rule 65 of the Rules of
WHEREFORE, I vote to grant the Petitions and to declare Court seeks the nullification of Manila City Ordinance No.
the subject contracts NULL and VOID. 8039, Series of 2002, 1 and respondent City Mayor's
(Agan, Jr. v. Philippine International Air Terminals Co.,
||| Executive Order No. 011, Series of 2002, 2 dated 15
Inc., G.R. No. 155001, 155547, 155661, [May 5, 2003], 450 August 2002, for being patently contrary to law.
PHIL 744-902) The antecedents are as follows:
Petitioner Liga ng mga Barangay National (Liga for brevity)
is the national organization of all the barangays in the
Philippines, which pursuant to Section 492 of Republic Act
No. 7160, otherwise known as The Local Government
Code of 1991, constitutes the duly elected presidents of
highly-urbanized cities, provincial chapters, the
metropolitan Manila Chapter, and metropolitan political
subdivision chapters.
Page 126 of 458

Section 493 of that law provides that "[t]he liga at the convene all the duly elected Component
municipal, city, provincial, metropolitan political subdivision, City/Municipal Chapter Presidents and all the
and national levels directly elect a president, a vice- current elected Punong Barangays (for
president, and five (5) members of the board of HUC/ICC) of the respective chapters in any
directors." All other matters not provided for in the law public place within its area of jurisdiction for the
purpose of reorganizing and electing the officers
affecting the internal organization of the leagues of local
and directors of the provincial, metropolitan or
government units shall be governed by their respective HUC/ICC Liga chapters. Said president duly
constitution and by-laws, which must always conform to the assisted by the government officer
provisions of the Constitution and existing laws. 3 aforementioned, shall notify, in writing, all the
On 16 March 2000, the Liga adopted and ratified its own above concerned at least fifteen (15) days before
the scheduled election meeting on the exact
Constitution and By-laws to govern its internal
date, time, place and requirements of the said
organization. 4 Section 1, third paragraph, Article XI of said meeting.
Constitution and By-Laws states:
The Liga thereafter came out with its Calendar of Activities
All other election matters not covered in this
Article shall be governed by the "Liga Election
and Guidelines in the Implementation of the Liga Election
Code" or such other rules as may be Code of 2002, 6 setting on 21 October 2002 the
promulgated by the National Liga Executive synchronized elections for highly urbanized city chapters,
Board in conformity with the provisions of such as the Liga Chapter of Manila, together with
existing laws. independent component city, provincial, and metropolitan
chapters.
By virtue of the above-cited provision, the Liga adopted
and ratified its own Election Code. 5 Section 1.2, Article I of On 28 June 2002, respondent City Council of Manila
the Liga Election Code states: enacted Ordinance No. 8039, Series of 2002, providing,
among other things, for the election of representatives of
1.2 Liga ng mga Barangay Provincial,
the District Chapters in the City Chapter of Manila and
Metropolitan, HUC/ICC Chapters. There shall be
nationwide synchronized elections for the setting the elections for both chapters thirty days after the
provincial, metropolitan, and HUC/ICC chapters barangay elections. Section 3(A) and (B) of the assailed
to be held on the third Monday of the month ordinance read:
immediately after the month when the SEC. 3. Representation Chapters. Every
synchronized elections in paragraph 1.1 above Barangay shall be represented in the said Liga
was held. The incumbent Liga chapter president Chapters . . . by the Punong Barangay . . . or, in
concerned duly assisted by the proper his absence or incapacity, by the kagawad duly
government agency, office or department, e.g. elected for the purpose among its members. . . .
Provincial/City/NCR/Regional Director, shall
Page 127 of 458

A. District Chapter WHETHER OR NOT THE RESPONDENT CITY


COUNCIL OF MANILA COMMITTED GRAVE
All elected Barangay Chairman in each
ABUSE OF DISCRETION AMOUNTING TO
District shall elect from among themselves
LACK OF OR IN EXCESS OF JURISDICTION,
the President, Vice-President and five (5)
WHEN IT ENACTED CITY ORDINANCE NO.
members of the Board. . . .
8039 S. 2002 PURPOSELY TO GOVERN THE
B. City Chapter ELECTIONS OF THE MANILA CHAPTER OF
THE LIGA NG MGA BARANGAYS AND WHICH
The District Chapter representatives shall PROVIDES A DIFFERENT MANNER OF
automatically become members of the ELECTING ITS OFFICERS, DESPITE THE
Board and they shall elect from among FACT THAT SAID CHAPTER'S ELECTIONS,
themselves a President, Vice-President, AND THE ELECTIONS OF ALL OTHER
Secretary, Treasurer, Auditor and create CHAPTERS OF THE LIGA NG MGA
other positions as it may deem necessary BARANGAYS FOR THAT MATTER, ARE BY
for the management of the chapter. LAW MANDATED TO BE GOVERNED BY THE
The assailed ordinance was later transmitted to respondent LIGA CONSTITUTION AND BY-LAWS AND
City Mayor Jose L. Atienza, Jr., for his signature and THE LIGA ELECTION CODE.
approval. II
On 16 July 2002, upon being informed that the ordinance WHETHER OR NOT THE RESPONDENT CITY
had been forwarded to the Office of the City Mayor, still MAYOR OF MANILA COMMITTED GRAVE
unnumbered and yet to be officially released, the Liga sent ABUSE OF DISCRETION AMOUNTING TO
respondent Mayor of Manila a letter requesting him that LACK OF OR IN EXCESS OF JURISDICTION
said ordinance be vetoed considering that it encroached WHEN HE ISSUED EXECUTIVE ORDER NO.
upon, or even assumed, the functions of the Liga through 011 TO IMPLEMENT THE QUESTIONED CITY
ORDINANCE NO. 8039 S. 2002.
legislation, a function which was clearly beyond the ambit
of the powers of the City Council. 7 In support of its petition, the Liga argues that City
Respondent Mayor, however, signed and approved the Ordinance No. 8039, Series of 2002, and Executive Order
No. 011, Series of 2002, contradict the Liga Election Code
assailed city ordinance and issued on 15 August 2002
Executive Order No. 011, Series of 2002, to implement the and are therefore invalid. There exists neither rhyme nor
ordinance. reason, not to mention the absence of legal basis, for the
Manila City Council to encroach upon, or even assume, the
Hence, on 27 August 2002, the Liga filed the instant functions of the Liga by prescribing, through legislation, the
petition raising the following issues: manner of conducting the Liga elections other than what
I has been provided for by the Liga Constitution and By-laws
Page 128 of 458

and the Liga Election Code. Accordingly, the subject Local political subdivisions are able to legislate only by
ordinance is an ultra vires act of the respondents and, as virtue of a valid delegation of legislative power from the
such, should be declared null and void. national legislature. They are mere agents vested with
what is called the power of subordinate legislation. Thus,
As for its prayer for the issuance of a temporary restraining
the enactments in question, which are local in origin,
order, the petitioner cites as reason therefor the fact that
cannot prevail against the decree, which has the force and
under Section 5 of the assailed city ordinance, the Manila
effect of law.
District Chapter elections would be held thirty days after
the regular barangay elections. Hence, it argued that the On the issue of non-observance by the petitioners of the
issuance of a temporary restraining order and/or hierarchy-of-courts rule, the OSG posits that technical rules
preliminary injunction would be imperative to prevent the of procedure should be relaxed in the instant petition.
implementation of the ordinance and executive order. While Batas Pambansa Blg. 129, as amended, grants
original jurisdiction over cases of this nature to the
On 12 September 2002, Barangay Chairman Arnel Pea,
Regional Trial Court (RTC), the exigency of the present
in his capacity as a member of the Liga ng mga Barangay
petition, however, calls for the relaxation of this rule.
in the City Chapter of Manila, filed a Complaint in
Section 496 (should be Section 491) of the Local
Intervention with Urgent Motion for the Issuance of
Government Code of 1991 primarily intended that the Liga
Temporary Restraining Order and/or Preliminary
ng mga Barangay determine the representation of the Liga
Injunction. 8 He supports the position of the Liga and prays
in the sanggunians for the immediate ventilation,
for the declaration of the questioned ordinance and
articulation, and crystallization of issues affecting barangay
executive order, as well as the elections of the Liga ng mga
government administration. Thus, the immediate resolution
Barangay pursuant thereto, to be null and void. The
of this petition is a must.
assailed ordinance prescribing for an "indirect manner of
election" amended, in effect, the provisions of the Local On the other hand, the respondents defend the validity of
Government Code of 1991, which provides for the election the assailed ordinance and executive order and pray for
of the Liga officers at large. It also violated and curtailed the dismissal of the present petition on the following
the rights of the petitioner and intervenor, as well as the grounds: (1) certiorari under Rule 65 of the Rules of Court
other 896 Barangay Chairmen in the City of Manila, to vote is unavailing; (2) the petition should not be entertained by
and be voted upon in a direct election.ETDAaC this Court in view of the pendency before the Regional Trial
Court of Manila of two actions or petitions questioning the
On 25 October 2002, the Office of the Solicitor General
subject ordinance and executive order; (3) the petitioner is
(OSG) filed a Manifestation in lieu of Comment. 9 It
guilty of forum shopping; and (4) the act sought to be
supports the petition of the Liga, arguing that the assailed
enjoined is fait accompli.
city ordinance and executive order are clearly inconsistent
with the express public policy enunciated in R.A. No. 7160.
Page 129 of 458

The respondents maintain that certiorari is an extraordinary pending cases and in this petition are different individuals
remedy available to one aggrieved by the decision of a or entities, they represent the same interest.
tribunal, officer, or board exercising judicial or quasi-judicial
With regard to petitioner's prayer for temporary restraining
functions. The City Council and City Mayor of Manila are
order and/ or preliminary injunction in its petition, the
not the "board" and "officer" contemplated in Rule 65 of the
respondents maintain that the same had become moot and
Rules of Court because both do not exercise judicial
academic in view of the elections of officers of the City Liga
functions. The enactment of the subject ordinance and
ng mga Barangay on 15 September 2002 and their
issuance of the questioned executive order are legislative
subsequent assumption to their respective offices. 10 Since
and executive functions, respectively, and thus, do not fall
the acts to be enjoined are now fait accompli, this petition
within the ambit of "judicial functions." They are both within
for certiorari with an application for provisional remedies
the prerogatives, powers, and authority of the City Council
must necessarily fail. Thus, where the records show that
and City Mayor of Manila, respectively. Furthermore, the
during the pendency of the case certain events or
petition failed to show with certainty that the respondents
circumstances had taken place that render the case moot
acted without or in excess of jurisdiction or with grave
and academic, the petition forcertiorari must be dismissed.
abuse of discretion.
After due deliberation on the pleadings filed, we resolve to
The respondents also asseverate that the petitioner cannot
dismiss this petition for certiorari.
claim that it has no other recourse in addressing its
grievance other than this petition for certiorari. As a matter First, the respondents neither acted in any judicial or quasi-
of fact, there are two cases pending before Branches 33 judicial capacity nor arrogated unto themselves any judicial
and 51 of the RTC of Manila (one is for mandamus; the or quasi-judicial prerogatives. A petition forcertiorari under
other, for declaratory relief) and three in the Court of Rule 65 of the 1997 Rules of Civil Procedure is a special
Appeals (one is for prohibition; the two other cases, for quo civil action that may be invoked only against a tribunal,
warranto), which are all akin to the present petition in the board, or officer exercising judicial or quasi-judicial
sense that the relief being sought therein is the declaration functions.
of the invalidity of the subject ordinance. Clearly, the
Section 1, Rule 65 of the 1997 Rules of Civil Procedure
petitioner may ask the RTC or the Court of Appeals the
provides:
relief being prayed for before this Court. Moreover, the
petitioner failed to prove discernible compelling reasons SECTION 1. Petition for certiorari. When any
attending the present petition that would warrant tribunal, board or officer exercising judicial or
cognizance of the present petition by this Court. quasi-judicial functions has acted without or in
excess of its or his jurisdiction, or with grave
Besides, according to the respondents, the petitioner has abuse of discretion amounting to lack or excess
transgressed the proscription against forum-shopping in of jurisdiction, and there is no appeal, or any
filing the instant suit. Although the parties in the other plain, speedy, and adequate remedy in the
Page 130 of 458

ordinary course of law, a person aggrieved to determine the law and adjudicate the respective rights of
thereby may file a verified petition in the proper the contending parties. 13
court, alleging the facts with certainty and
praying that judgment be rendered annulling or The respondents do not fall within the ambit of tribunal,
modifying the proceedings of such tribunal, board, or officer exercising judicial or quasi-judicial
board or officer, and granting such incidental functions. As correctly pointed out by the respondents, the
reliefs as law and justice may require. enactment by the City Council of Manila of the assailed
ordinance and the issuance by respondent Mayor of the
Elsewise stated, for a writ of certiorari to issue, the
questioned executive order were done in the exercise of
following requisites must concur: (1) it must be directed
legislative and executive functions, respectively, and not
against a tribunal, board, or officer exercising judicial or
of judicial or quasi-judicial functions. On this score
quasi-judicial functions; (2) the tribunal, board, or officer
alone, certiorari will not lie.
must have acted without or in excess of jurisdiction or with
grave abuse of discretion amounting lack or excess of Second, although the instant petition is styled as a petition
jurisdiction; and (3) there is no appeal or any plain, speedy, for certiorari, in essence, it seeks the declaration by this
and adequate remedy in the ordinary course of law. Court of the unconstitutionality or illegality of the
questioned ordinance and executive order. It, thus,
A respondent is said to be exercising judicial
partakes of the nature of a petition for declaratory relief
function where he has the power to determine what the law
over which this Court has only appellate, not original,
is and what the legal rights of the parties are, and then
jurisdiction. 14 Section 5, Article VIII of the Constitution
undertakes to determine these questions and adjudicate
provides:
upon the rights of the parties. 11
Sec. 5. The Supreme Court shall have the
Quasi-judicial function, on the other hand, is "a term which following powers:
applies to the actions, discretion, etc., of public
administrative officers or bodies . . . required to investigate (1) Exercise original jurisdiction over cases
facts or ascertain the existence of facts, hold hearings, and affecting ambassadors, other public ministers
draw conclusions from them as a basis for their official and consuls, and over petitions for certiorari,
prohibition, mandamus, quo warranto,
action and to exercise discretion of a judicial nature."12
and habeas corpus.
Before a tribunal, board, or officer may exercise judicial or (2) Review, revise, reverse, modify, or affirm on
quasi-judicial acts, it is necessary that there be a law that appeal or certiorari as the law or the Rules of
gives rise to some specific rights of persons or property Court may provide, final judgments and orders of
under which adverse claims to such rights are made, and lower courts in:
the controversy ensuing therefrom is brought before a
tribunal, board, or officer clothed with power and authority (a) All cases in which the constitutionality
or validity of any treaty, international or
Page 131 of 458

executive agreement, law, presidential be filed with the Regional Trial Court, and those
decree, proclamation, order, against the latter, with the Court of Appeals. A
instruction, ordinance, or regulation is in direct invocation of the Supreme Court's original
question. (Italics supplied). jurisdiction to issue these writs should be
allowed only when there are special and
As such, this petition must necessary fail, as this Court important reasons therefor, clearly and
does not have original jurisdiction over a petition for specifically set out in the petition. This is [an]
declaratory relief even if only questions of law are established policy. It is a policy necessary to
involved.15 prevent inordinate demands upon the Court's
time and attention which are better devoted to
Third, even granting arguendo that the present petition is
those matters within its exclusive jurisdiction,
ripe for the extraordinary writ of certiorari, there is here a and to prevent further over-crowding of the
clear disregard of the hierarchy of courts. No special and Court's docket.
important reason or exceptional and compelling
circumstance has been adduced by the petitioner or the As we have said in Santiago v. Vasquez, 17 the propensity
intervenor why direct recourse to this Court should be of litigants and lawyers to disregard the hierarchy of courts
allowed. in our judicial system by seeking relief directly from this
Court must be put to a halt for two reasons: (1) it would be
We have held that this Court's original jurisdiction to issue an imposition upon the precious time of this Court; and (2)
a writ of certiorari (as well as of prohibition, it would cause an inevitable and resultant delay, intended
mandamus, quo warranto, habeas corpus and injunction) is or otherwise, in the adjudication of cases, which in some
not exclusive, but is concurrent with the Regional Trial instances had to be remanded or referred to the lower
Courts and the Court of Appeals in certain cases. As aptly court as the proper forum under the rules of procedure, or
stated in People v. Cuaresma: 16 as better equipped to resolve the issues because this Court
This concurrence of jurisdiction is not, however, is not a trier of facts.
to be taken as according to parties seeking any
Thus, we shall reaffirm the judicial policy that this Court will
of the writs an absolute, unrestrained freedom of
choice of the court to which application therefore not entertain direct resort to it unless the redress desired
will be directed. There is after all a hierarchy of cannot be obtained in the appropriate courts, and
courts. That hierarchy is determinative of the exceptional and compelling circumstances justify the
venue of appeals, and also serves as a general availment of the extraordinary remedy of writ of certiorari,
determinant of the appropriate forum for petitions calling for the exercise of its primary jurisdiction. 18
for the extraordinary writs. A becoming regard of
that judicial hierarchy most certainly indicates
Petitioner's reliance on Pimentel v. Aguirre 19 is misplaced
that petitions for the issuance of extraordinary because the non-observance of the hierarchy-of-courts rule
writs against first level ("inferior") courts should was not an issue therein. Besides, what was sought to be
Page 132 of 458

nullified in the petition for certiorari and prohibition therein WHEREFORE, the petition is DISMISSED. IEAHca

was an act of the President of the Philippines, which would


SO ORDERED.
have greatly affected all local government units. We
reiterated therein that when an act of the legislative (Liga ng mga Barangay National v. City Mayor of Manila,
|||

department is seriously alleged to have infringed the G.R. No. 154599, [January 21, 2004], 465 PHIL 529-544)
Constitution, settling the controversy becomes the duty of
this Court. The same is true when what is seriously alleged
to be unconstitutional is an act of the President, who in our
constitutional scheme is coequal with Congress.

We hesitate to rule that the petitioner and the intervenor


are guilty of forum-shopping. Forum-shopping exists where
the elements of litis pendentia are present or when a final
judgment in one case will amount to res judicata in the
other. For litis pendentia to exist, the following requisites
must be present: (1) identity of parties, or at least such
parties as are representing the same interests in both
actions; (2) identity of rights asserted and reliefs prayed for,
the reliefs being founded on the same facts; and (3) identity [G.R. No. 139791. December 12, 2003.]
with respect to the two preceding particulars in the two
cases, such that any judgment that may be rendered in the MANILA BANKERS LIFE INSURANCE
pending case, regardless of which party is successful, CORPORATION, petitioner, vs. EDDY NG
would amount to res judicata in the other case. 20 KOK WEI, respondent.
In the instant petition, and as admitted by the respondents,
the parties in this case and in the alleged other pending Roy, Enrico C. Santos for petitioner.
cases are different individuals or entities; thus, forum-
Rogelio Velarde for respondent.
shopping cannot be said to exist. Moreover, even
assuming that those five petitions are indeed pending SYNOPSIS
before the RTC of Manila and the Court of Appeals, we can
Respondent instituted before the Makati Regional Trial
only guess the causes of action and issues raised before
Court a complaint for specific performance and damages
those courts, considering that the respondents failed to
against the petitioner. Petitioner allegedly failed to deliver
furnish this Court with copies of the said petitions.
the condominium unit to the respondent on the date
Page 133 of 458

specified in the Contract to Sell. After due trial, the trial OR CONDOMINIUM UNIT BUYER AGAINST THE
court found the petitioner liable for payment of damages OWNER OR DEVELOPER. Pursuant to Section 1 (c)
due to unreasonable delay in the delivery of the of Presidential Decree No. 1344, as amended, it is the
condominium unit to respondent. The decision of the trial HLURB which has jurisdiction over the instant case. We
court was affirmed in toto by the Court of Appeals. Hence, have consistently held that complaints for specific
this petition for review on certiorari where petitioner performance with damages by a lot or condominium unit
assailed the jurisdiction of the trial court.cHCSDa buyer against the owner or developer falls under the
exclusive jurisdiction of the HLURB. IcCDAS
The Supreme Court has consistently held that complaints
for specific performance with damages by a lot owner or 2. REMEDIAL LAW; COURTS; JURISDICTION; A PARTY
condominium buyer against the owner or developer falls WHO ACTIVELY PARTICIPATED IN THE
under the exclusive jurisdiction of the Housing and Land PROCEEDINGS IS ESTOPPED FROM ASSAILING THE
Use Regulatory Board. However, while it is true that the LACK THEREOF. While it may be true that the trial
trial court is without jurisdiction over respondent's court is without jurisdiction over the case, petitioner's active
complaint, petitioner's active participation in the participation in the proceedings estopped it from assailing
proceedings estopped it from assailing such lack of it. such lack of it. We have held that it is an undesirable
Furthermore, petitioner failed to raise the question of practice of a party participating in the proceedings and
jurisdiction before the trial court and the appellate court. In submitting its case for decision and then accepting the
effect, petitioner confirmed and ratified the trial court's judgment, only if favorable, and attacking it for lack of
jurisdiction over the case. Thus, it is now in estoppel and jurisdiction, when adverse. Here, petitioner failed to raise
can no longer question the trial court's jurisdiction. On the question of jurisdiction before the trial court and the
petitioner's claim that it did not incur delay, this is a factual Appellate Court. In effect, petitioner confirmed and ratified
issue. The Court ruled that the factual findings of the trial the trial court's jurisdiction over this case. Certainly, it is
court are given weight when supported by substantial now in estoppel and can no longer question the trial court's
evidence and carries more weight when affirmed by the jurisdiction.
IHDCcT

Court of Appeals. The Court affirmed in toto the decision of


3. ID.; EVIDENCE; FACTUAL FINDINGS OF TRIAL
the Court of Appeals. STcEIC
COURT GIVEN WEIGHT WHEN SUPPORTED BY
SUBSTANTIAL EVIDENCE AND CARRIES MORE
SYLLABUS WEIGHT WHEN AFFIRMED BY THE COURT OF
APPEALS. On petitioner's claim that it did not incur
1. ADMINISTRATIVE LAW; ADMINISTRATIVE AGENCY; delay, suffice it to say that this is a factual issue. Time and
HOUSING AND LAND USE REGULATORY BOARD; HAS again, we have ruled that "the factual findings of the trial
EXCLUSIVE JURISDICTION OVER COMPLAINTS FOR court are given weight when supported by substantial
SPECIFIC PERFORMANCE WITH DAMAGES BY A LOT evidence and carries more weight when affirmed by the
Page 134 of 458

Court of Appeals." Whether or not petitioner incurred delay Subsequently or on December 5, 1988, respondent paid
and thus, liable to pay damages as a result thereof are petitioner a reservation fee of P50,000.00 for the purchase
indeed factual questions. of a 46-square meter condominium unit (Unit 703) valued
at P860,922.00. On January 16, 1989, respondent paid
4. ID.; APPEALS; PETITION FOR REVIEW
90% of the purchase price in the sum of P729,830.00.
ON CERTIORARI; LIMITED TO REVIEW OF ERRORS OF
LAW, NOT OF FACT. The jurisdiction of this Court in a Consequently, petitioner, through its President, Mr. Antonio
petition for review on certiorari under Rule 45 of the 1997 G. Puyat, executed a Contract to Sell in favor of the
Rules of Civil Procedure, as amended, is limited to respondent. The contract expressly states that the subject
reviewing only errors of law, not of fact, unless the factual condominium unit "shall substantially be completed and
findings being assailed are not supported by evidence on delivered" to the respondent "within fifteen (15) months"
record or the impugned judgment is based on a from February 8, 1989 or on May 8, 1990, and that
misapprehension of facts. These exceptions are not "(S)hould there be no substantial completion and fail(ure)
present here. TEHDIA to deliver the unit on the date specified, a penalty of 1% of
the total amount paid (by respondent) shall be charged
against (petitioner)."
DECISION Considering that the stipulated 15-month period was at
hand, respondent returned to the Philippines sometime in
April, 1990.
SANDOVAL-GUTIERREZ, J : p

In a letter dated April 5, 1990, petitioner, through its Senior


Before us is a petition for review on certiorari assailing the Assistant Vice-President, Mr. Mario G. Zavalla, informed
Decision 1 dated March 26, 1999 and Resolution 2 dated respondent of the substantial completion of his
August 5, 1999 of the Court of Appeals in CA-G.R. CV No. condominium unit, however, due to various uncontrollable
40504, entitled "Eddy Ng Kok Wei vs. Manila Bankers Life forces (such as coup d'etat attempts, typhoon and steel
Insurance Corporation." and cement shortage), the final turnover is reset to May 31,
1990.
The factual antecedents as borne by the records are:
Meanwhile, on July 5, 1990, upon receipt of petitioner's
Eddy Ng Kok Wei, respondent, is a Singaporean notice of delivery dated May 31, 1990, respondent again
businessman who ventured into investing in the flew back to Manila. He found the unit still uninhabitable for
Philippines. On November 29, 1988, respondent, in a lack of water and electric facilities.
Letter of Intent addressed to Manila Bankers Life Insurance
Corporation, petitioner, expressed his intention to purchase Once more, petitioner issued another notice to move-in
a condominium unit at Valle Verde Terraces. addressed to its building administrator advising the latter
Page 135 of 458

that respondent is scheduled to move in on August 22, On appeal, the Court of Appeals, in a Decision dated
1990. March 26, 1999, affirmed in toto the trial court's award of
damages in favor of the respondent.
On October 5, 1990, respondent returned to the Philippines
only to find that his condominium unit was still unlivable. Unsatisfied, petitioner filed a motion for reconsideration but
Exasperated, he was constrained to send petitioner a letter was denied by the Appellate Court in a Resolution dated
dated November 21, 1990 demanding payment for the August 5, 1999.
damages he sustained. But petitioner ignored such
Hence, this petition for review on certiorari. Petitioner
demand, prompting respondent to file with the Regional
contends that the trial court has no jurisdiction over the
Trial Court, Branch 150, Makati City, a complaint against
instant case; and that the Court of Appeals erred in
the former for specific performance and damages,
affirming the trial court's finding that petitioner incurred
docketed as Civil Case No. 90-3440.
unreasonable delay in the delivery of the condominium unit
Meanwhile, during the pendency of the case, respondent to respondent.
finally accepted the condominium unit and on April 12,
On petitioner's contention that the trial court has no
1991, occupied the same. Thus, respondent's cause of
jurisdiction over the instant case, Section 1(c)
action has been limited to his claim for damages.
of Presidential Decree No. 1344, as amended, provides:
On December 18, 1992, the trial court rendered a "SECTION 1. In the exercise of its functions to
Decision 3 finding the petitioner liable for payment of regulate the real estate trade and business and
damages due to the delay in the performance of its in addition to its powers provided for
obligation to the respondent. The dispositive portion reads: in Presidential Decree No. 957, the National
"WHEREFORE, judgment is hereby rendered in Housing Authority [now Housing and Land Use
favor of plaintiff and against defendant, ordering Regulatory Board (HLURB)] 4 shall
Manila Bankers Life Insurance Corporation to have exclusive jurisdiction to hear and decide
pay plaintiff Eddy Ng Kok Wei the following: cases of the following nature:

1. One percent (1%) of the total amount plaintiff paid xxx xxx xxx
defendant; "C. Cases involving specific performance of
2. P100,000.00 as moral damages; contractual and statutory obligations filed by
buyers of subdivision lots or condominium units
3. P50,000.00 as exemplary damages; against the owner, developer, dealer, broker or
4. P25,000.00 by way of attorney's fees; and salesman.

5. Cost of suit. xxx xxx xxx."

"SO ORDERED."
Page 136 of 458

Pursuant to the above provisions, it is the HLURB which are not supported by evidence on record or the impugned
has jurisdiction over the instant case. We have consistently judgment is based on a misapprehension of facts. 8These
held that complaints for specific performance with damages exceptions are not present here.
by a lot or condominium unit buyer against the owner or
WHEREFORE, the petition is DENIED. The assailed
developer falls under the exclusive jurisdiction of the
Decision dated March 26, 1999 and Resolution dated
HLURB. 5
August 5, 1999 of the Court of Appeals are hereby
While it may be true that the trial court is without jurisdiction AFFIRMED IN TOTO.
over the case, petitioner's active participation in the
Costs against the petitioner.
proceedings estopped it from assailing such lack of it. We
have held that it is an undesirable practice of a party SO ORDERED.
participating in the proceedings and submitting its case for
(Manila Bankers Life Insurance Corp. v. Eddy Ng Kok
|||
decision and then accepting the judgment, only if favorable,
and attacking it for lack of jurisdiction, when adverse. 6 Wei, G.R. No. 139791, [December 12, 2003], 463 PHIL
871-878)

Here, petitioner failed to raise the question of jurisdiction


before the trial court and the Appellate Court. In effect,
petitioner confirmed and ratified the trial court's jurisdiction
over this case. Certainly, it is now in estoppel and can no
longer question the trial court's jurisdiction.
On petitioner's claim that it did not incur delay, suffice it to
say that this is a factual issue. Time and again, we have
ruled that "the factual findings of the trial court are given
weight when supported by substantial evidence and carries
more weight when affirmed by the Court of
Appeals." 7 Whether or not petitioner incurred delay and [A.M. No. MTJ-01-1370. April 25, 2003.]
thus, liable to pay damages as a result thereof, are indeed
(formerly A.M. No. 00-11-238-MTC)
factual questions.
The jurisdiction of this Court in a petition for review OFFICE OF THE COURT
on certiorari under Rule 45 of the 1997 Rules of Civil ADMINISTRATOR, complainant, vs. JUDGE
Procedure, as amended, is limited to reviewing only errors AGUSTIN T. SARDIDO, Municipal Trial
of law, not of fact, unless the factual findings being assailed
Page 137 of 458

Court of Koronadal, South IBP, but a criminal case filed with the trial court under its
Cotabato,respondent. jurisdiction. The Court further ruled that whether the
criminal case against Judge Hurtado relates to an act
committed before or after he became a judge is
SYNOPSIS
of no moment. Neither is it material that an MTC judge will
be trying an RTC judge in the criminal case. A criminal
The Office of the Court Administrator charged respondent case against an attorney or judge is distinct and separate
Agustin Sardido, formerly presiding judge of the Municipal from an administrative case against him and the dismissal
Trial Court of Koronadal, South Cotabato, with gross of the criminal case does not warrant the dismissal of an
ignorance of the law. Respondent allegedly excluded a administrative case arising from the same set of facts. The
certain Judge Braulio Hurtado, Jr. of the Regional Trial quantum of evidence that is required in the latter is only
Court of Kabacan, North Cotabato as one of the accused in preponderance of evidence, and not proof beyond
a case for Falsification and Use of Falsified Document. In reasonable doubt which is required in criminal cases.
his Explanation, Judge Sardido reasoned out that he Respondent Judge Agustin T. Sardido was fined Ten
excluded Judge Hurtado because Circular No. 3-89 directs Thousand Pesos (P10,000.00).
the IBP to forward to the Supreme Court for appropriate
action all cases involving justices and judges of lower
courts. Judge Sardido claimed that the Circular likewise SYLLABUS
applies to courts in cases involving justices or judges of the
lower courts, especially so in this case where Judge 1. POLITICAL LAW; ADMINISTRATIVE LAW; PUBLIC
Hurtado was charged with falsification of public document OFFICERS; JUDGES; CIRCULAR NO. 3-89 DOES NOT
as a notary public while he was still the Clerk of Court of REFER TO CRIMINAL CASES AGAINST ERRING
the Regional Trial Court, Koronadal, South Cotabato. JUSTICES OF APPELLATE COURTS OR JUDGES OF
LOWER COURTS; TRIAL COURTS RETAIN
The Supreme Court found respondent judge guilty of gross
JURISDICTION OVER THE CRIMINAL ASPECT OF THE
ignorance of the law. According to the Court, Circular No.
OFFENSES COMMITTED. Under Circular No. 3-89, the
3-89 does not refer to criminal cases against erring justices
Court has directed the IBP to refer to the Supreme Court
of appellate courts or judges of lower courts. Trial courts
for appropriate action all administrative cases filed with IBP
retain jurisdiction over the criminal aspect of offenses
against justices of appellate courts and judges of the lower
committed by justices of appellate courts and judges of
courts. As mandated by the Constitution, the Court
lower courts. It is clear from the Circular directing the IBP,
exercises the exclusive power to discipline administratively
and not the trial courts, to refer all administrative cases
justices of appellate courts and judges of lower courts.
filed against justices of appellate courts and judges of
Circular No. 3-89 does not refer to criminal cases against
lower courts to the Supreme Court. The case filed against
erring justices of appellate courts or judges of lower courts.
Judge Hurtado is not an administrative case filed with the
Page 138 of 458

Trial courts retain jurisdiction over the criminal aspect of be conversant with basic legal principles and well-settled
offenses committed by justices of appellate courts and doctrines. He should strive for excellence and seek the
judges of lower courts. This is clear from the Circular truth with passion. Judge Sardido failed in this regard. He
directing the IBP, and not the trial courts, to refer all erred in excluding Judge Hurtado as one of the accused in
administrative cases filed against justices of appellate the Amended Information and in forwarding the criminal
courts and judges of lower courts to the Supreme Court. case against Judge Hurtado to the Court.
The case filed against Judge Hurtado is not an
administrative case filed with the IBP. It is a criminal case
filed with the trial court under its jurisdiction as prescribed DECISION
by law. aDSIHc

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


ATTORNEY OR JUDGE IS DISTINCT AND SEPARATE CARPIO, J :p

FROM AN ADMINISTRATIVE CASE AGAINST HIM;


DISMISSAL OF THE CRIMINAL CASE DOES NOT The Case
WARRANT THE DISMISSAL OF THE ADMINISTRATIVE This is an administrative case against respondent Judge
CASE ARISING FROM THE SAME SET OF FACTS. Agustin T. Sardido ("Judge Sardido"), formerly presiding
The acts or omissions of a judge may well constitute at the judge of the Municipal Trial Court of Koronadal, South
same time both a criminal act and an administrative Cotabato, for gross ignorance of the law. Judge Sardido
offense. Whether the criminal case against Judge Hurtado issued an Order dated 20 October 1998 excluding Judge
relates to an act committed before or after he became a Braulio Hurtado, Jr. ("Judge Hurtado") of the Regional Trial
judge is of no moment. Neither is it material that an MTC Court of Kabacan, North Cotabato as one of the accused in
judge will be trying an RTC judge in the criminal case. A an Amended Information. 1 Judge Sardido ruled that
criminal case against an attorney or judge is distinct and Supreme Court Circular No. 3-89 requires that Judge
separate from an administrative case against him. The Hurtado be dropped from the Amended Information and his
dismissal of the criminal case does not warrant the case be forwarded to the Court. DIEACH

dismissal of an administrative case arising from the same The Facts


set of facts. The quantum of evidence that is required in the
latter is only preponderance of evidence, and not proof Private complainant Teresita Aguirre Magbanua accused
beyond reasonable doubt which is required in criminal Oscar Pagunsan and Danilo Ong of the crime of
cases. "Falsification by Private Individual and Use of Falsified
Document." 2 The Amended Information included Judge
3. ID.; ID.; ID.; ID.; IGNORANCE OF THE LAW: A judge is Hurtado. The case, docketed as Criminal Case No. 14071,
called upon to exhibit more than just a cursory was raffled to Judge Sardido, then presiding judge of the
acquaintance with statutes and procedural rules. He must
Page 139 of 458

Municipal Trial Court of Koronadal, South Cotabato ("MTC- case against him is one involving a judge of a lower court,
Koronadal"). the same should be forwarded to the Supreme Court
pursuant to Circular No. 3-89.
In a Deed of Absolute Sale dated 8 August 1993, private
complainant Magbanua and six other vendors allegedly The Provincial Prosecutor opposed Judge Hurtado's
sold two parcels of land, covered by TCT Nos. 47873 and motion, arguing that the case against Judge Hurtado is not
33633 and located at the commercial district of Koronadal, within the scope of Circular No. 3-89 since it is not an IBP-
to Davao Realty Development Corporation, represented by initiated case. Moreover, the offense charged was
accused Ong, with co-accused Pagunsan, as broker. committed in 1993 when Judge Hurtado was still a clerk of
Judge Hurtado, who at that time was the Clerk of Court of court and ex-officio notary public.
RTC-Koronadal and ex-officio notary public, notarized the
On 20 October 1998, Judge Sardido issued an Order, the
Deed of Absolute Sale.
pertinent portions of which read:
However, private complainant Magbanua denies signing
The issue to be resolved in the instant case is,
the Deed of Absolute Sale dated 8 August 1993 which whether the case of Judge Hurtado, who is
states that the consideration for the sale was only charged for acts committed prior to his
P600,000.00. Private complainant asserts that what she appointment as an RTC Judge, falls within the
and the other vendors signed was a Deed of Absolute Sale purview of the afore-said Circular No. 3-89.
dated 6 August 1996 for a consideration of
It is the humble submission of the Court that the
P16,000,000.00. Under the terms of the sale, the vendee
case of Judge Hurtado, an RTC Judge of the
agreed to pay for the capital gains tax. The consideration in Regional Trial Court of Kabacan, North
the 8 August 1993 Deed of Absolute Sale was apparently Cotabato, falls within the meaning and intent of
undervalued. Subsequently, the Bureau of Internal the said circular.
Revenue assessed the vendors a deficiency capital gains
tax of P1,023,375.00. For reasons being, firstly, the said circular
provides that all cases involving justices and
Judge Hurtado filed a motion praying that the criminal judges of lower courts shall be forwarded to the
complaint against him be forwarded to the Supreme Court. Supreme Court for appropriate action, whether
Judge Hurtado claimed that Circular No. 3-89 dated 6 or not such complaints deal with acts apparently
February 1989 requires "all cases involving justices and unrelated to the discharge of their official
judges of the lower courts, whether or not such complaints functions, and regardless of the nature of the
deal with acts apparently unrelated to the discharge of their crime, without any qualification whether the
crime was committed before or during his tenure
official functions, such as acts of immorality, estafa, crimes
of office. Under the law on Legal Hermeneutics,
against persons and property, etc." to be forwarded to the if the law does not qualify we must not qualify.
Supreme Court. Judge Hurtado asserted that since the Secondly, it would sound, to the mind of the
Page 140 of 458

Court, awkward for a first level court to be trying Amended Information and for transmitting the records of
an incumbent judge of a second level court. Judge Hurtado's case to the Court.
For reasons afore-stated, this Court can not and In his Explanation dated 26 January 2001, Judge Sardido
shall not try this case as against Judge Hurtado, reasoned out that he excluded Judge Hurtado because
unless the Honorable Supreme Court would Circular No. 3-89 directs the IBP to "forward to the
order otherwise.
Supreme Court for appropriate action all cases involving
Wherefore, the foregoing premises duly justices and judges of lower courts . . .." Judge Sardido
considered, the name of Judge Braulio L. claims that the Circular likewise "applies to courts in cases
Hurtado, Jr. is ordered excluded from the involving justices or judges of the lower courts," especially
amended information and the case against him so in this case where "Judge Hurtado was charged with
is ordered forwarded to the Honorable Supreme falsification of public document as a notary public while he
Court, pursuant to the afore-said Circular No. 3-
was still the Clerk of Court of the Regional Trial Court of
89 of the Supreme Court, dated February 9,
the 11th Judicial Region in Koronadal, South Cotabato."
1989.
In the Resolution of 28 March 2001, the Court referred this
case to the Office of the Court Administrator ("OCA") for
Accordingly, Maxima S. Borja ("Borja"), Stenographer I and evaluation, report and recommendation. On 10 July 2001,
Acting Clerk of Court II of the MTC-Koronadal, South the OCA submitted a Memorandum recommending that
Cotabato, wrote a letter dated 21 July 1999 forwarding the this case be re-docketed as a regular administrative matter.
criminal case against Judge Hurtado to the Court
Administrator for appropriate action. Judge Sardido filed his Manifestation dated 20 September
2001 stating that he is submitting the case for decision
Then Court Administrator Alfredo L. Benipayo issued a based on the pleadings and records already filed. Judge
Memorandum dated 25 October 2000 pointing out that Sardido insisted that he did "what he had done in all
Circular No. 3-89 refers only to administrative complaints honesty and good faith."
filed with the IBP against justices and judges of lower
courts. The Circular does not apply to criminal cases filed OCA's Findings and Conclusions
before trial courts against such justices and judges. The OCA found that Judge Sardido erred in excluding
Judge Hurtado as one of the accused in the Amended
Thus, in the Resolution of 6 December 2000, the Court
Information in Criminal Case No. 14071. The OCA held
directed that the letter of Acting Clerk of Court Borja be
that Circular No. 3-89, which is Judge Sardido's basis in
returned to the MTC-Koronadal together with the records of
issuing the Order of 20 October 1998, refers to
the criminal case. The Court directed Judge Sardido to
administrative complaints filed with the IBP against justices
explain in writing why he should not be held liable for gross
and judges of lower courts. The Circular does not apply to
ignorance of the law for excluding Judge Hurtado from the
Page 141 of 458

criminal cases filed against justices and judges of lower courts, whether or not such complaints deal with
courts. The OCA recommended that a fine of P5,000.00 be acts apparently unrelated to the discharge of
imposed on Judge Sardido for gross ignorance of the their official functions, such as acts of
law.HTSaEC
immorality, estafa, crimes against persons and
property, etc. . . .. (Emphasis supplied)
The Court's Ruling
Circular No. 3-89 clarified the second paragraph, Section 1
The Court issued Circular No. 3-89 in response to a letter of Rule 139-B of the Rules of Court which states that:
dated 19 December 1988 by then IBP President Leon M.
Garcia, seeking clarification of the Court's En The IBP Board of Governors may, motu
BancResolution of 29 November 1998 in RE: Letter of then proprio or upon referral by the Supreme Court or
by a Chapter Board of Officers, or at the instance
Acting Presiding Justice Rodolfo A. Nocon 3 and Associate
of any person, initiate and prosecute proper
Justices Reynato Puno 4 and Alfredo Marigomen 5 of the charges against erring attorneys including those
Court of Appeals. in the government service. (Emphasis supplied).
A certain Atty. Eduardo R. Balaoing had filed a complaint As clarified, the phrase "attorneys . . . in the government
against Court of Appeals Justices Nocon, Puno and service" in Section 1 of Rule 139-B does not include
Marigomen relating to a petition filed before their division. justices of appellate courts and judges of lower courts
In its En Banc Resolution of 29 November 1988, the Court who are not subject to the disciplining authority of the
required the IBP to refer to the Supreme Court for IBP. All administrative cases against justices of
appropriate action the complaint 6 filed by Atty. Balaoing appellate courts and judges of lower courts fall
with the IBP Commission on Bar Discipline. The Court exclusively within the jurisdiction of the Supreme Court.
stated that the power to discipline justices and judges of
the lower courts is within the Court's exclusive power and However, Rule 139-B refers to Disbarment and Discipline
authority as provided in Section 11, Article VII of the 1987 of Attorneys which is administrative and not criminal in
Constitution. 7 The Court Administrator publicized the En nature. The cases referred to in Circular No. 3-89 are
Banc Resolution of 29 November 1988 by issuing administrative cases for disbarment, suspension or
Circular No. 17 dated 20 December 1988. discipline of attorneys, including justices of appellate courts
and judges of the lower courts. The Court has vested the
The Court issued Circular No. 3-89 on 6 February 1989 IBP with the power to initiate and prosecute administrative
clarifying the En Banc Resolution of 29 November 1988. cases against erring lawyers. 8 However, under
Circular No. 3-89 provides in part as follows: Circular No. 3-89, the Court has directed the IBP to refer to
(1) The IBP (Board of Governors and the Supreme Court for appropriate action all administrative
Commission on Bar Discipline) shall forward to cases filed with IBP against justices of appellate courts and
the Supreme Court for appropriate action all judges of the lower courts. As mandated bythe
cases involving justices and judges of lower Constitution, the Court exercises the exclusive power to
Page 142 of 458

discipline administratively justices of appellate courts and The burden of proof for these types of cases
judges of lower courts. SHEIDC
differ. In a criminal case, proof beyond
reasonable doubt is necessary; in an
Circular No. 3-89 does not refer to criminal cases against administrative case for disbarment or
erring justices of appellate courts or judges of lower courts. suspension, 'clearly preponderant evidence' is all
Trial courts retain jurisdiction over the criminal aspect of that is required. Thus, a criminal prosecution will
offenses committed by justices of appellate courts 9 and not constitute a prejudicial question even if the
judges of lower courts. This is clear from the Circular same facts and circumstances are attendant in
directing the lBP, and not the trial courts, to refer all the administrative proceedings.
administrative cases filed against justices of appellate It should be emphasized that a finding of guilt in
courts and judges of lower courts to the Supreme Court. the criminal case will not necessarily result in a
The case filed against Judge Hurtado is not an finding of liability in the administrative case.
administrative case filed with the IBP. It is a criminal case Conversely, respondent's acquittal does not
filed with the trial court under its jurisdiction as prescribed necessarily exculpate him administratively. In the
by law. same vein, the trial court's finding of civil liability
against the respondent will not inexorably lead to
The acts or omissions of a judge may well constitute at the a similar finding in the administrative action
same time both a criminal act and an administrative before this Court. Neither will a favorable
offense. Whether the criminal case against Judge Hurtado disposition in the civil action absolve the
relates to an act committed before or after he became a administrative liability of the lawyer. The basic
judge is of no moment. Neither is it material that an MTC premise is that criminal and civil cases are
judge will be trying an RTC judge in the criminal case. A altogether different from administrative matters,
criminal case against an attorney or judge is distinct and such that the disposition in the first two will not
separate from an administrative case against him. The inevitably govern the third and vice versa. For
this reason, it would be well to remember the
dismissal of the criminal case does not warrant the
Court's ruling in In re Almacen, which we quote:
dismissal of an administrative case arising from the same
set of facts. The quantum of evidence that is required in the ". . . Disciplinary proceedings against
latter is only preponderance of evidence, and not proof lawyers are sui generis. Neither purely
beyond reasonable doubt which is required in criminal civil nor purely criminal, they do not
cases. 10 As held in Gatchalian Promotions Talents Pool, involve a trial of an action or a suit, but
Inc. v. Naldoza: 11 are rather investigations by the Court into
the conduct of one of its officers. Not
Administrative cases against lawyers belong to a being intended to inflict punishment, [they
class of their own. They are distinct from and are] in no sense a criminal prosecution.
they may proceed independently of civil and Accordingly, there is neither a plaintiff nor
criminal cases. a prosecutor therein. [They] may be
Page 143 of 458

initiated by the Court motu proprio. Public considering that this is not the first offense of Judge
interest is [their] primary objective, and Sardido.
the real question for determination is
whether or not the attorney is still a fit In RE: Hold Departure Order Issued by Judge Agustin T.
person to be allowed the privileges as Sardido, 14 the Court reprimanded Judge Sardido for
such. Hence, in the exercise of its issuing a hold-departure order contrary to Circular No. 39-
disciplinary powers, the Court merely calls 97. In Cabilao v. Judge Sardido, 15 the Court fined Judge
upon a member of the Bar to account for Sardido P5,000.00 for gross ignorance of the law, grave
his actuations as an officer of the Court abuse of discretion and gross misconduct. The Court gave
with the end in view of preserving the a stern warning to Judge Sardido that a commission of the
purity of the legal profession and the same or similar act would be dealt with more severely.
proper and honest administration of
In Almeron v. Judge Sardido, 16 the Court imposed on
justice by purging the profession of
members who by their misconduct have
Judge Sardido a stiffer fine of P10,000,00 for gross
prove[n] themselves no longer worthy to ignorance of the law. He was again sternly warned that the
be entrusted with the duties and commission of the same or similar act in the future would
responsibilities pertaining to the office of be dealt with more severely including, if warranted, his
an attorney. . . ." dismissal from the service.
In a more recent administrative case, Torcende v. Judge
Sardido, 17 the Court found Judge Sardido again guilty of
A judge is called upon to exhibit more than just a cursory
gross ignorance of the law and of gross misconduct. This
acquaintance with statutes and procedural rules. He must
time the Court dismissed Judge Sardido from the service
be conversant with basic legal principles and well-settled
with forfeiture of his retirement benefits, except accrued
doctrines. He should strive for excellence and seek the
leave credits. The dismissal was with prejudice to
truth with passion. 12 Judge Sardido failed in this regard.
reemployment in any branch of the government or any of
He erred in excluding Judge Hurtado as one of the
its agencies or instrumentalities, including government-
accused in the Amended Information and in forwarding the
owned and controlled corporations.
criminal case against Judge Hurtado to the Court.
The records of the OCA further disclose that Judge Sardido
One last point. This administrative case against Judge
has other similar administrative complaints 18 still pending
Sardido started before the amendment 13 of Rule 140
against him. Such an unflattering service record erodes the
classifying gross ignorance of the law a serious offense
people's faith and confidence in the judiciary. It is the duty
punishable by a fine of more than P20,000.00 but not
of every member of the bench to avoid any impression of
exceeding P40,000.00. The amendment cannot apply
impropriety to protect the image and integrity of the
retroactively to Judge Sardido's case. However, the fine of
judiciary. 19 The Court may still impose a fine on Judge
P5,000.00 recommended by the OCA is too light a penalty
Page 144 of 458

Sardido in the instant case despite his dismissal from the PANGANIBAN, J : p

service.
Where prescription, lack of jurisdiction or failure to state a
WHEREFORE, respondent Judge Agustin T. Sardido is cause of action clearly appear from the complaint filed with
FINED Ten Thousand Pesos (P10,000.00) for gross the trial court, the action may be dismissed motu proprio by
ignorance of the law. The fine may be deducted from his the Court of Appeals, even if the case has been elevated
accrued leave credits. for review on different grounds. Verily, the dismissal of
SO ORDERED. such cases appropriately ends useless litigations.
(Office of the Court Administrator v. Sardido, A.M. No.
|||
The Case
MTJ-01-1370, [April 25, 2003], 449 PHIL 619-631) Before us is a Petition for Review 1 under Rule 45 of the
Rules of Court, assailing the December 8, 2000
Decision 2 and the November 20, 2001 Resolution 3 of the
Court of Appeals in CA-GR SP No. 57496. The assailed
Decision disposed as follows:
"Assuming that petitioner is correct in saying that
he has the exclusive right in applying for the
patent over the land in question, it appears that
his action is already barred by laches because
he slept on his alleged right for almost 23 years
from the time the original certificate of title has
been issued to respondent Manuel Palanca, Jr.,
or after 35 years from the time the land was
certified as agricultural land. In addition, the
proper party in the annulment of patents or titles
[G.R. No. 151149. September 7, 2004.] acquired through fraud is the State; thus, the
petitioner's action is deemed misplaced as he
GEORGE KATON, petitioner, vs. MANUEL really does not have any right to assert or
PALANCA JR., LORENZO AGUSTIN, protect. What he had during the time he
requested for the re-classification of the land was
JESUS GAPILANGO and JUAN
the privilege of applying for the patent over the
FRESNILLO, respondents.
same upon the land's conversion from forest to
agricultural.

DECISION "WHEREFORE, the petition is hereby


DISMISSED. No pronouncement as to cost." 4
Page 145 of 458

The assailed Resolution, on the other hand, denied the from time to time to undertake development
Motion for Reconsideration filed by petitioner. It affirmed work, like planting of additional coconut trees.
the RTC's dismissal of his Complaint in Civil Case No. "The application for conversion of the whole
3231, not on the grounds relied upon by the trial court, but Sombrero Island was favorably endorsed by the
because of prescription and lack of jurisdiction. cSEaDA Forestry District Office of Puerto Princesa to its
main office in Manila for appropriate action. The
The Antecedent Facts
names of Felicisimo Corpuz, Clemente
The CA narrates the antecedent facts as follows: Magdayao and Jesus Gapilango and Juan
Fresnillo were included in the endorsement as
"On August 2, 1963, herein [P]etitioner [George
co-applicants of the petitioner.
Katon] filed a request with the District Office of
the Bureau of Forestry in Puerto Princesa, "In a letter dated September 23, 1965, then Asst.
Palawan, for the re-classification of a piece of Director of Forestry R.J.L. Utleg informed the
real property known as Sombrero Island, located Director of Lands, Manila, that since the subject
in Tagpait, Aborlan, Palawan, which consists of land was no longer needed for forest purposes,
approximately 18 hectares. Said property is the same is therefore certified and released as
within Timberland Block of LC Project No. 10-C agricultural land for disposition under the Public
of Aborlan, Palawan, per BF Map LC No. 1582. Land Act.
"Thereafter, the Bureau of Forestry District "Petitioner contends that the whole area known
Office, Puerto Princesa, Palawan, ordered the as Sombrero Island had been classified from
inspection, investigation and survey of the land forest land to agricultural land and certified
subject of the petitioner's request for eventual available for disposition upon his request and at
conversion or re-classification from forest to his instance. However, Mr. Lucio Valera, then
agricultural land, and thereafter for George [l]and investigator of the District Land Office,
Katon to apply for a homestead patent. Puerto Princesa, Palawan, favorably endorsed
the request of [R]espondents Manuel Palanca Jr.
"Gabriel Mandocdoc (now retired Land
and Lorenzo Agustin, for authority to survey on
Classification Investigator) undertook the
November 15, 1965. On November 22, a second
investigation, inspection and survey of the area
endorsement was issued by Palawan District
in the presence of the petitioner, his brother
Officer Diomedes De Guzman with specific
Rodolfo Katon (deceased) and his cousin,
instruction to survey vacant portions of Sombrero
[R]espondent Manuel Palanca, Jr. During said
Island for the respondents consisting of five (5)
survey, there were no actual occupants on the
hectares each. On December 10, 1965, Survey
island but there were some coconut trees
Authority No. R III-342-65 was issued authorizing
claimed to have been planted by petitioner and
Deputy Public Land Surveyor Eduardo Salvador
[R]espondent Manuel Palanca, Jr. (alleged
to survey ten (10) hectares of Sombrero Island
overseer of petitioner) who went to the island
Page 146 of 458

for the respondents. On December 23, 1990, "According to Mandocdoc, the island was
[R]espondent Lorenzo Agustin filed a homestead uninhabited but the respondents insist that they
patent application for a portion of the subject already had their respective occupancy and
island consisting of an area of 4.3 hectares. STaHIC improvements on the island. Palanca denies that
he is a mere overseer of the petitioner because
"Records show that on November 8, 1996,
he said he was acting for himself in developing
[R]espondent Juan Fresnillo filed a homestead
his own area and not as anybody's caretaker.
patent application for a portion of the island
comprising 8.5 hectares. Records also reveal "Respondents aver that they are all bona fide
that [R]espondent Jesus Gapilango filed a and lawful possessors of their respective
homestead application on June 8, 1972. portions and have declared said portions for
Respondent Manuel Palanca, Jr. was issued taxation purposes and that they have been
Homestead Patent No. 145927 and OCT No. G- faithfully paying taxes thereon for twenty years.
7089 on March 3, 1977 5 with an area of 6.84
"Respondents contend that the petitioner has no
hectares of Sombrero Island.
legal capacity to sue insofar as the island is
"Petitioner assails the validity of the homestead concerned because an action for reconveyance
patents and original certificates of title covering can only be brought by the owner and not a
certain portions of Sombrero Island issued in mere homestead applicant and that petitioner is
favor of respondents on the ground that the guilty of estoppel by laches for his failure to
same were obtained through fraud. Petitioner assert his right over the land for an unreasonable
prays for the reconveyance of the whole island in and unexplained period of time.
his favor.
"In the instant case, petitioner seeks to nullify the
"On the other hand, [R]espondent Manuel homestead patents and original certificates of
Palanca, Jr. claims that he himself requested for title issued in favor of the respondents covering
the reclassification of the island in dispute and certain portions of the Sombrero Island as well
that on or about the time of such request, as the reconveyance of the whole island in his
[R]espondents Fresnillo, Palanca and Gapilango favor. The petitioner claims that he has the
already occupied their respective areas and exclusive right to file an application for
introduced numerous improvements. In addition, homestead patent over the whole island since it
Palanca said that petitioner never filed any was he who requested for its conversion from
homestead application for the island. forest land to agricultural land." 6
Respondents deny that Gabriel Mandocdoc
undertook the inspection and survey of the
Respondents filed their Answer with Special and/or
island. Affirmative Defenses and Counterclaim in due time. On
June 30, 1999, they also filed a Motion to Dismiss on the
ground of the alleged defiance by petitioner of the trial
Page 147 of 458

court's Order to amend his Complaint so he could thus with petitioner that the trial court had acted without
effect a substitution by the legal heirs of the deceased, jurisdiction in perfunctorily dismissing his September 10,
Respondent Gapilango. The Motion to Dismiss was 1999 Motion for Reconsideration, on the erroneous ground
granted by the RTC in its Order dated July 29, 1999. that it was a third and prohibited motion when it was
actually only his first motion.
Petitioner's Motion for Reconsideration of the July 29, 1999
Order was denied by the trial court in its Resolution dated Nonetheless, the Complaint was dismissed motu proprio by
December 17, 1999, for being a third and prohibited the challenged Resolution of the CA Special Division of five
motion. In his Petition for Certiorari before the CA, members with two justices dissenting pursuant to its
petitioner charged the trial court with grave abuse of "residual prerogative" under Section 1 of Rule 9 of the
discretion on the ground that the denied Motion was his Rules of Court.
first and only Motion for Reconsideration of the aforesaid
Order.
From the allegations of the Complaint, the appellate court
Ruling of the Court of Appeals
opined that petitioner clearly had no standing to seek
Instead of limiting itself to the allegation of grave abuse of reconveyance of the disputed land, because he neither
discretion, the CA ruled on the merits. It held that while held title to it nor even applied for a homestead patent. It
petitioner had caused the reclassification of Sombrero reiterated that only the State could sue for cancellation of
Island from forest to agricultural land, he never applied for the title issued upon a homestead patent, and for reversion
a homestead patent under the Public Land Act. Hence, he of the land to the public domain.IAEcCT

never acquired title to that land.


Finally, it ruled that prescription had already barred the
The CA added that the annulment and cancellation of a action for reconveyance. First, petitioner's action was
homestead patent and the reversion of the property to the brought 24 years after the issuance of Palanca's
State were matters between the latter and the homestead homestead patent. Under the Public Land Act, such action
grantee. Unless and until the government takes steps to should have been taken within ten years from the issuance
annul the grant, the homesteader's right thereto stands. of the homestead certificate of title. Second, it appears
Finally, granting arguendo that petitioner had the exclusive from the submission (Annex "F" of the Complaint) of
right to apply for a patent to the land in question, he was petitioner himself that Respondents Fresnillo and Palanca
already barred by laches for having slept on his right for had been occupying six hectares of the island since 1965,
almost 23 years from the time Respondent Palanca's title or 33 years before he took legal steps to assert his right to
had been issued. the property. His action was filed beyond the 30-year
prescriptive period under Articles 1141 and 1137 of the
In the Assailed Resolution, the CA acknowledged that it Civil Code.
had erred when it ruled on the merits of the case. It agreed
Page 148 of 458

Hence, this Petition. 7 That explanation should have been enough to settle the
issue. The CA's Resolution on this point has rendered
Issues
petitioner's issue moot. Hence, there is no need to discuss
In his Memorandum, petitioner raises the following issues: it further. Suffice it to say that the appellate court indeed
"1. Is the Court of Appeals correct in resolving acted ultra jurisdictio in ruling on the merits of the case
the Petition for Certiorari based on an issue not when the only issue that could have been, and was in fact,
raised (the merits of the case) in the Petition? raised was the alleged grave abuse of discretion committed
by the trial court in denying petitioner's Motion for
"2. Is the Court of Appeals correct in invoking its
Reconsideration. Settled is the doctrine that the sole office
alleged 'residual prerogative' under Section 1,
Rule 9 of the 1997 Rules of Civil Procedure in of a writ of certiorari is the correction of errors of
resolving the Petition on an issue not raised in jurisdiction. Such writ does not include a review of the
the Petition?" 8 evidence, 10 more so when no determination of the merits
has yet been made by the trial court, as in this case.
The Court's Ruling
Second Issue:
The Petition has no merit.
Dismissal for Prescription and Lack of Jurisdiction
First Issue:
Petitioner next submits that the CA erroneously invoked its
Propriety of Ruling on the Merits "residual prerogatives" under Section 1 of Rule 9 of the
This is not the first time that petitioner has taken issue with Rules of Court when it motu proprio dismissed the Petition
the propriety of the CA's ruling on the merits. He raised it for lack of jurisdiction and prescription. According to him,
with the appellate court when he moved for reconsideration residual prerogative refers to the power that the trial court,
of its December 8, 2000 Decision. The CA even corrected in the exercise of its original jurisdiction, may still validly
itself in its November 20, 2001 Resolution, as follows: exercise even after perfection of an appeal. It follows that
such powers are not possessed by an appellate court.
"Upon another review of the case, the Court
concedes that it may indeed have lost its way Petitioner has confused what the CA adverted to as its
and been waylaid by the variety, complexity and "residual prerogatives" under Section 1 of Rule 9 of the
seeming importance of the interests and issues Rules of Court with the "residual jurisdiction" of trial courts
involved in the case below, the apparent over cases appealed to the CA.
reluctance of the judges, five in all, to hear the
case, and the volume of the conflicting, often Under Section 1 of Rule 9 of the Rules of Court, defenses
confusing, submissions bearing on incidental and objections not pleaded either in a motion to dismiss or
matters. We stand corrected." 9 in the answer are deemed waived, except when (1) lack of
jurisdiction over the subject matter, (2) litis pendentia,
(3) res judicata and (4) prescription are evident from the
Page 149 of 458

pleadings or the evidence on record. In the four excepted matter thereof upon the approval of the record
instances, the court shall motu proprio dismiss the claim or on appeal filed in due time.
action. In Gumabon v. Larin 11 we explained thus: "In appeals by notice of appeal, the court loses
". . . [T]he motu proprio dismissal of a case was jurisdiction over the case upon the perfection of
traditionally limited to instances when the court the appeals filed in due time and the expiration
clearly had no jurisdiction over the subject matter of the time to appeal of the other parties.
and when the plaintiff did not appear during "In appeals by record on appeal, the court loses
trial, failed to prosecute his action for an jurisdiction only over the subject matter thereof
unreasonable length of time or neglected to upon the approval of the records on appeal filed
comply with the rules or with any order of the in due time and the expiration of the time to
court. Outside of these instances, any motu appeal of the other parties.
proprio dismissal would amount to a violation of
the right of the plaintiff to be heard. Except for "In either case, prior to the transmittal of the
qualifying and expanding Section 2, Rule 9, and original record or the record on appeal, the court
Section 3, Rule 17, of the Revised Rules of may issue orders for the protection and
Court, the amendatory 1997 Rules of Civil preservation of the rights of the parties which do
Procedure brought about no radical not involve any matter litigated by the appeal,
change. Under the new rules, a court may motu approve compromises, permit appeals of
proprio dismiss a claim when it appears from the indigent litigants, order execution pending appeal
pleadings or evidence on record that it has no in accordance with Section 2 of Rule 39, and
jurisdiction over the subject matter; when there is allow withdrawal of the appeal." (Italics supplied)
another cause of action pending between the
The "residual jurisdiction" of trial courts is available at a
same parties for the same cause, or where the
action is barred by a prior judgment or by statute
stage in which the court is normally deemed to have lost
of limitations. . . ." 12 (Italics supplied) jurisdiction over the case or the subject matter involved in
the appeal. This stage is reached upon the perfection of
On the other hand, "residual jurisdiction" is embodied the appeals by the parties or upon the approval of the
in Section 9 of Rule 41 of the Rules of Court, as follows: cCTESa
records on appeal, but prior to the transmittal of the original
"SEC. 9. Perfection of appeal; effect thereof . records or the records on appeal. 13 In either instance, the
A party's appeal by notice of appeal is deemed trial court still retains its so-called residual jurisdiction to
perfected as to him upon the filing of the notice issue protective orders, approve compromises, permit
of appeal in due time. appeals of indigent litigants, order execution pending
appeal, and allow the withdrawal of the appeal.
"A party's appeal by record on appeal is deemed
perfected as to him with respect to the subject The CA's motu proprio dismissal of petitioner's Complaint
could not have been based, therefore, on residual
Page 150 of 458

jurisdiction under Rule 41. Undeniably, such order of land to agricultural land which request
dismissal was not one for the protection and preservation was favorably acted upon and approved
of the rights of the parties, pending the disposition of the as mentioned earlier; a clear case of
case on appeal. What the CA referred to as residual intrinsic fraud and misrepresentation;
prerogatives were the general residual powers of the courts xxx xxx xxx
to dismiss an action motu proprio upon the grounds 2.3. In stating in his application for
mentioned in Section 1 of Rule 9 of the Rules of Court and homestead patent that he was applying
under authority of Section 2 of Rule 1 14 of the same rules. for the VACANT PORTION of Sombrero
To be sure, the CA had the excepted instances in mind Island where there was none, the same
constituted another clear case of fraud
when it dismissed the Complaint motu proprio "on more
and misrepresentation;
fundamental grounds directly bearing on the lower court's
lack of jurisdiction" 15 and for prescription of the action. "3. That the issuance of Homestead Patent No.
Indeed, when a court has no jurisdiction over the subject 145927 and OCT No. G-7089 in the name of
matter, the only power it has is to dismiss the action. 16 [Respondent] Manuel Palanca Jr. and the filing
of Homestead Patent Applications in the names
Jurisdiction over the subject matter is conferred by law and of [respondents], Lorenzo Agustin, Jesus
is determined by the allegations in the complaint and the Gapilango and Juan Fresnillo[,] having been
character of the relief sought. 17 In his Complaint for done fraudulently and in bad faith, are ipso
"Nullification of Applications for Homestead and Original facto null and void and of no effect
Certificate of Title No. G-7089 and for Reconveyance of whatsoever." 19
Title," 18 petitioner averred: xxx xxx xxx
"2. That on November 10, 1965, without the ". . . By a wrongful act or a willful omission and
knowledge of [petitioner, Respondent] Manuel intending the effects with natural necessity arise
Palanca Jr., [petitioner's] cousin, in connivance knowing from such act or omission, [Respondent
with his co-[respondent], Lorenzo Agustin, . . . Palanca] on account of his blood relation, first
fraudulently and in bad faith: degree cousins, trust, interdependence and
2.1. . . . made the request for authority to intimacy is guilty of intrinsic fraud [sic] . . ." 20
survey as a pre-requisite to the filing of an
application for homestead patent in his
name and that of his Co-[Respondent] Thereupon, petitioner prayed, among others, for a
Agustin, [despite being] fully aware that judgment (1) nullifying the homestead patent applications
[Petitioner] KATON had previously applied of Respondents Agustin, Fresnillo and Gapilango as well
or requested for re-classification and as Homestead Patent No. 145927 and OCT No. G-7089 in
certification of the same land from forest the name of Respondent Palanca; and (2) ordering the
Page 151 of 458

director of the Land Management Bureau to reconvey the property through mistake or fraud is bound to hold and
Sombrero Island to petitioner. 21 reconvey to the plaintiff the property or the title thereto. 26
The question is, did the Complaint sufficiently allege an In the present case, nowhere in the Complaint did
action for declaration of nullity of the free patent and petitioner allege that he had previously held title to the land
certificate of title or, alternatively, for reconveyance? Or did in question. On the contrary, he acknowledged that the
it plead merely for reversion? disputed island was public land, 27 that it had never been
privately titled in his name, and that he had not applied for
The Complaint did not sufficiently make a case for any of
a homestead under the provisions of the Public Land
such actions, over which the trial court could have
Act. 28 This Court has held that a complaint by a private
exercised jurisdiction. HECTaA
party who alleges that a homestead patent was obtained
In an action for nullification of title or declaration of its by fraudulent means, and who consequently prays for its
nullity, the complaint must contain the following allegations: annulment, does not state a cause of action; hence, such
1) that the contested land was privately owned by the complaint must be dismissed. 29
plaintiff prior to the issuance of the assailed certificate of
Neither can petitioner's case be one for reversion. Section
title to the defendant; and 2) that the defendant
101 of the Public Land Act categorically declares that only
perpetuated a fraud or committed a mistake in obtaining a
the solicitor general or the officer in his stead may institute
document of title over the parcel of land claimed by the
such an action. 30 A private person may not bring an action
plaintiff. 22 In these cases, the nullity arises not from fraud
for reversion or any other action that would have the effect
or deceit, but from the fact that the director of the Land
of canceling a free patent and its derivative title, with the
Management Bureau had no jurisdiction to bestow title;
result that the land thereby covered would again form part
hence, the issued patent or certificate of title was void ab
of the public domain. 31
initio. 23
Thus, when the plaintiff admits in the complaint that the
In an alternative action for reconveyance, the certificate of
disputed land will revert to the public domain even if the
title is also respected as incontrovertible, but the transfer of
title is canceled or amended, the action is for reversion;
the property or title thereto is sought to be nullified on the
and the proper party who may bring action is the
ground that it was wrongfully or erroneously registered in
government, to which the property will revert. 32 A mere
the defendant's name. 24 As with an annulment of title, a
homestead applicant, not being the real party in interest,
complaint must allege two facts that, if admitted, would
has no cause of action in a suit for reconveyance. 33 As it
entitle the plaintiff to recover title to the disputed land: (1)
is, vested rights over the land applied for under a
that the plaintiff was the owner of the land, and (2) that the
homestead may be validly claimed only by the applicant,
defendant illegally dispossessed the plaintiff of the
after approval by the director of the Land Management
property. 25 Therefore, the defendant who acquired the
Bureau of the former's final proof of homestead patent. 34
Page 152 of 458

Consequently, the dismissal of the Complaint is proper not In Aldovino v. Alunan, 43 the Court has held that when the
only because of lack of jurisdiction, but also because of the plaintiff's own complaint shows clearly that the action has
utter absence of a cause of action, 35 a defense raised by prescribed, such action may be dismissed even if the
respondents in their Answer. 36 Section 2 of Rule 3 of the defense of prescription has not been invoked by the
Rules of Court 37 ordains that every action must be defendant. In Gicano v. Gegato, 44 we also explained thus:
prosecuted or defended in the name of the real party in ". . . [T]rial courts have authority and discretion to
interest, who stands to be benefited or injured by the dismiss an action on the ground of prescription
judgment in the suit. Indeed, one who has no right or when the parties' pleadings or other facts on
interest to protect has no cause of action by which to record show it to be indeed time-barred;
invoke, as a party-plaintiff, the jurisdiction of the court. 38 (Francisco v. Robles, Feb. 15, 1954; Sison
v. McQuaid, 50 O.G. 97; Bambao v. Lednicky,
Finally, assuming that petitioner is the proper party to bring
Jan. 28, 1961; Cordova v. Cordova, Jan. 14,
the action for annulment of title or its reconveyance, the 1958; Convets, Inc.v. NDC, Feb. 28, 1958; 32
case should still be dismissed for being time-barred. 39 It is SCRA 529; Sinaon v. Sorongan, 136 SCRA
not disputed that a homestead patent and an Original 408); and it may do so on the basis of a motion
Certificate of Title was issued to Palanca on February 21, to dismiss (Sec. 1, f, Rule 16, Rules of Court), or
1977, 40 while the Complaint was filed only on October 6, an answer which sets up such ground as an
1998. Clearly, the suit was brought way past ten years from affirmative defense (Sec. 5, Rule 16), or even if
the date of the issuance of the Certificate, the prescriptive the ground is alleged after judgment on the
period for reconveyance of fraudulently registered real merits, as in a motion for reconsideration (Ferrer
property. 41 v. Ericta, 84 SCRA 705); or even if the defense
has not been asserted at all, as where no
It must likewise be stressed that Palanca's title which statement thereof is found in the pleadings
attained the status of indefeasibility one year from the (Garcia v.Mathis, 100 SCRA 250; PNB v. Pacific
issuance of the patent and the Certificate of Title in Commission House, 27 SCRA 766; Chua Lamco
February 1977 is no longer open to review on the v. Dioso, et al., 97 Phil. 821); or where a
ground of actual fraud. Ybanez v. Intermediate Appellate defendant has been declared in default (PNB
Court 42 ruled that a certificate of title, issued under an v. Perez, 16 SCRA 270). What is essential only,
administrative proceeding pursuant to a homestead patent, to repeat, is that the facts demonstrating the
lapse of the prescriptive period be otherwise
is as indefeasible as one issued under a judicial
sufficiently and satisfactorily apparent on the
registration proceeding one year from its issuance; record; either in the averments of the plaintiff's
provided, however, that the land covered by it is disposable complaint, or otherwise established by the
public land, as in this case. evidence." 45 (Italics supplied)
Page 153 of 458

Clearly then, the CA did not err in dismissing the present NACHURA, J : p

case. After all, if and when they are able to do so, courts
must endeavor to settle entire controversies before them to When is a litigant estopped by laches from
prevent future litigations. 46 assailing the jurisdiction of a tribunal? This is the
paramount issue raised in this petition for review of the
WHEREFORE, the Petition is hereby DENIED, and the February 28, 2001 Decision 2 of the Court of Appeals
assailed Resolution AFFIRMED. The dismissal of the (CA) in CA-G.R. CR No. 22697. DcCIAa

Complaint in Civil Case No. 3231 is SUSTAINED on the


grounds of lack of jurisdiction, failure to state a cause of Pertinent are the following antecedent facts and
action and prescription. Costs against petitioner. proceedings:

SO ORDERED. AEIDTc
On July 8, 1994, an information 3 for reckless
imprudence resulting in homicide was filed against the
Sandoval-Gutierrez and petitioner before the Regional Trial Court (RTC) of
(Katon v. Palanca, Jr., G.R. No. 151149, [September 7,
|||
Bulacan, Branch 18. 4 The case was docketed as
Criminal Case No. 2235-M-94. 5 Trial on the merits
2004], 481 PHIL 168-188)
ensued and on August 19, 1998, the trial court
convicted the petitioner as charged. 6 In his appeal
before the CA, the petitioner questioned, among others,
for the first time, the trial court's jurisdiction. 7
The appellate court, however, in the challenged
decision, considered the petitioner to have actively
participated in the trial and to have belatedly attacked
the jurisdiction of the RTC; thus, he was already
estopped by laches from asserting the trial court's lack
of jurisdiction. Finding no other ground to reverse the
[G.R. No. 147406. July 14, 2008.] trial court's decision, the CA affirmed the petitioner's
conviction but modified the penalty imposed and the
VENANCIO FIGUEROA y damages awarded. 8
CERVANTES, 1 petitioner, vs. PEOPLE OF Dissatisfied, the petitioner filed the instant petition
THE PHILIPPINES, respondent. for review on certiorari raising the following issues for
our resolution:
a. Does the fact that the petitioner failed to raise
DECISION the issue of jurisdiction during the trial of this
Page 154 of 458

case, which was initiated and filed by the public e. Does the uncontroverted testimony of the
prosecutor before the wrong court, constitute defense witness Leonardo Hernal that the victim
laches in relation to the doctrine laid down unexpectedly crossed the road resulting in him
in Tijam v. Sibonghanoy, notwithstanding the fact getting hit by the bus driven by the petitioner not
that said issue was immediately raised in enough evidence to acquit him of the crime
petitioner's appeal to the Honorable Court of charged? 9
Appeals? Conversely, does the active
participation of the petitioner in the trial of his Applied uniformly is the familiar rule that the
case, which is initiated and filed not by him but jurisdiction of the court to hear and decide a case is
by the public prosecutor, amount to estoppel? conferred by the law in force at the time of the institution
of the action, unless such statute provides for a
b. Does the admission of the petitioner that it is retroactive application thereof. 10 In this case, at the
difficult to immediately stop a bus while it is
time the criminal information for reckless imprudence
running at 40 kilometers per hour for the
purpose of avoiding a person who resulting in homicide with violation of the Automobile
unexpectedly crossed the road, constitute Law (now Land Transportation and Traffic Code) was
enough incriminating evidence to warrant his filed, Section 32 (2) of Batas
conviction for the crime charged? Pambansa (B.P.) Blg. 129 11 had already been
amended by Republic Act No. 7691. 12 The said
c. Is the Honorable Court of Appeals justified in
provision thus reads:
considering the place of accident as falling within
Item 4 of Section 35 (b) of the Land Sec. 32. Jurisdiction of Metropolitan Trial Courts,
Transportation and Traffic Code, and Municipal Trial Courts and Municipal Circuit Trial
subsequently ruling that the speed limit thereto is Courts in Criminal Cases. Except in cases
only 20 kilometers per hour, when no evidence falling within the exclusive original jurisdiction of
whatsoever to that effect was ever presented by Regional Trial Courts and the Sandiganbayan,
the prosecution during the trial of this case? the Metropolitan Trial Courts, Municipal Trial
Courts, and Municipal Circuit Trial Courts shall
d. Is the Honorable Court of Appeals justified in exercise:
convicting the petitioner for homicide through
reckless imprudence (the legally correct xxx xxx xxx
designation is "reckless imprudence resulting to (2) Exclusive original jurisdiction over all
homicide") with violation of the Land offenses punishable with imprisonment not
Transportation and Traffic Code when the exceeding six (6) years irrespective of the
prosecution did not prove this during the trial amount of fine, and regardless of other
and, more importantly, the information filed imposable accessory or other penalties,
against the petitioner does not contain an including the civil liability arising from such
allegation to that effect?
EcHAaS
offenses or predicated thereon, irrespective of
Page 155 of 458

kind, nature, value or amount thereof: Provided, It has been frequently held that a lack of
however, That in offenses involving damage to jurisdiction over the subject-matter is fatal, and
property through criminal negligence, they shall subject to objection at any stage of the
have exclusive original jurisdiction thereof. proceedings, either in the court below or on
appeal (Ency. of Pl. & Pr., vol. 12, p. 189, and
As the imposable penalty for the crime charged large array of cases there cited), and
herein is prision correccional in its medium and indeed, where the subject-matter is not within
maximum periods or imprisonment for 2 years, 4 the jurisdiction, the court may dismiss the
months and 1 day to 6 years, 13 jurisdiction to hear and proceeding ex mero motu. (4 Ill., 133; 190 Ind.,
try the same is conferred on the Municipal Trial Courts 79; Chipman vs. Waterbury, 59 Conn., 496).
(MTCs). Clearly, therefore, the RTC of Bulacan does
Jurisdiction over the subject-matter in a judicial
not have jurisdiction over Criminal Case No. 2235-M-94. proceeding is conferred by the sovereign
While both the appellate court and the Solicitor authority which organizes the court; it is given
General acknowledge this fact, they nevertheless are of only by law and in the manner prescribed by law
the position that the principle of estoppel by laches has and an objection based on the lack of such
already precluded the petitioner from questioning the jurisdiction can not be waived by the parties. .
. . 16
jurisdiction of the RTC the trial went on for 4 years
with the petitioner actively participating therein and Later, in People v. Casiano, 17 the Court
without him ever raising the jurisdictional infirmity. The explained:
petitioner, for his part, counters that the lack of
4. The operation of the principle of estoppel
jurisdiction of a court over the subject matter may be on the question of jurisdiction seemingly
raised at any time even for the first time on appeal. As depends upon whether the lower court
undue delay is further absent herein, the principle of actually had jurisdiction or not. If it
laches will not be applicable.aCTADI had no jurisdiction, but the case was tried
To settle once and for all this problem of and decided upon the theory that
it had jurisdiction, the parties are not barred,
jurisdiction vis--vis estoppel by laches, which
on appeal, from assailing such jurisdiction,
continuously confounds the bench and the bar, we shall for the same "must exist as a matter of
analyze the various Court decisions on the matter. law, and may not be conferred by consent of
As early as 1901, this Court has declared the parties or by estoppel" (5 C.J.S., 861-863).
that unless jurisdiction has been conferred by some However, if the lower court had jurisdiction, and
legislative act, no court or tribunal can act on a matter the case was heard and decided upon a given
submitted to it. 14 We went on to state in U.S. v. De La theory, such, for instance, as that the court
had no jurisdiction, the party who induced it to
Santa 15 that:
adopt such theory will not be permitted, on
Page 156 of 458

appeal, to assume an inconsistent position jurisdiction by the plaintiff-appellee therein, made the
that the lower court had jurisdiction. Here, the following observations:
principle of estoppel applies. The rule that
jurisdiction is conferred by law, and does not It is surprising why it is only now, after the
depend upon the will of the parties, decision has been rendered, that the plaintiff-
has no bearing thereon. Thus, Corpus Juris appellee presents the question of this Court's
Secundum says: DcaSIH
jurisdiction over the case.Republic Act No.
2613 was enacted on August 1, 1959. This case
Where accused has secured a decision was argued on January 29, 1960.
that the indictment is void, or has been Notwithstanding this fact, the jurisdiction of this
granted an instruction based on its Court was never impugned until the adverse
defective character directing the jury to decision of this Court was handed down. The
acquit, he is estopped, when conduct of counsel leads us to believe that they
subsequently indicted, to assert that the must have always been of the belief that
former indictment was valid. In such notwithstanding said enactment of Republic Act
case, there may be a new prosecution 2613 this Court has jurisdiction of the case, such
whether the indictment in the former conduct being born out of a conviction that the
prosecution was good or actual real value of the properties in question
bad. Similarly, where, after the jury was actually exceeds the jurisdictional amount of this
impaneled and sworn, the court on Court (over P200,000). Our minute resolution in
accused's motion quashed the information G.R. No. L-10096, Hyson Tan, et al. vs. Filipinas
on the erroneous assumption that the Compaa de Seguros, et al., of March 23, 1956,
court had no jurisdiction, accused cannot a parallel case, is applicable to the conduct of
successfully plead former jeopardy to a plaintiff-appellee in this case, thus:
DaIACS

new information. . . . (22 C.J.S., sec. 252,


pp. 388-389; italics ours).
. . . that an appellant who files his brief
Where accused procured a prior and submits his case to the Court of
conviction to be set aside on the ground Appeals for decision, without questioning
that the court was without jurisdiction, he the latter's jurisdiction until decision is
is estopped subsequently to assert, in rendered therein, should be considered as
support of a defense of previous jeopardy, having voluntarily waived so much of his
that such court had jurisdiction." (22 claim as would exceed the jurisdiction of
C.J.S. p. 378). 18 said Appellate Court; for the reason that a
contrary rule would encourage the
But in Pindagan Agricultural Co., Inc. v. undesirable practice of appellants
Dans, 19 the Court, in not sustaining the plea of lack of submitting their cases for decision to the
Court of Appeals in expectation of
Page 157 of 458

favorable judgment, but with intent of that same jurisdiction (Dean vs. Dean, 136 Or.
attacking its jurisdiction should the 694, 86 A.L.R. 79). In the case just cited, by way
decision be unfavorable: . . . 20 of explaining the rule, it was further said that the
question whether the court had jurisdiction either
Then came our ruling in Tijam v. of the subject matter of the action or of the
Sibonghanoy 21 that a party may be barred by laches parties was not important in such cases because
from invoking lack of jurisdiction at a late hour for the the party is barred from such conduct not
purpose of annulling everything done in the case with because the judgment or order of the court is
the active participation of said party invoking the plea. valid and conclusive as an adjudication, but for
We expounded, thus: the reason that such a practice cannot be
tolerated obviously for reasons of public
A party may be estopped or barred from raising
policy.
a question in different ways and for different
reasons. Thus, we speak of estoppel in pais, of Furthermore, it has also been held that after
estoppel by deed or by record, and of estoppel voluntarily submitting a cause and encountering
by laches. an adverse decision on the merits, it is too late
for the loser to question the jurisdiction or power
Laches, in a general sense, is failure or neglect,
of the court (Pease vs. Rathbun-Jones etc., 243
for an unreasonable and unexplained length of
U.S. 273, 61 L. Ed. 715, 37 S.Ct. 283; St. Louis
time, to do that which, by exercising due
etc. vs. McBride, 141 U.S. 127, 35 L. Ed. 659).
diligence, could or should have been done
And inLittleton vs. Burgess, 16 Wyo. 58, the
earlier; it is negligence or omission to assert a
Court said that it is not right for a party who has
right within a reasonable time, warranting a
affirmed and invoked the jurisdiction of a court in
presumption that the party entitled to assert it
a particular matter to secure an affirmative relief,
either has abandoned it or declined to assert it.
to afterwards deny that same jurisdiction to
The doctrine of laches or of "stale demands" is escape a penalty. DCScaT

based upon grounds of public policy which


Upon this same principle is what We said in the
requires, for the peace of society, the
three cases mentioned in the resolution of the
discouragement of stale claims and, unlike the
Court of Appeals of May 20, 1963 (supra) to
statute of limitations, is not a mere question of
the effect that we frown upon the "undesirable
time but is principally a question of the inequity
practice" of a party submitting his case for
or unfairness of permitting a right or claim to be
decision and then accepting the judgment, only if
enforced or asserted.
favorable, and attacking it for lack of jurisdiction,
It has been held that a party cannot invoke the when adverse as well as in Pindagan etc. vs.
jurisdiction of a court to secure affirmative relief Dans et al., G.R. L-14591, September 26,
against his opponent and, after obtaining or 1962; Montelibano et al. vs. Bacolod-Murcia
failing to obtain such relief, repudiate or question Milling Co., Inc., G.R. L-15092;Young Men Labor
Page 158 of 458

Union etc. vs. The Court of Industrial Relations over the subject-matter of the action is a matter
et al., G.R. L-20307, Feb. 26, 1965, and Mejia of law and may not be conferred by consent or
vs. Lucas, 100 Phil. p. 277. agreement of the parties. The lack of jurisdiction
of a court may be raised at any stage of the
The facts of this case show that from the time the proceedings, even on appeal. This doctrine has
Surety became a quasi-party on July 31, 1948, it could been qualified by recent pronouncements which
have raised the question of the lack of jurisdiction of the stemmed principally from the ruling in the cited
Court of First Instance of Cebu to take cognizance of case of Sibonghanoy. It is to be regretted,
the present action by reason of the sum of money however, that the holding in said case had been
involved which, according to the law then in force, was applied to situations which were obviously not
within the original exclusive jurisdiction of inferior courts. contemplated therein. The exceptional
It failed to do so. Instead, at several stages of the circumstance involved in Sibonghanoy which
proceedings in the court a quo, as well as in the Court justified the departure from the accepted concept
of Appeals, it invoked the jurisdiction of said courts to of non-waivability of objection to jurisdiction has
been ignored and, instead a blanket doctrine had
obtain affirmative relief and submitted its case for a final
been repeatedly upheld that rendered the
adjudication on the merits. It was only after an adverse supposed ruling in Sibonghanoy not as the
decision was rendered by the Court of Appeals that it exception, but rather the general rule, virtually
finally woke up to raise the question of jurisdiction. Were overthrowing altogether the time-honored
we to sanction such conduct on its part, We would in principle that the issue of jurisdiction is not lost
effect be declaring as useless all the proceedings had in by waiver or by estoppel. DIcTEC

the present case since it was commenced on July 19,


In Sibonghanoy, the defense of lack of
1948 and compel the judgment creditors to go up their
jurisdiction of the court that rendered the
Calvary once more. The inequity and unfairness of this questioned ruling was held to be barred by
is not only patent but revolting. 22 aTcIAS
estoppel by laches. It was ruled that the lack of
For quite a time since we made this jurisdiction having been raised for the first time in
pronouncement in Sibonghanoy, courts and tribunals, in a motion to dismiss filed almost fifteen (15) years
resolving issues that involve the belated invocation of after the questioned ruling had been rendered,
lack of jurisdiction, have applied the principle of such a plea may no longer be raised for being
barred by laches. As defined in said case, laches
estoppel by laches. Thus, in Calimlim v. Ramirez, 23 we
is "failure or neglect, for an unreasonable and
pointed out that Sibonghanoy was developing into a unexplained length of time, to do that which, by
general rule rather than the exception: exercising due diligence, could or should have
A rule that had been settled by unquestioned been done earlier; it is negligence or omission to
acceptance and upheld in decisions so assert a right within a reasonable time,
numerous to cite is that the jurisdiction of a court warranting a presumption that the party entitled
Page 159 of 458

to assert has abandoned it or declined to assert adverse decision. As this Court held
it. 24 in Pantranco North Express, Inc. vs. Court
of Appeals (G.R. No. 105180, July 5,
In Calimlim, despite the fact that the one who 1993, 224 SCRA 477, 491), participation
benefited from the plea of lack of jurisdiction was the in all stages of the case before the trial
one who invoked the court's jurisdiction, and who later court, that included invoking its authority
obtained an adverse judgment therein, we refused to in asking for affirmative relief, effectively
apply the ruling in Sibonghanoy. The Court accorded barred petitioner by estoppel from
supremacy to the time-honored principle that the challenging the court's jurisdiction.
issue of jurisdiction is not lost by waiver or by Notably, from the time it filed its answer to
estoppel. the second amended complaint on April
16, 1985, petitioner did not question the
Yet, in subsequent cases decided lower court's jurisdiction. It was only on
after Calimlim, which by sheer volume are too plentiful December 29, 1989 when it filed its
to mention, the Sibonghanoy doctrine, as foretold motion for reconsideration of the lower
in Calimlim,became the rule rather than the exception. court's decision that petitioner raised the
As such, in Soliven v. Fastforms Philippines, Inc., 25 the question of the lower court's lack of
Court ruled: jurisdiction. Petitioner thus foreclosed its
right to raise the issue of jurisdiction by its
While it is true that jurisdiction may be raised at own inaction. (italics ours) cAaDCE

any time, "this rule presupposes that estoppel


has not supervened." In the instant case, Similarly, in the subsequent case of Sta. Lucia
respondent actively participated in all stages of Realty and Development, Inc. vs. Cabrigas, we
the proceedings before the trial court and ruled:
invoked its authority by asking for an affirmative
In the case at bar, it was found by the trial
relief. Clearly, respondent is estopped from
court in its 30 September 1996 decision in
challenging the trial court's jurisdiction,
LCR Case No. Q-60161(93) that private
especially when an adverse judgment has been
respondents (who filed the petition for
rendered. In PNOC Shipping and Transport
reconstitution of titles) failed to comply
Corporation vs. Court of Appeals,we held:
with both sections 12 and 13 of RA
Moreover, we note that petitioner did not 26 and therefore, it had no jurisdiction
question at all the jurisdiction of the lower over the subject matter of the case.
court . . . in its answers to both the However, private respondents never
amended complaint and the second questioned the trial court's jurisdiction
amended complaint. It did so only in its over its petition for reconstitution
motion for reconsideration of the decision throughout the duration of LCR Case No.
of the lower court after it had received an Q-60161(93). On the contrary, private
Page 160 of 458

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

SCRA 517 [1998], citing Ilocos Sur


Page 161 of 458

Laches is defined as the "failure or neglect for an which were obviously not contemplated
unreasonable and unexplained length of time, to therein. The exceptional circumstance
do that which, by exercising due diligence, could involved in Sibonghanoy which justified
or should have been done earlier; it is the departure from the accepted concept
negligence or omission to assert a right within a of non-waivability of objection to
reasonable time, warranting a presumption that jurisdiction has been ignored and, instead
the party entitled to assert it either has a blanket doctrine had been repeatedly
abandoned it or declined to assert it." upheld that rendered the supposed ruling
in Sibonghanoy not as the exception, but
The ruling in Sibonghanoy on the matter of
rather the general rule, virtually
jurisdiction is, however, the exception rather than
overthrowing altogether the time-honored
the rule. Estoppel by laches may be invoked to
principle that the issue of jurisdiction is not
bar the issue of lack of jurisdiction only in cases
lost by waiver or by estoppel.
in which the factual milieu is analogous to that in
the cited case. In such controversies, laches Indeed, the general rule remains: a court's lack
should be clearly present; that is, lack of of jurisdiction may be raised at any stage of the
jurisdiction must have been raised so belatedly proceedings, even on appeal. The reason is that
as to warrant the presumption that the party jurisdiction is conferred by law, and lack of it
entitled to assert it had abandoned or declined to affects the very authority of the court to take
assert it. ThatSibonghanoy applies only to cognizance of and to render judgment on the
exceptional circumstances is clarified in Calimlim action. Moreover, jurisdiction is determined by
v. Ramirez, which we quote: the averments of the complaint, not by the
defenses contained in the answer. 30 HScDIC
A rule that had been settled by
unquestioned acceptance and upheld in Also, in Mangaliag v. Catubig-Pastoral, 31 even if
decisions so numerous to cite is that the the pleader of lack of jurisdiction actively took part in the
jurisdiction of a court over the subject- trial proceedings by presenting a witness to seek
matter of the action is a matter of law and exoneration, the Court, reiterating the doctrine
may not be conferred by consent or
in Calimlim, said:
agreement of the parties. The lack of
jurisdiction of a court may be raised at any Private respondent argues that the defense of
stage of the proceedings, even on lack of jurisdiction may be waived by estoppel
appeal. This doctrine has been qualified through active participation in the trial. Such,
by recent pronouncements which however, is not the general rule but an
stemmed principally from the ruling in the exception, best characterized by the peculiar
cited case ofSibonghanoy. It is to be circumstances in Tijam vs. Sibonghanoy.
regretted, however, that the holding in In Sibonghanoy, the party invoking lack of
said case had been applied to situations jurisdiction did so only after fifteen years and at a
Page 162 of 458

stage when the proceedings had already been presumption that the party entitled to assert it
elevated to the CA. Sibonghanoy is an had abandoned or declined to assert it.
exceptional case because of the presence of
In Sibonghanoy, the defense of lack of
laches, which was defined therein as failure or
jurisdiction was raised for the first time in a
neglect for an unreasonable and unexplained
motion to dismiss filed by the Surety almost 15
length of time to do that which, by exercising due
years after the questioned ruling had been
diligence, could or should have been done
rendered. At several stages of the proceedings,
earlier; it is the negligence or omission to assert
in the court a quo as well as in the Court of
a right within a reasonable time, warranting a
Appeals, the Surety invoked the jurisdiction of
presumption that the party entitled to assert has
the said courts to obtain affirmative relief and
abandoned it or declined to assert it. 32
submitted its case for final adjudication on the
And in the more recent Regalado v. Go, 33 the merits. It was only when the adverse decision
Court again emphasized that laches should be clearly was rendered by the Court of Appeals that it
present for the Sibonghanoy doctrine to be applicable, finally woke up to raise the question of
thus:TAIaHE
jurisdiction.

Laches is defined as the "failure or neglect for an Clearly, the factual settings attendant
unreasonable and unexplained length of time, to in Sibonghanoy are not present in the case at
do that which, by exercising due diligence, could bar. Petitioner Atty. Regalado, after the receipt of
or should have been done earlier, it is the Court of Appeals resolution finding her guilty
negligence or omission to assert a right within a of contempt, promptly filed a Motion for
reasonable length of time, warranting a Reconsideration assailing the said court's
presumption that the party entitled to assert it jurisdiction based on procedural infirmity in
either has abandoned it or declined to assert it." initiating the action. Her compliance with the
appellate court's directive to show cause why
The ruling in People v. Regalario that was based she should not be cited for contempt and filing a
on the landmark doctrine enunciated in Tijam v. single piece of pleading to that effect could not
Sibonghanoy on the matter of jurisdiction be considered as an active participation in the
by estoppel is the exception rather than the judicial proceedings so as to take the case within
rule. Estoppel by laches may be invoked to bar the milieu of Sibonghanoy. Rather, it is the
the issue of lack of jurisdiction only in cases in natural fear to disobey the mandate of the court
which the factual milieu is analogous to that in that could lead to dire consequences that
the cited case. In such impelled her to comply. 34 cEaTHD

controversies, laches should have been clearly


present; that is, lack of jurisdiction must have The Court, thus, wavered on when to apply the
been raised so belatedly as to warrant the exceptional circumstance in Sibonghanoy and on when
to apply the general rule enunciated as early as in De
Page 163 of 458

La Santa and expounded at length in Calimlim. The and revolting inequity and unfairness of having the
general rule should, however, be, as it has always been, judgment creditors go up their Calvary once more after
that the issue of jurisdiction may be raised at any stage more or less 15 years. 37 The same, however, does not
of the proceedings, even on appeal, and is not lost by obtain in the instant case.
waiver or by estoppel. Estoppel by laches, to bar a We note at this point that estoppel, being in the
litigant from asserting the court's absence or lack of nature of a forfeiture, is not favored by law. It is to be
jurisdiction, only supervenes in exceptional cases applied rarely only from necessity, and only in
similar to the factual milieu of Tijam v. Sibonghanoy. extraordinary circumstances. The doctrine must be
Indeed, the fact that a person attempts to invoke applied with great care and the equity must be strong in
unauthorized jurisdiction of a court does not estop him its favor. 38 When misapplied, the doctrine of estoppel
from thereafter challenging its jurisdiction over the may be a most effective weapon for the
subject matter, since such jurisdiction must arise by law accomplishment of injustice. 39 Moreover, a judgment
and not by mere consent of the parties. This is rendered without jurisdiction over the subject matter is
especially true where the person seeking to invoke void. 40 Hence, the Revised Rules of Court provides for
unauthorized jurisdiction of the court does not thereby remedies in attacking judgments rendered by courts or
secure any advantage or the adverse party does not tribunals that have no jurisdiction over the concerned
suffer any harm. 35 ITScHa
cases. No laches will even attach when the judgment is
Applying the said doctrine to the instant case, the null and void for want of jurisdiction. 41 As we have
petitioner is in no way estopped by laches in assailing stated in Heirs of Julian Dela Cruz and Leonora Talaro
the jurisdiction of the RTC, considering that he raised v. Heirs of Alberto Cruz, 42
the lack thereof in his appeal before the appellate court. It is axiomatic that the jurisdiction of a tribunal,
At that time, no considerable period had yet elapsed for including a quasi-judicial officer or government
laches to attach. True, delay alone, though agency, over the nature and subject matter of a
unreasonable, will not sustain the defense of "estoppel petition or complaint is determined by the
by laches" unless it further appears that the party, material allegations therein and the character of
knowing his rights, has not sought to enforce them until the relief prayed for, irrespective of whether the
the condition of the party pleading laches has in good petitioner or complainant is entitled to any or all
faith become so changed that he cannot be restored to such reliefs. Jurisdiction over the nature and
his former state, if the rights be then enforced, due to subject matter of an action is conferred by the
loss of evidence, change of title, intervention of equities, Constitution and the law, and not by the consent
or waiver of the parties where the court
and other causes. 36 In applying the principle of
otherwise would have no jurisdiction over the
estoppel by laches in the exceptional case nature or subject matter of the action. Nor can it
of Sibonghanoy,the Court therein considered the patent be acquired through, or waived by, any act or
Page 164 of 458

omission of the parties. Moreover, estoppel does [G.R. No. 147406. July 14, 2008.]
not apply to confer jurisdiction to a tribunal that
has none over the cause of action. . . .
VENANCIO FIGUEROA y
Indeed, the jurisdiction of the court or tribunal is CERVANTES, 1 petitioner, vs. PEOPLE OF
not affected by the defenses or theories set up THE PHILIPPINES, respondent.
by the defendant or respondent in his answer or
motion to dismiss. Jurisdiction should be
determined by considering not only the status or
DECISION
the relationship of the parties but also the nature
of the issues or questions that is the subject of
the controversy. . . . The proceedings before a
court or tribunal without jurisdiction, including its NACHURA, J : p

decision, are null and void, hence, susceptible to


direct and collateral attacks. 43cIADaC
When is a litigant estopped by laches from
assailing the jurisdiction of a tribunal? This is the
With the above considerations, we find it paramount issue raised in this petition for review of the
unnecessary to resolve the other issues raised in the February 28, 2001 Decision 2 of the Court of Appeals
petition. (CA) in CA-G.R. CR No. 22697. DcCIAa

WHEREFORE, premises considered, the petition Pertinent are the following antecedent facts and
for review on certiorari is GRANTED. Criminal Case No. proceedings:
2235-M-94 is hereby DISMISSED without prejudice.
On July 8, 1994, an information 3 for reckless
SO ORDERED. imprudence resulting in homicide was filed against the
(Figueroa y Cervantes v. People, G.R. No. 147406, [July
||| petitioner before the Regional Trial Court (RTC) of
14, 2008], 580 PHIL 58-78) Bulacan, Branch 18. 4 The case was docketed as
Criminal Case No. 2235-M-94. 5 Trial on the merits
ensued and on August 19, 1998, the trial court
convicted the petitioner as charged. 6 In his appeal
before the CA, the petitioner questioned, among others,
for the first time, the trial court's jurisdiction. 7
The appellate court, however, in the challenged
decision, considered the petitioner to have actively
participated in the trial and to have belatedly attacked
the jurisdiction of the RTC; thus, he was already
Page 165 of 458

estopped by laches from asserting the trial court's lack whatsoever to that effect was ever presented by
of jurisdiction. Finding no other ground to reverse the the prosecution during the trial of this case?
trial court's decision, the CA affirmed the petitioner's d. Is the Honorable Court of Appeals justified in
conviction but modified the penalty imposed and the convicting the petitioner for homicide through
damages awarded. 8 reckless imprudence (the legally correct
Dissatisfied, the petitioner filed the instant petition designation is "reckless imprudence resulting to
homicide") with violation of the Land
for review on certiorari raising the following issues for
Transportation and Traffic Code when the
our resolution: prosecution did not prove this during the trial
a. Does the fact that the petitioner failed to raise and, more importantly, the information filed
the issue of jurisdiction during the trial of this against the petitioner does not contain an
case, which was initiated and filed by the public allegation to that effect?EcHAaS

prosecutor before the wrong court, constitute


e. Does the uncontroverted testimony of the
laches in relation to the doctrine laid down
defense witness Leonardo Hernal that the victim
in Tijam v. Sibonghanoy, notwithstanding the fact
unexpectedly crossed the road resulting in him
that said issue was immediately raised in
getting hit by the bus driven by the petitioner not
petitioner's appeal to the Honorable Court of
enough evidence to acquit him of the crime
Appeals? Conversely, does the active
charged? 9
participation of the petitioner in the trial of his
case, which is initiated and filed not by him but Applied uniformly is the familiar rule that the
by the public prosecutor, amount to estoppel? jurisdiction of the court to hear and decide a case is
b. Does the admission of the petitioner that it is conferred by the law in force at the time of the institution
difficult to immediately stop a bus while it is of the action, unless such statute provides for a
running at 40 kilometers per hour for the retroactive application thereof. 10 In this case, at the
purpose of avoiding a person who time the criminal information for reckless imprudence
unexpectedly crossed the road, constitute resulting in homicide with violation of the Automobile
enough incriminating evidence to warrant his Law (now Land Transportation and Traffic Code) was
conviction for the crime charged? filed, Section 32 (2) of Batas
c. Is the Honorable Court of Appeals justified in Pambansa (B.P.) Blg. 129 11 had already been
considering the place of accident as falling within amended by Republic Act No. 7691. 12 The said
Item 4 of Section 35 (b) of the Land provision thus reads:
Transportation and Traffic Code, and Sec. 32. Jurisdiction of Metropolitan Trial Courts,
subsequently ruling that the speed limit thereto is Municipal Trial Courts and Municipal Circuit Trial
only 20 kilometers per hour, when no evidence Courts in Criminal Cases. Except in cases
falling within the exclusive original jurisdiction of
Page 166 of 458

Regional Trial Courts and the Sandiganbayan, undue delay is further absent herein, the principle of
the Metropolitan Trial Courts, Municipal Trial laches will not be applicable. aCTADI

Courts, and Municipal Circuit Trial Courts shall


exercise: To settle once and for all this problem of
jurisdiction vis--vis estoppel by laches, which
xxx xxx xxx continuously confounds the bench and the bar, we shall
(2) Exclusive original jurisdiction over all analyze the various Court decisions on the matter.
offenses punishable with imprisonment not As early as 1901, this Court has declared
exceeding six (6) years irrespective of the
that unless jurisdiction has been conferred by some
amount of fine, and regardless of other
legislative act, no court or tribunal can act on a matter
imposable accessory or other penalties,
including the civil liability arising from such submitted to it. 14 We went on to state in U.S. v. De La
offenses or predicated thereon, irrespective of Santa 15 that:
kind, nature, value or amount thereof: Provided, It has been frequently held that a lack of
however, That in offenses involving damage to jurisdiction over the subject-matter is fatal, and
property through criminal negligence, they shall subject to objection at any stage of the
have exclusive original jurisdiction thereof. proceedings, either in the court below or on
appeal (Ency. of Pl. & Pr., vol. 12, p. 189, and
As the imposable penalty for the crime charged
large array of cases there cited), and
herein is prision correccional in its medium and indeed, where the subject-matter is not within
maximum periods or imprisonment for 2 years, 4 the jurisdiction, the court may dismiss the
months and 1 day to 6 years, 13 jurisdiction to hear and proceeding ex mero motu. (4 Ill., 133; 190 Ind.,
try the same is conferred on the Municipal Trial Courts 79; Chipman vs. Waterbury, 59 Conn., 496).
(MTCs). Clearly, therefore, the RTC of Bulacan does
Jurisdiction over the subject-matter in a judicial
not have jurisdiction over Criminal Case No. 2235-M-94.
proceeding is conferred by the sovereign
While both the appellate court and the Solicitor authority which organizes the court; it is given
General acknowledge this fact, they nevertheless are of only by law and in the manner prescribed by law
the position that the principle of estoppel by laches has and an objection based on the lack of such
already precluded the petitioner from questioning the jurisdiction can not be waived by the parties. .
jurisdiction of the RTC the trial went on for 4 years . . 16
with the petitioner actively participating therein and Later, in People v. Casiano, 17 the Court
without him ever raising the jurisdictional infirmity. The explained:
petitioner, for his part, counters that the lack of
4. The operation of the principle of estoppel
jurisdiction of a court over the subject matter may be
on the question of jurisdiction seemingly
raised at any time even for the first time on appeal. As depends upon whether the lower court
Page 167 of 458

actually had jurisdiction or not. If it new information. . . . (22 C.J.S., sec. 252,
had no jurisdiction, but the case was tried pp. 388-389; italics ours).
and decided upon the theory that
Where accused procured a prior
it had jurisdiction, the parties are not barred,
conviction to be set aside on the ground
on appeal, from assailing such jurisdiction,
that the court was without jurisdiction, he
for the same "must exist as a matter of
is estopped subsequently to assert, in
law, and may not be conferred by consent of
support of a defense of previous jeopardy,
the parties or by estoppel" (5 C.J.S., 861-863).
that such court had jurisdiction." (22
However, if the lower court had jurisdiction, and
C.J.S. p. 378). 18
the case was heard and decided upon a given
theory, such, for instance, as that the court But in Pindagan Agricultural Co., Inc. v.
had no jurisdiction, the party who induced it to Dans, 19 the Court, in not sustaining the plea of lack of
adopt such theory will not be permitted, on jurisdiction by the plaintiff-appellee therein, made the
appeal, to assume an inconsistent position following observations:
that the lower court had jurisdiction. Here, the
principle of estoppel applies. The rule that It is surprising why it is only now, after the
jurisdiction is conferred by law, and does not decision has been rendered, that the plaintiff-
depend upon the will of the parties, appellee presents the question of this Court's
has no bearing thereon. Thus, Corpus Juris jurisdiction over the case.Republic Act No.
Secundum says: DcaSIH
2613 was enacted on August 1, 1959. This case
was argued on January 29, 1960.
Where accused has secured a decision Notwithstanding this fact, the jurisdiction of this
that the indictment is void, or has been Court was never impugned until the adverse
granted an instruction based on its decision of this Court was handed down. The
defective character directing the jury to conduct of counsel leads us to believe that they
acquit, he is estopped, when must have always been of the belief that
subsequently indicted, to assert that the notwithstanding said enactment of Republic Act
former indictment was valid. In such 2613 this Court has jurisdiction of the case, such
case, there may be a new prosecution conduct being born out of a conviction that the
whether the indictment in the former actual real value of the properties in question
prosecution was good or actually exceeds the jurisdictional amount of this
bad. Similarly, where, after the jury was Court (over P200,000). Our minute resolution in
impaneled and sworn, the court on G.R. No. L-10096, Hyson Tan, et al. vs. Filipinas
accused's motion quashed the information Compaa de Seguros, et al., of March 23, 1956,
on the erroneous assumption that the a parallel case, is applicable to the conduct of
court had no jurisdiction, accused cannot plaintiff-appellee in this case, thus:
DaIACS

successfully plead former jeopardy to a


Page 168 of 458

. . . that an appellant who files his brief The doctrine of laches or of "stale demands" is
and submits his case to the Court of based upon grounds of public policy which
Appeals for decision, without questioning requires, for the peace of society, the
the latter's jurisdiction until decision is discouragement of stale claims and, unlike the
rendered therein, should be considered as statute of limitations, is not a mere question of
having voluntarily waived so much of his time but is principally a question of the inequity
claim as would exceed the jurisdiction of or unfairness of permitting a right or claim to be
said Appellate Court; for the reason that a enforced or asserted.
contrary rule would encourage the
It has been held that a party cannot invoke the
undesirable practice of appellants
jurisdiction of a court to secure affirmative relief
submitting their cases for decision to the
against his opponent and, after obtaining or
Court of Appeals in expectation of
failing to obtain such relief, repudiate or question
favorable judgment, but with intent of
that same jurisdiction (Dean vs. Dean, 136 Or.
attacking its jurisdiction should the
694, 86 A.L.R. 79). In the case just cited, by way
decision be unfavorable: . . . 20
of explaining the rule, it was further said that the
Then came our ruling in Tijam v. question whether the court had jurisdiction either
Sibonghanoy 21 that a party may be barred by laches of the subject matter of the action or of the
from invoking lack of jurisdiction at a late hour for the parties was not important in such cases because
purpose of annulling everything done in the case with the party is barred from such conduct not
the active participation of said party invoking the plea. because the judgment or order of the court is
valid and conclusive as an adjudication, but for
We expounded, thus:
the reason that such a practice cannot be
A party may be estopped or barred from raising tolerated obviously for reasons of public
a question in different ways and for different policy.
reasons. Thus, we speak of estoppel in pais, of
estoppel by deed or by record, and of estoppel Furthermore, it has also been held that after
by laches. voluntarily submitting a cause and encountering
an adverse decision on the merits, it is too late
Laches, in a general sense, is failure or neglect, for the loser to question the jurisdiction or power
for an unreasonable and unexplained length of of the court (Pease vs. Rathbun-Jones etc., 243
time, to do that which, by exercising due U.S. 273, 61 L. Ed. 715, 37 S.Ct. 283; St. Louis
diligence, could or should have been done etc. vs. McBride, 141 U.S. 127, 35 L. Ed. 659).
earlier; it is negligence or omission to assert a And inLittleton vs. Burgess, 16 Wyo. 58, the
right within a reasonable time, warranting a Court said that it is not right for a party who has
presumption that the party entitled to assert it affirmed and invoked the jurisdiction of a court in
either has abandoned it or declined to assert it. a particular matter to secure an affirmative relief,
Page 169 of 458

to afterwards deny that same jurisdiction to Calvary once more. The inequity and unfairness of this
escape a penalty. DCScaT
is not only patent but revolting. 22 aTcIAS

Upon this same principle is what We said in the For quite a time since we made this
three cases mentioned in the resolution of the pronouncement in Sibonghanoy, courts and tribunals, in
Court of Appeals of May 20, 1963 (supra) to resolving issues that involve the belated invocation of
the effect that we frown upon the "undesirable lack of jurisdiction, have applied the principle of
practice" of a party submitting his case for
estoppel by laches. Thus, in Calimlim v. Ramirez, 23 we
decision and then accepting the judgment, only if
favorable, and attacking it for lack of jurisdiction,
pointed out that Sibonghanoy was developing into a
when adverse as well as in Pindagan etc. vs. general rule rather than the exception:
Dans et al., G.R. L-14591, September 26, A rule that had been settled by unquestioned
1962; Montelibano et al. vs. Bacolod-Murcia acceptance and upheld in decisions so
Milling Co., Inc., G.R. L-15092;Young Men Labor numerous to cite is that the jurisdiction of a court
Union etc. vs. The Court of Industrial Relations over the subject-matter of the action is a matter
et al., G.R. L-20307, Feb. 26, 1965, and Mejia of law and may not be conferred by consent or
vs. Lucas, 100 Phil. p. 277. agreement of the parties. The lack of jurisdiction
of a court may be raised at any stage of the
The facts of this case show that from the time the proceedings, even on appeal. This doctrine has
Surety became a quasi-party on July 31, 1948, it could been qualified by recent pronouncements which
have raised the question of the lack of jurisdiction of the stemmed principally from the ruling in the cited
Court of First Instance of Cebu to take cognizance of case of Sibonghanoy. It is to be regretted,
the present action by reason of the sum of money however, that the holding in said case had been
involved which, according to the law then in force, was applied to situations which were obviously not
within the original exclusive jurisdiction of inferior courts. contemplated therein. The exceptional
It failed to do so. Instead, at several stages of the circumstance involved in Sibonghanoy which
proceedings in the court a quo, as well as in the Court justified the departure from the accepted concept
of Appeals, it invoked the jurisdiction of said courts to of non-waivability of objection to jurisdiction has
obtain affirmative relief and submitted its case for a final been ignored and, instead a blanket doctrine had
been repeatedly upheld that rendered the
adjudication on the merits. It was only after an adverse
supposed ruling in Sibonghanoy not as the
decision was rendered by the Court of Appeals that it exception, but rather the general rule, virtually
finally woke up to raise the question of jurisdiction. Were overthrowing altogether the time-honored
we to sanction such conduct on its part, We would in principle that the issue of jurisdiction is not lost
effect be declaring as useless all the proceedings had in by waiver or by estoppel. DIcTEC

the present case since it was commenced on July 19,


1948 and compel the judgment creditors to go up their In Sibonghanoy, the defense of lack of
jurisdiction of the court that rendered the
Page 170 of 458

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

has not supervened." In the instant case,


Similarly, in the subsequent case of Sta. Lucia
respondent actively participated in all stages of
Realty and Development, Inc. vs. Cabrigas, we
the proceedings before the trial court and
ruled:
Page 171 of 458

In the case at bar, it was found by the trial repudiate or question that same
court in its 30 September 1996 decision in jurisdiction (Asset Privatization Trust vs.
LCR Case No. Q-60161(93) that private Court of Appeals, 300 SCRA 579
respondents (who filed the petition for [1998]; Province of Bulacan vs. Court of
reconstitution of titles) failed to comply Appeals, 299 SCRA 442 [1998]). The
with both sections 12 and 13 of RA Court frowns upon the undesirable
26 and therefore, it had no jurisdiction practice of a party participating in the
over the subject matter of the case. proceedings and submitting his case for
However, private respondents never decision and then accepting judgment,
questioned the trial court's jurisdiction only if favorable, and attacking it for lack
over its petition for reconstitution of jurisdiction, when adverse (Producers
throughout the duration of LCR Case No. Bank of the Philippines vs. NLRC, 298
Q-60161(93). On the contrary, private SCRA 517 [1998], citing Ilocos Sur
respondents actively participated in the Electric Cooperative, Inc. vs. NLRC, 241
reconstitution proceedings by filing SCRA 36 [1995]). (italics ours) 26
pleadings and presenting its evidence.
They invoked the trial court's jurisdiction Noteworthy, however, is that, in the 2005 case
in order to obtain affirmative relief the of Metromedia Times Corporation v. Pastorin, 27 where
reconstitution of their titles. Private the issue of lack of jurisdiction was raised only in the
respondents have thus foreclosed their National Labor Relations Commission (NLRC) on
right to raise the issue of jurisdiction by appeal, we stated, after examining the doctrines of
their own actions. cAHIST jurisdiction vis--vis estoppel, that the ruling
The Court has constantly upheld the in Sibonghanoystands as an exception, rather than
doctrine that while jurisdiction may be the general rule. Metromedia, thus, was not estopped
assailed at any stage, a litigant's from assailing the jurisdiction of the labor arbiter before
participation in all stages of the case the NLRC on appeal. 28
before the trial court, including the Later, in Francel Realty Corporation v.
invocation of its authority in asking for Sycip, 29 the Court clarified that:
affirmative relief, bars such party from
challenging the court's jurisdiction (PNOC Petitioner argues that the CA's affirmation of the
Shipping and Transport Corporation vs. trial court's dismissal of its case was erroneous,
Court of Appeals, 297 SCRA 402 considering that a full-blown trial had already
[1998]). A party cannot invoke the been conducted. In effect, it contends that lack of
jurisdiction of a court to secure affirmative jurisdiction could no longer be used as a ground
relief against his opponent and after for dismissal after trial had ensued and ended.
obtaining or failing to obtain such relief,
Page 172 of 458

The above argument is anchored on estoppel by A rule that had been settled by
laches, which has been used quite successfully unquestioned acceptance and upheld in
in a number of cases to thwart dismissals based decisions so numerous to cite is that the
on lack of jurisdiction.Tijam v. Sibonghanoy, in jurisdiction of a court over the subject-
which this doctrine was espoused, held that a matter of the action is a matter of law and
party may be barred from questioning a court's may not be conferred by consent or
jurisdiction after being invoked to secure agreement of the parties. The lack of
affirmative relief against its opponent. In fine, jurisdiction of a court may be raised at any
laches prevents the issue of lack of jurisdiction stage of the proceedings, even on
from being raised for the first time on appeal by a appeal. This doctrine has been qualified
litigant whose purpose is to annul everything by recent pronouncements which
done in a trial in which it has actively stemmed principally from the ruling in the
participated.TcEaAS cited case ofSibonghanoy. It is to be
regretted, however, that the holding in
Laches is defined as the "failure or neglect for an
said case had been applied to situations
unreasonable and unexplained length of time, to
which were obviously not contemplated
do that which, by exercising due diligence, could
therein. The exceptional circumstance
or should have been done earlier; it is
involved in Sibonghanoy which justified
negligence or omission to assert a right within a
the departure from the accepted concept
reasonable time, warranting a presumption that
of non-waivability of objection to
the party entitled to assert it either has
jurisdiction has been ignored and, instead
abandoned it or declined to assert it."
a blanket doctrine had been repeatedly
The ruling in Sibonghanoy on the matter of upheld that rendered the supposed ruling
jurisdiction is, however, the exception rather than in Sibonghanoy not as the exception, but
the rule. Estoppel by laches may be invoked to rather the general rule, virtually
bar the issue of lack of jurisdiction only in cases overthrowing altogether the time-honored
in which the factual milieu is analogous to that in principle that the issue of jurisdiction is not
the cited case. In such controversies, laches lost by waiver or by estoppel.
should be clearly present; that is, lack of
Indeed, the general rule remains: a court's lack
jurisdiction must have been raised so belatedly
of jurisdiction may be raised at any stage of the
as to warrant the presumption that the party
proceedings, even on appeal. The reason is that
entitled to assert it had abandoned or declined to
jurisdiction is conferred by law, and lack of it
assert it. ThatSibonghanoy applies only to
affects the very authority of the court to take
exceptional circumstances is clarified in Calimlim
cognizance of and to render judgment on the
v. Ramirez, which we quote:
action. Moreover, jurisdiction is determined by
Page 173 of 458

the averments of the complaint, not by the negligence or omission to assert a right within a
defenses contained in the answer. 30 HScDIC reasonable length of time, warranting a
presumption that the party entitled to assert it
Also, in Mangaliag v. Catubig-Pastoral, 31 even if either has abandoned it or declined to assert it."
the pleader of lack of jurisdiction actively took part in the
trial proceedings by presenting a witness to seek The ruling in People v. Regalario that was based
exoneration, the Court, reiterating the doctrine on the landmark doctrine enunciated in Tijam v.
Sibonghanoy on the matter of jurisdiction
in Calimlim, said:
by estoppel is the exception rather than the
Private respondent argues that the defense of rule. Estoppel by laches may be invoked to bar
lack of jurisdiction may be waived by estoppel the issue of lack of jurisdiction only in cases in
through active participation in the trial. Such, which the factual milieu is analogous to that in
however, is not the general rule but an the cited case. In such
exception, best characterized by the peculiar controversies, laches should have been clearly
circumstances in Tijam vs. Sibonghanoy. present; that is, lack of jurisdiction must have
In Sibonghanoy, the party invoking lack of been raised so belatedly as to warrant the
jurisdiction did so only after fifteen years and at a presumption that the party entitled to assert it
stage when the proceedings had already been had abandoned or declined to assert it.
elevated to the CA. Sibonghanoy is an
exceptional case because of the presence of In Sibonghanoy, the defense of lack of
laches, which was defined therein as failure or jurisdiction was raised for the first time in a
neglect for an unreasonable and unexplained motion to dismiss filed by the Surety almost 15
length of time to do that which, by exercising due years after the questioned ruling had been
diligence, could or should have been done rendered. At several stages of the proceedings,
earlier; it is the negligence or omission to assert in the court a quo as well as in the Court of
a right within a reasonable time, warranting a Appeals, the Surety invoked the jurisdiction of
presumption that the party entitled to assert has the said courts to obtain affirmative relief and
abandoned it or declined to assert it. 32 submitted its case for final adjudication on the
merits. It was only when the adverse decision
And in the more recent Regalado v. Go, 33 the was rendered by the Court of Appeals that it
Court again emphasized that laches should be clearly finally woke up to raise the question of
present for the Sibonghanoy doctrine to be applicable, jurisdiction.
thus:TAIaHE
Clearly, the factual settings attendant
Laches is defined as the "failure or neglect for an in Sibonghanoy are not present in the case at
unreasonable and unexplained length of time, to bar. Petitioner Atty. Regalado, after the receipt of
do that which, by exercising due diligence, could the Court of Appeals resolution finding her guilty
or should have been done earlier, it is of contempt, promptly filed a Motion for
Page 174 of 458

Reconsideration assailing the said court's the jurisdiction of the RTC, considering that he raised
jurisdiction based on procedural infirmity in the lack thereof in his appeal before the appellate court.
initiating the action. Her compliance with the At that time, no considerable period had yet elapsed for
appellate court's directive to show cause why laches to attach. True, delay alone, though
she should not be cited for contempt and filing a unreasonable, will not sustain the defense of "estoppel
single piece of pleading to that effect could not
by laches" unless it further appears that the party,
be considered as an active participation in the
judicial proceedings so as to take the case within knowing his rights, has not sought to enforce them until
the milieu of Sibonghanoy. Rather, it is the the condition of the party pleading laches has in good
natural fear to disobey the mandate of the court faith become so changed that he cannot be restored to
that could lead to dire consequences that his former state, if the rights be then enforced, due to
impelled her to comply. 34cEaTHD
loss of evidence, change of title, intervention of equities,
and other causes. 36 In applying the principle of
The Court, thus, wavered on when to apply the estoppel by laches in the exceptional case
exceptional circumstance in Sibonghanoy and on when of Sibonghanoy,the Court therein considered the patent
to apply the general rule enunciated as early as in De and revolting inequity and unfairness of having the
La Santa and expounded at length in Calimlim. The judgment creditors go up their Calvary once more after
general rule should, however, be, as it has always been, more or less 15 years. 37 The same, however, does not
that the issue of jurisdiction may be raised at any stage obtain in the instant case.
of the proceedings, even on appeal, and is not lost by
waiver or by estoppel. Estoppel by laches, to bar a We note at this point that estoppel, being in the
litigant from asserting the court's absence or lack of nature of a forfeiture, is not favored by law. It is to be
jurisdiction, only supervenes in exceptional cases applied rarely only from necessity, and only in
similar to the factual milieu of Tijam v. Sibonghanoy. extraordinary circumstances. The doctrine must be
Indeed, the fact that a person attempts to invoke applied with great care and the equity must be strong in
unauthorized jurisdiction of a court does not estop him its favor. 38 When misapplied, the doctrine of estoppel
from thereafter challenging its jurisdiction over the may be a most effective weapon for the
subject matter, since such jurisdiction must arise by law accomplishment of injustice. 39 Moreover, a judgment
and not by mere consent of the parties. This is rendered without jurisdiction over the subject matter is
especially true where the person seeking to invoke void. 40 Hence, the Revised Rules of Court provides for
unauthorized jurisdiction of the court does not thereby remedies in attacking judgments rendered by courts or
secure any advantage or the adverse party does not tribunals that have no jurisdiction over the concerned
suffer any harm. 35 ITScHa
cases. No laches will even attach when the judgment is
null and void for want of jurisdiction. 41 As we have
Applying the said doctrine to the instant case, the
petitioner is in no way estopped by laches in assailing
Page 175 of 458

stated in Heirs of Julian Dela Cruz and Leonora Talaro WHEREFORE, premises considered, the petition
v. Heirs of Alberto Cruz, 42 for review on certiorari is GRANTED. Criminal Case No.
It is axiomatic that the jurisdiction of a tribunal, 2235-M-94 is hereby DISMISSED without prejudice.
including a quasi-judicial officer or government SO ORDERED.
agency, over the nature and subject matter of a
petition or complaint is determined by the (Figueroa y Cervantes v. People, G.R. No. 147406, [July
|||

material allegations therein and the character of 14, 2008], 580 PHIL 58-78)
the relief prayed for, irrespective of whether the
petitioner or complainant is entitled to any or all
such reliefs. Jurisdiction over the nature and
subject matter of an action is conferred by the
Constitution and the law, and not by the consent
or waiver of the parties where the court
otherwise would have no jurisdiction over the
nature or subject matter of the action. Nor can it
be acquired through, or waived by, any act or
omission of the parties. Moreover, estoppel does
not apply to confer jurisdiction to a tribunal that
has none over the cause of action. . . .
Indeed, the jurisdiction of the court or tribunal is
not affected by the defenses or theories set up
by the defendant or respondent in his answer or
motion to dismiss. Jurisdiction should be
determined by considering not only the status or
the relationship of the parties but also the nature
of the issues or questions that is the subject of [G.R. No. 173915. February 22, 2010.]
the controversy. . . . The proceedings before a
court or tribunal without jurisdiction, including its
IRENE SANTE AND REYNALDO
decision, are null and void, hence, susceptible to
SANTE, petitioners, vs. HON. EDILBERTO
direct and collateral attacks. 43cIADaC
T. CLARAVALL, in his capacity as
With the above considerations, we find it Presiding Judge of Branch 60, Regional
unnecessary to resolve the other issues raised in the Trial Court of Baguio City, and VITA N.
petition. KALASHIAN, respondents.
Page 176 of 458

DECISION petitioners be held liable to pay moral damages in the


amount of P300,000.00; P50,000.00 as exemplary
damages; P50,000.00 attorney's fees; P20,000.00
VILLARAMA, JR., J : p litigation expenses; and costs of suit.
Petitioners filed a Motion to Dismiss 5 on the
Before this Court is a petition for certiorari 1 under
ground that it was the Municipal Trial Court in Cities
Rule 65 of the 1997 Rules of Civil Procedure, as
(MTCC) and not the RTC of Baguio, that had jurisdiction
amended, filed by petitioners Irene and Reynaldo Sante
over the case. They argued that the amount of the claim
assailing the Decision 2 dated January 31, 2006 and the
for moral damages was not more than the jurisdictional
Resolution 3 dated June 23, 2006 of the Seventeenth
amount of P300,000.00, because the claim for
Division of the Court of Appeals in CA-G.R. SP No.
exemplary damages should be excluded in computing
87563. The assailed decision affirmed the orders of the
the total claim.
EIDaAH

Regional Trial Court (RTC) of Baguio City, Branch 60,


denying their motion to dismiss the complaint for On June 24, 2004, 6 the trial court denied the
damages filed by respondent Vita Kalashian against motion to dismiss citing our ruling in Movers-Baseco
them. Integrated Port Services, Inc. v. Cyborg Leasing
Corporation. 7The trial court held that the total claim of
The facts, culled from the records, are as follows:
respondent amounted to P420,000.00 which was above
On April 5, 2004, respondent filed before the RTC the jurisdictional amount for MTCCs outside Metro
of Baguio City a complaint for damages 4 against Manila. The trial court also later issued Orders on July
petitioners. In her complaint, docketed as Civil Case No. 7, 2004 8 and July 19, 2004, 9 respectively reiterating its
5794-R, respondent alleged that while she was inside denial of the motion to dismiss and denying petitioners'
the Police Station of Natividad, Pangasinan, and in the motion for reconsideration.
presence of other persons and police officers, petitioner
Aggrieved, petitioners filed on August 2, 2004, a
Irene Sante uttered words, which when translated in
Petition for Certiorari and Prohibition, 10 docketed
English are as follows, "How many rounds of sex did
as CA-G.R. SP No. 85465, before the Court of Appeals.
you have last night with your boss, Bert? You fuckin'
Meanwhile, on July 14, 2004, respondent and her
bitch!"Bert refers to Albert Gacusan, respondent's friend
husband filed an Amended Complaint 11 increasing the
and one (1) of her hired personal security guards
claim for moral damages from P300,000.00 to
detained at the said station and who is a suspect in the
P1,000,000.00. Petitioners filed a Motion to Dismiss
killing of petitioners' close relative. Petitioners also
with Answer Ad Cautelam and Counterclaim, but the
allegedly went around Natividad, Pangasinan telling
trial court denied their motion in an Order 12 dated
people that she is protecting and cuddling the suspects
September 17, 2004.
in the aforesaid killing. Thus, respondent prayed that
Page 177 of 458

Hence, petitioners again filed a Petition Thus, the prayer for exemplary damages should be
for Certiorari and Prohibition 13 before the Court of excluded in computing the total amount of the claim.
Appeals, docketed as CA-G.R. SP No. 87563, claiming On January 31, 2006, the Court of Appeals, this
that the trial court committed grave abuse of discretion time in CA-G.R. SP No. 87563, rendered a decision
in allowing the amendment of the complaint to increase affirming the September 17, 2004 Order of the RTC
the amount of moral damages from P300,000.00 to denying petitioners' Motion to Dismiss Ad Cautelam. In
P1,000,000.00. The case was raffled to the the said decision, the appellate court held that the total
Seventeenth Division of the Court of Appeals. or aggregate amount demanded in the complaint
On January 23, 2006, the Court of Appeals, constitutes the basis of jurisdiction. The Court of
Seventh Division, promulgated a decision in CA-G.R. Appeals did not find merit in petitioners' posture that the
SP No. 85465, as follows: claims for exemplary damages and attorney's fees are
WHEREFORE, finding grave abuse of discretion merely incidental to the main cause and should not be
on the part of [the] Regional Trial Court of included in the computation of the total claim. EASCDH

Baguio, Branch 60, in rendering the assailed The Court of Appeals additionally ruled that
Orders dated June 24, 2004 and July [19], 2004 respondent can amend her complaint by increasing the
in Civil Case No. 5794-R the instant petition amount of moral damages from P300,000.00 to
for certiorari is GRANTED. The assailed Orders
P1,000,000.00, on the ground that the trial court has
are hereby ANNULLED and SET ASIDE. Civil
Case No. 5794-R for damages is ordered jurisdiction over the original complaint and respondent is
DISMISSED for lack of jurisdiction. entitled to amend her complaint as a matter of right
under the Rules.
SO ORDERED. 14
Unable to accept the decision, petitioners are now before
The Court of Appeals held that the case clearly us raising the following issues:
falls under the jurisdiction of the MTCC as the
I.
allegations show that plaintiff was seeking to recover
moral damages in the amount of P300,000.00, which WHETHER OR NOT THERE WAS GRAVE
amount was well within the jurisdictional amount of the ABUSE OF DISCRETION AMOUNTING TO
MTCC. The Court of Appeals added that the totality of LACK OR IN EXCESS OF JURISDICTION ON
claim rule used for determining which court had THE PART OF THE (FORMER)
jurisdiction could not be applied to the instant case SEVENTEENTH DIVISION OF THE
because plaintiff's claim for exemplary damages was HONORABLE COURT OF APPEALS WHEN IT
RESOLVED THAT THE REGIONAL TRIAL
not a separate and distinct cause of action from her
COURT OF BAGUIO CITY BRANCH 60 HAS
claim of moral damages, but merely incidental to it. JURISDICTION OVER THE SUBJECT MATTER
Page 178 of 458

OF THE CASE FOR DAMAGES AMOUNTING amendment of the complaint to increase the claim for
TO P300,000.00; moral damages in order to confer jurisdiction.
II. In her Comment, 16 respondent averred that the
WHETHER OR NOT THERE WAS GRAVE nature of her complaint is for recovery of damages. As
ABUSE OF DISCRETION ON THE PART OF such, the totality of the claim for damages, including the
THE HONORABLE RESPONDENT JUDGE OF exemplary damages as well as the other damages
THE REGIONAL TRIAL COURT OF BAGUIO alleged and prayed in the complaint, such as attorney's
BRANCH 60 FOR ALLOWING THE fees and litigation expenses, should be included in
COMPLAINANT TO AMEND THE COMPLAINT determining jurisdiction. The total claim being
(INCREASING THE AMOUNT OF DAMAGES P420,000.00, the RTC has jurisdiction over the
TO 1,000,000.00 TO CONFER JURISDICTION complaint.
OVER THE SUBJECT MATTER OF THE CASE
DESPITE THE PENDENCY OF A PETITION We deny the petition, which although
FOR CERTIORARI FILED AT THE COURT OF denominated as a petition for certiorari, we treat as a
APPEALS, SEVENTH DIVISION, DOCKETED petition for review on certiorari under Rule 45 in view of
AS CA G.R. NO. 85465. 15 the issues raised. aDSHCc

In essence, the basic issues for our resolution Section 19 (8) of Batas Pambansa Blg. 129, 17 as
are: amended by Republic Act No. 7691, 18 states:
1) Did the RTC acquire jurisdiction over the SEC. 19. Jurisdiction in civil cases. Regional
case? and Trial Courts shall exercise exclusive original
jurisdiction:
2) Did the RTC commit grave abuse of
discretion in allowing the amendment xxx xxx xxx
of the complaint? (8) In all other cases in which the demand,
exclusive of interest, damages of whatever kind,
Petitioners insist that the complaint falls under the attorney's fees, litigation expenses, and costs or
exclusive jurisdiction of the MTCC. They maintain that the value of the property in controversy exceeds
the claim for moral damages, in the amount of One hundred thousand pesos (P100,000.00) or,
P300,000.00 in the original complaint, is the main in such other cases in Metro Manila, where the
action. The exemplary damages being discretionary demand, exclusive of the abovementioned items
should not be included in the computation of the exceeds Two hundred thousand pesos
jurisdictional amount. And having no jurisdiction over (P200,000.00).
the subject matter of the case, the RTC acted with
Section 5 of Rep. Act No. 7691 further provides:
grave abuse of discretion when it allowed the
Page 179 of 458

SEC. 5. After five (5) years from the effectivity of In this regard, Administrative Circular No. 09-94 19 is
this Act, the jurisdictional amounts mentioned in instructive:AICDSa

Sec. 19(3), (4), and (8); and Sec. 33(1) of Batas


Pambansa Blg. 129as amended by this Act, shall xxx xxx xxx
be adjusted to Two hundred thousand pesos 2. The exclusion of the term "damages of
(P200,000.00). Five (5) years thereafter, such whatever kind" in determining the jurisdictional
jurisdictional amounts shall be adjusted further to amount under Section 19 (8) and Section 33 (1)
Three hundred thousand pesos of B.P. Blg. 129, as amended by R.A. No. 7691,
(P300,000.00): Provided, however, That in the applies to cases where the damages are merely
case of Metro Manila, the abovementioned incidental to or a consequence of the main cause
jurisdictional amounts shall be adjusted after five of action. However, in cases where the claim
(5) years from the effectivity of this Act to Four for damages is the main cause of action, or
hundred thousand pesos (P400,000.00). one of the causes of action, the amount of
Relatedly, Supreme Court Circular No. 21-99 was such claim shall be considered in
determining the jurisdiction of the court.
issued declaring that the first adjustment in jurisdictional
(Emphasis ours.)
amount of first level courts outside of Metro Manila from
P100,000.00 to P200,000.00 took effect on March 20, In the instant case, the complaint filed in Civil
1999. Meanwhile, the second adjustment from Case No. 5794-R is for the recovery of damages for the
P200,000.00 to P300,000.00 became effective on alleged malicious acts of petitioners. The complaint
February 22, 2004 in accordance with OCA Circular No. principally sought an award of moral and exemplary
65-2004 issued by the Office of the Court Administrator damages, as well as attorney's fees and litigation
on May 13, 2004. expenses, for the alleged shame and injury suffered by
Based on the foregoing, there is no question that respondent by reason of petitioners' utterance while
at the time of the filing of the complaint on April 5, 2004, they were at a police station in Pangasinan. It is settled
the MTCC's jurisdictional amount has been adjusted to that jurisdiction is conferred by law based on the facts
P300,000.00. alleged in the complaint since the latter comprises a
concise statement of the ultimate facts constituting the
But where damages is the main cause of action, plaintiff's causes of action. 20 It is clear, based on the
should the amount of moral damages prayed for in the allegations of the complaint, that respondent's main
complaint be the sole basis for determining which court action is for damages. Hence, the other forms of
has jurisdiction or should the total amount of all the damages being claimed by respondent, e.g., exemplary
damages claimed regardless of kind and nature, such damages, attorney's fees and litigation expenses, are
as exemplary damages, nominal damages, and not merely incidental to or consequences of the main
attorney's fees, etc., be used?
Page 180 of 458

action but constitute the primary relief prayed for in the a basic jurisprudential principle that an amendment
complaint. cannot be allowed when the court has no jurisdiction
In Mendoza v. Soriano, 21 it was held that in over the original complaint and the purpose of the
cases where the claim for damages is the main cause of amendment is to confer jurisdiction on the court, 23 here,
action, or one of the causes of action, the amount of the RTC clearly had jurisdiction over the original
such claim shall be considered in determining the complaint and amendment of the complaint was then
jurisdiction of the court. In the said case, the still a matter of right. 24
ICcDaA

respondent's claim of P929,000.06 in damages and WHEREFORE, the petition is DENIED, for lack of
P25,000 attorney's fees plus P500 per court merit. The Decision and Resolution of the Court of
appearance was held to represent the monetary Appeals dated January 31, 2006 and June 23, 2006,
equivalent for compensation of the alleged injury. The respectively, are AFFIRMED. The Regional Trial Court
Court therein held that the total amount of monetary of Baguio City, Branch 60 is DIRECTED to continue
claims including the claims for damages was the basis with the trial proceedings in Civil Case No. 5794-R with
to determine the jurisdictional amount. deliberate dispatch.
Also, in Iniego v. Purganan, 22 the Court has held: No costs.
The amount of damages claimed is within the SO ORDERED.
jurisdiction of the RTC, since it is the claim for all
kinds of damages that is the basis of determining (Sante v. Claravall, G.R. No. 173915, [February 22,
|||

the jurisdiction of courts, whether the claims for 2010])


damages arise from the same or from different
causes of action.
xxx xxx xxx
Considering that the total amount of damages
claimed was P420,000.00, the Court of Appeals was
correct in ruling that the RTC had jurisdiction over the
case.
Lastly, we find no error, much less grave abuse of
discretion, on the part of the Court of Appeals in
affirming the RTC's order allowing the amendment of
the original complaint from P300,000.00 to
P1,000,000.00 despite the pendency of a petition
for certiorari filed before the Court of Appeals. While it is
Page 181 of 458

Thus, on March 8, 2004, after nine (9) years of spirited


advocacy by women's groups, Congress enacted Republic
[G.R. No. 179267. June 25, 2013.] Act (R.A.) No. 9262, entitled "An Act Defining Violence
Against Women and Their Children, Providing for
JESUS C. GARCIA, petitioner, vs. THE Protective Measures for Victims, Prescribing Penalties
HONORABLE RAY ALAN T. DRILON, Therefor, and for Other Purposes." It took effect on March
Presiding Judge, Regional Trial Court- 27, 2004. 4 aHDTAI

Branch 41, Bacolod City, and ROSALIE


R.A. 9262 is a landmark legislation
JAYPE-GARCIA, for herself and in behalf
that defines and criminalizes acts of violence against
of minor children, namely: JO-ANN,
women and their children (VAWC) perpetrated by women's
JOSEPH EDUARD, JESSE ANTHONE, all
intimate partners,i.e., husband; former husband; or any
surnamed GARCIA, respondents.
person who has or had a sexual or dating relationship, or
with whom the woman has a common child. 5 The law
provides forprotection orders from the barangay and the
DECISION courts to prevent the commission of further acts of VAWC;
and outlines the duties and responsibilities of barangay
officials, law enforcers, prosecutors and court personnel,
PERLAS-BERNABE, J : p
social workers, health care providers, and other local
government officials in responding to complaints of VAWC
Hailed as the bastion of Christianity in Asia, the Philippines or requests for assistance.
boasts of 86.8 million Filipinos or 93 percent of a total
population of 93.3 million adhering to the teachings of A husband is now before the Court assailing the
Jesus Christ. 1 Yet, the admonition for husbands to love constitutionality of R.A. 9262 as being violative of the equal
their wives as their own bodies just as Christ loved the protection and due process clauses, and an undue
church and gave himself up for her 2 failed to prevent, or delegation of judicial power to barangay officials.
even to curb, the pervasiveness of violence against Filipino The Factual Antecedents
women. The National Commission on the Role of Filipino
Women (NCRFW) reported that, for the years 2000-2003, On March 23, 2006, Rosalie Jaype-Garcia (private
"female violence comprised more than 90% of all forms of respondent) filed, for herself and in behalf of her minor
abuse and violence and more than 90% of these reported children, a verified petition 6 (Civil Case No. 06-797) before
cases were committed by the women's intimate partners the Regional Trial Court (RTC) of Bacolod City for the
such as their husbands and live-in partners." 3 issuance of a Temporary Protection Order (TPO) against
her husband, Jesus C. Garcia (petitioner), pursuant to R.A.
9262. She claimed to be a victim of physical abuse;
Page 182 of 458

emotional, psychological, and economic violence as a using the woman because of their accounts with the
result of marital infidelity on the part of petitioner, with bank. 10EHTIcD

threats of deprivation of custody of her children and of


Petitioner's infidelity spawned a series of fights that left
financial support. 7
private respondent physically and emotionally wounded. In
Private respondent's claims one of their quarrels, petitioner grabbed private respondent
Private respondent married petitioner in 2002 when she on both arms and shook her with such force that caused
was 34 years old and the former was eleven years her bruises and hematoma. At another time, petitioner hit
senior. They have three (3) children, namely: Jo-Ann J. private respondent forcefully on the lips that caused some
Garcia, 17 years old, who is the natural child of petitioner bleeding. Petitioner sometimes turned his ire on their
but whom private respondent adopted; Jessie Anthone J. daughter, Jo-Ann, who had seen the text messages he
Garcia, 6 years old; and Joseph Eduard J. Garcia, 3 years sent to his paramour and whom he blamed for squealing
old. 8 on him. He beat Jo-Ann on the chest and slapped her
many times. When private respondent decided to leave
Private respondent described herself as a dutiful and petitioner, Jo-Ann begged her mother to stay for fear that if
faithful wife, whose life revolved around her husband. On the latter leaves, petitioner would beat her up. Even the
the other hand, petitioner, who is of Filipino-Chinese small boys are aware of private respondent's sufferings.
descent, is dominant, controlling, and demands absolute Their 6-year-old son said that when he grows up, he would
obedience from his wife and children. He forbade private beat up his father because of his cruelty to private
respondent to pray, and deliberately isolated her from her respondent. 11
friends. When she took up law, and even when she was
already working part time at a law office, petitioner All the emotional and psychological turmoil drove private
trivialized her ambitions and prevailed upon her to just stay respondent to the brink of despair. On December 17, 2005,
at home. He was often jealous of the fact that his attractive while at home, she attempted suicide by cutting her wrist.
wife still catches the eye of some men, at one point She was found by her son bleeding on the floor. Petitioner
threatening that he would have any man eyeing her killed. 9 simply fled the house instead of taking her to the hospital.
Private respondent was hospitalized for about seven (7)
Things turned for the worse when petitioner took up an days in which time petitioner never bothered to visit, nor
affair with a bank manager of Robinson's Bank, Bacolod apologized or showed pity on her. Since then, private
City, who is the godmother of one of their sons. Petitioner respondent has been undergoing therapy almost every
admitted to the affair when private respondent confronted week and is taking anti-depressant medications. 12
him about it in 2004. He even boasted to the household
help about his sexual relations with said bank manager. When private respondent informed the management of
Petitioner told private respondent, though, that he was just Robinson's Bank that she intends to file charges against
the bank manager, petitioner got angry with her for
Page 183 of 458

jeopardizing the manager's job. He then packed his things conducted, thereby depriving her of access to full
and told private respondent that he was leaving her for information about said businesses. Until the filing of the
good. He even told private respondent's mother, who lives petition a quo, petitioner has not given private respondent
with them in the family home, that private respondent an accounting of the businesses the value of which she
should just accept his extramarital affair since he is not had helped raise to millions of pesos. 17
cohabiting with his paramour and has not sired a child with
Action of the RTC of Bacolod City
her. 13
Finding reasonable ground to believe that an imminent
Private respondent is determined to separate from danger of violence against the private respondent and her
petitioner but she is afraid that he would take her children children exists or is about to recur, the RTC issued a
from her and deprive her of financial support. Petitioner TPO 18 on March 24, 2006 effective for thirty (30) days,
had previously warned her that if she goes on a legal battle which is quoted hereunder:
with him, she would not get a single centavo. 14
Respondent (petitioner herein), Jesus Chua
Petitioner controls the family businesses involving mostly Garcia, is hereby:
the construction of deep wells. He is the President of three
corporations 326 Realty Holdings, Inc., Negros Rotadrill a) Ordered to remove all his personal
belongings from the conjugal dwelling or family
Corporation, and J-Bros Trading Corporation of which
home within 24 hours from receipt of the
he and private respondent are both stockholders. In Temporary Restraining Order and if he refuses,
contrast to the absolute control of petitioner over said ordering that he be removed by police officers
corporations, private respondent merely draws a monthly from the conjugal dwelling; this order is
salary of P20,000.00 from one corporation only, the Negros enforceable notwithstanding that the house is
Rotadrill Corporation. Household expenses amounting to under the name of 236 Realty Holdings, Inc.
not less than P200,000.00 a month are paid for by private (Republic Act No. 9262 states "regardless of
respondent through the use of credit cards, which, in turn, ownership"), this is to allow the Petitioner
are paid by the same corporation together with the bills for (private respondent herein) to enter the
utilities. 15
cDCIHT
conjugal dwelling without any danger from the
Respondent. IcADSE

On the other hand, petitioner receives a monthly salary of


P60,000.00 from Negros Rotadrill Corporation, and enjoys After the Respondent leaves or is removed
from the conjugal dwelling, or anytime the
unlimited cash advances and other benefits in hundreds of
Petitioner decides to return to the conjugal
thousands of pesos from the corporations. 16 After private dwelling to remove things, the Petitioner shall
respondent confronted him about the affair, petitioner be assisted by police officers when re-entering
forbade her to hold office at JBTC Building, Mandalagan, the family home.
where all the businesses of the corporations are
Page 184 of 458

The Chief of Police shall also give the g) To render an accounting of all advances,
Petitioner police assistance on Sunday, 26 benefits, bonuses and other cash he received
March 2006 because of the danger that the from all the corporations from 1 January 2006
Respondent will attempt to take her children up to 31 March 2006, which himself and as
from her when he arrives from Manila and finds President of the corporations and his
out about this suit. Comptroller, must submit to the Court not later
than 2 April 2006. Thereafter, an accounting of
b) To stay away from the petitioner and her
all these funds shall be reported to the court by
children, mother and all her household help
the Comptroller, copy furnished to the
and driver from a distance of 1,000 meters,
Petitioner, every 15 days of the month, under
and shall not enter the gate of the subdivision
pain of Indirect Contempt of Court.
where the Petitioner may be temporarily
residing. h) To ensure compliance especially with the
order granting support pendente lite, and
c) Not to harass, annoy, telephone, contact or
considering the financial resources of the
otherwise communicate with the Petitioner,
Respondent and his threat that if the Petitioner
directly or indirectly, or through other persons,
sues she will not get a single centavo, the
or contact directly or indirectly her children,
Respondent is ordered to put up a BOND TO
mother and household help, nor send gifts,
KEEP THE PEACE in the amount of FIVE
cards, flowers, letters and the like. Visitation
MILLION PESOS, in two sufficient sureties.
rights to the children may be subject of a
modified TPO in the future. On April 24, 2006, upon motion 19 of private respondent,
d) To surrender all his firearms including a the trial court issued an amended TPO, 20 effective for
.9MM caliber firearm and a Walther PPK and thirty (30) days, which included the following additional
ordering the Philippine National Police provisions:
Firearms and Explosives Unit and the i) The petitioners (private respondents herein)
Provincial Director of the PNP to cancel all the are given the continued use of the Nissan
Respondent's firearm licenses. He should also Patrol and the Starex Van which they are using
be ordered to surrender any unlicensed in Negros Occidental.
firearms in his possession or control.
j) The petitioners are given the continued use
e) To pay full financial support for the Petitioner and occupation of the house in Paraaque, the
and the children, including rental of a house for continued use of the Starex van in Metro
them, and educational and medical expenses. Manila, whenever they go to Manila.
f) Not to dissipate the conjugal business. aCTHEA
k) Respondent is ordered to immediately post a
bond to keep the peace, in two sufficient
sureties.
Page 185 of 458

l) To give monthly support to the petitioner Bacolod City within 24 hours from receipt of the
provisionally fixed in the sum of One Hundred Temporary Protection Order by his counsel;
Fifty Thousand Pesos (Php150,000.00) per
c) Ordering the Chief of the Women's Desk of
month plus rental expenses of Fifty Thousand
the Bacolod City Police Headquarters to
Pesos (Php50,000.00) per month until the
remove Respondent from the conjugal dwelling
matter of support could be finally resolved.
cAaDCE
within eight (8) hours from receipt of the
Two days later, or on April 26, 2006, petitioner filed an Temporary Protection Order by his counsel,
Opposition to the Urgent Ex-Parte Motion for Renewal of and that he cannot return until 48 hours after
the TPO 21 seeking the denial of the renewal of the TPO on the petitioners have left, so that the petitioner
the grounds that it did not (1) comply with the three-day Rosalie and her representatives can remove
notice rule, and (2) contain a notice of hearing. He further things from the conjugal home and make an
inventory of the household furniture, equipment
asked that the TPO be modified by (1) removing one
and other things in the conjugal home, which
vehicle used by private respondent and returning the same shall be submitted to the Court.
to its rightful owner, the J-Bros Trading Corporation, and
(2) cancelling or reducing the amount of the bond from d) Deliver full financial support of
P5,000,000.00 to a more manageable level at Php200,000.00 and Php50,000.00 for rental
P100,000.00. and Php25,000.00 for clothes of the three
petitioners (sic) children within 24 hours from
Subsequently, on May 23, 2006, petitioner moved 22 for the receipt of the Temporary Protection Order by
modification of the TPO to allow him visitation rights to his his counsel, otherwise be declared in indirect
children. contempt of Court; DaHSIT

On May 24, 2006, the TPO was renewed and extended yet e) That respondent surrender his two firearms
again, but subject only to the following modifications and all unlicensed firearms to the Clerk of
prayed for by private respondent: Court within 24 hours from receipt of the
Temporary Protection Order by his counsel;
a) That respondent (petitioner herein) return
the clothes and other personal belongings of f) That respondent shall pay petitioner
Rosalie and her children to Judge Jesus educational expenses of the children upon
Ramos, co-counsel for Petitioner, within 24 presentation of proof of payment of such
hours from receipt of the Temporary Protection expenses. 23
Order by his counsel, otherwise be declared in Claiming that petitioner continued to deprive them of
Indirect Contempt of Court; financial support; failed to faithfully comply with the TPO;
b) Respondent shall make an accounting or list and committed new acts of harassment against her and
of furniture and equipment in the conjugal their children, private respondent filed another
house in Pitimini St., Capitolville Subdivision, application 24 for the issuance of a TPO ex parte. She
Page 186 of 458

alleged inter alia that petitioner contrived a replevin suit 1) Prohibited from threatening to commit or
against himself by J-Bros Trading, Inc., of which the latter committing, personally or through another, acts
was purportedly no longer president, with the end in view of of violence against the offended party;
recovering the Nissan Patrol and Starex Van used by 2) Prohibited from harassing, annoying,
private respondent and the children. A writ of replevin was telephoning, contacting or otherwise
served upon private respondent by a group of six or seven communicating in any form with the offended
policemen with long firearms that scared the two small party, either directly or indirectly;
boys, Jessie Anthone and Joseph Eduard. 25 3) Required to stay away, personally or
While Joseph Eduard, then three years old, was driven to through his friends, relatives, employees or
school, two men allegedly attempted to kidnap him, which agents, from all the Petitioners Rosalie J.
incident traumatized the boy resulting in his refusal to go Garcia and her children, Rosalie J. Garcia's
three brothers, her mother Primitiva Jaype,
back to school. On another occasion, petitioner allegedly
cook Novelita Caranzo, driver Romeo
grabbed their daughter, Jo-Ann, by the arm and threatened
Hontiveros, laundrywoman Mercedita
her. 26 The incident was reported to the police, and Jo-Ann Bornales, security guard Darwin Gayona and
subsequently filed a criminal complaint against her father the petitioner's other household helpers from a
for violation of R.A. 7610, also known as the "Special distance of 1,000 meters, and shall not enter
Protection of Children Against Child Abuse, Exploitation the gate of the subdivision where the
and Discrimination Act." Petitioners are temporarily residing, as well as
from the schools of the three children;
Aside from the replevin suit, petitioner's lawyers initiated Furthermore, that respondent shall not contact
the filing by the housemaids working at the conjugal home the schools of the children directly or indirectly
of a complaint for kidnapping and illegal detention against in any manner including, ostensibly to pay for
private respondent. This came about after private their tuition or other fees directly, otherwise he
respondent, armed with a TPO, went to said home to get will have access to the children through the
her and her children's belongings. Finding some of her schools and the TPO will be rendered
things inside a housemaid's (Sheryl Jamola) bag in the nugatory;
maids' room, private respondent filed a case for qualified 4) Directed to surrender all his firearms
theft against Jamola. 27CDTHSI
including .9MM caliber firearm and a Walther
On August 23, 2006, the RTC issued a TPO, 28 effective for PPK to the Court;
thirty (30) days, which reads as follows: 5) Directed to deliver in full financial support of
Respondent (petitioner herein), Jesus Chua Php200,000.00 a month and Php50,000.00 for
Garcia, is hereby: rental for the period from August 6 to
September 6, 2006; and support in arrears
Page 187 of 458

from March 2006 to August 2006 the total Garcia, who shall affix her signature in the
amount of Php1,312,000.00; CIaDTE presence of the Register of Deeds, due to the
fear of petitioner Rosalie that her signature will
6) Directed to deliver educational expenses for
be forged in order to effect the encumbrance or
2006-2007 the amount of Php75,000.00 and
sale of these properties to defraud her or the
Php25,000.00;
conjugal partnership of gains.
7) Directed to allow the continued use of a
In its Order 29 dated September 26, 2006, the trial court
Nissan Patrol with Plate No. FEW 508 and a
Starex van with Plate No. FFD 991 and should extended the aforequoted TPO for another ten (10) days,
the respondent fail to deliver said vehicles, and gave petitioner a period of five (5) days within which to
respondent is ordered to provide the petitioner show cause why the TPO should not be renewed,
another vehicle which is the one taken by J extended, or modified. Upon petitioner's
Bros Tading; manifestation, 30 however, that he has not received a copy
of private respondent's motion to modify/renew the TPO,
8) Ordered not to dissipate, encumber,
alienate, sell, lease or otherwise dispose of the the trial court directed in its Order 31 dated October 6, 2006
conjugal assets, or those real properties in the that petitioner be furnished a copy of said motion.
name of Jesus Chua Garcia only and those in Nonetheless, an Order 32 dated a day earlier, October 5,
which the conjugal partnership of gains of the had already been issued renewing the TPO dated August
Petitioner Rosalie J. Garcia and respondent 23, 2006. The pertinent portion is quoted hereunder: AacDHE

have an interest in, especially the conjugal


xxx xxx xxx
home located in No. 14, Pitimini St., Capitolville
Subdivision, Bacolod City, and other properties . . . it appearing further that the hearing could
which are conjugal assets or those in which the not yet be finally terminated, the Temporary
conjugal partnership of gains of Petitioner Protection Order issued on August 23, 2006 is
Rosalie J. Garcia and the respondent have an hereby renewed and extended for thirty (30)
interest in and listed in Annexes "I," "I-1," and days and continuously extended and renewed
"I-2," including properties covered by TCT Nos. for thirty (30) days, after each expiration, until
T-186325 and T-168814; further orders, and subject to such
modifications as may be ordered by the
9) Ordered that the Register of Deeds of
court.STHAaD
Bacolod City and E.B. Magalona shall be
served a copy of this TEMPORARY After having received a copy of the foregoing Order,
PROTECTION ORDER and are ordered not to petitioner no longer submitted the required comment to
allow the transfer, sale, encumbrance or private respondent's motion for renewal of the TPO arguing
disposition of these above-cited properties to that it would only be an "exercise in futility." 33
any person, entity or corporation without the
personal presence of petitioner Rosalie J. Proceedings before the CA
Page 188 of 458

During the pendency of Civil Case No. 06-797, petitioner COLLATERAL ATTACK ON THE VALIDITY
filed before the Court of Appeals (CA) a petition 34 for OF THE LAW. EcHIAC

prohibition (CA-G.R. CEB-SP. No. 01698), with prayer for II.


injunction and temporary restraining order, challenging (1)
the constitutionality of R.A. 9262 for being violative of the THE COURT OF APPEALS COMMITTED
due process and the equal protection clauses, and (2) the SERIOUS ERROR IN FAILING TO
CONCLUDE THAT R.A. 9262 IS
validity of the modified TPO issued in the civil case for
DISCRIMINATORY, UNJUST, AND
being "an unwanted product of an invalid law." VIOLATIVE OF THE EQUAL PROTECTION
On May 26, 2006, the appellate court issued a 60-day CLAUSE.
Temporary Restraining Order 35 (TRO) against the III.
enforcement of the TPO, the amended TPOs and other
orders pursuant thereto. THE COURT OF APPEALS COMMITTED
GRAVE MISTAKE IN NOT FINDING
Subsequently, however, on January 24, 2007, the THAT R.A. 9262 RUNS COUNTER TO THE
appellate court dismissed 36 the petition for failure of DUE PROCESS CLAUSE OF THE
petitioner to raise the constitutional issue in his pleadings CONSTITUTION.
before the trial court in the civil case, which is clothed with IV.
jurisdiction to resolve the same. Secondly, the challenge to
the validity of R.A. 9262 through a petition for prohibition THE COURT OF APPEALS ERRED IN NOT
seeking to annul the protection orders issued by the trial FINDING THAT THE LAW DOES VIOLENCE
TO THE POLICY OF THE STATE TO
court constituted a collateral attack on said law.
PROTECT THE FAMILY AS A BASIC SOCIAL
His motion for reconsideration of the foregoing Decision INSTITUTION.
having been denied in the Resolution 37 dated August 14, V.
2007, petitioner is now before us alleging that
THE COURT OF APPEALS SERIOUSLY
The Issues ERRED IN NOT DECLARING R.A. No.
I. 9262 AS INVALID AND UNCONSTITUTIONAL
BECAUSE IT ALLOWS AN UNDUE
THE COURT OF APPEALS ERRED IN DELEGATION OF JUDICIAL POWER TO THE
DISMISSING THE PETITION ON THE BARANGAY OFFICIALS. 38
THEORY THAT THE ISSUE OF
CONSTITUTIONALITY WAS NOT RAISED AT The Ruling of the Court
THE EARLIEST OPPORTUNITY AND THAT, Before delving into the arguments propounded by petitioner
THE PETITION CONSTITUTES A against the constitutionality of R.A. 9262, we shall first
Page 189 of 458

tackle the propriety of the dismissal by the appellate court jurisdiction over cases of VAWC defined under the latter
of the petition for prohibition (CA-G.R. CEB-SP. No. 01698) law, viz.:
filed by petitioner.
EDIHSC
SEC. 7. Venue. The Regional Trial Court
As a general rule, the question of constitutionality must be designated as a Family Court shall have
raised at the earliest opportunity so that if not raised in the original and exclusive jurisdiction over cases of
pleadings, ordinarily it may not be raised in the trial, and if violence against women and their children
not raised in the trial court, it will not be considered on under this law. In the absence of such court in
the place where the offense was committed,
appeal. 39 Courts will not anticipate a question of
the case shall be filed in the Regional Trial
constitutional law in advance of the necessity of deciding Court where the crime or any of its elements
it. 40 was committed at the option of the
In defending his failure to attack the constitutionality of R.A. complainant. (Emphasis supplied) HIAESC

9262 before the RTC of Bacolod City, petitioner argues that Inspite of its designation as a family court, the RTC of
the Family Court has limited authority and jurisdiction that Bacolod City remains possessed of authority as a court of
is "inadequate to tackle the complex issue of general original jurisdiction to pass upon all kinds of cases
constitutionality." 41 whether civil, criminal, special proceedings, land
We disagree. registration, guardianship, naturalization, admiralty or
insolvency. 44 It is settled that RTCs have jurisdiction to
Family Courts have authority resolve the constitutionality of a statute, 45 "this authority
and jurisdiction to consider the being embraced in the general definition of the judicial
constitutionality of a statute. power to determine what are the valid and binding laws by
At the outset, it must be stressed that Family Courts are the criterion of their conformity to the fundamental
special courts, of the same level as Regional Trial Courts. law." 46 The Constitution vests the power of judicial review
Under R.A. 8369, otherwise known as the "Family Courts or the power to declare the constitutionality or validity of a
Act of 1997," family courts have exclusive original law, treaty, international or executive agreement,
jurisdiction to hear and decide cases of domestic violence presidential decree, order, instruction, ordinance, or
against women and children. 42 In accordance with said regulation not only in this Court, but in all RTCs. 47 We said
law, the Supreme Court designated from among the in J.M. Tuason and Co., Inc. v. CA 48 that, "[p]lainly the
branches of the Regional Trial Courts at least one Family Constitution contemplates that the inferior courts should
Court in each of several key cities identified. 43 To achieve have jurisdiction in cases involving constitutionality of any
harmony with the first mentioned law, Section 7 of R.A. treaty or law, for it speaks of appellate review of final
9262 now provides that Regional Trial Courts designated judgments of inferior courts in cases where such
as Family Courts shall have original and exclusive constitutionality happens to be in issue." Section 5, Article
VIII of the 1987 Constitution reads in part as follows:
Page 190 of 458

SEC. 5. The Supreme Court shall have the permanent protection order should not be
following powers: issued.
xxx xxx xxx (b) Respondent shall not include in the
opposition any counterclaim, cross-claim
2. Review, revise, reverse, modify, or
or third-party complaint, but any cause of
affirm on appeal or certiorari, as
action which could be the subject thereof may
the law or the Rules of Court may
be litigated in a separate civil action.
provide, final judgments and orders
(Emphasis supplied)
of lower courts in:
a. All cases in which the
We cannot subscribe to the theory espoused by petitioner
constitutionality or validity of that, since a counterclaim, cross-claim and third-party
any treaty, international or complaint are to be excluded from the opposition, the issue
executive agreement, law, of constitutionality cannot likewise be raised therein.
presidential decree, A counterclaim is defined as any claim for money or other
proclamation, order, relief which a defending party may have against an
instruction, ordinance, or opposing party. 50 A cross-claim, on the other hand, is any
regulation is in question. aADSIc claim by one party against a co-party arising out of the
xxx xxx xxx transaction or occurrence that is the subject matter either
of the original action or of a counterclaim therein. 51 Finally,
Thus, contrary to the posturing of petitioner, the issue of a third-party complaint is a claim that a defending party
constitutionality of R.A. 9262 could have been raised at the may, with leave of court, file against a person not a party to
earliest opportunity in his Opposition to the petition for the action for contribution, indemnity, subrogation or any
protection order before the RTC of Bacolod City, which had other relief, in respect of his opponent's claim. 52 As
jurisdiction to determine the same, subject to the review of pointed out by Justice Teresita J. Leonardo-de Castro, the
this Court. unconstitutionality of a statute is not a cause of action that
Section 20 of A.M. No. 04-10-11-SC, the Rule on Violence could be the subject of a counterclaim, cross-claim or a
Against Women and Their Children, lays down a new kind third-party complaint. Therefore, it is not prohibited from
of procedure requiring the respondent to file an opposition being raised in the opposition in view of the familiar maxim
to the petition and not an answer. 49 Thus: expressio unius est exclusio alterius. IHcSCA

SEC. 20. Opposition to petition. (a) The Moreover, it cannot be denied that this issue affects the
respondent may file an opposition to the resolution of the case a quo because the right of private
petition which he himself shall verify. It must be respondent to a protection order is founded solely on the
accompanied by the affidavits of witnesses and very statute the validity of which is being attacked 53 by
shall show cause why a temporary or petitioner who has sustained, or will sustain, direct injury as
Page 191 of 458

a result of its enforcement. The alleged unconstitutionality extend or renew the said order for a period of thirty (30)
of R.A. 9262 is, for all intents and purposes, a valid cause days each time until final judgment is rendered. It may
for the non-issuance of a protection order. likewise modify the extended or renewed temporary
protection order as may be necessary to meet the needs of
That the proceedings in Civil Case No. 06-797 are
the parties. With the private respondent given ample
summary in nature should not have deterred petitioner from
protection, petitioner could proceed to litigate the
raising the same in his Opposition. The question relative to
constitutional issues, without necessarily running afoul of
the constitutionality of a statute is one of law which does
the very purpose for the adoption of the rules on summary
not need to be supported by evidence. 54 Be that as it may,
procedure. DcAaSI
Section 25 of A.M. No. 04-10-11-SC nonetheless allows
the conduct of a hearing to determine legal issues, among In view of all the foregoing, the appellate court correctly
others, viz.: dismissed the petition for prohibition with prayer for
injunction and temporary restraining order (CA-G.R. CEB-
SEC. 25. Order for further hearing. In
SP. No. 01698). Petitioner may have proceeded upon an
case the court determines the need for further
hearing, it may issue an order containing the honest belief that if he finds succor in a superior court, he
following: could be granted an injunctive relief. However, Section 22
(j) of A.M. No. 04-10-11-SC expressly disallows the filing of
(a) Facts undisputed and admitted; a petition for certiorari, mandamus or prohibition against
(b) Factual and legal issues to be resolved; any interlocutory order issued by the trial court. Hence,
the 60-day TRO issued by the appellate court in this case
(c) Evidence, including objects and documents
against the enforcement of the TPO, the amended TPOs
that have been marked and will be presented;
and other orders pursuant thereto was improper, and it
(d) Names of witnesses who will be ordered to effectively hindered the case from taking its normal course
present their direct testimonies in the form of in an expeditious and summary manner.
affidavits; and
As the rules stand, a review of the case by appeal
(e) Schedule of the presentation of evidence by or certiorari before judgment is prohibited. Moreover, if the
both parties which shall be done in one day, to
appeal of a judgment granting permanent protection shall
the extent possible, within the 30-day period of
not stay its enforcement, 55 with more reason that a TPO,
the effectivity of the temporary protection order
issued. (Emphasis supplied) which is valid only for thirty (30) days at a time, 56 should
not be enjoined.
To obviate potential dangers that may arise concomitant to
the conduct of a hearing when necessary, Section 26 (b) The mere fact that a statute is alleged to be
of A.M. No. 04-10-11-SC provides that if a temporary unconstitutional or invalid, does not of itself entitle a litigant
protection order issued is due to expire, the trial court may to have the same enjoined. 57 In Younger v. Harris,
Page 192 of 458

Jr., 58 the Supreme Court of the United States declared, Petitioner claims that since R.A. 9262 is intended to
thus: prevent and criminalize spousal and child abuse, which
Federal injunctions against state criminal
could very well be committed by either the husband or the
statutes, either in their entirety or with respect to wife, gender alone is not enough basis to deprive the
their separate and distinct prohibitions, are not to husband/father of the remedies under the law. 60 IHTaCE

be granted as a matter of course, even if such A perusal of the deliberations of Congress on Senate Bill
statutes are unconstitutional. No citizen or No. 2723, 61 which became R.A. 9262, reveals that while
member of the community is immune from
the sponsor, Senator Luisa Pimentel-Ejercito (better known
prosecution, in good faith, for his alleged criminal
acts. The imminence of such a prosecution even as Senator Loi Estrada), had originally proposed what she
though alleged to be unauthorized and, hence, called a "synthesized measure" 62 an amalgamation of
unlawful is not alone ground for relief in equity two measures, namely, the "Anti-Domestic Violence Act"
which exerts its extraordinary powers only to and the "Anti-Abuse of Women in Intimate Relationships
prevent irreparable injury to the plaintiff who Act" 63 providing protection to "all family members,
seeks its aid. (Citations omitted) leaving no one in isolation" but at the same time giving
special attention to women as the "usual victims" of
The sole objective of injunctions is to preserve the status
violence and abuse, 64 nonetheless, it was eventually
quo until the trial court hears fully the merits of the case. It
agreed that men be denied protection under the same
bears stressing, however, that protection orders are
measure. We quote pertinent portions of the deliberations:
granted ex parte so as to protect women and their children
from acts of violence. To issue an injunction against such Wednesday, December 10, 2003
orders will defeat the very purpose of the law against Senator Pangilinan. I just wanted to place this
VAWC. on record, Mr. President. Some women's
Notwithstanding all these procedural flaws, we shall not groups have expressed concerns and relayed
shirk from our obligation to determine novel issues, or these concerns to me that if we are to include
domestic violence apart from against women
issues of first impression, with far-reaching implications.
as well as other members of the household,
We have, time and again, discharged our solemn duty as including children or the husband, they fear
final arbiter of constitutional issues, and with more reason that this would weaken the efforts to address
now, in view of private respondent's plea in her domestic violence of which the main victims or
Comment 59 to the instant Petition that we should put the the bulk of the victims really are the wives, the
challenge to the constitutionality of R.A. 9262 to rest. And spouses or the female partners in a
so we shall. relationship. We would like to place that on
record. How does the good Senator respond to
Intent of Congress in this kind of observation?
enacting R.A. 9262.
Page 193 of 458

Senator Estrada. Yes, Mr. President, there is to protect women's rights especially in the
this group of women who call themselves domestic environment.
"WIIR" Women in Intimate Relationship. They
As I said earlier, there are nameless,
do not want to include men in this domestic
countless, voiceless women who have not had
violence. But plenty of men are also being
the opportunity to file a case against their
abused by women. I am playing safe so I
spouses, their live-in partners after years, if not
placed here members of the family, prescribing
decade, of battery and abuse. If we broaden
penalties therefor and providing protective
the scope to include even the men, assuming
measures for victims. This includes the men,
they can at all be abused by the women or
children, live-in, common-law wives, and those
their spouses, then it would not equalize the
related with the family. 65
already difficult situation for women, Mr.
xxx xxx xxx President. aIcDCA

Wednesday, January 14, 2004 I think that the sponsor, based on our earlier
conversations, concurs with this position. I am
xxx xxx xxx
sure that the men in this Chamber who love
The President Pro Tempore. . . . SDITAC their women in their lives so dearly will agree
with this representation. Whether we like it or
Also, may the Chair remind the group that not, it is an unequal world. Whether we like it or
there was the discussion whether to limit this to not, no matter how empowered the women are,
women and not to families which was the issue we are not given equal opportunities especially
of the AWIR group. The understanding that I in the domestic environment where the macho
have is that we would be having a broader Filipino man would always feel that he is
scope rather than just women, if I remember stronger, more superior to the Filipino woman.
correctly, Madam sponsor.
xxx xxx xxx
Senator Estrada. Yes, Mr. President.
The President Pro Tempore. What does the
As a matter of fact, that was brought up by sponsor say?
Senator Pangilinan during the interpellation
period. Senator Estrada. Mr. President, before
accepting this, the committee came up with this
I think Senator Sotto has something to say to bill because the family members have been
that. included in this proposed measure since the
Senator Legarda. Mr. President, the reason I other members of the family other than women
am in support of the measure. Do not get me are also possible victims of violence. While
wrong. However, I believe that there is a need women are most likely the intended victims,
one reason incidentally why the measure
Page 194 of 458

focuses on women, the fact remains that in experts, sports groups and other affected
some relatively few cases, men also stand to sectors, Mr. President.
be victimized and that children are almost
Senator Sotto. Mr. President.
always the helpless victims of violence. I am
worried that there may not be enough The President Pro Tempore. Yes, with the
protection extended to other family members permission of the other senators.
particularly children who are excluded.
Although Republic Act No. 7610, for instance, Senator Sotto. Yes, with the permission of the
more or less, addresses the special needs of two ladies on the Floor.
abused children. The same law is inadequate. The President Pro Tempore. Yes, Sen. Vicente
Protection orders for one are not available in C. Sotto III is recognized.
said law.
Senator Sotto. I presume that the effect of the
I am aware that some groups are apprehensive proposed amendment of Senator Legarda
about granting the same protection to men, would be removing the "men and children" in
fearing that they may use this law to justify this particular bill and focus specifically on
their abusive behavior against women. women alone. That will be the net effect of that
However, we should also recognize that there proposed amendment. Hearing the rationale
are established procedures and standards in mentioned by the distinguished sponsor, Sen.
our courts which give credence to evidentiary Luisa "Loi" Ejercito Estrada, I am not sure now
support and cannot just arbitrarily and whether she is inclined to accept the proposed
whimsically entertain baseless complaints. cSCADE
amendment of Senator Legarda.
Mr. President, this measure is intended to I am willing to wait whether she is accepting
harmonize family relations and to protect the this or not because if she is going to accept
family as the basic social institution. Though I this, I will propose an amendment to the
recognize the unequal power relations between amendment rather than object to the
men and women in our society, I believe we amendment, Mr. President. EcATDH

have an obligation to uphold inherent rights


and dignity of both husband and wife and their xxx xxx xxx
immediate family members, particularly Senator Estrada. The amendment is accepted,
children. Mr. President.
While I prefer to focus mainly on women, I was The President Pro Tempore. Is there any
compelled to include other family members as objection?
a critical input arrived at after a series of
consultations/meetings with various NGOs, xxx xxx xxx
Page 195 of 458

Senator Sotto. . . . May I propose an Therefore, may I propose an amendment that,


amendment to the amendment. yes, we remove the aspect of the men in the
bill but not the children.
The President Pro Tempore. Before we act on
the amendment? Senator Legarda. I agree, Mr. President, with
the Minority Leader.
Senator Sotto. Yes, Mr. President.
The President Pro Tempore. Effectively then, it
The President Pro Tempore. Yes, please
will be women AND CHILDREN.
proceed.
Senator Sotto. Yes, Mr. President.
Senator Sotto. Mr. President, I am inclined to
believe the rationale used by the distinguished Senator Estrada. It is accepted, Mr. President.
proponent of the amendment. As a matter of
The President Pro Tempore. Is there any
fact, I tend to agree. Kung may maaabuso,
objection? [Silence] There being none, the
mas malamang iyong babae kaysa sa lalake.
amendment, as amended, is approved. 66
At saka iyong mga lalake, puwede na talagang
magulpi iyan. Okey lang iyan. But I cannot It is settled that courts are not concerned with the wisdom,
agree that we remove the children from this justice, policy, or expediency of a statute. 67 Hence, we
particular measure. dare not venture into the real motivations and wisdom of
So, if I may propose an amendment the members of Congress in limiting the protection against
violence and abuse under R.A. 9262 to women and
The President Pro Tempore. To the
children only. No proper challenge on said grounds may be
amendment.
entertained in this proceeding. Congress has made its
Senator Sotto. more than the women, the choice and it is not our prerogative to supplant this
children are very much abused. As a matter of judgment. The choice may be perceived as erroneous but
fact, it is not limited to minors. The abuse is not even then, the remedy against it is to seek its amendment
limited to seven, six, 5-year-old children. I have or repeal by the legislative. By the principle of separation of
seen 14, 15-year-old children being abused by
powers, it is the legislative that determines the necessity,
their fathers, even by their mothers. And it
breaks my heart to find out about these things.
adequacy, wisdom and expediency of any law. 68 We only
step in when there is a violation of the Constitution.
Because of the inadequate existing law on However, none was sufficiently shown in this case.
abuse of children, this particular measure will
update that. It will enhance and hopefully R.A. 9262 does not violate
prevent the abuse of children and not only the guaranty of equal protection
women. DEScaT of the laws.
SOTTO-LEGARDA AMENDMENTS
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Equal protection simply requires that all persons or things classification is that it be reasonable, which
similarly situated should be treated alike, both as to rights means that the classification should be based on
conferred and responsibilities imposed. The oft-repeated substantial distinctions which make for real
disquisition in the early case of Victoriano v. Elizalde Rope differences; that it must be germane to the
Workers' Union 69 is instructive: cSICHD
purpose of the law; that it must not be limited
to existing conditions only; and that it
The guaranty of equal protection of the laws is must apply equally to each member of the
not a guaranty of equality in the application of class. This Court has held that the standard is
the laws upon all citizens of the state. It is not, satisfied if the classification or distinction is
therefore, a requirement, in order to avoid the based on a reasonable foundation or rational
constitutional prohibition against inequality, that basis and is not palpably arbitrary. (Emphasis
every man, woman and child should be affected supplied)
alike by a statute. Equality of operation of
statutes does not mean indiscriminate operation Measured against the foregoing jurisprudential yardstick,
on persons merely as such, but on persons we find that R.A. 9262 is based on a valid classification as
according to the circumstances surrounding shall hereinafter be discussed and, as such, did not violate
them. It guarantees equality, not identity of the equal protection clause by favoring women over men
rights. The Constitution does not require that as victims of violence and abuse to whom the State
things which are different in fact be treated in law extends its protection.
IDAaCc

as though they were the same. The equal


protection clause does not forbid discrimination I. R.A. 9262 rests on substantial
as to things that are different. It does not prohibit distinctions.
legislation which is limited either in the object to The unequal power relationship between women and men;
which it is directed or by the territory within which
the fact that women are more likely than men to be victims
it is to operate.
of violence; and the widespread gender bias and prejudice
The equal protection of the laws clause of the against women all make for real differences justifying the
Constitution allows classification. Classification classification under the law. As Justice McIntyre succinctly
in law, as in the other departments of knowledge states, "the accommodation of differences . . . is the
or practice, is the grouping of things in essence of true equality." 70
speculation or practice because they agree with
one another in certain particulars. A law is not A. Unequal power relationship
invalid because of simple inequality. The very between men and women
idea of classification is that of inequality, so that
it goes without saying that the mere fact of According to the Philippine Commission on Women (the
inequality in no manner determines the matter of National Machinery for Gender Equality and Women's
constitutionality. All that is required of a valid Empowerment), violence against women (VAW) is deemed
Page 197 of 458

to be closely linked with the unequal power relationship Traditions subordinating women
between women and men otherwise known as "gender- have a long history rooted in
based violence". Societal norms and traditions dictate patriarchy the institutional rule
people to think men are the leaders, pursuers, providers, of men. Women were seen in
and take on dominant roles in society while women are virtually all societies to be
naturally inferior both physically
nurturers, men's companions and supporters, and take on
and intellectually. In ancient
subordinate roles in society. This perception leads to men Western societies, women
gaining more power over women. With power comes the whether slave, concubine or wife,
need to control to retain that power. And VAW is a form of were under the authority of men.
men's expression of controlling women to retain In law, they were treated as
power. 71HSaIET property.
The United Nations, which has long recognized VAW as a The Roman concept of patria potestas allowed
human rights issue, passed its Resolution 48/104 on the the husband to beat, or even kill, his wife if she
Declaration on Elimination of Violence Against Women on endangered his property right over her. Judaism,
December 20, 1993 stating that "violence against women is Christianity and other religions oriented towards
a manifestation of historically unequal power relations the patriarchal family strengthened the male
between men and women, which have led to domination dominated structure of society.
over and discrimination against women by men and to the English feudal law reinforced the tradition of
prevention of the full advancement of women, and that male control over women. Even the eminent
violence against women is one of the crucial social Blackstone has been quoted in his
mechanisms by which women are forced into subordinate commentaries as saying husband and wife were
positions, compared with men." 72 one and that one was the husband. However, in
the late 1500s and through the entire 1600s,
Then Chief Justice Reynato S. Puno traced the historical English common law began to limit the right of
and social context of gender-based violence and husbands to chastise their wives. Thus, common
developments in advocacies to eradicate VAW, in his law developed the rule of thumb, which allowed
remarks delivered during the Joint Launching of R.A. husbands to beat their wives with a rod or stick
9262 and its Implementing Rules last October 27, 2004, no thicker than their thumb.TcDAHS

the pertinent portions of which are quoted hereunder: In the later part of the 19th century, legal
History reveals that most societies sanctioned recognition of these rights to chastise wives or
the use of violence against women. The inflict corporeal punishment ceased. Even then,
patriarch of a family was accorded the right to the preservation of the family was given more
use force on members of the family under his importance than preventing violence to women.
control. I quote the early studies:
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The metamorphosis of the law on violence in the In an average 12-month period in


United States followed that of the English this country, approximately two
common law. In 1871, the Supreme Court of million women are the victims of
Alabama became the first appellate court to severe assaults by their male
strike down the common law right of a husband partners. In a 1985 survey,
to beat his wife: women reported that nearly one
of every eight husbands had
The privilege, ancient though it
assaulted their wives during the
may be, to beat one's wife with a