REBECCA A. BARBO, G.R. No.

157542
ELEONORA R. DE JESUS,
Pursuant to the said Board Resolutions, petitioners received EME, Rice Allowance, Christmas
and ANTONIO B. MAGTIBAY, Present:
Petitioners, Bonus, and Productivity Bonus from SFWD during the calendar years starting 1994 until 1996.
PUNO, C.J.,
QUISUMBING, On June 30, 1997, a Special Audit Team of COA Regional Office No. III at San Fernando,
YNARES-SANTIAGO, Pampanga audited the financial accounts of SFWD for the period covering January 1, 1994 to July 15,
CARPIO,
1996. The COA Special Audit Team disallowed the payment of the above-mentioned benefits and
- versus - AUSTRIA-MARTINEZ,
CORONA,* allowances received by petitioners after the same were found to be excessive and contrary to Sections
CARPIO MORALES, 228, 162 and 163 of the Government Accounting and Auditing Manual (GAAM) and to Civil Service
AZCUNA, Commission (CSC) Resolution No. 954073[6] in relation to Section 13 of Presidential Decree (PD) No. 198
TINGA, (Provincial Water Utilities Act of 1973) as amended. Thus, petitioners were directed to refund the benefits
COMMISSION ON AUDIT, CHICO-NAZARIO,
and allowances subject of the disallowance.
Respondent. VELASCO, JR.,
NACHURA,
REYES, Petitioners appealed to the COA Regional Director raising the following arguments:
LEONARDO-DE CASTRO, and
BRION, JJ. 1. That CSC Resolution No. 954073 issued in Cruz v. Cabili cannot extend
to appellants, they not having been made parties to the case;
Promulgated:
2. That it applied to appellants, said resolution will partake the nature of an
October 10, 2008 implementing rule and regulation which is beyond CSCs jurisdiction to
x--------------------------------------------------------------------------------------------------------------------x issue;

DECISION 3. That DBM, not CSC, is the appropriate authority to rule on

compensation;

LEONARDO-DE CASTRO, J.:
* On Official Leave as per Special Order No. 520
By this Petition for Certiorari under Rule 64 of the Rules of Court petitioners seek to annul or
reverse COA Decision No. 2000-133[1] dated May 16, 2000 and Resolution[2] dated February 27,
2003 rendered by the Commission on Audit (COA). In the said issuances, the COA affirmed its Regional
Directors 1st Indorsement [3] dated June 5, 1998, which in turn affirmed Notice of Disallowance No. 97-004
(94, 95, 96)[4] dated June 30, 1997 issued by the Special Audit Team against petitioners Rebecca A. Barbo,
Eleonora R. de Jesus, and Antonio B. Magtibay.
Petitioners are officials of the Local Water Utilities Administration (LWUA) and designated
members of the Interim Board of Directors of the San Fernando Water District (SFWD).
On December 4, 1995 and February 12 1996, the LWUA Board of Trustees issued Board
Resolution No. 313, Series of 1995 and Board Resolution No. 39, Series of 1996 [5] respectively. These
Board Resolutions authorized the Board of Directors of SFWD to receive reimbursable allowances in the
form of Representation and Transportation Allowance (RATA), Travel Allowance, and Extraordinary &
Miscellaneous Expense (EME); Christmas Bonus; Uniform Allowance; Rice Allowance; Medical and
Dental Benefits; and Productivity Incentive Bonus.
4. That Christmas Bonus, Productivity Bonus, Rice Allowance, and Uniform
Allowance are not compensation;
5. That Extraordinary and Miscellaneous Expenses are not compensation
but reimbursement of expenses; and
6. That the right of water district directors and the interim general manager
to receive allowances and other benefits is appropriately recognized by
LWUA.
The Regional Director, in his First Indorsement dated June 5, 1998, affirmed the Special Audit
Teams Notice of Disallowance No. 97-004 (94, 95, 96). The Regional Director declared that
the COA Special Audit Team was correct in citing CSC Resolution No. 954073, which resolved the case
of LWUA Employees Association for Progress (LEAP) v. Cabili and de Vera[7], because the said resolution
applied on all fours to petitioners case. In the said resolution, the CSC held that it is illegal for any LWUA
officer or employee who sits as member of the Board of Directors of a water district to receive and collect
any additional, double, or indirect compensation from said water district, except per diems, pursuant to
Section 13 of PD No. 198, as amended.
From the denial of their appeal by the COA Regional Director, petitioners elevated the matter to
the COA via a petition for review.
 In the herein challenged Decision dated May 16, 2000, the COA denied the petition for review
and affirmed the ruling of the COA Regional Director as contained in its First
Indorsement. The COA stressed that the Directors of local water districts (LWDs) were prohibited from
receiving compensation other than per diems and that LWUA Board Resolution Nos. 313 and 39 were
contrary to the law which it intended to implement, specifically, Section 13 of PD No. 198, as
amended. Citing the case Peralta v. Mathay,[8] the COA declared that the subject bonuses and allowances
received by petitioners constituted additional compensation or remuneration. The dispositive portion of the
decision reads:
PREMISES CONSIDERED, the instant Petition for Review of Mr. Simplicio
Belisario, et al. [herein petitioners included], is hereby denied. Accordingly, the
subject disallowances are affirmed with all officers and employees who received the
bonuses and allowances liable for their settlement together with the officers named in
the Notice of Disallowance, namely: Mr. Dionisio Polintan, General Manager, Ms.
Merlita Garcia, Finance Officer, and Ms. Arsenia Sicat, Cashier / Property
Management Supervisor. (Words in brackets ours)
Petitioners motion for reconsideration was denied by the COA in its challenged Resolution
dated February 27, 2003.
Thus, petitioners now come to this Court, imputing grave abuse of discretion amounting to lack
of jurisdiction on the part of the COA in issuing COA Decision No. 2000-133 and February 27,
2003 Resolution. Specifically, petitioners raise the following issues:
I. WHETHER OR NOT RESPONDENT HAS THE JURISDICTION
TO MOTU PROPRIO DECLARE LWUA BOARD RESOLUTION NO. 313,
SERIES OF 1995, AS AMENDED BY RESOLUTION NO. 39, SERIES OF
1996, TO BE TOTALLY IN CONFLICT WITH SEC. 13 OF PD NO. 198, AS
AMENDED.
II. WHETHER OR NOT SEC. 13, PD NO. 198, AS AMENDED, PROHIBIT
PETITIONERS ENTITLEMENT TO RATA, EME, BONUSES AND OTHER
BENEFITS AND ALLOWANCES.
III. WHETHER OR NOT PETITIONERS ARE LIABLE TO SETTLE /
REFUND THE DISALLOWED ALLOWANCES, BONUSES AND OTHER
BENEFITS RECEIVED BY PETITIONERS.
The petition is partly meritorious.
Petitioners contend that the COA lacks jurisdiction to declare whether or not LWUA Board
Resolution Nos. 313 and 39 are consistent with Section 13 of PD No. 198, as amended, on matters
pertaining to the compensation and other benefits of the Directors of the LWD. This is allegedly the
function of the courts.
The Court has already settled this issue in a myriad of cases.[9] Particularly, in Rodolfo S. de
Jesus [Catbalogan Water District] v. COA,[10] the Court upheld the authority and jurisdiction of the COA to
rule on the legality of the disbursement of government funds by a water district and declared that such
power does not conflict with the jurisdiction of the courts, the DBM, and the LWUA. Citing Section 2,
Subdivision D, Article IX of the 1987 Constitution[11] the Court declared that it is the mandate of the COA to
audit all government agencies, including government-owned and controlled corporations with original
charters. Indeed, the Constitution specifically vests in the COA the authority to determine whether
government entities comply with laws and regulations in disbursing government funds, and to disallow
illegal or irregular disbursements of government funds.[12] This independent constitutional body is tasked to
be vigilant and conscientious in safeguarding the proper use of the governments, and ultimately the
peoples, property.[13]
Anent the second issue, a water district is a government-owned and controlled corporation with
a special charter since it is created pursuant to a special law, Presidential Decree (PD) 198. It is
undeniable that PD 198 expressly prohibits the grant of RATA, EME, and bonuses to members of the
board of Water Districts. Section 13 of PD 198, as amended, reads as follows:
Compensation. - Each director shall receive a per diem, to be determined
by the board, for each meeting of the board actually attended by him, but no director
shall receive per diems in any given month in excess of the equivalent of the total per
diems of four meetings in any given month.No director shall receive other
compensation for services to the district.
Any per diem in excess of P50 shall be subject to approval of the
Administration.
In Baybay Water District v. Commission on Audit,[14] the members of the board of Baybay Water
District also questioned the disallowance by the COA of payment of RATA, rice allowance and excessive
per diems. The Court ruled that pursuant to PD 198, members of the board of water districts cannot
receive allowances and benefits more than those allowed by PD 198. Construing Section 13 of PD 198,
in Baybay, the Court declared:
xxx Under 13 of this Decree, per diem is precisely intended to be the
compensation of members of board of directors of water districts. Indeed, words and
phrases in a statute must be given their natural, ordinary, and commonly-accepted
meaning, due regard being given to the context in which the words and phrases are
used. By specifying the compensation which a director is entitled to receive and by
limiting the amount he/she is allowed to receive in a month, and, in the same
paragraph, providing No director shall receive other compensation than the amount
provided for per diems, the law quite clearly indicates that directors of water districts
are authorized to receive only the per diem authorized by law and no other
compensation or allowance in whatever form.
 Section 13 of PD 198 is clear enough that it needs no interpretation. It expressly prohibits the
grant of compensation other than the payment of per diem, thus preempting the exercise of any discretion
by water districts in paying other allowances and bonuses.
Lastly, the petitioners claim that they are not liable to settle or refund the disallowed payments of
benefits and allowances which they have received in good faith and as de jure officers of SFWD.
While we sustain the disallowance of the above benefits by respondent COA, however, we find
that the SFWD affected personnel who received the above mentioned benefits and privileges acted in
good faith under the honest belief that Board Resolution Nos. 313 and 39 authorized such
payment. In Abanilla v. Commission On Audit[15] citing Querubin v. Regional Cluster Director, Legal and
Adjudication Office, COA Regional Office VI, Pavia, Iloilo City,[16] this Court held:
Considering, however, that all the parties here acted in good faith, we cannot
countenance the refund of subject incentive benefits for the year 1992, which
amounts the petitioners have already received. Indeed, no indicia of bad faith can
be detected under the attendant facts and circumstances. The officials and chiefs of
offices concerned disbursed such incentive benefits in the honest belief that the
amounts given were due to the recipients and the latter accept the same with
gratitude, confident that they richly deserve such benefits.
x x x. Petitioners here received the additional allowances and bonuses in good faith
under the honest belief that LWUA Board Resolution No. 313 authorized such
payment. At the time petitioners received the additional allowances and bonuses,
the Court had not yet decided Baybay Water District. Petitioners had no knowledge
that such payment was without legal basis. Thus, being in good faith, petitioners
need not refund the allowances and bonuses they received but disallowed by
the COA.
The foregoing disquisitions were also applied to the more recent cases of De Jesus [Metro
Cariaga Water District];[17] Molen [Metro Iloilo Water District]; and Magno [Mangaldan Water
District].[18] The same reasoning and conclusions of the Court were reiterated in de Jesus v.
CSC[19] and Cabili and de Vera v. CSC.[20] We find no reason to depart from the rulings in these cases
which essentially involve the same issues as the instant case.
WHEREFORE, the instant petition is hereby PARTIALLY GRANTED. COA Decision No. 2000-133 dated
May 16, 2000 and Resolution dated February 27, 2003 are hereby AFFIRMED with
the MODIFICATION that the petitioners need not refund the benefits and allowances disallowed by
the COA.
No costs.
SO ORDERED.
G.R. No. 97149 March 31, 1992
FIDENCIO Y. BEJA, SR., petitioner,
vs.
COURT OF APPEALS, HONORABLE REINERIO O. REYES, in his capacity as Secretary of the
Department of Transportation and Communications; COMMODORE ROGELIO A. DAYAN, in his
capacity as General Manager of the Philippine Ports Authority; DEPARTMENT OF
TRANSPORTATION AND COMMUNICATIONS, ADMINISTRATIVE ACTION BOARD; and JUSTICE
ONOFRE A. VILLALUZ, in his capacity as Chairman of the Administrative Action Board,
DOTC, respondents.
ROMERO, J.:
The instant petition for certiorari questions the jurisdiction of the Secretary of the Department of
Transportation and Communications (DOTC) and/or its Administrative Action Board (AAB) over
administrative cases involving personnel below the rank of Assistant General Manager of the Philippine
Ports Authority (PPA), an agency attached to the said Department.
Petitioner Fidencio Y. Beja, Sr. 1 was first employed by the PPA as arrastre supervisor in 1975. He
became Assistant Port Operations Officer in 1976 and Port Operations Officer in 1977. In February 1988,
as a result of the reorganization of the PPA, he was appointed Terminal Supervisor.
On October 21, 1988, the PPA General Manager, Rogelio A. Dayan, filed Administrative Case No.
11-04-88 against petitioner Beja and Hernando G. Villaluz for grave dishonesty, grave misconduct, willful
violation of reasonable office rules and regulations and conduct prejudicial to the best interest of the
service. Beja and Villaluz allegedly erroneously assessed storage fees resulting in the loss of P38,150.77
on the part of the PPA. Consequently, they were preventively suspended for the charges. After a
preliminary investigation conducted by the district attorney for Region X, Administrative Case No. 11-04-88
was "considered closed for lack of merit."
On December 13, 1988, another charge sheet, docketed as Administrative Case No. 12-01-88, was filed
against Beja by the PPA General Manager also for dishonesty, grave misconduct, violation of reasonable
office rules and regulations, conduct prejudicial to the best interest of the service and for being notoriously
undesirable. The charge consisted of six (6) different specifications of administrative offenses including
fraud against the PPA in the total amount of P218,000.00. Beja was also placed under preventive
suspension pursuant to Sec. 41 of P.D. No. 807.
The case was redocketed as Administrative Case No. PPA-AAB-1-049-89 and thereafter, the PPA general
manager indorsed it to the AAB for "appropriate action." At the scheduled hearing, Beja asked for
continuance on the ground that he needed time to study the charges against him. The AAB proceeded to
hear the case and gave Beja an opportunity to present evidence. However, on February 20, 1989, Beja
filed a petition for certiorari with preliminary injunction before the Regional Trial Court of Misamis
Oriental. 2 Two days later, he filed with the AAB a manifestation and motion to suspend the hearing of
Administrative Case No. PPA-AAB-1-049-89 on account of the pendency of the certiorari proceeding
before the court. AAB denied the motion and continued with the hearing of the administrative case.
Thereafter, Beja moved for the dismissal of the certiorari case below and proceeded to file before this
Court a petition for certiorari with preliminary injunction and/or temporary restraining order. The case was
docketed as G.R. No. 87352 captioned "Fidencio Y. Beja v. Hon. Reinerio 0. Reyes, etc., et al." In the en
banc resolution of March 30, 1989, this Court referred the case to the Court of Appeals for "appropriate
action." 3 G.R. No. 87352 was docketed in the Court of Appeals as CA-G.R. SP No. 17270.
Meanwhile, a decision was rendered by the AAB in Administrative Case No. PPA-AAB-049-89. Its
dispositive portion reads:
WHEREFORE, judgment is hereby rendered, adjudging the following, namely:
a) That respondents Geronimo Beja, Jr. and Hernando Villaluz are exonerated from the charge against
them;
b) That respondent Fidencio Y. Beja be dismissed from the service;
c) That his leave credits and retirement benefits are declared forfeited;
d) That he be disqualified from re-employment in the government service;
e) That his eligibility is recommended to be cancelled.
Pasig, Metro Manila, February 28, 1989.
On December 10, 1990, after appropriate proceedings, the Court of Appeals also rendered a decision 4 in
CA-G.R. SP No. 17270 dismissing the petition for certiorari for lack of merit. Hence, Beja elevated the
case back to this Court through an "appeal by certiorari with preliminary injunction and/or temporary
restraining order."
We find the pleadings filed in this case to be sufficient bases for arriving at a decision and hence, the filing
of memoranda has been dispensed with.
In his petition, Beja assails the Court of Appeals for having "decided questions of substance in a way
probably not in accord with law or with the applicable decisions" of this Court. 5 Specifically, Beja contends
that the Court of Appeals failed to declare that: (a) he was denied due process; (b) the PPA general
manager has no power to issue a preventive suspension order without the necessary approval of the PPA
board of directors; (c) the PPA general manager has no power to refer the administrative case filed against
him to the DOTC-AAB, and (d) the DOTC Secretary, the Chairman of the DOTC-AAB and DOTC-AAB
itself as an adjudicatory body, have no jurisdiction to try the administrative case against him. Simply put,
Beja challenges the legality of the preventive suspension and the jurisdiction of the DOTC Secretary
and/or the AAB to initiate and hear administrative cases against PPA personnel below the rank of
Assistant General Manager.
Petitioner anchors his contention that the PPA general manager cannot subject him to a preventive
suspension on the following provision of Sec. 8, Art. V of Presidential Decree No. 857 reorganizing the
PPA:
(d) the General Manager shall, subject to the approval of the Board, appoint and remove personnel below
the rank of Assistant General Manager. (Emphasis supplied.)
Petitioner contends that under this provision, the PPA Board of Directors and not the PPA General
Manager is the "proper disciplining authority. 6
As correctly observed by the Solicitor General, the petitioner erroneously equates "preventive suspension"
as a remedial measure with "suspension" as a penalty for administrative dereliction. The imposition of
preventive suspension on a government employee charged with an administrative offense is subject to the
following provision of the Civil Service Law, P.D. No. 807:
Sec. 41. Preventive Suspension. — The proper disciplining authority may preventively suspend any
subordinate officer or employee under his authority pending an investigation, if the charge against such
officer or employee involves dishonesty, oppression or grave misconduct, or neglect in the performance of
duty, or if there are reasons to believe that the respondent is guilty of charges which would warrant his
removal from the service.
Imposed during the pendency of an administrative investigation, preventive suspension is not a penalty in
itself. It is merely a measure of precaution so that the employee who is charged may be separated, for
obvious reasons, from the scene of his alleged misfeasance while the same is being investigated. 7 Thus,
preventive suspension is distinct from the administrative penalty of removal from office such as the one
mentioned in Sec. 8(d) of P.D. No 857. While the former may be imposed on a respondent during the
investigation of the charges against him, the latter is the penalty which may only be meted upon him at the
termination of the investigation or the final disposition of the case.
The PPA general manager is the disciplining authority who may, by himself and without the approval of the
PPA Board of Directors, subject a respondent in an administrative case to preventive suspension. His
disciplinary powers are sanctioned, not only by Sec. 8 of P.D. No. 857 aforequoted, but also by Sec. 37 of
P.D. No. 807 granting heads of agencies the "jurisdiction to investigate and decide matters involving
disciplinary actions against officers and employees" in the PPA.
Parenthetically, the period of preventive suspension is limited. It may be lifted even if the disciplining
authority has not finally decided the administrative case provided the ninety-day period from the effectivity
of the preventive suspension has been exhausted. The employee concerned may then be
reinstated. 8 However, the said ninety-day period may be interrupted. Section 42 of P.D. No. 807 also
mandates that any fault, negligence or petition of a suspended employee may not be considered in the
computation of the said period. Thus, when a suspended employee obtains from a court of justice a
restraining order or a preliminary injunction inhibiting proceedings in an administrative case, the lifespan of
such court order should be excluded in the reckoning of the permissible period of the preventive
suspension. 9
With respect to the issue of whether or not the DOTC Secretary and/or the AAB may initiate and hear
administrative cases against PPA Personnel below the rank of Assistant General Manager, the
Court qualifiedly rules in favor of petitioner.
The PPA was created through P.D. No. 505 dated July 11, 1974. Under that Law, the corporate powers of
the PPA were vested in a governing Board of Directors known as the Philippine Port Authority Council. Sec.
5(i) of the same decree gave the Council the power "to appoint, discipline and remove, and determine the
composition of the technical staff of the Authority and other personnel."
On December 23, 1975, P.D. No. 505 was substituted by P.D. No. 857, See. 4(a) thereof created the
Philippine Ports Authority which would be "attached" to the then Department of Public Works,
Transportation and Communication. When Executive Order No. 125 dated January 30, 1987 reorganizing
the Ministry of Transportation and Communications was issued, the PPA retained its "attached"
status. 10 Even Executive Order No. 292 or the Administrative Code of 1987 classified the PPA as an
agency "attached" to the Department of Transportation and Communications (DOTC). Sec. 24 of Book IV,
Title XV, Chapter 6 of the same Code provides that the agencies attached to the DOTC "shall continue to
operate and function in accordance with the respective charters or laws creating them, except when they
conflict with this Code."
Attachment of an agency to a Department is one of the three administrative relationships mentioned in
Book IV, Chapter 7 of the Administrative Code of 1987, the other two being supervision and control and
administrative supervision. "Attachment" is defined in Sec. 38 thereof as follows:
(3) Attachment. — (a) This refers to the lateral relationship between the Department or its equivalent and
the attached agency or corporation for purposes of policy and program coordination. The coordination
shall be accomplished by having the department represented in the governing board of the attached
agency or corporation, either as chairman or as a member, with or without voting rights, if this is permitted
by the charter; having the attached corporation or agency comply with a system of periodic reporting which
shall reflect the progress of programs and projects; and having the department or its equivalent provide
general policies through its representative in the board, which shall serve as the framework for the internal
policies of the attached corporation or agency;
(b) Matters of day-to-day administration or all those pertaining to internal operations shall he left to the
discretion or judgment of the executive officer of the agency or corporation. In the event that the Secretary
and the head of the board or the attached agency or corporation strongly disagree on the interpretation
and application of policies, and the Secretary is unable to resolve the disagreement, he shall bring the
matter to the President for resolution and direction;
(c) Government-owned or controlled corporations attached to a department shall submit to the Secretary
concerned their audited financial statements within sixty (60) days after the close of the fiscal year; and
(d) Pending submission of the required financial statements, the corporation shall continue to operate on
the basis of the preceding year's budget until the financial statements shall have been submitted. Should
any government-owned or controlled corporation incur an operation deficit at the close of its fiscal year, it
shall be subject to administrative supervision of the department; and the corporation's operating and
capital budget shall be subject to the department's examination, review, modification and approval.
(emphasis supplied.)
An attached agency has a larger measure of independence from the Department to which it is attached
than one which is under departmental supervision and control or administrative supervision. This is borne
out by the "lateral relationship" between the Department and the attached agency. The attachment is
merely for "policy and program coordination." With respect to administrative matters, the independence of
an attached agency from Departmental control and supervision is further reinforced by the fact that even
an agency under a Department's administrative supervision is free from Departmental interference with
respect to appointments and other personnel actions "in accordance with the decentralization of personnel
functions" under the Administrative Code of 1987. 11 Moreover, the Administrative Code explicitly provides
that Chapter 8 of Book IV on supervision and control shall not apply to chartered institutions attached to a
Department. 12
Hence, the inescapable conclusion is that with respect to the management of personnel, an attached
agency is, to a certain extent, free from Departmental interference and control. This is more explicitly
shown by P.D. No. 857 which provides:
Sec. 8. Management and Staff. — a) The President shall, upon the recommendation of the Board, appoint
the General Manager and the Assistant General Managers.
(b) All other officials and employees of the Authority shall be selected and appointed on the basis of merit
and fitness based on a comprehensive and progressive merit system to be established by the Authority
immediately upon its organization and consistent with Civil Service rules and regulations. The recruitment,
transfer, promotion, and dismissal of all personnel of the Authority, including temporary workers, shall be
governed by such merit system.
(c) The General Manager shall, subject to the approval of the Board, determine the staffing pattern and the
number of personnel of the Authority, define their duties and responsibilities, and fix their salaries and
emoluments. For professional and technical positions, the General Manager shall recommend salaries
and emoluments that are comparable to those of similar positions in other government-owned corporations,
the provisions of existing rules and regulations on wage and position classification notwithstanding.
(d) The General Manager shall, subject to the approval by the Board, appoint and remove personnel below
the rank of Assistant General Manager.
xxx xxx xxx
(emphasis supplied.)
Although the foregoing section does not expressly provide for a mechanism for an administrative
investigation of personnel, by vesting the power to remove erring employees on the General Manager, with
the approval of the PPA Board of Directors, the law impliedly grants said officials the power to investigate
its personnel below the rank of Assistant Manager who may be charged with an administrative offense.
During such investigation, the PPA General Manager, as earlier stated, may subject the employee
concerned to preventive suspension. The investigation should be conducted in accordance with the
procedure set out in Sec. 38 of P.D. No. 807. 13 Only after gathering sufficient facts may the PPA General
Manager impose the proper penalty in accordance with law. It is the latter action which requires the
approval of the PPA Board of Directors. 14
From an adverse decision of the PPA General Manager and the Board of Directors, the employee
concerned may elevate the matter to the Department Head or Secretary. Otherwise, he may appeal
directly to the Civil Service Commission. The permissive recourse to the Department Secretary is
sanctioned by the Civil Service Law (P.D. No. 807) under the following provisions:
Sec. 37. Disciplinary Jurisdiction. — (a) The Commission shall decide upon appeal all administrative
disciplinary cases involving the imposition of a penalty of suspension for more than thirty days, or fine in an
amount exceeding thirty days salary, demotion in rank or salary or transfer, removal or dismissal from
office. A complaint may be filed directly with the Commission by a private citizen against a government
official or employee in which case it may hear and decide the case or it may deputize any department or
agency or official or group of officials to conduct the investigation. The results of the investigation shall be
submitted to the Commission with recommendation as to the penalty to be imposed or other action to be
taken.
(b) The heads of departments, agencies and instrumentalities, provinces, cities and municipalities shall
have jurisdiction to investigate and decide matters involving disciplinary action against officers and
employees under their jurisdiction. The decisions shall be final in case the penalty imposed is suspension
for not more than thirty days or fine in an amount not exceeding thirty days' salary. In case the decision
rendered by a bureau or office head is appealable to the Commission, the same may be initially appealed
to the department and finally to the Commission and pending appeal, the same shall be executory except
when the penalty is removal, in which case the same shall be executory only after confirmation by the
department head.
xxx xxx xxx
(Emphasis supplied.)
It is, therefore, clear that the transmittal of the complaint by the PPA General Manager to the AAB was
premature. The PPA General Manager should have first conducted an investigation, made the proper
recommendation for the imposable penalty and sought its approval by the PPA Board of Directors. It was
discretionary on the part of the herein petitioner to elevate the case to the then DOTC Secretary Reyes.
Only then could the AAB take jurisdiction of the case.
The AAB, which was created during the tenure of Secretary Reyes under Office Order No. 88-318 dated
July 1, 1988, was designed to act, decide and recommend to him "all cases of administrative malfeasance,
irregularities, grafts and acts of corruption in the Department." Composed of a Chairman and two (2)
members, the AAB came into being pursuant to Administrative Order No. 25 issued by the President on
May 25, 1987. 15 Its special nature as a quasi-judicial administrative body notwithstanding, the AAB is not
exempt from the observance of due process in its proceedings. 16 We are not satisfied that it did so in this
case the respondents protestation that petitioner waived his right to be heard notwithstanding. It should be
observed that petitioner was precisely questioning the AAB's jurisdiction when it sought judicial recourse.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED insofar as it upholds the power of the
PPA General Manager to subject petitioner to preventive suspension and REVERSED insofar as it
validates the jurisdiction of the DOTC and/or the AAB to act on Administrative Case No.
PPA-AAB-1-049-89 and rules that due process has been accorded the petitioner.
The AAB decision in said case is hereby declared NULL and VOID and the case in REMANDED to the
PPA whose General Manager shall conduct with dispatch its reinvestigation.
The preventive suspension of petitioner shall continue unless after a determination of its duration, it is
found that he had served the total of ninety (90) days in which case he shall be reinstated immediately.
SO ORDERED.
Blaquera vs Alcala
G.R. No. 119597. September 11, 1998]
ASSOCIATION OF DEDICATED EMPLOYEES OF THE PHILIPPINE TOURISM AUTHORITY
(ADEPT), petitioner, vs. COMMISSION ON AUDIT (COA), respondent.
DECISION
PURISIMA, J.:
These are cases for certiorari and prohibition, challenging the constitutionality and validity of
Administrative Order Nos. 29 and 268 on various grounds.
The facts in G.R. Nos. 109406, 110642, 111494, and 112056 are undisputed, to wit:
Petitioners are officials and employees of several government departments and agencies who were
paid incentive benefits for the year 1992, pursuant to Executive Order No. 292[1] (EO 292), otherwise
known as the Administrative Code of 1987, and the Omnibus Rules Implementing Book V [2]of EO 292.On
January 19, 1993, then President Fidel V. Ramos (President Ramos) issued Administrative Order No.
29 (AO 29) authorizing the grant of productivity incentive benefits for the year 1992 in the maximum
amount of P1,000.00[3] and reiterating the prohibition[4] under Section 7[5]of Administrative Order No.
268 (AO 268), enjoining the grant of productivity incentive benefits without prior approval of the
President. Section 4 of AO 29 directed [a]ll departments, offices and agencies which authorized payment
of CY 1992 Productivity Incentive Bonus in excess of the amount authorized under Section 1 hereof
[arehereby directed] to immediately cause the return/refund of the excess within a period of six months to
commence fifteen (15) days after the issuance of this Order. In compliance therewith, the heads of the
departments or agencies of the government concerned, who are the herein respondents, caused the
deduction from petitioners salaries or allowances of the amounts needed to cover the alleged
overpayments. To prevent the respondents from making further deductions from their salaries or
allowances, the petitioners have come before this Court to seek relief.
In G.R. No. 119597, the facts are different but the petition poses a common issue with the other
consolidated cases. The petitioner, Association of Dedicated Employees of the Philippine Tourism
Authority (ADEPT), is an association of employees of the Philippine Tourism Authority (PTA) who were
granted productivity incentive bonus for calendar year 1992 pursuant to Republic Act No. 6971 (RA
6971), otherwise known as the Productivity Incentives Act of 1990. Subject bonus was, however,
disallowed by the Corporate Auditor on the ground that it was prohibited under Administrative Order No. 29
dated January 19, 1993.[6] The disallowance of the bonus in question was finally brought on appeal to the
Commission on Audit (COA) which denied the appeal in its Decision[7]of March 6, 1995, ratiocinating, thus:
xxx Firstly, the provisions of RA #6971 insofar as the coverage is concerned, refer to business enterprises
including government owned and/or controlled corporations performing proprietary functions.
Section 1a of the Supplemental Rules Implementing RA #6971 classified such coverage as:
All business enterprises, with or without existing duly certified labor organizations, including government
owned and/or controlled corporations performing proprietary functions which are established solely for
business or profit and accordingly excluding those created, maintained or acquired in pursuance of a
policy of the State enunciated in the Constitution, or by law and those whose officers and employees are
covered by the Civil Service. (underscoring supplied)
The PTrA is a GOCC created in pursuance of a policy of the State. Section 9 of Presidential Decree No.
189 states that To implement the policies and program of the Department (Dept. of Tourism), there is
hereby created a Philippine Tourism Authority, xxx. Likewise, Section 21 of the same decree provides that
All officials and employees of the Authority, xxx, shall be subject to Civil Service Law, rules and regulations,
and the coverage of the Wage and Position Classification Office.
Furthermore, although Supplemental Rules and Regulations implementing R.A. #6971 was issued only on
December 27, 1991, the law itself is clear that it pertains to private business enterprises whose employees
are covered by the Labor Code of the Philippines, as mentioned in the following provisions:
Section 5. Labor Management Committee. xxx that at the request of any party to the negotiation, the
National Wages and Productivity Commission of the Department of Labor and Employment shall provide
the necessary studies, xxx.
Section 8. Notification. - A business enterprise which adopts a productivity incentive program shall submit
copies of the same to the National Wages and Productivity Commission and to the Bureau of Internal
Revenue for their information and record.
Section 9. Disputes and Grievances. - Whenever disputes, grievances, or other matters arise from the
interpretation or implementation of the productivity incentive program, xxx may seek the assistance of the
National Conciliation and Mediation Board of the Department of Labor and Employment for such purpose.
xxx
Therefore, considering the foregoing, the PTrA is within the exclusion provision of the Implementing Rules
of RA #6971 and so, it (PTrA) does not fall within its coverage as being entitled to the productivity incentive
bonus under RA #6971.
Secondly, Administrative Order No. 29 which is the basis for the grant of the productivity incentive
bonus/benefits for CY 1992 also expressly provides prohibiting payments of similar benefits in future years
unless duly authorized by the President.
Thirdly, the disallowance of the Auditor, PTrA has already been resolved when this Commission
circularized thru COA Memorandum #92-758 dated April 3, 1992 the Supplemental to Rules Implementing
RA 6971 otherwise known as the Productivity Incentives Act of 1990. xxx
Lastly, considering the title of RA #6971, i.e. An Act to encourage productivity and maintain industrial
peace by providing incentives to both labor and capital, and its implementing rules and regulations
prepared by the Department of Labor and Employment and the Department of Finance, this Office
concludes that said law/regulation pertains to agencies in the private sector whose employees are covered
by the Labor Code.
With the denial of its appeal, petitioner found its way here via the petition in G.R. No. 119597, to seek relief
from the aforesaid decision of COA.
We will first resolve the issue on the applicability of RA 6971 to petitioner ADEPT in G.R. No.
119597 before passing upon the constitutionality or validity of Administrative Orders 29 and 268.
Section 3 of RA 6971, reads:
SECTION 3. Coverage. This Act shall apply to all business enterprises with or without existing and duly
recognized or certified labor organizations, including government-owned and controlled corporations
performing proprietary functions. It shall cover all employees and workers including casual, regular,
supervisory and managerial employees. (underscoring ours)
Pursuant to Section 10[8] of RA 6971, the Secretary of Labor and Secretary of Finance issued
Supplemental Rules to Implement the said law, as follows:
Section 1. - Paragraph (a) Section 1, Rule II of the Rules Implementing RA 6971, shall be amended to
read as follows:
Coverage. These Rules shall apply to:
(a) All business enterprises with or without existing duly certified labor organizations, including
government-owned and controlled corporations performing proprietary functions which are established
solely for business or profit or gain and accordingly excluding those created, maintained or acquired in
pursuance of a policy of the state, enunciated in the Constitution or by law, and those whose officers and
employees are covered by the Civil Service. (underscoring ours)
xxx
Petitioner contends that the PTA is a government-owned and controlled corporation performing
proprietary function, and therefore the Secretary of Labor and Employment and Secretary of Finance
exceeded their authority in issuing the aforestated Supplemental Rules Implementing RA 6971.
Government-owned and controlled corporations may perform governmental or proprietary functions
or both, depending on the purpose for which they have been created. If the purpose is to obtain special
corporate benefits or earn pecuniary profit, the function is proprietary. If it is in the interest of health, safety
and for the advancement of public good and welfare, affecting the public in general, the function is
governmental.[9] Powers classified as proprietary are those intended for private advantage and benefit.[10]
The PTA was established by Presidential Decree No. 189, as amended by Presidential Decree No.
564 (PD 564).
Its general purposes [11] are:
1. To implement the policies and programs of the Department of Tourism (Department);
2. To develop tourist zones;
3. To assist private enterprises in undertaking tourism projects;
4. To operate and maintain tourist facilities;
5. To assure land availability for private investors in hotels and other tourist facilities;
6. To coordinate all tourism project plans and operations.
Its specific functions and powers[12] are:
1. Planning and development of tourism projects
a. To assist the Department make a comprehensive survey of the physical and natural
tourism resources of the Philippines; to establish the order of priority for development of
said areas; to recommend to the President the proclamation of a tourist zone; and to
define and fix the boundaries of the zone;
b. To formulate a development plan for each zone;
c. To submit to the President through the National Economic and Development Authority
for review and approval all development plans before the same are enforced or
implemented;
d. To submit to the President an Annual Progress Report;
e. To assist the Department to determine the additional capacity requirements for various
tourist facilities and services; to prepare a ten-year Tourism Priorities Plan; to update
annually the ten year Tourism Priorities Plan.
f. To gather, collate and analyze statistical data and other pertinent information for the
effective implementation of PD 564.
2. Acquisition and disposition of lands and other assets for tourist zone purposes
a. To acquire possession and ownership of all lands transferred to it from other
government corporations and institutions and any land having tourism potential and
earmarked in the Tourism Priorities Plans for intensive development into a tourist zone or
as a part thereof, subject to the approval of the President.
b. To acquire by purchase, by negotiation or by condemnation proceedings any private
land within and without the tourist zones for any of the following reasons: (a) consolidation
of lands for tourist zone development purposes, (b) prevention of land speculation in
areas declared as tourist zones, (c) acquisition of right of way to the zones, (d) protection
of water shed areas and natural assets with tourism value, and (e) for any other purpose
expressly authorized under PD 564.
c. For the purpose of providing land acquisition assistance to registered tourism
enterprises, to sell, subdivide, resell, lease, sublease, rent out, or otherwise, to said
registered tourism enterprises under sufficiently soft terms for use specifically in the
development of hotels, recreational facilities, and other tourist services.
d. To develop and/or subdivide any land in its name or undertake condominium projects
thereon, and sell subdivision lots or condominium units to private persons for investment
purposes.
e. To take over or transfer to a registered tourism enterprise in accordance with law any
lease on foreshore areas within a tourist zone or adjacent thereto, in cases said areas are
not being utilized in accordance with the PTAs approved zone development plan and
wherein the lessee concerned does not agree to conform accordingly.
f. To arrange for the reclamation of any land adjacent to or adjoining a tourist zone in
coordination with appropriate government agencies.
3. Infrastructure development for tourist zone purposes
a. To contract, supervise and pay for infrastructure works and civil works within a tourist
zone owned and operated by the PTA.
b. To coordinate with appropriate government agencies the development of infrastructure
requirements supporting a tourist zone.
c. To take water from any public stream, river, creek, lake, spring, or waterfall and to alter,
straighten, obstruct or increase the flow of water in streams.
4. Zone administration and control
a. To formulate and implement zoning regulations.
b. To determine and regulate the enterprises to be established within a tourist zone.
c. To ensure, through the proper authorities concerned, the ecological preservation,
maintenance and/or rehabilitation of the common and the public areas within a tourist
zone and the environment thereof.
d. To identify and recommend to the President the preservation and/or restoration of
national monuments or preserves; to arrange for the preservation and/or restoration of the
same with appropriate government agencies or with the private sector or with the owners
themselves of said tourist attractions; and to identify and recommend to the appropriate
authorities concerned the declaration of tourist areas and attractions as national
monuments and preserves.
5. Project and investment promotions
a. To identify, develop, invest in, own, manage and operate such projects as it may deem
to be vital for recreation and rest but not sufficiently attractive economically for private
investment.
b. To construct hotel buildings and other tourist facilities within a tourist zone and in turn
lease such facilities to registered tourism enterprises for operation, management and
maintenance.
c. To organize, finance, invest in, manage and operate wholly-owned subsidiary
corporations.
6. Direct assistance to registered enterprises
a. To administer the tax and other incentives granted to registered enterprises.
b. To evaluate, approve and register or reject any and all tourism projects or enterprises
established within the tourist zones.
c. To grant medium and long-term loans and/or re-lend any funds borrowed for the
purpose to duly qualified registered tourism enterprises.
d. To guarantee local and foreign borrowings of registered enterprises.
 e. To provide equity investments in the form of cash and/or land.
f. To extend technical, management and financial assistance to tourism projects.
g. To identify, contact and assist in negotiations of suitable partners for both local and
foreign investors interested in investment or participation in the tourism industry.
h. To assist registered enterprises and prospective investors to have their papers
processed with dispatch by government offices.
7. Other powers and functions
a. To engage or retain the services of financial, management, legal, technical, and/or
project consultants from the private or government sector.
b. To have the power to succeed by its corporate name.
c. To adopt, alter, and use a corporate seal.
d. To sue and be sued under its corporate name.
e. To enter into any contracts of any kind and description.
f. To own or possess personal and/or real property.
g. To make, adopt and enforce rules and regulations to execute its powers, duties and
functions.
h. To purchase, hold, and alienate shares of stock or bonds of any corporation.
I. To collect fees or charges as may be imposed under PD 564.
j. To contract indebtedness and issue bonds.
k. To fix and collect rentals for the lease, use or occupancy of lands, buildings, or other
property owned or administered by PTA.
l. To do any and all acts and things necessary to carry out the purposes for which the PTA
is created.
Categorized in light of the foregoing provisions of law in point, PTAs governmental functions include
the first, third, fourth, and sixth of the aforesaid general purposes. The second[13] and fifth general
purposes fall under its proprietary functions.
With respect to PTAs specific functions and powers, the first and fourth are governmental in nature
while the fifth specific functions and powers are proprietary in character. The second, third, sixth, and
seventh specific functions and powers can be considered partly-governmental and partly-proprietary,
considering that 2(a), 2(b), 2(c), 2(d), 2(e), 3(a), 6(c), 6(d), 6(e), 7(h), 7(j), and 7(k) are proprietary
functions while 2(f), 3(b), 3(c), 6(a), 6(b), 6(f), 6(g), 6(h), 7(a), 7(b), 7(c), 7(d), 7(f), 7(g), and 7(l) are
governmental functions. The specific functions and powers treated in 7(e) and 7(i) may be
classified either as proprietary or governmental, depending on the circumstances under which they are
exercised or performed.
The aforecited powers and functions of PTA are predominantly governmental, principally geared
towards the development and promotion of tourism in the scenic Philippine archipelago. But it is irrefutable
that PTA also performs proprietary functions, as envisaged by its charter.
Reliance on the above analysis of the functions and powers of PTA does not suffice for the
determination of whether or not it is within the coverage of RA 6971. For us to resolve the issues raised
here solely on the basis of the classification of PTAs powers and functions may lead to the rendition of
judgment repugnant to the legislative intent and to established doctrines, as well, such as on the
prohibition against government workers to strike.[14] Under RA 6971, the workers have the right to strike.
To ascertain whether PTA is within the ambit of RA 6971, there is need to find out the legislative
intent, and to refer to other provisions of RA 6971 and other pertinent laws, that may aid the Court in ruling
on the right of officials and employees of PTA to receive bonuses under RA 6971.
Petitioner cites an entry in the journal of the House of Representatives to buttress its submission that
PTA is within the coverage of RA 6971, to wit:
Chairman Veloso: The intent of including government-owned and controlled corporations within the
coverage of the Act is the recognition of the principle that when government goes into business, it (divests)
itself of its immunity from suit and goes down to the level of ordinary private enterprises and subjects itself
to the ordinary laws of the land just like ordinary private enterprises. Now, when people work therefore in
government-owned or controlled corporations, it is as if they are also, just like in the private sector, entitled
to all the benefits of all laws that apply to workers in the private sector. In my view, even including the right
to organize, bargain.... VELOSO (Bicameral Conference Committee on Labor and Employment, pp. 15-16)
After a careful study, the Court is of the view, and so holds, that contrary to petitioners interpretation,
the government-owned and controlled corporations Mr. Chairman Veloso had in mind were
government-owned and controlled corporations incorporated under the general corporation law. This is so
because only workers in private corporations and government-owned and controlled corporations,
incorporated under the general corporation law, have the right to bargain (collectively). Those in
government corporations with special charter, which are subject to Civil Service Laws, have no right to
bargain (collectively), except where the terms and conditions of employment are not fixed by law. [15] Their
rights and duties are not comparable with those in the private sector.
Since the terms and conditions of government employment are fixed by law, government workers cannot
use the same weapons employed by workers in the private sector to secure concessions from their
employers. The principle behind labor unionism in private industry is that industrial peace cannot be
secured through compulsion by law. Relations between private employers and their employees rest on an
essentially voluntary basis. Subject to the minimum requirements of wage laws and other labor and
welfare legislation, the terms and conditions of employment in the unionized private sector are settled
through the process of collective bargaining. In government employment, however, it is the legislature and,
where properly given delegated power, the administrative heads of government which fix the terms and
conditions of employment. And this is effected through statutes or administrative circulars, rules, and
regulations, not through collective bargaining agreements. (Alliance of Government Workers v. Minister of
Labor and Employment, 124 SCRA 1) (italics ours)
Government corporations may be created by special charters or by incorporation under the general
corporation law. Those created by special charters are governed by the Civil Service Law while those
incorporated under the general corporation law are governed by the Labor Code. [16]
The legislative intent to place only government-owned and controlled corporations performing
proprietary functions under the coverage of RA 6971 is gleanable from the other provisions of the law. For
instance, section 2[17] of said law envisions industrial peace and harmony and to provide corresponding
incentives to both labor and capital; section 4[18] refers to representatives of labor and management;
section 5[19] mentions of collective bargaining agent(s) of the bargaining unit(s); section 6[20] relates to
existing collective bargaining agreements, and labor and management; section 7[21] speaks of strike or
lockout; and section 9[22] purports to seek the assistance of the National Conciliation and Mediation Board
of the Department of Labor and Employment and include the name(s) of the voluntary arbitrators or panel
of voluntary arbitrator. All the aforecited provisions of law apply only to private corporations and
government-owned and controlled corporations organized under the general corporation law. Only they
have collective bargaining agents, collective bargaining units, collective bargaining agreements, and the
right to strike or lockout.
To repeat, employees of government corporations created by special charters have neither the right
to strike nor the right to bargain collectively, as defined in the Labor Code. The case of Social Security
System Employees Association indicates the following remedy of government workers not allowed to
strike or bargain collectively, to wit:
Government employees may, therefore, through their unions or associations, either petition the
Congress for the betterment of the terms and conditions of employment which are within the
ambit of legislation or negotiate with the appropriate government agencies for the improvement
of those which are not fixed by law. If there be any unresolved grievances, the dispute may be
referred to the Public Sector Labor-Management Council for appropriate action. But employees
in the civil service may not resort to strikes, walkouts and other temporary work stoppages, like
workers in the private sector, to pressure the Government to accede to their demands. (supra,
footnote 14, p. 698; italics ours)
It is a rule in statutory construction that every part of the statute must be interpreted with reference to
the context, i.e., that every part of the statute must be considered together with the other parts, and kept
subservient to the general intent of the whole enactment.[23] The provisions of RA 6971, taken together,
reveal the legislative intent to include only government-owned and controlled corporations performing
proprietary functions within its coverage.
Every statute must be construed and harmonized with other statutes as to form a uniform system of
jurisprudence.[24] We note Section 1, Rule X of the Omnibus Rules Implementing Book V of EO 292, which
reads:
SECTION 1. - Each department or agency of government, whether national or local,
including bureaus and agencies, state colleges and universities, and government
owned and controlled corporations with original charters, shall establish its own
Department or Agency Employee Suggestions and Incentives Award System in
accordance with these Rules and shall submit the same to the Commission for
approval. (underscoring ours)
It is thus evident that PTA, being a government-owned and controlled corporation with original charter
subject to Civil Service Law, Rules and Regulations,[25] is already within the scope of an incentives award
system under Section 1, Rule X of the Omnibus Rules Implementing EO 292 issued by the Civil Service
Commission (Commission). Since government-owned and controlled corporations with original charters
do have an incentive award system, Congress enacted a law that would address the same concern of
officials and employees of government-owned and controlled corporations incorporated under the general
corporation law.
All things studiedly considered in proper perspective, the Court finds no reversible error in the finding
by respondent Commission that PTA is not within the purview of RA 6971. As regards the promulgation of
implementing rules and regulations, it bears stressing that the power of administrative officials to
promulgate rules in the implementation of the statute is necessarily limited to what is provided for in the
legislative enactment.[26] In the case under scrutiny, the Supplementary Rules Implementing RA 6971
issued by the Secretary of Labor and Employment and the Secretary of Finance accord with the
intendment and provisions of RA 6971. Consequently, not being covered by RA 6971, AO 29 applies to
the petitioner.
We now tackle the common issue posited by the consolidated petitions on the constitutionality of AO
29 and AO 268.
Petitioners contend and argue, that:
I. AO 29 AND AO 268 ARE VIOLATIVE OF THE PROVISIONS OF EO 292 AND, HENCE,
NULL AND VOID.
II. AO 29 AND AO 268 UNLAWFULLY USURP THE CONSTITUTIONAL AUTHORITY
GRANTED SOLELY TO THE CIVIL SERVICE COMMISSION.
III. THE FORCED REFUND OF INCENTIVE PAY IS AN UNCONSTITUTIONAL
IMPAIRMENT OF A CONTRACTUAL OBLIGATION.
IV. ASSUMING, FOR THE SAKE OF ARGUMENT ONLY, THAT THE GRANT OF
PRODUCTIVITY INCENTIVE BENEFITS WAS INVALID, THE SAME SHOULD BE THE
PERSONAL LIABILITY OF OFFICIALS DIRECTLY RESPONSIBLE THEREFOR IN
ACCORDANCE WITH SECTION 9 OF AO 268.
Issued by the then President Corazon Aquino (President Aquino) on July 25, 1987 in the exercise of
her legislative powers under the 1987 Constitution,[27] EO 292, or the Administrative Code of
1987, provided for the following incentive award system:
Sec. 31. Career and Personnel Development Plans. - Each department or agency shall
prepare a career and personnel development plan which shall be integrated into a national
plan by the Commission. Such career and personnel development plans which shall include
provisions on merit promotions, performance evaluation, in-service training, including overseas
and local scholarships and training grants, job rotation, suggestions and incentive award
systems, and such other provisions for employees health, welfare, counseling, recreation and
similar services.
Sec. 35. Employee Suggestions and Incentive Award System. - There shall be established a
government-wide employee suggestions and incentive awards system which shall be
administered under such rules, regulations, and standards as maybe promulgated by the
Commission.
In accordance with rules, regulations, and standards promulgated by the Commission, the
President or the head of each department or agency is authorized to incur whatever
necessary expenses involved in the honorary recognition of subordinate officers and
employees of the government who by their suggestions, inventions, superior accomplishment,
and other personal efforts contribute to the efficiency, economy, or other improvement of
government operations, or who perform such other extraordinary acts or services in the public
interest in connection with, or in relation to, their official employment.
Sec. 36. Personnel Relations. - (1) It shall be the concern of the Commission to provide
leadership and assistance in developing employee relations programs in the department or
agencies.
(2) Every Secretary or head of agency shall take all proper steps toward the creation of an
atmosphere conducive to good supervisor-employee relations and the improvement of
employee morale.
Pursuant to the provision of Section 12(2),[28] Chapter 3, Book V of EO 292, the Commission adopted and
prescribed the Omnibus Rules Implementing Book V of EO 292 which, among others, provide:
Sec. 1. - Each department or agency of government, whether national or local, including
bureaus and agencies, state colleges and universities, and government owned and controlled
corporations with original charters, shall establish its own Department or Agency Employee
Suggestions and Incentives Award System in accordance with these Rules and shall submit
the same to the Commission for approval.
Sec. 2. - The System is designed to encourage creativity, innovativeness, efficiency, integrity
and productivity in the public service by recognizing and rewarding officials and employees,
individually or in groups, for their suggestions, inventions, superior accomplishments, and
other personal efforts which contribute to the efficiency, economy, or other improvement in
government operations, or for other extraordinary acts of services in the public interest.
xxx
Sec. 7. - The incentive awards shall consist of, though not limited to, the following:
xxx
(c) Productivity Incentive which shall be given to an employee or group of employees who has
exceeded their targets or has incurred incremental improvement over existing targets.
On February 21, 1992, President Aquino issued AO 268 which granted each official and employee
of the government the productivity incentive benefits in a maximum amount equivalent to thirty percent
(30%) of his one (1) month basic salary but in no case shall such amount be less than two thousand pesos
(P2,000.00),[29] for those who have rendered at least one year of service as of December 31, 1991.[30] Said
AO carried the prohibition, provided in Section 7 thereof, which reads:
SECTION 7. The productivity incentive benefits herein authorized shall be granted only for
Calendar Year 1991. Accordingly, all heads of agencies, including the governing boards of
government-owned or -controlled corporations and financial institutions, are hereby strictly
prohibited from authorizing/granting productivity incentive benefits or other allowances of
similar nature for Calendar Year 1992 and future years pending the result of a comprehensive
study being undertaken by the Office of the President in coordination with the Civil Service
Commission and the Department of Budget and Management on the matter.
The formulation of the necessary implementing guidelines for Executive Order No. 486 dated
8 November 1991 establishing a performance-based incentive system for government-owned
or -controlled corporations shall likewise be included in the comprehensive study referred to in
the preceding paragraph.
On January 19, 1993, President Ramos issued AO 29 which granted productivity incentive benefits
to government employees in the maximum amount of P1,000.00[31] for the calendar year 1992 but
reiterated the proscription under Section 7 of AO 268, thus:
SECTION 2. The prohibition prescribed under Section 7 of Administrative Order No. 268 is
hereby reiterated. Accordingly, all heads of government offices/agencies, including
government-owned and/or controlled corporations, as well as their respective governing
boards are hereby enjoined and prohibited from authorizing/granting Productivity Incentive
Benefits or any and all similar forms of allowances/benefits without prior approval and
authorization via Administrative Order by the Office of the President. Henceforth, anyone
found violating any of the mandates in this Order, including all officials/employees and the
COA Auditor-in-Charge of such government office/agency found to have taken part thereof,
shall be accordingly and severely dealt with in accordance with the applicable provisions of
existing penal laws.
Consequently, all administrative authorizations to grant any form of allowances/benefits and
all forms of additional compensation usually paid outside of the prescribed basic salary under
R.A. No. 6758, the Salary Standardization Law, that are inconsistent with the legislated policy
on the matter or are not covered by any legislative action are hereby revoked.
The implementation of Executive Order No. 486 dated November 8, 1991, as amended by
Executive Order No. 518 dated May 29, 1992, is hereby deferred until a more comprehensive
and equitable scheme for the grant of the benefits that can be applied government-wide is
formulated by the Department of Budget and Management.
Petitioners theorize that AO 29 and AO 268 violate EO 292 and since the latter is a law, it prevails
over executive issuances. Petitioners likewise assert that AO 29 and AO 268 encroach upon the
constitutional authority of the Civil Service Commission to adopt measures to strengthen the merit and
rewards system and to promulgate rules, regulations and standards governing the incentive awards
system of the civil service.
The Court is not impressed with petitioners submission. AO 29 and AO 268 were issued in the valid
exercise of presidential control over the executive departments.
In establishing a Civil Service Commission, the 1987 Constitution delineated its function, as follows:
The Civil Service Commission, as the central personnel agency of the Government, shall
establish a career service and adopt measures to promote morale, efficiency, integrity,
responsiveness, progressiveness, and courtesy in the civil service. It shall strengthen the
merit and rewards system, integrate all human resources development programs for all levels
and ranks, and institutionalize a management climate conducive to public accountability. It
shall submit to the President and the Congress an annual report on its personnel
programs. (Section 3, Article IX, B, 1987 Constitution)
The Commission handles personnel matters of the government. As the central personnel agency of the
Government, it is tasked to formulate and establish a system of incentives and rewards for officials and
employees in the public sector, alike.
The functions of the Commission have been decentralized to the different departments, offices, and
agencies of the government --
SEC. 1. Declaration of Policy. -- The State shall insure and promote the Constitutional
mandate that appointments in the Civil Service shall be made only according to merit and
fitness; that the Civil Service Commission, as the central personnel agency of the
Government shall establish a career service, adopt measures to promote morale, efficiency,
integrity, responsiveness, and courtesy in the civil service, strengthen the merit and rewards
system, integrate all human resources development programs for all levels and ranks, and
institutionalize a management climate conducive to public accountability; that public office is a
public trust and public officers and employees must at all times be accountable to the
people; and that personnel functions shall be decentralized, delegating the corresponding
authority to the departments, offices and agencies where such functions can be effectively
performed. (Section 1, Chapter I, Subtitle A, Title I, EO 292) (underscoring ours)
Specifically, implementation of the Employee Suggestions and Incentive Award System has been
decentralized to the President or to the head of each department or agency --
 Sec. 35. Employee Suggestions and Incentive Award System. - There shall be established a
government-wide employee suggestions and incentive awards system which shall be
administered under such rules, regulations, and standards as maybe promulgated by the
Commission.
In accordance with rules, regulations, and standards promulgated by the Commission, the
President or the head of each department or agency is authorized to incur whatever
necessary expenses involved in the honorary recognition of subordinate officers and
employees of the government who by their suggestions, inventions, superior accomplishment,
and other personal efforts contribute to the efficiency, economy, or other improvement of
government operations, or who perform such other extraordinary acts or services in the public
interest in connection with, or in relation to, their official employment. (EO 292) (underscoring
ours)
The President is the head of the government. Governmental power and authority are exercised and
implemented through him. His power includes the control over executive departments --
The president shall have control of all the executive departments, bureaus, and offices. He shall ensure
that the laws be faithfully executed. (Section 17, Article VII, 1987 Constitution)
Control means the power of an officer to alter or modify or set aside what a subordinate officer had
done in the performance of his duties and to substitute the judgment of the former for that of the latter. [32] It
has been held that [t]he President can, by virtue of his power of control, review, modify, alter or nullify any
action, or decision, of his subordinate in the executive departments, bureaus, or offices under him. He can
exercise this power motu proprio without need of any appeal from any party.[33]
When the President issued AO 29 limiting the amount of incentive benefits, enjoining heads of
government agencies from granting incentive benefits without prior approval from him, and directing the
refund of the excess over the prescribed amount, the President was just exercising his power of control
over executive departments. This is decisively clear from the WHEREAS CLAUSES of AO 268 and AO 29,
to wit:
ADMINISTRATIVE ORDER NO. 268
xxx
WHEREAS, the productivity incentive benefits granted by the different agencies are of varying amounts,
causing dissension/demoralization on the part of those who had received less and those who have not yet
received any such benefit, thereby defeating the purpose for which the same should be granted; and
WHEREAS, there exists the need to regulate the grant of the productivity incentive benefits or other similar
allowances in conformity with the policy on standardization of compensation pursuant to Republic Act No.
6758;
x x x.
ADMINISTRATIVE ORDER NO. 29
xxx
WHEREAS, the faithful implementation of statutes, including the Administrative Code of 1987 and
all laws governing all forms of additional compensation and personnel benefits is a Constitutional
prerogative vested in the President of the Philippines under Section 17, Article VII of the 1987
Constitution;
WHEREAS, the Constitutional prerogative includes the determination of the rates, the timing and
schedule of payment, and final authority to commit limited resources of government for the
payment of personnel incentives, cash awards, productivity bonus, and other forms of additional
compensation and fringe benefits;
WHEREAS, some government agencies have overlooked said Constitutional prerogative and have
unilaterally granted to their respective officials and employees incentive awards;
WHEREAS, the Office of the President issued Administrative Order No. 268, dated February 21, 1992,
strictly prohibiting the grant of Productivity Incentive Bonus or other allowances of similar nature for
Calendar Year 1992 and future years pending the issuance of the requisite authorization by the President;
WHEREAS, notwithstanding said prohibition some government offices/agencies and government-owned
and/or controlled corporations and financial institutions have granted productivity incentive benefits in
varying nomenclature and amounts without the proper authorization/coordination with the Office of the
President;
WHEREAS, the unilateral and uncoordinated grant of productivity incentive benefits gave rise to
discontentment, dissatisfaction and demoralization among government personnel who have received less
or have not received at all such benefits;
x x x.
The President issued subject Administrative Orders to regulate the grant of productivity incentive benefits
and to prevent discontentment, dissatisfaction and demoralization among government personnel by
committing limited resources of government for the equal payment of incentives and awards. The
President was only exercising his power of control by modifying the acts of the respondents who granted
incentive benefits to their employees without appropriate clearance from the Office of the President,
thereby resulting in the uneven distribution of government resources. In the view of the President,
respondents did a mistake which had to be corrected. In so acting, the President exercised a
constitutionally-protected prerogative --
The Presidents duty to execute the law is of constitutional origin. So, too, is his control of all executive
departments. Thus it is, that department heads are men of his confidence. His is the power to appoint
them; his, too, is the privilege to dismiss them at pleasure. Naturally, he controls and directs their
acts.Implicit then is his authority to go over, confirm, modify or reverse the action taken by his department
secretaries. In this context, it may not be said that the President cannot rule on the correctness of a
decision of a department secretary. (Lacson-Magallanes Co., Inc. v. Pao, 21 SCRA 898)
Neither can it be said that the President encroached upon the authority of the Commission on Civil
Service to grant benefits to government personnel. AO 29 and AO 268 did not revoke the privilege of
employees to receive incentive benefits. The same merely regulated the grant and amount thereof.
Sound management and effective utilization of financial resources of government are basically
executive functions,[34] not the Commissions. Implicit is this recognition in EO 292, which states:
Sec. 35. Employee Suggestions and Incentive Award System. - There shall be established a Untenable is petitioners contention that the herein respondents be held personally liable for the
government-wide employee suggestions and incentive awards system which shall be administered under refund in question. Absent a showing of bad faith or malice, public officers are not personally liable for
such rules, regulations, and standards as maybe promulgated by the Commission. damages resulting from the performance of official duties.[36]

In accordance with rules, regulations, and standards promulgated by the Commission, the President or the
head of each department or agency is authorized to incur whatever necessary expenses involved in the
honorary recognition of subordinate officers and employees of the government who by their suggestions,
inventions, superior accomplishment, and other personal efforts contribute to the efficiency, economy, or
other improvement of government operations, or who perform such other extraordinary acts or services in
the public interest in connection with, or in relation to, their official employment.(Chapter 5, Subtitle A,
Book V) (underscoring ours)
Conformably, it is the President or the head of each department or agency who is authorized to incur
the necessary expenses involved in the honorary recognition of subordinate officers and employees of the
government. It is not the duty of the Commission to fix the amount of the incentives. Such function belongs
to the President or his duly empowered alter ego.
Anent petitioners contention that the forcible refund of incentive benefits is an unconstitutional
impairment of a contractual obligation, suffice it to state that [n]ot all contracts entered into by the
government will operate as a waiver of its non-suability; distinction must be made between its sovereign
and proprietary acts (United States of America v. Ruiz, 136 SCRA 487).[35] The acts involved in this case
are governmental. Besides, the Court is in agreement with the Solicitor General that the incentive pay or
benefit is in the nature of a bonus which is not a demandable or enforceable obligation.
Every public official is entitled to the presumption of good faith in the discharge of official
duties.[37] Absent any showing of bad faith or malice, there is likewise a presumption of regularity in the
performance of official duties.[38]
In upholding the constitutionality of AO 268 and AO 29, the Court reiterates the well-entrenched
doctrine that in interpreting statutes, that which will avoid a finding of unconstitutionality is to be
preferred.[39]
Considering, however, that all the parties here acted in good faith, we cannot countenance the
refund of subject incentive benefits for the year 1992, which amounts the petitioners have already
received. Indeed, no indicia of bad faith can be detected under the attendant facts and circumstances. The
officials and chiefs of offices concerned disbursed such incentive benefits in the honest belief that the
amounts given were due to the recipients and the latter accepted the same with gratitude, confident that
they richly deserve such benefits.
WHEREFORE, the Petitions in G.R. Nos. 109406, 110642, 111494, and 112056
are hereby DISMISSED, and as above ratiocinated, further deductions from the salaries and allowances
of petitioners are hereby ENJOINED.
In G.R. No. 119597, the assailed Decision of respondent Commission on Audit is AFFIRMED. No
pronouncement as to costs.

It is understood that the Judiciary, Civil Service Commission, Commission on Audit, Commission on SO ORDERED.
Elections, and Office of the Ombudsman, which enjoy fiscal autonomy, are not covered by the amount
fixed by the President. As explained in Bengzon vs. Drilon (208 SCRA 133):
FRANCISCO I. CHAVEZ, G.R. No. 164527
As envisioned in the Constitution, the fiscal autonomy enjoyed by the Judiciary, the Civil Service Petitioner,
Commission, the Commission on Audit, the Commission on Elections, and the Office of the Ombudsman Present:
contemplates a guarantee of full flexibility to allocate and utilize their resources with the wisdom and
dispatch that their needs require. It recognizes the power and authority to levy, assess and collect fees, fix PUNO, CJ,
rates of compensation not exceeding the highest rates authorized by law for compensation and pay plans QUISUMBING,
of the government and allocate and disburse such sums as may be provided by law or prescribed by them YNARES-SANTIAGO,
in the course of the discharge of their functions. SANDOVAL-GUTIERREZ,
- versus - CARPIO,
Fiscal autonomy means freedom from outside control. If the Supreme Court says it needs 100 typewriters AUSTRIA-MARTINEZ,
but DBM rules we need only 10 typewriters and sends its recommendations to Congress without even CORONA,
informing us, the autonomy given by the Constitution becomes an empty and illusory platitude. CARPIO MORALES,
AZCUNA,
TINGA,
The Judiciary, the Constitutional Commissions, and the Ombudsman must have the independence and CHICO-NAZARIO,
flexibility needed in the discharge of their constitutional duties. The imposition of restrictions and GARCIA,
constraints on the manner the independent constitutional offices allocate and utilize the funds appropriated NATIONAL HOUSING VELASCO,
for their operations is anathema to fiscal autonomy and violative not only of the express mandate of the AUTHORITY, R-II BUILDERS, NACHURA, and
Constitution but especially as regards the Supreme Court, of the independence and separation of powers INC., R-II HOLDINGS, INC., REYES, JJ.
upon which the entire fabric of our constitutional system is based. In the interest of comity and cooperation, HARBOUR CENTRE PORT
the Supreme Court, Constitutional Commissions, and the Ombudsman have so far limited their objections TERMINAL, INC., and Promulgated:
to constant reminders. We now agree with the petitioners that this grant of autonomy should cease to be a MR. REGHIS ROMERO II,
meaningless provision. Respondents. August 15, 2007
x-----------------------------------------------------------------------------------------x
 DECISION Philippine Constabulary Integrated National Police, Philippine Information Agency and the Local
VELASCO, JR., J.:
Government Unit (referring to the City of Manila), Department of Social Welfare and Development,

Presidential Commission for Urban Poor, National Housing Authority (NHA), Department of Labor and
In this Petition for Prohibition and Mandamus with Prayer for Temporary Restraining Order and/or Writ of
Employment, Department of Education, Culture and Sports (now Department of Education), and
Preliminary Injunction under Rule 65, petitioner, in his capacity as taxpayer, seeks:
Presidential Management Staff.
to declare NULL AND VOID the Joint Venture Agreement (JVA) dated March 9, 1993
between the National Housing Authority and R-II Builders, Inc. and the Smokey
Mountain Development and Reclamation Project embodied therein; the subsequent Specifically, respondent NHA was ordered to conduct feasibility studies and develop low-cost housing
amendments to the said JVA; and all other agreements signed and executed in
relation thereto including, but not limited to the Smokey Mountain Asset Pool projects at the dumpsite and absorb scavengers in NHA resettlement/low-cost housing projects.[4] On the
Agreement dated 26 September 1994 and the separate agreements for Phase I and
Phase II of the Projectas well as all other transactions which emanated therefrom, for other hand, the DENR was tasked to review and evaluate proposed projects under the Plan with regard to
being UNCONSTITUTIONAL and INVALID;
their environmental impact, conduct regular monitoring of activities of the Plan to ensure compliance with
to enjoin respondentsparticularly respondent NHAfrom further implementing and/or environmental standards and assist DOH in the conduct of the study on hospital waste management.[5]
enforcing the said project and other agreements related thereto, and from further
deriving and/or enjoying any rights, privileges and interest therefrom x x x; and

to compel respondents to disclose all documents and information relating to the
projectincluding, but not limited to, any subsequent agreements with respect to the
different phases of the project, the revisions over the original plan, the additional
works incurred thereon, the current financial condition of respondent R-II Builders, Inc.,
and the transactions made respecting the project.[1]
At the time MO 161-A was issued by President Aquino, Smokey Mountain was a wasteland in Balut,
Tondo, Manila, where numerous Filipinos resided in subhuman conditions, collecting items that may have
some monetary value from the garbage. The SmokeyMountain dumpsite is bounded on the north by the

Estero Marala, on the south by the property of the National Government, on the east by the property of B

and I Realty Co., and on the west by Radial Road 10 (R-10).

The Facts

Pursuant to MO 161-A, NHA prepared the feasibility studies of the Smokey Mountain low-cost housing
On March 1, 1988, then President Corazon C. Aquino issued Memorandum Order No. (MO)
project which resulted in the formulation of the Smokey Mountain Development Plan and Reclamation of
161[2] approving and directing the implementation of the Comprehensive and Integrated Metropolitan
the Area Across R-10 or the Smokey Mountain Development and Reclamation Project (SMDRP; the
Manila Waste Management Plan (the Plan). The Metro Manila Commission, in coordination with various
Project). The Project aimed to convert the Smokey Mountain dumpsite into a habitable housing project,
government agencies, was tasked as the lead agency to implement the Plan as formulated by the
inclusive of the reclamation of the area across R-10, adjacent to the Smokey Mountain as the enabling
Presidential Task Force on Waste Management created by Memorandum Circular No. 39. A day after, on
component of the project.[6] Once finalized, the Plan was submitted to President Aquino for her approval.
March 2, 1988, MO 161-A[3] was issued, containing the guidelines which prescribed the functions and

responsibilities of fifteen (15) various government departments and offices tasked to implement the Plan,
On July 9, 1990, the Build-Operate-and-Transfer (BOT) Law (Republic Act No. [RA] 6957) was
namely: Department of Public Works and Highway (DPWH), Department of Health (DOH), Department of
enacted.[7] Its declared policy under Section 1 is [t]o recognize the indispensable role of the private sector
Environment and Natural Resources (DENR), Department of Transportation and Communication,
as the main engine for national growth and development and provide the most appropriate favorable
Department of Budget and Management, National Economic and Development Authority (NEDA),
incentives to mobilize private resources for the purpose. Sec. 3 authorized and empowered [a]ll

government infrastructure agencies, including government-owned and controlled corporations and local
government units x x x to enter into contract with any duly pre-qualified private contractor for the financing,
construction, operation and maintenance of any financially viable infrastructure facilities through the
build-operate-transfer or build and transfer scheme.
RA 6957 defined build-and-transfer scheme as [a] contractual arrangement whereby the contractor
undertakes the construction, including financing, of a given infrastructure facility, and its turnover after the
completion to the government agency or local government unit concerned which shall pay the contractor
its total investment expended on the project, plus reasonable rate of return thereon. The last paragraph of
Sec. 6 of the BOT Law provides that the repayment scheme in the case of land reclamation or the building
of industrial estates may consist of [t]he grant of a portion or percentage of the reclaimed land or industrial
estate built, subject to the constitutional requirements with respect to the ownership of lands.
On February 10, 1992, Joint Resolution No. 03[8] was passed by both houses of Congress. Sec.
1 of this resolution provided, among other things, that:
Section 1. There is hereby approved the following national infrastructure projects for
implementation under the provisions of Republic Act No. 6957 and its implementing
rules and regulations:
xxxx
(d) Port infrastructure like piers, wharves, quays, storage handling, ferry service and
related facilities;
xxxx
(k) Land reclamation, dredging and other related development facilities;
(l) Industrial estates, regional industrial centers and export processing zones including
steel mills, iron-making and petrochemical complexes and related infrastructure and
utilities;
xxxx
(p) Environmental and solid waste management-related facilities such as collection
equipment, composting plants, incinerators, landfill and tidal barriers, among others;
and
(q) Development of new townsites and communities and related facilities.
This resolution complied with and conformed to Sec. 4 of the BOT Law requiring the approval of all
national infrastructure projects by the Congress.
On January 17, 1992, President Aquino proclaimed MO 415[9] approving and directing the implementation
of the SMDRP. Secs. 3 and 4 of the Memorandum Order stated:
Section 3. The National Housing Authority is hereby directed to implement the
Smokey Mountain Development Plan and Reclamation of the Area Across
R-10 through a private sector joint venture scheme at the least cost to the
government.
Section 4. The land area covered by the Smokey Mountain dumpsite is hereby
conveyed to the National Housing Authority as well as the area to be reclaimed across
R-10. (Emphasis supplied.)
In addition, the Public Estates Authority (PEA) was directed to assist in the evaluation of proposals
regarding the technical feasibility of reclamation, while the DENR was directed to (1) facilitate titling
of Smokey Mountain and of the area to be reclaimed and (2) assist in the technical evaluation of proposals
regarding environmental impact statements.[10]
In the same MO 415, President Aquino created an Executive Committee (EXECOM) to oversee the
implementation of the Plan, chaired by the National Capital Region-Cabinet Officer for Regional
Development (NCR-CORD) with the heads of the NHA, City of Manila, DPWH, PEA, Philippine Ports
Authority (PPA), DENR, and Development Bank of the Philippines (DBP) as members. [11] The NEDA
subsequently became a member of the EXECOM. Notably, in a September 2, 1994 Letter,[12] PEA General
Manager Amado Lagdameo approved the plans for the reclamation project prepared by the NHA.
In conformity with Sec. 5 of MO 415, an inter-agency technical committee (TECHCOM) was created
composed of the technical representatives of the EXECOM [t]o assist the NHA in the evaluation of the
project proposals, assist in the resolution of all issues and problems in the project to ensure that all
aspects of the development from squatter relocation, waste management, reclamation, environmental
protection, land and house construction meet governing regulation of the region and to facilitate the
completion of the project.[13]
Subsequently, the TECHCOM put out the Public Notice and Notice to Pre-Qualify and Bid for the right to
become NHAs joint venture partner in the implementation of the SMDRP. The notices were published in
newspapers of general circulation on January 23 and 26 and February 1, 14, 16, and 23, 1992,
respectively. Out of the thirteen (13) contractors who responded, only five (5) contractors fully complied
with the required pre-qualification documents. Based on the evaluation of the pre-qualification documents,
the EXECOM declared the New San Jose Builders, Inc. and R-II Builders, Inc. (RBI) as the top two
contractors.[14]
Thereafter, the TECHCOM evaluated the bids (which include the Pre-feasibility Study and Financing Plan)
of the top two (2) contractors in this manner:
(1) The DBP, as financial advisor to the Project, evaluated their Financial Proposals;
(2) The DPWH, PPA, PEA and NHA evaluated the Technical Proposals for the Housing Construction and
Reclamation;
(3) The DENR evaluated Technical Proposals on Waste Management and Disposal by conducting the
Environmental Impact Analysis; and
(4) The NHA and the City of Manila evaluated the socio-economic benefits presented by the proposals.
On June 30, 1992, Fidel V. Ramos assumed the Office of the President (OP) of the Philippines.
On August 31, 1992, the TECHCOM submitted its recommendation to the EXECOM to approve the R-II
Builders, Inc. (RBI) proposal which garnered the highest score of 88.475%.
Subsequently, the EXECOM made a Project briefing to President Ramos. As a result, President
Ramos issued Proclamation No. 39[15] on September 9, 1992, which reads:
WHEREAS, the National Housing Authority has presented a viable conceptual plan to
convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of
the reclamation of the area across Road Radial 10 (R-10) adjacent to the Smokey
Mountain as the enabling component of the project;
xxxx
These parcels of land of public domain are hereby placed under the
administration and disposition of the National Housing Authority to develop,
subdivide and dispose to qualified beneficiaries, as well as its development for
mix land use (commercial/industrial) to provide employment opportunities to
on-site families and additional areas for port-related activities.
In order to facilitate the early development of the area for disposition, the Department
of Environment and Natural Resources, through the Lands and Management Bureau,
is hereby directed to approve the boundary and subdivision survey and to issue a
special patent and title in the name of the National Housing Authority, subject to final
survey and private rights, if any there be. (Emphasis supplied.)
On October 7, 1992, President Ramos authorized NHA to enter into a Joint Venture Agreement with RBI
[s]ubject to final review and approval of the Joint Venture Agreement by the Office of the President. [16]
On March 19, 1993, the NHA and RBI entered into a Joint Venture Agreement[17] (JVA) for the
development of the Smokey Mountain dumpsite and the reclamation of the area across R-10 based on
Presidential Decree No. (PD) 757[18] which mandated NHA [t]o undertake the physical and socio-economic
upgrading and development of lands of the public domain identified for housing, MO 161-A which required
NHA to conduct the feasibility studies and develop a low-cost housing project at the Smokey Mountain,
and MO 415 as amended by MO 415-A which approved the Conceptual Plan for Smokey Mountain and
creation of the EXECOM and TECHCOM. Under the JVA, the Project involves the clearing
of Smokey Mountain for eventual development into a low cost medium rise housing complex and
 2.06 The [RBI] shall likewise furnish all labor materials and equipment necessary to
industrial/commercial site with the reclamation of the area directly across [R-10] to act as the enabling complete all herein development works to be undertaken on a phase to phase basis in
accordance with the work program stipulated therein.
component of the Project.[19] The JVA covered a lot in Tondo, Manila with an area of two hundred twelve

thousand two hundred thirty-four (212,234) square meters and another lot to be reclaimed also in Tondo

with an area of four hundred thousand (400,000) square meters. The profit sharing shall be based on the approved pre-feasibility report submitted to the EXECOM, viz:

The Scope of Work of RBI under Article II of the JVA is as follows: For the developer (RBI):
1. To own the forty (40) hectares of reclaimed land.
a) To fully finance all aspects of development of Smokey Mountain and reclamation of
2. To own the commercial area at the Smokey Mountain area composed of 1.3
no more than 40 hectares of Manila Bay area across Radial Road 10.
hectares, and
b) To immediately commence on the preparation of feasibility report and detailed
3. To own all the constructed units of medium rise low cost permanent housing units
engineering with emphasis to the expedient acquisition of the Environmental
beyond the 3,500 units share of the [NHA].
Clearance Certificate (ECC) from the DENR.

c) The construction activities will only commence after the acquisition of the ECC, and
d) Final details of the contract, including construction, duration and delivery timetables,
shall be based on the approved feasibility report and detailed engineering.
Other obligations of RBI are as follows:
2.02 The [RBI] shall develop the PROJECT based on the Final Report and Detailed
Engineering as approved by the Office of the President. All costs and expenses for
hiring technical personnel, date gathering, permits, licenses, appraisals, clearances,
testing and similar undertaking shall be for the account of the [RBI].
For the NHA:
1. To own the temporary housing consisting of 3,500 units.
2. To own the cleared and fenced incinerator site consisting of 5 hectares situated at
the Smokey Mountain area.
3. To own the 3,500 units of permanent housing to be constructed by [RBI] at
the Smokey Mountain area to be awarded to qualified on site residents.
4. To own the Industrial Area site consisting of 3.2 hectares, and
5. To own the open spaces, roads and facilities within the Smokey Mountain area.

2.03 The [RBI] shall undertake the construction of 3,500 temporary housing units
complete with basic amenities such as plumbing, electrical and sewerage facilities
within the temporary housing project as staging area to temporarily house the squatter
In the event of extraordinary increase in labor, materials, fuel and non-recoverability of total project
families from the Smokey Mountain while development is being undertaken. These
temporary housing units shall be turned over to the [NHA] for disposition. expenses,[20] the OP, upon recommendation of the NHA, may approve a corresponding adjustment in the

2.04 The [RBI] shall construct 3,500 medium rise low cost permanent housing units enabling component.
on the leveled Smokey Mountain complete with basic utilities and amenities, in
accordance with the plans and specifications set forth in the Final Report approved by
the [NHA]. Completed units ready for mortgage take out shall be turned over by the
[RBI] to NHA on agreed schedule. The functions and responsibilities of RBI and NHA are as follows:

2.05 The [RBI] shall reclaim forty (40) hectares of Manila Bay area directly across
[R-10] as contained in Proclamation No. 39 as the enabling component of the project For RBI:
and payment to the [RBI] as its asset share.

4.01 Immediately commence on the preparation of the FINAL REPORT with

emphasis to the expedient acquisition, with the assistance of the [NHA] of
 Environmental Compliance Certificate (ECC) from the Environmental Management
Bureau (EMB) of the [DENR]. Construction shall only commence after the acquisition
of the ECC. The Environment Compliance Certificate (ECC) shall form part of the
FINAL REPORT.
The FINAL REPORT shall provide the necessary subdivision and housing plans,
detailed engineering and architectural drawings, technical specifications and other
related and required documents relative to the Smokey Mountain area.
With respect to the 40-hectare reclamation area, the [RBI] shall have the discretion to
develop the same in a manner that it deems necessary to recover the [RBIs]
investment, subject to environmental and zoning rules.
4.02 Finance the total project cost for land development, housing construction and
reclamation of the PROJECT.
4.03 Warrant that all developments shall be in compliance with the requirements of
the FINAL REPORT.
4.04 Provide all administrative resources for the submission of project
accomplishment reports to the [NHA] for proper evaluation and supervision on the
actual implementation.
4.05 Negotiate and secure, with the assistance of the [NHA] the grant of rights of way
to the PROJECT, from the owners of the adjacent lots for access road, water,
electrical power connections and drainage facilities.
4.06 Provide temporary field office and transportation vehicles (2 units), one (1)
complete set of computer and one (1) unit electric typewriter for the [NHAs] field
personnel to be charged to the PROJECT.
For the NHA:
4.07 The [NHA] shall be responsible for the removal and relocation of all squatters
within Smokey Mountain to the Temporary Housing Complex or to other areas
prepared as relocation areas with the assistance of the [RBI]. The [RBI] shall be
responsible in releasing the funds allocated and committed for relocation as detailed
in the FINAL REPORT.
4.08 Assist the [RBI] and shall endorse granting of exemption fees in the acquisition of
all necessary permits, licenses, appraisals, clearances and accreditations for the
PROJECT subject to existing laws, rules and regulations.
4.09 The [NHA] shall inspect, evaluate and monitor all works at
the Smokey Mountain and Reclamation Area while the land development and
construction of housing units are in progress to determine whether the development
and construction works are undertaken in accordance with the FINAL REPORT. If in
its judgment, the PROJECT is not pursued in accordance with the FINAL REPORT,
the [NHA] shall require the [RBI] to undertake necessary remedial works. All
expenses, charges and penalties incurred for such remedial, if any, shall be for the
account of the [RBI].
4.10 The [NHA] shall assist the [RBI] in the complete electrification of the
PROJECT. x x x
4.11 Handle the processing and documentation of all sales transactions related to its
assets shares from the venture such as the 3,500 units of permanent housing and the
allotted industrial area of 3.2 hectares.
4.12 All advances outside of project costs made by the [RBI] to the [NHA] shall be
deducted from the proceeds due to the [NHA].
4.13 The [NHA] shall be responsible for the acquisition of the Mother Title for
the Smokey Mountain and Reclamation Area within 90 days upon submission of
Survey returns to the Land Management Sector. The land titles to the 40-hectare
reclaimed land, the 1.3 hectare commercial area at the Smokey Mountain area and
the constructed units of medium-rise permanent housing units beyond the 3,500 units
share of the [NHA] shall be issued in the name of the [RBI] upon completion of the
project. However, the [RBI] shall have the authority to pre-sell its share as indicated in
this agreement.
The final details of the JVA, which will include the construction duration, costs, extent of reclamation, and
delivery timetables, shall be based on the FINAL REPORT which will be contained in a Supplemental
Agreement to be executed later by the parties.
The JVA may be modified or revised by written agreement between the NHA and RBI specifying the
clauses to be revised or modified and the corresponding amendments.
If the Project is revoked or terminated by the Government through no fault of RBI or by mutual agreement,
the Government shall compensate RBI for its actual expenses incurred in the Project plus a reasonable
rate of return not exceeding that stated in the feasibility study and in the contract as of the date of such
revocation, cancellation, or termination on a schedule to be agreed upon by both parties.
As a preliminary step in the project implementation, consultations and dialogues were conducted with the
settlers of the Smokey Mountain Dumpsite Area. At the same time, DENR started processing the
application for the Environmental Clearance Certificate (ECC) of the SMDRP. As a result however of the
consultative dialogues, public hearings, the report on the on-site field conditions, the Environmental Impact
Statement (EIS) published on April 29 and May 12, 1993 as required by the Environmental Management

Bureau of DENR, the evaluation of the DENR, and the recommendations from other government agencies, Under the ARJVA, RBI shall construct 2,992 temporary housing units, a reduction from 3,500 units under

it was discovered that design changes and additional work have to be undertaken to successfully the JVA.[27] However, it was required to construct 3,520 medium-rise low-cost permanent housing units

implement the Project.[21] instead of 3,500 units under the JVA. There was a substantial change in the design of the permanent

housing units such that a loft shall be incorporated in each unit so as to increase the living space from 20

Thus, on February 21, 1994, the parties entered into another agreement denominated as the Amended to 32 square meters. The additions and changes in the Original Project Component are as follows:

and Restated Joint Venture Agreement[22] (ARJVA) which delineated the different phases of the ORIGINAL CHANGES/REVISIONS

Project. Phase I of the Project involves the construction of temporary housing units for the current
residents of the Smokey Mountain dumpsite, the clearing and leveling-off of the dumpsite, and the
construction of medium-rise low-cost housing units at the cleared and leveled dumpsite.[23] Phase II of the
Project involves the construction of an incineration area for the on-site disposal of the garbage at the
1. TEMPORARY HOUSING
Wood/Plywood, ga. 31 G.I. Concrete/Steel Frame Structure Sheet
usable life of 3 years, gauge 26 G.I. roofing sheets future 12 SM floor
area. use as permanent structures for factory and warehouses mixed 17
sm & 12 sm floor area.

dumpsite.[24] The enabling component or consideration for Phase I of the Project was increased from 40 2. MEDIUM RISE MASS
HOUSING
hectares of reclaimed lands across R-10 to 79 hectares.[25] The revision also provided for the enabling
Box type precast Shelter Conventional and precast component 20
component for Phase II of 119 hectares of reclaimed lands contiguous to the 79 hectares of reclaimed
square meter concrete structures, 32 square
lands for Phase I.[26] Furthermore, the amended contract delineated the scope of works and the terms and floor area with 2.4 meter meter floor area with loft floor height; bare type,
160 units/ (sleeping quarter) 3.6 m. floor
conditions of Phases I and II, thus: building. height, painted and improved
architectural faade, 80 units/
building.
The PROJECT shall consist of Phase I and Phase II. 3. MITIGATING
MEASURES
Phase I shall involve the following:
3.1 For reclamation work Use of clean dredgefill material below the
a. the construction of 2,992 units of temporary housing for the affected MLLW and SM material
residents while clearing and development of Smokey Mountain [are] being undertaken mixed with dredgefill
above MLLW.
b. the clearing of Smokey Mountain and the subsequent construction of
3,520 units of medium rise housing and the development of the industrial/commercial a. 100% use of Smokey
site within the Smokey Mountain area Mountain material as
dredgefill Use of Steel Sheet Piles needed
c. the reclamation and development of a 79 hectare area directly across for longer depth of embedment.
Radial Road 10 to serve as the enabling component of Phase I b. Concrete Sheet Piles
short depth of
Phase II shall involve the following: embedment

a. the construction and operation of an incinerator plant that will conform c. Silt removal approximately Need to remove more than 3.0
to the emission standards of the DENR 1.0 meter only meters of silt after sub-soil investigation.[28]

b. the reclamation and development of 119-hectare area contiguous to that to be These material and substantial modifications served as justifications for the increase in the
reclaimed under Phase I to serve as the enabling component of Phase II.
share of RBI from 40 hectares to 79 hectares of reclaimed land.

Under the JVA, the specific costs of the Project were not stipulated but under the ARJVA, the stipulated
cost for Phase I was pegged at six billion six hundred ninety-three million three
hundred eighty-seven thousand three hundred sixty-four pesos (PhP 6,693,387,364).
In his February 10, 1994 Memorandum, the Chairperson of the SMDRP EXECOM submitted the
ARJVA for approval by the OP. After review of said agreement, the OP directed that certain terms and
conditions of the ARJVA be further clarified or amended preparatory to its approval. Pursuant to the
Presidents directive, the parties reached an agreement on the clarifications and amendments required to
be made on the ARJVA.
On August 11, 1994, the NHA and RBI executed an Amendment To the Amended and Restated Joint
Venture Agreement (AARJVA)[29] clarifying certain terms and condition of the ARJVA, which was submitted
to President Ramos for approval, to wit:
Phase II shall involve the following:
a. the construction and operation of an incinerator plant that will conform to the
emission standards of the DENR
b. the reclamation and development of 119-hectare area contiguous to that to be
reclaimed under Phase I to serve as the enabling component of Phase II, the
exact size and configuration of which shall be approved by the SMDRP
Committee[30]
Other substantial amendments are the following:
4. Paragraph 2.05 of Article II of the ARJVA is hereby amended to read as follows:
2.05. The DEVELOPER shall reclaim seventy nine (79) hectares of the
Manila Bay area directly across Radial Road 10 (R-10) to serve as payment
to the DEVELOPER as its asset share for Phase I and to develop such land
into commercial area with port facilities; provided, that the port plan shall be
integrated with the Philippine Port Authoritys North Harbor plan for the
Manila Bay area and provided further, that the final reclamation and port
plan for said reclaimed area shall be submitted for approval by the Public
Estates Authority and the Philippine Ports Authority, respectively: provided
finally, that subject to par. 2.02 above, actual reclamation work may
commence upon approval of the final reclamation plan by the Public
Estates Authority.
xxxx
9. A new paragraph to be numbered 5.05 shall be added to Article V of the ARJVA,
and shall read as follows:
5.05. In the event this Agreement is revoked, cancelled or terminated
by the AUTHORITY through no fault of the DEVELOPER, the AUTHORITY
shall compensate the DEVELOPER for the value of the completed portions
of, and actual expenditures on the PROJECT plus a reasonable rate of
return thereon, not exceeding that stated in the Cost Estimates of Items of
Work previously approved by the SMDRP Executive Committee and the
AUTHORITY and stated in this Agreement, as of the date of such
revocation, cancellation, or termination, on a schedule to be agreed upon
by the parties, provided that said completed portions of Phase I are in
accordance with the approved FINAL REPORT.
Afterwards, President Ramos issued Proclamation No. 465 dated August 31, 1994[31] increasing
the proposed area for reclamation across R-10 from 40 hectares to 79 hectares,[32] to wit:
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the
Philippines, by virtue of the powers vested in me by the law, and as recommended by
the SMDRP Executive Committee, do hereby authorize the increase of the area of
foreshore or submerged lands of Manila Bay to be reclaimed, as previously
authorized under Proclamation No. 39 (s. 1992) and Memorandum Order No. 415 (s.
1992), from Four Hundred Thousand (400,000) square meters, more or less, to Seven
Hundred Ninety Thousand (790,000) square meters, more or less.
On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued Special Patent No.
3591 conveying in favor of NHA an area of 211,975 square meters covering the Smokey Mountain
Dumpsite.
In its September 7, 1994 letter to the EXECOM, the OP through then Executive Secretary
Teofisto T. Guingona, Jr., approved the ARJVA as amended by the AARJVA.
On September 8, 1994, the DENR issued Special Patent 3592 pursuant to Proclamation No. 39,
conveying in favor of NHA a 401,485-square meter area.
 aforequoted provisions of the implementing rules (referring to PD 1594) would not be necessary where the

On September 26, 1994, the NHA, RBI, Home Insurance and Guaranty Corporation (HIGC), change orders inseparable from the original scope of the project, in which case, a negotiation with the

now known as the Home Guaranty Corporation, and the Philippine National Bank (PNB) [33] executed the incumbent contractor may be allowed.
[34]
Smokey Mountain Asset Pool Formation Trust Agreement (Asset Pool Agreement). Thereafter, a

Guaranty Contract was entered into by NHA, RBI, and HIGC. Thus, on February 19, 1998, the EXECOM issued a resolution directing NHA to enter into a

supplemental agreement covering said necessary works.

On June 23, 1994, the Legislature passed the Clean Air Act.[35] The Act made the establishment

of an incinerator illegal and effectively barred the implementation of the planned incinerator project under On March 20, 1998, the NHA and RBI entered into a Supplemental Agreement covering the

Phase II. Thus, the off-site disposal of the garbage at the Smokey Mountain became necessary.[36] aforementioned necessary works and submitted it to the President on March 24, 1998 for approval.

The land reclamation was completed in August 1996.[37] Outgoing President Ramos decided to endorse the consideration of the Supplemental

Agreement to incoming President Joseph E. Estrada. On June 30, 1998, Estrada became the 13th

Sometime later in 1996, pursuant likewise to Proclamation No. 39, the DENR issued Special Philippine President.

Patent No. 3598 conveying in favor of NHA an additional 390,000 square meter area.

However, the approval of the Supplemental Agreement was unacted upon for five months. As a

During the actual construction and implementation of Phase I of the SMDRP, the Inter-Agency result, the utilities and the road networks were constructed to cover only the 79-hectare original enabling

Technical Committee found and recommended to the EXECOM on December 17, 1997 that additional component granted under the ARJVA. The 220-hectare extension of the 79-hectare area was no longer

works were necessary for the completion and viability of the Project. The EXECOM approved the technically feasible. Moreover, the financial crises and unreliable real estate situation made it difficult to

recommendation and so, NHA instructed RBI to implement the change orders or necessary works. [38] sell the remaining reclaimed lots. The devaluation of the peso and the increase in interest cost led to the

substantial increase in the cost of reclamation.

Such necessary works comprised more than 25% of the original contract price and as a result,

the Asset Pool incurred direct and indirect costs. Based on C1 12 A of the Implementing Rules and On August 1, 1998, the NHA granted RBIs request to suspend work on the SMDRP due to the

Regulations of PD 1594, a supplemental agreement is required for all change orders and extra work delay in the approval of the Supplemental Agreement, the consequent absence of an enabling component

orders, the total aggregate cost of which being more than twenty-five (25%) of the escalated original to cover the cost of the necessary works for the project, and the resulting inability to replenish the Asset

contract price. Pool funds partially used for the completion of the necessary works.[39]

The EXECOM requested an opinion from the Department of Justice (DOJ) to determine whether As of August 1, 1998 when the project was suspended, RBI had already accomplished a portion

a bidding was required for the change orders and/or necessary works. The DOJ, through DOJ Opinion of the necessary works and change orders which resulted in [RBI] and the Asset Pool incurring advances

Nos. 119 and 155 dated August 26, 1993 and November 12, 1993, opined that a rebidding, pursuant to the
for direct and indirect cost which amount can no longer be covered by the 79-hectare enabling component In the March 23, 2000 OP Memorandum, the EXECOM was authorized to proceed and
[40]
under the ARJVA. complete the SMDRP subject to certain guidelines and directives.

Repeated demands were made by RBI in its own capacity and on behalf of the asset pool on After the parties in the case at bar had complied with the March 23, 2000 Memorandum, the

NHA for payment for the advances for direct and indirect costs subject to NHA validation. NHA November 9, 2000 Resolution No. 4323 approved the conveyance of the 17-hectare Vitas property in

favor of the existing or a newly created Asset Pool of the project to be developed into a mixed

In November 1998, President Estrada issued Memorandum Order No. 33 reconstituting the commercial-industrial area, subject to certain conditions.

SMDRP EXECOM and further directed it to review the Supplemental Agreement and submit its

recommendation on the completion of the SMDRP. On January 20, 2001, then President Estrada was considered resigned. On the same day,

President Gloria M. Arroyo took her oath as the 14th President of the Philippines.

The reconstituted EXECOM conducted a review of the project and recommended the

amendment of the March 20, 1998 Supplemental Agreement to make it more feasible and to identify and As of February 28, 2001, the estimated total project cost of the SMDRP has reached P8.65

provide new sources of funds for the project and provide for a new enabling component to cover the billion comprising of P4.78 billion in direct cost and P3.87 billion in indirect cost,[43] subject to validation by

payment for the necessary works that cannot be covered by the 79-hectare enabling component under the the NHA.

ARJVA.[41]

On August 28, 2001, NHA issued Resolution No. 4436 to pay for the various necessary

The EXECOM passed Resolution Nos. 99-16-01 and 99-16-02[42] which approved the works/change orders to SMDRP, to effect the corresponding enabling component consisting of the

modification of the Supplemental Agreement, to wit: conveyance of the NHAs Vitas Property and an additional 150-hectare reclamation area and to authorize

the release by NHA of PhP 480 million as advance to the project to make the Permanent Housing
a) Approval of 150 hectares additional reclamation in order to make the reclamation
feasible as part of the enabling component. habitable, subject to reimbursement from the proceeds of the expanded enabling component. [44]

b) The conveyance of the 15-hectare NHA Vitas property (actually 17 hectares based
on surveys) to the SMDRP Asset Pool.
On November 19, 2001, the Amended Supplemental Agreement (ASA) was signed by the
c) The inclusion in the total development cost of other additional, necessary and parties, and on February 28, 2002, the Housing and Urban Development Coordinating Council (HUDCC)
indispensable infrastructure works and the revision of the original cost stated in the
Supplemental Agreement dated March 20, 1998 from PhP 2,953,984,941.40 to PhP submitted the agreement to the OP for approval.
2,969,134,053.13.
In the July 20, 2002 Cabinet Meeting, HUDCC was directed to submit the works covered by the
d) Revision in the sharing agreement between the parties.
PhP 480 million [advance to the Project] and the ASA to public bidding. [45] On August 28, 2002, the

HUDCC informed RBI of the decision of the Cabinet.


In its September 2, 2002 letter to the HUDCC Chairman, RBI lamented the decision of the
government to bid out the remaining works under the ASA thereby unilaterally terminating the Project with
RBI and all the agreements related thereto. RBI demanded the payment of just compensation for all
accomplishments and costs incurred in developing the SMDRP plus a reasonable rate of return thereon
pursuant to Section 5.05 of the ARJVA and Section 6.2 of the ASA. [46]
Consequently, the parties negotiated the terms of the termination of the JVA and other
subsequent agreements.
On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement (MOA) whereby
both parties agreed to terminate the JVA and other subsequent agreements, thus:
1. TERMINATION
1.1 In compliance with the Cabinet directive dated 30 July 2002 to
submit the works covered by the P480 Million and the ASA to
public bidding, the following agreements executed by and
between the NHA and the DEVELOPER are hereby
terminated, to wit:
a. Joint Venture Agreement (JVA) dated 19 March 1993
b. Amended and Restated Joint Venture Agreement (ARJVA)
dated 21 February 1994
c. Amendment and Restated Joint Venture Agreement
dated 11 August 1994
d. Supplemental Agreement dated 24 March 1998
e. Amended Supplemental Agreement (ASA) dated 19
November 2001.
xxxx
5. SETTLEMENT OF CLAIMS
5.1 Subject to the validation of the DEVELOPERs claims, the NHA
hereby agrees to initially compensate the Developer for the
abovementioned costs as follows:
a. Direct payment to DEVELOPER of the amounts herein
listed in the following manner:
a.1 P250 Million in cash from the escrow account in
accordance with Section 2 herewith;
a.2 Conveyance of a 3 hectare portion of the Vitas
Industrial area immediately after joint
determination of the appraised value of the
said property in accordance with the
procedure herein set forth in the last
paragraph of Section 5.3. For purposes of all
payments to be made through conveyance of
real properties, the parties shall secure from
the NHA Board of Directors all documents
necessary and sufficient to effect the transfer
of title over the properties to be conveyed to
RBI, which documents shall be issued within
a reasonable period.
5.2 Any unpaid balance of the DEVELOPERS claims determined after
the validation process referred to in Section 4 hereof, may be
paid in cash, bonds or through the conveyance of properties
or any combination thereof. The manner, terms and
conditions of payment of the balance shall be specified and
agreed upon later within a period of three months from the
time a substantial amount representing the unpaid balance
has been validated pursuant hereto including, but not limited
to the programming of quarterly cash payments to be
sourced by the NHA from its budget for debt servicing, from
its income or from any other sources.
5.3 In any case the unpaid balance is agreed to be paid, either partially
or totally through conveyance of properties, the parties shall
agree on which properties shall be subject to conveyance.
The NHA and DEVELOPER hereby agree to determine the
valuation of the properties to be conveyed by getting the
average of the appraisals to be made by two (2) mutually
acceptable independent appraisers.
Meanwhile, respondent Harbour Centre Port Terminal, Inc. (HCPTI) entered into an agreement with the
asset pool for the development and operations of a port in the Smokey Mountain Area which is a major
component of SMDRP to provide a source of livelihood and employment for Smokey Mountain residents
and spur economic growth. A Subscription Agreement was executed between the Asset Pool and HCPTI
whereby the asset pool subscribed to 607 million common shares and 1,143 million preferred shares of
HCPTI. The HCPTI preferred shares had a premium and penalty interest of 7.5% per annum and a
mandatory redemption feature. The asset pool paid the subscription by conveying to HCPTI a 10-hectare
land which it acquired from the NHA being a portion of the reclaimed land of the SMDRP. Corresponding
certificates of titles were issued to HCPTI, namely: TCT Nos. 251355, 251356, 251357, and 251358.
 RESPONDENT R-II BUILDERS CANNOT ACQUIRE THE RECLAIMED
FORESHORE AND SUBMERGED LAND AREAS BECAUSE:
Due to HCPTIs failure to obtain a license to handle foreign containerized cargo from PPA, it suffered a net
1. THE RECLAIMED FORESHORE AND SUBMERGED PARCELS OF LAND ARE
income loss of PhP 132,621,548 in 2002 and a net loss of PhP 15,540,063 in 2003. The Project Governing
INALIENABLE PUBLIC LANDS WHICH ARE BEYOND THE COMMERCE OF MAN.
Board of the Asset Pool later conveyed by way of dacion en pago a number of HCPTI shares to RBI in lieu
2. ASSUMING ARGUENDO THAT THE SUBJECT RECLAIMED FORESHORE AND
of cash payment for the latters work in SMDRP. SUBMERGED PARCELS OF LAND WERE ALREADY DECLARED
ALIENABLE LANDS OF THE PUBLIC DOMAIN, RESPONDENT R-II
BUILDERS STILL COULD NOT ACQUIRE THE SAME BECAUSE THERE
WAS NEVER ANY DECLARATION THAT THE SAID LANDS WERE NO
On August 5, 2004, former Solicitor General Francisco I. Chavez, filed the instant petition which impleaded LONGER NEEDED FOR PUBLIC USE.
as respondents the NHA, RBI, R-II Holdings, Inc. (RHI), HCPTI, and Mr. Reghis Romero II, raising
3. EVEN ASSUMING THAT THE SUBJECT RECLAIMED LANDS ARE ALIENABLE
constitutional issues. AND NO LONGER NEEDED FOR PUBLIC USE, RESPONDENT R-II BUILDERS
STILL CANNOT ACQUIRE THE SAME BECAUSE THERE WAS NEVER ANY LAW
AUTHORIZING THE SALE THEREOF.

The NHA reported that thirty-four (34) temporary housing structures and twenty-one (21) permanent 4. THERE WAS NEVER ANY PUBLIC BIDDING AWARDING OWNERSHIP OF
THE SUBJECT LAND TO RESPONDENT R-II BUILDERS.
housing structures had been turned over by respondent RBI. It claimed that 2,510 beneficiary-families
5. ASSUMING THAT ALL THE REQUIREMENTS FOR A VALID TRANSFER OF
belonging to the poorest of the poor had been transferred to their permanent homes and benefited from ALIENABLE PUBLIC HAD BEEN PERFORMED, RESPONDENT R-II
BUILDERS, BEING PRIVATE CORPORATION IS NONETHELESS
the Project.
EXPRESSLYPROHIBITED BY THE PHILIPPINE CONSTITUTION TO
ACQUIRE LANDS OF THE PUBLIC DOMAIN.

III

RESPONDENT HARBOUR, BEING A PRIVATE CORPORATION WHOSE

MAJORITY STOCKS ARE OWNED AND CONTROLLED BY RESPONDENT
The Issues ROMEROS CORPORATIONS R-II BUILDERS AND R-II HOLDINGS IS
DISQUALIFIED FROM BEING A TRANSFEREE OF PUBLIC LAND.

IV
The grounds presented in the instant petition are:
I RESPONDENTS MUST BE COMPELLED TO DISCLOSE ALL INFORMATION
RELATED TO THE SMOKEY MOUNTAIN DEVELOPMENT AND RECLAMATION
NEITHER RESPONDENT NHA NOR RESPONDENT R-II BUILDERS MAY VALIDLY PROJECT.
RECLAIM FORESHORE AND SUBMERGED LAND BECAUSE:

1. RESPONDENT NHA AND R-II BUILDERS WERE NEVER GRANTED ANY

POWER AND AUTHORITY TO RECLAIM LANDS OF THE PUBLIC DOMAIN AS
The Courts Ruling
THIS POWER IS VESTED EXCLUSIVELY WITH THE PEA.

2. EVEN ASSUMING THAT RESPONDENTS NHA AND R-II BUILDERS WERE

GIVEN THE POWER AND AUTHORITY TO RECLAIM FORESHORE AND Before we delve into the substantive issues raised in this petition, we will first deal with several procedural
SUBMERGED LAND, THEY WERE NEVER GIVEN THE AUTHORITY BY
THE DENR TO DO SO. matters raised by respondents.

II Whether petitioner has the requisite locus standi to file this case
 established policy. It is a policy that is necessary to prevent inordinate demands upon
the Courts time and attention which are better devoted to those matters within its
exclusive jurisdiction, and to prevent further over-crowding of the Courts docket.[51] x x
Respondents argue that petitioner Chavez has no legal standing to file the petition. x

The OSG claims that the jurisdiction over petitions for prohibition and mandamus is concurrent
Only a person who stands to be benefited or injured by the judgment in the suit or entitled to the
with other lower courts like the Regional Trial Courts and the Court of Appeals. Respondent NHA argues
avails of the suit can file a complaint or petition. [47] Respondents claim that petitioner is not a proper
that the instant petition is misfiled because it does not introduce special and important reasons or
party-in-interest as he was unable to show that he has sustained or is in immediate or imminent danger of
exceptional and compelling circumstances to warrant direct recourse to this Court and that the lower
sustaining some direct and personal injury as a result of the execution and enforcement of the assailed
courts are more equipped for factual issues since this Court is not a trier of facts. Respondents RBI and
contracts or agreements.[48] Moreover, they assert that not all government contracts can justify a taxpayers
RHI question the filing of the petition as this Court should not be unduly burdened with repetitions,
suit especially when no public funds were utilized in contravention of the Constitution or a law.
invocation of jurisdiction over constitutional questions it had previously resolved and settled.
We explicated in Chavez v. PCGG[49] that in cases where issues of transcendental public

importance are presented, there is no necessity to show that petitioner has experienced or is in actual
In the light of existing jurisprudence, we find paucity of merit in respondents postulation.
danger of suffering direct and personal injury as the requisite injury is assumed. We find our ruling

in Chavez v. PEA[50] as conclusive authority on locus standi in the case at bar since the issues raised in
While direct recourse to this Court is generally frowned upon and discouraged, we have however ruled
this petition are averred to be in breach of the fair diffusion of the countrys natural resources and the
in Santiago v. Vasquez that such resort to us may be allowed in certain situations, wherein this Court ruled
constitutional right of a citizen to information which have been declared to be matters of transcendental
that petitions for certiorari, prohibition, or mandamus, though cognizable by other courts, may directly be
public importance. Moreover, the pleadings especially those of respondents readily reveal that public
filed with us if the redress desired cannot be obtained in the appropriate courts or where exceptional
funds have been indirectly utilized in the Project by means of Smokey Mountain Project Participation
compelling circumstances justify availment of a remedy within and calling for the exercise of [this Courts]
Certificates (SMPPCs) bought by some government agencies.
primary jurisdiction.[52]
Hence, petitioner, as a taxpayer, is a proper party to the instant petition before the court.

The instant petition challenges the constitutionality and legality of the SMDRP involving several hectares
Whether petitioners direct recourse to this Court was proper
of government land and hundreds of millions of funds of several government agencies. Moreover, serious

Respondents are one in asserting that petitioner circumvents the principle of hierarchy of courts in his constitutional challenges are made on the different aspects of the Project which allegedly affect the right of

petition. Judicial hierarchy was made clear in the case of People v. Cuaresma, thus: Filipinos to the distribution of natural resources in the country and the right to information of a

There is after all a hierarchy of courts. That hierarchy is determinative of the venue of citizenmatters which have been considered to be of extraordinary significance and grave consequence to
appeals, and should also serve as a general determinant of the appropriate forum for
the public in general. These concerns in the instant action compel us to turn a blind eye to the judicial
petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most
certainly indicates that petitions for the issuance of extraordinary writs against first structure meant to provide an orderly dispensation of justice and consider the instant petition as a justified
level (inferior) courts should be filed with the Regional Trial Court, and those against
the latter, with the Court of Appeals. A direct invocation of the Supreme Courts deviation from an established precept.
original jurisdiction to issue these writs should be allowed only when there are special
and important reasons therefor, clearly and specifically set out in the petition. This is
Core factual matters undisputed

(2) In PEA, AMARI and PEA executed a JVA to develop the Freedom Islands and reclaim submerged

Respondents next challenge the projected review by this Court of the alleged factual issues intertwined in areas without public bidding on April 25, 1995. In the instant NHA case, the NHA and RBI executed a JVA

the issues propounded by petitioner. They listed a copious number of questions seemingly factual in after RBI was declared the winning bidder on August 31, 1992 as the JVA partner of the NHA in the

nature which would make this Court a trier of facts.[53] SMDRP after compliance with the requisite public bidding.

We find the position of respondents bereft of merit. (3) In PEA, there was no law or presidential proclamation classifying the lands to be reclaimed as alienable
[54]
For one, we already gave due course to the instant petition in our January 18, 2005 Resolution. In said and disposal lands of public domain. In this RBI case, MO 415 of former President Aquino and

issuance, the parties were required to make clear and concise statements of established facts upon which Proclamation No. 39 of then President Ramos, coupled with Special Patents Nos. 3591, 3592, and 3598,

our decision will be based. classified the reclaimed lands as alienable and disposable;

Secondly, we agree with petitioner that there is no necessity for us to make any factual findings since the (4) In PEA, the Chavez petition was filed before the amended JVA was executed by PEA and AMARI. In

facts needed to decide the instant petition are well established from the admissions of the parties in their this NHA case, the JVA and subsequent amendments were already substantially
[55]
pleadings and those derived from the documents appended to said submissions. Indeed, the core facts implemented. Subsequently, the Project was terminated through a MOA signed on August 27,

which are the subject matter of the numerous issues raised in this petition are undisputed. 2003. Almost one year later on August 5, 2004, the Chavez petition was filed;

Now we will tackle the issues that prop up the instant petition. (5) In PEA, AMARI was considered to be in bad faith as it signed the amended JVA after the Chavez

petition was filed with the Court and after Senate Committee Report No. 560 was issued finding that the

Since petitioner has cited our decision in PEA as basis for his postulations in a number of issues, subject lands are inalienable lands of public domain. In the instant petition, RBI and other respondents are

we first resolve the queryis PEA applicable to the case at bar? considered to have signed the agreements in good faith as the Project was terminated even before the

Chavez petition was filed;

A juxtaposition of the facts in the two cases constrains the Court to rule in the negative.

(6) The PEA-AMARI JVA was executed as a result of direct negotiation between the parties and not in

The Court finds that PEA is not a binding precedent to the instant petition because the facts in said case accordance with the BOT Law. The NHA-RBI JVA and subsequent amendments constitute a BOT contract

are substantially different from the facts and circumstances in the case at bar, thus: governed by the BOT Law; and

(1) The reclamation project in PEA was undertaken through a JVA entered into between PEA and (7) In PEA, the lands to be reclaimed or already reclaimed were transferred to PEA, a government entity

AMARI. The reclamation project in the instant NHA case was undertaken by the NHA, a national tasked to dispose of public lands under Executive Order No. (EO) 525. [56] In the NHA case, the reclaimed

government agency in consultation with PEA and with the approval of two Philippine Presidents;
 there must be a formal declaration segregating reclaimed lands no longer needed for
lands were transferred to NHA, a government entity NOT tasked to dispose of public land and therefore public service from those still needed for public service. [60]

said alienable lands were converted to patrimonial lands upon their transfer to NHA.[57]

Thus the PEA Decision[58] cannot be considered an authority or precedent to the instant
In the Smokey Mountain Project, petitioner clarifies that the reclamation was not done by PEA or
case. The principle of stare decisis[59] has no application to the different factual setting of the instant case.
through a contract executed by PEA with another person or entity but by the NHA through an agreement

with respondent RBI. Therefore, he concludes that the reclamation is null and void.
We will now dwell on the substantive issues raised by petitioner. After a perusal of the grounds

raised in this petition, we find that most of these issues are moored on our PEA Decision which, as earlier
Petitioners contention has no merit.
discussed, has no application to the instant petition. For this reason alone, the petition can already be

rejected. Nevertheless, on the premise of the applicability of said decision to the case at bar, we will
EO 525 reads:
proceed to resolve said issues.

First Issue: Whether respondents NHA and RBI have been granted
the power and authority to reclaim lands of the public domain as
this power is vested exclusively in PEA as claimed by petitioner
Petitioner contends that neither respondent NHA nor respondent RBI may validly reclaim foreshore and
Section 1. The Public Estates Authority (PEA) shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of the
National Government. All reclamation projects shall be approved by the President
upon recommendation of the PEA, and shall be undertaken by the PEA or through a
proper contract executed by it with any person or entity; Provided, that, reclamation
projects of any national government agency or entity authorized under its
charter shall be undertaken in consultation with the PEA upon approval of the
President. (Emphasis supplied.)

submerged land because they were not given any power and authority to reclaim lands of the public

domain as this power was delegated by law to PEA. The aforequoted provision points to three (3) requisites for a legal and valid reclamation project, viz:

Asserting that existing laws did not empower the NHA and RBI to reclaim lands of public domain, the (1) approval by the President;

Public Estates Authority (PEA), petitioner claims, is the primary authority for the reclamation of all (2) favorable recommendation of PEA; and

foreshore and submerged lands of public domain, and relies on PEA where this Court held: (3) undertaken by any of the following:

Moreover, Section 1 of Executive Order No. 525 provides that PEA shall be primarily
responsible for integrating, directing, and coordinating all reclamation projects for and a. by PEA
on behalf of the National Government. The same section also states that [A]ll
b. by any person or entity pursuant to a contract it executed with PEA
reclamation projects shall be approved by the President upon recommendation of the
PEA, and shall be undertaken by the PEA or through a proper contract executed by it c. by the National Government agency or entity authorized under its charter to reclaim lands subject to
with any person or entity; x x x. Thus, under EO No. 525, in relation to PD No. 3-A and
PD No. 1084, PEA became the primary implementing agency of the National consultation with PEA
Government to reclaim foreshore and submerged lands of the public domain. EO No.
525 recognized PEA as the government entity to undertake the reclamation of lands
and ensure their maximum utilization in promoting public welfare and interests. Since
large portions of these reclaimed lands would obviously be needed for public service,
Without doubt, PEA under EO 525 was designated as the agency primarily responsible for integrating,
directing, and coordinating all reclamation projects. Primarily means mainly, principally, mostly,
generally. Thus, not all reclamation projects fall under PEAs authority of supervision, integration, and
[61]
coordination. The very charter of PEA, PD 1084, does not mention that PEA has the exclusive and sole
power and authority to reclaim lands of public domain. EO 525 even reveals the exceptionreclamation
projects by a national government agency or entity authorized by its charter to reclaim land. One example
is EO 405 which authorized the Philippine Ports Authority (PPA) to reclaim and develop submerged areas
for port related purposes. Under its charter, PD 857, PPA has the power to reclaim, excavate, enclose or
raise any of the lands vested in it.
Thus, while PEA under PD 1084 has the power to reclaim land and under EO 525 is primarily responsible
for integrating, directing and coordinating reclamation projects, such authority is NOT exclusive and such
power to reclaim may be granted or delegated to another government agency or entity or may even be
undertaken by the National Government itself, PEA being only an agency and a part of the National
Government.
Let us apply the legal parameters of Sec. 1, EO 525 to the reclamation phase of SMDRP. After a scrutiny
of the facts culled from the records, we find that the project met all the three (3) requirements, thus:
1. There was ample approval by the President of the Philippines; as a matter of fact, two Philippine
Presidents approved the same, namely: Presidents Aquino and Ramos. President Aquino sanctioned the
reclamation of both the SMDRP housing and commercial-industrial sites through MO 415 (s. 1992) which
approved the SMDRP under Sec. 1 and directed NHA x x x to implement the Smokey Mountain
Development Plan and Reclamation of the Area across R-10 through a private sector joint venture
scheme at the least cost to government under Section 3.
For his part, then President Ramos issued Proclamation No. 39 (s. 1992) which expressly reserved the
Smokey Mountain Area and the Reclamation Area for a housing project and related
commercial/industrial development.
Moreover, President Ramos issued Proclamation No. 465 (s. 1994) which authorized the
increase of the Reclamation Area from 40 hectares of foreshore and submerged land of
the Manila Bay to 79 hectares. It speaks of the reclamation of 400,000 square meters, more or less, of
the foreshore and submerged lands of Manila Bay adjoining R-10 as an enabling component of the
SMDRP.
As a result of Proclamations Nos. 39 and 465, Special Patent No. 3591 covering 211,975 square meters
of Smokey Mountain, Special Patent No. 3592 covering 401,485 square meters of reclaimed land, and
Special Patent No. 3598 covering another 390,000 square meters of reclaimed land were issued by the
DENR.
Thus, the first requirement of presidential imprimatur on the SMDRP has been satisfied.
2. The requisite favorable endorsement of the reclamation phase was impliedly granted by PEA. President
Aquino saw to it that there was coordination of the project with PEA by designating its general manager as
member of the EXECOM tasked to supervise the project implementation. The assignment was made in
Sec. 2 of MO 415 which provides:
Section 2. An Executive Committee is hereby created to oversee the implementation
of the Plan, chaired by the NCR-CORD, with the heads of the following agencies as
members: The National Housing Authority, the City of Manila, the Department of
Public Works and Highways, the Public Estates Authority, the Philippine Ports
Authority, the Department of Environment and Natural Resources and the
Development Bank of the Philippines. (Emphasis supplied.)
The favorable recommendation by PEA of the JVA and subsequent amendments were incorporated as
part of the recommendations of the EXECOM created under MO 415. While there was no specific
recommendation on the SMDRP emanating solely from PEA, we find that the approbation of the Project
and the land reclamation as an essential component by the EXECOM of which PEA is a member, and its
submission of the SMDRP and the agreements on the Project to the President for approval amply met the
second requirement of EO 525.
3. The third element was also presentthe reclamation was undertaken either by PEA or any person or
entity under contract with PEA or by the National Government agency or entity authorized under its charter
to reclaim lands subject to consultation with PEA. It cannot be disputed that the reclamation phase was not
done by PEA or any person or entity under contract with PEA. However, the reclamation was implemented
by the NHA, a national government agency whose authority to reclaim lands under consultation with PEA
is derived from its charterPD 727 and other pertinent lawsRA 7279 [62] and RA 6957 as amended by RA
7718.
While the authority of NHA to reclaim lands is challenged by petitioner, we find that the NHA had more
than enough authority to do so under existing laws. While PD 757, the charter of NHA, does not explicitly
mention reclamation in any of the listed powers of the agency, we rule that the NHA has an implied power
to reclaim land as this is vital or incidental to effectively, logically, and successfully implement an urban
land reform and housing program enunciated in Sec. 9 of Article XIII of the 1987 Constitution.
Basic in administrative law is the doctrine that a government agency or office has express and implied
powers based on its charter and other pertinent statutes. Express powers are those powers granted,
allocated, and delegated to a government agency or office by express provisions of law. On the other hand,
implied powers are those that can be inferred or are implicit in the wordings of the law [63] or conferred by
necessary or fair implication in the enabling act.[64] In Angara v. Electoral Commission, the Court clarified
and stressed that when a general grant of power is conferred or duty enjoined, every particular power
necessary for the exercise of the one or the performance of the other is also conferred by necessary
implication.[65] It was also explicated that when the statute does not specify the particular method to be
followed or used by a government agency in the exercise of the power vested in it by law, said agency has
the authority to adopt any reasonable method to carry out its functions.[66]
The power to reclaim on the part of the NHA is implicit from PD 757, RA 7279, MO 415, RA 6957, and PD
3-A,[67] viz:
1. NHAs power to reclaim derived from PD 757 provisions:
a. Sec. 3 of PD 757 implies that reclamation may be resorted to in order to attain the goals of NHA:
Section 3. Progress and Objectives. The Authority shall have the following purposes
and objectives:
xxxx
b) To undertake housing, development, resettlement or other activities as
would enhance the provision of housing to every Filipino;
c) To harness and promote private participation in housing ventures in
terms of capital expenditures, land, expertise, financing and other facilities
for the sustained growth of the housing industry. (Emphasis supplied.)
Land reclamation is an integral part of the development of resources for some of the housing requirements
of the NHA. Private participation in housing projects may also take the form of land reclamation.
b. Sec. 5 of PD 757 serves as proof that the NHA, as successor of the Tondo Foreshore Development
Authority (TFDA), has the power to reclaim, thus:
Section 5. Dissolution of Existing Housing Agencies. The People's
Homesite and Housing Corporation (PHHC), the Presidential Assistant on Housing
Resettlement Agency (PAHRA), the Tondo Foreshore Development Authority
(TFDA), the Central Institute for the Training and Relocation of Urban Squatters
(CITRUS), the Presidential Committee for Housing and Urban Resettlement
(PRECHUR), Sapang Palay Development Committee, Inter-Agency Task Force to
Undertake the Relocation of Families in Barrio Nabacaan, Villanueva, Misamis
Oriental and all other existing government housing and resettlement agencies, task
forces and ad-hoc committees, are hereby dissolved. Their powers and functions,
balance of appropriations, records, assets, rights, and choses in action, are
transferred to, vested in, and assumed by the Authority. x x x(Emphasis
supplied.)
PD 570 dated October 30, 1974 created the TFDA, which defined its objectives, powers, and
functions. Sec. 2 provides:
 Section 2. Objectives and Purposes. The Authority shall have the following purposes
and objectives: lands in the Tondo foreshore area which covers the 79-hectare land subject of Proclamations Nos. 39 and

a) To undertake all manner of activity, business or development projects for the 465 and Special Patents Nos. 3592 and 3598.
establishment of harmonious, comprehensive, integrated and healthy living
community in the Tondo Foreshoreland and its resettlement site;
c. Sec. 6 of PD 757 delineates the functions and powers of the NHA which embrace the authority to
b) To undertake and promote the physical and socio-economic amelioration of
the Tondo Foreshore residents in particular and the nation in general (Emphasis reclaim land, thus:
supplied.)

Sec. 6. Powers and functions of the Authority.The Authority shall have the following
powers and functions to be exercised by the Board in accordance with its established
national human settlements plan prepared by the Human Settlements Commission:
The powers and functions are contained in Sec. 3, to wit:
(a) Develop and implement the comprehensive and integrated housing
a) To develop and implement comprehensive and integrated urban renewal programs program provided for in Section hereof;
for the Tondo Foreshore and Dagat-dagatan lagoon and/or any other
additional/alternative resettlement site and to formulate and enforce general and xxxx
specific policies for its development which shall ensure reasonable degree of
compliance with environmental standards. (c) Prescribe guidelines and standards for the reservation, conservation
and utilization of public lands identified for housing and resettlement;
b) To prescribe guidelines and standards for the reservation, conservation
and utilization of public lands covering the Tondo Foreshore land and its xxxx
resettlement sites;
(e) Develop and undertake housing development and/or resettlement
c) To construct, acquire, own, lease, operate and maintain infrastructure facilities, projects through joint ventures or other arrangements with public and private
housing complex, sites and services; entities;
xxxx
d) To determine, regulate and supervise the establishment and operation of housing,
sites, services and commercial and industrial complexes and any other enterprises to (k) Enter into contracts whenever necessary under such terms and conditions as it
be constructed or established within the Tondo Foreshore and its resettlement sites; may deem proper and reasonable;

e) To undertake and develop, by itself or through joint ventures with other public or (l) Acquire property rights and interests and encumber or otherwise dispose the
private entities, all or any of the different phases of development of the Tondo same as it may deem appropriate;
Foreshore land and its resettlement sites;
xxxx
f) To acquire and own property, property-rights and interests, and encumber or
otherwise dispose of the same as it may deem appropriate (Emphasis supplied.) (s) Perform such other acts not inconsistent with this Decree, as may be
necessary to effect the policies and objectives herein declared. (Emphasis
supplied.)

From the foregoing provisions, it is readily apparent that the TFDA has the explicit power to develop public
The NHAs authority to reclaim land can be inferred from the aforequoted provisions. It can make
lands covering the Tondo foreshore land and any other additional and alternative resettlement sites under
use of public lands under letter (c) of Sec. 6 which includes reclaimed land as site for its comprehensive
letter b, Sec. 3 of PD 570. Since the additional and/or alternative sites adjacent to Tondo foreshore land
and integrated housing projects under letter (a) which can be undertaken through joint ventures with
cover foreshore and submerged areas, the reclamation of said areas is necessary in order to convert them
private entities under letter (e). Taken together with letter (s) which authorizes NHA to perform such other
into a comprehensive and integrated resettlement housing project for the slum dwellers and squatters of
activities necessary to effect the policies and objectives of PD 757, it is safe to conclude that the NHAs
Tondo.Since the powers of TFDA were assumed by the NHA, then the NHA has the power to reclaim
power to reclaim lands is a power that is implied from the exercise of its explicit powers under Sec. 6 in Lands belonging to the National Government include foreshore and submerged lands which can be

order to effectively accomplish its policies and objectives under Sec. 3 of its charter. Thus, the reclamation reclaimed to undertake housing development and resettlement projects.

of land is an indispensable component for the development and construction of the SMDRP housing

facilities. 3. MO 415 explains the undertaking of the NHA in SMDRP:

WHEREAS, Memorandum Order No. 161-A mandated the National Housing Authority
2. NHAs implied power to reclaim land is enhanced by RA 7279. to conduct feasibility studies and develop low-cost housing projects at the
dumpsites of Metro Manila;

PD 757 identifies NHAs mandate to [d]evelop and undertake housing development and/or resettlement WHEREAS, the National Housing Authority has presented a viable Conceptual Plan
to convert the Smokey Mountain dumpsite into a habitable housing project inclusive
projects through joint ventures or other arrangements with public and private entities. of the reclamation area across R-10 as enabling component of the Project;

WHEREAS, the said Plan requires the coordinated and synchronized efforts of the
City of Manila and other government agencies and instrumentalities to ensure
The power of the NHA to undertake reclamation of land can be inferred from Secs. 12 and 29 of RA 7279, effective and efficient implementation;
which provide: WHEREAS, the government encourages private sector initiative in the
implementation of its projects. (Emphasis supplied.)

Section 12. Disposition of Lands for Socialized Housing.The National Housing

Authority, with respect to lands belonging to the National Government, and the
local government units with respect to other lands within their respective localities, Proceeding from these whereas clauses, it is unequivocal that reclamation of land in
shall coordinate with each other to formulate and make available various alternative
the Smokey Mountain area is an essential and vital power of the NHA to effectively implement its avowed
schemes for the disposition of lands to the beneficiaries of the Program. These
schemes shall not be limited to those involving transfer of ownership in fee simple but goal of developing low-cost housing units at the Smokey Mountaindumpsites. The interpretation made by
shall include lease, with option to purchase, usufruct or such other variations as the
local government units or the National Housing Authority may deem most expedient in no less than the President of the Philippines as Chief of the Executive Branch, of which the NHA is a part,
carrying out the purposes of this Act.
must necessarily command respect and much weight and credit.
xxxx

Section 29. Resettlement.With two (2) years from the effectivity of this Act, the local
government units, in coordination with the National Housing Authority, shall 4. RA 6957 as amended by RA 7718the BOT Lawserves as an exception to PD 1084 and EO 525.
implement the relocation and resettlement of persons living in danger areas such
Based on the provisions of the BOT Law and Implementing Rules and Regulations, it is
as esteros, railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and
in other public places as sidewalks, roads, parks, and playgrounds. The local unequivocal that all government infrastructure agencies like the NHA can undertake infrastructure or
government unit, in coordination with the National Housing Authority, shall provide
relocation or resettlement sites with basic services and facilities and access to development projects using the contractual arrangements prescribed by the law, and land reclamation is
employment and livelihood opportunities sufficient to meet the basic needs of the
affected families. (Emphasis supplied.) one of the projects that can be resorted to in the BOT project implementation under the February 10, 1992

Joint Resolution No. 3 of the 8th Congress.

From the foregoing considerations, we find that the NHA has ample implied authority to undertake
reclamation projects.
Even without an implied power to reclaim lands under NHAs charter, we rule that the authority granted to
NHA, a national government agency, by the President under PD 3-A reinforced by EO 525 is more than
sufficient statutory basis for the reclamation of lands under the SMDRP.
PD 3-A is a law issued by then President Ferdinand E. Marcos under his martial law powers on September
23, 1972. It provided that [t]he provisions of any law to the contrary notwithstanding, the reclamation of
areas, underwater, whether foreshore or inland, shall be limited to the National Government or any person
authorized by it under the proper contract. It repealed, in effect, RA 1899 which previously delegated the
right to reclaim lands to municipalities and chartered cities and revested it to the National
Government.[68]Under PD 3-A, national government can only mean the Executive Branch headed by the
President. It cannot refer to Congress as it was dissolved and abolished at the time of the issuance of PD
3-A on September 23, 1972. Moreover, the Executive Branch is the only implementing arm in the
government with the equipment, manpower, expertise, and capability by the very nature of its assigned
powers and functions to undertake reclamation projects. Thus, under PD 3-A, the Executive Branch
through the President can implement reclamation of lands through any of its departments, agencies, or
offices.
Subsequently, on February 4, 1977, President Marcos issued PD 1084 creating the PEA, which was
granted, among others, the power to reclaim land, including foreshore and submerged areas by dredging,
filling or other means or to acquire reclaimed lands. The PEAs power to reclaim is not however exclusive
as can be gleaned from its charter, as the President retained his power under PD 3-A to designate another
agency to reclaim lands.
On February 14, 1979, EO 525 was issued. It granted PEA primary responsibility for integrating, directing,
and coordinating reclamation projects for and on behalf of the National Government although other
national government agencies can be designated by the President to reclaim lands in coordination with the
PEA. Despite the issuance of EO 525, PD 3-A remained valid and subsisting. Thus, the National
Government through the President still retained the power and control over all reclamation projects in the
country.
The power of the National Government through the President over reclamation of areas, that is,
underwater whether foreshore or inland, was made clear in EO 543[69] which took effect on June 24,
2006. Under EO 543, PEA was renamed the Philippine Reclamation Authority (PRA) and was granted the
authority to approve reclamation projects, a power previously reposed in the President under EO 525. EO
543 reads:
Section 1. The power of the President to approve reclamation projects is hereby
delegated to the Philippine Reclamation Authority [formerly PEA], through its
governing board, subject to compliance with existing laws and rules and subject to the
condition that reclamation contracts to be executed with any person or entity go
through public bidding.
Section 2. Nothing in the Order shall be construed as diminishing the Presidents
authority to modify, amend or nullify PRAs action.
Section 3. All executive issuances inconsistent with this Executive Order are hereby
repealed or amended accordingly. (Emphasis supplied.)
Sec. 2 of EO 543 strengthened the power of control and supervision of the President over
reclamation of lands as s/he can modify, amend, or nullify the action of PEA (now PRA).
From the foregoing issuances, we conclude that the Presidents delegation to NHA, a national
government agency, to reclaim lands under the SMDRP, is legal and valid, firmly anchored on PD 3-A
buttressed by EO 525 notwithstanding the absence of any specific grant of power under its charter, PD
757.
Second Issue: Whether respondents NHA and RBI were given the
power and authority by DENR to reclaim foreshore and submerged
lands
Petitioner Chavez puts forth the view that even if the NHA and RBI were granted the authority to reclaim, The DENR is deemed to have granted the authority to reclaim in the Smokey Mountain Project for the

they were not authorized to do so by the DENR. following reasons:

Again, reliance is made on our ruling in PEA where it was held that the DENRs authority is

necessary in order for the government to validly reclaim foreshore and submerged lands. In PEA, we 1. Sec. 17, Art. VII of the Constitution provides that the President shall have control of all executive

expounded in this manner: departments, bureaus and offices. The President is assigned the task of seeing to it that all laws are

faithfully executed. Control, in administrative law, means the power of an officer to alter, modify, nullify or
As manager, conservator and overseer of the natural resources of the State, DENR
exercises supervision and control over alienable and disposable public lands. DENR set aside what a subordinate officer has done in the performance of his duties and to substitute the
also exercises exclusive jurisdiction on the management and disposition of all lands of
judgment of the former for that of the latter.[71]
the public domain. Thus, DENR decides whether areas under water, like foreshore or
submerged areas of Manila Bay, should be reclaimed or not. This means that PEA
needs authorization from DENR before PEA can undertake reclamation projects
in Manila Bay, or in any part of the country. As such, the President can exercise executive power motu proprio and can supplant the act or decision of

DENR also exercises exclusive jurisdiction over the disposition of all lands of the a subordinate with the Presidents own. The DENR is a department in the executive branch under the
public domain. Hence, DENR decides whether reclaimed lands of PEA should be
classified as alienable under Sections 6 and 7 of CA No. 141. Once DENR decides President, and it is only an alter ego of the latter. Ordinarily the proposed action and the staff work are
that the reclaimed lands should be so classified, it then recommends to the President
initially done by a department like the DENR and then submitted to the President for approval. However,
the issuance of a proclamation classifying the lands as alienable or disposable lands
of the public domain open to disposition. We note that then DENR Secretary there is nothing infirm or unconstitutional if the President decides on the implementation of a certain
Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with
the Revised Administrative Code and Sections 6 and 7 of CA No. 141. project or activity and requires said department to implement it. Such is a presidential prerogative as long

In short, DENR is vested with the power to authorize the reclamation of areas under as it involves the department or office authorized by law to supervise or execute the Project. Thus, as in
water, while PEA is vested with the power to undertake the physical reclamation of
areas under water, whether directly or through private contractors. DENR is also this case, when the President approved and ordered the development of a housing project with the
empowered to classify lands of the public domain into alienable or disposable lands
subject to the approval of the President. On the other hand, PEA is tasked to develop, corresponding reclamation work, making DENR a member of the committee tasked to implement the
sell or lease the reclaimed alienable lands of the public domain.[70]
project, the required authorization from the DENR to reclaim land can be deemed satisfied. It cannot be

disputed that the ultimate power over alienable and disposable public lands is reposed in the President of

the Philippines and not the DENR Secretary. To still require a DENR authorization on
Despite our finding that PEA is not a precedent to the case at bar, we find after all that under
the Smokey Mountain when the President has already authorized and ordered the implementation of the
existing laws, the NHA is still required to procure DENRs authorization before a reclamation project in
Project would be a derogation of the powers of the President as the head of the executive
Manila Bay or in any part of the Philippines can be undertaken.The requirement applies to PEA, NHA, or
branch. Otherwise, any department head can defy or oppose the implementation of a project approved by
any other government agency or office granted with such power under the law.
the head of the executive branch, which is patently illegal and unconstitutional.

Notwithstanding the need for DENR permission, we nevertheless find petitioners position bereft
In Chavez v. Romulo, we stated that when a statute imposes a specific duty on the executive
of merit.
department, the President may act directly or order the said department to undertake an activity, thus:
 [A]t the apex of the entire executive officialdom is the President. Section 17, Article VII
of the Constitution specifies [her] power as Chief executive departments, bureaus and 2. Under Sec. 2 of MO 415, the DENR is one of the members of the EXECOM chaired by the NCR-CORD
offices. [She] shall ensure that the laws be faithfully executed. As Chief Executive,
President Arroyo holds the steering wheel that controls the course of her to oversee the implementation of the Project. The EXECOM was the one which recommended approval of
government. She lays down policies in the execution of her plans and
the project plan and the joint venture agreements.Clearly, the DENR retained its power of supervision and
programs. Whatever policy she chooses, she has her subordinates to implement
them. In short, she has the power of control. Whenever a specific function is control over the laws affected by the Project since it was tasked to facilitate the titling of
entrusted by law or regulation to her subordinate, she may act directly or
merely direct the performance of a duty x x x. Such act is well within the the Smokey Mountain and of the area to be reclaimed, which shows that it had tacitly given its authority to
prerogative of her office (emphasis supplied).[72]
the NHA to undertake the reclamation.

Moreover, the power to order the reclamation of lands of public domain is reposed first in the Philippine 3. Former DENR Secretary Angel C. Alcala issued Special Patents Nos. 3591 and 3592 while then

President. The Revised Administrative Code of 1987 grants authority to the President to reserve lands of Secretary Victor O. Ramos issued Special Patent No. 3598 that embraced the areas covered by the

public domain for settlement for any specific purpose, thus: reclamation. These patents conveyed the lands to be reclaimed to the NHA and granted to said agency

the administration and disposition of said lands for subdivision and disposition to qualified beneficiaries
Section 14. Power to Reserve Lands of the Public and Private Domain of the
Government.(1) The President shall have the power to reserve for settlement or
and for development for mix land use (commercial/industrial) to provide employment opportunities to
public use, and for specific public purposes, any of the lands of the public
domain, the use of which is not otherwise directed by law.The reserved land shall on-site families and additional areas for port related activities. Such grant of authority to administer and
thereafter remain subject to the specific public purpose indicated until otherwise
provided by law or proclamation. (Emphasis supplied.) dispose of lands of public domain under the SMDRP is of course subject to the powers of the EXECOM of

SMDRP, of which the DENR is a member.

President Aquino reserved the area of the Smokey Mountain dumpsite for settlement and

issued MO 415 authorizing the implementation of the Smokey Mountain Development Project plus the
4. The issuance of ECCs by the DENR for SMDRP is but an exercise of its power of supervision and
reclamation of the area across R-10. Then President Ramos issued Proclamation No. 39 covering the
control over the lands of public domain covered by the Project.
21-hectare dumpsite and the 40-hectare commercial/industrial area, and Proclamation No. 465 and MO

415 increasing the area of foreshore and submerged lands of Manila Bay to be reclaimed from 40 to 79
Based on these reasons, it is clear that the DENR, through its acts and issuances, has ratified and
hectares. Having supervision and control over the DENR, both Presidents directly assumed and exercised
confirmed the reclamation of the subject lands for the purposes laid down in Proclamations Nos. 39 and
the power granted by the Revised Administrative Code to the DENR Secretary to authorize the NHA to
465.
reclaim said lands. What can be done indirectly by the DENR can be done directly by the President. It

would be absurd if the power of the President cannot be exercised simply because the head of a Third Issue: Whether respondent RBI can acquire reclaimed
foreshore and submerged lands considered as inalienable and
department in the executive branch has not acted favorably on a project already approved by the outside the commerce of man
President. If such arrangement is allowed then the department head will become more powerful than the

President.
Petitioner postulates that respondent RBI cannot acquire the reclaimed foreshore and submerged areas

as these are inalienable public lands beyond the commerce of man based on Art. 1409 of the Civil Code

which provides:

Article 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs,
public order or public policy;
The directive to transfer the lands once reclaimed to the NHA implicitly carries with it the declaration that
said lands are alienable and disposable. Otherwise, the NHA cannot effectively use them in its housing
and resettlement project.

(2) Proclamation No. 39 issued by then President Ramos by which the reclaimed lands were conveyed to
xxxx
NHA for subdivision and disposition to qualified beneficiaries and for development into a mixed land use
(7) Those expressly prohibited or declared void by law.
(commercial/industrial) to provide employment opportunities to on-site families and additional areas for
These contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived. port-related activities. Said directive carries with it the pronouncement that said lands have been

transformed to alienable and disposable lands. Otherwise, there is no legal way to convey it to the

beneficiaries.
Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources are owned by the State and

they cannot be alienated except for alienable agricultural lands of the public domain. One of the States
(3) Proclamation No. 465 likewise issued by President Ramos enlarged the reclaimed area to 79 hectares
natural resources are lands of public domain which include reclaimed lands.
to be developed and disposed of in the implementation of the SMDRP. The authority put into the hands of
Petitioner contends that for these reclaimed lands to be alienable, there must be a law or
the NHA to dispose of the reclaimed lands tacitly sustains the conversion to alienable and disposable
presidential proclamation officially classifying these reclaimed lands as alienable and disposable and open
lands.
to disposition or concession. Absent such law or proclamation, the reclaimed lands cannot be the enabling
Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR anchored on Proclamations
component or consideration to be paid to RBI as these are beyond the commerce of man.
Nos. 39 and 465 issued by President Ramos, without doubt, classified the reclaimed areas as alienable

and disposable.
We are not convinced of petitioners postulation.

Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are explicit declarations that the
The reclaimed lands across R-10 were classified alienable and disposable lands of public domain of the
lands to be reclaimed are classified as alienable and disposable. We find however that such conclusion is
State for the following reasons, viz:
derived and implicit from the authority given to the NHA to transfer the reclaimed lands to qualified

beneficiaries.
First, there were three (3) presidential proclamations classifying the reclaimed lands across R-10 as

alienable or disposable hence open to disposition or concession, to wit:

The query is, when did the declaration take effect? It did so only after the special patents covering the

reclaimed areas were issued. It is only on such date that the reclaimed lands became alienable and
(1) MO 415 issued by President Aquino, of which Sec. 4 states that [t]he land covered by the Smokey
disposable lands of the public domain. This is in line with the ruling in PEA where said issue was clarified
Mountain Dumpsite is hereby conveyed to the National Housing Authority as well as the area to be
and stressed:
reclaimed across R-10.
PD No. 1085, coupled with President Aquinos actual issuance of a special
patent covering the Freedom Islands, is equivalent to an official proclamation
 classifying the Freedom Islands as alienable or disposable lands of the public
domain. PD No. 1085 and President Aquinos issuance of a land patent also
constitute a declaration that the Freedom Islands are no longer needed for
public service. The Freedom Islands are thus alienable or disposable lands of the
public domain, open to disposition or concession to qualified parties. [73] (Emphasis
supplied.)
Thus, MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly taken together with
Special Patent Nos. 3591, 3592, and 3598 more than satisfy the requirement in PEA that [t]here must be a
law or presidential proclamation officially classifying these reclaimed lands as alienable or disposable
[74]
and open to disposition or concession (emphasis supplied).
Apropos the requisite law categorizing reclaimed land as alienable or disposable, we find that RA 6957 as
amended by RA 7718 provides ample authority for the classification of reclaimed land in the SMDRP for
the repayment scheme of the BOT project as alienable and disposable lands of public domain. Sec. 6 of
RA 6957 as amended by RA 7718 provides:
For the financing, construction, operation and maintenance of any infrastructure
projects undertaken through the build-operate-and transfer arrangement or any of its
variations pursuant to the provisions of this Act, the project proponent x x x may
likewise be repaid in the form of a share in the revenue of the project or other
non-monetary payments, such as, but not limited to, the grant of a portion or
percentage of the reclaimed land, subject to the constitutional requirements with
respect to the ownership of the land. (Emphasis supplied.)
While RA 6957 as modified by RA 7718 does not expressly declare that the reclaimed lands that shall
serve as payment to the project proponent have become alienable and disposable lands and opened for
disposition; nonetheless, this conclusion is necessarily implied, for how else can the land be used as the
enabling component for the Project if such classification is not deemed made?
It may be argued that the grant of authority to sell public lands, pursuant to PEA, does not convert
alienable lands of public domain into private or patrimonial lands. We ruled in PEA that alienable lands of
public domain must be transferred to qualified private parties, or to government entities not tasked
to dispose of public lands, before these lands can become private or patrimonial lands (emphasis
[75]
supplied). To lands reclaimed by PEA or through a contract with a private person or entity, such
reclaimed lands still remain alienable lands of public domain which can be transferred only to Filipino
citizens but not to a private corporation. This is because PEA under PD 1084 and EO 525 is tasked to hold
and dispose of alienable lands of public domain and it is only when it is transferred to Filipino citizens that it
becomes patrimonial property. On the other hand, the NHA is a government agency not tasked to dispose
of public lands under its charterThe Revised Administrative Code of 1987. The NHA is an end-user agency
authorized by law to administer and dispose of reclaimed lands. The moment titles over reclaimed lands
based on the special patents are transferred to the NHA by the Register of Deeds, they are automatically
converted to patrimonial properties of the State which can be sold to Filipino citizens and private
corporations, 60% of which are owned by Filipinos. The reason is obvious: if the reclaimed land is not
converted to patrimonial land once transferred to NHA, then it would be useless to transfer it to the NHA
since it cannot legally transfer or alienate lands of public domain. More importantly, it cannot attain its
avowed purposes and goals since it can only transfer patrimonial lands to qualified beneficiaries and
prospective buyers to raise funds for the SMDRP.
From the foregoing considerations, we find that the 79-hectare reclaimed land has been declared alienable
and disposable land of the public domain; and in the hands of NHA, it has been reclassified as patrimonial
property.
Petitioner, however, contends that the reclaimed lands were inexistent prior to the three (3) Presidential
Acts (MO 415 and Proclamations Nos. 39 and 465) and hence, the declaration that such areas are
alienable and disposable land of the public domain, citing PEA,has no legal basis.
Petitioners contention is not well-taken.
Petitioners sole reliance on Proclamations Nos. 39 and 465 without taking into consideration the special
patents issued by the DENR demonstrates the inherent weakness of his proposition. As was ruled
in PEA cited by petitioner himself, PD No. 1085, coupled with President Aquinos actual issuance of a
special patent covering the Freedom Islands is equivalent to an official proclamation classifying the
Freedom islands as alienable or disposable lands of public domain. In a similar vein, the combined and
collective effect of Proclamations Nos. 39 and 465 with Special Patents Nos. 3592 and 3598 is tantamount law that should be treated differently is the BOT Law (RA 6957) which brought about a novel way of

to and can be considered to be an official declaration that the reclaimed lots are alienable or disposable implementing government contracts by allowing reclaimed land as part or full payment to the contractor of

lands of the public domain. a government project to satisfy the huge financial requirements of the undertaking. The NHA holds the

lands covered by Special Patents Nos. 3592 and 3598 solely for the purpose of the SMDRP undertaken by

The reclaimed lands covered by Special Patents Nos. 3591, 3592, and 3598, which evidence authority of the BOT Law and for disposition in accordance with said special law. The lands become

transfer of ownership of reclaimed lands to the NHA, are official acts of the DENR Secretary in the alienable and disposable lands of public domain upon issuance of the special patents and become

exercise of his power of supervision and control over alienable and disposable public lands and his patrimonial properties of the Government from the time the titles are issued to the NHA.

exclusive jurisdiction over the management and disposition of all lands of public domain under the Revised As early as 1999, this Court in Baguio v. Republic laid down the jurisprudence that:

Administrative Code of 1987. Special Patent No. 3592 speaks of the transfer of Lots 1 and 2, and
RI-003901-000012-D with an area of 401,485 square meters based on the survey and technical
description approved by the Bureau of Lands. Lastly, Special Patent No. 3598 was issued in favor of the
NHA transferring to said agency a tract of land described in Plan RL-00-000013 with an area of 390,000
It is true that, once a patent is registered and the corresponding certificate of title is
issued, the land covered by them ceases to be part of the public domain and becomes
private property, and the Torrens Title issued pursuant to the patent becomes
indefeasible upon the expiration of one year from the date of issuance of such
patent.[78]

square meters based on the survey and technical descriptions approved by the Bureau of Lands.

The doctrine was reiterated in Republic v. Heirs of Felipe Alijaga, Sr.,[79] Heirs of Carlos Alcaraz v.
The conduct of the survey, the preparation of the survey plan, the computation of the technical description,
Republic,[80] and the more recent case of Doris Chiongbian-Oliva v. Republic of the Philippines.[81] Thus,
and the processing and preparation of the special patent are matters within the technical area of expertise
the 79-hectare reclaimed land became patrimonial property after the issuance of certificates of titles to the
of administrative agencies like the DENR and the Land Management Bureau and are generally accorded
NHA based on Special Patents Nos. 3592 and 3598.
not only respect but at times even finality.[76] Preparation of special patents calls for technical examination

and a specialized review of calculations and specific details which the courts are ill-equipped to undertake;
One last point. The ruling in PEA cannot even be applied retroactively to the lots covered by Special
hence, the latter defer to the administrative agency which is trained and knowledgeable on such
Patents Nos. 3592 (40 hectare reclaimed land) and 3598 (39-hectare reclaimed land). The reclamation of
[77]
matters.
the land under SMDRP was completed in August 1996 while the PEA decision was rendered on July 9,

2002. In the meantime, subdivided lots forming parts of the reclaimed land were already sold to private
Subsequently, the special patents in the name of the NHA were submitted to the Register of Deeds of the
corporations for value and separate titles issued to the buyers. The Project was terminated through a
City of Manila for registration, and corresponding certificates of titles over the reclaimed lots were issued
Memorandum of Agreement signed on August 27, 2003. The PEA decision became final through
based on said special patents. The issuance of certificates of titles in NHAs name automatically converts
the November 11, 2003 Resolution. It is a settled precept that decisions of the Supreme Court can only be
the reclaimed lands to patrimonial properties of the NHA. Otherwise, the lots would not be of use to the
applied prospectively as they may prejudice vested rights if applied retroactively.
NHAs housing projects or as payment to the BOT contractor as the enabling component of the BOT

contract. The laws of the land have to be applied and interpreted depending on the changing conditions

and times. Tempora mutantur et legis mutantur in illis (time changes and laws change with it). One such
In Benzonan v. Court of Appeals, the Court trenchantly elucidated the prospective application of its

decisions based on considerations of equity and fair play, thus: President Ramos, in issuing Proclamation No. 39, declared, though indirectly, that the reclaimed
At that time, the prevailing jurisprudence interpreting section 119 of R.A.
141 as amended was that enunciated in Monge and Tupas cited above. The lands of the Smokey Mountain project are no longer required for public use or service, thus:
petitioners Benzonan and respondent Pe and the DBP are bound by these decisions
for pursuant to Article 8 of the Civil Code judicial decisions applying or interpreting the
laws of the Constitution shall form a part of the legal system of the Philippines. But These parcels of land of public domain are hereby placed under the administration
while our decisions form part of the law of the land, they are also subject to Article 4 of and disposition of the National Housing Authority to develop, subdivide and dispose
the Civil Code which provides that laws shall have no retroactive effect unless the to qualified beneficiaries, as well as its development for mix land use
contrary is provided. This is expressed in the familiar legal maxim lex prospicit, non (commercial/industrial) to provide employment opportunities to on-site families and
respicit, the law looks forward not backward. The rationale against retroactivity is easy additional areas for port related activities. (Emphasis supplied.)
to perceive. The retroactive application of a law usually divests rights that have
already become vested or impairs the obligations of contract and hence, is
unconstitutional.
While numerical count of the persons to be benefited is not the determinant whether the property is to be
The same consideration underlies our rulings giving only prospective effect to
decisions enunciating new doctrines. Thus, we emphasized in People v. Jabinal, 55 devoted to public use, the declaration in Proclamation No. 39 undeniably identifies only particular
SCRA 607 [1974] x x x when a doctrine of this Court is overruled and a different view
is adopted, the new doctrine should be applied prospectively and should not apply to individuals as beneficiaries to whom the reclaimed lands can be sold,
parties who had relied on the old doctrine and acted on the faith thereof.[82]
namelythe Smokey Mountain dwellers. The rest of the Filipinos are not qualified; hence, said lands are no

longer essential for the use of the public in general.

Fourth Issue: Whether respondent RBI can acquire reclaimed
lands when there was no declaration that said lands are no
In addition, President Ramos issued on August 31, 1994 Proclamation No. 465 increasing the
longer needed for public use
area to be reclaimed from forty (40) hectares to seventy-nine (79) hectares, elucidating that said lands are

undoubtedly set aside for the beneficiaries of SMDRP and not the publicdeclaring the power of NHA to
Petitioner Chavez avers that despite the declaration that the reclaimed areas are alienable lands of the
dispose of land to be reclaimed, thus: The authority to administer, develop, or dispose lands identified
public domain, still, the reclamation is flawed for there was never any declaration that said lands are no
and reserved by this Proclamation and Proclamation No. 39 (s.1992), in accordance with the SMDRP, as
longer needed for public use.
enhance, is vested with the NHA, subject to the provisions of existing laws. (Emphasis supplied.)

We are not moved by petitioners submission.

MO 415 and Proclamations Nos. 39 and 465 are declarations that proclaimed the non-use of the reclaimed

Even if it is conceded that there was no explicit declaration that the lands are no longer needed for public areas for public use or service as the Project cannot be successfully implemented without the withdrawal

use or public service, there was however an implicit executive declaration that the reclaimed areas R-10 of said lands from public use or service. Certainly, the devotion of the reclaimed land to public use or

are not necessary anymore for public use or public service when President Aquino through MO 415 service conflicts with the intended use of the Smokey Mountain areas for housing and employment of the

conveyed the same to the NHA partly for housing project and related commercial/industrial development Smokey Mountain scavengers and for financing the Project because the latter cannot be accomplished

intended for disposition to and enjoyment of certain beneficiaries and not the public in general and partly without abandoning the public use of the subject land. Without doubt, the presidential proclamations on

as enabling component to finance the project.

SMDRP together with the issuance of the special patents had effectively removed the reclaimed lands
from public use.
More decisive and not in so many words is the ruling in PEA which we earlier cited, that PD No. 1085 and
President Aquinos issuance of a land patent also constitute a declaration that the Freedom Islands are no
longer needed for public service. Consequently, we ruled in that case that the reclaimed lands are open to
disposition or concession to qualified parties.[83]
In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with the special patents have classified
the reclaimed lands as alienable and disposable and open to disposition or concession as they would be
devoted to units for Smokey Mountain beneficiaries.Hence, said lands are no longer intended for public
use or service and shall form part of the patrimonial properties of the State under Art. 422 of the Civil
Code.[84] As discussed a priori, the lands were classified as patrimonial properties of the NHA ready for
disposition when the titles were registered in its name by the Register of Deeds.
Moreover, reclaimed lands that are made the enabling components of a BOT infrastructure project
are necessarily reclassified as alienable and disposable lands under the BOT Law; otherwise, absurd
and illogical consequences would naturally result. Undoubtedly, the BOT contract will not be accepted by
the BOT contractor since there will be no consideration for its contractual obligations. Since reclaimed land
will be conveyed to the contractor pursuant to the BOT Law, then there is an implied declaration that such
land is no longer intended for public use or public service and, hence, considered patrimonial property
of the State.
Fifth Issue: Whether there is a law authorizing sale of
reclaimed lands
Petitioner next claims that RBI cannot acquire the reclaimed lands because there was no law authorizing
their sale. He argues that unlike PEA, no legislative authority was granted to the NHA to sell reclaimed
land.
This position is misplaced.
Petitioner relies on Sec. 60 of Commonwealth Act (CA) 141 to support his view that the NHA is not
empowered by any law to sell reclaimed land, thus:
Section 60. Any tract of land comprised under this title may be leased or sold, as the
case may be, to any person, corporation or association authorized to purchase or
lease public lands for agricultural purposes. The area of the land so leased or sold
shall be such as shall, in the judgment of the Secretary of Agriculture and Natural
Resources, be reasonably necessary for the purposes for which such sale or lease if
requested and shall in no case exceed one hundred and forty-four hectares: Provided,
however, That this limitation shall not apply to grants, donations, transfers, made to a
province, municipality or branch or subdivision of the Government for the purposes
deemed by said entities conducive to the public interest; but the land so granted
donated or transferred to a province, municipality, or branch or subdivision of
the Government shall not be alienated, encumbered, or otherwise disposed of
in a manner affecting its title, except when authorized by Congress; Provided,
further, That any person, corporation, association or partnership disqualified from
purchasing public land for agricultural purposes under the provisions of this Act, may
lease land included under this title suitable for industrial or residential purposes, but
the lease granted shall only be valid while such land is used for the purposes referred
to. (Emphasis supplied.)
Reliance on said provision is incorrect as the same applies only to a province, municipality or branch or
subdivision of the Government. The NHA is not a government unit but a government corporation
performing governmental and proprietary functions.
In addition, PD 757 is clear that the NHA is empowered by law to transfer properties acquired by it under
the law to other parties, thus:
Section 6. Powers and functions of the Authority. The Authority shall have the
following powers and functions to be exercised by the Boards in accordance with the
 established national human settlements plan prepared by the Human Settlements
Commission:

xxxx He finds that the NHA and RBI violated Secs. 63 and 67 of CA 141, as the reclaimed lands were conveyed

(k) Enter into contracts whenever necessary under such terms and conditions as it to RBI by negotiated contract and not by public bidding as required by law.
may deem proper and reasonable;

(l) Acquire property rights and interests, and encumber or otherwise dispose the This stand is devoid of merit.
same as it may deem appropriate (Emphasis supplied.)

There is no doubt that respondent NHA conducted a public bidding of the right to become its joint venture

Letter (l) is emphatic that the NHA can acquire property rights and interests and encumber or otherwise partner in the Smokey Mountain Project. Notices or Invitations to Bid were published in the national dailies

dispose of them as it may deem appropriate. The transfer of the reclaimed lands by the National on January 23 and 26, 1992 and February 1, 14, 16, and 23, 1992. The bidding proper was done by the

Government to the NHA for housing, commercial, and industrial purposes transformed them into Bids and Awards Committee (BAC) on May 18, 1992. On August 31, 1992, the Inter-Agency Techcom

patrimonial lands which are of course owned by the State in its private or proprietary capacity. Perforce, made up of the NHA, PEA, DPWH, PPA, DBP, and DENR opened the bids and evaluated them, resulting

the NHA can sell the reclaimed lands to any Filipino citizen or qualified corporation. in the award of the contract to respondent RBI on October 7, 1992.

On March 19, 1993, respondents NHA and RBI signed the JVA. On February 23, 1994, said JVA was
Sixth Issue: Whether the transfer of reclaimed lands to RBI
amended and restated into the ARJVA. On August 11, 1994, the ARJVA was again
was done by public bidding
amended. On September 7, 1994, the OP approved the ARJVA and the amendments to the ARJVA. From

these factual settings, it cannot be gainsaid that there was full compliance with the laws and regulations
Petitioner also contends that there was no public bidding but an awarding of ownership of said reclaimed
governing public biddings involving a right, concession, or property of the government.
lands to RBI. Public bidding, he says, is required under Secs. 63 and 67 of CA 141 which read:
Section 63. Whenever it is decided that lands covered by this chapter are
not needed for public purposes, the Director of Lands shall ask the Secretary of
Agriculture and Commerce for authority to dispose of the same. Upon receipt of such Petitioner concedes that he does not question the public bidding on the right to be a joint venture partner of
authority, the Director of Lands shall give notice by public advertisement in the same
manner as in the case of leases or sales of agricultural public land, that the the NHA, but the absence of bidding in the sale of alienable and disposable lands of public domain
Government will lease or sell, as the case may be, the lots or blocks specified in the
advertisement, for the purpose stated in the notice and subject to the conditions pursuant to CA 141 as amended.
specified in this chapter.

xxxx Petitioners theory is incorrect.

Section 67. The lease or sale shall be made through oral bidding; and adjudication
shall be made to the highest bidder. However, where an applicant has made
improvements on the land by virtue of a permit issued to him by competent authority, Secs. 63 and 67 of CA 141, as amended, are in point as they refer to government sale by the Director of
the sale or lease shall be made by sealed bidding as prescribed in section twenty-six
of this Act, the provisions of which shall be applied whenever applicable. If all or part Lands of alienable and disposable lands of public domain. This is not present in the case at bar. The
of the lots remain unleased or unsold, the Director of Lands shall from time to time
lands reclaimed by and conveyed to the NHA are no longer lands of public domain. These lands became
announce in the Official Gazette or in any other newspapers of general circulation, the
lease of sale of those lots, if necessary.
proprietary lands or patrimonial properties of the State upon transfer of the titles over the reclaimed lands More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial properties like reclaimed lands

to the NHA and hence outside the ambit of CA 141. The NHA can therefore legally transfer patrimonial transferred to a government agency like the NHA which has entered into a BOT contract with a private

land to RBI or to any other interested qualified buyer without any bidding conducted by the Director of firm. The reason is obvious. If the patrimonial property will be subject to public bidding as the only way of

Lands because the NHA, unlike PEA, is a government agency not tasked to sell lands of public disposing of said property, then Sec. 6 of RA 6957 on the repayment scheme is almost impossible or

domain. Hence, it can only hold patrimonial lands and can dispose of such lands by sale without need of extremely difficult to implement considering the uncertainty of a winning bid during public

public bidding. auction. Moreover, the repayment scheme of a BOT contract may be in the form of non-monetary payment

Petitioner likewise relies on Sec. 79 of PD 1445 which requires public bidding when government like the grant of a portion or percentage of reclaimed land. Even if the BOT partner participates in the

property has become unserviceable for any cause or is no longer needed. It appears from the Handbook public bidding, there is no assurance that he will win the bid and therefore the payment in kind as agreed to

on Property and Supply Management System, Chapter 6, that reclaimed lands which have become by the parties cannot be performed or the winning bid prize might be below the estimated valuation of the

patrimonial properties of the State, whose titles are conveyed to government agencies like the NHA, which land. The only way to harmonize Sec. 79 of PD 1445 with Sec. 6 of RA 6957 is to consider Sec. 79 of PD

it will use for its projects or programs, are not within the ambit of Sec. 79. We quote the determining factors 1445 as inapplicable to BOT contracts involving patrimonial lands. The law does not intend anything

in the Disposal of Unserviceable Property, thus: impossible (lex non intendit aliquid impossibile).

Determining Factors in the Disposal of Unserviceable Property Seventh Issue: Whether RBI, being a private corporation,
is barred by the Constitution to acquire lands of public domain
Property, which can no longer be repaired or reconditioned;

Property whose maintenance costs of repair more than outweigh the benefits
and services that will be derived from its continued use; Petitioner maintains that RBI, being a private corporation, is expressly prohibited by the 1987

Property that has become obsolete or outmoded because of changes in Constitution from acquiring lands of public domain.
technology;

Serviceable property that has been rendered unnecessary due to change in the
Petitioners proposition has no legal mooring for the following reasons:
agencys function or mandate;

Unused supplies, materials and spare parts that were procured in excess of
requirements; and 1. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid a portion as percentage

Unused supplies and materials that [have] become dangerous to use because of of the reclaimed land subject to the constitutional requirement that only Filipino citizens or corporations
long storage or use of which is determined to be hazardous.[85]
with at least 60% Filipino equity can acquire the same. It cannot be denied that RBI is a private corporation,

where Filipino citizens own at least 60% of the stocks. Thus, the transfer to RBI is valid and constitutional.
Reclaimed lands cannot be considered unserviceable properties. The reclaimed lands in
2. When Proclamations Nos. 39 and 465 were issued, inalienable lands covered by said
question are very much needed by the NHA for the Smokey Mountain Project because without it, then the
proclamations were converted to alienable and disposable lands of public domain. When the titles to the
projects will not be successfully implemented. Since the reclaimed lands are not unserviceable properties
reclaimed lands were transferred to the NHA, said alienable and disposable lands of public domain were
and are very much needed by NHA, then Sec. 79 of PD 1445 does not apply.
automatically classified as lands of the private domain or patrimonial properties of the State because the
NHA is an agency NOT tasked to dispose of alienable or disposable lands of public domain. The only way

it can transfer the reclaimed land in conjunction with its projects and to attain its goals is when it is The foregoing Resolution makes it clear that the SMDRP was a program adopted by the Government

automatically converted to patrimonial properties of the State. Being patrimonial or private properties of the under Republic Act No. 6957 (An Act Authorizing the Financing, Construction, Operation and Maintenance

State, then it has the power to sell the same to any qualified personunder the Constitution, Filipino citizens of Infrastructure Projects by the Private Sector, and For Other Purposes), as amended by RA 7718, which

as private corporations, 60% of which is owned by Filipino citizens like RBI. is a special law similar to RA 7227. Moreover, since the implementation was assigned to the NHA, an

end-user agency under PD 757 and RA 7279, the reclaimed lands registered under the NHA are

3. The NHA is an end-user entity such that when alienable lands of public domain are transferred to said automatically classified as patrimonial lands ready for disposition to qualified beneficiaries.

agency, they are automatically classified as patrimonial properties. The NHA is similarly situated as BCDA

which was granted the authority to dispose of patrimonial lands of the government under RA 7227. The The foregoing reasons likewise apply to the contention of petitioner that HCPTI, being a private

nature of the property holdings conveyed to BCDA is elucidated and stressed in the May 6, corporation, is disqualified from being a transferee of public land. What was transferred to HCPTI is a

2003 Resolution in Chavez v. PEA, thus: 10-hectare lot which is already classified as patrimonial property in the hands of the NHA. HCPTI, being a

qualified corporation under the 1987 Constitution, the transfer of the subject lot to it is valid and
BCDA is an entirely different government entity. BCDA is authorized by law to
sell specific government lands that have long been declared by presidential constitutional.
proclamations as military reservations for use by the different services of the
armed forces under the Department of National Defense. BCDAs mandate is
Eighth Issue: Whether respondents can be compelled to disclose
specific and limited in area, while PEAs mandate is general and
all information related to the SMDRP
national. BCDA holds government lands that have been granted to end-user
government entitiesthe military services of the armed forces. In contrast,
under Executive Order No. 525, PEA holds the reclaimed public lands, not as an
end-user entity, but as the government agency primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on Petitioner asserts his right to information on all documents such as contracts, reports, memoranda, and the
behalf of the National Government.
like relative to SMDRP.
x x x Well-settled is the doctrine that public land granted to an end-user government
agency for a specific public use may subsequently be withdrawn by Congress from
public use and declared patrimonial property to be sold to private parties. R.A. No.
7227 creating the BCDA is a law that declares specific military reservations no Petitioner asserts that matters relative to the SMDRP have not been disclosed to the public like the current
longer needed for defense or military purposes and reclassifies such lands as
patrimonial property for sale to private parties. stage of the Project, the present financial capacity of RBI, the complete list of investors in the asset pool,

the exact amount of investments in the asset pool and other similar important information regarding the
Government owned lands, as long as they are patrimonial property, can be sold
to private parties, whether Filipino citizens or qualified private Project.
corporations. Thus, the so-called Friar Lands acquired by the government under
Act No. 1120 are patrimonial property which even private corporations can acquire by
purchase. Likewise, reclaimed alienable lands of the public domain if sold or
transferred to a public or municipal corporation for a monetary consideration become He prays that respondents be compelled to disclose all information regarding the SMDRP and
patrimonial property in the hands of the public or municipal corporation. Once
converted to patrimonial property, the land may be sold by the public or municipal furnish him with originals or at least certified true copies of all relevant documents relating to the said
corporation to private parties, whether Filipino citizens or qualified private
project including, but not limited to, the original JVA, ARJVA, AARJVA, and the Asset Pool Agreement.
corporations.[86] (Emphasis supplied.)
 citizens can participate in public discussions leading to the formulation of government
This relief must be granted. policies and their effective implementation.An informed citizenry is essential to the
existence and proper functioning of any democracy.[88]

The right of the Filipino people to information on matters of public concern is enshrined in the

1987 Constitution, thus: Sec. 28, Art. II compels the State and its agencies to fully disclose all of its transactions involving

public interest. Thus, the government agencies, without need of demand from anyone, must bring into
ARTICLE II
public view all the steps and negotiations leading to the consummation of the transaction and the contents
xxxx
of the perfected contract.[89] Such information must pertain to definite propositions of the government,
SEC. 28. Subject to reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public meaning official recommendations or final positions reached on the different matters subject of
interest.
negotiation. The government agency, however, need not disclose intra-agency or inter-agency
ARTICLE III recommendations or communications during the stage when common assertions are still in the process of

SEC. 7. The right of the people to information on matters of public concern shall be
recognized. Access to official records, and to documents, and papers pertaining to
official acts, transactions, or decisions, as well as to government research data used
as basis for policy development, shall be afforded the citizen, subject to such
limitations as may be provided by law.
being formulated or are in the exploratory stage. The limitation also covers privileged communication like
information on military and diplomatic secrets; information affecting national security; information on
investigations of crimes by law enforcement agencies before the prosecution of the accused; information

on foreign relations, intelligence, and other classified information.

It is unfortunate, however, that after almost twenty (20) years from birth of the 1987 Constitution,
In Valmonte v. Belmonte, Jr., this Court explicated this way:
[A]n essential element of these freedoms is to keep open a continuing dialogue or there is still no enabling law that provides the mechanics for the compulsory duty of government agencies
process of communication between the government and the people. It is in the
interest of the State that the channels for free political discussion be maintained to the to disclose information on government transactions.Hopefully, the desired enabling law will finally see the
end that the government may perceive and be responsive to the peoples will. Yet, this
open dialogue can be effective only to the extent that the citizenry is informed and light of day if and when Congress decides to approve the proposed Freedom of Access to Information
thus able to formulate its will intelligently. Only when the participants in the discussion
are aware of the issues and have access to information relating thereto can such bear Act. In the meantime, it would suffice that government agencies post on their bulletin boards the
fruit.[87]
documents incorporating the information on the steps and negotiations that produced the agreements and

the agreements themselves, and if finances permit, to upload said information on their respective websites

In PEA, this Court elucidated the rationale behind the right to information: for easy access by interested parties. Without any law or regulation governing the right to disclose

These twin provisions of the Constitution seek to promote transparency in information, the NHA or any of the respondents cannot be faulted if they were not able to disclose
policy-making and in the operations of the government, as well as provide the people
sufficient information to exercise effectively other constitutional rights. These twin information relative to the SMDRP to the public in general.
provisions are essential to the exercise of freedom of expression. If the government
does not disclose its official acts, transactions and decisions to citizens, whatever
citizens say, even if expressed without any restraint, will be speculative and amount to
The other aspect of the peoples right to know apart from the duty to disclose is the duty to allow
nothing. These twin provisions are also essential to hold public officials at all times x x
x accountable to the people, for unless citizens have the proper information, they access to information on matters of public concern under Sec. 7, Art. III of the Constitution. The gateway to
cannot hold public officials accountable for anything. Armed with the right information,
information opens to the public the following: (1) official records; (2) documents and papers pertaining to
official acts, transactions, or decisions; and (3) government research data used as a basis for policy
development.
Thus, the duty to disclose information should be differentiated from the duty to permit access to
information. There is no need to demand from the government agency disclosure of information as this is
mandatory under the Constitution; failing that, legal remedies are available. On the other hand, the
interested party must first request or even demand that he be allowed access to documents and papers in
the particular agency. A request or demand is required; otherwise, the government office or agency will not
know of the desire of the interested party to gain access to such papers and what papers are needed. The
duty to disclose covers only transactions involving public interest, while the duty to allow access has a
broader scope of information which embraces not only transactions involving public interest, but any
matter contained in official communications and public documents of the government agency.
We find that although petitioner did not make any demand on the NHA to allow access to information, we
treat the petition as a written request or demand. We order the NHA to allow petitioner access to its official
records, documents, and papers relating to official acts, transactions, and decisions that are relevant to the
said JVA and subsequent agreements relative to the SMDRP.
Ninth Issue: Whether the operative fact doctrine applies to the
instant petition
Petitioner postulates that the operative fact doctrine is inapplicable to the present case because it is an
equitable doctrine which could not be used to countenance an inequitable result that is contrary to its
proper office.
On the other hand, the petitioner Solicitor General argues that the existence of the various agreements
implementing the SMDRP is an operative fact that can no longer be disturbed or simply ignored,
citing Rieta v. People of the Philippines.[90]
The argument of the Solicitor General is meritorious.
The operative fact doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a
legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid and must
be complied with, thus:
As the new Civil Code puts it: When the courts declare a law to be inconsistent with
the Constitution, the former shall be void and the latter shall govern. Administrative or
executive acts, orders and regulations shall be valid only when they are not contrary
to the laws of the Constitution. It is understandable why it should be so, the
Constitution being supreme and paramount. Any legislative or executive act contrary
to its terms cannot survive.
Such a view has support in logic and possesses the merit of simplicity. It may not
however be sufficiently realistic. It does not admit of doubt that prior to the
declaration of nullity such challenged legislative or executive act must have
been in force and had to be complied with. This is so as until after the judiciary, in
an appropriate case, declares its invalidity, it is entitled to obedience and
respect. Parties may have acted under it and may have changed their positions. What
could be more fitting than that in a subsequent litigation regard be had to what has
been done while such legislative or executive act was in operation and presumed to
be valid in all respects. It is now accepted as a doctrine that prior to its being nullified,
its existence as a fact must be reckoned with. This is merely to reflect awareness that
precisely because the judiciary is the governmental organ which has the final say on
whether or not a legislative or executive measure is valid, a period of time may have
elapsed before it can exercise the power of judicial review that may lead to a
declaration of nullity. It would be to deprive the law of its quality of fairness and justice
then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: The actual existence of a
statute, prior to such a determination [of unconstitutionality], is an operative
fact and may have consequences which cannot justly be ignored. The past
cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various aspects, with
respect to particular relations, individual and corporate, and particular conduct, private
and official. This language has been quoted with approval in a resolution in Araneta v.
Hill and the decision in Manila Motor Co., Inc. v. Flores. An even more recent instance
is the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and
Co.[91] (Emphasis supplied.)
This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission, wherein
we ruled that:
 Maintenance Of Infrastructure Projects By The Private Sector And For Other Purposes, which was passed
Moreover, we certainly cannot nullify the City Governments order of suspension, as
we have no reason to do so, much less retroactively apply such nullification to deprive by Congress on July 24, 1989, allows repayment to the private contractor of reclaimed lands. [95] Such law
private respondent of a compelling and valid reason for not filing the leave
application. For as we have held, a void act though in law a mere scrap of paper was relied upon by respondents, along with the above-mentioned executive issuances in pushing through
nonetheless confers legitimacy upon past acts or omissions done in reliance
with the Project.The existence of such law and issuances is an operative fact to which legal consequences
thereof. Consequently, the existence of a statute or executive order prior to its
being adjudged void is an operative fact to which legal consequences are have attached. This Court is constrained to give legal effect to the acts done in consonance with such
attached. It would indeed be ghastly unfair to prevent private respondent from relying
upon the order of suspension in lieu of a formal leave application. [92] (Emphasis executive and legislative acts; to do otherwise would work patent injustice on respondents.
supplied.)

Further, in the May 6, 2003 Resolution in Chavez v. PEA, we ruled that in certain cases, the transfer of

The principle was further explicated in the case of Rieta v. People of the Philippines, thus: land, although illegal or unconstitutional, will not be invalidated on considerations of equity and social

justice. However, in that case, we did not apply the same considering that PEA, respondent in said case,
In similar situations in the past this Court had taken the pragmatic and realistic course
set forth in Chicot County Drainage District vs. Baxter Bank to wit: was not entitled to equity principles there being bad faith on its part, thus:

The courts below have proceeded on the theory that the Act of Congress,
having been found to be unconstitutional, was not a law; that it was There are, moreover, special circumstances that disqualify Amari from invoking equity
inoperative, conferring no rights and imposing no duties, and hence principles. Amari cannot claim good faith because even before Amari signed the
affording no basis for the challenged decree. x x x It is quite clear, however, Amended JVA on March 30, 1999, petitioner had already filed the instant case
that such broad statements as to the effect of a determination of on April 27, 1998 questioning precisely the qualification of Amari to acquire
unconstitutionality must be taken with qualifications. The actual existence of the Freedom Islands. Even before the filing of this petition, two Senate Committees
a statute, prior to [the determination of its invalidity], is an operative fact and had already approved on September 16, 1997 Senate Committee Report No.
may have consequences which cannot justly be ignored. The past cannot 560. This Report concluded, after a well-publicized investigation into PEAs sale of
always be erased by a new judicial declaration. The effect of the the FreedomIslands to Amari, that the Freedom Islands are inalienable lands of the
subsequent ruling as to invalidity may have to be considered in various public domain. Thus, Amari signed the Amended JVA knowing and assuming all the
aspects with respect to particular conduct, private and official. Questions of
attendant risks, including the annulment of the Amended JVA.[96]
rights claimed to have become vested, of status, of prior determinations
deemed to have finality and acted upon accordingly, of public policy in the
light of the nature both of the statute and of its previous application, demand
examination. These questions are among the most difficult of those which
have engaged the attention of courts, state and federal, and it is manifest
Such indicia of bad faith are not present in the instant case. When the ruling in PEA was rendered by this
from numerous decisions that an all-inclusive statement of a principle of
absolute retroactive invalidity cannot be justified.
Court on July 9, 2002, the JVAs were all executed. Furthermore, when petitioner filed the instant case

against respondents on August 5, 2004, the JVAs were already terminated by virtue of the MOA between

the NHA and RBI. The respondents had no reason to think that their agreements were unconstitutional or
In the May 6, 2003 Resolution in Chavez v. PEA,[93] we ruled that De Agbayani[94] is not applicable to the
even questionable, as in fact, the concurrent acts of the executive department lent validity to the
case considering that the prevailing law did not authorize private corporations from owning land. The
implementation of the Project. The SMDRP agreements have produced vested rights in favor of the slum
prevailing law at the time was the 1935 Constitution as no statute dealt with the same issue.
dwellers, the buyers of reclaimed land who were issued titles over said land, and the agencies and

investors who made investments in the project or who bought SMPPCs. These properties and rights
In the instant case, RA 6957 was the prevailing law at the time that the joint venture agreement
cannot be disturbed or questioned after the passage of around ten (10) years from the start of the SMDRP
was signed. RA 6957, entitled An Act Authorizing The Financing, Construction, Operation And
implementation. Evidently, the operative fact principle has set in. The titles to the lands in the hands of the obedience to the mandate of legal authority, without regard to the exercise of his/her own judgment upon

buyers can no longer be invalidated. the propriety of the act done.[97]

The Courts Dispositions Whatever is left to be done in relation to the August 27, 2003 MOA, terminating the JVA and other related

agreements, certainly does not involve ministerial functions of the NHA but instead requires exercise of

Based on the issues raised in this petition, we find that the March 19, 1993 JVA between NHA and RBI judgment. In fact, Item No. 4 of the MOA terminating the JVAs provides for validation of the developers

and the SMDRP embodied in the JVA, the subsequent amendments to the JVA and all other agreements (RBIs) claims arising from the termination of the SMDRP through the various government

signed and executed in relation to it, including, but not limited to, the September 26, 1994 Smokey agencies.[98] Such validation requires the exercise of discretion.

Mountain Asset Pool Agreement and the agreement on Phase I of the Project as well as all other

transactions which emanated from the Project, have been shown to be valid, legal, and In addition, prohibition does not lie against the NHA in view of petitioners failure to avail and exhaust all

constitutional. Phase II has been struck down by the Clean Air Act. administrative remedies. Clear is the rule that prohibition is only available when there is no adequate

remedy in the ordinary course of law.

With regard to the prayer for prohibition, enjoining respondents particularly respondent NHA from further

implementing and/or enforcing the said Project and other agreements related to it, and from further More importantly, prohibition does not lie to restrain an act which is already a fait accompli. The operative

deriving and/or enjoying any rights, privileges and interest from the Project, we find the same prayer fact doctrine protecting vested rights bars the grant of the writ of prohibition to the case at bar. It should be

meritless. remembered that petitioner was the Solicitor General at the time SMDRP was formulated and

implemented. He had the opportunity to question the SMDRP and the agreements on it, but he did

Sec. 2 of Rule 65 of the 1997 Rules of Civil Procedure provides: not. The moment to challenge the Project had passed.

Sec. 2. Petition for prohibition.When the proceedings of any tribunal, corporation,

board, officer or person, whether exercising judicial, quasi-judicial or ministerial
functions, are without or in excess of its or his jurisdiction, or with grave abuse of On the prayer for a writ of mandamus, petitioner asks the Court to compel respondents to
discretion amounting to lack or excess of jurisdiction, and there is no appeal or any
disclose all documents and information relating to the project, including, but not limited to, any subsequent
other plain, speedy, and adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper court, alleging the facts with agreements with respect to the different phases of the Project, the revisions of the original plan, the
certainty and praying that judgment be rendered commanding the respondent to
desist from further proceedings in the action or matter specified therein, or otherwise additional works incurred on the Project, the current financial condition of respondent RBI, and the
granting such incidental reliefs as law and justice may require.
transactions made with respect to the project. We earlier ruled that petitioner will be allowed access to

official records relative to the SMDRP. That would be adequate relief to satisfy petitioners right to the
It has not been shown that the NHA exercised judicial or quasi-judicial functions in relation to the
information gateway.
SMDRP and the agreements relative to it. Likewise, it has not been shown what ministerial functions the

NHA has with regard to the SMDRP.

WHEREFORE, the petition is PARTIALLY GRANTED.
A ministerial duty is one which is so clear and specific as to leave no room for the exercise of discretion in

its performance. It is a duty which an officer performs in a given state of facts in a prescribed manner in
The prayer for a writ of prohibition is DENIED for lack of merit.

The prayer for a writ of mandamus is GRANTED. Respondent NHA is ordered to allow access to petitioner
to all public documents and official records relative to the SMDRPincluding, but not limited to, the March
19, 1993 JVA between the NHA and RBI and subsequent agreements related to the JVA, the revisions
over the original plan, and the additional works incurred on and the transactions made with respect to the
Project.
No costs.
SO ORDERED.
G.R. No. L-57883 March 12, 1982
GUALBERTO J. DE LA LLANA Presiding Judge, Branch II of the City Court of Olongapo,
ESTANISLAO L. CESA, JR., FIDELA Y. VARGAS, BENJAMIN C. ESCOLANGO, JUANITO C.
ATIENZA, MANUEL REYES ROSAPAPAN, JR., VIRGILIO E. ACIERTO, and PORFIRIO AGUILLON
AGUILA, petitioners,
vs.
MANUEL ALBA, Minister of Budget, FRANCISCO TANTUICO, Chairman, Commission on Audit, and
RICARDO PUNO, Minister of Justice, Respondents.
FERNANDO, C.J.:
This Court, pursuant to its grave responsibility of passing upon the validity of any executive or legislative
act in an appropriate cases, has to resolve the crucial issue of the constitutionality of Batas Pambansa Blg.
129, entitled "An act reorganizing the Judiciary, Appropriating Funds Therefor and for Other Purposes."
The task of judicial review, aptly characterized as exacting and delicate, is never more so than when a
conceded legislative power, that of judicial reorganization, 1 may possibly collide with the time-honored
principle of the independence of the judiciary 2 as protected and safeguarded by this constitutional
provision: "The Members of the Supreme Court and judges of inferior courts shall hold office during good
behavior until they reach the age of seventy years or become incapacitated to discharge the duties of their
office. The Supreme Court shall have the power to discipline judges of inferior courts and, by a vote of at
least eight Members, order their dismissal." 3 For the assailed legislation mandates that Justices and
judges of inferior courts from the Court of Appeals to municipal circuit courts, except the occupants of the
Sandiganbayan and the Court of Tax Appeals, unless appointed to the inferior courts established by such
Act, would be considered separated from the judiciary. It is the termination of their incumbency that for
petitioners justifies a suit of this character, it being alleged that thereby the security of tenure provision of
the Constitution has been ignored and disregarded,
That is the fundamental issue raised in this proceeding, erroneously entitled Petition for Declaratory Relief
and/or for Prohibition 4 considered by this Court as an action for prohibited petition, seeking to enjoin
respondent Minister of the Budget, respondent Chairman of the Commission on Audit, and respondent
Minister of Justice from taking any action implementing Batas Pambansa Blg. 129. Petitioners 5 sought to
bolster their claim by imputing lack of good faith in its enactment and characterizing as an undue
delegation of legislative power to the President his authority to fix the compensation and allowances of the
Justices and judges thereafter appointed and the determination of the date when the reorganization shall
be deemed completed. In the very comprehensive and scholarly Answer of Solicitor General Estelito P.
Mendoza, 6 it was pointed out that there is no valid justification for the attack on the constitutionality of this
statute, it being a legitimate exercise of the power vested in the Batasang Pambansa to reorganize the
judiciary, the allegations of absence of good faith as well as the attack on the independence of the judiciary
being unwarranted and devoid of any support in law. A Supplemental Answer was likewise filed on
October 8, 1981, followed by a Reply of petitioners on October 13. After the hearing in the morning and
afternoon of October 15, in which not only petitioners and respondents were heard through counsel but
also the amici curiae, 7 and thereafter submission of the minutes of the proceeding on the debate on Batas
Pambansa Blg. 129, this petition was deemed submitted for decision.
The importance of the crucial question raised called for intensive and rigorous study of all the legal aspects
of the case. After such exhaustive deliberation in several sessions, the exchange of views being
supplemented by memoranda from the members of the Court, it is our opinion and so hold that Batas
Pambansa Blg. 129 is not unconstitutional.
1. The argument as to the lack of standing of petitioners is easily resolved. As far as Judge de la Llana is
concerned, he certainly falls within the principle set forth in Justice Laurel's opinion in People v.
Vera. 8 Thus: "The unchallenged rule is that the person who impugns the validity of a statute must have a
personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a
result of its enforcement." 9 The other petitioners as members of the bar and officers of the court cannot be
considered as devoid of "any personal and substantial interest" on the matter. There is relevance to this
excerpt from a separate opinion in Aquino, Jr. v. Commission on Elections: 10 "Then there is the attack on
the standing of petitioners, as vindicating at most what they consider a public right and not protecting their
rights as individuals. This is to conjure the specter of the public right dogma as an inhibition to parties
intent on keeping public officials staying on the path of constitutionalism. As was so well put by Jaffe: 'The
protection of private rights is an essential constituent of public interest and, conversely, without a
well-ordered state there could be no enforcement of private rights. Private and public interests are, both in
substantive and procedural sense, aspects of the totality of the legal order.' Moreover, petitioners have
convincingly shown that in their capacity as taxpayers, their standing to sue has been amply demonstrated.
There would be a retreat from the liberal approach followed in Pascual v. Secretary of Public
Works, foreshadowed by the very decision of People v. Vera where the doctrine was first fully discussed, if
we act differently now. I do not think we are prepared to take that step. Respondents, however, would hark
back to the American Supreme Court doctrine in Mellon v. Frothingham with their claim that what
petitioners possess 'is an interest which is shared in common by other people and is comparatively so
minute and indeterminate as to afford any basis and assurance that the judicial process can act on it.' That
is to speak in the language of a bygone era even in the United States. For as Chief Justice Warren clearly
pointed out in the later case of Flast v. Cohen, the barrier thus set up if not breached has definitely been
lowered." 11
2. The imputation of arbitrariness to the legislative body in the enactment of Batas Pambansa Blg. 129 to
demonstrate lack of good faith does manifest violence to the facts. Petitioners should have exercised
greater care in informing themselves as to its antecedents. They had laid themselves open to the
accusation of reckless disregard for the truth, On August 7, 1980, a Presidential Committee on Judicial
Reorganization was organized. 12 This Executive Order was later amended by Executive Order No. 619-A.,
dated September 5 of that year. It clearly specified the task assigned to it: "1. The Committee shall
formulate plans on the reorganization of the Judiciary which shall be submitted within seventy (70) days
from August 7, 1980 to provide the President sufficient options for the reorganization of the entire Judiciary
which shall embrace all lower courts, including the Court of Appeals, the Courts of First Instance, the City
and Municipal Courts, and all Special Courts, but excluding the Sandigan Bayan." 13 On October 17, 1980,
a Report was submitted by such Committee on Judicial Reorganization. It began with this paragraph: "The
Committee on Judicial Reorganization has the honor to submit the following Report. It expresses at the
outset its appreciation for the opportunity accorded it to study ways and means for what today is a basic
and urgent need, nothing less than the restructuring of the judicial system. There are problems, both grave
and pressing, that call for remedial measures. The felt necessities of the time, to borrow a phrase from
Holmes, admit of no delay, for if no step be taken and at the earliest opportunity, it is not too much to say
that the people's faith in the administration of justice could be shaken. It is imperative that there be a
greater efficiency in the disposition of cases and that litigants, especially those of modest means — much
more so, the poorest and the humblest — can vindicate their rights in an expeditious and inexpensive
manner. The rectitude and the fairness in the way the courts operate must be manifest to all members of
the community and particularly to those whose interests are affected by the exercise of their functions. It is
to that task that the Committee addresses itself and hopes that the plans submitted could be a starting
point for an institutional reform in the Philippine judiciary. The experience of the Supreme Court, which
since 1973 has been empowered to supervise inferior courts, from the Court of Appeals to the municipal
courts, has proven that reliance on improved court management as well as training of judges for more
efficient administration does not suffice. I hence, to repeat, there is need for a major reform in the judicial
so stem it is worth noting that it will be the first of its kind since the Judiciary Act became effective on June
16, 1901." 14 I t went to say: "I t does not admit of doubt that the last two decades of this century are likely
to be attended with problems of even greater complexity and delicacy. New social interests are pressing
for recognition in the courts. Groups long inarticulate, primarily those economically underprivileged, have
found legal spokesmen and are asserting grievances previously ignored. Fortunately, the judicially has not
proved inattentive. Its task has thus become even more formidable. For so much grist is added to the mills
of justice. Moreover, they are likewise to be quite novel. The need for an innovative approach is thus
apparent. The national leadership, as is well-known, has been constantly on the search for solutions that
will prove to be both acceptable and satisfactory. Only thus may there be continued national
progress." 15 After which comes: "To be less abstract, the thrust is on development. That has been
repeatedly stressed — and rightly so. All efforts are geared to its realization. Nor, unlike in the past, was it
to b "considered as simply the movement towards economic progress and growth measured in terms of
sustained increases in per capita income and Gross National Product (GNP). 16 For the New Society, its
implication goes further than economic advance, extending to "the sharing, or more appropriately, the
democratization of social and economic opportunities, the substantiation of the true meaning of social
justice." 17 This process of modernization and change compels the government to extend its field of activity
and its scope of operations. The efforts towards reducing the gap between the wealthy and the poor
elements in the nation call for more regulatory legislation. That way the social justice and protection to
labor mandates of the Constitution could be effectively implemented." 18 There is likelihood then "that
some measures deemed inimical by interests adversely affected would be challenged in court on grounds
of validity. Even if the question does not go that far, suits may be filed concerning their interpretation and
application. ... There could be pleas for injunction or restraining orders. Lack of success of such moves
would not, even so, result in their prompt final disposition. Thus delay in the execution of the policies
embodied in law could thus be reasonably expected. That is not conducive to progress in
development." 19 For, as mentioned in such Report, equally of vital concern is the problem of clogged
dockets, which "as is well known, is one of the utmost gravity. Notwithstanding the most determined efforts
exerted by the Supreme Court, through the leadership of both retired Chief Justice Querube Makalintal
and the late Chief Justice Fred Ruiz Castro, from the time supervision of the courts was vested in it under
the 1973 Constitution, the trend towards more and more cases has continued." 20 It is understandable why.
With the accelerated economic development, the growth of population, the increasing urbanization, and
other similar factors, the judiciary is called upon much oftener to resolve controversies. Thus confronted
with what appears to be a crisis situation that calls for a remedy, the Batasang Pambansa had no choice. It
had to act, before the ailment became even worse. Time was of the essence, and yet it did not hesitate to
be duly mindful, as it ought to be, of the extent of its coverage before enacting Batas Pambansa Blg. 129.
3. There is no denying, therefore, the need for "institutional reforms," characterized in the Report as "both
pressing and urgent." 21 It is worth noting, likewise, as therein pointed out, that a major reorganization of
such scope, if it were to take place, would be the most thorough after four generations. 22 The reference
was to the basic Judiciary Act generations . enacted in June of 1901, 23 amended in a significant way, only
twice previous to the Commonwealth. There was, of course, the creation of the Court of Appeals in 1935,
originally composed "of a Presiding Judge and ten appellate Judges, who shall be appointed by the
President of the Philippines, with the consent of the Commission on Appointments of the National
Assembly, 24 It could "sit en banc, but it may sit in two divisions, one of six and another of five Judges, to
transact business, and the two divisions may sit at the same time." 25 Two years after the establishment of
independence of the Republic of the Philippines, the Judiciary Act of 1948 26 was passed. It continued the
existing system of regular inferior courts, namely, the Court of Appeals, Courts of First Instance, 27 the
Municipal Courts, at present the City Courts, and the Justice of the Peace Courts, now the Municipal
Circuit Courts and Municipal Courts. The membership of the Court of Appeals has been continuously
increased. 28 Under a 1978 Presidential Decree, there would be forty-five members, a Presiding Justice
and forty-four Associate Justices, with fifteen divisions. 29 Special courts were likewise created. The first
was the Court of Tax Appeals in 1954, 30 next came the Court of Agrarian Relations in 1955, 31 and then in
the same year a Court of the Juvenile and Domestic Relations for Manila in 1955, 32 subsequently followed
by the creation of two other such courts for Iloilo and Quezon City in 1966. 33 In 1967, Circuit Criminal
Courts were established, with the Judges having the same qualifications, rank, compensation, and
privileges as judges of Courts of First Instance. 34
4. After the submission of such Report, Cabinet Bill No. 42, which later became the basis of Batas
Pambansa Blg. 129, was introduced. After setting forth the background as above narrated, its Explanatory
Note continues: "Pursuant to the President's instructions, this proposed legislation has been drafted in
accordance with the guidelines of that report with particular attention to certain objectives of the
reorganization, to wit, the attainment of more efficiency in disposal of cases, a reallocation of jurisdiction,
and a revision of procedures which do not tend to the proper meeting out of justice. In consultation with,
and upon a consensus of, the governmental and parliamentary leadership, however, it was felt that some
options set forth in the Report be not availed of. Instead of the proposal to confine the jurisdiction of the
intermediate appellate court merely to appellate adjudication, the preference has been opted to increase
rather than diminish its jurisdiction in order to enable it to effectively assist the Supreme Court. This
preference has been translated into one of the innovations in the proposed Bill." 35 In accordance with the
parliamentary procedure, the Bill was sponsored by the Chairman of the Committee on Justice, Human
Rights and Good Government to which it was referred. Thereafter, Committee Report No. 225 was
submitted by such Committee to the Batasang Pambansa recommending the approval with some
amendments. In the sponsorship speech of Minister Ricardo C. Puno, there was reference to the
Presidential Committee on Judicial Reorganization. Thus: "On October 17, 1980, the Presidential
Committee on Judicial Reorganization submitted its report to the President which contained the 'Proposed
Guidelines for Judicial Reorganization.' Cabinet Bill No. 42 was drafted substantially in accordance with
the options presented by these guidelines. Some options set forth in the aforesaid report were not availed
of upon consultation with and upon consensus of the government and parliamentary leadership. Moreover,
some amendments to the bill were adopted by the Committee on Justice, Human Rights and Good
Government, to which The bill was referred, following the public hearings on the bill held in December of
1980. The hearings consisted of dialogues with the distinguished members of the bench and the bar who
had submitted written proposals, suggestions, and position papers on the bill upon the invitation of the
Committee on Justice, Human Rights and Good Government." 36 Stress was laid by the sponsor that the
enactment of such Cabinet Bill would, firstly, result in the attainment of more efficiency in the disposal of
cases. Secondly, the improvement in the quality of justice dispensed by the courts is expected as a
necessary consequence of the easing of the court's dockets. Thirdly, the structural changes introduced in
the bill, together with the reallocation of jurisdiction and the revision of the rules of procedure, are
designated to suit the court system to the exigencies of the present day Philippine society, and hopefully,
of the foreseeable future." 37 it may be observed that the volume containing the minutes of the proceedings
of the Batasang Pambansa show that 590 pages were devoted to its discussion. It is quite obvious that it
took considerable time and effort as well as exhaustive study before the act was signed by the President
on August 14, 1981. With such a background, it becomes quite manifest how lacking in factual basis is the
allegation that its enactment is tainted by the vice of arbitrariness. What appears undoubted and
undeniable is the good faith that characterized its enactment from its inception to the affixing of the
Presidential signature.
5. Nothing is better settled in our law than that the abolition of an office within the competence of a
legitimate body if done in good faith suffers from no infirmity. The ponencia of Justice J.B.L. Reyes in Cruz
v. Primicias, Jr. 38reiterated such a doctrine: "We find this point urged by respondents, to be without merit.
No removal or separation of petitioners from the service is here involved, but the validity of the abolition of
their offices. This is a legal issue that is for the Courts to decide. It is well-known rule also that valid
abolition of offices is neither removal nor separation of the incumbents. ... And, of course, if the abolition is
void, the incumbent is deemed never to have ceased to hold office. The preliminary question laid at rest,
we pass to the merits of the case. As well-settled as the rule that the abolition of an office does not amount
to an illegal removal of its incumbent is the principle that, in order to be valid, the abolition must be made in
good faith." 39 The above excerpt was quoted with approval in Bendanillo, Sr. v. Provincial
Governor, 40 two earlier cases enunciating a similar doctrine having preceded it. 41 As with the offices in
the other branches of the government, so it is with the judiciary. The test remains whether the abolition is in
good faith. As that element is conspicuously present in the enactment of Batas Pambansa Blg. 129, then
the lack of merit of this petition becomes even more apparent. The concurring opinion of Justice Laurel
in Zandueta v. De la Costa 42 cannot be any clearer. This is a quo warranto proceeding filed by petitioner,
claiming that he, and not respondent, was entitled to he office of judge of the Fifth Branch of the Court of
First Instance of Manila. There was a Judicial Reorganization Act in 1936, 43 a year after the inauguration
of the Commonwealth, amending the Administrative Code to organize courts of original jurisdiction known
as the Courts of First Instance Prior to such statute, petitioner was the incumbent of such branch.
Thereafter, he received an ad interim appointment, this time to the Fourth Judicial District, under the new
legislation. Unfortunately for him, the Commission on Appointments of then National Assembly
disapproved the same, with respondent being appointed in his place. He contested the validity of the Act
insofar as it resulted in his being forced to vacate his position This Court did not rule squarely on the matter.
His petition was dismissed on the ground of estoppel. Nonetheless, the separate concurrence of Justice
Laurel in the result reached, to repeat, reaffirms in no uncertain terms the standard of good faith to
preclude any doubt as to the abolition of an inferior court, with due recognition of the security of tenure
guarantee. Thus: " I am of the opinion that Commonwealth Act No. 145 in so far as it reorganizes, among
other judicial districts, the Ninth Judicial District, and establishes an entirely new district comprising Manila
and the provinces of Rizal and Palawan, is valid and constitutional. This conclusion flows from the
fundamental proposition that the legislature may abolish courts inferior to the Supreme Court and therefore
may reorganize them territorially or otherwise thereby necessitating new appointments and commissions.
Section 2, Article VIII of the Constitution vests in the National Assembly the power to define, prescribe and
apportion the jurisdiction of the various courts, subject to certain limitations in the case of the Supreme
Court. It is admitted that section 9 of the same article of the Constitution provides for the security of tenure
of all the judges. The principles embodied in these two sections of the same article of the Constitution must
be coordinated and harmonized. A mere enunciation of a principle will not decide actual cases and
controversies of every sort. (Justice Holmes in Lochner vs. New York, 198 U.S., 45; 49 Law. ed;
937)" 44 justice Laurel continued: "I am not insensible to the argument that the National Assembly may
abuse its power and move deliberately to defeat the constitutional provision guaranteeing security of
tenure to all judges, But, is this the case? One need not share the view of Story, Miller and Tucker on the
one hand, or the opinion of Cooley, Watson and Baldwin on the other, to realize that the application of a
legal or constitutional principle is necessarily factual and circumstantial and that fixity of principle is the
rigidity of the dead and the unprogressive. I do say, and emphatically, however, that cases may arise
where the violation of the constitutional provision regarding security of tenure is palpable and plain, and
that legislative power of reorganization may be sought to cloak an unconstitutional and evil purpose. When
a case of that kind arises, it will be the time to make the hammer fall and heavily. But not until then. I am
satisfied that, as to the particular point here discussed, the purpose was the fulfillment of what was
considered a great public need by the legislative department and that Commonwealth Act No. 145 was not
enacted purposely to affect adversely the tenure of judges or of any particular judge. Under these
circumstances, I am for sustaining the power of the legislative department under the Constitution. To be
sure, there was greater necessity for reorganization consequent upon the establishment of the new
government than at the time Acts Nos. 2347 and 4007 were approved by the defunct Philippine Legislature,
and although in the case of these two Acts there was an express provision providing for the vacation by the
judges of their offices whereas in the case of Commonwealth Act No. 145 doubt is engendered by its
silence, this doubt should be resolved in favor of the valid exercise of the legislative power." 45
6. A few more words on the question of abolition. In the above-cited opinion of Justice Laurel in Zandueta,
reference was made to Act No. 2347 46 on the reorganization of the Courts of First Instance and to Act No.
4007 47 on the reorganization of all branches of the government, including the courts of first instance. In
both of them, the then Courts of First Instance were replaced by new courts with the same appellation. As
Justice Laurel pointed out, there was no question as to the fact of abolition. He was equally categorical as
to Commonwealth Act No. 145, where also the system of the courts of first instance was provided for
expressly. It was pointed out by Justice Laurel that the mere creation of an entirely new district of the same
court is valid and constitutional. such conclusion flowing "from the fundamental proposition that the
legislature may abolish courts inferior to the Supreme Court and therefore may reorganize them territorially
or otherwise thereby necessitating new appointments and commissions." 48 The challenged statute
creates an intermediate appellate court, 49 regional trial courts, 50 metropolitan trial courts of the national
capital region, 51 and other metropolitan trial courts, 52 municipal trial courts in cities, 53 as well as in
municipalities, 54 and municipal circuit trial courts. 55 There is even less reason then to doubt the fact that
existing inferior courts were abolished. For the Batasang Pambansa, the establishment of such new
inferior courts was the appropriate response to the grave and urgent problems that pressed for solution.
Certainly, there could be differences of opinion as to the appropriate remedy. The choice, however, was
for the Batasan to make, not for this Court, which deals only with the question of power. It bears
mentioning that in Brillo v. Eñage 56 this Court, in an unanimous opinion penned by the late Justice Diokno,
citing Zandueta v. De la Costa, ruled: "La segunda question que el recurrrido plantea es que la Carta de
Tacloban ha abolido el puesto. Si efectivamente ha sido abolido el cargo, entonces ha quedado extinguido
el derecho de recurente a ocuparlo y a cobrar el salario correspodiente. Mc Culley vs. State, 46 LRA, 567.
El derecho de un juez de desempenarlo hasta los 70 años de edad o se incapacite no priva al Congreso
de su facultad de abolir, fusionar o reorganizar juzgados no constitucionales." 57 Nonetheless, such
well-established principle was not held applicable to the situation there obtaining, the Charter of Tacloban
City creating a city court in place of the former justice of the peace court. Thus: "Pero en el caso de autos
el Juzgado de Tacloban no ha sido abolido. Solo se le ha cambiado el nombre con el cambio de forma del
gobierno local." 58 The present case is anything but that. Petitioners did not and could not prove that the
challenged statute was not within the bounds of legislative authority.
7. This opinion then could very well stop at this point. The implementation of Batas Pambansa Blg. 129,
concededly a task incumbent on the Executive, may give rise, however, to questions affecting a judiciary
that should be kept independent. The all-embracing scope of the assailed legislation as far as all inferior
courts from the Courts of Appeals to municipal courts are concerned, with the exception solely of the
Sandiganbayan and the Court of Tax Appeals 59 gave rise, and understandably so, to misgivings as to its
effect on such cherished Ideal. The first paragraph of the section on the transitory provision reads: "The
provisions of this Act shall be immediately carried out in accordance with an Executive Order to be issued
by the President. The Court of Appeals, the Courts of First Instance, the Circuit Criminal Courts, the
Juvenile and Domestic Relations Courts, the Courts of Agrarian Relations, the City Courts, the Municipal
Courts, and the Municipal Circuit Courts shall continue to function as presently constituted and organized,
until the completion of the reorganization provided in this Act as declared by the President. Upon such
declaration, the said courts shall be deemed automatically abolished and the incumbents thereof shall
cease to hold the office." 60 There is all the more reason then why this Court has no choice but to inquire
further into the allegation by petitioners that the security of tenure provision, an assurance of a judiciary
free from extraneous influences, is thereby reduced to a barren form of words. The amended Constitution
adheres even more clearly to the long-established tradition of a strong executive that antedated the 1935
Charter. As noted in the work of former Vice-Governor Hayden, a noted political scientist, President Claro
M. Recto of the 1934 Convention, in his closing address, in stressing such a concept, categorically spoke
of providing "an executive power which, subject to the fiscalization of the Assembly, and of public opinion,
will not only know how to govern, but will actually govern, with a firm and steady hand, unembarrassed by
vexatious interferences by other departments, or by unholy alliances with this and that social
group." 61 The above excerpt was cited with approval by Justice Laurel in Planas v. Gil. 62 Moreover, under
the 1981 Amendments, it may be affirmed that once again the principle of separation of powers, to quote
from the same jurist as ponente in Angara v. Electoral Commission, 63 "obtains not through express
provision but by actual division." 64 The president, under Article VII, shall be the head of state and chief
executive of the Republic of the Philippines." 65Moreover, it is equally therein expressly provided that all
the powers he possessed under the 1935 Constitution are once again vested in him unless the Batasang
Pambansa provides otherwise." 66 Article VII of the 1935 Constitution speaks categorically: "The Executive
power shall be vested in a President of the Philippines." 67 As originally framed, the 1973 Constitution
created the position of President as the "symbolic head of state." 68 In addition, there was a provision for a
Prime Minister as the head of government exercising the executive power with the assistance of the
Cabinet 69 Clearly, a modified parliamentary system was established. In the light of the 1981 amendments
though, this Court in Free Telephone Workers Union v. Minister of Labor 70 could state: "The adoption of
certain aspects of a parliamentary system in the amended Constitution does not alter its essentially
presidential character." 71 The retention, however, of the position of the Prime Minister with the Cabinet, a
majority of the members of which shall come from the regional representatives of the Batasang Pambansa
and the creation of an Executive Committee composed of the Prime Minister as Chairman and not more
than fourteen other members at least half of whom shall be members of the Batasang Pambansa, clearly
indicate the evolving nature of the system of government that is now operative. 72 What is equally apparent
is that the strongest ties bind the executive and legislative departments. It is likewise undeniable that the
Batasang Pambansa retains its full authority to enact whatever legislation may be necessary to carry out
national policy as usually formulated in a caucus of the majority party. It is understandable then why
in Fortun v. Labang 73 it was stressed that with the provision transferring to the Supreme Court
administrative supervision over the Judiciary, there is a greater need "to preserve unimpaired the
independence of the judiciary, especially so at present, where to all intents and purposes, there is a fusion
between the executive and the legislative branches." 74
8. To be more specific, petitioners contend that the abolition of the existing inferior courts collides with the
security of tenure enjoyed by incumbent Justices and judges under Article X, Section 7 of the Constitution.
There was a similar provision in the 1935 Constitution. It did not, however, go as far as conferring on this
Tribunal the power to supervise administratively inferior courts. 75 Moreover, this Court is em powered "to
discipline judges of inferior courts and, by a vote of at least eight members, order their dismissal." 76 Thus it
possesses the competence to remove judges. Under the Judiciary Act, it was the President who was
vested with such power. 77 Removal is, of course, to be distinguished from termination by virtue of the
abolition of the office. There can be no tenure to a non-existent office. After the abolition, there is in law no
occupant. In case of removal, there is an office with an occupant who would thereby lose his position. It is
in that sense that from the standpoint of strict law, the question of any impairment of security of tenure
does not arise. Nonetheless, for the incumbents of inferior courts abolished, the effect is one of separation.
As to its effect, no distinction exists between removal and the abolition of the office. Realistically, it is
devoid of significance. He ceases to be a member of the judiciary. In the implementation of the assailed
legislation, therefore, it would be in accordance with accepted principles of constitutional construction that
as far as incumbent justices and judges are concerned, this Court be consulted and that its view be
accorded the fullest consideration. No fear need be entertained that there is a failure to accord respect to
the basic principle that this Court does not render advisory opinions. No question of law is involved. If such
were the case, certainly this Court could not have its say prior to the action taken by either of the two
departments. Even then, it could do so but only by way of deciding a case where the matter has been put
in issue. Neither is there any intrusion into who shall be appointed to the vacant positions created by the
reorganization. That remains in the hands of the Executive to whom it properly belongs. There is no
departure therefore from the tried and tested ways of judicial power, Rather what is sought to be achieved
by this liberal interpretation is to preclude any plausibility to the charge that in the exercise of the conceded
power of reorganizing tulle inferior courts, the power of removal of the present incumbents vested in this
Tribunal is ignored or disregarded. The challenged Act would thus be free from any unconstitutional taint,
even one not readily discernidble except to those predisposed to view it with distrust. Moreover, such a
construction would be in accordance with the basic principle that in the choice of alternatives between one
which would save and another which would invalidate a statute, the former is to be preferred. 78 There is an
obvious way to do so. The principle that the Constitution enters into and forms part of every act to avoid
any constitutional taint must be applied Nuñez v. Sandiganbayan, 79 promulgated last January, has this
relevant excerpt: "It is true that other Sections of the Decree could have been so worded as to avoid any
constitutional objection. As of now, however, no ruling is called for. The view is given expression in the
concurring and dissenting opinion of Justice Makasiar that in such a case to save the Decree from the
direct fate of invalidity, they must be construed in such a way as to preclude any possible erosion on the
powers vested in this Court by the Constitution. That is a proposition too plain to be committed. It
commends itself for approval." 80Nor would such a step be unprecedented. The Presidential Decree
constituting Municipal Courts into Municipal Circuit Courts, specifically provides: "The Supreme Court shall
carry out the provisions of this Decree through implementing orders, on a province-to-province basis." 81 It
is true there is no such provision in this Act, but the spirit that informs it should not be ignored in the
Executive Order contemplated under its Section 44. 82 Thus Batas Pambansa Blg. 129 could stand the
most rigorous test of constitutionality. 83
9. Nor is there anything novel in the concept that this Court is called upon to reconcile or harmonize
constitutional provisions. To be specific, the Batasang Pambansa is expressly vested with the authority to
reorganize inferior courts and in the process to abolish existing ones. As noted in the preceding paragraph,
the termination of office of their occupants, as a necessary consequence of such abolition, is hardly
distinguishable from the practical standpoint from removal, a power that is now vested in this Tribunal. It is
of the essence of constitutionalism to assure that neither agency is precluded from acting within the
boundaries of its conceded competence. That is why it has long been well-settled under the constitutional
system we have adopted that this Court cannot, whenever appropriate, avoid the task of reconciliation. As
Justice Laurel put it so well in the previously cited Angara decision, while in the main, "the Constitution has
blocked out with deft strokes and in bold lines, allotment of power to the executive, the legislative and the
judicial departments of the government, the overlapping and interlacing of functions and duties between
the several departments, however, sometimes makes it hard to say just where the one leaves off and the
other begins." 84 It is well to recall another classic utterance from the same jurist, even more emphatic in its
affirmation of such a view, moreover buttressed by one of those insights for which Holmes was so famous
"The classical separation of government powers, whether viewed in the light of the political philosophy of
Aristotle, Locke, or Motesquieu or of the postulations of Mabini, Madison, or Jefferson, is a relative theory
of government. There is more truism and actuality in interdependence than in independence and
separation of powers, for as observed by Justice Holmes in a case of Philippine origin, we cannot lay down
'with mathematical precision and divide the branches into water-tight compartments' not only because 'the
great ordinances of the Constitution do not establish and divide fields of black and white but also because
'even the more specific of them are found to terminate in a penumbra shading gradually from one extreme
to the other.'" 85 This too from Justice Tuazon, likewise expressing with force and clarity why the need for
reconciliation or balancing is well-nigh unavodiable under the fundamental principle of separation of
powers: "The constitutional structure is a complicated system, and overlappings of governmental functions
are recognized, unavoidable, and inherent necessities of governmental coordination." 86 In the same way
that the academe has noted the existence in constitutional litigation of right versus right, there are
instances, and this is one of them, where, without this attempt at harmonizing the provisions in question,
there could be a case of power against power. That we should avoid.
10. There are other objections raised but they pose no difficulty. Petitioners would characterize as an
undue delegation of legislative power to the President the grant of authority to fix the compensation and
the allowances of the Justices and judges thereafter appointed. A more careful reading of the challenged
Batas Pambansa Blg. 129 ought to have cautioned them against raising such an issue. The language of
the statute is quite clear. The questioned provisions reads as follows: "Intermediate Appellate Justices,
Regional Trial Judges, Metropolitan Trial Judges, municipal Trial Judges, and Municipal Circuit Trial
Judges shall receive such receive such compensation and allowances as may be authorized by the
President along the guidelines set forth in Letter of Implementation No. 93 pursuant to Presidential Decree
No. 985, as amended by Presidential Decree No. 1597." 87 The existence of a standard is thus clear. The
basic postulate that underlies the doctrine of non-delegation is that it is the legislative body which is
entrusted with the competence to make laws and to alter and repeal them, the test being the completeness
of the statue in all its terms and provisions when enacted. As pointed out in Edu v. Ericta: 88 "To avoid the
taint of unlawful delegation, there must be a standard, which implies at the very least that the legislature
itself determines matters of principle and lays down fundamental policy. Otherwise, the charge of complete
abdication may be hard to repel. A standard thus defines legislative policy, marks its limits, maps out its
boundaries and specifies the public agency to apply it. It indicates the circumstances under which the
legislative command is to be effected. It is the criterion by which legislative purpose may be carried out.
Thereafter, the executive or administrative office designated may in pursuance of the above guidelines
promulgate supplemental rules and regulations. The standard may be either express or implied. If the
former, the non-delegation objection is easily met. The standard though does not have to be spelled out
specifically. It could be implied from the policy and purpose of the act considered as a whole." 89 The
undeniably strong links that bind the executive and legislative departments under the amended
Constitution assure that the framing of policies as well as their implementation can be accomplished with
unity, promptitude, and efficiency. There is accuracy, therefore, to this observation in the Free Telephone
Workers Union decision: "There is accordingly more receptivity to laws leaving to administrative and
executive agencies the adoption of such means as may be necessary to effectuate a valid legislative
purpose. It is worth noting that a highly-respected legal scholar, Professor Jaffe, as early as 1947, could
speak of delegation as the 'dynamo of modern government.'" 90 He warned against a "restrictive approach"
which could be "a deterrent factor to much-needed legislation." 91 Further on this point from the same
opinion" "The spectre of the non-delegation concept need not haunt, therefore, party caucuses, cabinet
sessions or legislative chambers." 92 Another objection based on the absence in the statue of what
petitioners refer to as a "definite time frame limitation" is equally bereft of merit. They ignore the categorical
language of this provision: "The Supreme Court shall submit to the President, within thirty (30) days from
the date of the effectivity of this act, a staffing pattern for all courts constituted pursuant to this Act which
shall be the basis of the implementing order to be issued by the President in accordance with the
immediately succeeding section." 93 The first sentence of the next section is even more categorical: "The
provisions of this Act shall be immediately carried out in accordance with an Executive Order to be issued
by the President." 94 Certainly petitioners cannot be heard to argue that the President is insensible to his
constitutional duty to take care that the laws be faithfully executed. 95 In the meanwhile, the existing inferior
courts affected continue functioning as before, "until the completion of the reorganization provided in this
Act as declared by the President. Upon such declaration, the said courts shall be deemed automatically
abolished and the incumbents thereof shall cease to hold office." 96 There is no ambiguity. The incumbents
of the courts thus automatically abolished "shall cease to hold office." No fear need be entertained by
incumbents whose length of service, quality of performance, and clean record justify their being named
anew, 97 in legal contemplation without any interruption in the continuity of their service. 98 It is equally
reasonable to assume that from the ranks of lawyers, either in the government service, private practice, or
law professors will come the new appointees. In the event that in certain cases a little more time is
necessary in the appraisal of whether or not certain incumbents deserve reappointment, it is not from their
standpoint undesirable. Rather, it would be a reaffirmation of the good faith that will characterize its
implementation by the Executive. There is pertinence to this observation of Justice Holmes that even
acceptance of the generalization that courts ordinarily should not supply omissions in a law, a
generalization qualified as earlier shown by the principle that to save a statute that could be done, "there is
no canon against using common sense in construing laws as saying what they obviously mean." 99 Where
then is the unconstitutional flaw
11. On the morning of the hearing of this petition on September 8, 1981, petitioners sought to have the
writer of this opinion and Justices Ramon C. Aquino and Ameurfina Melencio-Herrera disqualified because
the first-named was the chairman and the other two, members of the Committee on Judicial
Reorganization. At the hearing, the motion was denied. It was made clear then and there that not one of
the three members of the Court had any hand in the framing or in the discussion of Batas Pambansa Blg.
129. They were not consulted. They did not testify. The challenged legislation is entirely the product of the
efforts of the legislative body. 100 Their work was limited, as set forth in the Executive Order, to submitting
alternative plan for reorganization. That is more in the nature of scholarly studies. That the undertook.
There could be no possible objection to such activity. Ever since 1973, this Tribunal has had administrative
supervision over interior courts. It has had the opportunity to inform itself as to the way judicial business is
conducted and how it may be improved. Even prior to the 1973 Constitution, it is the recollection of the
writer of this opinion that either the then Chairman or members of the Committee on Justice of the then
Senate of the Philippines 101 consulted members of the Court in drafting proposed legislation affecting the
judiciary. It is not inappropriate to cite this excerpt from an article in the 1975 Supreme Court Review: "In
the twentieth century the Chief Justice of the United States has played a leading part in judicial reform. A
variety of conditions have been responsible for the development of this role, and foremost among them
has been the creation of explicit institutional structures designed to facilitate reform." 102 Also: "Thus the
Chief Justice cannot avoid exposure to and direct involvement in judicial reform at the federal level and, to
the extent issues of judicial federalism arise, at the state level as well." 103
12. It is a cardinal article of faith of our constitutional regime that it is the people who are endowed with
rights, to secure which a government is instituted. Acting as it does through public officials, it has to grant
them either expressly or impliedly certain powers. Those they exercise not for their own benefit but for the
body politic. The Constitution does not speak in the language of ambiguity: "A public office is a public
trust." 104 That is more than a moral adjuration It is a legal imperative. The law may vest in a public official
certain rights. It does so to enable them to perform his functions and fulfill his responsibilities more
efficiently. It is from that standpoint that the security of tenure provision to assure judicial independence is
to be viewed. It is an added guarantee that justices and judges can administer justice undeterred by any
fear of reprisal or untoward consequence. Their judgments then are even more likely to be inspired solely
by their knowledge of the law and the dictates of their conscience, free from the corrupting influence of
base or unworthy motives. The independence of which they are assured is impressed with a significance
transcending that of a purely personal right. As thus viewed, it is not solely for their welfare. The
challenged legislation Thus subject d to the most rigorous scrutiny by this Tribunal, lest by lack of due care
and circumspection, it allow the erosion of that Ideal so firmly embedded in the national consciousness
There is this farther thought to consider. independence in thought and action necessarily is rooted in one's
mind and heart. As emphasized by former Chief Justice Paras in Ocampo v. Secretary of Justice, 105 there
is no surer guarantee of judicial independence than the God-given character and fitness of those
appointed to the Bench. The judges may be guaranteed a fixed tenure of office during good behavior, but if
they are of such stuff as allows them to be subservient to one administration after another, or to cater to
the wishes of one litigant after another, the independence of the judiciary will be nothing more than a myth
or an empty Ideal. Our judges, we are confident, can be of the type of Lord Coke, regardless or in spite of
the power of Congress — we do not say unlimited but as herein exercised — to reorganize inferior
courts." 106 That is to recall one of the greatest Common Law jurists, who at the cost of his office made This case is about a residential subdivisions resistance to the construction of a high-rise building beside it
clear that he would not just blindly obey the King's order but "will do what becomes [him] as a judge." So it
was pointed out in the first leading case stressing the independence of the judiciary, Borromeo v. and a failure to promptly file a memorandum appeal with the Office of the President (OP), resulting in the
Mariano, 107 The ponencia of Justice Malcolm Identified good judges with "men who have a mastery of the
dismissal of the case for failure to perfect the appeal.
principles of law, who discharge their duties in accordance with law, who are permitted to perform the
duties of the office undeterred by outside influence, and who are independent and self-respecting human
units in a judicial system equal and coordinate to the other two departments of government." 108 There is
no reason to assume that the failure of this suit to annul Batas Pambansa Blg. 129 would be attended with The Facts and the Case
deleterious consequences to the administration of justice. It does not follow that the abolition in good faith
of the existing inferior courts except the Sandiganbayan and the Court of Tax Appeals and the creation of
new ones will result in a judiciary unable or unwilling to discharge with independence its solemn duty or
one recreant to the trust reposed in it. Nor should there be any fear that less than good faith will attend the Petitioner Greenhills East Association, Inc. (GEA) is the homeowners association of Greenhills East
exercise be of the appointing power vested in the Executive. It cannot be denied that an independent and
Subdivision, a residential subdivision in Barangay Wack-Wack, Greenhills East, Mandaluyong City.
efficient judiciary is something to the credit of any administration. Well and truly has it been said that the
fundamental principle of separation of powers assumes, and justifiably so, that the three departments are
as one in their determination to pursue the Ideals and aspirations and to fulfilling the hopes of the
sovereign people as expressed in the Constitution. There is wisdom as well as validity to this For a time now, respondent E. Ganzon, Inc. (EGI) has sought to develop a 4,109-square meter lot (the
pronouncement of Justice Malcolm in Manila Electric Co. v. Pasay Transportation Company, 109 a decision
promulgated almost half a century ago: "Just as the Supreme Court, as the guardian of constitutional rights, land site) at the corner of EDSA and Ortigas Avenue in Barangay Wack-Wack (the Barangay) with its
should not sanction usurpations by any other department or the government, so should it as strictly confine
its own sphere of influence to the powers expressly or by implication conferred on it by the Organic owner, the San Buena Realty and Development Corp. EGI wanted to build on the property a 77-storey
Act." 110 To that basic postulate underlying our constitutional system, this Court remains committed.
mixed-used building with an 8-storey basement for a total of 85 storeys (the project). The proposed

WHEREFORE, the unconstitutionality of Batas Pambansa Blg. 129 not having been shown, this petition is SKYCITY Condominium, when built, will be the tallest building in the country.
dismissed. No costs.

GREENHILLS EAST ASSOCIATION, G.R. No. 169741 Petitioner GEAs subdivision has been classified under Section 4, Article IV of the Metropolitan Manila
INC., represented by its President
JOSEFINA J. CASTILLO, Commission Ordinance 81-01 (MMZO 81-01) as an R-1 low density residential zone. The subdivision
Petitioner, Present:
Carpio, J., Chairperson, consists of about 380 lots. It has a church (the Sanctuario de San Jose), a school (the La Salle Greenhills),
- versus - Brion,
Del Castillo, and a private road network.
Abad, and
Perez, JJ.
E. GANZON, INC., represented by its As it happened, the land site on which the project will rise is adjacent to Greenhills East Subdivision
President EULALIO GANZON, Promulgated:
Respondent. although MMZO 81-01 had classified that site as C-2 or a Major Commercial Zone. It is bounded by EDSA
January 20, 2010
x --------------------------------------------------------------------------------------- x on the east, Florida Street on the north, Lot 11, Block 4 of the Subdivision and a narrow creek on the west,

DECISION and Ortigas Avenue on the south.

ABAD, J.:
Sometime in April or May 1997, respondent EGI fenced its land site, demolished the structures on it, and

began excavation works without first getting a clearance from the Barangay. On July 10, 1997 the Housing

and Land Use Regulatory Board (HLURB) issued to EGI a Certificate of Locational Viability and on August

11, 1997 the City of Mandaluyong issued to it an Excavation and Ground Preparation Permit. On
September 15, 1997 the HLURB further issued to EGI a Preliminary Approval and Locational Clearance On February 10, 2003 petitioner GEA received a copy of an order from the OP dated January 28, 2003,

for its project. denying its appeal on the ground of GEAs failure to perfect it on time. GEA moved for a reconsideration of

the Order, but the OP denied the same.

In January 1998 petitioner GEA wrote the HLURB National Capital Region, Regional Director, opposing

respondent EGIs project. Not content with its HLURB opposition, GEA filed a separate one addressed to On August 13, 2003 petitioner GEA filed with the Court of Appeals (CA) a petition for review of the OPs

the Department of Public Works and Highways (DPWH). On June 4, 1998 the DPWH advised the Building orders. On December 21, 2004, the CA rendered judgment, denying GEAs petition. GEA filed a motion for

Official of Mandaluyong to require EGI to secure a Development Permit and a valid Locational Clearance reconsideration but this, too, was denied, hence, the present recourse to this Court.

for its project from the HLURB. In a separate development, EGI applied with the Barangay for clearance The Issues Presented

covering its project. On July 15, 1998, however, the Barangay denied the application.

Petitioner GEA basically presents the following issues for resolution:

On November 24, 1999 the HLURB Arbiter rendered a decision, dismissing petitioner GEAs opposition to

respondent EGIs project. On March 20, 2001 acting on GEAs petition for review of the Arbiters decision, 1. Whether or not the CA correctly upheld the ruling of the OP that petitioner

the HLURB Board of Commissioners issued a resolution, denying the petition. It also denied GEAs motion GEA failed to perfect on time its appeal to that office from the decision of the HLURB;

for reconsideration on October 30, 2001. and

On November 20, 2001 petitioner GEA filed its Notice of Appeal with the OP, simultaneously paying the 2. Whatever be the answer, if the substantial matter need to be addressed,

required appeal and legal fees. On December 12, 2001 GEA received a copy of the OPs order dated whether or not the HLURB erred in finding no valid ground to restrict respondent EGIs

November 27, 2001, requiring GEA to file its memorandum on appeal within 15 days from notice. But use of the subject land site, which lies beside a residential subdivision, for

before the period was up or on December 27, 2001, GEA filed a motion for extension of 15 days within constructing a high-rise building.

which to submit its memorandum on appeal. On January 11, 2002 GEA filed another motion for extension,

this time for five days or until January 16, 2002, within which to file the required memorandum. The Rulings of the Court

Petitioner GEA filed the required Memorandum on Appeal with the OP on January 16, 2002 but asked that One. Petitioner GEA contends that it had already perfected its appeal when it filed on November 20, 2001

office for an extension of two days within which to file the required draft decision. On January 18, 2002 a notice of appeal with the OP from the decision of the HLURB.

GEA filed still another motion for extension, this time for one day, within which to file the required

draft. GEA claims that it intended to file the same on January 21, 2002 but, due to a nationwide brownout The Rules and Regulations Governing Appeals to the Office of the President of the Philippines [1] requires

on that day, it had to ask for five more days within which to do so. Finally, GEA filed its draft decision with the appellant to file, not only a notice of appeal, but also a memorandum on appeal that must, among other

the OP on January 28, 2002. things, state the grounds relied on for the appeal, the issues involved, and the reliefs sought. [2] The
appellant must, to perfect his appeal, comply with these requirements within 15 days from receipt of a copy or issues, the Court deems it wise to resolve the substantial issue that petitioner GEA presents considering

of the HLURB decision. Petitioner GEA, however, failed to submit an appeal memorandum. that both sides have amply argued the same.

Still, the OP actually gave petitioner GEA a chance to comply with the omitted requirement by Petitioner GEA invokes Section 10, Article V of MMZO 81-01. This section provides height restrictions on a

directing it in the Order of November 27, 2001 to submit its appeal memorandum and draft decision within C-2 property that adjoins an R-1 property without an intervening street or permanent open space that

15 days from notice; otherwise, it would dismiss the case.Since GEA received the above order on is over six meters wide and that the properties have adjacent front yards, or even when there are none, the

December 12, 2001, it had until December 27, 2001 within which to comply with it. intervening street or permanent open space does not exceed three meters in width.

Petitioner GEA points out that it filed two successive motions for extension of time within which But MMZO 81-01 applies to a situation where an R-1 property adjoins a C-2 property. This has ceased to

to file the required memorandum appeal and draft decision. Since GEA had already filed its memorandum be the case between the land site and the subdivision after the Mandaluyong City government enacted

appeal before the OP could deny those motions, it cannot be said that GEA filed the memorandum appeal Ordinance 128 in 1993. That was before the present case came up. Ordinance 128 converted certain R-1

out of time. zones to C-2 zones and these included those on the western side of respondent EGIs land site, namely

Lot 11, Block 4, and Lot 11, Block 20. Consequently, the subject land site ceased to be adjacent to an R-1

But petitioner GEA gambled when it did not file the memorandum appeal and draft decision zone and no longer suffered from height restrictions.

within the extra 15 days that the OP gave it. It asked first for an extension of 15 days and then an

additional extension of five days. GEA had no right to assume, however, that the OP would grant these Petitioner GEA of course claims that the lots that Ordinance 128 converted into C-2 zones were

extensions. The governing rules did not provide for them. Consequently, GEA has only itself to blame only the lots between Ortigas Avenue and Notre Dame Street that run parallel to EDSA but at some depth
[3]
when its appeal was dismissed. from it. They are on the Wack-Wack side of Ortigas Avenue. Ordinance 128 describes the newly

converted C-2 zones relevant to this case as a lot deep along Ortigas Avenue from EDSA to Notre Dame

Notably, the OP also required petitioner GEA to file, along with its memorandum appeal, a draft Street. Because of the mention of Notre Dame Street, which is found on only one side of Ortigas Avenue,

decision. GEA did not. It instead filed two more motions for extension of time within which to do so. Section GEA concludes that the new C-2 zones did not extend to the other side of Ortigas Avenue where

5 of the Rules of that office provides that failure to comply with its orders may warrant a dismissal of the Greenhills East Subdivision and respondent EGIs land site are located.

appeal. Consequently, the OP acted within its authority in dismissing GEAs appeal for this additional

reason. But, as HLURB pointed out, if the purpose of the ordinance was to limit the land classification

Two. With the above ruling, this decision should end here. But petitioner GEA asks the Court to dispense conversion only to the side of Ortigas Avenue where the Wack-Wack Subdivision lay, it would have simply

with the technicalities involved and rule instead on the merits of the case, given that GEA and its members stated, using the technical language applied to the other converted areas, [4] a lot deep along the

had gone through a lot of trouble to get the HLURB to stop the project from rising on the contested land Wack-Wack side of Ortigas Avenue from EDSA to Notre Dame Street, instead of saying, a lot deep along

site. To avert the likelihood that this case would shift to another forum under the guise of some other issue Ortigas Avenue. It could only mean, therefore, that the ordinance intended to convert all the lots, on both

sides and margins of Ortigas Avenue up to the point where Notre Dame Street was.
 No matter how hard it tries to learn the technical intricacies of certain highly regulated human activities, the

The Court finds either conclusion unclear, given the essentially vague way by which Ordinance 128 Supreme Court will always be inadequately equipped to identify the facts that matter when resolving

describes the affected areas. What really clears up the issue for the Court is the HLURBs recourse to the issues involving such activities. Invariably, the Court must respect the factual findings of administrative

Revised Zoning Map of Mandaluyong City. The color-coded map shows identical color and captions for the agencies which have expertise on matters that fall within their jurisdiction. [5] Here, since the HLURB has

lots stretching at some depth from EDSA, but running parallel to it, on both sides of Ortigas Avenue, the expertise in applying zonal classifications on specific properties and since petitioner GEA fails to make

including Lot 11, Block 4, and Lot 11, Block 20 on the Greenhills East Subdivision side. The map tags both out a clear case that it has erred, the Court must rely on its finding that respondent EGIs land site does not,

sides of Ortigas Avenue with the same C-2 classification. for the purpose of applying height restrictions, adjoin an R-1 zone.[6]

In relying on the Mandaluyong zoning map, the HLURB took note of the standard procedure Petitioner GEA nonetheless contends that the proposed 77-storey building would have mixed uses, part

observed in fixing the boundaries of lands, where the preparation and drafting of the illustrative maps residential, part office, and part commercial, which would not be accord with the patterns of land uses

precede the drafting of the text that describes those boundaries.Although the text of the ordinance is suitable to C-2 zones. The buildings in C-2 zones, it suggests, should rise no higher than 40 or 50 storeys

controlling, any doubt or vagueness in the meaning of its provisions may be cleared up by a reference to from the ground. GEA invokes Article IV, Section 4, paragraph 5 of MMZO 81-01, which states that

the official map. As a quasi-judicial body, which enjoys an expertise in land zoning classifications, the establishments in a C-2 zone should be sufficient to provide the needs of the district level. GEA infers from

HLURB can take judicial notice of such official maps as are generated and used in government zoning this that a C-2 establishment must be such that it will provide the needs of the district level only and that,

activities. The Court has no reason to disturb its findings in this case. beyond those needs, the establishment should be in High Intensity or C-3 Zone.

Petitioner GEA argues, however, that even on the assumption that Ordinance 128 converted the lots on But such contention has no basis. MMZO 81-01 contains no provision that allows the

the Greenhills East Subdivision side of Ortigas Avenue into a C-2 zone, such conversion affected construction of not more than 40 or 50-storey buildings in a C-1 or C-2 zone and restricts higher buildings

only Lot 11, Block 20. It did not convert Lot 11, Block 4, which was adjacent to the controversial land to a C-3 zone. There are just no height restrictions under the law for buildings located in C-2 zones, save

site, and which retained an R-1 classification. probably for height clearances prescribed by the Air Transportation Office.

But, as the HLURB Board of Commissioners noted, using the sketch map submitted to it, The Court cannot find fault in HLURBs assertion that the real test of whether a land use serves the need of

although the land site indeed adjoins Lot 11, Block 4, it does so not in the manner that would properly call a district is not in the size or height of the buildings but in the sufficiency or surplus of the business or

for the application of the zoning ordinance. Based on the HLURBs observation, Lot 11 of Block 4 and the human activities in a given district to which they cater.Land use is affected by the intensity of such

land site do not have common boundaries that join them. Rather, they touch each other only at a certain activities. Extraordinary population density or overcrowding, brought about by competition for space in the

point due to the irregular shape of the properties, following the direction of the meandering creek that lies scarce area of the district, is to be avoided. Using this test, the HLURB, which is the clearing house for

between them. For this reason, it cannot be said that Section 10, Article V of MMZO 81-01, which sets efficient land use, found no clear showing that respondent EGIs project if finished would cause havoc in

height restrictions, applies to the project. the population level of the land district where the project lies.
 What is more, the houses of petitioner GEAs members are separated by fence and guarded
gates from the adjacent areas outside their subdivision. Their exclusiveness amply protects their yen for
greater space than the rest of the people of the metropolis outside their enclave can hope for. Respondent
EGIs project offers no threat to the subdivisions privacy. It is on the other side of the fence, wholly
unconnected to the workings within the subdivision. The new building would be in the stream of human
traffic that passes EDSA and Ortigas Avenue. Consequently, it would largely attract people whose primary
activities connect to those wide avenues. It would seem unreasonable for petitioner GEA to dictate on
property owners outside their gates how they should use their lands if such use is not in contravention of
law.
Finally, petitioner GEA contends that the lack of approval of the project by the homeowners association or
the Barangay precludes it from proceeding. GEA invokes Section 14, Article V of MMZO 81-01 which
provides that, where a proposed land use will necessarily affect the character of the residential zone, the
proponent needs to get such approval. It is a prerequisite for the issuance of a locational clearance and a
building permit.
But, although Section 152 (c) of the Local Government Code requires a barangay clearance for any
activity within its jurisdiction, such clearance cannot be denied when the activity is in a permissible
zone. The denial would otherwise be illegal. Here, as discussed above, the applicable ordinance
of Mandaluyong City does not preclude the construction of the project on the land site in question over the
unreasonable objection of a nearby association of subdivision dwellers. Indeed, the city or municipality to
which the barangay unit belongs may still issue the required license or building permit[7] despite the
withholding of the barangay clearance as had happened in this case.
The Court will not dwell on the other matters raised concerning environmental requirements
respecting light, ventilation, drainage, sewerage, waste disposal, and pollution relating to the
project. These matters very well fall under the competence of other government agencies. Surely, the
HLURB decision does not and cannot in any way confer a blanket passport for constructing a building that
does not meet the requirements of other laws.
ACCORDINGLY, the Court DENIES the petition for lack of merit and affirms the decision of the Court of
Appeals dated December 21, 2004 and its Resolution dated September 14, 2005.
SO ORDERED.
G.R. No. 102976 October 25, 1995
IRON AND STEEL AUTHORITY, petitioner,
vs.
THE COURT OF APPEALS and MARIA CRISTINA FERTILIZER CORPORATION, respondents.
FELICIANO, J.:
Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272 dated 9
August 1973 in order, generally, to develop and promote the iron and steel industry in the Philippines. The
objectives of the ISA are spelled out in the following terms:
Sec. 2. Objectives — The Authority shall have the following objectives:
(a) to strengthen the iron and steel industry of the Philippines and to expand the domestic and export
markets for the products of the industry;
(b) to promote the consolidation, integration and rationalization of the industry in order to increase industry
capability and viability to service the domestic market and to compete in international markets;
(c) to rationalize the marketing and distribution of steel products in order to achieve a balance between
demand and supply of iron and steel products for the country and to ensure that industry prices and profits
are at levels that provide a fair balance between the interests of investors, consumers suppliers, and the
public at large;
(d) to promote full utilization of the existing capacity of the industry, to discourage investment in excess
capacity, and in coordination, with appropriate government agencies to encourage capital investment in
priority areas of the industry;
(e) to assist the industry in securing adequate and low-cost supplies of raw materials and to reduce the
excessive dependence of the country on imports of iron and steel.
The list of powers and functions of the ISA included the following:
Sec. 4. Powers and Functions. — The authority shall have the following powers and functions:
 xxx xxx xxx
(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or
lease to the companies involved if it is shown that such use of the State's power is necessary to implement
the construction of capacity which is needed for the attainment of the objectives of the Authority;
xxx xxx xxx
(Emphasis supplied)
P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August 1973. 1 When
ISA's original term expired on 10 October 1978, its term was extended for another ten (10) years by
Executive Order No. 555 dated 31 August 1979.
The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National Development
Corporation which is itself an entity wholly owned by the National Government, embarked on an expansion
program embracing, among other things, the construction of an integrated steel mill in Iligan City. The
construction of such a steel mill was considered a priority and major industrial project of the Government.
Pursuant to the expansion program of the NSC, Proclamation No. 2239 was issued by the President of the
Philippines on 16 November 1982 withdrawing from sale or settlement a large tract of public land (totalling
about 30.25 hectares in area) located in Iligan City, and reserving that land for the use and immediate
occupancy of NSC.
Since certain portions of the public land subject matter Proclamation No. 2239 were occupied by a
non-operational chemical fertilizer plant and related facilities owned by private respondent Maria Cristina
Fertilizer Corporation ("MCFC"), Letter of Instruction (LOI), No. 1277, also dated 16 November 1982, was
issued directing the NSC to "negotiate with the owners of MCFC, for and on behalf of the Government, for
the compensation of MCFC's present occupancy rights on the subject land." LOI No. 1277 also directed
that should NSC and private respondent MCFC fail to reach an agreement within a period of sixty (60)
days from the date of LOI No. 1277, petitioner ISA was to exercise its power of eminent domain under P.D.
No. 272 and to initiate expropriation proceedings in respect of occupancy rights of private respondent
MCFC relating to the subject public land as well as the plant itself and related facilities and to cede the
same to the NSC.2
Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August 1983,
petitioner ISA commenced eminent domain proceedings against private respondent MCFC in the Regional
Trial Court, Branch 1, of Iligan City, praying that it (ISA) be places in possession of the property involved
upon depositing in court the amount of P1,760,789.69 representing ten percent (10%) of the declared
market values of that property. The Philippine National Bank, as mortgagee of the plant facilities and
improvements involved in the expropriation proceedings, was also impleaded as party-defendant.
On 17 September 1983, a writ of possession was issued by the trial court in favor of ISA. ISA in turn placed
NSC in possession and control of the land occupied by MCFC's fertilizer plant installation.
The case proceeded to trial. While the trial was ongoing, however, the statutory existence of petitioner ISA
expired on 11 August 1988. MCFC then filed a motion to dismiss, contending that no valid judgment could
be rendered against ISA which had ceased to be a juridical person. Petitioner ISA filed its opposition to this
motion.
In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did dismiss the
case. The dismissal was anchored on the provision of the Rules of Court stating that "only natural or
juridical persons or entities authorized by law may be parties in a civil case." 3 The trial court also referred
to non-compliance by petitioner ISA with the requirements of Section 16, Rule 3 of the Rules of Court. 4
Petitioner ISA moved for reconsideration of the trial court's Order, contending that despite the expiration of
its term, its juridical existence continued until the winding up of its affairs could be completed. In the
alternative, petitioner ISA urged that the Republic of the Philippines, being the real party-in-interest, should
be allowed to be substituted for petitioner ISA. In this connection, ISA referred to a letter from the Office of
the President dated 28 September 1988 which especially directed the Solicitor General to continue the
expropriation case.
The trial court denied the motion for reconsideration, stating, among other things that:
The property to be expropriated is not for public use or benefit [__] but for the use and benefit [__] of NSC,
a government controlled private corporation engaged in private business and for profit, specially now that
the government, according to newspaper reports, is offering for sale to the public its [shares of stock] in the
National Steel Corporation in line with the pronounced policy of the present administration to disengage
the government from its private business ventures.5 (Brackets supplied)
Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the Court of
Appeals affirmed the order of dismissal of the trial court. The Court of Appeals held that petitioner ISA, "a
government regulatory agency exercising sovereign functions," did not have the same rights as an
ordinary corporation and that the ISA, unlike corporations organized under the Corporation Code, was not
entitled to a period for winding up its affairs after expiration of its legally mandated term, with the result that
upon expiration of its term on 11 August 1987, ISA was "abolished and [had] no more legal authority to
perform governmental functions." The Court of Appeals went on to say that the action for expropriation
could not prosper because the basis for the proceedings, the ISA's exercise of its delegated authority to
expropriate, had become ineffective as a result of the delegate's dissolution, and could not be continued in
the name of Republic of the Philippines, represented by the Solicitor General:
It is our considered opinion that under the law, the complaint cannot prosper, and therefore, has to be
dismissed without prejudice to the refiling of a new complaint for expropriation if the Congress sees it fit."
(Emphases supplied)
At the same time, however, the Court of Appeals held that it was premature for the trial court to have ruled
that the expropriation suit was not for a public purpose, considering that the parties had not yet rested their
respective cases.
In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted the action
for expropriation in its capacity as agent of the Republic of the Philippines, the Republic, as principal of ISA,
is entitled to be substituted and to be made a party-plaintiff after the agent ISA's term had expired.
Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a law further
extending the term of ISA after 11 August 1988 evinced a "clear legislative intent to terminate the juridical
existence of ISA," and that the authorization issued by the Office of the President to the Solicitor General
for continued prosecution of the expropriation suit could not prevail over such negative intent. It is also
contended that the exercise of the eminent domain by ISA or the Republic is improper, since that power
would be exercised "not on behalf of the National Government but for the benefit of NSC."
The principal issue which we must address in this case is whether or not the Republic of the Philippines is
entitled to be substituted for ISA in view of the expiration of ISA's term. As will be made clear below, this is
really the only issue which we must resolve at this time.
Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action:
Sec. 1. Who May Be Parties. — Only natural or juridical persons or entities authorized by law may be
parties in a civil action.
Under the above quoted provision, it will be seen that those who can be parties to a civil action may be
broadly categorized into two (2) groups:
(a) those who are recognized as persons under the law whether natural, i.e., biological persons, on the
one hand, or juridical person such as corporations, on the other hand; and
(b) entities authorized by law to institute actions.
Examination of the statute which created petitioner ISA shows that ISA falls under category (b) above. P.D.
No. 272, as already noted, contains express authorization to ISA to commence expropriation proceedings
like those here involved:
Sec. 4. Powers and Functions. — The Authority shall have the following powers and functions:
xxx xxx xxx
(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or
lease to the companies involved if it is shown that such use of the State's power is necessary to implement
the construction of capacity which is needed for the attainment of the objectives of the Authority;
xxx xxx xxx
(Emphasis supplied)
It should also be noted that the enabling statute of ISA expressly authorized it to enter into certain kinds of
contracts "for and in behalf of the Government" in the following terms:
xxx xxx xxx
(i) to negotiate, and when necessary, to enter into contracts for and in behalf of the government, for the
bulk purchase of materials, supplies or services for any sectors in the industry, and to maintain inventories
of such materials in order to insure a continuous and adequate supply thereof and thereby reduce
operating costs of such sector;
xxx xxx xxx
(Emphasis supplied)
Clearly, ISA was vested with some of the powers or attributes normally associated with juridical personality.
There is, however, no provision in P.D. No. 272 recognizing ISA as possessing general or comprehensive
juridical personality separate and distinct from that of the Government. The ISA in fact appears to the
Court to be a non-incorporated agency or instrumentality of the Republic of the Philippines, or more
precisely of the Government of the Republic of the Philippines. It is common knowledge that other
agencies or instrumentalities of the Government of the Republic are cast in corporate form, that is to say,
are incorporated agencies or instrumentalities, sometimes with and at other times without capital stock,
and accordingly vested with a juridical personality distinct from the personality of the Republic. Among
such incorporated agencies or instrumentalities are: National Power Corporation;6 Philippine Ports
Authority;7 National Housing Authority;8 Philippine National Oil Company;9 Philippine National
Railways; 10 Public Estates Authority; 11 Philippine Virginia Tobacco Administration,12 and so forth. It is
worth noting that the term "Authority" has been used to designate both incorporated and non-incorporated
agencies or instrumentalities of the Government.
We consider that the ISA is properly regarded as an agent or delegate of the Republic of the Philippines.
The Republic itself is a body corporate and juridical person vested with the full panoply of powers and
attributes which are compendiously described as "legal personality." The relevant definitions are found in
the Administrative Code of 1987:
Sec. 2. General Terms Defined. — Unless the specific words of the text, or the context as a whole, or a
particular statute, require a different meaning:
(1) Government of the Republic of the Philippines refers to the corporate governmental entity through
which the functions of government are exercised throughout the Philippines, including, save as the
contrary appears from the context, the various arms through which political authority is made effective in
the Philippines, whether pertaining to the autonomous regions, the provincial, city, municipal or barangay
subdivisions or other forms of local government.
xxx xxx xxx
(4) Agency of the Government refers to any of the various units of the Government, including a department,
bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a
distinct unit therein.
xxx xxx xxx
(10) Instrumentality refers to any agency of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy, usually through a charter. This
term includes regulatory agencies, chartered institutions and government-owned or controlled
corporations.
xxx xxx xxx
(Emphases supplied)
When the statutory term of a non-incorporated agency expires, the powers, duties and functions as well as
the assets and liabilities of that agency revert back to, and are re-assumed by, the Republic of the
Philippines, in the absence of special provisions of law specifying some other disposition thereof such as,
e.g., devolution or transmission of such powers, duties, functions, etc. to some other identified successor
agency or instrumentality of the Republic of the Philippines. When the expiring agency is
an incorporated one, the consequences of such expiry must be looked for, in the first instance, in the
charter of that agency and, by way of supplementation, in the provisions of the Corporation Code. Since, in
the instant case, ISA is a non-incorporated agency or instrumentality of the Republic, its powers, duties,
functions, assets and liabilities are properly regarded as folded back into the Government of the Republic
of the Philippines and hence assumed once again by the Republic, no special statutory provision having
been shown to have mandated succession thereto by some other entity or agency of the Republic.
The procedural implications of the relationship between an agent or delegate of the Republic of the
Philippines and the Republic itself are, at least in part, spelled out in the Rules of Court. The general rule is,
of course, that an action must be prosecuted and defended in the name of the real party in interest. (Rule 3,
Section 2) Petitioner ISA was, at the commencement of the expropriation proceedings, a real party in
interest, having been explicitly authorized by its enabling statute to institute expropriation proceedings. The
Rules of Court at the same time expressly recognize the role of representative parties:
Sec. 3. Representative Parties. — A trustee of an expressed trust, a guardian, an executor or
administrator, or a party authorized by statute may sue or be sued without joining the party for whose
benefit the action is presented or defended; but the court may, at any stage of the proceedings, order such
beneficiary to be made a party. . . . . (Emphasis supplied)
In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or delegate or
representative of the Republic of the Philippines pursuant to its authority under P.D. No. 272. The present
expropriation suit was brought on behalf of and for the benefit of the Republic as the principal of ISA.
Paragraph 7 of the complaint stated:
7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land for the construction
and installation of iron and steel manufacturing facilities that are indispensable to the integration of the iron
and steel making industry which is vital to the promotion of public interest and welfare. (Emphasis
supplied)
The principal or the real party in interest is thus the Republic of the Philippines and not the National Steel
Corporation, even though the latter may be an ultimate user of the properties involved should the
condemnation suit be eventually successful.
From the foregoing premises, it follows that the Republic of the Philippines is entitled to be substituted in
the expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term of ISA having expired. Put
a little differently, the expiration of ISA's statutory term did not by itself require or justify the dismissal of the
eminent domain proceedings.
It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration of ISA's
statutory term, was not a ground for dismissal of such proceedings since a party may be dropped or added
by order of the court, on motion of any party or on the court's own initiative at any stage of the action and
on such terms as are just. 13 In the instant case, the Republic has precisely moved to take over the
proceedings as party-plaintiff.
14
In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court, the Court recognized that the
Republic may initiate or participate in actions involving its agents. There the Republic of the Philippines
was held to be a proper party to sue for recovery of possession of property although the "real" or registered
owner of the property was the Philippine Ports Authority, a government agency vested with a separate
juridical personality. The Court said:
It can be said that in suing for the recovery of the rentals, the Republic of the Philippines acted as principal
of the Philippine Ports Authority, directly exercising the commission it had earlier conferred on the latter as
its agent. . . .15 (Emphasis supplied)
In E.B. Marcha, the Court also stressed that to require the Republic to commence all over again another
proceeding, as the trial court and Court of Appeals had required, was to generate unwarranted delay and
create needless repetition of proceedings:
More importantly, as we see it, dismissing the complaint on the ground that the Republic of the Philippines
is not the proper party would result in needless delay in the settlement of this matter and also in derogation
of the policy against multiplicity of suits. Such a decision would require the Philippine Ports Authority to
refile the very same complaint already proved by the Republic of the Philippines and bring back as it were
to square one.16 (Emphasis supplied)
As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the Philippines
for the ISA upon the ground that the action for expropriation could not prosper because the basis for the
proceedings, the ISA's exercise of its delegated authority to expropriate, had become legally ineffective by
reason of the expiration of the statutory term of the agent or delegated i.e., ISA. Since, as we have held
above, the powers and functions of ISA have reverted to the Republic of the Philippines upon the
termination of the statutory term of ISA, the question should be addressed whether fresh legislative
authority is necessary before the Republic of the Philippines may continue the expropriation proceedings
initiated by its own delegate or agent.
While the power of eminent domain is, in principle, vested primarily in the legislative department of the
government, we believe and so hold that no new legislative act is necessary should the Republic decide,
upon being substituted for ISA, in fact to continue to prosecute the expropriation proceedings. For the
legislative authority, a long time ago, enacted a continuing or standing delegation of authority to the
President of the Philippines to exercise, or cause the exercise of, the power of eminent domain on behalf
of the Government of the Republic of the Philippines. The 1917 Revised Administrative Code, which was
in effect at the time of the commencement of the present expropriation proceedings before the Iligan
Regional Trial Court, provided that:
Sec. 64. Particular powers and duties of the President of the Philippines. — In addition to his general
supervisory authority, the President of the Philippines shall have such other specific powers and duties as
are expressly conferred or imposed on him by law, and also, in particular, the powers and duties set forth
in this Chapter.
Among such special powers and duties shall be:
xxx xxx xxx
(h) To determine when it is necessary or advantageous to exercise the right of eminent domain in behalf of
the Government of the Philippines; and to direct the Secretary of Justice, where such act is deemed
advisable, to cause the condemnation proceedings to be begun in the court having proper jurisdiction.
(Emphasis supplied)
The Revised Administrative Code of 1987 currently in force has substantially reproduced the foregoing
provision in the following terms:
Sec. 12. Power of eminent domain. — The President shall determine when it is necessary or
advantageous to exercise the power of eminent domain in behalf of the National Government, and direct
the Solicitor General, whenever he deems the action advisable, to institute expopriation proceedings in the
proper court. (Emphasis supplied)
In the present case, the President, exercising the power duly delegated under both the 1917 and 1987
Revised Administrative Codes in effect made a determination that it was necessary and advantageous to
exercise the power of eminent domain in behalf of the Government of the Republic and accordingly
directed the Solicitor General to proceed with the suit. 17
It is argued by private respondent MCFC that, because Congress after becoming once more the
depository of primary legislative power, had not enacted a statute extending the term of ISA, such
non-enactment must be deemed a manifestation of a legislative design to discontinue or abort the present
expropriation suit. We find this argument much too speculative; it rests too much upon simple silence on
the part of Congress and casually disregards the existence of Section 12 of the 1987 Administrative Code
already quoted above.
Other contentions are made by private respondent MCFC, such as, that the constitutional requirement of
"public use" or "public purpose" is not present in the instant case, and that the indispensable element of
just compensation is also absent. We agree with the Court of Appeals in this connection that these
contentions, which were adopted and set out by the Regional Trial Court in its order of dismissal, are
premature and are appropriately addressed in the proceedings before the trial court. Those proceedings
have yet to produce a decision on the merits, since trial was still on going at the time the Regional Trial
Court precipitously dismissed the expropriation proceedings. Moreover, as a pragmatic matter, the
Republic is, by such substitution as party-plaintiff, accorded an opportunity to determine whether or not, or
to what extent, the proceedings should be continued in view of all the subsequent developments in the iron
and steel sector of the country including, though not limited to, the partial privatization of the NSC.
WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991 to the
extent that it affirmed the trial court's order dismissing the expropriation proceedings, is hereby
REVERSED and SET ASIDE and the case is REMANDED to the court a quo which shall allow the
substitution of the Republic of the Philippines for petitioner Iron and Steel Authority and for further
proceedings consistent with this Decision. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 134990. April 27, 2000]
MANUEL M. LEYSON JR., petitioner, vs. OFFICE OF THE OMBUDSMAN, TIRSO ANTIPORDA,
Chairman, UCPB and CIIF Oil Mills, and OSCAR A. TORRALBA, President, CIIF Oil Mills,
respondents. ALEX
DECISION
BELLOSILLO, J.:
On 7 February 1996 International Towage and Transport Corporation (ITTC), a domestic corporation
engaged in the lighterage or shipping business, entered into a one (1)-year contract with Legaspi Oil
Company, Inc. (LEGASPI OIL), Granexport Manufacturing Corporation (GRANEXPORT) and United
Coconut Chemicals, Inc. (UNITED COCONUT), comprising the Coconut Industry Investment Fund (CIIF)
companies, for the transport of coconut oil in bulk through MT Transasia. The majority shareholdings of
these CIIF companies are owned by the United Coconut Planters Bank (UCPB) as administrator of the
CIIF. Under the terms of the contract, either party could terminate the agreement provided a three
(3)-month advance notice was given to the other party. However, in August 1996, or prior to the expiration
of the contract, the CIIF companies with their new President, respondent Oscar A. Torralba, terminated the
contract without the requisite advance notice. The CIIF companies engaged the services of another
vessel, MT Marilag, operated by Southwest Maritime Corporation. miso
On 11 March 1997 petitioner Manuel M. Leyson Jr., Executive Vice President of ITTC, filed with public
respondent Office of the Ombudsman a grievance case against respondent Oscar A. Torralba. The
following is a summary of the irregularities and corrupt practices allegedly committed by respondent
Torralba: (a) breach of contract - unilateral cancellation of valid and existing contract; (b) bad faith -
falsification of documents and reports to stop the operation of MT Transasia; (c) manipulation - influenced
their insurance to disqualify MT Transasia; (d) unreasonable denial of requirement imposed; (e) double
standards and inconsistent in favor of MT Marilag; (f) engaged and entered into a contract with Southwest
Maritime Corp. which is not the owner of MT Marilag, where liabilities were waived and whose paid-up
capital is only P250,000.00; and, (g) overpricing in the freight rate causing losses of millions of pesos to
Cocochem.[1]
On 2 January 1998 petitioner charged respondent Tirso Antiporda, Chairman of UCPB and CIIF Oil Mills,
and respondent Oscar A. Torralba with violation of The Anti-Graft and Corrupt Practices Act also before
the Ombudsman anchored on the aforementioned alleged irregularities and corrupt practices. spped
On 30 January 1998 public respondent dismissed the complaint based on its finding that
The case is a simple case of breach of contract with damages which should have
been filed in the regular court. This Office has no jurisdiction to determine the legality
or validity of the termination of the contract entered into by CIIF and ITTC. Besides the
entities involved are private corporations (over) which this Office has no jurisdiction. [2]
On 4 June 1998 reconsideration of the dismissal of the complaint was denied. The Ombudsman was
unswayed in his finding that the present controversy involved breach of contract as he also took into
account the circumstance that petitioner had already filed a collection case before the Regional Trial Court
of Manila-Br. 15, docketed as Civil Case No. 97-83354. Moreover, the Ombudsman found that the filing of
the motion for reconsideration on 31 March 1998 was beyond the inextendible period of five (5) days from
notice of the assailed resolution on 19 March 1998.[3] miso
Petitioner now imputes grave abuse of discretion on public respondent in dismissing his complaint. He
submits that inasmuch as Philippine Coconut Producers Federation, Inc. (COCOFED) v.
PCGG[4] and Republic v. Sandiganbayan[5] have declared that the coconut levy funds are public funds then,
conformably with Quimpo v. Tanodbayan,[6] corporations formed and organized from those funds or whose
controlling stocks are from those funds should be regarded as government owned and/or controlled
corporations. As in the present case, since the funding or controlling interest of the companies being
headed by private respondents was given or owned by the CIIF as shown in the certification of their
Corporate Secretary,[7] it follows that they are government owned and/or controlled corporations.
Corollarily, petitioner asserts that respondents Antiporda and Torralba are public officers subject to the
jurisdiction of the Ombudsman. Sdaadsc
Petitioner alleges next that public respondent's conclusion that his complaint refers to a breach of contract
is whimsical, capricious and irresponsible amounting to a total disregard of its main point, i. e., whether
private respondents violated The Anti-Graft and Corrupt Practices Act when they entered into a contract
with Southwest Maritime Corporation which was grossly disadvantageous to the government in general
and to the CIIF in particular. Petitioner admits that his motion for reconsideration was filed out of time.
Nonetheless, he advances that public respondent should have relaxed its rules in the paramount interest
of justice; after all, the delay was just a matter of days and he, a layman not aware of technicalities,
personally filed the complaint. Rtcspped
Private respondents counter that the CIIF companies were duly organized and are existing by virtue of the
Corporation Code. Their stockholders are private individuals and entities. In addition, private respondents
contend that they are not public officers as defined under The Anti-Graft and Corrupt Practices Act but are
private executives appointed by the Boards of Directors of the CIIF companies. They asseverate that
petitioner's motion for reconsideration was filed through the expert assistance of a learned counsel. They
then charge petitioner with forum shopping since he had similarly filed a case for collection of a sum of
money plus damages before the trial court.
The Office of the Solicitor General maintains that the Ombudsman approved the recommendation of the
investigating officer to dismiss the complaint because he sincerely believed there was no sufficient basis
for the criminal indictment of private respondents. spped
We find no grave abuse of discretion committed by the Ombudsman. COCOFED v. PCGG referred to
in Republic v. Sandiganbayan reviewed the history of the coconut levy funds. I These funds actually have
four (4) general classes: (a) the Coconut Investment Fund created under R. A. No. 6260;[8] (b) the Coconut
Consumers Stabilization Fund created under P. D. No. 276;[9] (c) the Coconut Industry Development Fund
created under P. D. No. 582;[10] and, (d) the Coconut Industry Stabilization Fund created under P. D. No.
1841.[11]
The various laws relating to the coconut industry were codified in 1976. On 21 October of that year, P. D.
No. 961[12] was promulgated. On 11 June 1978 it was amended by P. D. No. 1468[13] by inserting a new
provision authorizing the use of the balance of the Coconut Industry Development Fund for the acquisition
of "shares of stocks in corporations organized for the purpose of engaging in the establishment and
operation of industries x x x commercial activities and other allied business undertakings relating to
coconut and other palm oil indust(ries)."[14]From this fund thus created, or the CIIF, shares of stock in what
have come to be known as the "CIIF companies" were purchased. miso
We then stated in COCOFED that the coconut levy funds were raised by the State's police and taxing
powers such that the utilization and proper management thereof were certainly the concern of the
Government. These funds have a public character and are clearly affected with public interest.
Quimpo v. Tanodbayan involved the issue as to whether PETROPHIL was a government owned or
controlled corporation the employees of which fell within the jurisdictional purview of the Tanodbayan for
purposes of The Anti-Graft and Corrupt Practices Act. We upheld the jurisdiction of the Tanodbayan on the
ratiocination that -
While it may be that PETROPHIL was not originally "created" as a government-owned
or controlled corporation, after it was acquired by PNOC, which is a
government-owned or controlled corporation, PETROPHIL became a subsidiary of
PNOC and thus shed-off its private status. It is now funded and owned by the
government as, in fact, it was acquired to perform functions related to government
programs and policies on oil, a vital commodity in the economic life of the nation. It
was acquired not temporarily but as a permanent adjunct to perform essential
government or government-related functions, as the marketing arm of the PNOC to
assist the latter in selling and distributing oil and petroleum products to assure and
maintain an adequate and stable domestic supply. Korte
But these jurisprudential rules invoked by petitioner in support of his claim that the CIIF companies are
government owned and/or controlled corporations are incomplete without resorting to the definition of
"government owned or controlled corporation" contained in par. (13), Sec. 2, Introductory Provisions of the
Administrative Code of 1987, i. e., any agency organized as a stock or non-stock corporation vested with
functions relating to public needs whether governmental or proprietary in nature, and owned by the
Government directly or through its instrumentalities either wholly, or, where applicable as in the case of
stock corporations, to the extent of at least fifty-one (51) percent of its capital stock. The definition
mentions three (3) requisites, namely, first, any agency organized as a stock or non-stock corporation;
second, vested with functions relating to public needs whether governmental or proprietary in nature; and,
third, owned by the Government directly or through its instrumentalities either wholly, or, where applicable
as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock. Sclaw
In the present case, all three (3) corporations comprising the CIIF companies were organized as stock
corporations. The UCPB-CIIF owns 44.10% of the shares of LEGASPI OIL, 91.24% of the shares of
GRANEXPORT, and 92.85% of the shares of UNITED COCONUT.[15] Obviously, the below 51% shares of
stock in LEGASPI OIL removes this firm from the definition of a government owned or controlled
corporation. Our concern has thus been limited to GRANEXPORT and UNITED COCONUT as we go back
to the second requisite. Unfortunately, it is in this regard that petitioner failed to substantiate his
contentions. There is no showing that GRANEXPORT and/ or UNITED COCONUT was vested with
functions relating to public needs whether governmental or proprietary in nature unlike PETROPHIL
in Quimpo. The Court thus concludes that the CIIF companies are, as found by public respondent, private
corporations not within the scope of its jurisdiction. Sclex
With the foregoing conclusion, we find it unnecessary to resolve the other issues raised by petitioner.
A brief note on private respondents' charge of forum shopping. Executive Secretary v. Gordon [16] is
instructive that forum shopping consists of filing multiple suits involving the same parties for the same
cause of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment. It
is readily apparent that the present charge will not prosper because the cause of action herein, i. e.,
violation of The Anti-Graft and Corrupt Practices Act, is different from the cause of action in the case
pending before the trial court which is collection of a sum of money plus damages. miso
WHEREFORE, the petition is DISMISSED. The Resolution of public respondent Office of the Ombudsman
of 30 January 1998 which dismissed the complaint of petitioner Manuel M. Leyson Jr., as well as its Order
of 4 June 1998 denying his motion for reconsideration, is AFFIRMED. Costs against petitioner.
SO ORDERED.apdc
 [G.R. No. 86695. September 3, 1992.]
MARIA ELENA MALAGA, doing business under the name B.E. CONSTRUCTION; JOSIELEEN
NAJARRO, doing business under the name BEST BUILT CONSTRUCTION; JOSE N. OCCEÑA,
doing business under the name THE FIRM OF JOSE N. OCCEÑA; and the ILOILO BUILDERS
CORPORATION, Petitioners, v. MANUEL R. PENACHOS, JR., ALFREDO MATANGGA, ENRICO
TICAR AND TERESITA VILLANUEVA, in their respective capacities as Chairman and Members of
the Pre-qualification Bids and Awards Committee (PBAC)-BENIGNO PANISTANTE, in his capacity
as President of Iloilo State College of Fisheries, as well as in their respective personal capacities;
and HON. LODRIGIO L. LEBAQUIN, Respondents.
Salas, Villareal & Velasco, for Petitioners.
Virgilio A. Sindico for Respondents.
SYLLABUS
1. ADMINISTRATIVE LAW; GOVERNMENT INSTRUMENTALITY, DEFINED. — The 1987 Administrative
Code defines a government instrumentality as follows: Instrumentality refers to any agency of the National
Government, not integrated within the department framework, vested with special functions or jurisdiction
by law, endowed with some if not all corporate powers, administering special funds, and enjoying
operational autonomy, usually through a charter. This term includes regulatory agencies, chartered
institutions, and government-owned or controlled corporations. (Sec. 2 (5) Introductory Provisions).
2. ID.; CHARTERED INSTITUTION; DEFINED; APPLICATION IN CASE AT BAR. — The 1987
Administrative Code describes a chartered institution thus: Chartered institution — refers to any agency
organized or operating under a special charter, and vested by law with functions relating to specific
constitutional policies or objectives. This term includes the state universities and colleges, and the
monetary authority of the state. (Sec. 2 (12) Introductory Provisions). It is clear from the above definitions
that ISCOF is a chartered institution and is therefore covered by P.D. 1818. There are also indications in
its charter that ISCOF is a government instrumentality. First, it was created in pursuance of the integrated
fisheries development policy of the State, a priority program of the government to effect the
socio-economic life of the nation. Second, the Treasurer of the Republic of the Philippines shall also be the
ex-officio Treasurer of the state college with its accounts and expenses to be audited by the Commission
on Audit or its duly authorized representative. Third, heads of bureaus and offices of the National
Government are authorized to loan or transfer to it, upon request of the president of the state college, such
apparatus, equipment, or supplies and even the services of such employees as can be spared without
serious detriment to public service. Lastly, an additional amount of P1.5M had been appropriated out of the
funds of the National Treasury and it was also decreed in its charter that the funds and maintenance of the
state college would henceforth be included in the General Appropriations Law. (Presidential Decree No.
1523)
3. ID.; PROHIBITION OF ANY COURT FROM ISSUING INJUNCTION IN CASES INVOLVING
INFRASTRUCTURE PROJECTS OF GOVERNMENT (P.D. 1818); POWER OF THE COURTS TO
RESTRAIN APPLICATION. — In the case of Datiles and Co. v. Sucaldito, (186 SCRA 704) this Court
interpreted a similar prohibition contained in P.D. 605, the law after which P.D. 1818 was patterned. It was
there declared that the prohibition pertained to the issuance of injunctions or restraining orders by courts
against administrative acts in controversies involving facts or the exercise of discretion in technical cases.
The Court observed that to allow the courts to judge these matters would disturb the smooth functioning of
the administrative machinery. Justice Teodoro Padilla made it clear, however, that on issues definitely
outside of this dimension and involving questions of law, courts could not be prevented by P.D. No. 605
from exercising their power to restrain or prohibit administrative acts. We see no reason why the above
ruling should not apply to P.D. 1818. There are at least two irregularities committed by PBAC that justified
injunction of the bidding and the award of the project.
4. ID.; POLICIES AND GUIDELINES PRESCRIBED FOR GOVERNMENT INFRASTRUCTURE (PD
1594); RULES IMPLEMENTING THEREOF, NOT SUFFICIENTLY COMPLIED WITH IN CASE AT BAR.
— Under the Rules Implementing P.D. 1594, prescribing policies and guidelines for government
infrastructure contracts, PBAC shall provide prospective bidders with the Notice to Pre-qualification and
other relevant information regarding the proposed work. Prospective contractors shall be required to file
their ARC-Contractors Confidential Application for Registration & Classifications & the PRE-C2
Confidential Pre-qualification Statement for the Project (prior to the amendment of the rules, this was
referred to as Pre-C1) not later than the deadline set in the published Invitation to Bid, after which date no
PRE-C2 shall be submitted and received. Invitations to Bid shall be advertised for at least three times
within a reasonable period but in no case less than two weeks in at least two newspapers of general
circulations. (IB 13 1.2-19, Implementing Rules and Regulations of P.D. 1594 as amended) PBAC
advertised the pre-qualification deadline as December 2, 1988, without stating the hour thereof, and
announced that the opening of bids would be at 3 o’clock in the afternoon of December 12, 1988. This
scheduled was changed and a notice of such change was merely posted at the ISCOF bulletin board. The
notice advanced the cut-off time for the submission of pre-qualification documents to 10 o’clock in the
morning of December 2, 1988, and the opening of bids to 1 o’clock in the afternoon of December 12, 1988.
The new schedule caused the pre-disqualification of the petitioners as recorded in the minutes of the
PBAC meeting held on December 6, 1988. While it may be true that there were fourteen contractors who
were pre-qualified despite the change in schedule, this fact did not cure the defect of the irregular notice.
Notably, the petitioners were disqualified because they failed to meet the new deadline and not because of
their expired licenses. (B.E. & Best Built’s licenses were valid until June 30, 1989. [Ex. P & O respectively:
both were marked on December 28, 1988]) We have held that where the law requires a previous
advertisement before government contracts can be awarded, non-compliance with the requirement will, as
a general rule, render the same void and of no effect. (Caltex Phil. v. Delgado Bros., 96 Phil. 368) The fact
that an invitation for bids has been communicated to a number of possible bidders is not necessarily
sufficient to establish compliance with the requirements of the law if it is shown that other possible bidders
have not been similarly notified.
5. ID.; ID.; ID.; PURPOSE THEREOF; CASE AT BAR. — The purpose of the rules implementing P.D.
1594 is to secure competitive bidding and to prevent favoritism, collusion and fraud in the award of these
contracts to the detriment of the public. This purpose was defeated by the irregularities committed by
PBAC. It has been held that the three principles in public bidding are the offer to the public, an opportunity
for competition and a basis for exact comparison of bids. A regulation of the matter which excludes any of
these factors destroys the distinctive character of the system and thwarts the purpose of its adoption.
(Hannan v. Board of Education, 25 Okla. 372) In the case at bar, it was the lack of proper notice regarding
the pre-qualification requirement and the bidding that caused the elimination of petitioners B.E. and Best
Built. It was not because of their expired licenses, as private respondents now claim. Moreover, the plans
and specifications which are the contractors’ guide to an intelligent bid, were not issued on time, thus
defeating the guaranty that contractors be placed on equal footing when they submit their bids. The
purpose of competitive bidding is negated if some contractors are informed ahead of their rivals of the
plans and specifications that are to be the subject of their bids.
6. ID.; ID.; ID.; EFFECT OF NON-COMPLIANCE THEREOF. — It has been held in a long line of cases
that a contract granted without the competitive bidding required by law is void, and the party to whom it is
awarded cannot benefit from it. It has not been shown that the irregularities committed by PBAC were
induced by or participated in by any of the contractors. Hence, liability shall attach only to the private
respondents for the prejudice sustained by the petitioners as a result of the anomalies described above.
7. CIVIL LAW; NOMINAL DAMAGES; AWARD THEREOF, WHEN AVAILABLE. — As there is no
evidence of the actual loss suffered by the petitioners, compensatory damage may not be awarded to
them. Moral damages do not appear to be due either. Even so, the Court cannot close its eyes to the
evident bad faith that characterized the conduct of the private respondents, including the irregularities in
the announcement of the bidding and their efforts to persuade the ISCOF president to award the project
after two days from receipt of the restraining order and before they moved to lift such order. For such
questionable acts, they are liable in nominal damages at least in accordance with Article 2221 of the Civil
Code, which states: Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant may be vindicated or, recognized, and not for the purpose
of indemnifying the plaintiff for any loss suffered by him. These damages are to be assessed against the
private respondents in the amount of P10,000.00 each, to be paid separately for each of petitioners B.E.
Construction and Best Built Construction.
DECISION
CRUZ, J.:
This controversy involves the extent and applicability of P.D. 1818, which prohibits any court from issuing
injunctions in cases involving infrastructure projects of the government.chanrobles.com.ph : virtual law
library
The facts are not disputed.
The Iloilo State College of Fisheries (henceforth ISCOF) through its Pre-qualification, Bids and Awards
Committee (henceforth PBAC) caused the publication in the November 25, 26, 28, 1988 issues of the
Western Visayas Daily an Invitation to Bid for the construction of the Micro Laboratory Building at ISCOF.
The notice announced that the last day for the submission of pre-qualification requirements (PRE C-1) **
was December 2, 1988, and that the bids would be received and opened on December 12, 1988, 3 o’clock
in the afternoon. 1
Petitioners Maria Elena Malaga and Josieleen Najarro, respectively doing business under the name of the
B.E. Construction and Best Built Construction, submitted their pre-qualification documents at two o’clock in
the afternoon of December 2, 1988. Petitioner Jose Occeña submitted his own PRE-C1 on December 5,
1988. All three of them were not allowed to participate in the bidding because their documents were
considered late, having been submitted after the cut-off time of ten o’clock in the morning of December 2,
1988.
On December 12, 1988, the petitioners filed a complaint with the Regional Trial Court of Iloilo against the
chairman and members of PBAC in their official and personal capacities. The plaintiffs claimed that
although they had submitted their PRE-C1 on time, the PBAC refused without just cause to accept them.
As a result, they were not included in the list of pre-qualified bidders, could not secure the needed plans
and other documents, and were unable to participate in the scheduled bidding.
In their prayer, they sought the resetting of the December 12, 1988 bidding and the acceptance of their
PRE-C1 documents. They also asked that if the bidding had already been conducted, the defendants be
directed not to award the project pending resolution of their complaint.
On the same date, Judge Lodrigio L. Lebaquin issued a restraining order prohibiting PBAC from
conducting the bidding and awarding the project. 2
On December 16, 1988, the defendants filed a motion to lift the restraining order on the ground that the
Court was prohibited from issued restraining orders, preliminary injunctions and preliminary mandatory
injunctions by P.D. 1818.chanroblesvirtualawlibrary
The decree reads pertinently as follows:chanrob1es virtual 1aw library
Section 1. No Court in the Philippines shall have jurisdiction to issue any restraining order, preliminary
injunction, or preliminary infrastructure project, or a mining, fishery, forest or other natural resource
development project of the government, or any public utility operated by the government, including among
others public utilities for the transport of the goods and commodities, stevedoring and arrastre contracts, to
prohibit any person or persons, entity or government official from proceeding with, or continuing the
execution or implementation of any such project, or the operation of such public utility, or pursuing any
lawful activity necessary for such execution, implementation or operation.
The movants also contended that the question of the propriety of a preliminary injunction had become
moot and academic because the restraining order was received late, at 2 o’clock in the afternoon of
December 12, 1988, after the bidding had been conducted and closed at eleven thirty in the morning of
that date.
In their opposition of the motion, the plaintiffs argued against the applicability of P.D. 1818, pointing out
that while ISCOF was a state college, it had its own charter and separate existence and was not part of the
national government or of any local political subdivision. Even if P.D. 1818 were applicable, the prohibition
presumed a valid and legal government project, not one tainted with anomalies like the project at bar.
They also cited Filipinas Marble Corp. v. IAC, 3 where the Court allowed the issuance of a writ of
preliminary injunction despite a similar prohibition found in P.D. 385. The Court therein stated
that:chanrob1es virtual 1aw library
The government, however, is bound by basic principles of fairness and decency under the due process
clauses of the Bill of Rights. P.D. 385 was never meant to protect officials of government-lending
institutions who take over the management of a borrower corporation, lead that corporation to bankruptcy
through mismanagement or misappropriation of its funds, and who, after ruining it, use the mandatory
provisions of the decree to avoid the consequences of their misleads (p. 188, Emphasis supplied).
On January 2, 1989, the trial court lifted the restraining order and denied the petition for preliminary
injunction. It declared that the building sought to be construed at the ISCOF was an infrastructure project
of the government falling within the coverage of P.D. 1818. Even if it were not, the petition for the issuance
of a writ of preliminary injunction would still fail because the sheriff’s return showed that PBAC was served
a copy of the restraining order after the bidding sought to be restrained had already been held.
Furthermore, the members of the PBAC could not be restrained from awarding the project because the
authority to do so was lodged in the President of the ISCOF, who was not a party to the case. 4
In the petition now before us, it is reiterated that P.D. 1818 does not cover the ISCOF because of its
separate and distinct corporate personality. It is also stressed again that the prohibition under P.D. 1818
could not apply to the present controversy because the project was vitiated with irregularities, to
wit:chanrobles.com : virtual law library
1. The invitation to bid as published fixed the deadline of submission of pre-qualification document on
December 2, 1988 without indicating any time, yet after 10:00 o’clock of the given late, the PBAC already
refused to accept petitioners’ documents.
2. The time and date of bidding was published as December 12, 1988 at 3:00 p.m. yet it was held at 10:00
o’clock in the morning.
3. Private respondents, for the purpose of inviting bidders to participate, issued a mimeographed
"Invitation to Bid" form, which by law (P.D. 1594 and Implementing Rules, Exh. B-1) is to contain the
particulars of the project subject of bidding for the purpose of.
(i) enabling bidders to make an intelligent and accurate bids;
(ii) for PBAC to have a uniform basis for evaluating the bids;
(iii) to prevent collusion between a bidder and the PBAC, by opening to all the particulars of a project.
Additionally, the Invitation to Bid prepared by the respondents and the Itemized Bill of Quantities therein
were left blank. 5 And although the project in question was a "Construction," the private respondents used
an Invitation to Bid form for "Materials." 6
The petitioners also point out that the validity of the writ of preliminary injunction had not yet become moot
and academic because even if the bids had been opened before the restraining order was issued, the
project itself had not yet been awarded. The ISCOF president was not an indispensable party because the
signing of the award was merely a ministerial function which he could perform only upon the
recommendation of the Award Committee. At any rate, the complaint had already been duly amended to
include him as a party defendant.
In their Comment, the private respondents maintain that since the members of the board of trustees of the
ISCOF are all government officials under Section 7 of P.D. 1523 and since the operations and
maintenance of the ISCOF are provided for in the General Appropriations Law, it is should be considered a
government institution whose infrastructure project is covered by P.D. 1818.
Regarding the schedule for pre-qualification, the private respondents insist that PBAC posted on the
ISCOF bulletin board an announcement that the deadline for the submission of pre-qualifications
documents was at 10 o’clock of December 2, 1988, and the opening of bids would be held at 1 o’clock in
the afternoon of December 12, 1988. As of ten o’clock in the morning of December 2, 1988, B.E.
construction and Best Built construction had filed only their letters of intent. At two o’clock in the afternoon,
B.E., and Best Built filed through their common representative, Nenette Garuello, their pre-qualification
documents which were admitted but stamped "submitted late." The petitioners were informed of their
disqualification on the same date, and the disqualification became final on December 6, 1988. Having
failed to take immediate action to compel PBAC to pre-qualify them despite their notice of disqualification,
they cannot now come to this Court to question the binding proper in which they had not participated.
In the petitioners’ Reply, they raise as an additional irregularity the violation of the rule that where the
estimate project cost is from P1M to P5M, the issuance of plans, specifications and proposal book forms
should made thirty days before the date of bidding. 7 They point out that these forms were issued only on
December 2, 1988, and not at the latest on November 12, 1988, the beginning of the 30-day period prior to
the scheduled bidding.
In their Rejoinder, the private respondents aver that the documents of B.E. and Best Built were received
although filed late and were reviewed by the Award Committee, which discovered that the contractors had
expired licenses. B.E.’s temporary certificate of Renewal of Contractor’s License was valid only until
September 30, 1988, while Best Built’s license was valid only up to June 30, 1988.chanrobles lawlibrary :
rednad
The Court has considered the arguments of the parties in light of their testimonial and documentary
evidence and the applicable laws and jurisprudence. It finds for the petitioners.
The 1987 Administrative Code defines a government instrumentality as follows:chanrob1es virtual 1aw
library
Instrumentality refers to any agency of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy, usually through a charter. This
term includes regulatory agencies, chartered institutions, and government-owned or controlled
corporations. (Sec. 2 (5) Introductory Provisions).
The same Code describes a chartered institution thus:chanrob1es virtual 1aw library
Chartered institution — refers to any agency organized or operating under a special charter, and vested by
law with functions relating to specific constitutional policies or objectives. This term includes the state
universities and colleges, and the monetary authority of the state. (Sec. 2 (12) Introductory Provisions).
It is clear from the above definitions that ISCOF is a chartered institution and is therefore covered by P.D.
1818.
There are also indications in its charter that ISCOF is a government instrumentality. First, it was created in
pursuance of the integrated fisheries development policy of the State, a priority program of the government
of effect the socio-economic life of the nation. Second, the Treasurer of the Republic of the Philippines also
be the ex-officio Treasurer of the state college with its accounts and expenses to be audited by the
Commission on Audit or its duly authorized representative. Third, heads of bureaus and offices of the
National Government are authorized to loan or transfer to it, upon request of the president of the state
college, such apparatus, equipment, or supplies and even the services of such employees as can be
spared without serious detriment to public service. Lastly, an additional amount of P1.5M had been
appropriated out of the funds of the National Treasury and it was also decreed in its charter that the funds
and maintenance of the state college would henceforth be included in the General Appropriations Law. 8
Nevertheless, it does not automatically follow that ISCOF is covered by the prohibition in the said decree.
In the case of Datiles and Co. v. Sucaldito, 9 this Court interpreted a similar prohibition contained in P.D.
605, the law after which P.D. 1818 was patterned. It was there declared that the prohibition pertained to
the issuance of injunctions or restraining orders by courts against administrative acts in controversies
involving facts or the exercise of discretion in technical cases. The Court observed that to allow the courts
to judge these matters would disturb the smooth functioning of the administrative machinery. Justice
Teodoro Padilla made it clear, however, that on issues definitely outside of this dimension and involving
questions of law, courts could not be prevented by P.D. No. 605 from exercising their power to restrain or
prohibit administrative acts.
We see no reason why the above ruling should not apply to P.D. 1818.
There are at least two irregularities committed by PBAC that justified injunction of the bidding and the
award of the project.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
First, PBAC set deadlines for the filing of the PRE-C1 and the opening of bids and then changed these
deadlines without prior notice to prospective participants.
Under the Rules Implementing P.D. 1594, prescribing policies and guidelines for government
infrastructure contracts, PBAC shall provide prospective bidders with the Notice of Pre-qualification and
other relevant information regarding the proposed work. Prospective contractors shall be required to file
their ARC-Contractors Confidential Application for Registration & Classifications & the PRE-C2
Confidential Pre-qualification Statement for the Project (prior to the amendment of the rules, this was
referred to as PRE-C1) not later than the deadline set in the published Invitation to Bid, after which date no
PRE-C2 shall be submitted and received. Invitations to Bid shall be advertised for at least three times
within a reasonable period but in no case less than two weeks in at least two newspapers of general
circulations. 10
PBAC advertised the pre-qualification deadline as December 2, 1988, without stating the hour thereof, and
announced that the opening of bids would be at 3 o’clock in the afternoon of December 12, 1988. This
schedule was changed and a notice of such change was merely posted at the ISCOF bulletin board. The
notice advanced the cut-off time for the submission of pre-qualification documents to 10 o’clock in the
morning of December 2, 1988, and the opening of bids to 1 o’clock in the afternoon of December 12, 1988.
The new schedule caused the pre-disqualification of the petitioners as recorded in the minutes of the
PBAC meeting held on December 6, 1988. While it may be true that there were fourteen contractors who
were pre-qualified despite the change in schedule, this fact did not cure the defect of the irregular notice.
Notably, the petitioners were disqualified because they failed to meet the new deadline and not because of
their expired licenses. ***
We have held that where the law requires a previous advertisement before government contracts can be
awarded, non-compliance with the requirement will, as a general rule, render the same void and of no
effect 11 The facts that an invitation for bids has been communicated to a number of possible bidders is
not necessarily sufficient to establish compliance with the requirements of the law if it is shown that other
public bidders have not been similarly notified. 12
Second, PBAC was required to issue to pre-qualified applicants the plans, specifications and proposal
book forms for the project to be bid thirty days before the date of bidding if the estimate project cost was
between P1M and P5M. PBAC has not denied that these forms were issued only on December 2, 1988, or
only ten days before the bidding scheduled for December 12, 1988. At the very latest, PBAC should have
issued them on November 12, 1988, or 30 days before the scheduled bidding.
It is apparent that the present controversy did not arise from the discretionary acts of the administrative
body nor does it involve merely technical matters. What is involved here is non-compliance with the
procedural rules on bidding which required strict observance. The purpose of the rules implementing P.D.
1594 is to secure competitive bidding and to prevent favoritism, collusion and fraud in the award of these
contracts to the detriment of the public. This purpose was defeated by the irregularities committed by
PBAC.chanrobles law library : red
It has been held that the three principles in public bidding are the offer to the public, an opportunity for
competition and a basis for exact comparison of bids. A regulation of the matter which excludes any of
these factors destroys the distinctive character of the system and thwarts and purpose of its adoption. 13
In the case at bar, it was the lack of proper notice regarding the pre-qualification requirement and the
bidding that caused the elimination of petitioners B.E. and Best Built. It was not because of their expired
licenses, as private respondents now claim. Moreover, the plans and specifications which are the
contractors’ guide to an intelligent bid, were not issued on time, thus defeating the guaranty that
contractors be placed on equal footing when they submit their bids. The purpose of competitive bidding is
negated if some contractors are informed ahead of their rivals of the plans and specifications that are to be
the subject of their bids.
P.D. 1818 was not intended to shield from judicial scrutiny irregularities committed by administrative
agencies such as the anomalies above described. Hence, the challenged restraining order was not
improperly issued by the respondent judge and the writ of preliminary injunction should not have been
denied. We note from Annex Q of the private respondent’s memorandum, however, that the subject project
has already been "100% completed as to the Engineering Standard." This fait accompli has made the
petition for a writ of preliminary injunction moot and academic.
We come now to the liabilities of the private respondents.
It has been held in a long line of cases that a contract granted without the competitive bidding required by
law is void, and the party to whom it is awarded cannot benefit from it. 14 It has not been shown that the
irregularities committed by PBAC were induced by or participated in by any of the contractors. Hence,
liability shall attach only to the private respondents for the prejudice sustained by the petitioners as a result
of the anomalies described above.
As there is no evidence of the actual loss suffered by the petitioners, compensatory damage may not be
awarded to them. Moral damages do not appear to be due either. Even so, the Court cannot close its eyes
to the evident bad faith that characterized the conduct of the private respondents, including the
irregularities in the announcement of the bidding and their efforts to persuade the ISCOF president to
award the project after two days from receipt of the restraining order and before they moved to lift such
order. For such questionable acts, they are liable in nominal damages at least in accordance with Article
2221 of the Civil Code, which states:jgc:chanrobles.com.ph
"Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated
or invaded by the defendant may be vindicated or, recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.
These damages are to assessed against the private respondents in the amount of P10,000.00 each, to be
paid separately for each of petitioners B.E. Construction and Best Built Construction. The other petitioner,
Occeña Builders, is not entitled to relief because it admittedly submitted its pre-qualification documents on
December 5, 1988, or three days after the deadline.chanrobles virtual lawlibrary
WHEREFORE, judgment is hereby rendered: a) upholding the restraining order dated December 12, 1988,
as not covered by the prohibition in P.D. 1818; b) ordering the chairman and the members of the PBAC
board of trustees, namely Manuel R. Penachos, Jr., Alfredo Matangga, Enrico Ticar, and Teresita
Villanueva, to each pay separately to petitioners Maria Elena Malaga and Josieleen Najarro nominal
damages P10,000.00 each; and c) removing the said chairman and members from the PBAC board of
trustees, or whoever among them is still incumbent therein, for their malfeasance in office. Costs against
PBAC.
Let a copy of this decision be sent to the Office of the Ombudsman.
SO ORDERED.
PHILIPPINE AMUSEMENT AND GAMING CORPORATION G.R. No. 187972
(PAGCOR), represented by ATTY. CARLOS R. BAUTISTA,
JR.,
Petitioner, Present:
CORONA, CJ., Chairperson,
VELASCO, JR.,
- versus - LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.
FONTANA DEVELOPMENT CORPORATION,
Promulgated:
Respondent.
June 29, 2010
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
In this petition for review under Rule 45, the May 19, 2009 Decision of the Court of Appeals (CA) in
CA-G.R. SP No. 107247 is questioned for not nullifying the November 18, 2008 Order of the Regional Trial
Court (RTC) in Manila in Civil Case No. 08-120338 that issued a temporary restraining order (TRO)
against petitioner Philippine Amusement and Gaming Corporation (PAGCOR), barring PAGCOR from
committing acts that allegedly violate the rights of respondent Fontana Development Corporation (FDC)
under a December 23, 1999 Memorandum of Agreement (MOA).
The antecedents as culled by the CA from the records are:
Petitioner Philippine Amusement and Gaming Corporation (PAGCOR) is a
government owned and controlled corporation created under Presidential Decree (PD)
No. 1869 to enable the Government to regulate and centralize all games of chance
authorized by existing franchise or permitted by law.Section 10 thereof conferred on
PAGCOR a franchise of twenty-five (25) years or until July 11, 2008, renewable for
another twenty-five (25) years. Under Section 9 thereof, it was given regulatory
powers over persons and/or entities with contract or franchise with it, viz:
SECTION 9. Regulatory Power.The Corporation shall
maintain a Registry of the affiliated entities, and shall exercise all
the powers, authority and the responsibilities vested in the
Securities and Exchange Commission over such affiliated entities
mentioned under the preceding section, including but not limited
to amendments of Articles of Incorporation and By-Laws,
changes in corporate term, structure, capitalization and other
matters concerning the operation of the affiliating entities, the
provisions of the Corporation Code of the Philippines to the
contrary notwithstanding, except only with respect to original
incorporation.
On March 13, 1992, Republic Act No. 7227 was enacted to provide for the conversion
and development of existing military reservations, including former United
States military bases in the Philippines, into Special Economic Zones (SEZ). The law
also provides for the creation of the Subic Bay Metropolitan Authority (SBMA).
On April 3, 1993, then President Fidel V. Ramos issued Executive Order (EO) No.
80. Under Section 5 thereof, the Clark Special Economic Zone (CSEZ) was given all
the applicable incentives granted to Subic Bay Special Economic Zone (SSEZ), viz:
SECTION 5. Investments Climate in the CSEZ.Pursuant to
Section 5(m) and Section 15 of RA 7227, the BCDA shall
promulgate all necessary policies, rules and regulations
governing the CSEZ, including investment incentives, in
consultation with the local government units and pertinent
government departments for implementation by the CDC.
Among others, the CSEZ shall have all the applicable
incentives in the Subic Special Economic and Free Port Zone
under RA 7227 and those applicable incentives granted in the
Export Processing Zones, the Omnibus Investments Code of
1987, the Foreign Investments Act of 1991 and new investments
laws which may hereinafter be enacted.
The CSEZ Main Zone covering the Clark Air Base proper
shall have all the aforecited investment incentives, while
the CSEZ Sub-Zone covering the rest of the CSEZ shall have
limited incentives. The full incentives in the Clark SEZ Main Zone
and the limited incentives in the Clark SEZ Sub-Zone shall be
determined by the BCDA.
On December 23, 1999, PAGCOR granted private respondent Fontana Development
Corporation (FDC) (formerly RN Development Corporation) the authority to operate
and maintain a casino inside the CSEZ under a Memorandum of Agreement (MOA),
stating inter alia:
xxxx
1. RNDC Improvements
xxxx
4. Non-exclusivity, PAGCOR and RNDC agree that the license
granted to RNDC to engage in gaming and amusement
operations within CSEZ shall be non-exclusive and
co-terminus with the Charter of PAGCOR, or any
extension thereof, and shall be for the period
hereinabove defined. (Emphasis supplied.)
 xxxx
On April 12, 2000, Clark Development Corporation (CDC) issued Certificate
of Registration No. 2000-24. Pursuant to Article VII-11 thereof, the MOA was
amended on July 28, 2000, September 6, 2000, December 6, 2001, June 3, 2002,
October 13, 2003 and March 31, 2004.
Sometime in 2005, the Coconut Oil Refiners Association challenged before the
Supreme Court the constitutionality, among others, of EO No. 80 on the ground that
the incentives granted to SSEZ under RA No. 7227 was exclusive and cannot be
made applicable to CSEZ by a mere executive order.The case was decided in favor of
Coconut Oil Refiners Association and Section 5 aforequoted was declared of no legal
force and effect.
On June 20, 2007, RA No. 9487 was enacted, extending PAGCORs franchise up to
July 10, 2033 renewable for another twenty-five (25) years, viz:
SECTION 1. The Philippine Amusement and Gaming
Corporation (PAGCOR) franchise granted under Presidential
Decree No. 1869, otherwise known as the PAGCOR Charter, is
hereby further amended to read as follows:
(1) Section 10, Nature and Term of Franchise, is hereby
amended to read as follows:
SEC. 10. Nature and Term of Franchise.Subject to the
terms and conditions established in this Decree, the Corporation
is hereby granted from the expiration of its original term on July
11, 2008, another period of twenty-five (25) years, the rights,
privileges and authority to operate and license gambling casinos,
gaming clubs and other similar recreation or amusement places,
gaming pools, i.e., basketball, football, bingo, etc. except jai-alai,
whether on land or sea, within the territorial jurisdiction of the
Republic of the Philippines: Provided, That the corporation shall
obtain the consent of the local government unit that has territorial
jurisdiction over the area chosen as the site for any of its
operations.
xxxx
On July 18, 2008, PAGCOR informed FDC that it was extending the MOA on a
month-to-month basis until the finalization of the renewal of the contract. FDC
protested, claiming that the extension of PAGCORs franchise had automatically
extended the MOA: that the SC decisions, including RA Nos. 9400 and 9399, had no
effect on the authority of CDC to allow the establishment of a casino inside the CSEZ;
and that in Coconut Oil Refiners Association, Inc., the SC did not declare void the
entire EO No. 80 but only Section 5 thereof.
On October 6, 2008, after a series of dialogues and exchange of position papers,
PAGCOR notified FDC that its [new] standard Authority to Operate shall now govern
and regulate FDCs casino operations in place of the previous MOA. FDC moved for
the reconsideration of the said decision but the same was denied. On November 5,
2008, PAGCOR instructed FDC to remit its franchise fees in accordance with the
Authority to Operate.
On the same date of November 5, 2008, FDC filed before the RTC of Manila the
instant complaint for Injunction against PAGCOR, contending that it could not be
covered by a month-to-month extension nor by the standard Authority to Operate
since the MOA was automatically renewed and extended up to 2033; that the MOA
clearly provided that the same was co-terminus with PAGCORs franchise including
any extension thereof; that it had faithfully complied with the conditions under the
MOA; that pursuant to the MOA, it had built a hotel-casino complex and put up other
investments equivalent to P1 Billion; that it had adopted a marketing strategy to attract
high roller casino players from Asia and had scrupulously met all its obligations to
PAGCOR and other government agencies; and that the provisions invalidated
in Coconut Oil Refiners Association, Inc., principally pertained to tax and customs
duty, privileges or incentives which was thereafter restored by the enactment of RA
No. 9400. The complaint was docketed as the herein Civil Case No. 08-120338 and
raffled to Branch 7.
The RTC summoned PAGCOR and set the hearing on the application for TRO. On
November 13, 2008, PAGCOR filed its Special Appearance (for Dismissal of the
Petition and the Opposition to the Prayer for a Temporary Restraining Order and/or
Writ of Preliminary Injunction), praying that the complaint be dismissed for lack of
jurisdiction. PAGCOR contended that its decision to replace the MOA with the
Authority to Operate was pursuant to its regulatory powers under Sections 8 and 9 of
PD No. 1869; that under the said provisions, it was given all the powers, authority and
responsibilities of the Securities and Exchange Commission (SEC) over corporations
engaged in gambling; that consequently, being the SEC of said corporations, the
appeal or review of its decision should have been made directly to the SC under PD
No. 1869 in relation to the last paragraph of Section 6, PD No. 902-A; PAGCOR
argued that administrative agencies are co-equal with RTCs; that application or
operation of presidential decrees are appealable to the SC under Article VIII, Section
4(2) of the 1987 Constitution; and that there was no basis for the issuance of
TRO/Writ of Preliminary Injunction since the franchise or license granted to FDC was
not a property right but was merely a privilege and not a contract.
On November 18, 2008, the RTC issued the first assailed Order denying PAGCORs
motion to dismiss and granting FDCs application for a TRO. The RTC held that the
SC had no exclusive jurisdiction over cases involving PAGCOR; that the cases of Del
Mar vs. PAGCOR, Sandoval II vs. PAGCOR, Jaworski vs. PAGCOR were decided by
the SC in the exercise of its discretionary power to take cognizance of cases; that it
had jurisdiction over the instant complaint under Section 21(1) of Batas Pambansa
(BP) No. 129 in relation to Article VIII, Section 5(1) of the 1987 Constitution and the
rule on hierarchy of courts; that although PAGCOR was granted regulatory powers, it
was not extended quasi-judicial functions; and that PAGCOR is not an administrative
agency but a government owned and controlled corporation. Upon the posting by
FDC of the required bond of P500,000.00, the RTC issued on November 19, 2008 the
second assailed Order, a TRO enjoining the implementation of the Standard Authority
to Operate within a period of twenty (20) days. PAGCORs motion for reconsideration
was denied in the third assailed Order.
On December 8, 2008, the RTC issued an Order likewise denying FDCs application
for the issuance of a Writ of Preliminary Injunction. The RTC ruled that FDC failed to
 present a clear legal right to justify its issuance; that PAGCOR was granted with
legislative right to franchise to other entities the operation of gambling casinos; and
that since what was granted was a license to operate and not a contract, no vested
property right was at stake.
Both PAGCOR and Fontana moved for the reconsideration of the aforesaid
Order. Fontana maintained that it was entitled to a Writ of Preliminary Injunction while
PAGCOR wanted deleted the finding that it had the authority to issue casino license to
FDC under PD No. 1869.[1]
On February 5, 2009, PAGCOR filed a petition for certiorari and prohibition before the CA docketed as
CA-G.R. SP No. 107247 entitled PAGCOR represented by Atty. Carlos R. Bautista, Jr. v. Hon. Ma.
Theresa Dolores Estoesta and Fontana Development Corporation, questioning the November 18, 2008
Order, the November 19, 2008 Order and the December 4, 2008 Order of respondent judge.
Meanwhile, on January 30, 2009, the RTC issued an order, which reconsidered its December 8, 2008
Order and granted the writ of preliminary injunction in favor of FDC. The trial court held that since public
interest is not prejudiced, the license issued may not be revoked or rescinded by mere executive
action. The fallo reads:
WHEREFORE, having sufficiently established a prima facie proof of violation of its
right as a casino licensee under the MOA, FDCs application for the issuance of a
writ of preliminary injunction is GRANTED.
This reconsiders the Order dated December 8, 2008 insofar as it denied the issuance
of a writ of preliminary injunction.
Let a writ of preliminary injunction therefore ISSUE to become effective only upon
posting of ONE HUNDRED MILLION PESOS (P100,000,000.00).
SO ORDERED.
The Writ of Preliminary Injunction[2] was issued on February 25, 2009.
On February 17, 2009, PAGCOR filed its Motion for Reconsideration and to Dissolve the Preliminary
Injunction for Insufficiency of Bond and Irreparable Injury to the Government, which was opposed by
FDC. By Order issued on March 31, 2009, the RTC denied PAGCORs motion for reconsideration of its
Order dated January 30, 2009 that granted a writ of preliminary injunction in favor of FDC.
On May 19, 2009, the CA rejected the petition in CA-G.R. SP No. 107247 for lack of merit.
In dismissing PAGCORs petition, the CA threw out PAGCORs postulation that the RTC had no jurisdiction
over the case and that the proper remedy is an original action before this Court, as the corporation is a
body equal to the Securities and Exchange Commission (SEC). The appellate court reasoned that
nowhere in Presidential Decree No. (PD) 1869 and Republic Act No. (RA) 9487 does it state that the
instant petition can only be filed with this Court. Moreover, under RA 8799, the quasi-judicial powers earlier
granted to the SEC under PD 902-A were transferred to the RTC, while the powers retained by the
Commission are now subject to appeal to the CA.
An examination of the allegations of the complaint further revealed that it was an original action for
injunction, and under Batas Pampansa Blg. (BP) 129, the RTC shall exercise original jurisdiction over writs
of injunction. Lastly, the CA stressed that the case has been rendered moot and academic, as the TRO
issued by Judge Estoesta lapsed on December 9, 2008 and its issuance has ceased to be a justiciable
controversy. On the other hand, PAGCOR did not assail the writ of preliminary injunction issued by Judge
Estoesta on February 25, 2009 after the CA petition was filed.
In the instant petition, PAGCOR puts forward the following issues for the consideration of the Court, to wit:
The Court a quo and the trial court decided the question of substance (i.e. What is the
proper remedy available to a party claiming to be aggrieved by PAGCOR in the
exercise of its authority to operate games of chance/gambling and to license and
regulate others to operate games of chance/gambling?) not theretofore determined by
the Supreme Court.
The trial courts TRO and later a Writ of Preliminary Injunction in favor of the private
respondent prevented herein Petitioner from implementing the standard Authority to
Operate. In issuing such processes the trial court has so far departed from the
accepted and usual course of judicial proceedings, as to call for an exercise of the
power of supervision.
The trial courts TRO and later a Writ of Preliminary Injunction in favor of private
respondent prevented herein Petitioner from collecting Government revenues in the
form of the new license fee from private respondent under the standard Authority to
Operate. In issuing such processes the trial court has so far departed from the
 accepted and usual course of judicial proceedings, as to call for an exercise of the
power of supervision. A perusal of FDCs complaint in Civil Case No. 08-120338 easily reveals that it is an action for injunction

The Court a quo in declaring moot and academic the question of the TRO issued by based on an alleged violation of contractthe MOA between the partieswhich granted FDC the right to
the trial court had sanctioned the trial courts departure from the accepted and usual
operate a casino inside the Clark Special Economic Zone (CSEZ). As such, the Manila RTC has
course of judicial proceedings, as to call for an exercise of the power of supervision.
jurisdiction over FDCs complaint anchored on Sec. 19, Chapter II of BP 129, which grants the RTCs
The trial court in declaring that herein Petitioner issued the license (MOA) to herein
private respondent under the authority of PD 1869 and not under E.O. 80, Section 5 original exclusive jurisdiction over all civil actions in which the subject of the litigation is incapable of
decided such question of substance in a way not in accord with law or with the
applicable decisions of the Supreme Court. pecuniary estimation.Evidently, a complaint for injunction or breach of contract is incapable of pecuniary

estimation. Moreover, the RTCs shall exercise original jurisdiction in the issuance of writs of certiorari,

prohibition, mandamus, quo warranto, habeas corpus and injunction which may be enforced in any part of
We synthesize petitioners issues to two core issues:
their respective regions under Sec. 21 of BP 129.
(1) Whether the Manila RTC or this Court has jurisdiction over FDCs complaint for injunction and specific

performance; and
PAGCORs claim of jurisdiction of this Court over the complaint in question heavily leans on Sec. 9 of PD

1869, PAGCORs Charter, which provides:

(2) Did PAGCOR issue the license (MOA) under PD 1869 or under Executive Order No. (EO) 80, Section

5? Section 9. Regulatory Power.The Corporation shall maintain a Registry of the

affiliated entities and shall exercise all the powers, authority and responsibilities
vested in the Securities and Exchange Commission over such affiliated entities x x x.

On the threshold issue of jurisdiction, PAGCOR insists lack of jurisdiction of the trial court over the

complaint of FDC and, hence, all the processes and writs issued by said court are null and void. It posits In view of the vestment to PAGCOR by PD 1869 of the powers, authority, and responsibilities of the SEC,

that the proper legal remedy of FDC is not through an injunction complaint before the trial court, but a PAGCOR concludes that any decision or ruling it renders has to be brought to this Court via a petition for

petition for review on purely questions of law before this Court or an appeal to the Office of the President. It review based on Sec. 6 of SECs Charter, PD 902-A, which reads:

heavily relies on Sec. 9 of PD 1869, which states that PAGCOR shall exercise all the powers, authority
and responsibilities vested in the Securities and Exchange Commission, and Sec. 6 of PD 902-A which
provides for a petition for review to this Court from SECs decisions.
The aggrieved party may appeal the order, decision or ruling of the Commission
sitting en banc to the Supreme Court by petition for review in accordance with the
pertinent provisions of the Rules of Court.

We are not convinced.

This reasoning is flawed. A scrutiny of PD 1869 demonstrates that it has no procedure for the appeal or

review of PAGCORs decisions or orders. Neither does it make any express reference to an exclusive
Jurisdiction of a court over the subject matter of the action is a matter of law and is conferred only by the
remedy that can be brought before this Court. Even a review of PD 1869s predecessor lawsPD 1067-A,
Constitution or by statute.[3] It is settled that jurisdiction is determined by the allegations of the complaint or
1067-B, 1067-C, 1399, and 1632, as well as its amendatory law, RA 9487do not confer original jurisdiction
[4]
the petition irrespective of whether plaintiff is entitled to all or some of the claims or reliefs asserted.
to this Court to review PAGCORs actions and decisions.
 necessary to prevent inordinate demands upon the Courts time and attention which
PAGCOR, however, insists that this Court has jurisdiction over an action contesting its exercise of are better devoted to those matters within its exclusive jurisdiction, and to prevent
further over-crowding of the Courts docket.[9]
licensing and regulatory powers, i.e., the revocation of FDCs license to operate a casino in CSEZ and that

FDCs complaint is a case of first impression.

While it is the trial court that has original jurisdiction over FDCs complaint, PAGCOR nevertheless prays

that this Court suspend the Rules and directly decide the entire controversy in this proceeding instead of
PAGCORs argument is bereft of merit.
remanding the same to the trial court.[10]

A similar factual setting was presented by PAGCOR in PAGCOR v. Viola,[5] which involves the controversy
In the exercise of its broad discretionary power, we will resolve FDCs complaint on the merits, instead of
between PAGCOR and the Mimosa Regency Casino that operated inside the CSEZ. Mimosa filed a case
remanding it to the trial court for further proceedings. Moreover, the dispute between the parties involves a
for injunction and prayed for the issuance of a TRO before the Pampanga RTC when PAGCOR decided to
purely question of lawwhether the license or MOA was issued pursuant to PD 1869 or Sec. 5, EO 80, in
close down the casino. In this case, PAGCOR likewise assailed the jurisdiction of the trial court by claiming
relation to RA 7227, which does not necessitate a full blown trial. Demands of substantial justice and
that an original action before the CA is the proper remedy.
equity require the relaxation of procedural rules.[11] In Lianga Bay v. Court of Appeals,[12] the Court held:

In PAGCOR v. Viola, we ruled that PAGCOR, in the exercise of its licensing and regulatory powers, has no
quasi-judicial functions, as Secs. 8 and 9 of PD 1869 do not grant quasi-judicial powers to PAGCOR. As
such, direct resort to this Court is not allowed. While we allowed said recourse in Del Mar v.
PAGCOR[6] and Jaworski v. PAGCOR,[7] that is an exception to the principle of hierarchy of courts on the
grounds of expediency and the importance of the issues involved. More importantly, we categorically ruled
Remand of case to the lower court for further reception of evidence is not necessary
where the court is in a position to resolve the dispute based on the records before
it. On many occasions, the Court, in the public interest and the expeditious
administration of justice, has resolved actions on the merits instead of remanding
them to the trial court for further proceedings, such as where the ends of justice would
not be subserved by the remand of the case or when public interest demands an early
disposition of the case or where the trial court had already received all the evidence of
the parties.

in PAGCOR v. Viola that cases involving revocation of a license falls within the original jurisdiction of the

RTC, thus:
The core issue to be resolved is whether the trial court erred in declaring that PAGCOR issued the license
Having settled that PAGCORs revocation of MONDRAGONs authority to operate a (MOA) to FDC under the authority of PD 1869 and not under EO 80, Sec. 5.
casino was not an exercise of quasi-judicial powers then it follows that the case
was properly filed before the Regional Trial Court. Hence, as the Regional Trial
Court had jurisdiction to take cognizance of the case, petitioners contention that the
temporary restraining order and the preliminary injunction by the trial court are void PAGCOR maintains that the license it issued to the FDC was based on Sec. 5 of EO 80 and that its charter
must fail.[8]
PD 1869 should be read together with said EO. When Sec. 5 was nullified in Coconut Oil Refiners

Association, Inc. v. Torres,[13] the MOA it entered into with FDC was consequently voided.
Moreover, it is settled that the normal rule is to strictly follow the hierarchy of courts, thus:

The Supreme Court is a court of last resort, and must so remain if it is to satisfactorily
Such postulation must fail.
perform the functions assigned to it by the fundamental charter and immemorial
tradition. A direct invocation of this Courts original jurisdiction to issue said writs
should be allowed only when there are special and important reasons therefor, clearly
and specifically set out in the petition. This is established policya policy that is Sec. 5 of EO 80 provides:
 SECTION 5. Investments Climate in the CSEZ.Pursuant to Section 5(m) and Section
15 of RA 7227, the BCDA shall promulgate all necessary policies, rules and
regulations governing the CSEZ, including investment incentives, in consultation with
the local government units and pertinent government departments for implementation
by the CDC.
Among others, the CSEZ shall have all the applicable incentives in the Subic Special
Economic and Free Port Zone under RA 7227 and those applicable incentives
granted in the Export Processing Zones, the Omnibus Investments Code of 1987, the
Foreign Investments Act of 1991 and new investments laws which may hereinafter be
enacted.
On the other hand, we quote Sec. 13 of RA 7227 in relation to Sec. 5 of EO 80:
Sec. 13. The Subic Bay Metropolitan Authority.
(a) Creation of the Subic Bay Metropolitan Authority.A body corporate to be known as
the Subic Bay Metropolitan Authority is hereby created as an operating and
implementing arm of the Conversion Authority.
(b) Powers and functions of the Subic Bay Metropolitan Authority.The Subic Bay
Metropolitan Authority, otherwise known as the Subic Authority, shall have the
following powers and function:
xxxx
7) To operate directly or indirectly or license tourism related activities subject to
priorities and standards set by the Subic Authority including games and amusements,
except horse racing, dog racing and casino gambling which shall continue to be
licensed by the Philippine Amusement and Gaming Corporation
(PAGCOR) upon recommendation of the Conversion Authority; to maintain and
preserve the forested areas as a national park.
A reading of the aforequoted provisions does not point to any authority granted to PAGCOR to license
casinos within Subic, Clark, or any other economic zone. As a matter of fact, Sec. 13 of RA 7227 simply
shows that SBMA has no power to license or operate casinos. Rather, said casinos shall continue to be
licensed by PAGCOR. Hence, the source of PAGCORs authority lies in its basic charter, PD 1869, as
amended, and neither in RA 7227 nor its extension, EO 80, for the latter merely recognizes PAGCORs
power to license casinos. Indeed, PD 1869 empowers PAGCOR to regulate and control all games of
chance within the Philippines, and clearly, RA 7227 or EO 80 cannot be the source of its powers, but its
basic charter, PD 1869.
Basco v. PAGCOR[14] points to PD 1869 as the source of authority for PAGCOR to regulate and centralize
all games of chance authorized by existing franchise or law, thus:
P.D. 1869 was enacted pursuant to the policy of the government to regulate and
centralize thru an appropriate institution all games of chance authorized by existing
franchise or permitted by law (1st Whereas Clause, PD 1869). As was subsequently
proved, regulating and centralizing gambling operations in one corporate entity the
PAGCOR, was beneficial not just to the Government but to society in general. It is a
reliable source of much needed revenue for the cash strapped Government. It
provided funds for social impact projects and subjected gambling to close scrutiny,
regulation, supervision and control of the Government (4th Whereas Clause, PD
1869).
Lastly, only PD 1869, particularly Secs. 8 and 9 and not any other law, requires registration and affiliation
of all persons primarily engaged in gambling with PAGCOR. We quote Secs. 8 and 9:
TITLE IIIAFFILIATION PROVISIONS
Section 8. Registration.All persons primarily engaged in gambling, together with their
allied business, with contract or franchise from the Corporation, shall register and
affiliate their businesses with the Corporation. The Corporation shall issue the
corresponding certificates of affiliation upon compliance by the registering entity with
the promulgated rules and regulations.
Section 9. Regulatory Power.The Corporation shall maintain a Registry of the
affiliated entities, and shall exercise all the powers, authority and the responsibilities
vested in the Securities and Exchange Commission over such affiliated entities
mentioned under the preceding section, including but not limited to amendments of
Articles of Incorporation and By-Laws, changes in corporate term, structure,
capitalization and other matters concerning the operation of the affiliating entities, the
provisions of the Corporation Code of the Philippines to the contrary notwithstanding,
except only with respect to original incorporation.
In the light of the foregoing provisions, it is unequivocal that PAGCOR draws its authority and power to
operate and regulate casinos from PD 1869, and neither from Sec. 5 of EO 80 nor from RA 7227. Hence,
since PD 1869 remains unaffected by the unconstitutionality of Sec. 5 of EO 80, then PAGCOR has no
legal basis for nullifying or recalling the MOA with FDC and replacing it with its new Standard Authority to
Operate (SAO). There is no infirmity in the MOA, as it was validly entered by PAGCOR under PD 1869
and remains valid until legally terminated in accordance with the MOA.
The reliance of PAGCOR on Coconut Oil Refiners Association, Inc.[15] to buttress its position that the MOA
with FDC can be validly supplanted with the 10-year SAO is clearly misplaced. That case cannot be a
precedent to the instant case, as it dealt solely with the void grant of tax and duty-free incentives inside
CSEZ. The Court ruled in Coconut Oil Refiners Association, Inc. that the tax incentives within the CSEZ
were an invalid exercise of quasi-legislative powers, thus:
In the present case, while Section 12 of Republic Act No. 7227 expressly
provides for the grant of incentives to the SSEZ, it fails to make any similar grant in
favor of other economic zones, including the CSEZ. Tax and duty-free
incentives being in the nature of tax exemptions, the basis thereof should be
categorically and unmistakably expressed from the language of the
statute. Consequently, in the absence of any express grant of tax and duty-free
privileges to the CSEZ in Republic Act No. 7227, there would be no legal basis to
uphold the questioned portions of two issuances: Section 5 of Executive Order No.
80 and Section 4 of BCDA Board Resolution No. 93-05-034, which both pertain to the
CSEZ. (Emphasis supplied.)
Lastly, the Court has to point out that the issuance of the 10-year SAO by PAGCOR in lieu of the MOA with
FDC is a breach of the MOA. The MOA in question was validly entered into by PAGCOR and FDC on
December 23, 1999. It embodied the license and authority to operate a casino, the nature and extent of
PAGCORs regulatory powers over the casino, and the rights and obligations of FDC. Thus, the MOA is a
valid contract with all the essential elements required under the Civil Code. The parties are then bound by
the stipulations of the MOA subject to the regulatory powers of PAGCOR. Well-settled is the rule that a
contract voluntarily entered into by the parties is the law between them and all issues or controversies shall
be resolved mainly by the provisions thereof.[16]
On the revocation, termination, or suspension of the license or grant of authority to operate a casino,
PAGCOR agreed to the following stipulations on the revocation or termination of the MOA, viz:
VI. REVOCATION/TERMINATION
1. This grant of authority may be revoked or suspended at any time at the sole option
of PAGCOR by giving written notice to RNDC [FDC] of such revocation or suspension
stating therein the reason(s) for such revocation or suspension, on any of
the following grounds:
a. RNDC makes any default which PAGCOR considers material in the due
and punctual performance or observance of any of the obligations or
undertakings contained in the Agreement, and RNDC shall fail to
remedy such default, within fifteen (15) working days after notice
specifying the default. Should the default consist in the non-remittance
of the consideration as hereinabove specified, PAGCOR shall, in
addition have the right to proceed against the Surety Bond, unless
RNDC was able to cure the default so specified by PAGCOR within
seventy-two (72) hours after notice specifying the default. RNDC shall
be liable for interest at the prevailing commercial rates on all or portion
of the amounts due.
b. There shall be any failure on the part of RNDC which PAGCOR
considers material to comply with any provision of the Agreement and
RNDC fails to remedy the same within fifteen (15) working days after
notice specifying the default;
c. RNDC has become bankrupt;
d. After the RNDC casino shall have formally commenced gaming and
amusement operations within the CSEZ, RNDCs continuous
cumulative non-operation of the casino for a period of one (1) month
except upon lawful order of the Court or force majeure, provided that
upon the cessation of such cause or causes, RNDC shall immediately
continue its casino operations, otherwise, such continuous
non-operation for the period provided above shall be sufficient ground
for revocation or suspension;
e. Failure of RNDC to comply with and observe any pertinent law, rule,
regulation and/or ordinance promulgated by a competent authority,
including PAGCOR, relative to the operation of the casino;
f. Such other situations analogous to the above.[17]
Central to the present controversy is the term or period of effectivity of the MOA, as provided under the
definition of terms in Title I and Title II, No. 4, which, for clarity, we reiterate in full:
Period refers to the period of time co-terminus with that of the franchise granted
to PAGCOR in accordance with Section 10 of Presidential Decree No.
1869 including any extension thereof;[18]
xxxx
 4. Non-exclusivity. PAGCOR and RNDC agree that the license granted to RNDC to
engage in gaming and amusement operations within the CSEZ shall be
non-exclusive and co-terminus with the Charter of PAGCOR, or any
extension thereof, and shall be for the period hereinabove
defined.[19] (Emphasis supplied.)
As parties to the MOA, FDC and PAGCOR bound themselves to all its provisions. After all, the terms of a
contract have the force of law between the parties, and courts have no choice but to enforce such contract
so long as they are not contrary to law, morals, good customs, or public policy.[20] A stipulation for the term
or period for the effectivity of the MOA to be co-terminus with term of the franchise of PAGCOR
including any extension is not contrary to law, morals, good customs, or public policy.
It is beyond doubt that PAGCOR did not revoke or terminate the MOA based on any of the grounds
enumerated in No. 1 of Title VI, nor did it terminate it based on the period of effectivity of the MOA
specified in Title I and Title II, No. 4 of the MOA. Without explicitly terminating the MOA, PAGCOR simply
informed FDC on July 18, 2008 that it is giving the latter an extension of the MOA on a month-to-month
basis in gross contravention of the MOA. Worse, PAGCOR informed FDC only on October 6, 2008 that the
MOA is deemed expired on July 11, 2008 without an automatic renewal and is replaced with a 10-year
SAO. Clearly it is in breach of the MOAs stipulated effectivity period which is co-terminus with that of the
franchise granted to PAGCOR in accordance with Sec. 10 of PD 1869 including any extension. Hence,
PAGCORs disregard of the MOA is without legal basis and must be nullified. PAGCOR has to respect the
December 23, 1999 MOA it entered into with FDC, especially considering the huge investment poured into
the project by the latter in reliance and pursuant to the MOA in question.
WHEREFORE, the petition is hereby DENIED for lack of merit. The Decision dated May 19, 2009 of the
CA in CA-G.R. SP No. 107247 affirming the Orders dated November 18, 2008 and December 4, 2008 of
the RTC, Branch 7 in Manila is hereby AFFIRMED.The writ of injunction issued on February 25, 2009 by
the trial court pursuant to the January 30, 2009 Order in Civil Case No. 08-120338 is hereby
made PERMANENT. PAGCOR is ordered to honor and comply with the stipulations of the MOA dated
December 23, 1999, as amended, that it executed with FDC.
SO ORDERED.
G.R. No. 83578 March 16, 1989
THE PRESIDENTIAL ANTI-DOLLAR SALTING TASK FORCE, petitioner,
vs.
HONORABLE COURT OF APPEALS, HONORABLE TEOFILO L, GUADIZ, JR.,Presiding Judge,
REGIONAL TRIAL COURT, Branch 147: NCR (MAKATI), and KARAMFIL IMPORT-EXPORT CO.,
INC., respondents.
K. V. Faylona & Associates for respondents.
SARMIENTO, J.:
The petitioner, the Presidential Anti-Dollar Salting Task Force, the President's arm assigned to investigate
and prosecute so-called "dollar salting" activities in the country (per Presidential Decree No. 1936 as
amended by Presidential Decree No. 2002), asks the Court to hold as null and void two Resolutions of the
Court of Appeals, dated September 24, 1987 1 and May 20, 1988, 2 reversing its Decision, dated October
24, 1986. 3 The Decision set aside an Order, dated April 16, 1985, of the Regional Trial Court, 4 as well as
its Order, dated August 21, 1985. The Resolution, dated September 24, 1987 disposed of, and granted,
the private respondent Karamfil Import-Export Co., Inc.'s motion for reconsideration of the October 24,
1986 Decision; the Resolution dated May 20, 1988, in turn, denied the petitioner's own motion for
reconsideration.
The facts are not in controversy. We quote:
On March 12, 1985, State Prosecutor Jose B. Rosales, who is assigned with the Presidential Anti-Dollar
Salting Task Force hereinafter referred to as PADS Task Force for purposes of convenience, issued
search warrants Nos. 156, 157, 158, 159, 160 and 161 against the petitioners Karamfil Import-Export Co.,
Inc., P & B Enterprises Co., Inc., Philippine Veterans Corporation, Philippine Veterans Development
Corporation, Philippine Construction Development Corporation, Philippine Lauan Industries Corporation,
Inter-trade Development (Alvin Aquino), Amelili U. Malaquiok Enterprises and Jaime P. Lucman
Enterprises.
The application for the issuance of said search warrants was filed by Atty. Napoleon Gatmaytan of the
Bureau of Customs who is a deputized member of the PADS Task Force. Attached to the said application
is the affidavit of Josefin M. Castro who is an operative and investigator of the PADS Task Force. Said
Josefin M. Castro is likewise the sole deponent in the purported deposition to support the application for
the issuance of the six (6) search warrants involved in this case. The application filed by Atty. Gatmaytan,
the affidavit and deposition of Josefin M. Castro are all dated March 12, 1985. 5
Shortly thereafter, the private respondent (the petitioner below) went to the Regional Trial Court on a
petition to enjoin the implementation of the search warrants in question. 6 On March 13, 1985, the trial
court issued a temporary restraining order [effective "for a period of five (5) days notice " 7 ] and set the
case for hearing on March 18, 1985.
In disposing of the petition, the said court found the material issues to be:
1) Competency of this Court to act on petition filed by the petitioners;
2) Validity of the search warrants issued by respondent State Prosecutor;
3) Whether or not the petition has become moot and academic because all the search warrants sought to
be quashed had already been implemented and executed. 8
On April 16, 1985, the lower court issued the first of its challenged Orders, and held:
WHEREFORE, in view of all the foregoing, the Court hereby declares Search Warrant Nos. 156, 157, 158,
159, 160, and 161 to be null and void. Accordingly, the respondents are hereby ordered to return and
surrender immediately all the personal properties and documents seized by them from the petitioners by
virtue of the aforementioned search warrants.
SO ORDERED. 9
On August 21, 1985, the trial court denied reconsideration.
On April 4, 1986, the Presidential Anti-Dollar Salting Task Force went to the respondent Court of Appeals
to contest, on certiorari, the twin Order(s) of the lower court.
In ruling initially for the Task Force, the Appellate Court held:
Herein petitioner is a special quasi-judicial body with express powers enumerated under PD 1936 to
prosecute foreign exchange violations defined and punished under P.D. No. 1883.
The petitioner, in exercising its quasi-judicial powers, ranks with the Regional Trial Courts, and the latter in
the case at bar had no jurisdiction to declare the search warrants in question null and void.
Besides as correctly pointed out by the Assistant Solicitor General the decision of the Presidential
Anti-Dollar Salting Task Force is appealable to the Office of the President.10
On November 12, 1986, Karamfil Import-Export Co., Inc. sought a reconsideration, on the question
primarily of whether or not the Presidential Anti-Dollar Salting Task Force is "such other responsible officer'
countenanced by the 1973 Constitution to issue warrants of search and seizure.
As we have indicated, the Court of Appeals, on Karamfil's motion, reversed itself and issued its Resolution,
dated September 1987, and subsequently, its Resolution, dated May 20, 1988, denying the petitioner's
motion for reconsideration.
In its petition to this Court, the petitioner alleges that in so issuing the Resolution(s) above-mentioned, the
respondent Court of Appeals "committed grave abuse of discretion and/or acted in excess of its appellate
jurisdiction," 11 specifically:
a) In deviating from the settled policy and rulings of the Supreme Court that no Regional Trial Courts may
countermand or restrain the enforcement of lawful writs or decrees issued by a quasi-judicial body of equal
and coordinate rank, like the PADS Task Force;
b) For resorting to judicial legislation to arrive at its erroneous basis for reconsidering its previous Decision
dated October 24, 1986 (see Annex "I") and thus promulgated the questioned Resolutions (Annexes "A"
and "B"), which violated the constitutional doctrine on separation of powers;
c) In not resolving directly the other important issues raised by the petitioner in its Petition in CA-G.R. No.
08622-SP despite the fact that petitioner has demonstrated sufficiently and convincingly that respondent
RTC, in issuing the questioned Orders in Special Proceeding No. M-624 (see Annexes "C" and 'D"),
committed grave abuse of discretion and/or acted in excess of jurisdiction:
1. In ruling that (a) the description of the things to be seized as stated in the contested search warrant were
too general which allegedly render the search warrants null and void; (b) the applications for the contested
search warrants actually charged two offenses in contravention of the 2nd paragraph, Section 3, Rule 126
of the Rules of Court; and (c) this case has not become moot and academic, even if the contested search
warrants had already been fully implemented with positive results; and
2. In ruling that the petitioner PADS Task Force has not been granted under PD 1936 'judicial or
quasi-judicial jurisdiction. 12
We find, upon the foregoing facts, that the essential questions that confront us are- (i) is the Presidential
Anti-Dollar Salting Task Force a quasi-judicial body, and one co-equal in rank and standing with the
Regional Trial Court, and accordingly, beyond the latter's jurisdiction; and (ii) may the said presidential
body be said to be "such other responsible officer as may be authorized by law" to issue search warrants
under the 1973 Constitution questions we take up seriatim.**
In submitting that it is a quasi-judicial entity, the petitioner states that it is endowed with "express powers
and functions under PD No. 1936, to prosecute foreign exchange violations as defined and punished
under PD No. 1883." 13 "By the very nature of its express powers as conferred by the laws," so it is
contended, "which are decidedly quasi-judicial or discretionary function, such as to conduct preliminary
investigation on the charges of foreign exchange violations, issue search warrants or warrants of arrest,
hold departure orders, among others, and depending upon the evidence presented, to dismiss the charges
or to file the corresponding information in court of Executive Order No. 934, PD No. 1936 and its
Implementing Rules and Regulations effective August 26, 1984), petitioner exercises quasi-judicial power
or the power of adjudication ." 14
The Court of Appeals, in its Resolution now assailed, 15 was of the opinion that "[t]he grant of
quasi-judicial powers to petitioner did not diminish the regular courts' judicial power of interpretation. The
right to interpret a law and, if necessary to declare one unconstitutional, exclusively pertains to the
judiciary. In assuming this function, courts do not proceed on the theory that the judiciary is superior to the
two other coordinate branches of the government, but solely on the theory that they are required to declare
the law in every case which come before them." 16
This Court finds the Appellate Court to be in error, since what the petitioner puts to question is the
Regional Trial Court's act of assuming jurisdiction over the private respondent's petition below and its
subsequent countermand of the Presidential Anti-Dollar Salting Task Force's orders of search and seizure,
for the reason that the presidential body, as an entity (allegedly) coordinate and co-equal with the Regional
Trial Court, was (is) not vested with such a jurisdiction. An examination of the Presidential Anti-Dollar
Salting Task Force's petition shows indeed its recognition of judicial review (of the acts of Government) as
a basic privilege of the courts. Its objection, precisely, is whether it is the Regional Trial Court, or the
superior courts, that may undertake such a review.
Under the Judiciary Reorganization Act of 1980, 17 the Court of Appeals exercises:
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of
Regional Trial Court and quasi-judicial agencies, instrumentalities, boards or commissions, except those
falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the
provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948. 18
xxx xxx xxx
Under the present Constitution, with respect to its provisions on Constitutional Commissions, it is provided,
in part that:
... Unless otherwise provided by this Constitution or by law, any decision, order, or ruling of each
Commission may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days
from receipt of a copy thereof. 19
On the other hand, Regional Trial Courts have exclusive original jurisdiction:
(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising judicial
or quasi-judicial functions. 20
xxx xxx xxx
Likewise:
... The Supreme Court may designate certain branches of the Regional Trial Court to handle exclusively
criminal cases, juvenile and domestic relations cases, agrarian case, urban land reform cases which do
not fall under the jurisdiction of quasi- judicial bodies and agencies and/or such other special cases as the
Supreme Court may determine in the interest of a speedy and efficient administration of justice. 21
xxx xxx xxx
Under our Resolution dated January 11, 1983: 22
... The appeals to the Intermediate Appellate Court [now, Court of Appeals] from quasi-judicial bodies shall
continue to be governed by the provisions of Republic Act No. 5434 insofar as the same is not inconsistent
with the provisions of B.P. Blg. 129. 23
The pertinent provisions of Republic Act No. 5434 are as follows:
SECTION 1. Appeals from specified agencies.— Any provision of existing law or Rule of Court to the
contrary notwithstanding, parties aggrieved by a final ruling, award, order, decision, or judgment of the
Court of Agrarian Relations; the Secretary of Labor under Section 7 of Republic Act Numbered Six
hundred and two, also known as the "Minimum Wage Law"; the Department of Labor under Section 23 of
Republic Act Numbered Eight hundred seventy-five, also known as the "Industrial Peace Act"; the Land
Registration Commission; the Securities and Exchange Commission; the Social Security Commission; the
Civil Aeronautics Board; the Patent Office and the Agricultural Inventions Board, may appeal therefrom to
the Court of Appeals, within the period and in the manner herein provided, whether the appeal involves
questions of fact, mixed questions of fact and law, or questions of law, or all three kinds of questions. From
final judgments or decisions of the Court of Appeals, the aggrieved party may appeal by certiorari to the
Supreme Court as provided in Rule 45 of the Rules of Court. 24
Because of subsequent amendments, including the abolition of various special courts, 25 jurisdiction over
quasi-judicial bodies has to be, consequently, determined by the corresponding amendatory statutes.
Under the Labor Code, decisions and awards of the National Labor Relations Commission are final and
executory, but, nevertheless, 'reviewable by this Court through a petition for certiorari and not by way of
appeal." 26
Under the Property Registration Decree, decisions of the Commission of Land Registration, en consults,
are appealable to the Court of Appeals. 27
The decisions of the Securities and Exchange Commission are likewise appealable to the Appellate
Court, 28 and so are decisions of the Social Security Commission.29
As a rule, where legislation provides for an appeal from decisions of certain administrative bodies to the
Court of Appeals, it means that such bodies are co-equal with the Regional Trial Courts, in terms of rank
and stature, and logically, beyond the control of the latter.
As we have observed, the question is whether or not the Presidential Anti-Dollar Salting Task Force is, in
the first place, a quasi-judicial body, and one whose decisions may not be challenged before the regular
courts, other than the higher tribunals the Court of Appeals and this Court.
A quasi-judicial body has been defined as "an organ of government other than a court and other than a
legislature, which affects the rights of private parties through either adjudication or rule making." 30 The
most common types of such bodies have been listed as follows:
(1) Agencies created to function in situations wherein the government is offering some gratuity, grant, or
special privilege, like the defunct Philippine Veterans Board, Board on Pensions for Veterans, and NARRA,
and Philippine Veterans Administration.
(2) Agencies set up to function in situations wherein the government is seeking to carry on certain
government functions, like the Bureau of Immigration, the Bureau of Internal Revenue, the Board of
Special Inquiry and Board of Commissioners, the Civil Service Commission, the Central Bank of the
Philippines.
(3) Agencies set up to function in situations wherein the government is performing some business service
for the public, like the Bureau of Posts, the Postal Savings Bank, Metropolitan Waterworks & Sewerage
Authority, Philippine National Railways, the Civil Aeronautics Administration.
(4) Agencies set up to function in situations wherein the government is seeking to regulate business
affected with public interest, like the Fiber Inspections Board, the Philippine Patent Office, Office of the
Insurance Commissioner.
(5) Agencies set up to function in situations wherein the government is seeking under the police power to
regulate private business and individuals, like the Securities & Exchange Commission, Board of Food
Inspectors, the Board of Review for Moving Pictures, and the Professional Regulation Commission.
(6) Agencies set up to function in situations wherein the government is seeking to adjust individual
controversies because of some strong social policy involved, such as the National Labor Relations
Commission, the Court of Agrarian Relations, the Regional Offices of the Ministry of Labor, the Social
Security Commission, Bureau of Labor Standards, Women and Minors Bureau. 31
As may be seen, it is the basic function of these bodies to adjudicate claims and/or to determine rights, and
unless its decision are seasonably appealed to the proper reviewing authorities, the same attain finality
and become executory. A perusal of the Presidential Anti-Dollar Salting Task Force's organic act,
Presidential Decree No. 1936, as amended by Presidential Decree No. 2002, convinces the Court that the
Task Force was not meant to exercise quasi-judicial functions, that is, to try and decide claims and execute
its judgments. As the President's arm called upon to combat the vice of "dollar salting" or the
blackmarketing and salting of foreign exchange, 32 it is tasked alone by the Decree to handle the
prosecution of such activities, but nothing more. We quote:
SECTION 1. Powers of the Presidential Anti-Dollar Salting Task Force.-The Presidential Anti-Dollar
Salting Task Force, hereinafter referred to as Task Force, shall have the following powers and authority:
a) Motu proprio or upon complaint, to investigate and prosecute all dollar salting activities, including the
overvaluation of imports and the undervaluation of exports;
b) To administer oaths, summon persons or issue subpoenas requiring the attendance and testimony of
witnesses or the production of such books, papers, contracts, records, statements of accounts,
agreements, and other as may be necessary in the conduct of investigation;
c) To appoint or designate experts, consultants, state prosecutors or fiscals, investigators and hearing
officers to assist the Task Force in the discharge of its duties and responsibilities; gather data, information
or documents; conduct hearings, receive evidence, both oral and documentary, in all cases involving
violation of foreign exchange laws or regulations; and submit reports containing findings and
recommendations for consideration of appropriate authorities;
d) To punish direct and indirect contempts with the appropriate penalties therefor under Rule 71 of the
Rules of Court; and to adopt such measures and take such actions as may be necessary to implement this
Decree.
xxx xxx xxx
f. After due investigation but prior to the filing of the appropriate criminal charges with the fiscal's office or
the courts as the case may be, to impose a fine and/or administrative sanctions as the circumstances
warrant, upon any person found committing or to have committed acts constituting blackmarketing or
salting abroad of foreign exchange, provided said person voluntarily admits the facts and circumstances
constituting the offense and presents proof that the foreign exchange retained abroad has already been
brought into the country.
Thereafter, no further civil or criminal action may be instituted against said person before any other judicial
regulatory or administrative body for violation of Presidential Decree No. 1883.
The amount of the fine shall be determined by the Chairman of the Presidential Anti- Dollar Salting Task
Force and paid in Pesos taking into consideration the amount of foreign exchange retained abroad, the
exchange rate differentials, uncollected taxes and duties thereon, undeclared profits, interest rates and
such other relevant factors.
The fine shall be paid to the Task Force which shall retain Twenty percent (20 %) thereof. The informer, if
any, shall be entitled to Twenty percent (20 %) of the fine. Should there be no informer, the Task Force
shall be entitle to retain Forty percent (40 %) of the fine and the balance shall accrue to the general funds
of the National government. The amount of the fine to be retained by the Task Force shall form part of its
Confidential Fund and be utilized for the operations of the Task Force . 33
The Court sees nothing in the aforequoted provisions (except with respect to the Task Force's powers to
issue search warrants) that will reveal a legislative intendment to confer it with quasi-judicial
responsibilities relative to offenses punished by Presidential Decree No. 1883. Its undertaking, as we said,
is simply, to determine whether or not probable cause exists to warrant the filing of charges with the proper
court, meaning to say, to conduct an inquiry preliminary to a judicial recourse, and to recommend action
"of appropriate authorities". It is not unlike a fiscal's office that conducts a preliminary investigation to
determine whether or not prima facie evidence exists to justify haling the respondent to court, and yet,
while it makes that determination, it cannot be said to be acting as a quasi-court. For it is the courts,
ultimately, that pass judgment on the accused, not the fiscal.
It is not unlike the Presidential Commission on Good Government either, the executive body appointed to
investigate and prosecute cases involving "ill-gotten wealth". It had been vested with enormous powers,
like the issuance of writs of sequestration, freeze orders, and similar processes, but that did not, on
account thereof alone, make it a quasi-judicial entity as defined by recognized authorities. It cannot
pronounce judgement of the accused's culpability, the jurisdiction to do which is exclusive upon the
Sandiganbayan. 34
If the Presidential Anti-Dollar Salting Task Force is not, hence, a quasi-judicial body, it cannot be said to be
co-equal or coordinate with the Regional Trial Court. There is nothing in its enabling statutes that would
demonstrate its standing at par with the said court.
In that respect, we do not find error in the respondent Court of Appeal's resolution sustaining the
assumption of jurisdiction by the court a quo.
It will not do to say that the fact that the Presidential Task Force has been empowered to issue warrants of
arrest, search, and seizure, makes it, ergo, a "semi-court". Precisely, it is the objection interposed by the
private respondent, whether or not it can under the 1973 Charter, issue such kinds of processes.
It must be observed that under the present Constitution, the powers of arrest and search are exclusive
upon judges. 35 To that extent, the case has become moot and academic. Nevertheless, since the
question has been specifically put to the Court, we find it unavoidable to resolve it as the final arbiter of
legal controversies, pursuant to the provisions of the 1973 Constitution during whose regime the case was
commenced.
Since the 1973 Constitution took force and effect and until it was so unceremoniously discarded in 1986,
its provisions conferring the power to issue arrest and search warrants upon an officer, other than a judge,
by fiat of legislation have been at best controversial. In Lim v. Ponce de Leon, 36 a 1975 decision, this
Court ruled that a fiscal has no authority to issue search warrants, but held in the same vein that, by virtue
of the responsible officer" clause of the 1973 Bill of Rights, "any lawful officer authorized by law can issue a
search warrant or warrant of arrest.37 Authorities, however, have continued to express reservations
whether or not fiscals may, by statute, be given such a power. 38
Less than a year later, we promulgated Collector of Customs v. Villaluz, 39 in which we categorically
averred: Until now only the judge can issue the warrant of arrest." 40 "No law or presidential decree has
been enacted or promulgated vesting the same authority in a particular responsible officer ." 41
Apparently, Villaluz had settled the debate, but the same question persisted following this Courts
subsequent rulings upholding the President's alleged emergency arrest powers .42 [Mr. Justice Hugo
Gutierrez would hold, however, that a Presidential Commitment Order (PCO) is (was) not a species of
"arrest" in its technical sense, and that the (deposed) Chief Executive, in issuing one, does not do so in his
capacity as a "responsible officer" under the 1973 Charter, but rather, as Commander-in-Chief of the
Armed Forces in times of emergency, or in order to carry out the deportation of undesirable aliens.43 In
the distinguished Justice's opinion then, these are acts that can be done without need of judicial
intervention because they are not, precisely, judicial but Presidential actions.]
In Ponsica v. Ignalaga,44 however, we held that the mayor has been made a "responsible officer' by the
Local Government Code, 45 but had ceased to be one with the approval of the 1987 Constitution
according judges sole authority to issue arrest and search warrants. But in the same breath, we did not
rule the grant under the Code unconstitutional based on the provisions of the former Constitution. We were
agreed, though, that the "responsible officer" referred to by the fundamental law should be one capable of
approximating "the cold neutrality of an impartial judge." 46
In striking down Presidential Decree No. 1936 the respondent Court relied on American jurisprudence,
notably, Katz v. United States, 47 Johnson v. United States, 48 and Coolidge v. New Hampshire 49 in
which the American Supreme Court ruled that prosecutors (like the petitioner) cannot be given such
powers because of their incapacity for a "detached scrutiny" 50 of the cases before them. We affirm the
Appellate Court.
We agree that the Presidential Anti-Dollar Salting Task Force exercises, or was meant to exercise,
prosecutorial powers, and on that ground, it cannot be said to be a neutral and detached "judge" to
determine the existence of probable cause for purposes of arrest or search. Unlike a magistrate, a
prosecutor is naturally interested in the success of his case. Although his office "is to see that justice is
done and not necessarily to secure the conviction of the person accused," 51 he stands, invariably, as the
accused's adversary and his accuser. To permit him to issue search warrants and indeed, warrants of
arrest, is to make him both judge and jury in his own right, when he is neither. That makes, to our mind and
to that extent, Presidential Decree No. 1936 as amended by Presidential Decree No. 2002,
unconstitutional.
It is our ruling, thus, that when the 1973 Constitution spoke of "responsible officer" to whom the authority to
issue arrest and search warrants may be delegated by legislation, it did not furnish the legislator with the
license to give that authority to whomsoever it pleased. It is to be noted that the Charter itself makes the
qualification that the officer himself must be "responsible". We are not saying, of course, that the
Presidential Anti-Dollar Salting Task Force (or any similar prosecutor) is or has been irresponsible in
discharging its duty. Rather, we take "responsibility", as used by the Constitution, to mean not only skill
and competence but more significantly, neutrality and independence comparable to the impartiality
presumed of a judicial officer. A prosecutor can in no manner be said to be possessed of the latter
qualities.
According to the Court of Appeals, the implied exclusion of prosecutors under the 1973 Constitution was
founded on the requirements of due process, notably, the assurance to the respondent of an unbiased
inquiry of the charges against him prior to the arrest of his person or seizure of his property. We add that
the exclusion is also demanded by the principle of separation of powers on which our republican structure
rests. Prosecutors exercise essentially an executive function (the petitioner itself is chaired by the Minister,
now Secretary, of Trade and Industry), since under the Constitution, the President has pledged to execute
the laws. 52 As such, they cannot be made to issue judicial processes without unlawfully impinging the
prerogative of the courts.
At any rate, Ponsica v. Ignalaga should foreclose all questions on the matter, although the Court hopes
that this disposition has clarified a controversy that had generated often bitter debates and bickerings.
The Court joins the Government in its campaign against the scourge of "dollar- salting", a pernicious
practice that has substantially drained the nation's coffers and has seriously threatened its economy. We
recognize the menace it has posed (and continues to pose) unto the very stability of the country, the
urgency for tough measures designed to contain if not eradicate it, and foremost, the need for cooperation
from the citizenry in an all-out campaign. But while we support the State's efforts, we do so not at the
expense of fundamental rights and liberties and constitutional safeguards against arbitrary and
unreasonable acts of Government. If in the event that as a result of this ruling, we prove to be an
"obstacle" to the vital endeavour of stamping out the blackmarketing of valuable foreign exchange, we do
not relish it and certainly, do not mean it. The Constitution simply does not leave us much choice.
WHEREFORE, the petition is DISMISSED. No costs. SO ORDERED.
 [G.R. No. 135945. March 7, 2001]
THE UNITED RESIDENTS OF DOMINICAN HILL, INC., represented by its President RODRIGO S.
MACARIO, SR., petitioner, vs. COMMISSION ON THE SETTLEMENT OF LAND
PROBLEMS, represented by its Commissioner, RUFINO V. MIJARES; MARIO PADILAN,
PONCIANO BASILAN, HIPOLITO ESLAVA, WILLIAM LUMPISA, PACITO MOISES,
DIONISIO ANAS, NOLI DANGLA, NAPOLEON BALESTEROS, ELSIE MOISES, SEBIO
LACWASAN, BEN FLORES, DOMINGO CANUTAB, MARCELINO GABRIANO, TINA
TARNATE, ANDREW ABRAZADO, DANNY LEDDA, FERNANDO DAYAO, JONATHAN DE
LA PENA, JERRY PASSION, PETER AGUINSOD, and LOLITA DURAN, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for prohibition and declaratory relief seeking the annulment of a status
quo order[1] dated September 29, 1998 issued by the public respondent Commission on the Settlement of
Land Problems (COSLAP, for brevity) in COSLAP Case No. 98-253.
The facts are:
The property being fought over by the parties is a 10.36-hectare property in Baguio City called
Dominican Hills, formerly registered in the name of Diplomat Hills, Inc. It appeared that the property was
mortgaged to the United Coconut Planters Bank (UCPB) which eventually foreclosed the mortgage
thereon and acquired the same as highest bidder. On April 11, 1983, it was donated to the Republic of the
Philippines by UCPB through its President, Eduardo Cojuangco. The deed of donation stipulated that
Dominican Hills would be utilized for the priority programs, projects, activities in human settlements and
economic development and governmental purposes of the Ministry of Human Settlements.
On December 12, 1986, the then President Corazon C. Aquino issued Executive Order No. 85
abolishing the Office of Media Affairs and the Ministry of Human Settlements. All agencies under the
latters supervision as well as all its assets, programs and projects, were transferred to the Presidential
Management Staff (PMS).[2]
On October 18, 1988, the PMS received an application from petitioner UNITED RESIDENTS OF
DOMINICAN HILL, INC. (UNITED, for brevity), a community housing association composed of non-real
property owning residents of Baguio City, to acquire a portion of the Dominican Hills property. On February
2, 1990, PMS Secretary Elfren Cruz referred the application to the HOME INSURANCE GUARANTY
CORPORATION (HIGC). HIGC consented to act as originator for UNITED.[3] Accordingly, on May 9, 1990,
a Memorandum of Agreement was signed by and among the PMS, the HIGC, and UNITED. The
Memorandum of Agreement called for the PMS to sell the Dominican Hills property to HIGC which would,
in turn, sell the same to UNITED. The parties agreed on a selling price of P75.00 per square meter.
Thus, on June 12, 1991, HIGC sold 2.48 hectares of the property to UNITED. The deed of
conditional sale provided that ten (10) per cent of the purchase price would be paid upon signing, with the
balance to be amortized within one year from its date of execution. After UNITED made its final payment
on January 31, 1992, HIGC executed a Deed of Absolute Sale dated July 1, 1992.
Petitioner alleges that sometime in 1993, private respondents entered the Dominican Hills property
allocated to UNITED and constructed houses thereon. Petitioner was able to secure a demolition order
from the city mayor.[4]
Unable to stop the razing of their houses, private respondents, under the name DOMINICAN HILL
BAGUIO RESIDENTS HOMELESS ASSOCIATION (ASSOCIATION, for brevity) filed an action[5] for
injunction docketed as Civil Case No. 3316-R, in the Regional Trial Court of Baguio City, Branch 4.Private
respondents were able to obtain a temporary restraining order but their prayer for a writ of preliminary
injunction was later denied in an Order dated March 18, 1996. [6]
While Civil Case No. 3316-R was pending, the ASSOCIATION, this time represented by the Land
Reform Beneficiaries Association, Inc. (BENEFICIARIES, for brevity), filed Civil Case No. 3382-R before
Branch 61 of the same court. The complaint[7] prayed for damages, injunction and annulment of the said
Memorandum of Agreement between UNITED and HIGC. Upon motion of UNITED, the trial court in an
Order dated May 27, 1996 dismissed Civil Case No. 3382-R.[8] The said Order of dismissal is currently on
appeal with the Court of Appeals.[9]
Demolition Order No. 1-96 was subsequently implemented by the Office of the City Mayor and the
City Engineers Office of Baguio City. However, petitioner avers that private respondents returned and
reconstructed the demolished structures.
To forestall the re-implementation of the demolition order, private respondents filed on September
29, 1998 a petition[10] for annulment of contracts with prayer for a temporary restraining order, docketed as
COSLAP Case No. 98-253, in the Commission on the Settlement of Land Problems (COSLAP) against
petitioner, HIGC, PMS, the City Engineers Office, the City Mayor, as well as the Register of Deeds of
Baguio City. On the very same day, public respondent COSLAP issued the contested order requiring the
parties to maintain the status quo.
Without filing a motion for reconsideration from the aforesaid status quo order, petitioner filed the
instant petition questioning the jurisdiction of the COSLAP.
The issues we are called upon to resolve are:
1
IS THE COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS [COSLAP] CREATED UNDER
EXECUTIVE ORDER NO. 561 BY THE OFFICE OF THE PHILIPPINES [sic] EMPOWERED TO HEAR
AND TRY A PETITION FOR ANNULMENT OF CONTRACTS WITH PRAYER FOR A TEMPORARY
RESTRAINING ORDER AND THUS, ARROGATE UNTO ITSELF THE POWER TO ISSUE STATUS
QUO ORDER AND CONDUCT A HEARING THEREOF [sic]?
2
ASSUMING THAT THE COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS [COSLAP] HAS
JURISDICTION ON THE MATTER, IS IT EXEMPTED FROM OBSERVING A CLEAR CASE OF FORUM
SHOPPING ON THE PART OF THE PRIVATE RESPONDENTS?
To the extent that the instant case is denominated as one for declaratory relief, we initially clarify that
we do not possess original jurisdiction to entertain such petitions. [11] Such is vested in the Regional Trial
Courts.[12] Accordingly, we shall limit our review to ascertaining if the proceedings before public respondent
COSLAP are without or in excess of its jurisdiction. In this wise, a recounting of the history of the COSLAP
may provide useful insights into the extent of its powers and functions.
The COSLAP was created by virtue of Executive Order No. 561 dated September 21, 1979. Its
forerunner was the Presidential Action Committee on Land Problems (PACLAP) founded on July 31, 1970
by virtue of Executive Order No. 251. As originally conceived, the committee was tasked to expedite and
coordinate the investigation and resolution of land disputes, streamline and shorten administrative
procedures, adopt bold and decisive measures to solve land problems, and/or recommend other solutions.
It was given the power to issue subpoenas duces tecum and ad testificandum and to call upon any
department, office, agency or instrumentality of the government, including government owned or controlled
corporations and local government units, for assistance in the performance of its functions. At the time, the
PACLAP did not exercise quasi-judicial functions.
On March 19, 1971, Executive Order No. 305 was issued reconstituting the PACLAP.[13] The
committee was given exclusive jurisdiction over all cases involving public lands and other lands of the
public domain and accordingly was tasked:
1. To investigate, coordinate, and resolve expeditiously land disputes, streamline
administrative procedures, and in general, to adopt bold and decisive measures to solve
problems involving public lands and lands of the public domain;
2. To coordinate and integrate the activities of all government agencies having to do with
public lands or lands of the public domain;
3. To study and review present policies as embodied in land laws and administrative rules and
regulations, in relation to the needs for land of the agro-industrial sector and small farmers,
with the end in view to evolving and recommending new laws and policies and
establishing priorities in the grant of public land, and the simplification of processing of
land applications in order to relieve the small man from the complexities of existing laws,
rules and regulations;
4. To evolve and implement a system for the speedy investigation and resolution of land
disputes;
5. To receive all complaints of settlers and small farmers, involving public lands or other lands
of the public domain;
6. To look into the conflicts between Christians and non-Christians, between corporations and
small settlers and farmers; cause the speedy settlement of such conflicts in accordance
with priorities or policies established by the Committee; and
7. To perform such other functions as may be assigned to it by the President.
Thereafter, the PACLAP was reorganized pursuant to Presidential Decree No. 832 dated November
27, 1975.[14] Its jurisdiction was revised thus:
xxx xxx xxx
2. Refer for immediate action any land problem or dispute brought to the attention of the PACLAP, to any
member agency having jurisdiction thereof: Provided, that when the Executive Committee decides to act
on a case, its resolution, order or decision thereon, shall have the force and effect of a regular
administrative resolution, order or decision, and shall be binding upon the parties therein involved and
upon the member agency having jurisdiction thereof;
xxx xxx xxx
Notably, the said Presidential Decree No. 832 did not contain any provision for judicial review of the
resolutions, orders or decisions of the PACLAP.
On September 21, 1979, the PACLAP was abolished and its functions transferred to the present
Commission on the Settlement of Land Problems by virtue of Executive Order No. 561. This
reorganization, effected in line with Presidential Decree No. 1416, brought the COSLAP directly under the
Office of the President.[15] It was only at this time that a provision for judicial review was made from
resolutions, orders or decisions of the said agency, as embodied in section 3(2) thereof, to wit:
Powers and functions.The Commission shall have the following powers and functions:
1. Coordinate the activities, particularly the investigation work, of the various government
offices and agencies involved in the settlement of land problems or disputes, and
streamline administrative procedures to relieve small settlers and landholders and
members of cultural minorities of the expense and time-consuming delay attendant to the
solution of such problems or disputes;
2. Refer and follow-up for immediate action by the agency having appropriate jurisdiction any
land problem or dispute referred to the Commission: Provided, that the Commission may,
in the following cases, assume jurisdiction and resolve land problems or disputes which
are critical and explosive in nature considering, for instance, the large number of the
parties involved, the presence or emergence of social tension or unrest, or other similar
critical situations requiring immediate action:
(a) Between occupants/squatters and pasture lease agreement holders or timber
concessionaires;
(b) Between occupants/squatters and government reservation grantees;
(c) Between occupants/squatters and public land claimants or applicants;
(d) Petitions for classification, release and/or subdivision of lands of the public domain; and
(e) Other similar land problems of grave urgency and magnitude.
The Commission shall promulgate such rules of procedure as will insure expeditious resolution and action
on the above cases. The resolution, order or decision of the Commission on any of the foregoing cases
shall have the force and effect of a regular administrative resolution, order or decision and shall be binding
upon the parties therein and upon the agency having jurisdiction over the same. Said resolution, order or
decision shall become final and executory within thirty (30) days from its promulgation and shall be
appealable by certiorari only to the Supreme Court.
xxx xxx xxx
In the performance of its functions and discharge of its duties, the Commission is authorized, through the
Commissioner, to issue subpoena and subpoena duces tecum for the appearance of witnesses and the
production of records, books and documents before it. It may also call upon any ministry, office, agency or
instrumentality of the National Government, including government-owned or controlled corporations, and
local governments for assistance. This authority is likewise, conferred upon the provincial offices as may
be established pursuant to Section 5 of this Executive Order.
In Baaga v. Commission on the Settlement of Land Problems,[16] we characterized the COSLAPs
jurisdiction as being general in nature, as follows:
Petitioners also contend in their petition that the COSLAP itself has no jurisdiction to resolve the protest
and counter-protest of the parties because its power to resolve land problems is confined to those cases
which are critical and explosive in nature.
This contention is devoid of merit. It is true that Executive Order No. 561 provides that the COSLAP may
take cognizance of cases which are critical and explosive in nature considering, for instance, the large
number of parties involved, the presence or emergence of social tension or unrest, or other similar critical
situations requiring immediate action. However, the use of the word may does not mean that the
COSLAPs jurisdiction is merely confined to the above mentioned cases. The provisions of the said
Executive Order are clear that the COSLAP was created as a means of providing a more effective
mechanism for the expeditious settlement of land problems in general, which are frequently the source of
conflicts among settlers, landowners and cultural minorities. Besides, the COSLAP merely took over from
the abolished PACLAP whose functions, including its jurisdiction, power and authority to act on, decide
and resolve land disputes (Sec. 2, P.D. No. 832) were all assumed by it. The said Executive Order No. 561
containing said provision, being enacted only on September 21, 1979, cannot affect the exercise of
jurisdiction of the PACLAP Provincial Committee of Koronadal on September 29, 1978. Neither can it
affect the decision of the COSLAP which merely affirmed said exercise of jurisdiction.
Given the facts of the case, it is our view that the COSLAP is not justified in assuming jurisdiction
over the controversy. As matters stand, it is not the judiciarys place to question the wisdom behind a
law;[17] our task is to interpret the law. We feel compelled to observe, though, that by reason of the
ambiguous terminology employed in Executive Order No. 561, the power to assume jurisdiction granted to
the COSLAP provides an ideal breeding ground for forum shopping, as we shall explain
subsequently. Suffice it to state at this stage that the COSLAP may not assume jurisdiction over cases
which are already pending in the regular courts.
The reason is simple. Section 3(2) of Executive Order 561 speaks of any resolution, order or
decision of the COSLAP as having the force and effect of a regular administrative resolution, order or
decision. The qualification places an unmistakable emphasis on the administrative character of the
COSLAPs determinations, amplified by the statement that such resolutions, orders or decisions shall be
binding upon the parties therein and upon the agency having jurisdiction over the same. An agency is
defined by statute as any of the various units of the Government, including a department, bureau, office,
instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit
therein.[18] A department, on the other hand, refers to an executive department created by law.[19] Whereas,
a bureau is understood to refer to any principal subdivision of any department. [20] In turn, an office refers,
within the framework of governmental organization, to any major functional unit of a department or bureau
including regional offices. It may also refer to any position held or occupied by individual persons, whose
functions are defined by law or regulation.[21] An instrumentality is deemed to refer to any agency of the
National Government, not integrated within the department framework, vested with special functions or
jurisdiction by law, endowed with some if not all corporate powers, administering special funds and
enjoying operational autonomy, usually through a charter. This term includes regulatory agencies,
chartered institutions and government-owned or controlled corporations.[22] Applying the principle in
statutory construction of ejusdem generis, i.e., where general words follow an enumeration or persons or
things, by words of a particular and specific meaning, such general words are not to be construed in their
widest extent, but are to be held as applying only to persons or things of the same kind or class as those
specifically mentioned,[23] section 3(2) of Executive Order 561 patently indicates that the COSLAPs
dispositions are binding on administrative or executive agencies. The history of the COSLAP itself bolsters
this view. Prior enactments enumerated its member agencies among which it was to exercise a
coordinating function.
The COSLAP discharges quasi-judicial functions:
Quasi-judicial function is a term which applies to the actions, discretion, etc. of public administrative
officers or bodies, who are required to investigate facts, or ascertain the existence of facts, hold hearings,
and draw conclusions from them, as a basis for their official action and to exercise discretion of a judicial
nature.[24]
However, it does not depart from its basic nature as an administrative agency, albeit one that
exercises quasi-judicial functions. Still, administrative agencies are not considered courts; they are neither
part of the judicial system nor are they deemed judicial tribunals. [25] The doctrine of separation of powers
observed in our system of government reposes the three (3) great powers into its three (3) branches the
legislative, the executive, and the judiciary each department being co-equal and coordinate, and supreme
in its own sphere. Accordingly, the executive department may not, by its own fiat, impose the judgment of
one of its own agencies, upon the judiciary. Indeed, under the expanded jurisdiction of the Supreme Court,
it is empowered to determine whether or not there has been grave abuse of discretion amounting to lack of
or excess of jurisdiction on the part of any branch or instrumentality of the Government. [26]
There is an equally persuasive reason to grant the petition. As an additional ground for the
annulment of the assailed status quo order of COSLAP, UNITED accuses private respondents of
engaging in forum shopping. Forum shopping exists when a party repetitively avail[s] of several judicial
remedies in different courts, simultaneously or successively, all substantially founded on the same
transactions and the same essential facts and circumstances, and all raising substantially the same issues
either pending in, or already resolved adversely by some other court.[27] In this connection, Supreme Court
Administrative Circular No. 04-94 dated February 8, 1994 provides:
Revised Circular No. 28-91, dated February 8, 1994, applies to and governs the filing of petitions in the
Supreme Court and the Court of Appeals and is intended to prevent the multiple filing of petitions or
complaints involving the same issues in other tribunals or agencies as a form of forum shopping.
Complementary thereto and for the same purpose, the following requirements, in addition to those in
pertinent provisions of the Rules of Court and existing circulars, shall be strictly complied with in the filing
of complaints, petitions, applications or other initiatory pleadings in all courts and agencies other than the
Supreme Court and the Court of Appeals and shall be subject to the sanctions provided hereunder.
1. The plaintiff, petitioner, applicant or principal party seeking relief in the complaint, petition, application or
other initiatory pleading shall certify under oath in such original pleading, or in a sworn certification
annexed thereto and simultaneously filed therewith, to the truth of the following facts and undertakings: (a)
he has not theretofore commenced any other action or proceeding involving the same issues in the
Supreme Court, the Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no
such action or proceedings is pending in the Supreme Court, the Court of Appeals, or any other tribunal or
agency; (c) if there is any such action or proceeding which is either pending or may have been terminated,
he must state the status thereof; and (d) if he should thereafter learn that a similar action or proceeding
has been filed or is pending before the Supreme Court, the Court of Appeals or any other tribunal or
agency, he undertakes to report that fact within five (5) days therefrom to the court or agency wherein the
original pleading and sworn certification contemplated herein have been filed.
The complaint and other initiatory pleadings referred to and subject of this Circular are the original civil
complaint, counterclaim, cross-claim, third (fourth, etc.) party complaint, or complaint-in-intervention,
petition, or application wherein a party asserts his claim for relief.
2. Any violation of this Circular shall be a cause for the dismissal of the complaint, petition,
application or other initiatory pleading, upon motion and after hearing. However, any clearly willful
and deliberate forum shopping by any other party and his counsel through the filing of multiple
complaints or other initiatory pleadings to obtain favorable action shall be a ground for the
summary dismissal thereof and shall constitute contempt of court. Furthermore, the submission of a
false certification or non-compliance with the undertakings therein, as provided in Paragraph 1
hereof, shallconstitute indirect contempt of court, without prejudice to disciplinary proceedings against the
counsel and the filing of a criminal action against the party. [italics supplied]
xxx xxx xxx
The said Administrative Circulars use of the auxiliary verb shall imports an imperative obligation xxx
inconsistent with the idea of discretion.[28] Hence, compliance therewith is mandatory.[29]
It bears stressing that there is a material distinction between the requirement of submission of the
certification against forum shopping from the undertakings stated therein. Accordingly,
xxx [f]ailure to comply with this requirement cannot be excused by the fact that plaintiff is not guilty of
forum shopping. The Court of Appeals, therefore, erred in concluding that Administrative Circular No.
04-94 did not apply to private respondents case merely because her complaint was not based on
petitioners cause of action. The Circular applies to any complaint, petition, application, or other initiatory
pleading, regardless of whether the party filing it has actually committed forum shopping. Every party filing
a complaint or any other initiatory pleading is required to swear under oath that he has not committed nor
will he commit forum shopping. Otherwise, we would have an absurd situation where the parties
themselves would be the judge of whether their actions constitute a violation of said Circular, and
compliance therewith would depend on their belief that they might or might not have violated the
requirement. Such interpretation of the requirement would defeat the very purpose of Circular 04-94.
Indeed, compliance with the certification against forum shopping is separate from, and independent of, the
avoidance of forum shopping itself. Thus, there is a difference in the treatmentin terms of imposable
sanctionsbetween failure to comply with the certification requirement and violation of the prohibition
against forum shopping. The former is merely a cause for the dismissal, without prejudice, of the complaint
or initiatory pleading, while the latter is a ground for summary dismissal thereof and constitutes direct
contempt.[30]
A scrutiny of the pleadings filed before the trial courts and the COSLAP sufficiently establishes
private respondents propensity for forum shopping. We lay the premise that the certification against forum
shopping must be executed by the plaintiff or principal party, and not by his counsel.[31] Hence, one can
deduce that the certification is a peculiar personal representation on the part of the principal party, an
assurance given to the court or other tribunal that there are no other pending cases involving basically the
same parties, issues and causes of action. In the case at bar, private respondents litany of omissions
range from failing to submit the required certification against forum shopping to filing a false certification,
and then to forum shopping itself. First, the petition filed before the COSLAP conspicuously lacked a
certification against forum shopping. Second, it does not appear from the record that the ASSOCIATION
informed Branch 4 of the Regional Trial Court of Baguio City before which Civil Case No. 3316-R was
pending, that another action, Civil Case No. 3382-R, was filed before Branch 61 of the same
court. Another group of homeless residents of Dominican Hill, the LAND REFORM BENEFICIARIES
ASSOCIATION, INC. initiated the latter case. The aforesaid plaintiff, however, does not hesitate to admit
that it filed the second case in representation of private respondent, as one of its affiliates. In the same
manner, the certification against forum shopping accompanying the complaint in Civil Case No. 3382-R
does not mention the pendency of Civil Case No. 3316-R. In fact, the opposite assurance was given, that
there was no action pending before any other tribunal. Another transgression is that both branches of the
trial court do not appear to have been notified of the filing of the subject COSLAP Case No. 98-253.
It is evident from the foregoing facts that private respondents, in filing multiple petitions, have
mocked our attempts to eradicate forum shopping and have thereby upset the orderly administration of
justice. They sought recourse from three (3) different tribunals in order to obtain the writ of injunction they
so desperately desired. The willful attempt by private respondents to obtain a preliminary injunction in
another court after it failed to acquire the same from the original court constitutes grave abuse of the
judicial process.[32]
In this connection, we expounded on forum shopping in Viva Productions, Inc. v. Court of
Appeals[33] that:
Private respondents intention to engage in forum shopping becomes manifest with undoubted clarity upon
the following considerations. Notably, if not only to ensure the issuance of an injunctive relief, the
significance of the action for damages before the Makati court would be nil. What damages against private
respondent would there be to speak about if the Paraaque court already enjoins the performance of the
very same act complained of in the Makati court? Evidently, the action for damages is premature if not for
the preliminary injunctive relief sought. Thus, we find grave abuse of discretion on the part of the Makati
court, being a mere co-equal of the Paraaque court, in not giving due deference to the latter before which
the issue of the alleged violation of the sub-judice rule had already been raised and submitted. In such
instance, the Makati court, if it was wary of dismissing the action outrightly under Administrative Circular
No. 04-94, should have, at least, ordered the consolidation of its case with that of the Paraaque court,
which had first acquired jurisdiction over the related case xxx, or it should have suspended the
proceedings until the Paraaque court may have ruled on the issue xxx.
xxx xxx xxx
Thus, while we might admit that the causes of action before the Makati court and the Paraaque court are
distinct, and that private respondent cannot seek civil indemnity in the contempt proceedings, the same
being in the nature of criminal contempt, we nonetheless cannot ignore private respondents intention of
seeking exactly identical reliefs when it sought the preliminary relief of injunction in the Makati court. As
earlier indicated, had private respondent been completely in good faith, there would have been no
hindrance in filing the action for damages with the regional trial court of Paraaque and having it
consolidated with the contempt proceedings before Branch 274, so that the same issue on the alleged
violation of the sub judice rule will not have to be passed upon twice, and there would be no possibility of
having two courts of concurrent jurisdiction making two conflicting resolutions.
Yet from another angle, it may be said that when the Paraaque court acquired jurisdiction over the said
issue, it excluded all other courts of concurrent jurisdiction from acquiring jurisdiction over the same. To
hold otherwise would be to risk instances where courts of concurrent jurisdiction might have conflicting
orders. This will create havoc and result in an extremely disordered administration of justice. Therefore,
even on the assumption that the Makati court may acquire jurisdiction over the subject matter of the action
for damages, without prejudice to the application of Administrative Circular No. 04-94, it cannot
nonetheless acquire jurisdiction over the issue of whether or not petitioner has violated the sub
judice rule. At best, the Makati court may hear the case only with respect to the alleged injury suffered by
private respondent after the Paraaque court shall have ruled favorably on the said issue.
We also noted several indications of private respondents bad faith. The complaint filed in Civil Case
No. 3316-R was prepared by the ASSOCIATIONs counsel, Atty. Conrado Villamor Catral, Jr. whereas the
complaint filed in Civil Case No. 3382-R was signed by a different lawyer, Atty. Thomas S. Tayengco. With
regard to the petition filed with the COSLAP, the same was signed by private respondents individually. As
to the latter case, we noted that the petition itself could not have been prepared by ordinary laymen,
inasmuch as it exhibits familiarity with statutory provisions and legal concepts, and is written in a lawyerly
style.

In the same manner, the plaintiffs in the three (3) different cases were made to appear as
dissimilar: in Civil Case No. 3316-R, the plaintiff was ASSOCIATION of which private respondent Mario
Padilan was head, while the plaintiff in Civil Case No. 3382-R was the BENEFICIARIES. Before the
COSLAP, private respondents themselves were the petitioners, led again by Padilan.[34] Private
respondents also attempted to vary their causes of action: in Civil Case No. 3382-R and COSLAP Case
No. 98-253, they seek the annulment of the Memorandum of Agreement executed by and among UNITED,
the PMS, and HIGC as well as the transfer certificates of title accordingly issued to petitioner. All three (3)
cases sought to enjoin the demolition of private respondents houses.

It has been held that forum shopping is evident where the elements of litis pendentia or res
judicata are present. Private respondents subterfuge comes to naught, for the effects of res judicata or litis
pendentia may not be avoided by varying the designation of the parties or changing the form of the action
or adopting a different mode of presenting ones case.[35]

In view of the foregoing, all that remains to be done is the imposition of the proper penalty. A partys
willful and deliberate act of forum shopping is punishable by summary dismissal of the actions filed. [36] The
summary dismissal of both COSLAP Case No. 98-253 and Civil Case No. 3316-R is therefore warranted
under the premises. We shall refrain from making any pronouncement on Civil Case No. 3382-R, the
dismissal of which was elevated on appeal to the Court of Appeals where it is still pending.

WHEREFORE, the petition is hereby GRANTED. The status quo order dated September 29, 1998
issued in COSLAP Case No. 98-253 by respondent Commission On The Settlement Of Land Problems
(COSLAP) is hereby SET ASIDE; and the petition filed in COSLAP Case No. 98-253 and the complaint in
Civil Case No. 3316-R are hereby DISMISSED for lack of jurisdiction and forum shopping. Costs against
private respondents.

SO ORDERED.