1

A. PRELIMINARY CONSIDERATIONS
[G.R. No. 122156. February 3, 1997]
MANILA PRINCE HOTEL, petitioner, vs. GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA
HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT
CORPORATE COUNSEL, respondents.
DECISION
BELLOSILLO, J.:
The Filipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights, privileges, and
concessions covering the national economy and patrimony, the State shall give preference to qualified
Filipinos,[1] is invoked by petitioner in its bid to acquire 51% of the shares of the Manila Hotel Corporation
(MHC) which owns the historic Manila Hotel.Opposing, respondents maintain that the provision is not self-
executing but requires an implementing legislation for its enforcement. Corollarily, they ask whether the 51%
shares form part of the national economy and patrimony covered by the protective mantle of the Constitution.
The controversy arose when respondent Government Service Insurance System (GSIS), pursuant to the
privatization program of the Philippine Government under Proclamation No. 50 dated 8 December 1986,
decided to sell through public bidding 30% to 51% of the issued and outstanding shares of respondent
MHC. The winning bidder, or the eventual strategic partner, is to provide management expertise and/or an
international marketing/reservation system, and financial support to strengthen the profitability and
performance of the Manila Hotel.[2] In a close bidding held on 18 September 1995 only two (2) bidders
participated: petitioner Manila Prince Hotel Corporation, a Filipino corporation, which offered to buy 51% of the
MHC or 15,300,000 shares at P41.58 per share, and Renong Berhad, a Malaysian firm, with ITT-Sheraton as
its hotel operator, which bid for the same number of shares at P44.00 per share, or P2.42 more than the bid of
petitioner.
Pertinent provisions of the bidding rules prepared by respondent GSIS state -
I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC -
1. The Highest Bidder must comply with the conditions set forth below by October 23, 1995 (reset to November
3, 1995) or the Highest Bidder will lose the right to purchase the Block of Shares and GSIS will instead offer
the Block of Shares to the other Qualified Bidders:
a. The Highest Bidder must negotiate and execute with the GSIS/MHC the Management Contract, International
Marketing/Reservation System Contract or other type of contract specified by the Highest Bidder in its strategic
plan for the Manila Hotel x x x x
b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with GSIS x x x x
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER -
The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the following conditions are met:
a. Execution of the necessary contracts with GSIS/MHC not later than October 23, 1995 (reset to November 3,
1995); and
b. Requisite approvals from the GSIS/MHC and COP (Committee on Privatization)/ OGCC (Office of the
Government Corporate Counsel) are obtained.[3]
Pending the declaration of Renong Berhard as the winning bidder/strategic partner and the execution of
the necessary contracts, petitioner in a letter to respondent GSIS dated 28 September 1995 matched the bid
price of P44.00 per share tendered by Renong Berhad.[4] In a subsequent letter dated 10 October 1995
petitioner sent a managers check issued by Philtrust Bank for Thirty-three Million Pesos (P33,000,000.00) as
Bid Security to match the bid of the Malaysian Group, Messrs. Renong Berhad x x x x[5] which respondent
GSIS refused to accept.
On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the tender of the
matching bid and that the sale of 51% of the MHC may be hastened by respondent GSIS and consummated
with Renong Berhad, petitioner came to this Court on prohibition and mandamus. On 18 October 1995 the
Court issued a temporary restraining order enjoining respondents from perfecting and consummating the sale
to the Malaysian firm.
On 10 September 1996 the instant case was accepted by the Court En Banc after it was referred to it by
the First Division. The case was then set for oral arguments with former Chief Justice Enrique M. Fernando
and Fr. Joaquin G. Bernas, S.J., as amici curiae.
2
In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and submits that the
Manila Hotel has been identified with the Filipino nation and has practically become a historical monument
which reflects the vibrancy of Philippine heritage and culture. It is a proud legacy of an earlier generation of
Filipinos who believed in the nobility and sacredness of independence and its power and capacity to release
the full potential of the Filipino people. To all intents and purposes, it has become a part of the national
patrimony.[6] Petitioner also argues that since 51% of the shares of the MHC carries with it the ownership of the
business of the hotel which is owned by respondent GSIS, a government-owned and controlled corporation,
the hotel business of respondent GSIS being a part of the tourism industry is unquestionably a part of the
national economy.Thus, any transaction involving 51% of the shares of stock of the MHC is clearly covered by
the term national economy, to which Sec. 10, second par., Art. XII, 1987 Constitution, applies.[7]
It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony and its business
also unquestionably part of the national economy petitioner should be preferred after it has matched the bid
offer of the Malaysian firm. For the bidding rules mandate that if for any reason, the Highest Bidder cannot be
awarded the Block of Shares, GSIS may offer this to the other Qualified Bidders that have validly submitted
bids provided that these Qualified Bidders are willing to match the highest bid in terms of price per share.[8]
Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the 1987 Constitution is
merely a statement of principle and policy since it is not a self-executing provision and requires implementing
legislation(s) x x x x Thus, for the said provision to operate, there must be existing laws to lay down conditions
under which business may be done.[9]
Second, granting that this provision is self-executing, Manila Hotel does not fall under the term national
patrimony which only refers to lands of the public domain, waters, minerals, coal, petroleum and other mineral
oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna and all marine wealth in
its territorial sea, and exclusive marine zone as cited in the first and second paragraphs of Sec. 2, Art. XII,
1987 Constitution. According to respondents, while petitioner speaks of the guests who have slept in the hotel
and the events that have transpired therein which make the hotel historic, these alone do not make the hotel
fall under the patrimony of the nation. What is more, the mandate of the Constitution is addressed to the State,
not to respondent GSIS which possesses a personality of its own separate and distinct from the Philippines as
a State.
Third, granting that the Manila Hotel forms part of the national patrimony, the constitutional provision
invoked is still inapplicable since what is being sold is only 51% of the outstanding shares of the corporation,
not the hotel building nor the land upon which the building stands. Certainly, 51% of the equity of the MHC
cannot be considered part of the national patrimony. Moreover, if the disposition of the shares of the MHC is
really contrary to the Constitution, petitioner should have questioned it right from the beginning and not after it
had lost in the bidding.
Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which provides that if for any
reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to the other Qualified
Bidders that have validly submitted bids provided that these Qualified Bidders are willing to match the highest
bid in terms of price per share, is misplaced. Respondents postulate that the privilege of submitting a matching
bid has not yet arisen since it only takes place if for any reason, the Highest Bidder cannot be awarded the
Block of Shares. Thus the submission by petitioner of a matching bid is premature since Renong Berhad could
still very well be awarded the block of shares and the condition giving rise to the exercise of the privilege to
submit a matching bid had not yet taken place.
Finally, the prayer for prohibition grounded on grave abuse of discretion should fail since respondent GSIS
did not exercise its discretion in a capricious, whimsical manner, and if ever it did abuse its discretion it was not
so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined
by law. Similarly, the petition for mandamus should fail as petitioner has no clear legal right to what it demands
and respondents do not have an imperative duty to perform the act required of them by petitioner.
We now resolve. A constitution is a system of fundamental laws for the governance and administration of a
nation. It is supreme, imperious, absolute and unalterable except by the authority from which it emanates. It
has been defined as the fundamental and paramount law of the nation.[10] It prescribes the permanent
framework of a system of government, assigns to the different departments their respective powers and duties,
and establishes certain fixed principles on which government is founded. The fundamental conception in other
words is that it is a supreme law to which all other laws must conform and in accordance with which all private
rights must be determined and all public authority administered.[11] Under the doctrine of constitutional
3
supremacy, if a law or contract violates any norm of the constitution that law or contract whether promulgated
by the legislative or by the executive branch or entered into by private persons for private purposes is null and
void and without any force and effect. Thus, since the Constitution is the fundamental, paramount and supreme
law of the nation, it is deemed written in every statute and contract.
Admittedly, some constitutions are merely declarations of policies and principles. Their provisions
command the legislature to enact laws and carry out the purposes of the framers who merely establish an
outline of government providing for the different departments of the governmental machinery and securing
certain fundamental and inalienable rights of citizens.[12] A provision which lays down a general principle, such
as those found in Art. II of the 1987 Constitution, is usually not self-executing. But a provision which is
complete in itself and becomes operative without the aid of supplementary or enabling legislation, or that which
supplies sufficient rule by means of which the right it grants may be enjoyed or protected, is self-
executing. Thus a constitutional provision is self-executing if the nature and extent of the right conferred and
the liability imposed are fixed by the constitution itself, so that they can be determined by an examination and
construction of its terms, and there is no language indicating that the subject is referred to the legislature for
action.[13]
As against constitutions of the past, modern constitutions have been generally drafted upon a different
principle and have often become in effect extensive codes of laws intended to operate directly upon the people
in a manner similar to that of statutory enactments, and the function of constitutional conventions has evolved
into one more like that of a legislative body. Hence, unless it is expressly provided that a legislative act is
necessary to enforce a constitutional mandate, the presumption now is that all provisions of the constitution are
self-executing. If the constitutional provisions are treated as requiring legislation instead of self-executing, the
legislature would have the power to ignore and practically nullify the mandate of the fundamental law. [14] This
can be cataclysmic. That is why the prevailing view is, as it has always been, that -
x x x x in case of doubt, the Constitution should be considered self-executing rather than non-self-executing x x
x x Unless the contrary is clearly intended, the provisions of the Constitution should be considered self-
executing, as a contrary rule would give the legislature discretion to determine when, or whether, they shall be
effective. These provisions would be subordinated to the will of the lawmaking body, which could make them
entirely meaningless by simply refusing to pass the needed implementing statute.[15]
Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is clearly not self-
executing, as they quote from discussions on the floor of the 1986 Constitutional Commission -
MR. RODRIGO. Madam President, I am asking this question as the Chairman of the Committee on
Style. If the wording of PREFERENCE is given to QUALIFIED FILIPINOS, can it be understood
as a preference to qualified Filipinos vis-a-vis Filipinos who are not qualified. So, why do we not
make it clear? To qualified Filipinos as against aliens?
THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to remove the word
QUALIFIED?
MR. RODRIGO. No, no, but say definitely TO QUALIFIED FILIPINOS as against whom? As against
aliens or over aliens ?
MR. NOLLEDO. Madam President, I think that is understood. We use the word QUALIFIED because
the existing laws or prospective laws will always lay down conditions under which business may
be done. For example, qualifications on capital, qualifications on the setting up of other financial
structures, et cetera (underscoring supplied by respondents).
MR. RODRIGO. It is just a matter of style.
MR. NOLLEDO. Yes.[16]
Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to make it appear that it
is non-self-executing but simply for purposes of style. But, certainly, the legislature is not precluded from
enacting further laws to enforce the constitutional provision so long as the contemplated statute squares with
the Constitution. Minor details may be left to the legislature without impairing the self-executing nature of
constitutional provisions.
In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the exercise
of powers directly granted by the constitution, further the operation of such a provision, prescribe a practice to
be used for its enforcement, provide a convenient remedy for the protection of the rights secured or the
determination thereof, or place reasonable safeguards around the exercise of the right. The mere fact that
legislation may supplement and add to or prescribe a penalty for the violation of a self-executing constitutional
4
provision does not render such a provision ineffective in the absence of such legislation. The omission from a
constitution of any express provision for a remedy for enforcing a right or liability is not necessarily an
indication that it was not intended to be self-executing. The rule is that a self-executing provision of the
constitution does not necessarily exhaust legislative power on the subject, but any legislation must be in
harmony with the constitution, further the exercise of constitutional right and make it more available.
[17]
Subsequent legislation however does not necessarily mean that the subject constitutional provision is not,
by itself, fully enforceable.
Respondents also argue that the non-self-executing nature of Sec. 10, second par., of Art. XII is implied
from the tenor of the first and third paragraphs of the same section which undoubtedly are not self-executing.
[18]
The argument is flawed. If the first and third paragraphs are not self-executing because Congress is still to
enact measures to encourage the formation and operation of enterprises fully owned by Filipinos, as in the first
paragraph, and the State still needs legislation to regulate and exercise authority over foreign investments
within its national jurisdiction, as in the third paragraph, then a fortiori, by the same logic, the second paragraph
can only be self-executing as it does not by its language require any legislation in order to give preference to
qualified Filipinos in the grant of rights, privileges and concessions covering the national economy and
patrimony. A constitutional provision may be self-executing in one part and non-self-executing in another.[19]
Even the cases cited by respondents holding that certain constitutional provisions are merely statements
of principles and policies, which are basically not self-executing and only placed in the Constitution as moral
incentives to legislation, not as judicially enforceable rights - are simply not in point. Basco v. Philippine
Amusements and Gaming Corporation[20] speaks of constitutional provisions on personal dignity, [21] the sanctity
of family life,[22] the vital role of the youth in nation-building, [23] the promotion of social justice,[24] and the values
of education.[25] Tolentino v. Secretary of Finance[26] refers to constitutional provisions on social justice and
human rights[27] and on education.[28] Lastly, Kilosbayan, Inc. v. Morato[29] cites provisions on the promotion of
general welfare,[30] the sanctity of family life,[31] the vital role of the youth in nation-building [32] and the promotion
of total human liberation and development.[33] A reading of these provisions indeed clearly shows that they are
not judicially enforceable constitutional rights but merely guidelines for legislation. The very terms of the
provisions manifest that they are only principles upon which legislations must be based. Res ipsa loquitur.
On the other hand, Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive
command which is complete in itself and which needs no further guidelines or implementing laws or rules for its
enforcement. From its very words the provision does not require any legislation to put it in operation. It is per
se judicially enforceable. When our Constitution mandates that [i]n the grant of rights, privileges, and
concessions covering national economy and patrimony, the State shall give preference to qualified Filipinos, it
means just that - qualified Filipinos shall be preferred. And when our Constitution declares that a right exists in
certain specified circumstances an action may be maintained to enforce such right notwithstanding the
absence of any legislation on the subject; consequently, if there is no statute especially enacted to enforce
such constitutional right, such right enforces itself by its own inherent potency and puissance, and from which
all legislations must take their bearings. Where there is a right there is a remedy. Ubi jus ibi remedium.
As regards our national patrimony, a member of the 1986 Constitutional Commission[34] explains -
The patrimony of the Nation that should be conserved and developed refers not only to our rich
natural resources but also to the cultural heritage of our race. It also refers to our intelligence in arts,
sciences and letters. Therefore, we should develop not only our lands, forests, mines and other natural
resources but also the mental ability or faculty of our people.
We agree. In its plain and ordinary meaning, the term patrimony pertains to heritage.[35] When the
Constitution speaks of national patrimony, it refers not only to the natural resources of the Philippines, as the
Constitution could have very well used the term natural resources, but also to the cultural heritage of the
Filipinos.
Manila Hotel has become a landmark - a living testimonial of Philippine heritage. While it was restrictively
an American hotel when it first opened in 1912, it immediately evolved to be truly Filipino. Formerly a
concourse for the elite, it has since then become the venue of various significant events which have shaped
Philippine history. It was called the Cultural Center of the 1930s. It was the site of the festivities during the
inauguration of the Philippine Commonwealth. Dubbed as the Official Guest House of the Philippine
Government it plays host to dignitaries and official visitors who are accorded the traditional Philippine
hospitality.[36]
5
The history of the hotel has been chronicled in the book The Manila Hotel: The Heart and Memory of a
City.[37] During World War II the hotel was converted by the Japanese Military Administration into a military
headquarters. When the American forces returned to recapture Manila the hotel was selected by the Japanese
together with Intramuros as the two (2) places for their final stand. Thereafter, in the 1950s and 1960s, the
hotel became the center of political activities, playing host to almost every political convention. In 1970 the
hotel reopened after a renovation and reaped numerous international recognitions, an acknowledgment of the
Filipino talent and ingenuity. In 1986 the hotel was the site of a failed coup d etat where an aspirant for vice-
president was proclaimed President of the Philippine Republic.
For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and failures, loves
and frustrations of the Filipinos; its existence is impressed with public interest; its own historicity associated
with our struggle for sovereignty, independence and nationhood. Verily, Manila Hotel has become part of our
national economy and patrimony. For sure, 51% of the equity of the MHC comes within the purview of the
constitutional shelter for it comprises the majority and controlling stock, so that anyone who acquires or owns
the 51% will have actual control and management of the hotel. In this instance, 51% of the MHC cannot be
disassociated from the hotel and the land on which the hotel edifice stands. Consequently, we cannot sustain
respondents claim that the Filipino First Policy provision is not applicable since what is being sold is only 51%
of the outstanding shares of the corporation, not the Hotel building nor the land upon which the building
stands.[38]
The argument is pure sophistry. The term qualified Filipinos as used in our Constitution also includes
corporations at least 60% of which is owned by Filipinos. This is very clear from the proceedings of the 1986
Constitutional Commission -
THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I would like to introduce an amendment to the Nolledo amendment. And the
amendment would consist in substituting the words QUALIFIED FILIPINOS with the following:
CITIZENS OF THE PHILIPPINES OR CORPORATIONS OR ASSOCIATIONS WHOSE CAPITAL
OR CONTROLLING STOCK IS WHOLLY OWNED BY SUCH CITIZENS.
xxxx
MR. MONSOD. Madam President, apparently the proponent is agreeable, but we have to raise a
question. Suppose it is a corporation that is 80-percent Filipino, do we not give it preference?
MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino. What about a corporation
wholly owned by Filipino citizens?
MR. MONSOD. At least 60 percent, Madam President.
MR. DAVIDE. Is that the intention?
MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that the preference should only
be 100-percent Filipino.
MR. DAVIDE. I want to get that meaning clear because QUALIFIED FILIPINOS may refer only to
individuals and not to juridical personalities or entities.
MR. MONSOD. We agree, Madam President.[39]
xxxx
MR. RODRIGO. Before we vote, may I request that the amendment be read again.
MR. NOLLEDO. The amendment will read: IN THE GRANT OF RIGHTS, PRIVILEGES AND
CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE STATE
SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS. And the word Filipinos here, as
intended by the proponents, will include not only individual Filipinos but also Filipino-controlled
entities or entities fully-controlled by Filipinos.[40]
The phrase preference to qualified Filipinos was explained thus -
MR. FOZ. Madam President, I would like to request Commissioner Nolledo to please restate his
amendment so that I can ask a question.
MR. NOLLEDO. IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS COVERING THE
NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO
QUALIFIED FILIPINOS.
MR. FOZ. In connection with that amendment, if a foreign enterprise is qualified and a Filipino
enterprise is also qualified, will the Filipino enterprise still be given a preference?
MR. NOLLEDO. Obviously.
6
MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino enterprise, will the
Filipino still be preferred?
MR. NOLLEDO. The answer is yes.
MR. FOZ. Thank you.[41]
Expounding further on the Filipino First Policy provision Commissioner Nolledo continues
MR. NOLLEDO. Yes, Madam President. Instead of MUST, it will be SHALL - THE STATE SHALL
GIVE PREFERENCE TO QUALIFIED FILIPINOS. This embodies the so-called Filipino First
policy. That means that Filipinos should be given preference in the grant of concessions,
privileges and rights covering the national patrimony.[42]
The exchange of views in the sessions of the Constitutional Commission regarding the subject provision
was still further clarified by Commissioner Nolledo[43] -
Paragraph 2 of Section 10 explicitly mandates the Pro-Filipino bias in all economic concerns. It is better known
as the FILIPINO FIRST Policy x x x x This provision was never found in previous Constitutions x x x x
The term qualified Filipinos simply means that preference shall be given to those citizens who can make a
viable contribution to the common good, because of credible competence and efficiency. It certainly does NOT
mandate the pampering and preferential treatment to Filipino citizens or organizations that are incompetent or
inefficient, since such an indiscriminate preference would be counterproductive and inimical to the common
good.
In the granting of economic rights, privileges, and concessions, when a choice has to be made between a
qualified foreigner and a qualified Filipino, the latter shall be chosen over the former.
Lastly, the word qualified is also determinable. Petitioner was so considered by respondent GSIS and
selected as one of the qualified bidders. It was pre-qualified by respondent GSIS in accordance with its own
guidelines so that the sole inference here is that petitioner has been found to be possessed of proven
management expertise in the hotel industry, or it has significant equity ownership in another hotel company, or
it has an overall management and marketing proficiency to successfully operate the Manila Hotel.[44]
The penchant to try to whittle away the mandate of the Constitution by arguing that the subject provision is
not self-executory and requires implementing legislation is quite disturbing. The attempt to violate a clear
constitutional provision - by the government itself - is only too distressing. To adopt such a line of reasoning is
to renounce the duty to ensure faithfulness to the Constitution. For, even some of the provisions of the
Constitution which evidently need implementing legislation have juridical life of their own and can be the source
of a judicial remedy. We cannot simply afford the government a defense that arises out of the failure to enact
further enabling, implementing or guiding legislation. In fine, the discourse of Fr. Joaquin G. Bernas, S.J., on
constitutional government is apt -
The executive department has a constitutional duty to implement laws, including the Constitution, even before
Congress acts - provided that there are discoverable legal standards for executive action. When the executive
acts, it must be guided by its own understanding of the constitutional command and of applicable laws. The
responsibility for reading and understanding the Constitution and the laws is not the sole prerogative of
Congress. If it were, the executive would have to ask Congress, or perhaps the Court, for an interpretation
every time the executive is confronted by a constitutional command. That is not how constitutional government
operates.[45]
Respondents further argue that the constitutional provision is addressed to the State, not to respondent
GSIS which by itself possesses a separate and distinct personality.This argument again is at best specious. It
is undisputed that the sale of 51% of the MHC could only be carried out with the prior approval of the State
acting through respondent Committee on Privatization. As correctly pointed out by Fr. Joaquin G. Bernas, S.J.,
this fact alone makes the sale of the assets of respondents GSIS and MHC a state action. In constitutional
jurisprudence, the acts of persons distinct from the government are considered state action covered by the
Constitution (1) when the activity it engages in is a public function; (2) when the government is so significantly
involved with the private actor as to make the government responsible for his action; and, (3) when the
government has approved or authorized the action. It is evident that the act of respondent GSIS in selling 51%
of its share in respondent MHC comes under the second and third categories of state action. Without doubt
therefore the transaction, although entered into by respondent GSIS, is in fact a transaction of the State and
therefore subject to the constitutional command.[46]
When the Constitution addresses the State it refers not only to the people but also to the government as
elements of the State. After all, government is composed of three (3) divisions of power - legislative, executive
7
and judicial. Accordingly, a constitutional mandate directed to the State is correspondingly directed to the three
(3) branches of government. It is undeniable that in this case the subject constitutional injunction is addressed
among others to the Executive Department and respondent GSIS, a government instrumentality deriving its
authority from the State.
It should be stressed that while the Malaysian firm offered the higher bid it is not yet the winning
bidder. The bidding rules expressly provide that the highest bidder shall only be declared the winning bidder
after it has negotiated and executed the necessary contracts, and secured the requisite approvals. Since
the Filipino First Policy provision of the Constitution bestows preference on qualified Filipinos the mere tending
of the highest bid is not an assurance that the highest bidder will be declared the winning bidder.Resultantly,
respondents are not bound to make the award yet, nor are they under obligation to enter into one with the
highest bidder. For in choosing the awardee respondents are mandated to abide by the dictates of the 1987
Constitution the provisions of which are presumed to be known to all the bidders and other interested parties.
Adhering to the doctrine of constitutional supremacy, the subject constitutional provision is, as it should be,
impliedly written in the bidding rules issued by respondent GSIS, lest the bidding rules be nullified for being
violative of the Constitution. It is a basic principle in constitutional law that all laws and contracts must conform
with the fundamental law of the land. Those which violate the Constitution lose their reason for being.
Paragraph V. J. 1 of the bidding rules provides that [i]f for any reason the Highest Bidder cannot be
awarded the Block of Shares, GSIS may offer this to other Qualified Bidders that have validly submitted bids
provided that these Qualified Bidders are willing to match the highest bid in terms of price per share.
[47]
Certainly, the constitutional mandate itself is reason enough not to award the block of shares immediately to
the foreign bidder notwithstanding its submission of a higher, or even the highest, bid. In fact, we cannot
conceive of a stronger reason than the constitutional injunction itself.
In the instant case, where a foreign firm submits the highest bid in a public bidding concerning the grant of
rights, privileges and concessions covering the national economy and patrimony, thereby exceeding the bid of
a Filipino, there is no question that the Filipino will have to be allowed to match the bid of the foreign entity. And
if the Filipino matches the bid of a foreign firm the award should go to the Filipino. It must be so if we are to
give life and meaning to the Filipino First Policy provision of the 1987 Constitution. For, while this may neither
be expressly stated nor contemplated in the bidding rules, the constitutional fiat is omnipresent to be simply
disregarded. To ignore it would be to sanction a perilous skirting of the basic law.
This Court does not discount the apprehension that this policy may discourage foreign investors. But the
Constitution and laws of the Philippines are understood to be always open to public scrutiny. These are given
factors which investors must consider when venturing into business in a foreign jurisdiction. Any person
therefore desiring to do business in the Philippines or with any of its agencies or instrumentalities is presumed
to know his rights and obligations under the Constitution and the laws of the forum.
The argument of respondents that petitioner is now estopped from questioning the sale to Renong Berhad
since petitioner was well aware from the beginning that a foreigner could participate in the bidding is
meritless. Undoubtedly, Filipinos and foreigners alike were invited to the bidding. But foreigners may be
awarded the sale only if no Filipino qualifies, or if the qualified Filipino fails to match the highest bid tendered
by the foreign entity. In the case before us, while petitioner was already preferred at the inception of the bidding
because of the constitutional mandate, petitioner had not yet matched the bid offered by Renong Berhad. Thus
it did not have the right or personality then to compel respondent GSIS to accept its earlier bid. Rightly, only
after it had matched the bid of the foreign firm and the apparent disregard by respondent GSIS of petitioners
matching bid did the latter have a cause of action.
Besides, there is no time frame for invoking the constitutional safeguard unless perhaps the award has
been finally made. To insist on selling the Manila Hotel to foreigners when there is a Filipino group willing to
match the bid of the foreign group is to insist that government be treated as any other ordinary market player,
and bound by its mistakes or gross errors of judgment, regardless of the consequences to the Filipino
people. The miscomprehension of the Constitution is regrettable. Thus we would rather remedy the indiscretion
while there is still an opportunity to do so than let the government develop the habit of forgetting that the
Constitution lays down the basic conditions and parameters for its actions.
Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to the bidding
rules, respondent GSIS is left with no alternative but to award to petitioner the block of shares of MHC and to
execute the necessary agreements and documents to effect the sale in accordance not only with the bidding
guidelines and procedures but with the Constitution as well. The refusal of respondent GSIS to execute the
8
corresponding documents with petitioner as provided in the bidding rules after the latter has matched the bid of
the Malaysian firm clearly constitutes grave abuse of discretion.
The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987 Constitution not
merely to be used as a guideline for future legislation but primarily to be enforced; so must it be enforced. This
Court as the ultimate guardian of the Constitution will never shun, under any reasonable circumstance, the
duty of upholding the majesty of the Constitution which it is tasked to defend. It is worth emphasizing that it is
not the intention of this Court to impede and diminish, much less undermine, the influx of foreign
investments. Far from it, the Court encourages and welcomes more business opportunities but avowedly
sanctions the preference for Filipinos whenever such preference is ordained by the Constitution. The position
of the Court on this matter could have not been more appropriately articulated by Chief Justice Narvasa -
As scrupulously as it has tried to observe that it is not its function to substitute its judgment for that of the
legislature or the executive about the wisdom and feasibility of legislation economic in nature, the Supreme
Court has not been spared criticism for decisions perceived as obstacles to economic progress and
development x x x x in connection with a temporary injunction issued by the Courts First Division against the
sale of the Manila Hotel to a Malaysian Firm and its partner, certain statements were published in a major daily
to the effect that that injunction again demonstrates that the Philippine legal system can be a major obstacle to
doing business here.
Let it be stated for the record once again that while it is no business of the Court to intervene in contracts of the
kind referred to or set itself up as the judge of whether they are viable or attainable, it is its bounden duty to
make sure that they do not violate the Constitution or the laws, or are not adopted or implemented with grave
abuse of discretion amounting to lack or excess of jurisdiction. It will never shirk that duty, no matter how
buffeted by winds of unfair and ill-informed criticism.[48]
Privatization of a business asset for purposes of enhancing its business viability and preventing further
losses, regardless of the character of the asset, should not take precedence over non-material values. A
commercial, nay even a budgetary, objective should not be pursued at the expense of national pride and
dignity. For the Constitution enshrines higher and nobler non-material values. Indeed, the Court will always
defer to the Constitution in the proper governance of a free society; after all, there is nothing so sacrosanct in
any economic policy as to draw itself beyond judicial review when the Constitution is involved.[49]
Nationalism is inherent in the very concept of the Philippines being a democratic and republican state, with
sovereignty residing in the Filipino people and from whom all government authority emanates. In nationalism,
the happiness and welfare of the people must be the goal. The nation-state can have no higher purpose. Any
interpretation of any constitutional provision must adhere to such basic concept. Protection of foreign
investments, while laudible, is merely a policy. It cannot override the demands of nationalism.[50]
The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to the highest
bidder solely for the sake of privatization. We are not talking about an ordinary piece of property in a
commercial district. We are talking about a historic relic that has hosted many of the most important events in
the short history of the Philippines as a nation. We are talking about a hotel where heads of states would prefer
to be housed as a strong manifestation of their desire to cloak the dignity of the highest state function to their
official visits to the Philippines. Thus the Manila Hotel has played and continues to play a significant role as an
authentic repository of twentieth century Philippine history and culture. In this sense, it has become truly a
reflection of the Filipino soul - a place with a history of grandeur; a most historical setting that has played a part
in the shaping of a country.[51]
This Court cannot extract rhyme nor reason from the determined efforts of respondents to sell the
historical landmark - this Grand Old Dame of hotels in Asia - to a total stranger. For, indeed, the conveyance of
this epic exponent of the Filipino psyche to alien hands cannot be less than mephistophelian for it is, in
whatever manner viewed, a veritable alienation of a nations soul for some pieces of foreign silver. And so we
ask: What advantage, which cannot be equally drawn from a qualified Filipino, can be gained by the Filipinos if
Manila Hotel - and all that it stands for - is sold to a non-Filipino? How much of national pride will vanish if the
nations cultural heritage is entrusted to a foreign entity? On the other hand, how much dignity will be preserved
and realized if the national patrimony is safekept in the hands of a qualified, zealous and well-meaning
Filipino? This is the plain and simple meaning of the Filipino First Policy provision of the Philippine
Constitution. And this Court, heeding the clarion call of the Constitution and accepting the duty of being the
elderly watchman of the nation, will continue to respect and protect the sanctity of the Constitution.
9
WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL
CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE
COUNSEL are directed to CEASE and DESIST from selling 51% of the shares of the Manila Hotel Corporation
to RENONG BERHAD, and to ACCEPT the matching bid of petitioner MANILA PRINCE HOTEL
CORPORATION to purchase the subject 51% of the shares of the Manila Hotel Corporation at P44.00 per
share and thereafter to execute the necessary agreements and documents to effect the sale, to issue the
necessary clearances and to do such other acts and deeds as may be necessary for the purpose.
SO ORDERED.
Regalado, Davide, Jr., Romero, Kapunan, Francisco, and Hermosisima, Jr., JJ, concur.
Narvasa, C.J., (Chairman), and Melo, J., joins J. Puno in his dissent.
Padilla, J., see concurring opinion.
Vitug, J., see separate concurring opinion
Mendoza, J., see concurring opinion
Torres, J., with separate opinion
Puno, J., see dissent.
Panganiban J., with separate dissenting opinion.

B. THE STATE
G.R. No. L-26379 December 27, 1969
WILLIAM C. REAGAN, ETC., petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
Quasha, Asperilla, Blanco, Zafra and Tayag for petitioner.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete, Solicitor
Lolita O. Gal-lang and Special Attorney Gamaliel H. Mantolino for respondent.
FERNANDO, J.:
A question novel in character, the answer to which has far-reaching implications, is raised by petitioner William
C. Reagan, at one time a civilian employee of an American corporation providing technical assistance to the
United States Air Force in the Philippines. He would dispute the payment of the income tax assessed on him
by respondent Commissioner of Internal Revenue on an amount realized by him on a sale of his automobile to
a member of the United States Marine Corps, the transaction having taken place at the Clark Field Air Base at
Pampanga. It is his contention, seriously and earnestly expressed, that in legal contemplation the sale was
made outside Philippine territory and therefore beyond our jurisdictional power to tax.
Such a plea, far-fetched and implausible, on its face betraying no kinship with reality, he would justify by
invoking, mistakenly as will hereafter be more fully shown an observation to that effect in a 1951
opinion, 1 petitioner ignoring that such utterance was made purely as a flourish of rhetoric and by way of
emphasizing the decision reached, that the trading firm as purchaser of army goods must respond for the sales
taxes due from an importer, as the American armed forces being exempt could not be taxed as such under the
National Internal Revenue Code.2 Such an assumption, inspired by the commendable aim to render unavailing
any attempt at tax evasion on the part of such vendee, found expression anew in a 1962 decision,3 coupled
with the reminder however, to render the truth unmistakable, that "the areas covered by the United States
Military Bases are not foreign territories both in the political and geographical sense."
As thus clarified, it is manifest that such a view amounts at most to a legal fiction and is moreover obiter. It
certainly cannot control the resolution of the specific question that confronts us. We declare our stand in an
unequivocal manner. The sale having taken place on what indisputably is Philippine territory, petitioner's
liability for the income tax due as a result thereof was unavoidable. As the Court of Tax Appeals reached a
similar conclusion, we sustain its decision now before us on appeal.
In the decision appealed from, the Court of Tax Appeals, after stating the nature of the case, started the recital
of facts thus: "It appears that petitioner, a citizen of the United States and an employee of Bendix Radio,
Division of Bendix Aviation Corporation, which provides technical assistance to the United States Air Force,
was assigned at Clark Air Base, Philippines, on or about July 7, 1959 ... . Nine (9) months thereafter and
before his tour of duty expired, petitioner imported on April 22, 1960 a tax-free 1960 Cadillac car with
accessories valued at $6,443.83, including freight, insurance and other charges."4 Then came the following:
10
"On July 11, 1960, more than two (2) months after the 1960 Cadillac car was imported into the Philippines,
petitioner requested the Base Commander, Clark Air Base, for a permit to sell the car, which was granted
provided that the sale was made to a member of the United States Armed Forces or a citizen of the United
States employed in the U.S. military bases in the Philippines. On the same date, July 11, 1960, petitioner sold
his car for $6,600.00 to a certain Willie Johnson, Jr. (Private first class), United States Marine Corps, Sangley
Point, Cavite, Philippines, as shown by a Bill of Sale . . . executed at Clark Air Base. On the same date, Pfc.
Willie (William) Johnson, Jr. sold the car to Fred Meneses for P32,000.00 as evidenced by a deed of sale
executed in Manila."5
As a result of the transaction thus made, respondent Commissioner of Internal Revenue, after deducting the
landed cost of the car as well as the personal exemption to which petitioner was entitled, fixed as his net
taxable income arising from such transaction the amount of P17,912.34, rendering him liable for income tax in
the sum of P2,979.00. After paying the sum, he sought a refund from respondent claiming that he was exempt,
but pending action on his request for refund, he filed the case with the Court of Tax Appeals seeking recovery
of the sum of P2,979.00 plus the legal rate of interest.
As noted in the appealed decision: "The only issue submitted for our resolution is whether or not the said
income tax of P2,979.00 was legally collected by respondent for petitioner."6 After discussing the legal issues
raised, primarily the contention that the Clark Air Base "in legal contemplation, is a base outside the
Philippines" the sale therefore having taken place on "foreign soil", the Court of Tax Appeals found nothing
objectionable in the assessment and thereafter the payment of P2,979.00 as income tax and denied the refund
on the same. Hence, this appeal predicated on a legal theory we cannot accept. Petitioner cannot make out a
case for reversal.
1. Resort to fundamentals is unavoidable to place things in their proper perspective, petitioner apparently
feeling justified in his refusal to defer to basic postulates of constitutional and international law, induced no
doubt by the weight he would accord to the observation made by this Court in the two opinions earlier referred
to. To repeat, scant comfort, if at all is to be derived from such an obiter dictum, one which is likewise far from
reflecting the fact as it is.
Nothing is better settled than that the Philippines being independent and sovereign, its authority may be
exercised over its entire domain. There is no portion thereof that is beyond its power. Within its limits, its
decrees are supreme, its commands paramount. Its laws govern therein, and everyone to whom it applies
must submit to its terms. That is the extent of its jurisdiction, both territorial and personal. Necessarily, likewise,
it has to be exclusive. If it were not thus, there is a diminution of its sovereignty.
It is to be admitted that any state may, by its consent, express or implied, submit to a restriction of its sovereign
rights. There may thus be a curtailment of what otherwise is a power plenary in character. That is the concept
of sovereignty as auto-limitation, which, in the succinct language of Jellinek, "is the property of a state-force
due to which it has the exclusive capacity of legal self-determination and self-restriction."7 A state then, if it
chooses to, may refrain from the exercise of what otherwise is illimitable competence.
Its laws may as to some persons found within its territory no longer control. Nor does the matter end there. It is
not precluded from allowing another power to participate in the exercise of jurisdictional right over certain
portions of its territory. If it does so, it by no means follows that such areas become impressed with an alien
character. They retain their status as native soil. They are still subject to its authority. Its jurisdiction may be
diminished, but it does not disappear. So it is with the bases under lease to the American armed forces by
virtue of the military bases agreement of 1947. They are not and cannot be foreign territory.
Decisions coming from petitioner's native land, penned by jurists of repute, speak to that effect with impressive
unanimity. We start with the citation from Chief Justice Marshall, announced in the leading case of Schooner
Exchange v. M'Faddon,8 an 1812 decision: "The jurisdiction of the nation within its own territory is necessarily
exclusive and absolute. It is susceptible of no limitation not imposed by itself. Any restriction upon it, deriving
validity from an external source, would imply a diminution of its sovereignty to the extent of the restriction, and
an investment of that sovereignty to the same extent in that power which could impose such restriction." After
which came this paragraph: "All exceptions, therefore, to the full and complete power of a nation within its own
territories, must be traced up to the consent of the nation itself. They can flow from no other legitimate source."
Chief Justice Taney, in an 1857 decision,9 affirmed the fundamental principle of everyone within the territorial
domain of a state being subject to its commands: "For undoubtedly every person who is found within the limits
of a government, whether the temporary purposes or as a resident, is bound by its laws." It is no exaggeration
11
then for Justice Brewer to stress that the United States government "is one having jurisdiction over every foot
of soil within its territory, and acting directly upon each [individual found therein]; . . ."10
Not too long ago, there was a reiteration of such a view, this time from the pen of Justice Van Devanter. Thus:
"It now is settled in the United States and recognized elsewhere that the territory subject to its jurisdiction
includes the land areas under its dominion and control the ports, harbors, bays, and other in closed arms of the
sea along its coast, and a marginal belt of the sea extending from the coast line outward a marine league, or 3
geographic miles."11 He could cite moreover, in addition to many American decisions, such eminent treatise-
writers as Kent, Moore, Hyde, Wilson, Westlake, Wheaton and Oppenheim.
As a matter of fact, the eminent commentator Hyde in his three-volume work on International Law, as
interpreted and applied by the United States, made clear that not even the embassy premises of a foreign
power are to be considered outside the territorial domain of the host state. Thus: "The ground occupied by an
embassy is not in fact the territory of the foreign State to which the premises belong through possession or
ownership. The lawfulness or unlawfulness of acts there committed is determined by the territorial sovereign. If
an attache commits an offense within the precincts of an embassy, his immunity from prosecution is not
because he has not violated the local law, but rather for the reason that the individual is exempt from
prosecution. If a person not so exempt, or whose immunity is waived, similarly commits a crime therein, the
territorial sovereign, if it secures custody of the offender, may subject him to prosecution, even though its
criminal code normally does not contemplate the punishment of one who commits an offense outside of the
national domain. It is not believed, therefore, that an ambassador himself possesses the right to exercise
jurisdiction, contrary to the will of the State of his sojourn, even within his embassy with respect to acts there
committed. Nor is there apparent at the present time any tendency on the part of States to acquiesce in his
exercise of it."12
2. In the light of the above, the first and crucial error imputed to the Court of Tax Appeals to the effect that it
should have held that the Clark Air Force is foreign soil or territory for purposes of income tax legislation is
clearly without support in law. As thus correctly viewed, petitioner's hope for the reversal of the decision
completely fades away. There is nothing in the Military Bases Agreement that lends support to such an
assertion. It has not become foreign soil or territory. This country's jurisdictional rights therein, certainly not
excluding the power to tax, have been preserved. As to certain tax matters, an appropriate exemption was
provided for.
Petitioner could not have been unaware that to maintain the contrary would be to defy reality and would be an
affront to the law. While his first assigned error is thus worded, he would seek to impart plausibility to his claim
by the ostensible invocation of the exemption clause in the Agreement by virtue of which a "national of the
United States serving in or employed in the Philippines in connection with the construction, maintenance,
operation or defense of the bases and residing in the Philippines only by reason of such employment" is not to
be taxed on his income unless "derived from Philippine source or sources other than the United States
sources."13 The reliance, to repeat, is more apparent than real for as noted at the outset of this opinion,
petitioner places more faith not on the language of the provision on exemption but on a sentiment given
expression in a 1951 opinion of this Court, which would be made to yield such an unwarranted interpretation at
war with the controlling constitutional and international law principles. At any rate, even if such a contention
were more adequately pressed and insisted upon, it is on its face devoid of merit as the source clearly was
Philippine.
In Saura Import and Export Co. v. Meer,14 the case above referred to, this Court affirmed a decision rendered
about seven months previously,15 holding liable as an importer, within the contemplation of the National Internal
Revenue Code provision, the trading firm that purchased army goods from a United States government agency
in the Philippines. It is easily understandable why. If it were not thus, tax evasion would have been facilitated.
The United States forces that brought in such equipment later disposed of as surplus, when no longer needed
for military purposes, was beyond the reach of our tax statutes.
Justice Tuason, who spoke for the Court, adhered to such a rationale, quoting extensively from the earlier
opinion. He could have stopped there. He chose not to do so. The transaction having occurred in 1946, not so
long after the liberation of the Philippines, he proceeded to discuss the role of the American military contingent
in the Philippines as a belligerent occupant. In the course of such a dissertion, drawing on his well-known gift
for rhetoric and cognizant that he was making an as if statement, he did say: "While in army bases or
installations within the Philippines those goods were in contemplation of law on foreign soil."
12
It is thus evident that the first, and thereafter the controlling, decision as to the liability for sales taxes as an
importer by the purchaser, could have been reached without any need for such expression as that given
utterance by Justice Tuason. Its value then as an authoritative doctrine cannot be as much as petitioner would
mistakenly attach to it. It was clearly obiter not being necessary for the resolution of the issue before this
Court.16 It was an opinion "uttered by the way."17 It could not then be controlling on the question before us now,
the liability of the petitioner for income tax which, as announced at the opening of this opinion, is squarely
raised for the first time.18
On this point, Chief Justice Marshall could again be listened to with profit. Thus: "It is a maxim, not to be
disregarded, that general expressions, in every opinion, are to be taken in connection with the case in which
those expressions are used. If they go beyond the case, they may be respected, but ought not to control the
judgment in a subsequent suit when the very point is presented for decision."19
Nor did the fact that such utterance of Justice Tuason was cited in Co Po v. Collector of Internal Revenue,20 a
1962 decision relied upon by petitioner, put a different complexion on the matter. Again, it was by way of pure
embellishment, there being no need to repeat it, to reach the conclusion that it was the purchaser of army
goods, this time from military bases, that must respond for the advance sales taxes as importer. Again, the
purpose that animated the reiteration of such a view was clearly to emphasize that through the employment of
such a fiction, tax evasion is precluded. What is more, how far divorced from the truth was such statement was
emphasized by Justice Barrera, who penned the Co Po opinion, thus: "It is true that the areas covered by the
United States Military Bases are not foreign territories both in the political and geographical sense."21
Justice Tuason moreover made explicit that rather than corresponding with reality, what was said by him was in
the way of a legal fiction. Note his stress on "in contemplation of law." To lend further support to a conclusion
already announced, being at that a confirmation of what had been arrived at in the earlier case, distinguished
by its sound appreciation of the issue then before this Court and to preclude any tax evasion, an observation
certainly not to be taken literally was thus given utterance.
This is not to say that it should have been ignored altogether afterwards. It could be utilized again, as it
undoubtedly was, especially so for the purpose intended, namely to stigmatize as without support in law any
attempt on the part of a taxpayer to escape an obligation incumbent upon him. So it was quoted with that end
in view in the Co Po case. It certainly does not justify any effort to render futile the collection of a tax legally
due, as here. That was farthest from the thought of Justice Tuason.
What is more, the statement on its face is, to repeat, a legal fiction. This is not to discount the uses of a fictio
juris in the science of the law. It was Cardozo who pointed out its value as a device "to advance the ends of
justice" although at times it could be "clumsy" and even "offensive".22 Certainly, then, while far from
objectionable as thus enunciated, this observation of Justice Tuason could be misused or misconstrued in a
clumsy manner to reach an offensive result. To repeat, properly used, a legal fiction could be relied upon by the
law, as Frankfurter noted, in the pursuit of legitimate ends.23 Petitioner then would be well-advised to take to
heart such counsel of care and circumspection before invoking not a legal fiction that would avoid a mockery of
the law by avoiding tax evasion but what clearly is a misinterpretation thereof, leading to results that would
have shocked its originator.
The conclusion is thus irresistible that the crucial error assigned, the only one that calls for discussion to the
effect that for income tax purposes the Clark Air Force Base is outside Philippine territory, is utterly without
merit. So we have said earlier.
3. To impute then to the statement of Justice Tuason the meaning that petitioner would fasten on it is, to
paraphrase Frankfurter, to be guilty of succumbing to the vice of literalness. To so conclude is, whether by
design or inadvertence, to misread it. It certainly is not susceptible of the mischievous consequences now
sought to be fastened on it by petitioner.
That it would be fraught with such peril to the enforcement of our tax statutes on the military bases under lease
to the American armed forces could not have been within the contemplation of Justice Tuason. To so attribute
such a bizarre consequence is to be guilty of a grave disservice to the memory of a great jurist. For his real
and genuine sentiment on the matter in consonance with the imperative mandate of controlling constitutional
and international law concepts was categorically set forth by him, not as an obiter but as the rationale of the
decision, in People v. Acierto24 thus: "By the [Military Bases] Agreement, it should be noted, the Philippine
Government merely consents that the United States exercise jurisdiction in certain cases. The consent was
given purely as a matter of comity, courtesy, or expediency over the bases as part of the Philippine territory or
divested itself completely of jurisdiction over offenses committed therein."
13
Nor did he stop there. He did stress further the full extent of our territorial jurisdiction in words that do not admit
of doubt. Thus: "This provision is not and can not on principle or authority be construed as a limitation upon the
rights of the Philippine Government. If anything, it is an emphatic recognition and reaffirmation of Philippine
sovereignty over the bases and of the truth that all jurisdictional rights granted to the United States and not
exercised by the latter are reserved by the Philippines for itself."25
It is in the same spirit that we approach the specific question confronting us in this litigation. We hold, as
announced at the outset, that petitioner was liable for the income tax arising from a sale of his automobile in
the Clark Field Air Base, which clearly is and cannot otherwise be other than, within our territorial jurisdiction to
tax.
4. With the mist thus lifted from the situation as it truly presents itself, there is nothing that stands in the way of
an affirmance of the Court of Tax Appeals decision. No useful purpose would be served by discussing the other
assigned errors, petitioner himself being fully aware that if the Clark Air Force Base is to be considered, as it
ought to be and as it is, Philippine soil or territory, his claim for exemption from the income tax due was
distinguished only by its futility.
There is further satisfaction in finding ourselves unable to indulge petitioner in his plea for reversal. We thus
manifest fealty to a pronouncement made time and time again that the law does not look with favor on tax
exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken
and too categorical to be misinterpreted.26 Petitioner had not done so. Petitioner cannot do so.
WHEREFORE, the decision of the Court of Tax Appeals of May 12, 1966 denying the refund of P2,979.00 as
the income tax paid by petitioner is affirmed. With costs against petitioner.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Teehankee, JJ., concur.
Reyes, J.B.L., J., concurs in the result.
Barredo, J., took no part.

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

SHIPSIDE INCORPORATED, petitioner, vs. THE HON. COURT OF APPEALS [Special Former Twelfth
Division], HON. REGIONAL TRIAL COURT, BRANCH 26 (San Fernando City, La Union) & The
REPUBLIC OF THE PHILIPPINES, respondents.
DECISION
MELO, J.:
Before the Court is a petition for certiorari filed by Shipside Incorporated under Rule 65 of the 1997 Rules
on Civil Procedure against the resolutions of the Court of Appeals promulgated on November 4, 1999 and May
23, 2000, which respectively, dismissed a petition for certiorari and prohibition and thereafter denied a motion
for reconsideration.
The antecedent facts are undisputed:
On October 29, 1958, Original Certificate of Title No. 0-381 was issued in favor of Rafael Galvez, over four
parcels of land Lot 1 with 6,571 square meters; Lot 2, with 16,777 square meters; Lot 3 with 1,583 square
meters; and Lot 4, with 508 square meters.
On April 11, 1960, Lots No. 1 and 4 were conveyed by Rafael Galvez in favor of Filipina Mamaril,
Cleopatra Llana, Regina Bustos, and Erlinda Balatbat in a deed of sale which was inscribed as Entry No. 9115
OCT No. 0-381 on August 10, 1960. Consequently, Transfer Certificate No. T-4304 was issued in favor of the
buyers covering Lots No. 1 and 4.
Lot No. 1 is described as:
A parcel of land (Lot 1, Plan PSU-159621, L. R. Case No. N-361; L. R. C. Record No. N-14012, situated in the
Barrio of Poro, Municipality of San Fernando, Province of La Union, bounded on the NE, by the Foreshore; on
the SE, by Public Land and property of the Benguet Consolidated Mining Company; on the SW, by properties
of Rafael Galvez (US Military Reservation Camp Wallace) and Policarpio Munar; and on the NW, by an old
Barrio Road. Beginning at a point marked 1 on plan, being S. 74 deg. 11W. , 2670. 36 from B. L. L. M. 1, San
Fernando, thence
S. 66 deg. 19E., 134.95 m. to point 2; S. 14 deg. 57W., 11.79 m. to point 3;
S. 12 deg. 45W., 27.00 m. to point 4; S. 12 deg. 45W, 6.90 m. to point 5;
N. 69 deg., 32W., 106.00 m. to point 6; N. 52 deg., 21W., 36. 85 m. to point 7;
14
N. 21 deg. 31E., 42. 01 m. to the point of beginning; containing an area of SIX THOUSAND FIVE HUNDRED
AND SEVENTY-ONE (6,571) SQUARE METERS, more or less. All points referred to are indicated on the plan;
and marked on the ground; bearings true, date of survey, February 421, 1957.
Lot No. 4 has the following technical description:
A parcel of land (Lot 4, Plan PSU-159621, L. R. Case No. N-361 L. R. C. Record No. N-14012), situated in the
Barrio of Poro, Municipality of San Fernando, La Union. Bounded on the SE by the property of the Benguet
Consolidated Mining Company; on the S. by property of Pelagia Carino; and on the NW by the property of
Rafael Galvez (US Military Reservation, Camp Wallace).Beginning at a point marked 1 on plan, being S. deg.
24W. 2591. 69 m. from B. L. L. M. 1, San Fernando, thence S. 12 deg. 45W., 73. 03 m. to point 2; N. 79 deg.
59W., 13.92 m. to point 3; N. 23 deg. 26E. , 75.00 m. to the point of beginning; containing an area of FIVE
HUNDED AND EIGHT (508) SQUARE METERS, more or less. All points referred to are indicated in the plan
and marked on the ground; bearings true, date of survey, February 4-21, 1957.
On August 16, 1960, Mamaril, et al. sold Lots No. 1 and 4 to Lepanto Consolidated Mining Company. The
deed of sale covering the aforesaid property was inscribed as Entry No. 9173 on TCT No. T-
4304. Subsequently, Transfer Certificate No. T-4314 was issued in the name of Lepanto Consolidated Mining
Company as owner of Lots No. 1 and 4.
On February 1, 1963, unknown to Lepanto Consolidated Mining Company, the Court of First Instance of
La Union, Second Judicial District, issued an Order in Land Registration Case No. N-361 (LRC Record No. N-
14012) entitled Rafael Galvez, Applicant, Eliza Bustos, et al., Parties-In-Interest; Republic of the Philippines,
Movant declaring OCT No. 0-381 of the Registry of Deeds for the Province of La Union issued in the name of
Rafael Galvez, null and void, and ordered the cancellation thereof.
The Order pertinently provided:
Accordingly, with the foregoing, and without prejudice on the rights of incidental parties concerned herein to
institute their respective appropriate actions compatible with whatever cause they may have, it is hereby
declared and this court so holds that both proceedings in Land Registration Case No. N-361 and Original
Certificate No. 0-381 of the Registry of Deeds for the province of La Union issued in virtue thereof and
registered in the name of Rafael Galvez, are null and void; the Register of Deeds for the Province of La Union
is hereby ordered to cancel the said original certificate and / or such other certificates of title issued
subsequent thereto having reference to the same parcels of land; without pronouncement as to costs.
On October 28, 1963, Lepanto Consolidated Mining Company sold to herein petitioner Lots No. 1 and 4,
with the deed being entered in TCT NO. 4314 as entry No. 12381. Transfer Certificate of Title No. T-5710 was
thus issued in favor of the petitioner which starting since then exercised proprietary rights over Lots No. 1 and
4.
In the meantime, Rafael Galvez filed his motion for reconsideration against the order issued by the trial
court declaring OCT No. 0-381 null and void. The motion was denied on January 25, 1965. On appeal, the
Court of Appeals ruled in favor of the Republic of the Philippines in a Resolution promulgated on August 14,
1973 in CA-G. R. No. 36061-R.
Thereafter, the Court of Appeals issued an Entry of Judgment, certifying that its decision dated August 14,
1973 became final and executory on October 23, 1973.
On April 22, 1974, the trial court in L. R. C. Case No. N-361 issued a writ of execution of the judgment
which was served on the Register of Deeds, San Fernando, La Union on April 29, 1974.
Twenty four long years thereafter, on January 14, 1999, the Office of the Solicitor General received a letter
dated January 11, 1999 from Mr. Victor G. Floresca, Vice-President, John Hay Poro Point Development
Corporation, stating that the aforementioned orders and decision of the trial court in L. R. C. No. N-361 have
not been executed by the Register of Deeds, San Fernando, La Union despite receipt of the writ of execution.
On April 21, 1999, the Office of the Solicitor General filed a complaint for revival of judgment and
cancellation of titles before the Regional Trial Court of the First Judicial Region (Branch 26, San Fernando, La
Union) docketed therein as Civil Case No. 6346 entitled, Republic of the Philippines, Plaintiff, versus Heirs of
Rafael Galvez, represented by Teresita Tan, Reynaldo Mamaril, Elisa Bustos, Erlinda Balatbat, Regina Bustos,
Shipside Incorporated and the Register of Deeds of La Union, Defendants.
The evidence shows that the impleaded defendants (except the Register of Deeds of the province of La
Union) are the successors-in-interest of Rafael Galvez (not Reynaldo Galvez as alleged by the Solicitor
General) over the property covered by OCT No. 0-381, namely: (a) Shipside Inc. which is presently the
registered owner in fee simple of Lots No. 1 and 4 covered by TCT No. T-5710, with a total area of 7,079
15
square meters; (b) Elisa Bustos, Jesusito Galvez, and Teresita Tan who are the registered owners of Lot No. 2
of OCT No. 0-381;and (c) Elisa Bustos, Filipina Mamaril, Regina Bustos and Erlinda Balatbat who are the
registered owners of Lot No. 3 of OCT No. 0-381, now covered by TCT No. T-4916, with an area of 1,583
square meters.
In its complaint in Civil Case No. 6346, the Solicitor General argued that since the trial court in LRC Case
No. 361 had ruled and declared OCT No. 0-381 to be null and void, which ruling was subsequently affirmed by
the Court of Appeals, the defendants-successors-in-interest of Rafael Galvez have no valid title over the
property covered by OCT No. 0-381, and the subsequent Torrens titles issued in their names should be
consequently cancelled.
On July 22, 1999, petitioner Shipside, Inc. filed its Motion to Dismiss, based on the following grounds: (1)
the complaint stated no cause of action because only final and executory judgments may be subject of an
action for revival of judgment; (2) the plaintiff is not the real party-in-interest because the real property covered
by the Torrens titles sought to be cancelled, allegedly part of Camp Wallace (Wallace Air Station), were under
the ownership and administration of the Bases Conversion Development Authority (BCDA) under Republic Act
No. 7227; (3) plaintiffs cause of action is barred by prescription; (4) twenty-five years having lapsed since the
issuance of the writ of execution, no action for revival of judgment may be instituted because under Paragraph
3 of Article 1144 of the Civil Code, such action may be brought only within ten (10) years from the time the
judgment had been rendered.
An opposition to the motion to dismiss was filed by the Solicitor General on August 23, 1999, alleging
among others, that: (1) the real party-in-interest is the Republic of the Philippines;and (2) prescription does not
run against the State.
On August 31, 1999, the trial court denied petitioners motion to dismiss and on October 14, 1999, its
motion for reconsideration was likewise turned down.
On October 21, 1999, petitioner instituted a petition for certiorari and prohibition with the Court of Appeals,
docketed therein as CA-G.R. SP No. 55535, on the ground that the orders of the trial court denying its motion
to dismiss and its subsequent motion for reconsideration were issued in excess of jurisdiction.
On November 4, 1999, the Court of Appeals dismissed the petition in CA-G.R. SP No. 55535 on the
ground that the verification and certification in the petition, under the signature of Lorenzo Balbin, Jr., was
made without authority, there being no proof therein that Balbin was authorized to institute the petition for and
in behalf and of petitioner.
On May 23, 2000, the Court of Appeals denied petitioners motion for reconsideration on the grounds
that: (1) a complaint filed on behalf of a corporation can be made only if authorized by its Board of Directors,
and in the absence thereof, the petition cannot prosper and be granted due course;and (2) petitioner was
unable to show that it had substantially complied with the rule requiring proof of authority to institute an action
or proceeding.
Hence, the instant petition.
In support of its petition, Shipside, Inc. asseverates that:
1. The Honorable Court of Appeals gravely abused its discretion in dismissing the petition when it
made a conclusive legal presumption that Mr. Balbin had no authority to sign the petition despite
the clarity of laws, jurisprudence and Secretarys certificate to the contrary;
2. The Honorable Court of Appeals abused its discretion when it dismissed the petition, in effect
affirming the grave abuse of discretion committed by the lower court when it refused to dismiss the
1999 Complaint for Revival of a 1973 judgment, in violation of clear laws and jurisprudence.
Petitioner likewise adopted the arguments it raised in the petition and comment/reply it filed with the Court
of Appeals, attached to its petition as Exhibit L and N, respectively.
In his Comment, the Solicitor General moved for the dismissal of the instant petition based on the
following considerations: (1) Lorenzo Balbin, who signed for and in behalf of petitioner in the verification and
certification of non-forum shopping portion of the petition, failed to show proof of his authorization to institute
the petition for certiorari and prohibition with the Court of Appeals, thus the latter court acted correctly in
dismissing the same; (2) the real party-in-interest in the case at bar being the Republic of the Philippines, its
claims are imprescriptible.
In order to preserve the rights of herein parties, the Court issued a temporary restraining order on June 26,
2000 enjoining the trial court from conducting further proceedings in Civil Case No. 6346.
16
The issues posited in this case are: (1) whether or not an authorization from petitioners Board of Directors
is still required in order for its resident manager to institute or commence a legal action for and in behalf of the
corporation; and (2) whether or not the Republic of the Philippines can maintain the action for revival of
judgment herein.
We find for petitioner.
Anent the first issue:
The Court of Appeals dismissed the petition for certiorari on the ground that Lorenzo Balbin, the resident
manager for petitioner, who was the signatory in the verification and certification on non-forum shopping, failed
to show proof that he was authorized by petitioners board of directors to file such a petition.
A corporation, such as petitioner, has no power except those expressly conferred on it by the Corporation
Code and those that are implied or incidental to its existence. In turn, a corporation exercises said powers
through its board of directors and / or its duly authorized officers and agents. Thus, it has been observed that
the power of a corporation to sue and be sued in any court is lodged with the board of directors that exercises
its corporate powers (Premium Marble Resources, Inc. v. CA, 264 SCRA 11 [1996]). In turn, physical acts of
the corporation, like the signing of documents, can be performed only by natural persons duly authorized for
the purpose by corporate by-laws or by a specific act of the board of directors.
It is undisputed that on October 21, 1999, the time petitioners Resident Manager Balbin filed the petition,
there was no proof attached thereto that Balbin was authorized to sign the verification and non-forum shopping
certification therein, as a consequence of which the petition was dismissed by the Court of Appeals. However,
subsequent to such dismissal, petitioner filed a motion for reconsideration, attaching to said motion a certificate
issued by its board secretary stating that on October 11, 1999, or ten days prior to the filing of the petition,
Balbin had been authorized by petitioners board of directors to file said petition.
The Court has consistently held that the requirement regarding verification of a pleading is formal, not
jurisdictional (Uy v. LandBank, G.R. No. 136100, July 24, 2000). Such requirement is simply a condition
affecting the form of the pleading, non-compliance with which does not necessarily render the pleading fatally
defective. Verification is simply intended to secure an assurance that the allegations in the pleading are true
and correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in
good faith. The court may order the correction of the pleading if verification is lacking or act on the pleading
although it is not verified, if the attending circumstances are such that strict compliance with the rules may be
dispensed with in order that the ends of justice may thereby be served.
On the other hand, the lack of certification against forum shopping is generally not curable by the
submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of Civil Procedure
provides that the failure of the petitioner to submit the required documents that should accompany the petition,
including the certification against forum shopping, shall be sufficient ground for the dismissal thereof. The
same rule applies to certifications against forum shopping signed by a person on behalf of a corporation which
are unaccompanied by proof that said signatory is authorized to file a petition on behalf of the corporation.
In certain exceptional circumstances, however, the Court has allowed the belated filing of the
certification. In Loyola v. Court of Appeals, et. al. (245 SCRA 477 [1995]), the Court considered the filing of the
certification one day after the filing of an election protest as substantial compliance with the
requirement. In Roadway Express, Inc. v. Court of Appeals, et. al. (264 SCRA 696 [1996]), the Court allowed
the filing of the certification 14 days before the dismissal of the petition. In Uy v. LandBank, supra, the Court
had dismissed Uys petition for lack of verification and certification against non-forum shopping. However, it
subsequently reinstated the petition after Uy submitted a motion to admit certification and non-forum shopping
certification. In all these cases, there were special circumstances or compelling reasons that justified the
relaxation of the rule requiring verification and certification on non-forum shopping.
In the instant case, the merits of petitioners case should be considered special circumstances or
compelling reasons that justify tempering the requirement in regard to the certificate of non-forum
shopping. Moreover, in Loyola, Roadway, and Uy, the Court excused non-compliance with the requirement as
to the certificate of non-forum shopping. With more reason should we allow the instant petition since petitioner
herein did submit a certification on non-forum shopping, failing only to show proof that the signatory was
authorized to do so. That petitioner subsequently submitted a secretarys certificate attesting that Balbin was
authorized to file an action on behalf of petitioner likewise mitigates this oversight.
It must also be kept in mind that while the requirement of the certificate of non-forum shopping is
mandatory, nonetheless the requirements must not be interpreted too literally and thus defeat the objective of
17
preventing the undesirable practice of forum-shopping (Bernardo v. NLRC, 255 SCRA 108 [1996]). Lastly,
technical rules of procedure should be used to promote, not frustrate justice. While the swift unclogging of
court dockets is a laudable objective, the granting of substantial justice is an even more urgent ideal.
Now to the second issue:
The action instituted by the Solicitor General in the trial court is one for revival of judgment which is
governed by Article 1144(3) of the Civil Code and Section 6, Rule 39 of the 1997 Rules on Civil
Procedure. Article 1144(3) provides that an action upon a judgment must be brought within 10 years from the
time the right of action accrues." On the other hand, Section 6, Rule 39 provides that a final and executory
judgment or order may be executed on motion within five (5) years from the date of its entry, but that after the
lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by
action. Taking these two provisions into consideration, it is plain that an action for revival of judgment must be
brought within ten years from the time said judgment becomes final.
From the records of this case, it is clear that the judgment sought to be revived became final on October
23, 1973. On the other hand, the action for revival of judgment was instituted only in 1999, or more than
twenty-five (25) years after the judgment had become final. Hence, the action is barred by extinctive
prescription considering that such an action can be instituted only within ten (10) years from the time the cause
of action accrues.
The Solicitor General, nonetheless, argues that the States cause of action in the cancellation of the land
title issued to petitioners predecessor-in-interest is imprescriptible because it is included in Camp Wallace,
which belongs to the government.
The argument is misleading.
While it is true that prescription does not run against the State, the same may not be invoked by the
government in this case since it is no longer interested in the subject matter. While Camp Wallace may have
belonged to the government at the time Rafael Galvezs title was ordered cancelled in Land Registration Case
No. N-361, the same no longer holds true today.
Republic Act No. 7227, otherwise known as the Bases Conversion and Development Act of 1992, created
the Bases Conversion and Development Authority. Section 4 pertinently provides:
Section 4. Purposes of the Conversion Authority. The Conversion Authority shall have the following purposes:
(a) To own, hold and/or administer the military reservations of John Hay Air Station, Wallace Air
Station, ODonnell Transmitter Station, San Miguel Naval Communications Station, Mt. Sta. Rita
Station (Hermosa, Bataan) and those portions of Metro Manila military camps which may be
transferred to it by the President;
Section 2 of Proclamation No. 216, issued on July 27, 1993, also provides:
Section 2. Transfer of Wallace Air Station Areas to the Bases Conversion and Development Authority. All areas
covered by the Wallace Air Station as embraced and defined by the 1947 Military Bases Agreement between
the Philippines and the United States of America, as amended, excluding those covered by Presidential
Proclamations and some 25-hectare area for the radar and communication station of the Philippine Air Force,
are hereby transferred to the Bases Conversion Development Authority
With the transfer of Camp Wallace to the BCDA, the government no longer has a right or interest to
protect. Consequently, the Republic is not a real party in interest and it may not institute the instant action. Nor
may it raise the defense of imprescriptibility, the same being applicable only in cases where the government is
a party in interest. Under Section 2 of Rule 3 of the 1997 Rules of Civil Procedure, every action must be
prosecuted or defended in the name of the real party in interest. To qualify a person to be a real party in
interest in whose name an action must be prosecuted, he must appear to be the present real owner of the right
sought to enforced (Pioneer Insurance v. CA, 175 SCRA 668 [1989]). A real party in interest is the party who
stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. And
by real interest is meant a present substantial interest, as distinguished from a mere expectancy, or a future,
contingent, subordinate or consequential interest (Ibonilla v. Province of Cebu, 210 SCRA 526 [1992]). Being
the owner of the areas covered by Camp Wallace, it is the Bases Conversion and Development Authority, not
the Government, which stands to be benefited if the land covered by TCT No. T-5710 issued in the name of
petitioner is cancelled.
Nonetheless, it has been posited that the transfer of military reservations and their extensions to the BCDA
is basically for the purpose of accelerating the sound and balanced conversion of these military reservations
into alternative productive uses and to enhance the benefits to be derived from such property as a measure of
18
promoting the economic and social development, particularly of Central Luzon and, in general, the countrys
goal for enhancement (Section 2, Republic Act No. 7227). It is contended that the transfer of these military
reservations to the Conversion Authority does not amount to an abdication on the part of the Republic of its
interests, but simply a recognition of the need to create a body corporate which will act as its agent for the
realization of its program. It is consequently asserted that the Republic remains to be the real party in interest
and the Conversion Authority merely its agent.
We, however, must not lose sight of the fact that the BCDA is an entity invested with a personality
separate and distinct from the government. Section 3 of Republic Act No. 7227 reads:
Section 3. Creation of the Bases Conversion and Development Authority. There is hereby created a body
corporate to be known as the Conversion Authority which shall have the attribute of perpetual succession and
shall be vested with the powers of a corporation.
It may not be amiss to state at this point that the functions of government have been classified into
governmental or constituent and proprietary or ministrant. While public benefit and public welfare, particularly,
the promotion of the economic and social development of Central Luzon, may be attributable to the operation
of the BCDA, yet it is certain that the functions performed by the BCDA are basically proprietary in nature. The
promotion of economic and social development of Central Luzon, in particular, and the countrys goal for
enhancement, in general, do not make the BCDA equivalent to the Government. Other corporations have been
created by government to act as its agents for the realization of its programs, the SSS, GSIS, NAWASA and
the NIA, to count a few, and yet, the Court has ruled that these entities, although performing functions aimed at
promoting public interest and public welfare, are not government-function corporations invested with
governmental attributes. It may thus be said that the BCDA is not a mere agency of the Government but a
corporate body performing proprietary functions.
Moreover, Section 5 of Republic Act No. 7227 provides:
Section 5. Powers of the Conversion Authority. To carry out its objectives under this Act, the Conversion
Authority is hereby vested with the following powers:
(a) To succeed in its corporate name, to sue and be sued in such corporate name and to adopt, alter
and use a corporate seal which shall be judicially noticed;
Having the capacity to sue or be sued, it should thus be the BCDA which may file an action to cancel
petitioners title, not the Republic, the former being the real party in interest. One having no right or interest to
protect cannot invoke the jurisdiction of the court as a party plaintiff in an action (Ralla v. Ralla, 199 SCRA 495
[1991]). A suit may be dismissed if the plaintiff or the defendant is not a real party in interest. If the suit is not
brought in the name of the real party in interest, a motion to dismiss may be filed, as was done by petitioner in
this case, on the ground that the complaint states no cause of action (Tanpingco v. IAC, 207 SCRA 652
[1992]).
However, E. B. Marcha Transport Co. , Inc. v. IAC (147 SCRA 276 [1987]) is cited as authority that the
Republic is the proper party to sue for the recovery of possession of property which at the time of the institution
of the suit was no longer held by the national government but by the Philippine Ports Authority. In E. B. Marcha,
the Court ruled:
It can be said that in suing for the recovery of the rentals, the Republic of the Philippines, acted as principal of
the Philippine Ports Authority, directly exercising the commission it had earlier conferred on the latter as its
agent. We may presume that, by doing so, the Republic of the Philippines did not intend to retain the said
rentals for its own use, considering that by its voluntary act it had transferred the land in question to the
Philippine Ports Authority effective July 11, 1974. The Republic of the Philippines had simply sought to assist,
not supplant, the Philippine Ports Authority, whose title to the disputed property it continues to recognize. We
may expect then that the said rentals, once collected by the Republic of the Philippines, shall be turned over by
it to the Philippine Ports Authority conformably to the purposes of P. D. No. 857.
E. B. Marcha is, however, not on all fours with the case at bar. In the former, the Court considered the
Republic a proper party to sue since the claims of the Republic and the Philippine Ports Authority against the
petitioner therein were the same. To dismiss the complaint in E. B. Marcha would have brought needless delay
in the settlement of the matter since the PPA would have to refile the case on the same claim already litigated
upon. Such is not the case here since to allow the government to sue herein enables it to raise the issue of
imprescriptibility, a claim which is not available to the BCDA. The rule that prescription does not run against the
State does not apply to corporations or artificial bodies created by the State for special purposes, it being said
that when the title of the Republic has been divested, its grantees, although artificial bodies of its own creation,
19
are in the same category as ordinary persons (Kingston v. LeHigh Valley Coal Co., 241 Pa 469).By raising the
claim of imprescriptibility, a claim which cannot be raised by the BCDA, the Government not only assists the
BCDA, as it did in E. B. Marcha, it even supplants the latter, a course of action proscribed by said case.
Moreover, to recognize the Government as a proper party to sue in this case would set a bad precedent as
it would allow the Republic to prosecute, on behalf of government-owned or controlled corporations, causes of
action which have already prescribed, on the pretext that the Government is the real party in interest against
whom prescription does not run, said corporations having been created merely as agents for the realization of
government programs.
Parenthetically, petitioner was not a party to the original suit for cancellation of title commenced by the
Republic twenty-seven years for which it is now being made to answer, nay, being made to suffer financial
losses.
It should also be noted that petitioner is unquestionably a buyer in good faith and for value, having
acquired the property in 1963, or 5 years after the issuance of the original certificate of title, as a third
transferee. If only not to do violence and to give some measure of respect to the Torrens System, petitioner
must be afforded some measure of protection.
One more point.
Since the portion in dispute now forms part of the property owned and administered by the Bases
Conversion and Development Authority, it is alienable and registerable real property.
We find it unnecessary to rule on the other matters raised by the herein parties.
WHEREFORE, the petition is hereby granted and the orders dated August 31, 1999 and October 4, 1999
of the Regional Trial Court of the First National Judicial Region (Branch 26, San Fernando, La Union) in Civil
Case No. 6346 entitled Republic of the Philippines, Plaintiff, versus Heirs of Rafael Galvez, et. al., Defendants
as well as the resolutions promulgated on November 4, 1999 and May 23, 2000 by the Court of Appeals
(Twelfth Division) in CA-G. R. SP No. 55535 entitled Shipside, Inc., Petitioner versus Hon. Alfredo Cajigal, as
Judge, RTC, San Fernando, La Union, Branch 26, and the Republic of the Philippines, Respondents are
hereby reversed and set aside. The complaint in Civil Case No. 6346, Regional Trial Court, Branch 26, San
Fernando City, La Union entitled Republic of the Philippines, Plaintiff, versus Heirs of Rafael Galvez, et al." is
ordered dismissed, without prejudice to the filing of an appropriate action by the Bases Development and
Conversion Authority.
SO ORDERED.
Panganiban, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ. , concur.
Vitug, J. , Please see separate opinion.
SEPARATE OPINION

VITUG, J.:
I find no doctrinal difficulty in adhering to the draft ponencia written by our esteemed Chairman. Mr. Justice
JARM, insofar as it declares that an action for revival of judgment is barred by extinctive prescription, if not
brought within ten (10) years from the time the right of action accrues, pursuant to Article 1144(3) of the New
Civil Code. It appears that the judgment in the instant case has become final on 23 October 1973 or well more
than two decades prior to the action for its revival instituted only in 1999.
With due respect, however, I still am unable to subscribe to the idea that prescription may not be invoked
by the government in this case upon the thesis that the transfer of Camp Wallace to the Bases Conversion
Development authority renders the Republic with no right or interest to protect and thus unqualified under the
rules of procedure to be the real party-in-interest. While it is true that Republic Act 7227, otherwise known as
the Bases Conversion and Development Act of 1992, authorizes the transfer of the military reservations and
their extensions to the conversion Authority, the same, however, is basically for the purpose of accelerating the
sound and balanced conversion of these military reservations into alternative productive uses and to enhance
the benefits to be derived from such property as a measure of promoting the economic and social
development, particularly, of Central Luzon and, in general, the countrys goal for enhancement. [1] The transfer
of these military reservations to the Conversion Authority does not amount to an abdication on the part of the
Republic of its interests but simply a recognition of the need to create a body corporate which will act as its
agent for the realization of its program specified in the Act. It ought to follow that the Republic remains to be the
real party-in-interest and the Conversion authority being merely its agent.
In E. B. Marcha Transport Co. , Inc. vs. Intermediate Appellate Court,[2] the Court succinctly resolved the
issue of whether or not the Republic of the Philippines would be a proper party to sue for the recovery of
20
possession of property which at time of the institution of the suit was no longer being held by the national
government but by the Philippine Ports Authority. The Court ruled:
More importantly, as we see it, dismissing the complaint on the ground that the Republic of the Philippines is
not the proper party would result in needless delay in the settlement of this matter and also in derogation of the
policy against multiplicity of suits. Such a decision would require the Philippine Ports Authority to refile the very
same complaint already proved by the Republic of the Philippines and bring back the parties as it were to
square one.
It can be said that in suing for the recovery of the rentals, the Republic of the Philippines, acted as principal of
the Philippine Ports Authority, directly exercising the commission it had earlier conferred on the latter as its
agent. We may presume that, by doing so, the republic of the Philippines did not intend to retain the said
rentals for its own use, considering that by its voluntary act it had transferred the land in question to the
Philippine Ports authority effective July 11, 1974. The Republic of the Philippines had simply sought to assist,
not supplant, the Philippine Ports Authority, whose title to the disputed property it continues to recognize. We
may expect then that the said rentals, once collected by the Republic of the Philippines, shall be turned over by
it to the Philippine Ports Authority conformably to the purposes of P. D. No. 857."
There would seem to be no cogent reason for ignoring that rationale specially when taken in light of the
fact that the original suit for cancellation of title of petitioners predecessor-in-interest was commenced by the
Republic itself, and it was only in 1992 that the subject military camp was transferred to the Conversion
Authority.

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

DECISION
CARPIO, J.

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

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

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
21
sovereign power, in violation of Article 1 of the 1987 Constitution,10 embodying the terms of the Treaty of
Paris11 and ancillary treaties,12 and (2) RA 9522 opens the countrys waters landward of the baselines to
maritime passage by all vessels and aircrafts, undermining Philippine sovereignty and national security,
contravening the countrys nuclear-free policy, and damaging marine resources, in violation of relevant
constitutional provisions.13

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

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

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

We left unacted petitioners prayer for an injunctive writ.

The Issues

The petition raises the following issues:

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

The Ruling of the Court

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
22

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

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

RA 9522 is a Statutory Tool

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

Petitioners submit that RA 9522 dismembers a large portion of the national territory21 because it discards the
pre-UNCLOS III demarcation of Philippine territory under the Treaty of Paris and related treaties, successively
encoded in the definition of national territory under the 1935, 1973 and 1987 Constitutions. Petitioners theorize
that this constitutional definition trumps any treaty or statutory provision denying the Philippines sovereign
control over waters, beyond the territorial sea recognized 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)
23
Thus, baselines laws are nothing but statutory mechanisms for UNCLOS III States parties to delimit
with precision the extent of their maritime zones and continental shelves. In turn, this gives notice to the rest of
the international community of the scope of the maritime space and submarine areas within which States
parties exercise treaty-based rights, namely, the exercise of sovereignty over territorial waters (Article 2), the
jurisdiction to enforce customs, fiscal, immigration, and sanitation laws in the contiguous zone (Article 33), and
the right to exploit the living and non-living resources in the exclusive economic zone (Article 56) and
continental shelf (Article 77).

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

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

RA 9522s Use of the Framework

of Regime of Islands to Determine the
Maritime Zones of the KIG and the
Scarborough Shoal, not Inconsistent
with the Philippines Claim of Sovereignty
Over these Areas

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

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

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

Extent of maritime area Extent of maritime

using RA 3046, as area using RA 9522,
24

amended, taking into taking into account

account the Treaty of Paris UNCLOS III (in
delimitation (in square square nautical
nautical miles) miles)

Internal or
archipelagic 166,858 171,435
waters

Territorial 274,136 32,106

Sea

Exclusive
Economic 382,669
Zone

TOTAL 440,994 586,210

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
25
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. The need to
shorten this baseline, and in addition, to optimize the location of basepoints using current maps, became
imperative as discussed by respondents:

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

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

Hence, far from surrendering the Philippines claim over the KIG and the Scarborough Shoal, Congress
decision to classify the KIG and the Scarborough Shoal as Regime[s] of Islands under the Republic of the
Philippines consistent with Article 12136 of UNCLOS III manifests the Philippine States responsible observance
of its pacta sunt servanda obligation under UNCLOS III. Under Article 121 of UNCLOS III, any naturally formed
area of land, surrounded by water, which is above water at high tide, such as portions of the KIG, qualifies
under the category of regime of islands, whose islands generate their own applicable maritime zones.37
26

Statutory Claim Over Sabah under

RA 5446 Retained

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

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

UNCLOS III and RA 9522 not

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
27
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.53UNCLOS III, however, preserves the traditional freedom of navigation of other States that attached to
this zone beyond the territorial sea before UNCLOS III.

RA 9522 and the Philippines Maritime Zones

Petitioners hold the view that, based on the permissive text of UNCLOS III, Congress was not bound to
pass RA 9522.54 We have looked at the relevant provision of UNCLOS III55 and we find petitioners reading
plausible. Nevertheless, the prerogative of choosing this option belongs to Congress, not to this Court.
Moreover, the luxury of choosing this option comes at a very steep price. Absent an UNCLOS III compliant
baselines law, an archipelagic State like the Philippines will find itself devoid of internationally acceptable
baselines from where the breadth of its maritime zones and continental shelf is measured. This is recipe for a
two-fronted disaster: first, it sends an open invitation to the seafaring powers to freely enter and exploit the
resources in the waters and submarine areas around our archipelago; and second, it weakens the countrys
case in any international dispute over Philippine maritime space. These are consequences Congress wisely
avoided.
The enactment of UNCLOS III compliant baselines law for the Philippine archipelago and adjacent
areas, as embodied in RA 9522, allows an internationally-recognized delimitation of the breadth of the
28
Philippines maritime zones and continental shelf. RA 9522 is therefore a most vital step on the part of the
Philippines in safeguarding its maritime zones, consistent with the Constitution and our national interest.
WHEREFORE, we DISMISS the petition.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:

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

C.STATE IMMUNITY

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

UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, WILLIAM I. COLLINS and ROBERT
GOHIER, petitioners, vs.HON. V. M. RUIZ, Presiding Judge of Branch XV, Court of First Instance of Rizal
and ELIGIO DE GUZMAN & CO., INC., respondents.

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

ABAD SANTOS, J.:

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

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

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

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

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

Eligio de Guzman & Co., Inc. responded to the invitation and submitted bids. Subsequent thereto, the company
received from the United States two telegrams requesting it to confirm its price proposals and for the name of
its bonding company. The company complied with the requests. [In its complaint, the company alleges that the
United States had accepted its bids because "A request to confirm a price proposal confirms the acceptance of
29
a bid pursuant to defendant United States' bidding practices." (Rollo, p. 30.) The truth of this allegation has not
been tested because the case has not reached the trial stage.]

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

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

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

The petition is highly impressed with merit.

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

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

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

xxx xxx xxx

30
We agree to the above contention, and considering that the United States government, through
its agency at Subic Bay, entered into a contract with appellant for stevedoring and
miscellaneous labor services within the Subic Bay Area, a U.S. Naval Reservation, it is evident
that it can bring an action before our courts for any contractual liability that that political entity
may assume under the contract. The trial court, therefore, has jurisdiction to entertain this
case ... (Rollo, pp. 20-21.)

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

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

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

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

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

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

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

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

On the basis of the foregoing considerations we are of the belief and we hold that the real party defendant
in interest is the Government of the United States of America; that any judgment for back or Increased
rentals or damages will have to be paid not by defendants Moore and Tillman and their 64 co-defendants
but by the said U.S. Government. On the basis of the ruling in the case of Land vs. Dollar already cited,
and on what we have already stated, the present action must be considered as one against the U.S.
Government. It is clear hat the courts of the Philippines including the Municipal Court of Manila have no
jurisdiction over the present case for unlawful detainer. The question of lack of jurisdiction was raised and
interposed at the very beginning of the action. The U.S. Government has not , given its consent to the
31
filing of this suit which is essentially against her, though not in name. Moreover, this is not only a case of a
citizen filing a suit against his own Government without the latter's consent but it is of a citizen filing an
action against a foreign government without said government's consent, which renders more obvious the
lack of jurisdiction of the courts of his country. The principles of law behind this rule are so elementary and
of such general acceptance that we deem it unnecessary to cite authorities in support thereof. (At p. 323.)

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

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

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

Fernando, C.J., took no part.

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

MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner

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

Mauro C. Cabading, Jr. for petitioner.

Simeon G. Hipol for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari with prayer for the issuance of a writ of preliminary mandatory injunction seeking
the nullification or modification of the proceedings and the orders issued by the respondent Judge Romeo N.
Firme, in his capacity as the presiding judge of the Court of First Instance of La Union, Second Judicial District,
Branch IV, Bauang, La Union in Civil Case No. 107-BG, entitled "Juana Rimando Bania, et al. vs. Macario
Nieveras, et al." dated November 4, 1975; July 13, 1976; August 23,1976; February 23, 1977; March 16, 1977;
July 26, 1979; September 7, 1979; November 7, 1979 and December 3, 1979 and the decision dated October
10, 1979 ordering defendants Municipality of San Fernando, La Union and Alfredo Bislig to pay, jointly and
severally, the plaintiffs for funeral expenses, actual damages consisting of the loss of earning capacity of the
deceased, attorney's fees and costs of suit and dismissing the complaint against the Estate of Macario
Nieveras and Bernardo Balagot.

The antecedent facts are as follows:

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

At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving a passenger jeepney
driven by Bernardo Balagot and owned by the Estate of Macario Nieveras, a gravel and sand truck driven by
Jose Manandeg and owned by Tanquilino Velasquez and a dump truck of the Municipality of San Fernando, La
32
Union and driven by Alfredo Bislig. Due to the impact, several passengers of the jeepney including Laureano
Bania Sr. died as a result of the injuries they sustained and four (4) others suffered varying degrees of
physical injuries.

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

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

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

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

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

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

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

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

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

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

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

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

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

SO ORDERED. (Rollo, p. 30)

33
Petitioner filed a motion for reconsideration and for a new trial without prejudice to another motion which was
then pending. However, respondent judge issued another order dated November 7, 1979 denying the motion
for reconsideration of the order of September 7, 1979 for having been filed out of time.

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

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

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

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

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

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

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

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

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

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

Municipal corporations, for example, like provinces and cities, are agencies of the State when they are
engaged in governmental functions and therefore should enjoy the sovereign immunity from suit. Nevertheless,
they are subject to suit even in the performance of such functions because their charter provided that they can
sue and be sued. (Cruz, Philippine Political Law, 1987 Edition, p. 39)
34
A distinction should first be made between suability and liability. "Suability depends on the consent of the state
to be sued, liability on the applicable law and the established facts. The circumstance that a state is suable
does not necessarily mean that it is liable; on the other hand, it can never be held liable if it does not first
consent to be sued. Liability is not conceded by the mere fact that the state has allowed itself to be sued.
When the state does waive its sovereign immunity, it is only giving the plaintiff the chance to prove, if it can,
that the defendant is liable." (United States of America vs. Guinto, supra, p. 659-660)

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

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

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

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

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

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

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

After a careful examination of existing laws and jurisprudence, We arrive at the conclusion that the municipality
cannot be held liable for the torts committed by its regular employee, who was then engaged in the discharge
of governmental functions. Hence, the death of the passenger tragic and deplorable though it may be
imposed on the municipality no duty to pay monetary compensation.
35
All premises considered, the Court is convinced that the respondent judge's dereliction in failing to resolve the
issue of non-suability did not amount to grave abuse of discretion. But said judge exceeded his jurisdiction
when it ruled on the issue of liability.

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

SO ORDERED.

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

G.R. No. 101949 December 1, 1994

THE HOLY SEE, petitioner,

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

Padilla Law Office for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

QUIASON, J.:

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

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

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

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

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

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

The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as agent to the sellers.
Later, Licup assigned his rights to the sale to private respondent.
36
In view of the refusal of the squatters to vacate the lots sold to private respondent, a dispute arose as to who of
the parties has the responsibility of evicting and clearing the land of squatters. Complicating the relations of the
parties was the sale by petitioner of Lot 5-A to Tropicana Properties and Development Corporation (Tropicana).

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

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

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

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

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

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

On October 1, 1991, the trial court issued an order deferring the resolution on the motion for reconsideration
until after trial on the merits and directing petitioner to file its answer (Rollo, p. 22).
37
Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the privilege of sovereign
immunity only on its own behalf and on behalf of its official representative, the Papal Nuncio.

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

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

II

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

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

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

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

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

In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs moved with this
Court to be allowed to intervene on the side of petitioner. The Court allowed the said Department to file its
memorandum in support of petitioner's claim of sovereign immunity.
38
In some cases, the defense of sovereign immunity was submitted directly to the local courts by the
respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945]; Miquiabas v. Philippine-
Ryukyus Command, 80 Phil. 262 [1948]; United States of America v. Guinto, 182 SCRA 644 [1990] and
companion cases). In cases where the foreign states bypass the Foreign Office, the courts can inquire into the
facts and make their own determination as to the nature of the acts and transactions involved.

III

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

A. The Holy See

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

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

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

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

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

The Vatican City fits into none of the established categories of states, and the attribution to it of "sovereignty"
must be made in a sense different from that in which it is applied to other states (Fenwick, International Law
124-125 [1948]; Cruz, International Law 37 [1991]). In a community of national states, the Vatican City
represents an entity organized not for political but for ecclesiastical purposes and international objects. Despite
its size and object, the Vatican City has an independent government of its own, with the Pope, who is also
head of the Roman Catholic Church, as the Holy See or Head of State, in conformity with its traditions, and the
demands of its mission in the world. Indeed, the world-wide interests and activities of the Vatican City are such
as to make it in a sense an "international state" (Fenwick, supra., 125; Kelsen, Principles of International Law
160 [1956]).

One authority wrote that the recognition of the Vatican City as a state has significant implication that it is
possible for any entity pursuing objects essentially different from those pursued by states to be invested with
international personality (Kunz, The Status of the Holy See in International Law, 46 The American Journal of
International Law 308 [1952]).
39
Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as the Holy See and not
in the name of the Vatican City, one can conclude that in the Pope's own view, it is the Holy See that is the
international person.

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

B. Sovereign Immunity

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

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

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

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

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

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

On the other hand, this Court has considered the following transactions by a foreign state with private parties
as acts jure gestionis: (1) the hiring of a cook in the recreation center, consisting of three restaurants, a
cafeteria, a bakery, a store, and a coffee and pastry shop at the John Hay Air Station in Baguio City, to cater to
American servicemen and the general public (United States of America v. Rodrigo, 182 SCRA 644 [1990]); and
(2) the bidding for the operation of barber shops in Clark Air Base in Angeles City (United States of America v.
Guinto, 182 SCRA 644 [1990]). The operation of the restaurants and other facilities open to the general public
40
is undoubtedly for profit as a commercial and not a governmental activity. By entering into the employment
contract with the cook in the discharge of its proprietary function, the United States government impliedly
divested itself of its sovereign immunity from suit.

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

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

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

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

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

Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The donation was made not
for commercial purpose, but for the use of petitioner to construct thereon the official place of residence of the
Papal Nuncio. The right of a foreign sovereign to acquire property, real or personal, in a receiving state,
necessary for the creation and maintenance of its diplomatic mission, is recognized in the 1961 Vienna
Convention on Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the Philippine Senate and
entered into force in the Philippines on November 15, 1965.

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

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

The issue of petitioner's non-suability can be determined by the trial court without going to trial in the light of
the pleadings, particularly the admission of private respondent. Besides, the privilege of sovereign immunity in
this case was sufficiently established by the Memorandum and Certification of the Department of Foreign
Affairs. As the department tasked with the conduct of the Philippines' foreign relations (Administrative Code of
1987, Book IV, Title I, Sec. 3), the Department of Foreign Affairs has formally intervened in this case and
officially certified that the Embassy of the Holy See is a duly accredited diplomatic mission to the Republic of
the Philippines exempt from local jurisdiction and entitled to all the rights, privileges and immunities of a
41
diplomatic mission or embassy in this country (Rollo, pp. 156-157). The determination of the executive arm of
government that a state or instrumentality is entitled to sovereign or diplomatic immunity is a political question
that is conclusive upon the courts (International Catholic Migration Commission v. Calleja, 190 SCRA 130
[1990]). Where the plea of immunity is recognized and affirmed by the executive branch, it is the duty of the
courts to accept this claim so as not to embarrass the executive arm of the government in conducting the
country's foreign relations (World Health Organization v. Aquino, 48 SCRA 242 [1972]). As in International
Catholic Migration Commission and in World Health Organization, we abide by the certification of the
Department of Foreign Affairs.

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

IV

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

Private respondent can ask the Philippine government, through the Foreign Office, to espouse its claims
against the Holy See. Its first task is to persuade the Philippine government to take up with the Holy See the
validity of its claims. Of course, the Foreign Office shall first make a determination of the impact of its espousal
on the relations between the Philippine government and the Holy See (Young, Remedies of Private Claimants
Against Foreign States, Selected Readings on Protection by Law of Private Foreign Investments 905, 919
[1964]). Once the Philippine government decides to espouse the claim, the latter ceases to be a private cause.

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

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

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

SO ORDERED.

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

Padilla, J., took no part.

Feliciano, J., is on leave.

FIRST DIVISION

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

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

DECISION
42
YNARES-SANTIAGO, J.:

Petitioner is an economist working with the Asian Development Bank (ADB). Sometime in 1994, for allegedly
uttering defamatory words against fellow ADB worker Joyce Cabal, he was charged before the Metropolitan
Trial Court (MeTC) of Mandaluyong City with two counts of grave oral defamation docketed as Criminal Cases
Nos. 53170 and 53171. Petitioner was arrested by virtue of a warrant issued by the MeTC. After fixing
petitioners bail at P2,400.00 per criminal charge, the MeTC released him to the custody of the Security Officer
of ADB. The next day, the MeTC judge received an "office of protocol" from the Department of Foreign Affairs
(DFA) stating that petitioner is covered by immunity from legal process under Section 45 of the Agreement
between the ADB and the Philippine Government regarding the Headquarters of the ADB (hereinafter
Agreement) in the country. Based on the said protocol communication that petitioner is immune from suit, the
MeTC judge without notice to the prosecution dismissed the two criminal cases. The latter filed a motion for
reconsideration which was opposed by the DFA. When its motion was denied, the prosecution filed a petition
for certiorari and mandamus with the Regional Trial Court (RTC) of Pasig City which set aside the MeTC
rulings and ordered the latter court to enforce the warrant of arrest it earlier issued. After the motion for
reconsideration was denied, petitioner elevated the case to this Court via a petition for review arguing that he is
covered by immunity under the Agreement and that no preliminary investigation was held before the criminal
cases were filed in court.

The petition is not impressed with merit.

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

Second, under Section 45 of the Agreement which provides:

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

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

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

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

Fourth, under the Vienna Convention on Diplomatic Relations, a diplomatic agent, assuming petitioner is such,
enjoys immunity from criminal jurisdiction of the receiving state except in the case of an action relating to any
43
professional or commercial activity exercised by the diplomatic agent in the receiving state outside his official
functions.[5] As already mentioned above, the commission of a crime is not part of official duty.

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

WHEREFORE, the petition is DENIED.

SO ORDERED.

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

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

RESOLUTION
YNARES-SANTIAGO, J.:

This resolves petitioners Motion for Reconsideration of our Decision dated January 28, 2000, denying the
petition for review.
The Motion is anchored on the following arguments:
1) THE DFAS DETERMINATION OF IMMUNITY IS A POLITICAL QUESTION TO BE MADE BY THE
EXECUTIVE BRANCH OF THE GOVERNMENT AND IS CONCLUSIVE UPON THE COURTS.
2) THE IMMUNITY OF INTERNATIONAL ORGANIZATIONS IS ABSOLUTE.
3) THE IMMUNITY EXTENDS TO ALL STAFF OF THE ASIAN DEVELOPMENT BANK (ADB).
4) DUE PROCESS WAS FULLY AFFORDED THE COMPLAINANT TO REBUT THE DFA
PROTOCOL.
5) THE DECISION OF JANUARY 28, 2000 ERRONEOUSLY MADE A FINDING OF FACT ON THE
MERITS, NAMELY, THE SLANDERING OF A PERSON WHICH PREJUDGED PETITIONERS
CASE BEFORE THE METROPOLITAN TRIAL COURT (MTC)-MANDALUYONG.
6) THE VIENNA CONVENTION ON DIPLOMATIC RELATIONS IS NOT APPLICABLE TO THIS
CASE.
This case has its origin in two criminal Informations [1] for grave oral defamation filed against petitioner, a
Chinese national who was employed as an Economist by the Asian Development Bank (ADB), alleging that on
separate occasions on January 28 and January 31, 1994, petitioner allegedly uttered defamatory words to
Joyce V. Cabal, a member of the clerical staff of ADB. On April 13, 1994, the Metropolitan Trial Court of
Mandaluyong City, acting pursuant to an advice from the Department of Foreign Affairs that petitioner enjoyed
immunity from legal processes, dismissed the criminal Informations against him. On a petition for certiorari and
mandamus filed by the People, the Regional Trial Court of Pasig City, Branch 160, annulled and set aside the
order of the Metropolitan Trial Court dismissing the criminal cases.[2]
44
Petitioner, thus, brought a petition for review with this Court. On January 28, 2000, we rendered the
assailed Decision denying the petition for review. We ruled, in essence, that the immunity granted to officers
and staff of the ADB is not absolute; it is limited to acts performed in an official capacity. Furthermore, we held
that the immunity cannot cover the commission of a crime such as slander or oral defamation in the name of
official duty.
On October 18, 2000, the oral arguments of the parties were heard. This Court also granted the Motion for
Intervention of the Department of Foreign Affairs. Thereafter, the parties were directed to submit their
respective memorandum.
For the most part, petitioners Motion for Reconsideration deals with the diplomatic immunity of the ADB, its
officials and staff, from legal and judicial processes in the Philippines, as well as the constitutional and political
bases thereof. It should be made clear that nowhere in the assailed Decision is diplomatic immunity denied,
even remotely. The issue in this case, rather, boils down to whether or not the statements allegedly made by
petitioner were uttered while in the performance of his official functions, in order for this case to fall squarely
under the provisions of Section 45 (a) of the Agreement Between the Asian Development Bank and the
Government of the Republic of the Philippines Regarding the Headquarters of the Asian Development Bank, to
wit:

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

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

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

CONCURRING OPINION

PUNO, J.:

For resolution is the Motion for Reconsideration filed by petitioner Jeffrey Liang of this Courts decision
dated January 28, 2000 which denied the petition for review. We there held that: the protocol communication of
the Department of Foreign Affairs to the effect that petitioner Liang is covered by immunity is only preliminary
and has no binding effect in courts; the immunity provided for under Section 45(a) of the Headquarters
Agreement is subject to the condition that the act be done in an official capacity; that slandering a person
cannot be said to have been done in an official capacity and, hence, it is not covered by the immunity
45
agreement; under the Vienna Convention on Diplomatic Relations, a diplomatic agent, assuming petitioner is
such, enjoys immunity from criminal jurisdiction of the receiving state except in the case of an action relating to
any professional or commercial activity exercised by the diplomatic agent in the receiving state outside his
official functions; the commission of a crime is not part of official duty; and that a preliminary investigation is not
a matter of right in cases cognizable by the Metropolitan Trial Court.
Petitioners motion for reconsideration is anchored on the following arguments:
1. The DFAs determination of immunity is a political question to be made by the executive branch of
the government and is conclusive upon the courts;
2. The immunity of international organizations is absolute;
3. The immunity extends to all staff of the Asian Development Bank (ADB);
4. Due process was fully accorded the complainant to rebut the DFA protocol;
5. The decision of January 28, 2000 erroneously made a finding of fact on the merits, namely, the
slandering of a person which prejudged petitioner's case before the Metropolitan Trial Court (MTC)-
Mandaluyong; and
6. The Vienna Convention on diplomatic relations is not applicable to this case.
Petitioner contends that a determination of a persons diplomatic immunity by the Department of Foreign
Affairs is a political question. It is solely within the prerogative of the executive department and is conclusive
upon the courts. In support of his submission, petitioner cites the following cases: WHO vs. Aquino;
[1]
International Catholic Migration Commission vs. Calleja;[2]The Holy See vs. Rosario, Jr.;[3] Lasco vs.
United Nations;[4] and DFA vs. NLRC.[5]
It is further contended that the immunity conferred under the ADB Charter and the Headquarters
Agreement is absolute. It is designed to safeguard the autonomy and independence of international
organizations against interference from any authority external to the organizations. It is necessary to allow
such organizations to discharge their entrusted functions effectively. The only exceptions to this immunity is
when there is an implied or express waiver or when the immunity is expressly limited by statute. The exception
allegedly has no application to the case at bar.
Petitioner likewise urges that the international organizations immunity from local jurisdiction empowers
the ADB alone to determine what constitutes official acts and the same cannot be subject to different
interpretations by the member states. It asserts that the Headquarters Agreement provides for remedies to
check abuses against the exercise of the immunity. Thus, Section 49 states that the Bank shall waive the
immunity accorded to any person if, in its opinion, such immunity would impede the course of justice and the
waiver would not prejudice the purposes for which the immunities are accorded. Section 51 allows for
consultation between the government and the Bank should the government consider that an abuse has
occurred. The same section provides the mechanism for a dispute settlement regarding, among others, issues
of interpretation or application of the agreement.
Petitioners argument that a determination by the Department of Foreign Affairs that he is entitled to
diplomatic immunity is a political question binding on the courts, is anchored on the ruling enunciated in the
case of WHO, et al. vs. Aquino, et al.,[6] viz:

It is a recognized principle of international law and under our system of separation of powers that diplomatic
immunity is essentially a political question and courts should refuse to look beyond a determination by the
executive branch of the government, and where the plea of diplomatic immunity is recognized and affirmed by
the executive branch of the government as in the case at bar, it is then the duty of the courts to accept the
claim of immunity upon appropriate suggestion by the principal law officer of the government, the Solicitor
General in this case, or other officer acting under his direction. Hence, in adherence to the settled principle that
courts may not so exercise their jurisdiction by seizure and detention of property, as to embarrass the
executive arm of the government in conducting foreign relations, it is accepted doctrine that in such cases the
46
judicial department of the government follows the action of the political branch and will not embarrass the latter
by assuming an antagonistic jurisdiction.

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

is generally used to describe an organization set up by agreement between two or more states. Under
contemporary international law, such organizations are endowed with some degree of international legal
personality such that they are capable of exercising specific rights, duties and powers. They are organized
mainly as a means for conducting general international business in which the member states have an interest.
[11]

International public officials have been defined as:

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

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

Issues
47
1. Whether petitioner Liang, as an official of an international organization, is entitled to diplomatic
immunity;
2. Whether an international official is immune from criminal jurisdiction for all acts, whether private or
official;
3. Whether the authority to determine if an act is official or private is lodged in the courts;
4. Whether the certification by the Department of Foreign Affairs that petitioner is covered by immunity
is a political question that is binding and conclusive on the courts.

Discussion

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

1. Charter of the United Nations

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

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

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

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

xxx

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

xxx

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

xxx

Section 18 (a): Officials of the United Nations shall be immune from legal process in respect of words spoken
or written and all acts performed by them in their official capacity.
48
xxx

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

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

xxx

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

3. Vienna Convention on Diplomatic Relations

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

xxx

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

xxx

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

4. Vienna Convention on Consular Relations

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

xxx

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

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

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

49
Section 4: The specialized agencies, their property and assets, wherever located and by whomsoever held,
shall enjoy immunity from every form of legal process except in so far as in any particular case they have
expressly waived their immunity. It is, however, understood that no waiver of immunity shall extend to any
measure of execution.

Section 13(a): Representatives of members at meetings convened by a specialized agency shall, while
exercising their functions and during their journeys to and from the place of meeting, enjoy immunity from
personal arrest or detention and from seizure of their personal baggage, and in respect of words spoken or
written and all acts done by them in their official capacity, immunity from legal process of every kind.

xxx

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

xxx

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

6. Charter of the ADB

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

xxx

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

7. ADB Headquarters Agreement

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

xxx

Section 44: Governors, other representatives of Members, Directors, the President, Vice-President and
executive officers as may be agreed upon between the Government and the Bank shall enjoy, during their stay
in the Republic of the Philippines in connection with their official duties with the Bank: (a) immunity from
personal arrest or detention and from seizure of their personal baggage; (b) immunity from legal process of
every kind in respect of words spoken or written and all acts done by them in their official capacity; and (c) in
respect of other matters not covered in (a) and (b) above, such other immunities, exemptions, privileges and
50
facilities as are enjoyed by members of diplomatic missions of comparable rank, subject to corresponding
conditions and obligations.

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

II
There are three major differences between diplomatic and international immunities Firstly, one of
the recognized limitations of diplomatic immunity is that members of the diplomatic staff of a mission may be
appointed from among the nationals of the receiving State only with the express consent of that State; apart
from inviolability and immunity from jurisdiction in respect of official acts performed in the exercise of their
functions, nationals enjoy only such privileges and immunities as may be granted by the receiving
State. International immunities may be specially important in relation to the State of which the official is a
national. Secondly, the immunity of a diplomatic agent from the jurisdiction of the receiving State does not
exempt him from the jurisdiction of the sending State; in the case of international immunities there is no
sending State and an equivalent for the jurisdiction of the Sending State therefore has to be found either in
waiver of immunity or in some international disciplinary or judicial procedure. Thirdly, the effective sanctions
which secure respect for diplomatic immunity are the principle of reciprocity and the danger of retaliation by the
aggrieved State; international immunities enjoy no similar protection.[14]
The generally accepted principles which are now regarded as the foundation of international
immunities are contained in the ILO Memorandum, which reduced them in three basic propositions,
namely: (1) that international institutions should have a status which protects them against control or
interference by any one government in the performance of functions for the effective discharge of which they
are responsible to democratically constituted international bodies in which all the nations concerned are
represented; (2) that no country should derive any financial advantage by levying fiscal charges on common
international funds; and (3) that the international organization should, as a collectivity of States Members, be
accorded the facilities for the conduct of its official business customarily extended to each other by its
individual member States. The thinking underlying these propositions is essentially institutional in
character. It is not concerned with the status, dignity or privileges of individuals, but with the elements
of functional independence necessary to free international institutions from national control and to
enable them to discharge their responsibilities impartially on behalf of all their members. [15]
III

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

The Asian Development Bank and its Personnel fall under this third category.
There is connection between diplomatic privileges and immunities and those extended to international
officials. The connection consists in the granting, by contractual provisions, of the relatively well-established
body of diplomatic privileges and immunities to international functionaries. This connection is purely
51
historical. Both types of officials find the basis of their special status in the necessity of retaining functional
independence and freedom from interference by the state of residence. However, the legal relationship
between an ambassador and the state to which he is accredited is entirely different from the relationship
between the international official and those states upon whose territory he might carry out his functions. [17]
The privileges and immunities of diplomats and those of international officials rest upon different
legal foundations. Whereas those immunities awarded to diplomatic agents are a right of the sending stated
based on customary international law, those granted to international officials are based on treaty or
conventional law. Customary international law places no obligation on a state to recognize a special status of
an international official or to grant him jurisdictional immunities. Such an obligation can only result from specific
treaty provisions.[18]
The special status of the diplomatic envoy is regulated by the principle of reciprocity by which a state is
free to treat the envoy of another state as its envoys are treated by that state. The juridical basis of the
diplomats position is firmly established in customary international law. The diplomatic envoy is appointed by the
sending State but it has to make certain that the agreement of the receiving State has been given for the
person it proposes to accredit as head of the mission to that State.[19]
The staff personnel of an international organization the international officials assume a different
position as regards their special status. They are appointed or elected to their position by the organization
itself, or by a competent organ of it; they are responsible to the organization and their official acts are imputed
to it. The juridical basis of their special position is found in conventional law,[20] since there is no established
basis of usage or custom in the case of the international official. Moreover, the relationship between an
international organization and a member-state does not admit of the principle of reciprocity, [21] for it is
contradictory to the basic principle of equality of states. An international organization carries out functions in
the interest of every member state equally. The international official does not carry out his functions in the
interest of any state, but in serving the organization he serves, indirectly, each state equally. He cannot be,
legally, the object of the operation of the principle of reciprocity between states under such circumstances. It is
contrary to the principle of equality of states for one state member of an international organization to assert a
capacity to extract special privileges for its nationals from other member states on the basis of a status
awarded by it to an international organization. It is upon this principle of sovereign equality that international
organizations are built.
It follows from this same legal circumstance that a state called upon to admit an official of an international
organization does not have a capacity to declare him persona non grata.
The functions of the diplomat and those of the international official are quite different. Those of the
diplomat are functions in the national interest. The task of the ambassador is to represent his state, and its
specific interest, at the capital of another state. The functions of the international official are carried out in the
international interest. He does not represent a state or the interest of any specific state. He does not usually
represent the organization in the true sense of that term. His functions normally are administrative, although
they may be judicial or executive, but they are rarely political or functions of representation, such as those of
the diplomat.
There is a difference of degree as well as of kind. The interruption of the activities of a diplomatic agent is
likely to produce serious harm to the purposes for which his immunities were granted. But the interruption of
the activities of the international official does not, usually, cause serious dislocation of the functions of an
international secretariat.[22]
On the other hand, they are similar in the sense that acts performed in an official capacity by either a
diplomatic envoy or an international official are not attributable to him as an individual but are imputed to the
entity he represents, the state in the case of the diplomat, and the organization in the case of the international
official.[23]
IV
Looking back over 150 years of privileges and immunities granted to the personnel of international
organizations, it is clear that they were accorded a wide scope of protection in the exercise of their functions
52
the Rhine Treaty of 1804 between the German Empire and France which provided all the rights of neutrality to
persons employed in regulating navigation in the international interest; The Treaty of Berlin of 1878 which
granted the European Commission of the Danube complete independence of territorial authorities in the
exercise of its functions; The Covenant of the League which granted diplomatic immunities and privileges.
Today, the age of the United Nations finds the scope of protection narrowed. The current tendency is to
reduce privileges and immunities ofpersonnel of international organizations to a minimum. The
tendency cannot be considered as a lowering of the standard but rather as a recognition that the problem on
the privileges and immunities of international officials is new. The solution to the problem presented by the
extension of diplomatic prerogatives to international functionaries lies in the general reduction of the special
position of both types of agents in that the special status of each agent is granted in the interest of
function. The wide grant of diplomatic prerogatives was curtailed because of practical necessity and
because the proper functioning of the organization did not require such extensive immunity for its
officials. While the current direction of the law seems to be to narrow the prerogatives of the personnel of
international organizations, the reverse is true with respect to the prerogatives of the organizations themselves,
considered as legal entities. Historically, states have been more generous in granting privileges and
immunities to organizations than they have to the personnel of these organizations.[24]
Thus, Section 2 of the General Convention on the Privileges and Immunities of the United Nations states
that the UN shall enjoy immunity from every form of legal process except insofar as in any particular case it
has expressly waived its immunity. Section 4 of the Convention on the Privileges and Immunities of the
Specialized Agencies likewise provides that the specialized agencies shall enjoy immunity from every form of
legal process subject to the same exception. Finally, Article 50(1) of the ADB Charter and Section 5 of the
Headquarters Agreement similarly provide that the bank shall enjoy immunity from every form of legal process,
except in cases arising out of or in connection with the exercise of its powers to borrow money, to guarantee
obligations, or to buy and sell or underwrite the sale of securities.
The phrase immunity from every form of legal process as used in the UN General Convention has been
interpreted to mean absolute immunity from a states jurisdiction to adjudicate or enforce its law by legal
process, and it is said that states have not sought to restrict that immunity of the United Nations by
interpretation or amendment. Similar provisions are contained in the Special Agencies Convention as well as in
the ADB Charter and Headquarters Agreement. These organizations were accorded privileges and immunities
in their charters by language similar to that applicable to the United Nations. It is clear therefore that these
organizations were intended to have similar privileges and immunities. [25] From this, it can be easily deduced
that international organizations enjoy absolute immunity similar to the diplomatic prerogatives granted to
diplomatic envoys.
Even in the United States this theory seems to be the prevailing rule. The Foreign Sovereign Immunities
Act was passed adopting the restrictive theory limiting the immunity of states under international law
essentially to activities of a kind not carried on by private persons. Then the International Organizations
Immunities Act came into effect which gives to designated international organizations the same immunity from
suit and every form of judicial process as is enjoyed by foreign governments. This gives the impression that the
Foreign Sovereign Immunities Act has the effect of applying the restrictive theory also to international
organizations generally. However, aside from the fact that there was no indication in its legislative history that
Congress contemplated that result, and considering that the Convention on Privileges and Immunities of the
United Nations exempts the United Nations from every form of legal process, conflict with the United States
obligations under the Convention was sought to be avoided by interpreting the Foreign Sovereign Immunities
Act, and the restrictive theory, as not applying to suits against the United Nations.[26]
On the other hand, international officials are governed by a different rule. Section 18(a) of the General
Convention on Privileges and Immunities of the United Nations states that officials of the United Nations shall
be immune from legal process in respect of words spoken or written and all acts performed by them in their
official capacity. The Convention on Specialized Agencies carries exactly the same provision. The Charter of
the ADB provides under Article 55(i) that officers and employees of the bank shall be immune from legal
process with respect to acts performed by them in their official capacity except when the Bank waives
immunity. Section 45 (a) of the ADB Headquarters Agreement accords the same immunity to the officers and
staff of the bank.There can be no dispute that international officials are entitled to immunity only with
53
respect to acts performed in their official capacity, unlike international organizations which enjoy
absolute immunity.
Clearly, the most important immunity to an international official, in the discharge of his international
functions, is immunity from local jurisdiction. There is no argument in doctrine or practice with the principle that
an international official is independent of the jurisdiction of the local authorities for his official acts. Those acts
are not his, but are imputed to the organization, and without waiver the local courts cannot hold him liable for
them. In strict law, it would seem that even the organization itself could have no right to waive an
officials immunity for his official acts.This permits local authorities to assume jurisdiction over and
individual for an act which is not, in the wider sense of the term, his act at all. It is the organization
itself, as a juristic person, which should waive its own immunity and appear in court, not the individual,
except insofar as he appears in the name of the organization. Provisions for immunity from jurisdiction
for official acts appear, aside from the aforementioned treatises, in the constitution of most modern
international organizations. The acceptance of the principle is sufficiently widespread to be regarded
as declaratory of international law.[27]
V
What then is the status of the international official with respect to his private acts?
Section 18 (a) of the General Convention has been interpreted to mean that officials of the specified
categories are denied immunity from local jurisdiction for acts of their private life and empowers local courts
to assume jurisdiction in such cases without the necessity of waiver.[28] It has earlier been mentioned that
historically, international officials were granted diplomatic privileges and immunities and were thus considered
immune for both private and official acts. In practice, this wide grant of diplomatic prerogatives was curtailed
because of practical necessity and because the proper functioning of the organization did not require such
extensive immunity for its officials. Thus, the current status of the law does not maintain that states grant
jurisdictional immunity to international officials for acts of their private lives. [29] This much is explicit
from the Charter and Headquarters Agreement of the ADB which contain substantially similar
provisions to that of the General Convention.
VI
Who is competent to determine whether a given act is private or official?
This is an entirely different question. In connection with this question, the current tendency to narrow the
scope of privileges and immunities of international officials and representatives is most apparent. Prior to the
regime of the United Nations, the determination of this question rested with the organization and its decision
was final. By the new formula, the state itself tends to assume this competence. If the organization is
dissatisfied with the decision, under the provisions of the General Convention of the United States, or the
Special Convention for Specialized Agencies, the Swiss Arrangement, and other current dominant instruments,
it may appeal to an international tribunal by procedures outlined in those instruments. Thus, the state assumes
this competence in the first instance. It means that, if a local court assumes jurisdiction over an act without the
necessity of waiver from the organization, the determination of the nature of the act is made at the national
level.[30]
It appears that the inclination is to place the competence to determine the nature of an act as
private or official in the courts of the state concerned. That the prevalent notion seems to be to leave to
the local courts determination of whether or not a given act is official or private does not necessarily mean that
such determination is final. If the United Nations questions the decision of the Court, it may invoke proceedings
for settlement of disputes between the organization and the member states as provided in Section 30 of the
General Convention. Thus, the decision as to whether a given act is official or private is made by the national
courts in the first instance, but it may be subjected to review in the international level if questioned by the
United Nations.[31]
A similar view is taken by Kunz, who writes that the jurisdiction of local courts without waiver for acts of
private life empowers the local courts to determine whether a certain act is an official act or an act of private
life, on the rationale that since the determination of such question, if left in the hands of the organization, would
54
consist in the execution, or non-execution, of waiver, and since waiver is not mentioned in connection with the
provision granting immunities to international officials, then the decision must rest with local courts.[32]
Under the Third Restatement of the Law, it is suggested that since an international official does not enjoy
personal inviolability from arrest or detention and has immunity only with respect to official acts, he is subject to
judicial or administrative process and must claim his immunity in the proceedings by showing that the act in
question was an official act. Whether an act was performed in the individuals official capacity is a question for
the court in which a proceeding is brought, but if the international organization disputes the courts finding, the
dispute between the organization and the state of the forum is to be resolved by negotiation, by an agreed
mode of settlement or by advisory opinion of the International Court of Justice.[33]
Recognizing the difficulty that by reason of the right of a national court to assume jurisdiction over private
acts without a waiver of immunity, the determination of the official or private character of a particular act may
pass from international to national control, Jenks proposes three ways of avoiding difficulty in the matter. The
first would be for a municipal court before which a question of the official or private character of a particular act
arose to accept as conclusive in the matter any claim by the international organization that the act was official
in character, such a claim being regarded as equivalent to a governmental claim that a particular act is an act
of State. Such a claim would be in effect a claim by the organization that the proceedings against the official
were a violation of the jurisdictional immunity of the organization itself which is unqualified and therefore not
subject to delimitation in the discretion of the municipal court. The second would be for a court to accept as
conclusive in the matter a statement by the executive government of the country where the matter arises
certifying the official character of the act. The third would be to have recourse to the procedure of international
arbitration. Jenks opines that it is possible that none of these three solutions would be applicable in all cases;
the first might be readily acceptable only in the clearest cases and the second is available only if the executive
government of the country where the matter arises concurs in the view of the international organization
concerning the official character of the act. However, he surmises that taken in combination, these various
possibilities may afford the elements of a solution to the problem.[34]
One final point. The international officials immunity for official acts may be likened to a consular officials
immunity from arrest, detention, and criminal or civil process which is not absolute but applies only to acts or
omissions in the performance of his official functions, in the absence of special agreement. Since a consular
officer is not immune from all legal process, he must respond to any process and plead and prove immunity on
the ground that the act or omission underlying the process was in the performance of his official functions. The
issue has not been authoritatively determined, but apparently the burden is on the consular officer to prove his
status as well as his exemption in the circumstances. In the United States, the US Department of State
generally has left it to the courts to determine whether a particular act was within a consular officers official
duties.[35]

Submissions

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

First, petitioner Liang, a bank official of ADB, is not entitled to diplomatic immunity and hence his immunity
is not absolute.
Under the Vienna Convention on Diplomatic Relations, a diplomatic envoy is immune from criminal
jurisdiction of the receiving State for all acts, whether private or official, and hence he cannot be arrested,
prosecuted and punished for any offense he may commit, unless his diplomatic immunity is waived. [36] On the
other hand, officials of international organizations enjoy functional immunities, that is, only those
necessary for the exercise of the functions of the organization and the fulfillment of its purposes.
[37]
This is the reason why the ADB Charter and Headquarters Agreement explicitly grant immunity from legal
process to bank officers and employees only with respect to acts performed by them in their official capacity,
except when the Bank waives immunity. In other words, officials and employees of the ADB are subject to
the jurisdiction of the local courts for their private acts, notwithstanding the absence of a waiver of
immunity.
55
Petitioner cannot also seek relief under the mantle of immunity from every form of legal process
accorded to ADB as an international organization. The immunity of ADB is absolute whereas the
immunity of its officials and employees is restricted only to official acts. This is in consonance with the
current trend in international law which seeks to narrow the scope of protection and reduce the privileges and
immunities granted to personnel of international organizations, while at the same time aims to increase the
prerogatives of international organizations.
Second, considering that bank officials and employees are covered by immunity only for their official acts,
the necessary inference is that the authority of the Department of Affairs, or even of the ADB for that
matter, to certify that they are entitled to immunity is limited only to acts done in their official
capacity. Stated otherwise, it is not within the power of the DFA, as the agency in charge of the executive
departments foreign relations, nor the ADB, as the international organization vested with the right to waive
immunity, to invoke immunity for private acts of bank official and employees, since no such prerogative exists
in the first place. If the immunity does not exist, there is nothing to certify.
As an aside, ADB cannot even claim to have the right to waive immunity for private acts of its officials and
employees. The Charter and the Headquarters Agreement are clear that the immunity can be waived only with
respect to official acts because this is only the extent to which the privilege has been granted. One cannot
waive the right to a privilege which has never been granted or acquired.
Third, I choose to adopt the view that it is the local courts which have jurisdiction to determine whether or
not a given act is official or private. While there is a dearth of cases on the matter under Philippine
jurisprudence, the issue is not entirely novel.
The case of M.H. Wylie, et al. vs. Rarang, et al.[38] concerns the extent of immunity from suit of the
officials of a United States Naval Base inside the Philippine territory. Although a motion to dismiss was filed by
the defendants therein invoking their immunity from suit pursuant to the RP-US Military Bases Agreement, the
trial court denied the same and, after trial, rendered a decision declaring that the defendants are not entitled to
immunity because the latter acted beyond the scope of their official duties. The Court likewise applied the
ruling enunciated in the case of Chavez vs. Sandiganbayan[39] to the effect that a mere invocation of the
immunity clause does not ipso facto result in the charges being automatically dropped. While it is true that the
Chavez case involved a public official, the Court did not find any substantial reason why the same rule cannot
be made to apply to a US official assigned at the US Naval Station located in the Philippines. In this case, it
was the local courts which ascertained whether the acts complained of were done in an official or personal
capacity.
In the case of The Holy See vs. Rosario, Jr.,[40] a complaint for annulment of contract of sale,
reconveyance, specific performance and damages was filed against petitioner. Petitioner moved to dismiss on
the ground of, among others, lack of jurisdiction based on sovereign immunity from suit, which was denied by
the trial court. A motion for reconsideration, and subsequently, a Motion for a Hearing for the Sole Purpose of
Establishing Factual Allegation for Claim of Immunity as a Jurisdictional Defense were filed by petitioner. The
trial court deferred resolution of said motions until after trial on the merits. On certiorari, the Court there ruled
on the issue of petitioners non-suability on the basis of the allegations made in the pleadings filed by the
parties. This is an implicit recognition of the courts jurisdiction to ascertain the suability or non-suability of the
sovereign by assessing the facts of the case. The Court hastened to add that when a state or international
agency wishes to plead sovereign or diplomatic immunity in a foreign court, in some cases, the defense of
sovereign immunity was submitted directly to the local courts by the respondents through their private
counsels, or where the foreign states bypass the Foreign Office, the courts can inquire into the facts and make
their own determination as to the nature of the acts and transactions involved.
Finally, it appears from the records of this case that petitioner is a senior economist at ADB and as such he
makes country project profiles which will help the bank in deciding whether to lend money or support a
particular project to a particular country. [41] Petitioner stands charged of grave slander for allegedly uttering
defamatory remarks against his secretary, the private complainant herein. Considering that the immunity
accorded to petitioner is limited only to acts performed in his official capacity, it becomes necessary to make a
factual determination of whether or not the defamatory utterances were made pursuant and in relation to his
official functions as a senior economist.
56
I vote to deny the motion for reconsideration.

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

THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR SOERATMIN, and MINISTER

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

DECISION
AZCUNA, J:

This is a petition for review on certiorari to set aside the Decision of the Court of Appeals dated May 30,
2002 and its Resolution dated August 16, 2002, in CA-G.R. SP No. 66894 entitled The Republic of Indonesia,
His Excellency Ambassador Soeratmin and Minister Counselor Azhari Kasim v. Hon. Cesar Santamaria,
Presiding Judge, RTC Branch 145, Makati City, and James Vinzon, doing business under the name and style
of Vinzon Trade and Services.
Petitioner, Republic of Indonesia, represented by its Counsellor, Siti Partinah, entered into a Maintenance
Agreement in August 1995 with respondent James Vinzon, sole proprietor of Vinzon Trade and Services. The
Maintenance Agreement stated that respondent shall, for a consideration, maintain specified equipment at the
Embassy Main Building, Embassy Annex Building and the Wisma Duta, the official residence of petitioner
Ambassador Soeratmin. The equipment covered by the Maintenance Agreement are air conditioning units,
generator sets, electrical facilities, water heaters, and water motor pumps. It is likewise stated therein that the
agreement shall be effective for a period of four years and will renew itself automatically unless cancelled by
either party by giving thirty days prior written notice from the date of expiry.[1]
Petitioners claim that sometime prior to the date of expiration of the said agreement, or before August
1999, they informed respondent that the renewal of the agreement shall be at the discretion of the incoming
Chief of Administration, Minister Counsellor Azhari Kasim, who was expected to arrive in February 2000. When
Minister Counsellor Kasim assumed the position of Chief of Administration in March 2000, he allegedly found
respondents work and services unsatisfactory and not in compliance with the standards set in the Maintenance
Agreement. Hence, the Indonesian Embassy terminated the agreement in a letter dated August 31, 2000.
[2]
Petitioners claim, moreover, that they had earlier verbally informed respondent of their decision to terminate
the agreement.
On the other hand, respondent claims that the aforesaid termination was arbitrary and
unlawful. Respondent cites various circumstances which purportedly negated petitioners alleged dissatisfaction
over respondents services: (a) in July 2000, Minister Counsellor Kasim still requested respondent to assign to
the embassy an additional full-time worker to assist one of his other workers; (b) in August 2000, Minister
Counsellor Kasim asked respondent to donate a prize, which the latter did, on the occasion of the Indonesian
Independence Day golf tournament; and (c) in a letter dated August 22, 2000, petitioner Ambassador
Soeratmin thanked respondent for sponsoring a prize and expressed his hope that the cordial relations happily
existing between them will continue to prosper and be strengthened in the coming years.
Hence, on December 15, 2000, respondent filed a complaint [3] against petitioners docketed as Civil Case
No. 18203 in the Regional Trial Court (RTC) of Makati, Branch 145. On February 20, 2001, petitioners filed a
Motion to Dismiss, alleging that the Republic of Indonesia, as a foreign sovereign State, has sovereign
immunity from suit and cannot be sued as a party-defendant in the Philippines. The said motion further alleged
that Ambassador Soeratmin and Minister Counsellor Kasim are diplomatic agents as defined under the Vienna
Convention on Diplomatic Relations and therefore enjoy diplomatic immunity. [4] In turn, respondent filed on
March 20, 2001, an Opposition to the said motion alleging that the Republic of Indonesia has expressly waived
its immunity from suit. He based this claim upon the following provision in the Maintenance Agreement:
57
Any legal action arising out of this Maintenance Agreement shall be settled according to the laws of the
Philippines and by the proper court of Makati City, Philippines.

Respondents Opposition likewise alleged that Ambassador Soeratmin and Minister Counsellor Kasim can be
sued and held liable in their private capacities for tortious acts done with malice and bad faith.[5]
On May 17, 2001, the trial court denied herein petitioners Motion to Dismiss. It likewise denied the Motion
for Reconsideration subsequently filed.
The trial courts denial of the Motion to Dismiss was brought up to the Court of Appeals by herein
petitioners in a petition for certiorari and prohibition. Said petition, docketed as CA-G.R. SP No. 66894, alleged
that the trial court gravely abused its discretion in ruling that the Republic of Indonesia gave its consent to be
sued and voluntarily submitted itself to the laws and jurisdiction of Philippine courts and that petitioners
Ambassador Soeratmin and Minister Counsellor Kasim waived their immunity from suit.
On May 30, 2002, the Court of Appeals rendered its assailed decision denying the petition for lack of merit.
[6]
On August 16, 2002, it denied herein petitioners motion for reconsideration.[7]
Hence, this petition.
In the case at bar, petitioners raise the sole issue of whether or not the Court of Appeals erred in
sustaining the trial courts decision that petitioners have waived their immunity from suit by using as its basis
the abovementioned provision in the Maintenance Agreement.
The petition is impressed with merit.
International law is founded largely upon the principles of reciprocity, comity, independence, and equality
of States which were adopted as part of the law of our land under Article II, Section 2 of the 1987 Constitution.
[8]
The rule that a State may not be sued without its consent is a necessary consequence of the principles of
independence and equality of States.[9] As enunciated in Sanders v. Veridiano II,[10] the practical justification for
the doctrine of sovereign immunity is that there can be no legal right against the authority that makes the law
on which the right depends. In the case of foreign States, the rule is derived from the principle of the sovereign
equality of States, as expressed in the maxim par in parem non habet imperium. All states are sovereign
equals and cannot assert jurisdiction over one another.[11] A contrary attitude would unduly vex the peace of
nations.[12]
The rules of International Law, however, are neither unyielding nor impervious to change. The increasing
need of sovereign States to enter into purely commercial activities remotely connected with the discharge of
their governmental functions brought about a new concept of sovereign immunity. This concept, the restrictive
theory, holds that the immunity of the sovereign is recognized only with regard to public acts or acts jure
imperii, but not with regard to private acts or acts jure gestionis.[13]
In United States v. Ruiz,[14] for instance, we held that the conduct of public bidding for the repair of a wharf
at a United States Naval Station is an act jure imperii. On the other hand, we considered as an act jure
gestionis the hiring of a cook in the recreation center catering to American servicemen and the general public
at the John Hay Air Station in Baguio City, [15] as well as the bidding for the operation of barber shops in Clark
Air Base in Angeles City.[16]
Apropos the present case, the mere entering into a contract by a foreign State with a private party cannot
be construed as the ultimate test of whether or not it is an act jure imperii or jure gestionis. Such act is only the
start of the inquiry. Is the foreign State engaged in the regular conduct of a business? If the foreign State is not
engaged regularly in a business or commercial activity, and in this case it has not been shown to be so
engaged, the particular act or transaction must then be tested by its nature. If the act is in pursuit of a
sovereign activity, or an incident thereof, then it is an act jure imperii.[17]
Hence, the existence alone of a paragraph in a contract stating that any legal action arising out of the
agreement shall be settled according to the laws of the Philippines and by a specified court of the Philippines is
not necessarily a waiver of sovereign immunity from suit. The aforesaid provision contains language not
necessarily inconsistent with sovereign immunity. On the other hand, such provision may also be meant to
58
apply where the sovereign party elects to sue in the local courts, or otherwise waives its immunity by any
subsequent act. The applicability of Philippine laws must be deemed to include Philippine laws in its totality,
including the principle recognizing sovereign immunity. Hence, the proper court may have no proper action, by
way of settling the case, except to dismiss it.
Submission by a foreign state to local jurisdiction must be clear and unequivocal. It must be given explicitly
or by necessary implication. We find no such waiver in this case.
Respondent concedes that the establishment of a diplomatic mission is a sovereign function. On the other
hand, he argues that the actual physical maintenance of the premises of the diplomatic mission, such as the
upkeep of its furnishings and equipment, is no longer a sovereign function of the State.[18]
We disagree. There is no dispute that the establishment of a diplomatic mission is an act jure imperii. A
sovereign State does not merely establish a diplomatic mission and leave it at that; the establishment of a
diplomatic mission encompasses its maintenance and upkeep. Hence, the State may enter into contracts with
private entities to maintain the premises, furnishings and equipment of the embassy and the living quarters of
its agents and officials. It is therefore clear that petitioner Republic of Indonesia was acting in pursuit of a
sovereign activity when it entered into a contract with respondent for the upkeep or maintenance of the air
conditioning units, generator sets, electrical facilities, water heaters, and water motor pumps of the Indonesian
Embassy and the official residence of the Indonesian ambassador.
The Solicitor General, in his Comment, submits the view that, the Maintenance Agreement was entered
into by the Republic of Indonesia in the discharge of its governmental functions. In such a case, it cannot be
deemed to have waived its immunity from suit. As to the paragraph in the agreement relied upon by
respondent, the Solicitor General states that it was not a waiver of their immunity from suit but a mere
stipulation that in the event they do waive their immunity, Philippine laws shall govern the resolution of any
legal action arising out of the agreement and the proper court in Makati City shall be the agreed venue thereof.
[19]

On the matter of whether or not petitioners Ambassador Soeratmin and Minister Counsellor Kasim may be
sued herein in their private capacities, Article 31 of the Vienna Convention on Diplomatic Relations provides:

xxx

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

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

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

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

xxx

The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in terminating the
Maintenance Agreement is not covered by the exceptions provided in the abovementioned provision.
The Solicitor General believes that said act may fall under subparagraph (c) thereof, [20] but said provision
clearly applies only to a situation where the diplomatic agent engages in any professional or commercial
activity outside official functions, which is not the case herein.
59
WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in
CA G.R. SP No. 66894 are REVERSED and SET ASIDE and the complaint in Civil Case No. 18203 against
petitioners is DISMISSED. No costs.
SO ORDERED.

FIRST DIVISION

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

Petitioner,
Present:

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

DECISION

GARCIA, J.:

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

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

At the core of the litigation is a 4,924.60-square meter lot once covered by Transfer Certificate of Title (TCT)
No. 118527 of the Registry of Deeds of Manila in the name of the herein private respondent Tarcila Laperal
Mendoza (Mendoza), married to Perfecto Mendoza. The lot is situated at No. 1440 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:
60
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/T-118911 dated July 28,
1975; and

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

Inter alia, she prayed for the following:

4. Ordering the Republic to pay plaintiff [Mendoza] a reasonable compensation or rental for the use or
occupancy of the subject property in the sum of FIVE HUNDRED THOUSAND (P500,000.00)
PESOS a month with a five (5%) per cent yearly increase, plus interest thereon at the legal rate,
beginning July 1975 until it finally vacates the same;
61
5. Ordering the Republic to pay plaintiffs counsel a sum equivalent to TWENTY FIVE (25%) PER CENT
of the current value of the subject property and/or whatever amount is recovered under the
premises; Further, plaintiff prays for such other relief, just and equitable under the premises.

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

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

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

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

WHEREFORE, judgment is hereby rendered:

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;
62
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 - - Order[15] granting the private respondents motion for execution.

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

Hence, this petition for certiorari.

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

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

Petitioners posture is simply without merit.

Deprivation of procedural due process is obviously the petitioners threshold theme. Due process, in its
procedural aspect, guarantees in the minimum the opportunity to be heard. [18] Grave abuse of discretion,
however, cannot plausibly be laid at the doorstep of the respondent judge on account of his having issued the
63
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, 2003[25] denying the petitioners
notice of appeal after the court caused the issuance on November 27, 2003 of a certificate of finality of its
August 27, 2003 decision can hardly be described as arbitrary, as the petitioner would have this Court believe.
In this regard, the Court takes stock of the following key events and material dates set forth in the assailed
December 17, 2003 order, supra: (a) The petitioner, thru the OSG, received on August 29, 2003 a copy of the
RTC decision in this case, hence had up to September 13, 2003, a Saturday, within which to perfect an appeal;
(b) On September 15, 2003, a Monday, the OSG filed its motion for new trial, which the RTC denied, the OSG
receiving a copy of the order of denial on October 9, 2003; and (c) On October 24, 2003, the OSG sought
reconsideration of the order denying the motion for new trial. The motion for reconsideration was denied per
Order dated November 25, 2003, a copy of which the OSG received on the same date.
64
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 (15 th) 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
65
its assailed decision, however, the trial court ordered the petitioner to pay private respondent the total amount
of over P1.48 Billion or the mind-boggling amount of P1,480,627,688.00, to be exact, representing the
reasonable rental for the property, the interest rate thereon at the legal rate and the opportunity cost. This
figure is on top of the P143,600,000.00 which represents the acquisition cost of the disputed property. All told,
the trial court would have the Republic pay the total amount of about P1.624 Billion, exclusive of interest, for
the taking of a property with a declared assessed value of P2,388,900.00. This is not to mention the award of
attorneys fees in an amount equivalent to 15% of the amount due the private respondent.

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

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

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

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

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

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

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

The assailed trial courts issuance of the writ of execution [36] against government funds to satisfy its money
judgment is also nullified. It is basic that government funds and properties may not be seized under writs of
execution or garnishment to satisfy such judgments.[37] Republic v. Palacio[38] teaches that a judgment against
the State generally operates merely to liquidate and establish the plaintiffs claim in the absence of express
provision; otherwise, they can not be enforced by processes of law.
66
Albeit title to the Arlegui property remains in the name of the petitioner Republic, it is actually the Office of
the President which has beneficial possession of and use over it since the 1975 takeover. Accordingly, and in
accord with the elementary sense of justice, it behooves that office to make the appropriate budgetary
arrangements towards paying private respondent what is due her under the premises. This, to us, is the right
thing to do. The imperatives of fair dealing demand no less. And the Court would be remiss in the discharge of
its duties as dispenser of justice if it does not exhort the Office of the President to comply with what, in law and
equity, is its obligation. If the same office will undertake to pay its obligation with reasonable dispatch or in a
manner acceptable to the private respondent, then simple justice, while perhaps delayed, will have its day.
Private respondent is in the twilight of her life, being now over 90 years of age. [39] Any delay in the
implementation of this disposition would be a bitter cut.

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

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

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

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

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

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

G.R. No. 171182 August 23, 2012

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

EMMANUEL P. BELLO, WILFREDO P. DAVID, CASIANO S. ABRIGO, and JOSEFINA R.
LICUANAN,Petitioners,
vs.
HON. AGUSTIN S. DIZON, his capacity as Presiding Judge of the Regional Trial Court of Quezon City,
Branch 80, STERN BUILDERS, INC., and SERVILLANO DELA CRUZ, Respondents.
67
DECISION

BERSAMIN, J.:

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

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

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

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

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

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

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

2. 5,716,729.00 in actual damages

3. 10,000,000.00 in moral damages

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

5. Costs of suit.

SO ORDERED.

Following the RTCs denial of its motion for reconsideration on May 7, 2002,6 the UP filed a notice of appeal on
June 3, 2002.7 Stern Builders and dela Cruz opposed the notice of appeal on the ground of its filing being
belated, and moved for the execution of the decision. The UP countered that the notice of appeal was filed
within the reglementary period because the UPs Office of Legal Affairs (OLS) in Diliman, Quezon City received
68
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
69
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

70
On May 16, 2005, DBP filed a motion to consign the check representing the judgment award and to dismiss
the motion to cite its officials in contempt of court.43

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

On July 8, 2005, the RTC resolved all the pending matters,45 noting that the DBP had already delivered to the
sheriff Managers Check No. 811941 for 16,370,191.74 representing the garnished funds payable to the
order of Stern Builders and dela Cruz as its compliance with the RTCs order 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
71
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:
72
Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part that the
"disposition of the amount represented therein being subject to the final outcome of the case of the University
of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125 before the Court of Appeals) is
that the judgment or resolution of said court has to be final and executory, for if the same will still be elevated to
the Supreme Court, it will not attain finality yet until the highest court has rendered its own final judgment or
resolution.

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

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

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

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

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

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

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

It bears stressing, if only to set the record straight, that this Court did not in its Order dated January 3, 2007
(the implementation of which was restrained by the Supreme Court in its Resolution dated January 24, 2002)
direct that that garnished amount "be deposited with the garnishee bank (Development Bank of the
Philippines)". In the first place, there was no need to order DBP to make such deposit, as the garnished
amount was already deposited in the account of plaintiffs with the 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;
73
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 10 MILLION AS MORAL
DAMAGES TO RESPONDENTS.
74
IV - THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE RELEASE OF
THE JUDGMENT AWARD IN ITS ORDER DATED 3 JANUARY 2007 ON THE GROUND OF EQUITY AND
JUDICIAL COURTESY.

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

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

VI -THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN NOT ORDERING THE REDEPOSIT OF THE
GARNISHED AMOUNT TO THE DBP IN VIOLATION OF THE CLEAR LANGUAGE OF THE SUPREME
COURT RESOLUTION DATED 24 JANUARY 2007.

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

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

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

In contrast, Stern Builders and dela Cruz aver that the petition for review was fatally defective for its failure to
mention the other cases upon the same issues pending between the parties (i.e., CA-G.R. No. 77395 and G.R
No. 163501); that the UP was evidently resorting to forum shopping, and to delaying the satisfaction of the final
judgment by the filing of its petition for review; that the ruling in Commissioner of Public Works v. San Diego
had no application because there was an appropriation for the project; that the UP retained the funds allotted
for the project only in a fiduciary capacity; that the contract price had been meanwhile adjusted to
22,338,553.25, an amount already more than sufficient to cover the judgment award; that the UPs prayer to
reduce or delete the award of damages had no factual basis, because they had been gravely wronged, had
been deprived of their source of income, and had suffered untold miseries, discomfort, humiliation and
sleepless years; that dela Cruz had even been constrained to sell his house, his equipment and the
implements of his trade, and together with his family had been forced to live miserably because of the wrongful
actuations of the UP; and that the RTC correctly declared the Courts TRO to be already functus officio by
reason of the withdrawal of the garnished amount from the DBP.

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

(a) whether the funds of the UP were the proper subject of garnishment in order to satisfy the judgment award;
and (b) whether the UPs prayer for the deletion of the awards of actual damages of 5,716,729.00, moral
damages of 10,000,000.00 and attorneys fees of 150,000.00 plus 1,500.00 per appearance could be
granted despite the finality of the judgment of the RTC.
75
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.77 Hence, the funds subject of this action could not be validly made the subject of the RTCs writ of
execution or garnishment. The adverse judgment rendered against the UP in a suit to which it had impliedly
consented was not immediately enforceable by execution against the UP,78 because suability of the State did
not necessarily mean its liability.79

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

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

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

xxx The universal rule that where the State gives its consent to be sued by private parties either by general or
special law, it may limit claimants action "only up to the completion of proceedings anterior to the stage of
execution" and that the power of the Courts ends when the judgment is rendered, since government funds and
76
properties may not be seized under writs of execution or garnishment to satisfy such judgments, is based on
obvious considerations of public policy. Disbursements of public funds must be covered by the corresponding
appropriation as required by law. The functions and public services rendered by the State cannot be allowed to
be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as
appropriated by law.

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

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

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
77
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.
78
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 16,370,191.74 illegally garnished from its trust funds. Obstructing the plea is the
finality of the judgment based on the supposed tardiness of UPs appeal, which the RTC declared on
September 26, 2002. The CA upheld the declaration of finality on February 24, 2004, and the Court itself
denied the UPs petition for review on that issue on May 11, 2004 (G.R. No. 163501). The denial became final
on November 12, 2004.

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

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

We rule that the UPs plea for equity warrants the Courts exercise of the exceptional power to disregard the
declaration of finality of the judgment of the RTC for being in clear violation of the UPs right to due process.
79
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 fresh-period rule that the Court first
announced in mid-September of 2005 through its ruling in Neypes v. Court of Appeals,98 viz:

To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to appeal their
cases, the Court deems it practical to allow a fresh period of 15 days within which to file the notice of appeal in
80
the Regional Trial Court, counted from receipt of the order dismissing a motion for a new trial or motion for
reconsideration.

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

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

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

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

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

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

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)
81
The Constitution and the Rules of Court apparently delineate two main essential parts of a judgment, namely:
the body and the decretal portion. Although the latter is the controlling part,106 the importance of the former is
not to be lightly regarded because it is there where the court clearly and distinctly states its findings of fact and
of law on which the decision is based. To state it differently, one without the other is ineffectual and useless.
The omission of either inevitably results in a judgment that violates the letter and the spirit of the Constitution
and the Rules of Court.

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

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

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

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

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

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

There was also no clear and distinct statement of the factual and legal support for the award of moral damages
in the substantial amount of 10,000,000.00. The award was thus also speculative and whimsical. Like the
actual damages, the moral damages constituted another judicial ipse dixit, the inevitable consequence of which
was to render the award of moral damages incapable of attaining finality. In addition, the grant of moral
damages in that manner contravened the law that permitted the recovery of moral damages as the means to
assuage "physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injury."111 The contravention of the law was manifest considering
82
that Stern Builders, as an artificial person, was incapable of experiencing pain and moral
sufferings.112 Assuming that in granting the substantial amount of 10,000,000.00 as moral damages, the RTC
might have had in mind that dela Cruz had himself suffered mental anguish and anxiety. If that was the case,
then the RTC obviously disregarded his separate and distinct personality from that of Stern
Builders.113 Moreover, his moral and emotional sufferings as the President of Stern Builders were not the
sufferings of Stern Builders. Lastly, the RTC violated the basic principle that moral damages were not intended
to enrich the plaintiff at the expense of the defendant, but to restore the plaintiff to his status quo ante as much
as possible. Taken together, therefore, all these considerations exposed the substantial amount of
10,000,000.00 allowed as moral damages not only to be factually baseless and legally indefensible, but also to
be unconscionable, inequitable and unreasonable.

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

That the attorneys fees granted to the private respondents did not satisfy the foregoing requirement suffices
for the Court to undo them.121 The grant was ineffectual for being contrary to law and public policy, it being clear
that the express findings of fact and law were intended to bring the case within the exception and thereby
justify the award of the attorneys fees. Devoid of such express findings, the award was a conclusion without a
premise, its basis being improperly left to speculation and conjecture.122

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

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

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

Costs of suit to be paid by the private respondents.

SO ORDERED.
83
LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

G.R. No. 206510 September 16, 2014

MOST REV. PEDRO D. ARIGO, Vicar Apostolic of Puerto Princesa D.D.; MOST REV. DEOGRACIAS S.
INIGUEZ, JR., Bishop-Emeritus of Caloocan, FRANCES Q. QUIMPO, CLEMENTE G. BAUTISTA, JR.,
Kalikasan-PNE, MARIA CAROLINA P. ARAULLO, RENATO M. REYES, JR., Bagong Alyansang
Makabayan, HON. NERI JAVIER COLMENARES, Bayan Muna Partylist, ROLAND G. SIMBULAN, PH.D.,
Junk VF A Movement, TERESITA R. PEREZ, PH.D., HON. RAYMOND V. PALATINO, Kabataan Party-list,
PETER SJ. GONZALES, Pamalakaya, GIOVANNI A. TAPANG, PH. D., Agham, ELMER C. LABOG,
Kilusang Mayo Uno, JOAN MAY E. SALVADOR, Gabriela, JOSE ENRIQUE A. AFRICA, THERESA A.
CONCEPCION, MARY JOAN A. GUAN, NESTOR T. BAGUINON, PH.D., A. EDSEL F. TUPAZ, Petitioners,
vs.
SCOTT H. SWIFT in his capacity as Commander of the US. 7th Fleet, MARK A. RICE in his capacity as
Commanding Officer of the USS Guardian, PRESIDENT BENIGNO S. AQUINO III in his capacity as
Commander-in-Chief of the Armed Forces of the Philippines, HON. ALBERT F. DEL ROSARIO,
Secretary, pepartment of Foreign Affair.s, HON. PAQUITO OCHOA, JR., Executiv~.:Secretary, Office of
the President, . HON. VOLTAIRE T. GAZMIN, Secretary, Department of National Defense, HON. RAMON
JESUS P. P AJE, Secretary, Department of Environment and Natural Resoz!rces, VICE ADMIRAL JOSE
LUIS M. ALANO, Philippine Navy Flag Officer in Command, Armed Forces of the Philippines, ADMIRAL
RODOLFO D. ISO RENA, Commandant, Philippine Coast Guard, COMMODORE ENRICO EFREN
EVANGELISTA, Philippine Coast Guard Palawan, MAJOR GEN. VIRGILIO 0. DOMINGO, Commandant of
Armed Forces of the Philippines Command and LT. GEN. TERRY G. ROBLING, US Marine Corps
Forces. Pacific and Balikatan 2013 Exercise Co-Director, Respondents.

DECISION

VILLARAMA, JR, J.:

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

Factual Background

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

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

In 1993, Tubbataha was inscribed by the United Nations Educational Scientific and Cultural Organization
(UNESCO) as a World Heritage Site. It was recognized as one of the Philippines' oldest ecosystems,
containing excellent examples of pristine reefs and a high diversity of marine life. The 97,030-hectare protected
84
marine park is also an important habitat for internationally threatened and endangered marine species.
UNESCO cited Tubbataha's outstanding universal value as an important and significant natural habitat for in
situ conservation of biological diversity; an example representing significant on-going ecological and biological
processes; and an area of exceptional natural beauty and aesthetic importance.2

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

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

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

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

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

The Petition

Petitioners claim that the grounding, salvaging and post-salvaging operations of the USS Guardian cause and
continue to cause environmental damage of such magnitude as to affect the provinces of Palawan, Antique,
Aklan, Guimaras, Iloilo, Negros Occidental, Negros Oriental, Zamboanga del Norte, Basilan, Sulu, and Tawi-
Tawi, which events violate their constitutional rights to a balanced and healthful ecology. They also seek a
directive from this Court for the institution of civil, administrative and criminal suits for acts committed in
violation of environmental laws and regulations in connection with the grounding incident.
85
Specifically, petitioners cite the following violations committed by US respondents under R.A. No. 10067:
unauthorized entry (Section 19); non-payment of conservation fees (Section 21 ); obstruction of law
enforcement officer (Section 30); damages to the reef (Section 20); and destroying and disturbing resources
(Section 26[g]). Furthermore, petitioners assail certain provisions of the Visiting Forces Agreement (VFA) which
they want this Court to nullify for being unconstitutional.

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

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

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

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

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

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

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

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

b. Direct Respondents and appropriate agencies to commence administrative, civil, and criminal
proceedings against erring officers and individuals to the full extent of the law, and to make such
proceedings public;

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

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

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

f. Require the authorities of the Philippines and the United States to notify each other of the disposition
of all cases, wherever heard, related to the grounding of the Guardian;
86
g. Restrain Respondents from proceeding with any purported restoration, repair, salvage or post
salvage plan or plans, including cleanup plans covering the damaged area of the Tubbataha Reef
absent a just settlement approved by the Honorable Court;

h. Require Respondents to engage in stakeholder and LOU consultations in accordance with the Local
Government Code and R.A. 10067;

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

j. Direct Respondents to undertake measures to rehabilitate the areas affected by the grounding of the
Guardian in light of Respondents' experience in the Port Royale grounding in 2009, among other similar
grounding incidents;

k. Require Respondents to regularly publish on a quarterly basis and in the name of transparency and
accountability such environmental damage assessment, valuation, and valuation methods, in all stages
of negotiation;

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

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

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

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

p. Allow for continuing discovery measures;

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

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

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

Respondents' Consolidated Comment

In their consolidated comment with opposition to the application for a TEPO and ocular inspection and
production orders, respondents assert that: ( 1) the grounds relied upon for the issuance of a TEPO or writ of
Kalikasan have become fait accompli as the salvage operations on the USS Guardian were already completed;
(2) the petition is defective in form and substance; (3) the petition improperly raises issues involving the VFA
between the Republic of the Philippines and the United States of America; and ( 4) the determination of the
extent of responsibility of the US Government as regards the damage to the Tubbataha Reefs rests exdusively
with the executive branch.
87
The Court's Ruling

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

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

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

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

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

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

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

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

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

In United States of America v. Judge Guinto,18 we discussed the principle of state immunity from suit, as
follows:
88
The rule that a state may not be sued without its consent, now expressed in Article XVI, Section 3, of the
1987 Constitution, is one of the generally accepted principles of international law that we have adopted as part
of the law of our land under Article II, Section 2. x x x.

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

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

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

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

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

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

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

In the same case we also mentioned that in the case of diplomatic immunity, the privilege is not an immunity
from the observance of the law of the territorial sovereign or from ensuing legal liability; it is, rather, an
immunity from the exercise of territorial jurisdiction.22
89
In United States of America v. Judge Guinto,23 one of the consolidated cases therein involved a Filipino
employed at Clark Air Base who was arrested following a buy-bust operation conducted by two officers of the
US Air Force, and was eventually dismissed from his employment when he was charged in court for violation of
R.A. No. 6425. In a complaint for damages filed by the said employee against the military officers, the latter
moved to dismiss the case on the ground that the suit was against the US Government which had not given its
consent. The RTC denied the motion but on a petition for certiorari and prohibition filed before this Court, we
reversed the RTC and dismissed the complaint. We held that petitioners US military officers were acting in the
exercise of their official functions when they conducted the buy-bust operation against the complainant and
thereafter testified against him at his trial. It follows that for discharging their duties as agents of the United
States, they cannot be directly impleaded for acts imputable to their principal, which has not given its consent
to be sued.

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

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

It is a different matter where the public official is made to account in his capacity as such for acts contrary to
law and injurious to the rights of plaintiff. As was clearly set forth by JustiGe Zaldivar in Director of the Bureau
of Telecommunications, et al. vs. Aligaen, etc., et al. : "Inasmuch as the State authorizes only legal acts by its
officers, unauthorized acts of government officials or officers are not acts of the State, and an action against
the officials or officers by one whose rights have been invaded or violated by such acts, for the protection of his
rights, is not a suit against the State within the rule of immunity of the State from suit. In the same tenor, it has
been said that an action at law or suit in equity against a State officer or the director of a State department on
the ground that, while claiming to act for the State, he violates or invades the personal and property rights of
the plaintiff, under an unconstitutional act or under an assumption of authority which he does not have, is not a
suit against the State within the constitutional provision that the State may not be sued without its consent."
The rationale for this ruling is that the doctrine of state immunity cannot be used as an instrument for
perpetrating an injustice. x x x x

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

During the deliberations, Senior Associate Justice Antonio T. Carpio took the position that the conduct of the
US in this case, when its warship entered a restricted area in violation of R.A. No. 10067 and caused damage
to the TRNP reef system, brings the matter within the ambit of Article 31 of the United Nations Convention on
the Law of the Sea (UNCLOS). He explained that while historically, warships enjoy sovereign immunity from
suit as extensions of their flag State, Art. 31 of the UNCLOS creates an exception to this rule in cases where
90
they fail to comply with the rules and regulations of the coastal State regarding passage through the latter's
internal waters and the territorial sea.

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

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

The UNCLOS is a product of international negotiation that seeks to balance State sovereignty (mare clausum)
and the principle of freedom of the high seas (mare liberum).29 The freedom to use the world's marine waters is
one of the oldest customary principles of international law.30 The UNCLOS gives to the coastal State sovereign
rights in varying degrees over the different zones of the sea which are: 1) internal waters, 2) territorial sea, 3)
contiguous zone, 4) exclusive economic zone, and 5) the high seas. It also gives coastal States more or less
jurisdiction over foreign vessels depending on where the vessel is located.31

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

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

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

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

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

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

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

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

An overwhelming majority - over 80% -- of nation states are now members of UNCLOS, but despite this the
US, the world's leading maritime power, has not ratified it.
91
While the Reagan administration was instrumental in UNCLOS' negotiation and drafting, the U.S. delegation
ultimately voted against and refrained from signing it due to concerns over deep seabed mining technology
transfer provisions contained in Part XI. In a remarkable, multilateral effort to induce U.S. membership, the bulk
of UNCLOS member states cooperated over the succeeding decade to revise the objection.able provisions.
The revisions satisfied the Clinton administration, which signed the revised Part XI implementing agreement in
1994. In the fall of 1994, President Clinton transmitted UNCLOS and the Part XI implementing agreement to
the Senate requesting its advice and consent. Despite consistent support from President Clinton, each of his
successors, and an ideologically diverse array of stakeholders, the Senate has since withheld the consent
required for the President to internationally bind the United States to UNCLOS.

While UNCLOS cleared the Senate Foreign Relations Committee (SFRC) during the 108th and 110th
Congresses, its progress continues to be hamstrung by significant pockets of political ambivalence over U.S.
participation in international institutions. Most recently, 111 th Congress SFRC Chairman Senator John Kerry
included "voting out" UNCLOS for full Senate consideration among his highest priorities. This did not occur,
and no Senate action has been taken on UNCLOS by the 112th Congress.34

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

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

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

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

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

We fully concur with Justice Carpio's view that non-membership in the UNCLOS does not mean that the US
will disregard the rights of the Philippines as a Coastal State over its internal waters and territorial sea. We thus
expect the US to bear "international responsibility" under Art. 31 in connection with the USS Guardian
grounding which adversely affected the Tubbataha reefs. Indeed, it is difficult to imagine that our long-time ally
and trading partner, which has been actively supporting the country's efforts to preserve our vital marine
resources, would shirk from its obligation to compensate the damage caused by its warship while transiting our
internal waters. Much less can we comprehend a Government exercising leadership in international affairs,
92
unwilling to comply with the UNCLOS directive for all nations to cooperate in the global task to protect and
preserve the marine environment as provided in Article 197, viz:

Article 197
Cooperation on a global or regional basis

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

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

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

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

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

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

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

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

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

The reliefs that may be granted under the writ are the following:
93
(a) Directing respondent to permanently cease and desist from committing acts or neglecting the
performance of a duty in violation of environmental laws resulting in environmental destruction or
damage;

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

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

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

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

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

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

RULE3 x x x x

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

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

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

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

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

SEC. 5. Pre-trial conference; consent decree.-The judge shall put the parties and their counsels under oath,
and they shall remain under oath in all pre-trial conferences.
94
The judge shall exert best efforts to persuade the parties to arrive at a settlement of the dispute. The judge
may issue a consent decree approving the agreement between the parties in accordance with law, morals,
public order and public policy to protect the right of the people to a balanced and healthful ecology.x x x x

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

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

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

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

RULES

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

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

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

As held in BAYAN (Bagong Alyansang Makabayan) v. Exec. Sec. Zamora,41 the VFA was duly concurred in by
the Philippine Senate and has been recognized as a treaty by the United States as attested and certified by the
duly authorized representative of the United States government. The VF A being a valid and binding
agreement, the parties are required as a matter of international law to abide by its terms and provisions.42 The
present petition under the Rules is not the proper remedy to assail the constitutionality of its provisions.
WHEREFORE, the petition for the issuance of the privilege of the Writ of Kalikasan is hereby DENIED.

No pronouncement as to costs.

SO ORDERED. C E RTI F I CATI O N

95
Pursuant to Section 13, Article VIII of the 1987 Constitution, it is hereby certified that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the opinion of
the Court.

MARIA LOURDES P. A. SERENO

Chief Justice

CHINA NATIONAL MACHINERY & EQUIPMENT G.R. No. 185572

CORP. (GROUP),
Petitioner,
Promulgated:

versus February 7, 2012

HON. CESAR D. SANTAMARIA,

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

DECISION
SERENO, J.:

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

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

On 30 August 2003, the Export Import Bank of China (EXIM Bank) and the Department of Finance of
the Philippines (DOF) entered into a Memorandum of Understanding (Aug 30 MOU), wherein China agreed to
extend Preferential Buyers Credit to the Philippine government to finance the Northrail Project. [3] The Chinese
government designated EXIM Bank as the lender, while the Philippine government named the DOF as the
borrower.[4] Under the Aug 30 MOU, EXIM Bank 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
96
Issuance of Writs of Preliminary Prohibitory and Mandatory Injunction and/or TRO against CNMEG, the Office
of the Executive Secretary, the DOF, the Department of Budget and Management, the National Economic
Development Authority and Northrail.[11] The case was docketed as Civil Case No. 06-203 before the Regional
Trial Court, National Capital Judicial Region, Makati City, Branch 145 (RTC Br. 145). In the Complaint,
respondents alleged that the Contract Agreement and the Loan Agreement were void for being contrary to (a)
the Constitution; (b) Republic Act No. 9184 (R.A. No. 9184), otherwise known as the Government Procurement
Reform Act; (c) Presidential Decree No. 1445, otherwise known as the Government Auditing Code; and (d)
Executive Order No. 292, otherwise known as the Administrative Code.[12]

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

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

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

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

of China.
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:
97
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

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;
98

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;

WHEREAS, the NORTHRAIL CORP. considers CNMEGs proposal advantageous to

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

xxx xxx xxx

II. APPROVAL PROCESS

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

accordance with Paragraphs 1.3 and 1.4 above and in compliance with necessary
governmental laws, rules, regulations and procedures required from both parties, the
parties shall commence the preparation and negotiation of the terms and conditions
of the Contract (the Contract) to be entered into between them on the implementation
of the Project. The parties shall use their best endeavors to formulate and
finalize a Contract with a view to signing the Contract within one hundred
twenty (120) days from CNMEGs presentation of the Study.[33] (Emphasis
supplied)
99
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.

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
100
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,[38] it is clear from the foregoing provisions that the Northrail Project was a purely commercial
transaction.

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

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

B. CNMEG failed to adduce evidence that it is

immune from suit under Chinese law.

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
101
this Court held that (i)mmunity from suit is determined by the character of the objects for which the entity was
organized.[39]
In this regard, this Courts ruling in Deutsche Gesellschaft Fr Technische Zusammenarbeit (GTZ) v.
CA[40] must be examined. In Deutsche Gesellschaft, Germanyand the Philippines entered into a Technical
Cooperation Agreement, pursuant to which both signed an arrangement promoting the Social Health
InsuranceNetworking and Empowerment (SHINE) project. The two governments named their respective
implementing organizations: the Department of Health (DOH) and the Philippine Health Insurance Corporation
(PHIC) for the Philippines, and GTZ for the implementation of Germanys contributions. In ruling that GTZ was not
immune from suit, this Court held:

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

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

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

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

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

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

102
State immunity from suit may be waived by general or special law. The special law can
take the form of the original charter of the incorporated government agency. Jurisprudence is
replete with examples of incorporated government agencies which were ruled not entitled to
invoke immunity from suit, owing to provisions in their charters manifesting their consent to be
sued.

xxx xxx xxx

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

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

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

In truth, private respondents were unable to adduce any evidence to substantiate their
claim that GTZ was a private corporation, and the Labor Arbiter acted rashly in accepting such
claim without explanation. But neither has GTZ supplied any evidence defining its legal
nature beyond that of the bare descriptive implementing agency. There is no doubt that
the 1991 Agreement designated GTZ as the implementing agency in behalf of the German
government. Yet the catch is that such term has no precise definition that is responsive to
our concerns. Inherently, an agent acts in behalf of a principal, and the GTZ can be said to
act in behalf of the German state. But that is as far as implementing agency could take us.
The term by itself does not supply whether GTZ is incorporated or unincorporated,
whether it is owned by the German state or by private interests, whether it has juridical
personality independent of the German government or none at all.

xxx xxx xxx

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

It is entirely possible that under German law, an entity such as GTZ or particularly GTZ
itself has not been vested or has been specifically deprived the power and capacity to sue and/or
be sued. Yet in the proceedings below and before this Court, GTZ has failed to establish that
103
under German law, it has not consented to be sued despite it being owned by the Federal
Republic of Germany. We adhere to the rule that in the absence of evidence to the
contrary, foreign laws on a particular subject are presumed to be the same as those of the
Philippines, and following the most intelligent assumption we can gather, GTZ is akin to a
governmental owned or controlled corporation without original charter which, by virtue of
the Corporation Code, has expressly consented to be sued. At the very least, like the Labor
Arbiter and the Court of Appeals, this Court has no basis in fact to conclude or presume that GTZ
enjoys immunity from suit.[41] (Emphasis supplied.)

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

C. CNMEG failed to present a certification from the

Department of Foreign Affairs.

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

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

xxx xxx xxx

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

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

In some cases, the defense of sovereign immunity was submitted directly to the local
courts by the respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50
[1945]; Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of
America v. Guinto, 182 SCRA 644 [1990] and companion cases). In cases where the foreign
104
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
105
activity.[47] Surely, this is not the kind of certification that can establish CNMEGs entitlement to immunity from suit,
as Holy See unequivocally refers to the determination of the Foreign Office of the state where it is sued.
Further, CNMEG also claims that its immunity from suit has the executive endorsement of both the OSG
and the Office of the Government Corporate Counsel (OGCC), which must be respected by the courts. However,
as expressly enunciated in Deutsche Gesellschaft, this determination by the OSG, or by the OGCC for that
matter, does not inspire the same degree of confidence as a DFA certification. Even with a DFA certification,
however, it must be remembered that this Court is not precluded from making an inquiry into the intrinsic
correctness of such certification.

D. An agreement to submit any dispute to arbitration

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

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

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

33. SETTLEMENT OF DISPUTES AND ARBITRATION

33.1. Amicable Settlement

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

33.2. Arbitration

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

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

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

Second issue: Whether the Contract Agreement is an

executive agreement

Article 2(1) of the Vienna Convention on the Law of Treaties (Vienna Convention) defines a treaty as
follows:
106
[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.

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

Despite these differences, to be considered an executive agreement, the following three requisites
provided under the Vienna Convention must nevertheless concur: (a) the agreement must be between states; (b)
it must be written; and (c) it must governed by international law. The first and the third requisites do not obtain in
the case at bar.

A. CNMEG is neither a government nor a government

agency.

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

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

B. The Contract Agreement is to be governed by

Philippine law.

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

APPLICABLE LAW AND GOVERNING LANGUAGE

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

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

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

It is therefore clear from the foregoing reasons that the Contract Agreement does not partake of the
nature of an executive agreement. It is merely an ordinary commercial contract that can be questioned before the
local courts.
107
WHEREFORE, the instant Petition is DENIED. Petitioner China National Machinery & Equipment Corp.
(Group) is not entitled to immunity from suit, and the Contract Agreement is not an executive agreement. CNMEGs
prayer for the issuance of a TRO and/or Writ of Preliminary Injunction is DENIED for being moot and
academic. This case is REMANDED to the Regional Trial Court of Makati, Branch 145, for further
proceedings as regards the validity of the contracts subject of Civil Case No. 06-203.

No pronouncement on costs of suit.

SO ORDERED.

SECOND DIVISION

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

DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), Petitioner, v. SPOUSES

VICENTE ABECINA AND MARIA CLEOFE ABECINA, Respondents.

DECISION

BRION, J.:

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

ANTECEDENTS

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

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

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

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

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

On April 29, 2003, the respondent spouses sent a final demand letter to both the DOTC and Digitel to vacate
the premises and to pay unpaid rent/damages in the amount of one million two hundred thousand pesos
108
(P1,200,000.00). Neither the DOTC nor Digitel complied with the demand.

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

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

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

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

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

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

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

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

THE PARTIES' ARGUMENTS

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

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

Citing the 2007 case of Heirs of Mateo Pidacan v. Air Transportation Office (ATO),22 the Department prays that
instead of allowing recovery of the property, the case should be remanded to the RTC for determination of just
compensation.
109

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

OUR RULING

We find no merit in the petition.

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

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

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

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

The DOTC encroached on the respondents' properties when it constructed the local telephone exchange in
Daet, Camarines Norte. The exchange was part of the RTDP pursuant to the National Telephone Program. We
have no doubt that when the DOTC constructed the encroaching structures and subsequently entered into the
FLA with Digitel for their maintenance, it was carrying out a sovereign function. Therefore, we agree with the
DOTC's contention that these are acts jure imperii that fall within the cloak of state immunity.

However, as the respondents repeatedly pointed out, this Court has long established in Ministerio v
CFI,33Amigable v. Cuenca,34 the 2010 case Heirs of Pidacan v. ATO,35 and more recently in Vigilar v.
Aquino36 that the doctrine of state immunity cannot serve as an instrument for perpetrating an injustice to a
citizen.

The Constitution identifies the limitations to the awesome and near-limitless powers of the State. Chief among
these limitations are the principles that no person shall be deprived of life, liberty, or property without due
process of law and that private property shall not be taken for public use without just compensation.37 These
limitations are enshrined in no less than the Bill of Rights that guarantees the citizen protection from abuse by
the State.

Consequently, our laws38 require that the State's power of eminent domain shall be exercised through
expropriation proceedings in court. Whenever private property is taken for public use, it becomes the
ministerial duty of the concerned office or agency to initiate expropriation proceedings. By necessary
implication, the filing of a complaint for expropriation is a waiver of State immunity.
110
If the DOTC had correctly followed the regular procedure upon discovering that it had encroached on the
respondents' property, it would have initiated expropriation proceedings instead of insisting on its immunity
from suit. The petitioners would not have had to resort to filing its complaint for reconveyance. As this Court
said in Ministerio:ChanRoblesVirtualawlibrary
It is unthinkable then that precisely because there was a failure to abide by what the law requires, the
government would stand to benefit. It is just as important, if not more so, that there be fidelity to legal norms on
the part of officialdom if the rule of law were to be maintained. It is not too much to say that when the
government takes any property for public use, which is conditioned upon the payment of just
compensation, to be judicially ascertained, it makes manifest that it submits to the jurisdiction of a
court. There is no thought then that the doctrine of immunity from suit could still be appropriately
invoked.39 [Emphasis supplied]
We hold, therefore, that the Department's entry into and taking of possession of the respondents' property
amounted to an implied waiver of its governmental immunity from suit.

We also find no merit in the DOTC's contention that the RTC should not have ordered the reconveyance of the
respondent spouses' property because the property is being used for a vital governmental function, that is, the
operation and maintenance of a safe and efficient communication system.40chanrobleslaw

The exercise of eminent domain requires a genuine necessity to take the property for public use and the
consequent payment of just compensation. The property is evidently being used for a public purpose.
However, we also note that the respondent spouses willingly entered into a lease agreement with Digitel for the
use of the subject properties.

If in the future the factual circumstances should change and the respondents refuse to continue the lease, then
the DOTC may initiate expropriation proceedings. But as matters now stand, the respondents are clearly willing
to lease the property. Therefore, we find no genuine necessity for the DOTC to actually take the property at this
point.

Lastly, we find that the CA erred when it affirmed the RTC's decision without deleting the forfeiture of the
improvements made by the DOTC through Digitel. Contrary to the RTC's findings, the DOTC was not a builder
in bad faith when the improvements were constructed. The CA itself found that the Department's encroachment
over the respondents' properties was a result of a mistaken implementation of the donation from the
municipality of Jose Panganiban.41chanrobleslaw

Good faith consists in the belief of the builder that the land he is building on is his and [of] his ignorance of any
defect or flaw in his title.42 While the DOTC later realized its error and admitted its encroachment over the
respondents' property, there is no evidence that it acted maliciously or in bad faith when the construction was
done.

Article 52743 of the Civil Code presumes good faith. Without proof that the Department's mistake was made in
bad faith, its construction is presumed to have been made in good faith. Therefore, the forfeiture of the
improvements in favor of the respondent spouses is unwarranted.

WHEREFORE, we hereby DENY the petition for lack of merit. The May 20, 2009 decision of the Regional Trial
Court in Civil Case No. 7355, as modified by the March 20, 2013 decision of the Court of Appeals in CA-G.R.
CV No. 93795, is AFFIRMED with further MODIFICATION that the forfeiture of the improvements made by the
DOTC in favor of the respondents is DELETED. No costs.

SO ORDERED.chanRoblesvirtualLawlibrar

EN BANC

G.R. No. 207132, December 06, 2016

111
ASSOCIATION OF MEDICAL CLINICS FOR OVERSEAS WORKERS, INC., (AMCOW), REPRESENTED
HEREIN BY ITS PRESIDENT, DR. ROLANDO VILLOTE, Petitioner, v. GCC APPROVED MEDICAL
CENTERS ASSOCIATION, INC. AND CHRISTIAN CANGCO, Respondents.

G.R. No. 207205

HON. ENRIQUE T. ONA, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF

HEALTH, Petitioner, v. GCC APPROVED MEDICAL CENTERS ASSOCIATION, INC. AND CHRISTIAN E.
CANGCO, Respondents.

DECISION

BRION, J.:

In these consolidated petitions for review on certiorari1 filed under Rule 45 of the Rules of Court, by the
Association of Medical Clinics for Overseas Workers, Inc. (AMCOW) in GR No. 207132, and by Secretary
Enrique T. Ona (Secretary Ona) of the Department of Health (DOH) in GR No. 207205, we resolve the
challenge to the August 10, 2012 decision2 and the April 12, 2013 order3 of the Regional Trial Court (RTC) of
Pasay City, Branch 108, in Sp. Civil Action No. R-PSY-10-04391-CV.4

The August 10, 2012 decision and April 12, 2013 order declared null and void ab initio the August 23,
2010 and November 2, 2010 orders issued by the DOH directing respondent GCC Approved Medical Centers
Association, Inc. (GAMCA) to cease and desist from implementing the referral decking system (these orders
shall be alternately referred to as DOH CDO letters).

I. The Antecedents

On March 8, 2001, the DOH issued Administrative Order No. 5, Series of 20015(AO 5-01) which directed
the decking or equal distribution of migrant workers among the several clinics who are members of
GAMCA.

AO 5-01 was issued to comply with the Gulf Cooperative Countries (GCC) States' requirement that only GCC-
accredited medical clinics/hospitals' examination results will be honored by the GCC States' respective
embassies. It required an OFW applicant to first go to a GAMCA Center which, in turn, will refer the applicant
to a GAMCA clinic or hospital.

Subsequently, the DOH issued AO No. 106, Series of 20026holding in abeyance the implementation of the
referral decking system. The DOH reiterated its directive suspending the referral decking system in AO
No. 159, Series of 2004.7

In 2004, the DOH issued AO No. 167, Series of 20048repealing AO 5-01, reasoning that the referral decking
system did not guarantee the migrant workers' right to safe and quality health service. AO 167-04 pertinently
reads:
WHEREAS, after a meticulous and deliberate study, examination, and consultation about the GAMCA referral
decking system, the DOH believes that its mandate is to protect and promote the health of the Filipino people
by ensuring the rights to safe and quality health service and reliable medical examination results through the
stricter regulation of medical clinics and other health facilities, which the referral decking system neither
assures nor guarantees.

NOW, THEREFORE, for and in consideration of the foregoing, the DOH hereby withdraws, repeals and/or
revokes Administrative Order No. 5, series of 2001, concerning the referral decking system. Hence, all other
administrative issuances, bureau circulars and memoranda related to A.O. No. 5, series of 2001, are hereby
withdrawn, repealed and/revoked accordingly.
112
In Department Memorandum No. 2008-0210,9 dated September 26, 2008, then DOH Secretary Francisco T.
Duque III expressed his concern about the continued implementation of the referral decking system despite the
DOH's prior suspension directives. The DOH directed the "OFW clinics, duly accredited/licensed by the DOH
and/or by the Philippine Health Insurance Corporation (PHILHEALTH) belonging to and identified with GAMCA
x x x to forthwith stop, terminate, withdraw or otherwise end the x x x 'referral decking system.'"10

GAMCA questioned the DOH's Memorandum No. 2008-0210 before the Office of the President (OP). In a
decision11 dated January 14, 2010, the OP nullified Memorandum No. 2008-0210.

On March 8, 2010, Republic Act (RA) No. 1002212lapsed into law without the President's signature. Section
16 of RA No. 10022 amended Section 23 of RA No. 8042, adding two new paragraphs - paragraphs (c) and
(d). The pertinent portions of the amendatory provisions read:
Section 16. Under Section 23 of Republic Act No. 8042, as amended, add new paragraphs (c) and (d) with
their corresponding subparagraphs to read as follows:

(c) Department of Health. - The Department of Health (DOH) shall regulate the activities and operations
of all clinics which conduct medical, physical, optical, dental, psychological and other similar
examinations, hereinafter referred to as health examinations, on Filipino migrant workers as
requirement for their overseas employment. Pursuant to this, the DOH shall ensure that:

(c.1) The fees for the health examinations are regulated, regularly monitored and duly published to ensure that
the said fees are reasonable and not exorbitant;

(c.2) The Filipino migrant worker shall only be required to undergo health examinations when there is
reasonable certainty that he or she will be hired and deployed to the jobsite and only those health
examinations which are absolutely necessary for the type of job applied for or those specifically required by the
foreign employer shall be conducted;

(c.3) No group or groups of medical clinics shall have a monopoly of exclusively conducting health
examinations on migrant workers for certain receiving countries;

(c.4) Every Filipino migrant worker shall have the freedom to choose any of the DOH-accredited or
DOH-operated clinics that will conduct his/her health examinations and that his or her rights as a patient are
respected. The decking practice, which requires an overseas Filipino worker to go first to an office for
registration and then farmed out to a medical clinic located elsewhere, shall not be allowed;

(c.5) Within a period of three (3) years from the effectivity of this Act, all DOH regional and/or provincial
hospitals shall establish and operate clinics that can serve the health examination requirements of Filipino
migrant workers to provide them easy access to such clinics all over the country and lessen their transportation
and lodging expenses; and

(c.6) All DOH-accredited medical clinics, including the DOH operated clinics, conducting health examinations
for Filipino migrant workers shall observe the same standard operating procedures and shall comply with
internationally accepted standards in their operations to conform with the requirements of receiving countries
or of foreign employers/principals.

Any Foreign employer who does not honor the results of valid health examinations conducted by a DOH-
accredited or DOH-operated clinic shall be temporarily disqualified from participating in the overseas
employment program, pursuant to POEA rules and regulations.

In case an overseas Filipino worker is found to be not medically fit upon his/her immediate arrival in the country
of destination, the medical clinic that conducted the health examinations of such overseas Filipino worker shall
pay for his or her repatriation back to the Philippines and the cost of deployment of such worker.
113
Any government official or employee who violates any provision of this subsection shall be removed or
dismissed from service with disqualification to hold any appointive public office for five (5) years. Such penalty
is without prejudice to any other liability which he or she may have incurred under existing laws, rules or
regulations. [emphases and underscoring supplied]
On August 13, 2010, the Implementing Rules and Regulations13 (IRR) of RA No. 8042, as amended by RA
No. 10022, took effect.

Pursuant to Section 16 of RA No. 10022, the DOH, through its August 23, 2010 letter-order,14directed
GAMCA to cease and desist from implementing the referral decking system and to wrap up their
operations within three (3) days from receipt thereof. GAMCA received its copy of the August 23, 2010 letter-
order on August 25, 2010.

On August 26, 2010, GAMCA filed with the RTC of Pasig City a petition for certiorari and prohibition with prayer
for a writ of preliminary injunction and/or temporary restraining order (GAMCA's petition).15 It assailed: (1) the
DOH's August 23, 2010 letter-order on the ground of grave abuse of discretion; and (2) paragraphs c.3 and
c.4, Section 16 of RA No. 10022, as well as Section 1 (c) and (d), Rule XI of the IRR, as unconstitutional.

Meanwhile, the DOH reiterated - through its November 2, 2010 order - its directive that GAMCA cease and
desist from implementing the referral decking system.16

On November 23, 2010, AMCOW filed an urgent motion for leave to intervene and to file an opposition-in-
intervention, attaching its opposition-in-intervention to its motion.17 In the hearing conducted the following day,
November 24, 2010, the RTC granted AMCOW's intervention; DOH and GAMCA did not oppose AMCOW's
motion.18 AMCOW subsequently paid the docket fees and submitted its memorandum.19

In an order20 dated August 1, 2011, the RTC issued a writ of preliminary injunction21 directing the DOH to cease
and desist from implementing its August 23, 2010 and November 2, 2010 orders. The RTC likewise issued an
order denying the motion for inhibition/disqualification filed by AMCOW.

On August 18, 2011, the DOH sought reconsideration of the RTC's August 1, 2011 order.

The assailed RTC rulings

In its August 10, 2012 decision,22 the RTC granted GAMCA's certiorari petition and declared null and void ab
initio the DOH CDO letters. It also issued a writ of prohibition directing "the DOH Secretary and all persons
acting on his behalf to cease and desist from implementing the assailed Orders against the [GAMCA]."

The RTC upheld the constitutionality of Section 16 of RA No. 10022, amending Section 23 of RA No.
8042, but ruled that Section 16 of RA No. 10022 does not apply to GAMCA.
The RTC reasoned out that the prohibition against the referral decking system under Section 16 of RA No.
10022 must be interpreted as applying only to clinics that conduct health examination on migrant workers
bound for countries that do not require the referral decking system for the issuance of visas to job applicants.

It noted that the referral decking system is part of the application procedure in obtaining visas to enter the GCC
States, a procedure made in the exercise of the sovereign power of the GCC States to protect their nationals
from health hazards, and of their diplomatic power to regulate and screen entrants to their territories. Under the
principle of sovereign equality and independence of States, the Philippines cannot interfere with this system
and, in fact, must respect the visa-granting procedures of foreign states in the same way that they respect our
immigration procedures.

Moreover, to restrain GAMCA which is a mere adjunct of HMC, the agent of GCC States, is to restrain the GCC
States themselves. To the RTC, the Congress was aware of this limitation, pursuant to the generally accepted
principles of international law under Article II, Section 2 of the 1987 Constitution, when it enacted Section 16 of
RA No. 10022.
114
The DOH and AMCOW separately sought reconsideration of the RTC's August 10, 2012 decision, which
motions the RTC denied.23 The DOH and AMCOW separately filed the present Rule 45 petitions.

On August 24, 2013, AMCOW filed a motion for consolidation24 of the two petitions; the Court granted this
motion and ordered the consolidation of the two petitions in a resolution dated September 17, 2013.25cralawred

In the resolution26 of April 14, 2015, the Court denied: (1) GAMCA's most urgent motion for issuance of
temporary restraining order/writ of preliminary injunction/status quo ante order (with request for immediate
inclusion in the Honorable Court's agenda of March 3, 2015, its motion dated March 2, 2015);27 and (2) the
most urgent reiterating motion for issuance of temporary restraining order/writ of preliminary injunction/status
quo ante order dated March 11, 2015.28

The Court also suspended the implementation of the permanent injunction issued by the RTC of Pasay City,
Branch 108 in its August 10, 2012 decision.

II. The Issues

The consolidated cases before us present the following issues:

First, whether the Regional Trial Court legally erred in giving due course to the petition for certiorari and
prohibition against the DOH CDO letters;
Second, whether the DOH CDO letters prohibiting GAMCA from implementing the referral decking system
embodied under Section 16 of Republic Act No. 10022 violates Section 3, Article II of the 1987 Constitution for
being an undue taking of property;

Third, whether the application of Section 16 of Republic Act No.10022 to the GAMCA violates the international
customary principles of sovereign independence and equality.

III. Our Ruling

A. The RTC legally erred when it gave due course to GAMCA's petition for certiorari and prohibition.
The present case reached us through an appeal by certiorari (pursuant to Rule 45) of an RTC ruling, assailing
the decision based solely on questions of law. The RTC decision, on the other hand, involves the grant of the
petitions for certiorari and prohibition (pursuant to Rule 65) assailing the DOH CDO letters for grave abuse of
discretion.

The question before us asks whether the RTC made a reversible error of law when it issued writs
of certiorari and prohibition against the DOH CDO letters.

AMCOW questions the means by which GAMCA raised the issue of the legality of RA No. 10022 before the
RTC. AMCOW posits that GAMCA availed of an improper remedy, as certiorari and prohibition lie only against
quasi-judicial acts, and quasi-judicial and ministerial acts, respectively. Since the disputed cease and desist
order is neither, the RTC should have dismissed the petition outright for being an improper remedy.

We agree with the petitioners' assertion that the RTC erred when it gave due course to GAMCA's petition
for certiorari and prohibition, but we do so for different reasons.

1. Certiorari under Rules of Court and under the courts' expanded jurisdiction under Art VIII, Section 1
of the Constitution, as recognized by jurisprudence.

A.1.a. The Current Certiorari Situation

The use of petitions for certiorari and prohibition under Rule 65 is a remedy that judiciaries have used long
before our Rules of Court existed.29 As footnoted below, these writs - now recognized and regulated as
remedies under Rule 65 of our Rules of Court - have been characterized a "supervisory writs" used by superior
courts to keep lower courts within the confines of their granted jurisdictions, thereby ensuring orderliness in
lower courts' rulings.
115

We confirmed this characterization in Madrigal Transport v. Lapanday Holdings Corporation,30 when we held
that a writ is founded on the supervisory jurisdiction of appellate courts over inferior courts, and is issued to
keep the latter within the bounds of their jurisdiction. Thus, the writ corrects only errors of jurisdiction of judicial
and quasi-judicial bodies, and cannot be used to correct errors of law or fact. For these mistakes of judgment,
the appropriate remedy is an appeal.31

This situation changed after 1987 when the new Constitution "expanded" the scope of judicial power by
providing that -
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of
the Government. (italics supplied)32
In Francisco v. The House of Representatives,33 we recognized that this expanded jurisdiction was meant "to
ensure the potency of the power of judicial review to curb grave abuse of discretion by 'any branch or
instrumentalities of government.'" Thus, the second paragraph of Article VIII, Section 1 engraves, for the first
time in its history, into black letter law the "expanded certiorari jurisdiction" of this Court, whose nature and
purpose had been provided in the sponsorship speech of its proponent, former Chief Justice Constitutional
Commissioner Roberto Concepcion:
xxxx

The first section starts with a sentence copied from former

Constitutions. It says:
The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by
law.
I suppose nobody can question it.
The next provision is new in our constitutional law. I will read it first and explain.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
government.

Fellow Members of this Commission, this is actually a product of our experience during martial law. As a matter
of fact, it has some antecedents in the past, but the role of the judiciary during the deposed regime was marred
considerably by the circumstance that in a number of cases against the government, which then had no legal
defense at all, the solicitor general set up the defense of political question and got away with it. As a
consequence, certain principles concerning particularly the writ of habeas corpus, that is, the authority of
courts to order the release of political detainees, and other matters related to the operation and effect of martial
law failed because the government set up the defense of political question. And the Supreme Court said: "Well,
since it is political, we have no authority to pass upon it." The Committee on the Judiciary feels that this was
not a proper solution of the questions involved. It did not merely request an encroachment upon the rights of
the people, but it, in effect, encouraged further violations thereof during the martial law regime. x x x

xxxx

Briefly stated, courts of justice determine the limits of power of the agencies and offices of the government as
well as those of its officers. In other words, the judiciary is the final arbiter on the question whether or not a
branch of government or any of its officials has acted without jurisdiction or in excess of jurisdiction, or so
capriciously as to constitute an abuse of discretion amounting to excess of jurisdiction or lack of jurisdiction.
This is not only a judicial power but a duty to pass judgment on matters of this nature.

This is the background of paragraph 2 of Section 1, which means that the courts cannot hereafter evade the
116
duty to settle matters of this nature, by claiming that such matters constitute a political question.34 (italics in the
original; emphasis and underscoring supplied)
Meanwhile that no specific procedural rule has been promulgated to enforce this "expanded" constitutional
definition of judicial power and because of the commonality of "grave abuse of discretion" as a ground for
review under Rule 65 and the courts expanded jurisdiction, the Supreme Court based on its power to relax its
rules35 allowed Rule 65 to be used as the medium for petitions invoking the courts' expanded jurisdiction based
on its power to relax its Rules.36 This is however an ad hoc approach that does not fully consider the
accompanying implications, among them, that Rule 65 is an essentially distinct remedy that cannot simply be
bodily lifted for application under the judicial power's expanded mode. The terms of Rule 65, too, are not fully
aligned with what the Court's expanded jurisdiction signifies and requires.37

On the basis of almost thirty years' experience with the courts' expanded jurisdiction, the Court should now
fully recognize the attendant distinctions and should be aware that the continued use of Rule 65 on an ad
hoc basis as the operational remedy in implementing its expanded jurisdiction may, in the longer term, result in
problems of uneven, misguided, or even incorrect application of the courts' expanded mandate.

The present case is a prime example of the misguided reading that may take place in constitutional litigation:
the procedural issues raised apparently spring from the lack of proper understanding of what a petition
for certiorari assails under the traditional and expanded modes, and the impact of these distinctions in
complying with the procedural requirements for a valid petition.

2. The Basic Distinctions

A.2.a. Actual Case or Controversy
Basic in the exercise of judicial power whether under the traditional or in the expanded setting - is the presence
of an actual case or controversy. For a dispute to be justiciable, a legally demandable and enforceable right
must exist as basis, and must be shown to have been violated.38

Whether a case actually exists depends on the pleaded allegations, as affected by the elements of standing
(translated in civil actions as the status of being a "real-party-in-interest," in criminal actions as
"offended party" and in special proceedings as "interested party"),39ripeness,40prematurity, and
the moot and academic principle that likewise interact with one another. These elements and their
interactions are discussed m greater detail below.

The Court's expanded jurisdiction - itself an exercise of judicial power - does not do away with the actual
case or controversy requirement in presenting a constitutional issue, but effectively simplifies this requirement
by merely requiring a prima facie showing of grave abuse of discretion in the assailed governmental act.

A.2.b. Actions Correctable by Certiorari

A basic feature of the expanded jurisdiction under the constitutional definition of judicial power, is the authority
and command for the courts to act on petitions involving the commission by any branch or instrumentality of
government of grave abuse of discretion amounting to lack or excess of jurisdiction.

This command distinctly contrasts with the terms of Rule 65 which confines court certiorari action solely to the
review of judicial and quasi-judicial acts.41 These differing features create very basic distinctions that must
necessarily result in differences in the application of remedies.

While actions by lower courts do not pose a significant problem because they are necessarily acting judicially
when they adjudicate, a critical question comes up for the court acting on certiorari petitions when
governmental agencies are involved - under what capacity does the agency act?

This is a critical question as the circumstances of the present case show. When the government entity acts
quasi-judicially, the petition for certiorari challenging the action falls under Rule 65; in other instances, the
petition must be filed based on the courts' expanded jurisdiction.
117
A.2.c. Grave Abuse of Discretion
Another distinction, a seeming one as explained below, relates to the cited ground of a certiorari petition under
Rule 65 which speaks of lack or excess of jurisdiction or grave abuse of discretion amounting to lack or excess
of jurisdiction, as against the remedy under the courts' expanded jurisdiction which expressly only
mentions grave abuse of discretion amounting to lack or excess of jurisdiction.

This distinction is apparently not legally significant when it is considered that action outside of or in excess of
the granted authority necessarily involves action with grave abuse of discretion: no discretion is allowed in
areas outside of an agency's granted authority so that any such action would be a gravely abusive exercise of
power. The constitutional grant of power, too, pointedly addresses grave abuse of discretion when it amounts
to lack or excess of jurisdiction,42 thus establishing that the presence of jurisdiction is the critical element;
failure to comply with this requirement necessarily leads to the certiorari petition's immediate dismissal.43

As an added observation on a point that our jurisprudence has not fully explored, the result of the action by a
governmental entity (e.g., a law or an executive order) can be distinguished from the perspective of its legality
as tested against the terms of the Constitution or of another law (where subordinate action like an executive
order is involved), vis-a-vis the legality of the resulting action where grave abuse of discretion attended the
governmental action or the exercise of the governmental function.

In the former, the conclusion may be plain illegality or legal error that characterized the law or exec order (as
tested, for example, under the established rules of interpretation); no consideration is made of how the
governmental entity exercised its function. In the latter case, on the other hand, it is the governmental entity's
exercise of its function that is examined and adjudged independently of the result, with impact on the legality of
the result of the gravely abusive action.

Where the dispute in a case relates to plain legal error, ordinary court action and traditional mode are called for
and this must be filed in the lower courts based on rules of jurisdiction while observing the hierarchy of courts.

Where grave abuse of discretion is alleged to be involved, the expanded jurisdiction is brought into play based
on the express wording of the Constitution and constitutional implications may be involved (such as grave
abuse of discretion because of plain oppression or discrimination), but this must likewise be filed with the
lowest court of concurrent jurisdiction, unless the court highest in the hierarchy grants exemption. Note that in
the absence of express rules, it is only the highest court, the Supreme Court, that can only grant exemptions.

From these perspectives, the use of grave abuse of discretion can spell the difference in deciding whether a
case filed directly with the Supreme Court has been properly filed.

A.2.d. Exhaustion of Available Remedies

A basic requirement under Rule 65 is that there be "no other plain, speedy and adequate remedy found in
law,"44 which requirement the expanded jurisdiction provision does not expressly carry. Nevertheless, this
requirement is not a significant distinction in using the remedy of certiorari under the traditional and the
expanded modes. The doctrine of exhaustion of administrative remedies applies to a petition for certiorari,
regardless of the act of the administrative agency concerned, i.e., whether the act concerns a quasi-judicial, or
quasi-legislative function, or is purely regulatory.45

Consider in this regard that once an administrative agency has been empowered by Congress to undertake a
sovereign function, the agency should be allowed to perform its function to the full extent that the law grants.
This full extent covers the authority of superior officers in the administrative agencies to correct the actions of
subordinates, or for collegial bodies to reconsider their own decisions on a motion for reconsideration.
Premature judicial intervention would interfere with this administrative mandate, leaving administrative action
incomplete; if allowed, such premature judicial action through a writ of certiorari, would be a usurpation that
violates the separation of powers principle that underlies our Constitution.46
118
In every case, remedies within the agency's administrative process must be exhausted before external
remedies can be applied. Thus, even if a governmental entity may have committed a grave abuse of discretion,
litigants should, as a rule, first ask reconsideration from the body itself, or a review thereof before the agency
concerned. This step ensures that by the time the grave abuse of discretion issue reaches the court, the
administrative agency concerned would have fully exercised its jurisdiction and the court can focus its attention
on the questions of law presented before it.

Additionally, the failure to exhaust administrative remedies affects the ripeness to adjudicate the
constitutionality of a governmental act, which in turn affects the existence of the need for an actual
case or controversy for the courts to exercise their power of judicial review.47 The need for ripeness - an
aspect of the timing of a case or controversy does not change regardless of whether the issue of
constitutionality reaches the Court through the traditional means, or through the Court's expanded jurisdiction.
In fact, separately from ripeness, one other concept pertaining to judicial review is intrinsically connected to it;
the concept of a case being moot and academic.48

Both these concepts relate to the timing of the presentation of a controversy before the Court ripeness relates
to its prematurity, while mootness relates to a belated or unnecessary judgment on the issues. The Court
cannot preempt the actions of the parties, and neither should it (as a rule) render judgment after the issue has
already been resolved by or through external developments.

The importance of timing in the exercise of judicial review highlights and reinforces the need for an actual case
or controversy an act that may violate a party's right. Without any completed action or a concrete threat of
injury to the petitioning party, the act is not yet ripe for adjudication. It is merely a hypothetical problem. The
challenged act must have been accomplished or performed by either branch or instrumentality of government
before a court may come into the picture, and the petitioner must allege the existence of an immediate or
threatened injury to itself as a result of the challenged action.

In these lights, a constitutional challenge, whether presented through the traditional route or through the
Court's expanded jurisdiction, requires compliance with the ripeness requirement. In the case of administrative
acts, ripeness manifests itself through compliance with the doctrine of exhaustion of administrative remedies.

In like manner, an issue that was once ripe for resolution but whose resolution, since then, has been rendered
unnecessary, needs no resolution from the Court, as it presents no actual case or controversy and likewise
merely presents a hypothetical problem. In simpler terms, a case is moot and academic when an event
supervenes to render a judgment over the issues unnecessary and superfluous.

Without the element of ripeness or a showing that the presented issue is moot and academic, petitions
challenging the constitutionality of a law or governmental act are vulnerable to dismissal.

Not to be forgotten is that jurisprudence also prohibits litigants from immediately seeking judicial relief without
first exhausting the available administrative remedies for practical reasons.49

From the perspective of practicality, immediate resort to the courts on issues that are within the competence of
administrative agencies to resolve, would unnecessarily clog the courts' dockets. These issues, too, usually
involve technical considerations that are within the agency's specific competence and which, for the courts,
would require additional time and resources to study and consider.50 Of course, the Supreme Court cannot
really avoid the issues that a petition for certiorari, filed with the lower courts may present; the case may be
bound ultimately to reach the Court, albeit as an appeal from the rulings of the lower courts.

3. Situations Where a Petition for Certiorari May Be Used

There are two distinct situations where a writ of certiorari or prohibition may be sought. Each situation carries
requirements, peculiar to the nature of each situation, that lead to distinctions that should be recognized in the
use of certiorari under Rule 65 and under the courts' expanded jurisdiction.
119

The two situations differ in the type of questions raised. The first is the constitutional situation where the
constitutionality of acts are questioned. The second is the non-constitutional situation where acts amounting
to grave abuse of discretion are challenged without raising constitutional questions or violations.

The process of questioning the constitutionality of a governmental action provides a notable area of
comparison between the use of certiorari in the traditional and the expanded modes.

Under the traditional mode, plaintiffs question the constitutionality of a governmental action through the
cases they file before the lower courts; the defendants may likewise do so when they interpose the defense of
unconstitutionality of the law under which they are being sued. A petition for declaratory relief may also be used
to question the constitutionality or application of a legislative (or quasi-legislative) act before the court.51

For quasi-judicial actions, on the other hand, certiorari is an available remedy, as acts or exercise of functions
that violate the Constitution are necessarily committed with grave abuse of discretion for being acts undertaken
outside the contemplation of the Constitution. Under both remedies, the petitioners should comply with the
traditional requirements of judicial review, discussed below.52 In both cases, the decisions of these courts reach
the Court through an appeal by certiorari under Rule 45.

In contrast, existing Court rulings in the exercise of its expanded jurisdiction have allowed the direct filing of
petitions for certiorari and prohibition with the Court to question, for grave abuse of discretion, actions or the
exercise of a function that violate the Constitution.53 The governmental action may be questioned regardless of
whether it is quasi-judicial, quasi-legislative, or administrative in nature. The Court's expanded jurisdiction does
not do away with the actual case or controversy requirement for presenting a constitutional issue, but
effectively simplifies this requirement by merely requiring a prima facie showing of grave abuse of discretion in
the exercise of the governmental act.54

To return to judicial review heretofore mentioned, in constitutional cases where the question of constitutionality
of a governmental action is raised, the judicial power the courts exercise is likewise identified as the power of
judicial review - the power to review the constitutionality of the actions of other branches of government.55 As
a rule, as required by the hierarchy of courts principle, these cases are filed with the lowest court with
jurisdiction over the matter. The judicial review that the courts undertake requires:

1. there be an actual case or controversy calling for the exercise of judicial power;
2. the person challenging the act must have "Standing" to challenge; he must have a personal and
substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its
enforcement;
3. the question of constitutionality must be raised at the earliest possible opportunity; and
4. the issue of constitutionality must be the very lis mota of the case.56

The lower court's decision under the constitutional situation reaches the Supreme Court through the appeal
process, interestingly, through a petition for review on certiorari under Rule 45 of the Rules of Court.

In the non-constitutional situation, the same requirements essentially apply, less the requirements specific
to the constitutional issues. In particular, there must be an actual case or controversy and the compliance with
requirements of standing, as affected by the hierarchy of courts, exhaustion of remedies, ripeness, prematurity,
and the moot and academic principles.

A.3.a. The "Standing" Requirement

Under both situations, the party bringing suit must have the necessary "standing." This means that this party
has, in its favor, the demandable and enforceable right or interest giving rise to a justiciable controversy after
the right is violated by the offending party.
120
The necessity of a person's standing to sue derives from the very definition of judicial power. Judicial power
includes the duty of the courts to settle actual controversies involving rights which are legally demandable and
enforceable. Necessarily, the person availing of a judicial remedy must show that he possesses a legal interest
or right to it, otherwise, the issue presented would be purely hypothetical and academic. This concept has
been translated into the requirement to have "standing" in judicial review,57or to be considered as a "real-party-
in-interest" in civil actions,58 as the "offended party" in criminal actions59 and the "interested party" in special
proceedings.60

While the Court follows these terms closely in both non-constitutional cases and constitutional cases under the
traditional mode, it has relaxed the rule in constitutional cases harrdled under the expanded jurisdiction mode.
in the latter case, a prima facie showing that the questioned governmental act violated the Constitution,
effectively disputably shows an injury to the sovereign Filipino nation who approved the Constitution and
endowed it with authority, such that the challenged act may be questioned by any Philippine citizen before the
Supreme Court.61 In this manner, the "standing" requirement is relaxed compared with the standard of personal
stake or injury that the traditional petition requires.

The relaxation of the standing requirement has likewise been achieved through the application of the
"transcendental importance doctrine" under the traditional mode for constitutional cases.62 (Under the
traditional mode, "transcendental importance" not only relaxes the standing requirement, but also allows
immediate access to this Court, thus exempting the petitioner from complying with the hierarchy of courts
requirement.)63

More importantly perhaps, the prima facie showing of grave abuse of discretion in constitutional cases also
implies that the injury alleged is actual or imminent, and not merely hypothetical.

Through this approach, the Court's attention is directed towards the existence of an actual case or controversy
- that is, whether the government indeed violated the Constitution to the detriment of the Filipino people without
the distractions of determining the existence of transcendental importance indicators unrelated to the dispute
and which do not at all determine whether the Court properly exercises its power of judicial review.

Parenthetically, in the traditional mode, the determination of the transcendental importance of the issue
presented,64 aside from simply relaxing the standing requirement, may result in the dilution of the actual case
or controversy element because of the inextricable link between standing and the existence of an actual case
or controversy.

Consider, in this regard, that an actual case or controversy that calls for the exercise of judicial power
necessarily requires that the party presenting it possesses the standing to mount a challenge to a
governmental act. A case or controversy exists when there is an actual dispute between parties over their legal
rights, which remains in conflict at the time the dispute is presented before the court.65Standing, on the other
hand, involves a personal and substantial interest in the case because the petitioner has sustained, or will
sustain, direct injury as a result of the violation of its right.66

With the element of "standing" (or the petitioner's personal or substantial stake or interest in the case) relaxed,
the practical effect is to dilute the need to show that an immediate actual dispute over legal rights did indeed
take place and is now the subject of the action before the court.67

In both the traditional and the expanded modes, this relaxation carries a ripple effect under established
jurisprudential rulings,68 affecting not only the actual case or controversy requirement, but compliance with the
doctrine of hierarchy of courts, discussed in greater detail below.

A.3.b. The Hierarchy of Courts Principle

Another requirement that a certiorari petition carries, springs from the principle of "hierarchy of courts" which
recognizes the various levels of courts in the country as they are established under the Constitution and by
121
law, their ranking and effect of their rulings in relation with one another, and how these different levels of court
interact with one another.69 Since courts are established and given their defined jurisdictions by law, the
hierarchy of the different levels of courts should leave very little opening for flexibility (and potential legal
questions), but for the fact that the law creates courts at different and defined levels but with concurrent
jurisdictions.

The Constitution itself has partially determined the judicial hierarchy in the Philippine legal system by
designating the Supreme Court as the highest court with irreducible powers; its rulings serve as precedents
that other courts must follow70 because they form part of the law of the land.71 As a rule, the Supreme Court is
not a trial court and rules only on questions of law, in contrast with the Court of Appeals and other intermediate
courts72 which rule on both questions of law and of fact. At the lowest level of courts are the municipal and the
regional trial courts which handle questions of fact and law at the first instance according to the jurisdiction
granted to them by law.

Petitions for certiorari and prohibition fall under the concurrent jurisdiction of the regional trial courts and the
higher courts, all the way up to the Supreme Court. As a general rule, under the hierarchy of courts principle,
the petition must be brought to the lowest court with jurisdiction;73 the petition brought to the higher courts may
be dismissed based on the hierarchy principle. Cases, of course, may ultimately reach the Supreme Court
through the medium of an appeal.

The recognition of exceptions to the general rule is provided by the Supreme Court through jurisprudence, i.e.,
through the cases that recognized the propriety of filing cases directly with the Supreme Court. This is possible
as the Supreme Court has the authority to relax the application of its own rules.74

As observed above, this relaxation waters down other principles affecting the remedy of certiorari. While the
relaxation may result in greater and closer supervision by the Court over the lower courts and quasi-judicial
bodies under Rule 65, the effect may not always be salutary in the long term when it is considered that this
may affect the constitutional standards for the exercise of judicial power, particularly the existence of an actual
case or controversy.

The "transcendental importance" standard, in particular, is vague, open-ended and value-laden, and should be
limited in its use to exemptions from the application of the hierarchy of courts principle. It should not carry any
ripple effect on the constitutional requirement for the presence of an actual case or controversy.

4. The petition for certiorari and prohibition against the DOH Letter was filed before the wrong court.

In the present case, the act alleged to be unconstitutional refers to the cease and desist order that the DOH
issued against GAMCA's referral decking system. Its constitutionality was questioned through a petition
for certiorari and prohibition before the RTC. The case reached this Court through a Rule 45 appeal
by certiorari under the traditional route.

In using a petition for certiorari and prohibition to assail the DOHCDO letters, GAMCA committed
several procedural lapses that rendered its petition readily dismissible by the RTC. Not only did the petitioner
present a premature challenge against an administrative act; it also committed the grave jurisdictional
error of filing the petition before the wrong court.

A.4.a. The DOH CDO letters were issued in the exercise of the DOH's quasi-judicial functions, and
could be assailed through Rule 65 on certiorari and prohibition.

A cease and desist order is quasi-judicial in nature, as it applies a legislative policy to an individual or group
within the coverage of the law containing the policy.

The Court, in Municipal Council of Lemery, Batangas v. Provincial Board of Batangas,75 recognized the
difficulty of d fining the precise demarcation line between what are judicial and what are administrative or
122
ministerial functions, as the exercise of judicial functions may involve the performance of legislative or
administrative duties, and the performance of administrative or ministerial duties may, to some extent, involve
the exercise of functions judicial in character. Thus, the Court held that the nature of the act to be
performed, rather than of the office, board, or body which performs it, should determine whether or not
an action is in the discharge of a judicial or a quasi-judicial function.76

Generally, the exercise of judicial functions involves the determination of what the law is, and what the legal
rights of parties are under this law with respect to a matter in controversy. Whenever an officer is clothed with
this authority and undertakes to determine those questions, he acts judicially.77

In the administrative realm, a government officer or body exercises a quasi-judicial function when it hears and
determines questions of fact to which the legislative policy is to apply, and decide, based on the law's
standards, matters relating to the enforcement and administration of the law. 78

The DOH CDO letter directed GAMCA to cease and desist from engaging in the referral decking system
practice within three days from receipt of the letter. By issuing this CDO letter implementing Section 16 of RA
No. 10022, the DOH (1) made the finding of fact that GAMCA implements the referral decking system, and (2)
applied Section 16 of RA No. 10022, to conclude that GAMCA's practice is prohibited by law and should be
stopped.

From this perspective, the DOH acted in a quasi-judicial capacity: its CDO letter determined a question of fact,
and applied the legislative policy prohibiting the referral decking system practice.

Notably, cease and desist orders have been described and treated as quasi-judicial acts in past cases, and
had even been described as similar to the remedy of injunction granted by the courts.79

A.4.b. The petitions for certiorari and prohibition against the DOH CDO letters fall within the
jurisdiction of the Court of Appeals.

Since the CDO Letter was a quasi-judicial act, the manner by which GAMCA assailed it before the courts of
law had been erroneous; the RTC should not have entertained GAMCA's petition.

First, acts or omissions by quasi-judicial agencies, regardless of whether the remedy involves a Rule 43
appeal or a Rule 65 petition for certiorari, is cognizable by the Court of Appeals. In particular, Section 4, Rule
65 of the Rules of Court provides:
Section 4. When and where petition filed. The petition shall be filed not later than sixty (60) days from notice of
the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such
motion is required or not, the sixty (60) day period shall be counted from notice of the denial of said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a
corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area
as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid
of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves the
acts or omissions of a quasi-judicial agency, unless otherwise provided by law or these Rules, the
petition shall be filed in and cognizable only by the Court of Appeals. (emphasis, italics, and underscoring
supplied)
Since the DOH is part of the Executive Department and has acted in its quasi-judicial capacity, the petition
challenging its CDO letter should have been filed before the Court of Appeals. The RTC thus did not have
jurisdiction over the subject matter of the petitions and erred in giving due course to the petition
for certiorari and prohibition against the DOH CDO letters. In procedural terms, petitions for certiorari and
prohibition against a government agency are remedies avaiJable to assail its quasi-judicial acts, and should
thus have been filed before the CA.

The provision in Section 4, Rule 65 requiring that certiorari petitions challenging quasi-judicial acts to be filed
123
with the CA is in full accord with Section 9 of Batas Pambansa Blg. 12980 on the same point. Section 9
provides:
Section 9. Jurisdiction.- The Court of Appeals shall exercise:

1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo
warranto, and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction;

xxxx

3. Exclusive appellate jurisdiction over all final judgments, resolutions, orders or awards of Regional
Trial Courts and quasi-judicial agencies, instrumentalities, boards or commission, including the Securities
and Exchange Commission, the Social Security Commission, the Employees Compensation Commission and
the Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as
amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph 4 of the
fourth paragraph of Section 17 of the Judiciary Act of 1948.

xxxx

(emphases, italics, and underscoring supplied)

Thus, by law and by Supreme Court Rules, the CA is the court with the exclusive original jurisdiction to
entertain petitions for certiorari and prohibition against quasi-judicial agencies. In short, GAMCA filed its
remedy with the wrong court.

A.4.c The petitions for certiorari and prohibition against the DOH CDO letters were premature
challenges - they failed to comply with the requirement that there be "no other plain, speedy and
adequate remedy" and with the doctrine of exhaustion of administrative remedies.

Second, the Regional Trial Court of Pasay City unduly disregarded the requirements that there be "no other
plain, speedy and adequate remedy at law" and the doctrine of exhaustion of administrative remedies, when it
gave due course to the certiorari and prohibition petition against the DOH's CDO.

Under Chapter 8, Book IV of Executive Order (EO) No. 292,81 series of 1987, the DOH Secretary "shall have
supervision and control over the bureaus, offices, and agencies under him"82 and "shall have authority over
and responsibility for x x x operation" of the Department.

Section 1, Chapter 1, Title I, Book III of EO No. 292 in relation with Article VII, Sections 1 and 17 of the
Constitution,83 on the other hand, provides that the "President shall have control of all the executive
departments, bureaus, and offices."

These provisions both signify that remedies internal to the Executive Branch exist before resorting to judicial
remedies: GAMCA could ask the DOH Secretary to reconsider or clarify its letter-order, after which it could
appeal, should the ruling be unfavorable, to the Office of the President.

Significantly, this was what GAMCA did in the past when the DOH issued Memorandum Order No. 2008-0210
that prohibited the referral decking system. GAMCA then asked for the DOH Secretary's reconsideration, and
subsequently appealed the DOH's unfavorable decision with the Office of the President. The OP then reversed
Memorandum Order No. 2008-0210 and allowed the referral decking system to continue.

That GAMCA had earlier taken this course indicates that it was not unaware of the administrative remedies
available to it; it simply opted to disregard the doctrine of exhaustion of administrative remedies and the
requirement that there be no other plain, speedy, and adequate remedy in law when it immediately filed its
petition for certiorari with the RTC.

This blatant disregard of the Rule 65 requirements clearly places GAMCA's petition outside the exceptions that
124
we recognized in the past in relaxing strict compliance with the exhaustion of administrative remedies
requirement.

Jurisprudence84 shows that this Court never hesitated in the past in relaxing the application of the rules of
procedure to accommodate exceptional circumstances when their strict application would result in injustice.
These instances, founded as they are on equitable considerations, do not include the undue disreiard of
administrative remedies, particularly when they are readily available.85

A.4.d. The petitions for certiorari and prohibition against the DOH CDO letters should have been
dismissed outright, as Rule 65 Petitions for Certiorari and Prohibition are extraordinary remedies given
due course only upon compliance with the formal and substantive requirements.

Note, at this point, that Rule 65 petitions for certiorari and prohibition are discretionary writs, and that the
handling court possesses the authority to dismiss them outright for failure to comply with the form and
substance requirements. Section 6, Rule 65 of the Rules of Court in this regard provides:
Section 6. Order to comment. - If the petition is sufficient in form and substance to justify suclr process,
the court shall issue an order requiring the respondent or respondents to comment on the petition within ten
(10) days from receipt of a copy thereof. Such order shall be served on the respondents in such manner as the
court may direct together with a copy of the petition and any annexes thereto. (emphasis, italics, and
underscoring supplied)
Thus, even before requiring the DOH to comment, the RTC could have assessed the petition for certiorariand
prohibition for its compliance with the Rule 65 requirements. At that point, the petition for certiorariand
prohibition should have been dismissed outright, for failing to comply with Section 1 and Section 4 of Rule
65. When the court instead took cognizance of the petition, it acted on a matter outside its jurisdiction.

Consequently, the RTC's resulting judgment is void and carries no legal effect. The decision exempting
GAMCA from the application of the referral decking system should equally have no legal effect.

Noncompliance with the Section 1, Rule 65 requirement that there be no other plain, speedy, and adequate
remedy in law, on the other hand, is more than just a pro-forma requirement in the present case. Since the
petitions for certiorari and prohibition challenge a governmental act - i.e. action under the DOH CDO letters, as
well as the validity of the instruments under which these letters were issued - compliance with Section 1, Rule
65 and the doctrine of exhaustion of administrative remedies that judicial review requires is also mandatory. To
recall a previous discussion, the exhaustion of administrative remedies is also an aspect of ripeness in
deciding a constitutional issue.

Thus, GAMCA's disregard of the Rules of Court not only renders the petition dismissible for failure to first
exhaust administrative remedies; the constitutional issues GAMCA posed before the RTC were not also ripe
for adjudication.

5. The Regional Trial Court erred in finding grave abuse of discretion on the part of the DOH's issuance
of the DOH CDO letters.

On the merits, we find that the RTC of Pasay reversibly erred in law when it held that the DOH acted with
grave abuse of discretion m prohibiting GAMCA from implementing the referral decking system.

In exempting GAMCA from the referral decking system that RA No. 10022 prohibits, the RTC of Pasay City
noted that the regulation per se was not unconstitutional, but its application to GAMCA would violate the
principle of sovereign equality and independence.

While we agree with the RTC's ultimate conclusion upholding the constitutionality of the prohibition against the
referral decking system under RA No. 10022, our agreement proceeds from another reason; we disagree that
the prohibition does not apply to GAMCA and with the consequent ruling nullifying the DOH's CDO Letter.
125
A.5.a. The prohibition against the referral decking system under Section 16, RA No. 10022, is a valid
exercise of police power.

In its comment, GAMCA asserts that implementing the prohibition against the referral decking system would
amount to an undue taking of property that violates Article II, Section 2 of the 1987 Constitution.

It submits that the Securities and Exchange Commission had in fact approved its Articles of Incorporation and
Bylaws that embody the referral decking system; thus, the DOH cannot validly prohibit the implementation of
this system.

GAMCA further claims that its members made substantial investments to upgrade their facilities and
equipment. From this perspective, the August 23, 2010 order constitutes taking of property without due process
of law as its implementation would deprive GAMCA members of their property.

AMCOW responded to these claims with the argument that the DOH CDO letters implementing RA No. 10022
are consistent with the State's exercise of the police power to prescribe regulations to promote the health,
safety, and general welfare of the people. Public interest justifies the State's interference in health matters,
since the welfare of migrant workers is a legitimate public concern. The DOH thus merely performed its duty of
upholding the migrant workers' freedom to consult their chosen clinics for the conduct of health examinations.

We agree with AMCOW.

The State's police power86 is vast and plenary87 and the operation of a business,88 especially one that is imbued
with public interest (such as healthcare services),89 falls within the scope of governmental exercise of police
power through regulation.

As defined, police power includes (1) the imposition of restraint on liberty or property, (2) in order to foster the
common good.90 The exercise of police power involves the "state authority to enact legislation that may
interfere with personal liberty or property in order to promote the general welfare."91

By its very nature, the exercise of the State's police power limits individual rights and liberties, and subjects
them to the "far more overriding demands and requirements of the greater number."92 Though vast and plenary,
this State power also carries limitations, specifically, it may not be exercised arbitrarily or unreasonably.
Otherwise, it defeats the purpose for which it is exercised, that is, the advancement of the public good.93

To be considered reasonable, the government's exercise of police power must satisfy the "valid object and
valid means" method of analysis: first, the interest of the public generally, as distinguished from those of a
particular class, requires interference; and second, the means employed are reasonably necessary to attain
the objective sought and not unduly oppressive upon individuals.94

These two elements of reasonableness are undeniably present in Section 16 of RA No. 10022. The prohibition
against the referral decking system is consistent with the State's exercise of the police power to prescribe
regulations to promote the health, safety, and general welfare of the people. Public interest demands State
interference on health matters, since the welfare of migrant workers is a legitimate public concern.

We note that RA No. 10022 expressly reflects the declared State policies to "uphold the dignity of its citizens
whether in the country or overseas, in general, and Filipino migrant workers," and to "afford full protection to
labor, local and overseas, organized and unorganized, and promote full employment and equality of
employment opportunities for all. Towards this end, the State shall provide adequate and timely social,
economic and legal services to Filipino migrant workers." The prohibition against the referral decking system in
Section 16 of RA No. 10022 is an expression and implementation of these state policies.

The guarantee under Section 16 for OFWs to be given the option to choose a quality healthcare service
provider as expressed in Section 16 (c)95 of RA No. 10022 is guaranteed by the prohibition against the decking
126
practice and against monopoly practices in OFW health examinations.96

Section 16 likewise requires employers to accept health examinations from any DOH-accredited health facility;
a refusal could lead to their temporary disqualification under pertinent rules to be formulated by the Philippine
Overseas Employment Authority (POEA).97

These rules are part of the larger legal framework to ensure the Overseas Filipino Workers' (OFW) access to
quality healthcare services, and to curb existing practices that limit their choices to specific clinics and facilities.

Separately from the Section 16 prohibition against the referral decking system, RA No. 10022 also prohibits
and penalizes the imposition of a compulsory exclusive arrangement requiring OFWs to undergo health
examinations only from specifically designated medical clinics, institutions, entities or persons. Section 5, in
relation to Section 6 of RA No. 10022, penalizes compulsory, exclusive arrangements98 by imprisonment and
fine and by the automatic revocation of the participating medical clinic's license.

The DOH's role under this framework is to regulate the activities and operations of all clinics conducting health
examinations on Filipino migrant workers as a requirement for their overseas employment. The DOH is tasked
to ensure that:
(c.3) No group or groups of medical clinics shall have a monopoly of exclusively conducting health
examinations on migrant workers for certain receiving countries;

(c.4) Every Filipino migrant worker shall have the freedom to choose any of the DOH-accredited or DOH-
operated clinics that will conduct his/her health examinations and that his or her rights as a patient are
respected. The decking practice, which requires an overseas Filipino worker to go first to an office for
registration and then farmed out to a medical clinic located elsewhere, shall not be allowed;99
While Section 16 of RA No. 10022 does not specifically define the consequences of violating the prohibition
against the referral decking system, Republic Act No. 4226 (Hospital Licensure Act), which governs the
licensure and regulation of hospitals and health facilities, authorizes the DOH to suspend, revoke, or refuse to
renew the license of hospitals and clinics violating the law.100

These consequences cannot but apply to the violation of the prohibition against the referral decking system
under RA No. 10022. If, under the law, the DOH can suspend, revoke, or refuse to renew the license of these
hospitals upon the finding that they violated any provision of law (whether those found in RA No. 4226 or in RA
No. 10022), it follows- as a necessarily included lesser power - that the DOH can likewise order these clinics
and their association to cease and desist from practices that the law deems to be undesirable.

A.5.b. The DOH did not gravely abuse its discretion in issuing the assailed DOH CDO letters.

As discussed above, the letter-order implementing the prohibition against the referral decking system is quasi-
judicial in nature. This characteristic requires that procedural due process be observed - that is, that the clinics
concerned be given the opportunity to be heard before the standard found in the law can be applied to them.

Thus, prior to the issuance of the disputed CDO letter, the DOH should have given GAMCA the opportunity to
be heard on whether the prohibition applies to it. Lest this opportunity to be heard be misunderstood, this DOH
obligation raises an issue different from the question of whether Congress can, under the exercise of police
power, prohibit the referral decking system; this latter issue lies outside the scope of the DOH to pass upon.
The required hearing before the DOH relates solely to whether it properly implemented, based on the given
standards under the law, the prohibition that Congress decreed under RA No. 10022.

Under normal circumstances, the issuance of a CDO without a prior hearing would violate GAMCA's
procedural due process rights, and would amount to more than a legal error, i.e., an error equivalent to action
without jurisdiction. Rendering a decision quasi-judicial in nature without providing the opportunity to be heard
amounts to a grave abuse of discretion that divests a quasi-judicial agency of its jurisdiction.
127
Factual circumstances unique to the present case, however, lead us to conclude that while it was an error of
law for the DOH to issue a CDO without complying with the requirements of procedural due process, its action
did not amount to a grave abuse of discretion.

Grave abuse of discretion amounts to more than an error of law; it refers to an act that is so capricious,
arbitrary, and whimsical that it amounts to a clear evasion of a positive duty or a virtual refusal to perform a
duty enjoined by law, as where the power is exercised in an arbitrary and despotic manner because of passion
or hostility.101

Prior to the issuance of its CDO Letter, the DOH had more than sufficient basis to determine that GAMCA
practices the prohibited referral decking system under RA No. 10022. Notably, the DOH had earlier allowed
and recognized the referral decking system that GAMCA practiced through AO 5-01. This recognition was
made with GAMCA's practice in mind. The subsequent administrative orders and department memorandum
suspending and terminating the referral decking system, respectively, all pertain to the practice that the DOH
had authorized under AO 5-01. Even the subject matter of these issuances do not just pertain to any other
referral decking system, but to the "GAMCA referral decking system."

GAMCA likewise had more than several opportunities to contest the suspension and eventual revocation of the
referral decking system initially pe1mitted under AO 5-01. Its appeal even reached the Office of the President,
which overturned the DOH Memorandum Order terminating the referral decking system.

That the referral decking system had been subsequently prohibited by law shows the intent of Congress to
prevent and prohibit the practice that GAMCA initiated and which the President had allowed. The President's
duty under our political system is to implement the law; hence, when Congress subsequently prohibited the
practice that GAMCA initiated, the Executive - including the President -has no choice but to implement it.

Based on these circumstances, while the DOH erred when it issued its CDO letters without first giving GAMCA
the opportunity to prove whether the practice conducted by GAMCA is the same practice prohibited under RA
No. 10022, the DOH conclusion to so act, in our view, did not constitute grave abuse of discretion that would
have divested it of jurisdiction.

We note that the DOH had sufficient basis when it determined that the referral decking system prohibited under
RA No. 10022 was the same decking system practiced by GAMCA. To reiterate, the referral decking system
was not something new; it was an old system that GAMCA practiced and was known to all in its scope and
operating details. That GAMCA had previously questioned the DOH prohibition and had been given ample
opportunity to be heard when it filed an appeal before the OP, negate the conclusion that GAMCA had been
aggrieved by precipitate and unfair DOH action.

To be sure, these factual circumstances do not make the CDO letter compliant with procedural due process.
They mitigate, however, the error committed and render it less than the capricious, arbitrary, and patent refusal
to comply with a positive legal duty that characterizes an act committed with grave abuse of discretion.

The Court furthermore, in several instances,102 has recognized that an administrative agency may issue an ex
parte cease and desist order, where vital public interests outweigh the need for procedural due process." In
these instances, the Court noted that the affected establishment may contest the ex parteorder, upon which the
administrative agency concerned must conduct a hearing and allow the establishment to be heard. While
jurisprudence has so far used the "vital public interests" standard to pollution cases, it had not been a grave
abuse of discretion on the part of the DOH to consider that GAMCA's referral decking practice falls within this
category. The DOH has long made the factual finding that the referral decking system hinders our Filipino
seafarers' access to quality and affordable healthcare in its A.O. No. 106, series of 2002.

These circumstances further mitigate whatever legal error the DOH has committed and render the conclusion
that grave abuse of discretion had taken place misplaced.
128
Since the writs of certiorari and prohibition do not issue against legal errors, but to acts of grave abuse of
discretion, the RTC erred in issuing these writs against the DOH CDO letters.

6. The prohibition against the referral decking system against GAMCA does not violate the principle of
sovereign equality and independence.

The RTC based its decision to grant the writs of certiorari and prohibition against the DOH letter-order on the
principle of sovereign equality and independence; applying the referral decking system prohibition against
GAMCA violates this principle.

The RTC reasoned out that the prohibition against the referral decking system under Section 16 of RA No.
10022 must be interpreted to apply only to clinics conducting health examinations on migrant workers bound
for countries that do not require the referral decking system for the issuance of visas to job applicants.

The RTC observed, too, that the refer al decking system is part of the application procedure in obtaining visas
to enter the GCC States, a procedure made in the exercise of the sovereign power of the GCC States to
protect their nationals from health hazards, and of their diplomatic power to regulate and screen entrants to
their territories.

It also reasoned out that under the principle of sovereign equality and independence of States, the Philippines
cannot interfere with this system and in fact must respect the visa-granting procedures of foreign states in the
same way that they respect our immigration procedures. Moreover, to restrain GAMCA which is a mere adjunct
of HMC (an agent of GCC States) is to restrain the GCC States themselves.

AMCOW contests the RTC's conclusion, arguing that the principles of sovereign equality and independence of
States do not apply to the present case. According to AMCOW, the subject matter of this case pertains to a
domestic concern as the law and the regulations that GAMCA assails relate to the operation of medical clinics
in the Philippines.

It points out that the Philippines gave GAMCA and its members the privilege of conducting their businesses
domestically; hence, their operations are governed by Philippine laws, specifically by RA No. 10022 which
serves as one of the limitations on the privilege granted to them. GAMCA's right to engage in business should
yield to the State's exercise of police power. In legal contemplation, therefore, the DOH CDO letters did not
prejudice GAMCA's right to engage in business; nor did they hamper the GAMCA members' business
operations.

AMCOW further insists that the August 23, 2010 and November 2, 2010 orders are consistent with the State's
exercise of the police power to prescribe regulations to promote the health, safety, and general welfare of the
people. Public interest demands State interference on health matters, since the welfare of migrant workers is a
legitimate public concern. The DOH thus merely performed its duty of upholding the migrant workers' freedom
to choose any of its accredited or operated clinics that will conduct health examinations.

The DOH, for its part, adds that the implementation of RA No. 10022 cannot be defeated by agreements
entered into by GAMCA with the GCC States. The GCC States, the DOH points out, are not empowered to
determine the Philippines' courses of action with respect to the operation, within Philippine territory, of medical
clinics; the conduct of health examinations; and the freedom of choice of Filipino migrant workers.

GAMCA responds to these arguments by asserting that the referral decking system is a part of the application
procedure for obtaining visas to enter the GCC States. Hence, it is an exercise of the sovereign power of the
GCC States to protect their nationals from health hazards, and their diplomatic power to regulate and screen
entrants to their territories. To restrain an agent of the GCC States under the control and acting in accordance
with the direction of these GCC States, restrains the GCC States.

GAMCA also points out that the OFWs would suffer grave and irreparable damage and injury if the DOH CDO
129
letters would be implemented as the GCC States would not issue working visas without the GAMCA seal
attesting that the OFWs had been medically examined by GAMCA member clinics.

After considering all these arguments, we find that the RTC's decision misapplied the principle of sovereign
independence and equality to the present case. While the principles of sovereign independence and equality
have been recognized in Philippine jurisprudence, our recogmtmn of this principle does not extend to the
exemption of States and their affiliates from compliance with Philippine regulatory laws.

A.6. The principle of sovereign equality and independence of states does not exempt GAMCAfrom the
referral decking system prohibition under RA No. 10022.

In Republic of Indonesia v. Vinzon,103 we recognized the principle of sovereign independence and equality as
part of the law of the land. We used this principle to justify the recognition of the principle of sovereign
immunity which exempts the State - both our Government and foreign governments - from suit. We held:
International law is founded largely upon the principles of reciprocity, comity, independence, and equality of
States which were adopted as part of the law of our land under Article II, Section 2 of the 1987 Constitution.
The rule that a State may not be sued without its consent is a necessary consequence of the principles of
independence and equality of States. As enunciated in Sanders v. Veridiano II, the practical justification for the
doctrine of sovereign immunity is that there can be no legal right against the authority that makes the law on
which the right depends. In the case of foreign States, the rule is derived from the principle of the sovereign
equality of States, as expressed in the maxim par in parem non habet imperium. All states are sovereign
equals and cannot assert jurisdiction over one another. A contrary attitude would "unduly vex the peace of
nations."
Our recognition of sovereign immunity, however, has never been unqualified. While we recognized the
principles of independence and equality of States to justify a State's sovereign immunity from suit, we also
restricted state immunity to acts jus imperii, or public acts. We said that once a State enters into commercial
transactions (jus gestionis), then it descends to the level of a private individual, and is thus not immune from
the resulting liability and consequences of its actions.104

By this recognition, we acknowledge that a foreign government acting in its jus imperii function cannot be held
liable in a Philippine court. Philippine courts, as part of the Philippine government, cannot and should not take
jurisdiction over cases involving the public acts of a foreign government. Taking jurisdiction would amount to
authority over a foreign government, and would thus violate the principle of sovereign independence and
equality.105

This recognition is altogether different from exempting governments whose agents are in the Philippines from
complying with our domestic laws.106 We have yet to declare in a case that the principle of sovereign
independence and equality exempts agents of foreign governments from compliance with the application of
Philippine domestic law.

In the present case, GAMCA has not adduced any evidence in the court below, nor has it presented any
argument before us showing that the principle of sovereign equality and independence has developed into an
international custom shielding state agents from compliance with another state's domestic laws. Under this
situation, the Court is in no position to determine whether the practice that GAMCA alleges has indeed
crystallized into an international custom.

GAMCA has never proven in this case, too, that the GCC has extended its sovereign immunity to GAMCA.
Sovereign immunity belongs to the State, and it must first be extended to its agents before the latter may be
considered to possess sovereign immunity.

Significantly, the Court has even adopted a restrictive approach in recognizing state immunity, by distinguishing
between a State's jus imperii and jus gestionis. It is only when a State acts in its jus imperii function that we
recognize state immunity.107
130
We point out furthermore that the prohibition against the referral decking system applies to hospitals and
clinics, as well as to OFW employers, and does not seek to interfere with the GCC's visa requirement
processes. RA 10022 prohibits hospitals and clinics in the Philippines from practicing the referral decking
system, and employers from requiring OFWs to procure their medical examinations from hospitals and clinics
practicing the referral decking system.

The regulation applies to Philippine hospitals and clinics, as well as to employers of OFWs. It does not apply to
the GCCs and their visa processes. That the regulation could affect the OFWs' compliance with the visa
requirements imposed by GCCs does not place it outside the regulatory powers of the Philippine government.

In the same manner, GCC states continue to possess the prerogative to apply their visa requirements to any
foreign national, including our OFWs, who seeks to enter their territory; they may refuse to grant them entry for
failure to comply with the referral decking system, or they may adjust to the prohibition against the referral
decking system that we have imposed. These prerogatives lie with the GCC member-states and do not affect
at all the legality of the prohibition against the referral decking system.

Lastly, the effect of the prohibition against the referral decking system is beyond the authority of this Court to
consider. The wisdom of this prohibition has been decided by Congress, through the enactment of RA No.
10022. Our role in this case is merely to determine whether our government has the authority to enact the
law's prohibition against the referral decking system, and whether this prohibition is being implemented legally.
Beyond these lies the realm of policy that, under our Constitution's separation of powers, this Court cannot
cross.

WHEREFORE, in the light of these considerations, we hereby GRANT the petitions. Accordingly,
we REVERSE and SET ASIDE the orders dated August 10, 2012 and April 12, 2013 of the Regional Trial
Court of Pasay City, Branch 108, in Sp. Civil Action No. R-PSY-10-04391-CV.

Costs against respondent GAMCA.

SO ORDERED. cralawlawlibrary

D. SEPARATION OF POWERS AND CHECKS AND BALANCES

EN BANC
[G.R. No. 127255. August 14, 1997]
JOKER P. ARROYO, EDCEL C. LAGMAN, JOHN HENRY R. OSMEA, WIGBERTO E. TAADA, and
RONALDO B. ZAMORA, petitioners, vs. JOSE DE VENECIA, RAUL DAZA, RODOLFO ALBANO,
THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, AND THE COMMISSIONER OF
INTERNAL REVENUE, respondents.
DECISION
MENDOZA, J.:
131
This is a petition for certiorari and/or prohibition challenging the validity of Republic Act No. 8240, which
amends certain provisions of the National Internal Revenue Code by imposing so-called sin taxes (actually
specific taxes) on the manufacture and sale of beer and cigarettes.
Petitioners are members of the House of Representatives. They brought this suit against respondents
Jose de Venecia, Speaker of the House of Representatives, Deputy Speaker Raul Daza, Majority Leader
Rodolfo Albano, the Executive Secretary, the Secretary of Finance, and the Commissioner of Internal
Revenue, charging violation of the rules of the House which petitioners claim are constitutionally mandated so
that their violation is tantamount to a violation of the Constitution.
The law originated in the House of Representatives as H. No. 7198. This bill was approved on third
reading on September 12, 1996 and transmitted on September 16, 1996 to the Senate which approved it with
certain amendments on third reading on November 17, 1996. A bicameral conference committee was formed
to reconcile the disagreeing provisions of the House and Senate versions of the bill.
The bicameral conference committee submitted its report to the House at 8 a.m. on November 21,
1996. At 11:48 a.m., after a recess, Rep. Exequiel Javier, chairman of the Committee on Ways and Means,
proceeded to deliver his sponsorship speech, after which he was interpellated. Rep. Rogelio Sarmiento was
first to interpellate. He was interrupted when Rep. Arroyo moved to adjourn for lack of quorum. Rep. Antonio
Cuenco objected to the motion and asked for a head count. After a roll call, the Chair (Deputy Speaker Raul
Daza) declared the presence of a quorum.[1] Rep. Arroyo appealed the ruling of the Chair, but his motion was
defeated when put to a vote. The interpellation of the sponsor thereafter proceeded.
Petitioner Rep. Joker Arroyo registered to interpellate. He was fourth in the order, following Rep. Rogelio
Sarmiento, Rep. Edcel C. Lagman and Rep. Enrique Garcia. In the course of his interpellation, Rep. Arroyo
announced that he was going to raise a question on the quorum, although until the end of his interpellation he
never did. What happened thereafter is shown in the following transcript of the session on November 21, 1996
of the House of Representatives, as published by Congress in the newspaper issues of December 5 and 6,
1996:
MR. ALBANO. Mr. Speaker, I move that we now approve and ratify the conference committee report.
THE DEPUTY SPEAKER (Mr. Daza). Any objection to the motion?
MR. ARROYO. What is that, Mr. Speaker?
THE DEPUTY SPEAKER (Mr. Daza). There being none, approved.
(Gavel)
MR. ARROYO. No, no, no, wait a minute, Mr. Speaker, I stood up. I want to know what is the question
that the Chair asked the distinguished sponsor.
THE DEPUTY SPEAKER (Mr. Daza). There was a motion by the Majority Leader for approval of the
report, and the Chair called for the motion.
MR. ARROYO. Objection, I stood up, so I wanted to object.
THE DEPUTY SPEAKER (Mr. Daza). The session is suspended for one minute.
(It was 3:01 p.m.)
(3:40 p.m., the session was resumed)
THE DEPUTY SPEAKER (Mr. Daza). The session is resumed.
MR. ALBANO. Mr. Speaker, I move to adjourn until four oclock, Wednesday, next week.
THE DEPUTY SPEAKER (Mr. Daza). The session is adjourned until four oclock, Wednesday, next
week.
(It was 3:40 p.m.)
On the same day, the bill was signed by the Speaker of the House of Representatives and the President of
the Senate and certified by the respective secretaries of both Houses of Congress as having been finally
passed by the House of Representatives and by the Senate on November 21, 1996. The enrolled bill was
signed into law by President Fidel V. Ramos on November 22, 1996.
Petitioners claim that there are actually four different versions of the transcript of this portion of Rep.
Arroyos interpellation: (1) the transcript of audio-sound recording of the proceedings in the session hall
immediately after the session adjourned at 3:40 p.m. on November 21, 1996, which petitioner Rep. Edcel C.
Lagman obtained from the operators of the sound system; (2) the transcript of the proceedings from 3:00 p.m.
to 3:40 p.m. of November 21, 1996, as certified by the Chief of the Transcription Division on November 21,
1996, also obtained by Rep. Lagman; (3) the transcript of the proceedings from 3:00 p.m. to 3:40 p.m. of
November 21, 1996 as certified by the Chief of the Transcription Division on November 28, 1996, also obtained
132
by Rep. Lagman; and (4) the published version abovequoted. According to petitioners, the four versions differ
on three points, to wit: (1) in the audio-sound recording the word approved, which appears on line 13 in the
three other versions, cannot be heard; (2) in the transcript certified on November 21, 1996 the word no on line
17 appears only once, while in the other versions it is repeated three times; and (3) the published version does
not contain the sentence (Y)ou better prepare for a quorum because I will raise the question of the quorum,
which appears in the other versions.
Petitioners allegations are vehemently denied by respondents. However, there is no need to discuss this
point as petitioners have announced that, in order to expedite the resolution of this petition, they admit, without
conceding, the correctness of the transcripts relied upon by the respondents. Petitioners agree that for
purposes of this proceeding the word approved appears in the transcripts.
Only the proceedings of the House of Representatives on the conference committee report on H. No. 7198
are in question. Petitioners principal argument is that R.A. No. 8240 is null and void because it was passed in
violation of the rules of the House; that these rules embody the constitutional mandate in Art. VI, 16(3) that
each House may determine the rules of its proceedings and that, consequently, violation of the House rules is
a violation of the Constitution itself. They contend that the certification of Speaker De Venecia that the law was
properly passed is false and spurious.
More specifically, petitioners charge that (1) in violation of Rule VIII, 35 and Rule XVII, 103 of the rules of
the House,[2] the Chair, in submitting the conference committee report to the House, did not call for
the yeas or nays, but simply asked for its approval by motion in order to prevent petitioner Arroyo from
questioning the presence of a quorum; (2) in violation of Rule XIX, 112, [3] the Chair deliberately ignored Rep.
Arroyos question, What is that . . . Mr. Speaker? and did not repeat Rep. Albanos motion to approve or
ratify; (3) in violation of Rule XVI, 97, [4] the Chair refused to recognize Rep. Arroyo and instead proceeded to
act on Rep. Albanos motion and afterward declared the report approved; and (4) in violation of Rule XX, 121-
122, Rule XXI, 123, and Rule XVIII, 109, [5] the Chair suspended the session without first ruling on Rep. Arroyos
question which, it is alleged, is a point of order or a privileged motion. It is argued that Rep. Arroyos query
should have been resolved upon the resumption of the session on November 28, 1996, because the
parliamentary situation at the time of the adjournment remained upon the resumption of the session.
Petitioners also charge that the session was hastily adjourned at 3:40 p.m. on November 21, 1996 and the
bill certified by Speaker Jose De Venecia to prevent petitioner Rep. Arroyo from formally challenging the
existence of a quorum and asking for a reconsideration.
Petitioners urge the Court not to feel bound by the certification of the Speaker of the House that the law
had been properly passed, considering the Courts power under Art. VIII, 1 to pass on claims of grave abuse of
discretion by the other departments of the government, and they ask for a reexamination of Tolentino v.
Secretary of Finance,[6] which affirmed the conclusiveness of an enrolled bill, in view of the changed
membership of the Court.
The Solicitor General filed a comment in behalf of all respondents. In addition, respondent De Venecia
filed a supplemental comment. Respondents defense is anchored on the principle of separation of powers and
the enrolled bill doctrine. They argue that the Court is not the proper forum for the enforcement of the rules of
the House and that there is no justification for reconsidering the enrolled bill doctrine. Although the Constitution
provides in Art. VI, 16(3) for the adoption by each House of its rules of proceedings, enforcement of the rules
cannot be sought in the courts except insofar as they implement constitutional requirements such as that
relating to three readings on separate days before a bill may be passed. At all events, respondents contend
that, in passing the bill which became R.A. No. 8240, the rules of the House, as well as parliamentary
precedents for approval of conference committee reports on mere motion, were faithfully observed.
In his supplemental comment, respondent De Venecia denies that his certification of H. No. 7198 is false
and spurious and contends that under the journal entry rule, the judicial inquiry sought by the petitioners is
barred. Indeed, Journal No. 39 of the House of Representatives, covering the sessions of November 20 and
21, 1996, shows that On Motion of Mr. Albano, there being no objection, the Body approved the Conference
Committee Report on House Bill No. 7198. [7] This Journal was approved on December 2, 1996 over the lone
objection of petitioner Rep. Lagman.[8]
After considering the arguments of the parties, the Court finds no ground for holding that Congress
committed a grave abuse of discretion in enacting R.A. No. 8240. This case is therefore dismissed.
First. It is clear from the foregoing facts that what is alleged to have been violated in the enactment of
R.A. No. 8240 are merely internal rules of procedure of the House rather than constitutional requirements for
133
the enactment of a law, i.e., Art. VI, 26-27. Petitioners do not claim that there was no quorum but only that, by
some maneuver allegedly in violation of the rules of the House, Rep. Arroyo was effectively prevented from
questioning the presence of a quorum.
Petitioners contend that the House rules were adopted pursuant to the constitutional provision that each
House may determine the rules of its proceedings [9] and that for this reason they are judicially enforceable. To
begin with, this contention stands the principle on its head. In the decided cases,[10] the constitutional provision
that each House may determine the rules of its proceedings was invoked by parties, although not successfully,
precisely to support claims of autonomy of the legislative branch to conduct its business free from interference
by courts. Here petitioners cite the provision for the opposite purpose of invoking judicial review.
But the cases, both here and abroad, in varying forms of expression, all deny to the courts the power to
inquire into allegations that, in enacting a law, a House of Congress failed to comply with its own rules, in the
absence of showing that there was a violation of a constitutional provision or the rights of private individuals. In
Osmea v. Pendatun,[11] it was held: At any rate, courts have declared that the rules adopted by deliberative
bodies are subject to revocation, modification or waiver at the pleasure of the body adopting them. And it has
been said that Parliamentary rules are merely procedural, and with their observance, the courts have no
concern. They may be waived or disregarded by the legislative body. Consequently, mere failure to conform to
parliamentary usage will not invalidate the action (taken by a deliberative body) when the requisite number of
members have agreed to a particular measure.
In United States v. Ballin, Joseph & Co.,[12] the rule was stated thus: The Constitution empowers each
house to determine its rules of proceedings. It may not by its rules ignore constitutional restraints or violate
fundamental rights, and there should be a reasonable relation between the mode or method of proceeding
established by the rule and the result which is sought to be attained. But within these limitations all matters of
method are open to the determination of the House, and it is no impeachment of the rule to say that some
other way would be better, more accurate, or even more just. It is no objection to the validity of a rule that a
different one has been prescribed and in force for a length of time. The power to make rules is not one which
once exercised is exhausted. It is a continuous power, always subject to be exercised by the House, and within
the limitations suggested, absolute and beyond the challenge of any other body or tribunal.
In Crawford v. Gilchrist,[13] it was held: The provision that each House shall determine the rules of its
proceedings does not restrict the power given to a mere formulation of standing rules, or to the proceedings of
the body in ordinary legislative matters; but in the absence of constitutional restraints, and when exercised by a
majority of a constitutional quorum, such authority extends to a determination of the propriety and effect of any
action as it is taken by the body as it proceeds in the exercise of any power, in the transaction of any business,
or in the performance of any duty conferred upon it by the Constitution.
In State ex rel. City Loan & Savings Co. v. Moore,[14] the Supreme Court of Ohio stated: The provision for
reconsideration is no part of the Constitution and is therefore entirely within the control of the General
Assembly. Having made the rule, it should be regarded, but a failure to regard it is not the subject-matter of
judicial inquiry. It has been decided by the courts of last resort of many states, and also by the United States
Supreme Court, that a legislative act will not be declared invalid for noncompliance with rules.
In State v. Savings Bank,[15] the Supreme Court of Errors of Connecticut declared itself as follows: The
Constitution declares that each house shall determine the rules of its own proceedings and shall have all
powers necessary for a branch of the Legislature of a free and independent state. Rules of proceedings are the
servants of the House and subject to its authority. This authority may be abused, but when the House has
acted in a matter clearly within its power, it would be an unwarranted invasion of the independence of the
legislative department for the court to set aside such action as void because it may think that the House has
misconstrued or departed from its own rules of procedure.
In McDonald v. State,[16] the Wisconsin Supreme Court held: When it appears that an act was so passed,
no inquiry will be permitted to ascertain whether the two houses have or have not complied strictly with their
own rules in their procedure upon the bill, intermediate its introduction and final passage. The presumption is
conclusive that they have done so. We think no court has ever declared an act of the legislature void for non-
compliance with the rules of procedure made by itself, or the respective branches thereof, and which it or they
may change or suspend at will. If there are any such adjudications, we decline to follow them.
Schweizer v. Territory[17] is illustrative of the rule in these cases. The 1893 Statutes of Oklahoma provided
for three readings on separate days before a bill may be passed by each house of the legislature, with the
proviso that in case of an emergency the house concerned may, by two-thirds vote, suspend the operation of
134
the rule. Plaintiff was convicted in the district court of violation of a law punishing gambling. He appealed
contending that the gambling statute was not properly passed by the legislature because the suspension of the
rule on three readings had not been approved by the requisite two-thirds vote. Dismissing this contention, the
State Supreme Court of Oklahoma held:
We have no constitutional provision requiring that the legislature should read a bill in any particular manner. It
may, then, read or deliberate upon a bill as it sees fit, either in accordance with its own rules, or in violation
thereof, or without making any rules. The provision of section 17 referred to is merely a statutory provision for
the direction of the legislature in its action upon proposed measures. It receives its entire force from legislative
sanction, and it exists only at legislative pleasure. The failure of the legislature to properly weigh and consider
an act, its passage through the legislature in a hasty manner, might be reasons for the governor withholding his
signature thereto; but this alone, even though it is shown to be a violation of a rule which the legislature had
made to govern its own proceedings, could be no reason for the courts refusing its enforcement after it was
actually passed by a majority of each branch of the legislature, and duly signed by the governor. The courts
cannot declare an act of the legislature void on account of noncompliance with rules of procedure made by
itself to govern its deliberations. McDonald v. State, 80 Wis. 407, 50 N.W. 185; In re Ryan, 80 Wis. 414, 50 N.
W. 187; State v. Brown, 33 S.C. 151, 11 S. E. 641; Railway Co. v. Gill, 54 Ark. 101, 15 S. W. 18.
We conclude this survey with the useful summary of the rulings by former Chief Justice Fernando,
commenting on the power of each House of Congress to determine its rules of proceedings. He wrote:
Rules are hardly permanent in character. The prevailing view is that they are subject to revocation, modification
or waiver at the pleasure of the body adopting them as they are primarily procedural. Courts ordinarily have no
concern with their observance. They may be waived or disregarded by the legislative body. Consequently,
mere failure to conform to them does not have the effect of nullifying the act taken if the requisite number of
members have agreed to a particular measure. The above principle is subject, however, to this
qualification. Where the construction to be given to a rule affects persons other than members of the legislative
body the question presented is necessarily judicial in character. Even its validity is open to question in a case
where private rights are involved.[18]
In this case no rights of private individuals are involved but only those of a member who, instead of
seeking redress in the House, chose to transfer the dispute to this Court. We have no more power to look into
the internal proceedings of a House than members of that House have to look over our shoulders, as long as
no violation of constitutional provisions is shown.
Petitioners must realize that each of the three departments of our government has its separate sphere
which the others may not invade without upsetting the delicate balance on which our constitutional order rests.
Due regard for the working of our system of government, more than mere comity, compels reluctance on our
part to enter upon an inquiry into an alleged violation of the rules of the House. We must accordingly decline
the invitation to exercise our power.
Second. Petitioners, quoting former Chief Justice Roberto Concepcions sponsorship in the Constitutional
Commission, contend that under Art. VIII, 1, nothing involving abuse of discretion [by the other branches of the
government] amounting to lack or excess of jurisdiction is beyond judicial review. [19] Implicit in this statement of
the former Chief Justice, however, is an acknowledgment that the jurisdiction of this Court is subject to the
case and controversy requirement of Art. VIII, 5 and, therefore, to the requirement of a justiciable controversy
before courts can adjudicate constitutional questions such as those which arise in the field of foreign
relations. For while Art. VIII, 1 has broadened the scope of judicial inquiry into areas normally left to the political
departments to decide, such as those relating to national security, [20] it has not altogether done away with
political questions such as those which arise in the field of foreign relations. As we have already held, under
Art. VIII, 1, this Courts function
is merely [to] check whether or not the governmental branch or agency has gone beyond the constitutional
limits of its jurisdiction, not that it erred or has a different view. In the absence of a showing . . . [of] grave
abuse of discretion amounting to lack of jurisdiction, there is no occasion for the Court to exercise its corrective
power. . . . It has no power to look into what it thinks is apparent error.[21]
If, then, the established rule is that courts cannot declare an act of the legislature void on account merely of
noncompliance with rules of procedure made by itself, it follows that such a case does not present a situation
in which a branch of the government has gone beyond the constitutional limits of its jurisdiction so as to call for
the exercise of our Art. VIII, 1 power.
135
Third. Petitioners claim that the passage of the law in the House was railroaded. They claim that Rep.
Arroyo was still making a query to the Chair when the latter declared Rep. Albanos motion approved.
What happened is that, after Rep. Arroyos interpellation of the sponsor of the committee report, Majority
Leader Rodolfo Albano moved for the approval and ratification of the conference committee report. The Chair
called out for objections to the motion. Then the Chair declared: There being none, approved. At the same time
the Chair was saying this, however, Rep. Arroyo was asking, What is that . . . Mr. Speaker? The Chair and
Rep. Arroyo were talking simultaneously. Thus, although Rep. Arroyo subsequently objected to the Majority
Leaders motion, the approval of the conference committee report had by then already been declared by the
Chair, symbolized by its banging of the gavel.
Petitioners argue that, in accordance with the rules of the House, Rep. Albanos motion for the approval of
the conference committee report should have been stated by the Chair and later the individual votes of the
Members should have been taken. They say that the method used in this case is a legislators nightmare
because it suggests unanimity when the fact was that one or some legislators opposed the report.
No rule of the House of Representatives has been cited which specifically requires that in cases such as
this involving approval of a conference committee report, the Chair must restate the motion and conduct a viva
voce or nominal voting. On the other hand, as the Solicitor General has pointed out, the manner in which the
conference committee report on H. No. 7198 was approved was by no means a unique one. It has basis in
legislative practice. It was the way the conference committee report on the bills which became the Local
Government Code of 1991 and the conference committee report on the bills amending the Tariff and Customs
Code were approved.
In 1957, the practice was questioned as being contrary to the rules of the House. The point was answered
by Majority Leader Arturo M. Tolentino and his answer became the ruling of the Chair. Mr. Tolentino said:
Mr. Tolentino. The fact that nobody objects means a unanimous action of the House. Insofar as the matter of
procedure is concerned, this has been a precedent since I came here seven years ago, and it has been the
procedure in this House that if somebody objects, then a debate follows and after the debate, then the voting
comes in.
....
Mr. Speaker, a point of order was raised by the gentleman from Leyte, and I wonder what his attitude is now on
his point of order. I should just like to state that I believe that we have had a substantial compliance with the
Rules. The Rule invoked is not one that refers to statutory or constitutional requirement, and a substantial
compliance, to my mind, is sufficient. When the Chair announces the vote by saying Is there any objection?
and nobody objects, then the Chair announces The bill is approved on second reading. If there was any doubt
as to the vote, any motion to divide would have been proper. So, if that motion is not presented, we assume
that the House approves the measure. So I believe there is substantial compliance here, and if anybody wants
a division of the House he can always ask for it, and the Chair can announce how many are in favor and how
many are against.[22]
Indeed, it is no impeachment of the method to say that some other way would be better, more accurate
and even more just.[23] The advantages or disadvantages, the wisdom or folly of a method do not present any
matter for judicial consideration.[24] In the words of the U.S. Circuit Court of Appeals, this Court cannot provide
a second opinion on what is the best procedure. Notwithstanding the deference and esteem that is properly
tendered to individual congressional actors, our deference and esteem for the institution as a whole and for the
constitutional command that the institution be allowed to manage its own affairs precludes us from even
attempting a diagnosis of the problem.[25]
Nor does the Constitution require that the yeas and the nays of the Members be taken every time a House
has to vote, except only in the following instances: upon the last and third readings of a bill,[26] at the request of
one-fifth of the Members present,[27] and in repassing a bill over the veto of the President.[28] Indeed,
considering the fact that in the approval of the original bill the votes of the Members by yeas and nays had
already been taken, it would have been sheer tedium to repeat the process.
Petitioners claim that they were prevented from seeking reconsideration allegedly as a result of the
precipitate suspension and subsequent adjournment of the session. [29] It would appear, however, that the
session was suspended to allow the parties to settle the problem, because when it resumed at 3:40 p.m. on
that day Rep. Arroyo did not say anything anymore.While it is true that the Majority Leader moved for
adjournment until 4 p.m. of Wednesday of the following week, Rep. Arroyo could at least have objected if there
136
was anything he wanted to say. The fact, however, is that he did not. The Journal of November 21, 1996 of the
House shows:
ADJOURNMENT OF SESSION
On motion of Mr. Albano, there being no objection, the Chair declared the session adjourned until four oclock in
the afternoon of Wednesday, November 27, 1996.
It was 3:40 p.m. Thursday, November 21, 1996. (emphasis added)
This Journal was approved on December 2, 1996. Again, no one objected to its approval except Rep. Lagman.
It is thus apparent that petitioners predicament was largely of their own making. Instead of submitting the
proper motions for the House to act upon, petitioners insisted on the pendency of Rep. Arroyos question as an
obstacle to the passage of the bill. But Rep. Arroyos question was not, in form or substance, a point of order or
a question of privilege entitled to precedence.[30] And even if Rep. Arroyos question were so, Rep. Albanos
motion to adjourn would have precedence and would have put an end to any further consideration of the
question.[31]
Given this fact, it is difficult to see how it can plausibly be contended that in signing the bill which became
R.A. No. 8240, respondent Speaker of the House be acted with grave abuse of his discretion. Indeed, the
phrase grave abuse of discretion amounting to lack or excess of jurisdiction has a settled meaning in the
jurisprudence of procedure. It means such capricious and whimsical exercise of judgment by a tribunal
exercising judicial or quasi judicial power as to amount to lack of power. As Chief Justice Concepcion himself
said in explaining this provision, the power granted to the courts by Art. VIII, 1 extends to cases where a
branch of the government or any of its officials has acted without jurisdiction or in excess of jurisdiction, or so
capriciously as to constitute an abuse of discretion amounting to excess of jurisdiction.[32]
Here, the matter complained of concerns a matter of internal procedure of the House with which the Court
should not be concerned. To repeat, the claim is not that there was no quorumbut only that Rep. Arroyo was
effectively prevented from questioning the presence of a quorum. Rep. Arroyos earlier motion to adjourn for
lack of quorum had already been defeated, as the roll call established the existence of a quorum. The question
of quorum cannot be raised repeatedly especially when the quorum is obviously present for the purpose of
delaying the business of the House. [33] Rep. Arroyo waived his objection by his continued interpellation of the
sponsor for in so doing he in effect acknowledged the presence of a quorum.[34]
At any rate it is noteworthy that of the 111 members of the House earlier found to be present on November
21, 1996, only the five, i.e., petitioners in this case, are questioning the manner by which the conference
committee report on H. No. 7198 was approved on that day. No one, except Rep. Arroyo, appears to have
objected to the manner by which the report was approved. Rep. John Henry Osmea did not participate in the
bicameral conference committee proceedings.[35] Rep. Lagman and Rep. Zamora objected to the report [36] but
not to the manner it was approved; while it is said that, if voting had been conducted, Rep. Taada would have
voted in favor of the conference committee report.[37]
Fourth. Under the enrolled bill doctrine, the signing of H. No. 7198 by the Speaker of the House and the
President of the Senate and the certification by the secretaries of both Houses of Congress that it was passed
on November 21, 1996 are conclusive of its due enactment. Much energy and learning is devoted in the
separate opinion of Justice Puno, joined by Justice Davide, to disputing this doctrine. To be sure, there is no
claim either here or in the decision in the EVAT cases [Tolentino v. Secretary of Finance] that the enrolled bill
embodies a conclusive presumption. In one case[38] we went behind an enrolled bill and consulted the Journal
to determine whether certain provisions of a statute had been approved by the Senate.
But, where as here there is no evidence to the contrary, this Court will respect the certification of the
presiding officers of both Houses that a bill has been duly passed. Under this rule, this Court has refused to
determine claims that the three-fourths vote needed to pass a proposed amendment to the Constitution had
not been obtained, because a duly authenticated bill or resolution imports absolute verity and is binding on the
courts.[39] This Court quoted from Wigmore on Evidence the following excerpt which embodies good, if old-
fashioned, democratic theory:
The truth is that many have been carried away with the righteous desire to check at any cost the misdoings of
Legislatures. They have set such store by the Judiciary for this purpose that they have almost made them a
second and higher Legislature. But they aim in the wrong direction. Instead of trusting a faithful Judiciary to
check an inefficient Legislature, they should turn to improve the Legislature. The sensible solution is not to
patch and mend casual errors by asking the Judiciary to violate legal principle and to do impossibilities with the
137
Constitution; but to represent ourselves with competent, careful, and honest legislators, the work of whose
hands on the statute-roll may come to reflect credit upon the name of popular government.[40]
This Court has refused to even look into allegations that the enrolled bill sent to the President contained
provisions which had been surreptitiously inserted in the conference committee:
[W]here allegations that the constitutional procedures for the passage of bills have not been observed have no
more basis than another allegation that the Conference Committee surreptitiously inserted provisions into a bill
which it had prepared, we should decline the invitation to go behind the enrolled copy of the bill. To disregard
the enrolled bill rule in such cases would be to disregard the respect due the other two departments of our
government.[41]
It has refused to look into charges that an amendment was made upon the last reading of a bill in violation
of Art. VI, 26(2) of the Constitution that upon the last reading of a bill, no amendment shall be allowed. [42]
In other cases,[43] this Court has denied claims that the tenor of a bill was otherwise than as certified by the
presiding officers of both Houses of Congress.
The enrolled bill doctrine, as a rule of evidence, is well established. It is cited with approval by text writers
here and abroad.[44] The enrolled bill rule rests on the following considerations:
. . . As the President has no authority to approve a bill not passed by Congress, an enrolled Act in the custody
of the Secretary of State, and having the official attestations of the Speaker of the House of Representatives,
of the President of the Senate, and of the President of the United States, carries, on its face, a solemn
assurance by the legislative and executive departments of the government, charged, respectively, with the duty
of enacting and executing the laws, that it was passed by Congress. The respect due to coequal and
independent departments requires the judicial department to act upon that assurance, and to accept, as having
passed Congress, all bills authenticated in the manner stated; leaving the court to determine, when the
question properly arises, whether the Act, so authenticated, is in conformity with the Constitution.[45]
To overrule the doctrine now, as the dissent urges, is to repudiate the massive teaching of our cases and
overthrow an established rule of evidence.
Indeed, petitioners have advanced no argument to warrant a departure from the rule, except to say that,
with a change in the membership of the Court, the three new members may be assumed to have an open mind
on the question of the enrolled bill rule. Actually, not three but four (Cruz, Feliciano, Bidin, and Quiason, JJ.)
have departed from the Court since our decision in the EVAT cases and their places have since been taken by
four new members (Francisco, Hermosisima, Panganiban, and Torres, JJ.) Petitioners are thus simply banking
on the change in the membership of the Court.
Moreover, as already noted, the due enactment of the law in question is confirmed by the Journal of the
House of November 21, 1996 which shows that the conference committee report on H. No. 7198, which
became R.A. No. 8240, was approved on that day. The keeping of the Journal is required by the
Constitution. Art. VI, 16(4) provides:
Each House shall keep a Journal of its proceedings, and from time to time publish the same, excepting such
parts as may, in its judgment, affect national security; and the yeas and nays on any question shall, at the
request of one-fifth of the Members present, be entered in the Journal.
Each House shall also keep a Record of its proceedings.
The Journal is regarded as conclusive with respect to matters that are required by the Constitution to be
recorded therein.[46] With respect to other matters, in the absence of evidence to the contrary, the Journals
have also been accorded conclusive effect. Thus, in United States v. Pons,[47] this Court spoke of the
imperatives of public policy for regarding the Journals as public memorials of the most permanent character,
thus: They should be public, because all are required to conform to them; they should be permanent, that
rights acquired today upon the faith of what has been declared to be law shall not be destroyed tomorrow, or at
some remote period of time, by facts resting only in the memory of individuals. As already noted, the bill which
became R.A. No. 8240 is shown in the Journal. Hence its due enactment has been duly proven.
___________________
It would be an unwarranted invasion of the prerogative of a coequal department for this Court either to set
aside a legislative action as void because the Court thinks the House has disregarded its own rules of
procedure, or to allow those defeated in the political arena to seek a rematch in the judicial forum when
petitioners can find their remedy in that department itself. The Court has not been invested with a roving
commission to inquire into complaints, real or imagined, of legislative skullduggery. It would be acting in excess
of its power and would itself be guilty of grave abuse of its discretion were it to do so. The suggestion made in
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a case[48] may instead appropriately be made here: petitioners can seek the enactment of a new law or the
repeal or amendment of R.A. No. 8240. In the absence of anything to the contrary, the Court must assume that
Congress or any House thereof acted in the good faith belief that its conduct was permitted by its rules, and
deference rather than disrespect is due the judgment of that body.[49]
WHEREFORE, the petition for certiorari and prohibition is DISMISSED.
SO ORDERED.
Narvasa, C.J., Padilla, Melo, Kapunan, Francisco, and Hermosisima, Jr., JJ., concur.
Romero, J., has a separate opinion.
Puno, J., has a separate concurring and dissenting opinion.
Davide, Jr., J., joined the concurring and dissenting opinion of Justice Puno.
Vitug, J., has a separate concurring opinion.
Regalado, J., in the result.
Bellosillo, J., took no part due to relationship with parties.
Panganiban, J., took no part. Former counsel of a party.
Torres, Jr., J., on leave during the deliberations.

G.R. No. 127685 July 23, 1998

BLAS F. OPLE, petitioner,
vs.
RUBEN D. TORRES, ALEXANDER AGUIRRE, HECTOR VILLANUEVA, CIELITO HABITO, ROBERT
BARBERS, CARMENCITA REODICA, CESAR SARINO, RENATO VALENCIA, TOMAS P. AFRICA, HEAD
OF THE NATIONAL COMPUTER CENTER and CHAIRMAN OF THE COMMISSION ON
AUDIT, respondents.

PUNO, J.:
The petition at bar is a commendable effort on the part of Senator Blas F. Ople to prevent the shrinking of the
right to privacy, which the revered Mr. Justice Brandeis considered as "the most comprehensive of rights and
the right most valued by civilized men." 1 Petitioner Ople prays that we invalidate Administrative Order No.
308 entitled "Adoption of a National Computerized Identification Reference System" on two important
constitutional grounds, viz: one, it is a usurpation of the power of Congress to legislate, and two, it
impermissibly intrudes on our citizenry's protected zone of privacy. We grant the petition for the rights
sought to be vindicated by the petitioner need stronger barriers against further erosion.
A.O. No. 308 was issued by President Fidel V. Ramos On December 12, 1996 and reads as follows:
ADOPTION OF A NATIONAL COMPUTERIZED
IDENTIFICATION REFERENCE SYSTEM
WHEREAS, there is a need to provide Filipino citizens and foreign residents with the facility to
conveniently transact business with basic service and social security providers and other
government instrumentalities;
WHEREAS, this will require a computerized system to properly and efficiently identify persons
seeking basic services on social security and reduce, if not totally eradicate fraudulent
transactions and misrepresentations;
WHEREAS, a concerted and collaborative effort among the various basic services and social
security providing agencies and other government intrumentalities is required to achieve such a
system;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue of
the powers vested in me by law, do hereby direct the following:
Sec. 1. Establishment of a National Compoterized Identification Reference System. A decentralized
Identification Reference System among the key basic services and social security providers is
hereby established.
Sec. 2. Inter-Agency Coordinating Committee. An Inter-Agency Coordinating Committee (IACC) to
draw-up the implementing guidelines and oversee the implementation of the System is hereby
created, chaired by the Executive Secretary, with the following as members:
Head, Presidential Management Staff
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Secretary, National Economic Development Authority
Secretary, Department of the Interior and Local Government
Secretary, Department of Health
Administrator, Government Service Insurance System,
Administrator, Social Security System,
Administrator, National Statistics Office
Managing Director, National Computer Center.
Sec. 3. Secretariat. The National Computer Center (NCC) is hereby designated as secretariat to the
IACC and as such shall provide administrative and technical support to the IACC.
Sec. 4. Linkage Among Agencies. The Population Reference Number (PRN) generated by the NSO
shall serve as the common reference number to establish a linkage among concerned agencies.
The IACC Secretariat shall coordinate with the different Social Security and Services Agencies to
establish the standards in the use of Biometrics Technology and in computer application designs
of their respective systems.
Sec. 5. Conduct of Information Dissemination Campaign. The Office of the Press Secretary, in
coordination with the National Statistics Office, the GSIS and SSS as lead agencies and other
concerned agencies shall undertake a massive tri-media information dissemination campaign to
educate and raise public awareness on the importance and use of the PRN and the Social Security
Identification Reference.
Sec. 6. Funding. The funds necessary for the implementation of the system shall be sourced from
the respective budgets of the concerned agencies.
Sec. 7. Submission of Regular Reports. The NSO, GSIS and SSS shall submit regular reports to the
Office of the President through the IACC, on the status of implementation of this undertaking.
Sec. 8. Effectivity. This Administrative Order shall take effect immediately.
DONE in the City of Manila, this 12th day of December in the year of Our Lord, Nineteen Hundred
and Ninety-Six.
(SGD.) FIDEL V. RAMOS
A.O. No. 308 was published in four newspapers of general circulation on January 22, 1997 and January
23, 1997. On January 24, 1997, petitioner filed the instant petition against respondents, then Executive
Secretary Ruben Torres and the heads of the government agencies, who as members of the Inter-
Agency Coordinating Committee, are charged with the implementation of A.O. No. 308. On April 8,
1997, we issued a temporary restraining order enjoining its implementation.
Petitioner contends:
A. THE ESTABLISNMENT OF A NATIONAL COMPUTERIZED IDENTIFICATION REFERENCE
SYSTEM REQUIRES A LEGISLATIVE ACT. THE ISSUANCE OF A.O. NO. 308 BY THE PRESIDENT
OF THE REPUBLIC OF THE PHILIPPINES IS, THEREFORE, AN UNCONSTITUTIONAL
USURPATION OF THE LEGISLATIVE POWERS OF THE CONGRESS OF THE REPUBLIC OF THE
PHILIPPINES.
B. THE APPROPRIATION OF PUBLIC FUNDS BY THE PRESIDENT FOR THE IMPLEMENTATION
OF A.O. NO. 308 IS AN UNCONSTITUTIONAL USURPATION OF THE EXCLUSIVE RIGHT OF
CONGRESS TO APPROPRIATE PUBLIC FUNDS FOR EXPENDITURE.
C. THE IMPLEMENTATION OF A.O. NO. 308 INSIDIOUSLY LAYS THE GROUNDWORK FOR A
SYSTEM WHICH WILL VIOLATE THE BILL OF RIGHTS ENSHRINED IN THE CONSTITUTION. 2
Respondents counter-argue:
A. THE INSTANT PETITION IS NOT A JUSTICIABLE CASE AS WOULD WARRANT A JUDICIAL
REVIEW;
B. A.O. NO. 308 [1996] WAS ISSUED WITHIN THE EXECUTIVE AND ADMINISTRATIVE POWERS
OF THE PRESIDENT WITHOUT ENCROACHING ON THE LEGISLATIVE POWERS OF
CONGRESS;
C. THE FUNDS NECESSARY FOR THE IMPLEMENTATION OF THE IDENTIFICATION REFERENCE
SYSTEM MAY BE SOURCED FROM THE BUDGETS OF THE CONCERNED AGENCIES;
D. A.O. NO. 308 [1996] PROTECTS AN INDIVIDUAL'S INTEREST IN PRIVACY. 3
We now resolve.
I
140
As is usual in constitutional litigation, respondents raise the threshold issues relating to the standing
to sue of the petitioner and the justiciability of the case at bar. More specifically, respondents aver that
petitioner has no legal interest to uphold and that the implementing rules of A.O. No. 308 have yet to be
promulgated.
These submissions do not deserve our sympathetic ear. Petitioner Ople is a distinguished member of
our Senate. As a Senator, petitioner is possessed of the requisite standing to bring suit raising the
issue that the issuance of A.O. No. 308 is a usurpation of legislative power. 4 As taxpayer and member
of the Government Service Insurance System (GSIS), petitioner can also impugn the legality of the
misalignment of public funds and the misuse of GSIS funds to implement A.O. No. 308. 5
The ripeness for adjudication of the Petition at bar is not affected by the fact that the implementing
rules of A.O. No. 308 have yet to be promulgated. Petitioner Ople assails A.O. No. 308 as invalid per
se and as infirmed on its face. His action is not premature for the rules yet to be promulgated cannot
cure its fatal defects. Moreover, the respondents themselves have started the implementation of A.O.
No. 308 without waiting for the rules. As early as January 19, 1997, respondent Social Security System
(SSS) caused the publication of a notice to bid for the manufacture of the National Identification (ID)
card. 6 Respondent Executive Secretary Torres has publicly announced that representatives from the
GSIS and the SSS have completed the guidelines for the national identification system. 7 All signals
from the respondents show their unswerving will to implement A.O. No. 308 and we need not wait for
the formality of the rules to pass judgment on its constitutionality. In this light, the dissenters
insistence that we tighten the rule on standing is not a commendable stance as its result would be to
throttle an important constitutional principle and a fundamental right.
II
We now come to the core issues. Petitioner claims that A.O. No. 308 is not a mere administrative order
but a law and hence, beyond the power of the President to issue. He alleges that A.O. No. 308
establishes a system of identification that is all-encompassing in scope, affects the life and liberty of
every Filipino citizen and foreign resident, and more particularly, violates their right to privacy.
Petitioner's sedulous concern for the Executive not to trespass on the lawmaking domain of Congress
is understandable. The blurring of the demarcation line between the power of the Legislature to make
laws and the power of the Executive to execute laws will disturb their delicate balance of power and
cannot be allowed. Hence, the exercise by one branch of government of power belonging to another
will be given a stricter scrutiny by this Court.
The line that delineates Legislative and Executive power is not indistinct. Legislative power is "the
authority, under the Constitution, to make laws, and to alter and repeal them." 8 The Constitution, as
the will of the people in their original, sovereign and unlimited capacity, has vested this power in the
Congress of the Philippines. 9 The grant of legislative power to Congress is broad, general and
comprehensive. 10 The legislative body possesses plenary power for all purposes of civil
government. 11 Any power, deemed to be legislative by usage and tradition, is necessarily possessed
by Congress, unless the Constitution has lodged it elsewhere. 12 In fine, except as limited by the
Constitution, either expressly or impliedly, legislative power embraces all subjects and extends to
matters of general concern or common interest. 13
While Congress is vested with the power to enact laws, the President executes the laws. 14 The
executive power is vested in the Presidents. 15 It is generally defined as the power to enforce and
administer the laws. 16 It is the power of carrying the laws into practical operation and enforcing their
due observance. 17
As head of the Executive Department, the President is the Chief Executive. He represents the
government as a whole and sees to it that all laws are enforced by the officials and employees of his
department. 18 He has control over the executive department, bureaus and offices. This means that he
has the authority to assume directly the functions of the executive department, bureau and office or
interfere with the discretion of its officials.19 Corollary to the power of control, the President also has
the duty of supervising the enforcement of laws for the maintenance of general peace and public order.
Thus, he is granted administrative power over bureaus and offices under his control to enable him to
discharge his duties effectively. 20
Administrative power is concerned with the work of applying policies and enforcing orders as
determined by proper governmental organs. 21 It enables the President to fix a uniform standard of
141
administrative efficiency and check the official conduct of his agents. 22 To this end, he can issue
administrative orders, rules and regulations.
Prescinding from these precepts, we hold that A.O. No. 308 involves a subject that is not appropriate to
be covered by an administrative order. An administrative order is:
Sec. 3. Administrative Orders. Acts of the President which relate to particular aspects
of governmental operation in pursuance of his duties as administrative head shall be
promulgated in administrative orders. 23
An administrative order is an ordinance issued by the President which relates to specific
aspects in the administrative operation of government. It must be in harmony with the law and
should be for the sole purpose of implementing the law and carrying out the legislative
policy. 24 We reject the argument that A.O. No. 308 implements the legislative policy of the
Administrative Code of 1987. The Code is a general law and "incorporates in a unified document
the major structural, functional and procedural principles of governance." 25 and "embodies
changes in administrative structure and procedures designed to serve the
people." 26 The Code is divided into seven (7) Books: Book I deals with Sovereignty and General
Administration, Book II with the Distribution of Powers of the three branches of Government,
Book III on the Office of the President, Book IV on the Executive Branch, Book V on
Constitutional Commissions, Book VI on National Government Budgeting, and Book VII on
Administrative Procedure. These Books contain provisions on the organization, powers and
general administration of the executive, legislative and judicial branches of government, the
organization and administration of departments, bureaus and offices under the executive
branch, the organization and functions of the Constitutional Commissions and other
constitutional bodies, the rules on the national government budget, as well as guideline for the
exercise by administrative agencies of quasi-legislative and quasi-judicial powers. The Code
covers both the internal administration of government, i.e, internal organization, personnel and
recruitment, supervision and discipline, and the effects of the functions performed by
administrative officials on private individuals or parties outside government. 27
It cannot be simplistically argued that A.O. No. 308 merely implements the Administrative Code of
1987. It establishes for the first time a National Computerized Identification Reference System. Such a
System requires a delicate adjustment of various contending state policies the primacy of national
security, the extent of privacy interest against dossier-gathering by government, the choice of policies,
etc. Indeed, the dissent of Mr. Justice Mendoza states that the A.O. No. 308 involves the all-important
freedom of thought. As said administrative order redefines the parameters of some basic rights of our
citizenry vis-a-vis the State as well as the line that separates the administrative power of the President
to make rules and the legislative power of Congress, it ought to be evident that it deals with a subject
that should be covered by law.
Nor is it correct to argue as the dissenters do that A.D. No. 308 is not a law because it confers no right,
imposes no duty, affords no proctection, and creates no office. Under A.O. No. 308, a citizen cannot
transact business with government agencies delivering basic services to the people without the
contemplated identification card. No citizen will refuse to get this identification card for no one can
avoid dealing with government. It is thus clear as daylight that without the ID, a citizen will have
difficulty exercising his rights and enjoying his privileges. Given this reality, the contention that A.O.
No. 308 gives no right and imposes no duty cannot stand.
Again, with due respect, the dissenting opinions unduly expand the limits of administrative legislation
and consequently erodes the plenary power of Congress to make laws. This is contrary to the
established approach defining the traditional limits of administrative legislation. As well stated by
Fisher: ". . . Many regulations however, bear directly on the public. It is here that administrative
legislation must he restricted in its scope and application. Regulations are not supposed to be a
substitute for the general policy-making that Congress enacts in the form of a public law. Although
administrative regulations are entitled to respect, the authority to prescribe rules and regulations is not
an independent source of power to make laws." 28
III
Assuming, arguendo, that A.O. No. 308 need not be the subject of a law, still it cannot pass
constitutional muster as an administrative legislation because facially it violates the right to privacy.
142
The essence of privacy is the "right to be let alone." 29 In the 1965 case of Griswold v.
Connecticut, 30 the United States Supreme Court gave more substance to the right of privacy when it
ruled that the right has a constitutional foundation. It held that there is a right of privacy which can be
found within the penumbras of the First, Third, Fourth, Fifth and Ninth Amendments, 31 viz:
Specific guarantees in the Bill of Rights have penumbras formed by emanations from
these guarantees that help give them life and substance . . . various guarantees create
zones of privacy. The right of association contained in the penumbra of the First
Amendment is one, as we have seen. The Third Amendment in its prohibition against the
quartering of soldiers "in any house" in time of peace without the consent of the owner is
another facet of that privacy. The Fourth Amendment explicitly affirms the ''right of the
people to be secure in their persons, houses and effects, against unreasonable searches
and seizures." The Fifth Amendment in its Self-Incrimination Clause enables the citizen
to create a zone of privacy which government may not force him to surrender to his
detriment. The Ninth Amendment provides: "The enumeration in the Constitution, of
certain rights, shall not be construed to deny or disparage others retained by the
people."
In the 1968 case of Morfe v. Mutuc, 32 we adopted the Griswold ruling that there is a
constitutional right to privacy. Speaking thru Mr. Justice, later Chief Justice, Enrique Fernando,
we held:
xxx xxx xxx
The Griswold case invalidated a Connecticut statute which made the use of
contraceptives a criminal offence on the ground of its amounting to an unconstitutional
invasion of the right of privacy of married persons; rightfully it stressed "a relationship
lying within the zone of privacy created by several fundamental constitutional
guarantees." It has wider implications though. The constitutional right to privacy has
come into its own.
So it is likewise in our jurisdiction. The right to privacy as such is accorded recognition
independently of its identification with liberty; in itself, it is fully deserving of
constitutional protection. The language of Prof. Emerson is particularly apt: "The
concept of limited government has always included the idea that governmental powers
stop short of certain intrusions into the personal life of the citizen. This is indeed one of
the basic distinctions between absolute and limited government. Ultimate and pervasive
control of the individual, in all aspects of his life, is the hallmark of the absolute state. In
contrast, a system of limited government safeguards a private sector, which belongs to
the individual, firmly distinguishing it from the public sector, which the state can control.
Protection of this private sector protection, in other words, of the dignity and integrity
of the individual has become increasingly important as modern society has
developed. All the forces of a technological age industrialization, urbanization, and
organization operate to narrow the area of privacy and facilitate intrusion into it. In
modern terms, the capacity to maintain and support this enclave of private life marks the
difference between a democratic and a totalitarian society."
Indeed, if we extend our judicial gaze we will find that the right of privacy is recognized and enshrined
in several provisions of our Constitution. 33 It is expressly recognized in section 3 (1) of the Bill of
Rights:
Sec. 3. (1) The privacy of communication and correspondence shall be inviolable except
upon lawful order of the court, or when public safety or order requires otherwise as
prescribed by law.
Other facets of the right to privacy are protectad in various provisions of the Bill of
Rights, viz: 34
Sec. 1. No person shall be deprived of life, liberty, or property without due process of law,
nor shall any person be denied the equal protection of the laws.
Sec. 2. The right of the people to be secure in their persons, houses papers, and effects
against unreasonable searches and seizures of whatever nature and for any purpose
shall be inviolable, and no search warrant or warrant of arrest shall issue except upon
143
probable cause to be determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and particularly
describing the place to be searched and the persons or things to be seized.
xxx xxx xxx
Sec. 6. The liberty of abode and of changing the same within the limits prescribed by law
shall not be impaired except upon lawful order of the court. Neither shall the right to
travel be impaired except in the interest of national security, public safety, or public
health as may be provided by law.
xxx xxx xxx
Sec. 8. The right of the people, including those employed in the public and private
sectors, to form unions, associations, or societies for purposes not contrary to law shall
not be abridged.
Sec. 17. No person shall be compelled to be a witness against himself.
Zones of privacy are likewise recognized and protected in our laws. The Civil Code provides that
"[e]very person shall respect the dignity, personality, privacy and peace of mind of his neighbors and
other persons" and punishes as actionable torts several acts by a person of meddling and prying into
the privacy of another. 35 It also holds a public officer or employee or any private individual liable for
damages for any violation of the rights and liberties of another person, 36 and recognizes the privacy of
letters and other private communications. 37 The Revised Penal Code makes a crime the violation of
secrets by an officer, 38the revelation of trade and industrial secrets, 39 and trespass to
dwelling. 40 Invasion of privacy is an offense in special laws like the Anti-Wiretapping Law, 41 the
Secrecy of Bank Deposits Act 42 and the Intellectual Property Code. 43 The Rules of Court on privileged
communication likewise recognize the privacy of certain information. 44
Unlike the dissenters, we prescind from the premise that the right to privacy is a fundamental right
guaranteed by the Constitution, hence, it is the burden of government to show that A.O. No. 308 is
justified by some compelling state interest and that it is narrowly drawn. A.O. No. 308 is predicated on
two considerations: (1) the need to provides our citizens and foreigners with the facility to
conveniently transact business with basic service and social security providers and other government
instrumentalities and (2) the need to reduce, if not totally eradicate, fraudulent transactions and
misrepresentations by persons seeking basic services. It is debatable whether these interests are
compelling enough to warrant the issuance of A.O. No. 308. But what is not arguable is the broadness,
the vagueness, the overbreadth of A.O. No. 308 which if implemented will put our people's right to
privacy in clear and present danger.
The heart of A.O. No. 308 lies in its Section 4 which provides for a Population Reference Number (PRN)
as a "common reference number to establish a linkage among concerned agencies" through the use of
"Biometrics Technology" and "computer application designs."
Biometry or biometrics is "the science of the applicatin of statistical methods to biological facts; a
mathematical analysis of biological data." 45 The term "biometrics" has evolved into a broad category
of technologies which provide precise confirmation of an individual's identity through the use of the
individual's own physiological and behavioral characteristics. 46 A physiological characteristic is a
relatively stable physical characteristic such as a fingerprint, retinal scan, hand geometry or facial
features. A behavioral characteristic is influenced by the individual's personality and includes voice
print, signature and keystroke. 47 Most biometric idenfication systems use a card or personal
identificatin number (PIN) for initial identification. The biometric measurement is used to verify that the
individual holding the card or entering the PIN is the legitimate owner of the card or PIN. 48
A most common form of biological encoding is finger-scanning where technology scans a fingertip
and turns the unique pattern therein into an individual number which is called a biocrypt. The biocrypt
is stored in computer data banks 49 and becomes a means of identifying an individual using a service.
This technology requires one's fingertip to be scanned every time service or access is
provided. 50 Another method is the retinal scan. Retinal scan technology employs optical technology to
map the capillary pattern of the retina of the eye. This technology produces a unique print similar to a
finger print. 51 Another biometric method is known as the "artificial nose." This device chemically
analyzes the unique combination of substances excreted from the skin of people. 52 The latest on the
list of biometric achievements is the thermogram. Scientists have found that by taking pictures of a
144
face using infra-red cameras, a unique heat distribution pattern is seen. The different densities of
bone, skin, fat and blood vessels all contribute to the individual's personal "heat signature." 53
In the last few decades, technology has progressed at a galloping rate. Some science fictions are now
science facts. Today, biometrics is no longer limited to the use of fingerprint to identify an individual. It
is a new science that uses various technologies in encoding any and all biological characteristics of an
individual for identification. It is noteworthy that A.O. No. 308 does not state what specific biological
characteristics and what particular biometrics technology shall be used to identify people who will
seek its coverage. Considering the banquest of options available to the implementors of A.O. No. 308,
the fear that it threatens the right to privacy of our people is not groundless.
A.O. No. 308 should also raise our antennas for a further look will show that it does not state whether
encoding of data is limited to biological information alone for identification purposes. In fact, the
Solicitor General claims that the adoption of the Identification Reference System will contribute to the
"generation of population data for development planning." 54 This is an admission that the PRN will not
be used solely for identification but the generation of other data with remote relation to the avowed
purposes of A.O. No. 308. Clearly, the indefiniteness of A.O. No. 308 can give the government the
roving authority to store and retrieve information for a purpose other than the identification of the
individual through his PRN.
The potential for misuse of the data to be gathered under A.O. No. 308 cannot be undarplayed as the
dissenters do. Pursuant to said administrative order, an individual must present his PRN everytime he
deals with a government agency to avail of basic services and security. His transactions with the
government agency will necessarily be recorded whether it be in the computer or in the
documentary file of the agency. The individual's file may include his transactions for loan availments,
income tax returns, statement of assets and liabilities, reimbursements for medication, hospitalization,
etc. The more frequent the use of the PRN, the better the chance of building a huge formidable
informatin base through the electronic linkage of the files. 55 The data may be gathered for gainful and
useful government purposes; but the existence of this vast reservoir of personal information
constitutes a covert invitation to misuse, a temptation that may be too great for some of our authorities
to resist. 56
We can even grant, arguendo, that the computer data file will be limited to the name, address and other
basic personal infomation about the individual. 57 Even that hospitable assumption will not save A.O.
No. 308 from constitutional infirmity for again said order does not tell us in clear and categorical terms
how these information gathered shall he handled. It does not provide who shall control and access the
data, under what circumstances and for what purpose. These factors are essential to safeguard the
privacy and guaranty the integrity of the information. 58 Well to note, the computer linkage gives other
government agencies access to the information. Yet, there are no controls to guard against leakage of
information. When the access code of the control programs of the particular computer system is
broken, an intruder, without fear of sanction or penalty, can make use of the data for whatever purpose,
or worse, manipulate the data stored within the system. 59
It is plain and we hold that A.O. No. 308 falls short of assuring that personal information which will be
gathered about our people will only be processed for unequivocally specified purposes. 60 The lack of
proper safeguards in this regard of A.O. No. 308 may interfere with the individual's liberty of abode and
travel by enabling authorities to track down his movement; it may also enable unscrupulous persons
to access confidential information and circumvent the right against self-incrimination; it may pave the
way for "fishing expeditions" by government authorities and evade the right against unreasonable
searches and seizures. 61 The possibilities of abuse and misuse of the PRN, biometrics and computer
technology are accentuated when we consider that the individual lacks control over what can be read
or placed on his ID, much less verify the correctness of the data encoded. 62 They threaten the very
abuses that the Bill of Rights seeks to prevent. 63
The ability of sophisticated data center to generate a comprehensive cradle-to-grave dossier on an
individual and transmit it over a national network is one of the most graphic threats of the computer
revolution. 64 The computer is capable of producing a comprehensive dossier on individuals out of
information given at different times and for varied purposes. 65 It can continue adding to the stored
data and keeping the information up to date. Retrieval of stored date is simple. When information of a
privileged character finds its way into the computer, it can be extracted together with other data on the
145
subject. 66Once extracted, the information is putty in the hands of any person. The end of privacy
begins.
Though A.O. No. 308 is undoubtedly not narrowly drawn, the dissenting opinions would dismiss its
danger to the right to privacy as speculative and hypothetical. Again, we cannot countenance such a
laidback posture. The Court will not be true to its role as the ultimate guardian of the people's liberty if
it would not immediately smother the sparks that endanger their rights but would rather wait for the
fire that could consume them.
We reject the argument of the Solicitor General that an individual has a reasonable expectation of
privacy with regard to the Natioal ID and the use of biometrics technology as it stands on quicksand.
The reasonableness of a person's expectation of privacy depends on a two-part test: (1) whether by his
conduct, the individual has exhibited an expectation of privacy; and (2) whether this expectation is one
that society recognizes as reasonable. 67 The factual circumstances of the case determines the
reasonableness of the expectation. 68 However, other factors, such as customs, physical surroundings
and practices of a particular activity, may serve to create or diminish this expectation. 69 The use of
biometrics and computer technology in A.O. No. 308 does not assure the individual of a reasonable
expectation of privacy. 70 As technology advances, the level of reasonably expected privacy
decreases. 71 The measure of protection granted by the reasonable expectation diminishes as relevant
technology becomes more widely accepted. 72 The security of the computer data file depends not only
on the physical inaccessibility of the file but also on the advances in hardware and software computer
technology. A.O. No. 308 is so widely drawn that a minimum standard for a reasonable expectation of
privacy, regardless of technology used, cannot be inferred from its provisions.
The rules and regulations to be by the IACC cannot remedy this fatal defect. Rules and regulations
merely implement the policy of the law or order. On its face, A.O. No. gives the IACC virtually infettered
discretion to determine the metes and bounds of the ID System.
Nor do your present laws prvide adequate safeguards for a reasonable expectation of privacy.
Commonwealth Act. No. 591 penalizes the disclosure by any person of data furnished by the individual
to the NSO with imprisonment and fine. 73 Republic Act. No. 1161 prohibits public disclosure of SSS
employment records and reports. 74 These laws, however, apply to records and data with the NSO and
the SSS. It is not clear whether they may be applied to data with the other government agencies
forming part of the National ID System. The need to clarify the penal aspect of A.O. No. 308 is another
reason why its enactment should be given to Congress.
Next, the Solicitor General urges us to validate A.O. No. 308's abridgment of the right of privacy by
using the rational relationship test. 75 He stressed that the purposes of A.O. No. 308 are: (1) to
streamline and speed up the implementation of basic government services, (2) eradicate fraud by
avoiding duplication of services, and (3) generate population data for development planning. He
cocludes that these purposes justify the incursions into the right to privacy for the means are
rationally related to the end. 76
We are not impressed by the argument. In Morfe v. Mutuc, 77 we upheld the constitutionality of R.A.
3019, the Anti-Graft and Corrupt Practices Act, as a valid police power measure. We declared that the
law, in compelling a public officer to make an annual report disclosing his assets and liabilities, his
sources of income and expenses, did not infringe on the individual's right to privacy. The law was
enacted to promote morality in public administration by curtailing and minimizing the opportunities for
official corruption and maintaining a standard of honesty in the public service. 78
The same circumstances do not obtain in the case at bar. For one, R.A. 3019 is a statute, not an
administrative order. Secondly, R.A. 3019 itself is sufficiently detailed. The law is clear on what
practices were prohibited and penalized, and it was narrowly drawn to avoid abuses. IN the case at bar,
A.O. No. 308 may have been impelled by a worthy purpose, but, it cannot pass constitutional scrutiny
for it is not narrowly drawn. And we now hod that when the integrity of a fundamental right is at stake,
this court will give the challenged law, administrative order, rule or regulation a stricter scrutiny. It will
not do for the authorities to invoke the presumption of regularity in the performance of official duties.
Nor is it enough for the authorities to prove that their act is not irrational for a basic right can be
diminished, if not defeated, even when the government does not act irrationally. They must
satisfactorily show the presence of compelling state interests and that the law, rule or regulation is
narrowly drawn to preclude abuses. This approach is demanded by the 1987 Constitution whose entire
146
matrix is designed to protect human rights and to prevent authoritarianism. In case of doubt, the least
we can do is to lean towards the stance that will not put in danger the rights protected by the
Constitutions.
The case of Whalen v. Roe 79 cited by the Solicitor General is also off-line. In Whalen, the United States
Supreme Court was presented with the question of whether the State of New York could keep a
centralized computer record of the names and addresses of all persons who obtained certain drugs
pursuant to a doctor's prescription. The New York State Controlled Substance Act of 1972 required
physicians to identify parties obtaining prescription drugs enumerated in the statute, i.e., drugs with a
recognized medical use but with a potential for abuse, so that the names and addresses of the patients
can be recorded in a centralized computer file of the State Department of Health. The plaintiffs, who
were patients and doctors, claimed that some people might decline necessary medication because of
their fear that the computerized data may be readily available and open to public disclosure; and that
once disclosed, it may stigmatize them as drug addicts. 80 The plaintiffs alleged that the statute
invaded a constitutionally protected zone of privacy, i.e., the individual interest in avoiding disclosure
of personal matters, and the interest in independence in making certain kinds of important decisions.
The U.S. Supreme Court held that while an individual's interest in avoiding disclosuer of personal
matter is an aspect of the right to privacy, the statute did not pose a grievous threat to establish a
constitutional violation. The Court found that the statute was necessary to aid in the enforcement of
laws designed to minimize the misuse of dangerous drugs. The patient-identification requirement was
a product of an orderly and rational legislative decision made upon recommmendation by a specially
appointed commission which held extensive hearings on the matter. Moreover, the statute was
narrowly drawn and contained numerous safeguards against indiscriminate disclosure. The statute
laid down the procedure and requirements for the gathering, storage and retrieval of the informatin. It
ebumerated who were authorized to access the data. It also prohibited public disclosure of the data by
imposing penalties for its violation. In view of these safeguards, the infringement of the patients' right
to privacy was justified by a valid exercise of police power. As we discussed above, A.O. No. 308 lacks
these vital safeguards.
Even while we strike down A.O. No. 308, we spell out in neon that the Court is not per se agains the use
of computers to accumulate, store, process, retvieve and transmit data to improve our bureaucracy.
Computers work wonders to achieve the efficiency which both government and private industry seek.
Many information system in different countries make use of the computer to facilitate important social
objective, such as better law enforcement, faster delivery of public services, more efficient
management of credit and insurance programs, improvement of telecommunications and streamlining
of financial activities. 81 Used wisely, data stored in the computer could help good administration by
making accurate and comprehensive information for those who have to frame policy and make key
decisions. 82 The benefits of the computer has revolutionized information technology. It developed the
internet, 83 introduced the concept of cyberspace 84 and the information superhighway where the
individual, armed only with his personal computer, may surf and search all kinds and classes of
information from libraries and databases connected to the net.
In no uncertain terms, we also underscore that the right to privacy does not bar all incursions into
individual privacy. The right is not intended to stifle scientific and technological advancements that
enhance public service and the common good. It merely requires that the law be narrowly
focused 85 and a compelling interest justify such intrusions. 86 Intrusions into the right must be
accompanied by proper safeguards and well-defined standards to prevent unconstitutional invasions.
We reiterate that any law or order that invades individual privacy will be subjected by this Court to
strict scrutiny. The reason for this stance was laid down in Morfe v. Mutuc, to wit:
The concept of limited government has always included the idea that governmental
powers stop short of certain intrusions into the personal life of the citizen. This is indeed one of
the basic disctinctions between absolute and limited government. Ultimate and pervasive control
of the individual, in all aspects of his life, is the hallmark of the absolute state. In contrast, a
system of limited government safeguards a private sector, which belongs to the individual, firmly
distinguishing it from the public sector, which the state can control. Protection of this private
sector protection, in other words, of the dignity and integrity of the individual has become
increasingly important as modern society has developed. All the forces of a technological age
147
industrialization, urbanization, and organization operate to narrow the area of privacy and
facilitate intrusion into it. In modern terms, the capacity to maintain and support this enclave of
private life marks the difference between a democratic and a totalitarian society. 87
IV
The right to privacy is one of the most threatened rights of man living in a mass society. The threats
emanate from various sources governments, journalists, employers, social scientists, etc. 88 In th
case at bar, the threat comes from the executive branch of government which by issuing A.O. No. 308
pressures the people to surrender their privacy by giving information about themselves on the pretext
that it will facilitate delivery of basic services. Given the record-keeping power of the computer, only
the indifferent fail to perceive the danger that A.O. No. 308 gives the government the power to compile
a devastating dossier against unsuspecting citizens. It is timely to take note of the well-worded
warning of Kalvin, Jr., "the disturbing result could be that everyone will live burdened by an unerasable
record of his past and his limitations. In a way, the threat is that because of its record-keeping, the
society will have lost its benign capacity to forget." 89 Oblivious to this counsel, the dissents still say
we should not be too quick in labelling the right to privacy as a fundamental right. We close with the
statement that the right to privacy was not engraved in our Constitution for flattery.
IN VIEW WHEREOF, the petition is granted and Adminisrative Order No. 308 entitled "Adoption of a
National Computerized Identification Reference System" declared null and void for being
unconstitutional.
SO ORDERED.

EN BANC

KILUSANG MAYO UNO, G.R. No. 167798

NATIONAL FEDERATION OF
LABOR UNIONS-KILUSANG
MAYO UNO (NAFLU-KMU),
JOSELITO V. USTAREZ,
EMILIA P. DAPULANG,
SALVADOR T. CARRANZA,
MARTIN T. CUSTODIO, JR. and
ROQUE M. TAN,
Petitioners,
- versus
THE DIRECTOR-GENERAL,
NATIONAL ECONOMIC
DEVELOPMENT AUTHORITY,
and THE SECRETARY,
DEPARTMENT OF BUDGET and
MANAGEMENT,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CARPIO, J.:

This case involves two consolidated petitions for certiorari, prohibition, and mandamus under Rule 65 of the
Rules of Court, seeking the nullification of Executive Order No. 420 (EO 420) on the ground that it is
unconstitutional.

EO 420, issued by President Gloria Macapagal-Arroyo on 13 April 2005, reads:

148
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. 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.
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Section 4. Authorizing the Director-General, National Economic and Development
Authority, to Harmonize All Government Identification Systems. The Director-General,
National Economic Development Authority, is hereby authorized to streamline and harmonize all
government ID systems.
Section 5. Functions and responsibilities of the Director-General, National
Economic and Development Authority. In addition to his organic functions and
responsibilities, the Director-General, National Economic and Development Authority, shall have
the following functions and responsibilities:
a. Adopt within sixty (60) days from the effectivity of this executive order a unified
government ID system containing only such data and features, as indicated in
Section 3 above, to validly establish the identity of the card holder:
b. Enter into agreements with local governments, through their respective
leagues of governors or mayors, the Commission on Elections (COMELEC), and
with other branches or instrumentalities of the government, for the purpose of
ensuring government-wide adoption of and support to this effort to streamline the
ID systems in government;
b. Call on any other government agency or institution, or create
subcommittees or technical working groups, to provide such assistance as may
be necessary or required for the effective performance of its functions; and
d. Promulgate such rules or regulations as may be necessary in pursuance of the
objectives of this executive order.
Section 6. Safeguards. The Director-General, National Economic and Development
Authority, and the pertinent agencies shall adopt such safeguard as may be necessary and
adequate to ensure that the right to privacy of an individual takes precedence over efficient
public service delivery. Such safeguards shall, as a minimum, include the following:
a. The data to be recorded and stored, which shall be used only for purposes of
establishing the identity of a person, shall be limited to those specified in Section
3 of this executive order;
b. In no case shall the collection or compilation of other data in violation of a persons
right to privacy shall be allowed or tolerated under this order;
c. Stringent systems of access control to data in the identification system shall be
instituted;
d. Data collected and stored for this purpose shall be kept and treated as strictly
confidential and a personal or written authorization of the Owner shall be
required for access and disclosure of data;
e. The identification card to be issued shall be protected by advanced security features
and cryptographic technology; and
f. A written request by the Owner of the identification card shall be required for any
correction or revision of relevant data, or under such conditions as the
participating agency issuing the identification card shall prescribe.
Section 7. Funding. Such funds as may be recommended by the Department of Budget
and Management shall be provided to carry out the objectives of this executive order.
Section 8. Repealing clause. All executive orders or issuances, or portions thereof,
which are inconsistent with this executive order, are hereby revoked, amended or modified
accordingly.
Section 9. Effectivity. This executive order shall take effect fifteen (15) days after its
publication in two (2) newspapers of general circulation.

DONE in the City of Manila, this 13th day of April, in the year of Our Lord, Two Thousand
and Five.

Thus, under EO 420, the President directs all government agencies and government-owned and
controlled corporations to adopt a uniform data collection and format for their existing identification (ID)
systems.
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Petitioners in G.R. No. 167798 allege that EO 420 is unconstitutional because it constitutes usurpation of
legislative functions by the executive branch of the government. Furthermore, they allege that EO 420 infringes
on the citizens right to privacy.[1]

Petitioners in G.R. No. 167930 allege that EO 420 is void based on the following grounds:

1. EO 420 is contrary to law. It completely disregards and violates the decision of this Honorable
Court in Ople v. Torres et al., G.R. No. 127685, July 23, 1998. It also violates RA 8282
otherwise known as the Social Security Act of 1997.

2. The Executive has usurped the legislative power of Congress as she has no power to issue
EO 420. Furthermore, the implementation of the EO will use public funds not
appropriated by Congress for that purpose.

3. EO 420 violates the constitutional provisions on the right to privacy

(i) It allows access to personal confidential data without the owners consent.

(ii) EO 420 is vague and without adequate safeguards or penalties for any
violation of its provisions.

(iii) There are no compelling reasons that will legitimize the necessity of EO 420.

4. Granting without conceding that the President may issue EO 420, the Executive Order was
issued without public hearing.
5. EO 420 violates the Constitutional provision on equal protection of laws and results in the
discriminatory treatment of and penalizes those without ID.[2]

Issues

Essentially, the petitions raise two issues. First, petitioners claim that EO 420 is a usurpation of
legislative power by the President. Second, petitioners claim that EO 420 infringes on the citizens right to
privacy.

Respondents question the legal standing of petitioners and the ripeness of the petitions. Even
assuming that petitioners are bereft of legal standing, the Court considers the issues raised under the
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
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government entities are the GSIS,[3] SSS,[4] Philhealth,[5] Mayors Office,[6] LTO,[7] PRC,[8] and similar government
entities.
Section 1 of EO 420 directs these government entities to adopt a unified multi-purpose ID
system. Thus, all government entities that issue IDs as part of their functions under existing laws are required
to adopt a uniform data collection and format for their IDs. Section 1 of EO 420 enumerates
the purposes of the uniform data collection and format, namely:

a. To reduce costs and thereby lessen the financial burden on both the government
and the public brought about by the use of multiple ID cards and the maintenance of
redundant database containing the same or related information;

b. To ensure greater convenience for those transacting business with the government
and those availing of government services;

c. To facilitate private businesses and promote the wider use of the unified ID card
as provided under this executive order;
d. To enhance the integrity and reliability of government-issued ID cards; and

e. To facilitate access to and delivery of quality and effective government service.

In short, the purposes of the uniform ID data collection and ID format are to reduce costs, achieve efficiency
and reliability, insure compatibility, and provide convenience to the people served by government entities.

Section 3 of EO 420 limits the data to be collected and recorded under the uniform ID system to only 14
specific items, namely: (1) Name; (2) Home Address; (3) Sex; (4) Picture; (5) Signature; (6) Date of Birth; (7)
Place of Birth; (8) Marital Status; (9) Name of Parents; (10) Height; (11) Weight; (12) Two index fingers and two
thumbmarks; (13) Any prominent distinguishing features like moles or others; and (14) Tax Identification
Number.

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
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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
153
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
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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,[13] U.S. Justice Department v. Reporters Committee for Freedom of the Press,[14] and Whalen v.
Roe.[15] The last two decisions actually support the validity of EO 420, while the first is inapplicable to the
present case.

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
155
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
156
reasonably directed to the preservation of maternal health and that properly respect a patients confidentiality
and privacy are permissible.

Again, in Planned Parenthood of Southeastern Pennsylvania v. Casey,[17] the U.S. Supreme

Court upheld a law that required doctors performing an abortion to file a report to the government that included
the doctors name, the womans age, the number of prior pregnancies and abortions that the woman had, the
medical complications from the abortion, the weight of the fetus, and the marital status of the woman. In case
of state-funded institutions, the law made such information publicly available. In Casey, the U.S. Supreme
Court stated: The collection of information with respect to actual patients is a vital element of medical research,
and so it cannot be said that the requirements serve no purpose other than to make abortion more difficult.

Compared to the disclosure requirements of personal data that the U.S. Supreme Court have upheld
in Whalen, Danforth and Casey as not violative of the right to privacy,the disclosure requirements under EO
420 are far benign and cannot therefore constitute violation of the right to privacy. EO 420 requires disclosure
of 14 personal data that are routine for ID purposes, data that cannot possibly embarrass or humiliate anyone.

Petitioners have not shown how EO 420 will violate their right to privacy. Petitioners cannot show such
violation by a mere facial examination of EO 420 because EO 420 narrowly draws the data collection,
recording and exhibition while prescribing comprehensive safeguards. Ople v. Torres[18] is not authority to hold
that EO 420 violates the right to privacy because in that case the assailed executive issuance, broadly drawn
and devoid of safeguards, was annulled solely on the ground that the subject matter required legislation. As
then Associate Justice, now Chief Justice Artemio V. Panganiban noted in his concurring opinion in Ople v.
Torres, The voting is decisive only on the need for appropriate legislation, and it is only on this ground that the
petition is granted by this Court.

EO 420 applies only to government entities that already maintain ID systems and issue ID cards
pursuant to their regular functions under existing laws. EO 420 does not grant such government entities any
power that they do not already possess under existing laws. In contrast, the assailed executive issuance
in Ople v. Torres sought to establish a National Computerized Identification Reference System,[19] a national
ID system that did not exist prior to the assailed executive issuance. Obviously, a national ID card system
requires legislation because it creates a new national data collection and card issuance system where none
existed before.

In the present case, EO 420 does not establish a national ID system but makes the existing sectoral
card systems of government entities like GSIS, SSS, Philhealth and LTO less costly, more efficient, reliable
and user-friendly to the public. Hence, EO 420 is a proper subject of executive issuance under the Presidents
constitutional power of control over government entities in the Executive department, as well as under the
Presidents constitutional duty to ensure that laws are faithfully executed.
WHEREFORE, the petitions are DISMISSED. Executive Order No. 420 is declared VALID.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice
WE CONCUR

EN BANC

SENATE OF THE PHILIPPINES, G.R. No. 169777*

represented by FRANKLIN M. DRILON, in Present:
his capacity as Senate President, JUAN M.
FLAVIER, in his capacity as Senate PANGANIBAN, C.J.,
President Pro Tempore, FRANCIS N. PUNO,**
157
PANGILINAN, in his capacity as Majority QUISUMBING,
Leader, AQUILINO Q. PIMENTEL, JR., in YNARES-SANTIAGO,
his capacity as Minority Leader, SANDOVAL-GUTIERREZ,
SENATORS RODOLFO G. BIAZON, CARPIO,
COMPANERA PIA S. CAYETANO, AUSTRIA-MARTINEZ,
JINGGOY EJERCITO ESTRADA, LUISA CORONA,
LOI EJERCITO ESTRADA, JUAN PONCE CARPIO MORALES,
ENRILE, RICHARD J. GORDON, CALLEJO, SR.,
PANFILO M. LACSON, ALFREDO S. LIM, AZCUNA,
M. A. MADRIGAL, SERGIO OSMENA III, TINGA,
RALPH G. RECTO, and MAR ROXAS, CHICO-NAZARIO,
Petitioners, GARCIA, and
VELASCO, JR., JJ.
- versus -

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 Promulgated:
the President of the Philippines,
Respondents.
x------------------------------------------x 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 G.R. No. 169659
VIRADOR, COURAGE represented by
FERDINAND GAITE, and COUNSELS
FOR THE DEFENSE OF LIBERTIES
(CODAL) represented by ATTY.
REMEDIOS BALBIN,
Petitioners,

- versus -

EDUARDO ERMITA, in his capacity as

Executive Secretary and alter-ego of
President Gloria Macapagal-Arroyo,
Respondent.
x------------------------------------------x

FRANCISCO I. CHAVEZ,
Petitioner,
- versus -

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 G.R. No. 169660
his capacity as AFP Chief of Staff,
158
Respondents.
x------------------------------------------x

ALTERNATIVE LAW GROUPS, INC.

(ALG),
Petitioner,

- versus -

HON. EDUARDO R. ERMITA, in his

capacity as Executive Secretary,
Respondent. G.R. No. 169667
x-----------------------------------------x

PDP- LABAN,
Petitioner,

- versus -

EXECUTIVE SECRETARY EDUARDO R.

ERMITA,
Respondent.
x------------------------------------------x G.R. No. 169834

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, G.R. No. 171246
Petitioners,

- versus -

HON. EXECUTIVE SECRETARY

EDUARDO R. ERMITA,
Respondent.
x-----------------------------------------------------------------------------------------x

DECISION
CARPIO MORALES, J.:

A transparent government is one of the hallmarks of a truly republican state. Even in the early history of
republican thought, however, it has been recognized that the head of government may keep certain information
confidential in pursuit of the public interest. Explaining the reason for vesting executive power in only one
magistrate, a distinguished delegate to the U.S. Constitutional Convention said: Decision, activity, secrecy, and
dispatch will generally characterize the proceedings of one man, in a much more eminent degree than the
proceedings of any greater number; and in proportion as the number is increased, these qualities will be
diminished.[1]
159
History has been witness, however, to the fact that the power to withhold information lends itself to
abuse, hence, the necessity to guard it zealously.

The present consolidated petitions for certiorari and prohibition proffer that the President has abused
such power by issuing Executive Order No. 464 (E.O. 464) last September 28, 2005. They thus pray for its
declaration as null and void for being unconstitutional.

In resolving the controversy, this Court shall proceed with the recognition that the issuance under
review has come from a co-equal branch of government, which thus entitles it to a strong presumption of
constitutionality. Once the challenged order is found to be indeed violative of the Constitution, it is duty-bound
to declare it so. For the Constitution, being the highest expression of the sovereign will of the Filipino people,
must prevail over any issuance of the government that contravenes its mandates.

In the exercise of its legislative power, the Senate of the Philippines, through its various Senate Committees,
conducts inquiries or investigations in aid of legislation which call for, inter alia, the attendance of officials and
employees of the executive department, bureaus, and offices including those employed in Government Owned
and Controlled Corporations, the Armed Forces of the Philippines (AFP), and the Philippine National Police
(PNP).

On September 21 to 23, 2005, the Committee of the Senate as a whole issued invitations to various
officials of the Executive Department for them to appear on September 29, 2005 as resource speakers in a
public hearing on the railway project of the North Luzon Railways Corporation with the China National
Machinery and Equipment Group (hereinafter North Rail Project). The public hearing was sparked by a
privilege speech of Senator Juan Ponce Enrile urging the Senate to investigate the alleged overpricing and
other unlawful provisions of the contract covering the North Rail Project.

The Senate Committee on National Defense and Security likewise issued invitations[2] dated September
22, 2005 to the following officials of the AFP: the Commanding General of the Philippine Army, Lt. Gen.
Hermogenes C. Esperon; Inspector General of the AFP Vice Admiral Mateo M. Mayuga; Deputy Chief of Staff
for Intelligence of the AFP Rear Admiral Tirso R. Danga; Chief of the Intelligence Service of the AFP Brig. Gen.
Marlu Q. Quevedo; Assistant Superintendent of the Philippine Military Academy (PMA) Brig. Gen. Francisco V.
Gudani; and Assistant Commandant, Corps of Cadets of the PMA, Col. Alexander F. Balutan, for them to
attend as resource persons in a public hearing scheduled on September 28, 2005 on the following: (1)
Privilege Speech of Senator Aquilino Q. Pimentel Jr., delivered on June 6, 2005 entitled Bunye has Provided
Smoking Gun or has Opened a Can of Worms that Show Massive Electoral Fraud in the Presidential Election
of May 2005; (2) Privilege Speech of Senator Jinggoy E. Estrada delivered on July 26, 2005 entitled The
Philippines as the Wire-Tapping Capital of the World; (3) Privilege Speech of Senator Rodolfo Biazon delivered
on August 1, 2005 entitled Clear and Present Danger; (4) Senate Resolution No. 285 filed by Senator Maria
Ana Consuelo Madrigal Resolution Directing the Committee on National Defense and Security to Conduct an
Inquiry, in Aid of Legislation, and in the National Interest, on the Role of the Military in the So-called Gloriagate
Scandal; and (5) Senate Resolution No. 295 filed by Senator Biazon Resolution Directing the Committee on
National Defense and Security to Conduct an Inquiry, in Aid of Legislation, on the Wire-Tapping of the
President of the Philippines.

Also invited to the above-said hearing scheduled on September 28 2005 was the AFP Chief of Staff,
General Generoso S. Senga who, by letter[3] dated September 27, 2005, requested for its postponement due to
a pressing operational situation that demands [his] utmost personal attention while some of the invited AFP
officers are currently attending to other urgent operational matters.

On September 28, 2005, Senate President Franklin M. Drilon received from Executive Secretary Eduardo R.
Ermita a letter[4] dated September 27, 2005 respectfully request[ing] for the postponement of the hearing
[regarding the NorthRail project] to which various officials of the Executive Department have been invited in
order to afford said officials ample time and opportunity to study and prepare for the various issues so that they
may better enlighten the Senate Committee on its investigation.
160

Senate President Drilon, however, wrote[5] Executive Secretary Ermita that the Senators are unable to accede
to [his request] as it was sent belatedly and [a]ll preparations and arrangements as well as notices to all
resource persons were completed [the previous] week.

Senate President Drilon likewise received on September 28, 2005 a letter [6] from the President of the North
Luzon Railways Corporation Jose L. Cortes, Jr. requesting that the hearing on the NorthRail project be
postponed or cancelled until a copy of the report of the UP Law Center on the contract agreements relative to
the project had been secured.

On September 28, 2005, the President issued E.O. 464, ENSURING OBSERVANCE OF THE
PRINCIPLE OF SEPARATION OF POWERS, ADHERENCE TO THE RULE ON EXECUTIVE PRIVILEGE
AND RESPECT FOR THE RIGHTS OF PUBLIC OFFICIALS APPEARING IN LEGISLATIVE INQUIRIES IN
AID OF LEGISLATION UNDER THE CONSTITUTION, AND FOR OTHER PURPOSES, [7] which, pursuant to
Section 6 thereof, took effect immediately. The salient provisions of the Order are as follows:

SECTION 1. Appearance by Heads of Departments Before Congress. In accordance with Article

VI, Section 22 of the Constitution and to implement the Constitutional provisions on the
separation of powers between co-equal branches of the government, all heads of departments
of the Executive Branch of the government shall secure the consent of the President
prior to appearing before either House of Congress.
When the security of the State or the public interest so requires and the President so states in
writing, the appearance shall only be conducted in executive session.
SECTION. 2. Nature, Scope and Coverage of Executive Privilege.
(a) Nature and Scope. - The rule of confidentiality based on executive privilege is fundamental
to the operation of government and rooted in the separation of powers under the Constitution
(Almonte vs. Vasquez, G.R. No. 95367, 23 May 1995). Further, Republic Act No. 6713 or the
Code of Conduct and Ethical Standards for Public Officials and Employees provides that Public
Officials and Employees shall not use or divulge confidential or classified information officially
known to them by reason of their office and not made available to the public to prejudice the
public interest.
Executive privilege covers all confidential or classified information between the President and
the public officers covered by this executive order, including:

i. Conversations and correspondence between the President and the public

official covered by this executive order (Almonte vs. Vasquez G.R. No.
95367, 23 May 1995; Chavez v. Public Estates Authority, G.R. No.
133250, 9 July 2002);
ii. Military, diplomatic and other national security matters which in the
interest of national security should not be divulged (Almonte vs. Vasquez,
G.R. No. 95367, 23 May 1995; Chavez v. Presidential Commission on
Good Government, G.R. No. 130716, 9 December 1998).
iii. Information between inter-government agencies prior to the conclusion of
treaties and executive agreements (Chavez v. Presidential Commission
on Good Government, G.R. No. 130716, 9 December 1998);
iv. Discussion in close-door Cabinet meetings (Chavez v. Presidential
Commission on Good Government, G.R. No. 130716, 9 December 1998);
v. Matters affecting national security and public order (Chavez v. Public
Estates Authority, G.R. No. 133250, 9 July 2002).

(b) Who are covered. The following are covered by this executive order:
161
i. Senior officials of executive departments who in the judgment of the
department heads are covered by the executive privilege;
ii. Generals and flag officers of the Armed Forces of the Philippines and such other
officers who in the judgment of the Chief of Staff are covered by the executive
privilege;
iii. Philippine National Police (PNP) officers with rank of chief superintendent or
higher and such other officers who in the judgment of the Chief of the PNP are
covered by the executive privilege;
iv. Senior national security officials who in the judgment of the National Security
Adviser are covered by the executive privilege; and
v. Such other officers as may be determined by the President.

SECTION 3. Appearance of Other Public Officials Before Congress. All public officials
enumerated in Section 2 (b) hereof shall secure prior consent of the President prior to
appearing before either House of Congress to ensure the observance of the principle of
separation of powers, adherence to the rule on executive privilege and respect for the rights of
public officials appearing in inquiries in aid of legislation. (Emphasis and underscoring supplied)

Also on September 28, 2005, Senate President Drilon received from Executive Secretary Ermita a copy of E.O.
464, and another letter[8] informing him that officials of the Executive Department invited to appear at the
meeting [regarding the NorthRail project] will not be able to attend the same without the consent of the
President, pursuant to [E.O. 464] and that said officials have not secured the required consent from the
President. On even date which was also the scheduled date of the hearing on the alleged wiretapping, Gen.
Senga sent a letter[9] to Senator Biazon, Chairperson of the Committee on National Defense and Security,
informing him that per instruction of [President Arroyo], thru the Secretary of National Defense, no officer of the
[AFP] is authorized to appear before any Senate or Congressional hearings without seeking a written approval
from the President and that no approval has been granted by the President to any AFP officer to appear before
the public hearing of the Senate Committee on National Defense and Security scheduled [on] 28 September
2005.

Despite the communications received from Executive Secretary Ermita and Gen. Senga, the investigation
scheduled by the Committee on National Defense and Security pushed through, with only Col. Balutan and
Brig. Gen. Gudani among all the AFP officials invited attending.

For defying President Arroyos order barring military personnel from testifying before legislative inquiries without
her approval, Brig. Gen. Gudani and Col. Balutan were relieved from their military posts and were made to face
court martial proceedings.

As to the NorthRail project hearing scheduled on September 29, 2005, Executive Secretary Ermita, citing E.O.
464, sent letter of regrets, in response to the invitations sent to the following government officials: Light
Railway Transit Authority Administrator Melquiades Robles, Metro Rail Transit Authority Administrator Roberto
Lastimoso, Department of Justice (DOJ) Chief State Counsel Ricardo V. Perez, then Presidential Legal
Counsel Merceditas Gutierrez, Department of Transportation and Communication (DOTC) Undersecretary
Guiling Mamonding, DOTC Secretary Leandro Mendoza, Philippine National Railways General Manager Jose
Serase II, Monetary Board Member Juanita Amatong, Bases Conversion Development Authority Chairperson
Gen. Narciso Abaya and Secretary Romulo L. Neri. [10] NorthRail President Cortes sent personal regrets
likewise citing E.O. 464.[11]

On October 3, 2005, three petitions, docketed as G.R. Nos. 169659, 169660, and 169667, for certiorari and
prohibition, were filed before this Court challenging the constitutionality of E.O. 464.

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
162
organization of government employees, and Counsels for the Defense of Liberties (CODAL), a group of
lawyers dedicated to the promotion of justice, democracy and peace, all claiming to have standing to file the
suit because of the transcendental importance of the issues they posed, pray, in their petition that E.O. 464 be
declared null and void for being unconstitutional; that respondent Executive Secretary Ermita, in his capacity
as Executive Secretary and alter-ego of President Arroyo, be prohibited from imposing, and threatening to
impose sanctions on officials who appear before Congress due to congressional summons. Additionally,
petitioners claim that E.O. 464 infringes on their rights and impedes them from fulfilling their respective
obligations. Thus, Bayan Muna alleges that E.O. 464 infringes on its right as a political party entitled to
participate in governance; Satur Ocampo, et al. allege that E.O. 464 infringes on their rights and duties as
members of Congress to conduct investigation in aid of legislation and conduct oversight functions in the
implementation of laws; COURAGE alleges that the tenure of its members in public office is predicated on, and
threatened by, their submission to the requirements of E.O. 464 should they be summoned by Congress; and
CODAL alleges that its members have a sworn duty to uphold the rule of law, and their rights to information
and to transparent governance are threatened by the imposition of E.O. 464.

In G.R. No. 169660, petitioner Francisco I. Chavez, claiming that his constitutional rights as a citizen,
taxpayer and law practitioner, are affected by the enforcement of E.O. 464, prays in his petition that E.O. 464
be declared null and void for being unconstitutional.

In G.R. No. 169667, petitioner Alternative Law Groups, Inc.[12] (ALG), alleging that as a coalition of 17
legal resource non-governmental organizations engaged in developmental lawyering and work with the poor
and marginalized sectors in different parts of the country, and as an organization of citizens of the Philippines
and a part of the general public, it has legal standing to institute the petition to enforce its constitutional right to
information on matters of public concern, a right which was denied to the public by E.O. 464, [13] prays, that said
order be declared null and void for being unconstitutional and that respondent Executive Secretary Ermita be
ordered to cease from implementing it.

On October 11, 2005, Petitioner Senate of the Philippines, alleging that it has a vital interest in the
resolution of the issue of the validity of E.O. 464 for it stands to suffer imminent and material injury, as it has
already sustained the same with its continued enforcement since it directly interferes with and impedes the
valid exercise of the Senates powers and functions and conceals information of great public interest and
concern, filed its petition for certiorari and prohibition, docketed as G.R. No. 169777 and prays that E.O. 464
be declared unconstitutional.

On October 14, 2005, PDP-Laban, a registered political party with members duly elected into the
Philippine Senate and House of Representatives, filed a similar petition for certiorari and prohibition, docketed
as G.R. No. 169834, alleging that it is affected by the challenged E.O. 464 because it hampers its legislative
agenda to be implemented through its members in Congress, particularly in the conduct of inquiries in aid of
legislation and transcendental issues need to be resolved to avert a constitutional crisis between the executive
and legislative branches of the government.

Meanwhile, by letter[14] dated February 6, 2006, Senator Biazon reiterated his invitation to Gen. Senga
for him and other military officers to attend the hearing on the alleged wiretapping scheduled on February 10,
2005. Gen. Senga replied, however, by letter[15] dated February 8, 2006, that [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
163
Pesticide Authority Executive Director Norlito R. Gicana,[17] and those from the Department of Budget and
Management[18] having invoked E.O. 464.

In the budget hearings set by the Senate on February 8 and 13, 2006, Press Secretary and Presidential
Spokesperson Ignacio R. Bunye,[19] DOJ Secretary Raul M. Gonzalez [20] and Department of Interior and Local
Government Undersecretary Marius P. Corpus [21] communicated their inability to attend due to lack of
appropriate clearance from the President pursuant to E.O. 464. During the February 13, 2005 budget hearing,
however, Secretary Bunye was allowed to attend by Executive Secretary Ermita.

On February 13, 2006, Jose Anselmo I. Cadiz and the incumbent members of the Board of Governors
of the Integrated Bar of the Philippines, as taxpayers, and the Integrated Bar of the Philippines as the official
organization of all Philippine lawyers, all invoking their constitutional right to be informed on matters of public
interest, filed their petition for certiorari and prohibition, docketed as G.R. No. 171246, and pray that E.O. 464
be declared null and void.

All the petitions pray for the issuance of a Temporary Restraining Order enjoining respondents from
implementing, enforcing, and observing E.O. 464.

In the oral arguments on the petitions conducted on February 21, 2006, the following substantive issues
were ventilated: (1) whether respondents committed grave abuse of discretion in implementing E.O. 464 prior
to its publication in the Official Gazette or in a newspaper of general circulation; and (2) whether E.O. 464
violates the following provisions of the Constitution: Art. II, Sec. 28, Art. III, Sec. 4, Art. III, Sec. 7, Art. IV. Sec.
1, Art. VI, Sec. 21, Art. VI, Sec. 22, Art. XI, Sec. 1, and Art. XIII, Sec. 16. The procedural issue of whether there
is an actual case or controversy that calls for judicial review was not taken up; instead, the parties were
instructed to discuss it in their respective memoranda.

After the conclusion of the oral arguments, the parties were directed to submit their respective
memoranda, paying particular attention to the following propositions: (1) that E.O. 464 is, on its face,
unconstitutional; and (2) assuming that it is not, it is unconstitutional as applied in four instances, namely: (a)
the so called Fertilizer scam; (b) the NorthRail investigation (c) the Wiretapping activity of the ISAFP; and (d)
the investigation on the Venable contract.[22]

Petitioners in G.R. No. 169660[23] and G.R. No. 169777[24] filed their memoranda on March 7, 2006,
while those in G.R. No. 169667[25] and G.R. No. 169834[26] filed theirs the next day or on March 8, 2006.
Petitioners in G.R. No. 171246 did not file any memorandum.

Petitioners Bayan Muna et al. in G.R. No. 169659, after their motion for extension to file
memorandum[27] was granted, subsequently filed a manifestation[28] dated March 14, 2006 that it would no
longer file its memorandum in the interest of having the issues resolved soonest, prompting this Court to issue
a Resolution reprimanding them.[29]

Petitioners submit that E.O. 464 violates the following constitutional provisions:
Art. VI, Sec. 21[30] Art. VI, Sec. 22[31] Art. VI, Sec. 1[32] Art. XI, Sec. 1[33] Art. III, Sec. 7[34] Art. III, Sec.
4[35] Art. XIII, Sec. 16 [36] Art. II, Sec. 28[37]
Respondents Executive Secretary Ermita et al., on the other hand, pray in their consolidated
memorandum[38] on March 13, 2006 for the dismissal of the petitions for lack of merit.
The Court synthesizes the issues to be resolved as follows:
1. Whether E.O. 464 contravenes the power of inquiry vested in Congress;
2. Whether E.O. 464 violates the right of the people to information on matters of public concern; and
3. Whether respondents have committed grave abuse of discretion when they implemented E.O. 464 prior to
its publication in a newspaper of general circulation.

Essential requisites for judicial review

164

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. Ongpin[42] and Valmonte v.
Philippine Charity Sweepstakes Office,[43] respondents assert that to be considered a proper party, one must
have a personal and substantial interest in the case, such that he has sustained or will sustain direct injury due
to the enforcement of E.O. 464.[44]

That the Senate of the Philippines has a fundamental right essential not only for intelligent public
decision-making in a democratic system, but more especially for sound legislation [45] is not disputed. E.O. 464,
however, allegedly stifles the ability of the members of Congress to access information that is crucial to law-
making.[46] Verily, the Senate, including its individual members, has a substantial and direct interest over the
outcome of the controversy and is the proper party to assail the constitutionality of E.O. 464. Indeed,
legislators have standing to maintain inviolate the prerogative, powers and privileges vested by the Constitution
in their office and are allowed to sue to question the validity of any official action which they claim infringes
their prerogatives as legislators.[47]

In the same vein, party-list representatives Satur Ocampo (Bayan Muna), Teodoro Casino (Bayan
Muna), Joel Virador (Bayan Muna), Crispin Beltran (Anakpawis), Rafael Mariano (Anakpawis), and Liza Maza
165
(Gabriela) are allowed to sue to question the constitutionality of E.O. 464, the absence of any claim that an
investigation called by the House of Representatives or any of its committees was aborted due to the
implementation of E.O. 464 notwithstanding, it being sufficient that a claim is made that E.O. 464 infringes on
their constitutional rights and duties as members of Congress to conduct investigation in aid of legislation and
conduct oversight functions in the implementation of laws.

The national political party, Bayan Muna, likewise meets the standing requirement as it obtained three
seats in the House of Representatives in the 2004 elections and is, therefore, entitled to participate in the
legislative process consonant with the declared policy underlying the party list system of affording citizens
belonging to marginalized and underrepresented sectors, organizations and parties who lack well-defined
political constituencies to contribute to the formulation and enactment of legislation that will benefit the nation.
[48]

As Bayan Muna and Representatives Ocampo et al. have the standing to file their petitions, passing on
the standing of their co-petitioners COURAGE and CODAL is rendered unnecessary.[49]

In filing their respective petitions, Chavez, the ALG which claims to be an organization of citizens, and the
incumbent members of the IBP Board of Governors and the IBP in behalf of its lawyer members, [50] invoke their
constitutional right to information on matters of public concern, asserting that the right to information, curtailed
and violated by E.O. 464, is essential to the effective exercise of other constitutional rights [51] and to the
maintenance of the balance of power among the three branches of the government through the principle of
checks and balances.[52]

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.
166

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
167
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
168
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 diplomaticsecrets but also to documents integral to an appropriate exercise of the
executive domestic decisional and policy making functions, that is, those documents reflecting
the frank expression necessary in intra-governmental advisory and deliberative
communications.[70] (Emphasis and underscoring supplied)
169
That a type of information is recognized as privileged does not, however, necessarily mean that it would be
considered privileged in all instances. For in determining the validity of a claim of privilege, the question that
must be asked is not only whether the requested information falls within one of the traditional privileges, but
also whether that privilege should be honored in a given procedural setting.[71]

The leading case on executive privilege in the United States is U.S. v. Nixon, [72] decided in 1974. In issue in
that case was the validity of President Nixons claim of executive privilege against a subpoena issued by a
district court requiring the production of certain tapes and documents relating to the Watergate
investigations. The claim of privilege was based on the Presidents general interest in the confidentiality of his
conversations and correspondence. The U.S. Court held that while there is no explicit reference to a privilege
of confidentiality in the U.S. Constitution, it is constitutionally based to the extent that it relates to the effective
discharge of a Presidents powers. The Court, nonetheless, rejected the Presidents claim of privilege, ruling
that the privilege must be balanced against the public interest in the fair administration of criminal
justice. Notably, the Court was careful to clarify that it was not there addressing the issue of claims of privilege
in a civil litigation or against congressional demands for information.

Cases in the U.S. which involve claims of executive privilege against Congress are rare.[73] Despite frequent
assertion of the privilege to deny information to Congress, beginning with President Washingtons refusal to
turn over treaty negotiation records to the House of Representatives, the U.S. Supreme Court has never
adjudicated the issue.[74]However, the U.S. Court of Appeals for the District of Columbia Circuit, in a case
decided earlier in the same year as Nixon, recognized the Presidents privilege over his conversations against a
congressional subpoena.[75] Anticipating the balancing approach adopted by the U.S. Supreme Court in Nixon,
the Court of Appeals weighed the public interest protected by the claim of privilege against the interest that
would be served by disclosure to the Committee. Ruling that the balance favored the President, the Court
declined to enforce the subpoena. [76]

In this jurisdiction, the doctrine of executive privilege was recognized by this Court in Almonte v. Vasquez.
[77]
Almonte used the term in reference to the same privilege subject ofNixon. It quoted the following portion of
the Nixon decision which explains the basis for the privilege:

The expectation of a President to the confidentiality of his conversations and

correspondences, like the claim of confidentiality of judicial deliberations, for example,
has all the values to which we accord deference for the privacy of all citizens and, added to
those values, is the necessity for protection of the public interest in candid, objective, and even
blunt or harsh opinions in Presidential decision-making. A President and those who assist him
must be free to explore alternatives in the process of shaping policies and making decisions and
to do so in a way many would be unwilling to express except privately. These are the
considerations justifying a presumptive privilege for Presidential communications. The privilege
is fundamental to the operation of government and inextricably rooted in the separation
of powers under the Constitution x x x (Emphasis and underscoring supplied)

Almonte involved a subpoena duces tecum issued by the Ombudsman against the therein petitioners. It did not
involve, as expressly stated in the decision, the right of the people to 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
170
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.
171
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.

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)

172

Consistent with their statements earlier in the deliberations, Commissioners Davide and Maambong proceeded
from the same assumption that these provisions pertained to two different functions of the legislature. Both
Commissioners understood that the power to conduct inquiries in aid of legislation is different from the power
to conduct inquiries during the question hour. Commissioner Davides only concern was that the two provisions
on these distinct powers be placed closely together, they being complementary to each other. Neither
Commissioner considered them as identical functions of Congress.

The foregoing opinion was not the two Commissioners alone. From the above-quoted exchange,
Commissioner Maambongs committee the Committee on Style shared the view that the two provisions
reflected distinct functions of Congress. Commissioner Davide, on the other hand, was speaking in his capacity
as Chairman of the Committee on the Legislative Department. His views may thus be presumed as
representing that of his Committee.

In the context of a parliamentary system of government, the question hour has a definite meaning. It is a period
of confrontation initiated by Parliament to hold the Prime Minister and the other ministers accountable for their
acts and the operation of the government,[85] corresponding to what is known in Britain as the question
period. There was a specific provision for a question hour in the 1973 Constitution [86] which made the
appearance of ministers mandatory. The same perfectly conformed to the parliamentary system established by
that Constitution, where the ministers are also members of the legislature and are directly accountable to it.

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
173
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
174
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
175
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.
176
Certainly, Congress has the right to know why the executive considers the requested information
privileged. It does not suffice to merely declare that the President, or an authorized head of office, has
determined that it is so, and that the President has not overturned that determination. Such declaration leaves
Congress in the dark on how the requested information could be classified as privileged. That the message is
couched in terms that, on first impression, do not seem like a claim of privilege only makes it more
pernicious. It threatens to make Congress doubly blind to the question of why the executive branch is not
providing it with the information that it has requested.
A claim of privilege, being a claim of exemption from an obligation to disclose information, must, therefore, be
clearly asserted. As U.S. v. Reynolds teaches:

The privilege belongs to the government and must be asserted by it; it can neither be claimed
nor waived by a private party. It is not to be lightly invoked. There must be a formal claim of
privilege, lodged by the head of the department which has control over the matter, after actual
personal consideration by that officer. The court itself must determine whether the
circumstances are appropriate for the claim of privilege, and yet do so without forcing a
disclosure of the very thing the privilege is designed to protect.[92] (Underscoring supplied)

Absent then a statement of the specific basis of a claim of executive privilege, there is no way of determining
whether it falls under one of the traditional privileges, or whether, given the circumstances in which it is made, it
should be respected.[93] These, in substance, were the same criteria in assessing the claim of privilege
asserted against the Ombudsman in Almonte v. Vasquez[94] and, more in point, against a committee of the
Senate in Senate Select Committee on Presidential Campaign Activities v. Nixon.[95]

A.O. Smith v. Federal Trade Commission is enlightening:

[T]he lack of specificity renders an assessment of the potential harm resulting from disclosure
impossible, thereby preventing the Court from balancing such harm against plaintiffs needs to
determine whether to override any claims of privilege.[96] (Underscoring supplied)

And so is U.S. v. Article of Drug:[97]

On the present state of the record, this Court is not called upon to perform this balancing
operation. In stating its objection to claimants interrogatories, government asserts, and
nothing more, that the disclosures sought by claimant would inhibit the free expression
of opinion that non-disclosure is designed to protect. The government has not shown nor
even alleged that those who evaluated claimants product were involved in internal policymaking,
generally, or in this particular instance. Privilege cannot be set up by an unsupported
claim. The facts upon which the privilege is based must be established. To find these
interrogatories objectionable, this Court would have to assume that the evaluation and
classification of claimants products was a matter of internal policy formulation, an assumption in
which this Court is unwilling to indulge sua sponte.[98] (Emphasis and underscoring supplied)

Mobil Oil Corp. v. Department of Energy[99] similarly emphasizes that an agency must provide precise and
certain reasons for preserving the confidentiality of requested information.

Black v. Sheraton Corp. of America[100] amplifies, thus:

A formal and proper claim of executive privilege requires a specific designation and description
of the documents within its scope as well as precise and certain reasons for preserving their
confidentiality. Without this specificity, it is impossible for a court to analyze the claim short of
disclosure of the very thing sought to be protected. As the affidavit now stands, the Court has
little more than its sua sponte speculation with which to weigh the applicability of the claim. An
177
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.
178

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
179
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)
180
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.

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
181
successfully petition for a change of name and sex appearing in the birth certificate to reflect the result of a sex
reassignment surgery?
On November 26, 2002, petitioner Rommel Jacinto Dantes Silverio filed a petition for the change of his first
name and sex in his birth certificate in the Regional Trial Court of Manila, Branch 8. The petition, docketed as
SP Case No. 02-105207, impleaded the civil registrar of Manila as respondent.
Petitioner alleged in his petition that he was born in the City of Manila to the spouses Melecio Petines Silverio
and Anita Aquino Dantes on April 4, 1962. His name was registered as "Rommel Jacinto Dantes Silverio" in his
certificate of live birth (birth certificate). His sex was registered as "male."
He further alleged that he is a male transsexual, that is, "anatomically male but feels, thinks and acts as a
female" and that he had always identified himself with girls since childhood.1 Feeling trapped in a mans body,
he consulted several doctors in the United States. He underwent psychological examination, hormone
treatment and breast augmentation. His attempts to transform himself to a "woman" culminated on January 27,
2001 when he underwent sex reassignment surgery2 in Bangkok, Thailand. He was thereafter examined by Dr.
Marcelino Reysio-Cruz, Jr., a plastic and reconstruction surgeon in the Philippines, who issued a medical
certificate attesting that he (petitioner) had in fact undergone the procedure.
From then on, petitioner lived as a female and was in fact engaged to be married. He then sought to have his
name in his birth certificate changed from "Rommel Jacinto" to "Mely," and his sex from "male" to "female."
An order setting the case for initial hearing was published in the Peoples Journal Tonight, a newspaper of
general circulation in Metro Manila, for three consecutive weeks.3 Copies of the order were sent to the Office of
the Solicitor General (OSG) and the civil registrar of Manila.
On the scheduled initial hearing, jurisdictional requirements were established. No opposition to the petition was
made.
During trial, petitioner testified for himself. He also presented Dr. Reysio-Cruz, Jr. and his American fianc,
Richard P. Edel, as witnesses.
On June 4, 2003, the trial court rendered a decision4 in favor of petitioner. Its relevant portions read:
Petitioner filed the present petition not to evade any law or judgment or any infraction thereof or for any
unlawful motive but solely for the purpose of making his birth records compatible with his present sex.
The sole issue here is whether or not petitioner is entitled to the relief asked for.
The [c]ourt rules in the affirmative.
Firstly, the [c]ourt is of the opinion that granting the petition would be more in consonance with the
principles of justice and equity. With his sexual [re-assignment], petitioner, who has always felt, thought
and acted like a woman, now possesses the physique of a female. Petitioners misfortune to be trapped
in a mans body is not his own doing and should not be in any way taken against him.
Likewise, the [c]ourt believes that no harm, injury [or] prejudice will be caused to anybody or the
community in granting the petition. On the contrary, granting the petition would bring the much-awaited
happiness on the part of the petitioner and her [fianc] and the realization of their dreams.
Finally, no evidence was presented to show any cause or ground to deny the present petition despite
due notice and publication thereof. Even the State, through the [OSG] has not seen fit to interpose any
[o]pposition.
WHEREFORE, judgment is hereby rendered GRANTING the petition and ordering the Civil Registrar of
Manila to change the entries appearing in the Certificate of Birth of [p]etitioner, specifically for
petitioners first name from "Rommel Jacinto" to MELY and petitioners gender from "Male"
to FEMALE. 5
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.
182
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
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The determination of a persons sex appearing in his birth certificate is a legal issue and the court must look to
the statutes.21 In this connection, Article 412 of the Civil Code provides:
ART. 412. No entry in the civil register shall be changed or corrected without a judicial order.
Together with Article 376 of the Civil Code, this provision was amended by RA 9048 in so far as clerical or
typographical errors are involved. The correction or change of such matters can now be made through
administrative proceedings and without the need for a judicial order. In effect, RA 9048 removed from the ambit
of Rule 108 of the Rules of Court the correction of such errors.22 Rule 108 now applies only to substantial
changes and corrections in entries in the civil register.23
Section 2(c) of RA 9048 defines what a "clerical or typographical error" is:
SECTION 2. Definition of Terms. As used in this Act, the following terms shall mean:
xxx xxx xxx
(3) "Clerical or typographical error" refers to a mistake committed in the performance of clerical
work in writing, copying, transcribing or typing an entry in the civil register that is harmless and
innocuous, such as misspelled name or misspelled place of birth or the like, which is visible to
the eyes or obvious to the understanding, and can be corrected or changed only by reference to
other existing record or records: Provided, however, That no correction must involve the
change of nationality, age, status or sex of the petitioner. (emphasis supplied)
Under RA 9048, a correction in the civil registry involving the change of sex is not a mere clerical or
typographical error. It is a substantial change for which the applicable procedure is Rule 108 of the Rules of
Court.
The entries envisaged in Article 412 of the Civil Code and correctable under Rule 108 of the Rules of Court are
those provided in Articles 407 and 408 of the Civil Code:24
ART. 407. Acts, events and judicial decrees concerning the civil status of persons shall be recorded in
the civil register.
ART. 408. The following shall be entered in the civil register:
(1) Births; (2) marriages; (3) deaths; (4) legal separations; (5) annulments of marriage; (6) judgments
declaring marriages void from the beginning; (7) legitimations; (8) adoptions; (9) acknowledgments of
natural children; (10) naturalization; (11) loss, or (12) recovery of citizenship; (13) civil interdiction; (14)
judicial determination of filiation; (15) voluntary emancipation of a minor; and (16) changes of name.
The acts, events or factual errors contemplated under Article 407 of the Civil Code include even those that
occur after birth.25 However, no reasonable interpretation of the provision can justify the conclusion that it
covers the correction on the ground of sex reassignment.
To correct simply means "to make or set aright; to remove the faults or error from" while to change means "to
replace something with something else of the same kind or with something that serves as a substitute."26 The
birth certificate of petitioner contained no error. All entries therein, including those corresponding to his first
name and sex, were all correct. No correction is necessary.
Article 407 of the Civil Code authorizes the entry in the civil registry of certain acts (such as legitimations,
acknowledgments of illegitimate children and naturalization), events (such as births, marriages, naturalization
and deaths) and judicial decrees (such as legal separations, annulments of marriage, declarations of nullity of
marriages, adoptions, naturalization, loss or recovery of citizenship, civil interdiction, judicial determination of
filiation and changes of name). These acts, events and judicial decrees produce legal consequences that touch
upon the legal capacity, status and nationality of a person. Their effects are expressly sanctioned by the laws.
In contrast, sex reassignment is not among those acts or events mentioned in Article 407. Neither is it
recognized nor even mentioned by any law, expressly or impliedly.
"Status" refers to the circumstances affecting the legal situation (that is, the sum total of capacities and
incapacities) of a person in view of his age, nationality and his family membership.27
The status of a person in law includes all his personal qualities and relations, more or less permanent
in nature, not ordinarily terminable at his own will, such as his being legitimate or illegitimate, or his
being married or not. The comprehensive term status include such matters as the beginning and end
of legal personality, capacity to have rights in general, family relations, and its various aspects, such as
birth, legitimation, adoption, emancipation, marriage, divorce, and sometimes even
succession.28 (emphasis supplied)
A persons sex is an essential factor in marriage and family relations. It is a part of a persons legal capacity
and civil status. In this connection, Article 413 of the Civil Code provides:
184
ART. 413. All other matters pertaining to the registration of civil status shall be governed by special
laws.
But there is no such special law in the Philippines governing sex reassignment and its effects. This is fatal to
petitioners cause.
Moreover, Section 5 of Act 3753 (the Civil Register Law) provides:
SEC. 5. Registration and certification of births. The declaration of the physician or midwife in
attendance at the birth or, in default thereof, the declaration of either parent of the newborn child, shall
be sufficient for the registration of a birth in the civil register. Such declaration shall be exempt from
documentary stamp tax and shall be sent to the local civil registrar not later than thirty days after the
birth, by the physician or midwife in attendance at the birth or by either parent of the newborn child.
In such declaration, the person above mentioned shall certify to the following facts: (a) date and hour of
birth; (b) sex and nationality of infant; (c) names, citizenship and religion of parents or, in case the
father is not known, of the mother alone; (d) civil status of parents; (e) place where the infant was born;
and (f) such other data as may be required in the regulations to be issued.
xxx xxx xxx (emphasis supplied)
Under the Civil Register Law, a birth certificate is a historical record of the facts as they existed at the time of
birth.29Thus, the sex of a person is determined at birth, visually done by the birth attendant (the physician or
midwife) by examining the genitals of the infant. Considering that there is no law legally recognizing sex
reassignment, the determination of a persons sex made at the time of his or her birth, if not attended by
error,30 is immutable.31
When words are not defined in a statute they are to be given their common and ordinary meaning in the
absence of a contrary legislative intent. The words "sex," "male" and "female" as used in the Civil Register Law
and laws concerning the civil registry (and even all other laws) should therefore be understood in their common
and ordinary usage, there being no legislative intent to the contrary. In this connection, sex is defined as "the
sum of peculiarities of structure and function that distinguish a male from a female"32 or "the distinction
between male and female."33Female is "the sex that produces ova or bears young"34 and male is "the sex that
has organs to produce spermatozoa for fertilizing ova."35 Thus, the words "male" and "female" in everyday
understanding do not include persons who have undergone sex reassignment. Furthermore, "words that are
employed in a statute which had at the time a well-known meaning are presumed to have been used in that
sense unless the context compels to the contrary."36 Since the statutory language of the Civil Register Law was
enacted in the early 1900s and remains unchanged, it cannot be argued that the term "sex" as used then is
something alterable through surgery or something that allows a post-operative male-to-female transsexual to
be included in the category "female."
For these reasons, while petitioner may have succeeded in altering his body and appearance through the
intervention of modern surgery, no law authorizes the change of entry as to sex in the civil registry for that
reason. Thus, there is no legal basis for his petition for the correction or change of the entries in his birth
certificate.
Neither May Entries in the Birth Certificate As to First Name or Sex Be Changed on the Ground of
Equity
The trial court opined that its grant of the petition was in consonance with the principles of justice and equity. It
believed that allowing the petition would cause no harm, injury or prejudice to anyone. This is wrong.
The changes sought by petitioner will have serious and wide-ranging legal and public policy consequences.
First, even the trial court itself found that the petition was but petitioners first step towards his eventual
marriage to his male fianc. However, marriage, one of the most sacred social institutions, is a special contract
of permanent union between a man and a woman.37 One of its essential requisites is the legal capacity of the
contracting parties who must be a male and a female.38 To grant the changes sought by petitioner will
substantially reconfigure and greatly alter the laws on marriage and family relations. It will allow the union of a
man with another man who has undergone sex reassignment (a male-to-female post-operative transsexual).
Second, there are various laws which apply particularly to women such as the provisions of the Labor Code on
employment of women,39 certain felonies under the Revised Penal Code40 and the presumption of survivorship
in case of calamities under Rule 131 of the Rules of Court,41 among others. These laws underscore the public
policy in relation to women which could be substantially affected if petitioners petition were to be granted.
185
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.
SO ORDERED.
Puno, C.J., Chairperson, Sandoval-Gutierrez, Azcuna, Garcia, JJ., concur.

A.M. No. P-08-2535 June 23, 2010

(Formerly A.M. OCA IPI No. 04- 2022-P and A.M. No. 04-434-RTC)
OFFICE OF THE COURT ADMINISTRATOR, Complainant,
vs.
FLORENCIO M. REYES,1 Officer-in-Charge, and RENE DE GUZMAN, Clerk, Regional Trial Court, Branch
31, Guimba, Nueva Ecija, Respondents.
DECISION
Per curiam:*
This complaint for gross misconduct against Rene de Guzman (De Guzman), Clerk, Regional Trial Court
(RTC) of Guimba, Nueva Ecija, Branch 31, is an offshoot of the complaint filed by Atty. Hugo B. Sansano, Jr.
(Atty. Sansano) relative to the alleged incompetence/inefficiency of the RTC of Guimba, Nueva Ecija, Branch
31, in the transmittal of the records of Criminal Case No. 1144-G2 to the Court of Appeals.
In our Resolution dated September 17, 2007, we adopted the findings and recommendation of the Office of the
Court Administrator (OCA) declaring as closed and terminated the administrative matter relative to the delay in
the transmittal of the records of Criminal Case No. 1144-G, and exonerating De Guzman and Florencio M.
Reyes (Reyes), the Officer-in-Charge of the RTC of Guimba, Nueva Ecija, Branch 31.
However, in the same Resolution, we also required De Guzman to comment on the allegation that he is using
illegal drugs and had been manifesting irrational and queer behavior while at work. According to Reyes, De
Guzmans manifestations of absurd behavior prompted Judge Napoleon R. Sta. Romana (Judge Sta. Romana)
to request the Philippine National Police Crime Laboratory to perform a drug test on De Guzman. As alleged by
Reyes:
x x x Mr. Rene de Guzman, the Docket Clerk, was [in] charge of the preparation and transmission of the
records on appeal x x x. Nonetheless, x x x Judge Sta. Romana would x x x often x x x [remind him] about the
transmittal of records of the appealed cases [for more than] a dozen times, even personally confronting Mr.
Rene de Guzman about the matter, x x x though unsuccessfully x x x. Mr. De Guzman would just x x x dismiss
the subject in ridicule and with the empty assurance that the task is as good as finished and what x x x need[s]
to be done [is] simply retyping of the corrected indices or the like and that he would submit the same in [no]
time at all. This was after a number of weeks from March 26, 2003 after Mr. De Guzman made the undersigned
186
sign the transmittal of PP v. Manangan which he allegedly did not transmit before owing to some minor
corrections in the indexing. All too often, (it seems to have been customary on his part, for this he would do to
other pressing assignment) he would come to the office the next day, jubilant that the problem has been solved
at last! But to no avail. This attitude seemingly bordering on the irrational if not to say that a sense of
responsibility is utterly lacking may have given cue for Judge Sta. Romana to have Mr. De Guzman undergo a
drug test x x x.3
That Mr. De Guzman could brush aside even the personal importuning by the judge is a fete no other of our co-
employees dare emulate. On the contrary, everybody is apprehensive for his well being and in his behalf. x x x
On May 24, 2004, Judge Sta. Romana requested the Nueva Ecija Provincial Crime Laboratory Office to
conduct a drug test on De Guzman. On May 26, 2004, De Guzman underwent a qualitative examination the
results of which yielded positive for Tetrahydrocannabinol metabolites (marijuana) and Methamphetamine
(shabu), both dangerous drugs.
In our Resolution of September 17, 2007, we required De Guzman to submit his comment on the charge of
misconduct relative to the alleged use of prohibited drugs within 10 days from notice. Notwithstanding the
Courts directive, De Guzman failed to file his Comment. Thus, on January 23, 2008, we directed De Guzman
to show cause why he should not be held in contempt for failure to comply with the September 17, 2007
Resolution. At the same time, we resolved to require him to submit his comment within 10 days from notice.
De Guzman complied with our directive only on March 12, 2008. In his letter, De Guzman claimed that he
failed to comply with the Courts directive because he lost his copy of the September 17, 2007 Resolution.
Treating De Guzmans letter as his Comment, we referred the same to the OCA for evaluation, report and
recommendation. The OCA submitted its Report and Recommendation on July 23, 2008 which reads in part:
xxxx
Noticeably, respondent de Guzman did not challenge the authenticity and validity of the chemistry report of the
Nueva Ecija Provincial Crime Laboratory Office which found him positive for "marijuana" and "shabu". He did
not also promptly submit another test report or other document to controvert the drug test report. His plain
refutation of the charge and his willingness to submit himself now to a drug test are token attempts at candor
and assertion of innocence. These perfunctory attempts cannot prevail over the solitary yet compelling
evidence of misconduct for use of prohibited drugs.
Relative to respondents delay in filing his comment to the charge of misconduct, his claim that he "lost and
misplaced (his) copy of said resolution, and for that (he) almost forgot about it" is neither a valid reason nor an
excuse for the delay in complying with the order of the Court. His flippant attitude towards the repeated orders
of the Court to explain his conduct does not merit consideration and justification for delay.
It is settled that respondents "indifference to [the resolutions] requiring him to comment on the accusation(s) in
the complaint thoroughly and substantially is gross misconduct, and may even be considered as outright
disrespect to the Court." After all, a resolution of the Supreme Court is not a mere request and should be
complied with promptly and completely. Such failure to comply accordingly betrays not only a recalcitrant
streak in character, but has likewise been considered as an utter lack of interest to remain with, if not contempt
of the judicial system.
It should be mentioned that this is not the first instance that respondent is ordered to account for his failure to
comply with a court order. Earlier, he was required to explain to the Court his failure to promptly submit a copy
of the affidavit of retired court stenographer Jorge Caoile and to show cause why he should not be
administratively dealt with for his failure to comply with a show cause order.
For failure to overcome the charge of use of prohibited drugs and to satisfactorily explain his failure to submit
promptly his compliance to the Courts show cause order, respondent may be held guilty of two counts of gross
misconduct.
The OCA thus submitted the following recommendations for consideration of the Court viz:
1. The instant matter be RE-DOCKETED as a regular administrative case; and
2. Respondent Rene de Guzman be found guilty of gross misconduct and accordingly
be DISMISSED from the service effective immediately with forfeiture of all benefits except accrued
leave credits, with prejudice to his re-employment in any branch or instrumentality of the government,
including government-owned or controlled agencies, corporations and financial institutions.4
On August 27, 2008, we required De Guzman to manifest within 10 days from receipt whether he is willing to
submit the case for resolution on the basis of the pleadings/records already filed and submitted. As before, De
187
Guzman simply ignored our directive. Consequently, on September 28, 2009, we deemed waived the filing of
De Guzmans manifestation.
Our Ruling
We adopt the findings and recommendation of the OCA.
We note that De Guzman is adept at ignoring the Courts directives. In his letter-explanation in the
administrative matter relative to the delay in the transmittal of the records of Criminal Case No. 1144-G, he
requested for a period of 10 days or until November 15, 2004 within which to submit the Affidavit of George
Caoile (Caoile), the retired Stenographer, as part of his comment. However, despite the lapse of five months,
De Guzman still failed to submit Caoiles affidavit. Subsequently, we furnished him with a copy of the April 18,
2005 Resolution wherein we mentioned that we are awaiting his submission of the affidavit of Caoile which
shall be considered as part of his (De Guzmans) comment.
Nine months from the time he undertook to submit the affidavit of Caoile, De Guzman has yet to comply with
his undertaking. Thus, on August 10, 2005, we required De Guzman to show cause why he should not be
disciplinarily dealt with or held in contempt for such failure.
Unfortunately, De Guzman merely ignored our show cause order. Consequently, on November 20, 2006, we
imposed upon him a fine of 1,000.00. Finally, on January 24, 2007, or after the lapse of one year and two
months, De Guzman submitted the affidavit of Caoile.
Similarly, we also required De Guzman to file his comment within 10 days from notice as regards the allegation
that he was using prohibited drugs. However, he again ignored our directive as contained in the Resolution of
September 17, 2007. Thus, on January 23, 2008, we required him to show cause why he should not be held in
contempt for such failure. By way of explanation, De Guzman submitted a letter dated March 12, 2008 wherein
he claimed that he failed to file his comment on the charge of miscondouct because he allegedly lost his copy
of the said September 17, 2007 Resolution.
Finally, on August 27, 2008, we required De Guzman to manifest whether he is willing to submit the case for
resolution based on the pleadings submitted. As before, he failed to comply with the same.
As correctly observed by the OCA, De Guzman has shown his propensity to defy the directives of this
Court.5However, at this juncture, we are no longer wont to countenance such disrespectful behavior. As we
have categorically declared in Office of the Court Administrator v. Clerk of Court Fe P. Ganzan, MCTC, Jasaan,
Claveria, Misamis Oriental:6
x x x A resolution of the Supreme Court should not be construed as a mere request, and should be complied
with promptly and completely. Such failure to comply betrays, not only a recalcitrant streak in character, but
also disrespect for the lawful order and directive of the Court. Furthermore, this contumacious conduct of
refusing to abide by the lawful directives issued by the Court has likewise been considered as an utter lack of
interest to remain with, if not contempt of, the system. Ganzans transgression is highlighted even more by the
fact that she is an employee of the Judiciary, who, more than an ordinary citizen, should be aware of her duty
to obey the orders and processes of the Supreme Court without delay. x x x
Anent the use of illegal drugs, we have upheld in Social Justice Society (SJS) v. Dangerous Drugs Board7 the
validity and constitutionality of the mandatory but random drug testing of officers and employees of
both public and private offices. As regards public officers and employees, we specifically held that:
Like their counterparts in the private sector, government officials and employees also labor under reasonable
supervision and restrictions imposed by the Civil Service law and other laws on public officers, all enacted to
promote a high standard of ethics in the public service. And if RA 9165 passes the norm of reasonableness for
private employees, the more reason that it should pass the test for civil servants, who, by constitutional
demand, are required to be accountable at all times to the people and to serve them with utmost
responsibility and efficiency.8
Parenthetically, in A.M. No. 06-1-01-SC9 dated January 17, 2006, the Court has adopted guidelines for a
program to deter the use of dangerous drugs and institute preventive measures against drug abuse for the
purpose of eliminating the hazards of drug abuse in the Judiciary, particularly in the first and second level
courts. The objectives of the said program are as follows:
1. To detect the use of dangerous drugs among lower court employees, impose disciplinary sanctions,
and provide administrative remedies in cases where an employee is found positive for dangerous drug
use.
188
2. To discourage the use and abuse of dangerous drugs among first and second level court employees
and enhance awareness of their adverse effects by information dissemination and periodic random
drug testing.
3. To institute other measures that address the menace of drug abuse within the personnel of the
Judiciary.
In the instant administrative matter, De Guzman never challenged the authenticity of the Chemistry Report of
the Nueva Ecija Provincial Crime Laboratory Office. Likewise, the finding that De Guzman was found positive
for use of marijuana and shabu remains unrebutted. De Guzmans general denial that he is not a drug user
cannot prevail over this compelling evidence.
The foregoing constitutes more than substantial evidence that De Guzman was indeed found positive for use
of dangerous drugs. In Dadulo v. Court of Appeals,10 we held that "(a)dministrative proceedings are governed
by the substantial evidence rule. Otherwise stated, a finding of guilt in an administrative case would have to
be sustained for as long as it is supported by substantial evidence that the respondent has committed acts
stated in the complaint. Substantial evidence is more than a mere scintilla of evidence. It means such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds equally
reasonable might conceivably opine otherwise."11
This Court is a temple of justice. Its basic duty and responsibility is the dispensation of justice. As dispensers of
justice, all members and employees of the Judiciary are expected to adhere strictly to the laws of the land, one
of which is Republic Act No. 916512 which prohibits the use of dangerous drugs.13
The Court has adhered to the policy of safeguarding the welfare, efficiency, and well-being not only of all the
court personnel, but also that of the general public whom it serves. The Court will not allow its front-line
representatives, like De Guzman, to put at risk the integrity of the whole judiciary. As we held in Baron v.
Anacan,14 "(t)he image of a court of justice is mirrored in the conduct, official and otherwise, of the personnel
who work thereat. Thus, the conduct of a person serving the judiciary must, at all times, be characterized by
propriety and decorum and above all else, be above suspicion so as to earn and keep the respect of the public
for the judiciary. The Court would never countenance any conduct, act or omission on the part of all those in
the administration of justice, which will violate the norm of public accountability and diminish or even just tend
to diminish the faith of the people in the judiciary."
Article XI of the Constitution mandates that:
SECTION 1. Public office is a public trust. Public officers and employees must at all times be accountable to
the people and serve them with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and
justice, and lead modest lives.
De Guzmans use of prohibited drugs has greatly affected his efficiency in the performance of his functions. De
Guzman did not refute the observation of his superior, Judge Sta. Romana, that as a criminal docket court
clerk, he (De Guzman) was totally inept and incompetent. Hence, to get across his displeasure and
dissatisfaction with his job performance, Judge Sta. Romana gave De Guzman an unsatisfactory rating.
Moreover, De Guzmans efficiency as a custodian of court records is also totally wanting. As early as May 12,
2004, Judge Sta. Romana issued a Memorandum addressed to De Guzman relative to the "sleeping cases"
inside the latters drawer. It would appear that several cases have not been proceeded upon because De
Guzman hid the records of the same inside his drawer. The text of the said Memorandum reads:
An examination of the records found in your drawer reveal that the following cases have not moved because
you have not brought the same to the attention of the Presiding Judge, to wit:
1. Crim. Case No. 1849-C, PP v. Ruben Villanueva Order of transmittal to the Office of the Provincial
Prosecutor of Nueva Ecija dated August 6, 2003 to resolve the Motion for Reconsideration.
Resolution of the Provincial Prosecutor dated September 23, 2003 denying the Motion for
Reconsideration and transmitting the records to the RTC, Br. 31, Guimba, Nueva Ecija received by this
court on September 24, 2003;
2. Crim. Case No. 1993-G, PP vs. JOJO SUPNET Information dated October 14, 2002 received by
this Court on November 18, 2002;
3. Crim. Case No. 2013-G, PP vs. Brgy. Capt. BAYANI CAMIS Information dated September 23, 2002
received by this court on January 24, 2003;
4. Crim. Case No. 2007-G, PP vs. Armando Marcos Information dated June 23, 2002; Records
received on January 2, 2003.
189
The Presiding Judge caused the issuance of finding of probable causes and the corresponding Warrants of
Arrest. You are hereby ordered to assist the OIC/Clerk of Court in sending forthwith the Warrants of Arrest to
the proper agencies for implementation.
In the same vein, Reyes also put forth the absurd behavioral manifestations of De Guzman. According to
Reyes, Judge Sta. Romana would always remind De Guzman to prepare and transmit the complete records of
the appealed cases. However, De Guzman would only make empty assurances to perform his task.
Notwithstanding the reminders of his superiors, De Guzman would still fail to transmit the records. Instead, he
would report the next day and jubilantly declare that the problem has been solved at last.
In fine, we agree with the OCA that by his repeated and contumacious conduct of disrespecting the Courts
directives, De Guzman is guilty of gross misconduct and has already forfeited his privilege of being an
employee of the Court. Likewise, we can no longer countenance his manifestations of queer behavior,
bordering on absurd, irrational and irresponsible, because it has greatly affected his job performance and
efficiency. By using prohibited drugs, and being a front-line representative of the Judiciary, De Guzman has
exposed to risk the very institution which he serves. It is only by weeding out the likes of De Guzman from the
ranks that we would be able to preserve the integrity of this institution.
Two justices disagree with the majority opinion. They opine that the Courts action in this case contravenes an
express public policy, i.e., "imprisonment for drug dealers and pushers, rehabilitation for their victims." They
also posit that De Guzmans failure to properly perform his duties and promptly respond to Court orders
precisely springs from his drug addiction that requires rehabilitation. Finally, they state that the Courts real
strength is not in its righteousness but in its willingness to understand that men are not perfect and that there is
a time to punish and a time to give a chance for contrition and change.
However, the legislative policy as embodied in Republic Act No. 9165 in deterring dangerous drug use by
resort to sustainable programs of rehabilitation and treatment must be considered in light of this Courts
constitutional power of administrative supervision over courts and court personnel. The legislative power
imposing policies through laws is not unlimited and is subject to the substantive and constitutional limitations
that set parameters both in the exercise of the power itself and the allowable subjects of legislation.15 As such,
it cannot limit the Courts power to impose disciplinary actions against erring justices, judges and court
personnel. Neither should such policy be used to restrict the Courts power to preserve and maintain the
Judiciarys honor, dignity and integrity and public confidence that can only be achieved by imposing strict and
rigid standards of decency and propriety governing the conduct of justices, judges and court employees.
Likewise, we cannot subscribe to the idea that De Guzmans irrational behavior stems solely from his being a
drug user. Such queer behavior can be attributed to several factors. However, it cannot by any measure be
categorically stated at this point that it can be attributed solely to his being a drug user.
Finally, it must be emphasized at this juncture that De Guzmans dismissal is not grounded only on his being a
drug user. His outright dismissal from the service is likewise anchored on his contumacious and repeated acts
of not heeding the directives of this Court. As we have already stated, such attitude betrays not only a
recalcitrant streak of character, but also disrespect for the lawful orders and directives of the Court.
ACCORDINGLY, Rene de Guzman, Clerk, Regional Trial Court of Guimba, Nueva Ecija, Branch 31, is
hereby DISMISSED from the service with forfeiture of all retirement benefits, except accrued leave credits, and
disqualification from reinstatement or appointment to any public office, including government-owned or
controlled corporations.
SO ORDERED.
EN BANC
G.R. No. 196231 January 28, 2014
EMILIO A. GONZALES III, Petitioner,
vs.
OFFICE OF THE PRESIDENT OF THE PHILIPPINES, ACTING THROUGH AND REPRESENTED BY
EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR., SENIOR DEPUTY EXECUTIVE SECRETARY JOSE
AMOR M. AMORANDO, OFFICER-IN-CHARGE - OFFICE OF THE DEPUTY EXECUTIVE SECRETARY FOR
LEGAL AFFAIRS, ATTY. RONALDO A. GERON, DIR. ROWENA TURINGAN-SANCHEZ, AND ATTY.
CARLITO D. CATAYONG, Respondents.
x-----------------------x
G.R. No. 196232
190
WENDELL BARRERAS-SULIT Petitioner,
vs.
ATTY. PAQUITO N. OCHOA, JR., IN HIS CAP A CITY AS EXECUTIVE SECRETARY, OFFICE OF THE
PRESIDENT, ATTY. DENNIS F. ORTIZ, ATTY. CARLO D. SULAY AND ATTY. FROILAN D. MONTALBAN,
JR., IN THEIR CAPACITIES AS CHAIRMAN AND MEMBERS OF OFFICE OF MALACANANG LEGAL
AFFAIRS,Respondents.
CONCURRING AND DISSENTING OPINION
PERLAS-BERNABE, J.:
I concur with the ponencia in finding the Decision dated March 31, 2011 of the Office of the President of the
Philippines (OP) to be patently erroneous considering that the acts therein attributed to petitioner Emilio A.
Gonzales III (Gonzales), in his capacity as Deputy Ombudsman, do not constitute betrayal of public trust. In
the Court's Decision dated September 4, 2012 in the main,1 it was explained that the phrase "betrayal of public
trust" refers to acts which are just short of being criminal but constitute gross faithlessness against public trust,
tyrannical abuse of power, inexcusable negligence of duty, favoritism, and gross exercise of discretionary
powers. In other words, acts that should constitute betrayal of public trust as to warrant removal from office
may be less than criminal but must be attended by bad faith and of such gravity and seriousness as the other
grounds for impeachrnent.2 The OP, however, dismissed Gonzales based on acts which, as thoroughly detailed
and discussed in the ponencia, do not fit the foregoing legal description. Accordingly, its (OP) decision was
tainted with patent error.
Nevertheless, since the majority voted to declare the jurisdictional basis for the OP's authority to discipline the
Deputy Ombudsmen under Section 8(2)3 of Republic Act No. (RA) 67704 as unconstitutional, the fallo of the
ponencia states that any further ruling on the dismissal of Gonzales is rendered unnecessary, viz.:5
WHEREFORE, premises considered, the Court resolves to declare Section 8(2) UNCONSTITUTIONAL. This
ruling renders any further ruling on the dismissal of Deputy Ombudsman Emilio Gonzales III unnecessary, but
is without prejudice to the power of the Ombudsman to conduct an administrative investigation, if warranted,
into the possible administrative liability of Deputy Ombudsman Emilio Gonzales III under pertinent Civil Service
laws, rules and resgulations.
SO ORDERED.
I dissent.
To my mind, Section 8(2) of RA 6770, which confers the OP with jurisdiction to discipline not only the Special
Prosecutor but also the Deputy Ombudsmen, is wholly constitutional. To this end, I join the majority in
upholding the provisions constitutionality insofar as the Special Prosecutor is concerned, but register my
dissent against declaring the provision unconstitutional insofar as the Deputy Ombudsmen are
concerned.6 The reasons therefor are explained in the ensuing discussion.1wphi1
In dealing with constitutional challenges, one must be cognizant of the rule that every law is presumed
constitutional and therefore should not be stricken down unless its provisions clearly and unequivocally, and
not merely doubtfully, breach the Constitution.7 It is well-established that this presumption of constitutionality
can be overcome only by the clearest showing that there was indeed an infraction of the Constitution, and only
when such a conclusion is reached by the required majority may the Court pronounce, in the discharge of the
duty it cannot escape, that the challenged act must be struck down.8
In Victoriano v. Elizalde Rope Workers Union,9 the judicious instruction is that the "challenger must negate all
possible bases" and the adjudicating tribunal must not concern itself with the "wisdom, justice, policy, or
expediency of a statute"; "if any reasonable basis may be conceived which supports the statute, it will be
upheld":10
All presumptions are indulged in favor of constitutionality; one who attacks a statute, alleging unconstitutionality
must prove its invalidity beyond a reasonable doubt, that a law may work hardship does not render it
unconstitutional; that if any reasonable basis may be conceived which supports the statute, it will be upheld,
and the challenger must negate all possible bases; that the courts are not concerned with the wisdom, justice,
policy, or expediency of a statute; and that a liberal interpretation of the constitution in favor of the
constitutionality of legislation should be adopted. (Emphasis supplied)
Similarly, as held in Salvador v. Mapa,11 it was held that an "arguable implication" is not enough to strike down
the statute subject of constitutional scrutiny; thus, the guiding notion is that "to doubt is to sustain":12
The constitutionality of laws is presumed. To justify nullification of a law, there must be a clear and unequivocal
breach of the Constitution, not a doubtful or arguable implication; a law shall not be declared invalid unless the
191
conflict with the Constitution is clear beyond reasonable doubt. The presumption is always in favor of
constitutionality. To doubt is to sustain. x x x. (Emphases supplied)
Applying this framework, Section 8(2) of RA 6770, both with respect to the OPs disciplinary authority ver the
Special Prosecutor and the Deputy Ombudsmen, should be upheld in its entirety since it has not been shown
that said provision "clearly and unequivocally" offends any constitutional principle. By constitutional design,
disciplinary authority over non-impeachable officers, such as the Special Prosecutor and Deputy Ombudsmen,
was left to be determined by future legislation. This much is clear from the text of the Constitution. Section 2,
Article XI of the 1987 Constitution explicitly provides that non-impeachable officers may be removed from office
as may be provided by law:
Section 2. The President, the Vice-President, the Members of the Supreme Court, the Members of the
Constitutional Commissions, and the Ombudsman may be removed from office on impeachment for, and
conviction of, culpable violation of the Constitution, treason, bribery, graft and corruption, other high crimes, or
betrayal of public trust. All other public officers and employees may be removed from office as provided by law,
but not by impeachment. (Emphasis and underscoring supplied)
While Section 5, Article XI of the 1987 Constitution "created the independent Office of the Ombudsman" the
provision which is the legal anchor of the majoritys position on this matter the Constitution neither defines
what this principle of Ombudsman independence means nor prohibits the offices subjection to an external
disciplining authority. Meanwhile, what is discoverable from the deliberations of the Constitutional Commission
on Article XI, particularly those which are quoted in the ponencia,13 is that the Office of the Ombudsman was
merely intended to be a separate office from the Executive. This idea of organizational separation was meant
to obviate the Executive Department from exercising the encompassing powers of control and supervision over
the Office of the Ombudsman. It is only in this regard that the Office of the Ombudsman was deemed by the
Framers as independent.
To be sure, the power of control is the power of an officer to alter or modify or set aside what a subordinate
officer had done in the performance of his duties and to substitute the judgment of the former for that of the
latter. An officer in control lays down the rules in the doing of an act. If they are not followed, he may, in his
discretion, order the act undone or re-done by his subordinate or he may even decide to do it himself. On the
other hand, the power of supervision means "overseeing or the authority of an officer to see to it that the
subordinate officers perform their duties." If the subordinate officers fail or neglect to fulfill their duties, the
official may take such action or step as prescribed by law to make them perform their duties. Essentially, the
power of supervision means no more than the power of ensuring that laws are faithfully executed, or that
subordinate officers act within the law. The supervisor or superintendent merely sees to it that the rules are
followed, but he does not lay down the rules, nor does he have discretion to modify or replace them.14 By virtue
of these definitions, it is easy to envision how the Office of the Ombudsmans functions would be unduly
hampered if it was to be subjected to executive control and supervision: with control, the Office of the
Ombudsmans actions could be altered, modified or substituted by that of the President, and with supervision,
the office would operate under constant scrutiny of a separate but superior authority. With this in mind, the
Office of the Ombudsmans independence should only be construed in the context of organizational separation
which does not, as it should not, obviate the possibility of having an external disciplining authority over some of
its officials pursuant to the checks and balances principle.
Verily, the principle of checks and balances is not a general apothegm for total insulation but rather of
functional interrelation. It is clear that no one office of government works in absolute autonomy. To determine
the gradations and contours of institutional independence, one must look into the blueprint of the Constitution
which embodies the will and wisdom of the people. This is precisely what Section 2, Article XI of the 1987
Constitution states: non-impeachable officers, such as the Special Prosecutor and the Deputy Ombudsmen,
may be removed from office as may be provided by law. Indeed, this provision coupled with the Framers
silence on the meaning of Ombudsman independence should carve out space for Congress to define, by its
plenary legislative power acting as representatives of the people, the parameters of discipline over these so-
called non-impeachable officers, including, among others, the Special Prosecutor and the Deputy
Ombudsmen.
In any event, without a prohibition that may be clearly and unequivocally ascertained from the text and
deliberations of the Constitution against the disciplinary authority provided under Section 8(2) of RA 6770, the
overriding approach should operate - to doubt is to sustain; all doubts are to be construed in favor of
constitutionality.
192
Accordingly, I vote to uphold the constitutionality of Section 8(2) of RA 6770 in its entirety.
ESTELA M. PERLAS-BERNABE
Associate Justice

EN BANC
G.R. No. 170139, August 05, 2014
SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner, v. JOY C. CABILES, Respondent.
DECISION
LEONEN, J.:
This case involves an overseas Filipino worker with shattered dreams. It is our duty, given the facts and the
law, to approximate justice for her.

We are asked to decide a petition for review1 on certiorari assailing the Court of Appeals decision2 dated June
27, 2005. This decision partially affirmed the National Labor Relations Commissions resolution dated March
31, 2004,3 declaring respondents dismissal illegal, directing petitioner to pay respondents three-month salary
equivalent to New Taiwan Dollar (NT$) 46,080.00, and ordering it to reimburse the NT$3,000.00 withheld from
respondent, and pay her NT$300.00 attorneys fees.4cralawred

Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement agency.5Responding to
an ad it published, respondent, Joy C. Cabiles, submitted her application for a quality control job in
Taiwan.6cralawred

Joys application was accepted.7 Joy was later asked to sign a one-year employment contract for a monthly
salary of NT$15,360.00.8 She alleged that Sameer Overseas Agency required her to pay a placement fee of
P70,000.00 when she signed the employment contract.9cralawred

Joy was deployed to work for Taiwan Wacoal, Co. Ltd. (Wacoal) on June 26, 1997.10 She alleged that in her
employment contract, she agreed to work as quality control for one year.11 In Taiwan, she was asked to work as
a cutter.12cralawred

Sameer Overseas Placement Agency claims that on July 14, 1997, a certain Mr. Huwang from Wacoal
informed Joy, without prior notice, that she was terminated and that she should immediately report to their
office to get her salary and passport.13 She was asked to prepare for immediate repatriation.14cralawred

Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of
NT$9,000.15According to her, Wacoal deducted NT$3,000 to cover her plane ticket to Manila.16cralawred

On October 15, 1997, Joy filed a complaint17 with the National Labor Relations Commission against petitioner
and Wacoal. She claimed that she was illegally dismissed.18 She asked for the return of her placement fee, the
withheld amount for repatriation costs, payment of her salary for 23 months as well as moral and exemplary
damages.19 She identified Wacoal as Sameer Overseas Placement Agencys foreign principal.20cralawred

Sameer Overseas Placement Agency alleged that respondent's termination was due to her inefficiency,
negligence in her duties, and her failure to comply with the work requirements [of] her foreign
[employer].21 The agency also claimed that it did not ask for a placement fee of ?70,000.00.22 As evidence, it
showed Official Receipt No. 14860 dated June 10, 1997, bearing the amount of ?20,360.00.23 Petitioner added
that Wacoal's accreditation with petitioner had already been transferred to the Pacific Manpower &
Management Services, Inc. (Pacific) as of August 6, 1997.24 Thus, petitioner asserts that it was already
substituted by Pacific Manpower.25cralawred

Pacific Manpower moved for the dismissal of petitioners claims against it.26 It alleged that there was no
employer-employee relationship between them.27 Therefore, the claims against it were outside the jurisdiction
of the Labor Arbiter.28 Pacific Manpower argued that the employment contract should first be presented so that
193
the employers contractual obligations might be identified.29 It further denied that it assumed liability for
petitioners illegal acts.30cralawred

On July 29, 1998, the Labor Arbiter dismissed Joys complaint.31 Acting Executive Labor Arbiter Pedro C.
Ramos ruled that her complaint was based on mere allegations.32 The Labor Arbiter found that there was no
excess payment of placement fees, based on the official receipt presented by petitioner.33 The Labor Arbiter
found unnecessary a discussion on petitioners transfer of obligations to Pacific34 and considered the matter
immaterial in view of the dismissal of respondents complaint.35cralawred

Joy appealed36 to the National Labor Relations Commission.

In a resolution37 dated March 31, 2004, the National Labor Relations Commission declared that Joy was
illegally dismissed.38 It reiterated the doctrine that the burden of proof to show that the dismissal was based on
a just or valid cause belongs to the employer.39 It found that Sameer Overseas Placement Agency failed to
prove that there were just causes for termination.40 There was no sufficient proof to show that respondent was
inefficient in her work and that she failed to comply with company requirements.41 Furthermore, procedural due
process was not observed in terminating respondent.42cralawred

The National Labor Relations Commission did not rule on the issue of reimbursement of placement fees for
lack of jurisdiction.43 It refused to entertain the issue of the alleged transfer of obligations to Pacific.44 It did not
acquire jurisdiction over that issue because Sameer Overseas Placement Agency failed to appeal the Labor
Arbiters decision not to rule on the matter.45cralawred

The National Labor Relations Commission awarded respondent only three (3) months worth of salary in the
amount of NT$46,080, the reimbursement of the NT$3,000 withheld from her, and attorneys fees of
NT$300.46cralawred

The Commission denied the agencys motion for reconsideration47 dated May 12, 2004 through a
resolution48 dated July 2, 2004.

Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing of a petition49 for certiorari with
the Court of Appeals assailing the National Labor Relations Commissions resolutions dated March 31, 2004
and July 2, 2004.

The Court of Appeals50 affirmed the decision of the National Labor Relations Commission with respect to the
finding of illegal dismissal, Joys entitlement to the equivalent of three months worth of salary, reimbursement
of withheld repatriation expense, and attorneys fees.51 The Court of Appeals remanded the case to the
National Labor Relations Commission to address the validity of petitioner's allegations against Pacific.52 The
Court of Appeals held, thus:chanRoblesvirtualLawlibrary
Although the public respondent found the dismissal of the complainant-respondent illegal, we should point out
that the NLRC merely awarded her three (3) months backwages or the amount of NT$46,080.00, which was
based upon its finding that she was dismissed without due process, a finding that we uphold, given petitioners
lack of worthwhile discussion upon the same in the proceedings below or before us. Likewise we sustain
NLRCs finding in regard to the reimbursement of her fare, which is squarely based on the law; as well as the
award of attorneys fees.

But we do find it necessary to remand the instant case to the public respondent for further proceedings, for the
purpose of addressing the validity or propriety of petitioners third-party complaint against the transferee agent
or the Pacific Manpower & Management Services, Inc. and Lea G. Manabat. We should emphasize that as far
as the decision of the NLRC on the claims of Joy Cabiles, is concerned, the same is hereby affirmed with
finality, and we hold petitioner liable thereon, but without prejudice to further hearings on its third party
complaint against Pacific for reimbursement.

WHEREFORE, premises considered, the assailed Resolutions are hereby partly AFFIRMED in accordance
194
with the foregoing discussion, but subject to the caveat embodied in the last sentence. No costs.

SO ORDERED.53

Dissatisfied, Sameer Overseas Placement Agency filed this petition.54cralawred

We are asked to determine whether the Court of Appeals erred when it affirmed the ruling of the National Labor
Relations Commission finding respondent illegally dismissed and awarding her three months worth of salary,
the reimbursement of the cost of her repatriation, and attorneys fees despite the alleged existence of just
causes of termination.

Petitioner reiterates that there was just cause for termination because there was a finding of Wacoal that
respondent was inefficient in her work.55 Therefore, it claims that respondents dismissal was valid.56cralawred

Petitioner also reiterates that since Wacoals accreditation was validly transferred to Pacific at the time
respondent filed her complaint, it should be Pacific that should now assume responsibility for Wacoals
contractual obligations to the workers originally recruited by petitioner.57cralawred

Sameer Overseas Placement Agencys petition is without merit. We find for respondent.
I

Sameer Overseas Placement Agency failed to show that there was just cause for causing Joys dismissal. The
employer, Wacoal, also failed to accord her due process of law.

Indeed, employers have the prerogative to impose productivity and quality standards at work.58 They may also
impose reasonable rules to ensure that the employees comply with these standards.59 Failure to comply may
be a just cause for their dismissal.60 Certainly, employers cannot be compelled to retain the services of an
employee who is guilty of acts that are inimical to the interest of the employer.61While the law acknowledges
the plight and vulnerability of workers, it does not authorize the oppression or self-destruction of the
employer.62 Management prerogative is recognized in law and in our jurisprudence.

This prerogative, however, should not be abused. It is tempered with the employees right to security of
tenure.63 Workers are entitled to substantive and procedural due process before termination. They may not be
removed from employment without a valid or just cause as determined by law and without going through the
proper procedure.

Security of tenure for labor is guaranteed by our Constitution.64cralawred

Employees are not stripped of their security of tenure when they move to work in a different jurisdiction. With
respect to the rights of overseas Filipino workers, we follow the principle of lex loci contractus.

Thus, in Triple Eight Integrated Services, Inc. v. NLRC,65 this court noted:chanRoblesvirtualLawlibrary
Petitioner likewise attempts to sidestep the medical certificate requirement by contending that since Osdana
was working in Saudi Arabia, her employment was subject to the laws of the host country. Apparently,
petitioner hopes to make it appear that the labor laws of Saudi Arabia do not require any certification by a
competent public health authority in the dismissal of employees due to illness.

Again, petitioners argument is without merit.

First, established is the rule that lex loci contractus (the law of the place where the contract is made)
governs in this jurisdiction. There is no question that the contract of employment in this case was
perfected here in the Philippines. Therefore, the Labor Code, its implementing rules and regulations,
and other laws affecting labor apply in this case. Furthermore, settled is the rule that the courts of the
forum will not enforce any foreign claim obnoxious to the forums public policy. Here in the Philippines,
195
employment agreements are more than contractual in nature. The Constitution itself, in Article XIII, Section 3,
guarantees the special protection of workers, to wit:chanRoblesvirtualLawlibrary
The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to
security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and
decision-making processes affecting their rights and benefits as may be provided by law.

. . . .chanrobleslaw

This public policy should be borne in mind in this case because to allow foreign employers to determine for and
by themselves whether an overseas contract worker may be dismissed on the ground of illness would
encourage illegal or arbitrary pre-termination of employment contracts.66 (Emphasis supplied, citation omitted)

Even with respect to fundamental procedural rights, this court emphasized in PCL Shipping Philippines, Inc. v.
NLRC,67 to wit:chanRoblesvirtualLawlibrary
Petitioners admit that they did not inform private respondent in writing of the charges against him and that they
failed to conduct a formal investigation to give him opportunity to air his side. However, petitioners contend that
the twin requirements of notice and hearing applies strictly only when the employment is within the Philippines
and that these need not be strictly observed in cases of international maritime or overseas employment.

The Court does not agree. The provisions of the Constitution as well as the Labor Code which afford
protection to labor apply to Filipino employees whether working within the Philippines or abroad.
Moreover, the principle of lex loci contractus (the law of the place where the contract is made) governs
in this jurisdiction. In the present case, it is not disputed that the Contract of Employment entered into by and
between petitioners and private respondent was executed here in the Philippines with the approval of the
Philippine Overseas Employment Administration (POEA). Hence, the Labor Code together with its
implementing rules and regulations and other laws affecting labor apply in this case.68 (Emphasis supplied,
citations omitted)

By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or authorized cause and after
compliance with procedural due process requirements.

Article 282 of the Labor Code enumerates the just causes of termination by the employer.
Thus:chanRoblesvirtualLawlibrary
Art. 282. Termination by employer. An employer may terminate an employment for any of the following
causes:cralawlawlibrary

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;chanroblesvirtuallawlibrary

(b) Gross and habitual neglect by the employee of his duties;chanroblesvirtuallawlibrary

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;chanroblesvirtuallawlibrary

(d) Commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representatives; andChanRoblesVirtualawlibrary

(e) Other causes analogous to the foregoing.

Petitioners allegation that respondent was inefficient in her work and negligent in her duties69 may, therefore,
196
constitute a just cause for termination under Article 282(b), but only if petitioner was able to prove it.

The burden of proving that there is just cause for termination is on the employer. The employer must
affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause.70 Failure to show
that there was valid or just cause for termination would necessarily mean that the dismissal was
illegal.71cralawred

To show that dismissal resulting from inefficiency in work is valid, it must be shown that: 1) the employer has
set standards of conduct and workmanship against which the employee will be judged; 2) the standards of
conduct and workmanship must have been communicated to the employee; and 3) the communication was
made at a reasonable time prior to the employees performance assessment.

This is similar to the law and jurisprudence on probationary employees, which allow termination of the
employee only when there is just cause or when [the probationary employee] fails to qualify as a regular
employee in accordance with reasonable standards made known by the employer to the employee at the time
of his [or her] engagement.72cralawred

However, we do not see why the application of that ruling should be limited to probationary employment. That
rule is basic to the idea of security of tenure and due process, which are guaranteed to all employees, whether
their employment is probationary or regular.

The pre-determined standards that the employer sets are the bases for determining the probationary
employees fitness, propriety, efficiency, and qualifications as a regular employee. Due process requires that
the probationary employee be informed of such standards at the time of his or her engagement so he or she
can adjust his or her character or workmanship accordingly. Proper adjustment to fit the standards upon which
the employees qualifications will be evaluated will increase ones chances of being positively assessed for
regularization by his or her employer.

Assessing an employees work performance does not stop after regularization. The employer, on a regular
basis, determines if an employee is still qualified and efficient, based on work standards. Based on that
determination, and after complying with the due process requirements of notice and hearing, the employer may
exercise its management prerogative of terminating the employee found unqualified.

The regular employee must constantly attempt to prove to his or her employer that he or she meets all the
standards for employment. This time, however, the standards to be met are set for the purpose of retaining
employment or promotion. The employee cannot be expected to meet any standard of character or
workmanship if such standards were not communicated to him or her. Courts should remain vigilant on
allegations of the employers failure to communicate work standards that would govern ones employment if
[these are] to discharge in good faith [their] duty to adjudicate.73cralawred

In this case, petitioner merely alleged that respondent failed to comply with her foreign employers work
requirements and was inefficient in her work.74No evidence was shown to support such allegations. Petitioner
did not even bother to specify what requirements were not met, what efficiency standards were violated, or
what particular acts of respondent constituted inefficiency.

There was also no showing that respondent was sufficiently informed of the standards against which her work
efficiency and performance were judged. The parties conflict as to the position held by respondent
showed that even the matter as basic as the job title was not clear.

The bare allegations of petitioner are not sufficient to support a claim that there is just cause for termination.
There is no proof that respondent was legally terminated.

Petitioner failed to comply with

the due process requirements
197

Respondents dismissal less than one year from hiring and her repatriation on the same day show not only
failure on the part of petitioner to comply with the requirement of the existence of just cause for termination.
They patently show that the employers did not comply with the due process requirement.

A valid dismissal requires both a valid cause and adherence to the valid procedure of dismissal.75 The
employer is required to give the charged employee at least two written notices before termination.76One of the
written notices must inform the employee of the particular acts that may cause his or her dismissal.77 The other
notice must [inform] the employee of the employers decision.78 Aside from the notice requirement, the
employee must also be given an opportunity to be heard.79cralawred

Petitioner failed to comply with the twin notices and hearing requirements. Respondent started working on
June 26, 1997. She was told that she was terminated on July 14, 1997 effective on the same day and barely a
month from her first workday. She was also repatriated on the same day that she was informed of her
termination. The abruptness of the termination negated any finding that she was properly notified and given the
opportunity to be heard. Her constitutional right to due process of law was violated.
II

Respondent Joy Cabiles, having been illegally dismissed, is entitled to her salary for the unexpired portion of
the employment contract that was violated together with attorneys fees and reimbursement of amounts
withheld from her salary.

Section 10 of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of
1995, states that overseas workers who were terminated without just, valid, or authorized cause shall be
entitled to the full reimbursement of his placement fee with interest of twelve (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or for three (3) months for every year of the
unexpired term, whichever is less.
Sec. 10. MONEY CLAIMS. Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damages.

The liability of the principal/employer and the recruitment/placement agency for any and all claims under this
section shall be joint and several. This provisions [sic] shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages that
may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers
and directors and partners as the case may be, shall themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall not be
affected by any substitution, amendment or modification made locally or in a foreign country of the said
contract.

Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages under
this section shall be paid within four (4) months from the approval of the settlement by the appropriate
authority.

In case of termination of overseas employment without just, valid or authorized cause as defined by law or
contract, the workers shall be entitled to the full reimbursement of his placement fee with interest of twelve
(12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months
for every year of the unexpired term, whichever is less.
198
....

(Emphasis supplied)chanrobleslaw

Section 15 of Republic Act No. 8042 states that repatriation of the worker and the transport of his [or her]
personal belongings shall be the primary responsibility of the agency which recruited or deployed the worker
overseas. The exception is when termination of employment is due solely to the fault of the worker,80 which
as we have established, is not the case. It reads:chanRoblesvirtualLawlibrary
SEC. 15. REPATRIATION OF WORKERS; EMERGENCY REPATRIATION FUND. The repatriation of the
worker and the transport of his personal belongings shall be the primary responsibility of the agency which
recruited or deployed the worker overseas. All costs attendant to repatriation shall be borne by or charged to
the agency concerned and/or its principal. Likewise, the repatriation of remains and transport of the personal
belongings of a deceased worker and all costs attendant thereto shall be borne by the principal and/or local
agency. However, in cases where the termination of employment is due solely to the fault of the worker, the
principal/employer or agency shall not in any manner be responsible for the repatriation of the former and/or
his belongings.

....

The Labor Code81 also entitles the employee to 10% of the amount of withheld wages as attorneys fees when
the withholding is unlawful.

The Court of Appeals affirmed the National Labor Relations Commissions decision to award respondent
NT$46,080.00 or the three-month equivalent of her salary, attorneys fees of NT$300.00, and the
reimbursement of the withheld NT$3,000.00 salary, which answered for her repatriation.

We uphold the finding that respondent is entitled to all of these awards. The award of the three-month
equivalent of respondents salary should, however, be increased to the amount equivalent to the
unexpired term of the employment contract.

In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc.,82 this court ruled that the clause
or for three (3) months for every year of the unexpired term, whichever is less83 is unconstitutional for
violating the equal protection clause and substantive due process.84cralawred

A statute or provision which was declared unconstitutional is not a law. It confers no rights; it imposes no
duties; it affords no protection; it creates no office; it is inoperative as if it has not been passed at
all.85cralawred

We are aware that the clause or for three (3) months for every year of the unexpired term, whichever is
less was reinstated in Republic Act No. 8042 upon promulgation of Republic Act No. 10022 in 2010. Section 7
of Republic Act No. 10022 provides:chanRoblesvirtualLawlibrary
Section 7. Section 10 of Republic Act No. 8042, as amended, is hereby amended to read as
follows:chanRoblesvirtualLawlibrary
SEC. 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damage. Consistent with this mandate, the
NLRC shall endeavor to update and keep abreast with the developments in the global services industry.

The liability of the principal/employer and the recruitment/placement agency for any and all claims under this
section shall be joint and several. This provision shall be incorporated in the contract for overseas employment
and shall be a condition precedent for its approval. The performance bond to de [sic] filed by the
recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages that
199
may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers
and directors and partners as the case may be, shall themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall not be
affected by any substitution, amendment or modification made locally or in a foreign country of the said
contract.

Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages under
this section shall be paid within thirty (30) days from approval of the settlement by the appropriate authority.

In case of termination of overseas employment without just, valid or authorized cause as defined by law or
contract, or any unauthorized deductions from the migrant workers salary, the worker shall be entitled to the
full reimbursement if [sic] his placement fee and the deductions made with interest at twelve percent (12%) per
annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.

In case of a final and executory judgement against a foreign employer/principal, it shall be automatically
disqualified, without further proceedings, from participating in the Philippine Overseas Employment Program
and from recruiting and hiring Filipino workers until and unless it fully satisfies the judgement award.

Noncompliance with the mandatory periods for resolutions of case provided under this section shall subject the
responsible officials to any or all of the following penalties:cralawlawlibrary

(a) The salary of any such official who fails to render his decision or resolution within the prescribed period
shall be, or caused to be, withheld until the said official complies therewith;chanroblesvirtuallawlibrary

(b) Suspension for not more than ninety (90) days; or

(c) Dismissal from the service with disqualification to hold any appointive public office for five (5) years.

Provided, however, That the penalties herein provided shall be without prejudice to any liability which any such
official may have incured [sic] under other existing laws or rules and regulations as a consequence of violating
the provisions of this paragraph. (Emphasis supplied)

Republic Act No. 10022 was promulgated on March 8, 2010. This means that the reinstatement of the clause in
Republic Act No. 8042 was not yet in effect at the time of respondents termination from work in
1997.86 Republic Act No. 8042 before it was amended by Republic Act No. 10022 governs this case.

When a law is passed, this court awaits an actual case that clearly raises adversarial positions in their proper
context before considering a prayer to declare it as unconstitutional.

However, we are confronted with a unique situation. The law passed incorporates the exact clause already
declared as unconstitutional, without any perceived substantial change in the circumstances.

This may cause confusion on the part of the National Labor Relations Commission and the Court of Appeals.
At minimum, the existence of Republic Act No. 10022 may delay the execution of the judgment in this case,
further frustrating remedies to assuage the wrong done to petitioner. Hence, there is a necessity to decide this
constitutional issue.

Moreover, this court is possessed with the constitutional duty to [p]romulgate rules concerning the protection
and enforcement of constitutional rights.87 When cases become moot and academic, we do not hesitate to
provide for guidance to bench and bar in situations where the same violations are capable of repetition but will
evade review. This is analogous to cases where there are millions of Filipinos working abroad who are bound
200
to suffer from the lack of protection because of the restoration of an identical clause in a provision previously
declared as unconstitutional.

In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may exercise its
powers in any manner inconsistent with the Constitution, regardless of the existence of any law that supports
such exercise. The Constitution cannot be trumped by any other law. All laws must be read in light of the
Constitution. Any law that is inconsistent with it is a nullity.

Thus, when a law or a provision of law is null because it is inconsistent with the Constitution, the nullity cannot
be cured by reincorporation or reenactment of the same or a similar law or provision. A law or provision of law
that was already declared unconstitutional remains as such unless circumstances have so changed as to
warrant a reverse conclusion.

We are not convinced by the pleadings submitted by the parties that the situation has so changed so as to
cause us to reverse binding precedent.

Likewise, there are special reasons of judicial efficiency and economy that attend to these cases.

The new law puts our overseas workers in the same vulnerable position as they were prior to Serrano. Failure
to reiterate the very ratio decidendi of that case will result in the same untold economic hardships that our
reading of the Constitution intended to avoid. Obviously, we cannot countenance added expenses for further
litigation that will reduce their hard-earned wages as well as add to the indignity of having been deprived of the
protection of our laws simply because our precedents have not been followed. There is no constitutional
doctrine that causes injustice in the face of empty procedural niceties. Constitutional interpretation is complex,
but it is never unreasonable.

Thus, in a resolution88 dated October 22, 2013, we ordered the parties and the Office of the Solicitor General to
comment on the constitutionality of the reinstated clause in Republic Act No. 10022.

In its comment,89 petitioner argued that the clause was constitutional.90 The legislators intended a balance
between the employers and the employees rights by not unduly burdening the local recruitment
agency.91 Petitioner is also of the view that the clause was already declared as constitutional
in Serrano.92cralawred

The Office of the Solicitor General also argued that the clause was valid and constitutional.93 However, since
the parties never raised the issue of the constitutionality of the clause as reinstated in Republic Act No. 10022,
its contention is that it is beyond judicial review.94cralawred

On the other hand, respondent argued that the clause was unconstitutional because it infringed on workers
right to contract.95cralawred

We observe that the reinstated clause, this time as provided in Republic Act. No. 10022, violates the
constitutional rights to equal protection and due process.96 Petitioner as well as the Solicitor General have
failed to show any compelling change in the circumstances that would warrant us to revisit the precedent.

We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should be recovered by
an illegally dismissed overseas worker to three months is both a violation of due process and the
equal protection clauses of the Constitution.

Equal protection of the law is a guarantee that persons under like circumstances and falling within the same
class are treated alike, in terms of privileges conferred and liabilities enforced.97 It is a guarantee against
undue favor and individual or class privilege, as well as hostile discrimination or the oppression of
inequality.98cralawred
201
In creating laws, the legislature has the power to make distinctions and classifications.99 In exercising such
power, it has a wide discretion.100cralawred

The equal protection clause does not infringe on this legislative power.101 A law is void on this basis, only if
classifications are made arbitrarily.102 There is no violation of the equal protection clause if the law applies
equally to persons within the same class and if there are reasonable grounds for distinguishing between those
falling within the class and those who do not fall within the class.103 A law that does not violate the equal
protection clause prescribes a reasonable classification.104cralawred

A reasonable classification (1) must rest on substantial distinctions; (2) must be germane to the purposes of
the law; (3) must not be limited to existing conditions only; and (4) must apply equally to all members of the
same class.105cralawred

The reinstated clause does not satisfy the requirement of reasonable classification.

In Serrano, we identified the classifications made by the reinstated clause. It distinguished between fixed-
period overseas workers and fixed-period local workers.106 It also distinguished between overseas workers with
employment contracts of less than one year and overseas workers with employment contracts of at least one
year.107 Within the class of overseas workers with at least one-year employment contracts, there was a
distinction between those with at least a year left in their contracts and those with less than a year left in their
contracts when they were illegally dismissed.108cralawred

The Congress classification may be subjected to judicial review. In Serrano, there is a legislative classification
which impermissibly interferes with the exercise of a fundamental right or operates to the peculiar
disadvantage of a suspect class.109cralawred

Under the Constitution, labor is afforded special protection.110 Thus, this court in Serrano, [i]mbued with the
same sense of obligation to afford protection to labor, . . . employ[ed] the standard of strict judicial scrutiny, for
it perceive[d] in the subject clause a suspect classification prejudicial to OFWs.111cralawred

We also noted in Serrano that before the passage of Republic Act No. 8042, the money claims of illegally
terminated overseas and local workers with fixed-term employment were computed in the same
manner.112 Their money claims were computed based on the unexpired portions of their contracts.113The
adoption of the reinstated clause in Republic Act No. 8042 subjected the money claims of illegally dismissed
overseas workers with an unexpired term of at least a year to a cap of three months worth of their
salary.114 There was no such limitation on the money claims of illegally terminated local workers with fixed-term
employment.115cralawred

We observed that illegally dismissed overseas workers whose employment contracts had a term of less than
one year were granted the amount equivalent to the unexpired portion of their employment
contracts.116 Meanwhile, illegally dismissed overseas workers with employment terms of at least a year were
granted a cap equivalent to three months of their salary for the unexpired portions of their
contracts.117cralawred

Observing the terminologies used in the clause, we also found that the subject clause creates a sub-layer of
discrimination among OFWs whose contract periods are for more than one year: those who are illegally
dismissed with less than one year left in their contracts shall be entitled to their salaries for the entire unexpired
portion thereof, while those who are illegally dismissed with one year or more remaining in their contracts shall
be covered by the reinstated clause, and their monetary benefits limited to their salaries for three months
only.118cralawred

We do not need strict scrutiny to conclude that these classifications do not rest on any real or substantial
distinctions that would justify different treatments in terms of the computation of money claims resulting from
illegal termination.
202

Overseas workers regardless of their classifications are entitled to security of tenure, at least for the period
agreed upon in their contracts. This means that they cannot be dismissed before the end of their contract
terms without due process. If they were illegally dismissed, the workers right to security of tenure is violated.

The rights violated when, say, a fixed-period local worker is illegally terminated are neither greater than nor
less than the rights violated when a fixed-period overseas worker is illegally terminated. It is state policy to
protect the rights of workers without qualification as to the place of employment.119 In both cases, the workers
are deprived of their expected salary, which they could have earned had they not been illegally dismissed. For
both workers, this deprivation translates to economic insecurity and disparity.120 The same is true for the
distinctions between overseas workers with an employment contract of less than one year and overseas
workers with at least one year of employment contract, and between overseas workers with at least a year left
in their contracts and overseas workers with less than a year left in their contracts when they were illegally
dismissed.

For this reason, we cannot subscribe to the argument that [overseas workers] are contractual employees who
can never acquire regular employment status, unlike local workers121 because it already justifies differentiated
treatment in terms of the computation of money claims.122cralawred

Likewise, the jurisdictional and enforcement issues on overseas workers money claims do not justify a
differentiated treatment in the computation of their money claims.123 If anything, these issues justify an equal, if
not greater protection and assistance to overseas workers who generally are more prone to exploitation given
their physical distance from our government.

We also find that the classifications are not relevant to the purpose of the law, which is to establish a higher
standard of protection and promotion of the welfare of migrant workers, their families and overseas Filipinos in
distress, and for other purposes.124 Further, we find specious the argument that reducing the liability of
placement agencies redounds to the benefit of the [overseas] workers.125cralawred

Putting a cap on the money claims of certain overseas workers does not increase the standard of protection
afforded to them. On the other hand, foreign employers are more incentivized by the reinstated clause to enter
into contracts of at least a year because it gives them more flexibility to violate our overseas workers rights.
Their liability for arbitrarily terminating overseas workers is decreased at the expense of the workers whose
rights they violated. Meanwhile, these overseas workers who are impressed with an expectation of a stable job
overseas for the longer contract period disregard other opportunities only to be terminated earlier. They are left
with claims that are less than what others in the same situation would receive. The reinstated clause, therefore,
creates a situation where the law meant to protect them makes violation of rights easier and simply benign to
the violator.

As Justice Brion said in his concurring opinion in Serrano:chanRoblesvirtualLawlibrary

Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in fact provides a hidden twist
affecting the principal/employers liability. While intended as an incentive accruing to recruitment/manning
agencies, the law, as worded, simply limits the OFWs recovery in wrongful dismissal situations. Thus, it
redounds to the benefit of whoever may be liable, including the principal/employer the direct employer
primarily liable for the wrongful dismissal. In this sense, Section 10 read as a grant of incentives to
recruitment/manning agencies oversteps what it aims to do by effectively limiting what is otherwise the full
liability of the foreign principals/employers. Section 10, in short, really operates to benefit the wrong party and
allows that party, without justifiable reason, to mitigate its liability for wrongful dismissals. Because of this
hidden twist, the limitation of liability under Section 10 cannot be an appropriate incentive, to borrow the term
that R.A. No. 8042 itself uses to describe the incentive it envisions under its purpose clause.

What worsens the situation is the chosen mode of granting the incentive: instead of a grant that, to encourage
greater efforts at recruitment, is directly related to extra efforts undertaken, the law simply limits their liability for
the wrongful dismissals of already deployed OFWs. This is effectively a legally-imposed partial condonation of
203
their liability to OFWs, justified solely by the laws intent to encourage greater deployment efforts. Thus, the
incentive, from a more practical and realistic view, is really part of a scheme to sell Filipino overseas labor at a
bargain for purposes solely of attracting the market. . . .

The so-called incentive is rendered particularly odious by its effect on the OFWs the benefits accruing to the
recruitment/manning agencies and their principals are taken from the pockets of the OFWs to whom the full
salaries for the unexpired portion of the contract rightfully belong. Thus, the principals/employers and the
recruitment/manning agencies even profit from their violation of the security of tenure that an employment
contract embodies. Conversely, lesser protection is afforded the OFW, not only because of the lessened
recovery afforded him or her by operation of law, but also because this same lessened recovery renders a
wrongful dismissal easier and less onerous to undertake; the lesser cost of dismissing a Filipino will always be
a consideration a foreign employer will take into account in termination of employment decisions. . . .126

Further, [t]here can never be a justification for any form of government action that alleviates the burden of one
sector, but imposes the same burden on another sector, especially when the favored sector is composed of
private businesses such as placement agencies, while the disadvantaged sector is composed of OFWs whose
protection no less than the Constitution commands. The idea that private business interest can be elevated to
the level of a compelling state interest is odious.127cralawred

Along the same line, we held that the reinstated clause violates due process rights. It is arbitrary as it deprives
overseas workers of their monetary claims without any discernable valid purpose.128cralawred

Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in accordance with
Section 10 of Republic Act No. 8042. The award of the three-month equivalence of respondents salary must
be modified accordingly. Since she started working on June 26, 1997 and was terminated on July 14, 1997,
respondent is entitled to her salary from July 15, 1997 to June 25, 1998. To rule otherwise would be iniquitous
to petitioner and other OFWs, and would, in effect, send a wrong signal that principals/employers and
recruitment/manning agencies may violate an OFWs security of tenure which an employment contract
embodies and actually profit from such violation based on an unconstitutional provision of law.129cralawred
III
On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013, which revised the
interest rate for loan or forbearance from 12% to 6% in the absence of stipulation, applies in this case. The
pertinent portions of Circular No. 799, Series of 2013, read:chanRoblesvirtualLawlibrary
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions governing
the rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2 of Circular No.
905, Series of 1982:cralawlawlibrary

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed
in judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%) per
annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and Sections
4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions are hereby
amended accordingly.

This Circular shall take effect on 1 July 2013.

Through the able ponencia of Justice Diosdado Peralta, we laid down the guidelines in computing legal interest
in Nacar v. Gallery Frames:130cralawred
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate
of interest, as well as the accrual thereof, is imposed, as follows:chanRoblesvirtualLawlibrary
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
204
the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any case,
be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not
be disturbed and shall continue to be implemented applying the rate of interest fixed therein.131

Circular No. 799 is applicable only in loans and forbearance of money, goods, or credits, and in judgments
when there is no stipulation on the applicable interest rate. Further, it is only applicable if the judgment did not
become final and executory before July 1, 2013.132cralawred

We add that Circular No. 799 is not applicable when there is a law that states otherwise. While the Bangko
Sentral ng Pilipinas has the power to set or limit interest rates,133 these interest rates do not apply when the law
provides that a different interest rate shall be applied. [A] Central Bank Circular cannot repeal a law. Only a
law can repeal another law.134cralawred
For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated overseas workers are
entitled to the reimbursement of his or her placement fee with an interest of 12% per annum. Since Bangko
Sentral ng Pilipinas circulars cannot repeal Republic Act No. 8042, the issuance of Circular No. 799 does not
have the effect of changing the interest on awards for reimbursement of placement fees from 12% to 6%. This
is despite Section 1 of Circular No. 799, which provides that the 6% interest rate applies even to judgments.

Moreover, laws are deemed incorporated in contracts. The contracting parties need not repeat them. They do
not even have to be referred to. Every contract, thus, contains not only what has been explicitly stipulated, but
the statutory provisions that have any bearing on the matter.135 There is, therefore, an implied stipulation in
contracts between the placement agency and the overseas worker that in case the overseas worker is
adjudged as entitled to reimbursement of his or her placement fees, the amount shall be subject to a 12%
interest per annum. This implied stipulation has the effect of removing awards for reimbursement of placement
fees from Circular No. 799s coverage.

The same cannot be said for awards of salary for the unexpired portion of the employment contract under
Republic Act No. 8042. These awards are covered by Circular No. 799 because the law does not provide for a
specific interest rate that should apply.

In sum, if judgment did not become final and executory before July 1, 2013 and there was no stipulation in the
contract providing for a different interest rate, other money claims under Section 10 of Republic Act No. 8042
shall be subject to the 6% interest per annum in accordance with Circular No. 799.

This means that respondent is also entitled to an interest of 6% per annum on her money claims from the
finality of this judgment.
IV
205
Finally, we clarify the liabilities of Wacoal as principal and petitioner as the employment agency that facilitated
respondents overseas employment.

Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the foreign employer and
the local employment agency are jointly and severally liable for money claims including claims arising out of an
employer-employee relationship and/or damages. This section also provides that the performance bond filed
by the local agency shall be answerable for such money claims or damages if they were awarded to the
employee.

This provision is in line with the states policy of affording protection to labor and alleviating workers
plight.136cralawred

In overseas employment, the filing of money claims against the foreign employer is attended by practical and
legal complications. The distance of the foreign employer alone makes it difficult for an overseas worker to
reach it and make it liable for violations of the Labor Code. There are also possible conflict of laws,
jurisdictional issues, and procedural rules that may be raised to frustrate an overseas workers attempt to
advance his or her claims.

It may be argued, for instance, that the foreign employer must be impleaded in the complaint as an
indispensable party without which no final determination can be had of an action.137cralawred

The provision on joint and several liability in the Migrant Workers and Overseas Filipinos Act of 1995 assures
overseas workers that their rights will not be frustrated with these complications.

The fundamental effect of joint and several liability is that each of the debtors is liable for the entire
obligation.138 A final determination may, therefore, be achieved even if only one of the joint and several debtors
are impleaded in an action. Hence, in the case of overseas employment, either the local agency or the foreign
employer may be sued for all claims arising from the foreign employers labor law violations. This way, the
overseas workers are assured that someone the foreign employers local agent may be made to answer
for violations that the foreign employer may have committed.

The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers have recourse in law
despite the circumstances of their employment. By providing that the liability of the foreign employer may be
enforced to the full extent139 against the local agent, the overseas worker is assured of immediate and
sufficient payment of what is due them.140cralawred

Corollary to the assurance of immediate recourse in law, the provision on joint and several liability in the
Migrant Workers and Overseas Filipinos Act of 1995 shifts the burden of going after the foreign employer from
the overseas worker to the local employment agency. However, it must be emphasized that the local agency
that is held to answer for the overseas workers money claims is not left without remedy. The law does not
preclude it from going after the foreign employer for reimbursement of whatever payment it has made to the
employee to answer for the money claims against the foreign employer.

A further implication of making local agencies jointly and severally liable with the foreign employer is that an
additional layer of protection is afforded to overseas workers. Local agencies, which are businesses by nature,
are inoculated with interest in being always on the lookout against foreign employers that tend to violate labor
law. Lest they risk their reputation or finances, local agencies must already have mechanisms for guarding
against unscrupulous foreign employers even at the level prior to overseas employment applications.

With the present state of the pleadings, it is not possible to determine whether there was indeed a transfer of
obligations from petitioner to Pacific. This should not be an obstacle for the respondent overseas worker to
proceed with the enforcement of this judgment. Petitioner is possessed with the resources to determine the
proper legal remedies to enforce its rights against Pacific, if any.
206
V
Many times, this court has spoken on what Filipinos may encounter as they travel into the farthest and most
difficult reaches of our planet to provide for their families. In Prieto v. NLRC:141cralawred
The Court is not unaware of the many abuses suffered by our overseas workers in the foreign land where they
have ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of contract, maltreatment,
rape, insufficient nourishment, sub-human lodgings, insults and other forms of debasement, are only a few of
the inhumane acts to which they are subjected by their foreign employers, who probably feel they can do as
they please in their own country. While these workers may indeed have relatively little defense against
exploitation while they are abroad, that disadvantage must not continue to burden them when they return to
their own territory to voice their muted complaint. There is no reason why, in their very own land, the protection
of our own laws cannot be extended to them in full measure for the redress of their
grievances.142chanrobleslaw
But it seems that we have not said enough.

We face a diaspora of Filipinos. Their travails and their heroism can be told a million times over; each of their
stories as real as any other. Overseas Filipino workers brave alien cultures and the heartbreak of families left
behind daily. They would count the minutes, hours, days, months, and years yearning to see their sons and
daughters. We all know of the joy and sadness when they come home to see them all grown up and, being so,
they remember what their work has cost them. Twitter accounts, Facetime, and many other gadgets and online
applications will never substitute for their lost physical presence.

Unknown to them, they keep our economy afloat through the ebb and flow of political and economic crises.
They are our true diplomats, they who show the world the resilience, patience, and creativity of our people.
Indeed, we are a people who contribute much to the provision of material creations of this world.

This government loses its soul if we fail to ensure decent treatment for all Filipinos. We default by limiting the
contractual wages that should be paid to our workers when their contracts are breached by the foreign
employers. While we sit, this court will ensure that our laws will reward our overseas workers with what they
deserve: their dignity.

Inevitably, their dignity is ours as well.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED with modification.
Petitioner Sameer Overseas Placement Agency is ORDERED to pay respondent Joy C. Cabiles the amount
equivalent to her salary for the unexpired portion of her employment contract at an interest of 6% per annum
from the finality of this judgment. Petitioner is also ORDERED to reimburse respondent the withheld
NT$3,000.00 salary and pay respondent attorneys fees of NT$300.00 at an interest of 6% per annum from the
finality of this judgment.

The clause, or for three (3) months for every year of the unexpired term, whichever is less in Section 7 of
Republic Act No. 10022 amending Section 10 of Republic Act No. 8042 is declared unconstitutional and,
therefore, null and void.
SO ORDERED

G.R. No. 209287 July 1, 2014

MARIA CAROLINA P. ARAULLO, CHAIRPERSON, BAGONG ALYANSANG MAKABAYAN; JUDY M.
TAGUIWALO, PROFESSOR, UNIVERSITY OF THE PHILIPPINES DILIMAN, CO-CHAIRPERSON,
PAGBABAGO; HENRI KAHN, CONCERNED CITIZENS MOVEMENT; REP. LUZ ILAGAN, GABRIELA
WOMEN'S PARTY REPRESENTATIVE; REP. CARLOS ISAGANI ZARATE, BAY AN MUNA PARTY-LIST
REPRESENTATIVE; RENATO M. REYES, JR., SECRETARY GENERAL OF BAYAN; MANUEL K. DAYRIT,
CHAIRMAN, ANG KAPATIRAN PARTY; VENCER MARI E. CRISOSTOMO, CHAIRPERSON, ANAKBAYAN;
VICTOR VILLANUEVA, CONVENOR, YOUTH ACT NOW, Petitioners,
vs.
BENIGNO SIMEON C. AQUINO III, PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES; PAQUITO N.
207
OCHOA, JR., EXECUTIVE SECRETARY; AND FLORENCIO B. ABAD, SECRETARY OF THE
DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.
x-----------------------x
G.R. No. 209135
AUGUSTO L. SY JUCO JR., Ph.D., Petitioner,
vs.
FLORENCIO B. ABAD, IN HIS CAPACITY AS THE SECRETARY OF DEPARTMENT OF BUDGET AND
MANAGEMENT; AND HON. FRANKLIN MAGTUNAO DRILON, IN HIS CAP A CITY AS THE SENATE
PRESIDENT OF THE PHILIPPINES, Respondents.
x-----------------------x
G.R. No. 209136
MANUELITO R. LUNA, Petitioner,
vs.
SECRETARY FLORENCIO ABAD, IN HIS OFFICIAL CAPACITY AS HEAD OF THE DEPARTMENT OF
BUDGET AND MANAGEMENT; AND EXECUTIVE SECRETARY PAQUITO OCHOA, IN HIS OFFICIAL
CAPACITY AS ALTER EGO OF THE PRESIDENT, Respondents.
x-----------------------x
G.R. No. 209155
ATTY. JOSE MALV AR VILLEGAS, JR., Petitioner,
vs.
THE HONORABLE EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.; AND THE SECRETARY OF
BUDGET AND MANAGEMENT FLORENCIO B. ABAD, Respondents.
x-----------------------x
G.R. No. 209164
PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA), REPRESENTED BY DEAN FROILAN M.
BACUNGAN, BENJAMIN E. DIOKNO AND LEONOR M. BRIONES, Petitioners,
vs.
DEPARTMENT OF BUDGET AND MANAGEMENT AND/OR HON. FLORENCIO B. ABAD, Respondents.
x-----------------------x
G.R. No. 209260
INTEGRATED BAR OF THE PHILIPPINES (IBP), Petitioner,
vs.
SECRETARY FLORENCIO B. ABAD OF THE DEPARTMENT OF BUDGET AND MANAGEMENT
(DBM),Respondent.
x-----------------------x
G.R. No. 209442
GRECO ANTONIOUS BEDA B. BELGICA; BISHOP REUBEN MABANTE AND REV. JOSE L.
GONZALEZ,Petitioners,
vs.
PRESIDENT BENIGNO SIMEON C. AQUINO III, THE SENATE OF THE PHILIPPINES, REPRESENTED BY
SENATE PRESIDENT FRANKLIN M. DRILON; THE HOUSE OF REPRESENTATIVES, REPRESENTED BY
SPEAKER FELICIANO BELMONTE, JR.; THE EXECUTIVE OFFICE, REPRESENTED BY EXECUTIVE
SECRETARY PAQUITO N. OCHOA, JR.; THE DEPARTMENT OF BUDGET AND MANAGEMENT,
REPRESENTED BY SECRETARY FLORENCIO ABAD; THE DEPARTMENT OF FINANCE, REPRESENTED
BY SECRETARY CESAR V. PURISIMA; AND THE BUREAU OF TREASURY, REPRESENTED BY ROSALIA
V. DE LEON, Respondents.
x-----------------------x
G.R. No. 209517
CONFEDERATION FOR UNITY, RECOGNITION AND ADV AN CEMENT OF GOVERNMENT EMPLOYEES
(COURAGE), REPRESENTED BY ITS 1ST VICE PRESIDENT, SANTIAGO DASMARINAS, JR.;
ROSALINDA NARTATES, FOR HERSELF AND AS NATIONAL PRESIDENT OF THE CONSOLIDATED
UNION OF EMPLOYEES NATIONAL HOUSING AUTHORITY (CUENHA); MANUEL BACLAGON, FOR
HIMSELF AND AS PRESIDENT OF THE SOCIAL WELFARE EMPLOYEES ASSOCIATION OF THE
PHILIPPINES, DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT CENTRAL OFFICE (SWEAP-
208
DSWD CO); ANTONIA PASCUAL, FOR HERSELF AND AS NATIONAL PRESIDENT OF THE
DEPARTMENT OF AGRARIAN REFORM EMPLOYEES ASSOCIATION (DAREA); ALBERT MAGALANG,
FOR HIMSELF AND AS PRESIDENT OF THE ENVIRONMENT AND MANAGEMENT BUREAU
EMPLOYEES UNION (EMBEU); AND MARCIAL ARABA, FOR HIMSELF AND AS PRESIDENT OF THE
KAPISANAN PARA SA KAGALINGAN NG MGA KAW ANI NG MMDA (KKKMMDA), Petitioners,
vs.
BENIGNO SIMEON C. AQUINO Ill, PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES; PAQUITO
OCHOA, JR., EXECUTIVE SECRETARY; AND HON. FLORENCIO B. ABAD, SECRETARY OF THE
DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.
x-----------------------x
G.R. No. 209569
VOLUNTEERS AGAINST CRIME AND CORRUPTION (VACC), REPRESENTED BY DANTE L.
JIMENEZ,Petitioner,
vs.
PAQUITO N. OCHOA, EXECUTIVE SECRETARY, AND FLORENCIO B. ABAD, SECRETARY OF THE
DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.
DECISION
BERSAMIN, J.:
For resolution are the consolidated petitions assailing the constitutionality of the Disbursement Acceleration
Program(DAP), National Budget Circular (NBC) No. 541, and related issuances of the Department of Budget
and Management (DBM) implementing the DAP.
At the core of the controversy is Section 29(1) of Article VI of the 1987 Constitution, a provision of the
fundamental law that firmly ordains that "[n]o money shall be paid out of the Treasury except in pursuance of
an appropriation made by law." The tenor and context of the challenges posed by the petitioners against the
DAP indicate that the DAP contravened this provision by allowing the Executive to allocate public money
pooled from programmed and unprogrammed funds of its various agencies in the guise of the President
exercising his constitutional authority under Section 25(5) of the 1987 Constitution to transfer funds out of
savings to augment the appropriations of offices within the Executive Branch of the Government. But the
challenges are further complicated by the interjection of allegations of transfer of funds to agencies or offices
outside of the Executive.
Antecedents
What has precipitated the controversy?
On September 25, 2013, Sen. Jinggoy Ejercito Estrada delivered a privilege speech in the Senate of the
Philippines to reveal that some Senators, including himself, had been allotted an additional 50 Million each as
"incentive" for voting in favor of the impeachment of Chief Justice Renato C. Corona.
Responding to Sen. Estradas revelation, Secretary Florencio Abad of the DBM issued a public statement
entitled Abad: Releases to Senators Part of Spending Acceleration Program,1 explaining that the funds
released to the Senators had been part of the DAP, a program designed by the DBM to ramp up spending to
accelerate economic expansion. He clarified that the funds had been released to the Senators based on their
letters of request for funding; and that it was not the first time that releases from the DAP had been made
because the DAP had already been instituted in 2011 to ramp up spending after sluggish disbursements had
caused the growth of the gross domestic product (GDP) to slow down. He explained that the funds under the
DAP were usually taken from (1) unreleased appropriations under Personnel Services;2 (2) unprogrammed
funds; (3) carry-over appropriations unreleased from the previous year; and (4) budgets for slow-moving items
or projects that had been realigned to support faster-disbursing projects.
The DBM soon came out to claim in its website3 that the DAP releases had been sourced from savings
generated by the Government, and from unprogrammed funds; and that the savings had been derived from (1)
the pooling of unreleased appropriations, like unreleased Personnel Services4 appropriations that would lapse
at the end of the year, unreleased appropriations of slow-moving projects and discontinued projects per zero
based budgeting findings;5 and (2) the withdrawal of unobligated allotments also for slow-moving programs and
projects that had been earlier released to the agencies of the National Government.
The DBM listed the following as the legal bases for the DAPs use of savings,6 namely: (1) Section 25(5),
Article VI of the 1987 Constitution, which granted to the President the authority to augment an item for his
office in the general appropriations law; (2) Section 49 (Authority to Use Savings for Certain Purposes) and
209
Section 38 (Suspension of Expenditure Appropriations), Chapter 5, Book VI of Executive Order (EO) No. 292
(Administrative Code of 1987); and (3) the General Appropriations Acts (GAAs) of 2011, 2012 and 2013,
particularly their provisions on the (a) use of savings; (b) meanings of savings and augmentation; and (c)
priority in the use of savings.
As for the use of unprogrammed funds under the DAP, the DBM cited as legal bases the special provisions on
unprogrammed fund contained in the GAAs of 2011, 2012 and 2013.
The revelation of Sen. Estrada and the reactions of Sec. Abad and the DBM brought the DAP to the
consciousness of the Nation for the first time, and made this present controversy inevitable. That the issues
against the DAP came at a time when the Nation was still seething in anger over Congressional pork barrel
"an appropriation of government spending meant for localized projects and secured solely or primarily to bring
money to a representatives district"7 excited the Nation as heatedly as the pork barrel controversy.
Nine petitions assailing the constitutionality of the DAP and the issuances relating to the DAP were filed within
days of each other, as follows: G.R. No. 209135 (Syjuco), on October 7, 2013; G.R. No. 209136 (Luna), on
October 7, 2013; G.R. No. 209155 (Villegas),8 on October 16, 2013; G.R. No. 209164 (PHILCONSA), on
October 8, 2013; G.R. No. 209260 (IBP), on October 16, 2013; G.R. No. 209287 (Araullo), on October 17,
2013; G.R. No. 209442 (Belgica), on October 29, 2013; G.R. No. 209517 (COURAGE), on November6, 2013;
and G.R. No. 209569 (VACC), on November 8, 2013.
In G.R. No. 209287 (Araullo), the petitioners brought to the Courts attention NBC No. 541 (Adoption of
Operational Efficiency Measure Withdrawal of Agencies Unobligated Allotments as of June 30, 2012),
alleging that NBC No. 541, which was issued to implement the DAP, directed the withdrawal of unobligated
allotments as of June 30, 2012 of government agencies and offices with low levels of obligations, both for
continuing and current allotments.
In due time, the respondents filed their Consolidated Comment through the Office of the Solicitor General
(OSG).
The Court directed the holding of oral arguments on the significant issues raised and joined.
Issues
Under the Advisory issued on November 14, 2013, the presentations of the parties during the oral arguments
were limited to the following, to wit:
Procedural Issue:
A. Whether or not certiorari, prohibition, and mandamus are proper remedies to assail the constitutionality and
validity of the Disbursement Acceleration Program (DAP), National Budget Circular (NBC) No. 541, and all
other executive issuances allegedly implementing the DAP. Subsumed in this issue are whether there is a
controversy ripe for judicial determination, and the standing of petitioners.
Substantive Issues:
B. Whether or not the DAP violates Sec. 29, Art. VI of the 1987 Constitution, which provides: "No money shall
be paid out of the Treasury except in pursuance of an appropriation made by law."
C. Whether or not the DAP, NBC No. 541, and all other executive issuances allegedly implementing the DAP
violate Sec. 25(5), Art. VI of the 1987 Constitution insofar as:
(a)They treat the unreleased appropriations and unobligated allotments withdrawn from
government agencies as "savings" as the term is used in Sec. 25(5), in relation to the provisions
of the GAAs of 2011, 2012 and 2013;
(b)They authorize the disbursement of funds for projects or programs not provided in the GAAs
for the Executive Department; and
(c)They "augment" discretionary lump sum appropriations in the GAAs.
D. Whether or not the DAP violates: (1) the Equal Protection Clause, (2) the system of checks and balances,
and (3) the principle of public accountability enshrined in the 1987 Constitution considering that it authorizes
the release of funds upon the request of legislators.
E. Whether or not factual and legal justification exists to issue a temporary restraining order to restrain the
implementation of the DAP, NBC No. 541, and all other executive issuances allegedly implementing the DAP.
In its Consolidated Comment, the OSG raised the matter of unprogrammed funds in order to support its
argument regarding the Presidents power to spend. During the oral arguments, the propriety of releasing
unprogrammed funds to support projects under the DAP was considerably discussed. The petitioners in G.R.
No. 209287 (Araullo) and G.R. No. 209442 (Belgica) dwelled on unprogrammed funds in their respective
memoranda. Hence, an additional issue for the oral arguments is stated as follows:
210
F. Whether or not the release of unprogrammed funds under the DAP was in accord with the GAAs.
During the oral arguments held on November 19, 2013, the Court directed Sec. Abad to submit a list of savings
brought under the DAP that had been sourced from (a) completed programs; (b) discontinued or abandoned
programs; (c) unpaid appropriations for compensation; (d) a certified copy of the Presidents directive dated
June 27, 2012 referred to in NBC No. 541; and (e) all circulars or orders issued in relation to the DAP. 9
In compliance, the OSG submitted several documents, as follows:
(1) A certified copy of the Memorandum for the President dated June 25, 2012 (Omnibus Authority to
Consolidate Savings/Unutilized Balances and their Realignment);10
(2) Circulars and orders, which the respondents identified as related to the DAP, namely:
a. NBC No. 528 dated January 3, 2011 (Guidelines on the Release of Funds for FY 2011);
b. NBC No. 535 dated December 29, 2011 (Guidelines on the Release of Funds for FY 2012);
c. NBC No. 541 dated July 18, 2012 (Adoption of Operational Efficiency Measure Withdrawal
of Agencies Unobligated Allotments as of June 30, 2012);
d. NBC No. 545 dated January 2, 2013 (Guidelines on the Release of Funds for FY 2013);
e. DBM Circular Letter No. 2004-2 dated January 26, 2004 (Budgetary Treatment of
Commitments/Obligations of the National Government);
f. COA-DBM Joint Circular No. 2013-1 dated March 15, 2013 (Revised Guidelines on the
Submission of Quarterly Accountability Reports on Appropriations, Allotments, Obligations and
Disbursements);
g. NBC No. 440 dated January 30, 1995 (Adoption of a Simplified Fund Release System in the
Government).
(3) A breakdown of the sources of savings, including savings from discontinued projects and unpaid
appropriations for compensation from 2011 to 2013
On January 28, 2014, the OSG, to comply with the Resolution issued on January 21, 2014 directing the
respondents to submit the documents not yet submitted in compliance with the directives of the Court or its
Members, submitted several evidence packets to aid the Court in understanding the factual bases of the DAP,
to wit:
(1) First Evidence Packet11 containing seven memoranda issued by the DBM through Sec. Abad,
inclusive of annexes, listing in detail the 116 DAP identified projects approved and duly signed by the
President, as follows:
a. Memorandum for the President dated October 12, 2011 (FY 2011 Proposed Disbursement
Acceleration Program (Projects and Sources of Funds);
b. Memorandum for the President dated December 12, 2011 (Omnibus Authority to Consolidate
Savings/Unutilized Balances and its Realignment);
c. Memorandum for the President dated June 25, 2012 (Omnibus Authority to Consolidate
Savings/Unutilized Balances and their Realignment);
d. Memorandum for the President dated September 4, 2012 (Release of funds for other priority
projects and expenditures of the Government);
e. Memorandum for the President dated December 19, 2012 (Proposed Priority Projects and
Expenditures of the Government);
f. Memorandum for the President dated May 20, 2013 (Omnibus Authority to Consolidate
Savings/Unutilized Balances and their Realignment to Fund the Quarterly Disbursement
Acceleration Program); and
g. Memorandum for the President dated September 25, 2013 (Funding for the Task Force Pablo
Rehabilitation Plan).
(2) Second Evidence Packet12 consisting of 15 applications of the DAP, with their corresponding
Special Allotment Release Orders (SAROs) and appropriation covers;
(3) Third Evidence Packet13 containing a list and descriptions of 12 projects under the DAP;
(4) Fourth Evidence Packet14 identifying the DAP-related portions of the Annual Financial Report
(AFR) of the Commission on Audit for 2011 and 2012;
(5) Fifth Evidence Packet15 containing a letter of Department of Transportation and
Communications(DOTC) Sec. Joseph Abaya addressed to Sec. Abad recommending the withdrawal of
funds from his agency, inclusive of annexes; and
211
(6) Sixth Evidence Packet16 a print-out of the Solicitor Generals visual presentation for the January
28, 2014 oral arguments.
On February 5, 2014,17 the OSG forwarded the Seventh Evidence Packet,18 which listed the sources of funds
brought under the DAP, the uses of such funds per project or activity pursuant to DAP, and the legal bases
thereof.
On February 14, 2014, the OSG submitted another set of documents in further compliance with the Resolution
dated January 28, 2014, viz:
(1) Certified copies of the certifications issued by the Bureau of Treasury to the effect that the revenue
collections exceeded the original revenue targets for the years 2011, 2012 and 2013, including collections
arising from sources not considered in the original revenue targets, which certifications were required for the
release of the unprogrammed funds as provided in Special Provision No. 1 of Article XLV, Article XVI, and
Article XLV of the 2011, 2012 and 2013 GAAs; and (2) A report on releases of savings of the Executive
Department for the use of the Constitutional Commissions and other branches of the Government, as well as
the fund releases to the Senate and the Commission on Elections (COMELEC).
RULING
I.
Procedural Issue:
a) The petitions under Rule 65 are proper remedies
All the petitions are filed under Rule 65 of the Rules of Court, and include applications for the issuance of writs
of preliminary prohibitory injunction or temporary restraining orders. More specifically, the nature of the
petitions is individually set forth hereunder, to wit:

G.R. No. 209135 (Syjuco) Certiorari, Prohibition and Mandamus

G.R. No. 209136 (Luna) Certiorariand Prohibition
G.R. No. 209155 (Villegas) Certiorariand Prohibition
G.R. No. 209164 (PHILCONSA) Certiorariand Prohibition
G.R. No. 209260 (IBP) Prohibition
G.R. No. 209287 (Araullo) Certiorariand Prohibition
G.R. No. 209442 (Belgica) Certiorari
G.R. No. 209517 (COURAGE) Certiorari and Prohibition
G.R. No. 209569 (VACC) Certiorari and Prohibition

The respondents submit that there is no actual controversy that is ripe for adjudication in the absence of
adverse claims between the parties;19 that the petitioners lacked legal standing to sue because no allegations
were made to the effect that they had suffered any injury as a result of the adoption of the DAP and issuance of
NBC No. 541; that their being taxpayers did not immediately confer upon the petitioners the legal standing to
sue considering that the adoption and implementation of the DAP and the issuance of NBC No. 541 were not
in the exercise of the taxing or spending power of Congress;20 and that even if the petitioners had suffered
injury, there were plain, speedy and adequate remedies in the ordinary course of law available to them, like
assailing the regularity of the DAP and related issuances before the Commission on Audit (COA) or in the trial
courts.21
The respondents aver that the special civil actions of certiorari and prohibition are not proper actions for
directly assailing the constitutionality and validity of the DAP, NBC No. 541, and the other executive issuances
implementing the DAP.22
In their memorandum, the respondents further contend that there is no authorized proceeding under the
Constitution and the Rules of Court for questioning the validity of any law unless there is an actual case or
controversy the resolution of which requires the determination of the constitutional question; that the
jurisdiction of the Court is largely appellate; that for a court of law to pass upon the constitutionality of a law or
any act of the Government when there is no case or controversy is for that court to set itself up as a reviewer of
212
the acts of Congress and of the President in violation of the principle of separation of powers; and that, in the
absence of a pending case or controversy involving the DAP and NBC No. 541, any decision herein could
amount to a mere advisory opinion that no court can validly render.23
The respondents argue that it is the application of the DAP to actual situations that the petitioners can question
either in the trial courts or in the COA; that if the petitioners are dissatisfied with the ruling either of the trial
courts or of the COA, they can appeal the decision of the trial courts by petition for review on certiorari, or
assail the decision or final order of the COA by special civil action for certiorari under Rule 64 of the Rules of
Court.24
The respondents arguments and submissions on the procedural issue are bereft of merit.
Section 1, Article VIII of the 1987 Constitution expressly provides:
Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be
established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.
Thus, the Constitution vests judicial power in the Court and in such lower courts as may be established by law.
In creating a lower court, Congress concomitantly determines the jurisdiction of that court, and that court, upon
its creation, becomes by operation of the Constitution one of the repositories of judicial power.25 However, only
the Court is a constitutionally created court, the rest being created by Congress in its exercise of the legislative
power.
The Constitution states that judicial power includes the duty of the courts of justice not only "to settle actual
controversies involving rights which are legally demandable and enforceable" but also "to determine whether or
not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government." It has thereby expanded the concept of judicial power, which up
to then was confined to its traditional ambit of settling actual controversies involving rights that were legally
demandable and enforceable.
The background and rationale of the expansion of judicial power under the 1987 Constitution were laid out
during the deliberations of the 1986 Constitutional Commission by Commissioner Roberto R. Concepcion (a
former Chief Justice of the Philippines) in his sponsorship of the proposed provisions on the Judiciary, where
he said:
The Supreme Court, like all other courts, has one main function: to settle actual controversies involving
conflicts of rights which are demandable and enforceable. There are rights which are guaranteed by law but
cannot be enforced by a judicial party. In a decided case, a husband complained that his wife was unwilling to
perform her duties as a wife. The Court said: "We can tell your wife what her duties as such are and that she is
bound to comply with them, but we cannot force her physically to discharge her main marital duty to her
husband. There are some rights guaranteed by law, but they are so personal that to enforce them by actual
compulsion would be highly derogatory to human dignity." This is why the first part of the second paragraph of
Section 1 provides that: Judicial power includes the duty of courts to settle actual controversies involving rights
which are legally demandable or enforceable
The courts, therefore, cannot entertain, much less decide, hypothetical questions. In a presidential system of
government, the Supreme Court has, also, another important function. The powers of government are
generally considered divided into three branches: the Legislative, the Executive and the Judiciary. Each one is
supreme within its own sphere and independent of the others. Because of that supremacy power to determine
whether a given law is valid or not is vested in courts of justice.
Briefly stated, courts of justice determine the limits of power of the agencies and offices of the government as
well as those of its officers. In other words, the judiciary is the final arbiter on the question whether or not a
branch of government or any of its officials has acted without jurisdiction or in excess of jurisdiction, or so
capriciously as to constitute an abuse of discretion amounting to excess of jurisdiction or lack of jurisdiction.
This is not only a judicial power but a duty to pass judgmenton matters of this nature.
This is the background of paragraph 2 of Section 1, which means that the courts cannot hereafter evade the
duty to settle matters of this nature, by claiming that such matters constitute a political question. (Bold
emphasis supplied)26
213
Upon interpellation by Commissioner Nolledo, Commissioner Concepcion clarified the scope of judicial power
in the following manner:
MR. NOLLEDO. x x x
The second paragraph of Section 1 states: "Judicial power includes the duty of courts of justice to settle actual
controversies" The term "actual controversies" according to the Commissioner should refer to questions
which are political in nature and, therefore, the courts should not refuse to decide those political questions. But
do I understand it right that this is restrictive or only an example? I know there are cases which are not actual
yet the court can assume jurisdiction. An example is the petition for declaratory relief.
May I ask the Commissioners opinion about that?
MR. CONCEPCION. The Supreme Court has no jurisdiction to grant declaratory judgments.
MR. NOLLEDO. The Gentleman used the term "judicial power" but judicial power is not vested in the Supreme
Court alone but also in other lower courts as may be created by law.
MR. CONCEPCION. Yes.
MR. NOLLEDO. And so, is this only an example?
MR. CONCEPCION. No, I know this is not. The Gentleman seems to identify political questions with
jurisdictional questions. But there is a difference.
MR. NOLLEDO. Because of the expression "judicial power"?
MR. CONCEPCION. No. Judicial power, as I said, refers to ordinary cases but where there is a question as to
whether the government had authority or had abused its authority to the extent of lacking jurisdiction or excess
of jurisdiction, that is not a political question. Therefore, the court has the duty to decide.27
Our previous Constitutions equally recognized the extent of the power of judicial review and the great
responsibility of the Judiciary in maintaining the allocation of powers among the three great branches of
Government. Speaking for the Court in Angara v. Electoral Commission,28 Justice Jose P. Laurel intoned:
x x x In times of social disquietude or political excitement, the great landmarks of the Constitution are apt to be
forgotten or marred, if not entirely obliterated. In cases of conflict, the judicial department is the only
constitutional organ which can be called upon to determine the proper allocation of powers between the
several department and among the integral or constituent units thereof.
xxxx
The Constitution is a definition of the powers of government. Who is to determine the nature, scope and extent
of such powers? The Constitution itself has provided for the instrumentality of the judiciary as the rational way.
And when the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority over
the other department; it does not in reality nullify or invalidate an act of the legislature, but only asserts the
solemn and sacred obligation assigned to it by the Constitution to determine conflicting claims of authority
under the Constitution and to establish for the parties in an actual controversy the rights which that instrument
secures and guarantees to them. This is in truth all that is involved in what is termed "judicial supremacy"
which properly is the power of judicial review under the Constitution. x x x29
What are the remedies by which the grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the Government may be determined under the Constitution?
The present Rules of Court uses two special civil actions for determining and correcting grave abuse of
discretion amounting to lack or excess of jurisdiction. These are the special civil actions for certiorari and
prohibition, and both are governed by Rule 65. A similar remedy of certiorari exists under Rule 64, but the
remedy is expressly applicable only to the judgments and final orders or resolutions of the Commission on
Elections and the Commission on Audit.
The ordinary nature and function of the writ of certiorari in our present system are aptly explained in Delos
Santos v. Metropolitan Bank and Trust Company:30
In the common law, from which the remedy of certiorari evolved, the writ of certiorari was issued out of
Chancery, or the Kings Bench, commanding agents or officers of the inferior courts to return the record of a
cause pending before them, so as to give the party more sure and speedy justice, for the writ would enable the
superior court to determine from an inspection of the record whether the inferior courts judgment was rendered
without authority. The errors were of such a nature that, if allowed to stand, they would result in a substantial
injury to the petitioner to whom no other remedy was available. If the inferior court acted without authority, the
record was then revised and corrected in matters of law. The writ of certiorari was limited to cases in which the
inferior court was said to be exceeding its jurisdiction or was not proceeding according to essential
requirements of law and would lie only to review judicial or quasi-judicial acts.
214
The concept of the remedy of certiorari in our judicial system remains much the same as it has been in the
common law. In this jurisdiction, however, the exercise of the power to issue the writ of certiorari is largely
regulated by laying down the instances or situations in the Rules of Court in which a superior court may issue
the writ of certiorari to an inferior court or officer. Section 1, Rule 65 of the Rules of Court compellingly provides
the requirements for that purpose, viz:
xxxx
The sole office of the writ of certiorari is the correction of errors of jurisdiction, which includes the commission
of grave abuse of discretion amounting to lack of jurisdiction. In this regard, mere abuse of discretion is not
enough to warrant the issuance of the writ. The abuse of discretion must be grave, which means either that the
judicial or quasi-judicial power was exercised in an arbitrary or despotic manner by reason of passion or
personal hostility, or that the respondent judge, tribunal or board evaded a positive duty, or virtually refused to
perform the duty enjoined or to act in contemplation of law, such as when such judge, tribunal or board
exercising judicial or quasi-judicial powers acted in a capricious or whimsical manner as to be equivalent to
lack of jurisdiction.31
Although similar to prohibition in that it will lie for want or excess of jurisdiction, certiorari is to be distinguished
from prohibition by the fact that it is a corrective remedy used for the re-examination of some action of an
inferior tribunal, and is directed to the cause or proceeding in the lower court and not to the court itself, while
prohibition is a preventative remedy issuing to restrain future action, and is directed to the court itself.32 The
Court expounded on the nature and function of the writ of prohibition in Holy Spirit Homeowners Association,
Inc. v. Defensor:33
A petition for prohibition is also not the proper remedy to assail an IRR issued in the exercise of a quasi-
legislative function. Prohibition is an extraordinary writ directed against any tribunal, corporation, board, officer
or person, whether exercising judicial, quasi-judicial or ministerial functions, ordering said entity or person to
desist from further proceedings when said proceedings are without or in excess of said entitys or persons
jurisdiction, or are accompanied with grave abuse of discretion, and there is no appeal or any other plain,
speedy and adequate remedy in the ordinary course of law. Prohibition lies against judicial or ministerial
functions, but not against legislative or quasi-legislative functions. Generally, the purpose of a writ of prohibition
is to keep a lower court within the limits of its jurisdiction in order to maintain the administration of justice in
orderly channels. Prohibition is the proper remedy to afford relief against usurpation of jurisdiction or power by
an inferior court, or when, in the exercise of jurisdiction in handling matters clearly within its cognizance the
inferior court transgresses the bounds prescribed to it by the law, or where there is no adequate remedy
available in the ordinary course of law by which such relief can be obtained. Where the principal relief sought is
to invalidate an IRR, petitioners remedy is an ordinary action for its nullification, an action which properly falls
under the jurisdiction of the Regional Trial Court. In any case, petitioners allegation that "respondents are
performing or threatening to perform functions without or in excess of their jurisdiction" may appropriately be
enjoined by the trial court through a writ of injunction or a temporary restraining order.
With respect to the Court, however, the remedies of certiorari and prohibition are necessarily broader in scope
and reach, and the writ of certiorari or prohibition may be issued to correct errors of jurisdiction committed not
only by a tribunal, corporation, board or officer exercising judicial, quasi-judicial or ministerial functions but also
to set right, undo and restrain any act of grave abuse of discretion amounting to lack or excess of jurisdiction
by any branch or instrumentality of the Government, even if the latter does not exercise judicial, quasi-judicial
or ministerial functions. This application is expressly authorized by the text of the second paragraph of Section
1, supra.
Thus, petitions for certiorari and prohibition are appropriate remedies to raise constitutional issues and to
review and/or prohibit or nullify the acts of legislative and executive officials.34
Necessarily, in discharging its duty under Section 1, supra, to set right and undo any act of grave abuse of
discretion amounting to lack or excess of jurisdiction by any branch or instrumentality of the Government, the
Court is not at all precluded from making the inquiry provided the challenge was properly brought by interested
or affected parties. The Court has been thereby entrusted expressly or by necessary implication with both the
duty and the obligation of determining, in appropriate cases, the validity of any assailed legislative or executive
action. This entrustment is consistent with the republican system of checks and balances.35
Following our recent dispositions concerning the congressional pork barrel, the Court has become more alert
to discharge its constitutional duty. We will not now refrain from exercising our expanded judicial power in order
to review and determine, with authority, the limitations on the Chief Executives spending power.
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b) Requisites for the exercise of the
power of judicial review were
complied with
The requisites for the exercise of the power of judicial review are the following, namely: (1) there must bean
actual case or justiciable controversy before the Court; (2) the question before the Court must be ripe for
adjudication; (3) the person challenging the act must be a proper party; and (4) the issue of constitutionality
must be raised at the earliest opportunity and must be the very litis mota of the case.36
The first requisite demands that there be an actual case calling for the exercise of judicial power by the
Court.37 An actual case or controversy, in the words of Belgica v. Executive Secretary Ochoa:38
x x x is one which involves a conflict of legal rights, an assertion of opposite legal claims, susceptible of judicial
resolution as distinguished from a hypothetical or abstract difference or dispute. In other words, "[t]here must
be a contrariety of legal rights that can be interpreted and enforced on the basis of existing law and
jurisprudence." Related to the requirement of an actual case or controversy is the requirement of "ripeness,"
meaning that the questions raised for constitutional scrutiny are already ripe for adjudication. "A question is
ripe for adjudication when the act being challenged has had a direct adverse effect on the individual
challenging it. It is a prerequisite that something had then been accomplished or performed by either branch
before a court may come into the picture, and the petitioner must allege the existence of an immediate or
threatened injury to itself as a result of the challenged action." "Withal, courts will decline to pass upon
constitutional issues through advisory opinions, bereft as they are of authority to resolve hypothetical or moot
questions."
An actual and justiciable controversy exists in these consolidated cases. The incompatibility of the
perspectives of the parties on the constitutionality of the DAP and its relevant issuances satisfy the
requirement for a conflict between legal rights. The issues being raised herein meet the requisite ripeness
considering that the challenged executive acts were already being implemented by the DBM, and there are
averments by the petitioners that such implementation was repugnant to the letter and spirit of the Constitution.
Moreover, the implementation of the DAP entailed the allocation and expenditure of huge sums of public funds.
The fact that public funds have been allocated, disbursed or utilized by reason or on account of such
challenged executive acts gave rise, therefore, to an actual controversy that is ripe for adjudication by the
Court.
It is true that Sec. Abad manifested during the January 28, 2014 oral arguments that the DAP as a program
had been meanwhile discontinued because it had fully served its purpose, saying: "In conclusion, Your Honors,
may I inform the Court that because the DAP has already fully served its purpose, the Administrations
economic managers have recommended its termination to the President. x x x."39
The Solicitor General then quickly confirmed the termination of the DAP as a program, and urged that its
termination had already mooted the challenges to the DAPs constitutionality, viz:
DAP as a program, no longer exists, thereby mooting these present cases brought to challenge its
constitutionality. Any constitutional challenge should no longer be at the level of the program, which is now
extinct, but at the level of its prior applications or the specific disbursements under the now defunct policy. We
challenge the petitioners to pick and choose which among the 116 DAP projects they wish to nullify, the full
details we will have provided by February 5. We urge this Court to be cautious in limiting the constitutional
authority of the President and the Legislature to respond to the dynamic needs of the country and the evolving
demands of governance, lest we end up straight jacketing our elected representatives in ways not consistent
with our constitutional structure and democratic principles.40
A moot and academic case is one that ceases to present a justiciable controversy by virtue of supervening
events, so that a declaration thereon would be of no practical use or value.41
The Court cannot agree that the termination of the DAP as a program was a supervening event that effectively
mooted these consolidated cases. Verily, the Court had in the past exercised its power of judicial review
despite the cases being rendered moot and academic by supervening events, like: (1) when there was a grave
violation of the Constitution; (2) when the case involved a situation of exceptional character and was of
paramount public interest; (3) when the constitutional issue raised required the formulation of controlling
principles to guide the Bench, the Bar and the public; and (4) when the case was capable of repetition yet
evading review.42
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Assuming that the petitioners several submissions against the DAP were ultimately sustained by the Court
here, these cases would definitely come under all the exceptions. Hence, the Court should not abstain from
exercising its power of judicial review.
Did the petitioners have the legal standing to sue?
Legal standing, as a requisite for the exercise of judicial review, refers to "a right of appearance in a court of
justice on a given question."43 The concept of legal standing, or locus standi, was particularly discussed in De
Castro v. Judicial and Bar Council,44 where the Court said:
In public or constitutional litigations, the Court is often burdened with the determination of the locus standi of
the petitioners due to the ever-present need to regulate the invocation of the intervention of the Court to correct
any official action or policy in order to avoid obstructing the efficient functioning of public officials and offices
involved in public service. It is required, therefore, that the petitioner must have a personal stake in the
outcome of the controversy, for, as indicated in Agan, Jr. v. Philippine International Air Terminals Co., Inc.:
The question on legal standing is whether such parties have "alleged such a personal stake in the outcome of
the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which
the court so largely depends for illumination of difficult constitutional questions." Accordingly, it has been held
that the interest of a person assailing the constitutionality of a statute must be direct and personal. He must be
able to show, not only that the law or any government act is invalid, but also that he sustained or is in imminent
danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in
some indefinite way. It must appear that the person complaining has been or is about to be denied some right
or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by
reason of the statute or act complained of.
It is true that as early as in 1937, in People v. Vera, the Court adopted the direct injury test for determining
whether a petitioner in a public action had locus standi. There, the Court held that the person who would assail
the validity of a statute must have "a personal and substantial interest in the case such that he has sustained,
or will sustain direct injury as a result." Vera was followed in Custodio v. President of the Senate, Manila Race
Horse Trainers Association v. De la Fuente, Anti-Chinese League of the Philippines v. Felix, and Pascual v.
Secretary of Public Works.
Yet, the Court has also held that the requirement of locus standi, being a mere procedural technicality, can be
waived by the Court in the exercise of its discretion. For instance, in 1949, in Araneta v. Dinglasan, the Court
liberalized the approach when the cases had "transcendental importance." Some notable controversies whose
petitioners did not pass the direct injury test were allowed to be treated in the same way as in Araneta v.
Dinglasan.
In the 1975 decision in Aquino v. Commission on Elections, this Court decided to resolve the issues raised by
the petition due to their "far reaching implications," even if the petitioner had no personality to file the suit. The
liberal approach of Aquino v. Commission on Elections has been adopted in several notable cases, permitting
ordinary citizens, legislators, and civic organizations to bring their suits involving the constitutionality or validity
of laws, regulations, and rulings.
However, the assertion of a public right as a predicate for challenging a supposedly illegal or unconstitutional
executive or legislative action rests on the theory that the petitioner represents the public in general. Although
such petitioner may not be as adversely affected by the action complained against as are others, it is enough
that he sufficiently demonstrates in his petition that he is entitled to protection or relief from the Court in the
vindication of a public right.
Quite often, as here, the petitioner in a public action sues as a citizen or taxpayer to gain locus standi. That is
not surprising, for even if the issue may appear to concern only the public in general, such capacities
nonetheless equip the petitioner with adequate interest to sue. In David v. Macapagal-Arroyo, the Court aptly
explains why:
Case law in most jurisdiction snow allows both "citizen" and "taxpayer" standing in public actions. The
distinction was first laid down in Beauchamp v. Silk, where it was held that the plaintiff in a taxpayers suit is in
a different category from the plaintiff in a citizens suit. In the former, the plaintiff is affected by the expenditure
of public funds, while in the latter, he is but the mere instrument of the public concern. As held by the New York
Supreme Court in People ex rel Case v. Collins: "In matter of mere public right, howeverthe people are the
real partiesIt is at least the right, if not the duty, of every citizen to interfere and see that a public offence be
properly pursued and punished, and that a public grievance be remedied." With respect to taxpayers suits,
217
Terr v. Jordan held that "the right of a citizen and a taxpayer to maintain an action in courts to restrain the
unlawful use of public funds to his injury cannot be denied."45
The Court has cogently observed in Agan, Jr. v. Philippine International Air Terminals Co., Inc.46 that "[s]tanding
is a peculiar concept in constitutional law because in some cases, suits are not brought by parties who have
been personally injured by the operation of a law or any other government act but by concerned citizens,
taxpayers or voters who actually sue in the public interest."
Except for PHILCONSA, a petitioner in G.R. No. 209164, the petitioners have invoked their capacities as
taxpayers who, by averring that the issuance and implementation of the DAP and its relevant issuances
involved the illegal disbursements of public funds, have an interest in preventing the further dissipation of
public funds. The petitioners in G.R. No. 209287 (Araullo) and G.R. No. 209442 (Belgica) also assert their right
as citizens to sue for the enforcement and observance of the constitutional limitations on the political branches
of the Government.47
On its part, PHILCONSA simply reminds that the Court has long recognized its legal standing to bring cases
upon constitutional issues.48 Luna, the petitioner in G.R. No. 209136, cites his additional capacity as a lawyer.
The IBP, the petitioner in G.R. No. 209260, stands by "its avowed duty to work for the rule of law and of
paramount importance of the question in this action, not to mention its civic duty as the official association of all
lawyers in this country."49
Under their respective circumstances, each of the petitioners has established sufficient interest in the outcome
of the controversy as to confer locus standi on each of them.
In addition, considering that the issues center on the extent of the power of the Chief Executive to disburse and
allocate public funds, whether appropriated by Congress or not, these cases pose issues that are of
transcendental importance to the entire Nation, the petitioners included. As such, the determination of such
important issues call for the Courts exercise of its broad and wise discretion "to waive the requirement and so
remove the impediment to its addressing and resolving the serious constitutional questions raised."50
II.
Substantive Issues
1.
Overview of the Budget System
An understanding of the Budget System of the Philippines will aid the Court in properly appreciating and justly
resolving the substantive issues.
a) Origin of the Budget System
The term "budget" originated from the Middle English word bouget that had derived from the Latin word bulga
(which means bag or purse).51
In the Philippine setting, Commonwealth Act (CA) No. 246 (Budget Act) defined "budget" as the financial
program of the National Government for a designated fiscal year, consisting of the statements of estimated
receipts and expenditures for the fiscal year for which it was intended to be effective based on the results of
operations during the preceding fiscal years. The term was given a different meaning under Republic Act No.
992 (Revised Budget Act) by describing the budget as the delineation of the services and products, or benefits
that would accrue to the public together with the estimated unit cost of each type of service, product or
benefit.52 For a forthright definition, budget should simply be identified as the financial plan of the
Government,53 or "the master plan of government."54
The concept of budgeting has not been the product of recent economies. In reality, financing public goals and
activities was an idea that existed from the creation of the State.55 To protect the people, the territory and
sovereignty of the State, its government must perform vital functions that required public expenditures. At the
beginning, enormous public expenditures were spent for war activities, preservation of peace and order,
security, administration of justice, religion, and supply of limited goods and services.56 In order to finance those
expenditures, the State raised revenues through taxes and impositions.57 Thus, budgeting became necessary
to allocate public revenues for specific government functions.58 The States budgeting mechanism eventually
developed through the years with the growing functions of its government and changes in its market economy.
The Philippine Budget System has been greatly influenced by western public financial institutions. This is
because of the countrys past as a colony successively of Spain and the United States for a long period of
time. Many aspects of the countrys public fiscal administration, including its Budget System, have been
naturally patterned after the practices and experiences of the western public financial institutions. At any rate,
the Philippine Budget System is presently guided by two principal objectives that are vital to the development
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of a progressive democratic government, namely: (1) to carry on all government activities under a
comprehensive fiscal plan developed, authorized and executed in accordance with the Constitution, prevailing
statutes and the principles of sound public management; and (2) to provide for the periodic review and
disclosure of the budgetary status of the Government in such detail so that persons entrusted by law with the
responsibility as well as the enlightened citizenry can determine the adequacy of the budget actions taken,
authorized or proposed, as well as the true financial position of the Government.59
b) Evolution of the Philippine Budget System
The budget process in the Philippines evolved from the early years of the American Regime up to the passage
of the Jones Law in 1916. A Budget Office was created within the Department of Finance by the Jones Law to
discharge the budgeting function, and was given the responsibility to assist in the preparation of an executive
budget for submission to the Philippine Legislature.60
As early as under the 1935 Constitution, a budget policy and a budget procedure were established, and
subsequently strengthened through the enactment of laws and executive acts.61 EO No. 25, issued by
President Manuel L. Quezon on April 25, 1936, created the Budget Commission to serve as the agency that
carried out the Presidents responsibility of preparing the budget.62 CA No. 246, the first budget law, went into
effect on January 1, 1938 and established the Philippine budget process. The law also provided a line-item
budget as the framework of the Governments budgeting system,63 with emphasis on the observance of a
"balanced budget" to tie up proposed expenditures with existing revenues.
CA No. 246 governed the budget process until the passage on June 4, 1954 of Republic Act (RA) No.
992,whereby Congress introduced performance-budgeting to give importance to functions, projects and
activities in terms of expected results.64 RA No. 992 also enhanced the role of the Budget Commission as the
fiscal arm of the Government.65
The 1973 Constitution and various presidential decrees directed a series of budgetary reforms that culminated
in the enactment of PD No. 1177 that President Marcos issued on July30, 1977, and of PD No. 1405, issued
on June 11, 1978. The latter decree converted the Budget Commission into the Ministry of Budget, and gave
its head the rank of a Cabinet member.
The Ministry of Budget was later renamed the Office of Budget and Management (OBM) under EO No. 711.
The OBM became the DBM pursuant to EO No. 292 effective on November 24, 1989.
c) The Philippine Budget Cycle66
Four phases comprise the Philippine budget process, specifically: (1) Budget Preparation; (2) Budget
Legislation; (3) Budget Execution; and (4) Accountability. Each phase is distinctly separate from the others but
they overlap in the implementation of the budget during the budget year.
c.1.Budget Preparation67
The budget preparation phase is commenced through the issuance of a Budget Call by the DBM. The Budget
Call contains budget parameters earlier set by the Development Budget Coordination Committee (DBCC) as
well as policy guidelines and procedures to aid government agencies in the preparation and submission of their
budget proposals. The Budget Call is of two kinds, namely: (1) a National Budget Call, which is addressed to
all agencies, including state universities and colleges; and (2) a Corporate Budget Call, which is addressed to
all government-owned and -controlled corporations (GOCCs) and government financial institutions (GFIs).
Following the issuance of the Budget Call, the various departments and agencies submit their respective
Agency Budget Proposals to the DBM. To boost citizen participation, the current administration has tasked the
various departments and agencies to partner with civil society organizations and other citizen-stakeholders in
the preparation of the Agency Budget Proposals, which proposals are then presented before a technical panel
of the DBM in scheduled budget hearings wherein the various departments and agencies are given the
opportunity to defend their budget proposals. DBM bureaus thereafter review the Agency Budget Proposals
and come up with recommendations for the Executive Review Board, comprised by the DBM Secretary and
the DBMs senior officials. The discussions of the Executive Review Board cover the prioritization of programs
and their corresponding support vis--vis the priority agenda of the National Government, and their
implementation.
The DBM next consolidates the recommended agency budgets into the National Expenditure Program
(NEP)and a Budget of Expenditures and Sources of Financing (BESF). The NEP provides the details of
spending for each department and agency by program, activity or project (PAP), and is submitted in the form of
a proposed GAA. The Details of Selected Programs and Projects is the more detailed disaggregation of key
PAPs in the NEP, especially those in line with the National Governments development plan. The Staffing
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Summary provides the staffing complement of each department and agency, including the number of positions
and amounts allocated.
The NEP and BESF are thereafter presented by the DBM and the DBCC to the President and the Cabinet for
further refinements or reprioritization. Once the NEP and the BESF are approved by the President and the
Cabinet, the DBM prepares the budget documents for submission to Congress. The budget documents consist
of: (1) the Presidents Budget Message, through which the President explains the policy framework and budget
priorities; (2) the BESF, mandated by Section 22, Article VII of the Constitution,68 which contains the
macroeconomic assumptions, public sector context, breakdown of the expenditures and funding sources for
the fiscal year and the two previous years; and (3) the NEP.
Public or government expenditures are generally classified into two categories, specifically: (1) capital
expenditures or outlays; and (2) current operating expenditures. Capital expenditures are the expenses whose
usefulness lasts for more than one year, and which add to the assets of the Government, including investments
in the capital of government-owned or controlled corporations and their subsidiaries.69 Current operating
expenditures are the purchases of goods and services in current consumption the benefit of which does not
extend beyond the fiscal year.70 The two components of current expenditures are those for personal services
(PS), and those for maintenance and other operating expenses(MOOE).
Public expenditures are also broadly grouped according to their functions into: (1) economic development
expenditures (i.e., expenditures on agriculture and natural resources, transportation and communications,
commerce and industry, and other economic development efforts);71 (2) social services or social development
expenditures (i.e., government outlay on education, public health and medicare, labor and welfare and
others);72 (3) general government or general public services expenditures (i.e., expenditures for the general
government, legislative services, the administration of justice, and for pensions and gratuities);73 (4) national
defense expenditures (i.e., sub-divided into national security expenditures and expenditures for the
maintenance of peace and order);74 and (5) public debt.75
Public expenditures may further be classified according to the nature of funds, i.e., general fund, special fund
or bond fund.76
On the other hand, public revenues complement public expenditures and cover all income or receipts of the
government treasury used to support government expenditures.77
Classical economist Adam Smith categorized public revenues based on two principal sources, stating: "The
revenue which must defraythe necessary expenses of government may be drawn either, first from some fund
which peculiarly belongs to the sovereign or commonwealth, and which is independent of the revenue of the
people, or, secondly, from the revenue of the people."78 Adam Smiths classification relied on the two aspects
of the nature of the State: first, the State as a juristic person with an artificial personality, and, second, the State
as a sovereign or entity possessing supreme power. Under the first aspect, the State could hold property and
engage in trade, thereby deriving what is called its quasi private income or revenues, and which "peculiarly
belonged to the sovereign." Under the second aspect, the State could collect by imposing charges on the
revenues of its subjects in the form of taxes.79
In the Philippines, public revenues are generally derived from the following sources, to wit: (1) tax
revenues(i.e., compulsory contributions to finance government activities); 80 (2) capital revenues(i.e., proceeds
from sales of fixed capital assets or scrap thereof and public domain, and gains on such sales like sale of
public lands, buildings and other structures, equipment, and other properties recorded as fixed assets); 81 (3)
grants(i.e., voluntary contributions and aids given to the Government for its operation on specific purposes in
the form of money and/or materials, and do not require any monetary commitment on the part of the
recipient);82 (4) extraordinary income(i.e., repayment of loans and advances made by government corporations
and local governments and the receipts and shares in income of the Banko Sentral ng Pilipinas, and other
receipts);83 and (5) public borrowings(i.e., proceeds of repayable obligations generally with interest from
domestic and foreign creditors of the Government in general, including the National Government and its
political subdivisions).84
More specifically, public revenues are classified as follows:85

General Income Specific Income

1. Subsidy Income from National 1. Income Taxes
Government 2. Property Taxes
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2. Subsidy from Central Office 3. Taxes on Goods and Services
3. Subsidy from Regional 4. Taxes on International Trade and
Office/Staff Bureaus Transactions
4. Income from Government 5. Other Taxes 6.Fines and Penalties-Tax Revenue
Services 7. Other Specific Income
5. Income from Government
Business Operations
6. Sales Revenue
7. Rent Income
8. Insurance Income
9. Dividend Income
10. Interest Income
11. Sale of Confiscated Goods and
Properties
12. Foreign Exchange (FOREX)
Gains
13. Miscellaneous Operating and
Service Income
14. Fines and Penalties-Government
Services and Business Operations
15. Income from Grants and
Donations
c.2. Budget Legislation86
The Budget Legislation Phase covers the period commencing from the time Congress receives the Presidents
Budget, which is inclusive of the NEPand the BESF, up to the Presidents approval of the GAA. This phase is
also known as the Budget Authorization Phase, and involves the significant participation of the Legislative
through its deliberations.
Initially, the Presidents Budget is assigned to the House of Representatives Appropriations Committee on First
Reading. The Appropriations Committee and its various Sub-Committees schedule and conduct budget
hearings to examine the PAPs of the departments and agencies. Thereafter, the House of Representatives
drafts the General Appropriations Bill (GAB).87
The GABis sponsored, presented and defended by the House of Representatives Appropriations Committee
and Sub-Committees in plenary session. As with other laws, the GAB is approved on Third Reading before the
House of Representatives version is transmitted to the Senate.88
After transmission, the Senate conducts its own committee hearings on the GAB. To expedite proceedings, the
Senate may conduct its committee hearings simultaneously with the House of Representatives deliberations.
The Senates Finance Committee and its Sub-Committees may submit the proposed amendments to the GAB
to the plenary of the Senate only after the House of Representatives has formally transmitted its version to the
Senate. The Senate version of the GAB is likewise approved on Third Reading.89
The House of Representatives and the Senate then constitute a panel each to sit in the Bicameral Conference
Committee for the purpose of discussing and harmonizing the conflicting provisions of their versions of the
GAB. The "harmonized" version of the GAB is next presented to the President for approval.90 The President
reviews the GAB, and prepares the Veto Message where budget items are subjected to direct veto,91 or are
identified for conditional implementation.
If, by the end of any fiscal year, the Congress shall have failed to pass the GAB for the ensuing fiscal year, the
GAA for the preceding fiscal year shall be deemed re-enacted and shall remain in force and effect until the
GAB is passed by the Congress.92
c.3. Budget Execution93
With the GAA now in full force and effect, the next step is the implementation of the budget. The Budget
Execution Phase is primarily the function of the DBM, which is tasked to perform the following procedures,
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namely: (1) to issue the programs and guidelines for the release of funds; (2) to prepare an Allotment and Cash
Release Program; (3) to release allotments; and (4) to issue disbursement authorities.
The implementation of the GAA is directed by the guidelines issued by the DBM. Prior to this, the various
departments and agencies are required to submit Budget Execution Documents(BED) to outline their plans
and performance targets by laying down the physical and financial plan, the monthly cash program, the
estimate of monthly income, and the list of obligations that are not yet due and demandable.
Thereafter, the DBM prepares an Allotment Release Program (ARP)and a Cash Release Program (CRP).The
ARP sets a limit for allotments issued in general and to a specific agency. The CRP fixes the monthly, quarterly
and annual disbursement levels.
Allotments, which authorize an agency to enter into obligations, are issued by the DBM. Allotments are lesser
in scope than appropriations, in that the latter embrace the general legislative authority to spend. Allotments
may be released in two forms through a comprehensive Agency Budget Matrix (ABM),94 or, individually, by
SARO.95
Armed with either the ABM or the SARO, agencies become authorized to incur obligations96 on behalf of the
Government in order to implement their PAPs. Obligations may be incurred in various ways, like hiring of
personnel, entering into contracts for the supply of goods and services, and using utilities.
In order to settle the obligations incurred by the agencies, the DBM issues a disbursement authority so that
cash may be allocated in payment of the obligations. A cash or disbursement authority that is periodically
issued is referred to as a Notice of Cash Allocation (NCA),97 which issuance is based upon an agencys
submission of its Monthly Cash Program and other required documents. The NCA specifies the maximum
amount of cash that can be withdrawn from a government servicing bank for the period indicated. Apart from
the NCA, the DBM may issue a Non-Cash Availment Authority(NCAA) to authorize non-cash disbursements, or
a Cash Disbursement Ceiling(CDC) for departments with overseas operations to allow the use of income
collected by their foreign posts for their operating requirements.
Actual disbursement or spending of government funds terminates the Budget Execution Phase and is usually
accomplished through the Modified Disbursement Scheme under which disbursements chargeable against the
National Treasury are coursed through the government servicing banks.
c.4. Accountability98
Accountability is a significant phase of the budget cycle because it ensures that the government funds have
been effectively and efficiently utilized to achieve the States socio-economic goals. It also allows the DBM to
assess the performance of agencies during the fiscal year for the purpose of implementing reforms and
establishing new policies.
An agencys accountability may be examined and evaluated through (1) performance targets and outcomes;
(2) budget accountability reports; (3) review of agency performance; and (4) audit conducted by the
Commission on Audit(COA).
2.
Nature of the DAP as a fiscal plan
a. DAP was a program designed to
promote economic growth
Policy is always a part of every budget and fiscal decision of any Administration.99 The national budget the
Executive prepares and presents to Congress represents the Administrations "blueprint for public policy" and
reflects the Governments goals and strategies.100 As such, the national budget becomes a tangible
representation of the programs of the Government in monetary terms, specifying therein the PAPs and
services for which specific amounts of public funds are proposed and allocated.101 Embodied in every national
budget is government spending.102
When he assumed office in the middle of 2010, President Aquino made efficiency and transparency in
government spending a significant focus of his Administration. Yet, although such focus resulted in an
improved fiscal deficit of 0.5% in the gross domestic product (GDP) from January to July of 2011, it also
unfortunately decelerated government project implementation and payment schedules.103 The World Bank
observed that the Philippines economic growth could be reduced, and potential growth could be weakened
should the Government continue with its underspending and fail to address the large deficiencies in
infrastructure.104 The economic situation prevailing in the middle of 2011 thus paved the way for the
development and implementation of the DAP as a stimulus package intended to fast-track public spending and
to push economic growth by investing on high-impact budgetary PAPs to be funded from the "savings"
222
generated during the year as well as from unprogrammed funds.105 In that respect, the DAP was the product of
"plain executive policy-making" to stimulate the economy by way of accelerated spending.106The Administration
would thereby accelerate government spending by: (1) streamlining the implementation process through the
clustering of infrastructure projects of the Department of Public Works and Highways (DPWH) and the
Department of Education (DepEd),and (2) front loading PPP-related projects107 due for implementation in the
following year.108
Did the stimulus package work?
The March 2012 report of the World Bank,109 released after the initial implementation of the DAP, revealed that
the DAP was partially successful. The disbursements under the DAP contributed 1.3 percentage points to GDP
growth by the fourth quarter of 2011.110 The continued implementation of the DAP strengthened growth by
11.8% year on year while infrastructure spending rebounded from a 29% contraction to a 34% growth as of
September 2013.111
The DAP thus proved to be a demonstration that expenditure was a policy instrument that the Government
could use to direct the economies towards growth and development.112 The Government, by spending on
public infrastructure, would signify its commitment of ensuring profitability for prospective investors.113 The
PAPs funded under the DAP were chosen for this reason based on their: (1) multiplier impact on the economy
and infrastructure development; (2) beneficial effect on the poor; and (3) translation into disbursements.114
b. History of the implementation of
the DAP, and sources of funds
under the DAP
How the Administrations economic managers conceptualized and developed the DAP, and finally presented it
to the President remains unknown because the relevant documents appear to be scarce.
The earliest available document relating to the genesis of the DAP was the memorandum of October 12,2011
from Sec. Abad seeking the approval of the President to implement the proposed DAP. The memorandum,
which contained a list of the funding sources for 72.11 billion and of the proposed priority projects to be
funded,115 reads:
MEMORANDUM FOR THE PRESIDENT
xxxx
SUBJECT: FY 2011 PROPOSED DISBURSEMENT ACCELERATION PROGRAM (PROJECTS AND
SOURCES OF FUNDS)
DATE: OCTOBER 12, 2011
Mr. President, this is to formally confirm your approval of the Disbursement Acceleration Program totaling
72.11 billion. We are already working with all the agencies concerned for the immediate execution of the
projects therein.
A. Fund Sources for the Acceleration Program

Amount
Action
Fund Sources (In million Description
Requested
Php)

FY 2011 30,000 Unreleased Personnel Declare as

Unreleased Services (PS) savings and
Personal appropriations which approve/
Services (PS) will lapse at the end of authorize its use
Appropriations FY 2011 but may be for the 2011
pooled as savings and Disbursement
realigned for priority Acceleration
programs that require Program
immediate funding

FY 2011 482 Unreleased

Unreleased appropriations (slow
Appropriations moving projects and
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programs for
discontinuance)

FY 2010 12,336 Supported by the GFI Approve and

Unprogrammed Dividends authorize its use
Fund for the 2011
Disbursement
Acceleration
Program

FY 2010 21,544 Unreleased With prior

Carryover appropriations (slow approval from
Appropriation moving projects and the President in
programs for November 2010
discontinuance) and to declare as
savings from Zero-based Budgeting savings and with
Initiative authority to use
for priority
projects

FY 2011 Budget 7,748 FY 2011 Agency For information

items for Budget items that can
realignment be realigned within the
agency to fund new fast
disbursing projects
DPWH-3.981 Billion
DA 2.497 Billion
DOT 1.000 Billion
DepEd 270 Million

TOTAL 72.110

B. Projects in the Disbursement Acceleration Program

(Descriptions of projects attached as Annex A)

GOCCs and GFIs

Agency/Project Allotment
(SARO and NCA Release) (in Million Php)
1. LRTA: Rehabilitation of LRT 1 and 2 1,868
2. NHA: 11,050

a. Resettlement of North Triangle residents to 450

Camarin A7
b. Housing for BFP/BJMP 500
c. On-site development for families living 10,000
along dangerous
d. Relocation sites for informal settlers 100
along Iloilo River and its tributaries
3. PHIL. HEART CENTER: Upgrading of 357
ageing physical plant and medical equipment
224
75
4. CREDIT INFO CORP: Establishment of
centralized credit information system

100
5. PIDS: purchase of land to relocate the PIDS
office and building construction

400
6. HGC: Equity infusion for credit insurance
and mortgage guaranty operations of HGC

7. PHIC: Obligations incurred (premium 1,496

subsidy for indigent families) in January-June
2010, booked for payment in Jul[y] Dec
2010. The delay in payment is due to the
delay in the certification of the LGU
counterpart. Without it, the NG is obliged to
pay the full amount.
8. Philpost: Purchase of foreclosed property. 644
Payment of Mandatory Obligations, (GSIS,
PhilHealth, ECC), Franking Privilege
10,000
9. BSP: First equity infusion out of Php 40B
capitalization under the BSP Law

280
10. PCMC: Capital and Equipment Renovation

11. LCOP: 105

a. Pediatric Pulmonary Program
b. Bio-regenerative Technology Program 35
(Stem-Cell Research subject to legal 70
review and presentation)
570
12. TIDCORP: NG Equity infusion

TOTAL 26,945

NGAs/LGUs
Agency/Project Allotment
(SARO) Cash
(In Million Requirement
Php) (NCA)
225
13. DOF-BIR: NPSTAR
centralization of data
processing and others (To be
synchronized with GFMIS
activities) 758 758
14. COA: IT infrastructure
program and hiring of
additional litigational experts 144 144
15. DND-PAF: On Base Housing
Facilities and Communication
Equipment 30 30
16. DA: 2,959 2,223
a. Irrigation, FMRs and
Integrated Community Based Multi-Species
Hatchery and Aquasilvi
Farming 1,629 1,629
b. Mindanao Rural
Development Project 919 183
c. NIA Agno River Integrated
Irrigation Project 411 411
17. DAR: 1,293 1,293
a. Agrarian Reform
Communities Project 2 1,293 132
b. Landowners Compensation 5,432
18. DBM: Conduct of National
Survey of
Farmers/Fisherfolks/Ips 625 625
19. DOJ: Operating requirements
of 50 investigation agents and
15 state attorneys 11 11
20. DOT: Preservation of the Cine
Corregidor Complex 25 25
21. OPAPP: Activities for Peace
Process (PAMANA- Project
details: budget breakdown,
implementation plan, and
conditions on fund release
attached as Annex B) 1,819 1,819
22. DOST 425 425
a. Establishment of National
Meterological and Climate
Center 275 275
b. Enhancement of Doppler
Radar Network for National
Weather Watch, Accurate
Forecasting and Flood Early
226
Warning 190 190
23. DOF-BOC: To settle the
principal obligations with
PDIC consistent with the
agreement with the CISS and
SGS 2,800 2,800
24. OEO-FDCP: Establishment of
the National Film Archive and
local cinematheques, and other
local activities 20 20
25. DPWH: Various infrastructure
projects 5,500 5,500
26. DepEd/ERDT/DOST: Thin
Client Cloud Computing
Project 270 270
27. DOH: Hiring of nurses and
midwives 294 294
28. TESDA: Training Program in
partnership with BPO industry
and other sectors 1,100 1,100
29. DILG: Performance Challenge
Fund (People Empowered
Community Driven
Development with DSWD and
NAPC) 250 50
30. ARMM: Comprehensive Peace
and Development Intervention 8,592 8,592
31. DOTC-MRT: Purchase of
additional MRT cars 4,500 -
32. LGU Support Fund 6,500 6,500
33. Various Other Local Projects 6,500 6,500
34. Development Assistance to the
Province of Quezon 750 750
TOTAL 45,165 44,000

C. Summary

Fund Sources
Identified for Allotments Cash
Approval for Release Requirements for
(In Million Release in FY
Php) 2011
Total 72,110 72,110 70,895
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GOCCs 26,895 26,895
NGAs/LGUs 45,165 44,000

For His Excellencys Consideration

(Sgd.) FLORENCIO B. ABAD
[/] APPROVED
[ ] DISAPPROVED
(Sgd.) H.E. BENIGNO S. AQUINO, III
OCT 12, 2011
The memorandum of October 12, 2011 was followed by another memorandum for the President dated
December 12, 2011116 requesting omnibus authority to consolidate the savings and unutilized balances for
fiscal year 2011. Pertinent portions of the memorandum of December 12, 2011 read:
MEMORANDUM FOR THE PRESIDENT
xxxx
SUBJECT: Omnibus Authority to Consolidate Savings/Unutilized Balances and its Realignment
DATE: December 12, 2011
This is to respectfully request for the grant of Omnibus Authority to consolidate savings/unutilized balances in
FY 2011 corresponding to completed or discontinued projects which may be pooled to fund additional projects
or expenditures.
In addition, Mr. President, this measure will allow us to undertake projects even if their implementation carries
over to 2012 without necessarily impacting on our budget deficit cap next year.
BACKGROUND
1.0 The DBM, during the course of performance reviews conducted on the agencies operations,
particularly on the implementation of their projects/activities, including expenses incurred in
undertaking the same, have identified savings out of the 2011 General Appropriations Act. Said
savings correspond to completed or discontinued projects under certain departments/agencies
which may be pooled, for the following:
1.1 to provide for new activities which have not been anticipated during preparation of
the budget;
1.2 to augment additional requirements of on-going priority projects; and
1.3 to provide for deficiencies under the Special Purpose Funds, e.g., PDAF, Calamity
Fund, Contingent Fund
1.4 to cover for the modifications of the original allotment class allocation as a result of
on-going priority projects and implementation of new activities
2.0 x x x x
2.1 x x x
2.2 x x x
ON THE UTILIZATION OF POOLED SAVINGS
3.0 It may be recalled that the President approved our request for omnibus authority to pool
savings/unutilized balances in FY 2010 last November 25, 2010.
4.0 It is understood that in the utilization of the pooled savings, the DBM shall secure the
corresponding approval/confirmation of the President. Furthermore, it is assured that the
proposed realignments shall be within the authorized Expenditure level.
5.0 Relative thereto, we have identified some expenditure items that may be sourced from the
said pooled appropriations in FY 2010 that will expire on December 31, 2011 and appropriations
in FY 2011 that may be declared as savings to fund additional expenditures.
5.1 The 2010 Continuing Appropriations (pooled savings) is proposed to be spent for the
projects that we have identified to be immediate actual disbursements considering that
this same fund source will expire on December 31, 2011.
5.2 With respect to the proposed expenditure items to be funded from the FY 2011
Unreleased Appropriations, most of these are the same projects for which the DBM is
directed by the Office of the President, thru the Executive Secretary, to source funds.
228
6.0 Among others, the following are such proposed additional projects that have been chosen
given their multiplier impact on economy and infrastructure development, their beneficial effect
on the poor, and their translation into disbursements. Please note that we have classified the list
of proposed projects as follows:
7.0 x x x
FOR THE PRESIDENTS APPROVAL
8.0 Foregoing considered, may we respectfully request for the Presidents approval for the
following:
8.1 Grant of omnibus authority to consolidate FY 2011 savings/unutilized balances and
its realignment; and
8.2 The proposed additional projects identified for funding.
For His Excellencys consideration and approval.
(Sgd.)
[/] APPROVED
[ ] DISAPPROVED
(Sgd.) H.E. BENIGNO S. AQUINO, III
DEC 21, 2011
Substantially identical requests for authority to pool savings and to fund proposed projects were contained in
various other memoranda from Sec. Abad dated June 25, 2012,117 September 4, 2012,118 December 19,
2012,119 May 20, 2013,120 and September 25, 2013.121 The President apparently approved all the requests,
withholding approval only of the proposed projects contained in the June 25, 2012 memorandum, as borne out
by his marginal note therein to the effect that the proposed projects should still be "subject to further
discussions."122
In order to implement the June25, 2012 memorandum, Sec. Abad issued NBC No. 541 (Adoption of
Operational Efficiency Measure Withdrawal of Agencies Unobligated Allotments as of June 30,
2012),123 reproduced herein as follows:
NATIONAL BUDGET CIRCULAR No. 541
July 18, 2012
TO: All Heads of Departments/Agencies/State Universities and Colleges and other Offices of the National
Government, Budget and Planning Officers; Heads of Accounting Units and All Others Concerned
SUBJECT : Adoption of Operational Efficiency Measure Withdrawal of Agencies Unobligated Allotments as
of June 30, 2012
1.0 Rationale
The DBM, as mandated by Executive Order (EO) No. 292 (Administrative Code of 1987), periodically reviews
and evaluates the departments/agencies efficiency and effectiveness in utilizing budgeted funds for the
delivery of services and production of goods, consistent with the government priorities.
In the event that a measure is necessary to further improve the operational efficiency of the government, the
President is authorized to suspend or stop further use of funds allotted for any agency or expenditure
authorized in the General Appropriations Act. Withdrawal and pooling of unutilized allotment releases can be
effected by DBM based on authority of the President, as mandated under Sections 38 and 39, Chapter 5, Book
VI of EO 292.
For the first five months of 2012, the National Government has not met its spending targets. In order to
accelerate spending and sustain the fiscal targets during the year, expenditure measures have to be
implemented to optimize the utilization of available resources.
Departments/agencies have registered low spending levels, in terms of obligations and disbursements per
initial review of their 2012 performance. To enhance agencies performance, the DBM conducts continuous
consultation meetings and/or send call-up letters, requesting them to identify slow-moving programs/projects
and the factors/issues affecting their performance (both pertaining to internal systems and those which are
outside the agencies spheres of control). Also, they are asked to formulate strategies and improvement plans
for the rest of 2012.
Notwithstanding these initiatives, some departments/agencies have continued to post low obligation levels as
of end of first semester, thus resulting to substantial unobligated allotments.
In line with this, the President, per directive dated June 27, 2012 authorized the withdrawal of unobligated
allotments of agencies with low levels of obligations as of June 30, 2012, both for continuing and current
229
allotments. This measure will allow the maximum utilization of available allotments to fund and undertake other
priority expenditures of the national government.
2.0 Purpose
2.1 To provide the conditions and parameters on the withdrawal of unobligated allotments of
agencies as of June 30, 2012 to fund priority and/or fast-moving programs/projects of the
national government;
2.2 To prescribe the reports and documents to be used as bases on the withdrawal of said
unobligated allotments; and
2.3 To provide guidelines in the utilization or reallocation of the withdrawn allotments.
3.0 Coverage
3.1 These guidelines shall cover the withdrawal of unobligated allotments as of June 30, 2012 of
all national government agencies (NGAs) charged against FY 2011 Continuing Appropriation
(R.A. No.10147) and FY 2012 Current Appropriation (R.A. No. 10155), pertaining to:
3.1.1 Capital Outlays (CO);
3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the
implementation of programs and projects, as well as capitalized MOOE; and
3.1.3 Personal Services corresponding to unutilized pension benefits declared as
savings by the agencies concerned based on their updated/validated list of pensioners.
3.2 The withdrawal of unobligated allotments may cover the identified programs, projects and
activities of the departments/agencies reflected in the DBM list shown as Annex A or specific
programs and projects as may be identified by the agencies.
4.0 Exemption
These guidelines shall not apply to the following:
4.1 NGAs
4.1.1 Constitutional Offices/Fiscal Autonomy Group, granted fiscal autonomy under the
Philippine Constitution; and
4.1.2 State Universities and Colleges, adopting the Normative Funding allocation
scheme i.e., distribution of a predetermined budget ceiling.
4.2 Fund Sources
4.2.1 Personal Services other than pension benefits;
4.2.2 MOOE items earmarked for specific purposes or subject to realignment conditions
per General Provisions of the GAA:
Confidential and Intelligence Fund;
Savings from Traveling, Communication, Transportation and Delivery, Repair
and Maintenance, Supplies and Materials and Utility which shall be used for the
grant of Collective Negotiation Agreement incentive benefit;
Savings from mandatory expenditures which can be realigned only in the last
quarter after taking into consideration the agencys full year requirements, i.e.,
Petroleum, Oil and Lubricants, Water, Illumination, Power Services, Telephone,
other Communication Services and Rent.
4.2.3 Foreign-Assisted Projects (loan proceeds and peso counterpart);
4.2.4 Special Purpose Funds such as: E-Government Fund, International Commitments
Fund, PAMANA, Priority Development Assistance Fund, Calamity Fund, Budgetary
Support to GOCCs and Allocation to LGUs, among others;
4.2.5 Quick Response Funds; and
4.2.6 Automatic Appropriations i.e., Retirement Life Insurance Premium and Special
Accounts in the General Fund.
5.0 Guidelines
5.1 National government agencies shall continue to undertake procurement activities
notwithstanding the implementation of the policy of withdrawal of unobligated allotments until
the end of the third quarter, FY 2012. Even without the allotments, the agency shall proceed in
undertaking the procurement processes (i.e., procurement planning up to the conduct of bidding
but short of awarding of contract) pursuant to GPPB Circular Nos. 02-2008 and 01-2009 and
DBM Circular Letter No. 2010-9.
230
5.2 For the purpose of determining the amount of unobligated allotments that shall be
withdrawn, all departments/agencies/operating units (OUs) shall submit to DBM not later than
July 30, 2012, the following budget accountability reports as of June 30, 2012;
Statement of Allotments, Obligations and Balances (SAOB);
Financial Report of Operations (FRO); and
Physical Report of Operations.
5.3 In the absence of the June 30, 2012 reports cited under item 5.2 of this Circular, the
agencys latest report available shall be used by DBM as basis for withdrawal of allotment. The
DBM shall compute/approximate the agencys obligation level as of June 30 to derive its
unobligated allotments as of same period. Example: If the March 31 SAOB or FRO reflects
actual obligations of P 800M then the June 30 obligation level shall approximate to 1,600 M
(i.e., 800 M x 2 quarters).
5.4 All released allotments in FY 2011 charged against R.A. No. 10147 which remained
unobligated as of June 30, 2012 shall be immediately considered for withdrawal. This policy is
based on the following considerations:
5.4.1 The departments/agencies approved priority programs and projects are assumed
to be implementation-ready and doable during the given fiscal year; and
5.4.2 The practice of having substantial carryover appropriations may imply that the
agency has a slower-than-programmed implementation capacity or agency tends to
implement projects within a two-year timeframe.
5.5. Consistent with the Presidents directive, the DBM shall, based on evaluation of the reports
cited above and results of consultations with the departments/agencies, withdraw the
unobligated allotments as of June 30, 2012 through issuance of negative Special Allotment
Release Orders (SAROs).
5.6 DBM shall prepare and submit to the President, a report on the magnitude of withdrawn
allotments. The report shall highlight the agencies which failed to submit the June 30 reports
required under this Circular.
5.7 The withdrawn allotments may be:
5.7.1 Reissued for the original programs and projects of the agencies/OUs concerned,
from which the allotments were withdrawn;
5.7.2 Realigned to cover additional funding for other existing programs and projects of
the agency/OU; or
5.7.3 Used to augment existing programs and projects of any agency and to fund priority
programs and projects not considered in the 2012 budget but expected to be started or
implemented during the current year.
5.8 For items 5.7.1 and 5.7.2 above, agencies/OUs concerned may submit to DBM a Special
Budget Request (SBR), supported with the following:
5.8.1 Physical and Financial Plan (PFP);
5.8.2 Monthly Cash Program (MCP); and
5.8.3 Proof that the project/activity has started the procurement processes i.e., Proof of
Posting and/or Advertisement of the Invitation to Bid.
5.9 The deadline for submission of request/s pertaining to these categories shall be until the end
of the third quarter i.e., September 30, 2012. After said cut-off date, the withdrawn allotments
shall be pooled and form part of the overall savings of the national government.
5.10 Utilization of the consolidated withdrawn allotments for other priority programs and projects
as cited under item 5.7.3 of this Circular, shall be subject to approval of the President. Based on
the approval of the President, DBM shall issue the SARO to cover the approved priority
expenditures subject to submission by the agency/OU concerned of the SBR and supported
with PFP and MCP.
5.11 It is understood that all releases to be made out of the withdrawn allotments (both 2011
and 2012 unobligated allotments) shall be within the approved Expenditure Program level of the
national government for the current year. The SAROs to be issued shall properly disclose the
appropriation source of the release to determine the extent of allotment validity, as follows:
231
For charges under R.A. 10147 allotments shall be valid up to December 31, 2012;
and
For charges under R.A. 10155 allotments shall be valid up to December 31, 2013.
5.12 Timely compliance with the submission of existing BARs and other reportorial requirements
is reiterated for monitoring purposes.
6.0 Effectivity
This circular shall take effect immediately.
(Sgd.) FLORENCIO B. ABAD
Secretary
As can be seen, NBC No. 541 specified that the unobligated allotments of all agencies and departments as of
June 30, 2012 that were charged against the continuing appropriations for fiscal year 2011 and the 2012 GAA
(R.A. No. 10155) were subject to withdrawal through the issuance of negative SAROs, but such allotments
could be either: (1) reissued for the original PAPs of the concerned agencies from which they were withdrawn;
or (2) realigned to cover additional funding for other existing PAPs of the concerned agencies; or (3) used to
augment existing PAPs of any agency and to fund priority PAPs not considered in the 2012 budget but
expected to be started or implemented in 2012. Financing the other priority PAPs was made subject to the
approval of the President. Note here that NBC No. 541 used terminologies like "realignment" and
"augmentation" in the application of the withdrawn unobligated allotments.
Taken together, all the issuances showed how the DAP was to be implemented and funded, that is (1) by
declaring "savings" coming from the various departments and agencies derived from pooling unobligated
allotments and withdrawing unreleased appropriations; (2) releasing unprogrammed funds; and (3) applying
the "savings" and unprogrammed funds to augment existing PAPs or to support other priority PAPs.
c. DAP was not an appropriation
measure; hence, no appropriation
law was required to adopt or to
implement it
Petitioners Syjuco, Luna, Villegas and PHILCONSA state that Congress did not enact a law to establish the
DAP, or to authorize the disbursement and release of public funds to implement the DAP. Villegas,
PHILCONSA, IBP, Araullo, and COURAGE observe that the appropriations funded under the DAP were not
included in the 2011, 2012 and 2013 GAAs. To petitioners IBP, Araullo, and COURAGE, the DAP, being
actually an appropriation that set aside public funds for public use, should require an enabling law for its
validity. VACC maintains that the DAP, because it involved huge allocations that were separate and distinct
from the GAAs, circumvented and duplicated the GAAs without congressional authorization and control.
The petitioners contend in unison that based on how it was developed and implemented the DAP violated the
mandate of Section 29(1), Article VI of the 1987 Constitution that "[n]o money shall be paid out of the Treasury
except in pursuance of an appropriation made by law."
The OSG posits, however, that no law was necessary for the adoption and implementation of the DAP because
of its being neither a fund nor an appropriation, but a program or an administrative system of prioritizing
spending; and that the adoption of the DAP was by virtue of the authority of the President as the Chief
Executive to ensure that laws were faithfully executed.
We agree with the OSGs position.
The DAP was a government policy or strategy designed to stimulate the economy through accelerated
spending. In the context of the DAPs adoption and implementation being a function pertaining to the Executive
as the main actor during the Budget Execution Stage under its constitutional mandate to faithfully execute the
laws, including the GAAs, Congress did not need to legislate to adopt or to implement the DAP. Congress
could appropriate but would have nothing more to do during the Budget Execution Stage. Indeed, appropriation
was the act by which Congress "designates a particular fund, or sets apart a specified portion of the public
revenue or of the money in the public treasury, to be applied to some general object of governmental
expenditure, or to some individual purchase or expense."124 As pointed out in Gonzales v. Raquiza:125 "In a
strict sense, appropriation has been defined as nothing more than the legislative authorization prescribed by
the Constitution that money may be paid out of the Treasury, while appropriation made by law refers to the act
of the legislature setting apart or assigning to a particular use a certain sum to be used in the payment of debt
or dues from the State to its creditors."126
232
On the other hand, the President, in keeping with his duty to faithfully execute the laws, had sufficient
discretion during the execution of the budget to adapt the budget to changes in the countrys economic
situation.127 He could adopt a plan like the DAP for the purpose. He could pool the savings and identify the
PAPs to be funded under the DAP. The pooling of savings pursuant to the DAP, and the identification of the
PAPs to be funded under the DAP did not involve appropriation in the strict sense because the money had
been already set apart from the public treasury by Congress through the GAAs. In such actions, the Executive
did not usurp the power vested in Congress under Section 29(1), Article VI of the Constitution.
3.
Unreleased appropriations and withdrawn
unobligated allotments under the DAP
were not savings, and the use of such
appropriations contravened Section 25(5),
Article VI of the 1987 Constitution.
Notwithstanding our appreciation of the DAP as a plan or strategy validly adopted by the Executive to ramp up
spending to accelerate economic growth, the challenges posed by the petitioners constrain us to dissect the
mechanics of the actual execution of the DAP. The management and utilization of the public wealth inevitably
demands a most careful scrutiny of whether the Executives implementation of the DAP was consistent with the
Constitution, the relevant GAAs and other existing laws.
a. Although executive discretion
and flexibility are necessary in
the execution of the budget, any
transfer of appropriated funds
should conform to Section 25(5),
Article VI of the Constitution
We begin this dissection by reiterating that Congress cannot anticipate all issues and needs that may come
into play once the budget reaches its execution stage. Executive discretion is necessary at that stage to
achieve a sound fiscal administration and assure effective budget implementation. The heads of offices,
particularly the President, require flexibility in their operations under performance budgeting to enable them to
make whatever adjustments are needed to meet established work goals under changing conditions.128 In
particular, the power to transfer funds can give the President the flexibility to meet unforeseen events that may
otherwise impede the efficient implementation of the PAPs set by Congress in the GAA.
Congress has traditionally allowed much flexibility to the President in allocating funds pursuant to the
GAAs,129particularly when the funds are grouped to form lump sum accounts.130 It is assumed that the agencies
of the Government enjoy more flexibility when the GAAs provide broader appropriation items.131 This flexibility
comes in the form of policies that the Executive may adopt during the budget execution phase. The DAP as a
strategy to improve the countrys economic position was one policy that the President decided to carry out in
order to fulfill his mandate under the GAAs.
Denying to the Executive flexibility in the expenditure process would be counterproductive. In Presidential
Spending Power,132 Prof. Louis Fisher, an American constitutional scholar whose specialties have included
budget policy, has justified extending discretionary authority to the Executive thusly:
[T]he impulse to deny discretionary authority altogether should be resisted. There are many number of reasons
why obligations and outlays by administrators may have to differ from appropriations by legislators.
Appropriations are made many months, and sometimes years, in advance of expenditures. Congress acts with
imperfect knowledge in trying to legislate in fields that are highly technical and constantly undergoing change.
New circumstances will develop to make obsolete and mistaken the decisions reached by Congress at the
appropriation stage. It is not practicable for Congress to adjust to each new development by passing separate
supplemental appropriation bills. Were Congress to control expenditures by confining administrators to narrow
statutory details, it would perhaps protect its power of the purse but it would not protect the purse itself. The
realities and complexities of public policy require executive discretion for the sound management of public
funds.
xxxx
x x x The expenditure process, by its very nature, requires substantial discretion for administrators. They need
to exercise judgment and take responsibility for their actions, but those actions ought to be directed toward
233
executing congressional, not administrative policy. Let there be discretion, but channel it and use it to satisfy
the programs and priorities established by Congress.
In contrast, by allowing to the heads of offices some power to transfer funds within their respective offices, the
Constitution itself ensures the fiscal autonomy of their offices, and at the same time maintains the separation of
powers among the three main branches of the Government. The Court has recognized this, and emphasized
so in Bengzon v. Drilon,133 viz:
The Judiciary, the Constitutional Commissions, and the Ombudsman must have the independence and
flexibility needed in the discharge of their constitutional duties. The imposition of restrictions and constraints on
the manner the independent constitutional offices allocate and utilize the funds appropriated for their
operations is anathema to fiscal autonomy and violative not only of the express mandate of the Constitution but
especially as regards the Supreme Court, of the independence and separation of powers upon which the entire
fabric of our constitutional system is based.
In the case of the President, the power to transfer funds from one item to another within the Executive has not
been the mere offshoot of established usage, but has emanated from law itself. It has existed since the time of
the American Governors-General.134 Act No. 1902 (An Act authorizing the Governor-General to direct any
unexpended balances of appropriations be returned to the general fund of the Insular Treasury and to transfer
from the general fund moneys which have been returned thereto), passed on May 18, 1909 by the First
Philippine Legislature,135 was the first enabling law that granted statutory authority to the President to transfer
funds. The authority was without any limitation, for the Act explicitly empowered the Governor-General to
transfer any unexpended balance of appropriations for any bureau or office to another, and to spend such
balance as if it had originally been appropriated for that bureau or office.
From 1916 until 1920, the appropriations laws set a cap on the amounts of funds that could be transferred,
thereby limiting the power to transfer funds. Only 10% of the amounts appropriated for contingent or
miscellaneous expenses could be transferred to a bureau or office, and the transferred funds were to be used
to cover deficiencies in the appropriations also for miscellaneous expenses of said bureau or office.
In 1921, the ceiling on the amounts of funds to be transferred from items under miscellaneous expenses to any
other item of a certain bureau or office was removed.
During the Commonwealth period, the power of the President to transfer funds continued to be governed by
the GAAs despite the enactment of the Constitution in 1935. It is notable that the 1935 Constitution did not
include a provision on the power to transfer funds. At any rate, a shift in the extent of the Presidents power to
transfer funds was again experienced during this era, with the President being given more flexibility in
implementing the budget. The GAAs provided that the power to transfer all or portions of the appropriations in
the Executive Department could be made in the "interest of the public, as the President may determine."136
In its time, the 1971 Constitutional Convention wanted to curtail the Presidents seemingly unbounded
discretion in transferring funds.137 Its Committee on the Budget and Appropriation proposed to prohibit the
transfer of funds among the separate branches of the Government and the independent constitutional bodies,
but to allow instead their respective heads to augment items of appropriations from savings in their respective
budgets under certain limitations.138 The clear intention of the Convention was to further restrict, not to
liberalize, the power to transfer appropriations.139 Thus, the Committee on the Budget and Appropriation initially
considered setting stringent limitations on the power to augment, and suggested that the augmentation of an
item of appropriation could be made "by not more than ten percent if the original item of appropriation to be
augmented does not exceed one million pesos, or by not more than five percent if the original item of
appropriation to be augmented exceeds one million pesos."140 But two members of the Committee objected to
the 1,000,000.00 threshold, saying that the amount was arbitrary and might not be reasonable in the future.
The Committee agreed to eliminate the 1,000,000.00 threshold, and settled on the ten percent limitation.141
In the end, the ten percent limitation was discarded during the plenary of the Convention, which adopted the
following final version under Section 16, Article VIII of the 1973 Constitution, to wit:
(5) No law shall be passed authorizing any transfer of appropriations; however, the President, the Prime
Minister, the Speaker, the Chief Justice of the Supreme Court, and the heads of Constitutional Commissions
may by law be authorized to augment any item in the general appropriations law for their respective offices
from savings in other items of their respective appropriations.
The 1973 Constitution explicitly and categorically prohibited the transfer of funds from one item to another,
unless Congress enacted a law authorizing the President, the Prime Minister, the Speaker, the Chief Justice of
the Supreme Court, and the heads of the Constitutional omissions to transfer funds for the purpose of
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augmenting any item from savings in another item in the GAA of their respective offices. The leeway was
limited to augmentation only, and was further constricted by the condition that the funds to be transferred
should come from savings from another item in the appropriation of the office.142
On July 30, 1977, President Marcos issued PD No. 1177, providing in its Section 44 that:
Section 44. Authority to Approve Fund Transfers. The President shall have the authority to transfer any fund
appropriated for the different departments, bureaus, offices and agencies of the Executive Department which
are included in the General Appropriations Act, to any program, project, or activity of any department, bureau
or office included in the General Appropriations Act or approved after its enactment.
The President shall, likewise, have the authority to augment any appropriation of the Executive Department in
the General Appropriations Act, from savings in the appropriations of another department, bureau, office or
agency within the Executive Branch, pursuant to the provisions of Article VIII, Section 16 (5) of the Constitution.
In Demetria v. Alba, however, the Court struck down the first paragraph of Section 44 for contravening Section
16(5)of the 1973 Constitution, ruling:
Paragraph 1 of Section 44 of P.D. No. 1177 unduly over-extends the privilege granted under said Section 16. It
empowers the President to indiscriminately transfer funds from one department, bureau, office or agency of the
Executive Department to any program, project or activity of any department, bureau or office included in the
General Appropriations Act or approved after its enactment, without regard as to whether or not the funds to be
transferred are actually savings in the item from which the same are to be taken, or whether or not the transfer
is for the purpose of augmenting the item to which said transfer is to be made. It does not only completely
disregard the standards set in the fundamental law, thereby amounting to an undue delegation of legislative
powers, but likewise goes beyond the tenor thereof. Indeed, such constitutional infirmities render the provision
in question null and void.143
It is significant that Demetria was promulgated 25 days after the ratification by the people of the 1987
Constitution, whose Section 25(5) of Article VI is identical to Section 16(5), Article VIII of the 1973 Constitution,
to wit:
Section 25. x x x
xxxx
5) No law shall be passed authorizing any transfer of appropriations; however, the President, the President of
the Senate, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and the
heads of Constitutional Commissions may, by law, be authorized to augment any item in the general
appropriations law for their respective offices from savings in other items of their respective appropriations.
xxxx
The foregoing history makes it evident that the Constitutional Commission included Section 25(5), supra, to
keep a tight rein on the exercise of the power to transfer funds appropriated by Congress by the President and
the other high officials of the Government named therein. The Court stated in Nazareth v. Villar:144
In the funding of current activities, projects, and programs, the general rule should still be that the budgetary
amount contained in the appropriations bill is the extent Congress will determine as sufficient for the budgetary
allocation for the proponent agency. The only exception is found in Section 25 (5), Article VI of the Constitution,
by which the President, the President of the Senate, the Speaker of the House of Representatives, the Chief
Justice of the Supreme Court, and the heads of Constitutional Commissions are authorized to transfer
appropriations to augmentany item in the GAA for their respective offices from the savings in other items of
their respective appropriations. The plain language of the constitutional restriction leaves no room for the
petitioners posture, which we should now dispose of as untenable.
It bears emphasizing that the exception in favor of the high officials named in Section 25(5), Article VI of the
Constitution limiting the authority to transfer savings only to augment another item in the GAA is strictly but
reasonably construed as exclusive. As the Court has expounded in Lokin, Jr. v. Commission on Elections:
When the statute itself enumerates the exceptions to the application of the general rule, the exceptions are
strictly but reasonably construed. The exceptions extend only as far as their language fairly warrants, and all
doubts should be resolved in favor of the general provision rather than the exceptions. Where the general rule
is established by a statute with exceptions, none but the enacting authority can curtail the former. Not even the
courts may add to the latter by implication, and it is a rule that an express exception excludes all others,
although it is always proper in determining the applicability of the rule to inquire whether, in a particular case, it
accords with reason and justice.
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The appropriate and natural office of the exception is to exempt something from the scope of the general
words of a statute, which is otherwise within the scope and meaning of such general words. Consequently, the
existence of an exception in a statute clarifies the intent that the statute shall apply to all cases not excepted.
Exceptions are subject to the rule of strict construction; hence, any doubt will be resolved in favor of the
general provision and against the exception. Indeed, the liberal construction of a statute will seem to require in
many circumstances that the exception, by which the operation of the statute is limited or abridged, should
receive a restricted construction.
Accordingly, we should interpret Section 25(5), supra, in the context of a limitation on the Presidents discretion
over the appropriations during the Budget Execution Phase.
b. Requisites for the valid transfer of
appropriated funds under Section
25(5), Article VI of the 1987
Constitution
The transfer of appropriated funds, to be valid under Section 25(5), supra, must be made upon a concurrence
of the following requisites, namely:
(1) There is a law authorizing the President, the President of the Senate, the Speaker of the House of
Representatives, the Chief Justice of the Supreme Court, and the heads of the Constitutional
Commissions to transfer funds within their respective offices;
(2) The funds to be transferred are savings generated from the appropriations for their respective
offices; and (3) The purpose of the transfer is to augment an item in the general appropriations law for
their respective offices.
b.1. First RequisiteGAAs of 2011 and
2012 lacked valid provisions to
authorize transfers of funds under
the DAP; hence, transfers under the
DAP were unconstitutional
Section 25(5), supra, not being a self-executing provision of the Constitution, must have an implementing law
for it to be operative. That law, generally, is the GAA of a given fiscal year. To comply with the first requisite, the
GAAs should expressly authorize the transfer of funds.
Did the GAAs expressly authorize the transfer of funds?
In the 2011 GAA, the provision that gave the President and the other high officials the authority to transfer
funds was Section 59, as follows:
Section 59. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the House
of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional Commissions enjoying
fiscal autonomy, and the Ombudsman are hereby authorized to augment any item in this Act from savings in
other items of their respective appropriations.
In the 2012 GAA, the empowering provision was Section 53, to wit:
Section 53. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the House
of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional Commissions enjoying
fiscal autonomy, and the Ombudsman are hereby authorized to augment any item in this Act from savings in
other items of their respective appropriations.
In fact, the foregoing provisions of the 2011 and 2012 GAAs were cited by the DBM as justification for the use
of savings under the DAP.145
A reading shows, however, that the aforequoted provisions of the GAAs of 2011 and 2012 were textually
unfaithful to the Constitution for not carrying the phrase "for their respective offices" contained in Section 25(5),
supra. The impact of the phrase "for their respective offices" was to authorize only transfers of funds within
their offices (i.e., in the case of the President, the transfer was to an item of appropriation within the Executive).
The provisions carried a different phrase ("to augment any item in this Act"), and the effect was that the 2011
and 2012 GAAs thereby literally allowed the transfer of funds from savings to augment any item in the GAAs
even if the item belonged to an office outside the Executive. To that extent did the 2011 and 2012 GAAs
contravene the Constitution. At the very least, the aforequoted provisions cannot be used to claim authority to
transfer appropriations from the Executive to another branch, or to a constitutional commission.
Apparently realizing the problem, Congress inserted the omitted phrase in the counterpart provision in the
2013 GAA, to wit:
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Section 52. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the House
of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional Commissions enjoying
fiscal autonomy, and the Ombudsman are hereby authorized to use savings in their respective appropriations
to augment actual deficiencies incurred for the current year in any item of their respective appropriations.
Even had a valid law authorizing the transfer of funds pursuant to Section 25(5), supra, existed, there still
remained two other requisites to be met, namely: that the source of funds to be transferred were savings from
appropriations within the respective offices; and that the transfer must be for the purpose of augmenting an
item of appropriation within the respective offices.
b.2. Second Requisite There were
no savings from which funds
could be sourced for the DAP
Were the funds used in the DAP actually savings?
The petitioners claim that the funds used in the DAP the unreleased appropriations and withdrawn
unobligated allotments were not actual savings within the context of Section 25(5), supra, and the relevant
provisions of the GAAs. Belgica argues that "savings" should be understood to refer to the excess money after
the items that needed to be funded have been funded, or those that needed to be paid have been paid
pursuant to the budget.146 The petitioners posit that there could be savings only when the PAPs for which the
funds had been appropriated were actually implemented and completed, or finally discontinued or abandoned.
They insist that savings could not be realized with certainty in the middle of the fiscal year; and that the funds
for "slow-moving" PAPs could not be considered as savings because such PAPs had not actually been
abandoned or discontinued yet.147 They stress that NBC No. 541, by allowing the withdrawn funds to be
reissued to the "original program or project from which it was withdrawn," conceded that the PAPs from which
the supposed savings were taken had not been completed, abandoned or discontinued.148
The OSG represents that "savings" were "appropriations balances," being the difference between the
appropriation authorized by Congress and the actual amount allotted for the appropriation; that the definition of
"savings" in the GAAs set only the parameters for determining when savings occurred; that it was still the
President (as well as the other officers vested by the Constitution with the authority to augment) who ultimately
determined when savings actually existed because savings could be determined only during the stage of
budget execution; that the President must be given a wide discretion to accomplish his tasks; and that the
withdrawn unobligated allotments were savings inasmuch as they were clearly "portions or balances of any
programmed appropriationfree from any obligation or encumbrances which are (i) still available after the
completion or final discontinuance or abandonment of the work, activity or purpose for which the appropriation
is authorized"
We partially find for the petitioners.
In ascertaining the meaning of savings, certain principles should be borne in mind. The first principle is that
Congress wields the power of the purse. Congress decides how the budget will be spent; what PAPs to fund;
and the amounts of money to be spent for each PAP. The second principle is that the Executive, as the
department of the Government tasked to enforce the laws, is expected to faithfully execute the GAA and to
spend the budget in accordance with the provisions of the GAA.149 The Executive is expected to faithfully
implement the PAPs for which Congress allocated funds, and to limit the expenditures within the allocations,
unless exigencies result to deficiencies for which augmentation is authorized, subject to the conditions
provided by law. The third principle is that in making the Presidents power to augment operative under the
GAA, Congress recognizes the need for flexibility in budget execution. In so doing, Congress diminishes its
own power of the purse, for it delegates a fraction of its power to the Executive. But Congress does not thereby
allow the Executive to override its authority over the purse as to let the Executive exceed its delegated
authority. And the fourth principle is that savings should be actual. "Actual" denotes something that is real or
substantial, or something that exists presently in fact, as opposed to something that is merely theoretical,
possible, potential or hypothetical.150
The foregoing principles caution us to construe savings strictly against expanding the scope of the power to
augment. It is then indubitable that the power to augment was to be used only when the purpose for which the
funds had been allocated were already satisfied, or the need for such funds had ceased to exist, for only then
could savings be properly realized. This interpretation prevents the Executive from unduly transgressing
Congress power of the purse.
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The definition of "savings" in the GAAs, particularly for 2011, 2012 and 2013, reflected this interpretation and
made it operational, viz:
Savings refer to portions or balances of any programmed appropriation in this Act free from any obligation or
encumbrance which are: (i) still available after the completion or final discontinuance or abandonment of the
work, activity or purpose for which the appropriation is authorized; (ii) from appropriations balances arising
from unpaid compensation and related costs pertaining to vacant positions and leaves of absence without pay;
and (iii) from appropriations balances realized from the implementation of measures resulting in improved
systems and efficiencies and thus enabled agencies to meet and deliver the required or planned targets,
programs and services approved in this Act at a lesser cost.
The three instances listed in the GAAs aforequoted definition were a sure indication that savings could be
generated only upon the purpose of the appropriation being fulfilled, or upon the need for the appropriation
being no longer existent.
The phrase "free from any obligation or encumbrance" in the definition of savings in the GAAs conveyed the
notion that the appropriation was at that stage when the appropriation was already obligated and the
appropriation was already released. This interpretation was reinforced by the enumeration of the three
instances for savings to arise, which showed that the appropriation referred to had reached the agency level. It
could not be otherwise, considering that only when the appropriation had reached the agency level could it be
determined whether (a) the PAP for which the appropriation had been authorized was completed, finally
discontinued, or abandoned; or (b) there were vacant positions and leaves of absence without pay; or (c) the
required or planned targets, programs and services were realized at a lesser cost because of the
implementation of measures resulting in improved systems and efficiencies.
The DBM declares that part of the savings brought under the DAP came from "pooling of unreleased
appropriations such as unreleased Personnel Services appropriations which will lapse at the end of the year,
unreleased appropriations of slow moving projects and discontinued projects per Zero-Based Budgeting
findings."
The declaration of the DBM by itself does not state the clear legal basis for the treatment of unreleased or
unalloted appropriations as savings.
The fact alone that the appropriations are unreleased or unalloted is a mere description of the status of the
items as unalloted or unreleased. They have not yet ripened into categories of items from which savings can
be generated. Appropriations have been considered "released" if there has already been an allotment or
authorization to incur obligations and disbursement authority. This means that the DBM has issued either an
ABM (for those not needing clearance), or a SARO (for those needing clearance), and consequently an NCA,
NCAA or CDC, as the case may be. Appropriations remain unreleased, for instance, because of
noncompliance with documentary requirements (like the Special Budget Request), or simply because of the
unavailability of funds. But the appropriations do not actually reach the agencies to which they were allocated
under the GAAs, and have remained with the DBM technically speaking. Ergo, unreleased appropriations refer
to appropriations with allotments but without disbursement authority.
For us to consider unreleased appropriations as savings, unless these met the statutory definition of savings,
would seriously undercut the congressional power of the purse, because such appropriations had not even
reached and been used by the agency concerned vis--vis the PAPs for which Congress had allocated them.
However, if an agency has unfilled positions in its plantilla and did not receive an allotment and NCA for such
vacancies, appropriations for such positions, although unreleased, may already constitute savings for that
agency under the second instance.
Unobligated allotments, on the other hand, were encompassed by the first part of the definition of "savings" in
the GAA, that is, as "portions or balances of any programmed appropriation in this Act free from any obligation
or encumbrance." But the first part of the definition was further qualified by the three enumerated instances of
when savings would be realized. As such, unobligated allotments could not be indiscriminately declared as
savings without first determining whether any of the three instances existed. This signified that the DBMs
withdrawal of unobligated allotments had disregarded the definition of savings under the GAAs.
Justice Carpio has validly observed in his Separate Concurring Opinion that MOOE appropriations are deemed
divided into twelve monthly allocations within the fiscal year; hence, savings could be generated monthly from
the excess or unused MOOE appropriations other than the Mandatory Expenditures and Expenditures for
Business-type Activities because of the physical impossibility to obligate and spend such funds as MOOE for a
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period that already lapsed. Following this observation, MOOE for future months are not savings and cannot be
transferred.
The DBMs Memorandum for the President dated June 25, 2012 (which became the basis of NBC No. 541)
stated:
ON THE AUTHORITY TO WITHDRAW UNOBLIGATED ALLOTMENTS
5.0 The DBM, during the course of performance reviews conducted on the agencies operations,
particularly on the implementation of their projects/activities, including expenses incurred in undertaking
the same, have been continuously calling the attention of all National Government agencies (NGAs)
with low levels of obligations as of end of the first quarter to speedup the implementation of their
programs and projects in the second quarter.
6.0 Said reminders were made in a series of consultation meetings with the concerned agencies and
with call-up letters sent.
7.0 Despite said reminders and the availability of funds at the departments disposal, the level of
financial performance of some departments registered below program, with the targeted
obligations/disbursements for the first semester still not being met.
8.0 In order to maximize the use of the available allotment, all unobligated balances as of June 30,
2012, both for continuing and current allotments shall be withdrawn and pooled to fund fast moving
programs/projects.
9.0 It may be emphasized that the allotments to be withdrawn will be based on the list of slow moving
projects to be identified by the agencies and their catch up plans to be evaluated by the DBM.
It is apparent from the foregoing text that the withdrawal of unobligated allotments would be based on whether
the allotments pertained to slow-moving projects, or not. However, NBC No. 541 did not set in clear terms the
criteria for the withdrawal of unobligated allotments, viz:
3.1. These guidelines shall cover the withdrawal of unobligated allotments as of June 30, 2012 ofall
national government agencies (NGAs) charged against FY 2011 Continuing Appropriation (R.A. No.
10147) and FY 2012 Current Appropriation (R.A. No. 10155), pertaining to:
3.1.1 Capital Outlays (CO);
3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the implementation of
programs and projects, as well as capitalized MOOE; and
3.1.3 Personal Services corresponding to unutilized pension benefits declared as savings by the
agencies concerned based on their undated/validated list of pensioners.
A perusal of its various provisions reveals that NBC No. 541 targeted the "withdrawal of unobligated allotments
of agencies with low levels of obligations"151 "to fund priority and/or fast-moving programs/projects."152 But the
fact that the withdrawn allotments could be "[r]eissued for the original programs and projects of the
agencies/OUs concerned, from which the allotments were withdrawn"153 supported the conclusion that the
PAPs had not yet been finally discontinued or abandoned. Thus, the purpose for which the withdrawn funds
had been appropriated was not yet fulfilled, or did not yet cease to exist, rendering the declaration of the funds
as savings impossible.
Worse, NBC No. 541 immediately considered for withdrawal all released allotments in 2011 charged against
the 2011 GAA that had remained unobligated based on the following considerations, to wit:
5.4.1 The departments/agencies approved priority programs and projects are assumed to be
implementation-ready and doable during the given fiscal year; and
5.4.2 The practice of having substantial carryover appropriations may imply that the agency has a
slower-than-programmed implementation capacity or agency tends to implement projects within a two-
year timeframe.
Such withdrawals pursuant to NBC No. 541, the circular that affected the unobligated allotments for continuing
and current appropriations as of June 30, 2012, disregarded the 2-year period of availability of the
appropriations for MOOE and capital outlay extended under Section 65, General Provisions of the 2011 GAA,
viz:
Section 65. Availability of Appropriations. Appropriations for MOOE and capital outlays authorized in this Act
shall be available for release and obligation for the purpose specified, and under the same special provisions
applicable thereto, for a period extending to one fiscal year after the end of the year in which such items were
appropriated: PROVIDED, That appropriations for MOOE and capital outlays under R.A. No. 9970 shall be
made available up to the end of FY 2011: PROVIDED, FURTHER, That a report on these releases and
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obligations shall be submitted to the Senate Committee on Finance and the House Committee on
Appropriations.
and Section 63 General Provisions of the 2012 GAA, viz:
Section 63. Availability of Appropriations. Appropriations for MOOE and capital outlays authorized in this Act
shall be available for release and obligation for the purpose specified, and under the same special provisions
applicable thereto, for a period extending to one fiscal year after the end of the year in which such items were
appropriated: PROVIDED, That a report on these releases and obligations shall be submitted to the Senate
Committee on Finance and the House Committee on Appropriations, either in printed form or by way of
electronic document.154
Thus, another alleged area of constitutional infirmity was that the DAP and its relevant issuances shortened the
period of availability of the appropriations for MOOE and capital outlays.
Congress provided a one-year period of availability of the funds for all allotment classes in the 2013 GAA (R.A.
No. 10352), to wit:
Section 63. Availability of Appropriations. All appropriations authorized in this Act shall be available for
release and obligation for the purposes specified, and under the same special provisions applicable thereto,
until the end of FY 2013: PROVIDED, That a report on these releases and obligations shall be submitted to the
Senate Committee on Finance and House Committee on Appropriations, either in printed form or by way of
electronic document.
Yet, in his memorandum for the President dated May 20, 2013, Sec. Abad sought omnibus authority to
consolidate savings and unutilized balances to fund the DAP on a quarterly basis, viz:
7.0 If the level of financial performance of some department will register below program, even with the
availability of funds at their disposal, the targeted obligations/disbursements for each quarter will not be
met. It is important to note that these funds will lapse at the end of the fiscal year if these remain
unobligated.
8.0 To maximize the use of the available allotment, all unobligated balances at the end of every quarter,
both for continuing and current allotments shall be withdrawn and pooled to fund fast moving
programs/projects.
9.0 It may be emphasized that the allotments to be withdrawn will be based on the list of slow moving
projects to be identified by the agencies and their catch up plans to be evaluated by the DBM.
The validity period of the affected appropriations, already given the brief Lifes pan of one year, was further
shortened to only a quarter of a year under the DBMs memorandum dated May 20, 2013.
The petitioners accuse the respondents of forcing the generation of savings in order to have a larger fund
available for discretionary spending. They aver that the respondents, by withdrawing unobligated allotments in
the middle of the fiscal year, in effect deprived funding for PAPs with existing appropriations under the GAAs.155
The respondents belie the accusation, insisting that the unobligated allotments were being withdrawn upon the
instance of the implementing agencies based on their own assessment that they could not obligate those
allotments pursuant to the Presidents directive for them to spend their appropriations as quickly as they could
in order to ramp up the economy.156
We agree with the petitioners.
Contrary to the respondents insistence, the withdrawals were upon the initiative of the DBM itself. The text of
NBC No. 541 bears this out, to wit:
5.2 For the purpose of determining the amount of unobligated allotments that shall be withdrawn, all
departments/agencies/operating units (OUs) shall submit to DBM not later than July 30, 2012, the following
budget accountability reports as of June 30, 2012;
Statement of Allotments, Obligation and Balances (SAOB);
Financial Report of Operations (FRO); and
Physical Report of Operations.
5.3 In the absence of the June 30, 2012 reports cited under item 5.2 of this Circular, the agencys latest report
available shall be used by DBM as basis for withdrawal of allotment. The DBM shall compute/approximate the
agencys obligation level as of June 30 to derive its unobligated allotments as of same period. Example: If the
March 31 SAOB or FRO reflects actual obligations of P 800M then the June 30 obligation level shall
approximate to 1,600 M (i.e., 800 M x 2 quarters).
The petitioners assert that no law had authorized the withdrawal and transfer of unobligated allotments and the
pooling of unreleased appropriations; and that the unbridled withdrawal of unobligated allotments and the
240
retention of appropriated funds were akin to the impoundment of appropriations that could be allowed only in
case of "unmanageable national government budget deficit" under the GAAs,157 thus violating the provisions of
the GAAs of 2011, 2012 and 2013 prohibiting the retention or deduction of allotments.158
In contrast, the respondents emphasize that NBC No. 541 adopted a spending, not saving, policy as a last-
ditch effort of the Executive to push agencies into actually spending their appropriations; that such policy did
not amount to an impoundment scheme, because impoundment referred to the decision of the Executive to
refuse to spend funds for political or ideological reasons; and that the withdrawal of allotments under NBC No.
541 was made pursuant to Section 38, Chapter 5, Book VI of the Administrative Code, by which the President
was granted the authority to suspend or otherwise stop further expenditure of funds allotted to any agency
whenever in his judgment the public interest so required.
The assertions of the petitioners are upheld. The withdrawal and transfer of unobligated allotments and the
pooling of unreleased appropriations were invalid for being bereft of legal support. Nonetheless, such
withdrawal of unobligated allotments and the retention of appropriated funds cannot be considered as
impoundment.
According to Philippine Constitution Association v. Enriquez:159 "Impoundment refers to a refusal by the
President, for whatever reason, to spend funds made available by Congress. It is the failure to spend or
obligate budget authority of any type." Impoundment under the GAA is understood to mean the retention or
deduction of appropriations. The 2011 GAA authorized impoundment only in case of unmanageable National
Government budget deficit, to wit:
Section 66. Prohibition Against Impoundment of Appropriations. No appropriations authorized under this Act
shall be impounded through retention or deduction, unless in accordance with the rules and regulations to be
issued by the DBM: PROVIDED, That all the funds appropriated for the purposes, programs, projects and
activities authorized under this Act, except those covered under the Unprogrammed Fund, shall be released
pursuant to Section 33 (3), Chapter 5, Book VI of E.O. No. 292.
Section 67. Unmanageable National Government Budget Deficit. Retention or deduction of appropriations
authorized in this Act shall be effected only in cases where there is an unmanageable national government
budget deficit.
Unmanageable national government budget deficit as used in this section shall be construed to mean that (i)
the actual national government budget deficit has exceeded the quarterly budget deficit targets consistent with
the full-year target deficit as indicated in the FY 2011 Budget of
Expenditures and Sources of Financing submitted by the President and approved by Congress pursuant to
Section 22, Article VII of the Constitution, or (ii) there are clear economic indications of an impending
occurrence of such condition, as determined by the Development Budget Coordinating Committee and
approved by the President.
The 2012 and 2013 GAAs contained similar provisions.
The withdrawal of unobligated allotments under the DAP should not be regarded as impoundment because it
entailed only the transfer of funds, not the retention or deduction of appropriations.
Nor could Section 68 of the 2011 GAA (and the similar provisions of the 2012 and 2013 GAAs) be applicable.
They uniformly stated:
Section 68. Prohibition Against Retention/Deduction of Allotment. Fund releases from appropriations provided
in this Act shall be transmitted intact or in full to the office or agency concerned. No retention or deduction as
reserves or overhead shall be made, except as authorized by law, or upon direction of the President of the
Philippines. The COA shall ensure compliance with this provision to the extent that sub-allotments by agencies
to their subordinate offices are in conformity with the release documents issued by the DBM.
The provision obviously pertained to the retention or deduction of allotments upon their release from the DBM,
which was a different matter altogether. The Court should not expand the meaning of the provision by applying
it to the withdrawal of allotments.
The respondents rely on Section 38, Chapter 5, Book VI of the Administrative Code of 1987 to justify the
withdrawal of unobligated allotments. But the provision authorized only the suspension or stoppage of further
expenditures, not the withdrawal of unobligated allotments, to wit:
Section 38. Suspension of Expenditure of Appropriations.- Except as otherwise provided in the General
Appropriations Act and whenever in his judgment the public interest so requires, the President, upon notice to
the head of office concerned, is authorized to suspend or otherwise stop further expenditure of funds allotted
241
for any agency, or any other expenditure authorized in the General Appropriations Act, except for personal
services appropriations used for permanent officials and employees.
Moreover, the DBM did not suspend or stop further expenditures in accordance with Section 38, supra, but
instead transferred the funds to other PAPs.
It is relevant to remind at this juncture that the balances of appropriations that remained unexpended at the
end of the fiscal year were to be reverted to the General Fund.1wphi1 This was the mandate of Section 28,
Chapter IV, Book VI of the Administrative Code, to wit:
Section 28. Reversion of Unexpended Balances of Appropriations, Continuing Appropriations.- Unexpended
balances of appropriations authorized in the General Appropriation Act shall revert to the unappropriated
surplus of the General Fund at the end of the fiscal year and shall not thereafter be available for expenditure
except by subsequent legislative enactment: Provided, that appropriations for capital outlays shall remain valid
until fully spent or reverted: provided, further, that continuing appropriations for current operating expenditures
may be specifically recommended and approved as such in support of projects whose effective implementation
calls for multi-year expenditure commitments: provided, finally, that the President may authorize the use of
savings realized by an agency during given year to meet non-recurring expenditures in a subsequent year.
The balances of continuing appropriations shall be reviewed as part of the annual budget preparation process
and the preparation process and the President may approve upon recommendation of the Secretary, the
reversion of funds no longer needed in connection with the activities funded by said continuing appropriations.
The Executive could not circumvent this provision by declaring unreleased appropriations and unobligated
allotments as savings prior to the end of the fiscal year.
b.3. Third Requisite No funds from
savings could be transferred under
the DAP to augment deficient items
not provided in the GAA
The third requisite for a valid transfer of funds is that the purpose of the transfer should be "to augment an item
in the general appropriations law for the respective offices." The term "augment" means to enlarge or increase
in size, amount, or degree.160
The GAAs for 2011, 2012 and 2013 set as a condition for augmentation that the appropriation for the PAP item
to be augmented must be deficient, to wit:
x x x Augmentation implies the existence in this Act of a program, activity, or project with an appropriation,
which upon implementation, or subsequent evaluation of needed resources, is determined to be deficient. In no
case shall a non-existent program, activity, or project, be funded by augmentation from savings or by the use of
appropriations otherwise authorized in this Act.
In other words, an appropriation for any PAP must first be determined to be deficient before it could be
augmented from savings. Note is taken of the fact that the 2013 GAA already made this quite clear, thus:
Section 52. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the House
of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional Commissions enjoying
fiscal autonomy, and the Ombudsman are hereby authorized to use savings in their respective appropriations
to augment actual deficiencies incurred for the current year in any item of their respective appropriations.
As of 2013, a total of 144.4 billion worth of PAPs were implemented through the DAP.161
Of this amount 82.5 billion were released in 2011 and 54.8 billion in 2012.162 Sec. Abad has reported that
9% of the total DAP releases were applied to the PAPs identified by the legislators.163
The petitioners disagree, however, and insist that the DAP supported the following PAPs that had not been
covered with appropriations in the respective GAAs, namely:
(i) 1.5 billion for the Cordillera Peoples Liberation Army;
(ii) 1.8 billion for the Moro National Liberation Front;
(iii) 700 million for assistance to Quezon Province;164
(iv) 50 million to 100 (million) each to certain senators;165
(v) 10 billion for the relocation of families living along dangerous zones under the National Housing
Authority;
(vi) 10 billion and 20 billion equity infusion under the Bangko Sentral;
(vii) 5.4 billion landowners compensation under the Department of Agrarian Reform;
(viii) 8.6 billion for the ARMM comprehensive peace and development program;
(ix) 6.5 billion augmentation of LGU internal revenue allotments
242
(x) 5 billion for crucial projects like tourism road construction under the Department of Tourism and the
Department of Public Works and Highways;
(xi) 1.8 billion for the DAR-DPWH Tulay ng Pangulo;
(xii) 1.96 billion for the DOH-DPWH rehabilitation of regional health units; and
(xiii) 4 billion for the DepEd-PPP school infrastructure projects.166
In refutation, the OSG argues that a total of 116 DAP-financed PAPs were implemented, had appropriation
covers, and could properly be accounted for because the funds were released following and pursuant to the
standard practices adopted by the DBM.167 In support of its argument, the OSG has submitted seven evidence
packets containing memoranda, SAROs, and other pertinent documents relative to the implementation and
fund transfers under the DAP.168
Upon careful review of the documents contained in the seven evidence packets, we conclude that the
"savings" pooled under the DAP were allocated to PAPs that were not covered by any appropriations in the
pertinent GAAs.
For example, the SARO issued on December 22, 2011 for the highly vaunted Disaster Risk, Exposure,
Assessment and Mitigation (DREAM) project under the Department of Science and Technology (DOST)
covered the amount of 1.6 Billion,169 broken down as follows:

APPROPRIATION PARTICULARS AMOUNT

CODE AUTHORIZED
A.03.a.01.a Generation of new knowledge and
technologies and research capability building
in priority areas identified as strategic to
National Development
Personnel Services P 43,504,024
Maintenance and Other Operating Expenses 1,164,517,589
Capital Outlays 391,978,387
P 1,600,000,000

the pertinent provision of the 2011 GAA (R.A. No. 10147) showed that Congress had appropriated only
537,910,000 for MOOE, but nothing for personnel services and capital outlays, to wit:

Personnel Maintenance Capital TOTAL

Services and Other Outlays
Operating
Expenditures
III. Operations
a. Funding Assistance to Science 177,406,000 1,887,365,000 49,090,000 2,113,861,000
and Technology Activities
1. Central Office 1,554,238,000 1,554,238,000
a. Generation of new
knowledge and
technologies and research
capability building in
priority areas identified as
strategic to National
Development 537,910,000 537,910,000

Aside from this transfer under the DAP to the DREAM project exceeding by almost 300% the appropriation by
Congress for the program Generation of new knowledge and technologies and research capability building in
243
priority areas identified as strategic to National Development, the Executive allotted funds for personnel
services and capital outlays. The Executive thereby substituted its will to that of Congress. Worse, the
Executive had not earlier proposed any amount for personnel services and capital outlays in the NEP that
became the basis of the 2011 GAA.170
It is worth stressing in this connection that the failure of the GAAs to set aside any amounts for an expense
category sufficiently indicated that Congress purposely did not see fit to fund, much less implement, the PAP
concerned. This indication becomes clearer when even the President himself did not recommend in the NEP to
fund the PAP. The consequence was that any PAP requiring expenditure that did not receive any appropriation
under the GAAs could only be a new PAP, any funding for which would go beyond the authority laid down by
Congress in enacting the GAAs. That happened in some instances under the DAP.
In relation to the December 22, 2011 SARO issued to the Philippine Council for Industry, Energy and Emerging
Technology Research and Development (DOST-PCIEETRD)171 for Establishment of the Advanced Failure
Analysis Laboratory, which reads:

APPROPRIATION PARTICULARS AMOUNT

CODE AUTHORIZED

Development, integration and coordination of the

National Research System for Industry, Energy and
A.02.a
Emerging Technology and Related Fields
Capital Outlays
P 300,000,000

the appropriation code and the particulars appearing in the SARO did not correspond to the program specified
in the GAA, whose particulars were Research and Management Services(inclusive of the following activities:
(1) Technological and Economic Assessment for Industry, Energy and Utilities; (2) Dissemination of Science
and Technology Information; and (3) Management of PCIERD Information System for Industry, Energy and
Utilities. Even assuming that Development, integration and coordination of the National Research System for
Industry, Energy and Emerging Technology and Related Fields the particulars stated in the SARO could fall
under the broad program description of Research and Management Services as appearing in the SARO, it
would nonetheless remain a new activity by reason of its not being specifically stated in the GAA. As such, the
DBM, sans legislative authorization, could not validly fund and implement such PAP under the DAP.
In defending the disbursements, however, the OSG contends that the Executive enjoyed sound discretion in
implementing the budget given the generality in the language and the broad policy objectives identified under
the GAAs;172 and that the President enjoyed unlimited authority to spend the initial appropriations under his
authority to declare and utilize savings,173 and in keeping with his duty to faithfully execute the laws.
Although the OSG rightly contends that the Executive was authorized to spend in line with its mandate to
faithfully execute the laws (which included the GAAs), such authority did not translate to unfettered discretion
that allowed the President to substitute his own will for that of Congress. He was still required to remain faithful
to the provisions of the GAAs, given that his power to spend pursuant to the GAAs was but a delegation to him
from Congress. Verily, the power to spend the public wealth resided in Congress, not in the
Executive.174 Moreover, leaving the spending power of the Executive unrestricted would threaten to undo the
principle of separation of powers.175
Congress acts as the guardian of the public treasury in faithful discharge of its power of the purse whenever it
deliberates and acts on the budget proposal submitted by the Executive.176 Its power of the purse is touted as
the very foundation of its institutional strength,177 and underpins "all other legislative decisions and regulating
the balance of influence between the legislative and executive branches of government."178 Such enormous
power encompasses the capacity to generate money for the Government, to appropriate public funds, and to
spend the money.179 Pertinently, when it exercises its power of the purse, Congress wields control by specifying
the PAPs for which public money should be spent.
It is the President who proposes the budget but it is Congress that has the final say on matters of
appropriations.180For this purpose, appropriation involves two governing principles, namely: (1) "a Principle of
the Public Fisc, asserting that all monies received from whatever source by any part of the government are
244
public funds;" and (2) "a Principle of Appropriations Control, prohibiting expenditure of any public money
without legislative authorization."181To conform with the governing principles, the Executive cannot circumvent
the prohibition by Congress of an expenditure for a PAP by resorting to either public or private funds.182 Nor
could the Executive transfer appropriated funds resulting in an increase in the budget for one PAP, for by so
doing the appropriation for another PAP is necessarily decreased. The terms of both appropriations will thereby
be violated.
b.4 Third Requisite Cross-border
augmentations from savings were
prohibited by the Constitution
By providing that the President, the President of the Senate, the Speaker of the House of Representatives, the
Chief Justice of the Supreme Court, and the Heads of the Constitutional Commissions may be authorized to
augment any item in the GAA "for their respective offices," Section 25(5), supra, has delineated borders
between their offices, such that funds appropriated for one office are prohibited from crossing over to another
office even in the guise of augmentation of a deficient item or items. Thus, we call such transfers of funds
cross-border transfers or cross-border augmentations.
To be sure, the phrase "respective offices" used in Section 25(5), supra, refers to the entire Executive, with
respect to the President; the Senate, with respect to the Senate President; the House of Representatives, with
respect to the Speaker; the Judiciary, with respect to the Chief Justice; the Constitutional Commissions, with
respect to their respective Chairpersons.
Did any cross-border transfers or augmentations transpire?
During the oral arguments on January 28, 2014, Sec. Abad admitted making some cross-border
augmentations, to wit:
JUSTICE BERSAMIN:
Alright, the whole time that you have been Secretary of Department of Budget and Management, did the
Executive Department ever redirect any part of savings of the National Government under your control cross
border to another department?
SECRETARY ABAD:
Well, in the Memos that we submitted to you, such an instance, Your Honor
JUSTICE BERSAMIN:
Can you tell me two instances? I dont recall having read your material.
SECRETARY ABAD:
Well, the first instance had to do with a request from the House of Representatives. They started building their
e-library in 2010 and they had a budget for about 207 Million but they lack about 43 Million to complete its 250
Million requirements. Prior to that, the COA, in an audit observation informed the Speaker that they had to
continue with that construction otherwise the whole building, as well as the equipments therein may suffer from
serious deterioration. And at that time, since the budget of the House of Representatives was not enough to
complete 250 Million, they wrote to the President requesting for an augmentation of that particular item, which
was granted, Your Honor. The second instance in the Memos is a request from the Commission on Audit. At
the time they were pushing very strongly the good governance programs of the government and therefore, part
of that is a requirement to conduct audits as well as review financial reports of many agencies. And in the
performance of that function, the Commission on Audit needed information technology equipment as well as
hire consultants and litigators to help them with their audit work and for that they requested funds from the
Executive and the President saw that it was important for the Commission to be provided with those IT
equipments and litigators and consultants and the request was granted, Your Honor.
JUSTICE BERSAMIN:
These cross border examples, cross border augmentations were not supported by appropriations
SECRETARY ABAD:
They were, we were augmenting existing items within their (interrupted)
JUSTICE BERSAMIN:
No, appropriations before you augmented because this is a cross border and the tenor or text of the
Constitution is quite clear as far as I am concerned. It says here, "The power to augment may only be made to
increase any item in the General Appropriations Law for their respective offices." Did you not feel constricted
by this provision?
SECRETARY ABAD:
245
Well, as the Constitution provides, the prohibition we felt was on the transfer of appropriations, Your Honor.
What we thought we did was to transfer savings which was needed by the Commission to address deficiency
in an existing item in both the Commission as well as in the House of Representatives; thats how we saw
(interrupted)
JUSTICE BERSAMIN:
So your position as Secretary of Budget is that you could do that?
SECRETARY ABAD:
In an extreme instances because(interrupted)
JUSTICE BERSAMIN:
No, no, in all instances, extreme or not extreme, you could do that, thats your feeling.
SECRETARY ABAD:
Well, in that particular situation when the request was made by the Commission and the House of
Representatives, we felt that we needed to respond because we felt(interrupted).183
The records show, indeed, that funds amounting to 143,700,000.00 and 250,000,000.00 were transferred
under the DAP respectively to the COA184 and the House of Representatives.185 Those transfers of funds,
which constituted cross-border augmentations for being from the Executive to the COA and the House of
Representatives, are graphed as follows:186

AMOUNT
DATE (In thousand pesos)
OFFICE PURPOSE
RELEASED Reserve Releases
Imposed
Commission on IT Infrastructure Program and 11/11/11 143,700
Audit hiring of additional litigation
experts
Congress Completion of the construction 07/23/12 207,034 250,000
House of of the Legislative Library and (Savings of HOR)
Representatives Archives
Building/Congressional e-
library

The respondents further stated in their memorandum that the President "made available" to the "Commission
on Elections the savings of his department upon [its] request for funds"187 This was another instance of a
cross-border augmentation.
The respondents justified all the cross-border transfers thusly:
99. The Constitution does not prevent the President from transferring savings of his department to another
department upon the latters request, provided it is the recipient department that uses such funds to augment
its own appropriation. In such a case, the President merely gives the other department access to public funds
but he cannot dictate how they shall be applied by that department whose fiscal autonomy is guaranteed by
the Constitution.188
In the oral arguments held on February 18, 2014, Justice Vicente V. Mendoza, representing Congress,
announced a different characterization of the cross-border transfers of funds as in the nature of "aid" instead of
"augmentation," viz:
HONORABLE MENDOZA:
The cross-border transfers, if Your Honors please, is not an application of the DAP. What were these cross-
border transfers? They are transfers of savings as defined in the various General Appropriations Act. So, that
makes it similar to the DAP, the use of savings. There was a cross-border which appears to be in violation of
Section 25, paragraph 5 of Article VI, in the sense that the border was crossed. But never has it been claimed
that the purpose was to augment a deficient item in another department of the government or agency of the
government. The cross-border transfers, if Your Honors please, were in the nature of [aid] rather than
augmentations. Here is a government entity separate and independent from the Executive Department solely
in need of public funds. The President is there 24 hours a day, 7 days a week. Hes in charge of the whole
246
operation although six or seven heads of government offices are given the power to augment. Only the
President stationed there and in effect in-charge and has the responsibility for the failure of any part of the
government. You have election, for one reason or another, the money is not enough to hold election. There
would be chaos if no money is given as an aid, not to augment, but as an aid to a department like COA. The
President is responsible in a way that the other heads, given the power to augment, are not. So, he cannot
very well allow this, if Your Honor please.189
JUSTICE LEONEN:
May I move to another point, maybe just briefly. I am curious that the position now, I think, of government is
that some transfers of savings is now considered to be, if Im not mistaken, aid not augmentation. Am I correct
in my hearing of your argument?
HONORABLE MENDOZA:
Thats our submission, if Your Honor, please.
JUSTICE LEONEN:
May I know, Justice, where can we situate this in the text of the Constitution? Where do we actually derive the
concepts that transfers of appropriation from one branch to the other or what happened in DAP can be
considered a said? What particular text in the Constitution can we situate this?
HONORABLE MENDOZA:
There is no particular provision or statutory provision for that matter, if Your Honor please. It is drawn from the
fact that the Executive is the executive in-charge of the success of the government.
JUSTICE LEONEN:
So, the residual powers labelled in Marcos v. Manglapus would be the basis for this theory of the government?
HONORABLE MENDOZA:
Yes, if Your Honor, please.
JUSTICE LEONEN:
A while ago, Justice Carpio mentioned that the remedy is might be to go to Congress. That there are
opportunities and there have been opportunities of the President to actually go to Congress and ask for
supplemental budgets?
HONORABLE MENDOZA:
If there is time to do that, I would say yes.
JUSTICE LEONEN:
So, the theory of aid rather than augmentation applies in extra-ordinary situation?
HONORABLE MENDOZA:
Very extra-ordinary situations.
JUSTICE LEONEN:
But Counsel, this would be new doctrine, in case?
HONORABLE MENDOZA:
Yes, if Your Honor please.190
Regardless of the variant characterizations of the cross-border transfers of funds, the plain text of Section
25(5), supra, disallowing cross border transfers was disobeyed. Cross-border transfers, whether as
augmentation, or as aid, were prohibited under Section 25(5), supra.
4.
Sourcing the DAP from unprogrammed
funds despite the original revenue targets
not having been exceeded was invalid
Funding under the DAP were also sourced from unprogrammed funds provided in the GAAs for 2011,
2012,and 2013. The respondents stress, however, that the unprogrammed funds were not brought under the
DAP as savings, but as separate sources of funds; and that, consequently, the release and use of
unprogrammed funds were not subject to the restrictions under Section 25(5), supra.
The documents contained in the Evidence Packets by the OSG have confirmed that the unprogrammed funds
were treated as separate sources of funds. Even so, the release and use of the unprogrammed funds were still
subject to restrictions, for, to start with, the GAAs precisely specified the instances when the unprogrammed
funds could be released and the purposes for which they could be used.
247
The petitioners point out that a condition for the release of the unprogrammed funds was that the revenue
collections must exceed revenue targets; and that the release of the unprogrammed funds was illegal because
such condition was not met.191
The respondents disagree, holding that the release and use of the unprogrammed funds under the DAP were
in accordance with the pertinent provisions of the GAAs. In particular, the DBM avers that the unprogrammed
funds could be availed of when any of the following three instances occur, to wit: (1) the revenue collections
exceeded the original revenue targets proposed in the BESFs submitted by the President to Congress; (2) new
revenues were collected or realized from sources not originally considered in the BESFs; or(3) newly-approved
loans for foreign assisted projects were secured, or when conditions were triggered for other sources of funds,
such as perfected loan agreements for foreign-assisted projects.192 This view of the DBM was adopted by all
the respondents in their Consolidated Comment.193
The BESFs for 2011, 2012 and 2013 uniformly defined "unprogrammed appropriations" as appropriations that
provided standby authority to incur additional agency obligations for priority PAPs when revenue collections
exceeded targets, and when additional foreign funds are generated.194 Contrary to the DBMs averment that
there were three instances when unprogrammed funds could be released, the BESFs envisioned only two
instances. The third mentioned by the DBM the collection of new revenues from sources not originally
considered in the BESFs was not included. This meant that the collection of additional revenues from new
sources did not warrant the release of the unprogrammed funds. Hence, even if the revenues not considered in
the BESFs were collected or generated, the basic condition that the revenue collections should exceed the
revenue targets must still be complied with in order to justify the release of the unprogrammed funds.
The view that there were only two instances when the unprogrammed funds could be released was bolstered
by the following texts of the Special Provisions of the 2011 and 2012 GAAs, to wit:
2011 GAA
1. Release of Fund. The amounts authorized herein shall be released only when the revenue collections
exceed the original revenue targets submitted by the President of the Philippines to Congress pursuant to
Section 22, Article VII of the Constitution, including savings generated from programmed appropriations for the
year: PROVIDED, That collections arising from sources not considered in the aforesaid original revenue
targets may be used to cover releases from appropriations in this Fund: PROVIDED, FURTHER, That in case
of newly approved loans for foreign-assisted projects, the existence of a perfected loan agreement for the
purpose shall be sufficient basis for the issuance of a SARO covering the loan proceeds: PROVIDED,
FURTHERMORE, That if there are savings generated from the programmed appropriations for the first two
quarters of the year, the DBM may, subject to the approval of the President, release the pertinent
appropriations under the Unprogrammed Fund corresponding to only fifty percent (50%) of the said savings net
of revenue shortfall: PROVIDED, FINALLY, That the release of the balance of the total savings from
programmed appropriations for the year shall be subject to fiscal programming and approval of the President.
2012 GAA
1. Release of the Fund. The amounts authorized herein shall be released only when the revenue collections
exceed the original revenue targets submitted by the President of the Philippines to Congress pursuant to
Section 22, Article VII of the Constitution: PROVIDED, That collections arising from sources not considered in
the aforesaid original revenue targets may be used to cover releases from appropriations in this Fund:
PROVIDED, FURTHER, That in case of newly approved loans for foreign-assisted projects, the existence of a
perfected loan agreement for the purpose shall be sufficient basis for the issuance of a SARO covering the
loan proceeds.
As can be noted, the provisos in both provisions to the effect that "collections arising from sources not
considered in the aforesaid original revenue targets may be used to cover releases from appropriations in this
Fund" gave the authority to use such additional revenues for appropriations funded from the unprogrammed
funds. They did not at all waive compliance with the basic requirement that revenue collections must still
exceed the original revenue targets.
In contrast, the texts of the provisos with regard to additional revenues generated from newly-approved foreign
loans were clear to the effect that the perfected loan agreement would be in itself "sufficient basis" for the
issuance of a SARO to release the funds but only to the extent of the amount of the loan. In such instance, the
revenue collections need not exceed the revenue targets to warrant the release of the loan proceeds, and the
mere perfection of the loan agreement would suffice.
248
It can be inferred from the foregoing that under these provisions of the GAAs the additional revenues from
sources not considered in the BESFs must be taken into account in determining if the revenue collections
exceeded the revenue targets. The text of the relevant provision of the 2013 GAA, which was substantially
similar to those of the GAAs for 2011 and 2012, already made this explicit, thus:
1. Release of the Fund. The amounts authorized herein shall be released only when the revenue collections
exceed the original revenue targets submitted by the President of the Philippines to Congress pursuant to
Section 22, Article VII of the Constitution, including collections arising from sources not considered in the
aforesaid original revenue target, as certified by the BTr: PROVIDED, That in case of newly approved loans for
foreign-assisted projects, the existence of a perfected loan agreement for the purpose shall be sufficient basis
for the issuance of a SARO covering the loan proceeds.
Consequently, that there were additional revenues from sources not considered in the revenue target would
not be enough. The total revenue collections must still exceed the original revenue targets to justify the release
of the unprogrammed funds (other than those from newly-approved foreign loans).
The present controversy on the unprogrammed funds was rooted in the correct interpretation of the phrase
"revenue collections should exceed the original revenue targets." The petitioners take the phrase to mean that
the total revenue collections must exceed the total revenue target stated in the BESF, but the respondents
understand the phrase to refer only to the collections for each source of revenue as enumerated in the BESF,
with the condition being deemed complied with once the revenue collections from a particular source already
exceeded the stated target.
The BESF provided for the following sources of revenue, with the corresponding revenue target stated for each
source of revenue, to wit:

TAX REVENUES Government Services

Taxes on Net Income and Profits Interest on NG Deposits
Taxes on Property Interest on Advances to Government
Taxes on Domestic Goods and Services Corporations
General Sales, Turnover or VAT Income from Investments
Selected Excises on Goods Interest on Bond Holdings
Selected Taxes on Services Guarantee Fee
Taxes on the Use of Goods or Property or Gain on Foreign Exchange
Permission to Perform Activities NG Income Collected by BTr
Other Taxes Dividends on Stocks
Taxes on International Trade and NG Share from Airport
Transactions Terminal Fee
NON-TAX REVENUES NG Share from PAGCOR
Fees and Charges Income
BTR Income NG Share from MIAA Profit
 Privatization
Foreign Grants
Thus, when the Court required the respondents to submit a certification from the Bureau of Treasury (BTr) to
the effect that the revenue collections had exceeded the original revenue targets,195 they complied by
submitting certifications from the BTr and Department of Finance (DOF) pertaining to only one identified source
of revenue the dividends from the shares of stock held by the Government in government-owned and
controlled corporations.
To justify the release of the unprogrammed funds for 2011, the OSG presented the certification dated March 4,
2011 issued by DOF Undersecretary Gil S. Beltran, as follows:
This is to certify that under the Budget for Expenditures and Sources of Financing for 2011, the programmed
income from dividends from shares of stock in government-owned and controlled corporations is 5.5 billion.
This is to certify further that based on the records of the Bureau of Treasury, the National Government has
recorded dividend income amounting to 23.8 billion as of 31 January 2011.196
For 2012, the OSG submitted the certification dated April 26, 2012 issued by National Treasurer Roberto B.
Tan, viz:
This is to certify that the actual dividend collections remitted to the National Government for the period January
to March 2012 amounted to 19.419 billion compared to the full year program of 5.5 billion for 2012.197
And, finally, for 2013, the OSG presented the certification dated July 3, 2013 issued by National Treasurer
Rosalia V. De Leon, to wit:
This is to certify that the actual dividend collections remitted to the National Government for the period January
to May 2013 amounted to 12.438 billion compared to the full year program of 10.0198 billion for 2013.
Moreover, the National Government accounted for the sale of the right to build and operate the NAIA
expressway amounting to 11.0 billion in June 2013.199
The certifications reflected that by collecting dividends amounting to 23.8 billion in 2011, 19.419 billion in
2012, and 12.438 billion in 2013 the BTr had exceeded only the 5.5 billion in target revenues in the form of
dividends from stocks in each of 2011 and 2012, and only the 10 billion in target revenues in the form of
dividends from stocks in 2013.
However, the requirement that revenue collections exceed the original revenue targets was to be construed in
light of the purpose for which the unprogrammed funds were incorporated in the GAAs as standby
appropriations to support additional expenditures for certain priority PAPs should the revenue collections
exceed the resource targets assumed in the budget or when additional foreign project loan proceeds were
realized. The unprogrammed funds were included in the GAAs to provide ready cover so as not to delay the
implementation of the PAPs should new or additional revenue sources be realized during the year.200 Given the
tenor of the certifications, the unprogrammed funds were thus not yet supported by the corresponding
resources.201
The revenue targets stated in the BESF were intended to address the funding requirements of the proposed
programmed appropriations. In contrast, the unprogrammed funds, as standby appropriations, were to be
released only when there were revenues in excess of what the programmed appropriations required. As such,
the revenue targets should be considered as a whole, not individually; otherwise, we would be dealing with
artificial revenue surpluses. The requirement that revenue collections must exceed revenue target should be
understood to mean that the revenue collections must exceed the total of the revenue targets stated in the
BESF. Moreover, to release the unprogrammed funds simply because there was an excess revenue as to one
source of revenue would be an unsound fiscal management measure because it would disregard the budget
plan and foster budget deficits, in contravention of the Governments surplus budget policy.202
We cannot, therefore, subscribe to the respondents view.
5.
Equal protection, checks and balances,
and public accountability challenges
The DAP is further challenged as violative of the Equal Protection Clause, the system of checks and balances,
and the principle of public accountability.
With respect to the challenge against the DAP under the Equal Protection Clause,203 Luna argues that the
implementation of the DAP was "unfair as it [was] selective" because the funds released under the DAP was
not made available to all the legislators, with some of them refusing to avail themselves of the DAP funds, and
others being unaware of the availability of such funds. Thus, the DAP practised "undue favoritism" in favor of
select legislators in contravention of the Equal Protection Clause.
Similarly, COURAGE contends that the DAP violated the Equal Protection Clause because no reasonable
classification was used in distributing the funds under the DAP; and that the Senators who supposedly availed
themselves of said funds were differently treated as to the amounts they respectively received.
Anent the petitioners theory that the DAP violated the system of checks and balances, Luna submits that the
grant of the funds under the DAP to some legislators forced their silence about the issues and anomalies
surrounding the DAP. Meanwhile, Belgica stresses that the DAP, by allowing the legislators to identify PAPs,
authorized them to take part in the implementation and execution of the GAAs, a function that exclusively
belonged to the Executive; that such situation constituted undue and unjustified legislative encroachment in the
functions of the Executive; and that the President arrogated unto himself the power of appropriation vested in
Congress because NBC No. 541 authorized the use of the funds under the DAP for PAPs not considered in the
2012 budget.
Finally, the petitioners insist that the DAP was repugnant to the principle of public accountability enshrined in
the Constitution,204 because the legislators relinquished the power of appropriation to the Executive, and
exhibited a reluctance to inquire into the legality of the DAP.
The OSG counters the challenges, stating that the supposed discrimination in the release of funds under the
DAP could be raised only by the affected Members of Congress themselves, and if the challenge based on the
violation of the Equal Protection Clause was really against the constitutionality of the DAP, the arguments of
the petitioners should be directed to the entitlement of the legislators to the funds, not to the proposition that all
of the legislators should have been given such entitlement.
The challenge based on the contravention of the Equal Protection Clause, which focuses on the release of
funds under the DAP to legislators, lacks factual and legal basis. The allegations about Senators and
Congressmen being unaware of the existence and implementation of the DAP, and about some of them having
refused to accept such funds were unsupported with relevant data. Also, the claim that the Executive
discriminated against some legislators on the ground alone of their receiving less than the others could not of
itself warrant a finding of contravention of the Equal Protection Clause. The denial of equal protection of any
law should be an issue to be raised only by parties who supposedly suffer it, and, in these cases, such parties
would be the few legislators claimed to have been discriminated against in the releases of funds under the
DAP. The reason for the requirement is that only such affected legislators could properly and fully bring to the
fore when and how the denial of equal protection occurred, and explain why there was a denial in their
situation. The requirement was not met here. Consequently, the Court was not put in the position to determine
if there was a denial of equal protection. To have the Court do so despite the inadequacy of the showing of
factual and legal support would be to compel it to speculate, and the outcome would not do justice to those for
whose supposed benefit the claim of denial of equal protection has been made.
The argument that the release of funds under the DAP effectively stayed the hands of the legislators from
conducting congressional inquiries into the legality and propriety of the DAP is speculative. That deficiency
eliminated any need to consider and resolve the argument, for it is fundamental that speculation would not
support any proper judicial determination of an issue simply because nothing concrete can thereby be gained.
In order to sustain their constitutional challenges against official acts of the Government, the petitioners must
discharge the basic burden of proving that the constitutional infirmities actually existed.205 Simply put,
guesswork and speculation cannot overcome the presumption of the constitutionality of the assailed executive
act.
We do not need to discuss whether or not the DAP and its implementation through the various circulars and
memoranda of the DBM transgressed the system of checks and balances in place in our constitutional system.
Our earlier expositions on the DAP and its implementing issuances infringing the doctrine of separation of
powers effectively addressed this particular concern.
Anent the principle of public accountability being transgressed because the adoption and implementation of the
DAP constituted an assumption by the Executive of Congress power of appropriation, we have already held
that the DAP and its implementing issuances were policies and acts that the Executive could properly adopt
and do in the execution of the GAAs to the extent that they sought to implement strategies to ramp up or
accelerate the economy of the country.
6. --- Doctrine of operative fact was applicable
After declaring the DAP and its implementing issuances constitutionally infirm, we must now deal with the
consequences of the declaration.
Article 7 of the Civil Code provides:
Article 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be
excused by disuse, or custom or practice to the contrary.
When the courts declared a law to be inconsistent with the Constitution, the former shall be void and the latter
shall govern.
Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the
laws or the Constitution.
A legislative or executive act that is declared void for being unconstitutional cannot give rise to any right or
obligation.206 However, the generality of the rule makes us ponder whether rigidly applying the rule may at
times be impracticable or wasteful. Should we not recognize the need to except from the rigid application of the
rule the instances in which the void law or executive act produced an almost irreversible result?
The need is answered by the doctrine of operative fact. The doctrine, definitely not a novel one, has been
exhaustively explained in De Agbayani v. Philippine National Bank:207
The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an executive
order or a municipal ordinance likewise suffering from that infirmity, cannot be the source of any legal rights or
duties. Nor can it justify any official act taken under it. Its repugnancy to the fundamental law once judicially
declared results in its being to all intents and purposes a mere scrap of paper. As the new Civil Code puts it:
When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter
shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not
contrary to the laws of the Constitution. It is understandable why it should be so, the Constitution being
supreme and paramount. Any legislative or executive act contrary to its terms cannot survive.
Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently
realistic. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an
appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it
and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be
had to what has been done while such legislative or executive act was in operation and presumed to be valid in
all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be
reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental
organ which has the final say on whether or not a legislative or executive measure is valid, a period of time
may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It
would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had
transpired prior to such adjudication.
In the language of an American Supreme Court decision: The actual existence of a statute, prior to such a
determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling
as to invalidity may have to be considered in various aspects, with respect to particular relations, individual and
corporate, and particular conduct, private and official."
The doctrine of operative fact recognizes the existence of the law or executive act prior to the determination of
its unconstitutionality as an operative fact that produced consequences that cannot always be erased, ignored
or disregarded. In short, it nullifies the void law or executive act but sustains its effects. It provides an exception
to the general rule that a void or unconstitutional law produces no effect.208 But its use must be subjected to
great scrutiny and circumspection, and it cannot be invoked to validate an unconstitutional law or executive act,
but is resorted to only as a matter of equity and fair play.209 It applies only to cases where extraordinary
circumstances exist, and only when the extraordinary circumstances have met the stringent conditions that will
permit its application.
We find the doctrine of operative fact applicable to the adoption and implementation of the DAP. Its application
to the DAP proceeds from equity and fair play. The consequences resulting from the DAP and its related
issuances could not be ignored or could no longer be undone.
To be clear, the doctrine of operative fact extends to a void or unconstitutional executive act. The term
executive act is broad enough to include any and all acts of the Executive, including those that are quasi
legislative and quasi-judicial in nature. The Court held so in Hacienda Luisita, Inc. v. Presidential Agrarian
Reform Council:210
Nonetheless, the minority is of the persistent view that the applicability of the operative fact doctrine should be
limited to statutes and rules and regulations issued by the executive department that are accorded the same
status as that of a statute or those which are quasi-legislative in nature. Thus, the minority concludes that the
phrase executive act used in the case of De Agbayani v. Philippine National Bank refers only to acts, orders,
and rules and regulations that have the force and effect of law. The minority also made mention of the
Concurring Opinion of Justice Enrique Fernando in Municipality of Malabang v. Benito, where it was
supposedly made explicit that the operative fact doctrine applies to executive acts, which are ultimately quasi-
legislative in nature.
We disagree. For one, neither the De Agbayani case nor the Municipality of Malabang case elaborates what
executive act mean. Moreover, while orders, rules and regulations issued by the President or the executive
branch have fixed definitions and meaning in the Administrative Code and jurisprudence, the phrase executive
act does not have such specific definition under existing laws. It should be noted that in the cases cited by the
minority, nowhere can it be found that the term executive act is confined to the foregoing. Contrarily, the term
executive act is broad enough to encompass decisions of administrative bodies and agencies under the
executive department which are subsequently revoked by the agency in question or nullified by the Court.
A case in point is the concurrent appointment of Magdangal B. Elma (Elma) as Chairman of the Presidential
Commission on Good Government (PCGG) and as Chief Presidential Legal Counsel (CPLC) which was
declared unconstitutional by this Court in Public Interest Center, Inc. v. Elma. In said case, this Court ruled that
the concurrent appointment of Elma to these offices is in violation of Section 7, par. 2, Article IX-B of the 1987
Constitution, since these are incompatible offices. Notably, the appointment of Elma as Chairman of the PCGG
and as CPLC is, without a question, an executive act. Prior to the declaration of unconstitutionality of the said
executive act, certain acts or transactions were made in good faith and in reliance of the appointment of Elma
which cannot just be set aside or invalidated by its subsequent invalidation.
In Tan v. Barrios, this Court, in applying the operative fact doctrine, held that despite the invalidity of the
jurisdiction of the military courts over civilians, certain operative facts must be acknowledged to have existed
so as not to trample upon the rights of the accused therein. Relevant thereto, in Olaguer v. Military Commission
No. 34, it was ruled that military tribunals pertain to the Executive Department of the Government and are
simply instrumentalities of the executive power, provided by the legislature for the President as Commander-in-
Chief to aid him in properly commanding the army and navy and enforcing discipline therein, and utilized under
his orders or those of his authorized military representatives.
Evidently, the operative fact doctrine is not confined to statutes and rules and regulations issued by the
executive department that are accorded the same status as that of a statute or those which are quasi-
legislative in nature.
Even assuming that De Agbayani initially applied the operative fact doctrine only to executive issuances like
orders and rules and regulations, said principle can nonetheless be applied, by analogy, to decisions made by
the President or the agencies under the executive department. This doctrine, in the interest of justice and
equity, can be applied liberally and in a broad sense to encompass said decisions of the executive branch. In
keeping with the demands of equity, the Court can apply the operative fact doctrine to acts and consequences
that resulted from the reliance not only on a law or executive act which is quasi-legislative in nature but also on
decisions or orders of the executive branch which were later nullified. This Court is not unmindful that such
acts and consequences must be recognized in the higher interest of justice, equity and fairness.
Significantly, a decision made by the President or the administrative agencies has to be complied with because
it has the force and effect of law, springing from the powers of the President under the Constitution and existing
laws. Prior to the nullification or recall of said decision, it may have produced acts and consequences in
conformity to and in reliance of said decision, which must be respected. It is on this score that the operative
fact doctrine should be applied to acts and consequences that resulted from the implementation of the PARC
Resolution approving the SDP of HLI. (Bold underscoring supplied for emphasis)
In Commissioner of Internal Revenue v. San Roque Power Corporation,211 the Court likewise declared that "for
the operative fact doctrine to apply, there must be a legislative or executive measure, meaning a law or
executive issuance." Thus, the Court opined there that the operative fact doctrine did not apply to a mere
administrative practice of the Bureau of Internal Revenue, viz:
Under Section 246, taxpayers may rely upon a rule or ruling issued by the Commissioner from the time the rule
or ruling is issued up to its reversal by the Commissioner or this Court. The reversal is not given retroactive
effect. This, in essence, is the doctrine of operative fact. There must, however, be a rule or ruling issued by the
Commissioner that is relied upon by the taxpayer in good faith. A mere administrative practice, not formalized
into a rule or ruling, will not suffice because such a mere administrative practice may not be uniformly and
consistently applied. An administrative practice, if not formalized as a rule or ruling, will not be known to the
general public and can be availed of only by those with informal contacts with the government agency.
It is clear from the foregoing that the adoption and the implementation of the DAP and its related issuances
were executive acts.1avvphi1 The DAP itself, as a policy, transcended a merely administrative practice
especially after the Executive, through the DBM, implemented it by issuing various memoranda and circulars.
The pooling of savings pursuant to the DAP from the allotments made available to the different agencies and
departments was consistently applied throughout the entire Executive. With the Executive, through the DBM,
being in charge of the third phase of the budget cycle the budget execution phase, the President could
legitimately adopt a policy like the DAP by virtue of his primary responsibility as the Chief Executive of directing
the national economy towards growth and development. This is simply because savings could and should be
determined only during the budget execution phase.
As already mentioned, the implementation of the DAP resulted into the use of savings pooled by the Executive
to finance the PAPs that were not covered in the GAA, or that did not have proper appropriation covers, as well
as to augment items pertaining to other departments of the Government in clear violation of the Constitution.
To declare the implementation of the DAP unconstitutional without recognizing that its prior implementation
constituted an operative fact that produced consequences in the real as well as juristic worlds of the
Government and the Nation is to be impractical and unfair. Unless the doctrine is held to apply, the Executive
as the disburser and the offices under it and elsewhere as the recipients could be required to undo everything
that they had implemented in good faith under the DAP. That scenario would be enormously burdensome for
the Government. Equity alleviates such burden.
The other side of the coin is that it has been adequately shown as to be beyond debate that the
implementation of the DAP yielded undeniably positive results that enhanced the economic welfare of the
country. To count the positive results may be impossible, but the visible ones, like public infrastructure, could
easily include roads, bridges, homes for the homeless, hospitals, classrooms and the like. Not to apply the
doctrine of operative fact to the DAP could literally cause the physical undoing of such worthy results by
destruction, and would result in most undesirable wastefulness.
Nonetheless, as Justice Brion has pointed out during the deliberations, the doctrine of operative fact does not
always apply, and is not always the consequence of every declaration of constitutional invalidity. It can be
invoked only in situations where the nullification of the effects of what used to be a valid law would result in
inequity and injustice;212but where no such result would ensue, the general rule that an unconstitutional law is
totally ineffective should apply.
In that context, as Justice Brion has clarified, the doctrine of operative fact can apply only to the PAPs that can
no longer be undone, and whose beneficiaries relied in good faith on the validity of the DAP, but cannot apply
to the authors, proponents and implementors of the DAP, unless there are concrete findings of good faith in
their favor by the proper tribunals determining their criminal, civil, administrative and other liabilities.
WHEREFORE, the Court PARTIALLY GRANTS the petitions for certiorari and prohibition; and DECLARES the
following acts and practices under the Disbursement Acceleration Program, National Budget Circular No. 541
and related executive issuances UNCONSTITUTIONAL for being in violation of Section 25(5), Article VI of the
1987 Constitution and the doctrine of separation of powers, namely:
(a) The withdrawal of unobligated allotments from the implementing agencies, and the declaration of
the withdrawn unobligated allotments and unreleased appropriations as savings prior to the end of the
fiscal year and without complying with the statutory definition of savings contained in the General
Appropriations Acts;
(b) The cross-border transfers of the savings of the Executive to augment the appropriations of other
offices outside the Executive; and
(c) The funding of projects, activities and programs that were not covered by any appropriation in the
General Appropriations Act.
The Court further DECLARES VOID the use of unprogrammed funds despite the absence of a certification by
the National Treasurer that the revenue collections exceeded the revenue targets for non-compliance with the
conditions provided in the relevant General Appropriations Acts.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR