Constantino v Cuisia

The alter ego of the President is under the same Constitutional limitations in the exercise of his
power as the President.

Petitioners: Spouses Constantino and their minor children, Freedom from Debt Coalition

Respondents: Jose Cuisia in his capacity as Governor of the Central Bank, Ramon Del Rosario in
his capacity as Secretary of Finance, Emmanuel Pelaez in his capacity as Philippine Debt
Negotiating Chairman, and the National Treasurer

Nature: Petition for certiorari, prohibition and mandamus assailing contracts entered into
pursuant to the Philippine Comprehensive Financing Program for 1992 (Financing Program),
seeking to enjoin respondents from executing additional debt-relief contracts;

and urging the Court to issue an order compelling the Secretary of Justice to institute criminal
and administrative cases against respondents for acts which circumvent or negate the provisions
Art. XII of the Constitution.

Facts:

1. Petition was file on July 17, 1992 by petitioners and NGO which advocates “pro-people and
just Philippine debt policy.”
2. The Financing Program was the culmination of efforts that began during the term of
former Pres. Corazon Aquino to manage the country’s external debt problem through a
negotiation-oriented debt strategy involving cooperation and negotiation with foreign
creditors. Pursuant to this, the Aquino government entered into three restructuring
agreements with representatives of foreign creditor governments on 1986-1991.
3. On Feb. 28, 1992, the Philippine Debt Negotiating Team negotiated an agreement with the
country’s Bank Advisory Committee on the Financing Program which was characterized as
“a multi-option financing package”.
4. The Program was schedule to be executed by respondents in behalf of the Republic, but
petitioners allege that even prior to the execution of the Program, respondents had
already implemented its “buyback component” when the Philippines bought back P1.26
billion of external debts pursuant to the program.
5. Petitioners characterize the Financing Program providing two options:
a. Cash buyback of portions of the Philippine foreign debt at a discount, or;
b. Allow creditors to convert existing Philippine debt instruments into any of three
kinds of bonds/securities:
i. New money bonds with a five-year grace period and 17 years final
maturity
ii. Interest reduction bonds with a maturity of 25 years
 iii. Principal-collateralized interest-reduction bonds with a maturity of 25
years
6. Respondents say that the Financing Program would cover about $5.3 billion of foreign
commercial debts. The program carried three basic options from which foreign bank
lenders could choose:
a. Lend money
b. Exchange existing restructured Philippine debts with an interest reduction bond
c. Exchange the same Philippine debts with principal collateralized interest
reduction bond

Procedural issues:

1. Locus standi – petitioners have local standi, a taxpayer is allowed to sue where there is a
claim that public funds are illegally disbursed
2. Transcendental importance – a ruling on the case will not only determine validity of the
subject, but also create a precedent for other debts or debt related contracts executed in
behalf of the President by the Secretary of Finance.
3. Set aside procedural barring of standing and rule on justiciable issues by reason of the very
nature of the power wielded by the Pres., the effect of using this power on the economy,
and on the well-being of in general of the Filipino nation.

Issues:

1. WoN debt-release contracts entered into pursuant to the Financing Program as beyond
the powers granted to the President under Sec. 20, Art. VII of the Constitution.
2. Assuming the contracts are constitutionally permissible, WoN it is only the President who
may exercise the power to enter into these contracts and such power may not be delegated
to the respondents
3. WoN Financing Program violates several constitutional policies and that contracts
executed or to be executed pursuant thereto were or will be done by respondents with
grave abuse of discretion amounting to lack or excess of jurisdiction

Held:

First issue (re: Sec. 20, Art. VII)

Petitioner submits that the buyback and bond-conversion schemes do not constitute the loan
“contract” or “guarantee” contemplated in the Constitution.

Sec. 20, Art. VII of the Constitution provides:

“The President may contract or guarantee foreign loans in behalf of the Republic of the
Philippines with the prior concurrence of the Monetary Board and subject to such limitations as
may be provided under law. The Monetary Board shall, within thirty days from the end of every
quarter of the calendar year, submit to the Congress a complete report of its decisions on
applications for loans to be contracted or guaranteed by the government or government-owned
and controlled corporations which could have the effect of increasing the foreign debt, and
containing other matters as may be provided by law.”

On Bond-Conversion

Loans – transactions wherein the owner of a property allows another party to use the property
and where customarily, the latter promises to return the property after a specified period with
payment for its use, called interest.

Bonds – interest-bearing or discounted government or corporate securities that obligate the

issuer to pay the bond-holder a specified sum of money, usually at specific interval, and to repay
the principal amount of the loan at maturity

An investor who purchases a bond is lending money to the issuer, and the bond represents the
issuer’s contractual promise to pay interest and repay principal according to specific terms.

The Constitution allows the president to contract and guarantee foreign loans. It makes no
prohibition on the issuance of certain kinds of loans or distinctions as to which kinds of debt
instruments are more onerous than others. The only limitations are provided by law, such as R.A.
245 (An Act Authorizing the Secretary of Finance to Borrow to Meet Public Expenditures
Authorized by Law, and for Other Purposes). This allows foreign loans to be contracted in
the form of bonds.

On the Buyback Scheme

The legislative has promulgated a law ordaining an automatic appropriations provision for
debt-servicing by virtue of which the president is empowered to execute debt payments without
the need for further appropriations.

Legal authority for the buyback of loans is established under Section 2 of RA 240 where:

The Secretary of Finance shall cause to be paid out of any moneys in the National Treasury
not otherwise appropriated, or from any sinking funds provided for the purpose by law,
any interest falling due, or accruing on any portion of the public debt authorized by law.
He shall also cause to be paid out of any such money, or from any such sinking funds the
principal amount of any obligations which have matured.

Since buyback scheme is neither a guarantee nor a loan since it underlying intent is to extinguish
debts, petitioners suggest that contracts entered into pursuant to this are unconstitutional for not
being among those contemplated in Sec. 20, Art VII of the Constitution.

The fact that the Constitution does not explicitly bar the President from exercising a
power does not mean that he or she does not have that power.
 Second issue (re: delegation)

Petitioners: the power to incur foreign debts is expressly reserved by the Constitution in the
President alone.

This is negated by explicit constitutional and legal imprimaturs, as well as the doctrine of
qualified political agency.

It falls upon the Secretary of Finance as the alter ego of the President regarding “the sound and
efficient management of the financial resources of the Government”.

Certain powers vested in the President which may not be delegated or exercised by an agent or
alter ego of the president are the (1) declaration of martial law, (2) the suspension of the writ of
habeas corpus, and the (3) exercise of pardoning power notwithstanding the judicial
determination of guilt of the accused. This list is not exclusive, but there must be a showing that
the executive power in question is of similar gravitas or exceptional import.

It cannot be concluded that the power to contract or guarantee foreign debts falls within the same
exceptional class.

However, the agent of the President shall be under the same restrictions as the President.

Third issue (re: grave abuse of discretion and violation of constitutional policies)

Petitioners argue that the Financing Program violates constitutional state policies to promote
social order that will “ensure the prosperity and independence of the nation” and “free the people
from poverty,” foster “social justice in all phases of national development,” and “develop a self-
reliant and independent national economy effectively controlled by Filipinos.”

Respondents cite various studies showing support for their acts, such as (1) a DoF study showing
that as a result of implementation of voluntary debt reductions schemes, the country’s debt stock
was reduced by $4.4 billion, (2) revelations made by independent individuals made in a hearing
before the Senate Committee on Economic Affairs indicating that the assailed agreements would
bring about substantial benefits to the country, and (3) the Joint Legislative-Executive Foreign
Debt Council’s endorsement of the approval of the financing package containing the debt relief
agreements and issuance of a Motion to Urge the Philippine Debt Negotiating Panel to continue
with the negotiation on the aforesaid package.

In addition, respondents say that these are political questions.