Cases on jurisdiction

1.
THIRD DIVISION
G.R. No. 167702 March 20, 2009
LOURDES L. ERISTINGCOL, Petitioner,
vs.
COURT OF APPEALS an RANDOLP! C. LIM"OCO, Respondents.
D E C I S I O N
NAC!URA, J.:
This is a petition for review on certiorari under Rue !" of the Rues of Court which assais the Court of #ppeas $C#%
Decision1 in C#&'.R. SP. No. (!(!) dis*issin+ Civi Case No. ,,&),- .efore the Re+iona Tria Court $RTC% for
ac/ of 0urisdiction.
The facts, as narrated .1 the C#, are si*pe.
2Petitioner 3ourdes4 Eristin+co is an owner of a residentia ot in 5rdaneta Via+e $or 6via+e6%, 7a/ati Cit1 and
covered .1 Transfer Certificate of Tite No. )89"9(. On the other hand, 2respondent Randoph4 3i*0oco, 23oren:o4
Tan and 2;une4 Vivestre were the for*er president and chair*an of the .oard of +overnors $or 6.oard6%, construction
co**ittee chair*an and via+e *ana+er of 25rdaneta Via+e #ssociation Inc.4 5V#I, respective1. 5V#I is an
association of ho*eowners at 5rdaneta Via+e.
2Eristin+co<s4 action 2a+ainst 5V#I, 3i*0oco, Tan and Vivestre4 is founded on the ae+ations that in co*piance
with the Nationa =uidin+ Code and after 5V#I<s approva of her .uidin+ pans and acceptance of the construction
.ond and architect<s fee, Eristin+co started constructin+ a house on her ot with 6concrete canop1 direct1 a.ove the
*ain door and hi+hwa16> that for ae+ed vioation of its Construction Rues and Re+uations $or 6CRR6% on 6Set
=ac/ 3ine6 vis&a&vis the canop1 ease*ent, 5V#I i*posed on her a penat1 of P!88,888.88 and .arred her wor/ers
and contractors fro* enterin+ the via+e and wor/in+ on her propert1> that the CRR, particuar1 on 6Set =ac/ 3ine,6
is contrar1 to aw> and that the penat1 is unwarranted and e?cessive.
On @e.ruar1 ,, A,,,, or a da1 after the fiin+ of the co*paint, the parties reached a te*porar1 sette*ent where.1
5V#I, 3i*0oco, Tan and Vivestre e?ecuted an underta/in+ which aowed Eristin+co<s wor/ers, contractors and
suppiers to eave and enter the via+e, su.0ect on1 to nor*a securit1 re+uations of 5V#I.
On @e.ruar1 )(, A,,,, 5V#I, 3i*0oco, Tan and Vivestre fied a *otion to dis*iss on +round of ac/ of 0urisdiction
over the su.0ect *atter of the action. The1 ar+ued that it is the Ho*e Insurance 'uarant1 Corporation $or
6HI'C6%2 which has 0urisdiction over intra&corporate disputes invovin+ ho*eowners associations, pursuant to E?ec.
Order No. "B", Series of A,-,, as a*ended .1 E?ec. Order No. ,8, Series of A,9(.
Opposin+ the *otion, Eristin+co ae+ed, a*on+ others, that 5V#I, 3i*0oco, Tan and Vivestre did not co*p1 with
the *andator1 provisions of Secs. ! and (, Rue A" of the A,,- Rues of Civi Procedure and are estopped fro*
Cuestionin+ the 0urisdiction of the 2RTC4 after the1 vountari1 appeared therein 6and e*.raced its authorit1 .1
a+reein+ to si+n an 5nderta/in+.6
On 7a1 )8, A,,,, Eristin+co fied an a*ended co*paint .1 $i% i*peadin+ 7anue Car*ona $or 6Car*ona6% and
Rene Cristo.a $or 6Cristo.a6%, 5V#I<s new1&eected president and chair*an of the .oard and new1&desi+nated
construction co**ittee chair*an, respective1, as additiona defendants and $ii% increasin+ her cai* for *ora
da*a+es a+ainst each petitioner fro* P"88,888.88 to PA,888,888.88.
On 7a1 )", A,,,, Eristin+co fied a *otion for production and inspection of docu*ents, which 5V#I, 3i*0oco, Tan,
Vivestre, Car*ona and Cristo.a opposed. The *otion sou+ht to co*pe 25V#I and its officers4 to produce the
docu*ents used .1 5V#I as .asis for the i*position of the P!88,888.88 penat1 on Eristin+co as we as etters and
docu*ents showin+ that 5V#I had infor*ed the other ho*eowners of their vioations of the CRR.
On 7a1 )(, A,,,, the 2RTC4 issued an order which pertinent1 readsD
IN VIEE O@ THE @ORE'OIN', for ac/ of *erit, the defendants< 7otion to Dis*iss is Denied, and paintiff<s
*otion to decare defendants in defaut and for conte*pt are aso Denied.6
The 2RTC4 ratiocinated that 25V#I, 3i*0oco, Tan and Vivestre4 *a1 not assai its 0urisdiction 6after the1 vountari1
entered their appearance, sou+ht reiefs therein, and e*.raced its authorit1 .1 a+reein+ to si+n an underta/in+ to
desist fro* prohi.itin+ $Eristin+co<s% wor/ers fro* enterin+ the via+e.6 In so ruin+, it appied the doctrine
enunciated in Ti0a* v. Si.on+hano1.
On ;une -, A,,,, Eristin+co fied a *otion reiteratin+ her earier *otion for production and inspection of docu*ents.
On ;une 9, A,,,, 25V#I, 3i*0oco, Tan and Vivestre4 *oved for partia reconsideration of the order dated 7a1 )(,
A,,,. Eristin+co opposed the *otion.
On 7arch )!, )88A, the 2RTC4 issued an order +rantin+ Eristin+co<s *otion for production and inspection of
docu*ents, whie on 7arch )(, )88A, it issued an order den1in+ 25V#I<s, 3i*0oco<s, Tan<s and Vivestre<s4 *otion
for partia reconsideration.
On 7a1 A8, )88A, 25V#I, 3i*0oco, Tan and Vivestre4 eevated the dispute .efore 2the C#4 via 2a4 petition for
certiorari ae+in+ that the 2RTC4 acted without 0urisdiction in issuin+ the orders of 7a1 )(, A,,, and 7arch )! and
)(, )88A.3
The C# issued the herein assaied Decision reversin+ the RTC Order4 and dis*issin+ Eristin+co<s co*paint for ac/
of 0urisdiction.
Hence, this appea positin+ a soe issue for our resoutionD
Ehether it is the RTC or the Housin+ and 3and 5se Re+uator1 =oard $H35R=% which has 0urisdiction over the
su.0ect *atter of Eristin+co<s co*paint.
=efore an1thin+ ese, we note that the instant petition i*peads on1 3i*0oco as private respondent. The rest of the
defendants sued .1 Eristin+co .efore the RTC, who then coective1 fied the petition for certiorari .efore the C#
assaiin+ the RTC<s Order, were, curious1, not incuded as private respondents in this particuar petition.
Eristin+co e?pains that on1 respondent 3i*0oco was retained in the instant petition as her discussions with 5V#I
and the other defendants reveaed their ac/ of participation in the wor/&stoppa+e order which was supposed1 sin+e&
handed1 thou+ht of and i*pe*ented .1 3i*0oco.
The fore+oin+ carification notwithstandin+, the rest of the defendants shoud have .een i*peaded as respondents in
this petition considerin+ that the co*paint .efore the RTC, where the petition .efore the C# and the instant petition
ori+inated, has 1et to .e a*ended. @urther*ore, the present petition *aintains that it was serious error for the C# to
have rued that the RTC did not have 0urisdiction over a co*paint for decaration of nuit1 of 5V#I<s Construction
Rues. Cear1, 5V#I and the rest of the defendants shoud have .een i*peaded herein as respondents.
Section !$a%, Rue !" of the Rues of Court, reCuires that the petition sha 6state the fu na*e of the appeain+ part1
as petitioner and the adverse part1 as respondent, without i*peadin+ the ower courts or 0ud+es thereof either as
petitioners or respondents.6 #s the osin+ part1 in defendants< petition for certiorari .efore the C#, Eristin+co shoud
have i*peaded a petitioners, the winnin+ and adverse parties therein.
On this score aone, the present petition coud have .een dis*issed outri+ht.5 However, to sette the issue of
0urisdiction, we have opted to dispose of this case on the *erits.
Despite her havin+ dropped 5V#I, 3oren:o Tan $Tan% and ;une Vivestre $Vivestre% fro* this suit, Eristin+co insists
that her co*paint a+ainst 5V#I and the defendants was proper1 fied .efore the RTC as it pra1s for the decaration
of nuit1 of 5V#I<s Construction Rues and as/s that da*a+es .e paid .1 3i*0oco and the other 5V#I officers who
had inficted in0ur1 upon her. Eristin+co asseverates that since the case .efore the RTC is one for decaration of
nuit1, the nature of the Cuestion that is the su.0ect of controvers1, not 0ust the status or reationship of the parties,
shoud deter*ine which .od1 has 0urisdiction. In an1 event, Eristin+co su.*its that the RTC<s 0urisdiction over the
case was forecosed .1 the pra1er of 5V#I and its officers, incudin+ 3i*0oco, for affir*ative reief fro* that court.
Ee&setted in 0urisprudence is the rue that in deter*inin+ which .od1 has 0urisdiction over a case, we shoud
consider not on1 the status or reationship of the parties, .ut aso the nature of the Cuestion that is the su.0ect of their
controvers1.6 To deter*ine the nature of an action and which court has 0urisdiction, courts *ust oo/ at the aver*ents
of the co*paint or petition and the essence of the reief pra1ed for.7 Thus, we e?a*ine the pertinent ae+ations in
Eristin+co<s co*paint, specifica1 her a*ended co*paint, to witD
#e+ations Co**on to # Causes of #ction
B. In A,"9 and upon its incorporation, 25V#I4 adopted a set of =1&aws and Rues and Re+uations, ? ?
?. Ite* " of 25V#I<s4 Construction Rues pertinent1 providesD
6Set .ac/ ineD # =uidin+s, incudin+ +ara+e servants< Cuarters, or parts thereof $covered terraces,
portes cocheres% *ust .e constructed at a distance of not ess than three $B% *eters fro* the .oundar1
frontin+ a street and not ess than four $!% *eters frontin+ the draina+e cree/ or under+round cuvert and
two $)% *eters fro* other .oundaries of a ot. Distance wi .e *easured fro* the vertica pro0ection of
the roof nearest the propert1 ine. Co*pete1 open and unroofed terraces are not incuded in these
restrictions.6
Suffice it to state that there is nothin+ in the sa*e =1&aws which deas e?picit1 with canopies or
*arCuees which e?tend outward fro* the *ain .uidin+.
!. 2Eristin+co4 has .een a resident of 5rdaneta Via+e for eeven $AA% 1ears. In @e.ruar1 A,,-, she
purchased a parce of and in the Via+e, ocated at the corner of 5rdaneta #venue and Cerrada Street. ?
? ?.
". In considerin+ the desi+n for the house $the 6Cerrada propert16% which she intended to construct on
Cerrada Street, 2Eristin+co4 referred to the Nationa =uidin+ Code of the Phiippines. #fter assurin+
hersef that the said aw does not e?press1 provide an1 restrictions in respect thereof, and after notin+
that other houses owned .1 pro*inent fa*iies had si*iar structures without .ein+ cited .1 the
Via+e<s Construction Co**ittee, 2Eristin+co4 decided that the Cerrada propert1 woud have a concrete
canop1 direct1 a.ove the *ain door and drivewa1.
(. In co*piance with 25V#I<s4 rues, 2Eristin+co4 su.*itted to 25V#I4 copies of her .uidin+ pans in
respect of the Cerrada propert1 and the .uidin+ pans were du1 approved .1 25V#I4. ? ? ?.
-. 2Eristin+co4 su.*itted andFor paid the 6cash .ondFconstruction .ond deposit and architect<s
inspection fee6 of P)88,888.88 and the architect<s inspection fee of P"88.88 as reCuired under
Construction Rues ? ? ?.
9. In the atter part of A,,-, and whie the construction of the Cerrada propert1 was on+oin+,
2Eristin+co4 received a notice fro* 25V#I4, char+in+ her with ae+ed vioations of the Construction
Rues, i.e., those on the hei+ht restriction of eeven $AA.8% *eters, and the canop1 e?tension into the
ease*ent. On ))nd ;anuar1 A,,9, 2Eristin+co4 $throu+h her representatives% *et with, a*on+ others,
defendant 3i*0oco. In said *eetin+, and after dei.eration on the definition of the phrase 6ori+ina
+round eevation6 as a reference point, 2Eristin+co<s4 representatives a+reed to revise the .uidin+ pan
.1 re*ovin+ what was intended to .e a parapet or roof raiin+, and there.1 reduce the hei+ht of the
structure .1 !8 centi*eters, which proposa was accepted .1 the =oard throu+h defendant 3i*0oco, 'ov.
Cataino 7acarai+ ;r. $25V#I<s4 Construction Co**ittee chair*an%, and the Via+e<s #rchitect.
However, the issue of the ae+ed vioation in respect of the canop1Fe?tension re*ained unresoved.
? ? ? ?
,. In co*piance with the a+ree*ent reached at the ))nd ;anuar1 A,,9 *eetin+, 2Eristin+co4 caused the
revision of her .uidin+ pans such that, as it now stands, the Cerrada propert1 has a vertica hei+ht of
A8.,( *eters and, thus, was within the Via+e<s aowed *a?i*u* hei+ht of AA *eters.
A8. So*eti*e in ;une A,,9, 2Eristin+co4 was surprised to receive another etter fro* 25V#I4, this ti*e
fro* the Construction Co**ittee chair*an $defendant Tan%, a+ain cain+ her attention to ae+ed
vioations of the Construction Rues. On A"th ;une A,,9, 25V#I4 .arred 2Eristin+co<s4 construction
wor/ers fro* enterin+ the Via+e. Thus, 2Eristin+co<s4 Construction 7ana+er $7r. ;ai*e 7. Hida+o%
wrote defendant Tan to e?pain her position, and attached photo+raphs of si*iar 6vioations6 .1 other
propert1 owners which have not *erited the sa*e scrutin1 and sanction fro* 25V#I4.
? ? ? ?
AA. On )(th Octo.er A,,9, and for reasons /nown on1 to hi*, defendant Vivestre sent a etter to 7r.
'eroni*o deos Re1es, de*andin+ for an 6idea of how 27r. deos Re1es4 can de*onstrate in concrete
ter*s 2his4 +ood faith as a Cuid pro Cuo for co*pro*ise to6 25V#I<s4 continued insistence that
2Eristin+co4 had vioated 25V#I<s4 Construction Rues. ? ? ?.
? ? ? ?
A). 2Eristin+co4 throu+h 7r. Hida+o sent a etter dated )!th Nove*.er A,,9 to defendant Tan, copies
of which were furnished defendants 3i*0oco, Vivestre and the =oard, reiteratin+ that, a*on+ othersD $i%
the ae+ed hei+ht restriction vioation is untrue, since the Cerrada propert1 now has a hei+ht within the
i*its i*posed .1 25V#I4> and $ii% the de*and to reduce the canop1 .1 ninet1 $,8% centi*eters is
without .asis, in i+ht of the e?istence of thirt1&five $B"% si*iar 6vioations6 of the sa*e nature .1 other
ho*eowners. 2Eristin+co4 throu+h 7r. Hida+o further *entioned that she had done nothin+ to deserve
the crude and coercive Via+e etters and the =oard<s threats of wor/ stoppa+e, and she cited instances
when she deat with 25V#I4 and her feow ho*eowners in +ood faith and +oodwi such as in A,,-,
when she ver1 discreet1 spent su.stantia a*ounts to andscape the entire Via+e Par/, concrete the
Par/ trac/ ova which was .ein+ used as a 0o++in+ path, and donate to the #ssociation *oave .enches
used as Par/ .enches.
? ? ? ?
AB. On the sa*e date $)!th Nove*.er A,,9%, defendant Vivestre sent another etter addressed to
2Eristin+co<s4 construction *ana+er Hida+o, a+ain threatenin+ to en0oin a construction activit1 on the
Cerrada propert1 as we as .an entr1 of a wor/ers and construction deiveries effective Ast Dece*.er
A,,9 uness 7r. deos Re1es *et with defendants. ? ? ?.
? ? ? ?
A!. On )nd Dece*.er A,,9, 2Eristin+co<s4 representatives *et with defendants 3i*0oco, Tan, and
Vivestre. Durin+ that *eetin+, defendants were shown copies of the architectura pans for the Cerrada
propert1. 2Eristin+co<s4 representatives a+reed to aow 25V#I<s4 Construction Co**ittee<s architect to
vaidate the *easure*ents +iven. However, on the issue of the canop1 e?tension, the defendants
infor*ed 2Eristin+co<s4 representatives that the =oard woud i*pose a penat1 of @our Hundred
Thousand Pesos $P!88,888.88% for vioation of 25V#I<s4 6set .ac/6 or ease*ent rue. Defendants cited
the =oard<s i*position of si*iar fines to previous ho*eowners who had vioated the sa*e rue, and
the1 undertoo/ to furnish 2Eristin+co4 with a ist of past penaties i*posed and paid .1 ho*eowners
found .1 the =oard to have vioated the Via+e<s 6set .ac/6 provision.
A". On ))nd Dece*.er A,,9, defendant Vivestre sent 2Eristin+co4 a etter dated A9th Dece*.er A,,9
for*a1 i*posin+ a penat1 of P!88,888.88 for the 6canop1 ease*ent vioation.6 ? ? ?.
A(. On ),th Dece*.er A,,9, ? ? ?, Vivestre sent a etter to 2Eristin+co4, statin+ that 6as far as 2his4
ad*inistration is concerned, there has .een no past penaties e?ecuted .1 25V#I4, si*iar to the one we
are present1 de*andin+ on 1our on +oin+ construction. ? ? ?
A-. On !th ;anuar1 A,,,, 2Eristin+co<s4 representative sent a etter to the =oard, as/in+ for a
reconsideration of the i*position of the P!88,888.88 penat1 on the +round that the sa*e is unwarranted
and e?cessive. On (th ;anuar1 A,,,, 2Eristin+co4 hersef sent a etter to the =oard, e?poundin+ on the
reasons for opposin+ the =oard<s action. On A9th ;anuar1 A,,,, 2Eristin+co4 sent another etter in
co*piance with defendants< reCuest for a .rea/down of her e?penditures in respect of her donations
reative to the Via+e par/.
A9. On Brd @e.ruar1 A,,,, 2Eristin+co4 throu+h her aw1ers sent defendants a etter, reCuestin+ that her
etters of !th and (th ;anuar1 A,,, .e acted upon.
A,. On !th @e.ruar1 A,,,, ? ? ?, defendant 3i*0oco +ave a ver.a order to 25V#I<s4 +uards to .ar the
entr1 of wor/ers wor/in+ on the Cerrada propert1.
)8. In the *ornin+ of "th @e.ruar1 A,,,, defendants ph1sica1 .arred 2Eristin+co<s4 wor/ers and
contractors fro* enterin+ the Via+e and wor/in+ at the Cerrada propert1.8
Eristin+co then ists the foowin+ causes of actionD
A. Ite* " of 5V#I<s Construction Rues constitutes an ie+a and unwarranted intrusion upon Eristin+co<s
proprietar1 ri+hts as it i*poses a set&.ac/ or hori:onta ease*ent of B.8 *eters fro* the propert1 ine +reater
than the specification in Section A88"$.% of the =uidin+ Code that 6the hori:onta cearance .etween the
outer*ost ed+e of the *arCuee and the cur. ine sha .e not ess than B88 *ii*eters.6 #s such, Eristin+co
pra1s for the decaration of nuit1 of this provision in 5V#I<s Construction Rues insofar as she is concerned.
). 5V#I<s i*position of a P!88,888.88 penat1 on Eristin+co has no factua .asis, is ar.itrar1, whi*sica and
capricious as ra*pant vioations of the set&.ac/ rue .1 other ho*eowners in the Via+e were not penai:ed
.1 5V#I. Eristin+co pra1s to put a stop to defendants< ar.itrar1 e?ercise of power pursuant to 5V#I<s .1&
aws.
B. #.sent an1 factua or e+a .ases for the i*position of a P!88,888.88 penat1, defendants and a persons
wor/in+ under their contro shoud .e per*anent1 .arred or restrained fro* i*posin+ andFor enforcin+ an1
penat1 upon Eristin+co for an ae+ed vioation of 5V#I<s Construction Rues, specifica1 the provision on
set&.ac/.
!. Defendants 3i*0oco, Tan, and Vivestre, in vioation of #rtice A, of the Civi Code, de*onstrated .ias
a+ainst Eristin+co .1 :eroin+ in on her aone and her supposed vioation, whie other ho*eowners, who had
i/ewise vioated 5V#I<s Construction Rues, were not cited or penai:ed therefor. Defendants< actuations
were in cear vioation of their dut1 to +ive a ho*eowners, incudin+ Eristin+co, their due.
". Defendants< actuations have serious1 affected Eristin+co<s *enta disposition and have caused her to
suffer seepess ni+hts, *enta an+uish and serious an?iet1. Eristin+co<s reputation has i/ewise .een
.es*irched .1 5V#I<s and defendants< ar.itrar1 char+e that she had vioated 5V#I<s Construction Rues. In
this re+ard, individua defendants shoud each pa1 Eristin+co *ora da*a+es in the a*ount ofPA,888,888.88.
(. 3ast1, defendants shoud pa1 Eristin+co PA,888.888.88 for iti+ation e?penses she incurred in institutin+
this suit and for attorne1<s fees.
#t the outset, we note that the reationship .etween the parties is not in dispute and is, in fact, ad*itted .1 Eristin+co
in her co*paint. Nonetheess, Eristin+co is ada*ant that the su.0ect *atter of her co*paint is proper1 co+ni:a.e
.1 the re+uar courts and need not .e fied .efore a speciai:ed .od1 or co**ission.
Eristin+co<s contention is wron+.
Ostensi.1, Eristin+co<s co*paint, desi+nated as one for decaration of nuit1, fas within the re+uar courts<
0urisdiction. However, we have, on *ore than one occasion, hed that the caption of the co*paint is not deter*inative
of the nature of the action.9
# scrutin1 of the ae+ations contained in Eristin+co<s co*paint reveas that the nature of the Cuestion su.0ect of this
controvers1 on1 superficia1 deves into the vaidit1 of 5V#I<s Construction Rues. The co*paint actua1 +oes into
the proper interpretation and appication of 5V#I<s .1&aws, specifica1 its construction rues. Essentia1, the confict
.etween the parties arose as Eristin+co, ad*itted1 a *e*.er of 5V#I, now wishes to .e e?e*pt fro* the appication
of the canop1 reCuire*ent set forth in 5V#I<s Construction Rues. Si+nificant1, Eristin+co does not assai the hei+ht
restriction of 5V#I<s Construction Rues, as she has readi1 co*pied therewith.
Distinct1 in point is China =an/in+ Corp. v. Court of #ppeas,10 which uphed the 0urisdiction of the Securities and
E?chan+e Co**ission $SEC% over the suit and reco+ni:ed its specia co*petence to interpret and app1 Vae1 'of
and Countr1 Cu., Inc.<s $V'CCI<s% .1&aws. Ee rued, thusD
#pp1in+ the fore+oin+ principes in the case at .ar, to ascertain which tri.una has 0urisdiction we have to deter*ine
therefore whether or not petitioner is a stoc/hoder of V'CCI and whether or not the nature of the controvers1
.etween petitioner and private respondent corporation is intra&corporate.
#s to the first Cuer1, there is no Cuestion that the purchase of the su.0ect share or *e*.ership certificate at pu.ic
auction .1 petitioner $and the issuance to it of the correspondin+ Certificate of Sae% transferred ownership of the sa*e
to the atter and thus entited petitioner to have the said share re+istered in its na*e as a *e*.er of V'CCI. ? ? ?.
=1 virtue of the afore*entioned sae, petitioner .eca*e a .ona fide stoc/hoder of V'CCI and, therefore, the confict
that arose .etween petitioner and V'CCI apt1 e?e*pifies an intra&corporate controvers1 .etween a corporation and
its stoc/hoder under Sec. "$.% of P.D. ,8)&#.
#n i*portant consideration, *oreover, is the nature of the controvers1 .etween petitioner and private respondent
corporation. V'CCI cai*s a prior ri+ht over the su.0ect share anchored *ain1 on Sec. B, #rt. VIII of its .1&aws
which provides that 6after a *e*.er sha have .een posted as deinCuent, the =oard *a1 order hisFherFits share sod
to satisf1 the cai*s of the Cu.G6 It is pursuant to this provision that V'CCI aso sod the su.0ect share at pu.ic
auction, of which it was the hi+hest .idder. V'CCI caps its ar+u*ent .1 assertin+ that its corporate .1&aws shoud
prevai. The .one of contention, thus, is the proper interpretation and appication of V'CCI<s aforeCuoted .1&aws, a
su.0ect which irrefuta.1 cas for the specia co*petence of the SEC.
Ee reiterate herein the sound poic1 enunciated .1 the Court in #.e0o v. De a Cru:D
(. In the fifties, the Court ta/in+ co+ni:ance of the *ove to vest 0urisdiction in ad*inistrative co**issions and .oards
the power to resove speciai:ed disputes in the fied of a.or $as in corporations, pu.ic transportation and pu.ic
utiities% rued that Con+ress in reCuirin+ the Industria Court<s intervention in the resoution of a.or&*ana+e*ent
controversies i/e1 to cause stri/es or oc/outs *eant such 0urisdiction to .e e?cusive, athou+h it did not so
e?press1 state in the aw. The Court hed that under the 6sense&*a/in+ and e?peditious doctrine of pri*ar1
0urisdiction G the courts cannot or wi not deter*ine a controvers1 invovin+ a Cuestion which is within the
0urisdiction of an ad*inistrative tri.una, where the Cuestion de*ands the e?ercise of sound ad*inistrative discretion
reCuirin+ the specia /nowed+e, e?perience, and services of the ad*inistrative tri.una to deter*ine technica and
intricate *atters of fact, and a unifor*it1 of ruin+ is essentia to co*p1 with the purposes of the re+uator1 statute
ad*inistered.
? ? ? ?
In this case, the need for the SEC<s technica e?pertise cannot .e over&e*phasi:ed invovin+ as it does the *eticuous
ana1sis and correct interpretation of a corporation<s .1&aws as we as the appica.e provisions of the Corporation
Code in order to deter*ine the vaidit1 of V'CCI<s cai*s. The SEC, therefore, too/ proper co+ni:ance of the instant
case.11
3i/ewise in point is our iu*inatin+ ruin+ in Sta. Cara Ho*eowners< #ssociation v. Sps. 'aston,12 athou+h it
uti*ate1 hed that the Cuestion of su.0ect *atter 0urisdiction over the co*paint of respondent& spouses 'aston for
decaration of nuit1 of a .oard resoution issued .1 Sta. Cara Ho*eowners< #ssociation $SCH#% was vested in the
re+uar courts. In Sta. Cara, the *ain issue raised .1 SCH# readsD 6Ehether 2the C#4 erred in uphodin+ the
0urisdiction of the 2RTC4, Hto decare as nu and void the resoution of the =oard of SCH#, decreein+ that on1
*e*.ers 2in4 +ood standin+ of the said association were to .e issued stic/ers for use in their vehices.<6 In hodin+
that the re+uar courts had 0urisdiction over respondent&spouses 'aston<s co*paint for decaration of nuit1, we
stressed the a.sence of reationship and the conseCuent ac/ of privit1 of contract .etween the parties, thusD
#re 2Respondent&Spouses 'aston4 SCH# 7e*.ersI
In order to deter*ine if the HI'C has 0urisdiction over the dispute, it is necessar1 to resove prei*inari1Jon the
.asis of the ae+ations in the Co*paintJwhether 2respondent&spouses 'aston4 are *e*.ers of the SCH#.
2SCH#4 contend2s4 that .ecause the Co*paint arose fro* intra&corporate reations .etween the SCH# and its
*e*.ers, the HI'C therefore has 0urisdiction over the dispute. To support their contention that 2respondent&spouses
'aston4 are *e*.ers of the association, 2SCH#4 cite2s4 the SCH#<s #rtices of Incorporation and =1&aws which
provide that a andowners of the Sta. Cara Su.division are auto*atica1 *e*.ers of the SCH#.
Ee are not persuaded. The constitutiona1 +uaranteed freedo* of association incudes the freedo* not to associate.
The ri+ht to choose with who* one wi associate onesef is the ver1 foundation and essence of that partnership. It
shoud .e noted that the provision +uarantees the ri+ht to for* an association. It does not incude the ri+ht to co*pe
others to for* or 0oin one.
7ore to the point, 2respondent&spouses 'aston4 cannot .e co*peed to .eco*e *e*.ers of the SCH# .1 the si*pe
e?pedient of incudin+ the* in its #rtices of Incorporation and =1&aws without their e?press or i*pied consent. ? ?
?. In the present case, however, other than the said #rtices of Incorporation and =1&aws, there is no showin+ that
2respondent&spouses 'aston4 have a+reed to .e SCH# *e*.ers.
? ? ? ?
No privit1 of Contract
Cear1 then, no privit1 of contract e?ists .etween 2SCH#4 and 2respondent&spouses 'aston4. #s a +enera rue, a
contract is a *eetin+ of *inds .etween two persons. The Civi Code uphods the spirit over the for*> thus, it dee*s
an a+ree*ent to e?ist, provided the essentia reCuisites are present. ? ? ?. @ro* the *o*ent there is a *eetin+ of
*inds .etween the parties, it is perfected.
#s aread1 adverted to, there are cases in which a part1 who enters into a contract of sae is aso .ound .1 a ien
annotated on the certificate of tite. Ee reco+ni:ed this in =e #ir Via+e #ssociation, Inc. v. Dionisio, in which we
ruedD
There is no dispute that Transfer Certificate of Tite No. 9AAB( coverin+ the su.0ect parce of and issued in the na*e
of the petitioner contains an annotation to the effect that the ot owner .eco*es an auto*atic *e*.er of the
respondent =e&#ir #ssociation and *ust a.ide .1 such rues and re+uations aid down .1 the #ssociation in the
interest of the sanitation, securit1 and the +enera wefare of the co**unit1. It is i/ewise not disputed that the
provision on auto*atic *e*.ership was e?press1 annotated on the petitioner<s Transfer Certificate of Tite and on
the tite of his predecessor&in&interest.
The Cuestion, therefore, .ois down to whether or not the petitioner is .ound .1 such annotation.
Section B, of #rt. !,( $The 3and Re+istration #ct% statesD
Sec. B,. Ever1 person receivin+ a certificate of tite in pursuance of a decree of re+istration, and ever1 su.seCuent
purchaser of re+istered and who ta/es a certificate of tite for vaue in +ood faith sha hod the sa*e free of a
encu*.rances e?cept those noted on said certificate ? ? ?. $Itaics suppied%
The a.ove ruin+, however, does not app1 to the case at .ar. Ehen 2respondent&spouses 'aston4 purchased their
propert1 in A,-! and o.tained Transfer Certificates of Tite Nos. T&A)("!) and T&A)-!() for 3ots AA and A) of =oc/
B- aon+ San ;ose #venue in Sta. Cara Su.division, there was no annotation showin+ their auto*atic *e*.ership in
the SCH#. Thus, no privit1 of contract arisin+ fro* the tite certificate e?ists .etween 2SCH#4 and 2respondent&
spouses 'aston4.
@urther, the records are .ereft of an1 evidence that woud indicate that private respondents intended to .eco*e
*e*.ers of the SCH#. Prior to the i*pe*entation of the aforesaid Resoution, the1 and the other ho*eowners who
were not *e*.ers of the association were issued non&*e*.er +ate pass stic/ers for their vehices. This fact has not
.een disputed .1 2SCH#4. Thus, the SCH# reco+ni:ed that there were su.division andowners who were not
*e*.ers thereof, notwithstandin+ the provisions of its #rtices of Incorporation and =1&aws.
;urisdiction Deter*ined .1 #e+ations in the Co*paint
It is a setted rue that 0urisdiction over the su.0ect *atter is deter*ined .1 the ae+ations in the co*paint.
;urisdiction is not affected .1 the peas or the theories set up .1 the defendant in an answer or a *otion to dis*iss.
Otherwise, 0urisdiction woud .eco*e dependent a*ost entire1 upon the whi*s of the defendant.
The Co*paint does not ae+e that 2respondent&spouses 'aston4 are *e*.ers of the SCH#. In point of fact, the1
den1 such *e*.ership. Thus, the HI'C has no 0urisdiction over the dispute.13
In star/ contrast, the reationship .etween the parties in the instant case is we&esta.ished. 'iven this ad*itted
reationship, the privit1 of contract .etween 5V#I and Eristin+co is papa.e, despite the atter<s deft phraseoo+1 of
its pri*ar1 cause of action as a decaration of nuit1 of 5V#I<s Construction Rues. In short, the cru? of Eristin+co<s
co*paint is 5V#I<s supposed ar.itrar1 i*pe*entation of its construction rues a+ainst Eristin+co, a *e*.er
thereof.
7oreover, as in Sta. Cara $had respondent&spouses 'aston .een *e*.ers of SCH#%, the controvers1 which arose
.etween the parties in this case partoo/ of the nature of an intra&corporate dispute. E?ecutive Order $E.O.% No.
"B",14 which a*ended Repu.ic #ct No. "98 creatin+ the HI'C, transferred to the HI'C the re+uator1 and
ad*inistrative functions over ho*eowners< associations ori+ina1 vested with the SEC. Section ) of E.O. No. "B"
provides in pertinent partD
). In addition to the powers and functions vested under the Ho*e @inancin+ #ct, the Corporation, sha have a*on+
others, the foowin+ additiona powersD
$a% ? ? ?> and e?ercise a the powers, authorities and responsi.iities that are vested on the Securities and
E?chan+e Co**ission with respect to ho*e owners association, the provision of #ct A!",, as a*ended .1
P.D. ,8)&#, to the contrar1 notwithstandin+>
$.% To re+uate and supervise the activities and operations of a houseowners association re+istered in
accordance therewith.
=1 virtue thereof, the HI'C i/ewise assu*ed the SEC<s ori+ina and e?cusive 0urisdiction to hear and decide cases
invovin+ controversies arisin+ fro* intra&corporate or partnership reations.15 Thereafter, with the advent of Repu.ic
#ct No. 9-(B, the fore+oin+ powers and responsi.iities vested in the HI'C, with respect to ho*eowners<
associations, were transferred to the H35R=.
#s re+ards the defendants< supposed e*.race of the RTC<s 0urisdiction .1 appearin+ thereat and underta/in+ to desist
fro* prohi.itin+ Eristin+co<s wor/ers fro* enterin+ the via+e, suffice it to state that the invocation of the doctrine
in Ti0a*, et a. v. Si.on+hano1, et a.16 is Cuite a on+ stretch.
The factua *iieu o.tainin+ in Ti0a* and in the case at .ench are words apart. #s found .1 the C#, defendants<
appearance .efore the RTC was pursuant to, and in co*piance with, a su.poena issued .1 that court in connection
with Eristin+co<s appication for a Te*porar1 Restrainin+ Order $TRO%. On defendants< supposed a+ree*ent to si+n
the 5nderta/in+ aowin+ Eristin+co<s wor/ers, contractors, and suppiers to enter and e?it the via+e, this te*porar1
sette*ent cannot .e eCuated with fu acceptance of the RTC<s authorit1, as what actua1 transpired in Ti0a*.AavvphiA.:wK
The and*ar/ case of Ti0a* is, in fact, on1 an e?ception to the +enera rue that an o.0ection to the court<s 0urisdiction
over a case *a1 .e raised at an1 sta+e of the proceedin+s, as the ac/ of 0urisdiction affects the ver1 authorit1 of the
court to ta/e co+ni:ance of a case.17 In that case, the Suret1 fied a 7otion to Dis*iss .efore the C#, raisin+ the
Cuestion of ac/ of 0urisdiction for the first ti*eJfifteen 1ears after the action was co**enced in the Court of @irst
Instance $C@I% of Ce.u. Indeed, in severa sta+es of the proceedin+s in the C@I, as we as in the C#, the Suret1
invo/ed the 0urisdiction of said courts to o.tain affir*ative reief, and even su.*itted its case for a fina ad0udication
on the *erits. ConseCuent1, it was .arred .1 aches fro* invo/in+ the C@I<s ac/ of 0urisdiction.
To further hi+hi+ht the distinction in this case, the TRO hearin+ was hed on @e.ruar1 ,, A,,,, a da1 after the fiin+
of the co*paint. On even date, the parties reached a te*porar1 sette*ent refected in the 5nderta/in+. @ifteen da1s
thereafter, defendants, incudin+ 3i*0oco, fied a 7otion to Dis*iss. Certain1, this successive and continuous chain
of events cannot .e characteri:ed as aches as woud .ar defendants fro* Cuestionin+ the RTC<s 0urisdiction.
In fine, .ased on the ae+ations contained in Eristin+co<s co*paint, it is the H35R=, not the RTC, which has
0urisdiction over this case.
EHERE@ORE, pre*ises considered, the petition is DENIED. The Decision of the Court of #ppeas in C#&'.R. SP.
No. (!(!) is here.1 #@@IR7ED. Costs a+ainst petitioner.
SO ORDERED.
#NTONIO ED5#RDO =. N#CH5R#
#ssociate ;ustice
EE CONC5RD
CONSUELO #NARES$SANTIAGO
#ssociate ;ustice
Chairperson
MA. ALICIA AUSTRIA$MARTINE%
#ssociate ;ustice
DANTE O. TINGAL
#ssociate ;ustice
DIOSDADO M. PERALTA
#ssociate ;ustice
# T T E S T # T I O N
I attest that the concusions in the a.ove Decision were reached in consutation .efore the case was assi+ned to the
writer of the opinion of the Court<s Division.
CONSUELO #NARES$SANTIAGO
#ssociate ;ustice
Chairperson, Third Division
C E R T I @ I C # T I O N
Pursuant to Section AB, #rtice VIII of the Constitution and the Division ChairpersonMs #ttestation, I certif1 that the
concusions in the a.ove Decision had .een reached in consutation .efore the case was assi+ned to the writer of the
opinion of the Court<s Division.
RE#NATO S. PUNO
Chief ;ustice
). G.R. No. 1&12'2 "an(ar) *, 2002
GA+RIEL L. DUERO, petitioner,
vs.
!ON.COURT OF APPEALS, an +ERNARDO A. ERADEL, respondents.
,UISUM+ING, J.:
This petition for certiorari assais the Decision dated Septe*.er A-, A,,-, of the Court of #ppeas in C#&'.R. No. SP
No.. )B!8& 5DN, entited Bernardo Eradel vs. Non. Ermelino G. Andal, settin+ aside a proceedin+s in Civi Case
No.A8-", Gabriel L. Duero vs. Bernardo Eradel, .efore the =ranch )- of the Re+iona Tria Court of Tanda+, Suri+ao
de Sur .
The pertinent facts are as foow.
So*eti*e in A,99, accordin+ to petitioner, private respondent =e*ardo Erade2 entered and occupied petitionerMs and
covered .1 Ta? Decaration No. #&A(&AB&B8), ocated in =aras, San 7i+ue, Suri+ao de Sur. #s shown in the ta?
decaration, the and had an assessed vaue of P",)!8. Ehen petitioner poite1 infor*ed private respondent that the
and was his and reCuested the atter to vacate the and, private respondent refused, .ut instead threatened hi* with
.odi1 har*. Despite repeated de*ands, private respondent re*ained steadfast in his refusa to eave the and.
On ;une A(, A,,", petitioner fied .efore the RTC a co*paint for Recover1 of Possession and Ownership with
Da*a+es and #ttorne1Ms @ees a+ainst private respondent and two others, na*e1, #poinario and Inocencio Ruena.
Petitioner appended to the co*paint the afore*entioned ta? decaration. The counse of the Ruenas as/ed for
e?tension to fie their #nswer and was +iven unti ;u1 A9, A,,". 7eanwhie, petitioner and the, Ruenas e?ecuted a
co*pro*ise a+ree*ent, which .eca*e the tria courtMs .asis for a partia 0ud+*ent rendered on ;anuar1 A), A,,(. In
this a+ree*ent, the Ruenas throu+h their counse, #tt1. Euse.io #via, entered into a Co*pro*ise #+ree*ent with
herein petitioner, 'a.rie Duero. Inter alia, the a+ree*ent stated that the Ruenas reco+ni:ed and .ound the*seves to
respect the ownership and possession of Duero.3 Herein private respondent Erade was not a part1 to the a+ree*ent,
and he was decared in defaut for faiure to fie his answer to the co*paint.4
Petitioner presented his evidence ex parte on @e.ruar1 AB, A,,(. On 7a1 9, A,,(, 0ud+*ent was rendered in his favor,
and private respondent was ordered to peacefu1 vacate and turn over 3ot No.A8(" Cad. "B-&D to petitioner> pa1
petitioner P),888 annua renta fro* A,99 up the ti*e he vacates the and, and P",888 as attorne1Ms fees and the cost
of the suit.5 Private respondent received a cop1 of the decision on 7a1 )", A,,(.
On ;une A8, A,,(, private respondent fied a 7otion for New Tria, ae+in+ that he has .een occup1in+ the and as a
tenant of #rte*io 3aurente, Sr., since A,"9. He e?pained that he turned over the co*paint and su**ons to 3aurente
in the honest .eief that as andord, the atter had a .etter ri+ht to the and and was responsi.e to defend an1 adverse
cai* on it. However, the tria court denied the *otion for new tria.AOwphiA.nPt
7eanwhie, RED Confict Case No.A8),, an ad*inistrative case .etween petitioner and appicant&contestants Ro*eo,
#rte*io and ;ur1 3aurente, re*ained pendin+ with the Office of the Re+iona Director of the Depart*ent of
Environ*ent and Natura Resources in Davao Cit1. Eventua1, it was forwarded to the DENR Re+iona Office in
Prosperidad, #+usan de Sur .
On ;u1 )!, A,,(, private respondent fied .efore the RTC a Petition for Reief fro* ;ud+*ent, reiteratin+ the sa*e
ae+ation in his 7otion for New Tria. He averred that uness there is a deter*ination on who owned the and, he
coud not .e *ade to vacate the and. He aso averred that the 0ud+*ent of the tria court was void inas*uch as the
heirs of #rte*io 3aurente, Sr., who are indispensa.e parties, were not i*peaded.
On Septe*.er )!, A,,(, ;osephine, #na Soedad and Vir+inia, a surna*ed 3aurente, +randchidren of #rte*io who
were cai*in+ ownership of the and, fied a 7otion for Intervention. The RTC denied the *otion.
On Octo.er 9, A,,(, the tria court issued an order den1in+ the Petition for Reief fro* ;ud+*ent. In a 7otion for
Reconsideration of said order, private respondent ae+ed that the RTC had no 0urisdiction over the case, since the
vaue of the and was on1 P",)!8 and therefore it was under the 0urisdiction of the *unicipa tria court. On
Nove*.er )), A,,(, the RTC denied the *otion for reconsideration.
On ;anuar1 )), A,,-, petitioner fied a 7otion for E?ecution, which the RTC +ranted on ;anuar1 )9. On @e.ruar1 A9,
A,,-, Entr1 of ;ud+*ent was *ade of record and a writ of e?ecution was issued .1 the RTC on @e.ruar1 )-,A,,-. On
7arch A),A,,-, private respondent fied his petition for certiorari .efore the Court of #ppeas.
The Court of #ppeas +ave due course to the petition, *aintainin+ that private respondent is not estopped fro*
assaiin+ the 0urisdiction Mof the RTC, =ranch )- in Tanda+, Suri+ao de Sur, when private respondent fied with said
court his 7otion for Reconsideration #ndFOr #nnu*ent of ;ud+*ent. The Court of #ppeas decreed as foowsD
IN THE 3I'HT O@ #33 THE @ORE'OIN', the Petition is 'R#NTED. # proceedin+s in 6'a.rie 3.
Duero vs. =ernardo Erade, et. a. Civi Case A8-"6 fied in the Court a Cuo, incudin+ its Decision, #nne?
6E6 of the petition, and its Orders and Erit of E?ecution and the turn over of the propert1 to the Private
Respondent .1 the Sheriff of the Court a Cuo, are decared nu and void and here.1 SET #SIDE, No
pronounce*ent as to costs.
SO ORDERED.6
Petitioner now co*es .efore this Court, ae+in+ that the Court of #ppeas acted with +rave a.use of discretion
a*ountin+ to ac/ or in e?cess of 0urisdiction when it hed thatD
I.
...THE 3OEER CO5RT H#S NO ;5RISDICTION OVER THE S5=;ECT 7# TTER O@ THE C#SE.
II
...PRIV#TE RESPONDENT E#S NOT THERE=Q ESTOPPED @RO7 R5ESTIONIN' THE
;5RISDICTION O@ THE 3OEER CO5RT EVEN #@TER IT S5CCESS@533Q SO5'HT #@@IR7#TIVE
RE3IE@ THERE@RO7.
III
...THE @#35RE O@ PRIV#TE RESPONDENT TO @I3E HIS #NSEER IS ;5STI@IED. 7
The *ain issue .efore us is whether the Court of #ppeas +rave1 a.used its discretion when it hed that the *unicipa
tria court had 0urisdiction, and that private respondent was not estopped fro* assaiin+ the 0urisdiction of the RTC
after he had fied severa *otions .efore it. The secondar1 issue is whether the Court of appeas erred in hodin+ that
private respondentMs faiure to fie an answer to the co*paint was 0ustified.
#t the outset, however, we note that petitioner throu+h counse su.*itted to this Court peadin+s that contain
inaccurate state*ents. Thus, on pa+e " of his petition,8 we find that to .oster the cai* that the appeate court erred
in hodin+ that the RTC had no 0urisdiction, petitioner pointed to Annex E9 of his petition which supposed1 is the
Certification issued .1 the 7unicipa Treasurer of San 7i+ue, Suri+ao, specifica1 containin+ the notation, 6NoteD
Su.0ect for 'enera Revision Effective A,,!.6 =ut it appears that Annex E of his petition is not a Certification .ut a
?ero? cop1 of a Decaration of Rea Propert1. Nowhere does the docu*ent contain a notation, 6NoteD Su.0ect for
'enera Revision Effective A,,!.6 Petitioner aso as/ed this Court to refer to Annex F,10 where he said the :ona
vaue of the disputed and was PA.!8 per sC.*., thus pacin+ the co*puted vaue of the and at the ti*e the co*paint
was fied .efore the RTC at P"-,AAB.,9, hence .e1ond the 0urisdiction of the *unicipa court and within the
0urisdiction of the re+iona tria court. However, we find that these anne?es are .oth *ere1 ?ero? copies. The1 are
o.vious1 without evidentiar1 wei+ht or vaue.
Co*in+ now to the principa issue, petitioner contends that respondent appeate court acted with +rave a.use of
discretion. =1 6+rave a.use of discretion6 is *eant such capricious and whi*sica e?ercise of 0ud+*ent which is
eCuivaent to an e?cess or a ac/ of 0urisdiction. The a.use of discretion *ust .e so patent and +ross as to a*ount to
an evasion of a positive dut1 or a virtua refusa to perfor* a dut1 en0oined .1 aw, or to act at a in conte*pation of
aw as where the power is e?ercised in an ar.itrar1 and despotic *anner .1 reason of passion or hostiit1. 11 =ut here
we find that in its decision hodin+ that the *unicipa court has 0urisdiction over the case and that private respondent
was not estopped fro* Cuestionin+ the 0urisdiction of the RTC, respondent Court of #ppeas discussed the facts on
which its decision is +rounded as we as the aw and 0urisprudence on the *atter.12 Its action was neither whi*sica
nor capricious.
Eas private respondent estopped fro* Cuestionin+ the 0urisdiction of the RTCI In this case, we are in a+ree*ent with
the Court of #ppeas that he was not. Ehie participation in a sta+es of a case .efore the tria court, incudin+
invocation of its authorit1 in as/in+ for affir*ative reief, effective1 .ars a part1 .1 estoppe fro* chaen+in+ the
courtMs 0urisdiction,13 we note that estoppe has .eco*e an eCuita.e defense that is .oth su.stantive and re*edia and
its successfu invocation can .ar a ri+ht and not *ere1 its eCuita.e enforce*ent. 14Hence, estoppe ou+ht to .e
appied with caution. @or estoppe to app1, the action +ivin+ rise thereto *ust .e uneCuivoca and intentiona .ecause,
if *isappied, estoppe *a1 .eco*e a too of in0ustice.15
In the present case, private respondent Cuestions the 0urisdiction of RTC in Tanda+, Suri+ao de Sur, on e+a +rounds.
Reca that it was petitioner who fied the co*paint a+ainst private respondent and two other parties .efore the said
court,16 .eievin+ that the RTC had 0urisdiction over his co*paint. =ut .1 then, Repu.ic #ct -(,A17 a*endin+ =P
A), had .eco*e effective, such that 0urisdiction aread1 .eon+s not to the RTC .ut to the 7TC pursuant to said
a*end*ent. Private respondent, an unschooed far*er, in the *ista/en .eief that since he was *ere1 a tenant of the
ate #rte*io 3aurente Sr., his andord, +ave the su**ons to a Hipoito 3aurente, one of the survivin+ heirs of
#rte*io Sr., who did not do an1thin+ a.out the su**ons. @or faiure to answer the co*paint, private respondent was
decared in defaut. He then fied a 7otion for New Tria in the sa*e court and e?pained that he defauted .ecause of
his .eief that the suit ou+ht to .e answered .1 his andord. In that *otion he stated that he had .1 then the evidence
to prove that he had a .etter ri+ht than petitioner over the and .ecause of his on+, continuous and uninterrupted
possession as bona-fide tenant&essee of the and.18=ut his *otion was denied. He tried an aternative recourse. He
fied .efore the RTC a 7otion for Reief fro* ;ud+*ent. #+ain, the sa*e court denied his *otion, hence he *oved
for reconsideration of the denia. In his 7otion for Reconsideration, he raised for the first ti*e the RTCMs ac/ of
0urisdiction. This *otion was a+ain denied. Note that private respondent raised the issue of ac/ of 0urisdiction, not
when the case was aread1 on appea, .ut when the case, was sti .efore the RTC that rued hi* in defaut, denied his
*otion for new tria as we as for reief fro* 0ud+*ent, and denied i/ewise his two *otions for reconsideration.
#fter the RTC sti refused to reconsider the denia of private respondentMs *otion for reief fro* 0ud+*ent, it went on
to issue the order for entr1 of 0ud+*ent and a writ of e?ecution.
5nder these circu*stances, we coud not faut the Court of #ppeas in overruin+ the RTC and in hodin+ that private
respondent was not estopped fro* Cuestionin+ the 0urisdiction of the re+iona tria court. The funda*enta rue is that,
the ac/ of 0urisdiction of the court over an action cannot .e waived .1 the parties, or even cured .1 their sience,
acCuiescence or even .1 their e?press consent.19 @urther, a part1 *a1 assai the 0urisdiction of the court over the
action at an1 sta+e of the proceedin+s and even on appea.20 The appeate court did not err in sa1in+ that the RTC
shoud have decared itsef .arren of 0urisdiction over the action. Even if private respondent active1 participated in
the proceedin+s .efore said court, the doctrine of estoppe cannot sti .e proper1 invo/ed a+ainst hi* .ecause the
Cuestion of ac/ of 0urisdiction *a1 .e raised at an1ti*e and at an1 sta+e of the action. 21Precedents te us that as a
+enera rue, the 0urisdiction of a court is not a Cuestion of acCuiescence as a *atter of fact, .ut an issue of confer*ent
as a *atter of aw.22 #so, neither waiver nor estoppe sha app1 to confer 0urisdiction upon a court, .arrin+ hi+h1
*eritorious and e?ceptiona circu*stances.23 The Court of #ppeas found support for its ruin+ in our decision
in Javier vs. Court of Appeals, thusD
? ? ? The point si*p1 is that when a part1 co**its error in fiin+ his suit or proceedin+ in a court that ac/s
0urisdiction to ta/e co+ni:ance of the sa*e, such act *a1 not at once .e dee*ed sufficient .asis of estoppe. It
coud have .een the resut of an honest *ista/e, or of diver+ent interpretations of dou.tfu e+a provisions. I-
an) -a(./ 01 /o 23 045(/3 /o a 5ar/) /a60n7 1(ch co(r13 o- ac/0on, 5ar/ o- /h3 2.a43 1ho(. 23 5.ac3 on
/h3 co(r/ 8h0ch 1ha.. 3n/3r/a0n /h3 1(0/, /h3r32) .(..0n7 /h3 5ar/031 0n/o 23.0390n7 /ha/ /h3) 5(r1(3 /h30r
r343031 0n /h3 corr3c/ -or(4. 5nder the rues, it is the dut1 of the court to dis*iss an action Mwhenever it
appears that the court has no 0urisdiction over the su.0ect *atter.M $Sec. ), Rue ,, Rues of Court% Shoud the
Court render a 0ud+*ent without 0urisdiction, such 0ud+*ent *a1 .e i*peached or annued for ac/ of
0urisdiction $Sec. B8, Rue AB), I.id%, within ten $A8% 1ears fro* the finait1 of the sa*e. 2E*phasis ours.424
Indeed, 6...the tria court was dut1&.ound to ta/e 0udicia notice of the para*eters of its 0urisdiction and its faiure to
do so, *a/es its decision a MawessM thin+.625
Since a decision of a court without 0urisdiction is nu and void, it coud o+ica1 never .eco*e fina and e?ecutor1,
hence appea therefro* .1 writ of error woud .e out of the Cuestion. Resort .1 private respondent to a petition for
certiorari .efore the Court of #ppeas was in order .
In hodin+ that estoppe did not prevent private respondent fro* Cuestionin+ the RTCMs 0urisdiction, the appeate court
reiterated the doctrine that estoppe *ust .e appied on1 in e?ceptiona cases, as its *isappication coud resut in a
*iscarria+e of 0ustice. Here, we find that petitioner, who cai*s ownership of a parce of and, fied his co*paint
.efore a court without appropriate 0urisdiction. Defendant, a far*er whose tenanc1 status is sti pendin+ .efore the
proper ad*inistrative a+enc1 concerned, coud have *oved for dis*issa of the case on 0urisdictiona +rounds. =ut the
far*er as defendant therein coud not .e e?pected to /now the nuances of 0urisdiction and reated issues. This far*er,
who is now the private respondent, ou+ht not to .e penai:ed when he cai*s that he *ade an honest *ista/e when he
initia1 su.*itted his *otions .efore the RTC, .efore he reai:ed that the controvers1 was outside the RTCMs
co+ni:ance .ut within the 0urisdiction of the *unicipa tria court. To hod hi* in estoppe as the RTC did woud
a*ount to forecosin+ his avenue to o.tain a proper resoution of his case. @urther*ore, if the RTCMs order were to .e
sustained, he woud .e evicted fro* the and pre*ature1, whie RED Confict Case No.A8), woud re*ain
unresoved. Such eviction on a technicait1 if aowed coud resut in an in0ustice, if it is ater found that he has a e+a
ri+ht to ti the and he now occupies as tenant&essee.AOwphiA.nPt
Havin+ deter*ined that there was no +rave a.use of discretion .1 the appeate court in ruin+ that private respondent
was not estopped fro* Cuestionin+ the 0urisdiction of the RTC, we need not tarr1 to consider in detai the second
issue. Suffice it to sa1 that, +iven the circu*stances in this case, no error was co**itted on this score .1 respondent
appeate court. Since the RTC had no 0urisdiction over the case, private respondent had 0ustifia.e reason in aw not to
fie an answer, aside fro* the fact that he .eieved the suit was proper1 his andordMs concern.
:!EREFORE, the petition is DISMISSED. The assaied decision of the Court of #ppeas is AFFIRMED. The
decision of the Re+iona Tria Court in Civi Case No.A8-" entited Gabriel L. Duero vs. Bernardo Eradel, its Order
that private respondent turn over the disputed and to petitioner, and the Erit of E?ecution it issued, areANNULLED
an SET ASIDE. Costs a+ainst petitioner .
SO ORDERED.
Bellosillo !endo"a De Leon Jr. JJ. concur. Buena J. on officia eave.
B. Repu.ic of the Phiippines
SUPREME COURT
7ania
THIRD DIVISION
G.R. No. 1**02; D3c3423r 27, 2002
SPS. RENE GON%AGA an LERIO GON%AGA, petitioners,
vs.
!ON. COURT OF APPEALS, S3con D09010on, Man0.a,
!ON. ,UIRICO G. DEFENSOR, "(73, RTC, +ranch &6, S0</h "(0c0a. R370on, I.o0.o C0/),
an LUC=# !OMES, INC., r35r313n/3 2) :ILSON "ESENA, "R., a1 Mana73r, respondents.
D E C I S I O N
CORONA, J.:
=efore this Court is a petition for review on certiorari see/in+ the reversa of the decisionA of the Court of #ppeas
dated Dece*.er ),, A,,, and its resoution dated ;une A, )888 in C#&'.R. SP No. "!"9-.
The records discose that, so*eti*e in A,-8, petitioner&spouses purchased a parce of and fro* private respondent
3uc/1 Ho*es, Inc., situated in Ioio and containin+ an area of )!8 sCuare *eters. Said ot was specifica1
deno*inated as 3ot No. A, under Transfer Certificate of Tite $TCT% No. )9)"! and was *ort+a+ed to the Socia
Securit1 S1ste* $SSS% as securit1 for their housin+ oan. Petitioners then started the construction of their house, not
on 3ot No. A, .ut on 3ot No. A9, as private respondent *ista/en1 identified 3ot No. A9 as 3ot No. A,. 5pon
reai:in+ its error, private respondent, throu+h its +enera *ana+er, infor*ed petitioners of such *ista/e .ut the atter
offered to .u1 3ot No. A9 in order to widen their pre*ises. Thus, petitioners continued with the construction of their
house. However, petitioners defauted in the pa1*ent of their housin+ oan fro* SSS. ConseCuent1, 3ot No. A, was
forecosed .1 SSS and petitioners< certificate of tite was canceed and a new one was issued in the na*e of SSS.
#fter 3ot No. A, was forecosed, petitioners offered to swap 3ot Nos. A9 and A, and de*anded fro* private
respondent that their contract of sae .e refor*ed and another deed of sae .e e?ecuted with respect to 3ot No. A9,
considerin+ that their house was .uit therein. However, private respondent refused. This pro*pted petitioners to fie,
on ;une AB, A,,(, an action for refor*ation of contract and da*a+es with the Re+iona Tria Court of Ioio Cit1,
=ranch B(, which was doc/eted as Civi Case No. A-AA".
On ;anuar1 A", A,,9, the tria court) rendered its decision dis*issin+ the co*paint for ac/ of *erit and orderin+
herein petitioners to pa1 private respondent the a*ount of PA8,888 as *ora da*a+es and another PA8,888 as
attorne1<s fees. The pertinent concusion of the tria court reads as foowsD
6#ware of such fact, the paintiff nonetheess continued to sta1 in the pre*ises of 3ot A9 on the proposa that he woud
aso .u1 the sa*e. Paintiff however faied to .u1 3ot A9 and i/ewise defauted in the pa1*ent of his oan with the
SSS invovin+ 3ot A,. ConseCuent1 3ot A, was forecosed and sod at pu.ic auction. Thereafter TCT No. T&),,"8
was canceed and in ieu thereof TCT No. T&9((A) $E?h. H,<% was issued in favor of SSS. This .ein+ the situation
o.tainin+, the refor*ation of instru*ents, even if aowed, or the swappin+ of 3ot A9 and 3ot A, as earier proposed
.1 the paintiff, is no on+er feasi.e considerin+ that paintiff is no on+er the owner of 3ot A,, otherwise, defendant
wi .e osin+ 3ot A9 without an1 su.stitute therefore $sic%. 5pon the other hand, paintiff wi .e un0ust1 enrichin+
hi*sef havin+ in its favor .oth 3ot A, which was earier *ort+a+ed .1 hi* and su.seCuent1 forecosed .1 SSS, as
we as 3ot A9 where his house is present1 standin+.
6The o+ic and co**on sense of the situation ean heavi1 in favor of the defendant. It is evident that what paintiff
had .ou+ht fro* the defendant is 3ot A, covered .1 TCT No. )9)"! which parce of and has .een proper1 indicated
in the instru*ents and not 3ot A9 as cai*ed .1 the paintiff. The contracts .ein+ cear and un*ista/a.e, the1 refect
the true intention of the parties, .esides the paintiff faied to assai the contracts on *utua *ista/e, hence the sa*e
need no on+er .e refor*ed.6B
On ;une )), A,,9, a writ of e?ecution was issued .1 the tria court. Thus, on Septe*.er A-, A,,9, petitioners fied an
ur+ent *otion to reca writ of e?ecution, ae+in+ that the court a #uo had no 0urisdiction to tr1 the case as it was
vested in the Housin+ and 3and 5se Re+uator1 =oard $H35R=% pursuant to PD ,"- $The Su.division and
Condo*iniu* =u1ers Protective Decree%. Confor*a.1, petitioners fied a new co*paint a+ainst private respondent
with the H35R=. 3i/ewise, on ;une B8, A,,,, petitioner&spouses fied .efore the Court of #ppeas a petition for
annu*ent of 0ud+*ent, pre*ised on the +round that the tria court had no 0urisdiction to tr1 and decide Civi Case
No. A-AA".
In a decision rendered on Dece*.er ),, A,,,, the Court of #ppeas denied the petition for annu*ent of 0ud+*ent,
re1in+ *ain1 on the 0urisprudentia doctrine of estoppe as aid down in the case of $i%am vs. &ibon'(ano).!
Their su.seCuent *otion for reconsideration havin+ .een denied, petitioners fied this instant petition, contendin+ that
the Court of #ppeas erred in dis*issin+ the petition .1 app1in+ the principe of estoppe, even if the Re+iona Tria
Court, =ranch B( of Ioio Cit1 had no 0urisdiction to decide Civi Case No. A-AA".
#t the outset, it shoud .e stressed that petitioners are see/in+ fro* us the annu*ent of a tria court 0ud+*ent .ased
on ac/ of 0urisdiction. =ecause it is not an appea, the correctness of the 0ud+*ent is not in issue here. #ccordin+1,
there is no need to deve into the propriet1 of the decision rendered .1 the tria court.
Petitioners cai* that the recent decisions of this Court have aread1 a.andoned the doctrine aid down in $i%am vs.
&ibon'(ano)." Ee do not a+ree. In countess decisions, this Court has consistent1 hed that, whie an order or
decision rendered without 0urisdiction is a tota nuit1 and *a1 .e assaied at an1 sta+e, active participation in the
proceedin+s in the court which rendered the order or decision wi .ar such part1 fro* attac/in+ its 0urisdiction. #s we
hed in the eadin+ case of $i%am vs. &ibon'(ano)D(
6# part1 *a1 .e estopped or .arred fro* raisin+ a Cuestion in different wa1s and for different reasons. Thus we spea/
of estoppe in pais, or estoppe .1 deed or .1 record, and of estoppe .1 aches.
? ? ?
6It has .een hed that a part1 cannot invo/e the 0urisdiction of a court to secure affir*ative reief a+ainst his opponent
and, after o.tainin+ or faiin+ to o.tain such reief, repudiate, or Cuestion that sa*e 0urisdiction ? ? ? ? 2T4he Cuestion
whether the court had 0urisdiction either of the su.0ect *atter of the action or of the parties was not i*portant in such
cases .ecause the part1 is .arred fro* such conduct not be*ause t(e %ud'ment or order of t(e *ourt is valid and
*on*lusive as an ad%udi*ation but for t(e reason t(at su*( a pra*ti*e *an not be tolerated SS o.vious1 for reasons of
pu.ic poic1.6
Ti0a* has .een reiterated in *an1 succeedin+ cases. Thus, in Orosa vs. Court of Appeals>- #n+ Ping vs. Court of
Appeals>9 Salva vs. Court of Appeals>, ational Steel Corporation vs. Court of Appeals>A8 Provin!e of
"ula!an vs. Court of Appeals>AA POC S#ipping an$ %ransport Corporation vs. Court of Appeals,A) this
Court affir*ed the rue that a part1<s active participation in a sta+es of the case .efore the tria court, which incudes
invo/in+ the court<s authorit1 to +rant affir*ative reief, effective1 estops such part1 fro* ater chaen+in+ that sa*e
court<s 0urisdiction.
In the case at .ar, it was petitioners the*seves who invo/ed the 0urisdiction of the court a Cuo .1 institutin+ an action
for refor*ation of contract a+ainst private respondents. It appears that, in the proceedin+s .efore the tria court,
petitioners vi+orous1 asserted their cause fro* start to finish. Not even once did petitioners ever raise the issue of the
court<s 0urisdiction durin+ the entire proceedin+s which asted for two 1ears. It was on1 after the tria court rendered
its decision and issued a writ of e?ecution a+ainst the* in A,,9 did petitioners first raise the issue of 0urisdiction T
and it was on1 .ecause said decision was unfavora.e to the*. Petitioners thus effective1 waived their ri+ht to
Cuestion the court<s 0urisdiction over the case the1 the*seves fied.
Petitioners shoud .ear the conseCuence of their act. The1 cannot .e aowed to profit fro* their o*ission to the
da*a+e and pre0udice of the private respondent. This Court frowns upon the undesira.e practice of a part1 su.*ittin+
his case for decision and then acceptin+ the 0ud+*ent .ut on1 if favora.e, and attac/in+ it for ac/ of 0urisdiction if
not.AB
Pu.ic poic1 dictates that this Court *ust stron+1 conde*n an1 dou.e&deain+ .1 parties who are disposed to trife
with the courts .1 dei.erate1 ta/in+ inconsistent positions, in utter disre+ard of the ee*entar1 principes of 0ustice
and +ood faith.A! There is no den1in+ that, in this case, petitioners never raised the issue of 0urisdiction throu+hout the
entire proceedin+s in the tria court. Instead, the1 vountari1 and wiin+1 su.*itted the*seves to the 0urisdiction of
said court. It is now too ate in the da1 for the* to repudiate the 0urisdiction the1 were invo/in+ a aon+.
:!EREFORE, the petition for review is here.1 DENIED.
SO ORDERED.
+uno ,C(airman- +an'aniban &andoval-Gutierre" and !orales JJ. *on*ur.
Foo/no/31
A Penned .1 #ssociate ;ustice =ernardo 33. Saas, concurred in .1 #ssociate ;ustices Cancio C. 'arcia and
7ariano 7. 5*ai, Second Division.
) ;ud+e Ruirico '. Defensor of the Ioio Cit1 RTC presidin+.
B .ollo, p. AA!.
! )B SCR# ), 2A,(94.
" Ibid.
( Ibid.
- B), SCR# (") 2)8884.
9 BA8 SCR# B!B 2A,,,4.
, B8! SCR# (B) 2A,,,4.
A8 B8) SCR# ")) 2A,,,4.
AA ),, SCR# !!) 2A,,94.
A) ),- SCR# !8) 2A,,94.
AB Ua*.oan+a Eectric Cooperative, Inc. vs. =uat, )!B SCR# !- 2A,,"4.
A! Sava vs. Court of #ppeas, supra.
!. Repu.ic of the Phiippines
SUPREME COURT
7ania
SECOND DIVISION
G.R. No. 12*6** F32r(ar) ;, 200*
ARNEL ESCO+AL, petitioner,
vs
!ON. FRANCIS GARC!ITORENA, Pr3100n7 "(1/0c3 o- /h3 San07an2a)an, A//). L(01a23. A.-on1o$Cor/3>,
E<3c(/093 C.3r6 o- Co(r/ I? o- /h3 San07an2a)an, !on. Da90 C. Na9a., Pr3100n7 "(73 o- /h3 R370ona. Tr0a.
Co(r/ o- Na7a C0/), +ranch 21, L(> N. N(3ca, respondents.
D E C I S I O N
CALLE"O, SR., J.@
This is a petition for *ertiorari with a pra1er for the issuance of a te*porar1 restrainin+ order and prei*inar1
in0unction fied .1 #rne Esco.a see/in+ the nuification of the re*and .1 the Presidin+ ;ustice of the
Sandi+an.a1an of the records of Cri*ina Case No. ,8&BA9! to the Re+iona Tria Court $RTC% of Na+a Cit1, =ranch
)A.
The petition at .ench arose fro* the foowin+ *iieuD
The petitioner is a +raduate of the Phiippine 7iitar1 #cade*1, a *e*.er of the #r*ed @orces of the
Phiippines and the Phiippine Consta.uar1, as we as the Intei+ence 'roup of the Phiippine Nationa
Poice. On 7arch A(, A,,8, the petitioner was conductin+ surveiance operations on dru+ traffic/in+ at the&a
/aron' Caf0 Bar and .estaurant ocated aon+ =arin St., Na+a Cit1. He so*ehow +ot invoved in a shootin+
incident, resutin+ in the death of one Rodne1 Rafae N. Nueca. On @e.ruar1 (, A,,A, an a*ended
Infor*ation was fied with the RTC of Na+a Cit1, =ranch )A, doc/eted as Cri*ina Case No. ,8&BA9!
char+in+ the petitioner and a certain Natividad =o*.ita, ;r. aias 6;un =o*.ita6 with *urder. The accusator1
portion of the a*ended Infor*ation readsD
That on or a.out 7arch A(, A,,8, in the Cit1 of Na+a, Phiippines, and within the 0urisdiction of this
Honora.e Court .1 virtue of the Presidentia Eaiver, dated ;une A, A,,8, with intent to /i, conspirin+ and
confederatin+ to+ether and *utua1 hepin+ each other, did, then and there, wifu1, unawfu1 and
feonious1 attac/, assaut and *au one Rodne1 Nueca and accused )3t #rne Esco.a ar*ed with a cai.er .
!" service pisto shoot said Rodne1 Nueca there.1 infictin+ upon hi* serious, *orta and fata wounds
which caused his death, and as a conseCuence thereof, co*painant 35U N. N5EC#, *other of the deceased
victi*, suffered actua and co*pensator1 da*a+es in the a*ount of THREE H5NDRED SIVTQ&SEVEN
THO5S#ND ONE H5NDRED SEVEN W ,"FA88 $ P B(-,A8-.,"% PESOS, Phiippine Currenc1, and *ora
and e?e*par1 da*a+es in the a*ount of ONE H5NDRED THIRTQ&@IVE THO5S#ND $ P AB",888.88%
PESOS, Phiippine Currenc1.A
On 7arch A,, A,,A, the RTC issued an Order preventive1 suspendin+ the petitioner fro* the service under
Presidentia Decree No. ,-A, as a*ended .1 P.D. No. A9!-. Ehen apprised of the said order, the 'enera
HeadCuarters of the PNP issued on Octo.er (, A,,) Specia Order No. ,A, preventive1 suspendin+ the petitioner fro*
the service unti the case was ter*inated.)
The petitioner was arrested .1 virtue of a warrant issued .1 the RTC, whie accused =o*.ita re*ained at ar+e. The
petitioner posted .ai and was +ranted te*porar1 i.ert1.
Ehen arrai+ned on #pri ,, A,,A,B the petitioner, assisted .1 counse, peaded not +uit1 to the offense char+ed.
Thereafter, on Dece*.er )B, A,,A, the petitioner fied a 7otion to Ruash! the Infor*ation ae+in+ that as *andated
.1 Co**onweath #ct No. !89," in reation to Section A, Presidentia Decree No. A9)) and Section ," of R.#. No.
(,-", the court *artia, not the RTC, had 0urisdiction over cri*ina cases invovin+ PNP *e*.ers and officers.
Pendin+ the resoution of the *otion, the petitioner on ;une )", A,,B reCuested the Chief of the PNP for his
reinstate*ent. He ae+ed that under R.#. No. (,-", his suspension shoud ast for on1 ,8 da1s, and, havin+ served
the sa*e, he shoud now .e reinstated. On Septe*.er )B, A,,B,( the PNP Re+ion V HeadCuarters wrote ;ud+e David
C. Nava reCuestin+ infor*ation on whether he issued an order iftin+ the petitioner<s suspension. The RTC did not
rep1. Thus, on @e.ruar1 )), A,,!, the petitioner fied a *otion in the RTC for the iftin+ of the order of suspension.
He ae+ed that he had served the ,8&da1 preventive suspension and peaded for co*passionate 0ustice. The RTC
denied the *otion on 7arch ,, A,,!.- Tria thereafter proceeded, and the prosecution rested its case. The petitioner
co**enced the presentation of his evidence. On ;u1 )8, A,,!, he fied a 7otion to Dis*iss9 the case. Citin+
Repu.ic of the +(ilippines v. Asun*ion et al.,, he ar+ued that since he co**itted the cri*e in the perfor*ance of his
duties, the Sandi+an.a1an had e?cusive 0urisdiction over the case.
On Octo.er )9, A,,!, the RTC issued an OrderA8 den1in+ the *otion to dis*iss. It, however, ordered the conduct of a
prei*inar1 hearin+ to deter*ine whether or not the cri*e char+ed was co**itted .1 the petitioner in reation to his
office as a *e*.er of the PNP.
In the prei*inar1 hearin+, the prosecution *anifested that it was no on+er presentin+ an1 evidence in connection
with the petitioner<s *otion. It reasoned that it had aread1 rested its case, and that its evidence showed that the
petitioner did not co**it the offense char+ed in connection with the perfor*ance of his duties as a *e*.er of the
Phiippine Consta.uar1. #ccordin+ to the prosecution, the1 were a.e to show the foowin+ factsD $a% the petitioner
was not wearin+ his unifor* durin+ the incident> $.% the offense was co**itted 0ust after *idni+ht> $c% the petitioner
was drun/ when the cri*e was co**itted> $d% the petitioner was in the co*pan1 of civiians> and, $e% the offense was
co**itted in a .eerhouse caed 6&a /aron' Caf0 Bar and .estaurant.6AA
@or his part, the petitioner testified that at a.out A8D88 p.*. on 7arch A", A,,8, he was at the &a /aron' Caf0 Bar
and .estaurant at =arin St., Na+a Cit1, to conduct surveiance on ae+ed dru+ traffic/in+, pursuant to 7ission Order
No. 8B&8! issued .1 Poice Superintendent Rufo R. Puido. The petitioner adduced in evidence the sworn state*ents
of =en0a*in CariXo and Ro.erto @a0ardo who corro.orated his testi*on1 that he was on a surveiance *ission on the
aforestated date.A)
On ;u1 BA, A,,", the tria court issued an Order decarin+ that the petitioner co**itted the cri*e char+ed whie not
in the perfor*ance of his officia function. The tria court added that upon the enact*ent of R.#. No. -,-", ABthe issue
had .eco*e *oot and acade*ic. The a*endator1 aw transferred the 0urisdiction over the offense char+ed fro* the
Sandi+an.a1an to the RTC since the petitioner did not have a saar1 +rade of 6)-6 as provided for in or .1 Section
!$a%$A%, $B% thereof. The tria court nevertheess ordered the prosecution to a*end the Infor*ation pursuant to the
ruin+ in Repu.ic v. #suncionA! and R.#. No. -,-". The a*end*ent consisted in the incusion therein of an
ae+ation that the offense char+ed was not co**itted .1 the petitioner in the perfor*ance of his dutiesFfunctions, nor
in reation to his office.awphiA.nPt
The petitioner fied a *otion for the reconsiderationA" of the said order, reiteratin+ that .ased on his testi*on1 and
those of =en0a*in CariXo and Ro.erto @a0ardo, the offense char+ed was co**itted .1 hi* in reation to his officia
functions. He asserted that the tria court faied to consider the e?ceptions to the prohi.ition. He asserted that R.#. No.
-,-", which was enacted on 7arch B8, A,,", coud not .e appied retroactive1.A(
The petitioner further ae+ed that 3u: Nacario Nueca, the *other of the victi*, throu+h counse, cate+orica1 and
uneCuivoca.1 ad*itted in her co*paint fied with the Peope<s 3aw Enforce*ent =oard $P3E=% that he was on an
officia *ission when the cri*e was co**itted.
On Nove*.er )!, A,,", the RTC *ade a vote face and issued an Order reversin+ and settin+ aside its ;u1 BA, A,,"
Order. It decared that .ased on the petitioner<s evidence, he was on officia *ission when the shootin+ occurred. It
concuded that the prosecution faied to adduce controvertin+ evidence thereto. It i/ewise considered 3u: Nacario
Nueca<s ad*ission in her co*paint .efore the P3E= that the petitioner was on officia *ission when the shootin+
happened.
The RTC ordered the pu.ic prosecutor to fie a Re&#*ended Infor*ation and to ae+e that the offense char+ed was
co**itted .1 the petitioner in the perfor*ance of his dutiesFfunctions or in reation to his office> and, confor*a.1 to
R.#. No. -,-", to thereafter trans*it the sa*e, as we as the co*pete records with the steno+raphic notes, to the
Sandi+an.a1an, to witD
EHERE@ORE, the Order dated ;u1 BA, A,," is here.1 SET #SIDE and RECONSIDERED, and it is here.1
decared that after prei*inar1 hearin+, this Court has found that the offense char+ed in the Infor*ation herein
was co**itted .1 the accused in his reation to his function and dut1 as *e*.er of the then Phiippine
Consta.uar1.
Confor*a.1 with R.#. No. -,-" and the ruin+ of the Supre*e Court in Repu.ic v. #suncion, et a., '.R.
No. A98)89, 7arch AA, A,,!D
$A% The Cit1 Prosecutor is here.1 ordered to fie a Re&#*ended Infor*ation ae+in+ that the offense
char+ed was co**itted .1 the #ccused in the perfor*ance of his dutiesFfunctions or in reation to his
office, within fifteen $A"% da1s fro* receipt hereof>
$)% #fter the fiin+ of the Re&#*ended Infor*ation, the co*pete records of this case, to+ether with
the transcripts of the steno+raphic notes ta/en durin+ the entire proceedin+s herein, are here.1
ordered trans*itted i**ediate1 to the Honora.e Sandi+an.a1an, throu+h its Cer/ of Court,
7ania, for appropriate proceedin+s.A-
On ;anuar1 9, A,,(, the Presidin+ ;ustice of the Sandi+an.a1an ordered the E?ecutive Cer/ of Court IV, #tt1.
3uisa.e #fonso&Corte:, to return the records of Cri*ina Case No. ,8&BA9! to the court of ori+in, RTC of Na+a Cit1,
=ranch )A. It reasoned that under P.D. No. A(8(, as a*ended .1 R.#. No. -,-",A9 the RTC retained 0urisdiction over
the case, considerin+ that the petitioner had a saar1 +rade of 6)B.6 @urther*ore, the prosecution had aread1 rested its
case and the petitioner had co**enced presentin+ his evidence in the RTC> foowin+ the rue on continuit1 of
0urisdiction, the atter court shoud continue with the case and render 0ud+*ent therein after tria.
5pon the re*and of the records, the RTC set the case for tria on 7a1 B, A,,(, for the petitioner to continue
presentin+ his evidence. Instead of adducin+ his evidence, the petitioner fied a petition for certiorari, assaiin+ the
Order of the Presidin+ ;ustice of the Sandi+an.a1an re*andin+ the records of the case to the RTC.
The threshod issue for resoution is whether or not the Presidin+ ;ustice of the Sandi+an.a1an co**itted a +rave
a.use of his discretion a*ountin+ to e?cess or ac/ of 0urisdiction in orderin+ the re*and of the case to the RTC.
The petitioner contends that when the a*ended infor*ation was fied with the RTC on @e.ruar1 (, A,,A, P.D. No.
A(8( was sti in effect. 5nder Section !$a% of the decree, the Sandi+an.a1an had e?cusive 0urisdiction over the case
a+ainst hi* as he was char+ed with ho*icide with the i*posa.e penat1 of recusion te*pora, and the cri*e was
co**itted whie in the perfor*ance of his duties. He further asserts that athou+h P.D. No. A(8(, as a*ended .1 P.D.
No. A9(A and .1 R.#. No. -,-" provides that cri*es co**itted .1 *e*.ers and officers of the PNP with a saar1
+rade .eow 6)-6 co**itted in reation to office are within the e?cusive 0urisdiction of the proper RTC, the
a*end*ent thus introduced .1 R.#. No. -,-" shoud not .e appied retroactive1. This is so, the petitioner asserts,
.ecause under Section - of R.#. No. -,-", on1 those cases where tria has not .e+un in the Sandi+an.a1an upon the
effectivit1 of the aw shoud .e referred to the proper tria court.
The private co*painant a+rees with the contention of the petitioner. In contrast, the Office of the Specia Prosecutor
contends that the Presidin+ ;ustice of the Sandi+an.a1an acted in accordance with aw when he ordered the re*and of
the case to the RTC. It asserts that R.#. No. -,-" shoud .e appied retroactive1. #thou+h the Sandi+an.a1an had
0urisdiction over the cri*e co**itted .1 the petitioner when the a*ended infor*ation was fied with the RTC, .1 the
ti*e it resoved petitioner<s *otion to dis*iss on ;u1 BA, A,,", R.#. No. -,-" had aread1 ta/en effect. Thus, the aw
shoud .e +iven retroactive effect.
Th3 R(.0n7 o- /h3 Co(r/
The respondent Presidin+ ;ustice acted in accordance with aw and the ruin+s of this Court when he ordered the
re*and of the case to the RTC, the court of ori+in.
The 0urisdiction of the court over cri*ina cases is deter*ined .1 the ae+ations in the Infor*ation or the Co*paint
and the statute in effect at the ti*e of the co**ence*ent of the action, uness such statute provides for a retroactive
appication thereof. The 0urisdictiona reCuire*ents *ust .e ae+ed in the Infor*ation. A, Such 0urisdiction of the
court acCuired at the inception of the case continues unti the case is ter*inated.)8
5nder Section !$a% of P.D. No. A(8( as a*ended .1 P.D. No. A9(A, the Sandi+an.a1an had e?cusive 0urisdiction in
a cases invovin+ the foowin+D
$A% Vioations of Repu.ic #ct No. B8A,, as a*ended, otherwise /nown as the #nti&'raft and Corrupt
Practices #ct, Repu.ic #ct No. AB-,, and Chapter II, Section ), Tite VII of the Revised Pena Code>
$)% Other offenses or feonies co**itted .1 pu.ic officers and e*po1ees in reation to their office, incudin+
those e*po1ed in +overn*ent&owned or controed corporations, whether si*pe or co*pe?ed with other
cri*es, where the penat1 prescri.ed .1 aw is hi+her than prision correcciona or i*prison*ent for si? $(%
1ears, or a fine of P(,888.88 G.)A
However, for the Sandi+an.a1an to have e?cusive 0urisdiction under the said aw over cri*es co**itted .1 pu.ic
officers in reation to their office, it is essentia that the facts showin+ the inti*ate reation .etween the office of the
offender and the dischar+e of officia duties *ust .e ae+ed in the Infor*ation. It is not enou+h to *ere1 ae+e in the
Infor*ation that the cri*e char+ed was co**itted .1 the offender in reation to his office .ecause that woud .e a
concusion of aw.)) The a*ended Infor*ation fied with the RTC a+ainst the petitioner does not contain an1
ae+ation showin+ the inti*ate reation .etween his office and the dischar+e of his duties. Hence, the RTC had
0urisdiction over the offense char+ed when on Nove*.er )!, A,,", it ordered the re&a*end*ent of the Infor*ation to
incude therein an ae+ation that the petitioner co**itted the cri*e in reation to office. The tria court erred when it
ordered the eevation of the records to the Sandi+an.a1an. It .ears stressin+ that R.#. No. -,-" a*endin+ P.D. No.
A(8( was aread1 in effect and under Section ) of the awD
In cases where none of the principa accused are occup1in+ positions correspondin+ to saar1 +rade 6)-6 or
hi+her, as prescri.ed in the said Repu.ic #ct No. (-"9, or PNP officers occup1in+ the ran/ of superintendent
or hi+her, or their eCuivaent, e?cusive 0urisdiction thereof sha .e vested in the proper Re+iona Tria Court,
7etropoitan Tria Court, 7unicipa Tria Court, and 7unicipa Circuit Tria Court, as the case *a1 .e,
pursuant to their respective 0urisdiction as provided in =atas Pa*.ansa =+. A),.
5nder the aw, even if the offender co**itted the cri*e char+ed in reation to his office .ut occupies a position
correspondin+ to a saar1 +rade .eow 6)-,6 the proper Re+iona Tria Court or 7unicipa Tria Court, as the case *a1
.e, sha have e?cusive 0urisdiction over the case. In this case, the petitioner was a Poice Senior Inspector, with
saar1 +rade 6)B.6 He was char+ed with ho*icide punisha.e .1 recusion te*pora. Hence, the RTC had e?cusive
0urisdiction over the cri*e char+ed confor*a.1 to Sections )8 and B) of =atas Pa*.ansa =+. A),, as a*ended .1
Section ) of R.#. No. -(,A.
The petitioner<s contention that R.#. No. -,-" shoud not .e appied retroactive1 has no e+a .asis. It .ears stressin+
that R.#. No. -,-" is a su.stantive procedura aw which *a1 .e appied retroactive1.)B
IN 3I'HT O@ #33 THE @ORE'OIN', the petition is DIS7ISSED. No pronounce*ent as to costs.
SO ORDERED.
+uno ,C(airman- 1uisumbin' Austria-!artine" and $in'a JJ. concur.
Foo/no/31
A .ollo p. A,B.
) Id. at )!8&)!A.
B Id. at AA-.
! #nne? 6#,6 Petition> .ollo pp. AAB&AA(.
" Otherwise /nown as #rtices of Ear of the #r*ed @orces of the Phiippines.
( .ollo p. )!9.
- Id. at )!A&)!).
9 #nne? 6C,6 Petition> .ollo, pp. A)8&A)!.
, )BA SCR# )AA $A,,!%.
A8 #nne? 6D,6 Petition> .ollo pp. A)"&A)(.
AA .ollo p. A)-.
A) Id. at AB8&ABA.
AB Repu.ic #ct No. -,-", 6#n #ct to Stren+then the @unctiona and Structura Or+ani:ation of the
Sandi+an.a1an, a*endin+ for that purpose Presidentia Decree No. A(8", as a*ended, too/ effect on 7a1 (,
A,,".
A! &ee note 9.
A" #nne? 6',6 Petition> .ollo, pp. AB)&ABB.
A( Id. at AB)&ABB.
A- Id. at AB(&AB-.
A9 Too/ effect on 7a1 (, A,,".
A, La*son v. Exe*utive &e*retar) B8A SCR# ),9 $A,,,%.
)8 Baritua v. !er*ader B"8 SCR# 9( $)88A%.
)A &an*(e" v. Demetriou ))- SCR# ()- $A,,B%. $E*phasis suppied%.
)) &ee note A-.
)B La*son v. Exe*utive &e*retar) supra.
". Repu.ic of the Phiippines
SUPREME COURT
7ania
EN =#NC
G.R. No. 16991* A5r0. 7, 2009
ASIAAS EMERGING DRAGON CORPORATION, petitioner,
vs.
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, SECRETAR# LEANDRO R.
MENDO%A an MANILA INTERNATIONAL AIRPORT AUT!ORIT#, Respondents.
? & & & & & & & & & & & & & & & & & & & & & & &?
G.R. No. 17*166 A5r0. 7, 2009
REPU+LIC OF T!E P!ILIPPINES, r35r313n/3 2) /h3 DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS an MANILA INTERNATIONAL AIRPORT AUT!ORIT#, petitioners,
vs.
!ON. COURT OF APPEALS an SALACNI+ +ATERINA, Respondents.
R E S O 3 5 T I O N
C!ICO$NA%ARIO, J.:
In the Decision1 dated A9 #pri )889, Ee dis*issed the Petitions in '.R. No. A(,,A! and '.R. No. A-!A(( of #sia<s
E*er+in+ Dra+on Corporation $#EDC% and Saacni. @. =aterina $=aterina%, respective1. The fao of the Decision
readsD
EHERE@ORE, in view of the fore+oin+D
a. The Petition in '.R. No. A(,,A! is here.1 DIS7ISSED for ac/ of *erit> and
.. The Petition in '.R. No. A-!A(( is here.1 i/ewise DIS7ISSED for .ein+ *oot and acade*ic.
No costs.
Present1 .efore us are the separate 7otions for Reconsideration of the afore*entioned Decision fied .1 #EDC and
=aterina.
The 7otion for Reconsideration of #EDC $'.R. No. A(,,A!%
#EDC invo/es the foowin+ +rounds for its 7otion for ReconsiderationD
I.
#EDC, =EIN' THE ORI'IN#3 PROPONENT O@ THE 2NINOQ #R5INO INTERN#TION#3
#IRPORT&INTERN#TION#3 P#SSEN'ER TER7IN#3 III $N#I# IPT III%4 PRO;ECT, THO5'H
NOT ENTIT3ED TO #NQ 5ND5E PRE@ERENCE, H#S VESTED RI'HTS, =OTH 3E'#3
$5NDER THE =OT 3#E% #ND CONTR#CT5#3, EHICH 75ST =E RESPECTED #NDFOR
RECO'NIUED.
#% THE DECISION 7IST#NEN3Q CH#R#CTERIUED THE PROCESS O@ 5NSO3ICITED
PROPOS#3S 5NDER SECTION !&# O@ THE =OT 3#E #S # =IDDIN'. #EDC, #S THE
ORI'IN#3 PROPONENT, H#S RI'HTS 5NDER THE =OT 3#E, EHICH 75ST =E
RESPECTED #ND RECO'NIUED.
=% THE DECISION 7IST#NEN3Q CONC35DES TH#T EVEN I@ THE CH#33EN'E E#S
S5=SER5ENT3Q DEC3#RED VOID, THE ORI'IN#3 PROPONENT IS 3E@T EITHO5T
#NQ RI'HTS OR RE7EDQ SI7P3Q =EC#5SE THE DISR5#3I@IED CH#33EN'ER
H#S #3RE#DQ PROCEEDED TO I7P3E7ENT THE PRO;ECT.
II.
'IVEN THE DEC3#R#TION O@ THIS HONOR#=3E CO5RT TH#T THE 2PHI3IPPINE
INTERN#TION#3 #IR TER7IN#3S CO., INC. $PI#TCO%4 CONTR#CTS #RE VOID #= INITIO,
#T THE VERQ 3E#ST, THE 2N#I# IPT III4 PRO;ECT SHO53D =E COVERED #NEE =Q
SECTION A8.AA, R53E A8 O@ THE 2I7P3E7ENTIN' R53ES #ND RE'53#TIONS $IRR%4 O@
THE =OT 3#E, EHEREIN INVIT#TIONS @OR CO7P#R#TIVE PROPOS#3S SH#33 #'#IN =E
7#DE #ND THERI'HT O@ #EDC #S THE ORI'IN#3 PROPONENT TO 7#TCH THE =EST
O@@ER SHO53D =E REINST#TED.
III.
EITH THE N533I@IC#TION O@ THE PI#TCO CONTR#CTS, 'OVERN7ENT SHO53D NOT
H#VE INITI#TED EVPROPRI#TION PROCEEDIN'S #'#INST THE 2N#I# IPT III4 @#CI3ITIES.
=5T H#VIN' DONE SO, THE 'OVERN7ENT 7#Q PROCEED EITH THE EVPROPRI#TION
#ND THEN 5SE THE @#IR #ND ;5ST V#35#TION, #S 7#Q =E DETER7INED IN THE
EVPROPRI#TION PROCEEDIN'S, #S THE @3OOR PRICE @OR THE NEE INVIT#TION @OR
CO7P#R#TIVE PROPOS#3S @OR THE 2N#I# IPT III4 PRO;ECT.
IV.
IN THE EVENT O@ # NEE INVIT#TION @OR CO7P#R#TIVE PROPOS#3S, 3#E #ND ER5ITQ
DICT#TES TH#T 'OVERN7ENT SHO53D RECO'NIUE #NDFOR REINST#TE #EDC<S RI'HT
TO 7#TCH THE 3OEEST PRICE O@@ERFPROPOS#3 @OR THE 2N#I# IPT III4 PRO;ECT
EITHIN THE PERIOD #33OEED 5NDER THE =OT 3#E.
V.
THERE IS NO @#CT5#3 =#SIS TO CONC35DE TH#T #EDC E#S NOT @IN#NCI#33Q
R5#3I@IED TO 5NDERT#NE THE 2N#I# IPT III4 PRO;ECT =EC#5SE THIS 7#TTER E#S
NOT P5T IN ISS5E =Q THE P#RTIES. # DEC3#R#TION TH#T #EDC E#S NOT R5#3I@IED
EI33 ;EOP#RDIUE THE REP5=3IC<S POSITION IN THE INTERN#TION#3 #R=ITR#TION
C#SES =EC#5SE THE 'OVERN7ENT EI33 =E VIEEED #S H#VIN' 3ET PI#TCO TO
=E3IEVE TH#T PI#TCO<S CONTR#CTIN' PROCESS E#S 3E'#3 #ND TH#T PI#TCO
CO77ITTED NO VIO3#TION. CONSER5ENT3Q, PI#TCO 7#Q =E ENTIT3ED NOT ON3Q TO
CO7PENS#TION =5T #3SO TO D#7#'ES.
VI.
2N#I# IPT III4 E#S =5I3T =Q PI#TCO EITH SI'NI@IC#NT DEVI#TION @RO7 THE =ID
DOC57ENTS #ND DR#@T CONCESSION #'REE7ENT. #EDC<S T#NIN' OVER O@ 2N#I#
IPT III4 EI33 NOT RES53T IN #N #7END7ENT O@ ITS PROPOS#3. INSTE#D #EDC EI33
I7P3E7ENT OR EN@ORCE THE DR#@T CONCESSION #'REE7ENT #ND THE TECHNIC#3
SPECI@IC#TIONS #PPROVED =Q THE NED#, ICC #ND OTHER 'OVERN7ENT #'ENCIES,
THE 7E7OR#ND57 O@ 5NDERST#NDIN' #ND TER7S O@ RE@ERENCE OR =ID
DOC57ENTS.
VII.
THIS HONOR#=3E CO5RT SHO53D NOT H#VE P#SSED 5PON EITHER THE
#5THENTICITQ OR I7PORT O@ THE 7E7OR#ND57 O@ 5NDERST#NDIN' $H7O56%
=EC#5SE IT E#S NOT # 3ITI'#TED ISS5E. 'OVERN7ENT NEVER DISP5TED THE
C#P#CITQ O@ THE 7O5 TO CRE#TE RI'HTS #ND O=3I'#TIONS. TO CONC35DE TH#T
THE 7O5 E#S VOID IS TO NECESS#RI3Q #3SO CONC35DE TH#T THERE E#S NO
CONTR#CT TO OPEN 5P TO CH#33EN'E, #ND TH#T PI#TCO E#S ERON'@533Q 3ED TO
7O5NT # CH#33EN'E TH#T CO53D NOT POSSI=3Q =E V#3ID. =#SED ON THIS PRE7ISE,
'OVERN7ENT IS ENTIRE3Q TO =3#7E @OR THE 2N#I# IPT III4 DIS#STER #ND EI33
ENTIT3E PI#TCO TO D#7#'ES.
VIII.
#EDC RE3IED ON #ND #CTED DETRI7ENT#33Q IN RE3QIN' ON THE 7O5. IT IS #
D#N'ERO5S ;5DICI#3 PO3ICQ TO PER7IT 'OVERN7ENT TO 5NI3#TER#33Q =RE#CH
CONTR#CT5#3 O=3I'#TIONS EITHO5T CONSER5ENCE, ESPECI#33Q EHEN THE OTHER
P#RTQ IS NOT IN =RE#CH.
IV.
THE PETITION IS NOT =#RRED =Q THE DIS7ISS#3 O@ THE P#SI' C#SE. EHETHER THE
DIS7ISS#3 CONSTIT5TES RES ;5DIC#T# OR PREC35DES #EDC<S C3#I7 IS NOT #7ON'
THE ISS5ES R#ISED #ND 3ITI'#TED =Q THE P#RTIES IN THIS C#SE. HENCE, THE
ST#TE7ENT TH#T THE INST#NT PETITION IS NOT =#RRED =Q RES ;5DIC#T# SHO53D
NOT H#VE =EEN 7#DE. TO 5PHO3D THE DIS7ISS#3 O@ THE P#SI' C#SE #S # V#3ID
;5D'7ENT EO53D =E TO P5T 'OVERN7ENT<S #R=ITR#TION C#SES IN PERI3 =EC#5SE
IT EO53D #@@IR7 TH#T 'OVERN7ENT, INC35DIN' THE SO3ICITOR 'ENER#3, #ND
NOT ;5ST 7I## OR DOTC, 5PHE3D THE V#3IDITQ O@ THE PI#TCO CONTR#CTS, S5CH
EO53D P3#CE 'OVERN7ENT IN ESTOPPE3 TO DENQ C3#I7S @OR D#7#'ES, IN
#DDITION TO CO7PENS#TION, =Q PI#TCO.
V.
THE @5ND#7ENT#3 PRE7ISE @OR THE CO7PRO7ISE #'REEE7ENT $I.E. THE #7IC#=3E
SETT3E7ENT O@ #EDC<S #ND P5=3IC RESPONDENTS< C3#I7S% H#S CE#SED TO EVIST
IN VIEE O@ P5=3IC RESPONDENTS< #DOPTION O@ #EDC<S 3E'#3 POSITION TH#T THE
#E#RD O@ THE 2N#I# IPT III4 PRO;ECT TO PI#TCO E#S I33E'#3. THERE@ORE, =OTH
#EDC #ND P5=3IC RESPONDENTS SHO53D =E RE3E#SED @RO7 THEIR 75T5#3
O=3I'#TIONS 5NDER THE CO7PRO7ISE #'REE7ENT.
VI.
THE PETITION @OR 7#ND#75S E#S TI7E3Q @I3ED EITHIN THE PERIOD PROVIDED
5NDER THE R53ES O@ CO5RT.2
#t the end of its 7otion, #EDC pra1s to this Court to reconsider the atter<s Decision of A9 #pri )889, insofar as the
for*er<s Petition in '.R. No. A(,,A! is concerned, and render, in its stead, 0ud+*ent S
A. Directin+ Pu.ic Respondents, their officers, a+ents, successors, representatives or persons or entities
actin+ on their .ehaf to reco+ni:e #EDC<s ri+hts as an Ori+ina Proponent of an unsoicited pro0ect as set
forth a.ove>
). Directin+ Pu.ic Respondents to issue the appropriate Notice of #ward of the Pro0ect to #EDC, si+n the
draft concession a+ree*ent with #EDC and i*pe*ent the sa*e>
B. Directin+ Pu.ic Respondents, their officers, a+ents, successors, representatives or persons or entities
actin+ on their .ehaf to reco+ni:e #EDC<s ri+ht to conduct an invasive inspection and vauation of the
structures current1 .uit as 2N#I# IPT III4 for an effective vauation and deter*ination of the wor/ to .e
conducted thereon> and
!. Per*anent1 en0oinin+ Pu.ic Respondents, their officers, a+ents, successors, representatives or persons or
entities actin+ on their .ehaf, fro* ne+otiatin+, re&.iddin+, awardin+ or otherwise enterin+ into an1
concession contract with PI#TCO and other third parties, e?cept as otherwise stated a.ove, within the conte?t
of per*ittin+ #EDC to co*pete the construction and operation of the 2N#I# IPT III4 Pro0ect.
". In the aternative, directin+ Pu.ic Respondents to effect a new invitation for co*parative proposas for the
2N#I# IPT III4 Pro0ect in accordance with Rue A8 of the IRR of the =OT 3aw, as soon as practica.e and in
the process reco+ni:e andFor reinstate the ri+ht of #EDC to *atch the .est offer.
Other reiefs, 0ust and eCuita.e in the pre*ises, are i/ewise pra1ed for.3
#EDC persistent1 asserts its ri+ht to .e awarded the N#I# IPT III Pro0ect as the ori+ina proponent thereof,
foowin+ the decaration of nuit1 of the award of the said pro0ect to PI#TCO in A'an Jr. v. +(ilippine International
Air $erminals Co. In*.4 E?tensive as its 7otion for Reconsideration *a1 see*, it is *ost1 a reiteration of the
ar+u*ents #EDC aread1 raised in its Petition for !andamus and Prohi.ition $with #ppication for Te*porar1
Restrainin+ Order%, considered .1 this Court when it rendered its Decision dated A9 #pri )889 dis*issin+ said
Petition.
Ee are not persuaded, whether .1 the previous Petition or the present 7otion, to +rant #EDC the writs of *anda*us
and prohi.ition it pra1s for in the a.sence of a cear ri+ht to the sa*e. The decaration of nuit1 of the award of the
N#I# IPT III Pro0ect to PI#TCO in #+an does not auto*atica1 entite #EDC to the award of the said pro0ect on the
*ere .asis that it was the ori+ina proponent thereof.
The ri+hts of the ori+ina proponent of an unsoicited proposa are rooted in Section !&# of Repu.ic #ct No.
(,"-,5 *ore co**on1 /nown as the =uid&Operate&Transfer $=OT% 3aw, as a*ended .1 Repu.ic #ct No. --A9,
which readsD
SEC. !&#. 2nsoli*ited proposals. S 5nsoicited proposas for pro0ects *a1 .e accepted .1 an1 +overn*ent a+enc1 or
oca +overn*ent unit on a ne+otiated .asisD Provided, That, a the foowin+ conditions are *etD $A% such pro0ects
invove a new concept or technoo+1 andFor are not part of the ist of priorit1 pro0ects, $)% no direct +overn*ent
+uarantee, su.sid1 or eCuit1 is reCuired, and $B% the +overn*ent a+enc1 or oca +overn*ent unit has invited .1
pu.ication, for three $B% consecutive wee/s, in a newspaper of +enera circuation, co*parative or co*petitive
proposas and no other proposa is received for a period of si?t1 $(8% wor/in+ da1sD Provided, further, That in the
event another proponent su.*its a ower price proposa, the ori+ina proponent sha have the ri+ht to *atch the price
within thirt1 $B8% wor/in+ da1s.
In his dissent to this Resoution, 7r. ;ustice Renato C. Corona su.*its that the ori+ina proponent of an unsoicited
proposa for a =OT pro0ect, under Section !&# of Repu.ic #ct No. (,"-, as a*ended, is entited to the award of the
pro0ect in at east three circu*stancesD $A% no co*petitive .id was su.*itted> $)% there was a ower .id .1 a Cuaified
.idder .ut the ori+ina proponent *atched it> and $B% there was a ower .id .ut it was *ade .1 a personFentit1 not
Cuaified to .id, in which case, it is as if no co*petitive .id had .een *ade. =oth ;ustice Corona and 7r. ;ustice
Pres.iterio ;. Veasco, ;r., in their dissentin+ opinions, concude that #EDC is entited to the award of the N#I# IPT
III pro0ect as the ori+ina proponent thereof .ecause the third circu*stance is e?tant in this case.
Ee can on1 accept in part the afore&*entioned enu*eration of the circu*stances when an ori+ina proponent is
entited to the award of the pro0ect under Section !&# of Repu.ic #ct No. (,"-, as a*ended. In the A9 #pri )889
Decision, we have aread1 e?haustive1 scrutini:ed Section !&# of the =OT 3aw, as a*ended, in reation to its
IRR,6 and in consideration of the intent of the e+isators who crafted the =OT 3aw. Ee find no reason to distur. our
concusion therein thatD
The specia ri+hts or privie+es of an ori+ina proponent thus co*e into pa1 on1 when there are other proposas
su.*itted durin+ the pu.ic .iddin+ of the infrastructure pro0ect. #s can .e +eaned fro* the pain an+ua+e of the
statutes and the IRR, the ori+ina proponent hasD $A% the ri+ht to *atch the owest or *ost advanta+eous proposa
within B8 wor/in+ da1s fro* notice thereof, and $)% in the event that the ori+ina proponent is a.e to *atch the owest
or *ost advanta+eous proposa su.*itted, then it has the ri+ht to .e awarded the pro0ect. The second ri+ht or privie+e
is contin+ent upon the actua e?ercise .1 the ori+ina proponent of the first ri+ht or privie+e. =efore the pro0ect coud
.e awarded to the ori+ina proponent, he *ust have .een a.e to *atch the owest or *ost advanta+eous proposa
within the prescri.ed period. Hence, when the ori+ina proponent is a.e to ti*e1 *atch the owest or *ost
advanta+eous proposa, with a thin+s .ein+ eCua, it sha en0o1 preference in the awardin+ of the infrastructure
pro0ect.7
It is without Cuestion that in a situation where there is no other co*petitive .id su.*itted for the =OT pro0ect that the
pro0ect woud .e awarded to the ori+ina proponent thereof. However, when there are co*petitive .ids su.*itted, the
ori+ina proponent *ust .e a.e to *atch the *ost advanta+eous or owest .id> on1 when it is a.e to do so, wi the
ori+ina proponent en0o1 the preferentia ri+ht to the award of the pro0ect over the other .idder. These are the +enera
circu*stances covered .1 Section !&# of Repu.ic #ct No. (,"-, as a*ended.
Ee cannot accede to incude in such enu*eration the situation in this case and cate+orica1 decare that the ri+ht of
#EDC to the N#I# III Pro0ect is ensured and protected .1 Section !&# of Repu.ic #ct No. (,"-, as a*ended. Ehat
had happened in the proposa, .iddin+, and awardin+ process of the N#I# IPT III Pro0ect is indisputa.1 uniCue and
convouted. Ee cannot su.scri.e to disposin+ of the controvers1 as re+ards the N#I# IPT III Pro0ect with a
+enerai:ed rue, i.e., there was a ower .id .ut it was *ade .1 a personFentit1 not Cuaified to .id, in which case, it is
as if no co*petitive .id had .een *ade. #s we said in the Decision of A9 #pri )889, it woud .e a si*pistic approach
to what is a co*pe? pro.e*.
In the instant case, #EDC *a1 .e the ori+ina proponent of the N#I# IPT III Pro0ect> however, the Pre&Ruaification
=ids and #wards Co**ittee $P=#C% aso found the Peope<s #ir Car+o W Earehousin+ Co., Inc. Consortiu*
$Paircar+o%, the predecessor of PI#TCO, to .e a Cuaified .idder for the pro0ect. 5pon consideration of the .id of
Paircar+oFPI#TCO, P=#C found the sa*e to .e far *ore advanta+eous than the ori+ina offer of #EDC. It is aread1
an esta.ished fact in A'an that #EDC faied to *atch the *ore advanta+eous proposa su.*itted .1 PI#TCO .1 the
ti*e the B8&da1 wor/in+ period e?pired on )9 Nove*.er A,,(>8 and since it did not e?ercise its ri+ht to *atch the
*ost advanta+eous proposa within the prescri.ed period, it cannot assert its ri+ht to .e awarded the pro0ect.
#so, in #+an, the Court disCuaified PI#TCO fro* the N#I# IPT III Pro0ect for faiure to put up the reCuired
*ini*u* eCuit1 of P).- *iion. The feasi.iit1, however, of the financia proposa of Paircar+oFPI#TCO was never
put in issue. The proposas of #EDC and Paircar+oFPI#TCO contained the foowin+ ter*sD
=oth proponents offered to .uid the N#I# Passen+er Ter*ina III for at east YB"8 *iion at no cost to the
+overn*ent and to pa1 the +overn*entD "Z share in +ross revenues for the first five 1ears of operation, -."Z share in
+ross revenues for the ne?t ten 1ears of operation, and A8Z share in +ross revenues for the ast ten 1ears of operation,
in accordance with the =id Docu*ents. However, in addition to the fore+oin+, #EDC offered to pa1 the +overn*ent a
tota of PAB" *iion as +uaranteed pa1*ent for )- 1ears whie Paircar+o Consortiu* offered to pa1 the +overn*ent a
tota of PA-.-" .iion for the sa*e period. ? ? ?.9 $E*phasis ours.%
Cear1, the PA-.-" .iion +uaranteed pa1*ent of PI#TCO is *ore advanta+eous to the +overn*ent. There is not a
sin+e ae+ation that such proposa is i*possi.e to i*pe*ent. It is true that #EDC instituted .efore the Re+iona
Tria Court $RTC% of Pasi+ Cit1 Civi Case No. (()AB, co*painin+ that it was not +iven access to certain docu*ents
.1 which it coud have evauated the financia proposa of PI#TCO and its a.iit1 to *atch the sa*e. Thus, #EDC
sou+ht, a*on+ other thin+s, the nuification of the proceedin+s .efore the P=#C and the decaration of the a.sence of
an1 other co*petitive .id .1 a Cuaified .idder. Nevertheess, #EDC woud aso ater 0oint1 *ove $with therein
pu.ic respondents10 % for the dis*issa of Civi Case No. (()AB pursuant to a Concession #+ree*ent it e?ecuted on
A) ;u1 A,,- with the Depart*ent of Transportation and Co**unications $DOTC%. The Pasi+ Cit1 RTC +ranted the
0oint *otion of the parties and accordin+1 dis*issed with pre0udice Civi Case No. (()AB in an Order dated B8 #pri
A,,,. Therefore, #EDC not on1 faied to *atch the *ore advanta+eous proposa of PI#TCO, .ut it aso a+reed to no
on+er pursue its o.0ections thereto.
In the *eanti*e, PI#TCO aread1 .e+an .uidin+ the N#I# IPT III faciities. =1 the ti*e this Court pro*u+ated its
Decision in #+an, disCuaif1in+ PI#TCO as a .idder and annuin+ the award of the N#I# IPT III Pro0ect to it, the
N#I# IPT III faciities were su.stantia1 co*pete. The Court, in its Resoution in #+an, reco+ni:ed the ri+ht of
PI#TCO to 0ust co*pensation for the N#I# IPT III faciities, in accordance with aw and eCuit1. The 'overn*ent,
thereafter, instituted an e?propriation case for the deter*ination of the 0ust co*pensation to .e paid to PI#TCO. In
Repu.ic v. 'in+o1on,11 the Court affir*ed the appication of Repu.ic #ct No. 9,-!12 to the e?propriation case and
the ri+ht of the 'overn*ent to ta/e possession of the N#I# IPT III faciities upon the pa1*ent to PI#TCO of the
proffered vaue of the sa*e.
On AA Septe*.er )88(, the 7ania Internationa #irport #uthorit1 $7I##% tendered a 3and =an/ chec/ in the
a*ount of PB,88),A)",888.88 representin+ the proffered vaue of N#I# IPT III, which was received .1 a du1
authori:ed representative of PI#TCO. #s a resut, the 7I## and other concerned +overn*ent a+encies were a.e to
ta/e possession of the N#I# IPT III faciities and prepare the* for operation. The N#I# IPT III opened for do*estic
air trave on )) ;u1 )889.13 The first internationa fi+ht too/ off fro* N#I# IPT III on A #u+ust )889.14
These deveop*ents, as we as the i*pications and conseCuences thereof, cannot .e convenient1 i+nored. The
factua .ac/drop has si+nificant1 chan+ed fro* the ti*e of the .iddin+ of the N#I# IPT III Pro0ect, which prevents
us fro* concudin+ that, with the disCuaification of PI#TCO, #EDC sha auto*atica1 acCuire N#I# IPT III
Pro0ect as the ori+ina proponent thereof. The .iddin+ and awardin+ process for the N#I# IPT III Pro0ect had on+
.een cosed. The Court coud not 0ust convenient1 revert to the sta+e of .iddin+ and awardin+ of the said pro0ect and
i+nore a the factua and e+a deveop*ents that had aread1 ta/en pace.
There is no point in su.0ectin+ the N#I# IPT III Pro0ect to another .iddin+ and awardin+ process when it is
su.stantia1 finished and, contrar1 to the aver*ents of #EDC, aread1 operationa. Eorth stressin+ is that the N#I#
IPT III Pro0ect is a .uid&operate&transfer pro0ect. Ehen the N#I# IPT III faciities have aread1 .een .uit, their
possession transferred to the +overn*ent, and are now .ein+ operated .1 the atter, nothin+ *uch re*ains of the
pro0ect. The uti*ate +oa of a =OT pro0ect is for the +overn*ent to eventua1 +ain possession, ownership, and
contro of the infrastructure su.0ect thereof fro* the private sector that undertoo/ its .uidin+ and financin+, after
aowin+ the atter to recoup its invest*ents and reap reasona.e profit. In this case, the +overn*ent has aread1
attained possession and contro of the N#I# IPT III faciities. It woud aso acCuire ownership of said faciities once
the 0ust and eCuita.e co*pensation due PI#TCO as .uider15 has .een deter*ined and paid in the on+oin+
e?propriation proceedin+s, doc/eted as Case No. 8!&89-(C@7, .efore the Pasa1 Cit1 RTC. To return the N#I# IPT
III faciities to the private sector woud on1 .e a step .ac/wards.
The ac/ of technica s/i and co*petence of the 'overn*ent to operate N#I# IPT III cannot 0ustif1 turnin+ over the
sa*e to #EDC. There are severa other wa1s for the 'overn*ent to cope, i.e., recruitin+ *ore Cuaified peope,
without it havin+ to reinCuish ownership, possession, and contro of N#I# IPT III.
The protestation .1 #EDC of our characteri:ation of the process on unsoicited proposa as pu.ic .iddin+ is specious.
Ee ca attention to the foowin+ reevant sections of Rue A8 of the IRR specifica1 on 5nsoicited ProposasD
Sec. A8.,. Ne+otiation Eith the Ori+ina Proponent. S I**ediate1 after ICCF3oca San++unian<s cearance of the
pro0ect, the #+enc1F3'5 sha proceed with the in&depth ne+otiation of the pro0ect scope, i*pe*entation
arran+e*ents and concession a+ree*ent, a.. o- 8h0ch 80.. 23 (13 0n /h3 T3r41 o- R3-3r3nc3 -or /h3 1o.0c0/a/0on o-
co45ara/093 5ro5o1a.1. The #+enc1F3'5 and the proponent are +iven ninet1 $,8% da1s upon receipt of ICC<s
approva of the pro0ect to concude ne+otiations. The #+enc1F3'5 and the ori+ina proponent sha ne+otiate in +ood
faith. However, shoud there .e unresova.e differences durin+ the ne+otiations, the #+enc1F3'5 sha have the
option to re0ect the proposa and .id out the pro0ect. On the other hand, if the ne+otiation is successfu1
concuded, /h3 or070na. 5ro5on3n/ 1ha.. /h3n 23 r3B(0r3 /o r3-or4a/ an r31(240/ 0/1 5ro5o1a. 0n accoranc3
80/h /h3 r3B(0r343n/1 o- /h3 T3r41 o- R3-3r3nc3 /o -ac0.0/a/3 co45ar01on 80/h /h3 co45ara/093 5ro5o1a.1. The
#+enc1F3'5 sha vaidate the refor*atted proposa if it *eets the reCuire*ents of the TOR prior to the issuance of
the invitation for co*parative proposas.
Sec. A8.A8. Tender Docu*ents. S The Cuaification and tender docu*ents sha .e prepared aon+ the ines specified
under Rues ! and " hereof. The concession a+ree*ent that wi .e part of the tender docu*ents wi .e considered
fina and non&ne+otia.e .1 the chaen+ers. Proprietar1 infor*ation sha, however, .e respected, protected and
treated with ut*ost confidentiait1. #s such, it sha not for* part of the .iddin+Ftender and reated docu*ents.
Sec. A8.AA. Invitation for Co*parative Proposas. S The #+enc1F3'5 sha pu.ish the invitation for co*parative or
co*petitive proposas on1 after ICCF3oca San++unian issues a no o.0ection cearance of the draft contract. The
invitation for co*parative or co*petitive proposas shoud .e pu.ished at east once ever1 wee/ for three $B% wee/s
in at east one $A% newspaper of +enera circuation. It sha indicate the ti*e, which shoud not .e earier than the ast
date of pu.ication, and pace where tenderF.iddin+ docu*ents coud .e o.tained. It sha i/ewise e?picit1 specif1 a
ti*e of si?t1 $(8% wor/in+ da1s rec/oned fro* the date of issuance of the tenderF.iddin+ docu*ents upon which
proposas sha .e received. =e1ond said deadine, no proposas sha .e accepted. # pre&.id conference sha .e
conducted ten $A8% wor/in+ da1s after the issuance of the tenderF.iddin+ docu*ents.
Sec. A8.A). Postin+ of =id =ond .1 Ori+ina Proponent. S The ori+ina proponent sha .e reCuired at the date of the
first date of the pu.ication of the invitation for co*parative proposas to 1(240/ a 20 2on 3B(a. /o /h3 a4o(n/
an 0n /h3 -or4 r3B(0r3 o- /h3 cha..3n73r1.
Sec. A8.AB. Si*utaneous Ruaification of the Ori+ina Proponent. S The #+enc1F3'5 sha Cuaif1 the ori+ina
proponent .ased on the provisions of Rue " hereof, within thirt1 $B8% da1s fro* start of ne+otiation. @or consistenc1,
the evauation criteria used for Cuaif1in+ the ori+ina proponent shoud .e the sa*e criteria used in the Ter*s of
Reference for the chaen+ers.
Sec. A8.A!. Su.*ission of Proposa. S The .idders are reCuired to su.*it the proposa in three enveopes at the ti*e
and pace specified in the Tender Docu*ents. The first enveope sha contain the Cuaification docu*ents, the second
enveope the technica proposa as reCuired under Sec. -.A.$.%, and the third enveope as reCuired under Sec. -.A.$c%.
Sec. A8.A". Evauation of Proposas. S In ter*s of procedure, the evauation wi .e in three sta+esD Sta+e A is the
evauation of Cuaification docu*ents> Sta+e ), the technica proposa> and Sta+e B, the financia proposa. On1 those
.ids which passed the first sta+e wi .e considered for the second sta+e and si*iar1, on1 those which passed the
second sta+e wi .e considered for the third sta+e evauation. The #+enc1F3'5 wi return to the disCuaified .idders
the re*ainin+ enveopes unopened to+ether with a etter e?painin+ wh1 the1 were disCuaified. The criteria for
evauation wi foow Rue " for the Cuaification of .idders and Rue 9 for the technica and financia proposas. The
ti*e fra*es under Rues " and 9 sha i/ewise .e foowed.
Sec. A8.A(. Discosure of the Price Proposa. S The discosure of the price proposa of the ori+ina proponent in the
Tender Docu*ents wi .e eft to the discretion of the #+enc1F3'5. However, if it was not discosed in the Tender
Docu*ents, the ori+ina proponent<s price proposa shoud .e reveaed upon the openin+ of the financia proposas of
the chaen+ers. Th3 r07h/ o- /h3 or070na. 5ro5on3n/ /o 4a/ch /h3 231/ 5ro5o1a. 80/h0n /h0r/) C&0D 8or60n7 a)1
1/ar/1 (5on o--0c0a. no/0-0ca/0on 2) /h3 A73nc)ELGU o- /h3 4o1/ a9an/a73o(1 -0nanc0a. 5ro5o1a.. $E*phasis
ours.%
#fter the concerned +overn*ent a+enc1 or oca +overn*ent unit $3'5% has received, evauated, and approved the
pursuance of the pro0ect su.0ect of the unsoicited proposa, the su.seCuent steps are funda*enta1 si*iar to the
.iddin+ process conducted for ordinar1 +overn*ent pro0ects.
The three principes of pu.ic .iddin+ areD the offer to the pu.ic, an opportunit1 for co*petition, and a .asis for an
e?act co*parison of .ids,16 a of which are present in Sec. A8., to Sec. A8.A( of the IRR. @irst, the pro0ect is offered
to the pu.ic throu+h the pu.ication of the invitation for co*parative proposas. Second, the chaen+ers are +iven the
opportunit1 to co*pete for the pro0ect throu+h the su.*ission of their tenderF.id docu*ents. #nd third, the e?act
co*parison of the .ids is ensured .1 usin+ the sa*e reCuire*entsFCuaificationsFcriteria for the ori+ina proponent and
the chaen+ers, to witD the proposas of the ori+ina proponent17 and the chaen+ers *ust a .e in accordance with
the reCuire*ents of the Ter*s of Reference $TOR% for the pro0ect> the ori+ina proponent and the chaen+ers are
reCuired to post .id .onds eCua in a*ount and for*>18 and the Cuaifications of the ori+ina proponent and the
chaen+ers sha .e evauated .1 the concerned a+enc1F3'5 usin+ the sa*e evauation criteria.19AavvphiA.:wK
# perusa of Sec. A8., to Sec. A8.A( of the IRR further reveas repeated *ention of 6co*parative proposas6 and
6tenderF.id docu*ents6> as we as reference to and reCuired co*piance with the sa*e rues foowed in ordinar1
.iddin+ of +overn*ent pro0ects, such as Rue ! $=idFTender Docu*ents%> Rue " $Ruaification of =idders%> and Sec.
-.A$.% and Sec. -.A$c% of Rue - $Su.*ission, Receipt and Openin+ of =ids% of the sa*e IRR.
Hence, the process of unsoicited proposas does invove pu.ic .iddin+ where, in the end, the +overn*ent is free to
choose the .id or proposa *ost advanta+eous to it. However, .1 adoption of the Swiss Chaen+e, specia
consideration is +iven in said process to the ori+ina proponent of the pro0ect, na*e1, the ri+ht to .e awarded the
pro0ect shoud it .e a.e to *atch the owest or *ost advanta+eous proposa within B8 wor/in+ da1s fro* notice.
There is no truth to the aver*ent of #EDC that .1 our Decision of A9 #pri )889, we are aowin+ PI#TCO to .enefit
fro* its own fraud and wron+doin+. Our refusa to award the N#I# IPT III Pro0ect to #EDC does not in an1 wa1
.enefit PI#TCO. PI#TCO cannot .enefit fro* the N#I# IPT III Pro0ect when its Concession #+ree*ents invovin+
the sa*e were set aside for .ein+ nu and void, renderin+ it una.e to derive profit therefro*. It is on1 entited to 0ust
and eCuita.e co*pensation for .uidin+ the N#I# IPT III faciities, 6for the +overn*ent cannot un0ust1 enrich itsef
at the e?pense of PI#TCO and investors.620
#EDC ta/es e?ception to the dou.ts raised .1 this Court on the authenticit1 of the 7e*orandu* of 5nderstandin+
$7O5% dated )( @e.ruar1 A,,( it e?ecuted with the DOTC.
To reca, our Decision of A9 #pri )889 statesD
It is i*portant to note, however, that the docu*ent attached as #nne? 6E6 to the Petition of #EDC is a 6certified
photocop1 of records on fie.6 This Court cannot +ive *uch wei+ht to said docu*ent considerin+ that its e?istence and
due e?ecution have not .een esta.ished. It is not notari:ed, so it does not en0o1 the presu*ption of re+uarit1 of a
pu.ic docu*ent. It is not even witnessed .1 an1one. It is not certified true .1 its supposed si+natories, Secretar1
;esus =. 'arcia, ;r. for DOTC and Chair*an Henr1 S1, Sr. for #EDC, or .1 an1 +overn*ent a+enc1 havin+ its
custod1. It is certified as a photocop1 of records on fie .1 an #tt1. Ceciia 3. Pesa1co, the Corporate Secretar1, of an
unidentified corporation.21
#EDC itsef invo/ed the provisions of the 7O5 and attached a cop1 thereof as one of the #nne?es to its Petition in
'.R. No. A(,,A!. =1 su.*ittin+ a cop1 of the 7O5, #EDC su.0ects the said docu*ent to the scrutin1 of the Court,
which is dut1&.ound to e?a*ine and wei+h the sa*e in accordance with the rues. Ee are not o.i+ated to receive a
cop1 of the 7O5 0ust as #EDC offered it> and accept hoo/, ine, and sin/er, the references *ade .1 #EDC to the
contents thereof without ascertainin+ that it was actua1 the ver1 sa*e docu*ent e?ecuted .1 the parties. Nowhere in
our A9 #pri )889 Decision did we e?press1 decare that there was no 7O5 .etween #EDC and the +overn*ent.
Ehat we caed attention to therein was the fact that the docu*ent attached to the Petition of #EDC was hi+h1
suspect, not .ein+ a cear cop1 and not .ein+ proper1 certified as a true cop1 of the 7O5, for which reasons, it coud
not .e +iven *uch wei+ht and credence in esta.ishin+ the e?act contents of the 7O5 in Cuestion.
@urther*ore, it woud do we for #EDC to re*e*.er that we did proceed, for the sa/e of ar+u*ent, to rue on the
contents of the 7O5 as foowsD
Even assu*in+ for the sa/e of ar+u*ent, that the said 7e*orandu* of 25nderstandin+4, is in e?istence and du1
e?ecuted, it does itte to support the cai* of #EDC to the award of the N#I# IPT III Pro0ect. The co**it*ents
underta/en .1 the DOTC and #EDC in the 7e*orandu* of 25nderstandin+4 *a1 .e si*p1 su**ari:ed as a
co**it*ent to co*p1 with the procedure and reCuire*ents provided in Rues A8 and AA of the IRR. It .ears no
co**it*ent on the part of the DOTC to award the N#I# IPT III Pro0ect to #EDC. On the contrar1, the docu*ent
incudes e?press stipuations that ne+ate an1 such +overn*ent o.i+ation. Thus, in the first cause, the DOTC affir*ed
its co**it*ent to pursue, i*pe*ent and co*pete the N#I# IPT III Pro0ect on or .efore A,,9, noticea.1 without
*entionin+ that such co**it*ent was to pursue the pro0ect specifica1 with #EDC. 3i/ewise, in the second cause, it
was e*phasi:ed that the DOTC sha pursue the pro0ect under Rues A8 and AA of the IRR of Repu.ic #ct No. (,"-,
as a*ended .1 Repu.ic #ct No. --A9. #nd *ost si+nificant1, the tenth cause of the sa*e docu*ent providedD
A8. Nothin+ in this 7e*orandu* of 5nderstandin+ sha .e understood, interpreted or construed as per*ittin+,
aowin+ or authori:in+ the circu*vention of, or non&co*piance with, or as waivin+, the provisions of, and
reCuire*ents and procedures under, e?istin+ aws, rues and re+uations.22
Hence, even after a consideration of the contents of the 7O5, we do not find therein an a.soute underta/in+ on the
part of the +overn*ent, represented .1 the DOTC, to award the N#I# IPT III Pro0ect to #EDC.
There is i/ewise no sufficient reason for us to reverse the pronounce*ents in our Decision dated A9 #pri )889 that
the Petition of #EDC in '.R. No. A(,,A! suffered fro* procedura defectsD havin+ .een fied .e1ond reasona.e ti*e
and .ein+ .arred .1 res 0udicata.
Ee have aread1 adeCuate1 e?pained in our A9 #pri )889 Decision our findin+ that the Petition of #EDC was fied
.e1ond reasona.e ti*e, to witD
#EDC revived its hope to acCuire the N#I# IPT III Pro0ect when this Court pro*u+ated its Decision in A'an on "
7a1 )88B. The said Decision .eca*e fina and e?ecutor1 on A- @e.ruar1 )88! upon the denia .1 this Court of the
7otion for 3eave to @ie Second 7otion for Reconsideration su.*itted .1 PI#TCO. It is this Decision that decared
the award of the N#I# IPT III Pro0ect to PI#TCO as nu and void> without the sa*e, then the award of the N#I# IPT
III Pro0ect to PI#TCO woud sti su.sist and other persons woud re*ain precuded fro* acCuirin+ ri+hts thereto,
incudin+ #EDC. Irrefuta.1, the present cai* of #EDC is rooted in the Decision of this Court inA'an. However,
#EDC fied the Petition at .ar on1 )8 *onths after the pro*u+ation of the Decision in A'an on " 7a1 )88B.23
#EDC is *ere1 reiteratin+ in its 7otion for Reconsideration the sa*e disputation it previous1 *ade in its Petition S
that the period for fiin+ of said Petition shoud on1 .e counted fro* )A Septe*.er )88", the date when it received
the etter of the Soicitor 'enera den1in+ its offer to ta/e over the N#I# IPT III Pro0ect S and which we had aread1
considered and re0ected in our Decision dated A9 #pri )889 for the foowin+ reasonsD
#EDC contends that the 6reasona.e ti*e6 within which it shoud have fied its petition shoud .e rec/oned on1 fro*
)A Septe*.er )88", the date when #EDC received the etter fro* the Office of the Soicitor 'enera refusin+ to
reco+ni:e the ri+hts of #EDC to provide the avaia.e funds for the co*petion of the N#I# IPT III Pro0ect and to
rei*.urse the costs of the structures aread1 .uit .1 PI#TCO. It has .een un*ista/a.e that even on+ .efore said
etter S especia1 when the 'overn*ent instituted with the RTC of Pasa1 Cit1 e?propriation proceedin+s for the
N#I# IPT III on )A Dece*.er )88! S that the 'overn*ent woud not reco+ni:e an1 ri+ht that #EDC purported1 had
over the N#I# IPT III Pro0ect and that the 'overn*ent is intent on ta/in+ over and operatin+ the N#I# IPT III
itsef.24
Eithout an1 new ar+u*ent on this issue, we are not persuaded to chan+e our afore&Cuoted ruin+.
On the issue of res 0udicata, #EDC ar+ues that we erred in ta/in+ co+ni:ance thereof even when the issue was not
raised .1 the parties. Ee disa+ree.
Even if the pu.ic respondents in '.R. No. A(,,A! faied to pead res 0udicata in their Co**ent and is dee*ed to
have waived the said defense, we *a1 sti *otu proprio dis*iss the Petition .1 reason thereof if it appears in the
peadin+s or the evidence on record that the said Petition is .arred .1 prior 0ud+*ent.
Section A, Rue A8 of the Revised Rues of Court providesD
SECTION A. Defenses and o.0ections not peaded. S Defenses and o.0ections not peaded either in a *otion to
dis*iss or in the answer are dee*ed waived. However, when it appears fro* the peadin+s or the evidence on record
that the court has no 0urisdiction over the su.0ect *atter, that there is another action pendin+ .etween the sa*e parties
for the sa*e cause, or that the action is .arred .1 a prior 0ud+*ent or .1 statute of i*itations, the court sha dis*iss
the cai*. $E*phasis ours.%
#thou+h the fore+oin+ provision appears under the rues on proceedin+s .efore the tria court, the power to dis*iss
provided therein is a*on+ the residua prero+atives which the Court of #ppeas25 and even this Court *a1 e?ercise
.1 virtue of Section ), Rue A of the Revised Rues of Court.26
The Petition27 of #EDC itsef .rou+ht to our attention the institution of, the deveop*ents in, as we as the eventua
dis*issa with pre0udice of Civi Case No. (()AB .1 the Pasi+ Cit1 RTC. Ee had to ta/e co+ni:ance thereof, and after
carefu consideration, found that the dis*issa with pre0udice of Civi Case No. (()AB .1 the Pasi+ Cit1 RTC
effective1 .ars the instant Petition of #EDC.
#EDC had waived its ri+ht to chaen+e the award of the N#I# IPT III Pro0ect to PI#TCO when it a*ica.1 setted
Civi Case No. (()AB .efore the Pasi+ Cit1 RTC, resutin+ in the dis*issa with pre0udice of said case. Ee shoud not
aow the reviva .1 #EDC of its ri+ht to the N#I# IPT III Pro0ect as the ori+ina proponent thereof, after so*e other
part1 secured the annu*ent of the award to PI#TCO, not on1 .ecause it is .arred .1 res 0udicata, .ut aso .ecause it
constitutes papa.e opportunis*.
@ina1, we find .aseess the aver*ent of #EDC that our 0ud+*ent reco+ni:in+ and respectin+ the fina and
i**ediate1 e?ecutor1 Order dated B8 #pri A,,, of the Pasi+ Cit1 RTC S which +ranted, with pre0udice, the ;oint
7otion to Dis*iss Civi Case No. (()AB fied .1 the parties therein S wi i*peri the position of the +overn*ent in
the internationa ar.itration cases invovin+ the N#I# IPT III Pro0ect sti pendin+ .efore the Internationa Cha*.er of
Co**erce $ICC%. #EDC points out that the position ta/en .1 the +overn*ent in Civi Case No. (()AB $that PI#TCO
was Cuaified to participate in the .iddin+ for the N#I# IPT III Pro0ect% is inconsistent with the position the atter is
espousin+ in the internationa ar.itration cases $that PI#TCO was financia1 disCuaified fro* .iddin+ for the N#I#
IPT III Pro0ect%.
It shoud .e recaed, however, that in the ;oint 7otion to Dis*iss Civi Case No. (()AB, the parties, without
ad*ittin+ ia.iit1 or concedin+ to the position ta/en .1 the other, a+reed to reease and forever dischar+e each other
fro* an1 and a ia.iities, whether cri*ina or civi, arisin+ in connection with the case. Evident1, the parties
consented to reease and dischar+e each other fro* an1 ia.iit1 re+ardess of whether the other part1 *aintained or
conceded its position. Stated otherwise, the position ta/en .1 the parties on the issues in the case was not *ateria to
their a+ree*ent to reease and dischar+e each other fro* an1 ia.iit1. The Order dated B8 #pri A,,, of the Pasi+ Cit1
RTC *ere1 +ranted the ;oint 7otion to Dis*iss Civi Case No. (()AB, the ver1 ter*s of which rendered it
unnecessar1 for the said court to consider or rue upon the positions of the parties. Thus, nothin+ in the said Order of
the Pasi+ Cit1 RTC precudes the +overn*ent in the internationa ar.itration proceedin+s .efore the ICC fro*
adoptin+ the position that PI#TCO was financia1 disCuaified to .id for the N#I# IPT III Pro0ect.
The 7otion for Reconsideration of =aterina $'.R. No. A-!A((%
=aterina presents the foowin+ ar+u*ents in support of his 7otion for ReconsiderationD
The principes of res 0udicata and stare decisis, and the doctrine of the 6aw of the case,6 do not app1 to =aterina
.ecause he was not a part1 to the previous cases> and .ecause the issues raised here are not the sa*e issues iti+ated in
'in+o1on.28
The issues advocated .1 =aterina, especia1 on the ownership of Ter*ina B and the propriet1 of pa1in+ 0ust
co*pensation to PI#TCO, have not .eco*e *oot and acade*ic .ecause these issues re*ain to .e via.e and
0usticia.e controversies> a resoution on the *erits of these issues wi serve a usefu purpose that wi inure to the
.enefit of the @iipino peope.29
The issues advocated .1 =aterina re*ain to .e via.e and 0usticia.e controversies .ecause the pronounce*ents
reatin+ thereto in #'an and in 'in+o1on were not a fina ad0udication on the *erits.30
=aterina was deprived of a fair opportunit1 to .e heard .ecause the Court *a1 have unwittin+1 faied to e?pain the
factua and e+a reasons that ed the Court to re0ect =aterina<s ar+u*ents that the pronounce*ent in 'in+o1on
re+ardin+ PI#TCO<s ownership of Ter*ina B was not a fina ad0udication on the *erits and *a1 have .een
i*provident.31
# resoution on the *erits of the ownership of Ter*ina B wi serve a usefu and practica purpose, and wi inure to
the .enefit of the @iipino peope, .ecause it wi deter*ine the re+i*e of co*pensation that *ust .e appied to
PI#TCO.32
=aterina then see/s fro* this Court the foowin+D
PR#QER
EHERE@ORE, pre*ises considered, it is respectfu1 pra1ed that the Honora.e Court RECONSIDER and SET
#SIDE the Decision dated A9 #pri )889, at east insofar as '.R. No. A-!A(( is concerned, and RENDER a new
0ud+*ent as foowsD
A. DEC3#RE thatD $i% Ter*ina B as a *atter of aw, is pu.ic propert1 and thus not a proper o.0ect of
e*inent do*ain proceedin+s> and $ii% PI#TCO, as a *atter of aw, is *ere1 the .uider of Ter*ina B and, as
such, it *a1 fie a cai* for recover1 on Cuantu* *eruit with the Co**ission on #udit for deter*ination of
the a*ount thereof, if an1.
). DIRECT the Re+iona Tria Court of Pasa1 Cit1, =ranch AA- to dis*iss the e?propriation case, Civi Case
No. 8!&89-(&C@7.
B. DEC3#RE that the PhpB =iion paid to PI#TCO on AA Septe*.er )88( $representin+ the proferred vaue
of Ter*ina B% as funds hed in trust .1 PI#TCO for the .enefit of the Repu.ic and su.0ect to the outco*e of
the proceedin+s to deter*ine recover1 on Cuantu* *eruit due to PI#TCO, if an1.
!. DIRECT the Soicitor 'enera to discose the evidence it has +athered on the corruption, .ri.er1, fraud, .ad
faith, etc., to this Honora.e Court and the Co**ission on #udit, and to DEC3#RE such evidence to .e
ad*issi.e in an1 proceedin+ for the deter*ination of an1 co*pensation due to PI#TCO, if an1.
". In the aternative, toD
i. SET #SIDE the e?propriaton court<s Order dated 89 #u+ust )88( den1in+ =aterina<s *otion for
intervention in the e?propriation case, and
ii. DIRECT the e?propriation court to hear and resove the issue of ownership of Ter*ina B
consistent with the Honora.e Court<s hodin+ in 'in+o1on that 6the interests of the *ovants&in&
intervention *a1 .e du1 iti+ated in proceedin+s which are e?tant .efore ower courts.6
(. #s another aternative, even shoud this Honora.e Court not reconsider its Decision dated A9 #pri )889,
to decare that the e?propriation court is e*powered and is *andated, .1 .oth aw and to protect the pu.ic
interest and to ensure +ood +overnance, to consider evidence of PI#TCO<s ie+a activities and unreasona.e
e?penses and to accordin+1 ad0ust the a*ount of 0ust co*pensation due to PI#TCO.
Other reiefs, 0ust and eCuita.e in the pre*ises, are i/ewise pra1ed for.33
=aterina<s present 7otion presents no new ar+u*ents for our consideration and on1 dispa1s his o.stinate refusa to
ac/nowed+e and respect our fina and e?ecutor1 decisions in A'an and Gin'o)on.
Ee stand fir* on our pronounce*ent in our Decision dated A9 #pri )889 that the entite*ent of PI#TCO to 0ust and
eCuita.e consideration for its construction of N#I# IPT III and the propriet1 of the Repu.ic<s resort to e?propriation
proceedin+s were aread1 reco+ni:ed and uphed .1 this Court in #+an and 'in+o1on. 5ndou.ted1, the Repu.ic and
PI#TCO, the parties in Case No. 8!&89-(C@7, the e?propriation case instituted .1 the Repu.ic .efore the Pasa1
Cit1 RTC, are .ound .1 #+an and 'in+o1on .1 concusiveness of 0ud+*ent and aw of the case.
However, as to =aterina, a second hard oo/ at this case convinces us that the issue of whether he is .ound .1 #+an
and 'in+o1on is not even *ateria, +iven the fact that he has repeated1 faied to esta.ish to the satisfaction of the
courts his interest and e+a standin+ to intervene in previous or pendin+ 0udicia proceedin+s invovin+ the N#I# IPT
III Pro0ect.
=aterina<s 7otion for Intervention and 7otion for Reconsideration&in&Intervention of the Decision in 'in+o1on were
denied .1 the Court, not on1 for havin+ .een .eated1 fied, .ut aso pursuant to the foowin+ si+nificant
o.servationD
In the case of Representative =aterina, he invo/es his prero+ative as e+isator to curtai the dis.urse*ent without
appropriation of pu.ic funds to co*pensate PI#TCO, as we as that as a ta?pa1er, as the .asis of his e+a standin+ to
intervene. However, it shoud .e noted that the a*ount which the Court directed to .e paid .1 the 'overn*ent to
PI#TCO was derived fro* the *one1 deposited .1 the 7ania Internationa #irport #uthorit1, an a+enc1 which
en0o1s corporate autono*1 and possesses a e+a personait1 separate and distinct fro* those of the Nationa
'overn*ent and a+encies thereof whose .ud+ets have to .e approved .1 Con+ress.34
True, we aso noted that the interests of the *ovants&in&intervention in 'in+o1on, which incuded =aterina, 6*a1 .e
du1 iti+ated in proceedin+s which are e?tant .efore the ower courts.635 =ut such state*ent si*p1 reco+ni:ed
=aterina<s option to pursue his intervention in Case No. 8!&89-(C@7 .efore the Pasa1 Cit1 RTC, and contained no
a.soute assurance to =aterina or cate+orica directive to the tria court that his intervention sha .e aowed and +iven
due course. The Pasa1 Cit1 RTC can sti e?ercise its discretion in +rantin+ or den1in+ =aterina<s 7otion for
Intervention and in ad*ittin+ or re0ectin+ his Petition in Intervention.
In fact, in its e?ercise of said discretion, the Pasa1 Cit1 RTC issued an Order36 dated 9 #u+ust )88( den1in+
=aterina<s 7otion for Intervention and refusin+ to ad*it his Petition in Intervention in Case No. 8!&89-(C@7,
ratiocinatin+ thusD
#s re+ards Con+ress*an =aterina, et.a., $sic% the Court finds that, as e+isators and ta?pa1ers, the1 have no e+a
interest to intervene in this case.
? ? ? ?
There has .een no showin+ up to this point that paintiffs intend to use ta? refunds in the course of their e?propriation
of N#I# IPT B. In fact, the a*ount that paintiffs initia1 deposited with the 3and =an/ of the Phiippines for the
purposes of this case co*prised funds $sic% of paintiff 7ania Internationa #uthorit1 $7I##% $sic% and did not co*e
fro* the coection of ta?es. The reasonin+ .ehind the Supre*e Court<s denia of their *otion to intervene in .epubli*
vs. Gin'o)on aso appies hereD
? ? ? ?
7ore i*portant1, this Court itsef wi decide how *uch pa1*ent wi .e due fro* paintiffs to defendant PI#TCO,
in accordance with aw, since the deter*ination of 0ust co*pensation is a 0udicia function. The a*ount of 0ust
co*pensation is not for the paintiffs or defendant PI#TCO to decide. This, Con+ress*an =aterina, Et $sic% a. coud
not possi.1 set up a petition a+ainst .oth paintiffs and defendant for ie+a dis.urse*ent of pu.ic funds when it is
precise1 the Court, not paintiff or defendant, which wi ensure that the deter*ination and pa1*ent of 0ust
co*pensation to defendant PI#TCO woud .e in co*piance with Phiippine aws.
There is, therefore, no roo* in this e?propriation case for a ta?pa1er<s intervention. Si*iar1, there is aso no roo* in
this e?propriation case for the acco**odation of a e+isator<s petition. Paintiffs< e?ercise of the ri+ht of e*inent
do*ain does not infrin+e howsoever on e+isative prero+atives, powers of $sic% privie+es.
? ? ? ?
The *otion that private propert1 *a1 .e ta/en without need for pa1*ent of 0ust co*pensation, as espoused .1
Con+ress*an =aterina, et a., is so forei+n to Phiippine Constitutiona de*ocrac1 that it has no pace for
consideration in an e?propriation case. Con+ress*an =aterina, et.a., $sic% aso cannot re1 on cri*ina char+es fied
a+ainst private individuas, not invovin+ defendant PI#TCO, to defeat the pa1*ent of 0ust co*pensation for the
ta/in+ of private propert1, which no ess than the Phiippine Constitution *andates. Those cri*ina cases are
irreevant to this e?propriation.
Neither *a1 Con+ress*an =aterina, et a., re1 on the Supre*e Court<s ruin+ in #+ain vs. PI#TCO $'.R. No.
A""88A, 7a1 ", )88B% to esta.ish e+a standin+ here. A'an vs. +IA$C3 was an entire1 different case, invovin+ ver1
different e+a interests. It was not an e?propriation case. Con+ress*an =aterina, Et.a., $sic% cannot use this
e?propriation case as a venue to .eated1 ventiate ar+u*ents that the1 *a1 for+otten to raise in A'an vs. +IA$C3.
That is not aowed, especia1 since Con+ress*an =aterina, Et.a., $sic% has $sic% ever1 opportunit1 to see/
reconsideration of the Supre*e Court<s decision in #+an vs. PI#TCO.
@urther*ore, there is no .asis under the Rues of Court or in 0urisprudence for the aowance of a petition for
prohi.ition .ein+ inter*in+ed with a specia civi action for e?propriation.
@ina1, the Court notes that Con+ress*an =aterina et.a. $sic% never paid fiin+ fees for their petition for prohi.ition in
intervention. This Court, therefore, never o.tained 0urisdiction over their petition and never acCuired 0urisdiction to
per*it their intervention. #s the Supre*e Court carified in Serrano vs. Deica $'.R. No. AB(B)", ;u1 ),, )88"%. $sic%
It is not si*p1 the fiin+ of the co*paint or appropriate initiator1 peadin+, .ut the pa1*ent of the prescri.ed doc/et
fees that vests a tria court with 0urisdiction over the su.0ect *atter or nature of the action. 37
There is no showin+ that =aterina fied a 7otion for Reconsideration of the fore+oin+ Or3r a/3 ' A(7(1/ 2006 of
the Pasa1 Cit1 RTC den1in+ his 7otion for Intervention> or that he appeaed the said Order or chaen+ed the sa*e in
a Petition for Certiorari .efore the hi+her courts.
=aterina<s Petition for Certiorari and Prohi.ition $Eith 5r+ent Pra1er for the Issuance of a Te*porar1 Restrainin+
Order and Erit of Prei*inar1 In0unction%, doc/eted as C#&'.R. No. ,""B,, was fied .efore the Court of #ppeas
on 6 A(7(1/ 2006. It Cuestioned the issuance .1 the Pasa1 Cit1 RTC, ae+ed1 in +rave a.use of discretion, of
the Or3r1 a/3 27 March 2006 an 1; "(n3 2006 an :r0/ o- E<3c(/0on a/3 27 March 2006, which directed
the 7I## and 3and =an/ of the Phiippines to aread1 pa1 PI#TCO the proffered vaue of the N#I# IPT III faciities,
so that the +overn*ent coud ta/e possession of the said infrastructures. Thus, the 9 #u+ust )88( Order den1in+
=aterina<s 7otion for Intervention was cear1 not a*on+ the orders of the Pasa1 Cit1 RTC assaied in C#&'.R. No.
,""B,. #dditiona1, it was the issuance .1 the Court of #ppeas of a Te*porar1 Restrainin+ Order $TRO% in C#&'.R.
No. ,""B, that +ave rise to the Petition for Certiorari and Prohi.ition of the Repu.ic .efore this Court, doc/eted as
'.R. No. A-!A((. The Repu.ic sou+ht to en0oin the appeate court fro* i*pe*entin+ the said TRO and fro*
proceedin+ with C#&'.R. No. ,""B,. None of the afore&descri.ed proceedin+s .efore the Court of #ppeas or this
Court invove the Pasa1 Cit1 RTC Order dated 9 #u+ust )88(.
Since =aterina faied to avai hi*sef of an1 re*ed1 fro* the denia of his 7otion for Intervention in Case No. 8!&
89-(C@7, the sa*e has .eco*e fina and e?ecutor1 as to hi*. =aterina, therefore, can no on+er participate in the
proceedin+s .efore the Pasa1 Cit1 RTC in Case No. 8!&89-(C@7, for he is aread1 a stran+er to said case. Havin+
.een .arred fro* participatin+ an1 further in Case No. 8!&89-(C@7 .efore the Pasa1 Cit1 RTC, =aterina is
atte*ptin+ to have us rue on the *erits of his Petition in Intervention $which was not ad*itted .1 the Pasa1 Cit1
RTC% .1 *ere1 reiteratin+ the contents thereof in his Co**ent on the Petition of the Repu.ic in '.R. No. A-!A((.
This is a .atant circu*vention of the rues of procedure which we cannot countenance. In i+ht of =aterina<s faiure to
have the denia .1 the Pasa1 Cit1 RTC of his 7otion for Intervention reversed, no court, not even this Court, can ta/e
co+ni:ance of his Petition in Intervention, even if so cever1 presented as another peadin+ .ut with essentia1 the
sa*e pra1er.
:!EREFORE, pre*ises considered, the 7otions for Reconsideration of our A9 #pri )889 Decision fied .1 #sia<s
E*er+in+ Dra+on Corporation and Saacni. @. =aterina are here.1 DENIED :IT! FINALIT#.
SO ORDERED.
MINITA ?. C!ICO$NA%ARIO
#ssociate ;ustice
EE CONC5RD
RE#NATO S. PUNO
Chief ;ustice
LEONARDO A. ,UISUM+ING
#ssociate ;ustice
CONSUELO #NARES$SANTIAGO
#ssociate ;ustice
No part
ANTONIO T. CARPIOL
#ssociate ;ustice
MA. ALICIA AUSTRIA$MARTINE%
#ssociate ;ustice
RENATO C. CORONA
#ssociate ;ustice
CONC!ITA CARPIO MORALES
#ssociate ;ustice
DANTE O. TINGA
#ssociate ;ustice
PRES+ITERO ". ?ELASCO, "R.
#ssociate ;ustice
No part
ANTONIO EDUARDO +. NAC!URAL
#ssociate ;ustice
TERESITA ". LEONARDO$DE CASTRO
#ssociate ;ustice
ARTURO D. +RION
#ssociate ;ustice
DIOSDADO M. PERALTA
#ssociate ;ustice
C E R T I @ I C # T I O N
Pursuant to #rtice VIII, Section AB of the Constitution, it is here.1 certified that the concusions in the a.ove
Resoution were reached in consutation .efore the case was assi+ned to the writer of the opinion of the Court.
RE#NATO S. PUNO
Chief ;ustice
Foo/no/31
L No part.
1 Roo, '.R. No. A(,,A!, Vo. II, pp. B8)&!),> roo, '.R. No. A-!A((, Vo. IV, pp. A,(&B)).
2 Roo, '.R. No. A(,,A!, Vo. II, pp. "A)&"A".
3 Id. at "-,&"98.
4 Decision, !"8 Phi. -!! $)88B%> the Resoution on the 7otion for Reconsideration, !(" Phi. "!" $)88!%.
5 #n #ct #uthori:in+ the @inancin+, Construction, Operation and 7aintenance of Infrastructure Pro0ects .1
the Private Sector, and for other Purposes.
6 The entire Rue A8 on 5nsoicited Proposas.
7 Roo, '.R. No. A(,,A!, Vo. II, pp. )!&)".
8 Decision, A'an Jr. v. +(ilippine International Air $erminals Co. In*., supra note ! at -,!.
9 Id.
10 The Secretar1 of the Depart*ent of Transportation and Co**unications $DOTC% and the Chair*an and
7e*.ers of the PreCuaification =ids and #wards Co**ittee for the N#I# IPT III Pro0ect.
11 Decision, '.R. No. A((!),, A, Dece*.er )88", !-9 SCR# !-!.
12 #n #ct to @aciitate the #cCuisition of Ri+ht&of&Ea1, Site or 3ocation for Nationa 'overn*ent
Infrastructure Pro0ects and @or Other Purposes.
13 #ttp&''ne(sinfo.in)uirer.net'*rea+ingne(s',etro'vie('20080722-149917'.P/A%0-3-Planes-start-
fl1ing-out-of-A2A-3-for-1st-ti,e> #ttp&''ne(sinfo.in)uirer.net'in)uirer#ea$lines'nation' vie('
20080723-150120'After-6-1ears-A2A-3-finall1-opens.
14 httpDFFwww..wordonine.co*F=E898)89Fcontent.phpIid[88"
15 #s *andated in the Resoution on the 7otion for Reconsideration, A'an Jr. v. +(ilippine International Air
$erminals Co. In*. supra note ! at (8B.
16 !ala'a v. +ena*(os Jr., '.R. No. 9((,", B Septe*.er A,,), )AB SCR# "A(, ")(.
17 Section A8., of the IRR o.i+es the ori+ina proponent to refor*at and resu.*it its proposa in accordance
with the Ter*s of Reference $TOR% of the pro0ect.
18 Section A8.A) of the IRR.
19 Section A8.AB of the IRR.
20 Supra note A".
21 Roo, '.R. No. A(,,A!, Vo. II, p. BB).
22 Id. at BB)&BBB.
23 Id. at BB-.
24 Id. at BB9.
25 See Naton v. Paanca, '.R. No. A"AA!,, - Septe*.er )88!, !B- SCR# "(", "-B.
26 SEC. ). In what courts appica.e. S These Rues sha app1 in a the courts, e?cept as otherwise provided
.1 the Supre*e Court.
27 .ollo, '.R. No. A(,,A!, Vo. I, pp. )(&),.
28 Roo, '.R. No. A-!A((, Vo. IV, p. B)-.
29 Id. at B"(.
30 Id. at B"9.
31 Id. at B(,.
32 Id. at B-(.
33 Id. at B98&B9).
34 The Resoution on the 7otion for Reconsideration, Repu.ic v. 'in+o1on, '.R. No. A((!),, A @e.ruar1
)88(, !9A SCR# !"-, !-A.
35 Id.
36 Penned .1 #ctin+ Presidin+ ;ud+e ;esus =. 7upas> roo, '.R. No. A-!A((, Vo. I, pp. B-A&B--.
37 Id. at B-B&B-".
The 3awphi Pro0ect & #reano 3aw @oundation
DISSENTING OPINION
$on ;ustice Na:ario<s draft resoution of the 7otion for Reconsideration%
CORONA, J.:
In *1 dissent to the #pri A9, )889 decision in these cases, I dissented fro* the *a0orit1<s narrow interpretation of
Section !&# of the =OT 3aw.1 The *a0orit1 insisted that on1 two ri+hts are conceded to the ori+ina proponent of an
unsoicited proposaD $A% the ri+ht to *atch the owest or *ost advanta+eous proposa within B8 wor/in+ da1s fro*
notice thereof and $)% in the event that the ori+ina proponent is a.e to *atch the owest or *ost advanta+eous
proposa su.*itted, then it has the ri+ht to .e awarded the pro0ect. 2 Thus, the ori+ina proponent is awarded the
pro0ect on1 if it e?ercises its ri+ht to *atch the *ost advanta+eous proposa.
I *aintain *1 position that the ori+ina proponent is entited to the award of the pro0ect in at east three casesD $A% no
co*petitive .id was su.*itted> $)% there was a ower .id .1 a Cuaified .idder .ut the ori+ina proponent *atched it
and $B% there was a ower .id .ut it was *ade .1 a personFentit1 not Cuaified to .id, in which case it is as if no
co*petitive .id had .een *ade. This is consistent not on1 with #rtice II, Section )8 of the ConstitutionD
62the4 State reco+ni:es the indispensa.e roe of the private sector, encoura+es private enterprise, and provides
incentives needed to invest*ents6
.ut aso the rationae .ehind Section !&# of the =OT 3aw which is to protect the ori+ina proponent. This is aso in
accord with o+ic .ecause, contrar1 to the *a0orit1<s interpretation, 0/ r3co7n0>31 /h3 93r) r3a. 5o11020.0/) /ha/ no
o/h3r co453/0/093 20 3<01/1. I/ 01 0..o70ca. /ha/ an or070na. 5ro5on3n/ 8o(. ha93 5r3-3r3n/0a. r07h/1 8h3n /h3r3
ar3 o/h3r 203r1 2(/ non3 0- /h3r3 ar3 no o/h3r B(a.0-03 203r1.
The rationae for an ori+ina proponent<s preferentia ri+hts under Section !&# of the =OT 3aw is to protect and
reco+ni:e said proponent<s entrepreneuria spirit, its wiin+ness to assu*e ris/s and incur costs in connection with a
nationa +overn*ent infrastructure pro0ect. This rationae does not depend on the su.*ission of co*petitive .ids.
ConseCuent1, the preferentia ri+hts of the ori+ina proponent e?ist whether or not there are co*petitive .ids. #s I
statedD
The *a0orit1Ms readin+ of the aw considera.1 waters down the ri+hts accorded to an ori+ina proponent. In faiin+ to
consider a situation where either no co*petitive .id was su.*itted or a ower .id was su.*itted .1 an entit1 not
Cuaified to .id, the ri+hts of the ori+ina proponent are undu1 su.0ected to the condition of the presence of
co*petitive .ids. To reiterate, the spirit of the provision is 6to protect pro0ect proponents which have aread1 incurred
costs in the conceptua desi+n and in the preparation of the proposa.6 Certain1, re+ardess of the presence of
co*petitive .ids, the ori+ina proponent incurs costs. #s such, it deserves the protection which the aw see/s to afford
it. The aw which see/s to encoura+e private sector participation shoud .e interpreted in a wa1 that woud reco+ni:e,
not e*ascuate, ri+hts of private investors.3
7ore than o+ic, e?perience $which is the ife of the aw%4 shows that investors, ori+ina proponents incuded, are
encoura+ed to invest in a ci*ate of .road rather than i*ited incentives. Reduced to its essence, .usiness is a a.out
reduction of costs, *a?i*i:ation of .enefits and opti*i:ation of profits. The *a0orit1<s restrictive interpretation of
Section !&#, however, fais to pro*ote such /ind of an investor&friend1 .usiness ci*ate. Rather than .reathin+ ife
into the aw, the *a0orit1 effective1 e*ascuated Section !&# and i*prisoned its spirit in a .otte.
Eorse, Section !&# $as interpreted .1 the *a0orit1% is constitutiona1 infir*. It contradicts the eCua protection cause
as it *ade a suspect cassification when it i*ited the appication of Section !&# to an ori+ina proponent whose
proposa was chaen+ed .1 co*petitive .ids. I repeatD the rationae of Section !&# is not conditioned on the presence
of co*petitive .ids. On this account, the *a0orit1<s cassification is not +er*ane to the purpose of the aw. Nor does
the cassification rest on su.stantia distinctions. #n ori+ina proponent incurs costs in the conceptua desi+n and in the
preparation of the proposa whether its proposa is chaen+ed .1 another .idder or not. Therefore, it deserves the
protection of Section !&#.
The *a0orit1 decares that PI#TCO<s disCuaification as a chaen+er did not *ean that its financia proposa was aso
o.0ectiona.e5 and that, on the contrar1, it was sti the *ost advanta+eous proposa. Since #EDC faied to *atch such
proposa, it coud no on+er assert its ri+ht to .e awarded the pro0ect. This does not *a/e sense. There can on1 .e a
vaid co*petitive .id if there is a Cuaified co*petitive .idder. Since PI#TCO was disCuaified as a .idder, it foows
that its .id aso coud not .e considered. ConseCuent1, there was no other vaid proposa eft standin+ aside fro* that
of #EDC.
If we accept the reasonin+ of the *a0orit1, it *eans that an ori+ina proponent has no ri+ht to e?pect an award in case
of a faiure or a.sence of a Cuaified chaen+er even if its proposa has aread1 .een accepted. @urther*ore, an
ori+ina proponent *ust *atch even an invaid chaen+e .ecause it is on1 in this wa1 that an award can .e e?pected.
This reasonin+ is a.soute1 a.surd. It nuifies the ri+hts +iven .1 the =OT 3aw to the ori+ina proponent. #+ain, the
aw cear1 does not confer ri+hts on the proponent on1 if a chaen+e is *ade.
=ased on the wordin+ and spirit of the =OT 3aw, #EDC had the ri+ht to e+a1 e?pect that on1 a Cuaified .idder
with a vaid .id coud defeat its ori+ina1 accepted proposa. :0/ho(/ /h01 5r3$r3B(010/3, 0/1 r07h/ /o 4a/ch 8o(.
ac/(a..) 8or6 /o 0/1 01a9an/a73 0- 0/ ha /o 4a/ch 393n an 0n9a.0 5ro5o1a.. Th01 co(. no/ ha93 233n /h3
0n/3n/0on o- /h3 .a8.
#ccordin+ to the *a0orit1, it woud .e a step .ac/wards to return the pro0ect to the private sector considerin+ the
deveop*ents in N#I# IPT III.6 I disa+ree. 5nder the =OT 3aw, it is #EDC which had \ and sti has \ the ri+ht to
the pro0ect. Not on1 is it a step in the ri+ht direction to reco+ni:e the cear e+a ri+hts of the private sector, it is aso
i*perative since the State encoura+es it to ta/e part in nationa deveop*ent.
I hope we do not cose our e1es to the fact that, +iven its inherent inefficiencies and its crippin+ .ureaucratic
shortco*in+s, +overn*ent shoud not .e in .usiness. N#I# Ter*ina III is a fu1 co*puteri:ed, hi+h&tech faciit1
that needs not on1 Cuic/, continuous fundin+ .ut aso an internationa e?pertise to run, operate and *aintain. Ee have
seen the hu*iiatin+ down+radin+ of our ratin+ .1 the 5.S. @edera #viation #d*inistration to Cate+or1 II. How can
+overn*ent operate it weI
I cannot aso a+ree with the position of the *a0orit1 that the petition of #EDC was fied .e1ond a reasona.e ti*e.
This is pre*ised on the fact that #EDC fied this petition )8 *onths after the pro*u+ation of A'an. Ehen the
+overn*ent chose to e?propriate the structures .uit pursuant to the N#I# IPT III pro0ect, #EDC chose to first
de*and the award of the pro0ect fro* the for*er. Ehen it .eca*e evident that the +overn*ent was not wiin+ to
reco+ni:e #EDC<s ri+hts to the pro0ect, the atter did not dea1 in fiin+ this petition. Ehat it did was to e?haust
ad*inistrative re*edies and it shoud not .e fauted for doin+ so.
The *a0orit1 ri+id1 appied the doctrine of res %udi*ata and rued that the dis*issa of Civi Case No. (()AB $Pasi+
Case% .ars the instant petition of #EDC. This point has .een sufficient1 addressed in *1 dissentin+ opinion. There is
no identit1 of causes of action .etween the two cases. The principa reief sou+ht .1 #EDC in the Pasi+ case was to
prevent the award of the pro0ect to PI#TCO on the +round that the atter was not a Cuaified .idder. In this case,
#EDC is see/in+ that the pro0ect .e awarded to it as the unchaen+ed ori+ina proponent. 7ore i*portant1, I
reiterate *1 stance that, in view of the *onu*enta i*portance of this case, the .iions of pesos of invest*ents
invoved and its i*pications to the whoe nation and the #sean re+ion, it woud not .e sound 0udicia poic1 to .ind1
app1 the technica doctrine of res %udi*ata.
#ccordin+1, I *aintain *1 position and I respectfu1 vote to GRANT petitioner #sia<s E*er+in+ Dra+on
Corporation<s *otion for reconsideration.
RENATO C. CORONA
#ssociate ;ustice
Foo/no/31
1 Repu.ic #ct No. (,"-, a*ended .1 R# --A9.
2 A9 #pri )889, "") SCR# ",, ,A.
3 Id., Dissentin+ Opinion, pp. A"(&A"-.
4 Ho*es, Oiver Eende, The Co**on 3aw, 3itte, =rown W Co., A99A, p. A. See aso Estrada v. Es*ritor,
!"" Phi. !AA, "9B $)88B%, citin+ ;ustice Ho*es.
5 Resoution, pp. AA&A).
6 Id., p. A!.
The 3awphi Pro0ect & #reano 3aw @oundation
DISSENTING OPINION
?ELASCO, "R., J.:
I concur with the reasons advanced .1 ;ustice Corona in his dissent on wh1 the 7otion for Reconsideration of the
Decision dated #pri A9, )889 shoud .e +ranted. I, however, woud i/e to ea.orate *ore on the +rounds aread1
provided.
# su**ar1 of the pertinent facts is as foowsD
In A,,B, si? .usiness eaders consistin+ of ;ohn 'o/on+wei, #ndrew 'otianun, Henr1 S1, Sr., 3ucio Tan, 'eor+e T1
and #fonso Quchen+co *et with then President @ide V. Ra*os to e?pore the possi.iit1 of investin+ in the
construction and operation of a new internationa airport ter*ina. To si+nif1 their co**it*ent to pursue the pro0ect,
the1 for*ed the #sia<s E*er+in+ Dra+on Corporation $#EDC%.
ConseCuent1, on Octo.er ", A,,!, #EDC su.*itted an unsoicited proposa to the 'overn*ent throu+h the
Depart*ent of Transportation and Co**unication $DOTC% and the 7ania Internationa #irport #uthorit1 $7I##%
for the deveop*ent of the Nino1 #Cuino Internationa #irport Internationa Passen+er Ter*ina III $N#I# IPT III%
under a .uid&operate&transfer arran+e*ent pursuant to Repu.ic #ct No. (,"-, as a*ended .1 Repu.ic #ct No. --A9
$=OT 3aw%.1
The unsoicited proposa su.*itted .1 #EDC was endorsed .1 DOTC to the Nationa Econo*ic and Deveop*ent
#uthorit1 $NED#% on 7arch )-, A,,". # revised proposa, however, was forwarded .1 DOTC to NED# on
Dece*.er AB, A,,". The NED#&Invest*ent Coordinatin+ Counci $NED#&ICC% Technica =oard then favora.1
endorsed the pro0ect to the ICC&Ca.inet Co**ittee on ;anuar1 ", A,,(. Su.seCuent1, the ICC&Ca.inet Co**ittee
approved the sa*e on ;anuar1 A,, A,,(. Then on @e.ruar1 AB, A,,(, the NED# =oard passed Resoution No. ),
which approved the N#I# IPT Pro0ect as proposed .1 #EDC.
5pon the approva of the pro0ect, DOTC and #EDC then entered into a 7e*orandu* of 5nderstandin+ on @e.ruar1
)(, A,,( $DOTC&#EDC 7O5%.
On ;une -, A!, and )A, A,,(, the DOTC and 7I## caused the pu.ication in two dai1 newspapers of an invitation for
co*petitive or co*parative proposas on #EDC<s unsoicited proposa, in accordance with Section !&# of the =OT
3aw.
#s a resut of the invitation to .id, the consortiu* co*posed of Peope<s #ir Car+o and Earehousin+ Co., Inc.
$Paircar+o%, Phi. #ir and 'rounds Services, Inc. $P#'S% and Securit1 =an/ Corporation $Securit1 =an/%
$coective1, Paircar+o Consortiu*% su.*itted their co*petitive proposa to the PreCuaification =ids and #wards
Co**ittee $P=#C% on Septe*.er )8, A,,(.
=oth #EDC and Paircar+o Consortiu* offered to .uid the N#I# IPT III for at east 5SD B"8 *iion at no cost to the
+overn*ent and to pa1 the +overn*entD "Z share in +ross revenues for the first five 1ears of operation, -."Z share in
+ross revenues for the ne?t ten 1ears of operation, and A8Z share in +ross revenues for the ast A8 1ears of operation,
in accordance with the =id Docu*ents. In addition to the fore+oin+, #EDC, however, offered to pa1 the +overn*ent a
tota of PhP AB" *iion as +uaranteed pa1*ent for )- 1ears whie Paircar+o Consortiu* offered to pa1 the
+overn*ent a tota of PhP A-.-" .iion for the sa*e period.
Thus, the P=#C for*a1 infor*ed #EDC that it accepted the price proposa su.*itted .1 the Paircar+o Consortiu*,
and +ave #EDC B8 wor/in+ da1s within which to *atch the said .id> otherwise, the pro0ect woud .e awarded to
Paircar+o Consortiu*. #EDC, however, faied to *atch the .id and e?pressed certain o.0ections as to the
preCuaification of Paircar+o Consortiu*.
On @e.ruar1 )-, A,,-, Paircar+o Consortiu* incorporated into Phiippine Internationa #irport Ter*inas Co., Inc.
$PI#TCO%.
Su.seCuent1, #EDC protested the ae+ed undue preference +iven to PI#TCO and reiterated its previous1 e?pressed
o.0ections. #ccordin+1, on #pri A(, A,,-, #EDC fied with the Re+iona Tria Court in Pasi+ Cit1 a Petition for
Decaration of Nuit1 of the Proceedin+s, 7anda*us and In0unction a+ainst the Secretar1 of the DOTC, the
Chair*an of the P=#C, and the votin+ *e*.ers of the P=#C and Pantaeon D. #vare:, in his capacit1 as
Chairperson of the P=#C Technica Co**ittee.
Qet, on ;u1 ,, A,,-, the DOTC issued the notice of award for the pro0ect to PI#TCO. Severa a+ree*ents were then
entered into .etween the 'overn*ent, throu+h DOTC, in furtherance of the pro0ect, na*e1D $A% the Concession
#+ree*ent for the =uid&Operate&and&Transfer #rran+e*ent of the Nino1 #Cuino Internationa #irport Passen+er
Ter*ina III $A,,- Concession #+ree*ent%> $)% the #*ended and Restated Concession #+ree*ent $#RC#%> $B% the
@irst Suppe*ent to the #RC#> $!% the Second Suppe*ent to the #RC#> and $"% the Third Suppe*ent to the
#RC#.AavvphiA
#s a resut of these a+ree*ents, severa petitions were fied .efore the Court assaiin+ the vaidit1 of the a+ree*ents.
In decidin+ the e+ait1 of the a+ree*ents, this Court rued in #+an, ;r. v. Phiippine Internationa #ir Ter*inas Co.,
Inc. thatD
In su*, /h01 Co(r/ r(.31 /ha/ 0n 9038 o- /h3 a213nc3 o- /h3 r3B(010/3 -0nanc0a. ca5ac0/) o- /h3 Pa0rcar7o
Con1or/0(4, 5r33c311or o- r315on3n/ PIATCO, /h3 a8ar 2) /h3 P+AC o- /h3 con/rac/ o- con1/r(c/0on,
o53ra/0on an 4a0n/3nanc3 o- /h3 NAIA IPT III 01 n(.. an 9o0. @urther, considerin+ that the A,,- Concession
#+ree*ent contains *ateria and su.stantia a*end*ents, which a*end*ents had the effect of convertin+ the A,,-
Concession #+ree*ent into an entire1 different a+ree*ent fro* the contract .idded upon, /h3 1997 Conc3110on
A7r3343n/ 01 1040.ar.) n(.. an 9o0 -or 230n7 con/rar) /o 5(2.0c 5o.0c). The provisions under Sections !.8!$.%
and $c% in reation to Section A.8( of the A,,- Concession #+ree*ent and Section !.8!$c% in reation to Section A.8( of
the #RC#, which constitute a direct +overn*ent +uarantee e?press1 prohi.ited .1, a*on+ others, the =OT 3aw and
its I*pe*entin+ Rues and Re+uations are aso nu and void. The Suppe*ents, .ein+ accessor1 contracts to the
#RC#, are i/ewise nu and void.2
@urther, in a Resoution3 dated ;anuar1 )A, )88!, the Court denied with finait1 the 7otions for Reconsideration of its
7a1 ", )88B Decision in #+an fied .1 therein respondents PI#TCO and Con+ress*an Paras, et a., and respondents&
intervenors.4 Nota.1, the Court decared in the sa*e Resoution thatD
This Court, however, is not un*indfu of the reait1 that the structures co*prisin+ the N#I# IPT III faciit1 are a*ost
co*pete and that funds have .een spent .1 PI#TCO in their construction. @or the +overn*ent to ta/e over the said
faciit1, it has to co*pensate respondent PI#TCO as .uider of the said structures. The co*pensation *ust .e 0ust and
in accordance with aw and eCuit1 for the +overn*ent can not un0ust1 enrich itsef at the e?pense of PI#TCO and its
investors.5
7eanwhie, in a etter to respondent DOTC dated 7arch A!, )88", #EDC offered to i**ediate1 operate the N#I#
IPT III pro0ect.6 Qet, DOTC did not respond. Thus, #EDC sent another etter dated Septe*.er A, )88", de*andin+ the
i**ediate i*pe*entation of the DOTC&#EDC 7O5. #+ain, DOTC did not rep1. It was on1 on Septe*.er )A,
)88" that DOTC repied, after #EDC sent a third etter, sa1in+ that #EDC had no .asis in aw to cai* a vested and
perfected e+a ri+ht to operate N#I# IPT III and that the 'overn*ent had no o.i+ation to reco+ni:e #EDC<s ri+ht to
operate the ter*ina.7
Therefore, on Octo.er )8, )88", #EDC fied the Petition for 7anda*us and Prohi.ition $with #ppication for
Te*porar1 Restrainin+ Order%. This Court, however, denied #EDC<s petition in its Decision rendered on #pri A9,
)889. #EDC now co*es .efore us pra1in+ for a *otion for reconsideration of the decision. #EDC pra1s that this
CourtD $A% direct pu.ic respondents, their officers, a+ents, successors, representatives or persons or entities actin+ on
their .ehaf to reco+ni:e #EDC<s ri+hts as an Ori+ina Proponent of an unsoicited pro0ect> $)% direct pu.ic
respondents to issue the appropriate Notice of #ward of the Pro0ect to #EDC, si+n the draft concession a+ree*ent
with #EDC and i*pe*ent the sa*e> $B% direct pu.ic respondents, their officers, a+ents, successors, representatives
or persons or entities actin+ on their .ehaf to reco+ni:e #EDC<s ri+ht to conduct an invasive inspection and vauation
of the structures current1 .uit as N#I# B for an effective vauation and deter*ination of the wor/ to .e conducted
thereon> $!% per*anent1 en0oinin+ pu.ic respondents, their officers, a+ents, successors, representatives or persons or
entities actin+ on their .ehaf, fro* ne+otiatin+, re&.iddin+, awardin+ or otherwise enterin+ into an1 concession
contract with PI#TCO and other third parties, e?cept as otherwise stated a.ove within the conte?t of per*ittin+ #EDC
to co*pete the construction and operation of the N#I# B Pro0ect> and $"% in the aternative, directin+ pu.ic
respondents to effect a new invitation for co*parative proposas for the N#I# B Pro0ect in accordance with Rue A8 of
the IRR of the =OT 3aw, as soon as practica.e and in the process reco+ni:e andFor reinstate the ri+ht of #EDC to
*atch the .est offer.8
# carefu e?a*ination of the aw appica.e to this case wi revea that the *otion for reconsideration shoud .e
+ranted.
#EDC has a 3e+a Ri+ht to the N#I# IPT III Pro0ect
as the Ori+ina Proponent
The proposa su.*itted .1 #EDC for the N#I# IPT III is caed an 6unsoicited proposa.6 Such proposa is +overned
.1 Section !&# of the =OT 3awD
SEC. !&#. 5nsoicited proposas. & 5nsoicited proposas for pro0ects *a1 .e accepted .1 an1 +overn*ent a+enc1 or
oca +overn*ent unit on a ne+otiated .asisD Provided, That, a the foowin+ conditions are *etD 2A4 such pro0ects
invove a new concept or technoo+1 andFor are not part of the ist of priorit1 pro0ects, 2)4 no direct +overn*ent
+uarantee, su.sid1 or eCuit1 is reCuired, and 2B4 the +overn*ent a+enc1 or oca +overn*ent unit has invited .1
pu.ication, for three 2B4 consecutive wee/s, in a newspaper of +enera circuation, co*parative or co*petitive
proposas and no other proposa is received for a period of si?t1 2(84 wor/in+ da1sD Provided, further, That in the
event another proponent su.*its a ower price proposa, the ori+ina proponent sha have the ri+ht to *atch that price
within thirt1 2B84 wor/in+ da1s.
The I*pe*entin+ Rues and Re+uations $IRR% of the =OT 3aw further e?pound on unsoicited proposasD
Sec. A8.A. ReCuisites for 5nsoicited Proposas. S #n1 #+enc1F3'5 *a1 accept unsoicited proposas on a ne+otiated
.asis provided that a the foowin+ conditions are *etD
a. the pro0ect invoves a new concept or technoo+1 andFor is not part of the ist of priorit1 pro0ects>
.. no direct +overn*ent +uarantee, su.sid1 or eCuit1 is reCuired> and
c. the #+enc1F3'5 concerned has invited .1 pu.ication, for three $B% consecutive wee/s, in a newspaper of
+enera circuation, co*parative or co*petitive proposas and no other proposa is received for a period of
si?t1 $(8% wor/in+ da1s. In the event that another pro0ect proponent su.*its a price proposa ower than that
su.*itted .1 the ori+ina proponent, the atter sha have the ri+ht to *atch said price proposa within thirt1
$B8% wor/in+ da1s. Shoud the ori+ina pro0ect proponent fai to *atch the ower price proposa su.*itted
within the specified period, the contract sha .e awarded to the tenderer of the owest price. On the other
hand, if the ori+ina pro0ect proponent *atches the su.*itted owest price within the specified period, he sha
i**ediate1 .e awarded the pro0ect.
? ? ? ?
Sec. A8.(. Evauation of 5nsoicited Proposas. & The #+enc1F3'5 is tas/ed with the initia evauation of the
proposa. The #+enc1F3'5 shaD A% appraise the *erits of the pro0ect> )% evauate the Cuaification of the proponent>
and B% assess the appropriateness of the contractua arran+e*ent and reasona.eness of the ris/ aocation. The
#+enc1F3'5 is +iven si?t1 $(8% da1s to evauate the proposa fro* the date of su.*ission of the co*pete proposa.
Eithin this (8&da1 period the #+enc1F3'5, sha advise the proponent in writin+ whether it accepts or re0ects the
proposa. #cceptance *eans co**it*ent of the #+enc1F3'5 to pursue the pro0ect and reco+nition of the proponent
as the 6ori+ina proponent6. #t this point, the #+enc1F3'5 wi no on+er entertain other si*iar proposas unti the
soicitation of co*parative proposas. The i*pe*entation of the pro0ect, however, is sti contin+ent pri*ari1 on the
approva of the appropriate approvin+ authorities consistent with Section ).- of these IRR, the a+ree*ent .etween the
ori+ina proponent and the #+enc1F3'5 of the contract ter*s, and the approva of the contract .1 the ICC or 3oca
San++unian.
? ? ? ?
Sec. A8.,. Ne+otiation Eith the Ori+ina Proponent. S I**ediate1 after ICCF3oca San++unianMs cearance of the
pro0ect, the #+enc1F3'5 sha proceed with the in&depth ne+otiation of the pro0ect scope, i*pe*entation
arran+e*ents and concession a+ree*ent, a of which wi .e used in the Ter*s of Reference for the soicitation of
co*parative proposas. The #+enc1F3'5 and the proponent are +iven ninet1 $,8% da1s upon receipt of ICCMs approva
of the pro0ect to concude ne+otiations. The #+enc1F3'5 and the ori+ina proponent sha ne+otiate in +ood faith.
However shoud there .e unresova.e differences durin+ the ne+otiations, the #+enc1F3'5 sha have the option to
re0ect the proposa and .id out the pro0ect. On the other hand, if the ne+otiation is successfu1 concuded, the ori+ina
proponent sha then .e reCuired to refor*at and resu.*it its proposa in accordance with the reCuire*ents of the
Ter*s of Reference to faciitate co*parison with the co*parative proposas. The #+enc1F3'5 sha vaidate the
refor*atted proposa if it *eets the reCuire*ents of the TOR prior to the issuance of the invitation for co*parative
proposas.
Cear1, the =OT 3aw and its IRR confer e+a ri+hts to the ori+ina proponent of an unsoicited proposa. #ccordin+
to Sec. A8.( of the IRR, once an 6unsoicited proposa6 is accepted, the proponent is then reco+ni:ed as the 6ori+ina
proponent.6 ConseCuent1, the 'overn*ent .eco*es o.i+ated to pursue the pro0ect with the 6ori+ina proponent6
uness a chaen+er in a process /nown as the 6Swiss Chaen+e6 offers a .etter co*petitive or co*parative proposa,
and the 6ori+ina proponent6 is una.e to *atch the .etter offer.
Thus, on @e.ruar1 AB, A,,(, when the 'overn*ent accepted the unsoicited proposa of #EDC throu+h the DOTC,
favora.1 endorsed .1 the NED#&ICC and approved it throu+h ICC&Ca.inet Co**ittee and NED# =oard, #EDC
.eca*e the 6reco+ni:ed ori+ina proponent6 of the N#I# IPT III Pro0ect.
#s a resut of such reco+nition, DOTC .eca*e o.i+ated to pursue the N#I# IPT III pro0ect with #EDC pursuant to
Sec. A8.( of the IRR of the =OT 3aw, su.0ect on1 to a .etter offer .ein+ received and accepted .1 the 'overn*ent in
a 6Swiss Chaen+e6 process. 7oreover, the 'overn*ent ost its option to re0ect the proposa and .id out the pro0ect
after the successfu concusion of the ne+otiation process as descri.ed in Sec. A8., of the IRR of the =OT 3aw.
5ndou.ted1, as the reco+ni:ed ori+ina proponent of the unsoicited proposa, #EDC has the e+a ri+hts afforded to
hi* .1 the =OT 3aw and its IRR. Nota.1, this Court stated in #+an that the ri+hts or privie+es to the ori+ina
proponent of an unsoicited proposa for an infrastructure pro0ect are *eant to encoura+e private sector initiative in
conceptuai:in+ infrastructure pro0ects that woud .enefit the pu.ic.9 @urther, acceptance .1 the proper authorities of
a .id in accordance with the specifications converts the offer into a .indin+ contract, 10 even thou+h a for*a .idder<s
contract has not .een e?ecuted.11 It cannot .e denied, therefore, that #EDC, as an ori+ina proponent, has e+a ri+hts
under the =OT 3aw, as we as its IRR.
@urther, in a Decision rendered .1 the 5nited States District Court,12 a disappointed .idder has a constitutiona1
protected propert1 interest if appica.e state aw ac/nowed+es such.13 It further states that to esta.ish a propert1
interest, the paintiff *ust have a e+iti*ate cai* of entite*ent as deter*ined .1 reference to state aw.14 Propert1
interests do not on1 e*anate fro* the Constitution, .ut aso fro* state or federa statutor1 sche*es, which create
e+iti*ate cai*s of entite*ent to the .enefits which the1 confer.15
7oreover, a *a0orit1 of the courts in the 5nited States foows the rue that such protected propert1 interest is entited
to the non&ar.itrar1 e?ercise .1 the cit1 of its discretion in *a/in+ the award and that a deprivation of the protected
propert1 interest without due process is an actiona.e wron+.16
In the present case, the =OT 3aw and its IRR ac/nowed+e the ri+hts of the ori+ina proponent in an unsoicited
proposa. Thus, it ri+htfu1 foows that #EDC, as the ori+ina proponent, has a protected propert1 interest in the
N#I# IPT III proposa as the aw creates this protected propert1 interest in the =OT 3aw.
@urther*ore, the intent of Section !&# of the =OT 3aw is the protection of the ori+ina proponent. In Senator 'oria
7acapa+a&#rro1o<s17 sponsorship speech, she e?pained the o.0ect of the a*end*ent to Section !&# of the =OT
3aw, to witD
The o.0ect of the a*end*ent is to protect proponents which *a1 have aread1 incurred costs in the conceptua desi+n
and in the preparation of the proposa, and which *a1 have adopted an i*a+inative *ethod of construction or
innovative concept for the proposa.18
Certain1, it cannot .e e*phasi:ed enou+h that this Court shoud accord #EDC, as the reco+ni:ed ori+ina proponent,
its protected ri+hts under the =OT 3aw.
DisCuaification of PI#TCO 7a/es #EDC the Soe =idder
# 6Swiss Chaen+e6 occurs after the #+enc1 or 3oca 'overn*ent 5nit $3'5% concerned has invited, .1 pu.ication
in a newspaper of +enera circuation, co*parative or co*petitive proposa and another pro0ect proponent su.*its a
price proposa ower than that su.*itted .1 the ori+ina proponent. The ori+ina proponent sha then have the ri+ht to
*atch the said price proposa within B8 da1s. If the ori+ina pro0ect proponent fais to *atch the ower price proposa
su.*itted, the contract sha .e awarded to the tenderer of the owest price. If, on the other hand, the ori+ina pro0ect
proponent *atches the su.*itted owest price, the ori+ina proponent sha i**ediate1 .e awarded the pro0ect.19
Hence, shoud the 6Swiss Chaen+e6 process fai to produce a .etter offer, the ri+ht to the award .eon+s to the
ori+ina proponent.
#s this Court rued in #+an, the 6Swiss Chaen+e6 conducted .1 DOTC faied to produce a .etter offer fro* a
Cuaified chaen+er .ecause PI#TCO was found to .e inei+i.e and disCuaified .1 this Court and the award to
PI#TCO and a a+ree*ents it entered into with DOTC and 7I## were decared nu and void.
Thus, since there was no Cuaified .idder durin+ the 6Swiss Chaen+e,6 it foows, therefore, that no other proposas
coud have .een considered .1 respondents and the ori+ina proponent re*ain unchaen+ed.
In other words, since there was no Cuaified chaen+er to #EDC<s unsoicited proposa, the o.i+ation to *atch the
.etter offer never arose. PI#TCO<s disCuaification had the effect of *a/in+ #EDC as the soe and unchaen+ed
.idder for the N#I# IPT III pro0ect. #s a resut, #EDC shoud .e awarded N#I# IPT III Pro0ect.
@urther, it is hepfu to oo/ at the e+isative intent of the =OT 3aw as carified .1 for*er Con+ress*an Renato Dia:
of the )nd District of Nueva Eci0a when he stated that the ori+ina proponent shoud .e auto*atica1 awarded the
pro0ect in case no.od1 presents a vaid chaen+e within the period prescri.ed .1 aw.20 Such is the situation in the
case at hand.
@urther*ore, it coud aso .e ar+ued that faiure to award the pro0ect to #EDC woud resut in a denia of eCua
protection. In 3WH Sanitation, Inc. v. 3a/e Cit1 Sanitation, Inc.,21 the 5nited States District Court stated that there is
a denia of eCua protection as to the unsuccessfu .idder when there isD $A% a re+uated .iddin+ procedure, $)% *ateria
co*piance with the procedure .1 the unsuccessfu .idder, and $B% *ateria and si+nificant nonco*piance with the
procedure .1 the successfu .idder.22
In the present instance, PI#TCO faied to co*p1 with the reCuire*ents set .1 DOTC and 1et, was sti awarded the
pro0ect. This resuts in a denia of eCua protection to #EDC, who co*pied with a the reCuire*ents. #s a *atter of
fact, the appropriate +overn*ent .odies aread1 approved #EDC<s unsoicited proposa. @urther, the e?ecution of the
DOTC&#EDC 7e*orandu* cear1 shows that #EDC aread1 su.*itted a reCuire*ents.
Evident1, #EDC, as the unchaen+ed and reco+ni:ed ori+ina proponent, has the ri+ht to .e awarded the N#I# IPT
III Pro0ect. This Court shoud not refuse its dut1 to uphod the intent and *eanin+ of the =OT 3aw when it see/s to
protect the ori+ina proponent in situations such as these.
Poic1 of the 'overn*ent to Pro*ote Private =usiness
It has .een the on+&standin+ poic1 of the +overn*ent to pro*ote invest*ents in private .usinesses and veer awa1
fro* en+a+in+ in .usiness that woud otherwise .e .est served .1 private interests. Indeed, this poic1 is decared in
the Constitution that 62t4he State reco+ni:ed the indispensa.e roe of the private sector, encoura+es private enterprise,
and provides incentives to needed invest*ents.623
This poic1 of the State has .een consistent1 put into operation in severa e+isations, such as in Repu.ic #ct No.
,A(9.24
#so, in Section A of Proca*ation No. "8,25 it is decared that it is the 6poic1 of the State to pro*ote privati:ation
throu+h an order1, coordinated and efficient pro+ra* for the pro*pt disposition of the ar+e nu*.er of non&
perfor*in+ assets of the +overn*ent financia institutions, and certain +overn*ent&owned or controed corporations
which have .een found unnecessar1 or inappropriate for the +overn*ent sector to re*ain.6 It shoud .e noted,
however, that whie Proca*ation No. "8 *andates that non&perfor*in+ assets shoud .e pro*pt1 sod, it does not
prohi.it the disposa of other /inds of assets, whether perfor*in+, necessar1 or appropriate.26
Eithout a dou.t, the State<s poic1 of esta.ishin+ the privati:ation pro+ra* is to pro*ote private .usinesses and not
to en+a+e in .usiness itsef.
7ore si+nificant1, in the =OT 3aw, Section A providesD
It is the decared poic1 of the State to reco+ni:e the indispensa.e roe of the private sector as the *ain en+ine for
nationa +rowth and deveop*ent and provide the *ost appropriate incentives to *o.ii:e private resources for the
purpose of financin+ the construction, operation and *aintenance of infrastructure and deveop*ent pro0ects nor*a1
financed and underta/en .1 the 'overn*ent. Such incentives, aside fro* financia incentives as provided .1 aw,
sha incude providin+ a ci*ate of *ini*u* +overn*ent re+uations and procedures and specific +overn*ent
underta/in+s in support of the private sector.27 $E*phasis suppied.%
Cear1, the 'overn*ent<s consistent poic1 on the pro*otion of the private sector cannot .e denied. Thus, whie the
0udiciar1 does not want to intrude in the actions of the e?ecutive depart*ent, it *ust .e stressed that the aw supports
privati:ation and this shoud .e uphed. The 'overn*ent shoud not .e en+a+ed in .usiness.
The N#I# IPT III Pro0ect is a =OT Pro0ect
that shoud .e #warded to #EDC
5ndenia.1, the N#I# IPT III Pro0ect ste**ed fro* an unsoicited proposa and is, therefore, covered .1 the =OT
3aw. #s such, the =OT 3aw sti appies despite co*petion of the .uidin+ of the pro0ect.
# =OT Pro0ect is divided into three sta+esD $A% .uid, $)% operate, and $B% transfer. Thus, even thou+h the first sta+e has
.een co*peted, there re*ain two sta+es that sti need e?ecution. In this i+ht, #EDC, as the ori+ina proponent of
N#I# IPT III, can concude the ast two sta+es despite the co*petion of the first sta+e.
To recapituate, #EDC has the e+a ri+ht to the N#I# IPT III Pro0ect as the ori+ina proponent for ac/ of a Cuaified
.idder. #nd to advance the poic1 of the State to pro*ote the private sector, the operation and possession of the N#I#
IPT III shoud .e turned&over to #EDC. In this wa1, the 'overn*ent woud *a/e use of the resources of the private
sector in the financin+, operation and *aintenance of infrastructure and deveop*ent pro0ects which are necessar1 for
nationa +rowth and deveop*ent .ut which the +overn*ent, unfortunate1, coud not afford due to ac/ of funds.28
3i/ewise, prohi.ition is in order to prevent respondents fro* .iddin+ out or awardin+ the operation of N#I# IPT III
to third parties. This woud resut in the vioation of the ri+hts of #EDC.
However, shoud #EDC .e awarded the N#I# IPT III Pro0ect, it is o.i+ated to co*p1 with the foowin+D
$A% to construct an under+round passen+er access ter*ina connectin+ ter*inas I, II, and III>29
$)% co*pete the construction of N#I# IPT III>30
$B% finance the additiona invest*ents necessar1 to put N#I# IPT III in operation>31
$!% rei*.urse the +overn*ent the initia pa1*ent of PhP B,88),A)",888.88 it *ade to PI#TCO>32
$"% pa1 the .aance of the co*pensation due to PI#TCO as the .uider of N#I# IPT III> and
$(% pa1 the o.i+ations owin+ to the +enera contractors.33
Si*iar1, under the =OT 3aw, the +overn*ent is aso entited to the fees and inco*e it shoud receive fro* #EDC.
I, therefore, vote to 'R#NT petitioner #sia<s E*er+in+ Dra+on Corporation<s *otion for reconsideration.
PRES+ITERO ". ?ELASO, "R.
#ssociate ;ustice
Foo/no/31
1 #n #ct #uthori:in+ the @inancin+, Construction, Operation and 7aintenance of Infrastructure Pro0ects .1
the Private Sector, and for Other Purposes $A,,8%.
2 '.R. Nos. A""88A, A"""!- W A""((A, 7a1 ", )88B, !8) SCR# (A), (-9&(-,.
3 A'an Jr. v. +(ilippine International Air $erminals Co. In*., '.R. Nos. A""88A, A"""!- W A""((A, ;anuar1
)A, )88!, !)8 SCR# "-".
4 Id. at "98&"9A. Identified as e*po1ees of PI#TCO, other wor/ers of N#I# IPT III, and Na+/aisan+
7araita n+ Tanon+ #ssociation, Inc. $N7T#I%,
5 Id. at (8B.
6 Roo $'.R. No. A(,,A!%, p. BA.
7 Id. at B).
8 Id. at "-,&"98.
9 Supra note ), at ((-.
10 /arve) v. 2nited &tates, A8" 5S (-A, )( 3.Ed. A)8( $A99A%.
11 +ennin'ton v. &umner ))) Iowa A88", )-8 NE (),, A8, #3R B"" $A,B(%.
12 7etric Constructors, Inc. v. 'winnet Count1, 'eor+ia, -), @.Supp. A8A $A,,8%.
13 Id.
14 Id.> See =oard of Re+ents v. Roth, !89 5.S. "(!, "-- $A,-)%.
15 =oard of Re+ents, supra.
16 Nendric/ v. Cit1 Counci, "A( @.Supp. AAB!, AAB9 $S.D. 'a. A,9A%. See aso Three Rivers Ca.evision,
Inc., et a., v. Cit1 of Pitts.ur+h, et a., "8) @.Supp. AAA9 $E.D. Pa. A,98%> Teepro*pter of Erie, Inc. v. Cit1 of
Erie, "(- @.Supp. A)-- $E.D. Pa. A,9B%> Hi++ins, Inc. v. @orida Ne1s, "(" @.Supp. A)( $S.D. @a. A,9B%>
3WH Sanitation, Inc. v. 3a/e Cit1 Sanitation, Inc., -(, @.)d "A- $9th Cir. A,9"%> Naso* v. Cit1 of Sterin+
Hei+hts, (88 @.Supp. A""" $E.D. 7ich. A,9"%.
17 Now incu*.ent President of the Repu.ic of the Phiippines.
18 ;anuar1 )", A,,!, Senate dei.erations> roo $'.R. No. A(,,A!%, p. -".
19 See Sec. A8.A$c% of the IRR of the =OT 3aw.
20 Roo $'.R. No. A(,,A!%, p. !(.
21 Supra note A(.
22 3WH Sanitation, Inc., supra note A(> citin+ Three Rivers Ca.evision, Inc., supra note A(> Nendric/, supra
note A(.
23 Constitution, #rt. II, Sec. )8.
24 #n #ct to Provide Protection to New Pant Varieties, Esta.ishin+ a Nationa Pant Variet1 Protection
=oard and @or Other Purposes $)88)%.
25 Procai*in+ and 3aunchin+ a Pro+ra* for the E?peditious Disposition and Privati:ation of Certain
'overn*ent Corporations andFor the #ssets Thereof, and Creatin+ the Co**ittee on Privati:ation and the
#sset Privati:ation Trust $A,9(%.
26 #*ado S. =a+atsin+ v. Co**ittee on Privati:ation, '.R. No. AA)B,,, ;u1 A!, A,,", )!( SCR# BB!.
27 Repu.ic #ct No. (,"- $A,,8%, as a*ended .1 Repu.ic #ct No. --A9 $A,,!%, Sec. A.
28 #+an, supra note ), at ((-.
29 #EDC<s 7otion for Reconsideration of the Decision dated #pri A9, )889, p. B(.
30 Id.
31 Id.
32 Id.
33 Id. These are the Ta/ena/a and #sahi/osan Corporations.
(.
G.R. No. 1;;001 Ma) ;, 200&
DEMOST!ENES P. AGAN, "R., "OSEP! +. CATA!AN, "OSE MARI +. REUNILLA, MANUEL ANTONIO
+. +OFE, MAMERTO S. CLARA, REUEL E. DIMALANTA, MOR# ?. DOMALAON, CONRADO G.
DIMAANO, LOLITA R. !I%ON, REMEDIOS P. ADOLFO, +IEN?ENIDO C. !ILARIO, MIASCOR
:OR=ERS UNION $ NATIONAL LA+OR UNION CM:U$NLUD, an P!ILIPPINE AIRLINES
EMPLO#EES ASSOCIATION CPALEAD,petitioners,
vs.
P!ILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT
AUT!ORIT#, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS an SECRETAR#
LEANDRO M. MENDO%A, 0n h01 ca5ac0/) a1 !3a o- /h3 D35ar/43n/ o- Tran15or/a/0on an
Co44(n0ca/0on1, respondents,
MIASCOR GROUND!ANDLING CORPORATION, DNATA$:INGS A?IATION S#STEMS
CORPORATION, MACROASIA$EUREST SER?ICES, INC., MACROASIA$MEN%IES AIRPORT
SER?ICES CORPORATION, MIASCOR CATERING SER?ICES CORPORATION, MIASCOR AIRCRAFT
MAINTENANCE CORPORATION, an MIASCOR LOGISTICS CORPORATION, petitioners&in&intervention,
?&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&?
G.R. No. 1;;;*7 Ma) ;, 200&
SALACNI+ F. +ATERINA, CLA?EL A. MARTINE% an CONSTANTINO G. "ARAULA, petitioners,
vs.
P!ILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT
AUT!ORIT#, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, DEPARTMENT OF
PU+LIC :OR=S AND !IG!:A#S, SECRETAR# LEANDRO M. MENDO%A, 0n h01 ca5ac0/) a1 !3a o-
/h3 D35ar/43n/ o- Tran15or/a/0on an Co44(n0ca/0on1, an SECRETAR# SIMEON A. DATUMANONG, 0n
h01 ca5ac0/) a1 !3a o- /h3 D35ar/43n/ o- P(2.0c :or61 an !07h8a)1, respondents,
"ACINTO ?. PARAS, RAFAEL P. NANTES, EDUARDO C. %IALCITA, :ILL# +U#SON ?ILLARAMA,
PROSPERO C. NOGRALES, PROSPERO A. PIC!A#, "R., !ARLIN CAST A+A#ON, an +ENASING O.
MACARAN+ON, respondents&intervenors,
?&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&?
G.R. No. 1;;661 Ma) ;, 200&
CEFERINO C. LOPE%, RAMON M. SALES, ALFREDO +. ?ALENCIA, MA. TERESA ?. GAERLAN,
LEONARDO DE LA ROSA, DINA C. DE LEON, ?IRGIE CATAMIN RONALD SC!LO+OM, ANGELITO
SANTOS, MA. LUISA M. PALCON an SAMA!ANG MANGGAGA:A SA PALIPARAN NG PILIPINAS
CSMPPD, petitioners,
vs.
P!ILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT
AUT!ORIT#, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, SECRETAR#
LEANDRO M. MENDO%A, 0n h01 ca5ac0/) a1 !3a o- /h3 D35ar/43n/ o- Tran15or/a/0on an
Co44(n0ca/0on1, respondents.
PUNO, J.@
Petitioners and petitioners&in&intervention fied the instant petitions for prohi.ition under Rue (" of the Revised Rues
of Court see/in+ to prohi.it the 7ania Internationa #irport #uthorit1 $7I##% and the Depart*ent of Transportation
and Co**unications $DOTC% and its Secretar1 fro* i*pe*entin+ the foowin+ a+ree*ents e?ecuted .1 the
Phiippine 'overn*ent throu+h the DOTC and the 7I## and the Phiippine Internationa #ir Ter*inas Co., Inc.
$PI#TCO%D $A% the Concession #+ree*ent si+ned on ;u1 A), A,,-, $)% the #*ended and Restated Concession
#+ree*ent dated Nove*.er )(, A,,,, $B% the @irst Suppe*ent to the #*ended and Restated Concession #+ree*ent
dated #u+ust )-, A,,,, $!% the Second Suppe*ent to the #*ended and Restated Concession #+ree*ent dated
Septe*.er !, )888, and $"% the Third Suppe*ent to the #*ended and Restated Concession #+ree*ent dated ;une )),
)88A $coective1, the PI#TCO Contracts%.
The facts are as foowsD
In #u+ust A,9,, the DOTC en+a+ed the services of #eroport de Paris $#DP% to conduct a co*prehensive
stud1 of the Nino1 #Cuino Internationa #irport $N#I#% and deter*ine whether the present airport can cope
with the traffic deveop*ent up to the 1ear )8A8. The stud1 consisted of two partsD first, traffic forecasts,
capacit1 of e?istin+ faciities, N#I# future reCuire*ents, proposed *aster pans and deveop*ent pans> and
second, presentation of the prei*inar1 desi+n of the passen+er ter*ina .uidin+. The #DP su.*itted a Draft
@ina Report to the DOTC in Dece*.er A,9,.
So*e ti*e in A,,B, si? .usiness eaders consistin+ of ;ohn 'o/on+wei, #ndrew 'otianun, Henr1 S1, Sr.,
3ucio Tan, 'eor+e T1 and #fonso Quchen+co *et with then President @ide V. Ra*os to e?pore the
possi.iit1 of investin+ in the construction and operation of a new internationa airport ter*ina. To si+nif1
their co**it*ent to pursue the pro0ect, the1 for*ed the #siaMs E*er+in+ Dra+on Corp. $#EDC% which was
re+istered with the Securities and E?chan+e Co**ission $SEC% on Septe*.er A", A,,B.
On Octo.er ", A,,!, #EDC su.*itted an unsoicited proposa to the 'overn*ent throu+h the DOTCF7I##
for the deveop*ent of N#I# Internationa Passen+er Ter*ina III $N#I# IPT III% under a .uid&operate&and&
transfer arran+e*ent pursuant to R# (,"- as a*ended .1 R# --A9 $=OT 3aw%.A
On Dece*.er ), A,,!, the DOTC issued Dept. Order No. ,!&9B) constitutin+ the PreCuaification =ids and #wards
Co**ittee $P=#C% for the i*pe*entation of the N#I# IPT III pro0ect.
On 7arch )-, A,,", then DOTC Secretar1 ;ose 'arcia endorsed the proposa of #EDC to the Nationa Econo*ic and
Deveop*ent #uthorit1 $NED#%. # revised proposa, however, was forwarded .1 the DOTC to NED# on Dece*.er
AB, A,,". On ;anuar1 ", A,,(, the NED# Invest*ent Coordinatin+ Counci $NED# ICC% S Technica =oard favora.1
endorsed the pro0ect to the ICC S Ca.inet Co**ittee which approved the sa*e, su.0ect to certain conditions, on
;anuar1 A,, A,,(. On @e.ruar1 AB, A,,(, the NED# passed =oard Resoution No. ) which approved the N#I# IPT III
pro0ect.
On ;une -, A!, and )A, A,,(, DOTCF7I## caused the pu.ication in two dai1 newspapers of an invitation for
co*petitive or co*parative proposas on #EDCMs unsoicited proposa, in accordance with Sec. !&# of R# (,"-, as
a*ended. The aternative .idders were reCuired to su.*it three $B% seaed enveopes on or .efore "D88 p.*. of
Septe*.er )8, A,,(. The first enveope shoud contain the PreCuaification Docu*ents, the second enveope the
Technica Proposa, and the third enveope the @inancia Proposa of the proponent.
On ;une )8, A,,(, P=#C =uetin No. A was issued, postponin+ the avai*ent of the =id Docu*ents and the
su.*ission of the co*parative .id proposas. Interested fir*s were per*itted to o.tain the ReCuest for Proposa
Docu*ents .e+innin+ ;une )9, A,,(, upon su.*ission of a written appication and pa1*ent of a non&refunda.e fee
of P"8,888.88 $5SY),888%.
The =id Docu*ents issued .1 the P=#C provided a*on+ others that the proponent *ust have adeCuate capa.iit1 to
sustain the financin+ reCuire*ent for the detaied en+ineerin+, desi+n, construction, operation, and *aintenance
phases of the pro0ect. The proponent woud .e evauated .ased on its a.iit1 to provide a *ini*u* a*ount of eCuit1
to the pro0ect, and its capacit1 to secure e?terna financin+ for the pro0ect.
On ;u1 )B, A,,(, the P=#C issued P=#C =uetin No. ) invitin+ a .idders to a pre&.id conference on ;u1 ),,
A,,(.
On #u+ust A(, A,,(, the P=#C issued P=#C =uetin No. B a*endin+ the =id Docu*ents. The foowin+
a*end*ents were *ade on the =id Docu*entsD
a. #side fro* the fi?ed #nnua 'uaranteed Pa1*ent, the proponent sha incude in its financia proposa an
additiona percenta+e of +ross revenue share of the 'overn*ent, as foowsD
i. @irst " 1ears ".8Z
ii. Ne?t A8 1ears -."Z
iii. Ne?t A8 1ears A8.8Z
.. The a*ount of the fi?ed #nnua 'uaranteed Pa1*ent sha .e su.0ect of the price chaen+e. Proponent
*a1 offer an #nnua 'uaranteed Pa1*ent which need not .e of eCua a*ount, .ut pa1*ent of which sha
start upon site possession.
c. The pro0ect proponent *ust have adeCuate capa.iit1 to sustain the financin+ reCuire*ent for the detaied
en+ineerin+, desi+n, construction, andFor operation and *aintenance phases of the pro0ect as the case *a1 .e.
@or purposes of pre&Cuaification, this capa.iit1 sha .e *easured in ter*s ofD
i. Proof of the avaia.iit1 of the pro0ect proponent andFor the consortiu* to provide the *ini*u*
a*ount of eCuit1 for the pro0ect> and
ii. a etter testi*onia fro* reputa.e .an/s attestin+ that the pro0ect proponent andFor the *e*.ers of
the consortiu* are .an/in+ with the*, that the pro0ect proponent andFor the *e*.ers are of +ood
financia standin+, and have adeCuate resources.
d. The .asis for the preCuaification sha .e the proponentMs co*piance with the *ini*u* technica and
financia reCuire*ents provided in the =id Docu*ents and the IRR of the =OT 3aw. The *ini*u* a*ount of
eCuit1 sha .e B8Z of the Pro0ect Cost.
e. #*end*ents to the draft Concession #+ree*ent sha .e issued fro* ti*e to ti*e. Said a*end*ents sha
on1 cover ite*s that woud not *ateria1 affect the preparation of the proponentMs proposa.
On #u+ust ),, A,,(, the Second Pre&=id Conference was hed where certain carifications were *ade. 5pon the
reCuest of prospective .idder PeopeMs #ir Car+o W Earehousin+ Co., Inc $Paircar+o%, the P=#C warranted that .ased
on Sec. AA.(, Rue AA of the I*pe*entin+ Rues and Re+uations of the =OT 3aw, on1 the proposed #nnua
'uaranteed Pa1*ent su.*itted .1 the chaen+ers woud .e reveaed to #EDC, and that the chaen+ersM technica and
financia proposas woud re*ain confidentia. The P=#C aso carified that the ist of revenue sources contained in
#nne? !.)a of the =id Docu*ents was *ere1 indicative and that other revenue sources *a1 .e incuded .1 the
proponent, su.0ect to approva .1 DOTCF7I##. @urther*ore, the P=#C carified that on1 those fees and char+es
deno*inated as Pu.ic 5tiit1 @ees woud .e su.0ect to re+uation, and those char+es which woud .e actua1 dee*ed
Pu.ic 5tiit1 @ees coud sti .e revised, dependin+ on the outco*e of P=#CMs Cuer1 on the *atter with the
Depart*ent of ;ustice.
In Septe*.er A,,(, the P=#C issued =id =uetin No. ", entited 6#nswers to the Rueries of P#IRC#R'O as Per
3etter Dated Septe*.er B and A8, A,,(.6 Paircar+oMs Cueries and the P=#CMs responses were as foowsD
4. It is diffi*ult for +air*ar'o and Asso*iates to meet t(e re#uired minimum e#uit) re#uirement as pres*ribed
in &e*tion 5.6.7 of t(e Bid Do*uments *onsiderin' t(at t(e *apitali"ation of ea*( member *ompan) is so
stru*tured to meet t(e re#uirements and needs of t(eir *urrent respe*tive business underta8in'9a*tivities. In
order to *ompl) :it( t(is e#uit) re#uirement +air*ar'o is re#uestin' +BAC to %ust allo: ea*( member of
,si*- *orporation of t(e Joint ;enture to %ust exe*ute an a'reement t(at embodies a *ommitment to infuse t(e
re#uired *apital in *ase t(e pro%e*t is a:arded to t(e Joint ;enture instead of in*reasin' ea*( *orporation<s
*urrent aut(ori"ed *apital sto*8 %ust for pre#ualifi*ation purposes.
In preCuaification, the a+enc1 is interested in oneMs financia capa.iit1 at the ti*e of preCuaification, not
future or potentia capa.iit1.
# co**it*ent to put up eCuit1 once awarded the pro0ect is not enou+h to esta.ish that 6present6 financia
capa.iit1. However, tota financia capa.iit1 of a *e*.er co*panies of the Consortiu*, to .e esta.ished
.1 su.*ittin+ the respective co*paniesM audited financia state*ents, sha .e accepta.e.
=. At present +air*ar'o is ne'otiatin' :it( ban8s and ot(er institutions for t(e extension of a +erforman*e
&e*urit) to t(e %oint venture in t(e event t(at t(e Con*essions A'reement ,si*- is a:arded to t(em. /o:ever
+air*ar'o is bein' re#uired to submit a *op) of t(e draft *on*ession as one of t(e do*umentar) re#uirements.
$(erefore +air*ar'o is re#uestin' t(at t(e)<d ,si*- be furnis(ed *op) of t(e approved ne'otiated a'reement
bet:een t(e +BAC and t(e AEDC at t(e soonest possible time.
# cop1 of the draft Concession #+ree*ent is incuded in the =id Docu*ents. #n1 *ateria chan+es woud .e
*ade /nown to prospective chaen+ers throu+h .id .uetins. However, a fina version wi .e issued .efore
the award of contract.
The P=#C aso stated that it woud reCuire #EDC to si+n Suppe*ent C of the =id Docu*ents $#cceptance of
Criteria and Eaiver of Ri+hts to En0oin Pro0ect% and to su.*it the sa*e with the reCuired =id Securit1.
On Septe*.er )8, A,,(, the consortiu* co*posed of PeopeMs #ir Car+o and Earehousin+ Co., Inc. $Paircar+o%, Phi.
#ir and 'rounds Services, Inc. $P#'S% and Securit1 =an/ Corp. $Securit1 =an/% $coective1, Paircar+o Consortiu*%
su.*itted their co*petitive proposa to the P=#C. On Septe*.er )B, A,,(, the P=#C opened the first enveope
containin+ the preCuaification docu*ents of the Paircar+o Consortiu*. On the foowin+ da1, Septe*.er )!, A,,(,
the P=#C preCuaified the Paircar+o Consortiu*.
On Septe*.er )(, A,,(, #EDC infor*ed the P=#C in writin+ of its reservations as re+ards the Paircar+o Consortiu*,
which incudeD
a. The ac/ of corporate approvas and financia capa.iit1 of P#IRC#R'O>
.. The ac/ of corporate approvas and financia capa.iit1 of P#'S>
c. The prohi.ition i*posed .1 R# BB-, as a*ended $the 'enera =an/in+ #ct% on the a*ount that Securit1
=an/ coud e+a1 invest in the pro0ect>
d. The incusion of Sie*ens as a contractor of the P#IRC#R'O ;oint Venture, for preCuaification purposes>
and
e. The appoint*ent of 3ufthansa as the faciit1 operator, in view of the Phiippine reCuire*ent in the
operation of a pu.ic utiit1.
The P=#C +ave its rep1 on Octo.er ), A,,(, infor*in+ #EDC that it had considered the issues raised .1 the atter,
and that .ased on the docu*ents su.*itted .1 Paircar+o and the esta.ished preCuaification criteria, the P=#C had
found that the chaen+er, Paircar+o, had preCuaified to underta/e the pro0ect. The Secretar1 of the DOTC approved
the findin+ of the P=#C.
The P=#C then proceeded with the openin+ of the second enveope of the Paircar+o Consortiu* which contained its
Technica Proposa.
On Octo.er B, A,,(, #EDC reiterated its o.0ections, particuar1 with respect to Paircar+oMs financia capa.iit1, in
view of the restrictions i*posed .1 Section )A&= of the 'enera =an/in+ #ct and Sections AB98 and AB9A of the
7anua Re+uations for =an/s and Other @inancia Inter*ediaries. On Octo.er -, A,,(, #EDC a+ain *anifested its
o.0ections and reCuested that it .e furnished with e?cerpts of the P=#C *eetin+ and the acco*pan1in+ technica
evauation report where each of the issues the1 raised were addressed.
On Octo.er A(, A,,(, the P=#C opened the third enveope su.*itted .1 #EDC and the Paircar+o Consortiu*
containin+ their respective financia proposas. =oth proponents offered to .uid the N#I# Passen+er Ter*ina III for
at east YB"8 *iion at no cost to the +overn*ent and to pa1 the +overn*entD "Z share in +ross revenues for the first
five 1ears of operation, -."Z share in +ross revenues for the ne?t ten 1ears of operation, and A8Z share in +ross
revenues for the ast ten 1ears of operation, in accordance with the =id Docu*ents. However, in addition to the
fore+oin+, #EDC offered to pa1 the +overn*ent a tota of PAB" *iion as +uaranteed pa1*ent for )- 1ears whie
Paircar+o Consortiu* offered to pa1 the +overn*ent a tota of PA-.-" .iion for the sa*e period.
Thus, the P=#C for*a1 infor*ed #EDC that it had accepted the price proposa su.*itted .1 the Paircar+o
Consortiu*, and +ave #EDC B8 wor/in+ da1s or unti Nove*.er )9, A,,( within which to *atch the said .id,
otherwise, the pro0ect woud .e awarded to Paircar+o.
#s #EDC faied to *atch the proposa within the B8&da1 period, then DOTC Secretar1 #*ado 3a+da*eo, on
Dece*.er AA, A,,(, issued a notice to Paircar+o Consortiu* re+ardin+ #EDCMs faiure to *atch the proposa.
On @e.ruar1 )-, A,,-, Paircar+o Consortiu* incorporated into Phiippine Internationa #irport Ter*inas Co., Inc.
$PI#TCO%.
#EDC su.seCuent1 protested the ae+ed undue preference +iven to PI#TCO and reiterated its o.0ections as re+ards
the preCuaification of PI#TCO.
On #pri AA, A,,-, the DOTC su.*itted the concession a+ree*ent for the second&pass approva of the NED#&ICC.
On #pri A(, A,,-, #EDC fied with the Re+iona Tria Court of Pasi+ a Petition for Decaration of Nuit1 of the
Proceedin+s, 7anda*us and In0unction a+ainst the Secretar1 of the DOTC, the Chair*an of the P=#C, the votin+
*e*.ers of the P=#C and Pantaeon D. #vare:, in his capacit1 as Chair*an of the P=#C Technica Co**ittee.
On #pri A-, A,,-, the NED#&ICC conducted an ad referendum to faciitate the approva, on a no&o.0ection .asis, of
the =OT a+ree*ent .etween the DOTC and PI#TCO. #s the ad referendum +athered on1 four $!% of the reCuired si?
$(% si+natures, the NED# *ere1 noted the a+ree*ent.
On ;u1 ,, A,,-, the DOTC issued the notice of award for the pro0ect to PI#TCO.
On ;u1 A), A,,-, the 'overn*ent, throu+h then DOTC Secretar1 #rturo T. Enrie, and PI#TCO, throu+h its
President, Henr1 T. 'o, si+ned the 6Concession #+ree*ent for the =uid&Operate&and&Transfer #rran+e*ent of the
Nino1 #Cuino Internationa #irport Passen+er Ter*ina III6 $A,,- Concession #+ree*ent%. The 'overn*ent +ranted
PI#TCO the franchise to operate and *aintain the said ter*ina durin+ the concession period and to coect the fees,
rentas and other char+es in accordance with the rates or schedues stipuated in the A,,- Concession #+ree*ent. The
#+ree*ent provided that the concession period sha .e for twent1&five $)"% 1ears co**encin+ fro* the in&service
date, and *a1 .e renewed at the option of the 'overn*ent for a period not e?ceedin+ twent1&five $)"% 1ears. #t the
end of the concession period, PI#TCO sha transfer the deveop*ent faciit1 to 7I##.
On Nove*.er )(, A,,9, the 'overn*ent and PI#TCO si+ned an #*ended and Restated Concession #+ree*ent
$#RC#%. #*on+ the provisions of the A,,- Concession #+ree*ent that were a*ended .1 the #RC# wereD Sec. A.AA
pertainin+ to the definition of 6certificate of co*petion6> Sec. ).8" pertainin+ to the Specia O.i+ations of 'RP> Sec.
B.8) $a% deain+ with the e?cusivit1 of the franchise +iven to the Concessionaire> Sec. !.8! concernin+ the assi+n*ent
.1 Concessionaire of its interest in the Deveop*ent @aciit1> Sec. ".89 $c% deain+ with the proceeds of
ConcessionaireMs insurance> Sec. ".A8 with respect to the te*porar1 ta/e&over of operations .1 'RP> Sec. ".A(
pertainin+ to the ta?es, duties and other i*posts that *a1 .e evied on the Concessionaire> Sec. (.8B as re+ards the
periodic ad0ust*ent of pu.ic utiit1 fees and char+es> the entire #rtice VIII concernin+ the provisions on the
ter*ination of the contract> and Sec. A8.8) providin+ for the venue of the ar.itration proceedin+s in case a dispute or
controvers1 arises .etween the parties to the a+ree*ent.
Su.seCuent1, the 'overn*ent and PI#TCO si+ned three Suppe*ents to the #RC#. The @irst Suppe*ent was
si+ned on #u+ust )-, A,,,> the Second Suppe*ent on Septe*.er !, )888> and the Third Suppe*ent on ;une )),
)88A $coective1, Suppe*ents%.
The @irst Suppe*ent to the #RC# a*ended Sec. A.B( of the #RC# definin+ 6Revenues6 or 6'ross Revenues6> Sec.
).8" $d% of the #RC# referrin+ to the o.i+ation of 7I## to provide sufficient funds for the up/eep, *aintenance,
repair andFor repace*ent of a airport faciities and eCuip*ent which are owned or operated .1 7I##> and further
providin+ additiona specia o.i+ations on the part of 'RP aside fro* those aread1 enu*erated in Sec. ).8" of the
#RC#. The @irst Suppe*ent aso provided a stipuation as re+ards the construction of a surface road to connect
N#I# Ter*ina II and Ter*ina III in ieu of the proposed access tunne crossin+ Runwa1 ABFBA> the swappin+ of
o.i+ations .etween 'RP and PI#TCO re+ardin+ the i*prove*ent of Saes Road> and the chan+es in the ti*eta.e. It
aso a*ended Sec. (.8A $c% of the #RC# pertainin+ to the Disposition of Ter*ina @ees> Sec. (.8) of the #RC# .1
insertin+ an introductor1 para+raph> and Sec. (.8) $a% $iii% of the #RC# referrin+ to the Pa1*ents of Percenta+e Share
in 'ross Revenues.
The Second Suppe*ent to the #RC# contained provisions concernin+ the cearin+, re*ova, de*oition or disposa
of su.terranean structures uncovered or discovered at the site of the construction of the ter*ina .1 the
Concessionaire. It defined the scope of wor/s> it provided for the procedure for the de*oition of the said structures
and the consideration for the sa*e which the 'RP sha pa1 PI#TCO> it provided for ti*e e?tensions, incre*enta and
conseCuentia costs and osses conseCuent to the e?istence of such structures> and it provided for so*e additiona
o.i+ations on the part of PI#TCO as re+ards the said structures.
@ina1, the Third Suppe*ent provided for the o.i+ations of the Concessionaire as re+ards the construction of the
surface road connectin+ Ter*inas II and III.
7eanwhie, the 7I## which is char+ed with the *aintenance and operation of the N#I# Ter*inas I and II, had
e?istin+ concession contracts with various service providers to offer internationa airine airport services, such as in&
fi+ht caterin+, passen+er handin+, ra*p and +round support, aircraft *aintenance and provisions, car+o handin+ and
warehousin+, and other services, to severa internationa airines at the N#I#. So*e of these service providers are the
7iascor 'roup, DN#T#&Ein+s #viation S1ste*s Corp., and the 7acro#sia 'roup. 7iascor, DN#T# and
7acro#sia, to+ether with Phiippine #irines $P#3%, are the do*inant pa1ers in the industr1 with an a++re+ate
*ar/et share of -8Z.
On Septe*.er A-, )88), the wor/ers of the internationa airine service providers, cai*in+ that the1 stand to ose
their e*po1*ent upon the i*pe*entation of the Cuestioned a+ree*ents, fied .efore this Court a petition for
prohi.ition to en0oin the enforce*ent of said a+ree*ents.)
On Octo.er A", )88), the service providers, 0oinin+ the cause of the petitionin+ wor/ers, fied a *otion for
intervention and a petition&in&intervention.
On Octo.er )!, )88), Con+ress*en Saacni. =aterina, Cave 7artine: and Constantino ;araua fied a si*iar
petition with this Court.B
On Nove*.er (, )88), severa e*po1ees of the 7I## i/ewise fied a petition assaiin+ the e+ait1 of the various
a+ree*ents.!
On Dece*.er AA, )88). another +roup of Con+ress*en, Hon. ;acinto V. Paras, Rafae P. Nantes, Eduardo C. Uiacita,
Eiie =. Viara*a, Prospero C. No+raes, Prospero #. Picha1, ;r., Harin Cast #.a1on and =enasin+ O. 7acaran.on,
*oved to intervene in the case as Respondents&Intervenors. The1 fied their Co**ent&In&Intervention defendin+ the
vaidit1 of the assaied a+ree*ents and pra1in+ for the dis*issa of the petitions.
Durin+ the pendenc1 of the case .efore this Court, President 'oria 7acapa+a #rro1o, on Nove*.er ),, )88), in her
speech at the )88) 'oden She E?port #wards at 7aacaXan+ Paace, stated that she wi not 6honor $PI#TCO%
contracts which the E?ecutive =ranchMs e+a offices have concuded $as% nu and void.6"
Respondent PI#TCO fied its Co**ents to the present petitions on Nove*.er - and )-, )88). The Office of the
Soicitor 'enera and the Office of the 'overn*ent Corporate Counse fied their respective Co**ents in .ehaf of
the pu.ic respondents.
On Dece*.er A8, )88), the Court heard the case on ora ar+u*ent. #fter the ora ar+u*ent, the Court then resoved in
open court to reCuire the parties to fie si*utaneous1 their respective 7e*oranda in a*pification of the issues heard
in the ora ar+u*ents within B8 da1s and to e?pore the possi.iit1 of ar.itration or *ediation as provided in the
chaen+ed contracts.
In their consoidated 7e*orandu*, the Office of the Soicitor 'enera and the Office of the 'overn*ent Corporate
Counse pra1ed that the present petitions .e +iven due course and that 0ud+*ent .e rendered decarin+ the A,,-
Concession #+ree*ent, the #RC# and the Suppe*ents thereto void for .ein+ contrar1 to the Constitution, the =OT
3aw and its I*pe*entin+ Rues and Re+uations.
On 7arch (, )88B, respondent PI#TCO infor*ed the Court that on 7arch !, )88B PI#TCO co**enced ar.itration
proceedin+s .efore the Internationa Cha*.er of Co**erce, Internationa Court of #r.itration $ICC% .1 fiin+ a
ReCuest for #r.itration with the Secretariat of the ICC a+ainst the 'overn*ent of the Repu.ic of the Phiippines
actin+ throu+h the DOTC and 7I##.
In the present cases, the Court is a+ain faced with the tas/ of resovin+ co*picated issues *ade difficut .1 their
intersectin+ e+a and econo*ic i*pications. The Court is aware of the far reachin+ fa out effects of the ruin+
which it *a/es toda1. @or *ore than a centur1 and whenever the e?i+encies of the ti*es de*and it, this Court has
never shir/ed fro* its soe*n dut1 to dispense 0ustice and resove 6actua controversies invovin+ ri+hts which are
e+a1 de*anda.e and enforcea.e, and to deter*ine whether or not there has .een +rave a.use of discretion
a*ountin+ to ac/ or e?cess of 0urisdiction.6( To .e sure, this Court wi not .e+in to do otherwise toda1.
Ee sha first dispose of the 5roc3(ra. 011(31 raised .1 respondent PI#TCO which the1 ae+e wi .ar the resoution
of the instant controvers1.
P3/0/0on3r1A L37a. S/an0n7 /o F0.3
/h3 5r313n/ P3/0/0on1
a. G... Nos. 4>>??4 and 4>>@@4
In '.R. No. A""88A individua petitioners are e*po1ees of various service providers- havin+ separate concession
contracts with 7I## and continuin+ service a+ree*ents with various internationa airines to provide in&fi+ht
caterin+, passen+er handin+, ra*p and +round support, aircraft *aintenance and provisions, car+o handin+ and
warehousin+ and other services. #so incuded as petitioners are a.or unions 7I#SCOR Eor/ers 5nion&Nationa
3a.or 5nion and Phiippine #irines E*po1ees #ssociation. These petitioners fied the instant action for prohi.ition
as ta?pa1ers and as parties whose ri+hts and interests stand to .e vioated .1 the i*pe*entation of the PI#TCO
Contracts.
Petitioners&Intervenors in the sa*e case are a corporations or+ani:ed and e?istin+ under Phiippine aws en+a+ed in
the .usiness of providin+ in&fi+ht caterin+, passen+er handin+, ra*p and +round support, aircraft *aintenance and
provisions, car+o handin+ and warehousin+ and other services to severa internationa airines at the Nino1 #Cuino
Internationa #irport. Petitioners&Intervenors ae+e that as ta?&pa1in+ internationa airine and airport&reated service
operators, each one of the* stands to .e irrepara.1 in0ured .1 the i*pe*entation of the PI#TCO Contracts. Each of
the petitioners&intervenors have separate and su.sistin+ concession a+ree*ents with 7I## and with various
internationa airines which the1 ae+e are .ein+ interfered with and vioated .1 respondent PI#TCO.
In '.R. No. A""((A, petitioners constitute e*po1ees of 7I## and Sa*ahan+ 7an++a+awa sa Paiparan n+ Piipinas
& a e+iti*ate a.or union and accredited as the soe and e?cusive .ar+ainin+ a+ent of a the e*po1ees in 7I##.
Petitioners anchor their petition for prohi.ition on the nuit1 of the contracts entered into .1 the 'overn*ent and
PI#TCO re+ardin+ the .uid&operate&and&transfer of the N#I# IPT III. The1 fied the petition as ta?pa1ers and
persons who have a e+iti*ate interest to protect in the i*pe*entation of the PI#TCO Contracts.
Petitioners in .oth cases raise the ar+u*ent that the PI#TCO Contracts contain stipuations which direct1 contravene
nu*erous provisions of the Constitution, specific provisions of the =OT 3aw and its I*pe*entin+ Rues and
Re+uations, and pu.ic poic1. Petitioners contend that the DOTC and the 7I##, .1 enterin+ into said contracts,
have co**itted +rave a.use of discretion a*ountin+ to ac/ or e?cess of 0urisdiction which can .e re*edied on1 .1 a
writ of prohi.ition, there .ein+ no pain, speed1 or adeCuate re*ed1 in the ordinar1 course of aw.
In particuar, petitioners assai the provisions in the A,,- Concession #+ree*ent and the #RC# which +rant PI#TCO
the e?cusive ri+ht to operate a co**ercia internationa passen+er ter*ina within the Isand of 3u:on, e?cept those
internationa airports aread1 e?istin+ at the ti*e of the e?ecution of the a+ree*ent. The contracts further provide that
upon the co**ence*ent of operations at the N#I# IPT III, the 'overn*ent sha cause the cosure of Nino1 #Cuino
Internationa #irport Passen+er Ter*inas I and II as internationa passen+er ter*inas. Eith respect to e?istin+
concession a+ree*ents .etween 7I## and internationa airport service providers re+ardin+ certain services or
operations, the A,,- Concession #+ree*ent and the #RC# unifor*1 provide that such services or operations wi not
.e carried over to the N#I# IPT III and PI#TCO is under no o.i+ation to per*it such carr1 over e?cept throu+h a
separate a+ree*ent du1 entered into with PI#TCO.9
Eith respect to the petitionin+ service providers and their e*po1ees, upon the co**ence*ent of operations of the
N#I# IPT III, the1 ae+e that the1 wi .e effective1 .arred fro* providin+ internationa airine airport services at
the N#I# Ter*inas I and II as a internationa airines and passen+ers wi .e diverted to the N#I# IPT III. The
petitionin+ service providers wi thus .e co*peed to contract with PI#TCO aone for such services, with no
assurance that su.sistin+ contracts with 7I## and other internationa airines wi .e respected. Petitionin+ service
providers stress that despite the ver1 co*petitive *ar/et, the su.stantia capita invest*ents reCuired and the hi+h rate
of fees, the1 entered into their respective contracts with the 7I## with the understandin+ that the said contracts wi
.e in force for the stipuated period, and thereafter, renewed so as to aow each of the petitionin+ service providers to
recoup their invest*ents and o.tain a reasona.e return thereon.
Petitionin+ e*po1ees of various service providers at the N#I# Ter*inas I and II and of 7I## on the other hand
ae+e that with the cosure of the N#I# Ter*inas I and II as internationa passen+er ter*inas under the PI#TCO
Contracts, the1 stand to ose e*po1*ent.
The Cuestion on e+a standin+ is whether such parties have 6ae+ed such a persona sta/e in the outco*e of the
controvers1 as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so
ar+e1 depends for iu*ination of difficut constitutiona Cuestions.6, #ccordin+1, it has .een hed that the interest
of a person assaiin+ the constitutionait1 of a statute *ust .e direct and persona. He *ust .e a.e to show, not on1
that the aw or an1 +overn*ent act is invaid, .ut aso that he sustained or is in i**inent dan+er of sustainin+ so*e
direct in0ur1 as a resut of its enforce*ent, and not *ere1 that he suffers there.1 in so*e indefinite wa1. It *ust
appear that the person co*painin+ has .een or is a.out to .e denied so*e ri+ht or privie+e to which he is awfu1
entited or that he is a.out to .e su.0ected to so*e .urdens or penaties .1 reason of the statute or act co*pained of.A8
Ee hod that petitioners have the reCuisite standin+. In the a.ove&*entioned cases, petitioners have a direct and
su.stantia interest to protect .1 reason of the i*pe*entation of the PI#TCO Contracts. The1 stand to ose their
source of iveihood, a propert1 ri+ht which is :eaous1 protected .1 the Constitution. 7oreover, su.sistin+
concession a+ree*ents .etween 7I## and petitioners&intervenors and service contracts .etween internationa airines
and petitioners&intervenors stand to .e nuified or ter*inated .1 the operation of the N#I# IPT III under the PI#TCO
Contracts. The financia pre0udice .rou+ht a.out .1 the PI#TCO Contracts on petitioners and petitioners&intervenors
in these cases are e+iti*ate interests sufficient to confer on the* the reCuisite standin+ to fie the instant petitions.
b. G... No. 4>>>7A
In '.R. No. A"""!-, petitioners fied the petition for prohi.ition as *e*.ers of the House of Representatives, citi:ens
and ta?pa1ers. The1 ae+e that as *e*.ers of the House of Representatives, the1 are especia1 interested in the
PI#TCO Contracts, .ecause the contracts co*pe the 'overn*ent andFor the House of Representatives to appropriate
funds necessar1 to co*p1 with the provisions therein.AA The1 cite provisions of the PI#TCO Contracts which reCuire
dis.urse*ent of unappropriated a*ounts in co*piance with the contractua o.i+ations of the 'overn*ent. The1
ae+e that the 'overn*ent o.i+ations in the PI#TCO Contracts which co*pe +overn*ent e?penditure without
appropriation is a curtai*ent of their prero+atives as e+isators, contrar1 to the *andate of the Constitution that 62n4o
*one1 sha .e paid out of the treasur1 e?cept in pursuance of an appropriation *ade .1 aw.6A)
Standin+ is a pecuiar concept in constitutiona aw .ecause in so*e cases, suits are not .rou+ht .1 parties who have
.een persona1 in0ured .1 the operation of a aw or an1 other +overn*ent act .ut .1 concerned citi:ens, ta?pa1ers or
voters who actua1 sue in the pu.ic interest. #thou+h we are not un*indfu of the cases of I4(1 E.3c/r0c Co. 9.
M(n0c05a.0/) o- I4(1AB and Gon>a.31 9. RaB(0>aA! wherein this Court hed that appropriation *ust .e *ade on1 on
a*ounts i**ediate1 de*anda.e, 5(2.0c 0n/3r31/ 34an1 /ha/ 83 /a63 a 4or3 .023ra. 9038 0n 3/3r40n0n7
8h3/h3r /h3 53/0/0on3r1 1(0n7 a1 .3701.a/or1, /a<5a)3r1 an c0/0>3n1 ha93 .oc(1 1/an0 /o -0.3 /h3 0n1/an/ 53/0/0on.
In =0.o12a)an, Inc. 9. G(0n7ona,A" this Court hed 62i4n ine with the i.era poic1 of this Court on lo*us
standi ordinar1 ta?pa1ers, *e*.ers of Con+ress, and even association of panters, and non&profit civic or+ani:ations
were aowed to initiate and prosecute actions .efore this Court to Cuestion the constitutionait1 or vaidit1 of aws,
acts, decisions, ruin+s, or orders of various +overn*ent a+encies or instru*entaities.6A( @urther, 6insofar as
ta?pa1ersM suits are concerned . . . $this Court% is no/ 39o0 o- 01cr3/0on as to whether or not it shoud .e
entertained.6A- #s such 6. . . even if, strict1 spea/in+, the1 2the petitioners4 are not covered .1 the definition, it is sti
within the wide discretion of the Court to waive the reCuire*ent and so re*ove the i*pedi*ent to its addressin+ and
resovin+ the serious constitutiona Cuestions raised.6A9 In view of the serious e+a Cuestions invoved and their
i*pact on pu.ic interest, we resove to +rant standin+ to the petitioners.
O/h3r Proc3(ra. Ma//3r1
Respondent PI#TCO further ae+es that this Court is without 0urisdiction to review the instant cases as factua issues
are invoved which this Court is i&eCuipped to resove. 7oreover, PI#TCO ae+es that su.*ission of this
controvers1 to this Court at the first instance is a vioation of the rue on hierarch1 of courts. The1 contend that tria
courts have concurrent 0urisdiction with this Court with respect to a specia civi action for prohi.ition and hence,
foowin+ the rue on hierarch1 of courts, resort *ust first .e had .efore the tria courts.
#fter a thorou+h stud1 and carefu evauation of the issues invoved, this Court is of the view that the cru? of the
instant controvers1 invoves si+nificant .37a. B(31/0on1. The facts necessar1 to resove these e+a Cuestions are we
esta.ished and, hence, need not .e deter*ined .1 a tria court.
The rue on hierarch1 of courts wi not aso prevent this Court fro* assu*in+ 0urisdiction over the cases at .ar. The
said rue *a1 .e rea?ed when the redress desired cannot .e o.tained in the appropriate courts or where e?ceptiona
and co*pein+ circu*stances 0ustif1 avai*ent of a re*ed1 within and cain+ for the e?ercise of this CourtMs pri*ar1
0urisdiction.A,
It is eas1 to discern that 3<c35/0ona. c0rc(41/anc31 e?ist in the cases at .ar that ca for the rea?ation of the rue.
=oth petitioners and respondents a+ree that these cases are of /ran1c3n3n/a. 045or/anc3 as the1 invove the
construction and operation of the countr1Ms pre*ier internationa airport. 7oreover, the crucia issues su.*itted for
resoution are of first i*pression and the1 entai the proper e+a interpretation of /e1 provisions of the Constitution,
the =OT 3aw and its I*pe*entin+ Rues and Re+uations. Thus, considerin+ the nature of the controvers1 .efore the
Court, procedura .ars *a1 .e owered to +ive wa1 for the speed1 disposition of the instant cases.
L37a. E--3c/ o- /h3 Co443nc343n/
o- Ar20/ra/0on Proc330n71 2)
PIATCO
There is one *ore procedura o.stace which *ust .e overco*e. The Court is aware that ar.itration proceedin+s
pursuant to Section A8.8) of the #RC# have .een fied at the instance of respondent PI#TCO. #+ain, we hod that the
ar.itration step ta/en .1 PI#TCO wi not oust this Court of its 0urisdiction over the cases at .ar.
In De 7onte Corporation&5S# v. Court of #ppeas,)8 even after findin+ that the ar.itration cause in the
Distri.utorship #+ree*ent in Cuestion is vaid and the dispute .etween the parties is ar.itra.e, this Court affir*ed the
tria courtMs decision den1in+ petitionerMs 7otion to Suspend Proceedin+s pursuant to the ar.itration cause under the
contract. In so ruin+, this Court hed that as contracts produce e+a effect .etween the parties, their assi+ns and heirs,
on1 the parties to the Distri.utorship #+ree*ent are .ound .1 its ter*s, incudin+ the ar.itration cause stipuated
therein. This Court rued that ar.itration proceedin+s coud .e caed for .ut on.) with respect to the parties to the
contract in Cuestion. Considerin+ that there are parties to the case who are neither parties to the Distri.utorship
#+ree*ent nor heirs or assi+ns of the parties thereto, this Court, citin+ its previous ruin+ in Saas, ;r. v. 3apera
Reat1 Corporation,)A hed that to toerate the spittin+ of proceedin+s .1 aowin+ ar.itration as to so*e of the parties
on the one hand and tria for the others on the other hand woud, in effect, resut in 4(./05.0c0/) o- 1(0/1, (5.0c0/o(1
5roc3(r3 an (nn3c311ar) 3.a).)) Thus, we rued that the interest of 0ustice woud .est .e served if the tria court
hears and ad0udicates the case in a 10n7.3 an co45.3/3 5roc330n7.
It is esta.ished that 53/0/0on3r1 0n /h3 5r313n/ ca131 who have presented e+iti*ate interests in the resoution of the
controvers1 are no/ 5ar/031 /o /h3 PIATCO Con/rac/1. #ccordin+1, the1 cannot .e .ound .1 the ar.itration cause
provided for in the #RC# and hence, cannot .e co*peed to su.*it to ar.itration proceedin+s. A 1533) an
3c01093 r31o.(/0on o- a.. /h3 cr0/0ca. 011(31 0n /h3 5r313n/ con/ro93r1), 0nc.(0n7 /ho13 ra013 2) 53/0/0on3r1,
canno/ 23 4a3 23-or3 an ar20/ra. /r02(na.. The o.0ect of ar.itration is precise1 to aow an e?peditious
deter*ination of a dispute. This o.0ective woud not .e *et if this Court were to aow the parties to sette the cases
.1 ar.itration as there are certain issues invovin+ non&parties to the PI#TCO Contracts which the ar.itra tri.una wi
not .e eCuipped to resove.
Now, to the *erits of the instant controvers1.
I
I1 PIATCO a B(a.0-03 203rG
Pu.ic respondents ar+ue that the Paircar+o Consortiu*, PI#TCOMs predecessor, was not a du1 pre&Cuaified .idder
on the unsoicited proposa su.*itted .1 #EDC as the Paircar+o Consortiu* faied to *eet the financia capa.iit1
reCuired under the =OT 3aw and the =id Docu*ents. The1 ae+e that in co*putin+ the a.iit1 of the Paircar+o
Consortiu* to *eet the *ini*u* eCuit1 reCuire*ents for the pro0ect, the 3n/0r3 n3/ 8or/h o- S3c(r0/) +an6, a
43423r o- /h3 con1or/0(4, 1ho(. no/ 23 con103r3.
PI#TCO reies, on the other hand, on the stren+th of the 7e*orandu* dated Octo.er A!, A,,( issued .1 the DOTC
5ndersecretar1 Pri*itivo C. Ca statin+ that the Paircar+o Consortiu* is found to have a co*.ined net worth of
PB,,88,888,888.88, sufficient to *eet the eCuit1 reCuire*ents of the pro0ect. The said 7e*orandu* was in response
to a etter fro* 7r. #ntonio Henson of #EDC to President @ide V. Ra*os Cuestionin+ the financia capa.iit1 of the
Paircar+o Consortiu* on the +round that it does not have the financia resources to put up the reCuired *ini*u*
eCuit1 of P),-88,888,888.88. This contention is .ased on the restriction under R.#. No. BB-, as a*ended or the
'enera =an/in+ #ct that a co**ercia .an/ cannot invest in an1 sin+e enterprise in an a*ount *ore than A"Z of its
net worth. In the said 7e*orandu*, 5ndersecretar1 Ca opinedD
The =id Docu*ents, as carified throu+h =id =uetin Nos. B and ", reCuire that financia capa.iit1 wi .e
evauated .ased on tota financia capa.iit1 of a the *e*.er co*panies of the 2Paircar+o4 Consortiu*. In
this connection, the Chaen+er was found to have a co*.ined net worth of PB,,)(,!)A,)!).88 that coud
support a pro0ect costin+ appro?i*ate1 PAB =iion.
It is not a reCuire*ent that the net worth *ust .e 6unrestricted.6 To i*pose that as a reCuire*ent now wi .e
nothin+ ess than unfair.
The financia state*ent or the net worth is not the soe .asis in esta.ishin+ financia capa.iit1. #s stated in
=id =uetin No. B, financia capa.iit1 *a1 aso .e esta.ished .1 testi*onia etters issued .1 reputa.e
.an/s. The Chaen+er has co*pied with this reCuire*ent.
To recap, net worth refected in the @inancia State*ent shoud not .e ta/en as the a*ount of the *one1 to .e
used to answer the reCuired thirt1 percent $B8Z% eCuit1 of the chaen+er .ut rather to .e used in esta.ishin+
if there is enou+h .asis to .eieve that the chaen+er can co*p1 with the reCuired B8Z eCuit1. In fact, proof
of sufficient eCuit1 is reCuired as one of the conditions for award of contract $Section A).A IRR of the =OT
3aw% .ut not for pre&Cuaification $Section ".! of the sa*e docu*ent%.)B
5nder the =OT 3aw, in case of a .uid&operate&and&transfer arran+e*ent, the contract sha .e awarded to the
.idder 6who, havin+ satisfied the 40n04(4 -0nanc0a., /3chn0ca., or7an0>a/0ona. an .37a. 1/anar16
reCuired .1 the aw, has su.*itted the owest .id and *ost favora.e ter*s of the pro0ect. )! @urther, the A,,!
I*pe*entin+ Rues and Re+uations of the =OT 3aw provideD
Section ".! Pre&Cuaification ReCuire*ents.
??? ??? ???
c. @inancia Capa.iit1D The pro0ect proponent *ust have adeCuate capa.iit1 to sustain the financin+
reCuire*ents for the detaied en+ineerin+ desi+n, construction andFor operation and *aintenance phases of the
pro0ect, as the case *a1 .e. @or purposes of pre&Cuaification, this capa.iit1 sha .e *easured in ter*s of C0D
5roo- o- /h3 a20.0/) o- /h3 5roH3c/ 5ro5on3n/ anEor /h3 con1or/0(4 /o 5ro903 a 40n04(4 a4o(n/ o-
3B(0/) /o /h3 5roH3c/, an C00D a .3//3r /31/04on0a. -ro4 r35(/a2.3 2an61 a//31/0n7 /ha/ /h3 5roH3c/
5ro5on3n/ anEor 43423r1 o- /h3 con1or/0(4 ar3 2an60n7 80/h /h34, /ha/ /h3) ar3 0n 7oo -0nanc0a.
1/an0n7, an /ha/ /h3) ha93 a3B(a/3 r31o(rc31. The +overn*ent a+enc1F3'5 concerned sha deter*ine
on a pro0ect&to&pro0ect .asis and .efore pre&Cuaification, the *ini*u* a*ount of eCuit1 needed. $emp(asis
supplied%
Pursuant to this provision, the P=#C issued P=#C =uetin No. B dated #u+ust A(, A,,( a*endin+ the financia
capa.iit1 reCuire*ents for pre&Cuaification of the pro0ect proponent as foowsD
(. =asis of Pre&Cuaification
The .asis for the pre&Cuaification sha .e on the co*piance of the proponent to the *ini*u* technica and
financia reCuire*ents provided in the =id Docu*ents and in the IRR of the =OT 3aw, R.#. No. (,"-, as
a*ended .1 R.#. --A9.
The *ini*u* a*ount of eCuit1 to which the proponentMs financia capa.iit1 wi .e .ased sha .e /h0r/)
53rc3n/ C&0ID o- /h3 5roH3c/ co1/ 0n1/3a o- /h3 /83n/) 53rc3n/ C20ID 153c0-03 0n S3c/0on &.6.* o- /h3
+0 Doc(43n/1. This is to correate with the reCuired de.t&to&eCuit1 ratio of -8DB8 in Section ).8Aa of the
draft concession a+ree*ent. The de.t portion of the pro0ect financin+ shoud not e?ceed -8Z of the actua
pro0ect cost.
#ccordin+1, .ased on the a.ove provisions of aw, the Paircar+o Consortiu* or an1 chaen+er to the unsoicited
proposa of #EDC has to show that it possesses the reCuisite -0nanc0a. ca5a20.0/) /o (n3r/a63 /h3 5roH3c/ 0n /h3
40n04(4 a4o(n/ o- &0I o- /h3 5roH3c/ co1/ throu+h $i% proof of the a.iit1 to provide a *ini*u* a*ount of eCuit1
to the pro0ect, and $ii% a etter testi*onia fro* reputa.e .an/s attestin+ that the pro0ect proponent or *e*.ers of the
consortiu* are .an/in+ with the*, that the1 are in +ood financia standin+, and that the1 have adeCuate resources.
#s the *ini*u* pro0ect cost was esti*ated to .e 5SYB"8,888,888.88 or rou+h1 P,,A9B,("8,888.88, )" the Paircar+o
Consortiu* had to show to the satisfaction of the P=#C that it had the a.iit1 to provide the *ini*u* eCuit1 for the
pro0ect in the a*ount of at east P2,7;;,09;,000.00.
Paircar+oMs #udited @inancia State*ents as of A,,B and A,,! indicated that it had a net worth of P),-9B,",).88 and
PB,A)B,"A".88 respective1.)( P#'SM #udited @inancia State*ents as of A,," indicate that it has appro?i*ate1
P)(,-B",-88.88 to invest as its eCuit1 for the pro0ect.)- Securit1 =an/Ms #udited @inancia State*ents as of A,," show
that it has a net worth eCuivaent to its capita funds in the a*ount of PB,")B,"8!,B--.88.)9
Ee a+ree with pu.ic respondents that with respect to Securit1 =an/, the 3n/0r3 a4o(n/ of its net worth coud not .e
invested in a sin+e underta/in+ or enterprise, whether aied or non&aied in accordance with the provisions of R.#.
No. BB-, as a*ended or the 'enera =an/in+ #ctD
Sec. )A&=. The provisions in this or in an1 other #ct to the contrar1 notwithstandin+, the 7onetar1 =oard,
whenever it sha dee* appropriate and necessar1 to further nationa deveop*ent o.0ectives or support
nationa priorit1 pro0ects, 4a) a(/hor0>3 a co443rc0a. 2an6, a 2an6 a(/hor0>3 /o 5ro903 co443rc0a.
2an60n7 13r90c31, a1 83.. a1 a 7o93rn43n/$o8n3 an con/ro..3 2an6, /o o53ra/3 (n3r an 3<5an3
co443rc0a. 2an60n7 a(/hor0/) an 2) 90r/(3 /h3r3o- 3<3rc013, 0n a0/0on /o 5o83r1 a(/hor0>3 -or
co443rc0a. 2an61, /h3 5o83r1 o- an In931/43n/ !o(13 a1 5ro903 0n Pr3103n/0a. D3cr33 No. 129,
0n931/ 0n /h3 3B(0/) o- a non$a..03 (n3r/a60n7, or own a *a0orit1 or a of the eCuit1 in a financia
inter*ediar1 other than a co**ercia .an/ or a .an/ authori:ed to provide co**ercia .an/in+
servicesD Pro903, Tha/ $a% the tota invest*ent in eCuities sha not e?ceed fift1 percent $"8Z% of the net
worth of the .an/> C2D /h3 3B(0/) 0n931/43n/ 0n an) on3 3n/3r5r013 8h3/h3r a..03 or non$a..03 1ha.. no/
3<c33 -0-/33n 53rc3n/ C1;ID o- /h3 n3/ 8or/h o- /h3 2an6J $c% the eCuit1 invest*ent of the .an/, or of its
who1 or *a0orit1&owned su.sidiar1, in a sin+e non&aied underta/in+ sha not e?ceed thirt1&five percent
$B"Z% of the tota eCuit1 in the enterprise nor sha it e?ceed thirt1&five percent $B"Z% of the votin+ stoc/ in
that enterprise> and $d% the eCuit1 invest*ent in other .an/s sha .e deducted fro* the investin+ .an/Ms net
worth for purposes of co*putin+ the prescri.ed ratio of net worth to ris/ assets.
??? ??? ???
@urther, the A,,B 7anua of Re+uations for =an/s providesD
SECTION VB9B. Other 3i*itations and Restrictions. J The foowin+ i*itations and restrictions sha aso
app1 re+ardin+ eCuit1 invest*ents of .an/s.
a. In an1 sin+e enterprise. J The eCuit1 invest*ents of .an/s in an1 sin+e enterprise sha not e?ceed at an1
ti*e fifteen percent $A"Z% of the net worth of the investin+ .an/ as defined in Sec. VA8( and Su.sec.
VA)A.".
Thus, the *a?i*u* a*ount that Securit1 =an/ coud vaid1 invest in the Paircar+o Consortiu* is on1
P")9,")",("(."", representin+ A"Z of its entire net worth. The tota net worth therefore of the Paircar+o Consortiu*,
after considerin+ the 4a<04(4 a4o(n/1 that *a1 .e vaid1 invested .1 each of its *e*.ers isP;;',&'*,'71.;; or
on.) 6.0'I o- /h3 5roH3c/ co1/,), an a*ount su.stantia1 ess than the prescri.ed *ini*u* eCuit1 invest*ent
reCuired for the pro0ect in the a*ount of P),-"",8,",888.88 or B8Z of the pro0ect cost.
The purpose of pre&Cuaification in an1 pu.ic .iddin+ is to deter*ine, at the eariest opportunit1, the a.iit1 of the
.idder to underta/e the pro0ect. Thus, with respect to the .idderMs financia capacit1 at the pre&Cuaification sta+e, the
aw reCuires the +overn*ent a+enc1 to e?a*ine and deter*ine the a.iit1 of the .idder to fund the entire cost of the
pro0ect 2) con103r0n7 /h3 4a<04(4 a4o(n/1 /ha/ 3ach 203r 4a) 0n931/ 0n /h3 5roH3c/ a/ /h3 /043 o- 5r3$
B(a.0-0ca/0on.
The P=#C has deter*ined that an1 prospective .idder for the construction, operation and *aintenance of the N#I#
IPT III pro0ect shoud prove that it has the a.iit1 to provide eCuit1 in the *ini*u* a*ount of B8Z of the pro0ect cost,
in accordance with the -8DB8 de.t&to&eCuit1 ratio prescri.ed in the =id Docu*ents. Thus, in the case of Paircar+o
Consortiu*, the P=#C shoud deter*ine the 4a<04(4 a4o(n/1 that each *e*.er of the consortiu* *a1 co**it
for the construction, operation and *aintenance of the N#I# IPT III pro0ect a/ /h3 /043 o- 5r3$B(a.0-0ca/0on. Eith
respect to Securit1 =an/, the 4a<04(4 a4o(n/ which *a1 .e invested .1 it woud on1 .e A"Z of its net worth in
view of the restrictions i*posed .1 the 'enera =an/in+ #ct. Disre+ardin+ the invest*ent ceiin+s provided .1
appica.e aw woud not resut in a proper evauation of whether or not a .idder is pre&Cuaified to underta/e the
pro0ect as for a intents and purposes, such ceiin+ or e+a restriction deter*ines the /r(3 4a<04(4 a4o(n/ which a
.idder *a1 invest in the pro0ect.
@urther, the deter*ination of whether or not a .idder is pre&Cuaified to underta/e the pro0ect reCuires an evauation of
the financia capacit1 of the said .idder a/ /h3 /043 /h3 20 01 1(240//3 .ased on the reCuired docu*ents presented
.1 the .idder. The P=#C shoud not .e aowed to specuate on the -(/(r3 -0nanc0a. a20.0/)of the .idder to underta/e
the pro0ect on the .asis of docu*ents su.*itted. This woud open doors to a.use and defeat the ver1 purpose of a
pu.ic .iddin+. This is especia1 true in the case at .ar which invoves the invest*ent of .iions of pesos .1 the
pro0ect proponent. The reevant +overn*ent authorit1 is dut1&.ound to ensure that the awardee of the contract
possesses the *ini*u* reCuired financia capa.iit1 to co*pete the pro0ect. To aow the P=#C to esti*ate the
.idderMs future financia capa.iit1 woud not secure the via.iit1 and inte+rit1 of the pro0ect. # restrictive and
conservative appication of the rues and procedures of pu.ic .iddin+ is necessar1 not on1 to protect the i*partiait1
and re+uarit1 of the proceedin+s .ut aso to ensure the financia and technica reia.iit1 of the pro0ect. It has .een
hed thatD
The .asic rue in pu.ic .iddin+ is that .ids shoud .e evauated .ased on the reCuired docu*ents su.*itted
.efore and not after the openin+ of .ids. Otherwise, the foundation of a fair and co*petitive pu.ic .iddin+
woud .e defeated. S/r0c/ o213r9anc3 o- /h3 r(.31, r37(.a/0on1, an 7(03.0n31 o- /h3 200n7 5roc311 01
/h3 on.) 1a-37(ar /o a -a0r, hon31/ an co453/0/093 5(2.0c 200n7.B8
Thus, if the 4a<04(4 a4o(n/ o- 3B(0/) that a .idder *a1 invest in the pro0ect a/ /h3 /043 /h3 201 ar3
1(240//3 fas short of the *ini*u* a*ounts reCuired to .e put up .1 the .idder, said .idder shoud .e proper1
disCuaified. Considerin+ that at the pre&Cuaification sta+e, the *a?i*u* a*ounts which the Paircar+o Consortiu*
*a1 invest in the pro0ect fe short of the *ini*u* a*ounts prescri.ed .1 the P=#C, we hod that Paircar+o
Consortiu* was not a Cuaified .idder. Thus the award of the contract .1 the P=#C to the Paircar+o Consortiu*, a
disCuaified .idder, is nu and void.
Ehie it woud .e proper at this 0uncture to end the resoution of the instant controvers1, as the e+a effects of the
disCuaification of respondent PI#TCOMs predecessor woud co*e into pa1 and necessari1 resut in the nuit1 of a
the su.seCuent contracts entered .1 it in pursuance of the pro0ect, the Court fees that it is necessar1 to discuss in fu
the pressin+ issues of the present controvers1 for a co*pete resoution thereof.
II
I1 /h3 1997 Conc3110on A7r3343n/ 9a.0G
Petitioners and pu.ic respondents contend that the A,,- Concession #+ree*ent is invaid as it contains provisions
that su.stantia1 depart fro* the draft Concession #+ree*ent incuded in the =id Docu*ents. The1 *aintain that a
su.stantia departure fro* the draft Concession #+ree*ent is a vioation of pu.ic poic1 and renders the A,,-
Concession #+ree*ent nu and void.
PI#TCO *aintains, however, that the Concession #+ree*ent attached to the =id Docu*ents is intended to .e
ara-/, i.e., su.0ect to chan+e, ateration or *odification, and that this intention was cear to a participants, incudin+
#EDC, and DOTCF7I##. It ar+ued further that said intention is e?pressed in Part C $(% of =id =uetin No. B issued
.1 the P=#C which statesD
(. #*end*ents to the Draft Concessions #+ree*ent
#*end*ents to the Draft Concessions #+ree*ent sha .e issued fro* ti*e to ti*e. Said a*end*ents sha
on1 cover ite*s that woud not *ateria1 affect the preparation of the proponentMs proposa.
=1 its ver1 nature, pu.ic .iddin+ ai*s to protect the pu.ic interest .1 +ivin+ the pu.ic the .est possi.e advanta+es
throu+h open co*petition. ThusD
Co*petition *ust .e e+iti*ate, fair and honest. In the fied of +overn*ent contract aw, co*petition
reCuires, not on1 ].iddin+ upon a co**on standard, a co**on .asis, upon the sa*e thin+, the sa*e su.0ect
*atter, the sa*e underta/in+,M 2(/ a.1o /ha/ 0/ 23 .370/04a/3, -a0r an hon31/J an no/ 3107n3 /o 0nH(r3 or
3-ra( /h3 7o93rn43n/.BA
#n essentia ee*ent of a pu.ic1 .idded contract is that a .idders *ust .e on eCua footin+. Not si*p1 in ter*s of
appication of the procedura rues and re+uations i*posed .1 the reevant +overn*ent a+enc1, .ut *ore i*portant1,
on the contract .idded upon. Each .idder *ust .e a.e to .id on the sa*e thin+. The rationae is o.vious. If the
winnin+ .idder is aowed to ater incude or *odif1 certain provisions in the contract awarded such that the contract
is atered in an1 *ateria respect, then the essence of fair co*petition in the pu.ic .iddin+ is destro1ed. # pu.ic
.iddin+ woud indeed .e a farce if after the contract is awarded, the winnin+ .idder *a1 *odif1 the contract and
incude provisions which are favora.e to it that were not previous1 *ade avaia.e to the other .idders. ThusD
It is inherent in pu.ic .iddin+s that there sha .e a fair co*petition a*on+ the .idders. The specifications in
such .iddin+s provide the co**on +round or .asis for the .idders. The specifications shoud, accordin+1,
operate eCua1 or indiscri*inate1 upon a .idders.B)
The sa*e rue was restated .1 Chief ;ustice Stuart of the Supre*e Court of 7innesotaD
The aw is we setted that where, as in this case, *unicipa authorities can on1 et a contract for pu.ic wor/
to the owest responsi.e .idder, the proposas and specifications therefore *ust .e so fra*ed as to per*it
free and fu co*petition. Nor can /h3) 3n/3r 0n/o a con/rac/ 80/h /h3 231/ 203r con/a0n0n7 1(21/an/0a.
5ro9010on1 23n3-0c0a. /o h04, no/ 0nc.(3 or con/345.a/3 0n /h3 /3r41 an 153c0-0ca/0on1 (5on 8h0ch
/h3 201 83r3 0n90/3.BB
In fact, in the P=#C =id =uetin No. B cited .1 PI#TCO to support its ar+u*ent that the draft concession a+ree*ent
is su.0ect to a*end*ent, the pertinent portion of which was Cuoted a.ove, the P=#C aso carified thatKL1Ma0
a43n43n/1 1ha.. on.) co93r 0/341 /ha/ 8o(. no/ 4a/3r0a..) a--3c/ /h3 5r35ara/0on o- /h3 5ro5on3n/A1
5ro5o1a..K
Ehie we concede that a winnin+ .idder is not precuded fro* *odif1in+ or a*endin+ certain provisions of the
contract .idded upon, such chan+es 4(1/ no/ con1/0/(/3 1(21/an/0a. or 4a/3r0a. a43n43n/1 /ha/ 8o(. a./3r /h3
2a10c 5ara43/3r1 o- /h3 con/rac/ an 8o(. con1/0/(/3 a 3n0a. /o /h3 o/h3r 203r1 o- /h3 o55or/(n0/) /o 20 on
/h3 1a43 /3r41. Hence, the deter*ination of whether or not a *odification or a*end*ent of a contract .idded out
constitutes a su.stantia a*end*ent rests on whether the contract, when ta/en as a whoe, woud contain su.stantia1
different ter*s and conditions that woud have the effect of aterin+ the technica andFor financia proposas previous1
su.*itted .1 other .idders. The aterations and *odifications in the contract e?ecuted .etween the +overn*ent and
the winnin+ .idder *ust .e such as to render such e?ecuted contract to .e an 3n/0r3.) 0--3r3n/ con/rac/ -ro4 /h3
on3 /ha/ 8a1 203 (5on.
In the case of Ca./3< CPh0.0550n31D, Inc. 9. D3.7ao +ro/h3r1, Inc.,B! this Court Cuoted with approva the ruin+ of
the tria court that an a*end*ent to a contract awarded throu+h pu.ic .iddin+, when such su.seCuent a*end*ent
was *ade without a new pu.ic .iddin+, is nu and voidD
The Court a+rees with the contention of counse for the paintiffs that the due e?ecution of a contract after
pu.ic .iddin+ is a i*itation upon the ri+ht of the contractin+ parties to ater or a*end it without another
pu.ic .iddin+, for otherwise 8ha/ 8o(. a 5(2.0c 200n7 23 7oo -or 0- a-/3r /h3 3<3c(/0on o- a con/rac/
a-/3r 5(2.0c 200n7, /h3 con/rac/0n7 5ar/031 4a) a./3r or a43n /h3 con/rac/, or 393n canc3. 0/, a/ /h30r
80..G Pu.ic .iddin+s are hed for the protection of the pu.ic, and to +ive the pu.ic the .est possi.e
advanta+es .1 *eans of open co*petition .etween the .idders. He who .ids or offers the .est ter*s is
awarded the contract su.0ect of the .id, and it is o.vious that such protection and .est possi.e advanta+es to
the pu.ic wi disappear if the parties to a contract e?ecuted after pu.ic .iddin+ *a1 ater or a*end it
without another previous pu.ic .iddin+.B"
Hence, the Cuestion that co*es to fore is thisD is the A,,- Concession #+ree*ent the sa*e a+ree*ent that was offered
for pu.ic .iddin+, i.e., the draft Concession #+ree*ent attached to the =id Docu*entsI # cose co*parison of the
draft Concession #+ree*ent attached to the =id Docu*ents and the A,,- Concession #+ree*ent reveas that the
docu*ents differ in at east two *ateria respectsD
a. Mo0-0ca/0on on /h3 P(2.0c
U/0.0/) R393n(31 an Non$P(2.0c
U/0.0/) R393n(31 /ha/ 4a) 23
co..3c/3 2) PIATCO
The fees that *a1 .e i*posed and coected .1 PI#TCO under the draft Concession #+ree*ent and the A,,-
Concession #+ree*ent *a1 .e cassified into three distinct cate+oriesD $A% fees which are su.0ect to periodic
ad0ust*ent of once ever1 two 1ears in accordance with a prescri.ed para*etric for*ua and ad0ust*ents are *ade
effective on1 upon written approva .1 7I##> $)% fees other than those incuded in the first cate+or1 which *a1.e
ad0usted .1 PI#TCO whenever it dee*s necessar1 without need for consent of DOTCF7I##> and $B% new fees and
char+es that *a1 .e i*posed .1 PI#TCO which have not .een previous1 i*posed or coected at the Nino1 #Cuino
Internationa #irport Passen+er Ter*ina I, pursuant to #d*inistrative Order No. A, Series of A,,B, as a*ended. The
+arin+ distinctions .etween the draft Concession #+ree*ent and the A,,- Concession #+ree*ent ie in the t1pes of
fees incuded in each cate+or1 and the e?tent of the supervision and re+uation which 7I## is aowed to e?ercise in
reation thereto.
@or fees under the -0r1/ ca/37or), i.e., those which are su.0ect to periodic ad0ust*ent in accordance with a prescri.ed
para*etric for*ua and effective on1 upon written approva .1 7I##, /h3 ra-/ Conc3110on A7r3343n/ incudes
the foowin+DB(
$A% aircraft par/in+ fees>
$)% aircraft tac/in+ fees>
$B% +roundhandin+ fees>
$!% rentas and airine offices>
$"% chec/&in counter rentas> and
$(% portera+e fees.
5nder the 1997 Conc3110on A7r3343n/, fees which are su.0ect to ad0ust*ent and effective upon 7I## approva are
cassified as 6Pu.ic 5tiit1 Revenues6 and incudeDB-
$A% aircraft par/in+ fees>
$)% aircraft tac/in+ fees>
$B% chec/&in counter fees> and
$!% Ter*ina @ees.
The i*pication of the reduced nu*.er of fees that are su.0ect to 7I## approva is .est appreciated in reation to fees
incuded in the 13con ca/37or) identified a.ove. 5nder the 1997 Conc3110on A7r3343n/, fees which PI#TCO *a1
ad0ust whenever it dee*s necessar1 without need for consent of DOTCF7I## are 6Non&Pu.ic 5tiit1 Revenues6 and
is defined as 6a other inco*e not cassified as Pu.ic 5tiit1 Revenues derived fro* operations of the Ter*ina and
the Ter*ina Co*pe?.6B9 Thus, under the A,,- Concession #+ree*ent, +round handin+ fees, rentas fro* airine
offices and portera+e fees are no on+er su.0ect to 7I## re+uation.
@urther, under Section (.8B of the ra-/ Conc3110on A7r3343n/, 7I## reserves the ri+ht to re+uate $A% o..1 and
vehicuar par/in+ fees and $)% other new fees and char+es that *a1 .e i*posed .1 PI#TCO. Such re+uation *a1 .e
*ade .1 periodic ad0ust*ent and is effective on1 upon written approva of 7I##. The fu te?t of said provision is
Cuoted .eowD
Section (.8B. +eriodi* Ad%ustment in Fees and C(ar'es. #d0ust*ents in the aircraft par/in+ fees, aircraft
tac/in+ fees, +roundhandin+ fees, rentas and airine offices, chec/&in&counter rentas and portera+e fees sha
.e aowed on1 once ever1 two 1ears and in accordance with the Para*etric @or*ua attached hereto as
#nne? @. Provided that ad0ust*ents sha .e *ade effective on1 after the written e?press approva of the
7I##. Provided, further, that such approva of the 7I##, sha .e contin+ent on1 on the confor*it1 of the
ad0ust*ents with the a.ove said para*etric for*ua. The first ad0ust*ent sha .e *ade prior to the In&Service
Date of the Ter*ina.
Th3 MIAA r313r931 /h3 r07h/ /o r37(.a/3 (n3r /h3 -or37o0n7 /3r41 an con0/0on1 /h3 .o22) an
93h0c(.ar 5ar60n7 -331 an o/h3r n38 -331 an char731 a1 con/345.a/3 0n 5ara7ra5h 2 o- S3c/0on 6.01
0- 0n 0/1 H(743n/ /h3 (13r1 o- /h3 a0r5or/ 1ha.. 23 35r093 o- a -r33 o5/0on -or /h3 13r90c31 /h3) co93r.B,
On the other hand, the eCuivaent provision under the 1997 Conc3110on A7r3343n/ readsD
Section (.8B Periodic #d0ust*ent in @ees and Char+es.
??? ??? ???
$c% Concessionaire sha at a ti*es .e 0udicious in fi?in+ fees and char+es constitutin+ Non&Pu.ic 5tiit1
Revenues in order to ensure that End 5sers are not unreasona.1 deprived of services. :h0.3 /h3 93h0c(.ar
5ar60n7 -33, 5or/3ra73 -33 an 7r33/3rE83.. 801h3r -33 con1/0/(/3 Non$P(2.0c U/0.0/) R393n(31 o-
Conc3110ona0r3, GRP 4a) 0n/3r93n3 an r3B(0r3 Conc3110ona0r3 /o 3<5.a0n an H(1/0-) /h3 -33 0/ 4a) 13/
-ro4 /043 /o /043, if in the reasona.e opinion of 'RP the said fees have .eco*e e?or.itant resutin+ in the
unreasona.e deprivation of End 5sers of such services.!8
Thus, under the 1997 Conc3110on A7r3343n/, with respect to $A% vehicuar par/in+ fee, $)% portera+e fee and $B%
+reeterFwe wisher fee, a that 7I## can do is to reCuire PI#TCO to 3<5.a0n an H(1/0-) the fees set .1 PI#TCO. In
the ra-/ Conc3110on A7r3343n/, vehicuar par/in+ fee is su.0ect to 7I## re+uation and approva under the second
para+raph of Section (.8B thereof whie portera+e fee is covered .1 the first para+raph of the sa*e provision. There is
an o.vious rea?ation of the e?tent of contro and re+uation .1 7I## with respect to the particuar fees that *a1 .e
char+ed .1 PI#TCO.
7oreover, with respect to the /h0r ca/37or) of fees that *a1 .e i*posed and coected .1 PI#TCO, i.e., new fees
and char+es that *a1 .e i*posed .1 PI#TCO which have not .een previous1 i*posed or coected at the Nino1
#Cuino Internationa #irport Passen+er Ter*ina I, under Section (.8B of the ra-/ Conc3110on A7r3343n/ 7I##
has reserved the ri+ht to re+uate the sa*e under the sa*e conditions that 7I## *a1 re+uate fees under the first
cate+or1, i.e., periodic ad0ust*ent of once ever1 two 1ears in accordance with a prescri.ed para*etric for*ua and
effective on1 upon written approva .1 7I##. However, under the 1997 Conc3110on A7r3343n/, ad0ust*ent of fees
under the third cate+or1 is not su.0ect to 7I## re+uation.
Eith respect to ter*ina fees that *a1 .e char+ed .1 PI#TCO,!A as shown earier, this was incuded within the
cate+or1 of 6Pu.ic 5tiit1 Revenues6 under the A,,- Concession #+ree*ent. This cassification is si+nificant .ecause
under the 1997 Conc3110on A7r3343n/, 6Pu.ic 5tiit1 Revenues6 are su.0ect to an 6Interi* #d0ust*ent6 of fees
upon the occurrence of certain e?traordinar1 events specified in the a+ree*ent.!) However, under the ra-/
Conc3110on A7r3343n/, ter*ina fees are not incuded in the t1pes of fees that *a1 .e su.0ect to 6Interi*
#d0ust*ent.6!B
@ina1, under the 1997 Conc3110on A7r3343n/, 6Pu.ic 5tiit1 Revenues,6 e?cept ter*ina fees, are deno*inated in
5S Doars!! whie pa1*ents to the 'overn*ent are in Phiippine Pesos. In the ra-/ Conc3110on A7r3343n/, no
such stipuation was incuded. =1 stipuatin+ that 6Pu.ic 5tiit1 Revenues6 wi .e paid to PI#TCO in 5S Doars
whie pa1*ents .1 PI#TCO to the 'overn*ent are in Phiippine currenc1 under the A,,- Concession #+ree*ent,
PI#TCO is a.e to en0o1 the .enefits of depreciations of the Phiippine Peso, whie .ein+ effective1 insuated fro*
the detri*enta effects of e?chan+e rate fuctuations.
Ehen ta/en as a whoe, the chan+es under the A,,- Concession #+ree*ent with respect to reduction in the t1pes of
fees that are su.0ect to 7I## re+uation and the rea?ation of such re+uation with respect to other fees are si+nificant
a*end*ents that su.stantia1 distin+uish the draft Concession #+ree*ent fro* the A,,- Concession #+ree*ent. Th3
1997 Conc3110on A7r3343n/, 0n /h01 r3153c/, c.3ar.) 70931 PIATCO 4or3 -a9ora2.3 /3r41 /han 8ha/ 8a1
a9a0.a2.3 /o o/h3r 203r1 a/ /h3 /043 /h3 con/rac/ 8a1 203 o(/. It is not ver1 difficut to see that the chan+es in
the A,,- Concession #+ree*ent transate to 0r3c/ an concr3/3 -0nanc0a. a9an/a731 -or PIATCO which were not
avaia.e at the ti*e the contract was offered for .iddin+. It cannot .e denied that under the A,,- Concession
#+ree*ent on1 6Pu.ic 5tiit1 Revenues6 are su.0ect to 7I## re+uation. #d0ust*ents of a other fees i*posed and
coected .1 PI#TCO are entire1 within its contro. 7oreover, with respect to ter*ina fees, under the A,,-
Concession #+ree*ent, the sa*e is further su.0ect to 6Interi* #d0ust*ents6 not previous1 stipuated in the draft
Concession #+ree*ent. @ina1, the chan+e in the currenc1 stipuated for 6Pu.ic 5tiit1 Revenues6 under the A,,-
Concession #+ree*ent, e?cept ter*ina fees, +ives PI#TCO an added .enefit which was not avaia.e at the ti*e of
.iddin+.
2. A11(45/0on 2) /h3
Go93rn43n/ o- /h3 .0a20.0/031 o-
PIATCO 0n /h3 393n/ o- /h3 .a//3rA1
3-a(./ /h3r3o-
5nder the ra-/ Conc3110on A7r3343n/, defaut .1 PI#TCO of an1 of its o.i+ations to creditors who have provided,
oaned or advanced funds for the N#I# IPT III pro0ect does not resut in the assu*ption .1 the 'overn*ent of these
ia.iities. In fact, nowhere in the said contract does defaut of PI#TCOMs oans fi+ure in the a+ree*ent. Such defaut
does not direct1 resut in an1 conco*itant ri+ht or o.i+ation in favor of the 'overn*ent.
However, the 1997 Conc3110on A7r3343n/ providesD
Section !.8! #ssi+n*ent.
??? ??? ???
$.% In the event Concessionaire shoud defaut in the pa1*ent of an #ttendant 3ia.iit1, and the defaut has
resuted in the acceeration of the pa1*ent due date of the #ttendant 3ia.iit1 prior to its stated date of
*aturit1, the 5npaid Creditors and Concessionaire sha i**ediate1 infor* 'RP in writin+ of such defaut.
'RP sha, within one hundred ei+ht1 $A98% Da1s fro* receipt of the 0oint written notice of the 5npaid
Creditors and Concessionaire, either $i% ta/e over the Deveop*ent @aciit1 and assu*e the #ttendant
3ia.iities, or $ii% aow the 5npaid Creditors, if Cuaified, to .e su.stituted as concessionaire and operator of
the Deveop*ent @aciit1 in accordance with the ter*s and conditions hereof, or desi+nate a Cuaified
operator accepta.e to 'RP to operate the Deveop*ent @aciit1, i/ewise under the ter*s and conditions of
this #+ree*ent> Provided that if at the end of the A98&da1 period 'RP sha not have served the 5npaid
Creditors and Concessionaire written notice of its choice, 'RP sha .e dee*ed to have eected to ta/e over
the Deveop*ent @aciit1 with the conco*itant assu*ption of #ttendant 3ia.iities.
$c% If 'RP shoud, .1 written notice, aow the 5npaid Creditors to .e su.stituted as concessionaire, the atter
sha for* and or+ani:e a concession co*pan1 Cuaified to ta/e over the operation of the Deveop*ent
@aciit1. If the concession co*pan1 shoud eect to desi+nate an operator for the Deveop*ent @aciit1, the
concession co*pan1 sha in +ood faith identif1 and desi+nate a Cuaified operator accepta.e to 'RP within
one hundred ei+ht1 $A98% da1s fro* receipt of 'RPMs written notice. If the concession co*pan1, actin+ in
+ood faith and with due dii+ence, is una.e to desi+nate a Cuaified operator within the aforesaid period, then
'RP sha at the end of the A98&da1 period ta/e over the Deveop*ent @aciit1 and assu*e #ttendant
3ia.iities.
The ter* 6#ttendant 3ia.iities6 under the 1997 Conc3110on A7r3343n/ is defined asD
#ttendant 3ia.iities refer to a a*ounts recorded and fro* ti*e to ti*e outstandin+ in the .oo/s of the
Concessionaire a1 o80n7 /o Un5a0 Cr30/or1 8ho ha93 5ro903, .oan3 or a9anc3 -(n1 ac/(a..)
(13 -or /h3 ProH3c/, incudin+ a interests, penaties, associated fees, char+es, surchar+es, inde*nities,
rei*.urse*ents and other reated e?penses, and further incudin+ a*ounts owed .1 Concessionaire to its
suppiers, contractors and su.&contractors.
5nder the a.ove Cuoted portions of Section !.8! in reation to the definition of 6#ttendant 3ia.iities,6 3-a(./ 2)
PIATCO o- 0/1 .oan1 (13 /o -0nanc3 /h3 NAIA IPT III 5roH3c/ /r0773r1 /h3 occ(rr3nc3 o- c3r/a0n 393n/1 /ha/
.3a1 /o /h3 a11(45/0on 2) /h3 Go93rn43n/ o- /h3 .0a20.0/) -or /h3 .oan1. On1 in one instance *a1 the
'overn*ent escape the assu*ption of PI#TCOMs ia.iities, i.e., when the 'overn*ent so eects and aows a Cuaified
operator to ta/e over as Concessionaire. !o8393r, /h01 c0rc(41/anc3 01 353n3n/ on /h3 3<01/3nc3 an a9a0.a20.0/)
o- a B(a.0-03 o53ra/or 8ho 01 80..0n7 /o /a63 o93r /h3 r07h/1 an o2.07a/0on1 o- PIATCO (n3r /h3 con/rac/, a
c0rc(41/anc3 /ha/ 01 no/ 3n/0r3.) 80/h0n /h3 con/ro. o- /h3 Go93rn43n/.
Eithout +oin+ into the vaidit1 of this provision at this 0uncture, suffice it to state that Section !.8! of the A,,-
Concession #+ree*ent *a1 .e considered a for* of securit1 for the oans PI#TCO has o.tained to finance the
pro0ect, an option that was not *ade avaia.e in the draft Concession #+ree*ent. Section !.8! is an i*portant
a*end*ent to the A,,- Concession #+ree*ent .ecause it +rants PI#TCO a -0nanc0a. a9an/a73 or 23n3-0/ 8h0ch
8a1 no/ 5r390o(1.) 4a3 a9a0.a2.3 (r0n7 /h3 200n7 5roc311. This financia advanta+e is a si+nificant
*odification that transates to .etter ter*s and conditions for PI#TCO.
PI#TCO, however, ar+ues that the parties to the .iddin+ procedure ac/nowed+e that the draft Concession #+ree*ent
is su.0ect to a*end*ent .ecause the =id Docu*ents per*it financin+ or .orrowin+. The1 cai* that it was the enders
who proposed the a*end*ents to the draft Concession #+ree*ent which resuted in the A,,- Concession #+ree*ent.
Ee a+ree that it is not inconsistent with the rationae and purpose of the =OT 3aw to aow the pro0ect proponent or
the winnin+ .idder to o.tain financin+ for the pro0ect, especia1 in this case which invoves the construction,
operation and *aintenance of the N#I# IPT III. E?pected1, co*piance .1 the pro0ect proponent of its underta/in+s
therein woud invove a su.stantia a*ount of invest*ent. It is therefore inevita.e for the awardee of the contract to
see/ aternate sources of funds to support the pro0ect. =e that as it *a1, this Court *aintains that a*end*ents to the
contract .idded upon shoud awa1s confor* to the +enera poic1 on pu.ic .iddin+ if such procedure is to .e faithfu
to its rea nature and purpose. =1 its ver1 nature and characteristic, co*petitive pu.ic .iddin+ ai*s to protect the
pu.ic interest .1 +ivin+ the pu.ic the .est possi.e advanta+es throu+h open co*petition.!" It has .een hed that the
three principes in pu.ic .iddin+ are $A% the offer to the pu.ic> $)% opportunit1 for co*petition> and $B% a .asis for the
e?act co*parison of .ids. # re+uation of the *atter which e?cudes an1 of these factors destro1s the distinctive
character of the s1ste* and thwarts the purpose of its adoption.!( These are the .asic para*eters which ever1 awardee
of a contract .idded out *ust confor* to, reCuire*ents of financin+ and .orrowin+ notwithstandin+. Thus, upon a
concrete showin+ that, as in this case, the contract si+ned .1 the +overn*ent and the contract&awardee is an entire1
different contract fro* the contract .idded, courts shoud not hesitate to stri/e down said contract in its entiret1 for
vioation of pu.ic poic1 on pu.ic .iddin+. # strict adherence on the principes, rues and re+uations on pu.ic
.iddin+ *ust .e sustained if on1 to preserve the inte+rit1 and the faith of the +enera pu.ic on the procedure.
Pu.ic .iddin+ is a standard practice for procurin+ +overn*ent contracts for pu.ic service and for furnishin+ suppies
and other *aterias. It ai*s to secure for the +overn*ent the owest possi.e price under the *ost favora.e ter*s and
conditions, to curtai favoritis* in the award of +overn*ent contracts and avoid suspicion of ano*aies and it paces
a .idders in eCua footin+.!- An) 7o93rn43n/ ac/0on 8h0ch 53r40/1 an) 1(21/an/0a. 9ar0anc3 23/833n /h3
con0/0on1 (n3r 8h0ch /h3 201 ar3 0n90/3 an /h3 con/rac/ 3<3c(/3 a-/3r /h3 a8ar /h3r3o- 01 a 7ra93 a2(13
o- 01cr3/0on a4o(n/0n7 /o .ac6 or 3<c311 o- H(r010c/0on 8h0ch 8arran/1 5ro53r H(0c0a. ac/0on.
In view of the a.ove discussion, the fact that the fore+oin+ su.stantia a*end*ents were *ade on the 1997
Conc3110on A7r3343n/ renders the sa*e nu and void for .ein+ con/rar) /o 5(2.0c 5o.0c). These a*end*ents
convert the A,,- Concession #+ree*ent to an 3n/0r3.) 0--3r3n/ a7r3343n/ fro* the contract .idded out or the draft
Concession #+ree*ent. It is not difficut to see that the a*end*ents on $A% the t1pes of fees or char+es that are su.0ect
to 7I## re+uation or contro and the e?tent thereof and $)% the assu*ption .1 the 'overn*ent, under certain
conditions, of the ia.iities of PI#TCO 0r3c/.) /ran1.a/31 concr3/3 -0nanc0a. a9an/a731 /o PIATCO /ha/ 83r3
5r390o(1.) no/ a9a0.a2.3 (r0n7 /h3 200n7 5roc311. These a*end*ents cannot .e ta/en as *ere1 suppe*ents to
or i*pe*entin+ provisions of those aread1 e?istin+ in the draft Concession #+ree*ent. The a*end*ents discussed
a.ove present new ter*s and conditions which provide financia .enefit to PI#TCO which *a1 have atered the
technica and financia para*eters of other .idders had the1 /nown that such ter*s were avaia.e.
III
D0r3c/ Go93rn43n/ G(aran/33
#rtice IV, Section !.8!$.% and $c%, in reation to #rtice A.8(, of the A,,- Concession #+ree*ent providesD
Section !.8! #ssi+n*ent
??? ??? ???
$.% In the event Concessionaire shoud 3-a(./ 0n /h3 5a)43n/ o- an A//3nan/ L0a20.0/), and the defaut
resuted in the acceeration of the pa1*ent due date of the #ttendant 3ia.iit1 prior to its stated date of
*aturit1, the 5npaid Creditors and Concessionaire sha i**ediate1 infor* 'RP in writin+ of such defaut.
'RP sha within one hundred ei+ht1 $A98% da1s fro* receipt of the 0oint written notice of the 5npaid
Creditors and Concessionaire, either $i% ta/e over the Deveop*ent @aciit1 and a11(43 /h3 A//3nan/
L0a20.0/031, or $ii% aow the 5npaid Creditors, if Cuaified to .e su.stituted as concessionaire and operator of
the Deveop*ent faciit1 in accordance with the ter*s and conditions hereof, or desi+nate a Cuaified operator
accepta.e to 'RP to operate the Deveop*ent @aciit1, i/ewise under the ter*s and conditions of this
#+ree*ent> Provided, that if at the end of the A98&da1 period 'RP sha not have served the 5npaid Creditors
and Concessionaire written notice of its choice, GRP 1ha.. 23 3343 /o ha93 3.3c/3 /o /a63 o93r /h3
D393.o543n/ Fac0.0/) 80/h /h3 conco40/an/ a11(45/0on o- A//3nan/ L0a20.0/031.
$c% If 'RP, .1 written notice, aow the 5npaid Creditors to .e su.stituted as concessionaire, the atter sha
for* and or+ani:e a concession co*pan1 Cuaified to ta/eover the operation of the Deveop*ent @aciit1. If
the concession co*pan1 shoud eect to desi+nate an operator for the Deveop*ent @aciit1, the concession
co*pan1 sha in +ood faith identif1 and desi+nate a Cuaified operator accepta.e to 'RP within one hundred
ei+ht1 $A98% da1s fro* receipt of 'RPMs written notice. If the concession co*pan1, actin+ in +ood faith and
with due dii+ence, is una.e to desi+nate a Cuaified operator within the aforesaid period, /h3n GRP sha at
the end of the A98&da1 period /a63 o93r /h3 D393.o543n/ Fac0.0/) an a11(43 A//3nan/ L0a20.0/031.
G.
S3c/0on 1.06. A//3nan/ L0a20.0/031
#ttendant 3ia.iities refer to a.. a4o(n/1 r3cor3 an -ro4 /043 /o /043 o(/1/an0n7 0n /h3 2oo61 o- /h3
Conc3110ona0r3 a1 o80n7 /o Un5a0 Cr30/or1 who have provided, oaned or advanced funds actua1 used
for the Pro0ect, incudin+ a interests, penaties, associated fees, char+es, surchar+es, inde*nities,
rei*.urse*ents and other reated e?penses, and further incudin+ a*ounts owed .1 Concessionaire to its
suppiers, contractors and su.&contractors.!9
It is cear fro* the a.ove&Cuoted provisions that Go93rn43n/, 0n /h3 393n/ /ha/ PIATCO 3-a(./1 0n 0/1 .oan
o2.07a/0on1, 01 o2.07a/3 /o 5a) 6a a*ounts recorded and fro* ti*e to ti*e outstandin+ fro* the .oo/s6 of PI#TCO
which the atter owes to its creditors.!, These a*ounts incude 6a interests, penaties, associated fees, char+es,
surchar+es, inde*nities, rei*.urse*ents and other reated e?penses.6"8 This o.i+ation of the 'overn*ent to pa1
PI#TCOMs creditors upon PI#TCOMs defaut woud arise if the 'overn*ent opts to ta/e over N#I# IPT III. It shoud
.e noted, however, that even if the 'overn*ent chooses the second option, which is to aow PI#TCOMs unpaid
creditors operate N#I# IPT III, the 'overn*ent is sti at a ris/ of .ein+ ia.e to PI#TCOMs creditors shoud the atter
.e una.e to desi+nate a Cuaified operator within the prescri.ed period."A In effect,8ha/393r o5/0on /h3
Go93rn43n/ choo131 /o /a63 0n /h3 393n/ o- PIATCOA1 -a0.(r3 /o -(.-0.. 0/1 .oan o2.07a/0on1, /h3 Go93rn43n/ 01
1/0.. a/ a r016 o- a11(40n7 PIATCOA1 o(/1/an0n7 .oan1. This is due to the fact that the 'overn*ent woud on1 .e
free fro* assu*in+ PI#TCOMs de.ts if the unpaid creditors woud .e a.e to desi+nate a Cuaified operator within the
period provided for in the contract. Thus, /h3 Go93rn43n/A1 a11(45/0on o- .0a20.0/) 01 90r/(a..) o(/ o- 0/1 con/ro..
The 'overn*ent under the circu*stances provided for in the A,,- Concession #+ree*ent is at the *erc1 of the
e?istence, avaia.iit1 and wiin+ness of a Cuaified operator. The a.ove contractua provisions constitute a direct
+overn*ent +uarantee which is prohi.ited .1 aw.
One of the *ain i*petus for the enact*ent of the =OT 3aw is the ac/ of +overn*ent funds to construct the
infrastructure and deveop*ent pro0ects necessar1 for econo*ic +rowth and deveop*ent. This is wh1 private sector
resources are .ein+ tapped in order to finance these pro0ects. The =OT aw aows the private sector to participate, and
is in fact encoura+ed to do so .1 wa1 of incentives, such as *ini*i:in+ the unsta.e fow of returns, ") provided that
the +overn*ent woud not have to unnecessari1 e?pend scarce1 avaia.e funds for the pro0ect itsef. #s such, direct
+uarantee, su.sid1 and eCuit1 .1 the +overn*ent in these pro0ects are strict1 prohi.ited."B Th01 01 2(/ .o70ca. -or 0-
/h3 7o93rn43n/ 8o(. 0n /h3 3n 1/0.. 23 a/ a r016 o- 5a)0n7 /h3 32/1 0nc(rr3 2) /h3 5r09a/3 3n/0/) 0n /h3 +OT
5roH3c/1, /h3n /h3 5(r5o13 o- /h3 .a8 01 1(293r/3.
Section )$n% of the =OT 3aw defines direct +uarantee as foowsD
$n% Direct +overn*ent +uarantee J #n a+ree*ent where.1 the +overn*ent or an1 of its a+encies or oca
+overn*ent units assu*e responsi.iit1 for the r35a)43n/ o- 32/ 0r3c/.) 0nc(rr3 2) /h3 5roH3c/
5ro5on3n/ in i*pe*entin+ the pro0ect 0n ca13 o- a .oan 3-a(./.
Cear1 .1 providin+ that the 'overn*ent 6assu*es6 the attendant ia.iities, which consists of PI#TCOMs unpaid
de.ts, the A,,- Concession #+ree*ent provided for a direct +overn*ent +uarantee for the de.ts incurred .1 PI#TCO
in the i*pe*entation of the N#I# IPT III pro0ect. It is of no *o*ent that the reevant sections are su.su*ed under
the tite of 6assi+n*ent6. The provisions providin+ for direct +overn*ent +uarantee which is prohi.ited .1 aw is cear
fro* the ter*s thereof.
The fact that the #RC# superseded the A,,- Concession #+ree*ent did not cure this fata defect. #rtice IV, Section
!.8!$c%, in reation to #rtice I, Section A.8(, of the #RC# providesD
Section !.8! Securit1
??? ??? ???
$c% GRP a7r331 with Concessionaire $PI#TCO% that 0/ 1ha.. n37o/0a/3 0n 7oo -a0/h an 3n/3r 0n/o 0r3c/
a7r3343n/ 80/h /h3 S3n0or L3n3r1, or with an a+ent of such Senior 3enders $which a+ree*ent sha .e
su.0ect to the approva of the =an+/o Sentra n+ Piipinas%, in such for* as *a1 .e reasona.1 accepta.e to
.oth 'RP and Senior 3enders, with re+ard, inter aia, to the foowin+ para*etersD
??? ??? ???
$iv% I- the Concessionaire LPIATCOM 01 0n 3-a(./ (n3r a 5a)43n/ o2.07a/0on o83 /o /h3 S3n0or
L3n3r1, and as a resut thereof the Senior 3enders have .eco*e entited to acceerate the Senior
3oans, the Senior 3enders sha have the ri+ht to notif1 'RP of the sa*e, and without pre0udice to
an1 other ri+hts of the Senior 3enders or an1 Senior 3endersM a+ent *a1 have $incudin+ without
i*itation under securit1 interests +ranted in favor of the Senior 3enders%, to either in +ood faith
identif1 and desi+nate a no*inee which is Cuaified under su.&cause $viii%$1% .eow to operate the
Deveop*ent @aciit1 2N#I# Ter*ina B4 or transfer the ConcessionaireMs 2PI#TCO4 ri+hts and
o.i+ations under this #+ree*ent to a transferee which is Cuaified under su.&cause $viii% .eow>
??? ??? ???
$vi% if the Senior 3enders, actin+ in +ood faith and usin+ reasona.e efforts, are una.e to desi+nate a
no*inee or effect a transfer in ter*s and conditions satisfactor1 to the Senior 3enders within one
hundred ei+ht1 $A98% da1s after +ivin+ 'RP notice as referred to respective1 in $iv% or $v% a.ove,
then 'RP and the Senior 3enders sha endeavor in +ood faith to enter into an1 other arran+e*ent
reatin+ to the Deveop*ent @aciit1 2N#I# Ter*ina B4 $other than a turnover of the Deveop*ent
@aciit1 2N#I# Ter*ina B4 to 'RP% within the foowin+ one hundred ei+ht1 $A98% da1s. I- no
a7r3343n/ reatin+ to the Deveop*ent @aciit1 2N#I# Ter*ina B4 is arrived at .1 'RP and the
Senior 3enders within the said A98&da1 period, then at the end thereof the D393.o543n/ Fac0.0/)
LNAIA T3r40na. &M 1ha.. 23 /ran1-3rr3 2) /h3 Conc3110ona0r3 LPIATCOM /o GRP or 0/1 3107n33
an GRP 1ha.. 4a63 a /3r40na/0on 5a)43n/ /o Conc3110ona0r3 LPIATCOM 3B(a. /o /h3
A55ra013 ?a.(3 Ca1 h3r30na-/3r 3-0n3D o- /h3 D393.o543n/ Fac0.0/) LNAIA T3r40na. &M or /h3
1(4 o- /h3 A//3nan/ L0a20.0/031, 0- 7r3a/3r. Notwithstandin+ Section 9.8A$c% hereof, this
#+ree*ent sha .e dee*ed ter*inated upon the transfer of the Deveop*ent @aciit1 2N#I#
Ter*ina B4 to 'RP pursuant hereto>
??? ??? ???
S3c/0on 1.06. A//3nan/ L0a20.0/031
A//3nan/ L0a20.0/031 r3-3r /o a.. a4o(n/1 in each case supported .1 verifia.e evidence fro* ti*e to
ti*eo83 or 8h0ch 4a) 23co43 o80n7 2) Conc3110ona0r3 LPIATCOM /o S3n0or L3n3r1 or an) o/h3r
53r1on1 or 3n/0/031 8ho have provided, oaned, or advanced funds or 5ro903 -0nanc0a. -ac0.0/031 /o
Conc3110ona0r3 LPIATCOM for the Pro0ect 2N#I# Ter*ina B4, 0nc.(0n7, 80/ho(/ .040/a/0on, a.. 5r0nc05a.,
0n/3r31/, a11oc0a/3 -331, char731, r3042(r1343n/1, an o/h3r r3.a/3 3<53n131 $incudin+ the fees,
char+es and e?penses of an1 a+ents or trustees of such persons or entities%, whether pa1a.e at *aturit1, .1
acceeration or otherwise, and further incudin+ a*ounts owed .1 Concessionaire 2PI#TCO4 to its
professiona consutants and advisers, suppiers, contractors and su.&contractors."!
It is cear fro* the fore+oin+ contractua provisions that in the event that PI#TCO fais to fufi its oan o.i+ations to
its Senior 3enders, the 'overn*ent is o.i+ated to direct1 ne+otiate and enter into an a+ree*ent reatin+ to N#I#
IPT III with the Senior 3enders, shoud the atter fai to appoint a Cuaified no*inee or transferee who wi ta/e the
pace of PI#TCO. If the Senior 3enders and the 'overn*ent are una.e to enter into an a+ree*ent after the prescri.ed
period, the 'overn*ent *ust then pa1 PI#TCO, upon transfer of N#I# IPT III to the 'overn*ent, ter*ination
pa1*ent eCua to the appraised vaue of the pro0ect or /h3 9a.(3 o- /h3 a//3nan/ .0a20.0/031 8h0ch393r 01 7r3a/3r.
#ttendant ia.iities as defined in the #RC# incudes a a*ounts owed or thereafter *a1 .e owed .1 PI#TCO not
on1 to the Senior 3enders with who* PI#TCO has defauted in its oan o.i+ations .ut to a other persons who *a1
have oaned, advanced funds or provided an1 other t1pe of financia faciities to PI#TCO for N#I# IPT III. The
a*ount of PI#TCOMs de.t that the 'overn*ent woud have to pa1 as a resut of PI#TCOMs defaut in its oan
o.i+ations && in case no Cuaified no*inee or transferee is appointed .1 the Senior 3enders and no other a+ree*ent
reatin+ to N#I# IPT III has .een reached .etween the 'overn*ent and the Senior 3enders && incudes, .ut is not
i*ited to, 6a principa, interest, associated fees, char+es, rei*.urse*ents, and other reated e?penses . . . whether
pa1a.e at *aturit1, .1 acceeration or otherwise.6""
I/ 01 c.3ar -ro4 /h3 -or37o0n7 /ha/ /h3 ARCA 5ro9031 -or a 0r3c/ 7(aran/33 2) /h3 7o93rn43n/ /o 5a)
PIATCOA1 .oan1 no/ on.) /o 0/1 S3n0or L3n3r1 2(/ a.. o/h3r 3n/0/031 8ho 5ro903 PIATCO -(n1 or 13r90c31
(5on PIATCOA1 3-a(./ 0n 0/1 .oan o2.07a/0on 80/h 0/1 S3n0or L3n3r1. The fact that the 'overn*entMs o.i+ation to
pa1 PI#TCOMs enders for the atterMs o.i+ation woud on1 arise after the Senior 3enders fai to appoint a Cuaified
no*inee or transferee does not detract fro* the fact that, shoud the conditions as stated in the contract occur, the
#RC# 1/0.. o.i+ates the 'overn*ent to pa1 an1 and a a*ounts owed .1 PI#TCO to its enders in connection with
N#I# IPT III. Eorse, the conditions that woud *a/e the 'overn*ent ia.e for PI#TCOMs de.ts is tri++ered .1
PI#TCOMs own defaut of its oan o.i+ations to its Senior 3enders to which oan contracts the 'overn*ent was never
a part1 to. The 'overn*ent was not even +iven an option as to what course of action it shoud ta/e in case PI#TCO
defauted in the pa1*ent of its senior oans. The 'overn*ent, upon PI#TCOMs defaut, woud .e *ere1 notified .1
the Senior 3enders of the sa*e and it is the Senior 3enders who are authori:ed to appoint a Cuaified no*inee or
transferee. Shoud the Senior 3enders fai to *a/e such an appoint*ent, the 'overn*ent is then auto*atica1
o.i+ated to 6direct1 dea and ne+otiate6 with the Senior 3enders re+ardin+ N#I# IPT III. The on1 wa1 the
'overn*ent woud not .e ia.e for PI#TCOMs de.t is for a Cuaified no*inee or transferee to .e appointed in pace of
PI#TCO to continue the construction, operation and *aintenance of N#I# IPT III. This 6pre&condition6, however,
wi not ta/e the contract out of the a*.it of a direct +uarantee .1 the +overn*ent as the e?istence, avaia.iit1 and
wiin+ness of a Cuaified no*inee or transferee is tota1 out of the +overn*entMs contro. #s such /h3 Go93rn43n/ 01
90r/(a..) a/ /h3 43rc) o- PIATCO $that it woud not defaut on its oan o.i+ations to its Senior 3enders%, the Senior
3enders $that the1 woud appoint a Cuaified no*inee or transferee or a+ree to so*e other arran+e*ent with the
'overn*ent% and the e?istence of a Cuaified no*inee or transferee who is a.e and wiin+ to ta/e the pace of
PI#TCO in N#I# IPT III.
Th3 5ro1cr05/0on a7a0n1/ 7o93rn43n/ 7(aran/33 0n an) -or4 01 on3 o- /h3 5o.0c) con103ra/0on1 23h0n /h3 +OT
La8. Cear1, in the present case, the #RC# o.i+ates the 'overn*ent to pa1 for a oans, advances and o.i+ations
arisin+ out of financia faciities e?tended to PI#TCO for the i*pe*entation of the N#I# IPT III pro0ect shoud
PI#TCO defaut in its oan o.i+ations to its Senior 3enders and the atter fais to appoint a Cuaified no*inee or
transferee. This in effect woud *a/e the 'overn*ent ia.e for PI#TCOMs oans shoud the conditions as set forth in
the #RC# arise. This is a for* of direct +overn*ent +uarantee.
The =OT 3aw and its i*pe*entin+ rues provide that in order for an unsoicited proposa for a =OT pro0ect *a1 .e
accepted, the foowin+ conditions *ust first .e *etD $A% the pro0ect invoves a new concept in technoo+1 andFor is
not part of the ist of priorit1 pro0ects, C2D no 0r3c/ 7o93rn43n/ 7(aran/33, 1(210) or 3B(0/) 01 r3B(0r3, and $B%
the +overn*ent a+enc1 or oca +overn*ent unit has invited .1 pu.ication other interested parties to a pu.ic .iddin+
and conducted the sa*e."( The faiure to *eet an1 of the a.ove conditions wi resut in the denia of the proposa. It
is further provided that the presence of direct +overn*ent +uarantee, su.sid1 or eCuit1 wi 6necessari1 disCuaif1 a
proposa fro* .ein+ treated and accepted as an unsoicited proposa.6"- The =OT 3aw cear1 and strict1 prohi.its
direct +overn*ent +uarantee, su.sid1 and eCuit1 in unsoicited proposas that the *ere incusion of a provision to that
effect is fata and is sufficient to den1 the proposa. It stands to reason therefore that if a proposa can .e denied .1
reason of the e?istence of direct +overn*ent +uarantee, then its incusion in the contract e?ecuted after the said
proposa has .een accepted is i/ewise sufficient to invaidate the contract itsef. # prohi.ited provision, the incusion
of which woud resut in the denia of a proposa cannot, and shoud not, .e aowed to ater on .e inserted in the
contract resutin+ fro* the said proposa. The .asic rues of 0ustice and fair pa1 aone *iitate a+ainst such an
occurrence and *ust not, therefore, .e countenanced particuar1 in this instance where the +overn*ent is e?posed to
the ris/ of shouderin+ hundreds of *iion of doars in de.t.
This Court has on+ and consistent1 adhered to the e+a *a?i* that those that cannot .e done direct1 cannot .e
done indirect1."9 To 3c.ar3 /h3 PIATCO con/rac/1 9a.0 3150/3 /h3 c.3ar 1/a/(/or) 5roh020/0on a7a0n1/ a 0r3c/
7o93rn43n/ 7(aran/33 8o(. no/ on.) 4a63 a 4oc63r) o- 8ha/ /h3 +OT La8 13361 /o 5r393n/ $$ 8h0ch 01 /o
3<5o13 /h3 7o93rn43n/ /o /h3 r016 o- 0nc(rr0n7 a 4on3/ar) o2.07a/0on r31(./0n7 -ro4 a con/rac/ o- .oan 23/833n
/h3 5roH3c/ 5ro5on3n/ an 0/1 .3n3r1 an /o 8h0ch /h3 Go93rn43n/ 01 no/ a 5ar/) /o $$ 2(/ 8o(. a.1o r3n3r
/h3 +OT La8 (13.311 -or 8ha/ 0/ 13361 /o ach0393 N$ /o 4a63 (13 o- /h3 r31o(rc31 o- /h3 5r09a/3 13c/or 0n /h3
K-0nanc0n7, o53ra/0on an 4a0n/3nanc3 o- 0n-ra1/r(c/(r3 an 393.o543n/ 5roH3c/1K", 8h0ch ar3 n3c311ar) -or
na/0ona. 7ro8/h an 393.o543n/ 2(/ 8h0ch /h3 7o93rn43n/, (n-or/(na/3.), co(. 0..$a--or /o -0nanc3 a/ /h01
5o0n/ 0n /043.
I?
T345orar) /a63o93r o- 2(10n311 a--3c/3 80/h 5(2.0c 0n/3r31/
#rtice VII, Section A- of the A,9- Constitution providesD
Section A-. In ti*es of nationa e*er+enc1, when the pu.ic interest so reCuires, the State *a1, durin+ the
e*er+enc1 and under reasona.e ter*s prescri.ed .1 it, te*porari1 ta/e over or direct the operation of an1
private1 owned pu.ic utiit1 or .usiness affected with pu.ic interest.
The a.ove provision pertains to the ri+ht of the State in ti*es of nationa e*er+enc1, and in the e?ercise of its poice
power, to te*porari1 ta/e over the operation of an1 .usiness affected with pu.ic interest. In the A,9( Constitutiona
Co**ission, the ter* 6nationa e*er+enc16 was defined to incude threat fro* e?terna a++ression, caa*ities or
nationa disasters, .ut not stri/es 6uness it is of such proportion that woud para1:e +overn*ent service.6(8 The
duration of the e*er+enc1 itsef is the deter*inin+ factor as to how on+ the te*porar1 ta/eover .1 the +overn*ent
woud ast.(A The te*porar1 ta/eover .1 the +overn*ent e?tends on1 to the operation of the .usiness and not to the
ownership thereof. #s such the 7o93rn43n/ 01 no/ r3B(0r3 /o co453n1a/3 /h3 5r09a/3 3n/0/)$o8n3r o- /h3 1a0
2(10n311 a1 /h3r3 01 no /ran1-3r o- o8n3r1h05, whether per*anent or te*porar1. The private entit1&owner affected
.1 the te*porar1 ta/eover cannot, i/ewise, cai* 0ust co*pensation for the use of the said .usiness and its properties
as the te*porar1 ta/eover .1 the +overn*ent is in e?ercise of its 5o.0c3 5o83r and not of its power of e*inent
do*ain.
#rtice V, Section ".A8 $c% of the A,,- Concession #+ree*ent providesD
Section ".A8 Te*porar1 Ta/e&over of operations .1 'RP.
G.
$c% In the event the deveop*ent @aciit1 or an1 part thereof andFor the operations of Concessionaire or an1
part thereof, .eco*e the su.0ect *atter of or .e incuded in an1 notice, notification, or decaration concernin+
or reatin+ to acCuisition, sei:ure or appropriation .1 'RP in ti*es of war or nationa e*er+enc1, 'RP sha,
.1 written notice to Concessionaire, i**ediate1 ta/e over the operations of the Ter*ina andFor the Ter*ina
Co*pe?. Durin+ such ta/e over .1 'RP, the Concession Period sha .e suspended> provided, that upon
ter*ination of war, hostiities or nationa e*er+enc1, the operations sha .e returned to Concessionaire, at
which ti*e, the Concession period sha co**ence to run a+ain.Conc3110ona0r3 1ha.. 23 3n/0/.3 /o
r3a1ona2.3 co453n1a/0on -or /h3 (ra/0on o- /h3 /345orar) /a63 o93r 2) GRP, 8h0ch co453n1a/0on
1ha.. /a63 0n/o acco(n/ /h3 r3a1ona2.3 co1/ -or /h3 (13 o- /h3 T3r40na. anEor T3r40na. Co45.3<,
C8h0ch 01 0n /h3 a4o(n/ a/ .3a1/ 3B(a. /o /h3 32/ 13r90c3 r3B(0r343n/1 o- Conc3110ona0r3, if the
te*porar1 ta/e over shoud occur at the ti*e when Concessionaire is sti servicin+ de.ts owed to pro0ect
enders%, an1 oss or da*a+e to the Deveop*ent @aciit1, and other conseCuentia da*a+es. If the parties
cannot a+ree on the reasona.e co*pensation of Concessionaire, or on the ia.iit1 of 'RP as aforesaid, the
*atter sha .e resoved in accordance with Section A8.8A 2#r.itration4. #n1 a*ount deter*ined to .e
pa1a.e .1 'RP to Concessionaire sha .e offset fro* the a*ount ne?t pa1a.e .1 Concessionaire to 'RP.()
PIATCO canno/, 2) 43r3 con/rac/(a. 1/05(.a/0on, con/ra93n3 /h3 Con1/0/(/0ona. 5ro9010on on /345orar)
7o93rn43n/ /a63o93r an o2.07a/3 /h3 7o93rn43n/ /o 5a) Kr3a1ona2.3 co1/ -or /h3 (13 o- /h3 T3r40na. anEor
T3r40na. Co45.3<.K(B #rtice VII, section A- of the A,9- Constitution envisions a situation wherein the e?i+encies
of the ti*es necessitate the +overn*ent to 6te*porari1 ta/e over or direct the operation of an1 private1 owned pu.ic
utiit1 or .usiness affected with pu.ic interest.6 It is the wefare and interest of the pu.ic which is the para*ount
consideration in deter*inin+ whether or not to te*porari1 ta/e over a particuar .usiness. Cear1, the State in
effectin+ the te*porar1 ta/eover is e?ercisin+ its poice power. Poice power is the 6*ost essentia, insistent, and
ii*ita.e of powers.6(! Its e?ercise therefore *ust not .e unreasona.1 ha*pered nor its e?ercise .e a source of
o.i+ation .1 the +overn*ent in the a.sence of da*a+e due to ar.itrariness of its e?ercise. (" Thus, reCuirin+ the
+overn*ent to pa1 reasona.e co*pensation for the reasona.e use of the propert1 pursuant to the operation of the
.usiness contravenes the Constitution.
?
R37(.a/0on o- Mono5o.031
# *onopo1 is 6a privie+e or pecuiar advanta+e vested in one or *ore persons or co*panies, consistin+ in the
e?cusive ri+ht $or power% to carr1 on a particuar .usiness or trade, *anufacture a particuar artice, or contro the sae
of a particuar co**odit1.6(( The A,9- Con1/0/(/0on 1/r0c/.) r37(.a/31 4ono5o.031, whether private or pu.ic, and
even provides for their prohi.ition if pu.ic interest so reCuires. #rtice VII, Section A, of the A,9- Constitution
statesD
Sec. A,. The state sha re+uate or prohi.it *onopoies when the pu.ic interest so reCuires. No co*.inations
in restraint of trade or unfair co*petition sha .e aowed.
Cear1, *onopoies are not per se prohi.ited .1 the Constitution .ut *a1 .e per*itted to e?ist to aid the +overn*ent
in carr1in+ on an enterprise or to aid in the perfor*ance of various services and functions 0n /h3 0n/3r31/ o- /h3
5(2.0c.(- Nonetheess, a deter*ination *ust first .e *ade as to whether pu.ic interest reCuires a *onopo1. #s
*onopoies are su.0ect to a.uses that can infict severe pre0udice to the pu.ic, the1 are su.0ect to a hi+her eve of
State re+uation than an ordinar1 .usiness underta/in+.
In the cases at .ar, PI#TCO, under the A,,- Concession #+ree*ent and the #RC#, is +ranted the 63<c.(1093 r07h/ to
operate a co**ercia internationa passen+er ter*ina within the Isand of 3u:on6 at the N#I# IPT III.(9This is with
the e?ception of aread1 e?istin+ internationa airports in 3u:on such as those ocated in the Su.ic =a1 @reeport
Specia Econo*ic Uone $6S=@SEU6%, Car/ Specia Econo*ic Uone $6CSEU6% and in 3aoa+ Cit1.(, #s such, upon
co**ence*ent of PI#TCOMs operation of N#I# IPT III, Ter*inas A and ) of N#I# woud cease to function as
internationa passen+er ter*inas. This, however, does not prevent 7I## to use Ter*inas A and ) as do*estic
passen+er ter*inas or in an1 other *anner as it *a1 dee* appropriate e?cept those activities that woud co*pete
with N#I# IPT III in the atterMs operation as an internationa passen+er ter*ina. -8 The ri+ht +ranted to PI#TCO
to 3<c.(1093.) o53ra/3 NAIA IPT III woud .e for a period of twent1&five $)"% 1ears fro* the In&Service Date-A and
renewa.e for another twent1&five $)"% 1ears at the option of the +overn*ent.-) +o/h /h3 1997 Conc3110on
A7r3343n/ an /h3 ARCA -(r/h3r 5ro903 /ha/, 0n 9038 o- /h3 3<c.(1093 r07h/ 7ran/3 /o PIATCO, /h3
conc3110on con/rac/1 o- /h3 13r90c3 5ro903r1 c(rr3n/.) 13r90c0n7 T3r40na.1 1 an 2 8o(. no .on73r 23 r3n383
an /ho13 conc3110on con/rac/1 8ho13 3<50ra/0on ar3 1(213B(3n/ /o /h3 In$S3r90c3 Da/3 8o(. c3a13 /o 23
3--3c/093 on /h3 1a0 a/3.-B
The operation of an internationa passen+er airport ter*ina is no dou.t an underta/in+ i*.ued with pu.ic interest. In
enterin+ into a =uidSOperate&and&Transfer contract for the construction, operation and *aintenance of N#I# IPT III,
the +overn*ent has deter*ined that pu.ic interest woud .e served .etter if private sector resources were used in its
construction and an e?cusive ri+ht to operate .e +ranted to the private entit1 underta/in+ the said pro0ect, in this case
PI#TCO. Nonetheess, the privie+e +iven to PI#TCO is su.0ect to reasona.e re+uation and supervision .1 the
'overn*ent throu+h the 7I##, which is the +overn*ent a+enc1 authori:ed to operate the N#I# co*pe?, as we as
DOTC, the depart*ent to which 7I## is attached.-!
This is in accord with the Constitutiona *andate that a *onopo1 which is not prohi.ited *ust .e re+uated.-"Ehie
it is the decared poic1 of the =OT 3aw to encoura+e private sector participation .1 6providin+ a ci*ate of *ini*u*
+overn*ent re+uations,6-( the sa*e does not *ean that 'overn*ent *ust co*pete1 surrender its soverei+n power
to protect pu.ic interest in the operation of a pu.ic utiit1 as a *onopo1. The operation of said pu.ic utiit1 can not
.e done in an ar.itrar1 *anner to the detri*ent of the pu.ic which it see/s to serve. The ri+ht +ranted to the pu.ic
utiit1 *a1 .e e?cusive .ut the e?ercise of the ri+ht cannot run riot. Thus, whie PI#TCO *a1 .e authori:ed to
e?cusive1 operate N#I# IPT III as an internationa passen+er ter*ina, the 'overn*ent, throu+h the 7I##, has the
ri+ht and the dut1 to ensure that it is done in accord with pu.ic interest. PI#TCOMs ri+ht to operate N#I# IPT III
cannot aso vioate the ri+hts of third parties.
Section B.8A$e% of the A,,- Concession #+ree*ent and the #RC# provideD
B.8A Concession Period
??? ??? ???
$e% GRP con-0r41 /ha/ c3r/a0n conc3110on a7r3343n/1 reative to certain services and operations current1
.ein+ underta/en at the Nino1 #Cuino Internationa #irport passen+er Ter*ina I ha93 a 9a.00/) 53r0o
3</3n0n7 23)on /h3 In$S3r90c3 Da/3. 'RP throu+h DOTCF7I##, con-0r41 that these services and
operations 1ha.. no/ 23 carr03 o93r to the Ter*ina and the Concessionaire is under no .37a. o2.07a/0on /o
53r40/ 1(ch carr)$o93r e?cept throu+h a separate a+ree*ent du1 entered into with Concessionaire. In the
event Concessionaire .eco*es invoved in an1 iti+ation initiated .1 an1 such concessionaire or operator,
'RP underta/es and here.1 hods Concessionaire free and har*ess on fu inde*nit1 .asis fro* and a+ainst
an1 oss andFor an1 ia.iit1 resutin+ fro* an1 such iti+ation, incudin+ the cost of iti+ation and the
reasona.e fees paid or pa1a.e to ConcessionaireMs counse of choice, a such a*ounts sha .e fu1
deducti.e .1 wa1 of an offset fro* an1 a*ount which the Concessionaire is .ound to pa1 'RP under this
#+ree*ent.
Durin+ the ora ar+u*ents on Dece*.er A8, )88), the counse for the petitioners&in&intervention for '.R. No.
A""88A stated that there are two service providers whose contracts are sti e?istin+ and whose vaidit1
e?tends .e1ond the In&Service Date. One contract re*ains vaid unti )889 and the other unti )8A8.--
Ee hod that whie the service providers present1 operatin+ at N#I# Ter*ina A do not have an a.soute ri+ht for the
renewa or the e?tension of their respective contracts, those contracts whose duration e?tends .e1ond N#I# IPT IIIMs
In&Service&Date shoud not .e undu1 pre0udiced. These contracts *ust .e respected not 0ust .1 the parties thereto .ut
aso .1 third parties. PI#TCO cannot, .1 aw and certain1 not .1 contract, render a vaid and .indin+ contract
nu+ator1. PI#TCO, .1 the *ere e?pedient of cai*in+ an e?cusive ri+ht to operate, cannot reCuire the 'overn*ent to
.rea/ its contractua o.i+ations to the service providers. In contrast to the arrastre and stevedorin+ service providers
in the case of An7.o$F0. Tra0n7 Cor5ora/0on 9. La>aro-9 whose contracts consist of te*porar1 hod&over per*its,
the affected service providers in the cases at .ar, have a vaid and .indin+ contract with the 'overn*ent, throu+h
7I##, whose period of effectivit1, as we as the other ter*s and conditions thereof, cannot .e vioated.
In fine, the efficient functionin+ of N#I# IPT III is i*.ued with pu.ic interest. The provisions of the A,,-
Concession #+ree*ent and the #RC# did not strip +overn*ent, thru the 7I##, of its ri+ht to supervise the operation
of the whoe N#I# co*pe?, incudin+ N#I# IPT III. #s the pri*ar1 +overn*ent a+enc1 tas/ed with the 0o.,-, it is
7I##Ms responsi.iit1 to ensure that whoever .1 contract is +iven the ri+ht to operate N#I# IPT III wi do so within
the .ounds of the aw and with due re+ard to the ri+hts of third parties and a.ove a, the interest of the pu.ic.
?I
CONCLUSION
In su*, this Court rues that in view of the a.sence of the reCuisite financia capacit1 of the Paircar+o Consortiu*,
predecessor of respondent PI#TCO, the award .1 the P=#C of the contract for the construction, operation and
*aintenance of the N#I# IPT III is nu and void. @urther, considerin+ that the A,,- Concession #+ree*ent contains
*ateria and su.stantia a*end*ents, which a*end*ents had the effect of convertin+ the A,,- Concession
#+ree*ent into an entire1 different a+ree*ent fro* the contract .idded upon, the A,,- Concession #+ree*ent is
si*iar1 nu and void for .ein+ contrar1 to pu.ic poic1. The provisions under Sections !.8!$.% and $c% in reation to
Section A.8( of the A,,- Concession #+ree*ent and Section !.8!$c% in reation to Section A.8( of the #RC#, which
constitute a direct +overn*ent +uarantee e?press1 prohi.ited .1, a*on+ others, the =OT 3aw and its I*pe*entin+
Rues and Re+uations are aso nu and void. The Suppe*ents, .ein+ accessor1 contracts to the #RC#, are i/ewise
nu and void.
:!EREFORE, the A,,- Concession #+ree*ent, the #*ended and Restated Concession #+ree*ent and the
Suppe*ents thereto are set aside for .ein+ nu and void.
SO ORDERED.
Davide Jr. C.J. Bellosillo Bnares-&antia'o &andoval-Gutierre" Austria-!artine" Corona and Carpio-!orales
JJ. concur.
;itu' J. see separate $dissentin+% opinion.
+an'aniban J. pease see separate opinion.
1uisumbin' J. no 0urisdiction, pease see separate opinion of ;. Vitu+ in which he concurs.
Carpio J. no part.
Calle%o &r. J. aso concur in the separate opinion of ;. Pan+ani.an.
A"*una J. 0oins the separate opinion of ;. Vitu+.
SEPARATE OPINIONS
?ITUG, J.@
This Court is .ereft of 0urisdiction to hear the petitions at .ar. The Constitution provides that the Supre*e Court sha
e?ercise ori+ina 0urisdiction over, a*on+ other actua controversies, petitions for *ertiorari pro(ibition mandamus
#uo :arranto and (abeas *orpus.A The cases in Cuestion, athou+h deno*inated to .e petitions for prohi.ition,
actua1 pra1 for the nuification of the PI#TCO contracts and to restrain respondents fro* i*pe*entin+ said
a+ree*ents for .ein+ ie+a and unconstitutiona.
Section ), Rue (" of the Rues of Court statesD
6Ehen the proceedin+s of an1 tri.una, corporation, .oard, officer or person, whether e?ercisin+ 0udicia,
Cuasi&0udicia or *inisteria functions, are without or in e?cess of its or his 0urisdiction, or with +rave a.use of
discretion a*ountin+ to ac/ or e?cess of 0urisdiction, and there is no appea or an1 other pain, speed1 and
adeCuate re*ed1 in the ordinar1 course of aw, a person a++rieved there.1 *a1 fie a verified petition in the
proper court, ae+in+ the facts with certaint1 and pra1in+ that 0ud+*ent .e rendered co**andin+ the
respondent to desist fro* further proceedin+s in the action or *atter specified therein, or otherwise +rantin+
such incidenta reiefs as aw and 0ustice *a1 reCuire.6
The rue is e?picit. # petition for prohi.ition *a1 .e fied a+ainst a tri.una, corporation, .oard, officer or person,
e?ercisin+ %udi*ial #uasi-%udi*ial or ministerial fun*tions. Ehat the petitions see/ fro* respondents do not invove
0udicia, Cuasi&0udicia or *inisteria functions. In prohi.ition, on1 e+a issues affectin+ the 0urisdiction of the
tri.una, .oard or officer invoved *a1 .e resoved on the .asis of undisputed fa*ts.) The parties ae+e, respective1,
contentious evidentiar1 facts. It woud .e difficut, if not ano*aous, to decide the 0urisdictiona issue on the .asis of
the contradictor1 factua su.*issions *ade .1 the parties.B #s the Court has so often e?horted, it is not a trier of facts.
The petitions, in effect, are in the nature of actions for decarator1 reief under Rue (B of the Rues of Court. The
Rues provide that an1 person interested under a contract *a1, .efore .reach or vioation thereof, .rin+ an action in
the appropriate Re+iona Tria Court to deter*ine an1 Cuestion of construction or vaidit1 arisin+, and for a
decaration of his ri+hts or duties thereunder.! The Supre*e Court assu*es no 0urisdiction over petitions for
decarator1 reief which are co+ni:a.e .1 re+iona tria courts."
#s I have so e?pressed in $olentino vs. &e*retar) of Finan*e( reiterated in &antia'o vs. Guin'ona Jr.- , the Supre*e
Court shoud not .e thou+ht of as havin+ .een tas/ed with the aweso*e responsi.iit1 of overseein+ the entire
.ureaucrac1. Pervasive and i*itess, such as it *a1 see* to .e under the A,9- Constitution, 0udicia power sti
succu*.s to the para*ount doctrine of separation of powers. The Court *a1 not at +ood i.ert1 intrude, in the +uise
of soverei+n i*pri*atur, into ever1 affair of +overn*ent. Ehat si+nificance can sti then re*ain of the ti*e&honored
and wide1 accai*ed principe of separation of powers if, at ever1 turn, the Court aows itsef to pass upon at wi the
disposition of a co&eCua, independent and coordinate .ranch in our s1ste* of +overn*ent. I dread to thin/ of the so
varied uncertainties that such an undue interference can ead to.
#ccordin+1, I vote for the dis*issa of the petition.
1uisumbin' and A"*una JJ. concur.
PANGANI+AN, J.@
The five contracts for the construction and the operation of Nino1 #Cuino Internationa #irport $N#I#% Ter*ina III,
the su.0ect of the consoidated Petitions .efore the Court, are repete with outri+ht vioations of aw, pu.ic poic1 and
the Constitution. The on1 proper thin+ to do is decare the* a nu and void a. initio and et the chips fa where
the1 *a1. Fiat iustitia ruat *oelum.
The facts eadin+ to this controvers1 are aread1 we presented in the ponen*ia. I sha not .urden the readers with a
retein+ thereof. Instead, I wi cut to the chase and direct1 address the two sets of +ut issuesD
A. The first issue is pro*eduralD Does the Supre*e Court have ori+ina 0urisdiction to hear and decide the PetitionsI
Coroari1, do petitioners have ocus standi and shoud this Court decide the cases without an1 *andator1 referra to
ar.itrationI
). The second one is substantive in characterD Did the su.0ect contracts vioate the Constitution, the aws, and pu.ic
poic1 to such an e?tent as to render a of the* void and ine?istentI
71 answer to a the a.ove Cuestions is a fir* 6Qes.6
Th3 Proc3(ra. I11(3@
"(r010c/0on, S/an0n7 an Ar20/ra/0on
Definite1 and sure1, the issues invoved in these Petitions are cear1 of transcendenta i*portance and of nationa
interest. The su.0ect contracts pertain to the construction and the operation of the countr1Ms pre*iere internationa
airport ter*ina & an utra*odern word&cass pu.ic utiit1 that wi pa1 a *a0or roe in the countr1Ms econo*ic
deveop*ent and serve to pro0ect a positive i*a+e of our countr1 a.road. The five .uid&operate&W&transfer $=OT%
contracts, whie entaiin+ the invest*ent of .iions of pesos in capita and the avai*ent of severa hundred *iions
of doars in oans, contain provisions that tend to esta.ish a *onopo1, reCuire the dis.urse*ents of pu.ic funds
sans appropriations, and provide +overn*ent +uarantees in vioation of statutor1 prohi.itions, as we as other
provisions eCua1 offensive to aw, pu.ic poic1 and the Constitution. Pu.ic interest wi inevita.1 .e affected
there.1.
Thus, o.0ections to these Petitions, +rounded upon $a% the hierarch1 of courts, $.% the need for ar.itration prior to
court action, and $c% the ae+ed ac/ of sufficient personait1, standin+ or interest, .ein+ in the *ain procedura
*atters, *ust now .e set aside, as the1 have .een in past cases. This Court *ust .e per*itted to perfor* its
constitutiona dut1 of deter*inin+ whether the other a+encies of +overn*ent have acted within the i*its of the
Constitution and the aws, or if the1 have +rave1 a.used the discretion entrusted to the*.A
Hierarchy of Courts
The Court has, in the past, hed that Cuestions reatin+ to +ar+antuan +overn*ent contracts ou+ht to .e setted without
dea1.) This hodin+ appies with +reater force to the instant cases. Respondent Piatco is part1 correct in averrin+ that
petitioners can o.tain reief fro* the re+iona tria courts via an action to annu the contracts.
Nevertheess, the unavoida.e conseCuence of havin+ to await the rendition and the finait1 of an1 such 0ud+*ent
woud .e a proon+ed state of uncertaint1 that woud .e pre0udicia to the nation, the parties and the +enera pu.ic.
#nd, in i+ht of the feared oss of 0o.s of the petitionin+ wor/ers, conseCuent to the inevita.e preter*ination of
contracts of the petitionin+ service providers that wi foow upon the hees of the i*pendin+ openin+ of N#I#
Ter*ina III, the need for reief is patent1 ur+ent, and therefore, direct resort to this Court throu+h the specia civi
action of prohi.ition is thus 0ustified.B
Contrar1 to PiatcoMs ar+u*ent that the resoution of the issues raised in the Petitions wi reCuire devin+ into factua
Cuestions,! I su.*it that their disposition uti*ate1 turns on Cuestions of aw." @urther, *an1 of the si+nificant and
reevant factua Cuestions can .e easi1 addressed .1 an e?a*ination of the docu*ents su.*itted .1 the parties. In an1
event, the Petitions raise so*e nove Cuestions invovin+ the appication of the a*ended =OT 3aw, which this Court
has seen fit to tac/e.
Arbitration
Shoud the dispute .e referred to ar.itration prior to 0udicia recourseI Respondent Piatco cai*s that Section A8.8) of
the #*ended and Restated Concession #+ree*ent $#RC#% provides for ar.itration under the auspices of the
Internationa Cha*.er of Co**erce to sette an1 dispute or controvers1 or cai* arisin+ in connection with the
Concession #+ree*ent, its a*end*ents and suppe*ents. The +overn*ent disa+rees, however, insistin+ that there can
.e no ar.itration .ased on Section A8.8) of the #RC#, since a the Piatco contracts are void a. initio. Therefore, a
contractua provisions, incudin+ Section A8.8) of the #RC#, are i/ewise void, ine?istent and inoperative. To support
its stand, the +overn*ent cites C(ave" v. +residential Commission on Good GovernmentD( 6$(e void a'reement :ill
not be rendered operative b) t(e parties< alle'ed performan*e ,partial or full- of t(eir respe*tive prestations. A
*ontra*t t(at violates t(e Constitution and t(e la: is null and void ab initio and vests no ri'(ts and *reates no
obli'ations. It produ*es no le'al effe*t at all.6
#s wi .e discussed at en+th ater, the Piatco contracts are indeed void in their entiret1> thus, a resort to the aforesaid
provision on ar.itration is unavaiin+. =esides, petitioners and petitioners&in&intervention have pointed out that, even
+rantin+ ar'uendo that the ar.itration cause re*ained a vaid provision, it sti cannot .ind the* inas*uch as the1 are
not parties to the Piatco contracts. #nd in the fina ana1sis, it is unar+ua.e that the ar.itration process provided for
under Section A8.8) of the #RC#, to .e underta/en .1 a pane of three $B% ar.itrators appointed in accordance with
the Rues of #r.itration of the Internationa Cha*.er of Co**erce, wi not .e a.e to address, deter*ine and
definitive1 resove the constitutiona and e+a Cuestions that have .een raised in the Petitions .efore us.
Locus Standi
'iven this CourtMs previous decisions in cases of si*iar i*port, no one wi serious1 dou.t that, .ein+ ta?pa1ers and
*e*.ers of the House of Representatives, Petitioners =aterina et a. have lo*us standi to .rin+ the Petition in 'R No.
A"""!-. In Albano v. .e)es,- this Court hed that the petitioner therein, suin+ as a citi:en, ta?pa1er and *e*.er of the
House of Representatives, was sufficient1 cothed with standin+ to .rin+ the suit Cuestionin+ the vaidit1 of the
assaied contract. The Court cited the fact that pu.ic interest was invoved, in view of the i*portant roe of the 7ania
Internationa Container Ter*ina $7ICT% in the countr1Ms econo*ic deveop*ent and the *a+nitude of the financia
consideration. This, notwithstandin+ the fact that e?penditure of pu.ic funds was not reCuired under the assaied
contract.
In the cases present1 under consideration, petitionersM persona and su.stantia interest in the controvers1 is shown .1
the fact that certain provisions in the Piatco contracts create o.i+ations on the part of +overn*ent $throu+h the DOTC
and the 7I##% to dis.urse pu.ic funds without prior con+ressiona appropriations.
Petitioners thus correct1 assert that the in0ur1 to the* has a twofod aspectD $A% the1 are adverse1 affected as
ta?pa1ers on account of the ie+a dis.urse*ent of pu.ic funds> and $)% the1 are pre0udiced #ua e+isators, since the
contractua provisions reCuirin+ the +overn*ent to incur e?penditures without appropriations aso operate as
i*itations upon the e?cusive power and prero+ative of Con+ress over the pu.ic purse. #s *e*.ers of the House of
Representatives, the1 are actua1 deprived of discretion insofar as the incusion of those ite*s of e?penditure in the
.ud+et is concerned. To prevent such encroach*ent upon the e+isative privie+e and o.viate in0ur1 to the institution
of which the1 are *e*.ers, petitioners&e+isators have ocus standi to .rin+ suit.
7essrs. #+an et a. and 3ope: et a., are i/ewise ta?pa1ers and thus possessed of standin+ to chaen+e the ie+a
dis.urse*ent of pu.ic funds. 7essrs. #+an et a., in particuar, are e*po1ees $or representatives of e*po1ees% of
various service providers that have $A% e?istin+ concession a+ree*ents with the 7I## to provide airport services
necessar1 to the operation of the N#I# and $)% service a+ree*ents to furnish essentia support services to the
internationa airines operatin+ at the N#I#.
On the other hand, 7essrs. 3ope: et a. are e*po1ees of the 7I##. These petitioners $7essrs. #+an et a. and
7essrs. 3ope: et a.% are confronted with the prospect of .ein+ aid off fro* their 0o.s and osin+ their *eans of
iveihood when their e*po1er&co*panies are forced to shut down or otherwise retrench and cut .ac/ on *anpower.
Such deveop*ent woud resut fro* the i**inent i*pe*entation of certain provisions in the contracts that tend
toward the creation of a *onopo1 in favor of Piatco, its su.sidiaries and reated co*panies.
Petitioners&in&intervention are service providers in the .usiness of furnishin+ airport&reated services to internationa
airines and passen+ers in the N#I# and are therefore co*petitors of Piatco as far as that ine of .usiness is
concerned. On account of provisions in the Piatco contracts, petitioners&in&intervention have to enter into a written
contract with Piatco so as not to .e shut out of N#I# Ter*ina III and .arred fro* doin+ .usiness there. Since there is
no provision to ensure or safe+uard free and fair co*petition, the1 are itera1 at its *erc1. The1 cai* in0ur1 on
account of their deprivation of propert1 $.usiness% and of the i.ert1 to contract, without due process of aw.
#nd even if petitioners and petitioners&in&intervention were not sufficient1 cothed with e+a standin+, I have at the
outset aread1 esta.ished that, +iven its i*pact on the pu.ic and on nationa interest, this controvers1 is aden with
transcendenta i*portance and constitutiona si+nificance. Hence, I do not hesitate to adopt the sa*e position as was
enunciated in Cilosba)an v. Guin'ona Jr.9 that 6in *ases of trans*endental importan*e t(e Court ma) relax t(e
standin' re#uirements and allo: a suit to prosper even :(en t(ere is no dire*t in%ur) to t(e part) *laimin' t(e ri'(t of
%udi*ial revie:.6,
Th3 S(21/an/093 I11(3@
?0o.a/0on1 o- /h3 Con1/0/(/0on an /h3 La81
From the Outset, the Bidding Process as F!a"ed and #ainted
#fter stud1in+ the docu*ents su.*itted and ar+u*ents advanced .1 the parties, I have no dou.t that, ri+ht at the
outset, Piatco was not Cuaified to participate in the .iddin+ process for the Ter*ina III pro0ect, .ut was nevertheess
per*itted to do so. It even won the .iddin+ and was heped aon+ .1 what appears to .e a series of cousive and
corrosive acts.
The .uid&operate&and&transfer $=OT% pro0ect for the N#I# Passen+er Ter*ina III co*es under the cate+or1 of an
6unsoicited proposa,6 which is the su.0ect of Section !&# of the =OT 3aw.A8 The unsoicited proposa was ori+ina1
su.*itted .1 the #siaMs E*er+in+ Dra+on Corporation $#EDC% to the Depart*ent of Transportation and
Co**unications $DOTC% and the 7ania Internationa #irport #uthorit1 $7I##%, which reviewed and approved the
proposa.
The draft of the concession a+ree*ent as ne+otiated .etween #EDC and DOTCF7I## was endorsed to the Nationa
Econo*ic Deveop*ent #uthorit1 $NED#&ICC%, which in turn reviewed it on the .asis of its scope, econo*ic
via.iit1, financia indicators and ris/s> and thereafter approved it for .iddin+.
The DOTCF7I## then prepared the =id Docu*ents, incorporatin+ therein the ne+otiated Draft Concession
#+ree*ent, and pu.ished invitations for pu.ic .iddin+, i.e., for the su.*ission of co*parative or co*petitive
proposas. PiatcoMs predecessor&in&interest, the Paircar+o Consortiu*, was the on1 co*pan1 that su.*itted a
co*petitive .id or price chaen+e.
#t this point, I *ust e*phasi:e that the aw reCuires the award of a =OT pro0ect to the .idder that has satisfied the
*ini*u* reCuire*ents> and *et the technica, financia, or+ani:ationa and e+a standards provided in the =OT 3aw.
Section " of this statute statesD
6Sec. ". +ubli* biddin' of pro%e*ts. & . . .
6In the case of a .uid&operate&and&transfer arran+e*ent, the contract sha .e awarded to the .idder
who,ha90n7 1a/01-03 /h3 40n04(4 -0nanc0a., /3chn0ca., or7an0>a/0ona. an .37a. 1/anar1 r3B(0r3 2)
/h01 Ac/, has su.*itted the owest .id and *ost favora.e ter*s for the pro0ect, .ased on the present vaue of
its proposed tos, fees, rentas and char+es over a fi?ed ter* for the faciit1 to .e constructed, reha.iitated,
operated and *aintained accordin+ to the prescri.ed *ini*u* desi+n and perfor*ance standards, pans and
specifications. . . .6 $E*phasis suppied.%
The sa*e provision reCuires that the price chaen+e via pu.ic .iddin+ 6must be *ondu*ted under a t:o-
envelope9t:o-sta'e s)stemD t(e first envelope to *ontain t(e te*(ni*al proposal and t(e se*ond envelope to *ontain t(e
finan*ial proposal.6 7oreover, the A,,! I*pe*entin+ Rues and Re+uations $IRR% provide that on1 those .idders
that have passed the preCuaification sta+e are per*itted to have their two enveopes reviewed.
In other words, prospective .idders *ust preCuaif1 .1 su.*ittin+ their preCuaification docu*ents for evauation>
and on1 the pre&Cuaified .idders woud .e entited to have their .ids opened, evauated and appreciated. On the other
hand, disCuaified .idders are to .e infor*ed of the reason for their disCuaification. This procedure was confir*ed
and reiterated in the =id Docu*ents, which I Cuote thusD 6+re#ualified proponents :ill be *onsidered eli'ible to move
to se*ond sta'e te*(ni*al proposal evaluation. $(e se*ond and t(ird envelopes of pre-dis#ualified proponents :ill be
returned.6AA
#side fro* co*p1in+ with the e+a and technica reCuire*ents $trac/ record or e?perience of the fir* and its /e1
personne%, a pro0ect proponent desirin+ to preCuaif1 *ust aso de*onstrate its financia capacit1 to underta/e the
pro0ect. To esta.ish such capa.iit1, a proponent *ust prove that it is a.e to raise the *ini*u* a*ount of eCuit1
reCuired for the pro0ect and to procure the oans or financin+ needed for it. Section ".!$c% of the A,,! IRR providesD
6Sec. ".!. PreCuaification ReCuire*ents. & To pre&Cuaif1, a pro0ect proponent *ust co*p1 with the
foowin+ reCuire*entsD
? ? ? ? ? ? ? ? ?
6c. @inancia Capa.iit1. The pro0ect proponent *ust have adeCuate capa.iit1 to sustain the financin+
reCuire*ents for the detaied en+ineerin+ desi+n, construction, andFor operation and *aintenance phases of
the pro0ect, as the case *a1 .e. @or purposes of preCuaification, this capa.iit1 sha .e *easured in ter*s ofD
$i% proof of t(e abilit) of t(e pro%e*t proponent and9or t(e *onsortium to provide a minimum amount of e#uit)
to t(e pro%e*t, and $ii% a etter testi*onia fro* reputa.e .an/s attestin+ that the pro0ect proponent andFor
*e*.ers of the consortiu* are .an/in+ with the*, that the1 are in +ood financia standin+, and that the1 have
adeCuate resources. The +overn*ent #+enc1F3'5 concerned sha deter*ine on a pro0ect&to&pro0ect .asis,
and .efore preCuaification, the *ini*u* a*ount of eCuit1 needed. . . . .6 $Itaics suppied%
Since the *ini*u* a*ount of eCuit1 for the pro0ect was set at B8 percentA) of the *ini*u* pro0ect cost of 5SYB"8
*iion, the *ini*u* a*ount of eCuit1 reCuired of an1 proponent stood at 5SYA8" *iion. Converted to pesos at the
e?chan+e rate then of P)(.)B, to 5SYA.88 $as Cuoted .1 the =an+/o Sentra n+ Piipinas%, the peso eCuivaent of the
*ini*u* eCuit1 was P),-"",8,",888.
However, the co*.ined eCuit1 or net worth of the Paircar+o consortiu* stood at on1 P""9,B9!,9-A."". AB This
a*ount was on1 si+ht1 over ( percent of the *ini*u* pro0ect cost and ver1 *uch short of the reCuired *ini*u*
eCuit1, which was eCuivaent to B8 percent of the pro0ect cost. Such deficienc1 shoud have i**ediate1 caused the
disCuaification of the Paircar+o consortiu*. This *atter was .rou+ht to the attention of the PreCuaification and
=iddin+ Co**ittee $P=#C%.
Notwithstandin+ the +arin+ deficienc1, DOTC 5ndersecretar1 Pri*itivo C. Ca, concurrent chair of the P=#C,
decared in a 7e*orandu* dated A! Octo.er A,,( that 6t(e C(allen'er ,+air*ar'o *onsortium- :as found to (ave a
*ombined net :ort( of +6E=@7=4=7=.?? t(at *ould support a pro%e*t *ostin' approximatel) +46 billion.6 To 0ustif1
his concusion, he assertedD 6It is not a re#uirement t(at t(e net:ort( must be Funrestri*ted<. $o impose t(is as a
re#uirement no: :ill be not(in' less t(an unfair.6
He further opined, 6,$-(e net:ort( refle*ted in t(e Finan*ial &tatement s(ould not be ta8en as t(e amount of mone) to
be used to ans:er t(e re#uired t(irt) ,6?G- per*ent e#uit) of t(e *(allen'er but rat(er to be used in establis(in' if
t(ere is enou'( basis to believe t(at t(e *(allen'er *an *ompl) :it( t(e re#uired 6?G e#uit). In fa*t proof of
suffi*ient e#uit) is re#uired as one of t(e *onditions for a:ard of *ontra*t ,&e*. 4=.4 of I.. of t(e B3$ La:- but not
for pre#ualifi*ation ,&e*. >.7 of same do*ument-.H
On the .asis of the fore+oin+ du.ious decaration, the Paircar+o consortiu* was dee*ed preCuaified and thus
per*itted to proceed to the other sta+es of the .iddin+ process.
=1 virtue of the preCuaified status conferred upon the Paircar+o, 5ndersecretar1 CaMs findin+s in effect reieved the
consortiu* of the need to co*p1 with the financia capa.iit1 reCuire*ent i*posed .1 the =OT 3aw and IRR. This
position is un*ista/a.1 and sCuare1 at odds with the Supre*e CourtMs consistent doctrine e*phasi:in+ the strict
appication of pertinent rues, re+uations and +uideines for the pu.ic .iddin+ process, in order to pace each .idder &
actua or potentia & on the sa*e footin+. Thus, it is unar+ua.1 irre+uar and contrar1 to the ver1 concept of pu.ic
.iddin+ to per*it a variance .etween the conditions under which .ids are invited and those under which proposas are
su.*itted and approved.
.epubli* v. Capulon',A! teaches that if one .idder is reieved fro* havin+ to confor* to the conditions that i*pose
so*e dut1 upon it, that .idder is not contractin+ in fair co*petition with those .idders that propose to .e .ound .1 a
conditions. The essence of pu.ic .iddin+ is, after a, an opportunit1 for fair co*petition and a .asis for the precise
co*parison of .ids.A" Thus, each .idder *ust .id under the sa*e conditions> and .e su.0ect to the sa*e +uideines,
reCuire*ents and i*itations. The desired resut is to .e a.e to deter*ine the .est offer or owest .id, all t(in's bein'
e#ual.
Inas*uch as the Paircar+o consortiu* did not possess the *ini*u* eCuit1 eCuivaent to B8 percent of the *ini*u*
pro0ect cost, it shoud not have .een preCuaified or aowed to participate further in the .iddin+. The PreCuaification
and =iddin+ Co**ittee $P=#C% shoud therefore not have opened the two enveopes of the consortiu* containin+ its
technica and financia proposas> reCuired #EDC to *atch the consortiu*Ms .id> A( or awarded the Concession
#+ree*ent to the consortiu*Ms successor&in&interest, Piatco.
#s there was effective1 no pu.ic .iddin+ to spea/ of, the entire .iddin+ process havin+ .een fawed and tainted fro*
the ver1 outset, therefore, the award of the concession to Paircar+oMs successor Piatco was void, and the Concession
#+ree*ent e?ecuted with the atter was i/ewise void a. initio. @or this reason, Piatco cannot and shoud not .e
aowed to .enefit fro* that #+ree*ent.A-
A$%C as %e&ri'ed of the (ight to )atch P*A#CO+s Price Cha!!enge
In DOTC P=#C =id =uetin No. ! $par. B%, 5ndersecretar1 Ca decared that, for purposes of *atchin+ the price
chaen+e of Piatco, #EDC as ori+inator of the unsoicited proposa woud .e per*itted access on1 to the schedue of
proposed #nnua 'uaranteed Pa1*ents su.*itted .1 Piatco, and not to the atterMs financia and technica proposas
that constituted the .asis for the price chaen+e in the first pace. This was supposed1 in /eepin+ with Section AA.( of
the A,,! IRR, which provides that proprietar1 infor*ation is to .e respected, protected and treated with ut*ost
confidentiait1, and is therefore not to for* part of the .iddin+Ftender and reated docu*ents.
This pronounce*ent, I .eieve, was a +rievous *isappication of the *entioned provision. The 6proprietar1
infor*ation6 referred to in Section AA.( of the IRR pertains on1 to the proprietar1 infor*ation of the ori'inator of an
unsoicited proposa, and not to those .eon+in+ to a *(allen'er. The reason for the protection accorded proprietar1
infor*ation at a is the fact that, accordin+ to Section !&# of the =OT 3aw as a*ended, a proposa Cuaifies as an
6unsoicited proposa6 when it pertains to a pro0ect that invoves 6a ne: *on*ept or te*(nolo')6, andFor a pro0ect that
is not on the +overn*entMs ist of priorit1 pro0ects.
To .e considered as utii:in+ a new concept or technoo+1, a pro0ect *ust invove the possession of e?cusive ri+hts
$wordwide or re+iona% over a process> or possession of inteectua propert1 ri+hts over a desi+n, *ethodoo+1 or
en+ineerin+ concept.A9 Patent1, the intent of the =OT 3aw is to encoura+e individuas and +roups to co*e up with
creative innovations, fresh ideas and new technoo+1. Hence, the si+nificance and necessit1 of protectin+ proprietar1
infor*ation in connection with unsoicited proposas. #nd to *a/e the encoura+e*ent rea, the aw aso e?tends to
such individuas and +roups what a*ounts to a 6ri+ht of first refusa6 to underta/e the pro0ect the1 conceptuai:ed,
invovin+ the use of new technoo+1 or concepts, throu+h the *echanis* of *atchin+ a price chaen+e.
# co*petin+ .id is never 0ust an1 fi+ure con0ured fro* out of the .ue> it is arrived at after stud1in+ econo*ic,
financia, technica and other, factors> it is i/ewise .ased on certain assu*ptions as to the nature of the .usiness, the
*ar/et potentias, the pro.a.e de*and for the product or service, the future .ehavior of cost ite*s, poitica and other
ris/s, and so on. It is thus sef&evident that in order to .e a.e to intei+ent1 *atch a .id or price chaen+e, a .idder
*ust .e +iven access to the assu*ptions and the cacuations that went into craftin+ the co*petin+ .id.
In this instance, the financia and technica proposas of Piatco woud have provided #EDC with the necessar1
infor*ation to ena.e it to *a/e a reasona.1 infor*ed *atchin+ .id. To put it *ore si*p1, a .idder una.e to access
the co*petitorMs assu*ptions wi never fi+ure out how the co*petin+ .id ca*e a.out> reCuirin+ hi* to 6counter&
propose6 is i/e havin+ hi* shoot at a tar+et in the dar/ whie .indfoded.
=1 withhodin+ fro* #EDC the chaen+erMs financia and technica proposas containin+ the critica infor*ation it
needed, 5ndersecretar1 Ca actua1 and effective1 deprived #EDC of the a.iit1 to *atch the price chaen+e. One
coud sa1 that #EDC did not have the .enefit of a 6eve pa1in+ fied.6 It see*s to *e, thou+h, that #EDC
was a*tuall) s(ut out of t(e 'ame alto'et(er.
#t the end of the da1, the .otto* ine is that the vaidit1 and the propriet1 of the award to Piatco had .een irrepara.1
i*paired.
%e!ayed *ssuance of the ,otice of A"ard -io!ated the BO# La" and the *((
Section ,." of the IRR reCuires that the Notice of #ward *ust indicate the ti*e fra*e within which the winner of the
.iddin+ $and therefore the prospective awardee% sha su.*it the prescri.ed perfor*ance securit1, proof of
co**it*ent of eCuit1 contri.utions, and indications of sources of financin+ $oans%> and, in the case of 0oint ventures,
an a+ree*ent showin+ that the *e*.ers are 0oint1 and severa1 responsi.e for the o.i+ations of the pro0ect
proponent under the contract.
The purpose of havin+ a definite and fir* ti*eta.e for the su.*ission of the afore*entioned reCuire*ents is not on1
to prevent dea1s in the pro0ect i*pe*entation, .ut aso to e?pose and weed out unCuaified proponents, who *i+ht
have uncere*onious1 sipped throu+h the earier preCuaification process, .1 co*pein+ the* to put their *one1
where their *ouths are, so to spea/.
Nevertheess, this provision can .e easi1 circu*vented .1 *ere1 postponin+ the actua issuance of the Notice of
#ward, in order to +ive the favored proponent sufficient ti*e to co*p1 with the reCuire*ents. Hence, to avert or
*ini*i:e the *anipuation of the post&.iddin+ process, the IRR not on1 set out the precise seCuence of events
occurrin+ .etween the co*petion of the evauation of the technica .ids and the issuance of the Notice of #ward, .ut
aso specified the ti*eta.es for each such event. Definite aowa.e e?tensions of ti*e were provided for, as were the
conseCuences of a faiure to *eet a particuar deadine.
In particuar, Section ,.A of the A,,! IRR prescri.ed that within B8 caendar da1s fro* the ti*e the second&sta+e
evauation sha have .een co*peted, the Co**ittee *ust co*e to a decision whether or not to award the contract
and, within - da1s therefro*, the Notice of #ward *ust .e approved .1 the head of a+enc1 or oca +overn*ent unit
$3'5% concerned, and its issuance *ust foow within another - da1s thereafter.
Section ,.) of the IRR set the procedure appica.e to pro0ects invovin+ su.stantia +overn*ent underta/in+s as
foowsD Eithin - da1s after the decision to award is *ade, the draft contract sha .e su.*itted to the ICC for
cearance on a no&o.0ection .asis. If the draft contract incudes +overn*ent underta/in+s aread1 previous1 approved,
then the su.*ission sha .e for infor*ation on1.
However, shoud there .e additiona or new provisions different fro* the ori+ina +overn*ent underta/in+s, the draft
sha have to .e reviewed and approved. The ICC has A" wor/in+ da1s to act thereon, and uness otherwise specified,
its faiure to act on the contract within the specified ti*e fra*e si+nifies that the a+enc1 or 3'5 *a1 proceed with the
award. The head of a+enc1 or 3'5 sha approve the Notice of #ward within seven da1s of the cearance .1 the ICC
on a no&o.0ection .asis, and the Notice itsef has to .e issued within seven da1s thereafter.
The hi+h1 re+uated ti*e&fra*es within which the a+ents of +overn*ent were to act evinced the intent to i*pose
upon the* the dut1 to act e?peditious1 throu+hout the process, to the end that the pro0ect .e prosecuted and
i*pe*ented without dea1. This re+uated scenario was i/ewise intended to discoura+e cousion and su.stantia1
reduce the opportunit1 for a+ents of +overn*ent to a.use their discretion in the course of the award process.
Despite the cear ti*eta.es set out in the IRR, severa en+th1 and sti&une?pained dea1s occurred in the award
process, as can .e o.served fro* the presentation *ade .1 the counse for pu.ic respondents,A, Cuoted herein.eowD
6AA Dec. A,,( & The Paircar+o ;oint Venture was infor*ed .1 the P=#C that #EDC faied to *atch and that
ne+otiations preparator1 to Notice of #ward shoud .e co**enced. This was the decision to a"ard that
shoud have co**enced the runnin+ of the -&da1 period to approve the Notice of #ward, as per Section ,.A of
the IRR, or to su.*it the draft contract to the ICC for approva confor*a.1 with Section ,.).
68A #pri A,,- & The P=#C resoved that a cop1 of the fina draft of the Concession #+ree*ent .e su.*itted
to the NED# for cearance on a no&o.0ection .asis. This resoution ca*e *ore than B *onths too ate as it
shoud have .een *ade on the )8th of Dece*.er A,,( at the atest.
6A( #pri A,,- & The P=#C resoved that the period of si+nin+ the Concession #+ree*ent .e e?tended .1 A"
da1s.
6A9 #pri A,,- & NED# approved the Concession #+ree*ent. #+ain this is *ore than B *onths too ate as the
NED#Ms decision shoud have .een reeased on the A(th of ;anuar1 A,,- or fifteen da1s after it shoud have
.een su.*itted to it for review.
68, ;u1 A,,- & The Notice of #ward was issued to PI#TCO. @oowin+ the provisions of the IRR, the Notice
of #ward shoud have .een issued fourteen da1s after NED#Ms approva, or the )9th of ;anuar1 A,,-. In an1
case, even if it were to .e assu*ed that the reease of NED#Ms approva on the A9th of #pri was ti*e1, the
Notice of #ward shoud have .een issued on the ,th of 7a1 A,,-. In .oth cases, therefore, the reease of the
Notice of #ward occurred in a decided1 ess than ti*e1 fashion.6
This chronoo+1 of events .espea/s an un*ista/a.e disre+ard, if not disdain, .1 the persons in char+e of the award
process for the ti*e i*itations prescri.ed .1 the IRR. Their attitude fies in the face of this CourtMs soe*n
pronounce*ent in .epubli* v. Capulon',)8 that 6stri*t observan*e of t(e rules re'ulations and 'uidelines of t(e
biddin' pro*ess is t(e onl) safe'uard to a fair (onest and *ompetitive publi* biddin'.6
@ro* the fore+oin+, the on1 concusion that can possi.1 .e drawn is that the =OT aw and its IRR were repeated1
vioated with un*iti+ated i*punit1 & and .1 a+ents of +overn*ent, no ess^ On account of such vioation, the award of
the contract to Piatco, which undou.ted1 +ained ti*e and .enefited fro* the dea1s, *ust .e dee*ed nu and void
fro* the .e+innin+.
Further Amendments (esu!ted in a Substantia!!y %ifferent Contract, A"arded ithout Pub!ic Bidding
=ut the vioations and desecrations did not stop there. #fter the P=#C *ade its decision on Dece*.er AA, A,,( to
award the contract to Piatco, the atter ne+otiated chan+es to the Contract .idded out and ended up with what a*ounts
to a su.stantia1 new contract :it(out an) publi* biddin'. This Contract was su.seCuent1 further a*ended four *ore
ti*es throu+h ne+otiation and without an1 .iddin+. Thus, the contract actua1 e?ecuted .etween Piatco and
DOTCF7I## on ;u1 A), A,,- $the Concession #+ree*ent or 6C#6% differed fro* the contract .idded out $the draft
concession a+ree*ent or 6DC#6% in the foowin+ ver1 si+nificant respectsD
A. The C# inserted stipuations creatin+ a *onopo1 in favor of Piatco in the .usiness of providin+ airport&
reated services for internationa airines and passen+ers.)A
). The C# provided that +overn*ent is to answer for PiatcoMs unpaid oans and de.ts $u*ped under the
ter* Attendant Liabilities% in the event Piatco fais to pa1 its senior enders.))
B. The C# provided that in case of ter*ination of the contract due to the faut of +overn*ent, +overn*ent
sha pa1 a e?penses that Piatco incurred for the pro0ect pus the appraised vaue of the Ter*ina.)B
!. The C# i*posed new and specia o.i+ations on +overn*ent, incudin+ deiver1 of cean possession of the
site for the ter*ina> acCuisition of additiona and at the +overn*entMs e?pense for construction of road
networ/s reCuired .1 PiatcoMs approved pans and specifications> and assistance to Piatco in securin+ site
utiities, as we as a necessar1 per*its, icenses and authori:ations.)!
". Ehere Section B.8) of the DC# reCuires 'overnment to refrain fro* co*petin+ with the contractor with
respect to the operation of NAIA $erminal III, Section B.8)$.% of the C# e?cudes and prohi.its ever)one,
incudin+ +overn*ent, fro* direct1 or indirect1 co*petin+ with Piatco, with respect to the operation of, as
we as operations in, N#I# Ter*ina III. 3perations in is sufficient1 .road to enco*pass a retai and other
co**ercia .usiness enterprises operatin+ within Ter*ina III, incusive of the .usinesses of providin+
various airport&reated services to internationa airines, within the scope of the prohi.ition.
(. 5nder Section (.8A of the DC#, the foowin+ fees are su.0ect to the written approva of 7I##D
easeFrenta char+es, concession privie+e fees for passen+er services, food services, transportation utiit1
concessions, +roundhandin+, caterin+ and *isceaneous concession fees, portera+e fees, +reeterFwe&wisher
fees, carpar/ fees, advertisin+ fees, VIP faciities fees and others. 7oreover, ad0ust*ents to the
+roundhandin+ fees, rentas and portera+e fees are per*itted on1 once ever1 two 1ears and in accordance
with a para*etric for*ua, per DC# Section (.8B. However, the C# as e?ecuted with Piatco provides in
Section (.8( that a the aforesaid fees, rentas and char+es *a1 .e ad0usted without 7I##Ms approva or
intervention. Neither are the ad0ust*ents to these fees and char+es su.0ect to or i*ited .1 an1 para*etric
for*ua.)"
-. Section A.), of the DC# provides that the ter*ina fees, aircraft tac/in+ fees, aircraft par/in+ fees, chec/&
in counter fees and other fees are to .e Cuoted and paid in Phiippine pesos. =ut per Section A.BB of the C#,
a the aforesaid fees save the ter*ina fee are deno*inated in 5S Doars.
9. 5nder Section 9.8- of the DC#, the ter* attendant liabilities refers to liabilities pertinent to NAIA
$erminal III, such as pa1*ent of ease rentas and perfor*ance of other o.i+ations under the 3and 3ease
#+ree*ent> the o.i+ations under the Tenant #+ree*ents> and pa1*ent of a ta?es, fees, char+es and
assess*ents of whatever /ind that *a1 .e i*posed on N#I# Ter*ina III or parts thereof. =ut in Section A.8(
of the C# Attendant Liabilities refers to unpaid debts of +iat*oD HAll amounts re*orded and from time to time
outstandin' in t(e boo8s of ,+iat*o- as o:in' to 2npaid Creditors :(o (ave provided loaned or advan*ed
funds a*tuall) used for t(e +ro%e*t in*ludin' all interests penalties asso*iated fees *(ar'es sur*(ar'es
indemnities reimbursements and ot(er related expenses and furt(er in*ludin' amounts o:ed b) I+iat*oJ to
its suppliers *ontra*tors and sub*ontra*tors.6
,. Per Sections 9.8! and 9.8( of the DC#, +overn*ent *a1, on a**ount of t(e *ontra*tors brea*(, rescind the
contract and seect one of four optionsD $a% ta/e over the ter*ina and assu*e a its attendant ia.iities> $.%
aow the contractorMs creditors to assi+n the Pro0ect to another entit1 accepta.e to DOTCF7I##> $c% pa1 the
contractor rent for the faciities and eCuip*ent the DOTC *a1 utii:e> or $d% purchase the ter*ina at a price
esta.ished .1 independent appraisers. Dependin+ on the option seected, +overn*ent *a1 ta/e i**ediate
possession and contro of the ter*ina and its operations. 'overn*ent wi .e o.i+ated to co*pensate the
contractor for the 6eCuivaent or proportionate contract costs actua1 dis.ursed,6 .ut on1 where +overn*ent
is the one in .reach of the contract. =ut under Section 9.8($a% of the C#, whether on account of PiatcoMs
.reach of contract or its ina.iit1 to pa1 its creditors, +overn*ent is o.i+ed to either $a% ta/e over Ter*ina III
and assu*e a of PiatcoMs de.ts or $.% per*it the Cuaified unpaid creditors to .e su.stituted in pace of Piatco
or to desi+nate a new operator. #nd in the event of +overn*entMs .reach of contract, Piatco *a1 co*pe it to
purchase the ter*ina at fair *ar/et vaue, per Section 9.8($.% of the C#.
A8. 5nder the DC#, an1 dea1 .1 Piatco in the pa1*ent of the a*ounts due the +overn*ent constitutes
.reach of contract. However, under the C#, such dea1 does not necessari1 constitute .reach of contract,
since Piatco is per*itted to suspend pa1*ents to the +overn*ent in order to first satisf1 the cai*s of its
secured creditors, per Section 9.8!$d% of the C#.
It +oes without sa1in+ that the a*end*ent of the Contract .idded out $the DC# or draft concession a+ree*ent% & in
such su.stantia *anner, without an1 pu.ic .iddin+, and after the .iddin+ process had .een concuded on Dece*.er
AA, A,,( & is vioative of pu.ic poic1 on pu.ic .iddin+s, as we as the spirit and intent of the =OT 3aw. $(e :(ole
point of 'oin' t(rou'( t(e publi* biddin' exer*ise :as *ompletel) lost. Its ver) rationale :as totall) subverted b)
permittin' +iat*o to amend t(e *ontra*t for :(i*( publi* biddin' (ad alread) been *on*luded. Competitive biddin'
aims to obtain t(e best deal possible b) fosterin' transparen*) and preventin' favoritism *ollusion and fraud in t(e
a:ardin' of *ontra*ts. That is the reason wh1 procedura rues pertainin+ to pu.ic .iddin+ de*and strict
o.servance.)(
In a reative1 ear1 case, Caltex v. Del'ado Brot(ers,)- this Court *ade it cear that su.stantive a*end*ents to a
contract for which a pu.ic .iddin+ has aread1 .een finished shoud on1 .e awarded after another pu.ic .iddin+D
6The due e?ecution of a contract after pu.ic .iddin+ is a i*itation upon the ri+ht of the contractin+ parties to
ater or a*end it without another pu.ic .iddin+, for otherwise what woud a pu.ic .iddin+ .e +ood for if
after the e?ecution of a contract after pu.ic .iddin+, the contractin+ parties *a1 ater or a*end the contract,
or even cance it, at their wiI Pu.ic .iddin+s are hed for the protection of the pu.ic, and to +ive the pu.ic
the .est possi.e advanta+es .1 *eans of open co*petition .etween the .idders. He who .ids or offers the
.est ter*s is awarded the contract su.0ect of the .id, and it is o.vious that such protection and .est possi.e
advanta+es to the pu.ic wi disappear if the parties to a contract e?ecuted after pu.ic .iddin+ *a1 ater or
a*end it without another previous pu.ic .iddin+.6)9
The afore*entioned case deat with the unauthori:ed a*end*ent of a contract e?ecuted after pu.ic .iddin+> in the
situation .efore us, the a*end*ents were *ade aso after the .iddin+, .ut prior to e?ecution. Be t(at as it ma) t(e
same rationale underl)in' Caltex applies to t(e present situation :it( e#ual for*e. #owin+ the winnin+ .idder to
rene+otiate the contract for which the .iddin+ process has ended is tanta*ount to per*ittin+ it to put in an1thin+ it
wants. Here, the winnin+ .idder $Piatco% did not even .other to wait unti after actua e?ecution of the contract .efore
rushin+ to a*end it. Perhaps it .eieved that if the chan+es were *ade to a contract aread1 won throu+h .iddin+
$DC#% instead of waitin+ unti it is e?ecuted, the a*end*ents woud not .e noticed or discovered .1 the pu.ic.
In a ater case, !ata v. &an Die'o,), this Court reiterated its ruin+ as foowsD
6It is true that *odification of +overn*ent contracts, after the sa*e had .een awarded after a pu.ic .iddin+,
is not aowed .ecause such *odification serves to nuif1 the effects of the .iddin+ and whatever advanta+es
the 'overn*ent had secured there.1 and *a1 aso resut in *anifest in0ustice to the other .idders. This
prohi.ition, however, refers to a chan+e in vita and essentia particuars of the a+ree*ent which resuts in a
su.stantia1 new contract.6
PiatcoMs counter&ar+u*ent *a1 .e su**ed up thusD There was nothin+ in the A,,! IRR that prohi.ited further
ne+otiations and eventua a*end*ents to the DC# even after the .iddin+ had .een concuded. In fact, P=#C =id
=uetin No. B statesD HIAJmendments to t(e Draft Con*ession A'reement s(all be issued from time to time. &aid
amendments :ill onl) *over items t(at :ould not materiall) affe*t t(e preparation of t(e proponent<s proposal.6
I su.*it that acceptin+ such warped ar+u*ent wi resut in pervertin+ the poic1 under1in+ pu.ic .iddin+. The =OT
3aw cannot .e said to aow the ne+otiation of contractua stipuations resutin+ in a su.stantia1 new contract after
the .iddin+ process and price chaen+e had .een concuded. In fact, the =OT 3aw, in reco+nition of the ti*e, *one1
and effort invested in an unsoicited proposa, accords its ori+inator the privie+e of *atchin+ the chaen+erMs .id.
Section !&# of the =OT 3aw specifica1 refers to a 6ower pri*e proposa6 .1 a co*petin+ .idder> and to the ri+ht of
the ori+ina proponent 6to *atch the pri*e6 of the chaen+er. Thus, on1 the price proposas are in pa1. Theterms
*onditions and stipulations in the contract for which pu.ic .iddin+ has .een concuded are understood toremain
inta*t and not be sub%e*t to furt(er ne'otiation. Otherwise, the ver1 essence of pu.ic .iddin+ wi .e destro1ed & there
wi .e no .asis for an e?act co*parison .etween .ids.
7oreover, Piatco *isinterpreted the *eanin+ .ehind P=#C =id =uetin No. B. The phrase amendments . . . from time
to time refers on1 to those a*end*ents to the draft concession a+ree*ent issued .1 the P=#C prior to the su.*ission
of the price chaen+e> it certain1 does not incude or per*it a*end*ents ne+otiated for and introduced after the
.iddin+ process, has .een ter*inated.
Piatco+s Concession Agreement as Further Amended, .A(CA/ Again ithout Pub!ic Bidding
Not satisfied with the Concession #+ree*ent, Piatco & once *ore without .otherin+ with pu.ic .iddin+ & ne+otiated
with +overn*ent for sti *ore su.stantia chan+es. The resut was the #*ended and Restated Concession #+ree*ent
$#RC#% e?ecuted on Nove*.er )(, A,,9. The foowin+ chan+es were introducedD
A. The definition of Attendant Liabilities was further a*ended with the resut that the unpaid oans of Piatco,
for which +overn*ent *a1 .e reCuired to answer, are no on+er i*ited to on1 those oans recorded in
PiatcoMs .oo/s or oans whose proceeds were actua1 used in the Ter*ina III pro0ect.B8
). #thou+h the contract *a1 .e ter*inated due to .reach .1 Piatco, it wi not .e ia.e to pa1 the
+overn*ent an1 3iCuidated Da*a+es if a new operator is desi+nated to ta/e over the operation of the
ter*ina.BA
B. The 3iCuidated Da*a+es which +overn*ent .eco*es ia.e for in case of its .reach of contract were
su.stantia1 increased.B)
!. 'overn*entMs ri+ht to appoint a co*ptroer for Piatco in case the atter encounters iCuidit1 pro.e*s was
deeted.BB
". 'overn*ent is *ade ia.e for Incre*enta and ConseCuentia Costs and 3osses in case it fais to co*p1
or cause an1 third part1 under its direct or indirect contro to co*p1 with the specia o.i+ations i*posed on
+overn*ent.B!
(. The insurance poicies o.tained .1 Piatco coverin+ the ter*ina are now reCuired to .e assi+ned to the
Senior 3enders as securit1 for the oans> previous1, their proceeds were to .e used to repair and reha.iitate
the faciit1 in case of da*a+e.B"
-. 'overn*ent .ound itsef to set the initia rate of the ter*ina fee, to .e char+ed when Ter*ina III .e+ins
operations, at an a*ount hi+her than 5SY)8.B(
9. 'overn*ent waived its defense of the ie+ait1 of the contract and even a+reed to .e ia.e to pa1 da*a+es
to Piatco in the event the contract was decared ie+a.B-
,. Even thou+h +overn*ent *a1 .e entited to ter*inate the #RC# on account of .reach .1 Piatco,
+overn*ent is sti ia.e to pa1 Piatco the appraised vaue of Ter*ina III or the #ttendant 3ia.iities, if the
ter*ination occurs .efore the In&Service Date.B9 This condition contravenes the =OT 3aw provision on
ter*ination co*pensation.
A8. 'overn*ent is o.i+ated to ta/e the ad*inistrative action reCuired for PiatcoMs i*position, coection and
appication of a Pu.ic 5tiit1 Revenues.B, No such o.i+ation e?isted previous1.
AA. 'overn*ent is now aso o.i+ated to perfor* and cause other persons and entities under its direct or
indirect contro to perfor* a acts necessar1 to perfect the securit1 interests to .e created in favor of PiatcoMs
Senior 3enders.!8 No such o.i+ation e?isted previous1.
A). DOTCF7I##Ms ri+ht of intervention in instances where PiatcoMs Non&Pu.ic 5tiit1 Revenues .eco*e
e?or.itant or e?cessive has .een re*oved.!A
AB. The ie+ait1 and unenforcea.iit1 of the #RC# or an1 of its *ateria provisions was *ade an event of
defaut on t(e part of 'overnment onl), thus constitutin+ a +round for Piatco to ter*inate the #RC#.!)
A!. #*ounts due fro* and pa1a.e .1 +overn*ent under the contract were *ade pa1a.e on demand & net of
ta?es, evies, i*posts, duties, char+es or fees of an1 /ind e?cept as reCuired .1 aw.!B
A". The Para*etric @or*ua in the contract, which is utii:ed to co*pute for ad0ust*entsFincreases to the
pu.ic utiit1 revenues $i.e., aircraft par/in+ and tac/in+ fees, chec/&in counter fee and ter*ina fee%, was
revised to per*it Piatco to input its *ore cost1 short&ter* .orrowin+ rates instead of the on+er&ter*s rates in
the co*putations for ad0ust*ents, with the end resut that the chan+es wi redound to its +reater financia
.enefit.
A(. The Certificate of Co*petion si*p1 deeted the successfu perfor*ance&testin+ of the ter*ina faciit1 in
accordance with defined perfor*ance standards as a pre&condition for +overn*entMs acceptance of the
ter*ina faciit1.!!
In su*, the fore+oin+ revisions and a*end*ents as e*.odied in the #RC# constitute ver) material alterations of the
ter*s and conditions of the C#, and +ive further *anifest1 undue advanta+e to Piatco at the e?pense of +overn*ent.
Piatco cai*s that the chan+es to the C# were necessitated .1 the de*ands of its forei+n enders. However, no proof
:(atsoever (as been addu*ed to buttress t(is *laim.
In an1 event, it is Cuite patent that the su* tota of the afore*entioned chan+es resuted in drasti*all) :ea8enin'the
position of +overn*ent to a de+ree that see*s Cuite e?cessive, even fro* the standpoint of a .usinessperson who
re+uar1 transacts with .an/s and forei+n enders, is fa*iiar with their *ind&set, and understands what *otivates
the*. On the other hand, whatever it was that i*peed +overn*ent officias concerned to accede to those +ross1
disadvanta+eous chan+es, I can on1 ha:ard a +uess.
There is no Cuestion in *1 *ind that the #RC# was unauthori:ed and ie+a for ac/ of pu.ic .iddin+ and for .ein+
patent1 disadvanta+eous to +overn*ent.
#he #hree Su&&!ements *m&osed ,e" Ob!igations on 0o'ernment, A!so ithout Prior Pub!ic Bidding
#fter Piatco had *ana+ed to .reach the protective ra*part of pu.ic .iddin+, it rec/ess1 went on a ra*pa+e of
further assauts on the #RC#.
$(e First &upplement Is as ;oid as t(e A.CA
In the @irst Suppe*ent $6@S6% e?ecuted on #u+ust )-, A,,,, the foowin+ chan+es were *ade to the #RC#D
A. The a*ounts pa1a.e .1 Piatco to +overn*ent were redu*ed .1 aowin+ additiona e?ceptions to the 'ross
Revenues in which +overn*ent is supposed to participate.!"
). 7ade part of the properties which +overn*ent is o.i+ed to construct andFor *aintain and /eep in +ood
repair are $a% the access road connectin+ Ter*inas II and III & the construction of this access road is the
o.i+ation of Piatco, in ieu of its o.i+ation to construct an #ccess Tunne connectin+ Ter*inas II and III>
and $.% the ta?iane and ta?iwa1 & these are i/ewise part of PiatcoMs o.i+ations, since the1 are part and parce
of the pro0ect as descri.ed in Cause A.B of the =id Docu*ents .!(
B. The 7I## is o.i+ated to provide fundin+ for the *aintenance and repair of the airports and faciities
owned or operated .1 it and .1 third persons under its contro. It wi aso .e ia.e to Piatco for the atterMs
osses, e?penses and da*a+es as we as ia.iit1 to third persons, in case 7I## fais to perfor* such
o.i+ations. In addition, 7I## wi aso .e ia.e for the incre*enta and conseCuentia costs of the re*edia
wor/ done .1 Piatco on account of the for*erMs defaut.!-
!. The @S aso i*posed on +overn*ent ten $A8% 6#dditiona Specia O.i+ations,6 incudin+ the foowin+D
$a% Eor/in+ for the re*ova of the +enera aviation traffic fro* the N#I# airport co*pe?!9
$.% Providin+ throu+h 7I## the and reCuired .1 Piatco for the ta?iane and one ta?iwa1 at no cost
to Piatco!,
$c% I*pe*entin+ the +overn*entMs e?istin+ stor* draina+e *aster pan"8
$d% Coordinatin+ with DPEH the financin+, the i*pe*entation and the co*petion of the foowin+
wor/s .efore the In&Service DateD three eft&turnin+ overpasses $EDS# to Tra*o St., Tra*o to
#ndrews #ve., and 7anunas Road to Saes #ve.%>"A and a road up+rade and i*prove*ent pro+ra*
invovin+ widenin+, repair and resurfacin+ of Saes Road, #ndrews #venue and 7anunas Road>
i*prove*ent of Nichos Interchan+e> and re*ova of sCuatters aon+ #ndrews #venue.")
$e% Deain+ direct1 with =CD# and the Phi. #ir @orce in acCuirin+ additiona and or ri+ht of wa1
for the road up+rade and i*prove*ent pro+ra*."B
". 'overn*ent is reCuired to wor/ for the i**ediate reversion to 7I## of the Na)on' +ilipino Nationa
Par/."!
(. 'overn*entMs share in the ter*ina fees coected was revised fro* a fat rate of PA98 to B( percent thereof>
to+ether with +overn*entMs percenta+e share in the +ross revenues of Piatco, the a*ount wi .e re*itted to
+overn*ent in pesos instead of 5S doars."" This a*end*ent ena.es Piatco to .enefit fro* the further
erosion of the peso&doar e?chan+e rate, whie preventin+ +overn*ent fro* .uidin+ up its forei+n e?chan+e
reserves.
-. # pa1*ents fro* Piatco to +overn*ent are now to .e invoiced to 7I##, and pa1*ents are to accrue to
the atterMs e?cusive .enefit."( This *ove appears to .e in support of the funds 7I## advanced to DPEH.
I *ust e*phasi:e that the @irst Suppe*ent is void in two respects. First, it is *ere1 an a*end*ent to the #RC#,
upon which it is who1 dependent> therefore, since the #RC# is void, ine?istent and not capa.e of .ein+ ratified or
a*ended, it foows that the @S too is void, ine?istent and inoperative. &e*ond, even assu*in+ ar'uendo that the
#RC# is so*ehow re*ote1 vaid, nonetheess the @S, in i*posin+ si+nificant new o.i+ations upon +overn*ent,
atered the funda*enta ter*s and stipuations of the #RC#, thus necessitatin+ a pu.ic .iddin+ a over a+ain. That
the @S was entered into sans pu.ic .iddin+ renders it utter1 void and inoperative.
#he Second Su&&!ement *s Simi!ar!y -oid and *ne1istent
The Second Suppe*ent $6SS6% was e?ecuted .etween the +overn*ent and Piatco on Septe*.er !, )888. It cas for
Piatco, actin+ not as concessionaire of N#I# Ter*ina III .ut as a pu.ic wor/s contractor, to underta/e & in the
+overn*entMs stead & the cearin+, re*ova, de*oition and disposa of i*prove*ents, su.terranean o.structions and
waste *aterias at the pro0ect site."-
The scope of the wor/s, the procedures invoved, and the o.i+ations of the contractor are provided for in Parts II and
III of the SS. Section !.A sets out the co*pensation to .e paid, istin+ specific rates per cu.ic *eter of *aterias for
each phase of the wor/ & e?cavation, evein+, re*ova and disposa, .ac/fiin+ and dewaterin+. The a*ounts
coecti.e .1 Piatco are to .e offset a+ainst the #nnua 'uaranteed Pa1*ents it *ust pa1 +overn*ent.
Thou+h deno*inated as Second Suppe*ent, it was nothin+ ess than an entire1 new pu.ic wor/s contract. Qet it,
too, did not under+o an1 pu.ic .iddin+, for which reason it is aso void and inoperative.
Not surprisin+1, Piatco had to su.contract the wor/s to a certain Eintrac/ =uiders, a fir* reputed1 owned .1 a
for*er hi+h&ran/in+ DOTC officia. =ut that is another stor1 ato+ether.
#he #hird Su&&!ement *s Li2e"ise -oid and *ne1istent
The Third Suppe*ent $6TS6%, e?ecuted .etween the +overn*ent and Piatco on ;une )), )88A, passed on to the
+overn*ent certain o.i+ations of Piatco as Ter*ina III concessionaire, with respect to the surface road connectin+
Ter*inas II and III.
=1 wa1 of .ac/+round, at the inception of and for*in+ part of the N#I# Ter*ina III pro0ect was the proposed
construction of an access tunne crossin+ Runwa1 ABFBA, which. woud connect Ter*ina III to Ter*ina II. The =id
Docu*ents in Section !.A.).B2=42i4 decared that the said access tunne was su.0ect to further ne+otiation> .ut for
purposes of the .iddin+, the proponent shoud su.*it a .id for it as we. Therefore, the tunne was supposed to .e
part and parce of the Ter*ina III pro0ect.
However, in Section " of the @irst Suppe*ent, the parties decared that the access tunne was not econo*ica1 via.e
at that ti*e. In ieu thereof, the parties a+reed that a surface access road $now caed the T)&TB Road% was to .e
constructed .1 Piatco to connect the two ter*inas. Since it was pain1 in su.stitution of the tunne, the surface road
construction shoud i/ewise .e considered part and parce of the sa*e pro0ect, and therefore part of PiatcoMs
o.i+ation as we. Ehie the access tunne was esti*ated to cost a.out P988 *iion, the surface road woud have a
price ta+ in the vicinit1 of a.out PA88 *iion, thus producin+ si+nificant savin+s for Piatco.
Qet, the Third Suppe*ent, whie confir*in+ that Piatco woud construct the T)&TB Road, nevertheess shifted to
+overn*ent so*e of the o.i+ations pertainin+ to the for*er, as foowsD
A. 'overn*ent is now o.i+ed to re*ove at its own e?pense a tenants, sCuatters, i*prove*ents andFor waste
*aterias on the site where the T)&TB road is to .e constructed."9 There was no si*iar o.i+ation on the part
of +overn*ent insofar as the access tunne was concerned.
). Shoud +overn*ent fai to carr1 out its o.i+ation as a.ove descri.ed, Piatco *a1 underta/e it on
+overn*entMs .ehaf, su.0ect to the ter*s and conditions $incudin+ co*pensation pa1*ents% contained in the
Second Suppe*ent.",
B. 7I## wi answer for the operation, *aintenance and repair of the T)&TB Road.(8
The TS depends upon and is intended to suppe*ent the #RC# as we as the @irst Suppe*ent, .oth of which are
void and ine?istent and not capa.e of .ein+ ratified or a*ended. It foows that the TS is i/ewise void, ine?istent and
inoperative. #nd even if, h1pothetica1 spea/in+, .oth #RC# and @S are vaid, sti, the Third Suppe*ent & i*posin+
as it does si+nificant new o.i+ations upon +overn*ent & woud in effect ater the ter*s and stipuations of the #RC#
in *ateria respects, thus necessitatin+ another pu.ic .iddin+. Since the TS was not su.0ected to pu.ic .iddin+, it is
conseCuent1 utter1 void as we. #t an1 rate, the TS created new *onetar1 o.i+ations on the part of +overn*ent, for
which there were no prior appropriations. Hence it foows that the sa*e is void a. initio.
In patient1 tracin+ the pro+ress of the Piatco contracts fro* their inception up to the present, I noted that the whoe
process was ridded with si+nificant apses, if not outri+ht irre+uarit1 and whoesae vioations of aw and pu.ic
poic1. The rationae of .e+innin+ at the .e+innin+, so to spea/, wi .eco*e evident when the Cuestion of what to do
with the five Piatco contracts is discussed ater on.
In the *eanti*e, I sha ta/e up specific, provisions or chan+es in the contracts and hi+hi+ht the *ore pro*inent
o.0ectiona.e features.
0o'ernment %irect!y 0uarantees Piatco %ebts
Certain1 the *ost discussed provision in the partiesM ar+u*ents is the one creatin+ an unauthori:ed, direct
+overn*ent +uarantee of PiatcoMs o.i+ations in favor of the enders.
Section !&# of the =OT 3aw as a*ended states that unsoli*ited proposals, such as the N#I# Ter*ina III Pro0ect, *a1
.e accepted .1 +overn*ent provided inter aia that no direct 'overnment 'uarantee subsid) or e#uit) is re#uired. In
short, such +uarantee is prohi.ited in unsoicited proposas. Section )$n% of the sa*e e+isationdefines dire*t
'overnment 'uarantee as 6an a+ree*ent where.1 the +overn*ent or an1 of its a+encies or oca +overn*ent units
$wi% assu*e responsi.iit1 for the repa1*ent of de.t direct1 incurred .1 the pro0ect proponent in i*pe*entin+ the
pro0ect in case of a oan defaut.6
=oth the C# and the #RC# have provisions that undenia.1 create such prohi.ited +overn*ent +uarantee. Section
!.8! $c%$iv% to $vi% of the #RC#, which is si*iar to Section !.8! of the C#, provides thusD
6$iv% that if Concessionaire is in defaut under a pa1*ent o.i+ation owed to the Senior 3enders, and as a
resut thereof the Senior 3enders have .eco*e entited to acceerate the Senior 3oans, the Senior 3enders
sha have the ri+ht to notif1 'RP of the sa*e . . .>
$v% . . . the Senior 3enders *a1 after written notification to 'RP, transfer the ConcessionaireMs ri+hts and
o.i+ations to a transferee . . .>
$vi% if the Senior 3enders . . . are una.e to . . . effect a transfer . . ., then 'RP and the Senior 3enders sha
endeavor . . . to enter into an1 other arran+e*ent reatin+ to the Deveop*ent @aciit1 . . . If no a+ree*ent
reatin+ to the Deveop*ent @aciit1 is arrived at .1 'RP and the Senior 3enders within the said A98&da1
period, then at the end thereof the Deveop*ent @aciit1 sha .e transferred .1 the Concessionaire to 'RP or
its desi+nee and 'RP sha *a/e a ter*ination pa1*ent to Concessionaire eCua to the #ppraised Vaue $as
hereinafter defined% of the Deveop*ent @aciit1 or the su* of the #ttendant 3ia.iities, if +reater. . . .6
In turn, the ter* Attendant Liabilities is defined in Section A.8( of the #RC# as foowsD
6#ttendant 3ia.iities refer to a a*ounts in each case supported .1 verifia.e evidence fro* ti*e to ti*e
owed or which *a1 .eco*e, owin+ .1 Concessionaire to Senior 3enders or an1 other persons or entities who
have provided, oaned or advanced funds or provided financia faciities to Concessionaire for the Pro0ect,
incudin+, without i*itation, a principa, interest, associated fees, char+es, rei*.urse*ents, and other
reated e?penses $incudin+ the fees, char+es and e?penses of an1 a+ents or trustees of such persons or
entities%, whether pa1a.e at *aturit1, .1 acceeration or otherwise, and further incudin+ a*ounts owed .1
Concessionaire to its professiona consutants and advisers, suppiers, contractors and su.&contractors.6
'overn*entMs a+ree*ent to pa1 .eco*es effective in the event of a 3-a(./ .1 Piatco on an1 of its .oan o2.07a/0on1 to
the Senior 3enders, and the a*ount to .e paid .1 +overn*ent is the +reater of either the #ppraised Vaue of Ter*ina
III or /h3 a77r37a/3 a4o(n/ o- /h3 4on3)1 o83 2) P0a/co & whether to the Senior 3enders or to other entities,
incudin+ its suppiers, contractors and su.contractors. In effect, therefore, this a+ree*ent aread1 constitutes the
prohi.ited assu*ption .1 +overn*ent of responsi.iit1 for repa1*ent of PiatcoMs de.ts in case of a oan defaut. In
fine, a direct +overn*ent +uarantee.
It *atters not that there is a rounda.out procedure prescri.ed .1 Section !.8!$c%$iv%, $v% and $vi% that woud
reCuire, first, an atte*pt $a.eit unsuccessfu% .1 the Senior 3enders to transfer PiatcoMs ri+hts to a transferee of their
choice> and, second, an effort $eCua1 unsuccessfu% to 6enter into an1 other arran+e*ent6 with the +overn*ent
re+ardin+ the Ter*ina III faciit1, .efore +overn*ent is reCuired to *a/e +ood on its +uarantee. Ehat is a.undant1
cear is the fact that, in the devious a.1rinthine process detaied in the aforesaid section, it is entire1 within the
Senior 3endersM power, prero+ative and contro & e?ercisa.e via a *ere refusal or inabilit) to a+ree upon 6a
transferee6 or 6an1 other arran+e*ent6 re+ardin+ the ter*ina faciit1 & to push the process forward to the uti*ate
contractua cu&de&sac, wherein +overn*ent wi .e co*peed to a.0ect1 surrender and *a/e +ood on its +uarantee of
pa1*ent.
Piatco aso ar+ues that there is no proviso reCuirin+ +overn*ent to pa1 the Senior 3enders in the event of PiatcoMs
defaut. This is itera1 true, in the sense that Section !.8!$c%$vi% of #RC# spea/s of +overn*ent *a/in+ the
ter*ination pa1*ent to +iat*o, not to the enders. However, it is a*ost a certaint1 that the Senior 3enders wi
aread1 have *ade Piatco si+n over to the*, ahead of ti*e, its ri+ht to receive such pa1*ents fro* +overn*ent>
andFor the1 *a1 aread1 have had the*seves appointed its attorne1s&in&fact for the purpose of coectin+ and
receivin+ such pa1*ents.
Nevertheess, as petitioners&in&intervention pointed out in their 7e*orandu*,(A the ter*ination pa1*ent is to .e
*ade to Piatco, not to the enders> and there is no provision an1where in the contract docu*ents to prevent it fro*
divertin+ the proceeds to its own .enefit andFor to ensure that it wi necessari1 use the sa*e to pa1 off the Senior
3enders and other creditors, in order to avert the forecosure of the *ort+a+e and other iens on the ter*ina faciit1.
Such deficienc1 puts the interests of +overn*ent at +reat ris/. Indeed, if the unthin/a.e were to happen, +overn*ent
woud .e pa1in+ severa hundreds of *iions of doars, but t(e mort'a'e liens on t(e fa*ilit) ma) still be fore*losed
b) t(e &enior Lenders %ust t(e same.
ConseCuent1, the Piatco contracts are aso o.0ectiona.e for +rievous1 faiin+ to adeCuate1 protect +overn*entMs
interests. 7ore accurate1, the contracts woud consistent1 wea/en and do awa1 with protection of +overn*ent
interests. #s such, the1 are therefore +ross1 opsided in favor of Piatco andFor its Senior 3enders.
Ehie on this su.0ect, it is we to reca the earier discussion re+ardin+ a particuar1 noticea.e ateration of the
concept of 6#ttendant 3ia.iities.6 In Section A.8( of the C# definin+ the ter*, the Piatco de.ts to .e assu*edFpaid .1
+overn*ent were Cuaified .1 the phrases re*orded and from time to time outstandin' in t(e boo8s of t(e
Con*essionaire and a*tuall) used for t(e pro%e*t. These phrases were ei*inated fro* the #RC#Ms definition of
#ttendant 3ia.iities.
Since no e?panation has .een forthco*in+ fro* Piatco as to the possi.e 0ustification for such a drastic chan+e, the
on1 concusion, possi.e is that it intends to have a of its de.ts covered .1 the +uarantee, re+ardess of whether or
not the1 are discosed in its .oo/s. This has particuar reference to those .orrowin+s which were o.tained in vioation
of the oan covenants reCuirin+ Piatco to *aintain a *ini*u* -8DB8 de.t&to&eCuit1 ratio, and even if the oan
proceeds were not actua1 used for the pro0ect itsef.
This point .rin+s us .ac/ to the +uarantee itsef. In Section !.8!$c%$vi% of #RC#, the a*ount which +overn*ent has
+uaranteed to pa1 as ter*ination pa1*ent is the 7r3a/3r of either $i% the #ppraised Vaue of the ter*ina faciit1 or $ii%
the a++re+ate of the #ttendant 3ia.iities. 'iven that the #ttendant 3ia.iities *a1 incude practica1 an1 Piatco de.t
under the sun, it is hi+h1 conceiva.e that their su* *a1 +reat1 e?ceed the appraised vaue of the faciit1, and
+overn*ent *a1 end up pa1in+ ver1 *uch *ore than the rea worth of Ter*ina III. $So wh1 did +overn*ent have to
.other with pu.ic .iddin+ an1wa1I%
In the fina ana1sis, Section !.8!$c%$iv% to $vi% of the #RC# is dia*etrica1 at odds with the spirit and the intent of
the =OT 3aw. The aw *eant to *o.ii:e private resources $the private sector% to ta/e on the .urden and the ris/s of
financin+ the construction, operation and *aintenance of reevant infrastructure and deveop*ent pro0ects for the
si*pe reason that +overn*ent is not in a position to do so. =1 the sa*e to/en, +overn*ent +uarantee was prohi.ited,
since it woud *ere1 defeat the purpose and raison dMPtre of a .uid&operate&and&transfer pro0ect to .e underta/en .1
the private sector.
To the e?tent that the pro0ect proponent is a.e to o.tain oans to fund the pro0ect, those ris/s are shared .etween the
pro0ect proponent on the one hand, and its .an/s and other enders on the other. =ut where the proponent or its enders
*ana+e to ca0o or coerce the +overn*ent into e?tendin+ a +uarantee of pa1*ent of the oan o.i+ations, the ris/s
assu*ed .1 the enders are passed ri+ht .ac/ to +overn*ent. I cannot understand wh1, in the instant case, +overn*ent
cheerfu1 assented to re&assu*in+ the ris/s of the pro0ect when it +ave the prohi.ited +uarantee and thus si*p1
ne+ated the ver1 purpose of the =OT 3aw and the protection it +ives the +overn*ent.
Contract #ermination Pro'isions in the Piatco Contracts Are -oid
The =OT 3aw as a*ended provides for contract ter*ination as foowsD
6Sec. -. Contra*t $ermination. & In the event that a pro0ect is revo/ed, canceed or ter*inated .1 the
+overn*ent throu+h no faut of the pro0ect proponent or .1 *utua a+ree*ent, the 'overn*ent sha
co*pensate the said pro0ect proponent for its actua e?penses incurred in the pro0ect pus a reasona.e rate of
return thereon not e?ceedin+ that stated in the contract as of the date of such revocation, canceation or
ter*inationD +rovided, That the interest of the 'overn*ent in this instances 2sic4 sha .e du1 insured with
the 'overn*ent Service Insurance S1ste* or an1 other insurance entit1 du1 accredited .1 the Office of the
Insurance Co**issionerD +rovided finall), That the cost of the insurance covera+e sha .e incuded in the
ter*s and conditions of the .iddin+ referred to a.ove.
6In the event that the +overn*ent defauts on certain *a0or o.i+ations in the contract and such faiure is not
re*edia.e or if re*edia.e sha re*ain unre*edied for an unreasona.e en+th of ti*e, the pro0ect
proponentFcontractor *a1, .1 prior notice to the concerned nationa +overn*ent a+enc1 or oca +overn*ent
unit specif1in+ the turn&over date, ter*inate the contract. The pro0ect proponentFcontractor sha .e
reasona.1 co*pensated .1 the 'overn*ent for eCuivaent or proportionate contract cost as defined in the
contract.6
The fore+oin+ statutor1 provision in effect provides for the foowin+ i*ited instances when ter*ination
co*pensation *a1 .e aowedD
A. Ter*ination .1 the +overn*ent throu+h no faut of the pro0ect proponent
). Ter*ination upon the partiesM *utua a+ree*ent
B. Ter*ination .1 the proponent due to +overn*entMs defaut on certain *a0or contractua o.i+ations
To emp(asi"e t(e la: does not permit *ompensation for t(e pro%e*t proponent :(en *ontra*t termination is due to t(e
proponent<s o:n fault or brea*( of *ontra*t.
This principe was cear1 vioated in the Piatco Contracts. The #RC# stipuates that +overn*ent is to pa1 ter*ination
co*pensation to Piatco even when termination is initiated b) 'overnment for t(e follo:in' *ausesD
6$i% @aiure of Concessionaire to finish the Eor/s in a *ateria respects in accordance with the Tender
Desi+n and the Ti*eta.e>
$ii% Co**ission .1 Concessionaire of a *ateria .reach of this #+ree*ent . . .>
$iii% . . . a chan+e in contro of Concessionaire arisin+ fro* the sae, assi+n*ent, transfer or other disposition
of capita stoc/ which resuts in an ownership structure vioative of statutor1 or constitutiona i*itations>
$iv% # pattern of continuin+ or repeated non&co*piance, wifu vioation, or non&perfor*ance of other ter*s
and conditions hereof which is here.1 dee*ed a *ateria .reach of this #+ree*ent . . .6()
#s if that were not .ad enou+h, the #RC# aso inserted into Section 9.8A the phrase 6Su.0ect to Section !.8!.6 The
effect of this insertion is that in those instances where +overn*ent *a1 ter*inate the contract on account of PiatcoMs
.reach, and it is nevertheess reCuired under the #RC# to *a/e ter*ination co*pensation to Piatco even thou+h
unauthori:ed .1 aw, such co*pensation is to .e eCuivaent to the pa)ment amount 'uaranteed b) 'overnment & either
a% the #ppraised Vaue of the ter*ina faciit1 or $.% the a++re+ate of the #ttendant 3ia.iities, whichever a*ount is
+reater^
Cear1, this condition is not in ine with Section - of the =OT 3aw. That provision per*its a pro0ect proponent to
recover the actua e?penses it incurred in the prosecution of the pro0ect pus a reasona.e rate of return not in e?cess of
that provided in the contract> or to .e co*pensated for the eCuivaent or proportionate contract cost as defined in the
contract, in case the +overn*ent is in defaut on certain *a0or contractua o.i+ations.
@urther*ore, in those instances where such ter*ination co*pensation is authori3ed .1 the =OT 3aw, it is
indispensa.e that the interest of +overn*ent .e du!y insured. Section ".89 the #RC# *andates insurance covera+e
for the ter*ina faciit1> .ut a insurance poicies are to .e assi+ned, and a proceeds are pa1a.e, to the Senior
3enders. In .rief, the interest .ein+ secured .1 such covera+e is that of the Senior 3enders, not that of +overn*ent.
This can hard1 .e considered co*piance with aw.
In essence, the #RC# provisions on ter*ination co*pensation resut in another unauthori:ed +overn*ent +uarantee,
this ti*e in favor of Piatco.
A Prohibited %irect 0o'ernment Subsidy, hich at the Same #ime *s an Assau!t on the ,ationa! Honor
Sti another contractua provision offensive to aw and pu.ic poic1 is Section 9.8A$d% of the #RC#, which is a
6.oder and .adder6 version of Section 9.8!$d% of the C#.
It wi .e recaed that Section !&# of the =OT 3aw as a*ended prohi.its not on1 direct +overn*ent +uarantees, .ut
i/ewise a dire*t 'overnment subsid) for unsoicited proposas. Section AB.). .. iii. of the A,,, IRR defines adire*t
'overnment subsid) as enco*passin+ 6an a+ree*ent where.1 the 'overn*ent . . . wi . . . postpone an) pa)ments
due from t(e proponent.6
Despite the statutor1 .an, Section 9.8A $d% of the #RC# provides thusD
6$d% The provisions of Section 9.8A$a% notwithstandin+, and for the purpose of preventin+ a disruption of the
operations in the Ter*ina andFor Ter*ina Co*pe?, in the event that at an1 ti*e Concessionaire is of the
reasona.e opinion that it sha .e una.e to *eet a pa1*ent o.i+ation owed to the Senior 3enders,
Concessionaire sha +ive pro*pt notice to 'RP, throu+h DOTCF7I## and to the Senior 3enders. In such
circu*stances, the Senior 3enders $or the Senior 3endersM Representative% *a1 ensure that after *a/in+
provision for ad*inistrative e?penses and depreciation, t(e *as( resour*es of Con*essionaire s(all first be
used and applied to meet all pa)ment obli'ations o:ed to t(e &enior Lenders. An) ex*ess *as( after meetin'
su*( pa)ment obli'ations s(all be earmar8ed for t(e pa)ment of all sums pa)able b) Con*essionaire to G.+
under t(is A'reement. If .1 reason of the fore+oin+ 'RP shoud .e una.e to coect in fu a pa1*ents due
to 'RP under this #+ree*ent, then the unpaid .aance sha .e pa1a.e within a ,8&da1 +race period counted
fro* the reevant due date, with interest per annu* at the rate eCua to the avera+e ,A&da1 Treasur1 =i Rate
as of the auction date i**ediate1 precedin+ the reevant due date. If pa1*ent is not effected .1
Concessionaire within the +race period, then a spread of five $"Z% percent over the appica.e ,A&da1
Treasur1 =i Rate sha .e added on the unpaid a*ount co**encin+ on the e?pir1 of the +race period up to
the da1 of fu pa1*ent. Ehen the te*porar1 iiCuidit1 of Concessionaire sha have .een corrected and the
cash position of Concessionaire shoud indicate its a.iit1 to *eet its *aturin+ o.i+ations, then the provisions
set forth under this Section 9.8A$d% sha cease to app1. The fore+oin+ re*edia *easures sha .e appica.e
on1 whie there re*ains unpaid and outstandin+ a*ounts owed to the Senior 3enders.6 $E*phasis suppied%
=1 an1 *anner of interpretation or appication, Section 9.8A$d% of the #RC# cear1 *andates
the indefinitepostpone*ent of pa1*ent of a of PiatcoMs o.i+ations to the +overn*ent, in order to ensure that PiatcoMs
o.i+ations to the Senior 3enders are paid in fu first. That is nothin+ *ore or ess than the direct +overn*ent su.sid1
prohi.ited .1 the =OT 3aw and the IRR. The fact that Piatco wi pa1 interest on the unpaid a*ounts owed to
+overn*ent does not chan+e the situation or render the prohi.ited su.sid1 an1 ess unaccepta.e.
=ut .e1ond the cear vioations of aw, there are ar+er issues invoved in the #RC#. Earier, I *entioned that Section
9.8A$d% of the #RC# co*pete1 ei*inated the proviso in Section 9.8!$d% of the C# which +ave +overn*ent the ri+ht
to appoint a financia controer to *ana+e the cash position of Piatco durin+ situations of financia distress. Not on1
has +overn*ent .een deprived of an1 *eans of *onitorin+ and *ana+in+ the situation> worse, as can .e seen fro*
Section 9.8A$d% a.ove&Cuoted, the Senior 3enders have effective1 oc/ed in on the ri+ht to e?ercise financia
controership over Piatco and to aocate its cash resources to the pa1*ent of a a*ounts owed to the Senior 3enders
.efore aowin+ an1 pa1*ent to .e *ade to +overn*ent.
In .rief, this particuar provision of the #RC# has paced in the hands of forei+n enders the power and the authorit1
to deter*ine how *uch $if at a% and when the Phiippine +overn*ent $as +rantor of the franchise% *a1 .e aowed to
receive fro* Piatco. In that situation, +overn*ent wi .e at the *erc1 of the forei+n enders. This is a situation
co*pete1 contrar1 to the rationae of the =OT 3aw and to pu.ic poic1.
Th3 a-or31a0 5ro9010on ro(131 40<3 34o/0on1 $ 1ha43 an 017(1/ a/ /h3 5ar/031A C3153c0a..) /h3 7o93rn43n/
o--0c0a.1AD oc0.3 1(240110on an a2H3c/ 13r90/(3 an 1(rr3n3r /o /h3 0453r0o(1 an 3<c311093 34an1 o- /h3
-or307n .3n3r1, on /h3 on3 hanJ an 93h343n/ o(/ra73 a/ /h3 a--ron/ /o /h3 1o93r307n/) o- /h3 R35(2.0c an /o
/h3 na/0ona. honor, on /h3 o/h3r. I/ 01 0n33 /043 /o 5(/ an 3n /o 1(ch an (n23ara2.3, 01honora2.3 10/(a/0on.
#he Piatco Contracts 4narguab!y -io!ate Constitutiona! *n5unctions
I wi now discuss the *anner in which the Piatco Contracts offended the Constitution.
The E?cusive Ri+ht 'ranted to Piatco to Operate a Pu.ic 5tiit1 Is Prohi.ited .1 the Constitution
Ehie Section ).8) of the #RC# spo/e of +rantin+ to Piatco 6a franchise to operate and *aintain the Ter*ina
Co*pe?,6 Section B.8)$a% of the sa*e #RC# +ranted to Piatco, for the entire ter* of the concession a+ree*ent,
6t(e e1c!usi'e right to operate a *ommer*ial international passen'er terminal :it(in t(e Island of Lu"on6 with the
e?ception of those three ter*inas aread1 e?istin+(B at the ti*e of e?ecution of the #RC#.
Section AA of #rtice VII of the Constitution prohi.its the +rant of a 6franchise, certificate, or an1 other for* of
authori:ation for the operation of a pu.ic utiit16 that is 6e?cusive in character.6
In its Opinion No. 8-9, Series of A,,", the Depart*ent of 0ustice hed that 6the N#I# Ter*ina III which . . . is a
Mter*ina for pu.ic useM is a pu.ic utiit1.6 ConseCuent1, the constitutiona prohi.ition a+ainst the e?cusivit1 of a
franchise appies to the franchise for the operation of N#I# Ter*ina III as we.
Ehat was +ranted to Piatco was not *ere1 a franchise, .ut an 6e?cusive ri+ht6 to operate an internationa passen+er
ter*ina within the 6Isand of 3u:on.6 Ehat this +rant effective1 *eans is that the +overn*ent is now estopped fro*
e?ercisin+ its inherent power to award an1 other person another franchise or a ri+ht to operate such a pu.ic utiit1, in
the event pu.ic interest in 3u:on reCuires it. This restriction is hi+h1 detri*enta to +overn*ent and to the pu.ic
interest. @or*er Secretar1 of ;ustice Hernando =. Pere: e?pressed this point we in his 7e*orandu* for the
President dated )A 7a1 )88)D
6Section B.8) on ME?cusivit1M
6This provision +ives to PI#TCO $the Concessionaire% the e?cusive ri+ht to operate a co**ercia
internationa airport within the Isand of 3u:on with the e?ception of those aread1 e?istin+ at the ti*e of the
e?ecution of the #+ree*ent, such as the airports at Su.ic, Car/ and 3aoa+ Cit1. In the case of the Car/
Internationa #irport, however, the provision restricts its operation .e1ond its desi+n capacit1 of 9"8,888
passen+ers per annu* and the operation of new ter*ina faciities therein unti after the new N#I# Ter*ina
III sha have consistent1 reached or e?ceeded its desi+n capacit1 of ten $A8% *iion passen+er capacit1 per
1ear for three $B% consecutive 1ears durin+ the concession period.
6This is an onerous and disadvanta+eous provision. It effective1 +rants PI#TCO a monopol) in Lu"on and
ties the hands of +overn*ent in the *atter of deveopin+ new airports which *a1 .e found e?pedient and
necessar1 in carr1in+ out an1 future pan for an inter&*oda transportation s1ste* in 3u:on.
6#dditiona1, it i*poses an unreasona.e restriction on the operation of the Car/ Internationa #irport which
coud adverse1 affect the operation and deveop*ent of the Car/ Specia Econo*ic Uone to the econo*ic
pre0udice of the oca constituencies that are .ein+ .enefited .1 its operation.6 $E*phasis suppied%
Ehie it cannot .e +ainsaid that an enterprise that is a pu.ic utiit1 *a1 happen to constitute a *onopo1 on account
of the ver1 nature of its .usiness and the a.sence of co*petition, such a situation does not however constitute
0ustification to vioate the constitutiona prohi.ition and +rant an ex*lusive fran*(ise or ex*lusive ri'(t to operate a
pu.ic utiit1.
PiatcoMs contention that the Constitution does not actua1 prohi.it *onopoies is .eside the point. #s correct1
ar+ued,(! the e?istence of a *onopo1 .1 a pu.ic utiit1 is a situation created .1 circu*stances that do not encoura+e
co*petition. This situation is different fro* the +rant of a franchise to operate a pu.ic utiit1, a privie+e +ranted .1
+overn*ent. Of course, the +rant of a franchise *a1 resut in a *onopo1. =ut *a/in+ such franchise ex*lusive is
what is e?press1 proscri.ed .1 the Constitution.
#ctua1, the afore*entioned Section B.8) of the #RC# *ore than 0ust +uaranteed e?cusivit1> it aso +uaranteed that
the +overn*ent wi not i*prove or e?pand the faciities at Car/ & and in fact is reCuired to put a cap on the atterMs
operations & unti after Ter*ina III sha have .een operated at or .e1ond its pea/ capacit1 for
three*onse*utive 1ears.(" #s counse for pu.ic respondents pointed out, in the rea word where the rate of infu? of
internationa passen+ers can fuctuate su.stantia1 fro* 1ear to 1ear, it *a1 ta/e *an1 1ears .efore Ter*ina III sees
three consecutive 1earsM operations at pea/ capacit1. The Diosdado 7acapa+a Internationa #irport *a1 thus end up
sta+natin+ for a on+ ti*e. Indeed, in order to ensure +reater profits for Piatco, the econo*ic pro+ress of a re+ion has
had to .e sacrificed.
#he Piatco Contracts -io!ate the #ime Limitation on Franchises
Section AA of #rtice VII of the Constitution aso provides that 6no franchise, certificate or an1 other for* of
authori:ation for the operation of a pu.ic utiit1 sha .e . . . for a on+er period than fift) )ears.6 #fter a, a franchise
hed for an unreasona.1 on+ ti*e woud i/e1 +ive rise to the sa*e evis as a *onopo1.
The Piatco Contracts have co*e up with an innovative wa1 to circu*vent the prohi.ition and o.tain an e?tension.
This fact can .e +eaned fro* Section 9.8B$.% of the #RC#, which I Cuote thusD
6Sec. 9.8B. Ter*ination Procedure and ConseCuences of Ter*ination. &
a% ? ? ? ? ? ? ? ? ?
.% In the event the #+ree*ent is ter*inated pursuant to Section 9.8A $.% hereof, Concessionaire sha
.e entited to coect the 3iCuidated Da*a+es specified in #nne? M'M. The fu pa1*ent .1 'RP to
Concessionaire of the 3iCuidated Da*a+es sha .e a condition precedent to the transfer .1
Concessionaire to 'RP of the Deveop*ent @aciit1. Prior to the fu pa1*ent of the 3iCuidated
Da*a+es, Concessionaire sha to the e?tent practica.e continue to operate the Ter*ina and the
Ter*ina Co*pe? and sha .e entited to retain and withhod a pa1*ents to 'RP for the purpose of
offsettin+ the sa*e a+ainst the 3iCuidated Da*a+es. 5pon fu pa1*ent of the 3iCuidated Da*a+es,
Concessionaire sha i**ediate1 transfer the Deveop*ent @aciit1 to 'RP on Mas&is&where&isM
.asis.6
The aforesaid eas1 pa1*ent sche*e is ess .eneficia than it first appears. #thou+h it ena.es +overn*ent to avoid
havin+ to *a/e outri+ht pa1*ent of an o.i+ation that wi i/e1 run into .iions of pesos, this eas1 pa1*ent pan
wi nevertheess cost +overn*ent considera.e oss of inco*e, which it woud earn if it were to operate Ter*ina III
.1 itsef. Inas*uch as pa1*ents to the concessionaire $Piatco% wi .e on 6insta*ent .asis,6 interest char+es on the
re*ainin+ unpaid .aance woud undou.ted1 cause the tota outstandin+ .aance to swe. Piatco woud thus .e
entited to re*ain in the driverMs seat and /eep operatin+ the ter*ina for an indefinite en+th of ti*e.
$(e Contra*ts Create $:o !onopolies for +iat*o
=1 wa1 of .ac/+round, two *onopoies were actua1 created .1 the Piatco contracts. The first and *ore o.vious one
refers to the .usiness of operatin' an international passen'er terminal in Lu"on, the .usiness end of which invoves
providin+ internationa airines with par/in+ space for their aircraft, and airine passen+ers with the use of departure
and arriva areas, chec/&in counters, infor*ation s1ste*s, conve1or s1ste*s, securit1 eCuip*ent and paraphernaia,
i**i+rations and custo*s processin+ areas> and a*enities such as co*fort roo*s, restaurants and shops.
In furtherance of the first *onopo1, the Piatco Contracts stipuate that the N#I# Ter*ina III wi .e the on1 faciit1
to .e operated as an internationa passen+er ter*ina>(( that N#I# Ter*inas I and II wi no on+er .e operated as
such>(- and that no one $incudin+ the +overn*ent% wi .e aowed to co*pete with Piatco in the operation of an
internationa passen+er ter*ina in the N#I# Co*pe?.(9 'iven that, at this ti*e, the +overn*ent and Piatco are the
on1 ones en+a+ed in the .usiness of operatin+ an internationa passen+er ter*ina, I a* not acute1 concerned with
this particuar *onopoistic situation.
There was however another *onopo1 within the N#I# created .1 the su.0ect contracts for Piatco & in the .usiness of
providin+ internationa airines with the foowin+D 'round(andlin' in-fli'(t *aterin' *ar'o (andlin' and air*raft
repair and maintenan*e servi*es. These are ines of .usiness activit1 in which are en+a+ed *an1 service providers
$incudin+ the petitioners&in&intervention%, who wi .e adverse1 affected upon fu i*pe*entation of the Piatco
Contracts, particuar1 Sections B.8A$d%(, and $e%-8 of .oth the #RC# and the C#.
On the one hand, Section B.8)$a% of the #RC# *a/es Ter*ina III the on1 internationa passen+er ter*ina at the
N#I#, and therefore the on1 pace within the N#I# Co*pe? where the .usiness of providin+ airport&reated
services to internationa airines *a1 .e conducted. On the other hand, Section B.8A$d% of the #RC# reCuires
+overn*ent, throu+h the 7I##, not to aow service providers with e?pired 7I## contracts to renew or e?tend their
contracts to render airport&reated services to airines. 7eanwhie, Section B.8A$e% of the #RC# reCuires +overn*ent,
throu+h the DOTC and 7I##, not to aow service providers & those with su.sistin+ concession a+ree*ents for
services and operations .ein+ conducted at Ter*ina I & to carr1 over their concession a+ree*ents, services and
operations to Ter*ina III, uness the1 first enter into a separate a+ree*ent with Piatco.
The afore*entioned provisions vest in Piatco effective and e?cusive contro over which service provider *a1 and
*a1 not operate at Ter*ina III and render the airport&reated services needed .1 internationa airines. It there.1
possesses the power to e?cude co*petition. =1 necessar1 i*pication, it aso has effective contro over the fees and
char+es that wi .e i*posed and coected .1 these service providers.
This intention is e?ceedin+1 cear in the decaration .1 Piatco that it is 6co*pete1 within its ri+hts to e?cude an1
part1 that it has not contracted with fro* N#I# Ter*ina III.6-A
Eorse, there is nothin+ whatsoever in the Piatco Contracts that can serve to restrict, contro or re+uate the
concessionaireMs discretion and power to re0ect an1 service provider andFor i*pose an1 ter* or condition it *a1 see fit
in an1 contract it enters into with a service provider. In .rief, there is no safe+uard whatsoever to ensure free and fair
co*petition in the service&provider sector.
In the *eanti*e, and not surprisin+1, Piatco is first in ine, read1 to e?poit the uniCue .usiness opportunit1. It
announced-) that it has accredited three +roundhanders for Ter*ina III. #side fro* the Phiippine #irines, the other
accredited entities are the Phiippine #irport and 'round Services 'o.e+round, Inc. $6P#'S'o.e+round6% and the
Or.it #ir S1ste*s, Inc. $6Or.it6%. P#'S'o.e+round is a who1&owned su.sidiar1 of the Phiippine #irport and
'round Services, Inc. or P#'S,-B whie Or.it is a who1&owned su.sidiar1 of @riendship Hodin+s, Inc.,-!which is
in turn owned 98 percent .1 P#'S.-" P#'S is a service provider owned (8 percent .1 the Chen+ @a*i1> -( it is a
stoc/hoder of B" percent of Piatco-- and is the atterMs desi+nated contractor&operator for N#I# Ter*ina III.-9
Such entr1 into and do*ination of the airport&reated services sector appear to .e ver1 *uch in ine with the foowin+
provisions contained in the @irst #ddendu* to the Piatco Sharehoders #+ree*ent, -, e?ecuted on ;u1 (, A,,,, which
appear to constitute a sort of *aster pan to create a *onopo1 and co*.inations in restraint of tradeD
6AA. The Sharehoders sha ensureD
a. ? ? ? ? ? ? ? ? ?.>
.. That $Phi. #irport and 'round Services, Inc.% P#'S andFor its desi+nated #ffiiates sha, at a ti*es
durin+ the Concession Period, .e e?cusive1 authori:ed .1 $PI#TCO% to en+a+e in the provision of +round&
handin+, caterin+ and fuein+ services within the Ter*ina Co*pe?.
c. That P#IRC#R'O andFor its desi+nated #ffiiate sha, durin+ the Concession Period, .e the on1 entities
authori:ed to construct and operate a warehouse for a car+o handin+ and reated services within the Site.6
Precise1, proscri.ed .1 our Constitution are the *onopo1 and the restraint of trade .ein+ fostered .1 the Piatco
Contracts throu+h the erection of .arriers to the entr1 of other service providers into Ter*ina III. In $atad v.
&e*retar) of t(e Department of Ener'),98 the Court ruedD
6. . . 2S4ection A, of #rtice VII of the Constitution . . . *andatesD MThe State sha re+uate or prohi.it
*onopoies when the pu.ic interest so reCuires. No co*.inations in restraint of trade or unfair co*petition
sha .e aowed.M
6# *onopo1 is a privie+e or pecuiar advanta+e vested in one or *ore persons or co*panies, consistin+ in
the e?cusive ri+ht or power to carr1 on a particuar .usiness or trade, *anufacture a particuar artice, or
contro the sae or the whoe supp1 of a particuar co**odit1. It is a for* of *ar/et structure in which one
or on1 a few fir*s do*inate the tota saes of a product or service. On the other hand, a co*.ination in
restraint of trade is an a+ree*ent or understandin+ .etween two or *ore persons, in the for* of a contract,
trust, poo, hodin+ co*pan1, or other for* of association, for the purpose of undu1 restrictin+ co*petition,
*onopoi:in+ trade and co**erce in a certain co**odit1, controin+ its production, distri.ution and price,
or otherwise interferin+ with freedo* of trade without statutor1 authorit1. Co*.ination in restraint of trade
refers to the *eans whie *onopo1 refers to the end.
6? ? ? ? ? ? ? ? ?
6Section A,, #rtice VII of our Constitution is anti&trust in histor1 and in spirit. It espouses co*petition. The
desira.iit1 of co*petition is the reason for the prohi.ition a+ainst restraint of trade, the reason for the
interdiction of unfair co*petition, and the reason for re+uation of un*iti+ated *onopoies. Co*petition is
thus the under1in+ principe of 2S4ection A,, #rtice VII of our Constitution, . . .69A
Go8on':ei Jr. v. &e*urities and Ex*(an'e Commission9) eucidates the criteria to .e e*po1edD 6# M*onopo1M
e*.races an1 co*.ination the tendenc1 of which is to prevent co*petition in the .road and +enera sense, or to
contro prices to the detri*ent of the pu.ic. In short, it is the concentration of .usiness in the hands of a few. $(e
material *onsideration in determinin' its existen*e is not t(at pri*es are raised and *ompetition a*tuall) ex*luded but
t(at po:er exists to raise pri*es or ex*lude *ompetition :(en desired.69B $E*phasis suppied%
#he Contracts $ncourage )ono&o!istic Pricing, #oo
#side fro* creatin+ a *onopo1, the Piatco contracts aso +ive the concessionaire virtua1 i*itess power over the
char+in+ of fees, rentas and so forth. Ehat itte 6oversi+ht function6 the +overn*ent *i+ht .e a.e and *inded to
e?ercise is ess than sufficient to protect the pu.ic interest, as can .e +eaned fro* the foowin+ provisionsD
6Sec. (.8(. #d0ust*ent of Non&Pu.ic 5tiit1 @ees and Char+es
6@or fees, rentas and char+es constitutin+ Non&Pu.ic 5tiit1 Revenues, Concessionaire *a1 *a/e an1
ad0ust*ents it dee*s appropriate without need for the consent of 'RP or an1 +overn*ent a+enc1 su.0ect to
Sec. (.8B$c%.6
Section (.8B$c% in turn providesD
6$c% Concessionaire sha at a ti*es .e 0udicious in fi?in+ fees and char+es constitutin+ Non&Pu.ic 5tiit1
Revenues in order to ensure that End 5sers are not unreasona.1 deprived of services. Ehie the vehicuar
par/in+ fee, portera+e fee and +reeterFwewisher fee constitute Non&Pu.ic 5tiit1 Revenues of
Concessionaire, 'RP *a1 reCuire Concessionaire to e?pain and 0ustif1 the fee it *a1 set fro* ti*e to ti*e, if
in the reasona.e opinion of 'RP the said fees have .eco*e e?or.itant resutin+ in the unreasona.e
deprivation of End 5sers of such services.6
It wi .e noted that the a.ove&Cuoted provision has no teeth, so the concessionaire can def1 the +overn*ent without
fear of an1 sanction. 7oreover, Section (.8( & ta/en to+ether with Section (.8B$c% of the #RC# & fas short of the
standard set .1 the =OT 3aw as a*ended, which e?press1 reCuires in Section )$.% that the pro0ect proponent is
6allo:ed to *(ar'e fa*ilit) users appropriate tolls fees rentals and *(ar'es not e1ceeding those &ro&osed in its bid
or as negotiated and incor&orated in the contract x x x.6
#he Piatco Contracts -io!ate Constitutiona! Prohibitions Against
*m&airment of Contracts and %e&ri'ation of Pro&erty ithout %ue Process
Earier, I discussed how Section B.8A$e%9! of .oth the C# and the #RC# reCuires +overn*ent, throu+h DOTCF7I##,
not to per*it the carr1&over to Ter*ina III of the services and operations of certain service providers current1
operatin+ at Ter*ina I with su.sistin+ contracts.
=1 the In&Service Date, Ter*ina III sha .e the on1 faciit1 to .e operated as an internationa passen+er ter*ina at
the N#I#>9" thus, Ter*inas I and II sha no on+er operate as such,9( and no one sha .e aowed to co*pete with
Piatco in the operation of an internationa passen+er ter*ina in the N#I#. 9- The .otto* ine is that, as of the In&
Service Date, Ter*ina III wi .e the on1 ter*ina where the .usiness of providin+ airport&reated services to
internationa airines and passen+ers *a1 .e conducted at a.
ConseCuent1, +overn*ent throu+h the DOTCF7I## wi .e co*peed to cease honorin+ e?istin+ contracts with
service providers after the In&Service Date, as the1 cannot .e aowed to operate in Ter*ina III.
In short, the C# and the #RC# o.i+ate and constrain +overn*ent to .rea/ its e?istin+ contracts with these service
providers.
Nota.1, +overn*ent is not in a position to reCuire Piatco to acco**odate the dispaced service providers, and it
woud .e unreaistic to thin/ that these service providers can perfor* their service contracts in so*e other
internationa airport outside 3u:on. O.vious1, then, these dispaced service providers are & to .orrow a Cuaint
e?pression & up t(e river :it(out a paddle. In painer ter*s, the1 wi have ost their .usinesses entire1, in the .in/ of
an e1e.
Ehat we have here is a set of contractua provisions that i*pair the o.i+ation of contracts and contravene the
constitutiona prohi.ition a+ainst deprivation of propert1 without due process of aw.99
7oreover, since the dispaced service providers, .ein+ una.e to operate, wi .e forced to cose shop, their respective
e*po1ees & a*on+ the* 7essrs. #+an and 3ope: et a. & have ver1 +rave cause for concern, as the1 wi find
the*seves out of e*po1*ent and .ereft of their *eans of iveihood. This situation co*prises sti another vioation
of the constitution prohi.ition a+ainst deprivation of propert1 without due process.
True, doin+ .usiness at the N#I# *a1 .e viewed *ore as a privie+e than as a ri+ht. Nonetheess, where that privie+e
has .een avaied of .1 the petitioners&in&intervention service providers for 1ears on end, a situation arises, si*iar to
that in Ameri*an Inter-fas(ion v. G$EB.9, Ee hed therein that a privie+e en0o1ed for seven 1ears 6evolved into some
form of propert) ri'(t :(i*( s(ould not be removed x x x arbitraril) and :it(out due pro*ess.6 Said pronounce*ent is
particuar1 reevant and appica.e to the situation at .ar .ecause the iveihood of the e*po1ees of petitioners&
intervenors are at sta/e.
#he Piatco Contracts -io!ate Constitutiona! Prohibition
Against %e&ri'ation of Liberty ithout %ue Process
The Piatco Contracts .1 oc/in+ out e?istin+ service providers fro* entr1 into Ter*ina III and restrictin+ entr1 of
future service providers, there.1 infrin+ed upon the freedo* & +uaranteed to and heretofore en0o1ed .1 internationa
airines & to contract with oca service providers of their choice, and vice versa.
=oth the service providers and their cient airines wi .e deprived of the ri'(t to libert), which incudes the ri+ht to
enter into a contracts,,8 andFor the ri+ht to *a/e a contract in reation to oneMs .usiness.,A
By Creating ,e" Financia! Ob!igations for 0o'ernment,
Su&&!ements to the A(CA -io!ate the Constitutiona!
Ban on %isbursement of Pub!ic Funds ithout -a!id A&&ro&riation
Cear1 prohi.ited .1 the Constitution is the dis.urse*ent of pu.ic funds out of the treasur1, e?cept in pursuance of
an appropriation *ade .1 aw.,) The i**ediate effect of this constitutiona .an is that a the various a+encies of
+overn*ent are constrained to i*it their e?penditures to the a*ounts appropriated .1 aw for each fisca 1ear> and to
carefu1 count their cash .efore ta/in+ on contractua co**it*ents. 'ivin+ fesh and for* to the in0unction of the
funda*enta aw, Sections !( and !- of E?ecutive Order ),), otherwise /nown as the #d*inistrative Code of A,9-,
provide as foowsD
6Sec. !(. Appropriation Before Enterin' into Contra*t. & $A% No contract invovin+ the e?penditure of pu.ic
funds sha .e entered into uness there is an appropriation therefor, the une?pended .aance of which, free of
other o.i+ations, is sufficient to cover the proposed e?penditure> and . .
6Sec. !-. Certifi*ate &(o:in' Appropriation to !eet Contra*t. & E?cept in the case of a contract for persona
service, for suppies for current consu*ption or to .e carried in stoc/ not e?ceedin+ the esti*ated
consu*ption for three $B% *onths, or .an/in+ transactions of +overn*ent&owned or controed .an/s, no
contract invovin+ the e?penditure of pu.ic funds .1 an1 +overn*ent a+enc1 sha .e entered into or
authori:ed uness the proper accountin+ officia of the a+enc1 concerned sha have certified to the officer
enterin+ into the o.i+ation that funds have .een du1 appropriated for the purpose and that the a*ount
necessar1 to cover the proposed contract for the current caendar 1ear is avaia.e for e?penditure on account
thereof, su.0ect to verification .1 the auditor concerned. The certificate si+ned .1 the proper accountin+
officia and the auditor who verified it, sha .e attached to and .eco*e an inte+ra part of the proposed
contract, and the su* so certified sha not thereafter .e avaia.e for e?penditure for an1 other purpose unti
the o.i+ation of the +overn*ent a+enc1 concerned under the contract is fu1 e?tin+uished.6
Referrin+ to the aforeCuoted provisions, this Court has hed that 6$I%t is Cuite evident fro* the tenor of the an+ua+e of
the aw that the e?istence of appropriations and the avaia.iit1 of funds are indispensa.e pre&reCuisites to or
conditions sine #ua non for the e?ecution of +overn*ent contracts. The o.vious intent is to i*pose such conditions
as a priori reCuisites to the vaidit1 of the proposed contract.6,B
Notwithstandin+ the constitutiona .an, statutor1 *andates and ;urisprudentia precedents, the three Suppe*ents to
the #RC#, which were not approved .1 NED#, i*posed on +overn*ent the additiona .urden of spendin+ pu.ic
*one1s without prior appropriation.
In the @irst Suppe*ent $6@S6% dated #u+ust )-, A,,,, the foowin+ reCuire*ents were i*posed on the +overn*entD
_ To construct, *aintain and /eep in +ood repair and operatin+ condition a airport support services,
faciities, eCuip*ent and infrastructure owned andFor operated .1 7I##, which are not part of the Pro0ect or
which are ocated outside the Site, even thou+h constructed .1 Concessionaire & incudin+ the access road
connectin+ Ter*inas II and III and the ta?iane, ta?iwa1s and runwa1s
_ To o.i+ate the 7I## to provide fundin+ for the up/eep, *aintenance and repair of the airports and
faciities owned or operated .1 it and .1 third persons under its contro in order to ensure co*piance with
internationa standards> and hodin+ 7I## ia.e to Piatco for the atterMs osses, e?penses and da*a+es as
we as for the atterMs ia.iit1 to third persons, in case 7I## fais to perfor* such o.i+ations> in addition,
7I## wi aso .e ia.e for the incre*enta and conseCuentia costs of the re*edia wor/ done .1 Piatco on
account of the for*erMs defaut.
_ Section ! of the @S i*posed on +overn*ent ten $A8% 6#dditiona Specia O.i+ations,6 incudin+ the
foowin+D
Providin+ thru 7I## the and reCuired .1 Piatco for the ta?iane and one ta?iwa1, at no cost to
Piatco
I*pe*entin+ the +overn*entMs e?istin+ stor* draina+e *aster pan
Coordinatin+ with DPEH the financin+, i*pe*entation and co*petion of the foowin+ wor/s
.efore the In&Service DateD three eft&turnin+ overpasses $Edsa to Tra*o St., Tra*o to #ndrews #ve.,
and 7anunas Road to Saes #ve.% and a road up+rade and i*prove*ent pro+ra* invovin+
widenin+, repair and resurfacin+ of Saes Road, #ndrews #venue and 7anunas Road> i*prove*ent
of Nichos Interchan+e> and re*ova of sCuatters aon+ #ndrews #venue
Deain+ direct1 with =CD# and the Phiippine #ir @orce in acCuirin+ additiona and or ri+ht of
wa1 for the road up+rade and i*prove*ent pro+ra*
ReCuirin+ +overn*ent to wor/ for the i**ediate reversion to 7I## of the Na1on+ Piipino
Nationa Par/, in order to per*it the .uidin+ of the second west parae ta?iwa1
_ Section " of the @S aso provides that in ieu of the access tunne, a surface access road $T)&TB% wi .e
constructed. This provision reCuires +overn*ent to e?pend funds to purchase additiona and fro* Na)on'
+ilipino and to cear the sa*e in order to .e a.e to deiver cean possession of the site to Piatco, as reCuired
in Section "$c% of the @S.
On the other hand, the Third Suppe*ent $6TS6% o.i+ates the +overn*ent to deiver, within A)8 da1s fro* date
thereof, cean possession of the and on which the T)&TB Road is to .e constructed.
The fore+oin+ contractua stipuations undenia.1 i*pose on +overn*ent the e?penditures of pu.ic funds not
incuded in an1 con+ressiona appropriation or authori:ed .1 an1 other statute. Piatco however atte*pts to ta/e these
stipuations out of the a*.it of Sections !( and !- of the #d*inistrative Code .1 characteri:in+ the* as stipuations
for co*piance on a 6.est&efforts .asis6 on1.
To deter*ine whether the additiona o.i+ations under the Suppe*ents *a1 rea1 .e underta/en on a .est&efforts
.asis on1, the nature of each of these o.i+ations *ust .e e?a*ined in the conte?t of its reevance and si+nificance to
the Ter*ina III Pro0ect, as we as of an1 adverse i*pact that *a1 resut if such o.i+ation is not perfor*ed or
underta/en on ti*e. In short, the criteria for deter*inin+ whether the .est&efforts .asis wi app1 is whether the
o.i+ations are *riti*al to t(e su**ess of t(e +ro%e*t and, accordin+1, whether faiure to perfor* the* $or to perfor*
the* on ti*e% coud result in a material brea*( of the contract.
Viewed in this i+ht, the 6#dditiona Specia O.i+ations6 set out in Section ! of the @S ta/e on a different aspect. In
particuar, each of the foowin+ *a1 a .e dee*ed to pa1 a *a0or roe in the successfu and ti*e1 prosecution of
the Ter*ina III Pro0ectD the o.tention of and reCuired .1 PI#TCO for the ta?iane and ta?iwa1> the i*pe*entation
of +overn*entMs e?istin+ stor* draina+e *aster pan> and coordination with DPEH for the co*petion of the three
eft&turnin+ overpasses .efore the In&Service Date, as we as acCuisition and deiver1 of additiona and for the
construction of the T)&TB access road.
Converse1, faiure to deiver on an1 of these o.i+ations *a1 conceiva.1 resut in su.stantia pre0udice to the
concessionaire, to such an e?tent as to constitute a *ateria .reach of the Piatco Contracts. Ehereupon, the
concessionaire *a1 outri+ht1 ter*inate the Contracts pursuant to Section 9.8A$.%$i% and $ii% of the #RC# and see/
pa1*ent of 3iCuidated Da*a+es in accordance with Section 9.8)$a% of the #RC#> or the concessionaire *a1 instead
reCuire +overn*ent to pa1 the Incre*enta and ConseCuentia 3osses under Section A.)B of the #RC#. ,!The o+ica
concusion then is that the o.i+ations in the Suppe*ents are not to .e perfor*ed on a .est&efforts .asis on1, .ut are
unar+ua.1 *andator1 in character.
Re+ardin+ 7I##Ms o.i+ation to coordinate with the DPEH for the co*pete i*pe*entation of the road up+radin+
and i*prove*ent pro+ra* for Saes, #ndrews and 7anunas Roads $which provide access to the Ter*ina III site%
prior to the In&Service Date, it is essentia to ta/e note of the fact that there was a pressin+ need to co*pete the
pro+ra* .efore the openin+ of Ter*ina III.," @or that reason, the 7I## was co*peed to enter into a *e*orandu*
of a+ree*ent with the DPEH in order to ensure the ti*e1 co*petion of the road widenin+ and i*prove*ent
pro+ra*. 7I## a+reed to advance the tota a*ount of P!A8.AA *iion to DPEH for the wor/s, whie the atter was
co**itted to do the foowin+D
6).).9. Rei*.urse a advance pa1*ents to 7I## incudin+ .ut not i*ited to interest, fees, pus other costs
of *one1 within the periods CQ)88! and CQ)88( with pa1*ent of no ess than One Hundred 7iion Pesos
$PhPA887% ever1 1ear.
6).).,. Perfor* a acts necessar1 to incude in its CQ)88! to CQ)88( .ud+et aocation the repa1*ents for
the advances *ade .1 7I##, to ensure that the advances are fu1 repaid .1 CQ)88(. @or this purpose,
DPEH sha incude the a*ounts to .e appropriated for rei*.urse*ent to 7I## in the 6Not Needin+
Cearance6 cou*n of their #+enc1 =ud+et 7atri? $#=7% su.*itted to the Depart*ent of =ud+et and
7ana+e*ent.6
It can .e easi1 inferred, then, that DPEH did not set aside enou+h funds to .e a.e to co*pete the up+radin+
pro+ra* for the crucia1 situated access roads prior to the tar+eted openin+ date of Ter*ina III> and that, had 7I##
not a+reed to end the P!A8 7iion, DPEH woud not have .een a.e to co*pete the pro+ra* on ti*e. #s a
conseCuence, +overn*ent woud have .een in .reach of a *ateria o.i+ation. Hence, this particuar underta/in+ of
+overn*ent *a1 i/ewise not .e construed as .ein+ for .est&efforts co*piance on1.
#hey a!so *nfringe on the Legis!ati'e Prerogati'e and Po"er O'er the Pub!ic Purse
=ut the particuar1 sad thin+ a.out this transaction .etween 7I## and DPEH is the fact that .oth a+encies were
*aneuvered into $or aowed the*seves to .e *aneuvered into% an a+ree*ent that woud ensure deiver1 of up+raded
roads for PiatcoMs .enefit, usin+ funds not aocated for that purpose. The a+ree*ent woud then .e presented to
Con+ress as a done dea. Con+ress woud thus .e o.i+ed to uphod the a+ree*ent and support it with the necessar1
aocations and appropriations for three 1ears, in order to ena.e DPEH to deiver on its co**itted repa1*ents to
7I##. The net resut is an infrin+e*ent on the e+isative power over the pu.ic purse and a di*inution of Con+ressM
contro over e?penditures of pu.ic funds & a deveop*ent that woud not have co*e a.out, were it not for the
Suppe*ents. Ver1 cever .ut ver1 ie+a^
EPILOGUE
hat %o e %o ,o"6
In the fina ana1sis, there re*ains .ut one uti*ate Cuestion, which I raised durin+ the Ora #r+u*ent on Dece*.er
A8, )88)D :ha/ o 83 o 80/h /h3 P0a/co Con/rac/1 an T3r40na. IIII,( $@eedin+ direct1 into the resoution of
the de*isive #uestion is the other na++in+ issueD Eh1 shoud we .other with deter*inin+ the e+ait1 and vaidit1 of
these contracts, when the Ter*ina itsef has aread1 .een .uit and is practica1 co*peteI%
Prescindin+ fro* a the fore+oin+ disCuisition, I find that a the Piatco contracts, without e?ception, are void a.
initio, and therefore inoperative. Even the ver1 process .1 which the contracts ca*e into .ein+ & the .iddin+ and the
award & has .een ridded with irre+uarities +aore and .atant vioations of aw and pu.ic poic1, far too *an1 to
i+nore. There is thus no conceiva.e wa1, as proposed .1 so*e, of savin+ one $the ori+ina Concession #+ree*ent%
whie 0un/in+ a the rest.
Neither is it possi.e to ar+ue for the retention of the Draft Concession #+ree*ent $referred to in the various peadin+s
as the Contract =idded Out% as the contract that shoud .e /ept in force and effect to +overn the situation, inas*uch as
it was never e?ecuted .1 the parties. Ehat Piatco and the +overn*ent e?ecuted was the Concession #+ree*ent which
is entire1 different fro* the Draft Concession #+ree*ent.
5ti*ate1, thou+h, it woud .e tanta*ount to an outra+eous, +rievous and unfor+iva.e *utiation of pu.ic poic1
and an insut to ourseves if we opt to /eep in pace a contract & an1 contract & for to do so :ould assume t(at :e
a'ree to (avin' +iat*o *ontinue as t(e *on*essionaire for $erminal III.
Despite a the insidious contraventions of the Constitution, aw and pu.ic poic1 Piatco perpetrated, /eepin+ Piatco
on as concessionaire and even rewardin+ it .1 aowin+ it to operate and profit fro* Ter*ina III & instead of i*posin+
upon it the stiffest sanctions per*issi.e under the aws & is unconsciona.e.
It is no e?a++eration to sa1 that Piatco *a1 not rea1 *ind which contract we decide to /eep in pace. @or a it *a1
care, we can do 0ust as we without one, if :e onl) let it *ontinue and operate t(e fa*ilit). #fter a, the rea *one1
wi co*e not fro* .uidin+ the Ter*ina, .ut fro* a*tuall) operatin' it for fift) or more )ears and *(ar'in'
:(atever it feels li8e :it(out an) *ompetition at all. This scenario *ust not .e aowed to happen.
If the Piatco contracts are 0un/ed ato+ether as I thin/ the1 shoud .e, shoud not #EDC auto*atica1 .e considered
the winnin+ .idder and therefore aowed to operate the faciit1I 71 answer is a stone&cod MNoM. #EDC never won the
.iddin+, never si+ned an1 contract, and never .uit an1 faciit1. Eh1 shoud it .e aowed toautomati*all) step in and
.enefit fro* the +reed of anotherI
Shoud +overn*ent pa1 at a for reasona.e e?penses incurred in the construction of the Ter*inaI Indeed it shoud,
otherwise it wi .e un0ust1 enrichin+ itsef at the e?pense of Piatco and, in particuar, its funders, contractors and
investors & .oth oca and forei+n. #fter a, there is no Cuestion that the State needs and wi *a/e use of Ter*ina III,
it .ein+ part and parce of the critica infrastructure and transportation&reated pro+ra*s of +overn*ent.
In !el*(or v. Commission on Audit,,- this Court hed that even if the contract therein was void, the principe of
pa1*ent .1 #uantum meruit was found appica.e, and the contractor was aowed to recover the reasonablevaue of
the thin+ or services rendered $re+ardess of an1 a+ree*ent as to the supposed vaue%, in order to avoid un0ust
enrich*ent on the part of +overn*ent. The principe of #uantum meruit was i/ewise appied in Eslao v. Commission
on Audit,,9 .ecause to den1 pa1*ent for a .uidin+ a*ost co*peted and aread1 occupied woud .e to per*it
+overn*ent to un0ust1 enrich itsef at the e?pense of the contractor. The sa*e principe was appied in .epubli* v.
Court of Appeals.,,
One possi.e practica soution woud .e for +overn*ent & in view of the nuit1 of the Piatco contracts and of the fact
that Ter*ina III has aread1 .een .uit and is a*ost finished & to .id out the operation of the faciit1 under the sa*e
or anao+ous principes as .uid&operate&and&transfer pro0ects. To .e i*posed, however, is the condition that the
winnin+ .idder *ust pa1 the .uider of the faciit1 a price fi?ed .1 +overn*ent .ased on #uantum meruit> on the rea,
reasona.e & not infated & vaue of the .uit faciit1.
How the pa1*ent or series of pa1*ents to the .uider, funders, investors and contractors wi .e sta++ered and
schedued, wi have to .e .uit into the .ids, aon+ with the annua +uaranteed pa1*ents to +overn*ent. In this
*anner, this whoe sordid *ess coud resut in so*ethin+ tru1 .eneficia for a, especia1 for the @iipino peope.
:!EREFORE, I vote to +rant the Petitions and to decare the su.0ect contracts N2LL and ;3ID.
-.
G.R. No. 1;*;99 "an(ar) 21, 200*
T!E LIGA NG MGA +ARANGA# NATIONAL, petitioner,
vs.
T!E CIT# MA#OR OF MANILA, !ON. "OSE ATIEN%A, "R., an T!E CIT# COUNCIL OF
MANILA,respondents.
D E C I S I O N
DA?IDE, "R., C.J.@
This petition for *ertiorari under Rue (" of the Rues of Court see/s the nuification of 7ania Cit1 Ordinance No.
98B,, Series of )88),A and respondent Cit1 7a1or<s E?ecutive Order No. 8AA, Series of )88), ) dated A" #u+ust
)88) , for .ein+ patent1 contrar1 to aw.
The antecedents are as foowsD
Petitioner 3i+a n+ *+a =aran+a1 Nationa $3i+a for .revit1% is the nationa or+ani:ation of a the .aran+a1s
in the Phiippines, which pursuant to Section !,) of Repu.ic #ct No. -A(8, otherwise /nown as The 3oca
'overn*ent Code of A,,A, constitutes the du1 eected presidents of hi+h1&ur.ani:ed cities, provincia
chapters, the *etropoitan 7ania Chapter, and *etropoitan poitica su.division chapters.
Section !,B of that aw provides that 62t4he i+a at the *unicipa, cit1, provincia, *etropoitan poitica
su.division, and nationa eves direct1 eect a president, a vice&president, and five $"% *e*.ers of the .oard
of directors.6 # other *atters not provided for in the aw affectin+ the interna or+ani:ation of the ea+ues of
oca +overn*ent units sha .e +overned .1 their respective constitution and .1&aws, which *ust awa1s
confor* to the provisions of the Constitution and e?istin+ aws.B
On A( 7arch )888, the 3i+a adopted and ratified its own Constitution and =1&aws to +overn its interna
or+ani:ation.! Section A, third para+raph, #rtice VI of said Constitution and =1&3aws statesD
# other eection *atters not covered in this #rtice sha .e +overned .1 the 63i+a Eection Code6 or such
other rues as *a1 .e pro*u+ated .1 the Nationa 3i+a E?ecutive =oard in confor*it1 with the provisions of
e?istin+ aws.
=1 virtue of the a.ove&cited provision, the 3i+a adopted and ratified its own Eection Code." Section A.), #rtice I of
the 3i+a Eection Code statesD
A.) Li'a n' m'a Baran'a) +rovin*ial !etropolitan /2C9ICC C(apters. There sha .e nationwide
s1nchroni:ed eections for the provincia, *etropoitan, and H5CFICC chapters to .e hed on the third
7onda1 of the *onth i**ediate1 after the *onth when the s1nchroni:ed eections in para+raph A.A a.ove
was hed. The incu*.ent 3i+a chapter president concerned du1 assisted .1 the proper +overn*ent a+enc1,
office or depart*ent, e.+. ProvinciaFCit1FNCRFRe+iona Director, sha convene a the du1 eected
Co*ponent Cit1F7unicipa Chapter Presidents and a the current eected Punon+ =aran+a1s $for H5CFICC%
of the respective chapters in an1 pu.ic pace within its area of 0urisdiction for the purpose of reor+ani:in+
and eectin+ the officers and directors of the provincia, *etropoitan or H5CFICC 3i+a chapters. Said
president du1 assisted .1 the +overn*ent officer afore*entioned, sha notif1, in writin+, a the a.ove
concerned at east fifteen $A"% da1s .efore the schedued eection *eetin+ on the e?act date, ti*e, pace and
reCuire*ents of the said *eetin+.
The 3i+a thereafter ca*e out with its Caendar of #ctivities and 'uideines in the I*pe*entation of the 3i+a Eection
Code of )88),( settin+ on )A Octo.er )88) the s1nchroni:ed eections for hi+h1 ur.ani:ed cit1 chapters, such as the
3i+a Chapter of 7ania, to+ether with independent co*ponent cit1, provincia, and *etropoitan chapters.awphiA.net
On )9 ;une )88), respondent Cit1 Counci of 7ania enacted Ordinance No. 98B,, Series of )88), providin+, a*on+
other thin+s, for the eection of representatives of the District Chapters in the Cit1 Chapter of 7ania and settin+ the
eections for .oth chapters thirt1 da1s after the .aran+a1 eections. Section B $#% and $=% of the assaied ordinance
readD
SEC. B. Representation Chapters. J Ever1 =aran+a1 sha .e represented in the said 3i+a Chapters G .1 the
Punon+ =aran+a1Gor, in his a.sence or incapacit1, .1 the /a+awad du1 eected for the purpose a*on+ its
*e*.ersG.
#. District Chapter
# eected =aran+a1 Chair*an in each District sha eect fro* a*on+ the*seves the President, Vice&
President and five $"% *e*.ers of the =oardG.
=. Cit1 Chapter
The District Chapter representatives sha auto*atica1 .eco*e *e*.ers of the =oard and the1 sha eect
fro* a*on+ the*seves a President, Vice&President, Secretar1, Treasurer, #uditor and create other positions
as it *a1 dee* necessar1 for the *ana+e*ent of the chapter.
The assaied ordinance was ater trans*itted to respondent Cit1 7a1or ;ose 3. #tien:a, ;r., for his si+nature
and approva.
On A( ;u1 )88), upon .ein+ infor*ed that the ordinance had .een forwarded to the Office of the Cit1 7a1or,
sti unnu*.ered and 1et to .e officia1 reeased, the 3i+a sent respondent 7a1or of 7ania a etter
reCuestin+ hi* that said ordinance .e vetoed considerin+ that it encroached upon, or even assu*ed, the
functions of the 3i+a throu+h e+isation, a function which was cear1 .e1ond the a*.it of the powers of the
Cit1 Counci.-
Respondent 7a1or, however, si+ned and approved the assaied cit1 ordinance and issued on A" #u+ust )88)
E?ecutive Order No. 8AA, Series of )88), to i*pe*ent the ordinance.
Hence, on )- #u+ust )88), the 3i+a fied the instant petition raisin+ the foowin+ issuesD
I
EHETHER OR NOT THE RESPONDENT CITQ CO5NCI3 O@ 7#NI3# CO77ITTED 'R#VE
#=5SE O@ DISCRETION #7O5NTIN' TO 3#CN O@ OR IN EVCESS O@ ;5RISDICTION,
EHEN IT EN#CTED CITQ ORDIN#NCE NO. 98B, S. )88) P5RPOSE3Q TO 'OVERN THE
E3ECTIONS O@ THE 7#NI3# CH#PTER O@ THE 3I'# N' 7'# =#R#N'#QS #ND EHICH
PROVIDES # DI@@ERENT 7#NNER O@ E3ECTIN' ITS O@@ICERS, DESPITE THE @#CT TH#T
S#ID CH#PTER<S E3ECTIONS, #ND THE E3ECTIONS O@ #33 OTHER CH#PTERS O@ THE
3I'# N' 7'# =#R#N'#QS @OR TH#T 7#TTER, #RE =Q 3#E 7#ND#TED TO =E
'OVERNED =Q THE 3I'# CONSTIT5TION #ND =Q&3#ES #ND THE 3I'# E3ECTION CODE.
II
EHETHER OR NOT THE RESPONDENT CITQ 7#QOR O@ 7#NI3# CO77ITTED 'R#VE
#=5SE O@ DISCRETION #7O5NTIN' TO 3#CN O@ OR IN EVCESS O@ ;5RISDICTION
EHEN HE ISS5ED EVEC5TIVE ORDER NO. 8AA TO I7P3E7ENT THE R5ESTIONED CITQ
ORDIN#NCE NO. 98B, S. )88).
In support of its petition, the 3i+a ar+ues that Cit1 Ordinance No. 98B,, Series of )88), and E?ecutive Order No. 8AA,
Series of )88), contradict the 3i+a Eection Code and are therefore invaid. There e?ists neither rh1*e nor reason, not
to *ention the a.sence of e+a .asis, for the 7ania Cit1 Counci to encroach upon, or even assu*e, the functions of
the 3i+a .1 prescri.in+, throu+h e+isation, the *anner of conductin+ the 3i+a eections other than what has .een
provided for .1 the 3i+a Constitution and =1&aws and the 3i+a Eection Code. #ccordin+1, the su.0ect ordinance is
an ultra vires act of the respondents and, as such, shoud .e decared nu and void.
#s for its pra1er for the issuance of a te*porar1 restrainin+ order, the petitioner cites as reason therefor the fact that
under Section " of the assaied cit1 ordinance, the 7ania District Chapter eections woud .e hed thirt1 da1s after the
re+uar .aran+a1 eections. Hence, it ar+ued that the issuance of a te*porar1 restrainin+ order andFor prei*inar1
in0unction woud .e i*perative to prevent the i*pe*entation of the ordinance and e?ecutive order.
On A) Septe*.er )88), =aran+a1 Chair*an #rne PeXa, in his capacit1 as a *e*.er of the 3i+a n+ *+a =aran+a1 in
the Cit1 Chapter of 7ania, fied a Co*paint in Intervention with 5r+ent 7otion for the Issuance of Te*porar1
Restrainin+ Order andFor Prei*inar1 In0unction.9 He supports the position of the 3i+a and pra1s for the decaration of
the Cuestioned ordinance and e?ecutive order, as we as the eections of the 3i+a n+ *+a =aran+a1 pursuant thereto,
to .e nu and void. The assaied ordinance prescri.in+ for an 6indirect *anner of eection6 a*ended, in effect, the
provisions of the 3oca 'overn*ent Code of A,,A, which provides for the eection of the 3i+a officers at ar+e. It aso
vioated and curtaied the ri+hts of the petitioner and intervenor, as we as the other 9,( =aran+a1 Chair*en in the
Cit1 of 7ania, to vote and .e voted upon in a direct eection.
On )" Octo.er )88), the Office of the Soicitor 'enera $OS'% fied a 7anifestation in ieu of Co**ent. , It supports
the petition of the 3i+a, ar+uin+ that the assaied cit1 ordinance and e?ecutive order are cear1 inconsistent with the
e?press pu.ic poic1 enunciated in R.#. No. -A(8. 3oca poitica su.divisions are a.e to e+isate on1 .1 virtue of a
vaid dee+ation of e+isative power fro* the nationa e+isature. The1 are *ere a+ents vested with what is caed the
power of su.ordinate e+isation. Thus, the enact*ents in Cuestion, which are oca in ori+in, cannot prevai a+ainst
the decree, which has the force and effect of aw.
On the issue of non&o.servance .1 the petitioners of the hierarch1&of&courts rue, the OS' posits that technica rues
of procedure shoud .e rea?ed in the instant petition. Ehie =atas Pa*.ansa =+. A),, as a*ended, +rants ori+ina
0urisdiction over cases of this nature to the Re+iona Tria Court $RTC%, the e?i+enc1 of the present petition, however,
cas for the rea?ation of this rue. Section !,( $shoud .e Section !,A% of the 3oca 'overn*ent Code of A,,A
pri*ari1 intended that the Li'a n' m'a Baran'a) deter*ine the representation of the 3i+a in the san++unians for the
i**ediate ventiation, articuation, and cr1stai:ation of issues affectin+ .aran+a1 +overn*ent ad*inistration. Thus,
the i**ediate resoution of this petition is a *ust.
On the other hand, the respondents defend the vaidit1 of the assaied ordinance and e?ecutive order and pra1 for the
dis*issa of the present petition on the foowin+ +roundsD $A% *ertiorari under Rue (" of the Rues of Court is
unavaiin+> $)% the petition shoud not .e entertained .1 this Court in view of the pendenc1 .efore the Re+iona Tria
Court of 7ania of two actions or petitions Cuestionin+ the su.0ect ordinance and e?ecutive order> $B% the petitioner is
+uit1 of foru* shoppin+> and $!% the act sou+ht to .e en0oined is fait a**ompli.
The respondents *aintain that certiorari is an e?traordinar1 re*ed1 avaia.e to one a++rieved .1 the decision of a
tri.una, officer, or .oard e?ercisin+ 0udicia or Cuasi&0udicia functions. The Cit1 Counci and Cit1 7a1or of 7ania
are not the 6.oard6 and 6officer6 conte*pated in Rue (" of the Rues of Court .ecause .oth do not e?ercise 0udicia
functions. The enact*ent of the su.0ect ordinance and issuance of the Cuestioned e?ecutive order are e+isative and
e?ecutive functions, respective1, and thus, do not fa within the a*.it of 60udicia functions.6 The1 are .oth within
the prero+atives, powers, and authorit1 of the Cit1 Counci and Cit1 7a1or of 7ania, respective1. @urther*ore, the
petition faied to show with certaint1 that the respondents acted without or in e?cess of 0urisdiction or with +rave
a.use of discretion.
The respondents aso asseverate that the petitioner cannot cai* that it has no other recourse in addressin+ its
+rievance other than this petition for certiorari. #s a *atter of fact, there are two cases pendin+ .efore =ranches BB
and "A of the RTC of 7ania $one is for *anda*us> the other, for decarator1 reief% and three in the Court of #ppeas
$one is for prohi.ition> the two other cases, for #uo :arranto%, which are a a/in to the present petition in the sense
that the reief .ein+ sou+ht therein is the decaration of the invaidit1 of the su.0ect ordinance. Cear1, the petitioner
*a1 as/ the RTC or the Court of #ppeas the reief .ein+ pra1ed for .efore this Court. 7oreover, the petitioner faied
to prove discerni.e co*pein+ reasons attendin+ the present petition that woud warrant co+ni:ance of the present
petition .1 this Court.
=esides, accordin+ to the respondents, the petitioner has trans+ressed the proscription a+ainst foru*&shoppin+ in fiin+
the instant suit. #thou+h the parties in the other pendin+ cases and in this petition are different individuas or entities,
the1 represent the sa*e interest.
Eith re+ard to petitionerMs pra1er for te*porar1 restrainin+ order andF or prei*inar1 in0unction in its petition, the
respondents *aintain that the sa*e had .eco*e *oot and acade*ic in view of the eections of officers of the Cit1
3i+a n+ *+a =aran+a1 on A" Septe*.er )88) and their su.seCuent assu*ption to their respective offices. A8Since the
acts to .e en0oined are now fait acco*pi, this petition for certiorari with an appication for provisiona re*edies *ust
necessari1 fai. Thus, where the records show that durin+ the pendenc1 of the case certain events or circu*stances
had ta/en pace that render the case *oot and acade*ic, the petition for *ertiorari *ust .e dis*issed.
#fter due dei.eration on the peadin+s fied, we resove to dis*iss this petition for certiorari.
@irst, the respondents neither acted in an1 0udicia or Cuasi&0udicia capacit1 nor arro+ated unto the*seves an1
0udicia or Cuasi&0udicia prero+atives. # petition for certiorari under Rue (" of the A,,- Rues of Civi Procedure is a
specia civi action that *a1 .e invo/ed on1 a+ainst a tri.una, .oard, or officer e?ercisin+ 0udicia or Cuasi&0udicia
functions.
Section A, Rue (" of the A,,- Rues of Civi Procedure providesD
SECTION A. +etition for *ertiorari. J Ehen an1 tri.una, .oard or officer e?ercisin+ 0udicia or Cuasi&
0udicia functions has acted without or in e?cess of its or his 0urisdiction, or with +rave a.use of discretion
a*ountin+ to ac/ or e?cess of 0urisdiction, and there is no appea, or an1 pain, speed1, and adeCuate re*ed1
in the ordinar1 course of aw, a person a++rieved there.1 *a1 fie a verified petition in the proper court,
ae+in+ the facts with certaint1 and pra1in+ that 0ud+*ent .e rendered annuin+ or *odif1in+ the
proceedin+s of such tri.una, .oard or officer, and +rantin+ such incidenta reiefs as aw and 0ustice *a1
reCuire.
Esewise stated, for a writ of certiorari to issue, the foowin+ reCuisites *ust concurD $A% it *ust .e directed
a+ainst a tri.una, .oard, or officer e?ercisin+ 0udicia or Cuasi&0udicia functions> $)% the tri.una, .oard, or
officer *ust have acted without or in e?cess of 0urisdiction or with +rave a.use of discretion a*ountin+ ac/
or e?cess of 0urisdiction> and $B% there is no appea or an1 pain, speed1, and adeCuate re*ed1 in the ordinar1
course of aw.
# respondent is said to .e e?ercisin+ 0udicia function where he has the power to deter*ine what the aw is
and what the e+a ri+hts of the parties are, and then underta/es to deter*ine these Cuestions and ad0udicate
upon the ri+hts of the parties.AA
Ruasi&0udicia function, on the other hand, is 6a ter* which appies to the actions, discretion, etc., of pu.ic
ad*inistrative officers or .odies G reCuired to investi+ate facts or ascertain the e?istence of facts, hod hearin+s, and
draw concusions fro* the* as a .asis for their officia action and to e?ercise discretion of a 0udicia nature.6A)
=efore a tri.una, .oard, or officer *a1 e?ercise 0udicia or Cuasi&0udicia acts, it is necessar1 that there .e a aw that
+ives rise to so*e specific ri+hts of persons or propert1 under which adverse cai*s to such ri+hts are *ade, and the
controvers1 ensuin+ therefro* is .rou+ht .efore a tri.una, .oard, or officer cothed with power and authorit1 to
deter*ine the aw and ad0udicate the respective ri+hts of the contendin+ parties.AB
The respondents do not fa within the a*.it of tri.una, .oard, or officer e?ercisin+ 0udicia or Cuasi&0udicia
functions. #s correct1 pointed out .1 the respondents, the enact*ent .1 the Cit1 Counci of 7ania of the assaied
ordinance and the issuance .1 respondent 7a1or of the Cuestioned e?ecutive order were done in the e?ercise of
e+isative and e?ecutive functions, respective1, and not of 0udicia or Cuasi&0udicia functions. On this score aone,
certiorari wi not ie.
Second, athou+h the instant petition is st1ed as a petition for certiorari, in essence, it see/s the decaration .1 this
Court of the unconstitutionait1 or ie+ait1 of the Cuestioned ordinance and e?ecutive order. It, thus, parta/es of the
nature of a petition for decarator1 reief over which this Court has on1 appeate, not ori+ina, 0urisdiction. A!Section
", #rtice VIII of the Constitution providesD
Sec. ". The Supre*e Court sha have the foowin+ powersD
$A% E?ercise ori+ina 0urisdiction over cases affectin+ a*.assadors, other pu.ic *inisters and
consus, and over petitions for *ertiorari, prohi.ition, *anda*us, #uo :arranto and ha.eas corpus.
$)% Review, revise, reverse, *odif1, or affir* on appea or certiorari as the aw or the Rues of Court
*a1 provide, fina 0ud+*ents and orders of ower courts inD
$a% # cases in which the constitutionait1 or vaidit1 of an1 treat1, internationa or e?ecutive
a+ree*ent, aw, presidentia decree, proca*ation, order, instruction, ordinance, or re+uation
is in Cuestion. $Itali*s suppied%.
#s such, this petition *ust necessar1 fai, as this Court does not have ori+ina 0urisdiction over a petition for
decarator1 reief even if on1 Cuestions of aw are invoved.A"
Third, even +rantin+ ar+uendo that the present petition is ripe for the e?traordinar1 writ of *ertiorari, there is here a
cear disre+ard of the hierarch1 of courts. No specia and i*portant reason or e?ceptiona and co*pein+
circu*stance has .een adduced .1 the petitioner or the intervenor wh1 direct recourse to this Court shoud .e aowed.
Ee have hed that this Court<s ori+ina 0urisdiction to issue a writ of *ertiorari $as we as of prohi.ition,
*anda*us,#uo :arranto, (abeas *orpus and in0unction% is not e?cusive, .ut is concurrent with the Re+iona Tria
Courts and the Court of #ppeas in certain cases. #s apt1 stated in Peope v. Cuares*aDA(
This concurrence of 0urisdiction is not, however, to .e ta/en as accordin+ to parties see/in+ an1 of the writs
an a.soute, unrestrained freedo* of choice of the court to which appication therefor8 wi .e directed. There
is after a a hierarch1 of courts. That hierarch1 is deter*inative of the venue of appeas, and aso serves as a
+enera deter*inant of the appropriate foru* for petitions for the e?traordinar1 writs. # .eco*in+ re+ard of
that 0udicia hierarch1 *ost certain1 indicates that petitions for the issuance of e?traordinar1 writs a+ainst
first eve $6inferior6% courts shoud .e fied with the Re+iona Tria Court, and those a+ainst the atter, with
the Court of #ppeas. # direct invocation of the Supre*e Court<s ori+ina 0urisdiction to issue these writs
shoud .e aowed on1 when there are specia and i*portant reasons therefor, cear1 and specifica1 set out
in the petition. This is 2an4 esta.ished poic1. It is a poic1 necessar1 to prevent inordinate de*ands upon the
Court<s ti*e and attention which are .etter devoted to those *atters within its e?cusive 0urisdiction, and to
prevent further over&crowdin+ of the Court<s doc/et.
#s we have said in &antia'o v. ;as#ue"A- the propensit1 of iti+ants and aw1ers to disre+ard the hierarch1 of courts
in our 0udicia s1ste* .1 see/in+ reief direct1 fro* this Court *ust .e put to a hat for two reasonsD $A% it woud .e
an i*position upon the precious ti*e of this Court> and $)% it woud cause an inevita.e and resutant dea1, intended
or otherwise, in the ad0udication of cases, which in so*e instances had to .e re*anded or referred to the ower court
as the proper foru* under the rues of procedure, or as .etter eCuipped to resove the issues .ecause this Court is not a
trier of facts.
Thus, we sha reaffir* the 0udicia poic1 that this Court wi not entertain direct resort to it uness the redress desired
cannot .e o.tained in the appropriate courts, and e?ceptiona and co*pein+ circu*stances 0ustif1 the avai*ent of
the e?traordinar1 re*ed1 of writ of certiorari, cain+ for the e?ercise of its pri*ar1 0urisdiction.A9
Petitioner<s reiance on Pi*ente v. #+uirreA, is *ispaced .ecause the non&o.servance of the hierarch1&of&courts rue
was not an issue therein. =esides, what was sou+ht to .e nuified in the petition for certiorari and prohi.ition therein
was an act of the President of the Phiippines, which woud have +reat1 affected a oca +overn*ent units. Ee
reiterated therein that when an act of the e+isative depart*ent is serious1 ae+ed to have infrin+ed the Constitution,
settin+ the controvers1 .eco*es the dut1 of this Court. The sa*e is true when what is serious1 ae+ed to .e
unconstitutiona is an act of the President, who in our constitutiona sche*e is coeCua with Con+ress.
Ee hesitate to rue that the petitioner and the intervenor are +uit1 of foru*&shoppin+. @oru*&shoppin+ e?ists where
the ee*ents of litis pendentia are present or when a fina 0ud+*ent in one case wi a*ount to res %udi*atain the other.
@or litis pendentia to e?ist, the foowin+ reCuisites *ust .e presentD $A% identit1 of parties, or at east such parties as
are representin+ the sa*e interests in .oth actions> $)% identit1 of ri+hts asserted and reiefs pra1ed for, the reiefs
.ein+ founded on the sa*e facts> and $B% identit1 with respect to the two precedin+ particuars in the two cases, such
that an1 0ud+*ent that *a1 .e rendered in the pendin+ case, re+ardess of which part1 is successfu, woud a*ount
to res %udi*ata in the other case.)8
In the instant petition, and as ad*itted .1 the respondents, the parties in this case and in the ae+ed other pendin+
cases are different individuas or entities> thus, foru*&shoppin+ cannot .e said to e?ist. 7oreover, even assu*in+ that
those five petitions are indeed pendin+ .efore the RTC of 7ania and the Court of #ppeas, we can on1 +uess the
causes of action and issues raised .efore those courts, considerin+ that the respondents faied to furnish this Court
with copies of the said petitions.
:!EREFORE, the petition is DIS7ISSED.
SO ORDERED.
Davide Jr. C.J. +uno ;itu' 1uisumbin' Bnares-&antia'o &andoval-Gutierre" Carpio Austria-!artine" Corona
Carpio-!orales Calle%o &r. A"*una and $in'a JJ. concur.
+an'aniban J. in the resut.
Foo/no/31
9.
T!IRD DI?ISION
!ANNA! EUNICE D. SERANA, G.R. No. 1620;9
Petitioner,
PresentD
QN#RES&S#NTI#'O, J.
C(airperson
- versus - #5STRI#&7#RTINEU,
CORON#,L
N#CH5R#, and
REQES, JJ.
SANDIGAN+A#AN an Pro*u+atedD
PEOPLE OF T!E P!ILIPPINES,
Respondents. ;anuar1 )), )889
? & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & ?
D E C I S I O N
RE#ES, R.T., J.@
C#N the Sandi+an.a1an tr1 a +overn*ent schoarLL accused, aon+ with her .rother, of
swindin+ +overn*ent fundsI
MAAARI 2an7 .0/010n n7 San07an2a)an an7 01an7 016o.ar n7 2a)an, a/ an7
6an)an7 6a5a/0, na 6a58a 50narara/an7an n7 estafan7 53ra n7 2a)anG
The 0urisdictiona Cuestion is posed in this petition for *ertiorari assaiin+ the
Resoutions2A4 of the Sandi+an.a1an, @ifth Division, den1in+ petitioner<s *otion to
Cuash the infor*ation and her *otion for reconsideration.
Th3 An/3c33n/1
Petitioner Hannah Eunice D. Serana was a senior student of the 5niversit1 of the
Phiippines&Ce.u. # student of a state universit1 is /nown as a +overn*ent
schoar. She was appointed .1 then President ;oseph Estrada on Dece*.er )A, A,,, as
a student re+ent of 5P, to serve a one&1ear ter* startin+ ;anuar1 A, )888 and endin+
on Dece*.er BA, )888.
In the ear1 part of )888, petitioner discussed with President Estrada the renovation of
Vin:ons Ha #nne? in 5P Dii*an.2)4 OnSepte*.er !, )888, petitioner, with her
si.in+s and reatives, re+istered with the Securities and E?chan+e Co**ission the
Office of the Student Re+ent @oundation, Inc. $OSR@I%.2B4
One of the pro0ects of the OSR@I was the renovation of the Vin:ons Ha #nne?.
2!4 President Estrada +ave @ifteen 7iion Pesos $PA",888,888.88% to the OSR@I as
financia assistance for the proposed renovation. The source of the funds, accordin+ to
the infor*ation, was the Office of the President.
The renovation of Vin:ons Ha #nne? faied to *ateriai:e.2"4 The succeedin+
student re+ent, Nristine Care =u+a1on+, and Christine ;i De 'u:*an, Secretar1
'enera of the N#S#7# sa 5.P., a s1ste*&wide aiance of student councis within the
state universit1, conseCuent1 fied a co*paint for 7aversation of Pu.ic @unds and
Propert1 with the Office of the O*.uds*an.2(4
On ;u1 B, )88B, the O*.uds*an, after due investi+ation, found pro.a.e cause to indict
petitioner and her .rother ;ade Ian D. Serana for estafa, doc/eted as Cri*ina Case No.
)-9A, of the Sandi+an.a1an.2-4 The Infor*ation readsD
The undersi+ned Specia Prosecution Officer III, Office of the Specia
Prosecutor, here.1 accuses H#NN#H E5NICE D. SER#N#
and ;#DE I#N D. SER#N# of the cri*e of Estafa, defined and penai:ed
under Para+raph )$a%, #rtice BA" of the Revised Pena Code, as a*ended
co**itted as foowsD
That on Octo.er, )!, )888, or so*eti*e prior or su.seCuent thereto, in
Rue:on Cit1, 7etro 7ania, Phiippines, and within the 0urisdiction of this
Honora.e Court, a.ove&na*ed accused, H#NN#H E5NICE D.
SER#N#, a hi+h&ran/in+ pu.ic officer, .ein+ then the Student Re+ent of
the 5niversit1 of the Phiippines, Dii*an, Rue:on Cit1, whie in the
perfor*ance of her officia functions, co**ittin+ the offense in reation to
her office and ta/in+ advanta+e of her position, with intent to
+ain, conspirin+ with her .rother, ;#DE I#N D. SER#N#, a private
individua, did then and there wifu1, unawfu1 and feonious1 defraud
the +overn*ent .1 fase1 and frauduent1 representin+ to for*er President
;oseph E0ercito Estrada that the renovation of the Vin:ons Ha of the
5niversit1 of the Phiippines wi .e renovated and rena*ed as `President
;oseph E0ercito Estrada Student Ha,a and for which purpose accused
H#NN#H E5NICE D. SER#N# reCuested the a*ount of
@I@TEEN 7I33ION PESOS $PA",888,888.88%, Phiippine Currenc1, fro*
the Office of the President, and the atter re1in+ and .eievin+ on said fase
pretenses and *isrepresentation +ave and deivered to said accused 3and
=an/ Chec/ No. ,AB"B dated Octo.er )!, )888 in the a*ount of @I@TEEN
7I33ION PESOS $PA",888,888.88%, which chec/ was su.seCuent1
encashed .1 accused ;ade Ian D. Serana on Octo.er )", )888 and
*isappropriated for their persona use and .enefit, and despite repeated
de*ands *ade upon the accused for the* to return aforesaid a*ount, the
said accused faied and refused to do so to the da*a+e and pre0udice of the
+overn*ent in the aforesaid a*ount.
CONTR#RQ TO 3#E. $5nderscorin+ suppied%
Petitioner *oved to Cuash the infor*ation. She cai*ed that the Sandi+an.a1an does
not have an1 0urisdiction over the offense char+ed or over her person, in her capacit1 as
5P student re+ent.
Petitioner cai*ed that Repu.ic #ct $R.#.% No. B8A,, as a*ended .1 R.#. No. 9)!,,
enu*erates the cri*es or offenses over which the Sandi+an.a1an has 0urisdiction.294 It
has no 0urisdiction over the cri*e of estafa.2,4 It on1 has 0urisdiction over cri*es
covered .1 TiteVII, Chapter II, Section ) $Cri*es Co**itted .1 Pu.ic Officers%, =oo/
II of the Revised Pena Code $RPC%. Estafa fain+ under Tite V, Chapter VI $Cri*es
#+ainst Propert1%, =oo/ II of the RPC is not within the Sandi+an.a1an<s 0urisdiction.
She aso ar+ued that it was President Estrada, not the +overn*ent, that was duped. Even
assu*in+ that she received thePA",888,888.88, that a*ount ca*e fro* Estrada, not fro*
the coffers of the +overn*ent.2A84
Petitioner i/ewise posited that the Sandi+an.a1an had no 0urisdiction over her
person. #s a student re+ent, she was not a pu.ic officer since she *ere1 represented
her peers, in contrast to the other re+ents who hed their positions in an ex
offi*io capacit1. She added that she was a si*pe student and did not receive an1 saar1
as a student re+ent.
She further contended that she had no power or authorit1 to receive *onies or
funds. Such power was vested with the =oard of Re+ents $=OR% as a whoe. Since it
was not ae+ed in the infor*ation that it was a*on+ her functions or duties to receive
funds, or that the cri*e was co**itted in connection with her officia functions, the
sa*e is .e1ond the 0urisdiction of the Sandi+an.a1an citin+ the case of&oller v.
&andi'anba)an.2AA4
The O*.uds*an opposed the *otion.2A)4 It disputed petitioner<s interpretation of
the aw. Section !$.% of Presidentia Decree $P.D.% No. A(8( cear1 contains the *at*(-
all p(rase `in reation to office,a thus, the Sandi+an.a1an has 0urisdiction over the
char+es a+ainst petitioner. In the sa*e .reath, the prosecution countered that the source
of the *one1 is a *atter of defense. It shoud .e threshed out durin+ a fu&.own tria.
2AB4
#ccordin+ to the O*.uds*an, petitioner, despite her protestations, was a pu.ic
officer. #s a *e*.er of the =OR, she had the +enera powers of ad*inistration and
e?ercised the corporate powers of 5P. =ased on 7eche*<s definition of a pu.ic office,
petitioner<s stance that she was not co*pensated, hence, not a pu.ic officer, is
erroneous. Co*pensation is not an essentia part of pu.ic office. Parenthetica1,
co*pensation has .een interpreted to incude aowances. =1 this definition, petitioner
was co*pensated.2A!4
San07an2a)an D015o10/0on
In a Resoution dated Nove*.er A!, )88B, the Sandi+an.a1an denied petitioner<s
*otion for ac/ of *erit.2A"4 It ratiocinatedD
The foca point in controvers1 is the 0urisdiction of the
Sandi+an.a1an over this case.

It is e?tre*e1 erroneous to hod that on1 cri*ina offenses covered
.1 Chapter II, Section ), Tite VII, =oo/ II of the Revised Pena Code are
within the 0urisdiction of this Court. #s correct1 pointed out .1 the
prosecution, Section !$.% of R.#. 9)!, provides that the Sandi+an.a1an
aso has 0urisdiction over other offenses co**itted .1 pu.ic officias and
e*po1ees in reation to their office. @ro* this provision, there is no sin+e
dou.t that this Court has 0urisdiction over the offense of estafa co**itted
.1 a pu.ic officia in reation to his office.

#ccused&*ovant<s cai* that .ein+ *ere1 a *e*.er in
representation of the student .od1, she was never a pu.ic officer since she
never received an1 co*pensation nor does she fa under Saar1 'rade )-,
is of no *o*ent, in view of the e?press provision of Section ! of Repu.ic
#ct No. 9)!, which providesD
Sec. !. ;urisdiction S The Sandi+an.a1an sha e?ercise e?cusive ori+ina
0urisdiction in a cases invovin+D
$#% ? ? ?

$A% Officias of the e?ecutive .ranch occup1in+ the positions of
re+iona director and hi+her, otherwise cassified as 'rade `)-a and hi+her,
of the Co*pensation and Position Cassification #ct of A,9, $Repu.ic #ct
No. (-"9%, spe*ifi*all) in*ludin'D
? ? ? ?
$+% +residents dire*tors or trustees or mana'ers of 'overnment-
o:ned or *ontrolled *orporations state universities or edu*ational
institutions or foundations. $Itaics suppied%
It is ver1 cear fro* the aforeCuoted provision that the
Sandi+an.a1an has ori+ina e?cusive 0urisdiction over a offenses
invovin+ the officias enu*erated in su.section $+%, irrespe*tive of t(eir
salar) 'rades .ecause the pri*ordia consideration in the incusion of
these officias is the nature of their responsi.iities and functions.
Is accused&*ovant incuded in the conte*pated provision of awI
# *eticuous review of the e?istin+ Charter of the 5niversit1 of the
Phiippines reveas that the =oard of Re+ents, to which accused&*ovant
.eon+s, e?cusive1 e?ercises the +enera powers of ad*inistration and
corporate powers in the universit1, such asD A% To receive and appropriate to
the ends specified .1 aw such su*s as *a1 .e provided .1 aw for the
support of the universit1> )% To prescri.e rues for its own +overn*ent and
to enact for the +overn*ent of the universit1 such +enera ordinances and
re+uations, not contrar1 to aw, as are consistent with the purposes of the
universit1> and B% To appoint, on reco**endation of the President of the
5niversit1, professors, instructors, ecturers and other e*po1ees of the
5niversit1> to fi? their co*pensation, hours of service, and such other
duties and conditions as it *a1 dee* proper> to +rant to the* in its
discretion eave of a.sence under such re+uations as it *a1 pro*u+ate,
an1 other provisions of aw to the contrar1 notwithstandin+, and to re*ove
the* for cause after an investi+ation and hearin+ sha have .een had.
It is we&esta.ished in corporation aw that the corporation can act
on1 throu+h its .oard of directors, or .oard of trustees in the case of non&
stoc/ corporations. The .oard of directors or trustees, therefore, is the
+overnin+ .od1 of the corporation.
It is un*ista/a.1 evident that the =oard of Re+ents of the 5niversit1
of the Phiippines is perfor*in+ functions si*iar to those of the =oard of
Trustees of a non&stoc/ corporation. This draws to fore the concusion that
.ein+ a *e*.er of such .oard, accused&*ovant undou.ted1 fas within
the cate+or1 of pu.ic officias upon who* this Court is vested with
ori+ina e?cusive 0urisdiction, re+ardess of the fact that she does not
occup1 a position cassified as Saar1 'rade )- or hi+her under the
Co*pensation and Position Cassification #ct of A,9,.
@ina1, this court finds that accused&*ovant<s contention that the
sa*e of PA" 7iion was received fro* for*er President Estrada and not
fro* the coffers of the +overn*ent, is a *atter a defense that shoud .e
proper1 ventiated durin+ the tria on the *erits of this case.2A(4
On Nove*.er A,, )88B, petitioner fied a *otion for reconsideration.2A-4 The *otion
was denied with finait1 in a Resoution dated@e.ruar1 !, )88!.2A94
I11(3
Petitioner is now .efore this Court, contendin+ that `THE RESPONDENT CO5RT
CO77ITTED 'R#VE #=5SE O@ DISCRETION #7O5NTIN' TO
3#CN #NDFOR EVCESS O@ ;5RISDICTION IN NOT R5#SHIN' THE
IN@OR7#TION #ND DIS7ISIN' THE C#SE NOTEITHST#NDIN' TH#T
IS H#S NO ;5RISDICTION OVER THE O@@ENSE CH#R'ED IN THE
IN@OR7#TION.a2A,4
In her discussion, she reiterates her four&fod ar+u*ent .eow, na*e1D $a% the
Sandi+an.a1an has no 0urisdiction over estafa> $.% petitioner is not a pu.ic officer with
Saar1 'rade )- and she paid her tuition fees> $c% the offense char+ed was not
co**itted in reation to her office> $d% the funds in Cuestion persona1 ca*e fro*
President Estrada, not fro* the +overn*ent.
O(r R(.0n7
The petition cannot .e +ranted.
Pre!iminari!y, the denia! of a motion to
7uash is not correctib!e by certiorari.
Ee woud ordinari1 dis*iss this petition for *ertiorari outri+ht on procedura
+rounds. Ee&esta.ished is the rue that when a *otion to Cuash in a cri*ina case is
denied, the re*ed1 is not a petition for *ertiorari, .ut for petitioners to +o to tria,
without pre0udice to reiteratin+ the specia defenses invo/ed in their *otion to Cuash.
2)84 Re*edia *easures as re+ards interocutor1 orders, such as a *otion to Cuash, are
frowned upon and often dis*issed.2)A4 The evident reason for this rue is to avoid
*utipicit1 of appeas in a sin+e action.2))4
In Ne:s:ee8 In*. v. Intermediate Appellate Court,2)B4 the Court cear1 e?pained and
iustrated the rue and the e?ceptions, thusD
#s a +enera rue, an order den1in+ a *otion to dis*iss is *ere1
interocutor1 and cannot .e su.0ect of appea unti fina 0ud+*ent or order
is rendered. $Sec. ) of Rue !A%. The ordinar1 procedure to .e foowed in
such a case is to fie an answer, +o to tria and if the decision is adverse,
reiterate the issue on appea fro* the fina 0ud+*ent. The sa*e rue appies
to an order den1in+ a *otion to Cuash, e?cept that instead of fiin+ an
answer a pea is entered and no appea ies fro* a 0ud+*ent of acCuitta.
This +enera rue is su.0ect to certain e?ceptions. If the court, in den1in+
the *otion to dis*iss or *otion to Cuash, acts without or in e?cess of
0urisdiction or with +rave a.use of discretion, then *ertiorari or prohi.ition
ies. The reason is that it woud .e unfair to reCuire the defendant or
accused to under+o the ordea and e?pense of a tria if the court has no
0urisdiction over the su.0ect *atter or offense, or is not the court of proper
venue, or if the denia of the *otion to dis*iss or *otion to Cuash is *ade
with +rave a.use of discretion or a whi*sica and capricious e?ercise of
0ud+*ent. In such cases, the ordinar1 re*ed1 of appea cannot .e pain and
adeCuate. The foowin+ are a few e?a*pes of the e?ceptions to the
+enera rue.
In De Jesus v. Gar*ia $A, SCR# ""!%, upon the denia of a *otion to
dis*iss .ased on ac/ of 0urisdiction over the su.0ect *atter, this Court
+ranted the petition for *ertiorari and prohi.ition a+ainst the Cit1 Court of
7ania and directed the respondent court to dis*iss the case.
In Lope" v. Cit) Jud'e $A9 SCR# (A(%, upon the denia of a *otion to
Cuash .ased on ac/ of 0urisdiction over the offense, this Court +ranted the
petition for prohi.ition and en0oined the respondent court fro* further
proceedin+ in the case.
In Enri#ue" v. !a*adae' $9! Phi. (-!%, upon the denia of a *otion to
dis*iss .ased on i*proper venue, this Court +ranted the petition for
prohi.ition and en0oined the respondent 0ud+e fro* ta/in+ co+ni:ance of
the case e?cept to dis*iss the sa*e.
In !analo v. !ariano $(, SCR# 98%, upon the denia of a *otion to
dis*iss .ased on .ar .1 prior 0ud+*ent, this Court +ranted the petition
for*ertiorari and directed the respondent 0ud+e to dis*iss the case.
In Buvien'*o v. Da*u)*u) $A8" SCR# ((9%, upon the denia of a *otion to
dis*iss .ased on the Statute of @rauds, this Court +ranted the petition
for*ertiorari and dis*issed the a*ended co*paint.
In $a*as v. Cariaso $-) SCR# ")-%, this Court +ranted the petition
for *ertiorari after the *otion to Cuash .ased on dou.e 0eopard1 was
denied .1 respondent 0ud+e and ordered hi* to desist fro* further action in
the cri*ina case e?cept to dis*iss the sa*e.
In +eople v. .amos $9B SCR# AA%, the order den1in+ the *otion to Cuash
.ased on prescription was set aside on *ertiorari and the cri*ina case was
dis*issed .1 this Court.2)!4
Ee do not find the Sandi+an.a1an to have co**itted a +rave a.use of discretion.
#he 5urisdiction of the Sandiganbayan is
set by P.%. ,o. 89:9, as amended, not by
(.A. ,o. ;:8<, as amended.
Ee first address petitioner<s contention that the 0urisdiction of the Sandi+an.a1an is
deter*ined .1 Section ! of R.#. No. B8A, $The #nti&'raft and Corrupt Practices #ct, as
a*ended%. Ee note that petitioner refers to Section ! of the said aw 1et Cuotes Section
! of P.D. No. A(8(, as a*ended, in her *otion to Cuash .efore the Sandi+an.a1an.
2)"4 She repeats the reference in the instant petition for*ertiorari2)(4 and in her
*e*orandu* of authorities.2)-4
Ee cannot .rin+ ourseves to write this off as a *ere cerica or t1po+raphica error. It
.ears stressin+ that petitioner repeated this cai* twice despite corrections *ade .1 the
Sandi+an.a1an.2)94
Her cai* has no .asis in aw. It is P.D. No. A(8(, as a*ended, rather than R.#. No.
B8A,, as a*ended, that deter*ines the 0urisdiction of the Sandi+an.a1an. # .rief
e+isative histor1 of the statute creatin+ the Sandi+an.a1an is in order. The
Sandi+an.a1an was created .1P.D. No. A!9(, pro*u+ated .1 then President @erdinand
E. 7arcos on ;une AA, A,-9. It was pro*u+ated to attain the hi+hest nor*s of officia
conduct reCuired of pu.ic officers and e*po1ees, .ased on the concept that pu.ic
officers and e*po1ees sha serve with the hi+hest de+ree of responsi.iit1, inte+rit1,
o1at1 and efficienc1 and sha re*ain at a ti*es accounta.e to the peope.2),4
P.D. No. A!9( was, in turn, a*ended .1 P.D. No. A(8( which was pro*u+ated on
Dece*.er A8, A,-9. P.D. No. A(8( e?panded the 0urisdiction of the Sandi+an.a1an.2B84
P.D. No. A(8( was ater a*ended .1 P.D. No. A9(A on 7arch )B, A,9B, further aterin+
the Sandi+an.a1an 0urisdiction. R.#. No. -,-"approved on 7arch B8, A,," *ade
succeedin+ a*end*ents to P.D. No. A(8(, which was a+ain a*ended on @e.ruar1 ",
A,,- .1 R.#. No. 9)!,. Section ! of R.#. No. 9)!, further *odified the 0urisdiction of
the Sandi+an.a1an. #s it now stands, the Sandi+an.a1an has 0urisdiction over the
foowin+D
Sec. !. ;urisdiction. & The Sandi+an.a1an sha e?ercise e?cusive
ori+ina 0urisdiction in a cases invovin+D
#. Vioations of Repu.ic #ct No. B8A,, as a*ended, other
/nown as the #nti&'raft and Corrupt Practices #ct, Repu.ic #ct No. AB-,,
and Chapter II, Section ), Tite , =oo/ II of the Revised Pena Code, where
one or *ore of the accused are officias occup1in+ the foowin+ positions
in the +overn*ent, whether in a per*anent, actin+ or interi* capacit1, at
the ti*e of the co**ission of the offenseD
$A% Officias of the e?ecutive .ranch occup1in+ the positions of
re+iona director and hi+her, otherwise cassified as 'rade `)-a and hi+her,
of the Co*pensation and Position Cassification #ct of ,9, $Repu.ic #ct
No. (-"9%, specifica1 incudin+D
$a% Provincia +overnors, vice&+overnors, *e*.ers of
the san''unian' panlala:i'an, and provincia treasurers, assessors,
en+ineers, and other cit1 depart*ent heads>
$.% Cit1 *a1or, vice&*a1ors, *e*.ers of the san''unian'
panlun'sod, cit1 treasurers, assessors, en+ineers, and other cit1 depart*ent
heads>
$c% Officias of the dipo*atic service occup1in+ the position of consu
and hi+her>
$d% Phiippine ar*1 and air force coones, nava captains, and a
officers of hi+her ran/>
$e% Officers of the Phiippine Nationa Poice whie occup1in+
the position of provincia director and those hodin+ the ran/ of senior
superintended or hi+her>
$f% Cit1 and provincia prosecutors and their assistants, and
officias and prosecutors in the Office of the O*.uds*an and specia
prosecutor>
$+% Presidents, directors or trustees, or *ana+ers of +overn*ent&
owned or controed corporations, state universities or educationa
institutions or foundations.
$)% 7e*.ers of Con+ress and officias thereof cassified as
'rade `)-a and up under the Co*pensation and Position Cassification #ct
of A,9,>
$B% 7e*.ers of the 0udiciar1 without pre0udice to the provisions
of the Constitution>
$!% Chair*en and *e*.ers of Constitutiona Co**ission,
without pre0udice to the provisions of the Constitution> and
$"% # other nationa and oca officias cassified as 'rade `)-a
and hi+her under the Co*pensation and Position Cassification #ct of
A,9,.
=. Other offenses of feonies whether si*pe or co*pe?ed with other
cri*es co**itted .1 the pu.ic officias and e*po1ees *entioned in
su.section a of this section in reation to their office.
C. Civi and cri*ina cases fied pursuant to and in connection with
E?ecutive Order Nos. A, ), A! and A!&#, issued in A,9(.
In cases where none of the accused are occup1in+ positions
correspondin+ to Saar1 'rade `)-a or hi+her, as prescri.ed in the said
Repu.ic #ct No. (-"9, or *iitar1 and officer *entioned a.ove, e?cusive
ori+ina 0urisdiction thereof sha .e vested in the proper re+iona court,
*etropoitan tria court, *unicipa tria court, and *unicipa circuit tria
court, as the case *a1 .e, pursuant to their respective 0urisdictions as
provided in =atas Pa*.ansa =+. A),, as a*ended.
The Sandi+an.a1an sha e?ercise e?cusive appeate 0urisdiction
over fina 0ud+*ents, resoutions or order of re+iona tria courts whether in
the e?ercise of their own ori+ina 0urisdiction or of their appeate
0urisdiction as herein provided.
The Sandi+an.a1an sha have e?cusive ori+ina 0urisdiction over
petitions for the issuance of the writs of *anda*us, prohi.ition, *ertiorari,
ha.eas corpus, in0unctions, and other anciar1 writs and processes in aid of
its appeate 0urisdiction and over petitions of si*iar nature, incudin+ #uo
:arranto, arisin+ or that *a1 arise in cases fied or which *a1 .e fied
under E?ecutive Order Nos. A, ), A! and A!&#, issued in A,9(D Provided,
That the 0urisdiction over these petitions sha not .e e?cusive of the
Supre*e Court.
The procedure prescri.ed in =atas Pa*.ansa =+. A),, as we as the
i*pe*entin+ rues that the Supre*e Court has pro*u+ated and *a1
thereafter pro*u+ate, reative to appeasFpetitions for review to the Court
of #ppeas, sha app1 to appeas and petitions for review fied with the
Sandi+an.a1an. In a cases eevated to the Sandi+an.a1an and fro* the
Sandi+an.a1an to the Supre*e Court, the Office of the O*.uds*an,
throu+h its specia prosecutor, sha represent the Peope of the Phiippines,
e?cept in cases fied pursuant to E?ecutive Order Nos. A, ), A! and A!&#,
issued in A,9(.
In case private individuas are char+ed as co&principas, acco*pices
or accessories with the pu.ic officers or e*po1ees, incudin+ those
e*po1ed in +overn*ent&owned or controed corporations, the1 sha .e
tried 0oint1 with said pu.ic officers and e*po1ees in the proper courts
which sha e?ercise e?cusive 0urisdiction over the*.
#n1 provisions of aw or Rues of Court to the contrar1
notwithstandin+, the cri*ina action and the correspondin+ civi action for
the recover1 of civi ia.iit1 sha, at a ti*es, .e si*utaneous1 instituted
with, and 0oint1 deter*ined in, the sa*e proceedin+ .1 the Sandi+an.a1an
or the appropriate courts, the fiin+ of the cri*ina action .ein+ dee*ed to
necessari1 carr1 with it the fiin+ of the civi action, and no ri+ht to reserve
the fiin+ such civi action separate1 fro* the cri*ina action sha .e
reco+ni:edD Provided, however, That where the civi action had heretofore
.een fied separate1 .ut 0ud+*ent therein has not 1et .een
rendered, and the cri*ina case is hereafter fied with the Sandi+an.a1an
or the appropriate court, said civi action sha .e transferred to the
Sandi+an.a1an or the appropriate court, as the case *a1 .e, for
consoidation and 0oint deter*ination with the cri*ina action, otherwise
the separate civi action sha .e dee*ed a.andoned.
5pon the other hand, R.#. No. B8A, is a pena statute approved on #u+ust A-,
A,(8. The said aw represses certain acts of pu.ic officers and private persons ai/e
which constitute +raft or corrupt practices or which *a1 ead thereto.2BA4 Pursuant to
Section A8 of R.#. No. B8A,, a prosecutions for vioation of the said aw shoud .e
fied with the Sandi+an.a1an.2B)4
R.#. No. B8A, does not contain an enu*eration of the cases over which the
Sandi+an.a1an has 0urisdiction. In fact, Section ! of R.#. No. B8A, erroneous1 cited
.1 petitioner, deas not with the 0urisdiction of the Sandi+an.a1an .ut with prohi.ition
on private individuas. Ee CuoteD
Section !. +ro(ibition on private individuals. S $a% It sha .e unawfu for
an1 person havin+ fa*i1 or cose persona reation with an1 pu.ic officia
to capitai:e or e?poit or ta/e advanta+e of such fa*i1 or cose persona
reation .1 direct1 or indirect1 reCuestin+ or receivin+ an1 present, +ift or
*ateria or pecuniar1 advanta+e fro* an1 other person havin+ so*e
.usiness, transaction, appication, reCuest or contract with the +overn*ent,
in which such pu.ic officia has to intervene. @a*i1 reation sha incude
the spouse or reatives .1 consan+uinit1 or affinit1 in the third civi
de+ree. The word `cose persona reationa sha incude cose persona
friendship, socia and fraterna connections, and professiona e*po1*ent
a +ivin+ rise to inti*ac1 which assures free access to such pu.ic officer.
$.% It sha .e unawfu for an1 person /nowin+1 to induce or cause an1
pu.ic officia to co**it an1 of the offenses defined in Section B hereof.
In fine, the two statutes differ in that P.D. No. A(8(, as a*ended, defines the 0urisdiction
of the Sandi+an.a1an whie R.#. No. B8A,, as a*ended, defines +raft and corrupt
practices and provides for their penaties.
Sandiganbayan has 5urisdiction o'er
the offense of estafa.
Re1in+ on Section ! of P.D. No. A(8(, petitioner contends that estafa is not a*on+
those cri*es co+ni:a.e .1 the Sandi+an.a1an. Ee note that in hoistin+ this ar+u*ent,
petitioner isoated the first para+raph of Section ! of P.D. No. A(8(, without re+ard to
the succeedin+ para+raphs of the said provision.
The rue is we&esta.ished in this 0urisdiction that statutes shoud receive a sensi.e
construction so as to avoid an un0ust or an a.surd concusion.2BB4 Interpretatio talis in
ambi'uis semper fienda est ut evitetur in*onveniens et absurdum. Ehere there is
a*.i+uit1, such interpretation as wi avoid inconvenience and a.surdit1 is to .e
adopted. =(n7 1aan 4a)roon7 6a.a2(an, an7 5a75a5a.08ana7 a) h0n0 a5a/
4a70n7 4ah0ra5 a/ 6a/a8a$/a8a.
Ever1 section, provision or cause of the statute *ust .e e?pounded .1 reference to each
other in order to arrive at the effect conte*pated .1 the e+isature.2B!4 The intention
of the e+isator *ust .e ascertained fro* the whoe te?t of the aw and ever1 part of the
act is to .e ta/en into view.2B"4 In other words, petitioner<s interpretation ies in direct
opposition to the rue that a statute *ust .e interpreted as a whoe under the principe
that the .est interpreter of a statute is the statute itsef.2B(4 3ptima statuti interpretatrix
est ipsum statutum. An7 01an7 2a/a1 a) 4ara5a/ na 207)an n7 6ah(.(7an 1a
6an)an7 6a2((an 1a 0.a.04 n7 5r0n105)o na an7 50na6a4a0na4 na 0n/3r5r3/a1)on
a) an7 4014on7 2a/a1.
Section !$=% of P.D. No. A(8( readsD
=. Other offenses or feonies whether si*pe or co*pe?ed with other
cri*es co**itted .1 the pu.ic officias and e*po1ees *entioned in
su.section a of this section in reation to their office.
Evident1, the Sandi+an.a1an has 0urisdiction over other feonies co**itted .1
pu.ic officias in reation to their office. Ee see no pausi.e or sensi.e reason to
e?cude estafa as one of the offenses incuded in Section !$=% of P.D. No.
A(8(. Pain1, estafa is one of those other feonies. The 0urisdiction is si*p1 su.0ect to
the twin reCuire*ents that $a% the offense is co**itted .1 pu.ic officias and
e*po1ees *entioned in Section !$#% of P.D. No. A(8(, as a*ended, and that $.% the
offense is co**itted in reation to their office.
In +erlas Jr. v. +eople,2B-4 the Court had occasion to e?pain that the
Sandi+an.a1an has 0urisdiction over an indict*ent for estafaversus a director of the
Nationa Par/s Deveop*ent Co**ittee, a +overn*ent instru*entait1. The Court hed
thenD
The Nationa Par/s Deveop*ent Co**ittee was created ori+ina1 as an
E?ecutive Co**ittee on , for the deveop*ent of the Rue:on 7e*oria,
3uneta and other nationa par/s $E?ecutive Order No. B8%. It was ater
desi+nated as the Nationa Par/s Deveop*ent Co**ittee $NPDC%
on $E.O. No. (,%. On , 7rs. I*eda R. 7arcos and Teodoro @. Vaencia
were desi+nated Chair*an and Vice&Chair*an respective1 $E.O. No. B%.
Despite an atte*pt to transfer it to the =ureau of @orest Deveop*ent,
Depart*ent of Natura Resources, on $3etter of I*pe*entation No. B,,
issued pursuant to PD No. 9B8, dated Nove*.er )-, A,-"%, the NPDC has
re*ained under the Office of the President $E.O. No. -8,, dated ;u1 )-,
A,9A%.
Since A,-- to A,9A, the annua appropriations decrees isted NPDC as a
re+uar +overn*ent a+enc1 under the Office of the President and aot*ents
for its *aintenance and operatin+ e?penses were issued direct to NPDC
$E?h. A8&#, Peras, Ite* Nos. ), B%.
The Sandi+an.a1an<s 0urisdiction over estafa was reiterated with +reater fir*ness
in Bondo* v. &andi'anba)an.2B94 Pertinent parts of the Court<s ruin+ in =ondoc readD
@urther*ore, it is not e+a1 possi.e to transfer =ondoc<s cases to the
Re+iona Tria Court, for the si*pe reason that the atter woud not have
0urisdiction over the offenses. #s aread1 a.ove inti*ated, the ina.iit1 of
the Sandi+an.a1an to hod a 0oint tria of =ondoc<s cases and those of the
+overn*ent e*po1ees separate1 char+ed for the sa*e cri*es, has not
atered the nature of the offenses char+ed, as estafa thru fasification
punisha.e .1 penaties hi+her than prision *orre**ional or i*prison*ent
of si? 1ears, or a fine of P(,888.88, co**itted .1 +overn*ent e*po1ees in
conspirac1 with private persons, incudin+ =ondoc. These cri*es are
within the e?cusive, ori+ina 0urisdiction of the Sandi+an.a1an. The1
si*p1 cannot .e ta/en co+ni:ance of .1 the re+uar courts, apart fro* the
fact that even if the cases coud .e so transferred, a 0oint tria woud
nonetheess not .e possi.e.
Petitioner 4P student regent
is a &ub!ic officer.
Petitioner aso contends that she is not a pu.ic officer. She does not receive an1 saar1
or re*uneration as a 5P student re+ent. This is not the first or i/e1 the ast ti*e that
Ee wi .e caed upon to define a pu.ic officer. In C(an Jr. v. 3ffi*e of t(e
3mbudsman, Ee rued that it is difficut to pin down the definition of a pu.ic officer.
2B,4 The A,9- Constitution does not define who are pu.ic officers. Rather, the varied
definitions and concepts are found in different statutes and 0urisprudence.
In Aparri v. Court of Appeals,2!84 the Court hed thatD
# pu.ic office is the ri+ht, authorit1, and dut1 created and conferred .1
aw, .1 which for a +iven period, either fi?ed .1 aw or endurin+ at the
peasure of the creatin+ power, an individua is invested with so*e portion
of the soverei+n functions of the +overn*ent, to .e e?ercise .1 hi* for the
.enefit of the pu.ic $I!e*(em +ubli* 3ffi*es and 3ffi*ersJ Sec. A%. The
ri+ht to hod a pu.ic office under our poitica s1ste* is therefore not a
natura ri+ht. It e?ists, when it e?ists at a on1 .ecause and .1 virtue of
so*e aw e?press1 or i*pied1 creatin+ and conferrin+ it $!e*(em Ibid.,
Sec. (!%. There is no such thin+ as a vested interest or an estate in an
office, or even an a.soute ri+ht to hod office. E?ceptin+ constitutiona
offices which provide for specia i**unit1 as re+ards saar1 and tenure, no
one can .e said to have an1 vested ri+ht in an office or its saar1 $!) #*.
;ur. 99A%.
In Laurel v. Desierto,2!A4 the Court adopted the definition of 7eche* of a pu.ic
officeD
# pu.ic office is the ri+ht, authorit1 and dut1, created and conferred .1
aw, .1 which, for a +iven period, either fi?ed .1 aw or endurin+ at the
peasure of the creatin+ power, an individua is invested with so*e portion
of the soverei+n functions of the +overn*ent, to .e e?ercised .1 hi* for the
.enefit of the pu.ic. The individua so invested is a pu.ic officer.2!)4
Petitioner cai*s that she is not a pu.ic officer with Saar1 'rade )-> she is, in fact, a
re+uar tuition fee&pa1in+ student. This is i/ewise .ereft of *erit. It is not on1 the
saar1 +rade that deter*ines the 0urisdiction of the Sandi+an.a1an. The Sandi+an.a1an
aso has 0urisdiction over other officers enu*erated in P.D. No. A(8(. In Geduspan
v. +eople,2!B4 Ee hed that whie the first part of Section !$#% covers on1 officias
with Saar1 'rade )- and hi+her, its second part specifica1 incudes other
e?ecutive officias whose positions *a1 not .e of Saar1 'rade )- and hi+her .ut who
are .1 e?press provision of aw paced under the 0urisdiction of the said court. Petitioner
fas under the 0urisdiction of the Sandi+an.a1an as she is paced there .1 e?press
provision of aw.2!!4
Section !$#%$A%$+% of P.D. No. A(8( e?pict1 vested the Sandi+an.a1an with
0urisdiction over Presidents, directors or trustees, or *ana+ers of +overn*ent&owned or
controed corporations, state universities or educationa institutions or
foundations. Petitioner fas under this cate+or1. #s the Sandi+an.a1an pointed out, the
=OR perfor*s functions si*iar to those of a .oard of trustees of a non&stoc/
corporation.2!"4 =1 e?press *andate of aw, petitioner is, indeed, a pu.ic officer as
conte*pated .1 P.D. No. A(8(.
7oreover, it is we esta.ished that co*pensation is not an essentia ee*ent of
pu.ic office.2!(4 #t *ost, it is *ere1 incidenta to the pu.ic office.2!-4
Dee+ation of soverei+n functions is essentia in the pu.ic office. #n invest*ent in an
individua of so*e portion of the soverei+n functions of the +overn*ent, to .e e?ercised
.1 hi* for the .enefit of the pu.ic *a/es one a pu.ic officer.2!94
The ad*inistration of the 5P is a soverei+n function in ine with #rtice VIV of the
Constitution. 5P perfor*s a e+iti*ate +overn*enta function .1 providin+ advanced
instruction in iterature, phiosoph1, the sciences, and arts, and +ivin+ professiona and
technica trainin+.2!,4 7oreover, 5P is *aintained .1 the 'overn*ent and it decares
no dividends and is not a corporation created for profit.2"84
#he offense charged "as committed
in re!ation to &ub!ic office, according
to the *nformation.
Petitioner i/ewise ar+ues that even assu*in+ that she is a pu.ic officer, the
Sandi+an.a1an woud sti not have 0urisdiction over the offense .ecause it was not
co**itted in reation to her office.
#ccordin+ to petitioner, she had no power or authorit1 to act without the approva of the
=OR. She adds there was no =oard Resoution issued .1 the =OR authori:in+ her to
contract with then President Estrada> and that her acts were not ratified .1 the +overnin+
.od1 of the state universit1. Resutant1, her act was done in a private capacit1 and not
in reation to pu.ic office.
It is a?io*atic that 0urisdiction is deter*ined .1 the aver*ents in the infor*ation.
2"A4 7ore than that, 0urisdiction is not affected .1 the peas or the theories set up .1
defendant or respondent in an answer, a *otion to dis*iss, or a *otion to Cuash.
2")4 Otherwise, 0urisdiction woud .eco*e dependent a*ost entire1 upon the whi*s
of defendant or respondent.2"B4
In the case at .ench, the infor*ation ae+ed, in no uncertain ter*s that petitioner, .ein+
then a student re+ent of 5.P., `whie in the perfor*ance of her officia
functions, co**ittin+ the offense in reation to her office and ta/in+ advanta+e of her
position, with intent to +ain, conspirin+ with her .rother, ;#DE I#N D. SER#N#, a
private individua, did then and there wifu1, unawfu1 and feonious1 defraud the
+overn*ent ? ? ?.a $5nderscorin+ suppied%
Cear1, there was no +rave a.use of discretion on the part of the Sandi+an.a1an
when it did not Cuash the infor*ation .ased on this +round.
Source of funds is a defense that shou!d
be raised during tria! on the merits.
It is contended anew that the a*ount ca*e fro* President Estrada<s private funds
and not fro* the +overn*ent coffers. Petitioner insists the char+e has no e+ to stand
on.
Ee cannot a+ree. The infor*ation ae+es that the funds ca*e fro* the Office of
the President and not its then occupant, President ;oseph E0ercito Estrada. 5nder the
infor*ation, it is averred that `petitioner reCuested the a*ount of @ifteen 7iion Pesos
$PA",888,888.88%, Phiippine Currenc1, fro* the Office of the President, and the atter
re1in+ and .eievin+ on said fase pretenses and *isrepresentation +ave and deivered to
said accused 3and =an/ Chec/ No. ,AB"B dated Octo.er )!, )888 in the a*ount of
@ifteen 7iion Pesos $PA",888,888.88%.a
#+ain, the Court sustains the Sandi+an.a1an o.servation that the source of
the PA",888,888 is a *atter of defense that shoud .e ventiated durin+ the tria on the
*erits of the instant case.2"!4
A !a"yer o"es candor, fairness
and honesty to the Court.
#s a partin+ note, petitioner<s counse, Renato '. dea Cru:, *isrepresented his
reference to Section ! of P.D. No. A(8( as a Cuotation fro* Section ! of R.#. No.
B8A,. # review of his *otion to Cuash, the instant petition for *ertiorari and his
*e*orandu*, unveis the *isCuotation. Ee ur+e petitioner<s counse to o.serve Canon
A8 of the Code of Professiona Responsi.iit1, specifica1 Rue A8.8) of the Rues
statin+ that `a aw1er sha not *isCuote or *isrepresent.a
The Court stressed the i*portance of this rue in +an'an v. .amos,2""4 where #tt1
Dionisio D. Ra*os used the na*e Pedro D.D. Ra*os in connection with a cri*ina
case. The Court rued that #tt1. Ra*os resorted to deception .1 usin+ a na*e different
fro* that with which he was authori:ed. Ee severe1 repri*anded #tt1. Ra*os and
warned that a repetition *a1 warrant suspension or dis.ar*ent.2"(4
Ee ad*onish petitioner<s counse to .e *ore carefu and accurate in his citation. #
aw1er<s conduct .efore the court shoud .e characteri:ed .1 candor and fairness.
2"-4 The ad*inistration of 0ustice woud +rave1 suffer if aw1ers do not act with
co*pete candor and honest1 .efore the courts.2"94
:!EREFORE, the petition is DENIED for ac/ of *erit.
SO ORDERED.
R5=EN T. REQES
#ssociate ;ustice
EE CONC5RD
CONSUELO #NARES$SANTIAGO
#ssociate ;ustice
Chairperson
MA. ALICIA AUSTRIA$MARTINE% RENATO C. CORONA
#ssociate ;ustice #ssociate ;ustice
ANTONIO EDUARDO +. NAC!URA
#ssociate ;ustice


A T T E S T A T I O N
I attest that the concusions in the a.ove Decision had .een reached in consutation
.efore the case was assi+ned to the writer of the opinion of the Court<s Division.
CONSUELO #NARES$SANTIAGO
#ssociate ;ustice
Chairperson
C E R T I F I C A T I O N
Pursuant to Section AB, #rtice VIII of the Constitution and the Division Chairperson<s
#ttestation, I certif1 that the concusions in the a.ove Decision had .een reached in
consutation .efore the case was assi+ned to the writer of the opinion of the Court<s
Division.
RE#NATO S. PUNO
Chief ;ustice

rue A&"
A. E?ANGELINE ALDA#, &etitioner, 's. FGU INSURANCE
CORPORATION, res&ondent.
D E C I S I O N
GON%AGA$RE#ES, J.@
On " 7a1 A,9,, respondent @'5 Insurance Corporation fied a co*paint with the Re+iona Tria
Court of 7a/ati2A4 ae+in+ that petitioner Evan+eine N. #da1 owed it PAA!,("8.-(, representin+
uniCuidated cash advances, unre*itted costs of pre*iu*s and other char+es incurred .1 petitioner in
the course of her wor/ as an insurance a+ent for respondent.2)4 Respondent aso pra1ed for e?e*par1
da*a+es, attorne1<s fees, and costs of suit.2B4 Petitioner fied her answer and .1 wa1 of countercai*,
asserted her ri+ht for the pa1*ent of PA8!,9,B.!", representin+ direct co**issions, profit co**issions
and contin+ent .onuses earned fro* A ;u1 A,9( to - Dece*.er A,9(, and for accu*uated pre*iu*
reserves a*ountin+ to P"88,888.88. In addition, petitioner pra1ed for attorne1<s fees, iti+ation
e?penses, *ora da*a+es and e?e*par1 da*a+es for the ae+ed1 unfounded action fied .1
respondent.2!4 On )B #u+ust A,9,, respondent fied a `7otion to Stri/e Out #nswer Eith Co*pusor1
Countercai* #nd To Decare Defendant In Defauta .ecause petitioner<s answer was ae+ed1 fied
out of ti*e.2"4 However, the tria court denied the *otion on )" #u+ust A,9, and si*iar1 re0ected
respondent<s *otion for reconsideration on A) 7arch A,,8.2(4 # few wee/s ater, on AA #pri A,,8,
respondent fied a *otion to dis*iss petitioner<s countercai*, contendin+ that the tria court never
acCuired 0urisdiction over the sa*e .ecause of the non&pa1*ent of doc/et fees .1 petitioner.2-4 In
response, petitioner as/ed the tria court to decare her countercai* as e?e*pt fro* pa1*ent of doc/et
fees since it is co*pusor1 and that respondent .e decared in defaut for havin+ faied to answer such
countercai*.294
In its A9 Septe*.er A,,8 Order, the tria court2,4 +ranted respondent<s *otion to dis*iss
petitioner<s countercai* and conseCuent1, denied petitioner<s *otion. The court found petitioner<s
countercai* to .e *ere1 per*issive in nature and hed that petitioner<s faiure to pa1 doc/et fees
prevented the court fro* acCuirin+ 0urisdiction over the sa*e.2A84 The tria court si*iar1 denied
petitioner<s *otion for reconsideration on )9 @e.ruar1 A,,A.
On )B Dece*.er A,,9, the Court of #ppeas2AA4 sustained the tria court, findin+ that petitioner<s
own ad*issions, as contained in her answer, show that her countercai* is *ere1 per*issive. The
reevant portion of the appeate court<s decision2A)4 is Cuoted herewith S
Contrar1 to the protestations of appeant, *ere readin+ of the ae+ations in the answer a
Cuo wi readi1 show that her countercai* can in no wa1 .e co*pusor1. Ta/e note of
the foowin+ nu*.ered para+raphs in her answerD
`$A!% That, indeed, @'5<s cause of action which is not supported .1 an1 docu*ent other
than the sef&servin+ HState*ent of #ccount< dated 7arch )9, A,99 ? ? ?
$A"% That it shoud .e noted that the cause of action of @'5 is not the enforce*ent of
the Specia #+ent<s Contract .ut the ae+ed Hcash accounta.iities which are not .ased
on written a+ree*ent ? ? ?.
? ? ? ?
$A,% ? ? ? # carefu ana1sis of @'5<s three&pa+e co*paint wi show that its cause of
action is not for specific perfor*ance or enforce*ent of the Specia #+ent<s Contract
rather, it is for the pa1*ent of the ae+ed cash accounta.iities incurred .1 defendant
durin+ the period for* 2sic4 A,-" to A,9( which cai* is e?ecutor1 and has not .een
ratified. It is the esta.ished rue that unenforcea.e contracts, i/e this purported *one1
cai* of @'5, cannot .e sued upon or enforced uness ratified, thus it is as if the1 have
no effect. ? ? ?.a
To support the headin+ `Co*pusor1 Countercai*a in her answer and +ive the
i*pression that the countercai* is co*pusor1 appeant ae+ed that `@'5 has
un0ustifia.1 faied to re*it to defendant despite repeated de*ands in +ross vioation of
their Specia #+ent<s Contract ? ? ?.a The reference to said contract was incuded
purpose1 to *isead. Ehie on one hand appeant ae+ed that appeee<s cause of
action had nothin+ to do with the Specia #+ent<s Contract, on the other hand, she cai*
that @'5 vioated said contract which +ives rise of 2sic4 her cause of action. Cear1,
appeant<s cash accounta.iities cannot .e the offshoot of appeee<s ae+ed vioation of
the aforesaid contract.
On A, 7a1 A,,,, the appeate court denied petitioner<s *otion for reconsideration,2AB4 +ivin+ rise
to the present petition.
=efore +oin+ into the su.stantive issues, the Court sha first dispose of so*e procedura *atters
raised .1 the parties. Petitioner cai*s that respondent is estopped fro* Cuestionin+ her non&pa1*ent
of doc/et fees .ecause it did not raise this particuar issue when it fied its first *otion & the `7otion to
Stri/e out #nswer Eith Co*pusor1 Countercai* #nd To Decare Defendant In Defauta S with the
tria court> rather, it was on1 nine *onths after receivin+ petitioner<s answer that respondent assaied
the tria court<s ac/ of 0urisdiction over petitioner<s countercai*s .ased on the atter<s faiure to pa1
doc/et fees.2A!4 Petitioner<s position is un*eritorious. Estoppe .1 aches arises fro* the ne+i+ence or
o*ission to assert a ri+ht within a reasona.e ti*e, warrantin+ a presu*ption that the part1 entited to
assert it either has a.andoned or decined to assert it.2A"4 In the case at .ar, respondent cannot .e
considered as estopped fro* assaiin+ the tria court<s 0urisdiction over petitioner<s countercai* since
this issue was raised .1 respondent with the tria court itsef S the .od1 where the action is pendin+ &
even .efore the presentation of an1 evidence .1 the parties and definite1, wa1 .efore an1 0ud+*ent
coud .e rendered .1 the tria court.
7eanwhie, respondent Cuestions the 0urisdiction of the Court of #ppeas over the appea fied .1
petitioner fro* the A9 Septe*.er A,,8 and )9 @e.ruar1 A,,A orders of the tria court. It is si+nificant
to note that this o.0ection to the appeate court<s 0urisdiction is raised for the first ti*e .efore this
Court> respondent never havin+ raised this issue .efore the appeate court. #thou+h the ac/ of
0urisdiction of a court *a1 .e raised at an1 sta+e of the action, a part1 *a1 .e estopped fro* raisin+
such Cuestions if he has active1 ta/en part in the ver1 proceedin+s which he Cuestions, .eated1
o.0ectin+ to the court<s 0urisdiction in the event that that the 0ud+*ent or order su.seCuent1 rendered is
adverse to hi*.2A(4 In this case, respondent active1 too/ part in the proceedin+s .efore the Court of
#ppeas .1 fiin+ its appeee<s .rief with the sa*e.2A-4 Its participation, when ta/en to+ether with its
faiure to o.0ect to the appeate court<s 0urisdiction durin+ the entire duration of the proceedin+s .efore
such court, de*onstrates a wiin+ness to a.ide .1 the resoution of the case .1 such tri.una and
accordin+1, respondent is now *ost decided1 estopped fro* o.0ectin+ to the Court of #ppeas<
assu*ption of 0urisdiction over petitioner<s appea.2A94
The .asic issue for resoution in this case is whether or not the countercai* of petitioner is
co*pusor1 or per*issive in nature. # co*pusor1 countercai* is one which, .ein+ co+ni:a.e .1 the
re+uar courts of 0ustice, arises out of or is connected with the transaction or occurrence constitutin+ the
su.0ect *atter of the opposin+ part1<s cai* and does not reCuire for its ad0udication the presence of
third parties of who* the court cannot acCuire 0urisdiction.2A,4
In ;alen*ia v. Court of Appeals,2)84 this Court capsui:ed the criteria or tests that *a1 .e used in
deter*inin+ whether a countercai* is co*pusor1 or per*issive, su**ari:ed as foowsD
A. #re the issues of fa*t and la: raised .1 the cai* and countercai* ar+e1 the sa*eI
). Eoud res %udi*ata .ar a su.seCuent suit on defendant<s cai* a.sent the co*pusor1
countercai* rueI
B. Ei substantiall) t(e same eviden*e support or refute paintiff<s cai* as we as
defendant<s countercai*I
!. Is there an1 lo'i*al relation .etween the cai* and the countercai*I
#nother test, appied in the *ore recent case of 1uintanilla v. Court of Appeals,2)A4 is the `co*pein+
test of co*pusorinessa which reCuires `a o+ica reationship .etween the cai* and countercai*, that
is, where conductin+ separate trias of the respective cai*s of the parties woud entai a su.stantia
dupication of effort and ti*e .1 the parties and the court.a
#s contained in her answer, petitioner<s countercai*s are as foowsD
$)8% That defendant incorporates and repeads .1 reference a the fore+oin+ ae+ations
as *a1 .e *ateria to her Countercai* a+ainst @'5.
$)A% That @'5 is ia.e to pa1 the foowin+ 0ust, vaid and e+iti*ate cai*s of
defendantD
$a% the su* of at east PA8!,9,B.!" pus *a?i*u* interest thereon representin+, a*on+
others, direct co**issions, profit co**issions and contin+ent .onuses e+a1 due to
defendant> and
$.% the *ini*u* a*ount of P"88,888.88 pus the *a?i*u* aowa.e interest
representin+ defendant<s accu*uated pre*iu* reserve for A,9" and previous 1ears,
which @'5 has un0ustifia.1 faied to re*it to defendant despite repeated de*ands in
+ross vioation of their Specia #+ent<s Contract and in contravention of the principe of
aw that `ever1 person *ust, in the e?ercise of his ri+hts and in the perfor*ance of his
duties, act with 0ustice, +ive ever1one his due, and o.serve honest1 and +ood faith.a
$))% That as a resut of the fiin+ of this patent1 .aseess, *aicious and un0ustified
Co*paint, and @'5<s unawfu, ie+a and vindictive ter*ination of their Specia
#+ent<s Contract, defendant was unnecessari1 dra++ed into this iti+ation and to defense
2sic4 her side and assert her ri+hts and cai*s a+ainst @'5, she was co*peed to hire
the services of counse with who* she a+reed to pa1 the a*ount of PB8,888.88 as and
for attorne1<s fees and stands to incur iti+ation e?penses in the a*ount esti*ated to at
east P)8,888.88 and for which @'5 shoud .e assessed and *ade ia.e to pa1
defendant.
$)B% That considerin+ further the *aicious and unwarranted action of defendant in fiin+
this +ross1 unfounded action, defendant has suffered and continues to suffer fro*
serious an?iet1, *enta an+uish, fri+ht and hu*iiation. In addition to this, defendant<s
na*e, +ood reputation and .usiness standin+ in the insurance .usiness as we as in the
co**unit1 have .een .es*irched and for which @'5 shoud .e ad0ud+ed and *ade
ia.e to pa1 *ora da*a+es to defendant in the a*ount of PB88,888.88 as *ini*u*.
$)!% That in order to discoura+e the fiin+ of +roundess and *aicious suits i/e @'5<s
Co*paint, and .1 wa1 of servin+ 2as4 an e?a*pe for the pu.ic +ood, @'5 shoud .e
penai:ed and assessed e?e*par1 da*a+es in the su* of PA88,888.88 or such a*ount
as the Honora.e Court *a1 dee* warranted under the circu*stances.2))4
Tested a+ainst the a.ove*entioned standards, petitioner<s countercai* for co**issions, .onuses,
and accu*uated pre*iu* reserves is *ere1 per*issive. The evidence reCuired to prove petitioner<s
cai*s differs fro* that needed to esta.ish respondent<s de*ands for the recover1 of cash
accounta.iities fro* petitioner, such as cash advances and costs of pre*iu*s. The recover1 of
respondent<s cai*s is not contin+ent or dependent upon esta.ishin+ petitioner<s countercai*, such
that conductin+ separate trias wi not resut in the su.stantia dupication of the ti*e and effort of the
court and the parties. One woud search the records in vain for a o+ica connection .etween the
parties< cai*s. This concusion is further reinforced .1 petitioner<s own ad*issions since she decared
in her answer that respondent<s cause of action, uni/e her own, was not .ased upon the Specia #+ent<s
Contract.2)B4 However, petitioner<s cai*s for da*a+es, ae+ed1 suffered as a resut of the fiin+ .1
respondent of its co*paint, are co*pusor1.2)!4
There is no need for petitioner to pa1 doc/et fees for her co*pusor1 countercai*. 2)"4 On the
other hand, in order for the tria court to acCuire 0urisdiction over her per*issive countercai*,
petitioner is .ound to pa1 the prescri.ed doc/et fees.2)(4 The rue on the pa1*ent of fiin+ fees has
.een aid down .1 the Court in the case of Sun Insurance Office, 3td. v. Hon. 7a?i*iano #suncion2)-4&
A. It is not si*p1 the fiin+ of the co*paint or appropriate initiator1 peadin+, .ut the
pa1*ent of the prescri.ed doc/et fee, that vests a tria court with 0urisdiction over the
su.0ect&*atter or nature of the action. Ehere the fiin+ of the initiator1 peadin+ is not
acco*panied .1 pa1*ent of the doc/et fee, the court *a1 aow pa1*ent of the fee
within a reasona.e ti*e .ut in no case .e1ond the appica.e prescriptive or
re+e*entar1 period.
). The sa*e rue appies to per*issive countercai*s, third&part1 cai*s and si*iar
peadin+s, which sha not .e considered fied unti and uness the fiin+ fee prescri.ed
therefor is paid. The court *a1 aow pa1*ent of said fee within a reasona.e ti*e .ut
aso in no case .e1ond its appica.e prescriptive or re+e*entar1 period.
B. Ehere the tria court acCuires 0urisdiction over a cai* .1 the fiin+ of the appropriate
peadin+ and pa1*ent of the prescri.ed fiin+ fee .ut, su.seCuent1, the 0ud+*ent
awards a cai* not specified in the peadin+, or if specified the sa*e has .een eft for
deter*ination .1 the court, the additiona fiin+ fee therefor sha constitute a ien on the
0ud+*ent. It sha .e the responsi.iit1 of the Cer/ of Court or his du1 authori:ed
deput1 to enforce said ien and assess and coect the additiona fee.
The a.ove *entioned ruin+ in Sun Insurance has .een reiterated in the recent case of Suson v.
Court of #ppeas.2)94 In &uson, the Court e?pained that athou+h the pa1*ent of the prescri.ed doc/et
fees is a 0urisdictiona reCuire*ent, its non&pa1*ent does not resut in the auto*atic dis*issa of the
case provided the doc/et fees are paid within the appica.e prescriptive or re+e*entar1
period. Co*in+ now to the case at .ar, it has not .een ae+ed .1 respondent and there is nothin+ in the
records to show that petitioner has atte*pted to evade the pa1*ent of the proper doc/et fees for her
per*issive countercai*. #s a *atter of fact, after respondent fied its *otion to dis*iss petitioner<s
countercai* .ased on her faiure to pa1 doc/et fees, petitioner i**ediate1 fied a *otion with the
tria court, as/in+ it to decare her countercai* as co*pusor1 in nature and therefore e?e*pt fro*
doc/et fees and, in addition, to decare that respondent was in defaut for its faiure to answer her
countercai*.2),4 However, the tria court dis*issed petitioner<s countercai*. Pursuant to this Court<s
ruin+ in &un Insuran*e, the tria court shoud have instead +iven petitioner a reasona.e ti*e, .ut in no
case .e1ond the appica.e prescriptive or re+e*entar1 period, to pa1 the fiin+ fees for her per*issive
countercai*.
Petitioner asserts that the tria court shoud have decared respondent in defaut for havin+ faied to
answer her countercai*.2B84 Insofar as the per*issive countercai* of petitioner is concerned, there is
o.vious1 no need to fie an answer unti petitioner has paid the prescri.ed doc/et fees for on1 then
sha the court acCuire 0urisdiction over such cai*.2BA4 7eanwhie, the co*pusor1 countercai* of
petitioner for da*a+es .ased on the fiin+ .1 respondent of an ae+ed1 unfounded and *aicious suit
need not .e answered since it is insepara.e fro* the cai*s of respondent. If respondent were to
answer the co*pusor1 countercai* of petitioner, it woud *ere1 resut in the for*er peadin+ the
sa*e facts raised in its co*paint.2B)4
:!EREFORE, the assaied Decision of the Court of #ppeas pro*u+ated on )B Dece*.er A,,9
and its A, 7a1 A,,, Resoution are here.1 7ODI@IED. The co*pusor1 countercai* of petitioner for
da*a+es fied in Civi Case No. 9,&B9A( is ordered REINST#TED. 7eanwhie, the Re+iona Tria
Court of 7a/ati $=ranch AB!% is ordered to reCuire petitioner to pa1 the prescri.ed doc/et fees for her
per*issive countercai* $direct co**issions, profit co**issions, contin+ent .onuses and accu*uated
pre*iu* reserves%, after ascertainin+ that the appica.e prescriptive period has not 1et set in.2BB4
SO ORDERED.
!elo ,C(airman- ;itu' +an'aniban and &andoval-Gutierre" JJ. concur.
,.
A8.
AA. %324/ /252S2O
6G.R. No. 133365. September 16, 2003]
PLATINUM TOURS AND TRAVL, IN!ORPORATD, petitioner, vs. "OS M.
PANLILIO, respondent.
D ! I S I O N
!ORONA, J.:
"efore us is a petition for revie( on certiorari un$er 4ule 45 of t#e 4ules of
Court assailing t#e 7anuar1 158 1998 $e!ision619 of t#e Court of Appeals (#i!#
rule$ t#at&
? ? ?
ConseCuent1, the respondent 0ud+e co**itted +rave a.use of discretion in aowin+ the
consoidation of Civi Case No. ,(&(B" with Civi Case No. ,!&A(B!.
? ? ? Ee aso eave it to the respondent ;ud+e to decide whether he wi return Civi
Case No. ,(&(B" to =ranch A!( or /eep it in his doc/et .ut shoud he opt for the atter,
he shoud act on it as a separate case fro* Civi Case No. ,!&A(B!.
EHERE@ORE, the petition is partia1 +ranted and the assaied Orders dated ;u1 )B,
A,,( and Septe*.er A-, A,,(, aowin+ the consoidation of Civi Case No. ,(&(B" with
Civi Case No. ,!&A(B! and den1in+ petitioner<s *otion for reconsideration,
respective1, are #NN533ED and SET #SIDE, with the conseCuent co*pete severance
of the two $)% cases.2)4
%#e fa!ts follo(&
On April 278 19948 petitioner Platinu, %ours an$ %ravel 2n!. :Platinu,; file$ a
!o,plaint for a su, of ,one1 (it# $a,ages against Pan Asiati! %ravel
Corporation :PA%C; an$ its presi$ent eli$a <. <alve=. Platinu, soug#t to
!olle!t pa1,ent for t#e airline ti!+ets (#i!# PA%C *oug#t fro, it. %#e !ase (as
$o!+ete$ as Civil Case o. 94-1634.
On O!to*er 248 19948 t#e 4egional %rial Court of >a+ati Cit18 "ran!# 628
ren$ere$ a ?u$g,ent639 *1 $efault in favor of Platinu, an$ or$ere$ PA%C an$
eli$a <. <alve= to soli$aril1 pa1 Platinu, a!tual $a,ages of P 3598621.03
(it# legal interest8 P 508000 attorne1@s fees an$ !ost of suit.
On Ae*ruar1 108 19958 a (rit of eBe!ution (as issue$ on ,otion of Platinu,.
Pursuant to t#e (rit8 >anila Polo Clu* Proprietar1 >e,*ers#ip Certifi!ate o.
2133 in t#e na,e of eli$a <. <alve= (as levie$ upon an$ sol$ for P4798888.48
to a !ertain >a. 4osario C#oo.
On 7une 28 19958 private respon$ent 7ose >. Panlilio file$ a ,otion to
intervene in Civil Case o. 94-1634. Panlilio !lai,e$ t#at8 in O!to*er 19928
<alve= #a$ eBe!ute$ in #is favor a !#attel ,ortgage over #er s#ares of sto!+ in
t#e >anila Polo Clu* to se!ure #er P1 ,illion loan an$ t#at <alve= #a$ alrea$1
$elivere$ to #i, t#e sto!+ !ertifi!ates value$ at P5 ,illion.
On 7une 98 19958 t#e trial !ourt $enie$ Panlilio@s ,otion for intervention&
Su.*itted for resoution is ;ose 7. Paniio<s 7otion for Intervention dated 7a1 BA,
A,,".
This Court has to den1 the *otion .ecause $A% a decision had aread1 .een rendered in
this case and that the on1 *atters at issue is the propriet1 of the e?ecution> $)% it wi
on1 dea1 or pre0udice the ad0udication of the ri+hts of the ori+ina parties> and, $B% the
Intervenor<s ri+hts *a1 .e fu1 protected in a separate action.2!4
On 7anuar1 298 19968 t#e trial !ourt $e!lare$ t#e eBe!ution sale null an$ voi$
$ue to irregularities in t#e !on$u!t t#ereof.
On >a1 38 19968 Panlilio file$ against <alve= a !olle!tion !ase (it#
appli!ation for a (rit of preli,inar1 atta!#,ent of t#e $ispute$ >anila Polo Clu*
s#ares8 $o!+ete$ as Civil Case o. 96-365. %#e !ase (as raffle$ to "ran!# 146
of t#e 4egional %rial Court of >a+ati Cit1659. 2n t#e ,eanti,e8 Panlilio again
atte,pte$ to intervene in Civil Case o. 94-16348 t#is ti,e *1 in!orporating in
#is !o,plaint a ,otion to !onsoli$ate Civil Case o. 96-365 an$ Civil Case o.
94-1634.
On 7une 138 19968 7u$ge Salva$or %ensuan of "ran!# 146 grante$ t#e
,otion for !onsoli$ation on !on$ition t#at 7u$ge 4o*erto /io+no of "ran!# 628
(#o (as tr1ing Civil Case o. 94-16348 (oul$ not o*?e!t t#ereto. 7u$ge /io+no
later issue$ an or$er8 $ate$ 7ul1 238 19968 allo(ing t#e !onsoli$ation of t#e t(o
!ases an$ setting for #earing Panlilio@s appli!ation for a (rit of preli,inar1
atta!#,ent.
Platinu,8 as plaintiff in Civil Case o. 94-16348 ,ove$ to re!onsi$er t#e 7ul1
238 1996 or$er of 7u$ge /io+no *ut its ,otion (as $enie$.
On 7anuar1 318 19978 Platinu, file$ a petition for !ertiorari at t#e Court of
Appeals assailing8 a,ong ot#ers8 t#e 7ul1 238 1996 or$er of 7u$ge /io+no
allo(ing t#e !onsoli$ation of Civil Case o. 96-365 an$ Civil Case o. 94-1634.
2n a $e!ision $ate$ 7anuar1 158 19988 t#e Court of Appeals annulle$ t#e
assaile$ or$er *ut left it to 7u$ge /io+no to $e!i$e (#et#er to return Civil Case
o. 96-365 to 7u$ge %ensuan in "ran!# 1468 or to +eep it in #is $o!+et an$
$e!i$e it as a separate !ase.
Platinu, file$ a ,otion for partial re!onsi$eration of t#e $e!ision of t#e Court
of Appeals8 pra1ing t#at Civil Case o. 96-365 *e returne$ to "ran!# 146 or re-
raffle$ to anot#er 4%C "ran!# of >a+ati. 3o(ever8 t#e ,otion (as $enie$ *1
t#e Court of Appeals on April 28 1998.
2n t#e instant petition8 Platinu, insists t#at t#e >a+ati 4%C8 "ran!# 628 #as
no ?uris$i!tion to tr1 Civil Case o. 96-365. 2t argues t#at8 (#en 7u$ge /io+no@s
7ul1 238 1996 or$er allo(ing t#e !onsoli$ation of t#e t(o !ases (as annulle$
an$ set asi$e8 4%C "ran!# 62@s *asis for a!)uiring ?uris$i!tion over Civil Case
o. 96-365 (as li+e(ise eBtinguis#e$.
De $isagree.
7uris$i!tion is t#e po(er an$ aut#orit1 of t#e !ourt to #ear8 tr1 an$ $e!i$e a
!ase.669 2n general8 ?uris$i!tion ,a1 eit#er *e over t#e nature of t#e a!tion8 over
t#e su*?e!t ,atter8 over t#e person of t#e $efen$ants or over t#e issues fra,e$
in t#e plea$ings.
7uris$i!tion over t#e nature of t#e a!tion an$ su*?e!t ,atter is !onferre$ *1
la(. 2t is $eter,ine$ *1 t#e allegations of t#e !o,plaint8 irrespe!tive of (#et#er
or not t#e plaintiff is entitle$ to re!over upon all or so,e of t#e !lai,s asserte$
t#erein.679 7uris$i!tion over t#e person of t#e plaintiff is a!)uire$ fro, t#e ti,e #e
files #is !o,plaintE (#ile ?uris$i!tion over t#e person of t#e $efen$ant is a!)uire$
*1 #is voluntar1 appearan!e in !ourt an$ #is su*,ission to its aut#orit18 or *1
t#e !oer!ive po(er of legal pro!esses eBerte$ over #is person.
Sin!e ?uris$i!tion is t#e po(er to #ear an$ $eter,ine a parti!ular !ase8 it
$oes not $epen$ upon t#e regularit1 of t#e eBer!ise *1 t#e !ourt of t#at po(er or
on t#e !orre!tness of its $e!isions.
2n t#e !ase at *ar8 t#ere is no $ou*t t#at Panlilio@s !olle!tion !ase $o!+ete$
as Civil Case o. 96-365 falls (it#in t#e ?uris$i!tion of t#e 4%C of >a+ati8
"ran!# 62. %#e fa!t t#at t#e Court of Appeals su*se)uentl1 annulle$ 7u$ge
/io+no@s or$er granting t#e !onsoli$ation of Civil Case o. 96-365 an$ Civil
Case o. 94-16348 $i$ not affe!t t#e ?uris$i!tion of t#e !ourt (#i!# issue$ t#e
sai$ or$er.
`7uris$i!tionF s#oul$ *e $istinguis#e$ fro, t#e GeBer!ise of ?uris$i!tion.F
7uris$i!tion refers to t#e aut#orit1 to $e!i$e a !ase8 not t#e or$ers or t#e
$e!ision ren$ere$ t#erein. A!!or$ingl18 (#ere a !ourt #as ?uris$i!tion over t#e
person an$ t#e su*?e!t ,atter8 as in t#e instant !ase8 t#e $e!ision on all
)uestions arising fro, t#e !ase is *ut an eBer!ise of su!# ?uris$i!tion. An1 error
t#at t#e !ourt ,a1 !o,,it in t#e eBer!ise of its ?uris$i!tion is ,erel1 an error of
?u$g,ent (#i!# $oes not affe!t its aut#orit1 to $e!i$e t#e !ase8 ,u!# less $ivest
t#e !ourt of t#e ?uris$i!tion over t#e !ase.
De fin$ no reversi*le error on t#e part of t#e Court of Appeals (#en it left to
7u$ge /io+no of "ran!# 62 t#e $is!retion on (#et#er to return Civil Case o.
96-365 to "ran!# 146 or to $e!i$e t#e sa,e as a separate !ase in #is o(n sala.
>oreover8 (e fin$ t#e instant petition pre,ature an$ spe!ulative. 3a$
Platinu, (aite$ until 7u$ge /io+no $e!i$e$ on (#at to $o (it# Civil Case o.
96-3658 t#e parties (oul$ #ave *een spare$ t#e trou*le an$ t#e eBpense of
see+ing re!ourse fro, t#is Court8 (#i!# in turn (oul$ #ave #a$ one petition less
in its $o!+et.
%#e unfoun$e$ fear t#at Civil Case o. 96-365 (oul$ un$ul1 $ela1 t#e final
resolution of Civil Case o. 94-16348 if t#e for,er (ere retaine$ *1 "ran!# 628
,a$e Platinu, a!t (it# #aste. 2n so $oing8 it (aste$ t#e pre!ious ti,e not onl1
of t#e parties *ut also of t#is Court.
All tol$8 not#ing legall1 prevents t#e 4%C of >a+ati8 "ran!# 628 fro,
pro!ee$ing (it# Civil Case o. 96-365. S#oul$ it $e!i$e to retain t#e !ase8 it is
#ere*1 $ire!te$ to resolve t#e sa,e (it# $ispat!#.
#$R%OR8 petition is #ere*1 /020/.
SO ORDRD.
Puno, (Chairman), Panganiban, Sandoval-Gutierrez, an$ Carpio-Morales,
JJ, !on!ur
A). %324/ /252S2O
&G.R. No. 13'('1. ]
MANILA )AN*RS LI% INSURAN! !ORPORATION, petitioner, vs. DD+
NG *O* #I, respondent.
D ! I S I O N
SANDOVAL,GUTIRR-, J..
"efore us is a petition for revie( on certiorari assailing t#e /e!ision619 $ate$ an$
4esolution629 $ate$ of t#e Court of Appeals in CA-<.4. C5 o. 405048 entitle$ G0$$1 g Co+
Dei vs. >anila "an+ers Hife 2nsuran!e CorporationF.
%#e fa!tual ante!e$ents as *orne *1 t#e re!or$s are&
0$$1 g Co+ Dei8 respon$ent8 is a Singaporean *usiness,an (#o venture$ into
investing in t#e . On 8 respon$ent8 in a Hetter of 2ntent a$$resse$ to >anila "an+ers Hife
2nsuran!e Corporation8 petitioner8 eBpresse$ #is intention to pur!#ase a !on$o,iniu, unit at
5alle 5er$e %erra!es.
Su*se)uentl1 or on 8 respon$ent pai$ petitioner a reservation fee of P508000.00 for t#e
pur!#ase of a 46-s)uare ,eter !on$o,iniu, unit :.nit 703; value$ at P8608922.00. On 8
respon$ent pai$ 90I of t#e pur!#ase pri!e in t#e su, of P7298830.00.
Conse)uentl18 petitioner8 t#roug# its Presi$ent8 >r. Antonio <. Pu1at8 eBe!ute$ a Contra!t
to Sell in favor of t#e respon$ent. %#e !ontra!t eBpressl1 states t#at t#e su*?e!t !on$o,iniu,
unit Gs#all su*stantiall1 *e !o,plete$ an$ $elivere$F to t#e respon$ent G(it#in fifteen :15;
,ont#sF fro, Ae*ruar1 88 1989 or on M/0 1, 1''08 an$ t#at G:S;#oul$ t#ere *e no su*stantial
!o,pletion an$ fail:ure; to $eliver t#e unit on t#e $ate spe!ifie$8 a penalt1 of 1I of t#e total
a,ount pai$ :*1 respon$ent; s#all *e !#arge$ against :petitioner;F.
Consi$ering t#at t#e stipulate$ 15-,ont# perio$ (as at #an$8 respon$ent returne$ to
t#e so,eti,e in April8 1990.
2n a letter $ate$ April 58 19908 petitioner8 t#roug# its Senior Assistant 5i!e-Presi$ent8 >r.
>ario <. Javalla8 infor,e$ respon$ent of t#e su*stantial !o,pletion of #is !on$o,iniu, unit8
#o(ever8 $ue to various un!ontrolla*le for!es :su!# as coup d! etat atte,pts8 t1p#oon an$
steel an$ !e,ent s#ortage;8 t#e final turnover is reset to .
>ean(#ile8 on 8 upon re!eipt of petitioner@s noti!e of $eliver1 $ate$ 8 respon$ent again
fle( *a!+ to . 3e foun$ t#e unit still unin#a*ita*le for la!+ of (ater an$ ele!tri! fa!ilities.
On!e ,ore8 petitioner issue$ anot#er noti!e to ,ove-in a$$resse$ to its *uil$ing
a$,inistrator a$vising t#e latter t#at respon$ent is s!#e$ule$ to ,ove in on .
On 8 respon$ent returne$ to t#e onl1 to fin$ t#at #is !on$o,iniu, unit (as still
unliva*le. 0Basperate$8 #e (as !onstraine$ to sen$ petitioner a letter $ate$ $e,an$ing
pa1,ent for t#e $a,ages #e sustaine$. "ut petitioner ignore$ su!# $e,an$8 pro,pting
respon$ent to file (it# t#e 4egional %rial Court8 "ran!# 1508 8 a !o,plaint against t#e for,er
for spe!ifi! perfor,an!e an$ $a,ages8 $o!+ete$ as Civil Case o. 90-3440.
>ean(#ile8 $uring t#e pen$en!1 of t#e !ase8 respon$ent finall1 a!!epte$ t#e
!on$o,iniu, unit an$ on Apr23 12, 1''18 o!!upie$ t#e sa,e. %#us8 respon$ent@s !ause of
a!tion #as *een li,ite$ to #is !lai, for $a,ages.
On 8 t#e trial !ourt ren$ere$ a /e!ision639 fin$ing t#e petitioner lia*le for pa1,ent of
$a,ages $ue to t#e $ela1 in t#e perfor,an!e of its o*ligation to t#e respon$ent. %#e
$ispositive portion rea$s&
`EHERE@ORE, 0ud+*ent is here.1 rendered in favor of paintiff and a+ainst defendant,
orderin+ 7ania =an/ers 3ife Insurance Corporation to pa1 paintiff Edd1 N+ No/ Eei
the foowin+D
A. One percent $AZ% of the tota a*ount paintiff paid defendant>
). PA88,888.88 as *ora da*a+es>
B. P"8,888.88 as e?e*par1 da*a+es>
!. P)",888.88 .1 wa1 of attorne1<s fees> and
Cost of suit.
`SO ORDERED.a
On appeal8 t#e Court of Appeals8 in a /e!ision $ate$ 8 affir,e$ in toto t#e trial !ourt@s
a(ar$ of $a,ages in favor of t#e respon$ent.
.nsatisfie$8 petitioner file$ a ,otion for re!onsi$eration *ut (as $enie$ *1 t#e Appellate
Court in a 4esolution $ate$ .
3en!e8 t#is petition for revie( on certiorari. Petitioner !onten$s t#at t#e trial !ourt #as no
?uris$i!tion over t#e instant !aseE an$ t#at t#e Court of Appeals erre$ in affir,ing t#e trial
!ourt@s fin$ing t#at petitioner in!urre$ unreasona*le $ela1 in t#e $eliver1 of t#e !on$o,iniu,
unit to respon$ent.
On petitioner@s !ontention t#at t#e trial !ourt #as no ?uris$i!tion over t#e instant !ase8
Se!tion 1 :!; of Presi$ential /e!ree o. 13448 as a,en$e$8 provi$es&
`SECTION A. S In the e?ercise of its functions to re+uate the rea estate trade and
.usiness and in addition to its powers provided for in Presidentia Decree No. ,"-, the
Nationa Housin+ #uthorit1 2now Housin+ and 3and 5se Re+uator1 =oard $H35R=%4
649 sha have ex*lusive %urisdi*tion to hear and decide cases of the foowin+ natureD
? ? ?
`C. Cases invovin+ specific perfor*ance of contractua and statutor1 o.i+ations fied
.1 .u1ers of su.division ots or condo*iniu* units a+ainst the owner, deveoper, deaer,
.ro/er or saes*an.
? ? ?.a
Pursuant to t#e a*ove provisions8 it is t#e 3H.4" (#i!# #as ?uris$i!tion over t#e instant
!ase. De #ave !onsistentl1 #el$ t#at !o,plaints for spe!ifi! perfor,an!e (it# $a,ages *1 a
lot or !on$o,iniu, unit *u1er against t#e o(ner or $eveloper falls un$er t#e eB!lusive
?uris$i!tion of t#e 3H.4".659
D#ile it ,a1 *e true t#at t#e trial !ourt is (it#out ?uris$i!tion over t#e !ase8 petitioner@s
a!tive parti!ipation in t#e pro!ee$ings estoppe$ it fro, assailing su!# la!+ of it. De #ave
#el$ t#at it is an un$esira*le pra!ti!e of a part1 parti!ipating in t#e pro!ee$ings an$
su*,itting its !ase for $e!ision an$ t#en a!!epting t#e ?u$g,ent8 onl1 if favora*le8 an$
atta!+ing it for la!+ of ?uris$i!tion8 (#en a$verse.669
3ere8 petitioner faile$ to raise t#e )uestion of ?uris$i!tion *efore t#e trial !ourt an$ t#e
Appellate Court. 2n effe!t8 petitioner !onfir,e$ an$ ratifie$ t#e trial !ourt@s ?uris$i!tion over
t#is !ase. Certainl18 it is no( in estoppel an$ !an no longer )uestion t#e trial !ourt@s
?uris$i!tion.
On petitioner@s !lai, t#at it $i$ not in!ur $ela18 suffi!e it to sa1 t#at t#is is a fa!tual
issue. %i,e an$ again8 (e #ave rule$ t#at Gt#e fa!tual fin$ings of t#e trial !ourt are given
(eig#t (#en supporte$ *1 su*stantial evi$en!e an$ !arries ,ore (eig#t (#en affir,e$ *1 t#e
Court of Appeals.F679 #4et4er or 5ot pet2t2o5er 2567rre8 8e3/0 /58 t479, 32/b3e to p/0
8/m/:e9 /9 / re973t t4ereo;, /re 258ee8 ;/6t7/3 <7e9t2o59.
%#e ?uris$i!tion of t#is Court in a petition for revie( on certiorari un$er 4ule 45 of t#e
1997 4ules of Civil Pro!e$ure8 as a,en$e$8 is li,ite$ to revie(ing onl1 errors of la(8 not of
fa!t8 unless t#e fa!tual fin$ings *eing assaile$ are not supporte$ *1 evi$en!e on re!or$ or t#e
i,pugne$ ?u$g,ent is *ase$ on a ,isappre#ension of fa!ts.689 %#ese eB!eptions are not
present #ere.
#$R%OR8 t#e petition is /020/. %#e assaile$ /e!ision $ate$ an$ 4esolution
$ate$ of t#e Court of Appeals are #ere*1 AAA24>0/ "# $%$%.
Costs against t#e petitioner.
SO ORDRD.
&itug, (Chairman), , and Carpio-Morales, JJ, concur
619 AnneB GAF of t#e Petition for 4evie(8 4ollo at 27-57.
2)4 #nne? `Ca, id. at (B&(".
2B4 #nne? `Ha, id. at 9B&9,.
2!4 ;urisdiction was ori+ina1 vested in the Nationa Housin+ #uthorit1 $NH#% under
P.D. No. ,"-, as a*ended .1 P.D. No. AB!!. 5nder E.O. No. (!9 of , this
0urisdiction was transferred to the Hu*an Sette*ents Re+uator1 Co**ission
$HSRC% which, pursuant to E.O. No. ,8 of , was rena*ed as the Housin+ and
3and 5se Re+uator1 =oard $H35R=%.
2"4 See Soid Ho*es, Inc. vs. Pa1awa, '.R. No. 9!9AA, #u+ust ),, A,9,, A-- SCR#
-)> C.T. Torres Enterprises, Inc. vs. Hi.ionada, '.R. No. 98,A(, Nove*.er ,,
A,,8, A,A SCR# )(9>Te0ada vs. Ho*estead Propert1 Corporation, '.R. No.
-,()), Septe*.er ),, A,9,, A-9 SCR# A(!> #casid vs. Court of #ppeas, '.R.
No. ,!,)-, ;anuar1 )), A,,B, )A- SCR# !B-> @a0ardo vs. =autista, '.R. Nos.
A8)A,B&,-, 7a1 A8, A,,!, )B) SCR# ),A.
2(4 See Producers =an/ of the Phiippines vs. N3RC, et a, '.R. No. AA98(,, Nove*.er
A(, A,,9, ),9 SCR# "A-> TC3 Saes Corporation vs. Court of #ppeas, '.R. No.
A),---, ;anuar1 ", )88A, B!, SCR# B"> #da1 vs. @'5 Insurance Corporation,
'.R. No. AB99)), ;anuar1 )B, )88A, B"8 SCR# AAB.
2-4 3i* vs. Chan, '.R. No. A)-))-, @e.ruar1 )9, )88A, B"B SCR# "", ",,
citin+ Va+oson<s Reat1, Inc. vs. Court of #ppeas, )," SCR# !!, $A,,9%.
294 Cos*os =ottin+ Corporation vs. N3RC, '.R. No. A!(B,-, ;u1 A, )88B, citin+ De
Ra*a vs. Court of #ppeas, B"A SCR# ,! $)88A%.
AB. Repu.ic of the Phiippines
SUPREME COURT
7ania
SECOND DIVISION
G.R. No. 1;;206 Oc/o23r 2', 200&
GO?ERNMENT SER?ICE INSURANCE S#STEM, petitioner,
vs.
EDUARDO M. SANTIAGO, 1(21/0/(/3 2) h01 80o8 ROSARIO ENRI,UE% ?DA. DE
SANTIAGO, respondent.
D E C I S I O N
CALLE"O, SR., J.:
=efore the Court is the petition for review on certiorari fied .1 the 'overn*ent Service Insurance S1ste* $'SIS%,
see/in+ to reverse and set aside the Decision1 dated @e.ruar1 )), )88) of the Court of #ppeas $C#% in C#&'.R. CV
No. ()B8, and its Resoution dated Septe*.er ", )88) den1in+ its *otion for reconsideration.
The antecedent facts of the case, as cued fro* the assaied C# decision and that of the tria court, are as foowsD
Deceased spouses ;ose C. Uuueta and Soedad Ra*os o.tained various oans fro* defendant 'SIS for $the% period
Septe*.er, A,"( to Octo.er, A,"- in the tota a*ount of PB,AA-,888.88 secured .1 rea estate *ort+a+es over parces
of and covered .1 TCT Nos. )(A8", B-A-- and "8B(". The Uuuetas faied to pa1 their oans to defendant 'SIS and
the atter forecosed the rea estate *ort+a+es dated Septe*.er )", A,"(, 7arch (, A,"-, #pri !, A,"- and Octo.er
A", A,"-.
On #u+ust A!, A,-!, the *ort+a+ed properties were sod at pu.ic auction .1 defendant 'SIS su.*ittin+ a .id price
of P",)),,,)-.9!. Not a ots covered .1 the *ort+a+ed tites, however, were sod. Ninet1&one $,A% ots were
e?press1 e?cuded fro* the auction since the ots were sufficient to pa1 for a the *ort+a+e de.ts. # Certificate of
Sae $#nne? 6@,6 Records, Vo. I, pp. )B&)9% was issued .1 then Provincia Sheriff Nicanor D. Saa1sa1.
The Certificate of Sae dated #u+ust A!, A,-! had .een annotated and inscri.ed in TCT Nos. )(A8", B-A-- and
"8B"(, with the foowin+ notationsD 6$T%he foowin+ ots which for* part of this tite $TCT No. )(A8"% are not
covered .1 the *ort+a+e contract due to sae to third parties and donation to the +overn*entD "8&H&"&C&,&;&("&H&9,
"8&H&"&C&,;&7&-> "8&H&"&C&,&;&("&H&"> A ots Nos. A to AB, =oc/ No. A S&(,AB9 sC.*. ). 3ots Nos. A to AA, =oc/
No. ) S!,((8 sC.*. B. 3ot No. A", =oc/ No. B S!9- sC.*. !. 3ot No. A-, =oc/ No. ! S)(B sC.*. ". 3ot No. A, =oc/
No. - S !8) sC.*. (. Road 3ots Nos. A, ), B, W ! S ),-!- sC.*.6
In another 6NOTED The foowin+ ots in the #ntonio Su.division were aread1 reeased .1 the 'SIS and therefore are
not incuded in this sae, na*e1D 3OT NO. A, (, -, 9, ,, A8, and AB $Od Pan% =oc/ I> A, B, !, ", -, 9 and A8 $Od
Pan% =oc/ II> B, A8, A) and AB $New Pan% =oc/ I $Od Pan% =oc/ III> -, A! and )8 $New Pan% =oc/ III $Od
Pan% =oc/ V> AB and )8 $New Pan% =oc/ IV $Od Pan% =oc/ VI> A, ), B and A8 $New Pan% =oc/ V $Od Pan%
=oc/ VII> A, ", 9, A", )( and )- $New Pan% =oc/ VI $Od Pan% =oc/ VIII> -, A) and )8 $New Pan% =oc/ VII $Od
Pan% =oc/ II> A, ! and ( $New Pan% =oc/ VIII $Od Pan% =oc/ V> " $New Pan% =oc/ V $Od Pan% =oc/ UVII> (
$New Pan% =oc/ VI $Od Pan% =oc/ VII> A, =oc/ ,> A) =oc/ A> AA =oc/ )> A, =oc/ A> A8 =oc/ (> )B =oc/ B.6
#nd the ots on 6#DDITION#3 EVC35SION @RO7 P5=3IC S#3E6 are 63OTS NO. ( =oc/ !> ) =oc/ )> "
=oc/ "> A, ) and B =oc/ AA, A, ), B and ! =oc/ A8> " =oc/ AA $New%> A =oc/ B> " =oc/ A> A" =oc/ -> AA =oc/ ,>
AB =oc/ "> A) =oc/ "> B =oc/ A8> (.6
On Nove*.er )", A,-", an #ffidavit of Consoidation of Ownership $#nne? 6',6 Records, Vo. I, pp. ),&BA% was
e?ecuted .1 defendant 'SIS over Uuueta<s ots, incudin+ the ots, which as earier stated, were aread1 e?cuded
fro* the forecosure.
On 7arch (, A,98, defendant 'SIS sod the forecosed properties to Qor/stown Deveop*ent Corporation which sae
was disapproved .1 the Office of the President of the Phiippines. The sod properties were returned to defendant
'SIS.
The Re+ister of Deeds of Ri:a canceed the and tites issued to Qor/stown Deveop*ent Corporation. On ;u1 ),
A,98, TCT No. )B"") was issued cancein+ TCT No. )A,)(> TCT No. )B""B canceed TCT No. )A,)"> and TCT
No. )B""! cancein+ TCT No. )A,)!, a in the na*e of defendant 'SIS.AawphiA.nbt
#fter defendant 'SIS had re&acCuired the properties sod to Qor/stown Deveop*ent Corporation, it .e+an disposin+
the forecosed ots incudin+ the e?cuded ones.
On #pri -, A,,8, representative Eduardo Santia+o and then paintiff #ntonio Vic Uuueta e?ecuted an a+ree*ent
where.1 Uuueta transferred a his ri+hts and interests over the e?cuded ots. Paintiff Eduardo Santia+o<s aw1er,
#tt1. Eencesao =. Trinidad, wrote a de*and etter dated 7a1 AA, A,9, $#nne? 6H,6 Records, Vo. I, pp. B)&BB% to
defendant 'SIS as/in+ for the return of the ei+ht1&one $9A% e?cuded ots.2
On 7a1 -, A,,8, #ntonio Vic Uuueta, represented .1 Eduardo 7. Santia+o, fied with the Re+iona Tria Court
$RTC% of Pasi+ Cit1, =ranch -A, a co*paint for reconve1ance of rea estate a+ainst the 'SIS. Spouses #feo and
Nenita Escasa, 7anue III and S1via '. 5r.ano, and 7arciana P. 'on:aes and the heirs of 7a*erto 'on:aes
*oved to .e incuded as intervenors and fied their respective answers in intervention. Su.seCuent1, the petitioner, as
defendant therein, fied its answer ae+in+ inter aia that the action was .arred .1 the statute of i*itations andFor
aches and that the co*paint stated no cause of action. Su.seCuent1, Uuueta was su.stituted .1 Santia+o as the
paintiff in the co*paint a Cuo. 5pon the death of Santia+o on 7arch (, A,,(, he was su.stituted .1 his widow,
Rosario EnriCue: Vda. de Santia+o, as the paintiff.
#fter due tria, the RTC rendered 0ud+*ent a+ainst the petitioner orderin+ it to reconve1 to the respondent, Rosario
EnriCue: Vda. de Santia+o, in su.stitution of her deceased hus.and Eduardo, the sevent1&ei+ht ots e?cuded fro* the
forecosure sae.AawphiA.nbt The dispositive portion of the RTC decision readsD
EHERE@ORE, 0ud+*ent is here.1 rendered in favor of paintiff and a+ainst the defendantD
A. Orderin+ defendant to reconve1 to paintiff the sevent1&ei+ht $-9% ots reeased and e?cuded fro* the
forecosure sae incudin+ the additiona e?cusion fro* the pu.ic sae, na*e1D
a. 3ot Nos. A, (, -, 9, 8, A8, AB, =oc/ I $Od Pan%.
.. 3ot Nos. A, B, !, ", -, 9 and A8, =oc/ II $Od Pan%.
c. 3ot Nos. B, A8, A), and AB, =oc/ I $New Pan%, =oc/ III $Od Pan%,
d. 3ot Nos. -, A! and )8, =oc/ III $New Pan%, =oc/ V $Od Pan%.
e. 3ot Nos. AB and )8, =oc/ IV $New Pan%, =oc/ VI $Od Pan%.
f. 3ot Nos. A, ), B and A8, =oc/ V $New Pan%, =oc/ VII $Od Pan%.
+. 3ot Nos. A, ", 9, A", )( and )-, =oc/ VI $New Pan%, =oc/ VIII $Od Pan%.
h. 3ot Nos. - and A), =oc/ VII $New Pan%, =oc/ II $Od Pan%.
i. 3ot Nos. A, ! and (, =oc/ VIII $New Pan%, =oc/ V $Od Pan%.
0. 3ot ", =oc/ V $New Pan%, =oc/ VII $Od Pan%.
/. 3ot (, =oc/ VI $New Pan%, =oc/ VII $Od Pan%.
. 3ots ), ", A) and A", =oc/ I.
*. 3ots (, , and AA, =oc/ ).
n. 3ots A, ", (, -, A( and )B, =oc/ B.
o. 3ot (, =oc/ !.
p. 3ots ", A), AB and )!, =oc/ ".
C. 3ots A8 and A(, =oc/ (.
r. 3ots ( and A", =oc/ -.
s. 3ots AB, )!, )9 and ),, =oc/ 9.
t. 3ots A, AA, A- and )), =oc/ ,.
u. 3ots A, ), B and !, =oc/ A8.
v. 3ots A, ), B and " $New%, =oc/ AA.
). Orderin+ defendant to pa1 paintiff, if the sevent1&ei+ht $-9% e?cuded ots coud not .e reconve1ed, the fair
*ar/et vaue of each of said ots.
B. Orderin+ the Re+istr1 of Deeds of Pasi+ Cit1 to cance the and tites coverin+ the e?cuded ots in the
na*e of defendant or an1 of its successors&in&interest incudin+ a derivative tites therefro* and to issue
new and tites in paintiff<s na*e.
!. Orderin+ the Re+istr1 of Deeds of Pasi+ Cit1 to cance the Notices of 3is Pendens inscri.ed in TCT No.
PT&98B!) under Entr1 No. PT&A))(-FT&)B""!> TCT No. 9A9A) under Entr1 No. PT&A))(-FT&)B""!> and TCT
No. PT&9!,AB under Entr1 No. PT&A))(-FT&)B""!.
". Costs of suit.3
The petitioner eevated the case to the C# which rendered the assaied decision affir*in+ that of the RTC. The
dispositive portion of the assaied decision readsD
EHERE@ORE, pre*ises considered, the herein appea is DIS7ISSED for ac/ of *erit. The Decision of Dece*.er
A-, A,,- of =ranch -A of the Re+iona Tria Court of Pasi+ Cit1 is here.1 #@@IR7ED.4
The petitioner *oved for a reconsideration of the aforesaid decision .ut the sa*e was denied in the assaied C#
Resoution of Septe*.er ", )88).
The petitioner now co*es to this Court ae+in+ thatD
THE CO5RT O@ #PPE#3S CO77ITTED # REVERSI=3E ERROR IN R53IN' TH#T #% PETITIONER E#S
'5I3TQ O@ =#D @#ITH EHEN IN TR5TH #ND IN @#CT, THERE E#S NO S5@@ICIENT 'RO5ND TO
S5PPORT S5CH CONC35SION> #ND =% THERE E#S NO PRESCRIPTION IN THIS C#SE.5
In its petition, the petitioner *aintains that it did not act in .ad faith when it erroneous1 incuded in its certificate of
sae, and su.seCuent1 consoidated the tites in its na*e over the sevent1&ei+ht ots $6su.0ect ots6% that were e?cuded
fro* the forecosure sae. There was no proof of .ad faith nor coud fraud or *aice .e attri.uted to the petitioner
when it erroneous1 caused the issuance of certificates of tite over the su.0ect ots despite the fact that these were
e?press1 e?cuded fro* the forecosure sae.
The petitioner asserts that the action for reconve1ance instituted .1 the respondent had aread1 prescri.ed after the
apse of ten 1ears fro* Nove*.er )", A,-" when the petitioner consoidated its ownership over the su.0ect ots.
#ccordin+ to the petitioner, an action for reconve1ance .ased on i*pied or constructive trust prescri.es in ten 1ears
fro* the ti*e of its creation or upon the ae+ed frauduent re+istration of the propert1. In this case, when the action
was instituted on 7a1 -, A,,8, *ore than fourteen 1ears had aread1 apsed. Thus, the petitioner contends that the
sa*e was aread1 .arred .1 prescription as we as aches.
The petitioner i/ewise ta/es e?ception to the hodin+ of the tria court and the C# that it $the petitioner% faied to
apprise or return to the Uuuetas, the respondent<s predecessors&in&interest, the sevent1&ei+ht ots e?cuded fro* the
forecosure sae .ecause the petitioner had no such o.i+ation under the pertinent oan and *ort+a+e a+ree*ent.
The petitioner<s ar+u*ents fai to persuade.AawphiA.nbt
#t the outset, it .ears e*phasis that the 0urisdiction of this Court in a petition for review on certiorari under Rue !" of
the Rues of Court, as a*ended, is i*ited to reviewin+ on1 errors of aw. This Court is not a trier of facts. Case aw
has it that the findin+s of the tria court especia1 when affir*ed .1 the C# are .indin+ and concusive upon this
Court. #thou+h there are e?ceptions to the said rue, we find no reason to deviate therefro*. 6 =1 assaiin+ the
findin+s of facts of the tria court as affir*ed .1 the C#, that it acted in .ad faith, the petitioner there.1 raised
Cuestions of facts in its petition.
Nonetheess, even if we indu+ed the petition and deved into the factua issues, we find the petition .arren of *erit.
That the petitioner acted in .ad faith in consoidatin+ ownership and causin+ the issuance of tites in its na*e over the
su.0ect ots, notwithstandin+ that these were e?press1 e?cuded fro* the forecosure sae was the unifor* ruin+ of
the tria court and appeate court. #s decared .1 the C#D
The acts of defendant&appeant 'SIS in conceain+ fro* the Uuuetas 2the respondent<s predecessors&in&interest4 the
e?istence of these ots, in faiin+ to notif1 or apprise the spouses Uuueta a.out the e?cuded ots fro* the ti*e it
consoidated its tites on their forecosed properties in A,-", in faiin+ to infor* the* when it entered into a contract
of sae of the forecosed properties to Qor/stown Deveop*ent Corporation in A,98 as we as when the said sae was
revo/ed .1 then President @erdinand E. 7arcos durin+ the sa*e 1ear de*onstrated a cear effort on its part to defraud
the spouses Uuueta and appropriate for itsef the su.0ect properties. Even if tites over the ots had .een issued in the
na*e of the defendant&appeant, sti it coud not e+a1 cai* ownership and a.soute do*inion over the* .ecause
indefeasi.iit1 of tite under the Torrens s1ste* does not attach to tites secured .1 fraud or *isrepresentation. The
fraud co**itted .1 defendant&appeant in the for* of concea*ent of the e?istence of said ots and faiure to return
the sa*e to the rea owners after their e?cusion fro* the forecosure sae *ade defendant&appeant hoders in .ad
faith. It is we&setted that a hoder in .ad faith of a certificate of tite is not entited to the protection of the aw for the
aw cannot .e used as a shied for fraud.7
The Court a+rees with the findin+s and concusion of the tria court and the C#. The petitioner is not an ordinar1
*ort+a+ee. It is a +overn*ent financia institution and, i/e .an/s, is e?pected to e?ercise +reater care and prudence in
its deain+s, incudin+ those invovin+ re+istered ands.8 The Court<s ruin+ in Rura =an/ of Co*postea v. C#9 is
aproposD
=an/s, indeed, shoud e?ercise *ore care and prudence in deain+ even with re+istered ands, than private individuas,
for their .usiness is one affected with pu.ic interest, /eepin+ in trust *one1 .eon+in+ to their depositors, which the1
shoud +uard a+ainst oss .1 not co**ittin+ an1 act of ne+i+ence which a*ounts to ac/ of +ood faith .1 which the1
woud .e denied the protective *ante of and re+istration statute, #ct 2No.4 !,(, e?tended on1 to purchasers for
vaue and in +ood faith, as we as to *ort+a+ees of the sa*e character and description.10
Due dii+ence reCuired of .an/s e?tend even to persons, or institutions i/e the petitioner, re+uar1 en+a+ed in the
.usiness of endin+ *one1 secured .1 rea estate *ort+a+es.11
In this case, the petitioner e?ecuted an affidavit in consoidatin+ its ownership and causin+ the issuance of tites in its
na*e over the su.0ect ots despite the fact that these were e?press1 e?cuded fro* the forecosure sae. =1 so doin+,
the petitioner acted in +ross and evident .ad faith. It cannot fei+n i+norance of the fact that the su.0ect ots were
e?cuded fro* the sae at pu.ic auction. #t the east, its act constituted +ross ne+i+ence a*ountin+ to .ad faith.
@urther, as found .1 the C#, the petitioner<s acts of conceain+ the e?istence of these ots, its faiure to return the* to
the Uuuetas and even its atte*pt to se the* to a third part1 is proof of the petitioner<s intent to defraud the Uuuetas
and appropriate for itsef the su.0ect ots.
On the issue of prescription, +enera1, an action for reconve1ance of rea propert1 .ased on fraud prescri.es in four
1ears fro* the discover1 of fraud> such discover1 is dee*ed to have ta/en pace upon the issuance of the certificate of
tite over the propert1. Re+istration of rea propert1 is a constructive notice to a persons and, thus, the four&1ear
period sha .e counted therefro*.12 On the other hand, #rtice A!"( of the Civi Code providesD
#rt. A!"(. If propert1 is acCuired throu+h *ista/e or fraud, the person o.tainin+ it is, .1 force of aw, considered a
trustee of an i*pied trust for the .enefit of the person fro* who* the propert1 co*es.
#n action for reconve1ance .ased on i*pied or constructive trust prescri.es in ten 1ears fro* the ae+ed frauduent
re+istration or date of issuance of the certificate of tite over the propert1.13
The petitioner<s defense of prescription is untena.e. #s hed .1 the C#, the +enera rue that the discover1 of fraud is
dee*ed to have ta/en pace upon the re+istration of rea propert1 .ecause it is 6considered a constructive notice to a
persons6 does not app1 in this case. The C# correct1 cited the cases of #die v. Court of #ppeas14 and Sa,onte v.
Court of Appeals,15 where this Court rec/oned the prescriptive period for the fiin+ of the action for reconve1ance
.ased on i*pied trust fro* the actua discover1 of fraud.
In ruin+ that the action had not 1et prescri.ed despite the fact that *ore than ten 1ears had apsed .etween the date of
re+istration and the institution of the action for reconve1ance, the Court in #die ratiocinatedD
It is true that re+istration under the Torrens s1ste* is constructive notice of tite, .ut it has i/ewise .een our hodin+
that the Torrens tite does not furnish a shied for fraud. It is therefore no ar+u*ent to sa1 that the act of re+istration is
eCuivaent to notice of repudiation, assu*in+ there was one, notwithstandin+ the on+&standin+ rue that re+istration
operates as a universa notice of tite.
@or the sa*e reason, we cannot dis*iss private respondents< cai*s co**enced in A,-! over the estate re+istered in
A,"". Ehie actions to enforce a constructive trust prescri.es in ten 1ears, rec/oned fro* the date of the re+istration
of the propert1, we, as we said, are not prepared to count the period fro* such a date in this case. Ee note the
petitioner<s su. rosa efforts to +et hod of the propert1 e?cusive1 for hi*sef .e+innin+ with his frauduent
*isrepresentation in his uniatera affidavit of e?tra0udicia sette*ent that he is 6the on1 heir and chid of his *other
@ei:a with the conseCuence that he was a.e to secure tite in his na*e 2aone4.6 #ccordin+1, we hod that the ri+ht of
the private respondents co**enced fro* the ti*e the1 actua1 discovered the petitioner<s act of defraudation.
#ccordin+ to the respondent Court of #ppeas, the1 6ca*e to /now 2of it4 apparent1 on1 durin+ the pro+ress of the
iti+ation.6 Hence, prescription is not a .ar.16
The a.ove ruin+ was reiterated in the *ore recent case of Sa*onte. In this case, as esta.ished .1 the C#, the
respondent actua1 discovered the frauduent act of the petitioner on1 in A,9,D
... 2T4he prescriptive period of the action is to .e rec/oned fro* the ti*e paintiff&appeee $then Eduardo 7.
Santia+o% had actua1 discovered the frauduent act of defendant&appeant which was, as .orne out .1 the records,
on1 in A,9,. Paintiff&appeee Eduardo 7. Santia+o cate+orica1 testified $TSN of ;u1 AA, A,,", pp. A!&A"% that he
ca*e to /now that there were ,A e?cuded ots in #ntonio Via+e which were forecosed .1 the 'SIS and incuded in
its consoidation of ownership in A,-" when, in A,9,, he and #ntonio Vic Uuueta discussed it and he was +iven .1
Uuueta a specia power of attorne1 to represent hi* to recover the su.0ect properties fro* 'SIS. The co*paint for
reconve1ance was fied .are1 a 1ear fro* the discover1 of the fraud.17
@oowin+ the Court<s pronounce*ents in #die and Sa*onte, the institution of the action for reconve1ance in the
court a Cuo in A,,8 was thus we within the prescriptive period. Havin+ acted in .ad faith in securin+ tites over the
su.0ect ots, the petitioner is a hoder in .ad faith of certificates of tite over the su.0ect ots. The petitioner is not
entited to the protection of the aw for the aw cannot .e used as a shied for frauds.18
Contrar1 to its cai*, the petitioner unar+ua.1 had the e+a dut1 to return the su.0ect ots to the Uuuetas. The
petitioner<s atte*pts to 0ustif1 its o*ission .1 insistin+ that it had no such dut1 under the *ort+a+e contract is
o.vious1 cutchin+ at straw. #rtice )) of the Civi Code e?picit1 provides that 6ever1 person who, throu+h an act of
perfor*ance .1 another, or an1 other *eans, acCuires or co*es into possession of so*ethin+ at the e?pense of the
atter without 0ust or e+a +round, sha return the sa*e to hi*.6
EHERE@ORE, the petition is DENIED for ac/ of *erit.AacdFphiA.net The assaied Decision dated @e.ruar1 )), )88) and
Resoution dated Septe*.er ", )88) of the Court of #ppeas in C#&'.R. CV No. ()B8, are #@@IR7ED IN TOTO.
Costs a+ainst the petitioner.
SO ORDERED.
=eosio, $Chair*an%, Ruisu*.in+, #ustria&7artine:, and Tin+a, ;;., concur.
Foo/no/31
1 Penned .1 #ssociate ;ustice Ser+io 3. PestaXo with #ssociate ;ustices Conchita Carpio 7oraes and 7artin
S. Vianueva, ;r. concurrin+.
2 C# Decision, pp. B&"> Roo, pp. B-&B,.
3 Roo, p. B(.
4 Id. at !!.
5 Id. at )A&)).
6 "ari!uatro v. Court of Appeals, B)" SCR# AB- $)888%.
7 Id. at !). $Citations o*itted%.
8 Cru= v. "an!o, Ainan!e Corporation, B-, SCR# !,8 $)88)%.
9 )-A SC4A -( $A,,-%.
10 Id. at 99.
11 A$riano v. Pangilinan, B-B SCR# "!! $)88)%.
12 P#ilippine 0!ono,i! Jone Aut#orit1 v. Aernan$e=, B"9 SCR# !9, $)88A%.
13 I.id.
14 A"- SCR# !"" $A,99%.
15 B(A SCR# A-B $)88A%.
16 Supra.
17 Roo, pp. !A&!).
18 See note (.
A!. G.R. No. 1;11*9 S35/3423r 7, 200*
GEORGE =ATON, petitioner,
vs.
MANUEL PALANCA "R., LOREN%O AGUSTIN, "ESUS GAPILANGO an "UAN
FRESNILLO, respondents.
D E C I S I O N
PANGANI+AN, J.:
Ehere prescription, ac/ of 0urisdiction or faiure to state a cause of action cear1 appear fro* the co*paint fied
with the tria court, the action *a1 .e dis*issed *otu proprio .1 the Court of #ppeas, even if the case has .een
eevated for review on different +rounds. Veri1, the dis*issa of such cases appropriate1 ends useess iti+ations.
Th3 Ca13
=efore us is a Petition for ReviewA under Rue !" of the Rues of Court, assaiin+ the Dece*.er 9, )888 Decision)and
the Nove*.er )8, )88A ResoutionB of the Court of #ppeas in C#&'R SP No. "-!,(. The assaied Decision disposed
as foowsD
6#ssu*in+ that petitioner is correct in sa1in+ that he has the e?cusive ri+ht in app1in+ for the patent over
the and in Cuestion, it appears that his action is aread1 .arred .1 aches .ecause he sept on his ae+ed ri+ht
for a*ost )B 1ears fro* the ti*e the ori+ina certificate of tite has .een issued to respondent 7anue
Paanca, ;r., or after B" 1ears fro* the ti*e the and was certified as a+ricutura and. In addition, the proper
part1 in the annu*ent of patents or tites acCuired throu+h fraud is the State> thus, the petitioner<s action is
dee*ed *ispaced as he rea1 does not have an1 ri+ht to assert or protect. Ehat he had durin+ the ti*e he
reCuested for the re&cassification of the and was the privie+e of app1in+ for the patent over the sa*e upon
the and<s conversion fro* forest to a+ricutura.
6EHERE@ORE, the petition is here.1 DIS7ISSED. No pronounce*ent as to cost.6!
The assaied Resoution, on the other hand, denied the 7otion for Reconsideration fied .1 petitioner. It affir*ed the
RTC<s dis*issa of his Co*paint in Civi Case No. B)BA, not on the +rounds reied upon .1 the tria court, .ut
.ecause of prescription and ac/ of 0urisdiction.
Th3 An/3c33n/ Fac/1
The C# narrates the antecedent facts as foowsD
6On #u+ust ), A,(B, herein 2P4etitioner 2'eor+e Naton4 fied a reCuest with the District Office of the =ureau
of @orestr1 in Puerto Princesa, Paawan, for the re&cassification of a piece of rea propert1 /nown as
So*.rero Isand, ocated in Ta+pait, #.oran, Paawan, which consists of appro?i*ate1 A9 hectares. Said
propert1 is within Ti*.erand =oc/ of 3C Pro0ect No. A8&C of #.oran, Paawan, per =@ 7ap 3C No. A"9).
6Thereafter, the =ureau of @orestr1 District Office, Puerto Princesa, Paawan, ordered the inspection,
investi+ation and surve1 of the and su.0ect of the petitioner<s reCuest for eventua conversion or re&
cassification fro* forest to a+ricutura and, and thereafter for 'eor+e Naton to app1 for a ho*estead
patent.
6'a.rie 7andocdoc $now retired 3and Cassification Investi+ator% undertoo/ the investi+ation, inspection
and surve1 of the area in the presence of the petitioner, his .rother Rodofo Naton $deceased% and his cousin,
2R4espondent 7anue Paanca, ;r. Durin+ said surve1, there were no actua occupants on the isand .ut there
were so*e coconut trees cai*ed to have .een panted .1 petitioner and 2R4espondent 7anue Paanca, ;r.
$ae+ed overseer of petitioner% who went to the isand fro* ti*e to ti*e to underta/e deveop*ent wor/, i/e
pantin+ of additiona coconut trees.
6The appication for conversion of the whoe So*.rero Isand was favora.1 endorsed .1 the @orestr1
District Office of Puerto Princesa to its *ain office in 7ania for appropriate action. The na*es of @eicisi*o
Corpu:, Ce*ente 7a+da1ao and ;esus 'apian+o and ;uan @resnio were incuded in the endorse*ent as
co&appicants of the petitioner.
6In a etter dated Septe*.er )B, A,(", then #sst. Director of @orestr1 R.;.3. 5te+ infor*ed the Director of
3ands, 7ania, that since the su.0ect and was no on+er needed for forest purposes, the sa*e is therefore
certified and reeased as a+ricutura and for disposition under the Pu.ic 3and #ct.
6Petitioner contends that the whoe area /nown as So*.rero Isand had .een cassified fro* forest and to
a+ricutura and and certified avaia.e for disposition upon his reCuest and at his instance. However, 7r.
3ucio Vaera, then 24and investi+ator of the District 3and Office, Puerto Princesa, Paawan, favora.1
endorsed the reCuest of 2R4espondents 7anue Paanca ;r. and 3oren:o #+ustin, for authorit1 to surve1 on
Nove*.er A", A,(". On Nove*.er )), a second endorse*ent was issued .1 Paawan District Officer
Dio*edes De 'u:*an with specific instruction to surve1 vacant portions of So*.rero Isand for the
respondents consistin+ of five $"% hectares each. On Dece*.er A8, A,(", Surve1 #uthorit1 No. R III&B!)&("
was issued authori:in+ Deput1 Pu.ic 3and Surve1or Eduardo Savador to surve1 ten $A8% hectares of
So*.rero Isand for the respondents. On Dece*.er )B, A,,8, 2R4espondent 3oren:o #+ustin fied a
ho*estead patent appication for a portion of the su.0ect isand consistin+ of an area of !.B hectares.
6Records show that on Nove*.er 9, A,,(, 2R4espondent ;uan @resnio fied a ho*estead patent appication
for a portion of the isand co*prisin+ 9." hectares. Records aso revea that 2R4espondent ;esus 'apian+o
fied a ho*estead appication on ;une 9, A,-). Respondent 7anue Paanca, ;r. was issued Ho*estead Patent
No. A!",)- and OCT No. '&-89, on 7arch B, A,--" with an area of (.9! hectares of So*.rero Isand.
6Petitioner assais the vaidit1 of the ho*estead patents and ori+ina certificates of tite coverin+ certain
portions of So*.rero Isand issued in favor of respondents on the +round that the sa*e were o.tained throu+h
fraud. Petitioner pra1s for the reconve1ance of the whoe isand in his favor.
6On the other hand, 2R4espondent 7anue Paanca, ;r. cai*s that he hi*sef reCuested for the recassification
of the isand in dispute and that on or a.out the ti*e of such reCuest, 2R4espondents @resnio, Paanca and
'apian+o aread1 occupied their respective areas and introduced nu*erous i*prove*ents. In addition,
Paanca said that petitioner never fied an1 ho*estead appication for the isand. Respondents den1 that
'a.rie 7andocdoc undertoo/ the inspection and surve1 of the isand.
6#ccordin+ to 7andocdoc, the isand was uninha.ited .ut the respondents insist that the1 aread1 had their
respective occupanc1 and i*prove*ents on the isand. Paanca denies that he is a *ere overseer of the
petitioner .ecause he said he was actin+ for hi*sef in deveopin+ his own area and not as an1.od1<s
careta/er.
6Respondents aver that the1 are a .ona fide and awfu possessors of their respective portions and have
decared said portions for ta?ation purposes and that the1 have .een faithfu1 pa1in+ ta?es thereon for twent1
1ears.
6Respondents contend that the petitioner has no e+a capacit1 to sue insofar as the isand is concerned
.ecause an action for reconve1ance can on1 .e .rou+ht .1 the owner and not a *ere ho*estead appicant
and that petitioner is +uit1 of estoppe .1 aches for his faiure to assert his ri+ht over the and for an
unreasona.e and une?pained period of ti*e.
6In the instant case, petitioner see/s to nuif1 the ho*estead patents and ori+ina certificates of tite issued in
favor of the respondents coverin+ certain portions of the So*.rero Isand as we as the reconve1ance of the
whoe isand in his favor. The petitioner cai*s that he has the e?cusive ri+ht to fie an appication for
ho*estead patent over the whoe isand since it was he who reCuested for its conversion fro* forest and to
a+ricutura and.6(
Respondents fied their #nswer with Specia andFor #ffir*ative Defenses and Countercai* in due ti*e. On ;une B8,
A,,,, the1 aso fied a 7otion to Dis*iss on the +round of the ae+ed defiance .1 petitioner of the tria court<s Order
to a*end his Co*paint so he coud thus effect a su.stitution .1 the e+a heirs of the deceased, Respondent
'apian+o. The 7otion to Dis*iss was +ranted .1 the RTC in its Order dated ;u1 ),, A,,,.
Petitioner<s 7otion for Reconsideration of the ;u1 ),, A,,, Order was denied .1 the tria court in its Resoution
dated Dece*.er A-, A,,,, for .ein+ a third and prohi.ited *otion. In his Petition for Certiorari .efore the C#,
petitioner char+ed the tria court with +rave a.use of discretion on the +round that the denied 7otion was his first and
on1 7otion for Reconsideration of the aforesaid Order.
R(.0n7 o- /h3 Co(r/ o- A553a.1
Instead of i*itin+ itsef to the ae+ation of +rave a.use of discretion, the C# rued on the *erits. It hed that whie
petitioner had caused the recassification of So*.rero Isand fro* forest to a+ricutura and, he never appied for a
ho*estead patent under the Pu.ic 3and #ct. Hence, he never acCuired tite to that and.
The C# added that the annu*ent and canceation of a ho*estead patent and the reversion of the propert1 to the State
were *atters .etween the atter and the ho*estead +rantee. 5ness and unti the +overn*ent ta/es steps to annu the
+rant, the ho*esteader<s ri+ht thereto stands.
@ina1, +rantin+ ar+uendo that petitioner had the e?cusive ri+ht to app1 for a patent to the and in Cuestion, he was
aread1 .arred .1 aches for havin+ sept on his ri+ht for a*ost )B 1ears fro* the ti*e Respondent Paanca<s tite had
.een issued.
In the #ssaied Resoution, the C# ac/nowed+ed that it had erred when it rued on the *erits of the case. It a+reed
with petitioner that the tria court had acted without 0urisdiction in perfunctori1 dis*issin+ his Septe*.er A8, A,,,
7otion for Reconsideration, on the erroneous +round that it was a third and prohi.ited *otion when it was actua1
on1 his first *otion.
Nonetheess, the Co*paint was dis*issed *otu proprio .1 the chaen+ed Resoution of the C# Specia Division of
five *e*.ers S with two 0ustices dissentin+ S pursuant to its 6residua prero+ative6 under Section A of Rue , of the
Rues of Court.
@ro* the ae+ations of the Co*paint, the appeate court opined that petitioner cear1 had no standin+ to see/
reconve1ance of the disputed and, .ecause he neither hed tite to it nor even appied for a ho*estead patent. It
reiterated that on1 the State coud sue for canceation of the tite issued upon a ho*estead patent, and for reversion
of the and to the pu.ic do*ain.
@ina1, it rued that prescription had aread1 .arred the action for reconve1ance. @irst, petitioner<s action was .rou+ht
)! 1ears after the issuance of Paanca<s ho*estead patent. 5nder the Pu.ic 3and #ct, such action shoud have .een
ta/en within ten 1ears fro* the issuance of the ho*estead certificate of tite. Second, it appears fro* the su.*ission
$#nne? 6@6 of the Co*paint% of petitioner hi*sef that Respondents @resnio and Paanca had .een occup1in+ si?
hectares of the isand since A,(", or BB 1ears .efore he too/ e+a steps to assert his ri+ht to the propert1. His action
was fied .e1ond the B8&1ear prescriptive period under #rtices AA!A and AAB- of the Civi Code.
Hence, this Petition.-
I11(31
In his 7e*orandu*, petitioner raises the foowin+ issuesD
6A. Is the Court of #ppeas correct in resovin+ the Petition for Certiorari .ased on an issue not raised $the
*erits of the case% in the PetitionI
6). Is the Court of #ppeas correct in invo/in+ its ae+ed Hresidua prero+ative< under Section A, Rue , of the
A,,- Rues of Civi Procedure in resovin+ the Petition on an issue not raised in the PetitionI69
Th3 Co(r/O1 R(.0n7
The Petition has no *erit.
F0r1/ I11(3@
Pro&riety of (u!ing on the )erits
This is not the first ti*e that petitioner has ta/en issue with the propriet1 of the C#<s ruin+ on the *erits. He raised it
with the appeate court when he *oved for reconsideration of its Dece*.er 9, )888 Decision. The C# even corrected
itsef in its Nove*.er )8, )88A Resoution, as foowsD
65pon another review of the case, the Court concedes that it *a1 indeed have ost its wa1 and .een wa1aid
.1 the variet1, co*pe?it1 and see*in+ i*portance of the interests and issues invoved in the case .eow, the
apparent reuctance of the 0ud+es, five in a, to hear the case, and the vou*e of the confictin+, often
confusin+, su.*issions .earin+ on incidenta *atters. Ee stand corrected.6,
That e?panation shoud have .een enou+h to sette the issue. The C#<s Resoution on this point has rendered
petitioner<s issue *oot. Hence, there is no need to discuss it further. Suffice it to sa1 that the appeate court indeed
acted utra 0urisdictio in ruin+ on the *erits of the case when the on1 issue that coud have .een, and was in fact,
raised was the ae+ed +rave a.use of discretion co**itted .1 the tria court in den1in+ petitioner<s 7otion for
Reconsideration. Setted is the doctrine that the soe office of a writ of certiorari is the correction of errors of
0urisdiction. Such writ does not incude a review of the evidence,A8 *ore so when no deter*ination of the *erits has
1et .een *ade .1 the tria court, as in this case.
S3con I11(3@
%ismissa! for Prescri&tion and Lac2 of Jurisdiction
Petitioner ne?t su.*its that the C# erroneous1 invo/ed its 6residua prero+atives6 under Section A of Rue , of the
Rues of Court when it *otu proprio dis*issed the Petition for ac/ of 0urisdiction and prescription. #ccordin+ to hi*,
residua prero+ative refers to the power that the tria court, in the e?ercise of its ori+ina 0urisdiction, *a1 sti vaid1
e?ercise even after perfection of an appea. It foows that such powers are not possessed .1 an appeate court.
Petitioner has confused what the C# adverted to as its 6residua prero+atives6 under Section A of Rue , of the Rues
of Court with the 6residua 0urisdiction6 of tria courts over cases appeaed to the C#.
5nder Section A of Rue , of the Rues of Court, defenses and o.0ections not peaded either in a *otion to dis*iss or
in the answer are dee*ed waived, e?cept when $A% ac/ of 0urisdiction over the su.0ect *atter, $)% itis pendentia, $B%
res 0udicata and $!% prescription are evident fro* the peadin+s or the evidence on record. In the four e?cepted
instances, the court sha *otu proprio dis*iss the cai* or action. In 'u*a.on v. 3arinAA we e?pained thusD
6? ? ? 2T4he *otu proprio dis*issa of a case was traditiona1 i*ited to instances when the court cear1 had
no 0urisdiction over the su.0ect *atter and when the paintiff did not appear durin+ tria, faied to prosecute
his action for an unreasona.e en+th of ti*e or ne+ected to co*p1 with the rues or with an1 order of the
court. Outside of these instances, an1 *otu proprio dis*issa woud a*ount to a vioation of the ri+ht of the
paintiff to .e heard. E?cept for Cuaif1in+ and e?pandin+ Section ), Rue ,, and Section B, Rue A-, of the
Revised Rues of Court, the a*endator1 A,,- Rues of Civi Procedure .rou+ht a.out no radica chan+e.
5nder the new rues, a court *a1 *otu proprio dis*iss a cai* when it appears fro* the peadin+s or
evidence on record that it has no 0urisdiction over the su.0ect *atter> when there is another cause of action
pendin+ .etween the sa*e parties for the sa*e cause, or where the action is .arred .1 a prior 0ud+*ent or .1
statute of i*itations. ? ? ?.6A) $Itaics suppied%
On the other hand, 6residua 0urisdiction6 is e*.odied in Section , of Rue !A of the Rues of Court, as foowsD
6SEC. ,. Perfection of appea> effect thereof. S # part1<s appea .1 notice of appea is dee*ed perfected as to
hi* upon the fiin+ of the notice of appea in due ti*e.
6# part1<s appea .1 record on appea is dee*ed perfected as to hi* with respect to the su.0ect *atter thereof
upon the approva of the record on appea fied in due ti*e.
6In appeas .1 notice of appea, the court oses 0urisdiction over the case upon the perfection of the appeas
fied in due ti*e and the e?piration of the ti*e to appea of the other parties.
6In appeas .1 record on appea, the court oses 0urisdiction on1 over the su.0ect *atter thereof upon the
approva of the records on appea fied in due ti*e and the e?piration of the ti*e to appea of the other
parties.
6In either case, prior to the trans*itta of the ori+ina record or the record on appea, the court *a1 issue
orders for the protection and preservation of the ri+hts of the parties which do not invove an1 *atter iti+ated
.1 the appea, approve co*pro*ises, per*it appeas of indi+ent iti+ants, order e?ecution pendin+ appea in
accordance with Section ) of Rue B,, and aow withdrawa of the appea.6 $Itaics suppied%
The 6residua 0urisdiction6 of tria courts is avaia.e at a sta+e in which the court is nor*a1 dee*ed to have ost
0urisdiction over the case or the su.0ect *atter invoved in the appea. This sta+e is reached upon the perfection of the
appeas .1 the parties or upon the approva of the records on appea, .ut prior to the trans*itta of the ori+ina records
or the records on appea.AB In either instance, the tria court sti retains its so&caed residua 0urisdiction to issue
protective orders, approve co*pro*ises, per*it appeas of indi+ent iti+ants, order e?ecution pendin+ appea, and
aow the withdrawa of the appea.
The C#<s *otu proprio dis*issa of petitioner<s Co*paint coud not have .een .ased, therefore, on residua
0urisdiction under Rue !A. 5ndenia.1, such order of dis*issa was not one for the protection and preservation of the
ri+hts of the parties, pendin+ the disposition of the case on appea. Ehat the C# referred to as residua prero+atives
were the +enera residua powers of the courts to dis*iss an action *otu proprio upon the +rounds *entioned in
Section A of Rue , of the Rues of Court and under authorit1 of Section ) of Rue AA! of the sa*e rues.
To .e sure, the C# had the e?cepted instances in *ind when it dis*issed the Co*paint *otu proprio 6on *ore
funda*enta +rounds direct1 .earin+ on the ower court<s ac/ of 0urisdiction6A" and for prescription of the action.
Indeed, when a court has no 0urisdiction over the su.0ect *atter, the on1 power it has is to dis*iss the action.A(
;urisdiction over the su.0ect *atter is conferred .1 aw and is deter*ined .1 the ae+ations in the co*paint and the
character of the reief sou+ht.A- In his Co*paint for 6Nuification of #ppications for Ho*estead and Ori+ina
Certificate of Tite No. '&-89, and for Reconve1ance of Tite,6A9 petitioner averredD
6). That on Nove*.er A8, A,(", without the /nowed+e of 2petitioner, Respondent4 7anue Paanca ;r.,
2petitioner<s4 cousin, in connivance with his co&2respondent4, 3oren:o #+ustin, ? ? ? frauduent1 and in .ad
faithD
).A. ? ? ? *ade the reCuest for authorit1 to surve1 as a pre&reCuisite to the fiin+ of an appication for
ho*estead patent in his na*e and that of his Co&2Respondent4 #+ustin, 2despite .ein+4 fu1 aware
that 2Petitioner4 N#TON had previous1 appied or reCuested for re&cassification and certification of
the sa*e and fro* forest and to a+ricutura and which reCuest was favora.1 acted upon and
approved as *entioned earier> a cear case of intrinsic fraud and *isrepresentation>
? ? ? ? ? ? ? ? ?
).B. In statin+ in his appication for ho*estead patent that he was app1in+ for the V#C#NT
PORTION of So*.rero Isand where there was none, the sa*e constituted another cear case of fraud
and *isrepresentation>
6B. That the issuance of Ho*estead Patent No. A!",)- and OCT No. '&-89, in the na*e of 2Respondent4
7anue Paanca ;r. and the fiin+ of Ho*estead Patent #ppications in the na*es of 2respondents4, 3oren:o
#+ustin, ;esus 'apian+o and ;uan @resnio2,4 havin+ .een done frauduent1 and in .ad faith, are ipso facto
nu and void and of no effect whatsoever.6A,
? ? ? ? ? ? ? ? ?
6? ? ?. =1 a wron+fu act or a wifu o*ission and intendin+ the effects with natura necessit1 arise /nowin+
fro* such act or o*ission, 2Respondent Paanca4 on account of his .ood reation, first de+ree cousins, trust,
interdependence and inti*ac1 is +uit1 of intrinsic fraud 2sic4. ? ? ?.6)8
Thereupon, petitioner pra1ed, a*on+ others, for a 0ud+*ent $A% nuif1in+ the ho*estead patent appications of
Respondents #+ustin, @resnio and 'apian+o as we as Ho*estead Patent No. A!",)- and OCT No. '&-89, in the
na*e of Respondent Paanca> and $)% orderin+ the director of the 3and 7ana+e*ent =ureau to reconve1 the
So*.rero Isand to petitioner.)A
The Cuestion is, did the Co*paint sufficient1 ae+e an action for decaration of nuit1 of the free patent and
certificate of tite or, aternative1, for reconve1anceI Or did it pead *ere1 for reversionI
The Co*paint did not sufficient1 *a/e a case for an1 of such actions, over which the tria court coud have
e?ercised 0urisdiction.
In an action for nuification of tite or decaration of its nuit1, the co*paint *ust contain the foowin+ ae+ationsD
A% that the contested and was private1 owned .1 the paintiff prior to the issuance of the assaied certificate of tite to
the defendant> and )% that the defendant perpetuated a fraud or co**itted a *ista/e in o.tainin+ a docu*ent of tite
over the parce of and cai*ed .1 the paintiff.)) In these cases, the nuit1 arises not fro* fraud or deceit, .ut fro*
the fact that the director of the 3and 7ana+e*ent =ureau had no 0urisdiction to .estow tite> hence, the issued patent
or certificate of tite was void a. initio.)B
In an aternative action for reconve1ance, the certificate of tite is aso respected as incontroverti.e, .ut the transfer of
the propert1 or tite thereto is sou+ht to .e nuified on the +round that it was wron+fu1 or erroneous1 re+istered in
the defendant<s na*e.)! #s with an annu*ent of tite, a co*paint *ust ae+e two facts that, if ad*itted, woud
entite the paintiff to recover tite to the disputed andD $A% that the paintiff was the owner of the and, and $)% that the
defendant ie+a1 dispossessed the paintiff of the propert1.)" Therefore, the defendant who acCuired the propert1
throu+h *ista/e or fraud is .ound to hod and reconve1 to the paintiff the propert1 or the tite thereto.)(
In the present case, nowhere in the Co*paint did petitioner ae+e that he had previous1 hed tite to the and in
Cuestion. On the contrar1, he ac/nowed+ed that the disputed isand was pu.ic and, )- that it had never .een private1
tited in his na*e, and that he had not appied for a ho*estead under the provisions of the Pu.ic 3and #ct. )9 This
Court has hed that a co*paint .1 a private part1 who ae+es that a ho*estead patent was o.tained .1 frauduent
*eans, and who conseCuent1 pra1s for its annu*ent, does not state a cause of action> hence, such co*paint *ust .e
dis*issed.),
Neither can petitioner<s case .e one for reversion. Section A8A of the Pu.ic 3and #ct cate+orica1 decares that on1
the soicitor +enera or the officer in his stead *a1 institute such an action.B8 # private person *a1 not .rin+ an action
for reversion or an1 other action that woud have the effect of cancein+ a free patent and its derivative tite, with the
resut that the and there.1 covered woud a+ain for* part of the pu.ic do*ain.BA
Thus, when the paintiff ad*its in the co*paint that the disputed and wi revert to the pu.ic do*ain even if the tite
is canceed or a*ended, the action is for reversion> and the proper part1 who *a1 .rin+ action is the +overn*ent, to
which the propert1 wi revert.B) # *ere ho*estead appicant, not .ein+ the rea part1 in interest, has no cause of
action in a suit for reconve1ance.BB #s it is, vested ri+hts over the and appied for under a ho*estead *a1 .e vaid1
cai*ed on1 .1 the appicant, after approva .1 the director of the 3and 7ana+e*ent =ureau of the for*er<s fina
proof of ho*estead patent.B!
ConseCuent1, the dis*issa of the Co*paint is proper not on1 .ecause of ac/ of 0urisdiction, .ut aso .ecause of the
utter a.sence of a cause of action,B" a defense raised .1 respondents in their #nswer.B( Section ) of Rue B of the
Rues of CourtB- ordains that ever1 action *ust .e prosecuted or defended in the na*e of the rea part1 in interest,
who stands to .e .enefited or in0ured .1 the 0ud+*ent in the suit. Indeed, one who has no ri+ht or interest to protect
has no cause of action .1 which to invo/e, as a part1&paintiff, the 0urisdiction of the court.B9
@ina1, assu*in+ that petitioner is the proper part1 to .rin+ the action for annu*ent of tite or its reconve1ance, the
case shoud sti .e dis*issed for .ein+ ti*e&.arred.B, It is not disputed that a ho*estead patent and an Ori+ina
Certificate of Tite was issued to Paanca on @e.ruar1 )A, A,--,!8 whie the Co*paint was fied on1 on Octo.er (,
A,,9. Cear1, the suit was .rou+ht wa1 past ten 1ears fro* the date of the issuance of the Certificate, the prescriptive
period for reconve1ance of frauduent1 re+istered rea propert1.!A
It *ust i/ewise .e stressed that Paanca<s tite && which attained the status of indefeasi.iit1 one 1ear fro* the
issuance of the patent and the Certificate of Tite in @e.ruar1 A,-- && is no on+er open to review on the +round of
actua fraud. Q.ane: v. Inter*ediate #ppeate Court!) rued that a certificate of tite, issued under an ad*inistrative
proceedin+ pursuant to a ho*estead patent, is as indefeasi.e as one issued under a 0udicia re+istration proceedin+
one 1ear fro* its issuance> provided, however, that the and covered .1 it is disposa.e pu.ic and, as in this case.
In #dovino v. #unan,!B the Court has hed that when the paintiff<s own co*paint shows cear1 that the action has
prescri.ed, such action *a1 .e dis*issed even if the defense of prescription has not .een invo/ed .1 the defendant. In
'icano v. 'e+ato,!! we aso e?pained thusD
6? ? ? 2T4ria courts have authorit1 and discretion to dis*iss an action on the +round of prescription when the
partiesM peadin+s or other facts on record show it to .e indeed ti*e&.arred> $@rancisco v. Ro.es, @e.. A",
A,"!> Sison v. 7cRuaid, "8 O.'. ,-> =a*.ao v. 3ednic/1, ;an. )9, A,(A> Cordova v. Cordova, ;an. A!, A,"9>
Convets, Inc. v. NDC, @e.. )9, A,"9> B) SCR# "),> Sinaon v. Soron+an, AB( SCR# !89%> and it *a1 do so
on the .asis of a *otion to dis*iss $Sec. A,f, Rue A(, Rues of Court%, or an answer which sets up such
+round as an affir*ative defense $Sec. ", Rue A(%, or even if the +round is ae+ed after 0ud+*ent on the
*erits, as in a *otion for reconsideration $@errer v. Ericta, 9! SCR# -8"%> or even if the defense has not .een
asserted at a, as where no state*ent thereof is found in the peadin+s $'arcia v. 7athis, A88 SCR# )"8>
PN= v. Pacific Co**ission House, )- SCR# -((> Chua 3a*co v. Dioso, et a., ,- Phi. 9)A%> or where a
defendant has .een decared in defaut $PN= v. Pere:, A( SCR# )-8%. Ehat is essentia on1, to repeat, is that
the facts de*onstratin+ the apse of the prescriptive period .e otherwise sufficient1 and satisfactori1
apparent on the record> either in the aver*ents of the paintiffMs co*paint, or otherwise esta.ished .1 the
evidence.6!" $Itaics suppied%
Cear1 then, the C# did not err in dis*issin+ the present case. #fter a, if and when the1 are a.e to do so, courts
*ust endeavor to sette entire controversies .efore the* to prevent future iti+ations.!(
:!EREFORE, the Petition is here.1 DENIED, and the assaied Resoution AFFIRMED. The dis*issa of the
Co*paint in Civi Case No. B)BA is SUSTAINED on the +rounds of ac/ of 0urisdiction, faiure to state a cause of
action and prescription. Costs a+ainst petitioner.
SO ORDERED.
&andoval-Gutierre" Corona and Carpio !oralesK JJ. concur.
Foo/no/31
L On officia eave.
A Roo, pp. 9&A9.
) Id., pp. A,&)(. Twefth Division. Penned .1 ;ustice Eie:er R. de 3os Santos and concurred in .1 ;ustices
Eu+enio S. 3a.itoria $Division chair*an% and Eo1 R. =eo ;r. $*e*.er%.
B Roo, pp. )-&BA. Specia @or*er Twefth Division. Penned .1 ;ustice de 3os Santos, and concurred in .1
;ustices Re*edios Saa:ar&@ernando and Re.ecca de 'uia&Savador. ;ustices 3a.itoria and =eo dissented.
! C# Decision, p. -> roo, p. )"
" The date on the Certificate of Tite is @e.ruar1 )A, A,--. See C# roo, p. )9.
( C# Decision, pp. A&"> roo, pp. A,&)B.
- The Petition was dee*ed su.*itted for decision on 7arch A), )88B, upon the Court<s receipt of the
7e*orandu* of Respondents Paanca, 'apian+o and @resnio si+ned .1 #tt1. Uoio C. Cru:at. Respondent
#+ustin<s B&pa+e 7e*orandu*, received on @e.ruar1 A8, )88), was si+ned .1 #tt1. Roand E. Pa1.
Petitioner<s 7e*orandu*, si+ned .1 #tt1. 7anue #.ro+ar III, was received on @e.ruar1 A!, )88B.
9 Petitioner<s 7e*orandu*, p. ,> roo, p. A(8.
, C# Resoution, p. )> roo, p. )9.
A8 Oro v. Dia:, !AB Phi. !A(, !)-, ;u1 AA, )88A> Ne+ros Orienta Eectric Cooperative A v. Secretar1 of
3a.or and E*po1*ent, B"- SCR# ((9, (-B, 7a1 ,, )88A> Spouses #*peoCuio Sr. v. C#, B9, Phi. AB, A9&
A,, ;une A", )888.
AA !)) Phi. ))), )B8, Nove*.er )-, )88A.
A) I.id., per Vitu+, ;.
AB Uacate v. Co**ission on Eections, B"B SCR# !!A, !!9, 7arch A, )88A. See aso Re+aado, Re*edia
3aw Co*pendiu*, Vo. I $seventh rev. ed.%, pp. "8,&"A8.
A! The said section provides that 62t4hese rues sha app1 in a courts, e?cept as otherwise provided .1 the
Supre*e Court.6
A" C# Resoution, p. )> roo, p. )9.
A( Ua*ora v. C#, A9B SCR# )-,, )9", 7arch A,, A,,8.
A- #e*ar<s $Si.a W Sons%, Inc. v. C#, B"8 SCR# BBB, BB,, ;anuar1 )(, )88A> 'ochan v. Qoun+, B"! SCR#
)8-, )AA W )A(, 7arch A), )88A> Saura v. Saura ;r., BAB SCR# !(", !-), Septe*.er A, A,,,.
A9 This is the case caption.
A, Co*paint, p. "> roo, p. B,. Citations o*itted.
)8 Id., pp. ! W B9.
)A Id., pp. 9 W !).
)) Heirs of Nionisaa v. Heirs of Dacut, !)9 Phi. )!,, )(8, @e.ruar1 )-, )88).
)B I.id.
)! Id. p. )().
)" I.id.
)( Id., p. )(B.
)- Co*paint, par. -, p. B> roo, p. B-.
)9 On pa+e ! of his Co*paint, petitioner averred that he 6coud not have fied an appication for ho*estead
.ecause 2Respondent4 7anue Paanca ;r., as an overseer of So*.rero Isand for 2petitioner4 did not advise
2hi*4 of the receipt of the etter dated Septe*.er )B, A,(" ? ? ?6> roo, p. B9.
), Spouses Tan/i/o v. Ce:ar, B() Phi. A9!, A,! &A,", @e.ruar1 ), A,,, $citin+ 3ucas v. Durian, A8) Phi.
AA"-, AA"-&AA"9, Septe*.er )B, A,"-%.
B8 Heirs of Nionisaa v. Heirs of Dacut, supra> Spouses Tan/i/o v. Ce:ar, id., pp. A,B W A,"> Petan
Deveop*ent Inc. v. C#, BB( Phi. 9)!, 9B(, 7arch A,, A,,-.
BA 3ucas v. Durian, supra> Su*ai v. ;ud+e of the C@I, ,( Phi. ,!(, ,"B, #pri B8, A,"".
B) 'a.ia v. =arri+a, A!9&= Phi. (A", (A9, Septe*.er B8, A,-A $cited in Heirs of Nionisaa v. Heirs of Dacut,
supra%.
BB Ruinsa1 v. Inter*ediate #ppeate Court, A," SCR# )(9, )--, 7arch A9, A,,A> Ne.rada v. Heirs of #ivio,
A8! Phi. A)(, A),&AB8, ;une B8, A,"9.
B! Ruinsa1 v. Inter*ediate #ppeate Court, supra.
B" eA$+% of Rue A( of the Rues of Court.
B( Pp. B&! thereof> roo, pp. !(&!-. This affir*ative defense was aso raised .1 Respondent #+ustin in his
6#nswer with #ffir*ative Defense6 on p. ! thereof> roo, p. "B.
B- e) of Rue B of the Rues of Court readsD
6SEC. ). Parties in interest.& # rea part1 in interest is the part1 who stands to .e .enefited or in0ured
.1 the 0ud+*ent in the suit, or the part1 entited to the avais of the suit. 5ness otherwise authori:ed
.1 aw or these Rues, ever1 action *ust .e prosecuted or defended in the na*e of the rea part1 in
interest.6
B9 =oron+an v. 7adrideo, B98 Phi. )A", ))!, ;anuar1 )", )888.
B, Respondents raised this defense on p. ! of their #nswer> roo, p. !-.
!8 C# roo, p. )9. The tite was issued pursuant to Section A)) of #ct No. !,( $now Section A8B of PD
A"),%, which *andates the re+istration of patents i/e other deeds and conve1ances.
!A Q.ane: v. I#C, A,! SCR#-!B, -"A, 7arch (, A,,A $citin+ Caro v. C#, A98 SCR# !8A, !8-, Dece*.er )8,
A,9,%. See aso #rtice AA!! in reation to #rtice A!"( of the Civi Code.
!) A,! SCR# -!B, -!9&-!,, 7arch (, A,,A.
!B Qu Dino v. C#, !AA Phi. ",!, (8!, ;une )8, )88A $citin+ #dovino v. #unan III, )B8 SCR# 9)", 9B!,
7arch ,, A,,!%.
!! A"- SCR# A!8, ;anuar1 )8, A,99 $cited in Dino v. C#, supra%.
!" I.id., pp. A!"&A!(, per Narvasa, ;. $ater C;.% See aso 'arcia v. 7athis, A88 SCR#, )"8, )"), Septe*.er
B8, A,98.
!( Chua v. C#, BB9 Phi. )(), )-8, #pri A9, A,,-.
A". EN =#NC

ROMULO F. PECSON, Petitioner,




& versus &
G.R. No. 1'2'6;

PresentD

P5NO, C.J.,
R5IS57=IN',
QN#RES&
S#NTI#'O,
C#RPIO,
#5STRI#&


COMMISSION ON ELECTIONS, DEPARTMENT OF
INTERIOR AND LOCAL GO?ERNMENT an L#NDON A.
CUNANAN, Respondents.
7#RTINEU,
CORON#,
C#RPIO
7OR#3ES,
#UC5N#,
TIN'#,
CHICO&
N#U#RIO,
VE3#SCO, ;R.,
N#CH5R#,
REQES,
3EON#RDO&
DE C#STRO,
and
=RION, JJ.

Pro*u+atedD


Dece*.er )!,
)889

? &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&?
D E C I S I O N
+RION, J.@
This petition for *ertiorari L fied .1 Ro*uo @. Pecson $+e*son% under Rue (!, in
reation with Rue (" of the Revised Rues of Court S see/s to set aside and annu the
Resoution dated 7a1 )A, )889 of the Co**ission on Eections en ban* $C3!ELEC%
in SPR (8&)88-.2A4 The assaied Resoution nuified the +rant $via a Specia Order%
.1 the Re+iona Tria Court $.$C%, =ranch "(, #n+ees Cit1, of the e?ecution pendin+
appea of its Decision in the eection contest .etween Pecson and the private respondent
31ndon #. Cunanan $Cunanan%, the procai*ed winner in the )88- *a1orat1 eection in
7a+aan+, Pa*pan+a.

T!E ANTECEDENTS
Pecson and Cunanan were candidates for the *a1orat1 position in
the 7unicipait1 of 7a+aan+, Province of Pa*pan+a in the 7a1 )88-
eections. On 7a1 A-, )88-, Cunanan was procai*ed the winnin+ candidate, +arnerin+
a tota of A),",) votes as a+ainst Pecson<s A),"BA, or a *ar+in of (A votes. Cunanan
too/ his oath and assu*ed the position of 7a1or of 7a+aan+. Soon thereafter, Pecson
fied an eection protest, doc/eted as EPE No. 8-&"A, with the RTC.
On Nove*.er )B, )88-, the RTC rendered a Decision in Pecson<s favor. The RTC
rued that Pecson received a tota of A!,9,- votes as a+ainst Cunanan<s AB,-"9 S a vote
*ar+in of A,AB,.
Cunanan received a cop1 of the Decision on Nove*.er )(, )88- and fied a Notice
of #ppea the da1 after. The RTC issued onNove*.er )-, )889 an Order notin+ the
fiin+ of the notice of appea and the pa1*ent of appea fee and directin+ the trans*itta
of the records of the case to the Eectora Contests #d0udication Depart*ent $ECAD% of
the CO7E3EC. Pecson, on the other hand, fied onNove*.er )9, )88- an 5r+ent
7otion for I**ediate E?ecution Pendin+ #ppea, cai*in+ that Section AA, Rue A! of
the Rues of Procedure in Eection Contests .efore the Courts Invovin+ Eective
7unicipa and =aran+a1 Officias2)4 $.ules% aows this re*ed1.
The RTC +ranted Pecson<s *otion for e?ecution pendin+ appea via a Specia
Order dated Dece*.er B, )88- $&pe*ial 3rder% .ut suspended, pursuant to the Rues, the
actua issuance of the writ of e?ecution for twent1 $)8% da1s. The Specia Order states
the foowin+ reasonsD
A. The resut of the 0udicia revision show2s4 that the protestant +arnered
A!,9,- votes as a+ainst protestee<s AB,-"9 votes or a purait1 of A,AB, votes. The
victor1 of the protestant is cear1 and *anifest1 esta.ished .1 the ruin+s and
ta.uation of resuts *ade .1 the Court ? ? ?>
). It is setted 0urisprudence that e?ecution pendin+ appea in eection cases
shoud .e +ranted `to +ive as *uch reco+nition to the worth of a tria 0ud+e<s decision as
that which is initia1 ascri.ed .1 the aw to the proca*ation .1 the .oard of
canvassers.a The Court hods that this wisp of 0udicia wisdo* of the Supre*e Court
enunciated in the Ga(ol case and su.seCuent cases citin+ it is .orne .1 the reco+nition
that the decision of the tria court in an eection case is nothin+ .ut the court uphodin+
the *andate of the voter, which has as its source no other than the e?ercise of the
constitutiona ri+ht to vote. Ehie it is true that the protestee can avai of the re*ed1 of
appea .efore the CO7E3EC, the Court is *ore convinced that .etween uphodin+ the
*andate of the eectorate of 7a+aan+, Pa*pan+a which is the fruit of the e?ercise of
the constitutiona ri+ht to vote and a procedura re*ed1, the Court is *ore incined to
uphod and +ive effect to and actuai:e the *andate of the eectorate of 7a+aan+. To
the *ind of the Court, in +rantin+ e?ecution pendin+ appea the Court is .ein+ true to its
.ounden dut1 to uphod the e?ercise of constitutiona ri+hts and +ives fesh to the
*andate of the peope. The fore+oin+ is, as far as the Court is concerned, considered far
superior circu*stance that convinces the Court to +rant protestant<s *otion>
B. Pu.ic interest and the wi of the eectorate *ust .e respected and +iven
*eanin+>
!. In the case of Navarosa v. Comele*, the Supre*e Court hed that `In
the Ga(ol case, the Court +ave an additiona 0ustification for aowin+ e?ecution
pendin+ appea of decisions of tria courts, thusD Pu.ic poic1 underies it, ? ? ?
2S4o*ethin+ had to .e done to stri/e the death .ow at the pernicious +ra.&the&
proca*ation&proon+&the&protest techniCue often, if not invaria.1, resorted to .1
unscrupuous poiticians who woud render nu+ator1 the peope<s verdict a+ainst the*
and persist in continuin+ in an office the1 ver1 we /now the1 have no e+iti*ate ri+ht
to hod. ? ? ?.a # pri*ordia pu.ic interest is served .1 the +rant of the protestant<s
*otion, i.e., to o.viate a hoow victor1 for the du1 eected candidate. In the words of
Chief ;ustice Cesar =en+:on, `The we /nown dea1 in the ad0udication of eection
protests often +ave the successfu contestant a *ere p1rrhic victor1, i.e., a vindication
when the ter* of office is a.out to e?pire or has e?pired.a
E?pected1, Cunanan *oved to reconsider the Order, ar+uin+ that the RTC +rave1
a.used its discretionD $A% in ruin+ that there were +ood reasons to issue a writ of
e?ecution pendin+ appea> and $)% in entertainin+ and su.seCuent1 +rantin+ the *otion
for e?ecution pendin+ appea despite the issuance of an order trans*ittin+ the records of
the case.
Thereupon, Cunanan fied with the CO7E3EC a Petition for #ppication of
Prei*inar1 In0unction with Pra1er for Status Ruo #nte OrderFTe*porar1 Restrainin+
Order $$.3% with Pra1er for I**ediate Raffe. He ar+ued in his petition thatD $A% the
RTC Decision did not cear1 esta.ish Pecson<s victor1 or his $Cunanan<s% defeat S a
reCuire*ent of Section AA, Rue A! of the Rues> a*on+ other reasons, the nu*.er of
votes the RTC taied and ta.uated e?ceeded the nu*.er of those who actua1 voted
and the votes cast for the position of 7a1or, and $)% the RTC had constructive1
reinCuished its 0urisdiction .1 the issuance of the Order dated Nove*.er )-, )88-
directin+ the trans*itta of the records of the case.
The Second Division of the CO7E3EC issued on ;anuar1 !, )889 a (8&da1 TRO
directin+D $A% the RTC to cease and desist fro* issuin+ or causin+ the issuance of a writ
of e?ecution or i*pe*entin+ the Specia Order> and $)% Cunanan to continue
perfor*in+ the functions of 7a1or of 7a+aan+.
In his #nswer andFor Opposition, with Pra1er for I**ediate 3iftin+ of TRO,
Pecson ar+ued thatD $A% prei*inar1 in0unction cannot e?ist e?cept as part or incident of
an independent action, .ein+ a *ere anciar1 re*ed1 that e?ists on1 as an incident of
the *ain proceedin+> $)% the `petition for appication of prei*inar1 in0unction,a as an
ori+ina action, shoud .e dis*issed outri+ht> and $B% Cunanan is +uit1 of foru*
shoppin+, as he fied a *otion for reconsideration of the Specia Order si*utaneous1
with the petition fied with the CO7E3EC.
The CO7E3EC<s Second Division denied Cunanan<s petition in a Resoution
dated 7arch (, )889. It rued thatD $A% the resoution of the *otion for e?ecution
pendin+ appea is part of the residua 0urisdiction of the RTC to sette pendin+ incidents>
the *otion was fied prior to the e?piration of the period to appea and whie the RTC
was sti in possession of the ori+ina record> and $)% there is +ood reason to 0ustif1 the
e?ecution of the Decision pendin+ appea, as Pecson<s victor1 was cear1 and
*anifest1 esta.ished. Ruin+ on the ae+ed defect in the RTC count, the Second
Division ruedD
2#4fter a carefu scrutin1 of the Decision, Ee found that the error ies in the tria
court<s co*putation of the resuts. In its Decision, the tria court, to the votes o.tained
.1 the part1 $as per proca*ation of the 7=OC%, deducted the votes per ph1sica count
after revision and deducted further the invaidFnuified .aots per the tria court<s
appreciation and thereafter added the vaid cai*ed .aots per the tria court<s
appreciation, thusD
;otes obtained per pro*lamation of t(e !B3C ,&- ;otes per p()si*al *ount ,--
Invalid or nullified ballots ,M- ;alid *laimed ballots N $otal ;otes 3btained
The for*ua used .1 the tria court is erroneous as it used as its reference the
votes o.tained .1 the parties as per the proca*ation of the 7=OC. It co*picated an
otherwise si*pe and strai+htforward co*putation, thus eadin+ to the error. The correct
for*ua shoud have .een as foowsD
$otal Number of 2n*ontested Ballots ,
K
- ;alid Contested Ballots ,
K
- ;alid
Claimed Ballots N $otal ;otes 3btained
5sin+ this for*ua and app1in+ the fi+ures in pa+es -!! and -!" of the tria
court<s Decision, the resuts wi .e as foowsD
@or the Petitioner Cunanan
Tota Nu*.er of 5ncontested =aots ,,("(
#ddD Vaid Contested =aots ),8"9
#ddD Vaid Cai*ed =aots B(
To/a. ?o/31 o- P3/0/0on3r 11,7;0
@or the Private Respondent $Pecson%
Tota Nu*.er of 5ncontested =aots ,,)-A
#ddD Vaid Contested =aots ),9)-
#ddD Vaid Cai*ed =aots B,
To/a. ?o/31 o- P3/0/0on3r 12,1&*



5sin+ the correct for*ua, private respondent sti o.tained a purait1 of the
votes cast and en0o1s a *ar+in of B9! votes over the petitioner. #thou+h not as wide as
the *ar+in found .1 the tria court, Ee are nevertheess convinced that the victor1 of
private respondent has .een cear1 esta.ished in the tria court<s decision for the
foowin+ reasonsD
@irst, /h3 3rror .031 43r3.) 0n /h3 co45(/a/0on an o31 no/ 5(/ 0n 011(3 /h3
a55r3c0a/0on an /a2(.a/0on o- 9o/31. Th3 3rror 01 5(r3.) 4a/h34a/0ca. 8h0ch 80..
no/ 0n9o.93 /h3 o53n0n7 o- 2a..o/ 2o<31 or an 3<a40na/0on an a55r3c0a/0on o-
2a..o/1. I/ 01 a 4a//3r o- ar0/h43/0c 8h0ch ca..1 -or /h3 43r3 c.3r0ca. ac/ o-
r3-.3c/0n7 /h3 /r(3 an corr3c/ 9o/31 o- /h3 can0a/31.
Second, /h3 3rror 0 no/ a--3c/ /h3 -0na. o(/co43 o- /h3 3.3c/0on 5ro/31/ a1 /o
8h0ch can0a/3 o2/a0n3 /h3 5.(ra.0/) o- /h3 9o/31 ca1/.
Ee are i/ewise convinced that the assaied order states +ood or specia reasons
0ustif1in+ the e?ecution pendin+ appea, to witD
$A% The victor1 of the protestant was cear1 and *anifest1 esta.ished>
$)% E?ecution pendin+ appea in eection cases shoud .e +ranted to +ive as
*uch reco+nition to the worth of a tria 0ud+e<s decision as that which is
initia1 ascri.ed .1 the aw to the proca*ation .1 the .oard of canvassers>
$B% Pu.ic interest and the wi of the eectorate *ust .e respected and +iven
*eanin+> and
$!% Pu.ic poic1 underies it, as so*ethin+ had to .e done to stri/e the death
.ow at the pernicious +ra.&the&proca*ation&proon+&the&protest techniCue
often, if not invaria.1 resorted to .1 unscrupuous poiticians.
Such reasons to Our *ind constitute superior circu*stances as to warrant the
e?ecution of the tria court<s decision pendin+ appea.

Pecson thus as/ed for the issuance of a writ of e?ecution via an Ex-
+arte 7otion. Despite Cunanan<s opposition, the RTC +ranted Pecson<s *otion and
issued the writ of e?ecution on 7arch AA, )889. Pecson thereafter assu*ed the duties
and functions of 7a1or of 7a+aan+.
Th3 A11a0.3 R31o.(/0on
On Cunanan<s *otion, the CO7E3EC en ban* issued its Resoution dated 7a1
)A, )889 reversin+ the ruin+ of the Second Division insofar as it affir*ed the RTC<s
findin+s of +ood reasons to e?ecute the decision pendin+ appea. It affir*ed the
authorit1 of the RTC to order e?ecution pendin+ appea> it however nuified the 7arch
AA, )889 writ of e?ecution on the +round that the RTC coud no on+er issue the writ
.ecause it had ost 0urisdiction over the case after trans*itta of the records and the
perfection of the appeas of .oth Cunanan and Pecson $to .e accurate, the apse of
Pecson<s period to appea%.
On the propriet1 of e?ecutin+ the RTC Decision pendin+ appea, the
CO7E3EC en ban* rued that it was not convinced of the +ood reasons stated .1 the
RTC in its Specia Order. It rued that reco+nition of the worth of a tria 0ud+e<s
decision, on the one hand, and the ri+ht to appea, incudin+ the Co**ission<s authorit1
to review the decision of the tria court, on the other, r3B(0r31 a 2a.anc0n7 ac/J and not
ever1 invocation of pu.ic interest wi suffice to 0ustif1 an e?ecution pendin+ appea. It
added that at a sta+e when the decision of the tria court has 1et to attain finait1, .oth
the protestee and the protestant are to .e considered `presu*ptive winners.a It noted too
that the Second Division aread1 cast a dou.t on the correctness of the nu*.er of votes
o.tained .1 the parties after the tria court<s revision> thus, the resoution of the pendin+
appea .eco*es a the *ore i*portant. Bet:een t:o presumptive :inners, considerin+
the pendin+ appea of the eection protest to the Co**ission and pu.ic service .ein+
the pri*e consideration, /h3 2a.anc3 1ho(. /0./ 0n -a9or o- non$01r(5/0on o-
7o93rn43n/ 13r90c3. The e?ecution of the RTC Decision pendin+ appea woud
necessari1 entai the unseatin+ of the protestee, resutin+ not on1 in the disruption of
pu.ic service, .ut aso in confusion in runnin+ the affairs of the +overn*ent> a
su.seCuent reversa too of the RTC Decision aso resuts in the unseatin+ of the
protestant. This situation $i.e., the series of turn&over of the seat of power fro* one
presu*ptive winner to another% cannot .ut cause irrepara.e da*a+e to the peope of
7a+aan+, and overwei+hs the reasons asserted .1 the RTC in its Specia Order. In the
end, accordin+ to the CO7E3EC, pu.ic interest is .est served when he who was rea1
voted for the position is procai*ed and ad0ud+ed as winner with finait1.

Th3 P3/0/0on an /h3 Pra)3r -or /h3 011(anc3 o- a S/a/(1 ,(o Or3r
In i*putin+ +rave a.use of discretion to the CO7E3EC en ban*, Pecson ar+ues
thatD $A% the RTC Decision cear1 showed Pecson<s victor1> $)% the reasons for the
reversa of the RTC Decision practica1 render i*possi.e a +rant of an e?ecution
pendin+ appea> and $B% the RTC correct1 found the presence of the reCuisites for
e?ecution pendin+ appea.
Threatened to .e unseated, Pecson as/ed, as interi* reief, for the issuance of a
Status Ruo Order. He cai*ed thatD $A% the Depart*ent of Interior and 3oca
'overn*ent aread1 reco+ni:ed $.ased on the issuance of the assaied Resoution%
Cunanan<s assu*ption of office even if the assaied Resoution had not attained finait1>
and $)% in order to prevent +rave and irrepara.e in0ur1 to Pecson and the perpetuation of
a travest1 of 0ustice, a Status Ruo Order *ust i**ediate1 issue.
T!E COURTOS RULING
:3 -0n /h3 53/0/0on 43r0/or0o(1.
The re*ed1 of e?ecutin+ court decisions pendin+ appea in eection contests is
provided under the Rues as foowsD
SEC. AA. Exe*ution pendin' appeal . S On *otion of the prevaiin+ part1 with
notice to the adverse part1, the court, whie sti in possession of the ori+ina records,
*a1, at its discretion, order the e?ecution of the decision in an eection contest .efore
the e?piration of the period to appea, su.0ect to the foowin+ ruesD
$a% There *ust .e a *otion .1 the prevaiin+ part1 with three&da1 notice
to the adverse part1. E?ecution pendin+ appea sha not issue without prior notice and
hearin+. There *ust .e +ood reasons for the e?ecution pendin+ appea. The court, in a
specia order, *ust state the +ood or specia reasons 0ustif1in+ the e?ecution pendin+
appea. Such reasons *ustD
$A% constitute superior circu*stances de*andin+ ur+enc1 that wi
outwei+h the in0ur1 or da*a+e shoud the osin+ part1 secure a reversa of the
0ud+*ent on appea> and
$)% .e *anifest, in the decision sou+ht to .e e?ecuted, that the defeat of
the protestee or the victor1 of the protestant has .een cear1 esta.ished.
$.% If the court +rants e?ecution pendin+ appea, an a++rieved part1
sha have twent1 wor/in+ da1s fro* notice of the specia order within which to secure a
restrainin+ order or status #uo order fro* the Supre*e Court of the Co**ission on
Eections. The correspondin+ writ of e?ecution sha issue after twent1 da1s, if no
restrainin+ order or status #uo order is issued. Durin+ such period, the writ of e?ecution
pendin+ appea sha .e sta1ed. 2B4
This re*ed1 is not new. 5nder prevaiin+ 0urisprudence,2!4 the re*ed1 *a1 .e
resorted to pursuant to the suppetor1 appication of the Rues of Court, specifica1 its
Section ), Rue B,.2"4 Ehat the Rues $#.7. No. 8-&!&A"&C% has done is to +ive the
avaia.iit1 of the re*ed1 the ee*ent of certaint1. Si+nificant1, the Rues si*iar1
app1 the 'ood reason standard $in fact, the even +reater superior *ir*umstan*es
standard% for e?ecution pendin+ appea under the Rues of Court, *a/in+ the re*ed1 an
e?ception rather than the rue.
#t the heart of the present controvers1 is the Cuestion of whether there has .een
co*piance with the standards reCuired for an e?ecution pendin+ appea in an eection
contest. #s heretofore cited, the RTC found a these reCuisites present. The Second
Division of the CO7E3EC supported the RTC<s ruin+, .ut the CO7E3EC en
ban* hed a contrar1 view and nuified the e?ecution pendin+ appea. Thisen
ban* ruin+ is now .efore us.
Our review of a CO7E3EC ruin+ or decision is via a petition
for *ertiorari. This is a i*ited review on 0urisdictiona +rounds, specifica1 of the
Cuestion on whether the CO7E3EC has 0urisdiction, or whether the assaied order or
resoution is tainted with +rave a.use of discretion a*ountin+ to ac/ or e?cess of
0urisdiction. Correct1 understood, +rave a.use of discretion is such `capricious and
whi*sica e?ercise of 0ud+*ent as is eCuivaent to ac/ of 0urisdiction, or 2an4 e?ercise
of power in an ar.itrar1 and despotic *anner .1 reason of passion or persona hostiit1,
or an e?ercise of 0ud+*ent so patent and +ross as to a*ount to an evasion of a positive
dut1 or to a virtua refusa to perfor* the dut1 en0oined, or to act in a *anner not at a
in conte*pation of aw.a2(4
=ecause this case is essentia1 a.out the i*pe*entation of an RTC decision
pendin+ appea, we *ust first dwe on the writ the RTC issued. The CO7E3EC rued
in this re+ard that the writ of e?ecution the RTC issued on 7arch AA, )889 was void> the
RTC coud no on+erissue the writ .ecause of the apse of the period for appea, and
.ecause the RTC no on+er hed the records of the eection contest which had then .een
trans*itted to the EC#D&CO7E3EC.
Cunanan ar+ues in his Co**ent that this ruin+ has .eco*e fina and e?ecutor1
.ecause Pecson did not Cuestion it in the present petition. In Cunanan<s view, the finait1
of this aspect of the CO7E3EC ruin+ renders the issue of the nuification of the
Specia Order *oot and acade*ic, as an1 ruin+ we sha render woud serve no
practica purpose> it can no on+er .e i*pe*ented since the 43an1$o.vious1 referrin+
to the writ the RTC issued on 7arch AA, )889% of e?ecutin+ the RTC decision $i.e.,
seatin+ Pecson as 7a1or of 7a+aan+% has, to a intents and purposes, .een nuified
and rendered ineffective.
Ee see no *erit in Cunanan<s ar+u*ent. The writ of e?ecution issued .1 the RTC
is a *ere ad*inistrative enforce*ent *ediu* of the Specia Order S the *ain order
supportin+ Pecson<s *otion for the issuance of a writ of e?ecution. The writ itsef
cannot and does not assu*e a ife of its own independent fro* the Specia Order on
which it is .ased. Certain1, its nuification does not carr1 with it the nuification of the
Specia Order. This conseCuence does not of course hod true in the reverse situation S
the nuification of the Specia Order effective1 carries with it the nuification of its
i*pe*entin+ writ and re*oves the .asis for the issuance of another i*pe*entin+
writ. In the present case, the reait1 is that if and when we uti*ate1 affir* the vaidit1
of the Specia Order, nothin+ wi thereafter prevent the RTC fro* issuin+ another writ.
#nother e+a reait1 is that the CO7E3EC is wron+ in its ruin+ that the RTC
coud no on+er actua1 issue the writ on 7arch AA, )889 .ecause it no on+er had
0urisdiction to do so after the appea period apsed and after the records were trans*itted
to the EC#D&CO7E3EC. That the RTC is sti in possession of the records and that the
period to appea $of .oth contendin+ parties% *ust have not apsed are i*portant for
0urisdictiona purposes if t(e issue is t(e aut(orit) of t(e .$C to 'rant a S&ecia!
Order allo:in' exe*ution pendin' appeal> the1 are reCuisite ee*ents for the e?ercise .1
the RTC of its residua 0urisdiction to vaid1 order an e?ecution pendin+ appea, not for
the issuance of the writ itsef. This is cear1 evident fro* the cited provision of the
Rues which does not reCuire the issuance of the i*pe*entin+ writ within the a.ove
i*ited 0urisdictiona period. The RTC cannot e+a1 issue the
i*pe*entin+ :rit within this i*ited period for two reasonsD $A% the cited twent1&da1
waitin+ period under Section AA$.%> and $)% the *andator1 i**ediate trans*itta of the
records to the EC#D of the CO7E3EC under Section A8 of the Rues.2-4
On the su.stantive issue of whether a writ of e?ecution pendin+ appea shoud
issue, we do not a+ree with the CO7E3EC<s view that there are `t:o presumptive
:innersa prior to its ruin+ on the protest case. Ee i/ewise cannot support its
`.aancin+ acta view that essentia1 posits that +iven the pendenc1 of the appea and the
ac/ of finait1 of a decision in the eection protest, the unseatin+ of the protestee, and
the need for continuit1 of pu.ic service, the .aance shoud tit in favor of continuit1 or
non&disruption of pu.ic service> hence, the e?ecution pendin+ appea shoud .e denied.
#s Pecson correct1 ar+ued, this reasonin+ effective1 prevents a winner $at the
eve of the courts% of an eection protest fro* ever avaiin+ of an e?ecution pendin+
appea> it +ives too *uch e*phasis to the CO7E3EC<s authorit1 to decide the eection
contest and the osin+ part1<s ri+ht to appea. Ehat is there to e?ecute pendin+ appea if,
as the CO7E3EC su++ested, a part1 shoud await a CO7E3EC fina ruin+ on the
protest caseI Effective1, the `two presu*ptive winnersa and the `.aancin+ acta views
ne+ate the e?ecution pendin+ appea that we have cate+orica1 and uneCuivoca1
reco+ni:ed in our ruin+s and in the Rues we issued. To .e sure, the CO7E3EC
cannot, on its own, render ineffective a rule of pro*edure we esta.ished .1 for*uatin+
its own ruin+ reCuirin+ a fina deter*ination at its eve .efore an RTC decision in a
protest case can .e i*pe*ented.
Ee additiona1 note that `disruption of pu.ic servicea necessari1 resuts fro*
an1 order aowin+ e?ecution pendin+ appea and is a concern that this Court was aware
of when it e?press1 provided the re*ed1 under the Rues. Such disruption is therefore
an ee*ent that has .een wei+hed and factored in and cannot .e per se a .asis to den1
e?ecution pendin+ appea.
Ehat co*es out cear1 fro* this e?a*ination of the CO7E3EC ruin+ is that it
oo/ed at the wron+ *ateria considerations when it nuified the RTC<s Specia
Order. The1 are the wron+ considerations .ecause the1 are not the standards outined
under Section AA, Rue A! of the Rues a+ainst which the vaidit1 of a Specia Order
*ust .e tested. Si+nificant1, the use of wron+ considerations in arrivin+ at a decision
constitutes +rave a.use of discretion.294
The proper consideration that the CO7E3EC *ade reates to the correctness of
the RTC<s Decision in i+ht of the Rues< reCuire*ent that the victor1 of the protestant
and the defeat of the protestee .e cear1 esta.ished for e?ecution pendin+ appea to
issue. #ccordin+ to the CO7E3EC, no ess than the Second Division cast a dou.t on
the correctness of the nu*.er of votes o.tained .1 the parties after the revision of
.aots when the Second Division proposed a *athe*atica for*ua to correct the RTC
count. #t the sa*e ti*e, the CO7E3EC noted that the Second Division coud not have
corrected the RTC count, as the petition .efore it was one for *ertiorari whie the
correction of errors in co*putation proper1 pertained to the resoution of Cunanan<s
pendin+ appea. To the CO7E3EC, a these showed that the correctness of the RTC
Decision in favor of Pecson was far fro* cear and cannot support an e?ecution pendin+
appea.
Ee disa+ree once *ore with the CO7E3EC en ban* in this concusion, as it
faied to accurate1 and co*pete1 appreciate the Second Division<s findin+s. The RTC
Decision, on its face, shows that Pecson +arnered *ore vaid votes than Cunanan after
the revision of .aots. The Second Division proper1 reco+ni:ed, however, that the
RTC co*putation suffered fro* a facia defect that did not affect the fina resuts> as
Cunanan pointed out, the votes for Pecson and Cunanan, if tota1 su**ed up, e?ceeded
the tota nu*.er of vaid votes for *a1or.
Du1 aerted, the Second Division oo/ed into the purported error, ana1:ed it, and
found the error to .e *ere1 *athe*atica> the RTC for*ua woud necessari1 e?ceed
the tota nu*.er of votes cast for *a1or .ecause it counted so*e votes twice. In *a/in+
this findin+, the Second Division was +uided .1 the rue that one of the reCuisites for an
e?ecution pendin+ appea is a cear showin+ in the decision of the protestant<s victor1
and the protestee<s defeat. Its e?a*ination of the RTC Decision was on1 for this i*ited
purpose and this was what it did, no *ore no ess. Specifica1, it did not review the
RTC<s appreciation of the .aots on revision> it did not review the intrinsic *erits of the
RTC Decision S issues that proper1 .eon+ to the appea that is current1 pendin+. It
*ere1 found that the defect Cunanan noted was actua1 inconseCuentia with respect to
the resuts, thus showin+ Pecson<s cear victor1 under the RTC Decision. In other words,
the Second Division<s corrected view of the RTC count confir*ed, rather than
contradicted or paced in dou.t, the concusion that Pecson won.
Other than the carit1 of Pecson<s victor1 under the RTC Decision, the Specia
Order cited +ood and specia reasons that 0ustified an e?ecution pendin+ appea,
specifica1D $A% the need to +ive as *uch reco+nition to the worth of a tria 0ud+e<s
decision as that which is initia1 +iven .1 the aw to the proca*ation .1 the .oard of
canvassers> $)% pu.ic interest andFor respect for and +ivin+ *eanin+ to the wi of the
eectorate> and $B% pu.ic poic1 S so*ethin+ had to .e done to dea a death .ow to the
pernicious +ra.&the&proca*ation&proon+&the&protest techniCue often, if not invaria.1,
resorted to .1 unscrupuous poiticians who woud render nu+ator1 the peope<s verdict
a+ainst the*.
5nfortunate1, the CO7E3EC en ban* si*p1 +ossed over the RTC<s cited
reasons and did not fu1 discuss wh1 these reasons were not sufficient to 0ustif1
e?ecution pendin+ appea. # co*.ination, however, of the reasons the RTC cited, to our
*ind, 0ustifies e?ecution of the RTC Decision pendin+ appea.
# stri/in+ feature of the present case is the ti*e ee*ent invoved. Ee have ti*e
and a+ain noted the we /nown dea1 in the ad0udication of eection contests that, *ore
often than not, +ives the protestant an empt) or hoow victor1 in a on+ drawn&out e+a
.atte.2,4 So*e petitions .efore us invovin+ eection contests have .een in fact
dis*issed for .ein+ *oot, the ter* for the contested position havin+ on+ e?pired .efore
the fina ruin+ on the *erits ca*e.2A84 In the present case, the ter* for *a1or consists
of on1 three $B% 1ears. One 1ear and si? *onths has apsed since the 7a1 )88- eection>
thus, ess than two 1ears are eft of the eected *a1or<s ter*. The eection protest, whie
aread1 decided at the RTC eve, is sti at the e?ecution&pendin+&appea sta+e and is
sti far fro* the finait1 of an1 decision on the *erits, +iven the avaia.e appeate
re*edies and the recourses avaia.e throu+h specia civi actions. To .e sure, there is
nothin+ definite in the hori:on on who wi fina1 .e decared the awfu1 eected
*a1or.
#so, we reiterate here our consistent ruin+ that decisions of the courts in eection
protest cases, resutin+ as the1 do fro* a 0udicia evauation of the .aots and after fu&
.own adversaria proceedin+s, shoud at east .e +iven si*iar worth and reco+nition as
decisions of the .oard of canvassers.2AA4 This is especia1 true when attended .1 other
eCua1 wei+ht1 circu*stances of the case, such as the shortness of the ter* of the
contested eective office, of the case.
In i+ht of a these considerations, we concude that the CO7E3EC erred in
nuif1in+ the RTC<s Specia Order in a *anner sufficient1 +ross to affect its e?ercise of
0urisdiction. Specifica1, it co**itted +rave a.use of discretion when it oo/ed at
wron+ considerations and when it acted outside of the conte*pation of the aw in
nuif1in+ the Specia Order.

:!EREFORE, pre*ises considered, we GRANT the petition and
accordin+1 ANNUL the assaied CO7E3EC Resoution.

SO ORDERED.
#RT5RO D. =RION
#ssociate ;ustice
EE CONC5RD

REQN#TO S. P5NO
Chief ;ustice


3EON#RDO #. R5IS57=IN'
#ssociate ;ustice


#NTONIO T. C#RPIO
#ssociate ;ustice
CONS5E3O QN#RES&S#NTI#'O
#ssociate ;ustice


7#. #3ICI# #5STRI#&7#RTINEU
#ssociate ;ustice


REN#TO C. CORON#
#ssociate ;ustice


#DO3@O S. #UC5N#
#ssociate ;ustice


7INIT# V. CHICO&N#U#RIO
#ssociate ;ustice


#NTONIO ED5#RDO =. N#CH5R#
#ssociate ;ustice




CONCHIT# C#RPIO 7OR#3ES
#ssociate ;ustice


D#NTE O. TIN'#
#ssociate ;ustice


PRES=ITERO ;. VE3#SCO, ;R.
#ssociate ;ustice


R5=EN T. REQES
#ssociate ;ustice

TERESIT# ;. 3EON#RDO&DE C#STRO
#ssociate ;ustice

CERTI@IC#TION

Pursuant to Section AB, #rtice VIII of the Constitution, it is here.1 certified that
the concusions in the a.ove Decision were reached in consutation .efore the case was
assi+ned to the writer of the opinion of the Court.


REQN#TO S. P5NO
Chief ;ustice