1

A. PRELIMINARY CONSIDERATIONS
[G.R. No. 122156. February 3, 1997]
MANILA PRINCE HOTEL, petitioner, vs. GOVERNMENT SERVICE INSURANCE SYSTEM,
MANILA HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE
GOVERNMENT CORPORATE COUNSEL, respondents.
DECISION
BELLOSILLO, J.:
The Filipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights, privileges,
and concessions covering the national economy and patrimony, the State shall give preference to
qualified Filipinos,[1] is invoked by petitioner in its bid to acquire 51% of the shares of the Manila Hotel
Corporation (MHC) which owns the historic Manila Hotel.Opposing, respondents maintain that the
provision is not self-executing but requires an implementing legislation for its enforcement. Corollarily,
they ask whether the 51% shares form part of the national economy and patrimony covered by the
protective mantle of the Constitution.
The controversy arose when respondent Government Service Insurance System (GSIS),
pursuant to the privatization program of the Philippine Government under Proclamation No. 50 dated
8 December 1986, decided to sell through public bidding 30% to 51% of the issued and outstanding
shares of respondent MHC. The winning bidder, or the eventual strategic partner, is to provide
management expertise and/or an international marketing/reservation system, and financial support to
strengthen the profitability and performance of the Manila Hotel.[2] In a close bidding held on 18
September 1995 only two (2) bidders participated: petitioner Manila Prince Hotel Corporation, a
Filipino corporation, which offered to buy 51% of the MHC or 15,300,000 shares at P41.58 per share,
and Renong Berhad, a Malaysian firm, with ITT-Sheraton as its hotel operator, which bid for the same
number of shares at P44.00 per share, or P2.42 more than the bid of petitioner.
Pertinent provisions of the bidding rules prepared by respondent GSIS state -
I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC -
1. The Highest Bidder must comply with the conditions set forth below by October 23, 1995 (reset to
November 3, 1995) or the Highest Bidder will lose the right to purchase the Block of Shares and GSIS
will instead offer the Block of Shares to the other Qualified Bidders:
a. The Highest Bidder must negotiate and execute with the GSIS/MHC the Management Contract,
International Marketing/Reservation System Contract or other type of contract specified by the
Highest Bidder in its strategic plan for the Manila Hotel x x x x
b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with GSIS x x x x
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER -
The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the following
conditions are met:
a. Execution of the necessary contracts with GSIS/MHC not later than October 23, 1995 (reset to
November 3, 1995); and
b. Requisite approvals from the GSIS/MHC and COP (Committee on Privatization)/ OGCC (Office of
the Government Corporate Counsel) are obtained.[3]
Pending the declaration of Renong Berhard as the winning bidder/strategic partner and the
execution of the necessary contracts, petitioner in a letter to respondent GSIS dated 28 September
1995 matched the bid price of P44.00 per share tendered by Renong Berhad.[4] In a subsequent letter
dated 10 October 1995 petitioner sent a managers check issued by Philtrust Bank for Thirty-three
Million Pesos (P33,000,000.00) as Bid Security to match the bid of the Malaysian Group, Messrs.
Renong Berhad x x x x[5] which respondent GSIS refused to accept.
On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the tender of
the matching bid and that the sale of 51% of the MHC may be hastened by respondent GSIS and
consummated with Renong Berhad, petitioner came to this Court on prohibition and mandamus. On
2

18 October 1995 the Court issued a temporary restraining order enjoining respondents from
perfecting and consummating the sale to the Malaysian firm.
On 10 September 1996 the instant case was accepted by the Court En Banc after it was referred
to it by the First Division. The case was then set for oral arguments with former Chief Justice Enrique
M. Fernando and Fr. Joaquin G. Bernas, S.J., as amici curiae.
In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and submits
that the Manila Hotel has been identified with the Filipino nation and has practically become a
historical monument which reflects the vibrancy of Philippine heritage and culture. It is a proud legacy
of an earlier generation of Filipinos who believed in the nobility and sacredness of independence and
its power and capacity to release the full potential of the Filipino people. To all intents and purposes, it
has become a part of the national patrimony.[6] Petitioner also argues that since 51% of the shares of
the MHC carries with it the ownership of the business of the hotel which is owned by respondent
GSIS, a government-owned and controlled corporation, the hotel business of respondent GSIS being
a part of the tourism industry is unquestionably a part of the national economy.Thus, any transaction
involving 51% of the shares of stock of the MHC is clearly covered by the term national economy, to
which Sec. 10, second par., Art. XII, 1987 Constitution, applies.[7]
It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony and its
business also unquestionably part of the national economy petitioner should be preferred after it has
matched the bid offer of the Malaysian firm. For the bidding rules mandate that if for any reason, the
Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to the other Qualified
Bidders that have validly submitted bids provided that these Qualified Bidders are willing to match the
highest bid in terms of price per share.[8]
Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the 1987
Constitution is merely a statement of principle and policy since it is not a self-executing provision and
requires implementing legislation(s) x x x x Thus, for the said provision to operate, there must be
existing laws to lay down conditions under which business may be done.[9]
Second, granting that this provision is self-executing, Manila Hotel does not fall under the
term national patrimony which only refers to lands of the public domain, waters, minerals, coal,
petroleum and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife,
flora and fauna and all marine wealth in its territorial sea, and exclusive marine zone as cited in the
first and second paragraphs of Sec. 2, Art. XII, 1987 Constitution. According to respondents, while
petitioner speaks of the guests who have slept in the hotel and the events that have transpired therein
which make the hotel historic, these alone do not make the hotel fall under the patrimony of the
nation. What is more, the mandate of the Constitution is addressed to the State, not to respondent
GSIS which possesses a personality of its own separate and distinct from the Philippines as a State.
Third, granting that the Manila Hotel forms part of the national patrimony, the constitutional
provision invoked is still inapplicable since what is being sold is only 51% of the outstanding shares of
the corporation, not the hotel building nor the land upon which the building stands. Certainly, 51% of
the equity of the MHC cannot be considered part of the national patrimony. Moreover, if the
disposition of the shares of the MHC is really contrary to the Constitution, petitioner should have
questioned it right from the beginning and not after it had lost in the bidding.
Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which provides
that if for any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this
to the other Qualified Bidders that have validly submitted bids provided that these Qualified Bidders
are willing to match the highest bid in terms of price per share, is misplaced. Respondents postulate
that the privilege of submitting a matching bid has not yet arisen since it only takes place if for any
reason, the Highest Bidder cannot be awarded the Block of Shares. Thus the submission by
petitioner of a matching bid is premature since Renong Berhad could still very well be awarded the
block of shares and the condition giving rise to the exercise of the privilege to submit a matching bid
had not yet taken place.
3

Finally, the prayer for prohibition grounded on grave abuse of discretion should fail since
respondent GSIS did not exercise its discretion in a capricious, whimsical manner, and if ever it did
abuse its discretion it was not so patent and gross as to amount to an evasion of a positive duty or a
virtual refusal to perform a duty enjoined by law. Similarly, the petition for mandamus should fail as
petitioner has no clear legal right to what it demands and respondents do not have an imperative duty
to perform the act required of them by petitioner.
We now resolve. A constitution is a system of fundamental laws for the governance and
administration of a nation. It is supreme, imperious, absolute and unalterable except by the authority
from which it emanates. It has been defined as the fundamental and paramount law of the nation.[10] It
prescribes the permanent framework of a system of government, assigns to the different departments
their respective powers and duties, and establishes certain fixed principles on which government is
founded. The fundamental conception in other words is that it is a supreme law to which all other laws
must conform and in accordance with which all private rights must be determined and all public
authority administered.[11] Under the doctrine of constitutional supremacy, if a law or contract violates
any norm of the constitution that law or contract whether promulgated by the legislative or by the
executive branch or entered into by private persons for private purposes is null and void and without
any force and effect. Thus, since the Constitution is the fundamental, paramount and supreme law of
the nation, it is deemed written in every statute and contract.
Admittedly, some constitutions are merely declarations of policies and principles. Their provisions
command the legislature to enact laws and carry out the purposes of the framers who merely
establish an outline of government providing for the different departments of the governmental
machinery and securing certain fundamental and inalienable rights of citizens.[12] A provision which
lays down a general principle, such as those found in Art. II of the 1987 Constitution, is usually not
self-executing. But a provision which is complete in itself and becomes operative without the aid of
supplementary or enabling legislation, or that which supplies sufficient rule by means of which the
right it grants may be enjoyed or protected, is self-executing. Thus a constitutional provision is self-
executing if the nature and extent of the right conferred and the liability imposed are fixed by the
constitution itself, so that they can be determined by an examination and construction of its terms,
and there is no language indicating that the subject is referred to the legislature for action.[13]
As against constitutions of the past, modern constitutions have been generally drafted upon a
different principle and have often become in effect extensive codes of laws intended to operate
directly upon the people in a manner similar to that of statutory enactments, and the function of
constitutional conventions has evolved into one more like that of a legislative body. Hence, unless it is
expressly provided that a legislative act is necessary to enforce a constitutional mandate, the
presumption now is that all provisions of the constitution are self-executing. If the constitutional
provisions are treated as requiring legislation instead of self-executing, the legislature would have the
power to ignore and practically nullify the mandate of the fundamental law.[14] This can be
cataclysmic. That is why the prevailing view is, as it has always been, that -
x x x x in case of doubt, the Constitution should be considered self-executing rather than non-self-
executing x x x x Unless the contrary is clearly intended, the provisions of the Constitution should be
considered self-executing, as a contrary rule would give the legislature discretion to determine when,
or whether, they shall be effective. These provisions would be subordinated to the will of the
lawmaking body, which could make them entirely meaningless by simply refusing to pass the needed
implementing statute.[15]
Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is clearly not self-
executing, as they quote from discussions on the floor of the 1986 Constitutional Commission -
MR. RODRIGO. Madam President, I am asking this question as the Chairman of the
Committee on Style. If the wording of PREFERENCE is given to QUALIFIED FILIPINOS,
can it be understood as a preference to qualified Filipinos vis-a-vis Filipinos who are not
qualified. So, why do we not make it clear? To qualified Filipinos as against aliens?
4

THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to remove the word
QUALIFIED?
MR. RODRIGO. No, no, but say definitely TO QUALIFIED FILIPINOS as against whom? As
against aliens or over aliens ?
MR. NOLLEDO. Madam President, I think that is understood. We use the word QUALIFIED
because the existing laws or prospective laws will always lay down conditions under
which business may be done. For example, qualifications on capital, qualifications on the
setting up of other financial structures, et cetera (underscoring supplied by respondents).
MR. RODRIGO. It is just a matter of style.
MR. NOLLEDO. Yes.[16]
Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to make it
appear that it is non-self-executing but simply for purposes of style. But, certainly, the legislature is
not precluded from enacting further laws to enforce the constitutional provision so long as the
contemplated statute squares with the Constitution. Minor details may be left to the legislature without
impairing the self-executing nature of constitutional provisions.
In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the
exercise of powers directly granted by the constitution, further the operation of such a provision,
prescribe a practice to be used for its enforcement, provide a convenient remedy for the protection of
the rights secured or the determination thereof, or place reasonable safeguards around the exercise
of the right. The mere fact that legislation may supplement and add to or prescribe a penalty for the
violation of a self-executing constitutional provision does not render such a provision ineffective in the
absence of such legislation. The omission from a constitution of any express provision for a remedy
for enforcing a right or liability is not necessarily an indication that it was not intended to be self-
executing. The rule is that a self-executing provision of the constitution does not necessarily exhaust
legislative power on the subject, but any legislation must be in harmony with the constitution, further
the exercise of constitutional right and make it more available.[17] Subsequent legislation however
does not necessarily mean that the subject constitutional provision is not, by itself, fully enforceable.
Respondents also argue that the non-self-executing nature of Sec. 10, second par., of Art. XII is
implied from the tenor of the first and third paragraphs of the same section which undoubtedly are not
self-executing.[18] The argument is flawed. If the first and third paragraphs are not self-executing
because Congress is still to enact measures to encourage the formation and operation of enterprises
fully owned by Filipinos, as in the first paragraph, and the State still needs legislation to regulate and
exercise authority over foreign investments within its national jurisdiction, as in the third paragraph,
then a fortiori, by the same logic, the second paragraph can only be self-executing as it does not by
its language require any legislation in order to give preference to qualified Filipinos in the grant of
rights, privileges and concessions covering the national economy and patrimony. A constitutional
provision may be self-executing in one part and non-self-executing in another.[19]
Even the cases cited by respondents holding that certain constitutional provisions are merely
statements of principles and policies, which are basically not self-executing and only placed in the
Constitution as moral incentives to legislation, not as judicially enforceable rights - are simply not in
point. Basco v. Philippine Amusements and Gaming Corporation[20] speaks of constitutional
provisions on personal dignity,[21] the sanctity of family life,[22] the vital role of the youth in nation-
building,[23] the promotion of social justice,[24] and the values of education.[25] Tolentino v. Secretary of
Finance[26] refers to constitutional provisions on social justice and human rights[27] and on
education.[28] Lastly, Kilosbayan, Inc. v. Morato[29] cites provisions on the promotion of general
welfare,[30] the sanctity of family life,[31] the vital role of the youth in nation-building[32] and the
promotion of total human liberation and development.[33] A reading of these provisions indeed clearly
shows that they are not judicially enforceable constitutional rights but merely guidelines for
legislation. The very terms of the provisions manifest that they are only principles upon which
legislations must be based. Res ipsa loquitur.
5

On the other hand, Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive
command which is complete in itself and which needs no further guidelines or implementing laws or
rules for its enforcement. From its very words the provision does not require any legislation to put it in
operation. It is per se judicially enforceable. When our Constitution mandates that [i]n the grant of
rights, privileges, and concessions covering national economy and patrimony, the State shall give
preference to qualified Filipinos, it means just that - qualified Filipinos shall be preferred. And when
our Constitution declares that a right exists in certain specified circumstances an action may be
maintained to enforce such right notwithstanding the absence of any legislation on the subject;
consequently, if there is no statute especially enacted to enforce such constitutional right, such right
enforces itself by its own inherent potency and puissance, and from which all legislations must take
their bearings. Where there is a right there is a remedy. Ubi jus ibi remedium.
As regards our national patrimony, a member of the 1986 Constitutional Commission[34] explains -
The patrimony of the Nation that should be conserved and developed refers not only to our
rich natural resources but also to the cultural heritage of our race. It also refers to our
intelligence in arts, sciences and letters. Therefore, we should develop not only our lands,
forests, mines and other natural resources but also the mental ability or faculty of our people.
We agree. In its plain and ordinary meaning, the term patrimony pertains to heritage.[35] When the
Constitution speaks of national patrimony, it refers not only to the natural resources of the Philippines,
as the Constitution could have very well used the term natural resources, but also to the cultural
heritage of the Filipinos.
Manila Hotel has become a landmark - a living testimonial of Philippine heritage. While it was
restrictively an American hotel when it first opened in 1912, it immediately evolved to be truly
Filipino. Formerly a concourse for the elite, it has since then become the venue of various significant
events which have shaped Philippine history. It was called the Cultural Center of the 1930s. It was the
site of the festivities during the inauguration of the Philippine Commonwealth. Dubbed as the Official
Guest House of the Philippine Government it plays host to dignitaries and official visitors who are
accorded the traditional Philippine hospitality.[36]
The history of the hotel has been chronicled in the book The Manila Hotel: The Heart and
Memory of a City.[37] During World War II the hotel was converted by the Japanese Military
Administration into a military headquarters. When the American forces returned to recapture Manila
the hotel was selected by the Japanese together with Intramuros as the two (2) places for their final
stand. Thereafter, in the 1950s and 1960s, the hotel became the center of political activities, playing
host to almost every political convention. In 1970 the hotel reopened after a renovation and reaped
numerous international recognitions, an acknowledgment of the Filipino talent and ingenuity. In 1986
the hotel was the site of a failed coup d etat where an aspirant for vice-president was proclaimed
President of the Philippine Republic.
For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and failures,
loves and frustrations of the Filipinos; its existence is impressed with public interest; its own historicity
associated with our struggle for sovereignty, independence and nationhood. Verily, Manila Hotel has
become part of our national economy and patrimony. For sure, 51% of the equity of the MHC comes
within the purview of the constitutional shelter for it comprises the majority and controlling stock, so
that anyone who acquires or owns the 51% will have actual control and management of the hotel. In
this instance, 51% of the MHC cannot be disassociated from the hotel and the land on which the hotel
edifice stands. Consequently, we cannot sustain respondents claim that the Filipino First
Policy provision is not applicable since what is being sold is only 51% of the outstanding shares of the
corporation, not the Hotel building nor the land upon which the building stands.[38]
The argument is pure sophistry. The term qualified Filipinos as used in our Constitution also
includes corporations at least 60% of which is owned by Filipinos. This is very clear from the
proceedings of the 1986 Constitutional Commission -
THE PRESIDENT. Commissioner Davide is recognized.
6

MR. DAVIDE. I would like to introduce an amendment to the Nolledo amendment. And the
amendment would consist in substituting the words QUALIFIED FILIPINOS with the
following: CITIZENS OF THE PHILIPPINES OR CORPORATIONS OR ASSOCIATIONS
WHOSE CAPITAL OR CONTROLLING STOCK IS WHOLLY OWNED BY SUCH
CITIZENS.
xxxx
MR. MONSOD. Madam President, apparently the proponent is agreeable, but we have to
raise a question. Suppose it is a corporation that is 80-percent Filipino, do we not give it
preference?
MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino. What about a
corporation wholly owned by Filipino citizens?
MR. MONSOD. At least 60 percent, Madam President.
MR. DAVIDE. Is that the intention?
MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that the preference
should only be 100-percent Filipino.
MR. DAVIDE. I want to get that meaning clear because QUALIFIED FILIPINOS may refer
only to individuals and not to juridical personalities or entities.
MR. MONSOD. We agree, Madam President.[39]
xxxx
MR. RODRIGO. Before we vote, may I request that the amendment be read again.
MR. NOLLEDO. The amendment will read: IN THE GRANT OF RIGHTS, PRIVILEGES AND
CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE
STATE SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS. And the word Filipinos
here, as intended by the proponents, will include not only individual Filipinos but also
Filipino-controlled entities or entities fully-controlled by Filipinos.[40]
The phrase preference to qualified Filipinos was explained thus -
MR. FOZ. Madam President, I would like to request Commissioner Nolledo to please restate
his amendment so that I can ask a question.
MR. NOLLEDO. IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS
COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL GIVE
PREFERENCE TO QUALIFIED FILIPINOS.
MR. FOZ. In connection with that amendment, if a foreign enterprise is qualified and a Filipino
enterprise is also qualified, will the Filipino enterprise still be given a preference?
MR. NOLLEDO. Obviously.
MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino enterprise, will
the Filipino still be preferred?
MR. NOLLEDO. The answer is yes.
MR. FOZ. Thank you.[41]
Expounding further on the Filipino First Policy provision Commissioner Nolledo continues
MR. NOLLEDO. Yes, Madam President. Instead of MUST, it will be SHALL - THE STATE
SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS. This embodies the so-called
Filipino First policy. That means that Filipinos should be given preference in the grant of
concessions, privileges and rights covering the national patrimony.[42]
The exchange of views in the sessions of the Constitutional Commission regarding the subject
provision was still further clarified by Commissioner Nolledo[43] -
Paragraph 2 of Section 10 explicitly mandates the Pro-Filipino bias in all economic concerns. It is
better known as the FILIPINO FIRST Policy x x x x This provision was never found in previous
Constitutions x x x x
The term qualified Filipinos simply means that preference shall be given to those citizens who can
make a viable contribution to the common good, because of credible competence and efficiency. It
7

certainly does NOT mandate the pampering and preferential treatment to Filipino citizens or
organizations that are incompetent or inefficient, since such an indiscriminate preference would be
counterproductive and inimical to the common good.
In the granting of economic rights, privileges, and concessions, when a choice has to be made
between a qualified foreigner and a qualified Filipino, the latter shall be chosen over the former.
Lastly, the word qualified is also determinable. Petitioner was so considered by respondent GSIS
and selected as one of the qualified bidders. It was pre-qualified by respondent GSIS in accordance
with its own guidelines so that the sole inference here is that petitioner has been found to be
possessed of proven management expertise in the hotel industry, or it has significant equity
ownership in another hotel company, or it has an overall management and marketing proficiency to
successfully operate the Manila Hotel.[44]
The penchant to try to whittle away the mandate of the Constitution by arguing that the subject
provision is not self-executory and requires implementing legislation is quite disturbing. The attempt
to violate a clear constitutional provision - by the government itself - is only too distressing. To adopt
such a line of reasoning is to renounce the duty to ensure faithfulness to the Constitution. For, even
some of the provisions of the Constitution which evidently need implementing legislation have juridical
life of their own and can be the source of a judicial remedy. We cannot simply afford the government
a defense that arises out of the failure to enact further enabling, implementing or guiding
legislation. In fine, the discourse of Fr. Joaquin G. Bernas, S.J., on constitutional government is apt -
The executive department has a constitutional duty to implement laws, including the Constitution,
even before Congress acts - provided that there are discoverable legal standards for executive
action. When the executive acts, it must be guided by its own understanding of the constitutional
command and of applicable laws. The responsibility for reading and understanding the Constitution
and the laws is not the sole prerogative of Congress. If it were, the executive would have to ask
Congress, or perhaps the Court, for an interpretation every time the executive is confronted by a
constitutional command. That is not how constitutional government operates.[45]
Respondents further argue that the constitutional provision is addressed to the State, not to
respondent GSIS which by itself possesses a separate and distinct personality.This argument again
is at best specious. It is undisputed that the sale of 51% of the MHC could only be carried out with the
prior approval of the State acting through respondent Committee on Privatization. As correctly pointed
out by Fr. Joaquin G. Bernas, S.J., this fact alone makes the sale of the assets of respondents GSIS
and MHC a state action. In constitutional jurisprudence, the acts of persons distinct from the
government are considered state action covered by the Constitution (1) when the activity it engages
in is a public function; (2) when the government is so significantly involved with the private actor as to
make the government responsible for his action; and, (3) when the government has approved or
authorized the action. It is evident that the act of respondent GSIS in selling 51% of its share in
respondent MHC comes under the second and third categories of state action. Without doubt
therefore the transaction, although entered into by respondent GSIS, is in fact a transaction of the
State and therefore subject to the constitutional command.[46]
When the Constitution addresses the State it refers not only to the people but also to the
government as elements of the State. After all, government is composed of three (3) divisions of
power - legislative, executive and judicial. Accordingly, a constitutional mandate directed to the State
is correspondingly directed to the three (3) branches of government. It is undeniable that in this case
the subject constitutional injunction is addressed among others to the Executive Department and
respondent GSIS, a government instrumentality deriving its authority from the State.
It should be stressed that while the Malaysian firm offered the higher bid it is not yet the winning
bidder. The bidding rules expressly provide that the highest bidder shall only be declared the winning
bidder after it has negotiated and executed the necessary contracts, and secured the requisite
approvals. Since the Filipino First Policy provision of the Constitution bestows preference
on qualified Filipinos the mere tending of the highest bid is not an assurance that the highest bidder
8

will be declared the winning bidder.Resultantly, respondents are not bound to make the award yet,
nor are they under obligation to enter into one with the highest bidder. For in choosing the awardee
respondents are mandated to abide by the dictates of the 1987 Constitution the provisions of which
are presumed to be known to all the bidders and other interested parties.
Adhering to the doctrine of constitutional supremacy, the subject constitutional provision is, as it
should be, impliedly written in the bidding rules issued by respondent GSIS, lest the bidding rules be
nullified for being violative of the Constitution. It is a basic principle in constitutional law that all laws
and contracts must conform with the fundamental law of the land. Those which violate the
Constitution lose their reason for being.
Paragraph V. J. 1 of the bidding rules provides that [i]f for any reason the Highest Bidder cannot
be awarded the Block of Shares, GSIS may offer this to other Qualified Bidders that have validly
submitted bids provided that these Qualified Bidders are willing to match the highest bid in terms of
price per share.[47] Certainly, the constitutional mandate itself is reason enough not to award the block
of shares immediately to the foreign bidder notwithstanding its submission of a higher, or even the
highest, bid. In fact, we cannot conceive of a stronger reason than the constitutional injunction itself.
In the instant case, where a foreign firm submits the highest bid in a public bidding concerning the
grant of rights, privileges and concessions covering the national economy and patrimony, thereby
exceeding the bid of a Filipino, there is no question that the Filipino will have to be allowed to match
the bid of the foreign entity. And if the Filipino matches the bid of a foreign firm the award should go to
the Filipino. It must be so if we are to give life and meaning to the Filipino First Policy provision of the
1987 Constitution. For, while this may neither be expressly stated nor contemplated in the bidding
rules, the constitutional fiat is omnipresent to be simply disregarded. To ignore it would be to sanction
a perilous skirting of the basic law.
This Court does not discount the apprehension that this policy may discourage foreign
investors. But the Constitution and laws of the Philippines are understood to be always open to public
scrutiny. These are given factors which investors must consider when venturing into business in a
foreign jurisdiction. Any person therefore desiring to do business in the Philippines or with any of its
agencies or instrumentalities is presumed to know his rights and obligations under the Constitution
and the laws of the forum.
The argument of respondents that petitioner is now estopped from questioning the sale to
Renong Berhad since petitioner was well aware from the beginning that a foreigner could participate
in the bidding is meritless. Undoubtedly, Filipinos and foreigners alike were invited to the bidding. But
foreigners may be awarded the sale only if no Filipino qualifies, or if the qualified Filipino fails to
match the highest bid tendered by the foreign entity. In the case before us, while petitioner was
already preferred at the inception of the bidding because of the constitutional mandate, petitioner had
not yet matched the bid offered by Renong Berhad. Thus it did not have the right or personality then
to compel respondent GSIS to accept its earlier bid. Rightly, only after it had matched the bid of the
foreign firm and the apparent disregard by respondent GSIS of petitioners matching bid did the latter
have a cause of action.
Besides, there is no time frame for invoking the constitutional safeguard unless perhaps the
award has been finally made. To insist on selling the Manila Hotel to foreigners when there is a
Filipino group willing to match the bid of the foreign group is to insist that government be treated as
any other ordinary market player, and bound by its mistakes or gross errors of judgment, regardless
of the consequences to the Filipino people. The miscomprehension of the Constitution is
regrettable. Thus we would rather remedy the indiscretion while there is still an opportunity to do so
than let the government develop the habit of forgetting that the Constitution lays down the basic
conditions and parameters for its actions.
Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to the
bidding rules, respondent GSIS is left with no alternative but to award to petitioner the block of shares
of MHC and to execute the necessary agreements and documents to effect the sale in accordance
9

not only with the bidding guidelines and procedures but with the Constitution as well. The refusal of
respondent GSIS to execute the corresponding documents with petitioner as provided in the bidding
rules after the latter has matched the bid of the Malaysian firm clearly constitutes grave abuse of
discretion.
The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987
Constitution not merely to be used as a guideline for future legislation but primarily to be enforced; so
must it be enforced. This Court as the ultimate guardian of the Constitution will never shun, under any
reasonable circumstance, the duty of upholding the majesty of the Constitution which it is tasked to
defend. It is worth emphasizing that it is not the intention of this Court to impede and diminish, much
less undermine, the influx of foreign investments. Far from it, the Court encourages and welcomes
more business opportunities but avowedly sanctions the preference for Filipinos whenever such
preference is ordained by the Constitution. The position of the Court on this matter could have not
been more appropriately articulated by Chief Justice Narvasa -
As scrupulously as it has tried to observe that it is not its function to substitute its judgment for that of
the legislature or the executive about the wisdom and feasibility of legislation economic in nature, the
Supreme Court has not been spared criticism for decisions perceived as obstacles to economic
progress and development x x x x in connection with a temporary injunction issued by the Courts First
Division against the sale of the Manila Hotel to a Malaysian Firm and its partner, certain statements
were published in a major daily to the effect that that injunction again demonstrates that the Philippine
legal system can be a major obstacle to doing business here.
Let it be stated for the record once again that while it is no business of the Court to intervene in
contracts of the kind referred to or set itself up as the judge of whether they are viable or attainable, it
is its bounden duty to make sure that they do not violate the Constitution or the laws, or are not
adopted or implemented with grave abuse of discretion amounting to lack or excess of jurisdiction. It
will never shirk that duty, no matter how buffeted by winds of unfair and ill-informed criticism.[48]
Privatization of a business asset for purposes of enhancing its business viability and preventing
further losses, regardless of the character of the asset, should not take precedence over non-material
values. A commercial, nay even a budgetary, objective should not be pursued at the expense of
national pride and dignity. For the Constitution enshrines higher and nobler non-material
values. Indeed, the Court will always defer to the Constitution in the proper governance of a free
society; after all, there is nothing so sacrosanct in any economic policy as to draw itself beyond
judicial review when the Constitution is involved.[49]
Nationalism is inherent in the very concept of the Philippines being a democratic and republican
state, with sovereignty residing in the Filipino people and from whom all government authority
emanates. In nationalism, the happiness and welfare of the people must be the goal. The nation-state
can have no higher purpose. Any interpretation of any constitutional provision must adhere to such
basic concept. Protection of foreign investments, while laudible, is merely a policy. It cannot override
the demands of nationalism.[50]
The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to the
highest bidder solely for the sake of privatization. We are not talking about an ordinary piece of
property in a commercial district. We are talking about a historic relic that has hosted many of the
most important events in the short history of the Philippines as a nation. We are talking about a hotel
where heads of states would prefer to be housed as a strong manifestation of their desire to cloak the
dignity of the highest state function to their official visits to the Philippines. Thus the Manila Hotel has
played and continues to play a significant role as an authentic repository of twentieth century
Philippine history and culture. In this sense, it has become truly a reflection of the Filipino soul - a
place with a history of grandeur; a most historical setting that has played a part in the shaping of a
country.[51]
This Court cannot extract rhyme nor reason from the determined efforts of respondents to sell the
historical landmark - this Grand Old Dame of hotels in Asia - to a total stranger. For, indeed, the
10

conveyance of this epic exponent of the Filipino psyche to alien hands cannot be less than
mephistophelian for it is, in whatever manner viewed, a veritable alienation of a nations soul for some
pieces of foreign silver. And so we ask: What advantage, which cannot be equally drawn from a
qualified Filipino, can be gained by the Filipinos if Manila Hotel - and all that it stands for - is sold to a
non-Filipino? How much of national pride will vanish if the nations cultural heritage is entrusted to a
foreign entity? On the other hand, how much dignity will be preserved and realized if the national
patrimony is safekept in the hands of a qualified, zealous and well-meaning Filipino? This is the plain
and simple meaning of the Filipino First Policy provision of the Philippine Constitution. And this Court,
heeding the clarion call of the Constitution and accepting the duty of being the elderly watchman of
the nation, will continue to respect and protect the sanctity of the Constitution.
WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL
CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT
CORPORATE COUNSEL are directed to CEASE and DESIST from selling 51% of the shares of the
Manila Hotel Corporation to RENONG BERHAD, and to ACCEPT the matching bid of petitioner
MANILA PRINCE HOTEL CORPORATION to purchase the subject 51% of the shares of the Manila
Hotel Corporation at P44.00 per share and thereafter to execute the necessary agreements and
documents to effect the sale, to issue the necessary clearances and to do such other acts and deeds
as may be necessary for the purpose.
SO ORDERED.
Regalado, Davide, Jr., Romero, Kapunan, Francisco, and Hermosisima, Jr., JJ, concur.
Narvasa, C.J., (Chairman), and Melo, J., joins J. Puno in his dissent.
Padilla, J., see concurring opinion.
Vitug, J., see separate concurring opinion
Mendoza, J., see concurring opinion
Torres, J., with separate opinion
Puno, J., see dissent.
Panganiban J., with separate dissenting opinion.

B. THE STATE
G.R. No. L-26379 December 27, 1969
WILLIAM C. REAGAN, ETC., petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
Quasha, Asperilla, Blanco, Zafra and Tayag for petitioner.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete,
Solicitor Lolita O. Gal-lang and Special Attorney Gamaliel H. Mantolino for respondent.
FERNANDO, J.:
A question novel in character, the answer to which has far-reaching implications, is raised by
petitioner William C. Reagan, at one time a civilian employee of an American corporation providing
technical assistance to the United States Air Force in the Philippines. He would dispute the payment
of the income tax assessed on him by respondent Commissioner of Internal Revenue on an amount
realized by him on a sale of his automobile to a member of the United States Marine Corps, the
transaction having taken place at the Clark Field Air Base at Pampanga. It is his contention, seriously
and earnestly expressed, that in legal contemplation the sale was made outside Philippine territory
and therefore beyond our jurisdictional power to tax.
Such a plea, far-fetched and implausible, on its face betraying no kinship with reality, he would justify
by invoking, mistakenly as will hereafter be more fully shown an observation to that effect in a 1951
opinion, 1 petitioner ignoring that such utterance was made purely as a flourish of rhetoric and by way
of emphasizing the decision reached, that the trading firm as purchaser of army goods must respond
11

for the sales taxes due from an importer, as the American armed forces being exempt could not be
taxed as such under the National Internal Revenue Code.2 Such an assumption, inspired by the
commendable aim to render unavailing any attempt at tax evasion on the part of such vendee, found
expression anew in a 1962 decision,3 coupled with the reminder however, to render the truth
unmistakable, that "the areas covered by the United States Military Bases are not foreign territories
both in the political and geographical sense."
As thus clarified, it is manifest that such a view amounts at most to a legal fiction and is
moreover obiter. It certainly cannot control the resolution of the specific question that confronts us.
We declare our stand in an unequivocal manner. The sale having taken place on what indisputably is
Philippine territory, petitioner's liability for the income tax due as a result thereof was unavoidable. As
the Court of Tax Appeals reached a similar conclusion, we sustain its decision now before us on
appeal.
In the decision appealed from, the Court of Tax Appeals, after stating the nature of the case, started
the recital of facts thus: "It appears that petitioner, a citizen of the United States and an employee of
Bendix Radio, Division of Bendix Aviation Corporation, which provides technical assistance to the
United States Air Force, was assigned at Clark Air Base, Philippines, on or about July 7, 1959 ... .
Nine (9) months thereafter and before his tour of duty expired, petitioner imported on April 22, 1960 a
tax-free 1960 Cadillac car with accessories valued at $6,443.83, including freight, insurance and
other charges."4 Then came the following: "On July 11, 1960, more than two (2) months after the
1960 Cadillac car was imported into the Philippines, petitioner requested the Base Commander, Clark
Air Base, for a permit to sell the car, which was granted provided that the sale was made to a
member of the United States Armed Forces or a citizen of the United States employed in the U.S.
military bases in the Philippines. On the same date, July 11, 1960, petitioner sold his car for
$6,600.00 to a certain Willie Johnson, Jr. (Private first class), United States Marine Corps, Sangley
Point, Cavite, Philippines, as shown by a Bill of Sale . . . executed at Clark Air Base. On the same
date, Pfc. Willie (William) Johnson, Jr. sold the car to Fred Meneses for P32,000.00 as evidenced by
a deed of sale executed in Manila."5
As a result of the transaction thus made, respondent Commissioner of Internal Revenue, after
deducting the landed cost of the car as well as the personal exemption to which petitioner was
entitled, fixed as his net taxable income arising from such transaction the amount of P17,912.34,
rendering him liable for income tax in the sum of P2,979.00. After paying the sum, he sought a refund
from respondent claiming that he was exempt, but pending action on his request for refund, he filed
the case with the Court of Tax Appeals seeking recovery of the sum of P2,979.00 plus the legal rate
of interest.
As noted in the appealed decision: "The only issue submitted for our resolution is whether or not the
said income tax of P2,979.00 was legally collected by respondent for petitioner."6 After discussing the
legal issues raised, primarily the contention that the Clark Air Base "in legal contemplation, is a base
outside the Philippines" the sale therefore having taken place on "foreign soil", the Court of Tax
Appeals found nothing objectionable in the assessment and thereafter the payment of P2,979.00 as
income tax and denied the refund on the same. Hence, this appeal predicated on a legal theory we
cannot accept. Petitioner cannot make out a case for reversal.
1. Resort to fundamentals is unavoidable to place things in their proper perspective, petitioner
apparently feeling justified in his refusal to defer to basic postulates of constitutional and international
law, induced no doubt by the weight he would accord to the observation made by this Court in the two
opinions earlier referred to. To repeat, scant comfort, if at all is to be derived from such an obiter
dictum, one which is likewise far from reflecting the fact as it is.
Nothing is better settled than that the Philippines being independent and sovereign, its authority may
be exercised over its entire domain. There is no portion thereof that is beyond its power. Within its
limits, its decrees are supreme, its commands paramount. Its laws govern therein, and everyone to
whom it applies must submit to its terms. That is the extent of its jurisdiction, both territorial and
12

personal. Necessarily, likewise, it has to be exclusive. If it were not thus, there is a diminution of its
sovereignty.
It is to be admitted that any state may, by its consent, express or implied, submit to a restriction of its
sovereign rights. There may thus be a curtailment of what otherwise is a power plenary in character.
That is the concept of sovereignty as auto-limitation, which, in the succinct language of Jellinek, "is
the property of a state-force due to which it has the exclusive capacity of legal self-determination and
self-restriction."7 A state then, if it chooses to, may refrain from the exercise of what otherwise is
illimitable competence.
Its laws may as to some persons found within its territory no longer control. Nor does the matter end
there. It is not precluded from allowing another power to participate in the exercise of jurisdictional
right over certain portions of its territory. If it does so, it by no means follows that such areas become
impressed with an alien character. They retain their status as native soil. They are still subject to its
authority. Its jurisdiction may be diminished, but it does not disappear. So it is with the bases under
lease to the American armed forces by virtue of the military bases agreement of 1947. They are not
and cannot be foreign territory.
Decisions coming from petitioner's native land, penned by jurists of repute, speak to that effect with
impressive unanimity. We start with the citation from Chief Justice Marshall, announced in the leading
case of Schooner Exchange v. M'Faddon,8 an 1812 decision: "The jurisdiction of the nation within its
own territory is necessarily exclusive and absolute. It is susceptible of no limitation not imposed by
itself. Any restriction upon it, deriving validity from an external source, would imply a diminution of its
sovereignty to the extent of the restriction, and an investment of that sovereignty to the same extent
in that power which could impose such restriction." After which came this paragraph: "All exceptions,
therefore, to the full and complete power of a nation within its own territories, must be traced up to the
consent of the nation itself. They can flow from no other legitimate source."
Chief Justice Taney, in an 1857 decision,9 affirmed the fundamental principle of everyone within the
territorial domain of a state being subject to its commands: "For undoubtedly every person who is
found within the limits of a government, whether the temporary purposes or as a resident, is bound by
its laws." It is no exaggeration then for Justice Brewer to stress that the United States government "is
one having jurisdiction over every foot of soil within its territory, and acting directly upon each
[individual found therein]; . . ."10
Not too long ago, there was a reiteration of such a view, this time from the pen of Justice Van
Devanter. Thus: "It now is settled in the United States and recognized elsewhere that the territory
subject to its jurisdiction includes the land areas under its dominion and control the ports, harbors,
bays, and other in closed arms of the sea along its coast, and a marginal belt of the sea extending
from the coast line outward a marine league, or 3 geographic miles."11 He could cite moreover, in
addition to many American decisions, such eminent treatise-writers as Kent, Moore, Hyde, Wilson,
Westlake, Wheaton and Oppenheim.
As a matter of fact, the eminent commentator Hyde in his three-volume work on International Law, as
interpreted and applied by the United States, made clear that not even the embassy premises of a
foreign power are to be considered outside the territorial domain of the host state. Thus: "The ground
occupied by an embassy is not in fact the territory of the foreign State to which the premises belong
through possession or ownership. The lawfulness or unlawfulness of acts there committed is
determined by the territorial sovereign. If an attache commits an offense within the precincts of an
embassy, his immunity from prosecution is not because he has not violated the local law, but rather
for the reason that the individual is exempt from prosecution. If a person not so exempt, or whose
immunity is waived, similarly commits a crime therein, the territorial sovereign, if it secures custody of
the offender, may subject him to prosecution, even though its criminal code normally does not
contemplate the punishment of one who commits an offense outside of the national domain. It is not
believed, therefore, that an ambassador himself possesses the right to exercise jurisdiction, contrary
to the will of the State of his sojourn, even within his embassy with respect to acts there committed.
13

Nor is there apparent at the present time any tendency on the part of States to acquiesce in his
exercise of it."12
2. In the light of the above, the first and crucial error imputed to the Court of Tax Appeals to the effect
that it should have held that the Clark Air Force is foreign soil or territory for purposes of income tax
legislation is clearly without support in law. As thus correctly viewed, petitioner's hope for the reversal
of the decision completely fades away. There is nothing in the Military Bases Agreement that lends
support to such an assertion. It has not become foreign soil or territory. This country's jurisdictional
rights therein, certainly not excluding the power to tax, have been preserved. As to certain tax
matters, an appropriate exemption was provided for.
Petitioner could not have been unaware that to maintain the contrary would be to defy reality and
would be an affront to the law. While his first assigned error is thus worded, he would seek to impart
plausibility to his claim by the ostensible invocation of the exemption clause in the Agreement by
virtue of which a "national of the United States serving in or employed in the Philippines in connection
with the construction, maintenance, operation or defense of the bases and residing in the Philippines
only by reason of such employment" is not to be taxed on his income unless "derived from Philippine
source or sources other than the United States sources."13 The reliance, to repeat, is more apparent
than real for as noted at the outset of this opinion, petitioner places more faith not on the language of
the provision on exemption but on a sentiment given expression in a 1951 opinion of this Court, which
would be made to yield such an unwarranted interpretation at war with the controlling constitutional
and international law principles. At any rate, even if such a contention were more adequately pressed
and insisted upon, it is on its face devoid of merit as the source clearly was Philippine.
In Saura Import and Export Co. v. Meer,14 the case above referred to, this Court affirmed a decision
rendered about seven months previously,15 holding liable as an importer, within the contemplation of
the National Internal Revenue Code provision, the trading firm that purchased army goods from a
United States government agency in the Philippines. It is easily understandable why. If it were not
thus, tax evasion would have been facilitated. The United States forces that brought in such
equipment later disposed of as surplus, when no longer needed for military purposes, was beyond the
reach of our tax statutes.
Justice Tuason, who spoke for the Court, adhered to such a rationale, quoting extensively from the
earlier opinion. He could have stopped there. He chose not to do so. The transaction having occurred
in 1946, not so long after the liberation of the Philippines, he proceeded to discuss the role of the
American military contingent in the Philippines as a belligerent occupant. In the course of such a
dissertion, drawing on his well-known gift for rhetoric and cognizant that he was making an as
if statement, he did say: "While in army bases or installations within the Philippines those goods were
in contemplation of law on foreign soil."
It is thus evident that the first, and thereafter the controlling, decision as to the liability for sales taxes
as an importer by the purchaser, could have been reached without any need for such expression as
that given utterance by Justice Tuason. Its value then as an authoritative doctrine cannot be as much
as petitioner would mistakenly attach to it. It was clearly obiter not being necessary for the resolution
of the issue before this Court.16 It was an opinion "uttered by the way."17 It could not then be
controlling on the question before us now, the liability of the petitioner for income tax which, as
announced at the opening of this opinion, is squarely raised for the first time.18
On this point, Chief Justice Marshall could again be listened to with profit. Thus: "It is a maxim, not to
be disregarded, that general expressions, in every opinion, are to be taken in connection with the
case in which those expressions are used. If they go beyond the case, they may be respected, but
ought not to control the judgment in a subsequent suit when the very point is presented for
decision."19
Nor did the fact that such utterance of Justice Tuason was cited in Co Po v. Collector of Internal
Revenue,20 a 1962 decision relied upon by petitioner, put a different complexion on the matter. Again,
it was by way of pure embellishment, there being no need to repeat it, to reach the conclusion that it
14

was the purchaser of army goods, this time from military bases, that must respond for the advance
sales taxes as importer. Again, the purpose that animated the reiteration of such a view was clearly to
emphasize that through the employment of such a fiction, tax evasion is precluded. What is more,
how far divorced from the truth was such statement was emphasized by Justice Barrera, who penned
the Co Po opinion, thus: "It is true that the areas covered by the United States Military Bases are not
foreign territories both in the political and geographical sense."21
Justice Tuason moreover made explicit that rather than corresponding with reality, what was said by
him was in the way of a legal fiction. Note his stress on "in contemplation of law." To lend further
support to a conclusion already announced, being at that a confirmation of what had been arrived at
in the earlier case, distinguished by its sound appreciation of the issue then before this Court and to
preclude any tax evasion, an observation certainly not to be taken literally was thus given utterance.
This is not to say that it should have been ignored altogether afterwards. It could be utilized again, as
it undoubtedly was, especially so for the purpose intended, namely to stigmatize as without support in
law any attempt on the part of a taxpayer to escape an obligation incumbent upon him. So it was
quoted with that end in view in the Co Po case. It certainly does not justify any effort to render futile
the collection of a tax legally due, as here. That was farthest from the thought of Justice Tuason.
What is more, the statement on its face is, to repeat, a legal fiction. This is not to discount the uses of
a fictio juris in the science of the law. It was Cardozo who pointed out its value as a device "to
advance the ends of justice" although at times it could be "clumsy" and even "offensive".22 Certainly,
then, while far from objectionable as thus enunciated, this observation of Justice Tuason could be
misused or misconstrued in a clumsy manner to reach an offensive result. To repeat, properly used, a
legal fiction could be relied upon by the law, as Frankfurter noted, in the pursuit of legitimate
ends.23 Petitioner then would be well-advised to take to heart such counsel of care and
circumspection before invoking not a legal fiction that would avoid a mockery of the law by avoiding
tax evasion but what clearly is a misinterpretation thereof, leading to results that would have shocked
its originator.
The conclusion is thus irresistible that the crucial error assigned, the only one that calls for discussion
to the effect that for income tax purposes the Clark Air Force Base is outside Philippine territory, is
utterly without merit. So we have said earlier.
3. To impute then to the statement of Justice Tuason the meaning that petitioner would fasten on it is,
to paraphrase Frankfurter, to be guilty of succumbing to the vice of literalness. To so conclude is,
whether by design or inadvertence, to misread it. It certainly is not susceptible of the mischievous
consequences now sought to be fastened on it by petitioner.
That it would be fraught with such peril to the enforcement of our tax statutes on the military bases
under lease to the American armed forces could not have been within the contemplation of Justice
Tuason. To so attribute such a bizarre consequence is to be guilty of a grave disservice to the
memory of a great jurist. For his real and genuine sentiment on the matter in consonance with the
imperative mandate of controlling constitutional and international law concepts was categorically set
forth by him, not as an obiter but as the rationale of the decision, in People v. Acierto24 thus: "By the
[Military Bases] Agreement, it should be noted, the Philippine Government merely consents that the
United States exercise jurisdiction in certain cases. The consent was given purely as a matter of
comity, courtesy, or expediency over the bases as part of the Philippine territory or divested itself
completely of jurisdiction over offenses committed therein."
Nor did he stop there. He did stress further the full extent of our territorial jurisdiction in words that do
not admit of doubt. Thus: "This provision is not and can not on principle or authority be construed as a
limitation upon the rights of the Philippine Government. If anything, it is an emphatic recognition and
reaffirmation of Philippine sovereignty over the bases and of the truth that all jurisdictional rights
granted to the United States and not exercised by the latter are reserved by the Philippines for
itself."25
15

It is in the same spirit that we approach the specific question confronting us in this litigation. We hold,
as announced at the outset, that petitioner was liable for the income tax arising from a sale of his
automobile in the Clark Field Air Base, which clearly is and cannot otherwise be other than, within our
territorial jurisdiction to tax.
4. With the mist thus lifted from the situation as it truly presents itself, there is nothing that stands in
the way of an affirmance of the Court of Tax Appeals decision. No useful purpose would be served by
discussing the other assigned errors, petitioner himself being fully aware that if the Clark Air Force
Base is to be considered, as it ought to be and as it is, Philippine soil or territory, his claim for
exemption from the income tax due was distinguished only by its futility.
There is further satisfaction in finding ourselves unable to indulge petitioner in his plea for reversal.
We thus manifest fealty to a pronouncement made time and time again that the law does not look
with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words
too plain to be mistaken and too categorical to be misinterpreted.26 Petitioner had not done so.
Petitioner cannot do so.
WHEREFORE, the decision of the Court of Tax Appeals of May 12, 1966 denying the refund of
P2,979.00 as the income tax paid by petitioner is affirmed. With costs against petitioner.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Teehankee, JJ., concur.
Reyes, J.B.L., J., concurs in the result.
Barredo, J., took no part.

[G.R. No. 143377. February 20, 2001]

SHIPSIDE INCORPORATED, petitioner, vs. THE HON. COURT OF APPEALS [Special Former
Twelfth Division], HON. REGIONAL TRIAL COURT, BRANCH 26 (San Fernando City, La
Union) & The REPUBLIC OF THE PHILIPPINES, respondents.
DECISION
MELO, J.:
Before the Court is a petition for certiorari filed by Shipside Incorporated under Rule 65 of the
1997 Rules on Civil Procedure against the resolutions of the Court of Appeals promulgated on
November 4, 1999 and May 23, 2000, which respectively, dismissed a petition for certiorari and
prohibition and thereafter denied a motion for reconsideration.
The antecedent facts are undisputed:
On October 29, 1958, Original Certificate of Title No. 0-381 was issued in favor of Rafael Galvez,
over four parcels of land Lot 1 with 6,571 square meters; Lot 2, with 16,777 square meters; Lot 3 with
1,583 square meters; and Lot 4, with 508 square meters.
On April 11, 1960, Lots No. 1 and 4 were conveyed by Rafael Galvez in favor of Filipina Mamaril,
Cleopatra Llana, Regina Bustos, and Erlinda Balatbat in a deed of sale which was inscribed as Entry
No. 9115 OCT No. 0-381 on August 10, 1960. Consequently, Transfer Certificate No. T-4304 was
issued in favor of the buyers covering Lots No. 1 and 4.
Lot No. 1 is described as:
A parcel of land (Lot 1, Plan PSU-159621, L. R. Case No. N-361; L. R. C. Record No. N-14012,
situated in the Barrio of Poro, Municipality of San Fernando, Province of La Union, bounded on the
NE, by the Foreshore; on the SE, by Public Land and property of the Benguet Consolidated Mining
Company; on the SW, by properties of Rafael Galvez (US Military Reservation Camp Wallace) and
Policarpio Munar; and on the NW, by an old Barrio Road. Beginning at a point marked 1 on plan,
being S. 74 deg. 11W. , 2670. 36 from B. L. L. M. 1, San Fernando, thence
S. 66 deg. 19E., 134.95 m. to point 2; S. 14 deg. 57W., 11.79 m. to point 3;
S. 12 deg. 45W., 27.00 m. to point 4; S. 12 deg. 45W, 6.90 m. to point 5;
N. 69 deg., 32W., 106.00 m. to point 6; N. 52 deg., 21W., 36. 85 m. to point 7;
16

N. 21 deg. 31E., 42. 01 m. to the point of beginning; containing an area of SIX THOUSAND FIVE
HUNDRED AND SEVENTY-ONE (6,571) SQUARE METERS, more or less. All points referred to are
indicated on the plan; and marked on the ground; bearings true, date of survey, February 421, 1957.
Lot No. 4 has the following technical description:
A parcel of land (Lot 4, Plan PSU-159621, L. R. Case No. N-361 L. R. C. Record No. N-14012),
situated in the Barrio of Poro, Municipality of San Fernando, La Union. Bounded on the SE by the
property of the Benguet Consolidated Mining Company; on the S. by property of Pelagia Carino; and
on the NW by the property of Rafael Galvez (US Military Reservation, Camp Wallace).Beginning at a
point marked 1 on plan, being S. deg. 24W. 2591. 69 m. from B. L. L. M. 1, San Fernando, thence S.
12 deg. 45W., 73. 03 m. to point 2; N. 79 deg. 59W., 13.92 m. to point 3; N. 23 deg. 26E. , 75.00 m.
to the point of beginning; containing an area of FIVE HUNDED AND EIGHT (508) SQUARE
METERS, more or less. All points referred to are indicated in the plan and marked on the ground;
bearings true, date of survey, February 4-21, 1957.
On August 16, 1960, Mamaril, et al. sold Lots No. 1 and 4 to Lepanto Consolidated Mining
Company. The deed of sale covering the aforesaid property was inscribed as Entry No. 9173 on TCT
No. T-4304. Subsequently, Transfer Certificate No. T-4314 was issued in the name of Lepanto
Consolidated Mining Company as owner of Lots No. 1 and 4.
On February 1, 1963, unknown to Lepanto Consolidated Mining Company, the Court of First
Instance of La Union, Second Judicial District, issued an Order in Land Registration Case No. N-361
(LRC Record No. N-14012) entitled Rafael Galvez, Applicant, Eliza Bustos, et al., Parties-In-Interest;
Republic of the Philippines, Movant declaring OCT No. 0-381 of the Registry of Deeds for the
Province of La Union issued in the name of Rafael Galvez, null and void, and ordered the cancellation
thereof.
The Order pertinently provided:
Accordingly, with the foregoing, and without prejudice on the rights of incidental parties concerned
herein to institute their respective appropriate actions compatible with whatever cause they may have,
it is hereby declared and this court so holds that both proceedings in Land Registration Case No. N-
361 and Original Certificate No. 0-381 of the Registry of Deeds for the province of La Union issued in
virtue thereof and registered in the name of Rafael Galvez, are null and void; the Register of Deeds
for the Province of La Union is hereby ordered to cancel the said original certificate and / or such
other certificates of title issued subsequent thereto having reference to the same parcels of land;
without pronouncement as to costs.
On October 28, 1963, Lepanto Consolidated Mining Company sold to herein petitioner Lots No. 1
and 4, with the deed being entered in TCT NO. 4314 as entry No. 12381. Transfer Certificate of Title
No. T-5710 was thus issued in favor of the petitioner which starting since then exercised proprietary
rights over Lots No. 1 and 4.
In the meantime, Rafael Galvez filed his motion for reconsideration against the order issued by
the trial court declaring OCT No. 0-381 null and void. The motion was denied on January 25,
1965. On appeal, the Court of Appeals ruled in favor of the Republic of the Philippines in a Resolution
promulgated on August 14, 1973 in CA-G. R. No. 36061-R.
Thereafter, the Court of Appeals issued an Entry of Judgment, certifying that its decision dated
August 14, 1973 became final and executory on October 23, 1973.
On April 22, 1974, the trial court in L. R. C. Case No. N-361 issued a writ of execution of the
judgment which was served on the Register of Deeds, San Fernando, La Union on April 29, 1974.
Twenty four long years thereafter, on January 14, 1999, the Office of the Solicitor General
received a letter dated January 11, 1999 from Mr. Victor G. Floresca, Vice-President, John Hay Poro
Point Development Corporation, stating that the aforementioned orders and decision of the trial court
in L. R. C. No. N-361 have not been executed by the Register of Deeds, San Fernando, La Union
despite receipt of the writ of execution.
17

On April 21, 1999, the Office of the Solicitor General filed a complaint for revival of judgment and
cancellation of titles before the Regional Trial Court of the First Judicial Region (Branch 26, San
Fernando, La Union) docketed therein as Civil Case No. 6346 entitled, Republic of the Philippines,
Plaintiff, versus Heirs of Rafael Galvez, represented by Teresita Tan, Reynaldo Mamaril, Elisa
Bustos, Erlinda Balatbat, Regina Bustos, Shipside Incorporated and the Register of Deeds of La
Union, Defendants.
The evidence shows that the impleaded defendants (except the Register of Deeds of the province
of La Union) are the successors-in-interest of Rafael Galvez (not Reynaldo Galvez as alleged by the
Solicitor General) over the property covered by OCT No. 0-381, namely: (a) Shipside Inc. which is
presently the registered owner in fee simple of Lots No. 1 and 4 covered by TCT No. T-5710, with a
total area of 7,079 square meters; (b) Elisa Bustos, Jesusito Galvez, and Teresita Tan who are the
registered owners of Lot No. 2 of OCT No. 0-381;and (c) Elisa Bustos, Filipina Mamaril, Regina
Bustos and Erlinda Balatbat who are the registered owners of Lot No. 3 of OCT No. 0-381, now
covered by TCT No. T-4916, with an area of 1,583 square meters.
In its complaint in Civil Case No. 6346, the Solicitor General argued that since the trial court in
LRC Case No. 361 had ruled and declared OCT No. 0-381 to be null and void, which ruling was
subsequently affirmed by the Court of Appeals, the defendants-successors-in-interest of Rafael
Galvez have no valid title over the property covered by OCT No. 0-381, and the subsequent Torrens
titles issued in their names should be consequently cancelled.
On July 22, 1999, petitioner Shipside, Inc. filed its Motion to Dismiss, based on the following
grounds: (1) the complaint stated no cause of action because only final and executory judgments may
be subject of an action for revival of judgment; (2) the plaintiff is not the real party-in-interest because
the real property covered by the Torrens titles sought to be cancelled, allegedly part of Camp Wallace
(Wallace Air Station), were under the ownership and administration of the Bases Conversion
Development Authority (BCDA) under Republic Act No. 7227; (3) plaintiffs cause of action is barred
by prescription; (4) twenty-five years having lapsed since the issuance of the writ of execution, no
action for revival of judgment may be instituted because under Paragraph 3 of Article 1144 of the Civil
Code, such action may be brought only within ten (10) years from the time the judgment had been
rendered.
An opposition to the motion to dismiss was filed by the Solicitor General on August 23, 1999,
alleging among others, that: (1) the real party-in-interest is the Republic of the Philippines;and (2)
prescription does not run against the State.
On August 31, 1999, the trial court denied petitioners motion to dismiss and on October 14, 1999,
its motion for reconsideration was likewise turned down.
On October 21, 1999, petitioner instituted a petition for certiorari and prohibition with the Court of
Appeals, docketed therein as CA-G.R. SP No. 55535, on the ground that the orders of the trial court
denying its motion to dismiss and its subsequent motion for reconsideration were issued in excess of
jurisdiction.
On November 4, 1999, the Court of Appeals dismissed the petition in CA-G.R. SP No. 55535 on
the ground that the verification and certification in the petition, under the signature of Lorenzo Balbin,
Jr., was made without authority, there being no proof therein that Balbin was authorized to institute
the petition for and in behalf and of petitioner.
On May 23, 2000, the Court of Appeals denied petitioners motion for reconsideration on the
grounds that: (1) a complaint filed on behalf of a corporation can be made only if authorized by its
Board of Directors, and in the absence thereof, the petition cannot prosper and be granted due
course;and (2) petitioner was unable to show that it had substantially complied with the rule requiring
proof of authority to institute an action or proceeding.
Hence, the instant petition.
In support of its petition, Shipside, Inc. asseverates that:
18

1. The Honorable Court of Appeals gravely abused its discretion in dismissing the petition
when it made a conclusive legal presumption that Mr. Balbin had no authority to sign the
petition despite the clarity of laws, jurisprudence and Secretarys certificate to the contrary;
2. The Honorable Court of Appeals abused its discretion when it dismissed the petition, in
effect affirming the grave abuse of discretion committed by the lower court when it refused
to dismiss the 1999 Complaint for Revival of a 1973 judgment, in violation of clear laws
and jurisprudence.
Petitioner likewise adopted the arguments it raised in the petition and comment/reply it filed with
the Court of Appeals, attached to its petition as Exhibit L and N, respectively.
In his Comment, the Solicitor General moved for the dismissal of the instant petition based on the
following considerations: (1) Lorenzo Balbin, who signed for and in behalf of petitioner in the
verification and certification of non-forum shopping portion of the petition, failed to show proof of his
authorization to institute the petition for certiorari and prohibition with the Court of Appeals, thus the
latter court acted correctly in dismissing the same; (2) the real party-in-interest in the case at bar
being the Republic of the Philippines, its claims are imprescriptible.
In order to preserve the rights of herein parties, the Court issued a temporary restraining order on
June 26, 2000 enjoining the trial court from conducting further proceedings in Civil Case No. 6346.
The issues posited in this case are: (1) whether or not an authorization from petitioners Board of
Directors is still required in order for its resident manager to institute or commence a legal action for
and in behalf of the corporation; and (2) whether or not the Republic of the Philippines can maintain
the action for revival of judgment herein.
We find for petitioner.
Anent the first issue:
The Court of Appeals dismissed the petition for certiorari on the ground that Lorenzo Balbin, the
resident manager for petitioner, who was the signatory in the verification and certification on non-
forum shopping, failed to show proof that he was authorized by petitioners board of directors to file
such a petition.
A corporation, such as petitioner, has no power except those expressly conferred on it by the
Corporation Code and those that are implied or incidental to its existence. In turn, a corporation
exercises said powers through its board of directors and / or its duly authorized officers and
agents. Thus, it has been observed that the power of a corporation to sue and be sued in any court is
lodged with the board of directors that exercises its corporate powers (Premium Marble Resources,
Inc. v. CA, 264 SCRA 11 [1996]). In turn, physical acts of the corporation, like the signing of
documents, can be performed only by natural persons duly authorized for the purpose by corporate
by-laws or by a specific act of the board of directors.
It is undisputed that on October 21, 1999, the time petitioners Resident Manager Balbin filed the
petition, there was no proof attached thereto that Balbin was authorized to sign the verification and
non-forum shopping certification therein, as a consequence of which the petition was dismissed by
the Court of Appeals. However, subsequent to such dismissal, petitioner filed a motion for
reconsideration, attaching to said motion a certificate issued by its board secretary stating that on
October 11, 1999, or ten days prior to the filing of the petition, Balbin had been authorized by
petitioners board of directors to file said petition.
The Court has consistently held that the requirement regarding verification of a pleading is formal,
not jurisdictional (Uy v. LandBank, G.R. No. 136100, July 24, 2000). Such requirement is simply a
condition affecting the form of the pleading, non-compliance with which does not necessarily render
the pleading fatally defective. Verification is simply intended to secure an assurance that the
allegations in the pleading are true and correct and not the product of the imagination or a matter of
speculation, and that the pleading is filed in good faith. The court may order the correction of the
pleading if verification is lacking or act on the pleading although it is not verified, if the attending
19

circumstances are such that strict compliance with the rules may be dispensed with in order that the
ends of justice may thereby be served.
On the other hand, the lack of certification against forum shopping is generally not curable by the
submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of Civil
Procedure provides that the failure of the petitioner to submit the required documents that should
accompany the petition, including the certification against forum shopping, shall be sufficient ground
for the dismissal thereof. The same rule applies to certifications against forum shopping signed by a
person on behalf of a corporation which are unaccompanied by proof that said signatory is authorized
to file a petition on behalf of the corporation.
In certain exceptional circumstances, however, the Court has allowed the belated filing of the
certification. In Loyola v. Court of Appeals, et. al. (245 SCRA 477 [1995]), the Court considered the
filing of the certification one day after the filing of an election protest as substantial compliance with
the requirement. In Roadway Express, Inc. v. Court of Appeals, et. al. (264 SCRA 696 [1996]), the
Court allowed the filing of the certification 14 days before the dismissal of the petition. In Uy v.
LandBank, supra, the Court had dismissed Uys petition for lack of verification and certification against
non-forum shopping. However, it subsequently reinstated the petition after Uy submitted a motion to
admit certification and non-forum shopping certification. In all these cases, there were special
circumstances or compelling reasons that justified the relaxation of the rule requiring verification and
certification on non-forum shopping.
In the instant case, the merits of petitioners case should be considered special circumstances or
compelling reasons that justify tempering the requirement in regard to the certificate of non-forum
shopping. Moreover, in Loyola, Roadway, and Uy, the Court excused non-compliance with the
requirement as to the certificate of non-forum shopping. With more reason should we allow the instant
petition since petitioner herein did submit a certification on non-forum shopping, failing only to show
proof that the signatory was authorized to do so. That petitioner subsequently submitted a secretarys
certificate attesting that Balbin was authorized to file an action on behalf of petitioner likewise
mitigates this oversight.
It must also be kept in mind that while the requirement of the certificate of non-forum shopping is
mandatory, nonetheless the requirements must not be interpreted too literally and thus defeat the
objective of preventing the undesirable practice of forum-shopping (Bernardo v. NLRC, 255 SCRA
108 [1996]). Lastly, technical rules of procedure should be used to promote, not frustrate
justice. While the swift unclogging of court dockets is a laudable objective, the granting of substantial
justice is an even more urgent ideal.
Now to the second issue:
The action instituted by the Solicitor General in the trial court is one for revival of judgment which
is governed by Article 1144(3) of the Civil Code and Section 6, Rule 39 of the 1997 Rules on Civil
Procedure. Article 1144(3) provides that an action upon a judgment must be brought within 10 years
from the time the right of action accrues." On the other hand, Section 6, Rule 39 provides that a final
and executory judgment or order may be executed on motion within five (5) years from the date of its
entry, but that after the lapse of such time, and before it is barred by the statute of limitations, a
judgment may be enforced by action. Taking these two provisions into consideration, it is plain that an
action for revival of judgment must be brought within ten years from the time said judgment becomes
final.
From the records of this case, it is clear that the judgment sought to be revived became final
on October 23, 1973. On the other hand, the action for revival of judgment was instituted only in
1999, or more than twenty-five (25) years after the judgment had become final. Hence, the action is
barred by extinctive prescription considering that such an action can be instituted only within ten (10)
years from the time the cause of action accrues.
20

The Solicitor General, nonetheless, argues that the States cause of action in the cancellation of
the land title issued to petitioners predecessor-in-interest is imprescriptible because it is included in
Camp Wallace, which belongs to the government.
The argument is misleading.
While it is true that prescription does not run against the State, the same may not be invoked by
the government in this case since it is no longer interested in the subject matter. While Camp Wallace
may have belonged to the government at the time Rafael Galvezs title was ordered cancelled in Land
Registration Case No. N-361, the same no longer holds true today.
Republic Act No. 7227, otherwise known as the Bases Conversion and Development Act of 1992,
created the Bases Conversion and Development Authority. Section 4 pertinently provides:
Section 4. Purposes of the Conversion Authority. The Conversion Authority shall have the following
purposes:
(a) To own, hold and/or administer the military reservations of John Hay Air Station, Wallace
Air Station, ODonnell Transmitter Station, San Miguel Naval Communications Station, Mt.
Sta. Rita Station (Hermosa, Bataan) and those portions of Metro Manila military camps
which may be transferred to it by the President;
Section 2 of Proclamation No. 216, issued on July 27, 1993, also provides:
Section 2. Transfer of Wallace Air Station Areas to the Bases Conversion and Development
Authority. All areas covered by the Wallace Air Station as embraced and defined by the 1947 Military
Bases Agreement between the Philippines and the United States of America, as amended, excluding
those covered by Presidential Proclamations and some 25-hectare area for the radar and
communication station of the Philippine Air Force, are hereby transferred to the Bases Conversion
Development Authority
With the transfer of Camp Wallace to the BCDA, the government no longer has a right or interest
to protect. Consequently, the Republic is not a real party in interest and it may not institute the instant
action. Nor may it raise the defense of imprescriptibility, the same being applicable only in cases
where the government is a party in interest. Under Section 2 of Rule 3 of the 1997 Rules of Civil
Procedure, every action must be prosecuted or defended in the name of the real party in interest. To
qualify a person to be a real party in interest in whose name an action must be prosecuted, he must
appear to be the present real owner of the right sought to enforced (Pioneer Insurance v. CA, 175
SCRA 668 [1989]). A real party in interest is the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. And by real interest is meant a
present substantial interest, as distinguished from a mere expectancy, or a future, contingent,
subordinate or consequential interest (Ibonilla v. Province of Cebu, 210 SCRA 526 [1992]). Being the
owner of the areas covered by Camp Wallace, it is the Bases Conversion and Development Authority,
not the Government, which stands to be benefited if the land covered by TCT No. T-5710 issued in
the name of petitioner is cancelled.
Nonetheless, it has been posited that the transfer of military reservations and their extensions to
the BCDA is basically for the purpose of accelerating the sound and balanced conversion of these
military reservations into alternative productive uses and to enhance the benefits to be derived from
such property as a measure of promoting the economic and social development, particularly of
Central Luzon and, in general, the countrys goal for enhancement (Section 2, Republic Act
No. 7227). It is contended that the transfer of these military reservations to the Conversion Authority
does not amount to an abdication on the part of the Republic of its interests, but simply a recognition
of the need to create a body corporate which will act as its agent for the realization of its program. It is
consequently asserted that the Republic remains to be the real party in interest and the Conversion
Authority merely its agent.
We, however, must not lose sight of the fact that the BCDA is an entity invested with a personality
separate and distinct from the government. Section 3 of Republic Act No. 7227 reads:
21

Section 3. Creation of the Bases Conversion and Development Authority. There is hereby created a
body corporate to be known as the Conversion Authority which shall have the attribute of perpetual
succession and shall be vested with the powers of a corporation.
It may not be amiss to state at this point that the functions of government have been classified
into governmental or constituent and proprietary or ministrant. While public benefit and public welfare,
particularly, the promotion of the economic and social development of Central Luzon, may be
attributable to the operation of the BCDA, yet it is certain that the functions performed by the BCDA
are basically proprietary in nature. The promotion of economic and social development of Central
Luzon, in particular, and the countrys goal for enhancement, in general, do not make the BCDA
equivalent to the Government. Other corporations have been created by government to act as its
agents for the realization of its programs, the SSS, GSIS, NAWASA and the NIA, to count a few, and
yet, the Court has ruled that these entities, although performing functions aimed at promoting public
interest and public welfare, are not government-function corporations invested with governmental
attributes. It may thus be said that the BCDA is not a mere agency of the Government but a corporate
body performing proprietary functions.
Moreover, Section 5 of Republic Act No. 7227 provides:
Section 5. Powers of the Conversion Authority. To carry out its objectives under this Act, the
Conversion Authority is hereby vested with the following powers:
(a) To succeed in its corporate name, to sue and be sued in such corporate name and to
adopt, alter and use a corporate seal which shall be judicially noticed;
Having the capacity to sue or be sued, it should thus be the BCDA which may file an action to
cancel petitioners title, not the Republic, the former being the real party in interest. One having no
right or interest to protect cannot invoke the jurisdiction of the court as a party plaintiff in an action
(Ralla v. Ralla, 199 SCRA 495 [1991]). A suit may be dismissed if the plaintiff or the defendant is not
a real party in interest. If the suit is not brought in the name of the real party in interest, a motion to
dismiss may be filed, as was done by petitioner in this case, on the ground that the complaint states
no cause of action (Tanpingco v. IAC, 207 SCRA 652 [1992]).
However, E. B. Marcha Transport Co. , Inc. v. IAC (147 SCRA 276 [1987]) is cited as authority
that the Republic is the proper party to sue for the recovery of possession of property which at the
time of the institution of the suit was no longer held by the national government but by the Philippine
Ports Authority. In E. B. Marcha, the Court ruled:
It can be said that in suing for the recovery of the rentals, the Republic of the Philippines, acted as
principal of the Philippine Ports Authority, directly exercising the commission it had earlier conferred
on the latter as its agent. We may presume that, by doing so, the Republic of the Philippines did not
intend to retain the said rentals for its own use, considering that by its voluntary act it had transferred
the land in question to the Philippine Ports Authority effective July 11, 1974. The Republic of the
Philippines had simply sought to assist, not supplant, the Philippine Ports Authority, whose title to the
disputed property it continues to recognize. We may expect then that the said rentals, once collected
by the Republic of the Philippines, shall be turned over by it to the Philippine Ports Authority
conformably to the purposes of P. D. No. 857.
E. B. Marcha is, however, not on all fours with the case at bar. In the former, the Court
considered the Republic a proper party to sue since the claims of the Republic and the Philippine
Ports Authority against the petitioner therein were the same. To dismiss the complaint in E. B.
Marcha would have brought needless delay in the settlement of the matter since the PPA would have
to refile the case on the same claim already litigated upon. Such is not the case here since to allow
the government to sue herein enables it to raise the issue of imprescriptibility, a claim which is not
available to the BCDA. The rule that prescription does not run against the State does not apply to
corporations or artificial bodies created by the State for special purposes, it being said that when the
title of the Republic has been divested, its grantees, although artificial bodies of its own creation, are
in the same category as ordinary persons (Kingston v. LeHigh Valley Coal Co., 241 Pa 469).By
22

raising the claim of imprescriptibility, a claim which cannot be raised by the BCDA, the Government
not only assists the BCDA, as it did in E. B. Marcha, it even supplants the latter, a course of action
proscribed by said case.
Moreover, to recognize the Government as a proper party to sue in this case would set a bad
precedent as it would allow the Republic to prosecute, on behalf of government-owned or controlled
corporations, causes of action which have already prescribed, on the pretext that the Government is
the real party in interest against whom prescription does not run, said corporations having been
created merely as agents for the realization of government programs.
Parenthetically, petitioner was not a party to the original suit for cancellation of title commenced
by the Republic twenty-seven years for which it is now being made to answer, nay, being made to
suffer financial losses.
It should also be noted that petitioner is unquestionably a buyer in good faith and for value,
having acquired the property in 1963, or 5 years after the issuance of the original certificate of title, as
a third transferee. If only not to do violence and to give some measure of respect to the Torrens
System, petitioner must be afforded some measure of protection.
One more point.
Since the portion in dispute now forms part of the property owned and administered by the Bases
Conversion and Development Authority, it is alienable and registerable real property.
We find it unnecessary to rule on the other matters raised by the herein parties.
WHEREFORE, the petition is hereby granted and the orders dated August 31, 1999 and October
4, 1999 of the Regional Trial Court of the First National Judicial Region (Branch 26, San Fernando,
La Union) in Civil Case No. 6346 entitled Republic of the Philippines, Plaintiff, versus Heirs of Rafael
Galvez, et. al., Defendants as well as the resolutions promulgated on November 4, 1999 and May 23,
2000 by the Court of Appeals (Twelfth Division) in CA-G. R. SP No. 55535 entitled Shipside, Inc.,
Petitioner versus Hon. Alfredo Cajigal, as Judge, RTC, San Fernando, La Union, Branch 26, and the
Republic of the Philippines, Respondents are hereby reversed and set aside. The complaint in Civil
Case No. 6346, Regional Trial Court, Branch 26, San Fernando City, La Union entitled Republic of
the Philippines, Plaintiff, versus Heirs of Rafael Galvez, et al." is ordered dismissed, without prejudice
to the filing of an appropriate action by the Bases Development and Conversion Authority.
SO ORDERED.
Panganiban, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ. , concur.
Vitug, J. , Please see separate opinion.
SEPARATE OPINION

VITUG, J.:
I find no doctrinal difficulty in adhering to the draft ponencia written by our esteemed
Chairman. Mr. Justice JARM, insofar as it declares that an action for revival of judgment is barred by
extinctive prescription, if not brought within ten (10) years from the time the right of action accrues,
pursuant to Article 1144(3) of the New Civil Code. It appears that the judgment in the instant case has
become final on 23 October 1973 or well more than two decades prior to the action for its revival
instituted only in 1999.
With due respect, however, I still am unable to subscribe to the idea that prescription may not be
invoked by the government in this case upon the thesis that the transfer of Camp Wallace to the
Bases Conversion Development authority renders the Republic with no right or interest to protect and
thus unqualified under the rules of procedure to be the real party-in-interest. While it is true that
Republic Act 7227, otherwise known as the Bases Conversion and Development Act of 1992,
authorizes the transfer of the military reservations and their extensions to the conversion Authority,
the same, however, is basically for the purpose of accelerating the sound and balanced conversion of
these military reservations into alternative productive uses and to enhance the benefits to be derived
from such property as a measure of promoting the economic and social development, particularly, of
Central Luzon and, in general, the countrys goal for enhancement.[1] The transfer of these military
23

reservations to the Conversion Authority does not amount to an abdication on the part of the Republic
of its interests but simply a recognition of the need to create a body corporate which will act as its
agent for the realization of its program specified in the Act. It ought to follow that the Republic remains
to be the real party-in-interest and the Conversion authority being merely its agent.
In E. B. Marcha Transport Co. , Inc. vs. Intermediate Appellate Court,[2] the Court succinctly
resolved the issue of whether or not the Republic of the Philippines would be a proper party to sue for
the recovery of possession of property which at time of the institution of the suit was no longer being
held by the national government but by the Philippine Ports Authority. The Court ruled:
More importantly, as we see it, dismissing the complaint on the ground that the Republic of the
Philippines is not the proper party would result in needless delay in the settlement of this matter and
also in derogation of the policy against multiplicity of suits. Such a decision would require the
Philippine Ports Authority to refile the very same complaint already proved by the Republic of the
Philippines and bring back the parties as it were to square one.
It can be said that in suing for the recovery of the rentals, the Republic of the Philippines, acted as
principal of the Philippine Ports Authority, directly exercising the commission it had earlier conferred
on the latter as its agent. We may presume that, by doing so, the republic of the Philippines did not
intend to retain the said rentals for its own use, considering that by its voluntary act it had transferred
the land in question to the Philippine Ports authority effective July 11, 1974. The Republic of the
Philippines had simply sought to assist, not supplant, the Philippine Ports Authority, whose title to the
disputed property it continues to recognize. We may expect then that the said rentals, once collected
by the Republic of the Philippines, shall be turned over by it to the Philippine Ports Authority
conformably to the purposes of P. D. No. 857."
There would seem to be no cogent reason for ignoring that rationale specially when taken in light
of the fact that the original suit for cancellation of title of petitioners predecessor-in-interest was
commenced by the Republic itself, and it was only in 1992 that the subject military camp was
transferred to the Conversion Authority.

EN BANC
G.R No. 187167 Magallona vs Ermita
Respondents. July 16, 2011
x -----------------------------------------------------------------------------------------x

DECISION
CARPIO, J.

The Case
This original action for the writs of certiorari and prohibition assails the constitutionality of Republic
Act No. 95221 (RA 9522) adjusting the countrys archipelagic baselines and classifying the baseline
regime of nearby territories.

The Antecedents
In 1961, Congress passed Republic Act No. 3046 (RA 3046)2 demarcating the maritime baselines of
the Philippines as an archipelagic State.3 This law followed the framing of the Convention on the
Territorial Sea and the Contiguous Zone in 1958 (UNCLOS I),4 codifying, among others, the
sovereign right of States parties over their territorial sea, the breadth of which, however, was left
undetermined. Attempts to fill this void during the second round of negotiations in Geneva in 1960
(UNCLOS II) proved futile. Thus, domestically, RA 3046 remained unchanged for nearly five decades,
save for legislation passed in 1968 (Republic Act No. 5446 [RA 5446]) correcting typographical errors
and reserving the drawing of baselines around Sabah in North Borneo.
24

In March 2009, Congress amended RA 3046 by enacting RA 9522, the statute now under scrutiny.
The change was prompted by the need to make RA 3046 compliant with the terms of the United
Nations Convention on the Law of the Sea (UNCLOS III),5 which the Philippines ratified on 27
February 1984.6 Among others, UNCLOS III prescribes the water-land ratio, length, and contour of
baselines of archipelagic States like the Philippines7 and sets the deadline for the filing of application
for the extended continental shelf.8 Complying with these requirements, RA 9522 shortened one
baseline, optimized the location of some basepoints around the Philippine archipelago and classified
adjacent territories, namely, the Kalayaan Island Group (KIG) and the Scarborough Shoal, as regimes
of islands whose islands generate their own applicable maritime zones.

Petitioners, professors of law, law students and a legislator, in their respective capacities as citizens,
taxpayers or x x x legislators,9 as the case may be, assail the constitutionality of RA 9522 on two
principal grounds, namely: (1) RA 9522 reduces Philippine maritime territory, and logically, the reach
of the Philippine states sovereign power, in violation of Article 1 of the 1987 Constitution,10 embodying
the terms of the Treaty of Paris11 and ancillary treaties,12 and (2) RA 9522 opens the countrys waters
landward of the baselines to maritime passage by all vessels and aircrafts, undermining Philippine
sovereignty and national security, contravening the countrys nuclear-free policy, and damaging
marine resources, in violation of relevant constitutional provisions.13

In addition, petitioners contend that RA 9522s treatment of the KIG as regime of islands not
only results in the loss of a large maritime area but also prejudices the livelihood of subsistence
fishermen.14 To buttress their argument of territorial diminution, petitioners facially attack RA 9522 for
what it excluded and included its failure to reference either the Treaty of Paris or Sabah and its use of
UNCLOS IIIs framework of regime of islands to determine the maritime zones of the KIG and the
Scarborough Shoal.

Commenting on the petition, respondent officials raised threshold issues questioning (1) the petitions
compliance with the case or controversy requirement for judicial review grounded on petitioners
alleged lack of locus standi and (2) the propriety of the writs of certiorari and prohibition to assail the
constitutionality of RA 9522. On the merits, respondents defended RA 9522 as the countrys
compliance with the terms of UNCLOS III, preserving Philippine territory over the KIG or Scarborough
Shoal. Respondents add that RA 9522 does not undermine the countrys security, environment and
economic interests or relinquish the Philippines claim over Sabah.

Respondents also question the normative force, under international law, of petitioners
assertion that what Spain ceded to the United States under the Treaty of Paris were the islands
and all the waters found within the boundaries of the rectangular area drawn under the Treaty of
Paris.

We left unacted petitioners prayer for an injunctive writ.

The Issues

The petition raises the following issues:

1. Preliminarily
1. Whether petitioners possess locus standi to bring this suit; and
2. Whether the writs of certiorari and prohibition are the proper remedies to assail the
constitutionality of RA 9522.
2. On the merit, whether RA 9522 is unconstitutional.

The Ruling of the Court

25

On the threshold issues, we hold that (1) petitioners possess locus standi to bring this suit as citizens
and (2) the writs of certiorari and prohibition are proper remedies to test the constitutionality of RA
9522. On the merits, we find no basis to declare RA 9522 unconstitutional.
On the Threshold Issues
Petitioners Possess Locus
Standi as Citizens

Petitioners themselves undermine their assertion of locus standi as legislators and taxpayers
because the petition alleges neither infringement of legislative prerogative15 nor misuse of public
funds,16 occasioned by the passage and implementation of RA 9522. Nonetheless, we recognize
petitioners locus standi as citizens with constitutionally sufficient interest in the resolution of the merits
of the case which undoubtedly raises issues of national significance necessitating urgent resolution.
Indeed, owing to the peculiar nature of RA 9522, it is understandably difficult to find other litigants
possessing a more direct and specific interest to bring the suit, thus satisfying one of the
requirements for granting citizenship standing.17

The Writs of Certiorari and Prohibition

Are Proper Remedies to Test
the Constitutionality of Statutes

In praying for the dismissal of the petition on preliminary grounds, respondents seek a strict
observance of the offices of the writs of certiorari and prohibition, noting that the writs cannot issue
absent any showing of grave abuse of discretion in the exercise of judicial, quasi-judicial or ministerial
powers on the part of respondents and resulting prejudice on the part of petitioners.18

Respondents submission holds true in ordinary civil proceedings. When this Court exercises its
constitutional power of judicial review, however, we have, by tradition, viewed the writs of certiorari
and prohibition as proper remedial vehicles to test the constitutionality of statutes,19 and indeed, of
acts of other branches of government.20 Issues of constitutional import are sometimes crafted out of
statutes which, while having no bearing on the personal interests of the petitioners, carry such
relevance in the life of this nation that the Court inevitably finds itself constrained to take cognizance
of the case and pass upon the issues raised, non-compliance with the letter of procedural rules
notwithstanding. The statute sought to be reviewed here is one such law.
RA 9522 is Not Unconstitutional

RA 9522 is a Statutory Tool

to Demarcate the Countrys
Maritime Zones and Continental
Shelf Under UNCLOS III, not to
Delineate Philippine Territory

Petitioners submit that RA 9522 dismembers a large portion of the national territory21 because it
discards the pre-UNCLOS III demarcation of Philippine territory under the Treaty of Paris and related
treaties, successively encoded in the definition of national territory under the 1935, 1973 and 1987
Constitutions. Petitioners theorize that this constitutional definition trumps any treaty or statutory
provision denying the Philippines sovereign control over waters, beyond the territorial sea recognized
26

at the time of the Treaty of Paris, that Spain supposedly ceded to the United States. Petitioners argue
that from the Treaty of Paris technical description, Philippine sovereignty over territorial waters
extends hundreds of nautical miles around the Philippine archipelago, embracing the rectangular area
delineated in the Treaty of Paris.22

Petitioners theory fails to persuade us.

UNCLOS III has nothing to do with the acquisition (or loss) of territory. It is a multilateral treaty
regulating, among others, sea-use rights over maritime zones (i.e., the territorial waters [12 nautical
miles from the baselines], contiguous zone [24 nautical miles from the baselines], exclusive economic
zone [200 nautical miles from the baselines]), and continental shelves that UNCLOS III
delimits.23 UNCLOS III was the culmination of decades-long negotiations among United Nations
members to codify norms regulating the conduct of States in the worlds oceans and submarine areas,
recognizing coastal and archipelagic States graduated authority over a limited span of waters and
submarine lands along their coasts.

On the other hand, baselines laws such as RA 9522 are enacted by UNCLOS III States parties
to mark-out specific basepoints along their coasts from which baselines are drawn, either straight or
contoured, to serve as geographic starting points to measure the breadth of the maritime zones and
continental shelf. Article 48 of UNCLOS III on archipelagic States like ours could not be any clearer:

Article 48. Measurement of the breadth of the territorial sea, the contiguous zone,
the exclusive economic zone and the continental shelf. The breadth of the territorial sea,
the contiguous zone, the exclusive economic zone and the continental shelf shall be
measured from archipelagic baselines drawn in accordance with article 47.
(Emphasis supplied)
Thus, baselines laws are nothing but statutory mechanisms for UNCLOS III States parties to
delimit with precision the extent of their maritime zones and continental shelves. In turn, this gives
notice to the rest of the international community of the scope of the maritime space and submarine
areas within which States parties exercise treaty-based rights, namely, the exercise of sovereignty
over territorial waters (Article 2), the jurisdiction to enforce customs, fiscal, immigration, and sanitation
laws in the contiguous zone (Article 33), and the right to exploit the living and non-living resources in
the exclusive economic zone (Article 56) and continental shelf (Article 77).

Even under petitioners theory that the Philippine territory embraces the islands and all the
waters within the rectangular area delimited in the Treaty of Paris, the baselines of the Philippines
would still have to be drawn in accordance with RA 9522 because this is the only way to draw the
baselines in conformity with UNCLOS III. The baselines cannot be drawn from the boundaries or
other portions of the rectangular area delineated in the Treaty of Paris, but from the outermost islands
and drying reefs of the archipelago.24

UNCLOS III and its ancillary baselines laws play no role in the acquisition, enlargement or, as
petitioners claim, diminution of territory. Under traditional international law typology, States acquire (or
conversely, lose) territory through occupation, accretion, cession and prescription,25 not by executing
multilateral treaties on the regulations of sea-use rights or enacting statutes to comply with the treatys
terms to delimit maritime zones and continental shelves. Territorial claims to land features are outside
UNCLOS III, and are instead governed by the rules on general international law.26

RA 9522s Use of the Framework

of Regime of Islands to Determine the
27

Maritime Zones of the KIG and the

Scarborough Shoal, not Inconsistent
with the Philippines Claim of Sovereignty
Over these Areas

Petitioners next submit that RA 9522s use of UNCLOS IIIs regime of islands framework to draw the
baselines, and to measure the breadth of the applicable maritime zones of the KIG, weakens our
territorial claim over that area.27 Petitioners add that the KIGs (and Scarborough Shoals) exclusion
from the Philippine archipelagic baselines results in the loss of about 15,000 square nautical miles of
territorial waters, prejudicing the livelihood of subsistence fishermen.28 A comparison of the
configuration of the baselines drawn under RA 3046 and RA 9522 and the extent of maritime space
encompassed by each law, coupled with a reading of the text of RA 9522 and its congressional
deliberations, vis--vis the Philippines obligations under UNCLOS III, belie this view.

The configuration of the baselines drawn under RA 3046 and RA 9522 shows that RA 9522 merely
followed the basepoints mapped by RA 3046, save for at least nine basepoints that RA 9522 skipped
to optimize the location of basepoints and adjust the length of one baseline (and thus comply with
UNCLOS IIIs limitation on the maximum length of baselines). Under RA 3046, as under RA 9522, the
KIG and the Scarborough Shoal lie outside of the baselines drawn around the Philippine archipelago.
This undeniable cartographic fact takes the wind out of petitioners argument branding RA 9522 as a
statutory renunciation of the Philippines claim over the KIG, assuming that baselines are relevant for
this purpose.

Petitioners assertion of loss of about 15,000 square nautical miles of territorial waters under RA 9522
is similarly unfounded both in fact and law. On the contrary, RA 9522, by optimizing the location of
basepoints, increased the Philippines total maritime space (covering its internal waters, territorial sea
and exclusive economic zone) by 145,216 square nautical miles, as shown in the table below:29
Extent of maritime area Extent of maritime
using RA 3046, as area using RA
amended, taking into 9522, taking into
account the Treaty of account UNCLOS
Paris delimitation (in III (in square
square nautical miles) nautical miles)

Internal or
archipelagic 166,858 171,435
waters

Territorial 274,136 32,106

Sea

Exclusive
Economic 382,669
Zone

TOTAL 440,994 586,210

28

Thus, as the map below shows, the reach of the exclusive economic zone drawn under RA 9522
even extends way beyond the waters covered by the rectangular demarcation under the Treaty of
Paris. Of course, where there are overlapping exclusive economic zones of opposite or adjacent
States, there will have to be a delineation of maritime boundaries in accordance with UNCLOS III.30

Further, petitioners argument that the KIG now lies outside Philippine territory because the baselines
that RA 9522 draws do not enclose the KIG is negated by RA 9522 itself. Section 2 of the law
commits to text the Philippines continued claim of sovereignty and jurisdiction over the KIG and the
Scarborough Shoal:

SEC. 2. The baselines in the following areas over which the Philippines
likewise exercises sovereignty and jurisdiction shall be determined as Regime of
Islands under the Republic of the Philippines consistent with Article 121 of the United
Nations Convention on the Law of the Sea (UNCLOS):
a) The Kalayaan Island Group as constituted under Presidential Decree No. 1596
and
b) Bajo de Masinloc, also known as Scarborough Shoal. (Emphasis supplied)

Had Congress in RA 9522 enclosed the KIG and the Scarborough Shoal as part of the
Philippine archipelago, adverse legal effects would have ensued. The Philippines would have
committed a breach of two provisions of UNCLOS III. First, Article 47 (3) of UNCLOS III requires that
[t]he drawing of such baselines shall not depart to any appreciable extent from the general
configuration of the archipelago. Second, Article 47 (2) of UNCLOS III requires that the length of the
baselines shall not exceed 100 nautical miles, save for three per cent (3%) of the total number of
baselines which can reach up to 125 nautical miles.31

Although the Philippines has consistently claimed sovereignty over the KIG32 and the
Scarborough Shoal for several decades, these outlying areas are located at an appreciable distance
from the nearest shoreline of the Philippine archipelago,33 such that any straight baseline loped
around them from the nearest basepoint will inevitably depart to an appreciable extent from the
general configuration of the archipelago.

The principal sponsor of RA 9522 in the Senate, Senator Miriam Defensor-Santiago, took
pains to emphasize the foregoing during the Senate deliberations:

What we call the Kalayaan Island Group or what the rest of the world call[] the
Spratlys and the Scarborough Shoal are outside our archipelagic baseline because if
we put them inside our baselines we might be accused of violating the provision of
international law which states: The drawing of such baseline shall not depart to any
appreciable extent from the general configuration of the archipelago. So sa loob ng
ating baseline, dapat magkalapit ang mga islands. Dahil malayo ang Scarborough
Shoal, hindi natin masasabing malapit sila sa atin although we are still allowed by
international law to claim them as our own.

This is called contested islands outside our configuration. We see that our archipelago
is defined by the orange line which [we] call[] archipelagic baseline. Ngayon, tingnan
ninyo ang maliit na circle doon sa itaas, that is Scarborough Shoal, itong malaking circle
sa ibaba, that is Kalayaan Group or the Spratlys. Malayo na sila sa ating archipelago
29

kaya kung ilihis pa natin ang dating archipelagic baselines para lamang masama itong
dalawang circles, hindi na sila magkalapit at baka hindi na tatanggapin ng United
Nations because of the rule that it should follow the natural configuration of the
archipelago.34 (Emphasis supplied)

Similarly, the length of one baseline that RA 3046 drew exceeded UNCLOS IIIs limits. The
need to shorten this baseline, and in addition, to optimize the location of basepoints using current
maps, became imperative as discussed by respondents:

[T]he amendment of the baselines law was necessary to enable the Philippines
to draw the outer limits of its maritime zones including the extended continental shelf in
the manner provided by Article 47 of [UNCLOS III]. As defined by R.A. 3046, as
amended by R.A. 5446, the baselines suffer from some technical deficiencies, to wit:

1. The length of the baseline across Moro Gulf (from Middle of 3 Rock Awash to Tongquil
Point) is 140.06 nautical miles x x x. This exceeds the maximum length allowed under
Article 47(2) of the [UNCLOS III], which states that The length of such baselines shall
not exceed 100 nautical miles, except that up to 3 per cent of the total number of
baselines enclosing any archipelago may exceed that length, up to a maximum length
of 125 nautical miles.
2. The selection of basepoints is not optimal. At least 9 basepoints can be skipped or
deleted from the baselines system. This will enclose an additional 2,195 nautical miles
of water.
3. Finally, the basepoints were drawn from maps existing in 1968, and not established by
geodetic survey methods. Accordingly, some of the points, particularly along the west
coasts of Luzon down to Palawan were later found to be located either inland or on
water, not on low-water line and drying reefs as prescribed by Article 47.35

Hence, far from surrendering the Philippines claim over the KIG and the Scarborough Shoal,
Congress decision to classify the KIG and the Scarborough Shoal as Regime[s] of Islands under the
Republic of the Philippines consistent with Article 12136 of UNCLOS III manifests the Philippine States
responsible observance of its pacta sunt servanda obligation under UNCLOS III. Under Article 121 of
UNCLOS III, any naturally formed area of land, surrounded by water, which is above water at high
tide, such as portions of the KIG, qualifies under the category of regime of islands, whose islands
generate their own applicable maritime zones.37

Statutory Claim Over Sabah under

RA 5446 Retained

Petitioners argument for the invalidity of RA 9522 for its failure to textualize the Philippines claim over
Sabah in North Borneo is also untenable. Section 2 of RA 5446, which RA 9522 did not repeal, keeps
open the door for drawing the baselines of Sabah:

Section 2. The definition of the baselines of the territorial sea of the Philippine
Archipelago as provided in this Act is without prejudice to the delineation of the
baselines of the territorial sea around the territory of Sabah, situated in North
Borneo, over which the Republic of the Philippines has acquired dominion and
sovereignty. (Emphasis supplied)

UNCLOS III and RA 9522 not

30

Incompatible with the Constitutions

Delineation of Internal Waters

As their final argument against the validity of RA 9522, petitioners contend that the law
unconstitutionally converts internal waters into archipelagic waters, hence subjecting these waters to
the right of innocent and sea lanes passage under UNCLOS III, including overflight. Petitioners
extrapolate that these passage rights indubitably expose Philippine internal waters to nuclear and
maritime pollution hazards, in violation of the Constitution.38
Whether referred to as Philippine internal waters under Article I of the Constitution39 or as
archipelagic waters under UNCLOS III (Article 49 [1]), the Philippines exercises sovereignty over the
body of water lying landward of the baselines, including the air space over it and the submarine areas
underneath. UNCLOS III affirms this:

Article 49. Legal status of archipelagic waters, of the air space over archipelagic
waters and of their bed and subsoil.

1. The sovereignty of an archipelagic State extends to the waters

enclosed by the archipelagic baselines drawn in accordance with
article 47, described as archipelagic waters, regardless of their depth or
distance from the coast.
2. This sovereignty extends to the air space over the archipelagic
waters, as well as to their bed and subsoil, and the resources
contained therein.
xxxx

4. The regime of archipelagic sea lanes passage established in this Part shall
not in other respects affect the status of the archipelagic waters, including the sea
lanes, or the exercise by the archipelagic State of its sovereignty over such
waters and their air space, bed and subsoil, and the resources contained therein.
(Emphasis supplied)

The fact of sovereignty, however, does not preclude the operation of municipal and international law
norms subjecting the territorial sea or archipelagic waters to necessary, if not marginal, burdens in the
interest of maintaining unimpeded, expeditious international navigation, consistent with the
international law principle of freedom of navigation. Thus, domestically, the political branches of the
Philippine government, in the competent discharge of their constitutional powers, may pass legislation
designating routes within the archipelagic waters to regulate innocent and sea lanes
passage.40 Indeed, bills drawing nautical highways for sea lanes passage are now pending in
Congress.41

In the absence of municipal legislation, international law norms, now codified in UNCLOS III,
operate to grant innocent passage rights over the territorial sea or archipelagic waters, subject to the
treatys limitations and conditions for their exercise.42 Significantly, the right of innocent passage is a
customary international law,43 thus automatically incorporated in the corpus of Philippine law.44 No
modern State can validly invoke its sovereignty to absolutely forbid innocent passage that is
exercised in accordance with customary international law without risking retaliatory measures from
the international community.
The fact that for archipelagic States, their archipelagic waters are subject to both the right of
innocent passage and sea lanes passage45 does not place them in lesser footing vis--vis continental
coastal States which are subject, in their territorial sea, to the right of innocent passage and the right
31

of transit passage through international straits. The imposition of these passage rights through
archipelagic waters under UNCLOS III was a concession by archipelagic States, in exchange for their
right to claim all the waters landward of their baselines, regardless of their depth or distance from the
coast, as archipelagic waters subject to their territorial sovereignty. More importantly, the recognition
of archipelagic States archipelago and the waters enclosed by their baselines as one cohesive entity
prevents the treatment of their islands as separate islands under UNCLOS III.46 Separate islands
generate their own maritime zones, placing the waters between islands separated by more than 24
nautical miles beyond the States territorial sovereignty, subjecting these waters to the rights of other
States under UNCLOS III.47

Petitioners invocation of non-executory constitutional provisions in Article II (Declaration of

Principles and State Policies)48 must also fail. Our present state of jurisprudence considers the
provisions in Article II as mere legislative guides, which, absent enabling legislation, do not embody
judicially enforceable constitutional rights x x x.49 Article II provisions serve as guides in formulating
and interpreting implementing legislation, as well as in interpreting executory provisions of the
Constitution. Although Oposa v. Factoran50 treated the right to a healthful and balanced ecology
under Section 16 of Article II as an exception, the present petition lacks factual basis to substantiate
the claimed constitutional violation. The other provisions petitioners cite, relating to the protection of
marine wealth (Article XII, Section 2, paragraph 251) and subsistence fishermen (Article XIII, Section
752), are not violated by RA 9522.

In fact, the demarcation of the baselines enables the Philippines to delimit its exclusive
economic zone, reserving solely to the Philippines the exploitation of all living and non-living
resources within such zone. Such a maritime delineation binds the international community since the
delineation is in strict observance of UNCLOS III. If the maritime delineation is contrary to UNCLOS
III, the international community will of course reject it and will refuse to be bound by it.

UNCLOS III favors States with a long coastline like the Philippines. UNCLOS III creates a sui
generis maritime space the exclusive economic zone in waters previously part of the high seas.
UNCLOS III grants new rights to coastal States to exclusively exploit the resources found within this
zone up to 200 nautical miles.53UNCLOS III, however, preserves the traditional freedom of navigation
of other States that attached to this zone beyond the territorial sea before UNCLOS III.

RA 9522 and the Philippines Maritime Zones

Petitioners hold the view that, based on the permissive text of UNCLOS III, Congress was not
bound to pass RA 9522.54 We have looked at the relevant provision of UNCLOS III55 and we find
petitioners reading plausible. Nevertheless, the prerogative of choosing this option belongs to
Congress, not to this Court. Moreover, the luxury of choosing this option comes at a very steep price.
Absent an UNCLOS III compliant baselines law, an archipelagic State like the Philippines will find
itself devoid of internationally acceptable baselines from where the breadth of its maritime zones and
continental shelf is measured. This is recipe for a two-fronted disaster: first, it sends an open
invitation to the seafaring powers to freely enter and exploit the resources in the waters and
submarine areas around our archipelago; and second, it weakens the countrys case in any
international dispute over Philippine maritime space. These are consequences Congress wisely
avoided.
The enactment of UNCLOS III compliant baselines law for the Philippine archipelago and
adjacent areas, as embodied in RA 9522, allows an internationally-recognized delimitation of the
32

breadth of the Philippines maritime zones and continental shelf. RA 9522 is therefore a most vital
step on the part of the Philippines in safeguarding its maritime zones, consistent with the Constitution
and our national interest.
WHEREFORE, we DISMISS the petition.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court.
RENATO C. CORONA - Chief Justice

C.STATE IMMUNITY

G.R. No. L-35645 May 22, 1985

UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, WILLIAM I. COLLINS and

ROBERT GOHIER, petitioners, vs.HON. V. M. RUIZ, Presiding Judge of Branch XV, Court of First
Instance of Rizal and ELIGIO DE GUZMAN & CO., INC., respondents.

Sycip, Salazar, Luna & Manalo & Feliciano Law for petitioners Albert, Vergara, Benares, Perias &
Dominguez Law Office for respondents.

ABAD SANTOS, J.:

This is a petition to review, set aside certain orders and restrain the respondent judge from trying Civil
Case No. 779M of the defunct Court of First Instance of Rizal. The factual background is as follows:

At times material to this case, the United States of America had a naval base in Subic, Zambales.
The base was one of those provided in the Military Bases Agreement between the Philippines and the
United States.

Sometime in May, 1972, the United States invited the submission of bids for the following projects

1. Repair offender system, Alava Wharf at the U.S. Naval Station Subic Bay, Philippines.

2. Repair typhoon damage to NAS Cubi shoreline; repair typhoon damage to shoreline revetment,
NAVBASE Subic; and repair to Leyte Wharf approach, NAVBASE Subic Bay, Philippines.

Eligio de Guzman & Co., Inc. responded to the invitation and submitted bids. Subsequent thereto, the
company received from the United States two telegrams requesting it to confirm its price proposals
and for the name of its bonding company. The company complied with the requests. [In its complaint,
the company alleges that the United States had accepted its bids because "A request to confirm a
price proposal confirms the acceptance of a bid pursuant to defendant United States' bidding
33

practices." (Rollo, p. 30.) The truth of this allegation has not been tested because the case has not
reached the trial stage.]

In June, 1972, the company received a letter which was signed by Wilham I. Collins, Director,
Contracts Division, Naval Facilities Engineering Command, Southwest Pacific, Department of the
Navy of the United States, who is one of the petitioners herein. The letter said that the company did
not qualify to receive an award for the projects because of its previous unsatisfactory performance
rating on a repair contract for the sea wall at the boat landings of the U.S. Naval Station in Subic Bay.
The letter further said that the projects had been awarded to third parties. In the abovementioned Civil
Case No. 779-M, the company sued the United States of America and Messrs. James E. Galloway,
William I. Collins and Robert Gohier all members of the Engineering Command of the U.S. Navy. The
complaint is to order the defendants to allow the plaintiff to perform the work on the projects and, in
the event that specific performance was no longer possible, to order the defendants to pay damages.
The company also asked for the issuance of a writ of preliminary injunction to restrain the defendants
from entering into contracts with third parties for work on the projects.

The defendants entered their special appearance for the purpose only of questioning the jurisdiction
of this court over the subject matter of the complaint and the persons of defendants, the subject
matter of the complaint being acts and omissions of the individual defendants as agents of defendant
United States of America, a foreign sovereign which has not given her consent to this suit or any
other suit for the causes of action asserted in the complaint." (Rollo, p. 50.)

Subsequently the defendants filed a motion to dismiss the complaint which included an opposition to
the issuance of the writ of preliminary injunction. The company opposed the motion. The trial court
denied the motion and issued the writ. The defendants moved twice to reconsider but to no avail.
Hence the instant petition which seeks to restrain perpetually the proceedings in Civil Case No. 779-
M for lack of jurisdiction on the part of the trial court.

The petition is highly impressed with merit.

The traditional rule of State immunity exempts a State from being sued in the courts of another State
without its consent or waiver. This rule is a necessary consequence of the principles of independence
and equality of States. However, the rules of International Law are not petrified; they are constantly
developing and evolving. And because the activities of states have multiplied, it has been necessary
to distinguish them-between sovereign and governmental acts (jure imperii) and private, commercial
and proprietary acts (jure gestionis). The result is that State immunity now extends only to acts jure
imperil The restrictive application of State immunity is now the rule in the United States, the United
Kingdom and other states in western Europe. (See Coquia and Defensor Santiago, Public
International Law, pp. 207-209 [1984].)

The respondent judge recognized the restrictive doctrine of State immunity when he said in his Order
denying the defendants' (now petitioners) motion: " A distinction should be made between a strictly
governmental function of the sovereign state from its private, proprietary or non- governmental acts
(Rollo, p. 20.) However, the respondent judge also said: "It is the Court's considered opinion that
entering into a contract for the repair of wharves or shoreline is certainly not a governmental function
altho it may partake of a public nature or character. As aptly pointed out by plaintiff's counsel in his
reply citing the ruling in the case of Lyons, Inc., [104 Phil. 594 (1958)], and which this Court quotes
with approval, viz.:
34

It is however contended that when a sovereign state enters into a contract with a private
person, the state can be sued upon the theory that it has descended to the level of an
individual from which it can be implied that it has given its consent to be sued under the
contract. ...

xxx xxx xxx

We agree to the above contention, and considering that the United States government,
through its agency at Subic Bay, entered into a contract with appellant for stevedoring
and miscellaneous labor services within the Subic Bay Area, a U.S. Naval Reservation,
it is evident that it can bring an action before our courts for any contractual liability that
that political entity may assume under the contract. The trial court, therefore, has
jurisdiction to entertain this case ... (Rollo, pp. 20-21.)

The reliance placed on Lyons by the respondent judge is misplaced for the following reasons:

In Harry Lyons, Inc. vs. The United States of America, supra, plaintiff brought suit in the Court of First
Instance of Manila to collect several sums of money on account of a contract between plaintiff and
defendant. The defendant filed a motion to dismiss on the ground that the court had no jurisdiction
over defendant and over the subject matter of the action. The court granted the motion on the
grounds that: (a) it had no jurisdiction over the defendant who did not give its consent to the suit; and
(b) plaintiff failed to exhaust the administrative remedies provided in the contract. The order of
dismissal was elevated to this Court for review.

In sustaining the action of the lower court, this Court said:

It appearing in the complaint that appellant has not complied with the procedure laid
down in Article XXI of the contract regarding the prosecution of its claim against the
United States Government, or, stated differently, it has failed to first exhaust its
administrative remedies against said Government, the lower court acted properly in
dismissing this case.(At p. 598.)

It can thus be seen that the statement in respect of the waiver of State immunity from suit was purely
gratuitous and, therefore, obiter so that it has no value as an imperative authority.

The restrictive application of State immunity is proper only when the proceedings arise out of
commercial transactions of the foreign sovereign, its commercial activities or economic affairs. Stated
differently, a State may be said to have descended to the level of an individual and can thus be
deemed to have tacitly given its consent to be sued only when it enters into business contracts. It
does not apply where the contract relates to the exercise of its sovereign functions. In this case the
projects are an integral part of the naval base which is devoted to the defense of both the United
States and the Philippines, indisputably a function of the government of the highest order; they are
not utilized for nor dedicated to commercial or business purposes.

That the correct test for the application of State immunity is not the conclusion of a contract by a State
but the legal nature of the act is shown in Syquia vs. Lopez, 84 Phil. 312 (1949). In that case the
plaintiffs leased three apartment buildings to the United States of America for the use of its military
officials. The plaintiffs sued to recover possession of the premises on the ground that the term of the
leases had expired. They also asked for increased rentals until the apartments shall have been
vacated.
35

The defendants who were armed forces officers of the United States moved to dismiss the suit for
lack of jurisdiction in the part of the court. The Municipal Court of Manila granted the motion to
dismiss; sustained by the Court of First Instance, the plaintiffs went to this Court for review on
certiorari. In denying the petition, this Court said:

On the basis of the foregoing considerations we are of the belief and we hold that the real party
defendant in interest is the Government of the United States of America; that any judgment for
back or Increased rentals or damages will have to be paid not by defendants Moore and Tillman
and their 64 co-defendants but by the said U.S. Government. On the basis of the ruling in the
case of Land vs. Dollar already cited, and on what we have already stated, the present action
must be considered as one against the U.S. Government. It is clear hat the courts of the
Philippines including the Municipal Court of Manila have no jurisdiction over the present case for
unlawful detainer. The question of lack of jurisdiction was raised and interposed at the very
beginning of the action. The U.S. Government has not , given its consent to the filing of this suit
which is essentially against her, though not in name. Moreover, this is not only a case of a citizen
filing a suit against his own Government without the latter's consent but it is of a citizen filing an
action against a foreign government without said government's consent, which renders more
obvious the lack of jurisdiction of the courts of his country. The principles of law behind this rule
are so elementary and of such general acceptance that we deem it unnecessary to cite
authorities in support thereof. (At p. 323.)

In Syquia,the United States concluded contracts with private individuals but the contracts
notwithstanding the States was not deemed to have given or waived its consent to be sued for the
reason that the contracts were for jure imperii and not for jure gestionis.

WHEREFORE, the petition is granted; the questioned orders of the respondent judge are set aside
and Civil Case No. is dismissed. Costs against the private respondent.

Teehankee, Aquino, Concepcion, Jr., Melencio-Herrera, Plana, * Escolin, Relova, Gutierrez, Jr., De la
Fuente, Cuevas and Alampay, JJ., concur.

Fernando, C.J., took no part.

G.R. No. L-52179 April 8, 1991

MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner

vs.
HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIA, IAUREANO BANIA, JR., SOR
MARIETA BANIA, MONTANO BANIA, ORJA BANIA, AND LYDIA R. BANIA, respondents.

Mauro C. Cabading, Jr. for petitioner.

Simeon G. Hipol for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari with prayer for the issuance of a writ of preliminary mandatory injunction
seeking the nullification or modification of the proceedings and the orders issued by the respondent
Judge Romeo N. Firme, in his capacity as the presiding judge of the Court of First Instance of La
Union, Second Judicial District, Branch IV, Bauang, La Union in Civil Case No. 107-BG, entitled
"Juana Rimando Bania, et al. vs. Macario Nieveras, et al." dated November 4, 1975; July 13, 1976;
36

August 23,1976; February 23, 1977; March 16, 1977; July 26, 1979; September 7, 1979; November
7, 1979 and December 3, 1979 and the decision dated October 10, 1979 ordering defendants
Municipality of San Fernando, La Union and Alfredo Bislig to pay, jointly and severally, the plaintiffs
for funeral expenses, actual damages consisting of the loss of earning capacity of the deceased,
attorney's fees and costs of suit and dismissing the complaint against the Estate of Macario Nieveras
and Bernardo Balagot.

The antecedent facts are as follows:

Petitioner Municipality of San Fernando, La Union is a municipal corporation existing under and in
accordance with the laws of the Republic of the Philippines. Respondent Honorable Judge Romeo N.
Firme is impleaded in his official capacity as the presiding judge of the Court of First Instance of La
Union, Branch IV, Bauang, La Union. While private respondents Juana Rimando-Bania, Laureano
Bania, Jr., Sor Marietta Bania, Montano Bania, Orja Bania and Lydia R. Bania are heirs of the
deceased Laureano Bania Sr. and plaintiffs in Civil Case No. 107-Bg before the aforesaid court.

At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving a passenger
jeepney driven by Bernardo Balagot and owned by the Estate of Macario Nieveras, a gravel and sand
truck driven by Jose Manandeg and owned by Tanquilino Velasquez and a dump truck of the
Municipality of San Fernando, La Union and driven by Alfredo Bislig. Due to the impact, several
passengers of the jeepney including Laureano Bania Sr. died as a result of the injuries they
sustained and four (4) others suffered varying degrees of physical injuries.

On December 11, 1966, the private respondents instituted a compliant for damages against the
Estate of Macario Nieveras and Bernardo Balagot, owner and driver, respectively, of the passenger
jeepney, which was docketed Civil Case No. 2183 in the Court of First Instance of La Union, Branch I,
San Fernando, La Union. However, the aforesaid defendants filed a Third Party Complaint against
the petitioner and the driver of a dump truck of petitioner.

Thereafter, the case was subsequently transferred to Branch IV, presided over by respondent judge
and was subsequently docketed as Civil Case No. 107-Bg. By virtue of a court order dated May 7,
1975, the private respondents amended the complaint wherein the petitioner and its regular
employee, Alfredo Bislig were impleaded for the first time as defendants. Petitioner filed its answer
and raised affirmative defenses such as lack of cause of action, non-suability of the State,
prescription of cause of action and the negligence of the owner and driver of the passenger jeepney
as the proximate cause of the collision.

In the course of the proceedings, the respondent judge issued the following questioned orders, to wit:

(1) Order dated November 4, 1975 dismissing the cross-claim against Bernardo Balagot;

(2) Order dated July 13, 1976 admitting the Amended Answer of the Municipality of San
Fernando, La Union and Bislig and setting the hearing on the affirmative defenses only with
respect to the supposed lack of jurisdiction;

(3) Order dated August 23, 1976 deferring there resolution of the grounds for the Motion to
Dismiss until the trial;

(4) Order dated February 23, 1977 denying the motion for reconsideration of the order of July
13, 1976 filed by the Municipality and Bislig for having been filed out of time;
37

(5) Order dated March 16, 1977 reiterating the denial of the motion for reconsideration of the
order of July 13, 1976;

(6) Order dated July 26, 1979 declaring the case deemed submitted for decision it appearing
that parties have not yet submitted their respective memoranda despite the court's direction;
and

(7) Order dated September 7, 1979 denying the petitioner's motion for reconsideration and/or
order to recall prosecution witnesses for cross examination.

On October 10, 1979 the trial court rendered a decision, the dispositive portion is hereunder quoted
as follows:

IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby rendered for the plaintiffs,
and defendants Municipality of San Fernando, La Union and Alfredo Bislig are ordered to pay
jointly and severally, plaintiffs Juana Rimando-Bania, Mrs. Priscilla B. Surell, Laureano
Bania Jr., Sor Marietta Bania, Mrs. Fe B. Soriano, Montano Bania, Orja Bania and Lydia
B. Bania the sums of P1,500.00 as funeral expenses and P24,744.24 as the lost expected
earnings of the late Laureano Bania Sr., P30,000.00 as moral damages, and P2,500.00 as
attorney's fees. Costs against said defendants.

The Complaint is dismissed as to defendants Estate of Macario Nieveras and Bernardo

Balagot.

SO ORDERED. (Rollo, p. 30)

Petitioner filed a motion for reconsideration and for a new trial without prejudice to another motion
which was then pending. However, respondent judge issued another order dated November 7, 1979
denying the motion for reconsideration of the order of September 7, 1979 for having been filed out of
time.

Finally, the respondent judge issued an order dated December 3, 1979 providing that if defendants
municipality and Bislig further wish to pursue the matter disposed of in the order of July 26, 1979,
such should be elevated to a higher court in accordance with the Rules of Court. Hence, this petition.

Petitioner maintains that the respondent judge committed grave abuse of discretion amounting to
excess of jurisdiction in issuing the aforesaid orders and in rendering a decision. Furthermore,
petitioner asserts that while appeal of the decision maybe available, the same is not the speedy and
adequate remedy in the ordinary course of law.

On the other hand, private respondents controvert the position of the petitioner and allege that the
petition is devoid of merit, utterly lacking the good faith which is indispensable in a petition
for certiorari and prohibition. (Rollo, p. 42.) In addition, the private respondents stress that petitioner
has not considered that every court, including respondent court, has the inherent power to amend
and control its process and orders so as to make them conformable to law and justice. (Rollo, p. 43.)

The controversy boils down to the main issue of whether or not the respondent court committed grave
abuse of discretion when it deferred and failed to resolve the defense of non-suability of the State
amounting to lack of jurisdiction in a motion to dismiss.
38

In the case at bar, the respondent judge deferred the resolution of the defense of non-suability of the
State amounting to lack of jurisdiction until trial. However, said respondent judge failed to resolve
such defense, proceeded with the trial and thereafter rendered a decision against the municipality
and its driver.

The respondent judge did not commit grave abuse of discretion when in the exercise of its judgment it
arbitrarily failed to resolve the vital issue of non-suability of the State in the guise of the municipality.
However, said judge acted in excess of his jurisdiction when in his decision dated October 10, 1979
he held the municipality liable for the quasi-delict committed by its regular employee.

The doctrine of non-suability of the State is expressly provided for in Article XVI, Section 3 of the
Constitution, to wit: "the State may not be sued without its consent."

Stated in simple parlance, the general rule is that the State may not be sued except when it gives
consent to be sued. Consent takes the form of express or implied consent.

Express consent may be embodied in a general law or a special law. The standing consent of the
State to be sued in case of money claims involving liability arising from contracts is found in Act No.
3083. A special law may be passed to enable a person to sue the government for an alleged quasi-
delict, as in Merritt v. Government of the Philippine Islands (34 Phil 311). (see United States of
America v. Guinto, G.R. No. 76607, February 26, 1990, 182 SCRA 644, 654.)

Consent is implied when the government enters into business contracts, thereby descending to the
level of the other contracting party, and also when the State files a complaint, thus opening itself to a
counterclaim. (Ibid)

Municipal corporations, for example, like provinces and cities, are agencies of the State when they
are engaged in governmental functions and therefore should enjoy the sovereign immunity from suit.
Nevertheless, they are subject to suit even in the performance of such functions because their charter
provided that they can sue and be sued. (Cruz, Philippine Political Law, 1987 Edition, p. 39)

A distinction should first be made between suability and liability. "Suability depends on the consent of
the state to be sued, liability on the applicable law and the established facts. The circumstance that a
state is suable does not necessarily mean that it is liable; on the other hand, it can never be held
liable if it does not first consent to be sued. Liability is not conceded by the mere fact that the state
has allowed itself to be sued. When the state does waive its sovereign immunity, it is only giving the
plaintiff the chance to prove, if it can, that the defendant is liable." (United States of America vs.
Guinto, supra, p. 659-660)

Anent the issue of whether or not the municipality is liable for the torts committed by its employee, the
test of liability of the municipality depends on whether or not the driver, acting in behalf of the
municipality, is performing governmental or proprietary functions. As emphasized in the case of Torio
vs. Fontanilla (G. R. No. L-29993, October 23, 1978. 85 SCRA 599, 606), the distinction of powers
becomes important for purposes of determining the liability of the municipality for the acts of its
agents which result in an injury to third persons.

Another statement of the test is given in City of Kokomo vs. Loy, decided by the Supreme Court of
Indiana in 1916, thus:
39

Municipal corporations exist in a dual capacity, and their functions are twofold. In one they
exercise the right springing from sovereignty, and while in the performance of the duties
pertaining thereto, their acts are political and governmental. Their officers and agents in such
capacity, though elected or appointed by them, are nevertheless public functionaries
performing a public service, and as such they are officers, agents, and servants of the state. In
the other capacity the municipalities exercise a private, proprietary or corporate right, arising
from their existence as legal persons and not as public agencies. Their officers and agents in
the performance of such functions act in behalf of the municipalities in their corporate or
individual capacity, and not for the state or sovereign power." (112 N.E., 994-995) (Ibid, pp.
605-606.)

It has already been remarked that municipal corporations are suable because their charters grant
them the competence to sue and be sued. Nevertheless, they are generally not liable for torts
committed by them in the discharge of governmental functions and can be held answerable only if it
can be shown that they were acting in a proprietary capacity. In permitting such entities to be sued,
the State merely gives the claimant the right to show that the defendant was not acting in its
governmental capacity when the injury was committed or that the case comes under the exceptions
recognized by law. Failing this, the claimant cannot recover. (Cruz, supra, p. 44.)

In the case at bar, the driver of the dump truck of the municipality insists that "he was on his way to
the Naguilian river to get a load of sand and gravel for the repair of San Fernando's municipal
streets." (Rollo, p. 29.)

In the absence of any evidence to the contrary, the regularity of the performance of official duty is
presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, We rule that
the driver of the dump truck was performing duties or tasks pertaining to his office.

We already stressed in the case of Palafox, et. al. vs. Province of Ilocos Norte, the District Engineer,
and the Provincial Treasurer (102 Phil 1186) that "the construction or maintenance of roads in which
the truck and the driver worked at the time of the accident are admittedly governmental activities."

After a careful examination of existing laws and jurisprudence, We arrive at the conclusion that the
municipality cannot be held liable for the torts committed by its regular employee, who was then
engaged in the discharge of governmental functions. Hence, the death of the passenger tragic and
deplorable though it may be imposed on the municipality no duty to pay monetary compensation.

All premises considered, the Court is convinced that the respondent judge's dereliction in failing to
resolve the issue of non-suability did not amount to grave abuse of discretion. But said judge
exceeded his jurisdiction when it ruled on the issue of liability.

ACCORDINGLY, the petition is GRANTED and the decision of the respondent court is hereby
modified, absolving the petitioner municipality of any liability in favor of private respondents.

SO ORDERED.

Narvasa, Cruz, Gancayco and Grio-Aquino, JJ., concur.

G.R. No. 101949 December 1, 1994

40

THE HOLY SEE, petitioner,

vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial Court of
Makati, Branch 61 and STARBRIGHT SALES ENTERPRISES, INC., respondents.

Padilla Law Office for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and set aside
the Orders dated June 20, 1991 and September 19, 1991 of the Regional Trial Court, Branch 61,
Makati, Metro Manila in Civil Case No. 90-183.

The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint in Civil Case
No. 90-183, while the Order dated September 19, 1991 denied the motion for reconsideration of the
June 20,1991 Order.

Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy, and is
represented in the Philippines by the Papal Nuncio.

Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in the real
estate business.

This petition arose from a controversy over a parcel of land consisting of 6,000 square meters (Lot 5-
A, Transfer Certificate of Title No. 390440) located in the Municipality of Paraaque, Metro Manila
and registered in the name of petitioner.

Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer Certificates of Title
Nos. 271108 and 265388 respectively and registered in the name of the Philippine Realty Corporation
(PRC).

The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as agent to
the sellers. Later, Licup assigned his rights to the sale to private respondent.

In view of the refusal of the squatters to vacate the lots sold to private respondent, a dispute arose as
to who of the parties has the responsibility of evicting and clearing the land of squatters. Complicating
the relations of the parties was the sale by petitioner of Lot 5-A to Tropicana Properties and
Development Corporation (Tropicana).

On January 23, 1990, private respondent filed a complaint with the Regional Trial Court, Branch 61,
Makati, Metro Manila for annulment of the sale of the three parcels of land, and specific performance
and damages against petitioner, represented by the Papal Nuncio, and three other defendants:
namely, Msgr. Domingo A. Cirilos, Jr., the PRC and Tropicana (Civil Case No.
90-183).
41

The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of petitioner and the
PRC, agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at the price of P1,240.00 per square
meters; (2) the agreement to sell was made on the condition that earnest money of P100,000.00 be
paid by Licup to the sellers, and that the sellers clear the said lots of squatters who were then
occupying the same; (3) Licup paid the earnest money to Msgr. Cirilos; (4) in the same month, Licup
assigned his rights over the property to private respondent and informed the sellers of the said
assignment; (5) thereafter, private respondent demanded from Msgr. Cirilos that the sellers fulfill their
undertaking and clear the property of squatters; however, Msgr. Cirilos informed private respondent
of the squatters' refusal to vacate the lots, proposing instead either that private respondent undertake
the eviction or that the earnest money be returned to the latter; (6) private respondent
counterproposed that if it would undertake the eviction of the squatters, the purchase price of the lots
should be reduced from P1,240.00 to P1,150.00 per square meter; (7) Msgr. Cirilos returned the
earnest money of P100,000.00 and wrote private respondent giving it seven days from receipt of the
letter to pay the original purchase price in cash; (8) private respondent sent the earnest money back
to the sellers, but later discovered that on March 30, 1989, petitioner and the PRC, without notice to
private respondent, sold the lots to Tropicana, as evidenced by two separate Deeds of Sale, one over
Lot 5-A, and another over Lots 5-B and 5-D; and that the sellers' transfer certificate of title over the
lots were cancelled, transferred and registered in the name of Tropicana; (9) Tropicana induced
petitioner and the PRC to sell the lots to it and thus enriched itself at the expense of private
respondent; (10) private respondent demanded the rescission of the sale to Tropicana and the
reconveyance of the lots, to no avail; and (11) private respondent is willing and able to comply with
the terms of the contract to sell and has actually made plans to develop the lots into a townhouse
project, but in view of the sellers' breach, it lost profits of not less than P30,000.000.00.

Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between petitioner and
the PRC on the one hand, and Tropicana on the other; (2) the reconveyance of the lots in question;
(3) specific performance of the agreement to sell between it and the owners of the lots; and (4)
damages.

On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint petitioner
for lack of jurisdiction based on sovereign immunity from suit, and Msgr. Cirilos for being an improper
party. An opposition to the motion was filed by private respondent.

On June 20, 1991, the trial court issued an order denying, among others, petitioner's motion to
dismiss after finding that petitioner "shed off [its] sovereign immunity by entering into the business
contract in question" (Rollo, pp. 20-21).

On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991, petitioner
filed a "Motion for a Hearing for the Sole Purpose of Establishing Factual Allegation for claim of
Immunity as a Jurisdictional Defense." So as to facilitate the determination of its defense of sovereign
immunity, petitioner prayed that a hearing be conducted to allow it to establish certain facts upon
which the said defense is based. Private respondent opposed this motion as well as the motion for
reconsideration.

On October 1, 1991, the trial court issued an order deferring the resolution on the motion for
reconsideration until after trial on the merits and directing petitioner to file its answer (Rollo, p. 22).

Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the privilege of
sovereign immunity only on its own behalf and on behalf of its official representative, the Papal
Nuncio.
42

On December 9, 1991, a Motion for Intervention was filed before us by the Department of Foreign
Affairs, claiming that it has a legal interest in the outcome of the case as regards the diplomatic
immunity of petitioner, and that it "adopts by reference, the allegations contained in the petition of the
Holy See insofar as they refer to arguments relative to its claim of sovereign immunity from suit"
(Rollo, p. 87).

Private respondent opposed the intervention of the Department of Foreign Affairs. In compliance with
the resolution of this Court, both parties and the Department of Foreign Affairs submitted their
respective memoranda.

II

A preliminary matter to be threshed out is the procedural issue of whether the petition
for certiorari under Rule 65 of the Revised Rules of Court can be availed of to question the order
denying petitioner's motion to dismiss. The general rule is that an order denying a motion to dismiss is
not reviewable by the appellate courts, the remedy of the movant being to file his answer and to
proceed with the hearing before the trial court. But the general rule admits of exceptions, and one of
these is when it is very clear in the records that the trial court has no alternative but to dismiss the
complaint (Philippine National Bank v. Florendo, 206 SCRA 582 [1992]; Zagada v. Civil Service
Commission, 216 SCRA 114 [1992]. In such a case, it would be a sheer waste of time and energy to
require the parties to undergo the rigors of a trial.

The other procedural question raised by private respondent is the personality or legal interest of the
Department of Foreign Affairs to intervene in the case in behalf of the Holy See (Rollo, pp. 186-190).

In Public International Law, when a state or international agency wishes to plead sovereign or
diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it is sued to
convey to the court that said defendant is entitled to immunity.

In the United States, the procedure followed is the process of "suggestion," where the foreign state or
the international organization sued in an American court requests the Secretary of State to make a
determination as to whether it is entitled to immunity. If the Secretary of State finds that the defendant
is immune from suit, he, in turn, asks the Attorney General to submit to the court a "suggestion" that
the defendant is entitled to immunity. In England, a similar procedure is followed, only the Foreign
Office issues a certification to that effect instead of submitting a "suggestion" (O'Connell, I
International Law 130 [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and
Obligations, 50 Yale Law Journal 1088 [1941]).

In the Philippines, the practice is for the foreign government or the international organization to first
secure an executive endorsement of its claim of sovereign or diplomatic immunity. But how the
Philippine Foreign Office conveys its endorsement to the courts varies. In International Catholic
Migration Commission v. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a
letter directly to the Secretary of Labor and Employment, informing the latter that the respondent-
employer could not be sued because it enjoyed diplomatic immunity. In World Health Organization v.
Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial court a telegram to that
effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs
to request the Solicitor General to make, in behalf of the Commander of the United States Naval Base
at Olongapo City, Zambales, a "suggestion" to respondent Judge. The Solicitor General embodied
the "suggestion" in a Manifestation and Memorandum as amicus curiae.
43

In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs moved
with this Court to be allowed to intervene on the side of petitioner. The Court allowed the said
Department to file its memorandum in support of petitioner's claim of sovereign immunity.

In some cases, the defense of sovereign immunity was submitted directly to the local courts by the
respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945]; Miquiabas v.
Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America v. Guinto, 182 SCRA
644 [1990] and companion cases). In cases where the foreign states bypass the Foreign Office, the
courts can inquire into the facts and make their own determination as to the nature of the acts and
transactions involved.

III

The burden of the petition is that respondent trial court has no jurisdiction over petitioner, being a
foreign state enjoying sovereign immunity. On the other hand, private respondent insists that the
doctrine of non-suability is not anymore absolute and that petitioner has divested itself of such a cloak
when, of its own free will, it entered into a commercial transaction for the sale of a parcel of land
located in the Philippines.

A. The Holy See

Before we determine the issue of petitioner's non-suability, a brief look into its status as a sovereign
state is in order.

Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and he, as the
Holy See, was considered a subject of International Law. With the loss of the Papal States and the
limitation of the territory under the Holy See to an area of 108.7 acres, the position of the Holy See in
International Law became controversial (Salonga and Yap, Public International Law 36-37 [1992]).

In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the exclusive
dominion and sovereign jurisdiction of the Holy See over the Vatican City. It also recognized the right
of the Holy See to receive foreign diplomats, to send its own diplomats to foreign countries, and to
enter into treaties according to International Law (Garcia, Questions and Problems In International
Law, Public and Private 81 [1948]).

The Lateran Treaty established the statehood of the Vatican City "for the purpose of assuring to the
Holy See absolute and visible independence and of guaranteeing to it indisputable sovereignty also in
the field of international relations" (O'Connell, I International Law 311 [1965]).

In view of the wordings of the Lateran Treaty, it is difficult to determine whether the statehood is
vested in the Holy See or in the Vatican City. Some writers even suggested that the treaty created
two international persons the Holy See and Vatican City (Salonga and Yap, supra, 37).

The Vatican City fits into none of the established categories of states, and the attribution to it of
"sovereignty" must be made in a sense different from that in which it is applied to other states
(Fenwick, International Law 124-125 [1948]; Cruz, International Law 37 [1991]). In a community of
national states, the Vatican City represents an entity organized not for political but for ecclesiastical
purposes and international objects. Despite its size and object, the Vatican City has an independent
government of its own, with the Pope, who is also head of the Roman Catholic Church, as the Holy
See or Head of State, in conformity with its traditions, and the demands of its mission in the world.
44

Indeed, the world-wide interests and activities of the Vatican City are such as to make it in a sense an
"international state" (Fenwick, supra., 125; Kelsen, Principles of International Law 160 [1956]).

One authority wrote that the recognition of the Vatican City as a state has significant implication
that it is possible for any entity pursuing objects essentially different from those pursued by states to
be invested with international personality (Kunz, The Status of the Holy See in International Law, 46
The American Journal of International Law 308 [1952]).

Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as the Holy
See and not in the name of the Vatican City, one can conclude that in the Pope's own view, it is the
Holy See that is the international person.

The Republic of the Philippines has accorded the Holy See the status of a foreign sovereign. The
Holy See, through its Ambassador, the Papal Nuncio, has had diplomatic representations with the
Philippine government since 1957 (Rollo, p. 87). This appears to be the universal practice in
international relations.

B. Sovereign Immunity

As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the generally
accepted principles of International Law. Even without this affirmation, such principles of International
Law are deemed incorporated as part of the law of the land as a condition and consequence of our
admission in the society of nations (United States of America v. Guinto, 182 SCRA 644 [1990]).

There are two conflicting concepts of sovereign immunity, each widely held and firmly established.
According to the classical or absolute theory, a sovereign cannot, without its consent, be made a
respondent in the courts of another sovereign. According to the newer or restrictive theory, the
immunity of the sovereign is recognized only with regard to public acts or acts jure imperii of a state,
but not with regard to private acts or acts jure gestionis
(United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago, Public
International Law 194 [1984]).

Some states passed legislation to serve as guidelines for the executive or judicial determination when
an act may be considered as jure gestionis. The United States passed the Foreign Sovereign
Immunities Act of 1976, which defines a commercial activity as "either a regular course of commercial
conduct or a particular commercial transaction or act." Furthermore, the law declared that the
"commercial character of the activity shall be determined by reference to the nature of the course of
conduct or particular transaction or act, rather than by reference to its purpose." The Canadian
Parliament enacted in 1982 an Act to Provide For State Immunity in Canadian Courts. The Act
defines a "commercial activity" as any particular transaction, act or conduct or any regular course of
conduct that by reason of its nature, is of a "commercial character."

The restrictive theory, which is intended to be a solution to the host of problems involving the issue of
sovereign immunity, has created problems of its own. Legal treatises and the decisions in countries
which follow the restrictive theory have difficulty in characterizing whether a contract of a sovereign
state with a private party is an act jure gestionis or an act jure imperii.

The restrictive theory came about because of the entry of sovereign states into purely commercial
activities remotely connected with the discharge of governmental functions. This is particularly true
45

with respect to the Communist states which took control of nationalized business activities and
international trading.

This Court has considered the following transactions by a foreign state with private parties as
acts jure imperii: (1) the lease by a foreign government of apartment buildings for use of its military
officers (Syquia v. Lopez, 84 Phil. 312 [1949]; (2) the conduct of public bidding for the repair of a
wharf at a United States Naval Station (United States of America v. Ruiz, supra.); and (3) the change
of employment status of base employees (Sanders v. Veridiano, 162 SCRA 88 [1988]).

On the other hand, this Court has considered the following transactions by a foreign state with private
parties as acts jure gestionis: (1) the hiring of a cook in the recreation center, consisting of three
restaurants, a cafeteria, a bakery, a store, and a coffee and pastry shop at the John Hay Air Station in
Baguio City, to cater to American servicemen and the general public (United States of America v.
Rodrigo, 182 SCRA 644 [1990]); and (2) the bidding for the operation of barber shops in Clark Air
Base in Angeles City (United States of America v. Guinto, 182 SCRA 644 [1990]). The operation of
the restaurants and other facilities open to the general public is undoubtedly for profit as a
commercial and not a governmental activity. By entering into the employment contract with the cook
in the discharge of its proprietary function, the United States government impliedly divested itself of its
sovereign immunity from suit.

In the absence of legislation defining what activities and transactions shall be considered
"commercial" and as constituting acts jure gestionis, we have to come out with our own guidelines,
tentative they may be.

Certainly, the mere entering into a contract by a foreign state with a private party cannot be the
ultimate test. Such an act can only be the start of the inquiry. The logical question is whether the
foreign state is engaged in the activity in the regular course of business. If the foreign state is not
engaged regularly in a business or trade, the particular act or transaction must then be tested by its
nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it is an act jure
imperii, especially when it is not undertaken for gain or profit.

As held in United States of America v. Guinto, (supra):

There is no question that the United States of America, like any other state, will be
deemed to have impliedly waived its non-suability if it has entered into a contract in its
proprietary or private capacity. It is only when the contract involves its sovereign or
governmental capacity that no such waiver may be implied.

In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real estate
business, surely the said transaction can be categorized as an act jure gestionis. However, petitioner
has denied that the acquisition and subsequent disposal of Lot 5-A were made for profit but claimed
that it acquired said property for the site of its mission or the Apostolic Nunciature in the Philippines.
Private respondent failed to dispute said claim.

Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The donation was
made not for commercial purpose, but for the use of petitioner to construct thereon the official place
of residence of the Papal Nuncio. The right of a foreign sovereign to acquire property, real or
personal, in a receiving state, necessary for the creation and maintenance of its diplomatic mission, is
recognized in the 1961 Vienna Convention on Diplomatic Relations (Arts. 20-22). This treaty was
46

concurred in by the Philippine Senate and entered into force in the Philippines on November 15,
1965.

In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil and
administrative jurisdiction of the receiving state over any real action relating to private immovable
property situated in the territory of the receiving state which the envoy holds on behalf of the sending
state for the purposes of the mission. If this immunity is provided for a diplomatic envoy, with all the
more reason should immunity be recognized as regards the sovereign itself, which in this case is the
Holy See.

The decision to transfer the property and the subsequent disposal thereof are likewise clothed with a
governmental character. Petitioner did not sell Lot
5-A for profit or gain. It merely wanted to dispose off the same because the squatters living thereon
made it almost impossible for petitioner to use it for the purpose of the donation. The fact that
squatters have occupied and are still occupying the lot, and that they stubbornly refuse to leave the
premises, has been admitted by private respondent in its complaint (Rollo, pp. 26, 27).

The issue of petitioner's non-suability can be determined by the trial court without going to trial in the
light of the pleadings, particularly the admission of private respondent. Besides, the privilege of
sovereign immunity in this case was sufficiently established by the Memorandum and Certification of
the Department of Foreign Affairs. As the department tasked with the conduct of the Philippines'
foreign relations (Administrative Code of 1987, Book IV, Title I, Sec. 3), the Department of Foreign
Affairs has formally intervened in this case and officially certified that the Embassy of the Holy See is
a duly accredited diplomatic mission to the Republic of the Philippines exempt from local jurisdiction
and entitled to all the rights, privileges and immunities of a diplomatic mission or embassy in this
country (Rollo, pp. 156-157). The determination of the executive arm of government that a state or
instrumentality is entitled to sovereign or diplomatic immunity is a political question that is conclusive
upon the courts (International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]).
Where the plea of immunity is recognized and affirmed by the executive branch, it is the duty of the
courts to accept this claim so as not to embarrass the executive arm of the government in conducting
the country's foreign relations (World Health Organization v. Aquino, 48 SCRA 242 [1972]). As
in International Catholic Migration Commission and in World Health Organization, we abide by the
certification of the Department of Foreign Affairs.

Ordinarily, the procedure would be to remand the case and order the trial court to conduct a hearing
to establish the facts alleged by petitioner in its motion. In view of said certification, such procedure
would however be pointless and unduly circuitous (Ortigas & Co. Ltd. Partnership v. Judge Tirso
Velasco, G.R. No. 109645, July 25, 1994).

IV

Private respondent is not left without any legal remedy for the redress of its grievances. Under both
Public International Law and Transnational Law, a person who feels aggrieved by the acts of a
foreign sovereign can ask his own government to espouse his cause through diplomatic channels.

Private respondent can ask the Philippine government, through the Foreign Office, to espouse its
claims against the Holy See. Its first task is to persuade the Philippine government to take up with the
Holy See the validity of its claims. Of course, the Foreign Office shall first make a determination of the
impact of its espousal on the relations between the Philippine government and the Holy See
(Young, Remedies of Private Claimants Against Foreign States, Selected Readings on Protection by
47

Law of Private Foreign Investments 905, 919 [1964]). Once the Philippine government decides to
espouse the claim, the latter ceases to be a private cause.

According to the Permanent Court of International Justice, the forerunner of the International Court of
Justice:

By taking up the case of one of its subjects and by reporting to diplomatic action or
international judicial proceedings on his behalf, a State is in reality asserting its own
rights its right to ensure, in the person of its subjects, respect for the rules of
international law (The Mavrommatis Palestine Concessions, 1 Hudson, World Court
Reports 293, 302 [1924]).

WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case No. 90-183
against petitioner is DISMISSED.

SO ORDERED.

Narvasa, C.J., Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan and
Mendoza, JJ., concur.

Padilla, J., took no part.

Feliciano, J., is on leave.

FIRST DIVISION

[G.R. No. 125865. January 28, 2000]

JEFFREY LIANG (HUEFENG), petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.

DECISION

YNARES-SANTIAGO, J.:

Petitioner is an economist working with the Asian Development Bank (ADB). Sometime in 1994, for
allegedly uttering defamatory words against fellow ADB worker Joyce Cabal, he was charged before
the Metropolitan Trial Court (MeTC) of Mandaluyong City with two counts of grave oral defamation
docketed as Criminal Cases Nos. 53170 and 53171. Petitioner was arrested by virtue of a warrant
issued by the MeTC. After fixing petitioners bail at P2,400.00 per criminal charge, the MeTC released
him to the custody of the Security Officer of ADB. The next day, the MeTC judge received an "office
of protocol" from the Department of Foreign Affairs (DFA) stating that petitioner is covered by
immunity from legal process under Section 45 of the Agreement between the ADB and the Philippine
Government regarding the Headquarters of the ADB (hereinafter Agreement) in the country. Based
on the said protocol communication that petitioner is immune from suit, the MeTC judge without
notice to the prosecution dismissed the two criminal cases. The latter filed a motion for
reconsideration which was opposed by the DFA. When its motion was denied, the prosecution filed a
petition for certiorari and mandamus with the Regional Trial Court (RTC) of Pasig City which set aside
the MeTC rulings and ordered the latter court to enforce the warrant of arrest it earlier issued. After
the motion for reconsideration was denied, petitioner elevated the case to this Court via a petition for
48

review arguing that he is covered by immunity under the Agreement and that no preliminary
investigation was held before the criminal cases were filed in court.

The petition is not impressed with merit.

First, courts cannot blindly adhere and take on its face the communication from the DFA that
petitioner is covered by any immunity. The DFAs determination that a certain person is covered by
immunity is only preliminary which has no binding effect in courts. In receiving ex-parte the DFAs
advice and in motu proprio dismissing the two criminal cases without notice to the prosecution, the
latters right to due process was violated. It should be noted that due process is a right of the accused
as much as it is of the prosecution. The needed inquiry in what capacity petitioner was acting at the
time of the alleged utterances requires for its resolution evidentiary basis that has yet to be presented
at the proper time.[1] At any rate, it has been ruled that the mere invocation of the immunity clause
does not ipso facto result in the dropping of the charges.[2]

Second, under Section 45 of the Agreement which provides: Jksm

"Officers and staff of the Bank including for the purpose of this Article experts and
consultants performing missions for the Bank shall enjoy the following privileges and
immunities:

a.).......immunity from legal process with respect to acts performed by them in their official
capacity except when the Bank waives the immunity."

the immunity mentioned therein is not absolute, but subject to the exception that the act was done in
"official capacity." It is therefore necessary to determine if petitioners case falls within the ambit of
Section 45(a). Thus, the prosecution should have been given the chance to rebut the DFA protocol
and it must be accorded the opportunity to present its controverting evidence, should it so desire.

Third, slandering a person could not possibly be covered by the immunity agreement because our
laws do not allow the commission of a crime, such as defamation, in the name of official duty.[3]The
imputation of theft is ultra vires and cannot be part of official functions. It is well-settled principle of law
that a public official may be liable in his personal private capacity for whatever damage he may have
caused by his act done with malice or in bad faith or beyond the scope of his authority or
jurisdiction.[4] It appears that even the governments chief legal counsel, the Solicitor General, does
not support the stand taken by petitioner and that of the DFA.

Fourth, under the Vienna Convention on Diplomatic Relations, a diplomatic agent, assuming
petitioner is such, enjoys immunity from criminal jurisdiction of the receiving state except in the case
of an action relating to any professional or commercial activity exercised by the diplomatic agent in
the receiving state outside his official functions.[5] As already mentioned above, the commission of a
crime is not part of official duty.

Finally, on the contention that there was no preliminary investigation conducted, suffice it to say that
preliminary investigation is not a matter of right in cases cognizable by the MeTC such as the one at
bar.[6] Being purely a statutory right, preliminary investigation may be invoked only when specifically
granted by law.[7] The rule on criminal procedure is clear that no preliminary investigation is required
in cases falling within the jurisdiction of the MeTC.[8] Besides, the absence of preliminary investigation
does not affect the courts jurisdiction nor does it impair the validity of the information or otherwise
render it defective.[9]
49

WHEREFORE, the petition is DENIED.

SO ORDERED.

[G.R. No. 125865. March 26, 2001]

JEFFREY LIANG (HUEFENG), petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.

RESOLUTION
YNARES-SANTIAGO, J.:

This resolves petitioners Motion for Reconsideration of our Decision dated January 28, 2000,
denying the petition for review.
The Motion is anchored on the following arguments:
1) THE DFAS DETERMINATION OF IMMUNITY IS A POLITICAL QUESTION TO BE MADE
BY THE EXECUTIVE BRANCH OF THE GOVERNMENT AND IS CONCLUSIVE UPON
THE COURTS.
2) THE IMMUNITY OF INTERNATIONAL ORGANIZATIONS IS ABSOLUTE.
3) THE IMMUNITY EXTENDS TO ALL STAFF OF THE ASIAN DEVELOPMENT BANK
(ADB).
4) DUE PROCESS WAS FULLY AFFORDED THE COMPLAINANT TO REBUT THE DFA
PROTOCOL.
5) THE DECISION OF JANUARY 28, 2000 ERRONEOUSLY MADE A FINDING OF FACT
ON THE MERITS, NAMELY, THE SLANDERING OF A PERSON WHICH PREJUDGED
PETITIONERS CASE BEFORE THE METROPOLITAN TRIAL COURT (MTC)-
MANDALUYONG.
6) THE VIENNA CONVENTION ON DIPLOMATIC RELATIONS IS NOT APPLICABLE TO
THIS CASE.
This case has its origin in two criminal Informations[1] for grave oral defamation filed against
petitioner, a Chinese national who was employed as an Economist by the Asian Development Bank
(ADB), alleging that on separate occasions on January 28 and January 31, 1994, petitioner allegedly
uttered defamatory words to Joyce V. Cabal, a member of the clerical staff of ADB. On April 13, 1994,
the Metropolitan Trial Court of Mandaluyong City, acting pursuant to an advice from the Department
of Foreign Affairs that petitioner enjoyed immunity from legal processes, dismissed the criminal
Informations against him. On a petition for certiorari and mandamus filed by the People, the Regional
Trial Court of Pasig City, Branch 160, annulled and set aside the order of the Metropolitan Trial Court
dismissing the criminal cases.[2]
Petitioner, thus, brought a petition for review with this Court. On January 28, 2000, we rendered
the assailed Decision denying the petition for review. We ruled, in essence, that the immunity granted
to officers and staff of the ADB is not absolute; it is limited to acts performed in an official
50

capacity. Furthermore, we held that the immunity cannot cover the commission of a crime such as
slander or oral defamation in the name of official duty.
On October 18, 2000, the oral arguments of the parties were heard. This Court also granted the
Motion for Intervention of the Department of Foreign Affairs. Thereafter, the parties were directed to
submit their respective memorandum.
For the most part, petitioners Motion for Reconsideration deals with the diplomatic immunity of
the ADB, its officials and staff, from legal and judicial processes in the Philippines, as well as the
constitutional and political bases thereof. It should be made clear that nowhere in the assailed
Decision is diplomatic immunity denied, even remotely. The issue in this case, rather, boils down to
whether or not the statements allegedly made by petitioner were uttered while in the performance of
his official functions, in order for this case to fall squarely under the provisions of Section 45 (a) of the
Agreement Between the Asian Development Bank and the Government of the Republic of the
Philippines Regarding the Headquarters of the Asian Development Bank, to wit:

Officers ands staff of the Bank, including for the purpose of this Article experts and consultants
performing missions for the Bank, shall enjoy the following privileges and immunities:

(a) Immunity from legal process with respect to acts performed by them in their official capacity
except when the Bank waives the immunity.

After a careful deliberation of the arguments raised in petitioners and intervenors Motions for
Reconsideration, we find no cogent reason to disturb our Decision of January 28, 2000. As we have
stated therein, the slander of a person, by any stretch, cannot be considered as falling within the
purview of the immunity granted to ADB officers and personnel. Petitioner argues that the Decision
had the effect of prejudging the criminal case for oral defamation against him. We wish to stress that
it did not. What we merely stated therein is that slander, in general, cannot be considered as an act
performed in an official capacity. The issue of whether or not petitioners utterances constituted oral
defamation is still for the trial court to determine.
WHEREFORE, in view of the foregoing, the Motions for Reconsideration filed by petitioner and
intervenor Department of Foreign Affairs are DENIED with FINALITY.
SO ORDERED.
Davide, Jr., C.J., (Chairman), join the concurring opinion of Mr. Justice Puno.
Kapunan, and Pardo, JJ., concur.
Puno, J., Pls. See concurring opinion.

CONCURRING OPINION

PUNO, J.:

For resolution is the Motion for Reconsideration filed by petitioner Jeffrey Liang of this Courts
decision dated January 28, 2000 which denied the petition for review. We there held that: the protocol
communication of the Department of Foreign Affairs to the effect that petitioner Liang is covered by
immunity is only preliminary and has no binding effect in courts; the immunity provided for under
Section 45(a) of the Headquarters Agreement is subject to the condition that the act be done in an
51

official capacity; that slandering a person cannot be said to have been done in an official capacity
and, hence, it is not covered by the immunity agreement; under the Vienna Convention on Diplomatic
Relations, a diplomatic agent, assuming petitioner is such, enjoys immunity from criminal jurisdiction
of the receiving state except in the case of an action relating to any professional or commercial
activity exercised by the diplomatic agent in the receiving state outside his official functions; the
commission of a crime is not part of official duty; and that a preliminary investigation is not a matter of
right in cases cognizable by the Metropolitan Trial Court.
Petitioners motion for reconsideration is anchored on the following arguments:
1. The DFAs determination of immunity is a political question to be made by the executive
branch of the government and is conclusive upon the courts;
2. The immunity of international organizations is absolute;
3. The immunity extends to all staff of the Asian Development Bank (ADB);
4. Due process was fully accorded the complainant to rebut the DFA protocol;
5. The decision of January 28, 2000 erroneously made a finding of fact on the merits, namely,
the slandering of a person which prejudged petitioner's case before the Metropolitan Trial
Court (MTC)-Mandaluyong; and
6. The Vienna Convention on diplomatic relations is not applicable to this case.
Petitioner contends that a determination of a persons diplomatic immunity by the Department of
Foreign Affairs is a political question. It is solely within the prerogative of the executive department
and is conclusive upon the courts. In support of his submission, petitioner cites the following
cases: WHO vs. Aquino;[1] International Catholic Migration Commission vs. Calleja;[2]The Holy
See vs. Rosario, Jr.;[3] Lasco vs. United Nations;[4] and DFA vs. NLRC.[5]
It is further contended that the immunity conferred under the ADB Charter and the
Headquarters Agreement is absolute. It is designed to safeguard the autonomy and independence
of international organizations against interference from any authority external to the organizations. It
is necessary to allow such organizations to discharge their entrusted functions effectively. The only
exceptions to this immunity is when there is an implied or express waiver or when the immunity is
expressly limited by statute. The exception allegedly has no application to the case at bar.
Petitioner likewise urges that the international organizations immunity from local jurisdiction
empowers the ADB alone to determine what constitutes official acts and the same cannot be
subject to different interpretations by the member states. It asserts that the Headquarters
Agreement provides for remedies to check abuses against the exercise of the immunity. Thus,
Section 49 states that the Bank shall waive the immunity accorded to any person if, in its opinion,
such immunity would impede the course of justice and the waiver would not prejudice the purposes
for which the immunities are accorded. Section 51 allows for consultation between the government
and the Bank should the government consider that an abuse has occurred. The same section
provides the mechanism for a dispute settlement regarding, among others, issues of interpretation or
application of the agreement.
Petitioners argument that a determination by the Department of Foreign Affairs that he is entitled
to diplomatic immunity is a political question binding on the courts, is anchored on the ruling
enunciated in the case of WHO, et al. vs. Aquino, et al.,[6] viz:

It is a recognized principle of international law and under our system of separation of powers that
diplomatic immunity is essentially a political question and courts should refuse to look beyond a
52

determination by the executive branch of the government, and where the plea of diplomatic immunity
is recognized and affirmed by the executive branch of the government as in the case at bar, it is then
the duty of the courts to accept the claim of immunity upon appropriate suggestion by the principal
law officer of the government, the Solicitor General in this case, or other officer acting under his
direction. Hence, in adherence to the settled principle that courts may not so exercise their jurisdiction
by seizure and detention of property, as to embarrass the executive arm of the government in
conducting foreign relations, it is accepted doctrine that in such cases the judicial department of the
government follows the action of the political branch and will not embarrass the latter by assuming an
antagonistic jurisdiction.

This ruling was reiterated in the subsequent cases of International Catholic Migration
Commission vs. Calleja;[7] The Holy See vs. Rosario, Jr;[8] Lasco vs. UN;[9] and DFA vs. NLRC.[10]
The case of WHO vs. Aquino involved the search and seizure of personal effects of petitioner
Leonce Verstuyft, an official of the WHO. Verstyft was certified to be entitled to diplomatic immunity
pursuant to the Host Agreement executed between the Philippines and the WHO.
ICMC vs. Calleja concerned a petition for certification election filed against ICMC and IRRI. As
international organizations, ICMC and IRRI were declared to possess diplomatic immunity. It was
held that they are not subject to local jurisdictions. It was ruled that the exercise of jurisdiction by the
Department of Labor over the case would defeat the very purpose of immunity, which is to shield the
affairs of international organizations from political pressure or control by the host country and to
ensure the unhampered performance of their functions.
In Holy See v. Rosario, Jr. involved an action for annulment of sale of land against the Holy See,
as represented by the Papal Nuncio. The Court upheld the petitioners defense of sovereign
immunity. It ruled that where a diplomatic envoy is granted immunity from the civil and administrative
jurisdiction of the receiving state over any real action relating to private immovable property situated
in the territory of the receiving state, which the envoy holds on behalf of the sending state for the
purposes of the mission, with all the more reason should immunity be recognized as regards the
sovereign itself, which in that case is the Holy See.
In Lasco vs. United Nations, the United Nations Revolving Fund for Natural Resources
Exploration was sued before the NLRC for illegal dismissal. The Court again upheld the doctrine of
diplomatic immunity invoked by the Fund.
Finally, DFA v. NLRC involved an illegal dismissal case filed against the Asian Development
Bank. Pursuant to its Charter and the Headquarters Agreement, the diplomatic immunity of the Asian
Development Bank was recognized by the Court.
It bears to stress that all of these cases pertain to the diplomatic immunity enjoyed by
international organizations. Petitioner asserts that he is entitled to the same diplomatic
immunity and he cannot be prosecuted for acts allegedly done in the exercise of his official
functions.
The term international organizations

is generally used to describe an organization set up by agreement between two or more

states. Under contemporary international law, such organizations are endowed with some degree of
international legal personality such that they are capable of exercising specific rights, duties and
powers. They are organized mainly as a means for conducting general international business in
which the member states have an interest.[11]
53

International public officials have been defined as:

x x x persons who, on the basis of an international treaty constituting a particular international

community, are appointed by this international community, or by an organ of it, and are under its
control to exercise, in a continuous way, functions in the interest of this particular international
community, and who are subject to a particular personal status.[12]

Specialized agencies are international organizations having functions in particular fields, such as
posts, telecommunications, railways, canals, rivers, sea transport, civil aviation, meteorology, atomic
energy, finance, trade, education and culture, health and refugees.[13]

Issues

1. Whether petitioner Liang, as an official of an international organization, is entitled to

diplomatic immunity;
2. Whether an international official is immune from criminal jurisdiction for all acts, whether
private or official;
3. Whether the authority to determine if an act is official or private is lodged in the courts;
4. Whether the certification by the Department of Foreign Affairs that petitioner is covered by
immunity is a political question that is binding and conclusive on the courts.

Discussion

I
A perusal of the immunities provisions in various international conventions and agreements will
show that the nature and degree of immunities vary depending on who the recipient is.Thus:

1. Charter of the United Nations

Article 105 (1): The Organization shall enjoy in the territory of each of its Members such privileges
and immunities as are necessary for the fulfillment of its purposes.

Article 105(2): Representatives of the Members of the United Nations and officials of the Organization
shall similarly enjoy such privileges and immunities as are necessary for the independent exercise of
their functions in connection with the Organization.

2. Convention on the Privileges and Immunities of the United Nations

Section 2: The United Nations, its property and assets wherever located and by whomsoever held,
shall enjoy immunity from every form of legal process except insofar as in any particular case it has
expressly waived its immunity. It is, however, understood that no waiver of immunity shall extend to
any measure of execution.

xxx
54

Section 11 (a): Representatives of Members to the principal and subsidiary organs of the United
Nations x x shall x x x enjoy x x x immunity from personal arrest or detention and from seizure of their
personal baggage, and, in respect of words spoken or written and all acts done by them in their
capacity as representatives, immunity from legal process of every kind.

xxx

Section 14: Privileges and immunities are accorded to the representatives of Members not for the
personal benefit of the individuals themselves, but in order to safeguard the independent exercise of
their functions in connection with the United Nations. Consequently, a Member not only has the right
but is under a duty to waive the immunity of its representative in any case where in the opinion of the
Member the immunity would impede the course of justice, and it can be waived without prejudice to
the purpose for which the immunity is accorded.

xxx

Section 18 (a): Officials of the United Nations shall be immune from legal process in respect of words
spoken or written and all acts performed by them in their official capacity.

xxx

Section 19: In addition to the immunities and privileges specified in Section 18, the Secretary-General
and all Assistant Secretaries-General shall be accorded in respect of themselves, their spouses and
minor children, the privileges and immunities, exemptions and facilities accorded to diplomatic
envoys, in accordance with international law.

Section 20: Privileges and immunities are granted to officials in the interest of the United Nations and
not for the personal benefit of the individuals themselves. The Secretary-General shall have the right
and the duty to waive the immunity of any official in any case where, in his opinion, the immunity
would impede the course of justice and can be waived without prejudice to the interests of the United
Nations.

xxx

Section 22: Experts x x x performing missions for the United Nations x x x shall be accorded: (a)
immunity from personal arrest or detention and from seizure of their personal baggage; (b) in respect
of words spoken or written and acts done by them in the course of the performance of their mission,
immunity from legal process of every kind.

3. Vienna Convention on Diplomatic Relations

Article 29: The person of a diplomatic agent shall be inviolable. He shall not be liable to any form of
arrest or detention. The receiving State shall treat him with due respect and shall take all appropriate
steps to prevent any attack on his person, freedom, or dignity.

xxx

Article 31(1): A diplomatic agent shall enjoy immunity from the criminal jurisdiction of the receiving
State. He shall also enjoy immunity from its civil and administrative jurisdiction, except in certain
cases.
55

xxx

Article 38 (1): Except in so far as additional privileges and immunities may be granted by the
receiving State, a diplomatic agent who is a national of or permanently a resident in that State shall
enjoy only immunity from jurisdiction, and inviolability, in respect of official acts performed in the
exercise of his functions.

4. Vienna Convention on Consular Relations

Article 41(1): Consular officials shall not be liable to arrest or detention pending trial, except in the
case of a grave crime and pursuant to a decision by the competent judicial authority.

xxx

Article 43(1): Consular officers and consular employees shall not be amenable to the jurisdiction of
the judicial or administrative authorities of the receiving State in respect of acts performed in the
exercise of consular functions.

Article 43(2): The provisions of paragraph 1 of this Article shall not, however, apply in respect of a
civil action either: (a) arising out of a contract concluded by a consular officer or a consular employee
in which he did not contract expressly or impliedly as an agent of the sending State; or (b) by a third
party for damage arising from an accident in the receiving State caused by a vehicle, vessel or
aircraft.

5. Convention on the Privileges and Immunities of the Specialized Agencies

Section 4: The specialized agencies, their property and assets, wherever located and by whomsoever
held, shall enjoy immunity from every form of legal process except in so far as in any particular case
they have expressly waived their immunity. It is, however, understood that no waiver of immunity shall
extend to any measure of execution.

Section 13(a): Representatives of members at meetings convened by a specialized agency shall,

while exercising their functions and during their journeys to and from the place of meeting, enjoy
immunity from personal arrest or detention and from seizure of their personal baggage, and in respect
of words spoken or written and all acts done by them in their official capacity, immunity from legal
process of every kind.

xxx

Section 19(a): Officials of the specialized agencies shall be immune from legal process in respect of
words spoken or written and all acts performed by them in their official capacity.

xxx

Section 21: In addition to the immunities and privileges specified in sections 19 and 20, the executive
head of each specialized agency, including any official acting on his behalf during his absence from
duty, shall be accorded in respect of himself, his spouse and minor children, the privileges and
immunities, exemptions and facilities accorded to diplomatic envoys, in accordance with international
law.
56

6. Charter of the ADB

Article 50(1): The Bank shall enjoy immunity from every form of legal process, except in cases arising
out of or in connection with the exercise of its powers to borrow money, to guarantee obligations, or to
buy and sell or underwrite the sale of securities, in which cases actions may be brought against the
Bank in a court of competent jurisdiction in the territory of a country in which the Bank has its principal
or a branch office, or has appointed an agent for the purpose of accepting service or notice of
process, or has issued or guaranteed securities.

xxx

Article 55(i): All Governors, Directors, alternates, officers and employees of the Bank, including
experts performing missions for the Bank shall be immune from legal process with respect to acts
performed by them in their official capacity, except when the Bank waives the immunity.

7. ADB Headquarters Agreement

Section 5: The Bank shall enjoy immunity from every form of legal process, except in cases arising
out of or in connection with the exercise of its powers to borrow money, to guarantee obligations, or to
buy and sell or underwrite the sale of securities, in which cases actions may be brought against the
Bank in a court of competent jurisdiction in the Republic of the Philippines.

xxx

Section 44: Governors, other representatives of Members, Directors, the President, Vice-President
and executive officers as may be agreed upon between the Government and the Bank shall enjoy,
during their stay in the Republic of the Philippines in connection with their official duties with the
Bank: (a) immunity from personal arrest or detention and from seizure of their personal baggage; (b)
immunity from legal process of every kind in respect of words spoken or written and all acts done by
them in their official capacity; and (c) in respect of other matters not covered in (a) and (b) above,
such other immunities, exemptions, privileges and facilities as are enjoyed by members of diplomatic
missions of comparable rank, subject to corresponding conditions and obligations.

Section 45(a): Officers and staff of the Bank, including for the purposes of this Article experts and
consultants performing missions for the Bank, shall enjoy x x x immunity from legal process with
respect to acts performed by them in their official capacity, except when the Bank waives the
immunity.

II
There are three major differences between diplomatic and international immunities Firstly,
one of the recognized limitations of diplomatic immunity is that members of the diplomatic staff of a
mission may be appointed from among the nationals of the receiving State only with the express
consent of that State; apart from inviolability and immunity from jurisdiction in respect of official acts
performed in the exercise of their functions, nationals enjoy only such privileges and immunities as
may be granted by the receiving State. International immunities may be specially important in relation
to the State of which the official is a national. Secondly, the immunity of a diplomatic agent from the
jurisdiction of the receiving State does not exempt him from the jurisdiction of the sending State; in
the case of international immunities there is no sending State and an equivalent for the jurisdiction of
the Sending State therefore has to be found either in waiver of immunity or in some international
57

disciplinary or judicial procedure. Thirdly, the effective sanctions which secure respect for diplomatic
immunity are the principle of reciprocity and the danger of retaliation by the aggrieved State;
international immunities enjoy no similar protection.[14]
The generally accepted principles which are now regarded as the foundation of
international immunities are contained in the ILO Memorandum, which reduced them in three
basic propositions, namely: (1) that international institutions should have a status which protects
them against control or interference by any one government in the performance of functions for the
effective discharge of which they are responsible to democratically constituted international bodies in
which all the nations concerned are represented; (2) that no country should derive any financial
advantage by levying fiscal charges on common international funds; and (3) that the international
organization should, as a collectivity of States Members, be accorded the facilities for the conduct of
its official business customarily extended to each other by its individual member States. The thinking
underlying these propositions is essentially institutional in character. It is not concerned with
the status, dignity or privileges of individuals, but with the elements of functional
independence necessary to free international institutions from national control and to enable
them to discharge their responsibilities impartially on behalf of all their members.[15]
III

Positive international law has devised three methods of granting privileges and immunities to
the personnel of international organizations. The first is by simple conventional stipulation, as
was the case in the Hague Conventions of 1899 and 1907. The second is by internal legislation
whereby the government of a state, upon whose territory the international organization is to carry out
its functions, recognizes the international character of the organization and grants, by unilateral
measures, certain privileges and immunities to better assure the successful functioning of the
organization and its personnel. In this situation, treaty obligation for the state in question to grant
concessions is lacking. Such was the case with the Central Commission of the Rhine at Strasbourg
and the International Institute of Agriculture at Rome. The third is a combination of the first two. In
this third method, one finds a conventional obligation to recognize a certain status of an international
organization and its personnel, but the status is described in broad and general terms. The specific
definition and application of those general terms are determined by an accord between the
organization itself and the state wherein it is located. This is the case with the League of Nations, the
Permanent Court of Justice, and the United Nations.[16]

The Asian Development Bank and its Personnel fall under this third category.
There is connection between diplomatic privileges and immunities and those extended to
international officials. The connection consists in the granting, by contractual provisions, of the
relatively well-established body of diplomatic privileges and immunities to international
functionaries. This connection is purely historical. Both types of officials find the basis of their special
status in the necessity of retaining functional independence and freedom from interference by the
state of residence. However, the legal relationship between an ambassador and the state to which he
is accredited is entirely different from the relationship between the international official and those
states upon whose territory he might carry out his functions.[17]
The privileges and immunities of diplomats and those of international officials rest upon
different legal foundations. Whereas those immunities awarded to diplomatic agents are a right of
the sending stated based on customary international law, those granted to international officials are
based on treaty or conventional law. Customary international law places no obligation on a state to
recognize a special status of an international official or to grant him jurisdictional immunities. Such an
obligation can only result from specific treaty provisions.[18]
58

The special status of the diplomatic envoy is regulated by the principle of reciprocity by which a
state is free to treat the envoy of another state as its envoys are treated by that state. The juridical
basis of the diplomats position is firmly established in customary international law. The diplomatic
envoy is appointed by the sending State but it has to make certain that the agreement of the receiving
State has been given for the person it proposes to accredit as head of the mission to that State.[19]
The staff personnel of an international organization the international officials assume a
different position as regards their special status. They are appointed or elected to their position
by the organization itself, or by a competent organ of it; they are responsible to the organization and
their official acts are imputed to it. The juridical basis of their special position is found in
conventional law,[20] since there is no established basis of usage or custom in the case of the
international official. Moreover, the relationship between an international organization and a member-
state does not admit of the principle of reciprocity,[21] for it is contradictory to the basic principle of
equality of states. An international organization carries out functions in the interest of every member
state equally. The international official does not carry out his functions in the interest of any state, but
in serving the organization he serves, indirectly, each state equally. He cannot be, legally, the object
of the operation of the principle of reciprocity between states under such circumstances. It is contrary
to the principle of equality of states for one state member of an international organization to assert a
capacity to extract special privileges for its nationals from other member states on the basis of a
status awarded by it to an international organization. It is upon this principle of sovereign equality that
international organizations are built.
It follows from this same legal circumstance that a state called upon to admit an official of an
international organization does not have a capacity to declare him persona non grata.
The functions of the diplomat and those of the international official are quite different. Those of
the diplomat are functions in the national interest. The task of the ambassador is to represent his
state, and its specific interest, at the capital of another state. The functions of the international official
are carried out in the international interest. He does not represent a state or the interest of any
specific state. He does not usually represent the organization in the true sense of that term. His
functions normally are administrative, although they may be judicial or executive, but they are rarely
political or functions of representation, such as those of the diplomat.
There is a difference of degree as well as of kind. The interruption of the activities of a diplomatic
agent is likely to produce serious harm to the purposes for which his immunities were granted. But the
interruption of the activities of the international official does not, usually, cause serious dislocation of
the functions of an international secretariat.[22]
On the other hand, they are similar in the sense that acts performed in an official capacity by
either a diplomatic envoy or an international official are not attributable to him as an individual but are
imputed to the entity he represents, the state in the case of the diplomat, and the organization in the
case of the international official.[23]
IV
Looking back over 150 years of privileges and immunities granted to the personnel of
international organizations, it is clear that they were accorded a wide scope of protection in the
exercise of their functions the Rhine Treaty of 1804 between the German Empire and France which
provided all the rights of neutrality to persons employed in regulating navigation in the international
interest; The Treaty of Berlin of 1878 which granted the European Commission of the Danube
complete independence of territorial authorities in the exercise of its functions; The Covenant of the
League which granted diplomatic immunities and privileges. Today, the age of the United Nations
finds the scope of protection narrowed. The current tendency is to reduce privileges and
59

immunities ofpersonnel of international organizations to a minimum. The tendency cannot be

considered as a lowering of the standard but rather as a recognition that the problem on the privileges
and immunities of international officials is new. The solution to the problem presented by the
extension of diplomatic prerogatives to international functionaries lies in the general reduction of the
special position of both types of agents in that the special status of each agent is granted in the
interest of function. The wide grant of diplomatic prerogatives was curtailed because of
practical necessity and because the proper functioning of the organization did not require
such extensive immunity for its officials. While the current direction of the law seems to be to
narrow the prerogatives of the personnel of international organizations, the reverse is true with
respect to the prerogatives of the organizations themselves, considered as legal
entities. Historically, states have been more generous in granting privileges and immunities to
organizations than they have to the personnel of these organizations.[24]
Thus, Section 2 of the General Convention on the Privileges and Immunities of the United
Nations states that the UN shall enjoy immunity from every form of legal process except insofar as in
any particular case it has expressly waived its immunity. Section 4 of the Convention on the
Privileges and Immunities of the Specialized Agencies likewise provides that the specialized agencies
shall enjoy immunity from every form of legal process subject to the same exception. Finally, Article
50(1) of the ADB Charter and Section 5 of the Headquarters Agreement similarly provide that the
bank shall enjoy immunity from every form of legal process, except in cases arising out of or in
connection with the exercise of its powers to borrow money, to guarantee obligations, or to buy and
sell or underwrite the sale of securities.
The phrase immunity from every form of legal process as used in the UN General Convention has
been interpreted to mean absolute immunity from a states jurisdiction to adjudicate or enforce its law
by legal process, and it is said that states have not sought to restrict that immunity of the United
Nations by interpretation or amendment. Similar provisions are contained in the Special Agencies
Convention as well as in the ADB Charter and Headquarters Agreement. These organizations were
accorded privileges and immunities in their charters by language similar to that applicable to the
United Nations. It is clear therefore that these organizations were intended to have similar privileges
and immunities.[25] From this, it can be easily deduced that international organizations enjoy absolute
immunity similar to the diplomatic prerogatives granted to diplomatic envoys.
Even in the United States this theory seems to be the prevailing rule. The Foreign Sovereign
Immunities Act was passed adopting the restrictive theory limiting the immunity of states under
international law essentially to activities of a kind not carried on by private persons. Then the
International Organizations Immunities Act came into effect which gives to designated international
organizations the same immunity from suit and every form of judicial process as is enjoyed by foreign
governments. This gives the impression that the Foreign Sovereign Immunities Act has the effect of
applying the restrictive theory also to international organizations generally. However, aside from the
fact that there was no indication in its legislative history that Congress contemplated that result, and
considering that the Convention on Privileges and Immunities of the United Nations exempts the
United Nations from every form of legal process, conflict with the United States obligations under the
Convention was sought to be avoided by interpreting the Foreign Sovereign Immunities Act, and the
restrictive theory, as not applying to suits against the United Nations.[26]
On the other hand, international officials are governed by a different rule. Section 18(a) of the
General Convention on Privileges and Immunities of the United Nations states that officials of the
United Nations shall be immune from legal process in respect of words spoken or written and all acts
performed by them in their official capacity. The Convention on Specialized Agencies carries exactly
the same provision. The Charter of the ADB provides under Article 55(i) that officers and employees
of the bank shall be immune from legal process with respect to acts performed by them in their official
60

capacity except when the Bank waives immunity. Section 45 (a) of the ADB Headquarters Agreement
accords the same immunity to the officers and staff of the bank.There can be no dispute that
international officials are entitled to immunity only with respect to acts performed in their
official capacity, unlike international organizations which enjoy absolute immunity.
Clearly, the most important immunity to an international official, in the discharge of his
international functions, is immunity from local jurisdiction. There is no argument in doctrine or practice
with the principle that an international official is independent of the jurisdiction of the local authorities
for his official acts. Those acts are not his, but are imputed to the organization, and without waiver the
local courts cannot hold him liable for them. In strict law, it would seem that even the organization
itself could have no right to waive an officials immunity for his official acts.This permits local
authorities to assume jurisdiction over and individual for an act which is not, in the wider
sense of the term, his act at all. It is the organization itself, as a juristic person, which should
waive its own immunity and appear in court, not the individual, except insofar as he appears
in the name of the organization. Provisions for immunity from jurisdiction for official acts
appear, aside from the aforementioned treatises, in the constitution of most modern
international organizations. The acceptance of the principle is sufficiently widespread to be
regarded as declaratory of international law.[27]
V
What then is the status of the international official with respect to his private acts?
Section 18 (a) of the General Convention has been interpreted to mean that officials of the
specified categories are denied immunity from local jurisdiction for acts of their private life and
empowers local courts to assume jurisdiction in such cases without the necessity of waiver.[28] It has
earlier been mentioned that historically, international officials were granted diplomatic privileges and
immunities and were thus considered immune for both private and official acts. In practice, this wide
grant of diplomatic prerogatives was curtailed because of practical necessity and because the proper
functioning of the organization did not require such extensive immunity for its officials. Thus, the
current status of the law does not maintain that states grant jurisdictional immunity to
international officials for acts of their private lives.[29] This much is explicit from the Charter
and Headquarters Agreement of the ADB which contain substantially similar provisions to that
of the General Convention.
VI
Who is competent to determine whether a given act is private or official?
This is an entirely different question. In connection with this question, the current tendency to
narrow the scope of privileges and immunities of international officials and representatives is most
apparent. Prior to the regime of the United Nations, the determination of this question rested with the
organization and its decision was final. By the new formula, the state itself tends to assume this
competence. If the organization is dissatisfied with the decision, under the provisions of the General
Convention of the United States, or the Special Convention for Specialized Agencies, the Swiss
Arrangement, and other current dominant instruments, it may appeal to an international tribunal by
procedures outlined in those instruments. Thus, the state assumes this competence in the first
instance. It means that, if a local court assumes jurisdiction over an act without the necessity of
waiver from the organization, the determination of the nature of the act is made at the national
level.[30]
It appears that the inclination is to place the competence to determine the nature of an act
as private or official in the courts of the state concerned. That the prevalent notion seems to be
to leave to the local courts determination of whether or not a given act is official or private does not
61

necessarily mean that such determination is final. If the United Nations questions the decision of the
Court, it may invoke proceedings for settlement of disputes between the organization and the
member states as provided in Section 30 of the General Convention. Thus, the decision as to
whether a given act is official or private is made by the national courts in the first instance, but it may
be subjected to review in the international level if questioned by the United Nations.[31]
A similar view is taken by Kunz, who writes that the jurisdiction of local courts without waiver for
acts of private life empowers the local courts to determine whether a certain act is an official act or an
act of private life, on the rationale that since the determination of such question, if left in the hands of
the organization, would consist in the execution, or non-execution, of waiver, and since waiver is not
mentioned in connection with the provision granting immunities to international officials, then the
decision must rest with local courts.[32]
Under the Third Restatement of the Law, it is suggested that since an international official does
not enjoy personal inviolability from arrest or detention and has immunity only with respect to official
acts, he is subject to judicial or administrative process and must claim his immunity in the
proceedings by showing that the act in question was an official act. Whether an act was performed in
the individuals official capacity is a question for the court in which a proceeding is brought, but if the
international organization disputes the courts finding, the dispute between the organization and the
state of the forum is to be resolved by negotiation, by an agreed mode of settlement or by advisory
opinion of the International Court of Justice.[33]
Recognizing the difficulty that by reason of the right of a national court to assume jurisdiction over
private acts without a waiver of immunity, the determination of the official or private character of a
particular act may pass from international to national control, Jenks proposes three ways of avoiding
difficulty in the matter. The first would be for a municipal court before which a question of the official
or private character of a particular act arose to accept as conclusive in the matter any claim by the
international organization that the act was official in character, such a claim being regarded as
equivalent to a governmental claim that a particular act is an act of State. Such a claim would be in
effect a claim by the organization that the proceedings against the official were a violation of the
jurisdictional immunity of the organization itself which is unqualified and therefore not subject to
delimitation in the discretion of the municipal court. The second would be for a court to accept as
conclusive in the matter a statement by the executive government of the country where the matter
arises certifying the official character of the act. The third would be to have recourse to the procedure
of international arbitration. Jenks opines that it is possible that none of these three solutions would be
applicable in all cases; the first might be readily acceptable only in the clearest cases and the second
is available only if the executive government of the country where the matter arises concurs in the
view of the international organization concerning the official character of the act. However, he
surmises that taken in combination, these various possibilities may afford the elements of a solution
to the problem.[34]
One final point. The international officials immunity for official acts may be likened to a consular
officials immunity from arrest, detention, and criminal or civil process which is not absolute but applies
only to acts or omissions in the performance of his official functions, in the absence of special
agreement. Since a consular officer is not immune from all legal process, he must respond to any
process and plead and prove immunity on the ground that the act or omission underlying the process
was in the performance of his official functions. The issue has not been authoritatively determined,
but apparently the burden is on the consular officer to prove his status as well as his exemption in the
circumstances. In the United States, the US Department of State generally has left it to the courts to
determine whether a particular act was within a consular officers official duties.[35]
62

Submissions

On the bases of the foregoing disquisitions, I submit the following conclusions:

First, petitioner Liang, a bank official of ADB, is not entitled to diplomatic immunity and hence his
immunity is not absolute.
Under the Vienna Convention on Diplomatic Relations, a diplomatic envoy is immune from
criminal jurisdiction of the receiving State for all acts, whether private or official, and hence he cannot
be arrested, prosecuted and punished for any offense he may commit, unless his diplomatic immunity
is waived.[36] On the other hand, officials of international organizations enjoy functional
immunities, that is, only those necessary for the exercise of the functions of the organization
and the fulfillment of its purposes.[37] This is the reason why the ADB Charter and Headquarters
Agreement explicitly grant immunity from legal process to bank officers and employees only with
respect to acts performed by them in their official capacity, except when the Bank waives immunity. In
other words, officials and employees of the ADB are subject to the jurisdiction of the local
courts for their private acts, notwithstanding the absence of a waiver of immunity.
Petitioner cannot also seek relief under the mantle of immunity from every form of legal
process accorded to ADB as an international organization. The immunity of ADB is absolute
whereas the immunity of its officials and employees is restricted only to official acts. This is in
consonance with the current trend in international law which seeks to narrow the scope of protection
and reduce the privileges and immunities granted to personnel of international organizations, while at
the same time aims to increase the prerogatives of international organizations.
Second, considering that bank officials and employees are covered by immunity only for their
official acts, the necessary inference is that the authority of the Department of Affairs, or even of
the ADB for that matter, to certify that they are entitled to immunity is limited only to acts done
in their official capacity. Stated otherwise, it is not within the power of the DFA, as the agency in
charge of the executive departments foreign relations, nor the ADB, as the international organization
vested with the right to waive immunity, to invoke immunity for private acts of bank official and
employees, since no such prerogative exists in the first place. If the immunity does not exist, there is
nothing to certify.
As an aside, ADB cannot even claim to have the right to waive immunity for private acts of its
officials and employees. The Charter and the Headquarters Agreement are clear that the immunity
can be waived only with respect to official acts because this is only the extent to which the privilege
has been granted. One cannot waive the right to a privilege which has never been granted or
acquired.
Third, I choose to adopt the view that it is the local courts which have jurisdiction to determine
whether or not a given act is official or private. While there is a dearth of cases on the matter under
Philippine jurisprudence, the issue is not entirely novel.
The case of M.H. Wylie, et al. vs. Rarang, et al.[38] concerns the extent of immunity from suit of
the officials of a United States Naval Base inside the Philippine territory. Although a motion to dismiss
was filed by the defendants therein invoking their immunity from suit pursuant to the RP-US Military
Bases Agreement, the trial court denied the same and, after trial, rendered a decision declaring that
the defendants are not entitled to immunity because the latter acted beyond the scope of their official
duties. The Court likewise applied the ruling enunciated in the case of Chavez vs.
Sandiganbayan[39] to the effect that a mere invocation of the immunity clause does not ipso
facto result in the charges being automatically dropped. While it is true that the Chavez case involved
a public official, the Court did not find any substantial reason why the same rule cannot be made to
63

apply to a US official assigned at the US Naval Station located in the Philippines. In this case, it was
the local courts which ascertained whether the acts complained of were done in an official or personal
capacity.
In the case of The Holy See vs. Rosario, Jr.,[40] a complaint for annulment of contract of sale,
reconveyance, specific performance and damages was filed against petitioner. Petitioner moved to
dismiss on the ground of, among others, lack of jurisdiction based on sovereign immunity from suit,
which was denied by the trial court. A motion for reconsideration, and subsequently, a Motion for a
Hearing for the Sole Purpose of Establishing Factual Allegation for Claim of Immunity as a
Jurisdictional Defense were filed by petitioner. The trial court deferred resolution of said motions until
after trial on the merits. On certiorari, the Court there ruled on the issue of petitioners non-suability on
the basis of the allegations made in the pleadings filed by the parties. This is an implicit recognition of
the courts jurisdiction to ascertain the suability or non-suability of the sovereign by assessing the facts
of the case. The Court hastened to add that when a state or international agency wishes to plead
sovereign or diplomatic immunity in a foreign court, in some cases, the defense of sovereign
immunity was submitted directly to the local courts by the respondents through their private counsels,
or where the foreign states bypass the Foreign Office, the courts can inquire into the facts and make
their own determination as to the nature of the acts and transactions involved.
Finally, it appears from the records of this case that petitioner is a senior economist at ADB and
as such he makes country project profiles which will help the bank in deciding whether to lend money
or support a particular project to a particular country.[41] Petitioner stands charged of grave slander for
allegedly uttering defamatory remarks against his secretary, the private complainant
herein. Considering that the immunity accorded to petitioner is limited only to acts performed in his
official capacity, it becomes necessary to make a factual determination of whether or not the
defamatory utterances were made pursuant and in relation to his official functions as a senior
economist.
I vote to deny the motion for reconsideration.

[G.R. No. 154705. June 26, 2003]

THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR SOERATMIN, and

MINISTER COUNSELLOR AZHARI KASIM, petitioners, vs.JAMES VINZON, doing
business under the name and style of VINZON TRADE AND SERVICES, respondent.

DECISION
AZCUNA, J:

This is a petition for review on certiorari to set aside the Decision of the Court of Appeals dated
May 30, 2002 and its Resolution dated August 16, 2002, in CA-G.R. SP No. 66894 entitled The
Republic of Indonesia, His Excellency Ambassador Soeratmin and Minister Counselor Azhari Kasim
v. Hon. Cesar Santamaria, Presiding Judge, RTC Branch 145, Makati City, and James Vinzon, doing
business under the name and style of Vinzon Trade and Services.
Petitioner, Republic of Indonesia, represented by its Counsellor, Siti Partinah, entered into a
Maintenance Agreement in August 1995 with respondent James Vinzon, sole proprietor of Vinzon
Trade and Services. The Maintenance Agreement stated that respondent shall, for a consideration,
64

maintain specified equipment at the Embassy Main Building, Embassy Annex Building and the Wisma
Duta, the official residence of petitioner Ambassador Soeratmin. The equipment covered by the
Maintenance Agreement are air conditioning units, generator sets, electrical facilities, water heaters,
and water motor pumps. It is likewise stated therein that the agreement shall be effective for a period
of four years and will renew itself automatically unless cancelled by either party by giving thirty days
prior written notice from the date of expiry.[1]
Petitioners claim that sometime prior to the date of expiration of the said agreement, or before
August 1999, they informed respondent that the renewal of the agreement shall be at the discretion of
the incoming Chief of Administration, Minister Counsellor Azhari Kasim, who was expected to arrive
in February 2000. When Minister Counsellor Kasim assumed the position of Chief of Administration in
March 2000, he allegedly found respondents work and services unsatisfactory and not in compliance
with the standards set in the Maintenance Agreement. Hence, the Indonesian Embassy terminated
the agreement in a letter dated August 31, 2000.[2] Petitioners claim, moreover, that they had earlier
verbally informed respondent of their decision to terminate the agreement.
On the other hand, respondent claims that the aforesaid termination was arbitrary and
unlawful. Respondent cites various circumstances which purportedly negated petitioners alleged
dissatisfaction over respondents services: (a) in July 2000, Minister Counsellor Kasim still requested
respondent to assign to the embassy an additional full-time worker to assist one of his other workers;
(b) in August 2000, Minister Counsellor Kasim asked respondent to donate a prize, which the latter
did, on the occasion of the Indonesian Independence Day golf tournament; and (c) in a letter dated
August 22, 2000, petitioner Ambassador Soeratmin thanked respondent for sponsoring a prize and
expressed his hope that the cordial relations happily existing between them will continue to prosper
and be strengthened in the coming years.
Hence, on December 15, 2000, respondent filed a complaint[3] against petitioners docketed as
Civil Case No. 18203 in the Regional Trial Court (RTC) of Makati, Branch 145. On February 20, 2001,
petitioners filed a Motion to Dismiss, alleging that the Republic of Indonesia, as a foreign sovereign
State, has sovereign immunity from suit and cannot be sued as a party-defendant in the
Philippines. The said motion further alleged that Ambassador Soeratmin and Minister Counsellor
Kasim are diplomatic agents as defined under the Vienna Convention on Diplomatic Relations and
therefore enjoy diplomatic immunity.[4] In turn, respondent filed on March 20, 2001, an Opposition to
the said motion alleging that the Republic of Indonesia has expressly waived its immunity from
suit. He based this claim upon the following provision in the Maintenance Agreement:

Any legal action arising out of this Maintenance Agreement shall be settled according to the laws of
the Philippines and by the proper court of Makati City, Philippines.

Respondents Opposition likewise alleged that Ambassador Soeratmin and Minister Counsellor Kasim
can be sued and held liable in their private capacities for tortious acts done with malice and bad
faith.[5]
On May 17, 2001, the trial court denied herein petitioners Motion to Dismiss. It likewise denied
the Motion for Reconsideration subsequently filed.
The trial courts denial of the Motion to Dismiss was brought up to the Court of Appeals by herein
petitioners in a petition for certiorari and prohibition. Said petition, docketed as CA-G.R. SP No.
66894, alleged that the trial court gravely abused its discretion in ruling that the Republic of Indonesia
gave its consent to be sued and voluntarily submitted itself to the laws and jurisdiction of Philippine
courts and that petitioners Ambassador Soeratmin and Minister Counsellor Kasim waived their
immunity from suit.
65

On May 30, 2002, the Court of Appeals rendered its assailed decision denying the petition for
lack of merit.[6] On August 16, 2002, it denied herein petitioners motion for reconsideration.[7]
Hence, this petition.
In the case at bar, petitioners raise the sole issue of whether or not the Court of Appeals erred in
sustaining the trial courts decision that petitioners have waived their immunity from suit by using as its
basis the abovementioned provision in the Maintenance Agreement.
The petition is impressed with merit.
International law is founded largely upon the principles of reciprocity, comity, independence, and
equality of States which were adopted as part of the law of our land under Article II, Section 2 of the
1987 Constitution.[8] The rule that a State may not be sued without its consent is a necessary
consequence of the principles of independence and equality of States.[9] As enunciated in Sanders v.
Veridiano II,[10] the practical justification for the doctrine of sovereign immunity is that there can be no
legal right against the authority that makes the law on which the right depends. In the case of foreign
States, the rule is derived from the principle of the sovereign equality of States, as expressed in the
maxim par in parem non habet imperium. All states are sovereign equals and cannot assert
jurisdiction over one another.[11] A contrary attitude would unduly vex the peace of nations.[12]
The rules of International Law, however, are neither unyielding nor impervious to change. The
increasing need of sovereign States to enter into purely commercial activities remotely connected
with the discharge of their governmental functions brought about a new concept of sovereign
immunity. This concept, the restrictive theory, holds that the immunity of the sovereign is recognized
only with regard to public acts or acts jure imperii, but not with regard to private acts or acts jure
gestionis.[13]
In United States v. Ruiz,[14] for instance, we held that the conduct of public bidding for the repair
of a wharf at a United States Naval Station is an act jure imperii. On the other hand, we considered as
an act jure gestionis the hiring of a cook in the recreation center catering to American servicemen and
the general public at the John Hay Air Station in Baguio City,[15] as well as the bidding for the
operation of barber shops in Clark Air Base in Angeles City.[16]
Apropos the present case, the mere entering into a contract by a foreign State with a private party
cannot be construed as the ultimate test of whether or not it is an act jure imperii or jure
gestionis. Such act is only the start of the inquiry. Is the foreign State engaged in the regular conduct
of a business? If the foreign State is not engaged regularly in a business or commercial activity, and
in this case it has not been shown to be so engaged, the particular act or transaction must then be
tested by its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it is an
act jure imperii.[17]
Hence, the existence alone of a paragraph in a contract stating that any legal action arising out of
the agreement shall be settled according to the laws of the Philippines and by a specified court of the
Philippines is not necessarily a waiver of sovereign immunity from suit. The aforesaid provision
contains language not necessarily inconsistent with sovereign immunity. On the other hand, such
provision may also be meant to apply where the sovereign party elects to sue in the local courts, or
otherwise waives its immunity by any subsequent act. The applicability of Philippine laws must be
deemed to include Philippine laws in its totality, including the principle recognizing sovereign
immunity. Hence, the proper court may have no proper action, by way of settling the case, except to
dismiss it.
Submission by a foreign state to local jurisdiction must be clear and unequivocal. It must be given
explicitly or by necessary implication. We find no such waiver in this case.
66

Respondent concedes that the establishment of a diplomatic mission is a sovereign function. On

the other hand, he argues that the actual physical maintenance of the premises of the diplomatic
mission, such as the upkeep of its furnishings and equipment, is no longer a sovereign function of the
State.[18]
We disagree. There is no dispute that the establishment of a diplomatic mission is an act jure
imperii. A sovereign State does not merely establish a diplomatic mission and leave it at that; the
establishment of a diplomatic mission encompasses its maintenance and upkeep. Hence, the State
may enter into contracts with private entities to maintain the premises, furnishings and equipment of
the embassy and the living quarters of its agents and officials. It is therefore clear that petitioner
Republic of Indonesia was acting in pursuit of a sovereign activity when it entered into a contract with
respondent for the upkeep or maintenance of the air conditioning units, generator sets, electrical
facilities, water heaters, and water motor pumps of the Indonesian Embassy and the official residence
of the Indonesian ambassador.
The Solicitor General, in his Comment, submits the view that, the Maintenance Agreement was
entered into by the Republic of Indonesia in the discharge of its governmental functions. In such a
case, it cannot be deemed to have waived its immunity from suit. As to the paragraph in the
agreement relied upon by respondent, the Solicitor General states that it was not a waiver of their
immunity from suit but a mere stipulation that in the event they do waive their immunity, Philippine
laws shall govern the resolution of any legal action arising out of the agreement and the proper court
in Makati City shall be the agreed venue thereof.[19]
On the matter of whether or not petitioners Ambassador Soeratmin and Minister Counsellor
Kasim may be sued herein in their private capacities, Article 31 of the Vienna Convention on
Diplomatic Relations provides:

xxx

1. A diplomatic agent shall enjoy immunity from the criminal jurisidiction of the receiving State. He
shall also enjoy immunity from its civil and administrative jurisdiction, except in the case of:

(a) a real action relating to private immovable property situated in the territory of the receiving State,
unless he holds it on behalf of the sending State for the purposes of the mission;

(b) an action relating to succession in which the diplomatic agent is involved as executor,
administrator, heir or legatee as a private person and not on behalf of the sending State;

(c) an action relating to any professional or commercial activity exercised by the diplomatic agent in
the receiving State outside his official functions.

xxx

The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in terminating the
Maintenance Agreement is not covered by the exceptions provided in the abovementioned provision.
The Solicitor General believes that said act may fall under subparagraph (c) thereof,[20] but said
provision clearly applies only to a situation where the diplomatic agent engages in any professional or
commercial activity outside official functions, which is not the case herein.
67

WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of
Appeals in CA G.R. SP No. 66894 are REVERSED and SET ASIDE and the complaint in Civil Case
No. 18203 against petitioners is DISMISSED. No costs.
SO ORDERED.

FIRST DIVISION

REPUBLIC OF THE PHILIPPINES, G.R. No. 161657

Petitioner,
Present:

PUNO, C.J.,Chairperson,
- versus - SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
HON. VICENTE A. HIDALGO, in his capacity as GARCIA, JJ.
Presiding Judge of the Regional Trial Court of
Manila, Branch 37, CARMELO V. CACHERO, in his
capacity as Sheriff IV, Regional Trial Court of
Manila, and TARCILA LAPERAL MENDOZA, Promulgated:
Respondents.
October 4, 2007
x----------------------------------------------------------------------------------------x

DECISION

GARCIA, J.:

Via this verified petition for certiorari and prohibition under Rule 65 of the Rules of Court, the Republic
of the Philippines (Republic, for short), thru the Office of the Solicitor General (OSG), comes to this
Court to nullify and set aside the decision dated August 27, 2003 and other related issuances of the
Regional Trial Court (RTC) of Manila, Branch 37, in its Civil Case No. 99-94075. In directly invoking
the Courts original jurisdiction to issue the extraordinary writs of certiorari and prohibition, without
challenge from any of the respondents, the Republic gave as justification therefor the fact that the
case involves an over TWO BILLION PESO judgment against the State, allegedly rendered in blatant
violation of the Constitution, law and jurisprudence.

By any standard, the case indeed involves a colossal sum of money which, on the face of the
assailed decision, shall be the liability of the national government or, in fine, the taxpayers. This
consideration, juxtaposed with the constitutional and legal questions surrounding the controversy,
presents special and compelling reasons of public interests why direct recourse to the Court should
be allowed, as an exception to the policy on hierarchy of courts.

At the core of the litigation is a 4,924.60-square meter lot once covered by Transfer Certificate of Title
(TCT) No. 118527 of the Registry of Deeds of Manila in the name of the herein private respondent
Tarcila Laperal Mendoza (Mendoza), married to Perfecto Mendoza. The lot is situated at No. 1440
68

Arlegui St., San Miguel, Manila, near the Malacaang Palace complex. On this lot, hereinafter referred
to as the Arlegui property, now stands the Presidential Guest House which was home to two (2)
former Presidents of the Republic and now appears to be used as office building of the Office of the
President.[1]

The facts:

Sometime in June 1999, Mendoza filed a suit with the RTC of Manila for reconveyance and the
corresponding declaration of nullity of a deed of sale and title against the Republic, the Register of
Deeds of Manila and one Atty. Fidel Vivar. In her complaint, as later amended, docketed as Civil
Case No. 99-94075 and eventually raffled to Branch 35 of the court, Mendoza essentially alleged
being the owner of the disputed Arlegui property which the Republic forcibly dispossessed her of
and over which the Register of Deeds of Manila issued TCT No. 118911 in the name of the Republic.

Answering, the Republic set up, among other affirmative defenses, the States immunity from suit.

The intervening legal tussles are not essential to this narration. What is material is that in an Order of
March 17, 2000, the RTC of Manila, Branch 35, dismissed Mendozas complaint. The court would also
deny, in another order dated May 12, 2000, Mendozas omnibus motion for reconsideration. On a
petition for certiorari, however, the Court of Appeals (CA), in CA-G.R. SP No. 60749, reversed the
trial courts assailed orders and remanded the case to the court a quo for further proceedings.[2] On
appeal, this Court, in G.R. No. 155231, sustained the CAs reversal action.[3]

From Branch 35 of the trial court whose then presiding judge inhibited himself from hearing the
remanded Civil Case No. 99-94075, the case was re-raffled to Branch 37 thereof, presided by the
respondent judge.
On May 5, 2003, Mendoza filed a Motion for Leave of Court to file a Third Amended Complaint with a
copy of the intended third amended complaint thereto attached. In the May 16, 2003 setting to hear
the motion, the RTC, in open court and in the presence of the Republics counsel, admitted the third
amended complaint, ordered the Republic to file its answer thereto within five (5) days from May 16,
2003 and set a date for pre-trial.

In her adverted third amended complaint for recovery and reconveyance of the Arlegui property,
Mendoza sought the declaration of nullity of a supposed deed of sale dated July 15, 1975 which
provided the instrumentation toward the issuance of TCT No. 118911 in the name of the Republic.
And aside from the cancellation of TCT No. 118911, Mendoza also asked for the reinstatement of her
TCT No. 118527.[4] In the same third amended complaint, Mendoza averred that, since time
immemorial, she and her predecessors-in-interest had been in peaceful and adverse possession of
the property as well as of the owners duplicate copy of TCT No. 118527. Such possession, she
added, continued until the first week of July 1975 when a group of armed men representing
themselves to be members of the Presidential Security Group [PSG] of the then President Ferdinand
E. Marcos, had forcibly entered [her] residence and ordered [her] to turn over to them her Copy of
TCT No. 118525 and compelled her and the members of her household to vacate the same ; thus,
out of fear for their lives, [she] handed her Owners Duplicate Certificate Copy of TCT No. 118527 and
had left and/or vacated the subject property. Mendoza further alleged the following:

1. Per verification, TCT No. 118527 had already been cancelled by virtue of a deed of sale in favor of
the Republic allegedly executed by her and her deceased husband on July 15, 1975 and
69

acknowledged before Fidel Vivar which deed was annotated at the back of TCT No. 118527 under
PE: 2035/T-118911 dated July 28, 1975; and

2. That the aforementioned deed of sale is fictitious as she (Mendoza) and her husband have not
executed any deed of conveyance covering the disputed property in favor of the Republic, let alone
appearing before Fidel Vivar.

Inter alia, she prayed for the following:

4. Ordering the Republic to pay plaintiff [Mendoza] a reasonable compensation or rental for the
use or occupancy of the subject property in the sum of FIVE HUNDRED THOUSAND
(P500,000.00) PESOS a month with a five (5%) per cent yearly increase, plus interest
thereon at the legal rate, beginning July 1975 until it finally vacates the same;

5. Ordering the Republic to pay plaintiffs counsel a sum equivalent to TWENTY FIVE (25%)
PER CENT of the current value of the subject property and/or whatever amount is
recovered under the premises; Further, plaintiff prays for such other relief, just and
equitable under the premises.

On May 21, 2003, the Republic, represented by the OSG, filed a Motion for Extension (With Motion for
Cancellation of scheduled pre-trial). In it, the Republic manifested its inability to simply adopt its
previous answer and, accordingly, asked that it be given a period of thirty (30) days from May 21,
2003 or until June 20, 2003within which to submit an Answer.[5] June 20, 2003 came and went, but no
answer was filed. On July 18, 2003 and again on August 19, 2003, the OSG moved for a 30-day
extension at each instance. The filing of the last two motions for extension proved to be an idle
gesture, however, since the trial court had meanwhile issued an order[6] dated July 7, 2003 declaring
the petitioner Republic as in default and allowing the private respondent to present her evidence ex-
parte.

The evidence for the private respondent, as plaintiff a quo, consisted of her testimony denying having
executed the alleged deed of sale dated July 15, 1975 which paved the way for the issuance of TCT
No. 118911. According to her, said deed is fictitious or inexistent, as evidenced by separate
certifications, the first (Exh. E), issued by the Register of Deeds for Manila and the second (Exh. F),
by the Office of Clerk of Court, RTC Manila. Exhibit E[7] states that a copy of the supposed conveying
deed cannot, despite diligent efforts of records personnel, be located, while Exhibit F[8] states that
Fidel Vivar was not a commissioned notary public for and in the City of Manila for the year
1975. Three other witnesses[9] testified, albeit their testimonies revolved around the appraisal and
rental values of the Arlegui property.

Eventually, the trial court rendered a judgment by default[10] for Mendoza and against the Republic. To
the trial court, the Republic had veritably confiscated Mendozas property, and deprived her not only of
the use thereof but also denied her of the income she could have had otherwise realized during all the
years she was illegally dispossessed of the same.

Dated August 27, 2003, the trial courts decision dispositively reads as follows:

WHEREFORE, judgment is hereby rendered:

70

1. Declaring the deed of sale dated July 15, 1975, annotated at the
back of [TCT] No. 118527 as PE:2035/T-118911, as non-existent and/or
fictitious, and, therefore, null and void from the beginning;

2. Declaring that [TCT] No. 118911 of the defendant Republic of the

Philippines has no basis, thereby making it null and void from the
beginning;

3. Ordering the defendant Register of Deeds for the City of Manila to

reinstate plaintiff [Mendozas TCT] No. 118527;

4. Ordering the defendant Republic to pay just compensation in the

sum of ONE HUNDRED FORTY THREE MILLION SIX HUNDRED
THOUSAND (P143,600,000.00) PESOS, plus interest at the legal rate,
until the whole amount is paid in full for the acquisition of the subject
property;

5. Ordering the plaintiff, upon payment of the just compensation for

the acquisition of her property, to execute the necessary deed of
conveyance in favor of the defendant Republic ; and, on the other hand,
directing the defendant Register of Deeds, upon presentation of the said
deed of conveyance, to cancel plaintiffs TCT No. 118527 and to issue, in
lieu thereof, a new Transfer Certificate of Title in favor of the defendant
Republic;

6. Ordering the defendant Republic to pay the plaintiff the sum of ONE
BILLION FOUR HUNDRED EIGHTY MILLION SIX HUNDRED TWENTY
SEVEN THOUSAND SIX HUNDRED EIGHTY
EIGHT (P1,480,627,688.00) PESOS, representing the reasonable rental
for the use of the subject property, the interest thereon at the legal rate,
and the opportunity cost at the rate of three (3%) per cent per annum,
commencing July 1975 continuously up to July 30, 2003, plus an
additional interest at the legal rate, commencing from this date until the
whole amount is paid in full;

7. Ordering the defendant Republic to pay the plaintiff attorneys fee, in

an amount equivalent to FIFTEEN (15%) PER CENT of the amount due
to the plaintiff.
With pronouncement as to the costs of suit.

SO ORDERED. (Words in bracket and emphasis added.)

Subsequently, the Republic moved for, but was denied, a new trial per order of the trial court of
October 7, 2003.[11] Denied also was its subsequent plea for reconsideration.[12] These twin denial
orders were followed by several orders and processes issued by the trial court on separate dates as
hereunder indicated:

1. November 27, 2003 - - Certificate of Finality declaring the August 27, 2003 decision final
and executory.[13]
71

2. December 17, 2003 - - Order denying the Notice of Appeal filed on November 27, 2003,
the same having been filed beyond the reglementary period.[14]

3. December 19, 2003 - - Order[15] granting the private respondents motion for execution.

4. December 22, 2003 - - Writ of Execution.[16]

Hence, this petition for certiorari.

By Resolution[17] of November 20, 2006, the case was set for oral arguments. On January 22, 2007,
when this case was called for the purpose, both parties manifested their willingness to settle the case
amicably, for which reason the Court gave them up to February 28, 2007 to submit the compromise
agreement for approval. Following several approved extensions of the February 28, 2007 deadline,
the OSG, on August 6, 2007, manifested that it is submitting the case for resolution on the merits
owing to the inability of the parties to agree on an acceptable compromise.
In this recourse, the petitioner urges the Court to strike down as a nullity the trial courts order
declaring it in default and the judgment by default that followed. Sought to be nullified, too, also on the
ground that they were issued in grave abuse of discretion amounting to lack or in excess of
jurisdiction, are the orders and processes enumerated immediately above issued after the rendition of
the default judgment.

Petitioner lists five (5) overlapping grounds for allowing its petition. It starts off by impugning the order
of default and the judgment by default. To the petitioner, the respondent judge committed serious
jurisdictional error when he proceeded to hear the case and eventually awarded the private
respondent a staggering amount without so much as giving the petitioner the opportunity to present
its defense.

Petitioners posture is simply without merit.

Deprivation of procedural due process is obviously the petitioners threshold theme. Due process, in
its procedural aspect, guarantees in the minimum the opportunity to be heard.[18] Grave abuse of
discretion, however, cannot plausibly be laid at the doorstep of the respondent judge on account of
his having issued the default order against the petitioner, then proceeding with the hearing and
eventually rendering a default judgment. For, what the respondent judge did hew with what Section 3,
Rule 9 of the Rules of Court prescribes and allows in the event the defending party fails to
seasonably file a responsive pleading. The provision reads:

SEC. 3. Default; declaration of.- If the defending party fails to answer within the time allowed
therefor, the court shall, upon motion of the claiming party with notice to the defending
party, and proof of such failure, declare the defending party in default. Thereupon, the
court shall proceed to render judgment granting the claimant such relief as his pleading
may warrant, unless the court in its discretion requires the claimant to submit evidence
.[19]

While the ideal lies in avoiding orders of default,[20] the policy of the law being to have every litigated
case tried on its full merits,[21] the act of the respondent judge in rendering the default judgment after
an order of default was properly issued cannot be struck down as a case of grave abuse of discretion.
72

The term grave abuse of discretion, in its juridical sense, connotes capricious, despotic, oppressive or
whimsical exercise of judgment as is equivalent to lack of jurisdiction.[22] The abuse must be of such
degree as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by
law, as where the power is exercised in a capricious manner. The word capricious, usually used in
tandem with arbitrary, conveys the notion of willful and unreasoning action.[23]

Under the premises, the mere issuance by the trial court of the order of default followed by a
judgment by default can easily be sustained as correct and doubtless within its jurisdiction. Surely, a
disposition directing the Republic to pay an enormous sum without the trial court hearing its side does
not, without more, vitiate, on due procedural ground, the validity of the default judgment. The
petitioner may have indeed been deprived of such hearing, but this does not mean that its right to due
process had been violated. For, consequent to being declared in default, the defaulting defendant
is deemed to have waived his right to be heard or to take part in the trial. The handling solicitors
simply squandered the Republics opportunity to be heard. But more importantly, the law itself
imposes such deprivation of the right to participate as a form of penalty against one unwilling without
justification to join issue upon the allegations tendered by the plaintiff.

And going to another point, the petitioner would ascribe jurisdictional error on the respondent judge
for denying its motion for new trial based on any or a mix of the following factors, viz., (1) the failure to
file an answer is attributable to the negligence of the former handling solicitor; (2) the meritorious
nature of the petitioners defense; and (3) the value of the property involved.

The Court is not convinced. Even as the Court particularly notes what the trial court had said on the
matter of negligence: that all of the petitioners pleadings below bear at least three signatures, that of
the handling solicitor, the assistant solicitor and the Solicitor General himself, and hence
accountability should go up all the way to the top of the totem pole of authority, the cited reasons
advanced by the petitioner for a new trial are not recognized under Section 1, Rule 37 of the Rules of
Court for such recourse.[24] Withal, there is no cogent reason to disturb the denial by the trial court of
the motion for new trial and the denial of the reiterative motion for reconsideration.

Then, too, the issuance by the trial court of the Order dated December 17, 2003[25] denying the
petitioners notice of appeal after the court caused the issuance on November 27, 2003 of a certificate
of finality of its August 27, 2003 decision can hardly be described as arbitrary, as the petitioner would
have this Court believe. In this regard, the Court takes stock of the following key events and material
dates set forth in the assailed December 17, 2003 order, supra: (a) The petitioner, thru the OSG,
received on August 29, 2003 a copy of the RTC decision in this case, hence had up to September 13,
2003, a Saturday, within which to perfect an appeal; (b) On September 15, 2003, a Monday, the OSG
filed its motion for new trial, which the RTC denied, the OSG receiving a copy of the order of denial
on October 9, 2003; and (c) On October 24, 2003, the OSG sought reconsideration of the order
denying the motion for new trial. The motion for reconsideration was denied per Order dated
November 25, 2003, a copy of which the OSG received on the same date.

Given the foregoing time perspective, what the trial court wrote in its aforementioned impugned order
of December 17, 2003 merits approval:

In the case at bar, it is clear that the motion for new trial filed on the fifteenth (15th) day after the
decision was received on August 29, 2003 was denied and the moving party has only
the remaining period from notice of notice of denial within which to file a notice of
appeal. xxx
73

Accordingly, when defendants [Republic et al.] filed their motion for new trial on the last day of
the fifteen day (15) prescribed for taking an appeal, which motion was subsequently
denied, they had one (1) day from receipt of a copy of the order denying new trial within
which to perfect [an] appeal . Since defendants had received a copy of the order
denying their motion for new trial on 09 October 2003, reckoned from that date, they
only have one (1) day left within which to file the notice of appeal. But instead of doing
so, the defendants filed a motion for reconsideration which was later declared by the
Court as pro forma motion in the Order dated 25 November 2003. The running of the
prescriptive period, therefore, can not be interrupted by a pro forma motion. Hence the
filing of the notice of appeal on 27 November 2007 came much too late for by then the
judgment had already become final and executory.[26] (Words in bracket added;
Emphasis in the original.)
It cannot be over-emphasized at this stage that the special civil action of certiorari is limited to
resolving only errors of jurisdiction; it is not a remedy to correct errors of judgment. Hence, the
petitioners lament, partly covered by and discussed under the first ground for allowing its petition,
about the trial court taking cognizance of the case notwithstanding private respondents claim or
action being barred by prescription and/or laches cannot be considered favorably. For, let alone the
fact that an action for the declaration of the inexistence of a contract, as here, does not
prescribe;[27] that a void transfer of property can be recovered by accion reivindicatoria;[28] and that
the legal fiction of indefeasibility of a Torrens title cannot be used as a shield to perpetuate
fraud,[29] the trial courts disinclination not to appreciate in favor of the Republic the general principles
of prescription or laches constitutes, at best, errors of judgment not correctable by certiorari.
The evidence adduced below indeed adequately supports a conclusion that the Office of the
President, during the administration of then President Marcos, wrested possession of the property in
question and somehow secured a certificate of title over it without a conveying deed having been
executed to legally justify the cancellation of the old title (TCT No. 118527) in the name of the private
respondent and the issuance of a new one (TCT No. 118911) in the name of petitioner Republic.
Accordingly, granting private respondents basic plea for recovery of the Arlegui property, which was
legally hers all along, and the reinstatement of her cancelled certificate of title are legally correct as
they are morally right. While not exactly convenient because the Office of the President presently
uses it for mix residence and office purposes, restoring private respondent to her possession of
the Arlegui property is still legally and physically feasible. For what is before us, after all, is a
registered owner of a piece of land who, during the early days of the martial law regime, lost
possession thereof to the Government which appropriated the same for some public use, but without
going through the legal process of expropriation, let alone paying such owner just compensation.

The Court cannot, however, stop with just restoring the private respondent to her possession and
ownership of her property. The restoration ought to be complemented by some form of monetary
compensation for having been unjustly deprived of the beneficial use thereof, but not, however, in the
varying amounts and level fixed in the assailed decision of the trial court and set to be executed by
the equally assailed writ of execution. The Court finds the monetary award set forth therein to be
erroneous. And the error relates to basic fundamentals of law as to constitute grave abuse of
discretion.

As may be noted, private respondent fixed the assessed value of her Arlegui
property at P2,388,990.00. And in the prayer portion of her third amended complaint for recovery,
she asked to be restored to the possession of her property and that the petitioner be ordered to pay
her, as reasonable compensation or rental use or occupancy thereof, the sum of P500,000.00 a
month, or P6 Million a year, with a five percent (5%) yearly increase plus interest at the legal rate
beginning July 1975. From July 1975 when the PSG allegedly took over the subject property to July
74

2003, a month before the trial court rendered judgment, or a period of 28 years, private respondents
total rental claim would, per the OSGs computation, only amount to P371,440,426.00. In its assailed
decision, however, the trial court ordered the petitioner to pay private respondent the total amount of
over P1.48 Billion or the mind-boggling amount of P1,480,627,688.00, to be exact, representing the
reasonable rental for the property, the interest rate thereon at the legal rate and the opportunity cost.
This figure is on top of the P143,600,000.00 which represents the acquisition cost of the disputed
property. All told, the trial court would have the Republic pay the total amount of about P1.624
Billion, exclusive of interest, for the taking of a property with a declared assessed value
of P2,388,900.00. This is not to mention the award of attorneys fees in an amount equivalent to 15%
of the amount due the private respondent.

In doing so, the respondent judge brazenly went around the explicit command of Rule 9, Section 3(d)
of the Rules of Court[30] which defines the extent of the relief that may be awarded in a judgment by
default, i.e., only so much as has been alleged and proved. The court acts in excess of jurisdiction if it
awards an amount beyond the claim made in the complaint or beyond that proved by the
evidence.[31] While a defaulted defendant may be said to be at the mercy of the trial court, the Rules
of Court and certainly the imperatives of fair play see to it that any decision against him must be in
accordance with law.[32] In the abstract, this means that the judgment must not be characterized by
outrageous one-sidedness, but by what is fair, just and equitable that always underlie the enactment
of a law.

Given the above perspective, the obvious question that comes to mind is the level of compensation
which for the use and occupancy of the Arlegui property - would be fair to both the petitioner and the
private respondent and, at the same time, be within acceptable legal bounds. The process of
balancing the interests of both parties is not an easy one. But surely, the Arlegui property cannot
possibly be assigned, even perhaps at the present real estate business standards, a monthly rental
value of at least P500,000.00 or P6,000,000.00 a year, the amount private respondent particularly
sought and attempted to prove. This asking figure is clearly unconscionable, if not downright
ridiculous, attendant circumstances considered. To the Court, an award of P20,000.00 a month for
the use and occupancy of the Arlegui property, while perhaps a little bit arbitrary, is reasonable and
may be granted pro hac vice considering the following hard realities which the Court takes stock of:

1. The property is relatively small in terms of actual area and had an assessed value of only
P2,388,900.00;
2. What the martial law regime took over was not exactly an area with a new and imposing
structure, if there was any; and

3. The Arlegui property had minimal rental value during the relatively long martial law
years, given the very restrictive entry and egress conditions prevailing at the vicinity at that
time and even after.

To be sure, the grant of monetary award is not without parallel. In Alfonso v. Pasay City,[33] a case
where a registered owner also lost possession of a piece of lot to a municipality which took it for a
public purposes without instituting expropriation proceedings or paying any compensation for the lot,
the Court, citing Herrera v. Auditor General,[34] ordered payment of just compensation but in the form
of interest when a return of the property was no longer feasible.

The award of attorneys fees equivalent to 15% of the amount due the private respondent, as reduced
herein, is affirmed.
75

The assessment of costs of suit against the petitioner is, however, nullified, costs not being allowed
against the Republic, unless otherwise provided by law.[35]

The assailed trial courts issuance of the writ of execution[36] against government funds to satisfy its
money judgment is also nullified. It is basic that government funds and properties may not be seized
under writs of execution or garnishment to satisfy such judgments.[37] Republic v. Palacio[38] teaches
that a judgment against the State generally operates merely to liquidate and establish the plaintiffs
claim in the absence of express provision; otherwise, they can not be enforced by processes of law.

Albeit title to the Arlegui property remains in the name of the petitioner Republic, it is actually
the Office of the President which has beneficial possession of and use over it since the 1975
takeover. Accordingly, and in accord with the elementary sense of justice, it behooves that office to
make the appropriate budgetary arrangements towards paying private respondent what is due her
under the premises. This, to us, is the right thing to do. The imperatives of fair dealing demand no
less. And the Court would be remiss in the discharge of its duties as dispenser of justice if it does not
exhort the Office of the President to comply with what, in law and equity, is its obligation. If the same
office will undertake to pay its obligation with reasonable dispatch or in a manner acceptable to the
private respondent, then simple justice, while perhaps delayed, will have its day. Private respondent
is in the twilight of her life, being now over 90 years of age.[39] Any delay in the implementation of this
disposition would be a bitter cut.

WHEREFORE, the decision of the Regional Trial Court of Manila dated August 27, 2003 insofar as it
nullified TCT No. 118911 of petitioner Republic of the Philippines and ordered the Register of Deeds
of Manila to reinstate private respondent Tarcila L. Mendozas TCT No. 118527, or to issue her a new
certificate of title is AFFIRMED. Should it be necessary, the Register of Deeds of Manila shall
execute the necessary conveying deed to effect the reinstatement of title or the issuance of a new
title to her.

It is MODIFIED in the sense that for the use and occupancy of the Arlegui property, petitioner
Republic is ordered to pay private respondent the reasonable amount of P20,000.00 a month
beginning July 1975 until it vacates the same and the possession thereof restored to the private
respondent, plus an additional interest of 6% per annum on the total amount due upon the finality of
this Decision until the same is fully paid. Petitioner is further ordered to pay private respondent
attorney's fees equivalent to 15% of the amount due her under the premises.

Accordingly, a writ of certiorari is hereby ISSUED in the sense that:

1. The respondent courts assailed decision of August 27, 2003 insofar as it ordered the petitioner
Republic of the Philippines to pay private respondent Tarcila L. Mendoza the sum of One Billion Four
Hundred Eighty Million Six Hundred Twenty Seven Thousand Six Hundred Eighty Eight Pesos
(P1,480,627,688.00) representing the purported rental use of the property in question, the interest
thereon and the opportunity cost at the rate of 3% per annum plus the interest at the legal rate added
thereon is nullified. The portion assessing the petitioner Republic for costs of suit is also
declared null and void.

2. The Order of the respondent court dated December 19, 2003 for the issuance of a writ of execution
and the Writ of Execution dated December 22, 2003 against government funds are hereby
declared null and void. Accordingly, the presiding judge of the respondent court, the private
respondent, their agents and persons acting for and in their behalves are permanently enjoined from
enforcing said writ of execution.
76

However, consistent with the basic tenets of justice, fairness and equity, petitioner Republic, thru
the Office of the President, is hereby strongly enjoined to take the necessary steps, and, with
reasonable dispatch, make the appropriate budgetary arrangements to pay private respondent Tarcila
L. Mendoza or her assigns the amount adjudged due her under this disposition.
SO ORDERED.

G.R. No. 171182 August 23, 2012

UNIVERSITY OF THE PHILIPPINES, JOSE V. ABUEVA, RAUL P. DE GUZMAN, RUBEN P.

ASPIRAS, EMMANUEL P. BELLO, WILFREDO P. DAVID, CASIANO S. ABRIGO, and JOSEFINA
R. LICUANAN,Petitioners,
vs.
HON. AGUSTIN S. DIZON, his capacity as Presiding Judge of the Regional Trial Court of
Quezon City, Branch 80, STERN BUILDERS, INC., and SERVILLANO DELA CRUZ, Respondents.

DECISION

BERSAMIN, J.:

Trial judges should not immediately issue writs of execution or garnishment against the Government
or any of its subdivisions, agencies and instrumentalities to enforce money judgments.1 They should
bear in mind that the primary jurisdiction to examine, audit and settle all claims of any sort due from
the Government or any of its subdivisions, agencies and instrumentalities pertains to the Commission
on Audit (COA) pursuant to Presidential Decree No. 1445 (Government Auditing Code of the
Philippines).

The Case -On appeal by the University of the Philippines and its then incumbent officials (collectively,
the UP) is the decision promulgated on September 16, 2005,2 whereby the Court of Appeals (CA)
upheld the order of the Regional Trial Court (RTC), Branch 80, in Quezon City that directed the
garnishment of public funds amounting to 16,370,191.74 belonging to the UP to satisfy the writ of
execution issued to enforce the already final and executory judgment against the UP.

Antecedents -On August 30, 1990, the UP, through its then President Jose V. Abueva, entered into
a General Construction Agreement with respondent Stern Builders Corporation (Stern Builders),
represented by its President and General Manager Servillano dela Cruz, for the construction of the
extension building and the renovation of the College of Arts and Sciences Building in the campus of
the University of the Philippines in Los Baos (UPLB).3

In the course of the implementation of the contract, Stern Builders submitted three progress billings
corresponding to the work accomplished, but the UP paid only two of the billings. The third billing
worth 273,729.47 was not paid due to its disallowance by the Commission on Audit (COA). Despite
the lifting of the disallowance, the UP failed to pay the billing, prompting Stern Builders and dela Cruz
to sue the UP and its co-respondent officials to collect the unpaid billing and to recover various
damages. The suit, entitled Stern Builders Corporation and Servillano R. Dela Cruz v. University of
the Philippines Systems, Jose V. Abueva, Raul P. de Guzman, Ruben P. Aspiras, Emmanuel P.
Bello, Wilfredo P. David, Casiano S. Abrigo, and Josefina R. Licuanan, was docketed as Civil Case
No. Q-93-14971 of the Regional Trial Court in Quezon City (RTC).4
77

After trial, on November 28, 2001, the RTC rendered its decision in favor of the plaintiffs,5 viz:

Wherefore, in the light of the foregoing, judgment is hereby rendered in favor of the plaintiff and
against the defendants ordering the latter to pay plaintiff, jointly and severally, the following, to wit:

1. 503,462.74 amount of the third billing, additional accomplished work and retention
money

2. 5,716,729.00 in actual damages

3. 10,000,000.00 in moral damages

4. 150,000.00 and 1,500.00 per appearance as attorneys fees; and

5. Costs of suit.

SO ORDERED.

Following the RTCs denial of its motion for reconsideration on May 7, 2002,6 the UP filed a notice of
appeal on June 3, 2002.7 Stern Builders and dela Cruz opposed the notice of appeal on the ground of
its filing being belated, and moved for the execution of the decision. The UP countered that the notice
of appeal was filed within the reglementary period because the UPs Office of Legal Affairs (OLS) in
Diliman, Quezon City received the order of denial only on May 31, 2002. On September 26, 2002, the
RTC denied due course to the notice of appeal for having been filed out of time and granted the
private respondents motion for execution.8

The RTC issued the writ of execution on October 4, 2002,9 and the sheriff of the RTC served the writ
of execution and notice of demand upon the UP, through its counsel, on October 9, 2002.10 The UP
filed an urgent motion to reconsider the order dated September 26, 2002, to quash the writ of
execution dated October 4, 2002, and to restrain the proceedings.11 However, the RTC denied the
urgent motion on April 1, 2003.12

On June 24, 2003, the UP assailed the denial of due course to its appeal through a petition
for certiorari in the Court of Appeals (CA), docketed as CA-G.R. No. 77395.13

On February 24, 2004, the CA dismissed the petition for certiorari upon finding that the UPs notice of
appeal had been filed late,14 stating:

Records clearly show that petitioners received a copy of the Decision dated November 28, 2001 and
January 7, 2002, thus, they had until January 22, 2002 within which to file their appeal. On January
16, 2002 or after the lapse of nine (9) days, petitioners through their counsel Atty. Nolasco filed a
Motion for Reconsideration of the aforesaid decision, hence, pursuant to the rules, petitioners still had
six (6) remaining days to file their appeal. As admitted by the petitioners in their petition (Rollo, p. 25),
Atty. Nolasco received a copy of the Order denying their motion for reconsideration on May 17, 2002,
thus, petitioners still has until May 23, 2002 (the remaining six (6) days) within which to file their
appeal. Obviously, petitioners were not able to file their Notice of Appeal on May 23, 2002 as it was
only filed on June 3, 2002.

In view of the said circumstances, We are of the belief and so holds that the Notice of Appeal filed by
the petitioners was really filed out of time, the same having been filed seventeen (17) days late of the
78

reglementary period. By reason of which, the decision dated November 28, 2001 had already become
final and executory. "Settled is the rule that the perfection of an appeal in the manner and within the
period permitted by law is not only mandatory but jurisdictional, and failure to perfect that appeal
renders the challenged judgment final and executory. This is not an empty procedural rule but is
grounded on fundamental considerations of public policy and sound practice." (Rams Studio and
Photographic Equipment, Inc. vs. Court of Appeals, 346 SCRA 691, 696). Indeed, Atty. Nolasco
received the order of denial of the Motion for Reconsideration on May 17, 2002 but filed a Notice of
Appeal only on June 3, 3003. As such, the decision of the lower court ipso facto became final when
no appeal was perfected after the lapse of the reglementary period. This procedural caveat cannot be
trifled with, not even by the High Court.15

The UP sought a reconsideration, but the CA denied the UPs motion for reconsideration on April 19,
2004.16

On May 11, 2004, the UP appealed to the Court by petition for review on certiorari (G.R. No. 163501).

On June 23, 2004, the Court denied the petition for review.17 The UP moved for the reconsideration of
the denial of its petition for review on August 29, 2004,18 but the Court denied the motion on October
6, 2004.19 The denial became final and executory on November 12, 2004.20

In the meanwhile that the UP was exhausting the available remedies to overturn the denial of due
course to the appeal and the issuance of the writ of execution, Stern Builders and dela Cruz filed in
the RTC their motions for execution despite their previous motion having already been granted and
despite the writ of execution having already issued. On June 11, 2003, the RTC granted another
motion for execution filed on May 9, 2003 (although the RTC had already issued the writ of execution
on October 4, 2002).21

On June 23, 2003 and July 25, 2003, respectively, the sheriff served notices of garnishment on the
UPs depository banks, namely: Land Bank of the Philippines (Buendia Branch) and the Development
Bank of the Philippines (DBP), Commonwealth Branch.22 The UP assailed the garnishment through
an urgent motion to quash the notices of garnishment;23 and a motion to quash the writ of execution
dated May 9, 2003.24

On their part, Stern Builders and dela Cruz filed their ex parte motion for issuance of a release
order.25

On October 14, 2003, the RTC denied the UPs urgent motion to quash, and granted Stern Builders
and dela Cruzs ex parte motion for issuance of a release order.26

The UP moved for the reconsideration of the order of October 14, 2003, but the RTC denied the
motion on November 7, 2003.27

On January 12, 2004, Stern Builders and dela Cruz again sought the release of the garnished
funds.28 Despite the UPs opposition,29 the RTC granted the motion to release the garnished funds on
March 16, 2004.30 On April 20, 2004, however, the RTC held in abeyance the enforcement of the
writs of execution issued on October 4, 2002 and June 3, 2003 and all the ensuing notices of
garnishment, citing Section 4, Rule 52, Rules of Court, which provided that the pendency of a timely
motion for reconsideration stayed the execution of the judgment.31
79

On December 21, 2004, the RTC, through respondent Judge Agustin S. Dizon, authorized the
release of the garnished funds of the UP,32 to wit:

WHEREFORE, premises considered, there being no more legal impediment for the release of the
garnished amount in satisfaction of the judgment award in the instant case, let the amount garnished
be immediately released by the Development Bank of the Philippines, Commonwealth Branch,
Quezon City in favor of the plaintiff.

SO ORDERED.

The UP was served on January 3, 2005 with the order of December 21, 2004 directing DBP to
release the garnished funds.33

On January 6, 2005, Stern Builders and dela Cruz moved to cite DBP in direct contempt of court for
its non-compliance with the order of release.34

Thereupon, on January 10, 2005, the UP brought a petition for certiorari in the CA to challenge the
jurisdiction of the RTC in issuing the order of December 21, 2004 (CA-G.R. CV No. 88125).35 Aside
from raising the denial of due process, the UP averred that the RTC committed grave abuse of
discretion amounting to lack or excess of jurisdiction in ruling that there was no longer any legal
impediment to the release of the garnished funds. The UP argued that government funds and
properties could not be seized by virtue of writs of execution or garnishment, as held in Department of
Agriculture v. National Labor Relations Commission,36 and citing Section 84 of Presidential Decree
No. 1445 to the effect that "revenue funds shall not be paid out of any public treasury or depository
except in pursuance of an appropriation law or other specific statutory authority;" and that the order of
garnishment clashed with the ruling in University of the Philippines Board of Regents v. Ligot-
Telan37 to the effect that the funds belonging to the UP were public funds.

On January 19, 2005, the CA issued a temporary restraining order (TRO) upon application by the
UP.38

On March 22, 2005, Stern Builders and dela Cruz filed in the RTC their amended motion for sheriffs
assistance to implement the release order dated December 21, 2004, stating that the 60-day period
of the TRO of the CA had already lapsed.39 The UP opposed the amended motion and countered that
the implementation of the release order be suspended.40

On May 3, 2005, the RTC granted the amended motion for sheriffs assistance and directed the
sheriff to proceed to the DBP to receive the check in satisfaction of the judgment.41

The UP sought the reconsideration of the order of May 3, 2005.42

On May 16, 2005, DBP filed a motion to consign the check representing the judgment award and to
dismiss the motion to cite its officials in contempt of court.43

On May 23, 2005, the UP presented a motion to withhold the release of the payment of the judgment
award.44

On July 8, 2005, the RTC resolved all the pending matters,45 noting that the DBP had already
delivered to the sheriff Managers Check No. 811941 for 16,370,191.74 representing the garnished
funds payable to the order of Stern Builders and dela Cruz as its compliance with the RTCs order
80

dated December 21, 2004.46 However, the RTC directed in the same order that Stern Builders and
dela Cruz should not encash the check or withdraw its amount pending the final resolution of the UPs
petition for certiorari, to wit:47

To enable the money represented in the check in question (No. 00008119411) to earn interest during
the pendency of the defendant University of the Philippines application for a writ of injunction with the
Court of Appeals the same may now be deposited by the plaintiff at the garnishee Bank
(Development Bank of the Philippines), the disposition of the amount represented therein being
subject to the final outcome of the case of the University of the Philippines et al., vs. Hon. Agustin S.
Dizon et al., (CA G.R. 88125) before the Court of Appeals.

Let it be stated herein that the plaintiff is not authorized to encash and withdraw the amount
represented in the check in question and enjoy the same in the fashion of an owner during the
pendency of the case between the parties before the Court of Appeals which may or may not be
resolved in plaintiffs favor.

With the end in view of seeing to it that the check in question is deposited by the plaintiff at the
Development Bank of the Philippines (garnishee bank), Branch Sheriff Herlan Velasco is directed to
accompany and/or escort the plaintiff in making the deposit of the check in question.

SO ORDERED.

On September 16, 2005, the CA promulgated its assailed decision dismissing the UPs petition for
certiorari, ruling that the UP had been given ample opportunity to contest the motion to direct the DBP
to deposit the check in the name of Stern Builders and dela Cruz; and that the garnished funds could
be the proper subject of garnishment because they had been already earmarked for the project, with
the UP holding the funds only in a fiduciary capacity,48 viz:

Petitioners next argue that the UP funds may not be seized for execution or garnishment to satisfy the
judgment award. Citing Department of Agriculture vs. NLRC, University of the Philippines Board of
Regents vs. Hon. Ligot-Telan, petitioners contend that UP deposits at Land Bank and the
Development Bank of the Philippines, being government funds, may not be released absent an
appropriations bill from Congress.

The argument is specious. UP entered into a contract with private respondents for the expansion and
renovation of the Arts and Sciences Building of its campus in Los Baos, Laguna. Decidedly, there
was already an appropriations earmarked for the said project. The said funds are retained by UP, in a
fiduciary capacity, pending completion of the construction project.

We agree with the trial Court [sic] observation on this score:

"4. Executive Order No. 109 (Directing all National Government Agencies to Revert Certain
Accounts Payable to the Cumulative Result of Operations of the National Government and for
Other Purposes) Section 9. Reversion of Accounts Payable, provides that, all 1995 and prior years
documented accounts payable and all undocumented accounts regardless of the year they were
incurred shall be reverted to the Cumulative Result of Operations of the National Government
(CROU). This shall apply to accounts payable of all funds, except fiduciary funds, as long as the
purpose for which the funds were created have not been accomplished and accounts payable
under foreign assisted projects for the duration of the said project. In this regard, the Department of
Budget and Management issued Joint-Circular No. 99-6 4.0 (4.3) Procedural Guidelines which
81

provides that all accounts payable that reverted to the CROU may be considered for payment upon
determination thru administrative process, of the existence, validity and legality of the claim. Thus,
the allegation of the defendants that considering no appropriation for the payment of any amount
awarded to plaintiffs appellee the funds of defendant-appellants may not be seized pursuant to a
writ of execution issued by the regular court is misplaced. Surely when the defendants and the
plaintiff entered into the General Construction of Agreement there is an amount already allocated
by the latter for the said project which is no longer subject of future appropriation."49

After the CA denied their motion for reconsideration on December 23, 2005, the petitioners appealed
by petition for review.

Matters Arising During the Pendency of the Petition

On January 30, 2006, Judge Dizon of the RTC (Branch 80) denied Stern Builders and dela Cruzs
motion to withdraw the deposit, in consideration of the UPs intention to appeal to the CA,50 stating:

Since it appears that the defendants are intending to file a petition for review of the Court of Appeals
resolution in CA-G.R. No. 88125 within the reglementary period of fifteen (15) days from receipt of
resolution, the Court agrees with the defendants stand that the granting of plaintiffs subject motion is
premature.

Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part that the
"disposition of the amount represented therein being subject to the final outcome of the case of the
University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125 before the
Court of Appeals) is that the judgment or resolution of said court has to be final and executory, for if
the same will still be elevated to the Supreme Court, it will not attain finality yet until the highest court
has rendered its own final judgment or resolution.51

However, on January 22, 2007, the UP filed an Urgent Application for A Temporary Restraining Order
and/or A Writ of Preliminary Injunction,52 averring that on January 3, 2007, Judge Maria Theresa dela
Torre-Yadao (who had meanwhile replaced Judge Dizon upon the latters appointment to the CA) had
issued another order allowing Stern Builders and dela Cruz to withdraw the deposit,53 to wit:

It bears stressing that defendants liability for the payment of the judgment obligation has become
indubitable due to the final and executory nature of the Decision dated November 28, 2001. Insofar
as the payment of the [sic] judgment obligation is concerned, the Court believes that there is nothing
more the defendant can do to escape liability. It is observed that there is nothing more the defendant
can do to escape liability. It is observed that defendant U.P. System had already exhausted all its
legal remedies to overturn, set aside or modify the decision (dated November 28, 2001( rendered
against it. The way the Court sees it, defendant U.P. Systems petition before the Supreme Court
concerns only with the manner by which said judgment award should be satisfied. It has nothing to do
with the legality or propriety thereof, although it prays for the deletion of [sic] reduction of the award of
moral damages.

It must be emphasized that this Courts finding, i.e., that there was sufficient appropriation earmarked
for the project, was upheld by the Court of Appeals in its decision dated September 16, 2005. Being a
finding of fact, the Supreme Court will, ordinarily, not disturb the same was said Court is not a trier of
fact. Such being the case, defendants arguments that there was no sufficient appropriation for the
payment of the judgment obligation must fail.
82

While it is true that the former Presiding Judge of this Court in its Order dated January 30, 2006 had
stated that:

Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part that the
"disposition of the amount represented therein being subject to the final outcome of the case of the
University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125 before the
Court of Appeals) is that the judgment or resolution of said court has to be final and executory, for if
the same will still be elevated to the Supreme Court, it will not attain finality yet until the highest court
has rendered its own final judgment or resolution.

it should be noted that neither the Court of Appeals nor the Supreme Court issued a preliminary
injunction enjoining the release or withdrawal of the garnished amount. In fact, in its present petition
for review before the Supreme Court, U.P. System has not prayed for the issuance of a writ of
preliminary injunction. Thus, the Court doubts whether such writ is forthcoming.

The Court honestly believes that if defendants petition assailing the Order of this Court dated
December 31, 2004 granting the motion for the release of the garnished amount was meritorious, the
Court of Appeals would have issued a writ of injunction enjoining the same. Instead, said appellate
court not only refused to issue a wit of preliminary injunction prayed for by U.P. System but denied
the petition, as well.54

The UP contended that Judge Yadao thereby effectively reversed the January 30, 2006 order of
Judge Dizon disallowing the withdrawal of the garnished amount until after the decision in the case
would have become final and executory.

Although the Court issued a TRO on January 24, 2007 to enjoin Judge Yadao and all persons acting
pursuant to her authority from enforcing her order of January 3, 2007,55 it appears that on January 16,
2007, or prior to the issuance of the TRO, she had already directed the DBP to forthwith release the
garnished amount to Stern Builders and dela Cruz; 56 and that DBP had forthwith complied with the
order on January 17, 2007 upon the sheriffs service of the order of Judge Yadao.57

These intervening developments impelled the UP to file in this Court a supplemental petition on
January 26, 2007,58alleging that the RTC (Judge Yadao) gravely erred in ordering the immediate
release of the garnished amount despite the pendency of the petition for review in this Court.

The UP filed a second supplemental petition59 after the RTC (Judge Yadao) denied the UPs motion
for the redeposit of the withdrawn amount on April 10, 2007,60 to wit:

This resolves defendant U.P. Systems Urgent Motion to Redeposit Judgment Award praying that
plaintiffs be directed to redeposit the judgment award to DBP pursuant to the Temporary Restraining
Order issued by the Supreme Court. Plaintiffs opposed the motion and countered that the Temporary
Restraining Order issued by the Supreme Court has become moot and academic considering that the
act sought to be restrained by it has already been performed. They also alleged that the redeposit of
the judgment award was no longer feasible as they have already spent the same.

It bears stressing, if only to set the record straight, that this Court did not in its Order dated January
3, 2007 (the implementation of which was restrained by the Supreme Court in its Resolution dated
January 24, 2002) direct that that garnished amount "be deposited with the garnishee bank
(Development Bank of the Philippines)". In the first place, there was no need to order DBP to make
such deposit, as the garnished amount was already deposited in the account of plaintiffs with the
83

DBP as early as May 13, 2005. What the Court granted in its Order dated January 3, 2007 was
plaintiffs motion to allow the release of said deposit. It must be recalled that the Court found plaintiffs
motion meritorious and, at that time, there was no restraining order or preliminary injunction from
either the Court of Appeals or the Supreme Court which could have enjoined the release of plaintiffs
deposit. The Court also took into account the following factors:

a) the Decision in this case had long been final and executory after it was rendered on November
28, 2001;

b) the propriety of the dismissal of U.P. Systems appeal was upheld by the Supreme
Court;

c) a writ of execution had been issued;

d) defendant U.P. Systems deposit with DBP was garnished pursuant to a lawful writ of execution
issued by the Court; and

e) the garnished amount had already been turned over to the plaintiffs and deposited in
their account with DBP.

The garnished amount, as discussed in the Order dated January 16, 2007, was already owned by the
plaintiffs, having been delivered to them by the Deputy Sheriff of this Court pursuant to par. (c),
Section 9, Rule 39 of the 1997 Rules of Civil Procedure. Moreover, the judgment obligation has
already been fully satisfied as per Report of the Deputy Sheriff.

Anent the Temporary Restraining Order issued by the Supreme Court, the same has become functus
oficio, having been issued after the garnished amount had been released to the plaintiffs. The
judgment debt was released to the plaintiffs on January 17, 2007, while the Temporary Restraining
Order issued by the Supreme Court was received by this Court on February 2, 2007. At the time of
the issuance of the Restraining Order, the act sought to be restrained had already been done,
thereby rendering the said Order ineffectual.

After a careful and thorough study of the arguments advanced by the parties, the Court is of the
considered opinion that there is no legal basis to grant defendant U.P. Systems motion to redeposit
the judgment amount. Granting said motion is not only contrary to law, but it will also render this
Courts final executory judgment nugatory. Litigation must end and terminate sometime and
somewhere, and it is essential to an effective administration of justice that once a judgment has
become final the issue or cause involved therein should be laid to rest. This doctrine of finality of
judgment is grounded on fundamental considerations of public policy and sound practice. In fact,
nothing is more settled in law than that once a judgment attains finality it thereby becomes immutable
and unalterable. It may no longer be modified in any respect, even if the modification is meant to
correct what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the
modification is attempted to be made by the court rendering it or by the highest court of the land.

WHEREFORE, premises considered, finding defendant U.P. Systems Urgent Motion to Redeposit
Judgment Award devoid of merit, the same is hereby DENIED.

SO ORDERED.

Issues The UP now submits that:

84

I - THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DISMISSING THE PETITION,

ALLOWING IN EFFECT THE GARNISHMENT OF UP FUNDS, WHEN IT RULED THAT FUNDS
HAVE ALREADY BEEN EARMARKED FOR THE CONSTRUCTION PROJECT; AND THUS, THERE
IS NO NEED FOR FURTHER APPROPRIATIONS.

II -THE COURT OF APPEALS COMMITTED GRAVE ERROR IN ALLOWING GARNISHMENT OF A

STATE UNIVERSITYS FUNDS IN VIOLATION OF ARTICLE XIV, SECTION 5(5) OF THE
CONSTITUTION.

III - IN THE ALTERNATIVE, THE UNIVERSITY INVOKES EQUITY AND THE REVIEW POWERS OF
THIS HONORABLE COURT TO MODIFY, IF NOT TOTALLY DELETE THE AWARD OF 10
MILLION AS MORAL DAMAGES TO RESPONDENTS.

IV - THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE

RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED 3 JANUARY 2007 ON THE
GROUND OF EQUITY AND JUDICIAL COURTESY.

V -THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE

RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED 16 JANUARY 2007 ON THE
GROUND THAT PETITIONER UNIVERSITY STILL HAS A PENDING MOTION FOR
RECONSIDERATION OF THE ORDER DATED 3 JANUARY 2007.

VI -THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN NOT ORDERING THE REDEPOSIT

OF THE GARNISHED AMOUNT TO THE DBP IN VIOLATION OF THE CLEAR LANGUAGE OF
THE SUPREME COURT RESOLUTION DATED 24 JANUARY 2007.

The UP argues that the amount earmarked for the construction project had been purposely set aside
only for the aborted project and did not include incidental matters like the awards of actual damages,
moral damages and attorneys fees. In support of its argument, the UP cited Article 12.2 of the
General Construction Agreement, which stipulated that no deductions would be allowed for the
payment of claims, damages, losses and expenses, including attorneys fees, in case of any litigation
arising out of the performance of the work. The UP insists that the CA decision was inconsistent with
the rulings in Commissioner of Public Highways v. San Diego61 and Department of Agriculture v.
NLRC62 to the effect that government funds and properties could not be seized under writs of
execution or garnishment to satisfy judgment awards.

Furthermore, the UP contends that the CA contravened Section 5, Article XIV of the Constitution by
allowing the garnishment of UP funds, because the garnishment resulted in a substantial reduction of
the UPs limited budget allocated for the remuneration, job satisfaction and fulfillment of the best
available teachers; that Judge Yadao should have exhibited judicial courtesy towards the Court due
to the pendency of the UPs petition for review; and that she should have also desisted from declaring
that the TRO issued by this Court had become functus officio.

Lastly, the UP states that the awards of actual damages of 5,716,729.00 and moral damages of
10 million should be reduced, if not entirely deleted, due to its being unconscionable, inequitable and
detrimental to public service.

In contrast, Stern Builders and dela Cruz aver that the petition for review was fatally defective for its
failure to mention the other cases upon the same issues pending between the parties (i.e., CA-G.R.
No. 77395 and G.R No. 163501); that the UP was evidently resorting to forum shopping, and to
85

delaying the satisfaction of the final judgment by the filing of its petition for review; that the ruling in
Commissioner of Public Works v. San Diego had no application because there was an appropriation
for the project; that the UP retained the funds allotted for the project only in a fiduciary capacity; that
the contract price had been meanwhile adjusted to 22,338,553.25, an amount already more than
sufficient to cover the judgment award; that the UPs prayer to reduce or delete the award of
damages had no factual basis, because they had been gravely wronged, had been deprived of their
source of income, and had suffered untold miseries, discomfort, humiliation and sleepless years; that
dela Cruz had even been constrained to sell his house, his equipment and the implements of his
trade, and together with his family had been forced to live miserably because of the wrongful
actuations of the UP; and that the RTC correctly declared the Courts TRO to be already functus
officio by reason of the withdrawal of the garnished amount from the DBP.

The decisive issues to be considered and passed upon are, therefore:

(a) whether the funds of the UP were the proper subject of garnishment in order to satisfy the
judgment award; and (b) whether the UPs prayer for the deletion of the awards of actual damages of
5,716,729.00, moral damages of 10,000,000.00 and attorneys fees of 150,000.00 plus
1,500.00 per appearance could be granted despite the finality of the judgment of the RTC.

Ruling

The petition for review is meritorious.

I.
UPs funds, being government funds,
are not subject to garnishment

The UP was founded on June 18, 1908 through Act 1870 to provide advanced instruction in literature,
philosophy, the sciences, and arts, and to give professional and technical training to deserving
students.63 Despite its establishment as a body corporate,64 the UP remains to be a "chartered
institution"65 performing a legitimate government function. It is an institution of higher learning, not a
corporation established for profit and declaring any dividends.66 In enacting Republic Act No. 9500
(The University of the Philippines Charter of 2008), Congress has declared the UP as the national
university67 "dedicated to the search for truth and knowledge as well as the development of future
leaders."68

Irrefragably, the UP is a government instrumentality,69 performing the States constitutional mandate

of promoting quality and accessible education.70 As a government instrumentality, the UP administers
special funds sourced from the fees and income enumerated under Act No. 1870 and Section 1 of
Executive Order No. 714,71 and from the yearly appropriations, to achieve the purposes laid down by
Section 2 of Act 1870, as expanded in Republic Act No. 9500.72 All the funds going into the
possession of the UP, including any interest accruing from the deposit of such funds in any banking
institution, constitute a "special trust fund," the disbursement of which should always be aligned with
the UPs mission and purpose,73 and should always be subject to auditing by the COA.74

Presidential Decree No. 1445 defines a "trust fund" as a fund that officially comes in the possession
of an agency of the government or of a public officer as trustee, agent or administrator, or that is
received for the fulfillment of some obligation.75 A trust fund may be utilized only for the "specific
purpose for which the trust was created or the funds received."76
86

The funds of the UP are government funds that are public in character. They include the income
accruing from the use of real property ceded to the UP that may be spent only for the attainment of its
institutional objectives.77 Hence, the funds subject of this action could not be validly made the subject
of the RTCs writ of execution or garnishment. The adverse judgment rendered against the UP in a
suit to which it had impliedly consented was not immediately enforceable by execution against the
UP,78 because suability of the State did not necessarily mean its liability.79

A marked distinction exists between suability of the State and its liability. As the Court succinctly
stated in Municipality of San Fernando, La Union v. Firme:80

A distinction should first be made between suability and liability. "Suability depends on the consent of
the state to be sued, liability on the applicable law and the established facts. The circumstance that a
state is suable does not necessarily mean that it is liable; on the other hand, it can never be held
liable if it does not first consent to be sued. Liability is not conceded by the mere fact that the state
has allowed itself to be sued. When the state does waive its sovereign immunity, it is only giving the
plaintiff the chance to prove, if it can, that the defendant is liable.

Also, in Republic v. Villasor,81 where the issuance of an alias writ of execution directed against the
funds of the Armed Forces of the Philippines to satisfy a final and executory judgment was nullified,
the Court said:

xxx The universal rule that where the State gives its consent to be sued by private parties either by
general or special law, it may limit claimants action "only up to the completion of proceedings anterior
to the stage of execution" and that the power of the Courts ends when the judgment is rendered,
since government funds and properties may not be seized under writs of execution or garnishment to
satisfy such judgments, is based on obvious considerations of public policy. Disbursements of public
funds must be covered by the corresponding appropriation as required by law. The functions and
public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion
of public funds from their legitimate and specific objects, as appropriated by law.

The UP correctly submits here that the garnishment of its funds to satisfy the judgment awards of
actual and moral damages (including attorneys fees) was not validly made if there was no special
appropriation by Congress to cover the liability. It was, therefore, legally unwarranted for the CA to
agree with the RTCs holding in the order issued on April 1, 2003 that no appropriation by Congress
to allocate and set aside the payment of the judgment awards was necessary because "there (were)
already an appropriations (sic) earmarked for the said project."82 The CA and the RTC thereby
unjustifiably ignored the legal restriction imposed on the trust funds of the Government and its
agencies and instrumentalities to be used exclusively to fulfill the purposes for which the trusts were
created or for which the funds were received except upon express authorization by Congress or by
the head of a government agency in control of the funds, and subject to pertinent budgetary laws,
rules and regulations.83

Indeed, an appropriation by Congress was required before the judgment that rendered the UP liable
for moral and actual damages (including attorneys fees) would be satisfied considering that such
monetary liabilities were not covered by the "appropriations earmarked for the said project." The
Constitution strictly mandated that "(n)o money shall be paid out of the Treasury except in pursuance
of an appropriation made by law."84
87

II
COA must adjudicate private respondents claim
before execution should proceed

The execution of the monetary judgment against the UP was within the primary jurisdiction of the
COA. This was expressly provided in Section 26 of Presidential Decree No. 1445, to wit:

Section 26. General jurisdiction. - The authority and powers of the Commission shall extend to and
comprehend all matters relating to auditing procedures, systems and controls, the keeping of the
general accounts of the Government, the preservation of vouchers pertaining thereto for a period of
ten years, the examination and inspection of the books, records, and papers relating to those
accounts; and the audit and settlement of the accounts of all persons respecting funds or property
received or held by them in an accountable capacity, as well as the examination, audit, and
settlement of all debts and claims of any sort due from or owing to the Government or any of its
subdivisions, agencies and instrumentalities. The said jurisdiction extends to all government-owned
or controlled corporations, including their subsidiaries, and other self-governing boards, commissions,
or agencies of the Government, and as herein prescribed, including non governmental entities
subsidized by the government, those funded by donations through the government, those required to
pay levies or government share, and those for which the government has put up a counterpart fund or
those partly funded by the government.

It was of no moment that a final and executory decision already validated the claim against the UP.
The settlement of the monetary claim was still subject to the primary jurisdiction of the COA despite
the final decision of the RTC having already validated the claim.85 As such, Stern Builders and dela
Cruz as the claimants had no alternative except to first seek the approval of the COA of their
monetary claim.

On its part, the RTC should have exercised utmost caution, prudence and judiciousness in dealing
with the motions for execution against the UP and the garnishment of the UPs funds. The RTC had
no authority to direct the immediate withdrawal of any portion of the garnished funds from the
depository banks of the UP. By eschewing utmost caution, prudence and judiciousness in dealing
with the execution and garnishment, and by authorizing the withdrawal of the garnished funds of the
UP, the RTC acted beyond its jurisdiction, and all its orders and issuances thereon were void and of
no legal effect, specifically: (a) the order Judge Yadao issued on January 3, 2007 allowing Stern
Builders and dela Cruz to withdraw the deposited garnished amount; (b) the order Judge Yadao
issued on January 16, 2007 directing DBP to forthwith release the garnish amount to Stern Builders
and dela Cruz; (c) the sheriffs report of January 17, 2007 manifesting the full satisfaction of the writ of
execution; and (d) the order of April 10, 2007 deying the UPs motion for the redeposit of the
withdrawn amount. Hence, such orders and issuances should be struck down without exception.

Nothing extenuated Judge Yadaos successive violations of Presidential Decree No. 1445. She was
aware of Presidential Decree No. 1445, considering that the Court circulated to all judges its
Administrative Circular No. 10-2000,86 issued on October 25, 2000, enjoining them "to observe utmost
caution, prudence and judiciousness in the issuance of writs of execution to satisfy money judgments
against government agencies and local government units" precisely in order to prevent the
circumvention of Presidential Decree No. 1445, as well as of the rules and procedures of the COA, to
wit:

In order to prevent possible circumvention of the rules and procedures of the Commission on
Audit, judges are hereby enjoined to observe utmost caution, prudence and judiciousness in
88

the issuance of writs of execution to satisfy money judgments against government agencies
and local government units.

Judges should bear in mind that in Commissioner of Public Highways v. San Diego (31 SCRA 617,
625 1970), this Court explicitly stated:

"The universal rule that where the State gives its consent to be sued by private parties either by
general or special law, it may limit claimants action only up to the completion of proceedings anterior
to the stage of execution and that the power of the Court ends when the judgment is rendered, since
government funds and properties may not be seized under writs of execution or garnishment to
satisfy such judgments, is based on obvious considerations of public policy. Disbursements of public
funds must be covered by the corresponding appropriation as required by law. The functions and
public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion
of public funds from their legitimate and specific objects, as appropriated by law.

Moreover, it is settled jurisprudence that upon determination of State liability, the prosecution,
enforcement or satisfaction thereof must still be pursued in accordance with the rules and
procedures laid down in P.D. No. 1445, otherwise known as the Government Auditing Code of
the Philippines (Department of Agriculture v. NLRC, 227 SCRA 693, 701-02 1993 citing
Republic vs. Villasor, 54 SCRA 84 1973). All money claims against the Government must first
be filed with the Commission on Audit which must act upon it within sixty days. Rejection of
the claim will authorize the claimant to elevate the matter to the Supreme Court
on certiorari and in effect, sue the State thereby (P.D. 1445, Sections 49-50).

However, notwithstanding the rule that government properties are not subject to levy and execution
unless otherwise provided for by statute (Republic v. Palacio, 23 SCRA 899 1968; Commissioner of
Public Highways v. San Diego, supra) or municipal ordinance (Municipality of Makati v. Court of
Appeals, 190 SCRA 206 1990), the Court has, in various instances, distinguished between
government funds and properties for public use and those not held for public use. Thus, in Viuda de
Tan Toco v. Municipal Council of Iloilo (49 Phil 52 1926, the Court ruled that "where property of a
municipal or other public corporation is sought to be subjected to execution to satisfy judgments
recovered against such corporation, the question as to whether such property is leviable or not is to
be determined by the usage and purposes for which it is held." The following can be culled from
Viuda de Tan Toco v. Municipal Council of Iloilo:

1. Properties held for public uses and generally everything held for governmental purposes
are not subject to levy and sale under execution against such corporation. The same rule
applies to funds in the hands of a public officer and taxes due to a municipal corporation.

2. Where a municipal corporation owns in its proprietary capacity, as distinguished from its public or
government capacity, property not used or used for a public purpose but for quasi-private purposes, it
is the general rule that such property may be seized and sold under execution against the
corporation.

3. Property held for public purposes is not subject to execution merely because it is temporarily used
for private purposes. If the public use is wholly abandoned, such property becomes subject to
execution.

This Administrative Circular shall take effect immediately and the Court Administrator shall see to it
that it is faithfully implemented.
89

Although Judge Yadao pointed out that neither the CA nor the Court had issued as of then any writ of
preliminary injunction to enjoin the release or withdrawal of the garnished amount, she did not need
any writ of injunction from a superior court to compel her obedience to the law. The Court is disturbed
that an experienced judge like her should look at public laws like Presidential Decree No. 1445
dismissively instead of loyally following and unquestioningly implementing them. That she did so
turned her court into an oppressive bastion of mindless tyranny instead of having it as a true haven
for the seekers of justice like the UP.

III
Period of appeal did not start without effective
service of decision upon counsel of record;
Fresh-period rule announced in
Neypes v. Court of Appeals
can be given retroactive application

The UP next pleads that the Court gives due course to its petition for review in the name of equity in
order to reverse or modify the adverse judgment against it despite its finality. At stake in the UPs plea
for equity was the return of the amount of 16,370,191.74 illegally garnished from its trust funds.
Obstructing the plea is the finality of the judgment based on the supposed tardiness of UPs appeal,
which the RTC declared on September 26, 2002. The CA upheld the declaration of finality on
February 24, 2004, and the Court itself denied the UPs petition for review on that issue on May 11,
2004 (G.R. No. 163501). The denial became final on November 12, 2004.

It is true that a decision that has attained finality becomes immutable and unalterable, and cannot be
modified in any respect,87 even if the modification is meant to correct erroneous conclusions of fact
and law, and whether the modification is made by the court that rendered it or by this Court as the
highest court of the land.88 Public policy dictates that once a judgment becomes final, executory and
unappealable, the prevailing party should not be deprived of the fruits of victory by some subterfuge
devised by the losing party. Unjustified delay in the enforcement of such judgment sets at naught the
role and purpose of the courts to resolve justiciable controversies with finality.89Indeed, all litigations
must at some time end, even at the risk of occasional errors.

But the doctrine of immutability of a final judgment has not been absolute, and has admitted several
exceptions, among them: (a) the correction of clerical errors; (b) the so-called nunc pro tunc entries
that cause no prejudice to any party; (c) void judgments; and (d) whenever circumstances transpire
after the finality of the decision that render its execution unjust and inequitable.90 Moreover, in Heirs of
Maura So v. Obliosca,91 we stated that despite the absence of the preceding circumstances, the
Court is not precluded from brushing aside procedural norms if only to serve the higher interests of
justice and equity. Also, in Gumaru v. Quirino State College,92 the Court nullified the proceedings and
the writ of execution issued by the RTC for the reason that respondent state college had not been
represented in the litigation by the Office of the Solicitor General.

We rule that the UPs plea for equity warrants the Courts exercise of the exceptional power to
disregard the declaration of finality of the judgment of the RTC for being in clear violation of the UPs
right to due process.

Both the CA and the RTC found the filing on June 3, 2002 by the UP of the notice of appeal to be
tardy. They based their finding on the fact that only six days remained of the UPs reglementary 15-
day period within which to file the notice of appeal because the UP had filed a motion for
reconsideration on January 16, 2002 vis--vis the RTCs decision the UP received on January 7,
90

2002; and that because the denial of the motion for reconsideration had been served upon Atty.
Felimon D. Nolasco of the UPLB Legal Office on May 17, 2002, the UP had only until May 23, 2002
within which to file the notice of appeal.

The UP counters that the service of the denial of the motion for reconsideration upon Atty. Nolasco
was defective considering that its counsel of record was not Atty. Nolasco of the UPLB Legal Office
but the OLS in Diliman, Quezon City; and that the period of appeal should be reckoned from May 31,
2002, the date when the OLS received the order. The UP submits that the filing of the notice of
appeal on June 3, 2002 was well within the reglementary period to appeal.

We agree with the submission of the UP.

Firstly, the service of the denial of the motion for reconsideration upon Atty. Nolasco of the UPLB
Legal Office was invalid and ineffectual because he was admittedly not the counsel of record of the
UP. The rule is that it is on the counsel and not the client that the service should be made.93

That counsel was the OLS in Diliman, Quezon City, which was served with the denial only on May 31,
2002. As such, the running of the remaining period of six days resumed only on June 1,
2002,94 rendering the filing of the UPs notice of appeal on June 3, 2002 timely and well within the
remaining days of the UPs period to appeal.

Verily, the service of the denial of the motion for reconsideration could only be validly made upon the
OLS in Diliman, and no other. The fact that Atty. Nolasco was in the employ of the UP at the UPLB
Legal Office did not render the service upon him effective. It is settled that where a party has
appeared by counsel, service must be made upon such counsel.95 Service on the party or the partys
employee is not effective because such notice is not notice in law.96 This is clear enough from Section
2, second paragraph, of Rule 13, Rules of Court, which explicitly states that: "If any party has
appeared by counsel, service upon him shall be made upon his counsel or one of them, unless
service upon the party himself is ordered by the court. Where one counsel appears for several
parties, he shall only be entitled to one copy of any paper served upon him by the opposite side." As
such, the period to appeal resumed only on June 1, 2002, the date following the service on May 31,
2002 upon the OLS in Diliman of the copy of the decision of the RTC, not from the date when the UP
was notified.97

Accordingly, the declaration of finality of the judgment of the RTC, being devoid of factual and legal
bases, is set aside.

Secondly, even assuming that the service upon Atty. Nolasco was valid and effective, such that the
remaining period for the UP to take a timely appeal would end by May 23, 2002, it would still not be
correct to find that the judgment of the RTC became final and immutable thereafter due to the notice
of appeal being filed too late on June 3, 2002.

In so declaring the judgment of the RTC as final against the UP, the CA and the RTC applied the rule
contained in the second paragraph of Section 3, Rule 41 of the Rules of Court to the effect that the
filing of a motion for reconsideration interrupted the running of the period for filing the appeal; and that
the period resumed upon notice of the denial of the motion for reconsideration. For that reason, the
CA and the RTC might not be taken to task for strictly adhering to the rule then prevailing.
91

However, equity calls for the retroactive application in the UPs favor of the fresh-period rule that the
Court first announced in mid-September of 2005 through its ruling in Neypes v. Court of
Appeals,98 viz:

To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to
appeal their cases, the Court deems it practical to allow a fresh period of 15 days within which to file
the notice of appeal in the Regional Trial Court, counted from receipt of the order dismissing a motion
for a new trial or motion for reconsideration.

The retroactive application of the fresh-period rule, a procedural law that aims "to regiment or make
the appeal period uniform, to be counted from receipt of the order denying the motion for new trial,
motion for reconsideration (whether full or partial) or any final order or resolution,"99 is impervious to
any serious challenge. This is because there are no vested rights in rules of procedure.100 A law or
regulation is procedural when it prescribes rules and forms of procedure in order that courts may be
able to administer justice.101 It does not come within the legal conception of a retroactive law, or is not
subject of the general rule prohibiting the retroactive operation of statues, but is given retroactive
effect in actions pending and undetermined at the time of its passage without violating any right of a
person who may feel that he is adversely affected.

We have further said that a procedural rule that is amended for the benefit of litigants in furtherance
of the administration of justice shall be retroactively applied to likewise favor actions then pending, as
equity delights in equality.102 We may even relax stringent procedural rules in order to serve
substantial justice and in the exercise of this Courts equity jurisdiction.103 Equity jurisdiction aims to
do complete justice in cases where a court of law is unable to adapt its judgments to the special
circumstances of a case because of the inflexibility of its statutory or legal jurisdiction.104

It is cogent to add in this regard that to deny the benefit of the fresh-period rule to the UP would
amount to injustice and absurdity injustice, because the judgment in question was issued on
November 28, 2001 as compared to the judgment in Neypes that was rendered in 1998; absurdity,
because parties receiving notices of judgment and final orders issued in the year 1998 would enjoy
the benefit of the fresh-period rule but the later rulings of the lower courts like that herein would not.105

Consequently, even if the reckoning started from May 17, 2002, when Atty. Nolasco received the
denial, the UPs filing on June 3, 2002 of the notice of appeal was not tardy within the context of the
fresh-period rule. For the UP, the fresh period of 15-days counted from service of the denial of the
motion for reconsideration would end on June 1, 2002, which was a Saturday. Hence, the UP had
until the next working day, or June 3, 2002, a Monday, within which to appeal, conformably with
Section 1 of Rule 22, Rules of Court, which holds that: "If the last day of the period, as thus
computed, falls on a Saturday, a Sunday, or a legal holiday in the place where the court sits, the time
shall not run until the next working day."

IV
Awards of monetary damages,
being devoid of factual and legal bases,
did not attain finality and should be deleted

Section 14 of Article VIII of the Constitution prescribes that express findings of fact and of law should
be made in the decision rendered by any court, to wit:
92

Section 14. No decision shall be rendered by any court without expressing therein clearly and
distinctly the facts and the law on which it is based.

No petition for review or motion for reconsideration of a decision of the court shall be refused due
course or denied without stating the legal basis therefor.

Implementing the constitutional provision in civil actions is Section 1 of Rule 36, Rules of Court, viz:

Section 1. Rendition of judgments and final orders. A judgment or final order determining the
merits of the case shall be in writing personally and directly prepared by the judge, stating clearly and
distinctly the facts and the law on which it is based, signed by him, and filed with the clerk of the
court. (1a)

The Constitution and the Rules of Court apparently delineate two main essential parts of a judgment,
namely: the body and the decretal portion. Although the latter is the controlling part,106 the importance
of the former is not to be lightly regarded because it is there where the court clearly and distinctly
states its findings of fact and of law on which the decision is based. To state it differently, one without
the other is ineffectual and useless. The omission of either inevitably results in a judgment that
violates the letter and the spirit of the Constitution and the Rules of Court.

The term findings of fact that must be found in the body of the decision refers to statements of fact,
not to conclusions of law.107 Unlike in pleadings where ultimate facts alone need to be stated, the
Constitution and the Rules of Court require not only that a decision should state the ultimate facts but
also that it should specify the supporting evidentiary facts, for they are what are called the findings of
fact.

The importance of the findings of fact and of law cannot be overstated. The reason and purpose of
the Constitution and the Rules of Court in that regard are obviously to inform the parties why they win
or lose, and what their rights and obligations are. Only thereby is the demand of due process met as
to the parties. As Justice Isagani A. Cruz explained in Nicos Industrial Corporation v. Court of
Appeals:108

It is a requirement of due process that the parties to a litigation be informed of how it was decided,
with an explanation of the factual and legal reasons that led to the conclusions of the court. The court
cannot simply say that judgment is rendered in favor of X and against Y and just leave it at that
without any justification whatsoever for its action. The losing party is entitled to know why he lost, so
he may appeal to a higher court, if permitted, should he believe that the decision should be reversed.
A decision that does not clearly and distinctly state the facts and the law on which it is based leaves
the parties in the dark as to how it was reached and is especially prejudicial to the losing party, who is
unable to pinpoint the possible errors of the court for review by a higher tribunal.

Here, the decision of the RTC justified the grant of actual and moral damages, and attorneys fees in
the following terse manner, viz:

xxx The Court is not unmindful that due to defendants unjustified refusal to pay their outstanding
obligation to plaintiff, the same suffered losses and incurred expenses as he was forced to re-
mortgage his house and lot located in Quezon City to Metrobank (Exh. "CC") and BPI Bank just to
pay its monetary obligations in the form of interest and penalties incurred in the course of the
construction of the subject project.109
93

The statement that "due to defendants unjustified refusal to pay their outstanding obligation to
plaintiff, the same suffered losses and incurred expenses as he was forced to re-mortgage his house
and lot located in Quezon City to Metrobank (Exh. "CC") and BPI Bank just to pay its monetary
obligations in the form of interest and penalties incurred in the course of the construction of the
subject project" was only a conclusion of fact and law that did not comply with the constitutional and
statutory prescription. The statement specified no detailed expenses or losses constituting the
5,716,729.00 actual damages sustained by Stern Builders in relation to the construction project or to
other pecuniary hardships. The omission of such expenses or losses directly indicated that Stern
Builders did not prove them at all, which then contravened Article 2199, Civil Code, the statutory
basis for the award of actual damages, which entitled a person to an adequate compensation only for
such pecuniary loss suffered by him as he has duly proved. As such, the actual damages allowed by
the RTC, being bereft of factual support, were speculative and whimsical. Without the clear and
distinct findings of fact and law, the award amounted only to an ipse dixit on the part of the
RTC,110 and did not attain finality.

There was also no clear and distinct statement of the factual and legal support for the award of moral
damages in the substantial amount of 10,000,000.00. The award was thus also speculative and
whimsical. Like the actual damages, the moral damages constituted another judicial ipse dixit, the
inevitable consequence of which was to render the award of moral damages incapable of attaining
finality. In addition, the grant of moral damages in that manner contravened the law that permitted the
recovery of moral damages as the means to assuage "physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury."111 The contravention of the law was manifest considering that Stern Builders, as an artificial
person, was incapable of experiencing pain and moral sufferings.112 Assuming that in granting the
substantial amount of 10,000,000.00 as moral damages, the RTC might have had in mind that dela
Cruz had himself suffered mental anguish and anxiety. If that was the case, then the RTC obviously
disregarded his separate and distinct personality from that of Stern Builders.113 Moreover, his moral
and emotional sufferings as the President of Stern Builders were not the sufferings of Stern Builders.
Lastly, the RTC violated the basic principle that moral damages were not intended to enrich the
plaintiff at the expense of the defendant, but to restore the plaintiff to his status quo ante as much as
possible. Taken together, therefore, all these considerations exposed the substantial amount of
10,000,000.00 allowed as moral damages not only to be factually baseless and legally indefensible,
but also to be unconscionable, inequitable and unreasonable.

Like the actual and moral damages, the 150,000.00, plus 1,500.00 per appearance, granted as
attorneys fees were factually unwarranted and devoid of legal basis. The general rule is that a
successful litigant cannot recover attorneys fees as part of the damages to be assessed against the
losing party because of the policy that no premium should be placed on the right to litigate.114 Prior to
the effectivity of the present Civil Code, indeed, such fees could be recovered only when there was a
stipulation to that effect. It was only under the present Civil Code that the right to collect attorneys
fees in the cases mentioned in Article 2208115 of the Civil Code came to be
recognized.116 Nonetheless, with attorneys fees being allowed in the concept of actual
damages,117 their amounts must be factually and legally justified in the body of the decision and not
stated for the first time in the decretal portion.118 Stating the amounts only in the dispositive portion of
the judgment is not enough;119 a rendition of the factual and legal justifications for them must also be
laid out in the body of the decision.120

That the attorneys fees granted to the private respondents did not satisfy the foregoing requirement
suffices for the Court to undo them.121 The grant was ineffectual for being contrary to law and public
policy, it being clear that the express findings of fact and law were intended to bring the case within
94

the exception and thereby justify the award of the attorneys fees. Devoid of such express findings,
the award was a conclusion without a premise, its basis being improperly left to speculation and
conjecture.122

Nonetheless, the absence of findings of fact and of any statement of the law and jurisprudence on
which the awards of actual and moral damages, as well as of attorneys fees, were based was a fatal
flaw that invalidated the decision of the RTC only as to such awards. As the Court declared in Velarde
v. Social Justice Society,123 the failure to comply with the constitutional requirement for a clear and
distinct statement of the supporting facts and law "is a grave abuse of discretion amounting to lack or
excess of jurisdiction" and that "(d)ecisions or orders issued in careless disregard of the constitutional
mandate are a patent nullity and must be struck down as void."124 The other item granted by the RTC
(i.e., 503,462.74) shall stand, subject to the action of the COA as stated herein.

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS
ASIDE the decision of the Court of Appeals under review; ANNULS the orders for the garnishment of
the funds of the University of the Philippines and for the release of the garnished amount to Stern
Builders Corporation and Servillano dela Cruz; and DELETES from the decision of the Regional Trial
Court dated November 28, 2001 for being void only the awards of actual damages of 5,716,729.00,
moral damages of 10,000,000.00, and attorney's fees of 150,000.00, plus 1,500.00 per
appearance, in favor of Stern Builders Corporation and Servillano dela Cruz.

The Court ORDERS Stem Builders Corporation and Servillano dela Cruz to redeposit the amount of
16,370,191.74 within 10 days from receipt of this decision.

Costs of suit to be paid by the private respondents.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

G.R. No. 206510 September 16, 2014

MOST REV. PEDRO D. ARIGO, Vicar Apostolic of Puerto Princesa D.D.; MOST REV.
DEOGRACIAS S. INIGUEZ, JR., Bishop-Emeritus of Caloocan, FRANCES Q. QUIMPO,
CLEMENTE G. BAUTISTA, JR., Kalikasan-PNE, MARIA CAROLINA P. ARAULLO, RENATO M.
REYES, JR., Bagong Alyansang Makabayan, HON. NERI JAVIER COLMENARES, Bayan Muna
Partylist, ROLAND G. SIMBULAN, PH.D., Junk VF A Movement, TERESITA R. PEREZ, PH.D.,
HON. RAYMOND V. PALATINO, Kabataan Party-list, PETER SJ. GONZALES, Pamalakaya,
GIOVANNI A. TAPANG, PH. D., Agham, ELMER C. LABOG, Kilusang Mayo Uno, JOAN MAY E.
SALVADOR, Gabriela, JOSE ENRIQUE A. AFRICA, THERESA A. CONCEPCION, MARY JOAN
A. GUAN, NESTOR T. BAGUINON, PH.D., A. EDSEL F. TUPAZ, Petitioners,
vs.
SCOTT H. SWIFT in his capacity as Commander of the US. 7th Fleet, MARK A. RICE in his
capacity as Commanding Officer of the USS Guardian, PRESIDENT BENIGNO S. AQUINO III in
his capacity as Commander-in-Chief of the Armed Forces of the Philippines, HON. ALBERT F.
DEL ROSARIO, Secretary, pepartment of Foreign Affair.s, HON. PAQUITO OCHOA, JR.,
Executiv~.:Secretary, Office of the President, . HON. VOLTAIRE T. GAZMIN, Secretary,
95

Department of National Defense, HON. RAMON JESUS P. P AJE, Secretary, Department of

Environment and Natural Resoz!rces, VICE ADMIRAL JOSE LUIS M. ALANO, Philippine Navy
Flag Officer in Command, Armed Forces of the Philippines, ADMIRAL RODOLFO D. ISO RENA,
Commandant, Philippine Coast Guard, COMMODORE ENRICO EFREN EVANGELISTA,
Philippine Coast Guard Palawan, MAJOR GEN. VIRGILIO 0. DOMINGO, Commandant of Armed
Forces of the Philippines Command and LT. GEN. TERRY G. ROBLING, US Marine Corps
Forces. Pacific and Balikatan 2013 Exercise Co-Director, Respondents.

DECISION

VILLARAMA, JR, J.:

Before us is a petition for the issuance of a Writ of Kalikasan with prayer for the issuance of a
Temporary Environmental Protection Order (TEPO) under Rule 7 of A.M. No. 09-6-8-SC, otherwise
known as the Rules of Procedure for Environmental Cases (Rules), involving violations of
environmental laws and regulations in relation to the grounding of the US military ship USS Guardian
over the Tubbataha Reefs.

Factual Background

The name "Tubbataha" came from the Samal (seafaring people of southern Philippines) language
which means "long reef exposed at low tide." Tubbataha is composed of two huge coral atolls - the
north atoll and the south atoll - and the Jessie Beazley Reef, a smaller coral structure about 20
kilometers north of the atolls. The reefs of Tubbataha and Jessie Beazley are considered part of
Cagayancillo, a remote island municipality of Palawan.1

In 1988, Tubbataha was declared a National Marine Park by virtue of Proclamation No. 306 issued by
President Corazon C. Aquino on August 11, 1988. Located in the middle of Central Sulu Sea, 150
kilometers southeast of Puerto Princesa City, Tubbataha lies at the heart of the Coral Triangle, the
global center of marine biodiversity.

In 1993, Tubbataha was inscribed by the United Nations Educational Scientific and Cultural
Organization (UNESCO) as a World Heritage Site. It was recognized as one of the Philippines' oldest
ecosystems, containing excellent examples of pristine reefs and a high diversity of marine life. The
97,030-hectare protected marine park is also an important habitat for internationally threatened and
endangered marine species. UNESCO cited Tubbataha's outstanding universal value as an important
and significant natural habitat for in situ conservation of biological diversity; an example representing
significant on-going ecological and biological processes; and an area of exceptional natural beauty
and aesthetic importance.2

On April 6, 2010, Congress passed Republic Act (R.A.) No. 10067,3 otherwise known as the
"Tubbataha Reefs Natural Park (TRNP) Act of 2009" "to ensure the protection and conservation of
the globally significant economic, biological, sociocultural, educational and scientific values of the
Tubbataha Reefs into perpetuity for the enjoyment of present and future generations." Under the "no-
take" policy, entry into the waters of TRNP is strictly regulated and many human activities are
prohibited and penalized or fined, including fishing, gathering, destroying and disturbing the resources
within the TRNP. The law likewise created the Tubbataha Protected Area Management Board
(TPAMB) which shall be the sole policy-making and permit-granting body of the TRNP.
96

The USS Guardian is an Avenger-class mine countermeasures ship of the US Navy. In December
2012, the US Embassy in the Philippines requested diplomatic clearance for the said vessel "to enter
and exit the territorial waters of the Philippines and to arrive at the port of Subic Bay for the purpose
of routine ship replenishment, maintenance, and crew liberty."4 On January 6, 2013, the ship left
Sasebo, Japan for Subic Bay, arriving on January 13, 2013 after a brief stop for fuel in Okinawa,
Japan.1wphi1

On January 15, 2013, the USS Guardian departed Subic Bay for its next port of call in Makassar,
Indonesia. On January 17, 2013 at 2:20 a.m. while transiting the Sulu Sea, the ship ran aground on
the northwest side of South Shoal of the Tubbataha Reefs, about 80 miles east-southeast of
Palawan. No cine was injured in the incident, and there have been no reports of leaking fuel or oil.

On January 20, 2013, U.S. 7th Fleet Commander, Vice Admiral Scott Swift, expressed regret for the
incident in a press statement.5 Likewise, US Ambassador to the Philippines Harry K. Thomas, Jr., in a
meeting at the Department of Foreign Affairs (DFA) on February 4, "reiterated his regrets over the
grounding incident and assured Foreign Affairs Secretazy Albert F. del Rosario that the United States
will provide appropriate compensation for damage to the reef caused by the ship."6 By March 30,
2013, the US Navy-led salvage team had finished removing the last piece of the grounded ship from
the coral reef.

On April 1 7, 2013, the above-named petitioners on their behalf and in representation of their
respective sector/organization and others, including minors or generations yet unborn, filed the
present petition agairtst Scott H. Swift in his capacity as Commander of the US 7th Fleet, Mark A.
Rice in his capacity as Commanding Officer of the USS Guardian and Lt. Gen. Terry G. Robling, US
Marine Corps Forces, Pacific and Balikatan 2013 Exercises Co-Director ("US respondents");
President Benigno S. Aquino III in his capacity as Commander-in-Chief of the Armed Forces of the
Philippines (AFP), DF A Secretary Albert F. Del Rosario, Executive Secretary Paquito Ochoa, Jr.,
Secretary Voltaire T. Gazmin (Department of National Defense), Secretary Jesus P. Paje
(Department of Environment and Natural Resources), Vice-Admiral Jose Luis M. Alano (Philippine
Navy Flag Officer in Command, AFP), Admiral Rodolfo D. Isorena (Philippine Coast Guard
Commandant), Commodore Enrico Efren Evangelista (Philippine Coast Guard-Palawan), and Major
General Virgilio 0. Domingo (AFP Commandant), collectively the "Philippine respondents."

The Petition

Petitioners claim that the grounding, salvaging and post-salvaging operations of the USS Guardian
cause and continue to cause environmental damage of such magnitude as to affect the provinces of
Palawan, Antique, Aklan, Guimaras, Iloilo, Negros Occidental, Negros Oriental, Zamboanga del
Norte, Basilan, Sulu, and Tawi-Tawi, which events violate their constitutional rights to a balanced and
healthful ecology. They also seek a directive from this Court for the institution of civil, administrative
and criminal suits for acts committed in violation of environmental laws and regulations in connection
with the grounding incident.

Specifically, petitioners cite the following violations committed by US respondents under R.A. No.
10067: unauthorized entry (Section 19); non-payment of conservation fees (Section 21 ); obstruction
of law enforcement officer (Section 30); damages to the reef (Section 20); and destroying and
disturbing resources (Section 26[g]). Furthermore, petitioners assail certain provisions of the Visiting
Forces Agreement (VFA) which they want this Court to nullify for being unconstitutional.
97

The numerous reliefs sought in this case are set forth in the final prayer of the petition, to wit:
WHEREFORE, in view of the foregoing, Petitioners respectfully pray that the Honorable Court: 1.
Immediately issue upon the filing of this petition a Temporary Environmental Protection Order (TEPO)
and/or a Writ of Kalikasan, which shall, in particular,

a. Order Respondents and any person acting on their behalf, to cease and desist all operations
over the Guardian grounding incident;

b. Initially demarcating the metes and bounds of the damaged area as well as an additional
buffer zone;

c. Order Respondents to stop all port calls and war games under 'Balikatan' because of the
absence of clear guidelines, duties, and liability schemes for breaches of those duties, and
require Respondents to assume responsibility for prior and future environmental damage in
general, and environmental damage under the Visiting Forces Agreement in particular.

d. Temporarily define and describe allowable activities of ecotourism, diving, recreation, and
limited commercial activities by fisherfolk and indigenous communities near or around the
TRNP but away from the damaged site and an additional buffer zone;

2. After summary hearing, issue a Resolution extending the TEPO until further orders of the
Court;

3. After due proceedings, render a Decision which shall include, without limitation:

a. Order Respondents Secretary of Foreign Affairs, following the dispositive portion of Nicolas
v. Romulo, "to forthwith negotiate with the United States representatives for the appropriate
agreement on [environmental guidelines and environmental accountability] under Philippine
authorities as provided in Art. V[] of the VFA ... "

b. Direct Respondents and appropriate agencies to commence administrative, civil, and

criminal proceedings against erring officers and individuals to the full extent of the law, and to
make such proceedings public;

c. Declare that Philippine authorities may exercise primary and exclusive criminal jurisdiction
over erring U.S. personnel under the circumstances of this case;

d. Require Respondents to pay just and reasonable compensation in the settlement of all
meritorious claims for damages caused to the Tubbataha Reef on terms and conditions no less
severe than those applicable to other States, and damages for personal injury or death, if such
had been the case;

e. Direct Respondents to cooperate in providing for the attendance of witnesses and in the
collection and production of evidence, including seizure and delivery of objects connected with
the offenses related to the grounding of the Guardian;

f. Require the authorities of the Philippines and the United States to notify each other of the
disposition of all cases, wherever heard, related to the grounding of the Guardian;
98

g. Restrain Respondents from proceeding with any purported restoration, repair, salvage or
post salvage plan or plans, including cleanup plans covering the damaged area of the
Tubbataha Reef absent a just settlement approved by the Honorable Court;

h. Require Respondents to engage in stakeholder and LOU consultations in accordance with

the Local Government Code and R.A. 10067;

i. Require Respondent US officials and their representatives to place a deposit to the TRNP
Trust Fund defined under Section 17 of RA 10067 as a bona .fide gesture towards full
reparations;

j. Direct Respondents to undertake measures to rehabilitate the areas affected by the

grounding of the Guardian in light of Respondents' experience in the Port Royale grounding in
2009, among other similar grounding incidents;

k. Require Respondents to regularly publish on a quarterly basis and in the name of

transparency and accountability such environmental damage assessment, valuation, and
valuation methods, in all stages of negotiation;

l. Convene a multisectoral technical working group to provide scientific and technical support to
the TPAMB;

m. Order the Department of Foreign Affairs, Department of National Defense, and the
Department of Environment and Natural Resources to review the Visiting Forces Agreement
and the Mutual Defense Treaty to consider whether their provisions allow for the exercise of
erga omnes rights to a balanced and healthful ecology and for damages which follow from any
violation of those rights;

n. Narrowly tailor the provisions of the Visiting Forces Agreement for purposes of protecting
the damaged areas of TRNP;

o. Declare the grant of immunity found in Article V ("Criminal Jurisdiction") and Article VI of the
Visiting Forces Agreement unconstitutional for violating equal protection and/or for violating the
preemptory norm of nondiscrimination incorporated as part of the law of the land under Section
2, Article II, of the Philippine Constitution;

p. Allow for continuing discovery measures;

q. Supervise marine wildlife rehabilitation in the Tubbataha Reefs in all other respects; and

4. Provide just and equitable environmental rehabilitation measures and such other reliefs as
are just and equitable under the premises.7 (Underscoring supplied.)

Since only the Philippine respondents filed their comment8 to the petition, petitioners also filed a
motion for early resolution and motion to proceed ex parte against the US respondents.9

Respondents' Consolidated Comment

In their consolidated comment with opposition to the application for a TEPO and ocular inspection
and production orders, respondents assert that: ( 1) the grounds relied upon for the issuance of a
99

TEPO or writ of Kalikasan have become fait accompli as the salvage operations on the USS
Guardian were already completed; (2) the petition is defective in form and substance; (3) the petition
improperly raises issues involving the VFA between the Republic of the Philippines and the United
States of America; and ( 4) the determination of the extent of responsibility of the US Government as
regards the damage to the Tubbataha Reefs rests exdusively with the executive branch.

The Court's Ruling

As a preliminary matter, there is no dispute on the legal standing of petitioners to file the present
petition.

Locus standi is "a right of appearance in a court of justice on a given question."10 Specifically, it is "a
party's personal and substantial interest in a case where he has sustained or will sustain direct injury
as a result" of the act being challenged, and "calls for more than just a generalized
grievance."11 However, the rule on standing is a procedural matter which this Court has relaxed for
non-traditional plaintiffs like ordinary citizens, taxpayers and legislators when the public interest so
requires, such as when the subject matter of the controversy is of transcendental importance, of
overreaching significance to society, or of paramount public interest.12

In the landmark case of Oposa v. Factoran, Jr.,13 we recognized the "public right" of citizens to "a
balanced and healthful ecology which, for the first time in our constitutional history, is solemnly
incorporated in the fundamental law." We declared that the right to a balanced and healthful ecology
need not be written in the Constitution for it is assumed, like other civil and polittcal rights guaranteed
in the Bill of Rights, to exist from the inception of mankind and it is an issue of transcendental
importance with intergenerational implications.1wphi1 Such right carries with it the correlative duty to
refrain from impairing the environment.14

On the novel element in the class suit filed by the petitioners minors in Oposa, this Court ruled that
not only do ordinary citizens have legal standing to sue for the enforcement of environmental rights,
they can do so in representation of their own and future generations. Thus:

Petitioners minors assert that they represent their generation as well as generations yet unborn. We
find no difficulty in ruling that they can, for themselves, for others of their generation and for the
succeeding generations, file a class suit. Their personality to sue in behalf of the succeeding
generations can only be based on the concept of intergenerational responsibility insofar as the right to
a balanced and healthful ecology is concerned. Such a right, as hereinafter expounded, considers the
"rhythm and harmony of nature." Nature means the created world in its entirety. Such rhythm and
harmony indispensably include, inter alia, the judicious disposition, utilization, management, renewal
and conservation of the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas and
other natural resources to the end that their exploration, development and utilization be equitably
accessible to the present a:: well as future generations. Needless to say, every generation has a
responsibility to the next to preserve that rhythm and harmony for the full 1:njoyment of a balanced
and healthful ecology. Put a little differently, the minors' assertion of their right to a sound
environment constitutes, at the same time, the performance of their obligation to ensure the
protection of that right for the generations to come.15 (Emphasis supplied.)

The liberalization of standing first enunciated in Oposa, insofar as it refers to minors and generations
yet unborn, is now enshrined in the Rules which allows the filing of a citizen suit in environmental
cases. The provision on citizen suits in the Rules "collapses the traditional rule on personal and direct
interest, on the principle that humans are stewards of nature."16
100

Having settled the issue of locus standi, we shall address the more fundamental question of whether
this Court has jurisdiction over the US respondents who did not submit any pleading or manifestation
in this case.

The immunity of the State from suit, known also as the doctrine of sovereign immunity or non-suability
of the State,17is expressly provided in Article XVI of the 1987 Constitution which states:

Section 3. The State may not be sued without its consent.

In United States of America v. Judge Guinto,18 we discussed the principle of state immunity from suit,
as follows:

The rule that a state may not be sued without its consent, now expressed in Article XVI, Section 3,
of the 1987 Constitution, is one of the generally accepted principles of international law that we have
adopted as part of the law of our land under Article II, Section 2. x x x.

Even without such affirmation, we would still be bound by the generally accepted principles of
international law under the doctrine of incorporation. Under this doctrine, as accepted by the majority
of states, such principles are deemed incorporated in the law of every civilized state as a condition
and consequence of its membership in the society of nations. Upon its admission to such society, the
state is automatically obligated to comply with these principles in its relations with other states.

As applied to the local state, the doctrine of state immunity is based on the justification given by
Justice Holmes that ''there can be no legal right against the authority which makes the law on which
the right depends." [Kawanakoa v. Polybank, 205 U.S. 349] There are other practical reasons for the
enforcement of the doctrine. In the case of the foreign state sought to be impleaded in the local
jurisdiction, the added inhibition is expressed in the maxim par in parem, non habet imperium. All
states are sovereign equals and cannot assert jurisdiction over one another. A contrary disposition
would, in the language of a celebrated case, "unduly vex the peace of nations." [De Haber v. Queen
of Portugal, 17 Q. B. 171]

While the doctrine appears to prohibit only suits against the state without its consent, it is also
applicable to complaints filed against officials of the state for acts allegedly performed by them in the
discharge of their duties. The rule is that if the judgment against such officials will require the state
itself to perform an affirmative act to satisfy the same,. such as the appropriation of the amount
needed to pay the damages awarded against them, the suit must be regarded as against the state
itself although it has not been formally impleaded. [Garcia v. Chief of Staff, 16 SCRA 120] In such a
situation, the state may move to dismiss the comp.taint on the ground that it has been filed without its
consent.19 (Emphasis supplied.)

Under the American Constitution, the doctrine is expressed in the Eleventh Amendment which reads:

The Judicial power of the United States shall not be construed to extend to any suit in law or equity,
commenced or prosecuted against one of the United States by Citizens of another State, or by
Citizens or Subjects of any Foreign State.

In the case of Minucher v. Court of Appeals,20 we further expounded on the immunity of foreign states
from the jurisdiction of local courts, as follows:
101

The precept that a State cannot be sued in the courts of a foreign state is a long-standing rule of
customary international law then closely identified with the personal immunity of a foreign sovereign
from suit and, with the emergence of democratic states, made to attach not just to the person of the
head of state, or his representative, but also distinctly to the state itself in its sovereign capacity. If the
acts giving rise to a suit arc those of a foreign government done by its foreign agent, although not
necessarily a diplomatic personage, but acting in his official capacity, the complaint could be barred
by the immunity of the foreign sovereign from suit without its consent. Suing a representative of a
state is believed to be, in effect, suing the state itself. The proscription is not accorded for the benefit
of an individual but for the State, in whose service he is, under the maxim -par in parem, non habet
imperium -that all states are soverr~ign equals and cannot assert jurisdiction over one another. The
implication, in broad terms, is that if the judgment against an official would rec 1uire the state itself to
perform an affirmative act to satisfy the award, such as the appropriation of the amount needed to
pay the damages decreed against him, the suit must be regarded as being against the state itself,
although it has not been formally impleaded.21 (Emphasis supplied.)

In the same case we also mentioned that in the case of diplomatic immunity, the privilege is not an
immunity from the observance of the law of the territorial sovereign or from ensuing legal liability; it is,
rather, an immunity from the exercise of territorial jurisdiction.22

In United States of America v. Judge Guinto,23 one of the consolidated cases therein involved a
Filipino employed at Clark Air Base who was arrested following a buy-bust operation conducted by
two officers of the US Air Force, and was eventually dismissed from his employment when he was
charged in court for violation of R.A. No. 6425. In a complaint for damages filed by the said employee
against the military officers, the latter moved to dismiss the case on the ground that the suit was
against the US Government which had not given its consent. The RTC denied the motion but on a
petition for certiorari and prohibition filed before this Court, we reversed the RTC and dismissed the
complaint. We held that petitioners US military officers were acting in the exercise of their official
functions when they conducted the buy-bust operation against the complainant and thereafter
testified against him at his trial. It follows that for discharging their duties as agents of the United
States, they cannot be directly impleaded for acts imputable to their principal, which has not given its
consent to be sued.

This traditional rule of State immunity which exempts a State from being sued in the courts of another
State without the former's consent or waiver has evolved into a restrictive doctrine which
distinguishes sovereign and governmental acts (Jure imperil") from private, commercial and
proprietary acts (Jure gestionis). Under the restrictive rule of State immunity, State immunity extends
only to acts Jure imperii. The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign sovereign, its commercial activities or
economic affairs.24

In Shauf v. Court of Appeals,25 we discussed the limitations of the State immunity principle, thus:

It is a different matter where the public official is made to account in his capacity as such for acts
contrary to law and injurious to the rights of plaintiff. As was clearly set forth by JustiGe Zaldivar in
Director of the Bureau of Telecommunications, et al. vs. Aligaen, etc., et al. : "Inasmuch as the State
authorizes only legal acts by its officers, unauthorized acts of government officials or officers are not
acts of the State, and an action against the officials or officers by one whose rights have been
invaded or violated by such acts, for the protection of his rights, is not a suit against the State within
the rule of immunity of the State from suit. In the same tenor, it has been said that an action at law or
suit in equity against a State officer or the director of a State department on the ground that, while
102

claiming to act for the State, he violates or invades the personal and property rights of the plaintiff,
under an unconstitutional act or under an assumption of authority which he does not have, is not a
suit against the State within the constitutional provision that the State may not be sued without its
consent." The rationale for this ruling is that the doctrine of state immunity cannot be used as an
instrument for perpetrating an injustice. x x x x

The aforecited authorities are clear on the matter. They state that the doctrine of immunity from suit
will not apply and may not be invoked where the public official is being sued in his private and
personal capacity as an ordinary citizen. The cloak of protection afforded the officers and agents of
the government is removed the moment they are sued in their individual capacity. This situation
usually arises where the public official acts without authority or in excess of the powers vested in him.
It is a well-settled principle of law that a public official may be liable in his personal private capacity for
whatever damage he may have caused by his act done with malice and in bad faith, or beyond the
scope of his authority or jurisdiction.26 (Emphasis supplied.) In this case, the US respondents were
sued in their official capacity as commanding officers of the US Navy who had control and supervision
over the USS Guardian and its crew. The alleged act or omission resulting in the unfortunate
grounding of the USS Guardian on the TRNP was committed while they we:re performing official
military duties. Considering that the satisfaction of a judgment against said officials will require
remedial actions and appropriation of funds by the US government, the suit is deemed to be one
against the US itself. The principle of State immunity therefore bars the exercise of jurisdiction by this
Court over the persons of respondents Swift, Rice and Robling.

During the deliberations, Senior Associate Justice Antonio T. Carpio took the position that the
conduct of the US in this case, when its warship entered a restricted area in violation of R.A. No.
10067 and caused damage to the TRNP reef system, brings the matter within the ambit of Article 31
of the United Nations Convention on the Law of the Sea (UNCLOS). He explained that while
historically, warships enjoy sovereign immunity from suit as extensions of their flag State, Art. 31 of
the UNCLOS creates an exception to this rule in cases where they fail to comply with the rules and
regulations of the coastal State regarding passage through the latter's internal waters and the
territorial sea.

According to Justice Carpio, although the US to date has not ratified the UNCLOS, as a matter of
long-standing policy the US considers itself bound by customary international rules on the "traditional
uses of the oceans" as codified in UNCLOS, as can be gleaned from previous declarations by former
Presidents Reagan and Clinton, and the US judiciary in the case of United States v. Royal Caribbean
Cruise Lines, Ltd.27

The international law of the sea is generally defined as "a body of treaty rules arid customary norms
governing the uses of the sea, the exploitation of its resources, and the exercise of jurisdiction over
maritime regimes. It is a branch of public international law, regulating the relations of states with
respect to the uses of the oceans."28 The UNCLOS is a multilateral treaty which was opened for
signature on December 10, 1982 at Montego Bay, Jamaica. It was ratified by the Philippines in 1984
but came into force on November 16, 1994 upon the submission of the 60th ratification.

The UNCLOS is a product of international negotiation that seeks to balance State sovereignty (mare
clausum) and the principle of freedom of the high seas (mare liberum).29 The freedom to use the
world's marine waters is one of the oldest customary principles of international law.30 The UNCLOS
gives to the coastal State sovereign rights in varying degrees over the different zones of the sea
which are: 1) internal waters, 2) territorial sea, 3) contiguous zone, 4) exclusive economic zone, and
103

5) the high seas. It also gives coastal States more or less jurisdiction over foreign vessels depending
on where the vessel is located.31

Insofar as the internal waters and territorial sea is concerned, the Coastal State exercises
sovereignty, subject to the UNCLOS and other rules of international law. Such sovereignty extends to
the air space over the territorial sea as well as to its bed and subsoil.32

In the case of warships,33 as pointed out by Justice Carpio, they continue to enjoy sovereign immunity
subject to the following exceptions:

Article 30 - Non-compliance by warships with the laws and regulations of the coastal State

If any warship does not comply with the laws and regulations of the coastal State concerning passage
through the territorial sea and disregards any request for compliance therewith which is made to it,
the coastal State may require it to leave the territorial sea immediately.

Article 31 - Responsibility of the flag State for damage caused by a warship or other government ship
operated for non-commercial purposes

The flag State shall bear international responsibility for any loss or damage to the coastal State
resulting from the non-compliance by a warship or other government ship operated for non-
commercial purposes with the laws and regulations of the coastal State concerning passage through
the territorial sea or with the provisions of this Convention or other rules of international law.

Article 32 - Immunities of warships and other government ships operated for non-commercial
purposes

With such exceptions as are contained in subsection A and in articles 30 and 31, nothing in this
Convention affects the immunities of warships and other government ships operated for non-
commercial purposes. (Emphasis supplied.) A foreign warship's unauthorized entry into our internal
waters with resulting damage to marine resources is one situation in which the above provisions may
apply. But what if the offending warship is a non-party to the UNCLOS, as in this case, the US?

An overwhelming majority - over 80% -- of nation states are now members of UNCLOS, but despite
this the US, the world's leading maritime power, has not ratified it.

While the Reagan administration was instrumental in UNCLOS' negotiation and drafting, the U.S.
delegation ultimately voted against and refrained from signing it due to concerns over deep seabed
mining technology transfer provisions contained in Part XI. In a remarkable, multilateral effort to
induce U.S. membership, the bulk of UNCLOS member states cooperated over the succeeding
decade to revise the objection.able provisions. The revisions satisfied the Clinton administration,
which signed the revised Part XI implementing agreement in 1994. In the fall of 1994, President
Clinton transmitted UNCLOS and the Part XI implementing agreement to the Senate requesting its
advice and consent. Despite consistent support from President Clinton, each of his successors, and
an ideologically diverse array of stakeholders, the Senate has since withheld the consent required for
the President to internationally bind the United States to UNCLOS.

While UNCLOS cleared the Senate Foreign Relations Committee (SFRC) during the 108th and 110th
Congresses, its progress continues to be hamstrung by significant pockets of political ambivalence
over U.S. participation in international institutions. Most recently, 111 th Congress SFRC Chairman
104

Senator John Kerry included "voting out" UNCLOS for full Senate consideration among his highest
priorities. This did not occur, and no Senate action has been taken on UNCLOS by the 112th
Congress.34

Justice Carpio invited our attention to the policy statement given by President Reagan on March 10,
1983 that the US will "recognize the rights of the other , states in the waters off their coasts, as
reflected in the convention [UNCLOS], so long as the rights and freedom of the United States and
others under international law are recognized by such coastal states", and President Clinton's
reiteration of the US policy "to act in a manner consistent with its [UNCLOS] provisions relating to
traditional uses of the oceans and to encourage other countries to do likewise." Since Article 31
relates to the "traditional uses of the oceans," and "if under its policy, the US 'recognize[s] the rights
of the other states in the waters off their coasts,"' Justice Carpio postulates that "there is more reason
to expect it to recognize the rights of other states in their internal waters, such as the Sulu Sea in this
case."

As to the non-ratification by the US, Justice Carpio emphasizes that "the US' refusal to join the UN
CLOS was centered on its disagreement with UN CLOS' regime of deep seabed mining (Part XI)
which considers the oceans and deep seabed commonly owned by mankind," pointing out that such
"has nothing to do with its [the US'] acceptance of customary international rules on navigation."

It may be mentioned that even the US Navy Judge Advocate General's Corps publicly endorses the
ratification of the UNCLOS, as shown by the following statement posted on its official website:

The Convention is in the national interest of the United States because it establishes stable maritime
zones, including a maximum outer limit for territorial seas; codifies innocent passage, transit passage,
and archipelagic sea lanes passage rights; works against "jurisdictiomtl creep" by preventing coastal
nations from expanding their own maritime zones; and reaffirms sovereign immunity of warships,
auxiliaries anJ government aircraft.x x x x

Economically, accession to the Convention would support our national interests by enhancing the
ability of the US to assert its sovereign rights over the resources of one of the largest continental
shelves in the world. Further, it is the Law of the Sea Convention that first established the concept of
a maritime Exclusive Economic Zone out to 200 nautical miles, and recognized the rights of coastal
states to conserve and manage the natural resources in this Zone.35

We fully concur with Justice Carpio's view that non-membership in the UNCLOS does not mean that
the US will disregard the rights of the Philippines as a Coastal State over its internal waters and
territorial sea. We thus expect the US to bear "international responsibility" under Art. 31 in connection
with the USS Guardian grounding which adversely affected the Tubbataha reefs. Indeed, it is difficult
to imagine that our long-time ally and trading partner, which has been actively supporting the
country's efforts to preserve our vital marine resources, would shirk from its obligation to compensate
the damage caused by its warship while transiting our internal waters. Much less can we comprehend
a Government exercising leadership in international affairs, unwilling to comply with the UNCLOS
directive for all nations to cooperate in the global task to protect and preserve the marine environment
as provided in Article 197, viz:

Article 197
Cooperation on a global or regional basis
105

States shall cooperate on a global basis and, as appropriate, on a regional basis, directly or through
competent international organizations, in formulating and elaborating international rules, standards
and recommended practices and procedures consistent with this Convention, for the protection and
preservation of the marine environment, taking into account characteristic regional features.

In fine, the relevance of UNCLOS provisions to the present controversy is beyond dispute. Although
the said treaty upholds the immunity of warships from the jurisdiction of Coastal States while
navigating the.latter's territorial sea, the flag States shall be required to leave the territorial '::;ea
immediately if they flout the laws and regulations of the Coastal State, and they will be liable for
damages caused by their warships or any other government vessel operated for non-commercial
purposes under Article 31.

Petitioners argue that there is a waiver of immunity from suit found in the VFA. Likewise, they invoke
federal statutes in the US under which agencies of the US have statutorily waived their immunity to
any action. Even under the common law tort claims, petitioners asseverate that the US respondents
are liable for negligence, trespass and nuisance. We are not persuaded.

The VFA is an agreement which defines the treatment of United States troops and personnel visiting
the Philippines to promote "common security interests" between the US and the Philippines in the
region. It provides for the guidelines to govern such visits of military personnel, and further defines the
rights of the United States and the Philippine government in the matter of criminal jurisdiction,
movement of vessel and aircraft, importation and exportation of equipment, materials and
supplies.36 The invocation of US federal tort laws and even common law is thus improper considering
that it is the VF A which governs disputes involving US military ships and crew navigating Philippine
waters in pursuance of the objectives of the agreement.

As it is, the waiver of State immunity under the VF A pertains only to criminal jurisdiction and not to
special civil actions such as the present petition for issuance of a writ of Kalikasan. In fact, it can be
inferred from Section 17, Rule 7 of the Rules that a criminal case against a person charged with a
violation of an environmental law is to be filed separately:

SEC. 17. Institution of separate actions.-The filing of a petition for the issuance of the writ of kalikasan
shall not preclude the filing of separate civil, criminal or administrative actions.

In any case, it is our considered view that a ruling on the application or non-application of criminal
jurisdiction provisions of the VF A to US personnel who may be found responsible for the grounding
of the USS Guardian, would be premature and beyond the province of a petition for a writ of
Kalikasan. We also find it unnecessary at this point to determine whether such waiver of State
immunity is indeed absolute. In the same vein, we cannot grant damages which have resulted from
the violation of environmental laws. The Rules allows the recovery of damages, including the
collection of administrative fines under R.A. No. 10067, in a separate civil suit or that deemed
instituted with the criminal action charging the same violation of an environmental law.37

Section 15, Rule 7 enumerates the reliefs which may be granted in a petition for issuance of a writ of
Kalikasan, to wit:

SEC. 15. Judgment.-Within sixty (60) days from the time the petition is submitted for decision, the
court shall render judgment granting or denying the privilege of the writ of kalikasan.

The reliefs that may be granted under the writ are the following:
106

(a) Directing respondent to permanently cease and desist from committing acts or neglecting
the performance of a duty in violation of environmental laws resulting in environmental
destruction or damage;

(b) Directing the respondent public official, govemment agency, private person or entity to
protect, preserve, rehabilitate or restore the environment;

(c) Directing the respondent public official, government agency, private person or entity to
monitor strict compliance with the decision and orders of the court;

(d) Directing the respondent public official, government agency, or private person or entity to
make periodic reports on the execution of the final judgment; and

(e) Such other reliefs which relate to the right of the people to a balanced and healthful ecology
or to the protection, preservation, rehabilitation or restoration of the environment, except the
award of damages to individual petitioners. (Emphasis supplied.)

We agree with respondents (Philippine officials) in asserting that this petition has become moot in the
sense that the salvage operation sought to be enjoined or restrained had already been accomplished
when petitioners sought recourse from this Court. But insofar as the directives to Philippine
respondents to protect and rehabilitate the coral reef stn icture and marine habitat adversely affected
by the grounding incident are concerned, petitioners are entitled to these reliefs notwithstanding the
completion of the removal of the USS Guardian from the coral reef. However, we are mindful of the
fact that the US and Philippine governments both expressed readiness to negotiate and discuss the
matter of compensation for the damage caused by the USS Guardian. The US Embassy has also
declared it is closely coordinating with local scientists and experts in assessing the extent of the
damage and appropriate methods of rehabilitation.

Exploring avenues for settlement of environmental cases is not proscribed by the Rules. As can be
gleaned from the following provisions, mediation and settlement are available for the consideration of
the parties, and which dispute resolution methods are encouraged by the court, to wit:

RULE3 x x x x

SEC. 3. Referral to mediation.-At the start of the pre-trial conference, the court shall inquire from the
parties if they have settled the dispute; otherwise, the court shall immediately refer the parties or their
counsel, if authorized by their clients, to the Philippine Mediation Center (PMC) unit for purposes of
mediation. If not available, the court shall refer the case to the clerk of court or legal researcher for
mediation.

Mediation must be conducted within a non-extendible period of thirty (30) days from receipt of notice
of referral to mediation.

The medition report must be submitted within ten (10) days from the expiration of the 30-day period.

SEC. 4. Preliminary conference.-If mediation fails, the court will schedule the continuance of the pre-
trial. Before the scheduled date of continuance, the court may refer the case to the branch clerk of
court for a preliminary conference for the following purposes:

(a) To assist the parties in reaching a settlement;x x x x

107

SEC. 5. Pre-trial conference; consent decree.-The judge shall put the parties and their counsels
under oath, and they shall remain under oath in all pre-trial conferences.

The judge shall exert best efforts to persuade the parties to arrive at a settlement of the dispute. The
judge may issue a consent decree approving the agreement between the parties in accordance with
law, morals, public order and public policy to protect the right of the people to a balanced and
healthful ecology.x x x x

SEC. 10. Efforts to settle.- The court shall endeavor to make the parties to agree to compromise or
settle in accordance with law at any stage of the proceedings before rendition of judgment.
(Underscoring supplied.)

The Court takes judicial notice of a similar incident in 2009 when a guided-missile cruiser, the USS
Port Royal, ran aground about half a mile off the Honolulu Airport Reef Runway and remained stuck
for four days. After spending $6.5 million restoring the coral reef, the US government was reported to
have paid the State of Hawaii $8.5 million in settlement over coral reef damage caused by the
grounding.38

To underscore that the US government is prepared to pay appropriate compensation for the damage
caused by the USS Guardian grounding, the US Embassy in the Philippines has announced the
formation of a US interdisciplinary scientific team which will "initiate discussions with the Government
of the Philippines to review coral reef rehabilitation options in Tubbataha, based on assessments by
Philippine-based marine scientists." The US team intends to "help assess damage and remediation
options, in coordination with the Tubbataha Management Office, appropriate Philippine government
entities, non-governmental organizations, and scientific experts from Philippine universities."39

A rehabilitation or restoration program to be implemented at the cost of the violator is also a major
relief that may be obtained under a judgment rendered in a citizens' suit under the Rules, viz:

RULES

SECTION 1. Reliefs in a citizen suit.-If warranted, the court may grant to the plaintiff proper reliefs
which shall include the protection, preservation or rehabilitation of the environment and the payment
of attorney's fees, costs of suit and other litigation expenses. It may also require the violator to submit
a program of rehabilitation or restoration of the environment, the costs of which shall be borne by the
violator, or to contribute to a special trust fund for that purpose subject to the control of the
court.1wphi1

In the light of the foregoing, the Court defers to the Executive Branch on the matter of compensation
and rehabilitation measures through diplomatic channels. Resolution of these issues impinges on our
relations with another State in the context of common security interests under the VFA. It is settled
that "[t]he conduct of the foreign relations of our government is committed by the Constitution to the
executive and legislative-"the political" --departments of the government, and the propriety of what
may be done in the exercise of this political power is not subject to judicial inquiry or decision."40

On the other hand, we cannot grant the additional reliefs prayed for in the petition to order a review of
the VFA and to nullify certain immunity provisions thereof.

As held in BAYAN (Bagong Alyansang Makabayan) v. Exec. Sec. Zamora,41 the VFA was duly
concurred in by the Philippine Senate and has been recognized as a treaty by the United States as
108

attested and certified by the duly authorized representative of the United States government. The VF
A being a valid and binding agreement, the parties are required as a matter of international law to
abide by its terms and provisions.42 The present petition under the Rules is not the proper remedy to
assail the constitutionality of its provisions. WHEREFORE, the petition for the issuance of the
privilege of the Writ of Kalikasan is hereby DENIED.

No pronouncement as to costs.

SO ORDERED. CERTIFICATION

Pursuant to Section 13, Article VIII of the 1987 Constitution, it is hereby certified that the conclusions
in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court.

MARIA LOURDES P. A. SERENO

Chief Justice

CHINA NATIONAL MACHINERY & G.R. No. 185572

EQUIPMENT CORP. (GROUP),
Petitioner,
Promulgated:

versus February 7, 2012

HON. CESAR D. SANTAMARIA,

Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
SERENO, J.:

This is a Petition for Review on Certiorari with Prayer for the Issuance of a Temporary Restraining
Order (TRO) and/or Preliminary Injunction assailing the 30 September 2008 Decision and 5
December 2008 Resolution of the Court of Appeals (CA) in CAG.R. SP No. 103351.[1]

On 14 September 2002, petitioner China National Machinery & Equipment Corp. (Group) (CNMEG),
represented by its chairperson, Ren Hongbin, entered into a Memorandum of Understanding with the
North Luzon Railways Corporation (Northrail), represented by its president, Jose L. Cortes, Jr. for the
conduct of a feasibility study on a possible railway line from Manila to San Fernando, La Union (the
Northrail Project).[2]

On 30 August 2003, the Export Import Bank of China (EXIM Bank) and the Department of
Finance of the Philippines (DOF) entered into a Memorandum of Understanding (Aug 30 MOU),
wherein China agreed to extend Preferential Buyers Credit to the Philippine government to finance
the Northrail Project.[3] The Chinese government designated EXIM Bank as the lender, while the
Philippine government named the DOF as the borrower.[4] Under the Aug 30 MOU, EXIM Bank
109

agreed to extend an amount not exceeding USD 400,000,000 in favor of the DOF, payable in 20
years, with a 5-year grace period, and at the rate of 3% per annum.[5]

On 1 October 2003, the Chinese Ambassador to the Philippines, Wang Chungui (Amb. Wang), wrote
a letter to DOF Secretary Jose Isidro Camacho (Sec. Camacho) informing him of CNMEGs
designation as the Prime Contractor for the Northrail Project.[6]

On 30 December 2003, Northrail and CNMEG executed a Contract Agreement for the construction of
Section I, Phase I of the North Luzon Railway System from Caloocan to Malolos on a turnkey basis
(the Contract Agreement).[7] The contract price for the Northrail Project was pegged at USD
421,050,000.[8]

On 26 February 2004, the Philippine government and EXIM Bank entered into a counterpart
financial agreement Buyer Credit Loan Agreement No. BLA 04055 (the Loan Agreement).[9] In the
Loan Agreement, EXIM Bank agreed to extend Preferential Buyers Credit in the amount of USD
400,000,000 in favor of the Philippine government in order to finance the construction of Phase I of
the Northrail Project.[10]

On 13 February 2006, respondents filed a Complaint for Annulment of Contract and Injunction
with Urgent Motion for Summary Hearing to Determine the Existence of Facts and Circumstances
Justifying the Issuance of Writs of Preliminary Prohibitory and Mandatory Injunction and/or TRO
against CNMEG, the Office of the Executive Secretary, the DOF, the Department of Budget and
Management, the National Economic Development Authority and Northrail.[11] The case was docketed
as Civil Case No. 06-203 before the Regional Trial Court, National Capital Judicial Region, Makati
City, Branch 145 (RTC Br. 145). In the Complaint, respondents alleged that the Contract Agreement
and the Loan Agreement were void for being contrary to (a) the Constitution; (b) Republic Act No.
9184 (R.A. No. 9184), otherwise known as the Government Procurement Reform Act; (c) Presidential
Decree No. 1445, otherwise known as the Government Auditing Code; and (d) Executive Order No.
292, otherwise known as the Administrative Code.[12]

RTC Br. 145 issued an Order dated 17 March 2006 setting the case for hearing on the
issuance of injunctive reliefs.[13] On 29 March 2006, CNMEG filed an Urgent Motion for
Reconsideration of this Order.[14] Before RTC Br. 145 could rule thereon, CNMEG filed a Motion to
Dismiss dated 12 April 2006, arguing that the trial court did not have jurisdiction over (a) its person,
as it was an agent of the Chinese government, making it immune from suit, and (b) the subject
matter, as the Northrail Project was a product of an executive agreement.[15]

On 15 May 2007, RTC Br. 145 issued an Omnibus Order denying CNMEGs Motion to Dismiss
and setting the case for summary hearing to determine whether the injunctive reliefs prayed for
should be issued.[16] CNMEG then filed a Motion for Reconsideration,[17] which was denied by the trial
court in an Order dated 10 March 2008.[18] Thus, CNMEG filed before the CA a Petition for Certiorari
with Prayer for the Issuance of TRO and/or Writ of Preliminary Injunction dated 4 April 2008.[19]

In the assailed Decision dated 30 September 2008, the appellate court dismissed the Petition
for Certiorari.[20] Subsequently, CNMEG filed a Motion for Reconsideration,[21] which was denied by
the CA in a Resolution dated 5 December 2008.[22] Thus, CNMEG filed the instant Petition for Review
on Certiorari dated 21 January 2009, raising the following issues: [23]

Whether or not petitioner CNMEG is an agent of the sovereign Peoples

Republic of China.
110

Whether or not the Northrail contracts are products of an executive agreement

between two sovereign states.
Whether or not the certification from the Department of Foreign Affairs is
necessary under the foregoing circumstances.
Whether or not the act being undertaken by petitioner CNMEG is an act jure
imperii.
Whether or not the Court of Appeals failed to avoid a procedural limbo in the
lower court.
Whether or not the Northrail Project is subject to competitive public bidding.
Whether or not the Court of Appeals ignored the ruling of this Honorable Court
in the Neri case.

CNMEG prays for the dismissal of Civil Case No. 06-203 before RTC Br. 145 for lack of
jurisdiction. It likewise requests this Court for the issuance of a TRO and, later on, a writ of preliminary
injunction to restrain public respondent from proceeding with the disposition of Civil Case No. 06-203.

The crux of this case boils down to two main issues, namely:

1. Whether CNMEG is entitled to immunity, precluding it from being sued before a

local court.
2. Whether the Contract Agreement is an executive agreement, such that it cannot
be questioned by or before a local court.

First issue: Whether CNMEG is entitled to immunity

This Court explained the doctrine of sovereign immunity in Holy See v. Rosario,[24] to wit:

There are two conflicting concepts of sovereign immunity, each widely held and
firmly established. According to the classical or absolute theory, a sovereign cannot,
without its consent, be made a respondent in the courts of another
sovereign. According to the newer or restrictive theory, the immunity of the
sovereign is recognized only with regard to public acts or acts jure imperii of a
state, but not with regard to private acts or acts jure gestionis. (Emphasis supplied;
citations omitted.)
xxx xxx xxx

The restrictive theory came about because of the entry of sovereign states into
purely commercial activities remotely connected with the discharge of governmental
functions. This is particularly true with respect to the Communist states which took
control of nationalized business activities and international trading.

In JUSMAG v. National Labor Relations Commission,[25] this Court affirmed the Philippines
adherence to the restrictive theory as follows:

The doctrine of state immunity from suit has undergone further metamorphosis.
The view evolved that the existence of a contract does not, per se, mean that sovereign
states may, at all times, be sued in local courts. The complexity of relationships between
sovereign states, brought about by their increasing commercial activities, mothered a
more restrictive application of the doctrine.

xxx xxx xxx

111

As it stands now, the application of the doctrine of immunity from suit has
been restricted to sovereign or governmental activities (jure imperii). The mantle of
state immunity cannot be extended to commercial, private and proprietary acts (jure
gestionis).[26] (Emphasis supplied.)

Since the Philippines adheres to the restrictive theory, it is crucial to ascertain the legal nature of
the act involved whether the entity claiming immunity performs governmental, as opposed to
proprietary, functions. As held in United States of America v. Ruiz [27]

The restrictive application of State immunity is proper only when the proceedings
arise out of commercial transactions of the foreign sovereign, its commercial activities or
economic affairs. Stated differently, a State may be said to have descended to the level
of an individual and can thus be deemed to have tacitly given its consent to be sued
only when it enters into business contracts. It does not apply where the contract relates
to the exercise of its sovereign functions.[28]

A. CNMEG is engaged in a proprietary activity.

A threshold question that must be answered is whether CNMEG performs governmental or

proprietary functions. A thorough examination of the basic facts of the case would show that CNMEG is
engaged in a proprietary activity.

The parties executed the Contract Agreement for the purpose of constructing the Luzon
Railways, viz:[29]

WHEREAS the Employer (Northrail) desired to construct the railways form

Caloocan to Malolos, section I, Phase I of Philippine North Luzon Railways Project
(hereinafter referred to as THE PROJECT);

AND WHEREAS the Contractor has offered to provide the Project on Turnkey
basis, including design, manufacturing, supply, construction, commissioning, and training
of the Employers personnel;

AND WHEREAS the Loan Agreement of the Preferential Buyers Credit between
Export-Import Bank of China and Department of Finance of Republic of the Philippines;

NOW, THEREFORE, the parties agree to sign this Contract for the Implementation
of the Project.

The above-cited portion of the Contract Agreement, however, does not on its own reveal
whether the construction of the Luzon railways was meant to be a proprietary endeavor. In order to
fully understand the intention behind and the purpose of the entire undertaking, the Contract
Agreement must not be read in isolation. Instead, it must be construed in conjunction with three other
documents executed in relation to the Northrail Project, namely: (a) the Memorandum of
Understanding dated 14 September 2002 between Northrail and CNMEG;[30] (b) the letter of Amb.
Wang dated 1 October 2003 addressed to Sec. Camacho;[31] and (c) the Loan Agreement.[32]

1. Memorandum of Understanding dated 14 September

2002
112

The Memorandum of Understanding dated 14 September 2002 shows that CNMEG sought the
construction of the Luzon Railways as a proprietary venture. The relevant parts thereof read:

WHEREAS, CNMEG has the financial capability, professional competence and

technical expertise to assess the state of the [Main Line North (MLN)] and recommend
implementation plans as well as undertake its rehabilitation and/or modernization;

WHEREAS, CNMEG has expressed interest in the rehabilitation and/or

modernization of the MLN from Metro Manila to San Fernando, La Union passing
through the provinces of Bulacan, Pampanga, Tarlac, Pangasinan and La Union (the
Project);

WHEREAS, the NORTHRAIL CORP. welcomes CNMEGs proposal to

undertake a Feasibility Study (the Study) at no cost to NORTHRAIL CORP.;

WHEREAS, the NORTHRAIL CORP. also welcomes CNMEGs interest in

undertaking the Project with Suppliers Credit and intends to employ CNMEG as
the Contractor for the Project subject to compliance with Philippine and
Chinese laws, rules and regulations for the selection of a contractor;

WHEREAS, the NORTHRAIL CORP. considers CNMEGs proposal

advantageous to the Government of the Republic of the Philippines and has
therefore agreed to assist CNMEG in the conduct of the aforesaid Study;

xxx xxx xxx

II. APPROVAL PROCESS

2.1 As soon as possible after completion and presentation of the Study in

accordance with Paragraphs 1.3 and 1.4 above and in compliance with
necessary governmental laws, rules, regulations and procedures required from
both parties, the parties shall commence the preparation and negotiation of
the terms and conditions of the Contract (the Contract) to be entered into
between them on the implementation of the Project. The parties shall use
their best endeavors to formulate and finalize a Contract with a view to
signing the Contract within one hundred twenty (120) days from
CNMEGs presentation of the Study.[33] (Emphasis supplied)

Clearly, it was CNMEG that initiated the undertaking, and not the Chinese government. The
Feasibility Study was conducted not because of any diplomatic gratuity from or exercise of sovereign
functions by the Chinese government, but was plainly a business strategy employed by CNMEG with
a view to securing this commercial enterprise.

2. Letter dated 1 October 2003

That CNMEG, and not the Chinese government, initiated the Northrail Project was confirmed by
Amb. Wang in his letter dated 1 October 2003, thus:
113

1. CNMEG has the proven competence and capability to undertake

the Project as evidenced by the ranking of 42 given by the ENR among 225 global
construction companies.

2. CNMEG already signed an MOU with the North Luzon Railways

Corporation last September 14, 2000 during the visit of Chairman Li Peng. Such
being the case, they have already established an initial working relationship with your
North Luzon Railways Corporation. This would categorize CNMEG as the state
corporation within the Peoples Republic of China which initiated our
Governments involvement in the Project.

3. Among the various state corporations of the Peoples Republic

of China, only CNMEG has the advantage of being fully familiar with the current
requirements of the Northrail Project having already accomplished a Feasibility Study
which was used as inputs by the North Luzon Railways Corporation in the approvals
(sic) process required by the Republic of the Philippines.[34] (Emphasis supplied.)

Thus, the desire of CNMEG to secure the Northrail Project was in the ordinary or regular
course of its business as a global construction company. The implementation of the Northrail Project
was intended to generate profit for CNMEG, with the Contract Agreement placing a contract price of
USD 421,050,000 for the venture.[35] The use of the term state corporation to refer to CNMEG was
only descriptive of its nature as a government-owned and/or -controlled corporation, and its
assignment as the Primary Contractor did not imply that it was acting on behalf of China in the
performance of the latters sovereign functions. To imply otherwise would result in an absurd situation,
in which all Chinese corporations owned by the state would be automatically considered as
performing governmental activities, even if they are clearly engaged in commercial or proprietary
pursuits.

3. The Loan Agreement

CNMEG claims immunity on the ground that the Aug 30 MOU on the financing of the Northrail
Project was signed by the Philippine and Chinese governments, and its assignment as the Primary
Contractor meant that it was bound to perform a governmental function on behalf of China. However,
the Loan Agreement, which originated from the same Aug 30 MOU, belies this reasoning, viz:

Article 11. xxx (j) Commercial Activity The execution and delivery of this
Agreement by the Borrower constitute, and the Borrowers performance of and
compliance with its obligations under this Agreement will constitute, private and
commercial acts done and performed for commercial purposes under the laws of
the Republic of the Philippines and neither the Borrower nor any of its assets is
entitled to any immunity or privilege (sovereign or otherwise) from suit, execution
or any other legal process with respect to its obligations under this Agreement, as
the case may be, in any jurisdiction. Notwithstanding the foregoing, the Borrower does
not waive any immunity with respect of its assets which are (i) used by a diplomatic or
consular mission of the Borrower and (ii) assets of a military character and under control
of a military authority or defense agency and (iii) located in the Philippines and dedicated
to public or governmental use (as distinguished from patrimonial assets or assets
dedicated to commercial use). (Emphasis supplied.)
114

(k) Proceedings to Enforce Agreement In any proceeding in the Republic of

the Philippines to enforce this Agreement, the choice of the laws of the Peoples Republic
of China as the governing law hereof will be recognized and such law will be applied. The
waiver of immunity by the Borrower, the irrevocable submissions of the Borrower to the
non-exclusive jurisdiction of the courts of the Peoples Republic of China and the
appointment of the Borrowers Chinese Process Agent is legal, valid, binding and
enforceable and any judgment obtained in the Peoples Republic of China will be if
introduced, evidence for enforcement in any proceedings against the Borrower and its
assets in the Republic of the Philippines provided that (a) the court rendering judgment
had jurisdiction over the subject matter of the action in accordance with its jurisdictional
rules, (b) the Republic had notice of the proceedings, (c) the judgment of the court was
not obtained through collusion or fraud, and (d) such judgment was not based on a clear
mistake of fact or law.[36]

Further, the Loan Agreement likewise contains this express waiver of immunity:

15.5 Waiver of Immunity The Borrower irrevocably and unconditionally waives, any
immunity to which it or its property may at any time be or become entitled, whether
characterized as sovereign immunity or otherwise, from any suit, judgment, service of
process upon it or any agent, execution on judgment, set-off, attachment prior to
judgment, attachment in aid of execution to which it or its assets may be entitled in any
legal action or proceedings with respect to this Agreement or any of the transactions
contemplated hereby or hereunder. Notwithstanding the foregoing, the Borrower does not
waive any immunity in respect of its assets which are (i) used by a diplomatic or consular
mission of the Borrower, (ii) assets of a military character and under control of a military
authority or defense agency and (iii) located in the Philippines and dedicated to a public
or governmental use (as distinguished from patrimonial assets or assets dedicated to
commercial use).[37]

Thus, despite petitioners claim that the EXIM Bank extended financial assistance to Northrail
because the bank was mandated by the Chinese government, and not because of any motivation to do
business in the Philippines,[38] it is clear from the foregoing provisions that the Northrail Project was a
purely commercial transaction.

Admittedly, the Loan Agreement was entered into between EXIM Bank and the Philippine
government, while the Contract Agreement was between Northrail and CNMEG. Although the Contract
Agreement is silent on the classification of the legal nature of the transaction, the foregoing provisions
of the Loan Agreement, which is an inextricable part of the entire undertaking, nonetheless reveal the
intention of the parties to the Northrail Project to classify the whole venture as commercial or proprietary
in character.

Thus, piecing together the content and tenor of the Contract Agreement, the Memorandum of
Understanding dated 14 September 2002, Amb. Wangs letter dated 1 October 2003, and the Loan
Agreement would reveal the desire of CNMEG to construct the Luzon Railways in pursuit of a purely
commercial activity performed in the ordinary course of its business.

B. CNMEG failed to adduce evidence that it is

immune from suit under Chinese law.
115

Even assuming arguendo that CNMEG performs governmental functions, such claim does not
automatically vest it with immunity. This view finds support in Malong v. Philippine National Railways, in
which this Court held that (i)mmunity from suit is determined by the character of the objects for which
the entity was organized.[39]
In this regard, this Courts ruling in Deutsche Gesellschaft Fr Technische Zusammenarbeit (GTZ)
v. CA[40] must be examined. In Deutsche Gesellschaft, Germanyand the Philippines entered into a
Technical Cooperation Agreement, pursuant to which both signed an arrangement promoting the Social
Health InsuranceNetworking and Empowerment (SHINE) project. The two governments named their
respective implementing organizations: the Department of Health (DOH) and the Philippine Health
Insurance Corporation (PHIC) for the Philippines, and GTZ for the implementation of Germanys
contributions. In ruling that GTZ was not immune from suit, this Court held:

The arguments raised by GTZ and the [Office of the Solicitor General (OSG)] are
rooted in several indisputable facts. The SHINE project was implemented pursuant
to the bilateral agreements between the Philippine and German governments.
GTZ was tasked, under the 1991 agreement, with the implementation of the
contributions of the German government. The activities performed by GTZ
pertaining to the SHINE project are governmental in nature, related as they are to
the promotion of health insurance in the Philippines. The fact that GTZ entered into
employment contracts with the private respondents did not disqualify it from invoking
immunity from suit, as held in cases such as Holy See v. Rosario, Jr., which set forth
what remains valid doctrine:

Certainly, the mere entering into a contract by a foreign state with a

private party cannot be the ultimate test. Such an act can only be the start
of the inquiry. The logical question is whether the foreign state is engaged
in the activity in the regular course of business. If the foreign state is not
engaged regularly in a business or trade, the particular act or transaction
must then be tested by its nature. If the act is in pursuit of a sovereign
activity, or an incident thereof, then it is an act jure imperii, especially
when it is not undertaken for gain or profit.

Beyond dispute is the tenability of the comment points (sic) raised by GTZ and the
OSG that GTZ was not performing proprietary functions notwithstanding its entry into
the particular employment contracts. Yet there is an equally fundamental premise which
GTZ and the OSG fail to address, namely: Is GTZ, by conception, able to enjoy
the FederalRepublics immunity from suit?

The principle of state immunity from suit, whether a local state or a foreign state,
is reflected in Section 9, Article XVI of the Constitution, which states that the State may
not be sued without its consent. Who or what consists of the State? For one, the
doctrine is available to foreign States insofar as they are sought to be sued in the courts
of the local State, necessary as it is to avoid unduly vexing the peace of nations.

If the instant suit had been brought directly against the Federal Republic of
Germany, there would be no doubt that it is a suit brought against a State, and the only
necessary inquiry is whether said State had consented to be sued. However, the
116

present suit was brought against GTZ. It is necessary for us to understand what
precisely are the parameters of the legal personality of GTZ.

Counsel for GTZ characterizes GTZ as the implementing agency of the

Government of the Federal Republic of Germany, a depiction similarly adopted by
the OSG. Assuming that the characterization is correct, it does not automatically
invest GTZ with the ability to invoke State immunity from suit. The distinction lies in
whether the agency is incorporated or unincorporated.

xxx xxx xxx

State immunity from suit may be waived by general or special law. The special
law can take the form of the original charter of the incorporated government agency.
Jurisprudence is replete with examples of incorporated government agencies which
were ruled not entitled to invoke immunity from suit, owing to provisions in their charters
manifesting their consent to be sued.

xxx xxx xxx

It is useful to note that on the part of the Philippine government, it had designated
two entities, the Department of Health and the Philippine Health Insurance Corporation
(PHIC), as the implementing agencies in behalf of the Philippines. The PHIC was
established under Republic Act No. 7875, Section 16 (g) of which grants the corporation
the power to sue and be sued in court. Applying the previously cited jurisprudence, PHIC
would not enjoy immunity from suit even in the performance of its functions connected with
SHINE, however, (sic) governmental in nature as (sic) they may be.

Is GTZ an incorporated agency of the German government? There is some

mystery surrounding that question. Neither GTZ nor the OSG go beyond the
claim that petitioner is the implementing agency of the Government of the
Federal Republic of Germany. On the other hand, private respondents asserted
before the Labor Arbiter that GTZ was a private corporation engaged in the
implementation of development projects. The Labor Arbiter accepted that claim in his
Order denying the Motion to Dismiss, though he was silent on that point in his
Decision. Nevertheless, private respondents argue in their Comment that the finding
that GTZ was a private corporation was never controverted, and is therefore deemed
admitted. In its Reply, GTZ controverts that finding, saying that it is a matter of public
knowledge that the status of petitioner GTZ is that of the implementing agency, and not
that of a private corporation.

In truth, private respondents were unable to adduce any evidence to substantiate

their claim that GTZ was a private corporation, and the Labor Arbiter acted rashly in
accepting such claim without explanation. But neither has GTZ supplied any evidence
defining its legal nature beyond that of the bare descriptive implementing agency.
There is no doubt that the 1991 Agreement designated GTZ as the implementing
agency in behalf of the German government. Yet the catch is that such term has
no precise definition that is responsive to our concerns. Inherently, an agent acts
in behalf of a principal, and the GTZ can be said to act in behalf of the German
state. But that is as far as implementing agency could take us. The term by itself
does not supply whether GTZ is incorporated or unincorporated, whether it is
117

owned by the German state or by private interests, whether it has juridical

personality independent of the German government or none at all.

xxx xxx xxx

Again, we are uncertain of the corresponding legal implications under

German law surrounding a private company owned by the Federal Republic of
Germany. Yet taking the description on face value, the apparent equivalent under
Philippine law is that of a corporation organized under the Corporation Code but
owned by the Philippine government, or a government-owned or controlled
corporation without original charter. And it bears notice that Section 36 of the
Corporate Code states that [e]very corporation incorporated under this Code has
the power and capacity x x x to sue and be sued in its corporate name.

It is entirely possible that under German law, an entity such as GTZ or particularly
GTZ itself has not been vested or has been specifically deprived the power and capacity
to sue and/or be sued. Yet in the proceedings below and before this Court, GTZ has
failed to establish that under German law, it has not consented to be sued despite
it being owned by the Federal Republic of Germany. We adhere to the rule that in
the absence of evidence to the contrary, foreign laws on a particular subject are
presumed to be the same as those of the Philippines, and following the most
intelligent assumption we can gather, GTZ is akin to a governmental owned or
controlled corporation without original charter which, by virtue of the Corporation
Code, has expressly consented to be sued. At the very least, like the Labor Arbiter
and the Court of Appeals, this Court has no basis in fact to conclude or presume that
GTZ enjoys immunity from suit.[41] (Emphasis supplied.)

Applying the foregoing ruling to the case at bar, it is readily apparent that CNMEG cannot claim
immunity from suit, even if it contends that it performs governmental functions. Its designation as the
Primary Contractor does not automatically grant it immunity, just as the term implementing agency has
no precise definition for purposes of ascertaining whether GTZ was immune from suit. Although
CNMEG claims to be a government-owned corporation, it failed to adduce evidence that it has not
consented to be sued under Chinese law. Thus, following this Courts ruling in Deutsche Gesellschaft, in
the absence of evidence to the contrary, CNMEG is to be presumed to be a government-owned and -
controlled corporation without an original charter. As a result, it has the capacity to sue and be sued
under Section 36 of the Corporation Code.

C. CNMEG failed to present a certification from

the Department of Foreign Affairs.

In Holy See,[42] this Court reiterated the oft-cited doctrine that the determination by the Executive
that an entity is entitled to sovereign or diplomatic immunity is a political question conclusive upon the
courts, to wit:

In Public International Law, when a state or international agency wishes to plead

sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of the
118

state where it is sued to convey to the court that said defendant is entitled to
immunity.

xxx xxx xxx

In the Philippines, the practice is for the foreign government or the

international organization to first secure an executive endorsement of its claim of
sovereign or diplomatic immunity. But how the Philippine Foreign Office conveys its
endorsement to the courts varies. In International Catholic Migration Commission v.
Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly
to the Secretary of Labor and Employment, informing the latter that the respondent-
employer could not be sued because it enjoyed diplomatic immunity. In World Health
Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the
trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S.
Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to
make, in behalf of the Commander of the United States Naval Base at Olongapo City,
Zambales, a suggestion to respondent Judge. The Solicitor General embodied the
suggestion in a Manifestation and Memorandum as amicus curiae.

In the case at bench, the Department of Foreign Affairs, through the Office of
Legal Affairs moved with this Court to be allowed to intervene on the side of petitioner.
The Court allowed the said Department to file its memorandum in support of petitioners
claim of sovereign immunity.

In some cases, the defense of sovereign immunity was submitted directly to the
local courts by the respondents through their private counsels (Raquiza v. Bradford, 75
Phil. 50 [1945]; Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United
States of America v. Guinto, 182 SCRA 644 [1990] and companion cases). In cases
where the foreign states bypass the Foreign Office, the courts can inquire into the facts
and make their own determination as to the nature of the acts and transactions
involved.[43] (Emphasis supplied.)

The question now is whether any agency of the Executive Branch can make a determination of
immunity from suit, which may be considered as conclusive upon the courts. This Court, in Department of
Foreign Affairs (DFA) v. National Labor Relations Commission (NLRC),[44] emphasized the DFAs
competence and authority to provide such necessary determination, to wit:

The DFAs function includes, among its other mandates, the determination
of persons and institutions covered by diplomatic immunities, a determination
which, when challenge, (sic) entitles it to seek relief from the court so as not to
seriously impair the conduct of the country's foreign relations. The DFA must be
allowed to plead its case whenever necessary or advisable to enable it to help keep the
credibility of the Philippine government before the international community. When
international agreements are concluded, the parties thereto are deemed to have
likewise accepted the responsibility of seeing to it that their agreements are duly
regarded. In our country, this task falls principally of (sic) the DFA as being the
highest executive department with the competence and authority to so act in this
aspect of the international arena.[45] (Emphasis supplied.)
119

Further, the fact that this authority is exclusive to the DFA was also emphasized in this Courts
ruling in Deutsche Gesellschaft:

It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was
imperative for petitioners to secure from the Department of Foreign Affairs a certification
of respondents diplomatic status and entitlement to diplomatic privileges including
immunity from suits. The requirement might not necessarily be imperative. However, had
GTZ obtained such certification from the DFA, it would have provided factual
basis for its claim of immunity that would, at the very least, establish a disputable
evidentiary presumption that the foreign party is indeed immune which the
opposing party will have to overcome with its own factual evidence. We do not see
why GTZ could not have secured such certification or endorsement from the DFA
for purposes of this case. Certainly, it would have been highly prudential for GTZ to
obtain the same after the Labor Arbiter had denied the motion to dismiss. Still, even at
this juncture, we do not see any evidence that the DFA, the office of the executive
branch in charge of our diplomatic relations, has indeed endorsed GTZs claim of
immunity. It may be possible that GTZ tried, but failed to secure such certification, due
to the same concerns that we have discussed herein.

Would the fact that the Solicitor General has endorsed GTZs claim of
States immunity from suit before this Court sufficiently substitute for the DFA
certification? Note that the rule in public international law quoted in Holy See
referred to endorsement by the Foreign Office of the State where the suit is filed,
such foreign office in the Philippines being the Department of Foreign Affairs.
Nowhere in the Comment of the OSG is it manifested that the DFA has endorsed
GTZs claim, or that the OSG had solicited the DFAs views on the issue. The
arguments raised by the OSG are virtually the same as the arguments raised by GTZ
without any indication of any special and distinct perspective maintained by the
Philippine government on the issue. The Comment filed by the OSG does not
inspire the same degree of confidence as a certification from the DFA would
have elicited.[46] (Emphasis supplied.)

In the case at bar, CNMEG offers the Certification executed by the Economic and Commercial
Office of the Embassy of the Peoples Republic of China, stating that the Northrail Project is in pursuit of
a sovereign activity.[47] Surely, this is not the kind of certification that can establish CNMEGs entitlement
to immunity from suit, as Holy See unequivocally refers to the determination of the Foreign Office of the
state where it is sued.
Further, CNMEG also claims that its immunity from suit has the executive endorsement of both
the OSG and the Office of the Government Corporate Counsel (OGCC), which must be respected by
the courts. However, as expressly enunciated in Deutsche Gesellschaft, this determination by the OSG,
or by the OGCC for that matter, does not inspire the same degree of confidence as a DFA certification.
Even with a DFA certification, however, it must be remembered that this Court is not precluded from
making an inquiry into the intrinsic correctness of such certification.

D. An agreement to submit any dispute to

arbitration may be construed as an implicit waiver of
immunity from suit.
120

In the United States, the Foreign Sovereign Immunities Act of 1976 provides for a waiver by
implication of state immunity. In the said law, the agreement to submit disputes to arbitration in a
foreign country is construed as an implicit waiver of immunity from suit. Although there is no similar law
in the Philippines, there is reason to apply the legal reasoning behind the waiver in this case.

The Conditions of Contract,[48] which is an integral part of the Contract Agreement,[49] states:

33. SETTLEMENT OF DISPUTES AND ARBITRATION

33.1. Amicable Settlement

Both parties shall attempt to amicably settle all disputes or controversies arising
from this Contract before the commencement of arbitration.

33.2. Arbitration

All disputes or controversies arising from this Contract which cannot be settled
between the Employer and the Contractor shall be submitted to arbitration in accordance
with the UNCITRAL Arbitration Rules at present in force and as may be amended by the
rest of this Clause. The appointing authority shall be Hong
Kong International Arbitration Center. The place of arbitration shall be in Hong Kong at
Hong Kong International Arbitration Center (HKIAC).

under the above provisions, if any dispute arises between Northrail and CNMEG, both parties
are bound to submit the matter to the HKIAC for arbitration. In case the HKIAC makes an arbitral award
in favor of Northrail, its enforcement in the Philippines would be subject to the Special Rules on
Alternative Dispute Resolution (Special Rules). Rule 13 thereof provides for the Recognition and
Enforcement of a Foreign Arbitral Award. Under Rules 13.2 and 13.3 of the Special Rules, the party to
arbitration wishing to have an arbitral award recognized and enforced in the Philippines must petition
the proper regional trial court (a) where the assets to be attached or levied upon is located; (b) where
the acts to be enjoined are being performed; (c) in the principal place of business in the Philippines of
any of the parties; (d) if any of the parties is an individual, where any of those individuals resides; or (e)
in the National Capital Judicial Region.

From all the foregoing, it is clear that CNMEG has agreed that it will not be afforded immunity
from suit. Thus, the courts have the competence and jurisdiction to ascertain the validity of the Contract
Agreement.

Second issue: Whether the Contract Agreement is an

executive agreement

Article 2(1) of the Vienna Convention on the Law of Treaties (Vienna Convention) defines a
treaty as follows:

[A]n international agreement concluded between States in written form and

governed by international law, whether embodied in a single instrument or in two or more
related instruments and whatever its particular designation.
121

Inayan Muna v. Romulo, this Court held that an executive agreement is similar to a treaty, except
that the former (a) does not require legislative concurrence; (b) is usually less formal; and (c) deals with
a narrower range of subject matters.[50]

Despite these differences, to be considered an executive agreement, the following three

requisites provided under the Vienna Convention must nevertheless concur: (a) the agreement must be
between states; (b) it must be written; and (c) it must governed by international law. The first and the
third requisites do not obtain in the case at bar.

A. CNMEG is neither a government nor a

government agency.

The Contract Agreement was not concluded between the Philippines and China, but between
Northrail and CNMEG.[51] By the terms of the Contract Agreement, Northrail is a government-owned or -
controlled corporation, while CNMEG is a corporation duly organized and created under the laws of the
Peoples Republic of China.[52] Thus, both Northrail and CNMEG entered into the Contract Agreement
as entities with personalities distinct and separate from the Philippine and Chinese governments,
respectively.

Neither can it be said that CNMEG acted as agent of the Chinese government. As previously
discussed, the fact that Amb. Wang, in his letter dated 1 October 2003,[53] described CNMEG as a state
corporation and declared its designation as the Primary Contractor in the Northrail Project did not mean
it was to perform sovereign functions on behalf of China. That label was only descriptive of its nature as
a state-owned corporation, and did not preclude it from engaging in purely commercial or proprietary
ventures.

B. The Contract Agreement is to be governed by

Philippine law.

Article 2 of the Conditions of Contract,[54] which under Article 1.1 of the Contract Agreement is an
integral part of the latter, states:

APPLICABLE LAW AND GOVERNING LANGUAGE

The contract shall in all respects be read and construed in accordance with the
laws of the Philippines.

The contract shall be written in English language. All correspondence and other
documents pertaining to the Contract which are exchanged by the parties shall be written
in English language.

Since the Contract Agreement explicitly provides that Philippine law shall be applicable, the
parties have effectively conceded that their rights and obligations thereunder are not governed by
international law.

It is therefore clear from the foregoing reasons that the Contract Agreement does not partake of
the nature of an executive agreement. It is merely an ordinary commercial contract that can be
questioned before the local courts.
122

WHEREFORE, the instant Petition is DENIED. Petitioner China National Machinery & Equipment
Corp. (Group) is not entitled to immunity from suit, and the Contract Agreement is not an executive
agreement. CNMEGs prayer for the issuance of a TRO and/or Writ of Preliminary Injunction
is DENIED for being moot and academic. This case is REMANDED to the Regional Trial Court of
Makati, Branch 145, for further proceedings as regards the validity of the contracts subject of Civil
Case No. 06-203.

No pronouncement on costs of suit.

SO ORDERED.

SECOND DIVISION G.R. No. 206484, June 29, 2016

DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS

(DOTC), Petitioner, v. SPOUSES VICENTE ABECINA AND MARIA CLEOFE
ABECINA, Respondents.

DECISION BRION, J.:

This petition for review on certiorari seeks to reverse and set aside the March 20, 2013 decision of
the Court of Appeals (CA) in CA-G.R. CV No. 937951 affirming the decision of the Regional Trial
Court (RTC) of Daet, Camarines Norte, Branch 39, in Civil Case No. 7355.2 The RTC ordered the
Department of Transportation and Communications (DOTC) to vacate the respondents' properties
and to pay them actual and moral damages. ANTECEDENTS

Respondent spouses Vicente and Maria Cleofe Abecina (respondents/spouses Abecina) are the
registered owners of five parcels of land in Sitio Paltik, Barrio Sta. Rosa, Jose Panganiban,
Camarines Norte. The properties are covered by Transfer Certificates of Title (TCT) Nos. T-25094, T-
25095, T-25096, T-25097, and T-25098.3chanrobleslaw

In February 1993, the DOTC awarded Digitel Telecommunications Philippines, Inc. (Digitel) a contract
for the management, operation, maintenance, and development of a Regional Telecommunications
Development Project (RTDP) under the National Telephone Program, Phase I, Tranche 1 (NTPI-
1)4chanrobleslaw

The DOTC and Digitel subsequently entered into several Facilities Management Agreements (FMA)
for Digitel to manage, operate, maintain, and develop the RTDP and NTPI-1 facilities comprising local
telephone exchange lines in various municipalities in Luzon. The FMAs were later converted into
Financial Lease Agreements (FLA) in 1995.

Later on, the municipality of Jose Panganiban, Camarines Norte, donated a one thousand two
hundred (1,200) square-meter parcel of land to the DOTC for the implementation of the RDTP in the
municipality. However, the municipality erroneously included portions of the respondents' property in
the donation. Pursuant to the FLAs, Digitel constructed a telephone exchange on the property which
encroached on the properties of the respondent spouses.5chanrobleslaw

Sometime in the mid-1990s, the spouses Abecina discovered Digitel's occupation over portions of
their properties. They required Digitel to vacate their properties and pay damages, but the latter
refused, insisting that it was occupying the property of the DOTC pursuant to their FLA.
123

On April 29, 2003, the respondent spouses sent a final demand letter to both the DOTC and Digitel to
vacate the premises and to pay unpaid rent/damages in the amount of one million two hundred
thousand pesos (P1,200,000.00). Neither the DOTC nor Digitel complied with the demand.

On September 3, 2003, the respondent spouses filed an accion publiciana complaint6 against the
DOTC and Digitel for recovery of possession and damages. The complaint was docketed as Civil
Case No. 7355.

In its answer, the DOTC claimed immunity from suit and ownership over the subject
properties.7Nevertheless, during the pre-trial conference, the DOTC admitted that the Abecinas were
the rightful owners of the properties and opted to rely instead on state immunity from
suit.8chanrobleslaw

On March 12, 2007, the respondent spouses and Digitel executed a Compromise Agreement and
entered into a Contract of Lease. The RTC rendered a partial decision and approved the Compromise
Agreement on March 22, 2007.9chanrobleslaw

On May 20, 2009, the RTC rendered its decision against the DOTC.10 It brushed aside the defense of
state immunity. Citing Ministerio v. Court of First Instance11 and Amigable v. Cuenca,12 it held that
government immunity from suit could not be used as an instrument to perpetuate an injustice on a
citizen.13chanrobleslaw

The RTC held that as the lawful owners of the properties, the respondent spouses enjoyed the right
to use and to possess them - rights that were violated by the DOTC's unauthorized entry,
construction, and refusal to vacate. The RTC (1) ordered the Department - as a builder in bad faith -to
forfeit the improvements and vacate the properties; and (2) awarded the spouses with P1,200,000.00
as actual damages, P200,000.00 as moral damages, and P200,000.00 as exemplary damages plus
attorney's fees and costs of suit.

The DOTC elevated the case to the CA arguing: (1) that the RTC never acquired jurisdiction over it
due to state immunity from suit; (2) that the suit against it should have been dismissed after the
spouses Abecina and Digitel executed a compromise agreement; and (3) that the RTC erred in
awarding actual, moral, and exemplary damages against it.14 The appeal was docketed as CA-G.R.
CV No. 93795.

On March 20, 2013, the CA affirmed the RTC's decision but deleted the award of exemplary
damages. The CA upheld the RTC's jurisdiction over cases for accion publiciana where the assessed
value exceeds P20,000.00.15 It likewise denied the DOTC's claim of state immunity from suit,
reasoning that the DOTC removed its cloak of immunity after entering into a proprietary contract - the
Financial Lease Agreement with Digitel.16 It also adopted the RTC's position that state immunity
cannot be used to defeat a valid claim for compensation arising from an unlawful taking without the
proper expropriation proceedings.17The CA affirmed the award of actual and moral damages due to
the DOTC's neglect to verify the perimeter of the telephone exchange construction but found no valid
justification for the award of exemplary damages.18chanrobleslaw

On April 16, 2013, the DOTC filed the present petition for review on certiorari.

THE PARTIES' ARGUMENTS

124

The DOTC asserts that its Financial Lease Agreement with Digitel was entered into in pursuit of its
governmental functions to promote and develop networks of communication systems.19 Therefore, it
cannot be interpreted as a waiver of state immunity.

The DOTC also maintains that while it was regrettable that the construction of the telephone
exchange erroneously encroached on portions of the respondent's properties, the RTC erred in
ordering the return of the property.20 It argues that while the DOTC, in good faith and in the
performance of its mandate, took private property without formal expropriation proceedings, the
taking was nevertheless an exercise of eminent domain.21chanrobleslaw

Citing the 2007 case of Heirs of Mateo Pidacan v. Air Transportation Office (ATO),22 the Department
prays that instead of allowing recovery of the property, the case should be remanded to the RTC for
determination of just compensation.

On the other hand, the respondents counter that the state immunity cannot be invoked to perpetrate
an injustice against its citizens.23 They also maintain that because the subject properties are titled, the
DOTC is a builder in bad faith who is deemed to have lost the improvements it introduced.24 Finally,
they differentiate their case from Heirs of Mateo Pidacan v. ATO because Pidacan originated from a
complaint for payment of the value of the property and rentals while their case originated from a
complaint for recovery of possession and damages.25cralawredchanrobleslaw

OUR RULING

We find no merit in the petition.

The State may not be sued without its consent.26 This fundamental doctrine stems from the principle
that there can be no legal right against the authority which makes the law on which the right
depends.27This generally accepted principle of law has been explicitly expressed in both the
197328 and the present Constitutions.

But as the principle itself implies, the doctrine of state immunity is not absolute. The State may waive
its cloak of immunity and the waiver may be made expressly or by implication.

Over the years, the State's participation in economic and commercial activities gradually expanded
beyond its sovereign function as regulator and governor. The evolution of the State's activities and
degree of participation in commerce demanded a parallel evolution in the traditional rule of state
immunity. Thus, it became necessary to distinguish between the State's sovereign and governmental
acts (jure imperii) and its private, commercial, and proprietary acts (jure gestionis). Presently, state
immunity restrictively extends only to acts jure imperii while acts jure gestionis are considered as a
waiver of immunity.29chanrobleslaw

The Philippines recognizes the vital role of information and communication in nation building.30 As a
consequence, we have adopted a policy environment that aspires for the full development of
communications infrastructure to facilitate the flow of information into, out of, and across the
country.31To this end, the DOTC has been mandated with the promotion, development, and
regulation of dependable and coordinated networks of communication.32chanrobleslaw

The DOTC encroached on the respondents' properties when it constructed the local telephone
exchange in Daet, Camarines Norte. The exchange was part of the RTDP pursuant to the National
Telephone Program. We have no doubt that when the DOTC constructed the encroaching structures
125

and subsequently entered into the FLA with Digitel for their maintenance, it was carrying out a
sovereign function. Therefore, we agree with the DOTC's contention that these are acts jure
imperii that fall within the cloak of state immunity.

However, as the respondents repeatedly pointed out, this Court has long established in Ministerio v
CFI,33Amigable v. Cuenca,34 the 2010 case Heirs of Pidacan v. ATO,35 and more recently in Vigilar v.
Aquino36 that the doctrine of state immunity cannot serve as an instrument for perpetrating an
injustice to a citizen.

The Constitution identifies the limitations to the awesome and near-limitless powers of the State.
Chief among these limitations are the principles that no person shall be deprived of life, liberty, or
property without due process of law and that private property shall not be taken for public use without
just compensation.37 These limitations are enshrined in no less than the Bill of Rights that guarantees
the citizen protection from abuse by the State.

Consequently, our laws38 require that the State's power of eminent domain shall be exercised through
expropriation proceedings in court. Whenever private property is taken for public use, it becomes the
ministerial duty of the concerned office or agency to initiate expropriation proceedings. By necessary
implication, the filing of a complaint for expropriation is a waiver of State immunity.

If the DOTC had correctly followed the regular procedure upon discovering that it had encroached on
the respondents' property, it would have initiated expropriation proceedings instead of insisting on its
immunity from suit. The petitioners would not have had to resort to filing its complaint for
reconveyance. As this Court said in Ministerio:ChanRoblesVirtualawlibrary
It is unthinkable then that precisely because there was a failure to abide by what the law requires, the
government would stand to benefit. It is just as important, if not more so, that there be fidelity to legal
norms on the part of officialdom if the rule of law were to be maintained. It is not too much to say
that when the government takes any property for public use, which is conditioned upon the
payment of just compensation, to be judicially ascertained, it makes manifest that it submits
to the jurisdiction of a court. There is no thought then that the doctrine of immunity from suit could
still be appropriately invoked.39 [Emphasis supplied]
We hold, therefore, that the Department's entry into and taking of possession of the respondents'
property amounted to an implied waiver of its governmental immunity from suit.

We also find no merit in the DOTC's contention that the RTC should not have ordered the
reconveyance of the respondent spouses' property because the property is being used for a vital
governmental function, that is, the operation and maintenance of a safe and efficient communication
system.40chanrobleslaw

The exercise of eminent domain requires a genuine necessity to take the property for public use and
the consequent payment of just compensation. The property is evidently being used for a public
purpose. However, we also note that the respondent spouses willingly entered into a lease
agreement with Digitel for the use of the subject properties.

If in the future the factual circumstances should change and the respondents refuse to continue the
lease, then the DOTC may initiate expropriation proceedings. But as matters now stand, the
respondents are clearly willing to lease the property. Therefore, we find no genuine necessity for the
DOTC to actually take the property at this point.

Lastly, we find that the CA erred when it affirmed the RTC's decision without deleting the forfeiture of
126

the improvements made by the DOTC through Digitel. Contrary to the RTC's findings, the DOTC was
not a builder in bad faith when the improvements were constructed. The CA itself found that the
Department's encroachment over the respondents' properties was a result of a mistaken
implementation of the donation from the municipality of Jose Panganiban.41chanrobleslaw

Good faith consists in the belief of the builder that the land he is building on is his and [of] his
ignorance of any defect or flaw in his title.42 While the DOTC later realized its error and admitted its
encroachment over the respondents' property, there is no evidence that it acted maliciously or in bad
faith when the construction was done.

Article 52743 of the Civil Code presumes good faith. Without proof that the Department's mistake was
made in bad faith, its construction is presumed to have been made in good faith. Therefore, the
forfeiture of the improvements in favor of the respondent spouses is unwarranted.

WHEREFORE, we hereby DENY the petition for lack of merit. The May 20, 2009 decision of the
Regional Trial Court in Civil Case No. 7355, as modified by the March 20, 2013 decision of the Court
of Appeals in CA-G.R. CV No. 93795, is AFFIRMED with further MODIFICATION that the forfeiture
of the improvements made by the DOTC in favor of the respondents is DELETED. No costs.

SO ORDERED.chanRoblesvirtualLawlibrar

EN BANC

G.R. No. 207132, December 06, 2016

ASSOCIATION OF MEDICAL CLINICS FOR OVERSEAS WORKERS, INC., (AMCOW),

REPRESENTED HEREIN BY ITS PRESIDENT, DR. ROLANDO VILLOTE, Petitioner, v. GCC
APPROVED MEDICAL CENTERS ASSOCIATION, INC. AND CHRISTIAN CANGCO, Respondents.

G.R. No. 207205

HON. ENRIQUE T. ONA, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF

HEALTH, Petitioner, v. GCC APPROVED MEDICAL CENTERS ASSOCIATION, INC. AND
CHRISTIAN E. CANGCO, Respondents.

DECISION

BRION, J.:

In these consolidated petitions for review on certiorari1 filed under Rule 45 of the Rules of Court,
by the Association of Medical Clinics for Overseas Workers, Inc. (AMCOW) in GR No. 207132, and
by Secretary Enrique T. Ona (Secretary Ona) of the Department of Health (DOH) in GR No. 207205,
we resolve the challenge to the August 10, 2012 decision2 and the April 12, 2013 order3 of the
Regional Trial Court (RTC) of Pasay City, Branch 108, in Sp. Civil Action No. R-PSY-10-04391-CV.4

The August 10, 2012 decision and April 12, 2013 order declared null and void ab initio the August
23, 2010 and November 2, 2010 orders issued by the DOH directing respondent GCC Approved
Medical Centers Association, Inc. (GAMCA) to cease and desist from implementing the referral
decking system (these orders shall be alternately referred to as DOH CDO letters).
127

I. The Antecedents

On March 8, 2001, the DOH issued Administrative Order No. 5, Series of 20015(AO 5-
01) which directed the decking or equal distribution of migrant workers among the several
clinics who are members of GAMCA.

AO 5-01 was issued to comply with the Gulf Cooperative Countries (GCC) States' requirement that
only GCC-accredited medical clinics/hospitals' examination results will be honored by the GCC
States' respective embassies. It required an OFW applicant to first go to a GAMCA Center which, in
turn, will refer the applicant to a GAMCA clinic or hospital.

Subsequently, the DOH issued AO No. 106, Series of 20026holding in abeyance the
implementation of the referral decking system. The DOH reiterated its directive suspending
the referral decking system in AO No. 159, Series of 2004.7

In 2004, the DOH issued AO No. 167, Series of 20048repealing AO 5-01, reasoning that the referral
decking system did not guarantee the migrant workers' right to safe and quality health service. AO
167-04 pertinently reads:
WHEREAS, after a meticulous and deliberate study, examination, and consultation about the GAMCA
referral decking system, the DOH believes that its mandate is to protect and promote the health of the
Filipino people by ensuring the rights to safe and quality health service and reliable medical
examination results through the stricter regulation of medical clinics and other health facilities, which
the referral decking system neither assures nor guarantees.

NOW, THEREFORE, for and in consideration of the foregoing, the DOH hereby withdraws, repeals
and/or revokes Administrative Order No. 5, series of 2001, concerning the referral decking system.
Hence, all other administrative issuances, bureau circulars and memoranda related to A.O. No. 5,
series of 2001, are hereby withdrawn, repealed and/revoked accordingly.
In Department Memorandum No. 2008-0210,9 dated September 26, 2008, then DOH Secretary
Francisco T. Duque III expressed his concern about the continued implementation of the referral
decking system despite the DOH's prior suspension directives. The DOH directed the "OFW clinics,
duly accredited/licensed by the DOH and/or by the Philippine Health Insurance Corporation
(PHILHEALTH) belonging to and identified with GAMCA x x x to forthwith stop, terminate,
withdraw or otherwise end the x x x 'referral decking system.'"10

GAMCA questioned the DOH's Memorandum No. 2008-0210 before the Office of the President (OP).
In a decision11 dated January 14, 2010, the OP nullified Memorandum No. 2008-0210.

On March 8, 2010, Republic Act (RA) No. 1002212lapsed into law without the President's
signature. Section 16 of RA No. 10022 amended Section 23 of RA No. 8042, adding two new
paragraphs - paragraphs (c) and (d). The pertinent portions of the amendatory provisions read:
Section 16. Under Section 23 of Republic Act No. 8042, as amended, add new paragraphs (c) and
(d) with their corresponding subparagraphs to read as follows:

(c) Department of Health. - The Department of Health (DOH) shall regulate the activities and
operations of all clinics which conduct medical, physical, optical, dental, psychological and
other similar examinations, hereinafter referred to as health examinations, on Filipino migrant
workers as requirement for their overseas employment. Pursuant to this, the DOH shall ensure
that:
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(c.1) The fees for the health examinations are regulated, regularly monitored and duly published to
ensure that the said fees are reasonable and not exorbitant;

(c.2) The Filipino migrant worker shall only be required to undergo health examinations when there is
reasonable certainty that he or she will be hired and deployed to the jobsite and only those health
examinations which are absolutely necessary for the type of job applied for or those specifically
required by the foreign employer shall be conducted;

(c.3) No group or groups of medical clinics shall have a monopoly of exclusively conducting
health examinations on migrant workers for certain receiving countries;

(c.4) Every Filipino migrant worker shall have the freedom to choose any of the DOH-
accredited or DOH-operated clinics that will conduct his/her health examinations and that his or her
rights as a patient are respected. The decking practice, which requires an overseas Filipino
worker to go first to an office for registration and then farmed out to a medical clinic located
elsewhere, shall not be allowed;

(c.5) Within a period of three (3) years from the effectivity of this Act, all DOH regional and/or
provincial hospitals shall establish and operate clinics that can serve the health examination
requirements of Filipino migrant workers to provide them easy access to such clinics all over the
country and lessen their transportation and lodging expenses; and

(c.6) All DOH-accredited medical clinics, including the DOH operated clinics, conducting health
examinations for Filipino migrant workers shall observe the same standard operating procedures and
shall comply with internationally accepted standards in their operations to conform with the
requirements of receiving countries or of foreign employers/principals.

Any Foreign employer who does not honor the results of valid health examinations conducted by a
DOH-accredited or DOH-operated clinic shall be temporarily disqualified from participating in the
overseas employment program, pursuant to POEA rules and regulations.

In case an overseas Filipino worker is found to be not medically fit upon his/her immediate arrival in
the country of destination, the medical clinic that conducted the health examinations of such overseas
Filipino worker shall pay for his or her repatriation back to the Philippines and the cost of deployment
of such worker.

Any government official or employee who violates any provision of this subsection shall be removed
or dismissed from service with disqualification to hold any appointive public office for five (5) years.
Such penalty is without prejudice to any other liability which he or she may have incurred under
existing laws, rules or regulations. [emphases and underscoring supplied]
On August 13, 2010, the Implementing Rules and Regulations13 (IRR) of RA No. 8042, as amended
by RA No. 10022, took effect.

Pursuant to Section 16 of RA No. 10022, the DOH, through its August 23, 2010 letter-
order,14directed GAMCA to cease and desist from implementing the referral decking system and
to wrap up their operations within three (3) days from receipt thereof. GAMCA received its copy of the
August 23, 2010 letter-order on August 25, 2010.

On August 26, 2010, GAMCA filed with the RTC of Pasig City a petition for certiorari and prohibition
with prayer for a writ of preliminary injunction and/or temporary restraining order (GAMCA's
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petition).15 It assailed: (1) the DOH's August 23, 2010 letter-order on the ground of grave abuse of
discretion; and (2) paragraphs c.3 and c.4, Section 16 of RA No. 10022, as well as Section 1 (c) and
(d), Rule XI of the IRR, as unconstitutional.
Meanwhile, the DOH reiterated - through its November 2, 2010 order - its directive that GAMCA
cease and desist from implementing the referral decking system.16

On November 23, 2010, AMCOW filed an urgent motion for leave to intervene and to file an
opposition-in-intervention, attaching its opposition-in-intervention to its motion.17 In the hearing
conducted the following day, November 24, 2010, the RTC granted AMCOW's intervention; DOH and
GAMCA did not oppose AMCOW's motion.18 AMCOW subsequently paid the docket fees and
submitted its memorandum.19

In an order20 dated August 1, 2011, the RTC issued a writ of preliminary injunction21 directing the
DOH to cease and desist from implementing its August 23, 2010 and November 2, 2010 orders. The
RTC likewise issued an order denying the motion for inhibition/disqualification filed by AMCOW.
On August 18, 2011, the DOH sought reconsideration of the RTC's August 1, 2011 order.

The assailed RTC rulings

In its August 10, 2012 decision,22 the RTC granted GAMCA's certiorari petition and declared null and
void ab initio the DOH CDO letters. It also issued a writ of prohibition directing "the DOH Secretary
and all persons acting on his behalf to cease and desist from implementing the assailed Orders
against the [GAMCA]."

The RTC upheld the constitutionality of Section 16 of RA No. 10022, amending Section 23 of RA
No. 8042, but ruled that Section 16 of RA No. 10022 does not apply to GAMCA.
The RTC reasoned out that the prohibition against the referral decking system under Section 16 of
RA No. 10022 must be interpreted as applying only to clinics that conduct health examination on
migrant workers bound for countries that do not require the referral decking system for the issuance
of visas to job applicants.

It noted that the referral decking system is part of the application procedure in obtaining visas to enter
the GCC States, a procedure made in the exercise of the sovereign power of the GCC States to
protect their nationals from health hazards, and of their diplomatic power to regulate and screen
entrants to their territories. Under the principle of sovereign equality and independence of States, the
Philippines cannot interfere with this system and, in fact, must respect the visa-granting procedures of
foreign states in the same way that they respect our immigration procedures.

Moreover, to restrain GAMCA which is a mere adjunct of HMC, the agent of GCC States, is to
restrain the GCC States themselves. To the RTC, the Congress was aware of this limitation, pursuant
to the generally accepted principles of international law under Article II, Section 2 of the 1987
Constitution, when it enacted Section 16 of RA No. 10022.

The DOH and AMCOW separately sought reconsideration of the RTC's August 10, 2012 decision,
which motions the RTC denied.23 The DOH and AMCOW separately filed the present Rule 45
petitions.

On August 24, 2013, AMCOW filed a motion for consolidation24 of the two petitions; the Court granted
this motion and ordered the consolidation of the two petitions in a resolution dated September 17,
2013.25cralawred
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In the resolution26 of April 14, 2015, the Court denied: (1) GAMCA's most urgent motion for issuance
of temporary restraining order/writ of preliminary injunction/status quo ante order (with request for
immediate inclusion in the Honorable Court's agenda of March 3, 2015, its motion dated March 2,
2015);27 and (2) the most urgent reiterating motion for issuance of temporary restraining order/writ of
preliminary injunction/status quo ante order dated March 11, 2015.28

The Court also suspended the implementation of the permanent injunction issued by the RTC of
Pasay City, Branch 108 in its August 10, 2012 decision.

II. The Issues

The consolidated cases before us present the following issues:

First, whether the Regional Trial Court legally erred in giving due course to the petition
for certiorari and prohibition against the DOH CDO letters;
Second, whether the DOH CDO letters prohibiting GAMCA from implementing the referral decking
system embodied under Section 16 of Republic Act No. 10022 violates Section 3, Article II of the
1987 Constitution for being an undue taking of property;

Third, whether the application of Section 16 of Republic Act No.10022 to the GAMCA violates the
international customary principles of sovereign independence and equality.

III. Our Ruling

A. The RTC legally erred when it gave due course to GAMCA's petition for certiorari and
prohibition.
The present case reached us through an appeal by certiorari (pursuant to Rule 45) of an RTC ruling,
assailing the decision based solely on questions of law. The RTC decision, on the other hand,
involves the grant of the petitions for certiorari and prohibition (pursuant to Rule 65) assailing the
DOH CDO letters for grave abuse of discretion.

The question before us asks whether the RTC made a reversible error of law when it issued
writs of certiorari and prohibition against the DOH CDO letters.

AMCOW questions the means by which GAMCA raised the issue of the legality of RA No. 10022
before the RTC. AMCOW posits that GAMCA availed of an improper remedy, as certiorari and
prohibition lie only against quasi-judicial acts, and quasi-judicial and ministerial acts, respectively.
Since the disputed cease and desist order is neither, the RTC should have dismissed the petition
outright for being an improper remedy.

We agree with the petitioners' assertion that the RTC erred when it gave due course to GAMCA's
petition for certiorari and prohibition, but we do so for different reasons.

1. Certiorari under Rules of Court and under the courts' expanded jurisdiction under Art VIII,
Section 1 of the Constitution, as recognized by jurisprudence.
A.1.a. The Current Certiorari Situation
The use of petitions for certiorari and prohibition under Rule 65 is a remedy that judiciaries have used
long before our Rules of Court existed.29 As footnoted below, these writs - now recognized and
regulated as remedies under Rule 65 of our Rules of Court - have been characterized a "supervisory
writs" used by superior courts to keep lower courts within the confines of their granted jurisdictions,
thereby ensuring orderliness in lower courts' rulings.
131

We confirmed this characterization in Madrigal Transport v. Lapanday Holdings Corporation,30 when

we held that a writ is founded on the supervisory jurisdiction of appellate courts over inferior courts,
and is issued to keep the latter within the bounds of their jurisdiction. Thus, the writ corrects only
errors of jurisdiction of judicial and quasi-judicial bodies, and cannot be used to correct errors of law
or fact. For these mistakes of judgment, the appropriate remedy is an appeal.31

This situation changed after 1987 when the new Constitution "expanded" the scope of judicial power
by providing that -
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government. (italics supplied)32
In Francisco v. The House of Representatives,33 we recognized that this expanded jurisdiction was
meant "to ensure the potency of the power of judicial review to curb grave abuse of discretion by 'any
branch or instrumentalities of government.'" Thus, the second paragraph of Article VIII, Section 1
engraves, for the first time in its history, into black letter law the "expanded certiorari jurisdiction" of
this Court, whose nature and purpose had been provided in the sponsorship speech of its proponent,
former Chief Justice Constitutional Commissioner Roberto Concepcion:
xxxx

The first section starts with a sentence copied from former

Constitutions. It says:
The judicial power shall be vested in one Supreme Court and in such lower courts as may be
established by law.
I suppose nobody can question it.
The next provision is new in our constitutional law. I will read it first and explain.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the government.

Fellow Members of this Commission, this is actually a product of our experience during martial law.
As a matter of fact, it has some antecedents in the past, but the role of the judiciary during the
deposed regime was marred considerably by the circumstance that in a number of cases against the
government, which then had no legal defense at all, the solicitor general set up the defense of
political question and got away with it. As a consequence, certain principles concerning particularly
the writ of habeas corpus, that is, the authority of courts to order the release of political detainees,
and other matters related to the operation and effect of martial law failed because the government set
up the defense of political question. And the Supreme Court said: "Well, since it is political, we have
no authority to pass upon it." The Committee on the Judiciary feels that this was not a proper solution
of the questions involved. It did not merely request an encroachment upon the rights of the people,
but it, in effect, encouraged further violations thereof during the martial law regime. x x x
xxxx

Briefly stated, courts of justice determine the limits of power of the agencies and offices of the
government as well as those of its officers. In other words, the judiciary is the final arbiter on the
question whether or not a branch of government or any of its officials has acted without jurisdiction or
in excess of jurisdiction, or so capriciously as to constitute an abuse of discretion amounting to
132

excess of jurisdiction or lack of jurisdiction. This is not only a judicial power but a duty to pass
judgment on matters of this nature.

This is the background of paragraph 2 of Section 1, which means that the courts cannot hereafter
evade the duty to settle matters of this nature, by claiming that such matters constitute a political
question.34 (italics in the original; emphasis and underscoring supplied)
Meanwhile that no specific procedural rule has been promulgated to enforce this "expanded"
constitutional definition of judicial power and because of the commonality of "grave abuse of
discretion" as a ground for review under Rule 65 and the courts expanded jurisdiction, the Supreme
Court based on its power to relax its rules35 allowed Rule 65 to be used as the medium for petitions
invoking the courts' expanded jurisdiction based on its power to relax its Rules.36 This is however
an ad hoc approach that does not fully consider the accompanying implications, among them, that
Rule 65 is an essentially distinct remedy that cannot simply be bodily lifted for application under the
judicial power's expanded mode. The terms of Rule 65, too, are not fully aligned with what the Court's
expanded jurisdiction signifies and requires.37

On the basis of almost thirty years' experience with the courts' expanded jurisdiction, the Court should
now fully recognize the attendant distinctions and should be aware that the continued use of Rule 65
on an ad hoc basis as the operational remedy in implementing its expanded jurisdiction may, in the
longer term, result in problems of uneven, misguided, or even incorrect application of the courts'
expanded mandate.

The present case is a prime example of the misguided reading that may take place in constitutional
litigation: the procedural issues raised apparently spring from the lack of proper understanding of
what a petition for certiorari assails under the traditional and expanded modes, and the impact of
these distinctions in complying with the procedural requirements for a valid petition.

2. The Basic Distinctions

A.2.a. Actual Case or Controversy
Basic in the exercise of judicial power whether under the traditional or in the expanded setting - is the
presence of an actual case or controversy. For a dispute to be justiciable, a legally demandable and
enforceable right must exist as basis, and must be shown to have been violated.38

Whether a case actually exists depends on the pleaded allegations, as affected by the elements
of standing (translated in civil actions as the status of being a "real-party-in-interest," in
criminal actions as "offended party" and in special proceedings as "interested
party"),39ripeness,40prematurity, and the moot and academic principle that likewise interact with
one another. These elements and their interactions are discussed m greater detail below.

The Court's expanded jurisdiction - itself an exercise of judicial power - does not do away with the
actual case or controversy requirement in presenting a constitutional issue, but effectively simplifies
this requirement by merely requiring a prima facie showing of grave abuse of discretion in the
assailed governmental act.

A.2.b. Actions Correctable by Certiorari

A basic feature of the expanded jurisdiction under the constitutional definition of judicial power, is the
authority and command for the courts to act on petitions involving the commission by any branch or
instrumentality of government of grave abuse of discretion amounting to lack or excess of jurisdiction.

This command distinctly contrasts with the terms of Rule 65 which confines court certiorari action
133

solely to the review of judicial and quasi-judicial acts.41 These differing features create very basic
distinctions that must necessarily result in differences in the application of remedies.

While actions by lower courts do not pose a significant problem because they are necessarily acting
judicially when they adjudicate, a critical question comes up for the court acting on certiorari petitions
when governmental agencies are involved - under what capacity does the agency act?

This is a critical question as the circumstances of the present case show. When the government
entity acts quasi-judicially, the petition for certiorari challenging the action falls under Rule 65; in other
instances, the petition must be filed based on the courts' expanded jurisdiction.

A.2.c. Grave Abuse of Discretion

Another distinction, a seeming one as explained below, relates to the cited ground of
a certiorari petition under Rule 65 which speaks of lack or excess of jurisdiction or grave abuse of
discretion amounting to lack or excess of jurisdiction, as against the remedy under the courts'
expanded jurisdiction which expressly only mentions grave abuse of discretion amounting to lack or
excess of jurisdiction.

This distinction is apparently not legally significant when it is considered that action outside of or in
excess of the granted authority necessarily involves action with grave abuse of discretion: no
discretion is allowed in areas outside of an agency's granted authority so that any such action would
be a gravely abusive exercise of power. The constitutional grant of power, too, pointedly addresses
grave abuse of discretion when it amounts to lack or excess of jurisdiction,42 thus establishing that the
presence of jurisdiction is the critical element; failure to comply with this requirement necessarily
leads to the certiorari petition's immediate dismissal.43

As an added observation on a point that our jurisprudence has not fully explored, the result of the
action by a governmental entity (e.g., a law or an executive order) can be distinguished from the
perspective of its legality as tested against the terms of the Constitution or of another law (where
subordinate action like an executive order is involved), vis-a-vis the legality of the resulting action
where grave abuse of discretion attended the governmental action or the exercise of the
governmental function.

In the former, the conclusion may be plain illegality or legal error that characterized the law or exec
order (as tested, for example, under the established rules of interpretation); no consideration is made
of how the governmental entity exercised its function. In the latter case, on the other hand, it is the
governmental entity's exercise of its function that is examined and adjudged independently of the
result, with impact on the legality of the result of the gravely abusive action.

Where the dispute in a case relates to plain legal error, ordinary court action and traditional mode are
called for and this must be filed in the lower courts based on rules of jurisdiction while observing the
hierarchy of courts.

Where grave abuse of discretion is alleged to be involved, the expanded jurisdiction is brought into
play based on the express wording of the Constitution and constitutional implications may be involved
(such as grave abuse of discretion because of plain oppression or discrimination), but this must
likewise be filed with the lowest court of concurrent jurisdiction, unless the court highest in the
hierarchy grants exemption. Note that in the absence of express rules, it is only the highest court, the
Supreme Court, that can only grant exemptions.
134

From these perspectives, the use of grave abuse of discretion can spell the difference in deciding
whether a case filed directly with the Supreme Court has been properly filed.

A.2.d. Exhaustion of Available Remedies

A basic requirement under Rule 65 is that there be "no other plain, speedy and adequate remedy
found in law,"44 which requirement the expanded jurisdiction provision does not expressly carry.
Nevertheless, this requirement is not a significant distinction in using the remedy of certiorari under
the traditional and the expanded modes. The doctrine of exhaustion of administrative remedies
applies to a petition for certiorari, regardless of the act of the administrative agency concerned, i.e.,
whether the act concerns a quasi-judicial, or quasi-legislative function, or is purely regulatory.45

Consider in this regard that once an administrative agency has been empowered by Congress to
undertake a sovereign function, the agency should be allowed to perform its function to the full extent
that the law grants. This full extent covers the authority of superior officers in the administrative
agencies to correct the actions of subordinates, or for collegial bodies to reconsider their own
decisions on a motion for reconsideration. Premature judicial intervention would interfere with this
administrative mandate, leaving administrative action incomplete; if allowed, such premature judicial
action through a writ of certiorari, would be a usurpation that violates the separation of powers
principle that underlies our Constitution.46

In every case, remedies within the agency's administrative process must be exhausted before
external remedies can be applied. Thus, even if a governmental entity may have committed a grave
abuse of discretion, litigants should, as a rule, first ask reconsideration from the body itself, or a
review thereof before the agency concerned. This step ensures that by the time the grave abuse of
discretion issue reaches the court, the administrative agency concerned would have fully exercised its
jurisdiction and the court can focus its attention on the questions of law presented before it.

Additionally, the failure to exhaust administrative remedies affects the ripeness to adjudicate
the constitutionality of a governmental act, which in turn affects the existence of the need for
an actual case or controversy for the courts to exercise their power of judicial review.47 The
need for ripeness - an aspect of the timing of a case or controversy does not change regardless of
whether the issue of constitutionality reaches the Court through the traditional means, or through the
Court's expanded jurisdiction. In fact, separately from ripeness, one other concept pertaining to
judicial review is intrinsically connected to it; the concept of a case being moot and academic.48

Both these concepts relate to the timing of the presentation of a controversy before the Court
ripeness relates to its prematurity, while mootness relates to a belated or unnecessary judgment on
the issues. The Court cannot preempt the actions of the parties, and neither should it (as a rule)
render judgment after the issue has already been resolved by or through external developments.

The importance of timing in the exercise of judicial review highlights and reinforces the need for an
actual case or controversy an act that may violate a party's right. Without any completed action or a
concrete threat of injury to the petitioning party, the act is not yet ripe for adjudication. It is merely a
hypothetical problem. The challenged act must have been accomplished or performed by either
branch or instrumentality of government before a court may come into the picture, and the petitioner
must allege the existence of an immediate or threatened injury to itself as a result of the challenged
action.

In these lights, a constitutional challenge, whether presented through the traditional route or through
135

the Court's expanded jurisdiction, requires compliance with the ripeness requirement. In the case of
administrative acts, ripeness manifests itself through compliance with the doctrine of exhaustion of
administrative remedies.

In like manner, an issue that was once ripe for resolution but whose resolution, since then, has been
rendered unnecessary, needs no resolution from the Court, as it presents no actual case or
controversy and likewise merely presents a hypothetical problem. In simpler terms, a case is moot
and academic when an event supervenes to render a judgment over the issues unnecessary and
superfluous.

Without the element of ripeness or a showing that the presented issue is moot and academic,
petitions challenging the constitutionality of a law or governmental act are vulnerable to dismissal.

Not to be forgotten is that jurisprudence also prohibits litigants from immediately seeking judicial relief
without first exhausting the available administrative remedies for practical reasons.49

From the perspective of practicality, immediate resort to the courts on issues that are within the
competence of administrative agencies to resolve, would unnecessarily clog the courts' dockets.
These issues, too, usually involve technical considerations that are within the agency's specific
competence and which, for the courts, would require additional time and resources to study and
consider.50 Of course, the Supreme Court cannot really avoid the issues that a petition for certiorari,
filed with the lower courts may present; the case may be bound ultimately to reach the Court, albeit
as an appeal from the rulings of the lower courts.

3. Situations Where a Petition for Certiorari May Be Used

There are two distinct situations where a writ of certiorari or prohibition may be sought. Each situation
carries requirements, peculiar to the nature of each situation, that lead to distinctions that should be
recognized in the use of certiorari under Rule 65 and under the courts' expanded jurisdiction.

The two situations differ in the type of questions raised. The first is the constitutional
situation where the constitutionality of acts are questioned. The second is the non-constitutional
situation where acts amounting to grave abuse of discretion are challenged without raising
constitutional questions or violations.

The process of questioning the constitutionality of a governmental action provides a notable area of
comparison between the use of certiorari in the traditional and the expanded modes.

Under the traditional mode, plaintiffs question the constitutionality of a governmental action through
the cases they file before the lower courts; the defendants may likewise do so when they interpose
the defense of unconstitutionality of the law under which they are being sued. A petition for
declaratory relief may also be used to question the constitutionality or application of a legislative (or
quasi-legislative) act before the court.51

For quasi-judicial actions, on the other hand, certiorari is an available remedy, as acts or exercise of
functions that violate the Constitution are necessarily committed with grave abuse of discretion for
being acts undertaken outside the contemplation of the Constitution. Under both remedies, the
petitioners should comply with the traditional requirements of judicial review, discussed below.52 In
both cases, the decisions of these courts reach the Court through an appeal by certiorari under Rule
45.
136

In contrast, existing Court rulings in the exercise of its expanded jurisdiction have allowed the
direct filing of petitions for certiorari and prohibition with the Court to question, for grave abuse of
discretion, actions or the exercise of a function that violate the Constitution.53 The governmental
action may be questioned regardless of whether it is quasi-judicial, quasi-legislative, or administrative
in nature. The Court's expanded jurisdiction does not do away with the actual case or controversy
requirement for presenting a constitutional issue, but effectively simplifies this requirement by merely
requiring a prima facie showing of grave abuse of discretion in the exercise of the governmental act.54

To return to judicial review heretofore mentioned, in constitutional cases where the question of
constitutionality of a governmental action is raised, the judicial power the courts exercise is likewise
identified as the power of judicial review - the power to review the constitutionality of the actions of
other branches of government.55 As a rule, as required by the hierarchy of courts principle, these
cases are filed with the lowest court with jurisdiction over the matter. The judicial review that the
courts undertake requires:

1. there be an actual case or controversy calling for the exercise of judicial power;
2. the person challenging the act must have "Standing" to challenge; he must have a personal
and substantial interest in the case such that he has sustained, or will sustain, direct injury as a
result of its enforcement;
3. the question of constitutionality must be raised at the earliest possible opportunity; and
4. the issue of constitutionality must be the very lis mota of the case.56

The lower court's decision under the constitutional situation reaches the Supreme Court through the
appeal process, interestingly, through a petition for review on certiorari under Rule 45 of the Rules of
Court.

In the non-constitutional situation, the same requirements essentially apply, less the requirements
specific to the constitutional issues. In particular, there must be an actual case or controversy and the
compliance with requirements of standing, as affected by the hierarchy of courts, exhaustion of
remedies, ripeness, prematurity, and the moot and academic principles.

A.3.a. The "Standing" Requirement

Under both situations, the party bringing suit must have the necessary "standing." This means that
this party has, in its favor, the demandable and enforceable right or interest giving rise to a justiciable
controversy after the right is violated by the offending party.

The necessity of a person's standing to sue derives from the very definition of judicial power. Judicial
power includes the duty of the courts to settle actual controversies involving rights which are legally
demandable and enforceable. Necessarily, the person availing of a judicial remedy must show that he
possesses a legal interest or right to it, otherwise, the issue presented would be purely hypothetical
and academic. This concept has been translated into the requirement to have "standing" in judicial
review,57or to be considered as a "real-party-in-interest" in civil actions,58 as the "offended party" in
criminal actions59 and the "interested party" in special proceedings.60

While the Court follows these terms closely in both non-constitutional cases and constitutional cases
under the traditional mode, it has relaxed the rule in constitutional cases harrdled under the expanded
jurisdiction mode. in the latter case, a prima facie showing that the questioned governmental act
violated the Constitution, effectively disputably shows an injury to the sovereign Filipino nation who
approved the Constitution and endowed it with authority, such that the challenged act may be
questioned by any Philippine citizen before the Supreme Court.61 In this manner, the "standing"
137

requirement is relaxed compared with the standard of personal stake or injury that the traditional
petition requires.

The relaxation of the standing requirement has likewise been achieved through the application of the
"transcendental importance doctrine" under the traditional mode for constitutional cases.62 (Under the
traditional mode, "transcendental importance" not only relaxes the standing requirement, but also
allows immediate access to this Court, thus exempting the petitioner from complying with the
hierarchy of courts requirement.)63

More importantly perhaps, the prima facie showing of grave abuse of discretion in constitutional
cases also implies that the injury alleged is actual or imminent, and not merely hypothetical.

Through this approach, the Court's attention is directed towards the existence of an actual case or
controversy - that is, whether the government indeed violated the Constitution to the detriment of the
Filipino people without the distractions of determining the existence of transcendental importance
indicators unrelated to the dispute and which do not at all determine whether the Court properly
exercises its power of judicial review.

Parenthetically, in the traditional mode, the determination of the transcendental importance of the
issue presented,64 aside from simply relaxing the standing requirement, may result in the dilution of
the actual case or controversy element because of the inextricable link between standing and the
existence of an actual case or controversy.

Consider, in this regard, that an actual case or controversy that calls for the exercise of judicial power
necessarily requires that the party presenting it possesses the standing to mount a challenge to a
governmental act. A case or controversy exists when there is an actual dispute between parties over
their legal rights, which remains in conflict at the time the dispute is presented before the
court.65Standing, on the other hand, involves a personal and substantial interest in the case because
the petitioner has sustained, or will sustain, direct injury as a result of the violation of its right.66

With the element of "standing" (or the petitioner's personal or substantial stake or interest in the case)
relaxed, the practical effect is to dilute the need to show that an immediate actual dispute over legal
rights did indeed take place and is now the subject of the action before the court.67

In both the traditional and the expanded modes, this relaxation carries a ripple effect under
established jurisprudential rulings,68 affecting not only the actual case or controversy requirement, but
compliance with the doctrine of hierarchy of courts, discussed in greater detail below.

A.3.b. The Hierarchy of Courts Principle

Another requirement that a certiorari petition carries, springs from the principle of "hierarchy of courts"
which recognizes the various levels of courts in the country as they are established under the
Constitution and by law, their ranking and effect of their rulings in relation with one another, and how
these different levels of court interact with one another.69 Since courts are established and given their
defined jurisdictions by law, the hierarchy of the different levels of courts should leave very little
opening for flexibility (and potential legal questions), but for the fact that the law creates courts at
different and defined levels but with concurrent jurisdictions.

The Constitution itself has partially determined the judicial hierarchy in the Philippine legal system by
designating the Supreme Court as the highest court with irreducible powers; its rulings serve as
precedents that other courts must follow70 because they form part of the law of the land.71 As a rule,
138

the Supreme Court is not a trial court and rules only on questions of law, in contrast with the Court of
Appeals and other intermediate courts72 which rule on both questions of law and of fact. At the lowest
level of courts are the municipal and the regional trial courts which handle questions of fact and law at
the first instance according to the jurisdiction granted to them by law.

Petitions for certiorari and prohibition fall under the concurrent jurisdiction of the regional trial courts
and the higher courts, all the way up to the Supreme Court. As a general rule, under the hierarchy of
courts principle, the petition must be brought to the lowest court with jurisdiction;73 the petition brought
to the higher courts may be dismissed based on the hierarchy principle. Cases, of course, may
ultimately reach the Supreme Court through the medium of an appeal.

The recognition of exceptions to the general rule is provided by the Supreme Court through
jurisprudence, i.e., through the cases that recognized the propriety of filing cases directly with the
Supreme Court. This is possible as the Supreme Court has the authority to relax the application of its
own rules.74

As observed above, this relaxation waters down other principles affecting the remedy of certiorari.
While the relaxation may result in greater and closer supervision by the Court over the lower courts
and quasi-judicial bodies under Rule 65, the effect may not always be salutary in the long term when
it is considered that this may affect the constitutional standards for the exercise of judicial power,
particularly the existence of an actual case or controversy.

The "transcendental importance" standard, in particular, is vague, open-ended and value-laden, and
should be limited in its use to exemptions from the application of the hierarchy of courts principle. It
should not carry any ripple effect on the constitutional requirement for the presence of an actual case
or controversy.

4. The petition for certiorari and prohibition against the DOH Letter was filed before the wrong
court.
In the present case, the act alleged to be unconstitutional refers to the cease and desist order that the
DOH issued against GAMCA's referral decking system. Its constitutionality was questioned through a
petition for certiorari and prohibition before the RTC. The case reached this Court through a Rule 45
appeal by certiorari under the traditional route.

In using a petition for certiorari and prohibition to assail the DOHCDO letters, GAMCA committed
several procedural lapses that rendered its petition readily dismissible by the RTC. Not only did the
petitioner present a premature challenge against an administrative act; it also committed the
grave jurisdictional error of filing the petition before the wrong court.

A.4.a. The DOH CDO letters were issued in the exercise of the DOH's quasi-judicial functions,
and could be assailed through Rule 65 on certiorari and prohibition.
A cease and desist order is quasi-judicial in nature, as it applies a legislative policy to an individual or
group within the coverage of the law containing the policy.

The Court, in Municipal Council of Lemery, Batangas v. Provincial Board of Batangas,75 recognized
the difficulty of d fining the precise demarcation line between what are judicial and what are
administrative or ministerial functions, as the exercise of judicial functions may involve the
performance of legislative or administrative duties, and the performance of administrative or
ministerial duties may, to some extent, involve the exercise of functions judicial in character. Thus,
the Court held that the nature of the act to be performed, rather than of the office, board, or
139

body which performs it, should determine whether or not an action is in the discharge of a judicial
or a quasi-judicial function.76

Generally, the exercise of judicial functions involves the determination of what the law is, and what
the legal rights of parties are under this law with respect to a matter in controversy. Whenever an
officer is clothed with this authority and undertakes to determine those questions, he acts judicially.77

In the administrative realm, a government officer or body exercises a quasi-judicial function when it
hears and determines questions of fact to which the legislative policy is to apply, and decide, based
on the law's standards, matters relating to the enforcement and administration of the law.78

The DOH CDO letter directed GAMCA to cease and desist from engaging in the referral decking
system practice within three days from receipt of the letter. By issuing this CDO letter implementing
Section 16 of RA No. 10022, the DOH (1) made the finding of fact that GAMCA implements the
referral decking system, and (2) applied Section 16 of RA No. 10022, to conclude that GAMCA's
practice is prohibited by law and should be stopped.
From this perspective, the DOH acted in a quasi-judicial capacity: its CDO letter determined a
question of fact, and applied the legislative policy prohibiting the referral decking system practice.

Notably, cease and desist orders have been described and treated as quasi-judicial acts in past
cases, and had even been described as similar to the remedy of injunction granted by the courts.79

A.4.b. The petitions for certiorari and prohibition against the DOH CDO letters fall within the
jurisdiction of the Court of Appeals.
Since the CDO Letter was a quasi-judicial act, the manner by which GAMCA assailed it before the
courts of law had been erroneous; the RTC should not have entertained GAMCA's petition.

First, acts or omissions by quasi-judicial agencies, regardless of whether the remedy involves a Rule
43 appeal or a Rule 65 petition for certiorari, is cognizable by the Court of Appeals. In particular,
Section 4, Rule 65 of the Rules of Court provides:
Section 4. When and where petition filed. The petition shall be filed not later than sixty (60) days from
notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely
filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of
the denial of said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower
court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction
over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals
whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of
its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless
otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by
the Court of Appeals. (emphasis, italics, and underscoring supplied)
Since the DOH is part of the Executive Department and has acted in its quasi-judicial capacity, the
petition challenging its CDO letter should have been filed before the Court of Appeals. The RTC
thus did not have jurisdiction over the subject matter of the petitions and erred in giving due course to
the petition for certiorari and prohibition against the DOH CDO letters. In procedural terms, petitions
for certiorari and prohibition against a government agency are remedies avaiJable to assail its quasi-
judicial acts, and should thus have been filed before the CA.

The provision in Section 4, Rule 65 requiring that certiorari petitions challenging quasi-judicial acts to
140

be filed with the CA is in full accord with Section 9 of Batas Pambansa Blg. 12980 on the same point.
Section 9 provides:
Section 9. Jurisdiction.- The Court of Appeals shall exercise:

1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo
warranto, and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction;

xxxx

3. Exclusive appellate jurisdiction over all final judgments, resolutions, orders or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commission,
including the Securities and Exchange Commission, the Social Security Commission, the Employees
Compensation Commission and the Civil Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the
Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of
subparagraph (1) of the third paragraph and subparagraph 4 of the fourth paragraph of Section 17 of
the Judiciary Act of 1948. x x x x

(emphases, italics, and underscoring supplied)

Thus, by law and by Supreme Court Rules, the CA is the court with the exclusive original jurisdiction
to entertain petitions for certiorari and prohibition against quasi-judicial agencies. In short, GAMCA
filed its remedy with the wrong court.

A.4.c The petitions for certiorari and prohibition against the DOH CDO letters were premature
challenges - they failed to comply with the requirement that there be "no other plain, speedy
and adequate remedy" and with the doctrine of exhaustion of administrative remedies.

Second, the Regional Trial Court of Pasay City unduly disregarded the requirements that there be
"no other plain, speedy and adequate remedy at law" and the doctrine of exhaustion of administrative
remedies, when it gave due course to the certiorari and prohibition petition against the DOH's CDO.

Under Chapter 8, Book IV of Executive Order (EO) No. 292,81 series of 1987, the DOH Secretary
"shall have supervision and control over the bureaus, offices, and agencies under him"82 and "shall
have authority over and responsibility for x x x operation" of the Department.

Section 1, Chapter 1, Title I, Book III of EO No. 292 in relation with Article VII, Sections 1 and 17 of
the Constitution,83 on the other hand, provides that the "President shall have control of all the
executive departments, bureaus, and offices."

These provisions both signify that remedies internal to the Executive Branch exist before resorting to
judicial remedies: GAMCA could ask the DOH Secretary to reconsider or clarify its letter-order, after
which it could appeal, should the ruling be unfavorable, to the Office of the President.

Significantly, this was what GAMCA did in the past when the DOH issued Memorandum Order No.
2008-0210 that prohibited the referral decking system. GAMCA then asked for the DOH Secretary's
reconsideration, and subsequently appealed the DOH's unfavorable decision with the Office of the
President. The OP then reversed Memorandum Order No. 2008-0210 and allowed the referral
decking system to continue.
141

That GAMCA had earlier taken this course indicates that it was not unaware of the administrative
remedies available to it; it simply opted to disregard the doctrine of exhaustion of administrative
remedies and the requirement that there be no other plain, speedy, and adequate remedy in law
when it immediately filed its petition for certiorari with the RTC.

This blatant disregard of the Rule 65 requirements clearly places GAMCA's petition outside the
exceptions that we recognized in the past in relaxing strict compliance with the exhaustion of
administrative remedies requirement.

Jurisprudence84 shows that this Court never hesitated in the past in relaxing the application of the
rules of procedure to accommodate exceptional circumstances when their strict application would
result in injustice. These instances, founded as they are on equitable considerations, do not include
the undue disreiard of administrative remedies, particularly when they are readily available.85

A.4.d. The petitions for certiorari and prohibition against the DOH CDO letters should have
been dismissed outright, as Rule 65 Petitions for Certiorari and Prohibition are extraordinary
remedies given due course only upon compliance with the formal and substantive
requirements.

Note, at this point, that Rule 65 petitions for certiorari and prohibition are discretionary writs, and that
the handling court possesses the authority to dismiss them outright for failure to comply with the form
and substance requirements. Section 6, Rule 65 of the Rules of Court in this regard provides:
Section 6. Order to comment. - If the petition is sufficient in form and substance to justify suclr
process, the court shall issue an order requiring the respondent or respondents to comment on the
petition within ten (10) days from receipt of a copy thereof. Such order shall be served on the
respondents in such manner as the court may direct together with a copy of the petition and any
annexes thereto. (emphasis, italics, and underscoring supplied)
Thus, even before requiring the DOH to comment, the RTC could have assessed the petition
for certiorariand prohibition for its compliance with the Rule 65 requirements. At that point, the petition
for certiorariand prohibition should have been dismissed outright, for failing to comply with Section 1
and Section 4 of Rule 65. When the court instead took cognizance of the petition, it acted on a matter
outside its jurisdiction.

Consequently, the RTC's resulting judgment is void and carries no legal effect. The decision
exempting GAMCA from the application of the referral decking system should equally have no legal
effect.

Noncompliance with the Section 1, Rule 65 requirement that there be no other plain, speedy, and
adequate remedy in law, on the other hand, is more than just a pro-forma requirement in the present
case. Since the petitions for certiorari and prohibition challenge a governmental act - i.e. action under
the DOH CDO letters, as well as the validity of the instruments under which these letters were issued
- compliance with Section 1, Rule 65 and the doctrine of exhaustion of administrative remedies that
judicial review requires is also mandatory. To recall a previous discussion, the exhaustion of
administrative remedies is also an aspect of ripeness in deciding a constitutional issue.

Thus, GAMCA's disregard of the Rules of Court not only renders the petition dismissible for failure to
first exhaust administrative remedies; the constitutional issues GAMCA posed before the RTC were
not also ripe for adjudication.

5. The Regional Trial Court erred in finding grave abuse of discretion on the part of the DOH's
142

issuance of the DOH CDO letters.

On the merits, we find that the RTC of Pasay reversibly erred in law when it held that the DOH acted
with grave abuse of discretion m prohibiting GAMCA from implementing the referral decking system.

In exempting GAMCA from the referral decking system that RA No. 10022 prohibits, the RTC of
Pasay City noted that the regulation per se was not unconstitutional, but its application to GAMCA
would violate the principle of sovereign equality and independence.

While we agree with the RTC's ultimate conclusion upholding the constitutionality of the prohibition
against the referral decking system under RA No. 10022, our agreement proceeds from another
reason; we disagree that the prohibition does not apply to GAMCA and with the consequent ruling
nullifying the DOH's CDO Letter.

A.5.a. The prohibition against the referral decking system under Section 16, RA No. 10022, is a
valid exercise of police power.

In its comment, GAMCA asserts that implementing the prohibition against the referral decking system
would amount to an undue taking of property that violates Article II, Section 2 of the 1987
Constitution.

It submits that the Securities and Exchange Commission had in fact approved its Articles of
Incorporation and Bylaws that embody the referral decking system; thus, the DOH cannot validly
prohibit the implementation of this system.

GAMCA further claims that its members made substantial investments to upgrade their facilities and
equipment. From this perspective, the August 23, 2010 order constitutes taking of property without
due process of law as its implementation would deprive GAMCA members of their property.

AMCOW responded to these claims with the argument that the DOH CDO letters implementing RA
No. 10022 are consistent with the State's exercise of the police power to prescribe regulations to
promote the health, safety, and general welfare of the people. Public interest justifies the State's
interference in health matters, since the welfare of migrant workers is a legitimate public concern. The
DOH thus merely performed its duty of upholding the migrant workers' freedom to consult their
chosen clinics for the conduct of health examinations.

We agree with AMCOW.

The State's police power86 is vast and plenary87 and the operation of a business,88 especially one that
is imbued with public interest (such as healthcare services),89 falls within the scope of governmental
exercise of police power through regulation.

As defined, police power includes (1) the imposition of restraint on liberty or property, (2) in order to
foster the common good.90 The exercise of police power involves the "state authority to enact
legislation that may interfere with personal liberty or property in order to promote the general
welfare."91

By its very nature, the exercise of the State's police power limits individual rights and liberties, and
subjects them to the "far more overriding demands and requirements of the greater
number."92 Though vast and plenary, this State power also carries limitations, specifically, it may not
143

be exercised arbitrarily or unreasonably. Otherwise, it defeats the purpose for which it is exercised,
that is, the advancement of the public good.93

To be considered reasonable, the government's exercise of police power must satisfy the "valid
object and valid means" method of analysis: first, the interest of the public generally, as distinguished
from those of a particular class, requires interference; and second, the means employed are
reasonably necessary to attain the objective sought and not unduly oppressive upon individuals.94

These two elements of reasonableness are undeniably present in Section 16 of RA No. 10022. The
prohibition against the referral decking system is consistent with the State's exercise of the police
power to prescribe regulations to promote the health, safety, and general welfare of the people.
Public interest demands State interference on health matters, since the welfare of migrant workers is
a legitimate public concern.

We note that RA No. 10022 expressly reflects the declared State policies to "uphold the dignity of its
citizens whether in the country or overseas, in general, and Filipino migrant workers," and to "afford
full protection to labor, local and overseas, organized and unorganized, and promote full employment
and equality of employment opportunities for all. Towards this end, the State shall provide adequate
and timely social, economic and legal services to Filipino migrant workers." The prohibition against
the referral decking system in Section 16 of RA No. 10022 is an expression and implementation of
these state policies.

The guarantee under Section 16 for OFWs to be given the option to choose a quality healthcare
service provider as expressed in Section 16 (c)95 of RA No. 10022 is guaranteed by the prohibition
against the decking practice and against monopoly practices in OFW health examinations.96

Section 16 likewise requires employers to accept health examinations from any DOH-accredited
health facility; a refusal could lead to their temporary disqualification under pertinent rules to be
formulated by the Philippine Overseas Employment Authority (POEA).97

These rules are part of the larger legal framework to ensure the Overseas Filipino Workers' (OFW)
access to quality healthcare services, and to curb existing practices that limit their choices to specific
clinics and facilities.

Separately from the Section 16 prohibition against the referral decking system, RA No. 10022 also
prohibits and penalizes the imposition of a compulsory exclusive arrangement requiring OFWs to
undergo health examinations only from specifically designated medical clinics, institutions, entities or
persons. Section 5, in relation to Section 6 of RA No. 10022, penalizes compulsory, exclusive
arrangements98 by imprisonment and fine and by the automatic revocation of the participating medical
clinic's license.

The DOH's role under this framework is to regulate the activities and operations of all clinics
conducting health examinations on Filipino migrant workers as a requirement for their overseas
employment. The DOH is tasked to ensure that:
(c.3) No group or groups of medical clinics shall have a monopoly of exclusively conducting health
examinations on migrant workers for certain receiving countries;

(c.4) Every Filipino migrant worker shall have the freedom to choose any of the DOH-accredited or
DOH-operated clinics that will conduct his/her health examinations and that his or her rights as a
patient are respected. The decking practice, which requires an overseas Filipino worker to go first to
144

an office for registration and then farmed out to a medical clinic located elsewhere, shall not be
allowed;99
While Section 16 of RA No. 10022 does not specifically define the consequences of violating the
prohibition against the referral decking system, Republic Act No. 4226 (Hospital Licensure Act), which
governs the licensure and regulation of hospitals and health facilities, authorizes the DOH to
suspend, revoke, or refuse to renew the license of hospitals and clinics violating the law.100

These consequences cannot but apply to the violation of the prohibition against the referral decking
system under RA No. 10022. If, under the law, the DOH can suspend, revoke, or refuse to renew the
license of these hospitals upon the finding that they violated any provision of law (whether those
found in RA No. 4226 or in RA No. 10022), it follows- as a necessarily included lesser power - that
the DOH can likewise order these clinics and their association to cease and desist from practices that
the law deems to be undesirable.

A.5.b. The DOH did not gravely abuse its discretion in issuing the assailed DOH CDO letters.

As discussed above, the letter-order implementing the prohibition against the referral decking system
is quasi-judicial in nature. This characteristic requires that procedural due process be observed - that
is, that the clinics concerned be given the opportunity to be heard before the standard found in the
law can be applied to them.

Thus, prior to the issuance of the disputed CDO letter, the DOH should have given GAMCA the
opportunity to be heard on whether the prohibition applies to it. Lest this opportunity to be heard be
misunderstood, this DOH obligation raises an issue different from the question of whether Congress
can, under the exercise of police power, prohibit the referral decking system; this latter issue lies
outside the scope of the DOH to pass upon. The required hearing before the DOH relates solely to
whether it properly implemented, based on the given standards under the law, the prohibition that
Congress decreed under RA No. 10022.

Under normal circumstances, the issuance of a CDO without a prior hearing would violate GAMCA's
procedural due process rights, and would amount to more than a legal error, i.e., an error equivalent
to action without jurisdiction. Rendering a decision quasi-judicial in nature without providing the
opportunity to be heard amounts to a grave abuse of discretion that divests a quasi-judicial agency of
its jurisdiction.

Factual circumstances unique to the present case, however, lead us to conclude that while it was an
error of law for the DOH to issue a CDO without complying with the requirements of procedural due
process, its action did not amount to a grave abuse of discretion.
Grave abuse of discretion amounts to more than an error of law; it refers to an act that is so
capricious, arbitrary, and whimsical that it amounts to a clear evasion of a positive duty or a virtual
refusal to perform a duty enjoined by law, as where the power is exercised in an arbitrary and
despotic manner because of passion or hostility.101

Prior to the issuance of its CDO Letter, the DOH had more than sufficient basis to determine that
GAMCA practices the prohibited referral decking system under RA No. 10022. Notably, the DOH had
earlier allowed and recognized the referral decking system that GAMCA practiced through AO 5-01.
This recognition was made with GAMCA's practice in mind. The subsequent administrative orders
and department memorandum suspending and terminating the referral decking system, respectively,
all pertain to the practice that the DOH had authorized under AO 5-01. Even the subject matter of
these issuances do not just pertain to any other referral decking system, but to the "GAMCA referral
145

decking system."

GAMCA likewise had more than several opportunities to contest the suspension and eventual
revocation of the referral decking system initially pe1mitted under AO 5-01. Its appeal even reached
the Office of the President, which overturned the DOH Memorandum Order terminating the referral
decking system.
That the referral decking system had been subsequently prohibited by law shows the intent of
Congress to prevent and prohibit the practice that GAMCA initiated and which the President had
allowed. The President's duty under our political system is to implement the law; hence, when
Congress subsequently prohibited the practice that GAMCA initiated, the Executive - including the
President -has no choice but to implement it.

Based on these circumstances, while the DOH erred when it issued its CDO letters without first giving
GAMCA the opportunity to prove whether the practice conducted by GAMCA is the same practice
prohibited under RA No. 10022, the DOH conclusion to so act, in our view, did not constitute grave
abuse of discretion that would have divested it of jurisdiction.
We note that the DOH had sufficient basis when it determined that the referral decking system
prohibited under RA No. 10022 was the same decking system practiced by GAMCA. To reiterate, the
referral decking system was not something new; it was an old system that GAMCA practiced and was
known to all in its scope and operating details. That GAMCA had previously questioned the DOH
prohibition and had been given ample opportunity to be heard when it filed an appeal before the OP,
negate the conclusion that GAMCA had been aggrieved by precipitate and unfair DOH action.

To be sure, these factual circumstances do not make the CDO letter compliant with procedural due
process. They mitigate, however, the error committed and render it less than the capricious, arbitrary,
and patent refusal to comply with a positive legal duty that characterizes an act committed with grave
abuse of discretion.
The Court furthermore, in several instances,102 has recognized that an administrative agency may
issue an ex parte cease and desist order, where vital public interests outweigh the need for
procedural due process." In these instances, the Court noted that the affected establishment may
contest the ex parteorder, upon which the administrative agency concerned must conduct a hearing
and allow the establishment to be heard. While jurisprudence has so far used the "vital public
interests" standard to pollution cases, it had not been a grave abuse of discretion on the part of the
DOH to consider that GAMCA's referral decking practice falls within this category. The DOH has long
made the factual finding that the referral decking system hinders our Filipino seafarers' access to
quality and affordable healthcare in its A.O. No. 106, series of 2002.

These circumstances further mitigate whatever legal error the DOH has committed and render the
conclusion that grave abuse of discretion had taken place misplaced.

Since the writs of certiorari and prohibition do not issue against legal errors, but to acts of grave
abuse of discretion, the RTC erred in issuing these writs against the DOH CDO letters.

6. The prohibition against the referral decking system against GAMCA does not violate the
principle of sovereign equality and independence.

The RTC based its decision to grant the writs of certiorari and prohibition against the DOH letter-order
on the principle of sovereign equality and independence; applying the referral decking system
prohibition against GAMCA violates this principle.
The RTC reasoned out that the prohibition against the referral decking system under Section 16 of
146

RA No. 10022 must be interpreted to apply only to clinics conducting health examinations on migrant
workers bound for countries that do not require the referral decking system for the issuance of visas
to job applicants.

The RTC observed, too, that the refer al decking system is part of the application procedure in
obtaining visas to enter the GCC States, a procedure made in the exercise of the sovereign power of
the GCC States to protect their nationals from health hazards, and of their diplomatic power to
regulate and screen entrants to their territories.

It also reasoned out that under the principle of sovereign equality and independence of States, the
Philippines cannot interfere with this system and in fact must respect the visa-granting procedures of
foreign states in the same way that they respect our immigration procedures. Moreover, to restrain
GAMCA which is a mere adjunct of HMC (an agent of GCC States) is to restrain the GCC States
themselves.

AMCOW contests the RTC's conclusion, arguing that the principles of sovereign equality and
independence of States do not apply to the present case. According to AMCOW, the subject matter of
this case pertains to a domestic concern as the law and the regulations that GAMCA assails relate to
the operation of medical clinics in the Philippines.

It points out that the Philippines gave GAMCA and its members the privilege of conducting their
businesses domestically; hence, their operations are governed by Philippine laws, specifically by RA
No. 10022 which serves as one of the limitations on the privilege granted to them. GAMCA's right to
engage in business should yield to the State's exercise of police power. In legal contemplation,
therefore, the DOH CDO letters did not prejudice GAMCA's right to engage in business; nor did they
hamper the GAMCA members' business operations.

AMCOW further insists that the August 23, 2010 and November 2, 2010 orders are consistent with
the State's exercise of the police power to prescribe regulations to promote the health, safety, and
general welfare of the people. Public interest demands State interference on health matters, since the
welfare of migrant workers is a legitimate public concern. The DOH thus merely performed its duty of
upholding the migrant workers' freedom to choose any of its accredited or operated clinics that will
conduct health examinations.

The DOH, for its part, adds that the implementation of RA No. 10022 cannot be defeated by
agreements entered into by GAMCA with the GCC States. The GCC States, the DOH points out, are
not empowered to determine the Philippines' courses of action with respect to the operation, within
Philippine territory, of medical clinics; the conduct of health examinations; and the freedom of choice
of Filipino migrant workers.

GAMCA responds to these arguments by asserting that the referral decking system is a part of the
application procedure for obtaining visas to enter the GCC States. Hence, it is an exercise of the
sovereign power of the GCC States to protect their nationals from health hazards, and their
diplomatic power to regulate and screen entrants to their territories. To restrain an agent of the GCC
States under the control and acting in accordance with the direction of these GCC States, restrains
the GCC States.

GAMCA also points out that the OFWs would suffer grave and irreparable damage and injury if the
DOH CDO letters would be implemented as the GCC States would not issue working visas without
the GAMCA seal attesting that the OFWs had been medically examined by GAMCA member clinics.
147

After considering all these arguments, we find that the RTC's decision misapplied the principle of
sovereign independence and equality to the present case. While the principles of sovereign
independence and equality have been recognized in Philippine jurisprudence, our recogmtmn of this
principle does not extend to the exemption of States and their affiliates from compliance with
Philippine regulatory laws.

A.6. The principle of sovereign equality and independence of states does not exempt
GAMCAfrom the referral decking system prohibition under RA No. 10022.

In Republic of Indonesia v. Vinzon,103 we recognized the principle of sovereign independence and

equality as part of the law of the land. We used this principle to justify the recognition of the principle
of sovereign immunity which exempts the State - both our Government and foreign governments -
from suit. We held:
International law is founded largely upon the principles of reciprocity, comity, independence, and
equality of States which were adopted as part of the law of our land under Article II, Section 2 of the
1987 Constitution. The rule that a State may not be sued without its consent is a necessary
consequence of the principles of independence and equality of States. As enunciated in Sanders v.
Veridiano II, the practical justification for the doctrine of sovereign immunity is that there can be no
legal right against the authority that makes the law on which the right depends. In the case of foreign
States, the rule is derived from the principle of the sovereign equality of States, as expressed in the
maxim par in parem non habet imperium. All states are sovereign equals and cannot assert
jurisdiction over one another. A contrary attitude would "unduly vex the peace of nations."
Our recognition of sovereign immunity, however, has never been unqualified. While we recognized
the principles of independence and equality of States to justify a State's sovereign immunity from suit,
we also restricted state immunity to acts jus imperii, or public acts. We said that once a State enters
into commercial transactions (jus gestionis), then it descends to the level of a private individual, and is
thus not immune from the resulting liability and consequences of its actions.104

By this recognition, we acknowledge that a foreign government acting in its jus imperii function cannot
be held liable in a Philippine court. Philippine courts, as part of the Philippine government, cannot and
should not take jurisdiction over cases involving the public acts of a foreign government. Taking
jurisdiction would amount to authority over a foreign government, and would thus violate the principle
of sovereign independence and equality.105

This recognition is altogether different from exempting governments whose agents are in the
Philippines from complying with our domestic laws.106 We have yet to declare in a case that the
principle of sovereign independence and equality exempts agents of foreign governments from
compliance with the application of Philippine domestic law.

In the present case, GAMCA has not adduced any evidence in the court below, nor has it presented
any argument before us showing that the principle of sovereign equality and independence has
developed into an international custom shielding state agents from compliance with another state's
domestic laws. Under this situation, the Court is in no position to determine whether the practice that
GAMCA alleges has indeed crystallized into an international custom.

GAMCA has never proven in this case, too, that the GCC has extended its sovereign immunity to
GAMCA. Sovereign immunity belongs to the State, and it must first be extended to its agents before
the latter may be considered to possess sovereign immunity.
148

Significantly, the Court has even adopted a restrictive approach in recognizing state immunity, by
distinguishing between a State's jus imperii and jus gestionis. It is only when a State acts in its jus
imperii function that we recognize state immunity.107
We point out furthermore that the prohibition against the referral decking system applies to hospitals
and clinics, as well as to OFW employers, and does not seek to interfere with the GCC's visa
requirement processes. RA 10022 prohibits hospitals and clinics in the Philippines from practicing the
referral decking system, and employers from requiring OFWs to procure their medical examinations
from hospitals and clinics practicing the referral decking system.

The regulation applies to Philippine hospitals and clinics, as well as to employers of OFWs. It does
not apply to the GCCs and their visa processes. That the regulation could affect the OFWs'
compliance with the visa requirements imposed by GCCs does not place it outside the regulatory
powers of the Philippine government.

In the same manner, GCC states continue to possess the prerogative to apply their visa requirements
to any foreign national, including our OFWs, who seeks to enter their territory; they may refuse to
grant them entry for failure to comply with the referral decking system, or they may adjust to the
prohibition against the referral decking system that we have imposed. These prerogatives lie with the
GCC member-states and do not affect at all the legality of the prohibition against the referral decking
system.

Lastly, the effect of the prohibition against the referral decking system is beyond the authority of this
Court to consider. The wisdom of this prohibition has been decided by Congress, through the
enactment of RA No. 10022. Our role in this case is merely to determine whether our government has
the authority to enact the law's prohibition against the referral decking system, and whether this
prohibition is being implemented legally. Beyond these lies the realm of policy that, under our
Constitution's separation of powers, this Court cannot cross.

WHEREFORE, in the light of these considerations, we hereby GRANT the petitions. Accordingly,
we REVERSE and SET ASIDE the orders dated August 10, 2012 and April 12, 2013 of the Regional
Trial Court of Pasay City, Branch 108, in Sp. Civil Action No. R-PSY-10-04391-CV.
Costs against respondent GAMCA.
SO ORDERED
D. SEPARATION OF POWERS AND CHECKS AND BALANCES

EN BANC
[G.R. No. 127255. August 14, 1997]
JOKER P. ARROYO, EDCEL C. LAGMAN, JOHN HENRY R. OSMEA, WIGBERTO E. TAADA, and
RONALDO B. ZAMORA, petitioners, vs. JOSE DE VENECIA, RAUL DAZA, RODOLFO
ALBANO, THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, AND THE
COMMISSIONER OF INTERNAL REVENUE, respondents.
DECISION
MENDOZA, J.:
This is a petition for certiorari and/or prohibition challenging the validity of Republic Act No. 8240,
which amends certain provisions of the National Internal Revenue Code by imposing so-called sin
taxes (actually specific taxes) on the manufacture and sale of beer and cigarettes.
Petitioners are members of the House of Representatives. They brought this suit against
respondents Jose de Venecia, Speaker of the House of Representatives, Deputy Speaker Raul Daza,
Majority Leader Rodolfo Albano, the Executive Secretary, the Secretary of Finance, and the
Commissioner of Internal Revenue, charging violation of the rules of the House which petitioners
149

claim are constitutionally mandated so that their violation is tantamount to a violation of the
Constitution.
The law originated in the House of Representatives as H. No. 7198. This bill was approved on
third reading on September 12, 1996 and transmitted on September 16, 1996 to the Senate which
approved it with certain amendments on third reading on November 17, 1996. A bicameral
conference committee was formed to reconcile the disagreeing provisions of the House and Senate
versions of the bill.
The bicameral conference committee submitted its report to the House at 8 a.m. on November
21, 1996. At 11:48 a.m., after a recess, Rep. Exequiel Javier, chairman of the Committee on Ways
and Means, proceeded to deliver his sponsorship speech, after which he was interpellated. Rep.
Rogelio Sarmiento was first to interpellate. He was interrupted when Rep. Arroyo moved to adjourn
for lack of quorum. Rep. Antonio Cuenco objected to the motion and asked for a head count. After a
roll call, the Chair (Deputy Speaker Raul Daza) declared the presence of a quorum.[1] Rep. Arroyo
appealed the ruling of the Chair, but his motion was defeated when put to a vote. The interpellation of
the sponsor thereafter proceeded.
Petitioner Rep. Joker Arroyo registered to interpellate. He was fourth in the order, following Rep.
Rogelio Sarmiento, Rep. Edcel C. Lagman and Rep. Enrique Garcia. In the course of his
interpellation, Rep. Arroyo announced that he was going to raise a question on the quorum, although
until the end of his interpellation he never did. What happened thereafter is shown in the following
transcript of the session on November 21, 1996 of the House of Representatives, as published by
Congress in the newspaper issues of December 5 and 6, 1996:
MR. ALBANO. Mr. Speaker, I move that we now approve and ratify the conference
committee report.
THE DEPUTY SPEAKER (Mr. Daza). Any objection to the motion?
MR. ARROYO. What is that, Mr. Speaker?
THE DEPUTY SPEAKER (Mr. Daza). There being none, approved.
(Gavel)
MR. ARROYO. No, no, no, wait a minute, Mr. Speaker, I stood up. I want to know what is the
question that the Chair asked the distinguished sponsor.
THE DEPUTY SPEAKER (Mr. Daza). There was a motion by the Majority Leader for
approval of the report, and the Chair called for the motion.
MR. ARROYO. Objection, I stood up, so I wanted to object.
THE DEPUTY SPEAKER (Mr. Daza). The session is suspended for one minute.
(It was 3:01 p.m.)
(3:40 p.m., the session was resumed)
THE DEPUTY SPEAKER (Mr. Daza). The session is resumed.
MR. ALBANO. Mr. Speaker, I move to adjourn until four oclock, Wednesday, next week.
THE DEPUTY SPEAKER (Mr. Daza). The session is adjourned until four oclock, Wednesday,
next week.
(It was 3:40 p.m.)
On the same day, the bill was signed by the Speaker of the House of Representatives and the
President of the Senate and certified by the respective secretaries of both Houses of Congress as
having been finally passed by the House of Representatives and by the Senate on November 21,
1996. The enrolled bill was signed into law by President Fidel V. Ramos on November 22, 1996.
Petitioners claim that there are actually four different versions of the transcript of this portion of
Rep. Arroyos interpellation: (1) the transcript of audio-sound recording of the proceedings in the
session hall immediately after the session adjourned at 3:40 p.m. on November 21, 1996, which
petitioner Rep. Edcel C. Lagman obtained from the operators of the sound system; (2) the transcript
of the proceedings from 3:00 p.m. to 3:40 p.m. of November 21, 1996, as certified by the Chief of the
Transcription Division on November 21, 1996, also obtained by Rep. Lagman; (3) the transcript of the
150

proceedings from 3:00 p.m. to 3:40 p.m. of November 21, 1996 as certified by the Chief of the
Transcription Division on November 28, 1996, also obtained by Rep. Lagman; and (4) the published
version abovequoted. According to petitioners, the four versions differ on three points, to wit: (1) in
the audio-sound recording the word approved, which appears on line 13 in the three other versions,
cannot be heard; (2) in the transcript certified on November 21, 1996 the word no on line 17 appears
only once, while in the other versions it is repeated three times; and (3) the published version does
not contain the sentence (Y)ou better prepare for a quorum because I will raise the question of
the quorum, which appears in the other versions.
Petitioners allegations are vehemently denied by respondents. However, there is no need to
discuss this point as petitioners have announced that, in order to expedite the resolution of this
petition, they admit, without conceding, the correctness of the transcripts relied upon by the
respondents. Petitioners agree that for purposes of this proceeding the word approved appears in the
transcripts.
Only the proceedings of the House of Representatives on the conference committee report on H.
No. 7198 are in question. Petitioners principal argument is that R.A. No. 8240 is null and void
because it was passed in violation of the rules of the House; that these rules embody the
constitutional mandate in Art. VI, 16(3) that each House may determine the rules of its proceedings
and that, consequently, violation of the House rules is a violation of the Constitution itself. They
contend that the certification of Speaker De Venecia that the law was properly passed is false and
spurious.
More specifically, petitioners charge that (1) in violation of Rule VIII, 35 and Rule XVII, 103 of the
rules of the House,[2] the Chair, in submitting the conference committee report to the House, did not
call for the yeas or nays, but simply asked for its approval by motion in order to prevent petitioner
Arroyo from questioning the presence of a quorum; (2) in violation of Rule XIX, 112,[3] the Chair
deliberately ignored Rep. Arroyos question, What is that . . . Mr. Speaker? and did not repeat Rep.
Albanos motion to approve or ratify; (3) in violation of Rule XVI, 97,[4] the Chair refused to recognize
Rep. Arroyo and instead proceeded to act on Rep. Albanos motion and afterward declared the report
approved; and (4) in violation of Rule XX, 121-122, Rule XXI, 123, and Rule XVIII, 109,[5] the Chair
suspended the session without first ruling on Rep. Arroyos question which, it is alleged, is a point of
order or a privileged motion. It is argued that Rep. Arroyos query should have been resolved upon the
resumption of the session on November 28, 1996, because the parliamentary situation at the time of
the adjournment remained upon the resumption of the session.
Petitioners also charge that the session was hastily adjourned at 3:40 p.m. on November 21,
1996 and the bill certified by Speaker Jose De Venecia to prevent petitioner Rep. Arroyo from
formally challenging the existence of a quorum and asking for a reconsideration.
Petitioners urge the Court not to feel bound by the certification of the Speaker of the House that
the law had been properly passed, considering the Courts power under Art. VIII, 1 to pass on claims
of grave abuse of discretion by the other departments of the government, and they ask for a
reexamination of Tolentino v. Secretary of Finance,[6] which affirmed the conclusiveness of an
enrolled bill, in view of the changed membership of the Court.
The Solicitor General filed a comment in behalf of all respondents. In addition, respondent De
Venecia filed a supplemental comment. Respondents defense is anchored on the principle of
separation of powers and the enrolled bill doctrine. They argue that the Court is not the proper forum
for the enforcement of the rules of the House and that there is no justification for reconsidering the
enrolled bill doctrine. Although the Constitution provides in Art. VI, 16(3) for the adoption by each
House of its rules of proceedings, enforcement of the rules cannot be sought in the courts except
insofar as they implement constitutional requirements such as that relating to three readings on
separate days before a bill may be passed. At all events, respondents contend that, in passing the bill
which became R.A. No. 8240, the rules of the House, as well as parliamentary precedents for
approval of conference committee reports on mere motion, were faithfully observed.
151

In his supplemental comment, respondent De Venecia denies that his certification of H. No. 7198
is false and spurious and contends that under the journal entry rule, the judicial inquiry sought by the
petitioners is barred. Indeed, Journal No. 39 of the House of Representatives, covering the sessions
of November 20 and 21, 1996, shows that On Motion of Mr. Albano, there being no objection, the
Body approved the Conference Committee Report on House Bill No. 7198.[7] This Journal was
approved on December 2, 1996 over the lone objection of petitioner Rep. Lagman.[8]
After considering the arguments of the parties, the Court finds no ground for holding that
Congress committed a grave abuse of discretion in enacting R.A. No. 8240. This case is therefore
dismissed.
First. It is clear from the foregoing facts that what is alleged to have been violated in the
enactment of R.A. No. 8240 are merely internal rules of procedure of the House rather than
constitutional requirements for the enactment of a law, i.e., Art. VI, 26-27. Petitioners do not claim that
there was no quorum but only that, by some maneuver allegedly in violation of the rules of the House,
Rep. Arroyo was effectively prevented from questioning the presence of a quorum.
Petitioners contend that the House rules were adopted pursuant to the constitutional provision
that each House may determine the rules of its proceedings[9] and that for this reason they are
judicially enforceable. To begin with, this contention stands the principle on its head. In the decided
cases,[10] the constitutional provision that each House may determine the rules of its proceedings was
invoked by parties, although not successfully, precisely to support claims of autonomy of the
legislative branch to conduct its business free from interference by courts. Here petitioners cite the
provision for the opposite purpose of invoking judicial review.
But the cases, both here and abroad, in varying forms of expression, all deny to the courts the
power to inquire into allegations that, in enacting a law, a House of Congress failed to comply with its
own rules, in the absence of showing that there was a violation of a constitutional provision or the
rights of private individuals. In Osmea v. Pendatun,[11] it was held: At any rate, courts have declared
that the rules adopted by deliberative bodies are subject to revocation, modification or waiver at the
pleasure of the body adopting them. And it has been said that Parliamentary rules are merely
procedural, and with their observance, the courts have no concern. They may be waived or
disregarded by the legislative body. Consequently, mere failure to conform to parliamentary usage
will not invalidate the action (taken by a deliberative body) when the requisite number of members
have agreed to a particular measure.
In United States v. Ballin, Joseph & Co.,[12] the rule was stated thus: The Constitution empowers
each house to determine its rules of proceedings. It may not by its rules ignore constitutional
restraints or violate fundamental rights, and there should be a reasonable relation between the mode
or method of proceeding established by the rule and the result which is sought to be attained. But
within these limitations all matters of method are open to the determination of the House, and it is no
impeachment of the rule to say that some other way would be better, more accurate, or even more
just. It is no objection to the validity of a rule that a different one has been prescribed and in force for
a length of time. The power to make rules is not one which once exercised is exhausted. It is a
continuous power, always subject to be exercised by the House, and within the limitations suggested,
absolute and beyond the challenge of any other body or tribunal.
In Crawford v. Gilchrist,[13] it was held: The provision that each House shall determine the rules of
its proceedings does not restrict the power given to a mere formulation of standing rules, or to the
proceedings of the body in ordinary legislative matters; but in the absence of constitutional restraints,
and when exercised by a majority of a constitutional quorum, such authority extends to a
determination of the propriety and effect of any action as it is taken by the body as it proceeds in the
exercise of any power, in the transaction of any business, or in the performance of any duty conferred
upon it by the Constitution.
In State ex rel. City Loan & Savings Co. v. Moore,[14] the Supreme Court of Ohio stated: The
provision for reconsideration is no part of the Constitution and is therefore entirely within the control of
152

the General Assembly. Having made the rule, it should be regarded, but a failure to regard it is not
the subject-matter of judicial inquiry. It has been decided by the courts of last resort of many states,
and also by the United States Supreme Court, that a legislative act will not be declared invalid for
noncompliance with rules.
In State v. Savings Bank,[15] the Supreme Court of Errors of Connecticut declared itself as follows:
The Constitution declares that each house shall determine the rules of its own proceedings and shall
have all powers necessary for a branch of the Legislature of a free and independent state. Rules of
proceedings are the servants of the House and subject to its authority. This authority may be abused,
but when the House has acted in a matter clearly within its power, it would be an unwarranted
invasion of the independence of the legislative department for the court to set aside such action as
void because it may think that the House has misconstrued or departed from its own rules of
procedure.
In McDonald v. State,[16] the Wisconsin Supreme Court held: When it appears that an act was so
passed, no inquiry will be permitted to ascertain whether the two houses have or have not complied
strictly with their own rules in their procedure upon the bill, intermediate its introduction and final
passage. The presumption is conclusive that they have done so. We think no court has ever declared
an act of the legislature void for non-compliance with the rules of procedure made by itself, or the
respective branches thereof, and which it or they may change or suspend at will. If there are any such
adjudications, we decline to follow them.
Schweizer v. Territory[17] is illustrative of the rule in these cases. The 1893 Statutes of Oklahoma
provided for three readings on separate days before a bill may be passed by each house of the
legislature, with the proviso that in case of an emergency the house concerned may, by two-thirds
vote, suspend the operation of the rule. Plaintiff was convicted in the district court of violation of a law
punishing gambling. He appealed contending that the gambling statute was not properly passed by
the legislature because the suspension of the rule on three readings had not been approved by the
requisite two-thirds vote. Dismissing this contention, the State Supreme Court of Oklahoma held:
We have no constitutional provision requiring that the legislature should read a bill in any particular
manner. It may, then, read or deliberate upon a bill as it sees fit, either in accordance with its own
rules, or in violation thereof, or without making any rules. The provision of section 17 referred to is
merely a statutory provision for the direction of the legislature in its action upon proposed
measures. It receives its entire force from legislative sanction, and it exists only at legislative
pleasure. The failure of the legislature to properly weigh and consider an act, its passage through the
legislature in a hasty manner, might be reasons for the governor withholding his signature thereto; but
this alone, even though it is shown to be a violation of a rule which the legislature had made to govern
its own proceedings, could be no reason for the courts refusing its enforcement after it was actually
passed by a majority of each branch of the legislature, and duly signed by the governor. The courts
cannot declare an act of the legislature void on account of noncompliance with rules of procedure
made by itself to govern its deliberations. McDonald v. State, 80 Wis. 407, 50 N.W. 185; In re Ryan,
80 Wis. 414, 50 N. W. 187; State v. Brown, 33 S.C. 151, 11 S. E. 641; Railway Co. v. Gill, 54 Ark.
101, 15 S. W. 18.
We conclude this survey with the useful summary of the rulings by former Chief Justice
Fernando, commenting on the power of each House of Congress to determine its rules of
proceedings. He wrote:
Rules are hardly permanent in character. The prevailing view is that they are subject to revocation,
modification or waiver at the pleasure of the body adopting them as they are primarily
procedural. Courts ordinarily have no concern with their observance. They may be waived or
disregarded by the legislative body. Consequently, mere failure to conform to them does not have the
effect of nullifying the act taken if the requisite number of members have agreed to a particular
measure. The above principle is subject, however, to this qualification. Where the construction to be
given to a rule affects persons other than members of the legislative body the question presented is
153

necessarily judicial in character. Even its validity is open to question in a case where private rights are
involved.[18]
In this case no rights of private individuals are involved but only those of a member who, instead
of seeking redress in the House, chose to transfer the dispute to this Court. We have no more power
to look into the internal proceedings of a House than members of that House have to look over our
shoulders, as long as no violation of constitutional provisions is shown.
Petitioners must realize that each of the three departments of our government has its separate
sphere which the others may not invade without upsetting the delicate balance on which our
constitutional order rests. Due regard for the working of our system of government, more than mere
comity, compels reluctance on our part to enter upon an inquiry into an alleged violation of the rules
of the House. We must accordingly decline the invitation to exercise our power.
Second. Petitioners, quoting former Chief Justice Roberto Concepcions sponsorship in the
Constitutional Commission, contend that under Art. VIII, 1, nothing involving abuse of discretion [by
the other branches of the government] amounting to lack or excess of jurisdiction is beyond judicial
review.[19] Implicit in this statement of the former Chief Justice, however, is an acknowledgment that
the jurisdiction of this Court is subject to the case and controversy requirement of Art. VIII, 5 and,
therefore, to the requirement of a justiciable controversy before courts can adjudicate constitutional
questions such as those which arise in the field of foreign relations. For while Art. VIII, 1 has
broadened the scope of judicial inquiry into areas normally left to the political departments to decide,
such as those relating to national security,[20] it has not altogether done away with political
questions such as those which arise in the field of foreign relations. As we have already held, under
Art. VIII, 1, this Courts function
is merely [to] check whether or not the governmental branch or agency has gone beyond the
constitutional limits of its jurisdiction, not that it erred or has a different view. In the absence of a
showing . . . [of] grave abuse of discretion amounting to lack of jurisdiction, there is no occasion for
the Court to exercise its corrective power. . . . It has no power to look into what it thinks is apparent
error.[21]
If, then, the established rule is that courts cannot declare an act of the legislature void on account
merely of noncompliance with rules of procedure made by itself, it follows that such a case does not
present a situation in which a branch of the government has gone beyond the constitutional limits of
its jurisdiction so as to call for the exercise of our Art. VIII, 1 power.
Third. Petitioners claim that the passage of the law in the House was railroaded. They claim that
Rep. Arroyo was still making a query to the Chair when the latter declared Rep. Albanos motion
approved.
What happened is that, after Rep. Arroyos interpellation of the sponsor of the committee report,
Majority Leader Rodolfo Albano moved for the approval and ratification of the conference committee
report. The Chair called out for objections to the motion. Then the Chair declared: There being none,
approved. At the same time the Chair was saying this, however, Rep. Arroyo was asking, What is that
. . . Mr. Speaker? The Chair and Rep. Arroyo were talking simultaneously. Thus, although Rep.
Arroyo subsequently objected to the Majority Leaders motion, the approval of the conference
committee report had by then already been declared by the Chair, symbolized by its banging of the
gavel.
Petitioners argue that, in accordance with the rules of the House, Rep. Albanos motion for the
approval of the conference committee report should have been stated by the Chair and later the
individual votes of the Members should have been taken. They say that the method used in this case
is a legislators nightmare because it suggests unanimity when the fact was that one or some
legislators opposed the report.
No rule of the House of Representatives has been cited which specifically requires that in cases
such as this involving approval of a conference committee report, the Chair must restate the motion
and conduct a viva voce or nominal voting. On the other hand, as the Solicitor General has pointed
154

out, the manner in which the conference committee report on H. No. 7198 was approved was by no
means a unique one. It has basis in legislative practice. It was the way the conference committee
report on the bills which became the Local Government Code of 1991 and the conference committee
report on the bills amending the Tariff and Customs Code were approved.
In 1957, the practice was questioned as being contrary to the rules of the House. The point was
answered by Majority Leader Arturo M. Tolentino and his answer became the ruling of the Chair. Mr.
Tolentino said:
Mr. Tolentino. The fact that nobody objects means a unanimous action of the House. Insofar as the
matter of procedure is concerned, this has been a precedent since I came here seven years ago, and
it has been the procedure in this House that if somebody objects, then a debate follows and after the
debate, then the voting comes in.
....
Mr. Speaker, a point of order was raised by the gentleman from Leyte, and I wonder what his attitude
is now on his point of order. I should just like to state that I believe that we have had a substantial
compliance with the Rules. The Rule invoked is not one that refers to statutory or constitutional
requirement, and a substantial compliance, to my mind, is sufficient. When the Chair announces the
vote by saying Is there any objection? and nobody objects, then the Chair announces The bill is
approved on second reading. If there was any doubt as to the vote, any motion to divide would have
been proper. So, if that motion is not presented, we assume that the House approves the
measure. So I believe there is substantial compliance here, and if anybody wants a division of the
House he can always ask for it, and the Chair can announce how many are in favor and how many
are against.[22]
Indeed, it is no impeachment of the method to say that some other way would be better, more
accurate and even more just.[23] The advantages or disadvantages, the wisdom or folly of a method
do not present any matter for judicial consideration.[24] In the words of the U.S. Circuit Court of
Appeals, this Court cannot provide a second opinion on what is the best procedure. Notwithstanding
the deference and esteem that is properly tendered to individual congressional actors, our deference
and esteem for the institution as a whole and for the constitutional command that the institution be
allowed to manage its own affairs precludes us from even attempting a diagnosis of the problem.[25]
Nor does the Constitution require that the yeas and the nays of the Members be taken every time
a House has to vote, except only in the following instances: upon the last and third readings of a
bill,[26] at the request of one-fifth of the Members present,[27] and in repassing a bill over the veto of
the President.[28] Indeed, considering the fact that in the approval of the original bill the votes of the
Members by yeas and nays had already been taken, it would have been sheer tedium to repeat the
process.
Petitioners claim that they were prevented from seeking reconsideration allegedly as a result of
the precipitate suspension and subsequent adjournment of the session.[29] It would appear, however,
that the session was suspended to allow the parties to settle the problem, because when it resumed
at 3:40 p.m. on that day Rep. Arroyo did not say anything anymore.While it is true that the Majority
Leader moved for adjournment until 4 p.m. of Wednesday of the following week, Rep. Arroyo could at
least have objected if there was anything he wanted to say. The fact, however, is that he did not. The
Journal of November 21, 1996 of the House shows:
ADJOURNMENT OF SESSION
On motion of Mr. Albano, there being no objection, the Chair declared the session adjourned until four
oclock in the afternoon of Wednesday, November 27, 1996.
It was 3:40 p.m. Thursday, November 21, 1996. (emphasis added)
This Journal was approved on December 2, 1996. Again, no one objected to its approval except Rep.
Lagman.
It is thus apparent that petitioners predicament was largely of their own making. Instead of
submitting the proper motions for the House to act upon, petitioners insisted on the pendency of Rep.
155

Arroyos question as an obstacle to the passage of the bill. But Rep. Arroyos question was not, in form
or substance, a point of order or a question of privilege entitled to precedence.[30] And even if Rep.
Arroyos question were so, Rep. Albanos motion to adjourn would have precedence and would have
put an end to any further consideration of the question.[31]
Given this fact, it is difficult to see how it can plausibly be contended that in signing the bill which
became R.A. No. 8240, respondent Speaker of the House be acted with grave abuse of his
discretion. Indeed, the phrase grave abuse of discretion amounting to lack or excess of jurisdiction
has a settled meaning in the jurisprudence of procedure. It means such capricious and whimsical
exercise of judgment by a tribunal exercising judicial or quasi judicial power as to amount to lack of
power. As Chief Justice Concepcion himself said in explaining this provision, the power granted to the
courts by Art. VIII, 1 extends to cases where a branch of the government or any of its officials has
acted without jurisdiction or in excess of jurisdiction, or so capriciously as to constitute an abuse of
discretion amounting to excess of jurisdiction.[32]
Here, the matter complained of concerns a matter of internal procedure of the House with which
the Court should not be concerned. To repeat, the claim is not that there was no quorumbut only that
Rep. Arroyo was effectively prevented from questioning the presence of a quorum. Rep. Arroyos
earlier motion to adjourn for lack of quorum had already been defeated, as the roll call established the
existence of a quorum. The question of quorum cannot be raised repeatedly especially when the
quorum is obviously present for the purpose of delaying the business of the House.[33] Rep. Arroyo
waived his objection by his continued interpellation of the sponsor for in so doing he in effect
acknowledged the presence of a quorum.[34]
At any rate it is noteworthy that of the 111 members of the House earlier found to be present on
November 21, 1996, only the five, i.e., petitioners in this case, are questioning the manner by which
the conference committee report on H. No. 7198 was approved on that day. No one, except Rep.
Arroyo, appears to have objected to the manner by which the report was approved. Rep. John Henry
Osmea did not participate in the bicameral conference committee proceedings.[35] Rep. Lagman and
Rep. Zamora objected to the report[36] but not to the manner it was approved; while it is said that, if
voting had been conducted, Rep. Taada would have voted in favor of the conference committee
report.[37]
Fourth. Under the enrolled bill doctrine, the signing of H. No. 7198 by the Speaker of the House
and the President of the Senate and the certification by the secretaries of both Houses of Congress
that it was passed on November 21, 1996 are conclusive of its due enactment. Much energy and
learning is devoted in the separate opinion of Justice Puno, joined by Justice Davide, to disputing this
doctrine. To be sure, there is no claim either here or in the decision in the EVAT cases [Tolentino v.
Secretary of Finance] that the enrolled bill embodies a conclusive presumption. In one case[38] we
went behind an enrolled bill and consulted the Journal to determine whether certain provisions of a
statute had been approved by the Senate.
But, where as here there is no evidence to the contrary, this Court will respect the certification of
the presiding officers of both Houses that a bill has been duly passed. Under this rule, this Court has
refused to determine claims that the three-fourths vote needed to pass a proposed amendment to the
Constitution had not been obtained, because a duly authenticated bill or resolution imports absolute
verity and is binding on the courts.[39] This Court quoted from Wigmore on Evidence the following
excerpt which embodies good, if old-fashioned, democratic theory:
The truth is that many have been carried away with the righteous desire to check at any cost the
misdoings of Legislatures. They have set such store by the Judiciary for this purpose that they have
almost made them a second and higher Legislature. But they aim in the wrong direction. Instead of
trusting a faithful Judiciary to check an inefficient Legislature, they should turn to improve the
Legislature. The sensible solution is not to patch and mend casual errors by asking the Judiciary to
violate legal principle and to do impossibilities with the Constitution; but to represent ourselves with
156

competent, careful, and honest legislators, the work of whose hands on the statute-roll may come to
reflect credit upon the name of popular government.[40]
This Court has refused to even look into allegations that the enrolled bill sent to the President
contained provisions which had been surreptitiously inserted in the conference committee:
[W]here allegations that the constitutional procedures for the passage of bills have not been observed
have no more basis than another allegation that the Conference Committee surreptitiously inserted
provisions into a bill which it had prepared, we should decline the invitation to go behind the enrolled
copy of the bill. To disregard the enrolled bill rule in such cases would be to disregard the respect due
the other two departments of our government.[41]
It has refused to look into charges that an amendment was made upon the last reading of a bill in
violation of Art. VI, 26(2) of the Constitution that upon the last reading of a bill, no amendment shall
be allowed. [42]
In other cases,[43] this Court has denied claims that the tenor of a bill was otherwise than as
certified by the presiding officers of both Houses of Congress.
The enrolled bill doctrine, as a rule of evidence, is well established. It is cited with approval by text
writers here and abroad.[44] The enrolled bill rule rests on the following considerations:
. . . As the President has no authority to approve a bill not passed by Congress, an enrolled Act in the
custody of the Secretary of State, and having the official attestations of the Speaker of the House of
Representatives, of the President of the Senate, and of the President of the United States, carries, on
its face, a solemn assurance by the legislative and executive departments of the government,
charged, respectively, with the duty of enacting and executing the laws, that it was passed by
Congress. The respect due to coequal and independent departments requires the judicial department
to act upon that assurance, and to accept, as having passed Congress, all bills authenticated in the
manner stated; leaving the court to determine, when the question properly arises, whether the Act, so
authenticated, is in conformity with the Constitution.[45]
To overrule the doctrine now, as the dissent urges, is to repudiate the massive teaching of our
cases and overthrow an established rule of evidence.
Indeed, petitioners have advanced no argument to warrant a departure from the rule, except to
say that, with a change in the membership of the Court, the three new members may be assumed to
have an open mind on the question of the enrolled bill rule. Actually, not three but four (Cruz,
Feliciano, Bidin, and Quiason, JJ.) have departed from the Court since our decision in the EVAT
cases and their places have since been taken by four new members (Francisco, Hermosisima,
Panganiban, and Torres, JJ.) Petitioners are thus simply banking on the change in the membership of
the Court.
Moreover, as already noted, the due enactment of the law in question is confirmed by the Journal
of the House of November 21, 1996 which shows that the conference committee report on H. No.
7198, which became R.A. No. 8240, was approved on that day. The keeping of the Journal is
required by the Constitution. Art. VI, 16(4) provides:
Each House shall keep a Journal of its proceedings, and from time to time publish the same,
excepting such parts as may, in its judgment, affect national security; and the yeas and nays on any
question shall, at the request of one-fifth of the Members present, be entered in the Journal.
Each House shall also keep a Record of its proceedings.
The Journal is regarded as conclusive with respect to matters that are required by the
Constitution to be recorded therein.[46] With respect to other matters, in the absence of evidence to
the contrary, the Journals have also been accorded conclusive effect. Thus, in United States v.
Pons,[47] this Court spoke of the imperatives of public policy for regarding the Journals as public
memorials of the most permanent character, thus: They should be public, because all are required to
conform to them; they should be permanent, that rights acquired today upon the faith of what has
been declared to be law shall not be destroyed tomorrow, or at some remote period of time, by facts
157

resting only in the memory of individuals. As already noted, the bill which became R.A. No. 8240 is
shown in the Journal. Hence its due enactment has been duly proven.
___________________
It would be an unwarranted invasion of the prerogative of a coequal department for this Court
either to set aside a legislative action as void because the Court thinks the House has disregarded its
own rules of procedure, or to allow those defeated in the political arena to seek a rematch in the
judicial forum when petitioners can find their remedy in that department itself. The Court has not been
invested with a roving commission to inquire into complaints, real or imagined, of legislative
skullduggery. It would be acting in excess of its power and would itself be guilty of grave abuse of its
discretion were it to do so. The suggestion made in a case[48] may instead appropriately be made
here: petitioners can seek the enactment of a new law or the repeal or amendment of R.A. No.
8240. In the absence of anything to the contrary, the Court must assume that Congress or any House
thereof acted in the good faith belief that its conduct was permitted by its rules, and deference rather
than disrespect is due the judgment of that body.[49]
WHEREFORE, the petition for certiorari and prohibition is DISMISSED.
SO ORDERED.
Narvasa, C.J., Padilla, Melo, Kapunan, Francisco, and Hermosisima, Jr., JJ., concur.
Romero, J., has a separate opinion.
Puno, J., has a separate concurring and dissenting opinion.
Davide, Jr., J., joined the concurring and dissenting opinion of Justice Puno.
Vitug, J., has a separate concurring opinion.
Regalado, J., in the result.
Bellosillo, J., took no part due to relationship with parties.
Panganiban, J., took no part. Former counsel of a party.
Torres, Jr., J., on leave during the deliberations.

G.R. No. 127685 July 23, 1998

BLAS F. OPLE, petitioner,
vs.
RUBEN D. TORRES, ALEXANDER AGUIRRE, HECTOR VILLANUEVA, CIELITO HABITO,
ROBERT BARBERS, CARMENCITA REODICA, CESAR SARINO, RENATO VALENCIA, TOMAS
P. AFRICA, HEAD OF THE NATIONAL COMPUTER CENTER and CHAIRMAN OF THE
COMMISSION ON AUDIT, respondents.

PUNO, J.:
The petition at bar is a commendable effort on the part of Senator Blas F. Ople to prevent the
shrinking of the right to privacy, which the revered Mr. Justice Brandeis considered as "the most
comprehensive of rights and the right most valued by civilized men." 1 Petitioner Ople prays that we
invalidate Administrative Order No. 308 entitled "Adoption of a National Computerized
Identification Reference System" on two important constitutional grounds, viz: one, it is a
usurpation of the power of Congress to legislate, and two, it impermissibly intrudes on our
citizenry's protected zone of privacy. We grant the petition for the rights sought to be
vindicated by the petitioner need stronger barriers against further erosion.
A.O. No. 308 was issued by President Fidel V. Ramos On December 12, 1996 and reads as
follows:
ADOPTION OF A NATIONAL COMPUTERIZED
IDENTIFICATION REFERENCE SYSTEM
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WHEREAS, there is a need to provide Filipino citizens and foreign residents with the
facility to conveniently transact business with basic service and social security providers
and other government instrumentalities;
WHEREAS, this will require a computerized system to properly and efficiently identify
persons seeking basic services on social security and reduce, if not totally eradicate
fraudulent transactions and misrepresentations;
WHEREAS, a concerted and collaborative effort among the various basic services and
social security providing agencies and other government intrumentalities is required to
achieve such a system;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by
virtue of the powers vested in me by law, do hereby direct the following:
Sec. 1. Establishment of a National Compoterized Identification Reference System. A
decentralized Identification Reference System among the key basic services and social
security providers is hereby established.
Sec. 2. Inter-Agency Coordinating Committee. An Inter-Agency Coordinating Committee
(IACC) to draw-up the implementing guidelines and oversee the implementation of the
System is hereby created, chaired by the Executive Secretary, with the following as
members:
Head, Presidential Management Staff
Secretary, National Economic Development Authority
Secretary, Department of the Interior and Local Government
Secretary, Department of Health
Administrator, Government Service Insurance System,
Administrator, Social Security System,
Administrator, National Statistics Office
Managing Director, National Computer Center.
Sec. 3. Secretariat. The National Computer Center (NCC) is hereby designated as
secretariat to the IACC and as such shall provide administrative and technical support to
the IACC.
Sec. 4. Linkage Among Agencies. The Population Reference Number (PRN) generated by
the NSO shall serve as the common reference number to establish a linkage among
concerned agencies. The IACC Secretariat shall coordinate with the different Social
Security and Services Agencies to establish the standards in the use of Biometrics
Technology and in computer application designs of their respective systems.
Sec. 5. Conduct of Information Dissemination Campaign. The Office of the Press
Secretary, in coordination with the National Statistics Office, the GSIS and SSS as lead
agencies and other concerned agencies shall undertake a massive tri-media information
dissemination campaign to educate and raise public awareness on the importance and
use of the PRN and the Social Security Identification Reference.
Sec. 6. Funding. The funds necessary for the implementation of the system shall be
sourced from the respective budgets of the concerned agencies.
Sec. 7. Submission of Regular Reports. The NSO, GSIS and SSS shall submit regular
reports to the Office of the President through the IACC, on the status of implementation of
this undertaking.
Sec. 8. Effectivity. This Administrative Order shall take effect immediately.
DONE in the City of Manila, this 12th day of December in the year of Our Lord, Nineteen
Hundred and Ninety-Six.
(SGD.) FIDEL V. RAMOS
A.O. No. 308 was published in four newspapers of general circulation on January 22, 1997 and
January 23, 1997. On January 24, 1997, petitioner filed the instant petition against
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respondents, then Executive Secretary Ruben Torres and the heads of the government
agencies, who as members of the Inter-Agency Coordinating Committee, are charged with the
implementation of A.O. No. 308. On April 8, 1997, we issued a temporary restraining order
enjoining its implementation.
Petitioner contends:
A. THE ESTABLISNMENT OF A NATIONAL COMPUTERIZED IDENTIFICATION
REFERENCE SYSTEM REQUIRES A LEGISLATIVE ACT. THE ISSUANCE OF A.O. NO. 308
BY THE PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES IS, THEREFORE, AN
UNCONSTITUTIONAL USURPATION OF THE LEGISLATIVE POWERS OF THE CONGRESS
OF THE REPUBLIC OF THE PHILIPPINES.
B. THE APPROPRIATION OF PUBLIC FUNDS BY THE PRESIDENT FOR THE
IMPLEMENTATION OF A.O. NO. 308 IS AN UNCONSTITUTIONAL USURPATION OF THE
EXCLUSIVE RIGHT OF CONGRESS TO APPROPRIATE PUBLIC FUNDS FOR
EXPENDITURE.
C. THE IMPLEMENTATION OF A.O. NO. 308 INSIDIOUSLY LAYS THE GROUNDWORK
FOR A SYSTEM WHICH WILL VIOLATE THE BILL OF RIGHTS ENSHRINED IN THE
CONSTITUTION. 2
Respondents counter-argue:
A. THE INSTANT PETITION IS NOT A JUSTICIABLE CASE AS WOULD WARRANT A
JUDICIAL REVIEW;
B. A.O. NO. 308 [1996] WAS ISSUED WITHIN THE EXECUTIVE AND ADMINISTRATIVE
POWERS OF THE PRESIDENT WITHOUT ENCROACHING ON THE LEGISLATIVE
POWERS OF CONGRESS;
C. THE FUNDS NECESSARY FOR THE IMPLEMENTATION OF THE IDENTIFICATION
REFERENCE SYSTEM MAY BE SOURCED FROM THE BUDGETS OF THE CONCERNED
AGENCIES;
D. A.O. NO. 308 [1996] PROTECTS AN INDIVIDUAL'S INTEREST IN PRIVACY. 3
We now resolve.
I
As is usual in constitutional litigation, respondents raise the threshold issues relating to the
standing to sue of the petitioner and the justiciability of the case at bar. More specifically,
respondents aver that petitioner has no legal interest to uphold and that the implementing
rules of A.O. No. 308 have yet to be promulgated.
These submissions do not deserve our sympathetic ear. Petitioner Ople is a distinguished
member of our Senate. As a Senator, petitioner is possessed of the requisite standing to bring
suit raising the issue that the issuance of A.O. No. 308 is a usurpation of legislative
power. 4 As taxpayer and member of the Government Service Insurance System (GSIS),
petitioner can also impugn the legality of the misalignment of public funds and the misuse of
GSIS funds to implement A.O. No. 308. 5
The ripeness for adjudication of the Petition at bar is not affected by the fact that the
implementing rules of A.O. No. 308 have yet to be promulgated. Petitioner Ople assails A.O.
No. 308 as invalid per se and as infirmed on its face. His action is not premature for the rules
yet to be promulgated cannot cure its fatal defects. Moreover, the respondents themselves
have started the implementation of A.O. No. 308 without waiting for the rules. As early as
January 19, 1997, respondent Social Security System (SSS) caused the publication of a notice
to bid for the manufacture of the National Identification (ID) card. 6 Respondent Executive
Secretary Torres has publicly announced that representatives from the GSIS and the SSS
have completed the guidelines for the national identification system. 7 All signals from the
respondents show their unswerving will to implement A.O. No. 308 and we need not wait for
the formality of the rules to pass judgment on its constitutionality. In this light, the dissenters
160

insistence that we tighten the rule on standing is not a commendable stance as its result
would be to throttle an important constitutional principle and a fundamental right.
II
We now come to the core issues. Petitioner claims that A.O. No. 308 is not a mere
administrative order but a law and hence, beyond the power of the President to issue. He
alleges that A.O. No. 308 establishes a system of identification that is all-encompassing in
scope, affects the life and liberty of every Filipino citizen and foreign resident, and more
particularly, violates their right to privacy.
Petitioner's sedulous concern for the Executive not to trespass on the lawmaking domain of
Congress is understandable. The blurring of the demarcation line between the power of the
Legislature to make laws and the power of the Executive to execute laws will disturb their
delicate balance of power and cannot be allowed. Hence, the exercise by one branch of
government of power belonging to another will be given a stricter scrutiny by this Court.
The line that delineates Legislative and Executive power is not indistinct. Legislative power is
"the authority, under the Constitution, to make laws, and to alter and repeal them." 8 The
Constitution, as the will of the people in their original, sovereign and unlimited capacity, has
vested this power in the Congress of the Philippines. 9 The grant of legislative power to
Congress is broad, general and comprehensive. 10 The legislative body possesses plenary
power for all purposes of civil government. 11 Any power, deemed to be legislative by usage
and tradition, is necessarily possessed by Congress, unless the Constitution has lodged it
elsewhere. 12 In fine, except as limited by the Constitution, either expressly or impliedly,
legislative power embraces all subjects and extends to matters of general concern or common
interest. 13
While Congress is vested with the power to enact laws, the President executes the laws. 14 The
executive power is vested in the Presidents. 15 It is generally defined as the power to enforce
and administer the laws. 16 It is the power of carrying the laws into practical operation and
enforcing their due observance. 17
As head of the Executive Department, the President is the Chief Executive. He represents the
government as a whole and sees to it that all laws are enforced by the officials and employees
of his department. 18 He has control over the executive department, bureaus and offices. This
means that he has the authority to assume directly the functions of the executive department,
bureau and office or interfere with the discretion of its officials.19 Corollary to the power of
control, the President also has the duty of supervising the enforcement of laws for the
maintenance of general peace and public order. Thus, he is granted administrative power over
bureaus and offices under his control to enable him to discharge his duties effectively. 20
Administrative power is concerned with the work of applying policies and enforcing orders as
determined by proper governmental organs. 21 It enables the President to fix a uniform
standard of administrative efficiency and check the official conduct of his agents. 22 To this
end, he can issue administrative orders, rules and regulations.
Prescinding from these precepts, we hold that A.O. No. 308 involves a subject that is not
appropriate to be covered by an administrative order. An administrative order is:
Sec. 3. Administrative Orders. Acts of the President which relate to particular
aspects of governmental operation in pursuance of his duties as administrative
head shall be promulgated in administrative orders. 23
An administrative order is an ordinance issued by the President which relates to
specific aspects in the administrative operation of government. It must be in harmony
with the law and should be for the sole purpose of implementing the law and carrying
out the legislative policy. 24 We reject the argument that A.O. No. 308 implements the
legislative policy of the Administrative Code of 1987. The Code is a general law and
"incorporates in a unified document the major structural, functional and procedural
161

principles of governance." 25 and "embodies changes in administrative structure and

procedures designed to serve the
people." 26 The Code is divided into seven (7) Books: Book I deals with Sovereignty and
General Administration, Book II with the Distribution of Powers of the three branches of
Government, Book III on the Office of the President, Book IV on the Executive Branch,
Book V on Constitutional Commissions, Book VI on National Government Budgeting,
and Book VII on Administrative Procedure. These Books contain provisions on the
organization, powers and general administration of the executive, legislative and
judicial branches of government, the organization and administration of departments,
bureaus and offices under the executive branch, the organization and functions of the
Constitutional Commissions and other constitutional bodies, the rules on the national
government budget, as well as guideline for the exercise by administrative agencies of
quasi-legislative and quasi-judicial powers. The Code covers both the internal
administration of government, i.e, internal organization, personnel and recruitment,
supervision and discipline, and the effects of the functions performed by administrative
officials on private individuals or parties outside government. 27
It cannot be simplistically argued that A.O. No. 308 merely implements the Administrative
Code of 1987. It establishes for the first time a National Computerized Identification Reference
System. Such a System requires a delicate adjustment of various contending state policies
the primacy of national security, the extent of privacy interest against dossier-gathering by
government, the choice of policies, etc. Indeed, the dissent of Mr. Justice Mendoza states that
the A.O. No. 308 involves the all-important freedom of thought. As said administrative order
redefines the parameters of some basic rights of our citizenry vis-a-vis the State as well as the
line that separates the administrative power of the President to make rules and the legislative
power of Congress, it ought to be evident that it deals with a subject that should be covered
by law.
Nor is it correct to argue as the dissenters do that A.D. No. 308 is not a law because it confers
no right, imposes no duty, affords no proctection, and creates no office. Under A.O. No. 308, a
citizen cannot transact business with government agencies delivering basic services to the
people without the contemplated identification card. No citizen will refuse to get this
identification card for no one can avoid dealing with government. It is thus clear as daylight
that without the ID, a citizen will have difficulty exercising his rights and enjoying his
privileges. Given this reality, the contention that A.O. No. 308 gives no right and imposes no
duty cannot stand.
Again, with due respect, the dissenting opinions unduly expand the limits of administrative
legislation and consequently erodes the plenary power of Congress to make laws. This is
contrary to the established approach defining the traditional limits of administrative
legislation. As well stated by Fisher: ". . . Many regulations however, bear directly on the
public. It is here that administrative legislation must he restricted in its scope and application.
Regulations are not supposed to be a substitute for the general policy-making that Congress
enacts in the form of a public law. Although administrative regulations are entitled to respect,
the authority to prescribe rules and regulations is not an independent source of power to
make laws." 28
III
Assuming, arguendo, that A.O. No. 308 need not be the subject of a law, still it cannot pass
constitutional muster as an administrative legislation because facially it violates the right to
privacy. The essence of privacy is the "right to be let alone." 29 In the 1965 case of Griswold v.
Connecticut, 30 the United States Supreme Court gave more substance to the right of privacy
when it ruled that the right has a constitutional foundation. It held that there is a right of
162

privacy which can be found within the penumbras of the First, Third, Fourth, Fifth and Ninth
Amendments, 31 viz:
Specific guarantees in the Bill of Rights have penumbras formed by emanations
from these guarantees that help give them life and substance . . . various
guarantees create zones of privacy. The right of association contained in the
penumbra of the First Amendment is one, as we have seen. The Third
Amendment in its prohibition against the quartering of soldiers "in any house" in
time of peace without the consent of the owner is another facet of that privacy.
The Fourth Amendment explicitly affirms the ''right of the people to be secure in
their persons, houses and effects, against unreasonable searches and seizures."
The Fifth Amendment in its Self-Incrimination Clause enables the citizen to create
a zone of privacy which government may not force him to surrender to his
detriment. The Ninth Amendment provides: "The enumeration in the Constitution,
of certain rights, shall not be construed to deny or disparage others retained by
the people."
In the 1968 case of Morfe v. Mutuc, 32 we adopted the Griswold ruling that there is a
constitutional right to privacy. Speaking thru Mr. Justice, later Chief Justice, Enrique
Fernando, we held:
xxx xxx xxx
The Griswold case invalidated a Connecticut statute which made the use of
contraceptives a criminal offence on the ground of its amounting to an
unconstitutional invasion of the right of privacy of married persons; rightfully it
stressed "a relationship lying within the zone of privacy created by several
fundamental constitutional guarantees." It has wider implications though. The
constitutional right to privacy has come into its own.
So it is likewise in our jurisdiction. The right to privacy as such is accorded
recognition independently of its identification with liberty; in itself, it is fully
deserving of constitutional protection. The language of Prof. Emerson is
particularly apt: "The concept of limited government has always included the idea
that governmental powers stop short of certain intrusions into the personal life of
the citizen. This is indeed one of the basic distinctions between absolute and
limited government. Ultimate and pervasive control of the individual, in all
aspects of his life, is the hallmark of the absolute state. In contrast, a system of
limited government safeguards a private sector, which belongs to the individual,
firmly distinguishing it from the public sector, which the state can control.
Protection of this private sector protection, in other words, of the dignity and
integrity of the individual has become increasingly important as modern
society has developed. All the forces of a technological age industrialization,
urbanization, and organization operate to narrow the area of privacy and
facilitate intrusion into it. In modern terms, the capacity to maintain and support
this enclave of private life marks the difference between a democratic and a
totalitarian society."
Indeed, if we extend our judicial gaze we will find that the right of privacy is recognized and
enshrined in several provisions of our Constitution. 33 It is expressly recognized in section 3
(1) of the Bill of Rights:
Sec. 3. (1) The privacy of communication and correspondence shall be inviolable
except upon lawful order of the court, or when public safety or order requires
otherwise as prescribed by law.
Other facets of the right to privacy are protectad in various provisions of the Bill of
Rights, viz: 34
163

Sec. 1. No person shall be deprived of life, liberty, or property without due

process of law, nor shall any person be denied the equal protection of the laws.
Sec. 2. The right of the people to be secure in their persons, houses papers, and
effects against unreasonable searches and seizures of whatever nature and for
any purpose shall be inviolable, and no search warrant or warrant of arrest shall
issue except upon probable cause to be determined personally by the judge after
examination under oath or affirmation of the complainant and the witnesses he
may produce, and particularly describing the place to be searched and the
persons or things to be seized.
xxx xxx xxx
Sec. 6. The liberty of abode and of changing the same within the limits prescribed
by law shall not be impaired except upon lawful order of the court. Neither shall
the right to travel be impaired except in the interest of national security, public
safety, or public health as may be provided by law.
xxx xxx xxx
Sec. 8. The right of the people, including those employed in the public and private
sectors, to form unions, associations, or societies for purposes not contrary to
law shall not be abridged.
Sec. 17. No person shall be compelled to be a witness against himself.
Zones of privacy are likewise recognized and protected in our laws. The Civil Code provides
that "[e]very person shall respect the dignity, personality, privacy and peace of mind of his
neighbors and other persons" and punishes as actionable torts several acts by a person of
meddling and prying into the privacy of another. 35 It also holds a public officer or employee or
any private individual liable for damages for any violation of the rights and liberties of another
person, 36 and recognizes the privacy of letters and other private communications. 37 The
Revised Penal Code makes a crime the violation of secrets by an officer, 38the revelation of
trade and industrial secrets, 39 and trespass to dwelling. 40 Invasion of privacy is an offense in
special laws like the Anti-Wiretapping Law, 41 the Secrecy of Bank Deposits Act 42 and the
Intellectual Property Code. 43 The Rules of Court on privileged communication likewise
recognize the privacy of certain information. 44
Unlike the dissenters, we prescind from the premise that the right to privacy is a fundamental
right guaranteed by the Constitution, hence, it is the burden of government to show that A.O.
No. 308 is justified by some compelling state interest and that it is narrowly drawn. A.O. No.
308 is predicated on two considerations: (1) the need to provides our citizens and foreigners
with the facility to conveniently transact business with basic service and social security
providers and other government instrumentalities and (2) the need to reduce, if not totally
eradicate, fraudulent transactions and misrepresentations by persons seeking basic services.
It is debatable whether these interests are compelling enough to warrant the issuance of A.O.
No. 308. But what is not arguable is the broadness, the vagueness, the overbreadth of A.O.
No. 308 which if implemented will put our people's right to privacy in clear and present
danger.
The heart of A.O. No. 308 lies in its Section 4 which provides for a Population Reference
Number (PRN) as a "common reference number to establish a linkage among concerned
agencies" through the use of "Biometrics Technology" and "computer application designs."
Biometry or biometrics is "the science of the applicatin of statistical methods to biological
facts; a mathematical analysis of biological data." 45 The term "biometrics" has evolved into a
broad category of technologies which provide precise confirmation of an individual's identity
through the use of the individual's own physiological and behavioral characteristics. 46 A
physiological characteristic is a relatively stable physical characteristic such as a fingerprint,
retinal scan, hand geometry or facial features. A behavioral characteristic is influenced by the
164

individual's personality and includes voice print, signature and keystroke. 47 Most biometric
idenfication systems use a card or personal identificatin number (PIN) for initial identification.
The biometric measurement is used to verify that the individual holding the card or entering
the PIN is the legitimate owner of the card or PIN. 48
A most common form of biological encoding is finger-scanning where technology scans a
fingertip and turns the unique pattern therein into an individual number which is called a
biocrypt. The biocrypt is stored in computer data banks 49 and becomes a means of identifying
an individual using a service. This technology requires one's fingertip to be scanned every
time service or access is provided. 50 Another method is the retinal scan. Retinal scan
technology employs optical technology to map the capillary pattern of the retina of the eye.
This technology produces a unique print similar to a finger print. 51 Another biometric method
is known as the "artificial nose." This device chemically analyzes the unique combination of
substances excreted from the skin of people. 52 The latest on the list of biometric
achievements is the thermogram. Scientists have found that by taking pictures of a face using
infra-red cameras, a unique heat distribution pattern is seen. The different densities of bone,
skin, fat and blood vessels all contribute to the individual's personal "heat signature." 53
In the last few decades, technology has progressed at a galloping rate. Some science fictions
are now science facts. Today, biometrics is no longer limited to the use of fingerprint to
identify an individual. It is a new science that uses various technologies in encoding any and
all biological characteristics of an individual for identification. It is noteworthy that A.O. No.
308 does not state what specific biological characteristics and what particular biometrics
technology shall be used to identify people who will seek its coverage. Considering the
banquest of options available to the implementors of A.O. No. 308, the fear that it threatens
the right to privacy of our people is not groundless.
A.O. No. 308 should also raise our antennas for a further look will show that it does not state
whether encoding of data is limited to biological information alone for identification purposes.
In fact, the Solicitor General claims that the adoption of the Identification Reference System
will contribute to the "generation of population data for development planning." 54 This is an
admission that the PRN will not be used solely for identification but the generation of other
data with remote relation to the avowed purposes of A.O. No. 308. Clearly, the indefiniteness
of A.O. No. 308 can give the government the roving authority to store and retrieve information
for a purpose other than the identification of the individual through his PRN.
The potential for misuse of the data to be gathered under A.O. No. 308 cannot be undarplayed
as the dissenters do. Pursuant to said administrative order, an individual must present his
PRN everytime he deals with a government agency to avail of basic services and security. His
transactions with the government agency will necessarily be recorded whether it be in the
computer or in the documentary file of the agency. The individual's file may include his
transactions for loan availments, income tax returns, statement of assets and liabilities,
reimbursements for medication, hospitalization, etc. The more frequent the use of the PRN,
the better the chance of building a huge formidable informatin base through the electronic
linkage of the files. 55 The data may be gathered for gainful and useful government purposes;
but the existence of this vast reservoir of personal information constitutes a covert invitation
to misuse, a temptation that may be too great for some of our authorities to resist. 56
We can even grant, arguendo, that the computer data file will be limited to the name, address
and other basic personal infomation about the individual. 57 Even that hospitable assumption
will not save A.O. No. 308 from constitutional infirmity for again said order does not tell us in
clear and categorical terms how these information gathered shall he handled. It does not
provide who shall control and access the data, under what circumstances and for what
purpose. These factors are essential to safeguard the privacy and guaranty the integrity of the
information. 58 Well to note, the computer linkage gives other government agencies access to
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the information. Yet, there are no controls to guard against leakage of information. When the
access code of the control programs of the particular computer system is broken, an intruder,
without fear of sanction or penalty, can make use of the data for whatever purpose, or worse,
manipulate the data stored within the system. 59
It is plain and we hold that A.O. No. 308 falls short of assuring that personal information which
will be gathered about our people will only be processed for unequivocally specified
purposes. 60 The lack of proper safeguards in this regard of A.O. No. 308 may interfere with the
individual's liberty of abode and travel by enabling authorities to track down his movement; it
may also enable unscrupulous persons to access confidential information and circumvent the
right against self-incrimination; it may pave the way for "fishing expeditions" by government
authorities and evade the right against unreasonable searches and seizures. 61 The
possibilities of abuse and misuse of the PRN, biometrics and computer technology are
accentuated when we consider that the individual lacks control over what can be read or
placed on his ID, much less verify the correctness of the data encoded. 62 They threaten the
very abuses that the Bill of Rights seeks to prevent. 63
The ability of sophisticated data center to generate a comprehensive cradle-to-grave dossier
on an individual and transmit it over a national network is one of the most graphic threats of
the computer revolution. 64 The computer is capable of producing a comprehensive dossier on
individuals out of information given at different times and for varied purposes. 65 It can
continue adding to the stored data and keeping the information up to date. Retrieval of stored
date is simple. When information of a privileged character finds its way into the computer, it
can be extracted together with other data on the subject. 66Once extracted, the information is
putty in the hands of any person. The end of privacy begins.
Though A.O. No. 308 is undoubtedly not narrowly drawn, the dissenting opinions would
dismiss its danger to the right to privacy as speculative and hypothetical. Again, we cannot
countenance such a laidback posture. The Court will not be true to its role as the ultimate
guardian of the people's liberty if it would not immediately smother the sparks that endanger
their rights but would rather wait for the fire that could consume them.
We reject the argument of the Solicitor General that an individual has a reasonable
expectation of privacy with regard to the Natioal ID and the use of biometrics technology as it
stands on quicksand. The reasonableness of a person's expectation of privacy depends on a
two-part test: (1) whether by his conduct, the individual has exhibited an expectation of
privacy; and (2) whether this expectation is one that society recognizes as reasonable. 67 The
factual circumstances of the case determines the reasonableness of the
expectation. 68 However, other factors, such as customs, physical surroundings and practices
of a particular activity, may serve to create or diminish this expectation. 69 The use of
biometrics and computer technology in A.O. No. 308 does not assure the individual of a
reasonable expectation of privacy. 70 As technology advances, the level of reasonably
expected privacy decreases. 71 The measure of protection granted by the reasonable
expectation diminishes as relevant technology becomes more widely accepted. 72 The security
of the computer data file depends not only on the physical inaccessibility of the file but also
on the advances in hardware and software computer technology. A.O. No. 308 is so widely
drawn that a minimum standard for a reasonable expectation of privacy, regardless of
technology used, cannot be inferred from its provisions.
The rules and regulations to be by the IACC cannot remedy this fatal defect. Rules and
regulations merely implement the policy of the law or order. On its face, A.O. No. gives the
IACC virtually infettered discretion to determine the metes and bounds of the ID System.
Nor do your present laws prvide adequate safeguards for a reasonable expectation of privacy.
Commonwealth Act. No. 591 penalizes the disclosure by any person of data furnished by the
individual to the NSO with imprisonment and fine. 73 Republic Act. No. 1161 prohibits public
166

disclosure of SSS employment records and reports. 74 These laws, however, apply to records
and data with the NSO and the SSS. It is not clear whether they may be applied to data with
the other government agencies forming part of the National ID System. The need to clarify the
penal aspect of A.O. No. 308 is another reason why its enactment should be given to
Congress.
Next, the Solicitor General urges us to validate A.O. No. 308's abridgment of the right of
privacy by using the rational relationship test. 75 He stressed that the purposes of A.O. No. 308
are: (1) to streamline and speed up the implementation of basic government services, (2)
eradicate fraud by avoiding duplication of services, and (3) generate population data for
development planning. He cocludes that these purposes justify the incursions into the right to
privacy for the means are rationally related to the end. 76
We are not impressed by the argument. In Morfe v. Mutuc, 77 we upheld the constitutionality of
R.A. 3019, the Anti-Graft and Corrupt Practices Act, as a valid police power measure. We
declared that the law, in compelling a public officer to make an annual report disclosing his
assets and liabilities, his sources of income and expenses, did not infringe on the individual's
right to privacy. The law was enacted to promote morality in public administration by
curtailing and minimizing the opportunities for official corruption and maintaining a standard
of honesty in the public service. 78
The same circumstances do not obtain in the case at bar. For one, R.A. 3019 is a statute, not
an administrative order. Secondly, R.A. 3019 itself is sufficiently detailed. The law is clear on
what practices were prohibited and penalized, and it was narrowly drawn to avoid abuses. IN
the case at bar, A.O. No. 308 may have been impelled by a worthy purpose, but, it cannot pass
constitutional scrutiny for it is not narrowly drawn. And we now hod that when the integrity of
a fundamental right is at stake, this court will give the challenged law, administrative order,
rule or regulation a stricter scrutiny. It will not do for the authorities to invoke the presumption
of regularity in the performance of official duties. Nor is it enough for the authorities to prove
that their act is not irrational for a basic right can be diminished, if not defeated, even when
the government does not act irrationally. They must satisfactorily show the presence of
compelling state interests and that the law, rule or regulation is narrowly drawn to preclude
abuses. This approach is demanded by the 1987 Constitution whose entire matrix is designed
to protect human rights and to prevent authoritarianism. In case of doubt, the least we can do
is to lean towards the stance that will not put in danger the rights protected by the
Constitutions.
The case of Whalen v. Roe 79 cited by the Solicitor General is also off-line. In Whalen, the
United States Supreme Court was presented with the question of whether the State of New
York could keep a centralized computer record of the names and addresses of all persons
who obtained certain drugs pursuant to a doctor's prescription. The New York State
Controlled Substance Act of 1972 required physicians to identify parties obtaining
prescription drugs enumerated in the statute, i.e., drugs with a recognized medical use but
with a potential for abuse, so that the names and addresses of the patients can be recorded in
a centralized computer file of the State Department of Health. The plaintiffs, who were patients
and doctors, claimed that some people might decline necessary medication because of their
fear that the computerized data may be readily available and open to public disclosure; and
that once disclosed, it may stigmatize them as drug addicts. 80 The plaintiffs alleged that the
statute invaded a constitutionally protected zone of privacy, i.e., the individual interest in
avoiding disclosure of personal matters, and the interest in independence in making certain
kinds of important decisions. The U.S. Supreme Court held that while an individual's interest
in avoiding disclosuer of personal matter is an aspect of the right to privacy, the statute did
not pose a grievous threat to establish a constitutional violation. The Court found that the
statute was necessary to aid in the enforcement of laws designed to minimize the misuse of
167

dangerous drugs. The patient-identification requirement was a product of an orderly and

rational legislative decision made upon recommmendation by a specially appointed
commission which held extensive hearings on the matter. Moreover, the statute was narrowly
drawn and contained numerous safeguards against indiscriminate disclosure. The statute laid
down the procedure and requirements for the gathering, storage and retrieval of the
informatin. It ebumerated who were authorized to access the data. It also prohibited public
disclosure of the data by imposing penalties for its violation. In view of these safeguards, the
infringement of the patients' right to privacy was justified by a valid exercise of police power.
As we discussed above, A.O. No. 308 lacks these vital safeguards.
Even while we strike down A.O. No. 308, we spell out in neon that the Court is not per
se agains the use of computers to accumulate, store, process, retvieve and transmit data to
improve our bureaucracy. Computers work wonders to achieve the efficiency which both
government and private industry seek. Many information system in different countries make
use of the computer to facilitate important social objective, such as better law enforcement,
faster delivery of public services, more efficient management of credit and insurance
programs, improvement of telecommunications and streamlining of financial
activities. 81 Used wisely, data stored in the computer could help good administration by
making accurate and comprehensive information for those who have to frame policy and
make key decisions. 82 The benefits of the computer has revolutionized information
technology. It developed the internet, 83 introduced the concept of cyberspace 84 and the
information superhighway where the individual, armed only with his personal computer, may
surf and search all kinds and classes of information from libraries and databases connected
to the net.
In no uncertain terms, we also underscore that the right to privacy does not bar all incursions
into individual privacy. The right is not intended to stifle scientific and technological
advancements that enhance public service and the common good. It merely requires that the
law be narrowly focused 85 and a compelling interest justify such intrusions. 86 Intrusions into
the right must be accompanied by proper safeguards and well-defined standards to prevent
unconstitutional invasions. We reiterate that any law or order that invades individual privacy
will be subjected by this Court to strict scrutiny. The reason for this stance was laid down
in Morfe v. Mutuc, to wit:
The concept of limited government has always included the idea that
governmental powers stop short of certain intrusions into the personal life of the citizen.
This is indeed one of the basic disctinctions between absolute and limited government.
Ultimate and pervasive control of the individual, in all aspects of his life, is the hallmark
of the absolute state. In contrast, a system of limited government safeguards a private
sector, which belongs to the individual, firmly distinguishing it from the public sector,
which the state can control. Protection of this private sector protection, in other
words, of the dignity and integrity of the individual has become increasingly important
as modern society has developed. All the forces of a technological age
industrialization, urbanization, and organization operate to narrow the area of privacy
and facilitate intrusion into it. In modern terms, the capacity to maintain and support this
enclave of private life marks the difference between a democratic and a totalitarian
society. 87
IV
The right to privacy is one of the most threatened rights of man living in a mass society. The
threats emanate from various sources governments, journalists, employers, social
scientists, etc. 88 In th case at bar, the threat comes from the executive branch of government
which by issuing A.O. No. 308 pressures the people to surrender their privacy by giving
information about themselves on the pretext that it will facilitate delivery of basic services.
168

Given the record-keeping power of the computer, only the indifferent fail to perceive the
danger that A.O. No. 308 gives the government the power to compile a devastating dossier
against unsuspecting citizens. It is timely to take note of the well-worded warning of Kalvin,
Jr., "the disturbing result could be that everyone will live burdened by an unerasable record of
his past and his limitations. In a way, the threat is that because of its record-keeping, the
society will have lost its benign capacity to forget." 89 Oblivious to this counsel, the dissents
still say we should not be too quick in labelling the right to privacy as a fundamental right. We
close with the statement that the right to privacy was not engraved in our Constitution for
flattery.
IN VIEW WHEREOF, the petition is granted and Adminisrative Order No. 308 entitled "Adoption
of a National Computerized Identification Reference System" declared null and void for being
unconstitutional.
SO ORDERED.

EN BANC

KILUSANG MAYO UNO, G.R. No. 167798

NATIONAL FEDERATION OF
LABOR UNIONS-KILUSANG
MAYO UNO (NAFLU-KMU),
JOSELITO V. USTAREZ,
EMILIA P. DAPULANG,
SALVADOR T. CARRANZA,
MARTIN T. CUSTODIO, JR. and
ROQUE M. TAN,
Petitioners,
- versus
THE DIRECTOR-GENERAL,
NATIONAL ECONOMIC
DEVELOPMENT AUTHORITY,
and THE SECRETARY,
DEPARTMENT OF BUDGET and
MANAGEMENT,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CARPIO, J.:

This case involves two consolidated petitions for certiorari, prohibition, and mandamus under Rule 65
of the Rules of Court, seeking the nullification of Executive Order No. 420 (EO 420) on the ground
that it is unconstitutional.

EO 420, issued by President Gloria Macapagal-Arroyo on 13 April 2005, reads:

REQUIRING ALL GOVERNMENT AGENCIES AND GOVERNMENT-OWNED AND

CONTROLLED CORPORATIONS TO STREAMLINE AND HARMONIZE THEIR
IDENTIFICATION (ID) SYSTEMS, AND AUTHORIZING FOR SUCH PURPOSE THE
169

DIRECTOR-GENERAL, NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY

TO IMPLEMENT THE SAME, AND FOR OTHER PURPOSES
WHEREAS, good governance is a major thrust of this Administration;
WHEREAS, the existing multiple identification systems in government have
created unnecessary and costly redundancies and higher costs to government, while
making it inconvenient for individuals to be holding several identification cards;
WHEREAS, there is urgent need to streamline and integrate the processes and
issuance of identification cards in government to reduce costs and to provide greater
convenience for those transacting business with government;
WHEREAS, a unified identification system will facilitate private businesses,
enhance the integrity and reliability of government-issued identification cards in private
transactions, and prevent violations of laws involving false names and identities.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the
Republic of the Philippines by virtue of the powers vested in me by law, do hereby direct
the following:
Section 1. Adoption of a unified multi-purpose identification (ID) system for
government. All government agencies, including government-owned and controlled
corporations, are hereby directed to adopt a unified multi-purpose ID system to ensure
the attainment of the following objectives:
a. To reduce costs and thereby lessen the financial burden on both the
government and the public brought about by the use of multiple ID cards
and the maintenance of redundant database containing the same or
related information;
b. To ensure greater convenience for those transacting business with the
government and those availing of government services;
c. To facilitate private businesses and promote the wider use of the
unified ID card as provided under this executive order;
d. To enhance the integrity and reliability of government-issued ID
cards; and
e. To facilitate access to and delivery of quality and effective government service.
Section 2. Coverage All government agencies and government-owned and
controlled corporations issuing ID cards to their members or constituents shall be
covered by this executive order.
Section 3. Data requirement for the unified ID system The data to be
collected and recorded by the participating agencies shall be limited to the following:
Name
Home Address
Sex
Picture
Signature
Date of Birth
Place of Birth
Marital Status
Names of Parents
Height
Weight
Two index fingers and two thumbmarks
Any prominent distinguishing features like moles and others
Tax Identification Number (TIN)
170

Provided that a corresponding ID number issued by the participating agency and a common
reference number shall form part of the stored ID data and, together with at least the first five items
listed above, including the print of the right thumbmark, or any of the fingerprints as collected and
stored, shall appear on the face or back of the ID card for visual verification purposes.
Section 4. Authorizing the Director-General, National Economic and
Development Authority, to Harmonize All Government Identification Systems. The
Director-General, National Economic Development Authority, is hereby authorized to
streamline and harmonize all government ID systems.
Section 5. Functions and responsibilities of the Director-General, National
Economic and Development Authority. In addition to his organic functions and
responsibilities, the Director-General, National Economic and Development Authority,
shall have the following functions and responsibilities:
a. Adopt within sixty (60) days from the effectivity of this executive order a unified
government ID system containing only such data and features, as
indicated in Section 3 above, to validly establish the identity of the card
holder:
b. Enter into agreements with local governments, through their
respective leagues of governors or mayors, the Commission on Elections
(COMELEC), and with other branches or instrumentalities of the
government, for the purpose of ensuring government-wide adoption of and
support to this effort to streamline the ID systems in government;
b. Call on any other government agency or institution, or create
subcommittees or technical working groups, to provide such assistance as
may be necessary or required for the effective performance of its
functions; and
d. Promulgate such rules or regulations as may be necessary in pursuance of the
objectives of this executive order.
Section 6. Safeguards. The Director-General, National Economic and
Development Authority, and the pertinent agencies shall adopt such safeguard as may
be necessary and adequate to ensure that the right to privacy of an individual takes
precedence over efficient public service delivery. Such safeguards shall, as a minimum,
include the following:
a. The data to be recorded and stored, which shall be used only for purposes of
establishing the identity of a person, shall be limited to those specified in
Section 3 of this executive order;
b. In no case shall the collection or compilation of other data in violation of a
persons right to privacy shall be allowed or tolerated under this order;
c. Stringent systems of access control to data in the identification system shall be
instituted;
d. Data collected and stored for this purpose shall be kept and treated as strictly
confidential and a personal or written authorization of the Owner shall be
required for access and disclosure of data;
e. The identification card to be issued shall be protected by advanced security
features and cryptographic technology; and
f. A written request by the Owner of the identification card shall be required for
any correction or revision of relevant data, or under such conditions as the
participating agency issuing the identification card shall prescribe.
Section 7. Funding. Such funds as may be recommended by the Department of
Budget and Management shall be provided to carry out the objectives of this executive
order.
171

Section 8. Repealing clause. All executive orders or issuances, or portions

thereof, which are inconsistent with this executive order, are hereby revoked, amended
or modified accordingly.
Section 9. Effectivity. This executive order shall take effect fifteen (15) days
after its publication in two (2) newspapers of general circulation.

DONE in the City of Manila, this 13th day of April, in the year of Our Lord, Two
Thousand and Five.

Thus, under EO 420, the President directs all government agencies and government-owned
and controlled corporations to adopt a uniform data collection and format for their existing
identification (ID) systems.

Petitioners in G.R. No. 167798 allege that EO 420 is unconstitutional because it constitutes
usurpation of legislative functions by the executive branch of the government. Furthermore, they
allege that EO 420 infringes on the citizens right to privacy.[1]

Petitioners in G.R. No. 167930 allege that EO 420 is void based on the following grounds:

1. EO 420 is contrary to law. It completely disregards and violates the decision of this
Honorable Court in Ople v. Torres et al., G.R. No. 127685, July 23, 1998. It also
violates RA 8282 otherwise known as the Social Security Act of 1997.

2. The Executive has usurped the legislative power of Congress as she has no power to
issue EO 420. Furthermore, the implementation of the EO will use public funds
not appropriated by Congress for that purpose.

3. EO 420 violates the constitutional provisions on the right to privacy

(i) It allows access to personal confidential data without the owners consent.

(ii) EO 420 is vague and without adequate safeguards or penalties

for any violation of its provisions.

(iii) There are no compelling reasons that will legitimize the necessity of EO
420.

4. Granting without conceding that the President may issue EO 420, the Executive
Order was issued without public hearing.
5. EO 420 violates the Constitutional provision on equal protection of laws and results in
the discriminatory treatment of and penalizes those without ID.[2]

Issues

Essentially, the petitions raise two issues. First, petitioners claim that EO 420 is a usurpation of
legislative power by the President. Second, petitioners claim that EO 420 infringes on the citizens
right to privacy.

Respondents question the legal standing of petitioners and the ripeness of the petitions. Even
assuming that petitioners are bereft of legal standing, the Court considers the issues raised under the
172

circumstances of paramount public concern or of transcendental significance to the people. The

petitions also present a justiciable controversy ripe for judicial determination because all government
entities currently issuing identification cards are mandated to implement EO 420, which petitioners
claim is patently unconstitutional. Hence, the Court takes cognizance of the petitions.

The Courts Ruling

The petitions are without merit.

On the Alleged Usurpation of Legislative Power

Section 2 of EO 420 provides, Coverage. All government agencies and government-owned and
controlled corporations issuing ID cards to their members or constituents shall be covered by this
executive order. EO 420 applies only to government entities that issue ID cards as part of their
functions under existing laws. These government entities have already been issuing ID cards even
prior to EO 420. Examples of these government entities are the GSIS,[3] SSS,[4] Philhealth,[5] Mayors
Office,[6] LTO,[7] PRC,[8] and similar government entities.
Section 1 of EO 420 directs these government entities to adopt a unified multi-purpose ID
system. Thus, all government entities that issue IDs as part of their functions under existing laws are
required to adopt a uniform data collection and format for their IDs. Section 1 of EO 420
enumerates the purposes of the uniform data collection and format, namely:

a. To reduce costs and thereby lessen the financial burden on both the
government and the public brought about by the use of multiple ID cards and the
maintenance of redundant database containing the same or related information;

b. To ensure greater convenience for those transacting business with the

government and those availing of government services;

c. To facilitate private businesses and promote the wider use of the unified
ID card as provided under this executive order;
d. To enhance the integrity and reliability of government-issued ID cards; and

e. To facilitate access to and delivery of quality and effective government

service.

In short, the purposes of the uniform ID data collection and ID format are to reduce costs, achieve
efficiency and reliability, insure compatibility, and provide convenience to the people served by
government entities.

Section 3 of EO 420 limits the data to be collected and recorded under the uniform ID system
to only 14 specific items, namely: (1) Name; (2) Home Address; (3) Sex; (4) Picture; (5) Signature;
(6) Date of Birth; (7) Place of Birth; (8) Marital Status; (9) Name of Parents; (10) Height; (11) Weight;
(12) Two index fingers and two thumbmarks; (13) Any prominent distinguishing features like moles or
others; and (14) Tax Identification Number.
173

These limited and specific data are the usual data required for personal identification by government
entities, and even by the private sector. Any one who applies for or renews a drivers license provides
to the LTO all these 14 specific data.

At present, government entities like LTO require considerably more data from applicants for
identification purposes. EO 420 will reduce the data required to be collected and recorded in the
ID databases of the government entities. Government entities cannot collect or record data, for
identification purposes, other than the 14 specific data.

Various laws allow several government entities to collect and record data for their ID systems,
either expressly or impliedly by the nature of the functions of these government entities. Under their
existing ID systems, some government entities collect and record more data than what EO 420
allows. At present, the data collected and recorded by government entities are disparate, and the IDs
they issue are dissimilar.

In the case of the Supreme Court,[9] the IDs that the Court issues to all its employees, including
the Justices, contain 15 specific data, namely: (1) Name; (2) Picture; (3) Position; (4) Office Code
Number; (5) ID Number; (6) Height; (7) Weight; (8) Complexion; (9) Color of Hair; (10) Blood Type;
(11) Right Thumbmark; (12) Tax Identification Number; (13) GSIS Policy Number; (14) Name and
Address of Person to be Notified in Case of Emergency; and (15) Signature. If we consider that the
picture in the ID can generally also show the sex of the employee, the Courts ID actually contains 16
data.

In contrast, the uniform ID format under Section 3 of EO 420 requires only the first five items
listed in Section 3, plus the fingerprint, agency number and the common reference number, or only
eight specific data. Thus, at present, the Supreme Courts ID contains far more data than the
proposed uniform ID for government entities under EO 420. The nature of the data contained in the
Supreme Court ID is also far more financially sensitive, specifically the Tax Identification Number.

Making the data collection and recording of government entities unified, and making their ID
formats uniform, will admittedly achieve substantial benefits. These benefits are savings in terms of
procurement of equipment and supplies, compatibility in systems as to hardware and software, ease
of verification and thus increased reliability of data, and the user-friendliness of a single ID format for
all government entities.
There is no dispute that government entities can individually limit the collection and recording
of their data to the 14 specific items in Section 3 of EO 420. There is also no dispute that these
government entities can individually adopt the ID format as specified in Section 3 of EO 420. Such an
act is certainly within the authority of the heads or governing boards of the government entities that
are already authorized under existing laws to issue IDs.

A unified ID system for all these government entities can be achieved in either of two
ways. First, the heads of these existing government entities can enter into a memorandum of
agreement making their systems uniform. If the government entities can individually adopt a format
for their own ID pursuant to their regular functions under existing laws, they can also adopt by mutual
agreement a uniform ID format, especially if the uniform format will result in substantial savings,
greater efficiency, and optimum compatibility. This is purely an administrative matter, and does not
involve the exercise of legislative power.

Second, the President may by executive or administrative order direct the government entities
under the Executive department to adopt a uniform ID data collection and format. Section 17, Article
174

VII of the 1987 Constitution provides that the President shall have control of all executive
departments, bureaus and offices. The same Section also mandates the President to ensure that the
laws be faithfully executed.

Certainly, under this constitutional power of control the President can direct all government
entities, in the exercise of their functions under existing laws, to adopt a uniform ID data
collection and ID format to achieve savings, efficiency, reliability, compatibility, and convenience to
the public. The Presidents constitutional power of control is self-executing and does not need any
implementing legislation.
Of course, the Presidents power of control is limited to the Executive branch of government
and does not extend to the Judiciary or to the independent constitutional commissions. Thus, EO 420
does not apply to the Judiciary, or to the COMELEC which under existing laws is also authorized to
issue voters ID cards.[10] This only shows that EO 420 does not establish a national ID system
because legislation is needed to establish a single ID system that is compulsory for all branches of
government.

The Constitution also mandates the President to ensure that the laws are faithfully
executed. There are several laws mandating government entities to reduce costs, increase efficiency,
and in general, improve public services.[11] The adoption of a uniform ID data collection and format
under EO 420 is designed to reduce costs, increase efficiency, and in general, improve public
services. Thus, in issuing EO 420, the President is simply performing the constitutional duty to ensure
that the laws are faithfully executed.

Clearly, EO 420 is well within the constitutional power of the President to promulgate. The
President has not usurped legislative power in issuing EO 420. EO 420 is an exercise of Executive
power the Presidents constitutional power of control over the Executive department. EO 420 is also
compliance by the President of the constitutional duty to ensure that the laws are faithfully executed.

Legislative power is the authority to make laws and to alter or repeal them. In issuing EO 420,
the President did not make, alter or repeal any law but merely implemented and executed existing
laws. EO 420 reduces costs, as well as insures efficiency, reliability, compatibility and user-
friendliness in the implementation of current ID systems of government entities under existing
laws. Thus, EO 420 is simply an executive issuance and not an act of legislation.

The act of issuing ID cards and collecting the necessary personal data for imprinting on the ID
card does not require legislation. Private employers routinely issue ID cards to their employees.
Private and public schools also routinely issue ID cards to their students. Even private clubs and
associations issue ID cards to their members. The purpose of all these ID cards is simply to insure
the proper identification of a person as an employee, student, or member of a club. These ID cards,
although imposed as a condition for exercising a privilege, are voluntary because a person is not
compelled to be an employee, student or member of a club.

What require legislation are three aspects of a government maintained ID card

system. First, when the implementation of an ID card system requires a special appropriation
because there is no existing appropriation for such purpose. Second, when the ID card system is
compulsory on all branches of government, including the independent constitutional commissions, as
well as compulsory on all citizens whether they have a use for the ID card or not. Third, when the ID
card system requires the collection and recording of personal data beyond what is routinely or usually
required for such purpose, such that the citizens right to privacy is infringed.
175

In the present case, EO 420 does not require any special appropriation because the existing
ID card systems of government entities covered by EO 420 have the proper appropriation or
funding. EO 420 is not compulsory on all branches of government and is not compulsory on all
citizens. EO 420 requires a very narrow and focused collection and recording of personal data while
safeguarding the confidentiality of such data. In fact, the data collected and recorded under EO 420
are far less than the data collected and recorded under the ID systems existing prior to EO 420.

EO 420 does not establish a national ID card system. EO 420 does not compel all citizens
to have an ID card. EO 420 applies only to government entities that under existing laws are already
collecting data and issuing ID cards as part of their governmental functions. Every government
entity that presently issues an ID card will still issue its own ID card under its own name. The
only difference is that the ID card will contain only the five data specified in Section 3 of EO 420, plus
the fingerprint, the agency ID number, and the common reference number which is needed for cross-
verification to ensure integrity and reliability of identification.
This Court should not interfere how government entities under the Executive department should
undertake cost savings, achieve efficiency in operations, insure compatibility of equipment and
systems, and provide user-friendly service to the public. The collection of ID data and issuance of ID
cards are day-to-day functions of many government entities under existing laws. Even the Supreme
Court has its own ID system for employees of the Court and all first and second level courts. The
Court is even trying to unify its ID system with those of the appellate courts, namely the Court of
Appeals, Sandiganbayan and Court of Tax Appeals.

There is nothing legislative about unifying existing ID systems of all courts within the
Judiciary. The same is true for government entities under the Executive department.If government
entities under the Executive department decide to unify their existing ID data collection and ID card
issuance systems to achieve savings, efficiency, compatibility and convenience, such act does not
involve the exercise of any legislative power. Thus, the issuance of EO 420 does not constitute
usurpation of legislative power.

On the Alleged Infringement of the Right to Privacy

All these years, the GSIS, SSS, LTO, Philhealth and other government entities have been issuing ID
cards in the performance of their governmental functions. There have been no complaints from
citizens that the ID cards of these government entities violate their right to privacy. There have also
been no complaints of abuse by these government entities in the collection and recording of personal
identification data.

In fact, petitioners in the present cases do not claim that the ID systems of government entities prior
to EO 420 violate their right to privacy. Since petitioners do not make such claim, they even have less
basis to complain against the unified ID system under EO 420. The data collected and stored for the
unified ID system under EO 420 will be limited to only 14 specific data, and the ID card itself will show
only eight specific data. The data collection, recording and ID card system under EO 420 will even
require less data collected, stored and revealed than under the disparate systems prior to EO 420.

Prior to EO 420, government entities had a free hand in determining the kind, nature and extent of
data to be collected and stored for their ID systems. Under EO 420, government entities can collect
and record only the 14 specific data mentioned in Section 3 of EO 420. In addition, government
entities can show in their ID cards only eight of these specific data, seven less data than what the
Supreme Courts ID shows.
176

Also, prior to EO 420, there was no executive issuance to government entities prescribing safeguards
on the collection, recording, and disclosure of personal identification data to protect the right to
privacy. Now, under Section 5 of EO 420, the following safeguards are instituted:

a. The data to be recorded and stored, which shall be used only for
purposes of establishing the identity of a person, shall be limited to those
specified in Section 3 of this executive order;

b. In no case shall the collection or compilation of other data in violation of a

persons right to privacy be allowed or tolerated under this order;

c. Stringent systems of access control to data in the identification system

shall be instituted;

d. Data collected and stored for this purpose shall be kept and treated as
strictly confidential and a personal or written authorization of the Owner shall be
required for access and disclosure of data;

e. The identification card to be issued shall be protected by advanced

security features and cryptographic technology;

f. A written request by the Owner of the identification card shall be required

for any correction or revision of relevant data, or under such conditions as the
participating agency issuing the identification card shall prescribe.

On its face, EO 420 shows no constitutional infirmity because it even narrowly limits the data
that can be collected, recorded and shown compared to the existing ID systems of government
entities. EO 420 further provides strict safeguards to protect the confidentiality of the data collected, in
contrast to the prior ID systems which are bereft of strict administrative safeguards.

The right to privacy does not bar the adoption of reasonable ID systems by government
entities. Some one hundred countries have compulsory national ID systems, including democracies
such as Spain, France, Germany, Belgium, Greece, Luxembourg, and Portugal. Other countries
which do not have national ID systems, like the United States, Canada, Australia, New Zealand,
Ireland, the Nordic Countries and Sweden, have sectoral cards for health, social or other public
services.[12] Even with EO 420, the Philippines will still fall under the countries that do not have
compulsory national ID systems but allow only sectoral cards for social security, health services, and
other specific purposes.

Without a reliable ID system, government entities like GSIS, SSS, Philhealth, and LTO cannot
perform effectively and efficiently their mandated functions under existing laws. Without a reliable ID
system, GSIS, SSS, Philhealth and similar government entities stand to suffer substantial losses
arising from false names and identities. The integrity of the LTOs licensing system will suffer in the
absence of a reliable ID system.

The dissenting opinion cites three American decisions on the right to privacy, namely, Griswold
v. Connecticut,[13] U.S. Justice Department v. Reporters Committee for Freedom of the
Press,[14] and Whalen v. Roe.[15] The last two decisions actually support the validity of EO 420, while
the first is inapplicable to the present case.
177

In Griswold, the U.S. Supreme Court declared unconstitutional a state law that prohibited the
use and distribution of contraceptives because enforcement of the law would allow the police entry
into the bedrooms of married couples. Declared the U.S. Supreme Court: Would we allow the police
to search the sacred precincts of the marital bedrooms for telltale signs of the use of
contraceptives? The very idea is repulsive to the notions of privacy surrounding the marriage
relationship. Because the facts and the issue involved in Griswold are materially different from the
present case, Griswold has no persuasive bearing on the present case.
In U.S. Justice Department, the issue was not whether the State could collect and store
information on individuals from public records nationwide but whether the State could withhold such
information from the press. The premise of the issue in U.S. Justice Department is that the State
can collect and store in a central database information on citizens gathered from public
records across the country. In fact, the law authorized the Department of Justice to collect and
preserve fingerprints and other criminal identification records nationwide. The law also authorized the
Department of Justice to exchange such information with officials of States, cities and other
institutions.The Department of Justice treated such information as confidential. A CBS news
correspondent and the Reporters Committee demanded the criminal records of four members of a
family pursuant to the Freedom of Information Act. The U.S. Supreme Court ruled that the Freedom
of Information Act expressly exempts release of information that would constitute an unwarranted
invasion of personal privacy, and the information demanded falls under that category of exempt
information.

With the exception of the 8 specific data shown on the ID card, the personal data collected and
recorded under EO 420 are treated as strictly confidential under Section 6(d) of EO 420. These data
are not only strictly confidential but also personal matters. Section 7, Article III of the 1987
Constitution grants the right of the people to information on matters of public concern. Personal
matters are exempt or outside the coverage of the peoples right to information on matters of public
concern. The data treated as strictly confidential under EO 420 being private matters and not matters
of public concern, these data cannot be released to the public or the press. Thus, the ruling in U.S.
Justice Department does not collide with EO 420 but actually supports the validity EO 420.

Whalen v. Roe is the leading American case on the constitutional protection for control
over information. In Whalen, the U.S. Supreme Court upheld the validity of a New York law that
required doctors to furnish the government reports identifying patients who received prescription
drugs that have a potential for abuse. The government maintained a central computerized
database containing the names and addresses of the patients, as well as the identity of the
prescribing doctors. The law was assailed because the database allegedly infringed the right to
privacy of individuals who want to keep their personal matters confidential. The U.S. Supreme
Court rejected the privacy claim, and declared:

Disclosures of private medical information to doctors, to hospital personnel, to

insurance companies, and to public health agencies are often an essential part of
modern medical practice even when the disclosure may reflect unfavorably on the
character of the patient. Requiring such disclosures to representatives of the State
having responsibility for the health of the community does not automatically
amount to an impermissible invasion of privacy. (Emphasis supplied)
178

Compared to the personal medical data required for disclosure to the New York State in Whalen, the
14 specific data required for disclosure to the Philippine government under EO 420 are far less
sensitive and far less personal. In fact, the 14 specific data required under EO 420 are routine data
for ID systems, unlike the sensitive and potentially embarrassing medical records of patients taking
prescription drugs. Whalen, therefore, carries persuasive force for upholding the constitutionality of
EO 420 as non-violative of the right to privacy.

Subsequent U.S. Supreme Court decisions have reiterated Whalen. In Planned Parenthood of
Central Missouri v. Danforth,[16] the U.S. Supreme Court upheld the validity of a law that required
doctors performing abortions to fill up forms, maintain records for seven years, and allow the
inspection of such records by public health officials.The U.S. Supreme Court ruled that recordkeeping
and reporting requirements that are reasonably directed to the preservation of maternal health and
that properly respect a patients confidentiality and privacy are permissible.

Again, in Planned Parenthood of Southeastern Pennsylvania v. Casey,[17] the U.S. Supreme

Court upheld a law that required doctors performing an abortion to file a report to the government
that included the doctors name, the womans age, the number of prior pregnancies and abortions that
the woman had, the medical complications from the abortion, the weight of the fetus, and the marital
status of the woman. In case of state-funded institutions, the law made such information publicly
available. In Casey, the U.S. Supreme Court stated: The collection of information with respect to
actual patients is a vital element of medical research, and so it cannot be said that the requirements
serve no purpose other than to make abortion more difficult.

Compared to the disclosure requirements of personal data that the U.S. Supreme Court have
upheld in Whalen, Danforth and Casey as not violative of the right to privacy,the disclosure
requirements under EO 420 are far benign and cannot therefore constitute violation of the right to
privacy. EO 420 requires disclosure of 14 personal data that are routine for ID purposes, data that
cannot possibly embarrass or humiliate anyone.

Petitioners have not shown how EO 420 will violate their right to privacy. Petitioners cannot
show such violation by a mere facial examination of EO 420 because EO 420 narrowly draws the
data collection, recording and exhibition while prescribing comprehensive safeguards. Ople v.
Torres[18] is not authority to hold that EO 420 violates the right to privacy because in that case the
assailed executive issuance, broadly drawn and devoid of safeguards, was annulled solely on the
ground that the subject matter required legislation. As then Associate Justice, now Chief Justice
Artemio V. Panganiban noted in his concurring opinion in Ople v. Torres, The voting is decisive only
on the need for appropriate legislation, and it is only on this ground that the petition is granted by this
Court.

EO 420 applies only to government entities that already maintain ID systems and issue ID
cards pursuant to their regular functions under existing laws. EO 420 does not grant such government
entities any power that they do not already possess under existing laws. In contrast, the assailed
executive issuance in Ople v. Torres sought to establish
a National Computerized Identification Reference System,[19] a national ID system that did not exist
prior to the assailed executive issuance. Obviously, a national ID card system requires legislation
because it creates a new national data collection and card issuance system where none existed
before.

In the present case, EO 420 does not establish a national ID system but makes the existing
sectoral card systems of government entities like GSIS, SSS, Philhealth and LTO less costly, more
179

efficient, reliable and user-friendly to the public. Hence, EO 420 is a proper subject of executive
issuance under the Presidents constitutional power of control over government entities in the
Executive department, as well as under the Presidents constitutional duty to ensure that laws are
faithfully executed.
WHEREFORE, the petitions are DISMISSED. Executive Order No. 420 is declared VALID.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice
WE CONCUR

EN BANC

SENATE OF THE PHILIPPINES, G.R. No. 169777*

represented by FRANKLIN M. Present:
DRILON, in his capacity as Senate
President, JUAN M. FLAVIER, in his PANGANIBAN, C.J.,
capacity as Senate President Pro PUNO,**
Tempore, FRANCIS N. PANGILINAN, QUISUMBING,
in his capacity as Majority Leader, YNARES-SANTIAGO,
AQUILINO Q. PIMENTEL, JR., in his SANDOVAL-GUTIERREZ,
capacity as Minority Leader, CARPIO,
SENATORS RODOLFO G. BIAZON, AUSTRIA-MARTINEZ,
COMPANERA PIA S. CAYETANO, CORONA,
JINGGOY EJERCITO ESTRADA, CARPIO MORALES,
LUISA LOI EJERCITO ESTRADA, CALLEJO, SR.,
JUAN PONCE ENRILE, RICHARD J. AZCUNA,
GORDON, PANFILO M. LACSON, TINGA,
ALFREDO S. LIM, M. A. MADRIGAL, CHICO-NAZARIO,
SERGIO OSMENA III, RALPH G. GARCIA, and
RECTO, and MAR ROXAS, VELASCO, JR., JJ.
Petitioners,

- versus -

EDUARDO R. ERMITA, in his capacity

as Executive Secretary and alter-ego of Promulgated:
President Gloria Macapagal-Arroyo,
and anyone acting in his stead and in
behalf of the President of April 20, 2006
the Philippines,
Respondents.
x------------------------------------------x

BAYAN MUNA represented by DR.

REYNALDO LESACA, JR., Rep. G.R. No. 169659
180

SATUR OCAMPO, Rep. CRISPIN

BELTRAN, Rep. RAFAEL MARIANO,
Rep. LIZA MAZA, Rep. TEODORO
CASINO, Rep. JOEL VIRADOR,
COURAGE represented by
FERDINAND GAITE, and COUNSELS
FOR THE DEFENSE OF LIBERTIES
(CODAL) represented by ATTY.
REMEDIOS BALBIN,
Petitioners,

- versus -

EDUARDO ERMITA, in his capacity as

Executive Secretary and alter-ego of
President Gloria Macapagal-Arroyo,
Respondent.
x------------------------------------------x

FRANCISCO I. CHAVEZ,
Petitioner,
- versus -
G.R. No. 169660
EDUARDO R. ERMITA, in his capacity
as Executive Secretary, AVELINO J.
CRUZ, JR., in his capacity as
Secretary of Defense, and
GENEROSO S. SENGA, in his
capacity as AFP Chief of Staff,
Respondents.
x------------------------------------------x

ALTERNATIVE LAW GROUPS, INC.

(ALG),
Petitioner,
G.R. No. 169667
- versus -

HON. EDUARDO R. ERMITA, in his

capacity as Executive Secretary,
Respondent.
x-----------------------------------------x

PDP- LABAN,
Petitioner,

- versus - G.R. No. 169834

EXECUTIVE SECRETARY EDUARDO

R. ERMITA,
181

Respondent.
x------------------------------------------x

JOSE ANSELMO I. CADIZ,

FELICIANO M. BAUTISTA,ROMULO
R. RIVERA, JOSE AMOR
AMORANDO, ALICIA A. RISOS- G.R. No. 171246
VIDAL, FILEMON C. ABELITA III,
MANUEL P. LEGASPI, J. B. JOVY C.
BERNABE, BERNARD L. DAGCUTA,
ROGELIO V. GARCIA, and the
INTEGRATED BAR FOR THE
PHILIPPINES,
Petitioners,

- versus -

HON. EXECUTIVE SECRETARY

EDUARDO R. ERMITA,
Respondent.
x-----------------------------------------------------------------------------------------x

DECISION
CARPIO MORALES, J.:

A transparent government is one of the hallmarks of a truly republican state. Even in the early
history of republican thought, however, it has been recognized that the head of government may keep
certain information confidential in pursuit of the public interest. Explaining the reason for vesting
executive power in only one magistrate, a distinguished delegate to the U.S. Constitutional
Convention said: Decision, activity, secrecy, and dispatch will generally characterize the proceedings
of one man, in a much more eminent degree than the proceedings of any greater number; and in
proportion as the number is increased, these qualities will be diminished.[1]

History has been witness, however, to the fact that the power to withhold information lends
itself to abuse, hence, the necessity to guard it zealously.

The present consolidated petitions for certiorari and prohibition proffer that the President has
abused such power by issuing Executive Order No. 464 (E.O. 464) last September 28, 2005. They
thus pray for its declaration as null and void for being unconstitutional.

In resolving the controversy, this Court shall proceed with the recognition that the issuance
under review has come from a co-equal branch of government, which thus entitles it to a strong
presumption of constitutionality. Once the challenged order is found to be indeed violative of the
Constitution, it is duty-bound to declare it so. For the Constitution, being the highest expression of the
sovereign will of the Filipino people, must prevail over any issuance of the government that
contravenes its mandates.

In the exercise of its legislative power, the Senate of the Philippines, through its various Senate
Committees, conducts inquiries or investigations in aid of legislation which call for, inter alia, the
182

attendance of officials and employees of the executive department, bureaus, and offices including
those employed in Government Owned and Controlled Corporations, the Armed Forces of the
Philippines (AFP), and the Philippine National Police (PNP).

On September 21 to 23, 2005, the Committee of the Senate as a whole issued invitations to
various officials of the Executive Department for them to appear on September 29, 2005 as resource
speakers in a public hearing on the railway project of the North Luzon Railways Corporation with the
China National Machinery and Equipment Group (hereinafter North Rail Project). The public hearing
was sparked by a privilege speech of Senator Juan Ponce Enrile urging the Senate to investigate the
alleged overpricing and other unlawful provisions of the contract covering the North Rail Project.

The Senate Committee on National Defense and Security likewise issued invitations[2] dated
September 22, 2005 to the following officials of the AFP: the Commanding General of the Philippine
Army, Lt. Gen. Hermogenes C. Esperon; Inspector General of the AFP Vice Admiral Mateo M.
Mayuga; Deputy Chief of Staff for Intelligence of the AFP Rear Admiral Tirso R. Danga; Chief of the
Intelligence Service of the AFP Brig. Gen. Marlu Q. Quevedo; Assistant Superintendent of the
Philippine Military Academy (PMA) Brig. Gen. Francisco V. Gudani; and Assistant Commandant,
Corps of Cadets of the PMA, Col. Alexander F. Balutan, for them to attend as resource persons in a
public hearing scheduled on September 28, 2005 on the following: (1) Privilege Speech of Senator
Aquilino Q. Pimentel Jr., delivered on June 6, 2005 entitled Bunye has Provided Smoking Gun or has
Opened a Can of Worms that Show Massive Electoral Fraud in the Presidential Election of May 2005;
(2) Privilege Speech of Senator Jinggoy E. Estrada delivered on July 26, 2005 entitled The
Philippines as the Wire-Tapping Capital of the World; (3) Privilege Speech of Senator Rodolfo Biazon
delivered on August 1, 2005 entitled Clear and Present Danger; (4) Senate Resolution No. 285 filed
by Senator Maria Ana Consuelo Madrigal Resolution Directing the Committee on National Defense
and Security to Conduct an Inquiry, in Aid of Legislation, and in the National Interest, on the Role of
the Military in the So-called Gloriagate Scandal; and (5) Senate Resolution No. 295 filed by Senator
Biazon Resolution Directing the Committee on National Defense and Security to Conduct an Inquiry,
in Aid of Legislation, on the Wire-Tapping of the President of the Philippines.

Also invited to the above-said hearing scheduled on September 28 2005 was the AFP Chief of
Staff, General Generoso S. Senga who, by letter[3] dated September 27, 2005, requested for its
postponement due to a pressing operational situation that demands [his] utmost personal attention
while some of the invited AFP officers are currently attending to other urgent operational matters.

On September 28, 2005, Senate President Franklin M. Drilon received from Executive Secretary
Eduardo R. Ermita a letter[4] dated September 27, 2005 respectfully request[ing] for the postponement
of the hearing [regarding the NorthRail project] to which various officials of the Executive Department
have been invited in order to afford said officials ample time and opportunity to study and prepare for
the various issues so that they may better enlighten the Senate Committee on its investigation.

Senate President Drilon, however, wrote[5] Executive Secretary Ermita that the Senators are unable to
accede to [his request] as it was sent belatedly and [a]ll preparations and arrangements as well as
notices to all resource persons were completed [the previous] week.

Senate President Drilon likewise received on September 28, 2005 a letter[6] from the President of the
North Luzon Railways Corporation Jose L. Cortes, Jr. requesting that the hearing on the NorthRail
project be postponed or cancelled until a copy of the report of the UP Law Center on the contract
agreements relative to the project had been secured.
183

On September 28, 2005, the President issued E.O. 464, ENSURING OBSERVANCE OF THE
PRINCIPLE OF SEPARATION OF POWERS, ADHERENCE TO THE RULE ON EXECUTIVE
PRIVILEGE AND RESPECT FOR THE RIGHTS OF PUBLIC OFFICIALS APPEARING IN
LEGISLATIVE INQUIRIES IN AID OF LEGISLATION UNDER THE CONSTITUTION, AND FOR
OTHER PURPOSES,[7] which, pursuant to Section 6 thereof, took effect immediately. The salient
provisions of the Order are as follows:

SECTION 1. Appearance by Heads of Departments Before Congress. In accordance

with Article VI, Section 22 of the Constitution and to implement the Constitutional
provisions on the separation of powers between co-equal branches of the
government, all heads of departments of the Executive Branch of the government
shall secure the consent of the President prior to appearing before either House
of Congress.
When the security of the State or the public interest so requires and the President so
states in writing, the appearance shall only be conducted in executive session.
SECTION. 2. Nature, Scope and Coverage of Executive Privilege.
(a) Nature and Scope. - The rule of confidentiality based on executive privilege is
fundamental to the operation of government and rooted in the separation of powers
under the Constitution (Almonte vs. Vasquez, G.R. No. 95367, 23 May 1995). Further,
Republic Act No. 6713 or the Code of Conduct and Ethical Standards for Public Officials
and Employees provides that Public Officials and Employees shall not use or divulge
confidential or classified information officially known to them by reason of their office
and not made available to the public to prejudice the public interest.
Executive privilege covers all confidential or classified information between the
President and the public officers covered by this executive order, including:
i. Conversations and correspondence between the President and the
public official covered by this executive order (Almonte vs.
Vasquez G.R. No. 95367, 23 May 1995; Chavez v. Public Estates
Authority, G.R. No. 133250, 9 July 2002);
ii. Military, diplomatic and other national security matters which in the
interest of national security should not be divulged (Almonte vs.
Vasquez, G.R. No. 95367, 23 May 1995; Chavez v. Presidential
Commission on Good Government, G.R. No. 130716, 9 December
1998).
iii. Information between inter-government agencies prior to the
conclusion of treaties and executive agreements (Chavez v.
Presidential Commission on Good Government, G.R. No. 130716,
9 December 1998);
iv. Discussion in close-door Cabinet meetings (Chavez v. Presidential
Commission on Good Government, G.R. No. 130716, 9 December
1998);
v. Matters affecting national security and public order (Chavez v.
Public Estates Authority, G.R. No. 133250, 9 July 2002).
(b) Who are covered. The following are covered by this executive order:
i. Senior officials of executive departments who in the judgment of the
department heads are covered by the executive privilege;
184

ii. Generals and flag officers of the Armed Forces of the Philippines and such
other officers who in the judgment of the Chief of Staff are covered by the
executive privilege;
iii. Philippine National Police (PNP) officers with rank of chief superintendent
or higher and such other officers who in the judgment of the Chief of the
PNP are covered by the executive privilege;
iv. Senior national security officials who in the judgment of the National
Security Adviser are covered by the executive privilege; and
v. Such other officers as may be determined by the President.
SECTION 3. Appearance of Other Public Officials Before Congress. All public officials
enumerated in Section 2 (b) hereof shall secure prior consent of the President
prior to appearing before either House of Congress to ensure the observance of the
principle of separation of powers, adherence to the rule on executive privilege and
respect for the rights of public officials appearing in inquiries in aid of legislation.
(Emphasis and underscoring supplied)

Also on September 28, 2005, Senate President Drilon received from Executive Secretary Ermita a
copy of E.O. 464, and another letter[8] informing him that officials of the Executive Department invited
to appear at the meeting [regarding the NorthRail project] will not be able to attend the same without
the consent of the President, pursuant to [E.O. 464] and that said officials have not secured the
required consent from the President. On even date which was also the scheduled date of the hearing
on the alleged wiretapping, Gen. Senga sent a letter[9] to Senator Biazon, Chairperson of the
Committee on National Defense and Security, informing him that per instruction of [President Arroyo],
thru the Secretary of National Defense, no officer of the [AFP] is authorized to appear before any
Senate or Congressional hearings without seeking a written approval from the President and that no
approval has been granted by the President to any AFP officer to appear before the public hearing of
the Senate Committee on National Defense and Security scheduled [on] 28 September 2005.

Despite the communications received from Executive Secretary Ermita and Gen. Senga, the
investigation scheduled by the Committee on National Defense and Security pushed through, with
only Col. Balutan and Brig. Gen. Gudani among all the AFP officials invited attending.

For defying President Arroyos order barring military personnel from testifying before legislative
inquiries without her approval, Brig. Gen. Gudani and Col. Balutan were relieved from their military
posts and were made to face court martial proceedings.

As to the NorthRail project hearing scheduled on September 29, 2005, Executive Secretary Ermita,
citing E.O. 464, sent letter of regrets, in response to the invitations sent to the following government
officials: Light Railway Transit Authority Administrator Melquiades Robles, Metro Rail Transit
Authority Administrator Roberto Lastimoso, Department of Justice (DOJ) Chief State Counsel Ricardo
V. Perez, then Presidential Legal Counsel Merceditas Gutierrez, Department of Transportation and
Communication (DOTC) Undersecretary Guiling Mamonding, DOTC Secretary Leandro Mendoza,
Philippine National Railways General Manager Jose Serase II, Monetary Board Member Juanita
Amatong, Bases Conversion Development Authority Chairperson Gen. Narciso Abaya and Secretary
Romulo L. Neri.[10] NorthRail President Cortes sent personal regrets likewise citing E.O. 464.[11]

On October 3, 2005, three petitions, docketed as G.R. Nos. 169659, 169660, and 169667, for
certiorari and prohibition, were filed before this Court challenging the constitutionality of E.O. 464.
185

In G.R. No. 169659, petitioners party-list Bayan Muna, House of Representatives Members
Satur Ocampo, Crispin Beltran, Rafael Mariano, Liza Maza, Joel Virador and Teodoro
Casino, COURAGE, an organization of government employees, and Counsels for the Defense of
Liberties (CODAL), a group of lawyers dedicated to the promotion of justice, democracy and peace,
all claiming to have standing to file the suit because of the transcendental importance of the issues
they posed, pray, in their petition that E.O. 464 be declared null and void for being unconstitutional;
that respondent Executive Secretary Ermita, in his capacity as Executive Secretary and alter-ego of
President Arroyo, be prohibited from imposing, and threatening to impose sanctions on officials who
appear before Congress due to congressional summons. Additionally, petitioners claim that E.O. 464
infringes on their rights and impedes them from fulfilling their respective obligations. Thus, Bayan
Muna alleges that E.O. 464 infringes on its right as a political party entitled to participate in
governance; Satur Ocampo, et al. allege that E.O. 464 infringes on their rights and duties as
members of Congress to conduct investigation in aid of legislation and conduct oversight functions in
the implementation of laws; COURAGE alleges that the tenure of its members in public office is
predicated on, and threatened by, their submission to the requirements of E.O. 464 should they be
summoned by Congress; and CODAL alleges that its members have a sworn duty to uphold the rule
of law, and their rights to information and to transparent governance are threatened by the imposition
of E.O. 464.

In G.R. No. 169660, petitioner Francisco I. Chavez, claiming that his constitutional rights as a
citizen, taxpayer and law practitioner, are affected by the enforcement of E.O. 464, prays in his
petition that E.O. 464 be declared null and void for being unconstitutional.

In G.R. No. 169667, petitioner Alternative Law Groups, Inc.[12] (ALG), alleging that as a
coalition of 17 legal resource non-governmental organizations engaged in developmental lawyering
and work with the poor and marginalized sectors in different parts of the country, and as an
organization of citizens of the Philippines and a part of the general public, it has legal standing to
institute the petition to enforce its constitutional right to information on matters of public concern, a
right which was denied to the public by E.O. 464,[13] prays, that said order be declared null and void
for being unconstitutional and that respondent Executive Secretary Ermita be ordered to cease from
implementing it.

On October 11, 2005, Petitioner Senate of the Philippines, alleging that it has a vital interest in
the resolution of the issue of the validity of E.O. 464 for it stands to suffer imminent and material
injury, as it has already sustained the same with its continued enforcement since it directly interferes
with and impedes the valid exercise of the Senates powers and functions and conceals information of
great public interest and concern, filed its petition for certiorari and prohibition, docketed as G.R. No.
169777 and prays that E.O. 464 be declared unconstitutional.

On October 14, 2005, PDP-Laban, a registered political party with members duly elected into
the Philippine Senate and House of Representatives, filed a similar petition for certiorari and
prohibition, docketed as G.R. No. 169834, alleging that it is affected by the challenged E.O. 464
because it hampers its legislative agenda to be implemented through its members in Congress,
particularly in the conduct of inquiries in aid of legislation and transcendental issues need to be
resolved to avert a constitutional crisis between the executive and legislative branches of the
government.

Meanwhile, by letter[14] dated February 6, 2006, Senator Biazon reiterated his invitation to Gen.
Senga for him and other military officers to attend the hearing on the alleged wiretapping scheduled
on February 10, 2005. Gen. Senga replied, however, by letter[15] dated February 8, 2006, that
186

[p]ursuant to Executive Order No. 464, th[e] Headquarters requested for a clearance from the
President to allow [them] to appear before the public hearing and that they will attend once [their]
request is approved by the President. As none of those invited appeared, the hearing on February 10,
2006 was cancelled.[16]

In another investigation conducted jointly by the Senate Committee on Agriculture and Food
and the Blue Ribbon Committee on the alleged mismanagement and use of the fertilizer fund under
the Ginintuang Masaganang Ani program of the Department of Agriculture (DA), several Cabinet
officials were invited to the hearings scheduled on October 5 and 26, November 24 and December
12, 2005 but most of them failed to attend, DA Undersecretary Belinda Gonzales, DA Assistant
Secretary Felix Jose Montes, Fertilizer and Pesticide Authority Executive Director Norlito R.
Gicana,[17] and those from the Department of Budget and Management[18] having invoked E.O. 464.

In the budget hearings set by the Senate on February 8 and 13, 2006, Press Secretary and
Presidential Spokesperson Ignacio R. Bunye,[19] DOJ Secretary Raul M. Gonzalez[20] and Department
of Interior and Local Government Undersecretary Marius P. Corpus[21] communicated their inability to
attend due to lack of appropriate clearance from the President pursuant to E.O. 464. During the
February 13, 2005 budget hearing, however, Secretary Bunye was allowed to attend by Executive
Secretary Ermita.

On February 13, 2006, Jose Anselmo I. Cadiz and the incumbent members of the Board of
Governors of the Integrated Bar of the Philippines, as taxpayers, and the Integrated Bar of the
Philippines as the official organization of all Philippine lawyers, all invoking their constitutional right to
be informed on matters of public interest, filed their petition for certiorari and prohibition, docketed
as G.R. No. 171246, and pray that E.O. 464 be declared null and void.

All the petitions pray for the issuance of a Temporary Restraining Order enjoining respondents
from implementing, enforcing, and observing E.O. 464.

In the oral arguments on the petitions conducted on February 21, 2006, the
following substantive issues were ventilated: (1) whether respondents committed grave abuse of
discretion in implementing E.O. 464 prior to its publication in the Official Gazette or in a newspaper of
general circulation; and (2) whether E.O. 464 violates the following provisions of the Constitution: Art.
II, Sec. 28, Art. III, Sec. 4, Art. III, Sec. 7, Art. IV. Sec. 1, Art. VI, Sec. 21, Art. VI, Sec. 22, Art. XI, Sec.
1, and Art. XIII, Sec. 16. The procedural issue of whether there is an actual case or controversy that
calls for judicial review was not taken up; instead, the parties were instructed to discuss it in their
respective memoranda.

After the conclusion of the oral arguments, the parties were directed to submit their respective
memoranda, paying particular attention to the following propositions: (1) that E.O. 464 is, on its face,
unconstitutional; and (2) assuming that it is not, it is unconstitutional as applied in four instances,
namely: (a) the so called Fertilizer scam; (b) the NorthRail investigation (c) the Wiretapping activity of
the ISAFP; and (d) the investigation on the Venable contract.[22]

Petitioners in G.R. No. 169660[23] and G.R. No. 169777[24] filed their memoranda on March 7,
2006, while those in G.R. No. 169667[25] and G.R. No. 169834[26] filed theirs the next day or on March
8, 2006. Petitioners in G.R. No. 171246 did not file any memorandum.

Petitioners Bayan Muna et al. in G.R. No. 169659, after their motion for extension to file
memorandum[27] was granted, subsequently filed a manifestation[28] dated March 14, 2006 that it
187

would no longer file its memorandum in the interest of having the issues resolved soonest, prompting
this Court to issue a Resolution reprimanding them.[29]

Petitioners submit that E.O. 464 violates the following constitutional provisions:
Art. VI, Sec. 21[30] Art. VI, Sec. 22[31] Art. VI, Sec. 1[32] Art. XI, Sec. 1[33] Art. III, Sec. 7[34] Art. III,
Sec. 4[35] Art. XIII, Sec. 16 [36] Art. II, Sec. 28[37]
Respondents Executive Secretary Ermita et al., on the other hand, pray in their consolidated
memorandum[38] on March 13, 2006 for the dismissal of the petitions for lack of merit.
The Court synthesizes the issues to be resolved as follows:
1. Whether E.O. 464 contravenes the power of inquiry vested in Congress;
2. Whether E.O. 464 violates the right of the people to information on matters of public concern; and
3. Whether respondents have committed grave abuse of discretion when they implemented E.O. 464
prior to its publication in a newspaper of general circulation.

Essential requisites for judicial review

Before proceeding to resolve the issue of the constitutionality of E.O. 464, ascertainment of whether
the requisites for a valid exercise of the Courts power of judicial review are present is in order.

Like almost all powers conferred by the Constitution, the power of judicial review is subject to
limitations, to wit: (1) there must be an actual case or controversy calling for the exercise of judicial
power; (2) the person challenging the act must have standing to challenge the validity of the subject
act or issuance; otherwise stated, he must have a personal and substantial interest in the case such
that he has sustained, or will sustain, direct injury as a result of its enforcement; (3) the question of
constitutionality must be raised at the earliest opportunity; and (4) the issue of constitutionality must
be the very lis mota of the case.[39]

Except with respect to the requisites of standing and existence of an actual case or controversy
where the disagreement between the parties lies, discussion of the rest of the requisites shall be
omitted.

Standing

Respondents, through the Solicitor General, assert that the allegations in G.R. Nos. 169659, 169660
and 169667 make it clear that they, adverting to the non-appearance of several officials of the
executive department in the investigations called by the different committees of the Senate, were
brought to vindicate the constitutional duty of the Senate or its different committees to conduct inquiry
in aid of legislation or in the exercise of its oversight functions. They maintain that Representatives
Ocampo et al. have not shown any specific prerogative, power, and privilege of the House of
Representatives which had been effectively impaired by E.O. 464, there being no mention of any
investigation called by the House of Representatives or any of its committees which was aborted due
to the implementation of E.O. 464.

As for Bayan Munas alleged interest as a party-list representing the marginalized and
underrepresented, and that of the other petitioner groups and individuals who profess to have
standing as advocates and defenders of the Constitution, respondents contend that such interest falls
short of that required to confer standing on them as parties injured-in-fact.[40]
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Respecting petitioner Chavez, respondents contend that Chavez may not claim an interest as
a taxpayer for the implementation of E.O. 464 does not involve the exercise of taxing or spending
power.[41]

With regard to the petition filed by the Senate, respondents argue that in the absence of a personal or
direct injury by reason of the issuance of E.O. 464, the Senate and its individual members are not the
proper parties to assail the constitutionality of E.O. 464.

Invoking this Courts ruling in National Economic Protectionism Association v.

Ongpin[42] and Valmonte v. Philippine Charity Sweepstakes Office,[43] respondents assert that to be
considered a proper party, one must have a personal and substantial interest in the case, such that
he has sustained or will sustain direct injury due to the enforcement of E.O. 464.[44]

That the Senate of the Philippines has a fundamental right essential not only for intelligent
public decision-making in a democratic system, but more especially for sound legislation[45] is not
disputed. E.O. 464, however, allegedly stifles the ability of the members of Congress to access
information that is crucial to law-making.[46] Verily, the Senate, including its individual members, has a
substantial and direct interest over the outcome of the controversy and is the proper party to assail
the constitutionality of E.O. 464. Indeed, legislators have standing to maintain inviolate the
prerogative, powers and privileges vested by the Constitution in their office and are allowed to sue to
question the validity of any official action which they claim infringes their prerogatives as
legislators.[47]

In the same vein, party-list representatives Satur Ocampo (Bayan Muna), Teodoro Casino
(Bayan Muna), Joel Virador (Bayan Muna), Crispin Beltran (Anakpawis), Rafael Mariano
(Anakpawis), and Liza Maza (Gabriela) are allowed to sue to question the constitutionality of E.O.
464, the absence of any claim that an investigation called by the House of Representatives or any of
its committees was aborted due to the implementation of E.O. 464 notwithstanding, it being sufficient
that a claim is made that E.O. 464 infringes on their constitutional rights and duties as members of
Congress to conduct investigation in aid of legislation and conduct oversight functions in the
implementation of laws.

The national political party, Bayan Muna, likewise meets the standing requirement as it
obtained three seats in the House of Representatives in the 2004 elections and is, therefore, entitled
to participate in the legislative process consonant with the declared policy underlying the party list
system of affording citizens belonging to marginalized and underrepresented sectors, organizations
and parties who lack well-defined political constituencies to contribute to the formulation and
enactment of legislation that will benefit the nation.[48]

As Bayan Muna and Representatives Ocampo et al. have the standing to file their petitions,
passing on the standing of their co-petitioners COURAGE and CODAL is rendered unnecessary.[49]

In filing their respective petitions, Chavez, the ALG which claims to be an organization of citizens, and
the incumbent members of the IBP Board of Governors and the IBP in behalf of its lawyer
members,[50] invoke their constitutional right to information on matters of public concern, asserting
that the right to information, curtailed and violated by E.O. 464, is essential to the effective exercise of
other constitutional rights[51] and to the maintenance of the balance of power among the three
branches of the government through the principle of checks and balances.[52]
189

It is well-settled that when suing as a citizen, the interest of the petitioner in assailing the
constitutionality of laws, presidential decrees, orders, and other regulations, must be direct and
personal. In Franciso v. House of Representatives,[53] this Court held that when the proceeding
involves the assertion of a public right, the mere fact that he is a citizen satisfies the requirement of
personal interest.

As for petitioner PDP-Laban, it asseverates that it is clothed with legal standing in view of the
transcendental issues raised in its petition which this Court needs to resolve in order to avert a
constitutional crisis. For it to be accorded standing on the ground of transcendental importance,
however, it must establish (1) the character of the funds (that it is public) or other assets involved in
the case, (2) the presence of a clear case of disregard of a constitutional or statutory prohibition by
the public respondent agency or instrumentality of the government, and (3) the lack of any party with
a more direct and specific interest in raising the questions being raised.[54] The first and last
determinants not being present as no public funds or assets are involved and petitioners in G.R. Nos.
169777 and 169659 have direct and specific interests in the resolution of the controversy, petitioner
PDP-Laban is bereft of standing to file its petition. Its allegation that E.O. 464 hampers its legislative
agenda is vague and uncertain, and at best is only a generalized interest which it shares with the rest
of the political parties. Concrete injury, whether actual or threatened, is that indispensable element of
a dispute which serves in part to cast it in a form traditionally capable of judicial resolution.[55] In fine,
PDP-Labans alleged interest as a political party does not suffice to clothe it with legal standing.

Actual Case or Controversy

Petitioners assert that an actual case exists, they citing the absence of the executive officials invited
by the Senate to its hearings after the issuance of E.O. 464, particularly those on the NorthRail
project and the wiretapping controversy.

Respondents counter that there is no case or controversy, there being no showing that
President Arroyo has actually withheld her consent or prohibited the appearance of the invited
officials.[56] These officials, they claim, merely communicated to the Senate that they have not yet
secured the consent of the President, not that the President prohibited their
attendance.[57] Specifically with regard to the AFP officers who did not attend the hearing on
September 28, 2005, respondents claim that the instruction not to attend without the Presidents
consent was based on its role as Commander-in-Chief of the Armed Forces, not on E.O. 464.

Respondents thus conclude that the petitions merely rest on an unfounded apprehension that the
President will abuse its power of preventing the appearance of officials before Congress, and that
such apprehension is not sufficient for challenging the validity of E.O. 464.

The Court finds respondents assertion that the President has not withheld her consent or prohibited
the appearance of the officials concerned immaterial in determining the existence of an actual case
or controversy insofar as E.O. 464 is concerned. For E.O. 464 does not require either a deliberate
withholding of consent or an express prohibition issuing from the President in order to bar
officials from appearing before Congress.

As the implementation of the challenged order has already resulted in the absence of officials invited
to the hearings of petitioner Senate of the Philippines, it would make no sense to wait for any further
event before considering the present case ripe for adjudication. Indeed, it would be sheer
abandonment of duty if this Court would now refrain from passing on the constitutionality of E.O. 464.
190

Constitutionality of E.O. 464

E.O. 464, to the extent that it bars the appearance of executive officials before Congress, deprives
Congress of the information in the possession of these officials. To resolve the question of whether
such withholding of information violates the Constitution, consideration of the general power of
Congress to obtain information, otherwise known as the power of inquiry, is in order.

The power of inquiry

The Congress power of inquiry is expressly recognized in Section 21 of Article VI of the Constitution
which reads:

SECTION 21. The Senate or the House of Representatives or any of its respective
committees may conduct inquiries in aid of legislation in accordance with its duly
published rules of procedure. The rights of persons appearing in or affected by such
inquiries shall be respected. (Underscoring supplied)

This provision is worded exactly as Section 8 of Article VIII of the 1973 Constitution except that, in the
latter, it vests the power of inquiry in the unicameral legislature established therein the Batasang
Pambansa and its committees.

The 1935 Constitution did not contain a similar provision. Nonetheless, in Arnault v. Nazareno,[58] a
case decided in 1950 under that Constitution, the Court already recognized that the power of inquiry
is inherent in the power to legislate.

Arnault involved a Senate investigation of the reportedly anomalous purchase of the Buenavista and
Tambobong Estates by the Rural Progress Administration. Arnault, who was considered a leading
witness in the controversy, was called to testify thereon by the Senate. On account of his refusal to
answer the questions of the senators on an important point, he was, by resolution of the Senate,
detained for contempt. Upholding the Senates power to punish Arnault for contempt, this Court held:

Although there is no provision in the Constitution expressly investing either House of

Congress with power to make investigations and exact testimony to the end that it may
exercise its legislative functions advisedly and effectively, such power is so far
incidental to the legislative function as to be implied. In other words, the power of
inquiry with process to enforce it is an essential and appropriate auxiliary to the
legislative function. A legislative body cannot legislate wisely or effectively in the
absence of information respecting the conditions which the legislation is intended to
affect or change; and where the legislative body does not itself possess the requisite
information which is not infrequently true recourse must be had to others who do
possess it. Experience has shown that mere requests for such information are often
unavailing, and also that information which is volunteered is not always accurate or
complete; so some means of compulsion is essential to obtain what is needed.[59] .
. . (Emphasis and underscoring supplied)

That this power of inquiry is broad enough to cover officials of the executive branch may be deduced
from the same case. The power of inquiry, the Court therein ruled, is co-extensive with the power to
legislate.[60] The matters which may be a proper subject of legislation and those which may be a
proper subject of investigation are one. It follows that the operation of government, being a legitimate
subject for legislation, is a proper subject for investigation.
191

Thus, the Court found that the Senate investigation of the government transaction involved
in Arnault was a proper exercise of the power of inquiry. Besides being related to the expenditure of
public funds of which Congress is the guardian, the transaction, the Court held, also involved
government agencies created by Congress and officers whose positions it is within the power of
Congress to regulate or even abolish.

Since Congress has authority to inquire into the operations of the executive branch, it would be
incongruous to hold that the power of inquiry does not extend to executive officials who are the most
familiar with and informed on executive operations.

As discussed in Arnault, the power of inquiry, with process to enforce it, is grounded on
the necessity of information in the legislative process. If the information possessed by executive
officials on the operation of their offices is necessary for wise legislation on that subject, by parity of
reasoning, Congress has the right to that information and the power to compel the disclosure thereof.

As evidenced by the American experience during the so-called McCarthy era, however, the
right of Congress to conduct inquiries in aid of legislation is, in theory, no less susceptible to abuse
than executive or judicial power. It may thus be subjected to judicial review pursuant to the Courts
certiorari powers under Section 1, Article VIII of the Constitution.

For one, as noted in Bengzon v. Senate Blue Ribbon Committee,[61] the inquiry itself might not
properly be in aid of legislation, and thus beyond the constitutional power of Congress. Such inquiry
could not usurp judicial functions. Parenthetically, one possible way for Congress to avoid such a
result as occurred in Bengzon is to indicate in its invitations to the public officials concerned, or to any
person for that matter, the possible needed statute which prompted the need for the inquiry. Given
such statement in its invitations, along with the usual indication of the subject of inquiry and the
questions relative to and in furtherance thereof, there would be less room for speculation on the part
of the person invited on whether the inquiry is in aid of legislation.

Section 21, Article VI likewise establishes crucial safeguards that proscribe the legislative
power of inquiry. The provision requires that the inquiry be done in accordance with the Senate or
Houses duly published rules of procedure, necessarily implying the constitutional infirmity of an
inquiry conducted without duly published rules of procedure.Section 21 also mandates that the rights
of persons appearing in or affected by such inquiries be respected, an imposition that obligates
Congress to adhere to the guarantees in the Bill of Rights.

These abuses are, of course, remediable before the courts, upon the proper suit filed by the
persons affected, even if they belong to the executive branch. Nonetheless, there may be exceptional
circumstances, none appearing to obtain at present, wherein a clear pattern of abuse of the
legislative power of inquiry might be established, resulting in palpable violations of the rights
guaranteed to members of the executive department under the Bill of Rights. In such instances,
depending on the particulars of each case, attempts by the Executive Branch to forestall these
abuses may be accorded judicial sanction.

Even where the inquiry is in aid of legislation, there are still recognized exemptions to the
power of inquiry, which exemptions fall under the rubric of executive privilege.Since this term figures
prominently in the challenged order, it being mentioned in its provisions, its preambular
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clauses,[62] and in its very title, a discussion of executive privilege is crucial for determining the
constitutionality of E.O. 464.

Executive privilege

The phrase executive privilege is not new in this jurisdiction. It has been used even prior to the
promulgation of the 1986 Constitution.[63] Being of American origin, it is best understood in light of
how it has been defined and used in the legal literature of the United States.

Schwartz defines executive privilege as the power of the Government to withhold information
from the public, the courts, and the Congress.[64] Similarly, Rozell defines it as the right of the
President and high-level executive branch officers to withhold information from Congress, the courts,
and ultimately the public.[65]

Executive privilege is, nonetheless, not a clear or unitary concept. [66] It has encompassed claims of
varying kinds.[67] Tribe, in fact, comments that while it is customary to employ the phrase executive
privilege, it may be more accurate to speak of executive privileges since presidential refusals to
furnish information may be actuated by any of at least three distinct kinds of considerations, and may
be asserted, with differing degrees of success, in the context of either judicial or legislative
investigations.

One variety of the privilege, Tribe explains, is the state secrets privilege invoked by U.S.
Presidents, beginning with Washington, on the ground that the information is of such nature that its
disclosure would subvert crucial military or diplomatic objectives. Another variety is the informers
privilege, or the privilege of the Government not to disclose the identity of persons who furnish
information of violations of law to officers charged with the enforcement of that law. Finally,
a generic privilege for internal deliberations has been said to attach to intragovernmental
documents reflecting advisory opinions, recommendations and deliberations comprising part of a
process by which governmental decisions and policies are formulated. [68]
Tribes comment is supported by the ruling in In re Sealed Case, thus:

Since the beginnings of our nation, executive officials have claimed a variety of
privileges to resist disclosure of information the confidentiality of which they felt
was crucial to fulfillment of the unique role and responsibilities of the executive
branch of our government. Courts ruled early that the executive had a right to withhold
documents that might reveal military or state secrets. The courts have also granted the
executive a right to withhold the identity of government informers in some
circumstances and a qualified right to withhold information related to pending
investigations. x x x[69] (Emphasis and underscoring supplied)

The entry in Blacks Law Dictionary on executive privilege is similarly instructive regarding the scope
of the doctrine.

This privilege, based on the constitutional doctrine of separation of powers, exempts the
executive from disclosure requirements applicable to the ordinary citizen or
organization where such exemption is necessary to the discharge of highly
important executive responsibilities involved in maintaining governmental
operations, and extends not only to military and diplomaticsecrets but also
to documents integral to an appropriate exercise of the executive domestic decisional
and policy making functions, that is, those documents reflecting the frank expression
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necessary in intra-governmental advisory and deliberative

communications.[70] (Emphasis and underscoring supplied)

That a type of information is recognized as privileged does not, however, necessarily mean that it
would be considered privileged in all instances. For in determining the validity of a claim of privilege,
the question that must be asked is not only whether the requested information falls within one of the
traditional privileges, but also whether that privilege should be honored in a given procedural
setting.[71]

The leading case on executive privilege in the United States is U.S. v. Nixon, [72] decided in 1974. In
issue in that case was the validity of President Nixons claim of executive privilege against a subpoena
issued by a district court requiring the production of certain tapes and documents relating to the
Watergate investigations. The claim of privilege was based on the Presidents general interest in the
confidentiality of his conversations and correspondence. The U.S. Court held that while there is no
explicit reference to a privilege of confidentiality in the U.S. Constitution, it is constitutionally based to
the extent that it relates to the effective discharge of a Presidents powers. The Court, nonetheless,
rejected the Presidents claim of privilege, ruling that the privilege must be balanced against the public
interest in the fair administration of criminal justice. Notably, the Court was careful to clarify that it was
not there addressing the issue of claims of privilege in a civil litigation or against congressional
demands for information.

Cases in the U.S. which involve claims of executive privilege against Congress are rare.[73] Despite
frequent assertion of the privilege to deny information to Congress, beginning with President
Washingtons refusal to turn over treaty negotiation records to the House of Representatives, the U.S.
Supreme Court has never adjudicated the issue.[74]However, the U.S. Court of Appeals for the District
of Columbia Circuit, in a case decided earlier in the same year as Nixon, recognized the Presidents
privilege over his conversations against a congressional subpoena.[75] Anticipating the balancing
approach adopted by the U.S. Supreme Court in Nixon, the Court of Appeals weighed the public
interest protected by the claim of privilege against the interest that would be served by disclosure to
the Committee. Ruling that the balance favored the President, the Court declined to enforce the
subpoena. [76]

In this jurisdiction, the doctrine of executive privilege was recognized by this Court in Almonte v.
Vasquez.[77] Almonte used the term in reference to the same privilege subject ofNixon. It quoted the
following portion of the Nixon decision which explains the basis for the privilege:

The expectation of a President to the confidentiality of his conversations and

correspondences, like the claim of confidentiality of judicial deliberations, for
example, has all the values to which we accord deference for the privacy of all citizens
and, added to those values, is the necessity for protection of the public interest in
candid, objective, and even blunt or harsh opinions in Presidential decision-making. A
President and those who assist him must be free to explore alternatives in the process
of shaping policies and making decisions and to do so in a way many would be unwilling
to express except privately. These are the considerations justifying a presumptive
privilege for Presidential communications. The privilege is fundamental to the
operation of government and inextricably rooted in the separation of powers
under the Constitution x x x (Emphasis and underscoring supplied)

Almonte involved a subpoena duces tecum issued by the Ombudsman against the therein
petitioners. It did not involve, as expressly stated in the decision, the right of the people to
194

information.[78] Nonetheless, the Court recognized that there are certain types of information which
the government may withhold from the public, thus acknowledging, in substance if not in name, that
executive privilege may be claimed against citizens demands for information.

In Chavez v. PCGG,[79] the Court held that this jurisdiction recognizes the common law holding that
there is a governmental privilege against public disclosure with respect to state secrets regarding
military, diplomatic and other national security matters.[80] The same case held that closed-door
Cabinet meetings are also a recognized limitation on the right to information.

Similarly, in Chavez v. Public Estates Authority,[81] the Court ruled that the right to information
does not extend to matters recognized as privileged information under the separation of powers,[82] by
which the Court meant Presidential conversations, correspondences, and discussions in closed-door
Cabinet meetings. It also held that information on military and diplomatic secrets and those affecting
national security, and information on investigations of crimes by law enforcement agencies before the
prosecution of the accused were exempted from the right to information.

From the above discussion on the meaning and scope of executive privilege, both in the United
States and in this jurisdiction, a clear principle emerges. Executive privilege, whether asserted
against Congress, the courts, or the public, is recognized only in relation to certain types of
information of a sensitive character. While executive privilege is a constitutional concept,
a claim thereof may be valid or not depending on the ground invoked to justify it and the context in
which it is made. Noticeably absent is any recognition that executive officials are exempt from the
duty to disclose information by the mere fact of being executive officials. Indeed, the extraordinary
character of the exemptions indicates that the presumption inclines heavily against executive
secrecy and in favor of disclosure.

Validity of Section 1

Section 1 is similar to Section 3 in that both require the officials covered by them to secure the
consent of the President prior to appearing before Congress. There are significant differences
between the two provisions, however, which constrain this Court to discuss the validity of these
provisions separately.

Section 1 specifically applies to department heads. It does not, unlike Section 3, require a prior
determination by any official whether they are covered by E.O. 464. The President herself has,
through the challenged order, made the determination that they are. Further, unlike also Section 3,
the coverage of department heads under Section 1 is not made to depend on the department heads
possession of any information which might be covered by executive privilege. In fact, in marked
contrast to Section 3 vis--vis Section 2, there is no reference to executive privilege at all. Rather, the
required prior consent under Section 1 is grounded on Article VI, Section 22 of the Constitution on
what has been referred to as the question hour.

SECTION 22. The heads of departments may upon their own initiative, with the consent
of the President, or upon the request of either House, as the rules of each House shall
provide, appear before and be heard by such House on any matter pertaining to their
departments. Written questions shall be submitted to the President of the Senate or the
Speaker of the House of Representatives at least three days before their scheduled
appearance. Interpellations shall not be limited to written questions, but may cover
matters related thereto. When the security of the State or the public interest so requires
195

and the President so states in writing, the appearance shall be conducted in executive
session.

Determining the validity of Section 1 thus requires an examination of the meaning of Section 22 of
Article VI. Section 22 which provides for the question hour must be interpreted vis--vis Section 21
which provides for the power of either House of Congress to conduct inquiries in aid of legislation. As
the following excerpt of the deliberations of the Constitutional Commission shows, the framers were
aware that these two provisions involved distinct functions of Congress.

MR. MAAMBONG. x x x When we amended Section 20 [now Section 22 on the

Question Hour] yesterday, I noticed that members of the Cabinet cannot be compelled
anymore to appear before the House of Representatives or before the Senate. I have a
particular problem in this regard, Madam President, because in our experience in the
Regular Batasang Pambansa as the Gentleman himself has experienced in the interim
Batasang Pambansa one of the most competent inputs that we can put in our
committee deliberations, either in aid of legislation or in congressional investigations, is
the testimonies of Cabinet ministers. We usually invite them, but if they do not come
and it is a congressional investigation, we usually issue subpoenas.

I want to be clarified on a statement made by Commissioner Suarez when he said

that the fact that the Cabinet ministers may refuse to come to the House of
Representatives or the Senate [when requested under Section 22] does not mean
that they need not come when they are invited or subpoenaed by the committee
of either House when it comes to inquiries in aid of legislation or congressional
investigation. According to Commissioner Suarez, that is allowed and their
presence can be had under Section 21. Does the gentleman confirm this, Madam
President?

MR. DAVIDE. We confirm that, Madam President, because Section 20 refers only
to what was originally the Question Hour, whereas, Section 21 would refer
specifically to inquiries in aid of legislation, under which anybody for that matter,
may be summoned and if he refuses, he can be held in contempt of the
House.[83] (Emphasis and underscoring supplied)

A distinction was thus made between inquiries in aid of legislation and the question hour. While
attendance was meant to be discretionary in the question hour, it was compulsory in inquiries in aid of
legislation. The reference to Commissioner Suarez bears noting, he being one of the proponents of
the amendment to make the appearance of department heads discretionary in the question hour.

So clearly was this distinction conveyed to the members of the Commission that the Committee on
Style, precisely in recognition of this distinction, later moved the provision on question hour from its
original position as Section 20 in the original draft down to Section 31, far from the provision on
inquiries in aid of legislation. This gave rise to the following exchange during the deliberations:
MR. GUINGONA. [speaking in his capacity as Chairman of the Committee on Style] We
now go, Mr. Presiding Officer, to the Article on Legislative and may I request the
chairperson of the Legislative Department, Commissioner Davide, to give his reaction.

THE PRESIDING OFFICER (Mr. Jamir). Commissioner Davide is recognized.

196

MR. DAVIDE. Thank you, Mr. Presiding Officer. I have only one reaction to the Question
Hour. I propose that instead of putting it as Section 31, it should follow Legislative
Inquiries.

THE PRESIDING OFFICER. What does the committee say?

MR. GUINGONA. I ask Commissioner Maambong to reply, Mr. Presiding Officer.

MR. MAAMBONG. Actually, we considered that previously when we sequenced

this but we reasoned that in Section 21, which is Legislative Inquiry, it is actually
a power of Congress in terms of its own lawmaking; whereas, a Question Hour is
not actually a power in terms of its own lawmaking power because in Legislative
Inquiry, it is in aid of legislation.And so we put Question Hour as Section 31. I hope
Commissioner Davide will consider this.

MR. DAVIDE. The Question Hour is closely related with the legislative power, and
it is precisely as a complement to or a supplement of the Legislative Inquiry. The
appearance of the members of Cabinet would be very, very essential not only in the
application of check and balance but also, in effect, in aid of legislation.

MR. MAAMBONG. After conferring with the committee, we find merit in the
suggestion of Commissioner Davide. In other words, we are accepting that and
so this Section 31 would now become Section 22. Would it be, Commissioner Davide?

MR. DAVIDE. Yes.[84] (Emphasis and underscoring supplied)

Consistent with their statements earlier in the deliberations, Commissioners Davide and Maambong
proceeded from the same assumption that these provisions pertained to two different functions of the
legislature. Both Commissioners understood that the power to conduct inquiries in aid of legislation is
different from the power to conduct inquiries during the question hour. Commissioner Davides only
concern was that the two provisions on these distinct powers be placed closely together, they
being complementary to each other. Neither Commissioner considered them as identical functions of
Congress.

The foregoing opinion was not the two Commissioners alone. From the above-quoted exchange,
Commissioner Maambongs committee the Committee on Style shared the view that the two
provisions reflected distinct functions of Congress. Commissioner Davide, on the other hand, was
speaking in his capacity as Chairman of the Committee on the Legislative Department. His views may
thus be presumed as representing that of his Committee.

In the context of a parliamentary system of government, the question hour has a definite meaning. It
is a period of confrontation initiated by Parliament to hold the Prime Minister and the other ministers
accountable for their acts and the operation of the government,[85] corresponding to what is known in
Britain as the question period. There was a specific provision for a question hour in the 1973
Constitution[86] which made the appearance of ministers mandatory. The same perfectly conformed to
the parliamentary system established by that Constitution, where the ministers are also members of
the legislature and are directly accountable to it.
197

An essential feature of the parliamentary system of government is the immediate

accountability of the Prime Minister and the Cabinet to the National Assembly. They
shall be responsible to the National Assembly for the program of government and shall
determine the guidelines of national policy. Unlike in the presidential system where the
tenure of office of all elected officials cannot be terminated before their term expired, the
Prime Minister and the Cabinet remain in office only as long as they enjoy the
confidence of the National Assembly. The moment this confidence is lost the Prime
Minister and the Cabinet may be changed.[87]

The framers of the 1987 Constitution removed the mandatory nature of such appearance during the
question hour in the present Constitution so as to conform more fully to a system of separation of
powers.[88] To that extent, the question hour, as it is presently understood in this jurisdiction, departs
from the question period of the parliamentary system. That department heads may not be required to
appear in a question hour does not, however, mean that the legislature is rendered powerless to elicit
information from them in all circumstances. In fact, in light of the absence of a mandatory question
period, the need to enforce Congress right to executive information in the performance of its
legislative function becomes more imperative. As Schwartz observes:

Indeed, if the separation of powers has anything to tell us on the subject under
discussion, it is that the Congress has the right to obtain information from any
source even from officials of departments and agencies in the executive
branch. In the United States there is, unlike the situation which prevails in a
parliamentary system such as that in Britain, a clear separation between the legislative
and executive branches. It is this very separation that makes the congressional
right to obtain information from the executive so essential, if the functions of the
Congress as the elected representatives of the people are adequately to be
carried out. The absence of close rapport between the legislative and executive
branches in this country, comparable to those which exist under a parliamentary
system, and the nonexistence in the Congress of an institution such as the British
question period have perforce made reliance by the Congress upon its right to obtain
information from the executive essential, if it is intelligently to perform its legislative
tasks. Unless the Congress possesses the right to obtain executive information, its
power of oversight of administration in a system such as ours becomes a power devoid
of most of its practical content, since it depends for its effectiveness solely upon
information parceled out ex gratia by the executive.[89] (Emphasis and underscoring
supplied)

Sections 21 and 22, therefore, while closely related and complementary to each other, should not be
considered as pertaining to the same power of Congress. One specifically relates to the power to
conduct inquiries in aid of legislation, the aim of which is to elicit information that may be used for
legislation, while the other pertains to the power to conduct a question hour, the objective of which is
to obtain information in pursuit of Congress oversight function.

When Congress merely seeks to be informed on how department heads are implementing the
statutes which it has issued, its right to such information is not as imperative as that of the President
to whom, as Chief Executive, such department heads must give a report of their performance as a
matter of duty. In such instances, Section 22, in keeping with the separation of powers, states that
198

Congress may only request their appearance. Nonetheless, when the inquiry in which Congress
requires their appearance is in aid of legislation under Section 21, the appearance is mandatory for
the same reasons stated in Arnault.[90]

In fine, the oversight function of Congress may be facilitated by compulsory process only to the
extent that it is performed in pursuit of legislation. This is consistent with the intent discerned from the
deliberations of the Constitutional Commission.

Ultimately, the power of Congress to compel the appearance of executive officials under Section 21
and the lack of it under Section 22 find their basis in the principle of separation of powers. While the
executive branch is a co-equal branch of the legislature, it cannot frustrate the power of Congress to
legislate by refusing to comply with its demands for information.

When Congress exercises its power of inquiry, the only way for department heads to
exempt themselves therefrom is by a valid claim of privilege. They are not exempt by the mere
fact that they are department heads. Only one executive official may be exempted from this power
the President on whom executive power is vested, hence, beyond the reach of Congress except
through the power of impeachment. It is based on her being the highest official of the executive
branch, and the due respect accorded to a co-equal branch of government which is sanctioned by a
long-standing custom.

By the same token, members of the Supreme Court are also exempt from this power of
inquiry. Unlike the Presidency, judicial power is vested in a collegial body; hence, each member
thereof is exempt on the basis not only of separation of powers but also on the fiscal autonomy and
the constitutional independence of the judiciary. This point is not in dispute, as even counsel for the
Senate, Sen. Joker Arroyo, admitted it during the oral argument upon interpellation of the Chief
Justice.

Having established the proper interpretation of Section 22, Article VI of the Constitution, the Court
now proceeds to pass on the constitutionality of Section 1 of E.O. 464.

Section 1, in view of its specific reference to Section 22 of Article VI of the Constitution

and the absence of any reference to inquiries in aid of legislation, must be construed as
limited in its application to appearances of department heads in the question
hour contemplated in the provision of said Section 22 of Article VI. The reading is dictated by the
basic rule of construction that issuances must be interpreted, as much as possible, in a way that will
render it constitutional.

The requirement then to secure presidential consent under Section 1, limited as it is only to
appearances in the question hour, is valid on its face. For under Section 22, Article VI of the
Constitution, the appearance of department heads in the question hour is discretionary on their part.

Section 1 cannot, however, be applied to appearances of department heads in inquiries in aid

of legislation. Congress is not bound in such instances to respect the refusal of the department head
to appear in such inquiry, unless a valid claim of privilege is subsequently made, either by the
President herself or by the Executive Secretary.

Validity of Sections 2 and 3

199

Section 3 of E.O. 464 requires all the public officials enumerated in Section 2(b) to secure the
consent of the President prior to appearing before either house of Congress. The enumeration is
broad. It covers all senior officials of executive departments, all officers of the AFP and the PNP, and
all senior national security officials who, in the judgment of the heads of offices designated in the
same section (i.e. department heads, Chief of Staff of the AFP, Chief of the PNP, and the National
Security Adviser), are covered by the executive privilege.

The enumeration also includes such other officers as may be determined by the President. Given the
title of Section 2 Nature, Scope and Coverage of Executive Privilege , it is evident that under the rule
of ejusdem generis, the determination by the President under this provision is intended to be based
on a similar finding of coverage under executive privilege.

En passant, the Court notes that Section 2(b) of E.O. 464 virtually states that executive privilege
actually covers persons. Such is a misuse of the doctrine. Executive privilege, as discussed above, is
properly invoked in relation to specific categories of information and not to categories of persons.

In light, however, of Sec 2(a) of E.O. 464 which deals with the nature, scope and coverage of
executive privilege, the reference to persons being covered by the executive privilege may be read as
an abbreviated way of saying that the person is in possession of information which is, in the judgment
of the head of office concerned, privileged as defined in Section 2(a). The Court shall thus proceed on
the assumption that this is the intention of the challenged order.

Upon a determination by the designated head of office or by the President that an official is covered
by the executive privilege, such official is subjected to the requirement that he first secure the consent
of the President prior to appearing before Congress. This requirement effectively bars the
appearance of the official concerned unless the same is permitted by the President. The proviso
allowing the President to give its consent means nothing more than that the President may reverse a
prohibition which already exists by virtue of E.O. 464.

Thus, underlying this requirement of prior consent is the determination by a head of office, authorized
by the President under E.O. 464, or by the President herself, that such official is in possession of
information that is covered by executive privilege. This determination then becomes the basis for the
officials not showing up in the legislative investigation.

In view thereof, whenever an official invokes E.O. 464 to justify his failure to be present, such
invocation must be construed as a declaration to Congress that the President, or a head of office
authorized by the President, has determined that the requested information is privileged, and that the
President has not reversed such determination. Such declaration, however, even without mentioning
the term executive privilege, amounts to an implied claim that the information is being withheld by the
executive branch, by authority of the President, on the basis of executive privilege. Verily, there is
an implied claim of privilege.

The letter dated September 28, 2005 of respondent Executive Secretary Ermita to Senate President
Drilon illustrates the implied nature of the claim of privilege authorized by E.O. 464. It reads:

In connection with the inquiry to be conducted by the Committee of the Whole regarding
the Northrail Project of the North Luzon Railways Corporation on 29 September 2005 at
10:00 a.m., please be informed that officials of the Executive Department invited to
appear at the meeting will not be able to attend the same without the consent of the
President, pursuant to Executive Order No. 464 (s. 2005), entitled Ensuring Observance
200

Of The Principle Of Separation Of Powers, Adherence To The Rule On Executive

Privilege And Respect For The Rights Of Public Officials Appearing In Legislative
Inquiries In Aid Of Legislation Under The Constitution, And For Other Purposes. Said
officials have not secured the required consent from the President. (Underscoring
supplied)

The letter does not explicitly invoke executive privilege or that the matter on which these officials are
being requested to be resource persons falls under the recognized grounds of the privilege to justify
their absence. Nor does it expressly state that in view of the lack of consent from the President under
E.O. 464, they cannot attend the hearing.

Significant premises in this letter, however, are left unstated, deliberately or not. The letter assumes
that the invited officials are covered by E.O. 464. As explained earlier, however, to be covered by the
order means that a determination has been made, by the designated head of office or the President,
that the invited official possesses information that is covered by executive privilege. Thus, although it
is not stated in the letter that such determination has been made, the same must be deemed
implied. Respecting the statement that the invited officials have not secured the consent of the
President, it only means that the President has not reversed the standing prohibition against their
appearance before Congress.

Inevitably, Executive Secretary Ermitas letter leads to the conclusion that the executive branch, either
through the President or the heads of offices authorized under E.O. 464, has made a determination
that the information required by the Senate is privileged, and that, at the time of writing, there has
been no contrary pronouncement from the President. In fine, an implied claim of privilege has been
made by the executive.

While there is no Philippine case that directly addresses the issue of whether executive privilege may
be invoked against Congress, it is gathered from Chavez v. PEA that certain information in the
possession of the executive may validly be claimed as privileged even against Congress. Thus, the
case holds:

There is no claim by PEA that the information demanded by petitioner is privileged

information rooted in the separation of powers. The information does not
cover Presidential conversations, correspondences, or discussions during
closed-door Cabinet meetings which, like internal-deliberations of the Supreme
Court and other collegiate courts, or executive sessions of either house of
Congress, are recognized as confidential. This kind of information cannot be
pried open by a co-equal branch of government. A frank exchange of exploratory
ideas and assessments, free from the glare of publicity and pressure by interested
parties, is essential to protect the independence of decision-making of those tasked to
exercise Presidential, Legislative and Judicial power. This is not the situation in the
instant case.[91] (Emphasis and underscoring supplied)

Section 3 of E.O. 464, therefore, cannot be dismissed outright as invalid by the mere fact that it
sanctions claims of executive privilege. This Court must look further and assess the claim of privilege
authorized by the Order to determine whether it is valid.
201

While the validity of claims of privilege must be assessed on a case to case basis, examining the
ground invoked therefor and the particular circumstances surrounding it, there is, in an implied claim
of privilege, a defect that renders it invalid per se. By its very nature, and as demonstrated by the
letter of respondent Executive Secretary quoted above, the implied claim authorized by Section 3
of E.O. 464 is not accompanied by any specific allegation of the basis thereof (e.g., whether the
information demanded involves military or diplomatic secrets, closed-door Cabinet meetings,
etc.). While Section 2(a) enumerates the types of information that are covered by the privilege under
the challenged order, Congress is left to speculate as to which among them is being referred to by the
executive. The enumeration is not even intended to be comprehensive, but a mere statement of what
is included in the phrase confidential or classified information between the President and the public
officers covered by this executive order.
Certainly, Congress has the right to know why the executive considers the requested
information privileged. It does not suffice to merely declare that the President, or an authorized head
of office, has determined that it is so, and that the President has not overturned that
determination. Such declaration leaves Congress in the dark on how the requested information could
be classified as privileged. That the message is couched in terms that, on first impression, do not
seem like a claim of privilege only makes it more pernicious. It threatens to make Congress doubly
blind to the question of why the executive branch is not providing it with the information that it has
requested.
A claim of privilege, being a claim of exemption from an obligation to disclose information, must,
therefore, be clearly asserted. As U.S. v. Reynolds teaches:

The privilege belongs to the government and must be asserted by it; it can neither be
claimed nor waived by a private party. It is not to be lightly invoked. There must be a
formal claim of privilege, lodged by the head of the department which has control over
the matter, after actual personal consideration by that officer. The court itself must
determine whether the circumstances are appropriate for the claim of privilege, and yet
do so without forcing a disclosure of the very thing the privilege is designed to
protect.[92] (Underscoring supplied)

Absent then a statement of the specific basis of a claim of executive privilege, there is no way of
determining whether it falls under one of the traditional privileges, or whether, given the
circumstances in which it is made, it should be respected.[93] These, in substance, were the same
criteria in assessing the claim of privilege asserted against the Ombudsman in Almonte v.
Vasquez[94] and, more in point, against a committee of the Senate in Senate Select Committee on
Presidential Campaign Activities v. Nixon.[95]

A.O. Smith v. Federal Trade Commission is enlightening:

[T]he lack of specificity renders an assessment of the potential harm resulting from
disclosure impossible, thereby preventing the Court from balancing such harm against
plaintiffs needs to determine whether to override any claims of
privilege.[96] (Underscoring supplied)

And so is U.S. v. Article of Drug:[97]

On the present state of the record, this Court is not called upon to perform this
balancing operation. In stating its objection to claimants interrogatories, government
asserts, and nothing more, that the disclosures sought by claimant would inhibit
202

the free expression of opinion that non-disclosure is designed to protect. The

government has not shown nor even alleged that those who evaluated claimants
product were involved in internal policymaking, generally, or in this particular
instance. Privilege cannot be set up by an unsupported claim. The facts upon
which the privilege is based must be established. To find these interrogatories
objectionable, this Court would have to assume that the evaluation and classification of
claimants products was a matter of internal policy formulation, an assumption in which
this Court is unwilling to indulge sua sponte.[98] (Emphasis and underscoring supplied)

Mobil Oil Corp. v. Department of Energy[99] similarly emphasizes that an agency must provide precise
and certain reasons for preserving the confidentiality of requested information.

Black v. Sheraton Corp. of America[100] amplifies, thus:

A formal and proper claim of executive privilege requires a specific designation and
description of the documents within its scope as well as precise and certain reasons
for preserving their confidentiality. Without this specificity, it is impossible for a court
to analyze the claim short of disclosure of the very thing sought to be protected. As the
affidavit now stands, the Court has little more than its sua sponte speculation with which
to weigh the applicability of the claim. An improperly asserted claim of privilege is
no claim of privilege. Therefore, despite the fact that a claim was made by the proper
executive as Reynolds requires, the Court can not recognize the claim in the instant
case because it is legally insufficient to allow the Court to make a just and reasonable
determination as to its applicability. To recognize such a broad claim in which the
Defendant has given no precise or compelling reasons to shield these documents
from outside scrutiny, would make a farce of the whole procedure.[101] (Emphasis
and underscoring supplied)

Due respect for a co-equal branch of government, moreover, demands no less than a claim of
privilege clearly stating the grounds therefor. Apropos is the following ruling in McPhaul v. U.S:[102]

We think the Courts decision in United States v. Bryan, 339 U.S. 323, 70 S. Ct. 724, is
highly relevant to these questions. For it is as true here as it was there, that if
(petitioner) had legitimate reasons for failing to produce the records of the association, a
decent respect for the House of Representatives, by whose authority the
subpoenas issued, would have required that (he) state (his) reasons for
noncompliance upon the return of the writ. Such a statement would have given the
Subcommittee an opportunity to avoid the blocking of its inquiry by taking other
appropriate steps to obtain the records. To deny the Committee the opportunity to
consider the objection or remedy is in itself a contempt of its authority and an
obstruction of its processes. His failure to make any such statement was a patent
evasion of the duty of one summoned to produce papers before a congressional
committee[, and] cannot be condoned. (Emphasis and underscoring supplied; citations
omitted)

Upon the other hand, Congress must not require the executive to state the reasons for the claim with
such particularity as to compel disclosure of the information which the privilege is meant to
203

protect.[103] A useful analogy in determining the requisite degree of particularity would be the privilege
against self-incrimination. Thus, Hoffman v. U.S.[104] declares:

The witness is not exonerated from answering merely because he declares that in so
doing he would incriminate himself his say-so does not of itself establish the hazard
of incrimination. It is for the court to say whether his silence is justified, and to
require him to answer if it clearly appears to the court that he is
mistaken. However, if the witness, upon interposing his claim, were required to prove
the hazard in the sense in which a claim is usually required to be established in court,
he would be compelled to surrender the very protection which the privilege is designed
to guarantee. To sustain the privilege, it need only be evident from the
implications of the question, in the setting in which it is asked, that a responsive
answer to the question or an explanation of why it cannot be answered might be
dangerous because injurious disclosure could result. x x x (Emphasis and
underscoring supplied)

The claim of privilege under Section 3 of E.O. 464 in relation to Section 2(b) is thus invalid per
se. It is not asserted. It is merely implied. Instead of providing precise and certain reasons for the
claim, it merely invokes E.O. 464, coupled with an announcement that the President has not given
her consent. It is woefully insufficient for Congress to determine whether the withholding of
information is justified under the circumstances of each case. It severely frustrates the power of
inquiry of Congress.

In fine, Section 3 and Section 2(b) of E.O. 464 must be invalidated.

No infirmity, however, can be imputed to Section 2(a) as it merely provides guidelines, binding
only on the heads of office mentioned in Section 2(b), on what is covered by executive privilege. It
does not purport to be conclusive on the other branches of government. It may thus be construed as
a mere expression of opinion by the President regarding the nature and scope of executive privilege.

Petitioners, however, assert as another ground for invalidating the challenged order the
alleged unlawful delegation of authority to the heads of offices in Section 2(b).Petitioner Senate of the
Philippines, in particular, cites the case of the United States where, so it claims, only the President
can assert executive privilege to withhold information from Congress.

Section 2(b) in relation to Section 3 virtually provides that, once the head of office determines
that a certain information is privileged, such determination is presumed to bear the Presidents
authority and has the effect of prohibiting the official from appearing before Congress, subject only to
the express pronouncement of the President that it is allowing the appearance of such official. These
provisions thus allow the President to authorize claims of privilege by mere silence.

Such presumptive authorization, however, is contrary to the exceptional nature of the

privilege. Executive privilege, as already discussed, is recognized with respect to information the
confidential nature of which is crucial to the fulfillment of the unique role and responsibilities of the
executive branch,[105] or in those instances where exemption from disclosure is necessary to the
discharge of highly important executive responsibilities.[106] The doctrine of executive privilege is thus
premised on the fact that certain informations must, as a matter of necessity, be kept confidential in
pursuit of the public interest. The privilege being, by definition, an exemption from the obligation to
204

disclose information, in this case to Congress, the necessity must be of such high degree as to
outweigh the public interest in enforcing that obligation in a particular case.

In light of this highly exceptional nature of the privilege, the Court finds it essential to limit to
the President the power to invoke the privilege. She may of course authorize the Executive Secretary
to invoke the privilege on her behalf, in which case the Executive Secretary must state that the
authority is By order of the President, which means that he personally consulted with her. The
privilege being an extraordinary power, it must be wielded only by the highest official in the executive
hierarchy. In other words, the President may not authorize her subordinates to exercise such
power. There is even less reason to uphold such authorization in the instant case where the
authorization is not explicit but by mere silence. Section 3, in relation to Section 2(b), is further invalid
on this score.

It follows, therefore, that when an official is being summoned by Congress on a matter which,
in his own judgment, might be covered by executive privilege, he must be afforded reasonable time to
inform the President or the Executive Secretary of the possible need for invoking the privilege. This is
necessary in order to provide the President or the Executive Secretary with fair opportunity to
consider whether the matter indeed calls for a claim of executive privilege. If, after the lapse of that
reasonable time, neither the President nor the Executive Secretary invokes the privilege, Congress is
no longer bound to respect the failure of the official to appear before Congress and may then opt to
avail of the necessary legal means to compel his appearance.

The Court notes that one of the expressed purposes for requiring officials to secure the
consent of the President under Section 3 of E.O. 464 is to ensure respect for the rights of public
officials appearing in inquiries in aid of legislation. That such rights must indeed be respected by
Congress is an echo from Article VI Section 21 of the Constitution mandating that [t]he rights of
persons appearing in or affected by such inquiries shall be respected.

In light of the above discussion of Section 3, it is clear that it is essentially an authorization for
implied claims of executive privilege, for which reason it must be invalidated. That such authorization
is partly motivated by the need to ensure respect for such officials does not change the infirm nature
of the authorization itself.

Right to Information

E.O 464 is concerned only with the demands of Congress for the appearance of executive
officials in the hearings conducted by it, and not with the demands of citizens for information pursuant
to their right to information on matters of public concern. Petitioners are not amiss in claiming,
however, that what is involved in the present controversy is not merely the legislative power of
inquiry, but the right of the people to information.

There are, it bears noting, clear distinctions between the right of Congress to information which
underlies the power of inquiry and the right of the people to information on matters of public
concern. For one, the demand of a citizen for the production of documents pursuant to his right to
information does not have the same obligatory force as a subpoena duces tecum issued by
Congress. Neither does the right to information grant a citizen the power to exact testimony from
government officials. These powers belong only to Congress and not to an individual citizen.
205

Thus, while Congress is composed of representatives elected by the people, it does not follow,
except in a highly qualified sense, that in every exercise of its power of inquiry, the people are
exercising their right to information.

To the extent that investigations in aid of legislation are generally conducted in public,
however, any executive issuance tending to unduly limit disclosures of information in such
investigations necessarily deprives the people of information which, being presumed to be in aid of
legislation, is presumed to be a matter of public concern. The citizens are thereby denied access to
information which they can use in formulating their own opinions on the matter before Congress
opinions which they can then communicate to their representatives and other government officials
through the various legal means allowed by their freedom of expression. Thus holds Valmonte v.
Belmonte:

It is in the interest of the State that the channels for free political
discussion be maintained to the end that the government may perceive and be
responsive to the peoples will.Yet, this open dialogue can be effective only to the
extent that the citizenry is informed and thus able to formulate its will
intelligently. Only when the participants in the discussion are aware of the issues and
have access to information relating thereto can such bear fruit.[107] (Emphasis and
underscoring supplied)

The impairment of the right of the people to information as a consequence of E.O. 464 is,
therefore, in the sense explained above, just as direct as its violation of the legislatures power of
inquiry.

Implementation of E.O. 464 prior to its publication

While E.O. 464 applies only to officials of the executive branch, it does not follow that the same is
exempt from the need for publication. On the need for publishing even those statutes that do not
directly apply to people in general, Taada v. Tuvera states:

The term laws should refer to all laws and not only to those of general application, for
strictly speaking all laws relate to the people in general albeit there are some that do not
apply to them directly. An example is a law granting citizenship to a particular individual,
like a relative of President Marcos who was decreed instant naturalization. It surely
cannot be said that such a law does not affect the public although it
unquestionably does not apply directly to all the people. The subject of such law
is a matter of public interest which any member of the body politic may
question in the political forums or, if he is a proper party, even in courts of
justice.[108] (Emphasis and underscoring supplied)

Although the above statement was made in reference to statutes, logic dictates that the challenged
order must be covered by the publication requirement. As explained above, E.O. 464 has a direct
effect on the right of the people to information on matters of public concern. It is, therefore, a matter of
public interest which members of the body politic may question before this Court. Due process thus
requires that the people should have been apprised of this issuance before it was implemented.
206

Conclusion

Congress undoubtedly has a right to information from the executive branch whenever it is sought in
aid of legislation. If the executive branch withholds such information on the ground that it is privileged,
it must so assert it and state the reason therefor and why it must be respected.
The infirm provisions of E.O. 464, however, allow the executive branch to evade congressional
requests for information without need of clearly asserting a right to do so and/or proffering its reasons
therefor. By the mere expedient of invoking said provisions, the power of Congress to conduct
inquiries in aid of legislation is frustrated. That is impermissible. For

[w]hat republican theory did accomplishwas to reverse the old presumption in favor of
secrecy, based on the divine right of kings and nobles, and replace it with a
presumption in favor of publicity, based on the doctrine of popular
sovereignty. (Underscoring supplied)[109]

Resort to any means then by which officials of the executive branch could refuse to divulge
information cannot be presumed valid. Otherwise, we shall not have merely nullified the power of our
legislature to inquire into the operations of government, but we shall have given up something of
much greater value our right as a people to take part in government.

WHEREFORE, the petitions are PARTLY GRANTED. Sections 2(b) and 3 of Executive Order No.
464 (series of 2005), ENSURING OBSERVANCE OF THE PRINCIPLE OF SEPARATION OF
POWERS, ADHERENCE TO THE RULE ON EXECUTIVE
PRIVILEGE AND RESPECT FOR THE RIGHTS OF PUBLIC OFFICIALS APPEARING IN
LEGISLATIVE INQUIRIES IN AID OF LEGISLATION UNDER THE CONSTITUTION, AND FOR
OTHER PURPOSES, are declared VOID. Sections 1 and 2(a) are, however, VALID.

SO ORDERED.

FIRST DIVISION
G.R. No. 174689 October 22, 2007
ROMMEL JACINTO DANTES SILVERIO, petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, respondent.
DECISION
CORONA, J.:
When God created man, He made him in the likeness of God; He created them male and
female. (Genesis 5:1-2)
Amihan gazed upon the bamboo reed planted by Bathala and she heard voices coming from
inside the bamboo. "Oh North Wind! North Wind! Please let us out!," the voices said. She
pecked the reed once, then twice. All of a sudden, the bamboo cracked and slit open. Out
came two human beings; one was a male and the other was a female. Amihan named the man
"Malakas" (Strong) and the woman "Maganda" (Beautiful). (The Legend of Malakas and
Maganda)
When is a man a man and when is a woman a woman? In particular, does the law recognize the
changes made by a physician using scalpel, drugs and counseling with regard to a persons sex?
207

May a person successfully petition for a change of name and sex appearing in the birth certificate to
reflect the result of a sex reassignment surgery?
On November 26, 2002, petitioner Rommel Jacinto Dantes Silverio filed a petition for the change of
his first name and sex in his birth certificate in the Regional Trial Court of Manila, Branch 8. The
petition, docketed as SP Case No. 02-105207, impleaded the civil registrar of Manila as respondent.
Petitioner alleged in his petition that he was born in the City of Manila to the spouses Melecio Petines
Silverio and Anita Aquino Dantes on April 4, 1962. His name was registered as "Rommel Jacinto
Dantes Silverio" in his certificate of live birth (birth certificate). His sex was registered as "male."
He further alleged that he is a male transsexual, that is, "anatomically male but feels, thinks and acts
as a female" and that he had always identified himself with girls since childhood.1 Feeling trapped in a
mans body, he consulted several doctors in the United States. He underwent psychological
examination, hormone treatment and breast augmentation. His attempts to transform himself to a
"woman" culminated on January 27, 2001 when he underwent sex reassignment surgery2 in
Bangkok, Thailand. He was thereafter examined by Dr. Marcelino Reysio-Cruz, Jr., a plastic and
reconstruction surgeon in the Philippines, who issued a medical certificate attesting that he
(petitioner) had in fact undergone the procedure.
From then on, petitioner lived as a female and was in fact engaged to be married. He then sought to
have his name in his birth certificate changed from "Rommel Jacinto" to "Mely," and his sex from
"male" to "female."
An order setting the case for initial hearing was published in the Peoples Journal Tonight, a
newspaper of general circulation in Metro Manila, for three consecutive weeks.3 Copies of the order
were sent to the Office of the Solicitor General (OSG) and the civil registrar of Manila.
On the scheduled initial hearing, jurisdictional requirements were established. No opposition to the
petition was made.
During trial, petitioner testified for himself. He also presented Dr. Reysio-Cruz, Jr. and his American
fianc, Richard P. Edel, as witnesses.
On June 4, 2003, the trial court rendered a decision4 in favor of petitioner. Its relevant portions read:
Petitioner filed the present petition not to evade any law or judgment or any infraction thereof
or for any unlawful motive but solely for the purpose of making his birth records compatible
with his present sex.
The sole issue here is whether or not petitioner is entitled to the relief asked for.
The [c]ourt rules in the affirmative.
Firstly, the [c]ourt is of the opinion that granting the petition would be more in consonance with
the principles of justice and equity. With his sexual [re-assignment], petitioner, who has always
felt, thought and acted like a woman, now possesses the physique of a female. Petitioners
misfortune to be trapped in a mans body is not his own doing and should not be in any way
taken against him.
Likewise, the [c]ourt believes that no harm, injury [or] prejudice will be caused to anybody or
the community in granting the petition. On the contrary, granting the petition would bring the
much-awaited happiness on the part of the petitioner and her [fianc] and the realization of
their dreams.
Finally, no evidence was presented to show any cause or ground to deny the present petition
despite due notice and publication thereof. Even the State, through the [OSG] has not seen fit
to interpose any [o]pposition.
WHEREFORE, judgment is hereby rendered GRANTING the petition and ordering the Civil
Registrar of Manila to change the entries appearing in the Certificate of Birth of [p]etitioner,
specifically for petitioners first name from "Rommel Jacinto" to MELY and petitioners gender
from "Male" to FEMALE. 5
208

On August 18, 2003, the Republic of the Philippines (Republic), thru the OSG, filed a petition for
certiorari in the Court of Appeals.6 It alleged that there is no law allowing the change of entries in the
birth certificate by reason of sex alteration.
On February 23, 2006, the Court of Appeals7 rendered a decision8 in favor of the Republic. It ruled
that the trial courts decision lacked legal basis. There is no law allowing the change of either name or
sex in the certificate of birth on the ground of sex reassignment through surgery. Thus, the Court of
Appeals granted the Republics petition, set aside the decision of the trial court and ordered the
dismissal of SP Case No. 02-105207. Petitioner moved for reconsideration but it was denied.9 Hence,
this petition.
Petitioner essentially claims that the change of his name and sex in his birth certificate is allowed
under Articles 407 to 413 of the Civil Code, Rules 103 and 108 of the Rules of Court and RA 9048.10
The petition lacks merit.
A Persons First Name Cannot Be Changed On the Ground of Sex Reassignment
Petitioner invoked his sex reassignment as the ground for his petition for change of name and sex. As
found by the trial court:
Petitioner filed the present petition not to evade any law or judgment or any infraction thereof
or for any unlawful motive but solely for the purpose of making his birth records
compatible with his present sex. (emphasis supplied)
Petitioner believes that after having acquired the physical features of a female, he became entitled to
the civil registry changes sought. We disagree.
The State has an interest in the names borne by individuals and entities for purposes of
identification.11 A change of name is a privilege, not a right.12 Petitions for change of name are
controlled by statutes.13 In this connection, Article 376 of the Civil Code provides:
ART. 376. No person can change his name or surname without judicial authority.
This Civil Code provision was amended by RA 9048 (Clerical Error Law). In particular, Section 1 of
RA 9048 provides:
SECTION 1. Authority to Correct Clerical or Typographical Error and Change of First Name or
Nickname. No entry in a civil register shall be changed or corrected without a judicial order,
except for clerical or typographical errors and change of first name or nickname which can be
corrected or changed by the concerned city or municipal civil registrar or consul general in
accordance with the provisions of this Act and its implementing rules and regulations.
RA 9048 now governs the change of first name.14 It vests the power and authority to entertain
petitions for change of first name to the city or municipal civil registrar or consul general concerned.
Under the law, therefore, jurisdiction over applications for change of first name is now primarily
lodged with the aforementioned administrative officers. The intent and effect of the law is to exclude
the change of first name from the coverage of Rules 103 (Change of Name) and 108 (Cancellation or
Correction of Entries in the Civil Registry) of the Rules of Court, until and unless an administrative
petition for change of name is first filed and subsequently denied.15 It likewise lays down the
corresponding venue,16 form17 and procedure. In sum, the remedy and the proceedings regulating
change of first name are primarily administrative in nature, not judicial.
RA 9048 likewise provides the grounds for which change of first name may be allowed:
SECTION 4. Grounds for Change of First Name or Nickname. The petition for change of first
name or nickname may be allowed in any of the following cases:
(1) The petitioner finds the first name or nickname to be ridiculous, tainted with dishonor or
extremely difficult to write or pronounce;
(2) The new first name or nickname has been habitually and continuously used by the
petitioner and he has been publicly known by that first name or nickname in the community; or
(3) The change will avoid confusion.
Petitioners basis in praying for the change of his first name was his sex reassignment. He intended to
make his first name compatible with the sex he thought he transformed himself into through surgery.
209

However, a change of name does not alter ones legal capacity or civil status.18 RA 9048 does not
sanction a change of first name on the ground of sex reassignment. Rather than avoiding confusion,
changing petitioners first name for his declared purpose may only create grave complications in the
civil registry and the public interest.
Before a person can legally change his given name, he must present proper or reasonable cause or
any compelling reason justifying such change.19 In addition, he must show that he will be prejudiced
by the use of his true and official name.20 In this case, he failed to show, or even allege, any prejudice
that he might suffer as a result of using his true and official name.
In sum, the petition in the trial court in so far as it prayed for the change of petitioners first name was
not within that courts primary jurisdiction as the petition should have been filed with the local civil
registrar concerned, assuming it could be legally done. It was an improper remedy because the
proper remedy was administrative, that is, that provided under RA 9048. It was also filed in the wrong
venue as the proper venue was in the Office of the Civil Registrar of Manila where his birth certificate
is kept. More importantly, it had no merit since the use of his true and official name does not prejudice
him at all. For all these reasons, the Court of Appeals correctly dismissed petitioners petition in so far
as the change of his first name was concerned.
No Law Allows The Change of Entry In The Birth Certificate As To Sex On the Ground of Sex
Reassignment
The determination of a persons sex appearing in his birth certificate is a legal issue and the court
must look to the statutes.21 In this connection, Article 412 of the Civil Code provides:
ART. 412. No entry in the civil register shall be changed or corrected without a judicial order.
Together with Article 376 of the Civil Code, this provision was amended by RA 9048 in so far
as clerical or typographical errors are involved. The correction or change of such matters can now be
made through administrative proceedings and without the need for a judicial order. In effect, RA 9048
removed from the ambit of Rule 108 of the Rules of Court the correction of such errors.22 Rule 108
now applies only to substantial changes and corrections in entries in the civil register.23
Section 2(c) of RA 9048 defines what a "clerical or typographical error" is:
SECTION 2. Definition of Terms. As used in this Act, the following terms shall mean:
xxx xxx xxx
(3) "Clerical or typographical error" refers to a mistake committed in the performance of
clerical work in writing, copying, transcribing or typing an entry in the civil register that is
harmless and innocuous, such as misspelled name or misspelled place of birth or the
like, which is visible to the eyes or obvious to the understanding, and can be corrected
or changed only by reference to other existing record or records: Provided,
however, That no correction must involve the change of nationality, age, status
or sex of the petitioner. (emphasis supplied)
Under RA 9048, a correction in the civil registry involving the change of sex is not a mere clerical or
typographical error. It is a substantial change for which the applicable procedure is Rule 108 of the
Rules of Court.
The entries envisaged in Article 412 of the Civil Code and correctable under Rule 108 of the Rules of
Court are those provided in Articles 407 and 408 of the Civil Code:24
ART. 407. Acts, events and judicial decrees concerning the civil status of persons shall be
recorded in the civil register.
ART. 408. The following shall be entered in the civil register:
(1) Births; (2) marriages; (3) deaths; (4) legal separations; (5) annulments of marriage; (6)
judgments declaring marriages void from the beginning; (7) legitimations; (8) adoptions; (9)
acknowledgments of natural children; (10) naturalization; (11) loss, or (12) recovery of
citizenship; (13) civil interdiction; (14) judicial determination of filiation; (15) voluntary
emancipation of a minor; and (16) changes of name.
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The acts, events or factual errors contemplated under Article 407 of the Civil Code include even those
that occur after birth.25 However, no reasonable interpretation of the provision can justify the
conclusion that it covers the correction on the ground of sex reassignment.
To correct simply means "to make or set aright; to remove the faults or error from" while to change
means "to replace something with something else of the same kind or with something that serves as
a substitute."26 The birth certificate of petitioner contained no error. All entries therein, including those
corresponding to his first name and sex, were all correct. No correction is necessary.
Article 407 of the Civil Code authorizes the entry in the civil registry of certain acts (such as
legitimations, acknowledgments of illegitimate children and naturalization), events (such as births,
marriages, naturalization and deaths) and judicial decrees (such as legal separations, annulments of
marriage, declarations of nullity of marriages, adoptions, naturalization, loss or recovery of
citizenship, civil interdiction, judicial determination of filiation and changes of name). These acts,
events and judicial decrees produce legal consequences that touch upon the legal capacity, status
and nationality of a person. Their effects are expressly sanctioned by the laws. In contrast, sex
reassignment is not among those acts or events mentioned in Article 407. Neither is it recognized nor
even mentioned by any law, expressly or impliedly.
"Status" refers to the circumstances affecting the legal situation (that is, the sum total of capacities
and incapacities) of a person in view of his age, nationality and his family membership.27
The status of a person in law includes all his personal qualities and relations, more or less
permanent in nature, not ordinarily terminable at his own will, such as his being legitimate
or illegitimate, or his being married or not. The comprehensive term status include such
matters as the beginning and end of legal personality, capacity to have rights in general, family
relations, and its various aspects, such as birth, legitimation, adoption, emancipation,
marriage, divorce, and sometimes even succession.28 (emphasis supplied)
A persons sex is an essential factor in marriage and family relations. It is a part of a persons legal
capacity and civil status. In this connection, Article 413 of the Civil Code provides:
ART. 413. All other matters pertaining to the registration of civil status shall be governed by
special laws.
But there is no such special law in the Philippines governing sex reassignment and its effects. This is
fatal to petitioners cause.
Moreover, Section 5 of Act 3753 (the Civil Register Law) provides:
SEC. 5. Registration and certification of births. The declaration of the physician or midwife in
attendance at the birth or, in default thereof, the declaration of either parent of the newborn
child, shall be sufficient for the registration of a birth in the civil register. Such declaration shall
be exempt from documentary stamp tax and shall be sent to the local civil registrar not later
than thirty days after the birth, by the physician or midwife in attendance at the birth or by
either parent of the newborn child.
In such declaration, the person above mentioned shall certify to the following facts: (a) date
and hour of birth; (b) sex and nationality of infant; (c) names, citizenship and religion of
parents or, in case the father is not known, of the mother alone; (d) civil status of parents; (e)
place where the infant was born; and (f) such other data as may be required in the regulations
to be issued.
xxx xxx xxx (emphasis supplied)
Under the Civil Register Law, a birth certificate is a historical record of the facts as they existed at the
time of birth.29Thus, the sex of a person is determined at birth, visually done by the birth attendant
(the physician or midwife) by examining the genitals of the infant. Considering that there is no law
legally recognizing sex reassignment, the determination of a persons sex made at the time of his or
her birth, if not attended by error,30 is immutable.31
When words are not defined in a statute they are to be given their common and ordinary meaning in
the absence of a contrary legislative intent. The words "sex," "male" and "female" as used in the Civil
211

Register Law and laws concerning the civil registry (and even all other laws) should therefore be
understood in their common and ordinary usage, there being no legislative intent to the contrary. In
this connection, sex is defined as "the sum of peculiarities of structure and function that distinguish a
male from a female"32 or "the distinction between male and female."33Female is "the sex that
produces ova or bears young"34 and male is "the sex that has organs to produce spermatozoa for
fertilizing ova."35 Thus, the words "male" and "female" in everyday understanding do not include
persons who have undergone sex reassignment. Furthermore, "words that are employed in a statute
which had at the time a well-known meaning are presumed to have been used in that sense unless
the context compels to the contrary."36 Since the statutory language of the Civil Register Law was
enacted in the early 1900s and remains unchanged, it cannot be argued that the term "sex" as used
then is something alterable through surgery or something that allows a post-operative male-to-female
transsexual to be included in the category "female."
For these reasons, while petitioner may have succeeded in altering his body and appearance through
the intervention of modern surgery, no law authorizes the change of entry as to sex in the civil registry
for that reason. Thus, there is no legal basis for his petition for the correction or change of the entries
in his birth certificate.
Neither May Entries in the Birth Certificate As to First Name or Sex Be Changed on the Ground
of Equity
The trial court opined that its grant of the petition was in consonance with the principles of justice and
equity. It believed that allowing the petition would cause no harm, injury or prejudice to anyone. This
is wrong.
The changes sought by petitioner will have serious and wide-ranging legal and public policy
consequences. First, even the trial court itself found that the petition was but petitioners first step
towards his eventual marriage to his male fianc. However, marriage, one of the most sacred social
institutions, is a special contract of permanent union between a man and a woman.37 One of its
essential requisites is the legal capacity of the contracting parties who must be a male and a
female.38 To grant the changes sought by petitioner will substantially reconfigure and greatly alter the
laws on marriage and family relations. It will allow the union of a man with another man who has
undergone sex reassignment (a male-to-female post-operative transsexual). Second, there are
various laws which apply particularly to women such as the provisions of the Labor Code on
employment of women,39 certain felonies under the Revised Penal Code40 and the presumption of
survivorship in case of calamities under Rule 131 of the Rules of Court,41 among others. These laws
underscore the public policy in relation to women which could be substantially affected if petitioners
petition were to be granted.
It is true that Article 9 of the Civil Code mandates that "[n]o judge or court shall decline to render
judgment by reason of the silence, obscurity or insufficiency of the law." However, it is not a license
for courts to engage in judicial legislation. The duty of the courts is to apply or interpret the law, not to
make or amend it.
In our system of government, it is for the legislature, should it choose to do so, to determine what
guidelines should govern the recognition of the effects of sex reassignment. The need for legislative
guidelines becomes particularly important in this case where the claims asserted are statute-based.
To reiterate, the statutes define who may file petitions for change of first name and for correction or
change of entries in the civil registry, where they may be filed, what grounds may be invoked, what
proof must be presented and what procedures shall be observed. If the legislature intends to confer
on a person who has undergone sex reassignment the privilege to change his name and sex to
conform with his reassigned sex, it has to enact legislation laying down the guidelines in turn
governing the conferment of that privilege.
It might be theoretically possible for this Court to write a protocol on when a person may be
recognized as having successfully changed his sex. However, this Court has no authority to fashion a
212

law on that matter, or on anything else. The Court cannot enact a law where no law exists. It can only
apply or interpret the written word of its co-equal branch of government, Congress.
Petitioner pleads that "[t]he unfortunates are also entitled to a life of happiness, contentment and [the]
realization of their dreams." No argument about that. The Court recognizes that there are people
whose preferences and orientation do not fit neatly into the commonly recognized parameters of
social convention and that, at least for them, life is indeed an ordeal. However, the remedies
petitioner seeks involve questions of public policy to be addressed solely by the legislature, not by the
courts.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioner.
SO ORDERED.
Puno, C.J., Chairperson, Sandoval-Gutierrez, Azcuna, Garcia, JJ., concur.

A.M. No. P-08-2535 June 23, 2010

(Formerly A.M. OCA IPI No. 04- 2022-P and A.M. No. 04-434-RTC)
OFFICE OF THE COURT ADMINISTRATOR, Complainant,
vs.
FLORENCIO M. REYES,1 Officer-in-Charge, and RENE DE GUZMAN, Clerk, Regional Trial
Court, Branch 31, Guimba, Nueva Ecija, Respondents.
DECISION
Per curiam:*
This complaint for gross misconduct against Rene de Guzman (De Guzman), Clerk, Regional Trial
Court (RTC) of Guimba, Nueva Ecija, Branch 31, is an offshoot of the complaint filed by Atty. Hugo B.
Sansano, Jr. (Atty. Sansano) relative to the alleged incompetence/inefficiency of the RTC of Guimba,
Nueva Ecija, Branch 31, in the transmittal of the records of Criminal Case No. 1144-G2 to the Court of
Appeals.
In our Resolution dated September 17, 2007, we adopted the findings and recommendation of the
Office of the Court Administrator (OCA) declaring as closed and terminated the administrative matter
relative to the delay in the transmittal of the records of Criminal Case No. 1144-G, and exonerating
De Guzman and Florencio M. Reyes (Reyes), the Officer-in-Charge of the RTC of Guimba, Nueva
Ecija, Branch 31.
However, in the same Resolution, we also required De Guzman to comment on the allegation that he
is using illegal drugs and had been manifesting irrational and queer behavior while at work. According
to Reyes, De Guzmans manifestations of absurd behavior prompted Judge Napoleon R. Sta.
Romana (Judge Sta. Romana) to request the Philippine National Police Crime Laboratory to perform
a drug test on De Guzman. As alleged by Reyes:
x x x Mr. Rene de Guzman, the Docket Clerk, was [in] charge of the preparation and transmission of
the records on appeal x x x. Nonetheless, x x x Judge Sta. Romana would x x x often x x x [remind
him] about the transmittal of records of the appealed cases [for more than] a dozen times, even
personally confronting Mr. Rene de Guzman about the matter, x x x though unsuccessfully x x x. Mr.
De Guzman would just x x x dismiss the subject in ridicule and with the empty assurance that the task
is as good as finished and what x x x need[s] to be done [is] simply retyping of the corrected indices
or the like and that he would submit the same in [no] time at all. This was after a number of weeks
from March 26, 2003 after Mr. De Guzman made the undersigned sign the transmittal of PP v.
Manangan which he allegedly did not transmit before owing to some minor corrections in the
indexing. All too often, (it seems to have been customary on his part, for this he would do to other
pressing assignment) he would come to the office the next day, jubilant that the problem has been
solved at last! But to no avail. This attitude seemingly bordering on the irrational if not to say that a
213

sense of responsibility is utterly lacking may have given cue for Judge Sta. Romana to have Mr. De
Guzman undergo a drug test x x x.3
That Mr. De Guzman could brush aside even the personal importuning by the judge is a fete no other
of our co-employees dare emulate. On the contrary, everybody is apprehensive for his well being and
in his behalf. x x x
On May 24, 2004, Judge Sta. Romana requested the Nueva Ecija Provincial Crime Laboratory Office
to conduct a drug test on De Guzman. On May 26, 2004, De Guzman underwent a qualitative
examination the results of which yielded positive for Tetrahydrocannabinol metabolites (marijuana)
and Methamphetamine (shabu), both dangerous drugs.
In our Resolution of September 17, 2007, we required De Guzman to submit his comment on the
charge of misconduct relative to the alleged use of prohibited drugs within 10 days from notice.
Notwithstanding the Courts directive, De Guzman failed to file his Comment. Thus, on January 23,
2008, we directed De Guzman to show cause why he should not be held in contempt for failure to
comply with the September 17, 2007 Resolution. At the same time, we resolved to require him to
submit his comment within 10 days from notice.
De Guzman complied with our directive only on March 12, 2008. In his letter, De Guzman claimed
that he failed to comply with the Courts directive because he lost his copy of the September 17, 2007
Resolution.
Treating De Guzmans letter as his Comment, we referred the same to the OCA for evaluation, report
and recommendation. The OCA submitted its Report and Recommendation on July 23, 2008 which
reads in part:
xxxx
Noticeably, respondent de Guzman did not challenge the authenticity and validity of the chemistry
report of the Nueva Ecija Provincial Crime Laboratory Office which found him positive for "marijuana"
and "shabu". He did not also promptly submit another test report or other document to controvert the
drug test report. His plain refutation of the charge and his willingness to submit himself now to a drug
test are token attempts at candor and assertion of innocence. These perfunctory attempts cannot
prevail over the solitary yet compelling evidence of misconduct for use of prohibited drugs.
Relative to respondents delay in filing his comment to the charge of misconduct, his claim that he
"lost and misplaced (his) copy of said resolution, and for that (he) almost forgot about it" is neither a
valid reason nor an excuse for the delay in complying with the order of the Court. His flippant attitude
towards the repeated orders of the Court to explain his conduct does not merit consideration and
justification for delay.
It is settled that respondents "indifference to [the resolutions] requiring him to comment on the
accusation(s) in the complaint thoroughly and substantially is gross misconduct, and may even be
considered as outright disrespect to the Court." After all, a resolution of the Supreme Court is not a
mere request and should be complied with promptly and completely. Such failure to comply
accordingly betrays not only a recalcitrant streak in character, but has likewise been considered as an
utter lack of interest to remain with, if not contempt of the judicial system.
It should be mentioned that this is not the first instance that respondent is ordered to account for his
failure to comply with a court order. Earlier, he was required to explain to the Court his failure to
promptly submit a copy of the affidavit of retired court stenographer Jorge Caoile and to show cause
why he should not be administratively dealt with for his failure to comply with a show cause order.
For failure to overcome the charge of use of prohibited drugs and to satisfactorily explain his failure to
submit promptly his compliance to the Courts show cause order, respondent may be held guilty of
two counts of gross misconduct.
The OCA thus submitted the following recommendations for consideration of the Court viz:
1. The instant matter be RE-DOCKETED as a regular administrative case; and
2. Respondent Rene de Guzman be found guilty of gross misconduct and accordingly
be DISMISSED from the service effective immediately with forfeiture of all benefits except
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accrued leave credits, with prejudice to his re-employment in any branch or instrumentality of
the government, including government-owned or controlled agencies, corporations and
financial institutions.4
On August 27, 2008, we required De Guzman to manifest within 10 days from receipt whether he is
willing to submit the case for resolution on the basis of the pleadings/records already filed and
submitted. As before, De Guzman simply ignored our directive. Consequently, on September 28,
2009, we deemed waived the filing of De Guzmans manifestation.
Our Ruling
We adopt the findings and recommendation of the OCA.
We note that De Guzman is adept at ignoring the Courts directives. In his letter-explanation in the
administrative matter relative to the delay in the transmittal of the records of Criminal Case No. 1144-
G, he requested for a period of 10 days or until November 15, 2004 within which to submit the
Affidavit of George Caoile (Caoile), the retired Stenographer, as part of his comment. However,
despite the lapse of five months, De Guzman still failed to submit Caoiles affidavit. Subsequently, we
furnished him with a copy of the April 18, 2005 Resolution wherein we mentioned that we are awaiting
his submission of the affidavit of Caoile which shall be considered as part of his (De Guzmans)
comment.
Nine months from the time he undertook to submit the affidavit of Caoile, De Guzman has yet to
comply with his undertaking. Thus, on August 10, 2005, we required De Guzman to show cause why
he should not be disciplinarily dealt with or held in contempt for such failure.
Unfortunately, De Guzman merely ignored our show cause order. Consequently, on November 20,
2006, we imposed upon him a fine of 1,000.00. Finally, on January 24, 2007, or after the lapse of
one year and two months, De Guzman submitted the affidavit of Caoile.
Similarly, we also required De Guzman to file his comment within 10 days from notice as regards the
allegation that he was using prohibited drugs. However, he again ignored our directive as contained
in the Resolution of September 17, 2007. Thus, on January 23, 2008, we required him to show cause
why he should not be held in contempt for such failure. By way of explanation, De Guzman submitted
a letter dated March 12, 2008 wherein he claimed that he failed to file his comment on the charge of
miscondouct because he allegedly lost his copy of the said September 17, 2007 Resolution.
Finally, on August 27, 2008, we required De Guzman to manifest whether he is willing to submit the
case for resolution based on the pleadings submitted. As before, he failed to comply with the same.
As correctly observed by the OCA, De Guzman has shown his propensity to defy the directives of this
Court.5However, at this juncture, we are no longer wont to countenance such disrespectful behavior.
As we have categorically declared in Office of the Court Administrator v. Clerk of Court Fe P. Ganzan,
MCTC, Jasaan, Claveria, Misamis Oriental:6
x x x A resolution of the Supreme Court should not be construed as a mere request, and should be
complied with promptly and completely. Such failure to comply betrays, not only a recalcitrant streak
in character, but also disrespect for the lawful order and directive of the Court. Furthermore, this
contumacious conduct of refusing to abide by the lawful directives issued by the Court has likewise
been considered as an utter lack of interest to remain with, if not contempt of, the system. Ganzans
transgression is highlighted even more by the fact that she is an employee of the Judiciary, who,
more than an ordinary citizen, should be aware of her duty to obey the orders and processes of the
Supreme Court without delay. x x x
Anent the use of illegal drugs, we have upheld in Social Justice Society (SJS) v. Dangerous Drugs
Board7 the validity and constitutionality of the mandatory but random drug testing of officers and
employees of both public and private offices. As regards public officers and employees, we
specifically held that:
Like their counterparts in the private sector, government officials and employees also labor under
reasonable supervision and restrictions imposed by the Civil Service law and other laws on public
officers, all enacted to promote a high standard of ethics in the public service. And if RA 9165 passes
215

the norm of reasonableness for private employees, the more reason that it should pass the test
for civil servants, who, by constitutional demand, are required to be accountable at all times to
the people and to serve them with utmost responsibility and efficiency.8
Parenthetically, in A.M. No. 06-1-01-SC9 dated January 17, 2006, the Court has
adopted guidelines for a program to deter the use of dangerous drugs and institute preventive
measures against drug abuse for the purpose of eliminating the hazards of drug abuse in the
Judiciary, particularly in the first and second level courts. The objectives of the said program are as
follows:
1. To detect the use of dangerous drugs among lower court employees, impose disciplinary
sanctions, and provide administrative remedies in cases where an employee is found positive
for dangerous drug use.
2. To discourage the use and abuse of dangerous drugs among first and second level court
employees and enhance awareness of their adverse effects by information dissemination and
periodic random drug testing.
3. To institute other measures that address the menace of drug abuse within the personnel of
the Judiciary.
In the instant administrative matter, De Guzman never challenged the authenticity of the Chemistry
Report of the Nueva Ecija Provincial Crime Laboratory Office. Likewise, the finding that De Guzman
was found positive for use of marijuana and shabu remains unrebutted. De Guzmans general denial
that he is not a drug user cannot prevail over this compelling evidence.
The foregoing constitutes more than substantial evidence that De Guzman was indeed found positive
for use of dangerous drugs. In Dadulo v. Court of Appeals,10 we held that "(a)dministrative
proceedings are governed by the substantial evidence rule. Otherwise stated, a finding of guilt in an
administrative case would have to be sustained for as long as it is supported by substantial evidence
that the respondent has committed acts stated in the complaint. Substantial evidence is more than a
mere scintilla of evidence. It means such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds equally reasonable might conceivably opine
otherwise."11
This Court is a temple of justice. Its basic duty and responsibility is the dispensation of justice. As
dispensers of justice, all members and employees of the Judiciary are expected to adhere strictly to
the laws of the land, one of which is Republic Act No. 916512 which prohibits the use of dangerous
drugs.13
The Court has adhered to the policy of safeguarding the welfare, efficiency, and well-being not only of
all the court personnel, but also that of the general public whom it serves. The Court will not allow its
front-line representatives, like De Guzman, to put at risk the integrity of the whole judiciary. As we
held in Baron v. Anacan,14 "(t)he image of a court of justice is mirrored in the conduct, official and
otherwise, of the personnel who work thereat. Thus, the conduct of a person serving the judiciary
must, at all times, be characterized by propriety and decorum and above all else, be above suspicion
so as to earn and keep the respect of the public for the judiciary. The Court would never countenance
any conduct, act or omission on the part of all those in the administration of justice, which will violate
the norm of public accountability and diminish or even just tend to diminish the faith of the people in
the judiciary."
Article XI of the Constitution mandates that:
SECTION 1. Public office is a public trust. Public officers and employees must at all times be
accountable to the people and serve them with utmost responsibility, integrity, loyalty, and efficiency,
act with patriotism and justice, and lead modest lives.
De Guzmans use of prohibited drugs has greatly affected his efficiency in the performance of his
functions. De Guzman did not refute the observation of his superior, Judge Sta. Romana, that as a
criminal docket court clerk, he (De Guzman) was totally inept and incompetent. Hence, to get across
216

his displeasure and dissatisfaction with his job performance, Judge Sta. Romana gave De Guzman
an unsatisfactory rating.
Moreover, De Guzmans efficiency as a custodian of court records is also totally wanting. As early as
May 12, 2004, Judge Sta. Romana issued a Memorandum addressed to De Guzman relative to the
"sleeping cases" inside the latters drawer. It would appear that several cases have not been
proceeded upon because De Guzman hid the records of the same inside his drawer. The text of the
said Memorandum reads:
An examination of the records found in your drawer reveal that the following cases have not moved
because you have not brought the same to the attention of the Presiding Judge, to wit:
1. Crim. Case No. 1849-C, PP v. Ruben Villanueva Order of transmittal to the Office of the
Provincial Prosecutor of Nueva Ecija dated August 6, 2003 to resolve the Motion for
Reconsideration.
Resolution of the Provincial Prosecutor dated September 23, 2003 denying the Motion for
Reconsideration and transmitting the records to the RTC, Br. 31, Guimba, Nueva Ecija
received by this court on September 24, 2003;
2. Crim. Case No. 1993-G, PP vs. JOJO SUPNET Information dated October 14, 2002
received by this Court on November 18, 2002;
3. Crim. Case No. 2013-G, PP vs. Brgy. Capt. BAYANI CAMIS Information dated September
23, 2002 received by this court on January 24, 2003;
4. Crim. Case No. 2007-G, PP vs. Armando Marcos Information dated June 23, 2002;
Records received on January 2, 2003.
The Presiding Judge caused the issuance of finding of probable causes and the corresponding
Warrants of Arrest. You are hereby ordered to assist the OIC/Clerk of Court in sending forthwith the
Warrants of Arrest to the proper agencies for implementation.
In the same vein, Reyes also put forth the absurd behavioral manifestations of De Guzman.
According to Reyes, Judge Sta. Romana would always remind De Guzman to prepare and transmit
the complete records of the appealed cases. However, De Guzman would only make empty
assurances to perform his task. Notwithstanding the reminders of his superiors, De Guzman would
still fail to transmit the records. Instead, he would report the next day and jubilantly declare that the
problem has been solved at last.
In fine, we agree with the OCA that by his repeated and contumacious conduct of disrespecting the
Courts directives, De Guzman is guilty of gross misconduct and has already forfeited his privilege of
being an employee of the Court. Likewise, we can no longer countenance his manifestations of queer
behavior, bordering on absurd, irrational and irresponsible, because it has greatly affected his job
performance and efficiency. By using prohibited drugs, and being a front-line representative of the
Judiciary, De Guzman has exposed to risk the very institution which he serves. It is only by weeding
out the likes of De Guzman from the ranks that we would be able to preserve the integrity of this
institution.
Two justices disagree with the majority opinion. They opine that the Courts action in this case
contravenes an express public policy, i.e., "imprisonment for drug dealers and pushers, rehabilitation
for their victims." They also posit that De Guzmans failure to properly perform his duties and promptly
respond to Court orders precisely springs from his drug addiction that requires rehabilitation. Finally,
they state that the Courts real strength is not in its righteousness but in its willingness to understand
that men are not perfect and that there is a time to punish and a time to give a chance for contrition
and change.
However, the legislative policy as embodied in Republic Act No. 9165 in deterring dangerous drug
use by resort to sustainable programs of rehabilitation and treatment must be considered in light of
this Courts constitutional power of administrative supervision over courts and court personnel. The
legislative power imposing policies through laws is not unlimited and is subject to the substantive and
constitutional limitations that set parameters both in the exercise of the power itself and the allowable
217

subjects of legislation.15 As such, it cannot limit the Courts power to impose disciplinary actions
against erring justices, judges and court personnel. Neither should such policy be used to restrict the
Courts power to preserve and maintain the Judiciarys honor, dignity and integrity and public
confidence that can only be achieved by imposing strict and rigid standards of decency and propriety
governing the conduct of justices, judges and court employees.
Likewise, we cannot subscribe to the idea that De Guzmans irrational behavior stems solely from his
being a drug user. Such queer behavior can be attributed to several factors. However, it cannot by
any measure be categorically stated at this point that it can be attributed solely to his being a drug
user.
Finally, it must be emphasized at this juncture that De Guzmans dismissal is not grounded only on
his being a drug user. His outright dismissal from the service is likewise anchored on his
contumacious and repeated acts of not heeding the directives of this Court. As we have already
stated, such attitude betrays not only a recalcitrant streak of character, but also disrespect for the
lawful orders and directives of the Court.
ACCORDINGLY, Rene de Guzman, Clerk, Regional Trial Court of Guimba, Nueva Ecija, Branch 31,
is hereby DISMISSED from the service with forfeiture of all retirement benefits, except accrued leave
credits, and disqualification from reinstatement or appointment to any public office, including
government-owned or controlled corporations.
SO ORDERED.

A.M. No. SCC-13-18-J. July 1, 2015.*

(formerly A.M. OCA I.P.I. No. 11-36-SCC)

BAGUAN M. MAMISCAL, complainant, vs. CLERK OF COURT MACALINOG S. ABDULLAH,

SHARIA CIRCUIT COURT, MARAWI CITY, respondent.
Administrative Law; Public Officers; Civil Registrar; The civil registrar is the person charged by law for
the recording of vital events and other documents affecting the civil status of persons.The civil
registrar is the person charged by law for the recording of vital events and other documents affecting
the civil status of persons. The Civil Registry Law embraces all acts of civil life affecting the status of
persons and is applicable to all persons residing in the Philippines.
Same; Court Personnel; Clerks of Court; The Clerk of Court of the Sharia Circuit Court enjoys the
privilege of wearing two (2) hats: first, as Clerk of Court of the Sharia Circuit Court, and second, as
Circuit Registrar within his territorial jurisdiction.It becomes apparent that the Clerk of Court of the
Sharia Circuit Court enjoys the privilege of wearing two hats: first, as Clerk of Court of the Sharia
Circuit Court, and second, as Circuit Registrar within his territorial jurisdiction. Although the
Constitution vests the Court with the power of administrative supervision over all courts and its
personnel, this power must be taken with due regard to other prevailing laws.
Same; Complaints; Well-settled is the rule that what controls is not the designation of the offense but
the actual facts recited in the complaint.It becomes apparent that this Court does not have
jurisdiction to impose the proper disciplinary action against civil registrars. While he is undoubtedly a
member of the Judiciary as Clerk of Court of the Sharia Circuit Court, a review of the subject
complaint reveals that Mamiscal seeks to hold Abdullah liable for registering the divorce and issuing
the CRD pursuant to his duties as Circuit Registrar of Muslim divorces. It has been sai
that the test of jurisdiction is the nature of the offense and not the personality of the offender. The fact
that the complaint charges Abdullah for conduct unbecoming of a court employee is of no moment.
Well-settled is the rule that what controls is not the designation of the offense but the actual facts
recited in the complaint. Verily, unless jurisdiction has been conferred by some legislative act, no
court or tribunal can act on a matter submitted to it.
218

Remedial Law; Civil Procedure; Jurisdiction, or the power and authority of a court to hear, try and
decide a case must first be acquired by the court or an adjudicative body over the subject matter and
the parties in order to have authority to dispose of the case on the merits.It bears to stress at this
point that this Court can resolve the foregoing jurisdictional issue even if the matter of jurisdiction was
never raised by any of the parties. Jurisprudence is replete with rulings that jurisdiction, or the power
and authority of a court to hear, try and decide a case must first be acquired by the court or an
adjudicative body over the subject matter and the parties in order to have authority to dispose of the
case on the merits. Elementary is the distinction between jurisdiction over the subject matter and
jurisdiction over the person. Jurisdiction over the subject matter is conferred by the Constitution or by
law. In contrast, jurisdiction over the person is acquired by the court by virtue of the partys voluntary
submission to the authority of the court or through the exercise of its coercive processes. Jurisdiction
over the person is waivable unlike jurisdiction over the subject matter which is neither subject to
agreement nor conferred by consent of the parties.
Administrative Law; Public Officers; National Statistician; At present, the National Statistician is
empowered by Republic Act (R.A.) No. 10625, as Civil Registrar-General to exercise technical
supervision of civil registrars.The system of civil registration was first established in the Philippines
by the revolutionary government on June 18, 1898 or barely six days after the declaration of the
countrys independence from Spain on June 12, 1898. Originally, the system was decentralized in the
sense that civil registration was purely a local government responsibility. It was only on February 27,
1931, when C.A. No. 3753 took effect and centralized the system of civil registration in the country.
Under this law, the director of the National Library was made responsible as the Civil Registrar-
General to exercise technical supervision and ensure the prope
establishment and maintenance of our civil registry system. Then, following C.A. No. 591, the duties
exercised by the director of National Library with regard to matters concerning the system of civil
registration were transferred to the Bureau of Census and Statistics. This bureau subsequently
became the NSO, whose Administrator concurrently served as the Civil Registrar-General. At
present, the National Statistician is empowered by Republic Act (R.A.) No. 10625, as Civil Registrar-
General to exercise technical supervision of civil registrars.
Same; Same; Civil Registrars; It was only with the advent of the Local Government Code (LGC) that
the power of administrative supervision over civil registrars was devolved to the municipal and city
mayors of the respective local government units (LGUs).It was only with the advent of the Local
Government Code that the power of administrative supervision over civil registrars was devolved to
the municipal and city mayors of the respective local government units. Under the faithful execution
clause embodied in Section 455(b)(1)(x) and Section 444(b)(1)(x) of the Local Government Code, in
relation to Section 479 under Article IX, Title V of the same Code, the municipal and city mayors of
the respective local government units, in addition to their power to appoint city or municipal civil
registrars are also given ample authority to exercise administrative supervision over civil registrars.
Administrative Agencies; Civil Service Commission; The Civil Service Commission (CSC), as the
central personnel agency of the government, has the power to appoint and discipline its officials and
employees and to hear and decide administrative cases instituted by or brought before it directly or
on appeal.At this juncture, it should be remembered that the authority of the Mayor to exercise
administrative supervision over C/MCRs is not exclusive. The Civil Service Commission (CSC), as
the central personnel agency of the government, has the power to appoint and discipline its officials
and employees and to hear and decide administrative cases instituted by or brought before it directly
or on appeal. Under Section 9 of the Revised Uniform Rules on Administrative Cases in the Civil
Service, the CSC is granted original concurrent jurisdiction over administrative cases. Thus: Section
9. Jurisdiction of Heads of Agencies.The Secretaries and heads of agencies, and other
instrumentalities, provinces, cities and municipalities shall have original concurrent jurisdiction with
the Commission over their respective officers and employees.
Leonen, J., Concurring Opinion:
219

Political Law; Separation of Powers; View that each department of the government has exclusive
cognizance of matters within its jurisdiction, and is supreme within its own sphere.Separation of
powers is basic in our constitutional design. As explained by this court in the landmark case of
Angara v. Electoral Commission, 63 Phil. 139 (1936): The separation of powers is a fundamental
principle in our system of government. It obtains not through express provision but by actual division
in our Constitution. Each department of the government has exclusive cognizance of matters within
its jurisdiction, and is supreme within its own sphere. But it does not follow from the fact that the three
powers are to be kept separate and distinct that the Constitution intended them to be absolutely
unrestrained and independent of each other. The Constitution has provided for an elaborate system
of checks and balances to secure coordination in the workings of the various departments of the
government.
Same; Same; View that a careful consideration of the complaint reveals that Abdullah is being held to
account for acts committed in the course of his performance of functions, not as clerk of court but as
a circuit (or civil) registrar. He is therefore being charged, not in his capacity as an officer performing
judicial functions, but as an officer performing executive functions. In accordance with the principle of
separation of powers thus, the task of disciplining Abdulla does not fall upon the Supreme Court
(SC).The complaint subject of the present administrative matter charges respondent Macalinog S.
Abdullah with partiality, violation of due process, dishonesty, and conduct unbecoming of a court
employee. Article VIII, Section 6 of the 1987 Constitution provides for this courts administrative
supervision over all courts and the personnel thereof. However, a careful consideration of the
complaint reveals that Abdullah is being held to account for acts committed in the course of his
performance of functions, not as clerk of court but as a circuit (or civil) registrar. He is therefore being
charged, not in his capacity as an officer performing judicial functions, but as an officer performing
executive functions. In accordance with the principle of separation of powers
43
VOL. 761, JULY 1, 2015
43
Mamiscal vs. Abdullah

thus, the task of disciplining Abdulla does not fall upon this court. As ably pointed out by Justice Jose
C. Mendoza, Article 81 of Presidential Decree No. 1083, otherwise known as the Code of Muslim
Personal Laws provides that clerks of court of Sharia Circuit Courts shall also acts as circuit
registrars. In Justice Mendozas language thus, clerks of court of Sharia Circuit Courts wear two
hats: a judicial hat, in respect of their being clerks of court; and an executive one, in respect of their
being registrars. Indeed, disciplining civil registrars is well beyond the power of this court.
Same; Same; View that the statutory provisions which vest executive functions in clerks of court of
the Sharia Circuit Courts dangerously transgress the fundamental constitutional boundaries between
departments.Clearly, the statutory provisions which vest executive functions in clerks of court of the
Sharia Circuit Courts dangerously transgress the fundamental constitutional boundaries between
departments. It creates an enclave within the judiciary that is not subject to the disciplinary power of
this court but of executive bodies. Had it been raised as an issue in this case, I would have had no
hesitation to vote that they be declared unconstitutional. But, this is not the lis mota of the present
case.
ADMINISTRATIVE MATTER in the Supreme Court. Partiality, Violation of Due Process, Dishonesty,
and Conduct Unbecoming of a Court Employee.
The facts are stated in the opinion of the Court.
MENDOZA, J.:

This resolves the complaint1 of Baguan M. Mamiscal (Mamis-cal) against respondent Macalinog S.
Abdullah (Abdullah), Clerk of Court, Sharia Circuit Court, Marawi City, for partiality, violation of due
220

process, dishonesty, and conduct unbecoming of a court employee. Originally, the complaint also
charged Judge Aboali J. Cali (Judge Cali), Presiding Judge, Sharia Circuit Court, Marawi City, for his
partici-
pation in the subject controversy. On January 9, 2013, the Court resolved to dismiss the charges
against Judge Cali for lack of merit.2

The Facts

In his complaint, Mamiscal averred that on September 26, 2010, he and his wife, Adelaidah
Lomondot (Adelaidah) had a heated argument. In a fit of anger, Mamiscal decided to divorce his wife
by repudiating her (talaq).3 The repudiation was embodied in an agreement4 (kapasadan) signed by
Ma-mis-cal and Adelaidah.
The next day, Adelaidah left their conjugal dwelling in Iligan City and went back to her familys home
in Marinaut, Marawi City. A few days later, during the obligatory period of waiting (iddah),5 Mamiscal
had a change of heart and decided

Invitation10 notifying the couple and their representatives to appear before the Sharia Circuit Court on
February 28, 2011, in order to constitute the Agama Arbitration Council (AAC) that would explore the
possibility of reconciling the spouses.11
On March 24, 2011, Abdullah issued the Certificate of Registration of Divorce12 (CRD) finalizing the
divorce between Mamiscal and Adelaidah.
Mamiscal sought the revocation of the CRD, questioning the validity of the kapasadan on which the
CRD was based. In his motion, Mamiscal contended that the kapasadan was invalid considering that
he did not prepare the same. Moreover, there were no witnesses to its execution. He claimed that he
only signed the kapasadan because of Adelaidahs threats.
Mamiscal also questioned the validity of the COD, denying that he had executed and filed the same
before the office of Abdullah. Insisting that he never really intended to divorce his wife, Mamiscal
pointed out the fact that on December 13, 2010, before the expiration of the iddah, he wrote his
wife13 to inform her that he was revoking the repudiation he made on September 26, 2010 and the
kapasadan they entered into on the same day because he did it on the spur of the moment.14
For Mamiscal, the CRD should be declared invalid considering that: a) he was deprived of due
process because the AAC, before which he and his children were supposed to express their
sentiments regarding the divorce, was yet to be constituted; b) three days before the issuance of the
CRD, Professor Mustafa Lomala M. Dimaro, appeared before Judge Cali to discuss the possibility of
reconciliation between the parties; and c) their children, Adelah Rima and Naim Mamiscal, prayed
that the trial court advise their mother not to proceed with the divorce.15 In addition to the revocation
of the CRD, Mamiscal also prayed that Abdullah order the reconvening of the AAC and, thereafter,
grant the restoration of his marital rights with Adelaidah.
On April 20, 2011, Abdullah denied Mamiscals motion.16 In sustaining the divorce between Mamiscal
and Abdullah, Abdullah opined that it was simply his ministerial duty to receive the COD and the
attached kapasadan filed by Adelaidah. Abdullah also noted that when the AAC was convened during
the February 28, 2010 hearing, only Mamiscal and his representatives appeared. Considering the fact
that Adelaidah manifested her opposition in writing to any reconciliation with her husband and the fact
that the 90-day period of
iddah had already lapsed, Abdullah ruled that any move to reconstitute the AAC would have been
futile because the divorce between Mamiscal and his wife had already become final and irrevocable.
Contending that the issuance of the CRD was tainted with irregularity, Mamiscal comes to this Court,
through the subject complaint, charging Abdullah with partiality, violation of due process, dishonesty,
and conduct unbecoming of a court employee.
221

The Charge

In his complaint, Mamiscal averred that Abdullah should not have entertained or acted upon the COD
and the kapasadan filed by Adelaidah. He contended that under the Code of Muslim Personal Laws,
a divorce under talaq could only be filed and registered by the male spouse, considering that female
Muslims could do so only if the divorce was through tafwid.17
Moreover, Mamiscal alleged that Abdullah fabricated and twisted the facts18 when he declared that
only Mamiscal and his representative appeared when the AAC was convened. Mamiscal insisted that
Adelaidah and her relatives were also present during the hearing of February 28, 2010, and that the
AAC was never convened because the parties agreed to reset the proceedings so that they could
explore the possibility of reconciling the differences between them. Notwithstanding the ongoing
mediation proceedings, Abdullah proceeded to act on the COD and finalized the divorce by issuing
the CRD.
Finally, it was averred that Abdullah violated the Sharia rules of procedure when he initially refused to
receive Mamiscals motion for reconsideration when it was first filed. Mamiscal also argued that
Abdullah should not have considered the opposition of Adelaidah when he denied his attempt to seek
reconsideration because he was never furnished a copy of Adelaidahs opposition.

Abdullahs Comment

In his comment,19 Abdullah countered that although he had the authority to process the registration of
the divorce as court registrar, he could not be held responsible for the contents of the COD and the
kapasadan because his functions were only ministerial. Nevertheless, Abdullah asserted that the
divorce between Mamiscal and Adelaidah had already attained finality, not only because of the lapse
of the required iddah, but also because the kapasadan and Adelaidahs opposition both proved that
there could be no reconciliation between the spouses.
Abdullah also discounted any impropriety for processing the unsigned COD, arguing that since it was
accompanied by the kasapadan which bore the signature of Mamiscal and his declaration that he was
divorcing his wife by talaq there was nothing wrong with Adelaidah filing it with his office.
Moreover, with the lapse of the iddah, Abdullah argued that the COD had remained to be nothing
more than a formality for the purpose of registering the divorce with the National Statistics Office
(NSO) and its issuance using the NSO security paper.
As to the allegations pertaining to the February 28, 2010 hearing, Abdullah stated that he only
conducted the same because it was required under the Muslim Personal Code. Abdullah explained
that he did not convene the ACC anymore not only because Adelaidah or her representatives were
not present, but also because the divorcing couples own children wrote to him opposing the
convening of the council.
As to Mamiscals contention that he already revoked his repudiation of his wife, Abdullah pointed out
that his office was not informed of any revocation of the divorce. According to Abdullah, if Mamiscal
had indeed revoked his repudiation, he should have complied with the provisions of Rule II(1)(2) of
NSO Administrative Order No. 1, Series of 2001, which required the husband to file five (5) copies of
his sworn statement attesting to the fact of revocation, together with the written consent of his wife.

In its report,20 the Office of the Court Administrator (OCA) found Abdullah guilty of gross ignorance of
the law and recommended that he be fined in the amount of P10,000.00 with a stern warning that a
repetition of the same offense shall be dealt with severely.
On January 30, 2014, Abdullah filed a motion,21 praying for the early resolution of the complaint filed
against him. Reiterating his plea for the dismissal of the said complaint, Abdullah claimed that he was
due for compulsory retirement on June 5, 2014.
222

The Courts Ruling

At the outset, it must first be pointed out that while it may seem to be a related issue, the validity of
the divorce between Mamiscal and Adelaidah is not in issue here. Whether or not Mamiscal had
validly effected a divorce from his wife is a matter that must first be addressed by the Sharia Circuit
Court which, under the Code of Muslim Personal Laws of the Philippines (Muslim Code),22 enjoys
exclusive original jurisdiction to resolve disputes relating to divorce.
Thus, Article 155 of the Muslim Code provides:
Article 155. Jurisdiction.The Sharia Circuit Courts shall have exclusive original jurisdiction over;
(1) All cases involving offenses defined and (d) Customary dower (mahr);
punished under this Code. (e) Disposition and distribution of property upon
(2) All civil actions and proceedings between divorce;
parties who are Muslims or have been married (f) Maintenance and support, and consolatory
in accordance with Article 13 involving disputes gifts (muta); and
relating to: (g) Restitution of marital rights.
(a) Marriage; (3) All cases involving disputes relative to
(b) Divorce recognized under this Code; communal properties.
(c) Betrothal or breach of contract to marry; [Emphases supplied]

Consequently, in resolving the subject complaint, the Court shall confine itself to the sole issue of
whether or not Abdullah should be held administratively liable for his actions in connection with the
registration of the divorce between Mamiscal and Adelaidah. A priori to the resolution of the foregoing
issue is the question of whether this Court has jurisdiction to impose administrative sanction against
Abdullah for his acts.
The Court rules in the negative.
The civil registrar is the person charged by law for the recording of vital events and other documents
affecting the civil status of persons. The Civil Registry Law embraces all acts of civil life affecting the
status of persons and is applicable to all persons residing in the Philippines.23
To ensure the proper registration of all facets of the civil life of Muslim Filipinos throughout the
country, Article 81 of the Muslim Code provides:
Article 81. District Registrar.The Clerk of Court of the Sharia District Court shall, in addition to his
regular functions, act as District Registrar of Muslim Marriages, Divorces, Revocations of Divorces,
and Conversions within the territorial jurisdiction of said court.

The Clerk of Court of the Sharia Circuit Court shall act as Circuit Registrar of Muslim Marriages,
Divorces, Revocations of Divorces, and Conversions within his jurisdiction.
[Emphasis supplied]

In view of the above quoted provision, it becomes apparent that the Clerk of Court of the Sharia
Circuit Court enjoys the privilege of wearing two hats: first, as Clerk of Court of the Sharia Circuit
Court, and second, as Circuit Registrar within his territorial jurisdiction. Although the Constitution
vests the Court with the power of administrative supervision over all courts and its personnel,24 this
power must be taken with due regard to other prevailing laws.
Thus, Article 185 of the Muslim Code provides:
Article 185. Neglect of duty by registrars.Any district registrar or circuit registrar who fails to
perform properly his duties in accordance with this Code shall be penalized in accordance with
Section 18 of Act 3753.

Commonwealth Act (C.A.) No. 375325 is the primary law that governs the registry of civil status of
persons. To ensure that civil registrars perform their duties under the law, Section 18 of C.A. No.
3753 provides:
223

Section 18. Neglect of duty with reference to the provisions of this Act.Any local registrar who
fails to properly perform his duties in accordance with the provisions of this Act and of the regulations
issued hereunder, shall be punished for the first offense, by an administrative fine in a sum equal to
his salary for not less than fifteen days nor more than three months, and for a second or repeated
offense, by removal from the service.
[Emphasis supplied]

The same Act provides:

Section 2. Civil Registrar-General his duties and powers.The director of the National Library shall
be Civil Registrar-General and shall enforce the provisions of this Act. The Director of the National
Library, in his capacity as Civil Registrar-General, is hereby authorized to prepare and issue, with the
approval of the Secretary of Justice, regulations for carrying out the purposes of this Act, and to
prepare and order printed the necessary forms for its proper compliance. In the exercise of his
functions as Civil Registrar-General, the Director of the National Library shall have the power to give
orders and instructions to the local Civil registrars with reference to the performance of their duties as
such. It shall be the duty of the Director of the National Library to report any violation of the provisions
of this Act and all irregularities, negligence or incompetency on the part of the officers designated as
local civil registrars to the (Chief of the Executive Bureau or the Director of the Non-Christian Tribes)
Secretary of the Interior, as the case may be, who shall take the proper disciplinary action against the
offenders.
[Emphasis and underscoring supplied]

Prescinding from the foregoing, it becomes apparent that this Court does not have jurisdiction to
impose the proper disciplinary action against civil registrars. While he is undoubtedly a member of the
Judiciary as Clerk of Court of the Sharia Circuit Court, a review of the subject complaint reveals that
Mamiscal seeks to hold Abdullah liable for registering the divorce and issuing the CRD pursuant to
his duties as Circuit Registrar of Muslim divorces. It has been said that the test of jurisdiction is the
nature of the offense and not the personality of the offender.26 The fact that the complaint charges
Abdullah for conduct unbecoming of a court employee is of no moment. Well-settled is the rule that
what controls is not the designation of the offense but the actual facts recited in the complaint. Verily,
unless jurisdiction has been conferred by some legislative act, no court or tribunal can act on a matter
submitted to it.27
It bears to stress at this point that this Court can resolve the foregoing jurisdictional issue even if the
matter of jurisdiction was never raised by any of the parties. Jurisprudence is replete with rulings that
jurisdiction, or the power and authority of a court to hear, try and decide a case must first be acquired
by the court or an adjudicative body over the subject matter and the parties in order to have authority
to dispose of the case on the merits.28 Elementary is the distinction between jurisdiction over the
subject matter and jurisdiction over the person. Jurisdiction over the subject matter is conferred by the
Constitution or by law. In contrast, jurisdiction over the person is acquired by the court by virtue of the
partys voluntary submission to the authority of the court or through the exercise of its coercive
processes. Jurisdiction over the person is waivable unlike jurisdiction over the subject matter which is
neither subject to agreement nor conferred by consent of the parties.29
Having settled the foregoing issue, the following question now confronts the Court: Who, among the
various agencies and instrumentalities of the government, is empowered with administrative
supervisory powers in order to impose disciplinary sanctions against erring civil registrars?

On this score, a recap of the legislative history surrounding our system of civil registration is in order.
The system of civil registration was first established in the Philippines by the revolutionary
government on June 18, 1898 or barely six days after the declaration of the countrys independence
from Spain on June 12, 1898. Originally, the system was decentralized in the sense that civil
224

registration was purely a local government responsibility. It was only on February 27, 1931, when
C.A. No. 375330 took effect and centralized the system of civil registration in the country. Under this
law, the director of the National Library was made responsible as the Civil Registrar-General to
exercise technical supervision and ensure the proper establishment and maintenance of our civil
registry system.
Then, following C.A. No. 591,31 the duties exercised by the director of National Library with regard to
matters concerning the system of civil registration were transferred to the Bureau of Census and
Statistics. This bureau subsequently became the NSO,32 whose Administrator concurrently served as
the Civil Registrar-General.33 At present, the National Statistician is empowered by Republic Act
(R.A.) No. 10625, as Civil Registrar-General to exercise technical supervision of civil registrars.34

Due to the need to address the cultural peculiarities practiced by our Muslim brethren, however,
Congress saw the need to designate the Clerk of Court of the Sharia Circuit Court to act as the
Circuit Registrar of Muslim marriages, divorces, revocations of divorces, and conversions to Islam
within his jurisdiction. As earlier cited, Article 181 of the Muslim Code provides that: The Clerk of
Court of the Sharia Circuit Court shall act as Circuit Registrar of Muslim Marriages, Divorces,
Revocations of Divorces, and Conversions within his jurisdiction.
In order to ensure that Circuit Registrars remain faithful to their duties, Article 82 of the Muslim Code
tasks the Clerks of Court of the Sharia District Court to act as District Registrars and exercise
technical supervision over Circuit Registrars by requiring them to keep a proper recording of all
matters pertaining to the personal lives of Muslims. Thus:
Article 82. Duties of District Registrar.Every District Registrar shall exercise supervision over
Circuit Registrars in every Sharia District. He shall, in addition to an entry book, keep and bind copies
of certificates of Marriage, Divorce, Revocation of Divorce, and Conversion sent to him by the Circuit
Registrars in separate general registers. He shall send copies in accordance with Act No. 3753, as
amended, to the office of the Civil Registrar-General.

All these notwithstanding, the power of administrative supervision over civil registrars remains with
the National Government. As Section 2 of C.A. No. 3753 provides:

Section 2. Civil Registrar-General his duties and powers.The director of the National Library shall
be Civil Registrar-General and shall enforce the provisions of this Act. The Director of the National
Library, in his capacity as Civil Registrar-General, is hereby authorized to prepare and issue, with the
approval of the Secretary of Justice, regulations for carrying out the purposes of this Act, and to
prepare and order printed the necessary forms for its proper compliance. In the exercise of his
functions as Civil Registrar-General, the Director of the National Library shall have the power to give
orders and instructions to the local Civil registrars with reference to the performance of their duties as
such. It shall be the duty of the Director of the National Library to report any violation of the provisions
of this Act and all irregularities, negligence or incompetency on the part of the officers designated as
local civil registrars to the (Chief of the Executive Bureau or the Director of the Non-Christian Tribes)
Secretary of the Interior, as the case may be, who shall take the proper disciplinary action against the
offenders.
[Emphasis supplied]

It was only with the advent of the Local Government Code that the power of administrative
supervision over civil registrars was devolved to the municipal and city mayors of the respective local
government units. Under the faithful execution clause embodied in Section 455(b)(1)(x)35 and
Section
225

444(b)(1)(x)36 of the Local Government Code, in relation to Section 47937 under Article IX, Title V38 of
the same Code, the municipal and city mayors of the respective local government units, in addition to
their power to appoint city or municipal civil registrars are also given ample authority to exercise
administrative supervision over civil registrars. Thus, when Administrative Order No. 1, Series of 1993
of the Office of the Civil Registrar-General (OCRG) was passed to implement C.A. No. 3753 it was
declared:
Rule 1. Duties and Powers of the Civil Registrar-General.The Civil Registrar-General shall have
the following duties and powers:
a) To enforce the provisions of Act No. 3753;
b) To prepare and issue regulations for carrying out the purposes of Act No. 3753 and other laws
relative to civil registration, and to prepare and order printed the necessary forms for its proper
compliance;
c) To give orders and instructions to the city/mu-ni---cipal civil registrars with reference to the
performance of their duties as such; and
d) To report any violation of the provisions of Act No. 3753 and other laws on civil registration, and all
irregularities, negligence or incompetency of city/municipal civil registrar to the concerned mayor who
shall take the proper disciplinary action against the offender.

This authority of the Mayor to exercise administrative jurisdiction over Circuit Registrars was also
recognized generally, under Section 47(2) of the Administrative Code of 1987,39 and specifically,
under Rule 11 of Administrative Order No. 2, Series of 199340 of the OCRG, and the more recent
Adminis-
(2) The Secretaries and heads of agencies and instrumentalities, provinces, cities and
municipalities shall have jurisdiction to investigate and decide matters involving disciplinary action
against officers and employees under their jurisdiction. Their decisions shall be final in case the
penalty imposed is suspension for not more than thirty days or a fine in an amount not exceeding
thirty days salary. In case the decision rendered by a bureau or office head is appealable to the
Commission, the same may be initially appealed to the department and finally to the Commission and
pending appeal, the same shall be executory except when the penalty is removal, in which case the
same shall be executory only after confirmation by the Secretary concerned.
40 RULE 11. Other Aspects of Registration.All other aspects of registration such as assigning of
registry number, records keeping, submission of reports, issuance of certifications, violation of civil
trative Order No. 5, Series of 200541 of the same office, which applies specially to the registration of
acts and events concerning the civil status of Muslim Filipinos.
At this juncture, it should be remembered that the authority of the Mayor to exercise administrative
supervision over C/MCRs is not exclusive. The Civil Service Commission (CSC), as the central
personnel agency of the government, has the power to appoint and discipline its officials and
employees and to hear and decide administrative cases instituted by or brought before it directly or
on appeal.42 Under Section 9 of the Revised Uniform Rules on Administrative Cases in the Civil
Service, the CSC is granted original concurrent jurisdiction over administrative cases. Thus:
Section 9. Jurisdiction of Heads of Agencies.The Secretaries and heads of agencies, and other
instrumentalities, provinces, cities and municipalities shall have original concurrent jurisdiction with
the Commission over their respective officers and employees. x x x

Consequently, it behooves the Court to also forward the subject complaint to the Office of the Mayor,
Marawi City and to the CSC for appropriate action.
WHEREFORE, the administrative matter against Macalinog S. Abdullah, Clerk of Court II, Sharia
Circuit Court,
226

Marawi City, for partiality, violation of due process, dishonesty, and conduct unbecoming a court
employee is DISMISSED for lack of jurisdiction, without prejudice. The complaint of Baguan M.
Mamiscal against Macalinog S. Abdullah is hereby REFERRED to the Office of the Mayor, Marawi
City and the Civil Service Commission for appropriate action.
SO ORDERED.
Carpio (Chairperson), Bersamin** and Del Castillo, JJ., concur.
Leonen, J., See Concurring Opinion.

EN BANC
G.R. No. 196231 January 28, 2014
EMILIO A. GONZALES III, Petitioner,
vs.
OFFICE OF THE PRESIDENT OF THE PHILIPPINES, ACTING THROUGH AND REPRESENTED
BY EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR., SENIOR DEPUTY EXECUTIVE
SECRETARY JOSE AMOR M. AMORANDO, OFFICER-IN-CHARGE - OFFICE OF THE DEPUTY
EXECUTIVE SECRETARY FOR LEGAL AFFAIRS, ATTY. RONALDO A. GERON, DIR. ROWENA
TURINGAN-SANCHEZ, AND ATTY. CARLITO D. CATAYONG, Respondents.
x-----------------------x
G.R. No. 196232
WENDELL BARRERAS-SULIT Petitioner,
vs.
ATTY. PAQUITO N. OCHOA, JR., IN HIS CAP A CITY AS EXECUTIVE SECRETARY, OFFICE OF
THE PRESIDENT, ATTY. DENNIS F. ORTIZ, ATTY. CARLO D. SULAY AND ATTY. FROILAN D.
MONTALBAN, JR., IN THEIR CAPACITIES AS CHAIRMAN AND MEMBERS OF OFFICE OF
MALACANANG LEGAL AFFAIRS,Respondents.
CONCURRING AND DISSENTING OPINION
PERLAS-BERNABE, J.:
I concur with the ponencia in finding the Decision dated March 31, 2011 of the Office of the President
of the Philippines (OP) to be patently erroneous considering that the acts therein attributed to
petitioner Emilio A. Gonzales III (Gonzales), in his capacity as Deputy Ombudsman, do not constitute
betrayal of public trust. In the Court's Decision dated September 4, 2012 in the main,1 it was
explained that the phrase "betrayal of public trust" refers to acts which are just short of being criminal
but constitute gross faithlessness against public trust, tyrannical abuse of power, inexcusable
negligence of duty, favoritism, and gross exercise of discretionary powers. In other words, acts that
should constitute betrayal of public trust as to warrant removal from office may be less than criminal
but must be attended by bad faith and of such gravity and seriousness as the other grounds for
impeachrnent.2 The OP, however, dismissed Gonzales based on acts which, as thoroughly detailed
and discussed in the ponencia, do not fit the foregoing legal description. Accordingly, its (OP)
decision was tainted with patent error.
Nevertheless, since the majority voted to declare the jurisdictional basis for the OP's authority to
discipline the Deputy Ombudsmen under Section 8(2)3 of Republic Act No. (RA) 67704 as
unconstitutional, the fallo of the ponencia states that any further ruling on the dismissal of Gonzales is
rendered unnecessary, viz.:5
WHEREFORE, premises considered, the Court resolves to declare Section 8(2)
UNCONSTITUTIONAL. This ruling renders any further ruling on the dismissal of Deputy Ombudsman
Emilio Gonzales III unnecessary, but is without prejudice to the power of the Ombudsman to conduct
227

an administrative investigation, if warranted, into the possible administrative liability of Deputy

Ombudsman Emilio Gonzales III under pertinent Civil Service laws, rules and resgulations.
SO ORDERED.
I dissent.
To my mind, Section 8(2) of RA 6770, which confers the OP with jurisdiction to discipline not only the
Special Prosecutor but also the Deputy Ombudsmen, is wholly constitutional. To this end, I join the
majority in upholding the provisions constitutionality insofar as the Special Prosecutor is concerned,
but register my dissent against declaring the provision unconstitutional insofar as the Deputy
Ombudsmen are concerned.6 The reasons therefor are explained in the ensuing discussion.1wphi1
In dealing with constitutional challenges, one must be cognizant of the rule that every law is
presumed constitutional and therefore should not be stricken down unless its provisions clearly and
unequivocally, and not merely doubtfully, breach the Constitution.7 It is well-established that this
presumption of constitutionality can be overcome only by the clearest showing that there was indeed
an infraction of the Constitution, and only when such a conclusion is reached by the required majority
may the Court pronounce, in the discharge of the duty it cannot escape, that the challenged act must
be struck down.8
In Victoriano v. Elizalde Rope Workers Union,9 the judicious instruction is that the "challenger must
negate all possible bases" and the adjudicating tribunal must not concern itself with the "wisdom,
justice, policy, or expediency of a statute"; "if any reasonable basis may be conceived which supports
the statute, it will be upheld":10
All presumptions are indulged in favor of constitutionality; one who attacks a statute, alleging
unconstitutionality must prove its invalidity beyond a reasonable doubt, that a law may work hardship
does not render it unconstitutional; that if any reasonable basis may be conceived which supports the
statute, it will be upheld, and the challenger must negate all possible bases; that the courts are not
concerned with the wisdom, justice, policy, or expediency of a statute; and that a liberal interpretation
of the constitution in favor of the constitutionality of legislation should be adopted. (Emphasis
supplied)
Similarly, as held in Salvador v. Mapa,11 it was held that an "arguable implication" is not enough to
strike down the statute subject of constitutional scrutiny; thus, the guiding notion is that "to doubt is to
sustain":12
The constitutionality of laws is presumed. To justify nullification of a law, there must be a clear and
unequivocal breach of the Constitution, not a doubtful or arguable implication; a law shall not be
declared invalid unless the conflict with the Constitution is clear beyond reasonable doubt. The
presumption is always in favor of constitutionality. To doubt is to sustain. x x x. (Emphases supplied)
Applying this framework, Section 8(2) of RA 6770, both with respect to the OPs disciplinary authority
ver the Special Prosecutor and the Deputy Ombudsmen, should be upheld in its entirety since it has
not been shown that said provision "clearly and unequivocally" offends any constitutional principle. By
constitutional design, disciplinary authority over non-impeachable officers, such as the Special
Prosecutor and Deputy Ombudsmen, was left to be determined by future legislation. This much is
clear from the text of the Constitution. Section 2, Article XI of the 1987 Constitution explicitly provides
that non-impeachable officers may be removed from office as may be provided by law:
Section 2. The President, the Vice-President, the Members of the Supreme Court, the Members of
the Constitutional Commissions, and the Ombudsman may be removed from office on impeachment
for, and conviction of, culpable violation of the Constitution, treason, bribery, graft and corruption,
other high crimes, or betrayal of public trust. All other public officers and employees may be removed
from office as provided by law, but not by impeachment. (Emphasis and underscoring supplied)
While Section 5, Article XI of the 1987 Constitution "created the independent Office of the
Ombudsman" the provision which is the legal anchor of the majoritys position on this matter the
Constitution neither defines what this principle of Ombudsman independence means nor prohibits the
offices subjection to an external disciplining authority. Meanwhile, what is discoverable from the
228

deliberations of the Constitutional Commission on Article XI, particularly those which are quoted in the
ponencia,13 is that the Office of the Ombudsman was merely intended to be a separate office from the
Executive. This idea of organizational separation was meant to obviate the Executive Department
from exercising the encompassing powers of control and supervision over the Office of the
Ombudsman. It is only in this regard that the Office of the Ombudsman was deemed by the Framers
as independent.
To be sure, the power of control is the power of an officer to alter or modify or set aside what a
subordinate officer had done in the performance of his duties and to substitute the judgment of the
former for that of the latter. An officer in control lays down the rules in the doing of an act. If they are
not followed, he may, in his discretion, order the act undone or re-done by his subordinate or he may
even decide to do it himself. On the other hand, the power of supervision means "overseeing or the
authority of an officer to see to it that the subordinate officers perform their duties." If the subordinate
officers fail or neglect to fulfill their duties, the official may take such action or step as prescribed by
law to make them perform their duties. Essentially, the power of supervision means no more than the
power of ensuring that laws are faithfully executed, or that subordinate officers act within the law. The
supervisor or superintendent merely sees to it that the rules are followed, but he does not lay down
the rules, nor does he have discretion to modify or replace them.14 By virtue of these definitions, it is
easy to envision how the Office of the Ombudsmans functions would be unduly hampered if it was to
be subjected to executive control and supervision: with control, the Office of the Ombudsmans
actions could be altered, modified or substituted by that of the President, and with supervision, the
office would operate under constant scrutiny of a separate but superior authority. With this in mind,
the Office of the Ombudsmans independence should only be construed in the context of
organizational separation which does not, as it should not, obviate the possibility of having an
external disciplining authority over some of its officials pursuant to the checks and balances principle.
Verily, the principle of checks and balances is not a general apothegm for total insulation but rather of
functional interrelation. It is clear that no one office of government works in absolute autonomy. To
determine the gradations and contours of institutional independence, one must look into the blueprint
of the Constitution which embodies the will and wisdom of the people. This is precisely what Section
2, Article XI of the 1987 Constitution states: non-impeachable officers, such as the Special Prosecutor
and the Deputy Ombudsmen, may be removed from office as may be provided by law. Indeed, this
provision coupled with the Framers silence on the meaning of Ombudsman independence should
carve out space for Congress to define, by its plenary legislative power acting as representatives of
the people, the parameters of discipline over these so-called non-impeachable officers, including,
among others, the Special Prosecutor and the Deputy Ombudsmen.
In any event, without a prohibition that may be clearly and unequivocally ascertained from the text
and deliberations of the Constitution against the disciplinary authority provided under Section 8(2) of
RA 6770, the overriding approach should operate - to doubt is to sustain; all doubts are to be
construed in favor of constitutionality.
Accordingly, I vote to uphold the constitutionality of Section 8(2) of RA 6770 in its entirety.
ESTELA M. PERLAS-BERNABE
Associate Justice

EN BANC
G.R. No. 170139, August 05, 2014
SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner, v. JOY C. CABILES, Respondent.
DECISION
LEONEN, J.:
This case involves an overseas Filipino worker with shattered dreams. It is our duty, given the facts
and the law, to approximate justice for her.
229

We are asked to decide a petition for review1 on certiorari assailing the Court of Appeals
decision2 dated June 27, 2005. This decision partially affirmed the National Labor Relations
Commissions resolution dated March 31, 2004,3 declaring respondents dismissal illegal, directing
petitioner to pay respondents three-month salary equivalent to New Taiwan Dollar (NT$) 46,080.00,
and ordering it to reimburse the NT$3,000.00 withheld from respondent, and pay her NT$300.00
attorneys fees.4cralawred

Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement

agency.5Responding to an ad it published, respondent, Joy C. Cabiles, submitted her application for a
quality control job in Taiwan.6cralawred

Joys application was accepted.7 Joy was later asked to sign a one-year employment contract for a
monthly salary of NT$15,360.00.8 She alleged that Sameer Overseas Agency required her to pay a
placement fee of P70,000.00 when she signed the employment contract.9cralawred

Joy was deployed to work for Taiwan Wacoal, Co. Ltd. (Wacoal) on June 26, 1997.10 She alleged that
in her employment contract, she agreed to work as quality control for one year.11 In Taiwan, she was
asked to work as a cutter.12cralawred

Sameer Overseas Placement Agency claims that on July 14, 1997, a certain Mr. Huwang from
Wacoal informed Joy, without prior notice, that she was terminated and that she should immediately
report to their office to get her salary and passport.13 She was asked to prepare for immediate
repatriation.14cralawred

Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of
NT$9,000.15According to her, Wacoal deducted NT$3,000 to cover her plane ticket to
Manila.16cralawred

On October 15, 1997, Joy filed a complaint17 with the National Labor Relations Commission against
petitioner and Wacoal. She claimed that she was illegally dismissed.18 She asked for the return of her
placement fee, the withheld amount for repatriation costs, payment of her salary for 23 months as
well as moral and exemplary damages.19 She identified Wacoal as Sameer Overseas Placement
Agencys foreign principal.20cralawred

Sameer Overseas Placement Agency alleged that respondent's termination was due to her
inefficiency, negligence in her duties, and her failure to comply with the work requirements [of] her
foreign [employer].21 The agency also claimed that it did not ask for a placement fee of
?70,000.00.22 As evidence, it showed Official Receipt No. 14860 dated June 10, 1997, bearing the
amount of ?20,360.00.23 Petitioner added that Wacoal's accreditation with petitioner had already been
transferred to the Pacific Manpower & Management Services, Inc. (Pacific) as of August 6,
1997.24 Thus, petitioner asserts that it was already substituted by Pacific Manpower.25cralawred

Pacific Manpower moved for the dismissal of petitioners claims against it.26 It alleged that there was
no employer-employee relationship between them.27 Therefore, the claims against it were outside the
jurisdiction of the Labor Arbiter.28 Pacific Manpower argued that the employment contract should first
be presented so that the employers contractual obligations might be identified.29 It further denied that
it assumed liability for petitioners illegal acts.30cralawred

On July 29, 1998, the Labor Arbiter dismissed Joys complaint.31 Acting Executive Labor Arbiter
230

Pedro C. Ramos ruled that her complaint was based on mere allegations.32 The Labor Arbiter found
that there was no excess payment of placement fees, based on the official receipt presented by
petitioner.33 The Labor Arbiter found unnecessary a discussion on petitioners transfer of obligations
to Pacific34 and considered the matter immaterial in view of the dismissal of respondents
complaint.35cralawred

Joy appealed36 to the National Labor Relations Commission.

In a resolution37 dated March 31, 2004, the National Labor Relations Commission declared that Joy
was illegally dismissed.38 It reiterated the doctrine that the burden of proof to show that the dismissal
was based on a just or valid cause belongs to the employer.39 It found that Sameer Overseas
Placement Agency failed to prove that there were just causes for termination.40 There was no
sufficient proof to show that respondent was inefficient in her work and that she failed to comply with
company requirements.41 Furthermore, procedural due process was not observed in terminating
respondent.42cralawred

The National Labor Relations Commission did not rule on the issue of reimbursement of placement
fees for lack of jurisdiction.43 It refused to entertain the issue of the alleged transfer of obligations to
Pacific.44 It did not acquire jurisdiction over that issue because Sameer Overseas Placement Agency
failed to appeal the Labor Arbiters decision not to rule on the matter.45cralawred

The National Labor Relations Commission awarded respondent only three (3) months worth of salary
in the amount of NT$46,080, the reimbursement of the NT$3,000 withheld from her, and attorneys
fees of NT$300.46cralawred

The Commission denied the agencys motion for reconsideration47 dated May 12, 2004 through a
resolution48 dated July 2, 2004.

Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing of a petition49 for
certiorari with the Court of Appeals assailing the National Labor Relations Commissions resolutions
dated March 31, 2004 and July 2, 2004.

The Court of Appeals50 affirmed the decision of the National Labor Relations Commission with
respect to the finding of illegal dismissal, Joys entitlement to the equivalent of three months worth of
salary, reimbursement of withheld repatriation expense, and attorneys fees.51 The Court of Appeals
remanded the case to the National Labor Relations Commission to address the validity of petitioner's
allegations against Pacific.52 The Court of Appeals held, thus:chanRoblesvirtualLawlibrary
Although the public respondent found the dismissal of the complainant-respondent illegal, we should
point out that the NLRC merely awarded her three (3) months backwages or the amount of
NT$46,080.00, which was based upon its finding that she was dismissed without due process, a
finding that we uphold, given petitioners lack of worthwhile discussion upon the same in the
proceedings below or before us. Likewise we sustain NLRCs finding in regard to the reimbursement
of her fare, which is squarely based on the law; as well as the award of attorneys fees.

But we do find it necessary to remand the instant case to the public respondent for further
proceedings, for the purpose of addressing the validity or propriety of petitioners third-party complaint
against the transferee agent or the Pacific Manpower & Management Services, Inc. and Lea G.
Manabat. We should emphasize that as far as the decision of the NLRC on the claims of Joy Cabiles,
is concerned, the same is hereby affirmed with finality, and we hold petitioner liable thereon, but
without prejudice to further hearings on its third party complaint against Pacific for reimbursement.
231

WHEREFORE, premises considered, the assailed Resolutions are hereby partly AFFIRMED in
accordance with the foregoing discussion, but subject to the caveat embodied in the last sentence.
No costs.

SO ORDERED.53

Dissatisfied, Sameer Overseas Placement Agency filed this petition.54cralawred

We are asked to determine whether the Court of Appeals erred when it affirmed the ruling of the
National Labor Relations Commission finding respondent illegally dismissed and awarding her three
months worth of salary, the reimbursement of the cost of her repatriation, and attorneys fees despite
the alleged existence of just causes of termination.

Petitioner reiterates that there was just cause for termination because there was a finding of Wacoal
that respondent was inefficient in her work.55 Therefore, it claims that respondents dismissal was
valid.56cralawred

Petitioner also reiterates that since Wacoals accreditation was validly transferred to Pacific at the
time respondent filed her complaint, it should be Pacific that should now assume responsibility for
Wacoals contractual obligations to the workers originally recruited by petitioner.57cralawred

Sameer Overseas Placement Agencys petition is without merit. We find for respondent.
I

Sameer Overseas Placement Agency failed to show that there was just cause for causing Joys
dismissal. The employer, Wacoal, also failed to accord her due process of law.

Indeed, employers have the prerogative to impose productivity and quality standards at work.58 They
may also impose reasonable rules to ensure that the employees comply with these
standards.59 Failure to comply may be a just cause for their dismissal.60 Certainly, employers cannot
be compelled to retain the services of an employee who is guilty of acts that are inimical to the
interest of the employer.61While the law acknowledges the plight and vulnerability of workers, it does
not authorize the oppression or self-destruction of the employer.62 Management prerogative is
recognized in law and in our jurisprudence.

This prerogative, however, should not be abused. It is tempered with the employees right to security
of tenure.63 Workers are entitled to substantive and procedural due process before termination. They
may not be removed from employment without a valid or just cause as determined by law and without
going through the proper procedure.

Security of tenure for labor is guaranteed by our Constitution.64cralawred

Employees are not stripped of their security of tenure when they move to work in a different
jurisdiction. With respect to the rights of overseas Filipino workers, we follow the principle of lex loci
contractus.

Thus, in Triple Eight Integrated Services, Inc. v. NLRC,65 this court noted:chanRoblesvirtualLawlibrary
Petitioner likewise attempts to sidestep the medical certificate requirement by contending that since
Osdana was working in Saudi Arabia, her employment was subject to the laws of the host country.
232

Apparently, petitioner hopes to make it appear that the labor laws of Saudi Arabia do not require any
certification by a competent public health authority in the dismissal of employees due to illness.

Again, petitioners argument is without merit.

First, established is the rule that lex loci contractus (the law of the place where the contract is
made) governs in this jurisdiction. There is no question that the contract of employment in
this case was perfected here in the Philippines. Therefore, the Labor Code, its implementing
rules and regulations, and other laws affecting labor apply in this case. Furthermore, settled is
the rule that the courts of the forum will not enforce any foreign claim obnoxious to the forums public
policy. Here in the Philippines, employment agreements are more than contractual in nature. The
Constitution itself, in Article XIII, Section 3, guarantees the special protection of workers, to
wit:chanRoblesvirtualLawlibrary
The State shall afford full protection to labor, local and overseas, organized and unorganized, and
promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.

. . . .chanrobleslaw

This public policy should be borne in mind in this case because to allow foreign employers to
determine for and by themselves whether an overseas contract worker may be dismissed on the
ground of illness would encourage illegal or arbitrary pre-termination of employment
contracts.66 (Emphasis supplied, citation omitted)

Even with respect to fundamental procedural rights, this court emphasized in PCL Shipping
Philippines, Inc. v. NLRC,67 to wit:chanRoblesvirtualLawlibrary
Petitioners admit that they did not inform private respondent in writing of the charges against him and
that they failed to conduct a formal investigation to give him opportunity to air his side. However,
petitioners contend that the twin requirements of notice and hearing applies strictly only when the
employment is within the Philippines and that these need not be strictly observed in cases of
international maritime or overseas employment.

The Court does not agree. The provisions of the Constitution as well as the Labor Code which
afford protection to labor apply to Filipino employees whether working within the Philippines
or abroad. Moreover, the principle of lex loci contractus (the law of the place where the
contract is made) governs in this jurisdiction. In the present case, it is not disputed that the
Contract of Employment entered into by and between petitioners and private respondent was
executed here in the Philippines with the approval of the Philippine Overseas Employment
Administration (POEA). Hence, the Labor Code together with its implementing rules and regulations
and other laws affecting labor apply in this case.68 (Emphasis supplied, citations omitted)

By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or authorized cause
and after compliance with procedural due process requirements.
233

Article 282 of the Labor Code enumerates the just causes of termination by the employer.
Thus:chanRoblesvirtualLawlibrary
Art. 282. Termination by employer. An employer may terminate an employment for any of the
following causes:cralawlawlibrary

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;chanroblesvirtuallawlibrary

(b) Gross and habitual neglect by the employee of his duties;chanroblesvirtuallawlibrary

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;chanroblesvirtuallawlibrary

(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives;
andChanRoblesVirtualawlibrary

(e) Other causes analogous to the foregoing.

Petitioners allegation that respondent was inefficient in her work and negligent in her duties69 may,
therefore, constitute a just cause for termination under Article 282(b), but only if petitioner was able to
prove it.

The burden of proving that there is just cause for termination is on the employer. The employer must
affirmatively show rationally adequate evidence that the dismissal was for a justifiable
cause.70 Failure to show that there was valid or just cause for termination would necessarily mean
that the dismissal was illegal.71cralawred

To show that dismissal resulting from inefficiency in work is valid, it must be shown that: 1) the
employer has set standards of conduct and workmanship against which the employee will be judged;
2) the standards of conduct and workmanship must have been communicated to the employee; and
3) the communication was made at a reasonable time prior to the employees performance
assessment.

This is similar to the law and jurisprudence on probationary employees, which allow termination of the
employee only when there is just cause or when [the probationary employee] fails to qualify as a
regular employee in accordance with reasonable standards made known by the employer to the
employee at the time of his [or her] engagement.72cralawred

However, we do not see why the application of that ruling should be limited to probationary
employment. That rule is basic to the idea of security of tenure and due process, which are
guaranteed to all employees, whether their employment is probationary or regular.

The pre-determined standards that the employer sets are the bases for determining the probationary
employees fitness, propriety, efficiency, and qualifications as a regular employee. Due process
requires that the probationary employee be informed of such standards at the time of his or her
engagement so he or she can adjust his or her character or workmanship accordingly. Proper
adjustment to fit the standards upon which the employees qualifications will be evaluated will
increase ones chances of being positively assessed for regularization by his or her employer.
234

Assessing an employees work performance does not stop after regularization. The employer, on a
regular basis, determines if an employee is still qualified and efficient, based on work standards.
Based on that determination, and after complying with the due process requirements of notice and
hearing, the employer may exercise its management prerogative of terminating the employee found
unqualified.

The regular employee must constantly attempt to prove to his or her employer that he or she meets
all the standards for employment. This time, however, the standards to be met are set for the purpose
of retaining employment or promotion. The employee cannot be expected to meet any standard of
character or workmanship if such standards were not communicated to him or her. Courts should
remain vigilant on allegations of the employers failure to communicate work standards that would
govern ones employment if [these are] to discharge in good faith [their] duty to
adjudicate.73cralawred

In this case, petitioner merely alleged that respondent failed to comply with her foreign employers
work requirements and was inefficient in her work.74No evidence was shown to support such
allegations. Petitioner did not even bother to specify what requirements were not met, what efficiency
standards were violated, or what particular acts of respondent constituted inefficiency.

There was also no showing that respondent was sufficiently informed of the standards against which
her work efficiency and performance were judged. The parties conflict as to the position held by
respondent showed that even the matter as basic as the job title was not clear.

The bare allegations of petitioner are not sufficient to support a claim that there is just cause for
termination. There is no proof that respondent was legally terminated.

Petitioner failed to comply with

the due process requirements

Respondents dismissal less than one year from hiring and her repatriation on the same day show not
only failure on the part of petitioner to comply with the requirement of the existence of just cause for
termination. They patently show that the employers did not comply with the due process requirement.

A valid dismissal requires both a valid cause and adherence to the valid procedure of dismissal.75 The
employer is required to give the charged employee at least two written notices before
termination.76One of the written notices must inform the employee of the particular acts that may
cause his or her dismissal.77 The other notice must [inform] the employee of the employers
decision.78 Aside from the notice requirement, the employee must also be given an opportunity to be
heard.79cralawred

Petitioner failed to comply with the twin notices and hearing requirements. Respondent started
working on June 26, 1997. She was told that she was terminated on July 14, 1997 effective on the
same day and barely a month from her first workday. She was also repatriated on the same day that
she was informed of her termination. The abruptness of the termination negated any finding that she
was properly notified and given the opportunity to be heard. Her constitutional right to due process of
law was violated.
II

Respondent Joy Cabiles, having been illegally dismissed, is entitled to her salary for the unexpired
portion of the employment contract that was violated together with attorneys fees and reimbursement
235

of amounts withheld from her salary.

Section 10 of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995, states that overseas workers who were terminated without just, valid, or
authorized cause shall be entitled to the full reimbursement of his placement fee with interest of
twelve (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever is less.
Sec. 10. MONEY CLAIMS. Notwithstanding any provision of law to the contrary, the Labor Arbiters
of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction
to hear and decide, within ninety (90) calendar days after filing of the complaint, the claims arising out
of an employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral, exemplary and other forms of damages.

The liability of the principal/employer and the recruitment/placement agency for any and all claims
under this section shall be joint and several. This provisions [sic] shall be incorporated in the contract
for overseas employment and shall be a condition precedent for its approval. The performance bond
to be filed by the recruitment/placement agency, as provided by law, shall be answerable for all
money claims or damages that may be awarded to the workers. If the recruitment/placement agency
is a juridical being, the corporate officers and directors and partners as the case may be, shall
themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims
and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall
not be affected by any substitution, amendment or modification made locally or in a foreign country of
the said contract.

Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages

under this section shall be paid within four (4) months from the approval of the settlement by the
appropriate authority.

In case of termination of overseas employment without just, valid or authorized cause as defined by
law or contract, the workers shall be entitled to the full reimbursement of his placement fee with
interest of twelve (12%) per annum, plus his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is less.

....

(Emphasis supplied)chanrobleslaw

Section 15 of Republic Act No. 8042 states that repatriation of the worker and the transport of his [or
her] personal belongings shall be the primary responsibility of the agency which recruited or deployed
the worker overseas. The exception is when termination of employment is due solely to the fault of
the worker,80 which as we have established, is not the case. It reads:chanRoblesvirtualLawlibrary
SEC. 15. REPATRIATION OF WORKERS; EMERGENCY REPATRIATION FUND. The repatriation
of the worker and the transport of his personal belongings shall be the primary responsibility of the
agency which recruited or deployed the worker overseas. All costs attendant to repatriation shall be
borne by or charged to the agency concerned and/or its principal. Likewise, the repatriation of
remains and transport of the personal belongings of a deceased worker and all costs attendant
thereto shall be borne by the principal and/or local agency. However, in cases where the termination
of employment is due solely to the fault of the worker, the principal/employer or agency shall not in
236

any manner be responsible for the repatriation of the former and/or his belongings.

....

The Labor Code81 also entitles the employee to 10% of the amount of withheld wages as attorneys
fees when the withholding is unlawful.

The Court of Appeals affirmed the National Labor Relations Commissions decision to award
respondent NT$46,080.00 or the three-month equivalent of her salary, attorneys fees of NT$300.00,
and the reimbursement of the withheld NT$3,000.00 salary, which answered for her repatriation.

We uphold the finding that respondent is entitled to all of these awards. The award of the three-
month equivalent of respondents salary should, however, be increased to the amount
equivalent to the unexpired term of the employment contract.

In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc.,82 this court ruled that
the clause or for three (3) months for every year of the unexpired term, whichever is less83 is
unconstitutional for violating the equal protection clause and substantive due process.84cralawred

A statute or provision which was declared unconstitutional is not a law. It confers no rights; it
imposes no duties; it affords no protection; it creates no office; it is inoperative as if it has not been
passed at all.85cralawred

We are aware that the clause or for three (3) months for every year of the unexpired term, whichever
is less was reinstated in Republic Act No. 8042 upon promulgation of Republic Act No. 10022 in
2010. Section 7 of Republic Act No. 10022 provides:chanRoblesvirtualLawlibrary
Section 7. Section 10 of Republic Act No. 8042, as amended, is hereby amended to read as
follows:chanRoblesvirtualLawlibrary
SEC. 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor Arbiters of
the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to
hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising
out of an employer-employee relationship or by virtue of any law or contract involving Filipino workers
for overseas deployment including claims for actual, moral, exemplary and other forms of damage.
Consistent with this mandate, the NLRC shall endeavor to update and keep abreast with the
developments in the global services industry.

The liability of the principal/employer and the recruitment/placement agency for any and all claims
under this section shall be joint and several. This provision shall be incorporated in the contract for
overseas employment and shall be a condition precedent for its approval. The performance bond to
de [sic] filed by the recruitment/placement agency, as provided by law, shall be answerable for all
money claims or damages that may be awarded to the workers. If the recruitment/placement agency
is a juridical being, the corporate officers and directors and partners as the case may be, shall
themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims
and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall
not be affected by any substitution, amendment or modification made locally or in a foreign country of
the said contract.

Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages

237

under this section shall be paid within thirty (30) days from approval of the settlement by the
appropriate authority.

In case of termination of overseas employment without just, valid or authorized cause as defined by
law or contract, or any unauthorized deductions from the migrant workers salary, the worker shall be
entitled to the full reimbursement if [sic] his placement fee and the deductions made with interest at
twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is less.

In case of a final and executory judgement against a foreign employer/principal, it shall be

automatically disqualified, without further proceedings, from participating in the Philippine Overseas
Employment Program and from recruiting and hiring Filipino workers until and unless it fully satisfies
the judgement award.

Noncompliance with the mandatory periods for resolutions of case provided under this section shall
subject the responsible officials to any or all of the following penalties:cralawlawlibrary

(a) The salary of any such official who fails to render his decision or resolution within the prescribed
period shall be, or caused to be, withheld until the said official complies
therewith;chanroblesvirtuallawlibrary

(b) Suspension for not more than ninety (90) days; or

(c) Dismissal from the service with disqualification to hold any appointive public office for five (5)
years.

Provided, however, That the penalties herein provided shall be without prejudice to any liability which
any such official may have incured [sic] under other existing laws or rules and regulations as a
consequence of violating the provisions of this paragraph. (Emphasis supplied)

Republic Act No. 10022 was promulgated on March 8, 2010. This means that the reinstatement of the
clause in Republic Act No. 8042 was not yet in effect at the time of respondents termination from
work in 1997.86 Republic Act No. 8042 before it was amended by Republic Act No. 10022 governs
this case.

When a law is passed, this court awaits an actual case that clearly raises adversarial positions in their
proper context before considering a prayer to declare it as unconstitutional.

However, we are confronted with a unique situation. The law passed incorporates the exact clause
already declared as unconstitutional, without any perceived substantial change in the circumstances.

This may cause confusion on the part of the National Labor Relations Commission and the Court of
Appeals. At minimum, the existence of Republic Act No. 10022 may delay the execution of the
judgment in this case, further frustrating remedies to assuage the wrong done to petitioner. Hence,
there is a necessity to decide this constitutional issue.

Moreover, this court is possessed with the constitutional duty to [p]romulgate rules concerning the
protection and enforcement of constitutional rights.87 When cases become moot and academic, we
do not hesitate to provide for guidance to bench and bar in situations where the same violations are
capable of repetition but will evade review. This is analogous to cases where there are millions of
238

Filipinos working abroad who are bound to suffer from the lack of protection because of the
restoration of an identical clause in a provision previously declared as unconstitutional.

In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may
exercise its powers in any manner inconsistent with the Constitution, regardless of the existence of
any law that supports such exercise. The Constitution cannot be trumped by any other law. All laws
must be read in light of the Constitution. Any law that is inconsistent with it is a nullity.

Thus, when a law or a provision of law is null because it is inconsistent with the Constitution, the
nullity cannot be cured by reincorporation or reenactment of the same or a similar law or provision. A
law or provision of law that was already declared unconstitutional remains as such unless
circumstances have so changed as to warrant a reverse conclusion.

We are not convinced by the pleadings submitted by the parties that the situation has so changed so
as to cause us to reverse binding precedent.

Likewise, there are special reasons of judicial efficiency and economy that attend to these cases.

The new law puts our overseas workers in the same vulnerable position as they were prior
to Serrano. Failure to reiterate the very ratio decidendi of that case will result in the same untold
economic hardships that our reading of the Constitution intended to avoid. Obviously, we cannot
countenance added expenses for further litigation that will reduce their hard-earned wages as well as
add to the indignity of having been deprived of the protection of our laws simply because our
precedents have not been followed. There is no constitutional doctrine that causes injustice in the
face of empty procedural niceties. Constitutional interpretation is complex, but it is never
unreasonable.

Thus, in a resolution88 dated October 22, 2013, we ordered the parties and the Office of the Solicitor
General to comment on the constitutionality of the reinstated clause in Republic Act No. 10022.

In its comment,89 petitioner argued that the clause was constitutional.90 The legislators intended a
balance between the employers and the employees rights by not unduly burdening the local
recruitment agency.91 Petitioner is also of the view that the clause was already declared as
constitutional in Serrano.92cralawred

The Office of the Solicitor General also argued that the clause was valid and
constitutional.93 However, since the parties never raised the issue of the constitutionality of the clause
as reinstated in Republic Act No. 10022, its contention is that it is beyond judicial review.94cralawred

On the other hand, respondent argued that the clause was unconstitutional because it infringed on
workers right to contract.95cralawred

We observe that the reinstated clause, this time as provided in Republic Act. No. 10022, violates the
constitutional rights to equal protection and due process.96 Petitioner as well as the Solicitor General
have failed to show any compelling change in the circumstances that would warrant us to revisit the
precedent.

We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should be
recovered by an illegally dismissed overseas worker to three months is both a violation of due
process and the equal protection clauses of the Constitution.
239

Equal protection of the law is a guarantee that persons under like circumstances and falling within the
same class are treated alike, in terms of privileges conferred and liabilities enforced.97 It is a
guarantee against undue favor and individual or class privilege, as well as hostile discrimination or
the oppression of inequality.98cralawred

In creating laws, the legislature has the power to make distinctions and classifications.99 In
exercising such power, it has a wide discretion.100cralawred

The equal protection clause does not infringe on this legislative power.101 A law is void on this basis,
only if classifications are made arbitrarily.102 There is no violation of the equal protection clause if the
law applies equally to persons within the same class and if there are reasonable grounds for
distinguishing between those falling within the class and those who do not fall within the class.103 A
law that does not violate the equal protection clause prescribes a reasonable
classification.104cralawred

A reasonable classification (1) must rest on substantial distinctions; (2) must be germane to the
purposes of the law; (3) must not be limited to existing conditions only; and (4) must apply equally to
all members of the same class.105cralawred

The reinstated clause does not satisfy the requirement of reasonable classification.

In Serrano, we identified the classifications made by the reinstated clause. It distinguished between
fixed-period overseas workers and fixed-period local workers.106 It also distinguished between
overseas workers with employment contracts of less than one year and overseas workers with
employment contracts of at least one year.107 Within the class of overseas workers with at least one-
year employment contracts, there was a distinction between those with at least a year left in their
contracts and those with less than a year left in their contracts when they were illegally
dismissed.108cralawred

The Congress classification may be subjected to judicial review. In Serrano, there is a legislative
classification which impermissibly interferes with the exercise of a fundamental right or operates to
the peculiar disadvantage of a suspect class.109cralawred

Under the Constitution, labor is afforded special protection.110 Thus, this court in Serrano, [i]mbued
with the same sense of obligation to afford protection to labor, . . . employ[ed] the standard of strict
judicial scrutiny, for it perceive[d] in the subject clause a suspect classification prejudicial to
OFWs.111cralawred

We also noted in Serrano that before the passage of Republic Act No. 8042, the money claims of
illegally terminated overseas and local workers with fixed-term employment were computed in the
same manner.112 Their money claims were computed based on the unexpired portions of their
contracts.113The adoption of the reinstated clause in Republic Act No. 8042 subjected the money
claims of illegally dismissed overseas workers with an unexpired term of at least a year to a cap of
three months worth of their salary.114 There was no such limitation on the money claims of illegally
terminated local workers with fixed-term employment.115cralawred

We observed that illegally dismissed overseas workers whose employment contracts had a term of
less than one year were granted the amount equivalent to the unexpired portion of their employment
contracts.116 Meanwhile, illegally dismissed overseas workers with employment terms of at least a
240

year were granted a cap equivalent to three months of their salary for the unexpired portions of their
contracts.117cralawred

Observing the terminologies used in the clause, we also found that the subject clause creates a sub-
layer of discrimination among OFWs whose contract periods are for more than one year: those who
are illegally dismissed with less than one year left in their contracts shall be entitled to their salaries
for the entire unexpired portion thereof, while those who are illegally dismissed with one year or more
remaining in their contracts shall be covered by the reinstated clause, and their monetary benefits
limited to their salaries for three months only.118cralawred

We do not need strict scrutiny to conclude that these classifications do not rest on any real or
substantial distinctions that would justify different treatments in terms of the computation of money
claims resulting from illegal termination.

Overseas workers regardless of their classifications are entitled to security of tenure, at least for the
period agreed upon in their contracts. This means that they cannot be dismissed before the end of
their contract terms without due process. If they were illegally dismissed, the workers right to security
of tenure is violated.

The rights violated when, say, a fixed-period local worker is illegally terminated are neither greater
than nor less than the rights violated when a fixed-period overseas worker is illegally terminated. It is
state policy to protect the rights of workers without qualification as to the place of employment.119 In
both cases, the workers are deprived of their expected salary, which they could have earned had they
not been illegally dismissed. For both workers, this deprivation translates to economic insecurity and
disparity.120 The same is true for the distinctions between overseas workers with an employment
contract of less than one year and overseas workers with at least one year of employment contract,
and between overseas workers with at least a year left in their contracts and overseas workers with
less than a year left in their contracts when they were illegally dismissed.

For this reason, we cannot subscribe to the argument that [overseas workers] are contractual
employees who can never acquire regular employment status, unlike local workers121 because it
already justifies differentiated treatment in terms of the computation of money claims.122cralawred

Likewise, the jurisdictional and enforcement issues on overseas workers money claims do not justify
a differentiated treatment in the computation of their money claims.123 If anything, these issues justify
an equal, if not greater protection and assistance to overseas workers who generally are more prone
to exploitation given their physical distance from our government.

We also find that the classifications are not relevant to the purpose of the law, which is to establish a
higher standard of protection and promotion of the welfare of migrant workers, their families and
overseas Filipinos in distress, and for other purposes.124 Further, we find specious the argument that
reducing the liability of placement agencies redounds to the benefit of the [overseas]
workers.125cralawred

Putting a cap on the money claims of certain overseas workers does not increase the standard of
protection afforded to them. On the other hand, foreign employers are more incentivized by the
reinstated clause to enter into contracts of at least a year because it gives them more flexibility to
violate our overseas workers rights. Their liability for arbitrarily terminating overseas workers is
decreased at the expense of the workers whose rights they violated. Meanwhile, these overseas
workers who are impressed with an expectation of a stable job overseas for the longer contract period
241

disregard other opportunities only to be terminated earlier. They are left with claims that are less than
what others in the same situation would receive. The reinstated clause, therefore, creates a situation
where the law meant to protect them makes violation of rights easier and simply benign to the
violator.

As Justice Brion said in his concurring opinion in Serrano:chanRoblesvirtualLawlibrary

Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in fact provides a hidden
twist affecting the principal/employers liability. While intended as an incentive accruing to
recruitment/manning agencies, the law, as worded, simply limits the OFWs recovery in wrongful
dismissal situations. Thus, it redounds to the benefit of whoever may be liable, including the
principal/employer the direct employer primarily liable for the wrongful dismissal. In this sense,
Section 10 read as a grant of incentives to recruitment/manning agencies oversteps what it aims
to do by effectively limiting what is otherwise the full liability of the foreign
principals/employers. Section 10, in short, really operates to benefit the wrong party and allows that
party, without justifiable reason, to mitigate its liability for wrongful dismissals. Because of this hidden
twist, the limitation of liability under Section 10 cannot be an appropriate incentive, to borrow the
term that R.A. No. 8042 itself uses to describe the incentive it envisions under its purpose clause.

What worsens the situation is the chosen mode of granting the incentive: instead of a grant that, to
encourage greater efforts at recruitment, is directly related to extra efforts undertaken, the law simply
limits their liability for the wrongful dismissals of already deployed OFWs. This is effectively a legally-
imposed partial condonation of their liability to OFWs, justified solely by the laws intent to encourage
greater deployment efforts. Thus, the incentive, from a more practical and realistic view, is really part
of a scheme to sell Filipino overseas labor at a bargain for purposes solely of attracting the market. . .
.

The so-called incentive is rendered particularly odious by its effect on the OFWs the benefits
accruing to the recruitment/manning agencies and their principals are taken from the pockets of the
OFWs to whom the full salaries for the unexpired portion of the contract rightfully belong. Thus, the
principals/employers and the recruitment/manning agencies even profit from their violation of the
security of tenure that an employment contract embodies. Conversely, lesser protection is afforded
the OFW, not only because of the lessened recovery afforded him or her by operation of law, but also
because this same lessened recovery renders a wrongful dismissal easier and less onerous to
undertake; the lesser cost of dismissing a Filipino will always be a consideration a foreign employer
will take into account in termination of employment decisions. . . .126

Further, [t]here can never be a justification for any form of government action that alleviates the
burden of one sector, but imposes the same burden on another sector, especially when the favored
sector is composed of private businesses such as placement agencies, while the disadvantaged
sector is composed of OFWs whose protection no less than the Constitution commands. The idea
that private business interest can be elevated to the level of a compelling state interest is
odious.127cralawred

Along the same line, we held that the reinstated clause violates due process rights. It is arbitrary as it
deprives overseas workers of their monetary claims without any discernable valid
purpose.128cralawred

Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in
accordance with Section 10 of Republic Act No. 8042. The award of the three-month equivalence of
respondents salary must be modified accordingly. Since she started working on June 26, 1997 and
242

was terminated on July 14, 1997, respondent is entitled to her salary from July 15, 1997 to June 25,
1998. To rule otherwise would be iniquitous to petitioner and other OFWs, and would, in effect, send
a wrong signal that principals/employers and recruitment/manning agencies may violate an OFWs
security of tenure which an employment contract embodies and actually profit from such violation
based on an unconstitutional provision of law.129cralawred
III
On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013, which revised
the interest rate for loan or forbearance from 12% to 6% in the absence of stipulation, applies in this
case. The pertinent portions of Circular No. 799, Series of 2013, read:chanRoblesvirtualLawlibrary
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions
governing the rate of interest in the absence of stipulation in loan contracts, thereby amending
Section 2 of Circular No. 905, Series of 1982:cralawlawlibrary

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the
rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be
six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.

This Circular shall take effect on 1 July 2013.

Through the able ponencia of Justice Diosdado Peralta, we laid down the guidelines in computing
legal interest in Nacar v. Gallery Frames:130cralawred
II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as
follows:chanRoblesvirtualLawlibrary
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest
on the amount of damages awarded may be imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages,
except when or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such
certainty cannot be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
6% per annum from such finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013,
243

shall not be disturbed and shall continue to be implemented applying the rate of interest fixed
therein.131

Circular No. 799 is applicable only in loans and forbearance of money, goods, or credits, and in
judgments when there is no stipulation on the applicable interest rate. Further, it is only applicable if
the judgment did not become final and executory before July 1, 2013.132cralawred

We add that Circular No. 799 is not applicable when there is a law that states otherwise. While the
Bangko Sentral ng Pilipinas has the power to set or limit interest rates,133 these interest rates do not
apply when the law provides that a different interest rate shall be applied. [A] Central Bank Circular
cannot repeal a law. Only a law can repeal another law.134cralawred
For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated overseas
workers are entitled to the reimbursement of his or her placement fee with an interest of 12% per
annum. Since Bangko Sentral ng Pilipinas circulars cannot repeal Republic Act No. 8042, the
issuance of Circular No. 799 does not have the effect of changing the interest on awards for
reimbursement of placement fees from 12% to 6%. This is despite Section 1 of Circular No. 799,
which provides that the 6% interest rate applies even to judgments.

Moreover, laws are deemed incorporated in contracts. The contracting parties need not repeat them.
They do not even have to be referred to. Every contract, thus, contains not only what has been
explicitly stipulated, but the statutory provisions that have any bearing on the matter.135 There is,
therefore, an implied stipulation in contracts between the placement agency and the overseas worker
that in case the overseas worker is adjudged as entitled to reimbursement of his or her placement
fees, the amount shall be subject to a 12% interest per annum. This implied stipulation has the effect
of removing awards for reimbursement of placement fees from Circular No. 799s coverage.

The same cannot be said for awards of salary for the unexpired portion of the employment contract
under Republic Act No. 8042. These awards are covered by Circular No. 799 because the law does
not provide for a specific interest rate that should apply.

In sum, if judgment did not become final and executory before July 1, 2013 and there was no
stipulation in the contract providing for a different interest rate, other money claims under Section 10
of Republic Act No. 8042 shall be subject to the 6% interest per annum in accordance with Circular
No. 799.

This means that respondent is also entitled to an interest of 6% per annum on her money claims from
the finality of this judgment.
IV
Finally, we clarify the liabilities of Wacoal as principal and petitioner as the employment agency that
facilitated respondents overseas employment.

Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the foreign
employer and the local employment agency are jointly and severally liable for money claims including
claims arising out of an employer-employee relationship and/or damages. This section also provides
that the performance bond filed by the local agency shall be answerable for such money claims or
damages if they were awarded to the employee.

This provision is in line with the states policy of affording protection to labor and alleviating workers
plight.136cralawred
244

In overseas employment, the filing of money claims against the foreign employer is attended by
practical and legal complications. The distance of the foreign employer alone makes it difficult for an
overseas worker to reach it and make it liable for violations of the Labor Code. There are also
possible conflict of laws, jurisdictional issues, and procedural rules that may be raised to frustrate an
overseas workers attempt to advance his or her claims.

It may be argued, for instance, that the foreign employer must be impleaded in the complaint as an
indispensable party without which no final determination can be had of an action.137cralawred

The provision on joint and several liability in the Migrant Workers and Overseas Filipinos Act of 1995
assures overseas workers that their rights will not be frustrated with these complications.

The fundamental effect of joint and several liability is that each of the debtors is liable for the entire
obligation.138 A final determination may, therefore, be achieved even if only one of the joint and
several debtors are impleaded in an action. Hence, in the case of overseas employment, either the
local agency or the foreign employer may be sued for all claims arising from the foreign employers
labor law violations. This way, the overseas workers are assured that someone the foreign
employers local agent may be made to answer for violations that the foreign employer may have
committed.

The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers have
recourse in law despite the circumstances of their employment. By providing that the liability of the
foreign employer may be enforced to the full extent139 against the local agent, the overseas worker
is assured of immediate and sufficient payment of what is due them.140cralawred

Corollary to the assurance of immediate recourse in law, the provision on joint and several liability in
the Migrant Workers and Overseas Filipinos Act of 1995 shifts the burden of going after the foreign
employer from the overseas worker to the local employment agency. However, it must be
emphasized that the local agency that is held to answer for the overseas workers money claims is
not left without remedy. The law does not preclude it from going after the foreign employer for
reimbursement of whatever payment it has made to the employee to answer for the money claims
against the foreign employer.

A further implication of making local agencies jointly and severally liable with the foreign employer is
that an additional layer of protection is afforded to overseas workers. Local agencies, which are
businesses by nature, are inoculated with interest in being always on the lookout against foreign
employers that tend to violate labor law. Lest they risk their reputation or finances, local agencies
must already have mechanisms for guarding against unscrupulous foreign employers even at the
level prior to overseas employment applications.

With the present state of the pleadings, it is not possible to determine whether there was indeed a
transfer of obligations from petitioner to Pacific. This should not be an obstacle for the respondent
overseas worker to proceed with the enforcement of this judgment. Petitioner is possessed with the
resources to determine the proper legal remedies to enforce its rights against Pacific, if any.
V
Many times, this court has spoken on what Filipinos may encounter as they travel into the farthest
and most difficult reaches of our planet to provide for their families. In Prieto v. NLRC:141cralawred
The Court is not unaware of the many abuses suffered by our overseas workers in the foreign land
where they have ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of
contract, maltreatment, rape, insufficient nourishment, sub-human lodgings, insults and other forms of
245

debasement, are only a few of the inhumane acts to which they are subjected by their foreign
employers, who probably feel they can do as they please in their own country. While these workers
may indeed have relatively little defense against exploitation while they are abroad, that disadvantage
must not continue to burden them when they return to their own territory to voice their muted
complaint. There is no reason why, in their very own land, the protection of our own laws cannot be
extended to them in full measure for the redress of their grievances.142chanrobleslaw
But it seems that we have not said enough.

We face a diaspora of Filipinos. Their travails and their heroism can be told a million times over; each
of their stories as real as any other. Overseas Filipino workers brave alien cultures and the
heartbreak of families left behind daily. They would count the minutes, hours, days, months, and
years yearning to see their sons and daughters. We all know of the joy and sadness when they come
home to see them all grown up and, being so, they remember what their work has cost them. Twitter
accounts, Facetime, and many other gadgets and online applications will never substitute for their lost
physical presence.

Unknown to them, they keep our economy afloat through the ebb and flow of political and economic
crises. They are our true diplomats, they who show the world the resilience, patience, and creativity of
our people. Indeed, we are a people who contribute much to the provision of material creations of this
world.

This government loses its soul if we fail to ensure decent treatment for all Filipinos. We default by
limiting the contractual wages that should be paid to our workers when their contracts are breached
by the foreign employers. While we sit, this court will ensure that our laws will reward our overseas
workers with what they deserve: their dignity.

Inevitably, their dignity is ours as well.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED with
modification. Petitioner Sameer Overseas Placement Agency is ORDERED to pay respondent Joy C.
Cabiles the amount equivalent to her salary for the unexpired portion of her employment contract at
an interest of 6% per annum from the finality of this judgment. Petitioner is also ORDERED to
reimburse respondent the withheld NT$3,000.00 salary and pay respondent attorneys fees of
NT$300.00 at an interest of 6% per annum from the finality of this judgment.

The clause, or for three (3) months for every year of the unexpired term, whichever is less in Section
7 of Republic Act No. 10022 amending Section 10 of Republic Act No. 8042 is declared
unconstitutional and, therefore, null and void.
SO ORDERED

G.R. No. 209287 July 1, 2014

MARIA CAROLINA P. ARAULLO, CHAIRPERSON, BAGONG ALYANSANG MAKABAYAN; JUDY
M. TAGUIWALO, PROFESSOR, UNIVERSITY OF THE PHILIPPINES DILIMAN, CO-
CHAIRPERSON, PAGBABAGO; HENRI KAHN, CONCERNED CITIZENS MOVEMENT; REP. LUZ
ILAGAN, GABRIELA WOMEN'S PARTY REPRESENTATIVE; REP. CARLOS ISAGANI ZARATE,
BAY AN MUNA PARTY-LIST REPRESENTATIVE; RENATO M. REYES, JR., SECRETARY
GENERAL OF BAYAN; MANUEL K. DAYRIT, CHAIRMAN, ANG KAPATIRAN PARTY; VENCER
MARI E. CRISOSTOMO, CHAIRPERSON, ANAKBAYAN; VICTOR VILLANUEVA, CONVENOR,
YOUTH ACT NOW, Petitioners,
vs.
BENIGNO SIMEON C. AQUINO III, PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES;
246

PAQUITO N. OCHOA, JR., EXECUTIVE SECRETARY; AND FLORENCIO B. ABAD, SECRETARY

OF THE DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.
x-----------------------x
G.R. No. 209135
AUGUSTO L. SY JUCO JR., Ph.D., Petitioner,
vs.
FLORENCIO B. ABAD, IN HIS CAPACITY AS THE SECRETARY OF DEPARTMENT OF BUDGET
AND MANAGEMENT; AND HON. FRANKLIN MAGTUNAO DRILON, IN HIS CAP A CITY AS THE
SENATE PRESIDENT OF THE PHILIPPINES, Respondents.
x-----------------------x
G.R. No. 209136
MANUELITO R. LUNA, Petitioner,
vs.
SECRETARY FLORENCIO ABAD, IN HIS OFFICIAL CAPACITY AS HEAD OF THE
DEPARTMENT OF BUDGET AND MANAGEMENT; AND EXECUTIVE SECRETARY PAQUITO
OCHOA, IN HIS OFFICIAL CAPACITY AS ALTER EGO OF THE PRESIDENT, Respondents.
x-----------------------x
G.R. No. 209155
ATTY. JOSE MALV AR VILLEGAS, JR., Petitioner,
vs.
THE HONORABLE EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.; AND THE SECRETARY
OF BUDGET AND MANAGEMENT FLORENCIO B. ABAD, Respondents.
x-----------------------x
G.R. No. 209164
PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA), REPRESENTED BY DEAN FROILAN
M. BACUNGAN, BENJAMIN E. DIOKNO AND LEONOR M. BRIONES, Petitioners,
vs.
DEPARTMENT OF BUDGET AND MANAGEMENT AND/OR HON. FLORENCIO B.
ABAD, Respondents.
x-----------------------x
G.R. No. 209260
INTEGRATED BAR OF THE PHILIPPINES (IBP), Petitioner,
vs.
SECRETARY FLORENCIO B. ABAD OF THE DEPARTMENT OF BUDGET AND MANAGEMENT
(DBM),Respondent.
x-----------------------x
G.R. No. 209442
GRECO ANTONIOUS BEDA B. BELGICA; BISHOP REUBEN MABANTE AND REV. JOSE L.
GONZALEZ,Petitioners,
vs.
PRESIDENT BENIGNO SIMEON C. AQUINO III, THE SENATE OF THE PHILIPPINES,
REPRESENTED BY SENATE PRESIDENT FRANKLIN M. DRILON; THE HOUSE OF
REPRESENTATIVES, REPRESENTED BY SPEAKER FELICIANO BELMONTE, JR.; THE
EXECUTIVE OFFICE, REPRESENTED BY EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.;
THE DEPARTMENT OF BUDGET AND MANAGEMENT, REPRESENTED BY SECRETARY
FLORENCIO ABAD; THE DEPARTMENT OF FINANCE, REPRESENTED BY SECRETARY
CESAR V. PURISIMA; AND THE BUREAU OF TREASURY, REPRESENTED BY ROSALIA V. DE
LEON, Respondents.
x-----------------------x
G.R. No. 209517
247

CONFEDERATION FOR UNITY, RECOGNITION AND ADV AN CEMENT OF GOVERNMENT

EMPLOYEES (COURAGE), REPRESENTED BY ITS 1ST VICE PRESIDENT, SANTIAGO
DASMARINAS, JR.; ROSALINDA NARTATES, FOR HERSELF AND AS NATIONAL PRESIDENT
OF THE CONSOLIDATED UNION OF EMPLOYEES NATIONAL HOUSING AUTHORITY
(CUENHA); MANUEL BACLAGON, FOR HIMSELF AND AS PRESIDENT OF THE SOCIAL
WELFARE EMPLOYEES ASSOCIATION OF THE PHILIPPINES, DEPARTMENT OF SOCIAL
WELFARE AND DEVELOPMENT CENTRAL OFFICE (SWEAP-DSWD CO); ANTONIA PASCUAL,
FOR HERSELF AND AS NATIONAL PRESIDENT OF THE DEPARTMENT OF AGRARIAN
REFORM EMPLOYEES ASSOCIATION (DAREA); ALBERT MAGALANG, FOR HIMSELF AND AS
PRESIDENT OF THE ENVIRONMENT AND MANAGEMENT BUREAU EMPLOYEES UNION
(EMBEU); AND MARCIAL ARABA, FOR HIMSELF AND AS PRESIDENT OF THE KAPISANAN
PARA SA KAGALINGAN NG MGA KAW ANI NG MMDA (KKKMMDA), Petitioners,
vs.
BENIGNO SIMEON C. AQUINO Ill, PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES;
PAQUITO OCHOA, JR., EXECUTIVE SECRETARY; AND HON. FLORENCIO B. ABAD,
SECRETARY OF THE DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.
x-----------------------x
G.R. No. 209569
VOLUNTEERS AGAINST CRIME AND CORRUPTION (VACC), REPRESENTED BY DANTE L.
JIMENEZ,Petitioner,
vs.
PAQUITO N. OCHOA, EXECUTIVE SECRETARY, AND FLORENCIO B. ABAD, SECRETARY OF
THE DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.
DECISION
BERSAMIN, J.:
For resolution are the consolidated petitions assailing the constitutionality of the Disbursement
Acceleration Program(DAP), National Budget Circular (NBC) No. 541, and related issuances of the
Department of Budget and Management (DBM) implementing the DAP.
At the core of the controversy is Section 29(1) of Article VI of the 1987 Constitution, a provision of the
fundamental law that firmly ordains that "[n]o money shall be paid out of the Treasury except in
pursuance of an appropriation made by law." The tenor and context of the challenges posed by the
petitioners against the DAP indicate that the DAP contravened this provision by allowing the
Executive to allocate public money pooled from programmed and unprogrammed funds of its various
agencies in the guise of the President exercising his constitutional authority under Section 25(5) of
the 1987 Constitution to transfer funds out of savings to augment the appropriations of offices within
the Executive Branch of the Government. But the challenges are further complicated by the
interjection of allegations of transfer of funds to agencies or offices outside of the Executive.
Antecedents
What has precipitated the controversy?
On September 25, 2013, Sen. Jinggoy Ejercito Estrada delivered a privilege speech in the Senate of
the Philippines to reveal that some Senators, including himself, had been allotted an additional 50
Million each as "incentive" for voting in favor of the impeachment of Chief Justice Renato C. Corona.
Responding to Sen. Estradas revelation, Secretary Florencio Abad of the DBM issued a public
statement entitled Abad: Releases to Senators Part of Spending Acceleration Program,1 explaining
that the funds released to the Senators had been part of the DAP, a program designed by the DBM to
ramp up spending to accelerate economic expansion. He clarified that the funds had been released to
the Senators based on their letters of request for funding; and that it was not the first time that
releases from the DAP had been made because the DAP had already been instituted in 2011 to ramp
up spending after sluggish disbursements had caused the growth of the gross domestic product
(GDP) to slow down. He explained that the funds under the DAP were usually taken from (1)
248

unreleased appropriations under Personnel Services;2 (2) unprogrammed funds; (3) carry-over
appropriations unreleased from the previous year; and (4) budgets for slow-moving items or projects
that had been realigned to support faster-disbursing projects.
The DBM soon came out to claim in its website3 that the DAP releases had been sourced from
savings generated by the Government, and from unprogrammed funds; and that the savings had
been derived from (1) the pooling of unreleased appropriations, like unreleased Personnel
Services4 appropriations that would lapse at the end of the year, unreleased appropriations of slow-
moving projects and discontinued projects per zero based budgeting findings;5 and (2) the withdrawal
of unobligated allotments also for slow-moving programs and projects that had been earlier released
to the agencies of the National Government.
The DBM listed the following as the legal bases for the DAPs use of savings,6 namely: (1) Section
25(5), Article VI of the 1987 Constitution, which granted to the President the authority to augment an
item for his office in the general appropriations law; (2) Section 49 (Authority to Use Savings for
Certain Purposes) and Section 38 (Suspension of Expenditure Appropriations), Chapter 5, Book VI of
Executive Order (EO) No. 292 (Administrative Code of 1987); and (3) the General Appropriations
Acts (GAAs) of 2011, 2012 and 2013, particularly their provisions on the (a) use of savings; (b)
meanings of savings and augmentation; and (c) priority in the use of savings.
As for the use of unprogrammed funds under the DAP, the DBM cited as legal bases the special
provisions on unprogrammed fund contained in the GAAs of 2011, 2012 and 2013.
The revelation of Sen. Estrada and the reactions of Sec. Abad and the DBM brought the DAP to the
consciousness of the Nation for the first time, and made this present controversy inevitable. That the
issues against the DAP came at a time when the Nation was still seething in anger over
Congressional pork barrel "an appropriation of government spending meant for localized projects
and secured solely or primarily to bring money to a representatives district"7 excited the Nation as
heatedly as the pork barrel controversy.
Nine petitions assailing the constitutionality of the DAP and the issuances relating to the DAP were
filed within days of each other, as follows: G.R. No. 209135 (Syjuco), on October 7, 2013; G.R. No.
209136 (Luna), on October 7, 2013; G.R. No. 209155 (Villegas),8 on October 16, 2013; G.R. No.
209164 (PHILCONSA), on October 8, 2013; G.R. No. 209260 (IBP), on October 16, 2013; G.R. No.
209287 (Araullo), on October 17, 2013; G.R. No. 209442 (Belgica), on October 29, 2013; G.R. No.
209517 (COURAGE), on November6, 2013; and G.R. No. 209569 (VACC), on November 8, 2013.
In G.R. No. 209287 (Araullo), the petitioners brought to the Courts attention NBC No. 541 (Adoption
of Operational Efficiency Measure Withdrawal of Agencies Unobligated Allotments as of June 30,
2012), alleging that NBC No. 541, which was issued to implement the DAP, directed the withdrawal of
unobligated allotments as of June 30, 2012 of government agencies and offices with low levels of
obligations, both for continuing and current allotments.
In due time, the respondents filed their Consolidated Comment through the Office of the Solicitor
General (OSG).
The Court directed the holding of oral arguments on the significant issues raised and joined.
Issues
Under the Advisory issued on November 14, 2013, the presentations of the parties during the oral
arguments were limited to the following, to wit:
Procedural Issue:
A. Whether or not certiorari, prohibition, and mandamus are proper remedies to assail the
constitutionality and validity of the Disbursement Acceleration Program (DAP), National Budget
Circular (NBC) No. 541, and all other executive issuances allegedly implementing the DAP.
Subsumed in this issue are whether there is a controversy ripe for judicial determination, and the
standing of petitioners.
Substantive Issues:
249

B. Whether or not the DAP violates Sec. 29, Art. VI of the 1987 Constitution, which provides: "No
money shall be paid out of the Treasury except in pursuance of an appropriation made by law."
C. Whether or not the DAP, NBC No. 541, and all other executive issuances allegedly implementing
the DAP violate Sec. 25(5), Art. VI of the 1987 Constitution insofar as:
(a)They treat the unreleased appropriations and unobligated allotments withdrawn from
government agencies as "savings" as the term is used in Sec. 25(5), in relation to the
provisions of the GAAs of 2011, 2012 and 2013;
(b)They authorize the disbursement of funds for projects or programs not provided in
the GAAs for the Executive Department; and
(c)They "augment" discretionary lump sum appropriations in the GAAs.
D. Whether or not the DAP violates: (1) the Equal Protection Clause, (2) the system of checks and
balances, and (3) the principle of public accountability enshrined in the 1987 Constitution considering
that it authorizes the release of funds upon the request of legislators.
E. Whether or not factual and legal justification exists to issue a temporary restraining order to
restrain the implementation of the DAP, NBC No. 541, and all other executive issuances allegedly
implementing the DAP.
In its Consolidated Comment, the OSG raised the matter of unprogrammed funds in order to support
its argument regarding the Presidents power to spend. During the oral arguments, the propriety of
releasing unprogrammed funds to support projects under the DAP was considerably discussed. The
petitioners in G.R. No. 209287 (Araullo) and G.R. No. 209442 (Belgica) dwelled on unprogrammed
funds in their respective memoranda. Hence, an additional issue for the oral arguments is stated as
follows:
F. Whether or not the release of unprogrammed funds under the DAP was in accord with the GAAs.
During the oral arguments held on November 19, 2013, the Court directed Sec. Abad to submit a list
of savings brought under the DAP that had been sourced from (a) completed programs; (b)
discontinued or abandoned programs; (c) unpaid appropriations for compensation; (d) a certified copy
of the Presidents directive dated June 27, 2012 referred to in NBC No. 541; and (e) all circulars or
orders issued in relation to the DAP.9
In compliance, the OSG submitted several documents, as follows:
(1) A certified copy of the Memorandum for the President dated June 25, 2012 (Omnibus
Authority to Consolidate Savings/Unutilized Balances and their Realignment);10
(2) Circulars and orders, which the respondents identified as related to the DAP, namely:
a. NBC No. 528 dated January 3, 2011 (Guidelines on the Release of Funds for FY
2011);
b. NBC No. 535 dated December 29, 2011 (Guidelines on the Release of Funds for FY
2012);
c. NBC No. 541 dated July 18, 2012 (Adoption of Operational Efficiency Measure
Withdrawal of Agencies Unobligated Allotments as of June 30, 2012);
d. NBC No. 545 dated January 2, 2013 (Guidelines on the Release of Funds for FY
2013);
e. DBM Circular Letter No. 2004-2 dated January 26, 2004 (Budgetary Treatment of
Commitments/Obligations of the National Government);
f. COA-DBM Joint Circular No. 2013-1 dated March 15, 2013 (Revised Guidelines on
the Submission of Quarterly Accountability Reports on Appropriations, Allotments,
Obligations and Disbursements);
g. NBC No. 440 dated January 30, 1995 (Adoption of a Simplified Fund Release
System in the Government).
(3) A breakdown of the sources of savings, including savings from discontinued projects and
unpaid appropriations for compensation from 2011 to 2013
250

On January 28, 2014, the OSG, to comply with the Resolution issued on January 21, 2014 directing
the respondents to submit the documents not yet submitted in compliance with the directives of the
Court or its Members, submitted several evidence packets to aid the Court in understanding the
factual bases of the DAP, to wit:
(1) First Evidence Packet11 containing seven memoranda issued by the DBM through Sec.
Abad, inclusive of annexes, listing in detail the 116 DAP identified projects approved and duly
signed by the President, as follows:
a. Memorandum for the President dated October 12, 2011 (FY 2011 Proposed
Disbursement Acceleration Program (Projects and Sources of Funds);
b. Memorandum for the President dated December 12, 2011 (Omnibus Authority to
Consolidate Savings/Unutilized Balances and its Realignment);
c. Memorandum for the President dated June 25, 2012 (Omnibus Authority to
Consolidate Savings/Unutilized Balances and their Realignment);
d. Memorandum for the President dated September 4, 2012 (Release of funds for other
priority projects and expenditures of the Government);
e. Memorandum for the President dated December 19, 2012 (Proposed Priority Projects
and Expenditures of the Government);
f. Memorandum for the President dated May 20, 2013 (Omnibus Authority to
Consolidate Savings/Unutilized Balances and their Realignment to Fund the Quarterly
Disbursement Acceleration Program); and
g. Memorandum for the President dated September 25, 2013 (Funding for the Task
Force Pablo Rehabilitation Plan).
(2) Second Evidence Packet12 consisting of 15 applications of the DAP, with their
corresponding Special Allotment Release Orders (SAROs) and appropriation covers;
(3) Third Evidence Packet13 containing a list and descriptions of 12 projects under the DAP;
(4) Fourth Evidence Packet14 identifying the DAP-related portions of the Annual Financial
Report (AFR) of the Commission on Audit for 2011 and 2012;
(5) Fifth Evidence Packet15 containing a letter of Department of Transportation and
Communications(DOTC) Sec. Joseph Abaya addressed to Sec. Abad recommending the
withdrawal of funds from his agency, inclusive of annexes; and
(6) Sixth Evidence Packet16 a print-out of the Solicitor Generals visual presentation for the
January 28, 2014 oral arguments.
On February 5, 2014,17 the OSG forwarded the Seventh Evidence Packet,18 which listed the sources
of funds brought under the DAP, the uses of such funds per project or activity pursuant to DAP, and
the legal bases thereof.
On February 14, 2014, the OSG submitted another set of documents in further compliance with the
Resolution dated January 28, 2014, viz:
(1) Certified copies of the certifications issued by the Bureau of Treasury to the effect that the
revenue collections exceeded the original revenue targets for the years 2011, 2012 and 2013,
including collections arising from sources not considered in the original revenue targets, which
certifications were required for the release of the unprogrammed funds as provided in Special
Provision No. 1 of Article XLV, Article XVI, and Article XLV of the 2011, 2012 and 2013 GAAs; and (2)
A report on releases of savings of the Executive Department for the use of the Constitutional
Commissions and other branches of the Government, as well as the fund releases to the Senate and
the Commission on Elections (COMELEC).
RULING
I.
Procedural Issue:
a) The petitions under Rule 65 are proper remedies
251

All the petitions are filed under Rule 65 of the Rules of Court, and include applications for the
issuance of writs of preliminary prohibitory injunction or temporary restraining orders. More
specifically, the nature of the petitions is individually set forth hereunder, to wit:
G.R. No. 209135 (Syjuco) Certiorari, Prohibition and Mandamus
G.R. No. 209136 (Luna) Certiorariand Prohibition
G.R. No. 209155 (Villegas) Certiorariand Prohibition
G.R. No. 209164 (PHILCONSA) Certiorariand Prohibition
G.R. No. 209260 (IBP) Prohibition
G.R. No. 209287 (Araullo) Certiorariand Prohibition
G.R. No. 209442 (Belgica) Certiorari
G.R. No. 209517 (COURAGE) Certiorari and Prohibition
G.R. No. 209569 (VACC) Certiorari and Prohibition
The respondents submit that there is no actual controversy that is ripe for adjudication in the absence
of adverse claims between the parties;19 that the petitioners lacked legal standing to sue because no
allegations were made to the effect that they had suffered any injury as a result of the adoption of the
DAP and issuance of NBC No. 541; that their being taxpayers did not immediately confer upon the
petitioners the legal standing to sue considering that the adoption and implementation of the DAP and
the issuance of NBC No. 541 were not in the exercise of the taxing or spending power of
Congress;20 and that even if the petitioners had suffered injury, there were plain, speedy and
adequate remedies in the ordinary course of law available to them, like assailing the regularity of the
DAP and related issuances before the Commission on Audit (COA) or in the trial courts.21
The respondents aver that the special civil actions of certiorari and prohibition are not proper actions
for directly assailing the constitutionality and validity of the DAP, NBC No. 541, and the other
executive issuances implementing the DAP.22
In their memorandum, the respondents further contend that there is no authorized proceeding under
the Constitution and the Rules of Court for questioning the validity of any law unless there is an actual
case or controversy the resolution of which requires the determination of the constitutional question;
that the jurisdiction of the Court is largely appellate; that for a court of law to pass upon the
constitutionality of a law or any act of the Government when there is no case or controversy is for that
court to set itself up as a reviewer of the acts of Congress and of the President in violation of the
principle of separation of powers; and that, in the absence of a pending case or controversy involving
the DAP and NBC No. 541, any decision herein could amount to a mere advisory opinion that no
court can validly render.23
The respondents argue that it is the application of the DAP to actual situations that the petitioners can
question either in the trial courts or in the COA; that if the petitioners are dissatisfied with the ruling
either of the trial courts or of the COA, they can appeal the decision of the trial courts by petition for
review on certiorari, or assail the decision or final order of the COA by special civil action for certiorari
under Rule 64 of the Rules of Court.24
The respondents arguments and submissions on the procedural issue are bereft of merit.
Section 1, Article VIII of the 1987 Constitution expressly provides:
Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may
be established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a
252

grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
Thus, the Constitution vests judicial power in the Court and in such lower courts as may be
established by law. In creating a lower court, Congress concomitantly determines the jurisdiction of
that court, and that court, upon its creation, becomes by operation of the Constitution one of the
repositories of judicial power.25 However, only the Court is a constitutionally created court, the rest
being created by Congress in its exercise of the legislative power.
The Constitution states that judicial power includes the duty of the courts of justice not only "to settle
actual controversies involving rights which are legally demandable and enforceable" but also "to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government." It has thereby expanded
the concept of judicial power, which up to then was confined to its traditional ambit of settling actual
controversies involving rights that were legally demandable and enforceable.
The background and rationale of the expansion of judicial power under the 1987 Constitution were
laid out during the deliberations of the 1986 Constitutional Commission by Commissioner Roberto R.
Concepcion (a former Chief Justice of the Philippines) in his sponsorship of the proposed provisions
on the Judiciary, where he said:
The Supreme Court, like all other courts, has one main function: to settle actual controversies
involving conflicts of rights which are demandable and enforceable. There are rights which are
guaranteed by law but cannot be enforced by a judicial party. In a decided case, a husband
complained that his wife was unwilling to perform her duties as a wife. The Court said: "We can tell
your wife what her duties as such are and that she is bound to comply with them, but we cannot force
her physically to discharge her main marital duty to her husband. There are some rights guaranteed
by law, but they are so personal that to enforce them by actual compulsion would be highly
derogatory to human dignity." This is why the first part of the second paragraph of Section 1 provides
that: Judicial power includes the duty of courts to settle actual controversies involving rights which are
legally demandable or enforceable
The courts, therefore, cannot entertain, much less decide, hypothetical questions. In a presidential
system of government, the Supreme Court has, also, another important function. The powers of
government are generally considered divided into three branches: the Legislative, the Executive and
the Judiciary. Each one is supreme within its own sphere and independent of the others. Because of
that supremacy power to determine whether a given law is valid or not is vested in courts of justice.
Briefly stated, courts of justice determine the limits of power of the agencies and offices of the
government as well as those of its officers. In other words, the judiciary is the final arbiter on the
question whether or not a branch of government or any of its officials has acted without jurisdiction or
in excess of jurisdiction, or so capriciously as to constitute an abuse of discretion amounting to
excess of jurisdiction or lack of jurisdiction. This is not only a judicial power but a duty to pass
judgmenton matters of this nature.
This is the background of paragraph 2 of Section 1, which means that the courts cannot hereafter
evade the duty to settle matters of this nature, by claiming that such matters constitute a political
question. (Bold emphasis supplied)26
Upon interpellation by Commissioner Nolledo, Commissioner Concepcion clarified the scope of
judicial power in the following manner:
MR. NOLLEDO. x x x
The second paragraph of Section 1 states: "Judicial power includes the duty of courts of justice to
settle actual controversies" The term "actual controversies" according to the Commissioner should
refer to questions which are political in nature and, therefore, the courts should not refuse to decide
those political questions. But do I understand it right that this is restrictive or only an example? I know
there are cases which are not actual yet the court can assume jurisdiction. An example is the petition
for declaratory relief.
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May I ask the Commissioners opinion about that?

MR. CONCEPCION. The Supreme Court has no jurisdiction to grant declaratory judgments.
MR. NOLLEDO. The Gentleman used the term "judicial power" but judicial power is not vested in the
Supreme Court alone but also in other lower courts as may be created by law.
MR. CONCEPCION. Yes.
MR. NOLLEDO. And so, is this only an example?
MR. CONCEPCION. No, I know this is not. The Gentleman seems to identify political questions with
jurisdictional questions. But there is a difference.
MR. NOLLEDO. Because of the expression "judicial power"?
MR. CONCEPCION. No. Judicial power, as I said, refers to ordinary cases but where there is a
question as to whether the government had authority or had abused its authority to the extent of
lacking jurisdiction or excess of jurisdiction, that is not a political question. Therefore, the court has
the duty to decide.27
Our previous Constitutions equally recognized the extent of the power of judicial review and the great
responsibility of the Judiciary in maintaining the allocation of powers among the three great branches
of Government. Speaking for the Court in Angara v. Electoral Commission,28 Justice Jose P. Laurel
intoned:
x x x In times of social disquietude or political excitement, the great landmarks of the Constitution are
apt to be forgotten or marred, if not entirely obliterated. In cases of conflict, the judicial department is
the only constitutional organ which can be called upon to determine the proper allocation of powers
between the several department and among the integral or constituent units thereof.
xxxx
The Constitution is a definition of the powers of government. Who is to determine the nature, scope
and extent of such powers? The Constitution itself has provided for the instrumentality of the judiciary
as the rational way. And when the judiciary mediates to allocate constitutional boundaries, it does not
assert any superiority over the other department; it does not in reality nullify or invalidate an act of the
legislature, but only asserts the solemn and sacred obligation assigned to it by the Constitution to
determine conflicting claims of authority under the Constitution and to establish for the parties in an
actual controversy the rights which that instrument secures and guarantees to them. This is in truth all
that is involved in what is termed "judicial supremacy" which properly is the power of judicial review
under the Constitution. x x x29
What are the remedies by which the grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government may be determined under
the Constitution?
The present Rules of Court uses two special civil actions for determining and correcting grave abuse
of discretion amounting to lack or excess of jurisdiction. These are the special civil actions for
certiorari and prohibition, and both are governed by Rule 65. A similar remedy of certiorari exists
under Rule 64, but the remedy is expressly applicable only to the judgments and final orders or
resolutions of the Commission on Elections and the Commission on Audit.
The ordinary nature and function of the writ of certiorari in our present system are aptly explained in
Delos Santos v. Metropolitan Bank and Trust Company:30
In the common law, from which the remedy of certiorari evolved, the writ of certiorari was issued out
of Chancery, or the Kings Bench, commanding agents or officers of the inferior courts to return the
record of a cause pending before them, so as to give the party more sure and speedy justice, for the
writ would enable the superior court to determine from an inspection of the record whether the inferior
courts judgment was rendered without authority. The errors were of such a nature that, if allowed to
stand, they would result in a substantial injury to the petitioner to whom no other remedy was
available. If the inferior court acted without authority, the record was then revised and corrected in
matters of law. The writ of certiorari was limited to cases in which the inferior court was said to be
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exceeding its jurisdiction or was not proceeding according to essential requirements of law and would
lie only to review judicial or quasi-judicial acts.
The concept of the remedy of certiorari in our judicial system remains much the same as it has been
in the common law. In this jurisdiction, however, the exercise of the power to issue the writ of
certiorari is largely regulated by laying down the instances or situations in the Rules of Court in which
a superior court may issue the writ of certiorari to an inferior court or officer. Section 1, Rule 65 of the
Rules of Court compellingly provides the requirements for that purpose, viz:
xxxx
The sole office of the writ of certiorari is the correction of errors of jurisdiction, which includes the
commission of grave abuse of discretion amounting to lack of jurisdiction. In this regard, mere abuse
of discretion is not enough to warrant the issuance of the writ. The abuse of discretion must be grave,
which means either that the judicial or quasi-judicial power was exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, or that the respondent judge, tribunal or board
evaded a positive duty, or virtually refused to perform the duty enjoined or to act in contemplation of
law, such as when such judge, tribunal or board exercising judicial or quasi-judicial powers acted in a
capricious or whimsical manner as to be equivalent to lack of jurisdiction.31
Although similar to prohibition in that it will lie for want or excess of jurisdiction, certiorari is to be
distinguished from prohibition by the fact that it is a corrective remedy used for the re-examination of
some action of an inferior tribunal, and is directed to the cause or proceeding in the lower court and
not to the court itself, while prohibition is a preventative remedy issuing to restrain future action, and
is directed to the court itself.32 The Court expounded on the nature and function of the writ of
prohibition in Holy Spirit Homeowners Association, Inc. v. Defensor:33
A petition for prohibition is also not the proper remedy to assail an IRR issued in the exercise of a
quasi-legislative function. Prohibition is an extraordinary writ directed against any tribunal,
corporation, board, officer or person, whether exercising judicial, quasi-judicial or ministerial functions,
ordering said entity or person to desist from further proceedings when said proceedings are without or
in excess of said entitys or persons jurisdiction, or are accompanied with grave abuse of discretion,
and there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law.
Prohibition lies against judicial or ministerial functions, but not against legislative or quasi-legislative
functions. Generally, the purpose of a writ of prohibition is to keep a lower court within the limits of its
jurisdiction in order to maintain the administration of justice in orderly channels. Prohibition is the
proper remedy to afford relief against usurpation of jurisdiction or power by an inferior court, or when,
in the exercise of jurisdiction in handling matters clearly within its cognizance the inferior court
transgresses the bounds prescribed to it by the law, or where there is no adequate remedy available
in the ordinary course of law by which such relief can be obtained. Where the principal relief sought is
to invalidate an IRR, petitioners remedy is an ordinary action for its nullification, an action which
properly falls under the jurisdiction of the Regional Trial Court. In any case, petitioners allegation that
"respondents are performing or threatening to perform functions without or in excess of their
jurisdiction" may appropriately be enjoined by the trial court through a writ of injunction or a temporary
restraining order.
With respect to the Court, however, the remedies of certiorari and prohibition are necessarily broader
in scope and reach, and the writ of certiorari or prohibition may be issued to correct errors of
jurisdiction committed not only by a tribunal, corporation, board or officer exercising judicial, quasi-
judicial or ministerial functions but also to set right, undo and restrain any act of grave abuse of
discretion amounting to lack or excess of jurisdiction by any branch or instrumentality of the
Government, even if the latter does not exercise judicial, quasi-judicial or ministerial functions. This
application is expressly authorized by the text of the second paragraph of Section 1, supra.
Thus, petitions for certiorari and prohibition are appropriate remedies to raise constitutional issues
and to review and/or prohibit or nullify the acts of legislative and executive officials.34
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Necessarily, in discharging its duty under Section 1, supra, to set right and undo any act of grave
abuse of discretion amounting to lack or excess of jurisdiction by any branch or instrumentality of the
Government, the Court is not at all precluded from making the inquiry provided the challenge was
properly brought by interested or affected parties. The Court has been thereby entrusted expressly or
by necessary implication with both the duty and the obligation of determining, in appropriate cases,
the validity of any assailed legislative or executive action. This entrustment is consistent with the
republican system of checks and balances.35
Following our recent dispositions concerning the congressional pork barrel, the Court has become
more alert to discharge its constitutional duty. We will not now refrain from exercising our expanded
judicial power in order to review and determine, with authority, the limitations on the Chief Executives
spending power.
b) Requisites for the exercise of the
power of judicial review were
complied with
The requisites for the exercise of the power of judicial review are the following, namely: (1) there must
bean actual case or justiciable controversy before the Court; (2) the question before the Court must
be ripe for adjudication; (3) the person challenging the act must be a proper party; and (4) the issue of
constitutionality must be raised at the earliest opportunity and must be the very litis mota of the
case.36
The first requisite demands that there be an actual case calling for the exercise of judicial power by
the Court.37 An actual case or controversy, in the words of Belgica v. Executive Secretary Ochoa:38
x x x is one which involves a conflict of legal rights, an assertion of opposite legal claims, susceptible
of judicial resolution as distinguished from a hypothetical or abstract difference or dispute. In other
words, "[t]here must be a contrariety of legal rights that can be interpreted and enforced on the basis
of existing law and jurisprudence." Related to the requirement of an actual case or controversy is the
requirement of "ripeness," meaning that the questions raised for constitutional scrutiny are already
ripe for adjudication. "A question is ripe for adjudication when the act being challenged has had a
direct adverse effect on the individual challenging it. It is a prerequisite that something had then been
accomplished or performed by either branch before a court may come into the picture, and the
petitioner must allege the existence of an immediate or threatened injury to itself as a result of the
challenged action." "Withal, courts will decline to pass upon constitutional issues through advisory
opinions, bereft as they are of authority to resolve hypothetical or moot questions."
An actual and justiciable controversy exists in these consolidated cases. The incompatibility of the
perspectives of the parties on the constitutionality of the DAP and its relevant issuances satisfy the
requirement for a conflict between legal rights. The issues being raised herein meet the requisite
ripeness considering that the challenged executive acts were already being implemented by the
DBM, and there are averments by the petitioners that such implementation was repugnant to the
letter and spirit of the Constitution. Moreover, the implementation of the DAP entailed the allocation
and expenditure of huge sums of public funds. The fact that public funds have been allocated,
disbursed or utilized by reason or on account of such challenged executive acts gave rise, therefore,
to an actual controversy that is ripe for adjudication by the Court.
It is true that Sec. Abad manifested during the January 28, 2014 oral arguments that the DAP as a
program had been meanwhile discontinued because it had fully served its purpose, saying: "In
conclusion, Your Honors, may I inform the Court that because the DAP has already fully served its
purpose, the Administrations economic managers have recommended its termination to the
President. x x x."39
The Solicitor General then quickly confirmed the termination of the DAP as a program, and urged that
its termination had already mooted the challenges to the DAPs constitutionality, viz:
DAP as a program, no longer exists, thereby mooting these present cases brought to challenge its
constitutionality. Any constitutional challenge should no longer be at the level of the program, which is
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now extinct, but at the level of its prior applications or the specific disbursements under the now
defunct policy. We challenge the petitioners to pick and choose which among the 116 DAP projects
they wish to nullify, the full details we will have provided by February 5. We urge this Court to be
cautious in limiting the constitutional authority of the President and the Legislature to respond to the
dynamic needs of the country and the evolving demands of governance, lest we end up straight
jacketing our elected representatives in ways not consistent with our constitutional structure and
democratic principles.40
A moot and academic case is one that ceases to present a justiciable controversy by virtue of
supervening events, so that a declaration thereon would be of no practical use or value.41
The Court cannot agree that the termination of the DAP as a program was a supervening event that
effectively mooted these consolidated cases. Verily, the Court had in the past exercised its power of
judicial review despite the cases being rendered moot and academic by supervening events, like: (1)
when there was a grave violation of the Constitution; (2) when the case involved a situation of
exceptional character and was of paramount public interest; (3) when the constitutional issue raised
required the formulation of controlling principles to guide the Bench, the Bar and the public; and (4)
when the case was capable of repetition yet evading review.42
Assuming that the petitioners several submissions against the DAP were ultimately sustained by the
Court here, these cases would definitely come under all the exceptions. Hence, the Court should not
abstain from exercising its power of judicial review.
Did the petitioners have the legal standing to sue?
Legal standing, as a requisite for the exercise of judicial review, refers to "a right of appearance in a
court of justice on a given question."43 The concept of legal standing, or locus standi, was particularly
discussed in De Castro v. Judicial and Bar Council,44 where the Court said:
In public or constitutional litigations, the Court is often burdened with the determination of the locus
standi of the petitioners due to the ever-present need to regulate the invocation of the intervention of
the Court to correct any official action or policy in order to avoid obstructing the efficient functioning of
public officials and offices involved in public service. It is required, therefore, that the petitioner must
have a personal stake in the outcome of the controversy, for, as indicated in Agan, Jr. v. Philippine
International Air Terminals Co., Inc.:
The question on legal standing is whether such parties have "alleged such a personal stake in the
outcome of the controversy as to assure that concrete adverseness which sharpens the presentation
of issues upon which the court so largely depends for illumination of difficult constitutional questions."
Accordingly, it has been held that the interest of a person assailing the constitutionality of a statute
must be direct and personal. He must be able to show, not only that the law or any government act is
invalid, but also that he sustained or is in imminent danger of sustaining some direct injury as a result
of its enforcement, and not merely that he suffers thereby in some indefinite way. It must appear that
the person complaining has been or is about to be denied some right or privilege to which he is
lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the
statute or act complained of.
It is true that as early as in 1937, in People v. Vera, the Court adopted the direct injury test for
determining whether a petitioner in a public action had locus standi. There, the Court held that the
person who would assail the validity of a statute must have "a personal and substantial interest in the
case such that he has sustained, or will sustain direct injury as a result." Vera was followed in
Custodio v. President of the Senate, Manila Race Horse Trainers Association v. De la Fuente, Anti-
Chinese League of the Philippines v. Felix, and Pascual v. Secretary of Public Works.
Yet, the Court has also held that the requirement of locus standi, being a mere procedural
technicality, can be waived by the Court in the exercise of its discretion. For instance, in 1949, in
Araneta v. Dinglasan, the Court liberalized the approach when the cases had "transcendental
importance." Some notable controversies whose petitioners did not pass the direct injury test were
allowed to be treated in the same way as in Araneta v. Dinglasan.
257

In the 1975 decision in Aquino v. Commission on Elections, this Court decided to resolve the issues
raised by the petition due to their "far reaching implications," even if the petitioner had no personality
to file the suit. The liberal approach of Aquino v. Commission on Elections has been adopted in
several notable cases, permitting ordinary citizens, legislators, and civic organizations to bring their
suits involving the constitutionality or validity of laws, regulations, and rulings.
However, the assertion of a public right as a predicate for challenging a supposedly illegal or
unconstitutional executive or legislative action rests on the theory that the petitioner represents the
public in general. Although such petitioner may not be as adversely affected by the action complained
against as are others, it is enough that he sufficiently demonstrates in his petition that he is entitled to
protection or relief from the Court in the vindication of a public right.
Quite often, as here, the petitioner in a public action sues as a citizen or taxpayer to gain locus standi.
That is not surprising, for even if the issue may appear to concern only the public in general, such
capacities nonetheless equip the petitioner with adequate interest to sue. In David v. Macapagal-
Arroyo, the Court aptly explains why:
Case law in most jurisdiction snow allows both "citizen" and "taxpayer" standing in public actions. The
distinction was first laid down in Beauchamp v. Silk, where it was held that the plaintiff in a taxpayers
suit is in a different category from the plaintiff in a citizens suit. In the former, the plaintiff is affected
by the expenditure of public funds, while in the latter, he is but the mere instrument of the public
concern. As held by the New York Supreme Court in People ex rel Case v. Collins: "In matter of mere
public right, howeverthe people are the real partiesIt is at least the right, if not the duty, of every
citizen to interfere and see that a public offence be properly pursued and punished, and that a public
grievance be remedied." With respect to taxpayers suits, Terr v. Jordan held that "the right of a
citizen and a taxpayer to maintain an action in courts to restrain the unlawful use of public funds to his
injury cannot be denied."45
The Court has cogently observed in Agan, Jr. v. Philippine International Air Terminals Co., Inc.46 that
"[s]tanding is a peculiar concept in constitutional law because in some cases, suits are not brought by
parties who have been personally injured by the operation of a law or any other government act but
by concerned citizens, taxpayers or voters who actually sue in the public interest."
Except for PHILCONSA, a petitioner in G.R. No. 209164, the petitioners have invoked their capacities
as taxpayers who, by averring that the issuance and implementation of the DAP and its relevant
issuances involved the illegal disbursements of public funds, have an interest in preventing the further
dissipation of public funds. The petitioners in G.R. No. 209287 (Araullo) and G.R. No. 209442
(Belgica) also assert their right as citizens to sue for the enforcement and observance of the
constitutional limitations on the political branches of the Government.47
On its part, PHILCONSA simply reminds that the Court has long recognized its legal standing to bring
cases upon constitutional issues.48 Luna, the petitioner in G.R. No. 209136, cites his additional
capacity as a lawyer. The IBP, the petitioner in G.R. No. 209260, stands by "its avowed duty to work
for the rule of law and of paramount importance of the question in this action, not to mention its civic
duty as the official association of all lawyers in this country."49
Under their respective circumstances, each of the petitioners has established sufficient interest in the
outcome of the controversy as to confer locus standi on each of them.
In addition, considering that the issues center on the extent of the power of the Chief Executive to
disburse and allocate public funds, whether appropriated by Congress or not, these cases pose
issues that are of transcendental importance to the entire Nation, the petitioners included. As such,
the determination of such important issues call for the Courts exercise of its broad and wise
discretion "to waive the requirement and so remove the impediment to its addressing and resolving
the serious constitutional questions raised."50
II.
Substantive Issues
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1.
Overview of the Budget System
An understanding of the Budget System of the Philippines will aid the Court in properly appreciating
and justly resolving the substantive issues.
a) Origin of the Budget System
The term "budget" originated from the Middle English word bouget that had derived from the Latin
word bulga (which means bag or purse).51
In the Philippine setting, Commonwealth Act (CA) No. 246 (Budget Act) defined "budget" as the
financial program of the National Government for a designated fiscal year, consisting of the
statements of estimated receipts and expenditures for the fiscal year for which it was intended to be
effective based on the results of operations during the preceding fiscal years. The term was given a
different meaning under Republic Act No. 992 (Revised Budget Act) by describing the budget as the
delineation of the services and products, or benefits that would accrue to the public together with the
estimated unit cost of each type of service, product or benefit.52 For a forthright definition, budget
should simply be identified as the financial plan of the Government,53 or "the master plan of
government."54
The concept of budgeting has not been the product of recent economies. In reality, financing public
goals and activities was an idea that existed from the creation of the State.55 To protect the people,
the territory and sovereignty of the State, its government must perform vital functions that required
public expenditures. At the beginning, enormous public expenditures were spent for war activities,
preservation of peace and order, security, administration of justice, religion, and supply of limited
goods and services.56 In order to finance those expenditures, the State raised revenues through taxes
and impositions.57 Thus, budgeting became necessary to allocate public revenues for specific
government functions.58 The States budgeting mechanism eventually developed through the years
with the growing functions of its government and changes in its market economy.
The Philippine Budget System has been greatly influenced by western public financial institutions.
This is because of the countrys past as a colony successively of Spain and the United States for a
long period of time. Many aspects of the countrys public fiscal administration, including its Budget
System, have been naturally patterned after the practices and experiences of the western public
financial institutions. At any rate, the Philippine Budget System is presently guided by two principal
objectives that are vital to the development of a progressive democratic government, namely: (1) to
carry on all government activities under a comprehensive fiscal plan developed, authorized and
executed in accordance with the Constitution, prevailing statutes and the principles of sound public
management; and (2) to provide for the periodic review and disclosure of the budgetary status of the
Government in such detail so that persons entrusted by law with the responsibility as well as the
enlightened citizenry can determine the adequacy of the budget actions taken, authorized or
proposed, as well as the true financial position of the Government.59
b) Evolution of the Philippine Budget System
The budget process in the Philippines evolved from the early years of the American Regime up to the
passage of the Jones Law in 1916. A Budget Office was created within the Department of Finance by
the Jones Law to discharge the budgeting function, and was given the responsibility to assist in the
preparation of an executive budget for submission to the Philippine Legislature.60
As early as under the 1935 Constitution, a budget policy and a budget procedure were established,
and subsequently strengthened through the enactment of laws and executive acts.61 EO No. 25,
issued by President Manuel L. Quezon on April 25, 1936, created the Budget Commission to serve as
the agency that carried out the Presidents responsibility of preparing the budget.62 CA No. 246, the
first budget law, went into effect on January 1, 1938 and established the Philippine budget process.
The law also provided a line-item budget as the framework of the Governments budgeting
system,63 with emphasis on the observance of a "balanced budget" to tie up proposed expenditures
with existing revenues.
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CA No. 246 governed the budget process until the passage on June 4, 1954 of Republic Act (RA) No.
992,whereby Congress introduced performance-budgeting to give importance to functions, projects
and activities in terms of expected results.64 RA No. 992 also enhanced the role of the Budget
Commission as the fiscal arm of the Government.65
The 1973 Constitution and various presidential decrees directed a series of budgetary reforms that
culminated in the enactment of PD No. 1177 that President Marcos issued on July30, 1977, and of
PD No. 1405, issued on June 11, 1978. The latter decree converted the Budget Commission into the
Ministry of Budget, and gave its head the rank of a Cabinet member.
The Ministry of Budget was later renamed the Office of Budget and Management (OBM) under EO
No. 711. The OBM became the DBM pursuant to EO No. 292 effective on November 24, 1989.
c) The Philippine Budget Cycle66
Four phases comprise the Philippine budget process, specifically: (1) Budget Preparation; (2) Budget
Legislation; (3) Budget Execution; and (4) Accountability. Each phase is distinctly separate from the
others but they overlap in the implementation of the budget during the budget year.
c.1.Budget Preparation67
The budget preparation phase is commenced through the issuance of a Budget Call by the DBM. The
Budget Call contains budget parameters earlier set by the Development Budget Coordination
Committee (DBCC) as well as policy guidelines and procedures to aid government agencies in the
preparation and submission of their budget proposals. The Budget Call is of two kinds, namely: (1) a
National Budget Call, which is addressed to all agencies, including state universities and colleges;
and (2) a Corporate Budget Call, which is addressed to all government-owned and -controlled
corporations (GOCCs) and government financial institutions (GFIs).
Following the issuance of the Budget Call, the various departments and agencies submit their
respective Agency Budget Proposals to the DBM. To boost citizen participation, the current
administration has tasked the various departments and agencies to partner with civil society
organizations and other citizen-stakeholders in the preparation of the Agency Budget Proposals,
which proposals are then presented before a technical panel of the DBM in scheduled budget
hearings wherein the various departments and agencies are given the opportunity to defend their
budget proposals. DBM bureaus thereafter review the Agency Budget Proposals and come up with
recommendations for the Executive Review Board, comprised by the DBM Secretary and the DBMs
senior officials. The discussions of the Executive Review Board cover the prioritization of programs
and their corresponding support vis--vis the priority agenda of the National Government, and their
implementation.
The DBM next consolidates the recommended agency budgets into the National Expenditure
Program (NEP)and a Budget of Expenditures and Sources of Financing (BESF). The NEP provides
the details of spending for each department and agency by program, activity or project (PAP), and is
submitted in the form of a proposed GAA. The Details of Selected Programs and Projects is the more
detailed disaggregation of key PAPs in the NEP, especially those in line with the National
Governments development plan. The Staffing Summary provides the staffing complement of each
department and agency, including the number of positions and amounts allocated.
The NEP and BESF are thereafter presented by the DBM and the DBCC to the President and the
Cabinet for further refinements or reprioritization. Once the NEP and the BESF are approved by the
President and the Cabinet, the DBM prepares the budget documents for submission to Congress.
The budget documents consist of: (1) the Presidents Budget Message, through which the President
explains the policy framework and budget priorities; (2) the BESF, mandated by Section 22, Article VII
of the Constitution,68 which contains the macroeconomic assumptions, public sector context,
breakdown of the expenditures and funding sources for the fiscal year and the two previous years;
and (3) the NEP.
Public or government expenditures are generally classified into two categories, specifically: (1) capital
expenditures or outlays; and (2) current operating expenditures. Capital expenditures are the
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expenses whose usefulness lasts for more than one year, and which add to the assets of the
Government, including investments in the capital of government-owned or controlled corporations and
their subsidiaries.69 Current operating expenditures are the purchases of goods and services in
current consumption the benefit of which does not extend beyond the fiscal year.70 The two
components of current expenditures are those for personal services (PS), and those for maintenance
and other operating expenses(MOOE).
Public expenditures are also broadly grouped according to their functions into: (1) economic
development expenditures (i.e., expenditures on agriculture and natural resources, transportation and
communications, commerce and industry, and other economic development efforts);71 (2) social
services or social development expenditures (i.e., government outlay on education, public health and
medicare, labor and welfare and others);72 (3) general government or general public services
expenditures (i.e., expenditures for the general government, legislative services, the administration of
justice, and for pensions and gratuities);73 (4) national defense expenditures (i.e., sub-divided into
national security expenditures and expenditures for the maintenance of peace and order);74 and (5)
public debt.75
Public expenditures may further be classified according to the nature of funds, i.e., general fund,
special fund or bond fund.76
On the other hand, public revenues complement public expenditures and cover all income or receipts
of the government treasury used to support government expenditures.77
Classical economist Adam Smith categorized public revenues based on two principal sources,
stating: "The revenue which must defraythe necessary expenses of government may be drawn
either, first from some fund which peculiarly belongs to the sovereign or commonwealth, and which is
independent of the revenue of the people, or, secondly, from the revenue of the people."78 Adam
Smiths classification relied on the two aspects of the nature of the State: first, the State as a juristic
person with an artificial personality, and, second, the State as a sovereign or entity possessing
supreme power. Under the first aspect, the State could hold property and engage in trade, thereby
deriving what is called its quasi private income or revenues, and which "peculiarly belonged to the
sovereign." Under the second aspect, the State could collect by imposing charges on the revenues of
its subjects in the form of taxes.79
In the Philippines, public revenues are generally derived from the following sources, to wit: (1) tax
revenues(i.e., compulsory contributions to finance government activities); 80 (2) capital revenues(i.e.,
proceeds from sales of fixed capital assets or scrap thereof and public domain, and gains on such
sales like sale of public lands, buildings and other structures, equipment, and other properties
recorded as fixed assets); 81 (3) grants(i.e., voluntary contributions and aids given to the Government
for its operation on specific purposes in the form of money and/or materials, and do not require any
monetary commitment on the part of the recipient);82 (4) extraordinary income(i.e., repayment of loans
and advances made by government corporations and local governments and the receipts and shares
in income of the Banko Sentral ng Pilipinas, and other receipts);83 and (5) public borrowings(i.e.,
proceeds of repayable obligations generally with interest from domestic and foreign creditors of the
Government in general, including the National Government and its political subdivisions).84
More specifically, public revenues are classified as follows:85
General Income Specific Income
1. Subsidy Income from National 1. Income Taxes
Government 2. Property Taxes
2. Subsidy from Central Office 3. Taxes on Goods and Services
3. Subsidy from Regional 4. Taxes on International Trade and
Office/Staff Bureaus Transactions
4. Income from Government 5. Other Taxes 6.Fines and Penalties-Tax
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Services Revenue
5. Income from Government 7. Other Specific Income
Business Operations
6. Sales Revenue
7. Rent Income
8. Insurance Income
9. Dividend Income
10. Interest Income
11. Sale of Confiscated Goods and
Properties
12. Foreign Exchange (FOREX)
Gains
13. Miscellaneous Operating and
Service Income
14. Fines and Penalties-Government
Services and Business Operations
15. Income from Grants and
Donations
c.2. Budget Legislation86
The Budget Legislation Phase covers the period commencing from the time Congress receives the
Presidents Budget, which is inclusive of the NEPand the BESF, up to the Presidents approval of the
GAA. This phase is also known as the Budget Authorization Phase, and involves the significant
participation of the Legislative through its deliberations.
Initially, the Presidents Budget is assigned to the House of Representatives Appropriations
Committee on First Reading. The Appropriations Committee and its various Sub-Committees
schedule and conduct budget hearings to examine the PAPs of the departments and agencies.
Thereafter, the House of Representatives drafts the General Appropriations Bill (GAB).87
The GABis sponsored, presented and defended by the House of Representatives Appropriations
Committee and Sub-Committees in plenary session. As with other laws, the GAB is approved on
Third Reading before the House of Representatives version is transmitted to the Senate.88
After transmission, the Senate conducts its own committee hearings on the GAB. To expedite
proceedings, the Senate may conduct its committee hearings simultaneously with the House of
Representatives deliberations. The Senates Finance Committee and its Sub-Committees may
submit the proposed amendments to the GAB to the plenary of the Senate only after the House of
Representatives has formally transmitted its version to the Senate. The Senate version of the GAB is
likewise approved on Third Reading.89
The House of Representatives and the Senate then constitute a panel each to sit in the Bicameral
Conference Committee for the purpose of discussing and harmonizing the conflicting provisions of
their versions of the GAB. The "harmonized" version of the GAB is next presented to the President for
approval.90 The President reviews the GAB, and prepares the Veto Message where budget items are
subjected to direct veto,91 or are identified for conditional implementation.
If, by the end of any fiscal year, the Congress shall have failed to pass the GAB for the ensuing fiscal
year, the GAA for the preceding fiscal year shall be deemed re-enacted and shall remain in force and
effect until the GAB is passed by the Congress.92
c.3. Budget Execution93
262

With the GAA now in full force and effect, the next step is the implementation of the budget. The
Budget Execution Phase is primarily the function of the DBM, which is tasked to perform the following
procedures, namely: (1) to issue the programs and guidelines for the release of funds; (2) to prepare
an Allotment and Cash Release Program; (3) to release allotments; and (4) to issue disbursement
authorities.
The implementation of the GAA is directed by the guidelines issued by the DBM. Prior to this, the
various departments and agencies are required to submit Budget Execution Documents(BED) to
outline their plans and performance targets by laying down the physical and financial plan, the
monthly cash program, the estimate of monthly income, and the list of obligations that are not yet due
and demandable.
Thereafter, the DBM prepares an Allotment Release Program (ARP)and a Cash Release Program
(CRP).The ARP sets a limit for allotments issued in general and to a specific agency. The CRP fixes
the monthly, quarterly and annual disbursement levels.
Allotments, which authorize an agency to enter into obligations, are issued by the DBM. Allotments
are lesser in scope than appropriations, in that the latter embrace the general legislative authority to
spend. Allotments may be released in two forms through a comprehensive Agency Budget Matrix
(ABM),94 or, individually, by SARO.95
Armed with either the ABM or the SARO, agencies become authorized to incur obligations96 on behalf
of the Government in order to implement their PAPs. Obligations may be incurred in various ways,
like hiring of personnel, entering into contracts for the supply of goods and services, and using
utilities.
In order to settle the obligations incurred by the agencies, the DBM issues a disbursement authority
so that cash may be allocated in payment of the obligations. A cash or disbursement authority that is
periodically issued is referred to as a Notice of Cash Allocation (NCA),97 which issuance is based
upon an agencys submission of its Monthly Cash Program and other required documents. The NCA
specifies the maximum amount of cash that can be withdrawn from a government servicing bank for
the period indicated. Apart from the NCA, the DBM may issue a Non-Cash Availment
Authority(NCAA) to authorize non-cash disbursements, or a Cash Disbursement Ceiling(CDC) for
departments with overseas operations to allow the use of income collected by their foreign posts for
their operating requirements.
Actual disbursement or spending of government funds terminates the Budget Execution Phase and is
usually accomplished through the Modified Disbursement Scheme under which disbursements
chargeable against the National Treasury are coursed through the government servicing banks.
c.4. Accountability98
Accountability is a significant phase of the budget cycle because it ensures that the government funds
have been effectively and efficiently utilized to achieve the States socio-economic goals. It also
allows the DBM to assess the performance of agencies during the fiscal year for the purpose of
implementing reforms and establishing new policies.
An agencys accountability may be examined and evaluated through (1) performance targets and
outcomes; (2) budget accountability reports; (3) review of agency performance; and (4) audit
conducted by the Commission on Audit(COA).
2.
Nature of the DAP as a fiscal plan
a. DAP was a program designed to
promote economic growth
Policy is always a part of every budget and fiscal decision of any Administration.99 The national
budget the Executive prepares and presents to Congress represents the Administrations "blueprint
for public policy" and reflects the Governments goals and strategies.100 As such, the national budget
becomes a tangible representation of the programs of the Government in monetary terms, specifying
263

therein the PAPs and services for which specific amounts of public funds are proposed and
allocated.101 Embodied in every national budget is government spending.102
When he assumed office in the middle of 2010, President Aquino made efficiency and transparency
in government spending a significant focus of his Administration. Yet, although such focus resulted in
an improved fiscal deficit of 0.5% in the gross domestic product (GDP) from January to July of 2011,
it also unfortunately decelerated government project implementation and payment schedules.103 The
World Bank observed that the Philippines economic growth could be reduced, and potential growth
could be weakened should the Government continue with its underspending and fail to address the
large deficiencies in infrastructure.104 The economic situation prevailing in the middle of 2011 thus
paved the way for the development and implementation of the DAP as a stimulus package intended
to fast-track public spending and to push economic growth by investing on high-impact budgetary
PAPs to be funded from the "savings" generated during the year as well as from unprogrammed
funds.105 In that respect, the DAP was the product of "plain executive policy-making" to stimulate the
economy by way of accelerated spending.106The Administration would thereby accelerate
government spending by: (1) streamlining the implementation process through the clustering of
infrastructure projects of the Department of Public Works and Highways (DPWH) and the Department
of Education (DepEd),and (2) front loading PPP-related projects107 due for implementation in the
following year.108
Did the stimulus package work?
The March 2012 report of the World Bank,109 released after the initial implementation of the DAP,
revealed that the DAP was partially successful. The disbursements under the DAP contributed 1.3
percentage points to GDP growth by the fourth quarter of 2011.110 The continued implementation of
the DAP strengthened growth by 11.8% year on year while infrastructure spending rebounded from a
29% contraction to a 34% growth as of September 2013.111
The DAP thus proved to be a demonstration that expenditure was a policy instrument that the
Government could use to direct the economies towards growth and development.112 The
Government, by spending on public infrastructure, would signify its commitment of ensuring
profitability for prospective investors.113 The PAPs funded under the DAP were chosen for this reason
based on their: (1) multiplier impact on the economy and infrastructure development; (2) beneficial
effect on the poor; and (3) translation into disbursements.114
b. History of the implementation of
the DAP, and sources of funds
under the DAP
How the Administrations economic managers conceptualized and developed the DAP, and finally
presented it to the President remains unknown because the relevant documents appear to be scarce.
The earliest available document relating to the genesis of the DAP was the memorandum of October
12,2011 from Sec. Abad seeking the approval of the President to implement the proposed DAP. The
memorandum, which contained a list of the funding sources for 72.11 billion and of the proposed
priority projects to be funded,115 reads:
MEMORANDUM FOR THE PRESIDENT
xxxx
SUBJECT: FY 2011 PROPOSED DISBURSEMENT ACCELERATION PROGRAM (PROJECTS AND
SOURCES OF FUNDS)
DATE: OCTOBER 12, 2011
Mr. President, this is to formally confirm your approval of the Disbursement Acceleration Program
totaling 72.11 billion. We are already working with all the agencies concerned for the immediate
execution of the projects therein.
A. Fund Sources for the Acceleration Program
Fund Sources Amount Description Action
264

(In Requested
million
Php)

FY 2011 30,000 Unreleased Personnel Declare as

Unreleased Services (PS) savings and
Personal appropriations which approve/
Services (PS) will lapse at the end of authorize its use
Appropriations FY 2011 but may be for the 2011
pooled as savings and Disbursement
realigned for priority Acceleration
programs that require Program
immediate funding

FY 2011 482 Unreleased

Unreleased appropriations (slow
Appropriations moving projects and
programs for
discontinuance)

FY 2010 12,336 Supported by the GFI Approve and

Unprogrammed Dividends authorize its use
Fund for the 2011
Disbursement
Acceleration
Program

FY 2010 21,544 Unreleased With prior

Carryover appropriations (slow approval from
Appropriation moving projects and the President in
programs for November 2010
discontinuance) and to declare as
savings from Zero-based savings and with
Budgeting authority to use
Initiative for priority
projects

FY 2011 7,748 FY 2011 Agency For information

Budget Budget items that can
items for be realigned within the
realignment agency to fund new fast
disbursing projects
DPWH-3.981 Billion
DA 2.497 Billion
DOT 1.000 Billion
DepEd 270 Million

TOTAL 72.110
B. Projects in the Disbursement Acceleration Program
(Descriptions of projects attached as Annex A)
265

GOCCs and GFIs

Agency/Project Allotment
(SARO and NCA Release) (in Million Php)
1. LRTA: Rehabilitation of LRT 1 and 2 1,868
2. NHA: 11,050

a. Resettlement of North Triangle residents to 450

Camarin A7
b. Housing for BFP/BJMP 500
c. On-site development for families living 10,000
along dangerous
d. Relocation sites for informal settlers 100
along Iloilo River and its tributaries
3. PHIL. HEART CENTER: Upgrading of 357
ageing physical plant and medical equipment
4. CREDIT INFO CORP: Establishment of 75
centralized credit information system
5. PIDS: purchase of land to relocate the PIDS 100
office and building construction
6. HGC: Equity infusion for credit insurance 400
and mortgage guaranty operations of HGC
7. PHIC: Obligations incurred (premium 1,496
subsidy for indigent families) in January-June
2010, booked for payment in Jul[y] Dec
2010. The delay in payment is due to the
delay in the certification of the LGU
counterpart. Without it, the NG is obliged to
pay the full amount.
8. Philpost: Purchase of foreclosed property. 644
Payment of Mandatory Obligations, (GSIS,
PhilHealth, ECC), Franking Privilege
9. BSP: First equity infusion out of Php 40B 10,000
capitalization under the BSP Law
10. PCMC: Capital and Equipment Renovation 280
11. LCOP: 105
a. Pediatric Pulmonary Program
b. Bio-regenerative Technology Program 35
(Stem-Cell Research subject to legal 70
review and presentation)
12. TIDCORP: NG Equity infusion 570
266

TOTAL 26,945

NGAs/LGUs
Agency/Project Allotment
(SARO) Cash
(In Requirement
Million (NCA)
Php)
13. DOF-BIR: NPSTAR
centralization of data
processing and others (To be
synchronized with GFMIS
activities) 758 758
14. COA: IT infrastructure
program and hiring of
additional litigational experts 144 144
15. DND-PAF: On Base Housing
Facilities and Communication
Equipment 30 30
16. DA: 2,959 2,223
a. Irrigation, FMRs and
Integrated Community Based Multi-
Species
Hatchery and Aquasilvi 1,629 1,629
Farming
b. Mindanao Rural 919 183
Development Project
c. NIA Agno River Integrated
Irrigation Project 411 411
17. DAR: 1,293 1,293
a. Agrarian Reform
Communities Project 2 1,293 132
b. Landowners Compensation 5,432
18. DBM: Conduct of National
Survey of
Farmers/Fisherfolks/Ips 625 625
19. DOJ: Operating requirements
of 50 investigation agents and
15 state attorneys 11 11
20. DOT: Preservation of the Cine
Corregidor Complex 25 25
267

21. OPAPP: Activities for Peace

Process (PAMANA- Project
details: budget breakdown,
implementation plan, and
conditions on fund release
attached as Annex B) 1,819 1,819
22. DOST 425 425
a. Establishment of National
Meterological and Climate
Center 275 275
b. Enhancement of Doppler
Radar Network for National
Weather Watch, Accurate
Forecasting and Flood Early
Warning 190 190
23. DOF-BOC: To settle the
principal obligations with
PDIC consistent with the
agreement with the CISS and
SGS 2,800 2,800
24. OEO-FDCP: Establishment of
the National Film Archive and
local cinematheques, and other
local activities 20 20
25. DPWH: Various infrastructure
projects 5,500 5,500
26. DepEd/ERDT/DOST: Thin
Client Cloud Computing
Project 270 270
27. DOH: Hiring of nurses and
midwives 294 294
28. TESDA: Training Program in
partnership with BPO industry
and other sectors 1,100 1,100
29. DILG: Performance Challenge
Fund (People Empowered
Community Driven
Development with DSWD and
NAPC) 250 50
30. ARMM: Comprehensive Peace
and Development Intervention 8,592 8,592
31. DOTC-MRT: Purchase of
additional MRT cars 4,500 -
268

32. LGU Support Fund 6,500 6,500

33. Various Other Local Projects 6,500 6,500
34. Development Assistance to the
Province of Quezon 750 750
TOTAL 45,165 44,000
C. Summary
Fund Sources
Identified for Allotments Cash
Approval for Release Requirements for
(In Million Release in FY
Php) 2011
Total 72,110 72,110 70,895
GOCCs 26,895 26,895
NGAs/LGUs 45,165 44,000
For His Excellencys Consideration
(Sgd.) FLORENCIO B. ABAD
[/] APPROVED
[ ] DISAPPROVED
(Sgd.) H.E. BENIGNO S. AQUINO, III
OCT 12, 2011
The memorandum of October 12, 2011 was followed by another memorandum for the President
dated December 12, 2011116 requesting omnibus authority to consolidate the savings and unutilized
balances for fiscal year 2011. Pertinent portions of the memorandum of December 12, 2011 read:
MEMORANDUM FOR THE PRESIDENT
xxxx
SUBJECT: Omnibus Authority to Consolidate Savings/Unutilized Balances and its Realignment
DATE: December 12, 2011
This is to respectfully request for the grant of Omnibus Authority to consolidate savings/unutilized
balances in FY 2011 corresponding to completed or discontinued projects which may be pooled to
fund additional projects or expenditures.
In addition, Mr. President, this measure will allow us to undertake projects even if their
implementation carries over to 2012 without necessarily impacting on our budget deficit cap next
year.
BACKGROUND
1.0 The DBM, during the course of performance reviews conducted on the agencies
operations, particularly on the implementation of their projects/activities, including
expenses incurred in undertaking the same, have identified savings out of the 2011
General Appropriations Act. Said savings correspond to completed or discontinued
projects under certain departments/agencies which may be pooled, for the following:
1.1 to provide for new activities which have not been anticipated during
preparation of the budget;
1.2 to augment additional requirements of on-going priority projects; and
1.3 to provide for deficiencies under the Special Purpose Funds, e.g., PDAF,
Calamity Fund, Contingent Fund
269

1.4 to cover for the modifications of the original allotment class allocation as a
result of on-going priority projects and implementation of new activities
2.0 x x x x
2.1 x x x
2.2 x x x
ON THE UTILIZATION OF POOLED SAVINGS
3.0 It may be recalled that the President approved our request for omnibus authority to
pool savings/unutilized balances in FY 2010 last November 25, 2010.
4.0 It is understood that in the utilization of the pooled savings, the DBM shall secure
the corresponding approval/confirmation of the President. Furthermore, it is assured
that the proposed realignments shall be within the authorized Expenditure level.
5.0 Relative thereto, we have identified some expenditure items that may be sourced
from the said pooled appropriations in FY 2010 that will expire on December 31, 2011
and appropriations in FY 2011 that may be declared as savings to fund additional
expenditures.
5.1 The 2010 Continuing Appropriations (pooled savings) is proposed to be spent
for the projects that we have identified to be immediate actual disbursements
considering that this same fund source will expire on December 31, 2011.
5.2 With respect to the proposed expenditure items to be funded from the FY
2011 Unreleased Appropriations, most of these are the same projects for which
the DBM is directed by the Office of the President, thru the Executive Secretary,
to source funds.
6.0 Among others, the following are such proposed additional projects that have been
chosen given their multiplier impact on economy and infrastructure development, their
beneficial effect on the poor, and their translation into disbursements. Please note that
we have classified the list of proposed projects as follows:
7.0 x x x
FOR THE PRESIDENTS APPROVAL
8.0 Foregoing considered, may we respectfully request for the Presidents approval for
the following:
8.1 Grant of omnibus authority to consolidate FY 2011 savings/unutilized
balances and its realignment; and
8.2 The proposed additional projects identified for funding.
For His Excellencys consideration and approval.
(Sgd.)
[/] APPROVED
[ ] DISAPPROVED
(Sgd.) H.E. BENIGNO S. AQUINO, III
DEC 21, 2011
Substantially identical requests for authority to pool savings and to fund proposed projects were
contained in various other memoranda from Sec. Abad dated June 25, 2012,117 September 4,
2012,118 December 19, 2012,119 May 20, 2013,120 and September 25, 2013.121 The President
apparently approved all the requests, withholding approval only of the proposed projects contained in
the June 25, 2012 memorandum, as borne out by his marginal note therein to the effect that the
proposed projects should still be "subject to further discussions."122
In order to implement the June25, 2012 memorandum, Sec. Abad issued NBC No. 541 (Adoption of
Operational Efficiency Measure Withdrawal of Agencies Unobligated Allotments as of June 30,
2012),123 reproduced herein as follows:
NATIONAL BUDGET CIRCULAR No. 541
July 18, 2012
270

TO: All Heads of Departments/Agencies/State Universities and Colleges and other Offices of the
National Government, Budget and Planning Officers; Heads of Accounting Units and All Others
Concerned
SUBJECT : Adoption of Operational Efficiency Measure Withdrawal of Agencies Unobligated
Allotments as of June 30, 2012
1.0 Rationale
The DBM, as mandated by Executive Order (EO) No. 292 (Administrative Code of 1987), periodically
reviews and evaluates the departments/agencies efficiency and effectiveness in utilizing budgeted
funds for the delivery of services and production of goods, consistent with the government priorities.
In the event that a measure is necessary to further improve the operational efficiency of the
government, the President is authorized to suspend or stop further use of funds allotted for any
agency or expenditure authorized in the General Appropriations Act. Withdrawal and pooling of
unutilized allotment releases can be effected by DBM based on authority of the President, as
mandated under Sections 38 and 39, Chapter 5, Book VI of EO 292.
For the first five months of 2012, the National Government has not met its spending targets. In order
to accelerate spending and sustain the fiscal targets during the year, expenditure measures have to
be implemented to optimize the utilization of available resources.
Departments/agencies have registered low spending levels, in terms of obligations and
disbursements per initial review of their 2012 performance. To enhance agencies performance, the
DBM conducts continuous consultation meetings and/or send call-up letters, requesting them to
identify slow-moving programs/projects and the factors/issues affecting their performance (both
pertaining to internal systems and those which are outside the agencies spheres of control). Also,
they are asked to formulate strategies and improvement plans for the rest of 2012.
Notwithstanding these initiatives, some departments/agencies have continued to post low obligation
levels as of end of first semester, thus resulting to substantial unobligated allotments.
In line with this, the President, per directive dated June 27, 2012 authorized the withdrawal of
unobligated allotments of agencies with low levels of obligations as of June 30, 2012, both for
continuing and current allotments. This measure will allow the maximum utilization of available
allotments to fund and undertake other priority expenditures of the national government.
2.0 Purpose
2.1 To provide the conditions and parameters on the withdrawal of unobligated
allotments of agencies as of June 30, 2012 to fund priority and/or fast-moving
programs/projects of the national government;
2.2 To prescribe the reports and documents to be used as bases on the withdrawal of
said unobligated allotments; and
2.3 To provide guidelines in the utilization or reallocation of the withdrawn allotments.
3.0 Coverage
3.1 These guidelines shall cover the withdrawal of unobligated allotments as of June 30,
2012 of all national government agencies (NGAs) charged against FY 2011 Continuing
Appropriation (R.A. No.10147) and FY 2012 Current Appropriation (R.A. No. 10155),
pertaining to:
3.1.1 Capital Outlays (CO);
3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the
implementation of programs and projects, as well as capitalized MOOE; and
3.1.3 Personal Services corresponding to unutilized pension benefits declared as
savings by the agencies concerned based on their updated/validated list of
pensioners.
3.2 The withdrawal of unobligated allotments may cover the identified programs,
projects and activities of the departments/agencies reflected in the DBM list shown as
Annex A or specific programs and projects as may be identified by the agencies.
271

4.0 Exemption
These guidelines shall not apply to the following:
4.1 NGAs
4.1.1 Constitutional Offices/Fiscal Autonomy Group, granted fiscal autonomy
under the Philippine Constitution; and
4.1.2 State Universities and Colleges, adopting the Normative Funding allocation
scheme i.e., distribution of a predetermined budget ceiling.
4.2 Fund Sources
4.2.1 Personal Services other than pension benefits;
4.2.2 MOOE items earmarked for specific purposes or subject to realignment
conditions per General Provisions of the GAA:
Confidential and Intelligence Fund;
Savings from Traveling, Communication, Transportation and Delivery,
Repair and Maintenance, Supplies and Materials and Utility which shall be
used for the grant of Collective Negotiation Agreement incentive benefit;
Savings from mandatory expenditures which can be realigned only in the
last quarter after taking into consideration the agencys full year
requirements, i.e., Petroleum, Oil and Lubricants, Water, Illumination,
Power Services, Telephone, other Communication Services and Rent.
4.2.3 Foreign-Assisted Projects (loan proceeds and peso counterpart);
4.2.4 Special Purpose Funds such as: E-Government Fund, International
Commitments Fund, PAMANA, Priority Development Assistance Fund, Calamity
Fund, Budgetary Support to GOCCs and Allocation to LGUs, among others;
4.2.5 Quick Response Funds; and
4.2.6 Automatic Appropriations i.e., Retirement Life Insurance Premium and
Special Accounts in the General Fund.
5.0 Guidelines
5.1 National government agencies shall continue to undertake procurement activities
notwithstanding the implementation of the policy of withdrawal of unobligated allotments
until the end of the third quarter, FY 2012. Even without the allotments, the agency shall
proceed in undertaking the procurement processes (i.e., procurement planning up to the
conduct of bidding but short of awarding of contract) pursuant to GPPB Circular Nos.
02-2008 and 01-2009 and DBM Circular Letter No. 2010-9.
5.2 For the purpose of determining the amount of unobligated allotments that shall be
withdrawn, all departments/agencies/operating units (OUs) shall submit to DBM not
later than July 30, 2012, the following budget accountability reports as of June 30, 2012;
Statement of Allotments, Obligations and Balances (SAOB);
Financial Report of Operations (FRO); and
Physical Report of Operations.
5.3 In the absence of the June 30, 2012 reports cited under item 5.2 of this Circular, the
agencys latest report available shall be used by DBM as basis for withdrawal of
allotment. The DBM shall compute/approximate the agencys obligation level as of June
30 to derive its unobligated allotments as of same period. Example: If the March 31
SAOB or FRO reflects actual obligations of P 800M then the June 30 obligation level
shall approximate to 1,600 M (i.e., 800 M x 2 quarters).
5.4 All released allotments in FY 2011 charged against R.A. No. 10147 which remained
unobligated as of June 30, 2012 shall be immediately considered for withdrawal. This
policy is based on the following considerations:
272

5.4.1 The departments/agencies approved priority programs and projects are

assumed to be implementation-ready and doable during the given fiscal year;
and
5.4.2 The practice of having substantial carryover appropriations may imply that
the agency has a slower-than-programmed implementation capacity or agency
tends to implement projects within a two-year timeframe.
5.5. Consistent with the Presidents directive, the DBM shall, based on evaluation of the
reports cited above and results of consultations with the departments/agencies,
withdraw the unobligated allotments as of June 30, 2012 through issuance of negative
Special Allotment Release Orders (SAROs).
5.6 DBM shall prepare and submit to the President, a report on the magnitude of
withdrawn allotments. The report shall highlight the agencies which failed to submit the
June 30 reports required under this Circular.
5.7 The withdrawn allotments may be:
5.7.1 Reissued for the original programs and projects of the agencies/OUs
concerned, from which the allotments were withdrawn;
5.7.2 Realigned to cover additional funding for other existing programs and
projects of the agency/OU; or
5.7.3 Used to augment existing programs and projects of any agency and to fund
priority programs and projects not considered in the 2012 budget but expected to
be started or implemented during the current year.
5.8 For items 5.7.1 and 5.7.2 above, agencies/OUs concerned may submit to DBM a
Special Budget Request (SBR), supported with the following:
5.8.1 Physical and Financial Plan (PFP);
5.8.2 Monthly Cash Program (MCP); and
5.8.3 Proof that the project/activity has started the procurement processes i.e.,
Proof of Posting and/or Advertisement of the Invitation to Bid.
5.9 The deadline for submission of request/s pertaining to these categories shall be until
the end of the third quarter i.e., September 30, 2012. After said cut-off date, the
withdrawn allotments shall be pooled and form part of the overall savings of the national
government.
5.10 Utilization of the consolidated withdrawn allotments for other priority programs and
projects as cited under item 5.7.3 of this Circular, shall be subject to approval of the
President. Based on the approval of the President, DBM shall issue the SARO to cover
the approved priority expenditures subject to submission by the agency/OU concerned
of the SBR and supported with PFP and MCP.
5.11 It is understood that all releases to be made out of the withdrawn allotments (both
2011 and 2012 unobligated allotments) shall be within the approved Expenditure
Program level of the national government for the current year. The SAROs to be issued
shall properly disclose the appropriation source of the release to determine the extent of
allotment validity, as follows:
For charges under R.A. 10147 allotments shall be valid up to December 31,
2012; and
For charges under R.A. 10155 allotments shall be valid up to December 31,
2013.
5.12 Timely compliance with the submission of existing BARs and other reportorial
requirements is reiterated for monitoring purposes.
6.0 Effectivity
This circular shall take effect immediately.
273

(Sgd.) FLORENCIO B. ABAD

Secretary
As can be seen, NBC No. 541 specified that the unobligated allotments of all agencies and
departments as of June 30, 2012 that were charged against the continuing appropriations for fiscal
year 2011 and the 2012 GAA (R.A. No. 10155) were subject to withdrawal through the issuance of
negative SAROs, but such allotments could be either: (1) reissued for the original PAPs of the
concerned agencies from which they were withdrawn; or (2) realigned to cover additional funding for
other existing PAPs of the concerned agencies; or (3) used to augment existing PAPs of any agency
and to fund priority PAPs not considered in the 2012 budget but expected to be started or
implemented in 2012. Financing the other priority PAPs was made subject to the approval of the
President. Note here that NBC No. 541 used terminologies like "realignment" and "augmentation" in
the application of the withdrawn unobligated allotments.
Taken together, all the issuances showed how the DAP was to be implemented and funded, that is
(1) by declaring "savings" coming from the various departments and agencies derived from pooling
unobligated allotments and withdrawing unreleased appropriations; (2) releasing unprogrammed
funds; and (3) applying the "savings" and unprogrammed funds to augment existing PAPs or to
support other priority PAPs.
c. DAP was not an appropriation
measure; hence, no appropriation
law was required to adopt or to
implement it
Petitioners Syjuco, Luna, Villegas and PHILCONSA state that Congress did not enact a law to
establish the DAP, or to authorize the disbursement and release of public funds to implement the
DAP. Villegas, PHILCONSA, IBP, Araullo, and COURAGE observe that the appropriations funded
under the DAP were not included in the 2011, 2012 and 2013 GAAs. To petitioners IBP, Araullo, and
COURAGE, the DAP, being actually an appropriation that set aside public funds for public use,
should require an enabling law for its validity. VACC maintains that the DAP, because it involved
huge allocations that were separate and distinct from the GAAs, circumvented and duplicated the
GAAs without congressional authorization and control.
The petitioners contend in unison that based on how it was developed and implemented the DAP
violated the mandate of Section 29(1), Article VI of the 1987 Constitution that "[n]o money shall be
paid out of the Treasury except in pursuance of an appropriation made by law."
The OSG posits, however, that no law was necessary for the adoption and implementation of the
DAP because of its being neither a fund nor an appropriation, but a program or an administrative
system of prioritizing spending; and that the adoption of the DAP was by virtue of the authority of the
President as the Chief Executive to ensure that laws were faithfully executed.
We agree with the OSGs position.
The DAP was a government policy or strategy designed to stimulate the economy through
accelerated spending. In the context of the DAPs adoption and implementation being a function
pertaining to the Executive as the main actor during the Budget Execution Stage under its
constitutional mandate to faithfully execute the laws, including the GAAs, Congress did not need to
legislate to adopt or to implement the DAP. Congress could appropriate but would have nothing more
to do during the Budget Execution Stage. Indeed, appropriation was the act by which Congress
"designates a particular fund, or sets apart a specified portion of the public revenue or of the money in
the public treasury, to be applied to some general object of governmental expenditure, or to some
individual purchase or expense."124 As pointed out in Gonzales v. Raquiza:125 "In a strict sense,
appropriation has been defined as nothing more than the legislative authorization prescribed by the
Constitution that money may be paid out of the Treasury, while appropriation made by law refers to
the act of the legislature setting apart or assigning to a particular use a certain sum to be used in the
payment of debt or dues from the State to its creditors."126
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On the other hand, the President, in keeping with his duty to faithfully execute the laws, had sufficient
discretion during the execution of the budget to adapt the budget to changes in the countrys
economic situation.127 He could adopt a plan like the DAP for the purpose. He could pool the savings
and identify the PAPs to be funded under the DAP. The pooling of savings pursuant to the DAP, and
the identification of the PAPs to be funded under the DAP did not involve appropriation in the strict
sense because the money had been already set apart from the public treasury by Congress through
the GAAs. In such actions, the Executive did not usurp the power vested in Congress under Section
29(1), Article VI of the Constitution.
3.
Unreleased appropriations and withdrawn
unobligated allotments under the DAP
were not savings, and the use of such
appropriations contravened Section 25(5),
Article VI of the 1987 Constitution.
Notwithstanding our appreciation of the DAP as a plan or strategy validly adopted by the Executive to
ramp up spending to accelerate economic growth, the challenges posed by the petitioners constrain
us to dissect the mechanics of the actual execution of the DAP. The management and utilization of
the public wealth inevitably demands a most careful scrutiny of whether the Executives
implementation of the DAP was consistent with the Constitution, the relevant GAAs and other existing
laws.
a. Although executive discretion
and flexibility are necessary in
the execution of the budget, any
transfer of appropriated funds
should conform to Section 25(5),
Article VI of the Constitution
We begin this dissection by reiterating that Congress cannot anticipate all issues and needs that may
come into play once the budget reaches its execution stage. Executive discretion is necessary at that
stage to achieve a sound fiscal administration and assure effective budget implementation. The
heads of offices, particularly the President, require flexibility in their operations under performance
budgeting to enable them to make whatever adjustments are needed to meet established work goals
under changing conditions.128 In particular, the power to transfer funds can give the President the
flexibility to meet unforeseen events that may otherwise impede the efficient implementation of the
PAPs set by Congress in the GAA.
Congress has traditionally allowed much flexibility to the President in allocating funds pursuant to the
GAAs,129particularly when the funds are grouped to form lump sum accounts.130 It is assumed that
the agencies of the Government enjoy more flexibility when the GAAs provide broader appropriation
items.131 This flexibility comes in the form of policies that the Executive may adopt during the budget
execution phase. The DAP as a strategy to improve the countrys economic position was one
policy that the President decided to carry out in order to fulfill his mandate under the GAAs.
Denying to the Executive flexibility in the expenditure process would be counterproductive. In
Presidential Spending Power,132 Prof. Louis Fisher, an American constitutional scholar whose
specialties have included budget policy, has justified extending discretionary authority to the
Executive thusly:
[T]he impulse to deny discretionary authority altogether should be resisted. There are many number
of reasons why obligations and outlays by administrators may have to differ from appropriations by
legislators. Appropriations are made many months, and sometimes years, in advance of
expenditures. Congress acts with imperfect knowledge in trying to legislate in fields that are highly
technical and constantly undergoing change. New circumstances will develop to make obsolete and
mistaken the decisions reached by Congress at the appropriation stage. It is not practicable for
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Congress to adjust to each new development by passing separate supplemental appropriation bills.
Were Congress to control expenditures by confining administrators to narrow statutory details, it
would perhaps protect its power of the purse but it would not protect the purse itself. The realities and
complexities of public policy require executive discretion for the sound management of public funds.
xxxx
x x x The expenditure process, by its very nature, requires substantial discretion for administrators.
They need to exercise judgment and take responsibility for their actions, but those actions ought to be
directed toward executing congressional, not administrative policy. Let there be discretion, but
channel it and use it to satisfy the programs and priorities established by Congress.
In contrast, by allowing to the heads of offices some power to transfer funds within their respective
offices, the Constitution itself ensures the fiscal autonomy of their offices, and at the same time
maintains the separation of powers among the three main branches of the Government. The Court
has recognized this, and emphasized so in Bengzon v. Drilon,133 viz:
The Judiciary, the Constitutional Commissions, and the Ombudsman must have the independence
and flexibility needed in the discharge of their constitutional duties. The imposition of restrictions and
constraints on the manner the independent constitutional offices allocate and utilize the funds
appropriated for their operations is anathema to fiscal autonomy and violative not only of the express
mandate of the Constitution but especially as regards the Supreme Court, of the independence and
separation of powers upon which the entire fabric of our constitutional system is based.
In the case of the President, the power to transfer funds from one item to another within the Executive
has not been the mere offshoot of established usage, but has emanated from law itself. It has existed
since the time of the American Governors-General.134 Act No. 1902 (An Act authorizing the Governor-
General to direct any unexpended balances of appropriations be returned to the general fund of the
Insular Treasury and to transfer from the general fund moneys which have been returned thereto),
passed on May 18, 1909 by the First Philippine Legislature,135 was the first enabling law that granted
statutory authority to the President to transfer funds. The authority was without any limitation, for the
Act explicitly empowered the Governor-General to transfer any unexpended balance of appropriations
for any bureau or office to another, and to spend such balance as if it had originally been
appropriated for that bureau or office.
From 1916 until 1920, the appropriations laws set a cap on the amounts of funds that could be
transferred, thereby limiting the power to transfer funds. Only 10% of the amounts appropriated for
contingent or miscellaneous expenses could be transferred to a bureau or office, and the transferred
funds were to be used to cover deficiencies in the appropriations also for miscellaneous expenses of
said bureau or office.
In 1921, the ceiling on the amounts of funds to be transferred from items under miscellaneous
expenses to any other item of a certain bureau or office was removed.
During the Commonwealth period, the power of the President to transfer funds continued to be
governed by the GAAs despite the enactment of the Constitution in 1935. It is notable that the 1935
Constitution did not include a provision on the power to transfer funds. At any rate, a shift in the
extent of the Presidents power to transfer funds was again experienced during this era, with the
President being given more flexibility in implementing the budget. The GAAs provided that the power
to transfer all or portions of the appropriations in the Executive Department could be made in the
"interest of the public, as the President may determine."136
In its time, the 1971 Constitutional Convention wanted to curtail the Presidents seemingly unbounded
discretion in transferring funds.137 Its Committee on the Budget and Appropriation proposed to
prohibit the transfer of funds among the separate branches of the Government and the independent
constitutional bodies, but to allow instead their respective heads to augment items of appropriations
from savings in their respective budgets under certain limitations.138 The clear intention of the
Convention was to further restrict, not to liberalize, the power to transfer appropriations.139 Thus, the
Committee on the Budget and Appropriation initially considered setting stringent limitations on the
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power to augment, and suggested that the augmentation of an item of appropriation could be made
"by not more than ten percent if the original item of appropriation to be augmented does not exceed
one million pesos, or by not more than five percent if the original item of appropriation to be
augmented exceeds one million pesos."140 But two members of the Committee objected to the
1,000,000.00 threshold, saying that the amount was arbitrary and might not be reasonable in the
future. The Committee agreed to eliminate the 1,000,000.00 threshold, and settled on the ten
percent limitation.141
In the end, the ten percent limitation was discarded during the plenary of the Convention, which
adopted the following final version under Section 16, Article VIII of the 1973 Constitution, to wit:
(5) No law shall be passed authorizing any transfer of appropriations; however, the President, the
Prime Minister, the Speaker, the Chief Justice of the Supreme Court, and the heads of Constitutional
Commissions may by law be authorized to augment any item in the general appropriations law for
their respective offices from savings in other items of their respective appropriations.
The 1973 Constitution explicitly and categorically prohibited the transfer of funds from one item to
another, unless Congress enacted a law authorizing the President, the Prime Minister, the Speaker,
the Chief Justice of the Supreme Court, and the heads of the Constitutional omissions to transfer
funds for the purpose of augmenting any item from savings in another item in the GAA of their
respective offices. The leeway was limited to augmentation only, and was further constricted by the
condition that the funds to be transferred should come from savings from another item in the
appropriation of the office.142
On July 30, 1977, President Marcos issued PD No. 1177, providing in its Section 44 that:
Section 44. Authority to Approve Fund Transfers. The President shall have the authority to transfer
any fund appropriated for the different departments, bureaus, offices and agencies of the Executive
Department which are included in the General Appropriations Act, to any program, project, or activity
of any department, bureau or office included in the General Appropriations Act or approved after its
enactment.
The President shall, likewise, have the authority to augment any appropriation of the Executive
Department in the General Appropriations Act, from savings in the appropriations of another
department, bureau, office or agency within the Executive Branch, pursuant to the provisions of
Article VIII, Section 16 (5) of the Constitution.
In Demetria v. Alba, however, the Court struck down the first paragraph of Section 44 for
contravening Section 16(5)of the 1973 Constitution, ruling:
Paragraph 1 of Section 44 of P.D. No. 1177 unduly over-extends the privilege granted under said
Section 16. It empowers the President to indiscriminately transfer funds from one department,
bureau, office or agency of the Executive Department to any program, project or activity of any
department, bureau or office included in the General Appropriations Act or approved after its
enactment, without regard as to whether or not the funds to be transferred are actually savings in the
item from which the same are to be taken, or whether or not the transfer is for the purpose of
augmenting the item to which said transfer is to be made. It does not only completely disregard the
standards set in the fundamental law, thereby amounting to an undue delegation of legislative
powers, but likewise goes beyond the tenor thereof. Indeed, such constitutional infirmities render the
provision in question null and void.143
It is significant that Demetria was promulgated 25 days after the ratification by the people of the 1987
Constitution, whose Section 25(5) of Article VI is identical to Section 16(5), Article VIII of the 1973
Constitution, to wit:
Section 25. x x x
xxxx
5) No law shall be passed authorizing any transfer of appropriations; however, the President, the
President of the Senate, the Speaker of the House of Representatives, the Chief Justice of the
Supreme Court, and the heads of Constitutional Commissions may, by law, be authorized to augment
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any item in the general appropriations law for their respective offices from savings in other items of
their respective appropriations.
xxxx
The foregoing history makes it evident that the Constitutional Commission included Section 25(5),
supra, to keep a tight rein on the exercise of the power to transfer funds appropriated by Congress by
the President and the other high officials of the Government named therein. The Court stated in
Nazareth v. Villar:144
In the funding of current activities, projects, and programs, the general rule should still be that the
budgetary amount contained in the appropriations bill is the extent Congress will determine as
sufficient for the budgetary allocation for the proponent agency. The only exception is found in
Section 25 (5), Article VI of the Constitution, by which the President, the President of the Senate, the
Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and the heads of
Constitutional Commissions are authorized to transfer appropriations to augmentany item in the GAA
for their respective offices from the savings in other items of their respective appropriations. The plain
language of the constitutional restriction leaves no room for the petitioners posture, which we should
now dispose of as untenable.
It bears emphasizing that the exception in favor of the high officials named in Section 25(5), Article VI
of the Constitution limiting the authority to transfer savings only to augment another item in the GAA
is strictly but reasonably construed as exclusive. As the Court has expounded in Lokin, Jr. v.
Commission on Elections:
When the statute itself enumerates the exceptions to the application of the general rule, the
exceptions are strictly but reasonably construed. The exceptions extend only as far as their language
fairly warrants, and all doubts should be resolved in favor of the general provision rather than the
exceptions. Where the general rule is established by a statute with exceptions, none but the enacting
authority can curtail the former. Not even the courts may add to the latter by implication, and it is a
rule that an express exception excludes all others, although it is always proper in determining the
applicability of the rule to inquire whether, in a particular case, it accords with reason and justice.
The appropriate and natural office of the exception is to exempt something from the scope of the
general words of a statute, which is otherwise within the scope and meaning of such general words.
Consequently, the existence of an exception in a statute clarifies the intent that the statute shall apply
to all cases not excepted. Exceptions are subject to the rule of strict construction; hence, any doubt
will be resolved in favor of the general provision and against the exception. Indeed, the liberal
construction of a statute will seem to require in many circumstances that the exception, by which the
operation of the statute is limited or abridged, should receive a restricted construction.
Accordingly, we should interpret Section 25(5), supra, in the context of a limitation on the Presidents
discretion over the appropriations during the Budget Execution Phase.
b. Requisites for the valid transfer of
appropriated funds under Section
25(5), Article VI of the 1987
Constitution
The transfer of appropriated funds, to be valid under Section 25(5), supra, must be made upon a
concurrence of the following requisites, namely:
(1) There is a law authorizing the President, the President of the Senate, the Speaker of the
House of Representatives, the Chief Justice of the Supreme Court, and the heads of the
Constitutional Commissions to transfer funds within their respective offices;
(2) The funds to be transferred are savings generated from the appropriations for their
respective offices; and (3) The purpose of the transfer is to augment an item in the general
appropriations law for their respective offices.
b.1. First RequisiteGAAs of 2011 and
2012 lacked valid provisions to
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authorize transfers of funds under

the DAP; hence, transfers under the
DAP were unconstitutional
Section 25(5), supra, not being a self-executing provision of the Constitution, must have an
implementing law for it to be operative. That law, generally, is the GAA of a given fiscal year. To
comply with the first requisite, the GAAs should expressly authorize the transfer of funds.
Did the GAAs expressly authorize the transfer of funds?
In the 2011 GAA, the provision that gave the President and the other high officials the authority to
transfer funds was Section 59, as follows:
Section 59. Use of Savings. The President of the Philippines, the Senate President, the Speaker of
the House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to augment any
item in this Act from savings in other items of their respective appropriations.
In the 2012 GAA, the empowering provision was Section 53, to wit:
Section 53. Use of Savings. The President of the Philippines, the Senate President, the Speaker of
the House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to augment any
item in this Act from savings in other items of their respective appropriations.
In fact, the foregoing provisions of the 2011 and 2012 GAAs were cited by the DBM as justification for
the use of savings under the DAP.145
A reading shows, however, that the aforequoted provisions of the GAAs of 2011 and 2012 were
textually unfaithful to the Constitution for not carrying the phrase "for their respective offices"
contained in Section 25(5), supra. The impact of the phrase "for their respective offices" was to
authorize only transfers of funds within their offices (i.e., in the case of the President, the transfer was
to an item of appropriation within the Executive). The provisions carried a different phrase ("to
augment any item in this Act"), and the effect was that the 2011 and 2012 GAAs thereby literally
allowed the transfer of funds from savings to augment any item in the GAAs even if the item belonged
to an office outside the Executive. To that extent did the 2011 and 2012 GAAs contravene the
Constitution. At the very least, the aforequoted provisions cannot be used to claim authority to
transfer appropriations from the Executive to another branch, or to a constitutional commission.
Apparently realizing the problem, Congress inserted the omitted phrase in the counterpart provision in
the 2013 GAA, to wit:
Section 52. Use of Savings. The President of the Philippines, the Senate President, the Speaker of
the House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to use savings in
their respective appropriations to augment actual deficiencies incurred for the current year in any item
of their respective appropriations.
Even had a valid law authorizing the transfer of funds pursuant to Section 25(5), supra, existed, there
still remained two other requisites to be met, namely: that the source of funds to be transferred were
savings from appropriations within the respective offices; and that the transfer must be for the
purpose of augmenting an item of appropriation within the respective offices.
b.2. Second Requisite There were
no savings from which funds
could be sourced for the DAP
Were the funds used in the DAP actually savings?
The petitioners claim that the funds used in the DAP the unreleased appropriations and withdrawn
unobligated allotments were not actual savings within the context of Section 25(5), supra, and the
relevant provisions of the GAAs. Belgica argues that "savings" should be understood to refer to the
excess money after the items that needed to be funded have been funded, or those that needed to be
paid have been paid pursuant to the budget.146 The petitioners posit that there could be savings only
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when the PAPs for which the funds had been appropriated were actually implemented and
completed, or finally discontinued or abandoned. They insist that savings could not be realized with
certainty in the middle of the fiscal year; and that the funds for "slow-moving" PAPs could not be
considered as savings because such PAPs had not actually been abandoned or discontinued
yet.147 They stress that NBC No. 541, by allowing the withdrawn funds to be reissued to the "original
program or project from which it was withdrawn," conceded that the PAPs from which the supposed
savings were taken had not been completed, abandoned or discontinued.148
The OSG represents that "savings" were "appropriations balances," being the difference between the
appropriation authorized by Congress and the actual amount allotted for the appropriation; that the
definition of "savings" in the GAAs set only the parameters for determining when savings occurred;
that it was still the President (as well as the other officers vested by the Constitution with the authority
to augment) who ultimately determined when savings actually existed because savings could be
determined only during the stage of budget execution; that the President must be given a wide
discretion to accomplish his tasks; and that the withdrawn unobligated allotments were savings
inasmuch as they were clearly "portions or balances of any programmed appropriationfree from any
obligation or encumbrances which are (i) still available after the completion or final discontinuance or
abandonment of the work, activity or purpose for which the appropriation is authorized"
We partially find for the petitioners.
In ascertaining the meaning of savings, certain principles should be borne in mind. The first principle
is that Congress wields the power of the purse. Congress decides how the budget will be spent; what
PAPs to fund; and the amounts of money to be spent for each PAP. The second principle is that the
Executive, as the department of the Government tasked to enforce the laws, is expected to faithfully
execute the GAA and to spend the budget in accordance with the provisions of the GAA.149 The
Executive is expected to faithfully implement the PAPs for which Congress allocated funds, and to
limit the expenditures within the allocations, unless exigencies result to deficiencies for which
augmentation is authorized, subject to the conditions provided by law. The third principle is that in
making the Presidents power to augment operative under the GAA, Congress recognizes the need
for flexibility in budget execution. In so doing, Congress diminishes its own power of the purse, for it
delegates a fraction of its power to the Executive. But Congress does not thereby allow the Executive
to override its authority over the purse as to let the Executive exceed its delegated authority. And the
fourth principle is that savings should be actual. "Actual" denotes something that is real or substantial,
or something that exists presently in fact, as opposed to something that is merely theoretical,
possible, potential or hypothetical.150
The foregoing principles caution us to construe savings strictly against expanding the scope of the
power to augment. It is then indubitable that the power to augment was to be used only when the
purpose for which the funds had been allocated were already satisfied, or the need for such funds
had ceased to exist, for only then could savings be properly realized. This interpretation prevents the
Executive from unduly transgressing Congress power of the purse.
The definition of "savings" in the GAAs, particularly for 2011, 2012 and 2013, reflected this
interpretation and made it operational, viz:
Savings refer to portions or balances of any programmed appropriation in this Act free from any
obligation or encumbrance which are: (i) still available after the completion or final discontinuance or
abandonment of the work, activity or purpose for which the appropriation is authorized; (ii) from
appropriations balances arising from unpaid compensation and related costs pertaining to vacant
positions and leaves of absence without pay; and (iii) from appropriations balances realized from the
implementation of measures resulting in improved systems and efficiencies and thus enabled
agencies to meet and deliver the required or planned targets, programs and services approved in this
Act at a lesser cost.
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The three instances listed in the GAAs aforequoted definition were a sure indication that savings
could be generated only upon the purpose of the appropriation being fulfilled, or upon the need for the
appropriation being no longer existent.
The phrase "free from any obligation or encumbrance" in the definition of savings in the GAAs
conveyed the notion that the appropriation was at that stage when the appropriation was already
obligated and the appropriation was already released. This interpretation was reinforced by the
enumeration of the three instances for savings to arise, which showed that the appropriation referred
to had reached the agency level. It could not be otherwise, considering that only when the
appropriation had reached the agency level could it be determined whether (a) the PAP for which the
appropriation had been authorized was completed, finally discontinued, or abandoned; or (b) there
were vacant positions and leaves of absence without pay; or (c) the required or planned targets,
programs and services were realized at a lesser cost because of the implementation of measures
resulting in improved systems and efficiencies.
The DBM declares that part of the savings brought under the DAP came from "pooling of unreleased
appropriations such as unreleased Personnel Services appropriations which will lapse at the end of
the year, unreleased appropriations of slow moving projects and discontinued projects per Zero-
Based Budgeting findings."
The declaration of the DBM by itself does not state the clear legal basis for the treatment of
unreleased or unalloted appropriations as savings.
The fact alone that the appropriations are unreleased or unalloted is a mere description of the status
of the items as unalloted or unreleased. They have not yet ripened into categories of items from
which savings can be generated. Appropriations have been considered "released" if there has
already been an allotment or authorization to incur obligations and disbursement authority. This
means that the DBM has issued either an ABM (for those not needing clearance), or a SARO (for
those needing clearance), and consequently an NCA, NCAA or CDC, as the case may be.
Appropriations remain unreleased, for instance, because of noncompliance with documentary
requirements (like the Special Budget Request), or simply because of the unavailability of funds. But
the appropriations do not actually reach the agencies to which they were allocated under the GAAs,
and have remained with the DBM technically speaking. Ergo, unreleased appropriations refer to
appropriations with allotments but without disbursement authority.
For us to consider unreleased appropriations as savings, unless these met the statutory definition of
savings, would seriously undercut the congressional power of the purse, because such appropriations
had not even reached and been used by the agency concerned vis--vis the PAPs for which
Congress had allocated them. However, if an agency has unfilled positions in its plantilla and did not
receive an allotment and NCA for such vacancies, appropriations for such positions, although
unreleased, may already constitute savings for that agency under the second instance.
Unobligated allotments, on the other hand, were encompassed by the first part of the definition of
"savings" in the GAA, that is, as "portions or balances of any programmed appropriation in this Act
free from any obligation or encumbrance." But the first part of the definition was further qualified by
the three enumerated instances of when savings would be realized. As such, unobligated allotments
could not be indiscriminately declared as savings without first determining whether any of the three
instances existed. This signified that the DBMs withdrawal of unobligated allotments had disregarded
the definition of savings under the GAAs.
Justice Carpio has validly observed in his Separate Concurring Opinion that MOOE appropriations
are deemed divided into twelve monthly allocations within the fiscal year; hence, savings could be
generated monthly from the excess or unused MOOE appropriations other than the Mandatory
Expenditures and Expenditures for Business-type Activities because of the physical impossibility to
obligate and spend such funds as MOOE for a period that already lapsed. Following this observation,
MOOE for future months are not savings and cannot be transferred.
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The DBMs Memorandum for the President dated June 25, 2012 (which became the basis of NBC
No. 541) stated:
ON THE AUTHORITY TO WITHDRAW UNOBLIGATED ALLOTMENTS
5.0 The DBM, during the course of performance reviews conducted on the agencies
operations, particularly on the implementation of their projects/activities, including expenses
incurred in undertaking the same, have been continuously calling the attention of all National
Government agencies (NGAs) with low levels of obligations as of end of the first quarter to
speedup the implementation of their programs and projects in the second quarter.
6.0 Said reminders were made in a series of consultation meetings with the concerned
agencies and with call-up letters sent.
7.0 Despite said reminders and the availability of funds at the departments disposal, the level
of financial performance of some departments registered below program, with the targeted
obligations/disbursements for the first semester still not being met.
8.0 In order to maximize the use of the available allotment, all unobligated balances as of June
30, 2012, both for continuing and current allotments shall be withdrawn and pooled to fund fast
moving programs/projects.
9.0 It may be emphasized that the allotments to be withdrawn will be based on the list of slow
moving projects to be identified by the agencies and their catch up plans to be evaluated by
the DBM.
It is apparent from the foregoing text that the withdrawal of unobligated allotments would be based on
whether the allotments pertained to slow-moving projects, or not. However, NBC No. 541 did not set
in clear terms the criteria for the withdrawal of unobligated allotments, viz:
3.1. These guidelines shall cover the withdrawal of unobligated allotments as of June 30, 2012
ofall national government agencies (NGAs) charged against FY 2011 Continuing Appropriation
(R.A. No. 10147) and FY 2012 Current Appropriation (R.A. No. 10155), pertaining to:
3.1.1 Capital Outlays (CO);
3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the
implementation of programs and projects, as well as capitalized MOOE; and
3.1.3 Personal Services corresponding to unutilized pension benefits declared as
savings by the agencies concerned based on their undated/validated list of pensioners.
A perusal of its various provisions reveals that NBC No. 541 targeted the "withdrawal of unobligated
allotments of agencies with low levels of obligations"151 "to fund priority and/or fast-moving
programs/projects."152 But the fact that the withdrawn allotments could be "[r]eissued for the original
programs and projects of the agencies/OUs concerned, from which the allotments were
withdrawn"153 supported the conclusion that the PAPs had not yet been finally discontinued or
abandoned. Thus, the purpose for which the withdrawn funds had been appropriated was not yet
fulfilled, or did not yet cease to exist, rendering the declaration of the funds as savings impossible.
Worse, NBC No. 541 immediately considered for withdrawal all released allotments in 2011 charged
against the 2011 GAA that had remained unobligated based on the following considerations, to wit:
5.4.1 The departments/agencies approved priority programs and projects are assumed to be
implementation-ready and doable during the given fiscal year; and
5.4.2 The practice of having substantial carryover appropriations may imply that the agency
has a slower-than-programmed implementation capacity or agency tends to implement
projects within a two-year timeframe.
Such withdrawals pursuant to NBC No. 541, the circular that affected the unobligated allotments for
continuing and current appropriations as of June 30, 2012, disregarded the 2-year period of
availability of the appropriations for MOOE and capital outlay extended under Section 65, General
Provisions of the 2011 GAA, viz:
Section 65. Availability of Appropriations. Appropriations for MOOE and capital outlays authorized
in this Act shall be available for release and obligation for the purpose specified, and under the same
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special provisions applicable thereto, for a period extending to one fiscal year after the end of the
year in which such items were appropriated: PROVIDED, That appropriations for MOOE and capital
outlays under R.A. No. 9970 shall be made available up to the end of FY 2011: PROVIDED,
FURTHER, That a report on these releases and obligations shall be submitted to the Senate
Committee on Finance and the House Committee on Appropriations.
and Section 63 General Provisions of the 2012 GAA, viz:
Section 63. Availability of Appropriations. Appropriations for MOOE and capital outlays authorized
in this Act shall be available for release and obligation for the purpose specified, and under the same
special provisions applicable thereto, for a period extending to one fiscal year after the end of the
year in which such items were appropriated: PROVIDED, That a report on these releases and
obligations shall be submitted to the Senate Committee on Finance and the House Committee on
Appropriations, either in printed form or by way of electronic document.154
Thus, another alleged area of constitutional infirmity was that the DAP and its relevant issuances
shortened the period of availability of the appropriations for MOOE and capital outlays.
Congress provided a one-year period of availability of the funds for all allotment classes in the 2013
GAA (R.A. No. 10352), to wit:
Section 63. Availability of Appropriations. All appropriations authorized in this Act shall be available
for release and obligation for the purposes specified, and under the same special provisions
applicable thereto, until the end of FY 2013: PROVIDED, That a report on these releases and
obligations shall be submitted to the Senate Committee on Finance and House Committee on
Appropriations, either in printed form or by way of electronic document.
Yet, in his memorandum for the President dated May 20, 2013, Sec. Abad sought omnibus authority
to consolidate savings and unutilized balances to fund the DAP on a quarterly basis, viz:
7.0 If the level of financial performance of some department will register below program, even
with the availability of funds at their disposal, the targeted obligations/disbursements for each
quarter will not be met. It is important to note that these funds will lapse at the end of the fiscal
year if these remain unobligated.
8.0 To maximize the use of the available allotment, all unobligated balances at the end of
every quarter, both for continuing and current allotments shall be withdrawn and pooled to fund
fast moving programs/projects.
9.0 It may be emphasized that the allotments to be withdrawn will be based on the list of slow
moving projects to be identified by the agencies and their catch up plans to be evaluated by
the DBM.
The validity period of the affected appropriations, already given the brief Lifes pan of one year, was
further shortened to only a quarter of a year under the DBMs memorandum dated May 20, 2013.
The petitioners accuse the respondents of forcing the generation of savings in order to have a larger
fund available for discretionary spending. They aver that the respondents, by withdrawing unobligated
allotments in the middle of the fiscal year, in effect deprived funding for PAPs with existing
appropriations under the GAAs.155
The respondents belie the accusation, insisting that the unobligated allotments were being withdrawn
upon the instance of the implementing agencies based on their own assessment that they could not
obligate those allotments pursuant to the Presidents directive for them to spend their appropriations
as quickly as they could in order to ramp up the economy.156
We agree with the petitioners.
Contrary to the respondents insistence, the withdrawals were upon the initiative of the DBM itself.
The text of NBC No. 541 bears this out, to wit:
5.2 For the purpose of determining the amount of unobligated allotments that shall be withdrawn, all
departments/agencies/operating units (OUs) shall submit to DBM not later than July 30, 2012, the
following budget accountability reports as of June 30, 2012;
Statement of Allotments, Obligation and Balances (SAOB);
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Financial Report of Operations (FRO); and

Physical Report of Operations.
5.3 In the absence of the June 30, 2012 reports cited under item 5.2 of this Circular, the agencys
latest report available shall be used by DBM as basis for withdrawal of allotment. The DBM shall
compute/approximate the agencys obligation level as of June 30 to derive its unobligated allotments
as of same period. Example: If the March 31 SAOB or FRO reflects actual obligations of P 800M then
the June 30 obligation level shall approximate to 1,600 M (i.e., 800 M x 2 quarters).
The petitioners assert that no law had authorized the withdrawal and transfer of unobligated
allotments and the pooling of unreleased appropriations; and that the unbridled withdrawal of
unobligated allotments and the retention of appropriated funds were akin to the impoundment of
appropriations that could be allowed only in case of "unmanageable national government budget
deficit" under the GAAs,157 thus violating the provisions of the GAAs of 2011, 2012 and 2013
prohibiting the retention or deduction of allotments.158
In contrast, the respondents emphasize that NBC No. 541 adopted a spending, not saving, policy as
a last-ditch effort of the Executive to push agencies into actually spending their appropriations; that
such policy did not amount to an impoundment scheme, because impoundment referred to the
decision of the Executive to refuse to spend funds for political or ideological reasons; and that the
withdrawal of allotments under NBC No. 541 was made pursuant to Section 38, Chapter 5, Book VI of
the Administrative Code, by which the President was granted the authority to suspend or otherwise
stop further expenditure of funds allotted to any agency whenever in his judgment the public interest
so required.
The assertions of the petitioners are upheld. The withdrawal and transfer of unobligated allotments
and the pooling of unreleased appropriations were invalid for being bereft of legal support.
Nonetheless, such withdrawal of unobligated allotments and the retention of appropriated funds
cannot be considered as impoundment.
According to Philippine Constitution Association v. Enriquez:159 "Impoundment refers to a refusal by
the President, for whatever reason, to spend funds made available by Congress. It is the failure to
spend or obligate budget authority of any type." Impoundment under the GAA is understood to mean
the retention or deduction of appropriations. The 2011 GAA authorized impoundment only in case of
unmanageable National Government budget deficit, to wit:
Section 66. Prohibition Against Impoundment of Appropriations. No appropriations authorized under
this Act shall be impounded through retention or deduction, unless in accordance with the rules and
regulations to be issued by the DBM: PROVIDED, That all the funds appropriated for the purposes,
programs, projects and activities authorized under this Act, except those covered under the
Unprogrammed Fund, shall be released pursuant to Section 33 (3), Chapter 5, Book VI of E.O. No.
292.
Section 67. Unmanageable National Government Budget Deficit. Retention or deduction of
appropriations authorized in this Act shall be effected only in cases where there is an unmanageable
national government budget deficit.
Unmanageable national government budget deficit as used in this section shall be construed to mean
that (i) the actual national government budget deficit has exceeded the quarterly budget deficit targets
consistent with the full-year target deficit as indicated in the FY 2011 Budget of
Expenditures and Sources of Financing submitted by the President and approved by Congress
pursuant to Section 22, Article VII of the Constitution, or (ii) there are clear economic indications of an
impending occurrence of such condition, as determined by the Development Budget Coordinating
Committee and approved by the President.
The 2012 and 2013 GAAs contained similar provisions.
The withdrawal of unobligated allotments under the DAP should not be regarded as impoundment
because it entailed only the transfer of funds, not the retention or deduction of appropriations.
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Nor could Section 68 of the 2011 GAA (and the similar provisions of the 2012 and 2013 GAAs) be
applicable. They uniformly stated:
Section 68. Prohibition Against Retention/Deduction of Allotment. Fund releases from appropriations
provided in this Act shall be transmitted intact or in full to the office or agency concerned. No retention
or deduction as reserves or overhead shall be made, except as authorized by law, or upon direction
of the President of the Philippines. The COA shall ensure compliance with this provision to the extent
that sub-allotments by agencies to their subordinate offices are in conformity with the release
documents issued by the DBM.
The provision obviously pertained to the retention or deduction of allotments upon their release from
the DBM, which was a different matter altogether. The Court should not expand the meaning of the
provision by applying it to the withdrawal of allotments.
The respondents rely on Section 38, Chapter 5, Book VI of the Administrative Code of 1987 to justify
the withdrawal of unobligated allotments. But the provision authorized only the suspension or
stoppage of further expenditures, not the withdrawal of unobligated allotments, to wit:
Section 38. Suspension of Expenditure of Appropriations.- Except as otherwise provided in the
General Appropriations Act and whenever in his judgment the public interest so requires, the
President, upon notice to the head of office concerned, is authorized to suspend or otherwise stop
further expenditure of funds allotted for any agency, or any other expenditure authorized in the
General Appropriations Act, except for personal services appropriations used for permanent officials
and employees.
Moreover, the DBM did not suspend or stop further expenditures in accordance with Section 38,
supra, but instead transferred the funds to other PAPs.
It is relevant to remind at this juncture that the balances of appropriations that remained unexpended
at the end of the fiscal year were to be reverted to the General Fund.1wphi1 This was the mandate
of Section 28, Chapter IV, Book VI of the Administrative Code, to wit:
Section 28. Reversion of Unexpended Balances of Appropriations, Continuing Appropriations.-
Unexpended balances of appropriations authorized in the General Appropriation Act shall revert to
the unappropriated surplus of the General Fund at the end of the fiscal year and shall not thereafter
be available for expenditure except by subsequent legislative enactment: Provided, that
appropriations for capital outlays shall remain valid until fully spent or reverted: provided, further, that
continuing appropriations for current operating expenditures may be specifically recommended and
approved as such in support of projects whose effective implementation calls for multi-year
expenditure commitments: provided, finally, that the President may authorize the use of savings
realized by an agency during given year to meet non-recurring expenditures in a subsequent year.
The balances of continuing appropriations shall be reviewed as part of the annual budget preparation
process and the preparation process and the President may approve upon recommendation of the
Secretary, the reversion of funds no longer needed in connection with the activities funded by said
continuing appropriations.
The Executive could not circumvent this provision by declaring unreleased appropriations and
unobligated allotments as savings prior to the end of the fiscal year.
b.3. Third Requisite No funds from
savings could be transferred under
the DAP to augment deficient items
not provided in the GAA
The third requisite for a valid transfer of funds is that the purpose of the transfer should be "to
augment an item in the general appropriations law for the respective offices." The term "augment"
means to enlarge or increase in size, amount, or degree.160
The GAAs for 2011, 2012 and 2013 set as a condition for augmentation that the appropriation for the
PAP item to be augmented must be deficient, to wit:
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x x x Augmentation implies the existence in this Act of a program, activity, or project with an
appropriation, which upon implementation, or subsequent evaluation of needed resources, is
determined to be deficient. In no case shall a non-existent program, activity, or project, be funded by
augmentation from savings or by the use of appropriations otherwise authorized in this Act.
In other words, an appropriation for any PAP must first be determined to be deficient before it could
be augmented from savings. Note is taken of the fact that the 2013 GAA already made this quite
clear, thus:
Section 52. Use of Savings. The President of the Philippines, the Senate President, the Speaker of
the House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to use savings in
their respective appropriations to augment actual deficiencies incurred for the current year in any item
of their respective appropriations.
As of 2013, a total of 144.4 billion worth of PAPs were implemented through the DAP.161
Of this amount 82.5 billion were released in 2011 and 54.8 billion in 2012.162 Sec. Abad has
reported that 9% of the total DAP releases were applied to the PAPs identified by the legislators.163
The petitioners disagree, however, and insist that the DAP supported the following PAPs that had not
been covered with appropriations in the respective GAAs, namely:
(i) 1.5 billion for the Cordillera Peoples Liberation Army;
(ii) 1.8 billion for the Moro National Liberation Front;
(iii) 700 million for assistance to Quezon Province;164
(iv) 50 million to 100 (million) each to certain senators;165
(v) 10 billion for the relocation of families living along dangerous zones under the National
Housing Authority;
(vi) 10 billion and 20 billion equity infusion under the Bangko Sentral;
(vii) 5.4 billion landowners compensation under the Department of Agrarian Reform;
(viii) 8.6 billion for the ARMM comprehensive peace and development program;
(ix) 6.5 billion augmentation of LGU internal revenue allotments
(x) 5 billion for crucial projects like tourism road construction under the Department of
Tourism and the Department of Public Works and Highways;
(xi) 1.8 billion for the DAR-DPWH Tulay ng Pangulo;
(xii) 1.96 billion for the DOH-DPWH rehabilitation of regional health units; and
(xiii) 4 billion for the DepEd-PPP school infrastructure projects.166
In refutation, the OSG argues that a total of 116 DAP-financed PAPs were implemented, had
appropriation covers, and could properly be accounted for because the funds were released following
and pursuant to the standard practices adopted by the DBM.167 In support of its argument, the OSG
has submitted seven evidence packets containing memoranda, SAROs, and other pertinent
documents relative to the implementation and fund transfers under the DAP.168
Upon careful review of the documents contained in the seven evidence packets, we conclude that the
"savings" pooled under the DAP were allocated to PAPs that were not covered by any appropriations
in the pertinent GAAs.
For example, the SARO issued on December 22, 2011 for the highly vaunted Disaster Risk,
Exposure, Assessment and Mitigation (DREAM) project under the Department of Science and
Technology (DOST) covered the amount of 1.6 Billion,169 broken down as follows:
APPROPRIATION PARTICULARS AMOUNT
CODE AUTHORIZED
A.03.a.01.a Generation of new knowledge and
technologies and research capability
building in priority areas identified as
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strategic to National Development

Personnel Services P 43,504,024
Maintenance and Other Operating 1,164,517,589
Expenses 391,978,387
Capital Outlays P 1,600,000,000
the pertinent provision of the 2011 GAA (R.A. No. 10147) showed that Congress had appropriated
only 537,910,000 for MOOE, but nothing for personnel services and capital outlays, to wit:
Personnel Maintenance Capital TOTAL
Services and Other Outlays
Operating
Expenditures
III. Operations
a. Funding Assistance to Science 177,406,000 1,887,365,000 49,090,000 2,113,861,000
and Technology Activities
1. Central Office 1,554,238,000 1,554,238,000
a. Generation of new
knowledge and
technologies and research
capability building in
priority areas identified as
strategic to National
Development 537,910,000 537,910,000
Aside from this transfer under the DAP to the DREAM project exceeding by almost 300% the
appropriation by Congress for the program Generation of new knowledge and technologies and
research capability building in priority areas identified as strategic to National Development, the
Executive allotted funds for personnel services and capital outlays. The Executive thereby substituted
its will to that of Congress. Worse, the Executive had not earlier proposed any amount for personnel
services and capital outlays in the NEP that became the basis of the 2011 GAA.170
It is worth stressing in this connection that the failure of the GAAs to set aside any amounts for an
expense category sufficiently indicated that Congress purposely did not see fit to fund, much less
implement, the PAP concerned. This indication becomes clearer when even the President himself did
not recommend in the NEP to fund the PAP. The consequence was that any PAP requiring
expenditure that did not receive any appropriation under the GAAs could only be a new PAP, any
funding for which would go beyond the authority laid down by Congress in enacting the GAAs. That
happened in some instances under the DAP.
In relation to the December 22, 2011 SARO issued to the Philippine Council for Industry, Energy and
Emerging Technology Research and Development (DOST-PCIEETRD)171 for Establishment of the
Advanced Failure Analysis Laboratory, which reads:
APPROPRIATION PARTICULARS AMOUNT
CODE AUTHORIZED
Development, integration and coordination of
the National Research System for Industry,
A.02.a Energy and Emerging Technology and
Related Fields
Capital Outlays P 300,000,000
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the appropriation code and the particulars appearing in the SARO did not correspond to the program
specified in the GAA, whose particulars were Research and Management Services(inclusive of the
following activities: (1) Technological and Economic Assessment for Industry, Energy and Utilities; (2)
Dissemination of Science and Technology Information; and (3) Management of PCIERD Information
System for Industry, Energy and Utilities. Even assuming that Development, integration and
coordination of the National Research System for Industry, Energy and Emerging Technology and
Related Fields the particulars stated in the SARO could fall under the broad program description of
Research and Management Services as appearing in the SARO, it would nonetheless remain a new
activity by reason of its not being specifically stated in the GAA. As such, the DBM, sans legislative
authorization, could not validly fund and implement such PAP under the DAP.
In defending the disbursements, however, the OSG contends that the Executive enjoyed sound
discretion in implementing the budget given the generality in the language and the broad policy
objectives identified under the GAAs;172 and that the President enjoyed unlimited authority to spend
the initial appropriations under his authority to declare and utilize savings,173 and in keeping with his
duty to faithfully execute the laws.
Although the OSG rightly contends that the Executive was authorized to spend in line with its
mandate to faithfully execute the laws (which included the GAAs), such authority did not translate to
unfettered discretion that allowed the President to substitute his own will for that of Congress. He was
still required to remain faithful to the provisions of the GAAs, given that his power to spend pursuant
to the GAAs was but a delegation to him from Congress. Verily, the power to spend the public wealth
resided in Congress, not in the Executive.174 Moreover, leaving the spending power of the Executive
unrestricted would threaten to undo the principle of separation of powers.175
Congress acts as the guardian of the public treasury in faithful discharge of its power of the purse
whenever it deliberates and acts on the budget proposal submitted by the Executive.176 Its power of
the purse is touted as the very foundation of its institutional strength,177 and underpins "all other
legislative decisions and regulating the balance of influence between the legislative and executive
branches of government."178 Such enormous power encompasses the capacity to generate money for
the Government, to appropriate public funds, and to spend the money.179 Pertinently, when it
exercises its power of the purse, Congress wields control by specifying the PAPs for which public
money should be spent.
It is the President who proposes the budget but it is Congress that has the final say on matters of
appropriations.180For this purpose, appropriation involves two governing principles, namely: (1) "a
Principle of the Public Fisc, asserting that all monies received from whatever source by any part of
the government are public funds;" and (2) "a Principle of Appropriations Control, prohibiting
expenditure of any public money without legislative authorization."181To conform with the governing
principles, the Executive cannot circumvent the prohibition by Congress of an expenditure for a PAP
by resorting to either public or private funds.182 Nor could the Executive transfer appropriated funds
resulting in an increase in the budget for one PAP, for by so doing the appropriation for another PAP
is necessarily decreased. The terms of both appropriations will thereby be violated.
b.4 Third Requisite Cross-border
augmentations from savings were
prohibited by the Constitution
By providing that the President, the President of the Senate, the Speaker of the House of
Representatives, the Chief Justice of the Supreme Court, and the Heads of the Constitutional
Commissions may be authorized to augment any item in the GAA "for their respective offices,"
Section 25(5), supra, has delineated borders between their offices, such that funds appropriated for
one office are prohibited from crossing over to another office even in the guise of augmentation of a
deficient item or items. Thus, we call such transfers of funds cross-border transfers or cross-border
augmentations.
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To be sure, the phrase "respective offices" used in Section 25(5), supra, refers to the entire
Executive, with respect to the President; the Senate, with respect to the Senate President; the House
of Representatives, with respect to the Speaker; the Judiciary, with respect to the Chief Justice; the
Constitutional Commissions, with respect to their respective Chairpersons.
Did any cross-border transfers or augmentations transpire?
During the oral arguments on January 28, 2014, Sec. Abad admitted making some cross-border
augmentations, to wit:
JUSTICE BERSAMIN:
Alright, the whole time that you have been Secretary of Department of Budget and Management, did
the Executive Department ever redirect any part of savings of the National Government under your
control cross border to another department?
SECRETARY ABAD:
Well, in the Memos that we submitted to you, such an instance, Your Honor
JUSTICE BERSAMIN:
Can you tell me two instances? I dont recall having read your material.
SECRETARY ABAD:
Well, the first instance had to do with a request from the House of Representatives. They started
building their e-library in 2010 and they had a budget for about 207 Million but they lack about 43
Million to complete its 250 Million requirements. Prior to that, the COA, in an audit observation
informed the Speaker that they had to continue with that construction otherwise the whole building, as
well as the equipments therein may suffer from serious deterioration. And at that time, since the
budget of the House of Representatives was not enough to complete 250 Million, they wrote to the
President requesting for an augmentation of that particular item, which was granted, Your Honor. The
second instance in the Memos is a request from the Commission on Audit. At the time they were
pushing very strongly the good governance programs of the government and therefore, part of that is
a requirement to conduct audits as well as review financial reports of many agencies. And in the
performance of that function, the Commission on Audit needed information technology equipment as
well as hire consultants and litigators to help them with their audit work and for that they requested
funds from the Executive and the President saw that it was important for the Commission to be
provided with those IT equipments and litigators and consultants and the request was granted, Your
Honor.
JUSTICE BERSAMIN:
These cross border examples, cross border augmentations were not supported by appropriations
SECRETARY ABAD:
They were, we were augmenting existing items within their (interrupted)
JUSTICE BERSAMIN:
No, appropriations before you augmented because this is a cross border and the tenor or text of the
Constitution is quite clear as far as I am concerned. It says here, "The power to augment may only be
made to increase any item in the General Appropriations Law for their respective offices." Did you not
feel constricted by this provision?
SECRETARY ABAD:
Well, as the Constitution provides, the prohibition we felt was on the transfer of appropriations, Your
Honor. What we thought we did was to transfer savings which was needed by the Commission to
address deficiency in an existing item in both the Commission as well as in the House of
Representatives; thats how we saw(interrupted)
JUSTICE BERSAMIN:
So your position as Secretary of Budget is that you could do that?
SECRETARY ABAD:
In an extreme instances because(interrupted)
JUSTICE BERSAMIN:
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No, no, in all instances, extreme or not extreme, you could do that, thats your feeling.
SECRETARY ABAD:
Well, in that particular situation when the request was made by the Commission and the House of
Representatives, we felt that we needed to respond because we felt(interrupted).183
The records show, indeed, that funds amounting to 143,700,000.00 and 250,000,000.00 were
transferred under the DAP respectively to the COA184 and the House of Representatives.185 Those
transfers of funds, which constituted cross-border augmentations for being from the Executive to the
COA and the House of Representatives, are graphed as follows:186

AMOUNT
DATE (In thousand pesos)
OFFICE PURPOSE
RELEASED Reserve Releases
Imposed
Commission on IT Infrastructure 11/11/11 143,700
Audit Program and hiring of
additional litigation
experts
Congress Completion of the 07/23/12 207,034 250,000
House of construction of the (Savings of HOR)
Representatives Legislative Library and
Archives
Building/Congressional
e-library
The respondents further stated in their memorandum that the President "made available" to the
"Commission on Elections the savings of his department upon [its] request for funds"187 This was
another instance of a cross-border augmentation.
The respondents justified all the cross-border transfers thusly:
99. The Constitution does not prevent the President from transferring savings of his department to
another department upon the latters request, provided it is the recipient department that uses such
funds to augment its own appropriation. In such a case, the President merely gives the other
department access to public funds but he cannot dictate how they shall be applied by that department
whose fiscal autonomy is guaranteed by the Constitution.188
In the oral arguments held on February 18, 2014, Justice Vicente V. Mendoza, representing
Congress, announced a different characterization of the cross-border transfers of funds as in the
nature of "aid" instead of "augmentation," viz:
HONORABLE MENDOZA:
The cross-border transfers, if Your Honors please, is not an application of the DAP. What were these
cross-border transfers? They are transfers of savings as defined in the various General
Appropriations Act. So, that makes it similar to the DAP, the use of savings. There was a cross-
border which appears to be in violation of Section 25, paragraph 5 of Article VI, in the sense that the
border was crossed. But never has it been claimed that the purpose was to augment a deficient item
in another department of the government or agency of the government. The cross-border transfers, if
Your Honors please, were in the nature of [aid] rather than augmentations. Here is a government
entity separate and independent from the Executive Department solely in need of public funds. The
President is there 24 hours a day, 7 days a week. Hes in charge of the whole operation although six
or seven heads of government offices are given the power to augment. Only the President stationed
there and in effect in-charge and has the responsibility for the failure of any part of the government.
You have election, for one reason or another, the money is not enough to hold election. There would
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be chaos if no money is given as an aid, not to augment, but as an aid to a department like COA. The
President is responsible in a way that the other heads, given the power to augment, are not. So, he
cannot very well allow this, if Your Honor please.189
JUSTICE LEONEN:
May I move to another point, maybe just briefly. I am curious that the position now, I think, of
government is that some transfers of savings is now considered to be, if Im not mistaken, aid not
augmentation. Am I correct in my hearing of your argument?
HONORABLE MENDOZA:
Thats our submission, if Your Honor, please.
JUSTICE LEONEN:
May I know, Justice, where can we situate this in the text of the Constitution? Where do we actually
derive the concepts that transfers of appropriation from one branch to the other or what happened in
DAP can be considered a said? What particular text in the Constitution can we situate this?
HONORABLE MENDOZA:
There is no particular provision or statutory provision for that matter, if Your Honor please. It is drawn
from the fact that the Executive is the executive in-charge of the success of the government.
JUSTICE LEONEN:
So, the residual powers labelled in Marcos v. Manglapus would be the basis for this theory of the
government?
HONORABLE MENDOZA:
Yes, if Your Honor, please.
JUSTICE LEONEN:
A while ago, Justice Carpio mentioned that the remedy is might be to go to Congress. That there are
opportunities and there have been opportunities of the President to actually go to Congress and ask
for supplemental budgets?
HONORABLE MENDOZA:
If there is time to do that, I would say yes.
JUSTICE LEONEN:
So, the theory of aid rather than augmentation applies in extra-ordinary situation?
HONORABLE MENDOZA:
Very extra-ordinary situations.
JUSTICE LEONEN:
But Counsel, this would be new doctrine, in case?
HONORABLE MENDOZA:
Yes, if Your Honor please.190
Regardless of the variant characterizations of the cross-border transfers of funds, the plain text of
Section 25(5), supra, disallowing cross border transfers was disobeyed. Cross-border transfers,
whether as augmentation, or as aid, were prohibited under Section 25(5), supra.
4.
Sourcing the DAP from unprogrammed
funds despite the original revenue targets
not having been exceeded was invalid
Funding under the DAP were also sourced from unprogrammed funds provided in the GAAs for 2011,
2012,and 2013. The respondents stress, however, that the unprogrammed funds were not brought
under the DAP as savings, but as separate sources of funds; and that, consequently, the release and
use of unprogrammed funds were not subject to the restrictions under Section 25(5), supra.
The documents contained in the Evidence Packets by the OSG have confirmed that the
unprogrammed funds were treated as separate sources of funds. Even so, the release and use of the
unprogrammed funds were still subject to restrictions, for, to start with, the GAAs precisely specified
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the instances when the unprogrammed funds could be released and the purposes for which they
could be used.
The petitioners point out that a condition for the release of the unprogrammed funds was that the
revenue collections must exceed revenue targets; and that the release of the unprogrammed funds
was illegal because such condition was not met.191
The respondents disagree, holding that the release and use of the unprogrammed funds under the
DAP were in accordance with the pertinent provisions of the GAAs. In particular, the DBM avers that
the unprogrammed funds could be availed of when any of the following three instances occur, to wit:
(1) the revenue collections exceeded the original revenue targets proposed in the BESFs submitted
by the President to Congress; (2) new revenues were collected or realized from sources not originally
considered in the BESFs; or(3) newly-approved loans for foreign assisted projects were secured, or
when conditions were triggered for other sources of funds, such as perfected loan agreements for
foreign-assisted projects.192 This view of the DBM was adopted by all the respondents in their
Consolidated Comment.193
The BESFs for 2011, 2012 and 2013 uniformly defined "unprogrammed appropriations" as
appropriations that provided standby authority to incur additional agency obligations for priority PAPs
when revenue collections exceeded targets, and when additional foreign funds are
generated.194 Contrary to the DBMs averment that there were three instances when unprogrammed
funds could be released, the BESFs envisioned only two instances. The third mentioned by the DBM
the collection of new revenues from sources not originally considered in the BESFs was not
included. This meant that the collection of additional revenues from new sources did not warrant the
release of the unprogrammed funds. Hence, even if the revenues not considered in the BESFs were
collected or generated, the basic condition that the revenue collections should exceed the revenue
targets must still be complied with in order to justify the release of the unprogrammed funds.
The view that there were only two instances when the unprogrammed funds could be released was
bolstered by the following texts of the Special Provisions of the 2011 and 2012 GAAs, to wit:
2011 GAA
1. Release of Fund. The amounts authorized herein shall be released only when the revenue
collections exceed the original revenue targets submitted by the President of the Philippines to
Congress pursuant to Section 22, Article VII of the Constitution, including savings generated from
programmed appropriations for the year: PROVIDED, That collections arising from sources not
considered in the aforesaid original revenue targets may be used to cover releases from
appropriations in this Fund: PROVIDED, FURTHER, That in case of newly approved loans for
foreign-assisted projects, the existence of a perfected loan agreement for the purpose shall be
sufficient basis for the issuance of a SARO covering the loan proceeds: PROVIDED,
FURTHERMORE, That if there are savings generated from the programmed appropriations for the
first two quarters of the year, the DBM may, subject to the approval of the President, release the
pertinent appropriations under the Unprogrammed Fund corresponding to only fifty percent (50%) of
the said savings net of revenue shortfall: PROVIDED, FINALLY, That the release of the balance of
the total savings from programmed appropriations for the year shall be subject to fiscal programming
and approval of the President.
2012 GAA
1. Release of the Fund. The amounts authorized herein shall be released only when the revenue
collections exceed the original revenue targets submitted by the President of the Philippines to
Congress pursuant to Section 22, Article VII of the Constitution: PROVIDED, That collections arising
from sources not considered in the aforesaid original revenue targets may be used to cover releases
from appropriations in this Fund: PROVIDED, FURTHER, That in case of newly approved loans for
foreign-assisted projects, the existence of a perfected loan agreement for the purpose shall be
sufficient basis for the issuance of a SARO covering the loan proceeds.
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As can be noted, the provisos in both provisions to the effect that "collections arising from sources not
considered in the aforesaid original revenue targets may be used to cover releases from
appropriations in this Fund" gave the authority to use such additional revenues for appropriations
funded from the unprogrammed funds. They did not at all waive compliance with the basic
requirement that revenue collections must still exceed the original revenue targets.
In contrast, the texts of the provisos with regard to additional revenues generated from newly-
approved foreign loans were clear to the effect that the perfected loan agreement would be in itself
"sufficient basis" for the issuance of a SARO to release the funds but only to the extent of the amount
of the loan. In such instance, the revenue collections need not exceed the revenue targets to warrant
the release of the loan proceeds, and the mere perfection of the loan agreement would suffice.
It can be inferred from the foregoing that under these provisions of the GAAs the additional revenues
from sources not considered in the BESFs must be taken into account in determining if the revenue
collections exceeded the revenue targets. The text of the relevant provision of the 2013 GAA, which
was substantially similar to those of the GAAs for 2011 and 2012, already made this explicit, thus:
1. Release of the Fund. The amounts authorized herein shall be released only when the revenue
collections exceed the original revenue targets submitted by the President of the Philippines to
Congress pursuant to Section 22, Article VII of the Constitution, including collections arising from
sources not considered in the aforesaid original revenue target, as certified by the BTr: PROVIDED,
That in case of newly approved loans for foreign-assisted projects, the existence of a perfected loan
agreement for the purpose shall be sufficient basis for the issuance of a SARO covering the loan
proceeds.
Consequently, that there were additional revenues from sources not considered in the revenue target
would not be enough. The total revenue collections must still exceed the original revenue targets to
justify the release of the unprogrammed funds (other than those from newly-approved foreign loans).
The present controversy on the unprogrammed funds was rooted in the correct interpretation of the
phrase "revenue collections should exceed the original revenue targets." The petitioners take the
phrase to mean that the total revenue collections must exceed the total revenue target stated in the
BESF, but the respondents understand the phrase to refer only to the collections for each source of
revenue as enumerated in the BESF, with the condition being deemed complied with once the
revenue collections from a particular source already exceeded the stated target.
The BESF provided for the following sources of revenue, with the corresponding revenue target
stated for each source of revenue, to wit:
TAX REVENUES Government Services
Taxes on Net Income and Profits Interest on NG Deposits
Taxes on Property Interest on Advances to
Taxes on Domestic Goods and Services Government Corporations
General Sales, Turnover or VAT Income from Investments
Selected Excises on Goods Interest on Bond Holdings
Selected Taxes on Services Guarantee Fee
Taxes on the Use of Goods or Property Gain on Foreign Exchange
or Permission to Perform Activities NG Income Collected by BTr
Other Taxes Dividends on Stocks
Taxes on International Trade and NG Share from Airport
Transactions Terminal Fee
NON-TAX REVENUES NG Share from PAGCOR
Fees and Charges Income
BTR Income NG Share from MIAA
Profit
Privatization
Foreign Grants
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Thus, when the Court required the respondents to submit a certification from the Bureau of Treasury
(BTr) to the effect that the revenue collections had exceeded the original revenue targets,195 they
complied by submitting certifications from the BTr and Department of Finance (DOF) pertaining to
only one identified source of revenue the dividends from the shares of stock held by the
Government in government-owned and controlled corporations.
To justify the release of the unprogrammed funds for 2011, the OSG presented the certification dated
March 4, 2011 issued by DOF Undersecretary Gil S. Beltran, as follows:
This is to certify that under the Budget for Expenditures and Sources of Financing for 2011, the
programmed income from dividends from shares of stock in government-owned and controlled
corporations is 5.5 billion.
This is to certify further that based on the records of the Bureau of Treasury, the National
Government has recorded dividend income amounting to 23.8 billion as of 31 January 2011.196
For 2012, the OSG submitted the certification dated April 26, 2012 issued by National Treasurer
Roberto B. Tan, viz:
This is to certify that the actual dividend collections remitted to the National Government for the
period January to March 2012 amounted to 19.419 billion compared to the full year program of 5.5
billion for 2012.197
And, finally, for 2013, the OSG presented the certification dated July 3, 2013 issued by National
Treasurer Rosalia V. De Leon, to wit:
This is to certify that the actual dividend collections remitted to the National Government for the
period January to May 2013 amounted to 12.438 billion compared to the full year program of
10.0198 billion for 2013.
Moreover, the National Government accounted for the sale of the right to build and operate the NAIA
expressway amounting to 11.0 billion in June 2013.199
The certifications reflected that by collecting dividends amounting to 23.8 billion in 2011, 19.419
billion in 2012, and 12.438 billion in 2013 the BTr had exceeded only the 5.5 billion in target
revenues in the form of dividends from stocks in each of 2011 and 2012, and only the 10 billion in
target revenues in the form of dividends from stocks in 2013.
However, the requirement that revenue collections exceed the original revenue targets was to be
construed in light of the purpose for which the unprogrammed funds were incorporated in the GAAs
as standby appropriations to support additional expenditures for certain priority PAPs should the
revenue collections exceed the resource targets assumed in the budget or when additional foreign
project loan proceeds were realized. The unprogrammed funds were included in the GAAs to provide
ready cover so as not to delay the implementation of the PAPs should new or additional revenue
sources be realized during the year.200 Given the tenor of the certifications, the unprogrammed funds
were thus not yet supported by the corresponding resources.201
The revenue targets stated in the BESF were intended to address the funding requirements of the
proposed programmed appropriations. In contrast, the unprogrammed funds, as standby
appropriations, were to be released only when there were revenues in excess of what the
programmed appropriations required. As such, the revenue targets should be considered as a whole,
not individually; otherwise, we would be dealing with artificial revenue surpluses. The requirement
that revenue collections must exceed revenue target should be understood to mean that the revenue
collections must exceed the total of the revenue targets stated in the BESF. Moreover, to release the
unprogrammed funds simply because there was an excess revenue as to one source of revenue
would be an unsound fiscal management measure because it would disregard the budget plan and
foster budget deficits, in contravention of the Governments surplus budget policy.202
We cannot, therefore, subscribe to the respondents view.
5.
Equal protection, checks and balances,
and public accountability challenges
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The DAP is further challenged as violative of the Equal Protection Clause, the system of checks and
balances, and the principle of public accountability.
With respect to the challenge against the DAP under the Equal Protection Clause,203 Luna argues
that the implementation of the DAP was "unfair as it [was] selective" because the funds released
under the DAP was not made available to all the legislators, with some of them refusing to avail
themselves of the DAP funds, and others being unaware of the availability of such funds. Thus, the
DAP practised "undue favoritism" in favor of select legislators in contravention of the Equal Protection
Clause.
Similarly, COURAGE contends that the DAP violated the Equal Protection Clause because no
reasonable classification was used in distributing the funds under the DAP; and that the Senators
who supposedly availed themselves of said funds were differently treated as to the amounts they
respectively received.
Anent the petitioners theory that the DAP violated the system of checks and balances, Luna submits
that the grant of the funds under the DAP to some legislators forced their silence about the issues
and anomalies surrounding the DAP. Meanwhile, Belgica stresses that the DAP, by allowing the
legislators to identify PAPs, authorized them to take part in the implementation and execution of the
GAAs, a function that exclusively belonged to the Executive; that such situation constituted undue
and unjustified legislative encroachment in the functions of the Executive; and that the President
arrogated unto himself the power of appropriation vested in Congress because NBC No. 541
authorized the use of the funds under the DAP for PAPs not considered in the 2012 budget.
Finally, the petitioners insist that the DAP was repugnant to the principle of public accountability
enshrined in the Constitution,204 because the legislators relinquished the power of appropriation to the
Executive, and exhibited a reluctance to inquire into the legality of the DAP.
The OSG counters the challenges, stating that the supposed discrimination in the release of funds
under the DAP could be raised only by the affected Members of Congress themselves, and if the
challenge based on the violation of the Equal Protection Clause was really against the
constitutionality of the DAP, the arguments of the petitioners should be directed to the entitlement of
the legislators to the funds, not to the proposition that all of the legislators should have been given
such entitlement.
The challenge based on the contravention of the Equal Protection Clause, which focuses on the
release of funds under the DAP to legislators, lacks factual and legal basis. The allegations about
Senators and Congressmen being unaware of the existence and implementation of the DAP, and
about some of them having refused to accept such funds were unsupported with relevant data. Also,
the claim that the Executive discriminated against some legislators on the ground alone of their
receiving less than the others could not of itself warrant a finding of contravention of the Equal
Protection Clause. The denial of equal protection of any law should be an issue to be raised only by
parties who supposedly suffer it, and, in these cases, such parties would be the few legislators
claimed to have been discriminated against in the releases of funds under the DAP. The reason for
the requirement is that only such affected legislators could properly and fully bring to the fore when
and how the denial of equal protection occurred, and explain why there was a denial in their situation.
The requirement was not met here. Consequently, the Court was not put in the position to determine
if there was a denial of equal protection. To have the Court do so despite the inadequacy of the
showing of factual and legal support would be to compel it to speculate, and the outcome would not
do justice to those for whose supposed benefit the claim of denial of equal protection has been made.
The argument that the release of funds under the DAP effectively stayed the hands of the legislators
from conducting congressional inquiries into the legality and propriety of the DAP is speculative. That
deficiency eliminated any need to consider and resolve the argument, for it is fundamental that
speculation would not support any proper judicial determination of an issue simply because nothing
concrete can thereby be gained. In order to sustain their constitutional challenges against official acts
of the Government, the petitioners must discharge the basic burden of proving that the constitutional
295

infirmities actually existed.205 Simply put, guesswork and speculation cannot overcome the
presumption of the constitutionality of the assailed executive act.
We do not need to discuss whether or not the DAP and its implementation through the various
circulars and memoranda of the DBM transgressed the system of checks and balances in place in our
constitutional system. Our earlier expositions on the DAP and its implementing issuances infringing
the doctrine of separation of powers effectively addressed this particular concern.
Anent the principle of public accountability being transgressed because the adoption and
implementation of the DAP constituted an assumption by the Executive of Congress power of
appropriation, we have already held that the DAP and its implementing issuances were policies and
acts that the Executive could properly adopt and do in the execution of the GAAs to the extent that
they sought to implement strategies to ramp up or accelerate the economy of the country.
6. --- Doctrine of operative fact was applicable
After declaring the DAP and its implementing issuances constitutionally infirm, we must now deal with
the consequences of the declaration.
Article 7 of the Civil Code provides:
Article 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not
be excused by disuse, or custom or practice to the contrary.
When the courts declared a law to be inconsistent with the Constitution, the former shall be void and
the latter shall govern.
Administrative or executive acts, orders and regulations shall be valid only when they are not contrary
to the laws or the Constitution.
A legislative or executive act that is declared void for being unconstitutional cannot give rise to any
right or obligation.206 However, the generality of the rule makes us ponder whether rigidly applying the
rule may at times be impracticable or wasteful. Should we not recognize the need to except from the
rigid application of the rule the instances in which the void law or executive act produced an almost
irreversible result?
The need is answered by the doctrine of operative fact. The doctrine, definitely not a novel one, has
been exhaustively explained in De Agbayani v. Philippine National Bank:207
The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an
executive order or a municipal ordinance likewise suffering from that infirmity, cannot be the source of
any legal rights or duties. Nor can it justify any official act taken under it. Its repugnancy to the
fundamental law once judicially declared results in its being to all intents and purposes a mere scrap
of paper. As the new Civil Code puts it: When the courts declare a law to be inconsistent with the
Constitution, the former shall be void and the latter shall govern. Administrative or executive acts,
orders and regulations shall be valid only when they are not contrary to the laws of the Constitution. It
is understandable why it should be so, the Constitution being supreme and paramount. Any
legislative or executive act contrary to its terms cannot survive.
Such a view has support in logic and possesses the merit of simplicity. It may not however be
sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such challenged
legislative or executive act must have been in force and had to be complied with. This is so as until
after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and
respect. Parties may have acted under it and may have changed their positions. What could be more
fitting than that in a subsequent litigation regard be had to what has been done while such legislative
or executive act was in operation and presumed to be valid in all respects. It is now accepted as a
doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to
reflect awareness that precisely because the judiciary is the governmental organ which has the final
say on whether or not a legislative or executive measure is valid, a period of time may have elapsed
before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be
to deprive the law of its quality of fairness and justice then, if there be no recognition of what had
transpired prior to such adjudication.
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In the language of an American Supreme Court decision: The actual existence of a statute, prior to
such a determination [of unconstitutionality], is an operative fact and may have consequences which
cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect
of the subsequent ruling as to invalidity may have to be considered in various aspects, with respect to
particular relations, individual and corporate, and particular conduct, private and official."
The doctrine of operative fact recognizes the existence of the law or executive act prior to the
determination of its unconstitutionality as an operative fact that produced consequences that cannot
always be erased, ignored or disregarded. In short, it nullifies the void law or executive act but
sustains its effects. It provides an exception to the general rule that a void or unconstitutional law
produces no effect.208 But its use must be subjected to great scrutiny and circumspection, and it
cannot be invoked to validate an unconstitutional law or executive act, but is resorted to only as a
matter of equity and fair play.209 It applies only to cases where extraordinary circumstances exist, and
only when the extraordinary circumstances have met the stringent conditions that will permit its
application.
We find the doctrine of operative fact applicable to the adoption and implementation of the DAP. Its
application to the DAP proceeds from equity and fair play. The consequences resulting from the DAP
and its related issuances could not be ignored or could no longer be undone.
To be clear, the doctrine of operative fact extends to a void or unconstitutional executive act. The
term executive act is broad enough to include any and all acts of the Executive, including those that
are quasi legislative and quasi-judicial in nature. The Court held so in Hacienda Luisita, Inc. v.
Presidential Agrarian Reform Council:210
Nonetheless, the minority is of the persistent view that the applicability of the operative fact doctrine
should be limited to statutes and rules and regulations issued by the executive department that are
accorded the same status as that of a statute or those which are quasi-legislative in nature. Thus, the
minority concludes that the phrase executive act used in the case of De Agbayani v. Philippine
National Bank refers only to acts, orders, and rules and regulations that have the force and effect of
law. The minority also made mention of the Concurring Opinion of Justice Enrique Fernando in
Municipality of Malabang v. Benito, where it was supposedly made explicit that the operative fact
doctrine applies to executive acts, which are ultimately quasi-legislative in nature.
We disagree. For one, neither the De Agbayani case nor the Municipality of Malabang case
elaborates what executive act mean. Moreover, while orders, rules and regulations issued by the
President or the executive branch have fixed definitions and meaning in the Administrative Code and
jurisprudence, the phrase executive act does not have such specific definition under existing laws. It
should be noted that in the cases cited by the minority, nowhere can it be found that the term
executive act is confined to the foregoing. Contrarily, the term executive act is broad enough to
encompass decisions of administrative bodies and agencies under the executive department which
are subsequently revoked by the agency in question or nullified by the Court.
A case in point is the concurrent appointment of Magdangal B. Elma (Elma) as Chairman of the
Presidential Commission on Good Government (PCGG) and as Chief Presidential Legal Counsel
(CPLC) which was declared unconstitutional by this Court in Public Interest Center, Inc. v. Elma. In
said case, this Court ruled that the concurrent appointment of Elma to these offices is in violation of
Section 7, par. 2, Article IX-B of the 1987 Constitution, since these are incompatible offices. Notably,
the appointment of Elma as Chairman of the PCGG and as CPLC is, without a question, an executive
act. Prior to the declaration of unconstitutionality of the said executive act, certain acts or transactions
were made in good faith and in reliance of the appointment of Elma which cannot just be set aside or
invalidated by its subsequent invalidation.
In Tan v. Barrios, this Court, in applying the operative fact doctrine, held that despite the invalidity of
the jurisdiction of the military courts over civilians, certain operative facts must be acknowledged to
have existed so as not to trample upon the rights of the accused therein. Relevant thereto, in Olaguer
v. Military Commission No. 34, it was ruled that military tribunals pertain to the Executive Department
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of the Government and are simply instrumentalities of the executive power, provided by the
legislature for the President as Commander-in-Chief to aid him in properly commanding the army and
navy and enforcing discipline therein, and utilized under his orders or those of his authorized military
representatives.
Evidently, the operative fact doctrine is not confined to statutes and rules and regulations issued by
the executive department that are accorded the same status as that of a statute or those which are
quasi-legislative in nature.
Even assuming that De Agbayani initially applied the operative fact doctrine only to executive
issuances like orders and rules and regulations, said principle can nonetheless be applied, by
analogy, to decisions made by the President or the agencies under the executive department. This
doctrine, in the interest of justice and equity, can be applied liberally and in a broad sense to
encompass said decisions of the executive branch. In keeping with the demands of equity, the Court
can apply the operative fact doctrine to acts and consequences that resulted from the reliance not
only on a law or executive act which is quasi-legislative in nature but also on decisions or orders of
the executive branch which were later nullified. This Court is not unmindful that such acts and
consequences must be recognized in the higher interest of justice, equity and fairness.
Significantly, a decision made by the President or the administrative agencies has to be complied with
because it has the force and effect of law, springing from the powers of the President under the
Constitution and existing laws. Prior to the nullification or recall of said decision, it may have produced
acts and consequences in conformity to and in reliance of said decision, which must be respected. It
is on this score that the operative fact doctrine should be applied to acts and consequences that
resulted from the implementation of the PARC Resolution approving the SDP of HLI. (Bold
underscoring supplied for emphasis)
In Commissioner of Internal Revenue v. San Roque Power Corporation,211 the Court likewise
declared that "for the operative fact doctrine to apply, there must be a legislative or executive
measure, meaning a law or executive issuance." Thus, the Court opined there that the operative fact
doctrine did not apply to a mere administrative practice of the Bureau of Internal Revenue, viz:
Under Section 246, taxpayers may rely upon a rule or ruling issued by the Commissioner from the
time the rule or ruling is issued up to its reversal by the Commissioner or this Court. The reversal is
not given retroactive effect. This, in essence, is the doctrine of operative fact. There must, however,
be a rule or ruling issued by the Commissioner that is relied upon by the taxpayer in good faith. A
mere administrative practice, not formalized into a rule or ruling, will not suffice because such a mere
administrative practice may not be uniformly and consistently applied. An administrative practice, if
not formalized as a rule or ruling, will not be known to the general public and can be availed of only by
those with informal contacts with the government agency.
It is clear from the foregoing that the adoption and the implementation of the DAP and its related
issuances were executive acts.1avvphi1 The DAP itself, as a policy, transcended a merely
administrative practice especially after the Executive, through the DBM, implemented it by issuing
various memoranda and circulars. The pooling of savings pursuant to the DAP from the allotments
made available to the different agencies and departments was consistently applied throughout the
entire Executive. With the Executive, through the DBM, being in charge of the third phase of the
budget cycle the budget execution phase, the President could legitimately adopt a policy like the
DAP by virtue of his primary responsibility as the Chief Executive of directing the national economy
towards growth and development. This is simply because savings could and should be determined
only during the budget execution phase.
As already mentioned, the implementation of the DAP resulted into the use of savings pooled by the
Executive to finance the PAPs that were not covered in the GAA, or that did not have proper
appropriation covers, as well as to augment items pertaining to other departments of the Government
in clear violation of the Constitution. To declare the implementation of the DAP unconstitutional
without recognizing that its prior implementation constituted an operative fact that produced
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consequences in the real as well as juristic worlds of the Government and the Nation is to be
impractical and unfair. Unless the doctrine is held to apply, the Executive as the disburser and the
offices under it and elsewhere as the recipients could be required to undo everything that they had
implemented in good faith under the DAP. That scenario would be enormously burdensome for the
Government. Equity alleviates such burden.
The other side of the coin is that it has been adequately shown as to be beyond debate that the
implementation of the DAP yielded undeniably positive results that enhanced the economic welfare of
the country. To count the positive results may be impossible, but the visible ones, like public
infrastructure, could easily include roads, bridges, homes for the homeless, hospitals, classrooms and
the like. Not to apply the doctrine of operative fact to the DAP could literally cause the physical
undoing of such worthy results by destruction, and would result in most undesirable wastefulness.
Nonetheless, as Justice Brion has pointed out during the deliberations, the doctrine of operative fact
does not always apply, and is not always the consequence of every declaration of constitutional
invalidity. It can be invoked only in situations where the nullification of the effects of what used to be a
valid law would result in inequity and injustice;212but where no such result would ensue, the general
rule that an unconstitutional law is totally ineffective should apply.
In that context, as Justice Brion has clarified, the doctrine of operative fact can apply only to the PAPs
that can no longer be undone, and whose beneficiaries relied in good faith on the validity of the DAP,
but cannot apply to the authors, proponents and implementors of the DAP, unless there are concrete
findings of good faith in their favor by the proper tribunals determining their criminal, civil,
administrative and other liabilities.
WHEREFORE, the Court PARTIALLY GRANTS the petitions for certiorari and prohibition; and
DECLARES the following acts and practices under the Disbursement Acceleration Program, National
Budget Circular No. 541 and related executive issuances UNCONSTITUTIONAL for being in violation
of Section 25(5), Article VI of the 1987 Constitution and the doctrine of separation of powers, namely:
(a) The withdrawal of unobligated allotments from the implementing agencies, and the
declaration of the withdrawn unobligated allotments and unreleased appropriations as savings
prior to the end of the fiscal year and without complying with the statutory definition of savings
contained in the General Appropriations Acts;
(b) The cross-border transfers of the savings of the Executive to augment the appropriations of
other offices outside the Executive; and
(c) The funding of projects, activities and programs that were not covered by any appropriation
in the General Appropriations Act.
The Court further DECLARES VOID the use of unprogrammed funds despite the absence of a
certification by the National Treasurer that the revenue collections exceeded the revenue targets for
non-compliance with the conditions provided in the relevant General Appropriations Acts.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR