Вы находитесь на странице: 1из 60

1. CARMELITA V.

LIM and VICARVILLE REALTY and


DEVELOPMENT CORPORATION, Petitioners, - versus - HON.
BENJAMIN T. VIANZON in his capacity as the
Presiding Promulgated: Judge of Branch 1 of the Regional
Trial Court of Bataan and VALENTIN GARCIA and CONCEPCION
GARCIA,
Respondents. G.R. No. 137187 August 3, 2006
x--------------------------------------------------------------------------x
DECISION
TINGA, J.:

Before us is a Petition[1] for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure filed by
Carmelita V. Lim (Lim) and Vicarville Realty and Development Corporation (Vicarville), assailing
the Orders[2] dated 3 September 1998 and 13 November 1998 issued by public respondent
Benjamin T. Vianzon of Regional Trial Court (RTC) of Balanga, Bataan, Branch 1 in Civil Case
No. 6779, entitled Sps. Valentin and Concepcion Garcia v. Carmelita V. Lim and Vicarville
Realty and Development Corporation.The assailed orders allegedly denied perfunctorily
petitioners Motion to Dismiss dated 23 June 1998 and Motion for Reconsideration dated 25
September 1998, respectively.

The antecedents follow.

On 21 November 1997, petitioner Lim filed a Complaint Affidavit [3] before the Office of the
Provincial Prosecutor of Balanga, Bataan, docketed as I.S. No. 97-984, against Valentin Garcia
(Garcia) for Falsification and Perjury. Lim alleged that Garcia willfully and deliberately asserted a
falsehood in an affidavit he had submitted to the Register of Deeds of Balanga, Bataan. In said
affidavit, Garcia allegedly stated falsely that he had lost his owners duplicate copy of Transfer
Certificate of Title (TCT) No. 107535 after entrusting the same to his agent for purposes of
selling the property covered by the title.[4]

On 2 February 1998, Garcia filed before the Office of the Provincial Prosecutor a separate
Affidavit/Complaint and Counter-Affidavit[5] against petitioner Lim, Villamon Fernandez and
Corazon Rueda for Falsification of Public Document and Use of Falsified Document, docketed
as I.S. No. 98-095.[6]

On 20 February 1998, the Office of the Provincial Prosecutor of Bataan consolidated the
complaints in I.S. No. 97-984 and I.S. No. 98-095. [7] And on 17 March 1998, the Provincial
Prosecutor issued a Joint Resolution[8] recommending the filing of criminal charges against
Garcia and dismissing the charges filed by the latter against petitioner Lim, Fernandez and
Rueda.[9] The dispositive portion of the Joint Resolution reads as follows:
WHEREFORE, premises considered, it is recommended that an information for
Violation of Article 183 of the Revised Penal Code be filed against Valentin
Garcia, and the dismissal of the charge of Falsification also against Valentin
Garcia. And accordingly, the counter charges of Valentin Garcia against
Carmelita Lim, Corazon Rueda, and Villamon Fernandez are hereby dismissed.
SO RESOLVED.[10]
On 29 April 1998, Garcia and his wife Concepcion Garcia (private respondents) filed a
Complaint[11] before RTC of Balanga, Bataan, Branch 1 for Delivery of The Owners Duplicate
Certificate of Title and Damages involving the same TCT subject of the criminal case. Private
respondents principally prayed for the annulment of the alleged Deed of Sale which petitioners
claim to be the basis for their custody of the TCT.[12] The case was docketed as Civil Case No.
6779.[13]

Attached to private respondents Complaint is a Certification and Verification [14] Garcia had
executed which reads in part:
xxxx
That he is one of the plaintiffs in the foregoing Complaint;
That he has caused the preparation of the said Complaint the allegations of
which he has read and found to be true and correct;
That except for the criminal actions which are pending before the Office of the
Provincial Prosecutor of Bataan, he has not heretofore commenced any action or

filed any claim involving the same issues in any court, tribunal or quasi-judicial
agency and, to the best of his knowledge, no such other action or claim is
pending therein;
That if he should thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report that fact within five (5) days therefrom to
this Honorable Court x x x x[15]

Thereafter, Garcia filed before the Office of the Provincial Prosecutor a Petition for Suspension
of Criminal Action Based Upon The Pendency of A Prejudicial Question. [16] Garcia prayed that
the criminal action before said office be suspended pending the resolution of Civil Case No.
6779. This petition was later denied by the Office of the Provincial Prosecutor on 13 October
1998.[17]

On 24 June 1998, the petitioners filed before the RTC of Balanga, Bataan, Branch 1 a Motion to
Dismiss raising the following grounds: a) private respondents violated the rule against forumshopping in that they failed to state in the Verification and Certification attached to the Complaint
that there is an earlier case filed by petitioners (sic) against them (sic) not only involving the
same issues but also the same set of facts; and b) the claim set forth in private respondents
Complaint had been extinguished by the previous sale of the property to the petitioners.[18]

Public respondent then issued the assailed Order[19] dated 3 September 1998 denying the
petitioners Motion to Dismiss in this wise:
Finding the Motion to Dismiss filed by the defendants and the grounds relied
upon to be unmeritorious, the same is DENIED.
WHEREFORE, the Motion to Dismiss is hereby DENIED for the lack of merit.
SO ORDERED.[20]

Petitioners filed their Motion for Reconsideration on 25 September 1998 which public
respondent likewise denied in an Order [21]dated 13 November 1998. A portion of said Order
reads as follows:
xxxx
That the courts order dated September 3, 1998 is a mere interlocutory order and
not a final judgment or decision where there is a need for the court to state
clearly the facts and the law relied upon by it;
That as correctly pointed out by the plaintiffs counsel, for forum shopping to be
present, both actions must raise identical causes of action, subject matter and
issues and there can be no forum-shopping in the instant civil case because as a
civil action, it has a different cause of action from a criminal action instituted by
the defendants;[22]
Meanwhile, on 13 October 1998, an Information was filed by the Provincial Prosecutor against
Garcia before the Municipal Trial Court of Balanga, Bataan, Branch 1 for Violation of Article 183
of the Revised Penal Code. The case is entitled People of the Philippines v. Valentin
Garcia, docketed as Criminal Case No. 7266.[23]
In their Memorandum[24] dated 29 June 2002, petitioners allege that public respondent gravely
abused his discretion when he denied the motion to dismiss per his Order dated 3 September
1998, without stating therein clearly and distinctly the reasons therefor. Petitioners also assert
that the private respondents violated the rule against forum-shopping for failing to state that they
had previously filed a case involving the same facts, issues and parties and that there is an
earlier criminal case filed by petitioner Lim against respondent Garcia also involving the same
issues and facts. Petitioners likewise state that the claim set forth in private respondents
Complaint has been extinguished by the previous sale of the property to them.[25]
In their Memorandum[26] dated 30 November 2001, private respondents point out that petitioners
failed to attach the pleadings and documents required by Section 1, Rule 65 of the 1997 Rules
of Civil Procedure. They enumerated the pleadings or documents, copies of which petitioners
failed to attach or incorporate, to wit: (a) Motion to Dismiss dated 23 June 1998; (b) Opposition
to the Motion to Dismiss dated 13 July 1998; (c) Reply dated 27 July 1998; (d) Rejoinder dated
31 August 1998; (e) Motion for Reconsideration dated 25 September 1998; and (f) Opposition

dated 26 October 1998.[27] Citing Santiago, Jr. v. Bautista,[28]private respondents maintain that
such failure is fatal to petitioners cause.[29]
Moreover, private respondents maintain that they are not guilty of forum-shopping because the
cause of action of the civil action they instituted is different from that of a criminal action.[30]
We dismiss the petition.

On the procedural aspect, we find that petitioners disregarded the doctrine of judicial hierarchy
which we enjoin litigants and lawyers to strictly observe. The Courts original jurisdiction to issue
writs of certiorari, as in the case at bar, prohibition, mandamus, quo warranto, habeas corpus
and injunction is shared by this Court with the Regional Trial Courts and 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 necessary to avoid inordinate demands upon the
Courts time and attention which are better devoted to those matters within its exclusive
jurisdiction, and to preclude the further clogging of the Courts docket.[31]

In the instant petition, petitioners failed to show any compelling reason why they filed it before
us instead of the Court of Appeals. For this reason, among others, the petition must fail. We
recall our ruling in Vergara, Sr. v. Suelto,[32] thus:
The Supreme Court is a court of last resort, and must so remain if it is to
satisfactorily perform the functions assigned to it by the fundamental charter and
immemorial tradition. It cannot and should not be burdened with the task of
dealing with causes in the first instance. Its original jurisdiction to issue the socalled extraordinary writs should be exercised only where absolutely necessary
or where serious and important reasons exist therefor. Hence, that jurisdiction
should generally be exercised relative to actions or proceedings before the Court
of Appeals, or before constitutional or other tribunals, bodies or agencies whose
acts for some reason or another, are not controllable by the Court of Appeals.
Where the issuance of an extraordinary writ is also within the competence of the
Court of Appeals or a Regional Trial Court, it is in either of these courts that the
specific action for the writs procurement must be presented. This is and should
continue to be the policy in this regard, a policy that courts and lawyers must
strictly observe.[33]

Moreover, the instant petition is procedurally flawed as it is not accompanied by copies of


relevant pleadings mandated by the second paragraph of Section 1, Rule 65 of the 1997 Rules
of Civil Procedure. Said provision reads as follows:
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, nor 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.
The petition shall be accompanied by a certified true copy of the judgment,
order or resolution subject thereof, copies of all pleadings and documents
relevant and pertinent thereto, and a sworn certification of non-forum
shopping as provided in the third paragraph of Section 3, Rule 46.
(Emphasis supplied.)

Specifically, as pointed out by respondents, the instant petition is not accompanied by copies of
the Motion to Dismiss and Motion for Reconsideration that petitioners filed with the trial court.
These are documents important for the Courts appraisal, evaluation and judicious disposition of
the case. Failing to fully apprise the Court of the relevant details of the case, we find this
egregious error a sufficient cause for the dismissal of the instant petition. As held in Santiago,
Jr. v Bautista,[34] to wit:
x x x the lower courts holding that appellants failure to accompany his petition
with a copy of the judgment or order subject thereof together with copies of all
pleadings and documents relevant and pertinent thereto is fatal to his cause is
supported not only by the provision of that Rule but by precedents as well.[35]

A party who seeks to avail of the extraordinary remedy of certiorari must observe the rules laid
down by law, and non-observance of the said rules may not be brushed aside as mere
technicality.[36]

In any case, even on the substantive aspect, the petition fails to persuade us. While we agree
with petitioners lament that the Order dated 3 September 1998 is defective as it did not state

clearly and distinctly the reasons for the denial of petitioners Motion to Dismiss, it is noteworthy,
however, that public respondent corrected his error in the Order dated 13 November 1998
denying petitioners motion for reconsideration. There is no objection to a judge correcting or
altogether altering his case disposition on a motion for reconsideration, it being the purpose of
such recourse to provide the court an opportunity to cleanse itself of an error unwittingly
committed, or, with like effect, to allow the aggrieved party the chance to convince the court that
its ruling is erroneous. A motion for reconsideration before resort to certiorari is required
precisely to afford the public respondent an opportunity to correct any actual or fancied error
attributed to it by way of re-examination of the legal and factual aspects of the case.[37]

Parenthetically, assuming that the two orders were erroneous, such error would merely be
deemed as an error of judgment that cannot be remedied by certiorari. As long as the public
respondent acted with jurisdiction, any error committed by him or it in the exercise thereof will
amount to nothing more than an error of judgment which may be reviewed or corrected only by
appeal. All errors committed in the exercise of such jurisdiction are merely errors of judgment.
Certiorari under Rule 65 is a remedy designed for the correction of errors of jurisdiction and not
errors of judgment. Petitioners rights can be more appropriately addressed in an appeal.[38]

Significantly, even if we accord merit to petitioners contention that public respondent denied
their Motion to Dismiss perfunctorily, it does not follow that the motion to dismiss should have
been granted or that the conclusion should be that public respondent had acted with grave
abuse of discretion.
The Motion to Dismiss, as earlier noted, is predicated on two grounds, namely: breach of the
forum-shopping rule and extinguishment of the cause of action by the previous sale of the
property involved to them.

Forum-shopping exists when the elements of litis pendentia are present or where a final
judgment in one case will amount to res judicata in another. Litis pendentia requires the
concurrence of the following requisites: (1) identity of parties, or at least such parties as those
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 adjudicata in the
other case.[39]

What is pivotal in determining whether forum-shopping exists or not is the vexation caused the
courts and parties-litigants by a party who asks different courts and/or administrative agencies
to rule on the same or related causes and/or grant the same or substantially the same reliefs, in
the process creating possibility of conflicting decisions being rendered by the different courts
and/or administrative agencies upon the same issues.[40]
On this issue, we hold that private respondents were not mandated to disclose the status of the
criminal cases. This is so because, as asserted by private respondents, there is no identity of
the causes of action, issues and reliefs prayed for in the criminal cases and the civil case.
The subject matter in I.S. No. 97-984 is whether

criminal actions for Falsification and Perjury should be instituted against Garcia. The principal
issue in I.S. No. 98-095 is similarly whether a criminal complaint for Falsification and Use of A
Falsified Document should be filed against Carmelita Lim, Villamon Fernandez and Corazon
Rueda. The principal issue raised in Civil Case No. 6779 is the validity of the alleged Deed of
Sale which petitioners claim to be the basis for their custody of the subject transfer certificate of
title.

Anent the contention that private respondents complaint has been extinguished by their sale of
the property to the petitioners, this is a matter best threshed out through a full-blown trial.

In sum, the viability of the instant petitions is irreversibly neutered by the procedural deficiencies
thereof and the absence of grave abuse of discretion on public respondents part.

WHEREFORE, the petition is DISMISSED Costs against petitioners.

SO ORDERED.

2. THE LIGA NG MGA BARANGAY NATIONAL, petitioner, vs. THE


CITY MAYOR OF MANILA, HON. JOSE ATIENZA, JR., and THE
CITY COUNCIL OF MANILA, respondents. [G.R. No.
154599. January 21, 2004]

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.

[5]

By virtue of the above-cited provision, the Liga adopted and ratified its own Election Code.
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.
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. [10] Since 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 quasi-judicial 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. [14] Section 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. Aguirre[19] 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 forumshopping. Forum-shopping exists where the elements of litis pendentia are present or when a
final judgment in one case will amount to res judicata in the other. For litis pendentia to exist, the
following requisites must be present: (1) identity of parties, or at least such parties as are
representing the same interests in both actions; (2) identity of rights asserted and reliefs prayed
for, the reliefs being founded on the same facts; and (3) identity 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.

3. [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,

[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,

[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.

DECISION
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
Asias 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 AEDCs 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 proponents 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
proponents proposal.
On August 29, 1996, the Second Pre-Bid Conference was held where certain clarifications
were made. Upon the request of prospective bidder Peoples 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 PBACs 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. Paircargos queries and the
PBACs 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
corporations current authorized capital stock just for prequalification purposes.
In prequalification, the agency is interested in ones 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 theyd (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 Peoples 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 Paircargos
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
AEDCs 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 no-objection 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 BuildOperate-and-Transfer 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 twentyfive (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 Concessionaires insurance; Sec. 5.10 with respect to the temporary takeover 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, DNATA-Wings 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 Branchs 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 petitioners-intervenors 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 buildoperate-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 petitioners-intervenors 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
Imus[13] and Gonzales v. Raquiza[14] whereinthis 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 Courts 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 countrys
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 courts decision denying petitioners 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, PIATCOs predecessor, was not a
duly pre-qualified 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 pre-qualification
(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.
.
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 pre-qualification, 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 pre-qualification, 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 proponents 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.
Paircargos 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 Banks 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 nonallied 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 otherthan 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.

.
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 is P558,384,871.55 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 bidders
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 prequalification. 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 ability of 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 bidders 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 PIATCOs 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 a draft, 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
proponents 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 proponents 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,
groundhandling 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 In-Service 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
Agreement reads:

hand,

the

equivalent

provision

under

the 1997

Concession

Section 6.03 Periodic Adjustment in Fees and Charges.


.
(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 Dollars[44] 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 latters
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 PIATCOs 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.
.
(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 GRPs 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 subcontractors.
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
PIATCOs 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
.
(b) In the event Concessionaire should default in the payment of an Attendant Liability, and
the default resulted in the acceleration of the payment duedate 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
GRPs 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 subcontractors.[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
PIATCOs creditors upon PIATCOs 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 PIATCOs unpaid creditors operate NAIA IPT III, the Government is still at a risk
of being liable to PIATCOs 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 PIATCOs failure to fulfill its loan obligations, the Government is still at a risk
of assuming PIATCOs outstanding loans. This is due to the fact that the Government would
only be free from assuming PIATCOs debts if the unpaid creditors would be able to designate a
qualified operator within the period provided for in the contract. Thus, the Governments
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 PIATCOs 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
.
(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:
.
(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 subclause (viii)(y) below to operate the Development Facility [NAIA Terminal 3] or transfer the
Concessionaires [PIATCO] rights and obligations under this Agreement to a transferee which is
qualified under sub-clause (viii) below;
.
(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;
.
Section 1.06. Attendant Liabilities
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 [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 sub-contractors.[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 PIATCOs debt that the Government would have to pay as a result of PIATCOs 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 PIATCOs loans not only to its Senior Lenders but all other entities
who provided PIATCO funds or services upon PIATCOs default in its loan obligation with
its Senior Lenders. The fact that the Governments obligation to pay PIATCOs lenders for the
latters 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 PIATCOs debts is triggered by PIATCOs 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 PIATCOs
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 PIATCOs 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 governments 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 PIATCOs 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 entity-owner 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.[68] This 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 PIATCOs 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 latters 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 Date [71] 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.[75] While 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. PIATCOs 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
.

(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 carryoverexcept 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 Concessionaires 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 IIIs 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. Lazaro[78] 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 MIAAs 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.

4. REPUBLIC OF THE PHILIPPINES, Petitioner, vs. HON. RAMON


S. CAGUIOA, Presiding Judge, Branch 74, Regional Trial Court,
Third Judicial Region, Olongapo City, META TRANS TRADING
INTERNATIONAL CORPORATION, and HUNDRED YOUNG SUBIC
INTERNATIONAL, INC., Respondents.
G.R. No. 174385

February 20, 2013

DECISION
BRION, J.:
We resolve in this petition for certiorari and prohibition 1 (the present petition) the challenge to
the August 11, 2005 and July 5, 2006 orders2 of respondent Judge Ramon S. Caguioa, Regional
Trial Court (RTC) of Olongapo City, Branch 74, in Civil Case No. 102-0-05. The August 11, 2005
order granted the motion to intervene filed by private respondents Metatrans Trading
International Corporation and Hundred Young Subic International, Inc., while the July 5, 2006
order denied the motion for reconsideration and the motion to suspend the proceedings filed by
the petitioner Republic of the Philippines (Republic).
The Factual Antecedents
On March 14, 2005,3 Indigo Distribution Corporation and thirteen other petitioners (collectively
referred to as lower court petitioners) filed before the respondent judge a petition for declaratory
relief with prayer for temporary restraining order (TRO) and preliminary mandatory injunction4
against the Honorable Secretary of Finance, et al. The petition sought to nullify the
implementation of Section 6 of Republic Act (R.A.) No. 9334, otherwise known as "AN ACT
INCREASING THE EXCISE TAX RATES IMPOSED ON ALCOHOL AND TOBACCO
PRODUCTS, AMENDING FOR THE PURPOSE SECTIONS 131, 141, 142, 143, 144, 145 AND
288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED," as
unconstitutional. Section 6 of R.A. No. 9334, in part, reads:
SEC. 6. Section 131 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

SEC. 131. Payment of Excise Taxes on Imported Articles.


(A) Persons Liable. x x x.
xxxx
The provision of any special or general law to the contrary notwithstanding, the
importation of cigars and cigarettes, distilled spirits, fermented liquors and wines into
the Philippines, even if destined for tax and duty-free shops, shall be subject to all
applicable taxes, duties, charges, including excise taxes due thereon. This shall apply to
cigars and cigarettes, distilled spirits, fermented liquors and wines brought directly into
the duly chartered or legislated freeports of the Subic Special Economic and Freeport
Zone, created under Republic Act No. 7227; the Cagayan Special Economic Zone and
Freeport, created under Republic Act No. 7922; and the Zamboanga City Special Economic
Zone, created under Republic Act No. 7903, and such other freeports as may hereafter be
established or created by law: Provided, further, That importations of cigars and cigarettes,
distilled spirits, fermented liquors and wines made directly by a government- owned and
operated duty-free shop, like the Duty-Free Philippines (DFP), shall be exempted from all
applicable duties only[.] [emphasis ours; italics supplied]
The lower court petitioners are importers and traders duly licensed to operate inside the Subic
Special Economic and Freeport Zone (SSEFZ).
By way of background, Congress enacted, in 1992, R.A. No. 7227, otherwise known as "The
BASES CONVERSION AND DEVELOPMENT ACT OF 1992," which provided, among others,
for the creation of the SSEFZ, as well as the Subic Bay Metropolitan Authority (SBMA).
Pursuant to this law, the SBMA granted the lower court petitioners Certificates of Registration
and Tax Exemption. The certificates allowed them to engage in the business of import and
export of general merchandise (including alcohol and tobacco products) and uniformly granted
them tax exemptions for these importations.
On January 1, 2005, Congress passed R.A. No. 9334. Based on Section 6 of R.A. No. 9334, the
SBMA issued a Memorandum on February 7, 2005 directing its various departments to require
importers in the SSEFZ to pay the applicable duties and taxes on their importations of tobacco
and alcohol products before these importations are cleared and released from the freeport. The
memorandum prompted the lower court petitioners to bring before the RTC their petition for
declaratory relief (Civil Case No. 102-0- 05). The petition included a prayer for the issuance of a
writ of preliminary injunction and/or a TRO to enjoin the Republic (acting through the SBMA)
from enforcing the challenged memorandum.
On May 4, 2005,5 the respondent judge granted the lower court petitioners application for
preliminary injunction despite the Republics opposition, and on May 11, 2005, he issued the
preliminary injunction.

The Republic filed before this Court a petition for certiorari and prohibition docketed in this
Court as G.R. No. 168584 to annul the respondent judges order and the writ issued pursuant
to this order. The petition asked for the issuance of a TRO and/or a writ of preliminary injunction.
By motion dated July 21, 2005 filed before the lower court, the Republic asked the respondent
judge to suspend the proceedings pending the resolution of G.R. No. 168584.
On August 5, 2005, the private respondents (in the present petition now before us) filed before
the respondent judge motions for leave to intervene and to admit complaints-in-intervention.
They also asked in these motions that the respondent judge extend to them the effects and
benefits of his May 4, 2005 order, in the lower court petitioners favor, and the subsequently
issued May 11, 2005 writ of preliminary mandatory injunction.
Without acting on the Republics motion to suspend the proceedings, the respondent judge
granted on August 11, 2005 the private respondents motions and complaints-in-intervention.
The respondent judge found the private respondents to be similarly situated as the lower court
petitioners; they stood, too, to be adversely affected by the implementation of R.A. No. 9334.
The Republic moved to reconsider6 the respondent judges August 11, 2005 order, arguing that it
had been denied due process because it never received copies of the private respondents
motions and complaints-in-intervention.
On July 5, 2006, the respondent judge denied the Republics motion for reconsideration and the
previously filed motion to suspend the proceedings. The respondent judge held that all of the
parties in the case had been duly notified per the records. To justify the denial of the motion to
suspend the proceedings, the respondent judge pointed to the absence of any restraining order
in G.R. No. 168584. The Republic responded to the respondent judges actions by filing the
present petition.
The Petition
The present petition charges that the respondent judge acted with manifest partiality and with
grave abuse of discretion when he issued his August 11, 2005 and July 5, 2006 orders. In
particular, the Republic contends that the respondent judge violated its right to due process
when he peremptorily allowed the private respondents motions and complaints-in-intervention
and proceeded with their hearing ex parte despite the absence of any prior notice to it. The
Republic maintains that it never received any notice of hearing, nor any copy of the questioned
motions and complaints-in-intervention.7
Further, the Republic posits that the respondent judge abused his discretion when he extended
to the private respondents the benefits of the preliminary injunction earlier issued to the lower
court petitioners under the same P1,000,000.00 bond the lower court petitioners posted. The
Republic labels this action as a violation of Section 4, Rule 58 of the Rules of Court, claiming at
the same time that the bond is manifestly disproportionate to the resulting damage the Republic
stood to incur considering the number of the original and the additional lower court petitioners.8

Finally, in support of its prayer for the issuance of a TRO and/or a writ of preliminary injunction,
the Republic stresses that the assailed orders continue to cause it multi-million tax losses. It
justifies its prayer for the respondent judges inhibition by pointing to the latters act of
continuously allowing parties to intervene despite the absence of notice and to the inclusion of
non-parties to the original case.
During the pendency of the present petition, the Court en banc partially granted the Republics
petition in G.R. No. 168584. By a Decision9 dated October 15, 2007, this Court set aside and
nullified the respondent judges order of May 4, 2005 and the subsequent May 11, 2005 writ of
preliminary injunction. On January 15, 2008, the Court denied with finality the lower court
petitioners motion for reconsideration.10
The Respondents Position
In their defense, the private respondents point to the procedural defects in the petition,
specifically: first, the petition was filed out of time, arguing that the Republic only had 53
remaining days to file the petition from notice of the denial of its motion for reconsideration,
maintaining that the 60-day period within which to file the petition is counted from the notice of
the denial of the August 11, 2005 order; second, the petition did not comply with the rules on
proof of filing and service; third, the Republic failed to properly serve their counsel of record a
copy of the petition; and fourth, the Republic did not observe the hierarchy of courts in filing the
instant petition.11
The private respondents further contend that the respondent judge correctly allowed their
complaints-in-intervention as the matter of intervention is addressed to the courts discretion; as
noted in the assailed orders, the records show that the notice of hearing was addressed to all of
the parties in the original case.12
Finally, on the Republics prayer for prohibition, the private respondents maintain that prohibition
is improper since this Court, in G.R. No. 168584, denied the Republics prayer for a writ of
prohibition, noting that the respondent judge had been suspended, pending resolution of this
petition.13
The Courts Ruling
We resolve to PARTLY GRANT the petition.
Relaxation of procedural rules for compelling reasons
We disagree with the private respondents procedural objections.
First, we find that the present petition was filed within the reglementary period. Contrary to the
private respondents position, the 60- day period within which to file the petition for certiorari is
counted from the Republics receipt of the July 5, 2006 order denying the latters motion for
reconsideration. Section 4, Rule 65 of the Rules of Court is clear on this point "In case a

motion for reconsideration or new trial is timely filed, whether such motion is required or
not, the sixty (60) day period shall be counted from notice of the denial of said
motion."14 We find too that the present petition complied with the rules on proof of filing and
service of the petition. Attached to the petition in compliance with Sections 12 and 13, Rule 13
of the Rules of Court are the registry receipts and the affidavit of the person who filed and
served the petition by registered mail.
Second, while the principle of hierarchy of courts does indeed require that recourses should be
made to the lower courts before they are made to the higher courts,15 this principle is not an
absolute rule and admits of exceptions under well-defined circumstances. In several cases, we
have allowed direct invocation of this Courts original jurisdiction to issue writs of certiorari on
the ground of special and important reasons clearly stated in the petition;16 when dictated by
public welfare and the advancement of public policy; when demanded by the broader interest of
justice; when the challenged orders were patent nullities;17 or when analogous exceptional and
compelling circumstances called for and justified our immediate and direct handling of the
case.18
The Republic claims that the respondent judge violated and continues to violate its right to due
process by allowing the private respondents and several others to intervene in the
case sans notice to the Republic; by extending to them the benefit of the original injunction
without the requisite injunction bond applicable to them as separate injunction applicants; and
by continuing to suspend the Republics right to collect excise taxes from the private
respondents and from the lower court petitioners, thus adversely affecting the governments
revenues. To our mind, the demonstrated extent of the respondent judges actions and their
effects constitute special and compelling circumstances calling for our direct and immediate
attention.
Lastly, under our rules of procedure,19 service of the petition on a party, when that party is
represented by a counsel of record, is a patent nullity and is not binding upon the party
wrongfully served.20 This rule, however, is a procedural standard that may admit of exceptions
when faced with compelling reasons of substantive justice manifest in the petition and in the
surrounding circumstances of the case.21 Procedural rules can bow to substantive
considerations through a liberal construction aimed at promoting their objective of securing a
just, speedy and inexpensive disposition of every action and proceeding.22
The Republic has consistently and repeatedly maintained that it never received a copy of the
motions and complaints-in-intervention, as evidenced by the certification of the Docket Division
of the Office of the Solicitor General (OSG); it learned of the private respondents presence in
this case only after it received copies of the assailed orders, and it even had to inquire from the
lower court for the private respondents addresses. Although their counsels did not formally
receive any copy of the petition, the private respondents themselves admitted that they received
their copy of the present petition. The records show that the Republic subsequently complied
with the rules on service when, after the private respondents comment, the Republic served
copies of its reply and memorandum to the respondents counsel of record.

Under these circumstances, we are satisfied with the Republics explanation on why it failed to
initially comply with the rule on service of the present petition; its subsequent compliance with
the rule after being informed of the presence of counsels of record sufficiently warrants the
rules relaxed application.23 The lack of a proper service unlike the situation when the Republic
was simply confronted with already-admitted complaints-in-intervention did not result in any
prejudice; the private respondents themselves were actually served with, and duly received,
their copies of the present petition, allowing them to comment and to be heard on the petition.
The Republic was denied due process; the respondent judge issued the assailed orders
with grave abuse of discretion
Due process of law is a constitutionally guaranteed right reserved to every litigant.1wphi1 Even
the Republic as a litigant is entitled to this constitutional right, in the same manner and to the
same extent that this right is guaranteed to private litigants. The essence of due process is the
opportunity to be heard, logically preconditioned on prior notice, before judgment is rendered.24
A motion for intervention, like any other motion, has to comply with the mandatory requirements
of notice and hearing, as well as proof of its service,25 save only for those that the courts can act
upon without prejudice to the rights of the other parties.26 A motion which fails to comply with
these requirements is a worthless piece of paper that cannot and should not be acted
upon.27 The reason for this is plain: a movant asks the court to take a specific course of action,
often contrary to the interest of the adverse party and which the latter must then be given the
right and opportunity to oppose.28 The notice of hearing to the adverse party thus directly
services the required due process as it affords the adverse party the opportunity to properly
state his agreement or opposition to the action that the movant asks for.29 Consequently, our
procedural rules provide that a motion that does not afford the adverse party this kind of
opportunity should simply be disregarded.30
The notice requirement is even more mandatory when the movant asks for the issuance of a
preliminary injunction and/or a TRO. Under Section 5, Rule 58 of the Rules of Court, no
preliminary injunction shall be granted without a hearing and without prior notice to the party
sought to be enjoined. The prior notice under this requirement is as important as the hearing, as
no hearing can meaningfully take place, with both parties present or represented, unless a prior
notice of the hearing is given.
Additionally, in the same way that an original complaint must be served on the defendant, a
copy of the complaint-in-intervention must be served on the adverse party with the requisite
proof of service duly filed prior to any valid court action. Absent these or any reason duly
explained and accepted excusing strict compliance, the court is without authority to act on such
complaint; any action taken without the required service contravenes the law and the rules, and
violates the adverse partys basic and constitutional right to due process.
In the present case, records show that the OSG had never received contrary to the private
respondents claim a copy of the motions and complaints-in-intervention.31 The Republic duly
and fully manifested the irregularity before the respondent judge.32 Thus, the mere statement in

the assailed orders that the parties were duly notified is insufficient on the face of the
appropriate manifestation made and the supporting proof that the Republic submitted. In these
lights, the motions and complaints-in-intervention cannot but be mere scraps of paper that the
respondent judge had no reason to consider; in admitting them despite the absence of prior
notice, the respondent judge denied the Republic of its right to due process.
While we may agree with the private respondents claim that the matter of intervention is
addressed to the sound discretion of the court,33 what should not be forgotten is the requirement
that the exercise of discretion must in the first place be "sound." In other words, the basic
precepts of fair play and the protection of all interests involved must always be considered in the
exercise of discretion. Under the circumstances of the present case, these considerations
demand that the original parties to the action, which include the Republic, must have been
properly informed to give them a chance to protect their interests. These interests include,
among others, the protection of the Republics revenue-generating authority that should have
been insulated against damage through the filing of a proper bond. Thus, even from this narrow
view that does not yet consider the element of fair play, the private respondents case must fail;
judicial discretion cannot override a party litigants right to due process.
All told, the respondent judge acted with grave abuse of discretion warranting the issuance of
the corrective writ of certiorari. Grave abuse of discretion arises when a lower court or tribunal
violates the Constitution or grossly disregards the law or existing jurisprudence.34 The term
refers to such capricious and whimsical exercise of judgment equivalent to lack of jurisdiction,
as when the act amounts to an evasion of a positive duty or to a virtual refusal to perform a duty
enjoined by law, or to act at all in contemplation of law .35 The respondent judge so acted so that
the orders he issued should be declared void and of no effect.
Petition for prohibition and prayer for inhibition are denied for having been mooted by
subsequent events
On November 9, 2006, the Republic filed an administrative case against the respondent judge
for gross ignorance of the law, manifest partiality and conduct prejudicial to the best interest of
the service. The case, docketed as A.M. No. RTJ-07-2063, is likewise related to Civil Case No.
102-0-05 that underlie the present petition. By a decision dated June 26, 2009, and while this
case was still pending, this Court found the respondent judge guilty of gross ignorance of the
law and conduct prejudicial to the best interest of the service. The Court accordingly dismissed
the respondent judge from the service.
In light of these supervening events, the Court sees no reason to resolve the other matters
raised in this petition for being moot.
WHEREFORE, under these premises, we PARTIALLY GRANT the petition. We GRANT the writ
of certiorari and accordingly SET ASIDE the orders dated August 11, 2005 and July 5, 2006 of
respondent Judge Ramon S. Caguioa in Civil Case No. 102-0-05 for being NULL and VOID. We
DISMISS the prayer for writ of prohibition on the ground of mootness. Costs against Metatrans
Trading International Corporation and Hundred Young Subic International, Inc.

SO ORDERED.
5.
SAINT LOUIS UNIVERSITY, INC.,
Petitioner,

G.R. No. 187104


Present:

versus -

CARPIO MORALES, J., Chairperson


BRION,
BERSAMIN,

EVANGELINE C. COBARRUBIAS,

Respondent. -- -

VILLARAMA, JR., JJ.

ABAD, and

Promulgated:

August 3, 2010
x-----------------------------------------------------------------------------------------x
DECISION
BRION, J.:

We resolve the present petition for review on certiorari[1] filed by petitioner Saint Louis
University, Inc. (SLU), to challenge the decision[2] and the resolution[3] of the Court of Appeals
(CA) in CA-G.R. SP No. 101708.[4]

The Factual Background

The facts of the case, gathered from the records, are briefly summarized below.

Respondent

Evangeline

C.

Cobarrubias

is

an

associate

professor

of

the

petitioners College of Human Sciences. She is an active member of the Union of Faculty and
Employees of Saint Louis University (UFESLU).

The 2001-2006[5] and 2006-2011[6] Collective Bargaining Agreements (CBAs) between


SLU and UFESLU contain the following common provision on forced leave:

Section 7.7. For teaching employees in college who fail the yearly evaluation, the
following provisions shall apply:

(a)

Teaching employees who are retained for three (3)


cumulative years in five (5) years shall be on forced leave for one
(1) regular semester during which period all benefits due them
shall be suspended.[7]

SLU placed Cobarrubias on forced leave for the first semester of School Year (SY) 20072008 when she failed the evaluation for SY 2002-2003, SY 2005-2006, and SY 2006-2007, with
the rating of 85, 77, and 72.9 points, respectively, below the required rating of 87 points.

To reverse the imposed forced leave, Cobarrubias sought recourse from the CBAs
grievance machinery. Despite the conferences held, the parties still failed to settle their dispute,
prompting Cobarrubias to file a case for illegal forced leave or illegal suspension with the
National Conciliation and Mediation Board of the Department of Labor and Employment,
Cordillera Administrative Region, Baguio City. When circulation and mediation again failed, the
parties submitted the issues between them for voluntary arbitration before Voluntary Arbitrator
(VA) Daniel T. Farias.

Cobarrubias argued that the CA already resolved the forced leave issue in a prior case between
the parties, CA-G.R. SP No. 90596,[8] ruling that the forced leave for teachers who fail their
evaluation for three (3) times within a five-year period should be coterminous with the CBA in
force during the same five-year period.[9]

SLU, for its part, countered that the CA decision in CA-G.R. SP No. 90596 cannot be
considered in deciding the present case since it is presently on appeal with this Court (G.R. No.
176717)[10] and, thus, is not yet final. It argued that the forced leave provision applies
irrespective of which CBA is applicable, provided the employee fails her evaluation three (3)
times in five (5) years.[11]

The Voluntary Arbitrator Decision

On October 26, 2007, VA Daniel T. Farias dismissed the case. [12] He found that the CA decision
in CA-G.R. SP No. 90596 is not yet final because of the pending appeal with this Court. He
noted that the CBA clearly authorized SLU to place its teaching employees on forced leave
when they fail in the evaluation for three (3) years within a five-year period, without a distinction
on whether the three years fall within one or two CBA periods. Cobarrubias received the VAs
decision on November 20, 2007.[13]

On December 5, 2007, Cobarrubias filed with the CA a petition for review under Rule 43
of the Rules of Court, but failed to pay the required filing fees and to attach to the petition copies
of the material portions of the record.[14]

Thus, on January 14, 2008, the CA dismissed the petition outright for Cobarrubias
procedural lapses.[15] Cobarrubias received the CA resolution, dismissing her petition, on
January 31, 2008.[16]

On February 15, 2008, Cobarrubias filed her motion for reconsideration, arguing that the
ground cited is technical. She, nonetheless, attached to her motion copies of the material
portions of the record and the postal money orders for P4,230.00. She maintained that the ends
of justice and fair play are better served if the case is decided on its merits.[17]

On July 30, 2008, the CA reinstated the petition. It found that Cobarrubias substantially
complied with the rules by paying the appeal fee in full and attaching the proper documents in
her motion for reconsideration.[18]

SLU insisted that the VA decision had already attained finality for Cobarrubias failure to
pay the docket fees on time.

The CA Decision

The CA brushed aside SLUs insistence on the finality of the VA decision and annulled it,
declaring that the three (3) cumulative years in five (5) years phrase in Section 7.7(a) of the
2006-2011 CBA means within the five-year effectivity of the CBA. Thus, the CA ordered SLU to
pay all the benefits due Cobarrubias for the first semester of SY 2007-2008, when she was
placed on forced leave.[19]

When the CA denied[20] the motion for reconsideration that followed, [21] SLU filed the
present petition for review on certiorari.[22]

The Petition

SLU argues that the CA should not have reinstated the appeal since Cobarrubias failed to pay
the docket fees within the prescribed period, and rendered the VA decision final and executory.
Even if Cobarrubias procedural lapse is disregarded, SLU submits that Section 7.7(a) of the
2006-2011 CBA should apply irrespective of the five-year effectivity of each CBA.[23]

The Case for Cobarrubias

Cobarrubias insists that the CA settled the appeal fee issue, in its July 30, 2008 resolution,
when it found that she had substantially complied with the rules by subsequently paying the
docket fees in full. She submits that the CAs interpretation of Section 7.7(a) of the 2006-2011
CBA is more in accord with law and jurisprudence.[24]

The Issues

The core issues boil down to whether the CA erred in reinstating Cobarrubias petition
despite her failure to pay the appeal fee within the reglementary period, and in reversing the VA
decision. To state the obvious, the appeal fee is a threshold issue that renders all other issues
unnecessary if SLUs position on this issue is correct.

The Courts Ruling

We find the petition meritorious.

Payment of Appellate Court Docket Fees

Appeal is not a natural right but a mere statutory privilege, thus, appeal must be made strictly in
accordance with the provision set by law.[25] Rule 43 of the Rules of Court provides that appeals
from the judgment of the VA shall be taken to the CA, by filing a petition for review within fifteen
(15) days from the receipt of the notice of judgment. [26] Furthermore, upon the filing of the
petition, the petitioner shall pay to the CA clerk of court the docketing and other lawful fees;
[27]

non-compliance with the procedural requirements shall be a sufficient ground for the petitions

dismissal.[28] Thus, payment in full of docket fees within the prescribed period is not only
mandatory, but also jurisdictional.[29] It is an essential requirement, without which, the decision
appealed from would become final and executory as if no appeal has been filed.[30]

As early as the 1932 case of Lazaro v. Endencia and Andres,[31] we stressed that the
payment of the full amount of the docket fee is an indispensable step for the perfection of an
appeal. In Lee v. Republic,[32] we decided that even though half of the appellate court docket fee
was deposited, no appeal was deemed perfected where the other half was tendered after the
period within which payment should have been made. In Aranas v. Endona,[33] we reiterated that
the appeal is not perfected if only a part of the docket fee is deposited within the reglementary
period and the remainder is tendered after the expiration of the period.

The rulings in these cases have been consistently reiterated in subsequent


cases: Guevarra v. Court of Appeals,[34] Pedrosa v. Spouses Hill,[35] Gegare v. Court of Appeals,
[36]

Lazaro v. Court of Appeals,[37] Sps. Manalili v. Sps. de Leon,[38] La Salette College v. Pilotin,

[39]

Saint Louis University v. Spouses Cordero,[40] M.A. Santander Construction, Inc. v.

Villanueva,[41] Far Corporation v. Magdaluyo,[42] Meatmasters Intl. Corp. v. Lelis Integrated Devt.
Corp.,[43] Tamayo v. Tamayo, Jr.,[44] Enriquez v. Enriquez,[45] KLT Fruits, Inc. v. WSR Fruits, Inc.,
[46]

Tan v. Link,[47] Ilusorio v. Ilusorio-Yap,[48] and most recently in Tabigue v. International Copra

Export Corporation (INTERCO),[49] and continues to be the controlling doctrine.

In the present case, Cobarrubias filed her petition for review on December 5, 2007,
fifteen (15) days from receipt of the VA decision on November 20, 2007, but paid her docket
fees in full only after seventy-two (72) days, when she filed her motion for reconsideration on
February 15, 2008 and attached the postal money orders for P4,230.00. Undeniably, the docket
fees were paid late, and without payment of the full docket fees, Cobarrubias appeal was not
perfected within the reglementary period.

Exceptions to the Rule on Payment of Appellate Court


Docket Fees not applicable

Procedural rules do not exist for the convenience of the litigants; the rules were
established primarily to provide order to and enhance the efficiency of our judicial system.
[50]

While procedural rules are liberally construed, the provisions on reglementary periods are

strictly applied, indispensable as they are to the prevention of needless delays, and are
necessary to the orderly and speedy discharge of judicial business.[51]

Viewed in this light, procedural rules are not to be belittled or dismissed simply because
their non-observance may have prejudiced a party's substantive rights; like all rules, they are
required to be followed. However, there are recognized exceptions to their strict observance,
such as: (1) most persuasive and weighty reasons; (2) to relieve a litigant from an injustice not
commensurate with his failure to comply with the prescribed procedure; (3) good faith of the
defaulting party by immediately paying within a reasonable time from the time of the default; (4)
the existence of special or compelling circumstances; (5) the merits of the case; (6) a cause not
entirely attributable to the fault or negligence of the party favored by the suspension of the rules;
(7) a lack of any showing that the review sought is merely frivolous and dilatory; (8) the other
party will not be unjustly prejudiced thereby; (9) fraud, accident, mistake or excusable
negligence without the appellant's fault; (10) peculiar, legal and equitable circumstances
attendant to each case; (11) in the name of substantial justice and fair play; (12) importance of
the issues involved; and (13) exercise of sound discretion by the judge, guided by all the
attendant circumstances.[52] Thus, there should be an effort, on the part of the party invoking
liberality, to advance a reasonable or meritorious explanation for his/her failure to comply with
the rules.

In Cobarrubias' case, no such explanation has been advanced. Other than insisting
that the ends of justice and fair play are better served if the case is decided on its merits,
Cobarrubias offered no excuse for her failure to pay the docket fees in full when she filed her
petition for review. To us, Cobarrubias omission is fatal to her cause.

We, thus, find that the CA erred in reinstating Cobarrubias petition for review despite the
nonpayment of the requisite docket fees within the reglementary period. The VA decision had
lapsed to finality when the docket fees were paid; hence, the CA had no jurisdiction to entertain
the appeal except to order its dismissal.

WHEREFORE, the present petition is GRANTED. The assailed decision and resolution
of the Court of Appeals in CA-G.R. SP No. 101708 are hereby DECLARED VOID and are
consequently SET ASIDE. The decision of the voluntary arbitrator, that the voided Court of
Appeals decision and resolution nullified, stands. No pronouncement as to costs.

SO ORDERED.