Jurisdiction

a.) Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 167702

March 20, 2009

LOURDES L. ERISTINGCOL, Petitioner,

vs.
COURT OF APPEALS and RANDOLPH C. LIMJOCO, Respondents.
DECISION
NACHURA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court which assails the Court
of Appeals (CA) Decision1 in CA-G.R. SP. No. 64642 dismissing Civil Case No. 99-297 before the
Regional Trial Court (RTC) for lack of jurisdiction.
The facts, as narrated by the CA, are simple.
[Petitioner Lourdes] Eristingcol is an owner of a residential lot in Urdaneta Village (or "village"),
Makati City and covered by Transfer Certificate of Title No. 208586. On the other hand, [respondent
Randolph] Limjoco, [Lorenzo] Tan and [June] Vilvestre were the former president and chairman of
the board of governors (or "board"), construction committee chairman and village manager of
[Urdaneta Village Association Inc.] UVAI, respectively. UVAI is an association of homeowners at
Urdaneta Village.
[Eristingcols] action [against UVAI, Limjoco, Tan and Vilvestre] is founded on the allegations that in
compliance with the National Building Code and after UVAIs approval of her building plans and
acceptance of the construction bond and architects fee, Eristingcol started constructing a house on
her lot with "concrete canopy directly above the main door and highway"; that for alleged violation of
its Construction Rules and Regulations (or "CRR") on "Set Back Line" vis-a-vis the canopy
easement, UVAI imposed on her a penalty of P400,000.00 and barred her workers and contractors
from entering the village and working on her property; that the CRR, particularly on "Set Back Line,"
is contrary to law; and that the penalty is unwarranted and excessive.
On February 9, 1999, or a day after the filing of the complaint, the parties reached a temporary
settlement whereby UVAI, Limjoco, Tan and Vilvestre executed an undertaking which allowed
Eristingcols workers, contractors and suppliers to leave and enter the village, subject only to normal
security regulations of UVAI.

On February 26, 1999, UVAI, Limjoco, Tan and Vilvestre filed a motion to dismiss on ground of lack
of jurisdiction over the subject matter of the action. They argued that it is the Home Insurance
Guaranty Corporation (or "HIGC")2 which has jurisdiction over intra-corporate disputes involving
homeowners associations, pursuant to Exec. Order No. 535, Series of 1979, as amended by Exec.
Order No. 90, Series of 1986.
Opposing the motion, Eristingcol alleged, among others, that UVAI, Limjoco, Tan and Vilvestre did
not comply with the mandatory provisions of Secs. 4 and 6, Rule 15 of the 1997 Rules of Civil
Procedure and are estopped from questioning the jurisdiction of the [RTC] after they voluntarily
appeared therein "and embraced its authority by agreeing to sign an Undertaking."
On May 20, 1999, Eristingcol filed an amended complaint by (i) impleading Manuel Carmona (or
"Carmona") and Rene Cristobal (or "Cristobal"), UVAIs newly-elected president and chairman of the
board and newly-designated construction committee chairman, respectively, as additional
defendants and (ii) increasing her claim for moral damages against each petitioner
from P500,000.00 to P1,000,000.00.
On May 25, 1999, Eristingcol filed a motion for production and inspection of documents, which UVAI,
Limjoco, Tan, Vilvestre, Carmona and Cristobal opposed. The motion sought to compel [UVAI and its
officers] to produce the documents used by UVAI as basis for the imposition of the P400,000.00
penalty on Eristingcol as well as letters and documents showing that UVAI had informed the other
homeowners of their violations of the CRR.
On May 26, 1999, the [RTC] issued an order which pertinently reads:
IN VIEW OF THE FOREGOING, for lack of merit, the defendants Motion to Dismiss is Denied, and
plaintiffs motion to declare defendants in default and for contempt are also Denied."
The [RTC] ratiocinated that [UVAI, Limjoco, Tan and Vilvestre] may not assail its jurisdiction "after
they voluntarily entered their appearance, sought reliefs therein, and embraced its authority by
agreeing to sign an undertaking to desist from prohibiting (Eristingcols) workers from entering the
village." In so ruling, it applied the doctrine enunciated in Tijam v. Sibonghanoy.
On June 7, 1999, Eristingcol filed a motion reiterating her earlier motion for production and
inspection of documents.
On June 8, 1999, [UVAI, Limjoco, Tan and Vilvestre] moved for partial reconsideration of the order
dated May 26, 1999. Eristingcol opposed the motion.
On March 24, 2001, the [RTC] issued an order granting Eristingcols motion for production and
inspection of documents, while on March 26, 2001, it issued an order denying [UVAIs, Limjocos,
Tans and Vilvestres] motion for partial reconsideration.
On May 10, 2001, [UVAI, Limjoco, Tan and Vilvestre] elevated the dispute before [the CA] via [a]
petition for certiorari alleging that the [RTC] acted without jurisdiction in issuing the orders of May 26,
1999 and March 24 and 26, 2001.3

The CA issued the herein assailed Decision reversing the RTC Order4 and dismissing Eristingcols
complaint for lack of jurisdiction.
Hence, this appeal positing a sole issue for our resolution:
Whether it is the RTC or the Housing and Land Use Regulatory Board (HLURB) which has
jurisdiction over the subject matter of Eristingcols complaint.
Before anything else, we note that the instant petition impleads only Limjoco as private respondent.
The rest of the defendants sued by Eristingcol before the RTC, who then collectively filed the petition
for certiorari before the CA assailing the RTCs Order, were, curiously, not included as private
respondents in this particular petition.
Eristingcol explains that only respondent Limjoco was retained in the instant petition as her
discussions with UVAI and the other defendants revealed their lack of participation in the workstoppage order which was supposedly single-handedly thought of and implemented by Limjoco.
The foregoing clarification notwithstanding, the rest of the defendants should have been impleaded
as respondents in this petition considering that the complaint before the RTC, where the petition
before the CA and the instant petition originated, has yet to be amended. Furthermore, the present
petition maintains that it was serious error for the CA to have ruled that the RTC did not have
jurisdiction over a complaint for declaration of nullity of UVAIs Construction Rules. Clearly, UVAI and
the rest of the defendants should have been impleaded herein as respondents.
Section 4(a), Rule 45 of the Rules of Court, requires that the petition shall "state the full name of the
appealing party as petitioner and the adverse party as respondent, without impleading the lower
courts or judges thereof either as petitioners or respondents." As the losing party in defendants
petition for certiorari before the CA, Eristingcol should have impleaded all petitioners, the winning
and adverse parties therein.
On this score alone, the present petition could have been dismissed outright. 5 However, to settle the
issue of jurisdiction, we have opted to dispose of this case on the merits.
Despite her having dropped UVAI, Lorenzo Tan (Tan) and June Vilvestre (Vilvestre) from this suit,
Eristingcol insists that her complaint against UVAI and the defendants was properly filed before the
RTC as it prays for the declaration of nullity of UVAIs Construction Rules and asks that damages be
paid by Limjoco and the other UVAI officers who had inflicted injury upon her. Eristingcol asseverates
that since the case before the RTC is one for declaration of nullity, the nature of the question that is
the subject of controversy, not just the status or relationship of the parties, should determine which
body has jurisdiction. In any event, Eristingcol submits that the RTCs jurisdiction over the case was
foreclosed by the prayer of UVAI and its officers, including Limjoco, for affirmative relief from that
court.
Well-settled in jurisprudence is the rule that in determining which body has jurisdiction over a case,
we should consider not only the status or relationship of the parties, but also the nature of the
question that is the subject of their controversy.6 To determine the nature of an action and which

court has jurisdiction, courts must look at the averments of the complaint or petition and the essence
of the relief prayed for.7 Thus, we examine the pertinent allegations in Eristingcols complaint,
specifically her amended complaint, to wit:
Allegations Common to All Causes of Action
3. In 1958 and upon its incorporation, [UVAI] adopted a set of By-laws and Rules and Regulations, x
x x. Item 5 of [UVAIs] Construction Rules pertinently provides:
"Set back line: All Buildings, including garage servants quarters, or parts thereof (covered terraces,
portes cocheres) must be constructed at a distance of not less than three (3) meters from the
boundary fronting a street and not less than four (4) meters fronting the drainage creek or
underground culvert and two (2) meters from other boundaries of a lot. Distance will be measured
from the vertical projection of the roof nearest the property line. Completely open and unroofed
terraces are not included in these restrictions."
Suffice it to state that there is nothing in the same By-laws which deals explicitly with canopies or
marquees which extend outward from the main building.
4. [Eristingcol] has been a resident of Urdaneta Village for eleven (11) years. In February 1997, she
purchased a parcel of land in the Village, located at the corner of Urdaneta Avenue and Cerrada
Street. x x x.
5. In considering the design for the house (the "Cerrada property") which she intended to construct
on Cerrada Street, [Eristingcol] referred to the National Building Code of the Philippines. After
assuring herself that the said law does not expressly provide any restrictions in respect thereof, and
after noting that other houses owned by prominent families had similar structures without being cited
by the Villages Construction Committee, [Eristingcol] decided that the Cerrada property would have
a concrete canopy directly above the main door and driveway.
6. In compliance with [UVAIs] rules, [Eristingcol] submitted to [UVAI] copies of her building plans in
respect of the Cerrada property and the building plans were duly approved by [UVAI]. x x x.
7. [Eristingcol] submitted and/or paid the "cash bond/construction bond deposit and architects
inspection fee" of P200,000.00 and the architects inspection fee of P500.00 as required under
Construction Rules x x x.
8. In the latter part of 1997, and while the construction of the Cerrada property was ongoing,
[Eristingcol] received a notice from [UVAI], charging her with alleged violations of the Construction
Rules, i.e., those on the height restriction of eleven (11.0) meters, and the canopy extension into the
easement. On 22nd January 1998, [Eristingcol] (through her representatives) met with, among
others, defendant Limjoco. In said meeting, and after deliberation on the definition of the phrase
"original ground elevation" as a reference point, [Eristingcols] representatives agreed to revise the
building plan by removing what was intended to be a parapet or roof railing, and thereby reduce the
height of the structure by 40 centimeters, which proposal was accepted by the Board through
defendant Limjoco, Gov. Catalino Macaraig Jr. ([UVAIs] Construction Committee chairman), and the

Villages Architect. However, the issue of the alleged violation in respect of the canopy/extension
remained unresolved.
xxxx
9. In compliance with the agreement reached at the 22nd January 1998 meeting, [Eristingcol]
caused the revision of her building plans such that, as it now stands, the Cerrada property has a
vertical height of 10.96 meters and, thus, was within the Villages allowed maximum height of 11
meters.
10. Sometime in June 1998, [Eristingcol] was surprised to receive another letter from [UVAI], this
time from the Construction Committee chairman (defendant Tan), again calling her attention to
alleged violations of the Construction Rules. On 15th June 1998, [UVAI] barred [Eristingcols]
construction workers from entering the Village. Thus, [Eristingcols] Construction Manager (Mr. Jaime
M. Hidalgo) wrote defendant Tan to explain her position, and attached photographs of similar
"violations" by other property owners which have not merited the same scrutiny and sanction from
[UVAI].
xxxx
11. On 26th October 1998, and for reasons known only to him, defendant Vilvestre sent a letter to
Mr. Geronimo delos Reyes, demanding for an "idea of how [Mr. delos Reyes] can demonstrate in
concrete terms [his] good faith as a quid pro quo for compromise to" [UVAIs] continued insistence
that [Eristingcol] had violated [UVAIs] Construction Rules. x x x.
xxxx
12. [Eristingcol] through Mr. Hidalgo sent a letter dated 24th November 1998 to defendant Tan,
copies of which were furnished defendants Limjoco, Vilvestre and the Board, reiterating that, among
others: (i) the alleged height restriction violation is untrue, since the Cerrada property now has a
height within the limits imposed by [UVAI]; and (ii) the demand to reduce the canopy by ninety (90)
centimeters is without basis, in light of the existence of thirty-five (35) similar "violations" of the same
nature by other homeowners. [Eristingcol] through Mr. Hidalgo further mentioned that she had done
nothing to deserve the crude and coercive Village letters and the Boards threats of work stoppage,
and she cited instances when she dealt with [UVAI] and her fellow homeowners in good faith and
goodwill such as in 1997, when she very discreetly spent substantial amounts to landscape the
entire Village Park, concrete the Park track oval which was being used as a jogging path, and
donate to the Association molave benches used as Park benches.
xxxx
13. On the same date (24th November 1998), defendant Vilvestre sent another letter addressed to
[Eristingcols] construction manager Hidalgo, again threatening to enjoin all construction activity on
the Cerrada property as well as ban entry of all workers and construction deliveries effective 1st
December 1998 unless Mr. delos Reyes met with defendants. x x x.

xxxx
14. On 2nd December 1998, [Eristingcols] representatives met with defendants Limjoco, Tan, and
Vilvestre. During that meeting, defendants were shown copies of the architectural plans for the
Cerrada property. [Eristingcols] representatives agreed to allow [UVAIs] Construction Committees
architect to validate the measurements given. However, on the issue of the canopy extension, the
defendants informed [Eristingcols] representatives that the Board would impose a penalty of Four
Hundred Thousand Pesos (P400,000.00) for violation of [UVAIs] "set back" or easement rule.
Defendants cited the Boards imposition of similar fines to previous homeowners who had violated
the same rule, and they undertook to furnish [Eristingcol] with a list of past penalties imposed and
paid by homeowners found by the Board to have violated the Villages "set back" provision.
15. On 22nd December 1998, defendant Vilvestre sent [Eristingcol] a letter dated 18th December
1998 formally imposing a penalty of P400,000.00 for the "canopy easement violation." x x x.
16. On 29th December 1998, x x x, Vilvestre sent a letter to [Eristingcol], stating that "as far as [his]
administration is concerned, there has been no past penalties executed by [UVAI], similar to the one
we are presently demanding on your on going construction. x x x
17. On 4th January 1999, [Eristingcols] representative sent a letter to the Board, asking for a
reconsideration of the imposition of the P400,000.00 penalty on the ground that the same is
unwarranted and excessive. On 6th January 1999, [Eristingcol] herself sent a letter to the Board,
expounding on the reasons for opposing the Boards action. On 18th January 1999, [Eristingcol] sent
another letter in compliance with defendants request for a breakdown of her expenditures in respect
of her donations relative to the Village park.
18. On 3rd February 1999, [Eristingcol] through her lawyers sent defendants a letter, requesting that
her letters of 4th and 6th January 1999 be acted upon.
19. On 4th February 1999, x x x, defendant Limjoco gave a verbal order to [UVAIs] guards to bar the
entry of workers working on the Cerrada property.
20. In the morning of 5th February 1999, defendants physically barred [Eristingcols] workers and
contractors from entering the Village and working at the Cerrada property.8
Eristingcol then lists the following causes of action:
1. Item 5 of UVAIs Construction Rules constitutes an illegal and unwarranted intrusion upon
Eristingcols proprietary rights as it imposes a set-back or horizontal easement of 3.0 meters
from the property line greater than the specification in Section 1005(b) of the Building Code
that "the horizontal clearance between the outermost edge of the marquee and the curb line
shall be not less than 300 millimeters." As such, Eristingcol prays for the declaration of nullity
of this provision in UVAIs Construction Rules insofar as she is concerned.
2. UVAIs imposition of a P400,000.00 penalty on Eristingcol has no factual basis, is arbitrary,
whimsical and capricious as rampant violations of the set-back rule by other homeowners in

the Village were not penalized by UVAI. Eristingcol prays to put a stop to defendants
arbitrary exercise of power pursuant to UVAIs by-laws.
3. Absent any factual or legal bases for the imposition of a P400,000.00 penalty, defendants
and all persons working under their control should be permanently barred or restrained from
imposing and/or enforcing any penalty upon Eristingcol for an alleged violation of UVAIs
Construction Rules, specifically the provision on set-back.
4. Defendants Limjoco, Tan, and Vilvestre, in violation of Article 19 of the Civil Code,
demonstrated bias against Eristingcol by zeroing in on her alone and her supposed violation,
while other homeowners, who had likewise violated UVAIs Construction Rules, were not
cited or penalized therefor. Defendants actuations were in clear violation of their duty to give
all homeowners, including Eristingcol, their due.
5. Defendants actuations have seriously affected Eristingcols mental disposition and have
caused her to suffer sleepless nights, mental anguish and serious anxiety. Eristingcols
reputation has likewise been besmirched by UVAIs and defendants arbitrary charge that she
had violated UVAIs Construction Rules. In this regard, individual defendants should each
pay Eristingcol moral damages in the amount ofP1,000,000.00.
6. Lastly, defendants should pay Eristingcol P1,000.000.00 for litigation expenses she
incurred in instituting this suit and for attorneys fees.
At the outset, we note that the relationship between the parties is not in dispute and is, in fact,
admitted by Eristingcol in her complaint. Nonetheless, Eristingcol is adamant that the subject matter
of her complaint is properly cognizable by the regular courts and need not be filed before a
specialized body or commission.
Eristingcols contention is wrong.
Ostensibly, Eristingcols complaint, designated as one for declaration of nullity, falls within the regular
courts jurisdiction. However, we have, on more than one occasion, held that the caption of the
complaint is not determinative of the nature of the action.9
A scrutiny of the allegations contained in Eristingcols complaint reveals that the nature of the
question subject of this controversy only superficially delves into the validity of UVAIs Construction
Rules. The complaint actually goes into the proper interpretation and application of UVAIs by-laws,
specifically its construction rules. Essentially, the conflict between the parties arose as Eristingcol,
admittedly a member of UVAI, now wishes to be exempt from the application of the canopy
requirement set forth in UVAIs Construction Rules. Significantly, Eristingcol does not assail the
height restriction of UVAIs Construction Rules, as she has readily complied therewith.
Distinctly in point is China Banking Corp. v. Court of Appeals,10 which upheld the jurisdiction of the
Securities and Exchange Commission (SEC) over the suit and recognized its special competence to
interpret and apply Valley Golf and Country Club, Inc.s (VGCCIs) by-laws. We ruled, thus:

Applying the foregoing principles in the case at bar, to ascertain which tribunal has jurisdiction we
have to determine therefore whether or not petitioner is a stockholder of VGCCI and whether or not
the nature of the controversy between petitioner and private respondent corporation is intracorporate.
As to the first query, there is no question that the purchase of the subject share or membership
certificate at public auction by petitioner (and the issuance to it of the corresponding Certificate of
Sale) transferred ownership of the same to the latter and thus entitled petitioner to have the said
share registered in its name as a member of VGCCI. x x x.
By virtue of the aforementioned sale, petitioner became a bona fide stockholder of VGCCI and,
therefore, the conflict that arose between petitioner and VGCCI aptly exemplifies an intra-corporate
controversy between a corporation and its stockholder under Sec. 5(b) of P.D. 902-A.
An important consideration, moreover, is the nature of the controversy between petitioner and
private respondent corporation. VGCCI claims a prior right over the subject share anchored mainly
on Sec. 3, Art. VIII of its by-laws which provides that "after a member shall have been posted as
delinquent, the Board may order his/her/its share sold to satisfy the claims of the Club" It is
pursuant to this provision that VGCCI also sold the subject share at public auction, of which it was
the highest bidder. VGCCI caps its argument by asserting that its corporate by-laws should prevail.
The bone of contention, thus, is the proper interpretation and application of VGCCIs aforequoted bylaws, a subject which irrefutably calls for the special competence of the SEC.
We reiterate herein the sound policy enunciated by the Court in Abejo v. De la Cruz:
6. In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative
commissions and boards the power to resolve specialized disputes in the field of labor (as in
corporations, public transportation and public utilities) ruled that Congress in requiring the Industrial
Courts intervention in the resolution of labor-management controversies likely to cause strikes or
lockouts meant such jurisdiction to be exclusive, although it did not so expressly state in the law. The
Court held that under the "sense-making and expeditious doctrine of primary jurisdiction the
courts cannot or will not determine a controversy involving a question which is within the jurisdiction
of an administrative tribunal, where the question demands the exercise of sound administrative
discretion requiring the special knowledge, experience, and services of the administrative tribunal to
determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with
the purposes of the regulatory statute administered.
xxxx
In this case, the need for the SECs technical expertise cannot be over-emphasized involving as it
does the meticulous analysis and correct interpretation of a corporations by-laws as well as the
applicable provisions of the Corporation Code in order to determine the validity of VGCCIs claims.
The SEC, therefore, took proper cognizance of the instant case. 11
Likewise in point is our illuminating ruling in Sta. Clara Homeowners Association v. Sps.
Gaston,12 although it ultimately held that the question of subject matter jurisdiction over the complaint

of respondent- spouses Gaston for declaration of nullity of a board resolution issued by Sta. Clara
Homeowners Association (SCHA) was vested in the regular courts. In Sta. Clara, the main issue
raised by SCHA reads: "Whether [the CA] erred in upholding the jurisdiction of the [RTC], to declare
as null and void the resolution of the Board of SCHA, decreeing that only members [in] good
standing of the said association were to be issued stickers for use in their vehicles." In holding that
the regular courts had jurisdiction over respondent-spouses Gastons complaint for declaration of
nullity, we stressed the absence of relationship and the consequent lack of privity of contract
between the parties, thus:
Are [Respondent-Spouses Gaston] SCHA Members?
In order to determine if the HIGC has jurisdiction over the dispute, it is necessary to resolve
preliminarilyon the basis of the allegations in the Complaintwhether [respondent-spouses
Gaston] are members of the SCHA.
[SCHA] contend[s] that because the Complaint arose from intra-corporate relations between the
SCHA and its members, the HIGC therefore has jurisdiction over the dispute. To support their
contention that [respondent-spouses Gaston] are members of the association, [SCHA] cite[s] the
SCHAs Articles of Incorporation and By-laws which provide that all landowners of the Sta. Clara
Subdivision are automatically members of the SCHA.
We are not persuaded. The constitutionally guaranteed freedom of association includes the freedom
not to associate. The right to choose with whom one will associate oneself is the very foundation and
essence of that partnership. It should be noted that the provision guarantees the right to form an
association. It does not include the right to compel others to form or join one.
More to the point, [respondent-spouses Gaston] cannot be compelled to become members of the
SCHA by the simple expedient of including them in its Articles of Incorporation and By-laws without
their express or implied consent. x x x. In the present case, however, other than the said Articles of
Incorporation and By-laws, there is no showing that [respondent-spouses Gaston] have agreed to be
SCHA members.
xxxx
No privity of Contract
Clearly then, no privity of contract exists between [SCHA] and [respondent-spouses Gaston]. As a
general rule, a contract is a meeting of minds between two persons. The Civil Code upholds the
spirit over the form; thus, it deems an agreement to exist, provided the essential requisites are
present. x x x. From the moment there is a meeting of minds between the parties, it is perfected.
As already adverted to, there are cases in which a party who enters into a contract of sale is also
bound by a lien annotated on the certificate of title. We recognized this in Bel Air Village Association,
Inc. v. Dionisio, in which we ruled:

There is no dispute that Transfer Certificate of Title No. 81136 covering the subject parcel of land
issued in the name of the petitioner contains an annotation to the effect that the lot owner becomes
an automatic member of the respondent Bel-Air Association and must abide by such rules and
regulations laid down by the Association in the interest of the sanitation, security and the general
welfare of the community. It is likewise not disputed that the provision on automatic membership was
expressly annotated on the petitioners Transfer Certificate of Title and on the title of his
predecessor-in-interest.
The question, therefore, boils down to whether or not the petitioner is bound by such annotation.
Section 39 of Art. 496 (The Land Registration Act) states:
Sec. 39. Every person receiving a certificate of title in pursuance of a decree of registration, and
every subsequent purchaser of registered land who takes a certificate of title for value in good faith
shall hold the same free of all encumbrances except those noted on said certificate x x x. (Italics
supplied)
The above ruling, however, does not apply to the case at bar. When [respondent-spouses Gaston]
purchased their property in 1974 and obtained Transfer Certificates of Title Nos. T-126542 and T127462 for Lots 11 and 12 of Block 37 along San Jose Avenue in Sta. Clara Subdivision, there was
no annotation showing their automatic membership in the SCHA. Thus, no privity of contract arising
from the title certificate exists between [SCHA] and [respondent-spouses Gaston].
Further, the records are bereft of any evidence that would indicate that private respondents intended
to become members of the SCHA. Prior to the implementation of the aforesaid Resolution, they and
the other homeowners who were not members of the association were issued non-member gate
pass stickers for their vehicles. This fact has not been disputed by [SCHA]. Thus, the SCHA
recognized that there were subdivision landowners who were not members thereof, notwithstanding
the provisions of its Articles of Incorporation and By-laws.
Jurisdiction Determined by Allegations in the Complaint
It is a settled rule that jurisdiction over the subject matter is determined by the allegations in the
complaint. Jurisdiction is not affected by the pleas or the theories set up by the defendant in an
answer or a motion to dismiss. Otherwise, jurisdiction would become dependent almost entirely upon
the whims of the defendant.
The Complaint does not allege that [respondent-spouses Gaston] are members of the SCHA. In
point of fact, they deny such membership. Thus, the HIGC has no jurisdiction over the dispute. 13
In stark contrast, the relationship between the parties in the instant case is well-established. Given
this admitted relationship, the privity of contract between UVAI and Eristingcol is palpable, despite
the latters deft phraseology of its primary cause of action as a declaration of nullity of UVAIs
Construction Rules. In short, the crux of Eristingcols complaint is UVAIs supposed arbitrary
implementation of its construction rules against Eristingcol, a member thereof.

Moreover, as in Sta. Clara (had respondent-spouses Gaston been members of SCHA), the
controversy which arose between the parties in this case partook of the nature of an intra-corporate
dispute. Executive Order (E.O.) No. 535,14 which amended Republic Act No. 580 creating the HIGC,
transferred to the HIGC the regulatory and administrative functions over homeowners associations
originally vested with the SEC. Section 2 of E.O. No. 535 provides in pertinent part:
2. In addition to the powers and functions vested under the Home Financing Act, the Corporation,
shall have among others, the following additional powers:
(a) x x x; and exercise all the powers, authorities and responsibilities that are vested on the
Securities and Exchange Commission with respect to home owners association, the
provision of Act 1459, as amended by P.D. 902-A, to the contrary notwithstanding;
(b) To regulate and supervise the activities and operations of all houseowners association
registered in accordance therewith.
By virtue thereof, the HIGC likewise assumed the SECs original and exclusive jurisdiction to hear
and decide cases involving controversies arising from intra-corporate or partnership
relations.15 Thereafter, with the advent of Republic Act No. 8763, the foregoing powers and
responsibilities vested in the HIGC, with respect to homeowners associations, were transferred to
the HLURB.
As regards the defendants supposed embrace of the RTCs jurisdiction by appearing thereat and
undertaking to desist from prohibiting Eristingcols workers from entering the village, suffice it to state
that the invocation of the doctrine in Tijam, et al. v. Sibonghanoy, et al.16 is quite a long stretch.
The factual milieu obtaining in Tijam and in the case at bench are worlds apart. As found by the CA,
defendants appearance before the RTC was pursuant to, and in compliance with, a subpoena
issued by that court in connection with Eristingcols application for a Temporary Restraining Order
(TRO). On defendants supposed agreement to sign the Undertaking allowing Eristingcols workers,
contractors, and suppliers to enter and exit the village, this temporary settlement cannot be equated
with full acceptance of the RTCs authority, as what actually transpired in Tijam.
1avvphi1.zw+

The landmark case of Tijam is, in fact, only an exception to the general rule that an objection to the
courts jurisdiction over a case may be raised at any stage of the proceedings, as the lack of
jurisdiction affects the very authority of the court to take cognizance of a case. 17 In that case, the
Surety filed a Motion to Dismiss before the CA, raising the question of lack of jurisdiction for the first
timefifteen years after the action was commenced in the Court of First Instance (CFI) of Cebu.
Indeed, in several stages of the proceedings in the CFI, as well as in the CA, the Surety invoked the
jurisdiction of said courts to obtain affirmative relief, and even submitted its case for a final
adjudication on the merits. Consequently, it was barred by laches from invoking the CFIs lack of
jurisdiction.
To further highlight the distinction in this case, the TRO hearing was held on February 9, 1999, a day
after the filing of the complaint. On even date, the parties reached a temporary settlement reflected
in the Undertaking. Fifteen days thereafter, defendants, including Limjoco, filed a Motion to Dismiss.

Certainly, this successive and continuous chain of events cannot be characterized as laches as
would bar defendants from questioning the RTCs jurisdiction.
In fine, based on the allegations contained in Eristingcols complaint, it is the HLURB, not the RTC,
which has jurisdiction over this case.
WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals
in CA-G.R. SP. No. 64642 is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

b.) Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 131282

January 4, 2002

GABRIEL L. DUERO, petitioner,

vs.
HON.COURT OF APPEALS, and BERNARDO A. ERADEL, respondents.
QUISUMBING, J.:
This petition for certiorari assails the Decisionl dated September 17, 1997, of the Court of Appeals in
CA-G.R. No. SP No.. 2340- UDK, entitled Bernardo Eradel vs. Non. Ermelino G. Andal, setting aside
all proceedings in Civil Case No.1075, Gabriel L. Duero vs. Bernardo Eradel, before the Branch 27
of the Regional Trial Court of Tandag, Surigao del Sur .
The pertinent facts are as follow.
Sometime in 1988, according to petitioner, private respondent Bemardo Eradel 2 entered and
occupied petitioner's land covered by Tax Declaration No. A-16-13-302, located in Baras, San
Miguel, Surigao del Sur. As shown in the tax declaration, the land had an assessed value of P5,240.
When petitioner politely informed private respondent that the land was his and requested the latter to
vacate the land, private respondent refused, but instead threatened him with bodily harm. Despite
repeated demands, private respondent remained steadfast in his refusal to leave the land.
On June 16, 1995, petitioner filed before the RTC a complaint for Recovery of Possession and
Ownership with Damages and Attorney's Fees against private respondent and two others, namely,
Apolinario and Inocencio Ruena. Petitioner appended to the complaint the aforementioned tax
declaration. The counsel of the Ruenas asked for extension to file their Answer and was given until
July 18, 1995. Meanwhile, petitioner and the, Ruenas executed a compromise agreement, which
became the trial court's basis for a partial judgment rendered on January 12, 1996. In this
agreement, the Ruenas through their counsel, Atty. Eusebio Avila, entered into a Compromise

Agreement with herein petitioner, Gabriel Duero. Inter alia, the agreement stated that the Ruenas
recognized and bound themselves to respect the ownership and possession of Duero. 3 Herein
private respondent Eradel was not a party to the agreement, and he was declared in default for
failure to file his answer to the complaint.4
Petitioner presented his evidence ex parte on February 13, 1996. On May 8, 1996, judgment was
rendered in his favor, and private respondent was ordered to peacefully vacate and turn over Lot
No.1065 Cad. 537-D to petitioner; pay petitioner P2,000 annual rental from 1988 up the time he
vacates the land, and P5,000 as attorney's fees and the cost of the suit. 5 Private respondent
received a copy of the decision on May 25, 1996.
On June 10, 1996, private respondent filed a Motion for New Trial, alleging that he has been
occupying the land as a tenant of Artemio Laurente, Sr., since 1958. He explained that he turned
over the complaint and summons to Laurente in the honest belief that as landlord, the latter had a
better right to the land and was responsible to defend any adverse claim on it. However, the trial
court denied the motion for new trial.
1wphi1.nt

Meanwhile, RED Conflict Case No.1029, an administrative case between petitioner and applicantcontestants Romeo, Artemio and Jury Laurente, remained pending with the Office of the Regional
Director of the Department of Environment and Natural Resources in Davao City. Eventually, it was
forwarded to the DENR Regional Office in Prosperidad, Agusan del Sur .
On July 24, 1996, private respondent filed before the RTC a Petition for Relief from Judgment,
reiterating the same allegation in his Motion for New Trial. He averred that unless there is a
determination on who owned the land, he could not be made to vacate the land. He also averred that
the judgment of the trial court was void inasmuch as the heirs of Artemio Laurente, Sr., who are
indispensable parties, were not impleaded.
On September 24, 1996, Josephine, Ana Soledad and Virginia, all surnamed Laurente,
grandchildren of Artemio who were claiming ownership of the land, filed a Motion for Intervention.
The RTC denied the motion.
On October 8, 1996, the trial court issued an order denying the Petition for Relief from Judgment. In
a Motion for Reconsideration of said order, private respondent alleged that the RTC had no
jurisdiction over the case, since the value of the land was only P5,240 and therefore it was under the
jurisdiction of the municipal trial court. On November 22, 1996, the RTC denied the motion for
reconsideration.
On January 22, 1997, petitioner filed a Motion for Execution, which the RTC granted on January 28.
On February 18, 1997, Entry of Judgment was made of record and a writ of execution was issued by
the RTC on February 27,1997. On March 12,1997, private respondent filed his petition for certiorari
before the Court of Appeals.
The Court of Appeals gave due course to the petition, maintaining that private respondent is not
estopped from assailing the jurisdiction 'of the RTC, Branch 27 in Tandag, Surigao del Sur, when

private respondent filed with said court his Motion for Reconsideration And/Or Annulment of
Judgment. The Court of Appeals decreed as follows:
IN THE LIGHT OF ALL THE FOREGOING, the Petition is GRANTED. All proceedings in
"Gabriel L. Duero vs. Bernardo Eradel, et. al. Civil Case 1075" filed in the Court a quo,
including its Decision, Annex "E" of the petition, and its Orders and Writ of Execution and the
turn over of the property to the Private Respondent by the Sheriff of the Court a quo, are
declared null and void and hereby SET ASIDE, No pronouncement as to costs.
SO ORDERED.6
Petitioner now comes before this Court, alleging that the Court of Appeals acted with grave abuse of
discretion amounting to lack or in excess of jurisdiction when it held that:
I.
...THE LOWER COURT HAS NO JURISDICTION OVER THE SUBJECT MA TTER OF THE
CASE.
II
...PRIVATE RESPONDENT WAS NOT THEREBY ESTOPPED FROM QUESTIONING THE
JURISDICTION OF THE LOWER COURT EVEN AFTER IT SUCCESSFULLY SOUGHT
AFFIRMATIVE RELIEF THEREFROM.
III
...THE FAlLURE OF PRIVATE RESPONDENT TO FILE HIS ANSWER IS JUSTIFIED.

The main issue before us is whether the Court of Appeals gravely abused its discretion when it held
that the municipal trial court had jurisdiction, and that private respondent was not estopped from
assailing the jurisdiction of the RTC after he had filed several motions before it. The secondary issue
is whether the Court of appeals erred in holding that private respondent's failure to file an answer to
the complaint was justified.
At the outset, however, we note that petitioner through counsel submitted to this Court pleadings that
contain inaccurate statements. Thus, on page 5 of his petition,8 we find that to bolster the claim that
the appellate court erred in holding that the RTC had no jurisdiction, petitioner pointed to Annex E9 of
his petition which supposedly is the Certification issued by the Municipal Treasurer of San Miguel,
Surigao, specifically containing the notation, "Note: Subject for General Revision Effective 1994." But
it appears that Annex E of his petition is not a Certification but a xerox copy of a Declaration of Real
Property. Nowhere does the document contain a notation, "Note: Subject for General Revision
Effective 1994." Petitioner also asked this Court to refer to Annex F,10 where he said the zonal value
of the disputed land was P1.40 per sq.m., thus placing the computed value of the land at the time
the complaint was filed before the RTC at P57,113.98, hence beyond the jurisdiction of the municipal

court and within the jurisdiction of the regional trial court. However, we find that these annexes are
both merely xerox copies. They are obviously without evidentiary weight or value.
Coming now to the principal issue, petitioner contends that respondent appellate court acted with
grave abuse of discretion. By "grave abuse of discretion" is meant such capricious and whimsical
exercise of judgment which is equivalent to an excess or a lack of jurisdiction. The abuse of
discretion must be so patent and gross as to amount to an evasion of a positive duty or a virtual
refusal to perform a duty enjoined by law, or to act at all in contemplation of law as where the power
is exercised in an arbitrary and despotic manner by reason of passion or hostility.11 But here we find
that in its decision holding that the municipal court has jurisdiction over the case and that private
respondent was not estopped from questioning the jurisdiction of the RTC, respondent Court of
Appeals discussed the facts on which its decision is grounded as well as the law and jurisprudence
on the matter.12 Its action was neither whimsical nor capricious.
Was private respondent estopped from questioning the jurisdiction of the RTC? In this case, we are
in agreement with the Court of Appeals that he was not. While participation in all stages of a case
before the trial court, including invocation of its authority in asking for affirmative relief, effectively
bars a party by estoppel from challenging the court's jurisdiction,13 we note that estoppel has become
an equitable defense that is both substantive and remedial and its successful invocation can bar a
right and not merely its equitable enforcement.14Hence, estoppel ought to be applied with caution.
For estoppel to apply, the action giving rise thereto must be unequivocal and intentional because, if
misapplied, estoppel may become a tool of injustice.15
In the present case, private respondent questions the jurisdiction of RTC in Tandag, Surigao del Sur,
on legal grounds. Recall that it was petitioner who filed the complaint against private respondent and
two other parties before the said court,16 believing that the RTC had jurisdiction over his complaint.
But by then, Republic Act 769117 amending BP 129 had become effective, such that jurisdiction
already belongs not to the RTC but to the MTC pursuant to said amendment. Private respondent, an
unschooled farmer, in the mistaken belief that since he was merely a tenant of the late Artemio
Laurente Sr., his landlord, gave the summons to a Hipolito Laurente, one of the surviving heirs of
Artemio Sr., who did not do anything about the summons. For failure to answer the complaint,
private respondent was declared in default. He then filed a Motion for New Trial in the same court
and explained that he defaulted because of his belief that the suit ought to be answered by his
landlord. In that motion he stated that he had by then the evidence to prove that he had a better right
than petitioner over the land because of his long, continuous and uninterrupted possession as bonafide tenant-lessee of the land.18But his motion was denied. He tried an alternative recourse. He filed
before the RTC a Motion for Relief from Judgment. Again, the same court denied his motion, hence
he moved for reconsideration of the denial. In his Motion for Reconsideration, he raised for the first
time the RTC's lack of jurisdiction. This motion was again denied. Note that private respondent
raised the issue of lack of jurisdiction, not when the case was already on appeal, but when the case,
was still before the RTC that ruled him in default, denied his motion for new trial as well as for relief
from judgment, and denied likewise his two motions for reconsideration. After the RTC still refused to
reconsider the denial of private respondent's motion for relief from judgment, it went on to issue the
order for entry of judgment and a writ of execution.

Under these circumstances, we could not fault the Court of Appeals in overruling the RTC and in
holding that private respondent was not estopped from questioning the jurisdiction of the regional
trial court. The fundamental rule is that, the lack of jurisdiction of the court over an action cannot be
waived by the parties, or even cured by their silence, acquiescence or even by their express
consent.19 Further, a party may assail the jurisdiction of the court over the action at any stage of the
proceedings and even on appeal.20 The appellate court did not err in saying that the RTC should
have declared itself barren of jurisdiction over the action. Even if private respondent actively
participated in the proceedings before said court, the doctrine of estoppel cannot still be properly
invoked against him because the question of lack of jurisdiction may be raised at anytime and at any
stage of the action.21Precedents tell us that as a general rule, the jurisdiction of a court is not a
question of acquiescence as a matter of fact, but an issue of conferment as a matter of law.22 Also,
neither waiver nor estoppel shall apply to confer jurisdiction upon a court, barring highly meritorious
and exceptional circumstances.23 The Court of Appeals found support for its ruling in our decision
in Javier vs. Court of Appeals, thus:
x x x The point simply is that when a party commits error in filing his suit or proceeding in a
court that lacks jurisdiction to take cognizance of the same, such act may not at once be
deemed sufficient basis of estoppel. It could have been the result of an honest mistake, or of
divergent interpretations of doubtful legal provisions. If any fault is to be imputed to a party
taking such course of action, part of the blame should be placed on the court which
shall entertain the suit, thereby lulling the parties into believing that they pursued
their remedies in the correct forum. Under the rules, it is the duty of the court to dismiss
an action 'whenever it appears that the court has no jurisdiction over the subject matter.'
(Sec. 2, Rule 9, Rules of Court) Should the Court render a judgment without jurisdiction,
such judgment may be impeached or annulled for lack of jurisdiction (Sec. 30, Rule 132,
Ibid), within ten (10) years from the finality of the same. [Emphasis ours.] 24
Indeed, "...the trial court was duty-bound to take judicial notice of the parameters of its jurisdiction
and its failure to do so, makes its decision a 'lawless' thing." 25
Since a decision of a court without jurisdiction is null and void, it could logically never become final
and executory, hence appeal therefrom by writ of error would be out of the question. Resort by
private respondent to a petition for certiorari before the Court of Appeals was in order .
In holding that estoppel did not prevent private respondent from questioning the RTC's jurisdiction,
the appellate court reiterated the doctrine that estoppel must be applied only in exceptional cases,
as its misapplication could result in a miscarriage of justice. Here, we find that petitioner, who claims
ownership of a parcel of land, filed his complaint before a court without appropriate jurisdiction.
Defendant, a farmer whose tenancy status is still pending before the proper administrative agency
concerned, could have moved for dismissal of the case on jurisdictional grounds. But the farmer as
defendant therein could not be expected to know the nuances of jurisdiction and related issues. This
farmer, who is now the private respondent, ought not to be penalized when he claims that he made
an honest mistake when he initially submitted his motions before the RTC, before he realized that
the controversy was outside the RTC's cognizance but within the jurisdiction of the municipal trial
court. To hold him in estoppel as the RTC did would amount to foreclosing his avenue to obtain a
proper resolution of his case. Furthermore, if the RTC's order were to be sustained, he would be

evicted from the land prematurely, while RED Conflict Case No.1029 would remain unresolved. Such
eviction on a technicality if allowed could result in an injustice, if it is later found that he has a legal
right to till the land he now occupies as tenant-lessee.
1wphi1.nt

Having determined that there was no grave abuse of discretion by the appellate court in ruling that
private respondent was not estopped from questioning the jurisdiction of the RTC, we need not tarry
to consider in detail the second issue. Suffice it to say that, given the circumstances in this case, no
error was committed on this score by respondent appellate court. Since the RTC had no jurisdiction
over the case, private respondent had justifiable reason in law not to file an answer, aside from the
fact that he believed the suit was properly his landlord's concern.
WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals
is AFFIRMED. The decision of the Regional Trial Court in Civil Case No.1075 entitled Gabriel L.
Duero vs. Bernardo Eradel, its Order that private respondent turn over the disputed land to
petitioner, and the Writ of Execution it issued, areANNULLED and SET ASIDE. Costs against
petitioner .
SO ORDERED.

c.) Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 129638

December 8, 2003

ANTONIO T. DONATO, petitioner,

vs.
COURT OF APPEALS, FILOMENO ARCEPE, TIMOTEO BARCELONA, IGNACIO BENDOL,
THELMA P. BULICANO, ROSALINDA CAPARAS, ROSITA DE COSTO, FELIZA DE GUZMAN,
LETICIA DE LOS REYES, ROGELIO GADDI, PAULINO GAJARDO, GERONIMO IMPERIAL,
HOMER IMPERIAL, ELVIRA LESLIE, CEFERINO LUGANA, HECTOR PIMENTEL, NIMFA
PIMENTEL, AURELIO G. ROCERO, ILUMINADA TARA, JUANITO VALLESPIN, and NARCISO
YABUT, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a "petition for review on certiorari" filed on July 17, 1997 which should be a petition for
certiorari under Rule 65 of the Rules of Court. It assails the Resolutions 1 dated March 21, 1997 and
June 23, 1997 issued by the Court of Appeals in CA-G.R. SP No. 41394. 2
The factual background of the case is as follows:

Petitioner Antonio T. Donato is the registered owner of a real property located at Ciriaco Tuason
Street, San Andres, Manila, covered by Transfer Certificate of Title No. 131793 issued by the
Register of Deeds of the City of Manila on November 24, 1978. On June 7, 1994, petitioner filed a
complaint before the Metropolitan Trial Court (Branch 26) of Manila (MeTC) for forcible entry and
unlawful detainer against 43 named defendants and "all unknown occupants" of the subject
property.3
Petitioner alleges that: private respondents had oral contracts of lease that expired at the end of
each month but were impliedly renewed under the same terms by mere acquiescence or tolerance;
sometime in 1992, they stopped paying rent; on April 7, 1994, petitioner sent them a written demand
to vacate; the non-compliance with said demand letter constrained him to file the ejectment case
against them.4
Of the 43 named defendants, only 20 (private respondents, 5 for brevity) filed a consolidated Answer
dated June 29, 1994 wherein they denied non-payment of rentals. They contend that they cannot be
evicted because the Urban Land Reform Law guarantees security of tenure and priority right to
purchase the subject property; and that there was a negotiation for the purchase of the lots occupied
by them but when the negotiation reached a passive stage, they decided to continue payment of
rentals and tendered payment to petitioners counsel and thereafter initiated a petition for
consignation of the rentals in Civil Case No. 144049 while they await the outcome of the negotiation
to purchase.
Following trial under the Rule on Summary Procedure, the MeTC rendered judgment on September
19, 1994 against the 23 non-answering defendants, ordering them to vacate the premises occupied
by each of them, and to pay jointly and severally P10,000.00 per month from the date they last paid
their rent until the date they actually vacate, plus interest thereon at the legal rate allowed by law, as
well as P10,000.00 as attorneys fees and the costs of the suit. As to the 20 private respondents, the
MeTC issued a separate judgment6 on the same day sustaining their rights under the Land Reform
Law, declaring petitioners cause of action as not duly warranted by the facts and circumstances of
the case and dismissing the case without prejudice.
Not satisfied with the judgment dismissing the complaint as against the private respondents,
petitioner appealed to the Regional Trial Court (Branch 47) of Manila (RTC). 7 In a Decision8 dated
July 5, 1996, the RTC sustained the decision of the MeTC.
Undaunted, petitioner filed a petition for review with the Court of Appeals (CA for brevity), docketed
as CA-G.R. SP No. 41394. In a Resolution dated March 21, 1997, the CA dismissed the petition on
two grounds: (a) the certification of non-forum shopping was signed by petitioners counsel and not
by petitioner himself, in violation of Revised Circular No. 28-91;9 and, (b) the only annex to the
petition is a certified copy of the questioned decision but copies of the pleadings and other material
portions of the record as would support the allegations of the petition are not annexed, contrary to
Section 3, paragraph b, Rule 6 of the Revised Internal Rules of the Court of Appeals (RIRCA). 10
On April 17, 1997, petitioner filed a Motion for Reconsideration,11 attaching thereto a photocopy of
the certification of non-forum shopping duly signed by petitioner himself 12 and the relevant records of
the MeTC and the RTC.13 Five days later, or on April 22, 1997, petitioner filed a Supplement14 to his

motion for reconsideration submitting the duly authenticated original of the certification of non-forum
shopping signed by petitioner.15
In a Resolution16 dated June 23, 1997 the CA denied petitioners motion for reconsideration and its
supplement, ruling that "petitioners subsequent compliance did not cure the defect in the instant
petition."17
Hence, the present petition anchored on the following grounds:
I.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DISMISSING THE PETITION BASED
ON HYPER-TECHNICAL GROUNDS BECAUSE:
A. PETITIONER HAS SUBSTANTIALLY COMPLIED WITH SUPREME COURT CIRCULAR
NO. 28-91. MORE, PETITIONER SUBSEQUENTLY SUBMITTED DURING THE
PENDENCY OF THE PROCEEDINGS A DULY AUTHENTICATED CERTIFICATE OF NONFORUM SHOPPING WHICH HE HIMSELF SIGNED AND EXECUTED IN THE UNITED
STATES.
B. PETITIONER HAS SUBSTANTIALLY COMPLIED WITH SECTION 3, RULE 6 OF THE
REVISED INTERNAL RULES OF THE COURT OF APPEALS. MORE, PETITIONER
SUBSEQUENTLY SUBMITTED DURING THE PENDENCY OF THE PROCEEDINGS
COPIES OF THE RELEVANT DOCUMENTS IN THE CASES BELOW.
C. PETITIONER HAS A MERITORIOUS APPEAL, AND HE STANDS TO LOSE
SUBSTANTIAL PROPERTY IF THE APPEAL IS NOT GIVEN DUE COURSE. THE RULES
OF PROCEDURE MUST BE LIBERALLY CONSTRUED TO DO SUBSTANTIAL JUSTICE.
II.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT ALL THE
ELEMENTS OF UNLAWFUL DETAINER ARE PRESENT IN THE CASE AT BAR.
III.
RESPONDENT COURT OF APPEALS ERRED IN NOT RULING THAT THE RTC MANILA,
BRANCH 47, COMMITTED REVERSIBLE ERROR IN AFFIRMING THE FINDING OF MTC
MANILA, BRANCH 26, THAT PRIVATE RESPONDENTS CANNOT BE EJECTED FROM THE
SUBJECT PROPERTY WITHOUT VIOLATING THEIR SECURITY OF TENURE EVEN IF THE
TERM OF THE LEASE IS MONTH-TO-MONTH WHICH EXPIRES AT THE END OF EACH MONTH.
IN THIS REGARD,
A. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN NOT RULING THAT TENANTS UNDER P.D. 1517

MAY BE EVICTED FOR NON-PAYMENT OF RENT, TERMINATION OF LEASE OR OTHER

GROUNDS FOR EJECTMENT.
B. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN NOT RULING THAT THE ALLEGED "PRIORITY
RIGHT TO BUY THE LOT THEY OCCUPY" DOES NOT APPLY WHERE THE
LANDOWNER DOES NOT INTEND TO SELL THE SUBJECT PROPERTY, AS IN THE
CASE AT BAR.
C. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN RULING THAT THE SUBJECT PROPERTY IS
LOCATED WITHIN A ZONAL IMPROVEMENT AREA OR APD.
D. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN NOT RULING THAT PRIVATE RESPONDENTS
NON-COMPLIANCE WITH THE CONDITIONS UNDER THE LAW RESULT IN THE
WAIVER OF PROTECTION AGAINST EVICTION.
E. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN NOT RULING THAT PRIVATE RESPONDENTS
CANNOT BE ENTITLED TO PROTECTION UNDER P.D. 2016 SINCE THE GOVERNMENT
HAS NO INTENTION OF ACQUIRING THE SUBJECT PROPERTY.
F. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN FINDING THAT THERE IS AN ON-GOING
NEGOTIATION FOR THE SALE OF THE SUBJECT PROPERTY AND THAT IT RENDERS
THE EVICTION OF PRIVATE RESPONDENTS PREMATURE.
G. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN NOT RULING THAT THE ALLEGED CASE FOR
CONSIGNATION DOES NOT BAR THE EVICTION OF PRIVATE RESPONDENTS.
IV.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT RESPONDENTS
SHOULD PAY PETITIONER A REASONABLE COMPENSATION FOR THEIR USE AND
OCCUPANCY OF THE SUBJECT PROPERTY IN THE AMOUNT OF AT LEAST P10,000.00 PER
MONTH FROM THE DATE THEY LAST PAID RENT UNTIL THE TIME THEY ACTUALLY VACATE
THE SAME, WITH LEGAL INTEREST AT THE MAXIMUM RATE ALLOWED BY LAW UNTIL PAID.
V.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT RESPONDENTS
SHOULD PAY PETITIONER ATTORNEYS FEES AND EXPENSES OF LITIGATION OF AT
LEASTP20,000.00, PLUS COSTS.18

Petitioner submits that a relaxation of the rigid rules of technical procedure is called for in view of the
attendant circumstances showing that the objectives of the rule on certification of non-forum
shopping and the rule requiring material portions of the record be attached to the petition have not
been glaringly violated and, more importantly, the petition is meritorious.
The proper recourse of an aggrieved party from a decision of the CA is a petition for review
on certiorari under Rule 45 of the Rules of Court. However, if the error, subject of the recourse, is
one of jurisdiction, or the act complained of was perpetrated by a court with grave abuse of
discretion amounting to lack or excess of jurisdiction, the proper remedy available to the aggrieved
party is a petition for certiorari under Rule 65 of the said Rules. As enunciated by the Court in Fortich
vs. Corona:19
Anent the first issue, in order to determine whether the recourse of petitioners is proper or not, it is
necessary to draw a line between an error of judgment and an error of jurisdiction. An error of
judgment is one which the court may commit in the exercise of its jurisdiction, and which error is
reviewable only by an appeal. On the other hand, an error of jurisdiction is one where the act
complained of was issued by the court, officer or a quasi-judicial body without or in excess of
jurisdiction, or with grave abuse of discretion which is tantamount to lack or in excess of jurisdiction.
This error is correctible only by the extraordinary writ of certiorari. 20 (Emphasis supplied).
Inasmuch as the present petition principally assails the dismissal of the petition on ground of
procedural flaws involving the jurisdiction of the court a quo to entertain the petition, it falls within the
ambit of a special civil action for certiorari under Rule 65 of the Rules of Court.
At the time the instant petition for certiorari was filed, i.e., on July 17, 1997, the prevailing rule is the
newly promulgated 1997 Rules of Civil Procedure. However, considering that the CA Resolution
being assailed was rendered on March 21, 1997, the applicable rule is the three-month reglementary
period, established by jurisprudence.21 Petitioner received notice of the assailed CA Resolution
dismissing his petition for review on April 4, 1997. He filed his motion reconsideration on April 17,
1997, using up only thirteen days of the 90-day period. Petitioner received the CA Resolution
denying his motion on July 3, 1997 and fourteen days later, or on July 17, 1997, he filed a motion for
30-day extension of time to file a "petition for review" which was granted by us; and petitioner duly
filed his petition on August 15, 1997, which is well-within the period of extension granted to him.
We now go to the merits of the case.
We find the instant petition partly meritorious.
The requirement regarding the need for a certification of non-forum shopping in cases filed before
the CA and the corresponding sanction for non-compliance thereto are found in the then prevailing
Revised Circular No. 28-91.22It provides that the petitioner himself must make the certification
against forum shopping and a violation thereof shall be a cause for the summary dismissal of the
multiple petition or complaint. The rationale for the rule of personal execution of the certification by
the petitioner himself is that it is only the petitioner who has actual knowledge of whether or not he
has initiated similar actions or proceedings in other courts or tribunals; even counsel of record may
be unaware of such fact.23 The Court has ruled that with respect to the contents of the certification,

the rule on substantial compliance may be availed of. This is so because the requirement of strict
compliance with the rule regarding the certification of non-forum shopping simply underscores its
mandatory nature in that the certification cannot be altogether dispensed with or its requirements
completely disregarded, but it does not thereby interdict substantial compliance with its provisions
under justifiable circumstances.24
The petition for review filed before the CA contains a certification against forum shopping but said
certification was signed by petitioners counsel. In submitting the certification of non-forum shopping
duly signed by himself in his motion for reconsideration, 25 petitioner has aptly drawn the Courts
attention to the physical impossibility of filing the petition for review within the 15-day reglementary
period to appeal considering that he is a resident of 1125 South Jefferson Street, Roanoke, Virginia,
U.S.A. were he to personally accomplish and sign the certification.
We fully agree with petitioner that it was physically impossible for the petition to have been prepared
and sent to the petitioner in the United States, for him to travel from Virginia, U.S.A. to the nearest
Philippine Consulate in Washington, D.C., U.S.A., in order to sign the certification before the
Philippine Consul, and for him to send back the petition to the Philippines within the 15-day
reglementary period. Thus, we find that petitioner has adequately explained his failure to personally
sign the certification which justifies relaxation of the rule.
We have stressed that the rules on forum shopping, which were precisely designed to promote and
facilitate the orderly administration of justice, should not be interpreted with such absolute literalness
as to subvert its own ultimate and legitimate objective 26 which is simply to prohibit and penalize the
evils of forum-shopping.27 The subsequent filing of the certification duly signed by the petitioner
himself should thus be deemed substantial compliance, pro hac vice.
In like manner, the failure of the petitioner to comply with Section 3, paragraph b, Rule 6 of the
RIRCA, that is, to append to his petition copies of the pleadings and other material portions of the
records as would support the petition, does not justify the outright dismissal of the petition. It must be
emphasized that the RIRCA gives the appellate court a certain leeway to require parties to submit
additional documents as may be necessary in the interest of substantial justice. Under Section 3,
paragraph d of Rule 3 of the RIRCA,28 the CA may require the parties to complete the annexes as
the court deems necessary, and if the petition is given due course, the CA may require the elevation
of a complete record of the case as provided for under Section 3(d)(5) of Rule 6 of the RIRCA. 29 At
any rate, petitioner attached copies of the pleadings and other material portions of the records below
with his motion for reconsideration.30 In Jaro vs. Court of Appeals,31 the Court reiterated the doctrine
laid down inCusi-Hernandez vs. Diaz32 and Piglas-Kamao vs. National Labor Relations
Commission33 that subsequent submission of the missing documents with the motion for
reconsideration amounts to substantial compliance which calls for the relaxation of the rules of
procedure. We find no cogent reason to depart from this doctrine.
Truly, in dismissing the petition for review, the CA had committed grave abuse of discretion
amounting to lack of jurisdiction in putting a premium on technicalities at the expense of a just
resolution of the case.

Needless to stress, "a litigation is not a game of technicalities."34 When technicality deserts its
function of being an aid to justice, the Court is justified in exempting from its operations a particular
case.35 Technical rules of procedure should be used to promote, not frustrate justice. While the swift
unclogging of court dockets is a laudable objective, granting substantial justice is an even more
urgent ideal.36
The Courts pronouncement in Republic vs. Court of Appeals37 is worth echoing: "cases should be
determined on the merits, after full opportunity to all parties for ventilation of their causes and
defenses, rather than on technicality or some procedural imperfections. In that way, the ends of
justice would be better served."38 Thus, what should guide judicial action is that a party litigant is
given the fullest opportunity to establish the merits of his action or defense rather than for him to lose
life, honor or property on mere technicalities.39 This guideline is especially true when the petitioner
has satisfactorily explained the lapse and fulfilled the requirements in his motion for
reconsideration,40 as in this case.
In addition, petitioner prays that we decide the present petition on the merits without need of
remanding the case to the CA. He insists that all the elements of unlawful detainer are present in the
case. He further argues that the alleged "priority right to buy the lot they occupy" does not apply
where the landowner does not intend to sell the subject property, as in the case; that respondents
cannot be entitled to protection under P.D. No. 2016 since the government has no intention of
acquiring the subject property, nor is the subject property located within a zonal improvement area;
and, that assuming that there is a negotiation for the sale of the subject property or a pending case
for consignation of rentals, these do not bar the eviction of respondents.
We are not persuaded. We shall refrain from ruling on the foregoing issues in the present petition for
certiorari. The issues involved are factual issues which inevitably require the weighing of evidence.
These are matters that are beyond the province of this Court in a special civil action for certiorari.
These issues are best addressed to the CA in the petition for review filed before it. As an appellate
court, it is empowered to require parties to submit additional documents, as it may find necessary, or
to receive evidence, to promote the ends of justice, pursuant to the last paragraph of Section 9, B.P.
Blg. 129, otherwise known as The Judiciary Reorganization Act of 1980, to wit:
1wphi1

The Intermediate Appellate Court shall have the power to try cases and conduct hearings, receive
evidence and perform any and all acts necessary to resolve factual issues raised in cases falling
within its original and appellate jurisdiction, including the power to grant and conduct new trials or
further proceedings.
WHEREFORE, the petition is PARTLY GRANTED. The Resolutions dated March 21, 1997 and June
23, 1997 of the Court of Appeals in CA-G.R. SP No. 41394 are REVERSED and SET ASIDE. The
case is REMANDED to the Court of Appeals for further proceedings in CA-G.R. No. 41394, entitled,
"Antonio T. Donato vs. Hon. Judge of the Regional Trial Court of Manila, Branch 47, Filomeno
Arcepe, et al."
SO ORDERED.

d.) Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 144025

December 27, 2002

SPS. RENE GONZAGA and LERIO GONZAGA, petitioners,

vs.
HON. COURT OF APPEALS, Second Division, Manila,
HON. QUIRICO G. DEFENSOR, Judge, RTC, Branch 36, Sixth Judicial Region, Iloilo City,
and LUCKY HOMES, INC., represented by WILSON JESENA, JR., as Manager, respondents.
DECISION
CORONA, J.:
Before this Court is a petition for review on certiorari seeking the reversal of the decision 1 of the
Court of Appeals dated December 29, 1999 and its resolution dated June 1, 2000 in CA-G.R. SP No.
54587.
The records disclose that, sometime in 1970, petitioner-spouses purchased a parcel of land from
private respondent Lucky Homes, Inc., situated in Iloilo and containing an area of 240 square
meters. Said lot was specifically denominated as Lot No. 19 under Transfer Certificate of Title (TCT)
No. 28254 and was mortgaged to the Social Security System (SSS) as security for their housing
loan. Petitioners then started the construction of their house, not on Lot No. 19 but on Lot No. 18, as
private respondent mistakenly identified Lot No. 18 as Lot No. 19. Upon realizing its error, private
respondent, through its general manager, informed petitioners of such mistake but the latter offered
to buy Lot No. 18 in order to widen their premises. Thus, petitioners continued with the construction
of their house. However, petitioners defaulted in the payment of their housing loan from SSS.
Consequently, Lot No. 19 was foreclosed by SSS and petitioners certificate of title was cancelled
and a new one was issued in the name of SSS. After Lot No. 19 was foreclosed, petitioners offered
to swap Lot Nos. 18 and 19 and demanded from private respondent that their contract of sale be
reformed and another deed of sale be executed with respect to Lot No. 18, considering that their
house was built therein. However, private respondent refused. This prompted petitioners to file, on
June 13, 1996, an action for reformation of contract and damages with the Regional Trial Court of
Iloilo City, Branch 36, which was docketed as Civil Case No. 17115.
On January 15, 1998, the trial court2 rendered its decision dismissing the complaint for lack of merit
and ordering herein petitioners to pay private respondent the amount of P10,000 as moral damages
and another P10,000 as attorneys fees. The pertinent conclusion of the trial court reads as follows:
"Aware of such fact, the plaintiff nonetheless continued to stay in the premises of Lot 18 on the
proposal that he would also buy the same. Plaintiff however failed to buy Lot 18 and likewise
defaulted in the payment of his loan with the SSS involving Lot 19. Consequently Lot 19 was

foreclosed and sold at public auction. Thereafter TCT No. T-29950 was cancelled and in lieu thereof
TCT No. T-86612 (Exh. 9) was issued in favor of SSS. This being the situation obtaining, the
reformation of instruments, even if allowed, or the swapping of Lot 18 and Lot 19 as earlier proposed
by the plaintiff, is no longer feasible considering that plaintiff is no longer the owner of Lot 19,
otherwise, defendant will be losing Lot 18 without any substitute therefore (sic). Upon the other
hand, plaintiff will be unjustly enriching himself having in its favor both Lot 19 which was earlier
mortgaged by him and subsequently foreclosed by SSS, as well as Lot 18 where his house is
presently standing.
"The logic and common sense of the situation lean heavily in favor of the defendant. It is evident that
what plaintiff had bought from the defendant is Lot 19 covered by TCT No. 28254 which parcel of
land has been properly indicated in the instruments and not Lot 18 as claimed by the plaintiff. The
contracts being clear and unmistakable, they reflect the true intention of the parties, besides the
plaintiff failed to assail the contracts on mutual mistake, hence the same need no longer be
reformed."3
On June 22, 1998, a writ of execution was issued by the trial court. Thus, on September 17, 1998,
petitioners filed an urgent motion to recall writ of execution, alleging that the court a quo had no
jurisdiction to try the case as it was vested in the Housing and Land Use Regulatory Board (HLURB)
pursuant to PD 957 (The Subdivision and Condominium Buyers Protective Decree). Conformably,
petitioners filed a new complaint against private respondent with the HLURB. Likewise, on June 30,
1999, petitioner-spouses filed before the Court of Appeals a petition for annulment of judgment,
premised on the ground that the trial court had no jurisdiction to try and decide Civil Case No. 17115.
In a decision rendered on December 29, 1999, the Court of Appeals denied the petition for
annulment of judgment, relying mainly on the jurisprudential doctrine of estoppel as laid down in the
case of Tijam vs. Sibonghanoy.4
Their subsequent motion for reconsideration having been denied, petitioners filed this instant
petition, contending that the Court of Appeals erred in dismissing the petition by applying the
principle of estoppel, even if the Regional Trial Court, Branch 36 of Iloilo City had no jurisdiction to
decide Civil Case No. 17115.
At the outset, it should be stressed that petitioners are seeking from us the annulment of a trial court
judgment based on lack of jurisdiction. Because it is not an appeal, the correctness of the judgment
is not in issue here. Accordingly, there is no need to delve into the propriety of the decision rendered
by the trial court.
Petitioners claim that the recent decisions of this Court have already abandoned the doctrine laid
down in Tijam vs. Sibonghanoy.5 We do not agree. In countless decisions, this Court has
consistently held that, while an order or decision rendered without jurisdiction is a total nullity and
may be assailed at any stage, active participation in the proceedings in the court which rendered the
order or decision will bar such party from attacking its jurisdiction. As we held in the leading case
of Tijam vs. Sibonghanoy:6

"A party may be estopped or barred from raising a question in different ways and for different
reasons. Thus we speak of estoppel in pais, or estoppel by deed or by record, and of estoppel by
laches.
xxx
"It has been held that a party cannot invoke the jurisdiction of a court to secure affirmative relief
against his opponent and, after obtaining or failing to obtain such relief, repudiate, or question that
same jurisdiction x x x x [T]he question whether the court had jurisdiction either of the subject matter
of the action or of the parties was not important in such cases because the party is barred from such
conduct not because the judgment or order of the court is valid and conclusive as an adjudication,
but for the reason that such a practice can not be tolerated obviously for reasons of public policy."
Tijam has been reiterated in many succeeding cases. Thus, in Orosa vs. Court of Appeals;7 Ang Ping
vs. Court of Appeals;8 Salva vs. Court of Appeals;9 National Steel Corporation vs. Court of
Appeals;10 Province of Bulacan vs. Court of Appeals;11 PNOC Shipping and Transport Corporation vs.
Court of Appeals,12 this Court affirmed the rule that a partys active participation in all stages of the
case before the trial court, which includes invoking the courts authority to grant affirmative relief,
effectively estops such party from later challenging that same courts jurisdiction.
In the case at bar, it was petitioners themselves who invoked the jurisdiction of the court a quo by
instituting an action for reformation of contract against private respondents. It appears that, in the
proceedings before the trial court, petitioners vigorously asserted their cause from start to finish. Not
even once did petitioners ever raise the issue of the courts jurisdiction during the entire proceedings
which lasted for two years. It was only after the trial court rendered its decision and issued a writ of
execution against them in 1998 did petitioners first raise the issue of jurisdiction and it was only
because said decision was unfavorable to them. Petitioners thus effectively waived their right to
question the courts jurisdiction over the case they themselves filed.
Petitioners should bear the consequence of their act. They cannot be allowed to profit from their
omission to the damage and prejudice of the private respondent. This Court frowns upon the
undesirable practice of a party submitting his case for decision and then accepting the judgment but
only if favorable, and attacking it for lack of jurisdiction if not. 13
Public policy dictates that this Court must strongly condemn any double-dealing by parties who are
disposed to trifle with the courts by deliberately taking inconsistent positions, in utter disregard of the
elementary principles of justice and good faith.14 There is no denying that, in this case, petitioners
never raised the issue of jurisdiction throughout the entire proceedings in the trial court. Instead, they
voluntarily and willingly submitted themselves to the jurisdiction of said court. It is now too late in the
day for them to repudiate the jurisdiction they were invoking all along.
WHEREFORE, the petition for review is hereby DENIED.
SO ORDERED.

e.) Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 124644

February 5, 2004

ARNEL ESCOBAL, petitioner,

vs
HON. FRANCIS GARCHITORENA, Presiding Justice of the Sandiganbayan, Atty. Luisabel
Alfonso-Cortez, Executive Clerk of Court IV of the Sandiganbayan, Hon. David C. Naval,
Presiding Judge of the Regional Trial Court of Naga City, Branch 21, Luz N.
Nueca, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for certiorari with a prayer for the issuance of a temporary restraining order and
preliminary injunction filed by Arnel Escobal seeking the nullification of the remand by the Presiding
Justice of the Sandiganbayan of the records of Criminal Case No. 90-3184 to the Regional Trial
Court (RTC) of Naga City, Branch 21.
The petition at bench arose from the following milieu:
The petitioner is a graduate of the Philippine Military Academy, a member of the Armed
Forces of the Philippines and the Philippine Constabulary, as well as the Intelligence Group
of the Philippine National Police. On March 16, 1990, the petitioner was conducting
surveillance operations on drug trafficking at theSa Harong Caf Bar and Restaurant located
along Barlin St., Naga City. He somehow got involved in a shooting incident, resulting in the
death of one Rodney Rafael N. Nueca. On February 6, 1991, an amended Information was
filed with the RTC of Naga City, Branch 21, docketed as Criminal Case No. 90-3184 charging
the petitioner and a certain Natividad Bombita, Jr. alias "Jun Bombita" with murder. The
accusatory portion of the amended Information reads:
That on or about March 16, 1990, in the City of Naga, Philippines, and within the jurisdiction
of this Honorable Court by virtue of the Presidential Waiver, dated June 1, 1990, with intent
to kill, conspiring and confederating together and mutually helping each other, did, then and
there, willfully, unlawfully and feloniously attack, assault and maul one Rodney Nueca and
accused 2Lt Arnel Escobal armed with a caliber .45 service pistol shoot said Rodney Nueca
thereby inflicting upon him serious, mortal and fatal wounds which caused his death, and as
a consequence thereof, complainant LUZ N. NUECA, mother of the deceased victim,
suffered actual and compensatory damages in the amount of THREE HUNDRED SIXTYSEVEN THOUSAND ONE HUNDRED SEVEN & 95/100 (P367,107.95) PESOS, Philippine

Currency, and moral and exemplary damages in the amount of ONE HUNDRED THIRTYFIVE THOUSAND (P135,000.00) PESOS, Philippine Currency.1
On March 19, 1991, the RTC issued an Order preventively suspending the petitioner from the
service under Presidential Decree No. 971, as amended by P.D. No. 1847. When apprised of the
said order, the General Headquarters of the PNP issued on October 6, 1992 Special Order No. 91,
preventively suspending the petitioner from the service until the case was terminated. 2
The petitioner was arrested by virtue of a warrant issued by the RTC, while accused Bombita
remained at large. The petitioner posted bail and was granted temporary liberty.
When arraigned on April 9, 1991,3 the petitioner, assisted by counsel, pleaded not guilty to the
offense charged. Thereafter, on December 23, 1991, the petitioner filed a Motion to Quash 4 the
Information alleging that as mandated by Commonwealth Act No. 408,5 in relation to Section 1,
Presidential Decree No. 1822 and Section 95 of R.A. No. 6975, the court martial, not the RTC, had
jurisdiction over criminal cases involving PNP members and officers.
Pending the resolution of the motion, the petitioner on June 25, 1993 requested the Chief of the PNP
for his reinstatement. He alleged that under R.A. No. 6975, his suspension should last for only 90
days, and, having served the same, he should now be reinstated. On September 23, 1993, 6 the PNP
Region V Headquarters wrote Judge David C. Naval requesting information on whether he issued an
order lifting the petitioners suspension. The RTC did not reply. Thus, on February 22, 1994, the
petitioner filed a motion in the RTC for the lifting of the order of suspension. He alleged that he had
served the 90-day preventive suspension and pleaded for compassionate justice. The RTC denied
the motion on March 9, 1994.7 Trial thereafter proceeded, and the prosecution rested its case. The
petitioner commenced the presentation of his evidence. On July 20, 1994, he filed a Motion to
Dismiss8 the case. Citing Republic of the Philippines v. Asuncion, et al.,9 he argued that since he
committed the crime in the performance of his duties, the Sandiganbayan had exclusive jurisdiction
over the case.
On October 28, 1994, the RTC issued an Order 10 denying the motion to dismiss. It, however, ordered
the conduct of a preliminary hearing to determine whether or not the crime charged was committed
by the petitioner in relation to his office as a member of the PNP.
In the preliminary hearing, the prosecution manifested that it was no longer presenting any evidence
in connection with the petitioners motion. It reasoned that it had already rested its case, and that its
evidence showed that the petitioner did not commit the offense charged in connection with the
performance of his duties as a member of the Philippine Constabulary. According to the prosecution,
they were able to show the following facts: (a) the petitioner was not wearing his uniform during the
incident; (b) the offense was committed just after midnight; (c) the petitioner was drunk when the
crime was committed; (d) the petitioner was in the company of civilians; and, (e) the offense was
committed in a beerhouse called "Sa Harong Caf Bar and Restaurant."11
For his part, the petitioner testified that at about 10:00 p.m. on March 15, 1990, he was at the Sa
Harong Caf Bar and Restaurant at Barlin St., Naga City, to conduct surveillance on alleged drug
trafficking, pursuant to Mission Order No. 03-04 issued by Police Superintendent Rufo R. Pulido. The

petitioner adduced in evidence the sworn statements of Benjamin Cario and Roberto Fajardo who
corroborated his testimony that he was on a surveillance mission on the aforestated date. 12
On July 31, 1995, the trial court issued an Order declaring that the petitioner committed the crime
charged while not in the performance of his official function. The trial court added that upon the
enactment of R.A. No. 7975,13the issue had become moot and academic. The amendatory law
transferred the jurisdiction over the offense charged from the Sandiganbayan to the RTC since the
petitioner did not have a salary grade of "27" as provided for in or by Section 4(a)(1), (3) thereof. The
trial court nevertheless ordered the prosecution to amend the Information pursuant to the ruling in
Republic v. Asuncion14 and R.A. No. 7975. The amendment consisted in the inclusion therein of an
allegation that the offense charged was not committed by the petitioner in the performance of his
duties/functions, nor in relation to his office.
lawphi1.nt

The petitioner filed a motion for the reconsideration15 of the said order, reiterating that based on his
testimony and those of Benjamin Cario and Roberto Fajardo, the offense charged was committed
by him in relation to his official functions. He asserted that the trial court failed to consider the
exceptions to the prohibition. He asserted that R.A. No. 7975, which was enacted on March 30,
1995, could not be applied retroactively.16
The petitioner further alleged that Luz Nacario Nueca, the mother of the victim, through counsel,
categorically and unequivocably admitted in her complaint filed with the Peoples Law Enforcement
Board (PLEB) that he was on an official mission when the crime was committed.
On November 24, 1995, the RTC made a volte face and issued an Order reversing and setting aside
its July 31, 1995 Order. It declared that based on the petitioners evidence, he was on official mission
when the shooting occurred. It concluded that the prosecution failed to adduce controverting
evidence thereto. It likewise considered Luz Nacario Nuecas admission in her complaint before the
PLEB that the petitioner was on official mission when the shooting happened.
The RTC ordered the public prosecutor to file a Re-Amended Information and to allege that the
offense charged was committed by the petitioner in the performance of his duties/functions or in
relation to his office; and, conformably to R.A. No. 7975, to thereafter transmit the same, as well as
the complete records with the stenographic notes, to the Sandiganbayan, to wit:
WHEREFORE, the Order dated July 31, 1995 is hereby SET ASIDE and RECONSIDERED,
and it is hereby declared that after preliminary hearing, this Court has found that the offense
charged in the Information herein was committed by the accused in his relation to his
function and duty as member of the then Philippine Constabulary.
Conformably with R.A. No. 7975 and the ruling of the Supreme Court in Republic v.
Asuncion, et al., G.R. No. 180208, March 11, 1994:
(1) The City Prosecutor is hereby ordered to file a Re-Amended Information alleging
that the offense charged was committed by the Accused in the performance of his
duties/functions or in relation to his office, within fifteen (15) days from receipt hereof;

(2) After the filing of the Re-Amended Information, the complete records of this case,
together with the transcripts of the stenographic notes taken during the entire
proceedings herein, are hereby ordered transmitted immediately to the Honorable
Sandiganbayan, through its Clerk of Court, Manila, for appropriate proceedings. 17
On January 8, 1996, the Presiding Justice of the Sandiganbayan ordered the Executive Clerk of
Court IV, Atty. Luisabel Alfonso-Cortez, to return the records of Criminal Case No. 90-3184 to the
court of origin, RTC of Naga City, Branch 21. It reasoned that under P.D. No. 1606, as amended by
R.A. No. 7975,18 the RTC retained jurisdiction over the case, considering that the petitioner had a
salary grade of "23." Furthermore, the prosecution had already rested its case and the petitioner had
commenced presenting his evidence in the RTC; following the rule on continuity of jurisdiction, the
latter court should continue with the case and render judgment therein after trial.
Upon the remand of the records, the RTC set the case for trial on May 3, 1996, for the petitioner to
continue presenting his evidence. Instead of adducing his evidence, the petitioner filed a petition for
certiorari, assailing the Order of the Presiding Justice of the Sandiganbayan remanding the records
of the case to the RTC.
The threshold issue for resolution is whether or not the Presiding Justice of the Sandiganbayan
committed a grave abuse of his discretion amounting to excess or lack of jurisdiction in ordering the
remand of the case to the RTC.
The petitioner contends that when the amended information was filed with the RTC on February 6,
1991, P.D. No. 1606 was still in effect. Under Section 4(a) of the decree, the Sandiganbayan had
exclusive jurisdiction over the case against him as he was charged with homicide with the imposable
penalty of reclusion temporal, and the crime was committed while in the performance of his duties.
He further asserts that although P.D. No. 1606, as amended by P.D. No. 1861 and by R.A. No. 7975
provides that crimes committed by members and officers of the PNP with a salary grade below "27"
committed in relation to office are within the exclusive jurisdiction of the proper RTC, the amendment
thus introduced by R.A. No. 7975 should not be applied retroactively. This is so, the petitioner
asserts, because under Section 7 of R.A. No. 7975, only those cases where trial has not begun in
the Sandiganbayan upon the effectivity of the law should be referred to the proper trial court.
The private complainant agrees with the contention of the petitioner. In contrast, the Office of the
Special Prosecutor contends that the Presiding Justice of the Sandiganbayan acted in accordance
with law when he ordered the remand of the case to the RTC. It asserts that R.A. No. 7975 should
be applied retroactively. Although the Sandiganbayan had jurisdiction over the crime committed by
the petitioner when the amended information was filed with the RTC, by the time it resolved
petitioners motion to dismiss on July 31, 1995, R.A. No. 7975 had already taken effect. Thus, the
law should be given retroactive effect.
The Ruling of the Court
The respondent Presiding Justice acted in accordance with law and the rulings of this Court when he
ordered the remand of the case to the RTC, the court of origin.

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

The petitioners contention that R.A. No. 7975 should not be applied retroactively has no legal basis.
It bears stressing that R.A. No. 7975 is a substantive procedural law which may be applied
retroactively.23
IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED. No pronouncement as to costs.
SO ORDERED.

f.) Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 169914

April 18, 2008

ASIA'S EMERGING DRAGON CORPORATION, petitioner,

vs.
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, SECRETARY LEANDRO R.
MENDOZA and MANILA INTERNATIONAL AIRPORT AUTHORITY, respondents.
x ----------------------------------------- x
G.R. No. 174166

April 18, 2008

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF TRANSPORTATION

AND COMMUNICATIONS and MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,
vs.
HON. COURT OF APPEALS and SALACNIB BATERINA, respondents.
DECISION
CHICO-NAZARIO, J.:
This Court is still continuously besieged by Petitions arising from the awarding of the Ninoy Aquino
International Airport International Passenger Terminal III (NAIA IPT III) Project to the Philippine
International Air Terminals Co., Inc. (PIATCO), despite the promulgation by this Court of Decisions
and Resolutions in two cases, Agan, Jr. v. Philippine International Air Terminals Co.,
Inc.1 and Republic v. Gingoyon,2 which already resolved the more basic and immediate issues arising
from the said award. The sheer magnitude of the project, the substantial cost of its building, the
expected high profits from its operations, and its remarkable impact on the Philippine economy,
consequently raised significant interest in the project from various quarters.
Once more, two new Petitions concerning the NAIA IPT III Project are before this Court. It is only
appropriate, however, that the Court first recounts its factual and legal findings
in Agan and Gingoyon to ascertain that its ruling in the Petitions at bar shall be consistent and in
accordance therewith.
Agan, Jr. v. Philippine International Air Terminals Co., Inc. (G.R. Nos. 155001, 155547, and
155661)

Already established and incontrovertible are the following facts in Agan:

In August 1989, the [Department of Trade and Communications (DOTC)] engaged the
services of Aeroport de Paris (ADP) to conduct a comprehensive study of the Ninoy Aquino
International Airport (NAIA) and determine whether the present airport can cope with the
traffic development up to the year 2010. The study consisted of two parts: first, traffic
forecasts, capacity of existing facilities, NAIA future requirements, proposed master plans
and development plans; and second, presentation of the preliminary design of the passenger
terminal building. The ADP submitted a Draft Final Report to the DOTC in December 1989.
Some time in 1993, six business leaders consisting of John Gokongwei, Andrew Gotianun,
Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with then President Fidel V.
Ramos to explore the possibility of investing in the construction and operation of a new
international airport terminal. To signify their commitment to pursue the project, they formed
the Asia's Emerging Dragon Corp. (AEDC) which was registered with the Securities and
Exchange Commission (SEC) on September 15, 1993.
On October 5, 1994, AEDC submitted an unsolicited proposal to the Government through the
DOTC/[Manila International Airport Authority (MIAA)] for the development of NAIA
International Passenger Terminal III (NAIA IPT III) under a build-operate-and-transfer
arrangement pursuant to RA 6957 as amended by RA 7718 (BOT Law).
On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting the
Prequalification Bids and Awards Committee (PBAC) for the implementation of the NAIA IPT
III project.
On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal of AEDC to
the National Economic and Development Authority (NEDA). A revised proposal, however,
was forwarded by the DOTC to NEDA on December 13, 1995. On January 5, 1996, the
NEDA Investment Coordinating Council (NEDA ICC) - Technical Board favorably endorsed
the project to the ICC - Cabinet Committee which approved the same, subject to certain
conditions, on January 19, 1996. On February 13, 1996, the NEDA passed Board Resolution
No. 2 which approved the NAIA IPT III project.
On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of
an invitation for competitive or comparative proposals on AEDC's unsolicited proposal, in
accordance with Sec. 4-A of RA 6957, as amended. The alternative bidders were required to
submit three (3) sealed envelopes on or before 5:00 p.m. of September 20, 1996. The first
envelope should contain the Prequalification Documents, the second envelope the Technical
Proposal, and the third envelope the Financial Proposal of the proponent.
On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing the availment of the Bid
Documents and the submission of the comparative bid proposals. Interested firms were
permitted to obtain the Request for Proposal Documents beginning June 28, 1996, upon
submission of a written application and payment of a non-refundable fee of P50,000.00
(US$2,000).
The Bid Documents issued by the PBAC provided among others that the proponent must
have adequate capability to sustain the financing requirement for the detailed engineering,
design, construction, operation, and maintenance phases of the project. The proponent
would be evaluated based on its ability to provide a minimum amount of equity to the project,
and its capacity to secure external financing for the project.

On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders to a pre-bid
conference on July 29, 1996.
On August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents.
The following amendments were made on the Bid Documents:
a. Aside from the fixed Annual Guaranteed Payment, the proponent shall include in
its financial proposal an additional percentage of gross revenue share of the
Government, as follows:

i.

First 5 years

5.0%

ii.

Next 10 years

7.5%

iii.

Next 10 years

10.0%

b. The amount of the fixed Annual Guaranteed Payment shall be subject of the price
challenge. Proponent may offer an Annual Guaranteed Payment which need not be
of equal amount, but payment of which shall start upon site possession.
c. The project proponent must have adequate capability to sustain the financing
requirement for the detailed engineering, design, construction, and/or operation and
maintenance phases of the project as the case may be. For purposes of prequalification, this capability shall be measured in terms of:
i. Proof of the availability of the project proponent and/or the consortium to
provide the minimum amount of equity for the project; and
ii. a letter testimonial from reputable banks attesting that the project
proponent and/or the members of the consortium are banking with them, that
the project proponent and/or the members are of good financial standing, and
have adequate resources.
d. The basis for the prequalification shall be the proponent's compliance with the
minimum technical and financial requirements provided in the Bid Documents and
the [Implementing Rules and Regulations (IRR)] of the BOT Law. The minimum
amount of equity shall be 30% of the Project Cost.
e. Amendments to the draft Concession Agreement shall be issued from time to time.
Said amendments shall only cover items that would not materially affect the
preparation of the proponent's proposal.
On August 29, 1996, the Second Pre-Bid Conference was held where certain clarifications
were made. Upon the request of prospective bidder People's Air Cargo & Warehousing Co.,
Inc (Paircargo), the PBAC warranted that based on Sec. 11.6, Rule 11 of the Implementing

Rules and Regulations of the BOT Law, only the proposed Annual Guaranteed Payment
submitted by the challengers would be revealed to AEDC, and that the challengers' technical
and financial proposals would remain confidential. The PBAC also clarified that the list of
revenue sources contained in Annex 4.2a of the Bid Documents was merely indicative and
that other revenue sources may be included by the proponent, subject to approval by
DOTC/MIAA. Furthermore, the PBAC clarified that only those fees and charges denominated
as Public Utility Fees would be subject to regulation, and those charges which would be
actually deemed Public Utility Fees could still be revised, depending on the outcome of
PBAC's query on the matter with the Department of Justice.
In September 1996, the PBAC issued Bid Bulletin No. 5, entitled "Answers to the Queries of
PAIRCARGO as Per Letter Dated September 3 and 10, 1996." Paircargo's queries and the
PBAC's responses were as follows:
1. It is difficult for Paircargo and Associates to meet the required minimum equity
requirement as prescribed in Section 8.3.4 of the Bid Documents considering that
the capitalization of each member company is so structured to meet the
requirements and needs of their current respective business undertaking/activities. In
order to comply with this equity requirement, Paircargo is requesting PBAC to just
allow each member of (sic) corporation of the Joint Venture to just execute an
agreement that embodies a commitment to infuse the required capital in case the
project is awarded to the Joint Venture instead of increasing each corporation's
current authorized capital stock just for prequalification purposes.
In prequalification, the agency is interested in one's financial capability at the time of
prequalification, not future or potential capability.
A commitment to put up equity once awarded the project is not enough to establish
that "present" financial capability. However, total financial capability of all member
companies of the Consortium, to be established by submitting the respective
companies' audited financial statements, shall be acceptable.
2. At present, Paircargo is negotiating with banks and other institutions for the
extension of a Performance Security to the joint venture in the event that the
Concessions Agreement (sic) is awarded to them. However, Paircargo is being
required to submit a copy of the draft concession as one of the documentary
requirements. Therefore, Paircargo is requesting that they'd (sic) be furnished copy
of the approved negotiated agreement between the PBAC and the AEDC at the
soonest possible time.
A copy of the draft Concession Agreement is included in the Bid Documents. Any
material changes would be made known to prospective challengers through bid
bulletins. However, a final version will be issued before the award of contract.
The PBAC also stated that it would require AEDC to sign Supplement C of the Bid
Documents (Acceptance of Criteria and Waiver of Rights to Enjoin Project) and to submit the
same with the required Bid Security.
On September 20, 1996, the consortium composed of People's Air Cargo and Warehousing
Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp.
(Security Bank) (collectively, Paircargo Consortium) submitted their competitive proposal to
the PBAC. On September 23, 1996, the PBAC opened the first envelope containing the

prequalification documents of the Paircargo Consortium. On the following day, September

24, 1996, the PBAC prequalified the Paircargo Consortium.
On September 26, 1996, AEDC informed the PBAC in writing of its reservations as regards
the Paircargo Consortium, which include:
a. The lack of corporate approvals and financial capability of PAIRCARGO;
b. The lack of corporate approvals and financial capability of PAGS;
c. The prohibition imposed by RA 337, as amended (the General Banking Act) on the
amount that Security Bank could legally invest in the project;
d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for
prequalification purposes; and
e. The appointment of Lufthansa as the facility operator, in view of the Philippine
requirement in the operation of a public utility.
The PBAC gave its reply on October 2, 1996, informing AEDC that it had considered the
issues raised by the latter, and that based on the documents submitted by Paircargo and the
established prequalification criteria, the PBAC had found that the challenger, Paircargo, had
prequalified to undertake the project. The Secretary of the DOTC approved the finding of the
PBAC.
The PBAC then proceeded with the opening of the second envelope of the Paircargo
Consortium which contained its Technical Proposal.
On October 3, 1996, AEDC reiterated its objections, particularly with respect to Paircargo's
financial capability, in view of the restrictions imposed by Section 21-B of the General
Banking Act and Sections 1380 and 1381 of the Manual Regulations for Banks and Other
Financial Intermediaries. On October 7, 1996, AEDC again manifested its objections and
requested that it be furnished with excerpts of the PBAC meeting and the accompanying
technical evaluation report where each of the issues they raised were addressed.
On October 16, 1996, the PBAC opened the third envelope submitted by AEDC and the
Paircargo Consortium containing their respective financial proposals. Both proponents
offered to build the NAIA Passenger Terminal III for at least $350 million at no cost to the
government and to pay the government: 5% share in gross revenues for the first five years of
operation, 7.5% share in gross revenues for the next ten years of operation, and 10% share
in gross revenues for the last ten years of operation, in accordance with the Bid Documents.
However, in addition to the foregoing, AEDC offered to pay the government a total of P135
million as guaranteed payment for 27 years while Paircargo Consortium offered to pay the
government a total of P17.75 billion for the same period.
Thus, the PBAC formally informed AEDC that it had accepted the price proposal submitted
by the Paircargo Consortium, and gave AEDC 30 working days or until November 28, 1996
within which to match the said bid, otherwise, the project would be awarded to Paircargo.

As AEDC failed to match the proposal within the 30-day period, then DOTC Secretary
Amado Lagdameo, on December 11, 1996, issued a notice to Paircargo Consortium
regarding AEDC's failure to match the proposal.
On February 27, 1997, Paircargo Consortium incorporated into Philippine International
Airport Terminals Co., Inc. (PIATCO).
AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated
its objections as regards the prequalification of PIATCO.
On April 11, 1997, the DOTC submitted the concession agreement for the second-pass
approval of the NEDA-ICC.
On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a Petition for Declaration
of Nullity of the Proceedings, Mandamus and Injunction against the Secretary of the DOTC,
the Chairman of the PBAC, the voting members of the PBAC and Pantaleon D. Alvarez, in
his capacity as Chairman of the PBAC Technical Committee.
xxxx
On July 9, 1997, the DOTC issued the notice of award for the project to PIATCO.
On July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and
PIATCO, through its President, Henry T. Go, signed the "Concession Agreement for the
Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport
Passenger Terminal III" (1997 Concession Agreement). x x x.
On November 26, 1998, the Government and PIATCO signed an Amended and Restated
Concession Agreement (ARCA). x x x.
Subsequently, the Government and PIATCO signed three Supplements to the ARCA. The
First Supplement was signed on August 27, 1999; the Second Supplement on September 4,
2000; and the Third Supplement on June 22, 2001 (collectively, Supplements).
xxxx
Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA
Terminals I and II, had existing concession contracts with various service providers to offer
international airline airport services, such as in-flight catering, passenger handling, ramp and
ground support, aircraft maintenance and provisions, cargo handling and warehousing, and
other services, to several international airlines at the NAIA. x x x.
On September 17, 2002, the workers of the international airline service providers, claiming
that they stand to lose their employment upon the implementation of the questioned
agreements, filed before this Court a petition for prohibition to enjoin the enforcement of said
agreements.
On October 15, 2002, the service providers, joining the cause of the petitioning workers, filed
a motion for intervention and a petition-in-intervention.

On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and Constantino
Jaraula filed a similar petition with this Court.
On November 6, 2002, several employees of the MIAA likewise filed a petition assailing the
legality of the various agreements.
On December 11, 2002, another group of Congressmen, Hon. Jacinto V. Paras, Rafael P.
Nantes, Eduardo C. Zialcita, Willie B. Villarama, Prospero C. Nograles, Prospero A. Pichay,
Jr., Harlin Cast Abayon and Benasing O. Macaranbon, moved to intervene in the case as
Respondents-Intervenors. They filed their Comment-In-Intervention defending the validity of
the assailed agreements and praying for the dismissal of the petitions.
During the pendency of the case before this Court, President Gloria Macapagal Arroyo, on
November 29, 2002, in her speech at the 2002 Golden Shell Export Awards at Malacaang
Palace, stated that she will not "honor (PIATCO) contracts which the Executive Branch's
legal offices have concluded (as) null and void."3
The Court first dispensed with the procedural issues raised in Agan, ruling that (a) the MIAA service
providers and its employees, petitioners in G.R. Nos. 155001 and 155661, had the requisite standing
since they had a direct and substantial interest to protect by reason of the implementation of the
PIATCO Contracts which would affect their source of livelihood;4 and (b) the members of the House
of Representatives, petitioners in G.R. No. 155547, were granted standing in view of the serious
legal questions involved and their impact on public interest.5
As to the merits of the Petitions in Agan, the Court concluded that:
In sum, this Court rules that in view of the absence of the requisite financial capacity of the
Paircargo Consortium, predecessor of respondent PIATCO, the award by the PBAC of the
contract for the construction, operation and maintenance of the NAIA IPT III is null and void.
Further, considering that the 1997 Concession Agreement contains material and substantial
amendments, which amendments had the effect of converting the 1997 Concession
Agreement into an entirely different agreement from the contract bidded upon, the 1997
Concession Agreement is similarly null and void for being contrary to public policy. The
provisions under Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997 Concession
Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA, which constitute a
direct government guarantee expressly prohibited by, among others, the BOT Law and its
Implementing Rules and Regulations are also null and void. The Supplements, being
accessory contracts to the ARCA, are likewise null and void.6
Hence, the fallo of the Court's Decision in Agan reads:
WHEREFORE, the 1997 Concession Agreement, the Amended and Restated Concession
Agreement and the Supplements thereto are set aside for being null and void. 7
In a Resolution8 dated 21 January 2004, the Court denied with finality the Motions for
Reconsideration of its 5 May 2003 Decision in Agan filed by therein respondents PIATCO and
Congressmen Paras, et al., and respondents-intervenors.9 Significantly, the Court declared in the
same Resolution that:
This Court, however, is not unmindful of the reality that the structures comprising the NAIA
IPT III facility are almost complete and that funds have been spent by PIATCO in their

construction. For the government to take over the said facility, it has to compensate
respondent PIATCO as builder of the said structures. The compensation must be just
and in accordance with law and equity for the government can not unjustly enrich itself at
the expense of PIATCO and its investors.10 (Emphasis ours.)
It is these afore-quoted pronouncements that gave rise to the Petition in Gingoyon.
Republic v. Gingoyon (G.R. No. 166429)
According to the statement of facts in Gingoyon:
After the promulgation of the rulings in Agan, the NAIA 3 facilities have remained in the
possession of PIATCO, despite the avowed intent of the Government to put the airport
terminal into immediate operation. The Government and PIATCO conducted several rounds
of negotiation regarding the NAIA 3 facilities. It also appears that arbitral proceedings were
commenced before the International Chamber of Commerce International Court of Arbitration
and the International Centre for the Settlement of Investment Disputes, although the
Government has raised jurisdictional questions before those two bodies.
Then, on 21 December 2004, the Government filed a Complaint for expropriation with the
Pasay City Regional Trial Court (RTC), together with an Application for Special
Raffle seeking the immediate holding of a special raffle. The Government sought upon the
filing of the complaint the issuance of a writ of possession authorizing it to take immediate
possession and control over the NAIA 3 facilities. The Government also declared that it had
deposited the amount of P3,002,125,000.00 (3 Billion) in Cash with the Land Bank of the
Philippines, representing the NAIA 3 terminal's assessed value for taxation purposes.
The case was raffled to Branch 117 of the Pasay City RTC, presided by respondent judge
Hon. Henrick F. Gingoyon (Hon. Gingoyon). On the same day that the Complaint was filed,
the RTC issued an Orderdirecting the issuance of a writ of possession to the Government,
authorizing it to "take or enter upon the possession" of the NAIA 3 facilities. Citing the case
of City of Manila v. Serrano, the RTC noted that it had the ministerial duty to issue the writ of
possession upon the filing of a complaint for expropriation sufficient in form and substance,
and upon deposit made by the government of the amount equivalent to the assessed value
of the property subject to expropriation. The RTC found these requisites present, particularly
noting that "[t]he case record shows that [the Government has] deposited the assessed
value of the [NAIA 3 facilities] in the Land Bank of the Philippines, an authorized depositary,
as shown by the certification attached to their complaint." Also on the same day, the RTC
issued a Writ of Possession.According to PIATCO, the Government was able to take
possession over the NAIA 3 facilities immediately after the Writ of Possession was issued.
However, on 4 January 2005, the RTC issued another Order designed to supplement its 21
December 2004 Order and the Writ of Possession. In the 4 January 2005 Order, now
assailed in the present petition, the RTC noted that its earlier issuance of its writ of
possession was pursuant to Section 2, Rule 67 of the 1997 Rules of Civil Procedure.
However, it was observed that Republic Act No. 8974 (Rep. Act No. 8974), otherwise known
as "An Act to Facilitate the Acquisition of Right-of-Way, Site or Location for National
Government Infrastructure Projects and For Other Purposes" and its Implementing Rules
and Regulations (Implementing Rules) had amended Rule 67 in many respects.
There are at least two crucial differences between the respective procedures under Rep. Act
No. 8974 and Rule 67. Under the statute, the Government is required to make immediate

payment to the property owner upon the filing of the complaint to be entitled to a writ of
possession, whereas in Rule 67, the Government is required only to make an initial deposit
with an authorized government depositary. Moreover, Rule 67 prescribes that the initial
deposit be equivalent to the assessed value of the property for purposes of taxation, unlike
Rep. Act No. 8974 which provides, as the relevant standard for initial compensation, the
market value of the property as stated in the tax declaration or the current relevant zonal
valuation of the Bureau of Internal Revenue (BIR), whichever is higher, and the value of the
improvements and/or structures using the replacement cost method.
Accordingly, on the basis of Sections 4 and 7 of Rep. Act No. 8974 and Section 10 of the
Implementing Rules, the RTC made key qualifications to its earlier issuances. First, it
directed the Land Bank of the Philippines, Baclaran Branch (LBP-Baclaran), to immediately
release the amount of US$62,343,175.77 to PIATCO, an amount which the RTC
characterized as that which the Government "specifically made available for the purpose of
this expropriation;" and such amount to be deducted from the amount of just compensation
due PIATCO as eventually determined by the RTC. Second, the Government was directed to
submit to the RTC a Certificate of Availability of Funds signed by authorized officials to cover
the payment of just compensation. Third, the Government was directed "to maintain,
preserve and safeguard" the NAIA 3 facilities or "perform such as acts or activities in
preparation for their direct operation" of the airport terminal, pending expropriation
proceedings and full payment of just compensation. However, the Government was
prohibited "from performing acts of ownership like awarding concessions or leasing any part
of [NAIA 3] to other parties."
The very next day after the issuance of the assailed 4 January 2005 Order, the Government
filed an Urgent Motion for Reconsideration, which was set for hearing on 10 January 2005.
On 7 January 2005, the RTC issued another Order, the second now assailed before this
Court, which appointed three (3) Commissioners to ascertain the amount of just
compensation for the NAIA 3 Complex. That same day, the Government filed a Motion for
Inhibition of Hon. Gingoyon.
The RTC heard the Urgent Motion for Reconsideration and Motion for Inhibition on 10
January 2005. On the same day, it denied these motions in an Omnibus Order dated 10
January 2005. This is the third Ordernow assailed before this Court. Nonetheless, while
the Omnibus Order affirmed the earlier dispositions in the 4 January 2005 Order, it excepted
from affirmance "the superfluous part of the Order prohibiting the plaintiffs from awarding
concessions or leasing any part of [NAIA 3] to other parties."
Thus, the present Petition for Certiorari and Prohibition under Rule 65 was filed on 13
January 2005. The petition prayed for the nullification of the RTC orders dated 4 January
2005, 7 January 2005, and 10 January 2005, and for the inhibition of Hon. Gingoyon from
taking further action on the expropriation case. A concurrent prayer for the issuance of a
temporary restraining order and preliminary injunction was granted by this Court in
a Resolution dated 14 January 2005.11
The Court resolved the Petition of the Republic of the Philippines and Manila International Airport
Authority inGingoyon in this wise:
In conclusion, the Court summarizes its rulings as follows:
(1) The 2004 Resolution in Agan sets the base requirement that has to be observed before
the Government may take over the NAIA 3, that there must be payment to PIATCO of just

compensation in accordance with law and equity. Any ruling in the present expropriation case
must be conformable to the dictates of the Court as pronounced in the Agan cases.
(2) Rep. Act No. 8974 applies in this case, particularly insofar as it requires the immediate
payment by the Government of at least the proffered value of the NAIA 3 facilities to PIATCO
and provides certain valuation standards or methods for the determination of just
compensation.
(3) Applying Rep. Act No. 8974, the implementation of Writ of Possession in favor of the
Government over NAIA 3 is held in abeyance until PIATCO is directly paid the amount of P3
Billion, representing the proffered value of NAIA 3 under Section 4(c) of the law.
(4) Applying Rep. Act No. 8974, the Government is authorized to start the implementation of
the NAIA 3 Airport terminal project by performing the acts that are essential to the operation
of the NAIA 3 as an international airport terminal upon the effectivity of the Writ of
Possession, subject to the conditions above-stated. As prescribed by the Court, such
authority encompasses "the repair, reconditioning and improvement of the complex,
maintenance of the existing facilities and equipment, installation of new facilities and
equipment, provision of services and facilities pertaining to the facilitation of air traffic and
transport, and other services that are integral to a modern-day international airport."
5) The RTC is mandated to complete its determination of the just compensation within sixty
(60) days from finality of this Decision. In doing so, the RTC is obliged to comply with the
standards set under Rep. Act No. 8974 and its Implementing Rules. Considering that the
NAIA 3 consists of structures and improvements, the valuation thereof shall be determined
using the replacements cost method, as prescribed under Section 10 of the Implementing
Rules.
(6) There was no grave abuse of discretion attending the RTC Order appointing the
commissioners for the purpose of determining just compensation. The provisions on
commissioners under Rule 67 shall apply insofar as they are not inconsistent with Rep. Act
No. 8974, its Implementing Rules, or the rulings of the Court in Agan.
(7) The Government shall pay the just compensation fixed in the decision of the trial court to
PIATCO immediately upon the finality of the said decision.
(8) There is no basis for the Court to direct the inhibition of Hon. Gingoyon.
All told, the Court finds no grave abuse of discretion on the part of the RTC to warrant the
nullification of the questioned orders. Nonetheless, portions of these orders should be
modified to conform with law and the pronouncements made by the Court herein. 12
The decretal portion of the Court's Decision in Gingoyon thus reads:
WHEREFORE, the Petition is GRANTED in PART with respect to the orders dated 4 January
2005 and 10 January 2005 of the lower court. Said orders are AFFIRMED with the following
MODIFICATIONS:
1) The implementation of the Writ of Possession dated 21 December 2004 is HELD IN
ABEYANCE, pending payment by petitioners to PIATCO of the amount of Three Billion Two

Million One Hundred Twenty Five Thousand Pesos (P3,002,125,000.00), representing the
proffered value of the NAIA 3 facilities;
2) Petitioners, upon the effectivity of the Writ of Possession, are authorized [to] start the
implementation of the Ninoy Aquino International Airport Pasenger Terminal III project by
performing the acts that are essential to the operation of the said International Airport
Passenger Terminal project;
3) RTC Branch 117 is hereby directed, within sixty (60) days from finality of this Decision, to
determine the just compensation to be paid to PIATCO by the Government.
The Order dated 7 January 2005 is AFFIRMED in all respects subject to the qualification that
the parties are given ten (10) days from finality of this Decision to file, if they so choose,
objections to the appointment of the commissioners decreed therein.
The Temporary Restraining Order dated 14 January 2005 is hereby LIFTED.
No pronouncement as to costs.13
Motions for Partial Reconsideration of the foregoing Decision were filed by therein petitioners
Republic and MIAA, as well as the three other parties who sought to intervene, namely, Asakihosan
Corporation, Takenaka Corporation, and Congressman Baterina.
In a Resolution dated 1 February 2006, this Court denied with finality the Motion for Partial
Reconsideration of therein petitioners and remained faithful to its assailed Decision based on the
following ratiocination:
Admittedly, the 2004 Resolution in Agan could be construed as mandating the full payment
of the final amount of just compensation before the Government may be permitted to take
over the NAIA 3. However, the Decision ultimately rejected such a construction,
acknowledging the public good that would result from the immediate operation of the NAIA 3.
Instead, the Decision adopted an interpretation which is in consonance with Rep. Act No.
8974 and with equitable standards as well, that allowed the Government to take possession
of the NAIA 3 after payment of the proffered value of the facilities to PIATCO. Such a reading
is substantially compliant with the pronouncement in the 2004 Agan Resolution, and is in
accord with law and equity. In contrast, the Government's position, hewing to the strict
application of Rule 67, would permit the Government to acquire possession over the NAIA 3
and implement its operation without having to pay PIATCO a single centavo, a situation that
is obviously unfair. Whatever animosity the Government may have towards PIATCO does not
acquit it from settling its obligations to the latter, particularly those which had already been
previously affirmed by this Court.14
The Court, in the same Resolution, denied all the three motions for intervention of Asakihosan
Corporation, Takenaka Corporation, and Congressman Baterina, and ruled as follows:
We now turn to the three (3) motions for intervention all of which were filed after the
promulgation of the Court's Decision. All three (3) motions must be denied. Under Section 2,
Rule 19 of the 1997 Rules of Civil Procedure the motion to intervene may be filed at any time
before rendition of judgment by the court. Since this case originated from an original action
filed before this Court, the appropriate time to file the motions-in-intervention in this case if
ever was before and not after resolution of this case. To allow intervention at this juncture

would be highly irregular. It is extremely improbable that the movants were unaware of the
pendency of the present case before the Court, and indeed none of them allege such lack of
knowledge.
Takenaka and Asahikosan rely on Mago v. Court of Appeals wherein the Court took the
extraordinary step of allowing the motion for intervention even after the challenged order of
the trial court had already become final. Yet it was apparent in Mago that the movants therein
were not impleaded despite being indispensable parties, and had not even known of the
existence of the case before the trial court, and the effect of the final order was to deprive the
movants of their land. In this case, neither Takenaka nor Asahikosan stand to be
dispossessed by reason of the Court's Decision. There is no palpable due process violation
that would militate the suspension of the procedural rule.
Moreover, the requisite legal interest required of a party-in-intervention has not been
established so as to warrant the extra-ordinary step of allowing intervention at this late stage.
As earlier noted, the claims of Takenaka and Asahikosan have not been judicially proved or
conclusively established as fact by any trier of facts in this jurisdiction. Certainly, they could
not be considered as indispensable parties to the petition for certiorari. In the case of
Representative Baterina, he invokes his prerogative as legislator to curtail the disbursement
without appropriation of public funds to compensate PIATCO, as well as that as a taxpayer,
as the basis of his legal standing to intervene. However, it should be noted that the amount
which the Court directed to be paid by the Government to PIATCO was derived from the
money deposited by the Manila International Airport Authority, an agency which enjoys
corporate autonomy and possesses a legal personality separate and distinct from those of
the National Government and agencies thereof whose budgets have to be approved by
Congress.
It is also observed that the interests of the movants-in-intervention may be duly litigated in
proceedings which are extant before lower courts. There is no compelling reason to
disregard the established rules and permit the interventions belatedly filed after the
promulgation of the Court's Decision.15
Asia's Emerging Dragon Corporation v. Department of Transportation and Communications
and Manila International Airport Authority (G.R. No. 169914)
Banking on this Court's declaration in Agan that the award of the NAIA IPT III Project to PIATCO is
null and void, Asia's Emerging Dragon Corporation (AEDC) filed before this Court the present
Petition for Mandamus and Prohibition (with Application for Temporary Restraining Order), praying of
this Court that:
(1) After due hearing, judgment be rendered commanding the Respondents, their officers,
agents, successors, representatives or persons or entities acting on their behalf, to formally
award the NAIA-APT [sic] III PROJECT to Petitioner AEDC and to execute and formalize
with Petitioner AEDC the approved Draft Concession Agreement embodying the agreed
terms and conditions for the operation of the NAIA-IPT III Project and directing Respondents
to cease and desist from awarding the NAIA-IPT Project to third parties or negotiating into
any concession contract with third parties.
(2) Pending resolution on the merits, a Temporary Restraining Order be issued enjoining
Respondents, their officers, agents, successors or representatives or persons or entities
acting on their behalf from negotiating, re-bidding, awarding or otherwise entering into any

concession contract with PIATCO and other third parties for the operation of the NAIA-IPT III
Project.
Other relief and remedies, just and equitable under the premises, are likewise prayed for.16
AEDC bases its Petition on the following grounds:
I. PETITIONER AEDC, BEING THE RECOGNIZED AND UNCHALLENGED ORIGINAL
PROPONENT, HAS THE EXCLUSIVE, CLEAR AND VESTED STATUTORY RIGHT TO THE
AWARD OF THE NAIA-IPT III PROJECT;
II. RESPONDENTS HAVE A STATUTORY DUTY TO PROTECT PETITIONER AEDC AS
THE UNCHALLENGED ORIGINAL PROPONENT AS A RESULT OF THE SUPREME
COURT'S NULLIFICATION OF THE AWARD OF THE NAIA-IPT III PROJECT TO PIATCO[;
and]
III. RESPONDENTS HAVE NO LEGAL BASIS OR AUTHORITY TO TAKE OVER THE NAIAIPT III PROJECT, TO THE EXCLUSION OF PETITIONER AEDC, OR TO AWARD THE
PROJECT TO THIRD PARTIES.17
At the crux of the Petition of AEDC is its claim that, being the recognized and unchallenged original
proponent of the NAIA IPT III Project, it has the exclusive, clear, and vested statutory right to the
award thereof. However, the Petition of AEDC should be dismissed for lack of merit, being as it is,
substantially and procedurally flawed.
SUBSTANTIVE INFIRMITY
A petition for mandamus is governed by Section 3 of Rule 65 of the Rules of Civil Procedure, which
reads
SEC. 3. Petition for mandamus. When any tribunal, corporation, board, officer or person
unlawfully neglects the performance of an act which the law specifically enjoins as a duty
resulting from an office, trust, or station, or unlawfully excludes another from the use and
enjoyment of a right or office to which such other is entitled, and there is no other plain,
speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with certainty and praying
that judgment be rendered commanding the respondent, immediately or some other time to
be specified by the court, to do the act required to be done to protect the rights of the
petitioner, and to pay the damages sustained by the petitioner by reason of the wrongful acts
of the respondent.
It is well-established in our jurisprudence that only specific legal rights are enforceable
by mandamus, that the right sought to be enforced must be certain and clear, and that the writ will
not issue in cases where the right is doubtful. Just as fundamental is the principle governing the
issuance of mandamus that the duties to be performed must be such as are clearly and peremptorily
enjoined by law or by reason of official station.18
A rule long familiar is that mandamus never issues in doubtful cases. It requires a showing of a
complete and clear legal right in the petitioner to the performance of ministerial acts. In varying
language, the principle echoed and reechoed is that legal rights may be enforced by mandamus only

if those rights are well-defined, clear and certain. Otherwise, the mandamus petition must be
dismissed.19
The right that AEDC is seeking to enforce is supposedly enjoined by Section 4-A of Republic Act No.
6957,20 as amended by Republic Act No. 7718, on unsolicited proposals, which provides
SEC. 4-A. Unsolicited proposals. Unsolicited proposals for projects may be accepted by
any government agency or local government unit on a negotiated basis: Provided, That, all
the following conditions are met: (1) such projects involve a new concept or technology
and/or are not part of the list of priority projects, (2) no direct government guarantee, subsidy
or equity is required, and (3) the government agency or local government unit has invited by
publication, for three (3) consecutive weeks, in a newspaper of general circulation,
comparative or competitive proposals and no other proposal is received for a period of sixty
(60) working days: Provided, further, That in the event another proponent submits a lower
price proposal, the original proponent shall have the right to match the price within thirty (30)
working days.
In furtherance of the afore-quoted provision, the Implementing Rules and Regulations (IRR) of
Republic Act No. 6957, as amended by Republic Act No. 7718, devoted the entire Rule 10 to
Unsolicited Proposals, pertinent portions of which are reproduced below
Sec. 10.1. Requisites for Unsolicited Proposals. Any Agency/LGU may accept unsolicited
proposals on a negotiated basis provided that all the following conditions are met:
a. the project involves a new concept or technology and/or is not part of the list of priority
projects;
b. no direct government guarantee, subsidy or equity is required; and
c. the Agency/LGU concerned has invited by publication, for three (3) consecutive weeks, in
a newspaper of general circulation, comparative or competitive proposals and no other
proposal is received for a period of sixty (60) working days. In the event that another project
proponent submits a price proposal lower than that submitted by the original proponent, the
latter shall have the right to match said price proposal within thirty (30) working days. Should
the original proponent fail to match the lower price proposal submitted within the specified
period, the contract shall be awarded to the tenderer of the lowest price. On the other hand,
if the original project proponent matches the submitted lowest price within the specified
period, he shall be immediately be awarded the project.
xxxx
Sec. 10.6. Evaluation of Unsolicited Proposals. The Agency/LGU is tasked with the initial
evaluation of the proposal. The Agency/LGU shall: 1) appraise the merits of the project; 2)
evaluate the qualification of the proponent; and 3) assess the appropriateness of the
contractual arrangement and reasonableness of the risk allocation. The Agency/LGU is given
sixty (60) days to evaluate the proposal from the date of submission of the complete
proposal. Within this 60-day period, the Agency/LGU, shall advise the proponent in writing
whether it accepts or rejects the proposal. Acceptance means commitment of the
Agency/LGU to pursue the project and recognition of the proponent as the "original
proponent." At this point, the Agency/LGU will no longer entertain other similar
proposals until the solicitation of comparative proposals. The implementation of the
project, however, is still contingent primarily on the approval of the appropriate approving

authorities consistent with Section 2.7 of these IRR, the agreement between the original
proponent and the Agency/LGU of the contract terms, and the approval of the contract by the
[Investment Coordination Committee (ICC)] or Local Sanggunian.
xxxx
Sec. 10.9. Negotiation With the Original Proponent. Immediately after ICC/Local
Sanggunian's clearance of the project, the Agency/LGU shall proceed with the indepth negotiation of the project scope, implementation arrangements and concession
agreement, all of which will be used in the Terms of Reference for the solicitation of
comparative proposals. The Agency/LGU and the proponent are given ninety (90) days
upon receipt of ICC's approval of the project to conclude negotiations. The Agency/LGU and
the original proponent shall negotiate in good faith. However, should there be
unresolvable differences during the negotiations, the Agency/LGU shall have the
option to reject the proposal and bid out the project. On the other hand, if the
negotiation is successfully concluded, the original proponent shall then be required to
reformat and resubmit its proposal in accordance with the requirements of the Terms
of Reference to facilitate comparison with the comparative proposals. The
Agency/LGU shall validate the reformatted proposal if it meets the requirements of the
TOR prior to the issuance of the invitation for comparative proposals.
xxxx
Sec. 10.11. Invitation for Comparative Proposals. The Agency/LGU shall publish the
invitation for comparative or competitive proposals only after ICC/Local Sanggunian issues a
no objection clearance of the draft contract. The invitation for comparative or competitive
proposals should be published at least once every week for three (3) weeks in at least one
(1) newspaper of general circulation. It shall indicate the time, which should not be earlier
than the last date of publication, and place where tender/bidding documents could be
obtained. It shall likewise explicitly specify a time of sixty (60) working days reckoned from
the date of issuance of the tender/bidding documents upon which proposals shall be
received. Beyond said deadline, no proposals shall be accepted. A pre-bid conference shall
be conducted ten (10) working days after the issuance of the tender/bidding documents.
Sec. 10.12. Posting of Bid Bond by Original Proponent. The original proponent shall be
required at the date of the first date of the publication of the invitation for comparative
proposals to submit a bid bond equal to the amount and in the form required of the
challengers.
Sec. 10.13. Simultaneous Qualification of the Original Proponent. The Agency/LGU shall
qualify the original proponent based on the provisions of Rule 5 hereof, within thirty (30) days
from start of negotiation. For consistency, the evaluation criteria used for qualifying the
original proponent should be the same criteria used for qualifying the original proponent
should be the criteria used in the Terms of Reference for the challengers.
xxxx
Sec. 10.16. Disclosure of the Price Proposal. The disclosure of the price proposal of the
original proponent in the Tender Documents will be left to the discretion of the Agency/LGU.
However, if it was not disclosed in the Tender Documents, the original proponent's price
proposal should be revealed upon the opening of the financial proposals of the
challengers. The right of the original proponent to match the best proposal within thirty

(30) working days starts upon official notification by the Agency/LGU of the most
advantageous financial proposal. (Emphasis ours.)
In her sponsorship speech on Senate Bill No. 1586 (the precursor of Republic Act No. 7718), then
Senator (now President of the Republic of the Philippines) Gloria Macapagal-Arroyo explained the
reason behind the proposed amendment that would later become Section 4-A of Republic Act No.
6957, as amended by Republic Act No. 7718:
The object of the amendment is to protect proponents which have already incurred costs in
the conceptual design and in the preparation of the proposal, and which may have adopted
an imaginative method of construction or innovative concept for the proposal. The
amendment also aims to harness the ingenuity of the private sector to come up with
solutions to the country's infrastructure problems.21
It is irrefragable that Section 4-A of Republic Act No. 6957, as amended by Republic Act No. 7718,
and Section 10 of its IRR, accord certain rights or privileges to the original proponent of an
unsolicited proposal for an infrastructure project. They are meant to encourage private sector
initiative in conceptualizing infrastructure projects that would benefit the public. Nevertheless, none
of these rights or privileges would justify the automatic award of the NAIA IPT III Project to AEDC
after its previous award to PIATCO was declared null and void by this Court in Agan.
The rights or privileges of an original proponent of an unsolicited proposal for an infrastructure
project are never meant to be absolute. Otherwise, the original proponent can hold the Government
hostage and secure the award of the infrastructure project based solely on the fact that it was the
first to submit a proposal. The absurdity of such a situation becomes even more apparent when
considering that the proposal is unsolicited by the Government. The rights or privileges of an original
proponent depends on compliance with the procedure and conditions explicitly provided by the
statutes and their IRR.
An unsolicited proposal is subject to evaluation, after which, the government agency or local
government unit (LGU) concerned may accept or reject the proposal outright.
Under Section 10.6 of the IRR, the "acceptance" of the unsolicited proposal by the agency/LGU is
limited to the "commitment of the [a]gency/LGU to pursue the project and recognition of the
proponent as the 'original proponent.'" Upon acceptance then of the unsolicited proposal, the original
proponent is recognized as such but no award is yet made to it. The commitment of the
agency/LGU upon acceptance of the unsolicited proposal is to the pursuit of the project,
regardless of to whom it shall subsequently award the same. The acceptance of the unsolicited
proposal only precludes the agency/LGU from entertaining other similar proposals until the
solicitation of comparative proposals.
Consistent in both the statutes and the IRR is the requirement that invitations be published for
comparative or competitive proposals. Therefore, it is mandatory that a public bidding be held before
the awarding of the project. The negotiations between the agency/LGU and the original proponent,
as provided in Section 10.9 of the IRR, is for the sole purpose of coming up with draft agreements,
which shall be used in the Terms of Reference (TOR) for the solicitation of comparative proposals.
Even at this point, there is no definite commitment made to the original proponent as to the awarding
of the project. In fact, the same IRR provision even gives the concerned agency/LGU, in case of
unresolvable differences during the negotiations, the option to reject the original proponent's
proposal and just bid out the project.

Generally, in the course of processing an unsolicited proposal, the original proponent is treated in
much the same way as all other prospective bidders for the proposed infrastructure project. It is
required to reformat and resubmit its proposal in accordance with the requirements of the TOR. 22 It
must submit a bid bond equal to the amount and in the form required of the challengers. 23 Its
qualification shall be evaluated by the concerned agency/LGU, using evaluation criteria in
accordance with Rule 524 of the IRR, and which shall be the same criteria to be used in the TOR for
the challengers.25 These requirements ensure that the public bidding under Rule 10 of IRR on
Unsolicited Proposals still remain in accord with the three principles in public bidding, which are: the
offer to the public, an opportunity for competition, and a basis for exact comparison of bids. 26
The special rights or privileges of an original proponent thus come into play only when there are
other proposals submitted during the public bidding of the infrastructure project. As can be gleaned
from the plain language of the statutes and the IRR, the original proponent has: (1) the right to match
the lowest or most advantageous proposal within 30 working days from notice thereof, and (2) in the
event that the original proponent is able to match the lowest or most advantageous proposal
submitted, then it has the right to be awarded the project. The second right or privilege is contingent
upon the actual exercise by the original proponent of the first right or privilege. Before the project
could be awarded to the original proponent, he must have been able to match the lowest or most
advantageous proposal within the prescribed period. Hence, when the original proponent is able to
timely match the lowest or most advantageous proposal, with all things being equal, it shall enjoy
preference in the awarding of the infrastructure project.
This is the extent of the protection that Legislature intended to afford the original proponent, as
supported by the exchange between Senators Neptali Gonzales and Sergio Osmea during the
Second Reading of Senate Bill No. 1586:
Senator Gonzales:
xxxx
The concept being that in case of an unsolicited proposal and nonetheless public bidding
has been held, then [the original proponent] shall, in effect, be granted what is the
equivalent of the right of first refusal by offering a bid which shall equal or better the
bid of the winning bidder within a period of, let us say, 30 days from the date of bidding.
Senator Osmea:
xxxx
To capture the tenor of the proposal of the distinguished Gentleman, a subsequent
paragraph has to be added which says, "IF THERE IS A COMPETITIVE PROPOSAL, THE
ORIGINAL PROPONENT SHALL HAVE THE RIGHT TO EQUAL THE TERMS AND
CONDITIONS OF THE COMPETITIVE PROPOSAL."
In other words, if there is nobody who will submit a competitive proposal, then nothing is lost.
Everybody knows it, and it is open and transparent. But if somebody comes in with another
proposal and because it was the idea of the original proponent that proponent now has
the right to equal the terms of the original proposal.
SENATOR GONZALES:

That is the idea, Mr. President. Because it seems to me that it is utterly unfair for one who
has conceived an idea or a concept, spent and invested in feasibility studies, in the drawing
of plans and specifications, and the project is submitted to a public bidding, then somebody
will win on the basis of plans and specifications and concepts conceived by the original
proponent. He should at least be given the right to submit an equalizing bid. x x
x.27 (Emphasis ours.)
As already found by this Court in the narration of facts in Agan, AEDC failed to match the more
advantageous proposal submitted by PIATCO by the time the 30-day working period expired on 28
November 1996;28 and, without exercising its right to match the most advantageous proposal, it
cannot now lay claim to the award of the project.
The bidding process as to the NAIA IPT III Project was already over after the award thereof to
PIATCO, even if eventually, the said award was nullified and voided. The nullification of the award to
PIATCO did not revive the proposal nor re-open the bidding. AEDC cannot insist that this Court turn
back the hands of time and award the NAIA IPT III Project to it, as if the bid of PIATCO never existed
and the award of the project to PIATCO did not take place. Such is a simplistic approach to a very
complex problem that is the NAIA IPT III Project.
In his separate opinion in Agan, former Chief Justice Artemio V. Panganiban noted that "[T]here was
effectively no public bidding to speak of, the entire bidding process having been flawed and
tainted from the very outset, therefore, the award of the concession to Paircargo's successor
Piatco was void, and the Concession Agreement executed with the latter was likewise void ab
initio. x x x.29" (Emphasis ours.) In consideration of such a declaration that the entire bidding process
was flawed and tainted from the very beginning, then, it would be senseless to re-open the same to
determine to whom the project should have been properly awarded to. The process and all
proposals and bids submitted in participation thereof, and not just PIATCO's, were placed in doubt,
and it would be foolhardy for the Government to rely on them again. At the very least, it may be
declared that there was a failure of public bidding.30
In addition, PIATCO is already close to finishing the building of the structures comprising NAIA IPT
III,31 a fact that this Court cannot simply ignore. The NAIA IPT III Project was proposed, subjected to
bidding, and awarded as a build-operate-transfer (BOT) project. A BOT project is defined as
A contractual arrangement whereby the project proponent undertakes the construction,
including financing, of a given infrastructure facility, and the operation and
maintenance thereof. The project proponent operates the facility over a fixed term during
which it is allowed to charge facility users appropriate tolls, fees, rentals, and charges not
exceeding those proposed in its bid or as negotiated and incorporated in the contract to
enable the project proponent to recover its investment, and operating and maintenance
expenses in the project. The project proponent transfers the facility to the government
agency or local government unit concerned at the end of the fixed term that shall not exceed
fifty (50) years. This shall include a supply-and-operate situation which is a contractual
arrangement whereby the supplier of equipment and machinery for a given infrastructure
facility, if the interest of the Government so requires, operates the facility providing in the
process technology transfer and training to Filipino nationals.32 (Emphasis ours.)
The original proposal of AEDC is for a BOT project, in which it undertook to build, operate,
and transfer to the Government the NAIA IPT III facilities. This is clearly no longer applicable or
practicable under the existing circumstances. It is undeniable that the physical structures comprising
the NAIA IPT III Project are already substantially built, and there is almost nothing left for AEDC to

construct. Hence, the project could no longer be awarded to AEDC based on the theory of legal
impossibility of performance.
Neither can this Court revert to the original proposal of AEDC and award to it only the unexecuted
components of the NAIA IPT III Project. Whoever shall assume the obligation to operate and
maintain NAIA IPT III and to subsequently transfer the same to the Government (in case the
operation is not assumed by the Government itself) shall have to do so on terms and conditions that
would necessarily be different from the original proposal of AEDC. It will no longer include any
undertaking to build or construct the structures. An amendment of the proposal of AEDC to address
the present circumstances is out of the question since such an amendment would be substantive
and tantamount to an entirely new proposal, which must again be subjected to competitive bidding.
AEDC's offer to reimburse the Government the amount it shall pay to PIATCO for the NAIA IPT III
Project facilities, as shall be determined in the ongoing expropriation proceedings before the RTC of
Pasay City, cannot restore AEDC to its status and rights as the project proponent. It must be
stressed that the law requires the project proponent to undertake the construction of the
project, including financing; financing, thus, is but a component of the construction of the structures
and not the entirety thereof.
Moreover, this "reimbursement arrangement" may even result in the unjust enrichment of AEDC. In
its original proposal, AEDC offered to construct the NAIA IPT III facilities for $350 million or P9 billion
at that time. In exchange, AEDC would share a certain percentage of the gross revenues with, and
pay a guaranteed annual income to the Government upon operation of the NAIA IPT III.
In Gingoyon, the proferred value of the NAIA IPT III facilities was already determined to be P3 billion.
It seems improbable at this point that the balance of the value of said facilities for which the
Government is still obligated to pay PIATCO shall reach or exceed P6 billion. There is thus the
possibility that the Government shall be required to pay PIATCO an amount less than P9 billion. If
AEDC is to reimburse the Government only for the said amount, then it shall acquire the NAIA IPT III
facilities for a price less than its original proposal of P9 billion. Yet, per the other terms of its original
proposal, it may still recoup a capital investment of P9 billion plus a reasonable rate of return of
investment. A change in the agreed value of the NAIA IPT III facilities already built cannot be done
without a corresponding amendment in the other terms of the original proposal as regards profit
sharing and length of operation; otherwise, AEDC will be unjustly enriched at the expense of the
Government.
Again, as aptly stated by former Chief Justice Panganiban, in his separate opinion in Agan:
If the PIATCO contracts are junked altogether as I think they should be, should not AEDC
automatically be considered the winning bidder and therefore allowed to operate the facility?
My answer is a stone-cold 'No.' AEDC never won the bidding, never signed any contract, and
never built any facility. Why should it be allowed to automatically step in and benefit from the
greed of another?33
The claim of AEDC to the award of the NAIA IPT III Project, after the award thereof to PIATCO was
set aside for being null and void, grounded solely on its being the original proponent of the project, is
specious and an apparent stretch in the interpretation of Section 4-A of Republic Act No. 6957, as
amended by Republic Act No. 7718, and Rule 10 of the IRR.
In all, just as AEDC has no legal right to the NAIA IPT III Project, corollarily, it has no legal right over
the NAIA IPT III facility. AEDC does not own the NAIA IPT III facility, which this Court already
recognized in Gingoyon as owned by PIATCO; nor does AEDC own the land on which NAIA IPT III
stands, which is undisputedly owned by the Republic through the Bases Conversion Development

Authority (BCDA). AEDC did not fund any portion of the construction of NAIA IPT III, which was
entirely funded by PIATCO. AEDC also does not have any kind of lien over NAIA IPT III or any kind
of legal entitlement to occupy the facility or the land on which it stands. Therefore, nothing that the
Government has done or will do in relation to the project could possibly prejudice or injure AEDC.
AEDC then does not possess any legal personality to interfere with or restrain the activities of the
Government as regards NAIA IPT III. Neither does it have the legal personality to demand that the
Government deliver or sell to it the NAIA IPT III facility despite the express willingness of AEDC to
reimburse the Government the proferred amount it had paid PIATCO and complete NAIA IPT III
facility at its own cost.
AEDC invokes the Memorandum of Agreement, purportedly executed between the DOTC and AEDC
on 26 February 1996, following the approval of the NAIA IPT III Project by the National Economic
Development Authority Board in a Resolution dated 13 February 1996, which provided for the
following commitments by the parties:
a. commitment of Respondent DOTC to target mid 1996 as the time frame for the formal
award of the project and commencement of site preparation and construction activities with
the view of a partial opening of the Terminal by the first quarter of 1998;
b. commitment of Respondent DOTC to pursue the project envisioned in the unsolicited
proposal and commence and conclude as soon as possible negotiations with Petitioner
AEDC on the BOT contract;
c. commitment of Respondent DOTC to make appropriate arrangements through which the
formal award of the project can be affected[;]
d. commitment of Petitioner AEDC to a fast track approach to project implementation and to
commence negotiations with its financial partners, investors and creditors;
e. commitment of Respondent DOTC and Petitioner AEDC to fast track evaluation of
competitive proposals, screening and eliminating nuisance comparative bids; 34
It is important to note, however, that the document attached as Annex "E" to the Petition of AEDC is
a "certified photocopy of records on file." This Court cannot give much weight to said document
considering that its existence and due execution have not been established. It is not notarized, so it
does not enjoy the presumption of regularity of a public document. It is not even witnessed by
anyone. It is not certified true by its supposed signatories, Secretary Jesus B. Garcia, Jr. for DOTC
and Chairman Henry Sy, Sr. for AEDC, or by any government agency having its custody. It is
certified as a photocopy of records on file by an Atty. Cecilia L. Pesayco, the Corporate Secretary, of
an unidentified corporation.
Even assuming for the sake of argument, that the said Memorandum of Agreement, is in existence
and duly executed, it does little to support the claim of AEDC to the award of the NAIA IPT III Project.
The commitments undertaken by the DOTC and AEDC in the Memorandum of Agreement may be
simply summarized as a commitment to comply with the procedure and requirements provided in
Rules 10 and 11 of the IRR. It bears no commitment on the part of the DOTC to award the NAIA IPT
III Project to AEDC. On the contrary, the document includes express stipulations that negate any
such government obligation. Thus, in the first clause,35 the DOTC affirmed its commitment to pursue,
implement and complete the NAIA IPT III Project on or before 1998, noticeably without mentioning
that such commitment was to pursue the project specifically with AEDC. Likewise, in the second
clause,36 it was emphasized that the DOTC shall pursue the project under Rules 10 and 11 of the

IRR of Republic Act No. 6957, as amended by Republic Act No. 7718. And most significantly, the
tenth clause of the same document provided:
10. Nothing in this Memorandum of Understanding shall be understood, interpreted or
construed as permitting, allowing or authorizing the circumvention of, or non-compliance
with, or as waiving, the provisions of, and requirements and procedures under, existing laws,
rules and regulations.37
AEDC further decries that:
24. In carrying out its commitments under the DOTC-AEDC MOU, Petitioner AEDC
undertook the following activities, incurring in the process tremendous costs and expenses.
a. pre-qualified 46 design and contractor firms to assist in the NAIA-IPT III Project;
b. appointed a consortium of six (6) local banks as its financial advisor in June 1996;
c. hired the services of GAIA South, Inc. to prepare the Project Description Report and to
obtain the Environmental Clearance Certificate (ECC) for the NAIA-IPT III Project;
d. coordinated with the Airline Operators Association, Bases Conversion Development
Authority, Philippine Air Force, Bureau of Customs, Bureau of Immigration, relative to their
particular requirements regarding the NAIA-IPT III [P]roject; and
e. negotiated and entered into firm commitments with Ital Thai, Marubeni Corporation and
Mitsui Corporation as equity partners.38
While the Court may concede that AEDC, as the original proponent, already expended resources in
its preparation and negotiation of its unsolicited proposal, the mere fact thereof does not entitle it to
the instant award of the NAIA IPT III Project. AEDC was aware that the said project would have to
undergo public bidding, and there existed the possibility that another proponent may submit a more
advantageous bid which it cannot match; in which case, the project shall be awarded to the other
proponent and AEDC would then have no means to recover the costs and expenses it already
incurred on its unsolicited proposal. It was a given business risk that AEDC knowingly undertook.
Additionally, the very defect upon which this Court nullified the award of the NAIA IPT III Project to
PIATCO similarly taints the unsolicited proposal of AEDC. This Court found Paircargo Consortium
financially disqualified after striking down as incorrect the PBAC's assessment of the consortium's
financial capability. According to the Court's ratio in Agan:
As the minimum project cost was estimated to be US$350,000,000.00 or
roughly P9,183,650,000.00, the Paircargo Consortium had to show to the satisfaction of the
PBAC that it had the ability to provide the minimum equity for the project in the amount of at
least P2,755,095,000.00.
xxxx
Thus, the maximum amount that Security Bank could validly invest in the Paircargo
Consortium is onlyP528,525,656.55, representing 15% of its entire net worth. The total net
worth therefore of the Paircargo Consortium, after considering the maximum amounts that
may be validly invested by each of its members is P558,384,871.55 or only 6.08% of the

project cost, an amount substantially less than the prescribed minimum equity investment
required for the project in the amount of P2,755,095,000.00 or 30% of the project cost.
The purpose of pre-qualification in any public bidding is to determine, at the earliest
opportunity, the ability of the bidder to undertake the project. Thus, with respect to the
bidder's financial capacity at the pre-qualification stage, the law requires the government
agency to examine and determine the ability of the bidder to fund the entire cost of the
project by considering the maximum amounts that each bidder may invest in the
project at the time of pre-qualification.
xxxx
Thus, if the maximum amount of equity that a bidder may invest in the project at the time
the bids are submitted falls short of the minimum amounts required to be put up by the
bidder, said bidder should be properly disqualified. Considering that at the pre-qualification
stage, the maximum amounts which the Paircargo Consortium may invest in the project fell
short of the minimum amounts prescribed by the PBAC, we hold that Paircargo Consortium
was not a qualified bidder. Thus the award of the contract by the PBAC to the Paircargo
Consortium, a disqualified bidder, is null and void.39
Pursuant to the above-quoted ruling, AEDC, like the Paircargo Consortium, would not be financially
qualified to undertake the NAIA IPT III Project. Based on AEDC's own submissions to the
Government, it had then a paid-in capital of only P150,000,000.00,40 which was less than
the P558,384,871.55 that Paircargo Consortium was capable of investing in the NAIA IPT III Project,
and even far less that what this Court prescribed as the minimum equity investment required for the
project in the amount of P2,755,095,000.00 or 30% of the project cost. AEDC had not sufficiently
demonstrated that it would have been financially qualified to undertake the project at the time of
submission of the bids.
Instead, AEDC took pains to present to this Court that allowing it to take over and operate NAIA IPT
III at present would be beneficial to the Government. This Court must point out, however, that AEDC
is precisely making a new proposal befitting the current status of the NAIA IPT III Project, contrary to
its own argument that it is merely invoking its original BOT proposal. And it is not for this Court to
evaluate AEDC's new proposal and assess whether it would truly be most beneficial for the
Government, for the same is an executive function rather than judicial, for which the statutes and
regulations have sufficiently provided standards and procedures for evaluation.
It can even be said that if the award of the NAIA IPT III Project was merely a matter of choosing
between PIATCO and AEDC (which it is not), there could be no doubt that PIATCO is more qualified
to operate the structure that PIATCO itself built and PIATCO's offer of P17.75 Billion in annual
guaranteed payments to the Government is far better that AEDC's offer of P135 Million.
Hence, AEDC is not entitled to a writ of mandamus, there being no specific, certain, and clear legal
right to be enforced, nor duty to be performed that is clearly and peremptorily enjoined by law or by
reason of official station.
PROCEDURAL LAPSES
In addition to the substantive weaknesses of the Petition of AEDC, the said Petition also suffers from
procedural defects.

AEDC revived its hope to acquire the NAIA IPT III Project when this Court promulgated its Decision
in Agan on 5 May 2003. The said Decision became final and executory on 17 February 2004 upon
the denial by this Court of the Motion for Leave to File Second Motion for Reconsideration submitted
by PIATCO. It is this Decision that declared the award of the NAIA IPT III Project to PIATCO as null
and void; without the same, then the award of the NAIA IPT III Project to PIATCO would still subsist
and other persons would remain precluded from acquiring rights thereto, including AEDC. Irrefutably,
the present claim of AEDC is rooted in the Decision of this Court inAgan. However, AEDC filed the
Petition at bar only 20 months after the promulgation of the Decision in Agan on 5 May 2003.
It must be emphasized that under Sections 2 and 3, Rule 65 of the revised Rules of Civil Procedure,
petitions for prohibition and mandamus, such as in the instant case, can only be resorted to when
there is no other plain, speedy and adequate remedy for the party in the ordinary course of law.
In Cruz v. Court of Appeals,41 this Court elucidates that
Although Rule 65 does not specify any period for the filing of a petition for certiorari
and mandamus, it must, nevertheless, be filed within a reasonable time. In certiorari cases,
the definitive rule now is that such reasonable time is within three months from the
commission of the complained act. The same rule should apply to mandamus cases.
The unreasonable delay in the filing of the petitioner's mandamus suit unerringly negates any
claim that the application for the said extraordinary remedy was the most expeditious and
speedy available to the petitioner. (Emphasis ours.)
As the revised Rules now stand, a petition for certiorari may be filed within 60 days from notice of the
judgment, order or resolution sought to be assailed.42 Reasonable time for filing a petition
for mandamus should likewise be for the same period. The filing by the AEDC of its petition
for mandamus 20 months after its supposed right to the project arose is evidently beyond
reasonable time and negates any claim that the said petition for the extraordinary writ was the most
expeditious and speedy remedy available to AEDC.
AEDC contends that the "reasonable time" within which it should have filed its petition should be
reckoned only from 21 September 2005, the date when AEDC received the letter from the Office of
the Solicitor General refusing to recognize the rights of AEDC to provide the available funds for the
completion of the NAIA IPT III Project and to reimburse the costs of the structures already built by
PIATCO. It has been unmistakable that even long before said letter especially when the
Government instituted with the RTC of Pasay City expropriation proceedings for the NAIA IPT III on
21 December 2004 that the Government would not recognize any right that AEDC purportedly had
over the NAIA IPT III Project and that the Government is intent on taking over and operating the
NAIA IPT III itself.
Another strong argument against the AEDC's Petition is that it is already barred by res judicata.
In Agan,43 it was noted that on 16 April 1997, the AEDC instituted before the RTC of Pasig City Civil
Case No. 66213, a Petition for the Declaration of Nullity of the Proceedings, Mandamus and
Injunction, against the DOTC Secretary and the PBAC Chairman and members.
In Civil Case No. 66213, AEDC prayed for:

i) the nullification of the proceedings before the DOTC-PBAC, including its decision to qualify
Paircargo Consortium and to deny Petitioner AEDC's access to Paircargo Consortium's
technical and financial bid documents;
ii) the protection of Petitioner AEDC's right to match considering the void challenge bid of the
Paircargo Consortium and the denial by DOTC-PBAC of access to information vital to the
effective exercise of its right to match;
iii) the declaration of the absence of any other qualified proponent submitting a competitive
bid in an unsolicited proposal.44
Despite the pendency of Civil Case No. 66213, the DOTC issued the notice of award for the NAIA
IPT III Project to PIATCO on 9 July 1997. The DOTC and PIATCO also executed on 12 July 1997 the
1997 Concession Agreement. AEDC then alleges that:
k) On September 3, 1998, then Pres. Joseph Ejercito Estrada convened a meeting with the
members of the Board of Petitioner AEDC to convey his "desire" for the dismissal of the
mandamus case filed by Petition AEDC and in fact urged AEDC to immediately withdraw
said case.
l) The President's direct intervention in the disposition of this mandamus case was a clear
imposition that Petitioner AEDC had not choice but to accept. To do otherwise was to take a
confrontational stance against the most powerful man in the country then under the risk of
catching his ire, which could have led to untold consequences upon the business interests of
the stakeholders in AEDC. Thus, Petitioner AEDC was constrained to agree to the signing of
a Joint Motion to Dismiss and to the filing of the same in court.
m) Unbeknownst to AEDC at that time was that simultaneous with the signing of the July 12,
1997 Concession Agreement, the DOTC and PIATCO executed a secret side agreement
grossly prejudicial and detrimental to the interest of Government. It stipulated that in the
event that the Civil Case filed by AEDC on April 16, 1997 is not resolved in a manner
favorable to the Government, PIATCO shall be entitled to full reimbursement for all costs and
expenses it incurred in order to obtain the NAIA IPT III BOT project in an amount not less
than One Hundred Eighty Million Pesos (Php 180,000,000.00). This was apparently the
reason why the President was determined to have AEDC's case dismissed immediately.
n) On February 9, 1999, after the Amended and Restated Concession Agreement
(hereinafter referred to as "ARCA") was signed without Petitioner AEDC's knowledge,
Petitioner AEDC signed a Joint Motion to Dismiss upon the representation of the DOTC that
it would provide AEDC with a copy of the 1997 Concession Agreement. x x x. 45
On 30 April 1999, the RTC of Pasig City issued an Order dismissing with prejudice Civil Case No.
66213 upon the execution by the parties of a Joint Motion to Dismiss. According to the Joint Motion
to Dismiss
The parties, assisted by their respective counsel, respectfully state:
1. Philippine International Air Terminals Company, Inc. ("PIATCO") and the respondents have
submitted to petitioner, through the Office of the Executive Secretary, Malacaang, a copy of
the Concession Agreement which they executed for the construction and operation of the

Ninoy Aquino International Airport International Passenger Terminal III Project ("NAIA IPT III
Project), which petitioner requested.
2. Consequently, the parties have decided to amicably settle the instant case and jointly
move for the dismissal thereof without any of the parties admitting liability or conceding to
the position taken by the other in the instant case.
3. Petitioner, on the other hand, and the respondents, on the other hand, hereby release
and forever discharge each other from any and all liabilities, direct or indirect, whether
criminal or civil, which arose in connection with the instant case.
4. The parties agree to bear the costs, attorney's fees and other expenses they respectively
incurred in connection with the instant case. (Emphasis ours.)
AEDC, however, invokes the purported pressure exerted upon it by then President Joseph E.
Estrada, the alleged fraud committed by the DOTC, and paragraph 2 in the afore-quoted Joint
Motion to Dismiss to justify the non-application of the doctrine of res judicata to its present Petition.
The elements of res judicata, in its concept as a bar by former judgment, are as follows: (1) the
former judgment or order must be final; (2) it must be a judgment or order on the merits, that is, it
was rendered after a consideration of the evidence or stipulations submitted by the parties at the trial
of the case; (3) it must have been rendered by a court having jurisdiction over the subject matter and
the parties; and (4) there must be, between the first and second actions, identity of parties, of subject
matter and of cause of action.46 All of the elements are present herein so as to bar the present
Petition.
First, the Order of the RTC of Pasig City, dismissing Civil Case No. 66213, was issued on 30 April
1999. The Joint Motion to Dismiss, deemed a compromise agreement, once approved by the court is
immediately executory and not appealable.47
Second, the Order of the RTC of Pasig City dismissing Civil Case No. 66213 pursuant to the Joint
Motion to Dismiss filed by the parties constitutes a judgment on the merits.
The Joint Motion to Dismiss stated that the parties were willing to settle the case amicably and,
consequently, moved for the dismissal thereof. It also contained a provision in which the parties
the AEDC, on one hand, and the DOTC Secretary and PBAC, on the other released and forever
discharged each other from any and all liabilities, whether criminal or civil, arising in connection with
the case. It is undisputable that the parties entered into a compromise agreement, defined as "a
contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to
one already commenced.48" Essentially, it is a contract perfected by mere consent, the latter being
manifested by the meeting of the offer and the acceptance upon the thing and the cause which are
to constitute the contract. Once an agreement is stamped with judicial approval, it becomes more
than a mere contract binding upon the parties; having the sanction of the court and entered as its
determination of the controversy, it has the force and effect of any other judgment. 49 Article 2037 of
the Civil Code explicitly provides that a compromise has upon the parties the effect and authority
of res judicata.
Because of the compromise agreement among the parties, there was accordingly a judicial
settlement of the controversy, and the Order, dated 30 April 1999, of the RTC of Pasig City was no
less a judgment on the merits which may be annulled only upon the ground of extrinsic fraud. 50 Thus,
the RTC of Pasig City, in the same Order, correctly granted the dismissal of Civil Case No.
66213 with prejudice.

A scrutiny of the Joint Motion to Dismiss submitted to the RTC of Pasig City would reveal that the
parties agreed to discharge one another from any and all liabilities, whether criminal or civil, arising
from the case, after AEDC was furnished with a copy of the 1997 Concession Agreement between
the DOTC and PIATCO. This complete waiver was the reciprocal concession of the parties that puts
to an end the present litigation, without any residual right in the parties to litigate the same in the
future. Logically also, there was no more need for the parties to admit to any liability considering that
they already agreed to absolutely discharge each other therefrom, without necessarily conceding to
the other's position. For AEDC, it was a declaration that even if it was not conceding to the
Government's position, it was nonetheless waiving any legal entitlement it might have to sue the
Government on account of the NAIA IPT III Project. Conversely, for the Government, it was an
avowal that even if it was not accepting AEDC's stance, it was all the same relinquishing its right to
file any suit against AEDC in connection with the same project. That none of the parties admitted
liability or conceded its position is without bearing on the validity or binding effect of the compromise
agreement, considering that these were not essential to the said compromise.
Third, there is no question as to the jurisdiction of the RTC of Pasig City over the subject matter and
parties in Civil Case No. 66213. The RTC can exercise original jurisdiction over cases involving the
issuance of writs ofcertiorari, prohibition, mandamus, quo warranto, habeas corpus and
injunction.51 To recall, the Petition of AEDC before the RTC of Pasig City was for the declaration of
nullity of proceedings, mandamus and injunction. The RTC of Pasig City likewise had jurisdiction
over the parties, with the voluntary submission by AEDC and proper service of summons on the
DOTC Secretary and the PBAC Chairman and members.
Lastly, there is, between Civil Case No. 66213 before the RTC of Pasig City and the Petition now
pending before this Court, an identity of parties, of subject matter, and of causes of action.
There is an identity of parties. In both petitions, the AEDC is the petitioner. The respondents in Civil
Case No. 66213 are the DOTC Secretary and the PBAC Chairman and members. The respondents
in the instant Petition are the DOTC, the DOTC Secretary, and the Manila International Airport
Authority (MIAA). While it may be conceded that MIAA was not a respondent and did not participate
in Civil Case No. 66213, it may be considered a successor-in-interest of the PBAC. When Civil Case
No. 66213 was initiated, PBAC was then in charge of the NAIA IPT III Project, and had the authority
to evaluate the bids and award the project to the one offering the lowest or most advantageous bid.
Since the bidding is already over, and the structures comprising NAIA IPT III are now built, then
MIAA has taken charge thereof. Furthermore, it is clear that it has been the intention of the AEDC to
name as respondents in their two Petitions the government agency/ies and official/s who, at the
moment each Petition was filed, had authority over the NAIA IPT III Project.
There is an identity of subject matter because the two Petitions involve none other than the award
and implementation of the NAIA IPT III Project.
There is an identity of cause of action because, in both Petitions, AEDC is asserting the violation of
its right to the award of the NAIA IPT III Project as the original proponent in the absence of any other
qualified bidders. As early as in Civil Case No. 66213, AEDC already sought a declaration by the
court of the absence of any other qualified proponent submitting a competitive bid for the NAIA IPT
III Project, which, ultimately, would result in the award of the said project to it.
AEDC attempts to evade the effects of its compromise agreement by alleging that it was compelled
to enter into such an agreement when former President Joseph E. Estrada asserted his influence
and intervened in Civil Case No. 66213. This allegation deserves scant consideration. Without any
proof that such events did take place, such statements remain mere allegations that cannot be given
weight. One who alleges any defect or the lack of a valid consent to a contract must establish the

same by full, clear and convincing evidence, not merely by preponderance thereof. 52 And, even
assuming arguendo, that the consent of AEDC to the compromise agreement was indeed vitiated,
then President Estrada was removed from office in January 2001. AEDC filed the present Petition
only on 20 October 2005. The four-year prescriptive period, within which an action to annul a
voidable contract may be brought, had already expired. 53
The AEDC further claims that the DOTC committed fraud when, without AEDC's knowledge, the
DOTC entered into an Amended and Restated Concession Agreement (ARCA) with PIATCO. The
fraud on the part of the DOTC purportedly also vitiated AEDC's consent to the compromise
agreement. It is true that a judicial compromise may be set aside if fraud vitiated the consent of a
party thereof; and that the extrinsic fraud, which nullifies a compromise, likewise invalidates the
decision approving it.54 However, once again, AEDC's allegations of fraud are unsubstantiated. There
is no proof that the DOTC and PIATCO willfully and deliberately suppressed and kept the information
on the execution of the ARCA from AEDC. The burden of proving that there indeed was fraud lies
with the party making such allegation. Each party must prove his own affirmative allegations. The
burden of proof lies on the party who would be defeated if no evidence were given on either side. In
this jurisdiction, fraud is never presumed.55
Moreover, a judicial compromise may be rescinded or set aside on the ground of fraud in
accordance with Rule 38 of the Rules on Civil Procedure on petition for relief from judgment. Section
3 thereof prescribes the periods within which the petition for relief must be filed:
SEC. 3. Time for filing petition; contents and verification. A petition provided for in either of
the preceding sections of this Rule must be verified, filed within sixty (60) days after the
petitioner learns of the judgment, final order or other proceeding to be set aside, and not
more than six (6) months after such judgment or final order was entered, or such proceeding
was taken, and must be accompanied with affidavits showing the fraud, accident, mistake or
excusable negligence relied upon, and the facts constituting the petitioner's good and
substantial cause of action or defense, as the case may be.
According to this Court's ruling in Argana v. Republic,56 as applied to a judgment based on
compromise, both the 60-day and six-month reglementary periods within which to file a petition for
relief should be reckoned from the date when the decision approving the compromise agreement
was rendered because such judgment is considered immediately executory and entered on the date
that it was approved by the court. In the present case, the Order of the RTC of Pasig City granting
the Joint Motion to Dismiss filed by the parties in Civil Case No. 66213 was issued on 30 April 1999,
yet AEDC only spoke of the alleged fraud which vitiated its consent thereto in its Petition before this
Court filed on 20 October 2005, more than six years later.
It is obvious that the assertion by AEDC of its vitiated consent to the Joint Motion to Dismiss Civil
Case No. 66213 is nothing more than an after-thought and a desperate attempt to escape the legal
implications thereof, including the barring of its present Petition on the ground of res judicata.
It is also irrelevant to the legal position of AEDC that the Government asserted in Agan that the
award of the NAIA IPT III Project to PIATCO was void. That the Government eventually took such a
position, which this Court subsequently upheld, does not affect AEDC's commitments and
obligations under its judicially-approved compromise agreement in Civil Case No. 66213, which
AEDC signed willingly, knowingly, and ably assisted by legal counsel.
In addition, it cannot be said that there has been a fundamental change in the Government's position
since Civil Case No. 66213, contrary to the allegation of AEDC. The Government then espoused that
AEDC is not entitled to the award of the NAIA IPT III Project. The Government still maintains the

exact same position presently. That the Government eventually reversed its position on the validity of
its award of the project to PIATCO is not inconsistent with its position that neither should AEDC be
awarded the project.
For the foregoing substantive and procedural reasons, the instant Petition of AEDC should be
dismissed.
Republic of the Philippines v. Court of Appeals and Baterina (G.R. No. 174166)
As mentioned in Gingoyon, expropriation proceedings for the NAIA IPT III was instituted by the
Government with the RTC of Pasay City, docketed as Case No. 04-0876CFM. Congressman
Baterina, together with other members of the House of Representatives, sought intervention in Case
No. 04-0876CFM by filing a Petition for Prohibition in Intervention (with Application for Temporary
Restraining Order and Writ of Preliminary Injunction). Baterina, et al. believe that the Government
need not file expropriation proceedings to gain possession of NAIA IPT III and that PIATCO is not
entitled to payment of just compensation, arguing thus
A) Respondent PIATCO does not own Terminal III because BOT Contracts do not vest
ownership in PIATCO. As such, neither PIATCO nor FRAPORT are entitled to compensation.
B) Articles 448, ET SEQ., of the New Civil Code, as regards builders in good faith/bad faith,
do not apply to PIATCO's Construction of Terminal III.
C) Article 1412(2) of the New Civil Code allows the Government to demand the return of
what it has given without any obligation to comply with its promise.
D) The payment of compensation to PIATCO is unconstitutional, violative of the BuildOperate-Transfer Law, and violates the Civil Code and other laws. 57
On 27 October 2005, the RTC of Pasay City issued an Order admitting the Petition in Intervention of
Baterina, et al., as well as the Complaint in Intervention of Manuel L. Fortes, Jr. and the Answer in
Intervention of Gina B. Alnas, et al. The Republic sought reconsideration of the 27 October 2005
Order of the RTC of Pasay City, which, in an Omnibus Order dated 13 December 2005, was denied
by the RTC of Pasay City as regards the intervention of Baterina, et al. and Fortes, but granted as to
the intervention of Alnas, et al. On 22 March 2006, Baterina, et al. filed with the RTC of Pasay City a
Motion to Declare in Default and/or Motion for Summary Judgment considering that the Republic and
PIATCO failed to file an answer or any responsive pleading to their Petition for Prohibition in
Intervention.
In the meantime, on 19 December 2005, the Court's Decision in Gingoyon was promulgated.
Baterina also filed a Motion for Intervention in said case and sought reconsideration of the Decision
therein. However, his Motion for Intervention was denied by this Court in a Resolution dated 1
February 2006.
On 27 March 2006, the RTC of Pasay City issued an Order and Writ of Execution, the dispositive
portion of which reads
WHEREFORE, let a writ of execution be issued in this case directing the Sheriff of this court
to immediately implement the Order dated January 4, 2005 and January 10, 2005, as
affirmed by the Decision of the Supreme Court in G.R. No. 166429 in the above-entitled case
dated December 19, 2005, in the following manner:

1. Ordering the General Manager, the Senior Assistant General Manager and the Vice
President of Finance of the Manila International Airport Authority (MIAA) to immediately
withdraw the amount ofP3,002,125,000.00 from the above-mentioned Certificates of US
Dollar Time Deposits with the Land Bank of the Philippines, Baclaran Branch;
2. Ordering the Branch Manager, Land Bank of the Philippines, Baclaran Branch to
immediately release the sum of P3,002,125,000.00 to PIATCO;
Return of Service of the Writs shall be made by the Sheriff of this court immediately
thereafter;58
The RTC of Pasay City, in an Order, dated 15 June 2006, denied the Motions for Reconsideration of
its Order and Writ of Execution filed by the Government and Fortes. Baterina, meanwhile, went
before the Court of Appeals viaa Petition for Certiorari and Prohibition (With Urgent Prayer for the
Issuance of a Temporary Restraining Order and Writ of Preliminary Injunction), docketed as CA-G.R.
No. 95539, assailing the issuance, in grave abuse of discretion, by the RTC of Pasay City of its
Orders dated 27 March 2006 and 15 June 2006 and Writ of Execution dated 27 March 2006.
During the pendency of CA-G.R. No. 95539 with the Court of Appeals, the RTC of Pasay City issued
an Order, dated 7 August 2006, denying the Urgent Manifestation and Motion filed by the Republic in
which it relayed willingness to comply with the Order and Writ of Execution dated 27 March 2006,
provided that the trial court shall issue an Order expressly authorizing the Republic to award
concessions and lease portions of the NAIA IPT III to potential users. The following day, on 8 August
2006, the RTC of Pasay City issued an Order denying the intervention of Baterina, et al. and Fortes
in Case No. 04-0876CFM. In a third Order, dated 9 August 2006, the RTC of Pasay City directed
PIATCO to receive the amount of P3,002,125,000.00 from the Land Bank of the Philippines,
Baclaran Branch.
By 24 August 2006, the Republic was all set to comply with the 9 August 2006 Order of the RTC of
Pasay City. Hence, the representatives of the Republic and PIATCO met before the RTC of Pasay
City for the supposed payment by the former to the latter of the proferred amount. However, on the
same day, the Court of Appeals, in CA G.R. No. 95539, issued a Temporary Restraining Order (TRO)
enjoining, among other things, the RTC of Pasay City from implementing the questioned Orders,
dated 27 March 2006 and 15 June 2006, or "from otherwise causing payment and from further
proceeding with the determination of just compensation in the expropriation case involved herein,
until such time that petitioner's motion to declare in default and motion for partial summary judgment
shall have been resolved by the trial court; or it is clarified that PIATCO categorically disputes the
proferred value for NAIA Terminal 3." The TRO was to be effective for 30 days. Two days later, on 26
August 2006, the Republic filed with the Court of Appeals an Urgent Motion to Lift Temporary
Restraining Order, which the appellate court scheduled for hearing on 5 September 2006.
While the Urgent Motion to lift the TRO was still pending with the Court of Appeals, the Republic
already filed the present Petition for Certiorari and Prohibition With Urgent Application for a
Temporary Restraining Order and/or Writ of Preliminary Injunction, attributing to the Court of Appeals
grave abuse of discretion in granting the TRO and seeking a writ of prohibition against the Court of
Appeals to enjoin it from giving due course to Baterina's Petition in CA-G.R. No. 95539. The
Republic thus raises before this Court the following arguments:
I

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING

TO AN EXCESS OR LACK OF JURISDICTION WHEN IT GRANTED THE TEMPORARY
RESTRAINING ORDER.
A. THIS HONORABLE COURT'S DECISION IN GINGOYON CONSTITUTES THE
"LAW OF THE CASE".
B. THE TRO IS IN DIRECT CONTRAVENTION OF THIS COURT'S DECISION
WICH HAD ATTAINED FINALITY.
II
THE REPUBLIC IS SUFFERING IRREPARABLE DAMAGE.
III
THE COURT OF APPEALS MUST BE PROHIBITED FROM GIVING DUE COURSE TO A
PETITION THAT IS DEFECTIVE IN FORM AND SUBSTANCE.
A. PRIVATE RESPONDENT HAS NO LEGAL STANDING.
1. THIS HONORABLE COURT HAS RULED THAT PRIVATE RESPONDENT
HAS NO LEGAL STANDING.
2. PRIVATE RESPONDENT HAS LOST HIS STANDING AS AN
INTERVENOR.
B. PRIVATE RESPONDENT FAILED TO DEMONSTRATE THAT HE IS ENTITLED
TO THE INJUNCTIVE RELIEFS PRAYED FOR.
C. THE BOND POSTED IS INSUFFICIENT.
IV
GRANTING ARGUENDO THAT PRIVATE RESPONDENT'S PETITION IS SUFFICIENT IN
FORM AND SUBSTANCE, THE SAME HAS BECOME MOOT AND ACADEMIC.
A. THE MOTION TO DECLARE IN DEFAULT AND/OR MOTION FOR PARTIAL
SUMMARY JUDGMENT HAS ALREADY BEEN RESOLVED.
B. PIATCO HAS CATEGORICALLY DISPUTED THE PROFFERED VALUE FOR
NAIA TERMINAL III.59
The Republic prays of this Court that:
(a) Pending the determination of the merits of this petition, a temporary restraining order
and/or a writ of preliminary injunction be ISSUED restraining the Court of Appeals from
implementing the writ of preliminary injunction in CA-G.R. SP No. 95539 and proceeding in
said case such as hearing it on September 5, 2006. After both parties have been heard, the
preliminary injunction be MADE PERMANENT;

(b) The Resolution date 24 August 2006 of the Court of Appeals be SET ASIDE; and
(c) CA-G.R. SP No. 95539 be ORDERED DISMISSED.
Other just and equitable reliefs are likewise prayed for.60
On 4 September 2006, the Republic filed a Manifestation and Motion to Withdraw Urgent Motion to
Lift Temporary Restraining Order with the Court of Appeals stating, among other things, that it had
decided to withdraw the said Motion as it had opted to avail of other options and remedies. Despite
the Motion to Withdraw filed by the Government, the Court of Appeals issued a Resolution, dated 8
September 2006, lifting the TRO it issued, on the basis of the following
In view of the pronouncement of the Supreme Court in the Gingoyon case upholding the
right of PIATCO to be paid the proferred value in the amount of P3,002,125,000.00 prior to
the implementation of the writ of possession issued by the trial court on December 21, 2004
over the NAIA Passenger Terminal III, and directing the determination of just compensation,
there is no practical and logical reason to maintain the effects of the Temporary Restraining
Order contained in our Resolution dated August 24, 2006. Thus, We cannot continue
restraining what has been mandated in a final and executory decision of the Supreme Court.
WHEREFORE, Our Resolution dated 24 August 2006 be SET ASIDE. Consequently, the
Motion to Withdraw the Motion to Lift the Temporary Restraining Order is rendered moot and
academic.61
There being no more legal impediment, the Republic tendered on 11 September 2006 Land Bank
check in the amount of P3,002,125,000.00 representing the proferred value of NAIA IPT III, which
was received by a duly authorized representative of PIATCO.
On 27 December 2006, the Court of Appeals rendered a Decision in CA G.R. No. 95539 dismissing
Baterina's Petition.
The latest developments before the Court of Appeals and the RTC of Pasay City render the present
Petition of the Republic moot.
Nonetheless, Baterina, as the private respondent in the instant Petition, presented his own prayer
that a judgment be rendered as follows:
A. For this Honorable Court, in the exercise of its judicial discretion to relax procedural rules
consistent withMetropolitan Traffic Command v. Gonong and deem that justice would be
better served if all legal issuesinvolved in the expropriation case and in Baterina are
resolved in this case once and for all, to DECLAREthat:
i. TERMINAL 3, as a matter of law, is public property and thus not a proper object of
eminent domain proceedings; and
ii. PIATCO, as a matter of law, is merely the builder of TERMINAL 3 and, as such, it
may file a claim for recovery on quantum meruit with the Commission on Audi[t] for
determination of the amount thereof, if any.
B. To DIRECT the Regional Trial Court of Pasay City, Branch 117 to dismiss the
expropriation case;

C. To DISMISS the instant Petition and DENY The Republic's application for TRO and/or writ
of preliminary injunction for lack of merit;
D. To DECLARE that the P3 Billion (representing the proferred value of TERMINAL 3) paid
to PIATCO on 11 September 2006 as funds held in trust by PIATCO for the benefit of the
Republic and subject to the outcome of the proceedings for the determination of recovery
on quantum meruit due to PIATCO, if any.
E. To DIRECT the Solicitor General to disclose the evidence it has gathered on corruption,
bribery, fraud, bad faith, etc., to this Honorable Court and the Commission on Audit, and
to DECLARE such evidence to be admissible in any proceeding for the determination of any
compensation due to PIATCO, if any.
[F]. In the alternative, to:
i. SET ASIDE the trial court's Order dated 08 August 2006 denying Private
Respondent's motion for intervention in the expropriation case, and
ii. Should this Honorable Court lend credence to the argument of the Solicitor
General in its Commentdated 20 April 2006 that "there are issues as to material fact
that require presentation of evidence", to REMAND the resolution of the legal issues
raised by Private Respondent to the trial court consistent with this Honorable Court's
holding in the Gingoyon Resolution that "the interests of the movants-inintervention [meaning Takenaka, Asahikosan, and herein Private Respondent]
may be duly litigated in proceedings which are extant before the lower
courts."62
In essence, Baterina is opposing the expropriation proceedings on the ground that NAIA IPT III is
already public property. Hence, PIATCO is not entitled to just compensation for NAIA IPT III. He is
asking the Court to make a definitive ruling on this matter considering that it was not settled in
either Agan or Gingoyon.
We disagree. Contrary to Baterina's stance, PIATCO's entitlement to just and equitable consideration
for its construction of NAIA IPT III and the propriety of the Republic's resort to expropriation
proceedings were already recognized and upheld by this Court in Agan and Gingoyon.
The Court's Decisions in both Agan and Gingoyon had attained finality, the former on 17 February
2004 and the latter on 17 March 2006.
This Court already made an unequivocal pronouncement in its Resolution dated 21 January 2004
in Agan that for the Government of the Republic to take over the NAIA IPT III facility, it has to
compensate PIATCO as a builder of the structures; and that "[t]he compensation must be just and in
accordance with law and equity for the government cannot unjustly enrich itself at the expense of
PIATCO and its investors."63 As between the Republic and PIATCO, the judgment on the need to
compensate PIATCO before the Government may take over NAIA IPT III is already conclusive and
beyond question.
Hence, in Gingoyon, this Court declared that:
This pronouncement contains the fundamental premises which permeate this decision of the
Court. Indeed,Agan, final and executory as it is, stands as governing law in this case, and

any disposition of the present petition must conform to the conditions laid down by the Court
in its 2004 Resolution.
xxxx
The pronouncement in the 2004 Resolution is especially significant to this case in two
aspects, namely: (i) that PIATCO must receive payment of just compensation
determined in accordance with law and equity; and (ii) that the government is barred
from taking over NAIA 3 until such just compensation is paid. The parties cannot be
allowed to evade the directives laid down by this Court through any mode of judicial action,
such as the complaint for eminent domain.
It cannot be denied though that the Court in the 2004 Resolution prescribed mandatory
guidelines which the Government must observe before it could acquire the NAIA 3 facilities.
Thus, the actions of respondent judge under review, as well as the arguments of the parties
must, to merit affirmation, pass the threshold test of whether such propositions are in accord
with the 2004 Resolution.64
The Court then, in Gingoyon, directly addressed the issue on the appropriateness of the Republic's
resort to expropriation proceedings:
The Government has chosen to resort to expropriation, a remedy available under the
law, which has the added benefit of an integrated process for the determination of just
compensation and the payment thereof to PIATCO. We appreciate that the case at bar is
a highly unusual case, whereby the Government seeks to expropriate a building complex
constructed on land which the State already owns. There is an inherent illogic in the resort to
eminent domain on property already owned by the State. At first blush, since the State
already owns the property on which NAIA 3 stands, the proper remedy should be akin to an
action for ejectment.
However, the reason for the resort by the Government to expropriation proceedings is
understandable in this case. The 2004 Resolution, in requiring the payment of just
compensation prior to the takeover by the Government of NAIA 3, effectively precluded it
from acquiring possession or ownership of the NAIA 3 through the unilateral exercise of its
rights as the owner of the ground on which the facilities stood. Thus, as things stood after the
2004 Resolution, the right of the Government to take over the NAIA 3 terminal was
preconditioned by lawful order on the payment of just compensation to PIATCO as builder of
the structures.
xxxx
The right of eminent domain extends to personal and real property, and the NAIA 3
structures, adhered as they are to the soil, are considered as real property. The public
purpose for the expropriation is also beyond dispute. It should also be noted that Section 1
of Rule 67 (on Expropriation) recognizes the possibility that the property sought to be
expropriated may be titled in the name of the Republic of the Philippines, although
occupied by private individuals, and in such case an averment to that effect should be
made in the complaint. The instant expropriation complaint did aver that the NAIA 3 complex
"stands on a parcel of land owned by the Bases Conversion Development Authority, another
agency of [the Republic of the Philippines]."

Admittedly, eminent domain is not the sole judicial recourse by which the Government
may have acquired the NAIA 3 facilities while satisfying the requisites in the 2004
Resolution. Eminent domain though may be the most effective, as well as the speediest
means by which such goals may be accomplished. Not only does it enable immediate
possession after satisfaction of the requisites under the law, it also has a built-in procedure
through which just compensation may be ascertained. Thus, there should be no question as
to the propriety of eminent domain proceedings in this case.
Still, in applying the laws and rules on expropriation in the case at bar, we are impelled to
apply or construe these rules in accordance with the Court's prescriptions in the 2004
Resolution to achieve the end effect that the Government may validly take over the NAIA 3
facilities. Insofar as this case is concerned, the 2004 Resolution is effective not only as a
legal precedent, but as the source of rights and prescriptions that must be guaranteed, if not
enforced, in the resolution of this petition. Otherwise, the integrity and efficacy of the rulings
of this Court will be severely diminished.65 (Emphasis ours.)
The Court, also in Gingoyon, categorically recognized PIATCO's ownership over the structures it had
built in NAIA IPT III, to wit:
There can be no doubt that PIATCO has ownership rights over the facilities which it
had financed and constructed. The 2004 Resolution squarely recognized that right when it
mandated the payment of just compensation to PIATCO prior to the takeover by the
Government of NAIA 3. The fact that the Government resorted to eminent domain
proceedings in the first place is a concession on its part of PIATCO's ownership. Indeed, if
no such right is recognized, then there should be no impediment for the Government to seize
control of NAIA 3 through ordinary ejectment proceedings.
xxxx
Thus, the property subject of expropriation, the NAIA 3 facilities, are real property
owned by PIATCO. x x x (Emphasis ours.)66
It was further settled in Gingoyon that the expropriation proceedings shall be held in accordance with
Republic Act No. 8974,67 thus:
Unlike in the case of Rule 67, the application of Rep. Act No. 8974 will not contravene the
2004 Resolution, which requires the payment of just compensation before any takeover of
the NAIA 3 facilities by the Government. The 2004 Resolution does not particularize the
extent such payment must be effected before the takeover, but it unquestionably requires at
least some degree of payment to the private property owner before a writ of possession may
issue. The utilization of Rep. Act No. 8974 guarantees compliance with this bare minimum
requirement, as it assures the private property owner the payment of, at the very least, the
proffered value of the property to be seized. Such payment of the proffered value to the
owner, followed by the issuance of the writ of possession in favor of the Government, is
precisely the schematic under Rep. Act No. 8974, one which facially complies with the
prescription laid down in the 2004 Resolution.
And finally, as to the determination of the amount due PIATCO, this Court ruled in Gingoyon that:
Under Rep. Act No. 8974, the Government is required to "immediately pay" the owner of the
property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of
the property based on the current relevant zonal valuation of the [BIR]; and (2) the value of

the improvements and/or structures as determined under Section 7. As stated above, the
BIR zonal valuation cannot apply in this case, thus the amount subject to immediate
payment should be limited to "the value of the improvements and/or structures as
determined under Section 7," with Section 7 referring to the "implementing rules and
regulations for the equitable valuation of the improvements and/or structures on the land."
Under the present implementing rules in place, the valuation of the improvements/structures
are to be based using"the replacement cost method." However, the replacement cost is
only one of the factors to be considered in determining the just compensation.
In addition to Rep. Act No. 8974, the 2004 Resolution in Agan also mandated that the
payment of just compensation should be in accordance with equity as well. Thus, in
ascertaining the ultimate amount of just compensation, the duty of the trial court is to ensure
that such amount conforms not only to the law, such as Rep. Act No. 8974, but to principles
of equity as well.
Admittedly, there is no way, at least for the present, to immediately ascertain the value of the
improvements and structures since such valuation is a matter for factual determination. Yet
Rep. Act No. 8974 permits an expedited means by which the Government can immediately
take possession of the property without having to await precise determination of the
valuation. Section 4(c) of Rep. Act No. 8974 states that "in case the completion of a
government infrastructure project is of utmost urgency and importance, and there is no
existing valuation of the area concerned, the implementing agency shall immediately pay
the owner of the property its proferred value, taking into consideration the standards
prescribed in Section 5 [of the law]." The "proffered value" may strike as a highly subjective
standard based solely on the intuition of the government, but Rep. Act No. 8974 does
provide relevant standards by which "proffered value" should be based, as well as the
certainty of judicial determination of the propriety of the proffered value.
In filing the complaint for expropriation, the Government alleged to have deposited the
amount of P3 Billion earmarked for expropriation, representing the assessed value of the
property. The making of the deposit, including the determination of the amount of the deposit,
was undertaken under the erroneous notion that Rule 67, and not Rep. Act No. 8974, is the
applicable law. Still, as regards the amount, the Court sees no impediment to recognize this
sum of P3 Billion as the proffered value under Section 4(b) of Rep. Act No. 8974. After all, in
the initial determination of the proffered value, the Government is not strictly required to
adhere to any predetermined standards, although its proffered value may later be subjected
to judicial review using the standards enumerated under Section 5 of Rep. Act No. 8974. 68
Gingoyon constitutes as the law of the case for the expropriation proceedings, docketed as Case
No. 04-0876CFM, before the RTC of Pasay City. Law of the case has been defined in the following
manner
By "law of the case" is meant that "whatever is once irrevocably established as the
controlling legal rule or decision between the same parties in the same case continues to be
the law of the case" so long as the "facts on which such decision was predicated continue to
be the facts of the case before the court" (21 C.J.S. 330). And once the decision becomes
final, it is binding on all inferior courts and hence beyond their power and authority to alter or
modify (Kabigting vs. Acting Director of Prisons, G.R. L-15548, October 30, 1962).69
A ruling rendered on the first appeal, constitutes the law of the case, and, even if erroneous, it may
no longer be disturbed or modified since it has become final long ago. 70

The extensive excerpts from Gingoyon demonstrate and emphasize that the Court had already
adjudged the issues raised by Baterina, which he either conveniently overlooked or stubbornly
refused to accept.
The general rule precluding the relitigation of material facts or questions which were in issue and
adjudicated in former action are commonly applied to all matters essentially connected with the
subject matter of the litigation. Thus, it extends to questions necessarily involved in an issue,
and necessarily adjudicated, or necessarily implied in the final judgment, although no specific
finding may have been made in reference thereto, and although such matters were directly referred
to in the pleadings and were not actually or formally presented. Under this rule, if the record of the
former trial shows that the judgment could not have been rendered without deciding the particular
matter, it will be considered as having settled that matter as to all future actions between the parties
and if a judgment necessarily presupposes certain premises, they are as conclusive as the
judgment itself. Reasons for the rule are that a judgment is an adjudication on all the matters which
are essential to support it, and that every proposition assumed or decided by the court leading up to
the final conclusion and upon which such conclusion is based is as effectually passed upon as the
ultimate question which is finally solved.71
Since the issues Baterina wishes to raise as an intervenor in Case No. 04-0876CFM were already
settled with finality in both Agan and Gingoyon, then there is no point in still allowing his intervention.
His Petition-in-Intervention would only be a relitigation of matters that had been previously
adjudicated by no less than the Highest Court of the land. And, in no manner can the RTC of Pasay
City in Case No. 04-0876CFM grant the reliefs he prayed for without departing from or running afoul
of the final and executory Decisions of this Court inAgan and Gingoyon.
While it is true that when this Court, in a Resolution dated 1 February 2006, dismissed the Motions
for Intervention in Gingoyon, including that of Baterina, it also observed that the interests of the
movants-in-intervention may be duly litigated in proceedings which are extant before the lower
courts. This does not mean, however, that the said movants-in-interest were assured of being
allowed as intervenors or that the reliefs they sought as such shall be granted by the trial courts. The
fate of their intervention still rests on their interest or legal standing in the case and the merits of their
arguments.
WHEREFORE, in view of the foregoing:
a. The Petition in G.R. No. 169914 is hereby DISMISSED for lack of merit; and
b. The Petition in G.R. No. 174166 is hereby likewise DISMISSED for being moot and academic.
No costs.
SO ORDERED.

g.) Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 155001

May 5, 2003

DEMOSTHENES P. AGAN, JR., JOSEPH B. CATAHAN, JOSE MARI B. REUNILLA, MANUEL

ANTONIO B. BOE, MAMERTO S. CLARA, REUEL E. DIMALANTA, MORY V. DOMALAON,
CONRADO G. DIMAANO, LOLITA R. HIZON, REMEDIOS P. ADOLFO, BIENVENIDO C. HILARIO,
MIASCOR WORKERS UNION - NATIONAL LABOR UNION (MWU-NLU), and PHILIPPINE
AIRLINES EMPLOYEES ASSOCIATION (PALEA),petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT
AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS and
SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of
Transportation and Communications, respondents,
MIASCOR GROUNDHANDLING CORPORATION, DNATA-WINGS AVIATION SYSTEMS
CORPORATION, MACROASIA-EUREST SERVICES, INC., MACROASIA-MENZIES AIRPORT
SERVICES CORPORATION, MIASCOR CATERING SERVICES CORPORATION, MIASCOR
AIRCRAFT MAINTENANCE CORPORATION, and MIASCOR LOGISTICS
CORPORATION, petitioners-in-intervention,
x---------------------------------------------------------x
G.R. No. 155547 May 5, 2003
SALACNIB F. BATERINA, CLAVEL A. MARTINEZ and CONSTANTINO G. JARAULA, petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT
AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, DEPARTMENT
OF PUBLIC WORKS AND HIGHWAYS, SECRETARY LEANDRO M. MENDOZA, in his capacity
as Head of the Department of Transportation and Communications, and SECRETARY SIMEON
A. DATUMANONG, in his capacity as Head of the Department of Public Works and
Highways, respondents,
JACINTO V. PARAS, RAFAEL P. NANTES, EDUARDO C. ZIALCITA, WILLY BUYSON
VILLARAMA, PROSPERO C. NOGRALES, PROSPERO A. PICHAY, JR., HARLIN CAST
ABAYON, and BENASING O. MACARANBON, respondents-intervenors,
x---------------------------------------------------------x
G.R. No. 155661 May 5, 2003
CEFERINO C. LOPEZ, RAMON M. SALES, ALFREDO B. VALENCIA, MA. TERESA V.
GAERLAN, LEONARDO DE LA ROSA, DINA C. DE LEON, VIRGIE CATAMIN RONALD
SCHLOBOM, ANGELITO SANTOS, MA. LUISA M. PALCON and SAMAHANG MANGGAGAWA
SA PALIPARAN NG PILIPINAS (SMPP), petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT
AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, SECRETARY
LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and
Communications, respondents.
PUNO, J.:
Petitioners and petitioners-in-intervention filed the instant petitions for prohibition under Rule 65 of
the Revised Rules of Court seeking to prohibit the Manila International Airport Authority (MIAA) and
the Department of Transportation and Communications (DOTC) and its Secretary from implementing
the following agreements executed by the Philippine Government through the DOTC and the MIAA

and the Philippine International Air Terminals Co., Inc. (PIATCO): (1) the Concession Agreement
signed on July 12, 1997, (2) the Amended and Restated Concession Agreement dated November
26, 1999, (3) the First Supplement to the Amended and Restated Concession Agreement dated
August 27, 1999, (4) the Second Supplement to the Amended and Restated Concession Agreement
dated September 4, 2000, and (5) the Third Supplement to the Amended and Restated Concession
Agreement dated June 22, 2001 (collectively, the PIATCO Contracts).
The facts are as follows:
In August 1989, the DOTC engaged the services of Aeroport de Paris (ADP) to conduct a
comprehensive study of the Ninoy Aquino International Airport (NAIA) and determine
whether the present airport can cope with the traffic development up to the year 2010. The
study consisted of two parts: first, traffic forecasts, capacity of existing facilities, NAIA future
requirements, proposed master plans and development plans; and second, presentation of
the preliminary design of the passenger terminal building. The ADP submitted a Draft Final
Report to the DOTC in December 1989.
Some time in 1993, six business leaders consisting of John Gokongwei, Andrew Gotianun,
Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with then President Fidel V.
Ramos to explore the possibility of investing in the construction and operation of a new
international airport terminal. To signify their commitment to pursue the project, they formed
the Asia's Emerging Dragon Corp. (AEDC) which was registered with the Securities and
Exchange Commission (SEC) on September 15, 1993.
On October 5, 1994, AEDC submitted an unsolicited proposal to the Government through the
DOTC/MIAA for the development of NAIA International Passenger Terminal III (NAIA IPT III)
under a build-operate-and-transfer arrangement pursuant to RA 6957 as amended by RA
7718 (BOT Law).1
On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting the Prequalification
Bids and Awards Committee (PBAC) for the implementation of the NAIA IPT III project.
On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal of AEDC to the
National Economic and Development Authority (NEDA). A revised proposal, however, was forwarded
by the DOTC to NEDA on December 13, 1995. On January 5, 1996, the NEDA Investment
Coordinating Council (NEDA ICC) Technical Board favorably endorsed the project to the ICC
Cabinet Committee which approved the same, subject to certain conditions, on January 19, 1996.
On February 13, 1996, the NEDA passed Board Resolution No. 2 which approved the NAIA IPT III
project.
On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of an
invitation for competitive or comparative proposals on AEDC's unsolicited proposal, in accordance
with Sec. 4-A of RA 6957, as amended. The alternative bidders were required to submit three (3)
sealed envelopes on or before 5:00 p.m. of September 20, 1996. The first envelope should contain
the Prequalification Documents, the second envelope the Technical Proposal, and the third envelope
the Financial Proposal of the proponent.
On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing the availment of the Bid Documents
and the submission of the comparative bid proposals. Interested firms were permitted to obtain the
Request for Proposal Documents beginning June 28, 1996, upon submission of a written application
and payment of a non-refundable fee of P50,000.00 (US$2,000).

The Bid Documents issued by the PBAC provided among others that the proponent must have
adequate capability to sustain the financing requirement for the detailed engineering, design,
construction, operation, and maintenance phases of the project. The proponent would be evaluated
based on its ability to provide a minimum amount of equity to the project, and its capacity to secure
external financing for the project.
On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders to a pre-bid conference
on July 29, 1996.
On August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents. The
following amendments were made on the Bid Documents:
a. Aside from the fixed Annual Guaranteed Payment, the proponent shall include in its
financial proposal an additional percentage of gross revenue share of the Government, as
follows:

i. First 5 years

5.0%

ii. Next 10 years

7.5%

iii. Next 10 years

10.0%

b. The amount of the fixed Annual Guaranteed Payment shall be subject of the price
challenge. Proponent may offer an Annual Guaranteed Payment which need not be of equal
amount, but payment of which shall start upon site possession.
c. The project proponent must have adequate capability to sustain the financing requirement
for the detailed engineering, design, construction, and/or operation and maintenance phases
of the project as the case may be. For purposes of pre-qualification, this capability shall be
measured in terms of:
i. Proof of the availability of the project proponent and/or the consortium to provide
the minimum amount of equity for the project; and
ii. a letter testimonial from reputable banks attesting that the project proponent and/or
the members of the consortium are banking with them, that the project proponent
and/or the members are of good financial standing, and have adequate resources.
d. The basis for the prequalification shall be the proponent's compliance with the minimum
technical and financial requirements provided in the Bid Documents and the IRR of the BOT
Law. The minimum amount of equity shall be 30% of the Project Cost.
e. Amendments to the draft Concession Agreement shall be issued from time to time. Said
amendments shall only cover items that would not materially affect the preparation of the
proponent's proposal.

On August 29, 1996, the Second Pre-Bid Conference was held where certain clarifications were
made. Upon the request of prospective bidder People's Air Cargo & Warehousing Co., Inc
(Paircargo), the PBAC warranted that based on Sec. 11.6, Rule 11 of the Implementing Rules and
Regulations of the BOT Law, only the proposed Annual Guaranteed Payment submitted by the
challengers would be revealed to AEDC, and that the challengers' technical and financial proposals
would remain confidential. The PBAC also clarified that the list of revenue sources contained in
Annex 4.2a of the Bid Documents was merely indicative and that other revenue sources may be
included by the proponent, subject to approval by DOTC/MIAA. Furthermore, the PBAC clarified that
only those fees and charges denominated as Public Utility Fees would be subject to regulation, and
those charges which would be actually deemed Public Utility Fees could still be revised, depending
on the outcome of PBAC's query on the matter with the Department of Justice.
In September 1996, the PBAC issued Bid Bulletin No. 5, entitled "Answers to the Queries of
PAIRCARGO as Per Letter Dated September 3 and 10, 1996." Paircargo's queries and the PBAC's
responses were as follows:
1. It is difficult for Paircargo and Associates to meet the required minimum equity
requirement as prescribed in Section 8.3.4 of the Bid Documents considering that the
capitalization of each member company is so structured to meet the requirements and needs
of their current respective business undertaking/activities. In order to comply with this equity
requirement, Paircargo is requesting PBAC to just allow each member of (sic) corporation of
the Joint Venture to just execute an agreement that embodies a commitment to infuse the
required capital in case the project is awarded to the Joint Venture instead of increasing
each corporation's current authorized capital stock just for prequalification purposes.
In prequalification, the agency is interested in one's financial capability at the time of
prequalification, not future or potential capability.
A commitment to put up equity once awarded the project is not enough to establish that
"present" financial capability. However, total financial capability of all member companies of
the Consortium, to be established by submitting the respective companies' audited financial
statements, shall be acceptable.
2. At present, Paircargo is negotiating with banks and other institutions for the extension of a
Performance Security to the joint venture in the event that the Concessions Agreement (sic)
is awarded to them. However, Paircargo is being required to submit a copy of the draft
concession as one of the documentary requirements. Therefore, Paircargo is requesting that
they'd (sic) be furnished copy of the approved negotiated agreement between the PBAC and
the AEDC at the soonest possible time.
A copy of the draft Concession Agreement is included in the Bid Documents. Any material
changes would be made known to prospective challengers through bid bulletins. However, a
final version will be issued before the award of contract.
The PBAC also stated that it would require AEDC to sign Supplement C of the Bid Documents
(Acceptance of Criteria and Waiver of Rights to Enjoin Project) and to submit the same with the
required Bid Security.
On September 20, 1996, the consortium composed of People's Air Cargo and Warehousing Co., Inc.
(Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank)
(collectively, Paircargo Consortium) submitted their competitive proposal to the PBAC. On
September 23, 1996, the PBAC opened the first envelope containing the prequalification documents

of the Paircargo Consortium. On the following day, September 24, 1996, the PBAC prequalified the
Paircargo Consortium.
On September 26, 1996, AEDC informed the PBAC in writing of its reservations as regards the
Paircargo Consortium, which include:
a. The lack of corporate approvals and financial capability of PAIRCARGO;
b. The lack of corporate approvals and financial capability of PAGS;
c. The prohibition imposed by RA 337, as amended (the General Banking Act) on the amount
that Security Bank could legally invest in the project;
d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for
prequalification purposes; and
e. The appointment of Lufthansa as the facility operator, in view of the Philippine requirement
in the operation of a public utility.
The PBAC gave its reply on October 2, 1996, informing AEDC that it had considered the issues
raised by the latter, and that based on the documents submitted by Paircargo and the established
prequalification criteria, the PBAC had found that the challenger, Paircargo, had prequalified to
undertake the project. The Secretary of the DOTC approved the finding of the PBAC.
The PBAC then proceeded with the opening of the second envelope of the Paircargo Consortium
which contained its Technical Proposal.
On October 3, 1996, AEDC reiterated its objections, particularly with respect to Paircargo's financial
capability, in view of the restrictions imposed by Section 21-B of the General Banking Act and
Sections 1380 and 1381 of the Manual Regulations for Banks and Other Financial Intermediaries.
On October 7, 1996, AEDC again manifested its objections and requested that it be furnished with
excerpts of the PBAC meeting and the accompanying technical evaluation report where each of the
issues they raised were addressed.
On October 16, 1996, the PBAC opened the third envelope submitted by AEDC and the Paircargo
Consortium containing their respective financial proposals. Both proponents offered to build the
NAIA Passenger Terminal III for at least $350 million at no cost to the government and to pay the
government: 5% share in gross revenues for the first five years of operation, 7.5% share in gross
revenues for the next ten years of operation, and 10% share in gross revenues for the last ten years
of operation, in accordance with the Bid Documents. However, in addition to the foregoing, AEDC
offered to pay the government a total of P135 million as guaranteed payment for 27 years while
Paircargo Consortium offered to pay the government a total of P17.75 billion for the same period.
Thus, the PBAC formally informed AEDC that it had accepted the price proposal submitted by the
Paircargo Consortium, and gave AEDC 30 working days or until November 28, 1996 within which to
match the said bid, otherwise, the project would be awarded to Paircargo.
As AEDC failed to match the proposal within the 30-day period, then DOTC Secretary Amado
Lagdameo, on December 11, 1996, issued a notice to Paircargo Consortium regarding AEDC's
failure to match the proposal.

On February 27, 1997, Paircargo Consortium incorporated into Philippine International Airport
Terminals Co., Inc. (PIATCO).
AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated its
objections as regards the prequalification of PIATCO.
On April 11, 1997, the DOTC submitted the concession agreement for the second-pass approval of
the NEDA-ICC.
On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a Petition for Declaration of
Nullity of the Proceedings, Mandamus and Injunction against the Secretary of the DOTC, the
Chairman of the PBAC, the voting members of the PBAC and Pantaleon D. Alvarez, in his capacity
as Chairman of the PBAC Technical Committee.
On April 17, 1997, the NEDA-ICC conducted an ad referendum to facilitate the approval, on a noobjection basis, of the BOT agreement between the DOTC and PIATCO. As the ad
referendum gathered only four (4) of the required six (6) signatures, the NEDA merely noted the
agreement.
On July 9, 1997, the DOTC issued the notice of award for the project to PIATCO.
On July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and PIATCO,
through its President, Henry T. Go, signed the "Concession Agreement for the Build-Operate-andTransfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III" (1997
Concession Agreement). The Government granted PIATCO the franchise to operate and maintain
the said terminal during the concession period and to collect the fees, rentals and other charges in
accordance with the rates or schedules stipulated in the 1997 Concession Agreement. The
Agreement provided that the concession period shall be for twenty-five (25) years commencing from
the in-service date, and may be renewed at the option of the Government for a period not exceeding
twenty-five (25) years. At the end of the concession period, PIATCO shall transfer the development
facility to MIAA.
On November 26, 1998, the Government and PIATCO signed an Amended and Restated
Concession Agreement (ARCA). Among the provisions of the 1997 Concession Agreement that were
amended by the ARCA were: Sec. 1.11 pertaining to the definition of "certificate of completion"; Sec.
2.05 pertaining to the Special Obligations of GRP; Sec. 3.02 (a) dealing with the exclusivity of the
franchise given to the Concessionaire; Sec. 4.04 concerning the assignment by Concessionaire of
its interest in the Development Facility; Sec. 5.08 (c) dealing with the proceeds of Concessionaire's
insurance; Sec. 5.10 with respect to the temporary take-over of operations by GRP; Sec. 5.16
pertaining to the taxes, duties and other imposts that may be levied on the Concessionaire; Sec.
6.03 as regards the periodic adjustment of public utility fees and charges; the entire Article VIII
concerning the provisions on the termination of the contract; and Sec. 10.02 providing for the venue
of the arbitration proceedings in case a dispute or controversy arises between the parties to the
agreement.
Subsequently, the Government and PIATCO signed three Supplements to the ARCA. The First
Supplement was signed on August 27, 1999; the Second Supplement on September 4, 2000; and
the Third Supplement on June 22, 2001 (collectively, Supplements).
The First Supplement to the ARCA amended Sec. 1.36 of the ARCA defining "Revenues" or "Gross
Revenues"; Sec. 2.05 (d) of the ARCA referring to the obligation of MIAA to provide sufficient funds
for the upkeep, maintenance, repair and/or replacement of all airport facilities and equipment which

are owned or operated by MIAA; and further providing additional special obligations on the part of
GRP aside from those already enumerated in Sec. 2.05 of the ARCA. The First Supplement also
provided a stipulation as regards the construction of a surface road to connect NAIA Terminal II and
Terminal III in lieu of the proposed access tunnel crossing Runway 13/31; the swapping of
obligations between GRP and PIATCO regarding the improvement of Sales Road; and the changes
in the timetable. It also amended Sec. 6.01 (c) of the ARCA pertaining to the Disposition of Terminal
Fees; Sec. 6.02 of the ARCA by inserting an introductory paragraph; and Sec. 6.02 (a) (iii) of the
ARCA referring to the Payments of Percentage Share in Gross Revenues.
The Second Supplement to the ARCA contained provisions concerning the clearing, removal,
demolition or disposal of subterranean structures uncovered or discovered at the site of the
construction of the terminal by the Concessionaire. It defined the scope of works; it provided for the
procedure for the demolition of the said structures and the consideration for the same which the
GRP shall pay PIATCO; it provided for time extensions, incremental and consequential costs and
losses consequent to the existence of such structures; and it provided for some additional
obligations on the part of PIATCO as regards the said structures.
Finally, the Third Supplement provided for the obligations of the Concessionaire as regards the
construction of the surface road connecting Terminals II and III.
Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA Terminals I
and II, had existing concession contracts with various service providers to offer international airline
airport services, such as in-flight catering, passenger handling, ramp and ground support, aircraft
maintenance and provisions, cargo handling and warehousing, and other services, to several
international airlines at the NAIA. Some of these service providers are the Miascor Group, DNATAWings Aviation Systems Corp., and the MacroAsia Group. Miascor, DNATA and MacroAsia, together
with Philippine Airlines (PAL), are the dominant players in the industry with an aggregate market
share of 70%.
On September 17, 2002, the workers of the international airline service providers, claiming that they
stand to lose their employment upon the implementation of the questioned agreements, filed before
this Court a petition for prohibition to enjoin the enforcement of said agreements. 2
On October 15, 2002, the service providers, joining the cause of the petitioning workers, filed a
motion for intervention and a petition-in-intervention.
On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and Constantino Jaraula
filed a similar petition with this Court.3
On November 6, 2002, several employees of the MIAA likewise filed a petition assailing the legality
of the various agreements.4
On December 11, 2002. another group of Congressmen, Hon. Jacinto V. Paras, Rafael P. Nantes,
Eduardo C. Zialcita, Willie B. Villarama, Prospero C. Nograles, Prospero A. Pichay, Jr., Harlin Cast
Abayon and Benasing O. Macaranbon, moved to intervene in the case as Respondents-Intervenors.
They filed their Comment-In-Intervention defending the validity of the assailed agreements and
praying for the dismissal of the petitions.
During the pendency of the case before this Court, President Gloria Macapagal Arroyo, on
November 29, 2002, in her speech at the 2002 Golden Shell Export Awards at Malacaang Palace,
stated that she will not "honor (PIATCO) contracts which the Executive Branch's legal offices have
concluded (as) null and void."5

Respondent PIATCO filed its Comments to the present petitions on November 7 and 27, 2002. The
Office of the Solicitor General and the Office of the Government Corporate Counsel filed their
respective Comments in behalf of the public respondents.
On December 10, 2002, the Court heard the case on oral argument. After the oral argument, the
Court then resolved in open court to require the parties to file simultaneously their respective
Memoranda in amplification of the issues heard in the oral arguments within 30 days and to explore
the possibility of arbitration or mediation as provided in the challenged contracts.
In their consolidated Memorandum, the Office of the Solicitor General and the Office of the
Government Corporate Counsel prayed that the present petitions be given due course and that
judgment be rendered declaring the 1997 Concession Agreement, the ARCA and the Supplements
thereto void for being contrary to the Constitution, the BOT Law and its Implementing Rules and
Regulations.
On March 6, 2003, respondent PIATCO informed the Court that on March 4, 2003 PIATCO
commenced arbitration proceedings before the International Chamber of Commerce, International
Court of Arbitration (ICC) by filing a Request for Arbitration with the Secretariat of the ICC against the
Government of the Republic of the Philippines acting through the DOTC and MIAA.
In the present cases, the Court is again faced with the task of resolving complicated issues made
difficult by their intersecting legal and economic implications. The Court is aware of the far reaching
fall out effects of the ruling which it makes today. For more than a century and whenever the
exigencies of the times demand it, this Court has never shirked from its solemn duty to dispense
justice and resolve "actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been grave abuse of discretion amounting to
lack or excess of jurisdiction."6 To be sure, this Court will not begin to do otherwise today.
We shall first dispose of the procedural issues raised by respondent PIATCO which they allege will
bar the resolution of the instant controversy.
Petitioners' Legal Standing to File
the present Petitions
a. G.R. Nos. 155001 and 155661
In G.R. No. 155001 individual petitioners are employees of various service providers 7 having
separate concession contracts with MIAA and continuing service agreements with various
international airlines to provide in-flight catering, passenger handling, ramp and ground support,
aircraft maintenance and provisions, cargo handling and warehousing and other services. Also
included as petitioners are labor unions MIASCOR Workers Union-National Labor Union and
Philippine Airlines Employees Association. These petitioners filed the instant action for prohibition as
taxpayers and as parties whose rights and interests stand to be violated by the implementation of
the PIATCO Contracts.
Petitioners-Intervenors in the same case are all corporations organized and existing under Philippine
laws engaged in the business of providing in-flight catering, passenger handling, ramp and ground
support, aircraft maintenance and provisions, cargo handling and warehousing and other services to
several international airlines at the Ninoy Aquino International Airport. Petitioners-Intervenors allege
that as tax-paying international airline and airport-related service operators, each one of them stands

to be irreparably injured by the implementation of the PIATCO Contracts. Each of the petitionersintervenors have separate and subsisting concession agreements with MIAA and with various
international airlines which they allege are being interfered with and violated by respondent PIATCO.
In G.R. No. 155661, petitioners constitute employees of MIAA and Samahang Manggagawa sa
Paliparan ng Pilipinas - a legitimate labor union and accredited as the sole and exclusive bargaining
agent of all the employees in MIAA. Petitioners anchor their petition for prohibition on the nullity of
the contracts entered into by the Government and PIATCO regarding the build-operate-and-transfer
of the NAIA IPT III. They filed the petition as taxpayers and persons who have a legitimate interest to
protect in the implementation of the PIATCO Contracts.
Petitioners in both cases raise the argument that the PIATCO Contracts contain stipulations which
directly contravene numerous provisions of the Constitution, specific provisions of the BOT Law and
its Implementing Rules and Regulations, and public policy. Petitioners contend that the DOTC and
the MIAA, by entering into said contracts, have committed grave abuse of discretion amounting to
lack or excess of jurisdiction which can be remedied only by a writ of prohibition, there being no
plain, speedy or adequate remedy in the ordinary course of law.
In particular, petitioners assail the provisions in the 1997 Concession Agreement and the ARCA
which grant PIATCO the exclusive right to operate a commercial international passenger terminal
within the Island of Luzon, except those international airports already existing at the time of the
execution of the agreement. The contracts further provide that upon the commencement of
operations at the NAIA IPT III, the Government shall cause the closure of Ninoy Aquino International
Airport Passenger Terminals I and II as international passenger terminals. With respect to existing
concession agreements between MIAA and international airport service providers regarding certain
services or operations, the 1997 Concession Agreement and the ARCA uniformly provide that such
services or operations will not be carried over to the NAIA IPT III and PIATCO is under no obligation
to permit such carry over except through a separate agreement duly entered into with PIATCO. 8
With respect to the petitioning service providers and their employees, upon the commencement of
operations of the NAIA IPT III, they allege that they will be effectively barred from providing
international airline airport services at the NAIA Terminals I and II as all international airlines and
passengers will be diverted to the NAIA IPT III. The petitioning service providers will thus be
compelled to contract with PIATCO alone for such services, with no assurance that subsisting
contracts with MIAA and other international airlines will be respected. Petitioning service providers
stress that despite the very competitive market, the substantial capital investments required and the
high rate of fees, they entered into their respective contracts with the MIAA with the understanding
that the said contracts will be in force for the stipulated period, and thereafter, renewed so as to
allow each of the petitioning service providers to recoup their investments and obtain a reasonable
return thereon.
Petitioning employees of various service providers at the NAIA Terminals I and II and of MIAA on the
other hand allege that with the closure of the NAIA Terminals I and II as international passenger
terminals under the PIATCO Contracts, they stand to lose employment.
The question on legal standing is whether such parties have "alleged such a personal stake in the
outcome of the controversy as to assure that concrete adverseness which sharpens the presentation
of issues upon which the court so largely depends for illumination of difficult constitutional
questions."9 Accordingly, it has been held that the interest of a person assailing the constitutionality
of a statute must be direct and personal. He must be able to show, not only that the law or any
government act is invalid, but also that he sustained or is in imminent danger of sustaining some
direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite

way. It must appear that the person complaining has been or is about to be denied some right or
privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or
penalties by reason of the statute or act complained of. 10
We hold that petitioners have the requisite standing. In the above-mentioned cases, petitioners have
a direct and substantial interest to protect by reason of the implementation of the PIATCO Contracts.
They stand to lose their source of livelihood, a property right which is zealously protected by the
Constitution. Moreover, subsisting concession agreements between MIAA and petitionersintervenors and service contracts between international airlines and petitioners-intervenors stand to
be nullified or terminated by the operation of the NAIA IPT III under the PIATCO Contracts. The
financial prejudice brought about by the PIATCO Contracts on petitioners and petitioners-intervenors
in these cases are legitimate interests sufficient to confer on them the requisite standing to file the
instant petitions.
b. G.R. No. 155547
In G.R. No. 155547, petitioners filed the petition for prohibition as members of the House of
Representatives, citizens and taxpayers. They allege that as members of the House of
Representatives, they are especially interested in the PIATCO Contracts, because the contracts
compel the Government and/or the House of Representatives to appropriate funds necessary to
comply with the provisions therein.11 They cite provisions of the PIATCO Contracts which require
disbursement of unappropriated amounts in compliance with the contractual obligations of the
Government. They allege that the Government obligations in the PIATCO Contracts which compel
government expenditure without appropriation is a curtailment of their prerogatives as legislators,
contrary to the mandate of the Constitution that "[n]o money shall be paid out of the treasury except
in pursuance of an appropriation made by law."12
Standing is a peculiar concept in constitutional law because in some cases, suits are not brought by
parties who have been personally injured by the operation of a law or any other government act but
by concerned citizens, taxpayers or voters who actually sue in the public interest. Although we are
not unmindful of the cases of Imus Electric Co. v. Municipality of Imus13 and Gonzales v.
Raquiza14 wherein this Court held that appropriation must be made only on amounts immediately
demandable, public interest demands that we take a more liberal view in determining whether
the petitioners suing as legislators, taxpayers and citizens have locus standi to file the
instant petition. In Kilosbayan, Inc. v. Guingona,15 this Court held "[i]n line with the liberal policy of
this Court on locus standi, ordinary taxpayers, members of Congress, and even association of
planters, and non-profit civic organizations were allowed to initiate and prosecute actions before this
Court to question the constitutionality or validity of laws, acts, decisions, rulings, or orders of various
government agencies or instrumentalities."16 Further, "insofar as taxpayers' suits are concerned . . .
(this Court) is not devoid of discretion as to whether or not it should be entertained."17 As such ". . .
even if, strictly speaking, they [the petitioners] are not covered by the definition, it is still within the
wide discretion of the Court to waive the requirement and so remove the impediment to its
addressing and resolving the serious constitutional questions raised." 18 In view of the serious legal
questions involved and their impact on public interest, we resolve to grant standing to the petitioners.
Other Procedural Matters
Respondent PIATCO further alleges that this Court is without jurisdiction to review the instant cases
as factual issues are involved which this Court is ill-equipped to resolve. Moreover, PIATCO alleges
that submission of this controversy to this Court at the first instance is a violation of the rule on
hierarchy of courts. They contend that trial courts have concurrent jurisdiction with this Court with

respect to a special civil action for prohibition and hence, following the rule on hierarchy of courts,
resort must first be had before the trial courts.
After a thorough study and careful evaluation of the issues involved, this Court is of the view that the
crux of the instant controversy involves significant legal questions. The facts necessary to resolve
these legal questions are well established and, hence, need not be determined by a trial court.
The rule on hierarchy of courts will not also prevent this Court from assuming jurisdiction over the
cases at bar. The said rule may be relaxed when the redress desired cannot be obtained in the
appropriate courts or where exceptional and compelling circumstances justify availment of a remedy
within and calling for the exercise of this Court's primary jurisdiction.19
It is easy to discern that exceptional circumstances exist in the cases at bar that call for the
relaxation of the rule. Both petitioners and respondents agree that these cases are
of transcendental importance as they involve the construction and operation of the country's
premier international airport. Moreover, the crucial issues submitted for resolution are of first
impression and they entail the proper legal interpretation of key provisions of the Constitution, the
BOT Law and its Implementing Rules and Regulations. Thus, considering the nature of the
controversy before the Court, procedural bars may be lowered to give way for the speedy disposition
of the instant cases.
Legal Effect of the Commencement
of Arbitration Proceedings by
PIATCO
There is one more procedural obstacle which must be overcome. The Court is aware that arbitration
proceedings pursuant to Section 10.02 of the ARCA have been filed at the instance of respondent
PIATCO. Again, we hold that the arbitration step taken by PIATCO will not oust this Court of its
jurisdiction over the cases at bar.
In Del Monte Corporation-USA v. Court of Appeals,20 even after finding that the arbitration clause in
the Distributorship Agreement in question is valid and the dispute between the parties is arbitrable,
this Court affirmed the trial court's decision denying petitioner's Motion to Suspend Proceedings
pursuant to the arbitration clause under the contract. In so ruling, this Court held that as contracts
produce legal effect between the parties, their assigns and heirs, only the parties to the
Distributorship Agreement are bound by its terms, including the arbitration clause stipulated therein.
This Court ruled that arbitration proceedings could be called for but only with respect to the parties
to the contract in question. Considering that there are parties to the case who are neither parties to
the Distributorship Agreement nor heirs or assigns of the parties thereto, this Court, citing its
previous ruling in Salas, Jr. v. Laperal Realty Corporation,21 held that to tolerate the splitting of
proceedings by allowing arbitration as to some of the parties on the one hand and trial for the others
on the other hand would, in effect, result in multiplicity of suits, duplicitous procedure and
unnecessary delay.22 Thus, we ruled that the interest of justice would best be served if the trial
court hears and adjudicates the case in a single and complete proceeding.
It is established that petitioners in the present cases who have presented legitimate interests in
the resolution of the controversy are not parties to the PIATCO Contracts. Accordingly, they
cannot be bound by the arbitration clause provided for in the ARCA and hence, cannot be compelled
to submit to arbitration proceedings. A speedy and decisive resolution of all the critical issues in
the present controversy, including those raised by petitioners, cannot be made before an

arbitral tribunal. The object of arbitration is precisely to allow an expeditious determination of a

dispute. This objective would not be met if this Court were to allow the parties to settle the cases by
arbitration as there are certain issues involving non-parties to the PIATCO Contracts which the
arbitral tribunal will not be equipped to resolve.
Now, to the merits of the instant controversy.
I
Is PIATCO a qualified bidder?
Public respondents argue that the Paircargo Consortium, PIATCO's predecessor, was not a duly prequalified bidder on the unsolicited proposal submitted by AEDC as the Paircargo Consortium failed
to meet the financial capability required under the BOT Law and the Bid Documents. They allege
that in computing the ability of the Paircargo Consortium to meet the minimum equity requirements
for the project, the entire net worth of Security Bank, a member of the consortium, should not
be considered.
PIATCO relies, on the other hand, on the strength of the Memorandum dated October 14, 1996
issued by the DOTC Undersecretary Primitivo C. Cal stating that the Paircargo Consortium is found
to have a combined net worth of P3,900,000,000.00, sufficient to meet the equity requirements of
the project. The said Memorandum was in response to a letter from Mr. Antonio Henson of AEDC to
President Fidel V. Ramos questioning the financial capability of the Paircargo Consortium on the
ground that it does not have the financial resources to put up the required minimum equity of
P2,700,000,000.00. This contention is based on the restriction under R.A. No. 337, as amended or
the General Banking Act that a commercial bank cannot invest in any single enterprise in an amount
more than 15% of its net worth. In the said Memorandum, Undersecretary Cal opined:
The Bid Documents, as clarified through Bid Bulletin Nos. 3 and 5, require that financial
capability will be evaluated based on total financial capability of all the member companies of
the [Paircargo] Consortium. In this connection, the Challenger was found to have a
combined net worth of P3,926,421,242.00 that could support a project costing approximately
P13 Billion.
It is not a requirement that the net worth must be "unrestricted." To impose that as a
requirement now will be nothing less than unfair.
The financial statement or the net worth is not the sole basis in establishing financial
capability. As stated in Bid Bulletin No. 3, financial capability may also be established by
testimonial letters issued by reputable banks. The Challenger has complied with this
requirement.
To recap, net worth reflected in the Financial Statement should not be taken as the amount
of the money to be used to answer the required thirty percent (30%) equity of the challenger
but rather to be used in establishing if there is enough basis to believe that the challenger
can comply with the required 30% equity. In fact, proof of sufficient equity is required as one
of the conditions for award of contract (Section 12.1 IRR of the BOT Law) but not for prequalification (Section 5.4 of the same document).23
Under the BOT Law, in case of a build-operate-and-transfer arrangement, the contract shall
be awarded to the bidder "who, having satisfied the minimum financial, technical,

organizational and legal standards" required by the law, has submitted the lowest bid and
most favorable terms of the project.24 Further, the 1994 Implementing Rules and Regulations
of the BOT Law provide:
Section 5.4 Pre-qualification Requirements.
xxx

xxx

xxx

c. Financial Capability: The project proponent must have adequate capability to sustain the
financing requirements for the detailed engineering design, construction and/or operation
and maintenance phases of the project, as the case may be. For purposes of prequalification, this capability shall be measured in terms of (i) proof of the ability of the
project proponent and/or the consortium to provide a minimum amount of equity to
the project, and (ii) a letter testimonial from reputable banks attesting that the project
proponent and/or members of the consortium are banking with them, that they are in
good financial standing, and that they have adequate resources. The government
agency/LGU concerned shall determine on a project-to-project basis and before prequalification, the minimum amount of equity needed. (emphasis supplied)
Pursuant to this provision, the PBAC issued PBAC Bulletin No. 3 dated August 16, 1996 amending
the financial capability requirements for pre-qualification of the project proponent as follows:
6. Basis of Pre-qualification
The basis for the pre-qualification shall be on the compliance of the proponent to the
minimum technical and financial requirements provided in the Bid Documents and in the IRR
of the BOT Law, R.A. No. 6957, as amended by R.A. 7718.
The minimum amount of equity to which the proponent's financial capability will be based
shall be thirty percent (30%) of the project cost instead of the twenty percent (20%)
specified in Section 3.6.4 of the Bid Documents. This is to correlate with the required
debt-to-equity ratio of 70:30 in Section 2.01a of the draft concession agreement. The debt
portion of the project financing should not exceed 70% of the actual project cost.
Accordingly, based on the above provisions of law, the Paircargo Consortium or any challenger to
the unsolicited proposal of AEDC has to show that it possesses the requisite financial capability to
undertake the project in the minimum amount of 30% of the project cost through (i) proof of the
ability to provide a minimum amount of equity to the project, and (ii) a letter testimonial from
reputable banks attesting that the project proponent or members of the consortium are banking with
them, that they are in good financial standing, and that they have adequate resources.
As the minimum project cost was estimated to be US$350,000,000.00 or roughly
P9,183,650,000.00,25 the Paircargo Consortium had to show to the satisfaction of the PBAC that it
had the ability to provide the minimum equity for the project in the amount of at
least P2,755,095,000.00.
Paircargo's Audited Financial Statements as of 1993 and 1994 indicated that it had a net worth of
P2,783,592.00 and P3,123,515.00 respectively.26 PAGS' Audited Financial Statements as of 1995
indicate that it has approximately P26,735,700.00 to invest as its equity for the project. 27 Security
Bank's Audited Financial Statements as of 1995 show that it has a net worth equivalent to its capital
funds in the amount of P3,523,504,377.00.28

We agree with public respondents that with respect to Security Bank, the entire amount of its net
worth could not be invested in a single undertaking or enterprise, whether allied or non-allied in
accordance with the provisions of R.A. No. 337, as amended or the General Banking Act:
Sec. 21-B. The provisions in this or in any other Act to the contrary notwithstanding, the
Monetary Board, whenever it shall deem appropriate and necessary to further national
development objectives or support national priority projects, may authorize a commercial
bank, a bank authorized to provide commercial banking services, as well as a
government-owned and controlled bank, to operate under an expanded commercial
banking authority and by virtue thereof exercise, in addition to powers authorized for
commercial banks, the powers of an Investment House as provided in Presidential
Decree No. 129, invest in the equity of a non-allied undertaking, or own a majority or all
of the equity in a financial intermediary other than a commercial bank or a bank authorized to
provide commercial banking services: Provided, That (a) the total investment in equities
shall not exceed fifty percent (50%) of the net worth of the bank; (b) the equity investment
in any one enterprise whether allied or non-allied shall not exceed fifteen percent
(15%) of the net worth of the bank; (c) the equity investment of the bank, or of its wholly or
majority-owned subsidiary, in a single non-allied undertaking shall not exceed thirty-five
percent (35%) of the total equity in the enterprise nor shall it exceed thirty-five percent (35%)
of the voting stock in that enterprise; and (d) the equity investment in other banks shall be
deducted from the investing bank's net worth for purposes of computing the prescribed ratio
of net worth to risk assets.
xxx

xxx

xxx

Further, the 1993 Manual of Regulations for Banks provides:

SECTION X383. Other Limitations and Restrictions. The following limitations and
restrictions shall also apply regarding equity investments of banks.
a. In any single enterprise. The equity investments of banks in any single enterprise shall
not exceed at any time fifteen percent (15%) of the net worth of the investing bank as
defined in Sec. X106 and Subsec. X121.5.
Thus, the maximum amount that Security Bank could validly invest in the Paircargo Consortium is
only P528,525,656.55, representing 15% of its entire net worth. The total net worth therefore of the
Paircargo Consortium, after considering the maximum amounts that may be validly invested by
each of its members isP558,384,871.55 or only 6.08% of the project cost,29 an amount
substantially less than the prescribed minimum equity investment required for the project in the
amount of P2,755,095,000.00 or 30% of the project cost.
The purpose of pre-qualification in any public bidding is to determine, at the earliest opportunity, the
ability of the bidder to undertake the project. Thus, with respect to the bidder's financial capacity at
the pre-qualification stage, the law requires the government agency to examine and determine the
ability of the bidder to fund the entire cost of the project by considering the maximum amounts
that each bidder may invest in the project at the time of pre-qualification.
The PBAC has determined that any prospective bidder for the construction, operation and
maintenance of the NAIA IPT III project should prove that it has the ability to provide equity in the
minimum amount of 30% of the project cost, in accordance with the 70:30 debt-to-equity ratio
prescribed in the Bid Documents. Thus, in the case of Paircargo Consortium, the PBAC should
determine the maximum amounts that each member of the consortium may commit for the

construction, operation and maintenance of the NAIA IPT III project at the time of pre-qualification.
With respect to Security Bank, the maximum amount which may be invested by it would only be
15% of its net worth in view of the restrictions imposed by the General Banking Act. Disregarding the
investment ceilings provided by applicable law would not result in a proper evaluation of whether or
not a bidder is pre-qualified to undertake the project as for all intents and purposes, such ceiling or
legal restriction determines the true maximum amount which a bidder may invest in the project.
Further, the determination of whether or not a bidder is pre-qualified to undertake the project
requires an evaluation of the financial capacity of the said bidder at the time the bid is
submitted based on the required documents presented by the bidder. The PBAC should not be
allowed to speculate on the future financial abilityof the bidder to undertake the project on the
basis of documents submitted. This would open doors to abuse and defeat the very purpose of a
public bidding. This is especially true in the case at bar which involves the investment of billions of
pesos by the project proponent. The relevant government authority is duty-bound to ensure that the
awardee of the contract possesses the minimum required financial capability to complete the project.
To allow the PBAC to estimate the bidder's future financial capability would not secure the viability
and integrity of the project. A restrictive and conservative application of the rules and procedures of
public bidding is necessary not only to protect the impartiality and regularity of the proceedings but
also to ensure the financial and technical reliability of the project. It has been held that:
The basic rule in public bidding is that bids should be evaluated based on the required
documents submitted before and not after the opening of bids. Otherwise, the foundation of
a fair and competitive public bidding would be defeated. Strict observance of the rules,
regulations, and guidelines of the bidding process is the only safeguard to a fair,
honest and competitive public bidding.30
Thus, if the maximum amount of equity that a bidder may invest in the project at the time the bids
are submitted falls short of the minimum amounts required to be put up by the bidder, said bidder
should be properly disqualified. Considering that at the pre-qualification stage, the maximum
amounts which the Paircargo Consortium may invest in the project fell short of the minimum
amounts prescribed by the PBAC, we hold that Paircargo Consortium was not a qualified bidder.
Thus the award of the contract by the PBAC to the Paircargo Consortium, a disqualified bidder, is
null and void.
While it would be proper at this juncture to end the resolution of the instant controversy, as the legal
effects of the disqualification of respondent PIATCO's predecessor would come into play and
necessarily result in the nullity of all the subsequent contracts entered by it in pursuance of the
project, the Court feels that it is necessary to discuss in full the pressing issues of the present
controversy for a complete resolution thereof.
II
Is the 1997 Concession Agreement valid?
Petitioners and public respondents contend that the 1997 Concession Agreement is invalid as it
contains provisions that substantially depart from the draft Concession Agreement included in the
Bid Documents. They maintain that a substantial departure from the draft Concession Agreement is
a violation of public policy and renders the 1997 Concession Agreement null and void.
PIATCO maintains, however, that the Concession Agreement attached to the Bid Documents is
intended to be adraft, i.e., subject to change, alteration or modification, and that this intention was

clear to all participants, including AEDC, and DOTC/MIAA. It argued further that said intention is
expressed in Part C (6) of Bid Bulletin No. 3 issued by the PBAC which states:
6. Amendments to the Draft Concessions Agreement
Amendments to the Draft Concessions Agreement shall be issued from time to time. Said
amendments shall only cover items that would not materially affect the preparation of the
proponent's proposal.
By its very nature, public bidding aims to protect the public interest by giving the public the best
possible advantages through open competition. Thus:
Competition must be legitimate, fair and honest. In the field of government contract law,
competition requires, not only `bidding upon a common standard, a common basis, upon the
same thing, the same subject matter, the same undertaking,' but also that it be legitimate,
fair and honest; and not designed to injure or defraud the government.31
An essential element of a publicly bidded contract is that all bidders must be on equal footing. Not
simply in terms of application of the procedural rules and regulations imposed by the relevant
government agency, but more importantly, on the contract bidded upon. Each bidder must be able to
bid on the same thing. The rationale is obvious. If the winning bidder is allowed to later include or
modify certain provisions in the contract awarded such that the contract is altered in any material
respect, then the essence of fair competition in the public bidding is destroyed. A public bidding
would indeed be a farce if after the contract is awarded, the winning bidder may modify the contract
and include provisions which are favorable to it that were not previously made available to the other
bidders. Thus:
It is inherent in public biddings that there shall be a fair competition among the bidders. The
specifications in such biddings provide the common ground or basis for the bidders. The
specifications should, accordingly, operate equally or indiscriminately upon all bidders. 32
The same rule was restated by Chief Justice Stuart of the Supreme Court of Minnesota:
The law is well settled that where, as in this case, municipal authorities can only let a
contract for public work to the lowest responsible bidder, the proposals and specifications
therefore must be so framed as to permit free and full competition. Nor can they enter into
a contract with the best bidder containing substantial provisions beneficial to him, not
included or contemplated in the terms and specifications upon which the bids were
invited.33
In fact, in the PBAC Bid Bulletin No. 3 cited by PIATCO to support its argument that the draft
concession agreement is subject to amendment, the pertinent portion of which was quoted above,
the PBAC also clarified that"[s]aid amendments shall only cover items that would not materially
affect the preparation of the proponent's proposal."
While we concede that a winning bidder is not precluded from modifying or amending certain
provisions of the contract bidded upon, such changes must not constitute substantial or material
amendments that would alter the basic parameters of the contract and would constitute a
denial to the other bidders of the opportunity to bid on the same terms. Hence, the
determination of whether or not a modification or amendment of a contract bidded out constitutes a
substantial amendment rests on whether the contract, when taken as a whole, would contain

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

(2) aircraft tacking fees;

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

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(c) Concessionaire shall at all times be judicious in fixing fees and charges constituting NonPublic Utility Revenues in order to ensure that End Users are not unreasonably deprived of
services. While the vehicular parking fee, porterage fee and greeter/well wisher fee
constitute Non-Public Utility Revenues of Concessionaire, GRP may intervene and
require Concessionaire to explain and justify the fee it may set from time to time, if in
the reasonable opinion of GRP the said fees have become exorbitant resulting in the
unreasonable deprivation of End Users of such services.40
Thus, under the 1997 Concession Agreement, with respect to (1) vehicular parking fee, (2)
porterage fee and (3) greeter/well wisher fee, all that MIAA can do is to require PIATCO to explain
and justify the fees set by PIATCO. In the draft Concession Agreement, vehicular parking fee is
subject to MIAA regulation and approval under the second paragraph of Section 6.03 thereof while
porterage fee is covered by the first paragraph of the same provision. There is an obvious relaxation
of the extent of control and regulation by MIAA with respect to the particular fees that may be
charged by PIATCO.
Moreover, with respect to the third category of fees that may be imposed and collected by PIATCO,
i.e., new fees and charges that may be imposed by PIATCO which have not been previously
imposed or collected at the Ninoy Aquino International Airport Passenger Terminal I, under Section
6.03 of the draft Concession Agreement MIAA has reserved the right to regulate the same under
the same conditions that MIAA may regulate fees under the first category, i.e., periodic adjustment of
once every two years in accordance with a prescribed parametric formula and effective only upon
written approval by MIAA. However, under the 1997 Concession Agreement, adjustment of fees
under the third category is not subject to MIAA regulation.
With respect to terminal fees that may be charged by PIATCO,41 as shown earlier, this was included
within the category of "Public Utility Revenues" under the 1997 Concession Agreement. This
classification is significant because under the 1997 Concession Agreement, "Public Utility
Revenues" are subject to an "Interim Adjustment" of fees upon the occurrence of certain
extraordinary events specified in the agreement.42 However, under the draft Concession
Agreement, terminal fees are not included in the types of fees that may be subject to "Interim
Adjustment."43
Finally, under the 1997 Concession Agreement, "Public Utility Revenues," except terminal fees, are
denominated in US Dollars44 while payments to the Government are in Philippine Pesos. In the draft
Concession Agreement, no such stipulation was included. By stipulating that "Public Utility
Revenues" will be paid to PIATCO in US Dollars while payments by PIATCO to the Government are
in Philippine currency under the 1997 Concession Agreement, PIATCO is able to enjoy the benefits
of depreciations of the Philippine Peso, while being effectively insulated from the detrimental effects
of exchange rate fluctuations.
When taken as a whole, the changes under the 1997 Concession Agreement with respect to
reduction in the types of fees that are subject to MIAA regulation and the relaxation of such
regulation with respect to other fees are significant amendments that substantially distinguish the
draft Concession Agreement from the 1997 Concession Agreement. The 1997 Concession
Agreement, in this respect, clearly gives PIATCO more favorable terms than what was
available to other bidders at the time the contract was bidded out. It is not very difficult to see
that the changes in the 1997 Concession Agreement translate to direct and concrete financial
advantages for PIATCO which were not available at the time the contract was offered for bidding. It
cannot be denied that under the 1997 Concession Agreement only "Public Utility Revenues" are

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

The term "Attendant Liabilities" under the 1997 Concession Agreement is defined as:
Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the
books of the Concessionaire as owing to Unpaid Creditors who have provided, loaned
or advanced funds actually used for the Project, including all interests, penalties,
associated fees, charges, surcharges, indemnities, reimbursements and other related
expenses, and further including amounts owed by Concessionaire to its suppliers,
contractors and sub-contractors.
Under the above quoted portions of Section 4.04 in relation to the definition of "Attendant
Liabilities," default by PIATCO of its loans used to finance the NAIA IPT III project triggers the
occurrence of certain events that leads to the assumption by the Government of the liability
for the loans. Only in one instance may the Government escape the assumption of PIATCO's
liabilities, i.e., when the Government so elects and allows a qualified operator to take over as
Concessionaire. However, this circumstance is dependent on the existence and availability of
a qualified operator who is willing to take over the rights and obligations of PIATCO under the
contract, a circumstance that is not entirely within the control of the Government.
Without going into the validity of this provision at this juncture, suffice it to state that Section 4.04 of
the 1997 Concession Agreement may be considered a form of security for the loans PIATCO has
obtained to finance the project, an option that was not made available in the draft Concession
Agreement. Section 4.04 is an important amendment to the 1997 Concession Agreement because it
grants PIATCO a financial advantage or benefit which was not previously made available
during the bidding process. This financial advantage is a significant modification that translates to
better terms and conditions for PIATCO.
PIATCO, however, argues that the parties to the bidding procedure acknowledge that the draft
Concession Agreement is subject to amendment because the Bid Documents permit financing or
borrowing. They claim that it was the lenders who proposed the amendments to the draft
Concession Agreement which resulted in the 1997 Concession Agreement.
We agree that it is not inconsistent with the rationale and purpose of the BOT Law to allow the
project proponent or the winning bidder to obtain financing for the project, especially in this case
which involves the construction, operation and maintenance of the NAIA IPT III. Expectedly,
compliance by the project proponent of its undertakings therein would involve a substantial amount
of investment. It is therefore inevitable for the awardee of the contract to seek alternate sources of
funds to support the project. Be that as it may, this Court maintains that amendments to the contract
bidded upon should always conform to the general policy on public bidding if such procedure is to be
faithful to its real nature and purpose. By its very nature and characteristic, competitive public
bidding aims to protect the public interest by giving the public the best possible advantages through
open competition.45 It has been held that the three principles in public bidding are (1) the offer to the
public; (2) opportunity for competition; and (3) a basis for the exact comparison of bids. A regulation
of the matter which excludes any of these factors destroys the distinctive character of the system
and thwarts the purpose of its adoption.46 These are the basic parameters which every awardee of a
contract bidded out must conform to, requirements of financing and borrowing notwithstanding.
Thus, upon a concrete showing that, as in this case, the contract signed by the government and the
contract-awardee is an entirely different contract from the contract bidded, courts should not hesitate
to strike down said contract in its entirety for violation of public policy on public bidding. A strict
adherence on the principles, rules and regulations on public bidding must be sustained if only to
preserve the integrity and the faith of the general public on the procedure.

Public bidding is a standard practice for procuring government contracts for public service and for
furnishing supplies and other materials. It aims to secure for the government the lowest possible
price under the most favorable terms and conditions, to curtail favoritism in the award of government
contracts and avoid suspicion of anomalies and it places all bidders in equal footing. 47 Any
government action which permits any substantial variance between the conditions under
which the bids are invited and the contract executed after the award thereof is a grave abuse
of discretion amounting to lack or excess of jurisdiction which warrants proper judicial
action.
In view of the above discussion, the fact that the foregoing substantial amendments were made on
the 1997 Concession Agreement renders the same null and void for being contrary to public
policy. These amendments convert the 1997 Concession Agreement to an entirely different
agreement from the contract bidded out or the draft Concession Agreement. It is not difficult to see
that the amendments on (1) the types of fees or charges that are subject to MIAA regulation or
control and the extent thereof and (2) the assumption by the Government, under certain conditions,
of the liabilities of PIATCO directly translates concrete financial advantages to PIATCO that
were previously not available during the bidding process. These amendments cannot be taken
as merely supplements to or implementing provisions of those already existing in the draft
Concession Agreement. The amendments discussed above present new terms and conditions which
provide financial benefit to PIATCO which may have altered the technical and financial parameters
of other bidders had they known that such terms were available.
III
Direct Government Guarantee
Article IV, Section 4.04(b) and (c), in relation to Article 1.06, of the 1997 Concession Agreement
provides:
Section 4.04 Assignment
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(b) In the event Concessionaire should default in the payment of an Attendant

Liability, and the default resulted in the acceleration of the payment due date of the
Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and
Concessionaire shall immediately inform GRP in writing of such default. GRP shall within
one hundred eighty (180) days from receipt of the joint written notice of the Unpaid Creditors
and Concessionaire, either (i) take over the Development Facility and assume the
Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified to be substituted as
concessionaire and operator of the Development facility in accordance with the terms and
conditions hereof, or designate a qualified operator acceptable to GRP to operate the
Development Facility, likewise under the terms and conditions of this Agreement; Provided,
that if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and
Concessionaire written notice of its choice, GRP shall be deemed to have elected to take
over the Development Facility with the concomitant assumption of Attendant
Liabilities.
(c) If GRP, by written notice, allow the Unpaid Creditors to be substituted as concessionaire,
the latter shall form and organize a concession company qualified to takeover the operation
of the Development Facility. If the concession company should elect to designate an operator
for the Development Facility, the concession company shall in good faith identify and

designate a qualified operator acceptable to GRP within one hundred eighty (180) days from
receipt of GRP's written notice. If the concession company, acting in good faith and with due
diligence, is unable to designate a qualified operator within the aforesaid period, then
GRP shall at the end of the 180-day period take over the Development Facility and
assume Attendant Liabilities.
.
Section 1.06. Attendant Liabilities
Attendant Liabilities refer to all amounts recorded and from time to time outstanding in
the books of the Concessionaire as owing to Unpaid Creditors who have provided,
loaned or advanced funds actually used for the Project, including all interests, penalties,
associated fees, charges, surcharges, indemnities, reimbursements and other related
expenses, and further including amounts owed by Concessionaire to its suppliers,
contractors and sub-contractors.48
It is clear from the above-quoted provisions that Government, in the event that PIATCO defaults
in its loan obligations, is obligated to pay "all amounts recorded and from time to time
outstanding from the books" of PIATCO which the latter owes to its creditors. 49 These amounts
include "all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements
and other related expenses."50 This obligation of the Government to pay PIATCO's creditors upon
PIATCO's default would arise if the Government opts to take over NAIA IPT III. It should be noted,
however, that even if the Government chooses the second option, which is to allow PIATCO's unpaid
creditors operate NAIA IPT III, the Government is still at a risk of being liable to PIATCO's creditors
should the latter be unable to designate a qualified operator within the prescribed period. 51 In
effect,whatever option the Government chooses to take in the event of PIATCO's failure to
fulfill its loan obligations, the Government is still at a risk of assuming PIATCO's outstanding
loans. This is due to the fact that the Government would only be free from assuming PIATCO's
debts if the unpaid creditors would be able to designate a qualified operator within the period
provided for in the contract. Thus, the Government's assumption of liability is virtually out of its
control. The Government under the circumstances provided for in the 1997 Concession Agreement
is at the mercy of the existence, availability and willingness of a qualified operator. The above
contractual provisions constitute a direct government guarantee which is prohibited by law.
One of the main impetus for the enactment of the BOT Law is the lack of government funds to
construct the infrastructure and development projects necessary for economic growth and
development. This is why private sector resources are being tapped in order to finance these
projects. The BOT law allows the private sector to participate, and is in fact encouraged to do so by
way of incentives, such as minimizing the unstable flow of returns,52 provided that the government
would not have to unnecessarily expend scarcely available funds for the project itself. As such, direct
guarantee, subsidy and equity by the government in these projects are strictly prohibited. 53 This is
but logical for if the government would in the end still be at a risk of paying the debts
incurred by the private entity in the BOT projects, then the purpose of the law is subverted.
Section 2(n) of the BOT Law defines direct guarantee as follows:
(n) Direct government guarantee An agreement whereby the government or any of its
agencies or local government units assume responsibility for the repayment of debt
directly incurred by the project proponent in implementing the project in case of a loan
default.

Clearly by providing that the Government "assumes" the attendant liabilities, which consists of
PIATCO's unpaid debts, the 1997 Concession Agreement provided for a direct government
guarantee for the debts incurred by PIATCO in the implementation of the NAIA IPT III project. It is of
no moment that the relevant sections are subsumed under the title of "assignment". The provisions
providing for direct government guarantee which is prohibited by law is clear from the terms thereof.
The fact that the ARCA superseded the 1997 Concession Agreement did not cure this fatal defect.
Article IV, Section 4.04(c), in relation to Article I, Section 1.06, of the ARCA provides:
Section 4.04 Security
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(c) GRP agrees with Concessionaire (PIATCO) that it shall negotiate in good faith and
enter into direct agreement with the Senior Lenders, or with an agent of such Senior
Lenders (which agreement shall be subject to the approval of the Bangko Sentral ng
Pilipinas), in such form as may be reasonably acceptable to both GRP and Senior Lenders,
with regard, inter alia, to the following parameters:
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(iv) If the Concessionaire [PIATCO] is in default under a payment obligation

owed to the Senior Lenders, and as a result thereof the Senior Lenders have
become entitled to accelerate the Senior Loans, the Senior Lenders shall have the
right to notify GRP of the same, and without prejudice to any other rights of the
Senior Lenders or any Senior Lenders' agent may have (including without limitation
under security interests granted in favor of the Senior Lenders), to either in good faith
identify and designate a nominee which is qualified under sub-clause (viii)(y) below
to operate the Development Facility [NAIA Terminal 3] or transfer the
Concessionaire's [PIATCO] rights and obligations under this Agreement to a
transferee which is qualified under sub-clause (viii) below;
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(vi) if the Senior Lenders, acting in good faith and using reasonable efforts, are
unable to designate a nominee or effect a transfer in terms and conditions
satisfactory to the Senior Lenders within one hundred eighty (180) days after giving
GRP notice as referred to respectively in (iv) or (v) above, then GRP and the Senior
Lenders shall endeavor in good faith to enter into any other arrangement relating to
the Development Facility [NAIA Terminal 3] (other than a turnover of the
Development Facility [NAIA Terminal 3] to GRP) within the following one hundred
eighty (180) days. If no agreement relating to the Development Facility [NAIA
Terminal 3] is arrived at by GRP and the Senior Lenders within the said 180-day
period, then at the end thereof the Development Facility [NAIA Terminal 3] shall
be transferred by the Concessionaire [PIATCO] to GRP or its designee and
GRP shall make a termination payment to Concessionaire [PIATCO] equal to
the Appraised Value (as hereinafter defined) of the Development Facility [NAIA
Terminal 3] or the sum of the Attendant Liabilities, if greater. Notwithstanding
Section 8.01(c) hereof, this Agreement shall be deemed terminated upon the transfer
of the Development Facility [NAIA Terminal 3] to GRP pursuant hereto;
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Section 1.06. Attendant Liabilities

Attendant Liabilities refer to all amounts in each case supported by verifiable evidence
from time to timeowed or which may become owing by Concessionaire [PIATCO] to
Senior Lenders or any other persons or entities who have provided, loaned, or advanced
funds or provided financial facilities to Concessionaire [PIATCO] for the Project [NAIA
Terminal 3], including, without limitation, all principal, interest, associated fees,
charges, reimbursements, and other related expenses (including the fees, charges and
expenses of any agents or trustees of such persons or entities), whether payable at maturity,
by acceleration or otherwise, and further including amounts owed by Concessionaire
[PIATCO] to its professional consultants and advisers, suppliers, contractors and subcontractors.54
It is clear from the foregoing contractual provisions that in the event that PIATCO fails to fulfill its loan
obligations to its Senior Lenders, the Government is obligated to directly negotiate and enter into an
agreement relating to NAIA IPT III with the Senior Lenders, should the latter fail to appoint a qualified
nominee or transferee who will take the place of PIATCO. If the Senior Lenders and the Government
are unable to enter into an agreement after the prescribed period, the Government must then pay
PIATCO, upon transfer of NAIA IPT III to the Government, termination payment equal to the
appraised value of the project or the value of the attendant liabilities whichever is greater.
Attendant liabilities as defined in the ARCA includes all amounts owed or thereafter may be owed by
PIATCO not only to the Senior Lenders with whom PIATCO has defaulted in its loan obligations but
to all other persons who may have loaned, advanced funds or provided any other type of financial
facilities to PIATCO for NAIA IPT III. The amount of PIATCO's debt that the Government would have
to pay as a result of PIATCO's default in its loan obligations -- in case no qualified nominee or
transferee is appointed by the Senior Lenders and no other agreement relating to NAIA IPT III has
been reached between the Government and the Senior Lenders -- includes, but is not limited to, "all
principal, interest, associated fees, charges, reimbursements, and other related expenses . . .
whether payable at maturity, by acceleration or otherwise."55
It is clear from the foregoing that the ARCA provides for a direct guarantee by the
government to pay PIATCO's loans not only to its Senior Lenders but all other entities who
provided PIATCO funds or services upon PIATCO's default in its loan obligation with its
Senior Lenders. The fact that the Government's obligation to pay PIATCO's lenders for the latter's
obligation would only arise after the Senior Lenders fail to appoint a qualified nominee or transferee
does not detract from the fact that, should the conditions as stated in the contract occur, the
ARCA still obligates the Government to pay any and all amounts owed by PIATCO to its lenders in
connection with NAIA IPT III. Worse, the conditions that would make the Government liable for
PIATCO's debts is triggered by PIATCO's own default of its loan obligations to its Senior Lenders to
which loan contracts the Government was never a party to. The Government was not even given an
option as to what course of action it should take in case PIATCO defaulted in the payment of its
senior loans. The Government, upon PIATCO's default, would be merely notified by the Senior
Lenders of the same and it is the Senior Lenders who are authorized to appoint a qualified nominee
or transferee. Should the Senior Lenders fail to make such an appointment, the Government is then
automatically obligated to "directly deal and negotiate" with the Senior Lenders regarding NAIA IPT
III. The only way the Government would not be liable for PIATCO's debt is for a qualified nominee or
transferee to be appointed in place of PIATCO to continue the construction, operation and
maintenance of NAIA IPT III. This "pre-condition", however, will not take the contract out of the ambit
of a direct guarantee by the government as the existence, availability and willingness of a qualified
nominee or transferee is totally out of the government's control. As such the Government is
virtually at the mercy of PIATCO (that it would not default on its loan obligations to its Senior
Lenders), the Senior Lenders (that they would appoint a qualified nominee or transferee or agree to

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

The above provision pertains to the right of the State in times of national emergency, and in the
exercise of its police power, to temporarily take over the operation of any business affected with
public interest. In the 1986 Constitutional Commission, the term "national emergency" was defined to
include threat from external aggression, calamities or national disasters, but not strikes "unless it is
of such proportion that would paralyze government service." 60 The duration of the emergency itself is
the determining factor as to how long the temporary takeover by the government would last. 61 The
temporary takeover by the government extends only to the operation of the business and not to the
ownership thereof. As such the government is not required to compensate the private entityowner of the said business as there is no transfer of ownership, whether permanent or
temporary. The private entity-owner affected by the temporary takeover cannot, likewise, claim just
compensation for the use of the said business and its properties as the temporary takeover by the
government is in exercise of its police power and not of its power of eminent domain.
Article V, Section 5.10 (c) of the 1997 Concession Agreement provides:
Section 5.10 Temporary Take-over of operations by GRP.
.
(c) In the event the development Facility or any part thereof and/or the operations of
Concessionaire or any part thereof, become the subject matter of or be included in any
notice, notification, or declaration concerning or relating to acquisition, seizure or
appropriation by GRP in times of war or national emergency, GRP shall, by written notice to
Concessionaire, immediately take over the operations of the Terminal and/or the Terminal
Complex. During such take over by GRP, the Concession Period shall be suspended;
provided, that upon termination of war, hostilities or national emergency, the operations shall
be returned to Concessionaire, at which time, the Concession period shall commence to run
again.Concessionaire shall be entitled to reasonable compensation for the duration of
the temporary take over by GRP, which compensation shall take into account the
reasonable cost for the use of the Terminal and/or Terminal Complex, (which is in the
amount at least equal to the debt service requirements of Concessionaire, if the
temporary take over should occur at the time when Concessionaire is still servicing debts
owed to project lenders), any loss or damage to the Development Facility, and other
consequential damages. If the parties cannot agree on the reasonable compensation of
Concessionaire, or on the liability of GRP as aforesaid, the matter shall be resolved in
accordance with Section 10.01 [Arbitration]. Any amount determined to be payable by GRP
to Concessionaire shall be offset from the amount next payable by Concessionaire to GRP.62
PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision on
temporary government takeover and obligate the government to pay "reasonable cost for the
use of the Terminal and/or Terminal Complex."63 Article XII, section 17 of the 1987 Constitution
envisions a situation wherein the exigencies of the times necessitate the government to "temporarily
take over or direct the operation of any privately owned public utility or business affected with public
interest." It is the welfare and interest of the public which is the paramount consideration in
determining whether or not to temporarily take over a particular business. Clearly, the State in
effecting the temporary takeover is exercising its police power. Police power is the "most essential,
insistent, and illimitable of powers."64 Its exercise therefore must not be unreasonably hampered nor
its exercise be a source of obligation by the government in the absence of damage due to
arbitrariness of its exercise.65 Thus, requiring the government to pay reasonable compensation for
the reasonable use of the property pursuant to the operation of the business contravenes the
Constitution.

V
Regulation of Monopolies
A monopoly is "a privilege or peculiar advantage vested in one or more persons or companies,
consisting in the exclusive right (or power) to carry on a particular business or trade, manufacture a
particular article, or control the sale of a particular commodity." 66 The 1987 Constitution strictly
regulates monopolies, whether private or public, and even provides for their prohibition if public
interest so requires. Article XII, Section 19 of the 1987 Constitution states:
Sec. 19. The state shall regulate or prohibit monopolies when the public interest so requires.
No combinations in restraint of trade or unfair competition shall be allowed.
Clearly, monopolies are not per se prohibited by the Constitution but may be permitted to exist to aid
the government in carrying on an enterprise or to aid in the performance of various services and
functions in the interest of the public.67 Nonetheless, a determination must first be made as to
whether public interest requires a monopoly. As monopolies are subject to abuses that can inflict
severe prejudice to the public, they are subject to a higher level of State regulation than an ordinary
business undertaking.
In the cases at bar, PIATCO, under the 1997 Concession Agreement and the ARCA, is granted the
"exclusive right to operate a commercial international passenger terminal within the Island of
Luzon" at the NAIA IPT III.68This is with the exception of already existing international airports in
Luzon such as those located in the Subic Bay Freeport Special Economic Zone ("SBFSEZ"), Clark
Special Economic Zone ("CSEZ") and in Laoag City.69 As such, upon commencement of PIATCO's
operation of NAIA IPT III, Terminals 1 and 2 of NAIA would cease to function as international
passenger terminals. This, however, does not prevent MIAA to use Terminals 1 and 2 as domestic
passenger terminals or in any other manner as it may deem appropriate except those activities that
would compete with NAIA IPT III in the latter's operation as an international passenger
terminal.70 The right granted to PIATCO to exclusively operate NAIA IPT III would be for a period of
twenty-five (25) years from the In-Service Date71 and renewable for another twenty-five (25) years at
the option of the government.72 Both the 1997 Concession Agreement and the ARCA further
provide that, in view of the exclusive right granted to PIATCO, the concession contracts of
the service providers currently servicing Terminals 1 and 2 would no longer be renewed and
those concession contracts whose expiration are subsequent to the In-Service Date would
cease to be effective on the said date.73
The operation of an international passenger airport terminal is no doubt an undertaking imbued with
public interest. In entering into a BuildOperate-and-Transfer contract for the construction, operation
and maintenance of NAIA IPT III, the government has determined that public interest would be
served better if private sector resources were used in its construction and an exclusive right to
operate be granted to the private entity undertaking the said project, in this case PIATCO.
Nonetheless, the privilege given to PIATCO is subject to reasonable regulation and supervision by
the Government through the MIAA, which is the government agency authorized to operate the NAIA
complex, as well as DOTC, the department to which MIAA is attached. 74
This is in accord with the Constitutional mandate that a monopoly which is not prohibited must be
regulated.75While it is the declared policy of the BOT Law to encourage private sector participation by
"providing a climate of minimum government regulations,"76 the same does not mean that
Government must completely surrender its sovereign power to protect public interest in the operation
of a public utility as a monopoly. The operation of said public utility can not be done in an arbitrary
manner to the detriment of the public which it seeks to serve. The right granted to the public utility

may be exclusive but the exercise of the right cannot run riot. Thus, while PIATCO may be
authorized to exclusively operate NAIA IPT III as an international passenger terminal, the
Government, through the MIAA, has the right and the duty to ensure that it is done in accord with
public interest. PIATCO's right to operate NAIA IPT III cannot also violate the rights of third parties.
Section 3.01(e) of the 1997 Concession Agreement and the ARCA provide:
3.01 Concession Period
xxx

xxx

xxx

(e) GRP confirms that certain concession agreements relative to certain services and
operations currently being undertaken at the Ninoy Aquino International Airport passenger
Terminal I have a validity period extending beyond the In-Service Date. GRP through
DOTC/MIAA, confirms that these services and operations shall not be carried over to the
Terminal and the Concessionaire is under no legal obligation to permit such carryover except through a separate agreement duly entered into with Concessionaire. In the
event Concessionaire becomes involved in any litigation initiated by any such concessionaire
or operator, GRP undertakes and hereby holds Concessionaire free and harmless on full
indemnity basis from and against any loss and/or any liability resulting from any such
litigation, including the cost of litigation and the reasonable fees paid or payable to
Concessionaire's counsel of choice, all such amounts shall be fully deductible by way of an
offset from any amount which the Concessionaire is bound to pay GRP under this
Agreement.
During the oral arguments on December 10, 2002, the counsel for the petitioners-inintervention for G.R. No. 155001 stated that there are two service providers whose contracts
are still existing and whose validity extends beyond the In-Service Date. One contract
remains valid until 2008 and the other until 2010.77
We hold that while the service providers presently operating at NAIA Terminal 1 do not have an
absolute right for the renewal or the extension of their respective contracts, those contracts whose
duration extends beyond NAIA IPT III's In-Service-Date should not be unduly prejudiced. These
contracts must be respected not just by the parties thereto but also by third parties. PIATCO cannot,
by law and certainly not by contract, render a valid and binding contract nugatory. PIATCO, by the
mere expedient of claiming an exclusive right to operate, cannot require the Government to break its
contractual obligations to the service providers. In contrast to the arrastre and stevedoring service
providers in the case of Anglo-Fil Trading Corporation v. Lazaro78 whose contracts consist of
temporary hold-over permits, the affected service providers in the cases at bar, have a valid and
binding contract with the Government, through MIAA, whose period of effectivity, as well as the other
terms and conditions thereof, cannot be violated.
In fine, the efficient functioning of NAIA IPT III is imbued with public interest. The provisions of the
1997 Concession Agreement and the ARCA did not strip government, thru the MIAA, of its right to
supervise the operation of the whole NAIA complex, including NAIA IPT III. As the primary
government agency tasked with the job,79 it is MIAA's responsibility to ensure that whoever by
contract is given the right to operate NAIA IPT III will do so within the bounds of the law and with due
regard to the rights of third parties and above all, the interest of the public.
VI
CONCLUSION

In sum, this Court rules that in view of the absence of the requisite financial capacity of the Paircargo
Consortium, predecessor of respondent PIATCO, the award by the PBAC of the contract for the
construction, operation and maintenance of the NAIA IPT III is null and void. Further, considering that
the 1997 Concession Agreement contains material and substantial amendments, which
amendments had the effect of converting the 1997 Concession Agreement into an entirely different
agreement from the contract bidded upon, the 1997 Concession Agreement is similarly null and void
for being contrary to public policy. The provisions under Sections 4.04(b) and (c) in relation to
Section 1.06 of the 1997 Concession Agreement and Section 4.04(c) in relation to Section 1.06 of
the ARCA, which constitute a direct government guarantee expressly prohibited by, among others,
the BOT Law and its Implementing Rules and Regulations are also null and void. The Supplements,
being accessory contracts to the ARCA, are likewise null and void.
WHEREFORE, the 1997 Concession Agreement, the Amended and Restated Concession
Agreement and the Supplements thereto are set aside for being null and void.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Corona, and
Carpio-Morales, JJ., concur.
Vitug, J., see separate (dissenting) opinion.
Panganiban, J., please see separate opinion.
Quisumbing, J., no jurisdiction, please see separate opinion of J. Vitug in which he concurs.
Carpio, J., no part.
Callejo, Sr., J., also concur in the separate opinion of J. Panganiban.
Azcuna, J., joins the separate opinion of J. Vitug.

SEPARATE OPINIONS
VITUG, J.:
This Court is bereft of jurisdiction to hear the petitions at bar. The Constitution provides that the
Supreme Court shall exercise original jurisdiction over, among other actual controversies, petitions
for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.1 The cases in question,
although denominated to be petitions for prohibition, actually pray for the nullification of the PIATCO
contracts and to restrain respondents from implementing said agreements for being illegal and
unconstitutional.
Section 2, Rule 65 of the Rules of Court states:
"When the proceedings of any tribunal, corporation, board, officer or person, whether
exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and
there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of
law, a person aggrieved thereby may file a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be rendered commanding the respondent to
desist from further proceedings in the action or matter specified therein, or otherwise
granting such incidental reliefs as law and justice may require."

The rule is explicit. A petition for prohibition may be filed against a tribunal, corporation, board, officer
or person, exercising judicial, quasi-judicial or ministerial functions. What the petitions seek from
respondents do not involve judicial, quasi-judicial or ministerial functions. In prohibition, only legal
issues affecting the jurisdiction of the tribunal, board or officer involved may be resolved on the basis
of undisputed facts.2 The parties allege, respectively, contentious evidentiary facts. It would be
difficult, if not anomalous, to decide the jurisdictional issue on the basis of the contradictory factual
submissions made by the parties.3 As the Court has so often exhorted, it is not a trier of facts.
The petitions, in effect, are in the nature of actions for declaratory relief under Rule 63 of the Rules
of Court. The Rules provide that any person interested under a contract may, before breach or
violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of
construction or validity arising, and for a declaration of his rights or duties thereunder.4 The Supreme
Court assumes no jurisdiction over petitions for declaratory relief which are cognizable by regional
trial courts.5
As I have so expressed in Tolentino vs. Secretary of Finance,6 reiterated in Santiago vs. Guingona,
Jr.7 , the Supreme Court should not be thought of as having been tasked with the awesome
responsibility of overseeing the entire bureaucracy. Pervasive and limitless, such as it may seem to
be under the 1987 Constitution, judicial power still succumbs to the paramount doctrine of separation
of powers. The Court may not at good liberty intrude, in the guise of sovereign imprimatur, into every
affair of government. What significance can still then remain of the time-honored and widely
acclaimed principle of separation of powers if, at every turn, the Court allows itself to pass upon at
will the disposition of a co-equal, independent and coordinate branch in our system of government. I
dread to think of the so varied uncertainties that such an undue interference can lead to.
Accordingly, I vote for the dismissal of the petition.
Quisumbing, and Azcuna, JJ., concur.

PANGANIBAN, J.:
The five contracts for the construction and the operation of Ninoy Aquino International Airport (NAIA)
Terminal III, the subject of the consolidated Petitions before the Court, are replete with outright
violations of law, public policy and the Constitution. The only proper thing to do is declare them all
null and void ab initio and let the chips fall where they may. Fiat iustitia ruat coelum.
The facts leading to this controversy are already well presented in the ponencia. I shall not burden
the readers with a retelling thereof. Instead, I will cut to the chase and directly address the two sets
of gut issues:
1. The first issue is procedural: Does the Supreme Court have original jurisdiction to hear and decide
the Petitions? Corollarily, do petitioners have locus standi and should this Court decide the cases
without any mandatory referral to arbitration?
2. The second one is substantive in character: Did the subject contracts violate the Constitution, the
laws, and public policy to such an extent as to render all of them void and inexistent?
My answer to all the above questions is a firm "Yes."

The Procedural Issue:

Jurisdiction, Standing and Arbitration
Definitely and surely, the issues involved in these Petitions are clearly of transcendental importance
and of national interest. The subject contracts pertain to the construction and the operation of the
country's premiere international airport terminal - an ultramodern world-class public utility that will
play a major role in the country's economic development and serve to project a positive image of our
country abroad. The five build-operate-&-transfer (BOT) contracts, while entailing the investment of
billions of pesos in capital and the availment of several hundred millions of dollars in loans, contain
provisions that tend to establish a monopoly, require the disbursements of public funds sans
appropriations, and provide government guarantees in violation of statutory prohibitions, as well as
other provisions equally offensive to law, public policy and the Constitution. Public interest will
inevitably be affected thereby.
Thus, objections to these Petitions, grounded upon (a) the hierarchy of courts, (b) the need for
arbitration prior to court action, and (c) the alleged lack of sufficient personality, standing or interest,
being in the main procedural matters, must now be set aside, as they have been in past cases. This
Court must be permitted to perform its constitutional duty of determining whether the other agencies
of government have acted within the limits of the Constitution and the laws, or if they have gravely
abused the discretion entrusted to them.1
Hierarchy of Courts
The Court has, in the past, held that questions relating to gargantuan government contracts ought to
be settled without delay.2 This holding applies with greater force to the instant cases. Respondent
Piatco is partly correct in averring that petitioners can obtain relief from the regional trial courts via
an action to annul the contracts.
Nevertheless, the unavoidable consequence of having to await the rendition and the finality of any
such judgment would be a prolonged state of uncertainty that would be prejudicial to the nation, the
parties and the general public. And, in light of the feared loss of jobs of the petitioning workers,
consequent to the inevitable pretermination of contracts of the petitioning service providers that will
follow upon the heels of the impending opening of NAIA Terminal III, the need for relief is patently
urgent, and therefore, direct resort to this Court through the special civil action of prohibition is thus
justified.3
Contrary to Piatco's argument that the resolution of the issues raised in the Petitions will require
delving into factual questions,4 I submit that their disposition ultimately turns on questions of
law.5 Further, many of the significant and relevant factual questions can be easily addressed by an
examination of the documents submitted by the parties. In any event, the Petitions raise some novel
questions involving the application of the amended BOT Law, which this Court has seen fit to tackle.
Arbitration
Should the dispute be referred to arbitration prior to judicial recourse? Respondent Piatco claims that
Section 10.02 of the Amended and Restated Concession Agreement (ARCA) provides for arbitration
under the auspices of the International Chamber of Commerce to settle any dispute or controversy
or claim arising in connection with the Concession Agreement, its amendments and supplements.
The government disagrees, however, insisting that there can be no arbitration based on Section
10.02 of the ARCA, since all the Piatco contracts are void ab initio. Therefore, all contractual
provisions, including Section 10.02 of the ARCA, are likewise void, inexistent and inoperative. To
support its stand, the government cites Chavez v. Presidential Commission on Good

Government:6 "The void agreement will not be rendered operative by the parties' alleged
performance (partial or full) of their respective prestations. A contract that violates the Constitution
and the law is null and void ab initio and vests no rights and creates no obligations. It produces no
legal effect at all."
As will be discussed at length later, the Piatco contracts are indeed void in their entirety; thus, a
resort to the aforesaid provision on arbitration is unavailing. Besides, petitioners and petitioners-inintervention have pointed out that, even granting arguendo that the arbitration clause remained a
valid provision, it still cannot bind them inasmuch as they are not parties to the Piatco contracts. And
in the final analysis, it is unarguable that the arbitration process provided for under Section 10.02 of
the ARCA, to be undertaken by a panel of three (3) arbitrators appointed in accordance with the
Rules of Arbitration of the International Chamber of Commerce, will not be able to address,
determine and definitively resolve the constitutional and legal questions that have been raised in the
Petitions before us.
Locus Standi
Given this Court's previous decisions in cases of similar import, no one will seriously doubt that,
being taxpayers and members of the House of Representatives, Petitioners Baterina et al.
have locus standi to bring the Petition in GR No. 155547. In Albano v. Reyes,7 this Court held that
the petitioner therein, suing as a citizen, taxpayer and member of the House of Representatives, was
sufficiently clothed with standing to bring the suit questioning the validity of the assailed contract.
The Court cited the fact that public interest was involved, in view of the important role of the Manila
International Container Terminal (MICT) in the country's economic development and the magnitude
of the financial consideration. This, notwithstanding the fact that expenditure of public funds was not
required under the assailed contract.
In the cases presently under consideration, petitioners' personal and substantial interest in the
controversy is shown by the fact that certain provisions in the Piatco contracts create obligations on
the part of government (through the DOTC and the MIAA) to disburse public funds without prior
congressional appropriations.
Petitioners thus correctly assert that the injury to them has a twofold aspect: (1) they are adversely
affected as taxpayers on account of the illegal disbursement of public funds; and (2) they are
prejudiced qua legislators, since the contractual provisions requiring the government to incur
expenditures without appropriations also operate as limitations upon the exclusive power and
prerogative of Congress over the public purse. As members of the House of Representatives, they
are actually deprived of discretion insofar as the inclusion of those items of expenditure in the budget
is concerned. To prevent such encroachment upon the legislative privilege and obviate injury to the
institution of which they are members, petitioners-legislators have locus standi to bring suit.
Messrs. Agan et al. and Lopez et al., are likewise taxpayers and thus possessed of standing to
challenge the illegal disbursement of public funds. Messrs. Agan et al., in particular, are employees
(or representatives of employees) of various service providers that have (1) existing concession
agreements with the MIAA to provide airport services necessary to the operation of the NAIA and (2)
service agreements to furnish essential support services to the international airlines operating at the
NAIA.
On the other hand, Messrs. Lopez et al. are employees of the MIAA. These petitioners (Messrs.
Agan et al. and Messrs. Lopez et al.) are confronted with the prospect of being laid off from their jobs
and losing their means of livelihood when their employer-companies are forced to shut down or
otherwise retrench and cut back on manpower. Such development would result from the imminent

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

"In the case of a build-operate-and-transfer arrangement, the contract shall be awarded to

the bidder who,having satisfied the minimum financial, technical, organizational and
legal standards required by this Act, has submitted the lowest bid and most favorable
terms for the project, based on the present value of its proposed tolls, fees, rentals and
charges over a fixed term for the facility to be constructed, rehabilitated, operated and
maintained according to the prescribed minimum design and performance standards, plans
and specifications. . . ." (Emphasis supplied.)
The same provision requires that the price challenge via public bidding "must be conducted under a
two-envelope/two-stage system: the first envelope to contain the technical proposal and the second
envelope to contain the financial proposal." Moreover, the 1994 Implementing Rules and Regulations
(IRR) provide that only those bidders that have passed the prequalification stage are permitted to
have their two envelopes reviewed.
In other words, prospective bidders must prequalify by submitting their prequalification documents
for evaluation; and only the pre-qualified bidders would be entitled to have their bids opened,
evaluated and appreciated. On the other hand, disqualified bidders are to be informed of the reason
for their disqualification. This procedure was confirmed and reiterated in the Bid Documents, which I
quote thus: "Prequalified proponents will be considered eligible to move to second stage technical
proposal evaluation. The second and third envelopes of pre-disqualified proponents will be
returned."11
Aside from complying with the legal and technical requirements (track record or experience of the
firm and its key personnel), a project proponent desiring to prequalify must also demonstrate its
financial capacity to undertake the project. To establish such capability, a proponent must prove that
it is able to raise the minimum amount of equity required for the project and to procure the loans or
financing needed for it. Section 5.4(c) of the 1994 IRR provides:
"Sec. 5.4. Prequalification Requirements. - To pre-qualify, a project proponent must comply
with the following requirements:
xxx

xxx

xxx

"c. Financial Capability. The project proponent must have adequate capability to sustain the
financing requirements for the detailed engineering design, construction, and/or operation
and maintenance phases of the project, as the case may be. For purposes of
prequalification, this capability shall be measured in terms of: (i) proof of the ability of the
project proponent and/or the consortium to provide a minimum amount of equity to the
project, and (ii) a letter testimonial from reputable banks attesting that the project proponent
and/or members of the consortium are banking with them, that they are in good financial
standing, and that they have adequate resources. The government Agency/LGU concerned
shall determine on a project-to-project basis, and before prequalification, the minimum
amount of equity needed. . . . ." (Italics supplied)
Since the minimum amount of equity for the project was set at 30 percent 12 of the minimum project
cost of US$350 million, the minimum amount of equity required of any proponent stood at US$105
million. Converted to pesos at the exchange rate then of P26.239 to US$1.00 (as quoted by the
Bangko Sentral ng Pilipinas), the peso equivalent of the minimum equity was P2,755,095,000.
However, the combined equity or net worth of the Paircargo consortium stood at only
P558,384,871.55.13 This amount was only slightly over 6 percent of the minimum project cost and
very much short of the required minimum equity, which was equivalent to 30 percent of the project

cost. Such deficiency should have immediately caused the disqualification of the Paircargo
consortium. This matter was brought to the attention of the Prequalification and Bidding Committee
(PBAC).
Notwithstanding the glaring deficiency, DOTC Undersecretary Primitivo C. Cal, concurrent chair of
the PBAC, declared in a Memorandum dated 14 October 1996 that "the Challenger (Paircargo
consortium) was found to have a combined net worth of P3,926,421,242.00 that could support a
project costing approximately P13 billion." To justify his conclusion, he asserted: "It is not a
requirement that the networth must be `unrestricted'. To impose this as a requirement now will be
nothing less than unfair."
He further opined, "(T)he networth reflected in the Financial Statement should not be taken as the
amount of money to be used to answer the required thirty (30%) percent equity of the challenger but
rather to be used in establishing if there is enough basis to believe that the challenger can comply
with the required 30% equity. In fact, proof of sufficient equity is required as one of the conditions for
award of contract (Sec. 12.1 of IRR of the BOT Law) but not for prequalification (Sec. 5.4 of same
document)."
On the basis of the foregoing dubious declaration, the Paircargo consortium was deemed
prequalified and thus permitted to proceed to the other stages of the bidding process.
By virtue of the prequalified status conferred upon the Paircargo, Undersecretary Cal's findings in
effect relieved the consortium of the need to comply with the financial capability requirement
imposed by the BOT Law and IRR. This position is unmistakably and squarely at odds with the
Supreme Court's consistent doctrine emphasizing the strict application of pertinent rules, regulations
and guidelines for the public bidding process, in order to place each bidder - actual or potential - on
the same footing. Thus, it is unarguably irregular and contrary to the very concept of public bidding
to permit a variance between the conditions under which bids are invited and those under which
proposals are submitted and approved.
Republic v. Capulong,14 teaches that if one bidder is relieved from having to conform to the
conditions that impose some duty upon it, that bidder is not contracting in fair competition with those
bidders that propose to be bound by all conditions. The essence of public bidding is, after all, an
opportunity for fair competition and a basis for the precise comparison of bids. 15 Thus, each bidder
must bid under the same conditions; and be subject to the same guidelines, requirements and
limitations. The desired result is to be able to determine the best offer or lowest bid, all things being
equal.
Inasmuch as the Paircargo consortium did not possess the minimum equity equivalent to 30 percent
of the minimum project cost, it should not have been prequalified or allowed to participate further in
the bidding. The Prequalification and Bidding Committee (PBAC) should therefore not have opened
the two envelopes of the consortium containing its technical and financial proposals; required AEDC
to match the consortium's bid; 16 or awarded the Concession Agreement to the consortium's
successor-in-interest, Piatco.
As there was effectively no public bidding to speak of, the entire bidding process having been flawed
and tainted from the very outset, therefore, the award of the concession to Paircargo's successor
Piatco was void, and the Concession Agreement executed with the latter was likewise void ab initio.
For this reason, Piatco cannot and should not be allowed to benefit from that Agreement. 17
AEDC Was Deprived of the Right to Match PIATCO's Price Challenge

In DOTC PBAC Bid Bulletin No. 4 (par. 3), Undersecretary Cal declared that, for purposes of
matching the price challenge of Piatco, AEDC as originator of the unsolicited proposal would be
permitted access only to the schedule of proposed Annual Guaranteed Payments submitted by
Piatco, and not to the latter's financial and technical proposals that constituted the basis for the price
challenge in the first place. This was supposedly in keeping with Section 11.6 of the 1994 IRR, which
provides that proprietary information is to be respected, protected and treated with utmost
confidentiality, and is therefore not to form part of the bidding/tender and related documents.
This pronouncement, I believe, was a grievous misapplication of the mentioned provision. The
"proprietary information" referred to in Section 11.6 of the IRR pertains only to the proprietary
information of the originator of an unsolicited proposal, and not to those belonging to a challenger.
The reason for the protection accorded proprietary information at all is the fact that, according to
Section 4-A of the BOT Law as amended, a proposal qualifies as an "unsolicited proposal" when it
pertains to a project that involves "a new concept or technology", and/or a project that is not on the
government's list of priority projects.
To be considered as utilizing a new concept or technology, a project must involve the possession of
exclusive rights (worldwide or regional) over a process; or possession of intellectual property rights
over a design, methodology or engineering concept. 18 Patently, the intent of the BOT Law is to
encourage individuals and groups to come up with creative innovations, fresh ideas and new
technology. Hence, the significance and necessity of protecting proprietary information in connection
with unsolicited proposals. And to make the encouragement real, the law also extends to such
individuals and groups what amounts to a "right of first refusal" to undertake the project they
conceptualized, involving the use of new technology or concepts, through the mechanism of
matching a price challenge.
A competing bid is never just any figure conjured from out of the blue; it is arrived at after studying
economic, financial, technical and other, factors; it is likewise based on certain assumptions as to the
nature of the business, the market potentials, the probable demand for the product or service, the
future behavior of cost items, political and other risks, and so on. It is thus self-evident that in order
to be able to intelligently match a bid or price challenge, a bidder must be given access to the
assumptions and the calculations that went into crafting the competing bid.
In this instance, the financial and technical proposals of Piatco would have provided AEDC with the
necessary information to enable it to make a reasonably informed matching bid. To put it more
simply, a bidder unable to access the competitor's assumptions will never figure out how the
competing bid came about; requiring him to "counter-propose" is like having him shoot at a target in
the dark while blindfolded.
By withholding from AEDC the challenger's financial and technical proposals containing the critical
information it needed, Undersecretary Cal actually and effectively deprived AEDC of the ability to
match the price challenge. One could say that AEDC did not have the benefit of a "level playing
field." It seems to me, though, that AEDC was actually shut out of the game altogether.
At the end of the day, the bottom line is that the validity and the propriety of the award to Piatco had
been irreparably impaired.
Delayed Issuance of the Notice of Award Violated the BOT Law and the IRR
Section 9.5 of the IRR requires that the Notice of Award must indicate the time frame within which
the winner of the bidding (and therefore the prospective awardee) shall submit the prescribed
performance security, proof of commitment of equity contributions, and indications of sources of

financing (loans); and, in the case of joint ventures, an agreement showing that the members are
jointly and severally responsible for the obligations of the project proponent under the contract.
The purpose of having a definite and firm timetable for the submission of the aforementioned
requirements is not only to prevent delays in the project implementation, but also to expose and
weed out unqualified proponents, who might have unceremoniously slipped through the earlier
prequalification process, by compelling them to put their money where their mouths are, so to speak.
Nevertheless, this provision can be easily circumvented by merely postponing the actual issuance of
the Notice of Award, in order to give the favored proponent sufficient time to comply with the
requirements. Hence, to avert or minimize the manipulation of the post-bidding process, the IRR not
only set out the precise sequence of events occurring between the completion of the evaluation of
the technical bids and the issuance of the Notice of Award, but also specified the timetables for each
such event. Definite allowable extensions of time were provided for, as were the consequences of a
failure to meet a particular deadline.
In particular, Section 9.1 of the 1994 IRR prescribed that within 30 calendar days from the time the
second-stage evaluation shall have been completed, the Committee must come to a decision
whether or not to award the contract and, within 7 days therefrom, the Notice of Award must be
approved by the head of agency or local government unit (LGU) concerned, and its issuance must
follow within another 7 days thereafter.
Section 9.2 of the IRR set the procedure applicable to projects involving substantial government
undertakings as follows: Within 7 days after the decision to award is made, the draft contract shall be
submitted to the ICC for clearance on a no-objection basis. If the draft contract includes government
undertakings already previously approved, then the submission shall be for information only.
However, should there be additional or new provisions different from the original government
undertakings, the draft shall have to be reviewed and approved. The ICC has 15 working days to act
thereon, and unless otherwise specified, its failure to act on the contract within the specified time
frame signifies that the agency or LGU may proceed with the award. The head of agency or LGU
shall approve the Notice of Award within seven days of the clearance by the ICC on a no-objection
basis, and the Notice itself has to be issued within seven days thereafter.
The highly regulated time-frames within which the agents of government were to act evinced the
intent to impose upon them the duty to act expeditiously throughout the process, to the end that the
project be prosecuted and implemented without delay. This regulated scenario was likewise intended
to discourage collusion and substantially reduce the opportunity for agents of government to abuse
their discretion in the course of the award process.
Despite the clear timetables set out in the IRR, several lengthy and still-unexplained delays occurred
in the award process, as can be observed from the presentation made by the counsel for public
respondents,19 quoted hereinbelow:
"11 Dec. 1996 - The Paircargo Joint Venture was informed by the PBAC that AEDC failed to
match and that negotiations preparatory to Notice of Award should be commenced. This was
the decision to award that should have commenced the running of the 7-day period to
approve the Notice of Award, as per Section 9.1 of the IRR, or to submit the draft contract to
the ICC for approval conformably with Section 9.2.
"01 April 1997 - The PBAC resolved that a copy of the final draft of the Concession
Agreement be submitted to the NEDA for clearance on a no-objection basis. This resolution

came more than 3 months too late as it should have been made on the 20th of December
1996 at the latest.
"16 April 1997 - The PBAC resolved that the period of signing the Concession Agreement be
extended by 15 days.
"18 April 1997 - NEDA approved the Concession Agreement. Again this is more than 3
months too late as the NEDA's decision should have been released on the 16th of January
1997 or fifteen days after it should have been submitted to it for review.
"09 July 1997 - The Notice of Award was issued to PIATCO. Following the provisions of the
IRR, the Notice of Award should have been issued fourteen days after NEDA's approval, or
the 28th of January 1997. In any case, even if it were to be assumed that the release of
NEDA's approval on the 18th of April was timely, the Notice of Award should have been
issued on the 9th of May 1997. In both cases, therefore, the release of the Notice of Award
occurred in a decidedly less than timely fashion."
This chronology of events bespeaks an unmistakable disregard, if not disdain, by the persons in
charge of the award process for the time limitations prescribed by the IRR. Their attitude flies in the
face of this Court's solemn pronouncement in Republic v. Capulong,20 that "strict observance of the
rules, regulations and guidelines of the bidding process is the only safeguard to a fair, honest and
competitive public bidding."
From the foregoing, the only conclusion that can possibly be drawn is that the BOT law and its IRR
were repeatedly violated with unmitigated impunity - and by agents of government, no less! On
account of such violation, the award of the contract to Piatco, which undoubtedly gained time and
benefited from the delays, must be deemed null and void from the beginning.
Further Amendments Resulted in a Substantially Different Contract, Awarded Without Public
Bidding
But the violations and desecrations did not stop there. After the PBAC made its decision on
December 11, 1996 to award the contract to Piatco, the latter negotiated changes to the Contract
bidded out and ended up with what amounts to a substantially new contract without any public
bidding. This Contract was subsequently further amended four more times through negotiation and
without any bidding. Thus, the contract actually executed between Piatco and DOTC/MIAA on July
12, 1997 (the Concession Agreement or "CA") differed from the contract bidded out (the draft
concession agreement or "DCA") in the following very significant respects:
1. The CA inserted stipulations creating a monopoly in favor of Piatco in the business of
providing airport-related services for international airlines and passengers. 21
2. The CA provided that government is to answer for Piatco's unpaid loans and debts
(lumped under the term Attendant Liabilities) in the event Piatco fails to pay its senior
lenders.22
3. The CA provided that in case of termination of the contract due to the fault of government,
government shall pay all expenses that Piatco incurred for the project plus the appraised
value of the Terminal.23

4. The CA imposed new and special obligations on government, including delivery of clean
possession of the site for the terminal; acquisition of additional land at the government's
expense for construction of road networks required by Piatco's approved plans and
specifications; and assistance to Piatco in securing site utilities, as well as all necessary
permits, licenses and authorizations.24
5. Where Section 3.02 of the DCA requires government to refrain from competing with the
contractor with respect to the operation of NAIA Terminal III, Section 3.02(b) of the CA
excludes and prohibits everyone, including government, from directly or indirectly competing
with Piatco, with respect to the operation of, as well as operations in, NAIA Terminal
III. Operations in is sufficiently broad to encompass all retail and other commercial business
enterprises operating within Terminal III, inclusive of the businesses of providing various
airport-related services to international airlines, within the scope of the prohibition.
6. Under Section 6.01 of the DCA, the following fees are subject to the written approval of
MIAA: lease/rental charges, concession privilege fees for passenger services, food services,
transportation utility concessions, groundhandling, catering and miscellaneous concession
fees, porterage fees, greeter/well-wisher fees, carpark fees, advertising fees, VIP facilities
fees and others. Moreover, adjustments to the groundhandling fees, rentals and porterage
fees are permitted only once every two years and in accordance with a parametric formula,
per DCA Section 6.03. However, the CA as executed with Piatco provides in Section 6.06
that all the aforesaid fees, rentals and charges may be adjusted without MIAA's approval or
intervention. Neither are the adjustments to these fees and charges subject to or limited by
any parametric formula.25
7. Section 1.29 of the DCA provides that the terminal fees, aircraft tacking fees, aircraft
parking fees, check-in counter fees and other fees are to be quoted and paid in Philippine
pesos. But per Section 1.33 of the CA, all the aforesaid fees save the terminal fee are
denominated in US Dollars.
8. Under Section 8.07 of the DCA, the term attendant liabilities refers to liabilities pertinent to
NAIA Terminal III, such as payment of lease rentals and performance of other obligations
under the Land Lease Agreement; the obligations under the Tenant Agreements; and
payment of all taxes, fees, charges and assessments of whatever kind that may be imposed
on NAIA Terminal III or parts thereof. But in Section 1.06 of the CA, Attendant
Liabilities refers to unpaid debts of Piatco: "All amounts recorded and from time to time
outstanding in the books of (Piatco) as owing to Unpaid Creditors who have provided, loaned
or advanced funds actually used for the Project, including all interests, penalties, associated
fees, charges, surcharges, indemnities, reimbursements and other related expenses, and
further including amounts owed by [Piatco] to its suppliers, contractors and subcontractors."
9. Per Sections 8.04 and 8.06 of the DCA, government may, on account of the contractors
breach, rescind the contract and select one of four options: (a) take over the terminal and
assume all its attendant liabilities; (b) allow the contractor's creditors to assign the Project to
another entity acceptable to DOTC/MIAA; (c) pay the contractor rent for the facilities and
equipment the DOTC may utilize; or (d) purchase the terminal at a price established by
independent appraisers. Depending on the option selected, government may take immediate
possession and control of the terminal and its operations. Government will be obligated to
compensate the contractor for the "equivalent or proportionate contract costs actually
disbursed," but only where government is the one in breach of the contract. But under
Section 8.06(a) of the CA, whether on account of Piatco's breach of contract or its inability to
pay its creditors, government is obliged to either (a) take over Terminal III and assume all of

Piatco's debts or (b) permit the qualified unpaid creditors to be substituted in place of Piatco
or to designate a new operator. And in the event of government's breach of contract, Piatco
may compel it to purchase the terminal at fair market value, per Section 8.06(b) of the CA.
10. Under the DCA, any delay by Piatco in the payment of the amounts due the government
constitutes breach of contract. However, under the CA, such delay does not necessarily
constitute breach of contract, since Piatco is permitted to suspend payments to the
government in order to first satisfy the claims of its secured creditors, per Section 8.04(d) of
the CA.
It goes without saying that the amendment of the Contract bidded out (the DCA or draft concession
agreement) - in such substantial manner, without any public bidding, and after the bidding process
had been concluded on December 11, 1996 - is violative of public policy on public biddings, as well
as the spirit and intent of the BOT Law. The whole point of going through the public bidding exercise
was completely lost. Its very rationale was totally subverted by permitting Piatco to amend the
contract for which public bidding had already been concluded. Competitive bidding aims to obtain
the best deal possible by fostering transparency and preventing favoritism, collusion and fraud in the
awarding of contracts. That is the reason why procedural rules pertaining to public bidding demand
strict observance.26
In a relatively early case, Caltex v. Delgado Brothers,27 this Court made it clear that substantive
amendments to a contract for which a public bidding has already been finished should only be
awarded after another public bidding:
"The due execution of a contract after public bidding is a limitation upon the right of the
contracting parties to alter or amend it without another public bidding, for otherwise what
would a public bidding be good for if after the execution of a contract after public bidding, the
contracting parties may alter or amend the contract, or even cancel it, at their will? Public
biddings are held for the protection of the public, and to give the public the best possible
advantages by means of open competition between the bidders. He who bids or offers the
best terms is awarded the contract subject of the bid, and it is obvious that such protection
and best possible advantages to the public will disappear if the parties to a contract executed
after public bidding may alter or amend it without another previous public bidding." 28
The aforementioned case dealt with the unauthorized amendment of a contract executed after public
bidding; in the situation before us, the amendments were made also after the bidding, but prior to
execution. Be that as it may, the same rationale underlying Caltex applies to the present situation
with equal force. Allowing the winning bidder to renegotiate the contract for which the bidding
process has ended is tantamount to permitting it to put in anything it wants. Here, the winning bidder
(Piatco) did not even bother to wait until after actual execution of the contract before rushing to
amend it. Perhaps it believed that if the changes were made to a contract already won through
bidding (DCA) instead of waiting until it is executed, the amendments would not be noticed or
discovered by the public.
In a later case, Mata v. San Diego,29 this Court reiterated its ruling as follows:
"It is true that modification of government contracts, after the same had been awarded after a
public bidding, is not allowed because such modification serves to nullify the effects of the
bidding and whatever advantages the Government had secured thereby and may also result
in manifest injustice to the other bidders. This prohibition, however, refers to a change in vital
and essential particulars of the agreement which results in a substantially new contract."

Piatco's counter-argument may be summed up thus: There was nothing in the 1994 IRR that
prohibited further negotiations and eventual amendments to the DCA even after the bidding had
been concluded. In fact, PBAC Bid Bulletin No. 3 states: "[A]mendments to the Draft Concession
Agreement shall be issued from time to time. Said amendments will only cover items that would not
materially affect the preparation of the proponent's proposal."
I submit that accepting such warped argument will result in perverting the policy underlying public
bidding. The BOT Law cannot be said to allow the negotiation of contractual stipulations resulting in
a substantially new contract after the bidding process and price challenge had been concluded. In
fact, the BOT Law, in recognition of the time, money and effort invested in an unsolicited proposal,
accords its originator the privilege of matching the challenger's bid.
Section 4-A of the BOT Law specifically refers to a "lower price proposal" by a competing bidder; and
to the right of the original proponent "to match the price" of the challenger. Thus, only the price
proposals are in play. Theterms, conditions and stipulations in the contract for which public bidding
has been concluded are understood toremain intact and not be subject to further negotiation.
Otherwise, the very essence of public bidding will be destroyed - there will be no basis for an exact
comparison between bids.
Moreover, Piatco misinterpreted the meaning behind PBAC Bid Bulletin No. 3. The
phrase amendments . . . from time to time refers only to those amendments to the draft concession
agreement issued by the PBAC prior to the submission of the price challenge; it certainly does not
include or permit amendments negotiated for and introduced after the bidding process, has been
terminated.
Piatco's Concession Agreement Was Further Amended, (ARCA) Again Without Public
Bidding
Not satisfied with the Concession Agreement, Piatco - once more without bothering with public
bidding - negotiated with government for still more substantial changes. The result was the Amended
and Restated Concession Agreement (ARCA) executed on November 26, 1998. The following
changes were introduced:
1. The definition of Attendant Liabilities was further amended with the result that the unpaid
loans of Piatco, for which government may be required to answer, are no longer limited to
only those loans recorded in Piatco's books or loans whose proceeds were actually used in
the Terminal III project.30
2. Although the contract may be terminated due to breach by Piatco, it will not be liable to
pay the government any Liquidated Damages if a new operator is designated to take over
the operation of the terminal.31
3. The Liquidated Damages which government becomes liable for in case of its breach of
contract were substantially increased.32
4. Government's right to appoint a comptroller for Piatco in case the latter encounters
liquidity problems was deleted.33
5. Government is made liable for Incremental and Consequential Costs and Losses in case it
fails to comply or cause any third party under its direct or indirect control to comply with the
special obligations imposed on government.34

6. The insurance policies obtained by Piatco covering the terminal are now required to be
assigned to the Senior Lenders as security for the loans; previously, their proceeds were to
be used to repair and rehabilitate the facility in case of damage. 35
7. Government bound itself to set the initial rate of the terminal fee, to be charged when
Terminal III begins operations, at an amount higher than US$20. 36
8. Government waived its defense of the illegality of the contract and even agreed to be
liable to pay damages to Piatco in the event the contract was declared illegal. 37
9. Even though government may be entitled to terminate the ARCA on account of breach by
Piatco, government is still liable to pay Piatco the appraised value of Terminal III or the
Attendant Liabilities, if the termination occurs before the In-Service Date. 38 This condition
contravenes the BOT Law provision on termination compensation.
10. Government is obligated to take the administrative action required for Piatco's imposition,
collection and application of all Public Utility Revenues.39 No such obligation existed
previously.
11. Government is now also obligated to perform and cause other persons and entities under
its direct or indirect control to perform all acts necessary to perfect the security interests to be
created in favor of Piatco's Senior Lenders.40 No such obligation existed previously.
12. DOTC/MIAA's right of intervention in instances where Piatco's Non-Public Utility
Revenues become exorbitant or excessive has been removed. 41
13. The illegality and unenforceability of the ARCA or any of its material provisions was made
an event of default on the part of government only, thus constituting a ground for Piatco to
terminate the ARCA.42
14. Amounts due from and payable by government under the contract were made
payable on demand - net of taxes, levies, imposts, duties, charges or fees of any kind except
as required by law.43
15. The Parametric Formula in the contract, which is utilized to compute for
adjustments/increases to the public utility revenues (i.e., aircraft parking and tacking fees,
check-in counter fee and terminal fee), was revised to permit Piatco to input its more costly
short-term borrowing rates instead of the longer-terms rates in the computations for
adjustments, with the end result that the changes will redound to its greater financial benefit.
16. The Certificate of Completion simply deleted the successful performance-testing of the
terminal facility in accordance with defined performance standards as a pre-condition for
government's acceptance of the terminal facility.44
In sum, the foregoing revisions and amendments as embodied in the ARCA constitute very material
alterations of the terms and conditions of the CA, and give further manifestly undue advantage to
Piatco at the expense of government. Piatco claims that the changes to the CA were necessitated by
the demands of its foreign lenders. However, no proof whatsoever has been adduced to buttress this
claim.

In any event, it is quite patent that the sum total of the aforementioned changes resulted
in drastically weakeningthe position of government to a degree that seems quite excessive, even
from the standpoint of a businessperson who regularly transacts with banks and foreign lenders, is
familiar with their mind-set, and understands what motivates them. On the other hand, whatever it
was that impelled government officials concerned to accede to those grossly disadvantageous
changes, I can only hazard a guess.
There is no question in my mind that the ARCA was unauthorized and illegal for lack of public
bidding and for being patently disadvantageous to government.
The Three Supplements Imposed New Obligations on Government, Also Without Prior Public
Bidding
After Piatco had managed to breach the protective rampart of public bidding, it recklessly went on a
rampage of further assaults on the ARCA.
The First Supplement Is as Void as the ARCA
In the First Supplement ("FS") executed on August 27, 1999, the following changes were made to
the ARCA:
1. The amounts payable by Piatco to government were reduced by allowing additional
exceptions to the Gross Revenues in which government is supposed to participate. 45
2. Made part of the properties which government is obliged to construct and/or maintain and
keep in good repair are (a) the access road connecting Terminals II and III - the construction
of this access road is the obligation of Piatco, in lieu of its obligation to construct an Access
Tunnel connecting Terminals II and III; and (b) the taxilane and taxiway - these are likewise
part of Piatco's obligations, since they are part and parcel of the project as described in
Clause 1.3 of the Bid Documents .46
3. The MIAA is obligated to provide funding for the maintenance and repair of the airports
and facilities owned or operated by it and by third persons under its control. It will also be
liable to Piatco for the latter's losses, expenses and damages as well as liability to third
persons, in case MIAA fails to perform such obligations. In addition, MIAA will also be liable
for the incremental and consequential costs of the remedial work done by Piatco on account
of the former's default.47
4. The FS also imposed on government ten (10) "Additional Special Obligations," including
the following:
(a) Working for the removal of the general aviation traffic from the NAIA airport
complex48
(b) Providing through MIAA the land required by Piatco for the taxilane and one
taxiway at no cost to Piatco49
(c) Implementing the government's existing storm drainage master plan50
(d) Coordinating with DPWH the financing, the implementation and the completion of
the following works before the In-Service Date: three left-turning overpasses (EDSA

to Tramo St., Tramo to Andrews Ave., and Manlunas Road to Sales Ave.); 51 and a
road upgrade and improvement program involving widening, repair and resurfacing
of Sales Road, Andrews Avenue and Manlunas Road; improvement of Nichols
Interchange; and removal of squatters along Andrews Avenue.52
(e) Dealing directly with BCDA and the Phil. Air Force in acquiring additional land or
right of way for the road upgrade and improvement program. 53
5. Government is required to work for the immediate reversion to MIAA of the Nayong
Pilipino National Park.54
6. Government's share in the terminal fees collected was revised from a flat rate of P180 to
36 percent thereof; together with government's percentage share in the gross revenues of
Piatco, the amount will be remitted to government in pesos instead of US dollars. 55 This
amendment enables Piatco to benefit from the further erosion of the peso-dollar exchange
rate, while preventing government from building up its foreign exchange reserves.
7. All payments from Piatco to government are now to be invoiced to MIAA, and payments
are to accrue to the latter's exclusive benefit.56 This move appears to be in support of the
funds MIAA advanced to DPWH.
I must emphasize that the First Supplement is void in two respects. First, it is merely an amendment
to the ARCA, upon which it is wholly dependent; therefore, since the ARCA is void, inexistent and not
capable of being ratified or amended, it follows that the FS too is void, inexistent and
inoperative. Second, even assuming arguendo that the ARCA is somehow remotely valid,
nonetheless the FS, in imposing significant new obligations upon government, altered the
fundamental terms and stipulations of the ARCA, thus necessitating a public bidding all over again.
That the FS was entered into sans public bidding renders it utterly void and inoperative.
The Second Supplement Is Similarly Void and Inexistent
The Second Supplement ("SS") was executed between the government and Piatco on September 4,
2000. It calls for Piatco, acting not as concessionaire of NAIA Terminal III but as a public works
contractor, to undertake - in the government's stead - the clearing, removal, demolition and disposal
of improvements, subterranean obstructions and waste materials at the project site. 57
The scope of the works, the procedures involved, and the obligations of the contractor are provided
for in Parts II and III of the SS. Section 4.1 sets out the compensation to be paid, listing specific rates
per cubic meter of materials for each phase of the work - excavation, leveling, removal and disposal,
backfilling and dewatering. The amounts collectible by Piatco are to be offset against the Annual
Guaranteed Payments it must pay government.
Though denominated as Second Supplement, it was nothing less than an entirely new public works
contract. Yet it, too, did not undergo any public bidding, for which reason it is also void and
inoperative.
Not surprisingly, Piatco had to subcontract the works to a certain Wintrack Builders, a firm reputedly
owned by a former high-ranking DOTC official. But that is another story altogether.
The Third Supplement Is Likewise Void and Inexistent

The Third Supplement ("TS"), executed between the government and Piatco on June 22, 2001,
passed on to the government certain obligations of Piatco as Terminal III concessionaire, with
respect to the surface road connecting Terminals II and III.
By way of background, at the inception of and forming part of the NAIA Terminal III project was the
proposed construction of an access tunnel crossing Runway 13/31, which. would connect Terminal
III to Terminal II. The Bid Documents in Section 4.1.2.3[B][i] declared that the said access tunnel was
subject to further negotiation; but for purposes of the bidding, the proponent should submit a bid for it
as well. Therefore, the tunnel was supposed to be part and parcel of the Terminal III project.
However, in Section 5 of the First Supplement, the parties declared that the access tunnel was not
economically viable at that time. In lieu thereof, the parties agreed that a surface access road (now
called the T2-T3 Road) was to be constructed by Piatco to connect the two terminals. Since it was
plainly in substitution of the tunnel, the surface road construction should likewise be considered part
and parcel of the same project, and therefore part of Piatco's obligation as well. While the access
tunnel was estimated to cost about P800 million, the surface road would have a price tag in the
vicinity of about P100 million, thus producing significant savings for Piatco.
Yet, the Third Supplement, while confirming that Piatco would construct the T2-T3 Road,
nevertheless shifted to government some of the obligations pertaining to the former, as follows:
1. Government is now obliged to remove at its own expense all tenants, squatters,
improvements and/or waste materials on the site where the T2-T3 road is to be
constructed.58 There was no similar obligation on the part of government insofar as the
access tunnel was concerned.
2. Should government fail to carry out its obligation as above described, Piatco may
undertake it on government's behalf, subject to the terms and conditions (including
compensation payments) contained in the Second Supplement. 59
3. MIAA will answer for the operation, maintenance and repair of the T2-T3 Road. 60
The TS depends upon and is intended to supplement the ARCA as well as the First Supplement,
both of which are void and inexistent and not capable of being ratified or amended. It follows that the
TS is likewise void, inexistent and inoperative. And even if, hypothetically speaking, both ARCA and
FS are valid, still, the Third Supplement - imposing as it does significant new obligations upon
government - would in effect alter the terms and stipulations of the ARCA in material respects, thus
necessitating another public bidding. Since the TS was not subjected to public bidding, it is
consequently utterly void as well. At any rate, the TS created new monetary obligations on the part
of government, for which there were no prior appropriations. Hence it follows that the same is void
ab initio.
In patiently tracing the progress of the Piatco contracts from their inception up to the present, I noted
that the whole process was riddled with significant lapses, if not outright irregularity and wholesale
violations of law and public policy. The rationale of beginning at the beginning, so to speak, will
become evident when the question of what to do with the five Piatco contracts is discussed later on.
In the meantime, I shall take up specific, provisions or changes in the contracts and highlight the
more prominent objectionable features.
Government Directly Guarantees Piatco Debts

Certainly the most discussed provision in the parties' arguments is the one creating an unauthorized,
direct government guarantee of Piatco's obligations in favor of the lenders.
Section 4-A of the BOT Law as amended states that unsolicited proposals, such as the NAIA
Terminal III Project, may be accepted by government provided inter alia that no direct government
guarantee, subsidy or equity is required. In short, such guarantee is prohibited in unsolicited
proposals. Section 2(n) of the same legislationdefines direct government guarantee as "an
agreement whereby the government or any of its agencies or local government units (will) assume
responsibility for the repayment of debt directly incurred by the project proponent in implementing
the project in case of a loan default."
Both the CA and the ARCA have provisions that undeniably create such prohibited government
guarantee. Section 4.04 (c)(iv) to (vi) of the ARCA, which is similar to Section 4.04 of the CA,
provides thus:
"(iv) that if Concessionaire is in default under a payment obligation owed to the Senior
Lenders, and as a result thereof the Senior Lenders have become entitled to accelerate the
Senior Loans, the Senior Lenders shall have the right to notify GRP of the same . . .;
(v) . . . the Senior Lenders may after written notification to GRP, transfer the
Concessionaire's rights and obligations to a transferee . . .;
(vi) if the Senior Lenders . . . are unable to . . . effect a transfer . . ., then GRP and the Senior
Lenders shall endeavor . . . to enter into any other arrangement relating to the Development
Facility . . . If no agreement relating to the Development Facility is arrived at by GRP and the
Senior Lenders within the said 180-day period, then at the end thereof the Development
Facility shall be transferred by the Concessionaire to GRP or its designee and GRP shall
make a termination payment to Concessionaire equal to the Appraised Value (as hereinafter
defined) of the Development Facility or the sum of the Attendant Liabilities, if greater. . . ."
In turn, the term Attendant Liabilities is defined in Section 1.06 of the ARCA as follows:
"Attendant Liabilities refer to all amounts in each case supported by verifiable evidence from
time to time owed or which may become, owing by Concessionaire to Senior Lenders or any
other persons or entities who have provided, loaned or advanced funds or provided financial
facilities to Concessionaire for the Project, including, without limitation, all principal, interest,
associated fees, charges, reimbursements, and other related expenses (including the fees,
charges and expenses of any agents or trustees of such persons or entities), whether
payable at maturity, by acceleration or otherwise, and further including amounts owed by
Concessionaire to its professional consultants and advisers, suppliers, contractors and subcontractors."
Government's agreement to pay becomes effective in the event of a default by Piatco on any of
its loan obligations to the Senior Lenders, and the amount to be paid by government is the greater
of either the Appraised Value of Terminal III or the aggregate amount of the moneys owed by
Piatco - whether to the Senior Lenders or to other entities, including its suppliers, contractors and
subcontractors. In effect, therefore, this agreement already constitutes the prohibited assumption by
government of responsibility for repayment of Piatco's debts in case of a loan default. In fine, a direct
government guarantee.
It matters not that there is a roundabout procedure prescribed by Section 4.04(c)(iv), (v) and (vi) that
would require, first, an attempt (albeit unsuccessful) by the Senior Lenders to transfer Piatco's rights

to a transferee of their choice; and, second, an effort (equally unsuccessful) to "enter into any other
arrangement" with the government regarding the Terminal III facility, before government is required
to make good on its guarantee. What is abundantly clear is the fact that, in the devious labyrinthine
process detailed in the aforesaid section, it is entirely within the Senior Lenders' power, prerogative
and control - exercisable via a mere refusal or inability to agree upon "a transferee" or "any other
arrangement" regarding the terminal facility - to push the process forward to the ultimate contractual
cul-de-sac, wherein government will be compelled to abjectly surrender and make good on its
guarantee of payment.
Piatco also argues that there is no proviso requiring government to pay the Senior Lenders in the
event of Piatco's default. This is literally true, in the sense that Section 4.04(c)(vi) of ARCA speaks of
government making the termination payment to Piatco, not to the lenders. However, it is almost a
certainty that the Senior Lenders will already have made Piatco sign over to them, ahead of time, its
right to receive such payments from government; and/or they may already have had themselves
appointed its attorneys-in-fact for the purpose of collecting and receiving such payments.
Nevertheless, as petitioners-in-intervention pointed out in their Memorandum, 61 the termination
payment is to be made to Piatco, not to the lenders; and there is no provision anywhere in the
contract documents to prevent it from diverting the proceeds to its own benefit and/or to ensure that
it will necessarily use the same to pay off the Senior Lenders and other creditors, in order to avert
the foreclosure of the mortgage and other liens on the terminal facility. Such deficiency puts the
interests of government at great risk. Indeed, if the unthinkable were to happen, government would
be paying several hundreds of millions of dollars, but the mortgage liens on the facility may still be
foreclosed by the Senior Lenders just the same.
Consequently, the Piatco contracts are also objectionable for grievously failing to adequately protect
government's interests. More accurately, the contracts would consistently weaken and do away with
protection of government interests. As such, they are therefore grossly lopsided in favor of Piatco
and/or its Senior Lenders.
While on this subject, it is well to recall the earlier discussion regarding a particularly noticeable
alteration of the concept of "Attendant Liabilities." In Section 1.06 of the CA defining the term, the
Piatco debts to be assumed/paid by government were qualified by the phrases recorded and from
time to time outstanding in the books of the Concessionaire and actually used for the project. These
phrases were eliminated from the ARCA's definition of Attendant Liabilities.
Since no explanation has been forthcoming from Piatco as to the possible justification for such a
drastic change, the only conclusion, possible is that it intends to have all of its debts covered by the
guarantee, regardless of whether or not they are disclosed in its books. This has particular reference
to those borrowings which were obtained in violation of the loan covenants requiring Piatco to
maintain a minimum 70:30 debt-to-equity ratio, and even if the loan proceeds were not actually used
for the project itself.
This point brings us back to the guarantee itself. In Section 4.04(c)(vi) of ARCA, the amount which
government has guaranteed to pay as termination payment is the greater of either (i) the Appraised
Value of the terminal facility or (ii) the aggregate of the Attendant Liabilities. Given that the Attendant
Liabilities may include practically any Piatco debt under the sun, it is highly conceivable that their
sum may greatly exceed the appraised value of the facility, and government may end up paying very
much more than the real worth of Terminal III. (So why did government have to bother with public
bidding anyway?)

In the final analysis, Section 4.04(c)(iv) to (vi) of the ARCA is diametrically at odds with the spirit and
the intent of the BOT Law. The law meant to mobilize private resources (the private sector) to take
on the burden and the risks of financing the construction, operation and maintenance of relevant
infrastructure and development projects for the simple reason that government is not in a position to
do so. By the same token, government guarantee was prohibited, since it would merely defeat the
purpose and raison d'tre of a build-operate-and-transfer project to be undertaken by the private
sector.
To the extent that the project proponent is able to obtain loans to fund the project, those risks are
shared between the project proponent on the one hand, and its banks and other lenders on the
other. But where the proponent or its lenders manage to cajol or coerce the government into
extending a guarantee of payment of the loan obligations, the risks assumed by the lenders are
passed right back to government. I cannot understand why, in the instant case, government
cheerfully assented to re-assuming the risks of the project when it gave the prohibited guarantee and
thus simply negated the very purpose of the BOT Law and the protection it gives the government.
Contract Termination Provisions in the Piatco Contracts Are Void
The BOT Law as amended provides for contract termination as follows:
"Sec. 7. Contract Termination. - In the event that a project is revoked, cancelled or
terminated by the government through no fault of the project proponent or by mutual
agreement, the Government shall compensate the said project proponent for its actual
expenses incurred in the project plus a reasonable rate of return thereon not exceeding that
stated in the contract as of the date of such revocation, cancellation or termination: Provided,
That the interest of the Government in this instances [sic] shall be duly insured with the
Government Service Insurance System or any other insurance entity duly accredited by the
Office of the Insurance Commissioner: Provided, finally, That the cost of the insurance
coverage shall be included in the terms and conditions of the bidding referred to above.
"In the event that the government defaults on certain major obligations in the contract and
such failure is not remediable or if remediable shall remain unremedied for an unreasonable
length of time, the project proponent/contractor may, by prior notice to the concerned
national government agency or local government unit specifying the turn-over date,
terminate the contract. The project proponent/contractor shall be reasonably compensated
by the Government for equivalent or proportionate contract cost as defined in the contract."
The foregoing statutory provision in effect provides for the following limited instances when
termination compensation may be allowed:
1. Termination by the government through no fault of the project proponent
2. Termination upon the parties' mutual agreement
3. Termination by the proponent due to government's default on certain major contractual
obligations
To emphasize, the law does not permit compensation for the project proponent when contract
termination is due to the proponent's own fault or breach of contract.

This principle was clearly violated in the Piatco Contracts. The ARCA stipulates that government is to
pay termination compensation to Piatco even when termination is initiated by government for the
following causes:
"(i) Failure of Concessionaire to finish the Works in all material respects in accordance with
the Tender Design and the Timetable;
(ii) Commission by Concessionaire of a material breach of this Agreement . . .;
(iii) . . . a change in control of Concessionaire arising from the sale, assignment, transfer or
other disposition of capital stock which results in an ownership structure violative of statutory
or constitutional limitations;
(iv) A pattern of continuing or repeated non-compliance, willful violation, or non-performance
of other terms and conditions hereof which is hereby deemed a material breach of this
Agreement . . ."62
As if that were not bad enough, the ARCA also inserted into Section 8.01 the phrase "Subject to
Section 4.04." The effect of this insertion is that in those instances where government may terminate
the contract on account of Piatco's breach, and it is nevertheless required under the ARCA to make
termination compensation to Piatco even though unauthorized by law, such compensation is to be
equivalent to the payment amount guaranteed by government - either a) the Appraised Value of the
terminal facility or (b) the aggregate of the Attendant Liabilities, whichever amount is greater!
Clearly, this condition is not in line with Section 7 of the BOT Law. That provision permits a project
proponent to recover the actual expenses it incurred in the prosecution of the project plus a
reasonable rate of return not in excess of that provided in the contract; or to be compensated for the
equivalent or proportionate contract cost as defined in the contract, in case the government is in
default on certain major contractual obligations.
Furthermore, in those instances where such termination compensation is authorized by the BOT
Law, it is indispensable that the interest of government be duly insured. Section 5.08 the ARCA
mandates insurance coverage for the terminal facility; but all insurance policies are to be assigned,
and all proceeds are payable, to the Senior Lenders. In brief, the interest being secured by such
coverage is that of the Senior Lenders, not that of government. This can hardly be considered
compliance with law.
In essence, the ARCA provisions on termination compensation result in another unauthorized
government guarantee, this time in favor of Piatco.
A Prohibited Direct Government Subsidy, Which at the Same Time Is an Assault on the
National Honor
Still another contractual provision offensive to law and public policy is Section 8.01(d) of the ARCA,
which is a "bolder and badder" version of Section 8.04(d) of the CA.
It will be recalled that Section 4-A of the BOT Law as amended prohibits not only direct government
guarantees, but likewise a direct government subsidy for unsolicited proposals. Section 13.2. b. iii. of
the 1999 IRR defines adirect government subsidy as encompassing "an agreement whereby the
Government . . . will . . . postpone any payments due from the proponent."

Despite the statutory ban, Section 8.01 (d) of the ARCA provides thus:
"(d) The provisions of Section 8.01(a) notwithstanding, and for the purpose of preventing a
disruption of the operations in the Terminal and/or Terminal Complex, in the event that at any
time Concessionaire is of the reasonable opinion that it shall be unable to meet a payment
obligation owed to the Senior Lenders, Concessionaire shall give prompt notice to GRP,
through DOTC/MIAA and to the Senior Lenders. In such circumstances, the Senior Lenders
(or the Senior Lenders' Representative) may ensure that after making provision for
administrative expenses and depreciation, the cash resources of Concessionaire shall first
be used and applied to meet all payment obligations owed to the Senior Lenders. Any
excess cash, after meeting such payment obligations, shall be earmarked for the payment of
all sums payable by Concessionaire to GRP under this Agreement. If by reason of the
foregoing GRP should be unable to collect in full all payments due to GRP under this
Agreement, then the unpaid balance shall be payable within a 90-day grace period counted
from the relevant due date, with interest per annum at the rate equal to the average 91-day
Treasury Bill Rate as of the auction date immediately preceding the relevant due date. If
payment is not effected by Concessionaire within the grace period, then a spread of five
(5%) percent over the applicable 91-day Treasury Bill Rate shall be added on the unpaid
amount commencing on the expiry of the grace period up to the day of full payment. When
the temporary illiquidity of Concessionaire shall have been corrected and the cash position of
Concessionaire should indicate its ability to meet its maturing obligations, then the provisions
set forth under this Section 8.01(d) shall cease to apply. The foregoing remedial measures
shall be applicable only while there remains unpaid and outstanding amounts owed to the
Senior Lenders." (Emphasis supplied)
By any manner of interpretation or application, Section 8.01(d) of the ARCA clearly mandates
the indefinitepostponement of payment of all of Piatco's obligations to the government, in order to
ensure that Piatco's obligations to the Senior Lenders are paid in full first. That is nothing more or
less than the direct government subsidy prohibited by the BOT Law and the IRR. The fact that Piatco
will pay interest on the unpaid amounts owed to government does not change the situation or render
the prohibited subsidy any less unacceptable.
But beyond the clear violations of law, there are larger issues involved in the ARCA. Earlier, I
mentioned that Section 8.01(d) of the ARCA completely eliminated the proviso in Section 8.04(d) of
the CA which gave government the right to appoint a financial controller to manage the cash position
of Piatco during situations of financial distress. Not only has government been deprived of any
means of monitoring and managing the situation; worse, as can be seen from Section 8.01(d)
above-quoted, the Senior Lenders have effectively locked in on the right to exercise financial
controllership over Piatco and to allocate its cash resources to the payment of all amounts owed to
the Senior Lenders before allowing any payment to be made to government.
In brief, this particular provision of the ARCA has placed in the hands of foreign lenders the power
and the authority to determine how much (if at all) and when the Philippine government (as grantor
of the franchise) may be allowed to receive from Piatco. In that situation, government will be at the
mercy of the foreign lenders. This is a situation completely contrary to the rationale of the BOT Law
and to public policy.
The aforesaid provision rouses mixed emotions - shame and disgust at the parties'
(especially the government officials') docile submission and abject servitude and surrender
to the imperious and excessive demands of the foreign lenders, on the one hand; and
vehement outrage at the affront to the sovereignty of the Republic and to the national honor,
on the other. It is indeed time to put an end to such an unbearable, dishonorable situation.

The Piatco Contracts Unarguably Violate Constitutional Injunctions

I will now discuss the manner in which the Piatco Contracts offended the Constitution.
The Exclusive Right Granted to Piatco to Operate a Public Utility Is Prohibited by the Constitution
While Section 2.02 of the ARCA spoke of granting to Piatco "a franchise to operate and maintain the
Terminal Complex," Section 3.02(a) of the same ARCA granted to Piatco, for the entire term of the
concession agreement, "the exclusive right to operate a commercial international passenger
terminal within the Island of Luzon" with the exception of those three terminals already existing63 at
the time of execution of the ARCA.
Section 11 of Article XII of the Constitution prohibits the grant of a "franchise, certificate, or any other
form of authorization for the operation of a public utility" that is "exclusive in character."
In its Opinion No. 078, Series of 1995, the Department of justice held that "the NAIA Terminal III
which . . . is a 'terminal for public use' is a public utility." Consequently, the constitutional prohibition
against the exclusivity of a franchise applies to the franchise for the operation of NAIA Terminal III as
well.
What was granted to Piatco was not merely a franchise, but an "exclusive right" to operate an
international passenger terminal within the "Island of Luzon." What this grant effectively means is
that the government is now estopped from exercising its inherent power to award any other person
another franchise or a right to operate such a public utility, in the event public interest in Luzon
requires it. This restriction is highly detrimental to government and to the public interest. Former
Secretary of Justice Hernando B. Perez expressed this point well in his Memorandum for the
President dated 21 May 2002:
"Section 3.02 on 'Exclusivity'
"This provision gives to PIATCO (the Concessionaire) the exclusive right to operate a
commercial international airport within the Island of Luzon with the exception of those
already existing at the time of the execution of the Agreement, such as the airports at Subic,
Clark and Laoag City. In the case of the Clark International Airport, however, the provision
restricts its operation beyond its design capacity of 850,000 passengers per annum and the
operation of new terminal facilities therein until after the new NAIA Terminal III shall have
consistently reached or exceeded its design capacity of ten (10) million passenger capacity
per year for three (3) consecutive years during the concession period.
"This is an onerous and disadvantageous provision. It effectively grants PIATCO a monopoly
in Luzon and ties the hands of government in the matter of developing new airports which
may be found expedient and necessary in carrying out any future plan for an inter-modal
transportation system in Luzon.
"Additionally, it imposes an unreasonable restriction on the operation of the Clark
International Airport which could adversely affect the operation and development of the Clark
Special Economic Zone to the economic prejudice of the local constituencies that are being
benefited by its operation." (Emphasis supplied)
While it cannot be gainsaid that an enterprise that is a public utility may happen to constitute a
monopoly on account of the very nature of its business and the absence of competition, such a

situation does not however constitute justification to violate the constitutional prohibition and grant
an exclusive franchise or exclusive right to operate a public utility.
Piatco's contention that the Constitution does not actually prohibit monopolies is beside the point. As
correctly argued,64 the existence of a monopoly by a public utility is a situation created by
circumstances that do not encourage competition. This situation is different from the grant of a
franchise to operate a public utility, a privilege granted by government. Of course, the grant of a
franchise may result in a monopoly. But making such franchise exclusive is what is expressly
proscribed by the Constitution.
Actually, the aforementioned Section 3.02 of the ARCA more than just guaranteed exclusivity; it also
guaranteed that the government will not improve or expand the facilities at Clark - and in fact is
required to put a cap on the latter's operations - until after Terminal III shall have been operated at or
beyond its peak capacity for threeconsecutive years.65 As counsel for public respondents pointed
out, in the real world where the rate of influx of international passengers can fluctuate substantially
from year to year, it may take many years before Terminal III sees three consecutive years'
operations at peak capacity. The Diosdado Macapagal International Airport may thus end up
stagnating for a long time. Indeed, in order to ensure greater profits for Piatco, the economic
progress of a region has had to be sacrificed.
The Piatco Contracts Violate the Time Limitation on Franchises
Section 11 of Article XII of the Constitution also provides that "no franchise, certificate or any other
form of authorization for the operation of a public utility shall be . . . for a longer period than fifty
years." After all, a franchise held for an unreasonably long time would likely give rise to the same
evils as a monopoly.
The Piatco Contracts have come up with an innovative way to circumvent the prohibition and obtain
an extension. This fact can be gleaned from Section 8.03(b) of the ARCA, which I quote thus:
"Sec. 8.03. Termination Procedure and Consequences of Termination. a) x x x

xxx

xxx

b) In the event the Agreement is terminated pursuant to Section 8.01 (b) hereof,
Concessionaire shall be entitled to collect the Liquidated Damages specified in
Annex 'G'. The full payment by GRP to Concessionaire of the Liquidated Damages
shall be a condition precedent to the transfer by Concessionaire to GRP of the
Development Facility. Prior to the full payment of the Liquidated Damages,
Concessionaire shall to the extent practicable continue to operate the Terminal and
the Terminal Complex and shall be entitled to retain and withhold all payments to
GRP for the purpose of offsetting the same against the Liquidated Damages. Upon
full payment of the Liquidated Damages, Concessionaire shall immediately transfer
the Development Facility to GRP on 'as-is-where-is' basis."
The aforesaid easy payment scheme is less beneficial than it first appears. Although it enables
government to avoid having to make outright payment of an obligation that will likely run into billions
of pesos, this easy payment plan will nevertheless cost government considerable loss of income,
which it would earn if it were to operate Terminal III by itself. Inasmuch as payments to the
concessionaire (Piatco) will be on "installment basis," interest charges on the remaining unpaid
balance would undoubtedly cause the total outstanding balance to swell. Piatco would thus be
entitled to remain in the driver's seat and keep operating the terminal for an indefinite length of time.

The Contracts Create Two Monopolies for Piatco

By way of background, two monopolies were actually created by the Piatco contracts. The first and
more obvious one refers to the business of operating an international passenger terminal in Luzon,
the business end of which involves providing international airlines with parking space for their
aircraft, and airline passengers with the use of departure and arrival areas, check-in counters,
information systems, conveyor systems, security equipment and paraphernalia, immigrations and
customs processing areas; and amenities such as comfort rooms, restaurants and shops.
In furtherance of the first monopoly, the Piatco Contracts stipulate that the NAIA Terminal III will be
the only facility to be operated as an international passenger terminal; 66 that NAIA Terminals I and II
will no longer be operated as such;67 and that no one (including the government) will be allowed to
compete with Piatco in the operation of an international passenger terminal in the NAIA
Complex.68 Given that, at this time, the government and Piatco are the only ones engaged in the
business of operating an international passenger terminal, I am not acutely concerned with this
particular monopolistic situation.
There was however another monopoly within the NAIA created by the subject contracts for Piatco in the business of providing international airlines with the following: groundhandling, in-flight
catering, cargo handling, and aircraft repair and maintenance services. These are lines of business
activity in which are engaged many service providers (including the petitioners-in-intervention), who
will be adversely affected upon full implementation of the Piatco Contracts, particularly Sections
3.01(d)69 and (e)70 of both the ARCA and the CA.
On the one hand, Section 3.02(a) of the ARCA makes Terminal III the only international passenger
terminal at the NAIA, and therefore the only place within the NAIA Complex where the business of
providing airport-related services to international airlines may be conducted. On the other hand,
Section 3.01(d) of the ARCA requires government, through the MIAA, not to allow service providers
with expired MIAA contracts to renew or extend their contracts to render airport-related services to
airlines. Meanwhile, Section 3.01(e) of the ARCA requires government, through the DOTC and
MIAA, not to allow service providers - those with subsisting concession agreements for services and
operations being conducted at Terminal I - to carry over their concession agreements, services and
operations to Terminal III, unless they first enter into a separate agreement with Piatco.
The aforementioned provisions vest in Piatco effective and exclusive control over which service
provider may and may not operate at Terminal III and render the airport-related services needed by
international airlines. It thereby possesses the power to exclude competition. By necessary
implication, it also has effective control over the fees and charges that will be imposed and collected
by these service providers.
This intention is exceedingly clear in the declaration by Piatco that it is "completely within its rights to
exclude any party that it has not contracted with from NAIA Terminal III." 71
Worse, there is nothing whatsoever in the Piatco Contracts that can serve to restrict, control or
regulate the concessionaire's discretion and power to reject any service provider and/or impose any
term or condition it may see fit in any contract it enters into with a service provider. In brief, there is
no safeguard whatsoever to ensure free and fair competition in the service-provider sector.
In the meantime, and not surprisingly, Piatco is first in line, ready to exploit the unique business
opportunity. It announced72 that it has accredited three groundhandlers for Terminal III. Aside from
the Philippine Airlines, the other accredited entities are the Philippine Airport and Ground Services
Globeground, Inc. ("PAGSGlobeground") and the Orbit Air Systems, Inc. ("Orbit").

PAGSGlobeground is a wholly-owned subsidiary of the Philippine Airport and Ground Services, Inc.
or PAGS,73 while Orbit is a wholly-owned subsidiary of Friendship Holdings, Inc.,74which is in turn
owned 80 percent by PAGS.75 PAGS is a service provider owned 60 percent by the Cheng Family; 76 it
is a stockholder of 35 percent of Piatco77 and is the latter's designated contractor-operator for NAIA
Terminal III.78
Such entry into and domination of the airport-related services sector appear to be very much in line
with the following provisions contained in the First Addendum to the Piatco Shareholders
Agreement,79 executed on July 6, 1999, which appear to constitute a sort of master plan to create a
monopoly and combinations in restraint of trade:
"11. The Shareholders shall ensure:
a. x x x

xxx

x x x.;

b. That (Phil. Airport and Ground Services, Inc.) PAGS and/or its designated Affiliates shall,
at all times during the Concession Period, be exclusively authorized by (PIATCO) to engage
in the provision of ground-handling, catering and fueling services within the Terminal
Complex.
c. That PAIRCARGO and/or its designated Affiliate shall, during the Concession Period, be
the only entities authorized to construct and operate a warehouse for all cargo handling and
related services within the Site."
Precisely, proscribed by our Constitution are the monopoly and the restraint of trade being fostered
by the Piatco Contracts through the erection of barriers to the entry of other service providers into
Terminal III. In Tatad v. Secretary of the Department of Energy,80 the Court ruled:
". . . [S]ection 19 of Article XII of the Constitution . . . mandates: 'The State shall regulate or
prohibit monopolies when the public interest so requires. No combinations in restraint of
trade or unfair competition shall be allowed.'
"A monopoly is a privilege or peculiar advantage vested in one or more persons or
companies, consisting in the exclusive right or power to carry on a particular business or
trade, manufacture a particular article, or control the sale or the whole supply of a particular
commodity. It is a form of market structure in which one or only a few firms dominate the total
sales of a product or service. On the other hand, a combination in restraint of trade is an
agreement or understanding between two or more persons, in the form of a contract, trust,
pool, holding company, or other form of association, for the purpose of unduly restricting
competition, monopolizing trade and commerce in a certain commodity, controlling its
production, distribution and price, or otherwise interfering with freedom of trade without
statutory authority. Combination in restraint of trade refers to the means while monopoly
refers to the end.
"x x x

xxx

xxx

"Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses
competition. The desirability of competition is the reason for the prohibition against restraint
of trade, the reason for the interdiction of unfair competition, and the reason for regulation of
unmitigated monopolies. Competition is thus the underlying principle of [S]ection 19, Article
XII of our Constitution, . . ."81

Gokongwei Jr. v. Securities and Exchange Commission82 elucidates the criteria to be employed: "A
'monopoly' embraces any combination the tendency of which is to prevent competition in the broad
and general sense, or to control prices to the detriment of the public. In short, it is the concentration
of business in the hands of a few. The material consideration in determining its existence is not that
prices are raised and competition actually excluded, but that power exists to raise prices or exclude
competition when desired."83 (Emphasis supplied)
The Contracts Encourage Monopolistic Pricing, Too
Aside from creating a monopoly, the Piatco contracts also give the concessionaire virtually limitless
power over the charging of fees, rentals and so forth. What little "oversight function" the government
might be able and minded to exercise is less than sufficient to protect the public interest, as can be
gleaned from the following provisions:
"Sec. 6.06. Adjustment of Non-Public Utility Fees and Charges
"For fees, rentals and charges constituting Non-Public Utility Revenues, Concessionaire may
make any adjustments it deems appropriate without need for the consent of GRP or any
government agency subject to Sec. 6.03(c)."
Section 6.03(c) in turn provides:
"(c) Concessionaire shall at all times be judicious in fixing fees and charges constituting NonPublic Utility Revenues in order to ensure that End Users are not unreasonably deprived of
services. While the vehicular parking fee, porterage fee and greeter/wellwisher fee constitute
Non-Public Utility Revenues of Concessionaire, GRP may require Concessionaire to explain
and justify the fee it may set from time to time, if in the reasonable opinion of GRP the said
fees have become exorbitant resulting in the unreasonable deprivation of End Users of such
services."
It will be noted that the above-quoted provision has no teeth, so the concessionaire can defy the
government without fear of any sanction. Moreover, Section 6.06 - taken together with Section
6.03(c) of the ARCA - falls short of the standard set by the BOT Law as amended, which expressly
requires in Section 2(b) that the project proponent is "allowed to charge facility users appropriate
tolls, fees, rentals and charges not exceeding those proposed in its bid or as negotiated and
incorporated in the contract x x x."
The Piatco Contracts Violate Constitutional Prohibitions Against
Impairment of Contracts and Deprivation of Property Without Due Process
Earlier, I discussed how Section 3.01(e)84 of both the CA and the ARCA requires government,
through DOTC/MIAA, not to permit the carry-over to Terminal III of the services and operations of
certain service providers currently operating at Terminal I with subsisting contracts.
By the In-Service Date, Terminal III shall be the only facility to be operated as an international
passenger terminal at the NAIA;85 thus, Terminals I and II shall no longer operate as such,86 and no
one shall be allowed to compete with Piatco in the operation of an international passenger terminal
in the NAIA.87 The bottom line is that, as of the In-Service Date, Terminal III will be the only terminal
where the business of providing airport-related services to international airlines and passengers may
be conducted at all.

Consequently, government through the DOTC/MIAA will be compelled to cease honoring existing
contracts with service providers after the In-Service Date, as they cannot be allowed to operate in
Terminal III.
In short, the CA and the ARCA obligate and constrain government to break its existing contracts with
these service providers.
Notably, government is not in a position to require Piatco to accommodate the displaced service
providers, and it would be unrealistic to think that these service providers can perform their service
contracts in some other international airport outside Luzon. Obviously, then, these displaced service
providers are - to borrow a quaint expression - up the river without a paddle. In plainer terms, they
will have lost their businesses entirely, in the blink of an eye.
What we have here is a set of contractual provisions that impair the obligation of contracts and
contravene the constitutional prohibition against deprivation of property without due process of law.88
Moreover, since the displaced service providers, being unable to operate, will be forced to close
shop, their respective employees - among them Messrs. Agan and Lopez et al. - have very grave
cause for concern, as they will find themselves out of employment and bereft of their means of
livelihood. This situation comprises still another violation of the constitution prohibition against
deprivation of property without due process.
True, doing business at the NAIA may be viewed more as a privilege than as a right. Nonetheless,
where that privilege has been availed of by the petitioners-in-intervention service providers for years
on end, a situation arises, similar to that in American Inter-fashion v. GTEB.89 We held therein that a
privilege enjoyed for seven years "evolved into some form of property right which should not be
removed x x x arbitrarily and without due process." Said pronouncement is particularly relevant and
applicable to the situation at bar because the livelihood of the employees of petitioners-intervenors
are at stake.
The Piatco Contracts Violate Constitutional Prohibition
Against Deprivation of Liberty Without Due Process
The Piatco Contracts by locking out existing service providers from entry into Terminal III and
restricting entry of future service providers, thereby infringed upon the freedom - guaranteed to and
heretofore enjoyed by international airlines - to contract with local service providers of their choice,
and vice versa.
Both the service providers and their client airlines will be deprived of the right to liberty, which
includes the right to enter into all contracts,90 and/or the right to make a contract in relation to one's
business.91
By Creating New Financial Obligations for Government,
Supplements to the ARCA Violate the Constitutional
Ban on Disbursement of Public Funds Without Valid Appropriation
Clearly prohibited by the Constitution is the disbursement of public funds out of the treasury, except
in pursuance of an appropriation made by law.92 The immediate effect of this constitutional ban is
that all the various agencies of government are constrained to limit their expenditures to the amounts
appropriated by law for each fiscal year; and to carefully count their cash before taking on
contractual commitments. Giving flesh and form to the injunction of the fundamental law, Sections 46

and 47 of Executive Order 292, otherwise known as the Administrative Code of 1987, provide as
follows:
"Sec. 46. Appropriation Before Entering into Contract. - (1) No contract involving the
expenditure of public funds shall be entered into unless there is an appropriation therefor, the
unexpended balance of which, free of other obligations, is sufficient to cover the proposed
expenditure; and . .
"Sec. 47. Certificate Showing Appropriation to Meet Contract. - Except in the case of a
contract for personal service, for supplies for current consumption or to be carried in stock
not exceeding the estimated consumption for three (3) months, or banking transactions of
government-owned or controlled banks, no contract involving the expenditure of public funds
by any government agency shall be entered into or authorized unless the proper accounting
official of the agency concerned shall have certified to the officer entering into the obligation
that funds have been duly appropriated for the purpose and that the amount necessary to
cover the proposed contract for the current calendar year is available for expenditure on
account thereof, subject to verification by the auditor concerned. The certificate signed by the
proper accounting official and the auditor who verified it, shall be attached to and become an
integral part of the proposed contract, and the sum so certified shall not thereafter be
available for expenditure for any other purpose until the obligation of the government agency
concerned under the contract is fully extinguished."
Referring to the aforequoted provisions, this Court has held that "(I)t is quite evident from the tenor of
the language of the law that the existence of appropriations and the availability of funds are
indispensable pre-requisites to or conditions sine qua non for the execution of government contracts.
The obvious intent is to impose such conditions as a priori requisites to the validity of the proposed
contract."93
Notwithstanding the constitutional ban, statutory mandates and Jurisprudential precedents, the three
Supplements to the ARCA, which were not approved by NEDA, imposed on government the
additional burden of spending public moneys without prior appropriation.
In the First Supplement ("FS") dated August 27, 1999, the following requirements were imposed on
the government:
To construct, maintain and keep in good repair and operating condition all airport support
services, facilities, equipment and infrastructure owned and/or operated by MIAA, which are
not part of the Project or which are located outside the Site, even though constructed by
Concessionaire - including the access road connecting Terminals II and III and the taxilane,
taxiways and runways
To obligate the MIAA to provide funding for the upkeep, maintenance and repair of the
airports and facilities owned or operated by it and by third persons under its control in order
to ensure compliance with international standards; and holding MIAA liable to Piatco for the
latter's losses, expenses and damages as well as for the latter's liability to third persons, in
case MIAA fails to perform such obligations; in addition, MIAA will also be liable for the
incremental and consequential costs of the remedial work done by Piatco on account of the
former's default.
Section 4 of the FS imposed on government ten (10) "Additional Special Obligations,"
including the following:

Providing thru MIAA the land required by Piatco for the taxilane and one taxiway, at
no cost to Piatco

Implementing the government's existing storm drainage master plan

Coordinating with DPWH the financing, implementation and completion of the

following works before the In-Service Date: three left-turning overpasses (Edsa to
Tramo St., Tramo to Andrews Ave., and Manlunas Road to Sales Ave.) and a road
upgrade and improvement program involving widening, repair and resurfacing of
Sales Road, Andrews Avenue and Manlunas Road; improvement of Nichols
Interchange; and removal of squatters along Andrews Avenue

Dealing directly with BCDA and the Philippine Air Force in acquiring additional land or
right of way for the road upgrade and improvement program

Requiring government to work for the immediate reversion to MIAA of the Nayong
Pilipino National Park, in order to permit the building of the second west parallel
taxiway

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

Contracts. Whereupon, the concessionaire may outrightly terminate the Contracts pursuant to
Section 8.01(b)(i) and (ii) of the ARCA and seek payment of Liquidated Damages in accordance with
Section 8.02(a) of the ARCA; or the concessionaire may instead require government to pay the
Incremental and Consequential Losses under Section 1.23 of the ARCA. 94The logical conclusion
then is that the obligations in the Supplements are not to be performed on a best-efforts basis only,
but are unarguably mandatory in character.
Regarding MIAA's obligation to coordinate with the DPWH for the complete implementation of the
road upgrading and improvement program for Sales, Andrews and Manlunas Roads (which provide
access to the Terminal III site) prior to the In-Service Date, it is essential to take note of the fact that
there was a pressing need to complete the program before the opening of Terminal III. 95 For that
reason, the MIAA was compelled to enter into a memorandum of agreement with the DPWH in order
to ensure the timely completion of the road widening and improvement program. MIAA agreed to
advance the total amount of P410.11 million to DPWH for the works, while the latter was committed
to do the following:
"2.2.8. Reimburse all advance payments to MIAA including but not limited to interest, fees,
plus other costs of money within the periods CY2004 and CY2006 with payment of no less
than One Hundred Million Pesos (PhP100M) every year.
"2.2.9. Perform all acts necessary to include in its CY2004 to CY2006 budget allocation the
repayments for the advances made by MIAA, to ensure that the advances are fully repaid by
CY2006. For this purpose, DPWH shall include the amounts to be appropriated for
reimbursement to MIAA in the "Not Needing Clearance" column of their Agency Budget
Matrix (ABM) submitted to the Department of Budget and Management."
It can be easily inferred, then, that DPWH did not set aside enough funds to be able to complete the
upgrading program for the crucially situated access roads prior to the targeted opening date of
Terminal III; and that, had MIAA not agreed to lend the P410 Million, DPWH would not have been
able to complete the program on time. As a consequence, government would have been in breach of
a material obligation. Hence, this particular undertaking of government may likewise not be
construed as being for best-efforts compliance only.
They also Infringe on the Legislative Prerogative and Power Over the Public Purse
But the particularly sad thing about this transaction between MIAA and DPWH is the fact that both
agencies were maneuvered into (or allowed themselves to be maneuvered into) an agreement that
would ensure delivery of upgraded roads for Piatco's benefit, using funds not allocated for that
purpose. The agreement would then be presented to Congress as a done deal. Congress would
thus be obliged to uphold the agreement and support it with the necessary allocations and
appropriations for three years, in order to enable DPWH to deliver on its committed repayments to
MIAA. The net result is an infringement on the legislative power over the public purse and a
diminution of Congress' control over expenditures of public funds - a development that would not
have come about, were it not for the Supplements. Very clever but very illegal!
EPILOGUE
What Do We Do Now?
In the final analysis, there remains but one ultimate question, which I raised during the Oral
Argument on December 10, 2002: What do we do with the Piatco Contracts and Terminal III?
96
(Feeding directly into the resolution of the decisive question is the other nagging issue: Why

should we bother with determining the legality and validity of these contracts, when the Terminal
itself has already been built and is practically complete?)
Prescinding from all the foregoing disquisition, I find that all the Piatco contracts, without exception,
are void ab initio, and therefore inoperative. Even the very process by which the contracts came into
being - the bidding and the award - has been riddled with irregularities galore and blatant violations
of law and public policy, far too many to ignore. There is thus no conceivable way, as proposed by
some, of saving one (the original Concession Agreement) while junking all the rest.
Neither is it possible to argue for the retention of the Draft Concession Agreement (referred to in the
various pleadings as the Contract Bidded Out) as the contract that should be kept in force and effect
to govern the situation, inasmuch as it was never executed by the parties. What Piatco and the
government executed was the Concession Agreement which is entirely different from the Draft
Concession Agreement.
Ultimately, though, it would be tantamount to an outrageous, grievous and unforgivable mutilation of
public policy and an insult to ourselves if we opt to keep in place a contract - any contract - for to do
so would assume that we agree to having Piatco continue as the concessionaire for Terminal III.
Despite all the insidious contraventions of the Constitution, law and public policy Piatco perpetrated,
keeping Piatco on as concessionaire and even rewarding it by allowing it to operate and profit from
Terminal III - instead of imposing upon it the stiffest sanctions permissible under the laws - is
unconscionable.
It is no exaggeration to say that Piatco may not really mind which contract we decide to keep in
place. For all it may care, we can do just as well without one, if we only let it continue and operate
the facility. After all, the real money will come not from building the Terminal, but from actually
operating it for fifty or more years and charging whatever it feels like, without any competition at all.
This scenario must not be allowed to happen.
If the Piatco contracts are junked altogether as I think they should be, should not AEDC
automatically be considered the winning bidder and therefore allowed to operate the facility? My
answer is a stone-cold 'No'. AEDC never won the bidding, never signed any contract, and never built
any facility. Why should it be allowed toautomatically step in and benefit from the greed of another?
Should government pay at all for reasonable expenses incurred in the construction of the Terminal?
Indeed it should, otherwise it will be unjustly enriching itself at the expense of Piatco and, in
particular, its funders, contractors and investors - both local and foreign. After all, there is no
question that the State needs and will make use of Terminal III, it being part and parcel of the critical
infrastructure and transportation-related programs of government.
In Melchor v. Commission on Audit,97 this Court held that even if the contract therein was void, the
principle of payment by quantum meruit was found applicable, and the contractor was allowed to
recover the reasonablevalue of the thing or services rendered (regardless of any agreement as to
the supposed value), in order to avoid unjust enrichment on the part of government. The principle
of quantum meruit was likewise applied in Eslao v. Commission on Audit,98 because to deny payment
for a building almost completed and already occupied would be to permit government to unjustly
enrich itself at the expense of the contractor. The same principle was applied in Republic v. Court of
Appeals.99
One possible practical solution would be for government - in view of the nullity of the Piatco
contracts and of the fact that Terminal III has already been built and is almost finished - to bid out the

operation of the facility under the same or analogous principles as build-operate-and-transfer

projects. To be imposed, however, is the condition that the winning bidder must pay the builder of the
facility a price fixed by government based on quantum meruit; on the real, reasonable - not inflated value of the built facility.
How the payment or series of payments to the builder, funders, investors and contractors will be
staggered and scheduled, will have to be built into the bids, along with the annual guaranteed
payments to government. In this manner, this whole sordid mess could result in something truly
beneficial for all, especially for the Filipino people.
WHEREFORE, I vote to grant the Petitions and to declare the subject contracts NULL and VOID.

h.) Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 154599

January 21, 2004

THE LIGA NG MGA BARANGAY NATIONAL, petitioner,

vs.
THE CITY MAYOR OF MANILA, HON. JOSE ATIENZA, JR., and THE CITY COUNCIL OF
MANILA,respondents.
DECISION
DAVIDE, JR., C.J.:
This petition for certiorari under Rule 65 of the Rules of Court seeks the nullification of Manila City
Ordinance No. 8039, Series of 2002,1 and respondent City Mayors Executive Order No. 011, Series
of 2002,2 dated 15 August 2002 , for being patently contrary to law.
The antecedents are as follows:
Petitioner Liga ng mga Barangay National (Liga for brevity) is the national organization of all
the barangays in the Philippines, which pursuant to Section 492 of Republic Act No. 7160,
otherwise known as The Local Government Code of 1991, constitutes the duly elected
presidents of highly-urbanized cities, provincial chapters, the metropolitan Manila Chapter,
and metropolitan political subdivision chapters.
Section 493 of that law provides that "[t]he liga at the municipal, city, provincial, metropolitan
political subdivision, and national levels directly elect a president, a vice-president, and five
(5) members of the board of directors." All other matters not provided for in the law affecting
the internal organization of the leagues of local government units shall be governed by their
respective constitution and by-laws, which must always conform to the provisions of the
Constitution and existing laws.3
On 16 March 2000, the Liga adopted and ratified its own Constitution and By-laws to govern its
internal organization.4 Section 1, third paragraph, Article XI of said Constitution and By-Laws states:

All other election matters not covered in this Article shall be governed by the "Liga Election
Code" or such other rules as may be promulgated by the National Liga Executive Board in
conformity with the provisions of existing laws.
By virtue of the above-cited provision, the Liga adopted and ratified its own Election Code. 5 Section
1.2, Article I of the Liga Election Code states:
1.2 Liga ng mga Barangay Provincial, Metropolitan, HUC/ICC Chapters. There shall be
nationwide synchronized elections for the provincial, metropolitan, and HUC/ICC chapters to
be held on the third Monday of the month immediately after the month when the
synchronized elections in paragraph 1.1 above was held. The incumbent Liga chapter
president concerned duly assisted by the proper government agency, office or department,
e.g. Provincial/City/NCR/Regional Director, shall convene all the duly elected Component
City/Municipal Chapter Presidents and all the current elected Punong Barangays (for
HUC/ICC) of the respective chapters in any public place within its area of jurisdiction for the
purpose of reorganizing and electing the officers and directors of the provincial, metropolitan
or HUC/ICC Liga chapters. Said president duly assisted by the government officer
aforementioned, shall notify, in writing, all the above concerned at least fifteen (15) days
before the scheduled election meeting on the exact date, time, place and requirements of the
said meeting.
The Liga thereafter came out with its Calendar of Activities and Guidelines in the Implementation of
the Liga Election Code of 2002,6 setting on 21 October 2002 the synchronized elections for highly
urbanized city chapters, such as the Liga Chapter of Manila, together with independent component
city, provincial, and metropolitan chapters.
lawphi1.net

On 28 June 2002, respondent City Council of Manila enacted Ordinance No. 8039, Series of 2002,
providing, among other things, for the election of representatives of the District Chapters in the City
Chapter of Manila and setting the elections for both chapters thirty days after the barangay elections.
Section 3 (A) and (B) of the assailed ordinance read:
SEC. 3. Representation Chapters. Every Barangay shall be represented in the said Liga
Chapters by the Punong Barangayor, in his absence or incapacity, by the kagawad duly
elected for the purpose among its members.
A. District Chapter
All elected Barangay Chairman in each District shall elect from among themselves the
President, Vice-President and five (5) members of the Board.
B. City Chapter
The District Chapter representatives shall automatically become members of the Board and
they shall elect from among themselves a President, Vice-President, Secretary, Treasurer,
Auditor and create other positions as it may deem necessary for the management of the
chapter.
The assailed ordinance was later transmitted to respondent City Mayor Jose L. Atienza, Jr.,
for his signature and approval.

On 16 July 2002, upon being informed that the ordinance had been forwarded to the Office
of the City Mayor, still unnumbered and yet to be officially released, the Liga sent respondent
Mayor of Manila a letter requesting him that said ordinance be vetoed considering that it
encroached upon, or even assumed, the functions of the Liga through legislation, a function
which was clearly beyond the ambit of the powers of the City Council. 7
Respondent Mayor, however, signed and approved the assailed city ordinance and issued on 15
August 2002 Executive Order No. 011, Series of 2002, to implement the ordinance.
Hence, on 27 August 2002, the Liga filed the instant petition raising the following issues:
I
WHETHER OR NOT THE RESPONDENT CITY COUNCIL OF MANILA COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION, WHEN
IT ENACTED CITY ORDINANCE NO. 8039 S. 2002 PURPOSELY TO GOVERN THE ELECTIONS
OF THE MANILA CHAPTER OF THE LIGA NG MGA BARANGAYS AND WHICH PROVIDES A
DIFFERENT MANNER OF ELECTING ITS OFFICERS, DESPITE THE FACT THAT SAID
CHAPTERS ELECTIONS, AND THE ELECTIONS OF ALL OTHER CHAPTERS OF THE LIGA NG
MGA BARANGAYS FOR THAT MATTER, ARE BY LAW MANDATED TO BE GOVERNED BY THE
LIGA CONSTITUTION AND BY-LAWS AND THE LIGA ELECTION CODE.
II
WHETHER OR NOT THE RESPONDENT CITY MAYOR OF MANILA COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION WHEN HE
ISSUED EXECUTIVE ORDER NO. 011 TO IMPLEMENT THE QUESTIONED CITY ORDINANCE
NO. 8039 S. 2002.
In support of its petition, the Liga argues that City Ordinance No. 8039, Series of 2002, and
Executive Order No. 011, Series of 2002, contradict the Liga Election Code and are therefore invalid.
There exists neither rhyme nor reason, not to mention the absence of legal basis, for the Manila City
Council to encroach upon, or even assume, the functions of the Liga by prescribing, through
legislation, the manner of conducting the Liga elections other than what has been provided for by the
Liga Constitution and By-laws and the Liga Election Code. Accordingly, the subject ordinance is
an ultra vires act of the respondents and, as such, should be declared null and void.
As for its prayer for the issuance of a temporary restraining order, the petitioner cites as reason
therefor the fact that under Section 5 of the assailed city ordinance, the Manila District Chapter
elections would be held thirty days after the regular barangay elections. Hence, it argued that the
issuance of a temporary restraining order and/or preliminary injunction would be imperative to
prevent the implementation of the ordinance and executive order.
On 12 September 2002, Barangay Chairman Arnel Pea, in his capacity as a member of the Liga ng
mga Barangay in the City Chapter of Manila, filed a Complaint in Intervention with Urgent Motion for
the Issuance of Temporary Restraining Order and/or Preliminary Injunction. 8 He supports the position
of the Liga and prays for the declaration of the questioned ordinance and executive order, as well as
the elections of the Liga ng mga Barangay pursuant thereto, to be null and void. The assailed
ordinance prescribing for an "indirect manner of election" amended, in effect, the provisions of the
Local Government Code of 1991, which provides for the election of the Liga officers at large. It also
violated and curtailed the rights of the petitioner and intervenor, as well as the other 896 Barangay
Chairmen in the City of Manila, to vote and be voted upon in a direct election.

On 25 October 2002, the Office of the Solicitor General (OSG) filed a Manifestation in lieu of
Comment.9 It supports the petition of the Liga, arguing that the assailed city ordinance and executive
order are clearly inconsistent with the express public policy enunciated in R.A. No. 7160. Local
political subdivisions are able to legislate only by virtue of a valid delegation of legislative power from
the national legislature. They are mere agents vested with what is called the power of subordinate
legislation. Thus, the enactments in question, which are local in origin, cannot prevail against the
decree, which has the force and effect of law.
On the issue of non-observance by the petitioners of the hierarchy-of-courts rule, the OSG posits
that technical rules of procedure should be relaxed in the instant petition. While Batas Pambansa
Blg. 129, as amended, grants original jurisdiction over cases of this nature to the Regional Trial
Court (RTC), the exigency of the present petition, however, calls for the relaxation of this rule.
Section 496 (should be Section 491) of the Local Government Code of 1991 primarily intended that
the Liga ng mga Barangay determine the representation of the Liga in the sanggunians for the
immediate ventilation, articulation, and crystallization of issues affecting barangay government
administration. Thus, the immediate resolution of this petition is a must.
On the other hand, the respondents defend the validity of the assailed ordinance and executive
order and pray for the dismissal of the present petition on the following grounds: (1) certiorari under
Rule 65 of the Rules of Court is unavailing; (2) the petition should not be entertained by this Court in
view of the pendency before the Regional Trial Court of Manila of two actions or petitions
questioning the subject ordinance and executive order; (3) the petitioner is guilty of forum shopping;
and (4) the act sought to be enjoined is fait accompli.
The respondents maintain that certiorari is an extraordinary remedy available to one aggrieved by
the decision of a tribunal, officer, or board exercising judicial or quasi-judicial functions. The City
Council and City Mayor of Manila are not the "board" and "officer" contemplated in Rule 65 of the
Rules of Court because both do not exercise judicial functions. The enactment of the subject
ordinance and issuance of the questioned executive order are legislative and executive functions,
respectively, and thus, do not fall within the ambit of "judicial functions." They are both within the
prerogatives, powers, and authority of the City Council and City Mayor of Manila, respectively.
Furthermore, the petition failed to show with certainty that the respondents acted without or in
excess of jurisdiction or with grave abuse of discretion.
The respondents also asseverate that the petitioner cannot claim that it has no other recourse in
addressing its grievance other than this petition for certiorari. As a matter of fact, there are two cases
pending before Branches 33 and 51 of the RTC of Manila (one is for mandamus; the other, for
declaratory relief) and three in the Court of Appeals (one is for prohibition; the two other cases,
for quo warranto), which are all akin to the present petition in the sense that the relief being sought
therein is the declaration of the invalidity of the subject ordinance. Clearly, the petitioner may ask the
RTC or the Court of Appeals the relief being prayed for before this Court. Moreover, the petitioner
failed to prove discernible compelling reasons attending the present petition that would warrant
cognizance of the present petition by this Court.
Besides, according to the respondents, the petitioner has transgressed the proscription against
forum-shopping in filing the instant suit. Although the parties in the other pending cases and in this
petition are different individuals or entities, they represent the same interest.
With regard to petitioner's prayer for temporary restraining order and/ or preliminary injunction in its
petition, the respondents maintain that the same had become moot and academic in view of the
elections of officers of the City Liga ng mga Barangay on 15 September 2002 and their subsequent
assumption to their respective offices.10Since the acts to be enjoined are now fait accompli, this

petition for certiorari with an application for provisional remedies must necessarily fail. Thus, where
the records show that during the pendency of the case certain events or circumstances had taken
place that render the case moot and academic, the petition for certiorari must be dismissed.
After due deliberation on the pleadings filed, we resolve to dismiss this petition for certiorari.
First, the respondents neither acted in any judicial or quasi-judicial capacity nor arrogated unto
themselves any judicial or quasi-judicial prerogatives. A petition for certiorari under Rule 65 of the
1997 Rules of Civil Procedure is a special civil action that may be invoked only against a tribunal,
board, or officer exercising judicial or quasi-judicial functions.
Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:
SECTION 1. Petition for certiorari. When any tribunal, board or officer exercising judicial
or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal,
or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts with certainty and
praying that judgment be rendered annulling or modifying the proceedings of such tribunal,
board or officer, and granting such incidental reliefs as law and justice may require.
Elsewise stated, for a writ of certiorari to issue, the following requisites must concur: (1) it
must be directed against a tribunal, board, or officer exercising judicial or quasi-judicial
functions; (2) the tribunal, board, or officer must have acted without or in excess of
jurisdiction or with grave abuse of discretion amounting lack or excess of jurisdiction; and (3)
there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law.
A respondent is said to be exercising judicial function where he has the power to determine
what the law is and what the legal rights of the parties are, and then undertakes to determine
these questions and adjudicate upon the rights of the parties.11
Quasi-judicial function, on the other hand, is "a term which applies to the actions, discretion, etc., of
public administrative officers or bodies required to investigate facts or ascertain the existence of
facts, hold hearings, and draw conclusions from them as a basis for their official action and to
exercise discretion of a judicial nature."12
Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that
there be a law that gives rise to some specific rights of persons or property under which adverse
claims to such rights are made, and the controversy ensuing therefrom is brought before a tribunal,
board, or officer clothed with power and authority to determine the law and adjudicate the respective
rights of the contending parties.13
The respondents do not fall within the ambit of tribunal, board, or officer exercising judicial or quasijudicial functions. As correctly pointed out by the respondents, the enactment by the City Council of
Manila of the assailed ordinance and the issuance by respondent Mayor of the questioned executive
order were done in the exercise of legislative and executive functions, respectively, and not of
judicial or quasi-judicial functions. On this score alone, certiorari will not lie.
Second, although the instant petition is styled as a petition for certiorari, in essence, it seeks the
declaration by this Court of the unconstitutionality or illegality of the questioned ordinance and

executive order. It, thus, partakes of the nature of a petition for declaratory relief over which this
Court has only appellate, not original, jurisdiction. 14Section 5, Article VIII of the Constitution provides:
Sec. 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting ambassadors, other public
ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo
warranto, and habeas corpus.
(2) Review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the
Rules of Court may provide, final judgments and orders of lower courts in:
(a) All cases in which the constitutionality or validity of any treaty,
international or executive agreement, law, presidential decree, proclamation,
order, instruction, ordinance, or regulation is in question. (Italics supplied).
As such, this petition must necessary fail, as this Court does not have original jurisdiction
over a petition for declaratory relief even if only questions of law are involved. 15
Third, even granting arguendo that the present petition is ripe for the extraordinary writ of certiorari,
there is here a clear disregard of the hierarchy of courts. No special and important reason or
exceptional and compelling circumstance has been adduced by the petitioner or the intervenor why
direct recourse to this Court should be allowed.
We have held that this Courts original jurisdiction to issue a writ of certiorari (as well as of
prohibition, mandamus,quo warranto, habeas corpus and injunction) is not exclusive, but is
concurrent with the Regional Trial Courts and the Court of Appeals in certain cases. As aptly stated
in People v. Cuaresma:16
This concurrence of jurisdiction is not, however, to be taken as according to parties seeking
any of the writs an absolute, unrestrained freedom of choice of the court to which application
therefor0 will be directed. There is after all a hierarchy of courts. That hierarchy is
determinative of the venue of appeals, and also serves as a general determinant of the
appropriate forum for petitions for the extraordinary writs. A becoming regard of that judicial
hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against
first level ("inferior") courts should be filed with the Regional Trial Court, and those against
the latter, with the Court of Appeals. A direct invocation of the Supreme Courts original
jurisdiction to issue these writs should be allowed only when there are special and important
reasons therefor, clearly and specifically set out in the petition. This is [an] established policy.
It is a policy necessary to prevent inordinate demands upon the Courts time and attention
which are better devoted to those matters within its exclusive jurisdiction, and to prevent
further over-crowding of the Courts docket.
As we have said in Santiago v. Vasquez,17 the propensity of litigants and lawyers to disregard the
hierarchy of courts in our judicial system by seeking relief directly from this Court must be put to a
halt for two reasons: (1) it would be an imposition upon the precious time of this Court; and (2) it
would cause an inevitable and resultant delay, intended or otherwise, in the adjudication of cases,
which in some instances had to be remanded or referred to the lower court as the proper forum
under the rules of procedure, or as better equipped to resolve the issues because this Court is not a
trier of facts.

Thus, we shall reaffirm the judicial policy that this Court will not entertain direct resort to it unless the
redress desired cannot be obtained in the appropriate courts, and exceptional and compelling
circumstances justify the availment of the extraordinary remedy of writ of certiorari, calling for the
exercise of its primary jurisdiction.18
Petitioners reliance on Pimentel v. Aguirre19 is misplaced because the non-observance of the
hierarchy-of-courts rule was not an issue therein. Besides, what was sought to be nullified in the
petition for certiorari and prohibition therein was an act of the President of the Philippines, which
would have greatly affected all local government units. We reiterated therein that when an act of the
legislative department is seriously alleged to have infringed the Constitution, settling the controversy
becomes the duty of this Court. The same is true when what is seriously alleged to be
unconstitutional is an act of the President, who in our constitutional scheme is coequal with
Congress.
We hesitate to rule that the petitioner and the intervenor are guilty of forum-shopping. Forumshopping exists where the elements of litis pendentia are present or when a final judgment in one
case will amount to res judicatain the other. For litis pendentia to exist, the following requisites must
be present: (1) identity of parties, or at least such parties as are representing the same interests in
both actions; (2) identity of rights asserted and reliefs prayed for, the reliefs being founded on the
same facts; and (3) identity with respect to the two preceding particulars in the two cases, such that
any judgment that may be rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other case.20
In the instant petition, and as admitted by the respondents, the parties in this case and in the alleged
other pending cases are different individuals or entities; thus, forum-shopping cannot be said to
exist. Moreover, even assuming that those five petitions are indeed pending before the RTC of
Manila and the Court of Appeals, we can only guess the causes of action and issues raised before
those courts, considering that the respondents failed to furnish this Court with copies of the said
petitions.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.

i.) Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 162059

January 22, 2008

HANNAH EUNICE D. SERANA, petitioner,

vs.
SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, respondents.
DECISION
REYES, R.T., J.:

CAN the Sandiganbayan try a government scholaran** accused, along with her brother, of swindling
government funds?
MAAARI bang litisin ng Sandiganbayan ang isang iskolar ng bayan, at ang kanyang kapatid,
na kapwa pinararatangan ng estafa ng pera ng bayan?
The jurisdictional question is posed in this petition for certiorari assailing the Resolutions 1 of the
Sandiganbayan, Fifth Division, denying petitioners motion to quash the information and her motion
for reconsideration.
The Antecedents
Petitioner Hannah Eunice D. Serana was a senior student of the University of the Philippines-Cebu.
A student of a state university is known as a government scholar. She was appointed by then
President Joseph Estrada on December 21, 1999 as a student regent of UP, to serve a one-year
term starting January 1, 2000 and ending on December 31, 2000.
In the early part of 2000, petitioner discussed with President Estrada the renovation of Vinzons Hall
Annex in UP Diliman.2 On September 4, 2000, petitioner, with her siblings and relatives, registered
with the Securities and Exchange Commission the Office of the Student Regent Foundation, Inc.
(OSRFI).3
One of the projects of the OSRFI was the renovation of the Vinzons Hall Annex. 4 President Estrada
gave Fifteen Million Pesos (P15,000,000.00) to the OSRFI as financial assistance for the proposed
renovation. The source of the funds, according to the information, was the Office of the President.
The renovation of Vinzons Hall Annex failed to materialize. 5 The succeeding student regent, Kristine
Clare Bugayong, and Christine Jill De Guzman, Secretary General of the KASAMA sa U.P., a
system-wide alliance of student councils within the state university, consequently filed a complaint
for Malversation of Public Funds and Property with the Office of the Ombudsman. 6
On July 3, 2003, the Ombudsman, after due investigation, found probable cause to indict petitioner
and her brother Jade Ian D. Serana for estafa, docketed as Criminal Case No. 27819 of the
Sandiganbayan.7 The Information reads:
The undersigned Special Prosecution Officer III, Office of the Special Prosecutor, hereby
accuses HANNAH EUNICE D. SERANA and JADE IAN D. SERANA of the crime of Estafa,
defined and penalized under Paragraph 2(a), Article 315 of the Revised Penal Code, as
amended committed as follows:
That on October, 24, 2000, or sometime prior or subsequent thereto, in Quezon City, Metro
Manila, Philippines, and within the jurisdiction of this Honorable Court, above-named
accused, HANNAH EUNICE D. SERANA, a high-ranking public officer, being then the
Student Regent of the University of the Philippines, Diliman, Quezon City, while in the
performance of her official functions, committing the offense in relation to her office and
taking advantage of her position, with intent to gain, conspiring with her brother, JADE IAN
D. SERANA, a private individual, did then and there wilfully, unlawfully and feloniously
defraud the government by falsely and fraudulently representing to former President Joseph
Ejercito Estrada that the renovation of the Vinzons Hall of the University of the Philippines
will be renovated and renamed as "President Joseph Ejercito Estrada Student Hall," and for
which purpose accused HANNAH EUNICE D. SERANA requested the amount of FIFTEEN

MILLION PESOS (P15,000,000.00), Philippine Currency, from the Office of the President,
and the latter relying and believing on said false pretenses and misrepresentation gave and
delivered to said accused Land Bank Check No. 91353 dated October 24, 2000 in the
amount of FIFTEEN MILLION PESOS (P15,000,000.00), which check was subsequently
encashed by accused Jade Ian D. Serana on October 25, 2000 and misappropriated for their
personal use and benefit, and despite repeated demands made upon the accused for them
to return aforesaid amount, the said accused failed and refused to do so to the damage and
prejudice of the government in the aforesaid amount.
CONTRARY TO LAW. (Underscoring supplied)
Petitioner moved to quash the information. She claimed that the Sandiganbayan does not have any
jurisdiction over the offense charged or over her person, in her capacity as UP student regent.
Petitioner claimed that Republic Act (R.A.) No. 3019, as amended by R.A. No. 8249, enumerates the
crimes or offenses over which the Sandiganbayan has jurisdiction.8 It has no jurisdiction over the
crime of estafa.9 It only has jurisdiction over crimes covered by Title VII, Chapter II, Section 2
(Crimes Committed by Public Officers), Book II of the Revised Penal Code (RPC). Estafa falling
under Title X, Chapter VI (Crimes Against Property), Book II of the RPC is not within the
Sandiganbayans jurisdiction.
She also argued that it was President Estrada, not the government, that was duped. Even assuming
that she received the P15,000,000.00, that amount came from Estrada, not from the coffers of the
government.10
Petitioner likewise posited that the Sandiganbayan had no jurisdiction over her person. As a student
regent, she was not a public officer since she merely represented her peers, in contrast to the other
regents who held their positions in an ex officio capacity. She addsed that she was a simple student
and did not receive any salary as a student regent.
She further contended that she had no power or authority to receive monies or funds. Such power
was vested with the Board of Regents (BOR) as a whole. Since it was not alleged in the information
that it was among her functions or duties to receive funds, or that the crime was committed in
connection with her official functions, the same is beyond the jurisdiction of the Sandiganbayan citing
the case of Soller v. Sandiganbayan.11
The Ombudsman opposed the motion.12 It disputed petitioners interpretation of the law. Section 4(b)
of Presidential Decree (P.D.) No. 1606 clearly contains the catch -all phrase "in relation to office,"
thus, the Sandiganbayan has jurisdiction over the charges against petitioner. In the same breath, the
prosecution countered that the source of the money is a matter of defense. It should be threshed out
during a full-blown trial.13
According to the Ombudsman, petitioner, despite her protestations, iwas a public officer. As a
member of the BOR, she hads the general powers of administration and exerciseds the corporate
powers of UP. Based on Mechems definition of a public office, petitioners stance that she was not
compensated, hence, not a public officer, is erroneous. Compensation is not an essential part of
public office. Parenthetically, compensation has been interpreted to include allowances. By this
definition, petitioner was compensated.14
Sandiganbayan Disposition

In a Resolution dated November 14, 2003, the Sandiganbayan denied petitioners motion for lack of
merit.15 It ratiocinated:
The focal point in controversy is the jurisdiction of the Sandiganbayan over this case.
It is extremely erroneous to hold that only criminal offenses covered by Chapter II, Section 2,
Title VII, Book II of the Revised Penal Code are within the jurisdiction of this Court. As
correctly pointed out by the prosecution, Section 4(b) of R.A. 8249 provides that the
Sandiganbayan also has jurisdiction over other offenses committed by public officials and
employees in relation to their office. From this provision, there is no single doubt that this
Court has jurisdiction over the offense of estafa committed by a public official in relation to
his office.
Accused-movants claim that being merely a member in representation of the student body,
she was never a public officer since she never received any compensation nor does she fall
under Salary Grade 27, is of no moment, in view of the express provision of Section 4 of
Republic Act No. 8249 which provides:
Sec. 4. Jurisdiction The Sandiganbayan shall exercise exclusive original jurisdiction in all
cases involving:
(A) x x x
(1) Officials of the executive branch occupying the positions of regional director and higher,
otherwise classified as Grade "27" and higher, of the Compensation and Position
Classification Act of 1989 (Republic Act No. 6758), specifically including:
xxxx
(g) Presidents, directors or trustees, or managers of government-owned or controlled
corporations, state universities or educational institutions or foundations. (Italics supplied)
It is very clear from the aforequoted provision that the Sandiganbayan has original exclusive
jurisdiction over all offenses involving the officials enumerated in subsection (g), irrespective
of their salary grades, because the primordial consideration in the inclusion of these officials
is the nature of their responsibilities and functions.
Is accused-movant included in the contemplated provision of law?
A meticulous review of the existing Charter of the University of the Philippines reveals that
the Board of Regents, to which accused-movant belongs, exclusively exercises the general
powers of administration and corporate powers in the university, such as: 1) To receive and
appropriate to the ends specified by law such sums as may be provided by law for the
support of the university; 2) To prescribe rules for its own government and to enact for the
government of the university such general ordinances and regulations, not contrary to law,
as are consistent with the purposes of the university; and 3) To appoint, on recommendation
of the President of the University, professors, instructors, lecturers and other employees of
the University; to fix their compensation, hours of service, and such other duties and
conditions as it may deem proper; to grant to them in its discretion leave of absence under
such regulations as it may promulgate, any other provisions of law to the contrary

notwithstanding, and to remove them for cause after an investigation and hearing shall have
been had.
It is well-established in corporation law that the corporation can act only through its board of
directors, or board of trustees in the case of non-stock corporations. The board of directors
or trustees, therefore, is the governing body of the corporation.
It is unmistakably evident that the Board of Regents of the University of the Philippines is
performing functions similar to those of the Board of Trustees of a non-stock corporation.
This draws to fore the conclusion that being a member of such board, accused-movant
undoubtedly falls within the category of public officials upon whom this Court is vested with
original exclusive jurisdiction, regardless of the fact that she does not occupy a position
classified as Salary Grade 27 or higher under the Compensation and Position Classification
Act of 1989.
Finally, this court finds that accused-movants contention that the same of P15 Million was
received from former President Estrada and not from the coffers of the government, is a
matter a defense that should be properly ventilated during the trial on the merits of this
case.16
On November 19, 2003, petitioner filed a motion for reconsideration. 17 The motion was denied with
finality in a Resolution dated February 4, 2004.18
Issue
Petitioner is now before this Court, contending that "THE RESPONDENT COURT COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION
IN NOT QUASHING THE INFORMATION AND DISMISING THE CASE NOTWITHSTANDING THAT
IS HAS NO JURISDICTION OVER THE OFFENSE CHARGED IN THE INFORMATION."19
In her discussion, she reiterates her four-fold argument below, namely: (a) the Sandiganbayan has
no jurisdiction over estafa; (b) petitioner is not a public officer with Salary Grade 27 and she paid her
tuition fees; (c) the offense charged was not committed in relation to her office; (d) the funds in
question personally came from President Estrada, not from the government.
Our Ruling
The petition cannot be granted.
Preliminarily, the denial of a motion to
quash is not correctible by certiorari.
We would ordinarily dismiss this petition for certiorari outright on procedural grounds. Wellestablished is the rule that when a motion to quash in a criminal case is denied, the remedy is not a
petition for certiorari, but for petitioners to go to trial, without prejudice to reiterating the special
defenses invoked in their motion to quash.20Remedial measures as regards interlocutory orders,
such as a motion to quash, are frowned upon and often dismissed. 21 The evident reason for this rule
is to avoid multiplicity of appeals in a single action.22
In Newsweek, Inc. v. Intermediate Appellate Court,23 the Court clearly explained and illustrated the
rule and the exceptions, thus:

As a general rule, an order denying a motion to dismiss is merely interlocutory and cannot be
subject of appeal until final judgment or order is rendered. (Sec. 2 of Rule 41). The ordinary
procedure to be followed in such a case is to file an answer, go to trial and if the decision is
adverse, reiterate the issue on appeal from the final judgment. The same rule applies to an
order denying a motion to quash, except that instead of filing an answer a plea is entered
and no appeal lies from a judgment of acquittal.
This general rule is subject to certain exceptions. If the court, in denying the motion to
dismiss or motion to quash, acts without or in excess of jurisdiction or with grave abuse of
discretion, then certiorari or prohibition lies. The reason is that it would be unfair to require
the defendant or accused to undergo the ordeal and expense of a trial if the court has no
jurisdiction over the subject matter or offense, or is not the court of proper venue, or if the
denial of the motion to dismiss or motion to quash is made with grave abuse of discretion or
a whimsical and capricious exercise of judgment. In such cases, the ordinary remedy of
appeal cannot be plain and adequate. The following are a few examples of the exceptions to
the general rule.
In De Jesus v. Garcia (19 SCRA 554), upon the denial of a motion to dismiss based on lack
of jurisdiction over the subject matter, this Court granted the petition for certiorari and
prohibition against the City Court of Manila and directed the respondent court to dismiss the
case.
In Lopez v. City Judge (18 SCRA 616), upon the denial of a motion to quash based on lack of
jurisdiction over the offense, this Court granted the petition for prohibition and enjoined the
respondent court from further proceeding in the case.
In Enriquez v. Macadaeg (84 Phil. 674), upon the denial of a motion to dismiss based on
improper venue, this Court granted the petition for prohibition and enjoined the respondent
judge from taking cognizance of the case except to dismiss the same.
In Manalo v. Mariano (69 SCRA 80), upon the denial of a motion to dismiss based on bar by
prior judgment, this Court granted the petition for certiorari and directed the respondent
judge to dismiss the case.
In Yuviengco v. Dacuycuy (105 SCRA 668), upon the denial of a motion to dismiss based on
the Statute of Frauds, this Court granted the petition for certiorari and dismissed the
amended complaint.
In Tacas v. Cariaso (72 SCRA 527), this Court granted the petition for certiorari after the
motion to quash based on double jeopardy was denied by respondent judge and ordered
him to desist from further action in the criminal case except to dismiss the same.
In People v. Ramos (83 SCRA 11), the order denying the motion to quash based on
prescription was set aside on certiorari and the criminal case was dismissed by this Court. 24
We do not find the Sandiganbayan to have committed a grave abuse of discretion.
The jurisdiction of the Sandiganbayan is
set by P.D. No. 1606, as amended, not by
R.A. No. 3019, as amended.

We first address petitioners contention that the jurisdiction of the Sandiganbayan is determined by
Section 4 of R.A. No. 3019 (The Anti-Graft and Corrupt Practices Act, as amended). We note that
petitioner refers to Section 4 of the said law yet quotes Section 4 of P.D. No. 1606, as amended, in
her motion to quash before the Sandiganbayan.25 She repeats the reference in the instant petition
for certiorari26 and in her memorandum of authorities.27
We cannot bring ourselves to write this off as a mere clerical or typographical error. It bears stressing
that petitioner repeated this claim twice despite corrections made by the Sandiganbayan. 28
Her claim has no basis in law. It is P.D. No. 1606, as amended, rather than R.A. No. 3019, as
amended, that determines the jurisdiction of the Sandiganbayan. A brief legislative history of the
statute creating the Sandiganbayan is in order. The Sandiganbayan was created by P.D. No. 1486,
promulgated by then President Ferdinand E. Marcos on June 11, 1978. It was promulgated to attain
the highest norms of official conduct required of public officers and employees, based on the concept
that public officers and employees shall serve with the highest degree of responsibility, integrity,
loyalty and efficiency and shall remain at all times accountable to the people. 29
P.D. No. 1486 was, in turn, amended by P.D. No. 1606 which was promulgated on December 10,
1978. P.D. No. 1606 expanded the jurisdiction of the Sandiganbayan. 30
P.D. No. 1606 was later amended by P.D. No. 1861 on March 23, 1983, further altering the
Sandiganbayan jurisdiction. R.A. No. 7975 approved on March 30, 1995 made succeeding
amendments to P.D. No. 1606, which was again amended on February 5, 1997 by R.A. No. 8249.
Section 4 of R.A. No. 8249 further modified the jurisdiction of the Sandiganbayan. As it now stands,
the Sandiganbayan has jurisdiction over the following:
Sec. 4. Jurisdiction. - The Sandiganbayan shall exercise exclusive original jurisdiction in all
cases involving:
A. Violations of Republic Act No. 3019, as amended, other known as the Anti-Graft and
Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII, Book II of
the Revised Penal Code, where one or more of the accused are officials occupying the
following positions in the government, whether in a permanent, acting or interim capacity, at
the time of the commission of the offense:
(1) Officials of the executive branch occupying the positions of regional director and higher,
otherwise classified as Grade "27" and higher, of the Compensation and Position
Classification Act of 989 (Republic Act No. 6758), specifically including:
" (a) Provincial governors, vice-governors, members of the sangguniang panlalawigan, and
provincial treasurers, assessors, engineers, and other city department heads;
" (b) City mayor, vice-mayors, members of the sangguniang panlungsod, city treasurers,
assessors, engineers, and other city department heads;
"(c ) Officials of the diplomatic service occupying the position of consul and higher;
" (d) Philippine army and air force colonels, naval captains, and all officers of higher rank;
" (e) Officers of the Philippine National Police while occupying the position of provincial
director and those holding the rank of senior superintended or higher;

" (f) City and provincial prosecutors and their assistants, and officials and prosecutors in the
Office of the Ombudsman and special prosecutor;
" (g) Presidents, directors or trustees, or managers of government-owned or controlled
corporations, state universities or educational institutions or foundations.
" (2) Members of Congress and officials thereof classified as Grade "27'" and up under the
Compensation and Position Classification Act of 1989;
" (3) Members of the judiciary without prejudice to the provisions of the Constitution;
" (4) Chairmen and members of Constitutional Commission, without prejudice to the
provisions of the Constitution; and
" (5) All other national and local officials classified as Grade "27'" and higher under the
Compensation and Position Classification Act of 1989.
B. Other offenses of felonies whether simple or complexed with other crimes committed by
the public officials and employees mentioned in subsection a of this section in relation to
their office.
C. Civil and criminal cases filed pursuant to and in connection with Executive Order Nos. 1,
2, 14 and 14-A, issued in 1986.
" In cases where none of the accused are occupying positions corresponding to Salary
Grade "27'" or higher, as prescribed in the said Republic Act No. 6758, or military and PNP
officer mentioned above, exclusive original jurisdiction thereof shall be vested in the proper
regional court, metropolitan trial court, municipal trial court, and municipal circuit trial court,
as the case may be, pursuant to their respective jurisdictions as provided in Batas
Pambansa Blg. 129, as amended.
" The Sandiganbayan shall exercise exclusive appellate jurisdiction over final judgments,
resolutions or order of regional trial courts whether in the exercise of their own original
jurisdiction or of their appellate jurisdiction as herein provided.
" The Sandiganbayan shall have exclusive original jurisdiction over petitions for the issuance
of the writs of mandamus, prohibition, certiorari, habeas corpus, injunctions, and other
ancillary writs and processes in aid of its appellate jurisdiction and over petitions of similar
nature, including quo warranto, arising or that may arise in cases filed or which may be filed
under Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986: Provided, That the jurisdiction
over these petitions shall not be exclusive of the Supreme Court.
" The procedure prescribed in Batas Pambansa Blg. 129, as well as the implementing rules
that the Supreme Court has promulgated and may thereafter promulgate, relative to
appeals/petitions for review to the Court of Appeals, shall apply to appeals and petitions for
review filed with the Sandiganbayan. In all cases elevated to the Sandiganbayan and from
the Sandiganbayan to the Supreme Court, the Office of the Ombudsman, through its special
prosecutor, shall represent the People of the Philippines, except in cases filed pursuant to
Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986.

" In case private individuals are charged as co-principals, accomplices or accessories with
the public officers or employees, including those employed in government-owned or
controlled corporations, they shall be tried jointly with said public officers and employees in
the proper courts which shall exercise exclusive jurisdiction over them.
" Any provisions of law or Rules of Court to the contrary notwithstanding, the criminal action
and the corresponding civil action for the recovery of civil liability shall, at all times, be
simultaneously instituted with, and jointly determined in, the same proceeding by the
Sandiganbayan or the appropriate courts, the filing of the criminal action being deemed to
necessarily carry with it the filing of the civil action, and no right to reserve the filing such civil
action separately from the criminal action shall be recognized: Provided, however, That
where the civil action had heretofore been filed separately but judgment therein has not yet
been rendered, and the criminal case is hereafter filed with the Sandiganbayan or the
appropriate court, said civil action shall be transferred to the Sandiganbayan or the
appropriate court, as the case may be, for consolidation and joint determination with the
criminal action, otherwise the separate civil action shall be deemed abandoned."
Upon the other hand, R.A. No. 3019 is a penal statute approved on August 17, 1960. The said law
represses certain acts of public officers and private persons alike which constitute graft or corrupt
practices or which may lead thereto.31 Pursuant to Section 10 of R.A. No. 3019, all prosecutions for
violation of the said law should be filed with the Sandiganbayan.32
R.A. No. 3019 does not contain an enumeration of the cases over which the Sandiganbayan has
jurisdiction. In fact, Section 4 of R.A. No. 3019 erroneously cited by petitioner, deals not with the
jurisdiction of the Sandiganbayan but with prohibition on private individuals. We quote:
Section 4. Prohibition on private individuals. (a) It shall be unlawful for any person having
family or close personal relation with any public official to capitalize or exploit or take
advantage of such family or close personal relation by directly or indirectly requesting or
receiving any present, gift or material or pecuniary advantage from any other person having
some business, transaction, application, request or contract with the government, in which
such public official has to intervene. Family relation shall include the spouse or relatives by
consanguinity or affinity in the third civil degree. The word "close personal relation" shall
include close personal friendship, social and fraternal connections, and professional
employment all giving rise to intimacy which assures free access to such public officer.
(b) It shall be unlawful for any person knowingly to induce or cause any public official to
commit any of the offenses defined in Section 3 hereof.
In fine, the two statutes differ in that P.D. No. 1606, as amended, defines the jurisdiction of the
Sandiganbayan while R.A. No. 3019, as amended, defines graft and corrupt practices and provides
for their penalties.
Sandiganbayan has jurisdiction over
the offense of estafa.
Relying on Section 4 of P.D. No. 1606, petitioner contends that estafa is not among those crimes
cognizable by the Sandiganbayan. We note that in hoisting this argument, petitioner isolated the first
paragraph of Section 4 of P.D. No. 1606, without regard to the succeeding paragraphs of the said
provision.

The rule is well-established in this jurisdiction that statutes should receive a sensible construction so
as to avoid an unjust or an absurd conclusion.33 Interpretatio talis in ambiguis semper fienda est, ut
evitetur inconveniens et absurdum. Where there is ambiguity, such interpretation as will avoid
inconvenience and absurdity is to be adopted. Kung saan mayroong kalabuan, ang
pagpapaliwanag ay hindi dapat maging mahirap at katawa-tawa.
Every section, provision or clause of the statute must be expounded by reference to each other in
order to arrive at the effect contemplated by the legislature.34 The intention of the legislator must be
ascertained from the whole text of the law and every part of the act is to be taken into view.35 In other
words, petitioners interpretation lies in direct opposition to the rule that a statute must be interpreted
as a whole under the principle that the best interpreter of a statute is the statute itself. 36 Optima
statuti interpretatrix est ipsum statutum. Ang isang batas ay marapat na bigyan ng kahulugan sa
kanyang kabuuan sa ilalim ng prinsipyo na ang pinakamainam na interpretasyon ay ang
mismong batas.
Section 4(B) of P.D. No. 1606 reads:
B. Other offenses or felonies whether simple or complexed with other crimes committed by
the public officials and employees mentioned in subsection a of this section in relation to
their office.
Evidently, the Sandiganbayan has jurisdiction over other felonies committed by public officials in
relation to their office. We see no plausible or sensible reason to exclude estafa as one of the
offenses included in Section 4(bB) of P.D. No. 1606. Plainly, estafa is one of those other felonies.
The jurisdiction is simply subject to the twin requirements that (a) the offense is committed by public
officials and employees mentioned in Section 4(A) of P.D. No. 1606, as amended, and that (b) the
offense is committed in relation to their office.
In Perlas, Jr. v. People,37 the Court had occasion to explain that the Sandiganbayan has jurisdiction
over an indictment for estafa versus a director of the National Parks Development Committee, a
government instrumentality. The Court held then:
The National Parks Development Committee was created originally as an Executive
Committee on January 14, 1963, for the development of the Quezon Memorial, Luneta and
other national parks (Executive Order No. 30). It was later designated as the National Parks
Development Committee (NPDC) on February 7, 1974 (E.O. No. 69). On January 9, 1966,
Mrs. Imelda R. Marcos and Teodoro F. Valencia were designated Chairman and ViceChairman respectively (E.O. No. 3). Despite an attempt to transfer it to the Bureau of Forest
Development, Department of Natural Resources, on December 1, 1975 (Letter of
Implementation No. 39, issued pursuant to PD No. 830, dated November 27, 1975), the
NPDC has remained under the Office of the President (E.O. No. 709, dated July 27, 1981).
Since 1977 to 1981, the annual appropriations decrees listed NPDC as a regular
government agency under the Office of the President and allotments for its maintenance and
operating expenses were issued direct to NPDC (Exh. 10-A, Perlas, Item Nos. 2, 3).
The Sandiganbayans jurisdiction over estafa was reiterated with greater firmness in Bondoc v.
Sandiganbayan.38Pertinent parts of the Courts ruling in Bondoc read:
Furthermore, it is not legally possible to transfer Bondocs cases to the Regional Trial Court,
for the simple reason that the latter would not have jurisdiction over the offenses. As already
above intimated, the inability of the Sandiganbayan to hold a joint trial of Bondocs cases and

those of the government employees separately charged for the same crimes, has not altered
the nature of the offenses charged, as estafa thru falsification punishable by penalties higher
than prision correccional or imprisonment of six years, or a fine of P6,000.00, committed by
government employees in conspiracy with private persons, including Bondoc. These crimes
are within the exclusive, original jurisdiction of the Sandiganbayan. They simply cannot be
taken cognizance of by the regular courts, apart from the fact that even if the cases could be
so transferred, a joint trial would nonetheless not be possible.
Petitioner UP student regent
is a public officer.
Petitioner also contends that she is not a public officer. She does not receive any salary or
remuneration as a UP student regent. This is not the first or likely the last time that We will be called
upon to define a public officer. InKhan, Jr. v. Office of the Ombudsman, We ruled that it is difficult to
pin down the definition of a public officer.39The 1987 Constitution does not define who are public
officers. Rather, the varied definitions and concepts are found in different statutes and jurisprudence.
In Aparri v. Court of Appeals,40 the Court held that:
A public office is the right, authority, and duty created and conferred by law, by which for a
given period, either fixed by law or enduring at the pleasure of the creating power, an
individual is invested with some portion of the sovereign functions of the government, to be
exercise by him for the benefit of the public ([Mechem Public Offices and Officers,] Sec. 1).
The right to hold a public office under our political system is therefore not a natural right. It
exists, when it exists at all only because and by virtue of some law expressly or impliedly
creating and conferring it (Mechem Ibid., Sec. 64). There is no such thing as a vested
interest or an estate in an office, or even an absolute right to hold office. Excepting
constitutional offices which provide for special immunity as regards salary and tenure, no one
can be said to have any vested right in an office or its salary (42 Am. Jur. 881).
In Laurel v. Desierto,41 the Court adopted the definition of Mechem of a public office:
"A public office is the right, authority and duty, created and conferred by law, by which, for a
given period, either fixed by law or enduring at the pleasure of the creating power, an
individual is invested with some portion of the sovereign functions of the government, to be
exercised by him for the benefit of the public. The individual so invested is a public officer." 42
Petitioner claims that she is not a public officer with Salary Grade 27; she is, in fact, a regular tuition
fee-paying student. This is likewise bereft of merit. It is not only the salary grade that determines the
jurisdiction of the Sandiganbayan. The Sandiganbayan also has jurisdiction over other officers
enumerated in P.D. No. 1606. InGeduspan v. People,43 We held that while the first part of Section
4(A) covers only officials with Salary Grade 27 and higher, its second part specifically includes other
executive officials whose positions may not be of Salary Grade 27 and higher but who are by
express provision of law placed under the jurisdiction of the said court. Petitioner falls under the
jurisdiction of the Sandiganbayan as she is placed there by express provision of law.44
Section 4(A)(1)(g) of P.D. No. 1606 explictly vested the Sandiganbayan with jurisdiction over
Presidents, directors or trustees, or managers of government-owned or controlled corporations, state
universities or educational institutions or foundations. Petitioner falls under this category. As the
Sandiganbayan pointed out, the BOR performs functions similar to those of a board of trustees of a
non-stock corporation.45 By express mandate of law, petitioner is, indeed, a public officer as
contemplated by P.D. No. 1606.

Moreover, it is well established that compensation is not an essential element of public office. 46 At
most, it is merely incidental to the public office.47
Delegation of sovereign functions is essential in the public office. An investment in an individual of
some portion of the sovereign functions of the government, to be exercised by him for the benefit of
the public makes one a public officer.48
The administration of the UP is a sovereign function in line with Article XIV of the Constitution. UP
performs a legitimate governmental function by providing advanced instruction in literature,
philosophy, the sciences, and arts, and giving professional and technical training. 49 Moreover, UP is
maintained by the Government and it declares no dividends and is not a corporation created for
profit.50
The offense charged was committed
in relation to public office, according
to the Information.
Petitioner likewise argues that even assuming that she is a public officer, the Sandiganbayan would
still not have jurisdiction over the offense because it was not committed in relation to her office.
According to petitioner, she had no power or authority to act without the approval of the BOR. She
adds there was no Board Resolution issued by the BOR authorizing her to contract with then
President Estrada; and that her acts were not ratified by the governing body of the state university.
Resultantly, her act was done in a private capacity and not in relation to public office.
It is axiomatic that jurisdiction is determined by the averments in the information. 51 More than that,
jurisdiction is not affected by the pleas or the theories set up by defendant or respondent in an
answer, a motion to dismiss, or a motion to quash.52 Otherwise, jurisdiction would become
dependent almost entirely upon the whims of defendant or respondent. 53
In the case at bench, the information alleged, in no uncertain terms that petitioner, being then a
student regent of U.P., "while in the performance of her official functions, committing the offense in
relation to her office and taking advantage of her position, with intent to gain, conspiring with her
brother, JADE IAN D. SERANA, a private individual, did then and there wilfully, unlawfully and
feloniously defraud the government x x x." (Underscoring supplied)
Clearly, there was no grave abuse of discretion on the part of the Sandiganbayan when it did not
quash the information based on this ground.
Source of funds is a defense that should
be raised during trial on the merits.
It is contended anew that the amount came from President Estradas private funds and not from the
government coffers. Petitioner insists the charge has no leg to stand on.
We cannot agree. The information alleges that the funds came from the Office of the President and
not its then occupant, President Joseph Ejercito Estrada. Under the information, it is averred that
"petitioner requested the amount of Fifteen Million Pesos (P15,000,000.00), Philippine
Currency, from the Office of the President, and the latter relying and believing on said false
pretenses and misrepresentation gave and delivered to said accused Land Bank Check No. 91353
dated October 24, 2000 in the amount of Fifteen Million Pesos (P15,000,000.00)."

Again, the Court sustains the Sandiganbayan observation that the source of the P15,000,000 is a
matter of defense that should be ventilated during the trial on the merits of the instant case. 54
A lawyer owes candor, fairness
and honesty to the Court.
As a parting note, petitioners counsel, Renato G. dela Cruz, misrepresented his reference to
Section 4 of P.D. No. 1606 as a quotation from Section 4 of R.A. No. 3019. A review of his motion to
quash, the instant petition forcertiorari and his memorandum, unveils the misquotation. We urge
petitioners counsel to observe Canon 10 of the Code of Professional Responsibility, specifically
Rule 10.02 of the Rules stating that "a lawyer shall not misquote or misrepresent."
The Court stressed the importance of this rule in Pangan v. Ramos,55 where Atty Dionisio D. Ramos
used the name Pedro D.D. Ramos in connection with a criminal case. The Court ruled that Atty.
Ramos resorted to deception by using a name different from that with which he was authorized. We
severely reprimanded Atty. Ramos and warned that a repetition may warrant suspension or
disbarment.56
We admonish petitioners counsel to be more careful and accurate in his citation. A lawyers conduct
before the court should be characterized by candor and fairness.57 The administration of justice
would gravely suffer if lawyers do not act with complete candor and honesty before the courts. 58
WHEREFORE, the petition is DENIED for lack of merit.
SO ORDERED.

j.) Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 170122

October 12, 2009

CLARITA DEPAKAKIBO GARCIA, Petitioner,

vs.
SANDIGANBAYAN and REPUBLIC OF THE PHILIPPINES, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 171381
CLARITA DEPAKAKIBO GARCIA, Petitioner,
vs.
SANDIGANBAYAN and REPUBLIC OF THE PHILIPPINES, Respondents.
DECISION
VELASCO, JR., J.:

The Case
Before us are these two (2) consolidated petitions under Rule 65, each interposed by petitioner
Clarita D. Garcia, with application for injunctive relief. In the first petition for mandamus and/or
certiorari, docketed as G.R. No. 170122, petitioner seeks to nullify and set aside the August 5, 2005
Order,1 as reiterated in another Order dated August 26, 2005, both issued by the Sandiganbayan,
Fourth Division, which effectively denied the petitioners motion to dismiss and/or to quash Civil
Case No. 0193, a suit for forfeiture commenced by the Republic of the Philippines against the
petitioner and her immediate family. The second petition for certiorari, docketed as G.R. No. 171381,
seeks to nullify and set aside the November 9, 2005 Resolution2 of the Sandiganbayan, Fourth
Division, insofar as it likewise denied the petitioners motion to dismiss and/or quash Civil Case No.
0196, another forfeiture case involving the same parties but for different properties.
The Facts
To recover unlawfully acquired funds and properties in the aggregate amount of PhP 143,052,015.29
that retired Maj. Gen. Carlos F. Garcia, his wife, herein petitioner Clarita, children Ian Carl, Juan
Paulo and Timothy Mark (collectively, the Garcias) had allegedly amassed and acquired, the
Republic, through the Office of the Ombudsman (OMB), pursuant to Republic Act No. (RA)
1379,3 filed with the Sandiganbayan (SB) on October 29, 2004 a petition for the forfeiture of those
properties. This petition, docketed as Civil Case No. 0193, was eventually raffled to the Fourth
Division of the anti-graft court.
Civil Case No. 0193 was followed by the filing on July 5, 2005 of another forfeiture case, docketed
as Civil Case No. 0196, this time to recover funds and properties amounting to PhP 202,005,980.55.
Civil Case No. 0196 would eventually be raffled also to the Fourth Division of the SB. For
convenience and clarity, Civil Case No. 0193 shall hereinafter be also referred to as Forfeiture I and
Civil Case No. 0196 as Forfeiture II.
Prior to the filing of Forfeiture II, but subsequent to the filing of Forfeiture I, the OMB charged the
Garcias and three others with violation of RA 7080 (plunder) under an Information dated April 5,
2005 which placed the value of the property and funds plundered at PhP 303,272,005.99. Docketed
as Crim. Case No. 28107, the Information was raffled off to the Second Division of the SB. The
plunder charge, as the parties pleadings seem to indicate, covered substantially the same properties
identified in both forfeiture cases.
After the filing of Forfeiture I, the following events transpired in relation to the case:
(1) The corresponding summons were issued and all served on Gen. Garcia at his
place of detention. Per the Sheriffs Return4 dated November 2, 2005, the summons were
duly served on respondent Garcias. Earlier, or on October 29, 2004, the SB issued a writ of
attachment in favor of the Republic, an issuance which Gen. Garcia challenged before this
Court, docketed as G.R. No. 165835.
Instead of an answer, the Garcias filed a motion to dismiss on the ground of the SBs lack of
jurisdiction over separate civil actions for forfeiture. The OMB countered with a motion to
expunge and to declare the Garcias in default. To the OMBs motion, the Garcias interposed
an opposition in which they manifested that they have meanwhile repaired to the Court
on certiorari, docketed as G.R. No. 165835 to nullify the writ of attachment SB issued in
which case the SB should defer action on the forfeiture case as a matter of judicial courtesy.

(2) By Resolution5 of January 20, 2005, the SB denied the motion to dismiss; declared the
same motion aspro forma and hence without tolling effect on the period to answer. The same
resolution declared the Garcias in default.
Another resolution6 denied the Garcias motion for reconsideration and/or to admit answer,
and set a date for the ex-parte presentation of the Republics evidence.
A second motion for reconsideration was also denied on February 23, 2005, pursuant to the
prohibited pleading rule.
(3) Despite the standing default order, the Garcias moved for the transfer and consolidation
of Forfeiture I with the plunder case which were respectively pending in different divisions of
the SB, contending that such consolidation is mandatory under RA 8249. 7
On May 20, 2005, the SB 4th Division denied the motion for the reason that the forfeiture
case is not the corresponding civil action for the recovery of civil liability arising from the
criminal case of plunder.
(4) On July 26, 2005, the Garcias filed another motion to dismiss and/or to quash Forfeiture I
on, inter alia, the following grounds: (a) the filing of the plunder case ousted the SB 4th
Division of jurisdiction over the forfeiture case; and (b) that the consolidation is imperative in
order to avoid possible double jeopardy entanglements.
By Order8 of August 5, 2005, the SB merely noted the motion in view of movants having been
declared in default which has yet to be lifted.
It is upon the foregoing factual antecedents that petitioner Clarita has interposed her first special civil
action for mandamus and/or certiorari docketed as G.R. No. 170122, raising the following issues:
I. Whether or not the [SB] 4th Division acted without or in excess of jurisdiction or with grave abuse
of discretion x x x in issuing its challenged order of August 5, 2005 and August 26 2005 that merely
"Noted without action," hence refused to resolve petitioners motion to dismiss and/or to quash by
virtue of petitioners prior default in that:
A. For lack of proper and valid service of summons, the [SB] 4th Division could not have
acquired jurisdiction over petitioners, [and her childrens] x x x persons, much less make
them become the true "parties-litigants, contestants or legal adversaries" in forfeiture I. As
the [SB] has not validly acquired jurisdiction over the petitioners [and her childrens] x x x
persons, they could not possibly be declared in default, nor can a valid judgment by default
be rendered against them.
B. Even then, mere declaration in default does not per se bar petitioner from challenging the
[SB] 4th Divisions lack of jurisdiction over the subject matter of forfeiture I as the same can
be raised anytime, even after final judgment. In the absence of jurisdiction over the subject
matter, any and all proceedings before the [SB] are null and void.
C. Contrary to its August 26, 2005 rejection of petitioners motion for reconsideration of the
first challenged order that the issue of jurisdiction raised therein had already been passed
upon by [the SB 4th Divisions] resolution of May 20, 2005, the records clearly show that the
grounds relied upon by petitioner in her motion to dismiss and/or to quash dated July 26,
2005 were entirely different, separate and distinct from the grounds set forth in petitioners

manifestation and motion [to consolidate] dated April 15, 2005 that was denied by it per its
resolution of May 20, 2005.
D. In any event, the [SB] 4th Division has been ousted of jurisdiction over the subject matter
of forfeiture I upon the filing of the main plunder case against petitioner that mandates the
automatic forfeiture of the subject properties in forfeiture cases I & II as a function or adjunct
of any conviction for plunder.
E. Being incompatible, the forfeiture law (RA No. 1379 [1955]) was impliedly repealed by the
plunder law (RA No. 7080 [1991]) with automatic forfeiture mechanism.
F. Since the sought forfeiture includes properties purportedly located in the USA, any penal
conviction for forfeiture in this case cannot be enforced outside of the Philippines x x x.
G. Based on orderly procedure and sound administration of justice, it is imperative that the
matter of forfeiture be exclusively tried in the main plunder case to avoid possible double
jeopardy entanglements, and to avoid possible conflicting decisions by 2 divisions of the [SB]
on the matter of forfeiture as a penal sanction.9 (Emphasis added.)
With respect to Forfeiture II, the following events and proceedings occurred or were taken after the
petition for Forfeiture II was filed:
(1) On July 12, 2005, the SB sheriff served the corresponding summons. In his return of July
13, 2005, the sheriff stated giving the copies of the summons to the OIC/Custodian of
the PNP Detention Center who in turn handed them to Gen. Garcia. The general signed
his receipt of the summons, but as to those pertaining to the other respondents, Gen. Garcia
acknowledged receiving the same, but with the following qualifying note: "Im receiving the
copies of Clarita, Ian Carl, Juan Paolo & Timothy but these copies will not guarantee it
being served to the above-named (sic)."
(2) On July 26, 2005, Clarita and her children, thru special appearance of counsel, filed a
motion to dismiss and/or to quash Forfeiture II primarily for lack of jurisdiction over their
persons and on the subject matter thereof which is now covered by the plunder case.
To the above motion, the Republic filed its opposition with a motion for alternative
service of summons. The motion for alternative service would be repeated in another
motion of August 25, 2005.
(3) By Joint Resolution of November 9, 2005, the SB denied both the petitioners motion to
dismiss and/or to quash and the Republics motion for alternative service of summons.
On January 24, 2006, the SB denied petitioners motion for partial reconsideration. 10
From the last two issuances adverted to, Clarita has come to this Court via the instant petition for
certiorari, docketed as GR No. 171381. As there submitted, the SB 4th Division acted without or in
excess of jurisdiction or with grave abuse of discretion in issuing its Joint Resolution dated
November 9, 2005 and its Resolution of January 24, 2006 denying petitioners motion to dismiss
and/or to quash in that:
A. Based on its own finding that summons was improperly served on petitioner, the [SB]
ought to have dismissed forfeiture II for lack of jurisdiction over petitioners person x x x.

B. By virtue of the plunder case filed with the [SB] Second Division that mandates the
automatic forfeiture of unlawfully acquired properties upon conviction, the [SB] Fourth
Division has no jurisdiction over the subject matter of forfeiture.
C. Being incompatible, the forfeiture law (RA No. 1379 [1955]) was impliedly repealed by the
plunder law (RA No. 7080 [1991]) with automatic forfeiture mechanism.
D. Based on orderly procedure and sound administration of justice, it is imperative that the
matter of forfeiture be exclusively tried in the main plunder case to avoid possible double
jeopardy entanglements and worse conflicting decisions by 2 divisions of the Sandiganbayan
on the matter of forfeiture as a penal sanction.11 (Emphasis added.)
Per Resolution of the Court dated March 13, 2006, G.R. No. 170122 and G.R. No. 171381 were
consolidated.
The Courts Ruling
The petitions are partly meritorious.
The core issue tendered in these consolidated cases ultimately boils down to the question of
jurisdiction and may thusly be couched into whether the Fourth Division of the SB has acquired
jurisdiction over the person of petitionerand her three sons for that matterconsidering
that, first, vis--vis Civil Case Nos. 0193 (Forfeiture I) and 0196 (Forfeiture II), summons against her
have been ineffectively or improperly served and, second, that the plunder caseCrim. Case No.
28107has already been filed and pending with another division of the SB, i.e., Second Division of
the SB.
Plunder Case in Crim. Case No. 28107 Did Not Absorb the Forfeiture Cases in Civil Case Nos.
0193 and 0196
Petitioner maintains that the SB 4th Division has no jurisdiction over the subject matter of Forfeitures
I and II as both cases are now covered or included in the plunder case against the Garcias. Or as
petitioner puts it a bit differently, the filing of the main plunder case (Crim. Case No. 28107), with its
automatic forfeiture mechanism in the event of conviction, ousted the SB 4th Division of its
jurisdiction over the subject matter of the forfeiture cases. The inclusion of the forfeiture cases with
the plunder case is necessary, so petitioner claims, to obviate possible double jeopardy
entanglements and colliding case dispositions. Prescinding from these premises, petitioner would
ascribe grave abuse of discretion on the SB 4th Division for not granting its separate motions to
dismiss the two forfeiture petitions and/or to consolidate them with the plunder case on the foregoing
ground.
Petitioners contention is untenable. And in response to what she suggests in some of her pleadings,
let it be stated at the outset that the SB has jurisdiction over actions for forfeiture under RA 1379,
albeit the proceeding thereunder is civil in nature. We said so in Garcia v. Sandiganbayan12 involving
no less than petitioners husband questioning certain orders issued in Forfeiture I case.
Petitioners posture respecting Forfeitures I and II being absorbed by the plunder case, thus
depriving the 4th Division of the SB of jurisdiction over the civil cases, is flawed by the assumptions
holding it together, the first assumption being that the forfeiture cases are the corresponding civil
action for recovery of civil liability ex delicto. As correctly ruled by the SB 4th Division in its May 20,

2005 Resolution,13 the civil liability for forfeiture cases does not arise from the commission of a
criminal offense, thus:
Such liability is based on a statute that safeguards the right of the State to recover unlawfully
acquired properties. The action of forfeiture arises when a "public officer or employee [acquires]
during his incumbency an amount of property which is manifestly out of proportion of his salary x x x
and to his other lawful income x x x."14 Such amount of property is then presumed prima facie to
have been unlawfully acquired.15 Thus "if the respondent [public official] is unable to show to the
satisfaction of the court that he has lawfully acquired the property in question, then the court shall
declare such property forfeited in favor of the State, and by virtue of such judgment the property
aforesaid shall become property of the State.16 x x x (Citations in the original.)
Lest it be overlooked, Executive Order No. (EO) 14, Series of 1986, albeit defining only the
jurisdiction over cases involving ill-gotten wealth of former President Marcos, his immediate family
and business associates, authorizes under its Sec. 317 the filing of forfeiture suits under RA 1379
which will proceed independently of any criminal proceedings. The Court, in Republic v.
Sandiganbayan,18 interpreted this provision as empowering the Presidential Commission on Good
Government to file independent civil actions separate from the criminal actions.
Forfeiture Cases and the Plunder Case Have Separate Causes of Action; the Former Is Civil in
Nature while the Latter Is Criminal
It bears stressing, as a second point, that a forfeiture case under RA 1379 arises out of a cause of
action separate and different from a plunder case, thus negating the notion that the crime of plunder
charged in Crim. Case No. 28107 absorbs the forfeiture cases. In a prosecution for plunder, what is
sought to be established is the commission of the criminal acts in furtherance of the acquisition of illgotten wealth. In the language of Sec. 4 of RA 7080, for purposes of establishing the crime of
plunder, it is "sufficient to establish beyond reasonable doubt a pattern of overt or criminal acts
indicative of the overall unlawful scheme or conspiracy [to amass, accumulate or acquire ill-gotten
wealth]." On the other hand, all that the court needs to determine, by preponderance of evidence,
under RA 1379 is the disproportion of respondents properties to his legitimate income, it being
unnecessary to prove how he acquired said properties. As correctly formulated by the Solicitor
General, the forfeitable nature of the properties under the provisions of RA 1379 does not proceed
from a determination of a specific overt act committed by the respondent public officer leading to the
acquisition of the illegal wealth.19
Given the foregoing considerations, petitioners thesis on possible double jeopardy entanglements
should a judgment of conviction ensue in Crim. Case 28107 collapses entirely. Double jeopardy, as a
criminal law concept, refers to jeopardy of punishment for the same offense, 20 suggesting that double
jeopardy presupposes two separate criminal prosecutions. Proceedings under RA 1379 are, to
repeat, civil in nature. As a necessary corollary, one who is sued under RA 1379 may be proceeded
against for a criminal offense. Thus, the filing of a case under that law is not barred by the conviction
or acquittal of the defendant in Crim. Case 28107 for plunder.
Moreover, given the variance in the nature and subject matter of the proceedings between the
plunder case and the subject forfeiture cases, petitioners apprehension about the likelihood of
conflicting decisions of two different divisions of the anti-graft court on the matter of forfeiture as a
penal sanction is specious at best. What the SB said in this regard merits approving citation:
On the matter of forfeiture as a penal sanction, respondents argue that the division where the
plunder case is pending may issue a decision that would collide or be in conflict with the decision by
this division on the forfeiture case. They refer to a situation where this Courts Second Division may

exonerate the respondents in the plunder case while the Fourth Division grant the petition for
forfeiture for the same properties in favor of the state or vice versa.
Suffice it to say that the variance in the decisions of both divisions does not give rise to a conflict.
After all, forfeiture in the plunder case requires the attendance of facts and circumstances separate
and distinct from that in the forfeiture case. Between the two (2) cases, there is no causal connection
in the facts sought to be established and the issues sought to be addressed. As a result, the decision
of this Court in one does not have a bearing on the other.
There is also no conflict even if the decisions in both cases result in an order for the forfeiture of the
subject properties. The forfeiture following a conviction in the plunder case will apply only to those illgotten wealth not recovered by the forfeiture case and vise (sic) versa. This is on the assumption
that the information on plunder and the petition for forfeiture cover the same set of properties. 21
RA 7080 Did Not Repeal RA 1379
Petitioner takes a different tack in her bid to prove that SB erred in not dismissing Forfeitures I and II
with her assertion that RA 7080 impliedly repealed RA 1379. We are not convinced.
Nowhere in RA 7080 can we find any provision that would indicate a repeal, expressly or impliedly,
of RA 1379. RA 7080 is a penal statute which, at its most basic, aims to penalize the act of any
public officer who by himself or in connivance with members of his family amasses, accumulates or
acquires ill-gotten wealth in the aggregate amount of at least PhP 50 million. On the other hand, RA
1379 is not penal in nature, in that it does not make a crime the act of a public official acquiring
during his incumbency an amount of property manifestly out of proportion of his salary and other
legitimate income. RA 1379 aims to enforce the right of the State to recover the properties which
were not lawfully acquired by the officer.
It has often been said that all doubts must be resolved against any implied repeal and all efforts
should be exerted to harmonize and give effect to all laws and provisions on the same subject. To be
sure, both RA 1379 and RA 7080 can very well be harmonized. The Court perceives no
irreconcilable conflict between them. One can be enforced without nullifying the other.
Sandiganbayan Did Not Acquire Jurisdiction over the Persons of Petitioner and Her Children
On the issue of lack of jurisdiction, petitioner argues that the SB did not acquire jurisdiction over her
person and that of her children due to a defective substituted service of summons. There is merit in
petitioners contention.
1 a vv p h i 1

Sec. 7, Rule 14 of the 1997 Revised Rules of Civil Procedure clearly provides for the requirements
of a valid substituted service of summons, thus:
SEC. 7. Substituted service.If the defendant cannot be served within a reasonable time as
provided in the preceding section [personal service on defendant], service may be effected (a) by
leaving copies of the summons at the defendants residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copies at defendants office or regular place of
business with some competent person in charge thereof.
It is basic that a court must acquire jurisdiction over a party for the latter to be bound by its decision
or orders. Valid service of summons, by whatever mode authorized by and proper under the Rules,
is the means by which a court acquires jurisdiction over a person.22

In the instant case, it is undisputed that summons for Forfeitures I and II were served personally on
Maj. Gen. Carlos Flores Garcia, who is detained at the PNP Detention Center, who acknowledged
receipt thereof by affixing his signature. It is also undisputed that substituted service of summons for
both Forfeitures I and II were made on petitioner and her children through Maj. Gen. Garcia at the
PNP Detention Center. However, such substituted services of summons were invalid for being
irregular and defective.
In Manotoc v. Court of Appeals,23 we broke down the requirements to be:
(1) Impossibility of prompt personal service, i.e., the party relying on substituted service or
the sheriff must show that defendant cannot be served promptly or there is impossibility of
prompt service within a reasonable time. Reasonable time being "so much time as is
necessary under the circumstances for a reasonably prudent and diligent man to do,
conveniently, what the contract or duty requires that should be done, having a regard for the
rights and possibility of loss, if any[,] to the other party."24 Moreover, we indicated therein that
the sheriff must show several attempts for personal service of at least three (3) times on at
least two (2) different dates.
(2) Specific details in the return, i.e., the sheriff must describe in the Return of Summons the
facts and circumstances surrounding the attempted personal service.
(3) Substituted service effected on a person of suitable age and discretion residing at
defendants house or residence; or on a competent person in charge of defendants office or
regular place of business.
From the foregoing requisites, it is apparent that no valid substituted service of summons was made
on petitioner and her children, as the service made through Maj. Gen. Garcia did not comply with the
first two (2) requirements mentioned above for a valid substituted service of summons. Moreover,
the third requirement was also not strictly complied with as the substituted service was made not at
petitioners house or residence but in the PNP Detention Center where Maj. Gen. Garcia is detained,
even if the latter is of suitable age and discretion. Hence, no valid substituted service of summons
was made.
The stringent rules on valid service of summons for the court to acquire jurisdiction over the person
of the defendants, however, admits of exceptions, as when the party voluntarily submits himself to
the jurisdiction of the court by asking affirmative relief. 25 In the instant case, the Republic asserts that
petitioner is estopped from questioning improper service of summons since the improvident service
of summons in both forfeiture cases had been cured by their (petitioner and her children) voluntary
appearance in the forfeiture cases. The Republic points to the various pleadings filed by petitioner
and her children during the subject forfeiture hearings. We cannot subscribe to the Republics views.
Special Appearance to Question a Courts Jurisdiction Is Not Voluntary Appearance
The second sentence of Sec. 20, Rule 14 of the Revised Rules of Civil Procedure clearly provides:
Sec. 20. Voluntary appearance.The defendants voluntary appearance in the action shall be
equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside
from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary
appearance. (Emphasis ours.)

Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court over his
person, together with other grounds raised therein, is not deemed to have appeared voluntarily
before the court. What the rule on voluntary appearancethe first sentence of the above-quoted rule
means is that the voluntary appearance of the defendant in court is without qualification, in which
case he is deemed to have waived his defense of lack of jurisdiction over his person due to improper
service of summons.
The pleadings filed by petitioner in the subject forfeiture cases, however, do not show that she
voluntarily appeared without qualification. Petitioner filed the following pleadings in Forfeiture I: (a)
motion to dismiss; (b) motion for reconsideration and/or to admit answer; (c) second motion for
reconsideration; (d) motion to consolidate forfeiture case with plunder case; and (e) motion to
dismiss and/or to quash Forfeiture I. And in Forfeiture II: (a) motion to dismiss and/or to quash
Forfeiture II; and (b) motion for partial reconsideration.
The foregoing pleadings, particularly the motions to dismiss, were filed by petitioner solely
for special appearance with the purpose of challenging the jurisdiction of the SB over her
person and that of her three children. Petitioner asserts therein that SB did not acquire jurisdiction
over her person and of her three children for lack of valid service of summons through improvident
substituted service of summons in both Forfeiture I and Forfeiture II. This stance the petitioner never
abandoned when she filed her motions for reconsideration, even with a prayer to admit their
attached Answer Ex Abundante Ad Cautelam dated January 22, 2005 setting forth affirmative
defenses with a claim for damages. And the other subsequent pleadings, likewise, did not abandon
her stance and defense of lack of jurisdiction due to improper substituted services of summons in the
forfeiture cases. Evidently, from the foregoing Sec. 20, Rule 14 of the 1997 Revised Rules on Civil
Procedure, petitioner and her sons did not voluntarily appear before the SB constitutive of or
equivalent to service of summons.
Moreover, the leading La Naval Drug Corp. v. Court of Appeals26 applies to the instant case. Said
case elucidates the current view in our jurisdiction that a special appearance before the court
challenging its jurisdiction over the person through a motion to dismiss even if the movant invokes
other groundsis not tantamount to estoppel or a waiver by the movant of his objection to
jurisdiction over his person; and such is not constitutive of a voluntary submission to the jurisdiction
of the court.
Thus, it cannot be said that petitioner and her three children voluntarily appeared before the SB to
cure the defective substituted services of summons. They are, therefore, not estopped from
questioning the jurisdiction of the SB over their persons nor are they deemed to have waived such
defense of lack of jurisdiction. Consequently, there being no valid substituted services of summons
made, the SB did not acquire jurisdiction over the persons of petitioner and her children. And
perforce, the proceedings in the subject forfeiture cases, insofar as petitioner and her three children
are concerned, are null and void for lack of jurisdiction. Thus, the order declaring them in default
must be set aside and voided insofar as petitioner and her three children are concerned. For the
forfeiture case to proceed against them, it is, thus, imperative for the SB to serve anew summons or
alias summons on the petitioner and her three children in order to acquire jurisdiction over their
persons.
WHEREFORE, the petitions for certiorari and mandamus are PARTIALLY GRANTED. The
Sandiganbayan, Fourth Division has not acquired jurisdiction over petitioner Clarita D. Garcia and
her three children. The proceedings in Civil Case Nos. 0193 and 0196 before the Sandiganbayan,
Fourth Division, insofar as they pertain to petitioner and her three children, are VOID for lack of
jurisdiction over their persons. No costs.

SO ORDERED.

k.) THIRD DIVISION

[G.R. No. 133365. September 16, 2003]

PLATINUM TOURS AND TRAVEL, INCORPORATED, petitioner, vs. JOSE M. PANLILIO,

respondent.
DECISION
CORONA, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the January 15, 1998 decision[1] of the Court of Appeals which ruled that:

xxx

Consequently, the respondent judge committed grave abuse of discretion in

allowing the consolidation of Civil Case No. 96-635 with Civil Case No. 94-1634.

x x x We also leave it to the respondent Judge to decide whether he will return Civil
Case No. 96-635 to Branch 146 or keep it in his docket but should he opt for the
latter, he should act on it as a separate case from Civil Case No. 94-1634.

WHEREFORE, the petition is partially granted and the assailed Orders dated July 23,
1996 and September 17, 1996, allowing the consolidation of Civil Case No. 96-635
with Civil Case No. 94-1634 and denying petitioners motion for reconsideration,
respectively, are ANNULLED and SET ASIDE, with the consequent complete
severance of the two (2) cases.[2]

The facts follow:

On April 27, 1994, petitioner Platinum Tours and Travel Inc. (Platinum) filed a
complaint for a sum of money with damages against Pan Asiatic Travel Corporation
(PATC) and its president Nelida G. Galvez. Platinum sought to collect payment for
the airline tickets which PATC bought from it. The case was docketed as Civil Case
No. 94-1634.

On October 24, 1994, the Regional Trial Court of Makati City, Branch 62, rendered a
judgment[3] by default in favor of Platinum and ordered PATC and Nelida G. Galvez
to solidarily pay Platinum actual damages of P 359,621.03 with legal interest, P
50,000 attorneys fees and cost of suit.

On February 10, 1995, a writ of execution was issued on motion of Platinum.

Pursuant to the writ, Manila Polo Club Proprietary Membership Certificate No. 2133
in the name of Nelida G. Galvez was levied upon and sold for P479,888.48 to a
certain Ma. Rosario Khoo.

On June 2, 1995, private respondent Jose M. Panlilio filed a motion to intervene in

Civil Case No. 94-1634. Panlilio claimed that, in October 1992, Galvez had executed
in his favor a chattel mortgage over her shares of stock in the Manila Polo Club to
secure her P1 million loan and that Galvez had already delivered to him the stock
certificates valued at P5 million.

On June 9, 1995, the trial court denied Panlilios motion for intervention:

Submitted for resolution is Jose M. Panlilios Motion for Intervention dated May 31,
1995.

This Court has to deny the motion because (1) a decision had already been
rendered in this case and that the only matters at issue is the propriety of the
execution; (2) it will only delay or prejudice the adjudication of the rights of the
original parties; and, (3) the Intervenors rights may be fully protected in a separate
action.[4]

On January 29, 1996, the trial court declared the execution sale null and void due to
irregularities in the conduct thereof.

On May 3, 1996, Panlilio filed against Galvez a collection case with application for a
writ of preliminary attachment of the disputed Manila Polo Club shares, docketed as
Civil Case No. 96-365. The case was raffled to Branch 146 of the Regional Trial Court
of Makati City[5]. In the meantime, Panlilio again attempted to intervene in Civil
Case No. 94-1634, this time by incorporating in his complaint a motion to
consolidate Civil Case No. 96-365 and Civil Case No. 94-1634.

On June 13, 1996, Judge Salvador Tensuan of Branch 146 granted the motion for
consolidation on condition that Judge Roberto Diokno of Branch 62, who was trying
Civil Case No. 94-1634, would not object thereto. Judge Diokno later issued an
order, dated July 23, 1996, allowing the consolidation of the two cases and setting
for hearing Panlilios application for a writ of preliminary attachment.

Platinum, as plaintiff in Civil Case No. 94-1634, moved to reconsider the July 23,
1996 order of Judge Diokno but its motion was denied.

On January 31, 1997, Platinum filed a petition for certiorari at the Court of Appeals
assailing, among others, the July 23, 1996 order of Judge Diokno allowing the
consolidation of Civil Case No. 96-365 and Civil Case No. 94-1634.

In a decision dated January 15, 1998, the Court of Appeals annulled the assailed
order but left it to Judge Diokno to decide whether to return Civil Case No. 96-365 to
Judge Tensuan in Branch 146, or to keep it in his docket and decide it as a separate
case.

Platinum filed a motion for partial reconsideration of the decision of the Court of
Appeals, praying that Civil Case No. 96-365 be returned to Branch 146 or re-raffled
to another RTC Branch of Makati. However, the motion was denied by the Court of
Appeals on April 2, 1998.

In the instant petition, Platinum insists that the Makati RTC, Branch 62, has no
jurisdiction to try Civil Case No. 96-365. It argues that, when Judge Dioknos July 23,
1996 order allowing the consolidation of the two cases was annulled and set aside,
RTC Branch 62s basis for acquiring jurisdiction over Civil Case No. 96-365 was
likewise extinguished.

We disagree.

Jurisdiction is the power and authority of the court to hear, try and decide a case.[6]
In general, jurisdiction may either be over the nature of the action, over the subject
matter, over the person of the defendants or over the issues framed in the
pleadings.

Jurisdiction over the nature of the action and subject matter is conferred by law. It is
determined by the allegations of the complaint, irrespective of whether or not the
plaintiff is entitled to recover upon all or some of the claims asserted therein.[7]
Jurisdiction over the person of the plaintiff is acquired from the time he files his
complaint; while jurisdiction over the person of the defendant is acquired by his
voluntary appearance in court and his submission to its authority, or by the coercive
power of legal processes exerted over his person.

Since jurisdiction is the power to hear and determine a particular case, it does not
depend upon the regularity of the exercise by the court of that power or on the
correctness of its decisions.

In the case at bar, there is no doubt that Panlilios collection case docketed as Civil
Case No. 96-365 falls within the jurisdiction of the RTC of Makati, Branch 62. The
fact that the Court of Appeals subsequently annulled Judge Dioknos order granting
the consolidation of Civil Case No. 96-365 and Civil Case No. 94-1634, did not affect
the jurisdiction of the court which issued the said order.

Jurisdiction should be distinguished from the exercise of jurisdiction. Jurisdiction

refers to the authority to decide a case, not the orders or the decision rendered
therein. Accordingly, where a court has jurisdiction over the person and the subject
matter, as in the instant case, the decision on all questions arising from the case is
but an exercise of such jurisdiction. Any error that the court may commit in the

exercise of its jurisdiction is merely an error of judgment which does not affect its
authority to decide the case, much less divest the court of the jurisdiction over the
case.

We find no reversible error on the part of the Court of Appeals when it left to Judge
Diokno of Branch 62 the discretion on whether to return Civil Case No. 96-365 to
Branch 146 or to decide the same as a separate case in his own sala.

Moreover, we find the instant petition premature and speculative. Had Platinum
waited until Judge Diokno decided on what to do with Civil Case No. 96-365, the
parties would have been spared the trouble and the expense of seeking recourse
from this Court, which in turn would have had one petition less in its docket.

The unfounded fear that Civil Case No. 96-365 would unduly delay the final
resolution of Civil Case No. 94-1634, if the former were retained by Branch 62, made
Platinum act with haste. In so doing, it wasted the precious time not only of the
parties but also of this Court.

All told, nothing legally prevents the RTC of Makati, Branch 62, from proceeding with
Civil Case No. 96-365. Should it decide to retain the case, it is hereby directed to
resolve the same with dispatch.

WHEREFORE, petition is hereby DENIED.

SO ORDERED.

l.) Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 139791

December 12, 2003

MANILA BANKERS LIFE INSURANCE CORPORATION, petitioner,

vs.
EDDY NG KOK WEI, respondent.

DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari assailing the Decision1 dated March 26, 1999 and
Resolution2dated August 5, 1999 of the Court of Appeals in CA-G.R. CV No. 40504, entitled "Eddy
Ng Kok Wei vs. Manila Bankers Life Insurance Corporation".
The factual antecedents as borne by the records are:
Eddy Ng Kok Wei, respondent, is a Singaporean businessman who ventured into investing in the
Philippines. On November 29, 1988, respondent, in a Letter of Intent addressed to Manila Bankers
Life Insurance Corporation, petitioner, expressed his intention to purchase a condominium unit at
Valle Verde Terraces.
Subsequently or on December 5, 1988, respondent paid petitioner a reservation fee of P50,000.00
for the purchase of a 46-square meter condominium unit (Unit 703) valued at P860,922.00. On
January 16, 1989, respondent paid 90% of the purchase price in the sum of P729,830.00.
Consequently, petitioner, through its President, Mr. Antonio G. Puyat, executed a Contract to Sell in
favor of the respondent. The contract expressly states that the subject condominium unit "shall
substantially be completed and delivered" to the respondent "within fifteen (15) months" from
February 8, 1989 or on May 8, 1990, and that "(S)hould there be no substantial completion and
fail(ure) to deliver the unit on the date specified, a penalty of 1% of the total amount paid (by
respondent) shall be charged against (petitioner)".
Considering that the stipulated 15-month period was at hand, respondent returned to the Philippines
sometime in April, 1990.
In a letter dated April 5, 1990, petitioner, through its Senior Assistant Vice-President, Mr. Mario G.
Zavalla, informed respondent of the substantial completion of his condominium unit, however, due to
various uncontrollable forces (such as coup d etat attempts, typhoon and steel and cement
shortage), the final turnover is reset to May 31, 1990.
1wphi1

Meanwhile, on July 5, 1990, upon receipt of petitioners notice of delivery dated May 31, 1990,
respondent again flew back to Manila. He found the unit still uninhabitable for lack of water and
electric facilities.
Once more, petitioner issued another notice to move-in addressed to its building administrator
advising the latter that respondent is scheduled to move in on August 22, 1990.
On October 5, 1990, respondent returned to the Philippines only to find that his condominium unit
was still unlivable. Exasperated, he was constrained to send petitioner a letter dated November 21,
1990 demanding payment for the damages he sustained. But petitioner ignored such demand,
prompting respondent to file with the Regional Trial Court, Branch 150, Makati City, a complaint
against the former for specific performance and damages, docketed as Civil Case No. 90-3440.
Meanwhile, during the pendency of the case, respondent finally accepted the condominium unit and
on April 12, 1991, occupied the same. Thus, respondents cause of action has been limited to his
claim for damages.

On December 18, 1992, the trial court rendered a Decision 3 finding the petitioner liable for payment
of damages due to the delay in the performance of its obligation to the respondent. The dispositive
portion reads:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant, ordering
Manila Bankers Life Insurance Corporation to pay plaintiff Eddy Ng Kok Wei the following:
1. One percent (1%) of the total amount plaintiff paid defendant;
2. P100,000.00 as moral damages;
3. P50,000.00 as exemplary damages;
4. P25,000.00 by way of attorneys fees; and
Cost of suit.
"SO ORDERED."
On appeal, the Court of Appeals, in a Decision dated March 26, 1999, affirmed in toto the trial courts
award of damages in favor of the respondent.
Unsatisfied, petitioner filed a motion for reconsideration but was denied by the Appellate Court in a
Resolution dated August 5, 1999.
Hence, this petition for review on certiorari. Petitioner contends that the trial court has no jurisdiction
over the instant case; and that the Court of Appeals erred in affirming the trial courts finding that
petitioner incurred unreasonable delay in the delivery of the condominium unit to respondent.
On petitioners contention that the trial court has no jurisdiction over the instant case, Section 1 (c) of
Presidential Decree No. 1344, as amended, provides:
"SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in
addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority
[now Housing and Land Use Regulatory Board (HLURB)] 4 shall have exclusive jurisdiction to hear
and decide cases of the following nature:
xxx
"C. Cases involving specific performance of contractual and statutory obligations filed by buyers of
subdivision lots or condominium units against the owner, developer, dealer, broker or salesman.
x x x."
Pursuant to the above provisions, it is the HLURB which has jurisdiction over the instant case. We
have consistently held that complaints for specific performance with damages by a lot or
condominium unit buyer against the owner or developer falls under the exclusive jurisdiction of the
HLURB.5

While it may be true that the trial court is without jurisdiction over the case, petitioners active
participation in the proceedings estopped it from assailing such lack of it. We have held that it is an
undesirable practice of a party participating in the proceedings and submitting its case for decision
and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction, when
adverse.6
Here, petitioner failed to raise the question of jurisdiction before the trial court and the Appellate
Court. In effect, petitioner confirmed and ratified the trial courts jurisdiction over this case. Certainly,
it is now in estoppel and can no longer question the trial courts jurisdiction.
On petitioners claim that it did not incur delay, suffice it to say that this is a factual issue. Time and
again, we have ruled that "the factual findings of the trial court are given weight when supported by
substantial evidence and carries more weight when affirmed by the Court of Appeals." 7 Whether or
not petitioner incurred delay and thus, liable to pay damages as a result thereof, are indeed
factual questions.
The jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, is limited to reviewing only errors of law, not of fact, unless the factual
findings being assailed are not supported by evidence on record or the impugned judgment is based
on a misapprehension of facts.8 These exceptions are not present here.
WHEREFORE, the petition is DENIED. The assailed Decision dated March 26, 1999 and Resolution
dated August 5, 1999 of the Court of Appeals are hereby AFFIRMED IN TOTO.
Costs against the petitioner.
SO ORDERED.

m.) Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 155206

October 28, 2003

GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,

vs.
EDUARDO M. SANTIAGO, substituted by his widow ROSARIO ENRIQUEZ VDA. DE
SANTIAGO, respondent.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari filed by the Government Service Insurance
System (GSIS), seeking to reverse and set aside the Decision1 dated February 22, 2002 of the Court
of Appeals (CA) in CA-G.R. CV No. 62309 and its Resolution dated September 5, 2002 denying its
motion for reconsideration.

The antecedent facts of the case, as culled from the assailed CA decision and that of the trial court,
are as follows:
Deceased spouses Jose C. Zulueta and Soledad Ramos obtained various loans from defendant
GSIS for (the) period September, 1956 to October, 1957 in the total amount of P3,117,000.00
secured by real estate mortgages over parcels of land covered by TCT Nos. 26105, 37177 and
50365. The Zuluetas failed to pay their loans to defendant GSIS and the latter foreclosed the real
estate mortgages dated September 25, 1956, March 6, 1957, April 4, 1957 and October 15, 1957.
On August 14, 1974, the mortgaged properties were sold at public auction by defendant GSIS
submitting a bid price of P5,229,927.84. Not all lots covered by the mortgaged titles, however, were
sold. Ninety-one (91) lots were expressly excluded from the auction since the lots were sufficient to
pay for all the mortgage debts. A Certificate of Sale (Annex "F," Records, Vol. I, pp. 23-28) was
issued by then Provincial Sheriff Nicanor D. Salaysay.
The Certificate of Sale dated August 14, 1974 had been annotated and inscribed in TCT Nos. 26105,
37177 and 50356, with the following notations: "(T)he following lots which form part of this title (TCT
No. 26105) are not covered by the mortgage contract due to sale to third parties and donation to the
government: 50-H-5-C-9-J-65-H-8, 50-H-5-C-9J-M-7; 50-H-5-C-9-J-65-H-5; 1 lots Nos. 1 to 13,
Block No. 1 -6,138 sq.m. 2. Lots Nos. 1 to 11, Block No. 2 4,660 sq.m. 3. Lot No. 15, Block No. 3
487 sq.m. 4. Lot No. 17, Block No. 4 263 sq.m. 5. Lot No. 1, Block No. 7 402 sq.m. 6. Road Lots
Nos. 1, 2, 3, & 4 2,747 sq.m."
In another "NOTE: The following lots in the Antonio Subdivision were already released by the GSIS
and therefore are not included in this sale, namely: LOT NO. 1, 6, 7, 8, 9, 10, and 13 (Old Plan)
Block I; 1, 3, 4, 5, 7, 8 and 10 (Old Plan) Block II; 3, 10, 12 and 13 (New Plan) Block I (Old Plan)
Block III; 7, 14 and 20 (New Plan) Block III (Old Plan) Block V; 13 and 20 (New Plan) Block IV (Old
Plan) Block VI; 1, 2, 3 and 10 (New Plan) Block V (Old Plan) Block VII; 1, 5, 8, 15, 26 and 27 (New
Plan) Block VI (Old Plan) Block VIII; 7, 12 and 20 (New Plan) Block VII (Old Plan) Block II; 1, 4 and 6
(New Plan) Block VIII (Old Plan) Block X; 5 (New Plan) Block X (Old Plan) Block ZXII; 6 (New Plan)
Block XI (Old Plan) Block XII; 1, Block 9; 12 Block 1; 11 Block 2; 19 Block 1; 10 Block 6; 23 Block 3."
And the lots on "ADDITIONAL EXCLUSION FROM PUBLIC SALE" are "LOTS NO. 6 Block 4; 2
Block 2; 5 Block 5; 1, 2 and 3 Block 11, 1, 2, 3 and 4 Block 10; 5 Block 11 (New); 1 Block 3; 5 Block
1; 15 Block 7; 11 Block 9; 13 Block 5; 12 Block 5; 3 Block 10; 6."
On November 25, 1975, an Affidavit of Consolidation of Ownership (Annex "G," Records, Vol. I, pp.
29-31) was executed by defendant GSIS over Zuluetas lots, including the lots, which as earlier
stated, were already excluded from the foreclosure.
On March 6, 1980, defendant GSIS sold the foreclosed properties to Yorkstown Development
Corporation which sale was disapproved by the Office of the President of the Philippines. The sold
properties were returned to defendant GSIS.
The Register of Deeds of Rizal cancelled the land titles issued to Yorkstown Development
Corporation. On July 2, 1980, TCT No. 23552 was issued cancelling TCT No. 21926; TCT No. 23553
cancelled TCT No. 21925; and TCT No. 23554 cancelling TCT No. 21924, all in the name of
defendant GSIS.
1awphi1.nt

After defendant GSIS had re-acquired the properties sold to Yorkstown Development Corporation, it
began disposing the foreclosed lots including the excluded ones.

On April 7, 1990, representative Eduardo Santiago and then plaintiff Antonio Vic Zulueta executed an
agreement whereby Zulueta transferred all his rights and interests over the excluded lots. Plaintiff
Eduardo Santiagos lawyer, Atty. Wenceslao B. Trinidad, wrote a demand letter dated May 11, 1989
(Annex "H," Records, Vol. I, pp. 32-33) to defendant GSIS asking for the return of the eighty-one (81)
excluded lots.2
On May 7, 1990, Antonio Vic Zulueta, represented by Eduardo M. Santiago, filed with the Regional
Trial Court (RTC) of Pasig City, Branch 71, a complaint for reconveyance of real estate against the
GSIS. Spouses Alfeo and Nenita Escasa, Manuel III and Sylvia G. Urbano, and Marciana P.
Gonzales and the heirs of Mamerto Gonzales moved to be included as intervenors and filed their
respective answers in intervention. Subsequently, the petitioner, as defendant therein, filed its
answer alleging inter alia that the action was barred by the statute of limitations and/or laches and
that the complaint stated no cause of action. Subsequently, Zulueta was substituted by Santiago as
the plaintiff in the complaint a quo. Upon the death of Santiago on March 6, 1996, he was substituted
by his widow, Rosario Enriquez Vda. de Santiago, as the plaintiff.
After due trial, the RTC rendered judgment against the petitioner ordering it to reconvey to the
respondent, Rosario Enriquez Vda. de Santiago, in substitution of her deceased husband Eduardo,
the seventy-eight lots excluded from the foreclosure sale. The dispositive portion of the RTC
decision reads:
1awphi1.nt

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendant:
1. Ordering defendant to reconvey to plaintiff the seventy-eight (78) lots released and
excluded from the foreclosure sale including the additional exclusion from the public sale,
namely:
a. Lot Nos. 1, 6, 7, 8, 0, 10, 13, Block I (Old Plan).
b. Lot Nos. 1, 3, 4, 5, 7, 8 and 10, Block II (Old Plan).
c. Lot Nos. 3, 10, 12, and 13, Block I (New Plan), Block III (Old Plan),
d. Lot Nos. 7, 14 and 20, Block III (New Plan), Block V (Old Plan).
e. Lot Nos. 13 and 20, Block IV (New Plan), Block VI (Old Plan).
f. Lot Nos. 1, 2, 3 and 10, Block V (New Plan), Block VII (Old Plan).
g. Lot Nos. 1, 5, 8, 15, 26 and 27, Block VI (New Plan), Block VIII (Old Plan).
h. Lot Nos. 7 and 12, Block VII (New Plan), Block II (Old Plan).
i. Lot Nos. 1, 4 and 6, Block VIII (New Plan), Block X (Old Plan).
j. Lot 5, Block X (New Plan), Block XII (Old Plan).
k. Lot 6, Block XI (New Plan), Block XII (Old Plan).
l. Lots 2, 5, 12 and 15, Block I.

m. Lots 6, 9 and 11, Block 2.

n. Lots 1, 5, 6, 7, 16 and 23, Block 3.
o. Lot 6, Block 4.
p. Lots 5, 12, 13 and 24, Block 5.
q. Lots 10 and 16, Block 6.
r. Lots 6 and 15, Block 7.
s. Lots 13, 24, 28 and 29, Block 8.
t. Lots 1, 11, 17 and 22, Block 9.
u. Lots 1, 2, 3 and 4, Block 10.
v. Lots 1, 2, 3 and 5 (New), Block 11.
2. Ordering defendant to pay plaintiff, if the seventy-eight (78) excluded lots could not be
reconveyed, the fair market value of each of said lots.
3. Ordering the Registry of Deeds of Pasig City to cancel the land titles covering the
excluded lots in the name of defendant or any of its successors-in-interest including all
derivative titles therefrom and to issue new land titles in plaintiffs name.
4. Ordering the Registry of Deeds of Pasig City to cancel the Notices of Lis Pendens
inscribed in TCT No. PT-80342 under Entry No. PT-12267/T-23554; TCT No. 81812 under
Entry No. PT-12267/T-23554; and TCT No. PT-84913 under Entry No. PT-12267/T-23554.
5. Costs of suit.3
The petitioner elevated the case to the CA which rendered the assailed decision affirming that of the
RTC. The dispositive portion of the assailed decision reads:
WHEREFORE, premises considered, the herein appeal is DISMISSED for lack of merit. The
Decision of December 17, 1997 of Branch 71 of the Regional Trial Court of Pasig City is hereby
AFFIRMED.4
The petitioner moved for a reconsideration of the aforesaid decision but the same was denied in the
assailed CA Resolution of September 5, 2002.
The petitioner now comes to this Court alleging that:
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT A)
PETITIONER WAS GUILTY OF BAD FAITH WHEN IN TRUTH AND IN FACT, THERE WAS NO
SUFFICIENT GROUND TO SUPPORT SUCH CONCLUSION; AND B) THERE WAS NO
PRESCRIPTION IN THIS CASE.5

In its petition, the petitioner maintains that it did not act in bad faith when it erroneously included in
its certificate of sale, and subsequently consolidated the titles in its name over the seventy-eight lots
("subject lots") that were excluded from the foreclosure sale. There was no proof of bad faith nor
could fraud or malice be attributed to the petitioner when it erroneously caused the issuance of
certificates of title over the subject lots despite the fact that these were expressly excluded from the
foreclosure sale.
The petitioner asserts that the action for reconveyance instituted by the respondent had already
prescribed after the lapse of ten years from November 25, 1975 when the petitioner consolidated its
ownership over the subject lots. According to the petitioner, an action for reconveyance based on
implied or constructive trust prescribes in ten years from the time of its creation or upon the alleged
fraudulent registration of the property. In this case, when the action was instituted on May 7, 1990,
more than fourteen years had already lapsed. Thus, the petitioner contends that the same was
already barred by prescription as well as laches.
The petitioner likewise takes exception to the holding of the trial court and the CA that it (the
petitioner) failed to apprise or return to the Zuluetas, the respondents predecessors-in-interest, the
seventy-eight lots excluded from the foreclosure sale because the petitioner had no such obligation
under the pertinent loan and mortgage agreement.
The petitioners arguments fail to persuade.

1awphi1.nt

At the outset, it bears emphasis that the jurisdiction of this Court in a petition for review on certiorari
under Rule 45 of the Rules of Court, as amended, is limited to reviewing only errors of law. This
Court is not a trier of facts. Case law has it that the findings of the trial court especially when affirmed
by the CA are binding and conclusive upon this Court. Although there are exceptions to the said rule,
we find no reason to deviate therefrom.6 By assailing the findings of facts of the trial court as affirmed
by the CA, that it acted in bad faith, the petitioner thereby raised questions of facts in its petition.
Nonetheless, even if we indulged the petition and delved into the factual issues, we find the petition
barren of merit.
That the petitioner acted in bad faith in consolidating ownership and causing the issuance of titles in
its name over the subject lots, notwithstanding that these were expressly excluded from the
foreclosure sale was the uniform ruling of the trial court and appellate court. As declared by the CA:
The acts of defendant-appellant GSIS in concealing from the Zuluetas [the respondents
predecessors-in-interest] the existence of these lots, in failing to notify or apprise the spouses
Zulueta about the excluded lots from the time it consolidated its titles on their foreclosed properties
in 1975, in failing to inform them when it entered into a contract of sale of the foreclosed properties
to Yorkstown Development Corporation in 1980 as well as when the said sale was revoked by then
President Ferdinand E. Marcos during the same year demonstrated a clear effort on its part to
defraud the spouses Zulueta and appropriate for itself the subject properties. Even if titles over the
lots had been issued in the name of the defendant-appellant, still it could not legally claim ownership
and absolute dominion over them because indefeasibility of title under the Torrens system does not
attach to titles secured by fraud or misrepresentation. The fraud committed by defendant-appellant in
the form of concealment of the existence of said lots and failure to return the same to the real
owners after their exclusion from the foreclosure sale made defendant-appellant holders in bad faith.
It is well-settled that a holder in bad faith of a certificate of title is not entitled to the protection of the
law for the law cannot be used as a shield for fraud. 7

The Court agrees with the findings and conclusion of the trial court and the CA. The petitioner is not
an ordinary mortgagee. It is a government financial institution and, like banks, is expected to
exercise greater care and prudence in its dealings, including those involving registered lands. 8 The
Courts ruling in Rural Bank of Compostela v. CA9 is apropos:
Banks, indeed, should exercise more care and prudence in dealing even with registered lands, than
private individuals, for their business is one affected with public interest, keeping in trust money
belonging to their depositors, which they should guard against loss by not committing any act of
negligence which amounts to lack of good faith by which they would be denied the protective mantle
of land registration statute, Act [No.] 496, extended only to purchasers for value and in good faith, as
well as to mortgagees of the same character and description. 10
Due diligence required of banks extend even to persons, or institutions like the petitioner, regularly
engaged in the business of lending money secured by real estate mortgages. 11
In this case, the petitioner executed an affidavit in consolidating its ownership and causing the
issuance of titles in its name over the subject lots despite the fact that these were expressly
excluded from the foreclosure sale. By so doing, the petitioner acted in gross and evident bad faith.
It cannot feign ignorance of the fact that the subject lots were excluded from the sale at public
auction. At the least, its act constituted gross negligence amounting to bad faith. Further, as found by
the CA, the petitioners acts of concealing the existence of these lots, its failure to return them to the
Zuluetas and even its attempt to sell them to a third party is proof of the petitioners intent to defraud
the Zuluetas and appropriate for itself the subject lots.
On the issue of prescription, generally, an action for reconveyance of real property based on fraud
prescribes in four years from the discovery of fraud; such discovery is deemed to have taken place
upon the issuance of the certificate of title over the property. Registration of real property is a
constructive notice to all persons and, thus, the four-year period shall be counted therefrom. 12 On the
other hand, Article 1456 of the Civil Code provides:
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property comes.
An action for reconveyance based on implied or constructive trust prescribes in ten years from the
alleged fraudulent registration or date of issuance of the certificate of title over the property.13
The petitioners defense of prescription is untenable. As held by the CA, the general rule that the
discovery of fraud is deemed to have taken place upon the registration of real property because it is
"considered a constructive notice to all persons" does not apply in this case. The CA correctly cited
the cases of Adille v. Court of Appeals14 and Samonte v. Court of Appeals,15 where this Court
reckoned the prescriptive period for the filing of the action for reconveyance based on implied trust
from the actual discovery of fraud.
In ruling that the action had not yet prescribed despite the fact that more than ten years had lapsed
between the date of registration and the institution of the action for reconveyance, the Court in Adille
ratiocinated:
It is true that registration under the Torrens system is constructive notice of title, but it has likewise
been our holding that the Torrens title does not furnish a shield for fraud. It is therefore no argument
to say that the act of registration is equivalent to notice of repudiation, assuming there was one,
notwithstanding the long-standing rule that registration operates as a universal notice of title.

For the same reason, we cannot dismiss private respondents claims commenced in 1974 over the
estate registered in 1955. While actions to enforce a constructive trust prescribes in ten years,
reckoned from the date of the registration of the property, we, as we said, are not prepared to count
the period from such a date in this case. We note the petitioners sub rosa efforts to get hold of the
property exclusively for himself beginning with his fraudulent misrepresentation in his unilateral
affidavit of extrajudicial settlement that he is "the only heir and child of his mother Feliza with the
consequence that he was able to secure title in his name [alone]." Accordingly, we hold that the right
of the private respondents commenced from the time they actually discovered the petitioners act of
defraudation. According to the respondent Court of Appeals, they "came to know [of it] apparently
only during the progress of the litigation." Hence, prescription is not a bar.16
The above ruling was reiterated in the more recent case of Samonte. In this case, as established by
the CA, the respondent actually discovered the fraudulent act of the petitioner only in 1989:
... [T]he prescriptive period of the action is to be reckoned from the time plaintiff-appellee (then
Eduardo M. Santiago) had actually discovered the fraudulent act of defendant-appellant which was,
as borne out by the records, only in 1989. Plaintiff-appellee Eduardo M. Santiago categorically
testified (TSN of July 11, 1995, pp. 14-15) that he came to know that there were 91 excluded lots in
Antonio Village which were foreclosed by the GSIS and included in its consolidation of ownership in
1975 when, in 1989, he and Antonio Vic Zulueta discussed it and he was given by Zulueta a special
power of attorney to represent him to recover the subject properties from GSIS. The complaint for
reconveyance was filed barely a year from the discovery of the fraud. 17
Following the Courts pronouncements in Adille and Samonte, the institution of the action for
reconveyance in the court a quo in 1990 was thus well within the prescriptive period. Having acted in
bad faith in securing titles over the subject lots, the petitioner is a holder in bad faith of certificates of
title over the subject lots. The petitioner is not entitled to the protection of the law for the law cannot
be used as a shield for frauds.18
Contrary to its claim, the petitioner unarguably had the legal duty to return the subject lots to the
Zuluetas. The petitioners attempts to justify its omission by insisting that it had no such duty under
the mortgage contract is obviously clutching at straw. Article 22 of the Civil Code explicitly provides
that "every person who, through an act of performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal ground, shall
return the same to him."
WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision dated February 22,
2002 and Resolution dated September 5, 2002 of the Court of Appeals in CA-G.R. CV No. 62309
are AFFIRMED IN TOTO. Costs against the petitioner.
1a\^/phi1.net

SO ORDERED.

n.) Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 151149

September 7, 2004

GEORGE KATON, petitioner,

vs.
MANUEL PALANCA JR., LORENZO AGUSTIN, JESUS GAPILANGO and JUAN
FRESNILLO, respondents.
DECISION
PANGANIBAN, J.:
Where prescription, lack of jurisdiction or failure to state a cause of action clearly appear from the
complaint filed with the trial court, the action may be dismissed motu proprio by the Court of Appeals,
even if the case has been elevated for review on different grounds. Verily, the dismissal of such
cases appropriately ends useless litigations.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the December 8,
2000 Decision2and the November 20, 2001 Resolution3 of the Court of Appeals in CA-GR SP No.
57496. The assailed Decision disposed as follows:
"Assuming that petitioner is correct in saying that he has the exclusive right in applying for
the patent over the land in question, it appears that his action is already barred by laches
because he slept on his alleged right for almost 23 years from the time the original certificate
of title has been issued to respondent Manuel Palanca, Jr., or after 35 years from the time
the land was certified as agricultural land. In addition, the proper party in the annulment of
patents or titles acquired through fraud is the State; thus, the petitioners action is deemed
misplaced as he really does not have any right to assert or protect. What he had during the
time he requested for the re-classification of the land was the privilege of applying for the
patent over the same upon the lands conversion from forest to agricultural.
"WHEREFORE, the petition is hereby DISMISSED. No pronouncement as to cost." 4
The assailed Resolution, on the other hand, denied the Motion for Reconsideration filed by
petitioner. It affirmed the RTCs dismissal of his Complaint in Civil Case No. 3231, not on the
grounds relied upon by the trial court, but because of prescription and lack of jurisdiction.
The Antecedent Facts
The CA narrates the antecedent facts as follows:
"On August 2, 1963, herein [P]etitioner [George Katon] filed a request with the District Office
of the Bureau of Forestry in Puerto Princesa, Palawan, for the re-classification of a piece of
real property known as Sombrero Island, located in Tagpait, Aborlan, Palawan, which
consists of approximately 18 hectares. Said property is within Timberland Block of LC Project
No. 10-C of Aborlan, Palawan, per BF Map LC No. 1582.
"Thereafter, the Bureau of Forestry District Office, Puerto Princesa, Palawan, ordered the
inspection, investigation and survey of the land subject of the petitioners request for
eventual conversion or re-classification from forest to agricultural land, and thereafter for
George Katon to apply for a homestead patent.

"Gabriel Mandocdoc (now retired Land Classification Investigator) undertook the

investigation, inspection and survey of the area in the presence of the petitioner, his brother
Rodolfo Katon (deceased) and his cousin, [R]espondent Manuel Palanca, Jr. During said
survey, there were no actual occupants on the island but there were some coconut trees
claimed to have been planted by petitioner and [R]espondent Manuel Palanca, Jr. (alleged
overseer of petitioner) who went to the island from time to time to undertake development
work, like planting of additional coconut trees.
"The application for conversion of the whole Sombrero Island was favorably endorsed by the
Forestry District Office of Puerto Princesa to its main office in Manila for appropriate action.
The names of Felicisimo Corpuz, Clemente Magdayao and Jesus Gapilango and Juan
Fresnillo were included in the endorsement as co-applicants of the petitioner.
"In a letter dated September 23, 1965, then Asst. Director of Forestry R.J.L. Utleg informed
the Director of Lands, Manila, that since the subject land was no longer needed for forest
purposes, the same is therefore certified and released as agricultural land for disposition
under the Public Land Act.
"Petitioner contends that the whole area known as Sombrero Island had been classified from
forest land to agricultural land and certified available for disposition upon his request and at
his instance. However, Mr. Lucio Valera, then [l]and investigator of the District Land Office,
Puerto Princesa, Palawan, favorably endorsed the request of [R]espondents Manuel
Palanca Jr. and Lorenzo Agustin, for authority to survey on November 15, 1965. On
November 22, a second endorsement was issued by Palawan District Officer Diomedes De
Guzman with specific instruction to survey vacant portions of Sombrero Island for the
respondents consisting of five (5) hectares each. On December 10, 1965, Survey Authority
No. R III-342-65 was issued authorizing Deputy Public Land Surveyor Eduardo Salvador to
survey ten (10) hectares of Sombrero Island for the respondents. On December 23, 1990,
[R]espondent Lorenzo Agustin filed a homestead patent application for a portion of the
subject island consisting of an area of 4.3 hectares.
"Records show that on November 8, 1996, [R]espondent Juan Fresnillo filed a homestead
patent application for a portion of the island comprising 8.5 hectares. Records also reveal
that [R]espondent Jesus Gapilango filed a homestead application on June 8, 1972.
Respondent Manuel Palanca, Jr. was issued Homestead Patent No. 145927 and OCT No.
G-7089 on March 3, 19775 with an area of 6.84 hectares of Sombrero Island.
"Petitioner assails the validity of the homestead patents and original certificates of title
covering certain portions of Sombrero Island issued in favor of respondents on the ground
that the same were obtained through fraud. Petitioner prays for the reconveyance of the
whole island in his favor.
"On the other hand, [R]espondent Manuel Palanca, Jr. claims that he himself requested for
the reclassification of the island in dispute and that on or about the time of such request,
[R]espondents Fresnillo, Palanca and Gapilango already occupied their respective areas and
introduced numerous improvements. In addition, Palanca said that petitioner never filed any
homestead application for the island. Respondents deny that Gabriel Mandocdoc undertook
the inspection and survey of the island.
"According to Mandocdoc, the island was uninhabited but the respondents insist that they
already had their respective occupancy and improvements on the island. Palanca denies

that he is a mere overseer of the petitioner because he said he was acting for himself in
developing his own area and not as anybodys caretaker.
"Respondents aver that they are all bona fide and lawful possessors of their respective
portions and have declared said portions for taxation purposes and that they have been
faithfully paying taxes thereon for twenty years.
"Respondents contend that the petitioner has no legal capacity to sue insofar as the island is
concerned because an action for reconveyance can only be brought by the owner and not a
mere homestead applicant and that petitioner is guilty of estoppel by laches for his failure to
assert his right over the land for an unreasonable and unexplained period of time.
"In the instant case, petitioner seeks to nullify the homestead patents and original certificates
of title issued in favor of the respondents covering certain portions of the Sombrero Island as
well as the reconveyance of the whole island in his favor. The petitioner claims that he has
the exclusive right to file an application for homestead patent over the whole island since it
was he who requested for its conversion from forest land to agricultural land." 6
Respondents filed their Answer with Special and/or Affirmative Defenses and Counterclaim in due
time. On June 30, 1999, they also filed a Motion to Dismiss on the ground of the alleged defiance by
petitioner of the trial courts Order to amend his Complaint so he could thus effect a substitution by
the legal heirs of the deceased, Respondent Gapilango. The Motion to Dismiss was granted by the
RTC in its Order dated July 29, 1999.
Petitioners Motion for Reconsideration of the July 29, 1999 Order was denied by the trial court in its
Resolution dated December 17, 1999, for being a third and prohibited motion. In his Petition for
Certiorari before the CA, petitioner charged the trial court with grave abuse of discretion on the
ground that the denied Motion was his first and only Motion for Reconsideration of the aforesaid
Order.
Ruling of the Court of Appeals
Instead of limiting itself to the allegation of grave abuse of discretion, the CA ruled on the merits. It
held that while petitioner had caused the reclassification of Sombrero Island from forest to
agricultural land, he never applied for a homestead patent under the Public Land Act. Hence, he
never acquired title to that land.
The CA added that the annulment and cancellation of a homestead patent and the reversion of the
property to the State were matters between the latter and the homestead grantee. Unless and until
the government takes steps to annul the grant, the homesteaders right thereto stands.
Finally, granting arguendo that petitioner had the exclusive right to apply for a patent to the land in
question, he was already barred by laches for having slept on his right for almost 23 years from the
time Respondent Palancas title had been issued.
In the Assailed Resolution, the CA acknowledged that it had erred when it ruled on the merits of the
case. It agreed with petitioner that the trial court had acted without jurisdiction in perfunctorily
dismissing his September 10, 1999 Motion for Reconsideration, on the erroneous ground that it was
a third and prohibited motion when it was actually only his first motion.

Nonetheless, the Complaint was dismissed motu proprio by the challenged Resolution of the CA
Special Division of five members with two justices dissenting pursuant to its "residual
prerogative" under Section 1 of Rule 9 of the Rules of Court.
From the allegations of the Complaint, the appellate court opined that petitioner clearly had no
standing to seek reconveyance of the disputed land, because he neither held title to it nor even
applied for a homestead patent. It reiterated that only the State could sue for cancellation of the title
issued upon a homestead patent, and for reversion of the land to the public domain.
Finally, it ruled that prescription had already barred the action for reconveyance. First, petitioners
action was brought 24 years after the issuance of Palancas homestead patent. Under the Public
Land Act, such action should have been taken within ten years from the issuance of the homestead
certificate of title. Second, it appears from the submission (Annex "F" of the Complaint) of petitioner
himself that Respondents Fresnillo and Palanca had been occupying six hectares of the island since
1965, or 33 years before he took legal steps to assert his right to the property. His action was filed
beyond the 30-year prescriptive period under Articles 1141 and 1137 of the Civil Code.
Hence, this Petition.7
Issues
In his Memorandum, petitioner raises the following issues:
"1. Is the Court of Appeals correct in resolving the Petition for Certiorari based on an issue
not raised (the merits of the case) in the Petition?
"2. Is the Court of Appeals correct in invoking its alleged residual prerogative under Section
1, Rule 9 of the 1997 Rules of Civil Procedure in resolving the Petition on an issue not raised
in the Petition?"8
The Courts Ruling
The Petition has no merit.
First Issue:
Propriety of Ruling on the Merits
This is not the first time that petitioner has taken issue with the propriety of the CAs ruling on the
merits. He raised it with the appellate court when he moved for reconsideration of its December 8,
2000 Decision. The CA even corrected itself in its November 20, 2001 Resolution, as follows:
"Upon another review of the case, the Court concedes that it may indeed have lost its way
and been waylaid by the variety, complexity and seeming importance of the interests and
issues involved in the case below, the apparent reluctance of the judges, five in all, to hear
the case, and the volume of the conflicting, often confusing, submissions bearing on
incidental matters. We stand corrected."9
That explanation should have been enough to settle the issue. The CAs Resolution on this point has
rendered petitioners issue moot. Hence, there is no need to discuss it further. Suffice it to say that
the appellate court indeed acted ultra jurisdictio in ruling on the merits of the case when the only

issue that could have been, and was in fact, raised was the alleged grave abuse of discretion
committed by the trial court in denying petitioners Motion for Reconsideration. Settled is the doctrine
that the sole office of a writ of certiorari is the correction of errors of jurisdiction. Such writ does not
include a review of the evidence,10 more so when no determination of the merits has yet been made
by the trial court, as in this case.
Second Issue:
Dismissal for Prescription and Lack of Jurisdiction
Petitioner next submits that the CA erroneously invoked its "residual prerogatives" under Section 1 of
Rule 9 of the Rules of Court when it motu proprio dismissed the Petition for lack of jurisdiction and
prescription. According to him, residual prerogative refers to the power that the trial court, in the
exercise of its original jurisdiction, may still validly exercise even after perfection of an appeal. It
follows that such powers are not possessed by an appellate court.
Petitioner has confused what the CA adverted to as its "residual prerogatives" under Section 1 of
Rule 9 of the Rules of Court with the "residual jurisdiction" of trial courts over cases appealed to the
CA.
Under Section 1 of Rule 9 of the Rules of Court, defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived, except when (1) lack of jurisdiction over the
subject matter, (2) litis pendentia, (3) res judicata and (4) prescription are evident from the pleadings
or the evidence on record. In the four excepted instances, the court shall motu proprio dismiss the
claim or action. In Gumabon v. Larin11 we explained thus:
"x x x [T]he motu proprio dismissal of a case was traditionally limited to instances when the
court clearly had no jurisdiction over the subject matter and when the plaintiff did not appear
during trial, failed to prosecute his action for an unreasonable length of time or neglected to
comply with the rules or with any order of the court. Outside of these instances, any motu
proprio dismissal would amount to a violation of the right of the plaintiff to be heard. Except
for qualifying and expanding Section 2, Rule 9, and Section 3, Rule 17, of the Revised Rules
of Court, the amendatory 1997 Rules of Civil Procedure brought about no radical change.
Under the new rules, a court may motu proprio dismiss a claim when it appears from the
pleadings or evidence on record that it has no jurisdiction over the subject matter; when
there is another cause of action pending between the same parties for the same cause, or
where the action is barred by a prior judgment or by statute of limitations. x x x." 12 (Italics
supplied)
On the other hand, "residual jurisdiction" is embodied in Section 9 of Rule 41 of the Rules of Court,
as follows:
"SEC. 9. Perfection of appeal; effect thereof. A partys appeal by notice of appeal is
deemed perfected as to him upon the filing of the notice of appeal in due time.
"A partys appeal by record on appeal is deemed perfected as to him with respect to the
subject matter thereof upon the approval of the record on appeal filed in due time.
"In appeals by notice of appeal, the court loses jurisdiction over the case upon the perfection
of the appeals filed in due time and the expiration of the time to appeal of the other parties.

"In appeals by record on appeal, the court loses jurisdiction only over the subject matter
thereof upon the approval of the records on appeal filed in due time and the expiration of the
time to appeal of the other parties.
"In either case, prior to the transmittal of the original record or the record on appeal, the court
may issue orders for the protection and preservation of the rights of the parties which do not
involve any matter litigated by the appeal, approve compromises, permit appeals of indigent
litigants, order execution pending appeal in accordance with Section 2 of Rule 39, and allow
withdrawal of the appeal." (Italics supplied)
The "residual jurisdiction" of trial courts is available at a stage in which the court is normally deemed
to have lost jurisdiction over the case or the subject matter involved in the appeal. This stage is
reached upon the perfection of the appeals by the parties or upon the approval of the records on
appeal, but prior to the transmittal of the original records or the records on appeal. 13 In either
instance, the trial court still retains its so-called residual jurisdiction to issue protective orders,
approve compromises, permit appeals of indigent litigants, order execution pending appeal, and
allow the withdrawal of the appeal.
The CAs motu proprio dismissal of petitioners Complaint could not have been based, therefore, on
residual jurisdiction under Rule 41. Undeniably, such order of dismissal was not one for the
protection and preservation of the rights of the parties, pending the disposition of the case on
appeal. What the CA referred to as residual prerogatives were the general residual powers of the
courts to dismiss an action motu proprio upon the grounds mentioned in Section 1 of Rule 9 of the
Rules of Court and under authority of Section 2 of Rule 114 of the same rules.
To be sure, the CA had the excepted instances in mind when it dismissed the Complaint motu
proprio "on more fundamental grounds directly bearing on the lower courts lack of jurisdiction" 15 and
for prescription of the action. Indeed, when a court has no jurisdiction over the subject matter, the
only power it has is to dismiss the action.16
Jurisdiction over the subject matter is conferred by law and is determined by the allegations in the
complaint and the character of the relief sought. 17 In his Complaint for "Nullification of Applications for
Homestead and Original Certificate of Title No. G-7089 and for Reconveyance of Title," 18 petitioner
averred:
"2. That on November 10, 1965, without the knowledge of [petitioner, Respondent] Manuel
Palanca Jr., [petitioners] cousin, in connivance with his co-[respondent], Lorenzo Agustin, x
x x fraudulently and in bad faith:
2.1. x x x made the request for authority to survey as a pre-requisite to the filing of an
application for homestead patent in his name and that of his Co-[Respondent]
Agustin, [despite being] fully aware that [Petitioner] KATON had previously applied or
requested for re-classification and certification of the same land from forest land to
agricultural land which request was favorably acted upon and approved as
mentioned earlier; a clear case of intrinsic fraud and misrepresentation;
xxx

xxx

xxx

2.3. In stating in his application for homestead patent that he was applying for the
VACANT PORTION of Sombrero Island where there was none, the same constituted
another clear case of fraud and misrepresentation;

"3. That the issuance of Homestead Patent No. 145927 and OCT No. G-7089 in the name of
[Respondent] Manuel Palanca Jr. and the filing of Homestead Patent Applications in the
names of [respondents], Lorenzo Agustin, Jesus Gapilango and Juan Fresnillo[,] having
been done fraudulently and in bad faith, are ipso facto null and void and of no effect
whatsoever."19
xxx

xxx

xxx

"x x x. By a wrongful act or a willful omission and intending the effects with natural necessity
arise knowing from such act or omission, [Respondent Palanca] on account of his blood
relation, first degree cousins, trust, interdependence and intimacy is guilty of intrinsic fraud
[sic]. x x x."20
Thereupon, petitioner prayed, among others, for a judgment (1) nullifying the homestead patent
applications of Respondents Agustin, Fresnillo and Gapilango as well as Homestead Patent No.
145927 and OCT No. G-7089 in the name of Respondent Palanca; and (2) ordering the director of
the Land Management Bureau to reconvey the Sombrero Island to petitioner.21
The question is, did the Complaint sufficiently allege an action for declaration of nullity of the free
patent and certificate of title or, alternatively, for reconveyance? Or did it plead merely for reversion?
The Complaint did not sufficiently make a case for any of such actions, over which the trial court
could have exercised jurisdiction.
In an action for nullification of title or declaration of its nullity, the complaint must contain the following
allegations: 1) that the contested land was privately owned by the plaintiff prior to the issuance of the
assailed certificate of title to the defendant; and 2) that the defendant perpetuated a fraud or
committed a mistake in obtaining a document of title over the parcel of land claimed by the
plaintiff.22 In these cases, the nullity arises not from fraud or deceit, but from the fact that the director
of the Land Management Bureau had no jurisdiction to bestow title; hence, the issued patent or
certificate of title was void ab initio.23
In an alternative action for reconveyance, the certificate of title is also respected as incontrovertible,
but the transfer of the property or title thereto is sought to be nullified on the ground that it was
wrongfully or erroneously registered in the defendants name. 24 As with an annulment of title, a
complaint must allege two facts that, if admitted, would entitle the plaintiff to recover title to the
disputed land: (1) that the plaintiff was the owner of the land, and (2) that the defendant illegally
dispossessed the plaintiff of the property.25 Therefore, the defendant who acquired the property
through mistake or fraud is bound to hold and reconvey to the plaintiff the property or the title
thereto.26
In the present case, nowhere in the Complaint did petitioner allege that he had previously held title to
the land in question. On the contrary, he acknowledged that the disputed island was public
land,27 that it had never been privately titled in his name, and that he had not applied for a
homestead under the provisions of the Public Land Act.28 This Court has held that a complaint by a
private party who alleges that a homestead patent was obtained by fraudulent means, and who
consequently prays for its annulment, does not state a cause of action; hence, such complaint must
be dismissed.29
Neither can petitioners case be one for reversion. Section 101 of the Public Land Act categorically
declares that only the solicitor general or the officer in his stead may institute such an action. 30 A
private person may not bring an action for reversion or any other action that would have the effect of

canceling a free patent and its derivative title, with the result that the land thereby covered would
again form part of the public domain.31
Thus, when the plaintiff admits in the complaint that the disputed land will revert to the public domain
even if the title is canceled or amended, the action is for reversion; and the proper party who may
bring action is the government, to which the property will revert. 32 A mere homestead applicant, not
being the real party in interest, has no cause of action in a suit for reconveyance. 33 As it is, vested
rights over the land applied for under a homestead may be validly claimed only by the applicant,
after approval by the director of the Land Management Bureau of the formers final proof of
homestead patent.34
Consequently, the dismissal of the Complaint is proper not only because of lack of jurisdiction, but
also because of the utter absence of a cause of action, 35 a defense raised by respondents in their
Answer.36 Section 2 of Rule 3 of the Rules of Court37 ordains that every action must be prosecuted or
defended in the name of the real party in interest, who stands to be benefited or injured by the
judgment in the suit. Indeed, one who has no right or interest to protect has no cause of action by
which to invoke, as a party-plaintiff, the jurisdiction of the court.38
Finally, assuming that petitioner is the proper party to bring the action for annulment of title or its
reconveyance, the case should still be dismissed for being time-barred. 39 It is not disputed that a
homestead patent and an Original Certificate of Title was issued to Palanca on February 21,
1977,40 while the Complaint was filed only on October 6, 1998. Clearly, the suit was brought way past
ten years from the date of the issuance of the Certificate, the prescriptive period for reconveyance of
fraudulently registered real property.41
It must likewise be stressed that Palancas title -- which attained the status of indefeasibility one year
from the issuance of the patent and the Certificate of Title in February 1977 -- is no longer open to
review on the ground of actual fraud. Ybanez v. Intermediate Appellate Court 42 ruled that a certificate
of title, issued under an administrative proceeding pursuant to a homestead patent, is as
indefeasible as one issued under a judicial registration proceeding one year from its issuance;
provided, however, that the land covered by it is disposable public land, as in this case.
In Aldovino v. Alunan,43 the Court has held that when the plaintiffs own complaint shows clearly that
the action has prescribed, such action may be dismissed even if the defense of prescription has not
been invoked by the defendant. In Gicano v. Gegato, 44 we also explained thus:
"x x x [T]rial courts have authority and discretion to dismiss an action on the ground of
prescription when the parties' pleadings or other facts on record show it to be indeed timebarred; (Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v.
Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28,
1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis of a
motion to dismiss (Sec. 1,f, Rule 16, Rules of Court), or an answer which sets up such
ground as an affirmative defense (Sec. 5, Rule 16), or even if the ground is alleged after
judgment on the merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or
even if the defense has not been asserted at all, as where no statement thereof is found in
the pleadings (Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27
SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has been
declared in default (PNB v. Perez, 16 SCRA 270). What is essential only, to repeat, is that
the facts demonstrating the lapse of the prescriptive period be otherwise sufficiently and
satisfactorily apparent on the record; either in the averments of the plaintiff's complaint, or
otherwise established by the evidence."45 (Italics supplied)

Clearly then, the CA did not err in dismissing the present case. After all, if and when they are able to
do so, courts must endeavor to settle entire controversies before them to prevent future litigations. 46
WHEREFORE, the Petition is hereby DENIED, and the assailed Resolution AFFIRMED. The
dismissal of the Complaint in Civil Case No. 3231 is SUSTAINED on the grounds of lack of
jurisdiction, failure to state a cause of action and prescription. Costs against petitioner.
SO ORDERED.

o.)

EN BANC

ROMULO F. PECSON,

- versus -

Petitioner,

COMMISSION ON ELECTIONS, DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT

and LYNDON A. CUNANAN,
Respondents.

G.R. No. 182865

Present:

PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA,
REYES,
LEONARDO-DE CASTRO, and
BRION, JJ.

Promulgated:

December 24, 2008

x --------------------------------------------------------------------------------------------x
DECISION

BRION, J.:

This petition for certiorari filed by Romulo F. Pecson (Pecson) under Rule 64,
in relation with Rule 65 of the Revised Rules of Court seeks to set aside and annul
the Resolution dated May 21, 2008 of the Commission on Elections en banc
(COMELEC) in SPR 60-2007.[1] The assailed Resolution nullified the grant (via a
Special Order) by the Regional Trial Court (RTC), Branch 56, Angeles City, of the
execution pending appeal of its Decision in the election contest between Pecson and
the private respondent Lyndon A. Cunanan (Cunanan), the proclaimed winner in the
2007 mayoralty election in Magalang, Pampanga.

THE ANTECEDENTS

Pecson and Cunanan were candidates for the mayoralty position in the
Municipality of Magalang, Province of Pampanga in the May 2007 elections. On May
17, 2007, Cunanan was proclaimed the winning candidate, garnering a total of
12,592 votes as against Pecsons 12,531, or a margin of 61 votes. Cunanan took his
oath and assumed the position of Mayor of Magalang. Soon thereafter, Pecson filed
an election protest, docketed as EPE No. 07-51, with the RTC.

On November 23, 2007, the RTC rendered a Decision in Pecsons favor. The
RTC ruled that Pecson received a total of 14,897 votes as against Cunanans 13,758
a vote margin of 1,139.

Cunanan received a copy of the Decision on November 26, 2007 and filed a
Notice of Appeal the day after. The RTC issued on November 27, 2008 an Order
noting the filing of the notice of appeal and the payment of appeal fee and directing
the transmittal of the records of the case to the Electoral Contests Adjudication
Department (ECAD) of the COMELEC. Pecson, on the other hand, filed on November
28, 2007 an Urgent Motion for Immediate Execution Pending Appeal, claiming that
Section 11, Rule 14 of the Rules of Procedure in Election Contests before the Courts
Involving Elective Municipal and Barangay Officials[2] (Rules) allows this remedy.

The RTC granted Pecsons motion for execution pending appeal via a Special Order
dated December 3, 2007 (Special Order) but suspended, pursuant to the Rules, the
actual issuance of the writ of execution for twenty (20) days. The Special Order
states the following reasons:
1.
The result of the judicial revision show[s] that the protestant garnered
14,897 votes as against protestees 13,758 votes or a plurality of 1,139 votes. The
victory of the protestant is clearly and manifestly established by the rulings and
tabulation of results made by the Court x x x;

2.
It is settled jurisprudence that execution pending appeal in election
cases should be granted to give as much recognition to the worth of a trial judges
decision as that which is initially ascribed by the law to the proclamation by the
board of canvassers. The Court holds that this wisp of judicial wisdom of the
Supreme Court enunciated in the Gahol case and subsequent cases citing it is borne
by the recognition that the decision of the trial court in an election case is nothing
but the court upholding the mandate of the voter, which has as its source no other
than the exercise of the constitutional right to vote. While it is true that the
protestee can avail of the remedy of appeal before the COMELEC, the Court is more
convinced that between upholding the mandate of the electorate of Magalang,
Pampanga which is the fruit of the exercise of the constitutional right to vote and a
procedural remedy, the Court is more inclined to uphold and give effect to and
actualize the mandate of the electorate of Magalang. To the mind of the Court, in
granting execution pending appeal the Court is being true to its bounden duty to
uphold the exercise of constitutional rights and gives flesh to the mandate of the
people. The foregoing is, as far as the Court is concerned, considered far superior
circumstance that convinces the Court to grant protestants motion;

3.
Public interest and the will of the electorate must be respected and
given meaning;

4.
In the case of Navarosa v. Comelec, the Supreme Court held that In
the Gahol case, the Court gave an additional justification for allowing execution
pending appeal of decisions of trial courts, thus: Public policy underlies it, x x x
[S]omething had to be done to strike the death blow at the pernicious grab-theproclamation-prolong-the-protest technique often, if not invariably, resorted to by
unscrupulous politicians who would render nugatory the peoples verdict against
them and persist in continuing in an office they very well know they have no
legitimate right to hold. x x x. A primordial public interest is served by the grant of
the protestants motion, i.e., to obviate a hollow victory for the duly elected
candidate. In the words of Chief Justice Cesar Bengzon, The well known delay in
the adjudication of election protests often gave the successful contestant a mere
pyrrhic victory, i.e., a vindication when the term of office is about to expire or has
expired.

Expectedly, Cunanan moved to reconsider the Order, arguing that the RTC gravely
abused its discretion: (1) in ruling that there were good reasons to issue a writ of
execution pending appeal; and (2) in entertaining and subsequently granting the
motion for execution pending appeal despite the issuance of an order transmitting
the records of the case.

Thereupon, Cunanan filed with the COMELEC a Petition for Application of Preliminary
Injunction with Prayer for Status Quo Ante Order/Temporary Restraining Order (TRO)
with Prayer for Immediate Raffle. He argued in his petition that: (1) the RTC
Decision did not clearly establish Pecsons victory or his (Cunanans) defeat a
requirement of Section 11, Rule 14 of the Rules; among other reasons, the number
of votes the RTC tallied and tabulated exceeded the number of those who actually
voted and the votes cast for the position of Mayor, and (2) the RTC had
constructively relinquished its jurisdiction by the issuance of the Order dated
November 27, 2007 directing the transmittal of the records of the case.

The Second Division of the COMELEC issued on January 4, 2008 a 60-day TRO
directing: (1) the RTC to cease and desist from issuing or causing the issuance of a
writ of execution or implementing the Special Order; and (2) Cunanan to continue
performing the functions of Mayor of Magalang.

In his Answer and/or Opposition, with Prayer for Immediate Lifting of TRO, Pecson
argued that: (1) preliminary injunction cannot exist except as part or incident of an
independent action, being a mere ancillary remedy that exists only as an incident of
the main proceeding; (2) the petition for application of preliminary injunction, as
an original action, should be dismissed outright; and (3) Cunanan is guilty of forum
shopping, as he filed a motion for reconsideration of the Special Order
simultaneously with the petition filed with the COMELEC.

The COMELECs Second Division denied Cunanans petition in a Resolution dated

March 6, 2008. It ruled that: (1) the resolution of the motion for execution pending
appeal is part of the residual jurisdiction of the RTC to settle pending incidents; the
motion was filed prior to the expiration of the period to appeal and while the RTC
was still in possession of the original record; and (2) there is good reason to justify
the execution of the Decision pending appeal, as Pecsons victory was clearly and
manifestly established. Ruling on the alleged defect in the RTC count, the Second
Division ruled:
[A]fter a careful scrutiny of the Decision, We found that the error lies in the trial
courts computation of the results. In its Decision, the trial court, to the votes
obtained by the party (as per proclamation of the MBOC), deducted the votes per
physical count after revision and deducted further the invalid/nullified ballots per
the trial courts appreciation and thereafter added the valid claimed ballots per the
trial courts appreciation, thus:

Votes obtained per proclamation of the MBOC (-) Votes per physical count (-) Invalid
or nullified ballots (+) Valid claimed ballots = Total Votes Obtained

The formula used by the trial court is erroneous as it used as its reference the votes
obtained by the parties as per the proclamation of the MBOC. It complicated an
otherwise simple and straightforward computation, thus leading to the error. The
correct formula should have been as follows:

Total Number of Uncontested Ballots (+) Valid Contested Ballots (+) Valid Claimed
Ballots = Total Votes Obtained

Using this formula and applying the figures in pages 744 and 745 of the trial courts
Decision, the results will be as follows:

For the Petitioner Cunanan

Total Number of Uncontested Ballots

9,656

Add: Valid Contested Ballots

2,058

Add: Valid Claimed Ballots

Total Votes of Petitioner

36
11,750

For the Private Respondent (Pecson)

Total Number of Uncontested Ballots
Add: Valid Contested Ballots
Add: Valid Claimed Ballots
Total Votes of Petitioner

9,271
2,827
39
12,134

Using the correct formula, private respondent still obtained a plurality of the votes
cast and enjoys a margin of 384 votes over the petitioner. Although not as wide as
the margin found by the trial court, We are nevertheless convinced that the victory
of private respondent has been clearly established in the trial courts decision for
the following reasons:

First, the error lies merely in the computation and does not put in issue the
appreciation and tabulation of votes. The error is purely mathematical which will
not involve the opening of ballot boxes or an examination and appreciation of
ballots. It is a matter of arithmetic which calls for the mere clerical act of reflecting
the true and correct votes of the candidates.

Second, the error did not affect the final outcome of the election protest as to which
candidate obtained the plurality of the votes cast.

We are likewise convinced that the assailed order states good or special reasons
justifying the execution pending appeal, to wit:

(1) The victory of the protestant was clearly and manifestly established;
(2) Execution pending appeal in election cases should be granted to give as much
recognition to the worth of a trial judges decision as that which is initially ascribed
by the law to the proclamation by the board of canvassers;
(3) Public interest and the will of the electorate must be respected and given
meaning; and
(4) Public policy underlies it, as something had to be done to strike the death blow
at the pernicious grab-the-proclamation-prolong-the-protest technique often, if not
invariably resorted to by unscrupulous politicians.

Such reasons to Our mind constitute superior circumstances as to warrant the

execution of the trial courts decision pending appeal.

Pecson thus asked for the issuance of a writ of execution via an Ex-Parte Motion.
Despite Cunanans opposition, the RTC granted Pecsons motion and issued the writ
of execution on March 11, 2008. Pecson thereafter assumed the duties and
functions of Mayor of Magalang.

The Assailed Resolution

On Cunanans motion, the COMELEC en banc issued its Resolution dated May 21,
2008 reversing the ruling of the Second Division insofar as it affirmed the RTCs
findings of good reasons to execute the decision pending appeal. It affirmed the
authority of the RTC to order execution pending appeal; it however nullified the
March 11, 2008 writ of execution on the ground that the RTC could no longer issue
the writ because it had lost jurisdiction over the case after transmittal of the records
and the perfection of the appeals of both Cunanan and Pecson (to be accurate, the
lapse of Pecsons period to appeal).

On the propriety of executing the RTC Decision pending appeal, the COMELEC en
banc ruled that it was not convinced of the good reasons stated by the RTC in its
Special Order. It ruled that recognition of the worth of a trial judges decision, on
the one hand, and the right to appeal, including the Commissions authority to

review the decision of the trial court, on the other, requires a balancing act; and not
every invocation of public interest will suffice to justify an execution pending appeal.
It added that at a stage when the decision of the trial court has yet to attain finality,
both the protestee and the protestant are to be considered presumptive winners.
It noted too that the Second Division already cast a doubt on the correctness of the
number of votes obtained by the parties after the trial courts revision; thus, the
resolution of the pending appeal becomes all the more important. Between two
presumptive winners, considering the pending appeal of the election protest to the
Commission and public service being the prime consideration, the balance should
tilt in favor of non-disruption of government service. The execution of the RTC
Decision pending appeal would necessarily entail the unseating of the protestee,
resulting not only in the disruption of public service, but also in confusion in running
the affairs of the government; a subsequent reversal too of the RTC Decision also
results in the unseating of the protestant. This situation (i.e., the series of turn-over
of the seat of power from one presumptive winner to another) cannot but cause
irreparable damage to the people of Magalang, and overweighs the reasons
asserted by the RTC in its Special Order. In the end, according to the COMELEC,
public interest is best served when he who was really voted for the position is
proclaimed and adjudged as winner with finality.

The Petition and the Prayer for the issuance of a Status Quo Order

In imputing grave abuse of discretion to the COMELEC en banc, Pecson argues

that: (1) the RTC Decision clearly showed Pecsons victory; (2) the reasons for the
reversal of the RTC Decision practically render impossible a grant of an execution
pending appeal; and (3) the RTC correctly found the presence of the requisites for
execution pending appeal.

Threatened to be unseated, Pecson asked, as interim relief, for the issuance of

a Status Quo Order. He claimed that: (1) the Department of Interior and Local
Government already recognized (based on the issuance of the assailed Resolution)
Cunanans assumption of office even if the assailed Resolution had not attained
finality; and (2) in order to prevent grave and irreparable injury to Pecson and the
perpetuation of a travesty of justice, a Status Quo Order must immediately issue.

THE COURTS RULING

We find the petition meritorious.

The remedy of executing court decisions pending appeal in election contests is

provided under the Rules as follows:
SEC. 11. Execution pending appeal . On motion of the prevailing party with
notice to the adverse party, the court, while still in possession of the original
records, may, at its discretion, order the execution of the decision in an election
contest before the expiration of the period to appeal, subject to the following rules:

(a)
There must be a motion by the prevailing party with three-day notice to
the adverse party. Execution pending appeal shall not issue without prior notice
and hearing. There must be good reasons for the execution pending appeal. The
court, in a special order, must state the good or special reasons justifying the
execution pending appeal. Such reasons must:

(1)
constitute superior circumstances demanding urgency that will outweigh
the injury or damage should the losing party secure a reversal of the judgment on
appeal; and

(2)
be manifest, in the decision sought to be executed, that the defeat of
the protestee or the victory of the protestant has been clearly established.

(b)
If the court grants execution pending appeal, an aggrieved party shall
have twenty working days from notice of the special order within which to secure a
restraining order or status quo order from the Supreme Court of the Commission on
Elections. The corresponding writ of execution shall issue after twenty days, if no
restraining order or status quo order is issued. During such period, the writ of
execution pending appeal shall be stayed. [3]

This remedy is not new. Under prevailing jurisprudence,[4] the remedy may be
resorted to pursuant to the suppletory application of the Rules of Court, specifically
its Section 2, Rule 39.[5] What the Rules (A.M. No. 07-4-15-C) has done is to give
the availability of the remedy the element of certainty. Significantly, the Rules

similarly apply the good reason standard (in fact, the even greater superior
circumstances standard) for execution pending appeal under the Rules of Court,
making the remedy an exception rather than the rule.

At the heart of the present controversy is the question of whether there has been
compliance with the standards required for an execution pending appeal in an
election contest. As heretofore cited, the RTC found all these requisites present.
The Second Division of the COMELEC supported the RTCs ruling, but the COMELEC
en banc held a contrary view and nullified the execution pending appeal. This en
banc ruling is now before us.

Our review of a COMELEC ruling or decision is via a petition for certiorari. This is a
limited review on jurisdictional grounds, specifically of the question on whether the
COMELEC has jurisdiction, or whether the assailed order or resolution is tainted with
grave abuse of discretion amounting to lack or excess of jurisdiction. Correctly
understood, grave abuse of discretion is such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction, or [an] exercise of power in an
arbitrary and despotic manner by reason of passion or personal hostility, or an
exercise of judgment so patent and gross as to amount to an evasion of a positive
duty or to a virtual refusal to perform the duty enjoined, or to act in a manner not at
all in contemplation of law.[6]

Because this case is essentially about the implementation of an RTC decision

pending appeal, we must first dwell on the writ the RTC issued. The COMELEC ruled
in this regard that the writ of execution the RTC issued on March 11, 2008 was void;
the RTC could no longer issue the writ because of the lapse of the period for appeal,
and because the RTC no longer held the records of the election contest which had
then been transmitted to the ECAD-COMELEC.

Cunanan argues in his Comment that this ruling has become final and executory
because Pecson did not question it in the present petition. In Cunanans view, the
finality of this aspect of the COMELEC ruling renders the issue of the nullification of
the Special Order moot and academic, as any ruling we shall render would serve no
practical purpose; it can no longer be implemented since the means (obviously
referring to the writ the RTC issued on March 11, 2008) of executing the RTC
decision (i.e., seating Pecson as Mayor of Magalang) has, to all intents and
purposes, been nullified and rendered ineffective.

We see no merit in Cunanans argument. The writ of execution issued by the RTC is
a mere administrative enforcement medium of the Special Order the main order
supporting Pecsons motion for the issuance of a writ of execution. The writ itself
cannot and does not assume a life of its own independent from the Special Order on
which it is based. Certainly, its nullification does not carry with it the nullification of
the Special Order. This consequence does not of course hold true in the reverse
situation the nullification of the Special Order effectively carries with it the
nullification of its implementing writ and removes the basis for the issuance of
another implementing writ. In the present case, the reality is that if and when we
ultimately affirm the validity of the Special Order, nothing will thereafter prevent the
RTC from issuing another writ.

Another legal reality is that the COMELEC is wrong in its ruling that the RTC could no
longer actually issue the writ on March 11, 2008 because it no longer had
jurisdiction to do so after the appeal period lapsed and after the records were
transmitted to the ECAD-COMELEC. That the RTC is still in possession of the records
and that the period to appeal (of both contending parties) must have not lapsed are
important for jurisdictional purposes if the issue is the authority of the RTC to grant
a Special Order allowing execution pending appeal; they are requisite elements for
the exercise by the RTC of its residual jurisdiction to validly order an execution
pending appeal, not for the issuance of the writ itself. This is clearly evident from
the cited provision of the Rules which does not require the issuance of the
implementing writ within the above limited jurisdictional period. The RTC cannot
legally issue the implementing writ within this limited period for two reasons: (1) the
cited twenty-day waiting period under Section 11(b); and (2) the mandatory
immediate transmittal of the records to the ECAD of the COMELEC under Section 10
of the Rules.[7]

On the substantive issue of whether a writ of execution pending appeal should

issue, we do not agree with the COMELECs view that there are two presumptive
winners prior to its ruling on the protest case. We likewise cannot support its
balancing act view that essentially posits that given the pendency of the appeal
and the lack of finality of a decision in the election protest, the unseating of the
protestee, and the need for continuity of public service, the balance should tilt in
favor of continuity or non-disruption of public service; hence, the execution pending
appeal should be denied.

As Pecson correctly argued, this reasoning effectively prevents a winner (at the level
of the courts) of an election protest from ever availing of an execution pending
appeal; it gives too much emphasis to the COMELECs authority to decide the

election contest and the losing partys right to appeal. What is there to execute
pending appeal if, as the COMELEC suggested, a party should await a COMELEC
final ruling on the protest case? Effectively, the two presumptive winners and the
balancing act views negate the execution pending appeal that we have
categorically and unequivocally recognized in our rulings and in the Rules we
issued. To be sure, the COMELEC cannot, on its own, render ineffective a rule of
procedure we established by formulating its own ruling requiring a final
determination at its level before an RTC decision in a protest case can be
implemented.

We additionally note that disruption of public service necessarily results from any
order allowing execution pending appeal and is a concern that this Court was aware
of when it expressly provided the remedy under the Rules. Such disruption is
therefore an element that has been weighed and factored in and cannot be per se a
basis to deny execution pending appeal.

What comes out clearly from this examination of the COMELEC ruling is that it
looked at the wrong material considerations when it nullified the RTCs Special
Order. They are the wrong considerations because they are not the standards
outlined under Section 11, Rule 14 of the Rules against which the validity of a
Special Order must be tested. Significantly, the use of wrong considerations in
arriving at a decision constitutes grave abuse of discretion.[8]

The proper consideration that the COMELEC made relates to the correctness of the
RTCs Decision in light of the Rules requirement that the victory of the protestant
and the defeat of the protestee be clearly established for execution pending appeal
to issue. According to the COMELEC, no less than the Second Division cast a doubt
on the correctness of the number of votes obtained by the parties after the revision
of ballots when the Second Division proposed a mathematical formula to correct the
RTC count. At the same time, the COMELEC noted that the Second Division could
not have corrected the RTC count, as the petition before it was one for certiorari
while the correction of errors in computation properly pertained to the resolution of
Cunanans pending appeal. To the COMELEC, all these showed that the correctness
of the RTC Decision in favor of Pecson was far from clear and cannot support an
execution pending appeal.

We disagree once more with the COMELEC en banc in this conclusion, as it failed to
accurately and completely appreciate the Second Divisions findings. The RTC

Decision, on its face, shows that Pecson garnered more valid votes than Cunanan
after the revision of ballots. The Second Division properly recognized, however,
that the RTC computation suffered from a facial defect that did not affect the final
results; as Cunanan pointed out, the votes for Pecson and Cunanan, if totally
summed up, exceeded the total number of valid votes for mayor.

Duly alerted, the Second Division looked into the purported error, analyzed it, and
found the error to be merely mathematical; the RTC formula would necessarily
exceed the total number of votes cast for mayor because it counted some votes
twice. In making this finding, the Second Division was guided by the rule that one of
the requisites for an execution pending appeal is a clear showing in the decision of
the protestants victory and the protestees defeat. Its examination of the RTC
Decision was only for this limited purpose and this was what it did, no more no less.
Specifically, it did not review the RTCs appreciation of the ballots on revision; it did
not review the intrinsic merits of the RTC Decision issues that properly belong to
the appeal that is currently pending. It merely found that the defect Cunanan noted
was actually inconsequential with respect to the results, thus showing Pecsons
clear victory under the RTC Decision. In other words, the Second Divisions corrected
view of the RTC count confirmed, rather than contradicted or placed in doubt, the
conclusion that Pecson won.

Other than the clarity of Pecsons victory under the RTC Decision, the Special Order
cited good and special reasons that justified an execution pending appeal,
specifically: (1) the need to give as much recognition to the worth of a trial judges
decision as that which is initially given by the law to the proclamation by the board
of canvassers; (2) public interest and/or respect for and giving meaning to the will of
the electorate; and (3) public policy something had to be done to deal a death
blow to the pernicious grab-the-proclamation-prolong-the-protest technique often, if
not invariably, resorted to by unscrupulous politicians who would render nugatory
the peoples verdict against them.

Unfortunately, the COMELEC en banc simply glossed over the RTCs cited reasons
and did not fully discuss why these reasons were not sufficient to justify execution
pending appeal. A combination, however, of the reasons the RTC cited, to our mind,
justifies execution of the RTC Decision pending appeal.

A striking feature of the present case is the time element involved. We have time
and again noted the well known delay in the adjudication of election contests that,

more often than not, gives the protestant an empty or hollow victory in a long
drawn-out legal battle.[9] Some petitions before us involving election contests have
been in fact dismissed for being moot, the term for the contested position having
long expired before the final ruling on the merits came.[10] In the present case, the
term for mayor consists of only three (3) years. One year and six months has
lapsed since the May 2007 election; thus, less than two years are left of the elected
mayors term. The election protest, while already decided at the RTC level, is still at
the execution-pending-appeal stage and is still far from the finality of any decision
on the merits, given the available appellate remedies and the recourses available
through special civil actions. To be sure, there is nothing definite in the horizon on
who will finally be declared the lawfully elected mayor.

Also, we reiterate here our consistent ruling that decisions of the courts in election
protest cases, resulting as they do from a judicial evaluation of the ballots and after
full-blown adversarial proceedings, should at least be given similar worth and
recognition as decisions of the board of canvassers.[11] This is especially true when
attended by other equally weighty circumstances of the case, such as the shortness
of the term of the contested elective office, of the case.

In light of all these considerations, we conclude that the COMELEC erred in nullifying
the RTCs Special Order in a manner sufficiently gross to affect its exercise of
jurisdiction. Specifically, it committed grave abuse of discretion when it looked at
wrong considerations and when it acted outside of the contemplation of the law in
nullifying the Special Order.

WHEREFORE, premises considered, we GRANT the petition and accordingly

ANNUL the assailed COMELEC Resolution.

SO ORDERED.