U.S. Supreme Court United States v. Lovett, 328 U.S.

303 (1946)
United States v. LovettArgued May 3, 6, 1946 Decided June 3, 1946*328
U.S. 303
Syllabus
1. The issue as to the validity of 304 of the Urgent Deficiency Appropriation Act of
1943, providing that, after November 15, 1943, no salary or other compensation
shall be paid to certain employees of the Government (specified by name) out of
any monies then or thereafter appropriated except for services as jurors or
members of the armed forces, unless they were again appointed by the President
with the advice and consent of the Senate prior to such date, is not a mere political
issue over which Congress has final say, and a challenge to its constitutionality
presents a justiciable question to the courts. P. 328 U. S. 313.
(a) It is not a mere appropriation measure over which Congress has complete
control. P. 328 U. S. 313.
(b) Its purpose was not merely to cut off the employees' compensation through
regular disbursing channels, but permanently to bar them from government
service, except as jurors or soldiers -- because of what Congress thought of their
political beliefs. P. 328 U. S. 313.
(c) The Constitution did not contemplate that congressional action aimed at three
individuals, which stigmatized their reputations and seriously impaired their
chances to earn a living, could never be challenged in court. P. 328 U. S. 314.
2. Section 304 violates Article I, 3, cl. 9 of the Constitution, which forbids the
enactment of any bill of attainder or ex post facto law. P. 328 U. S. 315.
(a) Legislative acts, no matter what their form, that apply either to named
individuals or to easily ascertainable members of a group in such a way as to inflict
punishment on them without a judicial trial, are bills of attainder prohibited by the
Constitution. Cummins v. Missouri, 4 Wall. 277; Ex parte Garland, 4 Wall. 333. P.
328 U. S. 315.
(b) Section 304 clearly accomplishes the punishment of named individuals without
a judicial trial. P. 328 U. S. 316.
Page 328 U. S. 304
(c) The fact that the punishment is inflicted through the instrumentality of an Act
specifically cutting off the pay of certain named individuals found by Congress to
be guilty of disloyalty make it no less effective than if it had been done by an Act
which designated the conduct as criminal. P. 328 U. S. 316.
1

104 Ct.Cls. 557, 66 F.Supp. 142, affirmed.

The Court of Claims entered judgments in favor of certain government employees
for services rendered after November 15, 1943, to whom 304 of the Urgent
Deficiency Appropriation Act of 1943, 57 Stat. 431, 450, forbade payment of any
compensation after that date from appropriated funds. 104 Ct.Cls. 557, 66 F.Supp.
142. This Court granted certiorari. 327 U.S. 773. Affirmed, p. 328 U. S. 318.
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CERTIORARI TO THE COURT OF CLAIMS
Syllabus
1. The issue as to the validity of 304 of the Urgent Deficiency Appropriation Act of
1943, providing that, after November 15, 1943, no salary or other compensation
shall be paid to certain employees of the Government (specified by name) out of
any monies then or thereafter appropriated except for services as jurors or
members of the armed forces, unless they were again appointed by the President
with the advice and consent of the Senate prior to such date, is not a mere political
issue over which Congress has final say, and a challenge to its constitutionality
presents a justiciable question to the courts. P. 328 U. S. 313.
(a) It is not a mere appropriation measure over which Congress has complete
control. P. 328 U. S. 313.
(b) Its purpose was not merely to cut off the employees' compensation through
regular disbursing channels, but permanently to bar them from government
service, except as jurors or soldiers -- because of what Congress thought of their
political beliefs. P. 328 U. S. 313.
(c) The Constitution did not contemplate that congressional action aimed at three
individuals, which stigmatized their reputations and seriously impaired their
chances to earn a living, could never be challenged in court. P. 328 U. S. 314.
2. Section 304 violates Article I, 3, cl. 9 of the Constitution, which forbids the
enactment of any bill of attainder or ex post facto law. P. 328 U. S. 315.
(a) Legislative acts, no matter what their form, that apply either to named
individuals or to easily ascertainable members of a group in such a way as to inflict
2

punishment on them without a judicial trial, are bills of attainder prohibited by the
Constitution. Cummins v. Missouri, 4 Wall. 277; Ex parte Garland, 4 Wall. 333. P.
328 U. S. 315.
(b) Section 304 clearly accomplishes the punishment of named individuals without
a judicial trial. P. 328 U. S. 316.
Page 328 U. S. 304
(c) The fact that the punishment is inflicted through the instrumentality of an Act
specifically cutting off the pay of certain named individuals found by Congress to
be guilty of disloyalty make it no less effective than if it had been done by an Act
which designated the conduct as criminal. P. 328 U. S. 316.
104 Ct.Cls. 557, 66 F.Supp. 142, affirmed.
The Court of Claims entered judgments in favor of certain government employees
for services rendered after November 15, 1943, to whom 304 of the Urgent
Deficiency Appropriation Act of 1943, 57 Stat. 431, 450, forbade payment of any
compensation after that date from appropriated funds. 104 Ct.Cls. 557, 66 F.Supp.
142. This Court granted certiorari. 327 U.S. 773. Affirmed, p. 328 U. S. 318.
MR. JUSTICE BLACK delivered the opinion of the Court.
In 1943, the respondents, Lovett, Watson, and Dodd, were, and had been for
several years, working for the Government. The government agencies which had
lawfully
Page 328 U. S. 305
employed them were fully satisfied with the quality of their work, and wished to
keep them employed on their jobs. Over the protest of those employing agencies,
Congress provided in 304 of the Urgent Deficiency Appropriation Act of 1943, by
way of an amendment attached to the House bill, that, after November 15, 1943,
no salary or compensation should be paid respondents out of any monies then or
thereafter appropriated except for services as jurors or members of the armed
forces, unless they were, prior to November 15, 1943, again appointed to jobs by
the President with the advice and consent of the Senate. [Footnote 1] 57 Stat. 431,
450. Notwithstanding the congressional enactment, and the failure of the President
to reappoint respondents, the agencies kept all the respondents at work on their
jobs for varying periods after November 15, 1943; but their compensation was
discontinued after that date. To secure compensation for this post-November 15th
work, respondents brought these actions in the Court of
Page 328 U. S. 306
3

Claims. They urged that 304 is unconstitutional and void on the grounds that: (1)
The section, properly interpreted, shows a congressional purpose to exercise the
power to remove executive employees, a power not entrusted to Congress, but to
the Executive Branch of Government under Article II, 1, 2, 3, and 4 of the
Constitution; (2) the section violates Article I, 9, Clause 3, of the Constitution,
which provides that "No Bill of Attainder or ex post facto Law shall be passed"; (3)
the section violates the Fifth Amendment, in that it singles out these three
respondents and deprives them of their liberty and property without due process of
law. The Solicitor General, appearing for the Government, joined in the first two of
respondents' contentions, but took no position on the third. House Resolution 386,
89 Cong.Rec. 10882, and Joint Resolution No. 230, 78th Congress, 58 Stat. 113,
authorized a special counsel to appear on behalf of the Congress. This counsel
denied all three of respondents' contentions. He urged that 304 was a valid
exercise of congressional power under Article I, 8, Clause 1; 8, Clause 18, and
9, Clause 7 of the Constitution, which sections empower Congress "To lay and
collect Taxes . . . to pay the Debts and provide for the common Defence and
general Welfare of the United States," and
"To make all Laws which shall be necessary and proper for carrying into Execution .
. . all . . . Powers vested by this Constitution in the Government of the United
States, or in any Department or Officer thereof,"
and provide that "No Money shall be drawn from the Treasury, but in Consequence
of Appropriations made by Law . . ." Counsel for Congress also urged that 304 did
not purport to terminate respondents' employment. According to him, it merely cut
off respondents' pay, and deprived governmental agencies of any power to make
enforceable contracts with respondents for any further compensation. The
contention was that this involved
Page 328 U. S. 307
simply an exercise of congressional powers over appropriations, which, according
to the argument, are plenary, and not subject to judicial review. On this premise,
counsel for Congress urged that the challenge of the constitutionality of 304
raised no justiciable controversy. The Court of Claims entered judgments in favor of
respondents. Some of the judges were of the opinion that 304, properly
interpreted, did not terminate respondents' employment, but only prohibited
payment of compensation out of funds generally appropriated, and that,
consequently, the continued employment of respondents was valid, and justified
their bringing actions for pay in the Court of Claims. Other members of the Court
thought 304 unconstitutional and void, either as a bill of attainder, an
encroachment on exclusive executive authority, or a denial of due process. 104
Ct.Cls. 557, 66 F.Supp. 142. We granted certiorari because of the manifest
importance of the questions involved.
4

In this Court, the parties and counsel for Congress have urged the same points as
they did in the Court of Claims. According to the view we take, we need not decide
whether 304 is an unconstitutional encroachment on executive power or a denial
of due process of law, and the section is not challenged on the ground that it
violates the First Amendment. Our inquiry is thus confined to whether the actions,
in the light of a proper construction of the Act, present justiciable controversies,
and, if so, whether 304 is a bill of attainder against these respondents, involving
a use of power which the Constitution unequivocally declares Congress can never
exercise. These questions require an interpretation of the meaning and purpose of
the section, which, in turn, requires an understanding of the circumstances leading
to its passage. We, consequently, find it necessary to set out these circumstances
somewhat in detail.
Page 328 U. S. 308
In the background of the statute here challenged lies the House of Representatives'
feeling in the late thirties that many "subversives" were occupying influential
positions in the Government and elsewhere, and that their influence must not
remain unchallenged. As part of its program against "subversive" activities, the
House, in May, 1938, created a Committee on Un-American Activities, which
became known as the Dies Committee, after its Chairman, Congressman Martin
Dies. H.Res. 282, 83 Cong.Rec. 7568-7587. This Committee conducted a series of
investigations and made lists of people and organizations it thought "subversive."
See, e.g., H.Rep. No. 1, 77th Cong., 1st Sess.; H.Rep. No. 2743, 77th Cong., 2d
Sess. The creation of the Dies Committee was followed by provisions such as 9A
of the Hatch Act, 53 Stat. 1148, 1149, and 15(f) and 17(b) of the Emergency
Relief Appropriation Act of 1941, 54 Stat. 611, which forbade the holding of a
federal job by anyone who was a member of a political party or organization that
advocated the overthrow of our constitutional form of Government in the United
States. It became the practice to include a similar prohibition in all appropriations
acts, together with criminal penalties for its violation. [Footnote 2] Under these
provisions, the Federal Bureau of Investigation began wholesale investigations of
federal employees, which investigations were financed by special congressional
appropriations. 55 Stat. 292, 56 Stat. 468, 482. Thousands were investigated.
While all this was happening, Mr. Dies, on February 1, 1943, in a long speech on
the floor of the House, attacked thirty-nine named government employees as
"irresponsible, unrepresentative, crackpot, radical bureaucrats," and
Page 328 U. S. 309
affiliates of "Communist front organizations." Among these named individuals were
the three respondents. Congressman Dies told the House that respondents, as well
5

as the other thirty-six individuals he named, were, because of their beliefs and past
associations, unfit to "hold a Government position," and urged Congress to refuse
"to appropriate money for their salaries." In this connection, he proposed that the
Committee on Appropriations "take immediate and vigorous steps to eliminate
these people from public office." 89 Cong.Rec. 474, 479, 486. Four days later, an
amendment was offered to the Treasury-Post Office Appropriation Bill which
provided that "no part of any appropriation contained in this act shall be used to
pay the compensation of" the thirty-nine individuals Dies had attacked. 89
Cong.Rec. 645. The Congressional Record shows that this amendment precipitated
a debate that continued for several days. Id. 645-742. All of those participating
agreed that the "charges" against the thirty-nine individuals were serious. Some
wanted to accept Congressman Dies' statements as sufficient proof of "guilt," while
others referred to such proposed action as "legislative lynching," id. at 651,
smacking "of the procedure in the French Chamber of Deputies, during the Reign of
Terror." Id. at 654. The Dies charges were referred to as "indictments," and many
claimed this made it necessary that the named federal employees be given a
hearing and a chance to prove themselves innocent. Id. at 711. Congressman Dies
then suggested that the Appropriations Committee "weigh the evidence and . . .
take immediate steps to dismiss these people from the Federal service." Id. at 651.
Eventually, a resolution was proposed to defer action until the Appropriations
Committee could investigate, so that accused federal employees would get a
chance to prove themselves "innocent" of communism or disloyalty, and so that
each "man would
Page 328 U. S. 310
have his day in court," and "There would be no star chamber proceedings." Id. at
711 and 713, but see id. at 715. The resolution which was finally passed authorized
the Appropriations Committee, acting through a special subcommittee,
". . . to examine into any and all allegations or charges that certain persons in the
employ of the several executive departments and other executive agencies are
unfit to continue in such employment by reason of their present association or
membership or past association or membership in or with organizations whose
aims or purposes are or have been subversive to the Government of the United
States."
Id. at 734, 742. The Committee was to have full plenary powers, including the right
to summon witnesses and papers, and was to report its "findings and
determination" to the House. It was authorized to attach legislation recommended
by it to any general or special appropriation measure, notwithstanding general
House rules against such practice. Id. at 734. The purpose of the resolution was
thus described by the Chairman of the Committee on Appropriations in his closing
remarks in favor of its passage:
6

"The third and the really important effect is that we will expedite adjudication and
disposition of these cases, and thereby serve both the accused and the
Government. These men against whom charges are pending are faced with a
serious situation. If they are not guilty, they are entitled to prompt exoneration; on
the other hand, if they are guilty, then the quicker the Government removes them,
the sooner and the more certainly will we protect the Nation against sabotage and
fifth-column activity."
Id. at 741.
After the resolution was passed, a special subcommittee of the Appropriations
Committee held hearings in secret executive session. Those charged with
"subversive" beliefs and "subversive" associations were permitted to testify, but
lawyers, including those representing the agencies
Page 328 U. S. 311
by which the accused were employed, were not permitted to be present. At the
hearings, committee members, the committee staff, and whatever witness was
under examination were the only ones present. The evidence, aside from that
given by the accused employees, appears to have been largely that of reports
made by the Dies Committee, its investigators, and Federal Bureau of Investigation
reports, the latter being treated as too confidential to be made public.
After this hearing, the subcommittee's reports and recommendations were
submitted to the House as part of the Appropriation Committee's report. The
subcommittee stated that it had regarded the investigations "as in the nature of an
inquest of office," with the ultimate purpose of purging the public service of
anyone found guilty of "subversive activity." The committee, stating that
"subversive activity" had not before been defined by Congress or by the courts,
formulated its own definition of "subversive activity," which we set out in the
margin. [Footnote 3] Respondents Watson, Dodd, and Lovett were, according to the
subcommittee, guilty of having engaged in "subversive activity within the
definition adopted by the committee." H.Rep. No. 448, 78th Cong., 1st Sess., 7, 9.
The ultimate finding and recommendation as to respondent Watson, which was
substantially similar to the findings with respect to Lovett and Dodd, read as
follows:
"Upon consideration of all of the evidence, your committee finds that the
membership and association of Dr. Goodwin B. Watson with the organizations
mentioned,
Page 328 U. S. 312
7

and his views and philosophies as expressed in various statements and writings
constitute subversive activity within the definition adopted by your committee, and
that he is, therefore, unfit for the present to continue in Government employment."
H.Rep. No. 448, 78th Cong., 1st Sess., p. 6. As to Lovett, the Committee further
reported that it had rejected a "strong appeal" from the Secretary of the Interior for
permission to retain Lovett in government service because, as the Committee
stated, it could not
"escape the conviction that this official is unfit to hold a position of trust with this
Government by reason of his membership, association, and affiliation with
organizations whose aims and purposes are subversive to the Government of the
United States."
Id. at 12.
Section 304 was submitted to the House along with the Committee Report.
Congressman Kerr, who was chairman of the subcommittee, stated that the issue
before the House was simply:" . . . whether or not the people of this country want
men who are not in sympathy with the institutions of this country to run it." He said
further: " . . . these people under investigation have no property rights in these
offices. One Congress can take away their rights given them by another." 89
Cong.Rec. 4583. Other members of the House, during several days of debate,
bitterly attacked the measure as unconstitutional and unwise. Id. at 4482-4487,
4546-4556, 4581-4605. Finally, 304 was passed by the House.
The Senate Appropriation Committee eliminated 304, and its action was
sustained by the Senate. 89 Cong.Rec. 5024. After the first conference report,
which left the matter still in disagreement, the Senate voted 69 to 0 against the
conference report which left 304 in the bill. The House, however, insisted on the
amendment, and indicated that it would not approve any appropriation bill without
304. Finally, after the fifth conference report
Page 328 U. S. 313
showed that the House would not yield, the Senate adopted 304. When the
President signed the bill, he stated
"The Senate yielded, as I have been forced to yield, to avoid delaying our conduct
of the war. But I cannot so yield without placing on record my view that this
provision is not only unwise and discriminatory, but unconstitutional."
H.Doc. 264, 78th Cong., 1st Sess.
I
8

In view of the facts just set out, we cannot agree with the two judges of the Court
of Claims who held that 304 required "a mere stoppage of disbursing routine,
nothing more," and left the employer governmental agencies free to continue
employing respondents and to incur contractual obligations by virtue of such
continued work which respondents could enforce in the Court of Claims. Nor can
we agree with counsel for Congress that the section did not provide for the
dismissal of respondents, but merely forbade governmental agencies to
compensate respondents for their work or to incur obligations for such
compensation at any and all times. We therefore cannot conclude, as he urges,
that 304 is a mere appropriation measure, and that, since Congress, under the
Constitution, has complete control over appropriations, a challenge to the
measure's constitutionality does not present a justiciable question in the courts,
but is merely a political issue over which Congress has final say.
We hold that the purpose of 304 was not merely to cut off respondents'
compensation through regular disbursing channels, but permanently to bar them
from government service, and that the issue of whether it is constitutional is
justiciable. The section's language, as well as the circumstances of its passage
which we have just described, show that no mere question of compensation
procedure or of appropriations was involved, but that it
Page 328 U. S. 314
was designed to force the employing agencies to discharge respondents and to bar
their being hired by any other governmental agency. Cf. United States v. Dickerson,
310 U. S. 554. Any other interpretation of the section would completely frustrate
the purpose of all who sponsored 304, which clearly was to "purge" the then
existing and all future lists of government employees of those whom Congress
deemed guilty of "subversive activities," and therefore "unfit" to hold a federal job.
What was challenged, therefore, is a statute which, because of what Congress
thought to be their political beliefs, prohibited respondents from ever engaging in
any government work except as jurors or soldiers. Respondents claimed that their
discharge was unconstitutional; that they consequently rightfully continued to work
for the Government, and that the Government owes them compensation for
services performed under contracts of employment. Congress has established the
Court of Claims to try just such controversies. What is involved here is a
congressional proscription of Lovett, Watson, and Dodd, prohibiting their ever
holding a government job. Were this case to be not justiciable, congressional
action, aimed at three named individuals, which stigmatized their reputation and
seriously impaired their chance to earn a living, could never be challenged in any
court. Our Constitution did not contemplate such a result. To quote Alexander
Hamilton,

". . . a limited constitution . . . [is] one which contains certain specified exceptions
to the legislative authority, such, for instance, as that it shall pass no bills of
attainder, no ex post facto laws, and the like. Limitations of this kind can be
preserved in practice no other way than through the medium of the courts of
justice, whose duty it must be to declare all acts contrary to the manifest tenor of
the Constitution void. Without this, all the reservations of particular rights or
privileges would amount to nothing."
Federalist Paper No. 78.
Page 328 U. S. 315
II
We hold that 304 falls precisely within the category of congressional actions
which the Constitution barred by providing that "No Bill of Attainder or ex post
facto Law shall be passed." In Cummins v. Missouri, 4 Wall. 277, 71 U. S. 323, this
Court said,
"A bill of attainder is a legislative act which inflicts punishment without a judicial
trial. If the punishment be less than death, the act is termed a bill of pains and
penalties. Within the meaning of the Constitution, bills of attainder include bills of
pains and penalties."
The Cummins decision involved a provision of the Missouri Reconstruction
Constitution which required persons to take an Oath of Loyalty as a prerequisite to
practicing a profession. Cummins, a Catholic Priest, was convicted for teaching and
preaching as a minister without taking the oath. The oath required an applicant to
affirm that he had never given aid or comfort to persons engaged in hostility to the
United States, and had never "been a member of, or connected with, any order,
society, or organization, inimical to the government of the United States . . ." In an
illuminating opinion which gave the historical background of the constitutional
prohibition against bills of attainder, this Court invalidated the Missouri
constitutional provision both because it constituted a bill of attainder and because
it had an ex post facto operation. On the same day the Cummins case was
decided, the Court, in Ex parte Garland, 4 Wall. 333, also held invalid on the same
grounds an Act of Congress which required attorneys practicing before this Court to
take a similar oath. Neither of these cases has ever been overruled. They stand for
the proposition that legislative acts, no matter what their form, that apply either to
named individuals or to easily ascertainable members of a group in such a way as
to inflict punishment on them without a judicial trial are bills of attainder prohibited
by the Constitution.
Page 328 U. S. 316
10

Adherence to this principle requires invalidation of 304. We do adhere to it.

Section 304 was designed to apply to particular individuals. [Footnote 4] Just as the
statute in the two cases mentioned, it "operates as a legislative decree of
perpetual exclusion" from a chosen vocation. Ex parte Garland, supra, at 71 U. S.
377. This permanent proscription from any opportunity to serve the Government is
punishment, and of a most severe type. It is a type of punishment which Congress
has only invoked for special types of odious and dangerous crimes, such as
treason, 18 U.S.C. 2; acceptance of bribes by members of Congress, 18 U.S.C.199,
202, 203; or by other government officials, 18 U.S.C. 207, and interference with
elections by Army and Navy officers, 18 U.S.C. 58.
Section 304, thus, clearly accomplishes the punishment of named individuals
without a judicial trial. The fact that the punishment is inflicted through the
instrumentality of an Act specifically cutting off the pay of certain named
individuals found guilty of disloyalty makes it no less galling or effective than if it
had been done by an Act which designated the conduct as criminal. [Footnote 5]
No one would think that Congress could have passed a valid law stating that, after
investigation, it had found Lovett, Dodd, and Watson "guilty" of the crime of
engaging in "subversive activities," defined that term for the first time, and
sentenced them to perpetual exclusion from any government employment. Section
304, while it does not use that language, accomplishes that result. The effect was
to inflict punishment without the safeguards of a judicial trial and
Page 328 U. S. 317
"determined by no previous law or fixed rule." [Footnote 6] The Constitution
declares that that cannot be done either by a State or by the United States.
Those who wrote our Constitution well knew the danger inherent in special
legislative acts which take away the life, liberty, or property of particular named
persons because the legislature thinks them guilty of conduct which deserves
punishment. They intended to safeguard the people of this country from
punishment without trial by duly constituted courts. See Duncan v. Kahanamoku,
327 U. S. 304. And even the courts to which this important function was entrusted
were commanded to stay their hands until and unless certain tested safeguards
were observed. An accused in court must be tried by an impartial jury, has a right
to be represented by counsel, he must be clearly informed of the charge against
him, the law which he is charged with violating must have been passed before he
committed the act charged, he must be confronted by the witnesses against him,
he must not be compelled to incriminate himself, he cannot twice be put in
jeopardy for the same offense, and, even after conviction,
Page 328 U. S. 318
11

no cruel and unusual punishment can be inflicted upon him. See Chambers v.
Florida, 309 U. S. 227, 309 U. S. 235-238. When our Constitution and Bill of Rights
were written, our ancestors had ample reason to know that legislative trials and
punishments were too dangerous to liberty to exist in the nation of free men they
envisioned. And so they proscribed bills of attainder. Section 304 is one. Much as
we regret to declare that an Act of Congress violates the Constitution, we have no
alternative here.
Section 304 therefore does not stand as an obstacle to payment of compensation
to Lovett, Watson, and Dodd. The judgment in their favor is
Affirmed.
MR. JUSTICE JACKSON took no part in the consideration or decision of these cases.
* Together with No. 810, United States v. Watson, and No. 811, United States v.
Dodd, on certiorari to the same court, argued and decided on the same dates.
[Footnote 1]
Section 304 provides:
"No part of any appropriation, allocation, or fund (1) which is made available under
or pursuant to this Act, or (2) which is now, or which is hereafter made, available
under or pursuant to any other Act, to any department, agency, or instrumentality
of the United States, shall be used, after November 15, 1943, to pay any part of
the salary, or other compensation for the personal services, of Goodwin B. Watson,
William E. Dodd, Junior, and Robert Morss Lovett, unless prior to such date such
person has been appointed by the President, by and with the advice and consent
of the Senate: Provided, That this section shall not operate to deprive any such
person of payment for leaves of absence or salary, or of any refund or
reimbursement, which have accrued prior to November 15, 1943: Provided further,
That this section shall not operate to deprive any such person of payment for
services performed as a member of a jury or as a member of the armed forces of
the United States nor any benefit, pension, or emolument resulting therefrom."
As we shall point out, the President signed the bill because he had to do so, since
the appropriated funds were imperatively needed to carry on the war. He felt,
however, that 304 of the bill was unconstitutional, and failed to reappoint
respondents.
[Footnote 2]

12

55 Stat. 92, 5; 55 Stat. 265, 504; 55 Stat. 303, 7; 55 Stat. 366, 10; 55 Stat.
408, 3; 55 Stat. 446, 5; 55 Stat. 466, 704; 55 Stat. 499, 10; House Doc. 833,
77th Cong., 2d Sess.
[Footnote 3]
"Subversive activity in this country derives from conduct intentionally destructive
of or inimical to the Government of the United States -- that which seeks to
undermine its institutions, or to distort its functions, or to impede its projects, or to
lessen its efforts, the ultimate end being to overturn it all. Such activity may be
open and direct, as by effort to overthrow, or subtle and indirect, as by sabotage."
H.Rep. No. 448, 78th Cong., 1st Sess., p. 5.
[Footnote 4]
This is, of course, one of the usual characteristics of bills of attainder. See
Wooddeson Law Lectures: A Systematical View of the Laws of England (1792), No.
41, 622.
[Footnote 5]
See Cummins v. Missouri, supra, 4 Wall. at 71 U. S. 325, 71 U. S. 329; See also
Fletcher v. Peck, 6 Cranch 87, 10 U. S. 138-139; Burgess v. Salmon, 97 U. S. 381,
97 U. S. 385.
[Footnote 6]
See dissent of Mr. Justice Miller in Cummins v. Missouri, supra, 4 Wall. at 71 U. S.
388; see also Wooddeson, supra, at 624, 638 et seq. Section 304 has all the
characteristics of bills of attainder, even as they are set out by Justice Miller's
dissent, except the corruption of blood. 4 Wall. at 71 U. S. 387. The American
precedents do not consider corruption of blood a necessary element. Originally, a
judgment of death was necessary to attaint, and the consequences of attainder
were forfeiture and corruption of blood. Coke, First Institute (on Littleton) (Thomas
ed. 1818) Vol. III, 559, 563, 565. If the judgment was lesser punishment than
death, there was no attaint, and the bill was one of pains and penalties. Practically
all the American precedents are bills of pains and penalties. See Thompson, AntiLoyalist Legislation During the American Revolution (1908) 3 Ill.L.Rev. 81, 153 et
passim; John C. Hamilton, History of the Republic of the United States (1859) Vol.
III, 23-40. The Constitution, in prohibiting bills of attainder, undoubtedly included
bills of pains and penalties, as the majority in the Cummins case held.
MR. JUSTICE FRANKFURTER, whom MR. JUSTICE REED joins, concurring.

13

Nothing would be easier than personal condemnation of the provision of the Urgent
Deficiency Appropriation Act of 1943, here challenged . 304, 57 Stat. 431, 450.
[Footnote 2/1]
Page 328 U. S. 319
But the judicial function exacts considerations very different from those which may
determine a vote in Congress for or against a measure. And what may be decisive
for a Presidential disapproval may not at all satisfy the established criteria which
alone justify this Court's striking down an act of Congress.
It is not for us to find unconstitutionality in what Congress enacted, although it
may imply notions that are abhorrent to us as individuals or policies we deem
harmful to the country's wellbeing. Although it was proposed at the Constitutional
Convention to have this Court share in the legislative process, the Framers saw fit
to exclude it. And so,
"it must be remembered that legislatures are ultimate guardians of the liberties
and welfare of the people in quite as great a degree as the courts."
Missouri, K. & T. R. Co. v. May, 194 U. S. 267, 194 U. S. 270. This admonition was
uttered by Mr. Justice Holmes in one of his earliest opinions, and it needs to be
recalled whenever an exceptionally offensive enactment tempts the Court beyond
its strict confinements.
Not to exercise by indirection authority which the Constitution denied to this Court
calls for the severest intellectual detachment, and the most alert self-restraint. The
scrupulous observance, with some deviations, of the professed limits of this Court's
power to strike down legislation has been, perhaps, the one quality the great
judges of the Court have had in common. Particularly when Congressional
legislation is under scrutiny, every rational trail must be pursued to prevent
collision between Congress and Court. For Congress can readily mend its ways, or
the people may express disapproval by choosing different representatives. But a
decree of unconstitutionality by this Court is fraught with consequences so
enduring and far-reaching as to be avoided unless no choice is left in reason.
Page 328 U. S. 320
The inclusion of 304 in the Appropriation Bill undoubtedly raises serious
constitutional questions. But the most fundamental principle of constitutional
adjudication is not to face constitutional questions, but to avoid them, if at all
possible. And so the

14

"Court developed, for its own governance in the cases confessedly within its
jurisdiction, a series of rules under which it has avoided passing upon a large part
of all the constitutional questions pressed upon it for decision."
Brandeis, J., concurring, in Ashwander v. Tennessee Valley Authority, 297 U. S. 288,
297 U. S. 341, at 297 U. S. 346. That a piece of legislation under scrutiny may be
widely unpopular is as irrelevant to the observance of these rules for abstention
from avoidable adjudications as that it is widely popular. Some of these rules may
well appear over-refined or evasive to the laity. But they have the support not only
of the profoundest wisdom. They have been vindicated, in conspicuous instances
of disregard, by the most painful lessons of our constitutional history.
Such are the guiding considerations enjoined by constitutional principles and the
best practice for dealing with the various claims of unconstitutionality so ably
pressed upon us at the bar.
The Court reads 304 as though it expressly discharged respondents from office
which they held and prohibited them from holding any office under the
Government in the future. On the basis of this reading, the Court holds that the
provision is a bill of attainder, in that it "inflicts punishment without a judicial trial,"
Cummins v. Missouri, 4 Wall. 277, 71 U. S. 323, and is therefore forbidden by
Article I, 9 of the Constitution. Congress is said to have inflicted this punishment
upon respondents because it disapproved the beliefs they were thought to hold.
Such a colloquial treatment of the statute neglects the relevant canons of
constitutional adjudication and disregards those
Page 328 U. S. 321
features of the legislation which call its validity into question on grounds other than
inconsistency with the prohibition against bills of attainder. To characterize an act
of Congress as a bill of attainder readily enlists, however, the instincts of a free
people who are committed to a fair judicial process for the determination of issues
affecting life, liberty, or property, and naturally abhor anything that resembles
legislative determination of guilt and legislative punishment. As I see it, our duty
precludes reading 304 as the Court reads it. But even if it were to be so read the
provision is not within the constitutional conception of a bill of attainder.
Broadly speaking, two types of constitutional claims come before this Court. Most
constitutional issues derive from the broad standards of fairness written into the
Constitution (e.g., "due process," "equal protection of the laws," "just
compensation"), and the division of power as between States and Nation. Such
questions, by their very nature, allow a relatively wide play for individual legal
judgment. The other class gives no such scope. For this second class of
constitutional issues derives from very specific provisions of the Constitution.
15

These had their source in definite grievances, and led the Fathers to proscribe
against recurrence of their experience. These specific grievances and the
safeguards against their recurrence were not defined by the Constitution. They
were defined by history. Their meaning was so settled by history that definition was
superfluous. Judicial enforcement of the Constitution must respect these historic
limits.
The prohibition of bills of attainder falls, of course, among these very specific
constitutional provisions. The distinguishing characteristic of a bill of attainder is
the substitution of legislative determination of guilt and legislative imposition of
punishment for judicial finding and
Page 328 U. S. 322
sentence.
"A bill of attainder, by the common law, as our fathers imported it from England
and practised it themselves before the adoption of the Constitution, was an act of
sovereign power in the form of a special statute . . . by which a man was
pronounced guilty or attainted of some crime, and punished by deprivation of his
vested rights, without trial or judgment per legem terrae."
Farrar, Manual of the Constitution (1867) 419. And see 2 Story, Commentaries on
the Constitution (5th ed., 1891) 216; 1 Cooley, Constitutional Limitations (8th ed.,
1927) 536. It was this very special, narrowly restricted, intervention by the
legislature, in matters for which a decent regard for men's interests indicated a
judicial trial, that the Constitution prohibited. It must be recalled that the
Constitution was framed in an era when dispensing justice was a well established
function of the legislature. The prohibition against bills of attainder must be viewed
in the background of the historic situation when moves in specific litigation that are
now the conventional, and, for the most part, the exclusive, concern of courts were
commonplace legislative practices. See Calder v. Bull, 3 Dall. 386; Wilkinson v.
Leland, 2 Pet. 627, 27 U. S. 660; Baltimore & Susquehanna R. Co. v. Nesbit, 10
How. 395; Pound, Justice According to Law, II (1914) 14 Col.L.Rev. 1-12; Woodruff,
Chancery in Massachusetts (1889) 5 L.Q.Rev. 370. Cf. Sinking-Fund Cases, 99 U. S.
700. Bills of attainder were part of what now are staple judicial functions which
legislatures then exercised. It was this part of their recognized authority which the
Constitution prohibited when it provided that "No Bill of Attainder . . . shall be
passed." Section 304 lacks the characteristics of the enactments in the Statutes of
the Realm and the Colonial Laws that bear the hallmarks of bills of attainder.
All bills of attainder specify the offense for which the attainted person was deemed
guilty and for which the
Page 328 U. S. 323
16

punishment was imposed. There was always a declaration of guilt, either of the
individual or the class to which he belonged. The offense might be a preexisting
crime or an act made punishable ex post facto. Frequently, a bill of attainder was
thus doubly objectionable because of its ex post facto features. This is the historic
explanation for uniting the two mischiefs in one clause, "No Bill of Attainder or ex
post facto Law shall be passed." No one claims that 304 is an ex post facto law. If
it is, in substance, a punishment for acts deemed "subversive" (the statute, of
course, makes no such charge) for which no punishment had previously been
provided, it would clearly be ex post facto. Therefore, if 304 is a bill of attainder,
it is also an ex post facto law. But if it is not an ex post facto law, the reasons that
establish that it is not are persuasive that it cannot be a bill of attainder. No
offense is specified, and no declaration of guilt is made. When the framers of the
Constitution proscribed bills of attainder, they referred to a form of law which had
been prevalent in monarchical England, and was employed in the colonies. They
were familiar with its nature; they had experienced its use; they knew what they
wanted to prevent. It was not a law unfair in general, even unfair because affecting
merely particular individuals, that they outlawed by the explicitness of their
prohibition of bills of attainder. "Upon this point, a page of history is worth a
volume of logic." New York Trust Co. v. Eisner, 256 U. S. 345, 256 U. S. 349. Nor
should resentment against an injustice displace controlling history in judicial
construction of the Constitution.
Not only does 304 lack the essential declaration of guilt. It likewise lacks the
imposition of punishment in the sense appropriate for bills of attainder. The
punishment imposed by the most dreaded bill of attainder was, of course, death;
lesser punishments were imposed by similar bills more technically called bills of
pains and penalties.
Page 328 U. S. 324
The Constitution outlaws this entire category of punitive measures. Fletcher v.
Peck, 6 Cranch 87, 10 U. S. 138; Cummins v. Missouri, 4 Wall. 277. The amount of
punishment is immaterial to the classification of a challenged statute. But
punishment is a prerequisite.
Punishment presupposes an offense, not necessarily an act previously declared
criminal, but an act for which retribution is exacted. The fact that harm is inflicted
by governmental authority does not make it punishment. Figuratively speaking, all
discomforting action may be deemed punishment, because it deprives of what
otherwise would be enjoyed. But there may be reasons other than punitive for such
deprivation. A man may be forbidden to practice medicine because he has been
convicted of a felony, Hawker v. New York, 170 U. S. 189, or because he is no
longer qualified, Dent v. West Virginia, 129 U. S. 114.
17

"The deprivation of any rights, civil or political, previously enjoyed, may be

punishment, the circumstances attending and the causes of the deprivation
determining this fact."
Cummins v. Missouri, 4 Wall. 277, 71 U. S. 320.
Is it clear, then, that the respondents were removed from office, still accepting the
Court's reading of the statute, as a punishment for past acts? Is it clear, that is, to
that degree of certitude which is required before this Court declares legislation by
Congress unconstitutional? The disputed section does not say so. So far as the
House of Representatives is concerned, the Kerr Committee, which proposed the
measure, and many of those who voted in favor of the Bill (assuming it is
appropriate to go behind the terms of a statute to ascertain the unexpressed
motive of its members), no doubt considered the respondents "subversive," and
wished to exclude them from the Government because of their past associations
and their present views. But the legislation upon which we now pass judgment is
the product of both Houses of Congress
Page 328 U. S. 325
and the President. The Senate five times rejected the substance of 304. It finally
prevailed, not because the Senate joined in an unexpressed declaration of guilt
and retribution for it, but because the provision was included in an important
appropriation bill. The stiffest interpretation that can be placed upon the Senate's
action is that it agreed to remove the respondents from office (still assuming the
Court's interpretation of 304) without passing any judgment on their past conduct
or present views.
Section 304 became law by the President's signature. His motive in allowing it to
become law is free from doubt. He rejected the notion that the respondents were
"subversive," and explicitly stated that he wished to retain them in the service of
the Government. H.Doc. No. 264, 78th Cong., 1st Sess. Historically, Parliament
passed bills of attainder at the behest of the monarch. See Adams, Constitutional
History of England (Rev. ed., 1935) 228-29. The Constitution, of course, provides
for the enactment of legislation even against disapproval by the Executive. But to
hold that a measure which did not express a judgment of condemnation by the
Senate, and carried an affirmative disavowal of such condemnation by the
President constitutes a bill of attainder, disregards the historic tests for
determining what is a bill of attainder. At the least, there are such serious
objections to finding 304 a bill of attainder that it can be declared
unconstitutional only by a failure to observe that this Court reaches constitutional
invalidation only through inescapable necessity.
18

"It must be evident to anyone that the power to declare a legislative enactment
void is one which the judge, conscious of the fallibility of the human judgment, will
shrink from exercising in any case where he can conscientiously and with due
regard to duty and official oath decline the responsibility."
1 Cooley, Constitutional Limitations (8th ed., 1927) 332.
Page 328 U. S. 326
But even if it be agreed, for purposes of characterizing the deprivation of the
statute as punishment, that the motive of Congress was past action of the
respondents, presumed motive cannot supplant expressed legislative judgment.
"The expectations of those who sought the enactment of legislation may not be
used for the purpose of affixing to legislation when enacted a meaning which it
does not express."
United States v. Goelet, 232 U. S. 293, 232 U. S. 298. Congress omitted from 304
any condemnation for which the presumed punishment was a sanction. Thereby, it
negatived the essential notion of a bill of attainder. It may be said that such a view
of a bill of attainder offers Congress too easy a mode of evading the prohibition of
the Constitution. Congress need merely omit its ground of condemnation, and
legislate the penalty! But the prohibition against a "Bill of Attainder" is only one of
the safeguards of liberty in the arsenal of the Constitution. There are other
provisions in the Constitution, specific and comprehensive, effectively designed to
assure the liberties of our citizens. The restrictive function of this clause against
bills of attainder was to take from the legislature a judicial function which the
legislature once possessed. If Congress adopted, as it did, a form of statute so
lacking in any pretension to the very quality which gave a bill of attainder its
significance, that of a declaration of guilt under circumstances which made its
determination grossly unfair, it simply passed an act which this Court ought not to
denounce as a bill of attainder. And not the less so because Congress may have
been conscious of the limitations which the Constitution has placed upon it against
passing bills of attainder. If Congress chooses to say that men shall not be paid, or
even that they shall be removed from their jobs, we cannot decide that Congress
also said that they are guilty of an offense. And particularly we cannot so decide as
a
Page 328 U. S. 327
necessary assumption for declaring an act of Congress invalid. Congress has not
legislated that which is attributed to it, for the simple fact is that Congress has said
nothing. The words Congress used are not susceptible of being read as a legislative
verdict of guilt against the respondents, no matter what dictionary, or what form of
argumentation, we use as aids.
19

This analysis accords with our prior course of decision. In Cummins v. Missouri,
supra, and Ex parte Garland, 4 Wall. 333, the Court dealt with legislation of very
different scope and significance from that now before us. While the provisions
involved in those cases did not condemn or punish specific persons by name, they
proscribed all guilty of designated offenses. Refusal to take a prescribed oath
operated as an admission of guilt, and automatically resulted in the disqualifying
punishment. Avoidance of legislative proscription for guilt under the provisions in
the Cummins and Garland cases required positive exculpation. That the persons
legislatively punished were not named was a mere detail of identification.
Congress and the Missouri legislature, respectively, had provided the most
effective method for insuring identification. These enactments followed the
example of English bills of attainder which condemned a named person and "his
adherents." Section 304 presents a situation wholly outside the ingredients of the
enactments that furnished the basis for the Cummins and Garland decisions.
[Footnote 2/2]
While 304 is not a bill of attainder, as the gloss of history defines that phrase in
the Constitution, acceptance of the Court's reading of 304 would raise other
serious
Page 328 U. S. 328
constitutional questions. The first in magnitude and difficulty derives from the
constitutional distribution of power over removal. For about a century, this Court
astutely avoided adjudication of the power of control as between Congress and the
Executive of those serving in the Executive branch of the Government "until it
should be inevitably presented." Myers v. United States, 272 U. S. 52, 272 U. S.
173. The Court then gave the fullest consideration to the problem. The case was
twice argued, and was under consideration for nearly three years. So far as the
issues could be foreseen, they were elaborately dealt with in opinions aggregating
nearly two hundred pages. Within less than a decade, an opinion of fifteen pages
largely qualified what the Myers case had apparently so voluminously settled.
Humphrey's Executor v. United States, 295 U. S. 602. This experience serves as a
powerful reminder of the Court's duty so to deal with Congressional enactments as
to avoid their invalidation unless a road to any other decision is barred.
The other serious problem the Court's interpretation of 304 raises is that of due
process. In one aspect, this is another phase of the constitutional issue of the
removal power. For, if 304 is to be construed as a removal from office, it cannot
be determined whether singling out three government employees for removal
violated the Fifth Amendment until it is decided whether Congress has a removal
power at all over such employees, and how extensive it is. Even if the statute be
read as a mere stoppage of disbursement, the question arises whether Congress
20

can treat three employees of the Government differently from all others. But that
question we do not have to answer. In any event, respondents are entitled to
recover in this suit, and their remedy -- a suit in the Court of Claims -- is the same
whatever view one takes of the legal significance of 304. To be sure, 304 also
purports to prescribe conditions
Page 328 U. S. 329
relating to future employment of respondents by the Government. This, too, is a
question not now open for decision. Reemployment by any agency of the
Government, or the desire for reemployment, is not now in controversy, "and,
consequently, the subject may well be postponed until it actually arises for
decision." Wilson v. New, 243 U. S. 332, 243 U. S. 354. The "great gravity and
delicacy" of this Court's function in passing upon the validity of an act of Congress
is called into action only when absolutely necessary. Steamship Co. v. Emigration
Commissioners, 113 U. S. 33, 113 U. S. 39. It should not be exercised on the basis
of imaginary and nonexistent facts. See Brandeis, J., concurring, in Ashwander v.
Tennessee Valley Authority, supra, at 297 U. S. 338-345.
Since it is apparent that grave constitutional doubts will arise if we adopt the
construction the Court puts on 304, we ought to follow the practice which this
Court has established from the time of Chief Justice Marshall. The approach
appropriate to such a case as the one before us was thus summarized by Mr.
Justice Holmes in a similar situation:
". . . the rule is settled that, as between two possible interpretations of a statute,
by one of which it would be unconstitutional and by the other valid, our plain duty
is to adopt that which will save the Act. Even to avoid a serious doubt, the rule is
the same. United States v. Delaware & Hudson Co., 213 U. S. 366, 213 U. S. 407,
213 U. S. 408. United States v. Standard Brewery, 251 U. S. 210, 251 U. S. 220.
Texas v. Eastern Texas R.R. Co., 258 U. S. 204, 258 U. S. 217. Bratton v. Chandler,
260 U. S. 110, 260 U. S. 114. Panama R.R. Co. v. Johnson, 264 U. S. 375, 264 U. S.
390. Words have been strained more than they need to be strained here in order to
avoid that doubt. United States v. Jin Fuey Moy, 241 U. S. 394, 241 U. S. 401, 241
U. S. 402."
Blodgett v. Holden, 275 U. S. 142, 275 U. S. 148.
"'When the validity of an act of the Congress is drawn in question, and even if a
serious doubt of constitutionality
Page 328 U. S. 330

21

is raised, it is a cardinal principle that this Court will first ascertain whether a
construction of the statute is fairly possible by which the question may be
avoided.' Crowell v. Benson, 285 U. S. 22, 285 U. S. 62."
Brandeis, J., concurring, in Ashwander v. Tennessee Valley Authority, supra, at 297
U. S. 348.
We are not faced inescapably with the necessity of adjudicating these serious
constitutional questions. The obvious or, at the least, the one certain, construction
of 304 is that it forbids the disbursing agents of the Treasury to pay out of
specifically appropriated moneys sums to compensate respondents for their
services. We have noted the cloud cast upon this interpretation by manifestations
by committees and members of the House of Representatives before the passage
of this section. On the other hand, there is also much in the debates not only in the
Senate, but also in the House, which supports the mere fiscal scope to be given to
the statute. That such a construction is tenable settles our duty to adopt it and to
avoid determination of constitutional questions of great seriousness.
Accordingly, I feel compelled to construe 304 as did Mr. Chief Justice Whaley
below, 104 Ct.Cls. 557, 584, 66 F.Supp. 142, 147-148, whereby it merely prevented
the ordinary disbursal of money to pay respondents' salaries. It did not cut off the
obligation of the Government to pay for services rendered, and the respondents
are, therefore, entitled to recover the judgment which they obtained from the
Court of Claims.
[Footnote 2/1]
"SEC. 304. No part of any appropriation, allocation, or fund (1) which is made
available under or pursuant to this Act, or (2) which is now, or which is hereafter
made, available under or pursuant to any other Act, to any department, agency, or
instrumentality of the United States, shall be used, after November 15, 1943, to
pay any part of the salary, or other compensation for the personal services, of
Goodwin B. Watson, William E. Dodd, Junior, and Robert Morss Lovett, unless prior
to such date such person has been appointed by the President, by and with the
advice and consent of the Senate: Provided, That this section shall not operate to
deprive any such person of payment for leaves of absence or salary, or of any
refund or reimbursement, which have accrued prior to November 15, 1943:
Provided further, That this section shall not operate to deprive any such person of
payment for services performed as a member of a jury or as a member of the
armed forces of the United States nor any benefit, pension, or emolument resulting
therefrom."
[Footnote 2/2]

22

Even against the holding that such enactments were bills of attainder, Mr. Justice
Miller wrote the powerful dissent concurred in by Mr. Chief Justice Chase, Mr. Justice
Swayne, and Mr. Justice Davis. 71 U. S. 4 Wall. 333, 71 U. S. 382.
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G.R. No. 174629

February 14, 2008

REPUBLIC OF THE PHILIPPINES, Represented by THE ANTI-MONEY

LAUNDERING COUNCIL (AMLC), petitioner,
vs.
HON. ANTONIO M. EUGENIO, JR., AS PRESIDING JUDGE OF RTC, MANILA,
BRANCH 34, PANTALEON ALVAREZ and LILIA CHENG, respondents.
DECISION
TINGA, J.:
The present petition for certiorari and prohibition under Rule 65 assails the orders
and resolutions issued by two different courts in two different cases. The courts
and cases in question are the Regional Trial Court of Manila, Branch 24, which
heard SP Case No. 06-1142001 and the Court of Appeals, Tenth Division, which
heared CA-G.R. SP No. 95198.2 Both cases arose as part of the aftermath of the
ruling of this Court in Agan v. PIATCO3 nullifying the concession agreement
awarded to the Philippine International Airport Terminal Corporation (PIATCO) over
the Ninoy Aquino International Airport International Passenger Terminal 3 (NAIA 3)
Project.
I.
Following the promulgation of Agan, a series of investigations concerning the
award of the NAIA 3 contracts to PIATCO were undertaken by the Ombudsman and
the Compliance and Investigation Staff (CIS) of petitioner Anti-Money Laundering
Council (AMLC). On 24 May 2005, the Office of the Solicitor General (OSG) wrote
the AMLC requesting the latters assistance "in obtaining more evidence to
completely reveal the financial trail of corruption surrounding the [NAIA 3] Project,"
and also noting that petitioner Republic of the Philippines was presently defending
23

itself in two international arbitration cases filed in relation to the NAIA 3 Project.4
The CIS conducted an intelligence database search on the financial transactions of
certain individuals involved in the award, including respondent Pantaleon Alvarez
(Alvarez) who had been the Chairman of the PBAC Technical Committee, NAIA-IPT3
Project.5 By this time, Alvarez had already been charged by the Ombudsman with
violation of Section 3(j) of R.A. No. 3019.6 The search revealed that Alvarez
maintained eight (8) bank accounts with six (6) different banks.7
On 27 June 2005, the AMLC issued Resolution No. 75, Series of 2005,8 whereby the
Council resolved to authorize the Executive Director of the AMLC "to sign and verify
an application to inquire into and/or examine the [deposits] or investments of
Pantaleon Alvarez, Wilfredo Trinidad, Alfredo Liongson, and Cheng Yong, and their
related web of accounts wherever these may be found, as defined under Rule 10.4
of the Revised Implementing Rules and Regulations;" and to authorize the AMLC
Secretariat "to conduct an inquiry into subject accounts once the Regional Trial
Court grants the application to inquire into and/or examine the bank accounts" of
those four individuals.9 The resolution enumerated the particular bank accounts of
Alvarez, Wilfredo Trinidad (Trinidad), Alfredo Liongson (Liongson) and Cheng Yong
which were to be the subject of the inquiry.10 The rationale for the said resolution
was founded on the cited findings of the CIS that amounts were transferred from a
Hong Kong bank account owned by Jetstream Pacific Ltd. Account to bank accounts
in the Philippines maintained by Liongson and Cheng Yong.11 The Resolution also
noted that "[b]y awarding the contract to PIATCO despite its lack of financial
capacity, Pantaleon Alvarez caused undue injury to the government by giving
PIATCO unwarranted benefits, advantage, or preference in the discharge of his
official administrative functions through manifest partiality, evident bad faith, or
gross inexcusable negligence, in violation of Section 3(e) of Republic Act No.
3019."12
Under the authority granted by the Resolution, the AMLC filed an application to
inquire into or examine the deposits or investments of Alvarez, Trinidad, Liongson
and Cheng Yong before the RTC of Makati, Branch 138, presided by Judge (now
Court of Appeals Justice) Sixto Marella, Jr. The application was docketed as AMLC
No. 05-005.13 The Makati RTC heard the testimony of the Deputy Director of the
AMLC, Richard David C. Funk II, and received the documentary evidence of the
AMLC.14 Thereafter, on 4 July 2005, the Makati RTC rendered an Order (Makati RTC
bank inquiry order) granting the AMLC the authority to inquire and examine the
subject bank accounts of Alvarez, Trinidad, Liongson and Cheng Yong, the trial
court being satisfied that there existed "[p]robable cause [to] believe that the
deposits in various bank accounts, details of which appear in paragraph 1 of the
Application, are related to the offense of violation of Anti-Graft and Corrupt
Practices Act now the subject of criminal prosecution before the Sandiganbayan as
attested to by the Informations, Exhibits C, D, E, F, and G."15 Pursuant to the
24

Makati RTC bank inquiry order, the CIS proceeded to inquire and examine the
deposits, investments and related web accounts of the four.16
Meanwhile, the Special Prosecutor of the Office of the Ombudsman, Dennis VillaIgnacio, wrote a letter dated 2 November 2005, requesting the AMLC to investigate
the accounts of Alvarez, PIATCO, and several other entities involved in the nullified
contract. The letter adverted to probable cause to believe that the bank accounts
"were used in the commission of unlawful activities that were committed" in
relation to the criminal cases then pending before the Sandiganbayan.17 Attached
to the letter was a memorandum "on why the investigation of the [accounts] is
necessary in the prosecution of the above criminal cases before the
Sandiganbayan."18
In response to the letter of the Special Prosecutor, the AMLC promulgated on 9
December 2005 Resolution No. 121 Series of 2005,19 which authorized the
executive director of the AMLC to inquire into and examine the accounts named in
the letter, including one maintained by Alvarez with DBS Bank and two other
accounts in the name of Cheng Yong with Metrobank. The Resolution characterized
the memorandum attached to the Special Prosecutors letter as "extensively
justif[ying] the existence of probable cause that the bank accounts of the persons
and entities mentioned in the letter are related to the unlawful activity of violation
of Sections 3(g) and 3(e) of Rep. Act No. 3019, as amended."20
Following the December 2005 AMLC Resolution, the Republic, through the AMLC,
filed an application21 before the Manila RTC to inquire into and/or examine thirteen
(13) accounts and two (2) related web of accounts alleged as having been used to
facilitate corruption in the NAIA 3 Project. Among said accounts were the DBS Bank
account of Alvarez and the Metrobank accounts of Cheng Yong. The case was
raffled to Manila RTC, Branch 24, presided by respondent Judge Antonio Eugenio,
Jr., and docketed as SP Case No. 06-114200.
On 12 January 2006, the Manila RTC issued an Order (Manila RTC bank inquiry
order) granting the Ex Parte Application expressing therein "[that] the allegations
in said application to be impressed with merit, and in conformity with Section 11 of
R.A. No. 9160, as amended, otherwise known as the Anti-Money Laundering Act
(AMLA) of 2001 and Rules 11.1 and 11.2 of the Revised Implementing Rules and
Regulations."22 Authority was thus granted to the AMLC to inquire into the bank
accounts listed therein.
On 25 January 2006, Alvarez, through counsel, entered his appearance23 before
the Manila RTC in SP Case No. 06-114200 and filed an Urgent Motion to Stay
Enforcement of Order of January 12, 2006.24 Alvarez alleged that he fortuitously
learned of the bank inquiry order, which was issued following an ex parte
application, and he argued that nothing in R.A. No. 9160 authorized the AMLC to
25

seek the authority to inquire into bank accounts ex parte.25 The day after Alvarez
filed his motion, 26 January 2006, the Manila RTC issued an Order26 staying the
enforcement of its bank inquiry order and giving the Republic five (5) days to
respond to Alvarezs motion.
The Republic filed an Omnibus Motion for Reconsideration27 of the 26 January
2006 Manila RTC Order and likewise sought to strike out Alvarezs motion that led
to the issuance of said order. For his part, Alvarez filed a Reply and Motion to
Dismiss28 the application for bank inquiry order. On 2 May 2006, the Manila RTC
issued an Omnibus Order29 granting the Republics Motion for Reconsideration,
denying Alvarezs motion to dismiss and reinstating "in full force and effect" the
Order dated 12 January 2006. In the omnibus order, the Manila RTC reiterated that
the material allegations in the application for bank inquiry order filed by the
Republic stood as "the probable cause for the investigation and examination of the
bank accounts and investments of the respondents."30
Alvarez filed on 10 May 2006 an Urgent Motion31 expressing his apprehension that
the AMLC would immediately enforce the omnibus order and would thereby render
the motion for reconsideration he intended to file as moot and academic; thus he
sought that the Republic be refrained from enforcing the omnibus order in the
meantime. Acting on this motion, the Manila RTC, on 11 May 2006, issued an
Order32 requiring the OSG to file a comment/opposition and reminding the parties
that judgments and orders become final and executory upon the expiration of
fifteen (15) days from receipt thereof, as it is the period within which a motion for
reconsideration could be filed. Alvarez filed his Motion for Reconsideration33 of the
omnibus order on 15 May 2006, but the motion was denied by the Manila RTC in an
Order34 dated 5 July 2006.
On 11 July 2006, Alvarez filed an Urgent Motion and Manifestation35 wherein he
manifested having received reliable information that the AMLC was about to
implement the Manila RTC bank inquiry order even though he was intending to
appeal from it. On the premise that only a final and executory judgment or order
could be executed or implemented, Alvarez sought that the AMLC be immediately
ordered to refrain from enforcing the Manila RTC bank inquiry order.
On 12 July 2006, the Manila RTC, acting on Alvarezs latest motion, issued an
Order36 directing the AMLC "to refrain from enforcing the order dated January 12,
2006 until the expiration of the period to appeal, without any appeal having been
filed." On the same day, Alvarez filed a Notice of Appeal37 with the Manila RTC.
On 24 July 2006, Alvarez filed an Urgent Ex Parte Motion for Clarification.38
Therein, he alleged having learned that the AMLC had began to inquire into the
bank accounts of the other persons mentioned in the application for bank inquiry
order filed by the Republic.39 Considering that the Manila RTC bank inquiry order
26

was issued ex parte, without notice to those other persons, Alvarez prayed that the
AMLC be ordered to refrain from inquiring into any of the other bank deposits and
alleged web of accounts enumerated in AMLCs application with the RTC; and that
the AMLC be directed to refrain from using, disclosing or publishing in any
proceeding or venue any information or document obtained in violation of the 11
May 2006 RTC Order.40
On 25 July 2006, or one day after Alvarez filed his motion, the Manila RTC issued an
Order41 wherein it clarified that "the Ex Parte Order of this Court dated January 12,
2006 can not be implemented against the deposits or accounts of any of the
persons enumerated in the AMLC Application until the appeal of movant Alvarez is
finally resolved, otherwise, the appeal would be rendered moot and academic or
even nugatory."42 In addition, the AMLC was ordered "not to disclose or publish
any information or document found or obtained in [v]iolation of the May 11, 2006
Order of this Court."43 The Manila RTC reasoned that the other persons mentioned
in AMLCs application were not served with the courts 12 January 2006 Order. This
25 July 2006 Manila RTC Order is the first of the four rulings being assailed through
this petition.
In response, the Republic filed an Urgent Omnibus Motion for Reconsideration44
dated 27 July 2006, urging that it be allowed to immediately enforce the bank
inquiry order against Alvarez and that Alvarezs notice of appeal be expunged from
the records since appeal from an order of inquiry is disallowed under the Anti
money Laundering Act (AMLA).
Meanwhile, respondent Lilia Cheng filed with the Court of Appeals a Petition for
Certiorari, Prohibition and Mandamus with Application for TRO and/or Writ of
Preliminary Injunction45 dated 10 July 2006, directed against the Republic of the
Philippines through the AMLC, Manila RTC Judge Eugenio, Jr. and Makati RTC Judge
Marella, Jr.. She identified herself as the wife of Cheng Yong46 with whom she
jointly owns a conjugal bank account with Citibank that is covered by the Makati
RTC bank inquiry order, and two conjugal bank accounts with Metrobank that are
covered by the Manila RTC bank inquiry order. Lilia Cheng imputed grave abuse of
discretion on the part of the Makati and Manila RTCs in granting AMLCs ex parte
applications for a bank inquiry order, arguing among others that the ex parte
applications violated her constitutional right to due process, that the bank inquiry
order under the AMLA can only be granted in connection with violations of the
AMLA and that the AMLA can not apply to bank accounts opened and transactions
entered into prior to the effectivity of the AMLA or to bank accounts located
outside the Philippines.47
On 1 August 2006, the Court of Appeals, acting on Lilia Chengs petition, issued a
Temporary Restraining Order48 enjoining the Manila and Makati trial courts from
implementing, enforcing or executing the respective bank inquiry orders previously
27

issued, and the AMLC from enforcing and implementing such orders. On even date,
the Manila RTC issued an Order49 resolving to hold in abeyance the resolution of
the urgent omnibus motion for reconsideration then pending before it until the
resolution of Lilia Chengs petition for certiorari with the Court of Appeals. The
Court of Appeals Resolution directing the issuance of the temporary restraining
order is the second of the four rulings assailed in the present petition.
The third assailed ruling50 was issued on 15 August 2006 by the Manila RTC,
acting on the Urgent Motion for Clarification51 dated 14 August 2006 filed by
Alvarez. It appears that the 1 August 2006 Manila RTC Order had amended its
previous 25 July 2006 Order by deleting the last paragraph which stated that the
AMLC "should not disclose or publish any information or document found or
obtained in violation of the May 11, 2006 Order of this Court."52 In this new
motion, Alvarez argued that the deletion of that paragraph would allow the AMLC
to implement the bank inquiry orders and publish whatever information it might
obtain thereupon even before the final orders of the Manila RTC could become final
and executory.53 In the 15 August 2006 Order, the Manila RTC reiterated that the
bank inquiry order it had issued could not be implemented or enforced by the
AMLC or any of its representatives until the appeal therefrom was finally resolved
and that any enforcement thereof would be unauthorized.54
The present Consolidated Petition55 for certiorari and prohibition under Rule 65
was filed on 2 October 2006, assailing the two Orders of the Manila RTC dated 25
July and 15 August 2006 and the Temporary Restraining Order dated 1 August
2006 of the Court of Appeals. Through an Urgent Manifestation and Motion56
dated 9 October 2006, petitioner informed the Court that on 22 September 2006,
the Court of Appeals hearing Lilia Chengs petition had granted a writ of
preliminary injunction in her favor.57 Thereafter, petitioner sought as well the
nullification of the 22 September 2006 Resolution of the Court of Appeals, thereby
constituting the fourth ruling assailed in the instant petition.58
The Court had initially granted a Temporary Restraining Order59 dated 6 October
2006 and later on a Supplemental Temporary Restraining Order60 dated 13
October 2006 in petitioners favor, enjoining the implementation of the assailed
rulings of the Manila RTC and the Court of Appeals. However, on respondents
motion, the Court, through a Resolution61 dated 11 December 2006, suspended
the implementation of the restraining orders it had earlier issued.
Oral arguments were held on 17 January 2007. The Court consolidated the issues
for argument as follows:
1. Did the RTC-Manila, in issuing the Orders dated 25 July 2006 and 15 August 2006
which deferred the implementation of its Order dated 12 January 2006, and the
Court of Appeals, in issuing its Resolution dated 1 August 2006, which ordered the
28

status quo in relation to the 1 July 2005 Order of the RTC-Makati and the 12 January
2006 Order of the RTC-Manila, both of which authorized the examination of bank
accounts under Section 11 of Rep. Act No. 9160 (AMLA), commit grave abuse of
discretion?
(a) Is an application for an order authorizing inquiry into or examination of bank
accounts or investments under Section 11 of the AMLA ex-parte in nature or one
which requires notice and hearing?
(b) What legal procedures and standards should be observed in the conduct of the
proceedings for the issuance of said order?
(c) Is such order susceptible to legal challenges and judicial review?
2. Is it proper for this Court at this time and in this case to inquire into and pass
upon the validity of the 1 July 2005 Order of the RTC-Makati and the 12 January
2006 Order of the RTC-Manila, considering the pendency of CA G.R. SP No. 95-198
(Lilia Cheng v. Republic) wherein the validity of both orders was challenged?62
After the oral arguments, the parties were directed to file their respective
memoranda, which they did,63 and the petition was thereafter deemed submitted
for resolution.
II.
Petitioners general advocacy is that the bank inquiry orders issued by the Manila
and Makati RTCs are valid and immediately enforceable whereas the assailed
rulings, which effectively stayed the enforcement of the Manila and Makati RTCs
bank inquiry orders, are sullied with grave abuse of discretion. These conclusions
flow from the posture that a bank inquiry order, issued upon a finding of probable
cause, may be issued ex parte and, once issued, is immediately executory.
Petitioner further argues that the information obtained following the bank inquiry is
necessarily beneficial, if not indispensable, to the AMLC in discharging its awesome
responsibility regarding the effective implementation of the AMLA and that any
restraint in the disclosure of such information to appropriate agencies or other
judicial fora would render meaningless the relief supplied by the bank inquiry
order.
Petitioner raises particular arguments questioning Lilia Chengs right to seek
injunctive relief before the Court of Appeals, noting that not one of the bank inquiry
orders is directed against her. Her "cryptic assertion" that she is the wife of Cheng
Yong cannot, according to petitioner, "metamorphose into the requisite legal
standing to seek redress for an imagined injury or to maintain an action in behalf
of another." In the same breath, petitioner argues that Alvarez cannot assert any
violation of the right to financial privacy in behalf of other persons whose bank
29

accounts are being inquired into, particularly those other persons named in the
Makati RTC bank inquiry order who did not take any step to oppose such orders
before the courts.
Ostensibly, the proximate question before the Court is whether a bank inquiry
order issued in accordance with Section 10 of the AMLA may be stayed by
injunction. Yet in arguing that it does, petitioner relies on what it posits as the final
and immediately executory character of the bank inquiry orders issued by the
Manila and Makati RTCs. Implicit in that position is the notion that the inquiry
orders are valid, and such notion is susceptible to review and validation based on
what appears on the face of the orders and the applications which triggered their
issuance, as well as the provisions of the AMLA governing the issuance of such
orders. Indeed, to test the viability of petitioners argument, the Court will have to
be satisfied that the subject inquiry orders are valid in the first place. However,
even from a cursory examination of the applications for inquiry order and the
orders themselves, it is evident that the orders are not in accordance with law.
III.
A brief overview of the AMLA is called for.
Money laundering has been generally defined by the International Criminal Police
Organization (Interpol) `as "any act or attempted act to conceal or disguise the
identity of illegally obtained proceeds so that they appear to have originated from
legitimate sources."64 Even before the passage of the AMLA, the problem was
addressed by the Philippine government through the issuance of various circulars
by the Bangko Sentral ng Pilipinas. Yet ultimately, legislative proscription was
necessary, especially with the inclusion of the Philippines in the Financial Action
Task Forces list of non-cooperative countries and territories in the fight against
money laundering.65 The original AMLA, Republic Act (R.A.) No. 9160, was passed
in 2001. It was amended by R.A. No. 9194 in 2003.
Section 4 of the AMLA states that "[m]oney laundering is a crime whereby the
proceeds of an unlawful activity as [defined in the law] are transacted, thereby
making them appear to have originated from legitimate sources."66 The section
further provides the three modes through which the crime of money laundering is
committed. Section 7 creates the AMLC and defines its powers, which generally
relate to the enforcement of the AMLA provisions and the initiation of legal actions
authorized in the AMLA such as civil forefeiture proceedings and complaints for the
prosecution of money laundering offenses.67
In addition to providing for the definition and penalties for the crime of money
laundering, the AMLA also authorizes certain provisional remedies that would aid

30

the AMLC in the enforcement of the AMLA. These are the "freeze order" authorized
under Section 10, and the "bank inquiry order" authorized under Section 11.
Respondents posit that a bank inquiry order under Section 11 may be obtained
only upon the pre-existence of a money laundering offense case already filed
before the courts.68 The conclusion is based on the phrase "upon order of any
competent court in cases of violation of this Act," the word "cases" generally
understood as referring to actual cases pending with the courts.
We are unconvinced by this proposition, and agree instead with the then Solicitor
General who conceded that the use of the phrase "in cases of" was unfortunate,
yet submitted that it should be interpreted to mean "in the event there are
violations" of the AMLA, and not that there are already cases pending in court
concerning such violations.69 If the contrary position is adopted, then the bank
inquiry order would be limited in purpose as a tool in aid of litigation of live cases,
and wholly inutile as a means for the government to ascertain whether there is
sufficient evidence to sustain an intended prosecution of the account holder for
violation of the AMLA. Should that be the situation, in all likelihood the AMLC would
be virtually deprived of its character as a discovery tool, and thus would become
less circumspect in filing complaints against suspect account holders. After all,
under such set-up the preferred strategy would be to allow or even encourage the
indiscriminate filing of complaints under the AMLA with the hope or expectation
that the evidence of money laundering would somehow surface during the trial.
Since the AMLC could not make use of the bank inquiry order to determine whether
there is evidentiary basis to prosecute the suspected malefactors, not filing any
case at all would not be an alternative. Such unwholesome set-up should not come
to pass. Thus Section 11 cannot be interpreted in a way that would emasculate the
remedy it has established and encourage the unfounded initiation of complaints for
money laundering.
Still, even if the bank inquiry order may be availed of without need of a preexisting case under the AMLA, it does not follow that such order may be availed of
ex parte. There are several reasons why the AMLA does not generally sanction ex
parte applications and issuances of the bank inquiry order.
IV.
It is evident that Section 11 does not specifically authorize, as a general rule, the
issuance ex parte of the bank inquiry order. We quote the provision in full:
SEC. 11. Authority to Inquire into Bank Deposits. Notwithstanding the provisions
of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended,
Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any
particular deposit or investment with any banking institution or non bank financial
31

institution upon order of any competent court in cases of violation of this Act, when
it has been established that there is probable cause that the deposits or
investments are related to an unlawful activity as defined in Section 3(i) hereof or
a money laundering offense under Section 4 hereof, except that no court order
shall be required in cases involving unlawful activities defined in Sections 3(i)1, (2)
and (12).
To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may
inquire into or examine any deposit of investment with any banking institution or
non bank financial institution when the examination is made in the course of a
periodic or special examination, in accordance with the rules of examination of the
BSP.70 (Emphasis supplied)
Of course, Section 11 also allows the AMLC to inquire into bank accounts without
having to obtain a judicial order in cases where there is probable cause that the
deposits or investments are related to kidnapping for ransom,71 certain violations
of the Comprehensive Dangerous Drugs Act of 2002,72 hijacking and other
violations under R.A. No. 6235, destructive arson and murder. Since such special
circumstances do not apply in this case, there is no need for us to pass comment
on this proviso. Suffice it to say, the proviso contemplates a situation distinct from
that which presently confronts us, and for purposes of the succeeding discussion,
our reference to Section 11 of the AMLA excludes said proviso.
In the instances where a court order is required for the issuance of the bank inquiry
order, nothing in Section 11 specifically authorizes that such court order may be
issued ex parte. It might be argued that this silence does not preclude the ex parte
issuance of the bank inquiry order since the same is not prohibited under Section
11. Yet this argument falls when the immediately preceding provision, Section 10,
is examined.
SEC. 10. Freezing of Monetary Instrument or Property. The Court of Appeals,
upon application ex parte by the AMLC and after determination that probable
cause exists that any monetary instrument or property is in any way related to an
unlawful activity as defined in Section 3(i) hereof, may issue a freeze order which
shall be effective immediately. The freeze order shall be for a period of twenty (20)
days unless extended by the court.73
Although oriented towards different purposes, the freeze order under Section 10
and the bank inquiry order under Section 11 are similar in that they are
extraordinary provisional reliefs which the AMLC may avail of to effectively combat
and prosecute money laundering offenses. Crucially, Section 10 uses specific
language to authorize an ex parte application for the provisional relief therein, a
circumstance absent in Section 11. If indeed the legislature had intended to
authorize ex parte proceedings for the issuance of the bank inquiry order, then it
32

could have easily expressed such intent in the law, as it did with the freeze order
under Section 10.
Even more tellingly, the current language of Sections 10 and 11 of the AMLA was
crafted at the same time, through the passage of R.A. No. 9194. Prior to the
amendatory law, it was the AMLC, not the Court of Appeals, which had authority to
issue a freeze order, whereas a bank inquiry order always then required, without
exception, an order from a competent court.74 It was through the same enactment
that ex parte proceedings were introduced for the first time into the AMLA, in the
case of the freeze order which now can only be issued by the Court of Appeals. It
certainly would have been convenient, through the same amendatory law, to allow
a similar ex parte procedure in the case of a bank inquiry order had Congress been
so minded. Yet nothing in the provision itself, or even the available legislative
record, explicitly points to an ex parte judicial procedure in the application for a
bank inquiry order, unlike in the case of the freeze order.
That the AMLA does not contemplate ex parte proceedings in applications for bank
inquiry orders is confirmed by the present implementing rules and regulations of
the AMLA, promulgated upon the passage of R.A. No. 9194. With respect to freeze
orders under Section 10, the implementing rules do expressly provide that the
applications for freeze orders be filed ex parte,75 but no similar clearance is
granted in the case of inquiry orders under Section 11.76 These implementing
rules were promulgated by the Bangko Sentral ng Pilipinas, the Insurance
Commission and the Securities and Exchange Commission,77 and if it was the true
belief of these institutions that inquiry orders could be issued ex parte similar to
freeze orders, language to that effect would have been incorporated in the said
Rules. This is stressed not because the implementing rules could authorize ex
parte applications for inquiry orders despite the absence of statutory basis, but
rather because the framers of the law had no intention to allow such ex parte
applications.
Even the Rules of Procedure adopted by this Court in A.M. No. 05-11-04-SC78 to
enforce the provisions of the AMLA specifically authorize ex parte applications with
respect to freeze orders under Section 1079 but make no similar authorization with
respect to bank inquiry orders under Section 11.
The Court could divine the sense in allowing ex parte proceedings under Section 10
and in proscribing the same under Section 11. A freeze order under Section 10 on
the one hand is aimed at preserving monetary instruments or property in any way
deemed related to unlawful activities as defined in Section 3(i) of the AMLA. The
owner of such monetary instruments or property would thus be inhibited from
utilizing the same for the duration of the freeze order. To make such freeze order
anteceded by a judicial proceeding with notice to the account holder would allow
for or lead to the dissipation of such funds even before the order could be issued.
33

On the other hand, a bank inquiry order under Section 11 does not necessitate any
form of physical seizure of property of the account holder. What the bank inquiry
order authorizes is the examination of the particular deposits or investments in
banking institutions or non-bank financial institutions. The monetary instruments
or property deposited with such banks or financial institutions are not seized in a
physical sense, but are examined on particular details such as the account holders
record of deposits and transactions. Unlike the assets subject of the freeze order,
the records to be inspected under a bank inquiry order cannot be physically seized
or hidden by the account holder. Said records are in the possession of the bank and
therefore cannot be destroyed at the instance of the account holder alone as that
would require the extraordinary cooperation and devotion of the bank.
Interestingly, petitioners memorandum does not attempt to demonstrate before
the Court that the bank inquiry order under Section 11 may be issued ex parte,
although the petition itself did devote some space for that argument. The petition
argues that the bank inquiry order is "a special and peculiar remedy, drastic in its
name, and made necessary because of a public necessity [t]hus, by its very
nature, the application for an order or inquiry must necessarily, be ex parte." This
argument is insufficient justification in light of the clear disinclination of Congress
to allow the issuance ex parte of bank inquiry orders under Section 11, in contrast
to the legislatures clear inclination to allow the ex parte grant of freeze orders
under Section 10.
Without doubt, a requirement that the application for a bank inquiry order be done
with notice to the account holder will alert the latter that there is a plan to inspect
his bank account on the belief that the funds therein are involved in an unlawful
activity or money laundering offense.80 Still, the account holder so alerted will in
fact be unable to do anything to conceal or cleanse his bank account records of
suspicious or anomalous transactions, at least not without the whole-hearted
cooperation of the bank, which inherently has no vested interest to aid the account
holder in such manner.
V.
The necessary implication of this finding that Section 11 of the AMLA does not
generally authorize the issuance ex parte of the bank inquiry order would be that
such orders cannot be issued unless notice is given to the owners of the account,
allowing them the opportunity to contest the issuance of the order. Without such a
consequence, the legislated distinction between ex parte proceedings under
Section 10 and those which are not ex parte under Section 11 would be lost and
rendered useless.

34

There certainly is fertile ground to contest the issuance of an ex parte order.

Section 11 itself requires that it be established that "there is probable cause that
the deposits or investments are related to unlawful activities," and it obviously is
the court which stands as arbiter whether there is indeed such probable cause. The
process of inquiring into the existence of probable cause would involve the
function of determination reposed on the trial court. Determination clearly implies
a function of adjudication on the part of the trial court, and not a mechanical
application of a standard pre-determination by some other body. The word
"determination" implies deliberation and is, in normal legal contemplation,
equivalent to "the decision of a court of justice."81
The court receiving the application for inquiry order cannot simply take the AMLCs
word that probable cause exists that the deposits or investments are related to an
unlawful activity. It will have to exercise its
own determinative function in order to be convinced of such fact. The account
holder would be certainly capable of contesting such probable cause if given the
opportunity to be apprised of the pending application to inquire into his account;
hence a notice requirement would not be an empty spectacle. It may be so that
the process of obtaining the inquiry order may become more cumbersome or
prolonged because of the notice requirement, yet we fail to see any unreasonable
burden cast by such circumstance. After all, as earlier stated, requiring notice to
the account holder should not, in any way, compromise the integrity of the bank
records subject of the inquiry which remain in the possession and control of the
bank.
Petitioner argues that a bank inquiry order necessitates a finding of probable
cause, a characteristic similar to a search warrant which is applied to and heard ex
parte. We have examined the supposed analogy between a search warrant and a
bank inquiry order yet we remain to be unconvinced by petitioner.
The Constitution and the Rules of Court prescribe particular requirements attaching
to search warrants that are not imposed by the AMLA with respect to bank inquiry
orders. A constitutional warrant requires that the judge personally examine under
oath or affirmation the complainant and the witnesses he may produce,82 such
examination being in the form of searching questions and answers.83 Those are
impositions which the legislative did not specifically prescribe as to the bank
inquiry order under the AMLA, and we cannot find sufficient legal basis to apply
them to Section 11 of the AMLA. Simply put, a bank inquiry order is not a search
warrant or warrant of arrest as it contemplates a direct object but not the seizure
of persons or property.
Even as the Constitution and the Rules of Court impose a high procedural standard
for the determination of probable cause for the issuance of search warrants which
35

Congress chose not to prescribe for the bank inquiry order under the AMLA,
Congress nonetheless disallowed ex parte applications for the inquiry order. We
can discern that in exchange for these procedural standards normally applied to
search warrants, Congress chose instead to legislate a right to notice and a right to
be heard characteristics of judicial proceedings which are not ex parte. Absent
any demonstrable constitutional infirmity, there is no reason for us to dispute such
legislative policy choices.
VI.
The Courts construction of Section 11 of the AMLA is undoubtedly influenced by
right to privacy considerations. If sustained, petitioners argument that a bank
account may be inspected by the government following an ex parte proceeding
about which the depositor would know nothing would have significant implications
on the right to privacy, a right innately cherished by all notwithstanding the legally
recognized exceptions thereto. The notion that the government could be so
empowered is cause for concern of any individual who values the right to privacy
which, after all, embodies even the right to be "let
alone," the most comprehensive of rights and the right most valued by civilized
people.84
One might assume that the constitutional dimension of the right to privacy, as
applied to bank deposits, warrants our present inquiry. We decline to do so.
Admittedly, that question has proved controversial in American jurisprudence.
Notably, the United States Supreme Court in U.S. v. Miller85 held that there was no
legitimate expectation of privacy as to the bank records of a depositor.86
Moreover, the text of our Constitution has not bothered with the triviality of
allocating specific rights peculiar to bank deposits.
However, sufficient for our purposes, we can assert there is a right to privacy
governing bank accounts in the Philippines, and that such right finds application to
the case at bar. The source of such right is statutory, expressed as it is in R.A. No.
1405 otherwise known as the Bank Secrecy Act of 1955. The right to privacy is
enshrined in Section 2 of that law, to wit:
SECTION 2. All deposits of whatever nature with banks or banking institutions in
the Philippines including investments in bonds issued by the Government of the
Philippines, its political subdivisions and its instrumentalities, are hereby
considered as of an absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or office, except
upon written permission of the depositor, or in cases of impeachment, or upon
order of a competent court in cases of bribery or dereliction of duty of public

36

officials, or in cases where the money deposited or invested is the subject matter
of the litigation. (Emphasis supplied)
Because of the Bank Secrecy Act, the confidentiality of bank deposits remains a
basic state policy in the Philippines.87 Subsequent laws, including the AMLA, may
have added exceptions to the Bank Secrecy Act, yet the secrecy of bank deposits
still lies as the general rule. It falls within the zones of privacy recognized by our
laws.88 The framers of the 1987 Constitution likewise recognized that bank
accounts are not covered by either the right to information89 under Section 7,
Article III or under the requirement of full public disclosure90 under Section 28,
Article II.91 Unless the Bank Secrecy Act is repealed or
amended, the legal order is obliged to conserve the absolutely confidential nature
of Philippine bank deposits.
Any exception to the rule of absolute confidentiality must be specifically legislated.
Section 2 of the Bank Secrecy Act itself prescribes exceptions whereby these bank
accounts may be examined by "any person, government official, bureau or office";
namely when: (1) upon written permission of the depositor; (2) in cases of
impeachment; (3) the examination of bank accounts is upon order of a competent
court in cases of bribery or dereliction of duty of public officials; and (4) the money
deposited or invested is the subject matter of the litigation. Section 8 of R.A. Act
No. 3019, the Anti-Graft and Corrupt Practices Act, has been recognized by this
Court as constituting an additional exception to the rule of absolute
confidentiality,92 and there have been other similar recognitions as well.93
The AMLA also provides exceptions to the Bank Secrecy Act. Under Section 11, the
AMLC may inquire into a bank account upon order of any competent court in cases
of violation of the AMLA, it having been established that there is probable cause
that the deposits or investments are related to unlawful activities as defined in
Section 3(i) of the law, or a money laundering offense under Section 4 thereof.
Further, in instances where there is probable cause that the deposits or
investments are related to kidnapping for ransom,94 certain violations of the
Comprehensive Dangerous Drugs Act of 2002,95 hijacking and other violations
under R.A. No. 6235, destructive arson and murder, then there is no need for the
AMLC to obtain a court order before it could inquire into such accounts.
It cannot be successfully argued the proceedings relating to the bank inquiry order
under Section 11 of the AMLA is a "litigation" encompassed in one of the
exceptions to the Bank Secrecy Act which is when "the money deposited or
invested is the subject matter of the litigation." The orientation of the bank inquiry
order is simply to serve as a provisional relief or remedy. As earlier stated, the
application for such does not entail a full-blown trial.
37

Nevertheless, just because the AMLA establishes additional exceptions to the Bank
Secrecy Act it does not mean that the later law has dispensed with the general
principle established in the older law that "[a]ll deposits of whatever nature with
banks or banking institutions in the Philippines x x x are hereby considered as of an
absolutely confidential nature."96 Indeed, by force of statute, all bank deposits are
absolutely confidential, and that nature is unaltered even by the legislated
exceptions referred to above. There is disfavor towards construing these
exceptions in such a manner that would authorize unlimited discretion on the part
of the government or of any party seeking to enforce those exceptions and inquire
into bank deposits. If there are doubts in upholding the absolutely confidential
nature of bank deposits against affirming the authority to inquire into such
accounts, then such doubts must be resolved in favor of the former. Such a stance
would persist unless Congress passes a law reversing the general state policy of
preserving the absolutely confidential nature of Philippine bank accounts.
The presence of this statutory right to privacy addresses at least one of the
arguments raised by petitioner, that Lilia Cheng had no personality to assail the
inquiry orders before the Court of Appeals because she was not the subject of said
orders. AMLC Resolution No. 75, which served as the basis in the successful
application for the Makati inquiry order, expressly adverts to Citibank Account No.
88576248 "owned by Cheng Yong and/or Lilia G. Cheng with Citibank N.A.,"97
whereas Lilia Chengs petition before the Court of Appeals is accompanied by a
certification from Metrobank that Account Nos. 300852436-0 and 700149801-7,
both of which are among the subjects of the Manila inquiry order, are accounts in
the name of "Yong Cheng or Lilia Cheng."98 Petitioner does not specifically deny
that Lilia Cheng holds rights of ownership over the three said accounts, laying
focus instead on the fact that she was not named as a subject of either the Makati
or Manila RTC inquiry orders. We are reasonably convinced that Lilia Cheng has
sufficiently demonstrated her joint ownership of the three accounts, and such
conclusion leads us to acknowledge that she has the standing to assail via
certiorari the inquiry orders authorizing the examination of her bank accounts as
the orders interfere with her statutory right to maintain the secrecy of said
accounts.
While petitioner would premise that the inquiry into Lilia Chengs accounts finds
root in Section 11 of the AMLA, it cannot be denied that the authority to inquire
under Section 11 is only exceptional in character, contrary as it is to the general
rule preserving the secrecy of bank deposits. Even though she may not have been
the subject of the inquiry orders, her bank accounts nevertheless were, and she
thus has the standing to vindicate the right to secrecy that attaches to said
accounts and their owners. This statutory right to privacy will not prevent the
courts from authorizing the inquiry anyway upon the fulfillment of the
requirements set forth under Section 11 of the AMLA or Section 2 of the Bank
38

Secrecy Act; at the same time, the owner of the accounts have the right to
challenge whether the requirements were indeed complied with.
VII.
There is a final point of concern which needs to be addressed. Lilia Cheng argues
that the AMLA, being a substantive penal statute, has no retroactive effect and the
bank inquiry order could not apply to deposits or investments opened prior to the
effectivity of Rep. Act No. 9164, or on 17 October 2001. Thus, she concludes, her
subject bank accounts, opened between 1989 to 1990, could not be the subject of
the bank inquiry order lest there be a violation of the constitutional prohibition
against ex post facto laws.
No ex post facto law may be enacted,99 and no law may be construed in such
fashion as to permit a criminal prosecution offensive to the ex post facto clause. As
applied to the AMLA, it is plain that no person may be prosecuted under the penal
provisions of the AMLA for acts committed prior to the enactment of the law on 17
October 2001. As much was understood by the lawmakers since they deliberated
upon the AMLA, and indeed there is no serious dispute on that point.
Does the proscription against ex post facto laws apply to the interpretation of
Section 11, a provision which does not provide for a penal sanction but which
merely authorizes the inspection of suspect accounts and deposits? The answer is
in the affirmative. In this jurisdiction, we have defined an ex post facto law as one
which either:
(1) makes criminal an act done before the passage of the law and which was
innocent when done, and punishes such an act;
(2) aggravates a crime, or makes it greater than it was, when committed;
(3) changes the punishment and inflicts a greater punishment than the law
annexed to the crime when committed;
(4) alters the legal rules of evidence, and authorizes conviction upon less or
different testimony than the law required at the time of the commission of the
offense;
(5) assuming to regulate civil rights and remedies only, in effect imposes penalty
or deprivation of a right for something which when done was lawful; and
(6) deprives a person accused of a crime of some lawful protection to which he has
become entitled, such as the protection of a former conviction or acquittal, or a
proclamation of amnesty. (Emphasis supplied)100

39

Prior to the enactment of the AMLA, the fact that bank accounts or deposits were
involved in activities later on enumerated in Section 3 of the law did not, by itself,
remove such accounts from the shelter of absolute confidentiality. Prior to the
AMLA, in order that bank accounts could be examined, there was need to secure
either the written permission of the depositor or a court order authorizing such
examination, assuming that they were involved in cases of bribery or dereliction of
duty of public officials, or in a case where the money deposited or invested was
itself the subject matter of the litigation. The passage of the AMLA stripped
another layer off the rule on absolute confidentiality that provided a measure of
lawful protection to the account holder. For that reason, the application of the bank
inquiry order as a means of inquiring into records of transactions entered into prior
to the passage of the AMLA would be constitutionally infirm, offensive as it is to the
ex post facto clause.
Still, we must note that the position submitted by Lilia Cheng is much broader than
what we are willing to affirm. She argues that the proscription against ex post facto
laws goes as far as to prohibit any inquiry into deposits or investments included in
bank accounts opened prior to the effectivity of the AMLA even if the suspect
transactions were entered into when the law had already taken effect. The Court
recognizes that if this argument were to be affirmed, it would create a horrible
loophole in the AMLA that would in turn supply the means to fearlessly engage in
money laundering in the Philippines; all that the criminal has to do is to make sure
that the money laundering activity is facilitated through a bank account opened
prior to 2001. Lilia Cheng admits that "actual money launderers could utilize the ex
post facto provision of the Constitution as a shield" but that the remedy lay with
Congress to amend the law. We can hardly presume that Congress intended to
enact a self-defeating law in the first place, and the courts are inhibited from such
a construction by the cardinal rule that "a law should be interpreted with a view to
upholding rather than destroying it."101
Besides, nowhere in the legislative record cited by Lilia Cheng does it appear that
there was an unequivocal intent to exempt from the bank inquiry order all bank
accounts opened prior to the passage of the AMLA. There is a cited exchange
between Representatives Ronaldo Zamora and Jaime Lopez where the latter
confirmed to the former that "deposits are supposed to be exempted from scrutiny
or monitoring if they are already in place as of the time the law is enacted."102
That statement does indicate that transactions already in place when the AMLA
was passed are indeed exempt from scrutiny through a bank inquiry order, but it
cannot yield any interpretation that records of transactions undertaken after the
enactment of the AMLA are similarly exempt. Due to the absence of cited authority
from the legislative record that unqualifiedly supports respondent Lilia Chengs
thesis, there is no cause for us to sustain her interpretation of the AMLA, fatal as it
is to the anima of that law.
40

IX.
We are well aware that Lilia Chengs petition presently pending before the Court of
Appeals likewise assails the validity of the subject bank inquiry orders and
precisely seeks the annulment of said orders. Our current declarations may indeed
have the effect of preempting that0 petition. Still, in order for this Court to rule on
the petition at bar which insists on the enforceability of the said bank inquiry
orders, it is necessary for us to consider and rule on the same question which after
all is a pure question of law.
WHEREFORE, the PETITION is DISMISSED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 181704

December 6, 2011

BUREAU OF CUSTOMS EMPLOYEES ASSOCIATION (BOCEA), represented by

its National President (BOCEA National Executive Council) Mr. Romulo A.
Pagulayan, Petitioner,
vs.
HON. MARGARITO B. TEVES, in his capacity as Secretary of the
Department of Finance, HON. NAPOLEON L. MORALES, in his capacity as
Commissioner of the Bureau of Customs, HON. LILIAN B. HEFTI, in her
capacity as Commissioner of the Bureau of Internal Revenue,
Respondents.
DECISION
VILLARAMA, JR., J.:
Before this Court is a petition1 for certiorari and prohibition with prayer for
injunctive relief/s under Rule 65 of the 1997 Rules of Civil Procedure, as amended,
to declare Republic Act (R.A.) No. 9335,2 otherwise known as the Attrition Act of
2005, and its Implementing Rules and Regulations3 (IRR) unconstitutional, and the
implementation thereof be enjoined permanently.
The Facts
On January 25, 2005, former President Gloria Macapagal-Arroyo signed into law
R.A. No. 9335 which took effect on February 11, 2005.
In Abakada Guro Party List v. Purisima4 (Abakada), we said of R.A. No. 9335:
RA [No.] 9335 was enacted to optimize the revenue-generation capability and
collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs
41

(BOC). The law intends to encourage BIR and BOC officials and employees to
exceed their revenue targets by providing a system of rewards and sanctions
through the creation of a Rewards and Incentives Fund (Fund) and a Revenue
Performance Evaluation Board (Board). It covers all officials and employees of the
BIR and the BOC with at least six months of service, regardless of employment
status.
The Fund is sourced from the collection of the BIR and the BOC in excess of their
revenue targets for the year, as determined by the Development Budget and
Coordinating Committee (DBCC). Any incentive or reward is taken from the fund
and allocated to the BIR and the BOC in proportion to their contribution in the
excess collection of the targeted amount of tax revenue.
The Boards in the BIR and the BOC are composed of the Secretary of the
Department of Finance (DOF) or his/her Undersecretary, the Secretary of the
Department of Budget and Management (DBM) or his/her Undersecretary, the
Director General of the National Economic Development Authority (NEDA) or
his/her Deputy Director General, the Commissioners of the BIR and the BOC or
their Deputy Commissioners, two representatives from the rank-and-file employees
and a representative from the officials nominated by their recognized organization.
Each Board has the duty to (1) prescribe the rules and guidelines for the allocation,
distribution and release of the Fund; (2) set criteria and procedures for removing
from the service officials and employees whose revenue collection falls short of the
target; (3) terminate personnel in accordance with the criteria adopted by the
Board; (4) prescribe a system for performance evaluation; (5) perform other
functions, including the issuance of rules and regulations and (6) submit an annual
report to Congress.
The DOF, DBM, NEDA, BIR, BOC and the Civil Service Commission (CSC) were
tasked to promulgate and issue the implementing rules and regulations of RA [No.]
9335, to be approved by a Joint Congressional Oversight Committee created for
such purpose.5
The Joint Congressional Oversight Committee approved the assailed IRR on May
22, 2006. Subsequently, the IRR was published on May 30, 2006 in two
newspapers of general circulation, the Philippine Star and the Manila Standard, and
became effective fifteen (15) days later.6
Contending that the enactment and implementation of R.A. No. 9335 are tainted
with constitutional infirmities in violation of the fundamental rights of its members,
petitioner Bureau of Customs Employees Association (BOCEA), an association of
rank-and-file employees of the Bureau of Customs (BOC), duly registered with the
Department of Labor and Employment (DOLE) and the Civil Service Commission
42

(CSC), and represented by its National President, Mr. Romulo A. Pagulayan

(Pagulayan), directly filed the present petition before this Court against
respondents Margarito B. Teves, in his capacity as Secretary of the Department of
Finance (DOF), Commissioner Napoleon L. Morales (Commissioner Morales), in his
capacity as BOC Commissioner, and Lilian B. Hefti, in her capacity as
Commissioner of the Bureau of Internal Revenue (BIR). In its petition, BOCEA made
the following averments:
Sometime in 2008, high-ranking officials of the BOC pursuant to the mandate of
R.A. No. 9335 and its IRR, and in order to comply with the stringent deadlines
thereof, started to disseminate Collection District Performance Contracts7
(Performance Contracts) for the lower ranking officials and rank-and-file employees
to sign. The Performance Contract pertinently provided:
xxxx
WHEREAS, pursuant to the provisions of Sec. 25 (b) of the Implementing Rules and
Regulations (IRR) of the Attrition Act of 2005, that provides for the setting of
criteria and procedures for removing from the service Officials and Employees
whose revenue collection fall short of the target in accordance with Section 7 of
Republic Act 9335.
xxxx
NOW, THEREFORE, for and in consideration of the foregoing premises, parties unto
this Agreement hereby agree and so agreed to perform the following:
xxxx
2. The "Section 2, PA/PE" hereby accepts the allocated Revenue Collection Target
and further accepts/commits to meet the said target under the following
conditions:
a.) That he/she will meet the allocated Revenue Collection Target and thereby
undertakes and binds himself/herself that in the event the revenue collection falls
short of the target with due consideration of all relevant factors affecting the level
of collection as provided in the rules and regulations promulgated under the Act
and its IRR, he/she will voluntarily submit to the provisions of Sec. 25 (b) of the IRR
and Sec. 7 of the Act; and
b.) That he/she will cascade and/or allocate to respective Appraisers/Examiners or
Employees under his/her section the said Revenue Collection Target and require
them to execute a Performance Contract, and direct them to accept their individual
target.
The
Performance
Contract
executed
by
the
respective
43

Examiners/Appraisers/Employees shall be submitted to the

Commissioner through the LAIC on or before March 31, 2008.

Office

of

the

x x x x8
BOCEA opined that the revenue target was impossible to meet due to the
Governments own policies on reduced tariff rates and tax breaks to big
businesses, the occurrence of natural calamities and because of other economic
factors. BOCEA claimed that some BOC employees were coerced and forced to sign
the Performance Contract. The majority of them, however, did not sign. In
particular, officers of BOCEA were summoned and required to sign the Performance
Contracts but they also refused. To ease the brewing tension, BOCEA claimed that
its officers sent letters, and sought several dialogues with BOC officials but the
latter refused to heed them.
In addition, BOCEA alleged that Commissioner Morales exerted heavy pressure on
the District Collectors, Chiefs of Formal Entry Divisions, Principal Customs
Appraisers and Principal Customs Examiners of the BOC during command
conferences to make them sign their Performance Contracts. Likewise, BOC Deputy
Commissioner Reynaldo Umali (Deputy Commissioner Umali) individually spoke to
said personnel to convince them to sign said contracts. Said personnel were
threatened that if they do not sign their respective Performance Contracts, they
would face possible reassignment, reshuffling, or worse, be placed on floating
status. Thus, all the District Collectors, except a certain Atty. Carlos So of the
Collection District III of the Ninoy Aquino International Airport (NAIA), signed the
Performance Contracts.
BOCEA further claimed that Pagulayan was constantly harassed and threatened
with lawsuits. Pagulayan approached Deputy Commissioner Umali to ask the BOC
officials to stop all forms of harassment, but the latter merely said that he would
look into the matter. On February 5, 2008, BOCEA through counsel wrote the
Revenue Performance Evaluation Board (Board) to desist from implementing R.A.
No. 9335 and its IRR and from requiring rank-and-file employees of the BOC and
BIR to sign Performance Contracts.9 In his letter-reply10 dated February 12, 2008,
Deputy Commissioner Umali denied having coerced any BOC employee to sign a
Performance Contract. He also defended the BOC, invoking its mandate of merely
implementing the law. Finally, Pagulayan and BOCEAs counsel, on separate
occasions, requested for a certified true copy of the Performance Contract from
Deputy Commissioner Umali but the latter failed to furnish them a copy.11
This petition was filed directly with this Court on March 3, 2008. BOCEA asserted
that in view of the unconstitutionality of R.A. No. 9335 and its IRR, and their
adverse effects on the constitutional rights of BOC officials and employees, direct
resort to this Court is justified. BOCEA argued, among others, that its members and
44

other BOC employees are in great danger of losing their jobs should they fail to
meet the required quota provided under the law, in clear violation of their
constitutional right to security of tenure, and at their and their respective families
prejudice.
In their Comment,12 respondents, through the Office of the Solicitor General
(OSG), countered that R.A. No. 9335 and its IRR do not violate the right to due
process and right to security of tenure of BIR and BOC employees. The OSG
stressed that the guarantee of security of tenure under the 1987 Constitution is
not a guarantee of perpetual employment. R.A. No. 9335 and its IRR provided a
reasonable and valid ground for the dismissal of an employee which is germane to
the purpose of the law. Likewise, R.A. No. 9335 and its IRR provided that an
employee may only be separated from the service upon compliance with
substantive and procedural due process. The OSG added that R.A. No. 9335 and its
IRR must enjoy the presumption of constitutionality.
In its Reply,13 BOCEA claimed that R.A. No. 9335 employs means that are
unreasonable to achieve its stated objectives; that the law is unduly oppressive of
BIR and BOC employees as it shifts the extreme burden upon their shoulders when
the Government itself has adopted measures that make collection difficult such as
reduced tariff rates to almost zero percent and tax exemption of big businesses;
and that the law is discriminatory of BIR and BOC employees. BOCEA manifested
that only the high-ranking officials of the BOC benefited largely from the reward
system under R.A. No. 9335 despite the fact that they were not the ones directly
toiling to collect revenue. Moreover, despite the BOCEAs numerous requests,14
BOC continually refused to provide BOCEA the Expenditure Plan on how such
reward was distributed.
Since BOCEA was seeking similar reliefs as that of the petitioners in Abakada Guro
Party List v. Purisima, BOCEA filed a Motion to Consolidate15 the present case with
Abakada on April 16, 2008. However, pending action on said motion, the Court
rendered its decision in Abakada on August 14, 2008. Thus, the consolidation of
this case with Abakada was rendered no longer possible.16
In Abakada, this Court, through then Associate Justice, now Chief Justice Renato C.
Corona, declared Section 1217 of R.A. No. 9335 creating a Joint Congressional
Oversight Committee to approve the IRR as unconstitutional and violative of the
principle of separation of powers. However, the constitutionality of the remaining
provisions of R.A. No. 9335 was upheld pursuant to Section 1318 of R.A. No. 9335.
The Court also held that until the contrary is shown, the IRR of R.A. No. 9335 is
presumed valid and effective even without the approval of the Joint Congressional
Oversight Committee.19

45

Notwithstanding our ruling in Abakada, both parties complied with our

Resolution20 dated February 10, 2009, requiring them to submit their respective
Memoranda.
The Issues
BOCEA raises the following issues:
I.
WHETHER OR NOT THE ATTRITION LAW, REPUBLIC ACT [NO.] 9335, AND ITS
IMPLEMENTING RULES AND REGULATIONS ARE UNCONSTITUTIONAL AS THESE
VIOLATE THE RIGHT TO DUE PROCESS OF THE COVERED BIR AND BOC OFFICIALS
AND EMPLOYEES[;]
II.
WHETHER OR NOT THE ATTRITION LAW, REPUBLIC ACT [NO.] 9335, AND ITS
IMPLEMENTING RULES AND REGULATIONS ARE UNCONSTITUTIONAL AS THESE
VIOLATE THE RIGHT OF BIR AND BOC OFFICIALS AND EMPLOYEES TO THE EQUAL
PROTECTION OF THE LAWS[;]
III.
WHETHER OR NOT REPUBLIC ACT [NO.] 9335 AND ITS IMPLEMENTING RULES AND
REGULATIONS VIOLATE THE RIGHT TO SECURITY OF TENURE OF BIR AND BOC
OFFICIALS AND EMPLOYEES AS ENSHRINED UNDER SECTION 2 (3), ARTICLE IX (B)
OF THE CONSTITUTION[;]
IV.
WHETHER OR NOT REPUBLIC ACT [NO.] 9335 AND ITS IMPLEMENTING RULES AND
REGULATIONS ARE UNCONSTITUTIONAL AS THEY CONSTITUTE UNDUE DELEGATION
OF LEGISLATIVE POWERS TO THE REVENUE PERFORMANCE EVALUATION BOARD IN
VIOLATION OF THE PRINCIPLE OF SEPARATION OF POWERS ENSHRINED IN THE
CONSTITUTION[; AND]
V.
WHETHER OR NOT REPUBLIC ACT [NO.] 9335 IS A BILL OF ATTAINDER AND
HENCE[,] UNCONSTITUTIONAL BECAUSE IT INFLICTS PUNISHMENT THROUGH
LEGISLATIVE FIAT UPON A PARTICULAR GROUP OR CLASS OF OFFICIALS AND
EMPLOYEES WITHOUT TRIAL.21
BOCEA manifested that while waiting for the Court to give due course to its
petition, events unfolded showing the patent unconstitutionality of R.A. No. 9335. It
46

narrated that during the first year of the implementation of R.A. No. 9335, BOC
employees exerted commendable efforts to attain their revenue target of P196
billion which they surpassed by as much as P2 billion for that year alone. However,
this was attained only because oil companies made advance tax payments to BOC.
Moreover, BOC employees were given their "reward" for surpassing said target
only in 2008, the distribution of which they described as unjust, unfair, dubious and
fraudulent because only top officials of BOC got the huge sum of reward while the
employees, who did the hard task of collecting, received a mere pittance of around
P8,500.00. In the same manner, the Bonds Division of BOC-NAIA collected 400+%
of its designated target but the higher management gave out to the employees a
measly sum of P8,500.00 while the top level officials partook of millions of the
excess collections. BOCEA relies on a piece of information revealed by a newspaper
showing the list of BOC officials who apparently earned huge amounts of money by
way of reward.22 It claims that the recipients thereof included lawyers, support
personnel and other employees, including a dentist, who performed no collection
functions at all. These alleged anomalous selection, distribution and allocation of
rewards was due to the failure of R.A. No. 9335 to set out clear guidelines.23
In addition, BOCEA avers that the Board initiated the first few cases of attrition for
the Fiscal Year 2007 by subjecting five BOC officials from the Port of Manila to
attrition despite the fact that the Port of Manila substantially complied with the
provisions of R.A. No. 9335. It is thus submitted that the selection of these officials
for attrition without proper investigation was nothing less than arbitrary. Further,
the legislative and executive departments promulgation of issuances and the
Governments accession to regional trade agreements have caused a significant
diminution of the tariff rates, thus, decreasing over-all collection. These unrealistic
settings of revenue targets seriously affect BIR and BOC employees tasked with the
burden of collection, and worse, subjected them to attrition.24
BOCEA assails the constitutionality of R.A. No. 9335 and its IRR on the following
grounds:
1. R.A. No. 9335 and its IRR violate the BIR and BOC employees right to due
process because the termination of employees who had not attained their revenue
targets for the year is peremptory and done without any form of hearing to allow
said employees to ventilate their side. Moreover, R.A. No. 9335 and its IRR do not
comply with the requirements under CSC rules and regulations as the dismissal in
this case is immediately executory. Such immediately executory nature of the
Boards decision negates the remedies available to an employee as provided under
the CSC rules.
2. R.A. No. 9335 and its IRR violate the BIR and BOC employees right to equal
protection of the law because R.A. No. 9335 and its IRR unduly discriminates
against BIR and BOC employees as compared to employees of other revenue
47

generating government agencies like the Philippine Amusement and Gaming

Corporation, Department of Transportation and Communication, the Air
Transportation Office, the Land Transportation Office, and the Philippine Charity
Sweepstakes Office, among others, which are not subject to attrition.
3. R.A. No. 9335 and its IRR violate the BIR and BOC employees right to security of
tenure because R.A. No. 9335 and its IRR effectively removed remedies provided in
the ordinary course of administrative procedure afforded to government
employees. The law likewise created another ground for dismissal, i.e., nonattainment of revenue collection target, which is not provided under CSC rules and
which is, by its nature, unpredictable and therefore arbitrary and unreasonable.
4. R.A. No. 9335 and its IRR violate the 1987 Constitution because Congress
granted to the Revenue Performance Evaluation Board (Board) the unbridled
discretion of formulating the criteria for termination, the manner of allocating
targets, the distribution of rewards and the determination of relevant factors
affecting the targets of collection, which is tantamount to undue delegation of
legislative power.
5. R.A. No. 9335 is a bill of attainder because it inflicts punishment upon a
particular group or class of officials and employees without trial. This is evident
from the fact that the law confers upon the Board the power to impose the penalty
of removal upon employees who do not meet their revenue targets; that the same
is without the benefit of hearing; and that the removal from service is immediately
executory. Lastly, it disregards the presumption of regularity in the performance of
the official functions of a public officer.25
On the other hand, respondents through the OSG stress that except for Section 12
of R.A. No. 9335, R.A. No. 9335 and its IRR are constitutional, as per our ruling in
Abakada. Nevertheless, the OSG argues that the classification of BIR and BOC
employees as public officers under R.A. No. 9335 is based on a valid and
substantial distinction since the revenue generated by the BIR and BOC is
essentially in the form of taxes, which is the lifeblood of the State, while the
revenue produced by other agencies is merely incidental or secondary to their
governmental functions; that in view of their mandate, and for purposes of tax
collection, the BIR and BOC are sui generis; that R.A. No. 9335 complies with the
"completeness" and "sufficient standard" tests for the permissive delegation of
legislative power to the Board; that the Board exercises its delegated power
consistent with the policy laid down in the law, that is, to optimize the revenue
generation capability and collection of the BIR and the BOC; that parameters were
set in order that the Board may identify the officials and employees subject to
attrition, and the proper procedure for their removal in case they fail to meet the
targets set in the Performance Contract were provided; and that the rights of BIR
and BOC employees to due process of law and security of tenure are duly accorded
48

by R.A. No. 9335. The OSG likewise maintains that there was no encroachment of
judicial power in the enactment of R.A. No. 9335 amounting to a bill of attainder
since R.A. No. 9335 and its IRR merely defined the offense and provided for the
penalty that may be imposed. Finally, the OSG reiterates that the separation from
the service of any BIR or BOC employee under R.A. No. 9335 and its IRR shall be
done only upon due consideration of all relevant factors affecting the level of
collection, subject to Civil Service laws, rules and regulations, and in compliance
with substantive and procedural due process. The OSG opines that the
Performance Contract, far from violating the BIR and BOC employees right to due
process, actually serves as a notice of the revenue target they have to meet and
the possible consequences of failing to meet the same. More, there is nothing in
the law which prevents the aggrieved party from appealing the unfavorable
decision of dismissal.26
In essence, the issues for our resolution are:
1. Whether there is undue delegation of legislative power to the Board;
2. Whether R.A. No. 9335 and its IRR violate the rights of BOCEAs members to: (a)
equal protection of laws, (b) security of tenure and (c) due process; and
3. Whether R.A. No. 9335 is a bill of attainder.
Our Ruling
Prefatorily, we note that it is clear, and in fact uncontroverted, that BOCEA has
locus standi. BOCEA impugns the constitutionality of R.A. No. 9335 and its IRR
because its members, who are rank-and-file employees of the BOC, are actually
covered by the law and its IRR. BOCEAs members have a personal and substantial
interest in the case, such that they have sustained or will sustain, direct injury as a
result of the enforcement of R.A. No. 9335 and its IRR.27
However, we find no merit in the petition and perforce dismiss the same.
It must be noted that this is not the first time the constitutionality of R.A. No. 9335
and its IRR are being challenged. The Court already settled the majority of the
same issues raised by BOCEA in our decision in Abakada, which attained finality on
September 17, 2008. As such, our ruling therein is worthy of reiteration in this
case.
We resolve the first issue in the negative.
The principle of separation of powers ordains that each of the three great branches
of government has exclusive cognizance of and is supreme in matters falling within
its own constitutionally allocated sphere.28 Necessarily imbedded in this doctrine
49

is the principle of non-delegation of powers, as expressed in the Latin maxim

potestas delegata non delegari potest, which means "what has been delegated,
cannot be delegated." This doctrine is based on the ethical principle that such
delegated power constitutes not only a right but a duty to be performed by the
delegate through the instrumentality of his own judgment and not through the
intervening mind of another.29 However, this principle of non-delegation of powers
admits of numerous exceptions,30 one of which is the delegation of legislative
power to various specialized administrative agencies like the Board in this case.
The rationale for the aforementioned exception was clearly explained in our ruling
in Gerochi v. Department of Energy,31 to wit:
In the face of the increasing complexity of modern life, delegation of legislative
power to various specialized administrative agencies is allowed as an exception to
this principle. Given the volume and variety of interactions in todays society, it is
doubtful if the legislature can promulgate laws that will deal adequately with and
respond promptly to the minutiae of everyday life. Hence, the need to delegate to
administrative bodies the principal agencies tasked to execute laws in their
specialized fields the authority to promulgate rules and regulations to
implement a given statute and effectuate its policies. All that is required for the
valid exercise of this power of subordinate legislation is that the regulation be
germane to the objects and purposes of the law and that the regulation be not in
contradiction to, but in conformity with, the standards prescribed by the law. These
requirements are denominated as the completeness test and the sufficient
standard test.32
Thus, in Abakada, we held,
Two tests determine the validity of delegation of legislative power: (1) the
completeness test and (2) the sufficient standard test. A law is complete when it
sets forth therein the policy to be executed, carried out or implemented by the
delegate. It lays down a sufficient standard when it provides adequate guidelines
or limitations in the law to map out the boundaries of the delegates authority and
prevent the delegation from running riot. To be sufficient, the standard must
specify the limits of the delegates authority, announce the legislative policy and
identify the conditions under which it is to be implemented.
RA [No.] 9335 adequately states the policy and standards to guide the President in
fixing revenue targets and the implementing agencies in carrying out the
provisions of the law. Section 2 spells out the policy of the law:
"SEC. 2. Declaration of Policy. It is the policy of the State to optimize the
revenue-generation capability and collection of the Bureau of Internal Revenue
(BIR) and the Bureau of Customs (BOC) by providing for a system of rewards and
50

sanctions through the creation of a Rewards and Incentives Fund and a Revenue
Performance Evaluation Board in the above agencies for the purpose of
encouraging their officials and employees to exceed their revenue targets."
Section 4 "canalized within banks that keep it from overflowing" the delegated
power to the President to fix revenue targets:
"SEC. 4. Rewards and Incentives Fund. A Rewards and Incentives Fund,
hereinafter referred to as the Fund, is hereby created, to be sourced from the
collection of the BIR and the BOC in excess of their respective revenue targets of
the year, as determined by the Development Budget and Coordinating Committee
(DBCC), in the following percentages:
Excess of Collection [Over] the Revenue Targets
Percent (%) of the
Excess Collection to Accrue to the Fund
30% or below

15%
More than 30%
15% of the first 30% plus 20% of the remaining excess
The Fund shall be deemed automatically appropriated the year immediately
following the year when the revenue collection target was exceeded and shall be
released on the same fiscal year.
Revenue targets shall refer to the original estimated revenue collection expected
of the BIR and the BOC for a given fiscal year as stated in the Budget of
Expenditures and Sources of Financing (BESF) submitted by the President to
Congress. The BIR and the BOC shall submit to the DBCC the distribution of the
agencies revenue targets as allocated among its revenue districts in the case of
the BIR, and the collection districts in the case of the BOC.
xxx

xxx

x x x"

Revenue targets are based on the original estimated revenue collection expected
respectively of the BIR and the BOC for a given fiscal year as approved by the
DBCC and stated in the BESF submitted by the President to Congress. Thus, the
determination of revenue targets does not rest solely on the President as it also
undergoes the scrutiny of the DBCC.
On the other hand, Section 7 specifies the limits of the Boards authority and
identifies the conditions under which officials and employees whose revenue
collection falls short of the target by at least 7.5% may be removed from the
service:
"SEC. 7. Powers and Functions of the Board. The Board in the agency shall have
the following powers and functions:
xxx

xxx

xxx
51

(b) To set the criteria and procedures for removing from service officials and
employees whose revenue collection falls short of the target by at least seven and
a half percent (7.5%), with due consideration of all relevant factors affecting the
level of collection as provided in the rules and regulations promulgated under this
Act, subject to civil service laws, rules and regulations and compliance with
substantive and procedural due process: Provided, That the following exemptions
shall apply:
1. Where the district or area of responsibility is newly-created, not exceeding two
years in operation, and has no historical record of collection performance that can
be used as basis for evaluation; and
2. Where the revenue or customs official or employee is a recent transferee in the
middle of the period under consideration unless the transfer was due to
nonperformance of revenue targets or potential nonperformance of revenue
targets: Provided, however, That when the district or area of responsibility covered
by revenue or customs officials or employees has suffered from economic
difficulties brought about by natural calamities or force majeure or economic
causes as may be determined by the Board, termination shall be considered only
after careful and proper review by the Board.
(c) To terminate personnel in accordance with the criteria adopted in the preceding
paragraph: Provided, That such decision shall be immediately executory: Provided,
further, That the application of the criteria for the separation of an official or
employee from service under this Act shall be without prejudice to the application
of other relevant laws on accountability of public officers and employees, such as
the Code of Conduct and Ethical Standards of Public Officers and Employees and
the Anti-Graft and Corrupt Practices Act;
xxx

xxx

x x x"

At any rate, this Court has recognized the following as sufficient standards: "public
interest", "justice and equity", "public convenience and welfare" and "simplicity,
economy and welfare". In this case, the declared policy of optimization of the
revenue-generation capability and collection of the BIR and the BOC is infused with
public interest.33
We could not but deduce that the completeness test and the sufficient standard
test were fully satisfied by R.A. No. 9335, as evident from the aforementioned
Sections 2, 4 and 7 thereof. Moreover, Section 534 of R.A. No. 9335 also provides
for the incentives due to District Collection Offices. While it is apparent that the
last paragraph of Section 5 provides that "[t]he allocation, distribution and release
of the district reward shall likewise be prescribed by the rules and regulations of
the Revenue Performance and Evaluation Board," Section 7 (a)35 of R.A. No. 9335
52

clearly mandates and sets the parameters for the Board by providing that such
rules and guidelines for the allocation, distribution and release of the fund shall be
in accordance with Sections 4 and 5 of R.A. No. 9335. In sum, the Court finds that
R.A. No. 9335, read and appreciated in its entirety, is complete in all its essential
terms and conditions, and that it contains sufficient standards as to negate
BOCEAs supposition of undue delegation of legislative power to the Board.
Similarly, we resolve the second issue in the negative.
Equal protection simply provides that all persons or things similarly situated should
be treated in a similar manner, both as to rights conferred and responsibilities
imposed. The purpose of the equal protection clause is to secure every person
within a states jurisdiction against intentional and arbitrary discrimination,
whether occasioned by the express terms of a statute or by its improper execution
through the states duly constituted authorities. In other words, the concept of
equal justice under the law requires the state to govern impartially, and it may not
draw distinctions between individuals solely on differences that are irrelevant to a
legitimate governmental objective.361awphil
Thus, on the issue on equal protection of the laws, we held in Abakada:
The equal protection clause recognizes a valid classification, that is, a classification
that has a reasonable foundation or rational basis and not arbitrary. With respect to
RA [No.] 9335, its expressed public policy is the optimization of the revenuegeneration capability and collection of the BIR and the BOC. Since the subject of
the law is the revenue-generation capability and collection of the BIR and the BOC,
the incentives and/or sanctions provided in the law should logically pertain to the
said agencies. Moreover, the law concerns only the BIR and the BOC because they
have the common distinct primary function of generating revenues for the national
government through the collection of taxes, customs duties, fees and charges.
The BIR performs the following functions:
"Sec. 18. The Bureau of Internal Revenue. The Bureau of Internal Revenue,
which shall be headed by and subject to the supervision and control of the
Commissioner of Internal Revenue, who shall be appointed by the President upon
the recommendation of the Secretary [of the DOF], shall have the following
functions:
(1) Assess and collect all taxes, fees and charges and account for all revenues
collected;
(2) Exercise duly delegated police powers for the proper performance of its
functions and duties;
53

(3) Prevent and prosecute tax evasions and all other illegal economic activities;
(4) Exercise supervision and control over its constituent and subordinate units; and
(5) Perform such other functions as may be provided by law.
xxx

xxx

x x x"

On the other hand, the BOC has the following functions:

"Sec. 23. The Bureau of Customs. The Bureau of Customs which shall be headed
and subject to the management and control of the Commissioner of Customs, who
shall be appointed by the President upon the recommendation of the Secretary [of
the DOF] and hereinafter referred to as Commissioner, shall have the following
functions:
(1) Collect custom duties, taxes and the corresponding fees, charges and penalties;
(2) Account for all customs revenues collected;
(3) Exercise police authority for the enforcement of tariff and customs laws;
(4) Prevent and suppress smuggling, pilferage and all other economic frauds within
all ports of entry;
(5) Supervise and control exports, imports, foreign mails and the clearance of
vessels and aircrafts in all ports of entry;
(6) Administer all legal requirements that are appropriate;
(7) Prevent and prosecute smuggling and other illegal activities in all ports under
its jurisdiction;
(8) Exercise supervision and control over its constituent units;
(9) Perform such other functions as may be provided by law.
xxx

xxx

x x x"

Both the BIR and the BOC are bureaus under the DOF. They principally perform the
special function of being the instrumentalities through which the State exercises
one of its great inherent functions taxation. Indubitably, such substantial
distinction is germane and intimately related to the purpose of the law. Hence, the
classification and treatment accorded to the BIR and the BOC under RA [No.] 9335
fully satisfy the demands of equal protection.37

54

As it was imperatively correlated to the issue on equal protection, the issues on the
security of tenure of affected BIR and BOC officials and employees and their
entitlement to due process were also settled in Abakada:
Clearly, RA [No.] 9335 in no way violates the security of tenure of officials and
employees of the BIR and the BOC. The guarantee of security of tenure only means
that an employee cannot be dismissed from the service for causes other than
those provided by law and only after due process is accorded the employee. In the
case of RA [No.] 9335, it lays down a reasonable yardstick for removal (when the
revenue collection falls short of the target by at least 7.5%) with due consideration
of all relevant factors affecting the level of collection. This standard is analogous to
inefficiency and incompetence in the performance of official duties, a ground for
disciplinary action under civil service laws. The action for removal is also subject to
civil service laws, rules and regulations and compliance with substantive and
procedural due process.38
In addition, the essence of due process is simply an opportunity to be heard, or as
applied to administrative proceedings, a fair and reasonable opportunity to explain
ones side.39 BOCEAs apprehension of deprivation of due process finds its answer
in Section 7 (b) and (c) of R.A. No. 9335.40 The concerned BIR or BOC official or
employee is not simply given a target revenue collection and capriciously left
without any quarter. R.A. No. 9335 and its IRR clearly give due consideration to all
relevant factors41 that may affect the level of collection. In the same manner,
exemptions42 were set, contravening BOCEAs claim that its members may be
removed for unattained target collection even due to causes which are beyond
their control. Moreover, an employees right to be heard is not at all prevented and
his right to appeal is not deprived of him.43 In fine, a BIR or BOC official or
employee in this case cannot be arbitrarily removed from the service without
according him his constitutional right to due process. No less than R.A. No. 9335 in
accordance with the 1987 Constitution guarantees this.
We have spoken, and these issues were finally laid to rest. Now, the Court
proceeds to resolve the last, but new issue raised by BOCEA, that is, whether R.A.
No. 9335 is a bill of attainder proscribed under Section 22,44 Article III of the 1987
Constitution.
On this score, we hold that R.A. No. 9335 is not a bill of attainder. A bill of attainder
is a legislative act which inflicts punishment on individuals or members of a
particular group without a judicial trial. Essential to a bill of attainder are a
specification of certain individuals or a group of individuals, the imposition of a
punishment, penal or otherwise, and the lack of judicial trial.451avvphi1
In his Concurring Opinion in Tuason v. Register of Deeds, Caloocan City,46 Justice
Florentino P. Feliciano traces the roots of a Bill of Attainder, to wit:
55

Bills of attainder are an ancient instrument of tyranny. In England a few centuries

back, Parliament would at times enact bills or statutes which declared certain
persons attainted and their blood corrupted so that it lost all heritable quality (Ex
Parte Garland, 4 Wall. 333, 18 L.Ed. 366 [1867]). In more modern terms, a bill of
attainder is essentially a usurpation of judicial power by a legislative body. It
envisages and effects the imposition of a penalty the deprivation of life or liberty
or property not by the ordinary processes of judicial trial, but by legislative fiat.
While cast in the form of special legislation, a bill of attainder (or bill of pains and
penalties, if it prescribed a penalty other than death) is in intent and effect a penal
judgment visited upon an identified person or group of persons (and not upon the
general community) without a prior charge or demand, without notice and hearing,
without an opportunity to defend, without any of the civilized forms and safeguards
of the judicial process as we know it (People v. Ferrer, 48 SCRA 382 [1972];
Cummings and Missouri, 4 Wall. 277, 18 L. Ed. 356 [1867]; U.S. v. Lovett, 328, U.S.
303, 90 L.Ed. 1252 [1945]; U.S. v. Brown, 381 U.S. 437, 14 L.Ed. 2d. 484 [1965].
Such is the archetypal bill of attainder wielded as a means of legislative
oppression. x x x47
R.A. No. 9335 does not possess the elements of a bill of attainder. It does not seek
to inflict punishment without a judicial trial. R.A. No. 9335 merely lays down the
grounds for the termination of a BIR or BOC official or employee and provides for
the consequences thereof. The democratic processes are still followed and the
constitutional rights of the concerned employee are amply protected.
A final note.
We find that BOCEAs petition is replete with allegations of defects and anomalies
in allocation, distribution and receipt of rewards. While BOCEA intimates that it
intends to curb graft and corruption in the BOC in particular and in the government
in general which is nothing but noble, these intentions do not actually pertain to
the constitutionality of R.A. No. 9335 and its IRR, but rather in the faithful
implementation thereof. R.A. No. 9335 itself does not tolerate these pernicious acts
of graft and corruption.48 As the Court is not a trier of facts, the investigation on
the veracity of, and the proper action on these anomalies are in the hands of the
Executive branch. Correlatively, the wisdom for the enactment of this law remains
within the domain of the Legislative branch. We merely interpret the law as it is.
The Court has no discretion to give statutes a meaning detached from the manifest
intendment and language thereof.49 Just like any other law, R.A. No. 9335 has in
its favor the presumption of constitutionality, and to justify its nullification, there
must be a clear and unequivocal breach of the Constitution and not one that is
doubtful, speculative, or argumentative.50 We have so declared in Abakada, and
we now reiterate that R.A. No. 9335 and its IRR are constitutional.
56

WHEREFORE, the present petition for certiorari and prohibition with prayer for
injunctive relief/s is DISMISSED.
No costs.
SO ORDERED.
G.R. No. 135080

November 28, 2007

ORLANDO L. SALVADOR, for and in behalf of the Presidential Ad Hoc FactFinding Committee on Behest Loans, Petitioner,
vs.
PLACIDO L. MAPA, JR., RAFAEL A. SISON, ROLANDO M. ZOSA, CESAR C.
ZALAMEA, BENJAMIN BAROT, CASIMIRO TANEDO, J.V. DE OCAMPO, ALICIA
L. REYES, BIENVENIDO R. TANTOCO, JR., BIENVENIDO R. TANTOCO, SR.,
FRANCIS B. BANES, ERNESTO M. CARINGAL, ROMEO V. JACINTO, and
MANUEL D. TANGLAO, Respondents.
DECISION
NACHURA, J.:
The Presidential Ad Hoc Fact-Finding Committee on Behest Loans, (the Committee),
through Atty. Orlando L. Salvador (Atty. Salvador), filed this Petition for Review on
Certiorari seeking to nullify the October 9, 1997 Resolution1 of the Office of the
Ombudsman in OMB-0-96-2428, dismissing the criminal complaint against
respondents on ground of prescription, and the July 27, 1998 Order2 denying
petitioners motion for reconsideration.
On October 8, 1992 then President Fidel V. Ramos issued Administrative Order No.
13 creating the Presidential Ad Hoc Fact-Finding Committee on Behest Loans, which
reads:
WHEREAS, Sec. 28, Article II of the 1987 Constitution provides that "Subject to
reasonable conditions prescribed by law, the State adopts and implements a policy
of full public disclosure of all its transactions involving public interest";
WHEREAS, Sec. 15, Article XI of the 1987 Constitution provides that "The right of
the state to recover properties unlawfully acquired by public officials or employees,
from them or from their nominees or transferees, shall not be barred by
prescription, laches or estoppel";
WHEREAS, there have been allegations of loans, guarantees, and other forms of
financial accommodations granted, directly or indirectly, by government-owned
and controlled bank or financial institutions, at the behest, command, or urging by
57

previous government officials to the disadvantage and detriment of the Philippines

government and the Filipino people;
ACCORDINGLY, an "Ad-Hoc FACT FINDING COMMITTEE ON BEHEST LOANS" is
hereby created to be composed of the following:
Chairman of the Presidential
Commission on Good Government - Chairman
The Solicitor General - Vice-Chairman
Representative from the
Office of the Executive Secretary - Member
Representative from the
Department of Finance - Member
Representative from the
Department of Justice - Member
Representative from the
Development Bank of the Philippines - Member
Representative from the
Philippine National Bank - Member
Representative from the
Asset Privatization Trust - Member
Government Corporate Counsel - Member
Representative from the
Philippine Export and Foreign
Loan Guarantee Corporation - Member
The Ad Hoc Committee shall perform the following functions:
1. Inventory all behest loans; identify the lenders and borrowers, including the
principal officers and stockholders of the borrowing firms, as well as the persons
responsible for granting the loans or who influenced the grant thereof;
2. Identify the borrowers who were granted "friendly waivers," as well as the
government officials who granted these waivers; determine the validity of these
waivers;

58

3. Determine the courses of action that the government should take to recover
those loans, and to recommend appropriate actions to the Office of the President
within sixty (60) days from the date hereof.
The Committee is hereby empowered to call upon any department, bureau, office,
agency, instrumentality or corporation of the government, or any officer or
employee thereof, for such assistance as it may need in the discharge of its
functions.3
By Memorandum Order No. 61 dated November 9, 1992, the functions of the
Committee were subsequently expanded, viz.:
WHEREAS, among the underlying purposes for the creation of the Ad Hoc FactFinding Committee on Behest Loans is to facilitate the collection and recovery of
defaulted loans owing government-owned and controlled banking and/or financing
institutions;
WHEREAS, this end may be better served by broadening the scope of the factfinding mission of the Committee to include all non-performing loans which shall
embrace behest and non-behest loans;
NOW THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines,
by virtue of the power vested in me by law, do hereby order:
Sec. 1. The Ad Hoc Fact-Finding Committee on Behest Loans shall include in its
investigation, inventory, and study, all non-performing loans which shall embrace
both behest and non-behest loans:
The following criteria may be utilized as a frame of reference in determining a
behest loan:
1. It is under-collateralized;
2. The borrower corporation is undercapitalized;
3. Direct or indirect endorsement by high government officials like presence of
marginal notes;
4. Stockholders, officers or agents of the borrower corporation are identified as
cronies;
5. Deviation of use of loan proceeds from the purpose intended;
6. Use of corporate layering;
7. Non-feasibility of the project for which financing is being sought; and
59

8. Extraordinary speed in which the loan release was made.

Moreover, a behest loan may be distinguished from a non-behest loan in that while
both may involve civil liability for non-payment or non-recovery, the former may
likewise entail criminal liability.4
Several loan accounts were referred to the Committee for investigation, including
the loan transactions between Metals Exploration Asia, Inc. (MEA), now Philippine
Eagle Mines, Inc. (PEMI) and the Development Bank of the Philippines (DBP).
After examining and studying the documents relative to the loan transactions, the
Committee determined that they bore the characteristics of behest loans, as
defined under Memorandum Order No. 61 because the stockholders and officers of
PEMI were known cronies of then President Ferdinand Marcos; the loan was undercollateralized; and PEMI was undercapitalized at the time the loan was granted.
Specifically, the investigation revealed that in 1978, PEMI applied for a foreign
currency loan and bank investment on its preferred shares with DBP. The loan
application was approved on April 25, 1979 per Board Resolution (B/R) No. 1297,
but the loan was never released because PEMI failed to comply with the conditions
imposed by DBP. To accommodate PEMI, DBP subsequently adopted B/R No. 2315
dated June 1980, amending B/R No. 1297, authorizing the release of PEMIs foreign
currency loan proceeds, and even increasing the same. Per B/R No. 95 dated
October 16, 1980, PEMI was granted a foreign currency loan of $19,680,267.00 or
P146,601,979.00, and it was released despite non-compliance with the conditions
imposed by DBP. The Committee claimed that the loan had no sufficient collaterals
and PEMI had no sufficient capital at that time because its acquired assets were
only valued at P72,045,700.00, and its paid up capital was only P46,488,834.00.
Consequently, Atty. Orlando L. Salvador, Consultant of the Fact-Finding Committee,
and representing the Presidential Commission on Good Government (PCGG), filed
with the Office of the Ombudsman (Ombudsman) a sworn complaint for violation of
Sections 3(e) and (g) of Republic Act No. 3019, or the Anti-Graft and Corrupt
Practices Act, against the respondents Placido I. Mapa, Jr., Rafael A. Sison; Rolando
M. Zosa; Cesar C. Zalamea; Benjamin Barot, Casimiro Tanedo, J.V. de Ocampo,
Bienvenido R. Tantoco, Jr., Francis B. Banes, Ernesto M. Caringal, Romeo V. Jacinto,
Manuel D. Tanglao and Alicia Ll. Reyes.5
After considering the Committees allegation, the Ombudsman handed down the
assailed Resolution,6 dismissing the complaint. The Ombudsman conceded that
there was ground to proceed with the conduct of preliminary investigation.
Nonetheless, it dismissed the complaint holding that the offenses charged had
already prescribed, viz.:

60

[W]hile apparently, PEMI was undercapitalized at the time the subject loans were
entered into; the financial accommodations were undercollateralized at the time
they were granted; the stockholders and officers of the borrower corporation are
identified cronies of then President Marcos; and the release of the said loans was
made despite non-compliance by PEMI of the conditions attached therewith, which
consequently give a semblance that the subject Foreign Currency Loans are indeed
Behest Loans, the prosecution of the offenses charged cannot, at this point,
prosper on grounds of prescription.
It bears to stress that Section 11 of R.A. No. 3019 as originally enacted, provides
that the prescriptive period for violations of the said Act (R.A. 3019) is ten (10)
years. Subsequently, BP 195, enacted on March 16, 1982, amended the period of
prescription from ten (10) years to fifteen (15) years
Moreover as enunciated in [the] case of People vs. Sandiganbayan, 211 SCRA 241,
the computation of the prescriptive period of a crime violating a special law like
R.A. 3019 is governed by Act No. 3326 which provides, thus:
xxxx
Section 2. Prescription shall begin to run from the day of the commission of the
violation of law, and if the same be not known at the time, from the discovery
thereof and the institution of the judicial proceedings for its investigation and
punishment.
The prescription shall be interrupted when the proceedings are instituted against
the guilty person, and shall begin to run again if the proceedings are dismissed for
reasons not constituting jeopardy.
Corollary thereto, the Supreme Court in the case of People vs. Dinsay, C.A. 40 O.G.
12th Supp., 50, ruled that when there is nothing which was concealed or needed to
be discovered because the entire series of transactions were by public
instruments, the period of prescription commenced to run from the date the said
instrument were executed.
The aforesaid principle was further elucidated in the cases of People vs.
Sandiganbayan, 211 SCRA 241, 1992, and People vs. Villalon, 192 SCRA 521, 1990,
where the Supreme Court pronounced that when the transactions are contained in
public documents and the execution thereof gave rise to unlawful acts, the
violation of the law commences therefrom. Thus, the reckoning period for purposes
of prescription shall begin to run from the time the public instruments came into
existence.
In the case at bar, the subject financial accommodations were entered into by
virtue of public documents (e.g., notarized contracts, board resolutions, approved
61

letter-request) during the period of 1978 to 1981 and for purposes of computing
the prescriptive period, the aforementioned principles in the Dinsay, Villalon and
Sandiganbayan cases will apply. Records show that the complaint was referred and
filed with this Office on October 4, 1996 or after the lapse of more than fifteen (15)
years from the violation of the law. [Deductibly] therefore, the offenses charged
had already prescribed or forever barred by Statute of Limitations.
It bears mention that the acts complained of were committed before the issuance
of BP 195 on March 2, 1982. Hence, the prescriptive period in the instant case is
ten (10) years as provided in the (sic) Section 11 of R.A. 3019, as originally
enacted.
Equally important to stress is that the subject financial transactions between 1978
and 1981 transpired at the time when there was yet no Presidential Order or
Directive naming, classifying or categorizing them as Behest or Non-Behest Loans.
To reiterate, the Presidential Ad Hoc Committee on Behest Loans was created on
October 8, 1992 under Administrative Order No. 13. Subsequently, Memorandum
Order No. 61, dated November 9, 1992, was issued defining the criteria to be
utilized as a frame of reference in determining behest loans. Accordingly, if these
Orders are to be considered the bases of charging respondents for alleged offenses
committed, they become ex-post facto laws which are proscribed by the
Constitution. The Supreme Court in the case of People v. Sandiganbayan, supra,
citing Wilensky V. Fields, Fla, 267 So 2dl, 5, held that "an ex-post facto law is
defined as a law which provides for infliction of punishment upon a person for an
act done which when it was committed, was innocent."7
Thus, the Ombudsman disposed:
WHEREFORE, premises considered, it is hereby respectfully recommended that the
instant case be DISMISSED.
SO RESOLVED.8
The Committee filed a Motion for Reconsideration, but the Ombudsman denied it
on July 27, 1998.
Hence, this petition positing these issues:
A. WHETHER OR NOT THE CRIME DEFINED BY SEC. 3(e) AND (g) OF R.A. 3019 HAS
ALREADY PRESCRIBED AT THE TIME THE PETITIONER FILED ITS COMPLAINT.
B. WHETHER OR NOT ADMINISTRATIVE ORDER NO. 13 AND MEMORANDUM ORDER
NO. 61 ARE EX-POST FACTO LAW[S].9
The Court shall deal first with the procedural issue.
62

Commenting on the petition, Tantoco, Reyes, Mapa, Zalamea and Caringal argued
that the petition suffers from a procedural infirmity which warrants its dismissal.
They claimed that the PCGG availed of the wrong remedy in elevating the case to
this Court.
Indeed, what was filed before this Court is a petition captioned as Petition for
Review on Certiorari. We have ruled, time and again, that a petition for review on
certiorari is not the proper mode by which resolutions of the Ombudsman in
preliminary investigations of criminal cases are reviewed by this Court. The remedy
from the adverse resolution of the Ombudsman is a petition for certiorari under
Rule 65,10 not a petition for review on certiorari under Rule 45.
However, though captioned as a Petition for Review on Certiorari, we will treat this
petition as one filed under Rule 65 since a reading of its contents reveals that
petitioner imputes grave abuse of discretion to the Ombudsman for dismissing the
complaint. The averments in the complaint, not the nomenclature given by the
parties, determine the nature of the action.11 In previous rulings, we have treated
differently labeled actions as special civil actions for certiorari under Rule 65 for
reasons such as justice, equity, and fair play.12
Having resolved the procedural issue, we proceed to the merits of the case.
As the Committee puts it, the issues to be resolved are: (i) whether or not the
offenses subject of its criminal complaint have prescribed, and (ii) whether
Administrative Order No. 13 and Memorandum Order No. 61 are ex post facto laws.
The issue of prescription has long been settled by this Court in Presidential Ad Hoc
Fact-Finding Committee on Behest Loans v. Desierto,13 thus:
[I]t is well-nigh impossible for the State, the aggrieved party, to have known the
violations of R.A. No. 3019 at the time the questioned transactions were made
because, as alleged, the public officials concerned connived or conspired with the
"beneficiaries of the loans." Thus, we agree with the COMMITTEE that the
prescriptive period for the offenses with which the respondents in OMB-0-96-0968
were charged should be computed from the discovery of the commission thereof
and not from the day of such commission.14
The ruling was reiterated in Presidential Ad Hoc Fact-Finding Committee on Behest
Loans v. Ombudsman Desierto,15 wherein the Court explained:
In cases involving violations of R.A. No. 3019 committed prior to the February 1986
EDSA Revolution that ousted President Ferdinand E. Marcos, we ruled that the
government as the aggrieved party could not have known of the violations at the
time the questioned transactions were made. Moreover, no person would have
63

dared to question the legality of those transactions. Thus, the counting of the
prescriptive period commenced from the date of discovery of the offense in 1992
after an exhaustive investigation by the Presidential Ad Hoc Committee on Behest
Loans.16
This is now a well-settled doctrine which the Court has applied in subsequent cases
involving the PCGG and the Ombudsman.17
Since the prescriptive period commenced to run on the date of the discovery of the
offenses, and since discovery could not have been made earlier than October 8,
1992, the date when the Committee was created, the criminal offenses allegedly
committed by the respondents had not yet prescribed when the complaint was
filed on October 4, 1996.
Even the Ombudsman, in its Manifestation & Motion (In Lieu of Comment),18
conceded that the prescriptive period commenced from the date the Committee
discovered the crime, and not from the date the loan documents were registered
with the Register of Deeds. As a matter of fact, it requested that the record of the
case be referred back to the Ombudsman for a proper evaluation of its merit.
Likewise, we cannot sustain the Ombudsmans declaration that Administrative
Order No. 13 and Memorandum Order No. 61 violate the prohibition against ex post
facto laws for ostensibly inflicting punishment upon a person for an act done prior
to their issuance and which was innocent when done.
The constitutionality of laws is presumed. To justify nullification of a law, there
must be a clear and unequivocal breach of the Constitution, not a doubtful or
arguable implication; a law shall not be declared invalid unless the conflict with the
Constitution is clear beyond reasonable doubt. The presumption is always in favor
of constitutionality. To doubt is to sustain.19 Even this Court does not decide a
question of constitutional dimension, unless that question is properly raised and
presented in an appropriate case and is necessary to a determination of the case,
i.e., the issue of constitutionality must be the very lis mota presented.201wphi1
Furthermore, in Estarija v. Ranada,21 where the petitioner raised the issue of
constitutionality of Republic Act No. 6770 in his motion for reconsideration of the
Ombudsmans decision, we had occasion to state that the Ombudsman had no
jurisdiction to entertain questions on the constitutionality of a law. The
Ombudsman, therefore, acted in excess of its jurisdiction in declaring
unconstitutional the subject administrative and memorandum orders.
In any event, we hold that Administrative Order No. 13 and Memorandum Order
No. 61 are not ex post facto laws.

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An ex post facto law has been defined as one (a) which makes an action done
before the passing of the law and which was innocent when done criminal, and
punishes such action; or (b) which aggravates a crime or makes it greater than it
was when committed; or (c) which changes the punishment and inflicts a greater
punishment than the law annexed to the crime when it was committed; or (d)
which alters the legal rules of evidence and receives less or different testimony
than the law required at the time of the commission of the offense in order to
convict the defendant.22 This Court added two (2) more to the list, namely: (e) that
which assumes to regulate civil rights and remedies only but in effect imposes a
penalty or deprivation of a right which when done was lawful; or (f) that which
deprives a person accused of a crime of some lawful protection to which he has
become entitled, such as the protection of a former conviction or acquittal, or a
proclamation of amnesty.23
The constitutional doctrine that outlaws an ex post facto law generally prohibits
the retrospectivity of penal laws. Penal laws are those acts of the legislature which
prohibit certain acts and establish penalties for their violations; or those that define
crimes, treat of their nature, and provide for their punishment.24 The subject
administrative and memorandum orders clearly do not come within the shadow of
this definition. Administrative Order No. 13 creates the Presidential Ad Hoc FactFinding Committee on Behest Loans, and provides for its composition and
functions. It does not mete out penalty for the act of granting behest loans.
Memorandum Order No. 61 merely provides a frame of reference for determining
behest loans. Not being penal laws, Administrative Order No. 13 and Memorandum
Order No. 61 cannot be characterized as ex post facto laws. There is, therefore, no
basis for the Ombudsman to rule that the subject administrative and memorandum
orders are ex post facto.
One final note. Respondents Mapa and Zalamea, in their respective comments,
moved for the dismissal of the case against them. Mapa claims that he was
granted transactional immunity from all PCGG-initiated cases,25 while Zalamea
denied participation in the approval of the subject loans.26 The arguments
advanced by Mapa and Zalamea are matters of defense which should be raised in
their respective counter-affidavits. Since the Ombudsman erroneously dismissed
the complaint on ground of prescription, respondents respective defenses were
never passed upon during the preliminary investigation. Thus, the complaint
should be referred back to the Ombudsman for proper evaluation of its merit.
WHEREFORE, the petition is GRANTED. The assailed Resolution and Order of the
Office of Ombudsman in OMB-0-96-2428, are SET ASIDE. The Office of the
Ombudsman is directed to conduct with dispatch an evaluation of the merits of the
complaint against the herein respondents.
SO ORDERED.
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