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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

152154 July 15, 2003

by the following five account groups, using various foreign foundations in certain Swiss banks: (1) Azio-Verso-Vibur Foundation accounts; (2) Xandy-Wintrop: Charis-Scolari-Valamo-Spinus- Avertina Foundation accounts; (3) Trinidad-Rayby-Palmy Foundation accounts; (4) Rosalys-Aguamina Foundation accounts and (5) Maler Foundation accounts. In addition, the petition sought the forfeiture of US$25 million and US$5 million in treasury notes which exceeded the Marcos couple's salaries, other lawful income as well as income from legitimately acquired property. The treasury notes are frozen at the Central Bank of the Philippines, now Bangko Sentral ng Pilipinas, by virtue of the freeze order issued by the PCGG. On October 18, 1993, respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M. Araneta and Ferdinand R. Marcos, Jr. filed their answer. Before the case was set for pre-trial, a General Agreement and the Supplemental Agreements6 dated December 28, 1993 were executed by the Marcos children and then PCGG Chairman Magtanggol Gunigundo for a global settlement of the assets of the Marcos family. Subsequently, respondent Marcos children filed a motion dated December 7, 1995 for the approval of said agreements and for the enforcement thereof. The General Agreement/Supplemental Agreements sought to identify, collate, cause the inventory of and distribute all assets presumed to be owned by the Marcos family under the conditions contained therein. The aforementioned General Agreement specified in one of its premises or "whereas clauses" the fact that petitioner "obtained a judgment from the Swiss Federal Tribunal on December 21, 1990, that the Three Hundred Fifty-six Million U.S. dollars (US$356 million) belongs in principle to the Republic of the Philippines provided certain conditionalities are met x x x." The said decision of the Swiss Federal Supreme Court affirmed the decision of Zurich District Attorney Peter Consandey, granting petitioner's request for legal

REPUBLIC OF THE PHILIPPINES, petitioner, vs. HONORABLE SANDIGANBAYAN (SPECIAL FIRST DIVISION), FERDINAND E. MARCOS (REPRESENTED BY HIS ESTATE/HEIRS: IMELDA R. MARCOS, MARIA IMELDA [IMEE] MARCOS-MANOTOC, FERDINAND R. MARCOS, JR. AND IRENE MARCOS-ARANETA) AND IMELDA ROMUALDEZ MARCOS, respondents. CORONA, J.: This is a petition for certiorari under Rule 65 of the Rules of Court seeking to (1) set aside the Resolution dated January 31, 2002 issued by the Special First Division of the Sandiganbayan in Civil Case No. 0141 entitledRepublic of the Philippines vs. Ferdinand E. Marcos, et. al., and (2) reinstate its earlier decision dated September 19, 2000 which forfeited in favor of petitioner Republic of the Philippines (Republic) the amount held in escrow in the Philippine National Bank (PNB) in the aggregate amount of US$658,175,373.60 as of January 31, 2002. BACKGROUND OF THE CASE On December 17, 1991, petitioner Republic, through the Presidential Commission on Good Government (PCGG), represented by the Office of the Solicitor General (OSG), filed a petition for forfeiture before the Sandiganbayan, docketed as Civil Case No. 0141 entitled Republic of the Philippines vs. Ferdinand E. Marcos, represented by his Estate/Heirs and Imelda R. Marcos, pursuant to RA 13791 in relation to Executive Order Nos. 1,2 2,3 144 and 14-A.5 In said case, petitioner sought the declaration of the aggregate amount of US$356 million (now estimated to be more than US$658 million inclusive of interest) deposited in escrow in the PNB, as ill-gotten wealth. The funds were previously held

assistance.7 Consandey declared the various deposits in the name of the enumerated foundations to be of illegal provenance and ordered that they be frozen to await the final verdict in favor of the parties entitled to restitution. Hearings were conducted by the Sandiganbayan on the motion to approve the General/Supplemental Agreements. Respondent Ferdinand, Jr. was presented as witness for the purpose of establishing the partial implementation of said agreements. On October 18, 1996, petitioner filed a motion for summary judgment and/or judgment on the pleadings. Respondent Mrs. Marcos filed her opposition thereto which was later adopted by respondents Mrs. Manotoc, Mrs. Araneta and Ferdinand, Jr. In its resolution dated November 20, 1997, the Sandiganbayan denied petitioner's motion for summary judgment and/or judgment on the pleadings on the ground that the motion to approve the compromise agreement "(took) precedence over the motion for summary judgment." Respondent Mrs. Marcos filed a manifestation on May 26, 1998 claiming she was not a party to the motion for approval of the Compromise Agreement and that she owned 90% of the funds with the remaining 10% belonging to the Marcos estate. Meanwhile, on August 10, 1995, petitioner filed with the District Attorney in Zurich, Switzerland, an additional request for the immediate transfer of the deposits to an escrow account in the PNB. The request was granted. On appeal by the Marcoses, the Swiss Federal Supreme Court, in a decision dated December 10, 1997, upheld the ruling of the District Attorney of Zurich granting the request for the transfer of the funds. In 1998, the funds were remitted to the Philippines in escrow. Subsequently, respondent Marcos children moved that the funds be placed in custodia legis because the deposit in escrow in the PNB was allegedly in danger of dissipation by petitioner. The Sandiganbayan, in its resolution dated September 8, 1998, granted the motion. After the pre-trial and the issuance of the pre-trial order and supplemental pre-trial order dated October 28, 1999 and January 21, 2000, respectively, the case was set for trial. After several resettings, petitioner, on March 10, 2000, filed another motion for summary judgment pertaining to the forfeiture of the US$356 million, based on the following grounds: I

THE ESSENTIAL FACTS WHICH WARRANT THE FORFEITURE OF THE FUNDS SUBJECT OF THE PETITION UNDER R.A. NO. 1379 ARE ADMITTED BY RESPONDENTS IN THEIR PLEADINGS AND OTHER SUBMISSIONS MADE IN THE COURSE OF THE PROCEEDING. II RESPONDENTS' ADMISSION MADE DURING THE PRE-TRIAL THAT THEY DO NOT HAVE ANY INTEREST OR OWNERSHIP OVER THE FUNDS SUBJECT OF THE ACTION FOR FORFEITURE TENDERS NO GENUINE ISSUE OR CONTROVERSY AS TO ANY MATERIAL FACT IN THE PRESENT ACTION, THUS WARRANTING THE RENDITION OF SUMMARY JUDGMENT.8 Petitioner contended that, after the pre-trial conference, certain facts were established, warranting a summary judgment on the funds sought to be forfeited. Respondent Mrs. Marcos filed her opposition to the petitioner's motion for summary judgment, which opposition was later adopted by her co-respondents Mrs. Manotoc, Mrs. Araneta and Ferdinand, Jr. On March 24, 2000, a hearing on the motion for summary judgment was conducted. In a decision9 dated September 19, 2000, the Sandiganbayan granted petitioner's motion for summary judgment: CONCLUSION There is no issue of fact which calls for the presentation of evidence. The Motion for Summary Judgment is hereby granted. The Swiss deposits which were transmitted to and now held in escrow at the PNB are deemed unlawfully acquired as ill-gotten wealth. DISPOSITION

WHEREFORE, judgment is hereby rendered in favor of the Republic of the Philippines and against the respondents, declaring the Swiss deposits which were transferred to and now deposited in escrow at the Philippine National Bank in the total aggregate value equivalent to US$627,608,544.95 as of August 31, 2000 together with the increments thereof forfeited in favor of the State.10 Respondent Mrs. Marcos filed a motion for reconsideration dated September 26, 2000. Likewise, Mrs. Manotoc and Ferdinand, Jr. filed their own motion for reconsideration dated October 5, 2000. Mrs. Araneta filed a manifestation dated October 4, 2000 adopting the motion for reconsideration of Mrs. Marcos, Mrs. Manotoc and Ferdinand, Jr. Subsequently, petitioner filed its opposition thereto. In a resolution11 dated January 31, 2002, the Sandiganbayan reversed its September 19, 2000 decision, thus denying petitioner's motion for summary judgment: CONCLUSION In sum, the evidence offered for summary judgment of the case did not prove that the money in the Swiss Banks belonged to the Marcos spouses because no legal proof exists in the record as to the ownership by the Marcoses of the funds in escrow from the Swiss Banks. The basis for the forfeiture in favor of the government cannot be deemed to have been established and our judgment thereon, perforce, must also have been without basis. WHEREFORE, the decision of this Court dated September 19, 2000 is reconsidered and set aside, and this case is now being set for further proceedings.12 Hence, the instant petition. In filing the same, petitioner argues that the Sandiganbayan, in reversing its September 19, 2000 decision, committed grave abuse of discretion amounting to lack or excess of jurisdiction considering that -I

PETITIONER WAS ABLE TO PROVE ITS CASE IN ACCORDANCE WITH THE REQUISITES OF SECTIONS 2 AND 3 OF R.A. NO. 1379: A. PRIVATE RESPONDENTS CATEGORICALLY ADMITTED NOT ONLY THE PERSONAL CIRCUMSTANCES OF FERDINAND E. MARCOS AND IMELDA R. MARCOS AS PUBLIC OFFICIALS BUT ALSO THE EXTENT OF THEIR SALARIES AS SUCH PUBLIC OFFICIALS, WHO UNDER THE CONSTITUTION, WERE PROHIBITED FROM ENGAGING IN THE MANAGEMENT OF FOUNDATIONS. B. PRIVATE RESPONDENTS ALSO ADMITTED THE EXISTENCE OF THE SWISS DEPOSITS AND THEIR OWNERSHIP THEREOF: 1. ADMISSIONS IN PRIVATE RESPONDENTS' ANSWER; 2. ADMISSION IN THE GENERAL / SUPPLEMENTAL AGREEMENTS THEY SIGNED AND SOUGHT TO IMPLEMENT; 3. ADMISSION IN A MANIFESTATION OF PRIVATE RESPONDENT IMELDA R. MARCOS AND IN THE MOTION TO PLACE THE RES IN CUSTODIA LEGIS; AND 4. ADMISSION IN THE UNDERTAKING TO PAY THE HUMAN RIGHTS VICTIMS. C. PETITIONER HAS PROVED THE EXTENT OF THE LEGITIMATE INCOME OF FERDINAND E. MARCOS AND IMELDA R. MARCOS AS PUBLIC OFFICIALS. D. PETITIONER HAS ESTABLISHED A PRIMA FACIE PRESUMPTION OF UNLAWFULLY ACQUIRED WEALTH. II

SUMMARY JUDGMENT IS PROPER SINCE PRIVATE RESPONDENTS HAVE NOT RAISED ANY GENUINE ISSUE OF FACT CONSIDERING THAT: A. PRIVATE RESPONDENTS' DEFENSE THAT SWISS DEPOSITS WERE LAWFULLY ACQUIRED DOES NOT ONLY FAIL TO TENDER AN ISSUE BUT IS CLEARLY A SHAM; AND B. IN SUBSEQUENTLY DISCLAIMING OWNERSHIP OF THE SWISS DEPOSITS, PRIVATE RESPONDENTS ABANDONED THEIR SHAM DEFENSE OF LEGITIMATE ACQUISITION, AND THIS FURTHER JUSTIFIED THE RENDITION OF A SUMMARY JUDGMENT. III THE FOREIGN FOUNDATIONS NEED NOT BE IMPLEADED. IV THE HONORABLE PRESIDING JUSTICE COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING HIMSELF ON THE GROUND THAT ORIGINAL COPIES OF THE AUTHENTICATED SWISS DECISIONS AND THEIR "AUTHENTICATED TRANSLATIONS" HAVE NOT BEEN SUBMITTED TO THE COURT, WHEN EARLIER THE SANDIGANBAYAN HAS QUOTED EXTENSIVELY A PORTION OF THE TRANSLATION OF ONE OF THESE SWISS DECISIONS IN HIS "PONENCIA" DATED JULY 29, 1999 WHEN IT DENIED THE MOTION TO RELEASE ONE HUNDRED FIFTY MILLION US DOLLARS ($150,000,000.00) TO THE HUMAN RIGHTS VICTIMS. V PRIVATE RESPONDENTS ARE DEEMED TO HAVE WAIVED THEIR OBJECTION TO THE AUTHENTICITY OF THE SWISS FEDERAL SUPREME COURT DECISIONS.13 Petitioner, in the main, asserts that nowhere in the respondents' motions for reconsideration and supplemental motion for reconsideration were the authenticity,

accuracy and admissibility of the Swiss decisions ever challenged. Otherwise stated, it was incorrect for the Sandiganbayan to use the issue of lack of authenticated translations of the decisions of the Swiss Federal Supreme Court as the basis for reversing itself because respondents themselves never raised this issue in their motions for reconsideration and supplemental motion for reconsideration. Furthermore, this particular issue relating to the translation of the Swiss court decisions could not be resurrected anymore because said decisions had been previously utilized by the Sandiganbayan itself in resolving a "decisive issue" before it. Petitioner faults the Sandiganbayan for questioning the non-production of the authenticated translations of the Swiss Federal Supreme Court decisions as this was a marginal and technical matter that did not diminish by any measure the conclusiveness and strength of what had been proven and admitted before the Sandiganbayan, that is, that the funds deposited by the Marcoses constituted illgotten wealth and thus belonged to the Filipino people. In compliance with the order of this Court, Mrs. Marcos filed her comment to the petition on May 22, 2002. After several motions for extension which were all granted, the comment of Mrs. Manotoc and Ferdinand, Jr. and the separate comment of Mrs. Araneta were filed on May 27, 2002. Mrs. Marcos asserts that the petition should be denied on the following grounds: A. PETITIONER HAS A PLAIN, SPEEDY, AND ADEQUATE REMEDY AT THE SANDIGANBAYAN. B. THE SANDIGANBAYAN DID NOT ABUSE ITS DISCRETION IN SETTING THE CASE FOR FURTHER PROCEEDINGS.14 Mrs. Marcos contends that petitioner has a plain, speedy and adequate remedy in the ordinary course of law in view of the resolution of the Sandiganbayan dated January 31, 2000 directing petitioner to submit the authenticated translations of the Swiss decisions. Instead of availing of said remedy, petitioner now elevates the matter to this Court. According to Mrs. Marcos, a petition for certiorari which does not comply

with the requirements of the rules may be dismissed. Since petitioner has a plain, speedy and adequate remedy, that is, to proceed to trial and submit authenticated translations of the Swiss decisions, its petition before this Court must be dismissed. Corollarily, the Sandiganbayan's ruling to set the case for further proceedings cannot and should not be considered a capricious and whimsical exercise of judgment. Likewise, Mrs. Manotoc and Ferdinand, Jr., in their comment, prayed for the dismissal of the petition on the grounds that: (A) BY THE TIME PETITIONER FILED ITS MOTION FOR SUMMARY JUDGMENT ON 10 MARCH 2000, IT WAS ALREADY BARRED FROM DOING SO. (1) The Motion for Summary Judgment was based on private respondents' Answer and other documents that had long been in the records of the case. Thus, by the time the Motion was filed on 10 March 2000, estoppel by laches had already set in against petitioner. (2) By its positive acts and express admissions prior to filing the Motion for Summary Judgment on 10 March 1990, petitioner had legally bound itself to go to trial on the basis of existing issues. Thus, it clearly waived whatever right it had to move for summary judgment. (B) EVEN ASSUMING THAT PETITIONER WAS NOT LEGALLY BARRED FROM FILING THE MOTION FOR SUMMARY JUDGMENT, THE SANDIGANBAYAN IS CORRECT IN RULING THAT PETITIONER HAS NOT YET ESTABLISHED A PRIMA FACIE CASE FOR THE FORFEITURE OF THE SWISS FUNDS. (1) Republic Act No. 1379, the applicable law, is a penal statute. As such, its provisions, particularly the essential elements stated in section 3 thereof, are mandatory in nature. These should be strictly construed against petitioner and liberally in favor of private respondents.

(2) Petitioner has failed to establish the third and fourth essential elements in Section 3 of R.A. 1379 with respect to the identification, ownership, and approximate amount of the property which the Marcos couple allegedly "acquired during their incumbency". (a) Petitioner has failed to prove that the Marcos couple "acquired" or own the Swiss funds. (b) Even assuming, for the sake of argument, that the fact of acquisition has been proven, petitioner has categorically admitted that it has no evidence showing how much of the Swiss funds was acquired "during the incumbency" of the Marcos couple from 31 December 1965 to 25 February 1986. (3) In contravention of the essential element stated in Section 3 (e) of R.A. 1379, petitioner has failed to establish the other proper earnings and income from legitimately acquired property of the Marcos couple over and above their government salaries. (4) Since petitioner failed to prove the three essential elements provided in paragraphs (c)15 (d),16 and (e)17 of Section 3, R.A. 1379, the inescapable conclusion is that the prima facie presumption of unlawful acquisition of the Swiss funds has not yet attached. There can, therefore, be no premature forfeiture of the funds. (C) IT WAS ONLY BY ARBITRARILY ISOLATING AND THEN TAKING CERTAIN STATEMENTS MADE BY PRIVATE RESPONDENTS OUT OF CONTEXT THAT PETITIONER WAS ABLE TO TREAT THESE AS "JUDICIAL ADMISSIONS" SUFFICIENT TO ESTABLISH A PRIMA FACIE AND THEREAFTER A CONCLUSIVE CASE TO JUSTIFY THE FORFEITURE OF THE SWISS FUNDS. (1) Under Section 27, Rule 130 of the Rules of Court, the General and Supplemental Agreements, as well as the other written and testimonial statements submitted in relation thereto, are expressly barred from being admissible in evidence against private respondents.

(2) Had petitioner bothered to weigh the alleged admissions together with the other statements on record, there would be a demonstrable showing that no such "judicial admissions" were made by private respondents. (D) SINCE PETITIONER HAS NOT (YET) PROVEN ALL THE ESSENTIAL ELEMENTS TO ESTABLISH A PRIMA FACIE CASE FOR FORFEITURE, AND PRIVATE RESPONDENTS HAVE NOT MADE ANY JUDICIAL ADMISSION THAT WOULD HAVE FREED IT FROM ITS BURDEN OF PROOF, THE SANDIGANBAYAN DID NOT COMMIT GRAVE ABUSE OF DISCRETION IN DENYING THE MOTION FOR SUMMARY JUDGMENT. CERTIORARI, THEREFORE, DOES NOT LIE, ESPECIALLY AS THIS COURT IS NOT A TRIER OF FACTS.18 For her part, Mrs. Araneta, in her comment to the petition, claims that obviously petitioner is unable to comply with a very plain requirement of respondent Sandiganbayan. The instant petition is allegedly an attempt to elevate to this Court matters, issues and incidents which should be properly threshed out at the Sandiganbayan. To respondent Mrs. Araneta, all other matters, save that pertaining to the authentication of the translated Swiss Court decisions, are irrelevant and impertinent as far as this Court is concerned. Respondent Mrs. Araneta manifests that she is as eager as respondent Sandiganbayan or any interested person to have the Swiss Court decisions officially translated in our known language. She says the authenticated official English version of the Swiss Court decisions should be presented. This should stop all speculations on what indeed is contained therein. Thus, respondent Mrs. Araneta prays that the petition be denied for lack of merit and for raising matters which, in elaborated fashion, are impertinent and improper before this Court. PROPRIETY OF PETITIONER'S ACTION FOR CERTIORARI But before this Court discusses the more relevant issues, the question regarding the propriety of petitioner Republic's action for certiorari under Rule 6519 of the 1997 Rules of Civil Procedure assailing the Sandiganbayan Resolution dated January 21, 2002 should be threshed out. At the outset, we would like to stress that we are treating this case as an exception to the general rule governing petitions for certiorari. Normally, decisions of the

Sandiganbayan are brought before this Court under Rule 45, not Rule 65.20 But where the case is undeniably ingrained with immense public interest, public policy and deep historical repercussions, certiorari is allowed notwithstanding the existence and availability of the remedy of appeal.21 One of the foremost concerns of the Aquino Government in February 1986 was the recovery of the unexplained or ill-gotten wealth reputedly amassed by former President and Mrs. Ferdinand E. Marcos, their relatives, friends and business associates. Thus, the very first Executive Order (EO) issued by then President Corazon Aquino upon her assumption to office after the ouster of the Marcoses was EO No. 1, issued on February 28, 1986. It created the Presidential Commission on Good Government (PCGG) and charged it with the task of assisting the President in the "recovery of all ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates, whether located in the Philippines or abroad, including the takeover or sequestration of all business enterprises and entities owned or controlled by them during his administration, directly or through nominees, by taking undue advantage of their public office and/or using their powers, authority, influence, connections or relationship." The urgency of this undertaking was tersely described by this Court inRepublic vs. Lobregat22: surely x x x an enterprise "of great pith and moment"; it was attended by "great expectations"; it was initiated not only out of considerations of simple justice but also out of sheer necessity - the national coffers were empty, or nearly so. In all the alleged ill-gotten wealth cases filed by the PCGG, this Court has seen fit to set aside technicalities and formalities that merely serve to delay or impede judicious resolution. This Court prefers to have such cases resolved on the merits at the Sandiganbayan. But substantial justice to the Filipino people and to all parties concerned, not mere legalisms or perfection of form, should now be relentlessly and firmly pursued. Almost two decades have passed since the government initiated its search for and reversion of such illgotten wealth. The definitive resolution of such cases on the merits is thus long overdue. If there is proof of illegal acquisition, accumulation, misappropriation, fraud or illicit conduct, let it be brought out now. Let the ownership of these funds and other assets be finally determined and resolved with dispatch, free from all the delaying technicalities and annoying procedural sidetracks.23

We thus take cognizance of this case and settle with finality all the issues therein. ISSUES BEFORE THIS COURT The crucial issues which this Court must resolve are: (1) whether or not respondents raised any genuine issue of fact which would either justify or negate summary judgment; and (2) whether or not petitioner Republic was able to prove its case for forfeiture in accordance with Sections 2 and 3 of RA 1379. (1) THE PROPRIETY OF SUMMARY JUDGMENT We hold that respondent Marcoses failed to raise any genuine issue of fact in their pleadings. Thus, on motion of petitioner Republic, summary judgment should take place as a matter of right. In the early case of Auman vs. Estenzo24, summary judgment was described as a judgment which a court may render before trial but after both parties have pleaded. It is ordered by the court upon application by one party, supported by affidavits, depositions or other documents, with notice upon the adverse party who may in turn file an opposition supported also by affidavits, depositions or other documents. This is after the court summarily hears both parties with their respective proofs and finds that there is no genuine issue between them. Summary judgment is sanctioned in this jurisdiction by Section 1, Rule 35 of the 1997 Rules of Civil Procedure: SECTION 1. Summary judgment for claimant.- A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any part thereof.25 Summary judgment is proper when there is clearly no genuine issue as to any material fact in the action.26 The theory of summary judgment is that, although an answer may on its face appear to tender issues requiring trial, if it is demonstrated by affidavits, depositions or admissions that those issues are not genuine but sham or fictitious, the Court is justified in dispensing with the trial and rendering summary judgment for petitioner Republic. The Solicitor General made a very thorough presentation of its case for forfeiture:

xxx 4. Respondent Ferdinand E. Marcos (now deceased and represented by his Estate/Heirs) was a public officer for several decades continuously and without interruption as Congressman, Senator, Senate President and President of the Republic of the Philippines from December 31, 1965 up to his ouster by direct action of the people of EDSA on February 22-25, 1986. 5. Respondent Imelda Romualdez Marcos (Imelda, for short) the former First Lady who ruled with FM during the 14-year martial law regime, occupied the position of Minister of Human Settlements from June 1976 up to the peaceful revolution in February 22-25, 1986. She likewise served once as a member of the Interim Batasang Pambansa during the early years of martial law from 1978 to 1984 and as Metro Manila Governor in concurrent capacity as Minister of Human Settlements. x x x xxx xxx xxx

11. At the outset, however, it must be pointed out that based on the Official Report of the Minister of Budget, the total salaries of former President Marcos as President form 1966 to 1976 was P60,000 a year and from 1977 to 1985, P100,000 a year; while that of the former First Lady, Imelda R. Marcos, as Minister of Human Settlements from June 1976 to February 22-25, 1986 was P75,000 a year xxx. ANALYSIS OF RESPONDENTS LEGITIMATE INCOME xxx 12. Based on available documents, the ITRs of the Marcoses for the years 1965-1975 were filed under Tax Identification No. 1365-055-1. For the years 1976 until 1984, the returns were filed under Tax Identification No. M 6221-J 1117-A-9. 13. The data contained in the ITRs and Balance Sheet filed by the "Marcoses are summarized and attached to the reports in the following schedules: Schedule A:

Schedule of Income (Annex "T" hereof); Schedule B: Schedule of Income Tax Paid (Annex "T-1" hereof); Schedule C: Schedule of Net Disposable Income (Annex "T-2" hereof); Schedule D: Schedule of Networth Analysis (Annex "T-3" hereof). 14. As summarized in Schedule A (Annex "T" hereof), the Marcoses reported P16,408,442.00 or US$2,414,484.91 in total income over a period of 20 years from 1965 to 1984. The sources of income are as follows: Official Salaries Farm Income Others Total - P 2,627,581.00 - 16.01% 11,109,836.00 - 67.71% 149,700.00 .91% 2,521,325.00 - 15.37% P16,408,442.00 - 100.00%

16. Of the P11,109,836.00 in reported income from legal practice, the amount of P10,649,836.00 or 96% represents "receivables from prior years" during the period 1967 up to 1984. 17. In the guise of reporting income using the cash method under Section 38 of the National Internal Revenue Code, FM made it appear that he had an extremely profitable legal practice before he became a President (FM being barred by law from practicing his law profession during his entire presidency) and that, incredibly, he was still receiving payments almost 20 years after. The only problem is that in his Balance Sheet attached to his 1965 ITR immediately preceeding his ascendancy to the presidency he did not show any Receivables from client at all, much less the P10,65-M that he decided to later recognize as income. There are no documents showing any withholding tax certificates. Likewise, there is nothing on record that will show any known Marcos client as he has no known law office. As previously stated, his networth was a mere P120,000.00 in December, 1965. The joint income tax returns of FM and Imelda cannot, therefore, conceal the skeletons of their kleptocracy. 18. FM reported a total of P2,521,325.00 as Other Income for the years 1972 up to 1976 which he referred to in his return as "Miscellaneous Items" and "Various Corporations." There is no indication of any payor of the dividends or earnings. 19. Spouses Ferdinand and Imelda did not declare any income from any deposits and placements which are subject to a 5% withholding tax. The Bureau of Internal Revenue attested that after a diligent search of pertinent records on file with the Records Division, they did not find any records involving the tax transactions of spouses Ferdinand and Imelda in Revenue Region No. 1, Baguio City, Revenue Region No.4A, Manila, Revenue Region No. 4B1, Quezon City and Revenue No. 8, Tacloban, Leyte. Likewise, the Office of the Revenue Collector of Batac. Further, BIR attested that no records were found on any filing of capital gains tax return involving spouses FM and Imelda covering the years 1960 to 1965. 20. In Schedule B, the taxable reported income over the twenty-year period was P14,463,595.00 which represents 88% of the gross income. The Marcoses paid income taxes totaling P8,233,296.00 or US$1,220,667.59. The business expenses in the amount of P861,748.00 represent expenses incurred

Legal Practice -

15. FM's official salary pertains to his compensation as Senate President in 1965 in the amount of P15,935.00 and P1,420,000.00 as President of the Philippines during the period 1966 until 1984. On the other hand, Imelda reported salaries and allowances only for the years 1979 to 1984 in the amount of P1,191,646.00. The records indicate that the reported income came from her salary from the Ministry of Human Settlements and allowances from Food Terminal, Inc., National Home Mortgage Finance Corporation, National Food Authority Council, Light Rail Transit Authority and Home Development Mutual Fund.

for subscription, postage, stationeries and contributions while the other deductions in the amount of P567,097.00 represents interest charges, medicare fees, taxes and licenses. The total deductions in the amount of P1,994,845.00 represents 12% of the total gross income. 21. In Schedule C, the net cumulative disposable income amounts to P6,756,301.00 or US$980,709.77. This is the amount that represents that portion of the Marcoses income that is free for consumption, savings and investments. The amount is arrived at by adding back to the net income after tax the personal and additional exemptions for the years 1965-1984, as well as the tax-exempt salary of the President for the years 1966 until 1972. 22. Finally, the networth analysis in Schedule D, represents the total accumulated networth of spouses, Ferdinand and Imelda. Respondent's Balance Sheet attached to their 1965 ITR, covering the year immediately preceding their ascendancy to the presidency, indicates an ending networth of P120,000.00 which FM declared as Library and Miscellaneous assets. In computing for the networth, the income approach was utilized. Under this approach, the beginning capital is increased or decreased, as the case may be, depending upon the income earned or loss incurred. Computations establish the total networth of spouses Ferdinand and Imelda, for the years 1965 until 1984 in the total amount of US$957,487.75, assuming the income from legal practice is real and valid x x x. G. THE SECRET MARCOS DEPOSITS IN SWISS BANKS 23. The following presentation very clearly and overwhelmingly show in detail how both respondents clandestinely stashed away the country's wealth to Switzerland and hid the same under layers upon layers of foundations and other corporate entities to prevent its detection. Through their dummies/nominees, fronts or agents who formed those foundations or corporate entities, they opened and maintained numerous bank accounts. But due to the difficulty if not the impossibility of detecting and documenting all those secret accounts as well as the enormity of the deposits therein hidden, the following presentation is confined to five identified accounts groups, with balances amounting to about $356-M with a reservation for the filing of a supplemental or separate forfeiture complaint should the need arise. H. THE AZIO-VERSO-VIBUR FOUNDATION ACCOUNTS

24. On June 11, 1971, Ferdinand Marcos issued a written order to Dr. Theo Bertheau, legal counsel of Schweizeresche Kreditanstalt or SKA, also known as Swiss Credit Bank, for him to establish the AZIO Foundation. On the same date, Marcos executed a power of attorney in favor of Roberto S. Benedicto empowering him to transact business in behalf of the said foundation. Pursuant to the said Marcos mandate, AZIO Foundation was formed on June 21, 1971 in Vaduz. Walter Fessler and Ernst Scheller, also of SKA Legal Service, and Dr. Helmuth Merling from Schaan were designated as members of the Board of Trustees of the said foundation. Ferdinand Marcos was named first beneficiary and the Marcos Foundation, Inc. was second beneficiary. On November 12, 1971, FM again issued another written order naming Austrahil PTY Ltd. In Sydney, Australia, as the foundation's first and sole beneficiary. This was recorded on December 14, 1971. 25. In an undated instrument, Marcos changed the first and sole beneficiary to CHARIS FOUNDATION. This change was recorded on December 4, 1972. 26. On August 29, 1978, the AZIO FOUNDATION was renamed to VERSO FOUNDATION. The Board of Trustees remained the same. On March 11, 1981, Marcos issued a written directive to liquidated VERSO FOUNDATION and to transfer all its assets to account of FIDES TRUST COMPANY at Bank Hofman in Zurich under the account "Reference OSER." The Board of Trustees decided to dissolve the foundation on June 25, 1981. 27. In an apparent maneuver to bury further the secret deposits beneath the thick layers of corporate entities, FM effected the establishment of VIBUR FOUNDATION on May 13, 1981 in Vaduz. Atty. Ivo Beck and Limag Management, a wholly-owned subsidiary of Fides Trust, were designated as members of the Board of Trustees. The account was officially opened with SKA on September 10, 1981. The beneficial owner was not made known to the bank since Fides Trust Company acted as fiduciary. However, comparison of the listing of the securities in the safe deposit register of the VERSO FOUNDATION as of February 27, 1981 with that of VIBUR FOUNDATION as of December 31, 1981 readily reveals that exactly the same securities were listed. 28. Under the foregoing circumstances, it is certain that the VIBUR FOUNDATION is the beneficial successor of VERSO FOUNDATION.

29. On March 18, 1986, the Marcos-designated Board of Trustees decided to liquidate VIBUR FOUNDATION. A notice of such liquidation was sent to the Office of the Public Register on March 21, 1986. However, the bank accounts and respective balances of the said VIBUR FOUNDATION remained with SKA. Apparently, the liquidation was an attempt by the Marcoses to transfer the foundation's funds to another account or bank but this was prevented by the timely freeze order issued by the Swiss authorities. One of the latest documents obtained by the PCGG from the Swiss authorities is a declaration signed by Dr. Ivo Beck (the trustee) stating that the beneficial owner of VIBUR FOUNDATION is Ferdinand E. Marcos. Another document signed by G. Raber of SKA shows that VIBUR FOUNDATION is owned by the "Marcos Familie" 30. As of December 31, 1989, the balance of the bank accounts of VIBUR FOUNDATION with SKA, Zurich, under the General Account No. 469857 totaled $3,597,544.00 I. XANDY-WINTROP: CHARIS-SCOLARIVALAMO-SPINUS-AVERTINA FOUNDATION ACCOUNTS 31. This is the most intricate and complicated account group. As the Flow Chart hereof shows, two (2) groups under the foundation organized by Marcos dummies/nominees for FM's benefit, eventually joined together and became one (1) account group under the AVERTINA FOUNDATION for the benefit of both FM and Imelda. This is the biggest group from where the $50M investment fund of the Marcoses was drawn when they bought the Central Bank's dollar-denominated treasury notes with high-yielding interests. 32. On March 20, 1968, after his second year in the presidency, Marcos opened bank accounts with SKA using an alias or pseudonym WILLIAM SAUNDERS, apparently to hide his true identity. The next day, March 21, 1968, his First Lady, Mrs. Imelda Marcos also opened her own bank accounts with the same bank using an American-sounding alias, JANE RYAN. Found among the voluminous documents in Malacaang shortly after they fled to Hawaii in haste that fateful night of February 25, 1986, were accomplished forms for "Declaration/Specimen Signatures" submitted by the Marcos couple. Under the caption "signature(s)" Ferdinand and Imelda signed their real names as well as their respective aliases underneath. These accounts were actively operated and maintained by the Marcoses for about two (2) years

until their closure sometime in February, 1970 and the balances transferred to XANDY FOUNDATION. 33. The XANDY FOUNDATION was established on March 3, 1970 in Vaduz. C.W. Fessler, C. Souviron and E. Scheller were named as members of the Board of Trustees. 34. FM and Imelda issued the written mandate to establish the foundation to Markus Geel of SKA on March 3, 1970. In the handwritten Regulations signed by the Marcos couple as well as in the type-written Regulations signed by Markus Geel both dated February 13, 1970, the Marcos spouses were named the first beneficiaries, the surviving spouse as the second beneficiary and the Marcos children Imee, Ferdinand, Jr. (Bongbong) and Irene as equal third beneficiaries. 35. The XANDY FOUNDATION was renamed WINTROP FOUNDATION on August 29, 1978. The Board of Trustees remained the same at the outset. However, on March 27, 1980, Souviron was replaced by Dr. Peter Ritter. On March 10. 1981, Ferdinand and Imelda Marcos issued a written order to the Board of Wintrop to liquidate the foundation and transfer all its assets to Bank Hofmann in Zurich in favor of FIDES TRUST COMPANY. Later, WINTROP FOUNDATION was dissolved. 36. The AVERTINA FOUNDATION was established on May 13, 1981 in Vaduz with Atty. Ivo Beck and Limag Management, a wholly-owned subsidiary of FIDES TRUST CO., as members of the Board of Trustees. Two (2) account categories, namely: CAR and NES, were opened on September 10, 1981. The beneficial owner of AVERTINA was not made known to the bank since the FIDES TRUST CO. acted as fiduciary. However, the securities listed in the safe deposit register of WINTROP FOUNDATION Category R as of December 31, 1980 were the same as those listed in the register of AVERTINA FOUNDATION Category CAR as of December 31, 1981. Likewise, the securities listed in the safe deposit register of WINTROP FOUNDATION Category S as of December 31, 1980 were the same as those listed in the register of Avertina Category NES as of December 31, 1981.Under the circumstances, it is certain that the beneficial successor of WINTROP FOUNDATION is AVERTINA FOUNDATION. The balance of Category CAR as of December 31, 1989 amounted to US$231,366,894.00 while that of Category NES as of 12-31-83 was US$8,647,190.00. Latest

documents received from Swiss authorities included a declaration signed by IVO Beck stating that the beneficial owners of AVERTINA FOUNDATION are FM and Imelda. Another document signed by G. Raber of SKA indicates that Avertina Foundation is owned by the "Marcos Families." 37. The other groups of foundations that eventually joined AVERTINA were also established by FM through his dummies, which started with the CHARIS FOUNDATION. 38. The CHARIS FOUNDATION was established in VADUZ on December 27, 1971. Walter Fessler and Ernst Scheller of SKA and Dr. Peter Ritter were named as directors. Dr. Theo Bertheau, SKA legal counsel, acted as founding director in behalf of FM by virtue of the mandate and agreement dated November 12, 1971. FM himself was named the first beneficiary and Xandy Foundation as second beneficiary in accordance with the handwritten instructions of FM on November 12, 1971 and the Regulations. FM gave a power of attorney to Roberto S. Benedicto on February 15, 1972 to act in his behalf with regard to Charis Foundation. 39. On December 13, 1974, Charis Foundation was renamed Scolari Foundation but the directors remained the same. On March 11, 1981 FM ordered in writing that the Valamo Foundation be liquidated and all its assets be transferred to Bank Hofmann, AG in favor of Fides Trust Company under the account "Reference OMAL". The Board of Directors decided on the immediate dissolution of Valamo Foundation on June 25, 1981. 40 The SPINUS FOUNDATION was established on May 13, 1981 in Vaduz with Atty. Ivo Beck and Limag Management, a wholly-owned subsidiary of Fides Trust Co., as members of the Foundation's Board of Directors. The account was officially opened with SKA on September 10, 1981. The beneficial owner of the foundation was not made known to the bank since Fides Trust Co. acted as fiduciary. However, the list of securities in the safe deposit register of Valamo Foundation as of December 31, 1980 are practically the same with those listed in the safe deposit register of Spinus Foundation as of December 31, 1981. Under the circumstances, it is certain that the Spinus Foundation is the beneficial successor of the Valamo Foundation.

41. On September 6, 1982, there was a written instruction from Spinus Foundation to SKA to close its Swiss Franc account and transfer the balance to Avertina Foundation. In July/August, 1982, several transfers from the foundation's German marks and US dollar accounts were made to Avertina Category CAR totaling DM 29.5-M and $58-M, respectively. Moreover, a comparison of the list of securities of the Spinus Foundation as of February 3, 1982 with the safe deposit slips of the Avertina Foundation Category CAR as of August 19, 1982 shows that all the securities of Spinus were transferred to Avertina. J. TRINIDAD-RAYBY-PALMY FOUNDATION ACCOUNTS 42. The Trinidad Foundation was organized on August 26, 1970 in Vaduz with C.W. Fessler and E. Scheller of SKA and Dr. Otto Tondury as the foundation's directors. Imelda issued a written mandate to establish the foundation to Markus Geel on August 26, 1970. The regulations as well as the agreement, both dated August 28, 1970 were likewise signed by Imelda. Imelda was named the first beneficiary and her children Imelda (Imee), Ferdinand, Jr. (Bongbong) and, Irene were named as equal second beneficiaries. 43. Rayby Foundation was established on June 22, 1973 in Vaduz with Fessler, Scheller and Ritter as members of the board of directors. Imelda issued a written mandate to Dr. Theo Bertheau to establish the foundation with a note that the foundation's capitalization as well as the cost of establishing it be debited against the account of Trinidad Foundation. Imelda was named the first and only beneficiary of Rayby foundation. According to written information from SKA dated November 28, 1988, Imelda apparently had the intention in 1973 to transfer part of the assets of Trinidad Foundation to another foundation, thus the establishment of Rayby Foundation. However, transfer of assets never took place. On March 10, 1981, Imelda issued a written order to transfer all the assets of Rayby Foundation to Trinidad Foundation and to subsequently liquidate Rayby. On the same date, she issued a written order to the board of Trinidad to dissolve the foundation and transfer all its assets to Bank Hofmann in favor of Fides Trust Co. Under the account "Reference Dido," Rayby was dissolved on April 6, 1981 and Trinidad was liquidated on August 3, 1981.

44. The PALMY FOUNDATION was established on May 13, 1981 in Vaduz with Dr. Ivo Beck and Limag Management, a wholly-owned subsidiary of Fides Trust Co, as members of the Foundation's Board of Directors. The account was officially opened with the SKA on September 10, 1981. The beneficial owner was not made known to the bank since Fides Trust Co. acted as fiduciary. However, when one compares the listing of securities in the safe deposit register of Trinidad Foundation as of December 31,1980 with that of the Palmy Foundation as of December 31, 1980, one can clearly see that practically the same securities were listed. Under the circumstances, it is certain that the Palmy Foundation is the beneficial successor of the Trinidad Foundation. 45. As of December 31, 1989, the ending balance of the bank accounts of Palmy Foundation under General Account No. 391528 is $17,214,432.00. 46. Latest documents received from Swiss Authorities included a declaration signed by Dr. Ivo Beck stating that the beneficial owner of Palmy Foundation is Imelda. Another document signed by Raber shows that the said Palmy Foundation is owned by "Marcos Familie". K. ROSALYS-AGUAMINA FOUNDATION ACCOUNTS 47. Rosalys Foundation was established in 1971 with FM as the beneficiary. Its Articles of Incorporation was executed on September 24, 1971 and its ByLaws on October 3, 1971. This foundation maintained several accounts with Swiss Bank Corporation (SBC) under the general account 51960 where most of the bribe monies from Japanese suppliers were hidden. 48. On December 19, 1985, Rosalys Foundation was liquidated and all its assets were transferred to Aguamina Corporation's (Panama) Account No. 53300 with SBC. The ownership by Aguamina Corporation of Account No. 53300 is evidenced by an opening account documents from the bank. J. Christinaz and R.L. Rossier, First Vice-President and Senior Vice President, respectively, of SBC, Geneva issued a declaration dated September 3, 1991 stating that the by-laws dated October 3, 1971 governing Rosalys Foundation was the same by-law applied to Aguamina Corporation Account No. 53300. They further confirmed that no change of beneficial owner was involved while transferring the assets of Rosalys to Aguamina. Hence, FM remains the beneficiary of Aguamina Corporation Account No. 53300.

As of August 30, 1991, the ending balance of Account No. 53300 amounted to $80,566,483.00. L. MALER FOUNDATION ACCOUNTS 49. Maler was first created as an establishment. A statement of its rules and regulations was found among Malacaang documents. It stated, among others, that 50% of the Company's assets will be for sole and full right disposal of FM and Imelda during their lifetime, which the remaining 50% will be divided in equal parts among their children. Another Malacaang document dated October 19,1968 and signed by Ferdinand and Imelda pertains to the appointment of Dr. Andre Barbey and Jean Louis Sunier as attorneys of the company and as administrator and manager of all assets held by the company. The Marcos couple, also mentioned in the said document that they bought the Maler Establishment from SBC, Geneva. On the same date, FM and Imelda issued a letter addressed to Maler Establishment, stating that all instructions to be transmitted with regard to Maler will be signed with the word "JOHN LEWIS". This word will have the same value as the couple's own personal signature. The letter was signed by FM and Imelda in their signatures and as John Lewis. 50. Maler Establishment opened and maintained bank accounts with SBC, Geneva. The opening bank documents were signed by Dr. Barbey and Mr. Sunnier as authorized signatories. 51. On November 17, 1981, it became necessary to transform Maler Establishment into a foundation. Likewise, the attorneys were changed to Michael Amaudruz, et. al. However, administration of the assets was left to SBC. The articles of incorporation of Maler Foundation registered on November 17, 1981 appear to be the same articles applied to Maler Establishment. On February 28, 1984, Maler Foundation cancelled the power of attorney for the management of its assets in favor of SBC and transferred such power to Sustrust Investment Co., S.A. 52. As of June 6, 1991, the ending balance of Maler Foundation's Account Nos. 254,508 BT and 98,929 NY amount SF 9,083,567 and SG 16,195,258, respectively, for a total of SF 25,278,825.00. GM only until December 31, 1980. This account was opened by Maler when it was still an establishment which was subsequently transformed into a foundation.

53. All the five (5) group accounts in the over-all flow chart have a total balance of about Three Hundred Fifty Six Million Dollars ($356,000,000.00) as shown by Annex "R-5" hereto attached as integral part hereof. xxx x x x.27

14. Respondents specifically DENY paragraph 15 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs. 15. Respondents specifically DENY paragraph 16 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs. 16. Respondents specifically DENY paragraph 17 of the Petition insofar as it attributes willful duplicity on the part of the late President Marcos, for being false, the same being pure conclusions based on pure assumption and not allegations of fact; and specifically DENY the rest for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs or the attachments thereto. 17. Respondents specifically DENY paragraph 18 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs. 18. Respondents specifically DENY paragraph 19 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs and that they are not privy to the activities of the BIR. 19. Respondents specifically DENY paragraph 20 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs. 20. Respondents specifically DENY paragraph 21 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs.

Respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M. Araneta and Ferdinand Marcos, Jr., in their answer, stated the following: xxx xxx xxx

4. Respondents ADMIT paragraphs 3 and 4 of the Petition. 5. Respondents specifically deny paragraph 5 of the Petition in so far as it states that summons and other court processes may be served on Respondent Imelda R. Marcos at the stated address the truth of the matter being that Respondent Imelda R. Marcos may be served with summons and other processes at No. 10-B Bel Air Condominium 5022 P. Burgos Street, Makati, Metro Manila, and ADMIT the rest. xxx xxx xxx

10. Respondents ADMIT paragraph 11 of the Petition. 11. Respondents specifically DENY paragraph 12 of the Petition for lack of knowledge sufficient to form a belief as to the truth of the allegation since Respondents were not privy to the transactions and that they cannot remember exactly the truth as to the matters alleged. 12. Respondents specifically DENY paragraph 13 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs and Balance Sheet. 13. Respondents specifically DENY paragraph 14 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs.

21. Respondents specifically DENY paragraph 22 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs. 22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents clandestinely stashed the country's wealth in Switzerland and hid the same under layers and layers of foundation and corporate entities for being false, the truth being that Respondents aforesaid properties were lawfully acquired. 23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents were not privy to the transactions regarding the alleged Azio-Verso-Vibur Foundation accounts, except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired. 24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36,37, 38, 39, 40, and 41 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since Respondents are not privy to the transactions and as to such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago, except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired. 25. Respondents specifically DENY paragraphs 42, 43, 44, 45, and 46, of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since Respondents were not privy to the transactions and as to such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago, except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired. 26. Respondents specifically DENY paragraphs 49, 50, 51 and 52, of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since Respondents were not privy to the transactions and as to such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago, except

that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired. Upon careful perusal of the foregoing, the Court finds that respondent Mrs. Marcos and the Marcos children indubitably failed to tender genuine issues in their answer to the petition for forfeiture. A genuine issue is an issue of fact which calls for the presentation of evidence as distinguished from an issue which is fictitious and contrived, set up in bad faith or patently lacking in substance so as not to constitute a genuine issue for trial. Respondents' defenses of "lack of knowledge for lack of privity" or "(inability to) recall because it happened a long time ago" or, on the part of Mrs. Marcos, that "the funds were lawfully acquired" are fully insufficient to tender genuine issues. Respondent Marcoses' defenses were a sham and evidently calibrated to compound and confuse the issues. The following pleadings filed by respondent Marcoses are replete with indications of a spurious defense: (a) Respondents' Answer dated October 18, 1993; (b) Pre-trial Brief dated October 4, 1999 of Mrs. Marcos, Supplemental Pretrial Brief dated October 19, 1999 of Ferdinand, Jr. and Mrs. Imee MarcosManotoc adopting the pre-trial brief of Mrs. Marcos, and Manifestation dated October 19, 1999 of Irene Marcos-Araneta adopting the pre-trial briefs of her co- respondents; (c) Opposition to Motion for Summary Judgment dated March 21, 2000, filed by Mrs. Marcos which the other respondents (Marcos children) adopted; (d) Demurrer to Evidence dated May 2, 2000 filed by Mrs. Marcos and adopted by the Marcos children; (e) Motion for Reconsideration dated September 26, 2000 filed by Mrs. Marcos; Motion for Reconsideration dated October 5, 2000 jointly filed by Mrs. Manotoc and Ferdinand, Jr., and Supplemental Motion for Reconsideration dated October 9, 2000 likewise jointly filed by Mrs. Manotoc and Ferdinand, Jr.; (f) Memorandum dated December 12, 2000 of Mrs. Marcos and Memorandum dated December 17, 2000 of the Marcos children;

(g) Manifestation dated May 26, 1998; and (h) General/Supplemental Agreement dated December 23, 1993. An examination of the foregoing pleadings is in order. Respondents' Answer dated October 18, 1993.

In their answer, respondents failed to specifically deny each and every allegation contained in the petition for forfeiture in the manner required by the rules. All they gave were stock answers like "they have no sufficient knowledge" or "they could not recall because it happened a long time ago," and, as to Mrs. Marcos, "the funds were lawfully acquired," without stating the basis of such assertions. Section 10, Rule 8 of the 1997 Rules of Civil Procedure, provides: A defendant must specify each material allegation of fact the truth of which he does not admit and, whenever practicable, shall set forth the substance of the matters upon which he relies to support his denial. Where a defendant desires to deny only a part of an averment, he shall specify so much of it as is true and material and shall deny the remainder. Where a defendant is without knowledge or information sufficient to form a belief as to the truth of a material averment made in the complaint, he shall so state, and this shall have the effect of a denial.28 The purpose of requiring respondents to make a specific denial is to make them disclose facts which will disprove the allegations of petitioner at the trial, together with the matters they rely upon in support of such denial. Our jurisdiction adheres to this rule to avoid and prevent unnecessary expenses and waste of time by compelling both parties to lay their cards on the table, thus reducing the controversy to its true terms. As explained in Alonso vs. Villamor,29 A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art of movement and position, entraps and destroys the other. It is rather a contest in which each contending party fully and fairly lays before the court the facts in issue and then, brushing aside as wholly trivial and indecisive all imperfections of form and technicalities of procedure, asks that justice be done upon the merits. Lawsuits, unlike duels, are not to be won by a rapier's thrust.

On the part of Mrs. Marcos, she claimed that the funds were lawfully acquired. However, she failed to particularly state the ultimate facts surrounding the lawful manner or mode of acquisition of the subject funds. Simply put, she merely stated in her answer with the other respondents that the funds were "lawfully acquired" without detailing how exactly these funds were supposedly acquired legally by them. Even in this case before us, her assertion that the funds were lawfully acquired remains bare and unaccompanied by any factual support which can prove, by the presentation of evidence at a hearing, that indeed the funds were acquired legitimately by the Marcos family. Respondents' denials in their answer at the Sandiganbayan were based on their alleged lack of knowledge or information sufficient to form a belief as to the truth of the allegations of the petition. It is true that one of the modes of specific denial under the rules is a denial through a statement that the defendant is without knowledge or information sufficient to form a belief as to the truth of the material averment in the complaint. The question, however, is whether the kind of denial in respondents' answer qualifies as the specific denial called for by the rules. We do not think so. In Morales vs. Court of Appeals,30 this Court ruled that if an allegation directly and specifically charges a party with having done, performed or committed a particular act which the latter did not in fact do, perform or commit, a categorical and express denial must be made. Here, despite the serious and specific allegations against them, the Marcoses responded by simply saying that they had no knowledge or information sufficient to form a belief as to the truth of such allegations. Such a general, self-serving claim of ignorance of the facts alleged in the petition for forfeiture was insufficient to raise an issue. Respondent Marcoses should have positively stated how it was that they were supposedly ignorant of the facts alleged.31 To elucidate, the allegation of petitioner Republic in paragraph 23 of the petition for forfeiture stated: 23. The following presentation very clearly and overwhelmingly show in detail how both respondents clandestinely stashed away the country's wealth to Switzerland and hid the same under layers upon layers of foundations and other corporate entities to prevent its detection. Through their dummies/nominees, fronts or agents who formed those foundations or corporate entities, they opened and maintained numerous bank accounts. But

due to the difficulty if not the impossibility of detecting and documenting all those secret accounts as well as the enormity of the deposits therein hidden, the following presentation is confined to five identified accounts groups, with balances amounting to about $356-M with a reservation for the filing of a supplemental or separate forfeiture complaint should the need arise.32 Respondents' lame denial of the aforesaid allegation was: 22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents clandestinely stashed the country's wealth in Switzerland and hid the same under layers and layers of foundations and corporate entities for being false, the truth being that Respondents' aforesaid properties were lawfully acquired.33 Evidently, this particular denial had the earmark of what is called in the law on pleadings as a negative pregnant, that is, a denial pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied. It was in effect an admission of the averments it was directed at.34 Stated otherwise, a negative pregnant is a form of negative expression which carries with it an affirmation or at least an implication of some kind favorable to the adverse party. It is a denial pregnant with an admission of the substantial facts alleged in the pleading. Where a fact is alleged with qualifying or modifying language and the words of the allegation as so qualified or modified are literally denied, has been held that the qualifying circumstances alone are denied while the fact itself is admitted.35 In the instant case, the material allegations in paragraph 23 of the said petition were not specifically denied by respondents in paragraph 22 of their answer. The denial contained in paragraph 22 of the answer was focused on the averment in paragraph 23 of the petition for forfeiture that "Respondents clandestinely stashed the country's wealth in Switzerland and hid the same under layers and layers of foundations and corporate entities." Paragraph 22 of the respondents' answer was thus a denial pregnant with admissions of the following substantial facts: (1) the Swiss bank deposits existed and (2) that the estimated sum thereof was US$356 million as of December, 1990. Therefore, the allegations in the petition for forfeiture on the existence of the Swiss bank deposits in the sum of about US$356 million, not having been specifically

denied by respondents in their answer, were deemed admitted by them pursuant to Section 11, Rule 8 of the 1997 Revised Rules on Civil Procedure: Material averment in the complaint, xxx shall be deemed admitted when not specifically denied. xxx.36 By the same token, the following unsupported denials of respondents in their answer were pregnant with admissions of the substantial facts alleged in the Republic's petition for forfeiture: 23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since respondents were not privy to the transactions regarding the alleged Azio-Verso-Vibur Foundation accounts, except that, as to respondent Imelda R. Marcos, she specifically remembers that the funds involved were lawfully acquired. 24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since respondents were not privy to the transactions and as to such transactions they were privy to, they cannot remember with exactitude the same having occurred a long time ago, except as to respondent Imelda R. Marcos, she specifically remembers that the funds involved were lawfully acquired. 25. Respondents specifically DENY paragraphs 42, 43, 45, and 46 of the petition for lack of knowledge or information sufficient to from a belief as to the truth of the allegations since respondents were not privy to the transactions and as to such transaction they were privy to, they cannot remember with exactitude, the same having occurred a long time ago, except that as to respondent Imelda R. Marcos, she specifically remembers that the funds involved were lawfully acquired. 26. Respondents specifically DENY paragraphs 49, 50, 51 and 52 of the petition for lack of knowledge and information sufficient to form a belief as to the truth of the allegations since respondents were not privy to the transactions and as to such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago, except

that as to respondent Imelda R. Marcos, she specifically remembers that the funds involved were lawfully acquired. The matters referred to in paragraphs 23 to 26 of the respondents' answer pertained to the creation of five groups of accounts as well as their respective ending balances and attached documents alleged in paragraphs 24 to 52 of the Republic's petition for forfeiture. Respondent Imelda R. Marcos never specifically denied the existence of the Swiss funds. Her claim that "the funds involved were lawfully acquired" was an acknowledgment on her part of the existence of said deposits. This only reinforced her earlier admission of the allegation in paragraph 23 of the petition for forfeiture regarding the existence of the US$356 million Swiss bank deposits. The allegations in paragraphs 4737 and 4838 of the petition for forfeiture referring to the creation and amount of the deposits of the Rosalys-Aguamina Foundation as well as the averment in paragraph 52-a39 of the said petition with respect to the sum of the Swiss bank deposits estimated to be US$356 million were again not specifically denied by respondents in their answer. The respondents did not at all respond to the issues raised in these paragraphs and the existence, nature and amount of the Swiss funds were therefore deemed admitted by them. As held in Galofa vs. Nee Bon Sing,40 if a defendant's denial is a negative pregnant, it is equivalent to an admission. Moreover, respondents' denial of the allegations in the petition for forfeiture "for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since respondents were not privy to the transactions" was just a pretense. Mrs. Marcos' privity to the transactions was in fact evident from her signatures on some of the vital documents41 attached to the petition for forfeiture which Mrs. Marcos failed to specifically deny as required by the rules.42 It is worthy to note that the pertinent documents attached to the petition for forfeiture were even signed personally by respondent Mrs. Marcos and her late husband, Ferdinand E. Marcos, indicating that said documents were within their knowledge. As correctly pointed out by Sandiganbayan Justice Francisco Villaruz, Jr. in his dissenting opinion: The pattern of: 1) creating foundations, 2) use of pseudonyms and dummies, 3) approving regulations of the Foundations for the distribution of capital and income of the Foundations to the First and Second beneficiary (who are no other than FM and his family), 4) opening of bank accounts for the Foundations, 5) changing the names of the Foundations, 6) transferring funds

and assets of the Foundations to other Foundations or Fides Trust, 7) liquidation of the Foundations as substantiated by the Annexes U to U-168, Petition [for forfeiture] strongly indicate that FM and/or Imelda were the real owners of the assets deposited in the Swiss banks, using the Foundations as dummies.43 How could respondents therefore claim lack of sufficient knowledge or information regarding the existence of the Swiss bank deposits and the creation of five groups of accounts when Mrs. Marcos and her late husband personally masterminded and participated in the formation and control of said foundations? This is a fact respondent Marcoses were never able to explain. Not only that. Respondents' answer also technically admitted the genuineness and due execution of the Income Tax Returns (ITRs) and the balance sheets of the late Ferdinand E. Marcos and Imelda R. Marcos attached to the petition for forfeiture, as well as the veracity of the contents thereof. The answer again premised its denials of said ITRs and balance sheets on the ground of lack of knowledge or information sufficient to form a belief as to the truth of the contents thereof. Petitioner correctly points out that respondents' denial was not really grounded on lack of knowledge or information sufficient to form a belief but was based on lack of recollection. By reviewing their own records, respondent Marcoses could have easily determined the genuineness and due execution of the ITRs and the balance sheets. They also had the means and opportunity of verifying the same from the records of the BIR and the Office of the President. They did not. When matters regarding which respondents claim to have no knowledge or information sufficient to form a belief are plainly and necessarily within their knowledge, their alleged ignorance or lack of information will not be considered a specific denial.44 An unexplained denial of information within the control of the pleader, or is readily accessible to him, is evasive and is insufficient to constitute an effective denial.45 The form of denial adopted by respondents must be availed of with sincerity and in good faith, and certainly not for the purpose of confusing the adverse party as to what allegations of the petition are really being challenged; nor should it be made for the purpose of delay.46 In the instant case, the Marcoses did not only present unsubstantiated assertions but in truth attempted to mislead and deceive this Court by presenting an obviously contrived defense.

Simply put, a profession of ignorance about a fact which is patently and necessarily within the pleader's knowledge or means of knowing is as ineffective as no denial at all.47 Respondents' ineffective denial thus failed to properly tender an issue and the averments contained in the petition for forfeiture were deemed judicially admitted by them. As held in J.P. Juan & Sons, Inc. vs. Lianga Industries, Inc.: Its "specific denial" of the material allegation of the petition without setting forth the substance of the matters relied upon to support its general denial, when such matters were plainly within its knowledge and it could not logically pretend ignorance as to the same, therefore, failed to properly tender on issue.48 Thus, the general denial of the Marcos children of the allegations in the petition for forfeiture "for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since they were not privy to the transactions" cannot rightfully be accepted as a defense because they are the legal heirs and successors-in-interest of Ferdinand E. Marcos and are therefore bound by the acts of their father vis-a-vis the Swiss funds. PRE-TRIAL BRIEF DATED OCTOBER 18, 1993

(f) the number and names of the witnesses, and the substance of their respective testimonies.49 It is unquestionably within the court's power to require the parties to submit their pretrial briefs and to state the number of witnesses intended to be called to the stand, and a brief summary of the evidence each of them is expected to give as well as to disclose the number of documents to be submitted with a description of the nature of each. The tenor and character of the testimony of the witnesses and of the documents to be deduced at the trial thus made known, in addition to the particular issues of fact and law, it becomes apparent if genuine issues are being put forward necessitating the holding of a trial. Likewise, the parties are obliged not only to make a formal identification and specification of the issues and their proofs, and to put these matters in writing and submit them to the court within the specified period for the prompt disposition of the action.50 The pre-trial brief of Mrs. Marcos, as subsequently adopted by respondent Marcos children, merely stated: xxx WITNESSES 4.1 Respondent Imelda will present herself as a witness and reserves the right to present additional witnesses as may be necessary in the course of the trial. xxx DOCUMENTARY EVIDENCE 5.1 Respondent Imelda reserves the right to present and introduce in evidence documents as may be necessary in the course of the trial. Mrs. Marcos did not enumerate and describe the documents constituting her evidence. Neither the names of witnesses nor the nature of their testimony was stated. What alone appeared certain was the testimony of Mrs. Marcos only who in fact had previously claimed ignorance and lack of knowledge. And even then, the substance of her testimony, as required by the rules, was not made known either. Such cunning tactics of respondents are totally unacceptable to this Court. We hold that, since no genuine issue was raised, the case became ripe for summary judgment.

The pre-trial brief of Mrs. Marcos was adopted by the three Marcos children. In said brief, Mrs. Marcos stressed that the funds involved were lawfully acquired. But, as in their answer, they failed to state and substantiate how these funds were acquired lawfully. They failed to present and attach even a single document that would show and prove the truth of their allegations. Section 6, Rule 18 of the 1997 Rules of Civil Procedure provides: The parties shall file with the court and serve on the adverse party, x x x their respective pre-trial briefs which shall contain, among others: xxx (d) the documents or exhibits to be presented, stating the purpose thereof; xxx

OPPOSITION TO MOTION FOR SUMMARY JUDGMENT DATED MARCH 21, 2000

The opposition filed by Mrs. Marcos to the motion for summary judgment dated March 21, 2000 of petitioner Republic was merely adopted by the Marcos children as their own opposition to the said motion. However, it was again not accompanied by affidavits, depositions or admissions as required by Section 3, Rule 35 of the 1997 Rules on Civil Procedure: x x x The adverse party may serve opposing affidavits, depositions, or admissions at least three (3) days before hearing. After hearing, the judgment sought shall be rendered forthwith if the pleadings, supporting affidavits, depositions, and admissions on file, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.51 The absence of opposing affidavits, depositions and admissions to contradict the sworn declarations in the Republic's motion only demonstrated that the averments of such opposition were not genuine and therefore unworthy of belief. Demurrer to Evidence dated May 2, 2000;52 Motions for Reconsideration;53 and Memoranda of Mrs. Marcos and the Marcos children54

Make of record that as far as Imelda Marcos is concerned through the statement of Atty. Armando M. Marcelo that the US$360 million more or less subject matter of the instant lawsuit as allegedly obtained from the various Swiss Foundations do not belong to the estate of Marcos or to Imelda Marcos herself. That's your statement of facts? Atty. MARCELO: Yes, Your Honor. PJ Garchitorena: That's it. Okay. Counsel for Manotoc and Manotoc, Jr. What is your point here? Does the estate of Marcos own anything of the $360 million subject of this case. Atty. TECSON: We joined the Manifestation of Counsel. PJ Garchitorena: You do not own anything? Atty. TECSON: Yes, Your Honor. PJ Garchitorena:

All these pleadings again contained no allegations of facts showing their lawful acquisition of the funds. Once more, respondents merely made general denials without alleging facts which would have been admissible in evidence at the hearing, thereby failing to raise genuine issues of fact. Mrs. Marcos insists in her memorandum dated October 21, 2002 that, during the pretrial, her counsel stated that his client was just a beneficiary of the funds, contrary to petitioner Republic's allegation that Mrs. Marcos disclaimed ownership of or interest in the funds. This is yet another indication that respondents presented a fictitious defense because, during the pre-trial, Mrs. Marcos and the Marcos children denied ownership of or interest in the Swiss funds: PJ Garchitorena:

Counsel for Irene Araneta? Atty. SISON: I join the position taken by my other compaeros here, Your Honor. xxx

Atty. SISON: Irene Araneta as heir do (sic) not own any of the amount, Your Honor.55 We are convinced that the strategy of respondent Marcoses was to confuse petitioner Republic as to what facts they would prove or what issues they intended to pose for the court's resolution. There is no doubt in our mind that they were leading petitioner Republic, and now this Court, to perplexity, if not trying to drag this forfeiture case to eternity. Manifestation dated May 26, 1998 filed by MRS. Marcos; General/Supplemental Compromise Agreement dated December 28, 1993

But, as already pointed out, during the pre-trial conference, respondent Marcoses denied knowledge as well as ownership of the Swiss funds. Anyway we look at it, respondent Marcoses have put forth no real defense. The "facts" pleaded by respondents, while ostensibly raising important questions or issues of fact, in reality comprised mere verbiage that was evidently wanting in substance and constituted no genuine issues for trial. We therefore rule that, under the circumstances, summary judgment is proper. In fact, it is the law itself which determines when summary judgment is called for. Under the rules, summary judgment is appropriate when there are no genuine issues of fact requiring the presentation of evidence in a full-blown trial. Even if on their face the pleadings appear to raise issue, if the affidavits, depositions and admissions show that such issues are not genuine, then summary judgment as prescribed by the rules must ensue as a matter of law.56 In sum, mere denials, if unaccompanied by any fact which will be admissible in evidence at a hearing, are not sufficient to raise genuine issues of fact and will not defeat a motion for summary judgment.57 A summary judgment is one granted upon motion of a party for an expeditious settlement of the case, it appearing from the pleadings, depositions, admissions and affidavits that there are no important questions or issues of fact posed and, therefore, the movant is entitled to a judgment as a matter of law. A motion for summary judgment is premised on the assumption that the issues presented need not be tried either because these are patently devoid of substance or that there is no genuine issue as to any pertinent fact. It is a method sanctioned by the Rules of Court for the prompt disposition of a civil action where there exists no serious controversy.58 Summary judgment is a procedural device for the prompt disposition of actions in which the pleadings raise only a legal issue, not a genuine issue as to any material fact. The theory of summary judgment is that, although an answer may on its face appear to tender issues requiring trial, if it is established by affidavits, depositions or admissions that those issues are not genuine but fictitious, the Court is justified in dispensing with the trial and rendering summary judgment for petitioner.59 In the various annexes to the petition for forfeiture, petitioner Republic attached sworn statements of witnesses who had personal knowledge of the Marcoses' participation in the illegal acquisition of funds deposited in the Swiss accounts under the names of five groups or foundations. These sworn statements substantiated the

These pleadings of respondent Marcoses presented nothing but feigned defenses. In their earlier pleadings, respondents alleged either that they had no knowledge of the existence of the Swiss deposits or that they could no longer remember anything as it happened a long time ago. As to Mrs. Marcos, she remembered that it was lawfully acquired. In her Manifestation dated May 26, 1998, Mrs. Marcos stated that: COMES NOW undersigned counsel for respondent Imelda R. Marcos, and before this Honorable Court, most respectfully manifests: That respondent Imelda R, Marcos owns 90% of the subject matter of the above-entitled case, being the sole beneficiary of the dollar deposits in the name of the various foundations alleged in the case; That in fact only 10% of the subject matter in the above-entitled case belongs to the estate of the late President Ferdinand E. Marcos. In the Compromise/Supplemental Agreements, respondent Marcoses sought to implement the agreed distribution of the Marcos assets, including the Swiss deposits. This was, to us, an unequivocal admission of ownership by the Marcoses of the said deposits.

ill-gotten nature of the Swiss bank deposits. In their answer and other subsequent pleadings, however, the Marcoses merely made general denials of the allegations against them without stating facts admissible in evidence at the hearing, thereby failing to raise any genuine issues of fact. Under these circumstances, a trial would have served no purpose at all and would have been totally unnecessary, thus justifying a summary judgment on the petition for forfeiture. There were no opposing affidavits to contradict the sworn declarations of the witnesses of petitioner Republic, leading to the inescapable conclusion that the matters raised in the Marcoses' answer were false. Time and again, this Court has encountered cases like this which are either only halfheartedly defended or, if the semblance of a defense is interposed at all, it is only to delay disposition and gain time. It is certainly not in the interest of justice to allow respondent Marcoses to avail of the appellate remedies accorded by the Rules of Court to litigants in good faith, to the prejudice of the Republic and ultimately of the Filipino people. From the beginning, a candid demonstration of respondents' good faith should have been made to the court below. Without the deceptive reasoning and argumentation, this protracted litigation could have ended a long time ago. Since 1991, when the petition for forfeiture was first filed, up to the present, all respondents have offered are foxy responses like "lack of sufficient knowledge or lack of privity" or "they cannot recall because it happened a long time ago" or, as to Mrs. Marcos, "the funds were lawfully acquired." But, whenever it suits them, they also claim ownership of 90% of the funds and allege that only 10% belongs to the Marcos estate. It has been an incredible charade from beginning to end. In the hope of convincing this Court to rule otherwise, respondents Maria Imelda Marcos-Manotoc and Ferdinand R. Marcos Jr. contend that "by its positive acts and express admissions prior to filing the motion for summary judgment on March 10, 2000, petitioner Republic had bound itself to go to trial on the basis of existing issues. Thus, it had legally waived whatever right it had to move for summary judgment."60 We do not think so. The alleged positive acts and express admissions of the petitioner did not preclude it from filing a motion for summary judgment. Rule 35 of the 1997 Rules of Civil Procedure provides: Rule 35

Summary Judgment Section 1. Summary judgment for claimant. - A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any part thereof. Section 2. Summary judgment for defending party. - A party against whom a claim, counterclaim, or cross-claim is asserted or a declaratory relief is sought may, at any time, move with supporting affidavits, depositions or admissions for a summary judgment in his favor as to all or any part thereof. (Emphasis ours)61 Under the rule, the plaintiff can move for summary judgment "at any time after the pleading in answer thereto (i.e., in answer to the claim, counterclaim or cross-claim) has been served." No fixed reglementary period is provided by the Rules. How else does one construe the phrase "any time after the answer has been served?" This issue is actually one of first impression. No local jurisprudence or authoritative work has touched upon this matter. This being so, an examination of foreign laws and jurisprudence, particularly those of the United States where many of our laws and rules were copied, is in order. Rule 56 of the Federal Rules of Civil Procedure provides that a party seeking to recover upon a claim, counterclaim or cross-claim may move for summary judgment at any time after the expiration of 20 days from the commencement of the action or after service of a motion for summary judgment by the adverse party, and that a party against whom a claim, counterclaim or cross-claim is asserted may move for summary judgment at any time. However, some rules, particularly Rule 113 of the Rules of Civil Practice of New York, specifically provide that a motion for summary judgment may not be made until issues have been joined, that is, only after an answer has been served.62 Under said rule, after issues have been joined, the motion for summary judgment may be made at any stage of the litigation.63 No fixed prescriptive period is provided. Like Rule 113 of the Rules of Civil Practice of New York, our rules also provide that a motion for summary judgment may not be made until issues have been joined,

meaning, the plaintiff has to wait for the answer before he can move for summary judgment.64 And like the New York rules, ours do not provide for a fixed reglementary period within which to move for summary judgment. This being so, the New York Supreme Court's interpretation of Rule 113 of the Rules of Civil Practice can be applied by analogy to the interpretation of Section 1, Rule 35, of our 1997 Rules of Civil Procedure. Under the New York rule, after the issues have been joined, the motion for summary judgment may be made at any stage of the litigation. And what exactly does the phrase "at any stage of the litigation" mean? In Ecker vs. Muzysh,65 the New York Supreme Court ruled: "PER CURIAM. Plaintiff introduced her evidence and the defendants rested on the case made by the plaintiff. The case was submitted. Owing to the serious illness of the trial justice, a decision was not rendered within sixty days after the final adjournment of the term at which the case was tried. With the approval of the trial justice, the plaintiff moved for a new trial under Section 442 of the Civil Practice Act. The plaintiff also moved for summary judgment under Rule 113 of the Rules of Civil Practice. The motion was opposed mainly on the ground that, by proceeding to trial, the plaintiff had waived her right to summary judgment and that the answer and the opposing affidavits raised triable issues. The amount due and unpaid under the contract is not in dispute. The Special Term granted both motions and the defendants have appealed. The Special Term properly held that the answer and the opposing affidavits raised no triable issue. Rule 113 of the Rules of Civil Practice and the Civil Practice Act prescribe no limitation as to the time when a motion for summary judgment must be made. The object of Rule 113 is to empower the court to summarily determine whether or not a bona fide issue exists between the parties, and there is no limitation on the power of the court to make such a determination at any stage of the litigation." (emphasis ours) On the basis of the aforequoted disquisition, "any stage of the litigation" means that "even if the plaintiff has proceeded to trial, this does not preclude him from thereafter moving for summary judgment."66

In the case at bar, petitioner moved for summary judgment after pre-trial and before its scheduled date for presentation of evidence. Respondent Marcoses argue that, by agreeing to proceed to trial during the pre-trial conference, petitioner "waived" its right to summary judgment. This argument must fail in the light of the New York Supreme Court ruling which we apply by analogy to this case. In Ecker,67 the defendant opposed the motion for summary judgment on a ground similar to that raised by the Marcoses, that is, "that plaintiff had waived her right to summary judgment" by her act of proceeding to trial. If, as correctly ruled by the New York court, plaintiff was allowed to move for summary judgment even after trial and submission of the case for resolution, more so should we permit it in the present case where petitioner moved for summary judgment before trial. Therefore, the phrase "anytime after the pleading in answer thereto has been served" in Section 1, Rule 35 of our Rules of Civil Procedure means "at any stage of the litigation." Whenever it becomes evident at any stage of the litigation that no triable issue exists, or that the defenses raised by the defendant(s) are sham or frivolous, plaintiff may move for summary judgment. A contrary interpretation would go against the very objective of the Rule on Summary Judgment which is to "weed out sham claims or defenses thereby avoiding the expense and loss of time involved in a trial."68 In cases with political undertones like the one at bar, adverse parties will often do almost anything to delay the proceedings in the hope that a future administration sympathetic to them might be able to influence the outcome of the case in their favor. This is rank injustice we cannot tolerate. The law looks with disfavor on long, protracted and expensive litigation and encourages the speedy and prompt disposition of cases. That is why the law and the rules provide for a number of devices to ensure the speedy disposition of cases. Summary judgment is one of them. Faithful therefore to the spirit of the law on summary judgment which seeks to avoid unnecessary expense and loss of time in a trial, we hereby rule that petitioner Republic could validly move for summary judgment any time after the respondents' answer was filed or, for that matter, at any subsequent stage of the litigation. The fact that petitioner agreed to proceed to trial did not in any way prevent it from moving

for summary judgment, as indeed no genuine issue of fact was ever validly raised by respondent Marcoses. This interpretation conforms with the guiding principle enshrined in Section 6, Rule 1 of the 1997 Rules of Civil Procedure that the "[r]ules should be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding."69 Respondents further allege that the motion for summary judgment was based on respondents' answer and other documents that had long been in the records of the case. Thus, by the time the motion was filed on March 10, 2000, estoppel by laches had already set in against petitioner. We disagree. Estoppel by laches is the failure or neglect for an unreasonable or unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier, warranting a presumption that the person has abandoned his right or declined to assert it.70 In effect, therefore, the principle of laches is one of estoppel because "it prevents people who have slept on their rights from prejudicing the rights of third parties who have placed reliance on the inaction of the original parties and their successors-in-interest".71 A careful examination of the records, however, reveals that petitioner was in fact never remiss in pursuing its case against respondent Marcoses through every remedy available to it, including the motion for summary judgment. Petitioner Republic initially filed its motion for summary judgment on October 18, 1996. The motion was denied because of the pending compromise agreement between the Marcoses and petitioner. But during the pre-trial conference, the Marcoses denied ownership of the Swiss funds, prompting petitioner to file another motion for summary judgment now under consideration by this Court. It was the subsequent events that transpired after the answer was filed, therefore, which prevented petitioner from filing the questioned motion. It was definitely not because of neglect or inaction that petitioner filed the (second) motion for summary judgment years after respondents' answer to the petition for forfeiture. In invoking the doctrine of estoppel by laches, respondents must show not only unjustified inaction but also that some unfair injury to them might result unless the action is barred.72

This, respondents failed to bear out. In fact, during the pre-trial conference, the Marcoses disclaimed ownership of the Swiss deposits. Not being the owners, as they claimed, respondents did not have any vested right or interest which could be adversely affected by petitioner's alleged inaction. But even assuming for the sake of argument that laches had already set in, the doctrine of estoppel or laches does not apply when the government sues as a sovereign or asserts governmental rights.73 Nor can estoppel validate an act that contravenes law or public policy.74 As a final point, it must be emphasized that laches is not a mere question of time but is principally a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted.75 Equity demands that petitioner Republic should not be barred from pursuing the people's case against the Marcoses. (2) The Propriety of Forfeiture The matter of summary judgment having been thus settled, the issue of whether or not petitioner Republic was able to prove its case for forfeiture in accordance with the requisites of Sections 2 and 3 of RA 1379 now takes center stage. The law raises the prima facie presumption that a property is unlawfully acquired, hence subject to forfeiture, if its amount or value is manifestly disproportionate to the official salary and other lawful income of the public officer who owns it. Hence, Sections 2 and 6 of RA 137976 provide: xxx xxx

Section 2. Filing of petition. Whenever any public officer or employee has acquired during his incumbency an amount or property which is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and the income from legitimately acquired property, said property shall be presumed prima facie to have been unlawfully acquired. xxx xxx

Sec. 6. Judgment If the respondent is unable to show to the satisfaction of the court that he has lawfully acquired the property in question, then the court shall declare such property in question, forfeited in favor of the State, and by

virtue of such judgment the property aforesaid shall become the property of the State.Provided, That no judgment shall be rendered within six months before any general election or within three months before any special election. The Court may, in addition, refer this case to the corresponding Executive Department for administrative or criminal action, or both. From the above-quoted provisions of the law, the following facts must be established in order that forfeiture or seizure of the Swiss deposits may be effected: (1) ownership by the public officer of money or property acquired during his incumbency, whether it be in his name or otherwise, and (2) the extent to which the amount of that money or property exceeds, i. e., is grossly disproportionate to, the legitimate income of the public officer. That spouses Ferdinand and Imelda Marcos were public officials during the time material to the instant case was never in dispute. Paragraph 4 of respondent Marcoses' answer categorically admitted the allegations in paragraph 4 of the petition for forfeiture as to the personal circumstances of Ferdinand E. Marcos as a public official who served without interruption as Congressman, Senator, Senate President and President of the Republic of the Philippines from December 1, 1965 to February 25, 1986.77 Likewise, respondents admitted in their answer the contents of paragraph 5 of the petition as to the personal circumstances of Imelda R. Marcos who once served as a member of the Interim Batasang Pambansa from 1978 to 1984 and as Metro Manila Governor, concurrently Minister of Human Settlements, from June 1976 to February 1986.78 Respondent Mrs. Marcos also admitted in paragraph 10 of her answer the allegations of paragraph 11 of the petition for forfeiture which referred to the accumulated salaries of respondents Ferdinand E. Marcos and Imelda R. Marcos.79 The combined accumulated salaries of the Marcos couple were reflected in the Certification dated May 27, 1986 issued by then Minister of Budget and Management Alberto Romulo.80 The Certification showed that, from 1966 to 1985, Ferdinand E. Marcos and Imelda R. Marcos had accumulated salaries in the amount of P1,570,000 and P718,750, respectively, or a total of P2,288,750: Ferdinand E. Marcos, as President

1966-1976 1977-1984 1985

at P60,000/year at P100,000/year at P110,000/year

P660,000 800,000 110,000 P1,570,00

Imelda R. Marcos, as Minister June 1976-1985 at P75,000/year P718,000

In addition to their accumulated salaries from 1966 to 1985 are the Marcos couple's combined salaries from January to February 1986 in the amount of P30,833.33. Hence, their total accumulated salaries amounted to P2,319,583.33. Converted to U.S. dollars on the basis of the corresponding peso-dollar exchange rates prevailing during the applicable period when said salaries were received, the total amount had an equivalent value of $304,372.43. The dollar equivalent was arrived at by using the official annual rates of exchange of the Philippine peso and the US dollar from 1965 to 1985 as well as the official monthly rates of exchange in January and February 1986 issued by the Center for Statistical Information of the Bangko Sentral ng Pilipinas. Prescinding from the aforesaid admissions, Section 4, Rule 129 of the Rules of Court provides that: Section 4. Judicial admissions An admission, verbal or written, made by a party in the course of the proceedings in the same case does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.81 It is settled that judicial admissions may be made: (a) in the pleadings filed by the parties; (b) in the course of the trial either by verbal or written manifestations or stipulations; or (c) in other stages of judicial proceedings, as in the pre-trial of the case.82 Thus, facts pleaded in the petition and answer, as in the case at bar, are deemed admissions of petitioner and respondents, respectively, who are not permitted to contradict them or subsequently take a position contrary to or inconsistent with such admissions.83

The sum of $304,372.43 should be held as the only known lawful income of respondents since they did not file any Statement of Assets and Liabilities (SAL), as required by law, from which their net worth could be determined. Besides, under the 1935 Constitution, Ferdinand E. Marcos as President could not receive "any other emolument from the Government or any of its subdivisions and instrumentalities".84 Likewise, under the 1973 Constitution, Ferdinand E. Marcos as President could "not receive during his tenure any other emolument from the Government or any other source."85 In fact, his management of businesses, like the administration of foundations to accumulate funds, was expressly prohibited under the 1973 Constitution: Article VII, Sec. 4(2) The President and the Vice-President shall not, during their tenure, hold any other office except when otherwise provided in this Constitution, nor may they practice any profession, participate directly or indirectly in the management of any business, or be financially interested directly or indirectly in any contract with, or in any franchise or special privilege granted by the Government or any other subdivision, agency, or instrumentality thereof, including any government owned or controlled corporation. Article VII, Sec. 11 No Member of the National Assembly shall appear as counsel before any court inferior to a court with appellate jurisdiction, x x x. Neither shall he, directly or indirectly, be interested financially in any contract with, or in any franchise or special privilege granted by the Government, or any subdivision, agency, or instrumentality thereof including any government owned or controlled corporation during his term of office. He shall not intervene in any matter before any office of the government for his pecuniary benefit. Article IX, Sec. 7 The Prime Minister and Members of the Cabinet shall be subject to the provision of Section 11, Article VIII hereof and may not appear as counsel before any court or administrative body, or manage any business, or practice any profession, and shall also be subject to such other disqualification as may be provided by law. Their only known lawful income of $304,372.43 can therefore legally and fairly serve as basis for determining the existence of a prima facie case of forfeiture of the Swiss funds.

Respondents argue that petitioner was not able to establish a prima facie case for the forfeiture of the Swiss funds since it failed to prove the essential elements under Section 3, paragraphs (c), (d) and (e) of RA 1379. As the Act is a penal statute, its provisions are mandatory and should thus be construed strictly against the petitioner and liberally in favor of respondent Marcoses. We hold that it was not for petitioner to establish the Marcoses' other lawful income or income from legitimately acquired property for the presumption to apply because, as between petitioner and respondents, the latter were in a better position to know if there were such other sources of lawful income. And if indeed there was such other lawful income, respondents should have specifically stated the same in their answer. Insofar as petitioner Republic was concerned, it was enough to specify the known lawful income of respondents. Section 9 of the PCGG Rules and Regulations provides that, in determining prima facie evidence of ill-gotten wealth, the value of the accumulated assets, properties and other material possessions of those covered by Executive Order Nos. 1 and 2 must be out of proportion to the known lawful income of such persons. The respondent Marcos couple did not file any Statement of Assets and Liabilities (SAL) from which their net worth could be determined. Their failure to file their SAL was in itself a violation of law and to allow them to successfully assail the Republic for not presenting their SAL would reward them for their violation of the law. Further, contrary to the claim of respondents, the admissions made by them in their various pleadings and documents were valid. It is of record that respondents judicially admitted that the money deposited with the Swiss banks belonged to them. We agree with petitioner that respondent Marcoses made judicial admissions of their ownership of the subject Swiss bank deposits in their answer, the General/Supplemental Agreements, Mrs. Marcos' Manifestation and Constancia dated May 5, 1999, and the Undertaking dated February 10, 1999. We take note of the fact that the Associate Justices of the Sandiganbayan were unanimous in holding that respondents had made judicial admissions of their ownership of the Swiss funds. In their answer, aside from admitting the existence of the subject funds, respondents likewise admitted ownershipthereof. Paragraph 22 of respondents' answer stated: 22. Respondents specifically DENY PARAGRAPH 23 insofar as it alleges that respondents clandestinely stashed the country's wealth in Switzerland and

hid the same under layers and layers of foundations and corporate entities for being false, the truth being that respondents' aforesaid properties were lawfully acquired. (emphasis supplied) By qualifying their acquisition of the Swiss bank deposits as lawful, respondents unwittingly admitted their ownership thereof. Respondent Mrs. Marcos also admitted ownership of the Swiss bank deposits by failing to deny under oath the genuineness and due execution of certain actionable documents bearing her signature attached to the petition. As discussed earlier, Section 11, Rule 886 of the 1997 Rules of Civil Procedure provides that material averments in the complaint shall be deemed admitted when not specifically denied. The General87 and Supplemental88 Agreements executed by petitioner and respondents on December 28, 1993 further bolstered the claim of petitioner Republic that its case for forfeiture was proven in accordance with the requisites of Sections 2 and 3 of RA 1379. The whereas clause in the General Agreement declared that: WHEREAS, the FIRST PARTY has obtained a judgment from the Swiss Federal Tribunal on December 21, 1990, that the $356 million belongs in principle to the Republic of the Philippines provided certain conditionalities are met, but even after 7 years, the FIRST PARTY has not been able to procure a final judgment of conviction against the PRIVATE PARTY. While the Supplemental Agreement warranted, inter alia, that: In consideration of the foregoing, the parties hereby agree that the PRIVATE PARTY shall be entitled to the equivalent of 25% of the amount that may be eventually withdrawn from said $356 million Swiss deposits. The stipulations set forth in the General and Supplemental Agreements undeniably indicated the manifest intent of respondents to enter into a compromise with petitioner. Corollarily, respondents' willingness to agree to an amicable settlement with the Republic only affirmed their ownership of the Swiss deposits for the simple reason that no person would acquiesce to any concession over such huge dollar deposits if he did not in fact own them. Respondents make much capital of the pronouncement by this Court that the General and Supplemental Agreements were null and void.89 They insist that nothing in those

agreements could thus be admitted in evidence against them because they stood on the same ground as an accepted offer which, under Section 27, Rule 13090of the 1997 Rules of Civil Procedure, provides that "in civil cases, an offer of compromise is not an admission of any liability and is not admissible in evidence against the offeror." We find no merit in this contention. The declaration of nullity of said agreements was premised on the following constitutional and statutory infirmities: (1) the grant of criminal immunity to the Marcos heirs was against the law; (2) the PCGG's commitment to exempt from all forms of taxes the properties to be retained by the Marcos heirs was against the Constitution; and (3) the government's undertaking to cause the dismissal of all cases filed against the Marcoses pending before the Sandiganbayan and other courts encroached on the powers of the judiciary. The reasons relied upon by the Court never in the least bit even touched on the veracity and truthfulness of respondents' admission with respect to their ownership of the Swiss funds. Besides, having made certain admissions in those agreements, respondents cannot now deny that they voluntarily admitted owning the subject Swiss funds, notwithstanding the fact that the agreements themselves were later declared null and void. The following observation of Sandiganbayan Justice Catalino Castaeda, Jr. in the decision dated September 19, 2000 could not have been better said: x x x The declaration of nullity of the two agreements rendered the same without legal effects but it did not detract from the admissions of the respondents contained therein. Otherwise stated, the admissions made in said agreements, as quoted above, remain binding on the respondents.91 A written statement is nonetheless competent as an admission even if it is contained in a document which is not itself effective for the purpose for which it is made, either by reason of illegality, or incompetency of a party thereto, or by reason of not being signed, executed or delivered. Accordingly, contracts have been held as competent evidence of admissions, although they may be unenforceable.92 The testimony of respondent Ferdinand Marcos, Jr. during the hearing on the motion for the approval of the Compromise Agreement on April 29, 1998 also lent credence to the allegations of petitioner Republic that respondents admitted ownership of the Swiss bank accounts. We quote the salient portions of Ferdinand Jr.'s formal declarations in open court:

ATTY. FERNANDO: Mr. Marcos, did you ever have any meetings with PCGG Chairman Magtanggol C. Gunigundo? F. MARCOS, JR.: Yes. I have had very many meetings in fact with Chairman. ATTY. FERNANDO: Would you recall when the first meeting occurred? PJ GARCHITORENA: In connection with what? ATTY. FERNANDO: In connection with the ongoing talks to compromise the various cases initiated by PCGG against your family? F. MARCOS, JR.:

My reaction to all of these approaches is that I am always open, we are always open, we are very much always in search of resolution to the problem of the family and any approach that has been made us, we have entertained. And so my reaction was the same as what I have always why not? Maybe this is the one that will finally put an end to this problem.94 xxx ATTY. FERNANDO: Basically, what were the true amounts of the assets in the bank? PJ GARCHITORENA: So, we are talking about liquid assets here? Just Cash? F. MARCOS, JR.: Well, basically, any assets. Anything that was under the Marcos name in any of the banks in Switzerland which may necessarily be not cash.95 xxx xxx xxx xxx xxx

The nature of our meetings was solely concerned with negotiations towards achieving some kind of agreement between the Philippine government and the Marcos family. The discussions that led up to the compromise agreement were initiated by our then counsel Atty. Simeon Mesina x x x.93 xxx ATTY. FERNANDO: What was your reaction when Atty. Mesina informed you of this possibility? F. MARCOS, JR.: xxx xxx

PJ GARCHITORENA: x x x What did you do in other words, after being apprised of this contract in connection herewith? F. MARCOS, JR.: I assumed that we are beginning to implement the agreement because this was forwarded through the Philippine government lawyers through our lawyers and then, subsequently, to me. I was a little surprised because we hadn't really discussed the details of the transfer of the funds, what the bank accounts, what the mechanism would be. But nevertheless, I was happy to see that as far as the PCGG is

concerned, that the agreement was perfected and that we were beginning to implement it and that was a source of satisfaction to me because I thought that finally it will be the end.96 Ferdinand Jr.'s pronouncements, taken in context and in their entirety, were a confirmation of respondents' recognition of their ownership of the Swiss bank deposits. Admissions of a party in his testimony are receivable against him. If a party, as a witness, deliberately concedes a fact, such concession has the force of a judicial admission.97 It is apparent from Ferdinand Jr.'s testimony that the Marcos family agreed to negotiate with the Philippine government in the hope of finally putting an end to the problems besetting the Marcos family regarding the Swiss accounts. This was doubtlessly an acknowledgment of ownership on their part. The rule is that the testimony on the witness stand partakes of the nature of a formal judicial admission when a party testifies clearly and unequivocally to a fact which is peculiarly within his own knowledge.98 In her Manifestation99 dated May 26, 1998, respondent Imelda Marcos furthermore revealed the following: That respondent Imelda R. Marcos owns 90% of the subject matter of the above-entitled case, being the sole beneficiary of the dollar deposits in the name of the various foundations alleged in the case; That in fact only 10% of the subject matter in the above-entitled case belongs to the estate of the late President Ferdinand E. Marcos; xxx xxx xxx

instruments, in accordance with Section 8, Rule 8100 of the 1997 Rules of Civil Procedure. Likewise, in her Constancia101 dated May 6, 1999, Imelda Marcos prayed for the approval of the Compromise Agreement and the subsequent release and transfer of the $150 million to the rightful owner. She further made the following manifestations: xxx xxx xxx

2. The Republic's cause of action over the full amount is its forfeiture in favor of the government if found to be ill-gotten. On the other hand, the Marcoses defend that it is a legitimate asset. Therefore, both parties have an inchoate right of ownership over the account. If it turns out that the account is of lawful origin, the Republic may yield to the Marcoses. Conversely, the Marcoses must yield to the Republic. (underscoring supplied) xxx xxx xxx

3. Consistent with the foregoing, and the Marcoses having committed themselves to helping the less fortunate, in the interest of peace, reconciliation and unity, defendant MADAM IMELDA ROMUALDEZ MARCOS, in firm abidance thereby, hereby affirms her agreement with the Republic for the release and transfer of the US Dollar 150 million for proper disposition, without prejudice to the final outcome of the litigation respecting the ownership of the remainder. Again, the above statements were indicative of Imelda's admission of the Marcoses' ownership of the Swiss deposits as in fact "the Marcoses defend that it (Swiss deposits) is a legitimate (Marcos) asset." On the other hand, respondents Maria Imelda Marcos-Manotoc, Ferdinand Marcos, Jr. and Maria Irene Marcos-Araneta filed a motion102 on May 4, 1998 asking the Sandiganbayan to place the res (Swiss deposits) in custodia legis: 7. Indeed, the prevailing situation is fraught with danger! Unless the aforesaid Swiss deposits are placed in custodia legis or within the Court's protective mantle, its dissipation or misappropriation by the petitioner looms as a distinct possibility.

Respondents' ownership of the Swiss bank accounts as borne out by Mrs. Marcos' manifestation is as bright as sunlight. And her claim that she is merely a beneficiary of the Swiss deposits is belied by her own signatures on the appended copies of the documents substantiating her ownership of the funds in the name of the foundations. As already mentioned, she failed to specifically deny under oath the authenticity of such documents, especially those involving "William Saunders" and "Jane Ryan" which actually referred to Ferdinand Marcos and Imelda Marcos, respectively. That failure of Imelda Marcos to specifically deny the existence, much less the genuineness and due execution, of the instruments bearing her signature, was tantamount to a judicial admission of the genuineness and due execution of said

Such display of deep, personal interest can only come from someone who believes that he has a marked and intimate right over the considerable dollar deposits. Truly, by filing said motion, the Marcos children revealed their ownership of the said deposits. Lastly, the Undertaking103 entered into by the PCGG, the PNB and the Marcos foundations on February 10, 1999, confirmed the Marcoses' ownership of the Swiss bank deposits. The subject Undertaking brought to light their readiness to pay the human rights victims out of the funds held in escrow in the PNB. It stated: WHEREAS, the Republic of the Philippines sympathizes with the plight of the human rights victims-plaintiffs in the aforementioned litigation through the Second Party, desires to assist in the satisfaction of the judgment awards of said human rights victims-plaintiffs, by releasing, assigning and or waiving US$150 million of the funds held in escrow under the Escrow Agreements dated August 14, 1995, although the Republic is not obligated to do so under final judgments of the Swiss courts dated December 10 and 19, 1997, and January 8, 1998; WHEREAS, the Third Party is likewise willing to release, assign and/or waive all its rights and interests over said US$150 million to the aforementioned human rights victims-plaintiffs. All told, the foregoing disquisition negates the claim of respondents that "petitioner failed to prove that they acquired or own the Swiss funds" and that "it was only by arbitrarily isolating and taking certain statements made by private respondents out of context that petitioner was able to treat these as judicial admissions." The Court is fully aware of the relevance, materiality and implications of every pleading and document submitted in this case. This Court carefully scrutinized the proofs presented by the parties. We analyzed, assessed and weighed them to ascertain if each piece of evidence rightfully qualified as an admission. Owing to the farreaching historical and political implications of this case, we considered and examined, individually and totally, the evidence of the parties, even if it might have bordered on factual adjudication which, by authority of the rules and jurisprudence, is not usually done by this Court. There is no doubt in our mind that respondent Marcoses admitted ownership of the Swiss bank deposits. We have always adhered to the familiar doctrine that an admission made in the pleadings cannot be controverted by the party making such admission and becomes

conclusive on him, and that all proofs submitted by him contrary thereto or inconsistent therewith should be ignored, whether an objection is interposed by the adverse party or not.104 This doctrine is embodied in Section 4, Rule 129 of the Rules of Court: SEC. 4. Judicial admissions. An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.105 In the absence of a compelling reason to the contrary, respondents' judicial admission of ownership of the Swiss deposits is definitely binding on them. The individual and separate admissions of each respondent bind all of them pursuant to Sections 29 and 31, Rule 130 of the Rules of Court: SEC. 29. Admission by co-partner or agent. The act or declaration of a partner or agent of the party within the scope of his authority and during the existence of the partnership or agency, may be given in evidence against such party after the partnership or agency is shown by evidence other than such act or declaration. The same rule applies to the act or declaration of a joint owner, joint debtor, or other person jointly interested with the party.106 SEC. 31. Admission by privies. Where one derives title to property from another, the act, declaration, or omission of the latter, while holding the title, in relation to the property, is evidence against the former.107 The declarations of a person are admissible against a party whenever a "privity of estate" exists between the declarant and the party, the term "privity of estate" generally denoting a succession in rights.108 Consequently, an admission of one in privity with a party to the record is competent.109 Without doubt, privity exists among the respondents in this case. And where several co-parties to the record are jointly interested in the subject matter of the controversy, the admission of one is competent against all.110 Respondents insist that the Sandiganbayan is correct in ruling that petitioner Republic has failed to establish aprima facie case for the forfeiture of the Swiss deposits.

We disagree. The sudden turn-around of the Sandiganbayan was really strange, to say the least, as its findings and conclusions were not borne out by the voluminous records of this case. Section 2 of RA 1379 explicitly states that "whenever any public officer or employee has acquired during his incumbency an amount of property which is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and the income from legitimately acquired property, said property shall be presumed prima facie to have been unlawfully acquired. x x x" The elements which must concur for this prima facie presumption to apply are: (1) the offender is a public officer or employee; (2) he must have acquired a considerable amount of money or property during his incumbency; and (3) said amount is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and the income from legitimately acquired property. It is undisputed that spouses Ferdinand and Imelda Marcos were former public officers. Hence, the first element is clearly extant. The second element deals with the amount of money or property acquired by the public officer during his incumbency. The Marcos couple indubitably acquired and owned properties during their term of office. In fact, the five groups of Swiss accounts were admittedly owned by them. There is proof of the existence and ownership of these assets and properties and it suffices to comply with the second element. The third requirement is met if it can be shown that such assets, money or property is manifestly out of proportion to the public officer's salary and his other lawful income. It is the proof of this third element that is crucial in determining whether a prima facie presumption has been established in this case. Petitioner Republic presented not only a schedule indicating the lawful income of the Marcos spouses during their incumbency but also evidence that they had huge deposits beyond such lawful income in Swiss banks under the names of five different

foundations. We believe petitioner was able to establish the prima facie presumption that the assets and properties acquired by the Marcoses were manifestly and patently disproportionate to their aggregate salaries as public officials. Otherwise stated, petitioner presented enough evidence to convince us that the Marcoses had dollar deposits amounting to US $356 million representing the balance of the Swiss accounts of the five foundations, an amount way, way beyond their aggregate legitimate income of only US$304,372.43 during their incumbency as government officials. Considering, therefore, that the total amount of the Swiss deposits was considerably out of proportion to the known lawful income of the Marcoses, the presumption that said dollar deposits were unlawfully acquired was duly established. It was sufficient for the petition for forfeiture to state the approximate amount of money and property acquired by the respondents, and their total government salaries. Section 9 of the PCGG Rules and Regulations states: Prima Facie Evidence. Any accumulation of assets, properties, and other material possessions of those persons covered by Executive Orders No. 1 and No. 2, whose value is out of proportion to their known lawful income is prima facie deemed ill-gotten wealth. Indeed, the burden of proof was on the respondents to dispute this presumption and show by clear and convincing evidence that the Swiss deposits were lawfully acquired and that they had other legitimate sources of income. A presumption is prima facie proof of the fact presumed and, unless the fact thus prima facie established by legal presumption is disproved, it must stand as proved.111 Respondent Mrs. Marcos argues that the foreign foundations should have been impleaded as they were indispensable parties without whom no complete determination of the issues could be made. She asserts that the failure of petitioner Republic to implead the foundations rendered the judgment void as the joinder of indispensable parties was a sine qua non exercise of judicial power. Furthermore, the non-inclusion of the foreign foundations violated the conditions prescribed by the Swiss government regarding the deposit of the funds in escrow, deprived them of their day in court and denied them their rights under the Swiss constitution and international law.112 The Court finds that petitioner Republic did not err in not impleading the foreign foundations. Section 7, Rule 3 of the 1997 Rules of Civil Procedure,113 taken from

Rule 19b of the American Federal Rules of Civil Procedure, provides for the compulsory joinder of indispensable parties. Generally, an indispensable party must be impleaded for the complete determination of the suit. However, failure to join an indispensable party does not divest the court of jurisdiction since the rule regarding indispensable parties is founded on equitable considerations and is not jurisdictional. Thus, the court is not divested of its power to render a decision even in the absence of indispensable parties, though such judgment is not binding on the non-joined party.114 An indispensable party115 has been defined as one: [who] must have a direct interest in the litigation; and if this interest is such that it cannot be separated from that of the parties to the suit, if the court cannot render justice between the parties in his absence, if the decree will have an injurious effect upon his interest, or if the final determination of the controversy in his absence will be inconsistent with equity and good conscience. There are two essential tests of an indispensable party: (1) can relief be afforded the plaintiff without the presence of the other party? and (2) can the case be decided on its merits without prejudicing the rights of the other party?116 There is, however, no fixed formula for determining who is an indispensable party; this can only be determined in the context and by the facts of the particular suit or litigation. In the present case, there was an admission by respondent Imelda Marcos in her May 26, 1998 Manifestation before the Sandiganbayan that she was the sole beneficiary of 90% of the subject matter in controversy with the remaining 10% belonging to the estate of Ferdinand Marcos.117 Viewed against this admission, the foreign foundations were not indispensable parties. Their non-participation in the proceedings did not prevent the court from deciding the case on its merits and according full relief to petitioner Republic. The judgment ordering the return of the $356 million was neither inimical to the foundations' interests nor inconsistent with equity and good conscience. The admission of respondent Imelda Marcos only confirmed what was already generally known: that the foundations were established precisely to hide the money stolen by the Marcos spouses from petitioner Republic. It negated whatever illusion there was, if any, that the foreign foundations owned even a nominal part of the assets in question.

The rulings of the Swiss court that the foundations, as formal owners, must be given an opportunity to participate in the proceedings hinged on the assumption that they owned a nominal share of the assets.118 But this was already refuted by no less than Mrs. Marcos herself. Thus, she cannot now argue that the ruling of the Sandiganbayan violated the conditions set by the Swiss court. The directive given by the Swiss court for the foundations to participate in the proceedings was for the purpose of protecting whatever nominal interest they might have had in the assets as formal owners. But inasmuch as their ownership was subsequently repudiated by Imelda Marcos, they could no longer be considered as indispensable parties and their participation in the proceedings became unnecessary. In Republic vs. Sandiganbayan,119 this Court ruled that impleading the firms which are the res of the action was unnecessary: "And as to corporations organized with ill-gotten wealth, but are not themselves guilty of misappropriation, fraud or other illicit conduct in other words, the companies themselves are not the object or thing involved in the action, the res thereof there is no need to implead them either. Indeed, their impleading is not proper on the strength alone of their having been formed with ill-gotten funds, absent any other particular wrongdoing on their part Such showing of having been formed with, or having received ill-gotten funds, however strong or convincing, does not, without more, warrant identifying the corporations in question with the person who formed or made use of them to give the color or appearance of lawful, innocent acquisition to illegally amassed wealth at the least, not so as place on the Government the onus of impleading the former with the latter in actions to recover such wealth. Distinguished in terms of juridical personality and legal culpability from their erring members or stockholders, said corporations are not themselves guilty of the sins of the latter, of the embezzlement, asportation, etc., that gave rise to the Government's cause of action for recovery; their creation or organization was merely the result of their members' (or stockholders') manipulations and maneuvers to conceal the illegal origins of the assets or monies invested therein. In this light, they are simply the res in the actions for the recovery of illegally acquired wealth, and there is, in principle, no cause of action against them and no ground to implead them as defendants in said actions."

Just like the corporations in the aforementioned case, the foreign foundations here were set up to conceal the illegally acquired funds of the Marcos spouses. Thus, they were simply the res in the action for recovery of ill-gotten wealth and did not have to be impleaded for lack of cause of action or ground to implead them. Assuming arguendo, however, that the foundations were indispensable parties, the failure of petitioner to implead them was a curable error, as held in the previously cited case of Republic vs. Sandiganbayan:120 "Even in those cases where it might reasonably be argued that the failure of the Government to implead the sequestered corporations as defendants is indeed a procedural abberation, as where said firms were allegedly used, and actively cooperated with the defendants, as instruments or conduits for conversion of public funds and property or illicit or fraudulent obtention of favored government contracts, etc., slight reflection would nevertheless lead to the conclusion that the defect is not fatal, but one correctible under applicable adjective rules e.g., Section 10, Rule 5 of the Rules of Court [specifying the remedy of amendment during trial to authorize or to conform to the evidence]; Section 1, Rule 20 [governing amendments before trial], in relation to the rule respecting omission of so-called necessary or indispensable parties, set out in Section 11, Rule 3 of the Rules of Court. It is relevant in this context to advert to the old familiar doctrines that the omission to implead such parties "is a mere technical defect which can be cured at any stage of the proceedings even after judgment"; and that, particularly in the case of indispensable parties, since their presence and participation is essential to the very life of the action, for without them no judgment may be rendered, amendments of the complaint in order to implead them should be freely allowed, even on appeal, in fact even after rendition of judgment by this Court, where it appears that the complaint otherwise indicates their identity and character as such indispensable parties."121 Although there are decided cases wherein the non-joinder of indispensable parties in fact led to the dismissal of the suit or the annulment of judgment, such cases do not jibe with the matter at hand. The better view is that non-joinder is not a ground to dismiss the suit or annul the judgment. The rule on joinder of indispensable parties is founded on equity. And the spirit of the law is reflected in Section 11, Rule 3122 of the 1997 Rules of Civil Procedure. It prohibits the dismissal of a suit on the ground of non-joinder or misjoinder of parties and allows the amendment of the complaint at

any stage of the proceedings, through motion or on order of the court on its own initiative.123 Likewise, jurisprudence on the Federal Rules of Procedure, from which our Section 7, Rule 3124 on indispensable parties was copied, allows the joinder of indispensable parties even after judgment has been entered if such is needed to afford the moving party full relief.125 Mere delay in filing the joinder motion does not necessarily result in the waiver of the right as long as the delay is excusable.126 Thus, respondent Mrs. Marcos cannot correctly argue that the judgment rendered by the Sandiganbayan was void due to the non-joinder of the foreign foundations. The court had jurisdiction to render judgment which, even in the absence of indispensable parties, was binding on all the parties before it though not on the absent party.127 If she really felt that she could not be granted full relief due to the absence of the foreign foundations, she should have moved for their inclusion, which was allowable at any stage of the proceedings. She never did. Instead she assailed the judgment rendered. In the face of undeniable circumstances and the avalanche of documentary evidence against them, respondent Marcoses failed to justify the lawful nature of their acquisition of the said assets. Hence, the Swiss deposits should be considered illgotten wealth and forfeited in favor of the State in accordance with Section 6 of RA 1379: SEC. 6. Judgment. If the respondent is unable to show to the satisfaction of the court that he has lawfully acquired the property in question, then the court shall declare such property forfeited in favor of the State, and by virtue of such judgment the property aforesaid shall become property of the State x x x. THE FAILURE TO PRESENT AUTHENTICATED TRANSLATIONS OF THE SWISS DECISIONS Finally, petitioner Republic contends that the Honorable Sandiganbayan Presiding Justice Francis Garchitorena committed grave abuse of discretion in reversing himself on the ground that the original copies of the authenticated Swiss decisions and their authenticated translations were not submitted to the court a quo. Earlier PJ Garchitorena had quoted extensively from the unofficial translation of one of these Swiss decisions in hisponencia dated July 29, 1999 when he denied the motion to release US$150 Million to the human rights victims.

While we are in reality perplexed by such an incomprehensible change of heart, there might nevertheless not be any real need to belabor the issue. The presentation of the authenticated translations of the original copies of the Swiss decision was not de rigueur for the public respondent to make findings of fact and reach its conclusions. In short, the Sandiganbayan's decision was not dependent on the determination of the Swiss courts. For that matter, neither is this Court's. The release of the Swiss funds held in escrow in the PNB is dependent solely on the decision of this jurisdiction that said funds belong to the petitioner Republic. What is important is our own assessment of the sufficiency of the evidence to rule in favor of either petitioner Republic or respondent Marcoses. In this instance, despite the absence of the authenticated translations of the Swiss decisions, the evidence on hand tilts convincingly in favor of petitioner Republic. WHEREFORE, the petition is hereby GRANTED. The assailed Resolution of the Sandiganbayan dated January 31, 2002 is SET ASIDE. The Swiss deposits which were transferred to and are now deposited in escrow at the Philippine National Bank in the estimated aggregate amount of US$658,175,373.60 as of January 31, 2002, plus interest, are hereby forfeited in favor of petitioner Republic of the Philippines. SO ORDERED.

Footnotes
1

An Act Declaring Forfeiture In Favor of the State Any Property To Have Been Unlawfully Acquired By Any Public Officer or Employee and Providing For the Procedure Therefor. 2 E.O. No. 1 - promulgated on February 28, 1986, only two (2) days after the Marcoses fled the country, creating the PCGG which was primarily tasked to assist the President in the recovery of vast government resources allegedly amassed by former President Marcos, his immediate family, relatives, and close associates, both here and abroad. 3 E.O. No. 2 issued twelve (12) days later, warning all persons and entities who had knowledge of possession of ill-gotten assets and properties under pain of penalties prescribed by law, prohibiting them from concealing, transferring or dissipating them or from otherwise frustrating or obstructing the recovery efforts of the government. 4 E.O. No. 14 Series of 1986, as amended by E.O. No. 14-A. 5 Also series of 1986, vested Sandiganbayan the exclusive and original jurisdiction over cases, whether civil or criminal, to be filed by the PCGG with the assistance of the Office of the Solicitor General. The law also declared that the civil actions for the recovery of unlawfully acquired property under Republic Act No. 1379 or for restitution, reparation of damages, or indemnification for consequential and other damages or any other civil action under the Civil Code or other existing laws filed with the Sandiganbayan against Ferdinand Marcos et. al.,

may proceed independently of any criminal proceedings and may be proved by preponderance of evidence. 6 Declared null and void by this Court on December 9, 1998 in the case of " Francisco I. Chavez vs. PCGG and Magtanggol Gunigundo", docketed as G.R. No. 130716. 7 In April 1986, pursuant to E.O. No. 2, the Republic of the Philippines through the PCGG filed a request for mutual assistance with the Swiss Federal Police Department, under the procedures of the International Mutual Assistance in Criminal Proceedings (IMAC) to freeze the bank deposits of the Marcoses located in Switzerland. IMAC is a domestic statute of Switzerland which generally affords relief to the kind of request from foreign governments or entities as authorized under E.O. No. 2. The various Swiss local authorities concerned granted the request of petitioner Republic, and ordered the Swiss deposits to be "blocked" until the competent Philippine court could decide on the matter. 8 Volume III, Rollo, p. 2195. 9 Penned by Justice Catalino R. Castaeda, Jr. and concurred in by Presiding Justice Francis E. Garchitorena and Associate Justice Gregory S. Ong. 10 Volume III, Rollo, p. 2218. 11 Penned by Presiding Justice Francis E. Garchitorena with the separate concurring opinions of Associate Justice Nicodemo T. Ferrer and Associate Justice Gregory S. Ong. Associate Justices Catalino R. Castaeda, Jr. and Francisco H. Villaruz, Jr. both wrote their respective dissenting opinions. 12 Volume I, Rollo, pp. 145-146. 13 Volume I, Rollo, pp. 60-62. 14 Volume IV, Rollo, p. 2605. 15 Sec. 3 the petition shall contain the following information xxx (c) The approximate amount of property he has acquired during his incumbency in his past and present offices and employments. 16 (d) A description of said property, or such thereof as has been identified by the Solicitor General. 17 (e) The total amount of his government salary and other proper earnings and incomes from legitimately acquired property xxx. 18 Volume IV, Rollo, pp. 2651-2654. 19 Same as Section 1, Rule 65 of the old Rules of Court. 20 Filoteo, Jr. vs. Sandiganbayan, 263 SCRA 222 [1996]. 21 Central Bank vs. Cloribel, 44 S 307, 314 [1972]. 22 240 SCRA 376 [1995]. 23 Republic vs. Sandiganbayan, 269 SCRA 316 [1997]. 24 69 SCRA 524 [1976]. 25 Substantially the same as Section 1, Rule 34 of the old Rules of Court. 26 Agcanas vs. Nagum, L-20707, 143 Phil 177 [1970]. 27 Rollo, Vol. I, pp. 22-37. 28 Substantially the same as Section 10, Rule 8 of the old Rules of Court. 29 16 Phil., 315, 321-322 [1910]. 30 197 SCRA 391 [1991]. 31 Philippine Advertising vs. Revilla, 52 SCRA 246 [1973].

32 33

Petition, Annex C, Volume I, Rollo, p. 236. Answer, Annex D, Volume II, Rollo, p. 1064. 34 61A Am. Jur., 172-173. 35 Blume vs. MacGregor, 148 P. 2d. 656 [see p.428, Moran, Comments on the Rules of Court, 1995 ed.]. 36 Substantially the same as Section 1, Rule 9 of the old Rules of Court. 37 Supra. 38 Supra. 39 "All the five (5) group accounts in the over-all flow chart have a total balance of about Three Hundred Fifty Six Million Dollars ($356,000,000.00) as shown by Annex 'R-5' hereto attached as integral part hereof." 40 22 SCRA 48 [1968] 41 XANDY-WINTROP-AVERTINA FOUNDATION: (a) Contract for opening of deposit dated March 21, 1968; (b) Handwritten instruction; (c) Letter dated March 3, 1970; (d) Handwritten regulation of Xandy dated February 13, 1970; (e) Letter of instruction dated March 10, 1981; (f) Letter of Instructions dated March 10, 1991. TRINIDAD-RAYBY-PALMY FOUNDATION: (a) Management agreement dated August 28, 1990; (b) Letter of instruction dated August 26, 1970 to Markers Geel of Furich; (c) Approval of Statutes and By-laws of Trinidad Foundation dated August 26, 1990; (d) Regulations of the Trinidad Foundation dated August 28, 1970; (e) Regulations of the Trinidad Foundation prepared by Markers Geel dated August 28, 1970; (f) Letter of Instructions to the Board of Rayby Foundation dated March 10, 1981; (g) Letter of Instructions to the Board of Trinidad Foundation dated March 10, 1981. MALER ESTABLISHMENT FOUNDATION: (a) Rules and Regulations of Maler dated October 15, 1968; (b) Letter of Authorization dated October 19, 1968 to Barbey d Suncir; (c) Letter of Instruction to Muler to Swiss Bank dated October 19, 1968. 42 "Where an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading xxx, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party under oath, specifically denies them, and sets forth what he claims to be the facts xxx." 43 Annex A-F, Volume I, Rollo, pp. 193-194. 44 Ice Plant Equipment vs. Martocello, D.C.P., 1941, 43 F. Supp. 281. 45 Phil. Advertising Counselors, Inc. vs. Revilla, L- 31869, Aug. 8, 1973. 46 Warner Barnes & Co., Ltd. vs. Reyes, et. al., 55 O.G. 3109-3111. 47 Philippine Bank of Communications vs. Court of Appeals, 195 SCRA 567 [1991]. 48 28 SCRA 807, 812 [1969]. 49 Rule 20 of the old Rules of Court was amended but the change(s) had no adverse effects on the rights of private respondents. 50 Development Bank of the Phils. vs. CA, G.R. No. L-49410, 169 SCRA 409 [1989]. 51 Substantially the same as Section 3, Rule 34 of the old Rules of Court. 52 adopted by the Marcos children. 53 dated September 26, 2000 as filed by Mrs. Marcos; dated October 5, 2000 as jointly filed by Mrs. Manotoc and Ferdinand, Jr.; supplemental motion for reconsideration dated October 9, 2000 jointly filed by Mrs. Manotoc and Ferdinand, Jr.; 54 dated December 12, 2000 and December 17, 2000 as filed by the Marcos children. 55 TSN, pp. 47-48, October 28, 1999.

56

Evadel Realty and Development Corp. vs. Spouses Antera and Virgilio Soriano , April 20, 2001. 57 Plantadosi vs. Loew's, Inc., 7 Fed. Rules Service, 786, June 2, 1943. 58 Rabaca vs. Velez, 341 SCRA 543 [2000]. 59 Carcon Development Corp. vs. Court of Appeals, 180 SCRA 348 [1989]. 60 Rollo, pp. 2659-70. 61 Substantially the same as Sections 1 and 2, Rule 34 of the old Rules of Court. 62 Rule 113. Summary Judgment. - When an answer is served in an action to recover a debt or a liquidated demand arising, 1. on a contract, express or implied, sealed or not sealed; or 2. on a judgment for a stated sum; the answer may be struck out and judgment entered thereon on motion, and the affidavit of the plaintiff or of any other person having knowledge of the facts, verifying the cause of action and stating the amount claimed, and his belief that there is no defense to the action; unless the defendant by affidavit or other proof, shall show such facts as may be deemed, by the judge hearing the motion, sufficient to entitle him to defend. (emphasis ours) 63 73 Am Jur 2d 733, 12; 49 C.J.S. 412, 224. 64 Moran, Comments on the Rules of Court, Vol. II. (1996), pp. 183-184. 65 19 NYS2d 250 [1940]. 66 73 Am Jur 2d 733, 12; 49 C.J.S. 412, 224. 67 Supra. 68 Gregorio Estrada vs. Hon. Fracisco Consolacion, et. al., 71 SCRA 523 [1976]. 69 Substantially the same as Section 2, Rule 1 of the old Rules of Court. 70 Madeja vs. Patcho, 123 SCRA 540 [1983]. 71 Mejia de Lucas vs. Gamponia, 100 Phil. 277 [1956]. 72 Diaz vs. Gorricho, 103 Phil. 261 [1958]. 73 Collado vs. Court of Appeals, G.R. No.107764, October 4, 2002; Section 15, Article XI of the 1987 Constitution. 74 Go Tian An vs. Republic of the Philippines, 124 Phil. 472 [1966]. 75 Tijam vs. Sibonghanoy, 23 SCRA 29 [1968]. 76 "An Act Declaring Forfeiture in Favor of the State any Property Found to Have Been Unlawfully Acquired by Any Public Officer or Employee and Providing for the Proceedings Therefor", approved on June 18, 1955. 77 Petition, Annex D, Volume II, p. 1081. 78 Ibid. 79 Id., p. 1062. 80 Exhibit "S." 81 Substantially the same as Section 2, Rule 129 of the old Rules of Court. 82 Regalado, Remedial Law Compendium, Vol. II, 1997 ed., p. 650. 83 Moran, Comments on the Rules of Court, Volume V, 1980 ed., p. 64. 84 Section 9, Article VII. 85 Section 4(1), Article VII. 86 Substantially the same as Section 1, Rule 9 of the old Rules of Court. 87 Annex F-1, Volume II, Rollo, pp. 1095-1098. 88 Annex F-2, Volume II, Rollo, pp.1099-1100. 89 Chavez vs. PCGG, 299 SCRA 744, [1998].

90 91

Substantially the same as Section 24, Rule 130 of the old Rules of Court. Annex HH, Volume III, Rollo, p. 2205. 92 31A C.J.S., Par. 284, p.721. 93 Annex I, Volume II, Rollo, pp. 1177-1178. 94 Ibid, p. 1181. 95 Ibid, p. 1188. 96 Ibid, p. 1201. 97 29A Am. Jur., Par. 770, p. 137. 98 31A C.J.S., Par. 311, p.795. 99 Annex M, Volume II, Rollo, pp.1260-1261. 100 Substantially the same as Section 8, Rule 8 of the old Rules of Court. 101 Annex S, Volume II, Rollo, pp.1506-1507. 102 Annex L, Volume II, Rollo, p. 1256. 103 Annex P-1, Volume II, Rollo, p. 1289. 104 Santiago vs. de los Santos, 61 SCRA 146 [1974]. 105 Substantially the same as Section 2, Rule 129 of the old Rules of Court. 106 Substantially the same as Section 26, Rule 130 of the old Rules of Court. 107 Substantially the same as Section 28, Rule 130 of the old Rules of Court. 108 29 Am Jur 2d Par. 824, p. 211. 109 31A C.J.S., Par. 322, p. 817. 110 Ibid, p. 814. 111 Miriam Defensor Santiago, Rules of Court Annotated, 1999 ed., p. 857. 112 Rollo, pp. 2255-2265. 113 Sec. 7. Compulsory joinder of indispensable parties.Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants. The same as Section 7, Rule 3 of the old Rules of Court. 114 59 Am. Jur. 2d Parties 97 (2000). 115 Supra note 3 13 (2000). 116 Supra note 3 citing Picket vs. Paine, 230 Ga 786, 199 SE2d 223. 117 Rollo, p. 1260. Manifestation: "Comes now undersigned counsel for the respondent Imelda R. Marcos, and before this Honorable Court, most respectfully manifests: That respondent Imelda R. Marcos owns 90% of the subject-matter of the above-entitled case, being the sole beneficiary of the dollar deposits in the name of the various Foundations alleged in the case; That in fact only 10% of the subject-matter in the above-entitled case belongs to the Estate of the late President Ferdinand E. Marcos;" 118 Rollo, p. 2464, quoted from the December 18, 2000 memorandum of respondent Mrs. Marcos: "On the other hand, the opponent to the appeal, formally the owner of the assets to be seized and restituted, has not been involved in the collecting procedure pending in the Philippines. Even though such opponent is nothing but a legal construction to hide the true ownership to the assets of the Marcos family, they nevertheless are entitled to a hearing as far as the proceedings are concerned with accounts which are nominally theirs. The guarantees of the Republic of the Philippines therefore must include the process rights not only of the defendants but also of the formal owners of the assets to be delivered."

119 120

240 SCRA 376, 469 [1995]. Supra. 121 Id at 470-471. 122 Substantially the same as Section 11, Rule 3 of the old Rules of Court. 123 Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground for the dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately. 124 Same as Section 7, Rule 3 of the old Rules of Court. 125 Supra note 3 265 (2000) 126 Id citing Gentry vs. Smith (CA5 Fla) 487 F2d 571, 18 FR Serv 2d 221, later app (CA5 Fla) 538 F2d 1090, on reh (CA5 Fla) 544 F2d 900, holding that a failure to request the joinder of a defendant was excused where the moving party's former counsel, who had resisted the joinder, abruptly withdrew his appearance and substitute counsel moved promptly to join the corporation. 127 Supra note 3.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 176783 June 27, 2012

ELIZABETH DIMAANO, Petitioner, vs. THE HON. SANDIGANBAYAN and REPUBLIC OF THE PHILIPPINES, Respondents. DECISION ABAD, J.: This is a case about the propriety of collecting sheriffs percentage fee on the execution of a court order for return to a party of money that the government illegally confiscated from her. The Facts and the Case

On March 3, 1986 respondent Republic of the Philippines, acting through the Presidential Commission on Good Government (PCGG), confiscated cash of P2,868,850.00 and US$50,000.00 and some items from petitioner Elizabeth Dimaanos (Dimaano) house on a belief that they were ill-gotten wealth of an army general who belonged to the martial law regime.1 The PCGG subsequently filed a forfeiture action against her and others before the Sandiganbayan.2 On November 18, 1991 the Sandiganbayan dismissed the forfeiture case against Dimaano and ordered the Republic to return the money and items it seized from her.3 On July 21, 2003 this Court affirmed the order.4Consequently, Dimaano filed with the Sandiganbayan a motion for the release of the seized cash and items5 which that court granted on March 3, 20056 and further affirmed on August 1, 2005.7 Following the issuance of the writ of execution on February 14, 2006,8 Dimaano discovered that the PCGG had transferred the money to accounts that needed allocation documents from the Department of Budget and Management (DBM) before it could be withdrawn from the National Treasury. Eventually, however, the mistake was rectified and on April 4, 2006 the Bureau of Treasury released a P4,058,850.00 check to Dimaano in partial satisfaction of the writ.9 But the Sandiganbayan assessed Dimaano P163,391.50 as sheriffs percentage collection fee10 pursuant to A.M. 04-2-04-SC Re: Revision of Rule 141 of the Rules of Court. Dimaano filed a motion for reconsideration of the Sandiganbayans assessment order.11 She assailed it as unwarranted since the sheriffs percentage collection fee applied only to actions for money covering collectibles or unsatisfied debts or in actions pertaining to interest-bearing obligations. She also argued that the fee assessment would be iniquitous in her case because a) it penalized her when in fact, she was the wronged party; and b) it rewarded the police officers transgressions of her rights.12 On January 5, 2007 the Sandiganbayan denied Dimaanos motion for reconsideration, holding that the assessment of the challenged fee was not dependent on the "nature of the case" but on the fact of collection. And since the rule did not distinguish between "money collected" and "money returned" through the sheriffs effort, neither should petitioner, hence, Dimaanos recourse to this Court. Issue Presented

The sole issue presented in this case is whether or not the Sandiganbayan rightfully assessed Dimaano a sheriffs percentage collection fee on the money that the Republic returned to her pursuant to the writ of execution that the court issued in the case. Ruling of the Court Dimaano attempts to make a distinction between money ordered "collected" from the judgment debtor and paid to the judgment creditor and money ordered "returned" by one party to another from whom such money was unlawfully taken. Dimaano claims that she was already a victim when the government illegally seized her money. It would be unfair that she should still pay the government some fee to get her money back. But, first, the imposition of the sheriffs fee is not a penalty for some wrong that Dimaano had done.1wphi1 It is an assessment for the cost of the sheriffs service in collecting the judgment amount for her benefit. Its collection is authorized under Rule 141 of the Rules of Court, as amended,13 thus: xxxx SEC. 3. Persons authorized to collect legal fees. Except as otherwise provided in this rule, the officers and persons hereinafter mentioned, together with their assistants and deputies, may demand, receive, and take the several fees hereinafter mentioned x x x. xxxx SEC. 10. Sheriffs, PROCESS SERVERS and other persons serving processes. x x x (l) For money collected by him x x x by order, execution, attachment, or any other process, judicial or extrajudicial which shall immediately be turned over to the Clerk of Court, x x x. Second, the order to pay a party the money owed him and the order to pay another the money unlawfully taken from him are both awards of actual or compensatory damages. They compensate for the pecuniary loss that the party suffered and proved in court.14 The recipients of the award, whether for money owed or taken from him, benefit from the courts intervention and service in collecting the amount. As the Sandiganbayan correctly said, what determines the assessment of the disputed court

fee is the fact that the court, through valid processes, ordered a certain sum of money to be placed in the hands of the sheriff for turnover to the winning party. In addition to raising before the Court the matter of the sheriffs fee, Dimaano also questions the Sandiganbayans failure to award interest on the amount that was to be returned to her considering that the government used and invested the money as if it were its own. But, as the Republic points out, Dimaano could no longer seek the award of interest since she filed no appeal from the decision of the Sandiganbayan that ordered merely the return of such amount with no mention of interest.15 WHEREFORE, the Court AFFIRMS the Resolutions of the Sandiganbayan dated July 25, 2006 and January 5, 2007 that assessed petitioner Elizabeth Dimaano sheriffs percentage fee for the partial satisfaction of the writ of execution dated February 14, 2006. SO ORDERED. ROBERTO A. ABAD Associate Justice
Footnotes
*

Penned by Presiding Justice Teresita Leonardo-de Castro (now a member of the Court) and concurred in by Justices Francisco H. Villaruz, Jr. and Efren N. dela Cruz. 7 Penned by Presiding Justice Teresita Leonardo-de Castro (now a member of the Court) and concurred in by Justices Diosdado M. Peralta (now also a member of the Court) and Efren N. dela Cruz. 8 Rollo, pp. 115-116. 9 The pieces of jewelry had not yet been returned to Dimaano. 10 Rollo, pp. 118-119; Resolution written by Justice Diosdado M. Peralta and concurred in by Presiding Justice Teresita Leonardo-de Castro (both are now members of the Court) and Justice Efren N. De La Cruz. 11 Records, Vol. 2, pp. 69-72. 12 Rollo, pp. 120-123. 13 Amended by A.M. 04-2-04-SC effective August 16, 2004. 14 Civil Code, Article 2199 in relation to Articles 2195 and 1157. 15 Rollo, pp. 130-145.

Republic of the Philippines SUPREME COURT Manila EN BANC

Designated Acting Member in lieu of Associate Justice Jose Catral Mendoza, per Special Order 1241 dated June 14, 2012. ** Designated Additional Member in lieu of Associate Justice Diosdado M. Peralta, per Raffle dated June 27, 2012. 1 See Republic of the Philippines v. Sandiganbayan, 454 Phil. 504 (2003). The PCGG suspected that several properties of Dimaano were part of Major General Josephus Q. Ramas unexplained wealth. 2 The case was docketed before the Sandiganbayan as Civil Case 0037 (Republic v. Josephus Ramas and Elizabeth Dimaano); records, Vol. 1, pp. 11-39. 3 Rollo, pp. 32-60. 4 Republic of the Philippines v. Sandiganbayan, supra note 1. According to the Supreme Court, it is true that under the resulting government of the EDSA Revolution no constitution was operative. This did not necessarily mean, however, that the Philippines ceased to be bound by its treaty obligations, examples of which are the International Covenant on Civil and Political Rights and the Universal Declaration of Human Rights. The Court thus concluded that the raiding team, headed by Capt. Rodolfo Sebastian, exceeded their authority when they seized items not particularly described in the search warrant. And failing to show any other legal basis for the monies seizure, they indeed violated petitioners rights to privacy, home, and property. 5 Records, Vol. 1, pp. 202-204.

G.R No. 187167

August 16, 2011

PROF. MERLIN M. MAGALLONA, AKBAYAN PARTY-LIST REP. RISA HONTIVEROS, PROF. HARRY C. ROQUE, JR., AND UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW STUDENTS, ALITHEA BARBARA ACAS, VOLTAIRE ALFERES, CZARINA MAY ALTEZ, FRANCIS ALVIN ASILO, SHERYL BALOT, RUBY AMOR BARRACA, JOSE JAVIER BAUTISTA, ROMINA BERNARDO, VALERIE PAGASA BUENAVENTURA, EDAN MARRI CAETE, VANN ALLEN DELA CRUZ, RENE DELORINO, PAULYN MAY DUMAN, SHARON ESCOTO, RODRIGO FAJARDO III, GIRLIE FERRER, RAOULLE OSEN FERRER, CARLA REGINA GREPO, ANNA MARIE CECILIA GO, IRISH KAY KALAW, MARY ANN JOY LEE, MARIA LUISA MANALAYSAY, MIGUEL RAFAEL MUSNGI, MICHAEL OCAMPO, JAKLYN HANNA PINEDA, WILLIAM RAGAMAT, MARICAR RAMOS, ENRIK FORT REVILLAS, JAMES MARK TERRY RIDON, JOHANN FRANTZ RIVERA IV, CHRISTIAN RIVERO, DIANNE MARIE ROA, NICHOLAS SANTIZO, MELISSA CHRISTINA SANTOS, CRISTINE MAE TABING, VANESSA ANNE TORNO, MARIA ESTER VANGUARDIA,

and MARCELINO VELOSO III, Petitioners, vs. HON. EDUARDO ERMITA, IN HIS CAPACITY AS EXECUTIVE SECRETARY, HON. ALBERTO ROMULO, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF FOREIGN AFFAIRS, HON. ROLANDO ANDAYA, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF BUDGET AND MANAGEMENT, HON. DIONY VENTURA, IN HIS CAPACITY AS ADMINISTRATOR OF THE NATIONAL MAPPING & RESOURCE INFORMATION AUTHORITY, and HON. HILARIO DAVIDE, JR., IN HIS CAPACITY AS REPRESENTATIVE OF THE PERMANENT MISSION OF THE REPUBLIC OF THE PHILIPPINES TO THE UNITED NATIONS,Respondents. 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. 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 standiand (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 merits, whether RA 9522 is unconstitutional. The Ruling of the Court 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.20Issues 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 territory"21 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 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 nonliving 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 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.1avvphi1 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 using RA 3046, as amended, taking into account the Treaty of Paris delimitation (in square nautical miles) Internal or archipelagic waters Territorial Sea Exclusive Economic Zone TOTAL 440,994

Extent of maritime area using RA 9522, taking into account UNCLOS III (in square nautical miles)

166,858 274,136

171,435 32,106 382,669 586,210

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 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.1avvphi1 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 121"36 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 Actis 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 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 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.53 UNCLOS 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 internationallyrecognized delimitation of the 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
Footnotes
1

Entitled "An Act to Amend Certain Provisions of Republic Act No. 3046, as Amended by Republic Act No. 5446, to Define the Archipelagic Baselines of the Philippines, and for Other Purposes." 2 Entitled "An Act to Define the Baselines of the Territorial Sea of the Philippines." 3 The third "Whereas Clause" of RA 3046 expresses the import of treating the Philippines as an archipelagic State: "WHEREAS, all the waters around, between, and connecting the various islands of the Philippine archipelago, irrespective of their width or dimensions, have always been considered as necessary appurtenances of the land territory, forming part of the inland waters of the Philippines."

One of the four conventions framed during the first United Nations Convention on the Law of the Sea in Geneva, this treaty, excluding the Philippines, entered into force on 10 September 1964. 5 UNCLOS III entered into force on 16 November 1994. 6 The Philippines signed the treaty on 10 December 1982. 7 Article 47, paragraphs 1-3, provide: 1. An archipelagic State may draw straight archipelagic baselines joining the outermost points of the outermost islands and drying reefs of the archipelago provided that within such baselines are included the main islands and an area in which the ratio of the area of the water to the area of the land, including atolls, is between 1 to 1 and 9 to 1. 2. 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. 3. The drawing of such baselines shall not depart to any appreciable extent from the general configuration of the archipelago. (Emphasis supplied) xxxx 8 UNCLOS III entered into force on 16 November 1994. The deadline for the filing of application is mandated in Article 4, Annex II: "Where a coastal State intends to establish, in accordance with article 76, the outer limits of its continental shelf beyond 200 nautical miles, it shall submit particulars of such limits to the Commission along with supporting scientific and technical data as soon as possible but in any case within 10 years of the entry into force of this Convention for that State. The coastal State shall at the same time give the names of any Commission members who have provided it with scientific and technical advice." (Underscoring supplied) In a subsequent meeting, the States parties agreed that for States which became bound by the treaty before 13 May 1999 (such as the Philippines) the ten-year period will be counted from that date. Thus, RA 9522, which took effect on 27 March 2009, barely met the deadline. 9 Rollo, p. 34. 10 Which provides: "The national territory comprises the Philippine archipelago, with all the islands and waters embraced therein, and all other territories over which the Philippines has sovereignty or jurisdiction, consisting of its terrestrial, fluvial, and aerial domains, including its territorial sea, the seabed, the subsoil, the insular shelves, and other submarine areas. The waters around, between, and connecting the islands of the archipelago, regardless of their breadth and dimensions, form part of the internal waters of the Philippines." 11 Entered into between the Unites States and Spain on 10 December 1898 following the conclusion of the Spanish-American War. Under the terms of the treaty, Spain ceded to the United States "the archipelago known as the Philippine Islands" lying within its technical description. 12 The Treaty of Washington, between Spain and the United States (7 November 1900), transferring to the US the islands of Cagayan, Sulu, and Sibutu and the US-Great Britain Convention (2 January 1930) demarcating boundary lines between the Philippines and North Borneo. 13 Article II, Section 7, Section 8, and Section 16.

14

Allegedly in violation of Article XII, Section 2, paragraph 2 and Article XIII, Section 7 of the Constitution. 15 Kilosbayan, Inc. v. Morato, 320 Phil. 171, 186 (1995). 16 Pascual v. Secretary of Public Works, 110 Phil. 331 (1960); Sanidad v. COMELEC, 165 Phil. 303 (1976). 17 Francisco, Jr. v. House of Representatives, 460 Phil. 830, 899 (2003) citing Kilosbayan, Inc. v. Guingona,Jr., G.R. No. 113375, 5 May 1994, 232 SCRA 110, 155-156 (1995) (Feliciano, J., concurring). The two other factors are: "the character of funds or assets involved in the controversy and a clear disregard of constitutional or statutory prohibition." Id. 18 . Rollo, pp. 144-147. 19 See e.g. Aquino III v. COMELEC, G.R. No. 189793, 7 April 2010, 617 SCRA 623 (dismissing a petition for certiorari and prohibition assailing the constitutionality of Republic Act No. 9716, not for the impropriety of remedy but for lack of merit); Aldaba v. COMELEC, G.R. No. 188078, 25 January 2010, 611 SCRA 137 (issuing the writ of prohibition to declare unconstitutional Republic Act No. 9591); Macalintal v. COMELEC, 453 Phil. 586 (2003) (issuing the writs of certiorari and prohibition declaring unconstitutional portions of Republic Act No. 9189). 20 See e.g. Neri v. Senate Committee on Accountability of Public Officers and Investigations , G.R. No. 180643, 25 March 2008, 549 SCRA 77 (granting a writ of certiorari against the Philippine Senate and nullifying the Senate contempt order issued against petitioner). 21 Rollo, p. 31. 22 Respondents state in their Comment that petitioners theory "has not been accepted or recognized by either the United States or Spain," the parties to the Treaty of Paris. Respondents add that "no State is known to have supported this proposition." Rollo, p. 179. 23 UNCLOS III belongs to that larger corpus of international law of the sea, which petitioner Magallona himself defined as "a body of treaty rules and customary norms governing the uses of the sea, the exploitation of its resources, and the exercise of jurisdiction over maritime regimes. x x x x" (Merlin M. Magallona, Primer on the Law of the Sea 1 [1997]) (Italicization supplied). 24 Following Article 47 (1) of UNCLOS III which provides: An archipelagic State may draw straight archipelagic baselines joining the outermost points of theoutermost islands and drying reefs of the archipelago provided that within such baselines are included the main islands and an area in which the ratio of the area of the water to the area of the land, including atolls, is between 1 to 1 and 9 to 1. (Emphasis supplied) 25 Under the United Nations Charter, use of force is no longer a valid means of acquiring territory. 26 The last paragraph of the preamble of UNCLOS III states that "matters not regulated by this Convention continue to be governed by the rules and principles of general international law." 27 Rollo, p. 51. 28 Id. at 51-52, 64-66. 29 Based on figures respondents submitted in their Comment (id. at 182). 30 Under Article 74. 31 See note 7.

32 33

Presidential Decree No. 1596 classifies the KIG as a municipality of Palawan. KIG lies around 80 nautical miles west of Palawan while Scarborough Shoal is around 123 nautical west of Zambales. 34 Journal, Senate 14th Congress 44th Session 1416 (27 January 2009). 35 Rollo, p. 159. 36 Section 2, RA 9522. 37 Article 121 provides: "Regime of islands. 1. An island is a naturally formed area of land, surrounded by water, which is above water at high tide. 2. Except as provided for in paragraph 3, the territorial sea, the contiguous zone, the exclusive economic zone and the continental shelf of an island are determined in accordance with the provisions of this Convention applicable to other land territory. 3. Rocks which cannot sustain human habitation or economic life of their own shall have no exclusive economic zone or continental shelf." 38 Rollo, pp. 56-57, 60-64. 39 Paragraph 2, Section 2, Article XII of the Constitution uses the term "archipelagic waters" separately from "territorial sea." Under UNCLOS III, an archipelagic State may have internal waters such as those enclosed by closing lines across bays and mouths of rivers. See Article 50, UNCLOS III. Moreover, Article 8 (2) of UNCLOS III provides: "Where the establishment of a straight baseline in accordance with the method set forth in article 7 has the effect of enclosing as internal waters areas which had not previously been considered as such, a right of innocent passage as provided in this Convention shall exist in those waters." (Emphasis supplied) 40 Mandated under Articles 52 and 53 of UNCLOS III: Article 52. Right of innocent passage. 1. Subject to article 53 and without prejudice to article 50, ships of all States enjoy the right of innocent passage through archipelagic waters, in accordance with Part II, section 3. 2. The archipelagic State may, without discrimination in form or in fact among foreign ships, suspend temporarily in specified areas of its archipelagic waters the innocent passage of foreign ships if such suspension is essential for the protection of its security. Such suspension shall take effect only after having been duly published. (Emphasis supplied) Article 53. Right of archipelagic sea lanes passage. 1. An archipelagic State may designate sea lanes and air routes thereabove, suitable for the continuous and expeditious passage of foreign ships and aircraft through or over its archipelagic waters and the adjacent territorial sea. 2. All ships and aircraft enjoy the right of archipelagic sea lanes passage in such sea lanes and air routes. 3. Archipelagic sea lanes passage means the exercise in accordance with this Convention of the rights of navigation and overflight in the normal mode solely for the purpose of continuous, expeditious and unobstructed transit between one part of the high seas or an exclusive economic zone and another part of the high seas or an exclusive economic zone. 4. Such sea lanes and air routes shall traverse the archipelagic waters and the adjacent territorial sea and shall include all normal passage routes used as routes for

international navigation or overflight through or over archipelagic waters and, within such routes, so far as ships are concerned, all normal navigational channels, provided that duplication of routes of similar convenience between the same entry and exit points shall not be necessary. 5. Such sea lanes and air routes shall be defined by a series of continuous axis lines from the entry points of passage routes to the exit points. Ships and aircraft in archipelagic sea lanes passage shall not deviate more than 25 nautical miles to either side of such axis lines during passage, provided that such ships and aircraft shall not navigate closer to the coasts than 10 per cent of the distance between the nearest points on islands bordering the sea lane. 6. An archipelagic State which designates sea lanes under this article may also prescribe traffic separation schemes for the safe passage of ships through narrow channels in such sea lanes. 7. An archipelagic State may, when circumstances require, after giving due publicity thereto, substitute other sea lanes or traffic separation schemes for any sea lanes or traffic separation schemes previously designated or prescribed by it. 8. Such sea lanes and traffic separation schemes shall conform to generally accepted international regulations. 9. In designating or substituting sea lanes or prescribing or substituting traffic separation schemes, an archipelagic State shall refer proposals to the competent international organization with a view to their adoption. The organization may adopt only such sea lanes and traffic separation schemes as may be agreed with the archipelagic State, after which the archipelagic State may designate, prescribe or substitute them. 10. The archipelagic State shall clearly indicate the axis of the sea lanes and the traffic separation schemes designated or prescribed by it on charts to which due publicity shall be given. 11. Ships in archipelagic sea lanes passage shall respect applicable sea lanes and traffic separation schemes established in accordance with this article. 12. If an archipelagic State does not designate sea lanes or air routes, the right of archipelagic sea lanes passage may be exercised through the routes normally used for international navigation. (Emphasis supplied) 41 Namely, House Bill No. 4153 and Senate Bill No. 2738, identically titled "AN ACT TO ESTABLISH THE ARCHIPELAGIC SEA LANES IN THE PHILIPPINE ARCHIPELAGIC WATERS, PRESCRIBING THE RIGHTS AND OBLIGATIONS OF FOREIGN SHIPS AND AIRCRAFTS EXERCISING THE RIGHT OF ARCHIPELAGIC SEA LANES PASSAGE THROUGH THE ESTABLISHED ARCHIPELAGIC SEA LANES AND PROVIDING FOR THE ASSOCIATED PROTECTIVE MEASURES THEREIN." 42 The relevant provision of UNCLOS III provides: Article 17. Right of innocent passage. Subject to this Convention, ships of all States, whether coastal or landlocked, enjoy the right of innocent passage through the territorial sea . (Emphasis supplied) Article 19. Meaning of innocent passage.

1. Passage is innocent so long as it is not prejudicial to the peace, good order or security of the coastal State. Such passage shall take place in conformity with this Convention and with other rules of international law. 2. Passage of a foreign ship shall be considered to be prejudicial to the peace, good order or security of the coastal State if in the territorial sea it engages in any of the following activities: (a) any threat or use of force against the sovereignty, territorial integrity or political independence of the coastal State, or in any other manner in violation of the principles of international law embodied in the Charter of the United Nations; (b) any exercise or practice with weapons of any kind; (c) any act aimed at collecting information to the prejudice of the defence or security of the coastal State; (d) any act of propaganda aimed at affecting the defence or security of the coastal State; (e) the launching, landing or taking on board of any aircraft; (f) the launching, landing or taking on board of any military device; (g) the loading or unloading of any commodity, currency or person contrary to the customs, fiscal, immigration or sanitary laws and regulations of the coastal State; (h) any act of willful and serious pollution contrary to this Convention; (i) any fishing activities; (j) the carrying out of research or survey activities; (k) any act aimed at interfering with any systems of communication or any other facilities or installations of the coastal State; (l) any other activity not having a direct bearing on passage Article 21. Laws and regulations of the coastal State relating to innocent passage. 1. The coastal State may adopt laws and regulations, in conformity with the provisions of this Convention and other rules of international law, relating to innocent passage through the territorial sea, in respect of all or any of the following: (a) the safety of navigation and the regulation of maritime traffic; (b) the protection of navigational aids and facilities and other facilities or installations; (c) the protection of cables and pipelines; (d) the conservation of the living resources of the sea; (e) the prevention of infringement of the fisheries laws and regulations of the coastal State; (f) the preservation of the environment of the coastal State and the prevention, reduction and control of pollution thereof; (g) marine scientific research and hydrographic surveys; (h) the prevention of infringement of the customs, fiscal, immigration or sanitary laws and regulations of the coastal State.

2. Such laws and regulations shall not apply to the design, construction, manning or equipment of foreign ships unless they are giving effect to generally accepted international rules or standards. 3. The coastal State shall give due publicity to all such laws and regulations. 4. Foreign ships exercising the right of innocent passage through the territorial sea shall comply with all such laws and regulations and all generally accepted international regulations relating to the prevention of collisions at sea. 43 The right of innocent passage through the territorial sea applies only to ships and not to aircrafts (Article 17, UNCLOS III). The right of innocent passage of aircrafts through the sovereign territory of a State arises only under an international agreement. In contrast, the right of innocent passage through archipelagic waters applies to both ships and aircrafts (Article 53 (12), UNCLOS III). 44 Following Section 2, Article II of the Constitution: "Section 2. The Philippines renounces war as an instrument of national policy, adopts the generally accepted principles of international law as part of the law of the land and adheres to the policy of peace, equality, justice, freedom, cooperation, and amity with all nations." (Emphasis supplied) 45 "Archipelagic sea lanes passage is essentially the same as transit passage through straits" to which the territorial sea of continental coastal State is subject. R.R. Churabill and A.V. Lowe, The Law of the Sea 127 (1999). 46 Falling under Article 121 of UNCLOS III (see note 37). 47 Within the exclusive economic zone, other States enjoy the following rights under UNCLOS III: Article 58. Rights and duties of other States in the exclusive economic zone. 1. In the exclusive economic zone, all States, whether coastal or land-locked, enjoy, subject to the relevant provisions of this Convention, the freedoms referred to in article 87 of navigation and overflight and of the laying of submarine cables and pipelines, and other internationally lawful uses of the sea related to these freedoms, such as those associated with the operation of ships, aircraft and submarine cables and pipelines, and compatible with the other provisions of this Convention. 2. Articles 88 to 115 and other pertinent rules of international law apply to the exclusive economic zone in so far as they are not incompatible with this Part. xxxx Beyond the exclusive economic zone, other States enjoy the freedom of the high seas, defined under UNCLOS III as follows: Article 87. Freedom of the high seas. 1. The high seas are open to all States, whether coastal or land-locked. Freedom of the high seas is exercised under the conditions laid down by this Convention and by other rules of international law. It comprises, inter alia, both for coastal and landlocked States: (a) freedom of navigation; (b) freedom of overflight; (c) freedom to lay submarine cables and pipelines, subject to Part VI; (d) freedom to construct artificial islands and other installations permitted under international law, subject to Part VI; (e) freedom of fishing, subject to the conditions laid down in section 2;

(f) freedom of scientific research, subject to Parts VI and XIII. 2. These freedoms shall be exercised by all States with due regard for the interests of other States in their exercise of the freedom of the high seas, and also with due regard for the rights under this Convention with respect to activities in the Area. 48 See note 13. 49 Kilosbayan, Inc. v. Morato, 316 Phil. 652, 698 (1995); Taada v. Angara, 338 Phil. 546, 580-581 (1997). 50 G.R. No. 101083, 30 July 1993, 224 SCRA 792. 51 "The State shall protect the nations marine wealth in its archipe lagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens." 52 "The State shall protect the rights of subsistence fishermen, especially of local communities, to the preferential use of the communal marine and fishing resources, both inland and offshore. It shall provide support to such fishermen through appropriate technology and research, adequate financial, production, and marketing assistance, and other services. The State shall also protect, develop, and conserve such resources. The protection shall extend to offshore fishing grounds of subsistence fishermen against foreign intrusion. Fishworkers shall receive a just share from their labor in the utilization of marine and fishing resources." 53 This can extend up to 350 nautical miles if the coastal State proves its right to claim an extended continental shelf (see UNCLOS III, Article 76, paragraphs 4(a), 5 and 6, in relation to Article 77). 54 Rollo, pp. 67-69. 55 Article 47 (1) provides: "An archipelagic State may draw straight archipelagic baselines joining the outermost points of the outermost islands and drying reefs of the archipelago provided that within such baselines are included the main islands and an area in which the ratio of the area of the water to the area of the land, including atolls, is between 1 to 1 and 9 to 1." (Emphasis supplied) in the Area.

power and as final arbiter of all legal questions,2 it should strike such law down, however laudable its purpose/s might be and regardless of the deleterious effect such action may carry in its wake. Challenged in these proceedings is the constitutionality of Republic Act (RA 9522) entitled "An Act to Amend Certain Provisions of [RA] 3046, as Amended by [RA] 5446 to Define the Archipelagic Baselines Of The Philippines and for Other Purposes." For perspective, RA 3046, "An Act to Define the Baselines of the Territorial Sea of the Philippines, was enacted in 1961 to comply with the United Nations Convention on the Law of the Sea (UNCLOS) I. Eight years later, RA 5446 was enacted to amend typographical errors relating to coordinates in RA 3046. The latter law also added a provision asserting Philippine sovereignty over Sabah. As its title suggests, RA 9522 delineates archipelagic baselines of the country, amending in the process the old baselines law, RA 3046. Everybody is agreed that RA 9522 was enacted in response to the countrys commitment to conform to some 1982 Law of the Sea Convention (LOSC) or UNCLOS III provisions to define new archipelagic baselines through legislation, the Philippines having signed3 and eventually ratified4 this multilateral treaty. The Court can take judicial notice that RA 9522 was registered and deposited with the UN on April 4, 2009. As indicated in its Preamble,5 1982 LOSC aims, among other things, to establish, with due regard for the sovereignty of all States, "a legal order for the seas and oceans which will facilitate international communication, and will promote the peaceful uses of the seas and oceans." One of the measures to attain the order adverted to is to have a rule on baselines. Of particular relevance to the Philippines, as an archipelagic state, is Article 47 of UNCLOS III which deals with baselines: 1. An archipelagic State may draw straight archipelagic baselines joining the outermost points of the outermost islands and drying reefs of the archipelago provided that within such baselines are included the main islands and an area in which the ratio of the area of the water to the area of the land, including atolls, is between 1 to 1 and 9 to 1. 2. The length of such baseline 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.

CONCURRING OPINION VELASCO, JR., J.: I concur with the ponencia and add the following complementary arguments and observations: A statute is a product of hard work and earnest studies of Congress to ensure that no constitutional provision, prescription or concept is infringed. Withal, before a law, in an appropriate proceeding, is nullified, an unequivocal breach of, or a clear conflict with, the Constitution must be demonstrated in such a way as to leave no doubt in the mind of the Court.1 In the same token, if a law runs directly afoul of the Constitution, the Courts duty on the matter should be clear and simple: Pursuant to its judicial

3. The drawing of such baselines shall not depart to any appreciable extent from the general configuration of the archipelago. xxxx 9. The archipelagic State shall give due publicity to such charts or lists of geographical co-ordinates and shall deposit a copy of each such chart or list with the Secretary-General of the United Nations.6 (Emphasis added.) To obviate, however, the possibility that certain UNCLOS III baseline provisions would, in their implementation, undermine its sovereign and/or jurisdictional interests over what it considers its territory,7 the Philippines, when it signed UNCLOS III on December 10, 1982, made the following "Declaration" to said treaty: The Government of the Republic of the Philippines [GRP] hereby manifests that in signing the 1982 United Nations Convention on the Law of the Sea, it does so with the understandings embodied in this declaration, made under the provisions of Article 310 of the Convention, to wit: The signing of the Convention by the [GRP] shall not in any manner impair or prejudice the sovereign rights of the [RP] under and arising from the Constitution of the Philippines; Such signing shall not in any manner affect the sovereign rights of the [RP] as successor of the United States of America [USA], under and arising out of the Treaty of Paris between Spain and the United States of America of December 10, 1898, and the Treaty of Washington between the [USA] and Great Britain of January 2, 1930; xxxx Such signing shall not in any manner impair or prejudice the sovereignty of the [RP] over any territory over which it exercises sovereign authority, such as the Kalayaan Islands, and the waters appurtenant thereto; The Convention shall not be construed as amending in any manner any pertinent laws and Presidential Decrees or Proclamations of the Republic of the Philippines. The [GRP] maintains and reserves the right and authority to make any amendments to such laws, decrees or proclamations pursuant to the provisions of the Philippine Constitution;

The provisions of the Convention on archipelagic passage through sea lanes do not nullify or impair the sovereignty of the Philippines as an archipelagic state over the sea lanes and do not deprive it of authority to enact legislation to protect its sovereignty independence and security; The concept of archipelagic waters is similar to the concept of internal waters under the Constitution of the Philippines, and removes straits connecting these waters with the economic zone or high sea from the rights of foreign vessels to transit passage for international navigation.8 (Emphasis added.) Petitioners challenge the constitutionality of RA 9522 on the principal ground that the law violates Section 1, Article I of the 1987 Constitution on national territory which states: Section 1. The national territory comprises the Philippine archipelago, with all the islands and waters embraced therein, and all other territories over which the Philippines has sovereignty or jurisdiction, consisting of its terrestrial, fluvial and aerial domains, including its territorial sea, the seabed, the subsoil, the insular shelves, and other submarine areas. The waters around, between, and connecting the islands of the archipelago, regardless of their breadth and dimensions, form part of the internal waters of the Philippines. (Emphasis supplied.) According to Fr. Joaquin Bernas, S.J., himself a member of the 1986 Constitutional Commission which drafted the 1987 Constitution, the aforequoted Section 1 on national territory was "in substance a copy of its 1973 counterpart."9 Art. I of the 1973 Constitution reads: Section 1. The national territory comprises the Philippine archipelago, with all the islands and waters embraced therein, and all other territories belonging to the Philippines by historic right or legal title, including the territorial sea, the air space, the subsoil, the insular shelves, and other submarine areas over which the Philippines has sovereignty or jurisdiction. The waters around, between, and connecting the islands of the archipelago, regardless of their breadth and dimensions, form part of the internal waters of the Philippines. (Emphasis added.) As may be noted both constitutions speak of the "Philippine archipelago," and, via the last sentence of their respective provisions, assert the countrys adherence to the "archipelagic principle." Both constitutions divide the national territory into two main groups: (1) the Philippine archipelago and (2) other territories belonging to the

Philippines. So what or where is Philippine archipelago contemplated in the 1973 and 1987 Constitutions then? Fr. Bernas answers the poser in the following wise: Article I of the 1987 Constitution cannot be fully understood without reference to Article I of the 1973 Constitution. x x x xxxx x x x To understand [the meaning of national territory as comprising the Philippine archipelago], one must look into the evolution of [Art. I of the 1973 Constitution] from its first draft to its final form. Section 1 of the first draft submitted by the Committee on National Territory almost literally reproduced Article I of the 1935 Constitution x x x. Unlike the 1935 version, however, the draft designated the Philippines not simply as the Philippines but as "the Philippine archipelago.10 In response to the criticism that the definition was colonial in tone x x x, the second draft further designated the Philippine archipelago, as the historic home of the Filipino people from its beginning.11 After debates x x x, the Committee reported out a final draft, which became the initially approved version: "The national territory consists of the Philippine archipelago which is the ancestral home of the Filipino people and which is composed of all the islands and waters embraced therein" What was the intent behind the designation of the Philippines as an "archipelago"? x x x Asked by Delegate Roselller Lim (Zamboanga) where this archipelago was, Committee Chairman Quintero answered that it was the area delineated in the Treaty of Paris. He said that objections to the colonial implication of mentioning the Treaty of Paris was responsible for the omission of the express mention of the Treaty of Paris. Report No. 01 of the Committee on National Territory had in fact been explicit in its delineation of the expanse of this archipelago. It said: Now if we plot on a map the boundaries of this archipelago as set forth in the Treaty of Paris, a huge or giant rectangle will emerge, measuring about 600 miles in width and 1,200 miles in length. Inside this giant rectangle are the 7,100 islands comprising the Philippine Islands. From the east coast of Luzon to the eastern boundary of this huge rectangle in the Pacific Ocean, there is a distance of over 300 miles. From the

west coast of Luzon to the western boundary of this giant rectangle in the China sea, there is a distance of over 150 miles. When the [US] Government enacted the Jones Law, the Hare-Hawes Cutting Law and the Tydings McDuffie Law, it in reality announced to the whole world that it was turning over to the Government of the Philippine Islands an archipelago (that is a big body of water studded with islands), the boundaries of which archipelago are set forth in Article III of the Treaty of Paris. It also announced to the whole world that the waters inside the giant rectangle belong to the Philippines that they are not part of the high seas. When Spain signed the Treaty of Paris, in effect she announced to the whole world that she was ceding to the [US] the Philippine archipelago x x x, that this archipelago was bounded by lines specified in the treaty, and that the archipelago consisted of the huge body of water inside the boundaries and the islands inside said boundaries. The delineation of the extent of the Philippine archipelago must be understood in the context of the modifications made both by the Treaty of Washington of November 7, 1900, and of the Convention of January 12, 1930, in order to include the Islands of Sibutu and of Cagayan de Sulu and the Turtle and Mangsee Islands. However, x x x the definition of the archipelago did not include the Batanes group[, being] outside the boundaries of the Philippine archipelago as set forth in the Treaty of Paris. In literal terms, therefore, the Batanes islands would come not under the Philippine archipelago but under the phrase "all other territories belong to the Philippines."12 x x x (Emphasis added.) From the foregoing discussions on the deliberations of the provisions on national territory, the following conclusion is abundantly evident: the "Philippine archipelago" of the 1987 Constitution is the same "Philippine archipelago" referred to in Art. I of the 1973 Constitution which in turn corresponds to the territory defined and described in Art. 1 of the 1935 Constitution,13 which pertinently reads: Section 1. The Philippines comprises all the territory ceded to the [US] by the Treaty of Paris concluded between the [US] and Spain on the tenth day of December, [1898], the limits of which are set forth in Article III of said treaty, together with all the islands in the treaty concluded at Washington, between the [US] and Spain on November [7, 1900] and the treaty concluded between the [US] and Great Britain x x x.

While the Treaty of Paris is not mentioned in both the 1973 and 1987 Constitutions, its mention, so the nationalistic arguments went, being "a repulsive reminder of the indignity of our colonial past,"14 it is at once clear that the Treaty of Paris had been utilized as key reference point in the definition of the national territory. On the other hand, the phrase "all other territories over which the Philippines has sovereignty or jurisdiction," found in the 1987 Constitution, which replaced the deleted phrase "all territories belonging to the Philippines by historic right or legal title"15 found in the 1973 Constitution, covers areas linked to the Philippines with varying degrees of certainty.16 Under this category would fall: (a) Batanes, which then 1971 Convention Delegate Eduardo Quintero, Chairperson of the Committee on National Territory, described as belonging to the Philippines in all its history;17 (b) Sabah, over which a formal claim had been filed, the so-called Freedomland (a group of islands known as Spratleys); and (c) any other territory, over which the Philippines had filed a claim or might acquire in the future through recognized modes of acquiring territory.18 As an author puts it, the deletion of the words "by historic right or legal title" is not to be interpreted as precluding future claims to areas over which the Philippines does not actually exercise sovereignty.19 Upon the foregoing perspective and going into specifics, petitioners would have RA 9522 stricken down as unconstitutional for the reasons that it deprives the Philippines of what has long been established as part and parcel of its national territory under the Treaty of Paris, as supplemented by the aforementioned 1900 Treaty of Washington or, to the same effect, revises the definition on or dismembers the national territory. Pushing their case, petitioners argue that the constitutional definition of the national territory cannot be remade by a mere statutory act.20 As another point, petitioners parlay the theory that the law in question virtually weakens the countrys territorial claim over the Kalayaan Island Group (KIG) and Sabah, both of which come under the category of "other territories" over the Philippines has sovereignty or jurisdiction. Petitioners would also assail the law on grounds related to territorial sea lanes and internal waters transit passage by foreign vessels. It is remarkable that petitioners could seriously argue that RA 9522 revises the Philippine territory as defined in the Constitution, or worse, constitutes an abdication of territory. It cannot be over-emphasized enough that RA 9522 is a baseline law enacted to implement the 1982 LOSC, which in turn seeks to regulate and establish an orderly sea use rights over maritime zones. Or as the ponencia aptly states, RA 9522 aims to

mark-out specific base points along the Philippine coast from which baselines are drawn to serve as starting points to measure the breadth of the territorial sea and maritime zones.21 The baselines are set to define the sea limits of a state, be it coastal or archipelagic, under the UNCLOS III regime. By setting the baselines to conform to the prescriptions of UNCLOS III, RA 9522 did not surrender any territory, as petitioners would insist at every turn, for UNCLOS III is concerned with setting order in the exercise of sea-use rights, not the acquisition or cession of territory. And let it be noted that under UNCLOS III, it is recognized that countries can have territories outside their baselines. Far from having a dismembering effect, then, RA 9522 has in a limited but real sense increased the countrys maritime boundaries. How this situation comes about was extensively explained by then Minister of State and head of the Philippine delegation to UNCLOS III Arturo Tolentino in his sponsorship speech22 on the concurrence of the Batasang Pambansa with the LOSC: xxxx Then, we should consider, Mr. Speaker, that under the archipelagic principle, the whole area inside the archipelagic base lines become a unified whole and the waters between the islands which formerly were regarded by international law as open or international seas now become waters under the complete sovereignty of the Filipino people. In this light there would be an additional area of 141,800 square nautical miles inside the base lines that will be recognized by international law as Philippine waters, equivalent to 45,351,050 hectares. These gains in the waters of the sea, 45,211,225 hectares outside the base lines and 141,531,000 hectares inside the base lines, total 93,742,275 hectares as a total gain in the waters under Philippine jurisdiction. From a pragmatic standpoint, therefore, the advantage to our country and people not only in terms of the legal unification of land and waters of the archipelago in the light of international law, but also in terms of the vast resources that will come under the dominion and jurisdiction of the Republic of the Philippines, your Committee on Foreign Affairs does not hesitate to ask this august Body to concur in the Convention by approving the resolution before us today. May I say it was the unanimous view of delegations at the Conference on the Law of the Sea that archipelagos are among the biggest gainers or beneficiaries under the Convention on the Law of the Sea.

Lest it be overlooked, the constitutional provision on national territory, as couched, is broad enough to encompass RA 9522s definition of the archipelagic baselines. To reiterate, the laying down of baselines is not a mode of acquiring or asserting ownership a territory over which a state exercises sovereignty. They are drawn for the purpose of defining or establishing the maritime areas over which a state can exercise sovereign rights. Baselines are used for fixing starting point from which the territorial belt is measured seawards or from which the adjacent maritime waters are measured. Thus, the territorial sea, a marginal belt of maritime waters, is measured from the baselines extending twelve (12) nautical miles outward.23 Similarly, Art. 57 of the 1982 LOSC provides that the Exclusive Economic Zone (EEZ) "shall not extend beyond 200 nautical miles from the baselines from which the breadth of the territorial sea is measured."24 Most important to note is that the baselines indicated under RA 9522 are derived from Art. 47 of the 1982 LOSC which was earlier quoted. Since the 1987 Constitutions definition of national territory does not delimit where the Philippines baselines are located, it is up to the political branches of the government to supply the deficiency. Through Congress, the Philippines has taken an official position regarding its baselines to the international community through RA 3046,25 as amended by RA 544626 and RA 9522. When the Philippines deposited a copy of RA 9522 with the UN Secretary General, we effectively complied in good faith with our obligation under the 1982 LOSC. A declaration by the Court of the constitutionality of the law will complete the bona fides of the Philippines vis-a-vis the law of the sea treaty. It may be that baseline provisions of UNCLOS III, if strictly implemented, may have an imposing impact on the signatory states jurisdiction and even their sovereignty. But this actuality, without more, can hardly provide a justifying dimension to nullify the complying RA 9522. As held by the Court in Bayan Muna v. Romulo,27 treaties and international agreements have a limiting effect on the otherwise encompassing and absolute nature of sovereignty. By their voluntary acts, states may decide to surrender or waive some aspects of their sovereignty. The usual underlying consideration in this partial surrender may be the greater benefits derived from a pact or reciprocal undertaking. On the premise that the Philippines has adopted the generally accepted principles of international law as part of the law of the land, a portion of sovereignty may be waived without violating the Constitution. As a signatory of the 1982 LOSC, it behooves the Philippines to honor its obligations thereunder. Pacta sunt servanda, a basic international law postulate that "every treaty in force is binding upon the parties to it and must be performed by them in good

faith."28 The exacting imperative of this principle is such that a state may not invoke provisions in its constitution or its laws as an excuse for failure to perform this duty."29 The allegation that Sabah has been surrendered by virtue of RA 9522, which supposedly repealed the hereunder provision of RA 5446, is likewise unfounded. 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. There is nothing in RA 9522 indicating a clear intention to supersede Sec. 2 of RA 5446. Petitioners obviously have read too much into RA 9522s amendment on the baselines found in an older law. Aside from setting the countrys baselines, RA 9522 is, in its Sec. 3, quite explicit in its reiteration of the Philippines exercise of sovereignty, thus: Section 3. This Act affirms that the Republic of the Philippines has dominion, sovereignty and jurisdiction over all portions of the national territory as defined in the Constitution and by provisions of applicable laws including, without limitation, Republic Act No. 7160, otherwise known as the Local Government Code of 1991, as amended. To emphasize, baselines are used to measure the breadth of the territorial sea, the contiguous zone, the exclusive economic zone and the continental shelf. Having KIG and the Scarborough Shoal outside Philippine baselines will not diminish our sovereignty over these areas. Art. 46 of UNCLOS III in fact recognizes that an archipelagic state, such as the Philippines, is a state "constituted wholly by one or more archipelagos and may include other islands." (emphasis supplied) The "other islands" referred to in Art. 46 are doubtless islands not forming part of the archipelago but are nevertheless part of the states territory. The Philippines sovereignty over KIG and Scarborough Shoal are, thus, in no way diminished. Consider: Other countries such as Malaysia and the United States have territories that are located outside its baselines, yet there is no territorial question arising from this arrangement. 30

It may well be apropos to point out that the Senate version of the baseline bill that would become RA 9522 contained the following explanatory note: The law "reiterates our sovereignty over the Kalayaan Group of Islands declared as part of the Philippine territory under Presidential Decree No. 1596. As part of the Philippine territory, they shall be considered as a regime of islands under Article 121 of the Convention."31 Thus, instead of being in the nature of a "treasonous surrender" that petitioners have described it to be, RA 9522 even harmonizes our baseline laws with our international agreements, without limiting our territory to those confined within the countrys baselines. Contrary to petitioners contention, the classification of KIG and the Scarborough Shoal as falling under the Philippines regime of islands is not constitutionally objectionable. Such a classification serves as compliance with LOSC and the Philippines assertion of sovereignty over KIG and Scarborough Shoal. In setting the baseline in KIG and Scarborough Shoal, RA 9522 states that these are areas "over which the Philippines likewise exercises sovereignty and jurisdiction." It is, thus, not correct for petitioners to claim that the Philippines has lost 15,000 square nautical miles of territorial waters upon making this classification. Having 15,000 square nautical miles of Philippine waters outside of our baselines, to reiterate, does not translate to a surrender of these waters. The Philippines maintains its assertion of ownership over territories outside of its baselines. Even China views RA 9522 as an assertion of ownership, as seen in its Protest32 filed with the UN Secretary-General upon the deposit of RA 9522. We take judicial notice of the effective occupation of KIG by the Philippines. Petitioners even point out that national and local elections are regularly held there. The classification of KIG as under a "regime of islands" does not in any manner affect the Philippines consistent position with regard to sovereignty over KIG. It does not affect the Philippines other acts of ownership such as occupation or amend Presidential Decree No. 1596, which declared KIG as a municipality of Palawan. The fact that the baselines of KIG and Scarborough Shoal have yet to be defined would not detract to the constitutionality of the law in question. The resolution of the problem lies with the political departments of the government. All told, the concerns raised by the petitioners about the diminution or the virtual dismemberment of the Philippine territory by the enactment of RA 9522 are, to me, not well grounded. To repeat, UNCLOS III pertains to a law on the seas, not territory. As part of its Preamble,33 LOSC recognizes "the desirability of establishing through

this Convention, with due regard for the sovereignty of all States, a legal order for the seas and oceans x x x." This brings me to the matter of transit passage of foreign vessels through Philippine waters. Apropos thereto, petitioners allege that RA 9522 violates the nuclear weapons-free policy under Sec. 8, in relation to Sec. 16, Art. II of the Constitution, and exposes the Philippines to marine pollution hazards, since under the LOSC the Philippines supposedly must give to ships of all states the right of innocent passage and the right of archipelagic sea-lane passage. The adverted Sec. 8, Art. II of the 1987 Constitution declares the adoption and pursuit by the Philippines of "a policy of freedom from nuclear weapons in its territory." On the other hand, the succeeding Sec. l6 underscores the States firm commitment "to protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature." Following the allegations of petitioners, these twin provisions will supposedly be violated inasmuch as RA 9522 accedes to the right of innocent passage and the right of archipelagic sealane passage provided under the LOSC. Therefore, ships of all nationsbe they nuclear-carrying warships or neutral commercial vessels transporting goodscan assert the right to traverse the waters within our islands. A cursory reading of RA 9522 would belie petitioners posture. In context, RA 9522 simply seeks to conform to our international agreement on the setting of baselines and provides nothing about the designation of archipelagic sea-lane passage or the regulation of innocent passage within our waters. Again, petitioners have read into the amendatory RA 9522 something not intended. Indeed, the 1982 LOSC enumerates the rights and obligations of archipelagic partystates in terms of transit under Arts. 51 to 53, which are explained below: To safeguard, in explicit terms, the general balance struck by [Articles 51 and 52] between the need for passage through the area (other than straits used for international navigation) and the archipelagic states need for security, Article 53 gave the archipelagic state the right to regulate where and how ships and aircraft pass through its territory by designating specific sea lanes. Rights of passage through these archipelagic sea lanes are regarded as those of transit passage:

(1) An archipelagic State may designate sea lanes and air routes thereabove, suitable for safe, continuous and expeditious passage of foreign ships and aircraft through or over its archipelagic waters and the adjacent territorial sea. (2) All ships and aircraft enjoy the right of archipelagic sea lanes passage in such sea lanes and air routes. (3) Archipelagic sea lanes passage is the exercise in accordance with the present Convention of the rights of navigation and overflight in the normal mode solely for the purpose of continuous, expeditious and unobstructed transit between one part of the high seas or an exclusive economic zone and another part of the high seas or an exclusive economic zone.34 But owing to the geographic structure and physical features of the country, i.e., where it is "essentially a body of water studded with islands, rather than islands with water around them,"35 the Philippines has consistently maintained the conceptual unity of land and water as a necessary element for territorial integrity,36 national security (which may be compromised by the presence of warships and surveillance ships on waters between the islands),37 and the preservation of its maritime resources. As succinctly explained by Minister Arturo Tolentino, the essence of the archipelagic concept is "the dominion and sovereignty of the archipelagic State within its baselines, which were so drawn as to preserve the territorial integrity of the archipelago by the inseparable unity of the land and water domain."38 Indonesia, like the Philippines, in terms of geographic reality, has expressed agreement with this interpretation of the archipelagic concept. So it was that in 1957, the Indonesian Government issued the Djuanda Declaration, therein stating : [H]istorically, the Indonesian archipelago has been an entity since time immemorial.1avvphi1 In view of the territorial entirety and of preserving the wealth of the Indonesian state, it is deemed necessary to consider all waters between the islands and entire entity. x x x On the ground of the above considerations, the Government states that all waters around, between and connecting, the islands or parts of islands belonging to the Indonesian archipelago irrespective of their width or dimension are natural appurtenances of its land territory and therefore an integral part of the inland or national waters subject to the absolute sovereignty of Indonesia.39 (Emphasis supplied.)

Hence, the Philippines maintains the sui generis character of our archipelagic waters as equivalent to the internal waters of continental coastal states. In other words, the landward waters embraced within the baselines determined by RA 9522, i.e., all waters around, between, and connecting the islands of the archipelago, regardless of their breadth and dimensions, form part of the internal waters of the Philippines.40 Accordingly, such waters are not covered by the jurisdiction of the LOSC and cannot be subjected to the rights granted to foreign states in archipelagic waters, e.g., the right of innocent passage,41 which is allowed only in the territorial seas, or that area of the ocean comprising 12 miles from the baselines of our archipelago; archipelagic sea-lane passage;42 over flight;43 and traditional fishing rights.44 Our position that all waters within our baselines are internal waters, which are outside the jurisdiction of the 1982 LOSC,45 was abundantly made clear by the Philippine Declaration at the time of the signing of the LOSC on December 10, 1982. To reiterate, paragraphs 5, 6 and 7 of the Declaration state: 5. The Convention shall not be construed as amending in any manner any pertinent laws and Presidential decrees of Proclamation of the republic of the Philippines; the Government x x x maintains and reserves the right and authority to make any amendments to such laws, decrees or proclamations pursuant to the provisions of the Philippine Constitution; 6. The provisions of the Convention on archipelagic passage through sea lanes do not nullify or impair the sovereignty of the Philippines as an archipelagic State over the sea lanes and do not deprive it of authority to enact legislation to protect its sovereignty, independence and security; 7. The concept of archipelagic waters is similar to the concept of internal waters under the Constitution of the Philippines and removes straits connecting this water with the economic zone or high seas from the rights of foreign vessels to transit passage for international navigation. (Emphasis supplied.)46 More importantly, by the ratification of the 1987 Constitution on February 2, 1987, the integrity of the Philippine state as comprising both water and land was strengthened by the proviso in its first article, viz: "The waters around, between, and

connecting the islands of the [Philippine] archipelago, regardless of their breadth and dimensions, form part of the internal waters of the Philippines. (emphasis supplied) In effect, contrary to petitioners allegations, the Philippines ratification of the 1982 LOSC did not matter-of-factly open our internal waters to passage by foreign ships, either in the concept of innocent passage or archipelagic sea-lane passage, in exchange for the international communitys recognition of the Philippines as an archipelagic state. The Filipino people, by ratifying the 1987 Constitution, veritably rejected the quid pro quo petitioners take as being subsumed in that treaty. Harmonized with the Declaration and the Constitution, the designation of baselines made in RA 9522 likewise designates our internal waters, through which passage by foreign ships is not a right, but may be granted by the Philippines to foreign states but only as a dissolvable privilege. In view of the foregoing, I vote to DISMISS the Petition. PRESBITERO J. VELASCO, JR. Associate Justice Footnotes
1

10

League of Cities of the Phil. v. COMELEC, G.R. No. 176951, December 21, 2009, 608 SCRA 636. 2 Under Art. VIII, Sec. 5 of the Constitution, the Supreme Court is empowered to review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court may provide, final judgments and orders of lower courts in: all cases in which the Constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question. (Emphasis supplied.) 3 December 10, 1982. 4 May 8, 1984. 5 Available on <http://www.un.org/Depts/los/convention_agreements/texts/unclos/closindx.htm> (visited July 28, 2011). 6 UNCLOS, Art. 47, December 10, 1982. 7 J. Bernas, S.J., The 1987 Constitution of the Republic of the Philippines A Commentary 57 (2003). 8 See J. Batongbacal, The Metes and Bounds of the Philippine National Territory, An International Law and Policy Perspective, Supreme Court of the Philippines, Philippine Judicial Academy Third Distinguished Lecture, Far Eastern University, June 27, 2008. 9 J. Bernas, supra note 7, at 10.

Citing Report No. 01 of the Committee on National Territory. Citing Report No. 02 of the Committee on National Territory. 12 J. Bernas, supra note 7, at 11-14. 13 Id. at 14. 14 Id. at 9; citing Speech, Session February 15, 1972, of Delegates Amanio Sorongon, et al. 15 The history of this deleted phrase goes back to the last clause of Art. I of the 1935 Constitution which included "all territory over which the present Government of the Philippine Islands exercises jurisdiction. See J. Bernas, supra note 7, at 14. 16 J. Bernas, supra note 7, at 16. 17 Id.; citing deliberations of the February 17, 1972 Session. 18 Id. 19 De Leon, Philippine Constitution 62 (2011). 20 Petition, pp. 4-5. 21 Art. 48 of UNCLOS III provides that the breadth of the territorial sea, the contiguous zone, the exclusive economic zone and the continental shelf shall be measured from the archipelagic baseline drawn in accordance with Art. 47. 22 R.P. Lotilla, The Philippine National Territory: A Collection of Related Documents 513517 (1995); citing Batasang Pambansa, Acts and Resolution, 6th Regular Session. 23 J. Bernas, supra note 7, at 22. 24 UNCLOS III, Art. 57. 25 June 17, 1961. 26 September 18, 1968. 27 G.R. No. 159618, February 1, 2011; citing Taada v. Angara, G.R. No. 118295, May 2, 1997, 272 SCRA 18. 28 Art. 26, Vienna Convention on the Law of Treaties, 1969. 29 Art. 13, Declaration of Rights and Duties of States Adopted by the International Law Commission, 1949. 30 See J. Batongbacal, supra note 8. 31 Id. 32 The Protest reads in part: "The above-mentioned Philippine Act illegally claims Huangyan Island (referred as "Bajo de Masinloc" in the Act) of China as "areas over which the Philippines likewise exercises sovereignty and jurisdiction." The Chinese Government hereby reiterates that Huangyan Island and Nansha Islands have been part of the territory of China since ancient time. The Peoples Republic of China has indisputable sovereignty over Huangyan Island and Nansha Islands and their surrounding areas. Any claim to territorial sovereignty over Huangyan Island and Nansha Islands by any other State is, therefore, null and void." Available on <http://www.un.org/Depts/los/LEGISLATIONANDTREATIES/PDFFILES/DEPO SIT/ communicationsredeposit/mzn69_2009_chn.pdf> (visited August 9, 2011). 33 Supra note 5. 34 C. Ku, The Archipelagic States Concept and Regional Stability in Southeast Asia, Case W. Res. J. Intl L., Vol. 23:463, 469; citing 1958 U.N. Conference on the Law of the Sea, Summary Records 44, Doc. A/Conf. 13/42. 35 Id. 36 Hiran W. Jayewardene, The Regime of Islands in International Law, AD Dordrecht: Martinus Nijhoff Publishers, p. 103 (1990).
11

37 38

Id. at 112. UNCLOS III Off. Rec., Vol. II, 264, par. 65, and also pars. 61-62 and 66; cited in B. Kwiatkowska, "The Archipelagic Regime in Practice in the Philippines and Indonesia Making or Breaking International Law?", International Journal of Estuarine and Coastal Law, Vol. 6, No. 1, pp. 6-7. 39 4 Whiteman D.G., International Law 284 (1965); quoted in C. Ku, supra note 34, at 470. 40 1987 Constitution, Art. I. 41 LOSC, Arts. 52 and 54. 42 LOSC, Art. 53, par. 2. 43 LOSC, Art. 53, par. 2. 44 LOSC, Art. 51. 45 LOSC, Art. 8, par. 2. 46 Cf. B. Kwiatkowska, supra note 38; citing J.D. Ingles, "The United Nations Convention on the Law of the Sea: Implications of Philippine Ratification," 9 Philippine Yil (1983) 48-9 and 61-2; and Congress of the Philippines, First Regular Session, Senate, S. No. 232, Explanatory Note and An Act to Repeal Section 2 (concerning TS baselines around Sabah disputed with Malaysia) of the 1968 Act No. 5446.

This is a Petition for Review on Certiorari1 under Rule 45 seeking to reverse and set aside the January 14, 2004 Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 60659, which affirmed the November 3, 1997 Decision3of the Legaspi City Regional Trial Court (RTC), Branch I, declaring as null and void the December 21, 1998 Deed of Donation4 executed by the Municipality of Daraga, Albay in favor of petitioner, and directing the latter to return to respondent Celso Oate the possession of the portion of land occupied by the school site of the Daraga North Central Elementary School. The Facts Spouses Claro Oate and Gregoria Los Baos owned Lot No. 6849 (disputed lot) with an area of around 27,907 square meters registered under the Torrens System of land registration under Original Certificate of Title (OCT) No. 2563. Claro Oate had three children, namely: Antonio, Rafael, and Francisco, all surnamed Oate. Respondent Celso Oate is the grandson of Claro Oate, being the son of Francisco Oate. In 1940, Bagumbayan Elementary School of Daraga was constructed on a portion of the disputed lot. The school was eventually renamed Daraga North Central Elementary School. The Municipality of Daraga leveled the area while petitioner Department of Education Culture and Sports (DECS; now Department of Education [DepEd]) developed and built various school buildings and facilities on the disputed lot. Sometime in 1991, respondent filed a reconstitution proceeding of OCT No. 2563 which was granted by the Legaspi City RTC, Branch V after due notice, publication, and hearing. Consequently, OCT No. RO-189715 was issued in the name of spouses Claro Oate and Gregoria Los Baos. On August 26, 1991, a Deed of Extrajudicial Settlement of Estate and Cession was executed by respondent and his three (3) sisters, namely: Melba O. Napil, Cielo O. Lardizabal, and Maria Visia O. Maldo, who waived their successional rights in favor of respondent Celso Oate. Asserting that the disputed lot was inherited by his father, Francisco Oate, from the latters father, Claro Oate, by virtue of a prior partition among the three (3) sons of Claro Oate and Gregoria Los Baos, respondent in turn claimed ownership of said lot through the deed of extrajudicial settlement.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 161758 June 8, 2007

DEPARTMENT OF EDUCATION, DIVISION OF ALBAY represented by its SCHOOLS Division Superintendent, petitioner, vs. CELSO OATE, respondent. DECISION VELASCO, JR., J.: A little neglect may lead to great prejudice. The Case

Meanwhile, the issue of whether respondents father, Francisco Oate, truly acquired the disputed lot through a prior partition among Claro Oates three (3) children had been passed upon in another case, Civil Case No. 8724 for Partition, Reconveyance and Damages filed by the heirs of Rafael Oate before the Legaspi City RTC, Branch IX.6 In said case, respondent Celso Oate, the defendant, prevailed and the case was dismissed by the trial court. Thereafter, respondent caused Lot No. 6849 to be subdivided into five (5) lots, all under his name, except Lot No. 6849-B which is under the name of Mariano M. Lim. On October 26, 1992, the subdivided lots were issued Transfer Certificate of Titles (TCTs): (1) Lot No. 6849-A (13,072 square meters) under TCT No. T-83946;7 (2) Lot No. 6849-B (3,100 square meters) under TCT No. T-84049;8 (3) Lot No. 6849-C (10,000 square meters) under TCT No. T-83948;9 (4) Lot No. 6849-D (1,127 square meters) under TCT No. T-83949;10 and (5) Lot No. 6849-E (608 square meters) under TCT No. T-83950.11 On December 15, 1992, through his counsel, respondent sent a letter to petitioner apprising it about the facts and circumstances affecting the elementary school and its occupancy of Lot No. 6849-A with an area of 13,072 square meters. Respondent proposed to petitioner DECS that it purchase Lot No. 6849-A at the Fair Market Value (FMV) of PhP 400 per square meter and also requested for reasonable rentals from 1960.12 The records show that then DECS Director IV Jovencio Revil subsequently referred the matter to the DECS Division Superintendent Rizalina D. Saquido for investigation.13 On February 24, 1993, through his counsel, respondent likewise wrote to Engr. Orlando Roces, District Engineer, Albay Engineering District about the on-going construction projects in the school.14 Engr. Roces then informed respondents counsel that petitioner DECS is the owner of the school site having acquired the disputed lot by virtue of a Deed of Donation executed by the Municipality of Daraga, Albay in favor of petitioner.15 Consequently, on March 18, 1993, respondent instituted a Complaint for Annulment of Donation and/or Quieting of Title with Recovery of Possession of Lot No. 6849 located at Barrio Bagumbayan, Daraga, Albay before the Legaspi City RTC, docketed as Civil Case No. 8715, against petitioner DECS, Division of Albay, represented by the Division Superintendent of Schools, Mrs. Rizalina D. Saquido; and the Municipality of Daraga, Albay, represented by the Municipal Mayor, Honorable Cicero Triunfante.
16

In its April 28, 1993 Answer,17 the Municipality of Daraga, Albay, through Mayor Cicero Triunfante, denied respondents ownership of the disputed lot as it alleged that sometime in 1940, the Municipality bought said lot from Claro Oate, respondents grandfather, and since then it had continually occupied said lot openly and publicly in the concept of an owner until 1988 when the Municipality donated the school site to petitioner DECS; thus asserting that it could also claim ownership also through adverse possession. Moreover, it claimed that the disputed lot had been declared in the name of defendant municipality in the Municipal Assessors Office under Tax Declaration No. 31954 from 1940 until 1988 for purposes of exemption from real estate taxes. Further, defendant Municipality contended that respondent was guilty of laches and was estopped from assailing ownership over the disputed lot. Similarly, petitioners April 29, 1993 Answer18 reiterated in essence the defenses raised by the Municipality of Daraga, Albay and further contended that respondent had no cause of action because it acquired ownership over the disputed lot by virtue of a Deed of Donation executed on December 21, 1988 in its favor; and that respondents claim was vague as it was derived from a void Deed of Extrajudicial Settlement of Estate and Cession disposing of the disputed lot which was already sold to the Municipality of Daraga, Albay in 1940. Petitioner likewise assailed the issuance of a reconstituted OCT over Lot 6849 when the lower court granted respondents petition for reconstitution without notifying petitioner. During the ensuing trial where both parties presented documentary and testimonial evidence, respondent testified that he came to know of the disputed lot in 1973 when he was 23 years old; that he took possession of the said lot in the same year; that he came to know that the elementary school occupied a portion of the said lot only in 1991; and that it was only in 1992 that he came to know of the Deed of Donation executed by the Municipality of Daraga, Albay.19 Also, Felicito Armenta, a tenant cultivating a portion of disputed Lot 6849, testified that respondent indeed owned said lot and the share of the crops cultivated were paid to respondent.20 However, after respondent testified, defendants in said case filed a Joint Motion to Dismiss21 on the ground that respondents suit was against the State which was prohibited without the latters consent. Respondent countered with his Opposition to Joint Motion to Dismiss.22 Subsequently, the trial court denied the Joint Motion to Dismiss, ruling that the State had given implied consent by entering into a contract.231awphi1

Aside from the reconstituted OCT No. RO-18971, respondent presented the TCTs covering the five (5) portions of the partitioned Lot 6849, Tax Declaration No. 04006-0068124 issued for said lot, and the April 20, 1992 Certification25 from the Office of the Treasurer of the Municipality of Daraga, Albay attesting to respondents payment of realty taxes for Lot 6849 from 1980 to 1990. After respondent rested his case, the defense presented and marked their documentary exhibits of Tax Declaration No. 30235 issued in the name of the late Claro Oate, which was cancelled in 1938; Tax Declaration 31954,26 which cancelled Tax Declaration No. 30235, in the name of Municipality of Daraga with the annotation of Ex-Officio Deputy Assessor Natalio Grageda attesting to the purchase by the Municipality under Municipal Voucher No. 69, August 1940 accounts and the issuance of TCT No. 4812 in favor of the Municipality; Tax Declaration No. 892627 in the name of the Municipality which cancelled Tax Declaration No. 31954; and the subsequent Tax Declaration Nos. 22184,28 332,29 and 04-006-00068.30 The defense presented the testimony of Mr. Jose Adra,31 the Principal of Daraga North Central Elementary School, who testified on the Municipalitys donation of disputed Lot 6849 to petitioner and the improvements on said lot amounting to more than PhP 11 million; and Mrs. Toribia Milleza,32 a retired government employee and resident of Bagumbayan, Daraga, Albay since 1955, who testified on the Municipalitys continuous and adverse possession of the disputed lot since 1940. As mentioned earlier, Civil Case No. 8724 for Partition, Reconveyance and Damages was instituted by the heirs of Rafael Oate in Legaspi City RTC, Branch IX against Spouses Celso Oate and Allem Vellez, involving the same disputed lot. Petitioner and co-defendant Municipality of Daraga, Albay were about to file a complaint for intervention in said case, but it was overtaken by the resolution of the case on August 14, 1995 with the trial court dismissing the complaint. The Ruling of the RTC On November 3, 1997, the trial court rendered a Decision in favor of respondent Celso Oate. The dispositive portion declared, thus: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants:

1. Declaring the Deed of Donation executed by the Municipality of Daraga, Albay in favor of the defendant Department of Education Culture and Sports through the Albay Schools Division as null and void; 2. Declaring the plaintiff as the owner in fee simple of Lots Nos. 6849-A, 6849-C, 6849-D and 6849-E which are registered in his name; 3. Commanding the defendants to return the possession of the portion of the land occupied by the school site to the herein plaintiff Celso Oate; 4. Ordering the plaintiff for reason of equity, to pay the defendant Municipality of Daraga, Albay the amount of Fifty Thousand (50,000.00) Pesos pursuant to Article 479 of the New Civil Code of the Philippines; 5. The defendant Department of Education Culture and Sports being a builder in good faith, the provisions of Article 448 of the New Civil Code of the Philippines shall be observed by the parties; and 6. Ordering the defendants to pay the costs of the suit. No attorneys fees is hereby adjudged in favor of plaintiffs counsel. SO ORDERED.33 The trial court ratiocinated that it was clear that subject Lot 6849 was originally registered under the Torrens System in the name of Spouses Claro Oate and Gregoria Los Baos as evidenced by OCT No. RO-18971. The right of respondent Celso Oate over the disputed lot had not been proven otherwise or overturned in Civil Case No. 8724, and this was bolstered by the Deed of Extrajudicial Settlement of Estate and Cession, where respondents sister waived their successional rights in his favor. Thus, the trial court ruled in favor of respondents title. Besides, it further ruled that defendants could not assail the registered title of respondent in a collateral proceeding. While the Municipality of Daraga, Albay anchored its prior ownership over the disputed lot by virtue of a sale in 1940 and mentioned TCT No. 4812 supposedly issued in its name, it however failed to submit any deed of conveyance in its favor, as well as a copy of the alleged TCT No. 4812. Hence, the trial court held that its claim over disputed Lot 6849 was based solely on adverse prescription which could not prevail over respondents registered title.

The trial court concluded that given these factual and evidentiary proofs, petitioner had no right to occupy Lot 6849-A, and the Deed of Donation executed by the Municipality of Daraga, Albay in favor of petitioner must be nullified. Finally, the trial court awarded PhP 50,000 to the Municipality of Daraga, Albay for the cost of landfill and ordered that Article 44834 of the New Civil Code be followed by the parties as petitioner was a builder in good faith. The Ruling of the Court of Appeals Aggrieved, petitioner DECS and Municipality of Daraga, Albay filed their respective Notices of Appeal35 assailing the trial courts Decision before the CA. However, on June 17, 1998, the appellate court declared the appeals of both petitioners abandoned and dismissed for their failure to pay the required docket fees within the reglementary period.36 Petitioner then filed a Motion for Reconsideration37 of the said June 17, 1998 Resolution and its appeal was subsequently reinstated.38 The Municipality of Daraga, Albay, however, totally lost its appeal due to inaction, and the appellate court correspondingly issued a Partial Entry of Judgment on July 9, 1998.39 Moreover, the appellate court held that there was no jurisdictional defect in the reconstitution proceeding being one in rem, and in the issuance of OCT No. RO18971 based on the destroyed or lost OCT No. 2563, even if no notice was sent to petitioner. Thus, the CA ruled that respondents claim of ownership over Lot 6849-A occupied by the school is conclusive for being soundly predicated on TCT No. T83946 which cancelled the reconstituted OCT No. RO-18971. Furthermore, it reiterated the trial courts holding that petitioner is precluded from attacking collaterally respondents title over the disputed lot in this proceeding. The CA emphasized that petitioners failure to present TCT No. 4812allegedly issued in the name of the Municipality of Daraga, Albay in 1940 in lieu of OCT No. 2563 and the Deed of Conveyance executed by the original owner, Claro Oate, in favor of the Municipalitywas fatal to the defense. It reasoned that "all the more had their claim of ownership become doubtful when defendants-appellants [sic] failed to explain from their pleadings and the evidence submitted before Us their failure to present the two documents."40 The appellate court concluded that given these facts, no title in the name of the Municipality ever existed and thus it could not have validly donated the subject property to petitioner.

Anent the issue of the applicability of Amigable v. Cuenca,41 the CA affirmed the doctrine enunciated in said case that "to uphold the States immunity from suit would subvert the ends of justice." In fine, the appellate court pointed out the inconvenience and impossibility of restoring possession of Lot 6849-A to respondent considering the substantial improvements built on said lot by the government which amounted to almost PhP 12 million; and that the only relief available was for the government to pay just compensation in favor of respondent computed on the basis of the value of the property at the time of the governments taking of the land. Through its assailed Decision,42 the CA dismissed petitioners appeal for lack of merit and affirmed the trial courts decision in toto. It reasoned that laches does not apply, its application rests on the sound discretion of the court, and where the court believes that its application would result in manifest wrong or injustice, it is constrained not to be guided strictly by said doctrine. Besides, it opined that laches could not defeat the rights of a registered owner. The Issues Hence, we have the instant petition where petitioner raises the following assignment of errors: I THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS FINDING THAT RESPONDENTS CAUSE OF ACTION TO RECOVER POSSESSION OF THE SUBJECT PROPERTY IS NOT YET BARRED BY LACHES. II THE COURT OF APPEALS ERRED IN ACCORDING GREAT WEIGHT ON RESPONDENTS RECONSTITUTED ORIGINAL CERTIFICATE OF TITLE (OCT) NO. 2563 COVERING SUBJECT PROPERTY. III THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER MAY BE SUED IN VIOLATION OF THE STATES IMMUNITY FROM SUIT.

IV THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER MAY BE SUED INDEPENDENTLY OF THE REPUBLIC OF THE PHILIPPINES.43 Petitioner basically raises two issuesthe application of laches and the non-suability of the State. The threshold issue is whether petitioner DECS can be sued in Civil Case No. 8715 without its consent. A supplementary issue is whether petitioner DECS can be sued independently of the Republic of the Philippines. We rule that petitioner DECS can be sued without its permission as a result of its being privy to the Deed of Donation executed by the Municipality of Daraga, Albay over the disputed property. When it voluntarily gave its consent to the donation, any dispute that may arise from it would necessarily bring petitioner DECS down to the level of an ordinary citizen of the State vulnerable to a suit by an interested or affected party. It has shed off its mantle of immunity and relinquished and forfeited its armor of non-suability of the State.44 The auxiliary issue of non-joinder of the Republic of the Philippines is likewise resolved in the negative. While it is true that petitioner is an unincorporated government agency, and as such technically requires the Republic of the Philippines to be impleaded in any suit against the former, nonetheless, considering our resolution of the main issue below, this issue is deemed mooted. Besides, at this point, we deem it best to lift such procedural technicality in order to finally resolve the long litigation this case has undergone. Moreover, even if we give due course to said issue, we will arrive at the same ruling. The Republic of the Philippines need not be impleaded as a party-defendant in Civil Case No. 8715 considering that it impliedly gave its approval to the involvement of petitioner DECS in the Deed of Donation. In a situation involving a contract between a government department and a third party, the Republic of the Philippines need not be impleaded as a party to a suit resulting from said contract as it is assumed that the authority granted to such department to enter into such contract carries with it the full responsibility and authority to sue and be sued in its name. Main Issue: Equitable Remedy of Laches

Petitioner strongly asserts that the Municipality of Daraga, Albay had continuous, open, and adverse possession in the concept of an owner over the disputed lot since 1940 until December 21, 1988 or for about 48 years. Significantly, it maintains that Tax Declaration No. 31954 covering the disputed lot in the name of the Municipality of Daraga, Albay contains an annotation certifying that said lot was "under voucher No. 69, August, 1940 accounts. The corresponding Transfer Title No. 4812 has been issued by the Register of Deeds Office of Albay on August 3, 1940."45 When petitioner received the lot as donation from the Municipality on December 21, 1988, it possessed the subject lot also in the concept of an owner and continued to introduce improvements on the lot. Consequently, when respondent instituted the instant case in 1993, petitioner and its predecessor-in-interest Municipality of Daraga, Albay had possessed the subject lot for a combined period of about fifty two (52) years. Petitioner strongly avers that Claro Oate, the original owner of subject lot, sold it to the Municipality. At the very least it asserts that said Claro Oate allowed the Municipality to enter, possess, and enjoy the lot without protest. In fact, Claro Oate neither protested nor questioned the cancellation of his Tax Declaration No. 30235 covering the disputed lot and its substitution by Tax Declaration No. 31954 in the name of the Municipality on account of his sale of the lot to the latter. In the same vein, when Claro Oate and his spouse died, their children Antonio, Rafael, and Francisco who succeeded them also did not take any steps to question the ownership and possession by the Municipality of the disputed lot until they died on June 8, 1990, June 12, 1991, and October 22, 1957, respectively. Petitioner maintains that significantly, respondent and his siblings succeeding their father Francisco as the alleged owners, from his death on October 22, 1957also did not take any action to recover the questioned lot from 1957 until 1993 when the instant suit was commenced. Petitioner avers that if they were really the owners of said lot, they would not have waited 52 long years to institute the suit assuming they have a cause of action against the Municipality or petitioner. Thus, petitioner submits that the equitable principle of laches has indubitably set in to bar respondents action to recover possession of, and title to, the disputed lot. Laches and its elements Indeed, it is settled that rights and actions can be lost by delay and by the effect of delay as the equitable defense of laches does not concern itself with the character of

the defendants title, but only with plaintiffs long inaction or inexcusable neglect to bar the latters action as it would be inequitable and unjust to the defendant. Laches is defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that whichby the exercise of due diligencecould or should have been done earlier.46 Verily, laches serves to deprive a party guilty of it to any judicial remedies. Its elements are: (1) conduct on the part of the defendant, or of one under whom the defendant claims, giving rise to the situation which the complaint seeks a remedy; (2) delay in asserting the complainant's rights, the complainant having had knowledge or notice of the defendant's conduct as having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right in which the defendant bases the suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred.47 In Felix Gochan and Sons Realty Corporation, we held that "[t]hough laches applies even to imprescriptible actions, its elements must be proved positively. Laches is evidentiary in nature which could not be established by mere allegations in the pleadings and can not be resolved in a motion to dismiss (emphases supplied)."48 In the same vein, we explained in Santiago v. Court of Appeals that there is "no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances."49 Issue of laches not barred by adverse judgment

006-00068, 332, 22184, 31954, and 8926 are all cancelled and annulled (if not yet cancelled). What are the effects of the final judgment against Municipality of Daraga on its codefendant, petitioner DECS? Generally, it has no impact on the appeal of DECS unless the decision affects its defenses. In this petition, DECS no longer questions the declaration of nullity of the Deed of Donation over the disputed lot and hence can be considered as a final resolution of the issue. Likewise, it does not challenge the ownership of Oate of the disputed lots, but merely relied on the defense of laches. The final directive for Municipality of Daraga to return possession of the land has no significance on DECS appeal since precisely, it is DECS position that it should retain possession of the land. From these considerations, the final RTC November 3, 1997 Decision against the Municipality of Daraga has no substantial and material effect upon the DECS appeal. The only remaining issue left is whether laches can inure to the benefit of petitioner DECS considering the fact that Lot No. 6849-A was devoted to public education when the elementary school was built in 1940 under the supervision and control of DECS up to 1993 when Civil Case No. 8715 was filed by respondent Oate. We rule in the affirmative. Laches has set in

against Daraga, Albay It is unfortunate that defendant Municipality of Daraga, Albay lost its appeal in CAG.R. CV No. 60659 before the CA for its failure to pay the required docket fees within the reglementary period. As a result, a Partial Entry of Judgment was made on July 9, 1998 and consequently, the dispositions in the November 3, 1997 Decision, rendered by the Legaspi City RTC, Branch I in favor of respondent Celso Oate, became final and executory as against defendant Municipality of Daraga, Albay. As an off-shoot, with respect to the Municipality of Daraga, the Deed of Donation in favor of petitioner DECS was annulledrespondent Oate was declared owner in fee simple of the disputed lots and entitled to possession but was required to pay PhP 50,000 to the Daraga Municipal Government and the costs of suit. By reason of the finality of the Decision against the Municipality of Daraga, Tax Declaration Nos. 04A brief scrutiny of the records does show tell-tale signs of laches. The first element is undisputed: the then Bagumbayan Elementary School of Daraga was constructed in 1940 on a portion of disputed Lot 6849, specifically Lot No. 6849-A containing 13,072 square meters under TCT No. T-83946. Moreover, Mrs. Toribia Milleza,50 a retired government employee and resident of Bagumbayan, Daraga since 1955 pertinently testified, thus: Q: How long have you been residing in this place, Bagumbayan, Daraga, Albay? A: Maybe I stayed there in 1955 until the present.51 xxxx

Q: Now, can you further recall the kind of building that was constructed in this property? A: Seva type, building. Q: At present how many buildings were constructed in this property? A: Plenty of school buildings. Q: Now, how many buildings were first constructed in [sic] this property? A: In 1955 only one, the Seva type, then there was constructed five (5) Marcos Type buildings during the Marcos time.52 The devotion of Lot No. 6849-A to education started in 1940 and continued up to December 21, 1988 when said lot was donated to the DECS. From then on, DECS built various buildings and introduced improvements on said lot. Lot No. 6849-A was continuously used for public education until March 18, 1993 when respondent Oate filed Civil Case No. 8715 and thereafter up to the present. Thus, for a total period of more than fifty-two (52) years, Lot No. 6849-A was exclusively and completely utilized by DECS for public education. This fact was not successfully challenged nor refuted by respondent. The second element of laches was likewise proven. No evidence was presented to show that respondent or his predecessors-in-interest ever took any action, administrative or judicial, nor either party questioned or protested the Municipalitys adverse occupation of a portion of Lot 6849. As petitioner had demonstrated laches by persuasive and credible evidence, it is incumbent upon respondent to show that his predecessors-in-interest indeed protected their rights of ownership over the lot. Thus, as early as 1940, when the first Seva type school building was constructed over a portion of the disputed lot, now Lot 6849-A, respondent must prove that his predecessors-in-interest indeed undertook activities to contest the occupation of the portion of the lot by the Municipality and subsequently by petitioner DECS. Unfortunately, respondent failed to substantiate such defense of ownership and possession of the lot and even skirted this issue. Respondent testified that he came to know of Lot 6849 only in 1973 when he was 23 years old.53 He asserted that he took possession of said lot in the same year when his

two (2) uncles, the brothers of his late father, passed on to him the disputed lot as his fathers share of the inheritance from the late Claro Oate and Gregoria Los Baos (his grandparents). However, it is interesting to note that he testified that he only came to know in 1991 that the elementary school was built on a portion of Lot 6849, now Lot 6849-A. These assertions are irreconcilable. Common experience tells us that one who owns a property and takes possession of it cannot fail to discover and know that an existing elementary school was built and standing on the lot from the time that the owner starts possessing a property. Nonetheless, even granting that respondent indeed only came to know of such encroachment or occupation in 1991, his rights cannot be better than that of his predecessors-in-interest, that is, Claro Oate and his uncles, Antonio and Rafael, who died in 1990 and 1991, respectively. Since respondents right over the lot originated from his predecessors-in-interest, then he cannot have better rights over Lot No. 6849-A than the latter. The spring cannot rise higher than its source. Besides, respondent has not proffered any explanation why his predecessors-in-interest did not protest and challenge the Municipalitys occupancy over a portion of their lot. Verily, with the span of around 52 years afforded respondent and his predecessors-in-interest, their inaction and delay in protecting their rights were certainly excessive and unjustified. In the third element, the records clearly bear out the fact that petitioner DECS did not know nor anticipate that their possession and occupancy of a portion of Lot 6849 would later be questioned. In fact, petitioner built additional school buildings and facilities on the school site amounting to more than PhP 11 million. Mr. Jose Adra, School Principal of the Daraga North Central Elementary School, testified on the donation of the disputed lot to petitioner and the cost of the improvements on it.54 After more than forty-eight (48) years of unquestioned, peaceful, and uninterrupted possession by petitioner DECS, it had no knowledge nor reason to believe that respondent would assert any right over the lot after the lapse of such long occupation coupled with a tax declaration in the name of the Daraga Municipality. Finally, the last element is likewise proven by the antecedent facts that clearly show grave prejudice to the government, in general, and to petitioner, in particular, if the instant action is not barred without even considering the cost of the construction of the school buildings and facilities and the deleterious effect on the school children and affected school teachers and personnel if Lot No. 6849-A would be returned to respondent.

Verily, the application of laches is addressed to the sound discretion of the court as its application is controlled by equitable considerations. In the instant case, with the foregoing considerations, we are constrained from giving approbation to the trial and appellate courts ruling that the application of the principle of laches would subvert the ends of justice. Indeed, it is unjust for the State and the affected citizenry to suffer after respondent and his predecessors-in-interest had slept on their rights for 52 years. Also, the inaction of respondent Oate and his predecessors-in-interest for over 50 years has reduced their right to regain possession of Lot 6849-A to a stale demand. Laches holds over the actual area possessed and occupied by petitioner We, however, make the clear distinction that laches applies in favor of petitioner only as regards Lot 6849-A which is actually possessed and occupied by it. Laches does not apply to Lot Nos. 6849-B, 6849-C, 6849-D, and 6849-E. These portions were never occupied by the Municipality and petitioner. Agricultural tenant Felicito Armenta testified that his father, Antonio Armenta, started cultivating portions of Lot 6849 way back in the 1940s and that he took over the tenancy in 1960 when his father stopped tilling the land. Besides, if the Municipality indeed owned Lot 6849 by virtue of a purchase, it is likewise guilty of laches in not protecting or contesting the cultivation by Oates agricultural tenants of said portions of Lot 6849. Transfer Certificates of Title on portions of Lot 6849 valid Petitioner contends that the reconstitution of OCT No. 2563covering subject lot in 1991 or 52 years after the Municipality owned said lotdoes not in any way affect the latters preferential and superior right over the disputed lot. In the same vein, it maintains that it is inconsequential that petitioner and the Municipality failed to present as evidence the deed of conveyance in favor of the Municipality, as well as TCT No. 4812 as a registered land owner may lose the right to recover possession of a registered property by reason of laches. Petitioner concludes that the long delayed reconstitution of OCT No. 2563 by respondent was a mere afterthought and intended to camouflage his and his predecessors unreasonably long inaction which indicates an awareness that they have no valid claim whatsoever over disputed Lot 6849. We disagree. It must be noted that a reconstitution proceeding is one in rem and is thus binding to the whole world. While it is true that laches has set in so far as it pertains to the

portion of Lot 6849, specifically Lot 6849-A where the Municipality and petitioner DECS had constructed the existing school, such does not hold true for the totality of Lot 6849 as explained above. Indeed, the reconstitution proceeding being one in rem, the consequent issuance of OCT No. RO-18971 in lieu of the lost or destroyed OCT No. 2563 is valid. Anent the issue of non-notification, we agree with the observation of the courts a quo that even granting arguendothat petitioner was not notified about the reconstitution proceeding, such deficiency is not jurisdictional as to nullify and prevail over the final disposition of the trial court in a proceeding in rem. More so, while petitioner strongly asserts that the certification in Tax Declaration No. 31954 attesting to the payment of the disputed lot under Municipal Voucher No. 69 and the issuance of TCT No. 4812, which was never disputed nor controverted by respondent, should have been given evidentiary weight by the trial and appellate courts as the presumptions of regularity and validity of such official act have not been overcome, such documents cannot defeat the registered title of respondent. Between a clear showing of ownership evidenced by a registered title and a certification in a tax declaration, albeit done in an official capacity, the former holds as the latter is only persuasive evidence. Indeed, tax declarations in land cases per se do not constitute ownership without other substantial pieces of evidence. The records do not show and petitioner has not given any cogent explanation why the Deed of Conveyance in favor of the Municipality of Daraga, Albay and TCT No. 4812 were not presented. With clear and affirmative defenses set up by petitioner and Municipality of Daraga, Albay, it is incumbent for them to present these documents. Therefore, the unmistakable inference is that there was indeed no sale and conveyance by Claro Oate of Lot 6849 in favor of the Municipality. Consequently, the TCTs cancelling OCT No. RO-18971 covering Lot Nos. 6849-A, 6849-B, 6849C, 6849-D, and 6849-E were likewise validly issued. Thus, notwithstanding valid titles over the portions of Lot 6849, respondent Oate cannot now take possession over Lot No. 6849-A for reason of laches. In the recent case of De Vera-Cruz v. Miguel, we reiterated the principle we have consistently applied in laches: The law55 provides that no title to registered land in derogation of that of the registered owner can be acquired by prescription or adverse possession. Nonetheless,

while it is true that a Torrens Title is indefeasible and imprescriptible, the registered landowner may lose his right to recover the possession of his registered property by reason of laches.56 Thus, with our resolution of the principal issue of applicability of the equitable remedy of laches, the issue of suability of the State has been mooted. A final word. Considering our foregoing disquisition and upon grounds of equity, a modification of the final decision prevailing between respondent Oate and the Municipality of Daraga, Albay is in order. It would be grossly iniquitous for respondent Oate to pay PhP 50,000 to the Municipality of Daraga, Albay considering that he is not entitled to recover the possession and usufruct of Lot No. 6849-A. WHEREFORE, the instant petition is GRANTED and the January 14, 2004 Decision of the CA in CA-G.R. CV No. 60659 affirming the November 3, 1997 Decision of the Legaspi City RTC is AFFIRMED with the following modifications: 1) Declaring the DepEd (formerly DECS), Division of Albay to have the rights of possession and usufruct over Lot 6849-A with an area of 13,072 square meters under TCT No. T-83946 of the Registry of Deeds of Albay, as a result of laches on the part of respondent Celso Oate and his predecessors-in-interest. Respondent Celso Oate, his heirs, assigns, and successors-in-interest are prohibited from selling, mortgaging, or encumbering Lot 6849-A while the said lot is still being used and occupied by petitioner DECS. However, the rights of possession and usufruct will be restored to respondent the moment petitioner DECS no longer needs the said lot. The Registry of Deeds of Albay is ordered to annotate the aforementioned restrictions and conditions at the back of TCT No. T-83946-A in the name of respondent Celso Oate. Item No. 2 of the November 3, 1997 Decision of the Legaspi City RTC is modified accordingly; 2) Declaring Celso Oate as the true and legal owner in fee simple of the following lots: a. Lot 6849-C with an area of 10,000 square meters under TCT No. T-83948 of the Registry of Deeds of Albay; b. Lot 6849-D with an area of 1,127 square meters under TCT No. T-83949 of the Registry of Deeds of Albay; and

c. Lot 6849-E with an area of 608 square meters under TCT No. T-83950 of the Registry of Deeds of Albay. 3) Declaring Mariano M. Lim as true and legal owner of Lot 6849-B with an area of 3,100 square meters under TCT No. T-84049 of the Registry of Deeds of Albay; 4) Ordering petitioner DECS and all other persons claiming under said department to return the possession of Lots 6849-C, 6849-D, and 6849-E to respondent Celso Oate and Lot 6849-B to Mariano M. Lim; and 5) Deleting Item No. 4 of the November 3, 1997 Decision of the Legaspi City RTC, which ordered respondent Celso Oate to pay Fifty Thousand Pesos (PhP 50,000) to defendant Municipality of Daraga, Albay. The November 3, 1997 Decision of the Legaspi City RTC is AFFIRMED in all other respects. No costs. SO ORDERED. PRESBITERO J. VELASCO, JR. Associate Justice Footnotes
1 2

Rollo, pp. 13-48. Id. at 50-60. The Decision was penned by Associate Justice Sergio L. Pestao and concurred in by Associate Justices Marina L. Buzon (Chairperson) and Jose C. Mendoza. 3 Id. at 61-82. 4 Records, pp. 6-7. 5 Issued on October 16, 1992. 6 Records, pp. 164-171. See the August 14, 1995 Decision entitled Heirs of Rafael Oate, represented by Diego Oate v. Spouses Celso Oate and Allem Vellez. 7 Id. at 178-179. 8 Id. at 180-181. 9 Id. at 182-183. 10 Id. at 184-185. 11 Id. at 186-187. 12 Id. at 190-191. 13 Id. at 192.

14 15

Id. at 193. Id. at 194. 16 Id. at 1-4. 17 Id. at 24-27. 18 Id. at 29-31. 19 TSN, November 3, 1993 and July 12, 1994. 20 TSN, February 14, 1994 and August 3, 1995. 21 Records, pp. 97-100. 22 Id. at 106-111. 23 Id. at 112-117, March 11, 1994 Order of the RTC. 24 Id. at 189. 25 Id. at 195. 26 Id. at 101. 27 Id. at 102. 28 Id. at 103. 29 Id. at 104. 30 Id. at 105. 31 TSN, February 22, 1996. 32 TSN, September 30, 1996. 33 Supra note 3, at 81-82. 34 Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 456 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. 35 Records, pp. 296 & 298. 36 CA rollo, p. 17. 37 Id. at 18-19. 38 Id. at 21. 39 Id. at 28. 40 Id. at 59. 41 G.R. No. L-26400, February 29, 1972, 43 SCRA 360. 42 Supra note 2. 43 Rollo, pp. 25-26. 44 See United States of America v. Guinto, G.R. Nos. 76607, 79470, 80018 & 80258, February 26, 1990, 182 SCRA 644; and DAR v. NLRC, G.R. No. 104269, November 11, 1993, 227 SCRA 693. 45 Records, p. 213. 46 Soliva v. The Intestate Estate of Marcelo M. Villalba , G.R. No. 154017, December 8, 2003, 417 SCRA 277, 286; citing Ramos v. Heirs of Ramos, Sr., G.R. No. 140848, April 25, 2002, 381 SCRA 594, 605; andWestmont Bank v. Ong, G.R. No. 132560, January 30, 2002, 375 SCRA 212, 222.

47

Felix Gochan and Sons Realty Corporation v. Heirs of Baba, G.R. No. 138945, August 19, 2003, 409 SCRA 306, 315; citing Santos v. Santos, G.R. No. 133895, October 2, 2001, 366 SCRA 395, 405-406. 48 Id. 49 G.R. No. 103959, August 21, 1997, 278 SCRA 98, 112. 50 Supra note 32. 51 Id. at 4. 52 Id. at 5. 53 Supra note 19. 54 Supra note 31. 55 Act. No. 496, Sec. 46 (The Land Registration Act), now P.D. No. 1529 (Property Registration Decree). 56 G.R. No. 144103, August 31, 2005, 468 SCRA 506, 518; citing Isabela Colleges, Inc. v. Heirs of Nieves Tolentino-Rivera, G.R. No. 132677, October 20, 2000, 344 SCRA 95, 106107.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 161657 October 4, 2007

REPUBLIC OF THE PHILIPPINES, Petitioner, vs. HON. VICENTE A. HIDALGO, in his capacity as 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, Respondents. 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 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 acknowledged before Fidel Vivar

which deed was annotated at the back of TCT No. 118527 under PE: 2035/T118911 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 order6dated 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 witnesses9 testified, albeit their testimonies revolved around the appraisal and rental values of the Arlegui property. Eventually, the trial court rendered a judgment by default10 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: 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 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 - - Order15 granting the private respondents motion for execution. 4. December 22, 2003 - - Writ of Execution.16 Hence, this petition for certiorari. By Resolution17 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.

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, 200325 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 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 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 theP143,600,000.00 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 Court30 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 grantedpro 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. 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 execution36 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. Palacio38 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.1wphi1 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. 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. CANCIO C. GARCIA Associate Justice Footnotes
1 2

28 29

Page 12 of the Decision of the RTC of Manila, Br. 37; rollo, p. 59. Annex "I," Petition; id. at 77 et seq. 3 Annex "J," Petition, id. at 93. 4 Annex "K," Petition; id. at 94 et seq. 5 Annex "M," Petition; id. at 108. 6 Annex "A, Petition; id. at 47. 7 Id. at 105. 8 Id. at 106. 9 Engr. Hernando Gozon, Jr. of the Cuervo Appraisers, Inc.; Mr. Renato Chico of the Land Bank; and Engr. Israel Soguilon. 10 Per Judge Vicente A. Hidalgo; Annex "B," Petition; rollo, pp. 48 et seq. 11 Annex "C," Petition; id. at 62 et seq. 12 Annex "D," Petition; id. at 70. 13 Annex "E," Petition; id. at 71. 14 Annex "F," Petition; id. at 72 et seq. 15 Annex "G," Petition; id. at 75. 16 Annex "H," Petition; id. at 76. 17 Rollo, p. 341. 18 Roces v. Aportadera, Adm. Case No. 2936, March 31, 1995, 243 SCRA 108, citing cases. 19 First par. of Sec. 3 20 Citibank, N.A. v. Chua, G.R. No. 102300, March 17, 1993, 220 SCRA 75. 21 Lesaca v. Court of Appeals, G.R. No. 96432, October 21, 1992, 215 SCRA 17, citing Coombs v. Santos, 24 Phil 446 (1913). 22 Regalado, Remedial Law Compendium, Vol. 1, 8th Revised Edition, p. 718, citing Benito v. COMELEC, G.R. No. 134913, Jan. 19, 2001, 349 SCRA 705. 23 Olanolan v. COMELEC, G.R. No. 165491, March 31, 2005, 454 SCRA 807, citing cases. 24 Section. 1. Grounds of and period for filing motion for new trial or reconsideration . xxx (a) Fraud, accident, mistake or excusable negligence which ordinary prudence could not have guarded against and by reason of which such aggrieved party has probably been impaired in his right; or (b) Newly discovered evidence . 25 Supra note 14. 26 Rollo, pp. 72-73. 27 Art. 1410, Civil Code.

Tolentino, Commentaries and Jurisprudence on the Civil Code, Vol. IV, 1991 ed., p. 632. Republic v. Court of Appeals, G.R. No. 60169, March 23, 1990, 183 SCRA 1990, citing Acot v. Kempis, 55 O.G. 2907. 30 (d) Extent of relief to be awarded. - A judgment rendered against a party in default shall not exceed the amount or different in kind from that prayed for nor award unliquidated damages. 31 Regalado, Remedial Law Compendium, Vol. 1, 8th ed., p. 173, citing Pascua v. Florendo, L- 38047, April 30, 1985, 136 SCRA 208. 32 Lim Tanhu v. Remolete, No. L-40098, August 29, 1975, 66 SCRA 452. 33 106 Phil. 1017 (1960). 34 102 Phil. 875 (1958). 35 Sec. 1, Rule 142 of the Rules of Court. 36 Supra note 16. 37 Commissioner of Public Highways v. San Diego, No. L-30098, February 18, 1970, 31 SCRA 616. 38 No. L-20322, May 29, 1968, 23 SCRA 899, citing Merritt v. Insular Government, 34 Phil. 311 (1916). 39 See Motion for the Issuance of the Writ of Execution, Annex "Q," Petition; rollo, pp. 134 et seq.

Republic of the Philippines SUPREME COURT Baguio FIRST DIVISION G.R. No. 185918 April 18, 2012

LOCKHEED DETECTIVE AND WATCHMAN AGENCY, INC., Petitioner, vs. UNIVERSITY OF THE PHILIPPINES, Respondent. DECISION VILLARAMA, JR., J.: Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the August 20, 2008 Amended Decision1 and December 23, 2008 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 91281.

The antecedent facts of the case are as follows: Petitioner Lockheed Detective and Watchman Agency, Inc. (Lockheed) entered into a contract for security services with respondent University of the Philippines (UP). In 1998, several security guards assigned to UP filed separate complaints against Lockheed and UP for payment of underpaid wages, 25% overtime pay, premium pay for rest days and special holidays, holiday pay, service incentive leave pay, night shift differentials, 13th month pay, refund of cash bond, refund of deductions for the Mutual Benefits Aids System (MBAS), unpaid wages from December 16-31, 1998, and attorneys fees. On February 16, 2000, the Labor Arbiter rendered a decision as follows: WHEREFORE, premises considered, respondents Lockheed Detective and Watchman Agency, Inc. and UP as job contractor and principal, respectively, are hereby declared to be solidarily liable to complainants for the following claims of the latter which are found meritorious. Underpaid wages/salaries, premium pay for work on rest day and special holiday, holiday pay, 5 days service incentive leave pay, 13th month pay for 1998, refund of cash bond (deducted at P50.00 per month from January to May 1996, P100.00 per month from June 1996 and P200.00 from November 1997), refund of deduction for Mutual Benefits Aids System at the rate of P50.00 a month, and attorneys fees; in the total amount of P1,184,763.12 broken down as follows per attached computation of the Computation and [E]xamination Unit of this Commission, which computation forms part of this Decision: 1. JOSE SABALAS 2. TIRSO DOMASIAN 3. JUAN TAPEL 4. DINDO MURING 5. ALEXANDER ALLORDE 6. WILFREDO ESCOBAR P77,983.62 76,262.70 80,546.03 80,546.03 80,471.78 80,160.63

7. FERDINAND VELASQUEZ 78,595.53 8. ANTHONY GONZALES 9. SAMUEL ESCARIO 10. PEDRO FAILORINA 11. MATEO TANELA 12. JOB SABALAS 13. ANDRES DACANAYAN 14. EDDIE OLIVAR 76,869.97 80,509.78 80,350.87 70,590.58 59,362.40 77,403.73 77,403.73 P1,077,057.38 plus 10% attorneys fees GRAND TOTAL AWARD 107,705.74 P1,184,763.12

Third party respondent University of the Philippines is hereby declared to be liable to Third Party Complainant and cross claimant Lockheed Detective and Watchman Agency for the unpaid legislated salary increases of the latters security guards for the years 1996 to 1998, in the total amount of P13,066,794.14, out of which amount the amounts due complainants here shall be paid. The other claims are hereby DISMISSED for lack of merit (night shift differential and 13th month pay) or for having been paid in the course of this proceedings (salaries for December 15-31, 1997 in the amount of P40,140.44). The claims of Erlindo Collado, Rogelio Banjao and Amor Banjao are hereby DISMISSED as amicably settled for and in consideration of the amounts of P12,315.72, P12,271.77 and P12,819.33, respectively. SO ORDERED.3

Both Lockheed and UP appealed the Labor Arbiters decision. By Decision4 dated April 12, 2002, the NLRC modified the Labor Arbiters decision. The NLRC held: WHEREFORE, the decision appealed from is hereby modified as follows: 1. Complainants claims for premium pay for work on rest day and special holiday, and 5 days service incentive leave pay, are hereby dismissed for lack of basis. 2. The respondent University of the Philippines is still solidarily liable with Lockheed in the payment of the rest of the claims covering the period of their service contract. The Financial Analyst is hereby ordered to recompute the awards of the complainants in accordance with the foregoing modifications. SO ORDERED.5 The complaining security guards and UP filed their respective motions for reconsideration. On August 14, 2002, however, the NLRC denied said motions. As the parties did not appeal the NLRC decision, the same became final and executory on October 26, 2002.6 A writ of execution was then issued but later quashed by the Labor Arbiter on November 23, 2003 on motion of UP due to disputes regarding the amount of the award. Later, however, said order quashing the writ was reversed by the NLRC by Resolution7 dated June 8, 2004, disposing as follows: WHEREFORE, premises considered, we grant this instant appeal. The Order dated 23 November 2003 is hereby reversed and set aside. The Labor Arbiter is directed to issue a Writ of Execution for the satisfaction of the judgment award in favor of Third-Party complainants. SO ORDERED.8 UP moved to reconsider the NLRC resolution. On December 28, 2004, the NLRC upheld its resolution but with modification that the satisfaction of the judgment

award in favor of Lockheed will be only against the funds of UP which are not identified as public funds. The NLRC order and resolution having become final, Lockheed filed a motion for the issuance of an alias writ of execution. The same was granted on May 23, 2005.9 On July 25, 2005, a Notice of Garnishment10 was issued to Philippine National Bank (PNB) UP Diliman Branch for the satisfaction of the award of P12,142,522.69 (inclusive of execution fee). In a letter11 dated August 9, 2005, PNB informed UP that it has received an order of release dated August 8, 2005 issued by the Labor Arbiter directing PNB UP Diliman Branch to release to the NLRC Cashier, through the assigned NLRC Sheriff Max L. Lago, the judgment award/amount of P12,142,522.69. PNB likewise reminded UP that the bank only has 10 working days from receipt of the order to deliver the garnished funds and unless it receives a notice from UP or the NLRC before the expiry of the 10-day period regarding the issuance of a court order or writ of injunction discharging or enjoining the implementation and execution of the Notice of Garnishment and Writ of Execution, the bank shall be constrained to cause the release of the garnished funds in favor of the NLRC. On August 16, 2005, UP filed an Urgent Motion to Quash Garnishment.12 UP contended that the funds being subjected to garnishment at PNB are government/public funds. As certified by the University Accountant, the subject funds are covered by Savings Account No. 275-529999-8, under the name of UP System Trust Receipts, earmarked for Student Guaranty Deposit, Scholarship Fund, Student Fund, Publications, Research Grants, and Miscellaneous Trust Account. UP argued that as public funds, the subject PNB account cannot be disbursed except pursuant to an appropriation required by law. The Labor Arbiter, however, dismissed the urgent motion for lack of merit on August 30, 2005.13 On September 2, 2005, the amount of P12,062,398.71 was withdrawn by the sheriff from UPs PNB account.14 On September 12, 2005, UP filed a petition for certiorari before the CA based on the following grounds: I.

The concept of "solidary liability" by an indirect employer notwithstanding, respondent NLRC gravely abused its discretion in a manner amounting to lack or excess of jurisdiction by misusing such concept to justify the garnishment by the executing Sheriff of public/government funds belonging to UP. II. Respondents NLRC and Arbiter LORA acted without jurisdiction or gravely abused their discretion in a manner amounting to lack or excess of jurisdiction when, by means of an Alias Writ of Execution against petitioner UP, they authorized respondent Sheriff to garnish UPs public funds. Similarly, respondent LORA gravely abused her discretion when she resolved petitioners Motion to Quash Notice of Garnishment addressed to, and intended for, the NLRC, and when she unilaterally and arbitrarily disregarded an official Certification that the funds garnished are public/government funds, and thereby allowed respondent Sheriff to withdraw the same from PNB. III. Respondents gravely abused their discretion in a manner amounting to lack or excess of jurisdiction when they, despite prior knowledge, effected the execution that caused paralyzation and dislocation to petitioners governmental functions.15 On March 12, 2008, the CA rendered a decision16 dismissing UPs petition for certiorari. Citing Republic v. COCOFED,17 which defines public funds as moneys belonging to the State or to any political subdivisions of the State, more specifically taxes, customs, duties and moneys raised by operation of law for the support of the government or the discharge of its obligations, the appellate court ruled that the funds sought to be garnished do not seem to fall within the stated definition. On reconsideration, however, the CA issued the assailed Amended Decision. It held that without departing from its findings that the funds covered in the savings account sought to be garnished do not fall within the classification of public funds, it reconsiders the dismissal of the petition in light of the ruling in the case of National Electrification Administration v. Morales18 which mandates that all money claims against the government must first be filed with the Commission on Audit (COA).

Lockheed moved to reconsider the amended decision but the same was denied in the assailed CA Resolution dated December 23, 2008. The CA cited Manila International Airport Authority v. Court of Appeals19 which held that UP ranks with MIAA, a government instrumentality exercising corporate powers but not organized as a stock or non-stock corporation. While said corporations are government instrumentalities, they are loosely called government corporate entities but not government-owned and controlled corporations in the strict sense. Hence this petition by Lockheed raising the following arguments: 1. RESPONDENT UP IS A GOVERNMENT ENTITY WITH A SEPARATE AND DISTINCT PERSONALITY FROM THE NATIONAL GOVERNMENT AND HAS ITS OWN CHARTER GRANTING IT THE RIGHT TO SUE AND BE SUED. IT THEREFORE CANNOT AVAIL OF THE IMMUNITY FROM SUIT OF THE GOVERNMENT. NOT HAVING IMMUNITY FROM SUIT, RESPONDENT UP CAN BE HELD LIABLE AND EXECUTION CAN THUS ENSUE. 2. MOREOVER, IF THE COURT LENDS IT ASSENT TO THE INVOCATION OF THE DOCTRINE OF STATE IMMUNITY, THIS WILL RESULT [IN] GRAVE INJUSTICE. 3. FURTHERMORE, THE PROTESTATIONS OF THE RESPONDENT ARE TOO LATE IN THE DAY, AS THE EXECUTION PROCEEDINGS HAVE ALREADY BEEN TERMINATED.20 Lockheed contends that UP has its own separate and distinct juridical entity from the national government and has its own charter. Thus, it can be sued and be held liable. Moreover, Executive Order No. 714 entitled "Fiscal Control and Management of the Funds of UP" recognizes that "as an institution of higher learning, UP has always granted full management and control of its affairs including its financial affairs."21 Therefore, it cannot shield itself from its private contractual liabilities by simply invoking the public character of its funds. Lockheed also cites several cases wherein it was ruled that funds of public corporations which can sue and be sued were not exempt from garnishment. Lockheed likewise argues that the rulings in the NEA and MIAA cases are inapplicable. It contends that UP is not similarly situated with NEA because the jurisdiction of COA over the accounts of UP is only on a post-audit basis. As to

the MIAA case, the liability of MIAA pertains to the real estate taxes imposed by the City of Paranaque while the obligation of UP in this case involves a private contractual obligation. Lockheed also argues that the declaration in MIAA specifically citing UP was mere obiter dictum. Lockheed moreover submits that UP cannot invoke state immunity to justify and perpetrate an injustice. UP itself admitted its liability and thus it should not be allowed to renege on its contractual obligations. Lockheed contends that this might create a ruinous precedent that would likely affect the relationship between the public and private sectors. Lastly, Lockheed contends that UP cannot anymore seek the quashal of the writ of execution and notice of garnishment as they are already fait accompli. For its part, UP contends that it did not invoke the doctrine of state immunity from suit in the proceedings a quo and in fact, it did not object to being sued before the labor department. It maintains, however, that suability does not necessarily mean liability. UP argues that the CA correctly applied the NEA ruling when it held that all money claims must be filed with the COA. As to alleged injustice that may result for invocation of state immunity from suit, UP reiterates that it consented to be sued and even participated in the proceedings below. Lockheed cannot now claim that invocation of state immunity, which UP did not invoke in the first place, can result in injustice. On the fait accompli argument, UP argues that Lockheed cannot wash its hands from liability for the consummated garnishment and execution of UPs trust fund in the amount of P12,062,398.71. UP cites that damage was done to UP and the beneficiaries of the fund when said funds, which were earmarked for specific educational purposes, were misapplied, for instance, to answer for the execution fee of P120,123.98 unilaterally stipulated by the sheriff. Lockheed, being the party which procured the illegal garnishment, should be held primarily liable. The mere fact that the CA set aside the writ of garnishment confirms the liability of Lockheed to reimburse and indemnify in accordance with law. The petition has no merit. We agree with UP that there was no point for Lockheed in discussing the doctrine of state immunity from suit as this was never an issue in this case. Clearly, UP

consented to be sued when it participated in the proceedings below. What UP questions is the hasty garnishment of its funds in its PNB account. This Court finds that the CA correctly applied the NEA case. Like NEA, UP is a juridical personality separate and distinct from the government and has the capacity to sue and be sued. Thus, also like NEA, it cannot evade execution, and its funds may be subject to garnishment or levy. However, before execution may be had, a claim for payment of the judgment award must first be filed with the COA. Under Commonwealth Act No. 327,22 as amended by Section 26 of P.D. No. 1445,23 it is the COA which has primary jurisdiction to examine, audit and settle "all debts and claims of any sort" due from or owing the Government or any of its subdivisions, agencies and instrumentalities, including government-owned or controlled corporations and their subsidiaries. With respect to money claims arising from the implementation of Republic Act No. 6758,24 their allowance or disallowance is for COA to decide, subject only to the remedy of appeal by petition for certiorari to this Court.251wphi1 We cannot subscribe to Lockheeds argument that NEA is not similarly situated with UP because the COAs jurisdiction over the latter is only on post-audit basis. A reading of the pertinent Commonwealth Act provision clearly shows that it does not make any distinction as to which of the government subdivisions, agencies and instrumentalities, including government-owned or controlled corporations and their subsidiaries whose debts should be filed before the COA. As to the fait accompli argument of Lockheed, contrary to its claim that there is nothing that can be done since the funds of UP had already been garnished, since the garnishment was erroneously carried out and did not go through the proper procedure (the filing of a claim with the COA), UP is entitled to reimbursement of the garnished funds plus interest of 6% per annum, to be computed from the time of judicial demand to be reckoned from the time UP filed a petition for certiorari before the CA which occurred right after the withdrawal of the garnished funds from PNB. WHEREFORE, the petition for review on certiorari is DENIED for lack of merit. Petitioner Lockheed Detective and Watchman Agency, Inc. is ordered to REIMBURSE respondent University of the Philippines the amount ofP12,062,398.71 plus interest of 6% per annum, to be computed from September 12, 2005 up to the finality of this Decision, and 12% interest on the entire amount from date of finality of this Decision until fully paid.

No pronouncement as to costs. SO ORDERED. MARTIN S. VILLARAMA, JR. Associate Justice Footnotes


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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. 24 Compensation and Position Classification Act of 1989. 25 National Electrification Administration v. Morales, supra note 18, at 89-91.

Designated additional member per Raffle dated April 2, 2012. Designated additional member per Raffle dated April 16, 2012. 1 Rollo, pp. 47-50. Penned by Associate Justice Arcangelita M. Romilla-Lontok with Associate Justices Mariano C. Del Castillo (now a member of this Court) and Romeo F. Barza concurring. 2 Id. at 52-53. 3 CA rollo, pp. 23-24. 4 Id. at 22-38. 5 Id. at 37. 6 Id. at 44, citing NLRC records, p. 868. 7 Id. at 39-56. 8 Id. at 55. 9 Id. at 57-64. 10 Id. at 65. 11 Id. at 74. 12 Id. at 66-73. 13 Id. at 79-81. 14 Id. at 10. 15 Id. 16 Id. at 122-134. 17 G.R. Nos. 147062-64, December 14, 2001, 372 SCRA 462, 481. 18 G.R. No. 154200, June 24, 2007, 528 SCRA 79, 90-91. 19 G.R. No. 155650, July 20, 2006, 495 SCRA 591, 618-619. 20 Rollo, p. 17. 21 Id. at 24-25. 22 An Act Fixing the Time Within Which the Auditor General Shall Render His Decisions and Prescribing the Manner of Appeal Therefrom. 23 Ordaining And Instituting A Government Auditing Code Of The Philippines. Section 26 thereof provides: 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
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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION 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 P16,370,191.74 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 P273,729.47 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-9314971 of the Regional Trial Court in Quezon City (RTC).4 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. P503,462.74 amount of the third billing, additional accomplished work and retention money

2. P5,716,729.00 in actual damages 3. P10,000,000.00 in moral damages 4. P150,000.00 and P1,500.00 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 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 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 P16,370,191.74 representing the garnished funds payable to the order of Stern Builders and dela Cruz as its compliance with the RTCs order 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 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. 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, 2007,58 alleging 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 petition after the RTC (Judge Yadao) denied the UPs motion for the redeposit of the withdrawn amount on April 10, 2007,60 to wit:
59

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 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: 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 P10 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 andDepartment 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 P5,716,729.00 and moral damages of P10 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 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 P22,338,553.25, 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 P5,716,729.00, moral damages of P10,000,000.00 and attorneys fees of P150,000.00 plus P1,500.00 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 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.77Hence, 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 inMunicipality 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."82The 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 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 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. 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 P16,370,191.74 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.89 Indeed, 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, 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. However, equity calls for the retroactive application in the UPs favor of the freshperiod 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 15days 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: 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: thebody 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 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 P5,716,729.00 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 anipse 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 P10,000,000.00. 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 P10,000,000.00 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 P10,000,000.00 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 P150,000.00, plus P1,500.00 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 Codethat 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 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., P503,462.74) 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 P5,716,729.00, moral damages of P10,000,000.00, and attorney's fees ofP150,000.00, plus P1,500.00 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 ofP16,370,191.74 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 Footnotes
1 2

14

Administrative Circular No. 10-2000 dated October 25, 2000. Rollo, pp. 39-54; penned by Associate Justice Ruben T. Reyes (later Presiding Justice and Member of the Court, but now retired), with Associate Justice Josefina Guevara-Salonga (retired) and Associate Justice Fernanda Lampas-Peralta concurring. 3 Id. at 92-105. 4 Id. at 75-83. 5 Id. at 133-138. 6 Id. at 162. 7 Id. at 163-164. 8 Id. at 169-171. 9 Id. at 172-173. 10 Id. at 174. 11 Id. at 174-182. 12 Id. at 185-187. 13 Id. at 188-213.

Id. at 217-223; penned by Associate Justice B.A. Adefuin-Dela Cruz (retired), with Associate Justice Eliezer R. delos Santos (deceased) and Associate Justice Jose Catral Mendoza (now a Member of the Court) concurring. 15 Id. at 221. 16 Id. at 243. 17 Id. at 282. 18 Id. at 283-291. 19 Id. at 293. 20 Id. at 417. 21 Id. at 172-173; and 301. 22 Id. at 312. 23 Id. at 302-309. 24 Id. at 314-319 25 Id. at 321-322. 26 Id. at 323-325. 27 Id. at 326-328. 28 Id. at 332-333. 29 Id. at 334-336. 30 Id. at 339. 31 Id. at 340. 32 Id. at 341. 33 Id. at 341. 34 Id. at 342-344. 35 Id. at 346-360. 36 G.R. No. 104269, November 11, 1993, 227 SCRA 693. 37 G.R. No. 110280, October 21, 1993, 227 SCRA 342. 38 Rollo, pp. 366-367; penned by Associate Justice Reyes, with Associate Justice Tria Tirona (retired) and Associate Justice Jose C. Reyes, Jr. concurring. 39 Id. at 452-453. 40 Id. at 455-460. 41 Id. at 472-476. 42 Id. at 477-482. 43 Id. at 484. 44 Id. at 485-489. 45 Id. at 492-494. 46 Id. at 484. 47 Id. at 492-494. 48 Id. at 51. 49 Id. at 51-52. 50 Id. at 569. 51 Id. 52 Id. at 556-561. 53 Id. at 562-565. 54 Id. at 563-564. 55 Id. at 576-581. 56 Id. at 625-628.

57 58

Id. at 687-688. Id. at 605-615. 59 Id. at 705-714. 60 Id. at 719-721. 61 G.R. No. L-30098, February 18, 1970, 31 SCRA 616, 625. 62 G.R. No. 104269, November 11, 1993, 227 SCRA 693, 701-702. 63 Section 2, Act No. 1870. 64 Section 1, Act No. 1870. 65 Section 2(12) of Executive Order No. 292 reads: xxx xxx Chartered institution refers to any agency organized or operating under a special charter, and vested by law with functions relating to specific constitutional policies or objectives. This term includes the state universities and colleges and the monetary authority of the State. xxx 66 University of the Philippines and Anonas v. Court of Industrial Relations, 107 Phil 848, 850 (1960). 67 Section 2, R.A. No. 9500. 68 Section 3, R.A. No. 9500. 69 Section 2(10), of Executive Order No. 292 provides: xxx xxx Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations. xxx 70 Section 1, Article XIV, 1987 Constitution. 71 Entitled Fiscal Control and Management of the Funds of the University of the Philippines, promulgated on August 1, 1981. 72 Section 3, R.A. No. 9500. 73 Section 13(m), R.A. No. 9500. 74 Section 13, Act 1870; Section 6, Executive Order No. 714; Section 26, R.A. No. 9500. 75 Section 3(4), P.D. No. 1445. 76 Section 4(3), P.D. No. 1445. 77 Section 22(a), R.A. No. 9500. 78 Philippine Rock Industries, Inc. v. Board of Liquidators, G.R. No. 84992, December 15, 1989, 180 SCRA 171, 175. 79 Republic v. National Labor Relations Commission, G.R. No. 120385, October 17, 1996, 263 SCRA 290, 300. 80 G.R. No. L-52179, April 8, 1991, 195 SCRA 692, 697. 81 G.R. No. L-30671, November 28, 1973, 54 SCRA 83, 87. 82 Rollo, p. 51. 83 Section 84(2), P.D. No. 1445. 84 Section 29 (1), Article VI, Constitution.

85

National Home Mortgage Finance Corporation v. Abayari, G.R. No. 166508, October 2, 2009, 602 SCRA 242, 256. 86 Entitled EXERCISE OF UTMOST CAUTION, PRUDENCE AND JUDICIOUSNESS IN THE ISSUANCE OF WRITS OF EXECUTION TO SATISFY MONEY JUDGMENTS AGAINST GOVERNMENT AGENCIES AND LOCAL GOVERNMENT UNITS. 87 Airline Pilots Association of the Philippines v. Philippine Airlines, Inc., G.R. No. 168382, June 6, 2011, 650 SCRA 545, 557; Florentino v. Rivera, G.R. No. 167968, January 23, 2006, 479 SCRA 522, 528; Siy v. National Labor Relations Commission, G.R. No. 158971, August 25, 2005, 468 SCRA 154, 161-162. 88 FGU Insurance Corporation v. Regional Trial Court of Makati, Branch 66, G.R. No. 161282, February 23, 2011, 644 SCRA 50, 56. 89 Edillo v. Dulpina, G.R. No. 188360, January 21, 2010, 610 SCRA 590, 602. 90 Apo Fruits Corporation v. Court of Appeals, G.R. No. 164195, December 4, 2009, 607 SCRA 200, 214. 91 G.R. No. 147082, January 28, 2008, 542 SCRA 406, 418. 92 G.R. No. 164196, June 22, 2007, 525 SCRA 412, 426. 93 Antonio v. Court of Appeals, No. L-35434, November 9, 1988, 167 SCRA 127, 131-132. 94 Pursuant to Section 1, Rule 22 of the Rules of Court, "the day of the act or event from which the designated period of time begins to run is to be excluded and the date of performance included." 95 Anderson v. National Labor Relations Commission, G.R. No. 111212, January 22, 1996, 252 SCRA 116, 124. 96 Prudential Bank v. Business Assistance Group, Inc., G.R. No. 158806, December 16, 2004, 447 SCRA 187, 193; Cabili v. Badelles, No. L-17786, 116 Phil. 494, 497 (1962); Martinez v. Martinez, No. L-4075, 90 Phil. 697, 700 (1952); Vivero v. Santos, No. L-8105, 98 Phil. 500, 504 (1956); Perez v. Araneta, No. L-11788, 103 Phil. 1141 (1958); Visayan Surety and Insurance Corp. v. Central Bank of the Philippines, No. L-12199, 104 Phil. 562, 569 (1958). 97 Notor v. Daza, No. L-320, 76 Phil. 850 (1946). 98 G.R. No. 141524, September 14, 2005, 469 SCRA 633. 99 Id. at 644. 100 Jamero v. Melicor, G.R. No. 140929, May 26, 2005, 459 SCRA 113, 120. 101 Lopez v. Gloria, No. L-13846, 40 Phil 28 (1919). 102 Go v. Sunbanun, G.R. No. 168240, February 9, 2011, 642 SCRA 367, 370. 103 Buenaflor v. Court of Appeals, G.R. No. 142021, November 29, 2000, 346 SCRA 563, 567; Soriano v. Court of Appeals, G.R. No. 100525, May 25, 1993, 222 SCRA 545, 546-547. 104 Reyes v. Lim, G.R. No. 134241, August 11, 2003, 408 SCRA 560, 560-567. 105 De los Santos v. Vda. de Mangubat, G.R. No. 149508, October 10, 2007, 535 SCRA 411, 423. 106 Pelejo v. Court of Appeals, No. L-60800, August 31, 1982, 116 SCRA 406, 410. 107 Braga v. Millora, No. 1395, 3 Phil. 458 (1904). 108 G.R. No. 88709, February 11, 1992, 206 SCRA 127, 132. 109 Rollo, p. 137. 110 Translated, the phrase means: "He himself said it." It refers to an unsupported statement that rests solely on the authority of the individual asserting the statement. 111 Article 2217, Civil Code.

112

Crystal v. Bank of the Philippine Islands, G.R. No. 172428, November 28, 2008, 572 SCRA 697, 705. 113 Section 2, Corporation Code; Martinez v. Court of Appeals, G.R. No. 131673, September 10, 2004, 438 SCRA 130, 149; Consolidated Bank and Trust Corporation v. Court of Appeals, G.R. No. 114286, April 19, 2001, 356 SCRA 671, 682; Booc v. Bantuas, A.M. No. P-01-1464, March 13, 2001, 354 SCRA 279, 283. 114 Heirs of Justiva v. Gustilo, L-16396, January 31, 1963, 7 SCRA 72, 73; Firestone Tire & Rubber Co. of the Phil. v. Ines Chaves & Co., Ltd., No. L-17106, October 19, 1996, 18 SCRA 356, 358. 115 Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (1) When exemplary damages are awarded; (2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim; (6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmen's compensation and employer's liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered. In all cases, the attorney's fees and expenses of litigation must be reasonable. 116 See Reyes v. Yatco, No. L-11425, 100 Phil. 964 (1957); Tan Ti v. Alvear, No. 8228, 26 Phil. 566 (1914); Castueras, et al. v. Hon. Bayona, et al., No. L-13657, 106 Phil. 340 (1959). 117 Fores v. Miranda, No. L-12163, 105 Phil. 266 (1959). 118 Buduhan v. Pakurao, G.R. No. 168237, February 22, 2006, 483 SCRA 116, 127. 119 Gloria v. De Guzman, Jr., G.R. No. 116183, October 6, 1995, 249 SCRA 126, 136. 120 Policarpio v. Court of Appeals, G.R. No. 94563, March 5, 1991, 194 SCRA 729, 742. 121 Koa v. Court of Appeals, G.R. No. 84847, March 5, 1993, 219 SCRA 541, 549; Central Azucarera de Bais v. Court of Appeals, G.R. No. 87597, August 3, 1990, 188 SCRA 328, 340. 122 Ballesteros v. Abion, G.R. No. 143361, February 9, 2006, 482 SCRA 23. 123 G.R. No. 159357, April 28, 2004, 428 SCRA 283. 124 Id. at 309.

SECOND DIVISION G.R. No. 152318 April 16, 2009

DEUTSCHE GESELLSCHAFT FR TECHNISCHE ZUSAMMENARBEIT, also known as GERMAN AGENCY FOR TECHNICAL COOPERATION, (GTZ) HANS PETER PAULENZ and ANNE NICOLAY, Petitioners, vs. HON. COURT OF APPEALS, HON. ARIEL CADIENTE SANTOS, Labor Arbiter of the Arbitration Branch, National Labor Relations Commission, and BERNADETTE CARMELLA MAGTAAS, CAROLINA DIONCO, CHRISTOPHER RAMOS, MELVIN DELA PAZ, RANDY TAMAYO and EDGARDO RAMILLO, Respondents. DECISION TINGA, J.: On 7 September 1971, the governments of the Federal Republic of Germany and the Republic of the Philippines ratified an Agreement concerning Technical Cooperation (Agreement) in Bonn, capital of what was then West Germany. The Agreement affirmed the countries "common interest in promoting the technical and economic development of their States, and recogni[zed] the benefits to be derived by both States from closer technical co-operation," and allowed for the conclusion of "arrangements concerning individual projects of technical co-operation."1 While the Agreement provided for a limited term of effectivity of five (5) years, it nonetheless was stated that "[t]he Agreement shall be tacitly extended for successive periods of one year unless either of the two Contracting Parties denounces it in writing three months prior to its expiry," and that even upon the Agreements expiry, its provisions would "continue to apply to any projects agreed upon x x x until their completion."2 On 10 December 1999, the Philippine government, through then Foreign Affairs Secretary Domingo Siazon, and the German government, agreed to an Arrangement in furtherance of the 1971 Agreement. This Arrangement affirmed the common commitment of both governments to promote jointly a project called, Social Health InsuranceNetworking and Empowerment (SHINE), which was designed to "enable Philippine familiesespecially poor onesto maintain their health and secure health care of sustainable quality."3 It appears that SHINE had already been in existence even prior to the effectivity of the Arrangement, though the record does not indicate

Republic of the Philippines SUPREME COURT Manila

when exactly SHINE was constituted. Nonetheless, the Arrangement stated the various obligations of the Filipino and German governments. The relevant provisions of the Arrangement are reproduced as follows: 3. The Government of the Federal Republic of Germany shall make the following contributions to the project. It shall

- two cross-country vehicles, - ten computers with accessories, - office furnishings and equipment up to a total value of DM 310,000 (three hundred and ten thousand Deutsche Mark); (c) meet

(a) second - one expert in health economy, insurance and health systems for up to 48 expert/months, - one expert in system development for up to 10 expert/months - short-term experts to deal with special tasks for a total of up to 18 expert/months, - project assistants/guest students as required, who shall work on the project as part of their basic and further training and assume specific project tasks under the separately financed junior staff promotion programme of the Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ); (b) provide in situ - short-term experts to deal with diverse special tasks for a total of up to 27 expert/months, - five local experts in health economy, health insurance, community health systems, information technology, information systems, training and community mobilization for a total of up to 240 expert/months, - local and auxiliary personnel for a total of up to 120 months; (c) supply inputs, in particular xxx 4. The Government of the Republic of the Philippines shall make the following contributions to the project: It shall (a) provide the necessary Philippine experts for the project, in particular one project coordinator in the Philippine Health Insurance Corporation (Philhealth), at least three further experts and a sufficient number of administrative and auxiliary personnel, as well as health personnel in the pilot provinces and in the other project partners, in particular one responsible - the cost of accommodation for the seconded experts and their families in so far as this cost is not met by the seconded experts themselves, - the cost of official travel by the experts referred to in sub-paragraph (a) above within and outside the Republic of the Philippines, - the cost of seminars and courses, - the cost of transport and insurance to the project site of inputs to be supplied pursuant to sub-paragraph (c) above, excluding the charges and storage fees referred to in paragraph 4(d) below, - a proportion of the operating and administrative costs;

expert for each pilot province and for each association representing the various target groups, - release suitably qualified experts from their duties for attendance at the envisaged basic and further training activities; it shall only nominate such candidates as have given an undertaking to work on the project for at least five years after completing their training and shall ensure that these Philippine experts receive appropriate remuneration, - ensure that the project field offices have sufficient expendables, - make available the land and buildings required for the project; (b) assume an increasing proportion of the running and operating costs of the project; (c) afford the seconded experts any assistance they may require in carrying out the tasks assigned to them and place at their disposal all necessary records and documents; (d) guarantee that - the project is provided with an itemized budget of its own in order to ensure smooth continuation of the project. - the necessary legal and administrative framework is created for the project, - the project is coordinated in close cooperation with other national and international agencies relevant to implementation, - the inputs supplied for the project on behalf of the Government of the Federal Republic of Germany are exempted from the cost of licenses, harbour dues, import and export duties and other public charges and fees, as well as storage fees, or that any costs thereof are met, and that they are cleared by customs without delay. The aforementioned exemptions shall, at the request of the implementing

agencies also apply to inputs procured in the Republic of the Philippines, - the tasks of the seconded experts are taken over as soon as possible by Philippine experts, - examinations passed by Philippine nationals pursuant to this Arrangement are recognized in accordance with their respective standards and that the persons concerned are afforded such opportunities with regard to careers, appointments and advancement as are commensurate with their training.4 In the arraignment, both governments likewise named their respective implementing organizations for SHINE. The Philippines designated the Department of Health (DOH) and the Philippine Health Insurance Corporation (Philhealth) with the implementation of SHINE. For their part, the German government "charge[d] the Deustche Gesellschaft fr Technische Zusammenarbeit[5 ] (GTZ[6 ]) GmbH, Eschborn, with the implementation of its contributions."7 Private respondents were engaged as contract employees hired by GTZ to work for SHINE on various dates between December of 1998 to September of 1999. Bernadette Carmela Magtaas was hired as an "information systems manager and project officer of SHINE;"8 Carolina Dionco as a "Project Assistant of SHINE;"9 Christopher Ramos as "a project assistant and liason personnel of NHI related SHINE activities by GTZ;"10 Melvin Dela Paz and Randy Tamayo as programmers;11 and Edgardo Ramilo as "driver, messenger and multipurpose service man."12The employment contracts of all six private respondents all specified Dr. Rainer Tollkotter, identified as an adviser of GTZ, as the "employer." At the same time, all the contracts commonly provided that "[i]t is mutually agreed and understood that [Dr. Tollkotter, as employer] is a seconded GTZ expert who is hiring the Employee on behalf of GTZ and for a Philippine-German bilateral project named Social Health InsuranceNetworking and Empowerment (SHINE) which will end at a given time."13 In September of 1999, Anne Nicolay (Nicolay), a Belgian national, assumed the post of SHINE Project Manager. Disagreements eventually arose between Nicolay and private respondents in matters such as proposed salary adjustments, and the course Nicolay was taking in the implementation of SHINE different from her predecessors. The dispute culminated in a letter14 dated 8 June 2000, signed by the private

respondents, addressed to Nicolay, and copies furnished officials of the DOH, Philheath, and the director of the Manila office of GTZ. The letter raised several issues which private respondents claim had been brought up several times in the past, but have not been given appropriate response. It was claimed that SHINE under Nicolay had veered away from its original purpose to facilitate the development of social health insurance by shoring up the national health insurance program and strengthening local initiatives, as Nicolay had refused to support local partners and new initiatives on the premise that community and local government unit schemes were not sustainablea philosophy that supposedly betrayed Nicolays lack of understanding of the purpose of the project. Private respondents further alleged that as a result of Nicolays "new thrust, resources have been used inappropriately;" that the new management style was "not congruent with the original goals of the project;" that Nicolay herself suffered from "cultural insensitivity" that consequently failed to sustain healthy relations with SHINEs partners and staff. The letter ended with these ominous words: The issues that we [the private respondents] have stated here are very crucial to us in working for the project. We could no longer find any reason to stay with the project unless ALL of these issues be addressed immediately and appropriately.15 In response, Nicolay wrote each of the private respondents a letter dated 21 June 2000, all similarly worded except for their respective addressees. She informed private respondents that the "projects orientations and evolution" were decided in consensus with partner institutions, Philhealth and the DOH, and thus no longer subject to modifications. More pertinently, she stated: You have firmly and unequivocally stated in the last paragraph of your 8th June 2000 letter that you and the five other staff "could no longer find any reason to stay with the project unless ALL of these issues be addressed immediately and appropriately." Under the foregoing premises and circumstances, it is now imperative that I am to accept your resignation, which I expect to receive as soon as possible.16 Taken aback, private respondents replied with a common letter, clarifying that their earlier letter was not intended as a resignation letter, but one that merely intended to raise attention to what they perceived as vital issues.17Negotiations ensued between private respondents and Nicolay, but for naught. Each of the private respondents received a letter from Nicolay dated 11 July 2000, informing them of the pre-

termination of their contracts of employment on the grounds of "serious and gross insubordination, among others, resulting to loss of confidence and trust."18 On 21 August 2000, the private respondents filed a complaint for illegal dismissal with the NLRC. Named as respondents therein where GTZ, the Director of its Manila office Hans Peter Paulenz, its Assistant Project Manager Christian Jahn, and Nicolay. On 25 October 2005, GTZ, through counsel, filed a Motion to Dismiss, on the ground that the Labor Arbiter had no jurisdiction over the case, as its acts were undertaken in the discharge of the governmental functions and sovereign acts of the Government of the Federal Republic of Germany. This was opposed by private respondents with the arguments that GTZ had failed to secure a certification that it was immune from suit from the Department of Foreign Affairs, and that it was GTZ and not the German government which had implemented the SHINE Project and entered into the contracts of employment. On 27 November 2000, the Labor Arbiter issued an Order19 denying the Motion to Dismiss. The Order cited, among others, that GTZ was a private corporation which entered into an employment contract; and that GTZ had failed to secure from the DFA a certification as to its diplomatic status. On 7 February 2001, GTZ filed with the Labor Arbiter a "Reiterating Motion to Dismiss," again praying that the Motion to Dismiss be granted on the jurisdictional ground, and reprising the arguments for dismissal it had earlier raised.20 No action was taken by the Labor Arbiter on this new motion. Instead, on 15 October 2001, the Labor Arbiter rendered a Decision21 granting the complaint for illegal dismissal. The Decision concluded that respondents were dismissed without lawful cause, there being "a total lack of due process both substantive and procedural [sic]."22 GTZ was faulted for failing to observe the notice requirements in the labor law. The Decision likewise proceeded from the premise that GTZ had treated the letter dated 8 June 2000 as a resignation letter, and devoted some focus in debunking this theory. The Decision initially offered that it "need not discuss the jurisdictional aspect considering that the same had already been lengthily discussed in the Order de[n]ying respondents Motion to Dismiss."23 Nonetheless, it proceeded to discuss the jurisdictional aspect, in this wise: Under pain of being repetitious, the undersigned Labor Arbiter has jurisdiction to entertain the complaint on the following grounds:

Firstly, under the employment contract entered into between complainants and respondents, specifically Section 10 thereof, it provides that "contract partners agree that his contract shall be subject to the LAWS of the jurisdiction of the locality in which the service is performed." Secondly, respondent having entered into contract, they can no longer invoke the sovereignty of the Federal Republic of Germany. Lastly, it is imperative to be immune from suit, respondents should have secured from the Department of Foreign Affairs a certification of respondents diplomatic status and entitlement to diplomatic privileges including immunity from suits. Having failed in this regard, respondents cannot escape liability from the shelter of sovereign immunity.[sic]24 Notably, GTZ did not file a motion for reconsideration to the Labor Arbiters Decision or elevate said decision for appeal to the NLRC. Instead, GTZ opted to assail the decision by way of a special civil action for certiorari filed with the Court of Appeals.25 On 10 December 2001, the Court of Appeals promulgated a Resolution26 dismissing GTZs petition, finding that "judicial recourse at this stage of the case is uncalled for[,] [t]he appropriate remedy of the petitioners [being] an appeal to the NLRC x x x."27 A motion for reconsideration to this Resolution proved fruitless for GTZ.28 Thus, the present petition for review under Rule 45, assailing the decision and resolutions of the Court of Appeals and of the Labor Arbiter. GTZs arguments center on whether the Court of Appeals could have entertained its petition for certiorari despite its not having undertaken an appeal before the NLRC; and whether the complaint for illegal dismissal should have been dismissed for lack of jurisdiction on account of GTZs insistence that it enjoys immunity from suit. No special arguments are directed with respect to petitioners Hans Peter Paulenz and Anne Nicolay, respectively the then Director and the then Project Manager of GTZ in the Philippines; so we have to presume that the arguments raised in behalf of GTZs alleged immunity from suit extend to them as well. The Court required the Office of the Solicitor General (OSG) to file a Comment on the petition. In its Comment dated 7 November 2005, the OSG took the side of GTZ, with the prayer that the petition be granted on the ground that GTZ was immune from suit, citing in particular its assigned functions in implementing the SHINE

programa joint undertaking of the Philippine and German governments which was neither proprietary nor commercial in nature. The Court of Appeals had premised the dismissal of GTZs petition on its procedural misstep in bypassing an appeal to NLRC and challenging the Labor Arbiters Decision directly with the appellate court by way of a Rule 65 petition. In dismissing the petition, the Court of Appeals relied on our ruling in Air Service Cooperative v. Court of Appeals.29 The central issue in that case was whether a decision of a Labor Arbiter rendered without jurisdiction over the subject matter may be annulled in a petition before a Regional Trial Court. That case may be differentiated from the present case, since the Regional Trial Court does not have original or appellate jurisdiction to review a decision rendered by a Labor Arbiter. In contrast, there is no doubt, as affirmed by jurisprudence, that the Court of Appeals has jurisdiction to review, by way of its original certiorari jurisdiction, decisions ruling on complaints for illegal dismissal. Nonetheless, the Court of Appeals is correct in pronouncing the general rule that the proper recourse from the decision of the Labor Arbiter is to first appeal the same to the NLRC. Air Services is in fact clearly detrimental to petitioners position in one regard. The Court therein noted that on account of the failure to correctly appeal the decision of the Labor Arbiter to the NLRC, such judgment consequently became final and executory.30 GTZ goes as far as to "request" that the Court re-examine Air Services, a suggestion that is needlessly improvident under the circumstances. Air Services affirms doctrines grounded in sound procedural rules that have allowed for the considered and orderly disposition of labor cases. The OSG points out, citing Heirs of Mayor Nemencio Galvez v. Court of Appeals,31 that even when appeal is available, the Court has nonetheless allowed a writ of certiorari when the orders of the lower court were issued either in excess of or without jurisdiction. Indeed, the Court has ruled before that the failure to employ available intermediate recourses, such as a motion for reconsideration, is not a fatal infirmity if the ruling assailed is a patent nullity. This approach suggested by the OSG allows the Court to inquire directly into what is the main issuewhether GTZ enjoys immunity from suit. The arguments raised by GTZ and the 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.,32 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.33 Beyond dispute is the tenability of the comment points 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 Federal Republics 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,34 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 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 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. The following lucid discussion from Justice Isagani Cruz is pertinent: Where suit is filed not against the government itself or its officials but against one of its entities, it must be ascertained whether or not the State, as the principal that may ultimately be held liable, has given its consent to be sued. This ascertainment will depend in the first instance on whether the government agency impleaded is incorporated or unincorporated. An incorporated agency has a charter of its own that invests it with a separate juridical personality, like the Social Security System, the University of the Philippines, and the City of Manila. By contrast, the unincorporated agency is so called because it has no separate juridical personality but is merged in the general machinery of the government, like the Department of Justice, the Bureau of Mines and the Government Printing Office. If the agency is incorporated, the test of its suability is found in its charter. The simple rule is that it is suable if its charter says so, and this is true regardless of the functions it is performing. 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 provides that they can sue and be sued.35 State immunity from suit may be waived by general or special law.36 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. These include the National Irrigation Administration,37 the former Central Bank,38 and the National Power Corporation.39 In SSS v. Court of Appeals,40 the Court through Justice MelencioHerrera explained that by virtue of an express provision in its charter allowing it to sue and be sued, the Social Security System did not enjoy immunity from suit: We come now to the amendability of the SSS to judicial action and legal responsibility for its acts. To our minds, there should be no question on this score considering that the SSS is a juridical entity with a personality of its own. It has corporate powers separate and distinct from the Government. SSS' own organic act

specifically provides that it can sue and be sued in Court. These words "sue and be sued" embrace all civil process incident to a legal action. So that, even assuming that the SSS, as it claims, enjoys immunity from suit as an entity performing governmental functions, by virtue of the explicit provision of the aforecited enabling law, the Government must be deemed to have waived immunity in respect of the SSS, although it does not thereby concede its liability. That statutory law has given to the private citizen a remedy for the enforcement and protection of his rights. The SSS thereby has been required to submit to the jurisdiction of the Courts, subject to its right to interpose any lawful defense. Whether the SSS performs governmental or proprietary functions thus becomes unnecessary to belabor. For by that waiver, a private citizen may bring a suit against it for varied objectives, such as, in this case, to obtain compensation in damages arising from contract, and even for tort. A recent case squarely in point anent the principle, involving the National Power Corporation, is that of Rayo v. Court of First Instance of Bulacan, 110 SCRA 457 (1981), wherein this Court, speaking through Mr. Justice Vicente Abad Santos, ruled: "It is not necessary to write an extended dissertation on whether or not the NPC performs a governmental function with respect to the management and operation of the Angat Dam. It is sufficient to say that the government has organized a private corporation, put money in it and has allowed it to sue and be sued in any court under its charter. (R.A. No. 6395, Sec. 3[d]). As a government, owned and controlled corporation, it has a personality of its own, distinct and separate from that of the Government. Moreover, the charter provision that the NPC can 'sue and be sued in any court' is without qualification on the cause of action and accordingly it can include a tort claim such as the one instituted by the petitioners."41 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, governmental in nature as 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."42 The Labor Arbiter accepted that claim in his Order denying the Motion to Dismiss,43 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."44 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.45 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 owned by the German state or by private interests, whether it has juridical personality independent of the German government or none at all. GTZ itself provides a more helpful clue, inadvertently, through its own official Internet website.46 In the "Corporate Profile" section of the English language version of its site, GTZ describes itself as follows: As an international cooperation enterprise for sustainable development with worldwide operations, the federally owned Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ) GmbH supports the German Government in achieving its development-policy objectives. It provides viable, forward-looking solutions for political, economic, ecological and social development in a globalised world. Working under difficult conditions, GTZ promotes complex reforms and change processes. Its corporate objective is to improve peoples living conditions on a sustainable basis. GTZ is a federal enterprise based in Eschborn near Frankfurt am Main. It was founded in 1975 as a company under private law. The German Federal Ministry for Economic Cooperation and Development (BMZ) is its major client. The company

also operates on behalf of other German ministries, the governments of other countries and international clients, such as the European Commission, the United Nations and the World Bank, as well as on behalf of private enterprises. GTZ works on a public-benefit basis. All surpluses generated are channeled [sic] back into its own international cooperation projects for sustainable development.47 GTZs own website elicits that petitioner is "federally owned," a "federal enterprise," and "founded in 1975 as a company under private law." GTZ clearly has a very meaningful relationship with the Federal Republic of Germany, which apparently owns it. At the same time, it appears that GTZ was actually organized not through a legislative public charter, but under private law, in the same way that Philippine corporations can be organized under the Corporation Code even if fully owned by the Philippine government. This self-description of GTZ in its own official website gives further cause for pause in adopting petitioners argument that GTZ is entitled to immunity from suit because it is "an implementing agency." The above-quoted statement does not dispute the characterization of GTZ as an "implementing agency of the Federal Republic of Germany," yet it bolsters the notion that as a company organized under private law, it has a legal personality independent of that of the Federal Republic of Germany. The Federal Republic of Germany, in its own official website, also makes reference to GTZ and describes it in this manner: x x x Going by the principle of "sustainable development," the German Technical Cooperation (Deutsche Gesellschaft fr Technische Zusammenarbeit GmbH, GTZ) takes on non-profit projects in international "technical cooperation." The GTZ is a private company owned by the Federal Republic of Germany.49 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."50
48

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,51 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. This absence of basis in fact leads to another important point, alluded to by the Labor Arbiter in his rulings. Our ruling in Holy See v. Del Rosario52 provided a template on how a foreign entity desiring to invoke State immunity from suit could duly prove such immunity before our local courts. The principles enunciated in that case were derived from public international law. We stated then: 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.53 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."54 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.1avvphi1

Holy See made reference to Baer v. Tizon,55 and that in the said case, the United States Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to make a "suggestion" to the trial court, accomplished by way of a Manifestation and Memorandum, that the petitioner therein enjoyed immunity as the Commander of the Subic Bay Naval Base. Such circumstance is actually not narrated in the text of Baer itself and was likely supplied in Holy See because its author, Justice Camilio Quiason, had appeared as the Solicitor in behalf of the OSG in Baer. Nonetheless, as narrated in Holy See, it was the Secretary of Foreign Affairs which directed the OSG to intervene in behalf of the United States government in the Baer case, and such fact is manifest enough of the endorsement by the Foreign Office. We do not find a similar circumstance that bears here. The Court is thus holds and so rules that GTZ consistently has been unable to establish with satisfaction that it enjoys the immunity from suit generally enjoyed by its parent country, the Federal Republic of Germany. Consequently, both the Labor Arbiter and the Court of Appeals acted within proper bounds when they refused to acknowledge that GTZ is so immune by dismissing the complaint against it. Our finding has additional ramifications on the failure of GTZ to properly appeal the Labor Arbiters decision to the NLRC. As pointed out by the OSG, the direct recourse to the Court of Appeals while bypassing the NLRC could have been sanctioned had the Labor Arbiters decision been a "patent nullity." Since the Labor Arbiter acted properly in deciding the complaint, notwithstanding GTZs claim of immunity, we cannot see how the decision could have translated into a "patent nullity." As a result, there was no basis for petitioners in foregoing the appeal to the NLRC by filing directly with the Court of Appeals the petition for certiorari. It then follows that the Court of Appeals acted correctly in dismissing the petition on that ground. As a further consequence, since petitioners failed to perfect an appeal from the Labor Arbiters Decision, the same has long become final and executory. All other questions related to this case, such as whether or not private respondents were illegally dismissed, are no longer susceptible to review, respecting as we do the finality of the Labor Arbiters Decision. A final note. This decision should not be seen as deviation from the more common methodology employed in ascertaining whether a party enjoys State immunity from suit, one which focuses on the particular functions exercised by the party and determines whether these are proprietary or sovereign in nature. The nature of the acts performed by the entity invoking immunity remains the most important

barometer for testing whether the privilege of State immunity from suit should apply. At the same time, our Constitution stipulates that a State immunity from suit is conditional on its withholding of consent; hence, the laws and circumstances pertaining to the creation and legal personality of an instrumentality or agency invoking immunity remain relevant. Consent to be sued, as exhibited in this decision, is often conferred by the very same statute or general law creating the instrumentality or agency. WHEREFORE, the petition is DENIED. No pronouncement as to costs. SO ORDERED. DANTE O. TINGA Associate Justice
Footnotes
1 2

26

Rollo, p. 51. Id. at 56-57. 3 Id. at 59. 4 Id. at 59-62. 5 See id. at 2. Also known as the German Agency for Technical Cooperation. 6 "GTZ" is apparently the acronym by which petitioner is commonly identified; we adopt the same for purposes of brevity. 7 Rollo, p. 62. 8 Id. at 64-67. 9 Id. at 68-71. 10 Id. at 72-75. 11 Id. at 76-79, 80-83. 12 Id. at 84-87. 13 See id. at 64, 68, 72, 76, 80, 84. 14 Rollo, pp. 156-158. 15 Id. at 157. Emphasis in the original. 16 Id. at 159, 160, 161, 162, 163 & 164. Emphasis not ours. 17 Id. at 165. 18 Id. at 168-173. 19 See id. at 204-205. Order penned by Labor Arbiter Ariel Cadiente Santos, the Labor Arbiter who heard and eventually decided the complaint for illegal dismissal. 20 See id. at 206-211. 21 Id. at 212-223. 22 Id. 23 Id. at 219. 24 Id. at 220-221. 25 Docketed as CA-G.R. SP No. 67794.

Rollo, pp. 48-49. Resolution penned by Associate Justice Salvador T. Valdez, Jr. of the Court of Appeals Former Fifteenth Division, and concurred in by Associate Justices Mercedes Gozo-Dadole and Sergio L. Pestao. 27 Id. at 45. 28 The Resolution denying the Motion for Reconsideration was promulgated on 4 March 2002. 29 354 Phil. 905 (1998). 30 Id. at 916-917. 31 325 Phil. 1028 (1996). 32 G.R. No. 101949, 1 December 1994, 238 SCRA 524 33 Id. at 536. 34 See Syquia v. Almeda Lopez, 84 Phil. 312 (1949). 35 I. Cruz, Philippine Political Law (2002 ed.) at 43. Emphasis supplied. See also Metran v. Paredes, 79 Phil. 819 (1948). 36 See Traders Royal Bank v. Intermediate Appellate Court, G.R. No. 68514, 17 December 1990, 192 SCRA 305, 310. 37 See Fontanilla v. Maliaman, G.R. Nos. 55963 & 61045, 27 February 1991, 194 SCRA 486. 38 See Arcega v. Court of Appeals, 160 Phil. 919 (1975); Olizo v. Central Bank, 120 Phil. 355 (1964). 39 See Rayo v. CFI of Bulacan, 196 Phil. 572 (1981). 40 See SSS v. Court of Appeals, 205 Phil. 609 (1983). 41 Id. at 624. 42 See rollo, p. 110. 43 Id. at 204. 44 Id. at 278. 45 Id. at 317. 46 German language version at http://www.gtz.de/de/index.htm, while the English language version is athttp://www.gtz.de/en/ (Last visited, 23 March 2009) 47 "GTZ. Corporate Profile," at http://www.gtz.de/en/unternehmen/1698.htm (Last visited, 23 March 2009). 48 http://www.deutschland.de (Last visited, 23 March 2009). 49 "Das Deutschland Portal > German Technical Cooperation", at http://www.deutschland.de/ link.php?lang=2&category2=249&link_id=391 (Last visited, 23 March 2009, emphasis supplied). 50 See Corporation Code, Sec. 36. 51 Board of Commissioners v. Dela Rosa, G.R. Nos. 95122-23, 31 May 1991, 197 SCRA 854; Miciano v. Brimo, 50 Phil. 867 (1924); Lim and Lim v. Collector of Customs, 36 Phil. 472; Yam Ka Lim v. Collector of Customs, 30 Phil. 46 (1915). 52 Supra note 38. 53 Id. at 532. 54 See rollo, pp. 204, 221. 55 156 Phil. 1 (1974).

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 185572 February 7, 2012

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 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

CHINA NATIONAL MACHINERY & EQUIPMENT CORP. (GROUP), Petitioner, vs. HON. CESAR D. SANTAMARIA, in his official capacity as Presiding Judge of Branch 145, Regional Trial Court of Makati City, HERMINIO HARRY L. ROQUE, JR., JOEL R. BUTUYAN, ROGER R. RAYEL, ROMEL R. BAGARES, CHRISTOPHER FRANCISCO C. BOLASTIG, LEAGUE OF URBAN POOR FOR ACTION (LUPA), KILUSAN NG MARALITA SA MEYCAUAYAN (KMM-LUPA CHAPTER), DANILO M. CALDERON, VICENTE C. ALBAN, MERLYN M. VAAL, LOLITA S. QUINONES, RICARDO D. LANOZO, JR., CONCHITA G. GOZO, MA. TERESA D. ZEPEDA, JOSEFINA A. LANOZO, and SERGIO C. LEGASPI, JR., KALIPUNAN NG DAMAYANG MAHIHIRAP (KADAMAY), EDY CLERIGO, RAMMIL DINGAL, NELSON B. TERRADO, CARMEN DEUNIDA, and EDUARDO LEGSON, Respondents. 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

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 2008.18Thus, 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.20Subsequently, 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. 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

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 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;

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;

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 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: 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. xxx xxx

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.) (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,38it 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. 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. CA40 must be examined. In Deutsche Gesellschaft, Germany and 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 Federal Republics 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 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

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 owned by the German state or by

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

private interests, whether it has juridical personality independent of the German government or none at all. xxx xxx xxx

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

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. InWorld 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.) 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.47Surely, 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. 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, 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.
48

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. In Bayan 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.52Thus, 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. 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. MARIA LOURDES P. A. SERENO

Footnotes
1

China National Machinery & Equipment Corporation (Group) v. Hon. Cesar D. Santamaria, et al.

Petition, rollo, Vol. I, p. 25; Memorandum of Understanding dated 14 September 2002, rollo, Vol. I, pp. 400-406. 3 Petition, rollo, Vol. I, pp. 25-26; Memorandum of Understanding dated 30 August 2003, rollo, Vol. I, pp. 308-310, 407-409. 4 Id. 5 Memorandum of Understanding dated 30 August 2003, rollo, Vol. I, pp. 308-310, 407-409. 6 Petition, rollo, Vol. I, p. 26; Letter dated 1 October 2003, rollo, Vol. I, pp. 311-312. 7 Contract Agreement, rollo, Vol. I, pp. 126-130, 412-414. 8 Memorandum of Agreement dated December 2003, rollo, Vol. I, pp. 198-201. 9 Loan Agreement, rollo, Vol. I, pp. 242-282. 10 Id. 11 Complaint, rollo, Vol. I, pp. 102-125. 12 Id. 13 Order dated 17 March 2006, rollo, Vol. I, pp. 290-291. 14 Urgent Motion for Reconsideration, rollo, Vol. I, pp. 292-307 15 Motion to Dismiss, rollo, Vol. I, pp. 324-369. 16 Omnibus Order dated 15 May 2007, rollo, Vol. I, pp. 648-658. 17 Motion for Reconsideration, rollo, Vol. I, pp. 663-695. 18 Order dated 10 March 2008, rollo, Vol. I, p. 737. 19 Petition for Certiorari, rollo, Vol. I, pp. 738-792. 20 CA Decision, rollo, Vol. I, pp. 81-99. 21 Motion for Reconsideration, rollo, Vol. I, pp. 971-1001. 22 CA Resolution, rollo, Vol. I, pp. 100-102. 23 Petition, rollo, Vol. I, pp. 27-28. 24 G.R. No. 101949, 1 December 1994, 238 SCRA 524, 535. 25 G.R. No. 108813, 15 December 1994, 239 SCRA 224. 26 Id. at 231-232. 27 221 Phil. 179 (1985). 28 Id. at 184. 29 Contract Agreement, rollo, Vol. I, pp. 127, 413. 30 Supra note 2. 31 Supra note 6. 32 Supra note 9. 33 Supra note 2, at 400-402. 34 Supra note 6. 35 Supra note 8. 36 Supra note 9, at 260-261. 37 Id. at 268-269. 38 Petition, rollo, Vol. I, p. 47. 39 222 Phil 381, 384 (1985). 40 G.R. No. 152318, 16 April 2009, 585 SCRA 150. 41 Id. at 165-173. 42 Supra note 24. 43 Id. at 531-533. 44 330 Phil 573 (1996). 45 Id. at 587-588.

46 47

Supra note 40, at 174-175. Petition, rollo, Vol. I, p. 30. 48 Conditions of Contract, rollo, Vol. I, pp. 202-241, 415-455. 49 Supra note 7. Clause 1.1 of the Contract Agreement provides: The following documents shall constitute the Contract between the Employer and the Contractor, and each shall be read and construed as an integral part of the Contract: (1) Contract Agreement (2) Amendments, if any to the Contract documents agreed by the Parties (3) Conditions of Contract (4) Technical Documents (5) Preliminary Engineering Design including Bill of Quantities (6) Technical Specification 50 G.R. No. 159618, 1 February 2011, 641 SCRA 244, 258-259. 51 Supra note 7. 52 Id. 53 Supra note 6. 54 Supra note 48.

x-------------------------x G.R. No. 169659 April 20, 2006

BAYAN MUNA represented by DR. REYNALDO LESACA, JR., Rep. 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, vs. EDUARDO ERMITA, in his capacity as Executive Secretary and alter-ego of President Gloria Macapagal-Arroyo, Respondent. x-------------------------x G.R. No. 169660 April 20, 2006

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 169777* April 20, 2006

FRANCISCO I. CHAVEZ, Petitioner, vs. 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

SENATE OF THE PHILIPPINES, represented by FRANKLIN M. DRILON, in his capacity as Senate President, JUAN M. FLAVIER, in his capacity as Senate President Pro Tempore, FRANCIS N. PANGILINAN, in his capacity as Majority Leader, AQUILINO Q. PIMENTEL, JR., in his capacity as Minority Leader, SENATORS RODOLFO G. BIAZON, "COMPANERA" PIA S. CAYETANO, JINGGOY EJERCITO ESTRADA, LUISA "LOI" EJERCITO ESTRADA, JUAN PONCE ENRILE, RICHARD J. GORDON, PANFILO M. LACSON, ALFREDO S.LIM, M. A. MADRIGAL, SERGIO OSMENA III, RALPH G. RECTO, and MAR ROXAS,Petitioners, vs. EDUARDO R. ERMITA, in his capacity as Executive Secretary and alter-ego of President Gloria Macapagal-Arroyo, and anyone acting in his stead and in behalf of the President of the Philippines,Respondents.

G.R. No. 169667

April 20, 2006

ALTERNATIVE LAW GROUPS, INC. (ALG), Petitioner, vs. HON. EDUARDO R. ERMITA, in his capacity as Executive Secretary, Respondent. x-------------------------x G.R. No. 169834 April 20, 2006

PDP- LABAN, Petitioner, vs. EXECUTIVE SECRETARY EDUARDO R. ERMITA, Respondent. x-------------------------x G.R. No. 171246 April 20, 2006

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 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 invitations2 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

JOSE ANSELMO I. CADIZ, FELICIANO M. BAUTISTA, ROMULO R. RIVERA, JOSE AMOR AMORANDO, ALICIA A. RISOS-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, vs. HON. EXECUTIVE SECRETARY EDUARDO R. ERMITA, Respondent. 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

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 letter3 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 letter4 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, wrote5 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 letter6 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. 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: 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); 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). 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); Discussion in close-door Cabinet meetings (Chavez v. Presidential Commission on Good Government, G.R. No. 130716, 9 December 1998);

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: Senior officials of executive departments who in the judgment of the department heads are covered by the executive privilege; 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; 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; Senior national security officials who in the judgment of the National Security Adviser are covered by the executive privilege; and 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 letter8 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 letter9 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. 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 letter14 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 letter15 dated February 8, 2006, that "[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 Management18 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. Gonzalez20 and Department of Interior and Local Government Undersecretary Marius P. Corpus21 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. 16966023 and G.R. No. 16977724 filed their memoranda on March 7, 2006, while those in G.R. No. 16966725 and G.R. No. 16983426 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 memorandum27 was granted, subsequently filed a manifestation28 dated March 14, 2006 that it 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. 2130 Art. VI, Sec. 2231 Art. VI, Sec. 132 Art. XI, Sec. 133

Art. III, Sec. 734 Art. III, Sec. 435 Art. XIII, Sec. 16 36 Art. II, Sec. 2837 Respondents Executive Secretary Ermita et al., on the other hand, pray in their consolidated memorandum38 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 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. Ongpin42 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 legislation45 is not disputed. E.O. 464, however, allegedly stifles the ability of the members of Congress to access information that is crucial to lawmaking.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 welldefined 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 rights51 and to the maintenance of the balance of power among the three branches of the government through the principle of checks and balances.52 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. 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. 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 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 diplomatic secrets 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 necessary in intragovernmental 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.77Almonte used the term in reference to the same privilege subject of Nixon. 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 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 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.|avvphi|.net

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 abovequoted 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 Constitution86 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. 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 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

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 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. 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. Vasquez94 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 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 Energy99 similarly emphasizes that "an agency must provide precise and certain reasons for preserving the confidentiality of requested information." Black v. Sheraton Corp. of America100 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 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 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. 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. 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. CONCHITA CARPIO MORALES Associate Justice
Footnotes
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Henceforth, in consolidated petitions which assail the validity or constitutionality of an issuance of a government official or agency, the petitioner which is the most directly affected by the issuance shall be first in the order of enumeration of the titles of the petitions irrespective of their docket numbers or dates of filing. ** On Leave. 1 Hamilton, The Federalist No. 70. 2 Annexes "J-2" to "J-7," rollo (G.R. No. 169777), pp. 72-77. 3 Annex "G," id. at 58. 4 Annex "B," id. at 52. 5 Annex "C," id. at 53. 6 Annex "D," id. at 54-55. 7 Annex "A," id. at 48-51. 8 Annex "F," id. at 57. 9 Annex "H," id. at 59. 10 Rollo (G.R. No. 169777), p. 379. 11 Ibid. 12 The petitioner names the following organizations as members: Albert Schweitzer Association, Philippines, Inc. (ASAP), Alternative Law Research and Development Center, Inc. (ALTERLAW), Ateneo Human Rights Center (AHRC), Balay Alternative Legal Advocates for Development in Mindanaw, Inc (BALAOD Mindanaw), Childrens Legal Bureau (CLB), Inc., Environment Legal Assistance Center (ELAC), Free Rehabilitation, Economic, Education and Legal Assistance Volunteers Association, Inc. (FREELAVA), Kaisahan Tungo sa Kaunlaran ng Kanayunan at Repormang Pansakahan (KAISAHAN), Legal Rights and Natural Resources Center-Kasama sa Kalikasan/Friends of the EarthPhilippines, Inc. (LRC-LSK/FOEI-Phils.), Paglilingkod Batas Pangkapatiran Foundation (PBPF), Participatory Research Organization of Communities and Education Towards

Struggle for Self-Reliance (PROCESS) Foundation-PANAY, Inc., Pilipina Legal Resources Center (PLRC), Sentro ng Alternatibong Lingap Panligal (SALIGAN), Tanggapang Panligal ng Katutubong Pilipino (PANLIPI), Tanggol Kalikasan (TK), Womens Legal Bureau (WLB), and Womens Legal Education, Advocacy and Defense Foundation, Inc. (WomenLEAD). 13 Rollo (G.R. No. 169667), p. 22. 14 Annex "H," id. at 460-461. 15 Annex "H-1," id. at 462. 16 Rollo (G.R. No. 169777), pp. 383-384. 17 Annex "K," rollo (G.R. No. 169777), p. 466. 18 Annex "J," id. at 465. 19 Annex "M," id. at 468. 20 Annex "N," id. at 469. 21 Annex "O," id. at 470. 22 Court En Banc Resolution dated February 21, 2006, rollo (G.R. No. 169659), pp. 370-372. 23 Rollo (G.R. No. 169660), pp. 339-370. 24 Rollo (G.R. No. 169777), pp. 373-439. 25 Rollo (G.R. No. 169667), pp. 388-426. 26 Rollo (G.R. No. 169834), pp. 211-240. 27 Rollo (G.R. No. 169659), pp. 419-421. 28 id. at 469-471. 29 Court En Banc Resolution dated March 21, 2006, rollo (G.R. No. 169659), pp. 570-572. 30 Sec. 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. 31 Sec. 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 and the President so states in writing, the appearance shall be conducted in executive session. 32 Sec. 1. The legislative power shall be vested in the Congress of the Philippines which shall consist of a Senate and a House of Representatives, except to the extent reserved to the people by the provision on initiative and referendum. 1avvphil.net 33 Sec. 1. Public office is a public trust. Public officers and employees must at all times be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead modest lives. 34 Sec. 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law.

35

Sec. 4. No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances. 36 Sec. 16. The right of the people and their organizations to effective and reasonable participation at all levels of social, political, and economic decision-making shall not be abridged. The State shall, by law, facilitate the establishment of adequate consultation mechanisms. 37 Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest. 38 Rollo (G.R. No. 169777), pp. 524-569. 39 Francisco v. House of Representatives, G.R. No. 160261, November 10, 2003, 415 SCRA 44, 133. 40 Citing Lujan v. Defenders of Wildlife, 504 US 555, 119 L. Ed.2d 351 (1992), rollo (G.R. No. 169777), p. 116. 41 Citing Lim v. Hon. Exec. Sec., 430 Phil. 555 (2002), rollo (G.R. No. 169777), p. 116. 42 G.R. No. 67752, April 10, 1989, 171 SCRA 657. 43 G.R. No. 78716, September 22, 1987 (res). 44 Rollo (G.R. No. 169777), p. 117. 45 Id. at 279. 46 Ibid. 47 Pimentel Jr., v. Executive Secretary, G.R. No. 158088, July 6, 2005, 462 SCRA 623, 631632. 48 Section 2 of The Party-List System Act (Republic Act 7941) reads: SEC. 2. Declaration of Policy. The State shall promote proportional representation in the election of representatives to the House of Representatives through a party-list system of registered national, regional and sectoral parties or organizations or coalitions thereof, which will enable Filipino citizens belonging to marginalized and underrepresented sectors, organizations and parties, and who lack well-defined political constituencies but who could contribute to the formulation and enactment of appropriate legislation that will benefit the nation as a whole, to become members of the House of Representatives. Towards this end, the State shall develop and guarantee a full, free and open party system in order to attain the broadest possible representation of party, sectoral or group interests in the House of Representatives by enhancing their chances to compete for and win seats in the legislature, and shall provide the simplest scheme possible. 49 Chavez v. PCGG, G.R. No. 130716, December 9, 1998, 299 SCRA 744 , 761 (1998). 50 IBP Board of Governors Resolution No. XVII-2005-18, rollo (G.R. No 171246), p. 28. 51 Rollo (G.R. No. 169667), p. 3. 52 Rollo (G.R. No. 169660), p. 5. 53 Supra note 39 at 136. 54 Francisco, Jr. v. House of Representatives, supra note 39 at 139. 55 Lozada v. Commission on Elections, 205 Phil. 283, 287 (1983). 56 Rollo (G.R. No. 169659), p. 79. 57 Rollo (G.R. No. 169659), pp. 80-81. 58 87 Phil. 29 (1950). 59 Supra at 45, citing McGrain v. Daugherty 273 US 135, 47 S. Ct. 319, 71 L.Ed. 580, 50 A.L.R. 1 (1927).

60 61

Id. at 46. G.R. 89914, Nov. 20, 1991, 203 SCRA 767. 62 "WHEREAS, pursuant to the rule on executive privilege, the President and those who assist her must be free to explore the alternatives in the process of shaping policies and making decisions since this is fundamental to the operation of the government and is rooted in the separation of powers under the Constitution; xxxx "WHEREAS, recent events, particularly with respect to the invitation of a member of the Cabinet by the Senate as well as various heads of offices, civilian and military, have highlighted the need to ensure the observance of the principle of separation of powers, adherence to the rule on executive privilege and respect for the rights of persons appearing in such inquiries in aid of legislation and due regard to constitutional mandate; x x x" 63 II Record, Constitutional Commission 150-151 (July 23, 1986). 64 B. Schwartz, Executive Privilege and Congressional Investigatory Power 47 Cal. L. Rev. 3. 65 M. Rozell, Executive Privilege and the Modern Presidents: In Nixons Shadow (83 Minn. L. Rev. 1069). 66 P. Shane & H. Bruff, Separation of Powers: Law Cases and Materials 292 (1996). 67 Id. at 293. 68 I L.Tribe, American Constitutional Law 770-1 (3rd ed., 2000). 69 121 F.3d 729, 326 U.S. App. D.C. 276. 70 Blacks Law Dictionary 569-570 (6th ed., 1991) citing 5 U.S.C.A. Sec. 552(b)(1); Black v. Sheraton Corp. of America, D.C.D.C., 371 F.Supp. 97, 100. 71 I L.Tribe, supra note 68 at 771. 72 418 U.S. 683 (1974) 73 In re Sealed Case 121 F.3d 729, 326 U.S.App.D.C. 276 (1997) states: "It appears that the courts have been drawn into executive-congressional privilege disputes over access to information on only three recent occasions. These were: Unites States v. AT&T, 551 F.2d 384 (D.C. Cir.1976), appeal after remand, 567 F.2d 121 (D.C.Cir.1977); Senate Select Committee on Presidential Campaign Activities v. Nixon (Senate Committee), 498 F.2d 725 (D.C. Cir. 1974); United States v. House of Representatives, 556 F. Supp. 150 (D.D.C. 1983)"; Vide R. Iraola, Congressional Oversight, Executive Privilege, and Requests for Information Relating to Federal Criminal Investigations and Prosecutions (87 Iowa L. Rev. 1559): "The Supreme Court has yet to rule on a dispute over information requested by Congress where executive privilege has been asserted; in the past twenty-five years, there have been only three reported cases dealing with this issue." 74 J. Chaper & R. Fallon, Jr., Constitutional Law: Cases Comments Questions 197 (9th ed., 2001). 75 Senate Select Committee on Presidential Campaign Activities v. Nixon 498 F.2d 725, 162 U.S.App.D.C.183 (May 23, 1974). 76 N. Redlich & B. Schwartz, Constitutional Law 333 (3rd ed. ,1996) states in Note 24: "Now that the Supreme Court decision has specifically recognized a "privilege of confidentiality of Presidential communications," the Select Committee decision appears even stronger. If the need of the Watergate Committee for evidence was not enough before the Supreme Court recognized executive privilege, the same would surely have been true after the recognition. And, if the demand of the Watergate Committee, engaged in a specific investigation of such

importance, was not enough to outweigh the nondisclosure claim, it is hard to see what Congressional demand will fare better when met by an assertion of privilege." 77 314 Phil. 150 (1995). 78 Comm. Almonte v. Hon. Vasquez, 314 Phil. 150, 166 (1995) states: "To put this case in perspective it should be stated at the outset that it does not concern a demand by a citizen for information under the freedom of information guarantee of the Constitution." 79 360 Phil. 133 (1998). 80 Chavez v. PCGG, 360 Phil. 133, 160 (1998). 81 433 Phil. 506 (2002). 82 Chavez v. Public Estates Authority, 433 Phil. 506, 534 (2002). 83 II Record, Constitutional Commission 199 (July 24, 1986). 84 II Record, Constitutional Commission 900-1 (October 12, 1986). 85 H. Mendoza & A. Lim, The New Constitution 177 (1974). 86 Constitution (1973), Art. VIII, Sec. 12(1). 87 R. Martin, The New Constitution of the Philippines 394 (1973). 88 II Record, Constitutional Commission 133 (July 23, 1986). 89 Schwartz, supra at 11-12. 90 Supra. 91 Supra note 82 at 189. 92 345 U.S. 1 , 73 S. Ct. 528, 97 L.Ed. 727, 32 A.L.R.2d 382 (1953). 93 Vide Tribe, supra note 68. 94 Supra note 78. 95 Supra note 75. 96 403 F.Supp. 1000, 20 Fed,R.Serv.2d 1382 (1975). 97 43 F.R.D. 181 (1967). 98 Ibid., citation omitted. 99 520 F.Supp.414, 32 Fed.R.Serv.2d 913 (1981). 100 371 F.Supp.97, 18 Fed.R.Serv.2d 563 (1974). 101 Ibid., citations omitted. 102 364 U.S. 372, 81 S.Ct. 138, 5 L.Ed.2d 136 (1960). 103 U.S. v. Reynolds, supra note 85. 104 341 U.S. 479, 71 S.Ct. 814, 95 L.Ed. 1118 (1951). 105 In re Sealed Case, supra note 69. 106 Blacks Law Dictionary, supra note 70 at 569. 107 G.R. No. 74930, February 13, 1989, 170 SCRA 256. 108 G.R. No. L-63915, December 29, 1986, 146 SCRA 446, 453. 109 Hoffman, Governmental Secrecy and the Founding Fathers: A Study in Constitutional Controls (1981) 13.

EN BANC G.R. No. 167798 April 19, 2006

KILUSANG MAYO UNO, NATIONAL FEDERATION OF LABOR UNIONSKILUSANG MAYO UNO (NAFLU-KMU), JOSELITO V. USTAREZ, EMILIA P. DAPULANG, SALVADOR T. CARRANZA, MARTIN T. CUSTODIO, JR. and ROQUE M. TAN, Petitioners, vs. THE DIRECTOR-GENERAL, NATIONAL ECONOMIC DEVELOPMENT AUTHORITY, and THE SECRETARY, DEPARTMENT OF BUDGET and MANAGEMENT, Respondents. x-----------------------------------x G.R. No. 167930 April 19, 2006

Republic of the Philippines SUPREME COURT Manila

BAYAN MUNA Representatives SATUR C. OCAMPO, TEODORO A. CASIO, and JOEL G. VIRADOR, GABRIELA WOMENS PARTY Representative LIZA L. MAZA, ANAKPAWIS Representatives RAFAEL V. MARIANO and CRISPIN B. BELTRAN, Rep. FRANCIS G. ESCUDERO, Rep. EDUARDO C. ZIALCITA, Rep. LORENZO R. TAADA III, DR. CAROL PAGADUAN-ARAULLO and RENATO M. REYES, JR. of BAYAN, MARIE HILAO-ENRIQUEZ of KARAPATAN, ANTONIO L. TINIO of ACT, FERDINAND GAITE of COURAGE, GIOVANNI A. TAPANG of AGHAM, WILFREDO MARBELLA GARCIA, of KMP, LANA LINABAN of GABRIELA, AMADO GAT INCIONG, RENATO CONSTANTINO, JR., DEAN PACIFICO H. AGABIN, SHARON R. DUREMDES of the NATIONAL COUNCIL OF CHURCHES IN THE PHILIPPINES, and BRO. EDMUNDO L. FERNANDEZ (FSC) of the ASSOCIATION OF MAJOR RELIGIOUS SUPERIORS OF THE PHILIPPINES (AMRSP), Petitioners, vs. EDUARDO ERMITA, in his capacity as Executive Secretary, ROMULO NERI, in his capacity as Director-General of the NATIONAL ECONOMIC and DEVELOPMENT AUTHORITY (NEDA) and the Administrator of the NATIONAL STATISTICS OFFICE (NSO), Respondents. 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 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.1avvphil.net 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) 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 DirectorGeneral, 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 sub committees 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.

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. Issues Thus, under EO 420, the President directs all government agencies and governmentowned 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 inOple 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

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 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 multipurpose 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. 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 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. 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. 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,13U.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. 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) 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, 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
17

narrowly draws the data collection, recording and exhibition while prescribing comprehensive safeguards. Ople v. Torres18 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 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
Footnotes
1 2

Rollo, pp. 6-7. Rollo, pp. 15-16. 3 Government Service Insurance System. 4 Social Security System. 5 Philippine Health Insurance Corporation. Section 8 of RA No. 7875 (National Health Insurance Act) provides: "SECTION 8. Health Insurance ID Card. In conjunction with the

enrollment provided above, the Corporation through its local office shall issue a health insurance ID which shall be used for purposes of identification, eligibility verification, and utilization recording. The issuance of this ID card shall be accompanied by a clear explanation to the enrollee of his rights, privileges and obligations as a member. A list of health care providers accredited by the Local Health Insurance Office shall likewise be attached thereto." 6 Section 4(m) of RA No. 7432 (Senior Citizens Act), as expanded by RA No. 9257, provides: "In the availment of the privileges mentioned above, the senior citizen or elderly person may submit as proof of his/her entitlement thereto any of the following: (a) an ID issued by the city or municipal mayor or of the barangay captain of the place where the senior citizen or the elderly resides; (b) the passport of the elderly person or senior citizen concerned; and x x x." 7 Land Transportation Office. Section 24 of RA No. 4136 (Land Transportation and Traffic Code, as amended) provides: "SECTION 24. Use of Drivers License and Identification Card. Every license issued under the provisions of this Act to any driver shall entitle the holder thereof, while the same is valid and effective, to operate motor vehicles described in such license: Provided, however, That every licensed professional driver, before operating a public utility vehicle registered under classification (b) of Section seven hereof, as amended by Batas Pambansa Bilang 74, shall secure from the Director, upon payment of the sum of five pesos, a drivers identification card which he shall, at all times while so operating a public utility vehicle, display in plain sight in the vehicle being operated. The identification card shall be issued simultaneously with the license. 8 Professional Regulation Commission. Section 19 of RA No. 9292 (Electronics Engineering Law of 2004) provides: "SECTION 19. Issuance of the Certificate of Registration and Professional Identification Card. x x x A Professional Identification Card bearing the registration number, date of registration, duly signed by the Chairperson of the Commission, shall likewise be issued to every registrant who has paid the prescribed fee. This identification card will serve as evidence that the holder thereof is duly registered with the Commission." See also Section 19 of RA No. 9200 (Philippine Geodetic Engineering Act of 1998). 9 Like GSIS and SSS, there is no express provision of law authorizing the Supreme Court to issue ID cards to its employees. However, any employer necessarily must issue ID cards to its employees for several purposes. First, an ID card is necessary to identify those who may enter the premises of the employer, especially in areas where non-employees are prohibited. Second, an ID or reference number is necessary for a computerized payroll system. Third, an ID card is necessary to identify those who can withdraw stock or borrow property of the employer. In the case of GSIS and SSS, they issue ID cards not only to their employees but also to their members. Like any mutual association, GSIS and SSS can issue membership cards to their members who contribute to the trust funds they administer and who are entitled to the corresponding benefits. 10 Sections 126 and 128 of the Omnibus Election Code (BP Blg. 881) provide: "SECTION 126. Registration of voters. On the seventh and sixth Saturdays before a regular election or on the second Saturday following the day of the proclamation calling for a new special election, plebiscite or referendum, any person desiring to be registered as a voter shall

accomplish in triplicate before the board of election inspectors a voters affidavit in which shall be stated the following data: (a) Name, surname, middle name, maternal surname; (b) Date and place of birth; (c) Citizenship; (d) Periods of residence in the Philippines and in the place of registration; (e) Exact address with the name of the street and house number or in case there is none, a brief description of the locality and the place; (f) A statement that the applicant has not been previously registered, otherwise he shall be required to attach a sworn application for cancellation of his previous registration; and (g) Such other information or data which may be required by the Commission. The voters affidavit shall also contain three specimens of the applicants signature and clear and legible prints of his left and right hand thumbmarks and shall be sworn to and filed together with four copies of the latest identification photograph to be supplied by the applicant. The oath of the applicant shall include a statement that he does not have any of the disqualifications of a voter and that he has not been previously registered in the precinct or in any other precinct. Before the applicant accomplishes his voters affidavit, the board of election inspectors shall appraise the applicant of the qualifications and disqualifications prescribed by law for a voter. It shall also see to it that the accomplished voter's affidavit contains all the data therein required and that the applicant's specimen signatures, the prints of his left and right hand thumbmarks and his photograph are properly affixed in each of the voters affidavit. xxx SECTION 128. Voters identification. The identification card issued to the voter shall serve and be considered as a document for the identification of each registered voter: Provided, however, That if the voters identity is challenged on election day and he cannot present his voter identification card, his identity may be established by the specimen signatures, the photograph or the fingerprints in his voters affidavit in the book of voters. No extra or duplicate copy of the voter identification card shall be prepared and issued except upon authority of the Commission. Each identification card shall bear the name and the address of the voter, his date of birth, sex, civil status, occupation, his photograph, thumbmark, the city or municipality and number of the polling place where he is registered, his signature, his voter serial number and the signature of the chairman of the board of election inspectors. Any voter previously registered under the provisions of Presidential Decree Numbered 1896 who desires to secure a voter identification card shall, on any registration day, provide four copies of his latest identification photograph to the board of election inspectors which upon receipt thereof shall affix one copy thereof to the voters affidavit in the book of voters, one copy to the voter identification card to be issued to the voter and transmit through the election registrar, one copy each to

the provincial election supervisor and the Commission to be respectively attached to the voter's affidavit in their respective custody." 11 Section 48, Chapter 5, Book VI of the Revised Administrative Code of 1987 provides: "SECTION 48. Cost Reduction. Each head of a department, bureau, office or agency shall implement a cost reduction program for his department, bureau, office or agency for the purpose of reducing cost of operations and shall submit to the President reports on the results of the implementation thereof. The Department of Budget shall provide technical and other necessary assistance in the design and implementation of cost reduction activities. An incentive award not exceeding one months salary may be granted to any official or employee whose suggestion for cost reduction has been adopted and shall have actually resulted in cost reduction, payable from the savings resulting therefrom. Similarly, Section 54 of PD No. 1177 (Budget Reform Decree of 1977) provides: "SECTION 54. Cost Reduction. Each head of department, bureau, office or agency shall implement a cost reduction program for his department, bureau, office or agency for the purpose of reducing cost of operations and shall submit to the President reports on the results of the implementation thereof. The Budget Commission shall provide technical and other necessary assistance in the design and implementation of cost reduction activities. An incentive award not exceeding one month's salary may be granted to any official or employee whose suggestion for cost reduction has been adopted and shall have actually resulted in cost reduction, payable from the savings resulting therefrom. In addition, the annual General Appropriations Act contains similar provisions mandating cost reduction in all government offices. Moreover, Section (a) of RA No. 6713 (Code of Conduct and Ethical Standards for Public Officials and Employees) also provides: "Commitment to public interest. x x x All government resources and powers of their respective offices must be employed and used efficiently, effectively, honestly and economically, particularly to avoid wastage in public funds and revenues." (Emphasis supplied) 12 Identity Cards, Privacy International, http://www.privacy.org/pi/activities/idcard/idcard_faq.html. 13 381 U.S. 479 (1965). 14 489 U.S. 749 (1989). 15 429 U.S. 589 (1977). 16 428 U.S. 52 (1976). 17 505 U.S. 833 (1992). 18 354 Phil. 948 (1998). 19 Section 1 of Administrative Order No. 308 dated 12 December 1996 states: "SEC 1. Establishment of a National Computerized Identification Reference System. A decentralized Identification Reference System among the key basic services and social security providers is hereby established."

Republic of the Philippines SUPREME COURT Manila 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? 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 [reassignment], 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 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. 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

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. 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

(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,

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.29 Thus, 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 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."33 Female 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 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.

Footnotes
1

Petitioner went for his elementary and high school, as well as his Bachelor of Science in Statistics and Master of Arts, in the University of the Philippines. He took up Population Studies Program, Master of Arts in Sociology and Doctor of Philosophy in Sociology at the University of Hawaii, in Manoa, Hawaii, U.S.A. Rollo, p. 48. 2 This consisted of "penectomy [surgical removal of penis] bilateral oschiectomy [or orchiectomy which is the surgical excision of the testes] penile skin inversion vaginoplasty [plastic surgery of the vagina] clitoral hood reconstruction and augmentation mammoplasty [surgical enhancement of the size and shape of the breasts]." Id. 3 On January 23, 2003, January 30, 2003 and February 6, 2003. 4 Penned by Judge Felixberto T. Olalia, Jr. Rollo, pp. 51-53. 5 Id., pp. 52-53 (citations omitted). 6 Docketed as CA-G.R. SP No. 78824. 7 Special Sixth Division. 8 Penned by Associate Justice Arcangelita M. Romilla-Lontok with Associate Justices Marina L. Buzon and Aurora Santiago-Lagman concurring. Rollo, pp. 25-33. 9 Resolution dated September 14, 2006, id., pp. 45-46.

10

An Act Authorizing the City or Municipal Civil Registrar or the Consul General to Correct a Clerical or Typographical Error in an Entry and/or Change of First Name or Nickname in the Civil Register Without Need of a Judicial Order, Amending for the Purpose Articles 376 and 412 of the Civil Code of the Philippines. 11 Wang v. Cebu City Civil Registrar, G.R. No. 159966, 30 March 2005, 454 SCRA 155. 12 Id. 13 K v. Health Division, Department of Human Resources, 277 Or. 371, 560 P.2d 1070 (1977). 14 Under Section 2 (6) of RA 9048, "first name" refers to a name or nickname given to a person which may consist of one or more names in addition to the middle names and last names. Thus, the term "first name" will be used here to refer both to first name and nickname. 15 The last paragraph of Section 7 of RA 9048 provides: SECTION 7. Duties and Powers of the Civil Registrar General. xxx xxx xxx Where the petition is denied by the city or municipal civil registrar or the consul general, the petitioner may either appeal the decision to the civil registrar general or file the appropriate petition with the proper court. 16 SECTION 3. Who May File the Petition and Where. Any person having direct and personal interest in the correction of a clerical or typographical error in an entry and/or change of first name or nickname in the civil register may file, in person, a verified petition with the local civil registry office of the city or municipality where the record being sought to be corrected or changed is kept. In case the petitioner has already migrated to another place in the country and it would not be practical for such party, in terms of transportation expenses, time and effort to appear in person before the local civil registrar keeping the documents to be corrected or changed, the petition may be filed, in person, with the local civil registrar of the place where the interested party is presently residing or domiciled. The two (2) local civil registrars concerned will then communicate to facilitate the processing of the petition. Citizens of the Philippines who are presently residing or domiciled in foreign countries may file their petition, in person, with the nearest Philippine Consulates. The petitions filed with the city or municipal civil registrar or the consul general shall be processed in accordance with this Act and its implementing rules and regulations. All petitions for the clerical or typographical errors and/or change of first names or nicknames may be availed of only once. 17 SECTION 5. Form and Contents of the Petition. The petition shall be in the form of an affidavit, subscribed and sworn to before any person authorized by the law to administer oaths. The affidavit shall set forth facts necessary to establish the merits of the petition and shall show affirmatively that the petitioner is competent to testify to the matters stated. The petitioner shall state the particular erroneous entry or entries, which are sought to be corrected and/or the change sought to be made. The petition shall be supported with the following documents: (1) A certified true machine copy of the certificate or of the page of the registry book containing the entry or entries sought to be corrected or changed; (2) At least two (2) public or private documents showing the correct entry or entries upon which the correction or change shall be based; and (3) Other documents which the petitioner or the city or municipal civil registrar or the consul general may consider relevant and necessary for the approval of the petition.

In case of change of first name or nickname, the petition shall likewise be supported with the documents mentioned in the immediately preceding paragraph. In addition, the petition shall be published at least once a week for two (2) consecutive weeks in a newspaper of general circulation. Furthermore, the petitioner shall submit a certification from the appropriate law enforcement agencies that he has no pending case or no criminal record. 18 Republic v. Court of Appeals, G.R. No. 97906, 21 May 1992, 209 SCRA 189. 19 Supra note 11. 20 Id. 21 In re Ladrach, 32 Ohio Misc.2d 6, 513 N.E.2d 828 (1987). 22 Lee v. Court of Appeals, 419 Phil. 392 (2001). 23 Id. 24 Co v. Civil Register of Manila, G.R. No. 138496, 23 February 2004, 423 SCRA 420. 25 Id. 26 Id. 27 Beduya v. Republic of the Philippines, 120 Phil. 114 (1964). 28 Salonga, Jovito, Private International Law, 1995 Edition, Rex Bookstore, p. 238. 29 This, of course, should be taken in conjunction with Articles 407 and 412 of the Civil Code which authorizes the recording of acts, events and judicial decrees or the correction or change of errors including those that occur after birth. Nonetheless, in such cases, the entries in the certificates of birth are not be corrected or changed. The decision of the court granting the petition shall be annotated in the certificates of birth and shall form part of the civil register in the Office of the Local Civil Registrar. (Co v. Civil Register of Manila, supra note 24) 30 The error pertains to one where the birth attendant writes "male" or "female" but the genitals of the child are that of the opposite sex. 31 Moreover, petitioners female anatomy is all man-made. The body that he inhabits is a male body in all aspects other than what the physicians have supplied. 32 Blacks Law Dictionary, 8th edition (2004), p.1406. 33 Words and Phrases, volume 39, Permanent Edition, p. 106. 34 In re Application for Marriage License for Nash, 2003-Ohio-7221 (No. 2002-T-0149, slip op., Not Reported in N.E.2d, 2003 WL 23097095 (Ohio App. 11 Dist., December 31, 2003), citing Websters II New College Dictionary (1999). 35 Id. 36 Standard Oil Co. v. United States, 221 U.S. 1 (1911), 31 S.Ct. 502, 55 L.Ed. 619. 37 Article 1, Family Code. 38 Article 2(1), Id. 39 These are Articles 130 to 138 of the Labor Code which include nightwork prohibition, facilities for women, prohibition on discrimination and stipulation against marriage, among others. 40 These include Article 333 on adultery, Articles 337 to 339 on qualified seduction, simple seduction and acts of lasciviousness with the consent of the offended party and Articles 342 and 343 on forcible and consented abduction, among others. 41 Section 3(jj)(4).

Republic of the Philippines SUPREME COURT EN BANC G.R. No. 166429 December 19, 2005 REPUBLIC OF THE PHILIPPINES, Represented by Executive Secretary Eduardo R. Ermita, the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), and the MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA), Petitioners, vs. HON. HENRICK F. GINGOYON, In his capacity as Presiding Judge of the Regional Trial Court, Branch 117, Pasay City and PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., Respondents. DECISION TINGA, J.: The Ninoy Aquino International Airport Passenger Terminal III (NAIA 3) was conceived, designed and constructed to serve as the countrys show window to the world. Regrettably, it has spawned controversies. Regrettably too, despite the apparent completion of the terminal complex way back it has not yet been operated. This has caused immeasurable economic damage to the country, not to mention its deplorable discredit in the international community. In the first case that reached this Court, Agan v. PIATCO,1 the contracts which the Government had with the contractor were voided for being contrary to law and public policy. The second case now before the Court involves the matter of just compensation due the contractor for the terminal complex it built. We decide the case on the basis of fairness, the same norm that pervades both the Courts 2004 Resolution in the first case and the latest expropriation law. The present controversy has its roots with the promulgation of the Courts decision in Agan v. PIATCO,2promulgated in 2003 (2003 Decision). This decision nullified the "Concession Agreement for the Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III" entered into between the Philippine Government (Government) and the Philippine International Air Terminals

Co., Inc. (PIATCO), as well as the amendments and supplements thereto. The agreement had authorized PIATCO to build a new international airport terminal (NAIA 3), as well as a franchise to operate and maintain the said terminal during the concession period of 25 years. The contracts were nullified, among others, that Paircargo Consortium, predecessor of PIATCO, did not possess the requisite financial capacity when it was awarded the NAIA 3 contract and that the agreement was contrary to public policy.3 At the time of the promulgation of the 2003 Decision, the NAIA 3 facilities had already been built by PIATCO and were nearing completion.4 However, the ponencia was silent as to the legal status of the NAIA 3 facilities following the nullification of the contracts, as well as whatever rights of PIATCO for reimbursement for its expenses in the construction of the facilities. Still, in his Separate Opinion, Justice Panganiban, joined by Justice Callejo, declared as follows: Should government pay at all for reasonable expenses incurred in the construction of the Terminal? Indeed it should, otherwise it will be unjustly enriching itself at the expense of Piatco and, in particular, its funders, contractors and investors both local and foreign. After all, there is no question that the State needs and will make use of Terminal III, it being part and parcel of the critical infrastructure and transportation-related programs of government.5 PIATCO and several respondents-intervenors filed their respective motions for the reconsideration of the 2003 Decision. These motions were denied by the Court in its Resolution dated 21 January 2004 (2004 Resolution).6However, the Court this time squarely addressed the issue of the rights of PIATCO to refund, compensation or reimbursement for its expenses in the construction of the NAIA 3 facilities. The holding of the Court on this crucial point follows: This Court, however, is not unmindful of the reality that the structures comprising the NAIA IPT III facility are almost complete and that funds have been spent by PIATCO in their construction. For the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures. The compensation must be just and in accordance with law and equity for the government can not unjustly enrich itself at the expense of PIATCO and its investors.7

After the promulgation of the rulings in Agan, the NAIA 3 facilities have remained in the possession of PIATCO, despite the avowed intent of the Government to put the airport terminal into immediate operation. The Government and PIATCO conducted several rounds of negotiation regarding the NAIA 3 facilities.8 It also appears that arbitral proceedings were commenced before the International Chamber of Commerce International Court of Arbitration and the International Centre for the Settlement of Investment Disputes,9 although the Government has raised jurisdictional questions before those two bodies.10 Then, on 21 December 2004, the Government11 filed a Complaint for expropriation with the Pasay City Regional Trial Court (RTC), together with an Application for Special Raffle seeking the immediate holding of a special raffle. The Government sought upon the filing of the complaint the issuance of a writ of possession authorizing it to take immediate possession and control over the NAIA 3 facilities. The Government also declared that it had deposited the amount of P3,002,125,000.0012 (3 Billion)13 in Cash with the Land Bank of the Philippines, representing the NAIA 3 terminals assessed value for taxation purposes.14 The case was raffled to Branch 117 of the Pasay City RTC, presided by respondent judge Hon. Henrick F. Gingoyon (Hon. Gingoyon). On the same day that the Complaint was filed, the RTC issued an Order16 directing the issuance of a writ of possession to the Government, authorizing it to "take or enter upon the possession" of the NAIA 3 facilities. Citing the case of City of Manila v. Serrano,17 the RTC noted that it had the ministerial duty to issue the writ of possession upon the filing of a complaint for expropriation sufficient in form and substance, and upon deposit made by the government of the amount equivalent to the assessed value of the property subject to expropriation. The RTC found these requisites present, particularly noting that "[t]he case record shows that [the Government has] deposited the assessed value of the [NAIA 3 facilities] in the Land Bank of the Philippines, an authorized depositary, as shown by the certification attached to their complaint." Also on the same day, the RTC issued a Writ of Possession. According to PIATCO, the Government was able to take possession over the NAIA 3 facilities immediately after the Writ of Possession was issued.18 However, on 4 January 2005, the RTC issued another Order designed to supplement its 21 December 2004 Orderand the Writ of Possession. In the 4 January 2005 Order, now assailed in the present petition, the RTC noted that its earlier issuance of its writ of possession was pursuant to Section 2, Rule 67 of the 1997 Rules of Civil
15

Procedure. However, it was observed that Republic Act No. 8974 (Rep. Act No. 8974), otherwise known as "An Act to Facilitate the Acquisition of Right-of-Way, Site or Location for National Government Infrastructure Projects and For Other Purposes" and its Implementing Rules and Regulations (Implementing Rules) had amended Rule 67 in many respects. There are at least two crucial differences between the respective procedures under Rep. Act No. 8974 and Rule 67. Under the statute, the Government is required to make immediate payment to the property owner upon the filing of the complaint to be entitled to a writ of possession, whereas in Rule 67, the Government is required only to make an initial deposit with an authorized government depositary. Moreover, Rule 67 prescribes that the initial deposit be equivalent to the assessed value of the property for purposes of taxation, unlike Rep. Act No. 8974 which provides, as the relevant standard for initial compensation, the market value of the property as stated in the tax declaration or the current relevant zonal valuation of the Bureau of Internal Revenue (BIR), whichever is higher, and the value of the improvements and/or structures using the replacement cost method. Accordingly, on the basis of Sections 4 and 7 of Rep. Act No. 8974 and Section 10 of the Implementing Rules, the RTC made key qualifications to its earlier issuances. First, it directed the Land Bank of the Philippines, Baclaran Branch (LBPBaclaran), to immediately release the amount of US$62,343,175.77 to PIATCO, an amount which the RTC characterized as that which the Government "specifically made available for the purpose of this expropriation;" and such amount to be deducted from the amount of just compensation due PIATCO as eventually determined by the RTC. Second, the Government was directed to submit to the RTC a Certificate of Availability of Funds signed by authorized officials to cover the payment of just compensation. Third, the Government was directed "to maintain, preserve and safeguard" the NAIA 3 facilities or "perform such as acts or activities in preparation for their direct operation" of the airport terminal, pending expropriation proceedings and full payment of just compensation. However, the Government was prohibited "from performing acts of ownership like awarding concessions or leasing any part of [NAIA 3] to other parties."19 The very next day after the issuance of the assailed 4 January 2005 Order, the Government filed an Urgent Motion for Reconsideration, which was set for hearing on 10 January 2005. On 7 January 2005, the RTC issued another Order, the second now assailed before this Court, which appointed three (3) Commissioners to ascertain

the amount of just compensation for the NAIA 3 Complex. That same day, the Government filed a Motion for Inhibition of Hon. Gingoyon. The RTC heard the Urgent Motion for Reconsideration and Motion for Inhibition on 10 January 2005. On the same day, it denied these motions in an Omnibus Order dated 10 January 2005. This is the third Order now assailed before this Court. Nonetheless, while the Omnibus Order affirmed the earlier dispositions in the 4 January 2005 Order, it excepted from affirmance "the superfluous part of the Order prohibiting the plaintiffs from awarding concessions or leasing any part of [NAIA 3] to other parties."20 Thus, the present Petition for Certiorari and Prohibition under Rule 65 was filed on 13 January 2005. The petition prayed for the nullification of the RTC orders dated 4 January 2005, 7 January 2005, and 10 January 2005, and for the inhibition of Hon. Gingoyon from taking further action on the expropriation case. A concurrent prayer for the issuance of a temporary restraining order and preliminary injunction was granted by this Court in a Resolutiondated 14 January 2005.21 The Government, in imputing grave abuse of discretion to the acts of Hon. Gingoyon, raises five general arguments, to wit: (i) that Rule 67, not Rep. Act No. 8974, governs the present expropriation proceedings; (ii) that Hon. Gingoyon erred when he ordered the immediate release of the amount of US$62.3 Million to PIATCO considering that the assessed value as alleged in the complaint was only P3 Billion; (iii) that the RTC could not have prohibited the Government from enjoining the performance of acts of ownership; (iv) that the appointment of the three commissioners was erroneous; and (v) that Hon. Gingoyon should be compelled to inhibit himself from the expropriation case.22 Before we delve into the merits of the issues raised by the Government, it is essential to consider the crucial holding of the Court in its 2004 Resolution in Agan, which we repeat below:

This Court, however, is not unmindful of the reality that the structures comprising the NAIA IPT III facility are almost complete and that funds have been spent by PIATCO in their construction. For the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures. The compensation must be just and in accordance with law and equity for the government can not unjustly enrich itself at the expense of PIATCO and its investors.23 This pronouncement contains the fundamental premises which permeate this decision of the Court. Indeed, Agan, final and executory as it is, stands as governing law in this case, and any disposition of the present petition must conform to the conditions laid down by the Court in its 2004 Resolution. The 2004 Resolution Which Is Law of This Case Generally Permits Expropriation The pronouncement in the 2004 Resolution is especially significant to this case in two aspects, namely: (i) that PIATCO must receive payment of just compensation determined in accordance with law and equity; and (ii) that the government is barred from taking over NAIA 3 until such just compensation is paid. The parties cannot be allowed to evade the directives laid down by this Court through any mode of judicial action, such as the complaint for eminent domain. It cannot be denied though that the Court in the 2004 Resolution prescribed mandatory guidelines which the Government must observe before it could acquire the NAIA 3 facilities. Thus, the actions of respondent judge under review, as well as the arguments of the parties must, to merit affirmation, pass the threshold test of whether such propositions are in accord with the 2004 Resolution. The Government does not contest the efficacy of this pronouncement in the 2004 Resolution,24 thus its application to the case at bar is not a matter of controversy. Of course, questions such as what is the standard of "just compensation" and which particular laws and equitable principles are applicable, remain in dispute and shall be resolved forthwith.

The Government has chosen to resort to expropriation, a remedy available under the law, which has the added benefit of an integrated process for the determination of just compensation and the payment thereof to PIATCO. We appreciate that the case at bar is a highly unusual case, whereby the Government seeks to expropriate a building complex constructed on land which the State already owns.25 There is an inherent illogic in the resort to eminent domain on property already owned by the State. At first blush, since the State already owns the property on which NAIA 3 stands, the proper remedy should be akin to an action for ejectment. However, the reason for the resort by the Government to expropriation proceedings is understandable in this case. The 2004 Resolution, in requiring the payment of just compensation prior to the takeover by the Government of NAIA 3, effectively precluded it from acquiring possession or ownership of the NAIA 3 through the unilateral exercise of its rights as the owner of the ground on which the facilities stood. Thus, as things stood after the 2004 Resolution, the right of the Government to take over the NAIA 3 terminal was preconditioned by lawful order on the payment of just compensation to PIATCO as builder of the structures. The determination of just compensation could very well be agreed upon by the parties without judicial intervention, and it appears that steps towards that direction had been engaged in. Still, ultimately, the Government resorted to its inherent power of eminent domain through expropriation proceedings. Is eminent domain appropriate in the first place, with due regard not only to the law on expropriation but also to the Courts 2004 Resolution in Agan? The right of eminent domain extends to personal and real property, and the NAIA 3 structures, adhered as they are to the soil, are considered as real property.26 The public purpose for the expropriation is also beyond dispute. It should also be noted that Section 1 of Rule 67 (on Expropriation) recognizes the possibility that the property sought to be expropriated may be titled in the name of the Republic of the Philippines, although occupied by private individuals, and in such case an averment to that effect should be made in the complaint. The instant expropriation complaint did aver that the NAIA 3 complex "stands on a parcel of land owned by the Bases Conversion Development Authority, another agency of [the Republic of the Philippines]."27

Admittedly, eminent domain is not the sole judicial recourse by which the Government may have acquired the NAIA 3 facilities while satisfying the requisites in the 2004 Resolution. Eminent domain though may be the most effective, as well as the speediest means by which such goals may be accomplished. Not only does it enable immediate possession after satisfaction of the requisites under the law, it also has a built-in procedure through which just compensation may be ascertained. Thus, there should be no question as to the propriety of eminent domain proceedings in this case. Still, in applying the laws and rules on expropriation in the case at bar, we are impelled to apply or construe these rules in accordance with the Courts prescriptions in the 2004 Resolution to achieve the end effect that the Government may validly take over the NAIA 3 facilities. Insofar as this case is concerned, the 2004 Resolution is effective not only as a legal precedent, but as the source of rights and prescriptions that must be guaranteed, if not enforced, in the resolution of this petition. Otherwise, the integrity and efficacy of the rulings of this Court will be severely diminished. It is from these premises that we resolve the first question, whether Rule 67 of the Rules of Court or Rep. Act No. 8974 governs the expropriation proceedings in this case. Application of Rule 67 Violates the 2004 Agan Resolution The Government insists that Rule 67 of the Rules of Court governs the expropriation proceedings in this case to the exclusion of all other laws. On the other hand, PIATCO claims that it is Rep. Act No. 8974 which does apply. Earlier, we had adverted to the basic differences between the statute and the procedural rule. Further elaboration is in order. Rule 67 outlines the procedure under which eminent domain may be exercised by the Government. Yet by no means does it serve at present as the solitary guideline through which the State may expropriate private property. For example, Section 19 of the Local Government Code governs as to the exercise by local government units of the power of eminent domain through an enabling ordinance. And then there is Rep. Act No. 8974, which covers expropriation proceedings intended for national government infrastructure projects.

Rep. Act No. 8974, which provides for a procedure eminently more favorable to the property owner than Rule 67, inescapably applies in instances when the national government expropriates property "for national government infrastructure projects."28 Thus, if expropriation is engaged in by the national government for purposes other than national infrastructure projects, the assessed value standard and the deposit mode prescribed in Rule 67 continues to apply. Under both Rule 67 and Rep. Act No. 8974, the Government commences expropriation proceedings through the filing of a complaint. Unlike in the case of local governments which necessitate an authorizing ordinance before expropriation may be accomplished, there is no need under Rule 67 or Rep. Act No. 8974 for legislative authorization before the Government may proceed with a particular exercise of eminent domain. The most crucial difference between Rule 67 and Rep. Act No. 8974 concerns the particular essential step the Government has to undertake to be entitled to a writ of possession. The first paragraph of Section 2 of Rule 67 provides: SEC. 2. Entry of plaintiff upon depositing value with authorized government depository. Upon the filing of the complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall have the right to take or enter upon the possession of the real property involved if he deposits with the authorized government depositary an amount equivalent to the assessed value of the property for purposes of taxation to be held by such bank subject to the orders of the court. Such deposit shall be in money, unless in lieu thereof the court authorizes the deposit of a certificate of deposit of a government bank of the Republic of the Philippines payable on demand to the authorized government depositary. In contrast, Section 4 of Rep. Act No. 8974 relevantly states: SEC. 4. Guidelines for Expropriation Proceedings. Whenever it is necessary to acquire real property for the right-of-way, site or location for any national government infrastructure project through expropriation, the appropriate proceedings before the proper court under the following guidelines: a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency shall immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property

based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR); and (2) the value of the improvements and/or structures as determined under Section 7 hereof; ... c) In case the completion of a government infrastructure project is of utmost urgency and importance, and there is no existing valuation of the area concerned, the implementing agency shall immediately pay the owner of the property its proffered value taking into consideration the standards prescribed in Section 5 hereof. Upon completion with the guidelines abovementioned, the court shall immediately issue to the implementing agency an order to take possession of the property and start the implementation of the project. Before the court can issue a Writ of Possession, the implementing agency shall present to the court a certificate of availability of funds from the proper official concerned. ... As can be gleaned from the above-quoted texts, Rule 67 merely requires the Government to deposit with an authorized government depositary the assessed value of the property for expropriation for it to be entitled to a writ of possession. On the other hand, Rep. Act No. 8974 requires that the Government make a direct payment to the property owner before the writ may issue. Moreover, such payment is based on the zonal valuation of the BIR in the case of land, the value of the improvements or structures under the replacement cost method,29 or if no such valuation is available and in cases of utmost urgency, the proffered value of the property to be seized. It is quite apparent why the Government would prefer to apply Rule 67 in lieu of Rep. Act No. 8974. Under Rule 67, it would not be obliged to immediately pay any amount to PIATCO before it can obtain the writ of possession since all it need do is deposit the amount equivalent to the assessed value with an authorized government depositary. Hence, it devotes considerable effort to point out that Rep. Act No. 8974 does not apply in this case, notwithstanding the undeniable reality that NAIA 3 is a national government project. Yet, these efforts fail, especially considering the controlling effect of the 2004 Resolution in Agan on the adjudication of this case.

It is the finding of this Court that the staging of expropriation proceedings in this case with the exclusive use of Rule 67 would allow for the Government to take over the NAIA 3 facilities in a fashion that directly rebukes our 2004 Resolution in Agan. This Court cannot sanction deviation from its own final and executory orders. Section 2 of Rule 67 provides that the State "shall have the right to take or enter upon the possession of the real property involved if [the plaintiff] deposits with the authorized government depositary an amount equivalent to the assessed value of the property for purposes of taxation to be held by such bank subject to the orders of the court."30 It is thus apparent that under the provision, all the Government need do to obtain a writ of possession is to deposit the amount equivalent to the assessed value with an authorized government depositary. Would the deposit under Section 2 of Rule 67 satisfy the requirement laid down in the 2004 Resolution that "[f]or the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures"? Evidently not. If Section 2 of Rule 67 were to apply, PIATCO would be enjoined from receiving a single centavo as just compensation before the Government takes over the NAIA 3 facility by virtue of a writ of possession. Such an injunction squarely contradicts the letter and intent of the 2004 Resolution. Hence, the position of the Government sanctions its own disregard or violation the prescription laid down by this Court that there must first be just compensation paid to PIATCO before the Government may take over the NAIA 3 facilities. Thus, at the very least, Rule 67 cannot apply in this case without violating the 2004 Resolution. Even assuming that Rep. Act No. 8974 does not govern in this case, it does not necessarily follow that Rule 67 should then apply. After all, adherence to the letter of Section 2, Rule 67 would in turn violate the Courts requirement in the 2004 Resolution that there must first be payment of just compensation to PIATCO before the Government may take over the property. It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit under Rule 67 with the scheme of "immediate payment" in cases involving national government infrastructure projects. The following portion of the Senate deliberations, cited by PIATCO in its Memorandum, is worth quoting to cogitate on the purpose behind the plain meaning of the law:

THE CHAIRMAN (SEN. CAYETANO). "x x x Because the Senate believes that, you know, we have to pay the landowners immediately not by treasury bills but by cash. Since we are depriving them, you know, upon payment, no, of possession, we might as well pay them as much, no, hindi lang 50 percent. xxx THE CHAIRMAN (REP. VERGARA). Accepted. xxx THE CHAIRMAN (SEN. CAYETANO). Oo. Because this is really in favor of the landowners, e. THE CHAIRMAN (REP. VERGARA). Thats why we need to really secure the availability of funds. xxx THE CHAIRMAN (SEN. CAYETANO). No, no. Its the same. It says here: iyong first paragraph, diba? Iyong zonal talagang magbabayad muna. In other words, you know, there must be a payment kaagad. (TSN, Bicameral Conference on the Disagreeing Provisions of House Bill 1422 and Senate Bill 2117, August 29, 2000, pp. 14-20) xxx THE CHAIRMAN (SEN. CAYETANO). Okay, okay, no. Unang-una, it is not deposit, no. Its payment." REP. BATERINA. Its payment, ho, payment." (Id., p. 63)31 It likewise bears noting that the appropriate standard of just compensation is a substantive matter. It is well within the province of the legislature to fix the standard, which it did through the enactment of Rep. Act No. 8974. Specifically, this prescribes the new standards in determining the amount of just compensation in

expropriation cases relating to national government infrastructure projects, as well as the manner of payment thereof. At the same time, Section 14 of the Implementing Rules recognizes the continued applicability of Rule 67 on procedural aspects when it provides "all matters regarding defenses and objections to the complaint, issues on uncertain ownership and conflicting claims, effects of appeal on the rights of the parties, and such other incidents affecting the complaint shall be resolved under the provisions on expropriation of Rule 67 of the Rules of Court."32 Given that the 2004 Resolution militates against the continued use of the norm under Section 2, Rule 67, is it then possible to apply Rep. Act No. 8974? We find that it is, and moreover, its application in this case complements rather than contravenes the prescriptions laid down in the 2004 Resolution. Rep. Act No. 8974 Fits to the Situation at Bar and Complements the 2004 Agan Resolution Rep. Act No. 8974 is entitled "An Act To Facilitate The Acquisition Of Right-OfWay, Site Or Location For National Government Infrastructure Projects And For Other Purposes." Obviously, the law is intended to cover expropriation proceedings intended for national government infrastructure projects. Section 2 of Rep. Act No. 8974 explains what are considered as "national government projects." Sec. 2. National Government Projects. The term "national government projects" shall refer to all national government infrastructure, engineering works and service contracts, including projects undertaken by government-owned and controlled corporations, all projects covered by Republic Act No. 6957, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer Law, and other related and necessary activities, such as site acquisition, supply and/or installation of equipment and materials, implementation, construction, completion, operation, maintenance, improvement, repair and rehabilitation, regardless of the source of funding. As acknowledged in the 2003 Decision, the development of NAIA 3 was made pursuant to a build-operate-and-transfer arrangement pursuant to Republic Act No.

6957, as amended,33 which pertains to infrastructure or development projects normally financed by the public sector but which are now wholly or partly implemented by the private sector.34 Under the build-operate-and-transfer scheme, it is the project proponent which undertakes the construction, including the financing, of a given infrastructure facility.35 In Tatad v. Garcia,36 the Court acknowledged that the operator of the EDSA Light Rail Transit project under a BOT scheme was the owner of the facilities such as "the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant."37 There can be no doubt that PIATCO has ownership rights over the facilities which it had financed and constructed. The 2004 Resolution squarely recognized that right when it mandated the payment of just compensation to PIATCO prior to the takeover by the Government of NAIA 3. The fact that the Government resorted to eminent domain proceedings in the first place is a concession on its part of PIATCOs ownership. Indeed, if no such right is recognized, then there should be no impediment for the Government to seize control of NAIA 3 through ordinary ejectment proceedings. Since the rights of PIATCO over the NAIA 3 facilities are established, the nature of these facilities should now be determined. Under Section 415(1) of the Civil Code, these facilities are ineluctably immovable or real property, as they constitute buildings, roads and constructions of all kinds adhered to the soil.38 Certainly, the NAIA 3 facilities are of such nature that they cannot just be packed up and transported by PIATCO like a traveling circus caravan. Thus, the property subject of expropriation, the NAIA 3 facilities, are real property owned by PIATCO. This point is critical, considering the Governments insistence that the NAIA 3 facilities cannot be deemed as the "right-of-way", "site" or "location" of a national government infrastructure project, within the coverage of Rep. Act No. 8974. There is no doubt that the NAIA 3 is not, under any sensible contemplation, a "rightof-way." Yet we cannot agree with the Governments insistence that neither could NAIA 3 be a "site" or "location". The petition quotes the definitions provided in Blacks Law Dictionary of "location" as the specific place or position of a person or thing and site as pertaining to a place or location or a piece of property set aside for specific use."39 Yet even Blacks Law Dictionary provides that "[t]he term [site] does not of itself necessarily mean a place or tract of land fixed by definite boundaries."40 One would assume that the Government, to back up its contention,

would be able to point to a clear-cut rule that a "site" or "location" exclusively refers to soil, grass, pebbles and weeds. There is none. Indeed, we cannot accept the Governments proposition that the only properties that may be expropriated under Rep. Act No. 8974 are parcels of land. Rep. Act No. 8974 contemplates within its coverage such real property constituting land, buildings, roads and constructions of all kinds adhered to the soil. Section 1 of Rep. Act No. 8974, which sets the declaration of the laws policy, refers to "real property acquired for national government infrastructure projects are promptly paid just compensation."41 Section 4 is quite explicit in stating that the scope of the law relates to the acquisition of "real property," which under civil law includes buildings, roads and constructions adhered to the soil. It is moreover apparent that the law and its implementing rules commonly provide for a rule for the valuation of improvements and/or structures thereupon separate from that of the land on which such are constructed. Section 2 of Rep. Act No. 8974 itself recognizes that the improvements or structures on the land may very well be the subject of expropriation proceedings. Section 4(a), in relation to Section 7 of the law provides for the guidelines for the valuation of the improvements or structures to be expropriated. Indeed, nothing in the law would prohibit the application of Section 7, which provides for the valuation method of the improvements and or structures in the instances wherein it is necessary for the Government to expropriate only the improvements or structures, as in this case. The law classifies the NAIA 3 facilities as real properties just like the soil to which they are adhered. Any sub-classifications of real property and divergent treatment based thereupon for purposes of expropriation must be based on substantial distinctions, otherwise the equal protection clause of the Constitution is violated. There may be perhaps a molecular distinction between soil and the inorganic improvements adhered thereto, yet there are no purposive distinctions that would justify a variant treatment for purposes of expropriation. Both the land itself and the improvements thereupon are susceptible to private ownership independent of each other, capable of pecuniary estimation, and if taken from the owner, considered as a deprivation of property. The owner of improvements seized through expropriation suffers the same degree of loss as the owner of land seized through similar means. Equal protection demands that all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed. For purposes of expropriation, parcels of land are similarly situated as the buildings or

improvements constructed thereon, and a disparate treatment between those two classes of real property infringes the equal protection clause. Even as the provisions of Rep. Act No. 8974 call for that laws application in this case, the threshold test must still be met whether its implementation would conform to the dictates of the Court in the 2004 Resolution. Unlike in the case of Rule 67, the application of Rep. Act No. 8974 will not contravene the 2004 Resolution, which requires the payment of just compensation before any takeover of the NAIA 3 facilities by the Government. The 2004 Resolution does not particularize the extent such payment must be effected before the takeover, but it unquestionably requires at least some degree of payment to the private property owner before a writ of possession may issue. The utilization of Rep. Act No. 8974 guarantees compliance with this bare minimum requirement, as it assures the private property owner the payment of, at the very least, the proffered value of the property to be seized. Such payment of the proffered value to the owner, followed by the issuance of the writ of possession in favor of the Government, is precisely the schematic under Rep. Act No. 8974, one which facially complies with the prescription laid down in the 2004 Resolution. Clearly then, we see no error on the part of the RTC when it ruled that Rep. Act No. 8974 governs the instant expropriation proceedings. The Proper Amount to be Paid under Rep. Act No. 8974 Then, there is the matter of the proper amount which should be paid to PIATCO by the Government before the writ of possession may issue, consonant to Rep. Act No. 8974. At this juncture, we must address the observation made by the Office of the Solicitor General in behalf of the Government that there could be no "BIR zonal valuations" on the NAIA 3 facility, as provided in Rep. Act No. 8974, since zonal valuations are only for parcels of land, not for airport terminals. The Court agrees with this point, yet does not see it as an impediment for the application of Rep. Act No. 8974. It must be clarified that PIATCO cannot be reimbursed or justly compensated for the value of the parcel of land on which NAIA 3 stands. PIATCO is not the owner of the land on which the NAIA 3 facility is constructed, and it should not be entitled to just

compensation that is inclusive of the value of the land itself. It would be highly disingenuous to compensate PIATCO for the value of land it does not own. Its entitlement to just compensation should be limited to the value of the improvements and/or structures themselves. Thus, the determination of just compensation cannot include the BIR zonal valuation under Section 4 of Rep. Act No. 8974. Under Rep. Act No. 8974, the Government is required to "immediately pay" the owner of the property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property based on the current relevant zonal valuation of the [BIR]; and (2) the value of the improvements and/or structures as determined under Section 7. As stated above, the BIR zonal valuation cannot apply in this case, thus the amount subject to immediate payment should be limited to "the value of the improvements and/or structures as determined under Section 7," with Section 7 referring to the "implementing rules and regulations for the equitable valuation of the improvements and/or structures on the land." Under the present implementing rules in place, the valuation of the improvements/structures are to be based using "the replacement cost method."42 However, the replacement cost is only one of the factors to be considered in determining the just compensation. In addition to Rep. Act No. 8974, the 2004 Resolution in Agan also mandated that the payment of just compensation should be in accordance with equity as well. Thus, in ascertaining the ultimate amount of just compensation, the duty of the trial court is to ensure that such amount conforms not only to the law, such as Rep. Act No. 8974, but to principles of equity as well. Admittedly, there is no way, at least for the present, to immediately ascertain the value of the improvements and structures since such valuation is a matter for factual determination.43 Yet Rep. Act No. 8974 permits an expedited means by which the Government can immediately take possession of the property without having to await precise determination of the valuation. Section 4(c) of Rep. Act No. 8974 states that "in case the completion of a government infrastructure project is of utmost urgency and importance, and there is no existing valuation of the area concerned, the implementing agency shall immediately pay the owner of the property its proferred value, taking into consideration the standards prescribed in Section 5 [of the law]."44 The "proffered value" may strike as a highly subjective standard based solely on the intuition of the government, but Rep. Act No. 8974 does provide relevant standards by which "proffered value" should be based,45 as well as the certainty of judicial determination of the propriety of the proffered value.
46

In filing the complaint for expropriation, the Government alleged to have deposited the amount of P3 Billion earmarked for expropriation, representing the assessed value of the property. The making of the deposit, including the determination of the amount of the deposit, was undertaken under the erroneous notion that Rule 67, and not Rep. Act No. 8974, is the applicable law. Still, as regards the amount, the Court sees no impediment to recognize this sum of P3 Billion as the proffered value under Section 4(b) of Rep. Act No. 8974. After all, in the initial determination of the proffered value, the Government is not strictly required to adhere to any predetermined standards, although its proffered value may later be subjected to judicial review using the standards enumerated under Section 5 of Rep. Act No. 8974. How should we appreciate the questioned order of Hon. Gingoyon, which pegged the amount to be immediately paid to PIATCO at around $62.3 Million? The Order dated 4 January 2005, which mandated such amount, proves problematic in that regard. While the initial sum of P3 Billion may have been based on the assessed value, a standard which should not however apply in this case, the RTC cites without qualification Section 4(a) of Rep. Act No. 8974 as the basis for the amount of $62.3 Million, thus leaving the impression that the BIR zonal valuation may form part of the basis for just compensation, which should not be the case. Moreover, respondent judge made no attempt to apply the enumerated guidelines for determination of just compensation under Section 5 of Rep. Act No. 8974, as required for judicial review of the proffered value. The Court notes that in the 10 January 2005 Omnibus Order, the RTC noted that the concessions agreement entered into between the Government and PIATCO stated that the actual cost of building NAIA 3 was "not less than" US$350 Million.47 The RTC then proceeded to observe that while Rep. Act No. 8974 required the immediate payment to PIATCO the amount equivalent to 100% of the value of NAIA 3, the amount deposited by the Government constituted only 18% of this value. At this point, no binding import should be given to this observation that the actual cost of building NAIA 3 was "not less than" US$350 Million, as the final conclusions on the amount of just compensation can come only after due ascertainment in accordance with the standards set under Rep. Act No. 8974, not the declarations of the parties. At the same time, the expressed linkage between the BIR zonal valuation and the amount of just compensation in this case, is revelatory of erroneous thought on the part of the RTC. We have already pointed out the irrelevance of the BIR zonal valuation as an appropriate basis for valuation in this case, PIATCO not being the owner of the land

on which the NAIA 3 facilities stand. The subject order is flawed insofar as it fails to qualify that such standard is inappropriate. It does appear that the amount of US$62.3 Million was based on the certification issued by the LBP-Baclaran that the Republic of the Philippines maintained a total balance in that branch amounting to such amount. Yet the actual representation of the $62.3 Million is not clear. The Land Bank Certification expressing such amount does state that it was issued upon request of the Manila International Airport Authority "purportedly as guaranty deposit for the expropriation complaint."48 The Government claims in its Memorandum that the entire amount was made available as a guaranty fund for the final and executory judgment of the trial court, and not merely for the issuance of the writ of possession.49 One could readily conclude that the entire amount of US$62.3 Million was intended by the Government to answer for whatever guaranties may be required for the purpose of the expropriation complaint. Still, such intention the Government may have had as to the entire US$62.3 Million is only inferentially established. In ascertaining the proffered value adduced by the Government, the amount of P3 Billion as the amount deposited characterized in the complaint as "to be held by [Land Bank] subject to the [RTCs] orders,"50 should be deemed as controlling. There is no clear evidence that the Government intended to offer US$62.3 Million as the initial payment of just compensation, the wording of the Land Bank Certification notwithstanding, and credence should be given to the consistent position of the Government on that aspect. In any event, for the RTC to be able to justify the payment of US$62.3 Million to PIATCO and not P3 Billion Pesos, he would have to establish that the higher amount represents the valuation of the structures/improvements, and not the BIR zonal valuation on the land wherein NAIA 3 is built. The Order dated 5 January 2005 fails to establish such integral fact, and in the absence of contravening proof, the proffered value of P3 Billion, as presented by the Government, should prevail. Strikingly, the Government submits that assuming that Rep. Act No. 8974 is applicable, the deposited amount ofP3 Billion should be considered as the proffered value, since the amount was based on comparative values made by the City Assessor.51 Accordingly, it should be deemed as having faithfully complied with the requirements of the statute.52 While the Court agrees that P3 Billion should be considered as the correct proffered value, still we cannot deem the Government as having faithfully complied with Rep. Act No. 8974. For the law plainly requires direct payment to the property owner, and not a mere deposit with the authorized

government depositary. Without such direct payment, no writ of possession may be obtained. Writ of Possession May Not Be Implemented Until Actual Receipt by PIATCO of Proferred Value The Court thus finds another error on the part of the RTC. The RTC authorized the issuance of the writ of possession to the Government notwithstanding the fact that no payment of any amount had yet been made to PIATCO, despite the clear command of Rep. Act No. 8974 that there must first be payment before the writ of possession can issue. While the RTC did direct the LBP-Baclaran to immediately release the amount of US$62 Million to PIATCO, it should have likewise suspended the writ of possession, nay, withdrawn it altogether, until the Government shall have actually paid PIATCO. This is the inevitable consequence of the clear command of Rep. Act No. 8974 that requires immediate payment of the initially determined amount of just compensation should be effected. Otherwise, the overpowering intention of Rep. Act No. 8974 of ensuring payment first before transfer of repossession would be eviscerated. Rep. Act No. 8974 represents a significant change from previous expropriation laws such as Rule 67, or even Section 19 of the Local Government Code. Rule 67 and the Local Government Code merely provided that the Government deposit the initial amounts53 antecedent to acquiring possession of the property with, respectively, an authorized Government depositary54 or the proper court.55 In both cases, the private owner does not receive compensation prior to the deprivation of property. On the other hand, Rep. Act No. 8974 mandates immediate payment of the initial just compensation prior to the issuance of the writ of possession in favor of the Government. Rep. Act No. 8974 is plainly clear in imposing the requirement of immediate prepayment, and no amount of statutory deconstruction can evade such requisite. It enshrines a new approach towards eminent domain that reconciles the inherent unease attending expropriation proceedings with a position of fundamental equity.

While expropriation proceedings have always demanded just compensation in exchange for private property, the previous deposit requirement impeded immediate compensation to the private owner, especially in cases wherein the determination of the final amount of compensation would prove highly disputed. Under the new modality prescribed by Rep. Act No. 8974, the private owner sees immediate monetary recompense with the same degree of speed as the taking of his/her property. While eminent domain lies as one of the inherent powers of the State, there is no requirement that it undertake a prolonged procedure, or that the payment of the private owner be protracted as far as practicable. In fact, the expedited procedure of payment, as highlighted under Rep. Act No. 8974, is inherently more fair, especially to the layperson who would be hard-pressed to fully comprehend the social value of expropriation in the first place. Immediate payment placates to some degree whatever ill-will that arises from expropriation, as well as satisfies the demand of basic fairness. The Court has the duty to implement Rep. Act No. 8974 and to direct compliance with the requirement of immediate payment in this case. Accordingly, the Writ of Possession dated 21 December 2004 should be held in abeyance, pending proof of actual payment by the Government to PIATCO of the proffered value of the NAIA 3 facilities, which totals P3,002,125,000.00. Rights of the Government upon Issuance of the Writ of Possession Once the Government pays PIATCO the amount of the proffered value of P3 Billion, it will be entitled to the Writ of Possession. However, the Government questions the qualification imposed by the RTC in its 4 January 2005Order consisting of the prohibition on the Government from performing acts of ownership such as awarding concessions or leasing any part of NAIA 3 to other parties. To be certain, the RTC, in its 10 January 2005Omnibus Order, expressly stated that it was not affirming "the superfluous part of the Order [of 4 January 2005] prohibiting the plaintiffs from awarding concessions or leasing any part of NAIA [3] to other parties."56 Still, such statement was predicated on the notion that since the Government was not yet the

owner of NAIA 3 until final payment of just compensation, it was obviously incapacitated to perform such acts of ownership. In deciding this question, the 2004 Resolution in Agan cannot be ignored, particularly the declaration that "[f]or the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures." The obvious import of this holding is that unless PIATCO is paid just compensation, the Government is barred from "taking over," a phrase which in the strictest sense could encompass even a bar of physical possession of NAIA 3, much less operation of the facilities. There are critical reasons for the Court to view the 2004 Resolution less stringently, and thus allow the operation by the Government of NAIA 3 upon the effectivity of the Writ of Possession. For one, the national prestige is diminished every day that passes with the NAIA 3 remaining mothballed. For another, the continued non-use of the facilities contributes to its physical deterioration, if it has not already. And still for another, the economic benefits to the Government and the country at large are beyond dispute once the NAIA 3 is put in operation. Rep. Act No. 8974 provides the appropriate answer for the standard that governs the extent of the acts the Government may be authorized to perform upon the issuance of the writ of possession. Section 4 states that "the court shall immediately issue to the implementing agency an order to take possession of the property and start the implementation of the project." We hold that accordingly, once the Writ of Possession is effective, the Government itself is authorized to perform the acts that are essential to the operation of the NAIA 3 as an international airport terminal upon the effectivity of the Writ of Possession. These would include the repair, reconditioning and improvement of the complex, maintenance of the existing facilities and equipment, installation of new facilities and equipment, provision of services and facilities pertaining to the facilitation of air traffic and transport, and other services that are integral to a modern-day international airport. The Governments position is more expansive than that adopted by the Court. It argues that with the writ of possession, it is enabled to perform acts de jure on the expropriated property. It cites Republic v. Tagle,57 as well as the statement therein that "the expropriation of real property does not include mere physical entry or occupation of land," and from them concludes that "its mere physical entry and occupation of the property fall short of the taking of title, which includes all the rights that may be exercised by an owner over the subject property."

This conclusion is indeed lifted directly from statements in Tagle,58 but not from the ratio decidendi of that case.Tagle concerned whether a writ of possession in favor of the Government was still necessary in light of the fact that it was already in actual possession of the property. In ruling that the Government was entitled to the writ of possession, the Court in Tagle explains that such writ vested not only physical possession, but also the legal right to possess the property. Continues the Court, such legal right to possess was particularly important in the case, as there was a pending suit against the Republic for unlawful detainer, and the writ of possession would serve to safeguard the Government from eviction.59 At the same time, Tagle conforms to the obvious, that there is no transfer of ownership as of yet by virtue of the writ of possession. Tagle may concede that the Government is entitled to exercise more than just the right of possession by virtue of the writ of possession, yet it cannot be construed to grant the Government the entire panoply of rights that are available to the owner. Certainly, neither Tagle nor any other case or law, lends support to the Governments proposition that it acquires beneficial or equitable ownership of the expropriated property merely through the writ of possession. Indeed, this Court has been vigilant in defense of the rights of the property owner who has been validly deprived of possession, yet retains legal title over the expropriated property pending payment of just compensation. We reiterated the various doctrines of such import in our recent holding in Republic v. Lim:60 The recognized rule is that title to the property expropriated shall pass from the owner to the expropriator onlyupon full payment of the just compensation. Jurisprudence on this settled principle is consistent both here and in other democratic jurisdictions. In Association of Small Landowners in the Philippines, Inc. et al., vs. Secretary of Agrarian Reform[61], thus: "Title to property which is the subject of condemnation proceedings does not vest the condemnor until the judgment fixing just compensation is entered and paid, but the condemnors title relates back to the date on which the petition under the Eminent Domain Act, or the commissioners report under the Local Improvement Act, is filed. x x x Although the right to appropriate and use land taken for a canal is complete at the time of entry, title to the property taken remains in the owner until payment is actually made. (Emphasis supplied.)

In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to property does not pass to the condemnor until just compensation had actually been made. In fact, the decisions appear to be uniform to this effect. As early as 1838, in Rubottom v. McLure, it was held that actual payment to the owner of the condemned property was a condition precedent to the investment of the title to the property in the State albeit not to the appropriation of it to public use. In Rexford v. Knight, the Court of Appeals of New York said that the construction upon the statutes was that the fee did not vest in the State until the payment of the compensation although the authority to enter upon and appropriate the land was complete prior to the payment. Kennedy further said that both on principle and authority the rule is . . . that the right to enter on and use the property is complete, as soon as the property is actually appropriated under the authority of law for a public use, but that the title does not pass from the owner without his consent, until just compensation has been made to him." Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that: If the laws which we have exhibited or cited in the preceding discussion are attentively examined it will be apparent that the method of expropriation adopted in this jurisdiction is such as to afford absolute reassurance that no piece of land can be finally and irrevocably taken from an unwilling owner until compensation is paid...."(Emphasis supplied.) Clearly, without full payment of just compensation, there can be no transfer of title from the landowner to the expropriator. Otherwise stated, the Republics acquisition of ownership is conditioned upon the full payment of just compensation within a reasonable time. Significantly, in Municipality of Bian v. Garcia[62] this Court ruled that the expropriation of lands consists of two stages, to wit: "x x x The first is concerned with the determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context of the facts involved in the suit. It ends with an order, if not of dismissal of the action, "of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the filing of the complaint" x x x.

The second phase of the eminent domain action is concerned with the determination by the court of "the just compensation for the property sought to be taken." This is done by the court with the assistance of not more than three (3) commissioners. x x x. It is only upon the completion of these two stages that expropriation is said to have been completed. In Republic v. Salem Investment Corporation[63] , we ruled that, "the process is not completed until payment of just compensation." Thus, here, the failure of the Republic to pay respondent and his predecessors-in-interest for a period of 57 years rendered the expropriation process incomplete. Lim serves fair warning to the Government and its agencies who consistently refuse to pay just compensation due to the private property owner whose property had been expropriated. At the same time, Lim emphasizes the fragility of the rights of the Government as possessor pending the final payment of just compensation, without diminishing the potency of such rights. Indeed, the public policy, enshrined foremost in the Constitution, mandates that the Government must pay for the private property it expropriates. Consequently, the proper judicial attitude is to guarantee compliance with this primordial right to just compensation. Final Determination of Just Compensation Within 60 Days The issuance of the writ of possession does not write finis to the expropriation proceedings. As earlier pointed out, expropriation is not completed until payment to the property owner of just compensation. The proffered value stands as merely a provisional determination of the amount of just compensation, the payment of which is sufficient to transfer possession of the property to the Government. However, to effectuate the transfer of ownership, it is necessary for the Government to pay the property owner the final just compensation. In Lim, the Court went as far as to countenance, given the exceptional circumstances of that case, the reversion of the validly expropriated property to private ownership due to the failure of the Government to pay just compensation in that case.64 It was noted in that case that the Government deliberately refused to pay just compensation. The Court went on to rule that "in cases where the government failed to pay just compensation within five (5) years from the finality of the judgment in the

expropriation proceedings, the owners concerned shall have the right to recover possession of their property."65 Rep. Act No. 8974 mandates a speedy method by which the final determination of just compensation may be had. Section 4 provides: In the event that the owner of the property contests the implementing agencys proffered value, the court shall determine the just compensation to be paid the owner within sixty (60) days from the date of filing of the expropriation case. When the decision of the court becomes final and executory, the implementing agency shall pay the owner the difference between the amount already paid and the just compensation as determined by the court. We hold that this provision should apply in this case. The sixty (60)-day period prescribed in Rep. Act No. 8974 gives teeth to the laws avowed policy "to ensure that owners of real property acquired for national government infrastructure projects are promptly paid just compensation."66 In this case, there already has been irreversible delay in the prompt payment of PIATCO of just compensation, and it is no longer possible for the RTC to determine the just compensation due PIATCO within sixty (60) days from the filing of the complaint last 21 December 2004, as contemplated by the law. Still, it is feasible to effectuate the spirit of the law by requiring the trial court to make such determination within sixty (60) days from finality of this decision, in accordance with the guidelines laid down in Rep. Act No. 8974 and its Implementing Rules. Of course, once the amount of just compensation has been finally determined, the Government is obliged to pay PIATCO the said amount. As shown in Lim and other like-minded cases, the Governments refusal to make such payment is indubitably actionable in court. Appointment of Commissioners The next argument for consideration is the claim of the Government that the RTC erred in appointing the three commissioners in its 7 January 2005 Order without prior consultation with either the Government or PIATCO, or without affording the Government the opportunity to object to the appointment of these commissioners. We can dispose of this argument without complication.

It must be noted that Rep. Act No. 8974 is silent on the appointment of commissioners tasked with the ascertainment of just compensation.67 This protocol though is sanctioned under Rule 67. We rule that the appointment of commissioners under Rule 67 may be resorted to, even in expropriation proceedings under Rep. Act No. 8974, since the application of the provisions of Rule 67 in that regard do not conflict with the statute. As earlier stated, Section 14 of the Implementing Rules does allow such other incidents affecting the complaint to be resolved under the provisions on expropriation of Rule 67 of the Rules of Court. Even without Rule 67, reference during trial to a commissioner of the examination of an issue of fact is sanctioned under Rule 32 of the Rules of Court. But while the appointment of commissioners under the aegis of Rule 67 may be sanctioned in expropriation proceedings under Rep. Act No. 8974, the standards to be observed for the determination of just compensation are provided not in Rule 67 but in the statute. In particular, the governing standards for the determination of just compensation for the NAIA 3 facilities are found in Section 10 of the Implementing Rules for Rep. Act No. 8974, which provides for the replacement cost method in the valuation of improvements and structures.68 Nothing in Rule 67 or Rep. Act No. 8974 requires that the RTC consult with the parties in the expropriation case on who should be appointed as commissioners. Neither does the Court feel that such a requirement should be imposed in this case. We did rule in Municipality of Talisay v. Ramirez69 that "there is nothing to prevent [the trial court] from seeking the recommendations of the parties on [the] matter [of appointment of commissioners], the better to ensure their fair representation."70 At the same time, such solicitation of recommendations is not obligatory on the part of the court, hence we cannot impute error on the part of the RTC in its exercise of solitary discretion in the appointment of the commissioners. What Rule 67 does allow though is for the parties to protest the appointment of any of these commissioners, as provided under Section 5 of the Rule. These objections though must be made filed within ten (10) days from service of the order of appointment of the commissioners.71 In this case, the proper recourse of the Government to challenge the choice of the commissioners is to file an objection with the trial court, conformably with Section 5, Rule 67, and not as it has done, assail the same through a special civil action for certiorari. Considering that the expropriation proceedings in this case were effectively halted seven (7) days after the Order appointing the commissioners,72 it is permissible to allow the parties to file their objections with the RTC within five (5) days from finality of this decision.

Insufficient Ground for Inhibition of Respondent Judge The final argument for disposition is the claim of the Government is that Hon. Gingoyon has prejudged the expropriation case against the Governments cause and, thus, should be required to inhibit himself. This grave charge is predicated on facts which the Government characterizes as "undeniable." In particular, the Government notes that the 4 January 2005 Order was issued motu proprio, without any preceding motion, notice or hearing. Further, such order, which directed the payment of US$62 Million to PIATCO, was attended with error in the computation of just compensation. The Government also notes that the said Order was issued even before summons had been served on PIATCO. The disqualification of a judge is a deprivation of his/her judicial power73 and should not be allowed on the basis of mere speculations and surmises. It certainly cannot be predicated on the adverse nature of the judges rulings towards the movant for inhibition, especially if these rulings are in accord with law. Neither could inhibition be justified merely on the erroneous nature of the rulings of the judge. We emphasized in Webb v. People:74 To prove bias and prejudice on the part of respondent judge, petitioners harp on the alleged adverse and erroneous rulings of respondent judge on their various motions. By themselves, however, they do not sufficiently prove bias and prejudice to disqualify respondent judge. To be disqualifying, the bias and prejudice must be shown to have stemmed from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case. Opinions formed in the course of judicial proceedings, although erroneous, as long as they are based on the evidence presented and conduct observed by the judge, do not prove personal bias or prejudice on the part of the judge.As a general rule, repeated rulings against a litigant, no matter how erroneous and vigorously and consistently expressed, are not a basis for disqualification of a judge on grounds of bias and prejudice. Extrinsic evidence is required to establish bias, bad faith, malice or corrupt purpose, in addition to the palpable error which may be inferred from the decision or order itself. Although the decision may seem so erroneous as to raise doubts concerning a judge's integrity, absent extrinsic evidence, the decision itself would be insufficient to establish a case against the judge. The only exception to

the rule is when the error is so gross and patent as to produce an ineluctable inference of bad faith or malice.75 The Governments contentions against Hon. Gingoyon are severely undercut by the fact that the 21 December 2004 Order, which the 4 January 2005 Order sought to rectify, was indeed severely flawed as it erroneously applied the provisions of Rule 67 of the Rules of Court, instead of Rep. Act No. 8974, in ascertaining compliance with the requisites for the issuance of the writ of possession. The 4 January 2005 Order, which according to the Government establishes Hon. Gingoyons bias, was promulgated precisely to correct the previous error by applying the correct provisions of law. It would not speak well of the Court if it sanctions a judge for wanting or even attempting to correct a previous erroneous order which precisely is the right move to take. Neither are we convinced that the motu proprio issuance of the 4 January 2005 Order, without the benefit of notice or hearing, sufficiently evinces bias on the part of Hon. Gingoyon. The motu proprio amendment by a court of an erroneous order previously issued may be sanctioned depending on the circumstances, in line with the longrecognized principle that every court has inherent power to do all things reasonably necessary for the administration of justice within the scope of its jurisdiction.76 Section 5(g), Rule 135 of the Rules of Court further recognizes the inherent power of courts "to amend and control its process and orders so as to make them conformable to law and justice,"77 a power which Hon. Gingoyon noted in his 10 January 2005 Omnibus Order.78This inherent power includes the right of the court to reverse itself, especially when in its honest opinion it has committed an error or mistake in judgment, and that to adhere to its decision will cause injustice to a party litigant.79 Certainly, the 4 January 2005 Order was designed to make the RTCs previous order conformable to law and justice, particularly to apply the correct law of the case. Of course, as earlier established, this effort proved incomplete, as the 4 January 2005 Order did not correctly apply Rep. Act No. 8974 in several respects. Still, at least, the 4 January 2005 Order correctly reformed the most basic premise of the case that Rep. Act No. 8974 governs the expropriation proceedings. Nonetheless, the Government belittles Hon. Gingoyons invocation of Section 5(g), Rule 135 as "patently without merit". Certainly merit can be seen by the fact that the 4 January 2005 Order reoriented the expropriation proceedings towards the correct

governing law. Still, the Government claims that the unilateral act of the RTC did not conform to law or justice, as it was not afforded the right to be heard. The Court would be more charitably disposed towards this argument if not for the fact that the earlier order with the 4 January 2005 Order sought to correct was itself issued without the benefit of any hearing. In fact, nothing either in Rule 67 or Rep. Act No. 8975 requires the conduct of a hearing prior to the issuance of the writ of possession, which by design is available immediately upon the filing of the complaint provided that the requisites attaching thereto are present. Indeed, this expedited process for the obtention of a writ of possession in expropriation cases comes at the expense of the rights of the property owner to be heard or to be deprived of possession. Considering these predicates, it would be highly awry to demand that an order modifying the earlier issuance of a writ of possession in an expropriation case be barred until the staging of a hearing, when the issuance of the writ of possession itself is not subject to hearing. Perhaps the conduct of a hearing under these circumstances would be prudent. However, hearing is not mandatory, and the failure to conduct one does not establish the manifest bias required for the inhibition of the judge. The Government likewise faults Hon. Gingoyon for using the amount of US$350 Million as the basis for the 100% deposit under Rep. Act No. 8974. The Court has noted that this statement was predicated on the erroneous belief that the BIR zonal valuation applies as a standard for determination of just compensation in this case. Yet this is manifest not of bias, but merely of error on the part of the judge. Indeed, the Government was not the only victim of the errors of the RTC in the assailed orders. PIATCO itself was injured by the issuance by the RTC of the writ of possession, even though the former had yet to be paid any amount of just compensation. At the same time, the Government was also prejudiced by the erroneous ruling of the RTC that the amount of US$62.3 Million, and notP3 Billion, should be released to PIATCO. The Court has not been remiss in pointing out the multiple errors committed by the RTC in its assailed orders, to the prejudice of both parties. This attitude of error towards all does not ipso facto negate the charge of bias. Still, great care should be had in requiring the inhibition of judges simply because the magistrate did err. Incompetence may be a ground for administrative sanction, but not for inhibition, which requires lack of objectivity or impartiality to sit on a case.

The Court should necessarily guard against adopting a standard that a judge should be inhibited from hearing the case if one litigant loses trust in the judge. Such loss of trust on the part of the Government may be palpable, yet inhibition cannot be grounded merely on the feelings of the party-litigants. Indeed, every losing litigant in any case can resort to claiming that the judge was biased, and he/she will gain a sympathetic ear from friends, family, and people who do not understand the judicial process. The test in believing such a proposition should not be the vehemence of the litigants claim of bias, but the Courts judicious estimation, as people who know better than to believe any old cry of "wolf!", whether such bias has been irrefutably exhibited. The Court acknowledges that it had been previously held that "at the very first sign of lack of faith and trust in his actions, whether well-grounded or not, the judge has no other alternative but to inhibit himself from the case."80But this doctrine is qualified by the entrenched rule that "a judge may not be legally prohibited from sitting in a litigation, but when circumstances appear that will induce doubt to his honest actuations and probity in favor of either party, or incite such state of mind, he should conduct a careful selfexamination. He should exercise his discretion in a way that the people's faith in the Courts of Justice is not impaired."81 And a self-assessment by the judge that he/she is not impaired to hear the case will be respected by the Court absent any evidence to the contrary. As held in Chin v. Court of Appeals: An allegation of prejudgment, without more, constitutes mere conjecture and is not one of the "just and valid reasons" contemplated in the second paragraph of Rule 137 of the Rules of Court for which a judge may inhibit himself from hearing the case. We have repeatedly held that mere suspicion that a judge is partial to a party is not enough. Bare allegations of partiality and prejudgment will not suffice in the absence of clear and convincing evidence to overcome the presumption that the judge will undertake his noble role to dispense justice according to law and evidence and without fear or favor. There should be adequate evidence to prove the allegations, and there must be showing that the judge had an interest, personal or otherwise, in the prosecution of the case. To be a disqualifying circumstance, the bias and prejudice must be shown to have stemmed from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case.82

The mere vehemence of the Governments claim of bias does not translate to clear and convincing evidence of impairing bias. There is no sufficient ground to direct the inhibition of Hon. Gingoyon from hearing the expropriation case. In conclusion, the Court summarizes its rulings as follows: (1) The 2004 Resolution in Agan sets the base requirement that has to be observed before the Government may take over the NAIA 3, that there must be payment to PIATCO of just compensation in accordance with law and equity. Any ruling in the present expropriation case must be conformable to the dictates of the Court as pronounced in the Agan cases. (2) Rep. Act No. 8974 applies in this case, particularly insofar as it requires the immediate payment by the Government of at least the proffered value of the NAIA 3 facilities to PIATCO and provides certain valuation standards or methods for the determination of just compensation. (3) Applying Rep. Act No. 8974, the implementation of Writ of Possession in favor of the Government over NAIA 3 is held in abeyance until PIATCO is directly paid the amount of P3 Billion, representing the proffered value of NAIA 3 under Section 4(c) of the law. (4) Applying Rep. Act No. 8974, the Government is authorized to start the implementation of the NAIA 3 Airport terminal project by performing the acts that are essential to the operation of the NAIA 3 as an international airport terminal upon the effectivity of the Writ of Possession, subject to the conditions above-stated. As prescribed by the Court, such authority encompasses "the repair, reconditioning and improvement of the complex, maintenance of the existing facilities and equipment, installation of new facilities and equipment, provision of services and facilities pertaining to the facilitation of air traffic and transport, and other services that are integral to a modern-day international airport."83 (5) The RTC is mandated to complete its determination of the just compensation within sixty (60) days from finality of this Decision. In doing so, the RTC is obliged to comply with "law and equity" as ordained in Again and the standard set under Implementing Rules of Rep. Act No. 8974 which is the "replacement cost method" as the standard of valuation of structures and improvements.

(6) There was no grave abuse of discretion attending the RTC Order appointing the commissioners for the purpose of determining just compensation. The provisions on commissioners under Rule 67 shall apply insofar as they are not inconsistent with Rep. Act No. 8974, its Implementing Rules, or the rulings of the Court in Agan. (7) The Government shall pay the just compensation fixed in the decision of the trial court to PIATCO immediately upon the finality of the said decision. (8) There is no basis for the Court to direct the inhibition of Hon. Gingoyon. All told, the Court finds no grave abuse of discretion on the part of the RTC to warrant the nullification of the questioned orders. Nonetheless, portions of these orders should be modified to conform with law and the pronouncements made by the Court herein. WHEREFORE, the Petition is GRANTED in PART with respect to the orders dated 4 January 2005 and 10 January 2005 of the lower court. Said orders are AFFIRMED with the following MODIFICATIONS: 1) The implementation of the Writ of Possession dated 21 December 2005 is HELD IN ABEYANCE, pending payment by petitioners to PIATCO of the amount of Three Billion Two Million One Hundred Twenty Five Thousand Pesos (P3,002,125,000.00), representing the proffered value of the NAIA 3 facilities; 2) Petitioners, upon the effectivity of the Writ of Possession, are authorized start the implementation of the Ninoy Aquino International Airport Pasenger Terminal III project by performing the acts that are essential to the operation of the said International Airport Passenger Terminal project; 3) RTC Branch 117 is hereby directed, within sixty (60) days from finality of this Decision, to determine the just compensation to be paid to PIATCO by the Government. The Order dated 7 January 2005 is AFFIRMED in all respects subject to the qualification that the parties are given ten (10) days from finality of this Decision to file, if they so choose, objections to the appointment of the commissioners decreed therein. The Temporary Restraining Order dated 14 January 2005 is hereby LIFTED.

No pronouncement as to costs. SO ORDERED.


Footnotes 1 450 Phil. 744 (2003). The Motions for Reconsideration were denied in a Resolution dated 21 January 2004, see 420 SCRA 575. 2 Ibid. 3 "In sum, this Court rules that in view of the absence of the requisite financial capacity of the Paircargo Consortium, predecessor of respondent PIATCO, the award by the PBAC of the contract for the construction, operation and maintenance of the NAIA IPT III is null and void. Further, considering that the 1997 Concession Agreement contains material and substantial amendments, which amendments had the effect of converting the 1997 Concession Agreement into an entirely different agreement from the contract bidded upon, the 1997 Concession Agreement is similarly null and void for being contrary to public policy. The provisions under Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997 Concession Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA, which constitute a direct government guarantee expressly prohibited by, among others, the BOT Law and its Implementing Rules and Regulations are also null and void. The Supplements, being accessory contracts to the ARCA, are likewise null and void." Id. at 840. 4 Id. at 898. Per Separate Opinion, J. Panganiban. 5 Ibid at 899. Per Separate Opinion, J. Panganiban. Emphasis supplied. 6 G.R. Nos. 155001, 155547 & 155561, 21 January 2004, 420 SCRA 575. 7 Id. at 603. Emphasis supplied. 8 Rollo, pp. 27-28. 9 Id. at 60-61. 10 Ibid. 11 Particularly the Republic of the Philippines, represented by Executive Secretary Eduardo Ermita, the Department of Transportation and Communcations, represented by its Secretary Leandro Mendoza, and the Manila International Airport Authority, represented by its General Manager Alfonso Cusi. See rollo, pp. 88-90. 12 Rollo, p. 93. 13 For brevitys sake, all further references to this amount will be to this rounded off figure denominated in Philippine Pesos. 14 Based on the resolution by the Board of Directors of the Manila International Airport Authority to use the amount of P16,450.00 per square meter as the assessed value of the NAIA 3 Terminal. See rollo, p. 103. 15 Docketed as Civil Case No. 04-0876-9. 16 Rollo, pp. 108-109. 17 Cited as G.R. No. 142304, June 20, 2001. See rollo, p. 109. 18 Rollo, p. 255. According to PIATCO, on 21 December 2004, the same date of the filing of the complaint for expropriation and the issuance of the writ of possession, "hundreds of PNP fully armed (sic) SWAT teams flanked [the NAIA 3 facilities]", even though it had not yet been served summons. 19 Id. at 76-77. 20 Id. at 87.

21 22

Id. at 240-241. Id. at 34-35. 23 Id. at 603. Emphasis supplied. 24 See rollo, p. 297-298. "Petitioners agree with this Honorable Courts statement that [f]or the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures. However, petitioners would like to stress the qualification enunciated by this Honorable Court that the compensation must be just and in accordance with law and equity." 25 The NAIA 3 facility stands on a parcel of land owned by the Bases Conversion Development Authority.See rollo, p. 27. 26 See Article 415(1), Civil Code. 27 Rollo, infra. 28 See Section 1, Rep. Act No. 8974. 29 As prescribed by Section 10 of the Implementing Rules to Rep. Act No. 8974, in relation to Sections 4(a) and 7, Rep. Act No. 8974. 30 See Section 2, Rule 67, Rules of Court. 31 Private Respondents Memorandum, pp. 26-27. Emphasis not ours. See rollo, infra. 32 See Section 14, Implementing Rules. 33 See Agan 1, supra note 1 at 631-632. 34 See Section 2(a), Rep. Act No. 6957, as amended. 35 See Section 2(b), Rep. Act No. 6957, as amended. 36 G.R. No. 114222, 6 April 1995, 243 SCRA 436. 37 Ibid. 38 See Article 415(1), Civil Code. 39 Rollo, p. 42. 40 Blacks Law Dictionary, 6th ed., p. 1387. 41 See Section 1, Rep. Act No. 8974. 42 See Section 10, Implementing Rules to Rep. Act No. 8974. The replacement cost method is generally defined as "the amount necessary to replace the improvements/structures, based on the current market prices for materials, equipment, labor, contractors profit and overhead, and all other attendant costs associated with the acquisition and installation in place of the affected improvements/structures." 43 The replacement cost method is generally defined as "the amount necessary to replace the improvements/structures, based on the current market prices for materials, equipment, labor, contractors profit and overhead, and all other attendant costs associated with the acquisition and installation in place of the affected improvements/structures." Ibid. 44 See Section 4(c), Rep. Act No. 8974. 45 See Section 5, id. 46 "In the event that the owner of the property contests the implementing agencys proffered value, the court shall determine the just compensation to be paid the owner within sixty (60) days from the date of filing of the expropriation case." See Section 4, id. 47 Rollo, p. 84. 48 Annex "K-1" to Petition. See rollo, infra. 49 Rollo, p. 397. 50 Complaint dated 21 December 2004. See rollo, infra. 51 Rollo, p. 394.

52 53

Id. at 393. The assessed market value under Rule 67 of the Rules of Court, and 15% of the fair market value under the Local Government Code. 54 See Section 2, Rule 67, Rules of Court. 55 See Section 19, Local Government Code. 56 Ibid. 57 Cited as 299 SCRA 549 (1998). Rollo, p. 413. 58 "In exercising this power, petitioner intended to acquire not only physical possession but also the legal right to possess and ultimately to own the subject property. Hence, its mere physical entry and occupation of the property fall short of the taking of title, which includes all the rights that may be exercised by an owner over the subject property." Republic v. Tagle, 359 Phil. 892, 902 (1998). 59 Republic v. Tagle, id. at 903. 60 G.R. No. 161656, 29 June 2005. 61 G.R. No. 78742, July 14, 1989, 175 SCRA 343. 62 G.R. No. 69260, December 22, 1989, 180 SCRA 576, 583-584. 63 G.R. No. 137569, June 23, 2000, 334 SCRA 320, 329. 64 The Court in Republic v. Lim however recognized the exceptional circumstances in that case, wherein the government had not paid just compensation in the 57 years that had passed since the expropriation proceedings were terminated. The general rule, as stated in Republic, remained that "non-payment of just compensation (in expropriation proceedings) does not entitle the private landowners to recover possession of the expropriated lots." Id. 65 Republic v. Lim, supra note 60. The 5 year period set in Lim was based on Section 6, Rule 39 of the Rules of Court, which sets a 5 year period within which a final and executory judgment or order may be executed on motion. Id. 66 See Section 1, Rep. Act No. 8974. 67 Section 11 of the Implementing Rules does allow the implementing government agency to engage the services of government financing institutions or private appraisers duly accredited by those institutions to undertake the appraisal of the property, including the land and/or improvements and structures. Yet the engagement of these appraisers at the election of the Government is clearly different from the appointment by the trial court of commissioners. The differences extend beyond merely the selecting authority. The engagement of appraisers under Section 11 primarily occurs before the filing of the expropriation complaint, when the Government is obliged to determine the current relevant zonal valuation of the land to be expropriated, the valuation of the structures and improvements using the replacement cost method, or the proffered value of the property for expropriation, all for the purpose of making the initial payment necessary for the writ of possession under Section 4 of Rep. Act No. 8974. This initial determination of the amount is generally made by the Government, and not by the courts, and the engagement of appraisers is attuned for such purpose. However, if the Government engages these appraisers after the initial payment has been made to the property owner, for the express purpose of making the final determination of just compensation, there is no rule that binds the trial court to the findings of these appraisers. Neither are these appraisers obliged to receive evidence submitted by the parties, unlike the commissioners, who are expressly authorized to do so under Section 6, Rule 67. 68 Supra note 42. 69 G.R. No. 77071, 22 March 1990, 183 SCRA 528.

70 71

Id. at 532. See Section 5, Rule 67, Rules of Court. 72 By virtue of the issuance of the Temporary Restraining Order dated 14 January 2005. 73 See Estrada v. Desierto, G.R. Nos. 146710-15, 146738, 3 April 2001, 356 SCRA 108. 74 342 Phil. 206 (1997). 75 Id. at 216-217. See also Aleria v. Velez, G.R. No. 127400, 16 November 1998; People v. Court of Appeals, G.R. No. 129120, 2 July 1999; Seveses v. Court of Appeals, G.R. No. 102675, 13 October 1999; Soriano v. Angeles, G.R. No. 109920, 31 August 2000; People v. Gako, G.R. No. 135045, 15 December 2000; Gochan v. Gochan, G.R. No. 143089, 27 February 2003. 76 Shioji v. Harvey, 43 Phil. 333, 344 (1922). 77 Section 5, Rule 135, Rules of Court. 78 See rollo, p. 82. 79 Tocao v. Court of Appeals, G.R. No. 127405, 20 September 2001, 463 SCRA 365. See also Astraquillo v. Javier, L-20034, January 26, 1965, 13 SCRA 125. 80 See e.g., Gacayan v. Pamintuan, A.M. No. RTJ-99-1483, 17 September 1999, 314 SCRA 682. 81 See e.g., Pimentel vs. Salanga, 21 SCRA 160. 82 G.R. No. 144618, 15 August 2003, 206 SCRA 409. 83 Infra.

This Court, however, is not unmindful of the reality that the structures comprising the NAIA IPT III facility are almost complete and that funds have been spent by PIATCO in their construction. For the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures. The compensation must be just and in accordance with law and equity for the government cannot unjustly enrich itself at the expense of PIATCO and its investors. Agan involved solely the issue of the validity of THE PIATCO contracts. After striking down the contracts as void, we ruled that the State must pay just compensation to PIATCO before it could exercise the right to take over considering the undeniable fact that the latter spent a considerable sum of money to build the structures comprising the NAIA IPT III. The Court, however, did not spell out a rigid formula for just compensation to be paid to PIATCO except to say that it must be according to law and equity. The Courts language was carefully crafted to give the trial court sufficient flexibility in determining just compensation considering the exchange of charges and countercharges that the cost in building the said structures was unreasonably bloated. It ought to be stressed again that in Agan, we did not rule that the State cannot expropriate the said structures. Necessarily, we did not also set the procedure on how the expropriation proceedings should be conducted if the State would opt to expropriate said structures. We need not, therefore, strain in attempting to square our ruling in Agan with our ruling in the case at bar. If at all, Agan will later be relevant in fixing just compensation but not in determining which procedure to follow in the expropriation of NAIA IPT III. II R.A. No. 8974 cannot amend Rule 67 Article VIII, sec. 5 of the 1987 Constitution gave the Supreme Court the following powers: xxx (5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in all courts, the admission to the practice of law, the Integrated Bar, and legal assistance to the underprivileged. Such rules shall provide a simplified and inexpensive procedure for the speedy disposition of cases,

SEPARATE OPINION PUNO, J.: I join the exhaustive Dissent of Mr. Justice Corona. In addition, I proffer the following thoughts: I Agan case did not preclude right of State to expropriate The majority opinion took excruciating pains to reconcile our Decision in Agan and the inherent right of the State to expropriate private property. With due respect, the effort is strained and unnecessary for there nothing in Aganwhere it can be deduced that the right of the State to expropriate the subject property has been impaired or diminished. In Agan, we simply held: xxx

shall be uniform for all courts of the same grade, and shall not diminish, increase, or modify substantive rights. Rules of procedure of special courts and quasi-judicial bodies shall remain effective unless disapproved by the Supreme Court. In Echegaray v. Secretary of Justice1 we emphasized that the 1987 Constitution strengthened the rule making power of this Court, thus: The 1987 Constitution molded an even stronger and more independent judiciary. Among others, it enhanced the rule making power of this Court. x x x The rule making power of this Court was expanded. This Court for the first time was given the power to promulgate rules concerning the protection and enforcement of constitutional rights. x x x But most importantly, the 1987 Constitution took away the power of Congress to repeal, alter, or supplement rules concerning pleading, practice and procedure. In fine, the power to promulgate rules of pleading, practice and procedure is no longer shared by this Court with Congress x x x. Undoubtedly, Rule 67 is the rule this Court promulgated to govern the proceedings in expropriation cases filed in court. It has been the undeviating rule for quite a length of time. Following Article VIII, section 5(5) of the 1987 Constitution and the Echegaray jurisprudence, Rule 67 cannot be repealed or amended by Congress. This prohibition against non- repeal or non-amendment refers to any part of Rule 67 for Rule 67 is pure procedural law. Consequently, the Court should not chop Rule 67 into pieces and hold that some can be changed by Congress but others can be changed. The stance will dilute the rule making power of this Court which can not be allowed for it will weaken its institutional independence. III On December 12, 2005, the Solicitor General filed a Supplemental Manifestation and Motion. The Solicitor General informed the Court about an Order dated December 2, 2005 of the High Court of Justice, Queens Bench Division, London which reads: Claim No.: HT-05-269

TECHNOLOGY AND CONSTRUCTION COURT MR. JUSTICE RAMSEY BETWEEN: TAKENAKA CORPORATION (PHILIPPINE BRANCH) First Claimant ASAHIKOSAN CORPORATION Second Claimant -vs.PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC. Defendant _______________________________ ORDER DATED 2 DECEMBER 2005 _______________________________ UPON Judgment in default of Defence having been entered on 28 November 2005. AND UPON READING the Application Notice of the Claimants dated 28 November 2005 and the evidence referred to in Part C. AND UPON HEARING the solicitors for the Claimants and the solicitors for the Defendant appearing. IT IS ORDERED THAT:

IN THE HIGH COURT OF JUSTICE QUEENS BENCH DIVISION 1. Judgment be entered for the First Claimant in the sum of 21,688,012.18 United States dollars, together with interest in the sum of 6,052,805.83 United State dollars.

2. Judgment be entered for the Second Claimant in the sum of 30,319,284.36 United States dollars, together with interest in the sum of 5,442,628.26 United Stats dollars. 3. The Defendant do pay the Claimants costs in the action, to be subject to detailed assessment if not agreed. DATED this 2 day of December 2005. To be sure, the said Order is not yet final. Be that as it may, the Court cannot turn a blind eye to this new wrinkle of the case at bar. It is of judicial notice that despite Agan, the subject case has reached the international arbitral tribunals where the government and the private respondent have filed charges and countercharges. There is evident need to avoid the issues pestering the parties from further multiplying and for new proceedings to be started in other courts, lest public interest suffer further irretrievable prejudice. Towards this end, it is respectfully submitted that the Court should exercise its power to compel the parties to interplead pursuant to Rule 62 and invoke the need for orderly administration of justice. The parties may be given reasonable time to amend their pleadings in the trial court. IN VIEW WHEREOF, I join the Opinion of Mr. Justice Corona except the part calling for the inhibition of the respondent judge. The issues resolved by the respondent judge are not the run of the mill variety. Indeed, their novelty and complexity have divided even the members of this Court. There may have been lapses by the respondent judge but they do not bespeak of a biased predisposition. REYNATO S. PUNO Associate Justice

CARPIO, J.: I concur in the result of the majority opinion. Congress has no power to amend or repeal rules of procedure adopted by the Supreme Court.1 However, Congress can enact laws on substantive matters which are the subject of court procedures. Thus, Congress can prescribe the initial or minimum amount for just compensation in expropriation cases, and require immediate payment of such initial or minimum amount as condition for the immediate takeover of the property by the government. The rules of procedure, like Rule 67 of the Rules of Court, must adjust automatically to such new laws on substantive matters. Section 4 of Republic Act No. 8974, mandating immediate payment to the property owner of the full zonal or proffered value prior to takeover by the government, is a substantive requirement in expropriation cases. Thus, Section 4 must apply to all expropriation cases under RA No. 8974 involving the acquisition of real property, like the NAIA Terminal III, for "national government projects." Even assuming, for the sake of argument, that Section 4 of RA 8974 is not applicable to the expropriation of NAIA Terminal III, the Court must still apply the substantive concept in Section 4 of RA 8974 to expropriation proceedings under Rule 67 to insure equal protection of the law to property owners.2 There is no substantial reason to discriminate against property owners in expropriation cases under Rule 67. Under RA 8974, when private property is expropriated for a national government project, the government must first pay the zonal or proffered value to the property owner before the government can take over the property. In the present case, private property is expropriated for an admittedly national government project. Thus, the Court must extend the substantive benefits in Section 4 of RA 8974 to expropriation cases under Rule 67 to prevent denial of the equal protection of the law. Accordingly, I join in the result of the majority opinion.

Footnotes
1

ANTONIO T. CARPIO Associate Justice SEPARATE OPINION

361 Phil. 76 (1999).

Footnotes
1

Section 5(5), Article VIII, 1987 Constitution; Echegaray v. Secretary of Justice, 361 Phil. 76 (1999).
2

We all know in the legal profession that expropriation proceedings are covered by Rule 67 of the Rules of Court. I think it is self-evident that Section 4 seeks to revise Rule 67 of the Rules of Court. x x x Is this section intended to amend Rules of Procedure promulgated by the Supreme Court? x x x Senator [Renato] Cayetano. x x x Yes, Mr. President, to a certain extent, Section 4 would amend the provisions of the Rules of Court vis--vis expropriation x x x. xxxxxxxxx x x x Section 4 of this bill x x x effectively amends certain portions of the Rules of Court on expropriation. Senate deliberations on July 25, 2000 on Senate Bill (SB) No. 2038 which later became SB No. 2117. SB No. 2117 was consolidated with House Bill No. 1422 and enacted by Congress as RA 8974. This case involves the exercise by the national government of the power of eminent domain over the Ninoy Aquino International Airport International Passenger Terminal III (NAIA IPT3). From the start, there was never any doubt about the Republics position to exercise the power of eminent domain. The discussions within the Court focused on which procedure shall govern the determination of the just compensation due to PIATCO for the NAIA IPT3 facilities whether it would be Rule 67 of the Rules of Court or RA 8974. The majority ruled that RA 8974 should apply. It ordered the national government and its co-petitioners to immediately pay the just compensation for NAIA IPT3 before taking over the facility. In so doing, the majority may have unwittingly further delayed, if not virtually foreclosed, the expropriation of NAIA IPT3. I submit it erroneously allowed the procedure set forth in an unconstitutional law.

Section 1, Article III, 1987 Constitution. DISSENTING OPINION

CORONA, J.: The 1987 Constitution molded an even stronger and more independent judiciary. Among others, it enhanced the rule making power of this Court. x x x The rule making power of this Court was expanded. This Court for the first time was given the power to promulgate rules concerning the protection and enforcement of constitutional rights. x x x But most importantly, the 1987 Constitution took away the power of Congress to repeal, alter, or supplement rules concerning pleading, practice and procedure. In fine, the power to promulgate rules of pleading, practice and procedure is no longer shared by this Court with Congress x x x. (emphasis supplied) Echegaray v. Secretary of Justice, 361 Phil. 76 (1999) Senator [Miriam] Santiago. Mr. President, will the gentleman yield for clarificatory interpellation considering that I support the bill? xxxxxxxxx x x x I would now like to proceed with the clarificatory questions. I would like to go through the pages chronologically. I will refer to Section 4 on page 2 of [Senate Bill No. 2038]. This is the Section which sets out the procedures for acquisition of land or other real property, including expropriation.

The majority allowed Congress to encroach upon the rule-making power1 which the Constitution has reserved exclusively to this Court. And it may have created another white elephant as a result. Hence, I respectfully dissent. Before us is a petition for certiorari and prohibition with urgent prayer for preliminary injunction and temporary restraining order filed by the Republic of the Philippines (Republic), the Department of Transportation and Communications (DOTC) and the Manila International Airport Authority (MIAA). The petition seeks to nullify and set aside the January 4, 2005, January 7, 2005 and January 10, 2005 orders of the public respondent, Hon. Henrick F. Gingoyon, presiding judge of the Regional Trial Court of Pasay City, Branch 117, in RTC Civil Case No. 04-0876. The main case here is one of expropriation2 and is an offshoot of the decision3 and resolution4 of this Court in the consolidated cases of Agan v. PIATCO, Baterina v. PIATCO and Lopez v. PIATCO. The object of the expropriation proceedings is the NAIA IPT3.5 Petitioners Case The actual construction and development of the NAIA IPT3 were undertaken by PIATCO as contractor of a build-operate-transfer project6 pursuant to the following contracts: (1) Concession Agreement signed on July 12, 1997; (2) Amended and Restated Concession Agreement (ARCA) dated November 26, 1998; (3) First Supplement to the ARCA dated August 27, 1999; (4) Second Supplement to the ARCA dated September 4, 2000; and (5) Third Supplement to the ARCA dated June 22, 2001 [collectively, the PIATCO Contracts].7 At the end of a 25-year concession, PIATCO will transfer the operation of the terminal to the MIAA.8 PIATCO commenced but did not complete the construction of NAIA IPT3 because of certain developments which will be taken up in detail later. NAIA IPT3 stands on a parcel of land owned by the Bases Conversion Development Authority (BCDA), an agency of the Republic.9 By way of a brief background, this Court ruled in Agan that in view of the absence of the required financial capacity of PIATCOs predecessor, the Paircargo Consortium,10 the award to it by the Prequalification Bids and Awards Committee

(PBAC) of the contract for the construction, operation and maintenance of the NAIA IPT3 was null and void.11 Moreover, the 1997 Concession Agreement was nullified for being a substantially different agreement from the contract bidded upon. It also contained a provision constituting a direct government guarantee which was expressly prohibited by RA 6957 or the Build-Operate-Transfer (B-O-T) Law and its implementing rules. The 1999 ARCA and its supplements, being mere accessory contracts, were all similarly voided. After invalidating all the PIATCO Contracts, the Court declared in a resolution dated January 21, 2004 (2004 resolution): [that this] Court, however, is not unmindful of the reality that the structures comprising the NAIA [IPT3] facility are almost complete and that funds have been spent by PIATCO in their construction. For the government to take over the facility, it has to compensate respondent PIATCO as builder of the said structures. The compensation must be just and in accordance with law and equity for the government can not unjustly enrich itself at the expense of PIATCO and its investors.12 (emphasis supplied) More than a year later, however, the Republic still had not moved any closer to opening and operating a modern international airport. Petitioners allegedly exerted efforts, unfortunately to no avail, to negotiate with PIATCO and its foreign stockholder and lender, Fraport AG Frankfurt Airport Services Worldwide (Fraport), for the resolution of the stalemate. Petitioners claimed that their request for a "walkthrough" to arrive at a preliminary determination of the safety and structural integrity of the terminal as well as their appeal for the submission of construction plans and related documents were denied. On the ground that, under the Constitution, (1) private property can be taken for public use under certain conditions and (2) the State has the inherent power of eminent domain, the Republic resorted to an action for expropriation on December 21, 2004.13 Upon filing the complaint for expropriation, petitioners made a cash deposit of P3,002,125,000 (NAIA IPT3s assessed value for taxation purposes) at the Baclaran Branch of the Land Bank of the Philippines (LBP-Baclaran). The amount, roughly equivalent to US$ 53 million, was subject to the orders of the trial court. A writ of possession was thereafter issued, enabling petitioner to gain its first access to the terminal14 after the promulgation of Agan. With the writ,

petitioners entered and took possession of the NAIA IPT3.15 Meanwhile, the sheriff was not able to serve summons at the indicated address of PIATCO since it apparently no longer held office there.16 Petitioners claim that, as of January 3, 2005, the sheriff still had been unable to serve summons on PIATCO.17 On January 4, 2005, respondent judge issued the first assailed order: In view of the foregoing, this court hereby issues the following orders to supplement its Order dated 21 December 2004 and the writ of possession issued on the same date: (a) The Land Bank of the Philippines, Baclaran Branch, is hereby directed to immediately, upon receipt of this Order, release the amount of US$62,343,175.77 that plaintiffs specifically made available for the purpose of expropriation, to and in favor of PIATCO. This amount shall be deducted from the amount of just compensation due PIATCO that shall be determined by this court pursuant to Section 4 of R.A. No. 8974. (b) The plaintiffs are hereby directed to submit to this court a Certificate of Availability of Funds signed by authorized officials to cover the payment of just compensation. (c) Pending expropriation proceedings and full payment of just compensation to PIATCO, the plaintiffs are directed to maintain, preserve and safeguard NAIA IPT3, or perform such acts or activities in preparation for their direct operation of NAIA IPT3. Plaintiffs, however, are prohibited from performing acts of ownership like awarding concessions or leasing any part of NAIA IPT3 to other parties. SO ORDERED.18 Petitioners filed an urgent motion for reconsideration on January 5, 2005, asserting that the amount ordered released by the court (approximately US$ 62.3+ million) was excessive. The LBP-Baclaran had certified that the Republic had a total deposit of approximately US$ 62.3+19 million with it. Apparently, it was this whole amount the trial court wanted released to PIATCO. On the other hand, petitioner Republic objected to the order of the court because, as could be allegedly concluded from the documents it filed with the expropriation complaint, since there were no comparable values for the expropriated property,

"reasonable basis" should determine what the provisional value20 of NAIA IPT3 ought to be. Using "reasonable basis" as a guide, the Republic arrived at a provisional value of P3,002,125,000 or about US$ 53 million which actually represented the assessed value of the property for taxation purposes.21 The amount Judge Gingoyon wanted to be released immediately to PIATCO was about US$ 9 million more or US$ 63.2+ million. Hence, the Republics objection on the ground of excessiveness. Petitioners contended that it was likewise erroneous for the trial court to order the release of the deposit motu propio (that is, without any motion therefor) since just compensation was yet undetermined and the deposit itself was being claimed by other parties.22 According to petitioners, since they had not been granted "full and relevant access to the NAIA IPT3," it was impossible for them to fully assess its safety, structural integrity and real value after just one perfunctory guided tour of the facility.23 As there was no opportunity to thoroughly inspect the property being expropriated, the expenditure of public funds could not be legally justified.24 Hence, it was error for the trial court to order the release of any part of the Republics deposits in LBP-Baclaran to PIATCO. Petitioners also questioned why the court a quo applied RA 897425 instead of Rule 6726 of the 1997 Rules of Court to the expropriation proceedings. They argued that the title of RA 8974 itself defined its limited application: only for the acquisition of a right of way, site or location for a national infrastructure project. NAIA IPT3 was not a right-of-way, site or location for any national government infrastructure project. It was the national government infrastructure project itself.27 Furthermore, petitioners considered the trial courts prohibition against "acts of ownership like awarding concessions or leasing any part of NAIA IPT3 to other parties" as, in effect, an injunction or restraining order against a government infrastructure project and therefore a violation of RA 897528 which prohibits the issuance of an injunction (except by the Supreme Court) against government infrastructure projects.29 In total disregard of due process, the injunction was issued by the trial court without notice and hearing.30 Petitioners argued that preventing them from exercising the rights of a beneficial owner of NAIA IPT3 would negate the very purpose for which the writ of possession was issued31 and the expropriation itself was being pursued. Respondent judge, finding that petitioners had the legal right to expropriate NAIA IPT3, issued the second assailed order on January 7, 2005.

WHEREFORE, finding plaintiffs to have the right to expropriate NAIA IPT3, this court hereby orders: 1. The EXPROPRIATION of NAIA IPT3, which is particularly described in the Writ of Possession issued by this court on December 21, 2004; 2. The appointment of DR. FIORELLO R. ESTUAR, SOFRONIO B. URSAL and ANGELO I. PANGANIBAN as commissioners to ascertain and report to this court the just compensation for the taking of NAIA IPT3. They shall appear before this court within three (3) days from receipt hereof to take and subscribe an oath that they will faithfully perform their duties as commissioners under Section 6, Rule 67 of the 1997 Rules of Civil Procedure. a. The first session of the hearing to be held by the aforesaid commissioners shall be on January 14, 2005 at 10:00 A.M. at the NAIA International Passenger Terminal 3, Villamor Airbase, Pasay City. b. Thereafter, the commissioners shall hold session at least twice a week. c. The commissioners shall make a full and accurate report to the court of all their proceedings on or before February 28, 2005. d. The commissioners shall be paid reasonable fees that shall be taxed as part of the costs of the proceedings. SO ORDERED.32 On January 10, 2005, the trial court denied the urgent motion for reconsideration of its January 4, 2005 order and petitioners urgent motion for inhibition of respondent judge filed on January 7, 2005.33 WHEREFORE, plaintiffs['] Motion for Reconsideration of the Order dated January 4, 2005, and Urgent Motion for Inhibition are DENIED. Accordingly, except for the superfluous part of the Order prohibiting the plaintiffs from awarding concession or leasing any part of NAIA IPT3 to other parties, the order sought to be reconsidered stands: (1) The Land Bank of the Philippines, Baclaran Branch, must release the sum of US$62,343,175.77 in favor of PIATCO; (2)

The Plaintiffs must submit a certificate of availability of funds; and (3) Pending expropriation proceedings and full payment of just compensation to PIATCO, the plaintiffs are directed to maintain, preserve and safeguard NAIA IPT3, or perform such acts or activities in preparation for their direct operation of NAIA IPT3. SO ORDERED. Respondent PIATCOs Version of Events On October 5, 1994, petitioners received an unsolicited offer from Asias Emerging Dragons Corporation (AEDC) to construct, operate and maintain a state-of-the-art international passenger terminal under Section 4(a) of RA 6957 (the B-O-T Law),34 Section 4(a) because the government did not have the funds nor the expertise to do the same.35 The project was considered an unsolicited proposal because it was not a government priority project.36Paircargo Consortium, which eventually incorporated with other investors under the name PIATCO, submitted a counterproposal: to construct IPT-3 at a cost of not less than US$ 350 Million, operate such terminal at no cost to the Government, pay Government a total of at least P17.5 Billion in annual guaranteed payments over twenty-five (25) years and thereafter transfer title over IPT-3 to the Government for P1.00.37 The government, considering Paircargo Consortiums counterproposal more beneficial, gave AEDC thirty days to match it; this, AEDC failed to do.38 The DOTC then issued the notice of award for the NAIA IPT3 project to PIATCOs predecessor, Paircargo Consortium. The government, through then DOTC Secretary Arturo T. Enrile, and PIATCO, through its President, Henry T. Go, executed the so-called PIATCO Contracts whereby PIATCO was granted a 25-year concession to operate NAIA IPT3, after which title was to pass on to the government.39 The 1997 Concession Agreement was signed during former President Fidel V. Ramos administration while the ARCA and the first two supplements were executed during the tenure of former President Joseph Ejercito Estrada.40 In January 2001, the Estrada administration was overthrown by mass political action popularly known as EDSA People Power II. Six months into the new administration of President Gloria Macapagal-Arroyo, on June 22, 2001, the third supplement to the ARCA was signed. Since then, the NAIA IPT3 project has been beset by seemingly interminable difficulties on all fronts.

According to PIATCO, long-term loans from Asian Development Bank, Kreditanstalt fr Wiederaufbau, International Finance Corporation and Dresdner Bank could not be drawn on because of the refusal of the government to cooperate in the fulfillment of conditions precedent demanded by the lenders.41 Undaunted, PIATCO nevertheless continued the construction of NAIA IPT3 through advances from stockholders and interim financing. It would have completed NAIA IPT3 by now had it not been for the alleged lack of cooperation of the Macapagal-Arroyo administration and the obstacles it allegedly put up.42 (In her speech at the 2002 Golden Shell Export Awards at Malacaang Palace, President Macapagal-Arroyo stated that she could not honor the PIATCO Contracts denounced by government lawyers43 as null and void.44) Furthermore, while the government defended the validity of the PIATCO Contracts in the past, it suddenly made avolte face and joined the parties who sought their nullification.45 On September 17, 2002, various petitions were filed before this Court to annul the PIATCO Contracts and prohibit the DOTC and MIAA from implementing them.Agan was promulgated on May 5, 2003. Although this Court voided the PIATCO Contracts because PIATCO was, among other reasons, unqualified, this Court did not actually find private respondent to have acted fraudulently.46 Moreover, the Court required the government to pay PIATCO a fair and just compensation for NAIA IPT3 as a prerequisite for any takeover of the terminal.47 According to PIATCO, since the nullification of the PIATCO Contracts in 2003, petitioners have not shown any interest in the completion, opening and operation of NAIA IPT3. Instead of directing its resources and efforts to actually take over and operate NAIA IPT3 and to compensate PIATCO as builder of the structures, the government allegedly prepared to develop the Diosdado Macapagal International Airport in Clark Field, Pampanga.48 Contrary to petitioners assertion that they were not being given access to NAIA IPT3, PIATCO alleged that invitations to view and inspect the terminal were in fact extended to them on several occasions. According to private respondent, the following were actually able to inspect NAIA IPT3: (a) Secretary Leandro Mendoza; (b) Solicitor General Alfredo Benipayo;

(c) Former Executive Secretary, now Foreign Affairs Secretary Alberto Romulo; (d) Former MIAA General Manager Edgardo Manda; (e) MIAA General Manager Alfonso Cusi; (f) Former Immigration Commissioner Andrea Domingo; (g) Congressmen Alfonso Umali Jr., Raul Villareal, Joseph Santiago, Roberto Cajes, Corazon Malanyaon, Josephine Ramirez, Charity Leviste, Jacinto Paras, Prospero Pichay, Prospero Nograles, Willie Villarama, Perpetuo Ylagan, Eduardo Zialcita, Carmen Cari, Jose Solis, Consuelo Dy, Aleta Suarez, Rodolfo Bacani, Aurelio Umali, Augusto Syjuco Jr., Generoso Tulagan and Harlin Cast Abayon; (h) Senators Ramon Revilla Jr., Alfredo Lim, Juan Ponce Enrile, Edgardo Angara, Panfilo Lacson and Tessie Aquino-Oreta.49 PIATCO is convinced that the governments intentions vis--vis NAIA IPT3 are suspect. "They did not negotiate. They dictated."50 The government, with police assistance, allegedly seized control of NAIA IPT3 late in the afternoon of December 21, 2004 on the basis of a writ of possession issued by the trial court after no more than a unilateral assessment of the value of the facility.51

The Issues In fine, petitioners seek the resolution of the following issues: I. WHETHER OR NOT RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AND ACTED IN EXCESS OF JURISDICTION WHEN HE HELD THAT RA 8974, NOT RULE 67 OF THE RULES OF COURT, IS APPLICABLE IN THE EXPROPRIATION PROCEEDINGS. II. WHETHER OR NOT RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AND ACTED IN EXCESS OF HIS JURISDICTION WHEN HE MOTU PROPIO ISSUED THE ORDER DIRECTING THE DEPOSITARY BANK TO IMMEDIATELY RELEASE PETITIONERS DEPOSIT IN THE AMOUNT OF US$ 62,343,175.77 WHEN NAIA IPT3S ASSESSED VALUE FOR THE PURPOSE OF THE ISSUANCE OF THE WRIT AS ALLEGED IN THE COMPLAINT FOR EXPROPRIATION IS ONLY P 3,002,125,000 (APPROXIMATELY US$ 53 MILLION). III. WHETHER OR NOT RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AND ACTED IN EXCESS OF HIS JURISDICTION WHEN HE PROHIBITED PETITIONERS FROM PERFORMING "ACTS OF OWNERSHIP" SUCH AS AWARDING CONCESSIONS OR LEASING ANY PART OF NAIA IPT3 TO OTHER PARTIES. IV. WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED IN MOTU PROPIO ISSUING THE JANUARY 7, 2005 ORDER APPOINTING THREE COMMISSIONERS TO DETERMINE THE TERMINALS JUST COMPENSATION. V.

WHETHER OR NOT RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION IN REFUSING TO INHIBIT HIMSELF FROM THE EXPROPRIATION CASE. Parallel to the resolution of the foregoing issues, petitioners also sought: (1) a TRO commanding respondent judge to cease and desist from implementing his orders dated January 4, 2005, January 7, 2005 and January 10, 2005 in RTC Civil Case No. 04-876; (2) the nullification of the orders dated January 4, 2005; January 7, 2005; and January 10, 2005; and (3) an order to respondent judge in his capacity as presiding judge of the Regional Trial Court, Branch 117, Pasay City to inhibit himself from further actions on the subject case. The Court issued the TRO, as prayed for, on January 14, 2005.52 I shall discuss the issues in seriatim. The Constitutional Requirement of Public use This case essentially pertains to the exercise by the Republic of its inherent power of eminent domain or the right of the sovereign authority to acquire private property for public use upon payment of just compensation. It refers to the right to take or reassert dominion over property within the state for public use or to meet a public exigency.53 The constitutional requirement of due process lays down a rule of procedure to be observed in the exercise of such power.54 This rule of procedure is more familiarly known as expropriation,55 a term used interchangeably with eminent domain. The exercise of eminent domain is circumscribed by two limitations in the Constitution: (1) the taking must be for public use and (2) just compensation must be paid to the owner of the private property.56 These twin proscriptions are grounded on the necessity to achieve a balance between the interests of the State, on the one hand, and the private rights of the individual, on the other hand, by effectively restraining the former and affording protection to the latter.57 "Public use" as a limitation to the power of eminent domain is not defined in the Constitution. It is thus considered in its general notion of meeting a public need or a public exigency.58 It is not restricted to clear cases of "use by the public"59 but embraces whatever may be beneficially employed for the community.60 The concept now covers uses which, while not directly available to the public, redound to their

indirect advantage or benefit.61 It is generally accepted that it is just as broad as "public welfare."62 Viewed in this light, the "public use" dimension of a modern international airport need not be belabored. For it is inextricably linked to air transport which, in turn, is vital to the economy, to business and to tourism. It enhances the movement of goods, services and people across international borders. It serves as the countrys main gateway to the world and as its major link to its neighbors in the global village. Hardly anyone can doubt the public need for a modern international airport and the immeasurable boost it will give the countrys economy.63 Why Expropriate NAIA IPT3 in the First Place? In Manotok v. National Housing Authority,64 we ruled that the exercise of the power of eminent domain should be based on necessity. Is there such a necessity for the expropriation of NAIA IPT3? First, in todays global market governed by the hard-hearted rules of business dominance and competitiveness, time has become a precious resource and a critical determinant of either failure or success. Indeed, not only time but also resources are at stake in the expropriation of NAIA IPT3, an infrastructure project that needs only to be completed to become fully operational, instead of building an entirely new facility from scratch. Second, NAIA IPT3 sits on 65 hectares (161 acres) of prime government land located in one of the most expensive commercial areas in the country. But that valuable land will be completely laid to waste if NAIA IPT3 does not become operational, either because government does not allow it to operate or petitioners decide to build, operate or develop an entirely new international airport. In either case, both sides will only succeed in stalemating each other and NAIA IPT3 will be absolutely of no use to both petitioners and private respondent PIATCO. The land will just lie idle and unproductive while a white elephant abjectly sits on it. A repeat of the mothballed Bataan Nuclear Power Plant? Certainly. On the other hand, will not expropriating NAIA IPT3, putting it to good use and paying off its owner(s) redound to the benefit of the entire country and all parties concerned? Third, there is no denying that a project like NAIA IPT3 is long overdue, such that the prestige of the entire country before the international community is at stake. Politics and narrow vested interests have a peculiar way of extirpating the most

salutary and beneficial ventures in this country. The undertaking appears headed for the same fate unless this Court intervenes and exercises its judicial discretion to settle the destructive impasse. Shall this Court watch in silence while the parties claw at each other before international arbitration bodies? The majority opinion effectively disregarded this necessity. Public Use and Just Compensation None of the parties actually questioned the public purpose of the expropriation not the petitioners of course, not the respondent judge, not even private respondent PIATCO. In fact, petitioners exerted special effort to show that the taking was intended to encourage and promote international air traffic as well as to develop an airport with facilities, accommodations and services meeting international standards. As for PIATCO, the records do not show that it questioned the public purpose of the expropriation at all. The respondent judge, for his part, recognized that the NAIA IPT3 was undoubtedly a structure for a well-defined public purpose, being of critical importance to the Philippine economy in terms of the carriage of goods, services and people.65 Thus, there was never any question that the expropriation of NAIA IPT3 was for a public purpose. The policy underlying the constitutional provision for eminent domain is to make the private owner "whole" after his property is taken.66 Thus, private property cannot be taken in any way for public use without adequate compensation.67 Just compensation is the just and complete equivalent of the loss which the owner of the thing expropriated has to suffer by reason of the expropriation.68 The compensation given to the owner is just if he receives for his property a sum equivalent to its market value at the time of the taking.69 "Market value" is the price fixed by the buyer and the seller in the open market in the usual and ordinary course of legal trade and competition.70 RA 8974 or Rule 67 of the Rules of Court? At bottom, the bone of contention is the procedure that should govern the determination and payment of just compensation, i.e., whether it should be that under RA 897471 or that under Rule 67 of the Rules of Court.

Under the relevant provisions of Rule 67 of the Rules of Court, possession is given to the condemnor and just compensation is determined in accordance with the following procedures: xxxxxxxxx

expropriation declaring that the plaintiff has a lawful right to take the property sought to be expropriated, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the taking of the property or the filing of the complaint, whichever came first. xxxxxxxxx

SECTION 2. Entry of plaintiff upon depositing value with authorized government depositary. Upon the filing of the complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall have the right to take or enter upon the possession of the real property involved if he deposits with the authorized government depositary an amount equivalent to the assessed value of the property for purposes of taxation to be held by such bank subject to the orders of the court. x x x xxxxxxxxx After such deposit is made the court shall order the sheriff or other proper officer to forthwith place the plaintiff in possession of the property involved and promptly submit a report thereof to the court with service of copies to the parties. SECTION 3. Defenses and objections. xxxxxxxxx If a defendant has any objection to the filing of or the allegations in the complaint, or any objection or defense to the taking of his property, he shall serve his answer within the time stated in the summons. The answer shall specifically designate or identify the property in which he claims to have an interest, state the nature and extent of the interest claimed, and adduce all his objections and defenses to the taking of his property. x x x x x x However, at the trial of the issue of just compensation, whether or not a defendant has previously appeared or answered, he may present evidence as to the amount of the compensation to be paid for his property, and he may share in the distribution of the award. SECTION 4. Order of expropriation. If the objections to and the defenses against the right of the plaintiff to expropriate the property are overruled, or when no party appears to defend as required by this Rule, the court may issue an order of

SECTION 5. Ascertainment of compensation. Upon the rendition of the order of expropriation, the court shall appoint not more than three (3) competent and disinterested persons as commissioners to ascertain and report to the court the just compensation for the property sought to be taken. The order of appointment shall designate the time and place of the first session of the hearing to be held by the commissioners and specify the time within which their report shall be submitted to the court. Copies of the order shall be served on the parties. Objections to the appointment of any of the commissioners shall be filed with the court within ten (10) days from service, and shall be resolved within thirty (30) days after all the commissioners shall have received copies of the objections. (emphasis supplied) On the other hand, RA 8974 provides for the observance of the following guidelines: xxxxxxxxx SECTION 4. Guidelines for Expropriation Proceedings. Whenever it is necessary to acquire real property for the right-of-way, site or location for any national government infrastructure project through expropriation, the appropriate implementing agency shall initiate the expropriation proceedings before the proper court under the following guidelines: (a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency shall immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR); and (2) the value of the improvements and/or structures as determined under Section 7 hereof; xxxxxxxxx

(c) In case the completion of a government infrastructure project is of utmost urgency and importance, and there is no existing valuation of the area concerned, the implementing agency shall immediately pay the owner of the property its proffered value taking into consideration the standards prescribed in Section 5 hereof. Upon compliance with the guidelines abovementioned, the court shall immediately issue to the implementing agency an order to take possession of the property and start the implementation of the project. Before the court can issue a Writ of Possession, the implementing agency shall present to the court a certificate of availability of funds from the proper official concerned. In the event that the owner of the property contests the implementing agency's proffered value, the court shall determine the just compensation to be paid the owner within sixty (60) days from the date of filing of the expropriation case. When the decision of the court becomes final and executory, the implementing agency shall pay the owner the difference between the amount already paid and the just compensation as determined by the court. (emphasis supplied) To implement the above "guidelines", the Implementing Rules and Regulations (IRR) of RA 8974 provide: xxxxxxxxx SECTION 8. Expropriation. If the owner of a private property needed by the government implementing agency does not agree to convey his property to the government by any of the foregoing modes of acquiring and/or transferring ownership of the property, then the government shall exercise its right of eminent domain by filing a complaint with the proper Court for the expropriation of the private property. The verified complaint shall state with certainty the right and purpose of expropriation, describe the real or personal property sought to be expropriated, and join as defendants all persons owning or claiming to own, or occupying, any part thereof or interest therein, showing as far as practicable, the interest of each defendant separately. If the title of any property sought to be condemned appears to be in the name of the Republic of the Philippines, although occupied by private individuals, or if the title is otherwise obscure or doubtful so that the plaintiff cannot

with accuracy or certainty specify the real owners, averment to the effect may be made in the complaint. Pursuant to Section 4 of the Act, the Implementing Agency shall comply with the following guidelines: a. Upon the filing of the complaint, and after due notice to the defendant/property owner, the Implementing Agency shall immediately pay the property owner the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property based on the current zonal valuation of the BIR; and (2) the value of the improvements and/or structures as determined by the Implementing Agency, in accordance with Section 10 hereof, pursuant to Section 7 of the Act. xxxxxxxxx c. In case the completion of a national government project is of utmost urgency and importance, and there is no existing valuation of the area concerned, the Implementing Agency shall immediately pay the owner of the property its proffered value taking into consideration the standards stated in the second paragraph of Section 8 hereof, pursuant to Section 5 of the Act. xxxxxxxxx SECTION 10. Valuation of Improvements and/or Structures. Pursuant to Section 7 of the Act, the Implementing Agency shall determine the valuation of the improvements and/or structures on the land to be acquired using the replacement cost method. The replacement cost of the improvements/structures is defined as the amount necessary to replace the improvements/structures, based on the current market prices for materials, equipment, labor, contractor's profit and overhead, and all other attendant costs associated with the acquisition and installation in place of the affected improvements/structures. In the valuation of the affected improvements/structures, the Implementing Agency shall consider, among other things, the kinds and quantities of materials/equipment used, the location, configuration and other physical features of the properties, and prevailing construction prices. SECTION 11. Engagement of Appraisers. The Implementing Agency may, if it deems necessary, engage the services of government financing institutions and/or

private appraisers duly accredited by the said institutions to undertake the appraisal of the property, i.e., the land and/or improvements/structures, and to determine its fair market value. The Implementing Agency concerned shall consider the recommendations of the said appraisers in deciding on the purchase price of or just compensation for the property. SECTION 12. Writ of Possession. Pursuant to Section 4 of the Act, upon compliance with the guidelines stated in Section 8 of this IRR, the court shall immediately issue to the Implementing Agency an order to take possession of the property and start the implementation of the project. Before the Court can issue a Writ of Possession, however, the Implementing Agency shall present to the Court ofCertificate of Availability of Funds signed by authorized officials to cover the payment to be made to the property owner. After the Implementing Agency has complied with the foregoing requirements, the Court shall immediately issue the Writ of Possession to the complainant Implementing Agency. SECTION 13. Payment of Compensation. Should the property owner concerned contest the proffered value of the Implementing Agency, the Court shall determine the just compensation to be paid to the owner within sixty (60) days from the date of the filling of the expropriation case, considering the standards set out in Sections 8, 9 and 10 hereof, pursuant to Section 5 of the Act. When the decision of the Court becomes final and executory, the Implementing Agency shall pay the owner the difference between the amount already paid as provided in Section 8 (a) hereof and the just compensation determined by the court, pursuant to Section 4 of the Act. SECTION 14. Trial Proceedings. Within the sixty (60)-day period prescribed by the Act, all matters regarding defenses and objections to the complaint, issues on uncertain ownership and conflicting claims, effects of appeal on the rights of the parties, and such other incidents affecting the complaint shall be resolved under the provisions on expropriation of Rule 67 of the Rules of Court. (emphasis supplied) Petitioners assert that the provisions on expropriation of Rule 67 of the Rules of Court should apply. The trial court and respondent PIATCO opine that it should be RA 8974.

Rule 67 and RA 8974 differ in the manner of compensating the owner of the property under expropriation. Under Rule 67, before the government can take possession of the property to be expropriated, the deposit of an amount equivalent to the assessed value of the property for taxation purposes is sufficient for the time being, that is, until the conclusion of the court proceedings where both parties shall have proven their claims and the court shall have made a factual determination of the price of the property. Under RA 8974, on the other hand, immediate payment of the full zonal value (a much bigger sum than the assessed value required by Rule 67) of the property and improvements and/or structures as determined under Section 7 of the law is required before the government can take possession of the property. Petitioners maintain that the very title of RA 8974 states that it only covers the acquisition of right of way, site or location for government infrastructure projects. Thus, the law itself defines the limits of its application. Obviously, according to petitioners, an airport is not a right of way because a "right of way" refers to the right to pass through property owned by another, which is not so in this case. Neither is it a "site or location" because "location" is the specific place or position of a person or thing and "site" pertains to a place or location or a piece of property set aside for a specific use. They further aver that even the bicameral deliberations on the law reveal that the legislature never contemplated the use of this special law for the acquisition of land for a purpose other than a right of way, site or location for government infrastructure projects.72 Moreover, the provisions73 of RA 8974 cited by respondent judge speak of "relevant current zonal valuation of the [Bureau of Internal Revenue (BIR)]" as the amount of deposit necessary for the issuance of a writ of possession. BIR zonal valuations are only for parcels of land, not for airport facilities. There is no BIR zonal valuation for an airport terminal precisely because the latter is not land. The majority opinion ruled that RA 8974 applies in this case. It premised its conclusion on the argument that the application of Rule 67 will violate this Courts 2004 resolution in Agan, the alleged governing law of the case. The ruling is basically flawed as it is grounded on a wrong premise. It is incorrect to say that Agan constitutes the law of the case. The "law of the case" doctrine is defined as a term applied to an established rule that, when an appellate court passes on a question and remands the case to the lower court for further

proceedings, the question there settled becomes the law of the case on subsequent appeal.74 Unlike the doctrine of stare decisis, the doctrine of the law of the case operates only in the particular case.75 The law of the case finds application only in the same case between the parties. This case (which refers to the expropriation of NAIA IPT3) is irrefutably not the same as Agan (which was about the validity of the so-called "PIATCO contracts"). Hence, the pronouncements in Agan cannot constitute the law of the case here. The majority opinion claims that "the staging of expropriation proceedings in this case with the exclusive use of Rule 67 would allow for the government to take over the NAIA 3 facilities in a fashion that directly rebukes our 2004 resolution in Agan (which) mandated that there must be first payment of just compensation before the Government could take over the NAIA IPT3 facilities." This is very misleading. The full text of the relevant statement of the Court in its 2004 resolution in Agan is as follows: This Court, however, is not unmindful of the reality that the structures comprising the NAIA [IPT3] facility are almost complete and that funds have been spent by PIATCO in their construction. For the government to take over the facility, it has to compensate respondent PIATCO as builder of the said structures. The compensation must be just and in accordance with law and equity for the government can not unjustly enrich itself at the expense of PIATCO and its investors. (emphasis supplied) Clearly, the resolution only requires that PIATCO be given just compensation as a condition for any government take-over of NAIA IPT3. The just compensation should be in accordance with law and equity. There is something seriously wrong with the argument that RA 8974 is the only legal and equitable way to compensate PIATCO in accordance with our 2004 resolution. The application of Rule 67 in the expropriation proceedings of NAIA IPT3 is in consonance with Agan. The determination and payment of just compensation pursuant to Rule 67 are in accordance with law. Under Rule 67, PIATCO will be given FULL JUST COMPENSATION by the government for the taking of NAIA IPT3. That is mandatory. The Constitution itself ordains it.

Under Rule 67, there is no way the government can unjustly enrich itself at the expense of PIATCO. Section 9 of Rule 67 ensures this by requiring the payment of interest from the time government takes possession of the property. Moreover, I dare say the majority opinion actually got caught up in a selfcontradiction. At first, it claimed that the 2004 resolution in Agan laid down the following directives: (1) PIATCO must receive payment of just compensation determined in accordance with law and equity, and (2) the government is barred from taking over NAIA IPT3 until such just compensation is paid. It continued to argue that the 2004 resolution requires the payment of just compensation before the takeover of NAIA IPT3 facilities. Subsequently, however, it backtracked and stated that "the 2004 resolution does not particularize the extent such payment must be effected before the takeover, but it actually requires at least some degree of payment to the private owner before a writ of possession may issue." However, neither the proffered value nor the zonal valuation under RA 8974 is equivalent to just compensation. If the majority opinion were to pursue its argument to its logical conclusion, no takeover can be had without payment of the just compensation itself, not merely of a value corresponding to what it vaguely referred to as "some degree of payment". The requirement to pay the proffered value was a strained and belabored way of establishing that the application of RA 8974 is in consonance with the 2004 resolution in Agan. If the majority opinion were to be true to its pronouncement that the 2004 resolution demands payment of just compensation prior to the take over of NAIA IPT3, then payment of the proffered value is not enough. The proffered value is definitely not equivalent to just compensation. The majority failed to realize that respondent judge gravely abuse his discretion when he issued his January 10, 2005 order. Respondent judge precipitately ruled that Rule 67 of the Rules of Court and all the laws on expropriation involving infrastructure projects had been expressly repealed by RA 8974 and its implementing rules and regulations. Worse, respondent judge justified his conclusion by erroneously invoking a footnote in City of Iloilo v. Legaspi76. His order read: xxxxxxxxx [Petitioners] relied solely and this court initially went along with their reliance on Rule 67 on Expropriation (an perchance of P.D. Nos. 42 and 1533) as the applicable authority on the instant case for expropriation. But this court did not know then

that Rule [67] and all the laws on expropriation involving infrastructure projects have been expressly repealed by R.A. No. 8974 and its Implementing Rules and Regulationsinsofar as they are inconsistent with said Act. In the footnote of the recent case of City of lloilo vs. Judge Legaspi (G.R. No. 154614, November 25, 2004), the Supreme Court recognized that: "Section 4 of Rep. Act No. 8974 (An Act To Facilitate The Acquisition of Right-OfWay, Site Or Location For National Government Infrastructure Projects and For Other Purposes) provides for the guidelines for expropriation proceedings." Plaintiffs argument that R.A. No. 8974 is not applicable because NAIA IPT3 is "not right-of-way, site or location" for a national infrastructure project "but the infrastructure itself" is absurd. It is very plain to see, and this court hereby holds, that the NAIA IPT3 is itself the very right-of-way, the site or location of the national governments infrastructure project; it is the very right-of-way, site or location of an airport that will make them attain their "goal of encouraging and promoting international and domestic air traffic as well as developing an internationally acceptable airport accommodation and service."77 (emphasis supplied) Respondent judges theory about Rule 67s supposed repeal by RA 8974 was totally devoid of factual and legal basis. RA 8974 did not repeal Rule 67 at all. The Constitution will not allow it. In fact, neither its repealing clause nor any of its provisions even mentioned or referred to the Rules of Court, whether on expropriation or anything else. But even assuming (but not conceding) that respondent judges theory had been based on an impliedrepeal, still there would have been no legal justification for it. Settled is the rule in statutory construction that implied repeals are not favored. Thus: The two laws must be absolutely incompatible, and a clear finding thereof must surface, before the inference of implied repeal may be drawn. The rule is expressed in the maxim, interpretare et concordare legibus est optimus interpretendi, i.e., every statute must be so interpreted and brought into accord with other laws as to form a uniform system of jurisprudence. The fundament is that the legislature should be presumed to have known the existing laws on the subject and not have enacted conflicting statutes. Hence, all doubts must be resolved against any implied repeal, and all efforts should be exerted in order to harmonize and give effect to all laws on the subject.78

The foregoing becomes all the more significant when, as in this case, the provisions of RA 8974 reveal no manifest intent to revoke Rule 67. In fact, Section 14 of the IRR of RA 8974 makes an explicit reference to Rule 67 and mandates its applicability to all matters regarding defenses and objections to the complaint, issues on uncertain ownership and conflicting claims, effects of appeal on the rights of the parties and such other incidents affecting the complaint. If only for this reason, respondent judges "repeal theory" is totally erroneous. The footnote in City of Iloilo79 was not in any way necessary to resolve any of the issues in that case. Thus, it was merely part of an obiter dictum. Respondent judge should be reminded of our pronouncement in City of Manila v. Entote80 that a remark made or opinion expressed by a judge in a decision upon a cause, incidentally or collaterally, and not directly upon the question before the court, or upon a point not necessarily involved in the determination of the cause, is obiter dictum lacking the force of an adjudication. An obiter dictum is an opinion entirely unnecessary for the decision of the case and is not binding as precedent.81 Not only was there no pronouncement from us in City of Iloilo about Rule 67s repeal by RA 8974, we in fact applied Rule 67 in that case. The Court invoked Section 1 of Rule 67 in resolving the issue of the sufficiency in form and substance of the amended complaint for expropriation and Section 2 of the same Rule in holding that the City of Iloilo was not in estoppel since it simply followed the procedure that a prior hearing was not required before a writ of possession could be issued. Indeed, the Court could not even have applied RA 8974 in City of Iloilobecause it did not involve a project of the national government but that of a local government unit,82 thus requiring the application of RA 7160 (the Local Government Code).83 More importantly, any talk of repeal (whether express or implied) by legislative enactment of the rules of procedure duly promulgated by this Court goes against the Constitution itself. The power to promulgate rules of pleading, practice and procedure was granted by the Constitution to this Court to enhance its independence.84 It is no longer shared by this Court with Congress.85 The legislature now has no power to annul, modify or augment the Rules of Court. We expressly declared in Echegaray v. Secretary of Justice86 that the 1987 Constitution took away the power of Congress to repeal, alter or supplement rules concerning pleading, practice and procedure.87

The majority properly recognized that Rule 67 governs the procedure undertaken for eminent domain. It is thus surprising when they unequivocally declared that, as a rule of procedure, Rule 67 can be superseded by statutory enactment. A perusal of the so-called "Guidelines for Expropriation Proceedings" provided for under Section 4 of RA 8974 shows that the "guidelines" radically alter the rules for expropriation under Rule 67. The majority even declared that "RA 8974 represents a significant change from previous expropriation laws such as Rule 67." The majority however failed to realize that such change brought about by a legislative enactment subverts the fundamental law and defeats the constitutional intent to strengthen the independence of this Court. There is no question that the appropriate standard of just compensation is a substantive matter, not procedural. However, the manner of determining just compensation (including how it shall be paid and under what conditions a writ of possession may be issued) is a matter of procedure, not of substantive law. If a rule or statute creates a right or takes away a vested right, it is substantive. If it operates as a means of implementing an existing right, then it is procedural.88 The provisions of Rule 67 neither vest a new power on the State nor create a new right in favor of the property owner. Rule 67 merely provides the procedure for the States exercise of eminent domain and, at the same time, ensures the enforcement of the right of the private owner to receive just compensation for the taking of his property. It is purely a matter of procedure. It is therefore exclusively the domain of this Court. The Constitution prohibits Congress from transgressing this sphere. Congress cannot legislate the manner of payment of just compensation. Neither can Congress impose a condition on the issuance of a writ of possession. Yet that is what RA 8974 precisely does. The records of the 11th Congress which enacted RA 8974 reveal that Congress intended to revise and amend Rule 67. The Senate deliberations quoted at the beginning of this dissenting opinion show this legislative intent.89I am therefore disheartened that the majority opinion is in effect sanctioning the arrogation of judicial power by Congress.

In denying the petition, the majority effectively sustained respondent judges repeal theory. Thus, they allowed Congress to infringe on the Courts rule-making power, a power vested by the Constitution exclusively on this Court. Assuming ex gratia argumenti that the procedure outlined under RA 8974 does not constitute an impermissible encroachment on the Courts rule-making power, the law still does not apply here. Section 1 of the IRR of RA 8974 provides that the law covers: [A]ll acquisition of private real properties, including improvements therein, needed as right-of-way, site or location for national government projects undertaken by any department, office or agency of the national government, including any governmentowned or controlled corporation or state college or university, authorized by law or its respective charter to undertake national government projects. From this, we can clearly infer that the law does not apply to the following: (1) expropriation of private property which is personal or movable property; (2) taking of private property, whether personal or real, for a purpose other than for right-of-way, site or location of a national government project; (3) appropriation of private property for right-of-way, site or location of a project not classified as a national government project; (4) acquisition of private property for right-of-way, site or location of a national government project but to be undertaken by an entity not enumerated in Section 1 of the IRR of RA 8974. In the foregoing situations, it is Rule 67 of the Rules of Court or the relevant special law (if any)90 that will apply. Here, the expropriation of NAIA IPT3 falls under the second category since petitioners seek to take private property for a purpose other than for a right-of-way, site or location for a national government project. Unfortunately, the majority sided with respondent judge and completely disregarded the fact that NAIA IPT3 wasthe national government infrastructure project itself and

ruled instead that it was the right-of-way, site or location of a national government project. That was wrong and the reasoning was even more difficult to understand. True, under Section 2(d) of the IRR of RA 8974 defining "national government projects", an airport (which NAIA IPT3 essentially is) is specifically listed among the national government projects for which expropriation proceedings may be initiated under the law. However, the law and its IRR also provide that the expropriation should be for the purpose of providing for a right of way, site or location for the intended national government project. A national government project is separate and distinct from the purpose of expropriation. Otherwise, there would have been no need to define them separately. Thus, respondent judge erred when he equated one with the other and obliterated the clear distinction made by the law. Moreover, under Section 2(e) of the IRR, the specific objects or purposes of expropriation were lumped as ROW which is defined as the "right-of-way, site or location, with defined physical boundaries, used for a national government project." Obviously, the NAIA IPT3 is not a right of way, site or location for any national government infrastructure project but the infrastructure itself albeit still under construction. The construction (and now the completion) of NAIA IPT3 never required the acquisition of private property for a right of way, site or location since the terminal, including all its access roads, stands completely on governmen