You are on page 1of 13

/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.

doc \ 1

Agan v PIATCO
On October 16, 1996, the PBAC opened the third envelope submitted by AEDC and the
Facts: [PBAC = AEDC(bidder) v Paircargo(bidder)] Paircargo Consortium containing their respective financial proposals.
In August 1989, the DOTC engaged the services of Aeroport de Paris (ADP) to conduct a
comprehensive study of the Ninoy Aquino International Airport (NAIA) and determine whether Thus, the PBAC formally informed AEDC that it had accepted the price proposal submitted by
the present airport can cope with the traffic development up to the year 2010. the Paircargo Consortium, and gave AEDC 30 working days or until November 28, 1996 within
which to match the said bid, otherwise, the project would be awarded to Paircargo.
Some time in 1993, six business leaders consisting of John Gokongwei, Andrew Gotianun,
Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with then President Fidel V. As AEDC failed to match the proposal within the 30-day period, then DOTC Secretary
Ramos to explore the possibility of investing in the construction and operation of a new Amado Lagdameo, on December 11, 1996, issued a notice to Paircargo Consortium
international airport terminal. They formed the Asia’s Emerging Dragon Corp. (AEDC) AEDC regarding AEDC’s failure to match the proposal.
submitted an unsolicited proposal to the Government through the DOTC/MIAA for the
development of NAIA International Passenger Terminal III (NAIA IPT III) under a build-operate- On February 27, 1997, Paircargo Consortium incorporated into Philippine International Airport
and-transfer arrangement pursuant to RA 6957 as amended by RA 7718 (BOT Law). Terminals Co., Inc. (PIATCO).

On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting the AEDC subsequently protested the alleged undue preference given to PIATCO and
Prequalification Bids and Awards Committee (PBAC) for the implementation of the NAIA IPT III reiterated its objections as regards the prequalification of PIATCO.
project.
On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a Petition for
On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders to a pre-bid Declaration of Nullity of the Proceedings, Mandamus and Injunction against the Secretary
conference on July 29, 1996. of the DOTC, the Chairman of the PBAC, the voting members of the PBAC and Pantaleon
D. Alvarez, in his capacity as Chairman of the PBAC Technical Committee.
On August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents.
On July 9, 1997, the DOTC issued the notice of award for the project to PIATCO.
On September 20, 1996, the consortium composed of People’s Air Cargo and
Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and On July 12, 1997, the Government, granted PIATCO the franchise to operate and maintain
Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium) submitted their the Ninoy Aquino International Airport Passenger Terminal III” (1997 Concession
competitive proposal to the PBAC. Agreement) during the concession period and to collect the fees, rentals and other
charges in accordance with the rates or schedules stipulated in the 1997 Concession
On September 23, 1996, the PBAC opened the first envelope containing the Agreement. Concession period shall be for twenty-five (25) years commencing from the
prequalification documents of the Paircargo Consortium. On the following day, in-service date, and may be renewed at the option of the Government for a period not
September 24, 1996, the PBAC prequalified the Paircargo Consortium. exceeding twenty-five (25) years. At the end of the concession period, PIATCO shall
transfer the development facility to MIAA.
On September 26, 1996, AEDC informed the PBAC in writing of its reservations as
regards the Paircargo Consortium, which include: On November 26, 1998, the Government and PIATCO signed an Amended and Restated
a. The lack of corporate approvals and financial capability of PAIRCARGO; Concession Agreement (ARCA).
b. The lack of corporate approvals and financial capability of PAGS;
c. The prohibition imposed by RA 337, as amended (the General Banking Act) on the Subsequently, the Government and PIATCO signed three Supplements to the ARCA. I and III.
amount that Security Bank could legally invest in the project;
d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA
prequalification purposes; and Terminals I and II, had existing concession contracts with various service providers to offer
e. The appointment of Lufthansa as the facility operator, in view of the Philippine international airline airport services, such as in-flight catering, passenger handling, ramp and
requirement in the operation of a public utility. ground support, aircraft maintenance and provisions, cargo handling and warehousing, and
other services, to several international airlines at the NAIA.
The PBAC gave its reply on October 2, 1996, informing AEDC that it had considered the
issues raised by the latter, and that based on the documents submitted by Paircargo and On September 17, 2002, the workers of the international airline service providers,
the established prequalification criteria, the PBAC had found that the challenger, claiming that they stand to lose their employment upon the implementation of the
Paircargo, had prequalified to undertake the project. The Secretary of the DOTC questioned agreements, filed before this Court a petition for prohibition to enjoin the
approved the finding of the PBAC. enforcement of said agreements.

The PBAC then proceeded with the opening of the second envelope of the Paircargo On October 15, 2002, the service providers, joining the cause of the petitioning workers,
Consortium which contained its Technical Proposal. filed a motion for intervention and a petition-in-intervention.

On October 7, 1996, AEDC again manifested its objections and requested that it be furnished On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and Constantino
with excerpts of the PBAC meeting and the accompanying technical evaluation report where Jaraula filed a similar petition with this Court.
each of the issues they raised were addressed.
/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.doc \ 2

On November 6, 2002, several employees of the MIAA likewise filed a petition assailing compel the Government and/or the House of Representatives to appropriate funds necessary to
the legality of the various agreements. comply with the provisions therein

On December 11, 2002. another group of Congressmen moved to intervene in the case as Although we are not unmindful of the cases of Imus Electric Co. v. Municipality of Imus and
Respondents-Intervenors. Gonzales v. Raquiza, wherein this Court held that appropriation must be made only on
amounts immediately demandable, public interest demands that we take a more liberal
During the pendency of the case before this Court, President Gloria Macapagal Arroyo, view in determining whether the petitioners suing as legislators, taxpayers and citizens
on November 29, 2002, in her speech at the 2002 Golden Shell Export Awards at have locus standi to file the instant petition. In Kilosbayan, Inc. v. Guingona, this Court
Malacañang Palace, stated that she will not “honor (PIATCO) contracts which the held “[i]n line with the liberal policy of this Court on locus standi, ordinary taxpayers,
Executive Branch’s legal offices have concluded (as) null and void.” members of Congress, and even association of planters, and non-profit civic
organizations were allowed to initiate and prosecute actions before this Court to question
Respondent PIATCO filed its Comments to the present petitions on November 7 and 27, the constitutionality or validity of laws, acts, decisions, rulings, or orders of various
2002. government agencies or instrumentalities.”

In their consolidated Memorandum, the Office of the Solicitor General and the Office of I. Procedural Issue
the Government Corporate Counsel prayed that the present petitions be given due course B. WON requirement of Hierarchy of Courts is a bar against SC jurisdiction
and that judgment be rendered declaring the 1997 Concession Agreement, the ARCA and
the Supplements thereto void for being contrary to the Constitution, the BOT Law and its No.
Implementing Rules and Regulations. After a thorough study and careful evaluation of the issues involved, this Court is of the
view that the crux of the instant controversy involves significant legal questions. The
On March 6, 2003, respondent PIATCO informed the Court that on March 4, 2003 PIATCO facts necessary to resolve these legal questions are well established and, hence, need
commenced arbitration proceedings before the International Chamber of Commerce, not be determined by a trial court.
International
The rule on hierarchy of courts will not also prevent this Court from assuming jurisdiction
Issues/Ratio: over the cases at bar. The said rule may be relaxed when the redress desired cannot be
I. Procedural Issue obtained in the appropriate courts or where exceptional and compelling circumstances
A. WON Petitioners’ have legal standing to file the present Petitions justify availment of a remedy within and calling for the exercise of this Court’s primary
jurisdiction It is easy to discern that exceptional circumstances exist in the cases at bar that call
Yes. for the relaxation of the rule. Both petitioners and respondents agree that these cases are of
a. G.R. Nos. 155001 and 155661 transcendental importance as they involve the construction and operation of the country’s
Individual petitioners are employees of various service providers having separate concession premier international airport. Moreover, the crucial issues submitted for resolution are of first
contracts with MIAA and continuing service agreements with various international airlines to impression and they entail the proper legal interpretation of key provisions of the Constitution,
provide in-flight catering, passenger handling, ramp and ground support, aircraft maintenance the BOT Law and its Implementing Rules and Regulations.
and provisions, cargo handling and warehousing and other services. Also included as petitioners
are labor unions MIASCOR Workers Union-National Labor Union and Philippine Airlines I Procedural Issue
Employees Association. These petitioners filed the instant action for prohibition as taxpayers C. WON the Commencement of Arbitration Proceedings by PIATCO is a bar against SC
and as parties whose rights and interests stand to be violated by the implementation of the Jurisdiction
PIATCO Contracts.
No.
In G.R. No. 155661, petitioners constitute employees of MIAA and Samahang Manggagawa sa The Court is aware that arbitration proceedings pursuant to Section 10.02 of the ARCA have
Paliparan ng Pilipinas - a legitimate labor union and accredited as the sole and exclusive been filed at the instance of respondent PIATCO. Again, we hold that the arbitration step taken
bargaining agent of all the employees in MIAA. They filed the petition as taxpayers and persons by PIATCO will not oust this Court of its jurisdiction over the cases at bar.
who have a legitimate interest to protect in the implementation of the PIATCO Contracts.
In Del Monte Corporation-USA v. Court of Appeals, even after finding that the arbitration
We hold that petitioners have the requisite standing. In the above-mentioned cases, clause in the Distributorship Agreement in question is valid and the dispute between the
petitioners have a direct and substantial interest to protect by reason of the parties is arbitrable, this Court affirmed the trial court’s decision denying petitioner’s
implementation of the PIATCO Contracts. They stand to lose their source of livelihood, a Motion to Suspend Proceedings pursuant to the arbitration clause under the contract. In
property right which is zealously protected by the Constitution. Moreover, subsisting so ruling, this Court held that as contracts produce legal effect between the parties, their assigns
concession agreements between MIAA and petitioners-intervenors and service contracts and heirs, only the parties to the Distributorship Agreement are bound by its terms, including the
between international airlines and petitioners-intervenors stand to be nullified or arbitration clause stipulated therein. This Court ruled that arbitration proceedings could be called
terminated by the operation of the NAIA IPT III under the PIATCO Contracts. for but only with respect to the parties to the contract in question. Considering that there are
parties to the case who are neither parties to the Distributorship Agreement nor heirs or assigns
b. G.R. No. 155547 of the parties thereto, this Court, citing its previous ruling in Salas, Jr. v. Laperal Realty
In G.R. No. 155547, petitioners filed the petition for prohibition as members of the House of Corporation, held that to tolerate the splitting of proceedings by allowing arbitration as to
Representatives, citizens and taxpayers. They allege that as members of the House of some of the parties on the one hand and trial for the others on the other hand would, in
Representatives, they are especially interested in the PIATCO Contracts, because the contracts effect, result in multiplicity of suits, duplicitous procedure and unnecessary delay. Thus,
/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.doc \ 3

we ruled that the interest of justice would best be served if the trial court hears and adjudicates
the case in a single and complete proceeding. While it would be proper at this juncture to end the resolution of the instant controversy,
as the legal effects of the disqualification of respondent PIATCO’s predecessor would
It is established that petitioners in the present cases who have presented legitimate interests in come into play and necessarily result in the nullity of all the subsequent contracts
the resolution of the controversy are not parties to the PIATCO Contracts. Accordingly, they entered by it in pursuance of the project, the Court feels that it is necessary to discuss in
cannot be bound by the arbitration clause provided for in the ARCA and hence, cannot be full the pressing issues of the present controversy for a complete resolution thereof.
compelled to submit to arbitration proceedings.
II Substantive Issue
II. Substantial Issue B. Is the 1997 Concession Agreement valid?
A. WON PIATCO is a qualified bidder
No.
No. It is inherent in public biddings that there shall be a fair competition among the bidders. The
The Paircargo Consortium or any challenger to the unsolicited proposal of AEDC has to specifications in such biddings provide the common ground or basis for the bidders. The
show that it possesses the requisite financial capability to undertake the project in the specifications should, accordingly, operate equally or indiscriminately upon all bidders.
minimum amount of 30% of the project cost through (i) proof of the ability to provide a
minimum amount of equity to the project, and (ii) a letter testimonial from reputable The Court agrees with the contention of counsel for the plaintiffs that the due execution
banks attesting that the project proponent or members of the consortium are banking of a contract after public bidding is a limitation upon the right of the contracting parties to
with them, that they are in good financial standing, and that they have adequate alter or amend it without another public bidding, for otherwise what would a public
resources. bidding be good for if after the execution of a contract after public bidding, the
contracting parties may alter or amend the contract, or even cancel it, at their will? Public
As the minimum project cost was estimated to be US$350,000,000.00 or roughly biddings are held for the protection of the public, and to give the public the best possible
P9,183,650,000.00, the Paircargo Consortium had to show to the satisfaction of the PBAC that advantages by means of open competition between the bidders. He who bids or offers the best
it had the ability to provide the minimum equity for the project in the amount of at least terms is awarded the contract subject of the bid, and it is obvious that such protection and best
P2,755,095,000.00. possible advantages to the public will disappear if the parties to a contract executed after public
bidding may alter or amend it without another previous public bidding.
The maximum amount that Security Bank could validly invest in the Paircargo
Consortium is only P528,525,656.55, representing 15% of its entire net worth. The total  Modification on the Public Utility Revenues and Non-Public Utility Revenues that may
net worth therefore of the Paircargo Consortium, after considering the maximum amounts be collected by PIATCO
that may be validly invested by each of its members is P558,384,871.55 or only 6.08% of
the project cost, an amount substantially less than the prescribed minimum equity Under the 1997 Concession Agreement, with respect to (1) vehicular parking fee, (2) porterage
investment required for the project in the amount of P2,755,095,000.00 or 30% of the fee and (3) greeter/well wisher fee, all that MIAA can do is to require PIATCO to explain and
project cost. justify the fees set by PIATCO. In the draft Concession Agreement, vehicular parking fee is
subject to MIAA regulation and approval under the second paragraph of Section 6.03 thereof
The purpose of pre-qualification in any public bidding is to determine, at the earliest while porterage fee is covered by the first paragraph of the same provision. There is an obvious
opportunity, the ability of the bidder to undertake the project. Thus, with respect to the relaxation of the extent of control and regulation by MIAA with respect to the particular fees that
bidder’s financial capacity at the pre-qualification stage, the law requires the government agency may be charged by PIATCO.
to examine and determine the ability of the bidder to fund the entire cost of the project by
considering the maximum amounts that each bidder may invest in the project at the time of pre- Moreover, with respect to the third category of fees that may be imposed and collected by
qualification. PIATCO, i.e., new fees and charges that may be imposed by PIATCO which have not been
previously imposed or collected at the Ninoy Aquino International Airport Passenger Terminal I,
The PBAC should not be allowed to speculate on the future financial ability of the bidder under Section 6.03 of the draft Concession Agreement MIAA has reserved the right to regulate
to undertake the project on the basis of documents submitted. This would open doors to the same under the same conditions that MIAA may regulate fees under the first category, i.e.,
abuse and defeat the very purpose of a public bidding. This is especially true in the case periodic adjustment of once every two years in accordance with a prescribed parametric formula
at bar which involves the investment of billions of pesos by the project proponent. The and effective only upon written approval by MIAA. However, under the 1997 Concession
relevant government authority is duty-bound to ensure that the awardee of the contract Agreement, adjustment of fees under the third category is not subject to MIAA regulation.
possesses the minimum required financial capability to complete the project. To allow the
PBAC to estimate the bidder’s future financial capability would not secure the viability With respect to terminal fees that may be charged by PIATCO, as shown earlier, this was
and integrity of the project. included within the category of “Public Utility Revenues” under the 1997 Concession Agreement.
This classification is significant because under the 1997 Concession Agreement, “Public Utility
Thus, if the maximum amount of equity that a bidder may invest in the project at the time the Revenues” are subject to an “Interim Adjustment” of fees upon the occurrence of certain
bids are submitted falls short of the minimum amounts required to be put up by the bidder, said extraordinary events specified in the agreement. However, under the draft Concession
bidder should be properly disqualified. Considering that at the pre-qualification stage, the Agreement, terminal fees are not included in the types of fees that may be subject to “Interim
maximum amounts which the Paircargo Consortium may invest in the project fell short of the Adjustment.”
minimum amounts prescribed by the PBAC, we hold that Paircargo Consortium was not a
qualified bidder. Thus the award of the contract by the PBAC to the Paircargo Consortium, Finally, under the 1997 Concession Agreement, “Public Utility Revenues,” except terminal fees,
a disqualified bidder, is null and void. are denominated in US Dollars while payments to the Government are in Philippine Pesos. In
/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.doc \ 4

the draft Concession Agreement, no such stipulation was included. PIATCO is able to enjoy the A regulation of the matter which excludes any of these factors destroys the distinctive
benefits of depreciations of the Philippine Peso, while being effectively insulated from the character of the system and thwarts the purpose of its adoption. 1[46] These are the basic
detrimental effects of exchange rate fluctuations. parameters which every awardee of a contract bidded out must conform to, requirements
of financing and borrowing notwithstanding. Thus, upon a concrete showing that, as in
When taken as a whole, the changes under the 1997 Concession Agreement with respect this case, the contract signed by the government and the contract-awardee is an entirely
to reduction in the types of fees that are subject to MIAA regulation and the relaxation of different contract from the contract bidded, courts should not hesitate to strike down said
such regulation with respect to other fees are significant amendments that substantially contract in its entirety for violation of public policy on public bidding. A strict adherence
distinguish the draft Concession Agreement from the 1997 Concession Agreement. The on the principles, rules and regulations on public bidding must be sustained if only to
1997 Concession Agreement, in this respect, clearly gives PIATCO more favorable terms preserve the integrity and the faith of the general public on the procedure.
than what was available to other bidders at the time the contract was bidded out. It is not
very difficult to see that the changes in the 1997 Concession Agreement translate to direct In view of the above discussion, the fact that the foregoing substantial amendments were
and concrete financial advantages for PIATCO which were not available at the time the made on the 1997 Concession Agreement renders the same null and void for being
contract was offered for bidding. It cannot be denied that under the 1997 Concession contrary to public policy. These amendments convert the 1997 Concession Agreement to
Agreement only “Public Utility Revenues” are subject to MIAA regulation. Adjustments of an entirely different agreement from the contract bidded out or the draft Concession
all other fees imposed and collected by PIATCO are entirely within its control. Moreover, Agreement.
with respect to terminal fees, under the 1997 Concession Agreement, the same is further
subject to “Interim Adjustments” not previously stipulated in the draft Concession
Agreement. Finally, the change in the currency stipulated for “Public Utility Revenues” III WON there exists an illegal Direct Government Guarantee
under the 1997 Concession Agreement, except terminal fees, gives PIATCO an added
benefit which was not available at the time of bidding. Yes.
Article IV, Section 4.04(b) and (c), in relation to Article 1.06, of the 1997 Concession Agreement
 Assumption by the Government of the liabilities of PIATCO in the event of the latter’s provides: Section 4.04 Assignment
default ….
(b) In the event Concessionaire should default in the payment of an Attendant
Under the portions of Section 4.04 in relation to the definition of “Attendant Liabilities,” Liability, and the default resulted in the acceleration of the payment due date of the
default by PIATCO of its loans used to finance the NAIA IPT III project triggers the Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and
occurrence of certain events that leads to the assumption by the Government of the Concessionaire shall immediately inform GRP in writing of such default. GRP shall
liability for the loans. Only in one instance may the Government escape the assumption of within one hundred eighty (180) days from receipt of the joint written notice of the Unpaid
PIATCO’s liabilities, i.e., when the Government so elects and allows a qualified operator to take Creditors and Concessionaire, either (i) take over the Development Facility and assume
over as Concessionaire. However, this circumstance is dependent on the existence and the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified to be substituted as
availability of a qualified operator who is willing to take over the rights and obligations of PIATCO concessionaire and operator of the Development facility in accordance with the terms and
under the contract, a circumstance that is not entirely within the control of the Government. conditions hereof, or designate a qualified operator acceptable to GRP to operate the
Development Facility, likewise under the terms and conditions of this Agreement; Provided, that
Without going into the validity of this provision at this juncture, suffice it to state that Section 4.04 if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and
of the 1997 Concession Agreement may be considered a form of security for the loans PIATCO Concessionaire written notice of its choice, GRP shall be deemed to have elected to take over
has obtained to finance the project, an option that was not made available in the draft the Development Facility with the concomitant assumption of Attendant Liabilities.….
Concession Agreement. Section 4.04 is an important amendment to the 1997 Concession
Agreement because it grants PIATCO a financial advantage or benefit which was not previously It is clear from the above-quoted provisions that Government, in the event that PIATCO
made available during the bidding process. This financial advantage is a significant modification defaults in its loan obligations, is obligated to pay “all amounts recorded and from time to
that translates to better terms and conditions for PIATCO. time outstanding from the books” of PIATCO which the latter owes to its creditors, These
amounts include “all interests, penalties, associated fees, charges, surcharges,
We agree that it is not inconsistent with the rationale and purpose of the BOT Law to allow the indemnities, reimbursements and other related expenses.” This obligation of the
project proponent or the winning bidder to obtain financing for the project, especially in this case Government to pay PIATCO’s creditors upon PIATCO’s default would arise if the
which involves the construction, operation and maintenance of the NAIA IPT III. Expectedly, Government opts to take over NAIA IPT III. It should be noted, however, that even if the
compliance by the project proponent of its undertakings therein would involve a substantial Government chooses the second option, which is to allow PIATCO’s unpaid creditors
amount of investment. It is therefore inevitable for the awardee of the contract to seek alternate operate NAIA IPT III, the Government is still at a risk of being liable to PIATCO’s creditors
sources of funds to support the project. Be that as it may, this Court maintains that should the latter be unable to designate a qualified operator within the prescribed period.
amendments to the contract bidded upon should always conform to the general policy on In effect, whatever option the Government chooses to take in the event of PIATCO’s
public bidding if such procedure is to be faithful to its real nature and purpose. By its failure to fulfill its loan obligations, the Government is still at a risk of assuming PIATCO’s
very nature and characteristic, competitive public bidding aims to protect the public outstanding loans. This is due to the fact that the Government would only be free from
interest by giving the public the best possible advantages through open competition. It assuming PIATCO’s debts if the unpaid creditors would be able to designate a qualified operator
has been held that the three principles in public bidding are (1) the offer to the public; (2) within the period provided for in the contract. Thus, the Government’s assumption of liability
opportunity for competition; and (3) a basis for the exact comparison of bids. is virtually out of its control. The Government under the circumstances provided for in
the 1997 Concession Agreement is at the mercy of the existence, availability and

1
/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.doc \ 5

willingness of a qualified operator. The above contractual provisions constitute a direct and illimitable of powers.” Its exercise therefore must not be unreasonably hampered nor its
government guarantee which is prohibited by law. exercise be a source of obligation by the government in the absence of damage due to
arbitrariness of its exercise. Thus, requiring the government to pay reasonable
The ARCA also provides for a direct guarantee by the government to pay PIATCO’s loans not compensation for the reasonable use of the property pursuant to the operation of the
only to its Senior Lenders but all other entities who provided PIATCO funds or services upon business contravenes the Constitution.
PIATCO’s default in its loan obligation with its Senior Lenders. The fact that the Government’s
obligation to pay PIATCO’s lenders for the latter’s obligation would only arise after the Senior V WON there exists Monopolies that must be regulated
Lenders fail to appoint a qualified nominee or transferee does not detract from the fact that,
should the conditions as stated in the contract occur, the ARCA still obligates the Government to Yes.
pay any and all amounts owed by PIATCO to its lenders in connection with NAIA IPT III. Article XII, Section 19 of the 1987 Constitution states: The state shall regulate or prohibit
monopolies when the public interest so requires. No combinations in restraint of trade or unfair
Worse, the conditions that would make the Government liable for PIATCO’s debts is triggered by competition shall be allowed. Clearly, monopolies are not per se prohibited by the Constitution.
PIATCO’s own default of its loan obligations to its Senior Lenders to which loan contracts the Nonetheless, a determination must first be made as to whether public interest requires a
Government was never a party to. The Government was not even given an option as to what monopoly.
course of action it should take in case PIATCO defaulted in the payment of its senior loans. The
Government, upon PIATCO’s default, would be merely notified by the Senior Lenders of the In the cases at bar, PIATCO, under the 1997 Concession Agreement and the ARCA, is
same and it is the Senior Lenders who are authorized to appoint a qualified nominee or granted the “exclusive right to operate a commercial international passenger terminal
transferee. within the Island of Luzon” at the NAIA IPT III. This is with the exception of already existing
international airports in Luzon such as those located in the Subic Bay Freeport Special
The proscription against government guarantee in any form is one of the policy considerations Economic Zone (“SBFSEZ”), Clark Special Economic Zone (“CSEZ”) and in Laoag City. As such,
behind the BOT Law. Clearly, in the present case, the ARCA obligates the Government to pay upon commencement of PIATCO’s operation of NAIA IPT III, Terminals 1 and 2 of NAIA would
for all loans, advances and obligations arising out of financial facilities extended to PIATCO for cease to function as international passenger terminals. This, however, does not prevent MIAA to
the implementation of the NAIA IPT III project should PIATCO default in its loan obligations to its use Terminals 1 and 2 as domestic passenger terminals or in any other manner as it may deem
Senior Lenders and the latter fails to appoint a qualified nominee or transferee. This in effect appropriate except those activities that would compete with NAIA IPT III in the latter’s operation
would make the Government liable for PIATCO’s loans should the conditions as set forth as an international passenger terminal. The right granted to PIATCO to exclusively operate
in the ARCA arise. This is a form of direct government guarantee. NAIA IPT III would be for a period of twenty-five (25) years from the In-Service Date and
renewable for another twenty-five (25) years at the option of the government. Both the
IV. WON temporary takeover of business in circumstances of public interest deserves 1997 Concession Agreement and the ARCA further provide that, in view of the exclusive
compensation right granted to PIATCO, the concession contracts of the service providers currently
servicing Terminals 1 and 2 would no longer be renewed and those concession contracts
No. whose expiration are subsequent to the In-Service Date would cease to be effective on
Article XII, Section 17 of the 1987 Constitution provides for the right of the State in times of the said date
national emergency, and in the exercise of its police power, to temporarily take over the
operation of any business affected with public interest. The operation of an international passenger airport terminal is no doubt an undertaking
imbued with public interest. The constitution mandates that monopoly which is not prohibited
Article V, Section 5.10 (c) of the 1997 Concession Agreement provides: must be regulated. The right granted to the public utility may be exclusive but the exercise
Section 5.10 Temporary Take-over of operations by GRP. of the right cannot run riot. Thus, while PIATCO may be authorized to exclusively operate
…. NAIA IPT III as an international passenger terminal, the Government, through the MIAA,
(c) In the event the development Facility or any part thereof and/or the operations of has the right and the duty to ensure that it is done in accord with public interest.
PIATCO’s right to operate NAIA IPT III cannot also violate the rights of third parties.
Concessionaire or any part thereof, become the subject matter of or be included
in any notice, notification, or declaration concerning or relating to acquisition,
We hold that while the service providers presently operating at NAIA Terminal 1 do not
seizure or appropriation by GRP in times of war or national emergency, GRP
have an absolute right for the renewal or the extension of their respective contracts,
shall, by written notice to Concessionaire, immediately take over the
those contracts whose duration extends beyond NAIA IPT III’s In-Service-Date should not
operations of the Terminal and/or the Terminal Complex. During such take
be unduly prejudiced. These contracts must be respected not just by the parties thereto
over by GRP, the Concession Period shall be suspended; provided, that
but also by third parties. PIATCO cannot, by law and certainly not by contract, render a
upon termination of war, hostilities or national emergency, the operations
valid and binding contract nugatory.
shall be returned to Concessionaire, at which time, the Concession period
shall commence to run again. Concessionaire shall be entitled to
Holding: The 1997 Concession Agreement, the Amended and Restated Concession
reasonable compensation for the duration of the temporary take over by
Agreement and the Supplements thereto are set aside for being null and void.
GRP …
In sum, this Court rules that in view of the absence of the requisite financial capacity
PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision
of the Paircargo Consortium, predecessor of respondent PIATCO, the award by the
on temporary government takeover and obligate the government to pay “reasonable cost
PBAC of the contract for the construction, operation and maintenance of the NAIA IPT
for the use of the Terminal and/or Terminal Complex. Clearly, the State in effecting the
III is null and void.
temporary takeover is exercising its police power. Police power is the “most essential, insistent,
/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.doc \ 6

Further, considering that the 1997 Concession Agreement contains material and enjoin the Greater Metropolitan Manila Solid Waste Management Committee and MMDA from
substantial amendments, which amendments had the effect of converting the 1997 implementing the assailed resolution and disregarding the Award to, and the BOT contract with,
Concession Agreement into an entirely different agreement from the contract bidded JANCOM, and from making another award in its place. On May 29, 2000, the trial court
upon, the 1997 Concession Agreement is similarly null and void for being contrary to rendered a decision, the dispositive portion of which reads:
public policy.
JANCOM wins in CFI. Instead of appealing the decision, MMDA filed a special civil action for
The provisions under Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997 certiorari with prayer for a temporary restraining order with the Court of Appeals which was later
Concession Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA, docketed therein as CA-G.R. SP No. 59021.
which constitute a direct government guarantee expressly prohibited by, among
others, the BOT Law and its Implementing Rules and Regulations are also null and MMDA’s motion for reconsideration of said decision having been denied, MMDA filed the instant
void. The Supplements, being accessory contracts to the ARCA, are likewise null and petition, alleging that the Court of Appeals gravely erred in finding that:
void. 1) There is a valid and binding contract between the Republic of the Philippines and
JANCOM given that: a) the contract does not bear the signature of the President of the
MMDA v JANCO Philippines; b) the conditions precedent specified in the contract were not complied with; and c)
there was no valid notice of award.
Facts: 2) The MMDA had not seasonably appealed the Decision of the lower court via a petition
In 1994, President Fidel V. Ramos issued Presidential Memorandum Order No. 202 creating the for certiorari. (Hence this case)
Executive Committee (EXECOM) to oversee the BOT implementation of solid waste
management projects, headed by the Chairman of the MMDA and the Cabinet Officer for Issues:
Regional Development-National Capital Region (CORD-NCR). The EXECOM was to oversee WON Certiorari should have been pursued when there was an option for an appeal
and develop waste-to-energy projects for the waste disposal sites in San Mateo, Rizal and WON CA erred in finding that there is a valid and binding contract between RP and
Carmona, Cavite under the build-operate-transfer (BOT) scheme. JANCOM

JANCOM entered into a partnership with Asea Brown Boveri (ABB) to form JANCOM Holding/ Ratio: The petition is hereby DISMISSED for lack of merit.
Environmental Corporation while First Philippines formed a partnership with OGDEN. JANCOM
and First Philippines were declared the winning bidders, respectively, for the San Mateo and the 1. No.
Carmona projects.
There can be no dispute that the trial court’s May 29, 2000 decision was a final order or
After a series of meetings and consultations between the negotiating teams of EXECOM and judgment which MMDA should have appealed, had it been so minded. In its decision, the trial
JANCOM, a draft BOT contract was prepared and presented to the Presidential Task Force on court disposed of the main controversy by “declaring the Resolution of respondent Greater
Solid Waste Management. Metropolitan Manila Solid Waste Management Committee disregarding petitioner’s BOT Award
Contract and calling for bids for and authorizing a new contract for the Metro Manila waste
On December 19, 1997, the BOT Contract for the waste-to-energy project was signed between management ILLEGAL and VOID.”
JANCOM and the Philippine Government, represented by the Presidential Task Force on Solid
Waste Management through DENR Secretary Victor Ramos, CORD-NCR Chairman Dionisio However, instead of appealing the decision, MMDA resorted to the extraordinary remedy
dela Serna, and MMDA Chairman Prospero Oreta. The BOT contract was submitted to of certiorari, as a mode of obtaining reversal of the judgment. This cannot be done. The
President Ramos for approval but this was too close to the end of his term which expired without judgment was not in any sense null and void ab initio, incapable of producing any legal
him signing the contract. President Ramos, however, endorsed the contract to incoming effects whatever, which could be resisted at any time and in any court it was attempted.
President Joseph E. Estrada.
The RTC decision is not immediately executory. Only judgments in actions for injunction,
With the change of administration, the composition of the EXECOM also changed. And due to receivership, accounting and support and such other judgments as are now or may hereafter be
the clamor of residents of Rizal province, President Estrada had, in the interim, also ordered the declared to be immediately executory shall be enforced after their rendition and shall not be
closure of the San Mateo landfill. stayed by an appeal therefrom, unless otherwise ordered by the trial court (Sec. 4, rule 39, id.).

Due to these circumstances, the Greater Manila Solid Waste Management Committee Since the RTC decision is not immediately executory, appeal would have stayed its execution.
adopted a resolution not to pursue the BOT contract with JANCOM. JANCOM appealed Consequently, the adverse effects of said decision will not visit upon petitioners during the
to President Joseph Estrada the position taken by the EXECOM not to pursue the BOT appeal. In other words, appeal is a plain, speedy and adequate remedy in the ordinary course
Contract executed and signed between JANCOM and the Philippine Government, refuting of the law.
the cited reasons for non-implementation. Despite the pendency of the appeal, MMDA, on
February 22, 2000, caused the publication in a newspaper of an invitation to pre-qualify and to But as no appeal was taken within the reglementary period, the RTC decision had become
submit proposals for solid waste management projects for Metro Manila. final and executory. Well-settled is the rule that the special civil action for certiorari may
not be invoked as a substitute for the remedy of appeal (BF Corporation vs. Court of
JANCOM thus filed with the Regional Trial Court of Pasig a petition for certiorari to declare i) the Appeals, 288 SCRA 267). Therefore, the extraordinary remedy of certiorari does not lie.
resolution of the Greater Metropolitan Manila Solid Waste Management Committee disregarding
the BOT Contract and ii) the acts of MMDA calling for bids and authorizing a new contract for Admittedly, there are instances where the extraordinary remedy of certiorari may be resorted to
Metro Manila waste management, as illegal, unconstitutional, and void; and for prohibition to despite the availability of an appeal. The few significant exceptions were: when public welfare
/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.doc \ 7

and the advancement of public policy dictate; or when the broader interests of justice so require, Order No. 292 is relied upon as authority for the proposition that presidential approval is
or when the writs issued are null . . . or when the questioned order amounts to an oppressive necessary for the validity of the contract.
exercise of judicial authority.
The first argument conveniently overlooks the fact that then Secretary of Environment
In the instant case, however, MMDA has not sufficiently established the existence of any fact or and Natural Resources Victor Ramos was likewise a signatory to the contract. The
reason to justify its resort to the extraordinary remedy of certiorari. Neither does the record Secretary of Environment and Natural Resources has such an authority. In truth, the argument
show that the instant case, indeed, falls under any of the exceptions aforementioned. raised by MMDA does not focus on the lack of authority of the signatories, but on the
amount involved as placing the contract beyond the authority of the signatories to
The Court thus holds that the Court of Appeals did not err in declaring that the trial approve. Section 59 of Executive Order No. 292 reads:
court’s decision has become final due to the failure of MMDA to perfect an appeal within
the reglementary period. As such, the Court now deems it judicious to take cognizance of the Section 59. Contracts for Approval by the President. Contracts for infrastructure
substantive question, if only to put petitioner’s mind to rest. projects, including contracts for the supply of materials and equipment to be used in said
projects, which involve amounts above the ceilings provided in the preceding section
2. No. shall be approved by the President: Provided, That the President may, when conditions
so warrant, and upon recommendation of the National Economic and Development
Meeting of the Minds Authority, revise the aforesaid ceilings of approving authority.

Article 1315 of the Civil Code, provides that a contract is perfected by mere consent. Consent, However, the Court of Appeals trenchantly observed in this connection:
on the other hand, is manifested by the meeting of the offer and the acceptance upon the thing As regards the President’s approval of infrastructure projects required under Section 59
and the cause which are to constitute the contract (See Article 1319, Civil Code). In the case at of Executive Order No. 292, said section does not apply to the BOT contract in question.
bar, the signing and execution of the contract by the parties clearly show that, as between Sec. 59 should be correlated with Sec. 58 of Exec. Order No. 292.
the parties, there was a concurrence of offer and acceptance with respect to the material
details of the contract, thereby giving rise to the perfection of the contract. The execution Consequently, MMDA may not claim that the BOT contract is not valid and binding due to
and signing of the contract is not disputed by the parties. the lack of presidential approval. Significantly, the contract itself provides that the signature of
the President is necessary only for its effectivity (not perfection), pursuant to Article 19 of the
Admittedly, when petitioners accepted private respondents’ bid proposal (offer), there was, in contract. Stated differently, while the twenty-five year effectivity period of the contract has not yet
effect, a meeting of the minds upon the object (waste management project) and the cause (BOT started to run because of the absence of the President’s signature, the contract has,
scheme). Hence, the perfection of the contract. In City of Cebu vs. Heirs of Candido Rubi (306 nonetheless, already been perfected.
SCRA 108), the Supreme Court held that “the effect of an unqualified acceptance of the offer or
proposal of the bidder is to perfect a contract, upon notice of the award to the bidder. We, therefore, hold that the Court of Appeals did not err when it declared the existence of a valid
and perfected contract between the Republic of the Philippines and JANCOM. There being a
Admittedly, the notice of award has not complied with these requirements. However, the perfected contract, MMDA cannot revoke or renounce the same without the consent of
defect was cured by the subsequent execution of the contract entered into and signed by the other. From the moment of perfection, the parties are bound not only to the
authorized representatives of the parties; hence, it may not be gainsaid that there is a fulfillment of what has been expressly stipulated but also to all the consequences which,
perfected contract existing between the parties giving to them certain rights and according to their nature, may be in keeping with good faith, usage, and law (Article 1315,
obligations (conditions precedents) in accordance with the terms and conditions thereof. Civil Code). The contract has the force of law between the parties and they are expected
The fact that Chairman Oreta’s letter informed JANCOM EC that it was the “sole complying to abide in good faith by their respective contractual commitments, not weasel out of
(winning) bidder for the San Mateo project leads to no other conclusion than that the project was them.
being awarded to it. But assuming that said notice of award did not comply with the legal
requirements, private respondents cannot be faulted therefore as it was the government Just as nobody can be forced to enter into a contract, in the same manner, once a contract is
representatives’ duty to issue the proper notice. entered into, no party can renounce it unilaterally or without the consent of the other. It is a
general principle of law that no one may be permitted to change his mind or disavow and go
In any event, petitioners, as successors of those who previously acted for the back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party.
government (Chairman Oreta, et al), are estopped from assailing the validity of the notice Nonetheless, it has to be repeated that although the contract is a perfected one, it is still
of award issued by the latter. As private respondents correctly observed, in negotiating ineffective or unimplementable until and unless it is approved by the President.
on the terms and conditions of the BOT contract and eventually signing said contract, the
government had led private respondents to believe that the notice of award given to them Moreover, if after a perfected and binding contract has been executed between the parties, it
satisfied all the requirement of the law. occurs to one of them to allege some defect therein as reason for annulling it, the alleged defect
must be conclusively proven, since the validity and the fulfillment of contracts cannot be left to
Absence of Signature the will of one of the contracting parties.

MMDA also points to the absence of the President’s signature as proof that the same has not yet JORGE B. VARGAS, petitioner, vs. EMILIO RILLORAZA, JOSE BERNABE, MANUEL
been perfected. It is concluded that the signatories, CORD-NCR Chairman Dionisio dela ESCUDERO, Judges of People's Court, and THE SOLICITOR GENERAL OF THE
Serna and MMDA Chairman Prospero Oreta, had no authority to enter into any waste PHILIPPINES, respondents.
management project for and in behalf of the Government. Secondly, Section 59 of Executive
Facts
/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.doc \ 8

The unconstitutionality of Section 14 of the People's Court Act (Commonwealth Act No. 682) is rules of court, subject to the power of the Supreme Court to alter and modify the
being assailed. It reads: same, and to the power of the Congress to repeal, alter, or supplement them.

"SEC. 14. Any Justice of the Supreme Court who held any office or position under the Philippine Issues:
Executive Commission or under the government called Philippine Republic may not sit and vote 1. WON section 14 of the People's Court Act (Commonwealth Act No. 682) is
in any case brought to that Court under section thirteen hereof in which the accused is a person constitutional.
who held any office or position under either or both the Philippine Executive Commission and the a. WON Congress had power to add to the pre-existing grounds of
Philippine Republic or any branch, instrumentality and/or agency thereof. disqualification of a Justice of the Supreme Court, that provided for in said
section 14;
"If, on account of such disqualification, or because of any of the grounds of disqualification of b. WON a person may act as a Justice of the Supreme Court who has not
judges, in Rule 126, section I of the Rules of Court, or on account of illness, absence or been duly appointed by the President and confirmed by the Commission on
temporary disability the requisite number of Justices necessary to constitute a quorum or to Appointments pursuant to the constitution, even only as a "designee";
render judgment in any case is not present, the President may designate such number of c. WON by the method of "designation" created by the aforecited section 14 a
Judges of First Instance,Judges-at-large of First Instance, or Cadastral Judges, having none of Judge of First Instance, Judge-at-large of First Instance, or Cadastral
the disqualifications set forth in said section one hereof, as may be necessary to sit temporarily Judge, designated by the President under the same section can
as Justices of said Court, in order to form a quorum or until a judgment in said case is reached." constitutionally "sit temporarily as Justice" of the Supreme Court.

Objection is made upon the following grounds: Ratio/ Holding: Section 14 of the People's Court Act is unconstitutional; and this case be dealt
with henceforward in pursuance of and in harmony with this resolution.
It adds the pre-existing ground of not having held any office or position under the
Philippine Executive Commission or under the government called Philippine a. No
Republic as a requirement to being a Justice of the Supreme Court, as provided
for in said section 14 No act of the legislature repugnant to the constitution can become a law (Marbury vs. Madison).
To discover whether the above quoted section 14 of the People's Court Act is repugnant to the
It allows for a person may act as a Justice of the Supreme Court who has not constitution, one of the best tests would be to compare the operation of the pertinent
been duly appointed by the President and confirmed by the Commission on constitutional provisions without said section, with their operation with the same section
Appointments pursuant to the constitution, even only as a "designee" if the latter were to be allowed to produce its effects.

By the method of "designation" created by the aforecited section 14 a Judge of Concretely referring to the instant case, if section 14 of the People's Court Act had not been
First Instance, Judge-at-large of First Instance, or Cadastral Judge, designated inserted therein, there can be no question that each and every member of this Court would have
by the President under the same section can constitutionally "sit temporarily as to sit in judgment in said case. But if said section 14 were to be effective, such members of the
Justice" of the Supreme Court by virtue thereof Court "who held any office or position under the Philippine Executive Commission or under the
government called Philippine Republic" would be disqualified from sitting and voting in the
(For actual list of contentions and defense of OSG see p. 309) instant case, because the accused herein is a person who likewise held an office or position at
Such provisions of the said law are claimed to be repugnant to the constitution. least under the Philippine Executive Commission. In other words, what the constitution in
Particularly, article VIII: this respect ordained as a power and a duty to be exercised and fulfilled by said members
of the Court, the quoted section of the People's Court Act would prohibit them from
section 41 of the Constitution ordains that the Supreme Court shall be composed of a exercising and fulfilling. What the constitution directs the section prohibits. A clearer
Chief Justice and ten Associate Justices and may sit either in banc or in two divisions case of repugnancy to the fundamental law can hardly be imagined.
unless otherwise provided by law.
What matters here is not only that the Justice affected continue to be a member of the
Section 5 of the same Article provides, inter alia, that the members of the Supreme Court and to enjoy the emoluments as well as to exercise the other powers and fulfill the
Court shall be appointed by the President with the consent of the Commission on other duties of his office, but that he be left unhampered to exercise all the powers and
Appointments. fulfill all the responsibilities of said office in all cases properly coming before his Court
under the constitution, again without prejudice to proper cases of disqualification under
Section 6 of the same Article stipulates that no person may be appointed member of Rule 126. Any statute enacted by the legislature which would impede him in this regard,in
the Supreme Court unless he has been five years a citizen of the Philippines, is at the words of this Court in In re Guariña, supra, citing Marbury vs. Madison, supra, simply
least 40 years of age, and has for 10 years or more been a judge of a court of record "can not become law."
or engaged in the practice of law in the Philippines.
It goes without saying that, whether the matter of disqualification of judicial officers belongs to
Section 9 of said Article, the members of the Supreme Court, among other judicial the realm of adjective, or to that of substantive law, whatever modification, change or innovation
officials, shall hold office during good behavior, until they reach the age of 70 years, or the legislature may propose to introduce therein, must not in any way contravene the provisions
become incapacitated to discharge the duties of their office. of the constitution, nor be repugnant to the genius of the governmental system established
thereby. The tripartite system, the mutual independence of the three departments-in
Section 13 of the same Article VIII, inter alia, enunciates that the then existing laws on particular, the independence of the judiciary-, the scheme of checks and balances, are
pleading, practice, and procedure are thereby repealed as statutes, and are declared
/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.doc \ 9

commonplaces in democratic governments like this Republic. No legislation may be majority when sitting with said four Justices, giving rise to the result that, if the body composed
allowed which would destroy or tend to destroy any of them. by them all should be considered as the Supreme Court, it would be composed by four members
appointed and confirmed pursuant to sections 4 and 5 of Article VIII of the Constitution and six
If, according to section 4 of said Article VIII, "the Supreme Court shall be composed" of who have not been so appointed and confirmed.
the Chief Justice and Associate Justices therein referred to, its jurisdiction can only be
exercised by it as thus composed. To disqualify any of these constitutional component The situation would not be helped any by saying that such composition of the Court is only
members of the Court-particularly, as in the instant case, a majority of them-in a treason temporary, for no temporary composition of the Supreme Court is authorized by the constitution.
case, is nothing short of pro tanto depriving the Court itself of its jurisdiction as This Tribunal, as established under the organic law, is one of the permanent institutions of the
established by the fundamental law. Disqualification of a judge is a deprivation of his judicial government. The clause "unless otherwise provided by law" found in said section 4 can not be
power. (Diehl vs. Crumb). And if that judge is the one designated by the constitution to exercise construed to authorize any legislation which would alter the composition of the Supreme Court,
the jurisdiction of his court, as is the case with the Justices of this Court, the deprivation of his or as determined by the constitution, for however brief a time as may be imagined. In principle,
their judicial power is equivalent to the deprivation of the judicial power of the court itself. It what really matters is not the length or shortness of the alteration of the constitutional
would seem evident that if the Congress could disqualify members of this Court to take part in composition of the Court, but the very permanence and unalterability of that composition so long
the hearing and determination of certain collaboration cases it could extend the disqualification as the constitution which ordains it remains permanent and unaltered.
to other cases. The question is not one of degree or reasonableness. It affects the very heart of
judicial independence. The Legislature, when providing for the initial organization of the Supreme Court under the
Commonwealth was authorized to fix a different number of Justices than eleven, and determine
Precedence the manner of the Court's sitting differently from that established in section 4 of Article VIII of the
Constitution, but it was and is not empowered to alter the qualifications of the Justices and
Willoughby's United States under the topic of separation of powers, Volume 3, pages 1622- the mode of their appointment, which are matters governed by sections 5 and 6 of said
1624, says: Article VIII wherein the clause "unless otherwise provided by law" does not even exist,
nor the provision on who shall be the component members of the Court. Such a legislation
" The extent of their jurisdiction, they argue, may be more or less within legislative control, but was enacted in the form of Commonwealth Acts Nos. 3 and 259, the pertinent provisions of
the possession of powers for the efficient exercise of that jurisdiction, whether statutory or which amended sections 133 and 134 of the Revised Administrative Code
constitutional, which they do possess, they cannot be deprived of.
c. No.
In State vs. Morrill (16 Ark., 384), the Supreme Court of Arkansas declared:
However temporary or brief may be the action or participation of a judge designated under
"The legislature may regulate the exercise of, but cannot abridge, the express or necessarily section 14 of the People's Court Act in a collaboration case of the class therein defined, there is
implied powers granted to this court by the Constitution. no escaping the fact that he would be participating in the deliberations and acts of the
Supreme Court, as the appellate tribunal in such a case, and if allowed to do so, his vote
Also, let it not be argued that the Court is the same, only the membership being different. would count as much as that of any regular Justice of the Court. There can be no doubt
Because Article VIII, sections 4 and 5, of the Constitution do not admit any composition that the Chief Justice and Associate Justices required by section 4 of Article VIII of the
of the Supreme Court other than by the Chief Justice and Associate Justices therein Constitution to compose the Supreme Court are the regular members of the Court-
mentioned appointed as therein provided. And the infringement is enhanced and indeed, a "temporary member" thereof would be a misnomer, implying a position not
aggravated where a majority of the members of the Court-as in this case-are replaced by contemplated by the constitution. Section 5 of the same Article VIII, in requiring the
judges of first instance. It is distinctly another Supreme Court in addition to this. And the members of the Supreme Court to be appointed by the President with the consent of the
constitution provides for only one Supreme Court. Commission on Appointments, makes it plainly indubitable that the Chief Justice and
Associate Justices who are to compose the Court and sit therein under section 4, have to
b. No be thus appointed and confirmed.

In the face of the constitutional requirement (Art. VIII, section 5) that the members of the As already adverted to, a mere designation under section 14 of the People's Court Act does not
Supreme Court should be appointed by the President with the consent of the Commission on satisfy the constitutional requirement of appointment, with the additional circumstance that as to
Appointments, we are of opinion that no person not so appointed may act as Justice of the such designation the Commission on Appointments is entirely dispensed with. We find
Supreme Court and that the "designation" authorized in section 14 of the People's Court Act to absolutely nothing in the context which may soundly be construed as authorizing, merely by
be made by the President of any Judge of First Instance, Judge-at-large of First Instance or legislation, any change in the constitutional composition of the Supreme Court, or the
Cadastral Judge can not possibly be a compliance with the provision requiring that appointment. performance of its functions by any but its constitutional members. On the other hand, we have
to go by the cardinal rule that "usually provisions of a constitution are mandatory rather than
So that it may happen that a "designee" under section 14 of the People's Court Act, directory, and mandatory provisions are binding on all departments of the government." (16 C. J.
sitting as a substitute Justice of the Supreme Court in particular collaboration cases, and S., 120).
participating therein in the deliberations and functions of the Supreme Court, like any
regular Justice thereof, does not possess the required constitutional qualifications of a
regular member of said Court. Here again is another point of repugnancy between the
challenged section and the constitution. And if we consider the actual fact that only four of
the present ten Justices of this Court are not adversely affected by the disqualification
established in section 14 of the People's Court Act, we see that the "designees" constitute a
/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.doc \ 10

1. DE LA LLANA vs. ALBA Theoretically, there is no position to be cut short, for it was terminated by the BP.
Ponente: J. Fernando (sorry, malabo…)
• There is no intrusion into who shall be appointed to the vacant positions created by
Petitioners are assailing the constitutionality of Batas Pambansa Blg. 129, An Act Reorganizing the reorganization. That remains in the hands of the Executive to whom it properly
the Judiciary, Appropriating Funds Therefor, and for Other Purposes. belongs.
• Affects the independence of the Judiciary, which is upheld as sacred in the Consti
• SECURITY OF TENURE provision (Sec 7, Art X, 1973 Consti) has been ignored and
• There is nothing new in the concept that the SC is called upon to reconcile or
harmonize constitutional provisions. The BP is expressly vested with the authority
disregarded
to reorganize inferior courts and in the process, to abolish existing ones. The
o Lack of good faith in the enactment
termination of office of their occupants, as necessary consequence of such
o Undue delegation of legislative power to the President (to fix compensation
abolition, is hardly distinguishable from the practical standpoint from removal, a
and allowances) power that is now vested in this Tribunal. In short, the job of REMOVAL is for the
Judiciary, while the job of ABOLITION is for the Legislative, although there are some
Solicitor General: no valid justification for the attack – it was a legitimate exercise of the power of gray areas in between.
the Batasang Pambansa to reorganize the judiciary; the issue re: absence of good faith is
unwarranted and without any support of law 4. WON there was undue delegation of legislative power to the Pres in the allocation for
compensation and allowances of the members of the Judiciary  there was NONE
HOLDING: The Court is of the opinion that BP Blg. 129 is NOT unconstitutional. • Doctrine of Non-Delegation: it is the legislative body which is entrusted with the
competence to make laws and to alter and repeal them, the test being the
ISSUES: completeness of the statute in all its terms and provisions when enacted.
1. Legal Standing: petitioners, being members of the bench and of the bar, have legal • There must be a standard, which defines legislative policy, marks its limits, maps out
standing as they have personal and substantial interest its boundaries and specifies the public agency to apply it. It indicates circumstances
2. WON arbitrariness attended the enactment of BP Blg. 129  NO under which the legislative command is to be effected. It is the criterion by which
• Aug 7, 1980: Presidential Committee on Judicial Reorganization (PCJR) legislative purpose may be carried out.
was created, pursuant to EO 611 (as amended by EO 619-A), with the task • In the case, there exists a clear standard.
of planning for the judiciary’s reorganization • Chapter IV, Sec 41 of BP Blg. 129: “Intermediate Appelate Justices, Regional Trial
• Report of the PCJR: THERE IS A NEED FOR MAJOR REFORM IN THE Judges, etc… shall receive such compensation and allowances as may be authorized
JUDICIAL SYSTEM – greater efficiency in the disposition of cases; thrust of by the President along the guidelines set forth in LOI No. 93, pursuant to PD 985, as
development; democratization of social and economic opportunities, amended by PD 1597.”
substantiation of the true meaning of social justice; problem of clogged
dockets; with accelerated economic dev’t, growth of the population, 1. DUMLAO vs. COMELEC
increasing urbanization, etc., the Judiciary is called upon much oftener to Facts:
resolve controversies • Petitioners are Dumalao (as a candidate), Igot and Salapantan (as taxpayers)
• In light of the Report, the BP did not hesitate to be duly mindful; hence, they • Dumlao questions constitutionality of BP blg 52 alleging it is discriminatory and
enacted BP Blg. 129. They can be said to have acted in good faith since it contrary to equal protection and due process insofar as Sec 4 provides for a special
took considerable time and effort as well as exhaustive study before the act disqualification (“any retired elective provincial, city, or municipal official who has
was signed by the President. received payment of retirement benefits to which he is entitled under the law and who
• Another point: The abolition of an office within the competence of a shall have been 65 years of age at the commencement of the term of office to which
legitimate body, if done in good faith, suffers from no infirmity. he seeks to be elected, shall not be qualified to run for the same elective local office
• Still another point: The legislature may abolish courts inferior to the SC and from which he has retired”)
may reorganize them territorially or otherwise, thereby necessitating new • Igot and Salapantan on the other hand assail the validity of second paragraph of sec 4
appointments and commissions. (Sec 2, Art VII, 1973 Consti vests in the BP providing for disqualifications of certain candidates who have cases against them
the power to define, prescribe, and apportion the jurisdiction of the various which are filed but have not yet been decided (“a judgment of conviction for any of the
courts, subject to certain limitations…) aforementioned crimes shall be conclusive evidence of such fact”)
3. WON the Security of Tenure provision was disregarded  NO Held: (yup, held agad. Walang issues!!! Kidding! Non justiciable kasi siya in a way except sa
• Petitioners argue that the abolition of their offices, as a result of the reorganization, isa… yun huli)
disregarded their security of tenure, which is constitutionally upheld. • This case is unacceptable for judicial resolution
• REMOVAL is to be distinguished from TERMINATION by virtue of the abolition of the • For one, there is a misjoinder of parties (dumlao not related to the latter 2)
office. There can be no tenure to a non-existent office. After the abolition, there • Next, there standards to be followed in the exercise of function:
is legally no occupant. In case of removal, there is an office with an occupant o Existence of appropriate case
who would lose his position. o Personal and substantial interest in raising the constitutional question
• BP Blg. 129 sought to abolish the offices in order to reorganize the system – this o Plea that the function be exercised at the earliest opportunity (this has been
abolition results in the termination of the offices, and NOT removal of the officers. met by petitioners)
/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.doc \ 11

o Necessity that the constitutional question be passed upon to decide the • Foreign court directed PCC to pay filing fees but failed to state how much.
case • PCC sent communication with the Civil Judge asking how much the filing fees were
• Explained further… and that they be given 25 days to comply upon receipt of the Judge’s reply.
1. Actual Case and Controversy- judicial review is limited to the determination of actual • Foreign court granted the petition for execution on the ground that PCC was unable to
cases and controversies. Dumlao has not been adversely affected by the application comply with the payment of the fees.
of the assailed provisions. There is no petition seeking for his disqualification (so WTF • ONGC filed a complaint with the RTC of Surigao City for the enforcement of the
is his problem?). He’s raising a hypothetical issue and his case is within the judgment of the foreign court. PCC moved to dismiss. ONGC filed opposition on the
jurisdiction of respondent COMELEC. motion to dismiss.
2. Proper Party- person who impugns the validity of a statute must have a personal and • RTC denied motion to dismiss but held that the referral of the dispute to the arbitrator
substantial interest in the case such that he has sustained, or will sustain, direct injury
under Clause 16 amounted to a mistake of law or fact amounting to want of
as a result of its enforcement. Neither Igot nor Salapantan has been alleged to have
jurisdiction. Hence, ONGC acquired no enforceable right under the foreign court’s
been adversely affected by the operation of the statutory provisions they assail as
judgment.
unconstitutional. Theirs is a general grievance. There is no personal or substantial
• CA affirmed RTC and also ruled that:
interest. Provisions can’t be assailed by taxpayers bec they do not involve expenditure
of public moneys. Petitioners do not seek to restrain respondent from wasting public 1. The foreign court’s judgment contravened the Constitution because it did not
funds. Court has discretion as to WON a taxpayer’s suit should be entertained contain any findings of fact and law and only contained the dispositive portion.
3. Unavoidability of constitutional questions- the issue of constitutionality must be the 2. The dismissal of PCC objections, with regards to the amount of fees to be paid,
very lis mota presented. Petitioners are actually without cause of action. constituted violation of due process.
3. Arbitration proceedings was defective because the arbitrator was appointed by
• In the case of a 65-year old elective local official, who has retired from a provincial,
the ONGC who was also a former employer.
city, or municipal office, there is reason to disqualify him from running for the same
office from which he had retired. He ha already declared himself tired and unavailable
Issues:
for the same govt work. Equal protection clause does not forbid all legal classification.
1. WON the dispute was within the jurisdiction of the arbitrator pursuant to Clause 16.
What is proscribed is a classification which is arbitrary and unreasonable.
2. WON the foreign court’s judgment is enforceable in this jurisdiction despite failing to
• Absent herein is a showing of the clear invalidity of the questioned provision. There contain a statement of the facts and the law.
must be a clear unequivocal breach of the constitution. Unless the conflict with the
constitution is clear beyond reasonable doubt, it is within the competence of he Ratio/held:
legislature to prescribe qualifications 1. NO. Jurisdiction of the arbitrator, under Clause 16, should be confined to claims
• HOWEVER!!! Accdg to Igot and Salapantan, second par of sec 4 “a judgment of arising from or relating to the design, drawing, instructions, specifications or quality of
conviction for any of the aforementioned crimes shall be conclusive evidence of such the materials of the supply order/contract (technical aspects). Redress of all other
fact” contravenes the constitutional presumption of innocence. The court agrees with claims is covered by Clause 15. Clause 15 covers nondelivery of the materials and
them. grants exclusive jurisdiction to the local courts of the place from which the supply
order is situated.
WHEREFORE, 1st par of sec 4 BP blg52= valid, the portion of the 2nd par of sec 4 providing that 2. NO. Although the foreign court’s order may be categorized as a memorandum
“the filing of charges for the commission of such crimes before a civil court or military tribunal decision, which does not transgress the requirements in Art. VIII, Sec. 14 on clearly
after preliminary investigation shall be prima facie evidence of such fact”=null and void stating the facts and the law, a decision of a foreign court should include statements of
fact and law. If they don’t, the enforcement of such decisions would be based on
. OIL & GAS NATURE CORP vs. CA presumptions that laws in other jurisdictions are similar to our laws, at the expense of
Facts: justice based on the merits.
The guideline set forth in Art. VIII Sec. 14 cannot prevail over the fundamental
• Oil and Natural Gas Commission [ONGC] is a foreign corporation owned and elements of due process.
controlled by the government of India.
• Pacific Cement Company [PCC] is a private Philippine corporation. Case is REMANDED to the RTC for a full ventilation of the facts and issues and the presentation
• ONGC and PCC entered into a contract where PCC will supply ONGC with 4,300 of arguments in support and in rebuttal of the claims.
metric tons of oil well cement. ONGC will pay PCC 477,300 USD.
• Due to a dispute between the shipowner and PCC, the cargo was held up in Bangkok . ZALDIVAR vs. SANDIGANBAYAN
and failed to be delivered. PCC has already received payment. FACTS:
• ONGC and PCC agreed that PCC will replace the items to be delivered with class G • Petitioner Enrique A. Zaldivar, governor of the province of Antique, sought to restrain
cement but it did not conform to ONGC’s specifications. the Sandiganbayan and Tanodbayan Raul Gonzalez from proceeding with the
• Pursuant to Clause 16 of their contract, ONGC appointed and arbitrator to settle their prosecution and hearing of Criminal Cases Nos. 12159 to 12161 and 12163-12177 on
dispute. the ground that said cases were filed by said Tanodbayan without legal and
• The chosen arbitrator resolved the dispute in favor of ONGC. constitutional authority, since under the 1987 Constitution which took effect on
• ONGC filed a petition to the Court of the Civil Judge of Dehra Dun, India for the February 2,1987, it is only the Ombudsman (not the present or incumbent
execution of the decision of the arbitrator. Tanodbayan) who has the authority to file cases with the Sandiganbayan.
• The foreign court issued notices to PCC for filing of objections. PCC complied.
/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.doc \ 12

ISSUE: WON Tanodbayan Raul Gonzalez has the authority to file cases with the - the highest bidder will only be declared the winner after 1) execution of the
Sandiganbayan necessary contracts with GSIS/MHC and 2)securing the requisite approvals of the
GSIS/MHC, Committee on Privatization and Office of the Govt Corporate Counsel
HELD: NO Sept 28, 1995-pending the declaration of Renong Berhad as the winning bidder, petitioner
RATIO: matched the bid price of the Malaysian firm
Oct 10, 1995-petitioner sent a manager's check issued by Philtrust Bank as bid security
• Under the 1987 Constitution, Art XI sec.13, par.1 Oct 17, 1995-petitioner, wishing to stop the alleged "hurried" sale to the foreign firm, filed the
case in the SC
“the Ombudsman (as distinguished from the incumbent Tanodbayan) is charged with Oct 18, 1995-Court issues TRO
the duty to:
"Investigate on its own, or on complaint by any person, any act or omission of any public official, Petitioner: (Manila Prince Hotel)
employee, office or agency, when such act or omission appears to be illegal, unjust, improper, or 1. invokes Art12, Sec10, Par.2, and argues that the Manila Hotel was covered by the phrase
inefficient." "national patrimony" and hence cannot be sold to foreigners; selling 51% would be
tantamount to owning the business of a hotel which is owned by the GSIS, a GOCC,
The Constitution in Art. XI, Section 7 likewise provides that: the hotel business of respondent GSIS being a part of the tourism industry which
undoubtedly is part of the national economy.
"The existing Tanodbayan shall hereafter be known as the Office of the Special Prosecutor. It 2. petitioner should be preferred over its Malaysian counterpart after it has matched the bid,
shall continue to function and exercise its powers as now or hereafter may be provided by law, since the bidding rules state 'if for any reason, the Highest Bidder cannot be awarded
except thaw conferred on the Office of the Ombudsman created under this Constitution." the Block of shares, GSIS may offer this to other Qualified bidders, namely them
• The Duty is given to the Ombudsman, the incumbent Tanodbayan (called Special Respondents:(Govt Service Insurance System, Manila Hotel Corp, COP, OGCC)
1. Art12, Sec10, Par.2: merely a statement of policy/principle; requires enabling legislation
Prosecutor under the 1987 constitution and who is supposed to retain powers and
2. Manila Hotel does not fall under the term national patrimony; prohibition is against the State,
duties NOT GIVEN to the Ombudsman) is clearly without authority to conduct
not the GSIS as a separate entity
preliminary investigations and to direct the filing of criminal cases with the
3. the constitutional provision is inapplicable as since what is being sold are outstanding shares,
Sandiganbayan, except upon orders of the Ombudsman. This right to do so was lost
not the place itself or the land; 50% of equity is not part of national patrimony.
effective February 2, 1987. From that time, he has been divested of such authority.
4. the reliance of the petitioners on the bidding rules is misplaced; the condition/reason that will
• Under the present Constitution, the Special Prosecutor (Raul Gonzalez) is a mere deprive the highest bidder of the award of shares has not yet materialized hence the
subordinate of the Tanodbayan (Ombudsman) and can investigate and prosecute submission of a matching bid is premature
cases only upon the latter's authority or orders. The Special Prosecutor cannot initiate 5. prohibition should fail for respondent GSIS did not exercise its discretion in a capricious
the prosecution of cases but can only conduct the same if instructed to do so by the manner, did not evade duty or refused to d a duty as enjoined by law. Similarly
Ombudsman. Even his original power to issue subpoena, which he still claims under mandamus should fail since they have no clear legal right to demand anything
Section 10(d) of PD 1630, is now deemed transferred to the Ombudsman, who may,
however, retain it in the Special Prosecutor in connection with the cases he is ordered Issue:
to investigate. 1. Whether or not the constitutional provision is self-executory-YES
2. Whether or not the term "national patrimony" applies to the Manila Hotel-YES
It is not correct either to suppose that the Special Prosecutor remains the Ombudsman as long 3. Whether or not the term "qualified Filipinos" applies to the MPH-YES
as he has not been replaced, for the fact is that he has never been the Ombudsman. The Office 4. Whether or not the GSIS, being a chartered GOCC, is covered by the constitutional
of the Ombudsman is a new creation under Article XI of the Constitution different from the Office prohibition-YES
of the Tanodbayan created under PD 1607 although concededly some of the powers of the two
offices are identical or similar. The Special Prosecutor cannot plead that he has a right to hold Held:
over the position of Ombudsman as he has never held it in the first place. 1. admittedly, some constis are merely declarations of policies and principles. But a provision
which is complete in itself and becomes operative w/o the aid of enabling legislation , or
Manila Prince Hotel v GSIS, 02/03/97] that which supplies sufficient rule by means of which the right it grants may be enjoyed
Bellosillo, J. or protected is self-executing. Modern constis are drafted upon a different principle and
have often become extensive codes of law intended to operate directly. If the consti
Facts: respondent GSIS, pursuant to the privatization program under Proclamation No. 50 dated provisions are treated as requiring legislation instead of self-executing, the legislature
December 8, 1986, decided to sell through a public bidding 30-51% of the shares of respindent would have the power to ignore and practically nullify the mandate of the fundamental
Manila Hotel Corporation (MHC). The winning bidder "is to provide management expertise law, which can be cataclysmic. In case of doubt, the Consti should be considered self-
and/or an international marketing/reservation system, and financial suppport to strengthen the executing rather than not. Though this presumption is in place, the legislature is not
profitability and performance of the Manila Hotel. precluded from enacting further laws to enforce the consti provision so long as the
Sept 18, 1995- two bidders participated in the auction; one was petitioner Manila Prince Hotel contemplated statute squares with the consti. Also a consti provision may be self
Corp, who wanted to buy 51% of the shares at Php41.85 each, and Renong Berhad, a executing on one part and not on the other/s.
Malaysian firm, which bid for the same number of shares at Php44 each Respondents also rely on jurisprudence that are "simply not in point"-Basco v PAGCOR,
*pertinent provisions of bidding rules: Tolentino v Sec of Finance, Kilosbayan v Morato. A reading of the provisions involved in
- if for any reason, the Highest Bidder cannot be awarded the Block of shares, GSIS these cases clearly shows that they are not judicially enforceable constitutional rights but
may offer this to other Qualified bidders guidelines of laws, manifested in the very terms of the provisions. Res ipsa loquitur. As
/var/www/apps/collegelist/repos/collegelist/trunk/collegelist/tmp/scratch7/4689808.doc \ 13

opposed to Art12, Sec10, Par.2 which is a mandatory, positive command, complete in
itself, needing no further guidelines, creating a right where none existing before, that
right being that qualified Filipinos shall be preferred. And where there is a right, there is a
remedy.
2. in plain language, patrimony means heritage, referring not only to natural resouces but to
the cultural heritage of Filipinos as well. Manila Hotel has become a landmark-a living
testament of Philippine heritage.
3. "qualified" according to the Consti commission refers to 1)companies whose capital or
controlling stock is wholly owned by citizens of the Phil, 2) the fact that the company can
make viable contributions to the common good, because of credible competency and
efficiency. By giving preferrence to Phil comapnies or entities it does not mean that they
should be pampered; rather they should indeed "qualify" first with the requirements that
the law provides before they can even be considered as having the preferential
treatment of the state accorded to them.In the 1st place, MPH was selected as one of
the qualified bidders, which meant that they possessed both requirements. "in the
granting of economic rights, privileges and concessions, when a choice is between a
"qualified foreigner " and a "qualified Filipino", the latter shall be chosen"
4. the sale of the 51% of MHC could only be carried out with the prior approval of the State
through the COP.
"state action" refers to 1)when activity engaged in is a public function, 2)when govt is so
significantly involved in the actor as to make the govt responsible for his action 3)when
govt has approved or authorized the action. Act of GSIS selling the shares falls under the
2nd and 3rd categories. Also, when the Consti refers to state it refers not only to the
people but also to govt as elements of the state. Hence, the GSIS, being part of govt,
although chartered, is still covered by the provision.
(the rest is obiter)
Petition dismissed.